058-NLR-NLR-V-43-MOHAMED-v.-SINNEMUTTU.pdf
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KEUNEMAN J.—Mohamed v. Sinnemuttu.
1942Present : Soertsz and Keuneman JJ.
MOHAMED v. SINNEMUTTU96—D. C. (Inty.) Galle, 37,513.
Partition—Sale under decree—Undivided shares subject to mortgage—Distri-bution of proceeds—Partition Ordinance (Cap. 56), s. 8.
Where property sold under a partition decree was owned by fourco-owners in equal shares and the shares of two such co-owners weresubject to mortgage, the proper method of distribution of the proceedsof sale should be based upon a consideration of the value for which thepurchaser would buy the land as unencumbered.
After the deduction of the pro rata costs, the owners of the unen-cumbered shares would be entitled to one-fourth share each of thenet proceeds and the others to ofte-fourth each less the amount oftheir respective mortgages.
PPEAL, from an order of the District Judge of Galle.
A. Rajapakse (with him E. B. Wicieremanayake), for plaintiffappellant.
H. V. Perera, K.C. (with him 17. A. Jayesundere), for 4th defendant,respondent.
February 27, 1942. Keuneman J.—
The conflict in this case arises between two schemes of distributionof the proceeds of a public sale under the Partition Ordinance. Theactual sum realized at the sale was Rs. 3,175 pro rata costs and otherexpenses amounted to Rs. 250.47, leaving the net sum of Rs. 2,924.53available for distribution.
The property in question was held in the interlocutory decree to belongto the plaintiff, 1st defendant, 3rd defendant arid 4th defendant in equalshares, i.e., one quarter share to each. The shares of the 3rd and 4thdefendants were unencumbered. The share of the plaintiff was subjectto a mortgage of Rs. 1,500 and the share of the 1st defendant was subjectto a mortgage of Rs. 386.25. The sums mentioned included interestsaid to be due on the mortgages from the dates of the mortgages up to thedate of the sale under the Partition Ordinance.
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KETJNEMAN J.—Mohamed v. Sinnemuttu.
The plaintiff filed a scheme of distribution, in which the existence ofthe mortgages mentioned was disregarded. According to this scheme theplaintiff, the 1st defendant; the 3rd defendant and the 4th defendantreceived equal. shares of the net sum of Rs. 2,924.53, that is to say,Rs. 731.13 each. This scheme was rejected by the District Judge.
In support of this scheme Mr. Rajapakse argues that the provision ofsection 8 of the Partition Ordinance (Cap; 56) made a division in thismanner imperative. He depends on the words “ and the purchasershall pay into Court the amount of the purchase money, agreeably tothe conditions of sale, to jae paid over to the persons entitled thereto,under the order of the Court, in the proportion of their respective sharesCounsel argues that the word “ shares ” meant “ shares in the premises ”.
There is this decree of force in the argument, viz., that the words“ shares and interests ” or “ shares or interests ” appearing in the earliersections (see sections 4 and 5) are not reproduced here. Counsel arguesthat the word “shares” in section .8 was restricted to “shares in thepremises
I do not agree with the argument. It has to be remembered that thephrase in question occurs in a section that deals, not with the rights ofthe parties to the action, but with the duties and obligations of the Com-missioner and of the purchaser at the sale, and the effect of the certificateof the Court. Further, the money in question is to be paid over to thepersons entitled “ under the order of the Court ”. This shows that theCourt has a controlling discretion with regard to the payment of themoney.
To interpret the words “ shares ” in the narrow sense contended forwould offend against the scheme of the Partition Ordinance and wouldlead to manifest injustice. I’d take an example, a person who hasimproved the land, and has been held entitled to compensation forimprovements under the interlocutory decree', would be precluded fromobtaining any share of the purchase money, because he did not have achare in the premises.
I rnay add that the proviso to section 8 also throws some light on thismatter. Under this, where one of the co-owners purchases the property,
“ the share due to him …. shall be deducted from the amountto be paid into Court by him ”. The word “ share ” in this connectionis not the share in the premises, but appears to be the share of theproceeds to which he is entitled.
I reject the argument that the word “ shares ” in section 8 means“ shares of the premises ”.
