AKINSELURE & ANOR v. AYENI & ORS (2018)

In The Court of Appeal of Nigeria

On Friday, the 12th day of January, 2018

CA/L/505/2010

Before Their Lordships

MOJEED ADEKUNLE OWOADE Justice of The Court of Appeal of Nigeria
CHIDI NWAOMA UWA Justice of The Court of Appeal of Nigeria
HAMMA AKAWU BARKA Justice of The Court of Appeal of Nigeria


Between

1. CHIEF (DR.) J. E. B. AKINSELURE
2. HERITAGE BANK LIMITED- Appellants

AND

1. MRS. OLAJUMOKE AYENI
2. MERIT MOTORS LIMITED
3. TREASURY AND FINANCE COMPANY LIMITED
4. LARRY AYENI –Respondents

…………………….A…………………….

MOJEED ADEKUNLE OWOADE, J.C.A.(Delivering the Leading Judgment):This is an Appeal against the Judgment of Hon. Justice O. A. Adefope-Okojie delivered on 13/10/2009 in the Ikeja Judicial Division of the High Court of Lagos State.Suit No. ID/672/1994 which led to this Appeal was initially instituted by (1) Dipo Ayeni (now substituted on his demise with his wife, Mrs. Olajumoke Ayeni (z) Merit Motors Limited and Treasury and Finance Company Limited as Plaintiffs. The Writ of Summons and Statement of Claim was then against a sole Defendant – OWENA BANK (Nigeria) PLC which metamorphosed into Heritage Bank Limited.
The present 1st Appellant, Chief (Dr.) J. E. B. Akinselure was joined as Co-Defendant and because he filed a Counter-Claim against the Claimants became a Defendant Counter-Claimant in the Court below.
The present 4th Respondent, Mr. Larry Ayeni was substituted for his father, Pa Isaiah Ayeni who was joined in the Court below as 4th Defendant.
The 1st Respondent to this Appeal was/is for all intents and purposes the Executive chairman of the 2nd and 3rd Respondents.
The 1st to 3rd Respondents are customers of the 2nd Appellant (i.e. 1st Defendant) and they all operated separate Bank Accounts with the 2nd Appellant.
The 1st Respondent used his property at No. 17B, Sule Abuka Crescent, Opebi, Ikeja as collateral for credit facilities offered to the 2nd Respondent Company. The 1st Respondent further provided the property known as No. 9, Adepele Street, Ikeja belonging to his father, the 4th Respondent (i.e. 4th Defendant to Counter-Claim) as further collateral for the said loan with the 4th Respondent standing as surety/guarantor to the Deed of Mortgage executed between the 2nd Appellant and the 2nd Respondent in respect of the said loan.
The 3rd Respondent subsequently authorized the 2nd Appellant to alternate funds between the Accounts of 2nd and 3rd Respondents whenever the need arises. That is whenever there is a cheque drawn on the Account of the 3rd Respondent and there is insufficient fund to honour the cheque, the cheque can be honoured on the Account of 2nd Respondent and vice versa.
The 2nd Respondent paid fully the said loan facility given to it by the 2nd Appellant while the 3rd Respondent was unable to liquidate its debt to the 2nd Appellant.
The 2nd Appellant then transferred the debt balance in the Account of the 3rd Respondent to the Account of the 2nd Respondent and subsequently sold both 1st Respondent’s property (i.e. 17B, Sule Abuka Crescent, Opebi, Ikeja) and the 4th Respondent’s property (i.e. No. 9, Adepele street, Ikeja) to the 1st Appellant in the exercise of its power of sale under the mortgage.
The Respondents thereafter filed this action at the High Court of Lagos State claiming against the Appellants as contained in their 3rd Further Amended writ of summons and statement of claim.
The Court dismissed the Respondents’ case before same could be proved on the 29th November 2001 without the liberty to relist same on grounds of lack of diligent prosecution.
The Court also refused the application brought by the Respondents seeking leave to re-open their case and call further witnesses in proof thereof and seeking to join the 4th Respondent as co-Plaintiff.

…………………….B…………………….

The Court however, joined the 4th Respondent not as co-Plaintiff but as Defendant to counter-claim having dismissed the Plaintiffs/Claimants (Now Respondents) case.
Initially, the Appellants (Defendants) filed separate Statement of Defence to the Respondents’ claim that was dismissed for lack of prosecution. However, the 2nd Defendant (now 1st Appellant) in addition by his further Amended Statement of Defence of 01/06/2000 Counter-Claimed for the following:
1. “A declaration that the 2nd Defendant is the person entitled to the certificate of occupancy and statutory Right of Occupancy in respect of the piece or parcel of land situate, lying and being at No. 17B, Sule Abuka Crescent, Opebi, Ikeja, Lagos and the property known as No.9, Adepele Street, Ikeja , Lagos.
2. The sum of N500.00 (Five Hundred Naira only) as general damages for the plaintiffs forceful peaceful possession of the said subject matter of this action.
3. An order of perpetual injunction restraining the plaintiff by themselves, servants, agents and/or privies, workmen or any person otherwise however called from entering into, remaining thereon, or doing anything ADVERSE to the title, claim or interest of the 2nd Defendant in respect of the property known as No. 17B, Sule Abuka Crescent, Opebi, Ikeja, Lagos.
4. Possession of the property known as 
No. 9, Adepele Street, Ikeja, Lagos.
In response to the above, the Respondents filed a Defence to Counter-Claim dated 20/10/2000.
The Appellant led evidence in proof of his case while the Respondents later by leave of Court cross-examined the Appellants, witnesses and relied on the evidence given by the 4th Respondent prior to his been joined as 4th Defendant to counter-claim.
The parties filed written Addresses after close of evidence.
The learned trial Judge recognized from the Addresses of the parties that there are four Issues for determination In the Suit namely:
1. Whether the evidence of PW1 given before the dismissal of the Claimant’s case constitutes rebuttal of the 2nd Defendant’s Counter-Claim.
2. Whether there is a valid sale of the property known as No. 9, Adepele Street, Ikeja, Lagos to the 2nd Defendant which is the subject matter of this Counter-Claim.
3. Whether the Claimant’s claim is still valid, having been dismissed with no liberty to relist.
4. Whether the 2nd Defendant is entitled to the reliefs/prayers sought by him in his counter-claim in view of the facts and circumstances of this case. 

