NIGERIAN LAW SCHOOL

PORT-HARCOURT CAMPUS

MORTGAGES III
UGOCHUKWU CHARLES KANU
 LECTURE CONTENTS
1.Up-stamping
2.Remedies in a Mortgage transaction
3.Discharge of a Mortgage
4.Ethical Issues
 WHAT IS UP-STAMPING?
• General rule admitting no exception is that
Stamping is a statutory requirement of a
legal mortgage. S. 22 Stamp Duties Act.
• Up-stamping is the practice of payment
of additional Stamp duty in respect of an
increased facility over a subsisting
mortgage.
 PROCEDURE FOR UP-STAMPING
• The Mortgage Deed is taken to the relevant
Stamp Duty office for assessment.
• Upon assessment of the sum payable for the
additional facility, the fee is paid.
• Thereafter additional stamp will be placed on
the Deed reflecting payment for the improved
facility.
PROCEDURE FOR UP-STAMPING…
• The Consent of the Governor is needed for a
Legal Mortgage. See s.22 LUA.
QUERY:
 Is Consent of Governor needed for Equitable
Mortgage?
 See Okunneye v FBN Plc (1996)6 NWLR
(Pt.457)749.
PROCEDURE FOR UP-STAMPING…
• If parties in creating an equitable mortgage
obtained Gov. Consent, no further consent is
needed if a legal mortgage is later created.
See s.22 (1)(a) LUA.
• Stamp duty payable ad valorem. S.10 SDA.
• Deed to be stamped 30days from date of
execution.
IS GOVERNOR’S CONSENT NEEDED
FOR UP-STAMPING?
• Governor’s consent is not required for
up-stamping.
• See Owoniboys Tech Services v U.B.N
Plc (2003) 15 NWLR (Pt.844)545 SC;
Adepate v. Babatunde (2002) 4 NWLR
(Pt. 756) 99; S.82 SDA;
PROCEDURE FOR UP-STAMPING…

 Note that a building erected on a mortgage

land forms part of the mortgage property.
See Adepate v. Babatunde (2002) 4 NWLR
(Pt. 756) 99 CA.
 Note the doctrine of quic quid plantatur solo
solo cedit.
 QUERY
 Assuming a different collateral is used
to secure the grant of the additional
facility, is Governor Consent required?
 See Owoniboys Tech Services v U.B.N
Plc (2003) 15 NWLR (Pt.844)545 SC.
FEATURES OF UP-STAMPING
A. Same property
B. Same parties
C. New facility granted
D. Existing mortgage
E. New duties paid.
REMEDIES AVAILABLE TO A
MORTGAGEE
INTRODUCTION
• Some of these rights becomes active
immediately the mortgage deed is signed
(before the ink is dried up). See Four-Maids
Ltd v Dudley Marshall (Properties) Ltd.
(1957) Ch.317.
• Some have statutory protection but are
subject to contrary agmt. S.35 MPL.
RIGHTS OF THE MORTGAGEE

1. RIGHT TO TAKE POSSESSION

RIGHT TO TAKE POSSESSION…
• This right is immediate as it attaches to
the legal estate.
• Right to possession is not contingent
upon default of payment. See s.19(1)
(iii) CA; S.123 PCL.
• A legal mortgagee may take possession
without a court order. See Awojugbagbe
Light Industries v Chinukwe & Anor.
• An equitable mortgagee can only take
possession upon a court order. See Young
v Abina (1940) 6 WACA 180.
 • Legal mortgagee are reluctant to take over
because:
a. Render account for profit thus may be found
negligent.
b. Liable for deterioration of the property.
c. Cannot make personal profit. See Odu’a Invst.
Co. Ltd v Obadeyi (2016) All FWLR (Pt. 855) 90.
2. RIGHT TO APPOINT A RECEIVER
APPOINTING A RECEIVER…
• A receiver is 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 to satisfy the claim. Adetona & Anor. v
Zenith Int’l Bank Ltd (2008) All FWLR
(Pt.440)796.
• This is to avoid the property from being
dissipated.
RECEIVER…
 Empowered to collect rent and manage the
property for the discharge of the loan & interest
by action, distress or otherwise.
See Awojugbagbe Light Industries Ltd. Vs
Chinukwe & Anor; S. 19 (1),(iii) CA, S. 123(1),
(iii) PCL. & S. 35(1),(iii).
• Mortgagee can appoint a receiver once the
power of sale arises and become exercisable. S.
24 (1) CA;S. 131 (1) PCL; S. 43(1) MPL.
RECEIVER…

• A receiver though appointed by the

mortgagee is the agent of the mortgagor.
• A court appointed receiver is an officer of
the court.
• Appointment/removal of a receiver must be
in writing.
3. SALE OF THE SECURITY
SALE…

