Crest Investment Trust, Inc. v. Comstock

Moore, J., delivered the opinion of the Court. This appeal arises in the aftermath of a financial disaster involving a small business launched in 1964 on part of a 118 acre tract of farmland near Woods boro, in Frederick County, Maryland. The enterprise involved the breeding of guinea pigs and other small animals for use in laboratory research. The proceedings in equity below were upon the bill of complaint of Mr. and Mrs. Richard Comstock, appellees, to enjoin the foreclosure of the farm and improvements, to enforce a trust by a reconveyance of part of the tract, to set aside a mortgage, for damages and other relief.

After a 7-day trial, the Chancellor granted a substantial ²⁸² part of the relief prayed. He held that there was an attorney-client relationship between the Comstocks and one of the appellants, Sidney Kaplan, Esq.; that because the attorney-client relationship also existed between Mr. Kaplan and the appellant, Crest Investment Trust, Inc., and certain of its subsidiaries (with the knowledge of all parties), the attorney was under a fiduciary duty to make an adequate disclosure of all factors involved in an agreement between the Comstocks and Crest dated November 30, 1967, which revised a previous agreement between the parties dated July 21, 1966; that such disclosure had not been made; and that this constituted a breach of the fiduciary relationship because the agreement was unfair to the Comstocks and preferential toward Crest and its subsidiaries. The court enjoined the foreclosure, ordered the exercise by Crest and/or its affiliated companies of an option under the 1966 agreement to purchase 97 acres of the Comstock farm, free of mortgages or other encumbrances and granted alternative relief in the event of the non-exercise of the option. I Summary of Facts and Relief Ordered In 1964, Mr. and Mrs. Comstock began a potentially promising venture 1 in the breeding of small animals for laboratory research under the corporate title of Copper Oaks Farms, Inc., after borrowing $65,000 from the Farmers and Mechanics National Bank of Frederick, secured by a mortgage on the 118 acres owned by them as tenants by the entirety.

The proceeds of the mortgage loan were substantially consumed in constructing and equipping a building for the purpose of the business on approximately ²⁸³ three acres of the tract. Mr. Comstock at that time was a plumber with a record of modest earnings. Mrs. Comstock was a school teacher in Frederick. Before coming to Maryland in 1953, Mr. Comstock’s principal occupation was that of toolmaker, instrument designer and modelmaker.

He had conceived — but had not perfected — an automated feeding and waste removal system to be used in uniquely designed buildings for the purpose of producing animals for research. His income projections for the business were in the range of $400,000 per year. Pressed by business creditors and in dire need of capital, Mr. Comstock was introduced to appellant, Crest Investment Trust, Inc. in the spring of 1966. Crest, which had been established in 1956, was essentially a commercial banking institution specializing in providing funds for small businesses.

Its general counsel and chief executive officer was the appellant, Sidney Kaplan, Esq. The company rejected a loan application by Mr. Comstock in the sum of $25,000. Shortly thereafter, and at a time when foreclosure of the farm was imminent, a change in policy of Crest occurred, permitting equity participations in small business promotions “where the loan application showed good possibilities for business appreciation.” After a period of negotiations with Mr. Comstock, and investigation of the potential of his business, Crest entered into a written agreement with the Comstocks on July 21, 1966. The agreement was prepared by Mr. Kaplan, who was designated in the instrument as the attorney for the parties to prepare all appropriate documents to implement its terms.

It was testified by Mr. Comstock that prior to execution of the agreement he suggested that his own counsel 2 examine its contents but that Mr. Kaplan replied: “Save your money, I am your attorney” — a statement denied by Mr. Kaplan but ²⁸⁴ confirmed by a former member of the Crest Board, Mr. Hy Perry. The July 1966 agreement, characterized by the Chancellor as “fair” to all concerned, contemplated the formation of a new corporation (referred to as “New Corporation”) to carry on the animal breeding business. The substantive provisions may be summarized as follows: 1. Crest would pay into New Corporation $10,000 for which it would receive 9% non-voting preferred stock (“in the amount of $9,000”), plus 800 shares of common voting stock at no par value.