The learned trial Judge gave a positive answer to Issue one and a negative answer to Issue Three.
In answering Issue Two in the negative, the learned trial Judge reviewed the evidence of the parties especially that of the 4th Defendant to counter-claim (4th Respondent) Mr. Sunday Isaiah Ayeni, the 2nd Defendant counter-claimant, John Eriakim Babatunde Akinselure (1st Appellant) and the 1st Defendant’s (2nd Appellant) witness – DW2 – Owoeye Ibitade.
He referred copiously to Exhibits -D1, D2, D6and D7 and D17.
Then, at page 546 of the Records, the learned trial Judge noted:
“…I find the contents of Exhibit D6 and D7 quite clear. They in my opinion authorize the 1st Defendant to transfer the accounts as they have done.

…………………….C…………………….

The question however arises whether the property of the Defendant to counter-claim, Pa Isaiah Ayeni, used as collateral to secure the loan to the 2nd claimant, could be sold to the 2nd Defendant counter-claimant on the default of the 3rd Claimant.
I find it clear from the documents tendered by the 1st Defendant bank that the facilities extended to the 2nd claimant had been repaid. This is patent from Exhibit D7 tendered by the 1st Defendant and which I have reproduced above, where it is stated:
“I would also like to draw your attention to a point, that Merit Motors Ltd. has fully liquidated/adjusted their account with Owena Bank Plc. In fact the account has been in credit since January 1993” 

The learned trial Judge continued at pages 547 – 548 of the Records thus:
The question is thus whether the property of the Defendant to counter-claim (pa Sunday Isaiah Ayeni) used as collateral to secure the loan by the 1st Defendant to the 2nd claimant can be sold to the 2d Defendant/counter-claimant for a default, not of the party in respect of which the property was mortgaged, but in respect of a different loan to a different company.
It is my opinion that this cannot be so. While I do not contest the fact that the 1st Defendant had the authority to transfer the debit balance of the 3rd Claimant to the 2nd Claimant’s account, no document has been produced by the 1st Defendant to Counter-Claim authorizing the use of his property as collateral to any party but the 2nd Claimant.
Indeed, by Exhibit D7 reproduced above and relied upon by the Defendants, it was 
the 1st Claimant’s property at 17 Sule Abuka Crescent, Ikeja that the 1st Defendant was instructed to use as collateral for facilities extended to the 3rd Claimant. There was no mention made in that letter or in any other document authorizing the use of the Defendant to Counterclaim’s property at Adepele Street as collateral for any loan to 3rd Claimant.
The fact is clear from Exhibit D8, which letter was tendered in evidence by the DW2, the 1st Defendant’s witness. This letter from 1st Defendant addressed to 2nd Claimant, dated 27/09/1991 stated that it derived its authority to debit the account of the 2nd claimant with the debt of the 3rd claimant and seek appropriate action to realize its exposure, from Exhibits D6 and D7.
Indeed, Exhibit D9 tendered by the 1st Defendant, is categorical that it was the 1st claimant property that was used as collateral and never that of the 4th Defendant to Counter-claim.

Furthermore, after reproducing Exhibits D9 and D10, the learned trial Judge held at pages 551 – 552 of the Records that:
It is thus clear from the foregoing correspondence that the property used to secure the facilities to the 3rd Claimant is that belonging to the 1st Claimant at No. 17A, (sic) Sule Abuka Crescent, Opebi, Lagos and not No. 9, Adepele Street, Ikeja.
At what stage, and why No. 9, Adepele Street, Ikeja was used and subsequently sold, is not clear to me.
It is however clear that no notification was given by the 1st Defendant to either of the Claimants or the 4th Defendant to Counter-Claim of the use of the property at 9, Adepele Street, Ikeja as collateral for the loan to the 3rd Claimant. The Counterclaimant has failed to prove that any notification was given to any of Defendants to counterclaim that the property at No. 9, Adepele Street, Ikeja was going to be sold in exercise of the 1st Defendant’s right of sale.
Thus, even if I am wrong in holding that the evidence given by PW1 is admissible, the Counter-Claimant has failed, I hold, to prove that the property of the 4th Defendant to counterclaim was given as collateral for the facilities extended to the 3rd Claimant/Defendant to counterclaim.

