Katumba v Stanbic Bank Limited and Others (Civil Suit 201 of 2012) [2018] UGHCLD 85 (12 October 2018)

Full Case Text

#### THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA

### (LAND DIVISION)

## CIVIL SUIT NO.201 OF 2012

SAMALIE KATUMBA:::::::: **HIMMORE CONTINUES**

**VERSUS**

1. STANBIC BANK LTD

2. ANTHONY MUPERE T/a

ARMSTRONG AUCTIONEERS

**:::::::DEFENDANTS**

3. PRINT INNOVATIONS & 15

PUBLISHERS LTD

4. GODFREY KATUMBA

BEFORE: HON. MR: JUSTICE BASHAIJA K. ANDREW

#### **JUDGMENT:**

Samalie Katumba (hereinafter referred to as the "plaintiff") 20 brought this suit against Stanbic Bank Ltd; Anthony Mupere T/a Armstrong Auctioneers; Print Innovations & Publishers Ltd and Godfrey Katumba (hereinafter referred to as the $1^{st}$ , $2^{nd}$ , $3^{rd}$ and

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4th defendant respectively) jointly or severally. The plaintiff is $\overline{5}$ seeking a declaration that the mortgage executed on 13/02/2009 is null and void; an order of a permanent injunction restraining the defendants jointly and severally, their agents, representatives and or workmen from selling, evicting, harassing, intimidating or in any other way interrupting the plaintiff's use and enjoyment of 10 property comprised in Kyadondo Block 212 Plot 299 and Plot 300 at Kyebando, Kampala (hereinafter referred to as the "suit land"); general damages, interest and costs of the suit.

The plaintiff's main contention is that the mortgage created on 13/02/2009 with her matrimonial home as security is illegal as it 15 was done without her knowledge or consent. The plaintiff alleges that she only gave a written consent as a spouse to the 4th defendant in respect of the legal mortgage created on $14/01/2005$ between the 1st and 4th defendant which was fully serviced and discharged on 15/12/2008 when the spousal 20 consent she had given also expired. The plaintiff disputes the second mortgage which the 4th defendant took out from the 1st defendant on 13/02/2009 using the same property as security and contends that the transaction is illegal and invalid as it was done without her knowledge or consent. She maintains that

5 spousal consent is a mandatory requirement under Section 39 of the Land (Amendment) Act 2004 for such dealings/transactions to be valid.

The $1^{st}$ defendant denied the allegations of the plaintiff and avers that contrary to the plaintiff's allegations, the $1^{st}$ defendant followed all the requisite mortgage laws and that the plaintiff gave 10 the necessary spousal consent for the two mortgage transactions. That the plaintiff's spousal consent for the subsequent mortgage was not required given the terms of the offer letter in Clause 14. That the mortgage was a continuing security to the $1^{st}$ defendant for among others monies intended to be secured. That as such the spousal consent the plaintiff had given in the 1st mortgage continued at the time of executing the $2^{nd}$ mortgage between the $1^{\rm st}$ and $4^{\rm th}$ defendant.

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The $3^{rd}$ and $4^{th}$ defendant in their joint defence contend that the $1st$ mortgage facility was fully paid to the $1st$ defendant on 20 $15/12/2008$ and that the 1st defendant offered another facility which the $3^{rd}$ defendant accepted. That all that was required by the 1st defendant to secure the mortgage in the new facility was communicated in the offer letter Clause 14 and that the spousal consent of the plaintiff was not one of them. That they are

committed to repay the loan and have been making deposits to $\mathsf{S}$ that effect. That bas such the 1st defendant is not entitled to the reliefs sought.

The 2nd defendant never filed a defence and the matter proceeded against him as if he had filed a defence. At the hearing of the suit Mr. Mbaziira Fredrick represented the plaintiff, Mr. Alex Rezida represented the $1^{st}$ and $2^{nd}$ defendants and Mr. Allan Seruliika represented the 3rd and 4th defendants. In the parties' joint scheduling memorandum the following facts were agreed;

1. There was a duly executed legal mortgage on 14/01/2005.

- 2. The plaintiff did give a written consent as spouse to the $4^{th}$ defendant in respect of the legal mortgage on $14/01/2005$ . - 3. The legal mortgage executed on 14/01/2005 was fully serviced and completed on 15/12/2008. - 4. The 4th defendant subsequently took out a second mortgage from the $1$ st defendant on 13/02/2009.

