{ "id": 6136710, "name": "Robert E. MARSH v. NATIONAL BANK OF COMMERCE of El Dorado, Arkansas; Jerry M. Wilson; Nadelle S. Wilson; Ralph Jackson Vines; Jo E. Vines; and Gurvis F. Vines", "name_abbreviation": "Marsh v. National Bank of Commerce of El Dorado", "decision_date": "1992-01-29", "docket_number": "CA 91-239", "first_page": "41", "last_page": "51", "citations": [ { "type": "official", "cite": "37 Ark. App. 41" }, { "type": "parallel", "cite": "822 S.W.2d 404" } ], "court": { "name_abbreviation": "Ark. Ct. App.", "id": 13370, "name": "Arkansas Court of Appeals" }, "jurisdiction": { "id": 34, "name_long": "Arkansas", "name": "Ark." }, "cites_to": [ { "cite": "233 Ark. 808", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1691749 ], "weight": 2, "year": 1961, "opinion_index": 0, "case_paths": [ "/ark/233/0808-01" ] }, { "cite": "204 Ark. 1064", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1444107 ], "weight": 2, "year": 1942, "opinion_index": 0, "case_paths": [ "/ark/204/1064-01" ] }, { "cite": "8 Ark. App. 259", "category": "reporters:state", "reporter": "Ark. App.", "case_ids": [ 6141225 ], "weight": 2, "year": 1983, "opinion_index": 0, "case_paths": [ "/ark-app/8/0259-01" ] }, { "cite": "40 Ark. 69", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1897188 ], "year": 1882, "opinion_index": 0, "case_paths": [ "/ark/40/0069-01" ] }, { "cite": "163 S.W. 785", "category": "reporters:state_regional", "reporter": "S.W.", "year": 1914, "opinion_index": 0 }, { "cite": "111 Ark. 223", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1540401 ], "year": 1914, "opinion_index": 0, "case_paths": [ "/ark/111/0223-01" ] }, { "cite": "309 Minn. 362", "category": "reporters:state", "reporter": "Minn.", "case_ids": [ 899169 ], "weight": 2, "year": 1976, "opinion_index": 0, "case_paths": [ "/minn/309/0362-01" ] }, { "cite": "433 N.E.2d 608", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1982, "opinion_index": 0 }, { "cite": "69 Ohio St. 2d 677", "category": "reporters:state", "reporter": "Ohio St. 2d", "case_ids": [ 1808721 ], "year": 1982, "opinion_index": 0, "case_paths": [ "/ohio-st-2d/69/0677-01" ] }, { "cite": "230 Kan. 684", "category": "reporters:state", "reporter": "Kan.", "case_ids": [ 1428889 ], "weight": 2, "year": 1982, "opinion_index": 0, "case_paths": [ "/kan/230/0684-01" ] }, { "cite": "235 Ark. 348", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1684895 ], "weight": 3, "year": 1962, "pin_cites": [ { "page": "351" } ], "opinion_index": 0, "case_paths": [ "/ark/235/0348-01" ] }, { "cite": "4 Ark. App. 42", "category": "reporters:state", "reporter": "Ark. App.", "case_ids": [ 6136797 ], "weight": 2, "year": 1982, "opinion_index": 0, "case_paths": [ "/ark-app/4/0042-01" ] }, { "cite": "272 Ark. 278", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1174916 ], "weight": 2, "year": 1981, "opinion_index": 0, "case_paths": [ "/ark/272/0278-01" ] }, { "cite": "97 Wis. 2d 207", "category": "reporters:state", "reporter": "Wis. 2d", "case_ids": [ 8673439 ], "weight": 2, "year": 1980, "opinion_index": 0, "case_paths": [ "/wis-2d/97/0207-01" ] }, { "cite": "299 Ark. 455", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1888339 ], "weight": 5, "year": 1989, "pin_cites": [ { "page": "457" } ], "opinion_index": 0, "case_paths": [ "/ark/299/0455-01" ] }, { "cite": "299 Ark. 455", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1888339 ], "weight": 4, "year": 1989, "pin_cites": [ { "page": "457" }, { "page": "604" } ], "opinion_index": 1, "case_paths": [ "/ark/299/0455-01" ] } ], "analysis": { "cardinality": 921, "char_count": 19798, "ocr_confidence": 0.909, "pagerank": { "raw": 9.336228365632263e-08, "percentile": 0.5135951941599683 }, "sha256": "c93be85f641a9319a581e8339a517d8397b97e7cc3a8259cd41166cedd19ff83", "simhash": "1:926e607fc52680d6", "word_count": 3366 }, "last_updated": "2023-07-14T19:00:27.632915+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Mayfield, J., not participating.", "Rogers, J., dissents." ], "parties": [ "Robert E. MARSH v. NATIONAL BANK OF COMMERCE of El Dorado, Arkansas; Jerry M. Wilson; Nadelle S. Wilson; Ralph Jackson Vines; Jo E. Vines; and Gurvis F. Vines" ], "opinions": [ { "text": "John E. Jennings, Judge.