KANAGARATNA v. BANDA

028-NLR-NLR-V-25-KANAGARATNA-v.-BANDA.pdf


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Present: Jayewardene A.J.
KANAGARATNA v. BANDA.161—C. R. Anuradhapura, 11,755.
Mortgage bond—Subsequent oral agreement that mortgagee should cultivateland and take produce in lieu of interest—Evidence Ordinancef$. 92—Ordinance No. 7 of 1840, 5. 2—Use and occupation—Obiter dictum.
Plaintiff sued defendant to recover the principal and interestdue on a bond. Defendant denied that any interest was due, assubsequent to the date of the bond under a verbal agreement,plaintiff cultivated the land mortgaged and took the produce insatisfaction of interest.
Held, that oral evidence was admissible to prove the agreement.“ The agreement pleaded does not contradict or vary the termsof the mortgage bond. The defendant can prove that the plaintiffreceived the rents and profits of his land in payment of interestthat became due. The defendant cannot, of course, insist on hisoral agreement being enforced, and cannot insist on the plaintiffcontinuing in possession of the property and receiving the rents inlieu of interest that may become due in the future, for that would beto vary the terms of the bond.
rjIHE facts are set out in the judgment.
H. F. Perera, for the appellant.
James Joseph (with him Rajakariar), for the respondent.
August 23, 1923. Jayewardene A.J.—
This case raises a small point, but a point of practical importance.The plaintiff sued the defendant on a mortgage bond dated July 11,1917, to recover the principal, Rs. 100, and the interest due under itwhich was at the rate of 30 per cent, per annum. The defendantanswered admitting that the principal sum alone was due, and statingthat the interest had been paid. In the fourth paragraph of hieanswer he alleged " that in the month of November, 1917, it wasagreed between the plaintiff and the defendant that the plaintiffshould cultivate the land mortgaged to him and take the produce insatisfaction of the interest due on the said mortgage bond and on aloan of Rs. 20 for which a promissory note was given by the defend-ant to plaintiff on December 3,v1917. That from the said date theplaintiff got the said land cultivated by his son-in-law, Kiri BandaArachchi, and took the. produce, and thus paid himself the interestdue upon the said bond and the said promissory note.”
At the trial the proctor for the plaintiff raised the issue “ whetheroral evidence can be led to prove that plaintiff was allowed to possess
xxv.12(60)29
1923.
1923.
Jayewar*2>ENE A.J.
Kanagaratnav. Band#
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the mortgaged land in lieu of payment of interest.’* He arguedthat an agreement such as is contemplated in the answer created aninterest in land, and under section 2 of Ordinance No. 7 of 1840 wasnot valid without a notarial document. Defendant’s proctorargued that “ the plaintiff did not possess the land in lieu of interest,but that he paid himself the interest out of the produce of the land.”The Commissioner observed that this was a distinction without adifference, and decided the issue in the negative and gave judgmentfor the plaintiff. The defendant appeals. It is contended for himthat the agreement referred to in the answer does not contradict,vary, add to, or subtract from the terms of the mortgage bond, andthat, therefore, section 92 of the Evidence Ordinance does notprevent him from proving the agreement, and that as the agreementhas been acted upon and the plaintiff has taken the produce of thedefendant’s land, it can be proved, notwithstanding the provisionsof section 2 of Ordinance No. 7 of 1840. Counsel for respondent sup-ports the judgment and relies very strongly on the local cases ofMudianse v. Mudianse,1 which is a Full Bench decision. So that twopoints.arise for decision in this case: First, whether the agreement con-tradicts or varies the terms of the bond ; and second, if not, whetherit can be proved in view of section 2 of the Ordinance of Frauds.It seems to me that in its essence the agreement pleaded in the answerdoes not contradict or vary the terms of the mortgage bond. Whatthe mortgagor desires to prove is that the interest payable under thebond has been paid in a particular mode. He does not attempt tosupersede or vary the terms of the bond, he recognizes them, butwishes to prove that they have been fulfilled. This is the view takenof agreements of this nature by the Courts of India where section 92of the Indian Evidence Act is identical with section 92 of ourEvidence Ordinance. Thus, in Ram Bakksh v. Durjan- which wasan action upon a hypothecation bond payable by instalments, itwas held that the defendant could prove an oral agreement that theobligee should possess the hypothecated property until the amountdue on the bond had been liquidated from the rents. ThereEdge C. J. said—
“ In this case the Only question is, the action being in respect of abond payable by instalments, and the defendants in answerto the action saying that at the time of the giving of thebond it was orally agreed to let the creditor have possessionin lieu of instalments, whether the evidence of thatcontract, which was not in writing, is admissible. I thinkit is. It was a contract which did not detract from, add to,or vary the original contract. It was only providing forthe means by which the instalments were to be paid.The appellant got possession in accordance with the oralagreement.