The sale by the 1st Defendant to the 2nd Defendant of No. 9, Adepele Street, Ikeja belonging to the Defendant to counterclaim, Mr. Isaiah Sunday Ayeni, I can only hold was wrongful.

…………………….D…………………….

He referred to the case of GBADAMOSI vs. KABO TRAVELS LIMITED (2000) 8 NWLR (PART 669) 243 at 274 and held that the first condition in that case, that the mortgagor did mortgage the property in dispute to the mortgagee has not been shown to have been done in this case.
On the 4th Issue for determination, the learned trial Judge held partly in favour of the 1st Appellant – 2nd Defendant at page 555 of the Records as follows:
“Having held that the claimant’s did authorize the 1st Defendant to alternate funds and honour cheques from the accounts of the 2nd and 3rd Defendants and to use the 1st Claimant’s property at I7B, Sule Abuka Crescent, Opebi as collateral for the 3rd Claimant; and the Defendants having proved that the 3rd claimant was in default, which fact was admitted by the 1st claimant in his letter to the 1st Defendant (Exhibit D17) the sale of the 1st Claimant’s property at 17B Sure Abuka Crescent, Opebi, Lagos to the 2nd Defendant counterclaimant is upheld.
The sale of 9 Adepele Street, Ikeja is however unlawful, null and void.”

He concluded that the claim of the 2nd Defendant/Counter-Claimant’ (1st Appellant) succeeds in part.
Dissatisfied with the portion of the Judgment that declared the sale of the property of the 4th Respondent – Defendant to counter- claim at No. 9, Adepele Street, Ikeja as unlawful, null and void, the Appellants by a Notice of Appeal dated 20/11/2009 but filed on 22/04/2010 initially lodged an Appeal containing five Grounds of Appeal in this Court.
However, by their Amended Notice of Appeal of 03/02/2017, the Appellants filed only three (3) Grounds of Appeal.
The relevant Briefs of Argument for the Appeal are as follows:
I. 1st Appellant’s Brief of Argument dated and filed on 13/03/2017. It is settled by Milton Paul OHWOVORIOLE. (SAN).
II. Respondents’ Brief of Argument dated 28/04/2017 but filed on 04/05/2017. It is settled by Wole Olufon, Esq.
III. 1st Appellant’s Reply Brief dated and filed on 27/10/2017. It is settled by O. O. EJEWENTOFOR Esq.

Learned Senior Counsel for the Appellant nominated two Issues for determination. They are:
1. Whether having regard to the evidence before the Court, there was a valid sale of the property known as No. 9, Adepele Street, Ikeja.
2. Whether from the foregoing, the 
1st Appellant is not entitled to a declaration of title at No. 9, Adepele Street, Ikeja.
Learned Counsel for the Respondents on the other hand, formulated a sole Issue for the determination of the Appeal to wit:
“Whether having regard to the evidence before the Court, there was a valid sale of the property known as No. 9, Adepele Street, Ikeja to the 1st Appellant which would entitle the 1st Appellant to a declaration of title to same”. 
It seems to me that the sole Issue as couched by the Respondents covers the two Issues formulated by the Appellants. I accordingly adopt the formulation by the Respondent as the Sole Issue for determination in this Appeal.
On the Sole Issue for determination, learned Senior Counsel for the Appellant submitted that the Respondents (as Claimants) had mortgaged the property known as No. 17B, Sule Abuka Crescent, Ikeja and No. 9, Adepele Street, Ikeja, Lagos as security for credit facilities extended to the 2nd Respondent.
The Respondents, said Counsel, in their 3rd Amended Statement of claim dated 14th of June, 1990

…………………….E…………………….

admitted as much that the properties known as No. 17B, sure Abuka Crescent, Ikeja and No. 9, Adepele street, Ikeja, Lagos were used as collateral to serve facilities offered to the 2nd Respondent.
He submitted that mortgage is a conveyance of a legal or equitable interest in property subject to a right of redemption. That where the right of redemption has passed, the power of sale arises enabling the mortgagee to sell the mortgage property free from equity of redemption.
Counsel submitted that at trial, the 4th Respondent (as 4th Defendant to counter-claim) gave evidence that he gave his title documents to the 1st Respondent who in turn executed a deed between the 2nd Respondent and the 2nd Appellant.
The 4th Respondent only executed as surety to the mortgage agreement. The 4th Respondent said counsel, further denied knowledge of any mortgage transaction, only claiming that the 1st Respondent took a loan from the 2nd Appellant and he was asked to sign a document.
That, at trial, Exhibit D2 (a third party deed of legal mortgage) was tendered in proof of the mortgage executed by the parties in favour of the 2nd Respondent.
That the said Deed referred to the 2nd Respondent, Merit Motors as the ‘Borrower’, the 4th Respondent as the ‘surety’ and the 2nd Appellant was referred to as the ‘Bank’.
He submitted that the learned trial Judge had noted in her Judgment:
“…..A lot has been said about the right of the 1st Defendant to transfer the 3rd Claimant’s debit balance to the account of the 2nd Claimant. The 1st Defendant witnesses tendered Exhibit D6 and D7 in proof of the instruction to them by the Claimant – I find the content of Exhibit D6 and D7 quite clear. They, in my opinion, authorized the 1st Defendant to transfer the account as they have done…”
Learned Senior Counsel agreed with the learned trial Judge that the contents of Exhibits D6 and D7 expressly gave the 2nd Appellant authority to alternate funds between the 2nd and 3rd Respondents’ Account.
He added that the learned trial Judge however held that:
“The question is thus whether the property of the Defendant to Counter-Claim (Pa Sunday Isaiah Ayeni) used as collateral to secure the loan by the 1st Defendant to the 2nd Claimant can be sold by the 2nd Defendant/Counter-Claimant for a default, not of the party in respect of which the property was mortgage, but in respect of a different loan to a different company. It is my opinion that this cannot be so. While I do not contest the fact that the 1st Defendant had the authority to transfer account, no document has been produced by the 1st Defendant or the Counter-claimant to show that the 4th Defendant to counterclaim authorized the use of his property as collateral to any party but the 2nd Claimant…indeed by Exhibit D7 reproduced above and relied upon by the Defendant, it was the 1st Claimant’s property at 17B Sule Abuka crescent, Ikeja that the 1st Defendant was instructed to use as collateral for facilities extended to the 3rd claimant. There was no mention made in that or in any other document authorizing the use of the 4th Defendant to counterclaim’s property at Adepele Street, as collateral for any loan to the 3rd claimant. The fact is clear from Exhibit D8 which letter was tendered in evidence by the DW2 the 1st Defendant’s witness. This letter from 1st Defendant addressed to 2nd claimant dated 27/09/1993, stated that it derived its authority to debit the account of the 2nd claimant with the debt of the 3rd claimant and seek appropriate action to realize its exposure from Exhibit D6 and D7. Indeed,

