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Lawbreaking Deed Of Assignment

Part 6

Offences Relating to property and contracts

 

Division 1

Stealing and Like offences

 

 

Chapter 34

Stealing

 

382.        

Every inanimate thing whatever which is the property of any person, and which is movable, is capable of being stolen

 

                 Every inanimate thing which is the property of any person, and which is capable of being made movable, is capable of being stolen as soon as it becomes movable, although it is made movable in order to steal it.

 

                Every tame animal, whether tame by nature or wild by nature and tamed, which is the property of any person, is capable of being stolen: but tame pigeons are not capable of being stolen except while they are in a pigeon-house or on their owner's land.

 

                A thing in action is capable of being stolen.

 

                Animals wild by nature, of a kind which is not ordinarily found in a condition of natural liberty in Nigeria, which are the property of any person, and which are usually kept in a state of confinement, are capable of being stolen, whether they are actually in confinement or have escaped from confinement.

 

                Animals wild by nature, of a kind which is ordinarily found in a condition of natural liberty in Nigeria, which are the property of any person, are capable of being stolen while they are in confinement and while they are being actually pursued after escaping from confinement, but not at any other time.

 

                An animal wild by nature is deemed to he in a state of confinement so long as it is in a den, cage, sty, tank, or other small enclosure, or is otherwise so placed that it cannot escape and that its owner can take possession of it at pleasure.

 

                An ostrich on an enclosed ostrich farm is capable of being stolen.

 

                The term "animal" includes any Loving creature other than mankind.

 

                Wild animals in the enjoyment of their natural Liberty are not capable of being stolen, but their dead bodies are capable of being stolen.

 

                Everything produced by or forming part of the body of an animal capable of being stolen is capable of being stolen.

 

383.

   (1)          A person who fraudulently takes anything capable of being stolen, or fraudulently converts to his own use or to the use of any other person anything capable of being stolen, is said to steal that thing.

 

  (2)

          A person who takes or converts anything capable of being stolen is deemed to do so fraudulently if he does so with any of the following intents-

 

(a)

           an intent permanently to deprive the owner of the thing of it;

 

(b)          

an intent permanently to deprive any person who has any special property in the thing of such property;

 

(c)          

an intent to use the thing as a pledge or security;

 

(d)          

an intent to part with it on a condition as to its return which the person taking or converting it may be unable to perform;

 

(e)           

an intent to deal with it in such a manner that it cannot be returned in the condition in which it was at the time of the taking or conversion;

 

(f)           

  in the case of money, an intent to use it at the will of the person who takes or converts it, although he may intend afterwards to repay the amount to the owner.

 

                 The term "special property" includes any charge or lien upon the thing in question, and any right arising from or dependent upon holding possession of the thing in question, whether by the person entitled to such right or by some other person for his benefit.

 

  (3)

          The taking or conversion may he fraudulent, although it is effected without secrecy or attempt at concealment.

 

  (4)

          In the case of conversion, it is immaterial whether the thing converted is taken for the purpose of conversion, or whether it is at the time of the conversion in the possession of the person who converts it. It is also immaterial that the person who converts the property is the holder of a power of attorney for the disposition of it, or is otherwise authorised to dispose of the property.

 

  (5)

          When a thing converted has been lost by the owner and found by the person who converts it, the conversion is not deemed to be fraudulent if at the time of the conversion the person taking or converting the thing does not know who is the owner, and believes on reasonable grounds that the owner cannot be discovered.

 

  (6)         

A person shall not be deemed to take a thing unless he moves the thing or causes it to move.

 

384.  

(1)         When a factor or agent pledges or gives a lien on any goods or documents of title to goods entrusted to him for the purpose of sale or otherwise for any sum of money not greater than the amount due to him from his principal at the time of pledging or giving the lien, together with the amount of any bill of exchange or promissory note accepted or made by him for or on account of his principal, such dealing with the goods or document of title is not deemed to be stealing.

 

  (2)

         When a servant, contrary to his master's orders, takes from his possession any food in order that it may be given to an animal belonging to or in the possession of his master, such taking is not deemed to he stealing.

 

385.