The following issues were agreed for determination;

1. Whether the consent obtained from the plaintiff in execution of the $1^{st}$ mortgage continued at the time of

executing the $2^{nd}$ mortgage between the 1st defendant and the $4^{th}$ defendant.

2. Whether the $1$ st defendant is a bonafide mortgagee.

3. What remedies are available to the parties?

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I shall resolve Issue No.1 &2 jointly as they are interrelated.

Issue No.1: Whether the consent obtained from the plaintiff 10 in execution of the $1$ st mortgage continued at the time of "一个在我的"中国 executing the $2^{nd}$ mortgage between the 1st defendant and the $4^{th}$ defendant.

Issue No. 2: Whether the $1^{st}$ defendant is a bonafide mortgagee.

The plaintiff's main contention is that the mortgage facility between the $1^{st}$ defendant and the $3^{rd}$ & $4^{th}$ defendants created on 13/02/2009 against her matrimonial home is illegal and invalid for want of the necessary spousal consent. That being matrimonial property, any dealings/transaction in it requires the mandatory spousal consent under Section 39 of the Land (Amendment) Act (supra). For this proposition counsel for the plaintiff relied on the case of Musaija vs. Musaija & O'rs (HCT-01-LD-CA-0078 of 2016) in which court cited Enid Tumwebaze

vs. Mpereirwe Stephen & A'nor HCCA No.039 of 2010 to the $\overline{5}$ effect that the provisions of section 39(supra) are mandatory and cannot be circumvented.

The plaintiff's maintained that the consent which she gave for the 14/01/2005 mortgage facility was expressly unequivocal. That Exhibit D2 - the letter of offer by the 1st defendant to the 3rd & 4th 10 defendants had a time limit, a monetary limit and other limitations of the mortgage. That even though Section 39 (supra) does not provide time or monetary limits, it requires that at least every mortgage on matrimonial property be covered by a separate spousal consent. To support this proposition, counsel for the plaintiff cited the case of Alice & Michael Okiror vs. Global Capital Save & A'nor HCCS 149 of 2010 and opined that the $1st$ , $3rd$ and $4th$ defendants needed a separate plaintiff's spousal consent before creating the 2009 mortgage over her matrimonial home. The plaintiff insisted that the consent in the 2005 mortgage facility was only for the Shs.300,000,000 and that the consent expired on 15/12/2008 upon the particular mortgage being fully paid as shown in Exhibit 10.

The plaintiff's evidence in that regard was confirmed by the testimony of DW2 Katumba Godfrey the 4th defendant. Even in 25

- the averments in their defence the 3rd & 4th defendant state that $\mathsf{S}$ the 1st mortgage facility was fully paid to the 1st defendant on $15/12/2008$ . That the consent of the plaintiff expired with the mortgage facility being discharged and they were offered another facility whose terms never required the spousal consent. - Counsel for the plaintiff submitted that the plaintiff's earlier $10$ spousal consent cannot in any terms be stretched to cover fresh mortgages. That if that was to be the case, there would have been no any need to execute a fresh mortgage deed in 2009. That the facts as they are now mean that the 2009 mortgage was executed without the spousal consent as required by law hence illegal and 15 invalid.

For their part, the 1st and 2nd defendants maintained that the 2009 mortgage was an extension of the earlier mortgage executed in 2005 in which the plaintiff gave the required spousal consent. That as such there was no need for her to give a fresh spousal consent. That Exhibit D4 the letter of offer in Clauses 1, 3 and 14.7, clearly states that the mortgage of 2009 was just an enhancement of the 2004 offer. That Shs. 541, 593,000 in the mortgage of 2009 includes a repayment of the balance out of the 2005 mortgage of Shs. 300,000,000 as expressly stated in the

document. DW1 Mr. Twinamatsiko testified that the asterix in $5$ Clauses 1 and 6.1 of Exhibit D4 the 2008 offer letter, shows that there was only one earlier agreement of 2005 which was not to be varied save for the adjustment of the figures in the amount. DW1 insisted that the offer was a fusion of both the 2005 and 2009 facilities and it is the reason why Clause 13.6 therein states that;

"13.6 Consent to mortgage signed by Samalie Katumbaspouse on land and property pledged as security registered in Kyadondo Block 212, Plot 299..."

