Archive for the ‘Mortgagee’ Category

Common law estoppel: mortgagee not revealing his interest in the property

July 5, 2012

In Pickard v Sears (112 E.R. 179) P was the the mortgagee of property which the remained in the actual possession of M (the mortgagor). A writ of fieri facias was executed and the sheriff took the property mortgaged to P. P spoke to the sheriff about the sale of the property but never mentioned his own mortgage. The property was sold to S. P then claimed the property or payment of his debt from S. S refused. It was held that P was estopped from pleading his own mortgage having failed to mention it to the sheriff before the sale:

‘But the rule of law is clear, that where one by his words or conduct wilfully causes another to believe the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is concluded from averring against the latter a different state of things as existing at the time.’ (Lord Denman CJ).

Promissory estoppel: need for certainty

June 25, 2012

In Chekiang First Bank Ltd v Sino Legend International Enterprise Ltd ([2002] HKEC 264) a mortgagee sought possession of various properties over which it had a charge. The mortgagors claimed that a manager of the mortgagee had assured the mortgagors that they could handle the sale of the properties themselves provided the proceeds of sale were paid into the borrower’s account. They argued that as they had gone to the time and trouble of looking for buyers in reliance on this promise, the mortgagee was estopped from obtaining possession. This argument failed. The promise in promissory estoppel must be precise, clear, unambiguous. There was a lack of precision or certainty here. The limits on the price to be obtained and the length of time available to the borrowers to find buyers were not known (ie it was not clear how long the mortgagors were entitled to hold out in the hope of getting a better price than the mortgagee might obtain).

It is possible for a mortgagee to be bound by a collateral contract not to enforce its remedies but any conditions in this agreement must be strictly complied with. Even if the alleged promise had been made, the mortgagors had not complied with its terms since they had received deposits but not paid them into the borrower’s account.

The borrower also argued that the court had a discretion to postpone making an order for sale for a short time if there was a prospect that the indebtedness would be paid off in full. There was, however, no cogent evidence here to show that the loan could soon be paid off in full.

The borrower was concerned that the mortgagee would not get a good price for the properties but the court pointed out the mortgagee’s duty to get the best price reasonably obtainable.