THE UNITED REPUBLIC OF JUDICIARY

IN THE HIGH COURT OF TANZANIA (DISTRICT REGISTRY OF MBEYA) AT MBEYA

LAND CASE 08 OF 2017

HOSEA KASUMO MWAKASITU...... PLAINTIFF

VERSUS IGAWILO ENTREPRENEURSHIP ASSOCIATION...... 1st DEFENDANT ALAM JOSEPH MSIGWA...... 2nd DEFENDANT

GIBSON JOSEPH MWAKALIMBULE...... 3rd DEFENDANT

NCBA (T) LTD...... 4thDEFENDANT

LUMAGE AUCTION MART...... 5thDEFENDANT

JUDGEMENT

Date of Hearing : 08/10/2020 Date of Judgement: 10/12/2020

MONGELLA, J. Hosea Kasumo Mwakasitu, the plaintiff herein, is the legal owner of Plot No. 702, Block ‘DD’ Uyole area within Mbeya City (hereinafter referred to as the plot in dispute). The said plot bears CT No. 12564-MBYLR and LO No.

269783. In his plaint, he claims that, the 1st, 2nd, and 3rd defendants obtained a from the 4th defendant (trading as of Africa (T) Ltd by then) at its Mbeya branch to the tune of T.shs.

100,000,000/- (One hundred million Tanzania Shillings). The plaintiff guaranteed the said loan by charging the plot in dispute under mortgage. The loan was to be repaid within a span of eight months from 20th January 2012, the date it was disbursed.

He claims further that the 1st, 2nd, and 3rd defendants defaulted in repaying the loan. As a result, on 16th August 2013 the 4th defendant issued to him a sixty days’ notice to repay the outstanding balance of T.shs. 102,240,682.70 or else the 4th defendant shall proceed to enforce its remedies under the law. On 26th January 2014 he received a 14 days’ notice from the 5th defendant, following being instructed by the 4th defendant that upon failure to repay the outstanding balance the plot in dispute shall be sold without an order from the court. Given the situation, he resorted into filing this suit claiming for the following reliefs:

I. A declaration that the intended sale of the plaintiff’s suit premise by the 4th and 5th defendants is illegal and contrary to the law.

2. A permanent injunction against the 4fh and 5th defendants from interference with the plaintiff’s disputed property.

3. A declaration that the plaintiff has no obligation to pay the loan, rather the 1st, 2nd, and 3rd defendants are to repay the loan to the 4th defendant.

4. Costs of the suit. On the final pre-trial conference, six issues were framed for the proper determination of the matter, to wit:

1. Whether the plaintiff has got any cause of action against the 1st, 2nd,

and 3rd defendants.

2. Whether there was breach of contract for the payment of the loan

by the 1st, 2nd, and 3rd defendants.

3. On what terms the plaintiff mortgaged the suit property to the 4th defendant.

4. Whether the attempt to sale the property located on plot No. 702

Block ‘DD’ Uyole area in Mbeya City by the 4th and 5th defendants

was lawful.

5. Whether it was proper for the 4th and 5th defendants to attempt to auction the property of the plaintiff alone while the loan was guaranteed by two guarantors.

6. To what reliefs are the parties entitled to.

All parties were represented. The plaintiff was represented by Ms. Juliana

Marunda, the 1st, 2nd and 3rd defendants were represented by Mr. Mika Mbise, and the 4th and 5th defendants were represented by Mr. Joseph Mbogela, all learned advocates. In proving the issues os listed above, the prosecution mounted two witnesses and two exhibits. PW1 was the plaintiff himself. He testified that he guaranteed the 1st, 2nd and 3rd defendants on a bank loan by using his title deed. He said that sometime in August 2018 the 2nd and 3rd defendants went to see him and told him that they have an association named Igawilo Entrepreneurship Association (hereinafter referred to as IEA). They told him that they wanted a bank loan on behalf of the association, but had no collateral for the loan. They therefore asked for his title deed to obtain the loan.

PW1 continued to testify that the 2nd defendant is his neighbour and he pleaded with him to guarantee them through his title deed something which he agreed. In the same day he gave them the title deed for the bank to assess if it sufficed for the loan advancement. He claimed that the 3rd defendant was his local government leader thus he believed him. The two later informed him that the bank has assessed the title deed and approved it as sufficient to guarantee the bank loan. On 21st January

2012, they notified him that he was needed at the bank. He thus went to the bank on the same day. The bank was Commercial Bank of Africa

(CBA) by then, now NCBA Bank Tanzania Limited) located at Soweto area within Mbeya City. At the bank he was given some documents concerning guaranteeing the loan and he was told to sign as a guarantor. He was shown a place to sign and signed to guarantee IEA.

He added that the bank officer who attended him introduced him to another person named Stella Anyitike Mbogela. He was told that the said

Stella was his fellow guarantor and has also charged her title deed. They were thus two guarantors and they both signed the same document, but on different parts. PW1 guaranteed the loan through his house by giving the title deed. The same was admitted in evidence as ‘Exhibit Pl.’ Other people who signed the Credit Facility Letter were the 2nd and 3rd defendants as chairman and secretary of the 1st defendant, respectively. The same was admitted as ‘Exhibit P2.’

