Any contract by a company in a name other than its registered one cannot be enforced unless it is ratified

CHUKWU & ANOR V. CHUKWU & ORS (2018) LPELR-45482(CA)

In The Court Of Appeal
In the Owerri Judicial Division
Holden at Owerri
ON FRIDAY, THE 24TH DAY OF AUGUST, 2018
Suit No: CA/OW/243/2017

Before Their Lordships:
B MASSOUD ABDULRAHMAN OREDOLA J.C.A
AYOBODE OLUJIMI LOKULO-SODIPE J.C.A
ITA GEORGE MBABA J.C.A

Between
1. LAWSON NNAMDI CHUKWU
2. L. A. S. CHUKWU & SONS NIG LTD

Appellants

And
1. HON. LOLO STELLA C. CHUKWU
2. MR. MODESTUS O. OBIWURU (By his Attorney Bartholomew Okafor)
3. UNION BANK OF NIGERIA PLC

Respondents

LEAD JUDGMENT DELIVERED BY MASSOUD ABDULRAHMAN OREDOLA, J.C.A.

FACTS OF THE CASE
Union Bank of Nigeria Plc. (3rd respondent herein) advanced a loan facility to L. A. S. Chukwu & Sons Nig. Ltd and same was secured with a landed property/building known and referred to as Plot 178 E New Owerri, Imo State, (forthwith referred to as the property) being a property of the said L. A. S. Chukwu & Sons Nig. Ltd. Before fully liquidating the entire loan sum, Chief L.A.S. Chukwu died.

The law firm of B. F. Omidina & Co. was employed by the 3rd respondent to help recover the loan. The firm made a proposal to the deceased family to exercise an option to buy the property at the rate of N5,791,747 (Five Million Seven Hundred and Ninety One Thousand, Seven Hundred and Forty Seven Naira), which represented the outstanding balance of the unliquidated loan sum.

The 1st respondent sourced for the money from the 2nd respondent and paid off the said loan borrowed/taken by the 2nd appellant and fully discharged the 2nd appellant from further obligation with regard to liquidation in respect of the said loan facility and in exchange, the 1st respondent claimed that the Law Firm of B. F. Omidina & Co in its capacity as the agent of the 3rd respondent, transferred the legal title of the property to her, vide a private treaty arrangement (option to buy) in which the law firm purportedly disposed of “the pledged property used as collateral by L.A.S. CHUKWU (NIG.) LTD” (a name significantly different from L. A. S. Chukwu & Sons Nig. Ltd).

However, a month after the payment was made and acknowledged by the 3rd respondent, the title deed to the said property was not released to her by the 3rd respondent despite all efforts. The 1st and second respondents therefore initiated a suit at the Imo State High Court sitting at Owerri, to compel the 3rd respondent to fulfill the agreement it had with the 1st respondent by executing a proper and valid transfer agreement in favour of the 1st respondent and releasing the title document to the 1st respondent, among others.

During the course of proceedings, Lawson Nnamdi Chukwu and L. A. S. Chukwu & Sons Nig. Ltd (appellants herein), applied and were joined as the 2nd & 3rd defendants respectively by an order of the trial court. The 2nd and 3rd defendants (now appellants) counter-claimed that the property belonged to the L. A. S. Chukwu & Sons Nig. Ltd (2nd appellant herein) and not personal estate of Late Chief L.A.S. Chukwu. Further, that the loan, having been over-paid, the overpaid sum of N1,500,000.00 (One Million, Five Hundred Thousand Naira) be reimbursed and the deed of release as well as the title documents be given to the 2nd appellant, which is the rightful owner of the property. The appellants also canvassed that the 1st respondent, not being a member of the 2nd appellants company nor a director nor authorized to discharge the debt, should be regarded as gratuitous.

The 3rd respondent on its own part entered its defence against the 1st and 2nd respondents’ suit but did not contest the appellants’ counter claim. The 3rd respondent’s defence against the 1st & 2nd respondents claim was that the mandate given to the law firm of B. F. Omidina & Co. was to recover outstanding debts and that the duration of the contract was for three months period which had already elapsed before the law firm allegedly entered into the option to buy agreement with the 1st respondent. The 3rd respondent stated that they did not authorize the law firm or any other person to sell the property and that the mortgage on the property was not foreclosed.

After the close of hearing in the case, the learned trial judge found majorly in favour of the 1st and 2nd respondents and entered judgment in their favour. He also entered judgment partially in favour of the monetary claim in the counter-claim of the appellants.The appellants, being dissatisfied with the decision of the trial court, appealed against the same.

Despite being duly served with the appellants’ brief of argument, the respondents failed to file their respective briefs of argument and on the date slated for hearing, the respondents were absent despite service of hearing notice on them. Nevertheless, the court proceeded to hear this appeal on its merit.

ISSUE FOR DETERMINATION
The court distilled a sole issue for determination viz:
Whether the lower court in granting the claims of the 1st and 2nd respondents, was right, and the decision being sustainable, having regard to the lower court’s evaluation of the evidence adduced in relation to the pleadings. (Put differently, whether the 1st and 2nd respondents proved their case and were thus entitled to a favourable judgment).

