Sims v. First Nat. Bank, Harrison

• Decision Date: 03 December 1979
• Docket Number: No. 79-244,79-244
• Parties: Wanda Jo SIMS, Appellant, v. FIRST NATIONAL BANK, HARRISON, Appellee.
• Court: Arkansas Supreme Court

Page 270

590 S.W.2d 270

267 Ark. 253

Wanda Jo SIMS, Appellant, v. FIRST NATIONAL BANK, HARRISON, Appellee.

No. 79-244.

Supreme Court of Arkansas.

Dec. 3, 1979.

Rehearing Denied Jan. 7, 1980.

Thomas A. Martin, Jr., Jasper, for appellant.

Terry M. Poynter, Mountain Home, for appellee.

FOGLEMAN, Justice.

The cause of action involved on this appeal was commenced on December 16, 1977, when appellee First National Bank of Harrison filed a third party complaint against appellant Wanda Jo Walls Sims and her husband C. J. Sims for foreclosure of two mortgages in an action which had been instituted by a materialman to establish and foreclose a lien for materials and supplies. One mortgage was on a house in Robinwood II, a subdivision of Harrison, on property owned by C. J. Sims. The other mortgage was a second mortgage on a tract of land owned by appellant in Bergman, Arkansas. Appellant filed a counterclaim and cross-complaint in which she alleged that the mortgage on her property was obtained by duress and undue influence exercised by her husband, C. J. Sims, that the mortgage was obtained by appellee's fraudulent representation that $15,000 in "new money" would be loaned by appellee if her property was mortgaged as additional security to the bank and that she was entitled to rescind the contract on the ground that no Truth in Lending disclosures regarding the transaction were provided to her.

After a trial on the issues, appellant's contentions were rejected by the chancery court and a decree of foreclosure entered. On this appeal, appellant asserts the following points for reversal:

I

THE COURT ERRED IN FINDING THE APPELLANT'S EXECUTION OF THE MORTGAGE WAS NOT OBTAINED BY DURESS AND UNDUE INFLUENCE AND THAT THE APPELLEE WAS NOT THE PROXIMATE CAUSE OF SAME.

II

THE COURT ERRED IN FINDING THAT THE MORTGAGE SHOULD NOT BE CANCELLED BECAUSE OF FRAUD ON THE PART OF THE APPELLEE BANK.

III

THE COURT ERRED IN FINDING THAT THE TRANSACTION IN REGARDS THE APPELLANT WAS EXEMPT FROM FEDERAL TRUTH IN LENDING LAWS.

We shall treat the points for reversal in the order presented.

Appellant alleged in a cross-complaint against First National Bank that the mortgage on the tract of land owned by her should be set aside and removed as a cloud on her title because her signatures on the note secured by the mortgage and on the mortgage itself were obtained by duress and threats that her husband would be subject to criminal prosecution if those instruments were not executed. She also alleged that the note and mortgage were obtained by duress and fraud on the part of her husband, C. J. Sims, and that this duress and fraud were the direct results of threats by the bank that her husband would be subject to criminal prosecution. The final decree contained a recital that the court could not find any substantial evidence of duress on the part of plaintiff against appellant, although she may have been upset by the financial circumstances in which her husband, C. J. Sims, found himself and may have feared his being financially ruined. There was evidence that may well have been taken to establish probable cause for a criminal prosecution against C. J. Sims, and threats to prosecute would themselves have been a basis for cancellation on account of duress only if the charge was simulated. See United Life Ins. Co. v. Johnson,199 Ark. 241, 133 S.W.2d 841; Shattuck v. Watson, 53 Ark. 147, 13 S.W. 516; Marvin v. Marvin, 52 Ark. 425, 12 S.W. 875.

C. J. Sims had been a customer of the First National Bank for many years. Numerous loans had been made to him and the relationship had been satisfactory. In March, 1976, the bank made a loan of $37,000 for construction money for a house to be built by Sims in Robinwood II for resale. The Square Deal Construction Company, in which Sims was a partner and Ronnie Paul, the managing partner, was to construct the house. After some $32,000 had been advanced on the construction money loan, Ron Shaver, the bank's loan officer who had handled the loan, found, upon inspection in August or September, 1976, that the house was only one-third complete. It appeared that the bank had little or no security for its loan.

