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Capul v. Fleet Bank
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MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 1997 ME 140
Docket: Pen-96-652
Argued: May 6, 1997
Decided : June 30, 1997
Panel: WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, DANA, and LIPEZ, JJ.
PLACIDO R. CAPUL, et al.
v.
FLEET BANK OF MAINE
DANA, J.
[¶1] Placido "Paul" Capul and his corporation, Elpla, Inc., (hereinafter
referred to collectively as Capul) appeal from the judgment entered in the
Superior Court (Penobscot County, Marden J.) on a jury verdict finding Fleet
Bank of Maine not liable to Capul for fraudulent misrepresentation,
fraudulent nondisclosure, conversion, wrongful interference with an
advantageous relationship, and negligent misrepresentation. Capul contends
that the court erred when it (1) concluded that Fleet did not owe him a duty
of care in regard to a 1988 subordination agreement; (2) allowed Fleet to
introduce a document as a business record; (3) allowed Fleet to ask Capul
about his payment of taxes in prior years; (4) refused to submit to the jury
questions of fact related to his claim for rescission of the subordination
agreement; (5) excluded the testimony of Capul's expert; (6) refused to
provide the jury with his proposed instructions regarding negligent
misrepresentation and breach of contract; and (7) instructed the jury that
Capul must show clear and convincing evidence of fraud to recover on his
claims of interference with an advantageous relationship and conversion. We
affirm the judgment.
[¶2] From the parties' briefs and portions of the record made
available to the Court, the facts are as follows. In 1986 Capul sold a car
dealership to Hervey and Cynthia Triplett, accepting their note for
$449,289 secured by a second mortgage on the dealership. By 1988 Fleet
had made several substantial loans to the Tripletts to finance other business
ventures including a $500,000 line of credit secured by a $500,000 savings
account in the name of the Goss Trust. The Tripletts, executors of the Goss
Estate, needed cash to pay estate taxes and asked Fleet to release the Goss
Trust savings account. Fleet agreed to the release in exchange for a first
mortgage on the Tripletts' car dealership that had recently been appraised
at a value of $1.1 million. The Tripletts in turn asked Capul to subordinate
his mortgage on the dealership. Before agreeing to the subordination, Capul
alleges he spoke with his former attorney, Paul Rudman, who, according to
Capul, was acting as Fleet's attorney at the time.{1} After his meeting with
Rudman and his review of the recent appraisal, Capul agreed to subordinate
his mortgage, believing that the dealership's value was sufficient to secure
Fleet's first mortgage of $600,000 as well as his second mortgage on the
property.{2}
[¶3] On July 12, 1988, the Tripletts executed a mortgage and security
agreement with Fleet, giving the bank a first mortgage on the car dealership
for $3 million. On the same day, Capul signed a subordination agreement
with the Tripletts. The agreement did not specify the amount of Fleet's first
mortgage to which Capul's interest would be subordinate. In September
1989 the Tripletts sold the dealership for $1,169,609. Fleet took all the
proceeds from the sale.
[¶4] After the sale of the dealership Capul sought additional security
from the Tripletts and acquired a third mortgage on the Tripletts'
residence. Fleet held the first two mortgages on the property. In 1991
Fleet foreclosed on its second mortgage and Capul paid the $130,000
outstanding on that mortgage. After the foreclosure, Capul paid Fleet an
additional $60,000 that Fleet claimed was still outstanding on its first
mortgage. According to Capul, he later discovered that Fleet's first
mortgage had already been satisfied by the Tripletts.
[¶5] The court entered a judgment as a matter of law on Capul's claim
for negligence because the court concluded that Fleet had no duty to Capul
in regard to the subordination agreement. The jury returned a verdict in
favor of Fleet on all the remaining counts.
I.
[¶6] Capul contends the court erred when it concluded that Fleet did
not owe a duty of care to Capul and that the court should not have entered a
judgment as a matter of law for Fleet on his negligence claim. He argues
that he acquired the status of a surety when he subordinated his mortgage
on the dealership to Fleet's first mortgage, and that Fleet therefore had a
duty to disclose to him information regarding the nature of the risk he was
assuming.
[¶7] "Whether one party owes a duty of care to another is a matter of
law." Fish v. Paul, 574 A.2d 1365, 1366 (Me. 1990) (citing Joy v. Eastern
Me. Med. Ctr., 529 A.2d 1364, 1365 (Me. 1987)). On the facts of this case,
we cannot say the court erred by concluding that Fleet did not owe a duty of
care to Capul as a result of his subordination agreement with the Tripletts.
"A surety is one who undertakes to perform in the event of default by the
principal." Ford Motor Credit Co. v. Machias Ford, Mercury, Inc., 509 A.2d
658, 659 (Me. 1986) (citing Read v. Cutts, 7 Me. 186, 189 (1831)). Capul's
subordination agreement with the Tripletts merely changed his priority; he
did not promise Fleet that Fleet could pursue him if the Tripletts failed to
fulfill their obligation to the bank and did not undertake to pledge his
property as a guarantee for the Tripletts' debt. Capul simply allowed Fleet to
move ahead of him in regard to the right to foreclose on the dealership.
II.
[¶8] Capul contends that the court erred when it allowed Fleet to
introduce into evidence a memorandum dated August 1989 from Fleet's file
on the Tripletts that lists the outstanding debt on three of the Tripletts'
notes. He argues that Fleet did not lay an adequate foundation to satisfy
Maine Rule of Evidence 803(6) and that the list was therefore inadmissible
hearsay.
