Back
MITCHELL v. FERNANDO et al.
NLR46V265
1945 Present: Howard
C.J. and Keuneman J.
MITCHELL, Appellant, and FERNANDO et al., Respondents.
344-D. C. Colombo, 731.
Mortgage-Shares in
Company-Delivery of scrip-Delivery of possession-Cession of right-Sale in
execution against mortgagor-Knowledge of mortgage-Title of Fiscal's
transferee-Action on mortgage bond- Roman-Dutch law.
The first and second defendants mortgaged shares in a Company with the plaintiff
by bond and deposited the share certificates with the plaintiff along with the
bond. While the shares were under mortgage the third defendant purchased the
shares in execution of a money decree against the first and second defendants
and obtained Fiscal's conveyance. Thereafter the shares were registered in the
Company's, register under the name of the third defendant.
Held (In an action on the bond by the plaintiff), that delivery of the share
certificates was not sufficient evidence of the effective delivery of the shares
mortgaged. The possession of the share certificates did not give to the
plaintiff such control and direction of the shares-mortgaged as to be equivalent
to possession in law of the shares mortgaged.
As regards delivery of possession the mortgagee of an incorporeal right stands
on the same footing as that of a corporeal right. Although an incorporeal right
is incapable of physical delivery possession may be given by cession of right.
Held, further, that, as the third defendant had knowledge of the mortgage, the
plaintiff was. entitled to resort to the shares in her hands in execution of a
decree on the bond.
Held, also, that the Roman-Dutch Law was applicable to the case.
APPEAL
from a judgment of the District Judge of
Colombo. The facts appear from the head-note.
N. Nadarajah, K.C. (with him E. F. N. Gratiaen and S. J. Kadirgamer), for the
plaintiff, appellant.-The question for consideration is, where shares in a
Company have been mortgaged both by hypothecary bond and delivery of the share
certificates to the mortgagee, whether an execution sale of the right, title and
interest of the mortgagor in the shares extinguishes the mortgagee's rights even
where the execution purchaser had knowledge and notice of the existence of the
mortgage. The plaintiff in the present case is the mortgagee, the first and
second defendants are the executors of the deceased mortgagor, and the third
defendant had caused to be seized and sold and herself purchased the shares in
question under a money decree in D. C, Colombo, No. 52,407.
Shares are regarded as movables. Sections 61-69 of the Companies Ordinance, No.
51 of 1938, are relevant. It is the English law which would govern a mortgage of
shares. Section 3 of the Civil Law Ordinance (Cap. 66) definitely states that
any matter relating to joint stock companies is to be decided according to the
English law, unless it has been superseded by special enactment. There is no
enactment superseding the
English law as regards mortgages
of shares. Moreover, shares in Companies were things unknown to the Roman-Dutch
law. According to English law, the method of dealing with shares is by share
certificates. The certificates are the only evidence of title, and a mere
deposit of them is sufficient to create an equitable mortgage-Palmer on Company
Law (16th ed.) 127; Societe General de. Paris v. Walker1; Bradford
Banking Co. v. Briggs 2.
Assuming that Roman-Dutch law is applicable in the present case, a mortgage of
movable property may be effectually made by delivery of the movable to the
creditor coupled with an agreement that it is to be held as security-Wille on
Mortgage (1920 ed.) 95 ; Vote 20. 3. 1 ; Voet 20 1. "12; Grotius Intro
2.48.26-28; Tathan v. Andree 3. The difference in law between a
mortgagee with possession and a mortgagee without possession of the property
mortgaged is dealt with in Adaicappa Chetty v. Perera et al.4; Voet
20. 1. 13; Wille on Mortgage p. 257; Coaton v. Alex
