Valley Bank of Commerce v. Hilburn

• Decision Date: 05 August 2004
• Docket Number: No. 24,204.,24,204.
• Citation: 136 N.M. 741,2005 NMCA 4,105 P.3d 294
• Parties: VALLEY BANK OF COMMERCE, a New Mexico banking association, Plaintiff-Appellant, v. Jerry and Lois HILBURN, Defendants-Appellees.
• Court: Court of Appeals of New Mexico

105 P.3d 294

136 N.M. 741

2005 NMCA 4

VALLEY BANK OF COMMERCE, a New Mexico banking association, Plaintiff-Appellant, v. Jerry and Lois HILBURN, Defendants-Appellees.

No. 24,204.

Court of Appeals of New Mexico.

August 5, 2004.

Richard E. Olson, James M. Hudson, Hinkle, Hensley, Shanor & Martin, L.L.P., Roswell, NM, for Appellant.

Kenneth R. Wagner, Thomas J. McBride, Wagner, McBride, Ford & Associates, P.A., Martin E. Threet, Martin E. Threet & Associates, Albuquerque, NM, for Appellees.

OPINION

PICKARD, Judge.

{1} Jerry and Lois Hilburn (the Hilburns) executed a continuing guaranty of debts that Western Auto Rentals and Sales, Inc. (WARS) owed to Valley Bank of Commerce (Bank). When WARS defaulted on a $1.4 million loan, Bank negotiated settlements with WARS and the other individuals who had guaranteed the loan. The Hilburns did not participate in the settlement, contending that they were not liable for the debt. Bank sued the Hilburns for breach of contract and damages in the amount of the debt remaining after the settlement. The Hilburns countersued under a number of theories, including that Bank had orally agreed to return the guaranty before WARS incurred the debt. A jury returned a verdict finding that neither party should recover, and Bank appealed. First, we address a procedural matter. We hold that in jury trial cases, where one of the parties files a post-trial motion for judgment as a matter of law, the time to file a notice of appeal does not begin to run until the trial court enters an order denying that motion. Finding Bank's appeal timely, we address the merits of the appeal. We hold that the jury could have reasonably determined that the Hilburns were released from their guaranty through an oral agreement preceding the disputed indebtedness. On that basis, we affirm the jury verdict.

FACTS AND PROCEEDINGS

{2} WARS was a business that rented and sold used cars in Roswell, New Mexico. The principals of the business were Ron Peerson, his wife Elly Peerson, Donald "Pug" Thigpen, and his wife Katherine Collier. Also involved in the business were the Hilburns, who provided $625,000 to assist in starting up WARS' operations under a deal that was either a purchase of stock or a loan. {3} In October 1996, the Hilburns executed an Unconditional and Continuing Guaranty that guaranteed debts that WARS owed to Bank. The guaranty applied to "any and all liabilities, obligations or indebtedness of any kind or nature whatsoever, which now exist or may hereafter arise or accrue in any manner" between WARS and Bank. The guaranty agreement also provided that WARS could incur new debts that the Hilburns would guaranty, and it waived the Hilburns' right to notice of any new debts for which they would be liable. The guaranty agreement also gave Bank the ability to change the terms of the debt, to change or release other guarantors from the agreements, and to release or sell the collateral without affecting the Hilburns' guaranty. The Peersons, Thigpen, and Collier were also guarantors for the debts of WARS.

{4} In order to provide financing for the cars it was selling, WARS created an entity called Western Auto Finance, L.L.C. (WAF). WAF entered into an agreement with Bank that set up the following arrangement. WAF would enter into an installment contract with a consumer who was purchasing a vehicle from WARS. WAF would then sell the installment contract to Bank for face value. WAF would remain responsible for pursuing the consumer if there was a problem with payment, and WAF had a recourse obligation to pay the balance of the installment contract if the consumer did not. WAF and Bank split the interest on the installment contract. Although the Peersons, Thigpen, and Collier were involved in the operations of WAF, the Hilburns were not involved in the operation of WAF or in the relationship between WAF and Bank.

{5} In November 1996, Jerry Hilburn took out a $200,000 personal loan from Bank. That loan was eventually extended, increased to $275,000, and secured by the assets of three video stores that Jerry Hilburn purported to own. In January 2000, Bank determined that Jerry Hilburn did not actually own the assets that he pledged to secure his personal loan.

{6} Both parties agree that in January 2000, Jerry Hilburn had a phone conversation with Bank's president, John Burson (Burson). According to Bank, Burson refused Jerry Hilburn's request to be relieved from the WARS guaranty in return for full payment of his personal note because the two obligations were separate. According to the Hilburns, Burson accepted his offer and agreed to release them from the guaranty in return for full payment of Jerry Hilburn's personal note. Jerry Hilburn did pay his personal debt in full.

