African International Bank Ltd. V.lee & Tee Industries Ltd. & Anor (2003)

LawGlobal-Hub Lead Judgment Report

AMINA ADAMU AUGIE, J.C.A. 

This is an appeal against the judgment of Dorubo Narebor, J. in suit No. W/220/90, delivered on the 19th of September, 1996. The appellant was the defendant before the High Court in Warri and the respondents, the plaintiffs and they will hereinafter, be referred to by the same description.

The plaintiffs are customers of the defendant bank. On the 29th of October, 1987, the defendant granted the 1st plaintiff a loan of 2.9 Million Naira to purchase flour. The 2nd plaintiff was the surety and his property was used as security by a Deed of Mortgage registered as No. 23 at page 23 Vol. 739. The plaintiffs did not pay the proceeds of the sale of the flour into the 1st plaintiff’s account with the defendant bank as agreed upon, rather they diverted the proceeds into the account of J. E. Ziregbe (Nig.) Limited at the New Nigeria Bank.

The defendant then sued the plaintiffs and two other persons to recover a total sum of N3,130,182.77, being principal and interest. The suit was eventually settled out of court and the terms of settlement were made the judgment of the court. Pursuant to that judgment, the plaintiffs paid the sum of N2.7 Million Naira leaving a balance of N430,182.77, which the defendant thereafter converted into a loan, and secured with the 2nd plaintiff’s landed property.

The legal mortgage earlier registered in respect of the original loan was upstamped and registered as No. 11 page 11 Vol. 745. The 1st plaintiff has since then paid nothing out of the said balance. When the defendant advertised the mortgaged property for sale, the plaintiffs commenced this action in the High Court, Warri, claiming the reliefs set out in paragraph 15 of the statement of claim.

“15. WHEREFORE the plaintiffs claim:

i. A declaration that the mortgage Deed, dated 19th October, 1987, entered into between the plaintiffs and the defendant and registered as No. 11 at page 11 in Vol. 745 and No. 23 page 23 Vol. 739 of the lands (sic) in the office at Benin City is null and void and of no effect for non-compliance with the requirements of the Companies Decree, 1968, particularly, section 94 of the said Decree.

ii. A declaration that the defendant cannot sell the plaintiff’s landed property at Akusu Avenue, in Kodesoh Layout, Effurun, within the jurisdiction of Warri High Court, when the defendant has not proceeded against the principal debtor – Lee & Tee Limited.

iii. A declaration that the defendant cannot sell the 2nd plaintiff’s landed property at Akusu Avenue in Kodesoh Layout, Effurun, within the jurisdiction of Warri High Court, when the amount allegedly owing by the defendant has not been specified.

iv. A declaration that the defendant cannot sell the plaintiff’s landed property at Akusu Avenue in Kodesoh Layout, Effurun, when the relevant provisions of the Land Use Decree (Decree No. 61,1978) have not been complied with, particularly, sections 22, 23 and 26 of the said Decree.

v. Order of perpetual injunction restraining the defendant, her servants, agents, and privies from selling or tampering in anyway with the 2nd plaintiff’s properties at Akusu Avenue, Kodesoh Layout, Effurun, within the jurisdiction of the Warri High Court.

vi. N250,000.00 (Two Hundred and Fifty Thousand Naira) general damages suffered by the plaintiff’s, when on the 23rd July, 1990, the defendant unlawfully and wrongfully published in the Guardian Newspapers of that said date at page 13, offering for sale to the general public, the plaintiff’s landed properties at Akusu Avenue, in Kodesoh Layout, Effurun, within the jurisdiction of Warri High Court, a publication which was designed not only to embarrass the plaintiffs, but also to ruin their business. The defendant knew or ought to know that it has no right to sell.

vii. In the alternative, a declaration that the defendant cannot sell (if it has a right to sell) the plaintiffs properties at Akusu Avenue in Kodesoh Layout, Effurun, less than the sum of N723,000.00(Seven Hundred and Twenty-three Thousand Naira), being the value of the said properties as at 10-4-89, as per valuation report by Ochonogor & Co., which valuation was accepted by the High Court, Warri unchallenged as per the ruling of the said court dated 18th July, 1989, in suit No. W/222/87 Bank of Credit and Commerce International (Nigeria) Limited v. Lee & Tee Industries Limited and Others.

viii. An order compelling the defendant to return to the plaintiffs the title Deeds registered as No. 37 at page 37 in volume 267 in the lands office in Benin City.

At the end of the trial, the learned trial Judge entered judgment for the plaintiffs as to reliefs i, iii, v & viii, and dismissed the plaintiffs claims in respect of reliefs ii, iv, vi & vii.

Being dissatisfied with the decision of the court below, the defendant has come to this court. The grounds of appeal shorn of their particulars are –

1. The learned trial Judge erred in law when he held:

“That the Mortgage Deed dated 19th October, 1987, entered into between the plaintiffs and the defendant and registered as No. 11 at page 11 in Vol. 745 and No. 23 page 23 Vol. 739 of the lands Registry Office of Benin (or Asaba) is null and void for non-registration as required by applicable law”,

2. The learned trial Judge erred in law, when he held:

“I hold and declare that the defendant bank cannot sell the 2nd plaintiff’s landed property at Akusu Avenue in Kodesoh Layout, Effurun, when the amount allegedly owing including interest (if any) has not been specified nor demanded as required by law”.

