Savannah Bank Of Nigeria Ltd. V. Alhaji R.A. Salami (1996)

Savannah Bank Of Nigeria Ltd. V. Alhaji R.A. Salami (1996)

LAWGLOBAL HUB Lead Judgment Report

MOHAMMED, J.S.C.

The plaintiff, who is respondent in this appeal, instituted an action before the High Court of Ijebu-Igbo, Ogun State, and claimed against the defendant N50,000.00 as special and general damages for wrongful dishonour of his cheques.

The facts which gave rise to this appeal are in the following narrative:

Alhaji R.A. Salami maintained a current account No. 074 with the appellant at Ijebu-Igbo branch. The respondent, on 5th November, 1984, issued out two separate cheques for N1,000.00 and N3,000.00 in favour of one Ladipo Sodeinde and Alhaji Ileaje respectively. Again, on 31st December, 1984, he issued out cheque No. 119/C006534 for the sum of N2,000.00 and another cheque No. 119/006535 for the sum of N1,000.00. Both cheques were issued in favour of his son, Mr. Isiaka Ayodele, with special instruction to his son that if he collected the a money he should deliver it to any of his friends coming from Abuja. The money was to be used for the joint venture the respondent was executing with his friend at Abuja. All the cheques were dishonoured by the appellant. The respondent demanded for an apology from the bank for dishonouring his cheques when he had enough funds in his account to meet the amount in the cheques. When the apology was not given he instituted this action.

Pleadings were ordered, duly filed and delivered. The respondent gave evidence showing that he had enough funds in his current account No. 074 to meet the amount requested to be drawn in all the dishonoured cheques. His second witness was one Alhaji Rahman Olalere Yinusa. Part of his evidence touches the main issue concerning this appeal. When PW2 was cross-examined part of his reply reads thus:

“I can read and write. I agree that the overdraft given to me was for a period of 3 months. The Manager of the defendant Bank stated the conditions under which the overdraft would be approved. I also signed a paper in October 1984 in connection with this overdraft.

Letter of Approval dated 22/10/84 is admitted and marked Exhibit ‘L’. Witness continues: One of the conditions is that the guarantor must be a customer of the defendant Bank. Another condition is that the guarantor’s account must be good: I first nominated one Popoola as a guarantor. Popoola is a wealthy man. He later refused to go through with the formal process because according to Poopola, he guaranteed someone who later died and as at that time, he (Popoola) was still paying the debt. Before he said this, he had signed the formal guarantor’s form.

Witness reads out Clauses 4 and 9 of Exhibit “L”. The Manager told me that guarantor’s account must not fall below N5,000.00 during the pendency of the loan to me. I explained this to the plaintiff.”

The case for the appellant was given through six witnesses. But the most important of them is the evidence of Mr. Oluyemi Kuforiji the Manager of the respondent bank at Ijebu-Igbo branch. Part of his evidence is as follows:

During October 1984, Alhaji Yinusa applied for credit facilities. I looked at the account ledger in his name. He told me the purpose he wanted the money i.e. to buy drugs. He asked for N5,000.00

I gave conditions under which I would approve the overdraft. I told him he should have a fixed amount of N5,000.00 in his account or someone with N5,0000.00 in his savings or current account. This amount of N5,000.00 would be used to support the overdraft. This is known as personal guarantee supported with cash. This means that the account of the guarantor must not fall below N5,000.00 at any time before the overdraft is fully repaid. In other words, the guarantor’s account is blocked to the extent of N5,000.00. I repeat, the account blocked must not be allowed to reduce beyond N5,000.00. On this arrangement, Alhaji Salami’s account would not be allowed to go below the sum of N5,000.00″

The respondent told the trial court that on 5th November, 1984, he instructed his son to pay N4,000.00 into his current account and after payment he was given a teller. The teller was admitted as Exhibit “G”. The respondent however, admitted during cross examination that the Manager told him that at the time his cheque for N1,000.00 was presented for cashing his account’s credit balance would fall below N5,000.00 The respondent however denied any knowledge that the condition of his standing as guarantor for Alhaji R.O. Yinusa was that his account must not fall below N5,000.00.

