THE BRITISH AND FRENCH BANK LIMITED (PLAINTIFFS)
S. O. AKANDE (TRADING AS AKANDE BROS. & CO.) (DEFENDANT)
(1961) All N.L.R. 849
Division: High Court (West)
Date of Judgment: 26th October, 1961
Case Number: Ibadan Suit No. 1/220/61
Before: Fatayi-Williams, J.
Action for Foreclosure of an Equitable Mortgage.
The defendant had, in 1958, deposited the title deed to his property to secure overdraft facilities to be granted to him by the plaintiffs. The plaintiffs are incorporated in England, and had not been exempted by the Governor from the provisions of the Native Lands Acquisition Law. The approval of the Governor to the transaction was neither sought nor given. On the 23rd of December, 1958, the defendant took out an insurance policy in respect of the property, and had the plaintiffs' interest noted thereon. At the end of April 1960, the defendant was indebted to the plaintiffs in the sum of £869-14s-8d; and on the 20th of June, 1960, the plaintiffs obtained Judgment against the defendant for that sum, and subsequently brought this action for an Order of Foreclosure of the Equitable Mortgage. The defendant denied that any security was given for the overdraft. He alleged that he had applied for additional overdraft facilities in 1959, and that it was in consideration of those facilities only that the plaintiffs asked him to deposit the title deed, but that, notwithstanding the deposit, the additional overdraft facilities were not granted to him.
This allegation was denied by the plaintiffs.
(1) An action for foreclosure of a mortgage lies notwithstanding the fact that the Mortgagee has sued on the personal covenant to repay the loan and has obtained Judgment thereon.
(2) A bank incorporated in England is an "alien" within the definition of such in Section 2 of the W.R. Native Lands Acquisition Law. (W.R. Cap. 80).
(3) When dealing with Native Lands, an alien bank must comply with the provisions of the W.R. Native Lands Acquisition Law, (W.R. Cap. 80), unless exempted therefrom by the Governor under the provisions of section 7(2) of that Law.
(4) Except as provided in the W.R. Native Lands Acquisition (Approval of Transactions) Regulations 1958, an equitable mortgage created by a native in favour of an alien, without the approval of the Governor, is void; and an alien Bank, not exempted from the provisions of the W.R. Native Lands Acquisition Law (W.R. Cap. 80), which purports to take an equitable mortgage of such property as security for overdraft facilities, without the approval of the Governor, cannot be granted an order for foreclosure of that mortgage.
(5) Where the deposit of a title deed is not accompanied by a Memorandum of the terms of deposit; but evidence is adduced that the depositor, in taking out an insurance policy on the property, had the interest of the Equitable mortgagee noted on such policy, such evidence will, in a foreclosure action, be sufficient to prove an intention to create an Equitable Mortgage of the property by the deposit of the title deed.
Ordinance and Laws referred to:-
Native Lands Acquisition Ordinance, Cap. 144 (1948 Ed.), section 3.
W.R. Native Lands Acquisition Law, W.R. Cap. 80 section 3.
Regulations referred to:-
W.R. Native Lands Acquisition (Approval of Transactions) Regulations, Regulations 5 and 7.
ACTION for Foreclosure of an Equitable Mortgage.
Esan for the Plaintiffs.
Agbaje for the Defendant.
Fatayi-Williams, J.:-The plaintiffs claim against the defendant is for foreclosure of an equitable mortgage given by the defendant in 1958 by the deposit with the plaintiffs of the title deed relating to his property situate at and known as No. sectionI/203, Idi Arere, Ibadan, as security for overdraft granted at Ibadan by the plaintiffs to the defendant at his request between 1958 and 1960.
Pleadings were ordered and duly filed.
According to the Statement of Claim the defendant requested the plaintiffs for overdraft facilities in 1958 and deposited the title deed of his property to secure the overdraft. The defendant was granted the aforesaid overdraft by the plaintiffs during 1958-60. By the end of April, 1960, the defendant became indebted to the plaintiffs for the sum of £869-18s-4d for which sum the plaintiffs obtained Judgment on 20th June, 1960. In his Statement of Defence the defendant averred that the title deed of his property was deposited with the plaintiffs to secure overdrafts other than that in respect of which Judgment had been obtained against him by the plaintiffs.
At the hearing on the 18th October, 1961, I ruled after hearing argument from both the plaintiffs and the defendant that an action for foreclosure lies notwithstanding the fact that the plaintiffs had sued on the personal covenant to repay the amount and had obtained Judgment thereon.
After the ruling the case then proceeded and the evidence given on behalf of the plaintiffs can be summarised as follows. In 1958 the defendant requested the plaintiffs, a bank incorporated in England, for overdraft facilities. He was granted these facilities with a limit of £1,000. As security for the facilities the defendant deposited a title deed of his property (Ex. A) with the plaintiffs. He took advantage of the overdraft facilities and overdrew his account by the sum of £869-14s-8d between 1958-60. When he did not make good his indebtedness the plaintiffs sued for this amount and obtained Judgment on the 20th June, 1960. As the defendant had only paid £55 since Judgment was obtained, the plaintiffs asked for an order for foreclosure of the equitable mortgage created by the deposit of exhibit "A."
In his defence, the defendant denied that there was any security for the overdraft for £1,000. He further stated that in 1959 he applied for additional overdraft facilities and it was in respect of these that the plaintiffs asked him to deposit the title deed (exhibit A). Notwithstanding the deposit, the additional overdraft facilities were not granted. He admitted in answer to a question by the court, however, that he did not write to the bank demanding the return of the title deed when the additional overdraft was not approved.