1 (7895) 2 N. L. B. 86.2 (1887) 9 All. 892.
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This decision was followed in Kamala Sakai v. Bobu NundanMain1 where Mookerjee and Richardson J.J., referring to a similaragreement, discussed the position more fully, and said—
“ But it has been contended before us on behalf of the appellantthat the subsequent arrangement by which the mortgageewas placed in possession and was authorized to receive theprofits in satisfaction of his dues under the mortgagecannot be proved by oral evidence under section 92 of theEvidence Act. This contention in our opinion is not wellfounded ….
“ In order to make section 92 applicable, it has to'be shown thatthe oral agreement or statement was one which had theeffect of contradicting, varying, adding to, or subtractingfrom the terms of the original contract. Now, in the casebefore us, the effect of the subsequent agreement was notto alter, contradict, add to, or subtract from the termsof the original agreement, but merely to provide means forthe satisfaction of the bond.
" The learned vakil for the appellant contended that the effectof the agreement was to alter the term as to payment,because whereas, under the instrument the mortgagemoney was payable on a prescribed date, the effectof the agreement was to substitute another mode ofpayment.
“ In our opinion, the effect of the agreement was not to alterthe terms of the contract between the parties. Thelearned vakil for the appellant conceded that if themortgagor agreed with the mortgagees to pay moneyin instalments and did actually pay sums according tosuch agreement, section 92 would not debar the mortgagorfnan proving that payments had actually been made.But be contended that although in this case by analogyit might be opened to the mortgagor to prove that themortgagee had received the profits of the mortgagedproperty, yet it was not open to the mortgagor to provethat it had been agreed upon between himself and hismortgagee that the value of the profits so received wassufficient to discharge the mortgage debt; or, in otherwords, although it was open to the mortgagor to prove thatthe mortgage money had been paid not in cash, but by theprofits of the mortgaged property, the agreement, in so faras it provided that this profit during a certain term was tobe received in full satisfaction of whatever was due uponthe mortgage, could not be established. Obviously there1 (1909)12 C. L. J. Bep. 39 (41),
1923.
Jaybwar*0£ME A,, J•
Kana,aratna
v. Banda-
( 132 )
1923.
Jaybwati-•DEXE A.J.
Kanagaratnav. Banda
is no force in this contention, because the latter part of theagreement does not in any way effect the terms of theoriginal contract. The view that we take was adopted bythe learned Judges of the Allahabad High Court in the caseof Ram Bakhsh v. Durjan (supra).”
The same view was taken in Ramsakar v. TuUi rrosad Singh.1In Kattika Bapanamma v. Kattika Krist amma2 cited by counselfor the appellant, the Madras High Court came to the same con-clusion. In that case A had agreed by registered deed to give B forher life an annual amount by way of maintenance, and it was subse-quently orally agreed that B should enjoy certain lands in lieu ofsuch maintenance, and B was put in possession. It was held thatthe subsequent oral agreement to rescind or modify the originalwritten agreement was not receivable in evidence, but that it wasopen to the defendant to prove that the arrears claimed wereactually discharged by B taking possession, although the agreementto discharge cannot be proved. The Court there said—
“ In our opinion the settlement pleaded is an agreement torescind or modify the original agreement within the fourthproviso to section 92 of the Evidence Act, and as such isinadmissible in evidence, and the plaintiff is entitled tofuture maintenance at the rate stipulated in the originalagreement. But this being a suit for arrears of mainte-nance for certain years, it was open to the defendant toplead, as he has pleaded, that in discharge of the defendantsobligation to pay maintenance for such years, she agreed totake and took possession of certain lands; and it is im-material that she is alleged to have taken possession of theland in pursuance of an agreement which cannot be proved.The case appears to be on all fours with Karampalli UnniKurup v. TheJcku Vittil Muthora Kutti,3 and also to begoverned by Goseti Subba Row v. Varigonda Narasimham.4The defendant cannot prove the agreement to dischargethe claim for maintenance in the manner alleged, but hemay prove that the arrears have been, in fact, dischargedin the manner alleged.”
