Doty v. West Gate Bank, 292 Neb. 787

Background

In 2002–2003 members of the Doty family granted three separate deeds of trust (Starr Street, Harwood Court, 148th Street) to West Gate Bank securing the same underlying indebtedness, including future advances.
The Bank foreclosed under the 148th Street trustee’s sale (nonjudicial sale) on account of default on promissory Note 257 and applied proceeds to the note, leaving an unpaid balance.
The Dotys sued for a declaratory judgment, arguing Neb. Rev. Stat. § 76-1013 (3-month post-sale limitation for actions to recover a balance) barred the Bank from recovering any remaining balance or enforcing other collateral.
While the declaratory action proceeded, the Bank and Dotys entered agreements that substituted collateral (including a deposit account) and the Bank later foreclosed or sought to enforce other collateral; the Dotys conceded that if § 76-1013 did not extinguish Note 257, the Bank could enforce substituted collateral.
The district court granted summary judgment for the Dotys, holding § 76-1013 barred any collection action and effectively treated the debt as paid in full because the Bank failed to bring a § 76-1013 action within 3 months.
The Bank appealed; the Nebraska Supreme Court reviewed statutory interpretation de novo and strict construction principles applicable to trust deed statutes.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 76-1013’s 3‑month provision applies to nonjudicial foreclosures/enforcement of other collateral	§ 76-1013 bars the Bank from any action to collect the balance, including enforcing other collateral	§ 76-1013 governs only court actions (deficiency suits); nonjudicial foreclosures and enforcement of other collateral are not "an action" under the statute	Held: § 76-1013 "an action" means a judicial action; it does not include enforcement of liens or security interests in other collateral (nonjudicial foreclosure/enforcement permitted)
Whether the running of § 76-1013’s 3‑month limitation extinguishes or pays the underlying debt	The Dotys argued the debt is paid in full because the Bank failed to bring the statutory action within 3 months	The Bank argued the statute only bars a judicial deficiency remedy and does not extinguish the underlying obligation	Held: The statute of limitations bars only the remedy (personal deficiency action); it does not extinguish the underlying debt, and the Bank may enforce remaining collateral
Whether the Bank was required to obtain a fair‑market‑value determination before collecting other collateral	The Dotys argued FMV credit was required to prevent underbidding and to protect debtor rights under the Act	The Bank argued FMV requirement in § 76-1013 applies to deficiency actions in court, not to exhaustion of other collateral	Held: FMV determination requirement applies to § 76-1013 actions (judicial deficiency claims) and does not apply to enforcement of additional collateral
Whether the district court properly granted summary judgment for the Dotys	The Dotys relied on the district court’s broad statutory reading to obtain summary judgment	The Bank moved for summary judgment reversing that interpretation	Held: District court erred; Nebraska Supreme Court reversed and directed district court to grant Bank summary judgment

Key Cases Cited

Pantano v. Maryland Plaza Partnership, 244 Neb. 499 (1993) (discussing legislative purpose of § 76-1013 to protect debtors by crediting fair market value in deficiency actions)
Mutual of Omaha Bank v. Murante, 285 Neb. 747 (2013) (holding § 76-1013’s expiration does not extinguish the debt; it only bars the remedy against debtor)
First Nat. Bank of Omaha v. Davey, 285 Neb. 835 (2013) (characterizing § 76-1013 as limited to deficiency actions brought after nonjudicial trustee sales)
Phillips v. Utah State Credit Union, 811 P.2d 174 (Utah 1991) (Utah Supreme Court: creditor may retain and apply additional security despite not filing a deficiency action within three months)
Dreyfuss v. Union Bank of California, 24 Cal. 4th 400 (2000) (California Supreme Court: antideficiency statute’s FMV requirement not implicated when creditor exhausts other pledged property)
Department of Banking v. Keeley, 183 Neb. 370 (1968) (principle that a defense personal to a debtor may not bar recovery from a guarantor)