        When a person receives, either alone or jointly with another person, any money or valuable security or a power of attorney for the sale mortgage, pledge, or other disposition, of any property, whether capable of being stolen or not, with a direction in either case that such money or any part thereof, or any other money received in exchange for it, or any part thereof, or the proceeds or any part of the proceeds of such security, or of such security, or of such mortgage, pledge, or other disposition, shall he applied to any purpose or paid to any person specified in the direction, such money and proceeds are deemed to he the property of the person from whom the money, security, or power of attorney, was received until the direction has been complied with:

 

                Provided that if the person receiving the money, security, or power of attorney, and the person from whom he receives it, ordinarily deal with each other on such terms that in the absence of any special direction all money paid to the former on account of the latter would be properly treated as an item in a debtor and creditor account between them, the former cannot be charged with stealing the money or any such proceeds unless the direction is in writing.

 

386.

        When a person receives, either alone or jointly with another person, any property from another on terms authorising or requiring him to sell it or otherwise dispose of it, and requiring him to pay or account for the proceeds of the property, or any part of such proceeds, or to deliver anything received in exchange for the property, to the person whom it is received, or some other person, then the proceeds of the property, and anything so received in exchange for it, are deemed to be the property of the person from whom the property was so received, until they have been disposed of in accordance with the terms on which the property was received, unless it is a part of those terms that the proceeds, if any, shall form an item in a debtor and creditor account between him and the person to whom he is to pay them or

 

387.        

When a person receives, either alone or jointly with another person, any money on behalf of another, the money is deemed to be the property of the person on whose behalf it is received, unless the money is received on the terms that it shall form an item in a debtor and creditor account, and that the relation of debtor and creditor only shall exist between the parties in respect of it.

 

388.

         When any person takes or converts anything capable of being stolen, in such circumstances as would otherwise amount to stealing, it is immaterial that he himself has a special property or interest therein, or that he himself is the owner of the thing taken or converted subject to some special property or interest of some other person therein; or that he is lessee of the thing, or that he himself is one of two or more joint owners of the thing; or that he is a director or officer of a corporation or company or society who are the owners of it.

 

389.

         A person who, while a man and his wife are living together, procures either of them to deal with anything which is, to his knowledge, the property of the other in a manner which would be stealing if they were not married, is deemed to have stolen the thing, and may be charged with stealing it.

 

390.

         Any person who steals anything capable of being stolen is guilty of a felony, and is liable, if no other punishment is provided, to imprisonment for three years.

 

 

Punishment in Special Cases

 

 

  (1)

          If the thing stolen is a testamentary instrument, whether the testator is living or dead, the offender is liable to imprisonment for life.

 

  (2)        

  If the thing stolen is postal matter or any chattel, money, or valuable security, contained in any postal matter, the offender is liable to imprisonment for life.

 

  (3)

          If the thing stolen is any of the things following, that is to say: a horse, mare, gelding, ass, mule, cancel, bull, cow, ox, ram, ewe, wether, goat or pig, or the young of any such animal, the offender is liable on conviction to pay a fine of two hundred naira or to imprisonment for two years.

 

  (4)

          If the offence is committed in any of the following circumstances-

 

(a)

            if the thing is stolen from the person of another;

 

(b)

            if the thing is stolen in a dwelling-house, and its value exceeds ten naira, or the offender at or immediately before or after the time of stealing uses or threatens to use violence to any person in the dwelling-house;

 

(c)

            if the thing is stolen from any kind of vessel or vehicle or place of deposit used for the conveyance or custody of goods in transit from one place to another;

 

(d)

            if the thing is stolen is attached to or forms part of a railway;

 

(e)            if the thing is stolen from a vessel which is in distress or wrecked or stranded;

 

(f)

            if the thing is stolen from a public office in which it is deposited or kept;

 

(g)

            if the offender, in order to commit the offence, opens any locked room, box, or other receptacle, by means of a key or other instrument;

 

                the offender is liable to imprisonment for seven years.

 

  (5)

          If the offender is a person employed in the public service and the thing stolen is the property of the State, or came into the possession of the offender by virtue of his employment, he is liable to imprisonment for seven years.

 

  (6)

          If the offender is a clerk or servant, and the thing stolen is the property of his employer, or came into the possession of the offender on account of his employer, he is liable to imprisonment for seven years.

 

  (7)

          If the offender is a director or officer of a corporation or company, and the thing stolen is the property of the corporation or company, he is liable to imprisonment for seven years.

