CF & I Steel Corp. v. Pete Sublett and Co.

• Decision Date: 23 July 1981
• Docket Number: No. 17929,17929
• Citation: 623 S.W.2d 709
• Parties: CF & I STEEL CORPORATION, Appellant, v. PETE SUBLETT AND COMPANY and C. C. (Pete) Sublett, Appellees. (1st Dist.)
• Court: Texas Court of Appeals

Page 709

623 S.W.2d 709

CF & I STEEL CORPORATION, Appellant, v. PETE SUBLETT AND COMPANY and C. C. (Pete) Sublett, Appellees.

No. 17929.

Court of Civil Appeals of Texas, Houston (1st Dist.).

July 23, 1981.

Rehearing Denied Sept. 17, 1981.

Daniel H. Johnston, Jr., Robert R. Kamm, Ross, Banks, May, Cron & Cavin, Houston, for appellant.

Andrews, Kurth, Campbell & Jones, Carla Powers Dykes, William H. Tenison, Jr., Houston, for appellees.

Before COLEMAN, C. J., and PEDEN and WARREN, JJ.

COLEMAN, Chief Justice.

CF & I Steel Corporation (CF & I) sued Pete Sublett and Company on a series of notes and C.C. Sublett on a guaranty agreement. Both the Sublett Company and Mr. Sublett defended on the ground of duress. In addition Pete Sublett and Company filed a cross-action based on a theory that CF & I had unlawfully interfered with certain contracts and business relationships. The case was submitted to a jury and the jury's verdict was favorable to Pete Sublett and Company and C.C. Sublett. After the jury verdict was received the trial court permitted CF & I to file a trial amendment to conform the pleadings with the proof that Pete Sublett Company was indebted to CF & I in the amount of $218,183.72. The court then entered judgment that CF & I take nothing, and that the appellees recover judgment against CF & I in the amount of $68,255.71. The jury found actual and exemplary damages in the amount of $350,000. Judgment was entered for the difference between the damages awarded by the jury and the amount of the debt which the court found was established by the undisputed testimony.

CF & I manufactures oil field pipe. Pete Sublett and Company was in the business of selling oil field pipe and had the status of a distributor for CF & I. Pete Sublett and Company was one of seventeen or eighteen distributors for CF & I and was also a distributor for Armco Steel. The relationship with CF & I had been in existence over a long period of time and had been quite satisfactory to both parties prior to the events giving rise to this lawsuit.

The relationship between the mill and the distributor, though of considerable economic importance was not evidenced by a written contract. The Sublett Company would purchase pipe from CF & I both for its own inventory and to fill specific customer orders. In both cases CF & I would collect from Sublett. The mill would make sales solely on the credit worthiness of the distributor and did not collect from the consumer.

The year 1975 had been a period of high demand for oil field pipe, and CF & I had placed its distributors under a quota system, whereby they could order a limited quantity of pipe to be manufactured in the future. The Sublett Company ordered a quantity of pipe in July of 1975, to be delivered no later than the week of December 31, 1975. The consumer demand for pipe was drastically curtailed in January and subsequent months of 1976. The pipe ordered by Sublett and Company was not delivered in 1975 and the Sublett Company attempted to cancel the order. The pipe was delivered in late February of 1976, and the Sublett Company was billed for $313,000, which it was unable to pay. Prior to this time the Sublett Company had been paying its accounts early and did not owe for any past shipments. During the remainder of 1976, the Sublett Company ran a delinquent balance of approximately $300,000 and suffered a cash shortage, which Sublett Company claimed resulted from CF & I's refusal to cancel the order.

During November of 1976, CF & I became insistent that arrangements be made to liquidate the past-due account. After telephone negotiations it was decided that Sublett and Company would execute a series of notes and that Mr. Sublett would execute a personal guaranty as to existing and future debts of the company.

At a meeting between Mr. Stover, credit manager for CF & I, Mr. Sublett, and Mr. Livesay, the treasurer of Pete Sublett and Company, Mr. Stover demanded that Mr. Sublett execute the guaranty agreement previously discussed and that the indebtedness be paid off by the execution of a series of three notes payable in thirty, sixty, and ninety days. There is evidence that Mr. Stover represented that this was the only terms of payment which the board of directors had authorized and that if a mutual agreement on payment of the indebtedness was not reached the distributorship would be cancelled and suit for collection of the amount due would be filed. After further discussion Mr. Stover agreed to ask the board of directors to approve a pay-out by a series of six equal notes payable one each month. Mr. Stover was able to get the six-note series accepted by his company. It was also agreed that the future sale of pipe on credit to Pete Sublett and Company would be handled on an order-by-order basis.

