By
section 22 of the Stamp Duty Act Cap.
191, 1958, a document is required to be stamped ad valorem within 30 (thirty) days of first execution. Where the
instrument is void, unless it has been approved by a public officer, the 30
days run from the date of such approval – section
22(5) of the Stamp Duty Act.
Up-stamping
of mortgages refers to the practice or process of payment of additional stamp duties
on a mortgage document in transaction 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; an unstamped document will not be accepted for registration.(click on the pictures on left or right hand sides for more insights)
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, the
principle that 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.
The
major features of stamping-up are –
1.
If the property is the same;
2.
If the parties are the same; but
3.
If the new facility if different; hence
4.
The new documents are paid to (‘up-stamp’) the
document.
REMEDIES AVAILABLE TO
A MORTGAGEE
The
following are remedies of a mortgagee –
1.
Statutory power of sale;
2.
Appointment of a receiver;
3.
Action for order of specific performance;
4.
Taking possession of the security; and
5.
Foreclosure.
STATUTORY POWER OF
SALE
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, 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 –
1.
The mortgage must have been created by a deed;
2.
There must be no express contrary intention
against sale of the property contained in the mortgage deed; and
3.
The legal due date which is the date of
redemption of the mortgage must have accrued.
Although,
such power of sale must be exercisable under any of the three conditions in section 20 of C. A and section 125 of the PCL which are –
1.
Notice requiring payment of the mortgage money
has been served on the mortgagor or one of several mortgagors, and default has
been in payment of the mortgage money, or part thereof, for three months after
such service; or
2.
Some interest under the mortgage is in arrears
and unpaid for two months after becoming due; or
3.
There has been a breach of some provision
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.
The
following are reasons why a power of sale can be set aside –
1.
Where there is some corruption or collusion in
respect of the sale by the mortgagee to amount to fraud; or
2.
Where the sale is at such a low value that it
raises an inference that there is fraud in the sale; or
3.
Where there is evidence that the money has been
paid in full; or
4.
Where the mortgagee sells to itself or to its
privy.
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 mortgage 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 defines a receiver as a person appointed by 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.
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, mortgagees hardly take
possession of mortgaged property because of the insistence or equity on strict
accountability.
FORECLOSURE
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. 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 –
1.
Contractual right or legal right to redeem;
2.
Equitable right to redeem; and
3.
Equity of redemption.
CONTRACTUAL RIGHT 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 redeemed.
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 –
1.
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.
2.
A mortgage created by a charge by a way of a
legal mortgage is discharged by a statutory receipt.
3.
A registered charge under the Registration of
Titles Law is discharged when its registration is cancelled at the registry by
lodging the Charge Certificate at the Land Registry (Form 6 of the registry).
4.
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.
5.
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).
UNION BANK OF NIGERIA PLC v. OLORI MOTORS
& CO. LTD & ORS (1998) 5 NWLR (PT 551) 652
FACTS OF THE CASE
The appellant
sued the respondents jointly and severally claiming the sums of N7,947,273.00
(seven million, nine hundred and forty seven thousand, two hundred and seventy
three naira) being the debit balance outstanding in the current account of the
1st respondents as at 23/8/88 and N84,971.00 (eighty four thousand,
nine hundred and seventy one naira) being the balance outstanding in the loan
account of the 1st respondent. Both the overdraft and loan were
jointly guaranteed by the 2nd and 3rd respondents.
At the hearing of
the matter, the respondents were represented by counsel but they failed to lead
evidence in defence of the action. They also refused to call any witness to
prove the counterclaim which they filed. After hearing the case, the trial
Court entered judgment for the appellant as claimed. In addition, the appellant
was granted interests on the amount awarded. Furthermore, the court which
dismissed the respondent’s counterclaim went ahead to hold as follows “subject to any necessary consent being
obtained, the plaintiff is at liberty to sell the properties mortgaged by the
defendants as securities for the various facilities granted by the plaintiff”.