He continued to testify that after signing the loan facility letter he asked if the borrower was capable of paying and was assured by the bank officer that in accordance with their investigation the borrower was capable of paying the loan. He was told that his obligation was to remind the borrower to repay the loan. He said that after four months he followed up at the bank if the loan was being repaid, but was informed that it was repaid in only three months installments. The fourth month was not paid.

He followed up with the 2nd and 3rd defendants and they told him that he should wait for eight months as the loan shall be repaid in full.

He said that after eight months he was surprised to receive a letter from the bank notifying him that the borrower he guaranteed has not repaid the loan and was given sixty days to ensure that the loan was repaid. He thus went back to the borrower and he was assured that the loan shall be repaid within the sixty days’ period. However, the loan was never repaid.

He went back to the 1st defendant and was told that there were some problems, but was still assured that the loan shall be repaid. However, on

26th January 2014 he was issued a fourteen days’ notice by the 5th defendant on sale of his house. Thereafter he sought advice from a lawyer and ended up filing this matter in this Court. On cross examination, PW1 said that the 1st defendant is an institution and is the borrower. He denied having any relationship with the 1st defendant being it a member or holding any leadership position in the association.

He also denied taking any money form the loan advanced by the 4th defendant to the 1st defendant. He said that he did not understand if one guarantees a loan he is obliged to repay when the borrower defaults.

On re-examination he claimed that he signed the credit facility letter without knowing the contents therein as he does not know English language and the provisions were not interpreted to him. He insisted that it is the borrower who is supposed to repay the loan and not him.

PW2 was one Benedicto Mbogela, a member of the 1st defendant association. He also gave a sworn testimony saying that he knows the plaintiff as the guarantor of the 1st defendant on loan issued by the 4th defendant. He said that at one point their leaders asked them if they had any title deeds which can be used to obtain a bank loan. Later a meeting was conducted and they were informed that two guarantors were found. One of the guarantors was named Stella and was a member of the 1st defendant association and the second was the plaintiff. The said guarantors gave their title deeds and a loan was obtained by the leaders, that is, the chairman and the secretary. The loan was from CBA Bank and was to be repaid within eight months.

He continued to testify that, after the loan was obtained, the members were informed that they can obtain from the association. Some members obtained loans. However, they failed to repay as scheduled. Following that situation a meeting was called to insist members in repaying the loan. He then met with the plaintiff who informed him that his house was about to be sold as the association has failed to repay the loan.

PW2 further stated that the 1st defendant association has now disintegrated. He as well stated that the second guarantor, who was her sister, passed away and he does not know anything about her property. He said that the plaintiff is not a member of the 1st defendant association.

On cross examination, PW2 stated that the association had more than 300 members and he does not know all of them. He held no leadership position and was not responsible for keeping office records. He said that the loan was used to lend money to the members of the association.

On the other hand, the defence mounted three witnesses. DW1 testified in favour of the 4th and 5th defendants and DW2 and DW3 testified in favour of the 1st, 2nd, and 3rd defendants.

DW1, one Simbogo Maduhu, a bank officer in the loan recovery department of the 4th defendant’s bank, gave a sworn testimony to the effect that IEA, the 1st defendant, was issued a loan of T.shs. 100,000,000/-.

The loan contract was entered between IEA and CBA Bank by then. He said that the terms of the contract included the requirement of guarantee through immovable property. In the agreement forming part of the dispute at hand, the plaintiff’s house at plot no. 702 Uyole was charged as mortgage. He added that there was a specific agreement for the mortgage of a right of occupancy between Hosea Mwakasitu (the plaintiff herein) and CBA Bank (now NCBA Bank, the 4th defendant). The mortgage of a right of occupancy was admitted as ‘exhibit DI

DW1 continued to testify that the other terms concerned the time for repayment of the loan which was eight months at 21 percent interest and in the event IEA fails to repay the loan, the Bank would use the mortgaged property to recover its loan. In that respect the bank appointed an auctioneer named Lurnage Auctioneer (the 5th defendant) who did as instructed. The plaintiff however, resisted by securing a stop order and filed the case at hand to stop the Bank from selling the property. He said that until the date of hearing of the case, the debt had increased to T.shs. 141.7 million.

Describing the terms of the mortgage contract, DW1 stated that clause 2.2 charges the obligation to the mortgagor/guarantor to pay the outstanding amount of the loan upon demand by the bank. He said that the Bank notified the guarantor to repay the loan, but he did not honour the notice. He stated further that under clause 4 which is on securities, the mortgaged property was charged to guarantee the loan regardless of the economic condition of the borrower. He added that under clause 13 the Bank has the right to sell the property in the event the borrower fails to repay the loan.

On being cross examined by the plaintiff's counsel, DW1 admitted that the loan had two guarantors, being the plaintiff and one named Stella. He admitted that it was only the plaintiff’s house that was put under auction. He was not aware of what happened to Stella’s mortgaged property.