New Corporation agreed to give the Comstocks an option for 200 shares of common voting stock, to be issued for $1.00 “at anytime after the existing mortgage with Farmers and, Mechanics Bank of Frederick” shall have been paid; and upon the same conditions, the Comstocks would have an option to purchase a one acre parcel upon which their residence was located for the price of $1.00. (Emphasis added.) 2. The Comstocks agreed to deed the 115 acres to New Corporation which would assume the liability of the mortgage of approximately $65,000. The Comstocks also would transfer and assign the buildings, chattels and equipment free of any claims of their own or of their corporation (Copper Oaks Farms, Inc.). 3 3. “Upon satisfaction of all present corporate and mortgage debt” New Corporation would select 18 acres out of the tract and retain that parcel.

With respect to the balance of the 97 acres New Corporation would either: (a) Convey the 97 acres back to the Comstocks for the price of $1.00; or (b) retain any or all of the 97 acres and pay the ²⁸⁵ Comstocks at $500 per acre over a five year period. Any portion not thus purchased would be conveyed to the Comstocks for $1.00. (Emphasis added.) 4. New Corporation agreed to assume general trade debts of the Comstocks in the sum of approximately $12,000. 5.

An employment agreement would be entered into between New Corporation and Mr. Comstock at an annual salary of $7200 for one year, plus 15% of the net profits of New Corporation and a directorship therein. 6. During the period that New Corporation would hold ownership of the 115 acres, it would lease to the Comstocks their residence at a monthly rental of $100. Contingent upon securing life insurance on Mr. Comstock in the sum of $50,000, it would also create a death benefit for Mrs. Comstock in the sum of $5,000. 7. Crest agreed to give Mr. Comstock a three-year option to purchase up to 3000 shares of Crest stock at $8.75 per share, payable in monthly installments over a three-year period from the date of exercise of the option.

Crest also agreed to either loan or pledge its credit to secure a loan for New Corporation in the sum of $15,000. 8. At the sole option of Crest, the contract was contingent upon securing an agreement from Farmers and Mechanics Bank that “interest only” would be due on the mortgage for a period of one year and an agreement from the Frederick Gas Company that Comstocks’ account be paid in installments for 12 months, the balance to be due thereafter. 9. Upon formation of New Corporation the stockholders would execute a Buy-Sell agreement. 10. Sidney Kaplan was designated as attorney “for the purpose of drawing the papers and ²⁸⁶ documents,” reasonable compensation thereof to be assumed and paid by the Comstocks and Crest equally.

Mr. George Conover, a mortgage banker, realtor and insurer, who introduced the Comstocks to Crest management and testified below, had made an appraisal of the Comstocks’ property in November, 1965, as follows: — Three acres and buildings $100,000 for breeding animals — Farmland 64,200 — Equipment and furnishings 43,000- $207,200 Less: Mortgage 65,000 Net $142,200 Subsequently, on September 12, 1966, Mr. and Mrs. Comstock conveyed the entire property to “New Corporation” which had been organized under the name of Comstock, Inc., and the latter assumed the mortgage debt. The conveyance was drawn by Mr. Kaplan in the form of a deed absolute without reference to the provisions of the agreement including those pertaining to the option to purchase by Crest or the alternative reconveyance to Mr. and Mrs. Comstock of the 97 acres. Shares of stock in Comstock, Inc. were issued in the name of Mr. and Mrs. Comstock but were held in escrow by Mr. Kaplan, in accordance with the agreement. In the following 12-month period, the venture did not prosper despite a substantial infusion of funds by Crest.