 

  (8)         

If the thing stolen is any of the following things-

 

(a)        

    property which has been received by the offender with a power of attorney for the disposition thereof;

 

(b)

            property which has been entrusted to the offender either alone or jointly with any other person for him to retain in safe custody or to apply, pay or deliver for any purpose or to any person the same or any part thereof or any proceeds thereof;

 

(c)

            property which has been received by the offender either alone or jointly with any other person for or on account of any other person;

 

(d)

            the whole or part of the proceeds of any valuable security which has been received by the offender with a direction that the proceeds thereof should be applied to any purpose or paid to any person specified in the direction;

 

(e)

            the whole or part of the proceeds arising from any disposition of any property which have been received by the offender by virtue of a power of attorney for such disposition, such power of attorney having been received by the offender with a direction that such proceeds should be applied to any purpose or paid to any person specified in the direction;

 

                the offender is liable to imprisonment for seven years.

 

  (9)

          If the thing stolen is of the value of one thousand naira or upwards, the offender is liable to imprisonment for seven years.

 

 (10)        

If the thing stolen is a fixture or chattel let to the offender to be used by him with a house or lodging, and its value exceeds ten naira, he is liable to imprisonment for seven years.

 

(10A)

       If the thing stolen is a motor vehicle or motor cycle the offender shall upon conviction be sentenced to imprisonment for not less than five years but not more than seven years without the option of a fine.

 

 (11)

         If the offender, before committing the offence, had been convicted of any of the felonies, or misdemeanours defined in this Division of this Part of this code, he is liable to imprisonment for seven years.

 

 

Chapter 35

Offences analogous to Stealing

 

 

391.

         Any person who, with intent to defraud, conceals or takes from its place of deposit any register which is authorised or required by law to be kept for authenticating or recording the title to any property, or for recording births, baptisms, marriages, deaths, or burials, or a copy of any part of any such register which is required by law to be sent to any public office, is guilty of a felony, and is liable to imprisonment for fourteen years.

 

392.

         Any person who, with intent to defraud, conceals any testamentary instrument, whether the testator is living or dead, is guilty of a felony, and is liable to imprisonment for fourteen years.

 

393.

         Any person who, with intent to defraud, conceals the whole or part of any document which is evidence of title to any land or estate in land is guilty of a felony, and is liable to imprisonment for three years.

 

394.

         Any person who kills any animal capable of being stolen with intent to steal the skin or carcass, or any part of the skin or carcass, is guilty of an offence, and is liable to the same punishment as if he had stolen the animal.

 

395.

         Any person who makes anything movable with the intent to steal it is guilty of an offence, and is liable to the same punishment as if he had stolen the thing after it had become movable.

 

396.

         Any person who takes, conceals, or otherwise disposes of, any ore of any metal or mineral in or about a mine, with intent to defraud any person, is guilty of a felony, and is liable to imprisonment for three years.

 

397.

         Any person who, having at any place not in Nigeria obtained any property by any act which if it had been done in Nigeria would have constituted the offence of stealing, and which is an offence under the laws in force in the place where it was done, brings such property into the country, or has it in his possession in Nigeria, is guilty of an offence, and is liable to the same punishment as if he had stolen it in Nigeria; but so that the punishment does not exceed that which would be incurred for the same act under the laws in force in the place where the act by which he obtained the property was done.

 

398.         Any person who, being the mortgagor of mortgaged goods, removes or disposes of the goods without the consent of the mortgagee and with intent to defraud, is guilty of a felony, and is liable to imprisonment for three years.

                

                The offender cannot be arrested without warrant.

 

399.

         In the preceding section the term "mortgaged goods" includes any goods and chattels of any kind, and any live animals, and any progeny of any animals, and any crops or produce of the earth, whether growing or severed, which are subject for the time being to the provisions of any written instrument by which a valid charge or Hen is created upon them by way of security or any debt or obligation.

 

                The consent of the mortgagee may be either express or implied from the nature of the property mortgaged.

 

400.

         Any person who fraudulently abstracts or diverts to his own use or to the use of any other person any mechanical, illuminating, or electrical power derived from any machine, apparatus, or substance, the property of another person, is guilty of a felony, and is liable to imprisonment for three years.

