Things
to take Note under this part are;
1.
Up-stamping
2.
Rights
available to a Mortgagor
3.
Rights
available to a Mortgagee
4.
Discharge
of a Mortgage Transaction.
POSER:
UNDER WHAT CIRCUMSTANCES WILL THE GOVERNORS’ CONSENT NOT NEEDED?
1.
Up-stamping
2.
Creation
of equitable Mortgage
3.
Re-conveyance
of the Mortgage
4.
Conversion
of the equitable mortgage to legal mortgage and the consent was obtained for
the equitable mortgage.
UP-STAMPING
It is a
known fact that Mortgage documents are required to be stamped as evidence of
payment of Stamp duties (taxes) imposed by the Stamp Duties Act or the various
stamp duties laws of the state. So we can say STAMPING is the process of paying
statutorily prescribed duty of any mortgage transaction to the government. It
is first paid at the initial stage a property is mortgaged. See SECTION 22 of
the Stamp Duties Act.
Now we
understand STAMPING, however whenever, the same property is used for mortgage
again when the initial mortgage is still running, stamp duty is required to be
paid. So UP-STAMPING refers to the PRACTICE
or PROCESS of payment of
additional stamp duty on a subsequent loan over the same property, without
creating a second mortgage
N.B:
There is a need to draw a line of distinction between SUCCESSIVE LEGAL MORTGAGE
AND UP-STAMPING, Successive Legal Mortgage involves one MORTGAGOR, using the SAME
PROPERTY to create DIFFERENT MORTGAGES with DIFFERENT
MORTGAGEES WHILE Up-Stamping involves the SAME PROPERTY, the SAME
PARTIES (Same Mortgagor and Mortgagee) and all that is required is just
an increase of the loan facility from the initial facility granted to a higher
facility
CONDITIONS
FOR UP-STAMPING
1.
The
parties must be the same
2.
The
Mortgage property must be the same
3.
The
value of the property must cover both the first and subsequent loans
4.
There
must be no contrary intention in the deed creating the initial mortgage.
POSER:
IS GOVERNORS’ CONSENT NEEDED IN AN UP-STAMPING?
The
consent of the Governor is not required in granting the new facility so long as
his consent had been obtained when the first mortgage was created. This was
affirmed in BANK OF NORTH V BABATUNDE;
‘’Where
a consent is required in a deed of legal mortgage and such consent has been
obtained when the mortgage was originally created, no consent is required for
the up-stamping of the mortgage if a further facility is granted on it’’
See also OWONIBOYS TECHNICAL SERVICES LTD V UBN PLC
RIGHTS
AVAILABLE TO A MORTGAGOR
1)
Equity
of Redemption
2)
Legal
right to redeem
3)
Equitable
right to redeem
EQUITY OF REDEMPTION
This is
the inherent right of the mortgagor to redeem the property. This right is the
foundation of the mortgage transaction. As long as there is a Mortgage, there
is an equity of redemption
This
arises the moment the mortgage is created and it continues to subsist till the
day the mortgage ends or is discharged.
In NDABA V U.B.N: The court held
that ‘the right to redeem a mortgaged property is so inseparable an incident
of mortgage that it cannot be taken away either expressly or by implication,
nor can such redemption be limited to time or particular person. The right of
equity of redemption continues until mortgagor’s title is extinguished or the
interest destroyed by sale either under the process of court or by the
mortgagor’’
EFFECT OF THIS RIGHT: The court will not allow the
Mortgagee to take undue advantage of the mortgagor; hence equity will not give
effect to any clause in a mortgage instrument that tends to act as a clog,
restriction or impediment to the Mortgagor’s Right to Redeem. See OKONKWO V ACB LTD, UBA V OKEKE,
KNIGHTSBRIDGE ESTATE LTD V BRYNE.
LEGAL RIGHT TO REDEEM
This is
the first arm of equity of redemption. It is the legal right of the Mortgagor
to discharge the mortgage and recover his property on or before the legal due
date. It arises the moment mortgage is created and it continues to subsist
until the end or discharge of the mortgage.
EFFECT OF THIS RIGHT: The Mortgagor does not need to
wait for the legal due date before he can repay the mortgage sum and interest.
He can do so even the next day. OKONKWO
V ACB LTD, UBA V OKEKE. However, upon the expiration of the legal due date,
this legal right to redeem will cease to exist.
EQUITABLE RIGHT TO REDEEM
This is
the second arm of the equity of redemption. It is arises upon the expiration of
the legal right to redeem. In other words, once the legal due date have elapsed
and the mortgagor has not redeemed, you know he will lose his legal right to
redeem, so what he will have now is an equitable right to redeem simply because
the legal due date have passed.
