In a judgment that is set to redefine estate administration and banking practices in Nigeria, the Supreme Court has firmly declared that the death of a bank customer does not extinguish the customer’s debts or obligations to pay interests on loans or overdrafts.
Delivering the judgment in DAURA & ANOR v. UNION BANK (2024) LPELR-62008(SC), Emmanuel Akomaye Agim, JSC, explained the legal position with striking clarity:
“The banker-customer relationship, being primarily that of a debtor and creditor, survives the death of the customer to the extent of existing obligations to pay money or entitlements to be paid money under the contract.”
In this case, the administrators of a deceased person’s estate argued that the banker-customer relationship automatically terminated upon the death of the customer, and as such, the estate was no longer liable for interests that continued to accrue on loans post-mortem.
Union Bank contended otherwise, insisting that the loan obligations, including accruing interests, remained enforceable against the deceased’s estate until full repayment was made.
The Supreme Court upheld the bank’s position.
The apex Court emphasized fundamental principles of contract and estate law as follows:
- The Death of a Customer Ends the Banker-Customer Relationship, but not the debt obligations:
- While the fiduciary relationship ceases, the underlying contractual obligations (such as loan repayments and interest accruals) survive and are transferred to the deceased’s estate.
- Debtor-Creditor Relationships Are Contractual and Enforceable Against the Estate:
- Just as a customer’s entitlement to funds in his bank account survives his death, the bank’s entitlement to collect interests on loans remains intact and enforceable.
- Interest Obligations Continue to Accrue Until Full Repayment:
The Court clarified that the agreement to pay interest does not die with the debtor. The obligation persists so long as the principal sum remains unpaid, and it becomes a debt upon the estate.
The ruling firmly established that administrators of estates are duty-bound to account for and settle such debts before distributing assets to beneficiaries.
This ruling delivers a powerful message to estate administrators, financial institutions, and beneficiaries alike.
The notion that a borrower’s demise absolves the estate of debt obligations is now judicially debunked. Loans must be repaid, and interests continue to accrue until settlement.
Financial institutions now have solid judicial backing to pursue debts and interests from the estates of deceased customers, upholding the sanctity of loan agreements.
Potential heirs must brace for the reality that outstanding debts and accumulating interests will eat into the estate before any distribution occurs.
This judgment settles any ambiguity surrounding the survivability of financial obligations after death. It underscores that death is not a legal defense against fulfilling loan agreements, and the estate becomes the new legal personality responsible for those debts.
In the words of the Court, “The agreement to pay interest on the loan subsists so long as the loan remains unpaid, and the death of the debtor customer will not affect it.”
For legal practitioners, bankers, estate planners, and the general public, this decision serves as a legal compass; debts must be honored beyond the grave. Families must ensure that debts are factored into estate planning, and administrators must act with heightened diligence, lest they face personal liabilities.
