PROPERTY LAW: MORTGAGES 3
MORTGAGE III
WHEN A DEED OF MORTGAGE NEEDS TO BE UP-STAMPED
Mortgage documents (e.g. a Deed of Mortgage) are by Section 22 of the Stamp Duty Act Cap. 191, 1958, required to be stamped ad valorem within 30 (thirty) days of first execution as evidence of the payment of stamp duties as imposed by the Stamp Duties Act. Where a document is not stamped or there is evidence of insufficient payment of stamp duty, the document may not be admitted in evidence except a penal sum is paid.
Up-stamping of mortgages refers to the practice or process of payment of additional stamp duties on a mortgage document in a transaction as a result of the increased facility granted over an earlier mortgage. All transactions requiring the consent of the Governor under Section 22 of the Land Use Act, 1978 are affected by this provision. Instruments may be stamped outside prescribed period under a heavy penalty – Section 22(2)(b) of the Stamp Duty Act. Also, proper stamping is a pre-requisite of registration; and so an unstamped document will not be accepted for registration.
In practice, documents are normally submitted to the Stamp Duty Commissioner of the State where the land is situated for assessment. The Commissioner, after checking the consideration for which the document is made, calculates the duty payable and endorses a certificate indicating the amount. Where the document is voluntary, it must be ad valorem, as if it were a document on sale, with the substitution of the value of the property conveyed for the amount or value of the consideration for sale, and the duty must be adjudicated (that is, presented to the Commissioner for an opinion as to the amount that is to be paid) before the document is regarded as properly stamped.
Where a copy or duplicate of the document is to be fixed at the Deed’s Registry, this must be stamped with a fixed duty of 75k and the copy or duplicate will, in addition, bear a denoting fee of 39k in adhesive stamps, that is, post office stamps.
A legal mortgage is stamped at 75k per N200 or part of N200; and further advances are stamped in like manner. The duty for equitable mortgage is 30k per N200 or part of N200. Documents coming under this sub-head must be under hand only, e.g. an agreement expressed or implied to execute a mortgage. But where the equitable mortgage is accompanied by any deed or confers on the mortgage a power of sale or power of attorney, the document should be stamped as a legal mortgage.
It should however be noted that where a consent of the Governor is required in a deed of legal mortgage and such consent has been obtained when the mortgage was originally created, no consent of the Governor is required for the up-stamping of the mortgage if a further facility is granted on it – Per Amaizu JCA in Bank of the North v. Babatunde (2002) FWLR (Pt. 119) 1452 at 1469. Also, no further consent of the Governor is required for up-stamping applies even where the previous consent was granted under a law that ceases to exist – Adepate v. Babatunde (2002) FWLR (Pt. 91) 1503, where the court held that there is no legal necessity for fresh approval from the Governor under the Land Use Act, 1978 since the only difference is the enhancement of the facility from N12,000.00 (Twelve thousand naira) in exhibit 6 to N33,000.00 (Thirty three thousand naira) in exhibit 7. See also Owoniboys Technical Services Ltd v Union Bank of Nig. Ltd [2003] 15 NWLR (pt. 844) 545.
The major features of stamping-up are –
The following are remedies of a mortgagee –
Under Section 19(1) of the Conveyancing Act; and Section 123(1) of the PCL, every mortgagee (whether it is legal or equitable) whose mortgage is created by a deed, may enforce their security when the money becomes due by sale of the mortgaged property. Under this remedy, the power of sale is automatic and does not require an order of Court to sell.
However, the statutory power of sale will arise when the following conditions are met –
Generally, the mortgagee must wait for the power of sale to arise and also to become exercisable before he sells. But a purchaser who purchases a property before the power of sale arises will not get a good title, while a purchaser who buys after the power of sale arises but before the power becomes exercisable will have a good title notwithstanding this irregularity and the remedy of the mortgagor will only lie in damages against the mortgagee.
The following are reasons why a power of sale can be set aside –
Where the sale is completed, the Mortgagee should use the amount to satisfy the mortgagor’s indebtedness to him and then return the balance of the sale to the Mortgagor. Ekah Eteh v Nigeria Housing Development Society Ltd (1973) 6 SC 183; Nigeria Advertising Services Ltd v UBA Plc (1998) 8 NWLR (pt 616) 546 at 555.
APPOINTMENT OF A RECEIVER
This is provided under Section 19(1)(iii) of the C. A and Section 123(1)(iii) of the PCL.
