Court blocks bank from selling couple’s matrimonial home
Kalule was on the verge of losing his home located on Block 115 Plot 133 Folio 25 Central Ward in Buruli to the bank because his wife, Eseza Nalukwago, and his son Eric Kagimu had mortgaged it to the bank to secure a sh44m credit facility, which they failed to repay.
Court blocks bank from selling couple’s matrimonial home
_______________
It is a sigh of relief for Godfrey Kalule after the Commercial Division of the High Court in Kampala stopped Pearl Bank from selling his matrimonial home in Buruli, Nakasongola District.
Kalule was on the verge of losing his home located on Block 115 Plot 133 Folio 25 Central Ward in Buruli to the bank because his wife, Eseza Nalukwago, and his son Eric Kagimu had mortgaged it to the bank to secure a sh44m credit facility, which they failed to repay.
In a ruling dated August 20, High Court Judge Susan Odongo ruled that, being a matrimonial home, the property was illegally mortgaged due to lack of spousal consent as required under section 5(1) of the Mortgage Act.
“I, therefore, find that the mortgage over the property was not lawfully executed due to the absence of spousal consent and the mortgagee’s failure to conduct reasonable due diligence. The transaction is unlawful and unenforceable against the applicant’s interest,” Justice Odong ruled.
The judge said the bank also breached its statutory duty under section 4(2)(a) of the Mortgage Act by failing to take reasonable steps to ascertain the marital status of the mortgagors and the residential character of the property.
In a statutory declaration, Nalukwago claimed that she was a single mother, a document which Aisha Nabbosa, the bank’s branch manager, said they relied on to approve the mortgage.
“Allowing a bank to hide behind a fraudulent declaration would cause utmost injustice to the uninformed spouse whose home is being pledged. Had the bank exercised the enhanced due diligence expected of a prudent financial institution, the applicant’s occupancy would have been glaringly obvious,” Justice Odong noted.
The judge treated the bank’s failure to provide objective proof of their purported physical inspection as a critical evidentiary gap.
She faulted the bank over failure to consult the area Local Council 1 chairperson or neighbours in regard to the property and Nalukwago’s marital status.
“As argued by the applicant, it is incredulous to suppose that a financial institution would inspect a property due for mortgaging and not produce any inspection report of the same,” the judge noted.
While the bank argued that the fraudulent spouse should be the only one held accountable to the family, the judge said the law is clear that the mortgagee’s failure to look beyond fraud renders the security unenforceable against the protected interest of the innocent spouse.
The judge ordered the bank to surrender the certificate of title to Kalule within 14 days from the date of the ruling because the security interest was invalid. The judge advised the bank to recover the loan as an unsecured debt if it so wishes.
Court records indicate that Nalukwago and Kagimu mortgaged the property on September 17, 2013, and they were the registered proprietors of the land in question. They obtained the loan to support their business of Ericom Pharmaceuticals Limited.
In securing the loan facility, Nalukwago and Kagimu swore statutory declarations stating that none of them was married.
However, in her evidence, Nalukwago said she was simply told to sign the documents without reading the content of the same.
Law on mortgaging matrimonial property
Under the Mortgage Act, mortgaging a matrimonial home strictly requires the prior written and informed consent of both spouses.
Under the same law, any document or form used to mortgage a matrimonial home must be signed by or show clear evidence of assent from both the mortgagor and their spouse(s) living in that home.
If a mortgage is executed over a matrimonial home without spousal consent, the entire transaction is considered void and unenforceable by the bank or lender.