BARCLAYS BANK, D.C.O. (PLAINTIFF)
B. A. OLOFINTUYI
G.A. IBIRONKE J (DEFENDANTS)
(1961) All N.L.R. 828
Division: High Court (West)
Date of Judgment: 9th October, 1961
Case Number: Ibadan Suit No. 1/173/60
Before: Somolu, J.
Ibironke had deposited with the plaintiffs a title deed to registered land. The deposit was accompanied by a memorandum executed by him indicating that the purpose of the deposit was to create an equitable mortgage in favour of the plaintiffs. By Clauses 3 and 5 of the memorandum, Ibironke covenanted not to lease the property or to allow any other person to become the registered owner thereof during the continuance of the security, without the plaintiffs consent in writing.
On the 5th of May, 1959, the plaintiff obtained Judgment against Ibironke in the sum of £9,670-4s-3d with 75 guineas costs and on the 22nd of June in the same year he was still indebted to the plaintiffs in the sum of £7,747-9s-3d on foot the Judgment. The plaintiffs, on that date, took out a Writ of fieri facias but Ibironke obtained an Order for a Stay of Execution on the condition that he pay £500 down and £250 monthly towards the liquidation of the Judgment debt and costs. On the 13th of February, 1960, he conveyed the property to Olofintuyi.
The Deed of Conveyance described Ibironke as being entitled to the property "according to Native Customary Law and seised in absolute customary ownership free from incumbrances of the landed and house property." When Ibironke made default in the payment of the instalments ordered by the court, the plaintiffs attempted to sell the property but were met with the claim of Olofintuyi.
The plaintiffs then brought this action seeking an order to set aside the Deed of Conveyance on the ground that it was made to defraud them. They also sought an injunction to restrain both defendants from further dealing with the land.
(1) Where an equitable mortgagor executes a memorandum of deposit of title deeds undertaking not to lease the mortgaged property nor to allow any other person to become registered owner thereof during the continuance of the security, without the prior written consent of the mortgagee; the mortgagor thereby deprives himself of the power to deal with the mortgaged property without such consent; and he will he presumed to have sold such property with intent to defraud the mortgagee if he sells it without the required consent; as such a sale is to the prejudice of the mortgagee's right to have the property held in an unencumbered condition until the mortgage debt is satisfied.
(2) It is necessary for a purchaser of a legal estate, subject to a prior equitable mortgage, to plead specifically that he is a purchaser for value without notice; failure to plead this defence, or to call evidence to establish lack of notice, raises a presumption that the purchaser had notice of the prior mortgage.
(3) There is privity of estate between an equitable mortgagee of a property and a purchaser for value with notice from the equitable mortgagor; and the court will set aside a conveyance executed by the mortgagor in favour of such purchaser where such conveyance was made in fraud of the equitable mortgagee.
Judgment for the Plaintiffs: Deed of conveyance set aside. Injunction granted.
Cases referred to:-
Oliver v. Hinton, (1899) 2 Ch.D. 264; 68 L.J.Ch. 583; 81 L.T. 212; 48 W.R. 3; 15 T.L.R. 450; 43 Sol. Jo. 622.
R. A. Wright v. Ahmadiya Movement-in-Islam, W.A.C.A. 2886 (1949 Unrep.)
Law referred to:-
W.R. Property and Conveyance Law, W.R. Cap. 100, section 181.
ACTION to Set Aside Conveyance.
Okubadejo for the Plaintiffs.
Bolarinwa for the First Defendant.
Ayoola for the Second Defendant.
Somolu, J.-The plaintiff's writ of summons reads as follows:-The plaintiff seeks for:-
(1) An order setting aside a deed of conveyance dated the 13th day of February, 1960, registered as No. 14 at 14 in Volume 364 of the Lands Registry at Ibadan made between G. A. Ibironke of SW7/205A, Oke Ado, Ibadan, on behalf of himself and other members of his family as Vendors of the one part and Benjamin Ade Olofintuyi of SW6/34 Amunigun Street, Ibadan, as Purchaser of the other part which deed of conveyance was made by the second defendant in favour of the first defendant to defraud the plaintiff to whom the subjects described in the deed are mortgaged by a memorandum of deposit of deeds dated the 27th day of July, 1954, registered as No. 47 at 47 in Volume 15 of the Lands Register kept at Ibadan.