 

                The offender cannot be arrested without warrant.

 

 

Chapter 36

Stealing with Violence: Extortion by Threats

 

 

401.        

Any person who steals anything, and, at or immediately before or immediately after the time of stealing it, uses or threatens to use actual violence to any person or property in order to obtain or retain the thing stolen or to prevent or overcome resistance to its being stolen or retained, is said to be guilty of robbery.

 

402.  

(1)          Any person who commits the offence of robbery shall upon conviction be sentenced to imprisonment for not

 

  (2)

           If-

 

(a)

            any offender mentioned in subsection (1) of this section is armed with any firearms or any offensive weapon or any obnoxious or chemical materials or is in company with any person so armed; or

 

(b)           

at or immediately before or immediately after the time of robbery, the said offender wounds any person, the offender shall upon conviction be sentenced to death.

 

403.

   (1)         Any person who with intent to steal anything, assaults any other person and at or immediately after the time of assault, uses or threatens to use actual violence to any other person or any property in order to obtain the thing intended to be stolen shall upon conviction be sentenced to imprisonment for not less than fourteen years but not more than twenty years.

 

  (2)         

If-

 

(a)

            any offender mentioned in subsection (1) of this section, is armed with any firearms or any offensive weapon or is in company with any other person so armed; or

 

(b)

            at or immediately before or immediately after the time of the assault the said offender wounds or uses any other personal violence to any person, the offender shall upon conviction be sentenced to imprisonment for life with or without whipping.

 

  (3)

          Any person found in any public place in possession of any firearms whether real or imitation and in circumstances reasonably indicating that the possession of the firearms is with intent to the immediate or eventual commission by that person or any other person of any offence under section 402 of this Act shall upon conviction be sentenced to imprisonment for not less than fourteen years nor more than twenty years.

 

403A.

      Any person who conspires with any person to commit an offence under section 402 of this Act whether or not he is present when the offence is committed or attempted to be committed, shall be deemed to be guilty of the offence as a principal offender and shall be punished accordingly.

 

403B.

       For the purposes of section 402, 403 and 403A-

 

                "firearms" includes any canon, gun, flint-lock gun, revolver, pistol explosive or ammunition or other firearm, whether whole or in detached pieces;

 

                "offensive weapon" means any article apart from a firearm made or adapted for use for causing injury to the person or intend by the person having it for such use by him and it includes an air gun, air pistol, bow and arrow, spear, cutlass, matchet, dagger, cudgel, or any piece of wood, metal, glass or stone capable of being used as an offensive weapon.

 

404.

   (1)          Any person who, being employed in the public service of Nigeria, or in that of any other Government, corruptly and under colour of his employment-

 

(a)

            demands or takes property from any person; or

 

(b)

            compels any person to sell any property at other than its fair market value; or

 

(c)

            obtains lodging from and against the will of any person without payment or for inadequate payment; or

 

(d)

            compels, whether partially or wholly for his own profit, any person to work without payment or for inadequate payment;

 

                is guilty of a felony, and is liable to imprisonment for five years.

 

  (2)

          Any person who, falsely representing himself by words, conduct, or otherwise, to be a person employed in the public service "of Nigeria, or of any other Government, or to he an agent of, or acting under the authority of, the Government of Nigeria, or of any other Government, unlawfully and in such assumed character-

 

(a)

            does any of the acts or things specified in (a), (b), (c), and (d) in the last preceding subsection; or

 

(b)

            compels or orders any person to hand any property over to any other person, whether such property does or does not rightly belong, or is or is not rightly due, to the last-named person; is guilty of a felony, and is liable to imprisonment for five years.

 

  (3)

          Any person attempting, or inciting, soliciting, counselling, procuring, aiding, or abetting any person, to commit any of the Offences enumerated in the last two preceding subsections is guilty of a felony, and is liable to imprisonment for five years.

 

405.

         Any person who assaults any person with intent to steal anything is guilty of a felony, and is liable to imprisonment for three years.

 

406.

         Any person who, with intent to steal anything, demands it from any person with threats of any injury or detriment of any kind to be caused to him, either by the offender or by any other person, if the demand is not complied with, is guilty of a felony, and is liable to imprisonment for three years.

 

407.

