Irwin v. West Gate Bank, 288 Neb. 353

Irwin owned property leased by Shade, Inc.; West Gate held perfected security interests in Shade’s personal property securing Shade’s debt, which went into default.
In Jan. 2005 West Gate’s president signed an "Abandonment" document stating West Gate "abandons" its interest in Shade’s personal property to Irwin and that Irwin would bear dismantling, moving, and storage costs.
Shade filed bankruptcy; trustee auctioned the collateral and distributed proceeds to West Gate after the bankruptcy court ruled the Abandonment document was not an assignment or release of West Gate’s perfected security interest.
Irwin sued West Gate in state district court for breach of contract and/or warranty under the Abandonment document, alleging West Gate breached by not turning over auction proceeds to him.
West Gate pleaded defenses including claim/issue preclusion and lack of consideration; it also counterclaimed for reformation if the Abandonment were construed to transfer a security interest.
The district court ruled the bankruptcy order precluded claims that the Abandonment assigned or released West Gate’s security interest, and independently held the Abandonment was not an enforceable contract or warranty for lack of consideration; judgment for West Gate was affirmed on appeal.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the bankruptcy-court order precluded litigation that the Abandonment assigned or released West Gate’s perfected security interest	Irwin: Abandonment conveyed West Gate’s security interest to him, so proceeds belong to Irwin	West Gate: Bankruptcy order already determined Abandonment did not assign or release the security interest; res judicata/issue preclusion applies	Court: Bankruptcy order precluded litigation of assignment/release question, but that ruling was not determinative of the separate breach claim and need not be reviewed on appeal
Whether the Abandonment document was an enforceable contract or warranty (consideration)	Irwin: Abandonment was a binding contract/warranty; he relieved West Gate of duties re: the collateral as consideration	West Gate: The recited consideration (relief from duty to move/store collateral) was illusory because West Gate never possessed or had a duty to preserve or move the collateral; thus no consideration	Court: No consideration existed because West Gate had no duty to preserve/move property it did not possess; consequently no enforceable contract or warranty — judgment for West Gate affirmed

Braunger Foods v. Sears, 286 Neb. 29 (appellate standard for bench trial findings)
Thomas & Thomas Court Reporters v. Switzer, 283 Neb. 19 (appellate review of legal questions independent)
Schuelke v. Wilson, 255 Neb. 726 (party bearing burden to prove insufficient consideration)
Blinn v. Beatrice Community Hosp. & Health Ctr., 270 Neb. 809 (consideration essential to enforceability of contract)
Middagh v. Stanal Sound Ltd., 222 Neb. 54 (consideration required for contract validity)
Barth v. Reber, 135 Neb. 25 (extrinsic evidence may show lack of consideration despite recital)
City Nat. Bank v. Unique Structures, Inc., 49 F.3d 1330 (secured party has no duty to preserve collateral absent possession)
In re Leisure Time Sports, Inc., 194 B.R. 859 (security interest generally cannot be conveyed without transfer of the debt)