Equity Bank Limited v Chepkwony & 4 others [2023] KEHC 27217 (KLR)

Equity Bank Limited v Chepkwony & 4 others (Civil Appeal 01 of 2023) [2023] KEHC 27217 (KLR) (13 December 2023) (Judgment)

Neutral citation: [2023] KEHC 27217 (KLR)

Republic of Kenya

In the High Court at Kapsabet

Civil Appeal 01 of 2023

JR Karanja, J

December 13, 2023

Between

Equity Bank Limited

Appellant

and

Emily Chepkwony

1st Respondent

Isaac Kemboi Chepkwony

2nd Respondent

Kipsirichoi Farmers Co-operative Society Limited

3rd Respondent

Gladys Chebet

4th Respondent

Samson Kimaiyo Murei

5th Respondent

Judgment

1. The appeal arises from the Judgement of the Lower Court in Kapsabet Magistrate’s Court ELC Case No. 153 of 2018 as consolidated with ELC No. 21 of 2019 both in which the Plaintiff/ first Respondent, Emily Chepkwony, sought declaratory and injunctive orders against the Appellant/ First Defendant, Equity Bank (K) Limited and four others including the Second Respondent/ Defendant, Isaac Kemboi Chepkwony, the third Respondent/ Defendant, Kapsirichoi Farmers Co-operative Society Limited, the forth Respondent/Defendant, Gladys Chebet or Jebet and the fifth Respondent/Defendant, Samason Kimaiyo Murei, to the effect that the charge dated 31st March 2016 and registered on the 9th May 2016 over Land Parcel No. Nandi/Chepkongony/317 (Suit property) be declared null and void for want of spousal consent, a pre-requisite to the creation of a charge over family or matrimonial property and for collusion, fraud, impersonation and misrepresentation on the part of the defendants jointly and severally.

2. Further, that a permanent injunction be issued to restrain the Defendants either by themselves, agents, servant and anybody or authority from selling by public auction, private treaty or in any other manner disposing, transforming or dealing with the said property.In addition, the Plaintiff also sought general damages against the five Defendants for exceptional mental torture and anguish suffered by herself on learning that her only matrimonial home was due for sale within a short time together with costs of the suit.

3. It was pleaded that at all material times the Plaintiff was the only lawful wife of the Second Defendant/ Respondent having conducted a Marriage Ceremony Under Nandi Customary Law in the year 1994 after which they were blessed with five issues. That, she was the registered owner of the suit property when she learnt from members of the public and newspaper advertisements that the property was due for sale by public auction on account of a charge created over it by the first Defendant bank on 31st March 2016, in liaison with the fourth and fifth Defendant in total disregard of her right of ownership and possession of the property, her only matrimonial home.

4. The Plaintiff contended that her husband, the Second Defendant/ Respondent was also a registered owner of the property and the chargor but due to his mental infirmity he was incapable of creating any valid legal charge. That, the fifth Defendant/ Respondent took advantage of the fact and in his capacity as the treasurer of the third Defendant/ Respondent Co-operative Society caused the second Defendant/ Respondent to guarantee the loan of Kshs. 1,450,000/-advanced to the Co-operative Society by the first Defendant/ Respondent Bank.

5. The Plaintiff also contended that the suit property consisted of the Matrimonial home for which she had proprietory interest and therefore, the creation of the change over the property was null and void for want of her consent as the chargor’s spouse. That, the first Defendant/ Appellant colluded, with the fourth and fifth Defendants/ Respondents in allowing the fourth Defendant/Respondent to sign the spousal consent dated 31st March 2016 while misrepresenting herself and masquerading as the chargor’s wife.It was for all the foregoing reasons, “interalia” that the Plaintiff instituted this suit seeking the orders aforementioned.

6. The Defendants responded to the Plaintiff’s claim by respectively filing their statements of defence as fortified by their respective witness statements.The allegations made by the Plaintiff against the first Defendant/ appellant were denied with a contention that the second respondent/ Defendant voluntarily entered into the transaction where he guaranteed grant of a financial facility to the third Respondent/ Defendant Co-operative Society. In that regard, he pledged as security for the repayment of the facility the suit property and in doing so, the fourth Respondent/ Defendant stood as his spouse and consented to the impugned charge being created over the suit property.

