RUVUGABIGWI v. BANKI Y’ABATURAGE Y’U RWANDA

# RUVUGABIGWI v. BANKI Y’ABATURAGE Y’U RWANDA

- Source: Amategeko - Section: Decisions (Judgements) - Date: 2016-05-15 - Case/document no.: RCOMAA 0024/13/CS - Collection: Supreme Court

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RUVUGABIGWI v. BANKI Y’ABATURAGE Y’U RWANDA [Rwanda SUPREME COURT – RCOMAA 0024/13/CS (Mutashya, P.J., Karimunda and Gakwaya, J.) 15 May 2016] Contract law – Execution of the contract – Breach of the contract – The Banque was not entitled to resorting to any of provisions of the contract in whatever manner as it pretend and refer the case to court based on article 15 of the contract since it is the final general provisions without prior resort to article 9 of the contract which gave it the right to administer, leasing or selling the security in case of late payment – Law of 30/ 07/ 1988 relating to contract or obligation, articles 33. Damage – Being dragged into proceedings – Damages for being dragged into court proceeding – The bank cannot be awarded damages since it refeered the case to court disregarding the provisions of the contract, these damages must rather be awarded to the respondent because he spent too much time in the courts to claim his rights – Law of 30/ 07/ 1988 relating to contract or obligation, articles 258. Damages – procedural and advocate fees – Ruvugabigwi must be awarded these damages since he incurred expenses and he hired and advocate – Law of 30/ 07/ 1988 relating to contract or obligation, articles 258. Facts: The case started in the Commercial Court of Huye. Banque Populaire du Rwanda had sued Ruvugabigwi for he had defaulted to pay the loan it had given to him and its related interests. This Court ordered him to pay the principal debt, its interests, damages and advocate fees. He appealed against the judgment before the Commercial High Court submitting that article 9 of the contract he concluded with the Bank provides that it is the security that had to serve as the payment without resorting to Court. He added that the Court disregarded that article and hence went contrary to the position of the court in the judgment No RCOMA 0030/11/HCC while they similar cases. He deplored that this led to being ordered to pay excessive interests and damages. The Court found that that very article does not provide that at any cost the security would be executed without filing a claim to court since article 15 of that contract provides that all disputes arising the debt would be settled by the competent courts. The Court held further that the judgment RCOMA 0030/11/HCC was not based on was because it was not applicable to the case vis à vis the object of the litigation. Not satisfied of the ruling, Ruvugabigwi Jean Paul appealed to the Supreme Court disputing that article 9 of the contract provides that in case of default of payment within the agreed period, the bank would execute the pledged securities without judicial proceedings. They explained that this procedure as enshrined in the contract was the suitable one to avoid that any party could incur the loss. Banque Populaire du Rwanda replied that article 9 and 15 are embodied in the contract in the same contract that was penned by both parties which gives to the bank the privilege to resort whatever article therein including that of 15 since it is the one which provides for suitable and safe mechanism.

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Held: 1. Banque Populaire du Rwanda had to respect the provisions of article 9 of the contract instead of filing the case to court based on article 15 in the contract since they are final and general provisions which provides for prospective disputes arising from implementation of other provisions those of article 15 being excluded. Hence, the notice of payment it addressed to Ruvugabigwie about execution of the pledged securities in case of default in the period specified therein must be respected and resort to court in case of failure of that mechanism. 2. Banque Populaire du Rwanda cannot be awarded damages for being dragged into proceedings and the advocate fees isnce it is the one which filed a case to the Court disregarding the contract that it concluded with Rushingabigwi Jean Paul which gives him the right to sell, lease and administer the pledged security but rather opted to sue to court without taking into consideration of those agreement pretending to have rights to manipulate the provisions of the contract which is the reason why Rushingabigwi Jean Paul spent too much time in the courts in order to claim his rights. Hence, Banque Populaire du Rwanda must pay damages for that. 3. Ruvugabigwi Jean Paul must be awarded procedural and advocate fees since he was sued to courts and this led to expenses and hiring advocate. Appeal has merit; Appealed judgment quashed Banque Pupulare du Rwanda is ordered to pay Ruvugabigwi advocate, procedural fees and damages to drag him in the Court proceedings Banque Pupulare du Rwanda is ordered to pay the court fees. Statutes and statutory instruments referred to: Law of 30/ 07/ 1988 relating to contract or obligation, articles 33 and 258. No case was referred to Judgment I. BRIEF BACKGROUND OF THE CASE [1] This case started in the Commercial Court of Huye Banque Pupulaire du Rwanda suing Ruvugabigwi Jean-Paul for he had defaulted to pay the principal debt and related interests. [2] In the judgment no RCOM 0260/12/TC/HYE rendered on February 26, 2013, the Court found that though Ruvugabigwi Jean Paul could not agree with the bank on the quantum of the debt, there was evidence in support of the totality of the debt and its interests. He was ordered to pay the principal debt, its related interests and advocate fees, the totality being 293.950.055 Frw. [3] Not satisfied of the judgment, Ruvugabigwi Jean-Paul appealed to the Commercial High Court lamenting that article 9 of the contract specifies that the security would be be executed without referring the case to the courts, that the court disregarded that article and deliver the verdict which is in contradiction with the position taken by the Commercial High Courtin the