3. The learned trial Judge erred in law, when he ordered:

“Defendant bank, its servants, agents, and privies be and are hereby restrained from selling or tampering in any way with the 2nd plaintiff’s properties at Akusu Avenue, Kodesoh Layout, Effurun”,

4. The learned trial Judge erred in law, when he held:

“Defendant bank be and is hereby, ordered to return to the plaintiffs the title Deeds registered as No. 37 at page 37 in Volume 267 in the Lands Office in Benin City (or Asaba) not later than 30 days from today”.

5. The judgment is against the weight of evidence.

The defendant as appellant, formulated five issues for determination –

(1) Was the learned trial Judge right in holding that, the original mortgage or charge in respect of the loan of N2.9 Million Naira granted by the bank to the respondent, did not continue in respect of the balance of N430,182.77?

(2) Was the learned trial Judge right in holding that, the mortgage dated 29/10/87 and registered as No. 11/11/747 and re-registered as No. 23/23/739 of the Lands Registry is null and void in the circumstances of the case?

(3) Was the learned trial Judge right that the bank as mortgagee is not entitled to exercise its right of sale over the mortgaged property?

(4) Was the learned trial Judge right to restrain the bank from exercising its undoubted right of sale in respect of the mortgaged property?

(5) Was the learned trial Judge right, in ordering the bank to return to the respondent the title deed of the

mortgaged property, when the mortgage debt has not been discharged?

On their own part, the plaintiffs as respondents formulated three Issues –

1) Was the learned trial Judge right in holding that the mortgage deed dated 29th October, 1987, entered into between the plaintiffs and the defendant and registered as No. 11 at page 11 in Vol. 745 and No. 23 page 23 Vol. 739 at the Lands Registry is null and void and of no effect for non-compliance with the requirements of the Companies Decree of 1968 particularly section 94 of the said Decree?

2) Was the trial Judge right in holding that the defendant cannot sell the plaintiff’s landed property at Akusu Avenue in Kodesoh Layout, Effurun, which was used as security for the loan of N430,182.77 when:

(a) The amount owing has not been specified; and

(b) There was no demand for payment as required by law?

3) Was the trial Judge right in ordering the defendant to return to the plaintiffs the title deed of the landed

property at Akusu Avenue in Kodesoh Layout, Effurun, since the said mortgage involving the said security has been declared to be null and void and of no effect?

The issues for determination formulated by the appellant appear to me to have a more direct bearing on the grounds of appeal. I shall therefore, adopt them in dealing with the appeal. On the 1st issue, learned Counsel for the appellant, Mr. T. J. O. Okpoko, SAN, pointed out in his brief of argument, that the contentions of the parties are set out in the judgment of the learned trial Judge, wherein for the plaintiff, the Judge said –

“Plaintiff’s case is that the said registered original charge did not cover the sum outstanding (i.e. N430,182.77k) after the settlement of the relevant suit (No. W/222/87) by both parties out of court and which culminated in the consent judgment (exhibit ‘B1’)”.

For the defendant, the learned trial Judge put it thus –

“The defendant’s contention is that the original legal charge extended to the outstanding sum (N430,182.77k) which was a continuation of the original transaction and not a fresh loan or transaction. There was therefore no need or requirement for fresh or further registration of the legal charge in respect of the outstanding sum”.

Mr. Okpoko, SAN submitted that the trial Judge was in error for the following –

(a) That the issue before him was whether or not the mortgage – exhibit A continued to cover the sum of

N430,182.77 that remained owed under the consent judgment. And a learned trial Judge adverting his mind to that issue would have found that the parties in exhibit B – the terms of settlement had resolved that point.

(b) That the terms of settlement was the subject of a subsequent ruling in the same Suit No. W/222/87 by a court of competent jurisdiction. The ruling of Eruaga, J. (exhibit C) was delivered in a suit between the same parties in respect of the same subject matter. And on the principles of issue estoppel, the respondents can not contend that the mortgage registered as 37/37/267 did not cover the balance sum of N430, 182.77 and it is not open for the learned trial Judge to decide that issue contrary to the decision of Eruaga, J. which he admitted in evidence as exhibit C.

(c) That once exhibits B, B1, & C had resolved that the mortgage registered as 37/37/267 of the Lands Registry in the office in Benin City, continued in respect of the balance of N430,182.77, the question as to whether the N430,182.77 is a new grant or an old grant, becomes absolutely irrelevant, since by exhibits B, B1, & C – the mortgage has been adjudged to cover the said loan.

It is also his contention that although, the learned trial Judge quoted clause 3(a) & (b) of exhibit B in his judgment, he appeared to have conveniently overlooked sub-clause (a) which specified the security for the balance sum of N430,182.77 as “Legal Mortgage of the property of 2nd defendant registered as 37/37/267 of the Lands Registry in the office at Benin City to be continued and upstamped”.

He further submitted that the ruling of Eruaga, J. in suit No. W/222/87, which is a final judgment as there is no appeal against it, was admitted in evidence as exhibit C, wherein Eruaga, J. held as follows “The second part of the terms of settlement made up of paragraphs 3 & 4 dealt with the manner of payment of the balance of N430,182.77k of the judgment debt. By paragraph 3, the judgment debt which has been reduced to N430,182.77k by payment of N2,700.00k was by agreement of the parties converted into a loan granted to the 1st defendant upon securities specified by the plaintiff judgment creditor/applicant and to be provided by the 2nd and 4th defendants. The securities were (a) Legal Mortgage on the properties of the 2nd defendant registered as 37/37/267 at the Lands Registry in Benin City, which was to be continued and upstamped; and (b) a personal guarantee by the 4th defendant and its Director”.

