Mr. Sidiku Ajala Suberu V. Atiba Iyalamu Savings Loans Ltd. & Anor (2007)
LawGlobal-Hub Lead Judgment Report
MUNTAKA-COOMASSIE, J.C.A.
This is an appeal against the judgment of the High Court of Kwara State of Nigeria holden at Ilorin coram, Bamigbola J. delivered on 03/03/06 wherein judgment is entered in favour of the defendant and dismissed the plaintiff’s suit (save on the plaintiff’s claim that the notice of auction of his mortgaged property is wrongful). The trial court also granted the 1st respondent’s counter-claim.
The facts leading to this action are briefly thus:-
The appellant, who was the plaintiff before the lower court took a loan facility from the 1st respondent, herein in the sum of N600, 000.00. Before the loan was granted the 1st defendant wrote a letter to the plaintiff/appellant that reads thus:
“10th September, 1996.
S. A. Suberu,
Amusement Guest House,
Adamu Road,
Ilorin – Kwara State.
Dear Sir,
LETTER OF OFFER N0.4013020203
We are happy to inform you that a mortgage loan of N600, 000.00 (Six hundred thousand naira only) repayable within 12 (twelve) months at 3% per month has been granted to you. Thus the loan is approved subject to the under listed conditions.
(1) Your understanding that the loan is required to be spent to renovate your Hotel (Amusement Guest House).
(2) Your understanding that the loan will be secured with legal mortgage on your Hotel as per Deed of mortgage executed by you.
(3) Effective/maturity date – 10th September, 1996 to 9th September, 1999.
(4) Your paying a management fees of N9, 000.00 i.e. 2.5%.
(5) Your understanding that the repayment of both principal and the interest shall be on 12 equal instalment of i.e. N50, 000.00 plus interest every month.
(6) Your understanding that the current interest rate is subject to change.
(7) Your understanding that a penalty of 3% per month will be charged on your loan account failure to redeem it fully when due.
(8) Your understanding that the loan is being released through your Bank Account No.6005096601
Please you must accept this offer by signing and returning the acceptance copy within 7 days or it will lapse.
Similarly, all the conditions must be fully carried out or this offer can be withdrawn.
Yours faithfully,
ALIBA IYALAMU SAVINGS & LOANS LTD”.
This letter of offer of Legal Mortgage was executed by the parties, wherein the appellant’s Hotel was mortgaged as Security for the loan, and the interest chargeable on the facility was therein stated as 21 % per annum, which was quite different from the 3% per month stated in the letter of offer.
It is not in doubt that the appellant did not repay the loan within the twelve months stipulated, but he did make some payment, which according to the appellant amounted to N826,476.00k.
The 1st respondent was not satisfied with the manner of payment, consequently instructed the 2nd respondent to advertise the appellant’s property for sale by auction as agreed in the “Deed of Legal Mortgage”. It was as a result of this that the appellant instituted this action. In his further amended statement of claim, he claimed as follows:-
(1) A declaration that the defendants are not entitled to auction the building of the plaintiff who does not owe the 1st defendant.
(2) A declaration that non-disclosure of the plaintiffs Statement of Account and non-demand of a correct outstanding debt does not entitle the defendants to auction the plaintiff’s property.
(3) A declaration that under the money lenders law, the 1st defendant is not entitled to charge excessive interest on loans.
(4) An injunction restraining the defendants, their agents, servants, or privies from auctioning, selling or doing anything whatsoever with the said plaintiffs landed property situate at No. 11 Adamu Road, off Taiwo Road, Ilorin.
(5) AN ORDER that the defendant should refund to the plaintiff the overpayment of N 179,805.00 paid by him to the 1st defendant.”
The 1st defendant in its amended statement of defence and counter claim, counter-claimed against the plaintiff as follows:”
WHEREOF the 1st defendant claims against the plaintiff the sum of N 1,466,802.00 at 3% per month from 31st May 2002 until the amount is totally liquidated.”
