gaudencia gerald nyakuwa vs prisca anango raya 2020 tzhclandd 2325 16 october 2020

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (LAND DIVISION) AT PAR ES SALAAM LAND CASE NO. 96 OF 2016 GAUDENCIA GERALD NYAKUWA................................ PLAINTIFF VERSUS 1 PRISCA ANYANGO RAYA..................................... st DEFENDANT EQUITY BANK TANZANIA LIMITED.................. 2nd DEFENDANT FAISAL NAZIR AHMED...................................... 3rd DEFENDANT JUDGMENT I. MAIGE, J The plaintiff claims in this suit against the defendants and each of them for the following reliefs. First, declaration that the sale of a landed property at plot number 223 Block “M” within the Municipality of Temeke with certificate of title number 123509 (“the suit property”) to the fourth defendant at the instant of the second defendant is null and void. Two, the first defendant be ordered to pay the loan advanced to her by the second respondent. The suit property, it is common ground, was mortgaged in 2014 to secure an overdraft extended to the first defendant by the second defendant. i The first defendant does not, in her written statement of defense and testimony as DW1, deny to have received the overdraft in exhibit DI. Neither does she deny the fact that, her overdraft was guaranteed, by among others, the mortgage in exhibit DI. Her contention, which appears to be one of the grounds for the claim is that, she never defaulted in terms of exhibit DI. She more so denies to have been served with any notice of default nor any demand to pay. At paragraph 2(ii) of her written statement of defense, the first defendant states as follows “(ii) That it is the second defendant who advanced her and approved an overdraft facility amount to TZS 60,000,000/= to the 1st Defendant and she was repaying the overdraft as per the facility letter and at no time she defaulted to make monthly payment. ” In her plaint, the plaintiff has pleaded three grounds to challenge the sale. First, she signed into the deed of guarantee without comprehending the terms thereof. Two, she was not informed prior to the sale of the default of the first defendant to service the loan. Three, the sale of the suit property did not adhere to the procedure. In her written statement of defense, the second defendant denied the allegation and stated that, both the sale and mortgage of the suit property was legal and effectual. She further pleaded existence of notice of transfer under power of mortgage from the Registrar date 14th November 2014, notice of auction from the third defendant to 2 the second defendant dated 6th October 2014, deed of transfer under power of sale dated 7th October 2014 and certificate of sale of the right of occupancy issued on 7th October 2014 by the third defendant. The written statement of defense by the second defendant, it is imperative to note, is silent as to the outstanding loan amount the first defendant was in default of. Neither is there any factual allegation that a notice of default had been served on the plaintiff and/ or the first defendant. At the final pretrial conference and basing on the proposed issues filed by the parties, the following issues were framed for determination: - 1. Whether the plaintiff lawfully guaranteed the first defendant by mortgaging the suit property to secure loan. 2. Whether the first defendant defaulted to service the loan 3. Whether the second defendant was entitled to sell the suit property to realize the loan. 4. Whether the fourth defendant lawful purchased the suit property. 5. What reliefs are the parties entitled to. In an endeavor to establish her case, the plaintiff called three witnesses including herself who testified as PW1. She claims to be the lawful owner of the suit property. She blames the second and third defendants for illegally selling the suit property to the fourth defendant in realization of the mortgage. While she admits to have 3 mortgaged the suit property to secure a loan of TZS 40 million by the second defendant to the first defendant, she complains that, she was caused to sign into the mortgage related documents without being aware of the terms thereof. She further complains to have been denied copies of the said documents prior and after the execution in order that she could seek legal advice on the terms thereof. She further complains that, the sale of the suit property was made without her being served with a notice of default. She testifies further that, on 24th April 2014 and 15th July 2014 she visited the offices of the second defendant to inquire into the status of the loan. She was told by some bank officers whose names she has disclosed that, the first defendant had been properly servicing the loan. On 6th September 2014, it is further in her evidence, she was informed by one of the bank officers that, the first defendant was in default of TZS 3 million which was however cleared upon the first defendant returning back from Musoma. She goes on testifying that, on 31st September 2014, she was informed by a business partner of the first defendant that, the second defendant is in the process of selling the suit property in realization of the mortgage. She thereafter received a similar information from the third defendant and on the next day that, the suit property was sold to the fourth defendant at a purchase price which did not tally with the market value of the suit property. She therefore prays that, the sale agreement be invalidated and the second defendant directed to claim his loan from the first defendant. 