7. The first Defendant/ Appellant contended further that the Plaintiff bought this suit as an afterthought and as a proxy of the second Defendant/ Respondent chargor with the intention of abusing the court process and delay the exercise of the appellant bank’s statutory power of sale.The second Defendant/ Respondent denied ever taking a loan from the Defendant Bank nor signing the necessary consent of the Land Control Board. He contended that the documents were signed by his step brother, the fifth Defendant/ Respondent. He implied that if the impugned transaction was laced with fraud, then it was the fifth Defendant/ Respondent to blame.

8. It was further contended by the second Defendant/ Respondent that he never advised his only wife to sign the spousal consent which was instead signed by a wife of the son of his father’s brother.The third and fifth Defendants/ Respondents filed a joint statement of defence thereby implying that the fifth Respondent other than being a party to the suit in his personal capacity was also appearing as a representative of the third Respondent Co-operation Society. He admitted that a loan was obtained from the Defendant bank to purchase farm machinery and in the process, he borrowed the title to the suit property from the Second Defendant, his brother, and used it to secure the loan of Kshs. 1,450,000/-.

9. The fifth Respondent implied that he was misled by the staff of the Defendant Bank to execute the transaction documents on behalf of the second Respondent, but in the year 2018 the farm machinery was re-possessed and sold by the Defendant Bank thereby, repaying itself the outstanding loan amount. As for the fourth Respondent, she denied having signed the impugned charge and contended that she only signed loan forms which were presented to her by her brothers in law i.e. the second Respondent and the fifth Respondent for the purposes of guaranteeing a loan.

10. At the trial the Plaintiff, Emily Jelimo Chepkwony (PW1), testified and availed her neighbours as witnesses. These were Noah Kenei, (PW2) and Saidi Kipkemboi (PW3) whose evidence was more in relation to the second Respondent mental status.The first Defendant/Appellant testified through its credit manager, Kapsabet Branch, Shamim Chibole (DW1). The second Defendant/ Respondent, testified as DW4 while the third Defendant/ Respondent testified through the fifth Defendant/ Respondent as DW2. The fourth Defendant/ Respondent testified as DW3.

11. Notably, the testimonies of the second, third, fourth and fifth Defendants/ Respondents were largely skewed in favour of the Plaintiff/ first Respondent as against the first Defendant/Appellant. This may shade light as to why the present appeal by the first Defendant/Appellant is against the Plaintiff and the first Defendant’s erstwhile co-Defendants.Be that as is may, the appeal was canvassed by way of written submissions which were duly filed on behalf of the Appellant by Mburu Maina & Company Advocates and on behalf of the first Respondent by Rotich Langat and Partners Advocates.The second to fifth Respondents filed their respective submissions in person.

12. The appeal was given due consideration by this court on the basis of the supporting grounds and the rival submissions. The duty of the court was therefore to re-consider the evidence availed at the trial court and arrive at its own conclusion bearing in mind that the trial court had the benefit of seeing and hearing the witnesses (see, Selle Vs. Associated Motor Boat Company & Another (1968) EA 123).

13. In that regard, the evidence adduced by the Plaintiff and her witnesses was given due consideration by this court along with that adduced by all the five Defendants including the Appellant and the second, third, fourth and fifth Defendant/ Respondents. Coupled with the pleadings the evidence raised two basic issues for determination viz: -1)Whether the impugned charge instrument dated 31st March 2016 and duly registered on 9th May, 2016 was validly and legally executed and if so,2)Whether the execution thereof was marred with fraudulent acts and collusion on the part of the Defendants jointly and severally.

14. The first issue was in relation to the creation of a charge over the suit property said to be matrimonial property and the marital relationship, if any, between the second respondent/ charger and the Plaintiff/ first Respondent. These factors are captured in the first and second issues framed for determination by the trial court. The second issues relates to the allegations of fraud made against the Defendants jointly and severally by the Plaintiff with regard to the creation of a charge over the suit property, Nandi/Chepkongony/317.

15. The trial court in arriving at its conclusion found that the Plaintiff was the wife of the Second Defendant by dint of a customary marriage under the Nandi Customary Law. As such, she had a proprietary interest in the suit property comprising of her matrimonial home and the right to consent to the creation of a charge over the property. The trial court also found that the pre-requisite spousal consent in the creation of the charge over matrimonial property was given not by the Plaintiff but the fourth Defendant (Gladys) who had no capacity to do so not being the wife of the second Defendant/ Chargor.

