Terrel v. Duke City Lumber Co., Inc., 878

Citation86 N.M. 405,1974 NMCA 41,524 P.2d 1021
Decision Date22 May 1974
Docket NumberNo. 878,878
PartiesWilliam E. TERREL, d/b/a Little Tree Lumber Company, Plaintiff- Cross Appellant, v. DUKE CITY LUMBER COMPANY, INC., a New Mexico corporation, Joe Grevey, Jack Grevey and Ira Liberman, Defendants-Appellants, and Jo Dell TERRELL, Third-Party Defendant-Cross Appellant.
CourtCourt of Appeals of New Mexico
William E. Snead, Arturo G. Ortega, Albuquerque, for plaintiff-cross-appellant
OPINION

HENDLEY, Judge.

The jury returned a verdict against defendant, Duke City, in the sum of $635,458.50, on the theory of breach of contract and economic compulsion. The trial court granted Judgment N.O.V. to Duke City in the sum of $175,607.00. Duke City had previously been granted summary judgment on certain promissory notes in the sum of $344,174.19, '* * * subject, however, to any sums which may be awarded plaintiff. * * *' The trial court denied Duke City any interest or attorneys' fees '* * * on the sum of money for which summary judgment was entered. * * *'

Defendant appeals and plaintiff cross-appeals from the various judgments and rulings of the trial court. We affirm.

The charge of economic compulsion, like fraud, is one easily made. See Frear v. Roberts, 51 N.M. 137, 179 P.2d 998 (1947). It must therefore be proven by clear and convincing evidence. See Chatfield v. City of Seattle, 198 Wash. 179, 88 P.2d 582, 121 A.L.R. 1279 (1939); Carroll v. Fetty, 121 W.Va. 215, 2 S.E.2d 521 (1939), cert. denied, 308 U.S. 571, 60 S.Ct. 85, 84 L.Ed. 479 (1939). Plaintiff would have us follow the substantial evidence review standard for 'clear and convincing evidence' cases set forth in Sauter v. St. Michael's College, 70 N.M. 380, 374 P.2d 134 (1962) which states:

'It is a well settled rule that this court, on appeal, will * * * view the evidence in an aspect most favorable to the judgment and the party prevailing below. * * * (T)he weight of the evidence is not considered on appeal, rather only, if there is any substantial evidence to support the verdict. * * *'

Sauter has not been followed in this regard. Hockett v. Winks, 82 N.M. 597, 485 P.2d 353 (1971); McLean v. Paddock, 78 N.M. 234, 430 P.2d 392 (1967); Visic v. Paddock, 72 N.M. 207, 382 P.2d 694 (1963); see Lumpkins v. McPhee, 59 N.M. 442, 286 P.2d 299 (1955).

The above cases conform with the ordinary rules of review of the record on appeal. That is, presumptions are in favor of verdicts and reviewing courts will view the facts in the light most favorable to the prevailing party, will indulge in all reasonable inferences in support of the verdict, and will disregard all inferences or evidence to the contrary. Further, it is for the jury and not the reviewing court to weigh the testimony, determine the credibility of witnesses, reconcile inconsistent or contradictory statements of witnesses and say where the truth lies. Durrett v. Petritsis, 82 N.M. 1, 474 P.2d 487 (1970); Sauter v. St. Michael's College, supra. We will review the evidence to determine if it is sufficient to establish, clearly and convincingly, the claim of economic compulsion. Hockett v. Winks, supra.

We summarize as briefly as possible the facts contained in the 5,933 page record and the legion exhibits. Briefs--617 pages.

FACTS:

History and Negotiations

The Terrel family had been in the sawmill business in the Magdalena, New Mexico area for many years. By 1965 plaintiff, as the surviving member, had expanded the sawmill at a cost of $250,000.00 to $300,000.00. In November, 1966 plaintiff lost his inventory of logs by fire and subsequently was hard pressed for working capital. The situation was further compounded for plaintiff by a 'way above regular' snow in late 1967 which completely shut down all logging operations until well into 1968. Plaintiff's self-prepared balance sheet as of June 30, 1968 showed total assets of $798,784.33 less total liabilities of $265,605.52 with a resulting equity of $533,178.81. Of the total assets $63,804.33 were curren assets, $699,200.00 were fixed assets and $35,780.00 were other assets.

Duke City operated a lumber wholesale and molding manufacturing business in Albuquerque, New Mexico. It also owned three sawmills which were used to produce its own lumber.

