Koos Enterprises v. Bonnell ( 2019 )

IN THE NEBRASKA COURT OF APPEALS
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
(Memorandum Web Opinion)
KOOS ENTERPRISES V. BONNELL
NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
KOOS ENTERPRISES, LLC, A NEBRASKA LIMITED LIABILITY COMPANY, ET AL.,
APPELLEES AND CROSS-APPELLEES,
V.
MARVIN HUGHES, APPELLANT, AND
KATHLEEN T. BONNELL, APPELLEE AND CROSS-APPELLANT.
Filed December 10, 2019. No. A-18-496.
Appeal from the District Court for Adams County: STEPHEN R. ILLINGWORTH, Judge.
Affirmed.
Marvin Hughes, pro se.
Kathleen T. Bonnell, pro se.
Galen E. Stehlik, of Stehlik Law Firm, P.C., L.L.O., for appellees Koos Enterprises, LLC,
et al.
MOORE, Chief Judge, and RIEDMANN and BISHOP, Judges.
BISHOP, Judge.
INTRODUCTION
In 2011, Koos Enterprises, LLC; Treehouse Studio, LLC; and Linda Kube, doing business
as My Sister’s Closet (Kube) (collectively the Buyers), each entered into contracts with Marvin
Hughes that permitted the Buyers to occupy retail space in a building Hughes owned (later owned
by Kathleen T. Bonnell) and provided for a “transfer of title/deed of ownership” to the Buyers
after a 5-year “homestead period.” The Buyers ultimately vacated their retail spaces and filed
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claims of breach of contract and fraudulent misrepresentation against Hughes and Bonnell in the
Adams County District Court.
After a bench trial, the district court entered a judgment in favor of the Buyers solely on
their breach of contract claims and awarded damages to each of them. Hughes and Bonnell, each
acting pro se before the district court and this court, appeal that order. We affirm.
BACKGROUND
In 2016, the Buyers filed a complaint against Hughes and Bonnell. The Buyers alleged that
they entered into agreements with Hughes titled the “Homestead Act of Hastings, Nebraska
Agreement” (collectively Homestead Agreements), which stated in pertinent part:
The purpose of this agreement is to transfer ownership of part of the property located at
505 N. Hastings [Avenue] in Hastings, [Nebraska,] from owner (seller [Hughes]) to other
agreeing party(s) in a “Homestead Act” fashion. The buyer’s financial commitment to the
seller will contribute to sustaining the operation and life of subject property for the next
five (5) years. At the end of this homestead period, there will be transfer of title/deed of
ownership to BUYERS(S) [sic].
The property was a former school building located in Hastings, Nebraska (the City). The Buyers
asserted that Hughes purported to own the property, legally described as “Lots One (1) through
Twelve (12), inclusive, Block Six (6), Original Town, now City of Hastings, Adams County,
Nebraska,” and that Hughes purported to convey to the Buyers ownership of a portion of that
property. The Buyers claimed that since the time they entered into the Homestead Agreements,
Hughes allegedly had “never filed a condominium property regime” with the Register of Deeds of
Adams County to authorize the type of transfer of ownership contemplated by the Homestead
Agreements.
The Buyers claimed that by a deed recorded in December 2015, Hughes conveyed the
property to Bonnell. Since that conveyance, “Bonnell has contacted all three [of the Buyers],
continuing to assert that the [Homestead Agreements are] valid.” Based on Hughes’ and Bonnell’s
representations, an interest in real estate was “actually conveyed” and each of the Buyers would
have “complete ownership” of the property after 5 years. According to the Buyers, they made
improvements to the property, expended labor, provided materials that improved the property,
made “homestead” payments, and incurred consequential damages. The Buyers claimed the
following amounts had been paid either to Hughes and/or Bonnell or to improve the property:
$45,579.28 (by Koos Enterprises), $51,275.83 (by Treehouse Studio) (however, in the prayer of
the complaint, the amount requested was $51,215.83), and $20,646.90 (by Kube).
The Buyers further alleged that any sums they paid to improve the property (including
“rent”) were fraudulently induced by Hughes and Bonnell. The Buyers said they detrimentally
relied upon Hughes’ and Bonnell’s representations about ability to convey ownership interests in
the absence of compliance with Nebraska’s “Condominium Property Regime Act”; those
representations were “known to be false” or “made recklessly.”
