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

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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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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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EQUITABLE MORTGAGE TO CREATE A LEGAL MORTGAGE CAN SUE IN SPECIFIC PERFORMANCE

The equitable mortgage by agreement to create a legal mortgage, therefore, entitles the equitable mortgagee to something more than a mere right to payment out of the property or premises mortgaged; under the general principles, his remedies correspond as nearly as possible with those of the legal mortgagee. Because equity regards that as done which ought to be done the equitable mortgagee, by agreement to create a legal mortgage, can enforce the execution of a legal mortgage by suing in equity for specific performance; if successful he obtains a legal term of years and can then pursue all the statutory remedies open to a legal mortgagee.

– Idigbe JSC. Ogundiani v. Araba (1978)

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MORTGAGE DEBT SUPERSEDES EQUITABLE MORTGAGE

I have showed above that the only interest the 1st respondent in equity can deal with is the equity of redemption not the legal estate in the said property. The appellant from the very beginning of the deal with the 1st respondent over the said property has been aware i.e. acquainted with due notice of the bank loan and the mortgage of the said property to the 2nd respondent and the lodgement of the title deeds of the said property with the 2nd respondent to secure the bank loan. The appellant has had due notice that all he was negotiating was as regards the 1st respondent’s interests in the equity of redemption. And so, any purported attempt to transfer the legal estate by the mortgagor to the appellant as the 2nd relief in the claim is contending without getting rid of the mortgage debt and so, supersede the 2nd respondent’s equitable mortgage cannot be allowed in equity.

– Chukwuma-Eneh JSC. Yaro v. Arewa CL (2007)

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ONCE MORTGAGE ALWAYS MORTGAGE

An important feature of mortgages both legal or equitable is that once a mortgage always a mortgage and nothing but a mortgage. – Chukwuma-Eneh JSC. Yaro v. Arewa CL (2007)

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A MORTGAGEE HAS A POWER OF SALE AS OF RIGHT IN THIS INSTANCE

A mortgagee, unless where a contrary intention is shown, has a power of sale provided: (a) the mortgage was made by deed; and (b) the mortgage money is due, that is the legal date for redemption has passed. Where the money is payable by installments, the power of sale arises as soon as any installment is in arrears.

– L.A. Ayanlere v. Federal Mortgage Bank of Nig. Ltd. (1998) – CA/K/186/96

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ATTRIBUTES OF A LEGAL MORTGAGE

The main attributes of a legal mortgage are:- (a) a covenant to pay the principal debt and interest on a given date; (b) a covenant to pay interest in the event of default in payment of the principal on the day named; (c) the demise or sub-demise of, or the charge by way of legal mortgage on the mortgaged property; (d) the proviso for cesser; and (e) Such variations of the statutory provisions with regard to mortgages, as the arrangement between the parties requires.

– Augie JSC. Bank v. TEE (2003)

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