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judgment no RCOMA 0030/11/HCC while those cases are of the same nature.He concluded that those errors led him to being ordered to pay excessive interests. [4] In nthe judgment RCOMA 0125/13/HCC, Commercial High Court found that article 9 of the contract does not specifies that at any cost the secutities would be executed without prior recourse to the court since article 14 of the contract between parties provides that all related issues to the debt would be settled by the competent court. [5] The Court found that the reason why the case no RCOMA 0030/11/HCC was not based on was due to the fact that the objects of litigation were different since in that case, the bank had lost the case due to seeking redress through the procedure not set by the contract since there was a clause whuch immedietely could not allow either party to sue to court without prior execution of the security through public auction. The Court found further that damages, procedural and advocate fees that Ruvugabigwi Jean Paul was ordered to pay must not be judged excessive while it was computed based on both the principal debt that he was demanded to pay and the contract between him and the bank. The Court concluded upholding the appeald judgment. [6] Not satisfied of the decision, Ruvugabigwi appealed to the Supreme Court. [7] The hearing in an open court took place on December 12, 2015 Ruvugabigwi Jean Paul present and assisted by counsel Nsengiyumva Jean Claude while Bank Populaire du Rwanda was reprsented by Mubangizi Frank, the counsel. [8] The Court first had assessed the objection raised by Mubangizi Frank about inadmissibility of the claim because it was not in the jurisdiction of the Supreme Court as Ruvugabigwi Jean Paul had lost the case on the same grounds from both previous instances. [9] In the interlocutory judgment no RCOMAA 0024/13/CS decided on January 22, 2016, the Court found that the objection lack merit and fixed the hearing on March 8, 2016. [10] On that day,the hearing was conducted in open court Ruvugabigwi Jean Paul present and assisted by Nsengiyaremye Jean Claude while Banque Populaire du Rwanda was represented by Mubangizi Frank, the counsel. ANALYSIS OF THE LEGAL ISSUES [11] Ruvugabigwi Jean-Paul and his counsel submitted that article 9 of the loan contract between Ruvugabigwi Jean Paul and Bank Populaire du Rwanda provides that if Ruvugabigwi Jean Paul defaults to pay in the range of the agreed period, th Bank could have the privilage of executing the security to the debt without resorting to court. This procedure which is inshrined in the contracts, since it the one which is suitable to avoid loss that either paty may incur, had to be resorted to prior to any other procedure since it allocates the prerogatives and suitable to the interests of the bank since it help not to spend too mucgh time in the judicial proceedings, the reason why the bank inserted article 9 in the contract. [12] He explained that the fact that the bank did not respect the provisions of article 9 of the contract which gave it the right to sell, let or having full ownershipo over but rather opts to base