Trial started in earnest, evidence were called by both parties, the plaintiff gave evidence for himself and called one witness, the 1st defendant called one witness, and the 2nd defendant also testified for himself but called no other witness. Thereafter written addresses were ordered, filed and exchanged.
The main issues before the lower court are:-
(a) What was the rate of interest guiding this transaction? Was it “3% per month” as contained in the letter of offer, or the “21% per annum” as stated in the Deed of Legal Mortgage?
(b) How much was actually paid by the appellant to the 1st respondent, and what was the balance if any?
The trial Judge in a considered judgment delivered on 3/3/2006 found in respect of the 1st issue thus:- See pp.238.
“I agree with Mr. J. S. Bamigboye of learned counsel for the defendant that the contract is primarily on exhibit D1 (letter of offer), that the Mortgage in exhibit D2 is collateral to the main contract and merely gives a security or guaranty that the bank’s money will not be lost in any event. I also share his view that where the terms of the primary contract are written it determines the rights and liabilities of the parties including the interest charges.
The effect of different interest provision will only arise where the debtor makes a default and the bank falls on the mortgage; in that case it cannot realize more than the outstanding principal at 21% from the mortgage property. I am of the considered view that the interest rate known to the parties, and communicated and agreed between them in this loan is 3% per month, the interest rate offered and accepted and contained in exhibit D1, and not 21% per annum as contained in exhibit D2 the deed of legal mortgage. There is therefore no contradiction of any material effect between the different interest rates contained in exhibit D 1 and exhibit D2
…. I resolve Issue No.1 in the negative and I hold that on the evidence the interest rate agreed to by the parties in this case is 3% per month.”
On the 2nd issue above, the trial court held on p. 257 as follows:”
On the counter-claim therefore the court finds that the 1st defendant can only recover on the plaintiff’s account with her, No. 6005096601, the sum of N558,485.00 as at the 4th August, 1998 at the rate of 3% interest per month until the day this Judgment is delivered and thereafter at the rate of 10% per annum until the judgment amount is totally liquidated.”
The plaintiff was dissatisfied with this decision, as a result of which he had appealed to this court and filed a notice of appeal containing four grounds of appeal. The grounds without their particulars are reproduced as follows:-
GROUNDS OF APPEAL
“GROUND ONE
The learned trial Judge erred in law when he held that the binding loan interest agreement between the appellant and the 1st respondent was 3% per month and not 21% per annum.
GROUND TWO
The learned trial Judge erred in law when he held that the respondents had the legal right to auction the appellant’s building because the appellant was indebted to the 1st respondent.
GROUND THREE
The learned trial Judge erred in law when he held that the 1st respondent is entitled to counter-claim.
GROUND FOUR
The Judgment of the learned trial Judge is against the weight of the evidence,”
In accordance with the rules of our court Order 6 rr. 2 & 4 of the Court of Appeal Rules, the parties filed and exchanged their respective briefs of argument. The appellant in his brief of argument dated and filed on 18/9/2006 formulated four issues for our consideration of the appeal thus:-
(i) Which of the rate of interest is binding on the appellant’s loan? 21 % per annum as contained in the Mortgage Deed dated 4/10/1996 and signed by both parties or 3% per month as contained in the letter of offer dated 10/9/1996.
(ii) Whether, after repayment of N826,476.00 to the 1st respondent, the appellant was proved to be still indebted to the 1st respondent, as to entitled her to auction the appellant’s property.
(iii) Whether the 1st respondent proved any counter-claim against the appellant.
(iv) Whether judgment of the learned trial Judge is not against the weight of the evidence?’
The 1st respondent in its brief of argument dated 24/11/2006 and deemed properly filed and served on 13/12/06 also distilled four issues for the determination of this appeal thus:-
“1. Whether the loan transaction is governed by 3% interest rate per month or 21 % interest rate per annum.