{7} In February 2000, Bank extended WARS a loan for $1,553,000, which the parties refer to as "Note 5342." Note 5342 consolidated a series of earlier loans to WARS in order to facilitate one monthly payment.

{8} In July 2000, Jerry Hilburn sent a letter to Bank stating:

This is notice pursuant to the unconditional and continuing Guaranty dated October 29, 1996 and all other similar guarantees signed previous or subsequent relative to Western Automobile Rental and Sales, Inc. or any of its successors, that the undersigned elects not to guarantee any new indebtedness of the Borrower, (Western Automobile Rental and Sales, Inc. or its successors) to Valley Bank which may hereafter accrue.

The letter was signed by Jerry Hilburn only.

{9} WARS defaulted on its obligations to Bank in November 2000. WAF had also fallen on hard times, as more and more installment contracts went into default and increased the debt that WAF owed Bank based on the recourse obligation. Bank called a meeting with the guarantors of the WARS debt in January 2001 in order to negotiate a workout agreement. Jerry Hilburn attended the meeting and participated in the discussions that led to Bank's agreement to reduce the obligations of WAF and WARS by $750,000 in return for a $200,000 payment on the loan. The agreement was made in light of the fact that WARS and WAF were in the process of applying for a government loan to keep the businesses afloat. After the agreement was drafted, Jerry Hilburn refused to sign it. In February 2001, there was a heated phone conversation between Burson and Jerry Hilburn, in which Burson told Hilburn that if he did not enter into the workout agreement, Bank would enter a workout agreement with the Peersons, Thigpen, and Collier and sue the Hilburns for the balance of the WARS loan.

{10} Bank entered into an agreement with Thigpen and Collier in March 2001, whereby they would borrow $1,450,000 from Bank, secured by a mortgage on their farm and home, and use that money to pay down the WARS and WAF debts. A new entity, New Western Enterprises, would buy the assets of WARS and WAF and would try to secure the government loan to continue operations. In return, Bank agreed not to pursue WARS, WAF, Thigpen, or Collier for the approximately $750,000 of the balance of the WARS and WAF debts. At trial, Thigpen testified that he had made an oral agreement with Bank that the Hilburns would be released from the guaranty on the first note if Thigpen and Collier secured their new loan with their farm and home. However, the written agreement between Thigpen and Collier and Bank contained a provision stating that the agreement would not affect "any and all rights of Bank against Ron and Elly Peerson (`Peerson') or Jerry and Lois Hilburn (`Hilburn') and shall not effect or in any way cause a discharge of Peerson and Hilburn from any liability or obligation to Bank[.]" After the agreement was executed, $627,818.78 of the money that Thigpen and Collier borrowed from Bank was applied to Note 5342, as well as another, separate note. The remainder was used to pay off other debts owed by WARS and WAF.

{11} Bank filed suit against the Hilburns for breach of contract in order to collect the balance due on Note 5342. The Hilburns filed a counterclaim for breach of contract, breach of the covenant of good faith and fair dealing, and a myriad of other claims. After a full trial, the jury returned a verdict stating, "We find neither party should recover." After the district court denied Bank's motion for judgment as a matter of law, Bank appealed.

DISCUSSION

1. Timeliness of Appeal.

{12} In their brief, the Hilburns contended that Bank's appeal should be held to be untimely. Although the Hilburns withdrew this point at oral argument, we proceed to address it because timeliness of the appeal is a mandatory precondition to our jurisdiction. See Rice v. Gonzales, 79 N.M. 377, 378, 444 P.2d 288, 289 (1968) (addressing the timeliness issue despite the fact that neither party raised it). On April 17, 2003, Bank filed a timely motion for judgment as a matter of law under Rule 1-050 NMRA 2004. The district court held a hearing on May 28, 2003, and it entered an order denying Bank's motion on June 4, 2003. Bank filed a notice of appeal on July 3, 2003.

{13} According to the Hilburns, Bank's motion for judgment as a matter of law was automatically denied under NMSA 1978, § 39-1-1 (1917), which provides:

Any judgment, or decree, except in cases where trial by jury is necessary, may be rendered by the judge of the district court at any place where he may be in this state, and the district courts, except for jury trials, are declared to be at all times in session for all purposes, including the naturalization of aliens.... Final judgments and decrees, entered by district courts in all cases tried pursuant to the provisions of this section shall remain under the control of such courts for a period of thirty days after the entry thereof, and for such further time as may be necessary to enable the court to pass upon and dispose of any motion which may have been filed within such period, directed against such judgment; provided, that if the court shall fail to rule upon

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