\nOn January 29,1988, Jerry and Nadelle Wilson and Ralph and Jo Vines executed a promissory note to National Bank of Commerce of El Dorado for $245,000.00. Gurvis Vines and Robert Marsh signed the note as guarantors. On March 8, 1989, Jerry Wilson, Ralph Vines, and Robert Marsh signed a second note to the bank for $17,600.00 to 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 7, 1990. Robert Marsh appeals.\nThe primary issue is whether the chancellor erred in not holding that the bank\u2019s claim against Marsh was barred under section 124(1) of the Restatement of Security, dealing with the non-disclosure of material facts by a creditor to a surety, as expressly adopted by the Arkansas Supreme Court in Camp v. First Fin. Fed. Sav. and Loan Ass\u2019n, 299 Ark. 455, 772 S.W.2d 602 (1989). More specifically, Marsh contends that the bank\u2019s failure to disclose the status of a note owed by his co-guarantor, Gurvis Vines, bars the claim. We hold that the question was one of fact and that the chancellor\u2019s decision was not clearly wrong. Ark. R. Civ. P. 52(a). Because we find no error, the trial court\u2019s judgment is affirmed.\nSome history is necessary for an understanding of the issues presented. Jerry Wilson is the pastor of a Baptist church in El Dorado. He has also been in the business of buying real estate to renovate or rent. In 1983 he bought forty-one acres of land in Union County, for development purposes, financed by an $85,000.00 loan from the appellee bank and secured by a purchase money mortgage on the land. When the note fell due in 1986 and he could not pay it, Wilson called Robert Marsh, who was then the president of Ensco, Inc., to see if either Marsh or Ensco might buy the property. Although Marsh was not interested in buying the land, he agreed to help.\nIn September 1986, Marsh guaranteed a new one-year note for $120,000.00 made by Wilson and his wife, Nadelle, to the bank. When this note came due, Wilson again could pay neither principal nor interest. Marsh paid the $13,000.00 in interest due and the bank extended the note another year.\nBefore the note fell due again, Gurvis Vines, a member of Pastor Wilson\u2019s congregation, became concerned about Wilson\u2019s financial burdens and proposed a solution. Vines had been in the insurance business in El Dorado for many years and was also an independent oil producer, operating under the name of Jay Mike Oil Company. Vines also had a long standing relationship with James Cook, the president of the bank since 1969.\nVines had an interest in several idle, but potentially oil-producing, tracts of land. He proposed to put up these interests as collateral for a larger note, from which he would receive additional funds to get the oil wells into operation..The idea was that the entire note would then be satisfied from the proceeds of the sale of oil.\nVines, Wilson and Marsh met in January, 1988. The upshot was a new note to the bank for $245,000.00. The makers were Wilson and his wife and Ralph \u201cJay\u201d Vines and his wife, Jo. Ralph Vines, Gurvis Vines\u2019 son, is a sports memorabilia dealer in El Dorado. The note was guaranteed by Gurvis Vines and Robert Marsh and secured by a mortgage on the forty-one acres originally bought by Jerry Wilson, together with assignments of oil revenues on Vines\u2019 oil properties and chattel mortgages on related equipment. The proceeds of the note were used to satisfy in full Wilson\u2019s $ 120,000.00 note and to reimburse Marsh for the $ 13,000.00 in interest he had previously paid. The remaining note proceeds, some $ 100,000.00, were deposited to the account of Jay Mike Oil Company.\nGurvis Vines\u2019 oil wells proved to be a disappointment and on March 8,1989, Wilson, Marsh and Ralph Vines signed a note for $17,600.00 to pay the interest on the $245,000.00 note. By May of 1990 both notes were in default and the bank filed suit.