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on article 15 of that contract so as to reffer to court is deliberate breach of the contract with intention of causing him prejudice so as to benefit fromdamages that he would be charged without cause since article 15 could only be resorted to after prospective disputes. He added that the only issue which ocurred is that two months elabsed without paying and this is not disputes, it is rather the default of payment. [13] Mubangizi Frank, counsel for Banque Populaire du Rwanda states that articles 0 and 15 are embodied in the same contract penned by Ruvugabigwi Jean Paul since he admitted all its terms and it gives the bank the prerogatives to resort to any of its provisions. He submitted that the reasons which pusheed the bank to opt for article 15 was that Ruvugabigwi had defaulted to pay and the bank opted for the suitable and safe procedure which was to anable it to recover the loan that was given to Ruvugabigwi since somes the public auction of the securities later get cancelled. He stressed that he could not understand the reason why Rvugabigwi emphisized on article 9 since he appealed andif he gives value to that article, he could not have appealed so as to let judgments of the previous court executed. [14] He concluded submitting that there is no difference between article 9 and 15 of the contract apart from the provisions of article 15 which state that the Bank may opt to administer the proceeds of the securities so as to get paid while article 15 provides that the bank will have to resort to judicial proceeding if the debtor defaults to pay. All of that indicates, he added, that the statements of Ruvugabigwi Jean Paul and his counsel that article 15 would only be resorted to in case of disputes between both parties while article 9 would be resorted to after Ruvugabigwi Jean Paul would have defaulted to pay has no merit since no disputes exist between the bank and the debtor apart from default of payment. He concluded requesting the Court to uphold the judgments issued by the previous courts, to uphold the decision of the Commercial High Court therefore. THE VIEW OF THE COURT [15] Article 33 of the Civil Code Book III which was into effect at the time Bank Populaire du Rwanda entered into the contract with Ruvugabigwi Jean Paul provides that legally formed contract take the place of law to those who made them. They can be revoked only by mutual consent or for causes authorized by law. They must be performed in good faith. [16] The document of the case file includes the instrumentum of the loan contract no 105/2011/461/005 dated November 10, 2011. entered into between Bank Populaire du Rwanda. Its article 9 provides "If the debtor does not fulfill his commitments within the agreed time, the Bank will be entitled to require the application of legal and regulatory provisions on mortgages. Thus, in case of default of payment, the debtor authorizes the bank to, at its own discretion, manage, lease, or have full ownership over the mortgage. In case of full ownership over the mortgage, the sale will take place instead in the forms and procedures prescribed by the laws and regulations in this area. "article 15 of that contract provides" All disputes relating the undertakings covered by this contract will be the jurisdiction of the competent courts of the Headquarters of the Bank. If the Bank deems it necessary, it may bring the case before the court of the residence of the debtor"

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[17] The case file contains further the notice for Rwabigwi Jean Paul drafted by the Bank Populaire du Rwanda dated December 17, 2012 which requesting him toexecute the delayed payment within thirty working days. The notice further states, « otherwise your property will be sold as provided for by the law so as the debt to be paid,you property which will be put on sale is the following : -the house under constuction on plot no 85 in Huye - Ngoma District, Butare Cell, the house on plot no 330 located in in Huye, Tumba Sector Gitwa Cell. [18] The Court finds that article 9 of the contract does not states that if Rwaboigwi Jean Paul defaults to pay in the range of the time agreed upon in the contract, the matter will be referred to Court,that article provides rather that the Bank may opt to administer, lease, or have full ownership over the security, sell or execute it all being done in complience with regulations procedure regulating the execution of the security. The Bank opted opted the procedure of execution of the security is the one that was opted by the Bank as evidenced by the notice of payment dated December 17, 2016 that was addresed to Ruvugabigwi Jean. That notice warned that his two houses located in Huye Town would have to be sold in case of failure to respect his obligations in the range of periods ofthirty days. This implies that the Bank itself was convinced that what was to be done at right the first time was not referring the matter to the courts, rather the execution of the security.Therefore, the statements of counsel for the bank that it was also entitled to refer the matter court evidence the contradictions. [19] The Court finds that the indication that there was no recourse to courts in article 9 of the contract between Rwabigwi is that both parties agreed that that in case of Ruvugabigwi Jean Paul’s default to pay, the bank would get paid through the security without the judgment. This is imphasized by the statements of Mubangizi Frank, the counsel who submits that nothing stopped the execution of the security as well as by the notice dated December 17, 2012 addressed to Rwabigwi Jean Paul by the Bank warning him to pay within 30 days failure of which had to lead toexecution of the security. This notice does not specify that the execution would depend on the judgment issued by the Court. All of thse imply that the implimentation of article 9 of the contract was not dependent to the court decision. [20] The Court finds that the fact that Ruvugabigwi Jean Paul failed to fulfil his obligation on time cannot be qualified as disputes referred to in article 15 of the contract as alleged by Mubangizi Frank. Contrariwise, if after that notice of payment within thirsty days, he had disputed on the quantum of the debt or it interests or oppose the execution of the security so as the ban k to get paid, these disputes referred to in that article which would otherwise lead the bank ti filing the claim to the court so as to settle the matter. This justifies therefore that when it referred the case to the Court, the bank breached the provisions of the contract. [21] The Court finds further that article 15 is generala and final disposition which regulates to settle disputses that arise from the implemntations of all other provisions. It means that this article may be resorted to after the provisions of all other articles, every article being read separately from others or one being read together with others or all of them being read together article 15 being excluded wasnot respected. This also stresses that article 15 could not be based on while referring the matter to the Court while there is no disputes that arise from implementation of article 9. Hence, the defence of Bank Pupulaire du Rwanda that it had the prerogatives to apply any provisions at any time it needs have no merit since when it inserted article 9 in the contract it committed itself to execute its provisions which are sale, lease,

