F.H. Manisty and Others vs J.V. Jameson and Another

Jwala Prasad, J.—The plaintiffs are appellants. They are: (1) Francis Henry Manisty; (2) James Boyd Himson Bill: and (3) Henry Walter Dunlop Hill. The defendants are: (1) Julian Veitch Jameson and (2) Mrs. Georgina Gertrude Munro Jameson. Defendant No. 2 is the wife of Defendant 1.

The plaintiffs brought an action to enforce a simple mortgage sat forth in an indenture (Ex. 1) dated the 15th January 1920, and confirmed by an agreement (Ex. 2) dated 12th March 1920. The indentures were executed by both the defendants in respect of a debt of Rupees 21,000 due from Mr. J.V. Jameson alone to the plaintiffs; and as security for repayment of the debt Mr. Jameson mortgaged the whole of the Jalaha Indigo concern which belonged to him, and Mrs. Jameson mortgaged her undivided two-sixteenths share in the indigo concern called the Karnowl indigo concern. The loan was to be repaid in four instalments, namely:

(1) Rs. 3,000, on the day of handing over the indenture;

(2) Rs. 6,000, on the 30th June 1920.

(3) Rs. 6,000 on the 31st December 1920;

(4) Rs. 6000 on the 30th June 1921; and with a stipulation that in case any of the installments remained unpaid on the due date the mortgagees will have a right to take action on the indenture to recover the whole of the balance due after giving the said Mr. Jameson one month''s notice in writing of their intention to do so. The mortgagor however had a right to pay any installment or any part thereof before the date mentioned as that on which it falls due. As Mrs. Jameson was not the principal debtor it was stipulated for her benefit that as soon as the total amount due under the mortgage became less than Rs. 12,000 and the rents due to the Bettiah estate on account of the leasehold properties, whether mukurrari or otherwise, shall have been paid, the liability of Mrs. Jameson under the indenture shall cease and determine and thereafter the remaining amount unpaid shall continue to be the first charge on Mr. Jameson''s Jalaha Indigo Concern alone.

The first instalment of Rs. 3,000 was paid on the day the mortgage indenture was executed, i.e., on 15th January 1920 the second instalment of the 30th of June 1920 was not paid on the due date. On She 27th September 1920 Rs. 3,000 was sent by Mr. Palmer on behalf of Mr. Jameson to Mr. J.B.S. Hill through one Mr. Kasturi Lal and received by Mr. Hill on the 28th September 1920 (receipt Exhibit 3). Mr. Palmer did not direct as to whether the said sum of Rs. 3,500 was to be credited towards the mortgage loan or the personal loan which admittedly Mr. Jameson owed at that time to Mr. J.B.S. Hill. On the 8th November Mr. Palmer sent another sum of Rs. 3,000 stating in his letter (Ex. 9) of that date that it was paid on account of the mortgage on behalf of Mr. Jameson. On the 18th November Mr. J.B.S. Hill intimated to Mr. Jameson by his letter of that date (Ex. 4) that he had appropriated Rs. 2,083 due to him on account of the personal loan from Mr. Jameson out of Rs. 3,500. and the balance together with Rs. 3,000 was credited towards the mortgaged loan, thus leaving a balance of Rs. 2,524.4-0 due in respect of the June kist under the mortgage. He asked him to sent this sum so as to clear off the June kist. On the 25th November 1920 Mr. Palmer as Manager of the Jalaha Indigo Concern wrote a letter (Ex. 12) to Mr. J.B.S. Hill on behalf of Mr. Jameson sanding Rupees 1,515-12-6 along with two statements of account up to 27th November 1920, (1) for the personal loan; and (2) for the mortgage (Exhibits 12 and 12-B respectively) he credited the entire sum of Rs. 6,000 aforesaid towards the mortgage loan, and out of Rs. 1,515-13-6 he credited Rs. 541 towards the mortgage and the balance of Rs. 974-12-6 towards the personal loan thus reducing the loan account to Rs. 1,200 and the mortgage to Rs. 11,900. As the mortgage loan was brought down under Rule 12,000 claimed in his letter the release of Mrs. Jameson''s undivided two-sixteenths share in the Karnowl Indigo Concern in accordance with the stipulation in the mortgage bond, the kist due to the Bettiah estate having been paid in full on the 30th September 1920 on account of the leasehold properties and mukarrari. Mr. Hill acknowledged the letter and the sum of Rs. 1,515-12.6 on the very day he received them per letter (Exhibit 1) and said that as he was going that night to the mela he would send his reply later which he did on the 9th December (Ex. 10). In this letter he credited the aforesaid Rs. 1,515-12-6 towards the unpaid amount of June kist referred to in his letter of the 18th November (Ex. 4), reducing it to Rs. 1,008-7-6 (i.e., Rs. 2,524-4-0 minus Rs. 1,515-12-6). He insisted upon the appropriation made by him in his earlier letter of the 18th November on the ground that Mr. Jameson had premised payment of his personal loan in June. He also pointed out certain small in accuracies in the accounts given by Mr. Palmer.

