Case No.:

(HC-CS-36o- 1959)

Court:

The High Court

Issue No.:

1960

Principles

·  Mortgage- Equitable assignment

 
A deed of mortgage was executed between Taha Abdel Mageed El Gabbani and Abdel Hadi Abdel Mageed El Gabbani as debtor-mortgagors and Dolabgi Samje Virani (Sudan) Limited as creditor-mortgagee to secure the sum of  LS.10,000 for the financing of a partnership consisting of the two debtor mortgagors and the husband of the defendant Naiema Mohamed Hassan, whose liability for the repayment of the loan was stipulated in the deed as the guarantor mortgagor. The subject matter of the mortgage was property belonging to the debtor-mortgagors and the defendant, Naiema Mohamed Hassan. The debtor mortgagors paid two-thirds of the loan and failed to make any further payment. The creditor-mortgagee obtained by CS/61/57 a decree against the debtor mortgagors and the defendant Naiema as guarantor-mortgagor for the payment of the balance of the loan.
The two dehtor-mortgagors, having become bankrupts, agreed by way of compromise and composition to register all their properties, subject to the said mortgage, in the plaintiff’s name—the plaintiff paid the balance of the loan.
The two debtor-mortgagors, having become bankrupts, agreed by way of comprmise and composition to register all their properties, subject to the said mortgage, in the plantiff, s name –the pliantiff paid the balance of the loan to  the creditor-mortgagee and released the mortgage. The plaintiff as equitable transferee of the mortgage now sued the defendant Naiema Mohamed Hassan for the recovery of the money paid by him.
Held: The defendant was no longer a guarantor-mortgagor hut a debtor- mortgagor; for the mortgage agreement was merged in the decree passed by the District Court which placed the liability for the repayment of the loan on all the parties, debtor- and guarantor.mortgagors alike, jointly and severally without discrimination. The defendant having become by vIrtue of the decree a debtor- mortgagor was liable for the unpaid balance of the loan on the ground of equity. Equality is equity. That balance having been paid by the plaintiff, the defendant was liable to reimburse him with such funds as plaintiff found necessary to pay in order to release the mortgage.

Judgment

 (HIGH COURT)

SIDDIK ABDEL HADI EL GABBANI v. NAIEMA MOHAMED HASSAN ABDEL MONEIM

(HC-CS-36o- 1959)

Action

Advocate: Hussein Osman Wanni ………………for plaintiff

                            Mohamed Ahmed Mahgoub………..…… for defendant

June 28, 1960. Osman El Tayeb I.: —An agreement was made on August 29, 1955, whereby Taha Abdel Mageed El Gabbani and Abdel Hadi Abdel Mageed El Gabbanj on the one part, and Naiema Mohamed Hassan, wife of Khogali Abdel Mageed El Gabbani, on the second part, and Dolabgi Samje Viranj (Sudan) Limited on the third part, agreed that certain pro perties registered in the names of the first two and also certain properties registered in the name of Naiema be mortgaged to the named company to secure the sum of £S.10,000. This money was paid and the mortgage was registered.

Taha and Abdel Hadi were referred to in the mortgage deed as the debtor-mortgagorS and Naiema was referred to as the guarantor-mortgagor. The deed provided for the creation of a partnership between Taha, Abdel Hadi, and Khogali (husband of Naiema) with the object of export of cattle to Egypt, and it stated that the loan was required for the financing of the said partnerships and that the mortgagors, including Naiema as guarantor, mortgaged their properties to the lender. All the mortgagors undertook to pay the loan together with interest on some stipulated instalments, making the loan and interest to be £S11,000. The deed further provided that the liability of the partnerships including the two debtor-mortgagors, should be joint and several for the settlement of the loan.

By CS/61/57 in this court, the mortgagee applied for sale or foreclosure, and a preliminary decree was passed against the three mortgagorS for payment of the sum of £S.11, 451.000m/mS on January 23, I958 Taha and Abdel Hadi settled two-thirds of the said sum, leaving the balance of £S.3, 816.666m/ms unsettled.

It happened that both Taha and Abdel Hadi were adjudicated bankrupts, and in these proceedings Siddik Abdel Hadi appeared as one of the creditors. By way of both compromise and composition it was agreed that the properties of both Taha and Abdel Mageed subject to the above-mentioned mortgage be registered in his name free from any charges, and that he would settle the debts of the unsecured creditors in accordance with the scheme of composition. This necessitated that the mortgage debt of the company above referred to had to be fully settled.