The respondents
were dissatisfied with the judgment. They appealed to the Court of Appeal and
at the same time filed a motion for stay of execution. The respondents duly
paid for the service of both the notice of appeal and the motion for stay of
execution. However, the processes were not served on the appellant. The trial Judge
whose duty it was to fix the date for hearing of the motion retired before
assigning any date for the argument of the said motion. While the respondents
were trying to facilitate re-assigning the case to another Judge, the
appellants without going back to the trial Court for any process towards
executing the judgment against the respondents, simply resorted to its power of
sale under the mortgage deed executed by the parties. The appellant proceeded
to sell two of the respondents’ mortgaged properties. On becoming aware of the
sale, the respondents then filed a motion on notice before the trial Court
seeking to set aside the sale. After hearing the argument on the application,
the trial Court, relying heavily on Vaswani
v. Savalakh (1972) All NLR 922 granted the application and set aside the
ruling.
Aggrieved by the
ruling, the appellant appealed to the Court of Appeal.
HELD
On whether
mortgagee requires order of court before exercise of power of sale, the Court
of Appeal, Per Mohammed JSC, stated thus:
“the exercise of powers of sale under a
mortgage deed is quite distinct and separate from the exercise of power by a
judgment creditor to execute a judgment delivered in his favour. The two rights
are in fact governed by separate and distinct relevant laws applicable to the
exercise of each of the rights. This is because the appellant court could have
validly exercised its power of sale of the mortgaged properties under the deed
of mortgage even if the judgment of the lower court did not contain any order empowering
the appellant to sell the mortgaged properties. In other words, the execution
of the judgment of the lower court of 4/2/94 in favour of the appellant merely
came through incidentally in the process of the appellant’s exercise of its
right of power of sale under the mortgaged deed.”
On whether
exercise of power of sale by mortgagee/Judgment creditor without recourse to
Court amounts to Court process, it was stated that the issue of court process
cannot arise to justify the setting aside the sale of a mortgaged property
where as in this case, the sale was not done through the issue of any court
process but simply through the exercise of the mortgagee’s power of sale under
the mortgage deed.
Mohammed JSC,
further held that:
“It is also not in dispute from the facts averred in the
respondent’s affidavit in support of their motion and the appellant’s counter
affidavit that before the sale of the two mortgaged properties, the appellant
did not apply nor obtain any process from the lower court which delivered the
judgment in its favour on 4/2/94 in facilitating the execution of that
judgment. In other words, the appellant did not have any recourse to the
Registry of the lower court before selling the two mortgaged properties of the
respondents. In fact all what happened in the present case is that the
appellant chose to exercise its power of sale under the Mortgage Deed rather than going through the processes of execution
of the judgment in its favour. In the circumstances of this case therefore, was
the learned trial Judge right in applying the decision of the Supreme Court in
Vaswani Trading Co. v. Savalakh & Co. (supra) in coming to the conclusion
that the situation in the present case is similar to that in Vaswani’s case?
The answer of course is in the negative.
The Court of
Appeal thus held that the appeal succeeds and was allowed. The ruling of the
lower court of 31/3/95 setting aside ‘the
sale of the respondent’s mortgaged properties’ was set-aside and replaced
with an order dismissing the respondent’s application.
OWONIBOYS TECH SERVICES LTD. v. UNION BANK
OF NIGERIA LTD. (2003) 15 NWLR (PT 844) 545
FACTS OF THE CASE
The appellant
applied for a secured loan of N50,000.00 (Fifty thousand naira). It used its
landed property at Oja Iya, Taiwo Road, Illorin as collateral. A deed of
mortgage was executed for this purposed with the Governor’s consent (marked as
exhibit 4). Later, the loan was increased to N100,000.00 (One hundred thousand
naira) and another deed of mortgage was executed to reflect this amount, which
deed was accordingly upstamped (marked as Exhibit D1). Still later, the loan
was increased to N200,000.00 (Two hundred thousand naira). The same procedure
was followed (marked as exhibit 5). The Governor’s consent was not sought in
respect of exhibits D1 and 5.
There was
however, a failure of the repayment by the appellant of the facility granted.