One explanation was the inability of Mr. Comstock to put in operation his automated system for feeding and waste removal. By the late fall of 1967 Crest’s total cash contributions and commitments came to $215,346 and there were still trade debts outstanding. Between February and November, 1967, the total income of Comstock, Inc. was less than $5,000 and there were no sales from July, 1966 through January 21, 1967. Some time prior to November 30, 1967, a decision was reached that a professional veterinarian, W. H. Dieterich, with experience in the business of breeding small animals, ²⁸⁷ would be brought into the business and that the July 21, 1966 agreement would be revised.

Dr. Dieterich was hired to operate the business at a salary of $20,000, a five percent stock interest, life insurance and a pension plan. Negotiations with him were handled by Mr. Comstock and Mr. Perry, a Crest director. Thereafter, the November 30, 1967 agreement was executed. It contained recitals that the purpose of the agreement was to “modify and supplement” the July, 1966 contract; that Crest had pledged its credit and supplied necessary working capital in excess of $100,000 and had purchased the preferred and common stock for $10,000 as provided in the earlier agreement.

It then provided that: 1. The Comstocks’ option to purchase voting common stock was reduced from 200 shares to 100 shares, to be issued at $1.00 at any time after the Farmers and Mechanics Bank mortgage “and the debt due as hereinafter mentioned” shall have been paid. The other 100 shares of voting common stock would be issued by Comstock, Inc., to a pension plan fund conditioned upon approval by the Internal Revenue Service. 2. With respect to the 115 acres, the provisions of the earlier agreement were “revoke[d] and restate[d]” so that the land previously conveyed by appellees to Comstock, Inc. “shall remain the absolute and sole property of Comstock, Inc., or its assigns,” the only exception being that upon the repayment of the mortgage debt to Farmers and Mechanics Bank and the repayment 4 to Crest of all monies advanced to Comstock, Inc., the residence of Mr. and Mrs. Comstock and one acre upon which it was situated would be reconveyed to them for $1.00. 3.

Mr. Comstock would be employed on a full time basis at the same salary and under the same ²⁸⁸ conditions as in the prior agreement, except that his participation in net profits was reduced from 15% to 5%, and the Comstocks’ residence would be leased back to them at $100 per month as previously provided; and the widow’s death benefit provision was retained. “As a further good and valuable consideration,” Comstock, Inc. agreed to pay the Comstocks $1000 in cash. 4. Mr. Comstock’s option to purchase 3000 shares of Crest stock at $8.75 per share was reduced to 1000 shares. 5. Sidney Kaplan, Esq. was again designated as attorney to prepare the necessary papers and documents. One of the most significant features of the revised agreement, executed on November 30, 1967, was the provision that the farmland previously conveyed to Comstock, Inc. would “remain the absolute and sole property of Comstock, Inc.,” with the single exception that upon repayment of the mortgage debt to Farmers and Mechanics Bank and repayment to Crest of all monies advanced to Comstock, Inc., the Comstocks’ dwelling, plus one acre, would be reconveyed to them for the price of $1.00.

Thus, the provision of the July, 1966 agreement, whereby Comstock, Inc. was obligated, upon satisfaction of all corporate and mortgage debt, to convey the balance of 97 acres to the Comstocks for $1.00 or purchase it at $500 per acre was totally extinguished. According to Mr. Kaplan, this absolute conveyance of the farmland and improvements was required if Crest was to contribute any additional funds. He testified that he explained to Mr. Comstock that without additional money from Crest — which would be advanced by Crest only upon the execution of the November 30th agreement — the entire operation would have to cease. He said he explained that interest only had been paid on the $65,000 mortgage over the period of 18 months, that the land was occupied by a single-purpose building and that everything would be wiped out by mortgage foreclosure.

