Wakilii

Orient Bank Ltd v Francis Paschal Ntabaaazi and Mathias Senyondo (Civil Suit No 712 97)

High Court · [2001] UGHC 130 · 2001 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of debt and foreclosure of mortgaged property
Decision
Judgment entered against the 2nd Defendant (guarantor) for the full debt, interest, and foreclosure of the mortgaged property

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that a guarantor is solely liable under a deed of guarantee for the principal debtor's default where the principal fails to repay a banking facility. The court awarded judgment against the guarantor for the debt plus interest and granted foreclosure on the mortgaged plot, but refused foreclosure on a second plot not included in the security, holding that the bank must bear loss from its own failure to verify the correct plot description.

Outcome

Judgment entered against the 2nd Defendant (guarantor) for the full debt, interest, and foreclosure of the mortgaged property

Facts

The 1st Defendant applied for and received an overdraft facility of Shs 15 million from the Plaintiff bank on 30 October 1995. The 2nd Defendant guaranteed the facility and granted the 1st Defendant a Power of Attorney to use his land comprised in Kibuga Block 8, Plot 452 at Mengo as security. The title deed was deposited with the bank. The facility was for three months and attracted interest at 24% per annum, rising to 30% per annum after default. The 1st Defendant failed to repay despite repeated demands, and the debt rose to Shs 23,158,619 by the time of filing suit. The 2nd Defendant denied signing the guarantee but documentary evidence established both the Power of Attorney and the deed of guarantee were executed and registered on 1 November 1995.

Issues

  1. Whether the 2nd Defendant granted a Power of Attorney to the 1st Defendant.
  2. Whether the 2nd Defendant gave a personal guarantee to the 1st Defendant.
  3. Whether the 1st and 2nd Defendants are jointly liable.
  4. Whether remedies are available to the Plaintiff.

Orders

  • Judgment entered against the 2nd Defendant for Shs 23,158,619.
  • Interest on the principal sum at 20% per annum from date of filing until payment in full.
  • Order of foreclosure of Plot No. 452 Block 8 land at Mengo.
  • Costs awarded to the Plaintiff.

Rules and key headnotes

Banking & Finance — Guarantees — Nature of Guarantor's Liability
A guarantee is a written undertaking by one person to answer for the debt or default of another person. The contract of a guarantor is a separate contract in the nature of a warranty that the thing guaranteed to be done by the principal shall be done, and the guarantor is solely liable for the debt under the guarantee where the principal defaults.
Banking & Finance — Loan Agreements — Interest on Default
Where a banking facility agreement provides for an increased interest rate upon default and the borrower is notified of the rate change, the bank is entitled to interest at the higher default rate from the date of notification until the date of filing suit, and thereafter at the court-ordered rate.
Land & Property — Mortgages — Foreclosure — Scope of Security
A bank may only foreclose on property that was actually mortgaged or deposited as security for a loan. Where the bank seeks to foreclose on a plot that was not part of the security, the application must be refused, and the bank must bear any loss occasioned by its own negligence or failure to verify the correct plot description before accepting the title.
Contract Law — Guarantees — Power of Attorney as Security
A guarantor may grant a power of attorney to the principal debtor authorising use of the guarantor's land as security for a banking facility. Where the power of attorney is duly registered and the title deed deposited with the bank, the security is validly constituted.

Full judgment

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

Orient Bank Ltd v Francis Paschal Ntabaaazi and Mathias Senyondo (Civil Suit No 712_97) [2001] UGHC 130 (17 October 2001)
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.