C & H Const. & Paving Co., Inc. v. Citizens Bank

• Decision Date: 19 June 1979
• Docket Number: No. 3410,3410
• Citation: 597 P.2d 1190,1979 NMCA 77,93 N.M. 150
• Parties: C & H CONSTRUCTION & PAVING CO., INC., and Founders Investment, Ltd., Plaintiffs-Appellants, v. CITIZENS BANK, a State Banking Corporation, Clarke Harvey, James Arrott and E. M. Wilson, Defendants-Appellees.
• Court: Court of Appeals of New Mexico

Page 1190

597 P.2d 1190

93 N.M. 150

C & H CONSTRUCTION & PAVING CO., INC., and Founders

Investment, Ltd., Plaintiffs-Appellants, v. CITIZENS BANK, a State Banking Corporation, Clarke Harvey, James Arrott and E. M. Wilson, Defendants-Appellees.

No. 3410.

Court of Appeals of New Mexico.

June 19, 1979.

Joseph Goldberg, David A. Freedman, Freedman, Boyd & Daniels, Albuquerque, for plaintiffs-appellants

Russell Moore, Robert Clark, Keleher & McLeod, Frank H. Allen, Jr., Modrall, Sperling, Roehl, Harris & Sisk, Stephen Durkovich, John P. Viebranz, Nordhaus, Moses & Dunn, Albuquerque, for defendants-appellees.

OPINION

LOPEZ, Judge.

This suit was brought by plaintiffs-appellants in the District Court of Bernalillo County to recover damages resulting from the alleged wrongful acts of defendants-appellees. The trial court granted appellees' motions for summary judgment and denied appellants' motion for partial summary judgment. Appellants appeal from the court's entry of summary judgments in favor of appellees and from its denial of appellants' motion for partial summary judgment. We reverse the court's order granting appellees' summary judgment motions, affirm its order denying appellants' motion for partial summary judgment and remand.

I. FACTS

On December 20, 1972, appellant C & H Construction & Paving Co., Inc. (hereinafter referred to as C & H Construction), requested a $125,000 line of credit from appellee, Citizens Bank. The granting of the loan was conditioned upon C & H Construction's giving the bank a security interest in its accounts receivable. C & H Construction refused to give such an interest and, consequently, Citizens Bank denied the loan application. On December 28, 1972, C. R. Davis, acting on behalf of C & H Construction, executed a $50,000 promissory note to the bank. In order to secure this loan, Davis, again acting on behalf of C & H Construction, entered into a security agreement giving Citizens Bank a security interest in the accounts receivable of C & H Construction. The loan was paid on January 10, 1973. Appellees, E. M. Wilson and James Arrott (hereinafter referred to as Wilson and Arrott respectively), allegedly represented to Davis that the agreement would apply only to the December 28 loan and not to any previous loans given to C & H Construction by the bank. They also allegedly represented that the agreement would not be filed.

On January 2, 1973, Citizens Bank filed the financing statement accompanying the December 28 security agreement. Sometime in the middle of January, 1973, Arrott informed C. R. Davis of the filing. He further informed Davis that the bank considered the agreement to apply to all the indebtedness owed to it by C & H Construction. Davis conveyed this information to Wilson who refused to take any action. On August 28, 1973, C & H Construction executed a promissory note to the bank in the sum of $50,000. The note was marked unsecured and was both a renewal and combination of previous notes owed to the bank. C & H Construction failed to pay the note when it became due.

On January 11, 1974, Citizens Bank filed in the District Court of Bernalillo County a complaint against C & H Construction, C. R. Davis, Alice J. Davis, Paul D. Wood and Wanda Wood based upon the defaulted note, the December 28 security agreement and guaranties executed by the Davises and Woods. Additionally, on the same date, the bank filed a motion against C & H Construction for an order to show cause why a receiver should not be appointed to collect C & H Construction's accounts receivable and to show cause why C & H Construction should not submit a list of these accounts to the bank or a receiver appointed by the court. A motion for a temporary restraining order was filed by the bank on January 23, 1974, and, on that date, the court granted the motion and ordered C & H Construction and C. R. Davis to refrain from disposing or using any of C & H Construction's accounts receivable. On February 1, 1974, a hearing was held to show cause why the temporary restraining order previously entered should not be continued as a preliminary injunction pending final determination on the merits. A preliminary injunction was granted on that date and the court permitted Fidelity National Bank to file a complaint in intervention naming James C. Davis as a third party defendant. Approximately six days later, the court entered an order appointing a receiver and directing the defendants to turn over a list of accounts receivable. Subsequently, James Davis filed a cross-claim and then an amended cross-claim against Citizens Bank. In response, the bank filed answers pleading estoppel, waiver and laches as affirmative defenses. C. R. and Alice Davis also filed a counterclaim against the bank. In its pretrial order, the court made the following determinations: (1) C. R., Alice and James Davis all allege that Citizens Bank has proceeded negligently, fraudulently and maliciously in the action and has wrongfully obtained a court order placing the accounts receivable of C & H Construction in receivership and (2) the bank raises Inter alia the defenses of laches and estoppel.

