Civil Appeal 8611/06 Bank Hapoalim Ltd. v. Michal Martin - part 5

This is a stencil formula that the bank uses for the purpose of signing many customers who take out a mortgage loan from it.  According to the ordinary and simple meaning of what is stated therein, the Respondent and her husband undertook by signing this deed to mortgage the property in Ra'anana in favor of Bank Hapoalim for the purpose of securing the credit that the bank had already granted in the account, including any future credit, without limitation in amount.  Despite the Respondent's arguments, in light of the factual determinations of the District Court (determinations that also arose in the Magistrate's Court's decision regarding the temporary relief), the starting point for the hearing is that the Respondent knew that she was signing a "mortgage deed".  The Magistrate's Court, and later the District Court as well, noted a number of factual factors leading to the rejection of the alternative versions raised by the Respondent regarding her lack of knowledge that the mortgage deed contained the title "Mortgage Deed" which appears in large numbers on the form; The words "unlimited amount" appear in large letters in a prominent place on the mortgage note; the court's impression that the respondent is literate and has the ability to understand the nature of the document she signed; The lack of economic logic in the respondent's claim that she signed the note for the purpose of securing charges in the joint account only, since there was no debit balance in this account at all, and there was certainly no justification for creating a pledge in the value of the property in Ra'anana; The Applicant's claim that the deed is intended to guarantee her obligations but in the joint account contradicts what is stated in the mortgage deed itself; The Magistrate's Court rejected the respondent's testimony that she had no knowledge of the status of the joint account, after it was proven that the respondent had credit cards and a checkbook in that account, and after it became clear during her cross-examination that she was knowledgeable about the loans that her husband had taken over the years and the assets that were mortgaged for this purpose.  Indeed, from the logical conclusion that is probable on the face of it, and it is not for nothing that the two courts reached the same conclusion - that the respondent knew what was in the "mortgage deed" and that the respondent knew exactly what she was signing.  דוברדוברדובר

31. Ostensibly, if the respondent signed the mortgage deed knowingly and in a manner required by law, the usual and familiar rule applies according to which "agreements must be kept" (Pacta Sunt Servanda). In other words: the respondent must respect her signature on the mortgage deed and bear the consequences of her agreement to sign what is written in this deed - the guarantee of credit in the account of theInvestigation Unlimited in amount, in a way that anticipates both past and future (Civil Appeal 9538/06 Segal v.  Jerusalem Bank for Development and Mortgages Ltd., paragraph 6 of the judgment and the references cited therein ([Published in Nevo], 10.6.2008); Civil Appeal 8800/04 Steiner v.  United Mizrahi Bank in a Tax Appeal ([Published in Nevo], 11.11.2004); Civil Appeal 6799/02 Yulzari v.  United Mizrahi Bank Ltd., IsrSC 58(2) 145, 149 (2003) (hereinafter: the Yulzari)).  In this regard, the words of President Sussman are appropriate:

"Usually the law is that a person who signs a document without knowing its contents will not be heard on the grounds that he did not read the document and did not know what he signed and what he undertook.  He is presumed to have signed as a sign of his consent, whatever the content of the document" (Civil Appeal 467/64 Switzerland v.  Sandor, IsrSC 19(2), 113, 117 (1965)).

32. Thus, prima facie, however, there is an additional factual fact in our case that affects the validity of the mortgage deed. There is no dispute that no one On behalf of the bank did not inform the respondent of the size of the past debt that had already accumulated into the debt of the mortgage account, in the framework of which the mortgage was taken, prior to its signature on the mortgage deed.  As may be recalled, in his testimony in the District Court, the bank branch manager did not deny this:

"Q.  Show me a letter or other document, in which you, or any of those who work with you, inform the plaintiff that there is an existing loan in the amount of ILS 490,000?

1. Why do I need to inform Michal [Respondent - M.N.] of a credit of ILS 490,000 that is in Yehuda Martin's account, even before Michal is involved? After all, this is his personal account with mortgaged property in his name, why do I need to notify Michal? Where does Michal fit into a debt or other property before the mortgage?
2. Following on from your answer, in fact, if I were to call you and ask to know what the situation is in my wife's personal account, you would say that you need your wife's permission, right?
3. You are certainly not allowed to receive information if the account belongs only to your wife.
4. At the time of signing the mortgage deed, Appendix B to your affidavit, did any of the bank clerks inform the plaintiff, do you know, there is a debt of ILS 490,000?
5. I do not have such a letter or statement. It was not signed at the bank.  You're asking me about something I don't know.  That's why we're asking that the documents be signed in front of a lawyer outside, where he will be told everything that needs to be said.  Therefore, I prefer that it not be inside the branch" (p.  12 of the transcript of the hearing in the District Court).

