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BAD FAITH ON THE PURCHASER OF MORTGAGE PROPERTY

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The law of sale by auction or auction sale protects the purchaser and that is the basis of the principle of law that a mortgagor’s right essentially is in damages. The law has an important qualification and it is that the purchaser must have bought the mortgaged property in good faith, that is bona fide and not in bad faith, that is mala fide. The sympathies of the law on the purchaser will vanish the moment the court comes to the conclusion that the purchaser bought the property in bad faith. Bad faith on the part of the purchaser is a matter of fact to be deduced from the totality of the purchasing or buying conduct of the purchaser. Bad faith taints or better still, destroys a mortgage sale and therefore the property in the sale.

– Niki Tobi JSC. Okonkwo v. Cooperative Bank (2003)

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EQUITABLE MORTGAGE HAS PART PERFORMANCE

“An equitable mortgage is an agreement that has arisen out of the deposit of the mortgagor’s title deeds with the mortgagee for loan as security. The essence of an equitable mortgage by deposit of title deeds is an agreement, between parties concerned, followed by an act of part performance. Where a party pursuant to an oral agreement deposits his title deeds with a bank as here, the act of depositing the title deeds is regarded as part performance of an agreement, which removes the transaction from the provisions of the Statute of Frauds 1677.” as per Barclays Bank of Nigeria Ltd. v. Alhaji Adamu B. Ashiru and Anor. (1978) 6-7 S.C. (Reprint) 70; (1978) 6-7 S.C. 70

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

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EQUITY LOOKS AT SUBSTANCE NOT FORM IN MORTGAGES

In determining whether any given transaction is in the nature of a mortgage, equity looks at the substance of the matter and not merely at the form. – Iguh JSC. Ejikeme v. Okonkwo (1994)

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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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NON-COMPLIANCE WITH AUCTIONEERS LAW ONLY GIVES RISE TO DAMAGES

An auction sale of mortgaged property is however valid despite the non-compliance with auctioneers law. Thus, any irregularity in the sale is remediable to the mortgagor in damages. See OKONKWO V. C.C.B. (NIG) PLC. (Supra). In ABDULKADIR V. MOHAMMED (2019)12 NWLR (prt. 1687) 450 at 496, it was held that except where the sale of a mortgaged property by auction is tainted with fraud and collusion, any irregularity in an auction sale in breach of the auctioneers Law and Land use Act cannot vitiate the sale.

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

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How Equitable Mortgage is created?

Now, equitable mortgages are created inter alia, (1) by mere deposit of title deeds with a clear intention that the deed should be taken or retained as security for the loan; (2) by an agreement to create a legal mortgage and (3) by mere equitable Charge of the mortgagor’s property. In passing we think that it should be pointed out that the last of the three classes of equitable mortgage i.e. that which is created merely by a charge on the property intended as security for the loan differs considerably from the first two in respect of the remedies it confers; and the property so charged is appropriated only to the discharge of a debt or some other burden in respect of which the property stands charged.

– Idigbe JSC. Ogundiani v. Araba (1978)

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MORTGAGEE TO GIVE NOTICE BEFORE RESALE

In line with the provisions of section 125(1) of the Property and conveyancing Law, a mortgagee shall not exercise his power of sale unless and until a notice requiring payment of the mortgage money has been served on the mortgagor or one of several mortgagors and default has been made in payment of the mortgaged money or of part thereof for three months after such service. See B.O.N. Ltd. v. Aliyu (1999) 7 NWLR (Pt. 612) 622, where this court held that “the requirement of the law is that notice of intention to sell a mortgage property must be sent to the mortgagor as the words “shall not” are mandatory and not advisory. Consequently, any sale of any mortgage without the requisite notice is invalid ab initio and cannot convey any title to a subsequent purchaser”.

– Augie JSC. Bank v. TEE (2003)

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