*1 dеceased, where the law of place opposed made, certificates determining the ownership contract was However, the bank. court’s from a Texas deposit purchased considera- the domicile was based on the law of application involved, which is not the situation tion that marital property event, in the case bar. In the same result would have been any at the decision in Morris reached we to have applied were Cullipher.
After we careful consideration of the raised on points appeal, affirm the judge’s decision all probate respects.
Affirmed.
Cracraft, C.J., Jennings, J., agree. E. MARSH
Robert BANK OF NATIONAL Arkansas; Wilson; Dorado, COMMERCE of El M. Jerry Wilson; Vines; Vines; Nadelle S. Jackson Ralph Jo E.
Gurvis F. Vines
CA 91-239
Court of Arkansas Appeals
En Banc Opinion delivered January [Rehearing Februаry denied 1992.*] J., * Rogers, J., grant rehearing; Mayfield, would participating. *2 Associates, Lassiter, Wilson & Jack T. by: appellant. Prewett, William I. for appellees. Jennings, 29,1988,
John E. Judge. On January Jerry Nadelle Wilson and and Jo Vines executed a Ralph promissory note to National Bank of El Commerce of Dorado for $245,000.00. Gurvis Vines and Robert Marsh note as signed the 8, 1989, guarantors. Wilson, Vines, On March Jerry Ralph Robert Marsh a second note to the bank for cover accrued interest on the first note. After both notes went into default, the bank sued and obtained judgment against the parties in Union County Chancery Court on November 1990. Robert Marsh appeals. chancellor erred in issue is whether the primary was barred under against the bank’s claim Marsh
holding that with the 124(1) Security, dealing section of the Restatement of surety, facts a creditor to a by non-disclosure material Arkansas Court in adopted expressly Supreme Ass’n, 772 S.W.2d First Fin. Fed. Sav. and Loan More Marsh contends the bank’s that specifically, failure to disclose the his co-guarantor, status note owed Vines, Gurvis bars the We hold was one claim. of fact and that the not clearly wrong. chancellor’s decision was error, 52(a). Ark. R. Civ. P. court’s Because we find no the trial judgment affirmed.
Some history necessary for an the issues understanding of *3 presented. Jerry Wilson is the in El pastor of church Baptist Dorado. He has also been in the business of real estate to buying renovate rent. In 1983 he land in bought forty-one acres of Union County, for development by an purposes, financed $85,000.00 loan from the appellee bank secured aby purchase money on the mortgage land. When the note fell due in it, Marsh, and he could not Wilson pay called Robert who Ensco, was Inc., then the president to see if either Marsh or Ensco might buy Marsh property. Although was not inter- ested land, in buying the he agreed to help. Marsh September guaranteed a new note one-year $120,000.00
for wife, Nadelle, made Wilson and his to bank. duе, When this note came again Wilson could neither pay $13,000.00 nor interest. Marsh paid interest due and the bank extended the note year. another Vines,
Before note fell due again, Gurvis a member of Pastor Wilson’s congregation, became concerned about Wilson’s financial burdens and a solution. Vines had been in the proposed insurance business in El Dorado for many and was also an years oil independent producer, under the operating name of Mike Jay Oil Vines had Company. also a long standing with relationship Cook, James president since bank 1969. had idle,
Vines an interest in several but oil- potentially producing, tracts of land. put He to these proposed up interests collateral for a larger from which would receive addi- get tional funds to the oil wells into idea operation..The the entire note would then be satisfied from the proceeds sale of oil.
Vines, Wilson and Marsh met in 1988. The January, upshot $245,000.00. was a new note to the bank The makers were wife, Wilson and his wife and Vines and his Ralph “Jay” Jo. Vines, son, Gurvis Ralph Vines’ is a sports memorabilia dealer in El Dorado. The guaranteed note was Gurvis Vines and Robert Marsh and secured on the by mortgage acres forty-one Wilson, originally bought by Jerry together with assignments of oil revenues on Vines’ oil and chattel properties mortgages on related The equipment. of the note proceeds were used to satisfy 120,000.00 $ in full Wilson’s note and to reimburse Marsh for the 13,000.00 $ in interest he had previously paid. remaining note proceeds, some were to deposited the account of Jay Mike Oil Company.
