mremi enterprises ltd another vs boa bank t ltd others 2018 tzhclandd 56 9 march 2018

IN THE HIGH COURT OF TANZANIA (LAND DIVISION) AT DAR ES SALAAM LAND CASE NO. 195 OF 2014 MREMI ENTERPRISES LIMITED.............................1st PLAINTIFF MARY AMANIEL SARIA.........................................2nd DEFENDANT VERSUS BOA BANK TANZANIA LTD.................................... 1st DEFENDANT MWANAHIBA MOHAMED MZEE............................ 2nd DEFENDANT MABUNDA AUCTION MART.................................. 3rd DEFENDANT JUDGMENT 14th December, 2017 & 9 h March, 2018 MZUNA, J. The claim by the plaintiffs above mentioned is for a declaration that the sale of the second plaintiff's property on Plot No. 2018-2019 Block 'A' Kimara King'ong'o Area, Kinondoni Municipality which was mortgaged as collateral for the loan advanced to the first plaintiff is null and void. That there is no outstanding loan by the first plaintiff in favour of the first defendant. They also claimed for damages and costs of this suit. The defence on the other hand alleges that the letter of facility PDO/CDT/CiS/740/08 of 2nd December, 2008 extended to the first plaintiff had never been fully serviced prompting sale of the mortgaged property. The defence therefore prays for dismissal of the suit with costs. A total of four witnesses (two for the plaintiffs and two for defence) testified. Mr. Ogunde, the learned counsel appeared for the plaintiffs while the first and the second defendants were represented by Mr. Mogusu, the learned counsel. The suit proceeded ex parte against the third defendant who defaulted to appear despite being served. The following issues were framed for the court to determine: - 1. Whether the plaintiffs were indebted to the 1st defendant? 2. I f the 1st issue is answered in affirmative, what was the extent o f the plaintiff's liability? 3. Whether the sale o f the mortgaged property was lawful? 4. Whether the withdrawal o f the sum o f USD 3,473.29 by the 1st defendant from the 1st plaintiff's account was lawful? 5. Whether the plaintiffs have suffered damages due to the purported sale and eviction from the suitpremises by the 2ndand J d defendants? 6. To what reliefs are the parties untitled? 2 The first and second issues are interrelated and therefore I would combine them. The question is, were the plaintiffs indebted to the 1st defendant? I f so, how much? The evidence as they stands are that:- PW1 Gladstone Anderson Mremi said is the Director and shareholder of Mremi Enterprise, the first plaintiff. That in 2008 he took a loan of U$ 60000 from the Bank of Africa referred herein after as the 1st defendant. There was security of a house on Plot No. 2018-2019 Block A King'ong'o Dares Salaam as evidenced by the facility letter (exhibit PI). It was a term loan from December 2008 to December, 2009 payable with interest upon a return of the principle and in case of default or delay in paying the installments, penalty was charged on the said interest. PW1 says, the advanced loan was fully discharged having paid the interest and penalty for late payments leaving a balance of USD 3084 in the account as per Exhibit P2. PW1 had in mind to have another loan so he requested for the title deed be returned back. He was denied same allegedly that he never paid the loan in time and was still indebted to the bank for U$ 6500 as evidenced by a letter Exhibit P3. 3 His lawyer, wrote them a letter and was informed that he was indebted U$ 6000 and Tshs 8,000,000/- as evidenced by a letter of 1st October 2013 (exhibit P4) followed by another letter (exhibit P6). They allege that currently the claim stood at U$ 6581.90 and Tshs 8,201,979/31 which is strongly disputed and contradicts with exhibit P6 where it is alleged is indebted Tshs 26.9/-. He denies to have borrowed the money in Tanzania shillings. PW1 says even assuming they meant Tshs 26,900,0000/- still it contradicts with exhibit P4 where they alleged was indebted U$ 6501.90 and Tshs 8,201, 079.31. Further the alleged purchaser as per Exhibit P5 one Mwanahiba Mzee was employed by the bank and used to sign his loan. He says the eviction caused chaos to the children who were in classes and the auction was not publicly made instead it was the bouncers who were sent to evict them. He denies to be indebted. Mary Amaniel Saria (PW2) also told this court that she is the owner of the mortgaged property bearing Title No. 2018 and 2019 and that she authorized the 1st plaintiff to use her title as collateral for the Bank of Africa at an advanced loan of U$ 60,000. To the best of her understanding, the loan had already been fully paid by December 2011. On the other hand DW1 Joseph Bakari Mkonje, the recovery Manager told this court that the 1st plaintiff took the loan of USD 54,000 from the 1st defendant and the same was not paid as per terms and conditions. He tendered the Bank statement of Mremi Enterprise Ltd as exhibit D1 to support his testimony. That there was advertisement in the Nipashe Newspaper as evidenced by Exhibit D2. There