The 1st defendant thus totally denied that it ignored provisions of Section 39 (supra). That it was well aware of them but that the 15 mortgage of 2009 already had the required spousal consent in place. That this is what distinguishes it from the cases that the plaintiff has cited above. The 1st defendant maintained that the reason why the parties created and signed the new mortgage was because the amount of the mortgage had been enhanced. That 20 Clause 3 of *Exhibit D1* clearly states that the security was to be a $\frac{1}{2}$ continuing one notwithstanding any intermediate payment of the whole or part of the monies. That even then, the plaintiff's spousal consent did not state a limitation on the amount to be borrowed. That if it had stated the limitation the $1^{st}$ defendant

would have needed a fresh consent. That to treat this case differently would be condoning the plaintiff to approbate and reprobate which cannot be permitted.

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Counsel for the $1^{st}$ and $2^{nd}$ defendants further argued that this court should give the natural meaning to the words of the consent of the plaintiff that she "irrevocably consents to the mortgage" of the suit property. That the parole evidence rule under Section 91 and 92 of the Evidence Act, read together, applies in this case and there must be no attempt to contradict, vary, add to or subtract from the spousal consent's precise words by way of testimony.

Furthermore, that the plaintiff knew about the 2009 mortgage. because in Exhibit D5 which is her affidavit dated 24/05/2012 Annexture R1 is the 2008 offer letter. That in affect this imputes knowledge on the plaintiff of the very transaction. That in November, 2008 when the facility was enhanced, it had not yet been fully paid. Counsel opined that introducing limitations to the plaintiff's open consent in the circumstances is untenable and that the consent covered the two fused facilities.

Counsel for the 3rd & 4th defendants submitted that the law $\mathsf{S}$ obtaining in 2005 was the Mortgage Act, Cap 229 and the Land Act, Cap 227 (as amended) in 2004. That Section 39(1) (b) of the Land Act (supra) strictly provides that any contract of mortgage whose security is matrimonial property needs prior consent from the spouse. That this means that for every transaction of 10 mortgage there must be consent. That in this case there are two mortgages and one consent for the 2005 facility but not for the 2009 facility. That it is erroneous for the 1st defendant to allege that the 1st mortgage was a continuing security for future transactions and that it was not necessary for any more consent. 15 That provisions of a contract between parties cannot override provisions of the law in Section 39 (1) (b) (supra) which require spousal consent for every transaction. That even then, the plaintiff was never a party to the $1^{st}$ or $2^{nd}$ mortgage and as such the mortgage cannot be interpreted against her.

Counsel vehemently submitted that there was no evidence that contents of the 2nd mortgage deed were ever brought to the plaintiff's attention and as such the claim that there was no need for fresh consent is untenable. Further, that the claim of the 1st defendant that the document for consent was irrevocable does

not mean it extended to future transactions which are not $\overline{5}$ expressed therein. That for the consent to be irrevocable, it would only be in respect of the 1st mortgage for which the plaintiff could not withdraw it. That DW2 Godfrey Katumba also proved that the $4^{th}$ defendant fully settled the $1^{st}$ mortgage facility and upon payment of the final installment, he was given a tax invoice 10 Exhibit D8 and the Bank statement Exhibit D9 by the 1st defendant which shows that he paid the final installment on $15/12/2008$ . Counsel argued that once this final payment on the 1st mortgage facility was made, the consent ceased to exist and so did the 1st mortgage. That there is no way the two documents could be read as one as they were separate transactions distinct from each other. That Item $(1)$ in *Exhibit D4* shows that the lease was an existing facility and that by the November 2008 offer letter it is marked with an asterisk and that the lease was subject to conditions in agreement of 2004 varied in letter dated 30/06/2005. That therefore the $2^{nd}$ mortgage was separate and subject to new terms from those in the 1st mortgage.

