Irwin v. West Gate Bank ( 2014 )

Nebraska Advance Sheets
IRWIN v. WEST GATE BANK 353
Cite as 288 Neb. 353
CONCLUSION
Carngbe is entitled to credit for 197 days for time served, or
193 days for his prior criminal case wherein he was acquitted
and another 4 days for time served on this charge. We there-
fore modify Carngbe’s sentence to provide for a credit for time
served of 197 days. As modified, the judgment of the district
court is affirmed.
Affirmed as modified.
Jack L. Irwin, appellant, v.
West Gate Bank, appellee.
___ N.W.2d ___
Filed June 20, 2014. No. S-13-322.
1. Judgments: Appeal and Error. The trial court’s factual findings in a bench
trial of an action at law have the effect of a jury verdict and will not be set aside
unless clearly erroneous.
2. ____: ____. When reviewing questions of law, an appellate court has an obliga-
tion to resolve the questions independently of the conclusion reached by the
trial court.
3. Appeal and Error. In order to be considered by an appellate court, an alleged
error must be both specifically assigned and specifically argued in the brief of the
party asserting the error.
4. Contracts: Consideration. Consideration is an essential element to the validity
of a contract.
5. Security Interests. A secured party has a right but not a duty to take possession
of collateral.
6. ____. A secured party has no duty to preserve, move, or store secured property
over which it has no physical control or possession.
Appeal from the District Court for Lancaster County: Paul
D. Merritt, Jr., Judge. Affirmed.
Terry K. Barber, of Barber & Barber, P.C., L.L.O., for
appellant.
Brian S. Kruse, of Rembolt Ludtke, L.L.P., for appellee.
Heavican, C.J., Wright, Connolly, Stephan, McCormack,
Miller-Lerman, and Cassel, JJ.
Nebraska Advance Sheets
354 288 NEBRASKA REPORTS
P er Curiam.
NATURE OF CASE
Jack L. Irwin appeals the order of the district court for
Lancaster County in which the court found that the parties had
not entered into an enforceable contract and entered judgment
in favor of West Gate Bank (West Gate) on Irwin’s claim for
breach of contract or breach of warranty. We affirm.
STATEMENT OF FACTS
The parties in this case are connected to one another
through a bankrupt corporation named Shade, Inc. Irwin
owned a commercial building in which Shade was a ten-
ant; Irwin also owned a warehouse that Shade rented to
store personal property. West Gate held notes payable from
Shade; the notes were secured by Shade’s personal property.
In 2002, Shade defaulted on the notes. After collecting from
guarantors, West Gate was still owed a considerable sum
from Shade.
In early 2005, Irwin approached West Gate requesting
assist­nce with regard to an issue relating to Shade. Shade
a
was delinquent on its rent for the warehouse. Irwin had found
a new tenant but needed to move Shade’s personal property
to a nearby bay before the new tenant could move in. West
Gate’s president, Carl Sjulin, told Irwin that West Gate would
not object to Irwin’s moving the property. Irwin stated that
he would have his attorney draft a document to memorialize
the understanding between Irwin and West Gate. The result-
ing document was titled “Abandonment” (Abandonment docu-
ment) and provided in its entirety as follows:
For good and valuable consideration, the receipt of
which is hereby acknowledged, and including the finan-
cial responsibility for the expense of dismantling, mov-
ing and storage, West Gate . . . , 6003 Old Cheney
Road, Lincoln, Nebraska 68516, for itself, and for anyone
claiming through it, hereby abandons all of its right, title
and interest in and to the personal property of Shade,
Inc., including equipment, furniture, fixtures, machin-
ery, goods, tools, leasehold improvements and materials,
whether manufactured or awaiting manufacture, currently
Nebraska Advance Sheets
IRWIN v. WEST GATE BANK 355
Cite as 288 Neb. 353
located at 5049 Russell Circle, Lincoln, Nebraska, or
5100 North 57th Street, Lincoln, Nebraska. This aban-
donment is made to . . . Irwin, the owner of 5049 Russell
Circle and 5100 North 57th Street, and past landlord of
Shade, Inc., where such personal property is currently
located. West Gate . . . hereby also agrees to hold . . .