The same construction company was, during the period advances were being made to Sims, doing extensive remodeling on the house located on the tract which was the separate property of appellant. This work was started in February, 1976, for a contract price of $17,000. Appellant had purchased this tract, known as the Bergman property, from C. J. Sims and his former wife, Patricia, in 1975, for $28,000, but the title was not transferred until March 17, 1976, after C. J. Sims had been divorced from Patricia. Appellant paid $1,000 in cash and assumed a mortgage of $23,000 in favor of a savings and loan association. She made three monthly payments on this mortgage debt. It is not shown how she paid the rest of the purchase price, if she did. Appellant and C. J. Sims were married June 20, 1976, two months after she had been divorced from her former husband, Thomas Walls, to whom she was married when she started negotiations with Sims, a real estate agent, for the purchase of the property. After appellant married Mr. Sims, the monthly mortgage payments were made from their joint bank account. Appellant had been employed by Airport Realty Company, a partnership in which both C. J. Sims and Ronnie Paul were partners. It seems that she was not employed after the marriage.

Sims testified that he withdrew from Square Deal Construction Company in June, 1976, after a total of $32,000 had been advanced by the bank on the construction loan. Mr. Sims testified that this money went to Square Deal Construction Company, except for $7,000 paid for the lot on which the house was to be built. Appellant testified that Sims' withdrawal from this partnership took place four days prior to her marriage to him. She stated that Mr. Sims agreed, at that time, to assume the $17,000 remodeling cost. C. J. Sims testified that when he withdrew from the partnership, it was agreed that Square Deal Construction Company would complete both the house in Robinwood II and the remodeling job. When confronted, Sims told Shaver that not all the money advanced by the bank had gone into the house in Robinwood II, but assured Shaver that he could get the house finished in six months.

Appellant is in no position to assert that the mortgage was obtained by duress because of fear of prosecution of her husband because there is no evidence that anyone connected with the bank made any threat to her to prosecute him or that a representative of the bank induced her to execute the mortgage by any threat of such prosecution. Goodrum v. Merchants' & Planters' Bank, 102 Ark. 326, 144 S.W. 198, Ann.Cas.1914A 511. Appellant did not testify that such a threat was communicated to her by the bank or by her husband. C. J. Sims testified in a deposition introduced into evidence that he did not believe that he ever revealed the threat of prosecution to her. There is simply no evidence that any such threat was ever communicated to her by anyone. It was not contended at the trial, or here, that the agreement under which appellant signed the mortgage constituted the compounding of a felony. An obligation given in settlement of a civil liability arising from a wrong which is both public and private is not invalid because the offender is also subject to criminal prosecution. Goodrum v. Merchants' & Planters' Bank, supra.

The question here then is whether appellant is entitled to a cancellation of the mortgage on her separate property because of duress by her husband. To some extent, this question is dependent upon whether Mrs. Sims executed the mortgage out of a sense of duty to her husband or by reason of his threats. In order to disturb the chancellor's findings, we must be able to say that, when all the relations of the parties toward each other and the details surrounding the entire transaction are considered, they were clearly against the preponderance of the evidence. Gardner v. Ward, 99 Ark. 588, 138 S.W. 981. This we cannot do. Neither can we say that appellant met her burden of proof that she was compelled, not merely persuaded, to do what she did. Oberstein v. Oberstein, 217 Ark. 80, 228 S.W.2d 615. We could not say that she did meet her burden unless we accept her testimony as credible and disregard evidence tending to lead to a contrary conclusion, and we are unable to do this. In considering this question, it is significant that Mrs. Sims made no claim that the contract was entered into under duress until this foreclosure suit was filed. Silence or acquiescence in the contract for any considerable length of time amounts to ratification. See Oberstein v. Oberstein, supra. See also, Pirtle v. Pirtle, 166 Tenn. 180, 60 S.W.2d 172 (1933).

The mortgage foreclosure was filed on December 16, 1977. On January 3, 1978, appellant filed an answer that was simply a general denial. Her cross- complaint in which she first raised the issue of duress was filed on February 16, 1978. The mortgage had been executed on June 17, 1977, so for eight months, the duress under which appellant claims to have acted was a well kept secret. It is significant that she did not mention or in anywise indicate to the bank's officers and employees or the notary public who took her acknowledgment that she was not acting freely and voluntarily. See Rowley v. Rowley, 144 Okl. 157, 290 P. 181 (1930); Wallach v. Hoexter, 17 Abb.N.C. (N.Y.) 267 (1886); Marston v. Brittenham, 76 Ill. 611 (1875). The bank's loan officer testified that she came into the bank two hours before the arrival of her husband on the date the mortgage was executed at the bank. He testified that, at the time of closing, the atmosphere was calm and casual like a regular, normal closing. Mrs. Sims testified that she inquired why the mortgage debt matured in only six months, but she does not say that she made any other...