ATIBA IYALAMU SAVINGS & LOAN LIMITED V. SIDIKU AJALA SUBERU & ANOTHER (2018)

Background

This appeal concerned a mortgage-backed loan transaction between Atiba Iyalamu Savings & Loan Limited and Mr. Sidiku Ajala Suberu, the owner of Amusement International Guest House in Ilorin, Kwara State. On 10 September 1996, the appellant offered the 1st respondent a mortgage loan of N600,000.00, repayable over twelve months. The letter of offer, Exhibit D1, stated an interest rate of 3% per month and required the loan to be secured by a legal mortgage over the respondent’s property at No. 11, Adamu Road, Off Taiwo Road, Ilorin. The loan was subsequently secured by a deed of legal mortgage, Exhibit D2, executed on 4 October 1996. That deed stated that interest would be charged at 21% per annum.

The 1st respondent maintained that he had repaid N826,476.00, which exceeded the principal and applicable interest, and that the appellant nevertheless attempted to sell the mortgaged property by auction. An auction notice was published in the Nigerian Tribune and another notice was pasted on the property despite an injunction obtained by the respondent. He therefore commenced proceedings at the High Court of Kwara State seeking declarations that the notices were void, an injunction restraining the sale, a refund of N179,805.00 allegedly overpaid, and release of his title documents.

The appellant denied that the loan had been fully repaid. It contended that some payments related to another facility and counterclaimed N1,466,802.00, representing the alleged outstanding principal, interest and charges calculated at 3% per month. The trial court dismissed most of the respondent’s claims and granted the appellant’s counterclaim in part. On appeal, the Court of Appeal reversed that decision, accepted that the respondent had discharged the loan and overpaid the appellant, ordered a refund of N179,805.00, and dismissed the counterclaim. The appellant then appealed to the Supreme Court.

Issues

1. Whether the letter of offer or the subsequent deed of legal mortgage governed the parties’ transaction and the applicable interest rate.
2. Whether the Court of Appeal wrongly dismissed the appellant’s counterclaim for want of evidence.
3. Whether the respondent proved an overpayment of N179,805.00.
4. Whether the respondent’s further and better amended statement of claim disclosed a reasonable cause of action.
5. Whether certain comments by the Court of Appeal concerning excessive or illegal interest and the pasting of the auction notice were appealable decisions or merely obiter dicta.

Ratio Decidendi

The Supreme Court held that a binding contract requires consensus ad idem on essential terms, an intention to create legal relations, consideration where applicable, and a concluded bargain. Where an agreement is expressly made subject to the fulfilment of specified conditions, it remains inchoate and non-binding until those conditions are fulfilled. Exhibit D1 expressly required the loan to be secured by a legal mortgage and warned that all stated conditions had to be carried out. Consequently, Exhibit D2 was the operative and final agreement between the parties.

The Court further held that the executed and registered deed of legal mortgage superseded the earlier letter of offer to the extent of any inconsistency. The applicable interest rate was therefore 21% per annum, as stated in Exhibit D2, rather than 3% per month. Since the contract was reduced into writing, oral evidence or extrinsic material could not be used to add to, vary, subtract from, or contradict its terms.

The Court distinguished ratio decidendi from obiter dictum. The ratio is the legal principle upon which the decision rests, while an obiter dictum is an incidental observation that does not determine the live issue. An appeal lies against a decision, not against an observation made in passing. Accordingly, the appellant’s complaints against the Court of Appeal’s comments on the alleged illegality of the 3% monthly interest and the condemnation of the auction notice were incompetent because those comments did not form the basis of the judgment.

Court Findings

On the counterclaim, the Supreme Court reaffirmed that a counterclaim is an independent action. The counterclaimant becomes, in substance, the plaintiff and bears the burden of proving the claim on the balance of probabilities. The appellant’s calculation of N1,466,802.00 was founded on the wrong interest rate of 3% per month. Its statements of account and ledger entries also failed to explain how the alleged indebtedness increased from an earlier figure to the amount claimed. The trial court itself had found the accounting evidence unclear and unconvincing. It was therefore wrong to award a lesser sum without establishing what the sum represented. The Court of Appeal correctly dismissed the counterclaim.

Regarding the alleged overpayment, the Supreme Court accepted the Court of Appeal’s finding that the respondent had tendered payment tellers showing payments totalling approximately N826,476.00. The appellant’s stamp appeared on the tellers, and the appellant did not satisfactorily disprove the payments. When the correct interest rate of 21% per annum was applied, the respondent had paid more than the principal and accrued interest. The refund of N179,805.00 was therefore upheld.

The Court also held that the respondent’s pleadings disclosed a reasonable cause of action. A cause of action consists of the facts which, if proved, would entitle a claimant to judgment. At the interlocutory stage of determining whether a reasonable cause of action exists, the court considers the statement of claim and assumes its material facts to be true; it does not conduct a trial on the strength or weakness of the evidence. The respondent pleaded the loan, the mortgage, repayment, alleged overpayment, and the threatened sale of his property. Those facts, if established, entitled him to declaratory and injunctive relief.

A mortgage was described as an interest in property defeasible upon payment of the secured debt and interest. Although legal title is transferred to the mortgagee subject to the mortgage terms, the mortgagee’s power of sale cannot properly be exercised after the mortgagor has discharged the secured obligations. The mortgage would then be redeemable and the property releasable to the mortgagor.

Conclusion

The Supreme Court, in a unanimous decision delivered by Kekere-Ekun JSC, dismissed the appeal and affirmed the judgment of the Court of Appeal. The appellant was required to refund N179,805.00 to the 1st respondent. The parties were ordered to bear their respective costs.

Significance

The decision is important in Nigerian banking, mortgage and contract law. It confirms that a later, executed and registered mortgage deed may supersede inconsistent preliminary loan documentation, particularly where the preliminary offer is expressly conditional. It also emphasises the strict enforcement of written contractual terms and the inability of a party to rely on oral evidence or informal admissions to contradict a final written instrument. The decision additionally clarifies that a counterclaim must be independently proved, that an unexplained account cannot sustain a monetary judgment, and that a claimant resisting an allegedly wrongful mortgage sale has a reasonable cause of action where the pleadings assert full repayment. Finally, it reinforces the appellate distinction between binding judicial reasoning and non-appealable obiter observations.