The sum of £S.3, 816.666m/ms (one-third of the mortgage debt) was still unsettled. Plaintiff settled this sum in order to release the mortgage, at the same time reserving any right accruing to him by so doing against Naiema.

Now Siddik brought this case as plaintiff against Naiema as defendant, alleging that defendant as a co-mortgagor, with two others, was liable for payment of one-third of the mortgage debt, and that as he paid that one-third, he is entitled to become a mortgagee of the properties of defendant to secure that sum.

The defence made by defendant can be summarised in two points:

1. The defendant was a guarantor of the mortgage debt, and her mortgaged properties cannot be put for sale, nor should she be compelled to pay the mortgage debt, except after the exhaustion of the principal’s properties. And

2.There was no express or implied agreement between the parties that plaintiff should pay off the debt on assignment of the mortgage to him.

As to the first point, I think defendant is no longer a guarantor as far as the mortgage debt is concerned, but she has virtually become a principal mortgagor by the decree that was passed in the case. The decree ordered all the mortgagors to pay the principal debt and interest jointly and severally. The mortgage agreement in which defendant was shown as guarantor was merged in the decree which placed the liability on them and jointly and severally without reference as to whether the one was a principal and the other a guarantor. As a general rule—and I know of no other to the contrary—the guarantor can bear no less liability than the principal debtor vis-à-vis the creditor.

Another argument connected with this is that the other two debtors paid two-thirds of the mortgage debt, and the sale of part of their properties would have satisfied the other one-third of the debt. The decree provides for the sale of the mortgaged property or “any part thereof.” If the part of the properties of the other two debtors was sold the debt would have been settled in full and the defendant’s properties would have been released free of charge.

Had this been done it would have brought all this trouble to an end, but so long as the mortgage remained and before its release, the defendant should remain liable. But defendant should not remain liable alone for the unsettled amount of debt; the two other mortgagors should remain still liable with her for that unsettled part. The three of them are liable jointly and severally for any unpaid part of the debt.

Why should defendant be taken to have been liable for payment of that unpaid amount of the debt? It may be on the ground of justice and equity that the co-debtors should pay their debt in equal shares. Equality is equity.

I come to the second point: plaintiff paid off that one-third. It was stated in the record of the bankruptcy proceedings that he paid it on behalf of defendant, and the court gave him leave to proceed against defendant for any right that he may have against her.

It is clear that the mortgagee may assign or transfer the mortgage to a third person, who pays off the mortgage debt to him without the consent of the mortgagor. Transfer of charge or mortgage registered under the Land Settlement and Registration Ordinance can be affected by deed made and executed by the mortgagee and this transfer can be registered. This is a legal transfer. In case that no registration was made the transfer is an equitable one. So it appears that a transfer of a charge to a third person can be made without the agreement or consent of the mortgagor.

It depends on the agreement of the mortgagee and the transferee. But the mortgagee takes subject to the right accruing or being in the course of accruing to the mortgagee.

The learned advocate for plaintiff submits that as plaintiff paid off the mortgage debt he had the intention of keeping the mortgage alive for his benefit; and that as registration plaintiff did not affect the transfer has become an equitable transferee. He relies on a quotation from Haisbury’s Laws of England, 3rd edition, Vol. 27, p. 270.

“Although there has been no actual transfer of the mortgage, a person who advances money for the purpose of paying it oP, and whose money is thus applied, becomes an equitable assignee of the mortgage, and is entitled to have it kept alive for his benefit.”

I confess that I find this case to be a very difficult one. In trying to pronounce judgment in it and after a lot of thought, I came to the conclu sion: (a) that defendant was liable to pay the one-third of the debt that was left unpaid by the two first debtors who had paid two-thirds of their shares, and (b) that plaintiff, as he paid that one-third expressly to have an assignment of the mortgage on the property of defendant and that the mortgagees received the money and the mortgage was released, acquired an equitable interest on the property of the defendant. That equitable interest he contends is assignment of the mortgage, of which he is praying for specific performance.

In the circumstances of the case, that defencbnt’s property was mortgaged with the property of others, and that the payment was made to release all the properties, and that defendant did not agree expressly or impliedly to assignment of the mortgage to plaintiff, I find that it would not be fair to order registration of a mortgage in favour of plaintiff. I think further that the relief of plaintiff is the recovery of the sum that he had paid, as money paid by him for the use of defendant.

Decree to issue in favour of plaintiff against defendant for the recovery of the sum of £S.3, 816.666m/ms with costs.

(Judgment for plaintiff)*

*On appeal (AC/APP/19/1960).