This judgment, I think, means that the defendant cannot pleadthe agreement so as to prevent the plaintiff from claiming futuremaintenance at the rate stipulated in the original agreement, butthe defendant can prove that the plaintiff agreed to take and tookpossession of certain lands and the obligation to pay arrears ofmaintenance claimed was discharged. .
The allegation in the answer does not, therefore, amount to avariation of the form of the mortgage bond, and the defendant canprove that the plaintiff received the rents and profits of his land in
{1011) 14 G. L. J. Rep. 507.® {1902) I. L. R. 26 Mad. 195.
* (1006) 30 Mad. 231.4 (1903) I. L. R. 27 Mad. 368.
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payment of interest that became due. The defendant cannot,of course, insist on his oral agreement being enforced, and cannotinsist on the plaintiff continuing in possession of the property andreceiving the rents in lieu of interests that may become due in thefuture, for that would be to vary the terms of the bond, and theplaintiff can, at any moment, give up possession of the property andask for payment of interest in cash as stipulated in the bond, butthe defendant can prove that the liability to pay arrears of interesthas been discharged by actual possession and receipt of rents andprofits without in any way violating the terms of section 92 of theEvidence Ordinance.
The view taken by the Indian Court is practical and business-like, and should, I think, be adopted if there is nothing^in our lawwhich debars us from doing so. This view is not in conflict withthe opinion expressed by the majority of the judges in Mudianse v.Mudianse (supra), for there Withers J. said—
“ I conceive it to be good law that the breach of even a notarialcontract for the payment of interest in money may besatisfied by delivery and acceptance of goods, or otherconsideration equivalent to money in satisfaction of theinterest. I consider that proposition to be good law,because the effect of such payment does not contradict orvary the notarial contract, but satisfies the breach of it.That is not the case here. It is not alleged or proved thatso much of “ interest due under the bond was discharged bydelivery and acceptance of an equivalent of the sum due.’*But there still remains the further question, even if the factssought to be proved do not contradict or vary the terms of the bond,can the informal agreement, under which the rents and profits andpossession of the property were taken, be proved in view of section 2of Ordinance No. 7 of 1840 which declares such agreements to be of noforce or avail in law unless notarially executed ? It is on this aspectof the case that Mudianse v. Mudianse (supra) becomes applicable.
In that case, the plaintiff, the mortgagee, sued the heirs of themortgagor who had died seven years before action leaving a smallestate, alleging that the defendants by heirship, possession, andinterest represented the estate of the deceased debtor. The mort-gage was executed in 1877, and the action was not brought till 1893.In the plaint it was averred—
That by an agreement entered between the plaintiff and thedeceased debtor in 1880, the plaintiff entered into posses-sion of the mortgaged property, and has been since 1880,and still is, in possession thereof, with the consent of thedeceased debtor and defendants, cultivating and takingthe produce of same in lieu of interest on the principal sumwhich the deceased debtor obliged himself to pay bybond dated December 8, 1877.”
1923.
J AYE WAR-DENS A.tT.
K anagarafnav. Banda
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1923.
Jaybwar-BINE A.J
Kanauaratnav. Banda
The defendants resisted the claim on two grounds : (1) That theplaint did not disclose any cause of action ; and (2) that the claimon the bond was prescribed, as the agreement alleged in the plaintcould’not be proved in view of section 2 of Ordinance No. 7 of 1840.
It was held by Withers and Browne JJ., Lawrie A.C.J. dissenting,that the plaint did not disclose any cause of action against thedefendants as it did not indicate what asset or assets any of thedefendants as heir-at-law had possessed himself of for the purposeof administration. This ground alone would have been sufficientfor the dismissal of the plaintiff’s action, but the Court also held,Lawrie A.C.J., again dissenting, that the agreement alleged couldnot be proved, and that the plaintiff’s claim was therefore prescribedWithers J., continuing the passage I have cited above, said-—
" What is alleged is that three years after the execution of thebond the plaintiff, by agreement with the debtor, enteredinto possession of the property of which he was to take thefruits in.lieu of the interest in money payable under thebond.