The argument of the learned Senior Counsel is that on the face of clause 3 in exhibit B, the learned trial Judge could not in law have possibly entertained any doubt as to whether the outstanding sum of N430,182.77 is covered by the continued mortgage of the 2nd defendant’s property. On his own part, Chief B. B. E. Idigbe, learned Counsel for the respondent, submitted that the provisions of paragraph 3(a) & (b) and paragraph 4 of exhibit B (terms of settlement), and exhibit B1 (consent judgment) terminated the original legal charge on the 2nd plaintiffs landed property used as security for the loan of N2.9 Million. A view, he said, is supported by exhibit C, the ruling of Eruaga, J. wherein he held –

“Arising from the above, it is my view that the said amount of N430,182.77 plus whatever interest on it having been converted into loan by the judgment and secured by a Deed of Legal “Mortgage” as agreed by the parties, the said amount is no longer part of any judgment debt under the consent judgment in this case which can be enforced either by levying execution or by obtaining leave of court to levy for execution. It is also my view that there is nothing left under the consent judgment for execution… And the balance of N430,182.77 has already been converted into a loan secured by a Deed of Legal Mortgage”.

I agree with Mr. Okpoko, SAN that the issue before the learned trial Judge was whether or not the Legal Mortgage continued to cover the sum of N430,182.77 that remained owed under the consent judgment. I also agree with him that the learned trial Judge appeared to have overlooked sub-clause (a) to clause 3 of exhibit B in resolving this issue.

Now, clause 3 in exhibit B (terms of settlement), reads as follows –

“3. The balance of the judgment debt of N430,182.77 (Four hundred and thirty thousand, one hundred and eighty-two, seventy-seven kobo) and bank interests shall be granted to the 1st defendant by way of loan upon the following securities being provided:

(a) Legal mortgage of the properties of 2nd defendant registered as 37/37/267 of the Lands Registry in the office at Benin City to be continued and ups tamped.

(b) Personal guarantee by the 4th defendant and its Director”.

In his judgment, the learned trial Judge held as follows –

“The operative words in paragraph 3 of exhibit B, (terms of settlement) are “shall be granted to the 1st defendant by way of loan”. If the sum outstanding (N430,182.77K) was a continuation of the original sum loaned, paragraph 3 of exhibit “B” ought to have said so expressly and clearly. Indeed, there would have been no need to offer or grant the outstanding sum as a “loan”.

It ought properly to have been referred to and identified as the sum outstanding from the original loan of

N2,900,000.00″. Indeed DW1 stated in his evidence in chief that the advance was converted into a loan, and that the security was in respect of the original loan.

DW1 also testified under cross-examination that after upstamping, there was no registration with the Registrar of Companies. In the peculiar circumstances and facts of the instant case, —– I find that the sum still outstanding (i.e. N430,182.77) was a fresh transaction or loan, the original one having been terminated by the consent judgment in suit No. W/222/87″.

Sub-clause (a) to clause 3 in exhibit B speaks of the Legal Mortgage of the properties of 2nd defendant “to be continued and upstamped”. The question now is, if as the learned trial Judge held, the original loan was terminated by the consent judgment, what was to continue in sub-clause (a)? The word “continue” means – “to draw out or prolong; to extend; to go on with; to be a prolongation of; etc”, (see The Chambers Dictionary).

By this definition, the question on the other side of the coin is, if the sum still outstanding is a fresh transaction or loan, what is to continue in sub-clause (a)? It is crystal-clear from a careful reading of clause 3 and its sub-clause (a) that it is the Legal Mortgage of the properties of 2nd defendant registered as 37/37/267 of the Lands Registry in the office at Benin City that was to be continued and upstamped. The learned trial Judge referred to the evidence of DW1 to buttress his finding, however what DW1 actually said is;

“The balance was converted into a loan by the defendant to the 1st plaintiff. There was security by way of Deed of Legal Mortgage of a property in respect of the initial loan of N2.9 Million. — There is security by way of Deed of Legal Mortgage in respect of the second converted loan of N430,182.77k. The security was up-stamped by the defendant”.

The evidence of DW1 does not in any way counter clause 3 of exhibit B. Clause 3 of exhibit B clearly states that the balance of the judgment debt “shall be granted to the 1st defendant by way of loan upon the following securities being provided”. It is evident from the said clause that the balance sum was converted to a loan but on the condition that the defendants provide the securities specified in sub-clause (a) & (b). Sub-clause (a) specified that the Legal Mortgage of the properties of the 2nd defendant registered as 37/37/267 of the Lands Registry in the office at Benin City, is to be continued and upstamped.

Learned Counsel for the respondents referred to the ruling of Eruaga, J. in exhibit C to confirm his submission that the consent judgment terminated the original legal charge on the 2nd defendant’s property used as security for the loan of N2.9 Million. However, a close reading of the part of the ruling he reproduced in his brief shows that Eruaga, J. in exhibit C concluded therein –

“It is also my view that there is nothing left under the consent judgment for execution …. And the balance of N430,182.77 has already been converted into a loan secured by a Deed of Legal Mortgage “. (Italics mine).

