Wakilii

DFCU v Uganda Signs Limited &2 Others (Originating Summons 17 of 2018)

High Court · [2022] UGCOMMC 176 · 2022 Judgment for Plaintiff — Debt Declared Due AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Originating summons for enforcement of equitable mortgage and foreclosure following unsuccessful attempt to enforce defective legal mortgage
Decision
Debt declared due; defendant given two months to pay; plaintiff may return for foreclosure order upon default

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that where a legal mortgage is declared null and void for defective execution, a lender holding the certificate of title with intent to create security can perfect an equitable mortgage by lodging a caveat under Registration of Titles Act s.129(3). The court determined the debt due, ordered payment within two months, and directed that upon default the plaintiff may return for a foreclosure order in accordance with Mortgage Act s.8.

Outcome

Debt declared due; defendant given two months to pay; plaintiff may return for foreclosure order upon default

Facts

DFCU granted Uganda Signs Ltd a lease facility of UGX 60,000,000/= in May 2007 to purchase a large format digital printer, repayable over 24 months. The 2nd defendant, Cecilia Mulekezi Adriko, deposited the certificate of title for land at Kiwatule as security. The 2nd and 3rd defendants, both directors of Uganda Signs Ltd, signed mortgage deeds. Uganda Signs Ltd defaulted on repayment. DFCU issued a final demand in November 2008 for UGX 63,706,433/= and appointed a receiver/manager. In 2011, DFCU filed Originating Summons No. 9 of 2011 seeking to enforce the mortgage, but the court ruled in November 2014 that the legal mortgage was not properly executed and declared it null and void. DFCU then lodged a caveat on the suit property in September 2015 to perfect its equitable mortgage. Despite the passage of time, no payments were made towards discharging the loan. DFCU brought these proceedings in 2018 seeking enforcement of its equitable mortgage. The defendants raised a preliminary objection of res judicata which was overruled in 2018, but failed to file an affidavit in reply by the deadline set by the court in January 2019.

Issues

  1. Whether there is an equitable mortgage between the plaintiff and the defendants
  2. What is the appropriate procedure?
  3. What are the remedies available to the plaintiff?

Orders

  • The plaintiff has satisfactorily demonstrated that the mortgagor is indebted to the plaintiff in the sum of UGX 63,706,433/= as at 12/11/2008.
  • The said sum is declared as due and owing to the plaintiff.
  • The 1st defendant is ordered to pay the said amount to the plaintiff within two (2) months from the date of delivery of this ruling.
  • In the event of default, the plaintiff shall return to this court for the grant of an order for foreclosure.
  • The plaintiff is directed to notify the 1st defendant of this order by placing the same in a newspaper with wide national circulation.
  • The costs of this suit shall be paid by the 1st defendant.

Rules and key headnotes

Equitable Mortgages — Creation by Deposit of Certificate of Title and Lodging of Caveat
An equitable mortgage is validly created where a registered proprietor deposits a certificate of title with a lender with intent to create security and the lender lodges a caveat on the title to give notice of its interest to the public, in accordance with Registration of Titles Act s.129(3).
Mortgages — Equitable Mortgage Arising from Defective Legal Mortgage
Where parties intend to create a legal mortgage but it is declared null and void for defective execution, and the lender remains in custody of the certificate of title, the lender may perfect an equitable mortgage by lodging a caveat on the title.
Foreclosure Procedure — Two-Stage Process under Mortgage Act
Under Mortgage Act s.8(2) and (3), foreclosure of a mortgagor's equity of redemption requires the court first to determine the amount due and fix a period not exceeding six months for payment; only upon default may the court order foreclosure and sale.
Service by Publication — Uncontested Proceedings
Where a defendant fails to file an affidavit in reply by the court-ordered deadline and proceedings continue ex parte, the court may direct the plaintiff to notify the defendant of the order by publication in a newspaper with wide national circulation.

Legislation cited (8)

Cases cited (2)

  • DFCU Bank Ltd v Dotways Marketing Bureau Ltd & Anor (Originating Summons No. 6 of 2012)
  • DFCU v Uganda Signs Ltd & 2 Others (Originating Summons No. 9 of 2011)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

DFCU v Uganda Signs Limited &2 Others (Originating Summons 17 of 2018) [2022] UGCommC 176 (20 December 2022)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.