EFEECT OF THIS RIGHT: It gives the Mortgagor an
opportunity to repay the mortgage sum and interest after the expiration of the
legal due date. However, this right can only be lost when the Mortgagee
exercises his power to sale or an order of foreclosure absolute.
N.B: THE
DIFERENCE BETWEEN LEGAL AND EQUITABLE RIGHT TO REDEEM IS DURATION
RIGHTS AVAILABLE TO A MORTGAGEE
N.B: These rights
available to a mortgagee will depend on the type of mortgage created.
N.B: These rights
are not mutually exclusive, thus the taking of one does not exclude the use of
the others. The mortgagee can exercise any or all of them at the same time.
Rights
of a legal mortgagee include:
1)
Right
of action in court
2)
Right
to take possession
3)
Mortgagee’s
power of sale
4)
Right
to an order of Foreclosure
5)
Right
to appoint a receiver
N.B: If
a company is the mortgagor, then the mortgagee can also apply that the company
be wound up since it cannot pay up its debts.
Rights
of an equitable mortgagee
1)
Right
of action in court
2)
Foreclosure
3)
Specific
performance
4)
Power
of sale
N.B: Generally an equitable
mortgagee cannot exercise the power of sale without an order from the court.
However, for an equitable mortgagee to exercise the power of sale without
necessarily going to court, the following conditions must be satisfied:
·
The
equitable mortgage must be by deed
·
There
must be no contrary intention in the deed (no provision in the agreement
restricting power of sale)
·
Any
one of the remedial devices must be included in the deed (Power of Attorney or
Trust Declaration)
N.B: In the absence of these
conditions, the equitable mortgagee cannot exercise the power of sale without an
order of the court.
APPOINTMENT OF
RECEIVER
WHO IS A RECEIVER?
A
receiver is an independent, uninterested third party appointed to
manage the mortgaged property. ADETONA
& ANOR V. ZENITH INT’S BANK LTD
N.B:
This right is available to both LEGAL
and EQUITABLE mortgagee.
IN A
LEGAL MORTGAGE: The Mortgagee himself may appoint a receiver.
SECTION 19(1)(ii) C.A and SECTION 123(1)(iii) P.C.L both provides for the power
of the mortgagee, when the mortgage sum has become due for payment to appoint a
receiver of the income of the mortgaged property or any part of it.
IN AN
EQUITABLE MORTGAGE: This right is available to an equitable mortgagee provided
the equitable mortgage is by deed and provides for the power to appoint a
receiver. Where the equitable mortgage is not by deed, then the power to
appoint a receiver will not be automatic as a Court Order will be needed.
SECTION 131(8) PCL, SECTION 24(8) CA
N.B: Once appointed, only the
mortgagee has power to remove the receiver. See SECTION 399 CAMA, SECTION 43(5)
MPL
N.B: A receiver must act in good
faith. Where he colludes with a person to sell the property at a gross
undervalue, the sale will be set aside.
-WEST AFRICAN BREWERIES LTD V. SAVANNAH VENTURES LTD.
POSER: WHEN WILL THIS RIGHT
ARISE?
By Virtue of Section 131(1) of PCL and section 24(1) of the CA, a receiver can
only be appointed after the mortgagee has become entitled to exercise the power
of sale. If the mortgagee has not yet become entitled to exercise the power of
sale, he cannot appoint a receiver. See AWOJUGBABE
LIGHT INDUSTRIES LTD. v. CHINUKWE.
POSER: WHAT ARE THE WAYS OF
APPOINTING A RECEIVER?
1.
By
Agreement of the parties
2.
Express
provision in the Mortgage Instrument
3.
Appointment
by Court (applicable only for equitable mortgage)
4.
Appointment
under power given by the statue
RIGHT
TO TAKE POSSESSION
N.B: The right by entry into
possession is only available to a LEGAL
MORTGAGEE. This is based on the principle that ‘’possession goes with legal
ownership’’.
In ADETONA & ANOR V. ZENITH
INT’S BANK LTD:
The court stated that;
‘’it
is a settled that by a legal mortgage, the mortgagee becomes the legal owner of
the property although the mortgagor may be left in actual possession/occupation
of the mortgaged property but because the mortgagee is entitled to enter into
possession immediately upon the execution of the mortgage he has a right to
immediate possession’’
The
question will be how practicable is this right during the existence of the
mortgage transaction, knowing fully well that he will;
1.