Mr. Comstock testified, in response to a question relating to independent counsel, that ²⁸⁹ Mr. Kaplan used “words to the effect that I am the only attorney you need, don’t waste your money.” This was denied by Mr. Kaplan. Not specifically discussed by Mr. Kaplan with Mr. Com-stock, according to Mr. Comstock, was the fact that Crest had guaranteed the $65,000 mortgage after it had been assumed by Comstock, Inc., pursuant to the July 1966 agreement. This guarantee, made not to the Comstocks but to the mortgagee bank and at its request, was evidenced in the minutes of the Board of Directors of Crest on September 21, 1966, when the following resolution was adopted: “WHEREAS, the Directors of this Corporation at their last meeting authorized its Executive Vice-President to negotiate with and to consummate an agreement with Richard U. Comstock and to guarantee the first mortgage indebtedness of Richard U. Comstock, be it “RESOLVED, That Crest endorse the first mortgage on the farm property of Richard U. Comstock and Myra Johnson Comstock, his wife, to the Farmers Mechanics National Bank of Frederick in an amount not to exceed sixty-five thousand dollars ($65,000.00) which said mortgage covers a first lien on approximately 118 acres of land and the improvements thereon located in Woodsboro, Maryland and that the President and/or Secretary of this Corporation be and they are hereby authorized to execute on behalf of this Corporation said guarantee agreement. ” (Emphasis added.) Subsequent to the execution of the 1967 agreement, the sum of approximately $82,000 in cash was advanced to Comstock, Inc. by Crest, bringing the total cash invested by Crest as of July 31, 1968 to the sum of $197,520, together with guaranteed notes in the sum of $3,000. Notwithstanding these cash outlays, the business continued to founder.

After Dr. Dieterich’s arrival, a decision was made to discontinue the effort at automation until the company generated sufficient income ²⁹⁰ conventionally to meet expenses. Mr. Comstock remained as a director and was in charge of the design and mechanical operation of the plant. Comstock, Inc. ceased doing business, however, in late 1968. Some time before its demise, in mid-1968, the Comstock land was conveyed to Crest.

The purpose, according to Mr. Kaplan, was to make Crest’s financial statement “acceptable to its lending sources” and to improve that of Comstock, Inc. Thereafter, the officers of Crest caused the formation of another corporate organization known as Animal Resources, Inc. (A.R.I.) for the purpose of generating additional capital. The new organization issued debentures in the sum of $15,000 each and, upon the basis of Crest’s guarantee, 20 such debentures were sold providing additional cash in the sum of $300,000. All the real property and equipment of Comstock, Inc. was sold to A.R.I. and on June 18, 1969, Crest took a $45,000 mortgage as partial security for monies advanced by it. 5 The Comstocks received no stock interest in A.R.I. and the previous reservation to them of their residence and one acre for one dollar did not survive. The entire capital stock of A.R.I. was “spun-off” to the Crest stockholders on the basis of three shares of A.R.I. for one share of Crest.

For reasons not fully understandable from the record, even the additional $300,000 from debenture sales was insufficient to sustain the enterprise and on January 10, 1970, Mr. Kaplan, Dr. Dieterich and I. B. Kemick, another director of Crest, and their wives, individually borrowed $45,000 from the Maryland National Bank. The proceeds were loaned to A.R.I. which executed a $45,000 note to these individuals secured by another mortgage on the property. This note was endorsed with full recourse to Maryland National Bank as security for the loan. Maryland National required that the earlier mortgage to Crest also in the sum of $45,000 be subordinated. 6 Even this new loan, however, was not enough to keep A.R.I. from closing down. ²⁹¹ It was testified by Mr. Kaplan that the total loss to Crest on this venture before Animal Resources, Inc. ceased doing business in 1970 was $730,000, including debenture money, two-thirds of which was paid off by Crest.