Gurvis Vines’ oil wells to proved be a disappointment and on 8,1989, Wilson, March Marsh and Vines a note for Ralph $17,600.00 $245,000.00 the interest on the pay note. By May of 1990 both notes were in default and the bank filed suit. Cook,
At trial both James the bank’s president, Marsh testified that had they enjoyed an excellent business relationship with each other. Coоk testified that the bank had loaned Marsh some to build a home in Little Rock. Marsh testified *4 $170,000.00 that he had borrowed from the bank in 1987 to pay his $750,000.00 income tax and had a certificate of deposit there.
Cook, who had worked for the bank since had known Gurvis Vines since the 1970’s. He and Vines were partners an oil investment business from the late 1970’s until 1982. Cook testified him, that Vines still owed or some other partner, money as a result of that operation.
Robert Marsh is currently in the cattle business and is apprenticing as an mathematics, economist. He holds a BS in a BS in electrical engineering, masters in business administration from the University and a law Pennsylvania, degree from the University of Arkansas. In Arkansas he has been by employed Arkansas Power Light and as the director of treasury and aсcounting, Inc., Ensco, by Inc., and Stephens, first as treasurer and and then secretary as president. obtaining from arguing judgment
In that bank is barred him, $420,000.00 on a note made Marsh relies against mainly on January Vines and his wife to the bank 1986. Gurvis includ- payable monthly note was installments both and interest. The note had balance ing $395,161.00 29, 1988, the January on date Robert Marsh $245,000.00 Vines sued here. guaranteed Gurvis note upon that hе were payments James Cook testified believed interest note, on the but been current Gurvis Vines had only on the paid principal.
Marsh testified that he guaranteed would not have $245,000.00 had he known of Gurvis Vines’ that payment history; $245,000.00 note; he relying on Gurvis Vines pay to that him, Wilson, after the January meeting between Jerry Gurvis Vines, Vines told Marsh that never he had been this much in debt life; in his that he had no idea about the financial status of Ralph Vines; and that he felt that “had gotten Cook him into this mess.” that, Cook testified did although divulge to Marsh the status of Gurvis Vines’ he did tell Marsh that “Gurvis Vines could not borrow on money his own” and that “had Vines problems of his own.” Ass’n, First Fin. Fed. Sav. and Loan
455, 772 S.W.2d (1989), the supreme court section adopted 124(1) of the Restatement of Security:
(1) Where before the surety has obliga- undertaken his tion the creditor knows facts unknown to the surety increase materially the risk beyond that which the creditor has assume, reason to believe the surety intends to and the creditor also has reason to believe that these facts are unknown to the and has surety reasonable to opportunity communicate them to the surety, failure creditor notify the surety of such facts is a dеfense to surety. Although appellant characterizes the defense as one of it is estoppel, clear that the restatement section is an *5 application of the rule of contract law fraud creates a defense. Restatement of 124 cmt. Comment § b to 124 states:
b. Although in the rule stated this applying in Section to particular situations there is often cоnsiderable difficulty in the ascertaining degree of precise knowledge of and creditor and surety determining even the materi- concealed, of the facts ality alleged to be the rule itself is It does not simple. place any burden on the creditor to investigate for the surety’s benefit. does not require creditor to take any unusual to assure himself that steps surety with facts which acquainted assume are may known to both of them. Among facts that are material are the financial condition of the secret principal, agreements between the parties, the relations of third parties information, If principal. the surety requests the creditor must disclose it. Where he realizes that the surety acting or is about to act in reliance а mistaken belief upon about of a matter respect material to the surety’s risk, he should afford the the benefit of his surety informa- tion if he has an to do opportunity so.
