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MUSURU OKUNUBI
V.
ANTONIO ASSAF
THE WEST AFRICAN COURT OF APPEAL, HOLDEN AT LAGOS, NIGERIA
26TH DAY OF MAY, 1951
2PLR/1951/38 (WACA)
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OTHER CITATION(S)
2PLR/1951/38 (WACA)
(1951) XIII WACA PP. 226-231
LEX (1951) – XIII WACA 226-231
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BEFORE THEIR LORDSHIPS:
VERITY, C.J., NIGERIA
LEWEY, J.A.
DE COMARMOND, J.
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BETWEEN:
MUSURU OKUNUBI – Defendant-Appellant
AND
ANTONIO ASSAF – Plaintiff-Respondent
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ORIGINATING COURT(S)
Appeal from the Supreme Court, Civil Appeal No. 3446.
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REPRESENTATION
F. R. A. Williams — for Appellant
Moore — for Respondent
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ISSUE(S) FROM THE CAUSE(S) OF ACTION
REAL ESTATE AND PROPERTY LAW:- Contract of sale by mortgagor legal estate being vested in mortgagees – Subsequent sale by Mortgagor to second purchaser who paid the mortgagees the amount secured without obtaining a reconveyance – Equitable priorities of first and second purchaser – Mortgagees hold legal estate in trust for second purchaser – What constitutes notice of equitable interest – Note or memorandum sufficient to satisfy Statute of Frauds.
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CASE SUMMARY
The defendant was the appellant and appealed against the judgment of the trial Court which granted the respondent (first purchaser) possession of the properties in dispute. The facts were not seriously in dispute and arc fully set out in the judgment of this Court. The main issue was whether the first or second purchaser had priority. In deciding this issue this Court had to determine –
(a) The effect on priorities arising out of the fact that the second purchaser (the appellant) had paid to the mortgagees the amount secured by the mortgage but had obtained no reconveyance;
(b) Whether some knowledge by the mortgagees’ solicitor (who was also solicitor for the appellant) of the first transaction amounted to notice by the appellant of the respondent’s equitable interest.
A subsidiary point was whether there was a note or memorandum of the first contract sufficient to satisfy the Statute of Frauds.
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DECISION OF THE WEST AFRICAN COURT OF APPEAL
Held (allowing the Appeal) that:
1. There was a sufficient note or memorandum of first contract to satisfy Statute of Frauds.
2. The solicitor for the appellant received notice of first contract in his capacity as solicitor for the mortgagees and notice by him did not amount to notice by the appellant.
3. The mortgagees held the legal estate in trust for the second purchaser (the appellant) and, accordingly his title prevailed over the respondent.
Cases referred to:-
(1) Mercantile Investment and General Trust Co. v. River Plate Trust, Loan and Agency Co. (1894) 1 Ch 587
(2) Santos v. Ikosi Industries, 8 W.A .C.A. 29.
(3) Maddison v. Alderson (1883), 8 App. Cases, 441
(4) Beckett v. Nurse, (1948), 1 All F P 81.
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MAIN JUDGMENT
The following Judgment was delivered:
VERITY, AG. P.
This is an appeal from a judgment of Adomola, J., in an action in which the plaintiff sought to recover possession of certain premises at Ebute Motta and also mesne profits. The learned Judge entered judgment for the plaintiff on both claims and the defendant has appealed.
Before considering the rights of the parties I think it is essential to state as briefly as may be consistent with clarity, the facts, which are hardly in dispute.
The original owner of the premises was one Saminu Ajose. He mortgaged the property to a firm of moneylenders, of which Latunde Johnson, a solicitor, now deceased, was a director and acted as solicitor for the mortgagees. On the 9th October, 1948, Ajose agreed to sell the property to the respondent for £1,600, and the respondent paid £300 to Messrs. Irving & Bonnar, Ajose’s solicitors, on account of the purchase money. The respondent then asked the solicitors to investigate the title and instructed them to prepare a conveyance to him from Ajose, and the latter instructed them to prepare a reconveyance to him from Johnson’s firm. The solicitors asked Johnson to furnish them with the title deeds, the mortgage deed and a note of the amount due thereunder for principal and interest, and on 12th October, Johnson provided certified copies of title deeds to Messrs. Irving & Bonnar, informed them that the sum of £1,314 3s. 4d. was due on the mortgage and said he would be glad to receive their cheque therefor. Messrs, Irving & Bonnar prepared the conveyance and reconveyance and informed Ajose and the respondent. On 16th October the respondent attended and paid the solicitors £1,300 and obtained a receipt for that sum and the balance of the purchase money. On that day Ajose did not attend, and no conveyance was, therefore, executed. Nothing more transpired until the 25th October, when a solicitor, Mr Coker, wrote to Messrs. Irving & Bonnar, informing them that Ajose had instructed him that no agreement for sale had been completed by them with anyone, and that as his client had a more reasonable offer, Mr Coker thought his client should accept it. He requested them to stay any further steps in regard to the sale of the property. A copy of the letter Mr. Coker sent to Johnson. Messrs. Irving & Bonnar replied the same day that they were also acting for the respondent and stated that they presumed that he had agreed to cancelling the sale. They informed Mr. Coker that they held the purchase price paid by respondent to Ajose’s credit.
