1. The plaintiffs who are traders got into difficulties in the beginning of 1908 and being unable to pay their debts, compounded with their creditors and agreed to pay 9 annas in the rupee. They paid one anna with the aid of two friends and arranged with the defendants for the payment of the balance amounting to Rs. 41,638-2-0. To re-pay this sum, the plaintiffs proposed to transfer to the defendants certain immovable property valued at Rs. 9,500, goods valued at Rs. 29,000 and certain book-debts and mortgage-debts of the value of Rs. 12,138-2-4, making a total of Rs. 46,638-2-0. The defendants were not sure that they would be able to realise the full value of the moveables and debts and also anticipated some difficulty in obtaining possession of the goods and the immovable property. They therefore required the plaintiffs to give security for any balance that may remain due to them after realizing the debts and selling the goods and also for any loss they might sustain by not being able to obtain possession of the moveables and immovable. The plaintiffs agreed to this and deposited Rs. 4,000 in cash and endorsed promissory notes of the value of Rs. 2,100-6-9 as security and caused one P. Bapanayya to execute a bond for Rs. 2,000 as additional security. As the defendants declined to take the risk of the moveables and the debts not realising their full value, the plaintiffs in their turn insisted on the defendants accounting to them for the actual amount realized by the sale of the goods and collection of the debts, to which the defendants agreed.
2. The transaction was carried through by the exeoution of Exs. 1, 2 and 3 by the plaintiffs to the defendants and of Ex. A by the defendants to the plaintiff. Exs. ½ and 3 are transfers of the moveable and immovable property, the book-debts and morttage-debt respectively and Ex. A is the contract of the defendants to account to the plaintiff. Besides these, P. Bapanayya executed Ex. 20 to the defendants at the request of the plaintiffs as further security for Rs. 2,000 and this document recites the terms on which the security of Rs. 6,100-6-9 was deposited. Plaintiffs now sue for accounts on the covenant contained in Ex. A. The Subordinate Judge in the Court below has taken the accounts and awarded to the plaintiffs the sum of Rs. 5,968-7-4 as the amount due to them with interest at six per cent, from the beginning of 1909, when he thinks the amount due to the defendants had been fully discharged. The defendants appeal objecting to the disallowance of several items of credit in their favour. Before we deal with the items, it is necessary to dispose of two other points raised by the appellants. The first is this: In taking the accounts, the lower Court deducted the value of the immovable property Rupees 9,500 from the Rs. 41,638-2-0 found by the defendants for payment to plaintiffs' creditors, thus treating the defendants as owners of the immovable property. The defendants contend that this is wrong, and that they are only liable to account for the immovable property as trustees and the sum of Rs. 9,500 should not be deducted from the amount due to them. We think the lower Court was right in treating the defendants as owners of the immovable property and in deducting Rs. 9,500-0-0 from the amount to them. Ex. A is quite clear on this point and is in these terms:
“We shall at once re-sell the moveable property which we purchased from you, and we shall add up the sale proceeds thereof to the amount that will be realized under the transfer Seeds which you executed to us and if the total amount should exceed the amount of the balance after deducting Rs. 9,500-0-0 relating to the immovable property, from Rs. 41,638-2-0 which we now paid for you, such excess amount and the pro-notes of the value of Rs. 2,100-6-9 which you kept with us in advance, or the balance of the pro-notes (if any amounts should be collected under some of the pro-notes), and the cash Rs. 4,000-0-0, these items will be accounted for.”
3. Ex. 1 is terms a sale of the moveable and immovable properties for a sum of Rs. 29,500-0-0. It is only as regards moveables and the debts that the risk of loss was undertaken by the plaintiffs and security given him for the deficiency. As to the immovables, the sale operated as an immediate extinguishment of the debt due to the defendants of the sum of Rs. 9,500-0-0, the value of the immovables. The learned pleader for the appellants wanted to refer to certain subsequent documents which, he said, showed that was not what the parties intended. We think that Ex. A is quite plain and unambiguous and we are not at liberty to qualify or deviate from the plain meaning of the document by reference to subsequent statements or conduct of the parties. We must, therefore, disallow this contention. The next point argued is that the lower Court should have assessed and allowed the loss sustained by the defendants owing to the non-delivery of certain of the immovable properties conveyed to them under Ex. 1. The learned Subordinate Judge has declined to go into this question and has referred the defendants to a separate suit. In this, we think he was wrong. It is to be observed that the security given by the plaintiff was intended to cover this loss also: see Ex. 20.
4. The decree of the Subordinate Judge in effect directs the return of their security to the plaintiffs freed from the charge of the defendants. Now coming to the several items for which the defendants claim credit, the first is a sum of Rs. 1,000 for commission as stipulated in Ex. A. The plaintiffs contend, and their contention has been accepted by the lower Court, that this commission of Rs. 1,000 is payable only in the event of the movables and the debts transferred to the defendants realising more than the amount for which they were transferred; and as admittedly they realized less, the defendants are not entitled to any commission. The language of Ex. A is not as clear as it might be, but we think that on a fair construction of Ex. A, the defendants are entitled to the commission claimed. Ex. A recites that the plaintiffs agreed to pay Rs. 1,000 as commission for conducting “all these affairs” as for their trouble in selling the moveables and realizing the debts; their trouble would be the same whether they realized more or less than their estimated value. It cannot be the intention of the parties that if the defendants realized one rupee more than the estimated value they should get the Rs. 1,000, but if they realized one rupee less they should lose their commission. The commission, it is to be observed, is a fixed sum and not a proportion of the excess. We allow this item. The next item is a sum of Rs. 951, the value of goods sold by defendant 2 to the plaintiff which had not been paid for. This sum is admittedly included in the debt for which the plaintiffs agreed to pay the dividend of 9 annas in the rupee. It is said that though the plaintiffs purchased the goods they did not take actual delivery.