After considering the evidence given on behalf of both the plaintiffs and the defendant I accept the evidence given on behalf of the plaintiffs and reject that given by the defendant. I firmly believe that the deed (exhibit A) was deposited with the plaintiffs as security for the overdraft facilities limited to £1,000 granted to him. I am fortified in this view by exhibit D, the insurance policy taken out at the time in respect of the property to which the deed relates. The date of this policy is 23rd December, 1958, and the plaintiffs' interest should be noted in the policy if it was not intended that their interest in the defendant's property should be protected.
Having found as a fact that it was the intention of both parties that the deed (exhibit A) should be deposited as security for the defendant's overdraft, I will now proceed to consider whether such deposit creates, in the context of our law, an equitable mortgage which in turn confers upon the plaintiffs the right to ask the court for an order for foreclosure.
A deposit of title deed alone, unaccompanied by a memorandum of the terms of the deposit, does not in itself create a charge on the land and the mere possession of the deed without evidence of the contract under which possession was obtained will not create an equitable security. In this case, however, there is evidence which I believe, that the parties intended that the deposit was to secure the overdraft granted to the defendant. In other words, they intended to create an equitable mortgage on the property. In law, an equitable mortgage creates a charge on the land affected thus giving the equitable mortgagee an interest or right in or over the land.
I will now proceed to consider what effect, if any, the provisions of section 3 of the Native Lands Acquisition Law (Cap. 80 in Vol. IV of the Laws of Western Nigeria) has on the transaction. Section 3 provides as follows:-
3(1) Except as provided by any regulations or orders made pursuant to section 7 no alien shall acquire any interest or right in or over any land from a native unless the transaction under which the interest or right is acquired has been approved by the Governor in accordance with the provisions of this Law.
(2) Except as provided by any regulations or orders made pursuant to section 7, where any such interest or right has been lawfully acquired by an alien, that right shall not be transferred, alienated, demised or otherwise disposed of to any other alien, or be sold to any other alien under any process of law, without the approval of the Governor of the transaction or sale, as the case may be, in accordance with the provisions of this Law.
(3) Any agreement and any instrument in writing or under seal by or under which an alien purports to acquire any interest in or right over any land (other than a right or interest acquired pursuant to any regulations or order made under subsection (1) or subsection (2) of section 7) and which forms part of or gives effect to a transaction that has not been duly approved in accordance with the provisions of this Law shall be void and of no effect.
In Nahman v Odutola, 14 W.A.C.A. at 381, where similar provisions in the Native Lands Acquisition Ordinance, (Cap. 144 in the Laws of Nigeria, 1948) were considered, it was held that section 3 subsections (1) and (3) of the Native Lands Acquisition Ordinance required not only the approval of the terms of the instrument by which an alien acquires an interest in land, but also approval in writing of an alien as a person to secure such an interest. In my view, if the provisions of section 3 subsections (1) and (3) of the Native Lands Acquisition Law (Cap 80) and the provisions of regulations 5 and 7 of the Native Lands Acquisition (Approval of Transactions) Regulations made thereunder (see at 218 in Vol. IV of the Laws of Western Nigeria) are read together, the construction will be the same as that arrived at in Nahman v. Odutola.
According to section 2 of the Native Lands Acquisition Law, an "alien" means:-
(a) any individual other than a native of Nigeria, and
(b) any company or association or body of persons corporate or unincorporate other than:-
(i) a corporate body established specifically by or under any Ordinance or Law which empowers that body to acquire and hold land; or
(ii) a corporate body incorporated under the provisions of the Land (Perpetual Succession) Ordinance or any other Ordinance or Law containing general provisions for incorporation where the corporate body is composed solely of natives of Nigeria;
(iii) a corporate body established under any law of the Region relating to local government or education and empowered by that Law to acquire and hold land;
(iv) a co-operative society the majority of the members of which are natives of Nigeria and which is registered under the provisions of any Law of the Region relating to co-operative societies;
(v) a company or association or body of persons corporate or unincorporated which the Governor-in-Council may by order made under subsection (2) of section 7 declare to be exempt from the provisions of this Law.
A "native" is also defined in the same section as any individual, company or association, body of persons corporate or unincorporate, that is not an alien for the purpose of the Native Lands Acquisition Law.
As far as I am aware, the plaintiffs have not been exempted by the Governor-in-Council from the provisions of the Native Lands Acquisition Law. Therefore, in view of the admission made by the plaintiffs that the company was incorporated in England, I hold that the plaintiffs' company is an "alien" for the purposes of the Native Lands Acquisition Law. On the evidence before me I also hold that the defendant is a "native."
In the circumstances, it seems to me that, to create a valid equitable mortgage the transaction between the plaintiffs and the defendant should have been approved by the Governor in accordance with the provisions of section 3(1) of the Native Lands Acquisition Law. This approval has not been proved in this case and in view of the provisions of subsection (3) thereof, the equitable mortgage intended to be created by the transaction between the plaintiffs and the defendant whereby exhibit A was deposited as security for the overdraft is void and of no effect.
The effect of this is that no valid equitable mortgage has been created and the plaintiffs are therefore not an equitable mortgagee. As it is only a legal or equitable mortgagee who can apply to the court for an order for foreclosure, the plaintiffs' action is misconceived and must be dismissed. The claim is dismissed.