4 On cross examination by Mr. Philip for the second defendant, she admits to have executed a deed of mortgage while aware of its legal consequences. On further cross examination by Mr. Kerario for the fourth defendant, she admits to have given the certificate of title of the suit property to the second defendant. She testifies further that, she was not aware of how much was repaid by the first defendant. Next was Abdallah Maulidi Mbulu (PW2). His testimony pertains to what happened subsequent to the sale of the suit property. In my view, it is not relevant to the facts in issue. Equally so for the testimony of Zainabu Adam Mwange (PW3) in so far as it was limited to the mutual agreement between the plaintiff and first defendant on use of the suit property as a third party mortgage. On her part, the first defendant, Prisca Anyango Raya (DW1) relied solely on her own testimony. She claims to be the second defendant’s client for quite a long time. The suit property, she testifies, was used to guarantee an additional overdraft of 40 million that would be utilized in supply of goods to Mhimbili Medical Hospital on Tender. She was regularly servicing the loan without default save for default of TZS 3 million when she was in Musoma attending her sick relative. She however repaid upon coming back. She had neither been served with any notice of default nor any demand to repay the loan. Neither had she been served with any bank statement. She prays therefore that justice be done. 5 On cross examination by Mr. Victor for the plaintiff, she testifies that, she happened to be in default of TZS 3 Million. The reason being that she was attending her sick relative in Musoma. She cleared the amount soon thereafter. On further cross examination by Mr. Philip for the first defendant, she says that, aside from the suit property, the overdraft was also secured by mortgages on two unregistered lands, including one that belongs to her. She insists that, she had never defaulted in terms of the mortgage. She denies to have been served with any notice of default. The second defendant relies on the testimony of her credit and recovery manager Mr. Charles Shauru Masawe who testifies as DW2. He says that, the first defendant procured LPO financing loan. It was in the name of Changuke Limited wherein she was a director. He clarifies that, this kind of loan is extended where a client has been ordered to supply certain goods. It is usually disbursed in tranches. The first defendant, he testifies further, had a tender with Mhumbili Medical Hospital and that, the overdraft amount advanced was TZS 60 million being 70 percent of the value of the tender and it was repayable monthly. The first defendant received 40 million first and thereafter 20 million. He testifies that, before execution of the mortgage, all the legal formalities were observed. Upon execution, the mortgage was duly registered. 6 Since the plaintiff executed the mortgage as the administrator of an estate, all beneficiaries to the estate signed into an affidavit of consent. The deed of mortgage and the affidavit of consent were produced and admitted as DI and D2, respectively. He testifies further that, within a month from the date of first disbursal, the first defendant supplied the goods and paid TZS 50 million through her bank account. The TZS 40 million loan was deducted plus an interest of 1.92 per month. In a bid to prove the default under discussion, DW2 produce into evidence a bank statement which was, for reason of a preliminary objection by the counsel for the plaintiff, admitted tentatively as D4 and the issue of admissibility to be considered in the judgment. DW3 testifies further that, by 26th June, 2014, the balance due and payable by the first defendant was TZS 63,460,3286 though the same cannot been reflected in exhibit D4. Subsequently thereafter, it is further in his evidence, the plaintiff was served with 60 days notice (exhibit D5). He testifies that, the notice was received on 29th June 2020. She did not repay even after the expiry of the 60 days. Therefore, the first defendant engaged the third defendant to realize the mortgage. The third defendant issued 14 days notice on a newspaper and on 1st day of October 2014 the suit property was sold in public auction to the fourth defendant at the purchase price of TZS 70 million. He testifies that, the claim by the plaintiff is devoid of any merit and should be dismissed. 