ARGUMENTS
The crux of the argument by appellants’ counsel in respect of the sole issue is that the property which is the subject matter of this appeal belongs to the 2nd appellant which is a corporate entity with different legal personality from Late Chief L.A.S. Chukwu, and that that factual situation served as the basis why the property was not included in his Will. He called in aid the cases of AFRIBANK (NIG.) LTD. Vs. M. ENT. LTD. (2008) 12 NWLR (Pt. 1098) 223 at 241; SALOMON v. SALOMON (1897) AC22.

It was the submission of the appellants’ counsel that the trial court ought not to have mixed up the 2nd appellants’ juristic personality with that of the 1st respondent so as to enable the 1st respondent to supplant the 2nd appellant in the matter of the right to the release of the mortgaged property and its title document.

On the purported sale of the property to the 1st respondent, the learned counsel for the appellants argued that, B. F. Omidina & Co., which purportedly sold the property to the 1st respondent did not have any authority to transfer any interest in the property as its express scope of power was to recover the debt owed. In addition, that in law, a mortgagor reserves the right of ownership of the mortgaged property upon liquidation of the mortgage debt, and that since the bank had not foreclosed the 2nd appellant from recovering the property, any purported sale of the property without prior recourse to the 1st appellant is void.

Furthermore, the learned counsel for the appellants argued that apart from the fact that B. F. Omidina & Co., or any other person whosoever was not authorized to sell the property, the party said to be represented by B. F. Omidina & Co. was L.A.S. Chukwu (NIG.) Ltd. which is different from L.A.S. Chukwu & Sons Nig. Ltd. (the 2nd appellant, who entered into the mortgage transaction in this case with the 3rd respondent).Thus, the learned counsel for the appellants contended that the judgment of the trial court was perverse and urged the court to re-evaluate and review the evidence adduced by the parties and the decision of the lower court.

THE COURT’S FINDINGS
On the validity of the purported sale of the property by B. F. Omidina & Co. to the 1st respondent, or validity of the “option to buy” agreement, the court examined exhibit F (Debt Collection Assignment) and found that same was used to authorize the law firm of B. F. Omidina & Co. to undertake all legal means to recover the 3rd respondent’s monies in possession of some third parties as loans and no more, and invariably, there is nothing which authorized the law firm to dispose of the property (if any) used by the listed debtors as collaterals.

Furthermore, that the property was mortgaged to secure a loan in respect of which the 3rd respondent had consistently, persistently, stridently and strenuously stated that the property was not foreclosed. The Court then posited that both the 3rd respondent and its agent lacked the power to unilaterally sell the property to anybody, no matter who the buyer may be. The cases of Okonkwo v. Cooperative & Commerce Bank Nig. Plc & Ors. (2003) LPELR 2484 and Polo v. Ojor (2003) 3 NWLR (Pt. 807) 344, (2002) LPELR 6086 (CA) were culled in aid.

The Court, relying on the position of the law as enunciated above, and married with the facts of this case and judicial authorities cited in supported thereof, held firmly that the learned trial judge (with due respect) erred when he held that 1st respondent acquired a valid title to the property in dispute and that the 1st claimant (1st respondent) is the person who has the right to the release of the mortgaged property and not the 2nd and 3rd defendants (1st and 2nd appellants, respectively).

On the validity or otherwise of the “option to buy” agreement, it was discovered that the party on which behalf the law firm acted is legally different from the 2nd appellant who mortgaged the property to the 3rd respondent. In this regard, the court swiftly pointed out that it is elementary principle of corporate practice that a company is known by the name contained in its Memorandum of Association, by which it was registered and or incorporated and none other. Thus, if by any chance a company is sued or purported to have entered into any contract in a name different from its registered name, the contract would not be enforceable against the company, except the company by resolution ratifies it. Consequently, that having found in the instant case that the party represented by the law firm is different from the 2nd appellant, which mortgaged its property to the 3rd respondent, exhibit A (option to buy ) cannot be held binding on both the 2nd appellant and 3rd respondent.

The court thereafter concluded that from the pleaded facts and evidence led thereon by the respective parties, that the 1st and 2nd respondents did not discharge the burden of proof squarely placed on them with regard to authorization purportedly and or supposedly given by the 3rd respondent for the sale of the mortgaged property.

HELD
The court found this appeal to be meritorious and same was accordingly allowed. Consequently, the part of the judgment of the lower court delivered on the 26th day of January, 2017 in suit No. HOW/266/2005 in favour of the 1st and 2nd respondents wherein the lower court validated the sale of the property by the law firm to the 1st respondent, and the consequential orders in respect thereof were set aside and thus, the claims of the 1st and 2nd respondents were dismissed.

In its place, judgment was entered for the appellants in respect of their counter-claim in the following terms:
1. It is hereby declared that the 2nd appellant’s indebtedness to the 3rd respondent has been settled and the legal mortgage executed between the parties is accordingly discharged.
2. The 3rd respondent is hereby ordered to release the title documents of Plot 178, Housing Area E, New Owerri (the mortgaged property) to the 2nd appellant for onward transmission to the Estate of Late Chief L. A. S. Chukwu.
3. The 3rd respondent is hereby ordered to refund to the 2nd appellant, the sum of N1.5million being excess money which was paid by the 2nd appellant and the receipt duly acknowledged by the 3rd respondent bank.
And costs in the sum of N50,000.00 was awarded against the 1st and 2nd respondents and in favour of the appellants.

Appearances:
D.C. Denwigwe (SAN) with him, O. O. Okonkwo, Esq. – For Appellants
Respondents duly served with requisite hearing notices but absent.
Compiled By Lawpavilion