16. It was for the foregoing reasons that the trial court ultimately concluded that the spousal interest given by the fourth Defendant was null and void thereby invalidating the impugned charge and rendering the Plaintiff’s case against the Defendants having been proved to the required standard with judgment being entered in favour of the Plaintiff against the Defendant jointly and/or severally as prayed in the plaint.The court ordered that the second, third and fourth Defendant do provide an alternative security to the first Defendant Bank within sixty (60) days from the judgement date and that general damages in the sum of Kshs. 200,000/- be awarded to the Plaintiff for hurt feelings, mental torture and anguish on learning that her only matrimonial home was up for sale by public auction.

17. In this court’s opinion, the evidence in its totality did not raise or any substantial dispute on the execution of the charge and the primary players in the entire transaction. These were the first Defendant bank as the provider of the financial facility in the form of a loan of Kshs. 1,450,000/-, which was sought by the third Defendant Co-operative Society through its official the fifth Defendant and for which the second Defendant guaranteed by availing his parcel of land No. Nandi/Chepkongony/317 (suit property) as collateral for the repayment of the loan.

18. The suit property comprised of the second Defendant’s matrimonial home which meant that necessary consent had to be given by his lawful wife in order to validate the creation of a charge over the matrimonial home in terms of Section 79(3) of the Land Act 2012 and Section 28(a) of the Land Regulation Act, both of which provide for spousal consent in such transactions. Herein, the impugned charge was indeed created over the suit property and in the process the fourth Defendant (Gladys) was identified or held out by the second Defendant as his lawful wife for purposes of the pre-requisite spousal consent which is essentially a requirement that for there to be a valid charge of matrimonial property both spouses must be aware of the transaction and must agree to it.

19. Section 79(3) of the Land Act 2012 provides that: -“a charge of matrimonial home, shall be valid if any document or form used in applying for such a charge or used to grant the charge, is executed by the chargor and any spouse of the chargor living in that matrimonial home, or there is evidence from the document that it has been assented to by all such persons”And Section 28(a) of the Land Registration Act stipulates that“unless the contrary is expressed in the register all registered land shall be subject to the following overriding interests as may for the time being subsist and affect the same, without there being noted or the register: -a)Spousal rights over matrimonial property”

20. The thrust of the Plaintiff’s case was that the impugned charge was not valid for want of her consent to its creation as the lawful wife of the second Defendant/Chargor thereby invalidating any purported exercise of statutory power of sale by the first Defendant Bank upon the suit property.In her evidence, the Plaintiff contended that she was the only legal wife of the second Defendant (Isaac) but was kept in the dark by her husband and indeed all the other Defendants with regard to the impugned charge and all that appertained thereto.

21. Her neighbours (PW2 & 3) knew her as wife to the second Defendant even though they did not witness any celebration of their marriage in a church or before a marriage registrar. They however, alluded to the two having undergone a customary marriage under Nandi Customary Law.She (Plaintiff) implied that the second Defendant was misled by the third and fifth Defendant to charge their matrimonial property in favour of the first Defendant bank at a time when he was sickly suffering from either epilepsy and/or a mental illness. She also implied that the entire transaction was a conspiracy between the Defendants to deprive her of her right to giving spousal consent and to property interest over the suit property.

22. Save the first Defendant Bank, all the other Defendants confirmed that the Plaintiff was indeed the truthful wife of the second Defendant thereby upholding and affirming her claim in that regard and showing that her proprietory interest in the suit property was anchored on her marital relationship with the second Defendant and that they lived together and cohabited in the suit property as their matrimonial home. Under Section 92 of the Land Registration Act, if a spouse obtains an interest in land during the subsistence of a marriage for the Co-ownership and use of both spouses or all spouse, such property shall be deemed to be matrimonial property and shall be dealt with under the Matrimonial Property Act which defines matrimonial property to mean the matrimonial home or homes and also defines the matrimonial home to mean any property that is owned or leased by one or both spouses and occupied or utilized by the spouses as their family home and includes any other attached property (See, Section 2 and 6 of the Matrimonial Property Act).