In separate 2016 filings containing the same substantive content, Hughes and Bonnell by
“Special Appearance” claimed that the district court did not have jurisdiction over the case because
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“[Hughes/Bonnell] is a TRIBAL MEMBER, registration number TTB-201600290, and the
property located at 714 West 5th Street, Hastings [(another street address for the former school
building)] is in a Tribal Trust, and not subject to this [c]ourt’s jurisdiction.” They also claimed that
the Buyers were in breach of the Homestead Agreements for failure to comply with contract
requirements. After a hearing, the district court on October 14 overruled both Hughes’ and
Bonnell’s “Special Appearances” and gave them 30 days to answer or otherwise plead to the
complaint. On November 14, Hughes and Bonnell jointly filed an “Answer/Response,” in which
they questioned whether the lawsuit was about a “valid” contract.
After a hearing, the district court on February 15, 2017, ordered Hughes and Bonnell to file
an answer within 14 days. On February 27, they jointly filed by “Special Appearance” an
“Answer,” generally denying all allegations in the complaint. They admitted that Hughes acquired
the property in 2009. Hughes and Bonnell “previously owned” the property but “it has been in a
Tribal Trust [(the Trust)] with the Totonaca Tribe of Mexico and the United States Tribes, since
May 10, 2016.” In a subsequent motion, defendants claimed the property was placed in the Trust
“with the Turtle Island Tribal Network for Indigenous Health Centers.” “As Trustees [Hughes and
Bonnell] are unaware of the Mexico’s [sic] relationship and laws governing Mexican Tribes.”
They claimed the court lacked jurisdiction “over all the property.”
Further, Hughes and Bonnell claimed to have given contract signers a “guide” prepared by
an attorney on how to set up a condominium association (indicating the defendants’ belief that this
was an obligation for the Buyers to accomplish). They claimed the Buyers “voluntarily ended their
contract[s]” before the stated 5-year term (they acknowledged existence of Homestead Agreements
with Koos Enterprises and Treehouse Studio but claimed Kube merely entered into a “month to
month verbal commitment”). Hughes and Bonnell asked for dismissal of the case with prejudice
and for outstanding bills to be paid to them in full.
We note that Hughes and Bonnell submitted numerous pretrial filings concerning (among
other things) requests for dismissal or a change of venue, a stipulation to confine the case to the
“four corners” of the Homestead Agreements, removal to federal court, the judge’s recusal,
exclusion of certain witness testimony, and removal of a notice of lis pendens on the property.
Each of those motions were overruled. In an April 2017 journal entry and order, the court again
overruled the defendants’ “Special Appearance” but they continued to submit filings under that
designation.
A bench trial took place September 25 through September 27, 2017. Hughes appeared on
behalf of the defense; Bonnell did not make an appearance. Each party presented witness testimony
and exhibits.
On April 19, 2018, the district court entered an order finding as follows: Hughes and
Bonnell “at all times relevant to the issues in this case” owned the former school building, which
Hughes bought for $1 from a church in 2009. He began to develop the building commercially,
attempting to create a condominium development by giving others the “‘opportunity’” to own part
of the building. Hughes entered into agreements with Koos Enterprises (effective June 1, 2011),
Kube (dated October 15, 2011), and both Kay Evans of Treehouse Studio and Kube (dated October
15, 2011). Evans and Kube are sisters who first signed the agreement together and then decided to
have separate spaces. The Buyers owed a square footage charge for maintenance provided by
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Hughes and the Buyers were responsible for structural improvements and payment of their utilities.
Certain improvements had been made by Koos Enterprises and Kube into their respective spaces.
Hughes assured each of the Buyers that they would own the real estate after 5 years of occupancy.
Hughes retained an attorney to “do work on the project” in March 2011. That attorney testified
that “to achieve a Condo Status” additional “title work” had to be completed--e.g., a “Master Deed”
executed by “‘all’” parties, including Hughes who had an “obligation” to participate. The attorney
said that the Homestead Agreements created a property interest sufficient to create a “Master
Deed.” The district court noted that Hughes did not file such a deed, which deed was necessary to
establish a condominium regime.
The district court found that around December 7, 2015, Kube received a letter from Bonnell
advising that Bonnell was the owner of the building and that all exterior doors would be locked.
The next day, Kube cancelled her December payment. Kube testified that many prospective
customers “walked away” because of “no trespassing” signs placed on the premises by Hughes.