The 1st, 2nd, and 3rd defendants had two witnesses. These were the 2nd defendant, Alam Joseph Msigwa (DW2) and Gibson Jack Mwakalibule (DW3). DW2 testified that the 1st defendant is a registered group under the Ministry of Home Affairs. It has a leadership structure whereby it is governed by a board of nine members. He said that the duties of the board are to recruit members and issue loans.

Explaining the relationship between the plaintiff and the 1st defendant and how the bank loan came to be issued, DW2 stated that the plaintiff is a member of IEA with registration number 201, which is also his account number in the group for taking loans. He stated that the plaintiff is also a board member. At one point, the plaintiff was in need of a loan of T.shs. 20,000,000/- for his business. He was told that the loan was too big and the group had no enough funds to accommodate such an amount. The plaintiff then gave them an idea of taking a bank loan at CBA bank where IEA had an account. The plaintiff went to the bank and brought back information that the bank had agreed to issue the loan but wants a title deed. One Stella, who was also a board member of IEA, also came wanting a loan of T.shs. 20,000,000/-.

DW2 continued to state that they told the two to work on the loan and inform the board members. After completing the process, the plaintiff went back with documents and told them that they have to sign. He said that the loan was guaranteed by title deeds of the plaintiff and Stella. Hosea and Stella signed on behalf of the group. DW2 and DW3 also signed as chairperson and secretary, respectively.

He testified further that after sometime the plaintiff called them and told them that he wanted money as he wanted to travel to China. Thus they sent the secretary, the 3rd defendant to the bank to check if the loan money was already disbursed. There he found the loan money already disbursed by the bank. The plaintiff told them that they should deposit 17 million into his BOA Bank account and 3 million be deposited into his IEA account, something which was done by the secretary, the 3rd defendant. The said Stella borrowed 20 million and the rest of the money was borrowed by other IEA members. He said that he did not take any loan thereof and also the 3rd defendant did not.

DW2 added that after the loan advancement, that is, in 2013, elections for leadership position at IEA were conducted and one Uswege Jotam Kilembe was appointed the chairperson. He thus seized to be the chairperson. He stated that the 3rd defendant also seized to be secretary of the association in 2014 when he was elected as councilor at the local government level. In his place came one Musa Selemani.

Explaining on the loan contract, DW2 stated that the loan contract is between the guarantors and the Bank. He denied requesting any loan or title deed form the plaintiff. He said that the plaintiff went to the bank with his wife. He said that he has never seen the title deed before or the mortgage deed. He never signed the mortgage deed as well and thus he does not know the terms of the agreement between the olaintiff and the Bonk. He added that he personally does not have any contract with the plaintiff over the loan mortgage. He said he is not an institution thus he cannot repay the loan. He wondered why the plaintiff has sued him as well.

He further said that there is no any loan contract between the plaintiff and IEA, the 1st defendant. The contract is between the plaintiff and the Bank. He said that both the plaintiff and Stella never repaid their loans thus the money repaid by the rest of the members did not suffice to repay the loan. From that IEA paid more than T.shs. 42 million. He concluded by saying that he signed the loan facility letter only as a chairperson of IEA, he never took any money. When he left office he left all the money there.

When cross examined by Mr. Mbogela, DW2 stated that the loan from

CBA was advanced to IEA. On cross examination by Ms. Marunda, he stated that IEA repaid about T.shs. 42 million to the bank. However, he did not have documents to present before the court to substantiate the same. He further stated that IEA is a borrower represented by the chairperson. The plaintiff and Stella were guarantors. He insisted that the two were board members of IEA. When questioned about whether the 4th defendant issued any default notice to them, he replied that there were several communications between them whereby the 4th defendant reminded about repayment of the loan.

DW3 was the last defence witness. He testified that he worked with IEA as the secretary from 2011 to 2015 when he was elected councilor in the local government, thus resigned. He was employed by the board of IEA into that position of secretary. He also stated that the plaintiff was a board member of IEA which was established for purposes of assisting members

by issuing loans to them.

He said that when he got the job at IEA he was told that some IEA leaders with title deeds have been found. He was thus surprised to see that the plaintiff has included him in the suit as he does not have any contract with the plaintiff regarding the bank loan. He said that the responsible decision

making authority is the board of IEA. That, his duty as the secretary was to take records of the board meetings.

DW3 further stated that after completing all the process between the bank and the guarantors, the Bank issued documents they were required to sign as leaders. He said that the plaintiff did not guarantee him, but he guaranteed IEA thus it is incorrect to require him to repay the loan. He said that the plaintiff went to the Bank with his wife and followed all the process in guaranteeing the loan. Just like DW2, DW3 also said that the money obtained on loan was first needed by guarantors, but they had no circulating business so they went to IEA because its business was more circulating. Both guarantors were given 20 million each and the remaining

60 million was issued to other IEA member who needed loans.

DW3 stated further that the plaintiff was the first to get information on the disbursement of the loan money. Just like DW2, he also stated that the plaintiff instructed that 17 million be deposited into his BOA Bank account and 3 million be deposited into his IEA account. DW3 personally deposited the said money into the respective accounts as directed by the plaintiff. DW3 further stated that, he being an employee, he did not take any loan because as per the rules of IEA, employees are not allowed to obtain loans from the association. On those grounds he added that he personally

entered into no agreement with the plaintiff and therefore cannot be

compelled to repay the loan. He concluded that when he left his job as secretary he handed all the documents to the board which was his employer. He insisted that the plaintiff guaranteed the loan issued to the 1st defendant whereby he pledged to repay incase the 1st defendant

defaults by charging his property on mortgage. He should therefore be the one to repay it.