         Any person who, with intent to extort or gain anything from any person, and knowing the contents of the writing, causes any person to receive any writing demanding anything from any person without reasonable or probable cause, and containing threats of any injury or detriment of any kind to be caused to any person, either by the offender or any other person, if the demand is not complied with, is guilty of a felony, and is liable to imprisonment for fourteen years.

 

408.

         Any person who, with intent to extort or gain anything from any person-

 

  (1)

          accuses or threatens to accuse any person of committing any felony or misdemeanour, or of offering or making any solicitation or threat to any person as an inducement to commit or permit the commission of any felony or misdemeanour; or

 

  (2)

          threatens that any person shall he accused by any other person of any felony or misdemeanour, or of any such act; or

 

  (3)         

knowing the contents of the writing, causes any person to receive any writing containing any such accusation or threat as aforesaid;

 

                is guilty of a felony, and if the accusation or threat of accusation is of-

 

(a)

            an offence for which the punishment of death or imprisonment for life may be inflicted; or

 

(b)

           any of the offences defined in Chapter 21, or an attempt to commit any of such offences; or

 

(c)

            an assault with intent to have carnal knowledge of any person against the order of nature, or an unlawful and indecent assault upon a male person; or

 

(d)

            an attempt to commit the offence of rape, or an assault with intent to commit the offence of rape, or an unlawful and indecent assault upon a woman or girl; or

 

(e)

            a solicitation or threat offered or made to any person as an inducement to commit or permit the commission of any of the offences aforesaid; -

 

                 the offender is liable to imprisonment for fourteen years.

 

                 In any other case the offender is liable to imprisonment for three years. It is immaterial whether the person accused or threatened to he accused has or has not committed the offence or act of which he is accused or threatened to be accused.

 

409.

         Any person who, with intent to defraud, and by means of any unlawful violence to, or restraint of, the person of another, or by means of any threat of violence or restraint to be used to the person of another, or by means of accusing or threatening to accuse any person of committing any felony or misdemeanour, or by offering or making any solicitation or threat to any person as an inducement to commit or permit the commission of any offence, compels or induces any person-

 

(a)

           to execute, make, accept, endorse, alter, or destroy, the whole or any part of any valuable security; or

 

(b)

           to write, impress or affix, any name or seal upon or to any paper or parchment, in order that it may be afterwards made or converted into or used or dealt with as a valuable security;

 

                is guilty of a felony, and is liable to imprisonment for fourteen years.

 

 

Chapter 37

Burglary: Housebreaking: and like Offences

 

 

410.

         A person who breaks any part, whether external or internal, of a building, or opens by unlocking, pulling, pushing, lifting, or any other means whatever, any door, window, shutter, cellar flap, or other thing, intended to close or cover an opening in a building, or an opening giving passage from one part of a building to another, is said to break the building.

 

                A person is said to enter a building as soon as any part of his body or any part of any instrument used by him is within the building.

 

                A person who obtains entrance into a building by means of any threat or artifice used for that purpose, or by collusion with any person in the building, or who enters any chimney or other aperture of the building permanently left open for any necessary purpose, but not intended to be ordinarily used as a means of entrance, is deemed to have broken and entered the building.

 

411.

         Any person who-

 

  (1)

          breaks and enters the dwelling-house of another with intent to commit a felony therein; or

 

  (2)

          having entered the dwelling-house of another with intent to commit a felony therein, or having committed a felony in the dwelling-house of another, breaks out of the dwelling-house;

 

                is guilty of a felony, and is liable to imprisonment for fourteen years.

 

                if the offence is committed in the night, the offender is liable to imprisonment for life.

 

412.        

Any person who enters or is in the dwelling-house of another with intent to commit a felony therein is guilty of a felony, and is liable to imprisonment for seven years. If the offence is committed in the night, the offender is liable to imprisonment for fourteen years.

 

413.

         Any person who-

 

   (1)         breaks and enters a schoolhouse, shop, warehouse, store, office or counting-house, or a building which is adjacent to a dwelling-house and occupied with it but is not part of it, and commits a felony therein; or

 

  (2)

          having committed a felony in a schoolhouse, shop, warehouse, store, office, or counting-house, or in any such other building as last mentioned, breaks out of the building;

 

                is guilty of a felony, and is liable to imprisonment for fourteen years.

 

414.        