Learned Senior Counsel also referred to the same ruling by Eruaga, J. to buttress his submission that it is not open to the learned trial Judge to decide the issue in question contrary to the decision of Eruaga, J. which he admitted in evidence as exhibit C. In exhibit C, Eruaga, J. clearly spelt out that the ‘judgment debt which has been reduced to N430,182.77k by payment of N2.7 Million was by agreement of the parties converted into a loan granted to the 1st defendant upon securities specified by the Judgment creditor/applicant and to be provided by the 2nd and 4th defendants. The securities were (a) Legal Mortgage on the properties of the 2nd defendant registered as 37/37/267 at the Lands Registry in Benin City, which was to be continued and upstamped; and (b) a personal guarantee by the 4th defendant and its Director”.

The issue for determination here is whether or not the Legal Mortgage continued to cover the sum of N430,182.77 that remained owed under the consent judgment. It is obvious from the foregoing that, the answer easily gleaned from the documentary evidence before the trial court is in the affirmative. I therefore agree with Mr. Okpoko, SAN that on the face of clause 3(a) & (b) of exhibit B, there is no doubt that the outstanding sum of N430,182.77 is covered by the continued mortgage of 2nd defendant’s property. Issue No. 1 is therefore resolved in favour of the appellant.

Issue No. 2 formulated by the appellant is more or less the same as issue No.1 for the respondent and it reads as follows –

“Was the learned trial Judge right in holding that the mortgage dated 29/10/87 and registered as No. 11/11/747 and re-registered as No. 23/23/739 of the Lands Registry is null and void in the circumstances of the case?”

Mr. Okpoko, SAN submitted on this issue that it is clear from the mortgage – exhibit A, that the property in question is the personal property of the 2nd defendant, which is not a company within section 94 of the Companies Act. That the mortgage of the property of an individual does not require registration under section 94(1) of the Companies Act, and when this point was made, the learned trial Judge said-

“But with respect, learned SAN seems to have lost sight of the words “or undertaking” by the company in section 94(1). 1st plaintiff, a company limited under the applicable Act is the principal debtor, who made an undertaking to repay the original sum loaned to him. 2nd plaintiff guaranteed repayment of the loan. Thus, the undertaking made by 1st plaintiff or the charge is registrable. In respect of the fresh loan of N430,182.77k, there was no fresh registration of the charge or undertaking as required by the applicable law. I so find and hold.”

He further submitted that it is obvious from the statutory provision that the company’s undertaking to repay its loan is not what is required to be registered under section 94, as the section requires a charge on the company’s undertaking to be registered. In this con, he argued that the company’s undertaking means its business consisting of fixed assets, and it certainly does not mean the company’s obligation to repay a loan, debt or salaries, It is his submission that the learned trial Judge misdirected himself in Law in equating company’s ‘undertaking’ under section 94 of the Companies Act with the company’s undertaking to pay a debt or loan. Furthermore, that it is an erroneous conclusion to suggest that the company’s undertaking to pay a debt is registrable, He contended that there was no basis whatsoever for holding that the mortgage dated 29/10/87 and registered as 37/37/267 is void for non-registration after the learned trial Judge has held that there was no fresh charge to register. He also submitted that section 94 of the Companies Act, 1968, only renders a registrable charge void against a liquidator or creditor of the company and did not render such charge void as against the company. That the voiding effect of such non-registration of a registrable charge is in the express words of section 94 without prejudice to any right or obligation for repayment of the money thereby secured.

Chief B. B. E. Idigbe, on his own part submitted that even though the landed property in question is the personal property of the 2nd plaintiff, once it is used to secure the debt of the company, it is deemed to be company property, and by section 95(1) of the Companies Act, registration of any charge is to be effected on the application of any person interested in the charge. He therefore, argued that the appellant is the person having interest in the charge and since it failed in his duty to do so, the charge is void and of no effect. He was of the view that the learned trial Judge was right that the charge was void, as merely stamping the charge does not amount to compliance with section 94(1) Companies Law, 1968.

As regards this issue, the learned trial Judge held that the mortgage, exhibit A, is null and void because it was not registered pursuant to section 94 of the Companies Act, 1968. In his words-

The point is that whether the charge was registrable by 1st plaintiff company or defendant bank, the material point is that the charge relating to the fresh loan was not registered as required by the applicable law. The statutory effect of non-registration under section 94 sub-section (1) is that the security or undertaking is void against any creditors of the company. In the instant case, there was no fresh charge in respect of the fresh loan; there was no such charge, and there was therefore none to register. The original charge on the original loan was not re-registered. Upstamping’ as I understand it, is no substitute for registration as envisaged by section 94. Accordingly, consistent with section 94 sub-section (1) of the Companies Act, 1968, the charge (if any) being null and void for non-registration, the sum or loan in question (i.e. N430,182.77k) becomes payable immediately”.

Section 94(1) of the Companies Act, 1968 provides as follows

“Subject to the provisions of this part of this Decree, every charge created after the fixed date by a company, being a charge to which this section applies, shall so far as any security on the company’s property or undertaking is conferred thereby be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge together with the instrument, if any, by which the charge is created or evidenced, have been or are delivered to or received by the Registrar for registration in the manner required by this decree or by any enactment hereby repealed within thirty days after the date of its creation, but without prejudice to any contract or obligation for repayment of the money thereby secured, and when a charge becomes void under this section the money secured thereby shall immediately become payable”.

The provisions in this part of the Companies Act deal with the registration of charges, and by section 93(a) thereof, “charge” includes mortgage.