When cross examined by Ms. Marunda, DW3 stated that the plaintiff is a member of IEA. When asked about the documents to prove the same, he stated that he used to keep the records as the secretary, but he is no longer in office. He further stated that while in office there was a special ledger for keeping records of the members. He said that the ledger was not brought in court as they never expected the plaintiff to deny his membership in the association.

He further stated that he together with DW2 signed the credit facility letter as they were authorised to do so by the board. He insisted that the borrower was the 1st defendant and the plaintiff together with one member named Stella guaranteed the loan.

When asked about whether the 4th defendant communicated to IEA about the default, he stated that the 4th defendant wrote several

/i reminder letters on repoyment of the loon. However, he could not provide ony proof to that effect.

After closure of the defence case the counsels for both sides prayed to file written final submissions, a prayer which was granted by the court. The submissions were filed within the time fixed by the court.

Ms. Marunda, learned counsel for the plaintiff, started to argue on the first issue by providing a definition of the term ‘cause of action’ as provided in the book by Sarkar titled “Civil Procedure" Vol. 1,8th Edition, at page 125 to 128. She said that the term cause of action is defined to mean “the whole of the materiel facts, which are necessary for the plaintiff to allege and prove in order to succeed. There ought to be an infringement of the plaintiff's rights.” In consideration of this definition and the evidence adduced by PW1, Ms. Marunda was of the stance that the cause of action against the 1st, 2nd, and 3rd defendant has been established. She argued so saying that the 2nd and 3rd defendants approached the plaintiff seeking to use his title deed in obtaining the loan for the 1st defendant. She added that the 2nd and 3rd defendants signed the credit facility letter on behalf of the 1st defendant.

Arguing on the second issue, Ms. Marunda submitted that the 1st, 2nd, and 3rd defendants breached the contract by failure to repay the loan advanced by the 4th defendant as it was prior agreed. She said that the attempt by the 4th defendant to sell the plaintiff’s property resulted from 1st defendant through the 2nd and 3rd defendant’s failure to honour their obligation to pay the loan which was guaranteed by the plaintiff. She was of the view that the 1st, 2nd, and 3rd defendants should not be allowed to benefit from their own wrong, but should be compelled to repay the loan.

With regard to the third issue, she argued that the attempt to sell the plaintiff’s property by the 4th and 5th defendants was unlawful. She argued so referring to the testimony of PW1 who claimed that he did not know what he was signing. That the plaintiff was not well informed of the terms of the contract he signed. Under the circumstances, Ms. Marunda sought refuge under the doctrine of “non esf fuctum." To buttress her point she referred the court to an English case of Sounder v. Anglia Building Society

[197]] UKHL 5, [1971] AC1004 by the House of Lords. She argued that in this case while making reference to the case of Petelin v. Cullen [1971] the

Court had this to say:

“i. The person pleading ‘Non est fuctum' must belong to a class of persons who through no fault of their own, are unable to have any understanding of the purpose of the particular document because of blindness, illiteracy or some other disabilities. The disability must be one requiring the reliance on others for advice as to what they are signing.

ii. The signatory must have made a fundamental effect as to the nature of the contents of the documents signed, including its practical effects.”

Ms. Marunda further submitted that it is a matter of law and practice that the bank ought to have informed the borrower and the guarantor regarding the payment of the outstanding loan. However, the 4th defendant never gave any reminder notice to the 1st, 2nd, and 3rd defendant or to the second guarantor. Instead, the 4th defendant only dealt with the plaintiff as the first guarantor. She was of the view that this was wrong on the port of the 4th defendant.

On the fourth issue, Ms. Marunda argued that it was not proper for the 4th

and 5th defendants to attempt to auction the plaintiff’s property alone

while the loan was guaranteed by two guarantors who both mortgaged their properties. She contended that since the 2nd and the 3rd defendants

were responsible for administration of the loan as principle officers of the 1st defendant this court should hold them responsible to repay the said loan.

On his part Mr. Mbise argued on the 1st, 2nd, and 6th issues. On the first issue, he also started by defining the term cause of action as provided in the book by Sarkar (supra). He further referred the court to the case of J.

B. Shirima & Others v. Humphrey Meena t/a Comfort Bus Service [1992] TLR

290 in which the court when explaining the term cause of action held:

“...in other words, what would be the answer to this question- “what is the wrong which is being complained of in these pleadings." The answer to this question will constitute cause of action."

Further considering the principles settled in the case of John. M.

Byombalirwa v. Agency Maritime International (Tanzania) Ltd. [1983] TLR 1;

that of Lujuna Shubi Balonzi, Senior v. The Registered Trustees of Chama cha Mapinduzi [1996] TLR 203; and that of Musanga Ng’andwa v. Chief Japhet Wanzagi & 8 Others [2006] TLR 351, he argued that the plaintiff has not at all established any cause of action against any of the first three defendants.