Any person who breaks and enters a schoolhouse, shop, warehouse, store, office, or counting-house, or a building which is adjacent to a dwelling-house and occupied with it but is not part of it, with intent to commit a felony therein, is guilty of a felony, and is liable to imprisonment for seven years.

 

415.

         Any person who breaks and enters a building ordinarily used for religious worship and commits a felony therein, or having committed a felony in any such building breaks out of it, is guilty of a felony, and is liable to imprisonment for fourteen years.

 

416.

         Any person who breaks and enters a building ordinarily used for religious worship, with intent to commit a felony therein, is guilty of a felony, and is liable to imprisonment for seven years.

 

417.

         Any person who is found in any of the following circumstances- 

 

(a)            being armed with any dangerous or offensive weapon or instrument, and being so armed with intent to break or enter a dwelling-house, and to commit a felony therein;

 

(b)

            being armed as aforesaid by night, and being so armed with intent to break or enter any building whatever, and to commit a felony therein;

 

(c)

            having in his possession by night without lawful excuse, the proof of which lies on him, any instrument of housebreaking;

 

(d)

            having in his possession by day any such instrument with intent to commit a felony;

 

(e)           

having his face masked or blackened or being otherwise disguised, with intent to commit felony;

 

(f)

            being in any building whatever by night with intent to commit a felony therein; or

 

(g)

            being in any building whatever by day with intent to commit a felony therein, and having taken precautions to conceal his presence,

 

                is guilty of a felony, and is liable to imprisonment for three years.

 

                If the offender has been previously convicted of a felony relating to property, he is liable to imprisonment for seven years.

 

 

Chapter 38

Obtaining Property by false pretences; Cheating

 

 

418.

         Any representation made by words, writing, or conduct, of a matter of fact, either past or present, which representation is false in fact, and which the person making it knows to be false or does not believe to be true, is a false pretence.

 

419.

         Any person who by any false pretence, and with intent to defraud, obtains from any other person anything capable of being stolen, or induces any other person to deliver to any person anything capable of being stolen, is guilty of a felony, and is liable to imprisonment for three years.

 

                If the thing is of the value of one thousand naira or upwards, he is liable to imprisonment for seven years.

 

                It is immaterial that the thing is obtained or its delivery is induced through the medium of a contract induced by the false pretence.

 

                The offender cannot be arrested without warrant unless found committing the offence.

 

419A. 

(1)          Any person who by any false pretence or by means of any other fraud obtains credit for himself or any other person-

 

(a)

            in incurring any debt or liability; or

 

(b)

            by means of an entry in a debtor and creditor account between the person giving and the person receiving credit,

 

                 is guilty of a felony and is liable to imprisonment for three years.

 

  (2)

           The offender cannot be arrested without warrant unless found committing the offence.

 

419B.

       Where in any proceedings for an -offence under section 419 or 419Ait is proved that the accused-

 

(a)

            obtained or induced the delivery of anything capable of being stolen; or

 

(b)

           obtained credit for himself or any other person, by means of a cheque that, when presented for payment within a reasonable time, was dishonoured on the ground that no funds or insufficient funds were standing to the credit of the drawer of the cheque in the bank on which the cheque was drawn, the thing or its delivery shall be deemed to have been obtained or induced, or the credit shall he deemed to have been obtained, by a false pretence unless the court is satisfied by evidence that when the accused issued the cheque he had reasonable grounds for believing, and did in fact believe, that it would be honoured if presented for payment within a reasonable time after its issue by him.

 

420.

         Any person who by any false pretence, and with intent to defraud, induces any person to execute, make, accept, endorse, alter, or destroy, the whole or any part of any valuable security, or to write, impress, or affix, any name or seal upon or to any paper or parchment in order that it may be afterwards made or converted into or used or dealt with as a valuable security, is 

        

                The offender cannot be arrested without warrant unless found committing the offence.

 

421.        

Any person who by means of any fraudulent trick or device obtains from any other person anything capable of being stolen, or induces any other person to deliver to any person anything capable of being stolen or to pay or deliver to any person any money or goods, or any greater sum of money or greater quantity of goods than he would have paid or delivered but for such trick or device, is guilty of a misdemeanour, and is liable to imprisonment for two years.

 

                A person found committing the offence may be arrested without warrant.

