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[1988] ZASCA 50
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Boland Bank Ltd. v Pienaar and Another (356/86) [1988] ZASCA 50; [1988] 2 All SA 467 (A) (19 May 1988)
BOLAND BANK LIMITED
APPELLANT
and
J S PIENAA
R
FIRST RESPONDENT
J F VAN HEERDE
N
SECOND RESPONDENT
JUDGMENT BY:
H H NES
TADT
CASE NO. 356/86
/ccc
IN THE SUPREME
COURT OF SOUTH AFRICA
APPELLATE DIVISION
In the matter between
BOLAND BANK
LIMITED
APPELLANT
and
J S PIENAAR
FIRST
RESPONDENT
J F VAN HEERDEN
SECOND RESPONDENT
CORAM
: JANSEN, SMALBERGER, NESTADT, VIVIER JJA et VILJOEN AJA
DATE HEARD
: 2 MAY 1988
DATE DELIVERED
: 19 MAY 1988
JUDGMENT NESTADT JA
:
Appellant loaned money to second
respondent/
2.
respondent. It was a term of their agreement that it be repaid
in monthly instalments. In order to secure his obligation to do so,
second
respondent, in terms of
a first mortgage bond, hypothecated certain immovable
property of his to
appellant. Nevertheless, he failed
timeously to pay a particular instalment.
This en-
titled appellant to claim immediate payment of the full
amount of
capital and interest owing in terms of the
bond. It contained a clause to
this effect. The
material part of it provides:
"23. Ingeval enige betaling ten opsigte van Kapitaal of Finansieringskoste of
die Bykomende bedrag nie stiptelik op die vervaldatum
betaal word nie ... sal
die hele kapitaalbedrag en bykomende bedrag dan verskuldig tesame met
al
die/
3.
die finansieringskoste daarop on-
middellik betaalbaar wees
sonder
kennisgewing ..." Whilst appellant was considering putting the clause
into operation, but before it actually did so, first respondent,
wishing to
avoid the bond being called up, tendered payment of the arrears. Appellant
refused to accept such payment. It did not
wish to jeopardise its right of
foreclosure.
These, in outline, were the essential circumstances which led
first respondent to apply, as a matter of urgency, to the Orange Free
State
Provincial Division for an order, in effect, compelling appellant to accept
payment of what had been tendered. Appellant was
cited as first respondent and
the mortgagor as
second/
4. second respondent. The matter came before LICHTENBERG J, who
issued a rule nisi in these terms. It was directed that it operate
with
immediate effect. On the extended return day, and despite appellant's
opposi-tion, an order was made,by the same learned Judge,
in substance
confirming the rule and awarding costs against appellant on the attorney and
client scale. This appeal is against such
orders. It is before us with the leave
of the court a
quo
. Second re-spondent does not oppose it. First
respondent initially did. Heads of argument were filed on his behalf. At the
hearing
of the appeal, however, there was no appearance by or for him. Shortly
be-fore, his attorneys gave notice that they had
withdrawn/
5. withdrawn and that he would not be represented.
The judgment of the
court below (con-firming the rule) is reported (see
Pienaar vs Boland Bank
and Another
1986(4) S A 102(0)). It explains what first respondent's
interest was in seeking to purge second respondent's default in making payment
as he was obliged to under the bond. This was that a partnership allegedly
existed between them and that the mortgaged property was
a partnership asset (at
109 H). It specifies what the indebtedness of second respondent to appellant
was, when the bond was regis-tered
and the monthly payments due thereunder (104
F -H) as also when second respondent fell into arrear and in
what/ .......
6. what amount (109 I - J). Most important, details of the
various tenders made by first respondent to appellant to pay the arrear
instalment in question are set out (110 D - F). The exact terms of the order
granted against appellant are also given (117 C read
with 107 I - 109 A). It is,
therefore, un-necessary to deal further in this judgment with these
matters.