Hughes told her he put up those signs to keep city officials out. Neither Kube nor Treehouse Studio
completed 5 years of occupancy. We note the record includes a copy of the letter dated January
2016, that the City’s attorney said he sent to building occupants as a notice to vacate the building
due to Hughes’ failure to comply with building and maintenance codes and the lack of necessary
building permits or certificates of occupancy. The attorney said that “our building codes require a
certificate of occupancy any time the use of a building is changed” and that the building use
changed from being a school to “some type of a commercial enterprise and residential enterprise.”
Diane Koos (of Koos Enterprises) said that after 5 years passed, she asked for title in July; she
moved because of a notice to vacate from the City.
The district court found that Hughes blamed “many of his problems” on the City. Since
acquiring the property, he has been involved in “lawsuits and issues” with the City, primarily about
code violations. In a separate action (CR11-1553), Hughes was convicted of 21 code violations
(twice affirmed on appeals). Hughes argued that it was not his and Bonnell’s fault that the Buyers
“‘did nothing’” to protect their businesses when City officials began to try to “‘take the building
away’” from Hughes and Bonnell.
The district court said Hughes conveyed the building to Bonnell, who in September 2016
conveyed it by warranty deed into the Trust for the benefit of “United States of America Tribe(s)
& Totonaca Tribe of Mexico into Tribal Healing Center Trust (Grantees)” with Bonnell as trustee.
The court noted that “Hughes claims this is legitimate because the tribe has a[n] EIN tax number.”
The mailing address of “the Tribe” was located in Nevada. Hughes “provided no independent
evidence of the Tribe’s existence” and filed a mechanic’s lien on the property in the amount of
$707,718.88 in November. The court believed the transfer of the property to the Trust was a “sham
transaction” and a “Red Herring” in regard to the instant action; the lawsuit was “not against the
building but against Bonnell and Hughes.”
The district court understood that the complaint stated claims of fraudulent
misrepresentation and breach of contract. It concluded that the Buyers failed to prove their
fraudulent misrepresentation claims, finding that Hughes did not enter into the contracts with the
intent to defraud the Buyers. Instead, Hughes became “so caught up” in his “fight” with the City
that he was unable to complete his end of the bargain. The district court determined that each of
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the Buyers proved their breach of contract claims and that each defense generally raised was
meritless--i.e., that the City prevented performance, that it was not Hughes’ and Bonnell’s
responsibility to form a condominium regime, that the property was in the Trust, and that the
Buyers did not occupy spaces for 5 years. The district court concluded “when [the Buyers] vacated
the premises . . . [Hughes and Bonnell] would not and could not comply with the terms of the
contract through Hughes’ and Bonnell’s own actions. These include failing to provide a Master
Deed, placing no trespassing signs outside the premises and engaging in a prolonged and futile
fight against the City.” The court stated, “[I]t would have been an exercise in futility for [the
Buyers] to stick it out for five years as no deed was forthcoming, business was being driven away,
the building had numerous code violations and [the Buyers] had received notices to vacate from
the City.” Judgment was entered against both Hughes and Bonnell as follows: $45,579.28 plus
interest for Koos Enterprises, $51,215.83 plus interest for Treehouse Studio, and $20,646.90 plus
interest for Kube. No attorney fees were awarded.
Hughes timely filed a notice of appeal. Although Bonnell did not file a notice of appeal,
she joined in Hughes’ appellate brief (each signed the brief in his or her individual capacity).
ASSIGNMENTS OF ERROR
Hughes and Bonnell, each acting pro se, assign as error that the district erred by entering
an order in favor of the Buyers “and went beyond the court’s jurisdiction” and “ruled on an
Irrevocable Trust that was never a party to the action, or formed under Nebraska law, and to which
the Judge did not have subject matter jurisdiction, personal jurisdiction, or lawful jurisdiction to
rule on the validity or non-validity of the Irrevocable Trust; . . . only the proper Authority of the
State the Trust that was formed has that authority.” Brief for appellant and cross-appellant at 8.
As the Buyers suggest in their brief, it appears Hughes and Bonnell only assign error to the
district court not having jurisdiction over the action because the real estate at issue had been placed
in a trust outside its jurisdiction; we agree that the paragraph constituting Hughes’ and Bonnell’s
assignments of error can be construed in such a way. Further, to the extent Hughes and Bonnell
sought to separately assign error generally to the district court’s order entered in favor of the
Buyers, they do not specifically assign errors corresponding with their arguments set forth later in
their brief. Therefore, while we will address the assigned error related to the district court’s
jurisdiction, we will otherwise limit our review of the district court’s order for plain error. See
Mays v. Midnite Dreams, 300 Neb. 485, 915 N.W.2d 71 (2018) (appellate court may, at its option,
notice plain error).