- Whether the appellant has proved on the evidence that he has fully discharged his indebtedness to the 1st respondent.
- Whether the trial court was right in its award to the 1st respondent on her counter-claim.
- Whether the Judgment of the trial court is against the weight of evidence.”
The 2nd respondent, Mr. L. K. Ayinde the supposed auctioneer, did not file any brief before us. On the 24/1/07 when this appeal was heard, both counsel to the parties adopted their respective briefs on behalf of their clients without more.
TREATMENT OF ISSUES
The appellant, in his brief, submitted in respect of issue 1, that “the letter of offer exhibit D 1 is merely a conditional agreement, which is subject to the making of exhibit D2 (the Deed of Legal Mortgage). Acceptance of a conditional agreement does not make it a contract until the condition specified therein is fulfilled. He referred to clause 2 in exhibit D 1, and submitted that the making of exhibit D2 has rendered exhibit D 1 ineffective. He cited in support the case of Tsokwa Oil Marketing Co. v. Bank of The North (2002) 5 SCNJ 176/198 – 201, (2002) 11 NWLR (Pt.777) 163 Per ONU JSC.
He therefore submitted that the interest rate is 21% per annum as contained in exhibit D2 and not 3% per month. It was also the contention of the learned counsel to the appellant that parties to a contract can waive the conditions of an earlier agreement. Hence the execution of exhibit D2 after exhibit D 1 amounts to waiving the provisions of exhibit D 1. He cited the case of Panoutson v. Raymond Hadley Corporation of New York (1917) 2 K.B. 473.
On the 2nd issue, the learned appellant’s counsel submitted that the holding of the trial court that there is no iota of evidence to show that the plaintiff has repaid the loan was erroneous. He referred to exhibits A1 – A53, B1 – B70, C1 – C69 i.e. letters evidencing payment, which he calculated to be N826,476.00 and if this amount is deducted the balance would still be N751,573.50k. However, the learned counsel submitted that letters are the best means of proving payment. If a bank stamps and accepts a letter with the money entered therein, the bank is bound by such a letter. He cited the case of Saleh v. Bank of The North (2006) 6 NWLR (Pt.976) 316, (2006) 2 SCNJ 407 at 415 Per Musdapher JSC. See page 9 of the appellant’s brief of argument. Learned counsel therefore submitted that after repayment of N826,476.00 to the 1st respondent, the appellant has not been proved to still be indebted to the 1st respondent as at 4/3/1999.
On the 3rd issue, learned counsel submitted that the 1st respondent has not proved any counter-claim against the appellant, but the learned trial Judge, by himself, made a case of counter-claim for the 1st respondent. He referred to the finding of the trial Judge where he held that the respondents have not proved how the appellant became indebted to the tune of N 1,466,802.00k at 3% per month as at 31/5/02. This should have been the end of the counter-claim he submitted. Nonetheless the trial Judge, as if nothing had happened, proceeded to award the sum of N558,485.00 to the respondent with 3% interest per month until judgment. The learned counsel then submitted that no where was the sum of N558,485.00 pleaded by the respondent as the indebtedness accruing from the transaction, and neither was the sum of N558,485.00 proved by the respondent.
He cited case of:-
Narindex Ltd. v. N.I.M.B. (2001) 10 NWLR (Pt.721) 321, (2001) 4 SCNJ, 208; 211 – Holding 1 & 2 Per Kalgo, JSC.
On the (4) fourth issue, it was submitted that the lower court’s judgment is against the weight of evidence. It was wrong for the trial Judge to hold that the appellant did not explain their irregularity in making the payments into wrong account, when the burden is on the 1st respondent to prove any irregularity in the statement of account, which is in their custody and control, particularly when the appellant has tendered all the letters of the payments he made. He therefore urged this court to allow the appeal and set aside the decision of the lower court.