The
ratio
of the court a
quo's
decision must, however,
be briefly canvassed. It was that: (i) first respondent, even though a stranger
to the transaction, was entitled
to (tender to) pay second respondent's
indebtedness to appellant (110 F - 111 D); (ii) clause 23 of the bond did not
result in automatic
foreclosure;/
7
foreclosure; appellant had to
elect to do so (114 I -115 B); (iii) when first respondent tendered payment,
appellant, though intending
to do so, had not yet elected to call up the bond
(115 C); (iv) accordingly, such tenders were valid and should have been accepted
by appellant; its failure to do so was unlawful; and first respondent was
entitled to the relief claimed (115 D); (v) attorney and
client costs were
awarded because of appellant's dilatory, vexatious, obstructive and contemptuous
conduct (116 H - 117 C).
I am not sure that finding (iii) is justified. It
may be that appellant's refusal of all the tenders
per se
constituted an
election by it
to/....
8
to call up the bond. Moreover, second
respondent (as appears from 109 C) told a representative of appellant in October
1984, at a
time before the instal-ment in question was due, that it would not be
paid and asked that the bond be called up. He was told that
appellant would do
so. It may be that this amounted to a notification, in advance,of an election by
appellant to foreclose and that
the need to repeat this when second respondent
actually fell into arrear was dispensed with. And it must, of course, be
remembered
that it was second respondent as mortgagor, rather than first
respondent, to whom appellant's election had to be communicated. However,before
us, Mr
Burger
, for appellant, was content toargue the
matter/
9. matter on the basis that finding (iii) (as also (i) and (ii))
was correct. His attack was directed at (iv) (and, consequentially,
(v)). It was
submitted that on second respondent's failure to pay the instalment on due date,
appellant acquired the right to call
up the bond; it could not, pending a
decision whether to do so, be de-prived of such right by any tenders of payment;
it was, accordingly,
not obliged to accept them; and first respondent's
application should, in the premises, have been refused.
The principle
underlying the argument is a well-established one. It has been applied to the
case of a creditor seeking to cancel a
contract
of/
10. of sale on the basis of a
lex
commissoria
. His accrued right to do so is not defeated by a belated tender
of payment of the arrears before he exercises his election to cancel.
This was
decided in
Schuurman vs Davey
1908 T S 664.
An instalment of the purchase
price of fixed property was due on 2 April of a particular year. It was not then
paid. Only on 17 April
was it tendered. The seller, however, refused to accept
it. Relying on a
lex commissoria
in the deed of sale, he then notified
the purchaser that the agreement was cancelled. INNES CJ, rejected the
purchaser's contention
that the tender deprived the seller of his right to
cancel. Having found (at 671) that though such right accrued on the day of the
buyer's default, cancellation could
only/
11
only take effect on notification to the buyer of
the
seller's election to cancel, the learned judge
stated (at 671 - 2):
"Then the second point is whether the fact that the buyer, before the
noti-fication of cancellation, tendered pay-ment, affected the
seller's right to
notify his decision to cancel at once. Upon this point I entirely agree with the
contention of Mr Roos in the course
of his able argument. If the right to cancel
existed on the 17th April, the seller could not be deprived of it merely because
the
buyer tendered to pay on that day. Nothing but waiver, undue lapse of time,
or some default on the part of the seller in a matter
which was a condition
precedent to his obtaining payment under the contract, could deprive him of his
right. Tender of the price
after the due date could not cure the buyer's
default, and, therefore, could not affect the seller's position."
SOLOMON/
12.
SOLOMON and WESSELS JJ concurred.