At trial, the jury was instructed on the Davises' claim that Citizens Bank through Arrott committed fraud by inducing C. R. Davis to sign the December 28 security agreement. The defenses of estoppel and waiver raised by the bank to the claims of the Davises were also submitted to the jury by instruction. As grounds for these defenses, the bank asserted that the Davises did not oppose or object to the appointment of the receiver. The jury was further instructed to return a verdict for the Davises if they determined that the Davises had proved their claims and Citizens Bank had not proved any of its defenses. The jury found for the Davises and judgments were accordingly entered on the counterclaim of C. R. Davis and Alice Davis and the cross-claim of James Davis.

Citizens Bank appealed these judgments to this Court. See Citizens Bank v. C & H Const. & Paving Co., Inc., 89 N.M. 360, 552 P.2d 796 (Ct.App.), Cert. denied, 90 N.M. 7, 558 P.2d 619 (1976) (the litigation resulting in this appeal is hereinafter referred to as Citizens I). This Court, per Sutin, J., affirmed the judgments and held Inter alia that (1) the Davises' claim of fraud, both actual and constructive, was properly at issue and (2) waiver and judicial estoppel did not apply to the Davises. In order to establish that these principles were applicable, the bank argued in part that the preliminary injunction and order appointing the receiver established conclusively that the Davises had consented to the receivership and that they were thereby barred from asserting an inconsistent position later in the same action. This Court disagreed with that argument and found no consent or inconsistent position taken by the Davises.

On October 13, 1976, C & H Construction and appellant, Founders Investments, Ltd. (hereinafter referred to as Founders), filed a second amended complaint naming Citizens Bank, Wilson, Arrott and appellee, Clarke Harvey (hereinafter referred to as Harvey), as defendants. Wilson, Arrott and Harvey were sued individually and in their capacities as director and officers of the bank. Subsequently, the bank filed a motion to strike counts I, II, and III of the second amended complaint on the basis of a prior court order. This order found that the claims of C & H Construction against the bank were compulsory counterclaims which should have been asserted in Citizens I. The bank's motion to strike was granted. As a result of the granting of this motion, the only claims remaining in the suit were the claim of Founders against all defendants and the claims of C & H Construction against the individual defendants, Wilson, Arrott and Harvey. Citizens Bank, Wilson, Arrott and Harvey each moved individually for summary judgment. A separate hearing was held on Wilson's motion against C & H Construction and Founders. The bank's motion against Founders and Arrott's and Harvey's motions against C & H Construction and Founders were argued at the same hearing. At that hearing, appellants' summary judgment motion against the bank and Harvey was also argued. This appeal is from the orders entered on each of these motions. The issues for decision are (1) whether the court properly granted appellees' motions and (2) whether the court properly denied appellants' motion. We shall first discuss Wilson's motion and then the remaining motions.

II. Wilson's Motion

Summary judgment is a drastic remedy to be used with great caution. Pharmaseal Laboratories, Inc. v. Goffe,90 N.M. 753, 568 P.2d 589 (1977); Zengerle v. Commonwealth Insurance Co. of N. Y., 60 N.M. 379, 291 P.2d 1099 (1956). In deciding whether summary judgment is proper, an appellate court must view the matters presented in the light most favorable to support the right to trial on the issues. Gonzales v. Gackle Drilling Company, 70 N.M. 131, 371 P.2d 605 (1962); Read v. Western Farm Bur. Mut. Ins. Co., 90 N.M. 369, 563 P.2d 1162 (Ct.App.1977). In addition, a reviewing court must look to the whole record and take note of any evidence which puts a material fact in issue. Pharmaseal Laboratories, Inc. v. Goffe, supra. Furthermore, we are not bound by those grounds purportedly used by the trial court as the basis for the granting of summary judgment. Garrett v. Nissen Corporation, 84 N.M. 16, 498 P.2d 1359 (1972).

The burden rests on the party moving for summary judgment to establish that no genuine issue of material fact exists for trial and that the movant is entitled to judgment as a matter of law. If the movant fails to meet this burden, summary judgment is erroneous. N.M.R.Civ.P. 56(c), N.M.S.A.1978; Goodman v. Brock, 83 N.M. 789, 498 P.2d 676 (1972). Once this burden is satisfied, the non-moving party has the obligation of showing that there is a genuine, material factual issue requiring trial and that the movant is not entitled...