“ Now, to my mind such an agreement went to establish aninterest or an encumbrance on land, and was of no forceor avail in law, inasmuch as it was not notarial. Thisagreement was, no doubt, not used here to enforce suchan interest or encumbrance. It was used to prove anagreement to substitute one sort of payment for another ;but the provision of section 2 of Ordinance No. 7 of 1840prohibits the U6e, to my mind, of this agreement for evena collateral purpose.”
Mr. Perera for the appellant, contends that the judgment of theCourt regarding prescription and the effect of section 2 of OrdinanceNo. 7 of 1840 was unnecessary for the decision of the case in viewof the decision on the first point, and that it must be treated as anobiter dictum. I do not think it could be got rid of in that way.It cannot be regarded as purely obiter, for as Black says in his bookon “ Judicial Precedents ; ”
11 A court’s expression of opinion on a point actually involved inthe issue and properly before it for determination is notreduced to the level of mere dictum by the fact that theactual judgment in the case is ultimately rested uponother ground or grounds.”
And recently Warrington L.J., in Slack v. Leeds IndustrialCo-operative Society Ltd.,1 said—
“ In order to get rid of the effect of the opinions deliberatelyexpressed by three Judges of this Court, it is in my judg-ment not enough to say * they are all mere die a.’ Theyare not views casually expressed on a point not really1 (1923) 1 Ch. 431 at p. 45$.
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adequately considered, but they are arrived at and ex-pressed with the same care and deliberation as if they hadbeen necessary for the decision of the case. Although,therefore, they are not absolutely binding as would bean actual decision of the Court necessary to its judgmentthey are entitled to such weight that we ought to followthem, unless we find that they have been over-ruled, orthat they are inconsistent with previous decisions.”
In Amerasekera v. Amerasekera1 this Court felt itself bound bythat judgment, but proceeded to critically distinguish it from thecase before it, Wood Benton C. J. remarking—
“ I see no reason why the existence of an agreement for paymentmay not be established by implication from the circum-stances of a case. There is nothing in the case of Mudiansev. Mudianse (supra) which compels us to hold that proofof an agreement of this character is barred by the absenceof a notarially executed instrument. If the matter wereres Integra, I confess that I should be disposed to agreewith the dissenting judgment of Lawrie A.C. J. in Mudiansev. Mudianse (supra). But the facts in that case weredifferent from those now before us.”
But there is an earlier Full Courtcase (Perera v. Fernando *) whichI think is in conflict with the judgment in Mudianse v. Mudianse(supra). Perera v. Fernando (supra) was a suit to recover £9. 10s.for use and occupation under a parol lease. The question wasraised as to whether the plaintiff could recover for use and occupationunder such a lease after the Ordinance No. 7 of 1840, section 2.A Full Bench of the Supreme Court, consisting of Creasy C.J. andTemple and Thomson JJ., decided that a landowner can in Ceylonrecover for use and occupation without a notarial instrument,if there has been actual use and occupation, and that an action forU66 and occupation may in effect be regarded as an action for compen-sation, and thatall the evidence which is admissible to prove compen-sation is admissible in such an action. This case has been followedever since as laying down good law. See (to mention a few of thecases) Dissanayake v. Pranciscu,3 Wijesiriwardene v. de Zoysa4(where the application of section 91 of the Evidence Ordinance wasconsidered), Perera v. Amarasooriya,5 de Silva v. de Silva,*Jayetvickreme v. Arnolis Appu,7 and Nanayaklcara v. Andris8where Bertram C.J. said—
“ This action (that is, for use and occupation) was formally andauthoritatively adopted into our system by Perera v.Fernando (supra)”
(192$) 38 N. L. R. 508.5(2909)12 2T. L. R. 87.
Ram. (1868-68) 86.•(7973)2 C. A. C. 221.
(1898) 1 Tomb. 23.7(1914)C. W. R. 71.
(1906) 1 A. C. R. 43.8(1921)23 N. L. R. 193 (201).
1923.
J A YEW A*.
DENE A.J.
Kanagaratnav. Band*
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1923.
Jayewar-DENE A.J.