In the fall of 1968, before the formation of Animal Resources, Inc., Mr. Comstock sought legal assistance from attorney Glenn Carlisle Michel of Frederick “because he was having problems with regard to his working relationship with Crest.” On June 12, 1969, Mr. Michel wrote a letter to Crest stating in part: “. . . I find the central problem being one of the status of the title to the farm ... as well as the nature of any working agreement with both Crest and Animal Resources, Inc.” In August, 1969, after the exchange of correspondence between Mr. Michel and Crest, Mr. Comstock was discharged from his position with A.R.I. and subsequently Mr. Michel withdrew as his counsel because of a long standing relationship between his firm and the Farmers and Mechanics National Bank. Mr. Michel properly informed Mr. Comstock that, because of the possibility of foreclosure proceedings and a resulting conflict, he could no longer represent him. Other counsel was subsequently engaged by the Comstocks and the Bill of Complaint in this case was filed on April 26, 1971. 7 On April 29, 1971, the Circuit Court (Shure, C. J.) issued an order enjoining Sidney Kaplan and Irving Bowers from proceeding with a foreclosure sale of the property scheduled for May 3, 1971.

At the trial on the merits the Chancellor initially disposed of the case in an oral opinion from the bench and thereafter entered a decree containing comprehensive findings of fact and conclusions of law. The decree stated in part: “The law of Maryland required that the ²⁹² defendant Kaplan having undertaken representation of more than one party to this transaction owed a continuing duty to each party to act fairly and to adequately disclose to each all relevant facts of each transaction and to act in his clients best interest as an attorney.” The court concluded that appellant Kaplan, with the knowledge of his client, Crest, failed to discharge adequately his duty to the Comstocks. It was then ordered: “That the [appellants] Crest, Comstock, Inc. and Animal Resources, Inc., or any one of them shall [may] exercise the option of July 21, 1966 by paying the mortgage in the amount of sixty-five thousand dollars ($65,000) to Farmers and Mechanics National Bank and by the tender of the sum of forty-eight thousand five hundred dollars ($48,500) to the plaintiffs.” [The latter being the option price of the 97 acres at $500 per acre.] 8 The option was required to be exercised within 60 days; “That should the [appellants] fail to exercise their option or fail to pay the specified mortgage and make the required tender within the sixth [sic] (60) days allowed the ninety-seven (97) acres in litigation will be reconveyed to the plaintiffs free and clear of all mortgages and encumbrances including the mortgage to Farmers and Mechanics National Bank.” 9 [The directory provisions of this part of the decree were addressed to the corporate appellants, Crest and A.R.I. and appellant Kaplan]; That the attempted foreclosure of the property be permanently enjoined; That should the option be exercised and the ²⁹³ parties be unable to agree “on the one acre to accompany the residence house” or should the appellants fail to exercise the option, then the entire property be partitioned “for the purpose of accomplishing either the conveyance of the one acre and residence or the reconveyance of the ninety-seven (97) acres, whichever is appropriate.” Appellants did not exercise the option. At the time of trial the Comstocks were still occupying the farm but no business was being conducted.

II Appellants ’ Contentions The appellants contend that the Chancellor erred: 1. In finding an attorney-client relationship between the Comstocks and appellant Kaplan. 2. In finding that appellant Kaplan had acted unfairly and failed to make an adequate disclosure. 3. In ruling that the guarantee by Crest of the first mortgage indebtedness extended to the entire principal amount rather than any deficiency resulting from foreclosure. 4.

In finding that the appellants’ claim was not barred by laches. 5. In ordering that the option price be paid in full rather than over a five-year period as originally provided. 6. Because the relief granted in the final decree would result in unjust enrichment of the appellees. Ill The Attorney-Client Rulings The issues which confront us with respect to the assignment of alleged error by the Chancellor in finding an ²⁹⁴ attorney-client relationship between the Comstocks and Mr. Kaplan are (a) whether the court’s determination that the relationship existed was clearly erroneous and (b) if not, whether the holdings were clearly erroneous that the November 30, 1967 agreement was unfair and that appellant Kaplan failed to make an adequate disclosure.

