Walker v. Probandt
25 Neb. Ct. App. 30
| Neb. Ct. App. | 2017Background
- A& G Precision Parts, LLC and A&G Precision Parts Finance, LLC (the LLCs) obtained loans; after defaults, First State Bank (FSB) refinanced the debt in 2008 with a $1.5M promissory note signed by cosigners including Walker and Raynor. After defaults, FSB sued in 2009.
- Walker later settled with FSB in 2011, paid $1.05M, and obtained an assignment of the FSB note to Skyline Acquisition, LLC (Skyline), which then prosecuted the note; Walker and Skyline are plaintiffs at trial against Raynor and Probandt.
- Probandt never answered or appeared at trial. Plaintiffs moved for default judgment against him pretrial (later limited to a fraud/misappropriation claim); the district court denied default judgment pretrial but entered posttrial findings denying most claims against Probandt.
- At bench trial, the district court found Raynor liable on the FSB note and entered judgment for Skyline for the unpaid principal and accrued interest; the court stated (erroneously) that default had been entered against Probandt on the note.
- On appeal: plaintiffs (Walker/LLCs/Skyline) argued the court erred by not entering default judgment against Probandt for full note and misappropriation amounts; Raynor cross-appealed raising U.C.C. defenses (accommodation party, discharge, contribution), mutual mistake, Skyline’s status/consideration, and required set-offs for earlier settlements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether default judgment should have been entered against Probandt on misappropriation and unjust enrichment claims | Plaintiffs: Probandt failed to respond; they proved misappropriation and damages at trial | Probandant did not appear; court worried default against one defendant could create inconsistent results | Court: Default judgment should have been entered as to fraud/misappropriation only; award $2,184,530. No default on unjust enrichment claim. |
| Whether Skyline (assignee) can recover full unpaid note without credit for settlements | Plaintiffs: Assignment permits full enforcement by Skyline | Raynor: Skyline is not holder in due course and must take subject to defenses and set-offs for prior settlements | Court: Skyline is not a holder in due course and judgment must be reduced pro tanto by amounts previously received; remand to recalculate balance. |
| Whether Raynor is an accommodation party or entitled to discharge/contribution under U.C.C. | Raynor: He signed as an accommodation maker and thus has defenses, cannot be liable for full amount, and may seek contribution | Plaintiffs/Skyline: Raynor was a cosigner; accommodation status irrelevant to Skyline’s claim; contribution not ripe | Court: Even assuming accommodation status, Raynor waived suretyship defenses in the note; contribution claim denied because Raynor paid nothing more than his share. |
| Whether mutual mistake or lack of consideration voids Raynor’s obligation | Raynor: Parties mutually mistaken about his status/benefit; would not have signed but for mistake | Plaintiffs: Note reflects parties’ intent; consideration exists because Raynor intended to assist Herz | Court: Raynor failed to prove mutual mistake by clear, convincing evidence; consideration sufficed. |
Key Cases Cited
- Mandolfo v. Chudy, 253 Neb. 927 (assignment to guarantor does not expand recovery vs. co-guarantors)
- Schuelke v. Wilson, 255 Neb. 726 (bench trial standard; findings not set aside unless clearly erroneous)
- Frow v. De La Vega, 82 U.S. 552 (trial court should defer entering default against one of multiple defendants where inconsistent judgments could follow)
- Cepel v. Smallcomb, 261 Neb. 934 (contribution accrues only after co-obligor pays more than proportionate share)
- Builders Supply Co. v. Czerwinski, 275 Neb. 622 (suretyship defenses, including discharge by impairment of collateral, can be waived)