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ELCPartially AllowedMigori Chief Magistrate's Civil Suit (plaint dated 20th May 2014)· [2017] KEELC 2680 (KLR)

Walter Otieno Obala & another v Legacy Auctioneer Services [2017] KEELC 2680 (KLR)

Environment and Land Court
31 May 2017
GOG. M. A. Ongondo
1,026 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Migori court stopped an auction of family land because the owner had fully repaid the loan secured on it.

What this practically means

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Executive summary

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The Plaintiff, Walter Otieno Obala, sued Legacy Auctioneers Services (1st Defendant) and Agricultural Corporation (2nd Defendant) seeking a declaration that he owed no money on a loan secured by a charge over land parcel Suna East/Wasweta I/11964, and that the intended public auction of the property was unlawful, plus costs and interest at 14% per annum. He charged the land to the 2nd Defendant for Ksh. 200,000, defaulted, but later paid Ksh. 190,000 discharging the loan. The Defendants filed a defence asserting arrears, interest and auctioneer costs, but failed to attend the hearing despite service by registered post, and the suit proceeded ex parte. The Plaintiff testified and produced a demand letter, notification of sale, transaction and payment receipts totalling Ksh. 190,000, a discharge and release of title, and a Daily Nation auction advertisement. The court framed three issues: whether money was still owed, whether the intended auction was unlawful, and costs. Applying Section 96(2) of the Land Act, Article 40(2) of the Constitution and the Shimmers Plaza case, the court held that a bank may only realise security upon a lawful notice, and that the Plaintiff's uncontroverted evidence showed the loan was fully repaid and the security discharged. Judgment was entered for the Plaintiff with a declaration as sought. However, rather than the 14% contractual interest claimed, the court awarded costs to the Plaintiff against the Defendants with interest at court rates under Sections 26 and 27(1) of the Civil Procedure Act, guided by Rai vs Rai.

Key legal issues

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01

Whether the Plaintiff still owed money under the charged loan

Holding

The Plaintiff proved by transaction and receipts exhibits that he fully repaid the loan of Kshs. 190,000 and was discharged of the security, hence owes no money

Reasoning

The Plaintiff testified that he deposited Kshs.190,000 into the 2nd Defendant's account and produced the customer transaction receipt (P Exhibit 3) and receipt (P Exhibit 4), together with the discharge and release of title (P Exhibit 5). The evidence was uncontroverted as the Defendants failed to appear at the hearing despite service, and the court found it cogent.

p. 3
02

Whether the intended public auction of the suit land was unlawful

Holding

Since the loan was fully repaid and the security discharged, the intended sale by public auction was unlawful

Reasoning

The court considered the statutory framework under Section 96(2) of the Land Act and Article 40(2) of the Constitution protecting property rights. Having found the debt discharged, no lawful basis remained for the auction. The notification of sale and Daily Nation advertisement were rendered nugatory by the discharge and release of the title deed to the Plaintiff.

p. 3

Legal principles established

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  • A chargee may only realise its security upon giving a statutory notice that complies with the law; any other purported procedure is unlawful

Court orders

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  1. 1.Judgment entered for the Plaintiff against the Defendants for an order of declaration that the Plaintiff owes no money on account of the loan and that the intended sale by public auction of land parcel SUNA EAST/WASWETA I/11964 is unlawful, as sought in paragraph (a) of the plaint
  2. 2.The Defendants shall bear the costs of the suit together with interest at court rates

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 40(2)
  • Land ActSection 96(2)
  • Civil Procedure Act (Cap 21 Laws of Kenya)Section 27(1) proviso
  • Civil Procedure Act (Cap 21 Laws of Kenya)Section 26
  • Civil Procedure Rules, 2010Order 51 rule 6

Cases cited (7)

  • David Gitome Kuhiguka vs Equity Bank Ltd
    (2013) eKLR
  • Musa Angira Angira vs Industrial and Commercial Development Corporation
    (2015) eKLR
  • FAST Security Ltd vs Equity Bank
    (2014) eKLR
  • Albert Maribo Cordeiro & Anor vs Vishram
    (2015) eKLR
  • Palmy Company Limited vs Consolidated Bank of Kenya Ltd
    (2014) eKLR
  • National Bank of Kenya Limited vs Shimmers Plaza Limited
    (2009) KLR 278 at 283
  • Rai vs Rai
    (2014) eKLR
Jurisdiction invoked
Original civil jurisdiction over the plaint; claim framed under Article 40(2) of the Constitution of Kenya, 2010 and Section 96(2) of the Land Act

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Walter Otieno Obala & another v Legacy Auctioneer Services [2017] KEELC 2680 (KLR)", Case Analysis (2017). Migori Chief Magistrate's Civil Suit (plaint dated 20th May 2014). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/2680/eng@2017-05-31

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.