MUTHAMMAL Vs. RAZU PILLAI AND FIVE ORS

JUDGEMENT

(1.) This is an appeal by the plaintiff from the decree of the Temporary Subordinate Judge of Ramnad, dated 21st September 1914, in a suit to enforce a mortgage. The question is what amount is due to the fourth defendant on two prior mortgages which, it is agreed, should be deemed to be still outstanding against the plaintiff. On March 29, 1899, defendants Nos. 1 to 3, the owners of certain houses in the town of Madura, mortgaged them to the Hindu Permanent Fund of that town to secure the repayment of the sum of Rs. 1,500 and interest. On the 26th September of the same year they again mortgaged the same houses and certain lands of theirs to Sevugan Chetty, the fourth defendant, to secure the repayment of Rs. 1,000 and interest. On February 9,1901, they again mortgaged the houses alone to the plaintiff s husband (deceased) to secure the repayment of Rs. 500 and interest. Sevugan Chetty sued on his mortgage in the Madura Munsif s Court, obtained a decree for Rs. 1,265-10-0 and further interest till payment, and for sale of the mortgaged properties, brought them to sale and purchased the houses on the 15th April 1904 for Rs. 1,100 and the lands on the 21st August 1905 for Rs. 500, and soon after obtained possession. His decree was satisfied except for a small sum of about Rs. 95. As the Fund had a first mortgage on the houses, Sevugan Chetty after his purchase paid to the Fund Rs. 2,537-6-11 on June 18, 1906, that being the sum then due for principal and interest and redeemed the mortgage. Plaintiff s husband was not a party to Sevugan Chetty s suit, and was not bound by the proceedings therein. He, in September 1906, claimed to redeem Sevugan Chetty, unless he was himself redeemed; Sevugan Chetty was quite willing to be redeemed on payment of the sum due on foot of both his mortgages, but nothing was done as plaintiff s husband probably found that the properties were not worth more than the value of the prior mortgages. Sevugan Chetty has subsequently sold the properties and the purchasers of the houses are parties to this suit. Plaintiff s husband died in August 1912, without taking any steps to enforce his mortgage. In the meantime house property in Madura has risen considerably in value and the plaintiff instituted this suit in December 1912, claiming over Rs. 5,000 on her mortgage offering to redeem Sevugan Chetty or his assignees, but claims to do so on payment of what would be found due on the prior mortgages up to the date of delivery of possession to Sevugan Chetty. Sevugan Chetty and his assignees on the other hand claim the whole amount that would be found due according to the terms of the deeds of mortgage up to the date of payment, without taking into account the profits or the income which they have received from the lands and houses. The learned Judge in the Court below has substantially accepted the contention of Sevngan Chetty, and allowed the amount due up to the date of the written statement in this suit--why that particular date was fixed is not clear--though in calculating the sum due he made a mistake. The question then is on what basis is to be calculated the amount due on the prior mortgages which must be deemed to be still outstanding as against the plaintiff.

(2.) A number of cases were referred to in which the question has come up for decision, but before we deal with them let us first consider how the matter stands on principle. A mortgagee who sues for foreclosure of the equity of redemption or for the sale of the secured properties, if he succeeds, gets the title of the mortgagor as it stood on the date of his mortgage or transfers that title to the purchaser, free from all interests or liens subsequently created by the mortgagor, provided he makes the owner of such interests or liens parties to the suit; but if he omits to make any of them parties, their rights or liabilities are not affected, but the purchaser (we are concerned in this case only with sales, though the same principle would apply to foreclosure also) would acquire the rights in the mortgaged properties of all the persons who were parties, just as if he had obtained an assignment from all of them, without however a merger of the interests or extinction of the liens so acquired. It is immaterial whether the purchaser is the mortgagee who sued, or another person except that the latter would be subrogated to the rights of the mortgagee only to the extent to which the debt was paid out of the price. It must, however, be remembered that the several interests or liens so acquired are kept distinct or kept alive only against the excluded party; for example, the purchaser at a first mortgagee s sale in a suit against the mortgagor to which the puisne encumbrancer is not a party cannot by subrogation claim to keep alive the first mortgage debt against the mortgagor. This is a matter of substantive rights and no mere conveyancing device can give a larger right; and the same result would follow if instead of a purchase in a court- sale, the purchaser had obtained by private treaty a transfer of the first mortgage and the equity of redemption subject to that mortgage. In such a case as between himself and the mortgagor, the purchaser assumes the payment of the mortgage and whether on payment he extinguishes the debt or takes a transfer, cannot in any way affect the mortgagor. Further if a purchaser agrees with the mortgagor to pay all the encumbrances, he cannot by paying an earlier mortgage keep it alive as against a puisne encumbrance, for he has got all he bargained for, and by merely performing his own obligation cannot get a larger right. The matter may also be viewed in another aspect which brings it closer to the present question. The mortgagor having given money s worth to the purchaser to pay all the encumbrances, when the purchaser pays them or any of them he does so really with the money of the mortgagor and the mortgage is extinguished in just the same way as if it had been paid by the mortgagor himself, provided that the purchaser is not deprived of the property given to him. If, before he is deprived of the property given to him by the mortgagor, he has derived any benefit from it, to that extent it is the mortgagor s money in his hands for which he must account in a suit to redeem him. It follows therefore that if the mortgagor or the owner of the final equity of redemption is not made a party to the suit, the purchaser at the sale at the best acquires only the interest of the mortgagee and he can be redeemed on payment of whatever is due on the mortgage at the time of payment, on taking accounts, as if such purchaser was a legal assignee of the mortgages. Sivathi Odayan v. Rama Subbayyar (1898) I.L.R., 21 Mad., 64, Dadoba Arjunji v. Damodar Raghunath (1892) I.L.R., 16 Bom.,486. If the mortgage was a simple mortgage the purchaser would be entitled to the whole of the principal and interest then due. If however such a purchaser takes possession claiming to do so as purchaser of the equity of redemption, though he did not obtain the title, he would be accountable; for the profits derived from the property for such profits would be money of the mortgagor in his hands. If after such purchase he does not get possession as purchaser of the equity of redemption, but by subrogation by paying a mortgagee with possession, he can only be called on to account on foot of the mortgage with possession when that mortgage is sought to be redeemed. If the owner of the equity of redemption is a party to the suit, but a puisne encumbrancer is not, the purchaser becomes the assignee of the mortgage sued on, as well as the transferee of the equity of redemption subject to the mesne mortgage, and if the purchaser obtains possession on sale from the owner, he must account for the profits at least in cases where the price he pays is not more than sufficient to pay the mortgage sued on; for in such a case the purchaser pays nothing for the equity of redemption and the profits of the land are to be considered as the money of the mortgagor placed in the hands of the purchaser to discharge the mortgage pro tanto. If beyond the value of the mortgages a price is paid for the equity of redemption and the purchaser gets possession from the owner of the equity of redemption who is and who is entitled to be in possession, it may be the purchaser would not be bound to account for the profits (Jones on Mortgages, Volume II, Section 1118(a); but we think justice requires that there should be an apportionment of the profits between the value of the mortgage and of the equity of redemption.

(3.) In this case all the three mortgages are simple mortgages and the mortgagees as mortgagees were not entitled to possession either before or after default. The price paid at the court-sale was not sufficient even to pay the mortgage sued on. The fourth defendant and his assignees would therefore be entitled to the principal and interest due on foot of the two mortgages dated March and September 1896 and be bound to account for the rents and profits of the properties from the respective dates on which the fourth defendant obtained possession through Court, the account being carried up to the date fixed for payment.