\nAt trial both James Cook, the bank\u2019s president, and Marsh testified that they had enjoyed an excellent business relationship with each other. Cook testified that the bank had loaned Marsh some $250,000.00 to build a home in Little Rock. Marsh testified that he had borrowed $170,000.00 from the bank in 1987 to pay his income tax and had a $750,000.00 certificate of deposit there.\nCook, who had worked for the bank since 1954, had known Gurvis Vines since the 1970\u2019s. He and Vines were partners in an oil investment business from the late 1970\u2019s until 1982. Cook testified that Vines still owed him, or some other partner, money as a result of that operation.\nRobert Marsh is currently in the cattle business and is apprenticing as an economist. He holds a BS in mathematics, a BS in electrical engineering, a masters in business administration from the University of Pennsylvania, and a law degree from the University of Arkansas. In Arkansas he has been employed by Arkansas Power and Light as the director of treasury and accounting, by Stephens, Inc., and by Ensco, Inc., first as treasurer and secretary and then as president.\nIn arguing that the bank is barred from obtaining judgment against him, Marsh relies mainly on a $420,000.00 note made by Gurvis Vines and his wife to the bank on January 16, 1986. The note was payable in monthly installments of $ 12,000.00, including both principal and interest. The note had a balance of $395,161.00 on January 29, 1988, the date Robert Marsh and Gurvis Vines guaranteed the $245,000.00 note sued upon here. James Cook testified that he believed the interest payments were current on the Gurvis Vines note, but only $25,000.00 had been paid on the principal.\nMarsh testified that he would not have guaranteed the $245,000.00 had he known of Gurvis Vines\u2019 payment history; that he was relying on Gurvis Vines to pay the $245,000.00 note; that after the January meeting between him, Jerry Wilson, and Gurvis Vines, Vines told Marsh that he had never been this much in debt in his life; that he had no idea about the financial status of Ralph Vines; and that he felt that Cook \u201chad gotten him into this mess.\u201d Cook testified that, although he did not divulge to Marsh the status of Gurvis Vines\u2019 note, he did tell Marsh that \u201cGurvis Vines could not borrow money on his own\u201d and that Vines \u201chad problems of his own.\u201d\nIn Camp v. First Fin. Fed. Sav. and Loan Ass\u2019n, 299 Ark. 455, 772 S.W.2d 602 (1989), the supreme court adopted section 124(1) of the Restatement of Security:\n(1) Where before the surety has undertaken his obligation the creditor knows facts unknown to the surety that materially increase the risk beyond that which the creditor has reason to believe the surety intends to assume, and the creditor also has reason to believe that these facts are unknown to the surety and has reasonable opportunity to communicate them to the surety, failure of the creditor to notify the surety of such facts is a defense to the surety.\nAlthough appellant characterizes the defense as one of estoppel, it is clear that the restatement section is merely an application of the rule of contract law that fraud creates a defense. Restatement of Security \u00a7 124 cmt. a (1941). Comment b to \u00a7 124 states:\nb. Although in applying the rule stated in this Section to particular situations there is often considerable difficulty in ascertaining the precise degree of knowledge of surety and creditor and even in determining the materiality of the facts alleged to be concealed, the rule itself is simple. It does not place any burden on the creditor to investigate for the surety\u2019s benefit. It does not require the creditor to take any unusual steps to assure himself that the surety is acquainted with facts which he may assume are known to both of them. Among facts that are material are the financial condition of the principal, secret agreements between the parties, or the relations of third parties to the principal. If the surety requests information, the creditor must disclose it. Where he realizes that the surety is acting or is about to act in reliance upon a mistaken belief about the principal in respect of a matter material to the surety\u2019s risk, he should afford the surety the benefit of his information if he has an opportunity to do so.