Court Opinion

ID: 9705713
Source: CourtListenerOpinion
Date Created: 2023-08-26 01:17:35.598167+00
Date Added: 2024-06-11T18:22:13.703186
License: Public Domain

On Reargument
Holden, C. J.
After the opinion in this case was filed at the October Term 1965 the defendant Bank of Waterbury in due time requested reargument. Reargument was ordered and heard at the February Term 1966.
*439At the rehearing the defendant undertook to challenge twelve findings of fact made by the chancellor on the ground that the facts stated in these findings are not supported by the evidence. None of the deficiencies now claimed as to the findings were briefed when the appeal was first presented.
The office of reargument is to present to the Court some point overlooked, whether of law or fact, which was presented in the brief upon the original argument of the case. New questions are not for consideration nor are issues that have been argued and decided upon due consideration of the pertinent law and facts. Goodwin Admx. v. Gaston, 103 Vt. 357, 367, 154 Atl. 772; Supreme Court Rule 22.
The defendant refers us to numerous exceptions to the findings filed in the court of chancery. Since none of these exceptions was briefed the findings stand unchallenged on appeal. This effect is not changed by 12 V.S.A. §2385, enacted in 1959, which eliminates the necessity for filing exceptions to findings of fact as a prerequisite to preserve the question on appeal. But the requirements as to briefing remain unchanged. By force of this statute the appellant’s brief takes on new importance in connection with findings of fact”... since it now has the office of first raising the objection and then demonstrating that it is well founded.” Bresette v. Knapp, 121 Vt. 376, 378, 159 A.2d 329; Neverett v. Towne, 123 Vt. 45, 179 A.2d 583; Davis v. Kneeland Lumber Co., 124 Vt. 70, 71, 196 A.2d 572.
When the cause was first argued the bank took the position that its president, Mr. Meaker, was acting solely for the bank and not in an attorney-client relationship with the plaintiff. In the initial brief it was called to our attention that there was no evidence that Mr. Meaker was called upon to act as her attorney, or to advise her as such, with respect to the execution of the notes or the assignment of stocks. “As a matter of fact the evidence discloses that, prior to their assignment, her stock certificates were in the hands of Mr. Joslin, who was then acting as her attorney representing her in this action.” (Def. Br. 13). The fact that the plaintiff had other counsel available for consultation during some of the transactions here in question, was not mentioned in the opinion. The bank’s request for permission to reargue was predicted upon the position that the nature of the relationship between the plaintiff and Mr. Meaker was misunderstood. The bank further contended there was a total absence of any evidence to support the conclusion that the plaintiff reposed any confidence whatsoever in Mr. Meaker throughout these transactions. Since this was a controlling factor in allowing reargument, we go straight to this *440point. In so doing, our search has taken us behind the findings to the evidence received at the trial.
As the main opinion points out, until the middle of November 1959 the plaintiff and her husband were in severe financial difficulty. Their joint obligations to the bank on five different notes were continuously delinquent in payments of both interest and principal. Taxes on their homeplace were in arrears. The bank repeatedly requested the Griffins to pay various delinquencies. It is manifest from the findings and the record the bank became increasingly aware of their financial stress. The plaintiffs husband was in the logging business and his checking account with the plaintiff, used to pay business obligations, was frequently overdrawn. During the period from August to November, 1959, the bank statement of this account showed more overdrafts than other entries. The bank examiners became increasingly critical of the Griffin loans and requested the bank to obtain a current financial statement of the Griffin logging enterprise. It was in this background that Mr. Meaker, as the defendant’s president, and Mr. Brisbin, one of the defendant’s directors, called on the plaintiff in the fall of 1959. The object of their visit was the bank’s concern over the note of $7,200, dated November 2, 1956, secured by a government guaranteed mortgage on the Griffin home. It was their purpose to examine the premises for purposes of reappraising its value. During the course of this visit they informed Mrs. Griffin that unless the obligation was made current, foreclosure proceedings would be instituted.
To this the plaintiff responded by informing Mr. Meaker and Mr. Brisbin that she was about to inherit money and stocks and that when she received these funds she would take care of the arrearage insofar as the home property was concerned. She visited with the bank officers about her securities and inquired whether it would be best to borrow or sell stocks to satisfy this obligation. The defendant’s president, Mr. Meaker, declined to advise her in this regard but suggested she should seek advice from someone in the stock business. The plaintiff assured them she would take care of the home loan.