The 1st respondent submitted on the 1st issue that it is elementary that a contract comes into existence by absolute unity of minds by parties to the contract by way of offer and acceptance referred to as “consensus ad idem “. That exhibit D1 (letter of offer) having been accepted by the appellant becomes a binding contract.
Hence the agreed interest rate on the loan of N600,000.00 is 3% per month. He referred to exhibit Q where the appellant deposed to the fact that the accepted interest rate on the loan is 3% per month. He therefore submitted that it is not the duty of the court to make agreement for the parties, hence, parties are bound by the agreement they willingly entered into. He relied on the case of Olatunde v. Obafemi Awolowo University (1998) 5 NWLR (Pt.549) 178, (1998) 4 SCNJ 59 at 74 – 75 and Layande v. Panalpina World Transport Nig. Ltd. (1996) 6 NWLR (Pt.456) 544, (1996) 7 SCNJ 1, at 11. He then submitted that exhibit D1 is the primary agreement between the parties while exhibit D2 is a collateral agreement to the main contract which merely gives a security or guaranty that the bank’s money, will not be lost in any event. Hence the 21% per annum, interest rate provided in exhibit D2 cannot govern the primary loan created in exhibit D1.
On the 2nd issue, learned counsel, Joseph Bamigboye Esq., submitted that exhibit D1, specifically gave the outstanding indebtedness as N558,485.00 and exhibits D 13 and D 14 were letters of plea by the appellant and that exhibit D13 specifically admitted the indebtedness of N558,485.00. This is an admission by the appellant against his interest. He relied on the case of Ogunaike v. Ojayemi (1989) 3 SCNJ 69 at 70, (1987) 1 NWLR (Pt.53) 760. Therefore, it is the duty of the appellant to show that he has paid the amount he admitted, and this he failed to do. He dismissed the tellers tendered by the appellant as dubious in origin.
On the third issue, the 1st respondent’s counsel referred to the deposition in exhibit Q where the appellant deposed to the fact that he had paid N550,000.00 out of the N600,000.00k and contended that with this admission it is clear that the appellant knows the nature of his transaction with the 1st respondent. He submitted that the 1st respondent has duly proved the counter-claim. He argued that the 1st respondent honestly disclosed that the appellant had paid N655,000 out of the N1,466,802.00 which was outstanding against the appellant. Even though the trial court did not believe the contents of exhibits D7 and D8 as it did not cover the whole period of the transaction but the court relied on the admission of the sum of N588,485.00 outstanding in exhibits D12, D13 and D14 as at 4th August, 1998 by the appellant. The learned counsel submitted that the trial court has the jurisdiction to grant less the amount claimed in this case. He cited the case of Ugochukwu v. CCB. (Nig) Ltd. (1996) 6 NWLR (Pt.456) 524, (1996) 9 SCNJ 22/37; Ikenaeke Ezeakabekwe v. Julius Emenike (1998) 11 NWLR (Pt.575) 529, 9 SCNJ 58 at 72.
On the 4th issue, the learned counsel submitted that the trial court was right in granting or awarding the sum of N558, 486.00 to the 1st respondent in view of exhibits Q, D9 – D14, and submitted that in view of both oral and documentary evidence presented before the trial court, the judgment was supported with the weight of evidence, and urged the court to dismiss the appeal. As can be glaringly seen that the issues formulated by the parties in this appeal are in substance similar, only the wordings are slightly different, I therefore intend to treat all the issues together and at once. Under issue 1, the clause of exhibit D 1 generated so much controversy, it provided thus:-
“We are happy to inform you that a Mortgage Loan of N600, 000.00 (Six hundred thousand naira Only) repayable within 12 (twelve) months at 3% per month has been granted to you. Thus, the loan is approved subject to the under listed conditions.
1…
- Your understanding that the loan will be secured with Legal Mortgage executed by you
3 …
4… (Italics mine for emphasis).