Schuurman vs Davey
has been
followed
over the years (see, on the
point under consideration,
Pienaar vs Fortuin
1977(4) S A 428 (T) at 432 in fin -
433 C;
Mahabeer vs Sharma NO and Another
1982(2) S A
157 (D) at 164 A - C;
Mahabeer vs Sharma NO and Another
1982(4) S A 242 (N) at 249 D - E and, especially,
Moodley
vs
Reddy
1985(1) S A 76 (D)). In
Moodley's
case, a
submission that
Schuurman vs Davey
was wrongly decided
was rejected (at 82 G). During
the course of his
judgment, THIRION J said:
"(I)t would seem to me that the notion that a defaulting purchaser had a right
to purge his default by tendering his performance
late, and by
such
tender/
13.
tender to deprive the seller of the benefit of a
lex commissoria
express-
ly stipulated for in his favour, mili-tates against the whole
concept of the
lex commissoria
. It would mean that, after fulfilment of
the condition on which the
lex commissoria
was dependent, there would be
two concurrent and com-peting rights; the right of the de-faulting purchaser
still to tender performance
and the right of the seller at his option to cancel
the contract and it would then depend upon who was first in point of time to
exercise his right. Such a situation would be contrary to the object with which
a
lex commissoria
would be stipulated for (at 81 D - F). ... Whatever the
position may be in a case of a sale without a
lex commissoria
, once a
lex commissoria
is stipulated for in the seller's favour the position
be-comes altered and on fulfilment of the condition which hrings the
lex
commissoria
into operation there accrues to the seller a right to cancel
which cannot be de-feated by an offer of performance by
the/
14.
the purchaser and the offer of performance by the purchaser
then becomes subordi-nated to the choice of the seller to cancel." (at
82 F -
G).
THIRION J's views are supported by old
authority. Some are referred to by
him. Another is
Voet's
Commentary on the Pandects
22.1.31 where
the
following is stated:
"
Default cannot always be purged
. -Still it should be noticed that
freedom to purge a default has not been bestowed on a defaulter in every case.
If right from the
commission of default a kind of new obligation has arisen in
favour of him against whom default has been made, there is no room for
purgation, since a right which has once accrued to anyone cannot be taken from
him except by his own act.
Instances from
Lex commissoria: -On those
lines if a thing has been
sold/
15.
sold and delivered to anyone under a
commissory term, and he has deferred
payment beyond the day fixed in advance, he effects nothing by afterwards making
a tender. He could not deprive the seller of the
power which accrued from the
first moment of default to reclaim the thing purchased by action in
rem
or in
personam.
"
(Gane's
translation, vol III, p 721). In principle
this is surely correct. Normally,
a creditor is
obliged to accept a tender of performance by the debtor.
His
failure to do so would constitute a breach of
contract and giv.e rise to
mora creditoris
. But as
De Wet and Yeats
Kontraktereg en
Handelsreg
, 4th ed,
167 point out, this does not apply where "die skuldeiser
weens die
mora
van die skuldenaar h terugtredingsreg
het waarvan hy gebruik wil
maak". Were this
otherwise/
16. otherwise, what is a bad
tender,because it is out of time, would be elevated to the status of a good one
which the creditor would
have to accept. And having done that, he would be
precluded from invoking the
lex commissoria
. This amounts to an imposed
variation of the contract; instead of having to perform by a particular date,the
purchaser is able to
pay at any time prior to the seller communicating his
election to cancel. I agree, therefore, with both the reasoning and conclusion
of THIRION J and,in particular, that
Schuurman vs Davey
is good law.
And,insofar as
Middelburgse Stadsraad vs Trans-Natal Steenkoolkorporasie
Bpk
1985 (2) S A 524(T)
at 529 A is at variance with it (as to whether it
is,
see/.... .
17. see 1985 Annual Survey 116), it must
be taken to be wrong. (The judgment has in fact, for reasons not rele-vant to
the issue under
discussion, been reversed; see
Middelburgse Stadsraad vs
Trans-Natal Steenkoolkorporasie Bpk
1987(2) S A 244 (T).)
But does the
principle in question apply
in casu
? In my view it does. I can see no
difference in principle (in relation to the point under consideration) between a
lex commissoria
in a contract of sale and a foreclosure clause in a bond.