The December kist of Rs. 6,000 fell due on the 21st December and was not paid. Mr. Hill accordingly, on the 9th January 1921, wrote a letter (Ex. 6) to Jameson stating that as the balance of June kist according to his letter of the 9th December and also the December instalment were not paid he would give due notice that if the full amount was not paid within a month he would take action to realize the whole amount of the mortgage under the terms of the deed. He sent the notice that very day (Ex. 13) which was received by Mr. Jameson on the 14th January per acknowledgment (Ex. 15). On the 13th February 1921 Mr. Jameson wrote to Mr. Hill refusing to accept Mr. Hill''s mode of appropriation of the payments made by him and asking him to appropriate the same in the manner stated by Mr. Palmer in his letter of the 25th November. He also asked him to release the Karnowl Indigo Concern of his wife from the mortgage. Mr. Hill wrote back to him (Ex. 11) on the 19th February refusing to accede to his request and insisting upon his right to appropriate Rs. 3,500 paid in September 1920 towards his personal loan inasmuch as it was not suggested to him that it was to be credited to the mortgage account.

Mr. Hill brought his suit to enforce the mortgage against both the defendants Mr. and Mrs. Jameson, inasmuch as according to him Rs. 1,008-7-6 was due to him in respect of the June kist of 1920 and Rs. 12,000 for the December kist of 1920 and June kist of 1921 making a total of Rs. 13,008-7-6 which with interest on the date of the suit amounted to Rs. 13,265-12-5.

The defendants filed separate written statements. The principal contention however on their behalf has been that the plaintiffs ought to have credited the entire sum of Rs. 3,500 paid on the 27th September 1920 to the mortgage account instead of crediting only a portion of it namely Rs. 1,418, after paying off the personal loan of Mr. J.B.S. Hill amounting to Rs. 2083, and that the, plaintiff''s claim should thus be reduced which would bring down their claim to less than Rs. 12,000 on the 8th November 1920, the date on which another sum of Rs. 3,000 was paid. Accordingly on behalf of the Defendant 2 it was contended that her liability under the mortgage ceased and determined and that the plaintiffs were not entitled to a decree against her own share in the Karnowl Indigo concern. The other pleas of the defendants were of minor importance as the issues framed would show and the Court below decided those issues against them. They do not arise in this appeal.

The principal contentions of the defendants referred to above gave rise to the following issues: Whether the plaintiffs were entitled to credit Rs. 3,500 towards the loan account as alleged by them.--(Issue No. 3).--

Did the defendant 1 promise to pay up the loan account in June? If so does it entitle the plaintiffs to credit Rs. 3,500 to the loan account?--(Issue No. 4).

The Court below decided the two issues together and held that the Defendant 1 had promised to pay the personal loan to the Plaintiff 2 along with the June instalment of 1920 but that the plaintiffs were not entitled to credit any amount out of the sum of Rs. 35,000 against the loan account and ought to have credited the same towards the mortgage account. Accordingly the Court below reduced the claim of the plaintiffs to Rs. 11,900 on the 8th November 1920 as contended for by the defendants and as this sum was under Rs. 12,000 and the arrears of rent due to the Bettia estate were paid up the Court below released Mrs. Jameson and her Karnowl Indigo Concern from the mortgage.

The plaintiffs have appealed against this decision. Mr. Jameson has not appeared in this Court, and the appeal is resisted only by Mrs. Jamson.

The only question before us is whether Mr. J.B.S. Hill, one of the plaintiffs, was entitled to appropriate Rs. 2,083 out of Rs. 3,500 paid on the 27th September 1920 towards his personal loan and then due from Mr. Jameson. (His Lordship then while discussing the circumstances and probabilities in respect of the appropriation of the amount continued). In the case of Simson v. Ingham 2 B and C 65 it was laid down that the right of the creditor to appropriate the payment towards any of the debts due to him continues up to the time that he intimates the appropriation to the debtor. The decision goes further and holds that the creditor has a right to cancel his own appropriation towards a particular debt and to appropriate subsequently towards another debt provided he does so before he had communicated the previous appropriation to the debtor. Referring to the aforesaid case Sir Henry Cunningham and Sir Horatio Shepherd, in their commentary on the Indian Contract Act u/s 60 observe:

This is contrary to the rule of civil law according to which an appropriation whether by debtor or creditor is necessarily made at the time of payment.

