Wilkinson Development v. Ford & Ford Investments , 311 Neb. 476 ( 2022 )


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  • Nebraska Supreme Court Online Library
    www.nebraska.gov/apps-courts-epub/
    07/15/2022 01:06 AM CDT
    - 476 -
    Nebraska Supreme Court Advance Sheets
    311 Nebraska Reports
    WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
    Cite as 
    311 Neb. 476
    Wilkinson Development, Inc., appellee,
    v. Ford & Ford Investments, a general
    partnership, appellee, and PSK, LLC,
    a Nebraska limited liability
    company, appellant.
    ___ N.W.2d ___
    Filed April 28, 2022.    No. S-21-496
    1. Motions to Vacate: Appeal and Error. The decision of a district
    court to deny the vacation of its order will be affirmed absent an abuse
    of discretion.
    2. Statutes: Property. The interpretation of a statute, including the inter-
    pretation of the lis pendens statute, is a question of law.
    3. Judgments: Appeal and Error. On a question of law, an appellate court
    is obligated to reach a conclusion independent of the determination
    reached by the court below.
    4. Actions: Property: Notice: Words and Phrases. The term “lis ­pendens”
    literally means a pending lawsuit. Under this common-law doctrine, the
    pendency of a suit affecting title to real property is constructive notice
    to the world of the disputed claim.
    5. Actions: Property: Words and Phrases. Lis pendens is a procedural
    mechanism intended to alert prospective purchasers about property dis-
    putes and protect the status quo until the parties’ substantive property
    rights can be determined in litigation.
    6. Property: Intent. The purpose of lis pendens is to prevent third persons,
    during the pendency of litigation involving a property dispute, from
    acquiring interests in the disputed land which would preclude the court
    from granting the relief sought.
    7. Property: Jurisdiction: Statutes: Intent. The lis pendens statute serves
    to hold disputed property within the court’s jurisdiction until the parties’
    rights are finally determined.
    - 477 -
    Nebraska Supreme Court Advance Sheets
    311 Nebraska Reports
    WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
    Cite as 
    311 Neb. 476
    Appeal from the District Court for Dawson County: James
    E. Doyle IV, Judge. Affirmed.
    Blake E. Johnson, of Bruning Law Group, for appellant.
    Allen L. Fugate for appellee Wilkinson Development, Inc.
    Heavican, C.J., Miller-Lerman, Cassel, Stacy, Papik,
    and Freudenberg, JJ., and Schreiner, District Judge.
    Heavican, C.J.
    INTRODUCTION
    Wilkinson Development, Inc. (Wilkinson), filed an action
    for specific performance of a real estate contract concerning
    the purchase of commercial real estate located in Lexington,
    Nebraska. The district court found in favor of Wilkinson and
    against the seller, Ford & Ford Investments (Ford). PSK, LLC,
    a subsequent purchaser of the real estate in question, then filed
    a motion to vacate the decree of specific performance and
    also sought an order of joinder. The district court denied that
    motion. PSK appeals. We affirm.
    BACKGROUND
    Wilkinson, as buyer, and Ford, as seller, entered into a con-
    tract on August 30, 2019, for the purchase of commercial real
    estate located in Dawson County, Nebraska. The sale price was
    $325,000, and the transaction was set to close on November
    20. Wilkinson sought an extension of the closing date, which
    was permitted by the parties’ contract assuming that Wilkinson
    advanced earnest money to Ford. That advance was made, and
    closing was set for December 4.
    On November 21, 2019, the real estate agent who had been
    representing both buyer and seller informed Wilkinson that the
    agreement had been declared void by Ford. During the same
    time period, the agent was communicating with PSK about the
    possibility of PSK purchasing the property.
    On November 21, 2019, Wilkinson delivered the full pur-
    chase price to the closing agent and notified the agent that
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    Nebraska Supreme Court Advance Sheets
    311 Nebraska Reports
    WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
    Cite as 
    311 Neb. 476
    it had done so. On November 22, a purchase agreement between
    PSK and Ford was signed at a price of $365,000, with closing
    set for November 26. There is evidence in the record indicating
    that at that time, Wilkinson was unaware of the negotiations or
    agreement Ford had reached with PSK.
