RES exam question on Land Law: A bank takes a registered mortgage from a registered proprietor who, unknown to…
A bank takes a registered mortgage from a registered proprietor who, unknown to the bank, had earlier obtained title by forging an earlier transfer. The bank had no knowledge of and was not party to the fraud. As against the defrauded former owner, what is the bank's position?
- AThe mortgage is void, because a forgery anywhere in the chain of title taints every later registered interest in the land
- BThe State takes the land free of all interests and compensates both parties from the assurance fund
- CThe defrauded owner can always recover the land from the bank, since the bank's security came from a forger
- DIt is generally protected by indefeasibility; the fraud exception reaches only a party to, or with notice of, the fraud
Show answer & explanation
Answer
D. It is generally protected by indefeasibility; the fraud exception reaches only a party to, or with notice of, the fraud
Explanation
Under the Torrens system, a bona fide registered interest taken without notice of the fraud is generally indefeasible; the fraud exception operates against the fraudster or a party with notice — not the innocent mortgagee.
Study the concept behind this question: Caveats and Registration of Title
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