• This right is conferred by statute in the event

of default.
• Parties may by agreement modify or vary it.
See S.19(1) CA; S.123(1)PCL; S.35 MPL.
• If the proceeds of sale satisfies the mortgage
sum and interest the transaction is
concluded.
SALE…

• If the sum is not enough, mortgagee can

sue the mortgagor directly for the balance
based on personal covenant to pay.
• The right of sale is also available to an
equitable mortgagee. See Ogundiani v
Araba.
 CONDITIONS FOR STATUTORY
POWER OF SALE TO ARISE
A. Mortgage must be created by deed;
B. The legal due date must have passed;
C. No contrary intention contained in the
agreement. See S.19 CA; S.123 PCL;
S.35 MPL.
The above conditions must be fulfilled.
 POWER BECOMES EXERCISABLE IF:
S.20 CA; S.125 PCL
a) Default on two consecutive months to pay
interest.
b) Service of notice of demand and 3 months
has passed from date of service.
c) There is a breach of another fundamental
term in the deed. B.O.N v Aliyu (1998) 7
NWLR (Pt.612) 622.
POWER BECOMES EXERCISABLE IN
THE MPL S.37
• Notice demanding payment served but
default in payment of principal sum and
interest for two months after service.
OR
• There is breach of other covenants in the
deed other than covenant to pay principal
sum and interest.
SALE…

• Power of sale must arise and become

exercisable before sale. Nig. Advertising
Services Ltd v U.B.A Plc. (1999) 8 NWLR
(Pt.616) 546.
• Sale and purchase before power of sale
arises does not transfer good title.
SALE…

• Sale after the power has arisen but not yet

exercisable transfers good title.
• Mortgagor can only sue mortgagee in
damages.
- NOTE the distinction btw when the power
arises & when it becomes exercisable.
 CONDUCT OF SALE

 Public auction or private contract or tender.

 Sale must be genuine (motive is irrelevant). UBA v
Okeke & Ors (2004) 7 NWLR (Pt. 872) 393;
 Bound to sell at a good price which need not be the
market value provided, he acts in good faith.
 Conduct of sale…

Sale must be without collusion with purchaser.

See Eka-Eteh v NHDS Ltd. (1973) 6 SC 183.
Compliance with the applicable Auctioneer’s Law
in the Service of notice, is a condition precedent for
a valid sale by public auction. Okonkwo v Coop &
Comm. Bank Nig PLC (2003) FWLR Pt. 154, 457.
 CONDUCT OF SALE…
 Compliance with the agreed mode of service of
notice is mandatory (except where no mode was
agreed upon). See B.O.N v Aliyu.
 Bona fide purchaser for value without notice who
bought when the power of sale has arisen but not
exercisable is protected. See S. 21 (2) C.A.,
S.126 (2) PCL& S. 38(2) MPL
 APPLICATION OF PROCEEDS OF
SALE
1. Payment of mortgages ranking in priority.
2. Payment of cost & expenses incidental to the
conduct of the sale.
3. Payment of the principal sum & interest on the
mortgage.
4. Payment of balance if any, to the mortgagor or
any other person entitled to the mortgaged
property.
 APPLICATION OF PROCEEDS OF SALE
Proceeds must be used to offset the loan & the
remainder given to the mortgagor where there is a
balance. See B. Visioni Nig. Ltd v. NBN Ltd.
(1975) 1 NMLR 8.
The mortgagee is not an agent of the mortgagor
when selling but is, in respect of the proceeds of
the sale.
 EFFECT OF SALE
1.The mortgagor’s equitable right to redeem is
extinguished.
2.Mortgagor is entitled to the balance of the
proceeds of sale because of his equity of
redemption. See B. Visioni Nig. Ltd v. NBN
Ltd. (1975) 1 NMLR 8.
 INSTANCES WHEN A SALE MAY BE
SET ASIDE
1. When a different mode of sale or service of
notice was agreed by the parties;
2. Where the mortgagor has no good title;
3. Failure to obtain requisite consent;
4. Non-registration of the mortgage;
5. Fraud by the mortgagee or collusion between
the mortgagee and the purchaser;
INSTANCES WHEN A SALE MAY BE
SET ASIDE CONTD…
6. The right of sale has not arisen;
7. The mortgage is a fraud on the mortgagor;
8. Sale occurred after repayment of the
mortgaged sum and interest;
9. Property soled at gross undervalue.
10. Order of court not obtained before sale.
11. Sale to himself.
 WHEN IT MAY NOT BE SET ASIDE
1.Court order was not obtained before sale
2.Power of sale was improperly exercised.
3.Demand notice was not served or service
was insufficient.
4.Mortgagor paid substantial part of the loan.
5. Outstanding sum is contested by parties.
6. Property soled at a low price.
7. Sale motivated by ill-will.
See Okonkwo v C.C.B Ltd (2003)8 NWLR
(Pt.822)347.
4. FORECLOSURE
 FORECLOSURE
 An order of court at the instance of the mortgagee
vesting on him the title to the property.
 It has the effect of terminating the mortgagor’s
equitable right to redeem & destroying his equity
of redemption. Carter v Wake (1877)4 Ch.D 605.
 Remedy of both the equitable mortgagee and
legal mortgagee. See OGUNDAINI V. ARABA
(supra).
FORECLOSURE…