was also tendered Bank Statement as exhibit D3. That the sale of the house which was used as security was at Tshs 140 million as evidenced by the certificate of sale, exhibit D4. Submitting on the first issue, Mr. Wilson Ogunde, the learned counsel for the plaintiffs submitted that the issue should be looked as at the date of the auction, that is 7th December, 2013. He admits the advancement of the loan to the 1st plaintiff both for U$ 54,000 and 60,000 which attracted an interest at the time of payment and or penalty for late payment over and above the interest charged. However he says his client cleared the outstanding loan that is why the first plaintiff approached the first defendant to have the title deed returned back the request which was however refused. That the bank statement (exhibit P2) tendered by PW1 showed there was a balance of U$ 3,375.00 at the time of the auction (7/12/2013) in the loan account No. 10201609003. That even the bank statement Exhibit D1 tendered by the defence never showed a negative balance. It was his view that the tendered bank statements (exhibit P2 and Dl) shows the plaintiff was not indebted to the first defendant by 7th December, 2013. That, the defence failed to prove such liability as they gave four different versions on the outstanding debt. He touched on paragraph 2 of the first defendant's defence where it is alleged that the 1st plaintiff was indebted U$ 6,014.71 which contradicts with the evidence of DW1 who said that the liability stood at 6643.11 at the time of the auction. That is also opposed to Exhibit P4, a letter of 1st October, 2013 directed to the plaintiff's lawyer where it is alleged that the first plaintiff was indebted U$ 6,581.90 and TZS. 8,201,079.31. Lastly, on exhibit P6, a letter of 8th July, 2014 directed to the plaintiff's lawyer as an answer for the demand for return of the title deed where it was alleged that the instruction to sale the property used as security was after the plaintiff had failed to pay TZS. 26.9. That the instruction to auction the property (as per the annexed copy of letter to exhibit P6) was to recover Tshs 26,998,697.85 being the first plaintiff's liability. This figure he says is unsupported because even if it is converted at Tshs 2000 per one U$ assuming he was indebted U$ 6643.11 6 (as alleged by DW1) or U$ 6014.71 (as per the filed WSD) could not reach that figure. Based on these anomalies, the learned counsel is of the view that the amount of the claim was cooked and not proved. That the defendant tendered exhibit D3 which in the first place is not pleaded, purporting to show that the first plaintiff was indebted U$ 5,158.61 in respect of Account No. 02016090017 which was created by the bank without knowledge and approval of the first plaintiff. He prayed for the court to answer the first and second issue in the negative that they were not indebted. On his part, Mr. Magusu Mugoka, the learned counsel submitted that the first plaintiff admitted to have received a bank loan whereby a house on Plot No. 2018 and 2019 Block A Kimara King'ong'o was used as security. Initially there was a house which was then developed into a School (Kilimanjaro Academy). The learned counsel submitted that the evidence of DW1 and the bank statement exhibit D1 shows that on 17th March, 2014, Mremi Enterprise was still indebted USD 6,000. That the tendered bank statement by the plaintiff has failed to disprove such liability. It was his view that this issue should be answered in the positive and the extent of such liability is U$ 6,000. Reading from the adduced evidence, it is not disputed that there was an advanced loan to the first plaintiff of U$ 60,000. It is said the first plaintiff failed to service the loan prompting issuance of notices which was never responded to, leading to the sale after advertisement in the newspaper. Now, who was expected to lead evidence of such indebtedness? The defence relies on Exhibit D1 and the evidence of DW1 that the plaintiff was indebted U$ 6000. Reading from Exhibit Dl, by 14/11/2013 there was a balance of U$ 2773 .29. That evidence could only be contradicted by the demand notice whereby the plaintiff could have been notified the amount due. Actually DW1 said a balance of U$ 3000 cleared a debt of 2011. Nothing was said about U$ 2773.29. In the absence of such evidence I would rule that U$ 2,773.29 be deducted from U$ 6,000 making a total of claimed sum as U$ 3,226.71. I have arrived at that conclusion based on the contradictory statement in the evidence of DW1. When DW1 was cross examined by Mr. Ogunde the learned counsel he said that:- "DW1 ...A t the time o f auction Mr. Mremi Enterprise was indebted U$ 13000 which includes aii charges by 07/12/2013. According to Bank statement (Exhibit D l) he was indebted U$ 6,643.11. A t the loan account it is reflected U$ 1487.05 as Principal plus interest U$ 5,158.61 which total makes U$ 6,643.11. MR. OGUNDE ADVOCATE fI refer him to Exhibit P6.) DW1: This is the instruction letter. We instructed her (Best Group) to