\nEvery surety by the nature of his obligation undertakes risks which are the inevitable concomitants of the transactions involved. Circumstances of the transactions vary the risks which will be regarded as normal and contemplated by the surety. While no surety takes the risk of material concealment, what will be deemed material concealment in respect of one surety may not be regarded so in respect of 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 the appearances of a transaction. The rule stated in this Section applies an objective test of the materiality of the facts not disclosed rather than the intent of the creditor in failing to make the disclosure.\nIn the case at bar the testimony was in conflict as to whether Cook told Marsh anything about Gurvis Vines\u2019 financial condition. Furthermore, the materiality of facts not disclosed is ordinarily itself a question of fact. First Nat\u2019l Bank and Trust Co. of Racine v. Notte, 97 Wis. 2d 207, 293 N.W.2d 530 (1980). See also Southern Equip. & Tractor Co. v. K&K Mines, Inc., 272 Ark. 278, 613 S.W.2d 596 (1981). It is also a prerequisite for the application of the section 124 defense that the creditor \u201chas reason to believe that [the] facts are unknown to the surety....\u201d Restatement of Security \u00a7 124(1) (1941).\nThe chancellor stated that Marsh\u2019s \u201ccontention that he would not have signed the guarantee had he known of a 1986 Gurvis Vines note to NBC is contrary to the evidence and is also refuted by the fact that he made no request for Gurvis Vines to guarantee the note for $17,595.00 In March of 1989.\u201d The latter is a legitimate inference the chancellor was entitled to draw. It was also proper for the chancellor to give consideration to Marsh\u2019s education and background in financial matters. Restatement of Security \u00a7 124 cmt. b. There are other distinctions between Camp and the case at bar. In Camp, the trial court was unaware of the rule and \u201capplied the wrong standard of duty.\u201d Camp, 299 Ark. at 457. Here, the chancellor knew the applicable law. Camp involved the issuance of secret side loans to the maker after the original note was guaranteed; the allegation here is one of non-disclosure of a pre-existing liability of a co-guarantor. Our conclusion is that the question in the case at bar was one of fact and we cannot say that the chancellor\u2019s determination that Robert Marsh had not established the defense of fraud is clearly against a preponderance of the evidence. Ark. R. Civ. P. 52(a).\nAppellant next contends that the chancellor erred in not finding a fiduciary relationship between him and the bank. The general rule is that the relationship between a bank and its customer is merely that of debtor and creditor. See Lasley v. Bank of Northeast Ark., 4 Ark. App. 42, 627 S.W.2d 261 (1982). \u201cThere is no set formula by which the existence of a confidential relationship may be determined, for each case is factually different and involves different individuals.\u201d Donaldson v. Johnson, 235 Ark. 348, 359 S.W.2d 810 (1962). The question is one of fact and the party claiming the existence of the confidential relationship has the burden of proving it. See Donaldson, 235 Ark. at 351. These last two general rules have been applied in the context of the bank-customer relationship. See, e.g., Dennison State Bank v. Madeira, 230 Kan. 684, 640 P.2d 1235 (1982). In the case at bar, Mr. Marsh testified that he guaranteed Wilson\u2019s original note \u201cas a favor to the bank.\u201d It was for the trial court to determine the weight to be accorded this testimony. In viewing the record as a whole, we cannot say that the chancellor\u2019s failure to find the existence of a fiduciary relationship between the bank and Marsh was clearly against a preponderance of the evidence.