Every
surety by
nature of his obligation under-
takes risks which are the inevitable concomitants of the
transactions involved. Circumstances of the transactions
vary
risks which will
regarded
be
as normal and
contemplаted by
While
surety.
no
takes the
surety
risk
concealment,
material
what will be deemed material
concealment in
of one
respect
not be
surety
regarded
may
so in
respect
another. A creditor may have a lesser
burden of bringing facts to the notice of a compensated
surety who is known to make careful investigations before
taking any obligation than to a casual surety who relies
more
completely upon
appearances
a transaction.
The rule stated in this Section
objective
an
applies
test of
the materiality of the facts not disclosed rather than the
intent of the creditor in failing to make the disclosure.
In the case at bar the
was in
testimony
conflict as to whether
Cook told Marsh anything аbout Gurvis Vines’ financial condi
tion. Furthermore,
the materiality of facts not disclosed is
itself a
ordinarily
fact. First Nat’l Bank and Trust Co.
Notte,
Racine v.
207, 293
97 Wis. 2d
N.W.2d 530 (1980). See
of
also
Mines,
Southern
& Tractor
Equip.
Inc.,
Co. v. K&K
47
surety....”
reason to
that
facts are unknown
believe
[the]
124(1) (1941).
of Restatement
that he
The chancеllor stated that Marsh’s “contention
of a 1986
guarantee
would not have
the
had
known
is
the
and is also
Gurvis Vines note to NBC
evidence
contrary
made
for Gurvis Vines to
refuted
the fact that he
no
request
The
guarantee the note for
In
of 1989.”
latter
March
is a
was
draw.
legitimate inference the chancellor
entitled to
It
was
consideration to
give
also
the chancellor to
proper
Marsh’s education and
in financial matters. Restate
background
ment of
124 cmt. b. There are other distinctions
Security §
between
and the
at bar. In
the
court
Camp
Camp,
case
trial
was
unaware
the rule
“applied
wrong
and
the
standard
duty.”
Here,
Camp,
Appellant next contends that chancellor erred in a finding fiduciary between him relationship and bank. general The rule is that the between a bank its relationship customer is that of debtor and creditor. See Lasley Bank Ark., Northeast 42, 627 4 Ark. S.W.2d 261 App. (1982). “There is no set formula which the existence of a confidential determined, be relationship may for each case is factually different and involves different individuals.” Donaldson John son, 348, 359 235 Ark. (1962). S.W.2d 810 question one of fact and the party claiming the existence of the confidential Donaldson, has the relationship burden of it. See proving 235 Ark. at general 351. These last two rules have been in the applied context of See, the bank-customer relationship. Dennison e.g., Madeira, State Bank v. 230 Kan. P.2d In bаr, the case at Mr. Marsh testified he guaranteed that Wilson’s original note “as a favor to the bank.” was for the trial court to weight determine the to be accorded this testimony. viewing whole, the record as a we cannot chancellor’s failure say to find the existence of fiduciary relationship between bank clearly against Marsh was of the evidence. preрonderance *7 relies on to this argument cases are appellant support Newark, v. First Nat’l Bank Ohio persuasive. Walters 69 of 677,
St. 2d 608 (1982), 433 N.E.2d stands for the has a loan proposition that a bank a to counsel as to duty applicant how to secure insurance. In Bank & Trust mortgage Richfield 362, Co. v. Minn. 648 Sjogren, (1976), 309 244 N.W.2d there no contention that a apparently fiduciary relationship еxisted. argues also that the notes are
Appellant unenforceable against true, a him due to “failure of consideration.” It is contends, that a appellant contract of like other guaranty, any contract, must be based upon consideration. First Nat’l Bank v. Nakdimen, 223, true, (1914). 111 Ark. 163 S.W. 785 is not however, that benefit must have to him any See passed personally. 40 Ark. see Peay, (1882); 69 also Restatement Rockafellow (Second) of (1979). Contracts 88 A contract of may guaranty be sufficient supported by long consideration so as there ais benefit to a guarantor, debtor or or a detriment to the guarantee. Benton, Shamburger Union Bank 8 Ark. App. 259, 650 S.W.2d (1983). 596 A promise to forebear suit bringing or an agreement to extend the time for payment debt sufficient consideratiоn. Wilson Bros. Lumber Co. v. Furqueron, 1064, 204 S.W.2d (1942). 1026 Here both notes were clearly supported by consideration. 8,