During August, 1968 plaintiff met with the principal officers of Duke City to discuss his various financing needs. At that time Ira Liberman, the Executive Vice-President of Duke City, prepared a contract draft of what was discussed in the way of financing, except as to working capital. Terrel planned to get working capital loans from outside sources. (See 'Working Capital' infra).

Plaintiff then inquired if Duke City could advance some money on the tentative agreement, since time was short before the unproductive winter months. Duke City informed plaintiff that no funds could be released until all the required documents had been prepared.

Contract

Subsequently, on October 16, 1968 the contract between Duke City and plaintiff was signed. Under that contract Duke City agreed to loan Terrel $160,000.00, $127,000.00 of which went directly to pay Terrel's existing debts and $33,000.00 to Terrel himself. Terrel agreed to pay back the debt plus ten percent interest in twenty-four months, paying twenty-five percent of the value of all rough green lumber delivered to Duke City through January 31 1969 and fifty percent thereafter. As security for the note Duke City encumbered all of Terrel's manufacturing and rolling equipment, taking a second lien on some items. Duke City also had Terrel place the leases covering the Magdelena Mill and all Forest Service timber contracts, then operative or after acquired, in escrow. On default Duke City had the right to foreclose upon Terrel's equipment and to take over his leases and his timber contracts (included in the latter were prepaid deposits, accruals, roads and camps.)

Terrel also promised to ship to Duke City, for the term of the contract plus three years, '* * * all of the rough green Ponderosa Pine shop and better (grades of timber) developed from his mill * * *' on Duke City's grade and tally under the rules of (WWPA) Western Wood Products Association. The price paid by Duke City was tied to Random Lengths Report (See 'Market Conditions,' infra) and adjusted quarterly. Duke City would also buy, at prevailing wholesale market prices, 100 percent of all other common and dimension lumber (lower grades), of whatever species produced by Terrel during the term of the contract. Duke City was to receive a five percent wholesale commission and a two percent cash discount ten days from the date of invoice.

Terrel was to be in default:

'a. If at any time in three successive months the sawmill production (was) below 500 MBF (thousand board feet) per month;

'b. If Terrel default(ed) in the performance of any of the terms and conditions of (the) contract;

'c. If Terrel (became) insolvent or bankrupt;

'd. If Terrel fail(ed) to maintain his insurance, leases or real estate or forest service contracts in good standing;

'e. If Terrel remove(d) from the Magdalena Mill any of the personal property listed on Exhibit 'A' without prior written approval of Duke;

'f. If for any reason Terrel die(d), or

'g. If the said note and security agreement (were) not paid according to their tenor.'

The contract had an acceleration clause. On sale of the mill Duke City had a right of first refusal and an option to terminate the contract or continue with the new buyer.

Finally Duke City had the right to inspect all of Terrel's sales and production records and have a 'resident representative' at the Magdalena mill.

Beginning Operations under Contract

Plaintiff did not start shipping lumber to Duke City until the early part of December, 1968. He stated his reason for this as follows:

'I had contacted a contract logger. In fact, I contacted him in August shortly after it had been agreed by all concerned that we could make a deal. At this time, his loggers were ready to go to work, and at this time, this is one of the reasons I was anxious to get the contract signed and to get the money to where I could put them in the woods and commence building roads and commence getting in logging and skidding logs and working in general when I was able to. These people took on another short contract while they were waiting for me to obtain funds to where I could keep them working, or start them to working. After I signed the contract, I called them and told them, 'Let's go.' And they said that they would be a week or so before they could clean up this deal they were on. 'We will be there as soon as we can get this operation cleaned up.' Consequently, it was in the middle of November when they did show up and begin logging.'

Working Capital

Terrel attempted to secure inventory financing for working capital purposes elsewhere. One company agreed to provide it if Duke City would agree to guarantee the financing. Duke City earlier informed plaintiff that it would make the guarantee, however, in the latter part of January, 1969 it said '* * * that they would be unable or that they would not guarantee * * *' outside lenders working capital agreements and that they decided '* * * they (Duke City) would go ahead and supply the necessary working capital. * * *' Up to this time, Duke City had made working capital advances of $60,000.00 to $75,000.00 and had taken a security agreement on all present and future lumber and log inventory. Duke City had been crediting twenty-five percent of the price of the upper grade lumber shipped to if on the original indebtedness and the balance of seventy-five percent was credited toward the working capital advances. After Duke City agreed to...

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