"An equitable mortgage is one which is lacking one or more formalities of legal requirements, such as stamping, filing or registration. Equitable mortgages are recognized under common law to protect the rights and obligations under a mortgage that is not completed in law. However, an equitable mortgage will be subordinate to the priority given to a legal mortgage.
Ways in which an equitable mortgage could be created were listed in Ogundiani v. Araba (1978) 6-7 S.C. 42, (1978) LPELR-2330(SC), as follows: 1. by mere deposit of title deeds with a clear intention that the deeds should be taken or retained as security for the loan; 2. by an agreement to create a legal mortgage and 3. by mere equitable charge of the mortgagor's property. See also: Yaro v. Arewa Construction Ltd (supra); B.O.N. v. Akintoye (1999) 12 NWLR (Pt. 631) 392; First Bank of Nigeria Plc v. Songonuga (2005) LPELR-7495(CA); Hydro-Tech Nigeria Ltd v. Leadway Assurance Co. Ltd (2016) LPELR-40146(CA). On the nature of equitable mortgages in First Bank of Nigeria Plc v. Songonuga (supra), Ogunbiyi, JCA (as he then was) expounded: "Deducing from the conduct of parties, even in the absence of a formal consent obtained from the governor it is sufficient that the intention to appropriate the property to the discharge of a debt was clearly manifested and thus creating a sufficient pre-requisite of an equitable charge.
Without any need of a mathematical calculation, it is an established principle of law, well grounded, that "equity looks on that as done which ought to be done." In other words, "equity looks to the intent rather than to the form." The authors of Snells' Principles of Equity, 27th Edition at p. 39 held the view that the said maxim lies at the root of equitable doctrines governing mortgages. Furthermore, it has also been firmly established that even the history of creation of equitable mortgage itself bears out the willingness of the Court to enforce intentions even if appropriate formalities for legal validity have not been met.
The authority underlining the said laid down principle is the Law of Real Property, 3rd Edition by Megarry and Wade p. 895... It is evident that by the very act of the respondent depositing the title deeds with the execution of a memorandum of deposit, same had indicated only one clear intention and purpose which was the creation of an equitable mortgage."In all these authorities, one thing stands clear: there must be a clear intention that the title deeds deposited should be taken or retained as security for the loan. One way in which such intention can be made manifest is by the execution of a memorandum of deposit; Yaro v. Arewa Construction Ltd. (supra); B.O.N. v Akintoye (1999) 12 NWLR (Pt. 631) 392; First Bank of Nigeria Plc v. Songonuga (supra).
A memorandum of deposit is a document which acknowledges the deposit of the title deeds for the purpose of an equitable mortgage and states the terms of the transaction, including interest rates applicable. An offer letter for the facility which states the terms of the transaction, incorporating the deposit of the title documents as part of its terms and which the party endorses by execution can also be viewed as a memorandum of deposit; Standard Manufacturing Company Ltd v. Sterling Bank Plc (2015) LPELR-24741(CA). The crucial point is that it must be made unambiguously manifest that there was a clear intention that the title deeds should be taken or retained as security for the loan."
Per OTISI, J.C.A. IN FBN v. DAVIES CITATION: (2017) LPELR-43556(CA)
