The plaintiff/respondent brought an action (as amended) against the defendant/appellant for the sum of N346,523.57 together with interest. The short facts upon which the action was founded were that the respondent got a contract from the Imo State Government sometime in 1982 which it duly executed from loan facilities provided by the appellant. The loan was N1,950,000.00 and was granted in June, 1983.

The Imo State Government issued a promissory note for N3,024,000.00 to the respondent which was to mature in August, 1983. The respondent assigned, or in other words indorsed, the promissory note to the appellant as security for the said loan and interest thereon. At maturity the principal loan and interest were to be deducted by the appellant from the proceeds of the promissory note was presented on the due date, it was dishonoured. Although the appellant notified the respondent of the dishonour, it unilaterally and without the consent of the respondent granted the Imo State Government extension of time within which to pay the money due on the promissory note. Indeed, it was a form of agreement with Imo State government for installmental payment. In the event it took about one year from the maturity date of the promissory note to pay the proceeds in full.

The appellant then deducted the amount of loan and interest due thereon up to the maturity date of the promissory note. It went further than that. It in addition, in effect, surcharged the respondent with interest on the loan for the period of one year it itself negotiated with the Imo State Government to honour the promissory note by installments and paid over N812,224.05 to the respondent. There was an underpayment of N346,523.57 which the respondent claimed it was entitled to together with interest thereon.

In a well-considered judgment, the learned trial judge held that the unilateral extension of time granted by the appellant to the Imo State Government to meet its obligation under the promissory note discharged the respondent from liability thereunder.