…………………….F…………………….

Exhibit D7 tendered by the 1st Defendant is categorical that it was the 1st claimant’s property that was used as collateral and never that of the 4th Defendant to counterclaim…..” PAGES 547- 548 OF THE RECORDS. 
On the above, learned senior counsel submitted that the learned trial Judge was wrong. That the learned trial Judge misdirected himself on the facts in coming to this decision.
He submitted that the learned trial Judge failed to appreciate the point that by virtue of the instructions in Exhibit D6, liability for the 3rd Respondent debt had been assumed by the 2nd Respondent and vice-versa. By transferring the outstanding debt balance from the 3rd Respondent to the 2nd Respondent’s Account, the 2nd Respondent effectively became the debtor and was responsible for the debt of the 3rd Respondent.
Appellants’ Counsel argued that the implications thereafter of the instructions from the 2nd Respondent are clear to see. That the 2nd Respondent has provided collateral in the form of No. 17B, Sule Abuka Crescent, Ikeja and No. 9, Adepele Street, Ikeja as security for facilities extended to the Respondent.
The 2nd Respondent having failed to liquidate the outstanding liability, the 2nd Appellant’s right of sale arose which it duly exercised.
He referred to the case of: MOHAMMED vs. ABDULKADIR (2008) 4 NWLR (PT. 1076) PAGE 111 where it was held that a trial Court has a duty to consider all documents placed before it.
He submitted that the 2nd Respondent’s letter to the 2nd Appellant clearly intended that the latter have authority to transfer the Account when necessary. Consequently, the 2nd Respondent had assumed the debt of the 3rd Respondent.
Counsel submitted that the 1st Appellant (as Defendant/Counter Claimant) in their Final Address dated 30th April 2008 continuously emphasized that the mortgage’s right of sale had risen. However, that, the learned trial Judge held on the Issue that:
“It is clear from the forgoing correspondence that the property used to secure the facilities to the 3rd claimant is that belonging to the 1st claimant at No. 17B Sule Abuka Crescent, Opebi, Lagos and not: No. 9 Adepele Street, Ikeja.
At what stage, and why No. 9 Adepele street, Ikeja was used and subsequently sold is not clear to me. It is however clear that the no notification was given 
by the 1st Defendant to either of the claimant’s or the 4th Defendant to counterclaim of the use of the property at 9 Adepele Street as collateral for loan to the 3rd claimant: The counterclaim has also failed to prove that any notification was given to any of the Defendants to counterclaim that the property at No. 9 Adepele Street was going to be sold in exercise of the 1st Defendant’s right of sale.
Thus even if I am wrong in holding that the evidence given by PW1 is admissible, the counterclaim has failed, I hold to prove that the property of the 4th Defendant to counterclaim was given as collateral for the facilities extended to the 3rd counterclaim/Defendant to counterclaim. The sale by the 1st Defendant to the 2nd Defendant of No. 9 Adepele street belonging to the Defendant to counterclaim Mr. Isaiah Sunday Ayeni, I can only hold was wrongful… “PAGES 557 – 552 OF THE RECORDS.