    On November 25, 2019, Wilkinson filed a complaint for spe-
    cific performance. On November 26, Wilkinson filed a notice
    of lis pendens with the Dawson County register of deeds. Also
    on November 26, Ford and PSK entered into a second purchase
    agreement with a closing date of December 17. On December
    4, the closing agent for the PSK/Ford agreement informed the
    parties to that agreement that it could not offer title insurance
    because of the existence of the Wilkinson/Ford agreement.
    Ford was served with a summons for the specific performance
    complaint on December 6.
    PSK and Ford closed the sale for the property on December
    16, 2019. On December 19, a partnership warranty deed from
    Ford to PSK was recorded with the Dawson County register
    of deeds.
    On March 4, 2021, the district court granted Wilkinson’s
    complaint for specific performance. Ford did not appeal this
    determination and does not appear in this appeal. On March 26,
    PSK sought vacation of the decree and an order of joinder. A
    hearing was held on that motion and evidence was offered. The
    district court denied PSK’s motion. PSK appeals.
    ASSIGNMENTS OF ERROR
    PSK assigns that the district court erred in determining that
    (1) joinder of PSK was not necessary to provide the court with
    subject matter jurisdiction; (2) the Nebraska lis pendens stat-
    ute eliminated Wilkinson’s and the court’s obligation to join
    PSK; (3) knowledge of a third party’s interest in the subject
    property, acquired after the commencement of the action, does
    not give rise to the compulsory joinder requirement of 
    Neb. Rev. Stat. § 25-323
     (Reissue 2016); (4) PSK had no interest in
    the subject property so as to require joinder; (5) PSK knew a
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    Nebraska Supreme Court Advance Sheets
    311 Nebraska Reports
    WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
    Cite as 
    311 Neb. 476
    valid, binding contract existed between Ford and Wilkinson at
    the time it executed the PSK contract; and (6) PSK knew that
    Wilkinson had paid the full purchase price for the property to
    the escrow agent at the time it executed the PSK contract.
    STANDARD OF REVIEW
    [1-3] The decision of a district court to deny the vacation of
    its order will be affirmed absent an abuse of discretion. 1 The
    interpretation of a statute, including the interpretation of the lis
    pendens statute, is a question of law. 2 On a question of law, an
    appellate court is obligated to reach a conclusion independent
    of the determination reached by the court below. 3
    ANALYSIS
    PSK’s primary argument on appeal is that the district court
    erred in not vacating the decree of specific performance and
    remanding the matter for further proceedings on the basis that
    Wilkinson was required to join PSK as a necessary and indis-
    pensable party. PSK argues that Wilkinson and the court had an
    obligation to join it, irrespective of the fact that Wilkinson had
    filed a notice of lis pendens.
    Lis Pendens Propositions of Law.
    [4] The term “lis pendens” literally means a pending law-
    suit. Under this common-law doctrine, the pendency of a suit
    affecting title to real property is constructive notice to the
    world of the disputed claim. 4 This principle has been codified
    in Nebraska statute. 
    Neb. Rev. Stat. § 25-531
     (Reissue 2016)
    provides, as relevant:
    In all actions brought to affect the title to real property,
    the plaintiff may either at the time of filing his or her
    1
    See Kibler v. Kibler, 
    287 Neb. 1027
    , 
    845 N.W.2d 585
     (2014).
    2
    Brown v. Jacobsen Land & Cattle Co., 
    297 Neb. 541
    , 
    900 N.W.2d 765
    (2017).
    3
    
    Id.
    4
    
    Id.
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    Nebraska Supreme Court Advance Sheets
    311 Nebraska Reports
    WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
    Cite as 
    311 Neb. 476
    complaint or afterwards, . . . file with the clerk or register
    of deeds of each county in which the real estate thus to
    be affected, or any part thereof, is situated, a notice of the
    pendency of such action. . . . From the time of filing such
    notice the pendency of such action shall be constructive
    notice to any purchaser or encumbrancer to be affected
    thereby. Every person whose conveyance or encumbrance
    is subsequently executed or subsequently recorded shall
    be deemed to be a subsequent purchaser or encumbrancer
    and shall be bound by all proceedings taken in the action
    after the filing of such notice to the same extent as if he
    or she were made a party to the action.
