LEGAL PRINCIPLE: PROPERTY LAW — Mortgage — Exercise of Power of Sale — Undervalue Alone Not Sufficient to Vitiate Sale
PRINCIPLE STATEMENT
Undervalue alone is not enough to vitiate a mortgagee's exercise of power of sale. It must be shown that the sale was made at a fraudulent or gross undervalue. If the mortgagee acts bona fide and without collusion, the court will not interfere even if the sale is disadvantageous, unless the price is so low as to be evidence of fraud.
RATIO DECIDENDI (SOURCE)
Per Ogundare, JSC, in African Continental Bank Ltd v. Ihekwoaba (2003) NLC-1141999(SC) at pp. 14–15; Paras D–A.
"We think it is now beyond controversy that undervalue alone is not enough to vitiate the exercise of a mortgagee's power of sale. It must be shown that the sale was made at a fraudulent or gross undervalue. Indeed, it is well established that 'if a mortgagee exercises his power of sale bona fide for the purpose of realising his debt and without collusion with the purchaser, the court will not interfere even though the sale be very disadvantageous, unless the price is so low as in itself to be evidence of fraud.'"
EXPLANATION / SCOPE
Undervalue alone does not vitiate a mortgagee’s sale. Fraud or gross undervalue must be shown. The principle applies to mortgage law. The mortgagee must act bona fide. The rule protects purchasers. The mortgagor may claim damages for improper exercise. The principle is well-established.