Shortly after this conference the plaintiff received her inheritance. Two days later, on November 16, 1959, the plaintiff went to the bank and paid the amount past due on the delinquent home mortgage. In addition, the bank requested and received $698.70 to apply on all loans except the note of $1,485.53 dated December 15, 1958. The bank requested this particular obligation be paid in full. The plaintiff complied.
Shortly after these transactions the plaintiff and her children *441bécame involved in an automobile accident and all were hospitalized. The chancellor found that during the next five months the plaintiff was induced to sign a series of new notes aggregating $22,000, which increased the original indebtedness from $11,000 to $33,000. Although none of the proceeds from these loans were received by the plaintiff, most of her inheritance was transferred to the defendant to secure these obligations.
The bank’s participation in this result is the crux of this controversy. Its part in these transactions is complicated by the fact that its president and counsel had previously served as attorney for the Griffins in the preparation of income tax returns. Mr. Meaker testified that the plaintiff and her husband had consulted him in his office in connection with the automobile accident of 1959.
There is no claim of violation of professional confidence or breach of professional ethics. However, the question of the plaintiff’s reliance on the bank and its officers, without the need for independent legal advice, must be considered in the light of the past relationships. Mr. Meaker’s prior representation of the plaintiff and her husband is also of significance in its bearing on his knowledge, as an officer of the bank, of the financial distress and the family circumstances which attended these transactions. As a result of assisting the plaintiff and her husband in the preparation of income tax returns for 1959, the president of the bank knew, or should have known, that the interest on past obligations, before the assignment of the plaintiff’s stock, was more than twice the amount received by the plaintiff and her husband as earnings for that year.
That the bank was keenly interested in obtaining additional security for the overdue obligations from the plaintiff is manifest from the record. Its treasurer, Mr. Chase, testified “We had been promised for a long period of time that the delinquencies would be taken care of from the inheritance.” It appears from the testimony of the treasurer that he urged the plaintiff’s husband in this direction.
It is of some significance, too, that the plaintiff’s pledge of substantially all her inheritance went far beyond her commitment made to the bank officers at the time of the threatened foreclosure. On that occasion she promised to take care of the mortgage on their homeplace. Her payment of $2,000 in November, 1959, exceeded this assurance but there was no indication from the bank or any of its officials that they would look to the plaintiff to secure future business obligations which might be incurred by her husband to an extent that tripled the past indebtedness.
*442That the plaintiff relied on the integrity and fair dealing of those representing the bank is demonstrated in the record. She solicited advice of the bank officials as to how she could take care of the government insured mortgage to the bank, whether by loan or pledge. She left the key to her safety deposit box in the custody of the bank’s treasurer. She signed the instruments presented to her by officials of the bank without question.
The record bears out the bank’s contention that the securities, before assignment, were in the custody of Mr. Joslin. From his cross-examination of the bank’s president, it appears that Mr. Joslin was handling the estate from which the plaintiff’s inheritance was derived. In any event, it does not appear that the plaintiff called upon any attorney for advice before making the assignments in question. Neither is there any indication that she had reason to suspect bad faith or undue advantage on the part of the bank at this time. There is nothing to indicate that she felt it necessary to seek independent advice in connection with the transactions which are the subject of this controversy.
The bank’s desire to apply the resources gained from the plaintiff’s assignment of her inheritance appears from testimony of its treasurer, Mr. Chase. This purpose resulted in the alteration of the notes given December 10 and December 28, 1959. The excess of security gained in the transaction on the tractor loan on March 7, was applied at will to prior obligations as the treasurer thought expedient for the bank. These writings were material since they purported to increase the security which the plaintiff had committed to these notes, directly affecting the rights of both parties.
The stock certificates assigned in blank on March 7 were accepted by the bank at a time when the prospect that past obligations would be honored was hopeless. Two days after this assignment, on March 9, the bank’s treasurer wrote to the plaintiff’s husband reminding him of an overdraft on the checking account. The communication called to his attention that the “G.I. Loan” on the homeplace was delinquent and requested immediate satisfaction of these obligations “otherwise, we must make up a small note for this amount secured by the stock we are now holding belonging to your wife...
Later, on June 30, the bank’s president wrote to Mr. and Mrs. Griffin “You must be advised at this time unless some definite arrangement is made, our next step will be to sell the securities which are here as collateral, take possession of your personal property equip*443ment and have a sheriff’s sale of that and, if necessary, proceed with foreclosure of your home.”
