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MORTGAGEE OR RECEIVER EXERCISING A POWER OF SALE ONLY HAS A DUTY TO ACT BONA FIDE

Dictum

There is an abundance of authorities describing the obligations of a mortgagee and by extension, a receiver, exercising a power of sale. Thus, whether the mortgagee or receiver owes a duty of care in the conduct of the sale, the law seems sufficiently well settled that the mortgagee or receiver engaged in selling the mortgaged property has a duty to act bona fide. In EKA – ETEH V. NIGERIA HOUSING DEVELOPMENT SOCIETY LTD & ANOR (1973) NSCC 373, 380, at 381, the Supreme Court held that – “The only obligation incumbent on a mortgagee selling under and in pursuance of a power of sale in the mortgage deed is that he should act in good faith.”

— M.L. Shuaibu, JCA. FBN v Benlion (2021) – CA/C/31/2016

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RIGHT TO REDEMPTION IN MORTGAGE CANNOT BE BARRED

It is a settled rule of equity that any agreement which directly bars the mortgagor’s right to redemption is ineffectual. – Iguh JSC. Ejikeme v. Okonkwo (1994)

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DATE FOR PAYMENT IN A MORTGAGE AGREEMENT

Fixing a date for repayment in a mortgage transaction does not generally indicate the parties intention that the actual payment is to be made on the named date, but only that the mortgagee may call for payment on or after that date, if so minded, but not before. See Ogioro v. Igbinovia (supra), and B.O.N Ltd. v.Akintoye (supra), where it was also held that if the mortgage debt is not paid at any time fixed for payment, the mortgagee is entitled to exercise his power of sale, the debt having been deemed to have become due and payable on that day.

– Augie JSC. Bank v. TEE (2003)

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EFFECT OF NOTICE ON PURCHASER OF AN EQUITABLE MORTGAGE

This brings us to the subject of the equitable doctrine of “Notice.” It is usually said that a purchaser of the legal estate in any property for value and without notice has an “absolute, unqualified and unanswerable defence” to any claim of a prior equitable owner or person having a prior equitable interest in the same property (see Pilcher Vs Rawlings (1872) 7 Ch. App. 259 at 269 per James L.J.). Where, however, the purchaser, as here, has notice of a prior equitable mortgage in the property in which he seeks to take a legal estate he has a duty, by himself or by his vendor, to get rid of that prior equitable interest otherwise he is taking unnecessary risk.

– Idigbe JSC. Ogundiani v. Araba (1978)

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DEFINITION OF MORTGAGE

A mortgage is defined as creation of an interest in a property defeasible, that is, annullable upon performing the condition of paying a given sum of money with interest at a certain time. Thus, the legal consequence of the above is that the owner of the mortgaged property becomes divested of the right to dispose of it until he has secured a release of the property from the mortgagee.

— M.L. Shuaibu, JCA. FBN v Benlion (2021) – CA/C/31/2016

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IN LEGAL MORTGAGE PROPERTY IS TRANSFERRED TO THE MORTGAGEE SUBJECT TO REDEMPTION

In a legal mortgage, title to the property is therefore transferred to the mortgagee subject to the proviso that the mortgage property would be reconveyed by the mortgagee to the mortgagor upon the performance of the conditions stipulated in the mortgage deed and upon payment of the debt at the time stipulated therein. In other words, the mortgagor is liable to repay the loan as stipulated; otherwise the mortgaged property is foreclosed. See BANK OF NORTH V. BELLO (2000) 7 NWLR (prt 664) 244, ADETONA V. ZENITH INTERNATIONAL BANK PLC (2011) 18 NWLR (prt 1278) 627 and ATIBA IYALAMU SAVINGS & LOANS LTD V. SUBERU (2018) 13 NWLR (prt 1637) 387 at 414.

— M.L. Shuaibu, JCA. FBN v Benlion (2021) – CA/C/31/2016

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DEPOSIT OF TITLE DEED CREATES EQUITABLE MORTGAGE

Kadiri v. Olusaga (1956) 1 FSC at p. 178: “It is the case, as stated by the learned trial Judge, that the security given was not the form of a legal mortgage, that is to say by deed, transferring the legal estate to the respondent, but the deposit of title deeds as security for a loan is an equitable mortgage, and I am unable to agree that the loan was an unsecured one within the meaning of the legislation in question. As Lord Macnaghten said when delivering the judgment of the Board in Bank of New South Wales v. O’Connor (1889) 14 AC page 273. ‘It is a well established rule of equity that a deposit of a document of title without either writing or word of mouth will create in equity a charge upon the property to which the document relates to the extent of the interest of the person who makes the deposit. In the absence of consent that charge can only be displaced by actual payment of the amount secured.'”

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