Bock v. Bank of Bellevue

• Decision Date: 20 January 1989
• Docket Number: Nos. 87-139,87-146,s. 87-139
• Citation: 434 N.W.2d 310,230 Neb. 908
• Parties: Ralph BOCK and Lucile D. Bock, Appellants, v. BANK OF BELLEVUE, Appellee.
• Court: Nebraska Supreme Court

Page 310

434 N.W.2d 310

230 Neb. 908

Ralph BOCK and Lucile D. Bock, Appellants, v. BANK OF BELLEVUE, Appellee.

Nos. 87-139, 87-146.

Supreme Court of Nebraska.

Jan. 20, 1989.

Syllabus by the Court

1. Appeal and Error. Errors assigned but not argued will not be considered.

2. Equity: Appeal and Error. On appeal to this court, an equity action is reviewed de novo on the record, subject to the rule that where the credible evidence is in conflict, the Supreme Court may consider the fact that the trial court observed the witnesses and accepted one version of the facts over another.

3. Pleadings: Appeal and Error. Where an issue is not raised by the pleadings, it will not be addressed for the first time on appeal.

4. Contracts: Consideration. There is sufficient consideration for a promise if there is any benefit to the promisor or any detriment to the promisee. The benefit rendered need not be to the party contracting, but may be to anyone else at the contracting party's procurement or request.

5. Duress: Words and Phrases. To constitute duress, there must be an application of such pressure or constraint that compels a person to go against that person's will and takes away that person's free agency, destroying the power of refusing to comply with the unjust demands of another.

6. Contracts: Duress. To be voidable because of duress, an agreement must not only be obtained by means of the pressure brought to bear, but the agreement itself must be unjust, unconscionable, or illegal. The essence of duress is the surrender to unlawful or unconscionable demands. It cannot be predicated upon demands which are lawful, or the threat to do that which the demanding party has a legal right to do.

7. Fraud: Proof. To establish misrepresentation, the party alleging it must plead and prove that a representation was made; that the representation was false; that the representation was known to be false when made, or was made recklessly without knowledge of its truth and as a positive assertion; that it was made with the intention that the plaintiff should rely on it; that the plaintiff reasonably did so rely; and that the plaintiff suffered damage as a result.

8. Fraud: Equity: Proof: Evidence. In an equity case, a fraudulent misrepresentation must be proved by clear and convincing evidence.

9. Contracts. One who signs an instrument without reading it, when he can read and has the opportunity to do so, cannot avoid the effect of his signature merely because he was not informed of the contents of the instrument.

10. Contracts: Principal and Surety: Debtors and Creditors. Where the surety makes no inquiry on the subject, the duty of disclosure as to facts increasing the risks of the undertaking depends upon the circumstances of the case. Generally, the creditor may assume that the surety has obtained information from other sources or has chosen to assume whatever risks may be involved. A duty of disclosure may arise when the creditor knows or has good grounds for believing (1) the surety is being deceived or misled or (2) the surety has been induced to enter the contract in ignorance of facts materially increasing his risks, of which the creditor has knowledge and the opportunity to disclose prior to the surety's acceptance of the undertaking.

Kenneth Cobb, of Law Offices of Cobb & Hallinan, P.C., Lincoln, for appellants.

Gerald P. Laughlin and Jill Robb Ackerman, of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim, Omaha, and Emmett D. Childers, Bellevue, for appellee.

HASTINGS, C.J., GRANT, and FAHRNBRUCH, JJ., and HENDRIX and OLBERDING, District Judges.

FAHRNBRUCH, Justice.

Ralph and Lucile D. Bock appeal a district judge's refusal to rescind, vacate, and set aside their personal guaranty and two deeds of trust given to the Bank of Bellevue at the request of their son to secure a $250,000 loan. The judge also refused to enjoin the sale, pursuant to the deeds of trust, of two Bock farm properties.

The trial judge's rulings were entered in separate equitable actions in Gage and Jefferson Counties, where the Bocks own farmland. The cases were consolidated for trial and for purposes of appeal. We affirm the trial judge in both cases.

Bocks' assignments of error number 16. Not all of the assigned errors were briefed or argued. Those errors assigned but not argued will not be considered. Wells Fargo Ag Credit Corp. v. Batterman, 229 Neb. 15, 424 N.W.2d 870 (1988); In re Estate of West, 226 Neb. 813, 415 N.W.2d 769 (1987). Consolidated, those assignments of error properly before this court claim the trial court erred in finding: (1) that Neb.Rev.Stat. § 40-104 (Reissue 1988) does not require that a guaranty be acknowledged; (2) that the guaranty and deeds of trust were supported by sufficient consideration; (3) that the bank did not have a duty to disclose the son's financial situation to the Bocks and that the bank did not coerce the Bocks through fraud, duress, or misrepresentations; and (4) that the appellants had the burden of proving their case by clear and convincing evidence.

