O'Connor v. Kearny Junction
295 Neb. 981
| Neb. | 2017Background
- Landlord (Kearny Junction, L.L.C.) leased commercial property to Tenant; the lease included a purchase option conditioned on Tenant's full performance of lease obligations.
- Tenant assigned the purchase option to Raymond and Jennifer O’Connor (Assignees) in 2007; at assignment time Tenant was current, but later had periods of underpaid rent that Tenant cured and Landlord accepted.
- In October 2013 Assignees attempted to exercise the option; Landlord returned the downpayment and claimed the condition precedent (full performance) was not satisfied and could never be met.
- Assignees sued (declaratory judgment, specific performance, and monetary relief). Landlord moved for summary relief, expressly conceding in its motion and the resulting order that Assignees had an option and had duly exercised it; the court ordered specific performance and the sale closed in March 2015.
- The remaining issue at trial was equitable monetary relief for lost rents during the delay (May 1, 2014 to closing). The district court awarded Assignees $135,426 (rents net of taxes/insurance). Landlord appealed the monetary award.
- The Nebraska Supreme Court affirmed specific performance based on judicial estoppel (Landlord’s admission) but reduced the monetary award by about $65,000 to account for interest on the unpaid purchase price, resulting in a net award of $70,426.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Assignees duly exercise the purchase option? | O’Connor: option valid and properly exercised. | Kearny: condition precedent (full performance) failed due to rent defaults, so no option. | Court: Landlord’s motion admitted the option and exercise; judicial estoppel bars Landlord from asserting the inconsistent defense. |
| Does law-of-the-case bind the court on the option/exercise question? | O’Connor: prior summary order resolved the issue in their favor. | Kearny: summary order was interlocutory and not binding on later issues. | Court: law-of-the-case did not apply because prior order was not final, but judicial estoppel produced the same result. |
| Was the monetary award of $135,426 proper (including mitigation and expense offsets)? | O’Connor: award reflects equitable rents/net profits; burden of mitigation proof on Landlord. | Kearny: Assignees failed to mitigate; court should deduct purchasers’ carrying costs (e.g., mortgage interest); or offset award by interest on purchase price. | Court: Mitigation burden is Landlord’s—no error. Vendor deducted taxes/insurance only. Court reduced award by interest on unpaid purchase price (~$65,000) so Assignees also owe interest; net award $70,426. |
| Should Landlord receive interest offset on unpaid purchase price? | O’Connor: not entitled to full legal interest; might be denied if vendor’s delay egregious. | Kearny: entitled to interest on unpaid purchase money during delay. | Court: Equity requires purchaser to account for interest on purchase price when rents are awarded; reduced award to approximate interest at just over 3%. |
Key Cases Cited
- Ficke v. Wolken, 291 Neb. 482 (Neb. 2015) (standard of review in equity actions; de novo review of facts with weight given to trial court credibility findings)
- TFF, Inc. v. SID No. 59, 280 Neb. 767 (Neb. 2010) (doctrine of judicial estoppel and its application)
- III Lounge, Inc. v. Gaines, 227 Neb. 585 (Neb. 1987) (vendor's right to deduct carrying expenses from rents awarded in equitable accounting)
- Russell v. Western Nebraska Rest Home, Inc., 180 Neb. 728 (Neb. 1966) (equitable rule: vendee entitled to rents/profits; vendor entitled to interest on purchase price)
- Strunk v. Chromy-Strunk, 270 Neb. 917 (Neb. 2006) (equity will devise remedies to address situations contrary to equitable principles)