Both provisions state that a legal mortgagee has the power to appoint a receiver where the mortgagor defaults to pay. Where the mortgage is an equitable mortgage created by deed, the deed should provide for the power to appoint a receiver. This statutory right is implied in every mortgage, legal or equitable, created by a deed where the circumstances would allow the mortgagee to exercise a power of sale.
But equitable mortgages whose mortgage is not by deed must apply to court for the appointment of a receiver. In practice however, most mortgage instruments contain an express provision for the appointment of a receiver. In Adetona & Anor. v. Zenith International Bank Ltd. (2008) All FWLR (Pt 440) 796, the court defined a receiver as a person appointed by the court for the purpose of preserving the property of a debtor pending an action against him or applying the property in satisfaction of a creditor’s claim whenever there is danger that in the absence of such appointment, the property will be lost, removed or injured. Under Sections 24 CA and 131 PCL, the powers, duties and right of a receiver so appointed include:
ACTION FOR ORDER OF SPECIFIC PERFORMANCE
This was decided in Ogundiani v. Araba (1978) 1 LRN 280, that mere deposit of title deed as security for loan is sufficient act of part performance upon which the court will lend its powers to grant an order for specific performance in the enforcement of the mortgage security. Where the deposit is accompanied by a memorandum of deposit under seal stating the time of repayment of the loan, the rate of interest to be paid and containing an agreement by the borrower to execute a legal mortgage when required, can sell the mortgage property if there is default.
However, to pass the legal estate of the mortgagor, either a power of attorney – Labadebi v. Odulana (1973) 4 CCCHCJ 98, or a trust declaration – LCC Banking Corporation v. Goddard (1897) 1 Ch. 642 clause must be inserted in the memorandum under seal.
TAKING POSSESSION OF THE SECURITY
A legal mortgagee has a right to possession because legal estate to the mortgaged property resides in him. In law, possession follows the legal estate. In Four Maids Ltd. v. Dudley Marshall Properties Ltd. (1975) Ch. D 317 at 320, Per Harman J. held that a legal mortgagee may go into possession before the ink is dry on the mortgage.
A mortgagee is entitled to take possession without being liable in trespass – Awojugbagbe Light Industry Ltd v. Chinukwe (1995) 4 NWLR (Pt. 390) 370. As regards to this, he has to render account. In practice however, mortgages hardly take possession of mortgaged property because of the insistence or equity on strict accountability.
In the very recent case of Prince Abdul Adetono v Zenith Bank Plc decided by the Supreme Court on 16th December, 2011, the Court per Chukwuma Eneh JSc that
It is 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 possession immediately upon the execution of the mortgage, he has a right to immediate possession.
Note that it is not contingent upon breach on the part of the Mortgagor.
FORECLOSURE
This remedy is usually available in equitable mortgage. By this, the mortgagee takes the whole mortgaged property by a court order. And having taken the whole security, the mortgagee cannot also claim payment, unless the foreclosure is subsequently opened in which the mortgagor is allowed the opportunity to redeem the security – Perry v. Baker (1806) 13 Ves. 198. It extinguishes the equity of redemption. But where the mortgagee sells the mortgaged property after foreclosure, the mortgagee cannot re-open the foreclosure and cannot sue the mortgagor even if the proceed of sale is not sufficient to defray the outstanding mortgage sum and interest – Palmer v. Hendrie (1859) 27 Beav. v. Hendrie (1859) 27 Beav. 349; Lockhart v. Hardy (1946) 9 Beav. 349.
REMEDIES AVAILABLE TO A MORTGAGOR
These are –
CONTRACTUAL OR LEGAL RIGHT TO REDEEM
This is a remedy under the common law of the mortgage contract to recover his property upon discharging the obligations which the mortgage was created for in order to secure. This means that a mortgage to secure a money loan basically fixes a date for repayment which must be abided to.
Generally, the date for repayment and redemption may be suspended for any period, however long, provided that the mortgage contract is not a device to render the right as well as the equity of redemption as a cloak for an unquestionable bargain.
In practice, the period for redemption is normally short because it is an advantage to the mortgagee to place the mortgagor in default as soon as possible.
EQUITABLE RIGHT TO REDEEM
This is the right to recover his security by discharging his obligations under the mortgage despite the fact that the time fixed by the mortgage contract for the repayment or the performance of the obligation(s) has passed.
According to Lord Bramwell in Salt v. Marquess of Northampton (1892) A. C 1 at 18,
“The right to redeem in equity is therefore a right given in contradiction to the declared terms of the contract between the parties.”
In modern times, it is generally implied that the mortgagor has a right to redeem even after default on the date named for redemption – Kreglinger v. New Patogonia Meat and Cold Storage Co. Ltd. (1914) AC 25 at 50 Per Lord Parker.