A charge is the appropriation of real or personal property for the discharge of a debt or other obligation, without giving the creditor either a general or special property in, or possession of, the subject of the security. The creditor has a right of realization by judicial process in case of non-payment of the debt. See Halliday v. Holgate (1868) LR 3 Exch. 299.

It has been held that it is only charges to secure money that are registrable, so a charge which, if granted by an individual, would require registration under the Bills of Sale Act, 1882, will not necessarily be registrable if granted by a company. See Stoneleigh Finance Ltd. v. Phillips (1965) 2 QB 537. And only a charge created by a company requires registration not one, which arises by operation of law such as an unpaid vendor’s lien. See London and Cheshire Insurance Co. Ltd. v. Laplagrene Property Co. Ltd. (1971) Ch. 499.

The effect of non-compliance with the provisions of section 94 is quite grave. Non-registration at the Companies Registry of charges created by the company, as opposed to existing charges acquired by the company, destroys the validity of the charge. Unless the prescribed particulars are delivered to the Registrar within 30 days of the creation of the charge, it will, so far as any security on the company’s assets is conferred thereby, “be void against the liquidator and any creditor of the company”. But this is “without prejudice to any contract or obligation for repayment of the money thereby secured, and when a charge becomes void under this section the money secured thereby shall immediately become payable”.

As Mr. Okpoko, SAN rightly submitted, it is the security only, which is void against any creditor and the liquidator of the company for non-registration, the money itself becomes immediately repayable. The security is void against secured creditors of the company, even though they have notice of the un-registered security.

See Re Monolithic Building Co., Tacon v. Monolithic Building Co. (1915) 1 Ch. 643. But the security is valid against the company. The company itself can not have a cause of action arising out of non-registration. See Independent Automatic Sales Ltd. v. Knowles and Foster (1962) 3 All ER 27.

The import of section 94(1) of the Companies Act, is that the particulars of any charge created by a company must be delivered to or received by Registrar of Companies within thirty days after its creation, or else any security on the company’s property or undertaking shall be void against the liquidator and any creditor of the company. In essence, the focal point in section 94(1) of the Companies Act, 1968, is the company. It is a charge created by a company that must be registered. If the charge is not registered, it is the security on the company’s property or the security on the company’s undertaking that shall be void. And the said security is void only against the liquidator and any creditor of the company.

It is an accepted fact in this case that, the property mortgaged is the property of the 2nd respondent, who is an individual, not a company. It is submitted for the respondents that since the property was used to secure the debt of the company, it is deemed to be company property. This line of argument lacks merit. The case of Salomon v. Salomon (1897) AC 22 established the elementary principle that a limited liability company has an entity separate from its proprietor. The law is that once incorporation takes place, the company becomes a separate legal entity from those who incorporated it, and there is no personal liability for any debt incurred by the Company. See U.B.N v. Orharhuge (2000) 2 NWLR (Pt.645) 495; Idi v. Yau (2001) 10 NWLR (Pt. 722) 640.Learned Counsel for the respondents also contended that the learned trial Judge was right when he held that – ‘The original charge on the original loan was not re-registered. Upstamping’ as I understand it, is no substitute for registration as envisaged by section 94″.

But that is not the correct pronouncement to make in the peculiar circumstances of this case. If the learned trial Judge had addressed his mind to the pertinent issues and evidence before the court, it would have been obvious to him that the provisions of section 94 of the Companies Act, 1968, did not come into play at all. The original mortgage was a continuing security for the balance sum that was converted to a loan, and the only thing needed was simply to upstamp it. In the case of B.O.N Ltd. v. Akintoye (1999) 12 NWLR (Pt. 631) 392, with similar facts as in this one, except that it relates to Governor’s consent, this court held per Amaizu, J.C.A. –

“Where an original mortgage is a continuing security for raising a second mortgage, what is needed is to upstamp it. There is no need to obtain a fresh consent of the Governor for the second mortgage. In the instant case, where the wordings of the mortgage deeds relating to the security are clear and unambiguous and where the original deed was a continuing security, there was no need to obtain a fresh consent of the Governor for the second mortgage”. (Italics mine)

It goes without saying that the provisions of section 94(1) of the Companies Act, 1968 do not apply in this case. But I will say it. Section 94 of the Companies Act, 1968, has no application in this case. The learned trial Judge was therefore in error in holding that non-compliance with section 94(1) of the Companies Act, 1968, rendered the charge null and void.

The other issues for determination are – (3) Was the learned trial Judge right that the bank as mortgagee is not entitled to exercise its right of sale over the mortgaged property? And (4) Was the learned trial Judge right to restrain the bank from exercising its undoubted right of sale in respect of the mortgaged property?

It is submitted for the appellant that the learned trial Judge had no basis for his conclusion – “the defendant bank cannot sell 2nd defendant’s mortgaged property in question”. The reasons for this submission are as follows –

a) The learned trial Judge found that the loan of N430,182.77 remained unpaid after the period stipulated for repayment has elapsed. The finding by itself shows that that sum is now due and payable to the mortgagee.

b) A mortgagee’s right of sale cannot be affected by dispute as to the amount due. To stop the mortgagee’s power of sale, the mortgagor must have paid the mortgaged sum in full. Cited in support are the cases of Okonkwo v. C.C.S. (Nig.) Plc. (1997) 6 NWLR (Pt. 507) 48 at 71 and N. H. Development Society v. Yaya Mumuni (1977) 11 NSSC 66.

c) Having admitted the appellant’s right to sell the mortgaged property in exhibit C, it is not open to either the respondents or the learned trial Judge to reopen the issue as to appellant’s right to sell the mortgaged property.

d) By the express terms of the mortgage – exhibit A, the parties ousted the restrictive provisions of section 125 of the Property and Conveyancing Law. Non-payment of a mortgage debt is enough justification for the sale of a mortgaged property.

e) There was no dispute between the parties as to rate of interest chargeable. Interest was therefore, not in issue and the pronouncement of the learned trial Judge on interest goes to no issue.

f) The learned trial Judge did not indicate the basis for the order of injunction he made. He simply granted the order of injunction as a matter of course.