 

422.

         Any person who conspires with another by deceit or any fraudulent means to affect the market price of anything publicly sold, or to defraud the public, or any person, whether a particular person or not, or to extort any property from any person, is guilty of a felony, and is liable to imprisonment for seven years.

 

                The offender cannot be arrested without warrant.

 

423.

         Any person who, being a seller or mortgagor of any property, or being the solicitor or agent of any such seller or mortgagor, with intent to induce the purchaser or mortgagee to accept the title offered or produced to him, and with intent to defraud-

 

  (1)

          conceals from the purchaser or mortgagee any instrument material to the title, or any incumbrance; or

 

  (2)         

falsifies any pedigree on which the title depends or may depend; or

 

  (3)         

makes any false statement as to the title offered or conceals any fact material thereto, is guilty of a misdemeanour, and is liable to imprisonment for two years.

The press is full of articles concerning residential real estate foreclosures. Sometimes questions arise in these judicial and non-judicial proceedings concerning ownership and enforcement of the notes and related mortgages. Uniform Commercial Code Articles 3 and 9 (and related definitions in Article 1) address some of the issues that have come up in these proceedings. The litigants and the courts considering these matters sometimes do not recognize the applicability of the UCC or may have difficulty applying the rules of the UCC. See, e.g., U.S. Bank v. Ibanez, 458 Mass. 637, 941 N.E.2d 40 (2011).

The Permanent Editorial Board for the Uniform Commercial Code has just issued a report (Report) to explain the application of UCC provisions that govern selected aspects of these matters and how those provisions apply to common fact patterns in this area. The PEB Report addresses how the UCC governs the following matters:

  • Who is the person entitled to enforce a mortgage note?
  • How is the transfer of a property interest (ownership or a security interest to secure an obligation) in a mortgage note accomplished?
  • What effect does the transfer of a mortgage note have on the related mortgage?
  • How can a person enforce a mortgage note by foreclosing non-judicially if the person does not have a recordable assignment of the mortgage?

Procedure

The PEB prepared and issued a draft Report for public comment in March 2011. The PEB received comments and prepared revisions to the Report. The final Report was issued in mid-November. It is available on the webpages of the two sponsors of the UCC, the American Law Institute (www.ali.org) and the Uniform Law Commission (www.uniformlaws.org).

During the course of the comment period, at least two courts cited the draft Report when considering issues addressed by the Report. See In re Jackson, 451 B.R. 24 (Bankr. E.D. Calif. 2011) and In re Veal, 449 B.R. 542 (9th Cir. BAP 2011). In each case the court held for the homeowner, concluding that the person seeking to enforce the particular mortgage note had not satisfied the relevant requirements of the UCC, as explained in the (draft) PEB Report.

What the Report Does Not Cover

The Report limits its discussion to selected UCC issues:

  • The Report states several times that the UCC governs the issues that it governs, but does not address issues of real property law.
  • The Report sometimes refers to the UCC's use of other law in connection with the application of the UCC's rules, for example agency law. In those circumstances, the Report notes the applicability of the other law (such as agency law) but does not discuss the content of the other law. In particular, where the UCC requires "possession" of a note to create certain rights, the Report observes that both Article 3 and Article 9 (with an assist from UCC § 1-103(b)) recognize that possession of the note can occur through an agent.
  • The Report's discussion of Article 3 recognizes that Article 3 applies only to "negotiable instruments" as that term is defined in Article 3; the Report observes that if a mortgage note is not a "negotiable instrument," the Report's discussion of Article 3 issues does not apply to that mortgage note.
  • The Report's discussion of Article 9 issues notes that Article 9 applies to all instruments, i.e., both negotiable and non-negotiable notes.
  • The Report does not address all issues that might arise under the UCC in this context, such as the possible status of a holder of a mortgage note as a holder in due course of the mortgage note and the effect that that status might have on possible defenses that the maker might be able to assert.

Who is Entitled to Enforce a Mortgage Note?

Article 3 employs the concept of a "person entitled to enforce" a note to determine the person to whom the maker of the note owes its payment obligation. UCC § 3-301. That person might or might not be the owner of the note (UCC § 3-203, Comment 1), but payment to that person discharges the maker's obligation under the note. UCC §§ 3-412 and 3-602.

