Wakilii

Ntwatwa v Bank of Baroda (U) Limited & Another (Civil Suit 302 of 2019)

High Court · [2023] UGCOMMC 260 · 2023 Judgment for Defendant AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit seeking declaration that mortgage sale was illegal and void; counterclaim for eviction and damages
Decision
Plaintiff's suit dismissed; counterclaim granted with eviction order and damages

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that the mortgagee bank lawfully exercised its power of sale under Section 20 of the Mortgage Act after the mortgagor defaulted on an overdraft facility. The bank complied with statutory notice requirements under Section 26, advertised the sale, and obtained a valuation report before selling the property. The sale was neither illegal nor fraudulent. The purchaser acquired good title as a bona fide purchaser for value without notice under Section 29 of the Mortgage Act. The plaintiff's suit was dismissed. The counterclaim succeeded; the court ordered the plaintiff's eviction and awarded general damages of UGX 50,000,000 to the second defendant.

Outcome

Plaintiff's suit dismissed; counterclaim granted with eviction order and damages

Facts

The Plaintiff obtained an overdraft facility of UGX 300,000,000 from the 1st Defendant bank and mortgaged property in Wakiso District as security. He defaulted on repayment and requested rescheduling. The Plaintiff entered negotiations with the 2nd Defendant to sell part of the property but negotiations failed. The 1st Defendant served statutory notices, advertised the sale in a newspaper, obtained a valuation report, and sold the property to the 2nd Defendant for UGX 400,000,000. The Plaintiff alleged the sale was illegal, fraudulent, conducted in secrecy, and that the property was deliberately undervalued by UGX 600,000,000 based on his own valuation. The 2nd Defendant counterclaimed for eviction and damages, stating the Plaintiff remained in possession despite the lawful sale.

Issues

  1. Whether the sale of the suit property by the 1st Defendant to the 2nd Defendant/Counter-claimant was illegal and fraudulent?
  2. Whether the 2nd Defendant/Counter-claimant lawfully purchased and acquired good title to the suit property?
  3. Whether the Plaintiff is entitled to the remedies sought in the Plaint?
  4. Whether the 2nd Defendant/Counter-claimant is entitled to the remedies sought in the Counterclaim?

Orders

  • The Plaintiff's suit is dismissed.
  • Order of eviction against the Plaintiff/Counter Defendant from the suit property within a period of 30 days.
  • General damages of UGX 50,000,000 awarded to the 2nd Defendant/Counter-Claimant.
  • Costs of the suit and Counterclaim granted to the Defendants.

Rules and key headnotes

Banking & Finance — Mortgage — Mortgagee's Power of Sale — Statutory Requirements
A mortgagee has power to sell mortgaged property under Section 20 of the Mortgage Act where a mortgagor is in default and remains in default at the expiry of the time provided for rectification in the notice served under Section 19. Before such sale, the mortgagee must serve a notice to sell on the mortgagor under Section 26(2), and no sale may be concluded until twenty-one days have lapsed from the date of service.
Banking & Finance — Mortgage — Mortgagee's Duty of Care — Best Price
A mortgagee exercising the power to sell mortgaged property has a statutory duty under Section 27(1) of the Mortgage Act to take all reasonable steps to obtain the best price. Good practice requires the mortgagee not to act in secret, to value the property before sale to establish current market and forced sale value, to advertise the property after notifying the mortgagor, and to use a transparent method of sale such as public auction or, if private treaty is used, to ensure the best price and involvement of the mortgagor.
Land & Property — Bona Fide Purchaser for Value — Protection under Mortgage Act
A purchaser in a sale effected by a mortgagee acquires good title under Section 29 of the Mortgage Act except in a case of fraud, misrepresentation, or other dishonest conduct on the part of the mortgagee of which the purchaser has actual or constructive notice. To qualify as a bona fide purchaser for value without notice, the purchaser must have a valid certificate of title from a person registered as proprietor, must have paid valuable consideration, must have acted in good faith without notice of fraud, and the vendor must have been a former registered owner of the property.
Land & Property — Estoppel — Approbation and Reprobation — Valuation of Unapproved Developments
A mortgagee who accepted property as security, carried out valuation including developments on the property, and sold the property to recover a debt is estopped by the principle of approbation and reprobation from later arguing that developments on the property were unapproved under Section 33(1) of the Physical Planning Act and therefore valueless. If the properties were valueless, the mortgagee ought not to have considered them as security in the first place.
Contract Law — Fraud — Definition — Burden of Proof
Fraud is an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with something valuable or to surrender a legal right. It includes false representation of fact, whether by words or conduct, by false or misleading allegations, or by concealment of truth, calculated to deceive another to act upon it to their legal injury. A party alleging fraud must prove deliberate or intentional perversion of truth or false representation.
Civil Procedure — Counterclaim — Remedies — Eviction
Where a purchaser has rightfully purchased mortgaged property and the former mortgagor remains in possession, the purchaser is entitled to an order of eviction. Although the Mortgage Act is silent on the purchaser's right to enter possession, it offers protection to the purchaser under Section 29, and a mortgagee has power to enter possession under Sections 20(d) and 24.
Damages & Quantum — General Damages — Loss of Use
General damages are awarded in the discretion of the court to compensate the aggrieved party for inconveniences faced as a result of the actions of the other party. Where a purchaser of property has been denied use of the property since purchase, an award of general damages is appropriate.

Legislation cited (9)

Cases cited (6)

  • Fredrick Zaabwe v Orient Bank Ltd and 5 Others (Civil Appeal No. 4 of 2006)
  • Sendagire Stephen & Nanyombi Gladys v DFCU Limited & 2 Others (HCCS No. 26 of 2008)
  • Majid Mkuze v Centenary Development Bank (HCCS No. 87 of 2015)
  • Henry Okumu Okori & Another v Alfred Tumwesigte (HCCS No. 301 of 2008)
  • David Sekajja Nalima v Rebecca Musoke (Supreme Court Civil Appeal No. 12 of 1985)
  • Hannington Njuki v George William Musisi [1999] KALR 784

Full judgment

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

Ntwatwa v Bank of Baroda (U) Limited & Another (Civil Suit 302 of 2019) [2023] UGCommC 260 (18 October 2023)
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.