Maryland Rule 1086. On the first issue, the findings stated in the .decree of the court were these: “Defendant Sidney Kaplan, a director and officer of the defendant Crest, acted as attorney for Richard and Myra Comstock beginning in 1966, a short time prior to their signing of the July 21, 1966, agreement just described, and continued to act as their attorney until 1969 when another attorney attempted to settle the difference that had arisen between plaintiffs and defendants. Throughout this time defendant Kaplan also represented defendant Crest Investment Trust, Inc., and from the time of their formation on, two wholly owned subsidiaries of Crest, defendant Comstock, Inc., and Animal Resources, Inc. There was no real controversy and no divergence of interest as between Crest and its subsidiaries, Comstock, Inc., and Animal Resources, Inc. However, in representing these several corporations in their dealings with plaintiffs, defendant Kaplan undertook a dual representation of conflicting interests.” Later in the decree, the court addressed itself to appellants’ contention that there existed only a business relationship: “The defendants contend that the plaintiff, Richard U. Comstock, and the defendants were engaged in a straight business transaction and that there was in fact no fiduciary relationship. Although Mr. Comstock had had previous business experience he was not trained as an attorney in ²⁹⁵ corporate and conveyancing matters and when he indicated that he would consult his own attorney he was told by the defendant Kaplan ‘Save your money, I’m your lawyer’.

On other occasions he was dissuaded from seeking independent legal advice and was always assured that the defendant Kaplan was acting as his attorney and on his behalf. The court finds that not only was there an attorney client relationship between the plaintiffs and the defendant Kaplan but that the plaintiffs depended on Mr. Kaplan for his advice and looked to his knowledge in corporate transactions of the type the parties entered into and that they did not become fully aware of what was going on until late in 1969. ’’(Emphasis added.) In the court’s earlier oral opinion from the bench, corroboration of the making of the above statement by Mr. Kaplan, but denied by him, was found in the testimony of Mr. Hy Perry, a former officer and director of Crest and A.R.I., who was present when the Comstocks signed their initial agreement with Crest on July 21, 1966. Mr. Perry testified: “THE WITNESS: Mr. Comstock, in an embarrassed way, suggested that he would show this to an attorney and Mr. Kaplan told him, ‘Save your money, I am your attorney.’ ” That was not the only occasion, as Mr. Perry went on to state: “THE WITNESS: There was another understanding, another agreement was drawn up by Mr. Kaplan and presented to Mr. Comstock to sign that would in essence give Crest the control of the entire property and at that time Mr. Comstock, again, voiced the desire or suggestion that his attorney check this and Mr. Kaplan was annoyed and told him he was his attorney, that that wasn’t necessary.” ²⁹⁶ Judge Barrick who had represented the Comstocks “on most matters” until August, 1967, testified that he had not been consulted by appellees with reference to the Crest transactions and had never been shown any of the Crest-Comstock agreements. No other independent counsel was consulted by Mr. Comstock until he engaged Mr. Michel in the fall of 1968.

In a pretrial deposition, portions of which were read into evidence by appellees at the trial, Mr. Kaplan was asked: “You never suggested that he get independent counsel?” His answer was: “To the best of my recollection, no, sir.” Conceding that the contractual relationship of attorney and client may be implied, Ewing v. Haas, 132 Va. 215 , 111 S. E. 255, 258 (1922) and, of course, that whether the relationship exists depends on the facts and circumstances of each case, Bailey, Oot and Ryan v. Butcher, Tanner and Foster, 240 N. Y. 323 , 148 N. E. 537, 538 (1925), it is variously contended by appellants that the unilateral act of one party (presumably appellant Kaplan) is not sufficient to create the relationship, that the “only probative evidence . . . deals with what Mr. Kaplan said and did” and this is “in dispute,” that the court viewed only isolated pieces of evidence and that, to the extent that Mr. Kaplan acted as attorney for the appellees he did so not only for them but for the corporate appellants as well, for the limited purposes set forth in the two agreements and that he never received any compensation from the Com-stocks over the 4-year period. As for compensation, the Court of Appeals has held that the relationship of attorney and client is not necessarily dependent on the payment of a fee. In Central Cab Co. v. Clarke, 259 Md. 542 , 270 A. 2d 662 (1970), Barnes, J., speaking for the Court, stated: “Although an agreement upon the amount of a retainer and its payment is rather conclusive evidence of the establishment of the attorney-client relationship, the absence of such an agreement or payment does not indicate conclusively that no such relationship exists. Indeed, the payment of fees is ²⁹⁷ not a necessary element in the relationship of attorney and client.