(2) An injunction to restrain the defendants from participating in further dealings with the subjects described in the said deed of conveyance.
Pleadings were filed, and it appears to me that the relevant portions of the Statement of Claim are paragraphs 2, 3, 4, 5, 6 and 7, insofar as the issues in the case are concerned, and the relevant portions of the defence are paragraphs 1, 3, 6 of the Statement of Defence of second defendant and paragraph 3 of the Statement of Defence of the first defendant. At the hearing, the only witness called testified for the plaintiff, and the defendants neither testified on their own nor called witnesses.
The Manager of the plaintiff/bank in his evidence said that the second defendant deposited exhibit A with his bank in July 1954 by means of exhibit B with intent to create equitable mortgage upon all the hereditaments and property in dispute "for securing the payment and discharge on demand of all moneys and liabilities now or hereafter due from" the second defendant to the plaintiff. Clauses 3 and 5 of the document, exhibit B, are, in my view, very important in this case, and they deprive the second defendant of the power of leasing the property in dispute, and also of allowing any person to become the registered proprietor of the said hereditaments or any part thereof without the written consent of the plaintiff during the continuance of the security.
On 5-5-59, the plaintiff obtained Judgment against the second defendant for the sum of £9,670-4s-3d plus 75 guineas costs and on 22-6-59 a writ of fi fa, was taken out in respect of the Judgment/debt and costs. As a result, the sum of £42 was realised, but it would appear that the second defendant paid a further £2,000; at the time of the writ in this case, a total of £7,747-9s-3d was still outstanding and due to be paid by the second defendant to the plaintiff, and it is true to say that nothing more has been paid by him up to the time of hearing. The second defendant obtained an order for stay of execution on the condition that he paid £500 down and £250 every month, but plaintiff's witness says that he had defaulted. The order in question was not produced, but when this evidence was given no objection was taken by the learned Counsel for the defendants and it is difficult for me to close my eyes to it, especially in view of exhibit E which was sent to plaintiff's Counsel by the Registrar, and the evidence of plaintiff's witness that upon the default of second defendant the plaintiff made efforts to sell the property in dispute but was met with the claim of the first defendant. The second defendant has not challenged this piece of evidence and I accept it as the true version of the events. Now, it is not disputed that the second defendant sold the property in dispute to the first defendant and conveyed it to him by means of exhibit D, and the sole question to be determined is whether that disposition is in fraud of the plaintiff who is not only his mortgagee by means of exhibit B and the deposit of exhibit A, but is also a Judgment-creditor. Learned Counsel for the defendants has submitted with some force that the second defendant never lost his right to sell the property, and that the only qualification of that right is that such a sale will be subject to the right of the mortgagee. He, of course, has not been able to cite a single authority to buttress this apparent novel proposition of law. It is quite possible to envisage a situation in which this proposition may be appropriate, but I cannot accept it as applying to the unchallenged facts in this case. When the second defendant executed exhibit B and deposited exhibit A with the plaintiff, what did he think he was doing? When he agreed to clauses 3 and 5 of exhibit B prohibiting him from even leasing the property in dispute, or to get someone else to become the registered proprietor of it during the continuance of the security without the written consent of the plaintiff, what did he think those provisions meant? Or has the security been terminated? In my view, the conduct of the second defendant in selling the property in dispute as admitted by him is in clear fraud of the rights of the plaintiff in it, apart from the fact that it is also a breach of his undertakings under exhibit B. At the time he purported to have power to sell it to first defendant, he had no such power at all and he was guilty of obtaining money under false pretences. He should thank his stars that the process of the criminal law has not been set in motion against him. In my opinion, the fraudulent intent of the second defendant is made more patent, upon a careful consideration of exhibit D. Exhhibit A makes it clear that the second defendant held the property in dispute as fee simple owner, but he sold and conveyed it to first defendant as one entitled to it "according to Native Customary Law and seized in absolute customary ownership free from incumbrances of the landed and house property." Was