Appellant’s Counsel contended that the learned trial Judge was wrong in his evaluation of the evidence. That the learned trial Judge in holding that the sale of No. 9, Adepele Street, Ikeja, Lagos was wrongful, had also failed to consider the right of the 1st Appellant as

…………………….G…………………….

a Purchaser for value without notice. He submitted relying on the case of AKANO VS. FIRST BANK OF NIGERIA PLC (2004) 8 NWLR (PT. 875) 334 that an innocent purchaser for value is not bound to enquire whether the right to sell the mortgage property has arisen.
Counsel submitted that the 1st Appellant at trial had testified that he had been buying property from the 1st Defendant. He further testified that he does not know if there was notice of the auction. That the 1st Appellant had also testified under cross-examination that it was not his duty but that of the 1st Defendant (now 2nd Respondent) to notify the claimant’s (now Respondent) of the sale.
Learned senior counsel for the Appellant referred to the case of GBADAMOSI VS. KABO TRAVELS LIMITED (2000) 8 NWLR (PART 668) PAGE 247 where Salami, JCA held that:
“… The sale of mortgaged property is not vitiated merely on the ground that no case has arisen to authorize the sale or that due notice was not given or that the power was otherwise improperly or irregularly exercised if it is shown to the satisfaction of the Court that:
i. The mortgagor did mortgage the property in dispute to the 
mortgagee.
ii. The loan or any instalment thereof has become payable.
iii. The power of sale under the mortgage agreement has arisen; and
iv. The power of the sale was in fact exercised and that the title in the property passed to the purchaser.

The above requirement, said Counsel have been completely fulfilled. He submitted that the sale was nonetheless valid notwithstanding the complaint of the Respondent that he was not given requisite notice.
Still on the sole issue learned Senior Counsel for the Appellants referred to the cases of:
MOHAMMED VS ABDULKADIR (2008) 4 NWLR (Pt. 1076) PAGE 111 at 161;
AFRICAN CONTINENTAL BANK LIMITED VS. IHEKWOABA (2003) 16 NWLR (PT. 846) 249;
IBIYEYE VS. FOJULE (2006) 3 NWLR (PT. 968) at 640; and MAJEKODUNMI VS. CO-OP BANK (1997) NWLR (PT. 524) 198

and submitted that where a sale of property was not tainted with any fraud or collusion, and the buyer bought in good faith and was not aware of any irregular circumstances surrounding the sale or anything likely to affect the property of the sale, the sale must be valid and subsisting.
He submitted that the 1st Appellant is a bona fide purchaser without notice and has shown that he falls within the ambit of the above decisions.
That the learned trial Judge was wrong to have held that the sale of No. 9, Adepele Street, Ikeja was wrongful. And, urged us to set aside the Judgment of the learned trial Judge which invalidated the sale of the property known as No. 9, Adepele Street, Ikeja, Lagos and make a declaration in favour of the 1st Appellant.
Learned Counsel for the Respondents on the other hand, submitted that the learned trial Judge was right when he held that the “sale of No. 9, Adepele Street, Ikeja is however unlawful, null and void”.
He submitted that it is crystal clear from the testimonies of the witnesses and the documents tendered as Exhibits that the property at No. 9, Adepele Street, Ikeja belonging to the 4th Respondent was used as collateral to secure only the credit facility given to the 2nd Respondent by the 2nd Appellant and not used at all as security for the loan to the 3rd Respondent. That in fact, from the evidence before the Court there was actually no legal mortgage existing between the 3rd Respondent and the 2nd Appellant. He said, what

…………………….H…………………….

existed was an arrangement whereby the 2nd Appellant was authorized to alternate funds in the Accounts of the 2nd and 3rd Respondents. This arrangement said, counsel is in Exhibit D6.
Learned counsel for the Respondents contended that though the 2nd Appellant was authorized to alternate funds between the Accounts of the 2nd and 3rd Respondents (as stated in Exhibit D6) and to use the 1st Respondent’s property at No. 17B, Sule Abuka Crescent, Opebi, Ikeja as security for the said arrangement as stated in Exhibit D7, there was no such authority or arrangement to use the property of the 4th Respondent at No. 9, Adepele Street, Ikeja as security for the facility extended to the 3rd Respondent by the 2nd Appellant.
He submitted that:
It is obvious from the Tripartite Deed of Legal Mortgage executed (i.e. exhibit D2) that the 4th Respondent stood surety only for the loan of the 2nd Respondent. The 3rd Respondent was not a party to that legal mortgage. The 4th Respondent had also testified that he did not know nor have any dealings at all with the 3rd Respondent let alone consent to the use of his property as security for the 3rd Respondent’s loan. This piece of evidence was uncontroverted. It can also be deduced from exhibit D9 (final demand notice) by the 2nd Appellant’s witness that they are not in any doubt as to the fact that only the 1st Respondent’s property (i.e. 17 Sule Abuka Crescent, Opebi) was used to cross-collaterise the facility availed to the 3rd Respondent. This position is further confirmed by Exhibit D10 (notice of sale) also tendered by the 2nd Appellant’s witness whrch clearly indicated that the property that was sold in exercise of the 2nd Appellant’s power of sale was the 1st Respondent’s property at 17 SuleAbuka Crescent, Opebi, Lagos. The learned trial Judge said counsel was therefore right when she observed in her judgment:
”At what stage, and why No.9 Adepele Street, Ikeja was used and subsequently sold is not clear to me” (page 551, 4th paragraph of records).
Respondents’ counsel agreed with the learned trial judge when she held based on the evidence before her that:
“It is however clear that no notification was given by the 1st Defendant (2nd Appellant) to either of the claimants (Respondents) or the 4th Defendant to counter-claim (4th respondent) of the use of the property at 9 Adepele street as collateral for the loan to the 3rd Claimant (3rd Respondent). The Counterclaimant (1st Appellant) has also failed to prove that any notification was given to any of the Defendants to counterclaim (Respondents) that the property at No 9, Adepele Street, Ikeja was going to be sold in exercise of the 1st Defendant (2nd Appellant) power of sale.”(page 551 last paragraph of records).
The learned trial judge said Counsel went further in holding and rightly so, that the counter claimant (1st Appellant) has failed. I hold, to prove that the property of the 4th Defendant to counterclaim (4th Respondent) was given as collateral for the facilities extended to the 3rd claimant/Defendant to counterclaim (3rd Respondent). The sale by the 1st Defendant (2nd Appellant) to the 2nd Defendant (1st Appellant) of No 9, Adepele Street, belonging to the Defendant to counter-claim; Mr. Isaiah Sunday Ayeni (4th Respondent), I can only hold was wrongful” (Page 552 para 1 & 2 of Records).
Respondents’ Counsel disagreed with the submission of the 1st Appellant’s counsel in Appellant’s brief (at Page 13 Paragraphs 2 &3) that the implication of the Respondents instructions in Exhibit D6 was that the 2nd Respondent had provided collateral in the form of 17B Sule Abuka, Crescent, Opebi and No. 9 Adepele street, Ikeja as security for facilities

