The wife of the convicted Ewart Layne in the Maurice Bishop Murder trial has suffered a major defeat in a court case against a local commercial bank.
High court judge Justice Raulston Glasgow ruled that Karen Roden-Layne was not entitled to any money from the Grenada Co-operative Bank Limited [GCBL] in the sale of a property along the Maurice Bishop highway in the south of the island in her capacity as a real estate agent.
The property was reportedly bought in the 1980’s by the mother of Raymond ‘Ben” Gittens and used by Gittens Agencies as security for a loan from the bank.
A member of the Gittens family apparently contracted Roden-Layne to try and sell the property when the business defaulted on the bank loan.
GCBL went ahead and did its own sale and Roden-Layne took court action against the bank on the grounds that she was entitled to a commission on the grounds that she found the buyer.
RODEN-LAYNE took legal action against GITTENS AGENCY LIMITED and the GRENADA COOPERATIVE BANK LIMITED.
An attorney-at-law from St Vincent Shirlan Barnwell represented Roden-Layne while Deborah St. Bernard and Ian Sandy represented the bank and Deborah Mitchell for Gittens.
The lawyers for the bank and Gittens agencies argued that the wife of the convicted Ewart Layne was not entitled to the money as the bank had not retained her as their real estate agent in the transaction.
THE NEW TODAY as a public service reproduces in full the judgment delivered in the court case by Justice Glasgow.
(4) Notwithstanding these foregoing propositions, the mortgagor retains an equity of redemption which he or she can dispose of by, among other things, selling the same;
(5) The mortgagor must be mindful though that the mortgagee can sell outright and that, provided that the mortgagee is selling in good faith and acting reasonably to obtain the true market value of the property, before a contract is entered into, the mortgagee can only be stopped in the sale effort if all the moneys due to the mortgagee under the mortgage are paid to the mortgagee or tendered into court;
(6) If the mortgagee enters into a sale agreement, the mortgagor’s equity of redemption is extinguished and the sale may only be set aside on grounds that the sale is not being conducted or has not been conducted in good faith or that the mortgagee is not acting or has not acted reasonably in obtaining the true market value of the property.
What are the implications of those principles for this claim thus far?
GCBL
[64] Once Gittens had fallen into default of payments under the loan, there was nothing precluding GCBL from selling its security, the property, outright without any regard to any interests Gittens may have held in the same. In that exercise, GCBL would be acting in its own interest and not as the agent or on behalf of Gittens. So long as GCBL acted in good faith and reasonably to obtain the true market value of the property, it could proceed with any sale to sell the property to recoup the sums owed to it by Gittens.
Gittens
[65] Equally, up until GCBL entered the sale agreement with the Steeles on 20th April 2016, Gittens could pursue selling the property in furtherance of the rights attendant to its equity of redemption. Gittens could also retain anyone to do so on its behalf. Before GCBL entered into the sale agreement with the Steeles on 20th April 2016, Gittens or its agent on Gittens’ behalf could tender the full sums due to GCBL. GCBL would have then be obliged to stop or to order its agent, Terra Caribbean, to stop all its negotiations for the sale of the property.
[66] After GCBL entered a sale agreement with the Steeles on 20th April 2016, Gittens or Mrs. Roden Layne on Gittens’ behalf could no longer proceed with any sale of the property. Gittens could not stop the completion of any sale by GCBL with the Steeles after 20th April 2016 except where it was argued that GCBL was not acting in good faith or was acting unreasonably in obtaining the true market value of the property from the Steeles. Once the sale was completed on 27th May 2016, the only interest residing in Gittens or its agent, Mrs. Roden Layne is with respect to the post sale obligations under the mortgage contract or in law, including the obligations as to the disbursement of the sale sums.
The sale agreement and the agency of Terra Caribbean and Mrs. Roden Layne
[67] The further import of all this is that although GCBL and Gittens entered into the sale agreement, either of them could proceed to sell the property pursuant to their individual rights but subject to the conditions in the law recited above. The only implication of the sale agreement entered in between the parties in December 2014 was that the parties outlined terms on which they would both exercise their rights to sell the property. It did not preclude them from selling according to their various interests but merely circumscribed the manner in which they did so. That arrangement was agreed for a period of nine months. When the nine months ended without sale of the property, either party could continue to fully explore their right to sell the property. This is what precisely occurred.
[68] Mr. Gittens on behalf of Gittens (further to Gittens’ effort to sell under its equity of redemption) engaged Mrs. Roden Layne in December 2015 to sell on its behalf. For those purposes, Mrs. Roden Layne can be strictly described as the mortgagor’s agent in the mortgagor’s exercise to realise its equity of redemption by sale of the property. Mrs. Roden Layne’s discussions and engagements with Mr. Steele regarding her retainer with Mr. Gittens on behalf of Gittens were entirely in her capacity as acting for and on behalf of the mortgagor and not the mortgagee, GCBL. It is quite evident also that GCBL was at the same time pursuing its right to sell the property pursuant to its power of sale.
