Wakilii

Simon Kato Bugoba v Samuel Kigozi (HCT-00-CC-CS 543 of 2004)

High Court · [2007] UGCOMMC 12 · 2007 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for declaration of illegal transfer and cancellation of title following equitable mortgage default
Decision
Transfer of one plot confirmed in defendant's favour; transfer of second plot cancelled and restored to plaintiff

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that an equitable mortgagee who takes deposit of title and signed transfer forms cannot directly transfer mortgaged land into his own names upon borrower default without following statutory foreclosure procedures under the Mortgage Act. Such a clause in a loan agreement ousts the mortgagor's equitable right to redeem and is invalid under the doctrine that once a mortgage, always a mortgage. A purchaser from the mortgagee who had prior dealings with the mortgagor and knowledge of his interest is not a bona fide purchaser. The court allowed foreclosure of one plot to settle the debt but restored the second plot to the plaintiff.

Outcome

Transfer of one plot confirmed in defendant's favour; transfer of second plot cancelled and restored to plaintiff

Facts

In July 2002, the plaintiff borrowed UGX 20,000,000 from the 1st defendant under a written agreement for UGX 26,000,000 (including interest) repayable within 30 days. As security, the plaintiff pledged land comprised in Kyaggwe Block 110 Plots 1526 and 2282 at Seeta, deposited certificates of title and signed blank transfer forms. He also provided a post-dated cheque which bounced when presented. The loan agreement contained a clause purporting to allow the 1st defendant to transfer the land into his own names upon default. When the plaintiff failed to repay within the stipulated period, the 1st defendant transferred both plots into his names in September 2002 without notice to the plaintiff. The plaintiff lodged caveats, but these were subsequently removed. The 1st defendant then sold both plots to the 2nd defendant for UGX 40,000,000 in February 2004, though the property was valued at UGX 125,000,000. The plaintiff alleged he and the 1st defendant had agreed to sell only one plot to settle the debt and that he had been in contact with the 2nd defendant as a potential buyer before going into hiding due to problems with creditors. The 1st defendant disappeared after the sale.

Issues

  1. Whether the 1st defendant was entitled to transfer the land into his own names.
  2. Whether the 2nd defendant was a bonafide purchaser.
  3. Whether the plaintiff is entitled to the remedies sought.

Orders

  • The plaintiff's interest in Plot 1526 foreclosed in favour of the 1st defendant for the loan amount to clothe him with power to transfer it to the 2nd defendant.
  • Transfer of Plot 1526 to the 2nd defendant confirmed together with rent proceeds from 2004 to date in full and final settlement of plaintiff's indebtedness.
  • Transfer of Plot 2282 to the 2nd defendant cancelled.
  • Plot 2282 restored to the plaintiff.
  • Plaintiff at liberty to seek restoration of his name in the Register Book in respect of Plot 2282.
  • No order as to general damages.
  • Each party to bear own costs.

Rules and key headnotes

Equitable Mortgage — Right to Redeem — Clauses Ousting Redemption Rights
A clause in an equitable mortgage agreement purporting to grant the mortgagee power to transfer the mortgaged land directly into his own names upon borrower default is invalid as it ousts the mortgagor's equitable right to redeem the property, contrary to the doctrine that once a mortgage always a mortgage.
Equitable Mortgage — Creation and Effect — Interest in Land
Under section 129(2) of the Registration of Titles Act, an equitable mortgage created by deposit of certificate of title with intent to create security is deemed to create an interest in land, meaning the mortgagee acquires an interest only to the extent of the sum loaned.
Equitable Mortgage — Remedies Upon Default — Statutory Compliance
Upon default by an equitable mortgagor, the remedies available to the mortgagee are those set out in the Mortgage Act, including appointment of a receiver, taking possession, or foreclosure through court application, not direct transfer of the mortgaged property into the mortgagee's own names.
Bona Fide Purchaser — Notice of Prior Interest — Dishonest Conduct
A purchaser who has prior knowledge of the mortgagor's continuing interest in mortgaged property, has had dealings with the mortgagor regarding sale of the property, and acts dishonestly by misrepresenting the property's value and developments to valuers, is not a bona fide purchaser without notice.
Equitable Mortgage — Right to Redeem — Temporal Scope
A mortgagor who has secured land as equitable mortgage is entitled to redeem the property on payment of the debt in full at any time, even after expiry of the contractual repayment date stated in the mortgage agreement.

Legislation cited (2)

Cases cited (1)

  • Samuel v Jarrah Timber of Wood Paving Corporation [1904] AC 323

Full judgment

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

Simon Kato Bugoba v Samuel Kigozi (HCT-00-CC-CS 543 of 2004) [2007] UGCommC 12 (5 February 2007)
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.