…………………….I…………………….

extended to the 3rd Respondent. The contention, said Counsel conveniently ignored the fact that the 4th Respondent who owned the property at No. 9 Adepele street, was not a party to the arrangement contained in Exhibit D6 and therefore his said property cannot be used as collateral in that circumstance without his consent. He submitted that it is trite that a party cannot be held liable under a contract that he is not privy to. He relied on the Supreme Court decision in the case of J. E. OSHEVIRE LTD vs TRIPOLI MOTORS (1997) 5 NWLR PT 503 PG 1 AT PG 4 RATIO 1 where it was held that “A contract cannot confer rights or impose obligations arising under it on any person except the parties to it.” So even if it was correct that the implication of the Respondents instruction in Exhibit D6 was that 2nd Respondent had provided collateral for the debt of 3rd Respondent in the form of the two properties, the property at 9, Adepele Street, cannot be used as collateral without the express authorization or consent of the 4th Respondent who was not privy to the arrangement viaExhibit D6. He referred to INCAR NIG LTD & ANOR vs CHIEF OJOMO (1986) 5 NWLR PT 39 PG 111 AT PAGE 112 RATIO 6). 
He contended that it is clear from all the evidence before the Court that the 1st Respondent did not even authorize the use of the property at No 9, Adepele Street, Ikeja as collateral for the debt of the 3rd Respondent.He only authorised the use of his own property at 17B Sule Abuka Crescent, Opebi as can be gleaned from Exhibits D7, D9 & D10. That in the case of GBADAMOSI VS KABO TRAVELS LTD (2000) 8 NWLR PT 668 PG 243 AT PG 248-249 RATIO 1. it was held by the Court of Appeal that:
“the sale of a mortgaged property is not vitiated merely on ground that no case has arisen to authorize the sale or that due notice was not given or that the power was otherwise improperly or irregularly exercised if it is shown to the satisfaction of the Court that:
(1) The mortgagor did mortgage the property in dispute to mortgagee.”

He submitted that the sale in the instant case can be and should be vitiated as done by the learned trial judge in view of the fact that it cannot be said by any stretch of imagination or iota of evidence that the mortgagor herein, that is, the 1st Respondent mortgaged the property situate at 9 Adepele Street, Ikeja to the 2nd Appellant with respect to the loan given to the 3rd Respondent. That from the preponderance of evidence the 1st Respondent did not mortgage or instruct the 2nd Appellant to use the property at 9 Adepele Street, Ikeja as collateral for the debt of the 3rd Respondent; therefore, the sale of the property by the 2nd Appellant to the 1st Appellant is null and void and the said sale was rightly vitiated by the learned trial judge.
He submitted that the issue of being a purchaser for value without notice does not arise at all here since the property at No 9 Adepele Street, Ikeja was not available for sale in the first place in view of the fact as earlier contended that it was not used as collateral for the loan of the 3rd Respondent. The issue therefore was not that there were irregularities in the exercise of the power of sale by the 2nd Appellant which should not impeach the title of the 1st Appellant to the property but that no such power existed at all. The 2nd Appellant could not have given what it did not have by way of sale. He referred to the case of B.O.N. LTD VS Aliyu (1999) 7 NWLR PT 612 PG 622 AT B24 RATIO 2 where the Court of Appeal held as follows:
“Although this is a presumption that the Statutory Power of sale when exercised shall not affect the right of a Purchaser or put him on enquiry whether such default has been made, this presumption cannot be rebutted. Indeed the phrase “a purchaser of value without notice” only means that the purchaser need not investigate the fact that a right of sale has arisen over the mortgaged property but ‘without notice” therein cannot be said to mean without notice of any irregularity affecting transfer of title to the purchaser. Thus, where there is irregularity abinitio such a purchaser has an

…………………….J…………………….