On appeal to this court, an equity action is reviewed de novo on the record, subject to the rule that where the credible evidence is in conflict, the Supreme Court may consider the fact that the trial court observed the witnesses and accepted one version of the facts over another. Brown v. Borland, 230 Neb. 391, 432 N.W.2d 13 (1988). The fact that the trial court observed the witnesses and accepted one version of the facts over another is indeed important in these cases, if not crucial.

In the spring of 1983, the appellants' son LaVern Bock wanted to refinance his business indebtedness with a loan from the Bellevue bank. He also wanted computer equipment for his business, Photo Laboratory of Lincoln, Inc. (Photo Lab). LaVern was told by a Bellevue bank officer that he needed additional collateral to secure the desired loan. In 1979, Ralph and Lucile Bock had mortgaged their farm so that LaVern could obtain a loan from First National Bank of Beatrice. At the time LaVern approached the Bellevue bank, the Beatrice bank loan was still unpaid. LaVern suggested to the Bellevue bank officer that his parents would provide the additional security it required to loan him money.

Unbeknown to his parents, LaVern submitted a financial statement to the Bellevue bank showing that Ralph and Lucile Bock owned 580 acres of farmland worth $940,000. A later appraisal of the Bock land for the bank by Wayne Kubert showed the Bocks owned about 480 acres of land worth $577,000. The guaranty and deeds of trust recite 320 acres.

LaVern testified that his father was aware an appraisal for the Bellevue bank was to be made and that he explained that the appraisal was being required by the bank. LaVern said he accompanied Kubert to the farm and introduced him to Ralph Bock. Kerby Cunningham, the elder Bocks' C.P.A., testified that he had been contacted by Ralph Bock regarding the lease-purchase of computer equipment by LaVern. The C.P.A. said Ralph was interested in the tax consequences of a lease-purchase of the computer equipment in his own name and its rental to Photo Lab. Cunningham recalled that Ralph had not yet agreed to help LaVern on the lease-purchase, but was favorable to the idea.

The loan was closed and the lease-purchase agreement finalized at the Bock farm home on November 22, 1983. The elder Bocks testified that LaVern called their home the morning of November 22 and told them he had papers for them to sign. Kyle Eichorn, an employee of Affiliated Midwest Bancs Leasing and the leasing officer in charge of LaVern's computer equipment lease, accompanied LaVern to the farm. Eichorn brought with him the papers for the loan from the Bellevue bank. Both Ralph and Lucile Bock claimed they knew nothing of the loan or the lease-purchase agreement until the morning the documents were executed.

The elder Bocks executed and delivered to the Bank of Bellevue a "Term Loan Agreement," a "Continuing Personal Guaranty," a "First Deed of Trust" to a quarter section of land in Gage County, and a "First Deed of Trust" to a quarter section of land in Jefferson County, and in their own right executed a lease-purchase agreement for computer equipment.

The "Term Loan Agreement" provided that the Bellevue bank would loan $250,000 to Photo Lab, which was owned by LaVern Bock. Besides the elder Bocks, LaVern and his wife were to be guarantors. The "Continuing Personal Guaranty" guaranteed payment of the $250,000 loan upon default and provided it would be secured by the two deeds of trust to the elder Bocks' land. It was signed by the elder Bocks but was not notarized. Each of the elder Bocks signed each of the deeds of trust before a notary, who took their acknowledgments and notarized their signatures. Eichorn served as the notary.

Eichorn testified that each document was explained to Ralph and Lucile Bock and that they were given an opportunity to read the papers. Neither of them read any of the documents, although LaVern Bock testified that his parents "paged" through the papers. Eichorn said he told the Bocks they would have to make the payments or lose their farm if their son LaVern defaulted. Ralph Bock said he told Eichorn that he could not make the loan payments if LaVern did not. Lucile Bock testified that she was reluctant to sign the required documents. However, she wanted to do the right thing and help LaVern. Both parents testified they trusted LaVern.

Both Ralph and Lucile Bock testified Eichorn told them the loan was "safe" and would be paid off in the spring after he, Eichorn, sold condominiums owned by LaVern. Eichorn denied making any such statement. LaVern testified that it was he who told his parents the loan was safe and would be paid off shortly after the condominiums were sold. The Bocks claim they did not know that the condominiums were heavily mortgaged nor that their sale would not produce enough money to pay off the loan.

Both...