7 On cross examination by Mr. Kerario for the second defendant, DW2 told the Court that, subsequent after payment of the full purchase price, the second defendant issued to the fourth defendant a deed of transfer under power of sale of the mortgage and Land form number 29 (exhibit D6 collectively) as well as a certificate of sale (exhibit D7). In the course of cross examination, DW2 also sought to produce a document purporting to be a notice of transfer from the Registrar of Titles. Its admissibility was objected by the counsel for the plaintiff on account that, it was a photocopy. Nevertheless, it was tentatively admitted and marked D8 with a note that the issue of admissibility would be considered in the final judgment. On further cross examination by the first defendant, he told the Court that, all documents are with the Bank. On further examination by Mr. Victor for the plaintiff, he testifies that, though exhibit DI is in English, it was read out and explained to her before execution. The fourth defendant testifies as DW4. He claims to have become aware of the sale of the suit property on seeing a publication on newspaper (exhibit D9). He claims to take part in the auction and was the highest bidder at the purchase price of TZS 70 million. On the same day, he paid TZS 17.5 million which is 25 percent of the total purchase price. Within 14 days from the date thereof, he paid the balance purchase price. He says that, the amount is reflected in exhibit D4. He further testifies that, despite being promised vacant 8 possession of the suit property within 14 days thereafter, it was not. He claims to have registered the suit property in his name. He purchased the suit property for parking of his vehicles for sale. His business collapsed for failure of the second defendant to give him vacant possession of the suit property. He prays therefore that, the suit be dismissed with costs. On cross examination by Mr. Philip for the send defendant, he says that, he was present at the auction and many people participated and bided. On further cross examination by the first defendant, he tells the Court that, he did not personally serve the notice of transfer on the plaintiff. He says, he was not aware that the suit property was in dispute. On further cross examination by Victor for the plaintiff, he says that, exhibit D9 does not show where the suit property is. In the prosecution of the suit, the plaintiff was assisted by Mr. Victor, learned advocate. The first defendant appeared in persons and was not represented. The second defendant was represented by Mr. Philip, learned advocate and Mr. Kerario also learned advocate represented the fourth defendant. The third defendant never entered appearance despite being duly served. Neither did he file any written statement of defense. As a result, the suit proceeded against him ex parte. At the end of the trial, the parties and/ or their counsel addressed the Court generally on the merit or otherwise of the suit. 9 On the first issue, it was the submissions for the plaintiff that, the plaintiff executed exhibit DI without being aware of the terms thereof. He submits further that, the plaintiff being a mere standard seven leaver would not have comprehended the details in the mortgage written in English language. He has thus urged the court to invoke the non est factum rule and hold that the mortgage deed under discussion does not belong to the plaintiff. The counsel’s submissions, it appears to me, depart from the pleadings and testimony by the plaintiff as PW1. As shown elsewhere in this judgment, the plaintiff expressly admitted to have executed exhibit DI while aware of the legal consequences thereof. Furthermore, in exhibit P3, the plaintiff admits to have agreed with the first defendant that the latter would use her title deed to secure a loan. She can thus not been heard denying execution of the deed of mortgage on mere reason that she is a standard seven. She would have, in my view, not accepted to give her certificate of title to the Bank and sign a document without understanding the contents therein. I will for the foregoing reason not accept the said submissions. It was also submitted for the plaintiff that, the mortgage in exhibit DI in so far as it refers to the secured loan as “the Agreement entered into between the Mortgagee and the Borrower from time to time”, is void for being uncertain or alternative it should, under the contra preferendum rule be construed in favour of the plaintiff, the weaker party. In Philibert Krisantus Mpeo vs. theNational Microfinance 10 Bank PLC & Another, Land Case No. 297 of 2017 (High Court, Land Division, Unreported), where I faced a