{
  "id": 1568837,
  "name": "FIRST NATIONAL BANK IN CLAYTON, Plaintiff-Appellant, v. Roy M. WOOD, Defendant-Appellee",
  "name_abbreviation": "First National Bank v. Wood",
  "decision_date": "1979-09-06",
  "docket_number": "No. 3752",
  "first_page": "467",
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  "last_updated": "2023-07-14T15:53:36.909287+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
    "batch": "2018"
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  "casebody": {
    "judges": [
      "WOOD, C. J., specially concurring.",
      "HERNANDEZ, J., concurring in Chief Judge WOOD\u2019S special concurrence.",
      "HERNANDEZ, J., concurs."
    ],
    "parties": [
      "FIRST NATIONAL BANK IN CLAYTON, Plaintiff-Appellant, v. Roy M. WOOD, Defendant-Appellee."
    ],
    "opinions": [
      {
        "text": "OPINION\nSUTIN, Judge.\nPlaintiff (The Bank) sued defendant (Wood) on a written guaranty given by Wood to The Bank to secure a portion of a debt owed to The Bank by Wood\u2019s son. The guaranty was in the sum of $20,000. Wood asserted the affirmative defense of coercion and duress exercised by The Bank in obtaining the guaranty and filed counterclaims. At the close of the case, both parties moved for a directed verdict. The court took the motions under advisement, but announced that it would like to leave the parties where they were when they first entered the courtroom.\nAfter the case was submitted to the jury, it hung and a mistrial was declared. Thereupon, the court granted The Bank\u2019s motion for a directed verdict against Wood\u2019s counterclaims, and granted Wood\u2019s motion for a directed verdict, dismissing The Bank\u2019s complaint. The announcement of the court at the close of the case was made effective. The Bank appeals. We affirm.\nTwo points are raised on appeal but argued as one: (1) the evidence was insufficient to show as a matter of law, economic compulsion which caused Wood to sign the written guarantee, and (2) The Bank was entitled to a directed verdict on the guarantee agreement because the defense of duress or coercion was not established.\nPrior to June, 1974, The Bank, along with a correspondent bank in Albuquerque, had extended to Wood a $500,000 line of credit. In June and December of each year, promissory notes at The Bank matured and were renewed if necessary.\nIn June, 1974, Wood\u2019s son was indebted to The Bank in the sum of $68,000. The Bank decided that it needed more security to cover the son\u2019s loan and that a guaranty was the only method of obtaining it. The president of The Bank contacted Wood and told him under instructions from the board that \u201c \u2018[W]e can\u2019t renew your line of credit until you sign a guaranty on [your son].\u2019 \u201d Four other officers of The Bank confirmed the fact that The Bank demanded a guaranty by Wood of his son\u2019s indebtedness. Otherwise his notes and credit line would not be renewed. Wood refused to guaranty the entire indebtedness. He went to the First National Bank in Raton as an alternative source at which to seek credit in the sum of $400,000, but this bank was without money to loan him.\nFrom June to September, Wood tried to get his credit renewed. Whenever he spoke with officers of The Bank, they spoke of the indebtedness of the son. Wood said:\nThey were trying to force me to sign [his son\u2019s] guaranty before they would renew my note.\nTo keep his operations afloat, Wood had to sign a guaranty. He figured that the son\u2019s total indebtedness was $68,000; that his son\u2019s security was valued at $48,000 and that the deficiency was $20,000. On September 13, 1974, Wood finally agreed to sign the guarantee in the sum of $20,000 so that The Bank would renew his credit that was then 90 days past due. On that date, his son executed a note to The Bank in the sum of $66,337.20 and Wood signed the guarantee. Three days later, on September 16, 1974, Wood\u2019s note was renewed and his credit line extended.\nThe Bank\u2019s position was that Wood testified he had had no financial problems with The Bank. Nevertheless, unknown to Wood, the bank examiner notified The Bank that it had exceeded the Wood loan limit and had violated the law, and that The Bank had to negotiate some kind of agreement with Wood. On May 30, 1974, due to a drop in value of his collateral that secured his note, Wood was short $122,000, i. e., if all Wood\u2019s cattle were sold, Wood would still owe The Bank $122,000. The Bank told Wood that he had to liquidate a portion of his assets and reduce his indebtedness in order for The Bank to comply with its lending limits. Wood refinanced his land and paid the funds received to The Bank in September, 1974. Having complied, and having signed the guaranty, his note was renewed on September 16, 1974. The Bank\u2019s position has no reference to the defense of duress and coercion. But it is obvious that the fault of The Bank created a Bank-Wood problem.\nSubsequently, The Bank recovered judgment against Wood\u2019s son, and in 1978, Wood\u2019s son was discharged in bankruptcy.\nThe Bank was entitled to a directed verdict against Wood on the guaranty agreement if Wood\u2019s defense failed. The only question on this appeal is:\nDid The Bank exercise duress or coerce Wood into signing the guaranty agreement as a matter of law?\nThe Bank relies on Pecos Const. Co. v. Mortgage Invest. Co. of El Paso, 80 N.M. 680, 459 P.2d 842 (1969); Terrel v. Duke City Lumber Company, 86 N.M. 405, 524 P.2d 1021 (Ct.App.1974), aff\u2019d in part, rev\u2019d in part, 88 N.M. 299, 540 P.2d 229 (1975). The Supreme Court affirmed Terrel on the issues raised in this appeal.