inchoate title. For example, where the sale of a mortgaged property did not comply with the written term of the mortgaged deed, no title passed in that transaction abinitio or in any case. In such case, the purchaser has notice of the irregularity, whatever inchoate title he may assume had passed on to him becomes to him a nullity and in that event he has a duty to mitigate his loss and demand his money from the seller or mortgagor”.
He submitted that on the premise of the above case, the title purportedly acquired by the 1st Appellant is defective abinitio and it is a nullity and what is opened to the 1st Appellant is to mitigate his loss and seek damages from the 2nd Appellant.
He submitted that the case of ACB VS IHEKWOABA (2003) SC (PT 11) PAGE 1 wherein the Supreme Court held that irregularity in the exercise of mortgage’s power of sale will not vitiate sale to a purchaser for value without notice is distinguishable from and not applicable to this particular case.
Learned counsel for the Respondents urged us to hold.
Learned Counsel for the 1st Appellant in his Reply Brief further made the point that assuming without conceding that the 4th Respondent was not a party to the mortgage agreement, the fact that the 4th Respondent willfully held out himself as surety upon which he further deposited and/or gave out his title documents as further security or collateral for the mortgage agreement is enough creation of equitable mortgage agreement binding and enforceable against the Respondents by the Appellants.
On this, Appellants’ counsel referred to the cases of:
ADARAN OGUNDIANI VS O.A.L ARABA, 6-7 S.C 55 at 73;
HYDRO-TECH NIGERIA LIMITED AND ORS VS LEADWAY ASSURANCE CO. LIMITED AND ORS. (2016) LPELR-40146 (CA);
B.O.N VS. AKINTOYE (1999) 12 NWLR (PT. 631) 392 at 403.

He added that equity presumes as done that which ought to be done. Also, that equity looks at the intent, rather than the form. He submitted that the intention was to create a legal mortgage even though the mere deposit of title deed already created an equitable mortgage.
The intention, said Counsel was that the title document be used for the sale of the property even without recourse to the 4th Respondent, should there be breach in obligations to the legal mortgage which was eventually breached by the Respondents.
RESOLUTION OF ISSUE
Perhaps it is appropriate to start by saying that the learned Senior Counsel for the Appellants was right in his re-statement of the law more especially through cases such as:
IBIYEYE VS. FOJULE (2006) 3 NWLR (PT. 968) at 640; and
AFRICAN CONTINENTAL BANK LIMITED VS. IHEKWOABA (2008) 3 NWLR (PT. 846) 
249;
that irregularity in exercise of mortgagee’s power of sale will not vitiate sale. And, that where a sale of property was not tainted with any fraud or collusion and the buyer bought in good faith and was not aware of any irregular circumstances surrounding the sale or anything likely to affect the property of the sale, the sale must be valid and subsisting.
It seems to me however, that the facts and circumstances of the instant case are distinguishable from the case cited by or referred to by the learned senior counsel for the Appellants.

…………………….K…………………….

Clearly, the parties are not in dispute as to the instruction given by the 3rd Respondent to the 2nd Appellant via Exhibit D6 to alternate funds and the honouring of cheques in between the Accounts of the 2nd and 3rd Respondents.
In fact, the strongest point made by the learned Senior Counsel to the Appellants in this Appeal is that the logical consequence of the instruction in Exhibit D6 was/is such that the 2nd Appellant was justified to sell the allegedly mortgaged properties after transferring the indebtedness of the 3rd Respondent to the 2nd Respondent. However, there are loopholes and questionable lacuna not only in the banking and/or administrative arrangements of the 2nd Appellant but perhaps in a more damaging sense in the concessions and oral evidence offered by the 2nd Appellant.
For example, if are to start from the point that the indebtedness of the 2nd Respondent was transferred to the 3rd Respondent by virtue of Exhibit D6, the factual implication would be that at the point of sale the 2nd Respondent was still indebted to the 2nd Appellant. unfortunately, for the Appellants, this was not the trend of evidence offered before the trial Court. The DW2 who testified for the 2nd Appellant conceded the case of the Respondents that the 2nd Appellant was actually in credit balance at the time of the sale before the indebtedness of the 3rd Respondent was transferred to the 2nd Respondent.
The logical implication and effect of Exhibit D6 ought to be a lack of separation in the identities of the credit and debit balances in the first place of the 2nd and 3rd Respondents.
Meanwhile, there was specific instruction by the 2nd Respondent to the 2nd Appellant that his property at No. 17B, Sule Abuka Crescent, Opebi, Ikeja should be used as security to cross-collaterise the instruction in Exhibit D6. This specific instruction in Exhibit D7 was confirmed by Exhibit D9 (Final Demand Notice) and Exhibit D10 (Notice of Sale) tendered by the Appellants.
The 4th Respondent stood surety for Exhibit D2, but Exhibit D2 is the deed of legal mortgage in respect of any default by the 2nd Respondent.
As it is, therefore, the parties did not execute any mortgage deed for the default if any in the Account of the 3rd Respondent.
In this respect, the argument by the learned Senior Counsel for the Appellants that the deposit of title deed in respect of the 4th Respondent’s property at No. 9, Adepele Street Ikeja created in the minimum an equitable mortgage may be right as a matter of law, but in fact does not help the case for the Appellants.
The reason for this is first that, there is no nexus between the deposit of the title deed of the 4th Respondent and the failure of obligation by the 3rd Respondent. In other words, the deposit of the 4th Respondent’s Title Deed of No. 9, Adepele Street Ikeja could as well be an additional collateral for any failure of obligation from the 2nd Respondent, this is more so in the light of Exhibits D7, D9 and D10 which are agreed, that it is only the 2nd Respondent’s property at No. 17B, Sule Abuka Crescent, Opebi, Ikeja that was meant to cross-collaterise the facility availed to the 3rd Respondent.
The learned Senior Counsel for the Appellants went further to say that having deposited his Deed of Title and having stood as surety in Exhibit D2, it is just and equitable for the 2nd Appellant to sell the 4th Respondent’s property at No. 9, Adepele Street, Ikeja. with respect to the Appellants” counsel, it is difficult to accept or countenance this trend of argument. This is because,