Irwin harmless from any claims made to such property
through West Gate . . . , in any fashion. This abandonment
may be signed and delivered by facsimile, and any such
copy shall be as effective as an original.
The Abandonment document was dated January 12, 2005, and
was signed by Sjulin as West Gate’s president.
Shade filed for bankruptcy in April 2005 in the U.S.
Bankruptcy Court for the District of Nebraska. Irwin filed a
claim in Shade’s bankruptcy case in which he asserted that
West Gate had “‘abandoned’” its security interest in Shade’s
personal property to Irwin. In July 2006, Shade’s bankruptcy
trustee filed a motion to sell Shade’s personal property free
and clear of liens. Irwin resisted the trustee’s motion, but the
trustee proceeded with an auction of the personal property,
and in August, the bankruptcy court granted the trustee’s
motion and confirmed the sale of the personal property.
Irwin testified that he had unsuccessfully bid $175,000 for
the property.
In January 2007, the trustee filed a notice of intent to dis-
tribute the proceeds of the auction to West Gate, which, the
trustee asserted, had a perfected security interest in the prop-
erty. Irwin filed an objection, asserting that he rather than West
Gate was entitled to the proceeds. At an evidentiary hearing in
the bankruptcy court on the trustee’s notice of intent to distrib-
ute, Irwin presented evidence to support his objection. Irwin’s
evidence included the Abandonment document. The evidence
also included the affidavit of Sjulin in which he asserted that
West Gate had not assigned or terminated its security inter-
est in Shade’s personal property. On May 17, the bankruptcy
court filed an order in which it overruled Irwin’s resistance
and approved distribution of the proceeds to West Gate. In the
order, the bankruptcy court stated the following with regard to
Irwin’s objection:
Nebraska Advance Sheets
356 288 NEBRASKA REPORTS
The objection of . . . Irwin is overruled. The
“ABANDONMENT” document is not an assignment of
a perfected security interest and it is not a release of the
perfected security interest. The document may give . . .
Irwin some claim against West Gate . . . , but as between
the trustee and the secured creditor [West Gate], it is the
trustee’s obligation to turn over the proceeds and the per-
sonal property to the secured creditor.
Irwin appealed the bankruptcy court’s order to the U.S.
Bankruptcy Appellate Panel for the Eighth Circuit. On July 27,
2007, the appellate panel dismissed the appeal as moot. The
appellate panel stated in its judgment:
The bankruptcy court denied [Irwin’s] motion for a stay
pending an appeal and when a similar request was not
made of us, the trustee distributed the money pursuant to
the bankruptcy court’s order. The trustee now moves to
dismiss the appeal as moot.
Because [Irwin] did not obtain a stay pending appeal
nor make West Gate . . . a party to this appeal, we would
be unable to grant effective relief to [Irwin], even if
we thought his appeal had merit. Under the bankruptcy
court’s order, [Irwin] is free to make a claim against West
Gate . . . in another forum under its “Abandonment.”
Irwin thereafter filed this action against West Gate in the
district court for Lancaster County. In the operative amended
complaint filed February 27, 2012, Irwin asserted four claims
for relief, three of which were later withdrawn. The claim that
remained was labeled as a claim for “Breach of Contract and/
or Warranty.” Irwin alleged that West Gate had breached its
obligations under the Abandonment document by failing to pay
the auction sale proceeds over to Irwin.