[¶9] Rule 803(6) provides that the following is not excluded by the
hearsay rule:
A memorandum, report, record, or data compilation, in any
form, of acts, events, conditions, opinions, or diagnoses, made at
or near the time by, or from information transmitted by, a
person with knowledge, if kept in the course of a regular
conducted business, and if it was the regular practice of that
business to make the memorandum, report, record, or data
compilation, all as shown by the testimony of the custodian or
other qualified witness, unless the source of information or the
method or circumstances of preparation indicate a lack of
trustworthiness. . . .
We review the court's findings regarding the foundational elements
necessary to Rule 803(6) for clear error. Adamatic v. Progressive Baking
Co., 667 A.2d 871, 874 (Me. 1995).
[¶10] Here, the court admitted the memorandum over Capul's
objection after hearing the testimony of Bill Lucy, an assistant vice-president
at Fleet, who stated that the memorandum was the type of record regularly
kept and prepared by the bank, that the document reflected the interest
due on the Tripletts' "floor plan debt," that Lucy was one of the people
involved in tracking the Tripletts' floor plan debt, that it was Fleet's policy
to prepare such memos to reflect the amount of unpaid interest on such
debts, and that he believed the memo was created by himself or by one of
the two other Fleet employees who were responsible for dealing with the
Tripletts' debt. Lucy's testimony provides competent evidence on which
the court could have found that the elements of Rule 803(6) were satisfied.
III.
[¶11] Capul asserts that the court erred when it allowed Fleet to ask
him questions about his income and payment of federal income taxes in
prior years. He argues his testimony regarding the payment of taxes was not
probative of truthfulness or untruthfulness and, alternatively, even if
probative, the testimony was unduly prejudicial and should have been
excluded pursuant to Maine Rule of Evidence 403.{3}
[¶12] Maine Rule of Evidence 608(b) gives the trial court discretion
to allow inquiry into specific instances of a witness's conduct if such
conduct is probative of truthfulness or untruthfulness.{4} The admissibility of
evidence pursuant to Rule 608(b), however, is also subject to the balancing
under Rule 403.{5} State v. Zadakis, 511 A.2d 1074, 1075 (Me. 1986)
(quoting United States v. Atwell, 766 F.2d 416, 420 (10th Cir. 1985), cert.
denied, 474 U.S. 921 (1985)). Here, we cannot say the court erred in
finding that Capul's nonpayment of income taxes in prior years was probative
of untruthfulness, or that the court abused its discretion in determining that
the probative value of his testimony was not "substantially outweighed by the
danger of unfair prejudice." M.R. Evid. 403. Furthermore, as noted by the
trial court, Capul invited Fleet's questions about his character for
truthfulness by eliciting testimony from another witness, Paul Rudman, that
Capul was generally a truthful person.
IV.
[¶13] Capul asserts that the court erred by refusing to submit to the
jury questions of fact related to Capul's claim for rescission of the
subordination agreement with the Tripletts. Capul argued at the trial that
he was entitled to rescind the agreement because the Tripletts fraudulently
provided erroneous information to Capul to induce him to sign the
agreement.
[¶14] "It is well settled that rescission is an equitable remedy."
Harriman v. Maddocks, 560 A.2d 11, 13 (Me. 1989) (citations omitted).
Contrary to Capul's contentions, the court, not the jury, determines factual
questions relevant to a claim for equitable relief. See, e.g., Harriman, 560
A.2d at 12-13; Bowden v. Grindle, 651 A.2d 347, 350 (Me. 1994). Thus, the
court did not err by refusing to submit factual questions to the jury
regarding the existence and terms of the agreement between Capul and the
Tripletts.
V.
[¶15] We do not address Capul's remaining contentions because he
has not submitted an adequate record for review of those issues. See Martin
v. Scott Paper Co., 434 A.2d 514, 518 (Me. 1981); M.R. Civ. P. 74.
The entry is:
Judgment affirmed.
Attorneys for plaintiff:
John J. Weltman, Esq. (orally)
Lawson & Weitzen, LLP
425 Summer Street
Boston, MA 02210-1736
James G. Lynch, Esq.
Paine, Lynch & Harris, P.A.
P O Box 1451
Bangor, ME 04402-1451
Attorneys for defendant:
Bernard J. Kubetz, Esq. (orally)
Thad B. Zmistowski, Esq.
Eaton, Peabody, Bradford & Veague, P.A.
P O Box 1210
Bangor, ME 04402-1210
FOOTNOTES******************************** {1}. Rudman testified that he
has no recollection of such a meeting. {2}. Capul conceded at oral argument
that he consulted another attorney who advised him not to subordinate his
interest in the dealership. {3}. The substance of Capul's testimony was
that he had purchased about 100 used cars from auctions across the country
and then sold the cars, making about $1000 per car in profits. According
to his deposition testimony that he confirmed at the trial, he stated that
he did not have to share this income with anyone and that it was "tax-free
income that [he did not] have the opportunity to earn[.]" He also testified
at the trial, in response to questions from his own attorney, that he did
not pay taxes on such income because it was offset by other business losses
and that he had never lied on his income tax returns. {4}. Rule 608(b) provides:
Specific instances of the conduct of a witness, for the purpose of attacking
or supporting his credibility, other than conviction of crime as provided
in Rule 609, may not be proved by extrinsic evidence. They may, however,
in the discretion of the court, if probative of truthfulness or untruthfulness,
be inquired into on cross-examination of the witness (1) concerning his
character for truthfulness or untruthfulness, or (2) concerning the character
for truthfulness or untruthfulness of another witness as to which character
the witness being cross-examined has testified. {5}. Rule 403 provides:
Although relevant, evidence may be excluded if its probative value is substantially
outweighed by the danger of unfair prejudice, confusion of the issues, or
misleading the jury, or by considerations of undue delay, waste of time,
or needless presentation of cumulative evidence.
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