A person is the person entitled to enforce the note if any of the following is true:

  1. The person is the "holder" of the note,
  2. The person is in possession of the note, which was "transferred" to that person, but the person is not a "holder" of the note, and
  3. The note has been lost or destroyed (or is unavailable for other reasons) and the person who had been in possession was a person entitled to enforce the note

These alternatives for becoming the person entitled to enforce the mortgage note are satisfied (or not) as follows:

  • The first alternative is satisfied only if the person (or its agent) has possession of the mortgage note and the mortgage note is payable or endorsed to that person or endorsed in blank.
  • The second approach also requires that the person (or its agent) has possession of the mortgage note. If the mortgage note is not payable to the person in possession or to bearer, then the person is not a "holder." However, if the mortgage note was "delivered" to the person in possession "for the purpose of giving" that person the right to enforce the instrument, the second alternative applies.
  • The third alternative requires proof of the elements noted above, along with the terms of the mortgage note.

Transfer of Ownership

Unlike Article 3, Article 9 applies to interests in both negotiable and non-negotiable instruments. UCC § 9-102(a)(47). Article 9 applies to both a security interest in a mortgage note to secure an obligation and to the rights of a buyer of a mortgage note. UCC § 9-109(a)(1) and (3). Article 9 thus determines the requirements for an "effective" transfer of rights in those two situations. UCC § 9-203.

The requirements for an effective transfer of ownership (in the case of a sale) or a security interest to secure an obligation (in the case of a loan secured by the mortgage note) are straightforward:

  1. Value must be given--this is typically satisfied by the payment of the purchase price in the case of a sale of a mortgage note and the promise to make a loan or the advance of the loan amount in the case of a security interest to secure an obligation. UCC § 1-204.
  2. The seller or person creating the security interest to secure an obligation must have "rights" in the mortgage note--this too is usually easy to satisfy.
  3. Generally, the seller or person creating a security interest to secure an obligation must "authenticate" a security agreement describing the mortgage note. UCC § 9-203(b)(3)(A). Whether the agreement covers the sale of the mortgage note or a security interest to secure an obligation, the agreement sufficiently describes the mortgage note if the agreement "reasonably identifies" the mortgage note. UCC § 9-108(a). For example, a description of mortgage notes by "category" or "type" is sufficient. UCC § 9-108(b)(2) and (3). (An oral (or other unauthenticated) security agreement is also possible in some circumstances. UCC § 9-203(b)(3)(B)).

If these requirements are satisfied, the buyer or lender with a security interest in a mortgage note to secure an obligation obtains a property interest in the note as owner or holder of the security interest to secure an obligation.

The Mortgage Follows the Note

The law in the United States has long followed the Mary's Little Lamb rule--wherever the mortgage note goes the related mortgage is sure to follow. Restatement (Third) of Property (Mortgages) § 5.4. UCC § 9-203(g) codifies this rule for both sales of a mortgage note and a security interest in a mortgage note to secure an obligation. Further, perfection of a security interest in the mortgage note (whether in favor of a buyer or a lender with a security interest to secure an obligation) also perfects the security interest in the buyer's or lender's security interest in the seller's or borrower's rights in the mortgage. References to a "mortgage" in UCC § 9-203(g) include other types of consensual rights in real property to secure an obligation, such as a deed of trust. UCC § 9-102(a)(55).

Getting the Mortgage in the Secured Party's Name

To save effort and money for all concerned, often a buyer of a mortgage note or a lender with a security interest in the mortgage note to secure an obligation will not record an assignment of the mortgage in the real estate records. As Article 9 makes clear, recording an assignment is not necessary for the buyer or lender to perfect its rights in the seller's or borrower's rights in the mortgage.

However, if the buyer or lender wants to foreclose, it may not have and may not be able to obtain the documents necessary to record the assignment in the real estate records, which may be necessary under local real estate law. Article 9 provides a procedure for the buyer or lender to record a document in the real estate records to reflect that assignment. UCC § 9-607(b).

Conclusion

The PEB Report describes the application of selected provisions of UCC Articles 3 and 9 to several key issues that may come up in connection with mortgage notes. There may well be additional UCC issues or issues arising under other law that also must be resolved, but the Report should help both practitioners and courts understand many of the issues that the UCC addresses in this area.