23. Section 12(1) of the Act (Matrimonial Property Act) stipulates that“an estate or interest in any matrimonial property shall not, during the substance of a monogamous marriage and without consent of both spouses be alienated in any form, whether by way of sale, gift, lease, mortgage or otherwise”.And, Under Section 12(5) of the Act, the matrimonial home shall not be mortgaged or leased without the written and informed consent of both spouses. The general proposition with regard to burden of proof is that it lies upon the party who invites the aid of the law and substantially asserts the affirmative of the issue (see, Evans Nyakwanra Vs. Cleophas Barasa Ongaro (2015) e KLR and Section 107 of the Evidence Act) Under Section 109 and 112 of the Evidence Act, the evidential burden of proof is placed upon either party.

24. On a balance of probabilities backed by her oral evidence and that of her witnesses as well as that of the second, third and fourth Defendants the Plaintiff discharged her legal burden of proving and established that she was indeed the lawful and only wife of the second Defendant/Chargor even though she did not avail documentary evidence of her marriage to the second Defendant. Her evidence as a whole clearly indicated that it was most likely that not that her marriage to the second Defendant was a customary marriage under the Nandi Customary Law. In any event, the couple, held themselves and was held out by all and sundry as man and wife.

25. In the circumstances, a presumption of marriage between the couple existed and was never disproved and/or rebutted by any evidence from the Defendants who actually supported the presumption save for the first Defendant who failed through its witness (DW1) to offer any or substantial evidence in rebuttal.The charge documents (P. EX 2) contains the spousal consent; a necessary ingredient in validating a legal charge. However, it was signed and executed by the fourth Defendant who denied herein being the wife of the second Defendant/ Chargor and alluded to having been misled by her Co-Defendants into executing the consent.

26. It would appear that the first Defendant Bank in obtaining the spousal consent from the fourth Defendant was less than diligent and if otherwise, then it ought to have caused the fourth Defendant to depone an affidavit of spousal consent. It did not.The proven lack of spousal consent from the Plaintiff as the lawful wife of the second Defendant/ Chargor militated against the validity of the charge. Therefore, the first Defendant could not purport to exercise its statutory power of sale through public auction or otherwise against the second Defendant and the suit property which consisted of his matrimonial home. Any purported process undertaken by the first Defendant bank in that regard was therefore null and void “ab-initio”.

27. It is for the foregoing reasons that this court must hereby uphold the impugned decision and judgement of the lower court and hold with regard in the first issues for determination that the impugned charge instrument dated 31st March 2016 and duly registered on 9th May 2016 was not validly executed and therefore remain an invalid charge for any exercise of statutory power of sale by the first Defendant Bank. Having so held, the second issue for determination no longer falls for determination as it depended on the findings on the first issue.

28. It may however, be observed that the entire process and transaction leading to this case was a premeditated scheme by the first Defendant through its agents and/or servants/ employees and the second, third and fourth Defendants to not only dupe the first Defendant as a financial institution but also the Plaintiff of her proprietary interest in the suit property and her right to give spousal consent to any transaction pertaining to the property. The first Defendant ought to have proceeded against its concerned officials and the rest of the Defendants for any damages it may have suffered at their expense.

29. It was no wonder that the trial court rightfully granted the declaratory and injunctive order in favour of the Plaintiff against all the Defendants jointly and severally and went further to order that the second, third and fourth Defendant/ Respondents provide an alternative security to the first Defendant/ Appellant.This court would add that if the order has not been complied with then the first Defendant would be at liberty to legally move against the second, third and fourth Defendants/ Respondents and by extension the fifth Defendant/Respondent as the responsible official of the third Defendant/ Respondent.

30. On the award of general damages in the sum of Kshs. 200,000/- it is this courts’ opinion that it was unjustified for want of proof and the absence of any exceptional circumstances for such award. It was therefore untenable in the circumstances of the case and is hereby set aside.In sum, other than the alteration or variation of the trial court’s decision on general damages, this appeal is devoid of merit and is hereby dismissed with costs to the Plaintiff/ first Respondent against the first Defendant/ Appellant as well as costs in the lower court suit against all the five Defendants i.e. Appellant, second Respondent, third Respondent, Fourth Respondent and fifth Respondent.Ordered accordingly

DELIVERED AND DATED THIS 13THDAY OF DECEMBER, 2023J. R. KARANJAH,JUDGE