The appellant has forcefully argued that exhibit D1 is a conditional agreement, and it can only be effective, upon the fulfillment of the conditions stated therein. In the case of Tsokwa Oil Co. v. Bank of the North (supra), the Supreme Court held that a conditional contract would not become operational and binding until the conditions stipulated therein is fulfilled. Onu JSC has this to say on p. 198 – 199:-
“It must be remembered that for a contract to come into being in law there must have been a definite offer by the offer or and a definite acceptance by the offeree. See Ajayi-Obe v. Executive Secretary (1975) 3 Sc. 1 at 6-7 … The phrase ‘subject to’ from the con it is used, thus makes it mandatory for the appellant to satisfy all the conditions in exhibit 75 before a legally binding contract can take place. See the case of Messrs Sulaiman and Bros v. Hans Mehr of Hamburg (1957) SCNLR 261 at 263 where De Lestang, FJ held inter alia:
‘Exhibit B expressly says that the sale is ‘subject to confirmation from Messrs Hans of Hamburg’, and until that confirmation there can be no concluded contract. In other words, what we have here is a conditional sale which, until the conditions fulfilled cannot become a biding contract.’
… From the evidence on record, it is clear that there is a condition precedent in the parties’ agreement. It is trite law that once a condition precedent is incorporated into an agreement, that condition precedent must be fulfilled before the effect can flow ….”It is clear that the 1st respondent is avoiding this point. He did not argue this point in his brief.
I think it is safe for me to state that it is not in doubt that in exhibit D1, some conditions were distinctively listed to be fulfilled before the transaction between the parties could become valid one of which is the execution of a deed of mortgage. Consequently, exhibit D2 was made in line with that stance. At this juncture it may not be out of place to attempt to know what a mortgage is in fact. In Strouds Judicial Dictionary 5th Ed at p.1632, mortgage was defined as follows:-
“A mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given – the security is redeemable on the payment or discharge of such debt or obligation – any provision to the contrary notwithstanding …”
As a necessity, a mortgage must state the debt being secured and the conditions for the facility, i.e. the rate of interest as it is in the case at hand. In the instant case, a Deed of Legal Mortgage was prepared, executed by the parties, and registered with the appropriate government authorities. With tremendous respect to both the trial Judge and the learned counsel to the respondent that Deed of Legal Mortgage is binding on the parties and its provisions override that of exhibit D 1 which is a mere letter of offer. I therefore have no hesitation in holding that 3% per month cannot be applicable in this case instead 21% interest per annum, that is applicable in this transaction. The 1st issue was resolved in favour of the appellant, that is to say the 21% interest rate per annum is binding on the parties.
Issue No.2 is answered negatively in favour of the appellant.
Issue No.3 is resolved against the 1st respondent.
The 4th issue is resolved against the respondents. The judgment of the lower court is clearly against the weight of the evidence. Assuming without necessarily conceding, that this court should accept 3% per month to be applicable interest rate as contained in exhibit D1, it would still be considered as excessive, usurious and therefore illegal since it contravened the applicable interest rate allowed by the Central Bank of Nigeria at the time the contract was entered into.
Since I have already held that exhibit D2 and not exhibit D1, is applicable it is clear that the appellant had already paid up the loan he collected with the relevant interest since. That being the case, the decision of the learned trial Judge on the counter-claim cannot possibly stand. It is perverse. The counter-claim lacks evidence to back it up, same is dismissed.
For the avoidance of any possible doubt, the appeal is pregnant with a lot of merit, same is therefore allowed. The judgment of the lower court delivered on 3/3/2006 by Hon. Justice Bamigbola is hereby set aside. The action of the respondents herein is condemnable and bad in law. That being the case the auction notice pasted on the mortgaged property has no legal basis and is hereby cancelled.
The 1st respondent herein shall refund to the plaintiff the sum of N 179,805.00 over paid to the 1st respondent.
Other Citations: (2007)LCN/2271(CA)