similar issue, I made the following statement which I still subscribe to:- Two, the provision of exhibit P2 as observed elsewhere in this judgment is express that, the terms and conditions therein set put are "as may be varied from time to time”. Therefore, the series of future transections portrayed by the phrase “from time to time” is implied in exhibit P2. Third, it was also express in clause 9 read together with recital A of exhibit Pl that, the guarantee therein created was a continuing guarantee which is allowed under the laws of Tanzania. Section 81 of the Law of Contract Act provides that “a guarantee which extends to a series of transections is called a continuing guarantee”. As I understand the provision of section 82 of the same, a continuous guarantee, unless revoked by notice to the creditor, is relevant to the future transections. As held by Lord Cotton in Re Sherry, London and County Banking Co. vs. Terry, (1884) 25 Ch. D. 692 the amount secured in a continuing guarantee consists of the general balance of the customer's account existing at the time the guarantee comes to an end. I therefore, do not agree with the counsel for the plaintiff that, the expression entered from time to time in exhibit Pl renders the contract uncertain. The reason being that in banking practice, the expression is commonly used in guarantee of overdrafts to signify that the secured loan consists of series of transection. That was also express in exhibit P2. On that account therefore, I will not agree with Mr. Victor’s contention that, the mortgage in exhibit DI is void for uncertainty. I will not also apply the contra preferendum rule in the circumstance. ii This takes me right away to the issue of default to service the loan. The plaintiff who is a guarantor claims that, until the advertisement for the sale of the suit property in September 2014, he was not aware of any default in terms of the mortgage. The first defendant who is the principal debtor expressly denies in pleadings to have defaulted in terms of the overdraft and mortgage. The claims for the plaintiff, it would appear to me, is in negative proposition. Though the plaintiff was not privy to the overdraft in exhibit D4, he was responsible under the mortgage in exhibit DI, for any event of default to service the overdraft by the first defendant. As between the plaintiff and the defendant, it is a matter of common sense, it is the latter who is deemed to have knowledge of the status of loan. Since whether the first defendant defaulted in terms of the overdraft is within the special > knowledge of the second defendant, in terms of section 115 of the Evidence Act therefore, once the plaintiff denied default in terms of the mortgage, it was a duty of the second defendant to prove, on the balance of probability that, the principal debtor defaulted in terms of the overdraft and that the plaintiff upon expiry of statutory notice, defaulted in terms of the same mortgage. Though the plaintiff and first defendant denied both in pleadings and evidence of there being commission of any event of default, they were not, on cross examination, shown with any bank statement to establish the status of the loan. In her testimony through her credit officer DW2, the second defendant tendered what appears as a bank 12 statement. Its admissibility was objected on account that it was neither pleaded nor preceded by a notice of default. I admitted the statement tentatively as exhibit D3 with a note that the issue of admissibility would be considered in my final judgment. Though the witness was not caused to explain why the document was neither pleaded nor attached in the list of documents to be relied upon, the counsel for the second defendant in his submissions, informed the Court that he could not attach it in the written statement of defense or a list of documents because it was not in the possession of the second defendant. I cannot agree with him. The document was printed out from the account of the first defendant held in the bank of the second defendant. The second defendant is a. juristic person. There is no evidence adduced of any devolution in the second defendant’s legal personality. In the premise, I agree with the counsel for the plaintiff and the second defendant that, the production of the documents did not, without sufficient reason, comply with the notice requirement under order 13 of the CPC. As such, the plaintiff and the first defendant have been taken by surprise. For those reasons, I sustain the objection and I will not place reliance on the bank statement in exhibit D3. Another evidence adduced to support the defense, is a notice of default (exhibit D5). The notice though not pleaded, was listed in the list of documents filed prior to the date of first hearing. On cross 13 examination, I have noted, the plaintiff conceded that the signature therein appearing belongs