Be liable to account strictly to the Mortgagor
for the rent accruing from the property. See GASKELL V GOSLING.
2.
He will be liable for negligence or willful
default for any sum not recovered.
3.
He
is also liable for any deterioration or neglect or disrepair of the
property.
4.
He
cannot make profit from the property; he can only realize his security.
Although
this is an inherent right of a legal mortgagee, but in practice he will rather
go into possession upon the default of the mortgagor.
ACTION IN COURT
N.B:
This right is available to both the LEGAL
and EQUITABLE mortgagee
A
mortgagee can institute an action in the court to recover the principal and
Interest by way of civil action-recovery of debt or liquidated sum. This can be
done using the UNDEFENDED LIST under Order 21 of High Court of the Federal Capital
Territory Abuja (Civil Procedure) Rules or SUMMARY JUDGMENT PROCEDURE under
Order 11 High Court of Lagos (Civil Procedure) Rules.
POWER OF SALE
N.B: This
is available to all mortgages created by deed, whether legal or equitable, and
it is provided for under s. 123(1)(i) of PCL, s. 19(1)(i) CA
UNDER EQUITABLE MORTGAGE: Generally an equitable
mortgagee cannot exercise the power of sale without an order from the court.
However, for an equitable mortgagee to exercise the power of sale without
necessarily going to court, the following conditions must be satisfied:
• The
equitable mortgage must be by deed
• There
must be no contrary intention in the deed (no provision in the agreement
restricting power of sale)
• Any
one of the remedial devices must be included in the deed (Power of Attorney or
Trust Declaration)
N.B: In
the absence of these conditions, the equitable mortgagee cannot exercise the
power of sale without an order of the court.
UNDER LEGAL MORTGAGE: The power and right of a
mortgagee to sell property is central to legal mortgages created by deed. The
mortgagee need not go to court to enforce it, as long as it has arisen and has become EXERCISABLE.
POSER: MUSA DERIN a Final year
law student asked you if the Power of Sale is Automatic under the legal
mortgage.
The
power of sale is not automatic. Before the mortgage property can be sold in
exercise of the power of sale, two conditions must be satisfied. They are:
1.
The
power of sale has arisen – s. 123(1)(i) of PCL, s. 19(1)(i) CA
2.
The
power of sale has become exercisable – s. 125 PCL, s. 20 CA
POSER: When do we say THE POWER
OF SALE HAS ARISEN?
When
these three conditions must co-exist at the same time;
1.
The mortgage
must be by deed
2.
The legal due
date must have passed (that is, mortgagor must have defaulted and lost his
legal right to redeem)
3.
There must be
no contrary intention in the mortgage deed. That is, there must be nothing in
the legal mortgage deed that is inconsistent with the power of sale such as an
increased interest rate or other penalty or remedy.
N.B:
Even where power of sale has arisen, the mortgagee is still NOT entitled to
sell the mortgaged property unless and until the power has become exercisable.
. NAB Ltd v. UBA Plc.
POSER: When do we
say THE POWER HAS BECOME EXERCISABLE?
The
power becomes exercisable when ANY of the three conditions in
SECTION 20 OF THE CA AND 125 OF THE P
& CL is satisfied, which is that:
1.
A
written Notice to the mortgagor to pay the loan sum had been served on him and
after a period of 3 months he is still in default, OR
2.
The
interest/ mortgage sum are in arrears after becoming due for two months, OR
3.
There
has been a breach of a fundamental provision contained in the mortgage deed or
in the Act/Law and on the part of the mortgagor-OKONKWO V. ACB.
N.B:
What we saying is that once the power to sale has ARISEN, the occurrence of any of the above three events will
give the Mortgagee absolute power to exercise his power of sale.
So
from the above it is clear that until the legal date elapse, the Mortgagee cannot
have the power to sale, this seems to be a form of disadvantage for the
Mortgagee because the Mortgagor can refuse to pay as long as the legal due date
has not passed and the mortgagee is helpless.
POSER: WHAT DO YOU
THINK THE MORTGAGEE CAN DO IN TO PROTECT HIMSELF?
The
mortgagee can insert a proviso that the entire mortgage sum and interest is to
be repaid at a shorter legal due date. That is, a date shorter than the proper
legal due date on which installments would end. The effect of this is to bring
the legal due date closer in order to make the power of sale arise in the event
of a default. This shorter legal due date is called a “LEGAL FICTION.”
POSER: DON’T YOU THINK
IF THE MORTGAGOR SEES THIS MAY BE AFRAID?