Mr. Raiapakse also argues that, though mortgages either of the whole,land or of undivided shares attach to the land in the hands of the pur-chaser and not to the proceeds of sale (see de Silva v. Rosinahamythe personal obligation of the mortgagor to pay the amount due remains,and it is open to the mortgagee to bring an action against the mortgagorfor the amount, and to give up the hypothecary action. I am inclinedto think that this contingency is so remote that it is usually incapable toassessment, and that ordinarily such ai contingency may be disregarded.
1 41 N. L. R. 56.
KEUNEMAN J.—Mohamed ». Sinnemuttu.235
Mr. Kajapakse also contends that the adoption of any other methodof distribution, except that advocated by himself, would involve theCourt in difficult and doubtful inquiries. Some of the inquiries willinvolve difficult questions of fact, but I do not think this affords a reasonfor deciding in Mr. Rajapakse’s favour. Certainly special considerationswill have to be taken into account, where the mortgages bind not onlythe land sold but other premises as well, and there may be other instanceswhere the assessment will be doubtful. It is sufficient to say that thepresent case appears to be free of these difficulties.
The scheme of distribution of the 4th defendant which has been acceptedby the District Judge subject to a slight modification is as follows. AsMr. H. V. Perera puts it, it is based upon the proposition that the schemeof distribution depends on the value of each party’s interest as it stoodimmediately before the sale. Accordingly the person who had anunencumbered interest must of necessity have a more valuable assetthan the person whose interest was subject to a mortgage. The nextpoint Mr. Perera urged was that the purchaser, whose purchase wasmade subject to the existing mortgages, would take those mortgages intoaccount in making his bid, and would accordingly offer less than for thepremises as unencumbered.
In the present case Mr. Perera argues that the fair value of the pre-mises unencumbered must be regarded as Rs. 3,175 (i.e., the actual bidof the purchaser) plus the amount of the two mortgages, i.e., Rs. 1,500and Rs. 386.25. The aggregate would then be Rs. 5,061.25, which maybe regarded as the purchaser’s appraisement of the property as unen-cumbered. From this the sum payable as pro rata costs, &c. (i.e.,Rs. 250.47) has to be deducted, leaving a balance of Rs. 4,810.78. The3rd and 4th defendants should really be entitled to one-quarter each ofthis amount; the 1st defendant to one-quarter, less Rs. 386.25; theplaintiff to one-quarter, less Rs. 1,500. In the case, of the plaintiff,however, this results in an adverse balance against Him, and accordinglythe sum actually available for distribution has to be divided among the1st, 3rd, and 4th defendants proportionally to their interests and theplaintiff gets nothing.
It is unfortunate that the plaintiff cannot be declared entitled to anycompensation, but Mr. Perera argues that this is due to the fact that hehas mortgaged his share for a larger amount than the purchaser waswilling to pay for it.
I think the two propositions on which Mr. Perera rests his scheme ofdistribution are fair and reasonable, and I see no legal obstacle, to theiradoption for the purpose of making the distribution. In this case Mr.Perera arrives at his estimate of the fair value of the premises unencum-bered by adding, to the amount of the purchaser’s bid, the sums due onthe mortgages outstanding. Ordinarily this may be a satisfactory methodof arriving at the true value of the property as unencumbered, but I amfar from saying that this method can be employed as a rule of- thumb,for special circumstances may exist in particular cases which have to betaken into account.- I have already rferred to one of these cases. It
236
HEARNE J.—Dionis v. Piyoris Appu.
is sufficient to say that, in the present case, no such special circumstanceshave been shown to exist, and I think the present scheme of distributionis reasonable.
There is one argument of Mr. Rajapakse to which I have not referred.He urges that besides the mortgages disclosed in the partition proceedingsthere may be mortgages not disclosed. In practice • these would berestricted to registered mortgages, and the parties interested should beIn a position to place material before the Court. As far as the Court isconcerned, it will have to decide the case on the material before it.As regards the question whether any part of the capital or interest dueon the mortgages has been paid before the date of sale, here again theparty interested should be in a position to supply adequate materialfor the Court to determine this question. I do not think any of thesematters provide insuperable difficulties.
The appeal is dismissed with costs.
Soertsz J.—I agree.
Appeal dismissed.