Good afternoon, LSP Readers. Today, we’re looking at an important issue of law: Does the death of a bank customer automatically end the relationship between the bank and that customer? To understand this, we’ll rely on the case of Daura v. U.B.N. Plc (2024) 14 NWLR (Pt. 1957) 41, where this issue was examined in detail
The facts of this case was that the appellants’ mother, a customer of U.B.N., took out a loan of six million naira. Sadly, she passed away just a few days after. Her children, the appellants, became the administrators of her estate. They inherited over 15 million naira from her account in First Bank. Instead of using part of that money to settle her debt with U.B.N., they spent some on her funeral and shared the rest among themselves and other beneficiaries.
To take control of their mother’s assets, the children had to apply for letters of administration. A letter of administration is a legal document issued by a court that grants a person the authority to manage and distribute the estate of someone who has died without leaving a valid will. This allows the administrator to collect the deceased’s assets, settle any debts, and distribute what remains to the rightful beneficiaries. It’s essential in situations where there is no Will, as it gives legal power to the appointed individual to handle the estate responsibly. In this case, the children used their authority as administrators to access and distribute their mother’s funds, but they failed to pay off her debt to U.B.N. first.
Naturally, the bank wanted its money back, so it took the matter to court. However, the court dismissed the bank’s case, saying the bank did not prove its claim well enough. Dissatisfied, the bank appealed, and the Court of Appeal ruled in the bank’s favor. The children then took the case to the Supreme Court, hoping to overturn the decision
At the heart of the matter was the duty of the administrators of an estate. When a person dies, the administrators must first identify any debts the deceased left behind and settle those debts before distributing the estate’s assets. It’s not enough to claim ignorance of a debt; the law expects the administrators to make reasonable efforts to uncover all liabilities. In this case, the children failed to settle their mother’s debt to U.B.N. before distributing her estate, a mistake that led to the legal dispute
Another important point is about the responsibility of beneficiaries – people who inherit money or property from the deceased. If you receive money from an estate that still owes debts, you may be required to pay back part of what you received to settle those debts. In this case, the mother had other properties and shares that could have been used to pay off the loan. But even if those assets weren’t enough, the children, as beneficiaries, could still be asked to repay the debt from the money they inherited.
Now, to the core issue of determination – does a bank-customer relationship end with the customer’s death? Generally, yes, but with certain exceptions. The death of a customer terminates the everyday operations of a bank account, but it does not erase existing obligations, such as loans. The Supreme Court in this case made it clear that the obligation to repay a loan and any accrued interest survives the death of the borrower. The loan becomes a debt that must be paid from the deceased’s estate.
Interestingly, the Court of Appeal had previously ruled that the bank should have stopped charging interest once it became aware of the customer’s death. However, the Supreme Court disagreed, holding that as long as the loan remains unpaid, the agreed-upon interest continues to accumulate. This means that the death of a debtor does not freeze interest on outstanding loans—the bank is still entitled to charge interest until the debt is fully repaid.
In conclusion, this case shows that death doesn’t wipe away financial obligations. If someone owes money, their estate is still responsible for settling those debts. Administrators need to be careful to pay off any debts before distributing money to the beneficiaries. It’s a good reminder to handle estate matters properly to avoid unnecessary legal troubles later on
Thank you for reading🤍. See you next week🙏
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