The
insertion of a shorter legal due date (legal fiction) is not to prejudice the mortgagor, but only to put him on his toes. So, he has
nothing to worry about as long as he is faithful with the payments of the
installments of the mortgage sum and interest. This will not affect the
installments payments which will end when they ought to end. It will only
operate to make the power of sale arise.
N.B:
If after the power of sale arises, the mortgagee goes ahead to sell without the
power becoming exercisable, then the mortgagor can have the following remedies:
a)
An order of court setting aside the sale and damages for breach of contract
b)
It the mortgagee has not sold, but is preparing to sell, the mortgagor can
obtain an injunction to restrain him from selling
However,
if the mortgagee sells to a bona fide purchaser for value without notice, such
sale will be valid – s. 21(2) CA, s. 126 PCL. The mortgagor can only sue the
mortgagee for damages.
POSER: WHAT WILL BE
THE EFFECT OF A VALID SALE?
This
simply means when the Mortgagees’ power to sale has arisen and has become EXERCISABLE.
The effects of the sale are;
1.
It
will terminate mortgagee equity of redemption & equitable right to redeem.
See SECTION 111&112 PCL
2.
Mortgagee
may incur liability for improper exercise of power of sale. See SECTION 126 PCL
and 21 CA
POSER: ARE THERE
INSTANCES WHEN THE SALE CAN BE SET ASIDE?
- Where the mortgagor has no good title ab initio. See ALLI v. IKUSEBIALA, for instance, family property without consent
- Where requisite consent was not obtained
- Where there is fraud or collusion in respect of the sale between the mortgagee and the purchaser
- Where the power of sale has not arisen
- Where the property is sold at a gross under-value price.
- Where the mortgage is a fraud on the mortgagor. For instance where the sale is at such a low value that it raises an inference that there is fraud in the sale
- Where the property is sold even after the mortgagor has fully repaid the mortgage sum and interest
- Where the parties agreed on a different mode of sale
- Where the mortgagor can validly rely on plea of estoppel
- Where the mortgagee sells to himself or privy
HOWEVER, Note that there are
instances where the sale will not be set aside;
1.
It
was sold at a low price, except it was sold at a gross undervalue and there is
fraud in it, S. 183 of the PCL and OKONKWO V. ACB
2.
The
outstanding sum is contested by the parties
3.
The
sale was motivated by ill-will
4.
The
mortgagor has paid a part of the loan
5.
The
mortgage sum and interest is paid after the sale
6.
An
Order of the Court was not obtained before the sale- UBN LTD. V. OLORI MOTORS
LTD
7.
The
power of sale was improperly exercised.
V.I.P
THE CASE OF UBN LTD V OLORI MOTORS LTD
FACTS: The
mortgage (bank) brought an action in court to recover the mortgage sum and
interest. While the case was pending, the mortgagee sold the mortgage property
in exercise of the power of sale. Mortgagor sought to set aside the sale of the
mortgage property on the ground that the sale violated the principle of
pendente lite and that by instituting an action in court to recover the mortgage
sum and interest, the mortgagee could not exercise the power of sale.
HELD: It
was held at the Supreme Court that since in a legal mortgage, the
right to sell the mortgage property was independent of the court in
that the
mortgagee can sell without any court order and also, since the
remedies of a mortgagee are not mutually exclusive, then the mortgagee can exercise
the power of sale even if there was an action in court provided that the power
of sale had ARISEN and was EXERCISABLE
PROCEDURE FOR THE
APPLICATION OF PROCEEDS OF SALE
1.
Settle
Prior Encumbrances
2.
Settle
costs and charges incurred in the course of sale
3.
Settle
outstanding mortgage sum and interests
4.
Balance
to be returned to the mortgagor (If there are no subsequent encumbrances)
SEE
SECTION 39 MPL, 127 PCL, 21(3) CA
V.I.P
VISIONI LIMITED V NATIONAL BANK OF NIGERIA
THE COURT DESCRIBED THE
APPLICATION OF THE ABOVE AS FOLLOWS;
‘’A mortgagee has a
duty to deliver to the mortgagor the balance of the proceeds of sale of the
mortgaged property, after deducting the principal money, interests and
expenses, or give it to him on demand. If the mortgagee fails to discharge this
duty, the mortgagor may recover the balance in an action for money had and
received’’
POSER: WHAT IS THE STATUS OF THE
MORTGAGEE BEFORE, DURING AND AFTER SALE ?
BEFORE and DURING the sale, the mortgagee is neither a trustee nor an
agent for the mortgagor. In the exercise of the power of sale, the mortgagee
does not even need to consult the mortgagor.
