Co-operative Bank ordered to return title illegally used to secure Sh4m loan

 

A bank has been ordered to return a title it was holding as a security for a Sh4 million loan it issued under unclear circumstances.

The magistrate’s court directed Co-operative Bank to surrender the crucial document after finding that the deal between it and its customer was marred with illegality. 

The case was filed by Serphina Auma, and her children Victor Mwai, Edwin Odhiambo and Geoffrey Omondi against the bank, Priscot Interprices, the lands registrar and the Attorney General. 

They lamented that Priscot had fraudulently told the Lands Control Board that they had guaranteed the firm two sets of loans of Sh2 million each and had surrendered their property as collateral. 

Chief Magistrate Julius Nang’ea found that the lender never called any of its officials who handled the transaction to testify how they interacted with the four adding that Pricost’s director Vincent Opanyi could have obtained the original title to the contested property and illegally used the same as security. 

Opanyi, the court heard was Auma’s nephew. 

“Several inconsistencies and or discrepancies are discernible in the impugned transactions. Firstly, the second defendant has not called its relevant officials who handled the transactions to state how they interacted with the plaintiffs over the matter,” ruled Nang’ea. 

“The court is persuaded on the material record that the purported guarantees and indemnities are fraudulent. The second defendant did not also act diligently as shown and enabled the fraud,” he added.

Auma and her children told the court that they became aware of the loan when Co-operative Bank sent auctioneers to sell the property. 

According to them, there were two cases; one filed in 2015 while another one was filed two years later, with Auma and Omondi as litigants against the bank. 

However, the four argued that they never hired a lawyer to file a case on their behalf. They asserted that there was no evidence to show they indemnified Priscot. 

The lender in response claimed that they signed the loan documents and Priscot was issued with an overdraft following an oral request. 

The bank claimed that Priscot in October 2011 orally requested for a further Sh2 million with the title as a security. 

The bank further told court that on July 16, 2012, the firm went for a third Sh2 million overdraft, this time in writing. 

According to the bank, there was an agreement with the four that the title would be used to secure the third overdraft. The limit for the overdraft was Sh11 million. 

Co-operative Bank explained that Priscot did not pay the overdraft after it was notified in 2014 and 2015. 

The lender said that two cases were filed by Auma and Omondi to challenge the sale of the property. It also argued that the case was an afterthought and denied committing any fraud. 

In a counterclaim, Co-operative Bank asked the court to compel the four to pay Sh5.1 million, which it alleged was an outstanding overdraft and interest. 

The four who testified in person denied signing the loan document. The court heard that the bank had in 2021 sent auctioneers to sell the property without issuing notice to them. 

Auma said that the title went missing sometime in 2006 after her husband died and her nephew used it to secure the loan. 

The court heard that it was absurd for the bank to issue Sh4 million on August 12, 2012, while on the other hand, the documents claimed to have been signed by the complainants show they signed the same earlier in March 2011 before the offer letter was issued. 

Auma said that they also wrote to the Lands Control Board asking for an alleged consent and they never got a response. This, they said, buttressed their claim that the loan was shrouded in illegalities and fraud. 

They called a forensic examiner Karisa Kenga who told the court that there was evidence that they did not sign the documents. He added that there was no similarities between the signed documents and the signature specimens from the four. 

On the other hand, the bank called its employee Brian Odhiambo as a witness. He said that there was evidence that the four had signed the same. However, he admitted that he was not an employee at the bank in 2011 when the transactions happened. 

The bank also had Evans Morange file a supporting statement. The lawyer insisted that Auma and her children appeared before him on September 19, 2011, in Nairobi and executed a further charge on October 7, 2011, in his presence after introducing themselves through their national identification cards.

However, the court observed that he did not testify orally.

By Kamau Muthoni