In furtherance of that effort, it withheld advertising the property until 15th September 2015, but thereafter it was quite free to sell the property by advertising it as it pleased including advertising the sale on Terra Caribbean’s website through its agency agreement with Terra Caribbean.
[69] Additionally, it would seem to me that Terra Caribbean was not precluded in any of the material before me from acting as agent for Gittens either in the exercise of the rights attendant to Gittens’ equity of redemption or as agent retained by GCBL in exercise of GCBL’s power of sale. It turns out that Terra Caribbean contacted GCBL and concluded the sale with GCBL further to GCBL and Terra Caribbean’s agreement. There is no evidence that Terra Caribbean ever contacted Mr. Gittens further to Terra Caribbean’s agreement with Gittens. Thus for all intents and purposes, the sale was completed further to the exercise of GCBL’s power to sell and not further to Gittens’ exercise of its rights under the equity of redemption.
[70] In the meantime, Mrs. Roden Layne was not similarly circumstanced as Terra Caribbean. Mrs. Roden Layne was not retained by GCBL and as such had no connection to the mortgagee’s exercise of its power of sale. She was, as I have stated above, the agent for the mortgagor’s exercise of its rights under the equity of redemption. To be fair, Mrs. Roden Layne had no idea that GCBL held the power of sale over the property. But I see nothing wrong with this state of affairs.
[71] In fact, Mrs Roden Layne states in her evidence that when she queried about this lack of information from Mr. Gittens, he made it plain that “he was the one who engaged me and any sale I got would be a matter between me and him.” In my view Mr. Gittens was correct in this assertion since he was seeking to realise the rights attendant to the mortgagor’s equity of redemption and, subject to what I have said above about the limitations attached to such rights, Gittens’ exercise of this right had nothing to do with GCBL’s right to sell the property. But now that the property was sold by GCBL in furtherance of its power of sale, was Mrs. Roden Layne to be paid out of the funds realised and, if so, who should pay her? This raises questions of the disbursement of the sums raised by the sale of the property.
What then of the disbursement of the proceeds of the sale?
[72] As stated above, Mrs. Roden Layne argues that GCBL should pay her out of the proceeds of sale. Mrs. Roden Layne argues that the statutory basis for her claim arises from section 11(3) of the Act recited above. To repeat, section 11(3) reads –
“The money which is received by the mortgagee, arising from the sale, after discharge of prior incumbrances to which the sale is not made subject, if any, or after payment into Court under this Act of a sum to meet any prior incumbrance, shall be held by him or her in trust to be applied by him or her, first, in payment of all costs, charges and expenses properly incurred by him or her as incident to the sale or any attempted sale, or otherwise; and secondly, in discharge of the mortgage money, interest and costs and other money, if any, due under the mortgage; and the residue of the money shall be paid to the person entitled to the mortgaged property or authorised to give receipts for the proceeds of the sale thereof.
[73] Fisher and Lightwood make the point that –
“A sale destroys the equity of redemption in the mortgaged property and constitutes the mortgagee exercising the power of sale a trustee of the surplus proceeds of sale, if any, for the interested persons according to their priorities.”
And,
“A mortgagee’s right to costs arises out of the particular relationship between him and the mortgagor. Therefore, even in the absence of a stipulation regulating the recovery of costs in the security document, a mortgagee is entitled to reimburse himself out of the mortgaged property for all costs, charges and expenses reasonably and properly incurred in enforcing or preserving the security…”
[74] The foregoing exposition of law makes perfect sense. If the mortgagee is put to the expense and costs of exercising his or her power of sale to recover the sums due to him or her, section 11(3) states clearly that it permits him or her to recoup those expenses and costs properly “incurred by him or her”. It must be recalled that the sale to which section 11 refers is the sale permitted by section 9 of the Act, that is, the mortgagee’s power of sale. It makes no sense for the mortgagee to repay the expenses or costs of the mortgagor’s exercise of its rights to sell under the mortgagor’s equity of redemption. In terms of the facts under consideration in this case, I would say that in a case of this nature, the only obligation that the mortgagee held to the mortgagor was to pay out any surplus of the sale moneys to the mortgagor (or other person entitled to the equity of redemption). The mortgagor or other person entitled to the equity of redemption may then disburse those funds as they see fit including paying expenses incurred for the exercise of the mortgagor’s rights under the equity of redemption. For it must always be remembered that in the exercise of the mortgagee’s power to sell to get in the moneys due from the mortgagor, the mortgagee owes no obligation to the mortgagor or anyone acting on the mortgagor’s behalf other than to exercise the mortgagee’s power of sale in good faith and to act reasonably in getting the true market value of the property. The entire purpose of the exercise of the mortgagee’s power of sale is to get in the sums due and to do so for its own benefit and not that of the mortgagor.