AFTER: The sale, the mortgagee is a
trustee for the mortgagor in respect of the proceeds of the sale. The
implication of this is that the mortgagee has a duty to account to the
mortgagor on the proceeds of the sale.
FORECLOSURE
What
is FORECLOSURE?
Foreclosure
is an order of court that extinguishes the mortgagor’s equity of redemption. It
operates to vest the entire interest of the mortgagor in the mortgagee.
WHEN WILL THIS RIGHT ARISE: it arises on the date that the
mortgagor’s legal right to redeem expires and that date depends on the proviso
for redemption.
PROCEDURE: Usually, foreclosure order is
granted in stages
The
first stage is the decree nisi
The
second stage, decree absolute, six months after the decree nisi has been
granted.
EFFECT OF FORECLOSURE ORDER
ABSOLUTE: The
effect of a foreclosure order ABSOLUTE, depends on the type of mortgage.
IN LEGAL MORTGAGE: Vests the
ownership of the mortgage property in the mortgagee absolutely, subject only to
any legal mortgage having priority
IN EQUITABLE MORTGAGE: The
Mortgagor is compelled to convey the property to the mortgagee but upon sale of
the property, the mortgagee must account (to the mortgagor) for the proceeds of
sale.
RE-OPENING
OF FORECLOSURE
Generally,
once the order for foreclosure is made absolute, it cannot be re-opened.
However, there are certain circumstances in which the mortgagor may bring an
application to re-open a foreclosure order ABSOLUTE;
1.
Where
the value of the property is far higher than mortgage sum
2.
Where
the property is of special value to the Mortgagor
3.
Where,
after obtaining an order of foreclosure absolute, the mortgagee still sues the mortgagor on his personal
covenant to repay
4.
Where
the mortgagee satisfy the court that his failure or inability to pay was due to
circumstances beyond his control and that he is now ready and willing to repay
HOWEVER,
the MORTGAGOR must satisfy certain
CONDITIONS before his application to RE-OPEN a FORECLOSURE ORDER ABSOLUTE
can succeed
1.
That
the application is brought timeously; mortgagor is not guilty of delay
2.
That
Mortgagor’s failure to liquidate the mortgage sum and interest was due to circumstances
beyond his control
3.
That
the Mortgagor is now ready with the Mortgage sum and interest
4.
Application
is brought in good faith; mortgagor is not guilty of any unconscionable
conduct.
N.B:
HE WHO COMES TO EQUITY MUST COME WITH CLEAN HANDS
DISCHARGE
OF MORTAGE
MEANING: This is when the mortgagor has
paid in full loan plus interest and the mortgagee is ready to release the
property and return to the mortgagor documents deposited as security.
N.B: The
discharge of a mortgage terminates and releases the mortgagor from his obligation
under mortgage. The mode of discharge depends in the type of mortgage created.
MODE
OF CREATION
|
MODE
OF DISCHARGE
|
Demise/Sub-demise/
Assignment
|
Deed
of surrender(Deed of Release or Re-conveyance)
|
Charge
by Deed expressed by way of legal/statutory Mortgage in PCL
|
Mere
Payment/ Statutory Recipt
|
Equitable
Mortgage
|
Simple
Receipt
|
N.B: Discharge Of Mortgage in Lagos State;
By virtue of Section 41 MPL it provides that mere RECEIPT is sufficient for
discharge. But in Section 55 LRL (LAGOS) provides that discharge may be made by
deed which is registrable.
N.B: Discharge by Court; The Mortgagor in
exercising his legal right to redeem and he has been denied, He can apply to
court, the court will order that the mortgage money be paid into court upon the
payment, the mortgage is discharged. The application is by (MOTION EX-PARTE)
SEE SECTION 5 C.A, and SECTION 41 MPL
N.B:
Discharge of Mortgage By Companies;
1. The
general procedure for discharge still applies i.e Deed of
Release/Surrender/Re-conveyance.
2. The
Mortgagor must deliver the following documents
to the Corporate Affairs Commission after the discharge;
a)
Evidence of Discharge i.e Deed of Release or the receipt
b)
Declaration Verifying Memorandum of Satisfaction of Charge. (FORM CAC 9)
POSER: Documents the company
(mortgagor) must deliver to the CAC for registration of the Mortgage
1.
Mortgage
Instrument- usually Deed of legal Mortgage
2.
Particulars
of Charge (FORM CAC 8)
3.
Debenture
Trust Deed.
TO BE CONTINUED!!!!!!
READ HARD
EAT HARD
REST HARD
PRAY HARD.................................DO NOT GIVE UP.........
0 comments:
Post a Comment