EQUITY OF REDEMPTION
This is a remedy under equity in which a mortgagor must be differentiated from that which arise after the legal due date has passed. In Kreglinger v. New Patogonia Meat and Cold Storage Co. Ltd. (supra) 48, Lord Parker pointed out that equity of redemption arises simultaneously in favour of the mortgagor as soon as a mortgage is created. Equity, from the outset, treats the mortgagor as continuing to be the owner of the property which he conveyed away, subject only to the mortgagee’s interest which is not a right to the mortgage debt – Okonkwo v. CCB (Nig.) Plc. (2003) 8 NWLR (Pt. 822) 347; U. B. A Plc v. Okeke (2004) 7 NWLR (Pt. 872) 393.
DISCHARGE OF A MORTGAGE
This means that the loan including the interest has been repaid. The discharge of a mortgage terminates and releases the mortgagor from his obligations under the mortgage. The discharge of a mortgage depends on the type of the mortgage and how it was created –
WHEN A DEED OF MORTGAGE NEEDS TO BE UP-STAMPED
Mortgage documents (e.g. a Deed of Mortgage) are by Section 22 of the Stamp Duty Act Cap. 191, 1958, required to be stamped ad valorem within 30 (thirty) days of first execution as evidence of the payment of stamp duties as imposed by the Stamp Duties Act. Where a document is not stamped or there is evidence of insufficient payment of stamp duty, the document may not be admitted in evidence except a penal sum is paid.
Up-stamping of mortgages refers to the practice or process of payment of additional stamp duties on a mortgage document in a transaction as a result of the increased facility granted over an earlier mortgage. All transactions requiring the consent of the Governor under Section 22 of the Land Use Act, 1978 are affected by this provision. Instruments may be stamped outside prescribed period under a heavy penalty – Section 22(2)(b) of the Stamp Duty Act. Also, proper stamping is a pre-requisite of registration; and so an unstamped document will not be accepted for registration.
In practice, documents are normally submitted to the Stamp Duty Commissioner of the State where the land is situated for assessment. The Commissioner, after checking the consideration for which the document is made, calculates the duty payable and endorses a certificate indicating the amount. Where the document is voluntary, it must be ad valorem, as if it were a document on sale, with the substitution of the value of the property conveyed for the amount or value of the consideration for sale, and the duty must be adjudicated (that is, presented to the Commissioner for an opinion as to the amount that is to be paid) before the document is regarded as properly stamped.
Where a copy or duplicate of the document is to be fixed at the Deed’s Registry, this must be stamped with a fixed duty of 75k and the copy or duplicate will, in addition, bear a denoting fee of 39k in adhesive stamps, that is, post office stamps.
A legal mortgage is stamped at 75k per N200 or part of N200; and further advances are stamped in like manner. The duty for equitable mortgage is 30k per N200 or part of N200. Documents coming under this sub-head must be under hand only, e.g. an agreement expressed or implied to execute a mortgage. But where the equitable mortgage is accompanied by any deed or confers on the mortgage a power of sale or power of attorney, the document should be stamped as a legal mortgage.
It should however be noted that where a consent of the Governor is required in a deed of legal mortgage and such consent has been obtained when the mortgage was originally created, no consent of the Governor is required for the up-stamping of the mortgage if a further facility is granted on it – Per Amaizu JCA in Bank of the North v. Babatunde (2002) FWLR (Pt. 119) 1452 at 1469. Also, no further consent of the Governor is required for up-stamping applies even where the previous consent was granted under a law that ceases to exist – Adepate v. Babatunde (2002) FWLR (Pt. 91) 1503, where the court held that there is no legal necessity for fresh approval from the Governor under the Land Use Act, 1978 since the only difference is the enhancement of the facility from N12,000.00 (Twelve thousand naira) in exhibit 6 to N33,000.00 (Thirty three thousand naira) in exhibit 7. See also Owoniboys Technical Services Ltd v Union Bank of Nig. Ltd [2003] 15 NWLR (pt. 844) 545.
The major features of stamping-up are –
- The property is the same;
- The parties are the same; but
- The new facility if different; hence
- The new duties are paid to (‘up-stamp’) the document.
The following are remedies of a mortgagee –
- Action to recover mortgage sum and interest;
- Statutory power of sale;
- Appointment of a receiver;
- Action for order of specific performance;
- Taking possession of the security
Under Section 19(1) of the Conveyancing Act; and Section 123(1) of the PCL, every mortgagee (whether it is legal or equitable) whose mortgage is created by a deed, may enforce their security when the money becomes due by sale of the mortgaged property. Under this remedy, the power of sale is automatic and does not require an order of Court to sell.