\nThe cases appellant relies on to support this argument are not persuasive. Walters v. First Nat\u2019l Bank of Newark, 69 Ohio St. 2d 677, 433 N.E.2d 608 (1982), stands merely for the proposition that a bank has a duty to counsel a loan applicant as to how to secure mortgage insurance. In Richfield Bank & Trust Co. v. Sjogren, 309 Minn. 362, 244 N.W.2d 648 (1976), there was apparently no contention that a fiduciary relationship existed.\nAppellant also argues that the notes are unenforceable against him due to a \u201cfailure of consideration.\u201d It is true, as appellant contends, that a contract of guaranty, like any other contract, must be based upon consideration. First Nat\u2019l Bank v. Nakdimen, 111 Ark. 223, 163 S.W. 785 (1914). It is not true, however, that any benefit must have passed to him personally. See Rockafellow v. Peay, 40 Ark. 69 (1882); see also Restatement (Second) of Contracts \u00a7 88 (1979). A contract of guaranty may be supported by sufficient consideration so long as there is a benefit to a principal debtor or guarantor, or a detriment to the guarantee. Shamburger v. Union Bank of Benton, 8 Ark. App. 259, 650 S.W.2d 596 (1983). A promise to forebear bringing suit or an agreement to extend the time for payment of a debt is sufficient consideration. Wilson Bros. Lumber Co. v. Furqueron, 204 Ark. 1064, 166 S.W.2d 1026 (1942). Here both notes were clearly supported by consideration.\nAlthough Marsh\u2019s name appears as a maker on the March 8, 1988, note for $ 17,600.00, he contends that the trial court erred in finding him to be a maker of the note because the bank admitted he was a guarantor in response to requests for admission. The short answer to this contention is that the bank\u2019s admission is not binding upon the other parties to the note, who have the only real interest in the distinction.\nFinally, appellant argues that the chancellor erred in refusing to marshal assets. The marshaling of assets is an equitable principle through which the assets and securities of a debtor are resorted to or apportioned in such a manner as to secure protection to the rights of each of two or more creditors, or of a creditor and some person other than a creditor having an interest in such assets and securities. Bank of Bentonville v. Swift & Co., 233 Ark. 808, 348 S.W.2d 881 (1961). Appellant cites no authority that would require the application of the doctrine at the instance of a co-debtor in circumstances similar to those presented here. While we agree generally with appellant\u2019s contention that the doctrine, like other equitable doctrines, should be applied in a flexible manner, we cannot say the court erred in refusing to apply it under the facts of this case.\nWe affirm the judgment of the trial court in its entirety.\nMayfield, J., not participating.\nRogers, J., dissents.", "type": "majority", "author": "John E. Jennings, Judge." }, { "text": "Judith Rogers, Judge,\ndissenting. I believe the chancellor\u2019s decision should be reversed because of NBC\u2019s non-disclosure of Gurvis Vines\u2019 financial condition to appellant. Although appellant was clearly obligated on the 1986 note for $ 120,000.00, I believe that NBC\u2019s actions with regard to appellant\u2019s guaranty of the 1988 note provides a defense to appellant.\nIn affirming the chancellor\u2019s decision, the majority refuses to apply the protection of \u00a7 124(1) of the Restatement of Security (1941), adopted by the Arkansas Supreme Court in Camp v. First Financial Federal Savings and Loan Association, 299 Ark. 455, 772 S.W.2d 602 (1989), to appellant. Section 124(1) provides a defense to the surety if the creditor knows facts, unknown to the surety, that materially increase the risk beyond that which the creditor has reason to believe the surety intends to assume and does not communicate these facts to the surety. Although I agree with the majority that whether this nondisclosure is material is a question of fact, I strongly believe that the chancellor\u2019s finding that NBC did not conceal material facts about Mr. Vines from appellant is clearly erroneous.