He argued that the plaintiff clearly stated in his plaint that he guaranteed the loan granted to the first defendant by mortgaging his own house as security. He said that by doing this the plaintiff authorised the 4th defendant to advance T.shs. 100,000,000/- to the 1st defendant on an understanding that should the borrower fail to repay the loan he would make good the loss to the bank and in case of failure, the bank shall recover its money out of the mortgaged property. He added that there was no any agreement between the plaintiff and the 1st, 2nd, and 3rd defendants and the plaintiff did not present such agreement in court. He was of the view that the agreement was between the plaintiff as the mortgagor and the 4th defendant as the mortgagee. The 1st defendant was merely a beneficiary who is related to the plaintiff as evidenced by exhibits tendered by the plaintiff himself, whereby he appears to be a board member of the 1st defendant.

Mr. Mbise further argued that there is no evidence on record showing that the plaintiff entered into any contract with the 2nd and 3rd defendants in connection to the loan. He referred to the defence evidence which shows that the plaintiff also benefited from the loan issued in the name of the 1st defendant and has not repaid the loan. He added that when mortgaging his house, the plaintiff gave power of attorney to the Bank to act for him in any manner including sell of the mortgaged property. He was of the stance that the 1st, 2nd, and 3rd defendants have not done any wrong to him to render him have a cause of action against them. Referring to section 80 of the Low of Contract Act, Cop 345 R.E. 2002 and the case of (Tanzania) Limited v. Dascar Limited and Another

[201 7] TLSLR 120, he concluded that a guarantor of a loan is liable to the same extent as the principal debtor.

With regard to the second issue, Mr. Mbise argued that this issue became redundant with the 4th defendant withdrawing his counterclaim. He argued that the loan agreement was between the 1st and the 4th defendants. Under the circumstances, he argued that the issue whether there was a breach was relevant in the counterclaim which was a suit between the 4th defendant as a plaintiff and the 1st, 2nd, and 3rd defendants and the plaintiff in this case as the defendants in the counterclaim. He was of the view that as things stand at the moment, the plaintiff/guarantor cannot sue on an agreement entered between the 1st and 4th defendants.

He argued further that the as per the evidence on record, the 2nd and 3rd defendants were merely chairman and secretary, respectively, of the 1st defendant association. They did not have any personal gain in the transaction nor executed any personal guarantee/indemnity as a condition in the loan agreement. The 2nd defendant vacated the office at the end of his tenure leaving the same to new leadership. The 3rd defendant was a mere employee of the 1st defendant when elected councilor leaving everything to his employer. The two are thus not personally liable to obligations of the association. Arguing on the reliefs, Mr. Mbise contended that the declaration order sought by the plaintiff to the effect that he has no obligation to repay the loan, rather the 1st, 2nd, and 3rd defendants is clearly a wrong prayer. He argued so submitting that on reasons best known to him, the plaintiff mortgaged his own property as guarantor with obligation to make good any loss which may result from the loan transaction. He was of the stance that the plaintiff cannot turn around and ask for orders contradicting the written agreement he entered voluntarily. He prayed for the plaintiff’s suit to be dismissed with costs.

Mr. Mbogela also filed his written submission. Arguing on the first issue, he submitted that the loan was advanced to the 1st defendant. The 2nd and 3rd defendants were only leaders of the 1st defendant. Considering this fact he contended that the plaintiff has no cause of action against the 2nd and 3rd defendants. The plaintiff guaranteed the loan advanced to the 1st defendant which is a separate entity from its leaders or directors. He referred the court to the case of Solomon v. Solomon (1897) AC 22 which ruled that the company is distinct from its directors. Referring to the plaint, he added that the plaintiff also did not plead any claim against the 2nd and the 3rd defendants.

Mr. Mbogela argued on the second issue in the affirmative. He referred to the testimonies of PW1, PW2, DW1, and DW2 whereby they all testified that the 1st defendant failed to pay the debt as agreed in the credit facility letter (exhibit P2) and default notices were issued, but not honoured. On these bases he argued that the 1st defendant as the borrower breached the terms and conditions of the loan agreement as he failed to pay as agreed.

With regard to the third issue, Mr. Mbogela referred to the mortgage deed; exhibit DI, specifically at clause 2. He contended that in accordance with this clause, the plaintiff agreed to pay the bank on demand in case the borrower fails to repay the debt. He again referred to clause 20.6 of the mortgage deed and argued that in the said clause, the plaintiff certified and consented freely to charge his property to secure the loan extended to the 1st defendant in accordance with the terms and conditions in the credit facility letter, exhibit P2. He further referred to clause 20.2 of the mortgage deed, exhibit DI and argued that by signing the deed, the mortgagor agreed that the bank can exercise its rights provided under the laws in Tanzania.