The learned trial Judge after considering all the evidence adduced found, in a well considered judgment, that the dishonour of the respondent’s cheques was not wrongful. He accordingly dismissed his claim. Alhaji R.A. Salami being dissatisfied with the decision of the trial High Court filed an appeal before the Court of Appeal. In a split decision Sulu-Gambari, J.CA. and Ogwuegbu, J.C.A. (as he then was) allowed the appeal and awarded N10,000.00 damages in favour of Alhaji Salami. Akanbi, J .C.A. (as he then was) dissented and dismissed the appeal.

The majority decision was based on the interpretation given to Exhibit “J”. Exhibit “J” was a letter which Alhaji Yinusa told the trial Court that the Manager told him to get the respondent to write to the bank and say that he (the respondent) agreed to stand as a guarantor to the loan which Alhaji Yinusa applied to be given. Alhaji Yinusa told the Court that he helped the respondent to write the letter. The letter is Exhibit “J” and it reads:

“This is to certify that I guarantee M/S Royco Chemists and Supermarket Limited, ljebu-Igbo, for the sum of N5,000.00 (Five Thousand Naira) and I also agree that my account be blocked for the same amount in the event the guarantee fails to pay the overdraft on schedule.”

Sulu-Gambari, J.CA. who wrote the lead judgment, with which Ogwuegbu, J.CA. concurred, interpreted Exhibit “J” in the following words:

“It means that in the event the guarantee (borrower) fails to pay the overdraft on schedule, then the guarantor’s account would be blocked for the same amount. The schedule of payment was to ensure for the period of three months. In the course of the specified period, the borrower complied with the terms of the repayment schedule. He paid in N1,000.00 and it was in evidence that he never defaulted. Having not defaulted therefore, the account of the guarantor does not become blockable.”

Dissatisfied with the majority decision of the Court of Appeal, the appellant came before this Court. Learned counsel for the appellant relied on a single issue in prosecuting this appeal. The issue reads:

“Whether the majority of the Court of Appeal (Sulu-Gambari & Ogwuegbu JJ.C.A.) were right in relying solely on Exhibit “J” to conclude that the defendant unlawfully dishonoured the plaintiffs cheques and without taking into consideration evidence of the nature of the transaction, the circumstances under which the exhibit was written and the intention of the parties to the transaction.”

Learned counsel for the respondent formulated similar issue and urged that the appeal be dismissed.

Two documents are vital for the determination of this appeal. They are Exhibit “J” (reproduced above) and Exhibit “S” which is the Bank’s continuing Guarantee Form. The appellant’s case as given in the pleadings is that the condition for the grant of the overdraft by the appellant to PW2 was that the guarantor’s account must not fall below N5,000.00 during the pendency of the overdraft. In the minority judgment of Akanbi, J.C.A. (as he then was) the learned justice disagreed with the interpretation given to Exhibit “J” by the majority judgments. The learned justice quite correctly, in my view, gave reasons for his disagreement with the majority in the following words:

“In the instant case to construe Exhibit “J” in the manner appellant’s counsel would want me to do, is to overlook the facts of the case, the issue before the court and the nature of the transaction. PW2, the plaintiff’s own witness testified to the effect that the condition precedent to the grant of the overdraft was that he should produce a guarantor who has a current account with the bank, that guarantor must maintain in the account a minimum sum of N5,000.00 of the overdraft and that sum has to be “blocked” for the duration of the overdraft. The witness said that he duly communicated these requirements to his guarantor and it was in those premises that Exhibit “J” was written not by the lending bank but by the PW2 himself before the guarantor duly signed it. The trial court adverted its mind to these and came to the conclusion that the intention manifested in Exhibit “J” was that as long as PW2 continued to enjoy and operate the overdraft facilities, the appellant has to have at least N5,000.00 in his current account to support the overdraft.”

It is quite plain, going through the evidence as a whole that Akanbi, J.C.A. was quite right in his interpretation: In his testimony, PW2 told the trial Court that when he approached the bank for the loan, the Manager told him that he must get somebody who had account with the bank arid that the guarantor’s account must not fall below N5,000.00 during the pendency of the loan given to him. PW2 said that he explained the condition to the respondent.