collect Tshs. 26,998,697.85/= MR. OGUNDE ADVOCATE: Does that relate to the U$ 6,643.11 DW1: The Tshs. 26,998,607/85 includes the said U$ 6,643.11" I would agree with Mr. Ogunde the learned counsel that the claimed amount U$ 6,643.11 as stated by DW1 or U$ 6581.90 shown in exhibit P4, with due respect was cooked and not proved. Actually DW1 conceded that their WSD purported that the claim was U$ 6,014/71 which differed with the amount he testified in court. He said the figure could vary depending on how 9 one commands the system, which is something very dangerous and not safe for a financial institution worth such a name. For the above stated reasons, the first issue is answered in the affirmative that the first plaintiff is indebted to the first defendant. Now, the second issue, to what extent? The plaintiff has said never borrowed money in Tshs. However, he concedes to have opened two accounts, one in foreign currency being No. 102016090003 and another in Tshs 1020160900004. He had never touched on the later account. DW1 said he remembers he took loan in Tshs. That by itself places a burden on the plaintiff to disprove such an allegation which he never did albeit on the balance of probabilities. The account was opened with purpose. I agree he was also indebted in Tshs. I would say he is indebted in Tanzania shillings 8,201,079.31 as stated in exhibit P4 which stands unopposed. The total claim therefore as at the time of auction was Tshs 8,201,079.31 plus U$ 3,226.71. The third issue is whether the sale of the mortgaged property namely Title No. 80891 Plot No. 2018 -2019 Block 'A' Kimara King'ong'o was lawful? 10 The PW1 contended that the 1st defendant did not serve him with the mandatory sixty (60) days' notice within which to remedy the default. He therefore alleged that the sale was null and void for want of notice as provided under Section 127 of the Land Act, C apll3 R.E. 2002. The defence evidence of DW2 Joseph Assey, the Broker, said that there was publication in the newspaper of wide coverage and was given 14 days' notice as evidenced by Exhibit D2. The auction was then conducted as evidenced by the certificate of sale (Exhibit D4). The evidence on record shows that the 1st plaintiff took the loan and the 2nd plaintiff's property was mortgaged as security. As above shown, the overdraft was not paid to date. In the circumstances, the 1st defendant is entitled to exercise lender's lien over the mortgaged property under the facility letter. The only remedy the Mortgagee has where there is default in payment of the loan is to sell the mortgage property. Section 131 (1) of the Land Act (supra) clearly states so. It provides:- "(1) Where a borrower is in default o f his obligations under a mortgage and remains in default at the expiry o f the time provided for the rectification o f that default in the notice served on him under ii subsection (1) o f section 125, a lender may exercise his power to sell the mortgaged land." I am aware under section 127 (1) and (2) of the Land Act, Cap 113, read together with section 131 (1) and (2) of the Land Act, there is a requirement that sale should not issue unless and until a written notice was issued to the mortgagor before exercising power of sale. The plaintiff was made aware and had time to rectify the default but never bothered to do so. It was held in the case of Harnam and Others vs. Kirpal and Another [1974] 1 EA 78 that:- "If there was anything incorrect in the advertisement it was a mere irregularity." (Emphasis mine). In the circumstances, I find that the sale was lawful because the plaintiff had never cleared the loan. However, there is a sub issue? Did the sale o f the mortgaged property pass title? There was the evidence of PW1 and PW2 that the property which was sold, a school is on Plot No. 20/22 and 20/23 not Plot No 2018-2019 Block "A" Kimara which was used to secure the mortgage deed. There was also a 12 complaint on the purchaser. DW2 admitted never made survey. There was no valuation which was tendered either. This issue of the purchaser was strongly touched by Mr. Ogunde the learned counsel during his final submission. He argues that it was not proper for the Bank Officer one Mwanahiba Mzee, then Head Retail Banking who was dealing with the 1st plaintiff when he made application to secure the loan to purchase the mortgaged property. It is clearly shown that the said purchaser who is the second defendant, signed Exhibit P3 and P5 both in her official then personal capacity. Although the defence counsel has argued that even Bank officers have the right to purchase such property, this version with due respect and without citing any authority, is illegal for the reasons of conflict of interest. It is I think high time that Bank Officers should have Code of Ethics. There is clear proof of collusion and fraud in order to benefit the purported purchaser. It is no wonder as the plaintiffs alleged, there was no purchase money which was paid, a certificate of sale notwithstanding. This finding is based