• The property cannot be foreclosed without

court order. See Re Farnol, Eades, Irvin &
Co. (1915) 1 Ch. 22.
• Right to foreclosure arises only after the legal
due date has passed and mortgagor is in
default or after demand is made for payment.
Williams v Morgan (1906)1 Ch 804.
 Foreclosure…
Court may make an order of sale in lieu of
foreclosure (judicial sale).
A purchaser under the order, must obtain the
Gov.’s consent before a cert. of Purchase will be
issued by the court. DANJARA V. BAI (1965)
NMLR 445.
FORECLOSURE ORDER NISI & ABSOLUTE
• A foreclosure order once made, puts an end to all
other remedies of the mortgagee unless reopened.
• Mortgagee cannot sue for balance if proceeds of
sale do not satisfy principal sum.
• Cannot also account for profit made from sale.
• Foreclosure order Nisi for duration of 6 months.
• Thereafter, Foreclosure Order Absolute.
WHEN MAY A FORECLOSURE ORDER
ABSOLUTE WILL BE RE-OPENED?
1.An action by mortgagee suing mortgagor on
his personal covenant.
2.Exercise of court discretion if there is gross
3.Fraud. See Campbell v Holyland.
 5. ACTION FOR PERSONAL
COVENANT
• This right is implied to recover debt for breach.
Sutton v Sutton (1882) Ch.D 511.
• The due date must have passed. Bolten v
Buckenham (1891)1 QB 278.
• It is advisable to make this right the last resort
because if what is realised is less he cannot use
other remedies.
RIGHTS AND REMEDIES AVAILABLE TO
A MORTGAGOR
1. EQUITY OF REDEMPTION
• Sum total of the mortgagor’s interest over the
security.
• Comes into existence at the time of executing the
mortgage deed.
• It can only terminate by redemption or foreclosure
or lapse of time. Nigeria Advertising Services Ltd
v UBA Plc. (1991) 8 NWLR (Pt.616)546.
EQUITY OF REDEMPTION…
• The right continues until mortgagor’s title is
extinguished. See Ejikeme v Okonkwo (1994) 8
NWLR (Pt. 362).
• Mortgagor has inherent right to redeem.
• Equity of redemption is a legal estate that can be
transferred but purchaser takes subject to the
mortgage. Barclays Bank Olofintuyi (1961) All NLR
799.
2. LEGAL RIGHT TO REDEEM
• Legal or contractual right of the mortgagor to
redeem.
• This is the right to redeem the property on or
before the legal due date.
3. EQUITABLE RIGHT TO REDEEM

• Arises where the legal right to redeem has

elapsed.
• Operates till property is redeemed, sold or
foreclosed.
• A result of equity’s intervention in the agreement
between the parties because once a mortgage
always a mortgage.
 4. To demand for an Account (where
mortgagee goes into possession).
5. To balance of proceeds of sale where
applicable.
6. Right to repossession of the
property/document/deeds.
DISCHARGE OF A MORTGAGE
 1. A LEGAL MORTGAGE
• Discharged by deed of discharge also known
as Deed of release or Deed of
surrender/reconveyance.
 2. A LEGAL CHARGE
• Discharged by a simply receipt i.e. statutory
receipt.
 3. EQUITABLE MORTGAGE
 Discharged by a simple receipt of payment
under hand.
 Where payment is made to the mortgagee’s
solicitor, the receipt should be by Deed, to
protect the mortgagor or the person paying
the money.
 4. MPL – S 47
• A receipt (Form 2 in First Schedule may be
used).
• Deed of re-assignment, surrender, release or
transfer executed in lieu of receipt.
See S. 47(4) MPL.
• A receipt in Form 5 of the Second
Schedule to the MPL for statutory
mortgage or legal charge.
 5. FOR A COMPANY
• Same modes of discharged above based on
jurisdiction where the company is situate.
• In addition file a memorandum of satisfaction
at the Corporate Affairs Commission
pursuant to section 229 of the CAMA 2020.