The respondent, sometime in 1988 made a demand for the repayment. As the
appellant did not comply, the respondent then advertised for the sale of the mortgaged
property. The respondent alleged that the appellant failed to repay the loan
together with the accrued interest in accordance with the terms of the
agreement. It decided to exercise its power of sale of the property as provided
under the deed of mortgage. The appellant on the other hand disputed it was
owing. It alleged that it discovered several multiple debits of particular
cheques which when sorted out would leave it with enormous credit balance. It
also contended that the Governor’s consent was not obtained for exhibits D1 and
5 and that they were null and void as a result. It then argued that since
exhibit 4 has ceased to exist on the principle of merger, there was no valid
mortgage upon which the power to sell its property could be exercised by the
respondent. Finally, it contended that even if there was a subsisting deed of
mortgage, the originally agreed interest rate could not be increased by the
respondent and used to calculate its liability without both parties agreeing
upon such an increase.
Consequently, the
appellant instituted the action leading to this appeal against the respondent
challenging, in the main, the validity of the mortgages and injunction
restraining the respondent from selling the property, subject to the said
mortgages.
At the conclusion
of the hearing, the trial court granted the appellant’s claim. Upon appeal to
the Court of Appeal by the respondent, the judgment of the trial court was
reversed and the Appellant’s claim was dismissed.
The appellant was
dissatisfied with the decision of the Court of Appeal and appealed to the
Supreme Court. One of the issues raised by the appellant was that the
respondent’s ground of appeal which challenged the ruling of the trial court in
refusing to grant the respondent an amendment of its statement of defence,
having been filed along with the appeal against the final decision of the trial
court, without leave, was incompetent.
HELD
On application of
principles of merger to mortgages, it was stated that a mere mortgage is
extinguished by the taking of formal mortgage, even though the mortgage does
not confer a legal estate, and the sum from then on secured is the sum
mentioned in the mortgage notwithstanding that other sums were covered by the
deposit. What is referred to here as ‘deposit’ is the equitable mortgage by way
of deposit of the deed of conveyance to secure a loan. It should be understood
that merger may take the form of a merger of estates or of a merger of charge
in the land. It is the merger of charge in the land. It is the merger of an
equitable mortgage with the legal mortgage in land that is reflected here.
However, a mortgage is not merged by the taking of a new mortgage on the same
property to cover the original debt and further advances. Thus, in the instant
case, it was proper to unstamp the relevant exhibits to reflect the further
advances or loans made to the appellant in consequence of the authorized
mortgage transaction.
On whether
Governor’s consent required for upstamping of mortgage, it was stated that
where the consent of the Governor had been obtained in respect of a mortgage
deed, an increase in the amount of the loan would not call for fresh Governor’s
consent. The Governor’s consent has nothing to do with the amount of loan.
Rather, the consent is for the alienation of the legal title in the property to
the mortgagee in compliance with section 22 and 26 of the Land Use Act, 1978,
for the period of the mortgage transaction. So, no further consent would be
necessary just because further loans had been obtained upon the same
collateral.
The appeal was
thus dismissed for lacking merit.
SAMPLE SEARCH REPORT AND A COVERING LETTER
SOULBEEZ & GRAM
NIGERIA LTD.
No. 43 Nedo Crescent, Abuja
08036362477, 08022534477
20th January 2011
The Managing Director
Zubaiski Plc
No. 8, Bmara Crescent Abuja
Dear Sir,
A SEARCH REPORT CONDUCTED ON THE PROPERTY
OF PRINCE BIJALO MIMZ
1.
Introduction
– This is the search report of the property of Prince Bijalo Mimz lying and
situated at Plot 5, Bwari square, Abuja.
2.
Date of
search – This search was conducted on 18th April, 2010
3.
Name of
Borrower – Prince Bijalo Mimz
4.
Name of
person giving security other than borrower – Mr. Nedu Inno
5.
Brief
description of the property – The property is a mansion, situate and lying
at Plot 5, Bwari square, Abuja, property designated with the Survey Plan No. AB
001 registered at the Land Registry of Oyo State.
6.
Type of
title – The owner is a beneficial owner of the property subject to legal
mortgage with Zenith Bank Plc.
7.
Encumbrances
– There is subsisting an undischarged legal mortgage.
8.
Valuation
report – The property has been valued by a registered estate valuer to
worth the sum of N10,000,000.00 (Ten million naira)
9.
Conclusion/Opinion
– The title is defective unless the mortgagee consents to the sale by using
the purchase price to repay the outstanding loan security on the property.
_______________________
Barr. Chigozie
Ezekiel
Principal
partner
07034997413
