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EFFECT OF NOTICE ON PURCHASER OF AN EQUITABLE MORTGAGE

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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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doctrine of notice, mortgage

DISPUTE AS TO AMOUNT OWNED IS NOT VALID GRANT FOR MORTGAGEE NOT TO SELL

A dispute as to volume of indebtedness is not a valid ground known to law such as can be relied upon to prohibit a mortgagee from exercising his right of sale. In other words, the mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute. He will be restrained, however, if the mortgagor pays the amount claimed into court, that is the amount which the mortgagee swears to be due to him, unless on the terms of the mortgage the claim is exclusive. [Sabbagh v. Batik of West Africa (1962) 2 All NLR 225]

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

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MORTGAGEE WILL ENTER POSSESSION ONCE MORTGAGOR’s PAYMENT OF INSTALLMENT IS IN ARREARS

In Robertson v. Cilia, (1956) 1 W.L.R. 1502, there a mortgagee applied by summons to the court for an order for pos-session of the mortgaged property on the ground that payment of instalments was in arrear. The mortgagor applied for the case to stand over generally. After certain interlocutory proceedings, the summons was adjourned into court in order that it might be determined to what extent the court had power to stand over generally a summon of that nature. At the time of the hearing, all arrears of instalments due under the mortgage had been paid up, but the right to repay by instalments had lapsed; and it was admitted that owing to general credit restrictions the mortgagor would not be in a position to redeem within any foreseen time. It was held that, an order for possession should be made as the mortgagee was entitled to possession, and in those circumstance, there was no power to stand the matter over generally without the consent of the mortgagee nor would it be a reasonable exercise of power to stand it over for a period when there was no prospect that the mortgagee would be in a position to make an acceptable offer. (See also Hinkley and South Leicester Permanent Benefit Building Society v. Freeman, (1941) Ch.32).

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MORTGAGEE’S RIGHT OF PROPERTY SALE

Intercity Bank Plc. v. F and F F (Nig.) Ltd. (2001) 17 NWLR (Pt.742) 347, wherein Omage, J.C.A. stated as follows on page 365 “In my respectful opinion, the complaint of the mortgagor notwithstanding, about the actual sum owing on the mortgage, the court will not interfere or restrain the mortgagee from exercising his right of sale of the mortgaged property. To intervene is to seek to vary the terms of the mortgage agreement and the court will not rewrite the mortgage agreement for the parties. The right of sale of the mortgagee is the only certain shield of recovery of the mortgagee’s investment … and he should be allowed to sell, ceteris paribus (all things being equal)”.

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LAND TRANSACTION – VALUE WITHOUT NOTICE – ACTUAL, CONSTRUCTIVE, IMPUTED NOTICE

In the case of Animashaun v Olojo (1990) 6 NWLR (Pt. 154) 111, 122-123, Obaseki, JSC expounded the law as follows: “What is the meaning of ‘bona fide purchaser of the legal estate for value without notice? Bona fide is defined as ‘in good faith, honesty, without fraud, collusion or participation in wrong doing’. Purchasing for value – ‘Purchaser’ in its technical sense does not necessarily imply purchaser for value. ‘For value’ are included to show that value must be given to earn the immunity. ‘Value’ means any consideration in money, money’s worth (e.g. other lands, stocks and shares or services or marriage…). ‘Of a legal estate’ – As Courts of equity break in upon the Common Law, when necessity and conscience require it, still they allow superior force and strength to a legal title to estate…
‘Without notice’ He must have neither actual notice nor constructive notice nor imputed notice. A person has Actual Notice of all facts of which he had actual knowledge however that knowledge was acquired…
Constructive Notice – The Court of Chancery insisted that the purchaser should inquire about equitable interest with no less diligence about legal which they could ignore only at their own peril. The motto of English Conveyance is caveat emptor; the risk of encumbrances is on the purchaser who must satisfy himself by a full investigation of title before completing his purchase.A purchaser would be able to plead absence of notice only if he had made all usual and proper inquiries and had still failed to detect the equitable interest.
Imputed Notice –There is a third category of notice known as imputed notice. If a purchaser employs an agent, such as a solicitor, any actual or constructive notice… which the agent receives is imputed to the purchaser…” [This case was relied on in Umar Ibrahim v Nasiru Danladi Mu’azu & 2 Ors. (2022) – CA/G/317/2019]

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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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RIGHT TO REDEEM A MORTGAGE

It is important to note that incident to every mortgage is a right of the mortgagor to redeem. This right is generally referred to as the right of redemption. The right to redeem is so inseparable an incident of a mortgage that it cannot be taken away even by an expressed agreement of the parties that the mortgage is not to be redeem or that the right is to be continued to a particular time or to a particular description of persons. The right continues unless and until the mortgagor’s title is extinguished or his interest is destroyed by sale either under the process of the court or of a power in the mortgage deed.

– Mohammed JCA. Rufukka v. Kurfi (1996)

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