The respondents contended that the finding of the learned trial Judge that there was no notice by defendant bank “demanding” repayment of the “fresh loan”, is supported by evidence on record; that the defendant had applied to court as stated in exhibit C to specify the amount due to enable it levy execution, which shows conclusively that the defendant did not know the amount the plaintiffs were owing. It is also submitted that the amount owing must be stated in the demand notice. The case of Thomas Pinnock v. G. B. Ollivant & Co. Ltd. 2 WACA 164, was cited to support the submission that since the amount due and owing has not been specified, the defendant bank has no specific amount to be stated in the demand notice; therefore, the learned trial Judge was right in holding that the defendant did not serve on the plaintiffs any demand notice.

Sections 123 & 125 of the Property and Conveyancing Law, reads –

“123.(1) A mortgagee, where the mortgage money is made by deed, shall, by virtue of this Law, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed, but not further (namely)

(i) A power, when the mortgage money has become due, to sell, or to concur with any other person in selling, the mortgaged property, or any part thereof, either subject to prior charges or not, and either together or in lots, by public auction or by private contract, subject to such conditions respecting title, or evidence of title or other matter, as the mortgagee thinks fit, with power to vary any contract for sale, and to buy in at an auction, or to rescind any contract for sale, and to resell, without being answerable for any loss occasioned thereby”.

125. A mortgagee shall not exercise the power of sale conferred by this law unless and until –

(i) Notice requiring payment of the mortgage money has been served on the mortgagor or one or more mortgagors and default has been made in payment of the mortgage money, or of part thereof, for three months after such service, or

(ii) Some interest under the mortgage is in arrears and unpaid for two months after becoming due”, or

(iii) There has been breach of some provision contained in the mortgage deed or in this Law, … and on the part of the mortgagor, or of some person concurring in making the mortgage, to be observed or performed, other than and besides a covenant for payment of the mortgage money or interest thereon”.

The main attributes of a legal mortgage are:-

(a) a covenant to pay the principal debt and interest on a given date;

(b) a covenant to pay interest in the event of default in payment of the principal on the day named;

(c) the demise or sub-demise of, or the charge by way of legal mortgage on the mortgaged property;

(d) the proviso for cesser; and

(e) Such variations of the statutory provisions with regard to mortgages, as the arrangement between the parties requires. See Ogiorio v. Igbinovia (1998) 13 NWLR (pt. 582) 426.

Fixing a date for repayment in a mortgage transaction does not generally indicate the parties intention that the actual payment is to be made on the named date, but only that the mortgagee may call for payment on or after that date, if so minded, but not before. See Ogioro v. Igbinovia (supra), & B.O.N Ltd. v.Akintoye (supra), where it was also held that if the mortgage debt is not paid at any time fixed for payment, the mortgagee is entitled to exercise his power of sale, the debt having been deemed to have become due and payable on that day.

In line with the provisions of section 125(1) of the Property and conveyancing Law, a mortgagee shall not exercise his power of sale unless and until a notice requiring payment of the mortgage money has been served on the mortgagor or one of several mortgagors and default has been made in payment of the mortgaged money or of part thereof for three months after such service. See B.O.N. Ltd. v. Aliyu (1999) 7 NWLR (Pt. 612) 622, where this court held that “the requirement of the law is that notice of intention to sell a mortgage property must be sent to the mortgagor as the words “shall not” are mandatory and not advisory. Consequently, any sale of any mortgage without the requisite notice is invalid ab initio and cannot convey any title to a subsequent purchaser”.

What constitutes a notice of demand of repayment depends on the facts of each case. See B.O.N. Ltd. v. Muri (1998) 2 NWLR (Pt.536) 153. As the Supreme Court observed in Eka-Eteh v. N.H.D.S. Ltd. (1973) 1 All NLR 646 at 658, in determining whether the mortgagee’s conduct in any given case comes up to the required standards or not, regard must be had to the circumstances of the particular case. Every case has to be determined on its own facts and in the light of its own circumstances.

In this case on appeal, the appellant granted the respondents a loan of N2.9 Million on the 29th of October, 1987. The appellant later sued the respondents and two other persons to recover a total sum of N3,130,182.77k being principal and interest. The 2nd respondent explained the circumstance, thus –

“I paid back N2.7 Million to the defendant. Defendant went to court before the expiration of the loan. We went to court and the matter was settled out of court before the said N2.7 Million was paid by us. Terms of settlement were filed and consent judgment was delivered”.

The 2nd respondent further testified as follows on page 33 of the record-

“Defendant filed a motion in respect of the fresh loan. The motion was argued after we filed a counter-affidavit.

The motion was dismissed, and the prayers refused. I have an original copy of the ruling in question (exhibit C). I brought this action because the defendant made a publication in the Guardian Newspaper. I do not remember the said publication. The defendant offered to sell my property at Akusu Avenue to the public.

Defendant has no right to offer my property for sale”.

