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MORTGAGE DEBT SUPERSEDES EQUITABLE MORTGAGE

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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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READY BUILT HOUSES TO BE PAID FOR INSTALLMENTALLY ARE MORTGAGES

I will have to state clearly that the statutory corporations, with authority to build houses and sell on terms to people who otherwise would be unable to build on their own, are in someway mortgages to the buyers. But instead of outright loan to the buyer they provide ready built houses to be paid for on certain terms. The terms range according to the laid down policy of each corporation. Some require a certain percentage of the full price to be paid as first deposit and the remainder to be paid in certain instalments. They are in some cases flexible as to time but in most cases spell out when and how to liquidate the full price. All these terms are without prejudice to mortgagor’s right to pay the full price outright; or if he defaults for just a few days or even weeks in a reasonable way he still retains his equity of redemption, i.e. even if the contractual date had passed. Howard V Harris (1683) 1 Vern 190; Spurgeon V Collier (1578) 1 Eden 55; Jennings V Ward (1705) 5 Vern 520. What found its way into our statutes is no more than the historical Common Law Practice of protecting the weak borrowing from the overbearing lender. Once the lender (mortgagee) was adequately protected to recover his money in full plus interest at reasonable time even if somewhat outside the contracted period the mortgagor’s equity of redemption should not be vitiated. What is essentially a mortgage in this case is dressed up as a conveyance with the right to withhold possession from the mortgagor until he liquidated the debt; but should he fail to liquidate by unreasonably defaulting in payment and was in arrears for long the mortgagee’s right of foreclosure should also not be vitiated.

— Belgore, JSC. A.S.H.D.C. v Emekwue (1996) – SC. 282/1989

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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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BAD FAITH ON THE PURCHASER OF MORTGAGE PROPERTY

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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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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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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EQUITABLE MORTGAGE FIRST IN TIME TAKES PRIORITY

I have earlier set out the peculiar factors and circumstances not least being that the appellant has paid part of the purchase price of ₦2.3m to the tune of ₦1.8m leaving a balance of ₦500,000.00 and has been put in possession of the disputed property. There is a binding agreement of sale of the 1st respondent’s interest in the said property between the appellant and the 1st respondent. The appellant has thereby acquired an equitable interest to the extent of the 1st respondent’s interest in the equity of redemption and this is the interest which the mortgagor, the 1st respondent has had at all material times. The 1st respondent cannot give what it hasn’t got. And as I intimated earlier any attempt to pass the legal estate in the disputed property to the appellant will be of no effect and void not voidable because the 1st respondent as the mortgagor has bound itself to convey the legal estate to the mortgagee whenever it is called upon to do so until the principal, interest and costs are duly paid on the mortgage. See: Barclays Bank of Nigeria Ltd v. Ashiru and Anor. (supra) per ldigbe JSC, and Jared v. Clements (1903) 1 Ch. 428. Besides, the appellant is acquainted with notice of the mortgage and so cannot take priority to the 2nd respondent’s equitable mortgage which is first in time. – Chukwuma-Eneh JSC. Yaro v. Arewa CL (2007)

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