Awojugbagbe Light Industries Limited V. P. N. Chinukwe & Anor (1995)

LAWGLOBAL HUB Lead Judgment Report

BELLO, C.J.N.

This appeal raises very important question of law, particularly to bankers, on the validity of a loan and mortgage agreement when the morgagee performed his obligation under the agreement by lending to the mortgagor the sum of N215,000.00 and the mortgagor charged by way of first legal mortgage his property, No. 60-64 Ijebu Road, Ibadan, as security for the loan before the Governor of Oyo State gave his consent for the mortgage under Section 22 of the Land Use Act. The section provides:

“22(i) It shall not be lawful for the holder of a statutory right of occupancy granted by the Governor to alienate his right of occupancy or any part thereof by assignment, mortgage, transfer of possession, sublease or otherwise howsoever without the consent of the Governor first had and obtained:

Provided that the consent of the Governor:-

(a) shall not be required to the creation of a legal mortgage over a statutory right of occupancy in favour of a person in whose favour an equitable mortgage over the right of occupancy has already been created with the consent of the Governor;

(b) shall not be required to the reconveyance or release by a mortgagee to a holder or occupier of a statutory right of occupancy which that holder or occupier has mortgaged to that mortgagee with the consent of the Governor;

(c) to the renewal of a sub-lease shall not be presumed by reason only of his having consented to the grant of a sublease containing an option to renew the same.

(2) The Governor when giving his consent to an assignment, mortgage or sub-lease may require the holder of a statutory right of occupancy to submit an instrument executed in evidence of the assignment, mortgage or sub-lease and the holder shall when so required deliver the said instrument to the Governor in order that the consent given by the Governor under subsection (1) of this section may be signified by endorsement thereon.”

The fact of the case as found by the trial Judge are not in dispute. Between October 1979 and 1987, the 2nd respondent granted a loan of N215,000.00 to the appellant. The terms and condition of the loan were contained in a Loan and Mortgage Agreement, hereinafter referred to as the Mortgage Deed. It appeared from the documentary evidence that negotiation and granting of the loan were transacted long before the execution of the Mortgage Deed. Exhibit B, a letter from the 2nd respondent to the appellant, showed that the loan was approved on 11th October, 1979 and immediately thereafter the appellant started to use the facility.

By a letter dated the 20th of November, 1979, the 2nd respondent sent a draft of the Mortgage Deed to the appellant for his comments and approval. In his reply of 22nd November, 1979, the appellant approved the draft and returned it to the 2nd respondent. Again the 2nd respondent forwarded, by their letter of 13th February, 1980, the draft Mortgage Deed to the appellant for execution which he returned to the 2nd respondent duly executed under cover of his letter of 11th march, 1980. On 26th July, 1982, the 2nd respondent wrote to the appellant as follows:

“Loan and Mortgage Agreement

The above-mentioned document is yet to be registered because Oyo State Government has not given the necessary consent to the Mortgage transactions.

You will agree with us that this matter has dragged on for so long.

In view of our anxiety to complete the transactions as soon as possible, we now call on you to take all necessary steps to obtain and forward to us soonest consent of the State Government to the Mortgage transactions.”