However, the statutory power of sale will arise when the following conditions are met –
- The mortgage must have been created by a deed;
- There must be no express contrary intention against sale of the property contained in the mortgage deed; and
- The legal due date which is the date of redemption of the mortgage must have accrued.
- Notice requiring payment of the mortgage money has been served on the mortgagor or one of several mortgagors, and there has been default in payment of the mortgage money, or part thereof, for three months after such service; or
- Some interest under the mortgage is in arrears and unpaid for two months after becoming due; or
- There has been a breach of some provisions contained in the mortgage deed or in the CA & PCL, and on the part of the mortgagor, or of some person concurring in making the mortgage, to be observed or performed, other than and beside a covenant for payment of the mortgage or interest thereon.
Generally, the mortgagee must wait for the power of sale to arise and also to become exercisable before he sells. But a purchaser who purchases a property before the power of sale arises will not get a good title, while a purchaser who buys after the power of sale arises but before the power becomes exercisable will have a good title notwithstanding this irregularity and the remedy of the mortgagor will only lie in damages against the mortgagee.
The following are reasons why a power of sale can be set aside –
- Where there is some corruption or collusion in respect of the sale by the mortgagee to amount to fraud; or
- Where the sale is at such a low value that it raises an inference that there is fraud in the sale; or
- Where there is evidence that the money has been paid in full; or
- Where the mortgagee sells to itself or to its privy (sale to a simulacrum).
Where the sale is completed, the Mortgagee should use the amount to satisfy the mortgagor’s indebtedness to him and then return the balance of the sale to the Mortgagor. Ekah Eteh v Nigeria Housing Development Society Ltd (1973) 6 SC 183; Nigeria Advertising Services Ltd v UBA Plc (1998) 8 NWLR (pt 616) 546 at 555.
APPOINTMENT OF A RECEIVER
This is provided under Section 19(1)(iii) of the C. A and Section 123(1)(iii) of the PCL.
Both provisions state that a legal mortgagee has the power to appoint a receiver where the mortgagor defaults to pay. Where the mortgage is an equitable mortgage created by deed, the deed should provide for the power to appoint a receiver. This statutory right is implied in every mortgage, legal or equitable, created by a deed where the circumstances would allow the mortgagee to exercise a power of sale.
But equitable mortgages whose mortgage is not by deed must apply to court for the appointment of a receiver. In practice however, most mortgage instruments contain an express provision for the appointment of a receiver. In Adetona & Anor. v. Zenith International Bank Ltd. (2008) All FWLR (Pt 440) 796, the court defined a receiver as a person appointed by the court for the purpose of preserving the property of a debtor pending an action against him or applying the property in satisfaction of a creditor’s claim whenever there is danger that in the absence of such appointment, the property will be lost, removed or injured. Under Sections 24 CA and 131 PCL, the powers, duties and right of a receiver so appointed include:
- That the receiver shall have the power to demand and receive all the income of the property;
- He shall be entitled to remuneration out of the money received by him to pay taxes , rates and other outgoings on the mortgaged property;
- To pay interest accruing in respect of any principal money due under the mortgage; and
- To pay the residue of the money received by him to the person who is entitled to receive the income of the mortgaged property.
ACTION FOR ORDER OF SPECIFIC PERFORMANCE
This was decided in Ogundiani v. Araba (1978) 1 LRN 280, that mere deposit of title deed as security for loan is sufficient act of part performance upon which the court will lend its powers to grant an order for specific performance in the enforcement of the mortgage security. Where the deposit is accompanied by a memorandum of deposit under seal stating the time of repayment of the loan, the rate of interest to be paid and containing an agreement by the borrower to execute a legal mortgage when required, can sell the mortgage property if there is default.
However, to pass the legal estate of the mortgagor, either a power of attorney – Labadebi v. Odulana (1973) 4 CCCHCJ 98, or a trust declaration – LCC Banking Corporation v. Goddard (1897) 1 Ch. 642 clause must be inserted in the memorandum under seal.
TAKING POSSESSION OF THE SECURITY
A legal mortgagee has a right to possession because legal estate to the mortgaged property resides in him. In law, possession follows the legal estate. In Four Maids Ltd. v. Dudley Marshall Properties Ltd. (1975) Ch. D 317 at 320, Per Harman J. held that a legal mortgagee may go into possession before the ink is dry on the mortgage.