West Gate filed an answer in which it denied, inter alia,
that it had breached any obligation under the Abandonment
document. West Gate alleged various affirmative defenses,
including allegations that because of the bankruptcy court’s
May 17, 2007, order, Irwin’s claims were barred by res judi-
cata or claim preclusion and Irwin was collaterally estopped
or barred by issue preclusion from making certain allegations
in his complaint. West Gate also affirmatively alleged that the
Nebraska Advance Sheets
IRWIN v. WEST GATE BANK 357
Cite as 288 Neb. 353
purported contract between Irwin and West Gate lacked con-
sideration. West Gate filed a counterclaim in which it alleged
that to the extent the court construed the Abandonment docu-
ment to convey West Gate’s security interest to Irwin, the
document was the result of a mutual mistake and did not fully
state the agreement or intention of the parties; West Gate
requested the court to order reformation to reflect the parties’
mutual understanding and intent. During the course of these
proceedings, West Gate has referred to various authorities,
stating that “[i]f the debt is not transferred, neither is the
security interest.” See In re Leisure Time Sports, Inc., 194
B.R. 859, 861 (9th Cir. 1996). These references were in sup-
port of West Gate’s position that it was a legal impossibility
to convey the security interest to Irwin without also transfer-
ring the underlying debt, the latter of which was not claimed
by Irwin.
After a bench trial which included testimony from both
Irwin and Sjulin, the district court filed its order on March 14,
2013. The court first considered the extent to which Irwin’s
claims were precluded by the bankruptcy court’s decision. The
court noted that the bankruptcy court order had provided that
the Abandonment document was not an assignment or a release
of West Gate’s perfected security interest; the district court
therefore found that the “doctrine of res judicata” applied to
any claim by Irwin that the Abandonment document granted
him a perfected security interest or represented a release by
West Gate of its perfected security interest in the personal
property of Shade. The court concluded, however, that the
bankruptcy court’s order did not preclude any other claim
that Irwin might have against West Gate with respect to the
Abandonment document.
The court therefore considered Irwin’s claim for breach
of contract or warranty. The court determined that the
Abandonment document was not an enforceable contract,
because, inter alia, there was no consideration exchanged
between the parties and there was no mutual understanding
of what the document was intended to mean or of its purpose.
The court also determined that there was nothing in the docu-
ment that could be interpreted as a warranty from West Gate
Nebraska Advance Sheets
358 288 NEBRASKA REPORTS
to Irwin. Having determined that the document was neither an
enforceable contract nor a warranty, the court concluded that
there was no merit to Irwin’s claim of a breach of contract
or warranty as alleged in the amended complaint. The court
therefore entered judgment in West Gate’s favor on Irwin’s
claims, and it dismissed West Gate’s counterclaim for reforma-
tion as moot.
Irwin appeals the district court’s order.
ASSIGNMENTS OF ERROR
Irwin claims that the district court erred when it determined
that (1) “res judicata” would apply to his claims that the
Abandonment document was an assignment or release of West
Gate’s security interest in the personal property of Shade and
(2) the Abandonment document was not an enforceable con-
tract or a warranty.
STANDARD OF REVIEW
[1,2] The trial court’s factual findings in a bench trial of an
action at law have the effect of a jury verdict and will not be
set aside unless clearly erroneous. Braunger Foods v. Sears,
286 Neb. 29, 834 N.W.2d 779 (2013). When reviewing ques-
tions of law, however, we have an obligation to resolve the
questions independently of the conclusion reached by the trial
court. Thomas & Thomas Court Reporters v. Switzer, 283 Neb.
19, 810 N.W.2d 677 (2012).
ANALYSIS
Correctness of the District Court’s Ruling Regarding
the Preclusive Effect of the Bankruptcy Court
Order Is Not Determinative of the Claim
in This Action and Need Not
Be Considered.