Exhibit B is the terms of settlement and it is dated 28th January, 1988. Exhibit B1 is the enrolled consent judgment and it is dated 29th January, 1988, exactly three months after the original loan was granted. The balance of N430,182.77k left unpaid was granted to the respondent as a fresh loan, and up till the time of the said publication in the Guardian Newspaper dated 23rd July, 1990, the “plaintiffs had failed, refused and neglected to pay defendant the sum of N430,182.77 and the interest thereon after several demands had been made by the defendant to the plaintiff’. (See paragraph 10 of the statement of defence on page 42 of the records).

In his Judgment, the learned trial Judge held as follows on page 82 –

“In the instant case, as far as the fresh loan (N430,182.77) is concerned the periods stipulated for repayment have lapsed. I find however that, there is no notice by defendant bank “demanding” repayment of the fresh loan. I also find that apart from the non-payment there is no evidence before me of any contractual or statutory breach on part of the plaintiffs”.

The argument of learned Senior Counsel is that the learned trial Judge overlooked the evidence on record before him. He pointed out that in paragraph 10 of the statement of claim at page 28 of the records, the respondents as plaintiffs pleaded the earlier ruling of the High Court which was admitted in evidence as exhibit C. It is his submission that the plaintiffs admitted in exhibit C, the right of the appellant to sell the mortgaged property, and having done so, they can not now reopen the issue as to the appellant’s right to sell the mortgaged property.

It is also his contention that by the express terms of the mortgage, exhibit A, the parties ousted the restrictive provisions of section 125 of the Property and Conveyancing Law. He further argued that a finding that the debt of N430,182.77 stated in exhibit B is still outstanding as at the date of the judgment years after it became due is obviously a breach of the contractual terms set out in the terms of settlement within section 123 of the Property and Conveyancing Law. He was of the view that non-payment of the sum due was obviously a breach which the learned trial Judge readily conceded but appeared ready to ignore. He therefore, submitted that non-payment of a mortgage debt is enough justification for the sale of a mortgaged property.

To start with, it is settled law that a mortgagee’s power of sale or foreclosure cannot be affected merely because the amount due under the mortgage agreement is in dispute. See Omidiji v. F.M.B. (2001) 13 NWLR (Pt. 731) 646 and B.O.N. Ltd. v. Akintoye (supra).

The law is that a mortgagee will not be restrained nor can his power of foreclosure be affected by the exercise of his power of sale merely because the amount due is in dispute or the mortgagor has commenced a redemption action in court. See Intercity Bank Plc. v. F & F F (Nig.) Ltd. (2001) 17 NWLR (Pt.742) 347, wherein Omage, J.C.A. stated as follows on page 365

“In my respectful opinion, the complaint of the mortgagor notwithstanding, about the actual sum owing on the mortgage, the court will not interfere or restrain the mortgagee from exercising his right of sale of the mortgaged property. To intervene is to seek to vary the terms of the mortgage agreement and the court will not rewrite the mortgage agreement for the parties. The right of sale of the mortgagee is the only certain shield of recovery of the mortgagee’s investment … and he should be allowed to sell, ceteris paribus (all things being equal)”.In the instant case on appeal, the fact that the respondents are disputing the exact amount owed is not sufficient to restrain the appellant from exercising his power of sale under the Deed of Legal Mortgage. The learned trial Judge was clearly in error in arriving at that conclusion.

The parties also have raised the issue of notice, that is, whether the respondents were served with a notice requiring payment of the mortgage money. Particulars of error (b) & (c) to the 2nd ground of appeal reads-

(b) By the terms of exhibit A and the law applicable thereto a formal demand as a condition precedent to the exercise of the right of sale by the mortgagee is excluded in this transaction.

(c) By exhibit C, the plaintiffs and the court are stopped from re-opening the issue of formal demand and or specification of amount due.

In exhibit C, Eruaga, J. stated as follows on page 91 of the record –

“Learned Counsel (Chief B. B. E. Idigbe) then submitted that by the said judgment, the applicant is a mortgagee in respect of the property of the judgment debtor secured by a Mortgage Deed registered as – – and that in the event of there being a default, the only remedy open to the judgment creditor/applicant is to foreclose and sell the mortgaged property and not to ask for a blanket power to levy execution at random. Learned Counsel then referred to the respondent’s counter-affidavit and a copy of the Mortgage Deed attached thereto as exhibit ‘A’ and paragraph G at page 3 of the Deed which gives the applicant right to foreclose in the event of any default on the part of the respondents. Learned Counsel also referred to paragraph E(a) at page 5 of the Deed which gives the applicant statutory power of sale exercisable without regard to the provisions of section 125 of the Property and Conveyancing Law, 1976, – – – “(Italics mine).

From the above ruling, exhibit C, it would appear that the respondents acknowledged the following facts –

a) That the appellant is a mortgagee in respect of the property of the 2nd respondent herein, secured by a Mortgage Deed registered as No. 37/37/267 in the Lands Registry in Benin City,;

b) That paragraph G at page 3 of the Mortgage Deed (exhibit A) gave the appellant the right to foreclose in the event of any default on the part of the respondents; and

c) That paragraph E (a) at page 5 of the Mortgage Deed (exhibit A) gave the appellant statutory power of sale exercisable without regard to the provisions of section 125 of the Property and Conveyancing Law, 1976.