to her. The notice of default which was admitted D5 is dated 26th June 2014 and was signed, for the mortgagee on the same date. It appears to have been signed by the plaintiff. In a photocopy of the notice of default attached in the list of documents, I have noted, the date space immediately after the signature of the mortgagor is not filled in. Conversely, in the original notice admitted as D5 the same is filled in. The difference between the exhibited document and its purported photocopy is not in the nature of this claim insignificant. In his testimony, DW4 was not caused to make a clarification of this discrepancy. Neither did he say in his oral testimony as to when exhibit D5 was served on the plaintiff. In the circumstance, the credibility of the document in exhibit D5 is highly suspicious. I will not place reliance on it. As a result, the evidence in the said exhibit is not sufficient to establish that it was served on the plaintiff 60 days before the date of the sale in question. There is yet another important point to observe in relation to notice. The mortgage under discussion was in guarantee of the loan by the first defendant in the form of an overdraft. As a matter of law, the liability of a guarantor is co-extensive with that of the borrower. This is in terms of section 8 of the Law of Contract Act. In this matter, both the plaintiff and first defendant vigorously denied both in pleadings and evidence the fact that the first defendant defaulted in terms of the overdraft facility. In the circumstance, the second 14 defendant, as lender, was obliged to demonstrate in evidence default in terms of the overdraft on the part of the borrower. Though the notice requirement under section 127 of Land Act may not be relevant to the borrower where the guarantee is in the form of a third party mortgage, it is a common banking practice that, in an overdraft, a demand note is a minimum requirement to establish default. The rationale behind being that an overdraft falls under a contract between a banker and customer and has to be distinguished from ordinary case of loan of money. In JOACHIMSON VS. SWISS BANK CORPORATION, (1921) All ER. 92 it was held that an advance made on overdraft does not become due until the banker has actually demanded payment. In my view therefore, in the absence of a demand note, it cannot be said that, the second defendant has established default in terms of the overdraft which would also be the basis of the default in terms of the mortgage. From the foregoing discussions and in the absence of evidence of service of a 60 days notice of default on the plaintiff in terms of mortgage and a demand note on the first defendant in terms of the overdraft, it cannot be said that, there has been adduced sufficient evidence to establish that the plaintiff as a mortgagor, has committed any event of default in terms of the mortgage. 15 Since under the law of mortgage the right to sale arises after expiry of 60 days statutory notice, it is obvious that the 2nd defendant was not entitled to sell the suit property. As such, the sale of the suit property to the fourth defendant was premature. Issues number two and three are accordingly answered against the second, third and fourth defendants. This now takes me to the last issue as to the legality of the sale of the suit property to the fourth defendant. In his evidence, the fourth defendant claims to be a bonafide purchaser for value without notice. He claims to have registered the transfer of the suit property in his own name. He relied, in the first place, on form number 29 and 30 (exhibit D6). Quite unexpectedly, the land forms exhibited do not bear any endorsement to suggest that they have been duly registered. There is no signature of the Commissioner for Land in both forms either. More so, they are not dated. The fourth defendant also produced a photocopy of what would be a notice of transfer from the Registrar of Titles. It was, upon objection, admitted tentatively as exhibit D8 with a note that the issue of admissibility would be considered in the final judgment. Throughout his evidence, DW4 did not make any explanation to justify production of secondary evidence. Neither did the counsel make any clarification in his written submissions. The document under discussion appears to have been issued by the Registrar of Titles and addressed to the 16 mortgagor. The mortgagor denies service of the same. There is no indication therein of the service of the notice to the plaintiff. The Registrar of Title or any officer from the Registry who would be in the custody of the document was not called to produce the document and establish the service. Nor was he served with a notice to produce. In the circumstance, placing reliance on the said document will not only offend the requirements under section 67 and 68 of the Evidence Act but lead to miscarriage of