\nIn Pecos and Terrel, plaintiff sued defendant for damages on the basis of business duress and compulsion. In each case, defendant was in the superior bargaining position. \u201cIn Pecos the establishment of a superior bargaining position (control of funds) created the duty to offer the weaker party a reasonable choice of alternatives.\u201d Terrel, supra, (86 N.M. at 423, 524 P.2d at 1039). In the case at hand, The Bank was master in the control of funds of Wood by way of non-renewal of Wood\u2019s credit line and notes. Its command to Wood was \u201cGuaranty your son\u2019s indebtedness or else.\u201d No reasonable choice of alternatives were offered. Nevertheless, Wood did seek an alternative choice without success.\nCaldwell v. Higginbotham, 20 N.M. 482, 151 P. 315 (1915) was cited in Pecos and Terrel. Paraphrasing the quoted language in 20 N.M. at 507 and 509, 151 P. 315 it reads:\nDuress exerted under circumstances sufficient to influence the apprehensions and conduct of a prudent business man to obtain a guaranty is wrongfully induced thereby and ought not to be regarded as voluntary.\nTo constitute the coercion or duress which will be regarded as sufficient to make the guaranty involuntary, there must be some actual or threatened exercise of power possessed, by the party exacting or receiving the guaranty over the person or property of another, from which the latter has no other means of immediate relief, than by making the guaranty. The doctrine established by the authorities is that a guaranty is not to be regarded as compulsory unless made to emancipate the person or property from an actual or existing duress imposed upon it by the party to whom the guarantee was given.\nIn effect, these were the instructions given to the jury in Terrel. See instructions Nos. 11 and 12 [Id. 418-19].\nThe evidence is undisputed that (1) The Bank threatened Wood with a serious attack upon his financial business operations, (2) that this duress was sufficient to affect Wood\u2019s conduct toward executing a guarantee, (3) that the execution of the guarantee was compulsory or involuntary, and (4) that The Bank did not offer Wood any alternatives. These facts established the defense of duress or coercion, commonly called \u201ceconomic compulsion.\u201d\nWood has established by clear and convincing evidence as a matter of law that The Bank exercised duress or coercion in obtaining Wood\u2019s guaranty.\nAffirmed.\nIT IS SO ORDERED.\nWOOD, C. J., specially concurring.\nHERNANDEZ, J., concurring in Chief Judge WOOD\u2019S special concurrence.",
        "type": "majority",
        "author": "SUTIN, Judge."
      },
      {
        "text": "WOOD, Chief Judge\n(specially concurring):\nI agree that the trial court properly directed a verdict in favor of Wood on the economic compulsion claim; I agree that the Bank gave Wood no alternative in requiring execution of the guaranty before renewing Wood\u2019s loan. The evidence is undisputed that if Wood did not execute the guaranty, the Bank would call the loan.\nThis special concurrence is directed to the Bank\u2019s claim that it had a legal right to require the guaranty. See Terrel v. Duke City Lumber Company, Inc., 86 N.M. 405, supra, at 419, 524 P.2d 1021.\nPursuant to the written loan commitment, signed by the parties, Wood had a line of credit to the maximum amount of $500,000. Wood began borrowing money in 1971. The loan was reviewed and renewed every six months. Wood used the money in connection with his cattle operations. Because of the amount of the loan, the Bank did not expect the loan to be paid off when the six-month note matured. The ordinary procedure was that the note was renewed after a review of Wood\u2019s financial condition and operations during the preceding six months.\nIn 1974, the cattle market was severely depressed, resulting in loss in value of the cattle securing the loan. In June, 1974, the Bank imposed conditions for renewal, including the sale of some assets in order to reduce the amount of the loan. These conditions were consistent with, and permissible under, the written agreement of the parties. Wood met those conditions. Nevertheless, the Bank refused to renew the loan unless Wood also executed the agreement which guaranteed $20,000 of the son\u2019s indebtedness, for which Wood was not liable. There is nothing in the written loan commitment which gave the Bank the legal right to require the guaranty as a condition for renewing the loan, and there is nothing in the trial testimony that supports such a legal right. The Bank added the guaranty requirement without any legal right to do so.\nHERNANDEZ, J., concurs.",
        "type": "concurrence",
        "author": "WOOD, Chief Judge"
      }
    ],
    "attorneys": [
      "Ethan K. Stevens, Clayton, J. Walter Park, IV, David T. Turlington, Davis & Turlington, Inc., San Antonio, Tex., for plaintiff-appellant.",
      "Charles D. Alsup, Clayton, for defendantappellee."
    ],
    "corrections": "",
    "head_matter": "601 P.2d 437\nFIRST NATIONAL BANK IN CLAYTON, Plaintiff-Appellant, v. Roy M. WOOD, Defendant-Appellee.\nNo. 3752.\nCourt of Appeals of New Mexico.\nSept. 6. 1979.\nRehearing Denied Sept. 19, 1979.\nEthan K. Stevens, Clayton, J. Walter Park, IV, David T. Turlington, Davis & Turlington, Inc., San Antonio, Tex., for plaintiff-appellant.\nCharles D. Alsup, Clayton, for defendantappellee."
  },
  "file_name": "0467-01",
  "first_page_order": 513,
  "last_page_order": 516
}