…………………….L…………………….

the liability of a surety/guarantor arises when there is failure on the part of the principal debtor to meet its obligation.
In the instant case, there is evidence from both parties that the 2nd Respondent who was guaranteed by the 4th Respondent has liquidated its indebtedness to the 2nd Appellant and was actually in credit up to and at the time of the sale of the properties to the 1st Appellant. Consequently, no issue of guarantor’s liability arose from the facts of the case.
Both the parties and the learned trial Judge at different times in the course of this case have cited and relied on the decision of the Court of Appeal per Salami, JCA in the case of GBADAMOSI VS. KABO TRAVELS LIMITED (2000) 8 NWLR (PART 668) 247where it was held that:
“…. The sale of mortgaged property is not vitiated merely on the ground that no case has arisen to authorize the sale or that due notice was not given or that the power was otherwise improperly or irregularly exercised if it is shown to the satisfaction of the Court that:
i. The mortgagor did mortgage the property in dispute to the mortgagee.
ii. The loan or any instalment thereof has become Payable.
iii. The power of sale under the mortgage agreement has arisen; and
iv. The power of the sale was in fact exercised and that the title in the property passed to the Purchaser. ”
If we apply the conditions stipulated in the GBADAMOSI VS. KABO TRAVELS LIMITED (supra) it would be found that the Court could not be said on the facts of the case to be satisfied with conditions (i), (ii) and (iii).
First, there was no evidence that the property of the 4th Respondent at No. 9, Adepele Street, Ikeja was ever mortgaged as collateral for the 3rd Respondent.
To the contrary, Exhibits D7, D9 and D10 suggest that it is only the property of the 2nd Respondent at No. 17B, Sule Abuka Crescent, Opebi, Ikeja that was used as facility extended to the 3rd Respondent by the 2nd Appellant.
On condition (ii) above, the loan to the 2nd Respondent on which Exhibit D2 was based was said to have been fully liquidated.
Relatedly, on condition (iii) no power of sale could have arisen in relation to the Account of the 2nd Respondent on which the 4th Respondent stood as surety in respect of Exhibit D2.
The (iv) condition stipulated in the case of GBADAMOSI vs. KABO TRAVELS LIMITED (supra) is dependent on conditions (i), (ii) and (iii) and cannot therefore operate in a vacuum for the benefit of the Appellants.
Given the facts and circumstances of this case, the learned trial Judge was right to have observed at page 551 of Records that:
“At what stage, and why No. 9, Adepele Street, Ikeja was used and subsequently sold is not clear to me”
In the instant case, the 1st Appellant failed to prove that any notification was given to the Respondents that the property at No. 9, Adepele Street, Ikeja was going to be sold in exercise of the 2nd Appellant’s power of sale.
In the case of B. O. N. LIMITED VS. ALIYU (2009) 7 NWLR (PT. 612) at 622, the Court of Appeal held that where the sale of mortgaged property did not comply with the written term of the mortgaged deed, no title passed in that transaction ab initio. And, that in such case, the purchaser has notice of the irregularity whatever inchoate title he may assume had passed on to him is a nullity and in that event he has a duty to mitigate his loss and demand his money from the seller or mortgagor.
In the instant case, the learned trial Judge was right to have held that having regard to the evidence before the Court, there was no valid sale of the property known as No. 9, Adepele Street, Ikeja and

…………………….M…………………….

also that the 1st Appellant is not entitled to a declaration of title to No. 9, Adepele Street, Ikeja.
The only Issue in this Appeal is resolved against the Appellants.
Having resolved the sole issue in this Appeal against the Appellants, the Appeal lacks merit and it is accordingly dismissed. There shall be Thirty Thousand Naira (N30,000.00) costs in favour of the Respondents.
CHIDI NWAOMA UWA, J.C.A.: I read in advance the judgment delivered by my learned brother, MOJEED ADEKUNLE OWOADE, JCA. I agree with his reasoning and conclusion arrived at in dismissing the appeal for lacking in merit. I also dismiss it and abide by the order made as to costs in the leading judgment.
HAMMA AKAWU BARKA, J.C.A.: I was opportuned to have read in draft the Judgment of my learned brother MOJEED ADEKUNLE OWOADE, JCA, just delivered.
I am in full agreement with the reasoning and conclusions reached to the inevitable conclusion that the Appeal is without merit and same is accordingly dismissed.
I abide on order made as to costs in the lead Judgment.

Appearances

O. O. Ohwovoriole-Okpoli, Esq. for the 1st Appellant
2nd Appellant was served on 26/10/2017 through counsel – O. Okubule, Esq.-For Appellant

AND

A.O.Olufon, Esq. with him, O.O Omole, Esq. and O.A. Atunbi, Esq.-For Respondent

Leave a Reply

Your email address will not be published. Required fields are marked *