Terrell was born in Patrick County, Virginia. In 1831, his Quaker family moved to Boonville, Missouri. He graduated from the University of Missouri and was admitted to the bar in 1849. He practiced law in St. Joseph, Missouri. In 1852, he moved to Austin, Texas. He served as a district court judge from 1857 until 1863 when he resigned to join the First Texas Cavalry Regiment of the Confederate military as major. He fought in several major battles as part of the Red River Campaign including the Mansfield, Louisiana, in the spring of 1864. In 1865, he obtained the rank of brigadier general, but the war ended before his promotion was officially confirmed.
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