That in light of the position of the law, the 2nd mortgage was unenforceable as it was unlawfully created due to failure to obtain fresh spousal consent. To support this proposition counsel

cited the case of Dushabe vs. Grient Bank Ltd & 2 O'rs Civil $\mathsf{S}$ Suit No.131 of 2014.

I will start with sections 91 and 92 of the Evidence Act (supra). Under the parole evidence rule, where there is a document with clear terms no extrinsic evidence to prove the contents thereof may be adduced unless the contents are ambiguous. In the present case they are not. The rule applies equally to the plaintiff as it does to the defendants. The relevant parts of the sections state as follows;

Exclusion of oral by documentary evidence.

91. Evidence of terms of contracts, grants and other 15 dispositions of property reduced to form of document.

$\mathcal{L}^{\mathcal{L}}_{\mathcal{L}} = \mathcal{L}^{\mathcal{L}}_{\mathcal{L}} \mathcal{L}^{\mathcal{L}}_{\mathcal{L}}$

When the terms of a contract or of a grant, or of any other disposition of property, have been reduced to the form of a document, and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence, except as mentioned in section 79, shall be given in proof of the terms of that contract, grant or other disposition of property, or of such matter except the document itself, or secondary evidence of its contents in cases in which

secondary evidence is admissible under the provisions $5$ hereinbefore contained.

92. Exclusion of evidence of oral agreement.

When the terms of any such contract, grant or other disposition of property, or any matter required by law to be extensabilities reduced to the form of a document, have been proved according to section 91, no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest, for the purpose of contradicting, varying, adding to or subtracting from its terms..."

It is also clear that where a person is not privy to a contract such person cannot benefit from it or be affected by it. The doctrine of privity of contract as given in Black's Law Dictionary 8th Edition page 1237 refers to a relationship between parties to a contract, allowing them to sue each other but preventing a third party from doing so.

The 1st defendant claims the spousal consent for a subsequent mortgage facility was not necessary while the plaintiff contends that it was. It is not in dispute that the $2^{nd}$ mortgage facility deed

- 5 executed without a fresh consent. The 1st defendant insists that fresh consent was not necessary as the first mortgage was a continuing security and the plaintiff had given irrevocable consent without limit on the amount of money to be borrowed and the $2^{nd}$ mortgage was thus a continuation of the first one. - The position of the law is settled. Section 39 (1) (b) of the Land $10$ Act (supra) requires spousal consent for any transaction on the matrimonial property. This means that every transaction of any nature specified in the provision on the matrimonial property requires spousal consent. The suit land in this case is a matrimonial property. The fact of the plaintiff and 4th defendant 15 being spouses is also not in dispute. The relevant part of Section 39(supra) provides as follows;

"39. Restrictions on transfer of family land

(1) No person shall—

(a) sell, exchange, transfer, pledge, mortgage or lease any 20 family land;

(b) enter into any contract for the sale, exchange, transfer, pledging, mortgage or lease of any family land; or

(c) give away any family land, inter vivos, or enter into any $5^{\circ}$ other transaction in respect of family land; except with the prior consent of his or her spouse...."(Underlining for emphasis mine)

Prior seeking and obtaining of the spousal consent for any transactions on matrimonial property is therefore a mandatory 10 requirement under section 39(1) (a) and (b) (supra). It would means in the instant case that regardless of whether or not there had been consent to previous dealings over the same matrimonial property, the 1st defendant ought to have sought and obtained fresh spousal consent before entering into new or additional 15 mortgage on the same matrimonial property with the 3rd & 4th defendants. Clearly, the 1st defendant attempted to present the two transactions as one and the subsequent one as a continuation of the previous one. This notion is, however, not borne out by the very mortgage documents themselves in the two transactions. The mortgages are clearly two separate deeds. Even though the offer latter in 2009 transaction refers to terms the 2004 mortgage, the two do not indicate anywhere that the mortgages were one and the same or that they were fused.

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In enacting Section 39 (supra) with a mandatory requirement of $\overline{5}$ spousal consent for any transaction on matrimonial property, the Legislature's clear intention was to forestall loss of matrimonial properties in the event of default which would significantly impact on spouses as well as the mortgagor. Owing to the likelihood of families being left without homes or very important 10 source of livelihood, the provision was intended to have spouses well informed about all facts of the risks their matrimonial properties were put to so that they could approve with full knowledge of those facts. It was intended to protect the spouses' and families' right of occupancy of the family properties. Needless $15$ to state, that it would not even cost much for a bank to comply with the requirements under Section 39 (supra) and that it is the reason court would not let the 1st defendant circumvent those clear and mandatory provisions of the law.