The services of an attorney to the client may be rendered gratuitously but the relationship of attorney and client nonetheless exists. ” (Citations omitted.) (Emphasis added.) Authority in other States also supports the rule that the relationship between attorney and client may be implied from the conduct of the parties and does not depend, unless the parties so specify, on the payment of a fee or the execution of a formal contract. E. F. Hutton & Co. v. Brown, 305 F. Supp. 371 (S.D. Texas 1969); Lawrence v. Tschirgi, 244 Iowa 386 , 57 N.W.2d 46 (1953); Bresette v. Knapp, 121 Vt. 376 , 159 A. 2d 329 (1960). Thus, an attorney-client relationship was held to exist between a party and his cousin who was a practicing attorney and who did not collect a fee or have any contract of employment. Prigmore v. Hardware Mut.

Ins. Co. of Minnesota, Tex.Civ.App., 225 S.W.2d 897 (1949). It is sufficient for such a relationship that the advice or the assistance of an attorney is sought and is received. Nicholson v. Shockey, 192 Va. 270 , 64 S.E.2d 813 (1951).

The trial court had before it testimony concerning Mr. Comstock’s desire for independent counsel more than once and Mr. Kaplan’s assurances that none was necessary and that he would be Mr. Comstock’s attorney. It was the trial court’s responsibility to weigh the testimony and to judge the credibility of the witnesses. This is not our function, West v. State, 3 Md. App. 123, 127 , 238 A. 2d 292 (1968); and the judgment of the lower court will not be set aside on the evidence unless clearly erroneous. Maryland Rule 1086; McFadden v. State, 2 Md. App. 725 , 237 A. 2d 93 (1968).

We cannot say the judgment of the lower court that an attorney-client relationship existed between Mr. Kaplan and Mr. Comstock was clearly erroneous. We turn, therefore, to the further issue, whether the court was clearly erroneous in its findings that the November, 1967 agreement was unfair and that appellant Kaplan failed to make an adequate disclosure. The findings of the Chancellor as set forth in the decree were as follows with ²⁹⁸ respect to the nature and fairness of the initial agreement of July, 1966: “The court further finds that defendant Kaplan made an adequate disclosure to plaintiffs of all relevant factors involved in their entering into the agreement of July 21, 1966, with defendant Crest, for which he was also acting as attorney, and said agreement was fair to all parties ... It was the clear intention of the parties that the existing mortgage placed on the property to fund the business operation was to be paid from future profits of the business or upon default by the defendant Crest.

It is also clear from their original contract and from the evidence that the ninety-seven acres of ground was to be free from the encumbrance of that mortgage although the mortgage was not released at that time. It was not the intention of the parties to include the ninety-seven (97) acres of property in the original contract of July 21, 1966, but rather to free it of all business debts. The intention is further demonstrated by the option the plaintiffs granted to the defendant Crest to purchase the remaining ninety-seven (97) acres at five hundred dollars ($500.00) per acre (thought to be the fair market value in 1966) without any reduction in price by proportioning the mortgage over the entire tract.” (Emphasis added.) On the other hand, the court characterized as “obviously preferential” to Crest and Comstock, Inc. and “manifestly unfair” to Richard and Myra Comstock, the provisions of the November, 1967 revision of the July, 1966 agreement: “On November 30, 1967, at a time when defendant Kaplan