justice on the part of the plaintiff as well. It is on that account that, I sustain the preliminary objection. I will p -u therefore not place reliance on exhibit D8. As that is not enough, the fourth defendant, for the reason better known to himself, neither pleaded not tendered any certificate of title registered in his name despite the legality of the sale being contentious. In the absence of the said certificate of title, this Court cannot have any factual basis to imply registration of the suit property in the name of the fourth defendant. The defense of bonafide purchaser for value without notice, is protected under section 135 (2) and (3) of the Land Act which provides as follows:- 135-(1) This section applies to- (a) a person who purchase mortgaged land from the mortgagee or receiver, excluding a case where the mortgagee is the purchaser; 17 (b) a person claiming the mortgaged land through the person who purchases mortgage land from the mortgagee or receiver, including a person claiming through the mortgagee where the mortgagee is the purchaser where, in such a case, the person so claiming obtained the mortgaged land in good faith. (2) A person to whom this section applies- (a) is not answerable for the loss, misapplication or non application of the purchase money paid for the mortgaged land. (b) Is not obliged to see to the application of the purchase price. (c) Is not obliged to inquire whether there has been a default by the mortgagor or whether any notice required to be given in connection with the exercise of the power of sale has been duly given or whether the sale is otherwise necessary, proper or irregular. (3) A person to whom this section applies is protected even if at any time before completion of sale, he has actual notice that there has not been default by the mortgagor, or that a notice has not been duly served or that the sale is in some way unnecessary, improper, or irregular, except in the case offraud, misrepresentation or other dishonest conduct on the part of the mortgagee of which that person has actual or constructive notice. The scope of the application of the above provisions was judicially considered in Moshi Electrical Light Co. Ltd, and others vs. Equity Bank (T) LTD and Others, Land Case No. 55 of 2015 (HC- Mwanza, Unreported), where it was observed as follows:- Since the provision of section 51 of the LRA has survived upon the fundamental reforms brought by Land (Amendment) Act No. 2 of 2004 and Mortgage and Finance (Special Provisions) Act No. 17 of2008, and in so far as the interest of the mortgagor in the mortgaged property passes to the purchaser, according to section 134 (4) of the LA, upon registration of the 18 right of occupancy in the name of the purchaser, it is my opinion that, the protection under section 135 of the LA accrues upon registration of the transfer. It does not ever seem to have been the intention of the legislature to protect a purchaser without affording corresponding protection to the mortgagor. It is in the sprit of striking such a balance that, section 51(1) of the LRA requires the Registrar, before registering the transfer, to avail the mortgagor with a 30 days notice within which he can initiate proceedings to the High Court to challenge the sale. The protection under section 135 of the LA therefore presupposes that a sale agreement has been made between the mortgagee and the purchaser and has been duly registered in due compliance with the provision of section 51 (1) of the LRA and of course, after the mortgagor has been afforded an opportunity to raise any question on the validity and legality of the transfer to the High Court. Therefore, since there has not been adduced sufficient evidence to establish that the suit property had, before the institution of this suit, been duly registered in the name of the fourth defendant, the defense of bonafide purchaser for value without notice cannot stand. The fourth issue is also answered against the second, third and fourth defendants. On the last issue as to relief, it is my position in the first place that, the plaintiff is entitled a decree nullifying the sale of the suit property. It is accordingly granted and the sale nullified and set aside for being premature. I have been requested to direct the second defendant to solely claim his loan to the first defendant. Since I have held in relation to the first issue that, the mortgage was valid, I will not grant the relief. In the final result, the suit succeeds to the extent 19 of proof of default and validity of the sale. The sale of the suit property to the fourth defendant is accordingly nullified with costs. JUDGE 16/10/2020 Judgment delivered this 16th day of October in the absence of the plaintiff and in the presence of the first and fourth defendant in persons, second defendant through advocate Kasta Jerald and in the absence of 3rd Defendant. 20