(The judgment further discussing the evidence found that the finding of the learned Subordinate Judge as regards the appropriation was erroneous and then proceeded.) Suppose for a moment that Mr. Jameson intended that the sum of Rs. 3,500 should be appropriated towards the June kist of the mortgage, but his intention will not be of any avail until it was communicated to the creditor. The principle of appropriation of payments made by a debtor who owes several debts, to a creditor has been enunciated in the case of Cory Bros. & Co. Ltd. v. Owners of the Turkish Steamship "Mecca" (1897) AC 286, where it has been laid down that the right to adopt the manner of appropriation rests directly with the debtor. In the absence of any direction of the debtor it is open to his creditor to appropriate the payment towards any of his debts, and lastly, if there is no intimation by the debtor at the time of payment with regard to appropriation by the creditor, then it is open to the creditor to insist upon appropriation being made in the chronological order in which the debts stand. These principles have been so firmly established that it is needless to refer to any further authority. Suffice it to say that the principles have been crystallized in the Indian Contract Act in Sections 59 to 61. The present case lies in a nutshell. Mr. Jameson, as proprietor of the Jalaha Indigo Concern owed two debts to Mr. J.B.S. Hill (1) on account of his loan advanced to the Jalaha factory at a time when he, along with the other plaintiffs and Mr. Jameson, was the proprietor and which subsequently became the sole property of Mr. Jameson; and (2) the mortgage debt due to Mr. J.B.S. Hill and the other two plaintiffs in the case, Mr. Hill acting on their behalf and representing them throughout the transaction. Mr. Jameson had promised to pay off the personal loan along with the June kist under the mortgage. In September 1920, long after the June kist had become due, Mr. Jameson paid Rs. 3,500 on the 27th September 1920 to Mr. Hill without telling him towards which of the two debts payment was to be appropriated. In the absence of any such direction Mr. Hill appropriated the same towards the full satisfaction of his personal loan and the balance towards mortgage debt, and he indicated the same to Mr. Jameson on the 18th November 1920. Mr. Jameson subsequently asked him to credit the entire sum of Rs. 3,500 towards the mortgage loan, and not towards his personal loans Mr. Hill refused to do so. Thereafter Mr. Jameson, on the 13th January 1921, objected to the appropriation and asked Mr. Hill to appropriate the entire sum of Rs. 3,500, towards the June kist which Mr. Hill refused in the following words:

With reference to your letter dated 13th instant I have to write to you that I am sorry I cannot accept the suggestions made in your said letter.

At the time of the payment of Rs. 8500 in September 1920 it was not suggested to me that the payment should be first credited to the mortgage account B or that any specified amount should be credited to the mortgage account B. I had the right to credit to whichever account I liked and as I considered it proper to credit it first to the loan account I did so and you are duly informed about it. You are wrong in thinking now that you have a right to ask me to credit any portion of the sum credited to the loan account to the mortgage account,

The position taken by Mr. Hill in this letter is fully in consonance with the law on the subject as stated above. Therefore Rs. 3,500 was properly credited towards to personal loan account of Mr. J.B.S. Hill. The result of this appropriation is that the mortgage debt due at the date of the suit, or when the cause of action arose, was not under Rs. 12,000, but it was as claimed in the plaint, and therefore Mr. Jameson or Mrs. Jameson or her two-sixteenth share in the Karnowal Indigo Concern could not be exempted from the mortgage. The view taken by the learned Subordinate Judge is wrong, and, differing from him, I set aside the decree made by him and decree the appeal with costs.

Accordingly we decree the plaintiffs'' suit in terms of the reliefs sought for by them against both the defendants and the properties mortgaged in the mortgaged indenture (Exhibit 1), dated the 15th January 1920. The plaintiffs will get an ordinary mortgage decree with six months'' grace allowed to the defendants to pay up the principal sum claimed with interest at the stipulated rate, failing which the plaintiff will be entitled to sell the properties mortgaged. After the expiry of the period of grace interest will run at the rate of 6 per cent. per annum. The plaintiffs will also get a decree under Order 34, Rule 4 of the Code of Civil Procedure.

Bucknill, J.

I should like to add only a few words to the judgment of my learned brother. I think that the law in this subject is clear. In the House of Lords in the case of Gory Brother and Company Ltd. v. The Owners of the Turkish Steamship "Mecca" (1897) AC 286, His Lordship Lord Macnaghten there states in clear language that when a debtor is making a payment to his creditor he may appropriate the money as he pleased and that the creditor must apply it accordingly. If the debtor does not make any appropriation at the time when he makes the payment the right of appropriation devolves upon the creditor. In the old and former case of Devaynes v. Noble (1816) 1 Mer 585 (usually known as Glayton''s case) which was decided in 1816, it was held that the creditor was bound to make his election at once or within a reasonable time. But Lord Macnaghten observes that it had long been held, and is now quite settled law, that the creditor has the right of election up to the very last moment. It was also stated in the same case decided in the House of Lords, to which I have already referred, that the appropriation of the money is governed, not by any rigid rule of law, but by the intention of the creditor, expressed, implied or presumed and that the same principle is no doubt applicable to appropriation by the debtor. Now in this appeal now before the Court it is common ground that there certainly was no express information given by the debtor to the creditor as to the appropriation of the sum, nor, so far as I could see, was there any ground for suggesting that with regard to this sum (the appropriation of which is now in dispute) there had taken place anything from which the creditor could or should have extracted any implied intention on part of the debtor as to the methods of its appropriation. Still less was there in my view any presumption which could be fastened upon the creditor that the debtor''s intention was that the money should be appropriated to the latter of the two specific debts, i.e., to the mortgage. Under these circumstances it appears to me that in this case, as the law stands, it is hopeless to argue and cannot seriously be maintained that Mr. Hill could not have had the right of appropriating the sum in whatever manner he might have thought fit.