The learned counsel for the respondent argued that the majority decision had no difficulty in holding that the language of Exhibit “J” was so clear that no parole evidence is required to determine its true meaning. It is trite law that when a transaction has been reduced into writing by the agreement of the parties extrinsic evidence is inadmissible to contradict, vary, add to or subtract from the terms of the document. However, a stranger to the agreement could not be precluded from proving the truth of what had been agreed in order to establish the ignorance, carelessness or fraud of the parties.

In the case in hand, Exhibit ‘J’ is a letter written to the Bank Manager by the respondent certifying that he stood as guarantor to Messrs Royco Chemists and Supermarket, Ijebu-Igbo, for the overdraft of N5,000.00.The issue in dispute between the parties is the point where the respondent said in Exhibit ‘J’ that he agreed that his account be blocked for the same amount in the event PW2 failed to pay back the overdraft on schedule. The document was signed by both PW1 and PW 2. PW2, as a matter of fact explained in his evidence before the trial court that he helped the respondent who was illiterate to draft the letter, Exhibit ‘J’. It is evidently clear that the Manager of the Bank is a stranger to the terms of the agreement in Exhibit ‘J’. That being so, it falls within the exception to the general rule that extrinsic evidence could be adduced to explain what the Manager told PW2 to inform the respondent to write in a letter which the Manager termed as additional security to the guarantee. It is quite in order to permit the Manager to establish through evidence what he actually told PW2 orally as a condition for the guarantee of the loan.

The evidence of PW2 confirmed what the Manager told the Court was the condition of the guarantee. Those conditions were clearly spelt out in Exhibit “S”. I therefore entirely agree with the opinion of Akanbi, J .C.A. (as he then was) in the minority judgment that if the construction of the majority justices to Exhibit “J” is without reference to the circumstances that brought it to life, the document would be rendered useless and guaranteeing nothing. If the account of the respondent is not blocked to maintain a minimum of N5,000.00 during the pendency of the overdraft, what is the wisdom of the Bank in insisting in blocking the account in the first place. The respondent could clear all the funds in his current account since the bank could not dishonour his cheques during the pendency of the overdraft. Thus, if PW2 defaulted in paying back the overdraft by which time the account of the respondent was without any credit balance, blocking the account would be the most ridiculous and absurd exercise.

I therefore agree with the minority judgment that the learned trial Judge was right that at the time the cheques of the respondent was presented before the bank the amount in his current account would not leave the mandatory N5,000.00 which had been blocked pending the settlement of the draft. The learned trial Judge gave his reason why he believed that the cheques presented by the respondent were not dishonoured wrongfully in the following words:

“If, on 5/11/84, the opening balance in account No. 074 was N5,979.88 as I have held above, that the agreement between the Bank and the plaintiff is that at all times during the life of the overdraft in favour of PW2, the minimum to remain in that account should not be less than N5,000.00 can it be said that there was sufficient and available fund in this account when Exhibit “B” or “D” was presented on 5/11/84 There was no sufficient and available fund to accommodate either of them or worse still, both. This is so because I believe “that when these two cheques were presented, the payment in Exhibit ‘G’ had not been made.

Similarly, and for the same reason as above, when Exhibits ‘E’ and ‘F’ were presented on 31/12/84 (the defendant was not sure that Exhibit ‘E’ reached the Bank 0031/12/84) there was no sufficient and available fund in the account 074 to accommodate these cheques.”

There are several limitations to the banker’s duty to honour a cheque drawn by the customer. First, the banker is under an obligation to honour a cheque only if the customer’s account is either actually in credit, or, where it is in debit if the customer has been given an overdraft.

Thus, if the customer has made a deposit, but a cheque is presented before the banker has had reasonable time crediting the amount deposited into his account, he is not liable if he dishonours the cheque – See Marzetti v. Williams (1830) IB. & Ad. 41S, 424. The Manager in the case in hand explained that when the cheques were presented the N4,000.00 which the respondent directed to be paid into his account had not yet been credited to the account. It is therefore wrong to hold the bank liable for the dishonour of the respondent’s cheques if the banking practice is taken into consideration.

In the end, this appeal succeeds and it is allowed. The majority judgment of the Court of Appeal together with all the orders made therein are set aside. If any money had been paid by the respondent, it should be refunded. The decision of the trial High Court which the minority judgment of the Court of Appeal affirmed is hereby confirmed. I award N1,000.00 costs in favour of the appellant.

SC.44/1990