It appears that in the meantime the appellant was negotiating with Ajose for the purchase of the same lands, and on the same day as Mr. Coker’s letter, he received from Ajose a receipt for the purchase money, £2,700. This sum he paid by means of two cheques, one endorsed in favour of Johnson and one drawn in favour of Ajose. The former was in satisfaction of the mortgage debt and the latter the balance of the purchase money. On the following day, 26th October, Johnson wrote to Messrs. Irving&: Bonnar that Ajose had paid off the whole mortgage and asking for the return of the copies of conveyance sent to them earlier. There is no evidence that any reply to this letter was ever sent. On the 29th October, Ajose executed a deed purporting to convey the premises to the appellant’ in fee simple.
The deed was registered on the 15th November, 1948. During the month of November, 1948, the respondent commenced proceedings in the Supreme Court against Ajose for specific performance of the contract for sale which he averred had been made between Ajose and himself, and on 28th June, 1949, Mr Justice Gregg gave judgment in his favour, making an Order that “All the parties concerned do execute the relevant conveyances within thirty days”, and also an Order for possession. The conveyances referred to in this judgment are described as “now in the hands of Messrs. Irving& Bonnar”, and I presume therefore, that they refer to the reconveyance from Johnson to Ajose as well as the conveyance from Ajose to the respondent. I would observe in passing, that Johnson was not a party to that suit. At the date of the suit, it is also to be observed, the property was not in the possession of Ajose, but of the appellant, who was not a party to the suit. No reconveyance was ever executed, nor did the respondent secure possession. On 13th September, 1949, Ajose executed a second conveyance, this time in favour of the respondent, and the deed was registered on 31st October, 1949. In March, 1950, the respondent commenced these proceedings.
It is, I think, desirable in the first place to consider whether or not the judgment of Gregg, J., is binding upon the appellant in the present suit. The learned Judge in the Court below expressed his view that, while the appellant was not a party to the suit tried by Gregg, J., he was well aware of it. This is certainly true, for he was a witness therein. The learned Judge proceeded:-
“He cannot now re-open the case as he claims through Ajose. That judgment, in my view, puts the plaintiff “(the present respondent)” in possession of the premises as against Ajose and those who claim through him. … I cannot go, behind that judgment.”
Counsel for the appellant cited the decision of Romer, J., in Mercantile Investment & General Trust Co. v. River Plate Trust, Loan & Agency Co. (1), when his Lordship said:-
“A prior purchaser of land cannot be estopped as being a privy in estate by a judgment obtained in an action against the vendor commenced after the purchase.”
If I may say so with great respect, there are obviously sound reasons for this view. A purchaser who enters into negotiations with a vendor after proceedings have been commenced to determine the vendor’s rights and especially if he has notice and knowledge of such proceedings, does so with his eyes open and may well be bound by the result thereof. But a purchaser who buys and completes his purchase before any such proceedings cannot be affected by such proceedings unless he is made a party thereto, for the contractual relationship between the vendor and himself has come to an end by performance of the contract. A third party, who wishes to bind the purchaser, should join him in the proceedings, and if he does not do so, then he must take fresh proceedings against him, as in fact the respondent has done in the present case, and in those proceedings he cannot rely on the previous proceedings against the vendor in which he failed to join the purchaser as he should have done.
In such a case as the present and in that which preceded the vendor had very little real interest. He had received purchase money from both parties, and although he might actually be inclined to support the second rather than the first of these transactions, for it is the more profitable, whether or not he executed a second conveyance was more or less immaterial to him. In any event, he was left in possession of the purchase money in relation to both transactions, at least while the rival purchasers fight it out. For the appellant to be bound by a decision obtained in such circumstances would certainly be inequitable, even though, as in the case cited, he knew of the action and assisted therein.