Irwin claims in his first assignment of error, restated, that
the district court erred when it determined that based on
the “doctrine of res judicata,” the order of the bankruptcy
court precluded further litigation of whether the Abandonment
document served as a release or assignment of West Gate’s
security interest in Shade’s property. No party challenges the
portion of the district court’s order which determined that the
Nebraska Advance Sheets
IRWIN v. WEST GATE BANK 359
Cite as 288 Neb. 353
bankruptcy court order did not preclude further litigation as
to whether West Gate breached the terms of the Abandonment
document or any purported warranty contained therein. No
party challenged the district court’s authority to go forward
with the trial of the only surviving claim in the operative
complaint, i.e., Irwin’s claim that West Gate breached the
Abandonment document and/or the warranty. Given the fore-
going, the correctness of the district court’s order, which
determined that the bankruptcy order precluded potential fur-
ther litigation of whether the Abandonment document served
as a release or assignment of West Gate’s security interest in
Shade’s property, is not relevant to any issue in the case or
necessary to the resolution of this appeal and we need not
consider this assignment of error. See Recio v. Evers, 278 Neb.
405, 771 N.W.2d 121 (2009) (appellate court is not obligated
to engage in analysis which is not needed to adjudicate con-
troversy before it).
The District Court’s Rulings That There Was No
Consideration and That the Abandonment
Document Was Not an Enforceable
Contract or a Warranty
Were Not Error.
Irwin next claims that the district court erred when it deter-
mined that the Abandonment document was not an enforceable
contract or a warranty. Because the court’s determination that
there was no consideration was correct, its determination that
there was not an enforceable contract was also correct. We
reject this assignment of error.
[3] We note first that although Irwin assigns error to the
court’s finding that the document did not contain a warranty, he
makes no specific argument regarding the existence of a war-
ranty other than the general argument he makes to the effect
that the court erred when it found that the document was not an
enforceable contract. In order to be considered by an appellate
court, an alleged error must be both specifically assigned and
specifically argued in the brief of the party asserting the error.
J.P. v. Millard Public Schools, 285 Neb. 890, 830 N.W.2d 453
(2013). Therefore, we do not separately consider whether the
Nebraska Advance Sheets
360 288 NEBRASKA REPORTS
district court erred when it found that the document did not
contain a warranty.
In this action, Irwin contended that a binding contract
existed between himself and West Gate and that he sought to
enforce what he believed were the terms of the Abandonment
document. Among West Gate’s affirmative defenses was the
allegation that the purported contract “lacks consideration.”
The burden of proving insufficient consideration was on West
Gate, which it successfully did. See Schuelke v. Wilson, 255
Neb. 726, 587 N.W.2d 369 (1998).
[4] Lack of consideration is relevant to whether the parties
have formed an enforceable contract. See Blinn v. Beatrice
Community Hosp. & Health Ctr., 270 Neb. 809, 820, 708
N.W.2d 235, 245 (2006) (stating that contract requires offer,
acceptance, “and consideration furnished for its enforceabil-
ity”). We have approved the proposition that “consideration
is an essential element to the validity of a contract.” Middagh
v. Stanal Sound Ltd., 222 Neb. 54, 59, 382 N.W.2d 303, 307
(1986). Actual consideration is therefore relevant to whether an
enforceable contract was formed.
We have long observed: “‘That the contract was lacking in
consideration from its inception may be shown by extrinsic
evidence, providing the proof thereof does not contradict or
vary the contractual consideration named in the written con-
tract . . . .’” Barth v. Reber, 135 Neb. 25, 28, 280 N.W. 219,
220 (1938). A statement that consideration for a promise was
received is a statement of fact, not a term of the contract. As
a statement of fact, it may be explained or contradicted by
extrinsic evidence. The Restatement (Second) of Contracts
§ 71, comment b. at 173 (1981), states that “a mere pretense
of bargain does not suffice, as where there is a false recital of
consideration or where the purported consideration is merely
nominal. In such cases there is no consideration . . . .”
In this case, the Abandonment document provides: “For
good and valuable consideration, the receipt of which is
hereby acknowledged, and including the financial responsi-
bility for the expense of dismantling, moving and storage,
West Gate . . . hereby abandons all of its right, title and
interest in and to the personal property of Shade . . . .” Irwin
Nebraska Advance Sheets
IRWIN v. WEST GATE BANK 361
Cite as 288 Neb. 353
approached West Gate because West Gate held a secured
interest in Shade’s property. The enumerated consideration
in the Abandonment document for West Gate’s promise was
Irwin’s relieving West Gate of its duty to care for and move
Shade’s property. This is the consideration named in the docu-
ment, and extrinsic evidence could be used to show that such
consideration was meaningless and that hence, there was no
consideration. See Barth, supra.