It must be added that if financial institutions and particularly banks were permitted to do transactions in the manner the 1st defendant suggests by its contentions in this case, it would defeat the whole purpose and effect of the mischief that Section 39 (supra) was intended to cure. It would create the undesirable effect that for as long as a spouse consented to one transaction

he or she would have consented to all new and future $\overline{5}$ transactions; which would produce absurd results. Not seeking fresh and obtaining fresh spousal consent for any new or additional transaction on matrimonial property would thus be sinister as spouses would then likely take advantage of by their opposite spouses entering into a transaction of a risk of a nature unknown to them.

Section 39 (supra) is couched in plain and unambiguous words which only need to be assigned their ordinary literal meaning. A transaction is a transaction whether subsequent to another or not. The 1st defendant ought to have sought fresh spousal 15 consent of the plaintiff before executing any subsequent mortgage with the 3rd and 4th defendant over the matrimonial property of the plaintiff with the 4th defendant. The exception to the mandatory requirement of spousal consent is clearly stated under subsection (4) of Section 39 (supra). Otherwise subsection (1) is mandatory that any transaction on matrimonial property shall require spousal consent. The consent given for the 2005 mortgage did not continue or extend to the 2009 mortgage. The law requires fresh spousal consent for any mortgage of matrimonial property. Every single transaction must therefore be

- consented to by the spouse. There is no such thing as a $\mathsf{S}$ "continuing consent" anywhere in the provision of Section 39 (supra). The 1st defendant admitted to not having obtained the consent in the second mortgage and hence the 2009 mortgage is illegal and invalid for want of the spousal consent. - DW1 admitted in his evidence that two separate mortgage deeds 10 were executed for each of the facilities and that the 1st defendant never obtained separate consent nor did it communicate to the plaintiff before the 2009 mortgage was executed. Given this evidence, it would be wrong for the 1st defendant to turn around and claim that the plaintiff knew about the mortgages. I find that 15 the 1st defendant's the claim that the spousal consent covered the two fused facilities is an attempt to rewrite the law. The 2009 mortgage deed does not in any way state that it has been consolidated with the 2005 mortgage. If the intention of the 1st defendant was to amalgamate or fuse the two, the mortgage deed 20 of 13/01/2009 should have expressly stated so. Even then, the law would still require the spousal consent of the plaintiff afresh.

Besides the above, it is also observed that the plaintiff did not sign or witness any of the mortgages. She was thus never a party to any of the transactions and therefore the doctrine of privity of

contract applies with full effect. Black's Law Dictionary 8th $\mathsf{S}$ Edition page 1237 defines privity of contract as a relationship between parties to a contract, allowing them to sue each other but preventing a third party from doing so.

Applying the doctrine to facts in the instant case, the 1st and 2nd defendant cannot claim that the plaintiff was aware of contents of 10 the mortgage since she was not privy to them. That being the case, the issue of approbating and reprobating the mortgage also does not arise. It is an agreed fact, in the joint scheduling memorandum, that the 2005 mortgage was fully paid. That notwithstanding, it would mean that the $3rd$ and $4th$ defendants 15 are privy to the subsequent mortgage as they were involved albeit without the fresh spousal consent of the plaintiff. They are accordingly liable to the plaintiff in that respect. Issue No.1 and 2 are answered in the negative.

Issue No. 3: What remedies are available to the parties? Having found as above, the plaintiff's claim is upheld with the following declarations and orders;

1. The 2009 mortgage is illegal, null and void for want of proper spousal consent.

2. A permanent injunction doth issue restraining the defendants jointly or severally by themselves or through their agents or any one acting under them from selling or evicting the plaintiff from the suit land. 3. The certificates of title for the suit land shall be handed over to the plaintiff.

4. The plaintiff is awarded costs of the suit to be paid by the defendants jointly in equal share.

BASHAHA K. ANDREW

**JUDGE**

12/10/2018

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$\mathsf{S}$