Mr. Mbogela argued further that the 4th defendant acted in accordance with the law and the terms of the mortgage deed. He issued first a 60 days statutory notice as required under section 127 (1) of the Land Act, Cap 113. After failure to repay the loan after expiry of the notice period he appointed the 5th defendant to sell the mortgaged property under section 132 (1) of the Land Act. He further referred to section 80 of the

Law of Contract Act, Cap 345 R.E. 2019 which provides that “a surety’s liability is coextensive with that of the principal debtor unless it is otherwise provided by the contract.” To cement his point he referred the court to the case of International Commercial Bank (T) Limited v. Yusufu Mulla and Another, Commercial Case No. 108 of 2019 and that of Exim Bonk (Tanzania) Limited v. Dascar Limited and Another [2017] TLSLR 120, which reiterated the position settled under section 80 of the Law of Contract

Act.

He contended further that since the plaintiff failed to honour his obligation under the mortgage deed, the 4th defendant is entitled to sell the mortgaged property to recover its money extended to the 1st defendant. He insisted that the plaintiff consented freely to create a charge over his

property to secure the loan taken by the 1st defendant and covenanted to pay the debt to the 4th defendant in the event the 1st defendant fails to repay the loan, including his property being sold by the 4th defendant to recover the monies.

Submitting on the fourth issue, Mr. Mbogela argued that it is the option of the bank to select the property to be sold first to recover its monies. He

contended that the bank could as well start by auctioning the property of

the second guarantor. He concluded that it was therefore proper for the

4th and 5th defendants to auction the property of the plaintiff as it is the right and option of the bank to exercise its rights.

On the fifth issue, Mr. Mbogela argued that the attempt to sell the plaintiff’s property was done after failure by the plaintiff to pay the loan after expiry of the 60 days’ notice to the plaintiff followed by the 14 days’

notice issued to him by the 5th defendant. He submitted that even if the notices were not tendered in court, the same is not in dispute as it was

admitted by the plaintiff. He added that the statutory notice of default is in compliance with the requirement of the law as provided under section 127 (2) of the Land Act. In the said notice, the mortgagor was informed that the mortgage may proceed to exercise his remedies against the mortgaged land including sell of the property.

He further referred to section 132 (1) of the Land Act which empowers the mortgagee to sell the mortgaged land. Referring further to section 134 (1) (d) of the Land Act, he argued that the law empowers the mortgagee to sell the mortgaged property by private contract or by public auction. In consideration of this provision, Mr. Mbogela submitted that in the exercise of its powers, the mortgagee, that is, the 4th defendant, instructed the 5th defendant to sell the mortgaged property by public auction whereby he published the announcement to sell the house, something which led the plaintiff to institute the case at hand. He concluded by praying for the court to dismiss the plaintiff’s suit for want of merit, with costs.

I have given the testimonies by witnesses on both sides and the submissions by counsels for both sides due consideration. As it can be recalled, during the final pre-trial conference, six issues were determined as I have listed them earlier in this judgment.

With regard to the first issue, the plaintiff claims to have a cause of action against the 1st, 2nd, and 3rd defendants. He testified that he guaranteed a loan advanced by the 4th defendant to the 1st defendant. He claimed further that it was the 2nd and the 3rd defendants who approached him at his shop and requested him to guarantee the said loan. In addition, taking into consideration that the 2nd and 3rd defendants were chairman and secretary, respectively, of the 1st defendant and signed the credit facility letter on behalf of the 1st defendant, he believed that the same renders them responsible. This stance was shared by his advocate, Ms. Marunda, in her written submission.

It is not disputed that the loan guaranteed by the plaintiff was advanced to the 1st defendant. This is also evidenced by the Credit Facility Letter, exhibit P2. Being a registered entity, the 1st defendant bears a legal personality whereby it is capable of entering into legal contracts.

However, its decisions are entered by the board and executed by its office bearers. To this effect, as evidenced at page 9 of exhibit P2, the board of the 1st defendant, through a resolution, reached the decision to take the loan and accept the credit facility arrangement. For ease of reference this part reads:

"We, Igawilo Entrepreneurship Association, under and by virtue of a Board Resolution dated 09.08.2011 a copy of which is attached, hereby accept the Credit Facility Arrangements stated herein and upon the terms and conditions and subject to the covenants set out in this Credit Facilities Letter by affixing the company seal hereunder."

The said resolution was as well attached to the Credit Facility Letter and formed part of exhibit P2. Like I pointed out earlier, the decisions/resolutions of the board are executed by officer bears. In this case it was the 2nd and 3rd defendants, as chairman and secretary, respectively, of the 1st defendant association who signed the Credit Facility Letter on behalf of the 1st defendant. However, in my settled opinion, the signing of the Credit Facility Letter on behalf of the 1st defendant does not in any way make them personally responsible on contractual liabilities related to the Credit Facility. The argument by the plaintiff and his advocate is thus misconceived.

I as well do not subscribe to Ms. Marunda’s argument and the plaintiff’s testimony that the 2nd and the 3rd defendants are to be held liable as they approached the plaintiff seeking his title deed to obtain the loan. This is simply on two reasons: first the plaintiff just gave mere assertions with nothing to back up the story. Second, it is the plaintiff’s word against that of the 2nd and 3rd defendants who on their part testified that the plaintiff is a member of the board of IEA, the 1st defendant and was the one who brought up the whole idea on obtaining the loan as he needed money for his business. They testified that the plaintiff is the one who worked in obtaining the loan by guaranteeing the same with his own house whereby he even involved his wife in the process. Looking at the Board Resolution attached to the Credit Facility Letter, exhibit P2, the plaintiff has signed as one of the directors. This therefore proves that he was fully aware of what was going on and was not approached by the 2nd and 3rd defendants as he claims.