In retrospect, the plaintiff’s first intimation to the bank of her prospective inheritance, as a means to take care of the mortgage on her home, became the signal for vastly increased new obligations. Those representing the bank knew, or should have known, that repayment was beyond all financial capability of the obligors to repay except by resort to the plaintiff’s inheritance. And the new loans became the vehicle by which the bank obtained possession of the plaintiff’s inheritance.
It cannot be questioned that the defendant, William Griffin, participated in the inducement of the plaintiff to enter these transactions. We recognize that the most dominant influence of all relations is that of the husband over the wife. Transactions between them to be valid, particularly as to her, must be fair and reasonable, voluntarily and understandably made. Such transactions are jealously scrutinized to prevent the wife from being overreached or defrauded by undue influence or improper conduct on the part of her husband. When they are brought about by anything amounting to constructive fraud on his part, they are voidable against all persons participating other than bona fide purchasers. Peyton v. William Peyton Corp., 23 Del. Ch. 321 7A.2d 737; 123 A.L.R. 1482 and annotation which follows; 26 Am. Jur. Husband and Wife, §269; 41 C.J.S. §514. See also, Commercial Credit Plan, Inc. v. Beebe, 123 Vt. 317, 321, 187 A.2d 502.
While the bank refrained from any direct persuasion or inducement, the evidence establishes that its treasurer urged the codefendant husband to gain access to his wife’s inheritance. Mr. Chase testified he had conversations with the plaintiff’s husband, inquiring when his wife was going to get the money and make some payments to the bank.
As a result of these activities the bank moved from the status of a creditor, with meager and scant security for delinquent obligations of $11,000, to the comfortable position of abundant protection on combined obligations in excess of $35,000. All of this was at the ex-pence of the plaintiff’s newly acquired inheritance.
Perhaps no single circumstance, standing alone, would justify the interference of equity. In combination they present the necessary ingredients for equitable relief.
Unfairness and undue advantage to the point of constructive fraud, may be derived from a variety of circumstances. Ordinarily it is enough *444to justify the intervention of equity if a “vendee has actively attempted to ensnare, and has in fact ensnared, the vendor into the making of an unconscionable contract.” Crompton v. Beedle and Thomas, 83 Vt. 287, 297, 75 Atl. 331; Howard v. Howard, 122 Vt. 27, 32, 163 A.2d 861.
Equity jurisdiction extends to “those cases where a party, although perhaps still keeping within the limits of the strict law, so as to be sustained by the law courts, had committed some unconscientious act or breach of good faith, and had thereby obtained an undue advantage over another, which advantage, even though legal, equity would not suffer him to retain.” 3 Pomeroy’s Equity Jurisprudence, §873 (Fifth Edition).
The term “fraud” as applied to the bank’s participation and that of its officers, is to be understood in its innocent sense without involvement of evil intent. In re Campbell’s Will, 100 Vt. 395, 402, 138 Atl. 725. Nonetheless, the findings and the record support the inference that the undue advantage acquired through the transactions which started in November 1959, was intentionally gained for the purpose of salvaging distressed obligations at the plaintiff’s expense. See Kendall’s Admr. v. Roseberry, 120 Vt. 498, 502, 144 A.2d 836. And the bank knew, or should have known, that the plaintiff personally was to receive none of the proceeds of the new loans.
It is not disputed that the assignment of March 7, 1960, was negotiated when the plaintiff was acting under the misapprehension and misunderstanding that the pledge of her stock was to be temporary and only during refinancing of the tractor. The bank said or did nothing to dispel this illusion; it remained silent. “As far as the bank was concerned, all certificates secured all notes.” Beyond that the bank presented for the plaintiff’s signature a note which made no mention of her stocks and bonds as security. The security, designated on the note, mentioned only the chattel, and this security the bank had left undisturbed. Certainly the bank was aware of its own intentions. The bank knew, or should have known, that if this pledge was to be taken as a blanket assignment, the plaintiff’s inheritance would be irretrievably consumed to satisfy obligations which yielded her no consideration.
In the light of the plaintiff’s predicament and her past association with the bank and its officers, there was a duty on the bank to disclose its intention and the impending consequences to the plaintiff. Considerations of candor and fairness required at least that. In these circumstances the suppression of important facts calculated to mislead *445will vitiate the assignment. Brigham v. Dana, (Redfield, C.J.) 29Vt. 1, 11.
The decree of the chancellor, which restores the plaintiff to possession of the securities thus parted with, is well founded on fundamental considerations of equity.
The other points raised in reargument are fully disposed of in the first opinion.

Let full entry go down.