Kanagaratnav. Banda
It has also been held that a person entering into possession on aparol lease may be treated either as a monthly tenant, or as atenant at-will (Wambeck v. Le Mesurier,l The Secretary of State forWar v. Ward? and Buulifens v. Carolis Appu3), and that the termsof the parol agreement may be proved to show what would be a faircompensation to allow for use and occupation (Perera v. Fernando(supra), Perera v. Amarasooriya {supra), de Silva v. de Silva{supra), Wambeck v. Le Mesurier {supra), and Nanayahkara v.Andris {supra) ) where the matter was considered afresh. And, ofcourse, an action for use and occupation does not lie unless therehas been a contractual relationship, express or implied, between theparties {Isaa Maricar v. Andris Appu4). Thus Perera v. Fernando(supra) and the cases based on it lay down that when a person islet into possession of immovable property under an agreementinvalid in law, he is liable to pay compensation arfd can be sued inan action for use and occupation or as a monthly tenant, or a tenantat will, and the agreement can be proved for the collateral purpose ofshowing what would be a fair compensation* Thus in Jayawick-reme v. Arnolis (supra) the compensation claimed and allowed wasa share of a crop of paddy, and in Nanayahkara v. Andris (supra)a share of the gems found.
When analysed, the defendant’s plea in the present case amountsin substance and in effect to a claim for compensation for use and.occupation, coupled with an allegation that the compensation duehas been paid and satisfied in a particular way. Defendant let theplaintiff into possession of his field, the plaintiff agreeing to payhim a share of the produce or profits. Defendant owed plaintiffmoney. Defendant asked plaintiff to take his share in paymentof the debt. The defendant might have claimed the value of hisshare as compensation for use and occupation by way of counter-claim in the case, or he might, if the present plea is rejected, bringan action making the same claim. In such an event, the defendant,according to the authorities, would be entitled to prove all the factsnecessary to sustain his action—the agreement and possessionunder it.
The principle laid' down by the Full Court in Perera v. Fernando,(supra) is, therefore, in direct conflict with the Full Bench decisionin Mudianse v. Mvdianse (supra)—
“ When a court is confronted by two conflicting decisions ofCourts of co-ordinate jurisdiction, it must decide whichof them it must follow (see 10 N. L. R. 148) ”—
said Hutchinson C.J. in Perera v. Amarasooriya (supra).
In the circumstances I prefer to adopt the judgment of this Courtin Perera v. Fernando (supra), the soundness of which has never
1 (J49J) 3 N. L. R. 105.a (1919) 21 N. L. R. 156.
* (1901) 2 Br. 256.4 (1907) 10 N. L. R. 178.
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been questioned and which has been consistently followed for thelast sixty years.
In my opinion, therefore, the defendant is entitled to prove thatthe plaintiff entered on his land and cultivated it, and that by agree-ment his share of the rents and profits was set off against what wasdue by him to the plaintiff by way of interest on the bond.
In Nanayakkara v. Andris (supra) Bertram C.J., in meeting acontention put forward for the appellant that in an action for useand occupation only a reasonable sum of money could be recovered,and that the alleged special agreement by which the defendantswere to pay the respondents half the value of the gems found couldnot be used as evidence of the quantum of compensation, said—
“ It is quite true that there is no case in the books where in anaction for use and occupation the compensation has beenassessed as a proportion of the profits. But that is not con-clusive. Local customs must be regarded. I see no reasonwhy such a method of assessment should not be adoptedwhen the agreement is that a certain proportion of the cropsshould be paid as rent. Equally, I see no reason why Bucha course should not be taken when the agreement is for afixed proportion of the value of the gemB found. If theagreement can be used as evidence of the quantum ofcompensation when a rent is fixed in the ordinary form,I see no reason why it should not be so used when the rentagreed upon is a proportion of the tenant’s revenuederived from the land of whatever character.”
If that be so, much more can the defendant, here prove thatwhat was due to him, which might have been paid either in kind orin money, was to be taken in discharge of what was due from him.Such an agreement does not involve any interest in land, and is notinvalid under any provision of our law.
I accordingly allow the appeal and send the case back for adjudi-cation on the merits. The appellant is entitled to his costs ofappeal.
Set aside.
1923.
Jayewas-
DEKE A.J.
Kanajara nav. Jian'fa