9911796707
TMI Blog1906 (12) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... directed that upon failure of the Defendants to pay, within six months, the decretal amount (about Rs. 1,100) the mortgaged property be sold. Payment was not made, the decree-holder took out execution, the mortgaged property was sold on the 20th September 1897 and was purchased by the present Appellant for Rs. 600. On the 31st August 1903, the second mortgagee commenced this action to enforce his security upon the allegation that at the sale held in execution of the decree obtained by the first mortgagee, the property had been bought in by the mortgagor in the name of the ostensible purchaser and that, consequently, the validity of the second mortgage had not been affected in any manner. The claim was resisted by the prior purchaser on the ground that he was the beneficial owner and that the sale at the instance of the first mortgagee had extinguished the second mortgage. The Subordinate Judge held, upon the evidence, that the purchaser was not a benamdar for the mortgagor, that the sale at the instance of the first mortgagee had extinguished the second mortgage because the second mortgagee had failed to avail himself of the opportunity to redeem given by the decree and that the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recisely what is stated by the learned vakil for the Appellant; the effect of a sale under such circumstances is to pass the property to the purchaser free of both the prior and the puisne incumbrances and the second mortgagee is entitled to the benefit of the surplus sale-proceeds after the claim of the first mortgagee has been satisfied: for, as observed by their Lordships of the Judicial Committee in Raja Kishen Dutt Ram v. Momtaz All Khan L.R. 6 IndAp 145: s.c. I.L.R. 5 Cal. 198 at p. 211 (1879), the effect of a sale under a power-of-sale is to destroy the equity of redemption in the lands and to constitute the mortgagee exercising the power, a trustee of the surplus proceeds after satisfying his own charge, first, for the subsequent incumbrancers and ultimately for the mortgagor; the estate if purchased by a stranger passes into his hands free from all the incumbrances. If, however, upon a sale by the first mortgagee, the property is purchased by the mortgagor himself, other considerations arise and the mortgagor can only acquire the estate, subject to the second mortgage upon the principle that it is his duty to discharge the estate for the benefit of the second mortgagee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was pointedly stated by Wood, V.C, himself in Bevan v. Habgood 1 John. and Hem. 222 (228) (1860), it was the duty of the mortgagor to pay up the first mortgage, the power-of-sale under which could arise only on the mortgagor's default; the mortgagor cannot take advantage of his own default to purchase the estate under the power to the prejudice of the second mortgagee with whom he had contracted to give a security upon the estate to the amount of the money which he had advanced. That this is the true foundation of the rule is manifest from the judgment of Lord Chancellor Cranworth delivered in the appeal which was preferred in that case Otter v. Lord Vaur 6 DeG. M. and G. 638 (1856), in which he observed that no distinction could be based upon the circumstance that the title of the mortgagor arose under the power of sale of the first incumbrancer; to do so would be to sacrifice substance to form. To all intents and purposes the mortgagor had paid a sum of money to his first incumbrancer and got back the estate for the benefit of subsequent incumbrances created by himself, against which he could not set up the prior debt. In other words, as put by Palles, C.B., in In re Cork H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle deducible from these authorities has also been held applicable to cases in this country. See Ramawtar Singh v. Tulsiram 5 C.L.R. 227 (1879), Shyama Churn v. Ananda Chandra 3 C.W.N. 323 (1880), Raghu Nath v. Lalji I.L.R. 23 Cal. 397 (1895) and Ganga Sahay v. Tulshirum I.L.R. 25 All. 371: s.c. 23 All. W. N. 75 (1903). Reference may also be made to the decision of the Judicial Committee in Raja Kishen Dutt Ram v. Momtaz Ali Khan L.R. 6 IndAp 145: s.c. I.L.R. 5 Cal. 198 (1879), which affirms the general principle, that most acquisitions by a mortgagor enure for the benefit of the mortgagee, as agreeable to equity and good conscience and in Syed Rutf Ali Khan v. Futteh Bahadoor L.R. 16 IndAp 129: s.c. I.L.R. 17 Cal. 23 (1889) which shows that a purchase by a mortgagor at an execution sale at the instance of his second mortgagee does not entitle him to possession as against the purchaser in execution of a decree obtained against him by his first mortgagee. It must be held consequently in the present case that if the mortgagor himself really purchased the property at the sale held in execution of the decree obtained by the first mortgagee, such purchase did not in any way prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he estate created and passing by the mortgage, or estates or interests subsequently acquired by the mortgagor, and ensuring by way of estoppel to the benefit of the mortgagee; and consequently, not only the mortgagor, but all persons deriving title from him subsequent to the mortgage and bound thereby as holders of different fragments of the equity of redemption are necessary and proper parties to a suit to enforce the mortgage [see Wells v. American Mortgage Co. 119 Alab. 430]. These observations may be appropriately applied be the circumstances of the present case. Here the Appellant does not claim adversely to the title of the mortgagor and the mortgagee; he does not question the validity of the mortgage at its inception; but he contends that subsequent to the mortgage, he has acquired a title by reason of which the mortgage has been destroyed. The mortgagee contends, on the other hand, that the Appellant is a mere shadow of the mortgagor, and that in spite of the transaction which is alleged by him to be the foundation of his title, the mortgage is still operative and enforceable. The case, therefore, falls within the principle of the decision in Converse v. Michigan Dairy Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortgagee should therefore be permitted to bring the claimant before the Court for the purpose of determining whether his own rights have or have not been divested by the sale. If this was not done, there would be a substantial impediment to the enforcement of the mortgage, as no third person would purchase the property at a fair price, and assume the burden of a subsequent litigation with the prior purchaser. This view was taken by the Supreme Court, of the United States in Mendenhall v. Hall 134 U.S. 559, in which it has held that when a mortgagee comes into Court, and asserts his rights as against a tax-sale of the mortgaged property, alleged by him to have been collusively made by the mortgagor and the purchaser to remove the mortgage lien, he may proceed against both the purchaser and the mortgagor. [See also Hefner v. N.W. Mutual Life Insurance Co. 123 U.S. 747], in which it was held that although the holders of a prior adverse title were not proper parties to a mortgage-suit, yet where the whole title was in the mortgagor at the date of the mortgage, and a claimant alleged that he had subsequently acquired title superior to that created by the mortgage, the owner of such alle ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