5. We are not inclined to believe this story. The goods were admittedly weighed and after weighment the plaintiffs were debited with the price in the defendants' books and the plaintiffs signed the;entry. The title to the goods passed to them and if they did not take actual delivery it must have been included in the goods transferred to the defendants under Ex. I for the value of which the defendants have accounted in this suit. We allow this item. The next item consists of two sums of Rs. 1,130 and 140 making a total of Rs. 1,270. The plaintiffs signed an acknowledgment of having received these two sums from the defendants and expressly stipulated that they will re-pay this sum with interest if on taking accounts it was found that no money was due to them from the defendants. The acknowledgment shows that this sum was paid for railway and other charges for goods, which was not included in the sum of Rs. 41,000 odd which the defendants undertook to pay on behalf of the plaintiffs. The plaintiffs now say that these two sums are really part of the aforesaid Rs. 41,000 odd; in fact their previous acknowledgment of their receipt of these sums for railway charges, etc. is false. We see no reason to believe their present story and allow this item also. The next two items are items of charge against the defendants in respect of a mortgage-bond and a promissory note transferred to the defendants. The defendants did not take any steps to realise sums due till nearly two years after the transfer and when they sued, position of the debtor had materially changed for the worse. The result was the defendants, though they obtained a decree on the note, have not been able to recover anything from the debtor and it is said he has now become an insolvent. They have not realized the mortgage either and the security, it is said, is not sufficient to pay even a half of the mortgage-money.
6. If they had sued soon after the transfer to them, the defendants, as the Judge finds, might have realised the whole sum due from the mortgagors personally on their covenant. In these circumstances we agree with the lower Court that they were negligent in realising these two debts and were properly charged with their value. A distinction was sought to be drawn between the mortgage-debt which was transferred to the defendants, it is said, as trustees and the promissory note which was deposited as security, which the defendants were not bound to realize and which they were entitled to return to the plaintiffs in specie. Ex. A, no doubt, gives the defendants liberty to return the pro-notes deposited as security but the document contemplates that the matter should be completed in two months. Whether the debts were transferred to the defendants as trustees or mortgagees, in either case they were bound to realise the debts with due diligence [Coote on Mortgages, p. 319 Shyam Kumari v. Rameswar Singh(1)]. The lower Court was right in debiting the defendants with the face value of the documents. The learned Judge was also right in not allowing the defendants the costs incurred by them in suing on the note.
7. The only other question which remains is the allowance of interest on the amount found due to the plaintiff. Both the parties proceeded to trial in the first Court on the footing that the jural relationship between them was that of trustee and beneficiary and the same assumption was made in the arguments in appeal. We are not certain that the true relationship was not that of mortgagor and mortgagee. The distinction, however, is hardly material as regards the taking of accounts though in the matter of charging interest it may make a difference. A mortgagee in possession, as soon as his debt is paid off, will be bound to pay interest on any money which he may retain thereafter, while the liability of a trustee would depend on whether he is guilty of a breach of trust: see Wilson v. Metcalfe(2), Ashworth v. Lord(3) and compare Section 23 of the Trusts Act., In this case, however, there were bona fide disputes as to the amount payable to the defendants and it is far from clear that the amounts due to the defendants had been paid in the beginning of 1909. The total sum found due to the plaintiffs by the lower Court was Rs. 5,968-7-4; we have now allowed the defendants Rs. 3,221 and there can be no doubt that there was a bona fide dispute as to the liability of the defendants with respect to the non-realisation of the promissory note and the mortgage debt. If this had been allowed in their favour there would have been no balance to pay to the plaintiffs. Again the defendants were entitled to be paid any loss they may have sustained owing to the default of the plaintiffs in the delivery of possession of the immovable properties sold to the defendants. We therefore think that the lower Court was wrong in charging the defendants with interest. These are our conclusions on the various points raised in appeal. Before we can dispose of this appeal finally we must have a finding from the Subordinate Judge's Court of Guntur on the following issue:
“Whether the defendants sustained any loss by the non-delivery (if any) of possession of the immovable properties sold under Ex. 1 and if they did, what is the amount of the loss.”
8. The parties will be at liberty to adduce fresh evidence. Finding will be returned in two months and seven days will be allowed for filing objections. We dismiss the memorandum of objections with costs. (This appeal coming on for final hearing after the return of the finding of the lower Court upon the issue referred to it for trial by this Court, the Court delivered the following.)
JUDGMENT
9. The finding is that the defendants have sustained a loss of Rs. 1,943-5-9 on account of non-delivery of the immovable property. We have already allowed certain items of claim in favour of the defendants. The parties agree that on taking the accounts as stated above the amount due to the plaintiffs is Rs. 954-11-3. The decree of the lower Court will be modified and plaintiffs will be entitled to Rs. 954-11-3 with interest from date of plaint and at 6 per cent till date of deposit by the defendants in the lower Court. The parties will pay and receive proportionate costs in both Courts.
S.N/R.K
10. Appeal partly allowed.