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administration or have full ownership pledged by Ruvugaigwi Jean Paul and it could only refer the case to Court after the this mechanism fails. [22] The Court notes that based on article 33 of the Civil Code Book III which was into effect at the time of the conclusion of the loan contract between Bananque Populaire du Rwanda and Ruvugabigwi Jean Paul and on the holdings above, Bananque Populaire du Rwanda must first respect the provisions of article 9 of the contract between it and Ruvugabigwi Jean Paul and refer the case to the Court after the application of the provisions of that article becomes impossible. Therefore, the judgment no RCOMA 0125/13/HCC delivered by the Commercial High Court on June 10, 2014 as well as the judgment no RCOM 0260/12/TC/HYE rendered by the Commercial Court of Huye on February 26, 2013 must be quashed for for things to remain intact as the situation was before those judgment were rendered. This means that the last notice dated December 17, 2012 as dreafter by Bank Populaire must apply. [23] The Court concludes that as long as the appeald judgment no long exist, there is no reason to assess the matters about the loss occasioned by the damages that Ruvugabigwi challenges as being excessive. II.2. Whether Ruvugabigwi Jean Paul must be awarded procedural and advocate fees [24] Ruvugabigwi Jean-Paul alongside his counsel states that Ruvugabigwi Jean Paul must not be ordered to pay damages that Bank Populaire du Rwanda requests since it had only enjoyed its right of appeal. It reiterated rather that it had been dreagged into proceedings while the contract between parties provides that the securities must be executed for the satisfaction of the debt. He requests the damages of 10 000 000 Frw and 2 500 000Frw for advocate fees. [25] Mubangizi Frank responded that the damages that Ruvugabigwi requests have no merit; rather, he states, Banque Populaire du Rwanda continued being dragged into proceedings and hence requests damages equivalent to 1 000 000Frw for advocate fees. THE VIEW OF THE COURT [26] Article 258 of Civil Code Book III provides that any act of man, which causes damage to another obliges the person by whose fault it happened to repair it. [27] With regard to to the damages of being dragged into proceedings, the Court notes that it is Banque Populaire du Rwanda which initiated the proceeding before the Commercial Court of Huye disregarding its own notice dated December 17, 2012 that it addressed to Ruvugabigwi Jean Paul warning him that the security could be executed without necessitating the judgment as provided for by article 9 of the contract between both parties; it proceeded to this mechanisim without weighing the effects on Ruvugabigwi Jean Paul without even indicating the cause which hinders it from respecting the provisions of that article aprt from stating that he has right to proceed whatever manner it likes in regard to that contract. This it is this arbitrary decision duwhich led Ruvugabigwi to being referring the case to the Courts to make his rights understandable. Hence, Banqu Populaire du Rwanda must pay damages for that. However, given that 10.000.000 Frw requested by Ruvugabigwi Jean-Paul is excessive, he is awarded in the discretion of the Court 2 000 000 Frw.

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[28] With regard to the procedural and advocate fees the Court finds that Ruvugabigwi Jean Paul was msued into courts, and this incurred expenses for the follow-up of the case and it necessited to hire an advocate. Notwithstanding, since 2 500 000Frw that he requests is excessive especially that he does not provides evidence in support, he is awarded in the discretion of the Court 2 000 000Frw for procedual and advocate fees. THE DECISION OF THE COURT [29] Decides that appeal filed by Ruvugabigwi Jean Paul has merit; [30] Holds that the judgment RCOMA 0125/13/HCC rendered by the Commercial High Court on June 10, 2013 the same as the judgment no RCOM 0260/12/TC/HYE rendered by the Commercial Court of Huye on February 10, 2013 are quashed so that thisngs can get to their initial situation prior to their adjudication. The provisions in the last notice of payment addressed to him by Banque Populaire du Rwanda on December 17, 2012 must be executed, [31] Orders Banque Populaire du Rwanda to pay to Ruvugabigwi Jean Paul 2000 000Frw for being dragged in proceedings 2000 000 Frw for procedural and advocate fees the totality being 4 000 000Frw; [32] Orders Banque Populaire du Rwanda to pay the court fees.