on the fact that DW1 alleges that the claimed sum was for Tshs 26 Million, that the property was sold for Tshs 140,000,000/-. He said that the balance was deposited in the plaintiffs account, the account number he 13 could not recall. There was no such proof. Above all, even DW2 who purported to have conducted such sale, could not recall the name of the second bidder. Order XXI Rule 88 (1) of the CPC Cap 33 RE 2002 allows court to set aside sale on grounds of irregularity due to fraud if the party who alleges, has sustained "substantial injury" by reasons of such irregularities. PW1 and PW2 said at the time of mortgage it was a normal house which was used as security not a storey building which was at a different plot and is a school. The school was closed. I find that the prevailing circumstances has necessitated this court to set aside sale on ground of irregularities. Courts of law do so very rarely. This is a case of its peculiar nature and should never at any rate lay a precedent to other similar loan defaulters. The plaintiffs are hereby given 30 (thirty) days from today within which to clear the loan due as shown above. The fourth issue is whether withdrawal o f a sum o f USD 3,473.29 by the 1st defendant from the account o f the plaintiffs was lawful? The 1st plaintiff stated that he had already paid the loan therefore the money deposited in his account was unlawfully withdrawn by the 1st defendant. DW1 on the other hand insisted that the money was withdrawn so as to clear the 1st plaintiff's debt. That the said money had to clear the accumulated interest not the loan due. According to the evidence on record the 1st plaintiff was indebted. As proof thereof, he continued to deposit money even in 2013 and 2014 while fully aware that the mortgaged property was sold in 2013. This is a contradiction for the 1st plaintiff's allegation that he had already paid for the loan in 2011. He said nothing on the interest. I find as above shown that the 1st plaintiff was still indebted and therefore the withdrawn money was meant to offset the bank interest. It was therefore lawful. As to the issue on whether the plaintiffs have suffered damages for the purported sale, PW2 said that she incurred loss because parents had to claim back their money due to such closure of a school. Other children left from school and the desks were taken away as a result some children had to sit down. In total Tshs 300,000,000/- was prayed for as damages. The plaintiffs asked to tender a list of items which support such claim. However that prayer was refused because it was never reflected in the plaint. 15 Since the plaintiffs have failed to prove to the satisfaction of the court that the advanced loan was fully paid, I find they never suffered damages for the sale. Above all, they said that so far there is no eviction which had been issued against them. The alleged 300,000,000/- claimed as exemplary damages stated in the plaint has not been proved to the satisfaction of the court. Lastly on reliefs. Reading the filed plaint, special attention has been made for rectification of the Land register to de-register the second defendant's name to be that of the second defendant. Mr. Magusu, the learned counsel for the 1st defendant has strongly objected to this prayer for non-joinder of the Commissioner for Lands who made such transfer as a necessary party defendant. On the other hand, Mr. Ogunde, the learned counsel has submitted that the proper person was the second defendant who was joined but failed to show up because she knew to have played a foul play. That inference adverse on her should be drawn based on the case of Hemed Said vs. Mohamed Mbilu [1984] TLR 113. It is true that the Commissioner for Land ought to have been called as a witness not necessarily as a party to the suit. Personally, on the strength of the evidence, I would think the second defendant was a material witness 16 for the defence case. It was held in the case of Hemed Said vs. Mohamed Mbilu (supra) the position I entirely subscribe to, that:- "Where, for undisclosed reasons, a party fails to call a material witness on his side, the court is entitled to draw an inference that if the witnesses were called they would have given evidence contrary to the party's interests." A bonafide purchaser for value could not have failed to appear by any stretch of imagination to protect her interest. I would therefore, for this reason grant this prayer of de-registering subject to the payment of the above said money within the time set. After all, Mr. Magusu the learned counsel on 12/10/2017 said that the buyer changed mind. So, the issue of Commissioner for Land is only an afterthought. I find and hold that the purported sale is declared voidab initio. Judgment is therefore partly entered in favour of the defendant and partly in favour of the plaintiff. There should be another auction after one month if the said money is not fully paid. Otherwise the sale is hereby set aside. Each party to bear its own costs. M. G. MZUNA, JUDGE, 17