Further, this suit emanates from a mortgage transaction contract between the plaintiff and the 4th defendant whereby the plaintiff pledged to guarantee the loan advanced to the 1st defendant. As argued by Mr. Mbise, of which I subscribe, the 1st defendant was thus a beneficiary in the mortgage contract, but not privy to the said contract. The plaintiff is seeking to stop the 4th and 5th defendants from selling the house charged on mortgage. His cause of action therefore lies on this particular aspect, thus against the 4th and 5th defendants and not the 1st, 2nd, and 3rd defendants.

At this point, I should not be misunderstood that the plaintiff does not have any recourse against the 1st defendant whom he guaranteed in the loan. The plaintiff has recourse against the 1st defendant to recover the loss he incurred in fulfillment of his obligations towards the 4th defendant following failure by the 1st defendant to repay the loan advanced. However, in my considered opinion, this is a subject of another suit and not the one at hand whereby the plaintiff seeks to stop the 4th and 5th defendant from exercising the rights under the mortgage contract by selling the mortgaged property. Even in the said suit, if any, the plaintiff can only sue the 1st defendant and the Board and not the 2nd and 3rd defendants who were mere office bearers implementing resolution of the Board and are no longer in office.

On the second issue, it is not disputed that the 1st defendant failed to repay the loan of T.shs. 100,000,000/- advanced to him by the 4th defendant. This led to the 4th and 5th defendant’s attempt to sell the plaintiff’s mortgaged property. On those bases I agree with both parties that the 1st defendant breached the terms of the Credit Facility on repaying the loan. However, this does not exonerate the plaintiff from making good on the loan advanced because he covenanted to make good where the 1st defendant defaults in honouring his obligations to repay the loan. In consideration of the discussion I made on the first issue, it is my finding that the 2nd and the 3rd defendant did not breach any contract and they never entered into the loan contract in their personal capacity.

Coming to the third issue, I first wish to point out that the plaintiff does not dispute mortgaging his suit property in guaranteeing the loan advanced to the 1st defendant. Among the terms set out in the mortgage deed, exhibit DI, the 4th defendant is entitled to exercise its rights to recover the monies advanced as loan by including selling the mortgaged property. In his testimony, the plaintiff claimed that while signing the mortgage deed, he did not understand the terms of the contract. He did not understand that his mortgaged property shall be sold to cover the debt in the event the 1st defendant as a borrower fails to repay the loan. He claimed that the mortgage deed is written in English language which he is not familiar with and the bank officials did not thoroughly explain the terms to him. In essence, and as argued by his advocate, Ms. Marunda, the plaintiff sought to shield under the doctrine of “non est factum" whereby he is basically trying to impeach the deed as being not his.

The application of the doctrine of "non est factum” was discussed in the case of Tanganyika Bus Service Co. Ltd. v. The National Bus Service Ltd (KAM ATA) [1986] TLR 203 whereby it was ruled that "the document signed should be radically different in character from that which the plaintiff believed he was signing.” The court referred to the decision of Lord Reid in the House of Lords in the case of Saunders v. Anglia Building Society

[1970] 3 All ER 961 at page 964 (also cited by Ms. Marunda, but with a different citation) in which it was held: “There must I think be radical difference between what he signed and what he thought he was signing-or one could use the words 'fundamental' or ‘serious’ or ‘very substantial.’ But what amounts to a radical difference will depend on all the circumstance.’’

The gist of the plea of “non est factum” is that the person signing believed that the deed he signed had a different effect other than what he thought. In the matter at hand, the plaintiff claims that he did not know if

by guaranteeing the loan by charging his property on mortgage the 4th defendant would sell in recovery of the money. I however, hesitate to

subscribe to the plaintiff’s claim on two grounds:

First, for one to rely on the doctrine of “non est factum" he must specifically plead the same in his pleading. I have gone through the plaintiff’s plaint and found nowhere pleaded that the plaintiff was made

to sign a document he did not understand the contents of. Thus in my settled opinion, bringing up the claim at the trial stage upon adducing evidence was an afterthought and cannot be entertained.

Second, when a person guarantees a loan by charging his property on mortgage, there is no any other connotation that can be invoked apart from the fact that the said property shall be used to recover the monies owed in case of default, unless where there are express provisions to the contrary. When require securities or guarantees for the loans advanced, they do not engage in a mediocre exercise, but rather in a serious business of protecting the monies advanced to borrowers by ensuring that the same is repaid in full even in events of default by the borrowers. The Court of Appeal in the case of CRDB Bank Limited v. Issack Mwamasika & 2 Others, Civil Appeal No. 139 of 2017 (unreported) once

warned that guarantors put their properties at risk when the principal debtor defaults. The Court observed that if a person executed a personal guarantee to support the principal debtor's application for loan, the guarantor concerned puts all his property at risk if the principal debtor defaults.

