High Court Stops SBM Bank from Auctioning Widow’s Home, Declares Mortgage Invalid

The High Court in Nairobi has stopped SBM Bank Kenya Limited from auctioning a widow’s matrimonial home after finding that the mortgage relied upon by the lender was invalid, void, and unenforceable in law.

Justice Helene R. Namisi ruled in favour of Florence Edelquonn Wendoh, the registered owner of Land Reference Number 2327/277 (Original Number 2327/68/6), located in Karen, Nairobi, after she challenged the bank’s attempt to exercise its statutory power of sale.

The widow had moved to court seeking protection against the threatened auction of the property, which served as her matrimonial home with her late husband, Charles Khakali Maringo, until his death on April 7, 2021.

The court heard that the property, measuring approximately 0.404 hectares, had been acquired by the couple in 2002 before being registered in their joint names in July 2003.

Justice Namisi issued a permanent injunction restraining SBM Bank, its officers, agents, auctioneers, or any persons acting on its behalf from selling, advertising for sale, entering upon, or interfering with the widow’s ownership and occupation of the property.

Disputed Loan Facilities and Mortgage Documents

This litigation emanated from the disputes about loans given to the deceased Charles Maringo by Chase Bank Kenya Limited, whose assets and liabilities had been taken over by SBM Bank Kenya Limited in accordance with the prevailing laws in banking.

From its files, it appeared that the deceased had accessed facilities worth approximately Ksh 11.15 million, consisting of Ksh 9.15 million overdraft and Ksh 2 million term loan.

It was alleged that this loan was guaranteed by a Letter of Offer on May 26, 2010, which was later restructured to Ksh 14.6 million in 2016.

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It is SBM Bank’s case that the plaintiff was aware of the transactions and had signed various mortgage documents such as the Legal Mortgage of April 3, 2012, Letter of Guarantee & Indemnity, Spousal Consent documents, and the valuation consent form.

The lender claimed that it had fulfilled all its legal obligations prior to sending the sale notices.

On the other hand, the widow denied the accusations, explaining to the court that she did not have knowledge of the facilities mentioned and came to know about this issue only in late 2018 or early 2019 when her husband was seriously ill.

During this time, after getting hold of her husband’s phone, she observed numerous calls and messages received by the bank regarding the alleged debt.

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Defects in the Mortgage Render it Null and Void

The Court was called to determine whether the mortgage agreement dated April 3, 2012, was a legal one, and if SBM Bank was lawfully able to take control of the property for sale.

According to Justice Namisi, the charge that the bank based its case on was defective, and thus, could not support any claim over the bank exercising its power of sale.

The Court ruled that the Charge/Mortgage made on the property located at Karen was “invalid, null and void” since it lacked proper signing, required spousal approval, and there was fraudulent misrepresentation.

According to section 79(6) of the Land Act, the Court equally assessed the SBM Bank’s case based on the informal charge of the land.

The SBM Bank claims that the right of security on the aforementioned land was granted to them by their deposit of the title deed.

In this regard, the Court acknowledged the existence of an informal charge but maintained that the existence of such a charge does not give a financier an automatic statutory power of selling the land, but rather entitles him/her to a court of law.

“Without a court order, the defendant was sold by public auction notice,” the verdict partially read.

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Court Hammer. PHOTO/DPP