Although Marsh’s name maker appears as a on the March note for he contends that the trial court erred in finding him to be a maker of the note because bank admitted guarantor was a response admission. The requests short answer to this contention is that bank’s admission is not binding upon the other to the parties who have the real only interest in the distinction. argues
Finally, appellant that the chancellor erred in refusing to marshal assets. The marshaling of assets is an equitable through which the principle assets securities of debtor are resorted to or in such a apportioned manner as to secure protection rights creditors, of eаch or of two more of a creditor and some other person than creditor having an interest in such assets securities. Bank Bentonville v. Swift cites no Co., Appellant 348 S.W.2d & 233 Ark. at the of the doctrine would application authority require to those similar co-debtor in circumstances instance of a with con- While we agree generally appellant’s here. presеnted doctrines, doctrine, should be like other equitable tention that the manner, erred in the court say in a flexible we cannot applied it under of this case. refusing to the facts apply We the trial court in its judgment entirety. affirm J., not participating. Mayfield, J., Rogers, dissents. chancel- Rogers, Judge, dissenting. I believe the
Judith lor’s be decision should reversed because NBC’s non-disclosure *8 оf Gurvis financial to Although Vines’ condition appellant. was on the 1986 note for appellant clearly obligated I regard believe that NBC’s actions with to guaranty appellant’s of the provides 1988 note a defense to appellant. decision, affirming
In
the
majority
chancellor’s
the
refuses to
the
apply
124(1)
of
the
of
protection
of
Restatement
§
(1941),
the
in
Arkansаs
Court
adopted
Supreme
Camp
Association,
First Financial Federal
and Loan
299
Savings
Ark.
455,
When of the 1988 he was appellant signed guaranty ignorant of Gurvis Vines’ financial situаtion and of Mr. poor Vines’ close with NBC its lengthy, relationship president, Mr. Cook. Cook Although Mr. testified that he informed appel- lant that Mr. Vines was a borrower” “problem and could not own, borrow this amount of on his this information did not money inform adequately facts appellant pertinent affecting risk he was undertaking. The does not majority opinion attach enough significance to Mr. long Cook’s with Mr. relationship Vines and his extensive of Mr. personal knowledge Vines’ poor financial situation. He knew that Mr. Vines was not able off to pay $420,000 Indeed, his note to NBC. Mr. Cook had intimate knowledge Mr. Vines’ prior being unable to off history pay that, his debts. He $420,000 knew when Mr. Vines note, his older notes to NBC were not Mr. performing planned. Cook also had information about Mr. Vines’ bad financial situation that he had obtained their during in an oil partnership investment; fact, he knew that Mr. Vines still owed on money that venture. Mr. Cook had reason to believe that appellant facts, ignorant of these yet withheld this information from appellant. is clear that the information withheld from appellant materially increased risk far appellant’s beyond that which Mr. Cook had reason to believe he intended to assume.
Additionally, majority’s description oil wells’ performance as a “disappointment” is not completely appropri- *9 ate. When the 1988 note was signed, oil wells were not all, producing at and the evidence reveals little justification for Mr. Vines’ optimism that he could make them produce adequate income to retire the debt. that,
Appellant’s argument facts, had he known these he would not have signed the 1988 guaranty, believa- thoroughly ble and persuasive. I also cannot agree with this court’s approval of the chancellor’s refusal to extend the protection 124 of the § Restatement of because appellant he is a well- educated, sophisticated businessman. That section makes no such distinction among sureties. Although appellant clearly under- stood the liability guarantor, did not know the full extent of sum, risk he was undertaking. Mr. Cook knew facts about Vines, Mr. which he had know, reason to believe did not appellant that materially increased appellant’s risk beyond that which Because guaranty. executing intended to assume appellant 124,1 would his defense under I believe established appellant reverse. Controls,
Jim Inc. Management TRICOU and Utility MANAGEMENT, ACI INC.
CA 90-547
Court of Arkansas Appeals
Division I delivered Opinion January