A mortgagee is entitled to take possession without being liable in trespass – Awojugbagbe Light Industry Ltd v. Chinukwe (1995) 4 NWLR (Pt. 390) 370. As regards to this, he has to render account. In practice however, mortgages hardly take possession of mortgaged property because of the insistence or equity on strict accountability.
In the very recent case of Prince Abdul Adetono v Zenith Bank Plc decided by the Supreme Court on 16th December, 2011, the Court per Chukwuma Eneh JSc that
It is 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 possession immediately upon the execution of the mortgage, he has a right to immediate possession.
Note that it is not contingent upon breach on the part of the Mortgagor.
FORECLOSURE
This remedy is usually available in equitable mortgage. By this, the mortgagee takes the whole mortgaged property by a court order. And having taken the whole security, the mortgagee cannot also claim payment, unless the foreclosure is subsequently opened in which the mortgagor is allowed the opportunity to redeem the security – Perry v. Baker (1806) 13 Ves. 198. It extinguishes the equity of redemption. But where the mortgagee sells the mortgaged property after foreclosure, the mortgagee cannot re-open the foreclosure and cannot sue the mortgagor even if the proceed of sale is not sufficient to defray the outstanding mortgage sum and interest – Palmer v. Hendrie (1859) 27 Beav. v. Hendrie (1859) 27 Beav. 349; Lockhart v. Hardy (1946) 9 Beav. 349.
REMEDIES AVAILABLE TO A MORTGAGOR
These are –
- Contractual right or legal right to redeem;
- Equitable right to redeem; and
- Equity of redemption.
CONTRACTUAL OR LEGAL RIGHT TO REDEEM
This is a remedy under the common law of the mortgage contract to recover his property upon discharging the obligations which the mortgage was created for in order to secure. This means that a mortgage to secure a money loan basically fixes a date for repayment which must be abided to.
Generally, the date for repayment and redemption may be suspended for any period, however long, provided that the mortgage contract is not a device to render the right as well as the equity of redemption as a cloak for an unquestionable bargain.
In practice, the period for redemption is normally short because it is an advantage to the mortgagee to place the mortgagor in default as soon as possible.
EQUITABLE RIGHT TO REDEEM
This is the right to recover his security by discharging his obligations under the mortgage despite the fact that the time fixed by the mortgage contract for the repayment or the performance of the obligation(s) has passed.
According to Lord Bramwell in Salt v. Marquess of Northampton (1892) A. C 1 at 18,
“The right to redeem in equity is therefore a right given in contradiction to the declared terms of the contract between the parties.”
In modern times, it is generally implied that the mortgagor has a right to redeem even after default on the date named for redemption – Kreglinger v. New Patogonia Meat and Cold Storage Co. Ltd. (1914) AC 25 at 50 Per Lord Parker.
EQUITY OF REDEMPTION
This is a remedy under equity in which a mortgagor must be differentiated from that which arise after the legal due date has passed. In Kreglinger v. New Patogonia Meat and Cold Storage Co. Ltd. (supra) 48, Lord Parker pointed out that equity of redemption arises simultaneously in favour of the mortgagor as soon as a mortgage is created. Equity, from the outset, treats the mortgagor as continuing to be the owner of the property which he conveyed away, subject only to the mortgagee’s interest which is not a right to the mortgage debt – Okonkwo v. CCB (Nig.) Plc. (2003) 8 NWLR (Pt. 822) 347; U. B. A Plc v. Okeke (2004) 7 NWLR (Pt. 872) 393.
DISCHARGE OF A MORTGAGE
This means that the loan including the interest has been repaid. The discharge of a mortgage terminates and releases the mortgagor from his obligations under the mortgage. The discharge of a mortgage depends on the type of the mortgage and how it was created –
- A legal mortgage created by assignment or sub-demise is discharged by a deed of surrender, discharge, or release of the interest in the property to the mortgagor. Such a deed should as evidence of discharge be registered at the lands registry.
- A mortgage created by a charge by a way of a legal charge is discharged by a statutory receipt.
- A registered charge under the Registration of Titles Law is discharged when its registration is cancelled at the registry by lodging the Charge Certificate and the Land Registry (Form 6 of the registry).
- Equitable mortgage is discharged by a simple receipt under hand, unless payment is made to the mortgagee’s solicitor, whereby, the receipt should be by a deed, so as to protect the mortgagor or person paying the money.
- Where the mortgagor is a corporate entity, upon the redemption of the debt, a memorandum of satisfaction under section 204 of the Companies and Allied Matters Act (CAMA) should be filed at the Corporate Affairs Commission (CAC) in Form CAC 8 and 9.
Comments
Post a Comment