he holding it under Native Customary Law? Was the property free from incumbrances at the time of the purported sale to the first defendant? The answers to these questions must be no, and it is not surprising that he has not got the courage to explain these things to the court. In paragraph 6 of his Statement of Defence the second defendant claimed that he had a right to deal with the property by virtue of his equity of redemption and that he informed the plaintiff "before he concluded the transaction which was to raise money to liquidate instalments ordered him to be paid by the High Court on the Judgment debt." But I must say that no one impedes him in the exercise of his right to the equity of redemption; he is the one who ties his own hands in exhibit B, and if he has any quarrel over that issue, that quarrel should be with himself and no one else. As to informing the plaintiff about the transaction, that is false and that is why he cannot give any evidence to prove it; it was not even suggested to plaintiff's witness. I reject the defence of the second defendant and the submissions made on his
behalf. I find as a fact that when he sold the property in dispute to first defendant and conveyed it to the latter by virtue of exhibit D, he did so with the intent to defraud the plaintiff, as such transaction could not but be to the prejudice of the right of the plaintiff to hold it in an unencumbered condition to satisfy the debt the second defendant was owing the bank.
The case of the first defendant is however slightly different. He is a purchaser for valuable consideration, because he paid £2,250 for it. In normal circumstances, it will be difficult for the first defendant to show that he had no notice of the rights of the plaintiff in it at the time he was buying it. But he has not set up the defence that he is a bona fide purchaser without notice, and I am not permitted to set up a case for him which he does not make out. Now, when he was negotiating to buy the property, did he investigate the title of the second defendant to it? If he did not, why? If he did, what did he discover? It is not easy to find answers to these questions, but exhibit B shows that the second defendant held a registered title to the property and it is my view that if the first defendant got to know this after he had bought, he would still be put on enquiry as to its whereabouts. If he knew of this at the time of the negotiation, wisdom would have compelled him to call for it. If he called for it during negotiation, he would have known that it was with the plaintiff as deposit for equitable mortgage. If he discovered the fact after he got exhibit D, what did he do? However, since the first defendant has not set up a defence of being a bona fide purchaser without notice, so as to bring himself within the provisions of section 181(2) of the Property and Conveyancing Law, Cap. 100, Laws of Western Nigeria, I must presume that he called no evidence or set up that defence because he knew that he could not sustain it. Therefore, I hold that he was not without notice of the rights of the plaintiff in the property when he was negotiating to buy it. If he was, it would have been the easiest thing to plead it and give evidence on it. Alternatively, I hold that he was negligent in not being able to discover that the title deed, exhibit B, was with the plaintiff. I find it hard to believe that a man paying £2,500 for a property will fail to investigate the title to it. In my Judgment, the first defendant investigated the title to the property and I find as a fact that he knew that the second defendant was not in possession of the title deed, exhibit A, but did not bother to press on him to produce it. I am of the opinion that the decision in the case of Oliver v. Hinton, (1899) 2 Ch.D. 264, applies to this case, and also that section 181(1) of the Property and Conveyancing Law, Vol. V, Laws of Western Nigeria, is applicable. There is privity of estate between the plaintiff and first defendant, and since fraud has been alleged and proved, it follows that the remedy of the plaintiff lies in this action to set aside the sale and conveyance of the property to second defendant, as laid down in the decision of the West African Court of Appeal in R.A. Wright v. Ahmadiya Movement-in-Islam. W.A.C.A. 2886 (Cyclostyled Report February-May 1949) and a long line of similar cases following it.
It follows therefore that the plaintiff succeeds in this case. I hereby set aside the conveyance of the property in dispute by the second defendant to the first defendant as sought. I order injunction against defendants restraining them from further dealings with the said property.
I assess costs against the second defendant at 45 guineas in favour of the plaintiff, and 20 guineas in favour of first defendant. I order 10 guineas costs against first defendant in favour of the plaintiff.
Judgment for Plaintiff: Deed of Conveyance set aside: Injunction granted.