STANDARD OF REVIEW
Appellate courts independently decide questions of law. Foundation One Bank v. Svoboda,
303 Neb. 624, 931 N.W.2d 431 (2019).
Plain error is error plainly evident from the record and of such a nature that to leave it
uncorrected would result in damage to the integrity, reputation, or fairness of the judicial process.
Estate of Schluntz v. Lower Republican NRD, 300 Neb. 582, 915 N.W.2d 427 (2018).
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ANALYSIS
PARTIES ON APPEAL
As stated previously, Hughes filed a notice of appeal but Bonnell did not; together they
submitted one appellants’ brief. Because Hughes properly filed an initial (and only) notice of
appeal, he is designated as an appellant and all other parties are designated as appellees and have
the right to cross-appeal, which need only be asserted in the appellee’s brief as provided by Neb.
Ct. R. App. P. § 2-109(D)(4) (rev. 2014). See Neb. Ct. R. App. P. § 2-101(C) and (E) (rev. 2015).
Bonnell was therefore required to follow our rules on cross-appeals, given her status as an
appellee/cross-appellant. See § 2-109(D)(4) (cross-appeal shall be noted on cover of appellee’s
brief, set forth in separate division of brief headed “Brief on Cross-Appeal,” and be prepared in
same manner and under same rules as brief of appellant).
We recognize the Supreme Court’s requirement of strict compliance with § 2-109(D)(4).
See Krejci v. Krejci, 304 Neb. 302, 934 N.W.2d 179 (2019) (court declined to consider merits of
cross-appeal when brief failed to set forth separate cross-appeal title page and table of contents).
However, unlike the appellee in Krejci v. Krejci, supra, who attempted to file a brief of appellee
and brief on cross-appeal but failed to comply with § 2-109(D)(4), Bonnell filed a joint appellants’
brief with Hughes. The Supreme Court has distinguished between the two situations, stating that
the “distinguishing factor is that in Knaub v. Knaub, 245 Neb. 172, 512 N.W.2d 124 (1994), and
In re Application A-16642, [236 Neb. 671, 463 N.W.2d 591 (1990)], a party who was an appellee
and should have cross-appealed mistakenly designated itself as an appellant, rather than as a
cross-appellant.” In re Interest of Natasha H. & Sierra H., 258 Neb. 131, 146, 602 N.W.2d 439,
451 (1999). In such a situation, the Supreme Court considered the appellee’s arguments. We note
that the situation in Knaub v. Knaub, as further described by the court in In re Interest of Natasha
H. & Sierra H., supra, is somewhat similar to the present situation. In Knaub, an ex-husband
sought to modify a child support and alimony award; the district court dismissed the action and
assessed attorney fees against the ex-husband and his attorney. The ex-husband’s attorney and the
ex-husband each filed a notice of appeal, but the ex-husband’s notice was a nullity because it was
filed second. See, Neb. Ct. R. App. P. § 2-101(C); In re Interest of Natasha H. & Sierra H., supra.
The two parties then filed a “combined brief, which designated both of them as appellants,” and
the Supreme Court considered both parties’ arguments. In re Interest of Natasha H. & Sierra H.,
258 Neb. at 146, 602 N.W.2d at 451. We proceed to do the same.
JURISDICTION OVER TRUST
Hughes and Bonnell claim that the district court had “no subject matter jurisdiction or
personal jurisdiction over [the] Trust [that] was never sued or a party to the action and was formed
in another State.” Brief for appellant and cross-appellant at 10. We emphasize that their claim on
appeal does not relate to whether the district court had jurisdiction over them personally or over
the breach of contract dispute between the parties. Rather, they argue the district court’s order is
void because the court lacked subject matter jurisdiction.
Subject matter jurisdiction is the power of a tribunal to hear and determine a case in the
general class or category to which the proceedings in question belong and to deal with the general
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subject matter involved. Boyd v. Cook, 298 Neb. 819, 906 N.W.2d 31 (2018). District courts have
jurisdiction over any civil proceeding that could have been brought in the English equity or
common-law courts, and a breach of contract is a common-law action. See Kotrous v. Zerbe, 287
Neb. 1033, 846 N.W.2d 122 (2014). There is no question that the district court had subject matter
jurisdiction over the Buyers’ breach of contract claims.
