Lindsay Internat. Sales & Serv. v. Wegener
917 N.W.2d 133
Neb.2018Background
- Wegener and Pribil (guarantors) signed personal guaranties in Dec 2012 for invoices Lindsay issued for irrigation pivots sold to IJS Irrigation, LLC (principal debtor) for the benefit of Ko’ol Agricola (a Mexican farming venture).
- Pivots were ordered and shipped; invoices listed IJS as buyer and referenced Ko’ol Ag in item descriptions; dispute arose whether all pivots were delivered to IJS or to other entities and whether any made it to Ko’ol Ag’s land.
- Lindsay sued Wegener and Pribil for $1,019,795.38 on the guaranties after IJS defaulted; defendants pleaded affirmative defenses including impairment of collateral, failure of consideration, UDTPA violation, fraud/misrepresentation, and others.
- At trial the court admitted Wegener’s and Pribil’s financial statements over relevance objections, granted a directed verdict to Lindsay on impairment of collateral, failure of consideration, and the UDTPA defense, and submitted the misrepresentation/fraud issues to the jury.
- The jury returned a verdict for Lindsay for the full amount. The district court denied Wegener’s and Pribil’s motion for new trial. The Nebraska Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument (Lindsay) | Defendant's Argument (Wegener & Pribil) | Held |
|---|---|---|---|
| Whether impairment of collateral defense applied | No security interest existed; no collateral to impair | Creditor’s actions deprived guarantors of subrogation and released them | Directed verdict for Lindsay; defense inapplicable because debt was unsecured |
| Whether failure of consideration supported defense | Guaranties were supported by Lindsay extending credit to IJS; jury was instructed to decide amount owed | Some pivots were not delivered to IJS (or Ko’ol Ag), so consideration failed or diminished guarantors’ liability | Directed verdict on this defense was, at most, harmless error because jury rejected non-delivery and awarded full amount |
| Whether UDTPA §87-303.07 (deceptive trade practices) defenses protect guarantors | Statute does not apply to guarantors; it protects buyers/lessees; guarantors cannot assert buyer-only statutory rescission | Lindsay induced guaranties via deceptive practices and §87-303.07 should render agreements unenforceable | Directed verdict for Lindsay; statute protects buyers/lessees only and defendants did not show buyer was deceived |
| Whether admission of guarantors’ financial statements was reversible error | Financial statements were relevant to transaction background and to rebut claims of susceptibility to inducement; probative value > nothing | Evidence of net worth was irrelevant and unduly prejudicial | Admission not an abuse of discretion; statements had at least minimal relevance to inducement/frailty; no reversible error |
Key Cases Cited
- Custom Leasing, Inc. v. Carlson Stapler & Shippers Supply, Inc., 195 Neb. 292, 237 N.W.2d 645 (1976) (recognizes guarantor discharge when creditor’s acts impair collateral and guarantor’s subrogation rights)
- Myers v. Bank of Niobrara, 215 Neb. 29, 336 N.W.2d 608 (1983) (impairment defense requires secured underlying debt)
- Mutual of Omaha Bank v. Murante, 285 Neb. 747, 829 N.W.2d 676 (2013) (certain defenses are personal to principal debtor and not available to guarantor)
- Smith v. Colorado Organ Recovery Sys., 269 Neb. 578, 694 N.W.2d 610 (2005) (appellate harmless-error analysis where jury findings render pretrial rulings nonprejudicial)
- West v. Wegner, 172 Neb. 692, 111 N.W.2d 449 (1961) (general fraud-in-the-inducement principles applicable to guaranties)
- Century 21 Prods. v. Glacier Sales, 129 Wash. 2d 406, 918 P.2d 168 (1996) (discusses guarantor subrogation rights and related defenses)