I am of the opinion that the obvious conclusion is that the bank has not fulfilled the duty of disclosure placed before it, and this has operational significance with regard to the validity of the mortgage deed.  I will expand a little on the discussion of the bank's debts as such; And then I will turn to examine the result of the breach of the duty of disclosure in our case.

33. Banks play a central role in economic and commercial life. In his judgment inCivil Appeal 3352/07 Bank Hapoalim in Tax Appeal v.  Horesh ([Published in Nevo], December 7, 2009) (hereinafter: the Matter Inherited), Justice Gibran noted the uniqueness of a mortgage deed type banking contract: in light of the uniqueness of the contract between the bank and the customer, a special balance is required that will embody the power disparity between the parties and the status of the banking corporation.  When the court comes to deal with the interpretation of the banking contract, it must take into account the special characteristics of the contract before it (see more on this matter: Civil Appeal 6055/04 Landau v.  Bank Leumi Le-Israel Ltd., paragraph 15 of the judgment ([Published in Nevo], 12.7.2006); Civil Appeal 8593/91 Tefahot Mortgage Bank of Israel in Tax Appeal v.  Sabah, IsrSC 48(2) 573 (1995); Interest Yulzari, supra, at pp.  150-151; Civil Appeal 7451/96 Avraham v.  Massad Bank in Tax Appeal - Rishon Lezion Branch, IsrSC 35(2) 337 (1999) (hereinafter: the Avraham)).
34. The Bank is subject to increased disclosure obligations that are intended to reflect the Bank's strength vis-à-vis the customer, as well as the intensity of the known influence of its conduct in relation to the entire economy. The great power in the hands of the banks prevents the customer, in many cases, from being able to deal with the bank equally.  The bank is obligated to act in good faith, not to mislead the recipient of the service, to disclose every detail that is important to the service provided, and no less important - it must detail the full range of risks involved in this service.  According to Section 17A of theBanking Law (Customer Service), the bank's obligations to the customer, including the duty of disclosure derived from the broad duty of fiduciary, also apply to Tonight.  The District Court rightly narrowed the guarantor's law to the law of the guarantor, including the mortgagee, and ruled that Banking Law (Customer Service) It also applies to the Mishkan.  In general, it seems that today this analogy is accepted between the guarantor and the mortgagee, an analogy whose logic is on the side - there is no point in distinguishing between the two, since the difference between them lies in the scope of their secondary obligation to the lender vis-à-vis the loan.  This does not affect the nature of the loan's duty to them (Section 12 to the Pledge Law; Civil Appeal 11120/07 Simchoni v.  Bank Hapoalim in a Tax Appeal Paragraphs 25-26 of the judgment of Justice A.  Rubinstein (not yet published, December 28, 2009) (hereinafter: the Simchoni); Civil Appeal Feibushevich v.  Bank Leumi Le-Israel Ltd., Piskei Din 44(1) 365, 377-376 (2002); Roy Bar-Kahn Guarantee, 125-131, 393-397 (2006) (hereinafter: Bar-Cohen Arvot); Ruth Plato-Shinar "The Duty of Banking Disclosure Towards The mortgage is an asset to ensure the obligation of another." The Attorney 49(2) 385 (2007); Regarding the developments that occurred regarding the bank's debts to the guarantor, see an overview of the judgment of Justice Hayut inCivil Appeal Authority 4373/05 Even Haim v.  Independence Mortgage and Development Bank Ltd., paragraphs 6-9 of the judgment ([Published in Nevo], 15.11.2007); And Parashat Avraham, supra, at pp.  346-351).
35. The figure regarding the amount of the existing debt constitutes Material Figure When we are dealing with a transaction like the one before us. The mortgage lender is entitled to know what debt he secures is from the mortgage of one of his assets, especially when the mortgage is not the debtor and does not have direct access to the transaction data (see and compare: Civil Appeal 8822/04 Gabbay v.  United Mizrahi Bank Ltd., paragraph 4 of Justice Rubinstein's judgment ([Published in Nevo], 9.11.2005)).  As a result, this is a fact that must be revealed.  OnCivil Appeal 8546/06 Soltani v.  Bank Leumi Le-Israel inTax Appeal ([Published in Nevo], July 7, 2008) (hereinafter: the case Sultani) There were similar circumstances in our case.  In the same matter, the appellant signed mortgage deeds according to which he mortgaged for the benefit of the bank his rights in a certain real estate property, in connection with his son's debts.  The purpose of the pledge was to assist his son in managing a family business that was located in the mortgaged real estate property.  After the family business failed to repay its debts to the bank, the bank sought to realize the property.  The District Court in the matter Sultani He adopted the testimony of the lawyer before whom the mortgage deeds were signed, and determined that the same lawyer presented the appellant (the mortgagee) with the essence of the legal action that he was going to perform when he signed the mortgage deeds and also explained to him the risks involved.  However, the District Court ruled that the appellant did not know and was not informed, prior to signing the mortgage deeds, regarding existing debts in the sum of approximately ILS 275,000 in favor of the bank.  In the judgment, it was also determined that failure to disclose information regarding past debts leads to the nullity of the entire mortgage, including with respect to the debts that arose after the mortgage was created:

"In my opinion, the breach of the duty of disclosure in these circumstances leads to the complete nullity of the mortgage deed [emphasis in the original - M.N.], since the data regarding existing debts in the accounts at the time of signing the mortgage notes is very substantial, all the more so when it comes to a business that is in financial difficulties, and it is quite possible that if the deceased had been aware of the debt situation in the accounts, as it would have been prior to the signature, he would not have mortgaged the property he owned" (paragraph 15 of the judgment of Justice Danziger).

36. In the matter Simchoni (supra), the appellant signed a certain waiver document with the bank, in the framework of which she waived her rights in a real estate property that was the family's residence, while declaring that she would not raise any claim regarding rights in the property. In the matter Simchoni, the appellant signed the document, according to her, without reading it and listened to her husband's words, according to which her signature was necessary for them in order to receive financing for a certain construction project; I will also note that the lawyer who approved the appellant's signature did so even though she did not sign it before him and he did not see it with his own eyes.  In any event, what is important for our purposes is that at the time of signing that waiver document, nothing was explained to the appellant by the bank.  My colleague Justice Rubinstein ruled that the bank's good faith was denied "since it signed the waiver document, because it was concerned that it might raise a claim for sharing in the property, and this Without explaining anything to herand in a manner that does not meet his own standards" (emphasis in the original - M.N.; paragraph 23 of his judgment).  After discussing at length the bank's debts to a guarantor, including a mortgage, my colleague Justice Rubinstein held:

"A representative of the bank should have met with the appellant, explained to her what she was signing, what this meant and the scope of the debts.  The appellant did not meet with the representative of the bank, and the meaning of her signature and its implications were not explained to her.  It is difficult to reconcile this behavior of the bank, and I wonder about it" (paragraph 31 of its judgment).

37. The disclosure obligation that applies to the bank has been extensively discussed in case law in many and varied contexts. Dr.  Plato-Shinar discussed the scope of the duty of disclosure and the sources of this obligation:

"When we speak of a 'duty of disclosure' imposed on the banks, we usually mean the bank's obligation to provide the customer with the data and the material facts necessary for the execution of the transaction in question.  However, this is only a duty of disclosure in the narrow sense of the word.  By virtue of the banking fiduciary duty, the bank has a much broader obligation.  This obligation includes, in addition to the obligation to provide data (the duty to disclose in the narrow sense), several other obligations that differ from each other and complement each other: the obligation to draw up a written contract, to give the customer time to review it before signing it, and to provide the customer with a copy after signing; the obligation to emphasize and highlight certain details; the obligation to translate the text for non-Hebrew speaking clients; the obligation to explain the nature of the transaction, including its legal aspects; and the obligation to ensure that the customer understands the full information provided to him.  [...] The justification for this lies in the special concept of trust that characterizes the bank's relationship with the customer and the special importance that our legal system gives it.  [...] Hence, the bank's duty is not to be satisfied with providing informative data (the duty to disclose in the narrow sense), but to fulfill all those additional obligations, which are intended to ensure the customer's understanding of the transaction.  The bank must fulfill the duty of disclosure in the broad sense with all its components, even if it is acting against its personal interest, which emphasizes the connection between the duty of disclosure and the duty of trust.  Another reason for the expansion of the disclosure duty imposed on the bank is the inherent informative inequality between the parties.  [...] In order to reduce the dimensions of the aforementioned gap and to ensure that the bank does not abuse its considerable power, it is appropriate not to suffice with imposing a narrow disclosure duty on the bank, which amounts to the provision of data and facts.  The bank must be charged with all those additional debts intended to obtain the customer bank in all aspects of the transaction it wishes to carry out at the bank.  [...] The broad duty of disclosure is not limited to the relationship between the bank and the customer, and it also applies to the guarantor and to the mortgagee of an asset to secure the obligation of another (hereinafter: the mortgage).  The same special concept of trust described above also characterizes the Bank's relationship with the guarantor and with the mortgagee.  The bank's informative advantages and the power disparities between the parties are also prominent with regard to these contractors.  Therefore, all the subsidiary duties that constitute the duty of disclosure in the broad sense will apply not only to the client, but also to the guarantor and the mortgagee.  In particular, we note the duty to provide a detailed explanation of the nature of the transaction and its legal aspects, and the obligation to obtain the contractor's understanding of the nature of the contract" (Ruth Plato-Shinar Banking Law - The Duty of Banking Trust 202-199 (2010) (hereinafter: Plato-Shinar); emphases added - M.N.).