It was submitted on behalf of the respondent that in Santos v. Ikosi Industries Ltd. & Another (2), this Court held that the judgment of Romer, J. in the case cited was not applicable in the present or similar circumstances. All that was held, then, by this Court was, however, that in a case when a vendor executes a conveyance subsequent to proceedings in pursuance of an agreement entered into before the proceedings, the vendor and purchaser are clearly privies. Such a decision is not, in my view, applicable in the present case, in which the transaction was completed and the conveyance executed and registered before the proceedings against the vendor were commenced. I considered, therefore that the judgment of Mr Justice Gregg in the suit against Ajose is not binding upon the appellant in the present proceedings and that the learned Judge in the Court below erred in holding that as between the present parties he could not go behind it.
Assuming that I am right in my conclusion that the appellant is not bound by the judgment in the suit between the respondent and Ajose, I will proceed to consideration of the position as between the parties to the present suit. The first point to be decided is, I think, the nature and effect of the transaction between Ajose and the respondent on the 9th and 16th October. In the suit between those parties it was held that this transaction was a contract for sale capable of enforcement by a Court of equity. But if the appellant is not bound by that judgment it is open to him to attack the validity of that contract which is the very root of the respondent’s claim against him. Counsel submitted that the contract, being one for the sale of land, it is required to be in writing, and unless it is so it cannot be enforced unless the facts in relation to the transaction bring it within the doctrine of part performance. It is well established that the mere payment of part or even the whole of the purchase money is not sufficient part performance of such a contract to bring it within this rule, for as was said by Lord Selborne in Maddison v. Alderson (3), “the payment of money is not in itself, until the connection is established by parol evidence, indicative of a contract concerning land.” In the present case, however, the respondent is in a somewhat stronger position for he has not to depend upon parol evidence alone, there are the two receipts of the 9th and 16th October, 1948 (Exhibits A and B).
It might appear, therefore, that when the payment of money is linked with a writing “indicative of a contract concerning land”, the transaction would come within the rule. Counsel for the appellant referred us, however, to the case of Beckett v. Nurse (4), in which it was held that a mere receipt for purchase money, even though accompanied by a plan, is not a written contract. From this Counsel argued that it is not an enforceable contract by reason of the Statute of Frauds. It is to be observed, however, that the Statute does not require a contract for the sale of land to be a written contract, but that –
“no action shall be brought … upon any contract of sale of lands … unless the agreement … or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith “.
The whole point of the decision in Beckett v. Nurse (4) was that the County Court Judge had erred in treating the purchase receipt as a written contract and for that reason excluding parol evidence of the agreement between the parties, but that the receipt was admissible as evidence of a note or memorandum sufficient to satisfy the Statute and that the opposing party should have been allowed to give parol evidence to show, if he could, that it was not in fact a note of the real terms of the oral agreement of which it purported to be a note. That is exactly the position in the present case. The receipts were admitted in evidence as a note or memorandum of an oral agreement. The vendor in the previous action had sought to show that it did not contain the real terms of the agreement. He was disbelieved, and no attempt was made by the appellant in the present action to attack the note on this ground. I think, therefore, that it is a sufficient note of the oral agreement to satisfy the Statute and that the respondent thereby established his contract of sale.
The next question for consideration is what is the legal position created by these circumstances. In the first place, what was the nature of the contract entered into by Ajose and the respondent? In order to determine this it is necessary to examine the oral testimony. It is, I think, clear from the evidence of the respondent himself, that what he agreed to purchase was the legal estate in the property and not merely the equity of redemption which was all that the vendor was in a position to sell, for he says, “I knew the property was mortgaged. I am not concerned whether or not the mortgage has been discharged”. This was a perfectly valid contract from the point of view both of the vendor and the purchaser, but unless and until the mortgage was redeemed and the legal estate reconveyed to the vendor, it was a contract which was incapable of being carried out. This was recognised by the parties, for Messrs. Irving & Bonnar were instructed to prepare a reconveyance at the same time as they prepared the conveyance. The position on the 16th October, was that the respondent had contracted to purchase the legal estate and had deposited with his solicitors the full amount of the purchase money. The legal estate was not at that time vested in the vendor and he could only get it in by paying off the mortgage. Messrs. Irving & Bonnar, who had prepared the documents, informed both parties, but it was necessary also for the mortgagee to be present in order that he might, if paid, execute the re-conveyance. The purchaser, however, was under no obligation to pay the purchase money until the re-conveyance was executed, for until that was done a conveyance by the vendor would have conferred upon him no more than the equity of redemption, which was not what he had agreed to purchase. With the redemption of the mortgage he expressly states he was not concerned. It is true that, had all the parties met, he might, indeed, he probably would have consented to the payment of some of the purchase price, the payment to the mortgagee of the amount due on the mortgage, followed by the execution of the re-conveyance and finally of the conveyance to himself. In point of fact, however, none of these things happened. No reconveyance has, up to the present moment, been executed. The vendor has at no time, therefore, been in a position to convey to the respondent what he had contracted to sell. There was no doubt an obligation upon the vendor to get in the legal estate in order that he might carry out his contract. If he failed to do so, however, the remedy of the purchaser was an action in damages for breach of contract and not for specific performance of a contract to sell that which was not vested in him, although no doubt the Court in his action for specific performance might have awarded damages in lieu of the relief sought.