The district court received evidence which showed that West
Gate’s involvement in the property was by virtue of its security
interest in such collateral but that it had not taken possession
of the property. West Gate had no other interest in the prop-
erty. Irwin testified that the sole consideration to West Gate,
as recited in the Abandonment document, was being relieved
of what he believed was West Gate’s obligation to dismantle,
move, or store Shade’s property. However, West Gate had no
such obligation.
[5,6] A secured party has a right but not a duty to take pos-
session of collateral. Neb. U.C.C. § 9-609 (Reissue 2001).
See, also, Neb. U.C.C. § 9-601 (Cum. Supp. 2012). If it takes
possession, a secured party has a duty to use reasonable care
in the custody and preservation of collateral. Neb. U.C.C.
§ 9-207(a) (Cum. Supp. 2012). The cases show that a secured
party has no duty to preserve, move, or store secured property
over which it has no physical control or possession. E.g., City
Nat. Bank v. Unique Structures, Inc., 49 F.3d 1330 (8th Cir.
1995). See 8 William D. Hawkland & Frederick H. Miller,
Uniform Commercial Code Series § 9-207:1 (Cum. Supp.
2013-14) (cases collected). Where West Gate had no control or
possession of the property, the Abandonment document’s relief
from the purported duty of West Gate was meaningless and
could not constitute consideration for West Gate’s promise.
The district court’s determination that there was no consider-
ation was correct, and thus, there was no enforceable contract,
as the district court ruled.
CONCLUSION
Because the district court’s determination regarding the
preclusive effect of the bankruptcy court’s ruling with respect
Nebraska Advance Sheets
362 288 NEBRASKA REPORTS
to an assignment or release of West Gate’s security inter-
est did not affect the court’s consideration of the breach of
contract or warranty claim in this case, we need not review
the correctness of such determination on appeal. The district
court’s determinations that there was no consideration and
that the Abandonment document was not an enforceable con-
tract were correct. We therefore affirm the judgment of the
district court.
Affirmed.
In re Estate of R alph Greb, deceased.
First Nebraska Trust Company, Personal R epresentative
of the Estate of R alph Greb, deceased, appellee and
cross-appellee, v. R ichard Greb, appellee and
cross-appellant, and Nanette J. Wright,
appellant and cross-appellee.
___ N.W.2d ___
Filed June 20, 2014. No. S-13-543.
1. Decedents’ Estates: Appeal and Error. An appellate court reviews probate cases
for error appearing on the record made in the county court.
2. Decedents’ Estates: Judgments: Appeal and Error. When reviewing questions
of law in a probate matter, an appellate court reaches a conclusion independent of
the determination reached by the court below.
3. Decedents’ Estates: Appeal and Error. The probate court’s factual findings
have the effect of a verdict, and an appellate court will not set those findings
aside unless they are clearly erroneous.
4. Joint Tenancy: Banks and Banking. Neb. Rev. Stat. § 30-2718(a) (Reissue
2008) provides that a multiple-party account may be with or without a right of
survivorship between the parties.
5. Decedents’ Estates: Banks and Banking: Contracts. Neb. Rev. Stat.
§ 30-2719(a) (Reissue 2008) provides that a contract of deposit establishes the
type of account if the contract contains provisions in substantially the form pro-
vided by that subsection.
6. Corporations: Collateral Attack. A private party may collaterally attack the
legal stature of a corporate entity if it has been dissolved and retains neither a de
jure nor a de facto existence.
7. Corporations. A de facto corporation exists when there has been a good faith
attempt to organize the corporation, statutory requirements have been colorably
complied with, and the corporation has exercised the functions or conducted the
business that it was organized to perform.