Both úsually (and in the present matter do): (i) involve periodic
payments by the debtor; (ii) which if not made timeously, afford the creditor an
election of remedies; (iii) which election, however,
must be made within a
reasonable
time/
18.
time and (iv) may be waived (by e g an acceptance of late
payment); (v) but, having been made, binds him and (vi) results in the
termination
of the sale or bond (as the case may be). In particular, as in the
case of a
lex commissoria
, the fulfilment of the condi-tion giving rise
to the foreclosure clause being able to be put into operation, results in the
mortgagee
obtaining a right which would be negated were he bound to accept late
performance by the mortgagor. The
Schuurman vs Davey
rule is probably of
more general appli-catidn. Thus the view is expressed at 82 D of
Moodley's
case that a lessor would not be precluded from terminating the lease simply
because of a tender of overdue rental prior to actual
cancellation. And the
first paragraph of
Voet,/
19. Voet, op
cit
, clearly does not confine the inability of
a defaulter to purge his default to the case where the creditor has the
advantage of a
lex commissoria
. I do not, however, propose to express a
firm view in this regard. It suffices to say that I am satisfied that a
mortgagee is entitled,
in circumstances such as the present, to rely on a
foreclosure clause, notwith-standing that he only elected to employ it
subsequent
to the mortgagor having tendered to cure his failure timeously to pay
an instalment due in terms of the bond.
It is unnecessary to attempt to
determine when, on the papers, foreclosure of the bond by appellant actually
took place. (It should
be noted
in/ ......
20. in this regard that the reference to "18 July 1984" and "2
December 1985" at 114 G of the judgment a
quo
should respectively be to
"18 July 1985" and "2 December 1984".) First respondent has never suggested that
when the tenders of payment
were made, there had been an undue delay by
appellant in electing to call up the bond. In the result, therefore, applying
the princi-ple
under discussion, LICHTENBERG J should have held that appellant
was not bound to accept any of the tenders made by first respondent.
It
remains to mention certain miscellaneous matters on the merits. They are the
following:
(i) In his counsel's heads of argument (to which I earlier referred) it is
not contended on behalf
of/
21. of first respondent that an acceptance by
appellant of the tender of payment would have precluded a foreclosure of the
bond. The
point taken is simply that the order granted was justified because it
obliged appellant merely to accept payment on account of the
full amount owing
under the bond. This is untenable. Payment was never tendered on that basis. The
whole pur-pose of the application
was to avoid foreclosure and the sale of the
property in execution; the
dispute was whether appellant was entitled so to act; and the tenor of the
judgment a
quo
. fully reflects this to have been so.
(ii)/.....
22.
(ii) An alternative argument presented to the court a
quo
on behalf of first respondent, and re-ferred to by the learned judge
at 115 E - F (though not decided by him) was that there has
been a "conspiracy"
between appellant and second respondent that payments under the bond cease and
that appellant thus be enabled
to foreclose it. There is no guestion of a
conspiracy - at least not an unlawful one. Even if non payment by second
respondent did
take place pursuant to an agreement with appellant, they,as the
contracting parties, were perfectly entitled so to agree. (iii) Another
point
raised on behalf of first
respondent/
23.
respondent in the court below, but which also was not finally decided,
was that it had not been proved that appellant's representative
had authority to
elect to call up the bond (see at 115 G - 116 B). I do not think that this view
is, on the facts, justified. In
any event, an application of the correct legal
principles should have resulted in it being found that appellant need not have
elected
to have called up the bond prior to the tenders of payment (or the
launching of the application) at all.
To sum up then, I am of the opinion that
the/ .....
24.
the application for an order that appellant accept
payment of the amount
tendered by first respondent
was ill-founded and should have been
dismissed.
This being so the order for costs against appellant
also cannot
stand. Appellant is obviously entitled
to the costs of appeal. I think these
should
include the costs of two counsel.
The following order is made:
(1) The appeal succeeds and is allowed with costs. These are to be paid by first
respondent and are to in-clude those of two
counsel.
(2) The order of the court a
quo
is
set/
25. set aside and the following substituted: "The rule
nisi
is discharged
with costs".
NESTADT, JA
JANSEN, JA )
SMALBERGER, JA )
) CONCUR VIVIER, JA )
VILJOEN, AJA )