In my view, therefore, the respondent had, at the date of the subsequent purchase by the appellant, neither a legal nor any equitable estate or interest in the land, his sole right being to damage for breach of contract. But if for the sake of argument, it be admitted that he had an equitable interest, and he certainly can have had no more than that, what would have been the effect of the subsequent purchase by the appellant?
The rule as to equitable priorities is clearly expressed in Snell’s Principles of Equity (23rd Edition, pp. 29 et seq.). The rule which it is important to bear in mind in this case is that –
“A purchaser for valuable consideration who obtains a legal estate at the time of his purchase without notice of a prior equitable right is entitled to priority in equity as well as in law.”
It is to be observed that this principle involves three factors: that the purchase must be for valuable consideration (which is beyond doubt in the present case); that he must have obtained the legal estate or it must be vested in some person on his behalf; and that he must have had no notice of the equitable interest at the time he gave his consideration for the conveyance.
It is these two latter considerations that are here in question. In the first place, did the appellant obtain the legal estate or was it vested in some person on his behalf? It is clear from the evidence in the Court below and from the additional evidence adduced by leave at the hearing of the appeal that prior to the execution of the conveyances from Ajose to him, the appellant had paid off the mortgage. It is equally clear that he did not secure, by means of Ajose’s conveyance, the legal estate, for this had not been and still has not been reconveyed, although the mortgage is satisfied. The mortgage debt having been paid off, however, the mortgagee held the legal estate as trustee for the mortgagor on whose behalf property is vested in him. By the conveyance to the appellant Ajose assigned to the appellant his beneficial interest in the property and from that date the legal interest remained vested in the mortgagee but was so vested on behalf of the appellant. The second condition is therefore, in my view, fulfilled, and it remains only to be considered whether the appellant purchased without notice.
It is submitted on behalf of the respondent that Johnson, who was not only solicitor and director of the mortgagee firm, but also solicitor for the appellant, had notice of the prior transaction between Ajose and the respondent, as indeed he had, and it is further submitted that notice to Johnson was therefore notice to the appellant. The learned author of Snell’s Principle of Equity (p. 39) expresses the rule in the following terms save as to certain exceptions:-
“When the same solicitor acts for both parties to a transaction, any notice he acquires is imputed to both parties.”
In the present case, however, it is clear that Johnson was not acting on behalf of both parties to the transaction, that is to say, for both respondent and appellant, nor did he acquire notice of the transaction between the respondent and Ajose by virtue of his position as solicitor to either. Notice was given him of the proposed sale by Ajose to the respondent in his capacity as solicitor to the mortgagee and it cannot be said, I think, that he owed any duty to communicate his knowledge to the appellant when the latter subsequently became his client. More particularly is this so when it is remembered that by reason of Mr. Coker’s letter and of the fact that he received no further communication from Messrs. Irving & Bonnar, he had good reason to believe that the earlier transaction had been abandoned. In my opinion, therefore, the appellant was a purchaser for value without notice and his conscience was in no way affected by the prior equitable right of the respondent.
I think, therefore, that the learned Judge erred in finding for the respondent, whose claim should have been dismissed, and I would allow the appeal with costs setting aside the judgment in the Court below and entering judgment therein for the defendant with costs.
I would observe, although it is not a point necessarily to be determined in view of the conclusion at which I have arrived on other aspects of the case, that I do not think that the submission of Mr F. R. A. Williams for the appellant based upon the terms of section 16 of the Land Registration Ordinance is well founded. He contended that by virtue of this section the prior registration of the appellant’s conveyance barred the respondent from setting up any claim under his own subsequent conveyance. Having in mind the provisions of section 19 of that Ordinance as well as applying thereto a reasonable method of interpretation, I think that this proposition cannot be supported. Whatever may be the intention of section 16, I think it is plain that it does not mean that if A sells C’s property to B, and C subsequently sells to D, C is precluded by B’s prior registration from showing that A had no interest to convey to B. At the same time, I wish to express my appreciation of the very interesting and helpful arguments presented by Mr. Williams in his conduct of this appeal.
Appeal allowed.