[75] The converse of this logic would suggest that where the mortgagee exercises the power of sale, the mortgagee has to pay any expense or costs that the mortgagor or the mortgagor’s agent’s may have incurred in any attempt to exercise the mortgagor’s rights to sell under the equity of redemption before the mortgagee retrieves the sums due for the debt that the mortgagor has defaulted on. This would have the extraordinary result, for instance, that if the mortgagee sold the property for a sum less than the sums due to the mortgagee by the mortgagor, the mortgagee would be obliged to put the mortgagor’s interests before its interests and ensure that the expenses of the mortgagor consequent on the mortgagor’s attempt to exercise of its rights under the equity of redemption by means of selling are satisfied before the mortgagee can satisfy the debt due to itself. Mrs. Roden Layne has presented no authority for such a posture in law.
[76] I would say bluntly that, in a case of this nature, any expense or cost incurred by the mortgagor in the exercise of its rights under the equity of redemption are the mortgagor’s expenses except where it can be shown that those expenses and costs were incurred as consequence of the mortgagee’s failure to honour its obligation act in good faith and to act reasonably in obtaining the true market value of the property or some other breach of the obligations that the mortgagee may have to the mortgagor. The mortgagee is allowed in law to recover the expenses or costs that he or she properly incurs from the exercise of the power of sale, since it is through no fault of him or her that he or she has to go to market to sell the property to obtain the sums due from the mortgagor. The mortgagee cannot be asked to bear his or her own expense or costs properly incurred by him or her in those circumstances.
[77] Permit me to add that it would be a different scenario in those cases where, by way of example, a receiver is appointed at the instance of the mortgagee. See, for instance, section 14 of the Act which reads –
Appointment, powers, remuneration and duties of receiver
(1) A mortgagee entitled to appoint a receiver under the power in that behalf conferred by this Act shall not appoint a receiver until he or she has become entitled to exercise the power of sale conferred by this Act, but may then, by writing under his or her hand, appoint such person as he or she thinks fit to be receiver.
(2) The receiver shall be deemed to be the agent of the mortgagor, and the mortgagor shall be solely responsible for the receiver’s acts or defaults, unless the mortgage deed otherwise provides.
(6) The receiver shall be entitled to retain out of any money received by him or her for his or her remuneration, and in satisfaction of all costs, charges and expenses incurred by him or her as receiver, a commission at such rate, not exceeding five per cent on the gross amount of all money received, as is specified in his or her appointment, and if no rate is so specified, then at the rate of five per cent on that gross amount, or at such higher rate as the Court thinks fit to allow, on application made by him or her for that purpose.
((8) The receiver shall apply all money received by him or her as follows, namely in—
(a) the discharge of all rents, taxes, rates and outgoings whatever affecting the mortgaged property;
(b) keeping down all annual sums or other payments, and the interest on all principal sums, having priority to the mortgage in right whereof he or she is receiver;
(c) payment of his or her commission, and of the premiums on fire, life or other insurances, if any, properly payable under the mortgage deed or under this Act, and the cost of executing necessary or proper repairs directed in writing by the mortgagee; and
(d) in payment of the interest accruing due in respect of any principal money due under the mortgage, and shall pay the residue of the money received by him or her to the person who, but for the possession of the receiver, would have been entitled to receive the income of the mortgaged property, or who is otherwise entitled to that property. (Bold emphasis mine)
[78] Section 14 recites the statutory power of the mortgagee to appoint a receiver. The mortgagee may also do so by the express terms of the deed of mortgage or by an order of the court. Section 14(2) stipulates that the receiver is deemed to be the mortgagor’s agent except where the parties expressly agree otherwise by deed. Section 14(6) states that the receiver’s costs, charges and expenses are paid out of the sums obtained from the sale of the mortgage property or other income derived from the exercise of the receiver’s powers in accordance with the receiver’s instruction.
[79] The similar principle applies where the receiver is appointed by express powers set out in the deed. Fisher and Lightwood explain
“A receiver appointed under an express power is generally expressed to be, or expressly deemed to be, the agent of the mortgagor by the terms of the power5. The mortgagor will thus be liable for the receiver’s acts and defaults6. However, if the receiver was appointed under an express power and is not expressed to be the agent of the mortgagor, he will be the agent of the mortgagee and the mortgagee will be responsible for his acts, defaults and remuneration7. The receiver will not be deemed to be the mortgagor’s agent if the mortgagee represents otherwise, or directs or interferes with his actions.”
