Question

Andrew forged a mortgage and registered it against the fee simple title of Julia, without her knowledge. Andrew then went to the Handy Dandy finance company and sold the mortgage to them. Wendy, an employee of Handy Dandy, searched the title and ascertained that Andrew was the registered mortgagee, prior to buying the mortgage from Andrew. Subsequently, Julia learned of the mortgage when Handy Dandy sent notice to her instructing her to make her payments in future to Handy Dandy. Julia told Handy Dandy that she had never granted a mortgage to anyone, and that she had no intention of paying them anything. Andrew is now living happily in Bolivia. Which of the following statements is TRUE?

(a) Handy Dandy's mortgage is protected under the Land Title Act, since they dealt with the registered holder of the mortgage, and relied on the register.
(b) Julia will be obliged to repay the mortgage to Handy Dandy, but she will be entitled to recover that amount from the assurance fund.
(c) Handy Dandy will not be able to recover the mortgage debt from Julia, but they will be able to recover the amount of the mortgage from the assurance fund.
(d) Julia will be able to have Handy Dandy's mortgage removed from her title, and Handy Dandy will have no recourse, except against Andrew.

Answer 1

Julia can likely have the forged mortgage removed from her title, as she is the true owner and never consented to the mortgage. Handy Dandy's ability to recover the mortgage amount depends on the Land Title Act provisions and their own diligence in the transaction. Handy Dandy might have recourse through an assurance fund, subject to local laws.

Step-by-step explanation:

The student's question relates to the application of the Land Title Act to a situation involving a forged mortgage. Specifically, the true owner of the property, Julia, is contesting a mortgage registered against her property by Andrew, which was then sold to the finance company, Handy Dandy. Wendy, an employee of Handy Dandy, had checked the register and found Andrew to be the registered mortgagee before purchasing the mortgage.

Upon discovery of the forged mortgage, Julia contests the legitimacy of the mortgage. Considering the principles of property law and the protection provided by the Land Title Act, the registered mortgagee, subject to the legislation in place, typically Handy Dandy in this case, would not necessarily be protected if they took the mortgage in bad faith or without due diligence.

It depends on the jurisdiction, but generally, if the mortgage was registered fraudulently (as in this case, with a forged mortgage), the true owner (Julia) would not be held liable for the mortgage registered in her name without her consent. Thus, Julia will be able to have Handy Dandy's mortgage removed from her title, and Handy Dandy's recourse would be limited to their own due diligence and potential recovery actions against Andrew.

However, whether Handy Dandy can recover from an assurance fund or similar protection scheme depends on specific legislation and the circumstances of the case, such as whether Handy Dandy acted in good faith and undertook proper checks before purchasing the mortgage. Typically, assurance funds are in place to compensate parties harmed by fraud or errors in the land title system.