As I stated earlier, one of the attributes of a legal mortgage, is “such variations of the statutory provisions with regard to mortgages, as the arrangement between the parties requires”. In his evidence in chief, the 2nd respondent said – “There was a mortgage agreement in respect of the loan”. During cross-examination, he replied at page 34 of the record – “I can read and write at the time I signed exhibit A. I also signed exhibit B (terms of settlement)”. Further on at page 35, he replied –

“I signed exhibit A. I said so in my previous evidence. I signed exhibit A (Deed of Legal Mortgage) as a surety for 1st plaintiff.”

It is an established principle of law, that the contents of a document are binding on the party who being of full capacity appends his signature to it. He cannot thereafter resile from it or choose an alternative course. See B.O.N. (Ltd.) v. Aliyu (supra). The behavior of the respondents in this matter is quite reprehensible, I must say.

They borrowed money from the appellant bank to purchase flour in 1987, and the agreement was that the proceeds would be paid into their account with the appellant bank. The respondents denied in paragraph 1 of their reply to statement of defence that they did not attempt to defraud the appellant. But the fact still remains that the respondents paid the proceeds from the delivery of the flour financed by the appellant into another account with the New Nigeria Bank.

It was after the appellant instituted an action to recover the loan and the interest thereon from the respondents and two others, including the New Nigeria Bank, that the respondents paid up N2.7 million leaving a balance of N430,182.77. This balance was then converted into another loan in favour of the appellant. The Mortgage Deed used to secure the original loan continued in respect of the second loan. The 2nd respondent signed the Mortgage Deed (exhibit A), the terms of which excluded a formal demand as a condition precedent to the exercise of the right of sale by the appellant. When the appellant filed a motion for leave to levy execution etc., the respondents did not hesitate to argue that the application should not be granted using the said terms of the Mortgage Deed to support their position. Now that the appellant seeks to exercise its light of sale, the same respondents are contending that the appellant can not do so, and they are relying on the same terms of the same mortgage deed to buttress their submissions.

Exhibit A, is the Deed of Legal Mortgage dated the 29th of October, 1987. Paragraph G at page 3 of exhibit B reads as follows -“THE BORROWER AND SURETY HEREBY COVENANTS WITH THE BANK JOINTLY AND SEVERALLY AS FOLLOWS:

g. That if default shall be made in payment of any such sum or sums of money due under this security or any part thereof the Bank may at any time thereafter enter into and upon the mortgaged property or any part thereof and shall thenceforth quietly possess and enjoy the same and receive the rents and profits thereof without any lawful eviction, interruption, disturbances, claim or demand by the borrower and or surety or any other person or persons whomsoever AND THAT IN SUCH EVENT the surety will effectually free and discharge the mortgaged property or indemnify the bank against all estates incumbrances claim and demands whatsoever.

E. AND IT IS HEREBY FURTHER EXPRESSLY AGREED AND DECLARED AS FOLLOWS:

a. The statutory power of sale shall be exercisable at any time after the monies owing shall have become payable without regard to section 125 of the Property and Conveyancing Law, Cap. 129, Laws of Bendel State of Nigeria, 1976, which section shall not apply to this security or any sale made by virtue hereof and in any such sale the bank may sell any fixtures or plant or machinery comprised therein either together with any part of the mortgaged property to which they are affixed or separately and detached there from”. (Italics mine)

Generally, where parties to an agreement have set out the terms thereof in a written document, extrinsic evidence is not admissible to add to, vary from, or contradict the terms of the written instrument. See B.O.N. Ltd. v. Akintoye (supra). In the instant case on appeal, the wordings of the Mortgage Deed are clear and unambiguous. It is therefore, not necessary to add or subtract from them. The respondents can not approbate and reprobate at the same time, and they will not be allowed to. The contents of exhibit A are binding on the respondents and they can not therefore resile from it.

The learned trial Judge found as a fact that “as far as the fresh loan of N430,182.77 is concerned, the periods stipulated for repayment have lapsed”. However, he proceeded to also find that “apart from the non-payment there is no evidence before me of any contractual or statutory breach on part of the plaintiffs”. He then granted an order restraining the appellant from selling or tampering in any way with the mortgaged property. The learned trial Judge appeared not to appreciate the issues before him.

A mortgagee will only be restrained from exercising his power of sale, if the mortgagor pays the amount claimed in court. In other words, in order to stop the mortgagee’s power of sale of a mortgaged property, the amount owed must be paid in full. See Intercity Bank Plc. v. F. & F. F. (Nig.) Ltd. (supra), B.O.N. (Ltd.) v. Aliyu (supra).

The power of sale inherent in a mortgage is given to the mortgagee for his own benefit, to enable him the better to realise his debt. The learned trial Judge was clearly in error in granting the order of injunction. This issue is also resolved in favour of the appellant.

As to whether the learned trial Judge was right in ordering the bank to return to the respondent, the title deed of the mortgaged property when the mortgage debt has not been discharged? The answer is quite simple. The appellant is entitled to keep the registered title Deeds as long as the mortgage had not been discharged. The learned trial Judge was wrong to order a return of the title Deeds to the respondent. See U.B.N. v. Orharhuge (supra). The appeal therefore succeeds on this issue.

It is in view of the foregoing that this appeal succeeds and it is allowed. The Judgment of Dorubo Narebor, J. delivered on the 19th September, is hereby set aside. In place of that judgment, I hereby, substitute an order dismissing the entire claims of the plaintiffs/respondents. There shall be five thousand Naira (N5,000.00) costs to the appellant.

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Other Citations: (2003)LCN/1346(CA)