    [5-7] Lis pendens is a procedural mechanism intended to
    alert prospective purchasers about property disputes and pro-
    tect the status quo until the parties’ substantive property rights
    can be determined in litigation. 5 “Generally speaking, the pur-
    pose of lis pendens is to prevent third persons, during the pend­
    ency of litigation involving a property dispute, from acquiring
    interests in the disputed land which would preclude the court
    from granting the relief sought.” 6 “[T]he lis pendens statute
    serves to hold disputed property within the court’s jurisdiction
    until the parties’ rights are finally determined.” 7 In Hadley v.
    Corey, we noted:
    “In a legal sense the term (lis pendens) is equivalent
    to the maxim that pending the suit nothing should be
    changed (pendente lite nihil innovetur); and the doctrine
    of lis pendens is that one who acquires any interest in
    property during the pendency of litigation respecting
    such property from a party to the litigation takes subject
    to the decree of judgment in such litigation and is bound
    by it.” 8
    5
    
    Id.
    6
    
    Id. at 551
    , 900 N.W.2d at 772.
    7
    Id.
    8
    Hadley v. Corey, 
    137 Neb. 204
    , 215, 
    288 N.W. 826
    , 832 (1939).
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    Nebraska Supreme Court Advance Sheets
    311 Nebraska Reports
    WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
    Cite as 
    311 Neb. 476
    It is undisputed that Wilkinson filed a notice of lis pendens
    with the Dawson County register of deeds on November 26,
    2019, and that PSK recorded its deed to the property in that same
    office on December 19. Thus, for purposes of Nebraska’s lis
    pendens statute, § 25-531, the lis pendens notice was “construc-
    tive notice” and PSK a “person whose conveyance [was] sub-
    sequently executed or subsequently recorded shall be deemed
    to be a subsequent purchaser . . . and shall be bound by all
    proceedings taken . . . after the filing of such notice to the
    same extent as if he or she were made party to the action.”
    Equitable Conversion.
    Still, PSK makes several arguments as to why the notice
    of lis pendens was insufficient notice. First, relying on the
    doctrine of equitable conversion, PSK argues that it obtained
    “equitable title” to the property as of November 22, 2019, the
    date of its purchase agreement with Ford, which was prior to
    the filing of the notice of lis pendens and that as such, it was
    not bound by that notice. 9
    We reject this assertion. Generally speaking, this equitable
    doctrine provides that
    “if the owner of real estate enters into a contract of sale
    whereby the purchaser agrees to buy and the owner agrees
    to sell it and the vendor retains the legal title until the
    purchase money or some part of it is paid, the ownership
    of the real estate as such passes to and vests in the pur-
    chaser, and that from the date of the contract the vendor
    holds the legal title as security for a debt as trustee for
    the purchaser.” 10
    But PSK overlooks certain exceptions to that rule:
    “[W]here the third-party purchaser is (1) made a party
    to the suit before rendition of judgment, or (2) has
    9
    Brief for appellant at 16.
    10
    DeBoer v. Oakbrook Home Assn., 
    218 Neb. 813
    , 816, 
    359 N.W.2d 768
    ,
    771 (1984).
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    Nebraska Supreme Court Advance Sheets
    311 Nebraska Reports
    WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
    Cite as 
    311 Neb. 476
    knowledge of the adverse claim at the time of signing of
    the executory contract, or (3) has paid only a portion of
    the purchase price before the lis pendens is filed.” 11
    The facts show that at the very least, PSK was aware that
    there was a purchase agreement between Wilkinson and Ford
    that predated PSK’s own purchase agreement with Ford. As
    such, we conclude that PSK had knowledge of Wilkinson’s
    adverse claim. Nor is there any evidence in the record that PSK
    had paid the entire purchase price in advance of Wilkinson’s
    filing of its notice of lis pendens. For these reasons, we decline
    to apply the doctrine of equitable conversion on these facts and
    find no merit to this assertion by PSK.
    Knowledge of Interest in Property.