\nThe majority opinion states \u00a7 124 is merely an application of the rule of contract law that fraud creates a defense. I strongly disagree with the majority\u2019s implication that one seeking to use this section as a defense must establish fraud. In Camp v. First Fin. Fed. Sav. and Loan Ass\u2019n, 299 Ark. at 457, 772 S.W.2d at 604, the Arkansas Supreme Court held that it is not necessary for the surety to prove bad faith or fraudulent misrepresentation; only the elements set forth in \u00a7 124 need be proved. I am convinced that appellant proved these elements.\nWhen appellant signed the guaranty of the 1988 note, he was ignorant of Gurvis Vines\u2019 poor financial situation and of Mr. Vines\u2019 lengthy, close relationship with NBC and its president, Mr. Cook. Although Mr. Cook testified that he informed appellant that Mr. Vines was a \u201cproblem borrower\u201d and could not borrow this amount of money on his own, this information did not adequately inform appellant of the pertinent facts affecting the risk he was undertaking. The majority opinion does not attach enough significance to Mr. Cook\u2019s long relationship with Mr. Vines and his extensive personal knowledge of Mr. Vines\u2019 poor financial situation. He knew that Mr. Vines was not able to pay off his $420,000 note to NBC. Indeed, Mr. Cook had intimate knowledge of Mr. Vines\u2019 prior history of being unable to pay off his debts. He knew that, when Mr. Vines signed the $420,000 note, his older notes to NBC were not performing as planned. Mr. Cook also had information about Mr. Vines\u2019 bad financial situation that he had obtained during their partnership in an oil investment; in fact, he knew that Mr. Vines still owed money on that venture. Mr. Cook had reason to believe that appellant was ignorant of these facts, yet he withheld this information from appellant. It is clear that the information withheld from appellant materially increased appellant\u2019s risk far beyond that which Mr. Cook had reason to believe he intended to assume.\nAdditionally, the majority\u2019s description of the oil wells\u2019 performance as a \u201cdisappointment\u201d is not completely appropriate. When the 1988 note was signed, the oil wells were not producing at all, and the evidence reveals little justification for Mr. Vines\u2019 optimism that he could make them produce adequate income to retire the debt.\nAppellant\u2019s argument that, had he known these facts, he would not have signed the 1988 guaranty, is thoroughly believable and persuasive. I also cannot agree with this court\u2019s approval of the chancellor\u2019s refusal to extend the protection of \u00a7 124 of the Restatement of Security to appellant because he is a well-educated, sophisticated businessman. That section makes no such distinction among sureties. Although appellant clearly understood the liability of a guarantor, he did not know the full extent of the risk he was undertaking. In sum, Mr. Cook knew facts about Mr. Vines, which he had reason to believe appellant did not know, that materially increased appellant\u2019s risk beyond that which appellant intended to assume in executing the guaranty. Because I believe appellant established his defense under \u00a7 124,1 would reverse.", "type": "dissent", "author": "Judith Rogers, Judge," } ], "attorneys": [ "Wilson & Associates, by: Jack T. Lassiter, for appellant.", "William I. Prewett, for appellees." ], "corrections": "", "head_matter": "Robert E. MARSH v. NATIONAL BANK OF COMMERCE of El Dorado, Arkansas; Jerry M. Wilson; Nadelle S. Wilson; Ralph Jackson Vines; Jo E. Vines; and Gurvis F. Vines\nCA 91-239\n822 S.W.2d 404\nCourt of Appeals of Arkansas En Banc\nOpinion delivered January 29, 1992\n[Rehearing denied February 26, 1992.]\nWilson & Associates, by: Jack T. Lassiter, for appellant.\nWilliam I. Prewett, for appellees.\nRogers, J., would grant rehearing; Mayfield, J., not participating." }, "file_name": "0041-01", "first_page_order": 61, "last_page_order": 71 }