Adams Bank & Trust v. Brown
A-16-1065
| Neb. Ct. App. | Oct 17, 2017Background
- Charles and June Brown (Appellants) and Travis & Tina Brown executed promissory notes secured by two deeds of trust: a deed covering a 32‑acre tract (Travis/Tina) and a deed covering the Brady property (Charles & June). The Appellants’ deed cross‑collateralized obligations, encompassing both notes.
- Travis & Tina defaulted and the 32‑acre tract went to tax sale; Vandelay obtained a tax deed and the bankruptcy court later quieted title in favor of Vandelay. Adams Bank participated in the bankruptcy/adversary proceeding but did not redeem the tax sale.
- Adams Bank notified Appellants of the tax sale and the past‑due Travis/Tina loan; none of the parties redeemed or paid. Appellants defaulted on their note, Adams Bank foreclosed on the Brady property, purchased it at the trustee’s sale for $95,000, later resold it for $110,000 after improvements, and sought a deficiency judgment.
- Appellants asserted 11 counterclaims (including duty to protect/pay taxes, fraud/constructive fraud, unjust enrichment, fiduciary breach, laches, waiver, failure to mitigate, breach of implied covenant, negligence). The district court dismissed nine theories as premised on a non‑existent duty and tried the remaining two (fraud/constructive fraud and breach of implied covenant).
- After a bench trial the court entered judgment for Adams Bank: a deficiency of $23,175.07 plus interest, awarded attorney’s fees to Adams Bank, and overruled Appellants’ evidentiary objections. Appellants appealed; the Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Adams Bank had a duty to pay delinquent taxes on the 32‑acre tract or to notify Appellants such that multiple counterclaims survive | Appellants: Deeds/notes and equitable principles imposed a duty on the bank to protect secondary security (Brady property) by paying taxes or notifying them | Adams Bank: Deeds of trust give the bank the right, but not a mandatory duty, to pay taxes or intervene; no contractual duty to notify | Court: Bank had the right but not a duty; counterclaims and defenses premised on that duty were properly dismissed |
| Whether the district court improperly struck affirmative defenses and should have allowed amendment | Appellants: Dismissal of “any defense” premised on duty exceeded motion’s scope and court should have invited amendment | Adams Bank: Defenses premised on a nonexistent duty would fail; dismissal limited to defenses/counterclaims relying on that duty was proper | Court: Order read in context limited to claims/defenses premised on the non‑existent duty; no error in strike and court was not required to sua sponte invite amendment |
| Admissibility of Exhibits 28 and 35 and certain testimony (foundation for indebtedness and attorney fee entries) | Appellants: Exhibits unreliable and lacking foundation, especially entries reflecting payments to law firm; objection to foundation on testimony | Adams Bank: Bank witnesses laid foundation; court reserved right to exclude or adjust attorneys’ fees later | Court: Trial judge acted within discretion in admitting exhibits and overruling foundation objections; reserved ability to assess fee admissibility later |
| Whether Adams Bank proved entitlement to a deficiency judgment and to attorney fees; whether Appellants proved fraud/modification or breach | Appellants: Foreclosure resale for $110,000 shows higher FMV; alleged oral assurances/modifications (fraud/good‑faith breach) and statute of frauds issues; insufficient basis for fees | Adams Bank: Sale price at trustee’s sale ($95,000) is FMV; deed language cross‑collateralized obligations so deficiency exists; bank entitled to contractual collection fees; oral modification testimony not credible | Court: $95,000 was fair market value at sale; total secured indebtedness exceeded sale proceeds yielding $23,175.07 deficiency; Appellants’ credibility evidence failed; attorney fees allowed under contract and found reasonable |
Key Cases Cited
- Doe v. Omaha Pub. Sch. Dist., 273 Neb. 79 (standards for 12(b)(6) dismissal and pleading construction)
- Ferer v. Erickson, Sederstrom, 272 Neb. 113 (liberal construction of pleadings)
- Green Tree Fin. Servicing v. Sutton, 264 Neb. 533 (trial court discretion on admissibility of evidence)
- Tremain v. Tremain, 264 Neb. 328 (abuse of discretion standard)
- Donut Holdings v. Risberg, 294 Neb. 861 (bench trial factual findings reviewed for clear error)
- Facilities Cost v. Otoe County School, 291 Neb. 642 (contract interpretation is a question of law)
- Gonzalez v. Union Pac. R.R. Co., 282 Neb. 47 (existence and scope of fiduciary duty are legal questions)
- Vanice v. Oehm, 255 Neb. 166 (laches is an affirmative defense)
- Omaha Police Union Local 101 v. City of Omaha, 292 Neb. 381 (waiver as defense)
- Borley Storage & Transfer Co. v. Whitted, 271 Neb. 84 (failure to mitigate / avoidable consequences as defense)
- Weeder v. Cent. Cmty. Coll., 269 Neb. 114 (noncompliance with condition precedent is an affirmative defense)
- Kelly v. Kelly, 246 Neb. 55 (appellate courts need not decide unnecessary issues)
- Sherman v. Sherman, 18 Neb. App. 342 (judge must avoid advocacy; no duty to prompt amendment)