All of Hughes’ and Bonnell’s arguments related to jurisdiction pertain to their underlying
allegation that the property at issue is now under some tribal trust over which the district court had
no authority. They claim, “The United States of America and Totonaca Tribe of Mexico
Irrevocable Trust did not give their Sovereignty to the Lower Courts” and the district court “did
not have authority to rule against an Irrevocable Trust not formed or governed by the laws of
Nebraska, or a party to the action.” Brief for appellant and cross-appellant at 18. However,
regardless of the existence of such a trust or the possibility of the property being held in such a
trust, the district court entered a judgment only against the named defendants to the action, Hughes
and Bonnell, on a breach of contract claim brought by the Buyers. The district court did not enter
a judgment against or for the Trust; in other words, the district court did not exercise jurisdiction
over the Trust. As the district court stated, any transfer of the property to the Trust was a “sham
transaction” and a “Red Herring” in regard to the instant action; the lawsuit was “not against the
building but against Bonnell and Hughes.” We agree, and we find no merit to this assigned error.
CORRECTNESS OF RULING IN FAVOR OF BUYERS
As previously noted, to the extent Hughes and Bonnell generally assert that the district
court erred by ruling for the Buyers (on the breach of contract claims), they did not specifically
assign errors in this regard. 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.
See U.S. Pipeline v. Northern Natural Gas Co., 303 Neb. 444, 930 N.W.2d 460 (2019). See, also,
§ 2-109(D)(1)(e) (requirements for assignments of error section in brief of appellant; consideration
of case is limited to errors assigned and discussed); Friedman v. Friedman, 290 Neb. 973, 863
N.W.2d 153 (2015) (pro se litigant will receive same consideration as if he or she had been
represented by attorney, and concurrently, that litigant is held to same standards as one who is
represented by counsel). Although Hughes and Bonnell make various arguments in their brief,
such as: the Buyers breached the Homestead Agreements and had no right to recover damages, the
district court was biased against Hughes and Bonnell, and parol evidence should not have been
admitted, their assigned error is simply too broad and fails to comply with § 2-109(D)(1)(e).
Therefore, we limit our review of the district court’s decision related to the breach of
contract claim for plain error. See Mays v. Midnite Dreams, supra (appellate court may, at its
option, notice plain error). Plain error is error plainly evident from the record and of such a nature
that to leave it uncorrected would result in damage to the integrity, reputation, or fairness of the
judicial process. Estate of Schluntz v. Lower Republican NRD, supra. In order to recover in an
action for breach of contract, the plaintiff must plead and prove the existence of a promise, its
breach, damage, and compliance with any conditions precedent that activate the defendant’s duty.
Phipps v. Skyview Farms, 259 Neb. 492, 610 N.W.2d 723 (2000).
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The district court found that Hughes and the Buyers entered into contracts (exhibits 6, 24,
25, and 58); Hughes later conveyed the property to Bonnell. The court found the terms of the
contracts were that Hughes would transfer ownership of the property if the Buyers sustained their
operations and life of the property for 5 years, that the Buyers were responsible for their areas and
had to pay a monthly fee and fulfill other conditions set out in the contracts, and that at the end of
5 years, Hughes as the seller was to transfer title. Hughes and Bonnell breached the Homestead
Agreements because it was “clear” that when the Buyers vacated the premises, Hughes and
Bonnell would not and could not comply with the terms of the contract through Hughes’ and
Bonnell’s own inaction or actions. One inaction was Hughes’ and Bonnell’s failure to execute a
“Master Deed,” which the district court found was the owner’s responsibility under Neb. Rev. Stat.
§§ 76-803 and 76-809 (Reissue 2008) to establish a condominium property regime. Other actions
included placing “no trespassing” signs outside the premises and engaging in a “prolonged and
futile fight” against the City (with “minimal” to no attempt to cooperate with the City to bring the
building up to code). The breach of the Homestead Agreements was the proximate cause of the
damage to the Buyers “because of money each expended to improve the premises” (damages
alleged set forth in exhibits 20, 26, and 29).
We conclude there was evidence in the record to support the district court’s judgment in
favor of the Buyers, and the decision does not result in damage to the integrity, reputation, or
fairness of the judicial process. Thus, we find no plain error.
CONCLUSION
For the foregoing reasons, we affirm the April 19, 2018, judgment of the district court.
AFFIRMED.
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