Cattle Nat. Bank & Trust Co. v. Watson, 293 Neb. 943

Background

In 2007 four Watson family members (Robert, Shona, Bill, Rebecca) signed identical two-page personal guaranties for Reserve Design, LLC’s debts to The Cattle National Bank & Trust Co.; signatures appear on page 1 but none initialed or signed page 2. Page 1 expressly incorporated page 2 and defined “Undersigned” as all persons who sign the guaranty.
In 2010 the Bank loaned Reserve $40,000; Reserve defaulted in 2012 and the Bank sued the Watsons on their guaranties. Robert counterclaimed for fraud in the inducement of the loan (signed as Reserve’s manager).
The district court granted the Bank’s motions for summary judgment on breach of guaranty and dismissed Robert’s counterclaim (concluding Robert was not the real party in interest and that fraud defenses were waived by the guaranty). The order entered “judgment” but did not adjudicate Shona’s cross-claim or include § 25-1315 language making a partial adjudication final.
While the first appeal was pending, the Bank obtained writs of execution and garnishment; proceedings occurred before a final judgment was entered. Bill and Rebecca objected; district court overruled objections and allowed execution/garnishment.
The Court of Appeals dismissed the first appeal for lack of finality. The district court later dismissed Shona’s cross-claim and denied Robert’s motion to vacate the earlier summary-judgment order; the Nebraska Supreme Court consolidated appeals and reviewed (1) merits of summary judgment and denial of vacatur and (2) validity of the earlier execution/garnishment.

Issues

Issue	Plaintiff's Argument (Bank)	Defendant's Argument (Watsons)	Held
Whether page 2 of the guaranty is part of the contract and binds guarantors who did not initial page 2	Page 1 expressly incorporates page 2 and defines “Undersigned” to include all who sign page 1; thus page 2 is binding	Page 2 required an additional signature/initial ("undersign") and therefore its terms (waivers, notice) do not bind them	Court: Page 2 is incorporated by clear language on page 1; the definition of “Undersigned” on page 1 controls; guarantors are bound by page 2
Whether guarantors can assert fraud-in-the-inducement defenses based on Reserve’s defenses to the underlying loan	Guaranty includes a broad waiver of defenses belonging to Reserve (including fraud) so Bank entitled to judgment	Robert: fraud induced him to sign loan; defense should negate enforcement	Court: Waiver in guaranty bars defenses of Reserve (including fraud); Robert also not real party in interest to prosecute Reserve’s fraud claim
Whether Robert could prosecute fraud counterclaim (real party in interest)	Bank: loan claim belongs to Reserve; Robert lacks standing and may not represent Reserve	Robert: he was induced and should be able to assert fraud defense/counterclaim	Court: Robert signed loan as Reserve’s manager; Reserve (an LLC) is distinct and not a party; Robert is not the real party in interest; summary judgment proper
Whether execution/garnishment issued pre-judgment were valid	Bank: relied on interlocutory summary-judgment order that called itself a judgment	Watsons: writs issued before a final judgment under § 25-1315, so process is void	Court: Writs issued before final judgment were void; interlocutory order lacking disposition of all claims cannot support execution/garnishment; vacated orders overruling objections

Key Cases Cited

Braunger Foods v. Sears, 286 Neb. 29 (interpreting incorporated terms on contract reverse as part of contract)
Ray Tucker & Sons v. GTE Directories Sales Corp., 253 Neb. 458 (contract clauses on reverse side are part of agreement when front references them)
Oddo v. Speedway Scaffold Co., 233 Neb. 1 (reference to terms on reverse enforces incorporation)
Malolepszy v. State, 270 Neb. 100 (statutory requirement for explicit adjudication or § 25-1315 certification to create finality)
Federal Land Bank v. McElhose, 222 Neb. 448 (series of entries may constitute final judgment; caution re multiple inconsistent entries)
Breci v. St. Paul Mercury Ins. Co., 288 Neb. 626 (declaratory-judgment procedure must be framed by pleadings)
Redding & Co. v. Russwine Construction Corp., 417 F.2d 721 (Rule 54(b)-type determinations relevant to execution; execution ordinarily issues only on final judgment)
International Controls Corp. v. Vesco, 535 F.2d 742 (execution depends on finality of prior judgments)