    PSK also contends that the lis pendens notice did not relieve
    Wilkinson of the obligation to join it once it learned of PSK’s
    purported interest. We disagree.
    It is undisputed that Wilkinson was, at some point, aware
    that Ford and PSK had entered into a separate purchase agree-
    ment on the property. But when that knowledge was gained
    impacts our analysis. Assuming, without deciding, for example,
    that Wilkinson had been aware of the PSK/Ford agreement at
    the time it filed the lis pendens notice, the lis pendens would
    have been insufficient notice to PSK that it would be consid-
    ered a subsequent purchaser. But there is no evidence in the
    record that Wilkinson had such knowledge at the time of the
    filing of the lis pendens.
    PSK relies on Brown v. Jacobsen Land & Cattle Co. 12
    and Munger v. Beard & Bro. 13 to support its assertion that
    Wilkinson had a duty to join PSK once it became aware
    11
    DeShields v. Broadwater, 
    338 Md. 422
    , 445, 
    659 A.2d 300
    , 311 (1995)
    (quoting Meyering v. Russell, 
    53 Mich. App. 695
    , 
    220 N.W.2d 121
     (1974),
    reversed on other grounds 
    393 Mich. 770
    , 
    224 N.W.2d 280
    ).
    12
    Brown v. Jacobsen Land & Cattle Co., 
    supra note 2
    .
    13
    Munger v. Beard & Bro., 
    79 Neb. 764
    , 
    113 N.W. 214
     (1907).
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    Nebraska Supreme Court Advance Sheets
    311 Nebraska Reports
    WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
    Cite as 
    311 Neb. 476
    of the PSK/Ford purchase agreement, at whatever point that
    might be. However, those cases do not stand for that proposi-
    tion; rather, the cases support only a conclusion that what mat-
    ters is the plaintiff’s knowledge at the time of the filing of the
    lis pendens. There is nothing in those cases that would support
    a conclusion that in the aftermath of a lis pendens notice, a
    plaintiff has a continuing obligation to join potential parties.
    Necessary and Indispensable Parties.
    PSK also directs us to § 25-323, as well as this court’s deci-
    sion in Midwest Renewable Energy v. American Engr. Testing. 14
    There, we discussed necessary and indispensable parties. PSK
    contends that it is a necessary and indispensable party, that
    Wilkinson’s specific performance action cannot be litigated
    without affecting PSK’s rights, and that as such, PSK should
    have been joined. Even assuming that PSK would be consid-
    ered a necessary and indispensable party—an analysis we do
    not undertake here—we still disagree that there was error on
    the part of the district court in failing to join PSK.
    PSK’s reliance on § 25-323 to support the conclusion that
    it must be joined would read out of existence the portion of
    § 25-531 that holds that anyone recording an interest in prop-
    erty after the filing of a notice of lis pendens is considered a
    subsequent purchaser and “shall be bound by all proceedings
    taken in the action after the filing of such notice to the same
    extent as if he or she were made a party to the action.” We
    have repeatedly held that when there is a conflict between two
    statutes on the same subject, the specific statute controls over
    the general. 15 Here, we conclude that the lis pendens statute,
    which is specific to notice afforded to subsequent purchasers
    in the event of litigation regarding real property, is the more
    specific over the general joinder statute.
    14
    Midwest Renewable Energy v. American Engr. Testing, 
    296 Neb. 73
    , 
    894 N.W.2d 221
     (2017).
    15
    See, e.g., Becher v. Becher, 
    299 Neb. 206
    , 
    908 N.W.2d 12
     (2018).
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    Nebraska Supreme Court Advance Sheets
    311 Nebraska Reports
    WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
    Cite as 
    311 Neb. 476
    Intervention.
    PSK could have sought to intervene, but declined to do so.
    It argues on appeal that its failure to intervene does not excuse
    the failure to join it. But there was no failure in not joining it.
    On the other hand, seeking to intervene would have preserved
    PSK’s assertion that it should have been heard in the under­
    lying specific performance action.
    There is no merit to any of PSK’s assignments of error. We
    therefore affirm the district court’s denial of PSK’s motion
    to vacate.
    CONCLUSION
    We affirm the decision of the district court.
    Affirmed.
    Funke, J., not participating.