Pete Sublett and Company thereafter continued to do business with CF & I and paid two of the six notes within a few days after their due date. Default was made in the payment of the third note. After a meeting in July of 1977, the distributorship was cancelled. This suit was filed after the due date of the last of the six notes.

The appellants assert that the guaranty agreement and the series of notes were executed under duress. This affirmative defense was submitted to the jury by special issue no. 2. This issue inquired: "Do you find from a preponderance of the evidence that any of the following agreements were validly entered into by and between the parties hereto." Thereafter followed in separate paragraphs spaces for "yes" or "no" answers for each of the remaining promissory notes and the personal guaranty agreement. In each instance the jury answered "no."

In connection with this issue an instruction in the following language was given:

You are instructed in answering Special Issue No. 2 that a contract which is entered into as a result of duress is not validly entered into. The term "duress" means that degree of constraint, whether actually inflicted or threatened or impending which is sufficient in severity or in apprehension, to overcome the mind of the person to whom such constraint is directed. It consists of no precise act or form, but it's (sic) essence is that it so effected the mind as to overcome the free will of the person affected, so that the instrument executed was not in truth what it would have been but for the constraint.

The appellant objected to the form of the issue on the ground that it placed the burden of proof on the plaintiff when the burden should have been placed on the defendant to prove its affirmative defense. The issue as submitted requires the plaintiff to secure a finding of fact that the notes were valid. There is no dispute but that the notes were executed by the payor and supported by consideration. The notes were admitted into evidence without objection. The trial court erred in overruling this objection made by CF & I Steel to special issue no. 2. The issue should be so framed as to definitely place the burden upon the party pleading the affirmative of the question included in the special issue. Traders & General Ins. Co. v. Jenkins, 135 Tex. 232, 141 S.W.2d 312 (1940); Lemons v. Davis, 306 S.W.2d 224 (Tex.Civ.App.-Fort Worth 1957, writ ref'd n. r. e.).

The appellant also contends that there was no evidence requiring the submission of special issue no. 2. What constitutes duress is a question of law, but whether the facts exist to establish the elements of duress may be an issue of fact. The courts of Texas have consistently followed the rule that, as a matter of law, (1) there can be no duress unless there is a threat to do some act which the party threatening has no legal right to do; (2) there must be some illegal exaction or some fault or deception; (3) the restraint must be imminent and such as to destroy free agency without the present means of protection. Tower Contracting Co., Inc. of Texas v. Burden Brothers, Inc., 482 S.W.2d 330 (Tex.Civ.App.-Dallas 1972, writ ref'd n. r. e.). There is no evidence that CF & I was guilty of fraud or deception or that it had no legal right to take the actions threatened. Under the evidence CF & I was entitled to terminate the distributorship at will. Pete Sublett and Company does not argue that the money represented by the series of notes was not due and payable at the time the notes were executed. The evidence is not sufficient to raise an issue on duress. Dale v. Simon, 267 S.W. 467 (Tex.Comm'n App. 1924, jdgmt. adopted).

The jury found that a contract or contracts for the sale of pipe existed between Mitchell Energy Company, through its subsidiary Butler Drilling Company, and Pete Sublett and Company from approximately February 18, 1977, until May 11, 1977; that CF & I knew that the contract or contracts were in existence; that CF & I intentionally and willfully interfered with the contract or contracts; that CF & I was not justified in such interference; that CF & I's conduct in interfering with the contract or contracts was the proximate cause of the cancellation of the order or orders between Mitchell Energy Company, through its subsidiary Butler Drilling Company, and Pete Sublett and Company; and that $150,000 would fairly and reasonably compensate Pete Sublett and Company for its injuries which resulted from the occurrence in question.

The court instructed the jury that "justified" means one is privileged to interfere with contracts between others when they do so in bona fide exercise of their own rights or when they possess an equal or superior interest to that of the other party in the subject matter.

A case of wrongful interference with a contract is established by findings that a defendant willfully and intentionally committed acts calculated to cause damage to the plaintiffs' lawful business when the acts were done with the unlawful purpose of causing damage and loss, without right or justifiable excuse on the part of the defendant, which result in actual damage and loss to the...