In the latter instance, the expenses and costs of the receiver properly incurred, would be expenses and costs that would be paid out of the sums obtained from the sale of the mortgage property or other income derived from the exercise of the receiver’s powers in accordance with the receiver’s instruction.
[80] Now, Mrs. Roden Layne may argue that the expenses of the sale were not properly incurred by GCBL because GCBL was made aware that she had introduced the property to the Steeles and should have paid her instead of Terra Caribbean. She is wrong, in my view, for two reasons –
(1) For the reasons that I have stated above, GCBL held no obligations to her in law and could have ignored her request even if it was made before the 20th April 2016 when GCBL entered into an agreement for sale with the Steeles through GCBL’s agent, Terra Caribbean. This is since, to repeat, Mrs. Roden Layne was Mr. Gittens or Gittens’ agent and not GCBL’s agent. She was not acting to get in GCBL’s money further to its power of sale. She was acting as agent for Gittens further to the exercise of Gittens’ rights under the equity of redemption. The mortgagee, GCBL, held no obligations in law to the mortgagor, Gittens, for the exercise of Gittens’ rights under the equity of redemption, other than to act in good faith and to act reasonably when GCBL was exercising its own power to sell the property;
(2) Even if GCBL was obliged in law to pay the mortgagor’s agent for the agent’s expenses, there was no sale by the agent. By 25th April 2016 when Mrs. Roden Layne, as agent for Gittens, contacted GCBL, a sale agreement was already settled by GCBL with GCBL’s agent Terra Caribbean on behalf of the Steeles. Terra Caribbean was thereby entitled to receive the commission as part of GCBL’s expenses of the sale in accordance with section 11(3) of the Act.
[81] This would mean that Mrs. Roden Layne has not proved her claim for the commission from GCBL. Before parting on this aspect of the claim though, I must comment on Mrs. Roden Layne’s assertion that she bore no duty in law to research the Gittens’ title before going to market the property for sale. I agree with Mrs. Roden Layne that the law does not impose such a duty on her. But certainly had she advised herself both of the capacity in which she was engaged and/or researched the title to the property before going to market, she would have been aware that the property was encumbered with the mortgage to GCBL and that GCBL was in the process of selling the property under its power of sale.
[82] This information would have, additionally informed Mrs. Roden Layne of the capacity in which Mr. Gittens and Gittens were engaging her. In her witness statement at paragraph 21 she explains that during the month of March 2016, after she learnt of GCBL’s involvement with the property, she contemplated whether she should register with GCBL “as an agent” and disclose “my interest in the sale of the property. But I decided against that because I decided to honour the undertaking of confidentiality I had given to Jonathan Steele.” I believe that if Mrs. Roden Layne had investigated the title of the property that she was tasked with selling before going to market with the same, she would have been able to better inform herself of whether she needed to engage with GCBL at a much sooner date. Perhaps such research would have advised her whether she needed to be engaged as agent for GCBL in the exercise of its power of sale at a date before GCBL agreed to sell the property to the Steeles.
Does Gittens have to pay Mrs. Roden Layne?
[83] Mrs. Roden Layne has also claimed against Gittens for breach of contract. The short answer to this is that Gittens was trying to sell further to its rights under the equity of redemption. Such a sale was always at risk of being overridden by a sale concluded by GCBL pursuant to its power of sale, which is what transpired. Mr. Gittens and Gittens did not breach the contract with Mrs. Roden Layne. That contract was made subject to GCBL’s right to sell the property outright. If GCBL exercised its right to sell, as it so did in this case, Gittens could owe no obligation to Mrs. Roden Layne in such circumstances.
[84] In any event, Gittens’ obligation to pay Mrs. Roden Layne could only arise if a sale was concluded by her. No such sale was concluded by Mrs. Roden Layne and there is no evidence presented by her to suggest that Mr. Gittens did anything to cause such an event not to occur. The claim against Gittens must also fail.
Gittens’ ancillary claim against GCBL
[85] There is no need to venture any thoughts on Gittens’ ancillary claim against GCBL since the success or otherwise of that claim was entirely contingent on Mrs. Roden Layne being successful in her claim against Gittens. Mrs. Roden Layne’s claim against Gittens is unsuccessful and as such the ancillary claim is rendered moot.
Conclusion
IT IS HEREBY ORDERED:
[86] The claim brought by Mrs. Roden Layne against Gittens and GCBL is refused.
[87] The ancillary claim brought by Gittens against GCBL is also refused.
[88] Mrs. Roden Layne is to pay costs to GCBL in the sum of $25,000.00 for defending the claim and ancillary claim and costs to Gittens for defending the claim in the sum of $2,500.00.
Raulston L.A. Glasgow
High Court Judge
BY THE COURT