Moving to the fourth issue, the 4th defendant engaged the 5th defendant to auction the plaintiff’s property located on plot No. 702 Block lDD’ Uyole area in Mbeya City. The 4th defendant did that in exercise of its rights under the mortgage deed entered between him and the plaintiff after the 1st defendant, who is the principal borrower, defaulted in repaying the

loan.

In resistance, the plaintiff claims that the attempt to sell the property in

dispute is unlawful. He claims so, on the ground that it was the 1st, 2nd, and 3rd defendants who were obliged to repay the loan and not him. Ms. Marunda in her submission was also in support of her client’s claim. She added that the 4th defendant did not issue notice of default to the 1st, 2nd,

and 3rd defendants before going after the plaintiff’s property.

In the case of Exim Bank (Tanzania) Ltd v. Dascar Limited & Another, Civil

Appeal No. 92 of 2009 (unreported), the CAT while amplifying on section 80 of the Law of Contract Act on the liability of the guarantor ruled that:

“Surety's liability is coextensive with that of the principal debtor unless it is otherwise provided by the contract. Coextensive means the same limits or extent. That means the surety becomes liable to pay the entire amount. The liability is immediate; it does not defer until the creditor exhausts his remedies against the principal debtor... Once a principal debtor defaults in the payment of the loan, the surety steps into or is placed into equal footing with that of the principal debtor. So, unless the principal debtor sooner discharges the liability, the guarantor is as liable as the principal debtor to the creditor and to the same extent under the terms of the loan facility.”

The Court went ahead to provide circumstances which can discharge surety from his liability as provided under the Law of Contract being:

‘‘(a) When the terms of the contract between the principal debtor and the creditor are varied without the consent of the surety.

(b) When there is any contract between the creditor and the principal debtor, releasing the principal debtor; or where there is any act or omission on the part of the creditor the legal consequence of which is to discharge the principal debtor.

(c) If it is a continuing guarantee, it is revoked by the surety by notice to the creditor, at any time, as to future transactions.

(d) If the surety dies, and in the absence of any contract to the contrary, it revokes the operation of a continuing guarantee as regards future transactions.

/e) When the creditor enters into a composition agreement with the principal debtor, or promises to give time to the principal debtor, or not to sue the principal debtor, unless the surety assents to such contract and;

If) If the creditor does any act which is inconsistent with the rights of the surety or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired."

In the case at hand none of the situations listed above occurred to render the plaintiff as the guarantor discharged from his liability to repay the loan following default by the 1st defendant.

On the other hand however, I find it pertinent to address the claim by the plaintiff and his advocate, Ms. Marunda to the effect that the 4th defendant before going after the plaintiff’s property never issued any default notice to the 1st, 2nd, and 3rd defendants. In this matter the borrower was the 1st defendant and the plaintiff was the guarantor. Section 125 (1) of the Land Act requires the lender to provide a written notice to the borrower in default of his obligation requiring him to pay the money owing or to perform and observe the agreement. In addition, section 131 of the Land Act provides that the lender can only exercise his powers to sell the mortgaged land after a written notice in terms of section 125 (1) has been issued to the borrower and until expiration of the notice period the borrower remains in default.

DW2 and DW3 testified that the 4th defendant issued notice to them on several occasions. However, neither they nor DW1 who testified on behalf of the 4th and 5th defendants tendered any notice issued to the 1st defendant, the borrower. The only notice presented was the one issued to the plaintiff as the guarantor. Failure to tender a single written notice to the borrower signifies that no notice was issued to the borrower. Since the mortgage in the matter at hand was a third party mortgage it was imperative for the 4th defendant to first issue a written notice of default to the 1st defendant who is borrower as required under the law before attempting to exercise its rights over the plaintiff’s property. It was thus premature on the part of the 4th and 5th defendants to attempt to sell the mortgaged property without prior written notice of default to the borrower, the 1st defendant, as required under the law.

With regard to the fifth issue, the plaintiff claims that there were two guarantors to the loan. However, the 4th defendant illegally attempted to only sell the plaintiff’s property. Mr. Mbogela argued that the bank has an option to choose which properties among the guarantors' properties to sell to recover the money. I do not subscribe to Mr. Mbogela’s argument.

In my considered opinion, by having two guarantors, the guarantors were placed in a shared responsibility. It was therefore not right for the 4th defendant to proceed on the plaintiff’s property alone.

Given the observations I have made hereinabove, the parties are entitled to the following reliefs:

1. The 4th defendant is entitled to recover his money from the plaintiff as a guarantor, but subject to adherence to procedures provided

under the law, to wit, issuance first of written notice to the 1st

defendant who is the borrower. Upon failure to repay he can

proceed to exercise his rights as set out in the mortgage deed in accordance with the law. 2. Since the loan advanced to the 1st defendant was guaranteed by two guarantors, the liability to repay the loan following default by the 1st defendant has to be shared equally by the two guarantors.

From the foregoing, the plaintiff’s suit partly succeeds as provided above. The rest of the plaintiff’s claims are dismissed. Given the outcome, each party shall bear his own costs of the suit.

Dated at Mbeya on this 10th day of December 2020.

L. M. MONGELLA