In re Estate of Clark , 31 Neb. Ct. App. 250 ( 2022 )

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Nebraska Court of Appeals Advance Sheets
31 Nebraska Appellate Reports
IN RE ESTATE OF CLARK
Cite as 31 Neb. App. 250In re Estate of Steven G. Clark, deceased.
Clark Grain Company, a Nebraska corporation,
and Brian D. Clark, appellants and
cross-appellees, v. Jelayne Clark,
appellee and cross-appellant.
___ N.W.2d ___
Filed August 9, 2022. No. A-21-803.
1. Contracts. The interpretation of a contract and whether the contract is
ambiguous are questions of law subject to independent review.
2. Jurisdiction: Appeal and Error. It is the power and duty of an appel-
late court to determine whether it has jurisdiction over the matter before
it, irrespective of whether the issue is raised by the parties.
3. Jurisdiction: Final Orders: Appeal and Error. For an appellate court
to acquire jurisdiction of an appeal, there must be a final order entered
by the court from which the appeal is taken.
4. Final Orders: Appeal and Error. Under Neb. Rev. Stat. § 25-1902(Cum. Supp. 2020), the three types of final orders that an appellate
court may review are (1) an order that affects a substantial right and that
determines the action and prevents a judgment, (2) an order that affects
a substantial right made during a special proceeding, and (3) an order
that affects a substantial right made on summary application in an action
after a judgment is rendered.
5. Decedents’ Estates. A proceeding under the Nebraska Probate Code is a
special proceeding.
6. Final Orders: Appeal and Error. A substantial right is affected if an
order affects the subject matter of the litigation, such as diminishing a
claim or defense that was available to an appellant before the order from
which an appeal is taken.
7. ____: ____. A substantial right is not affected when that right can be
effectively vindicated in an appeal from the final judgment.
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IN RE ESTATE OF CLARK
Cite as 31 Neb. App. 2508. Contracts. A contract written in clear and unambiguous language is not
subject to interpretation or construction and must be enforced according
to its terms.
9. ____. The fact that the parties have suggested opposite meanings of a
disputed instrument does not necessarily compel the conclusion that the
instrument is ambiguous.
10. ____. A court is not free to rewrite a contract or to speculate as to terms
of the contract which the parties have not seen fit to include.
11. ____. Extrinsic evidence is not permitted to explain the terms of a con-
tract that is unambiguous.
12. ____. A latent ambiguity exists when collateral facts make the meaning
of the contract uncertain.
13. ____. A contract must receive a reasonable construction, and a court
must construe it as a whole and, if possible, give effect to every part of
the contract.
14. ____. A contract is viewed as a whole in order to construe it.
15. ____. Whatever the construction of a particular clause of a contract,
standing alone, may be, it must be read in connection with other clauses.
Appeal from the County Court for Nemaha County: Curtis
L. Maschman, Judge. Reversed and remanded with directions.
Louie M. Ligouri, of Ligouri Law Office, for appellants.
Charles M. Bressman, Jr., of Bressman, Hoffman & Jacobs,
for appellee.
Moore, Riedmann, and Arterburn, Judges.
Riedmann, Judge.
INTRODUCTION
Brian D. Clark and Clark Grain Company (the Company)
appeal, and Jelayne Clark cross-appeals, the order of the county
court for Nemaha County which determined that a term defined
in a contract was ambiguous and, therefore, utilized extrinsic
evidence to ascertain the intent of the parties. We conclude that
the court erred in finding ambiguity in the contract and reverse
the court’s order and remand the cause with directions.
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IN RE ESTATE OF CLARK
Cite as 31 Neb. App. 250BACKGROUND
The Company is a closely held Nebraska corporation. Its
four shareholders were Steven G. Clark; his brother, Brian;
and their parents, William Clark and Marilyn Clark. In January
2005, the shareholders entered into a Restricted Stock Purchase
Agreement (RSPA). The RSPA provided that in the event of the
death of Steven or Brian, the Company had “the right to pur-
chase the deceased’s shares of stock from his estate at fair mar-
ket value.” Paragraph 3 of the RSPA further provided, “‘Fair
market value’ for the stock shall be determined by the amount
of the previous year-end corporate balance sheet, wherein
assets, less liabilities, divided by the number of outstanding
shares of stock shall be the value.”
Steven died in July 2017. In August, his widow, Jelayne,
filed an application for informal appointment of personal rep-
resentative in intestacy. Within the action, the Company and
its shareholders filed a petition to adjudicate and settle stock
shares. They asked that pursuant to the RSPA, the county
court value Steven’s shares of stock according to the formula
set forth in the RSPA and facilitate the right granted to the
Company to purchase his shares.
Jelayne filed an answer, alleging that the formula provided
in the RSPA for calculating the value of Steven’s shares was
ambiguous and asking the court to hold a hearing at which
the parties could provide evidence of the fair market value
of the stock, including the opinions of her expert witness.
The Company and its shareholders responded, objecting to
Jelayne’s requests to present evidence and asking for an order
in limine excluding her expert’s opinions. After holding a
hearing on the objections and motion in limine, the county
court entered an order in April 2018, in which it observed
that the RSPA included a definition of fair market value, but
found that
there is a problem with this definition. Although the par-
ties designated this as a definition of [fair market value],
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IN RE ESTATE OF CLARK
Cite as 31 Neb. App. 250it is essentially the definition of book value. If fixed
assets make up a significant portion of the balance sheet
and they are not periodically revalued to reflect current
value they are then “carried at book”. A significant appre-
ciation or depreciation would greatly impact the [fair mar-
ket value] of the assets and thus the share value.
The court therefore concluded that there was a latent ambi-
guity in the RSPA as to the meaning of the term “fair market
value.” Accordingly, it held that extrinsic evidence was neces-
sary to resolve the ambiguity as to whether the formula was
one for fair market value or book value.
A trial was held in July 2021, and on September 9, the
county court entered a written order. After reviewing the evi-
dence presented at trial, the court reaffirmed its previous find-
ing that the RSPA’s definition of fair market value was ambigu-
ous because no evidence was presented that would make the
RSPA’s formula anything other than book value. The court
therefore looked to extrinsic evidence of the intent of the par-
ties to resolve the ambiguity.
In reviewing the language of the RSPA and the evidence
submitted at trial, the court determined that the primary intent
of the RSPA was to provide a fair and straightforward way
for the continuation of the Company in the event of the death
of Steven or Brian. Of the competing goals of fairness and
straightforwardness, the court held that fairness “must be the
lodestar.” Accordingly, the court utilized the formula set forth
in the RSPA, but substituted expert opinion of the fair market
value of real estate for the value of certain real estate listed
on the balance sheet to reach a total value for Steven’s shares
of $1,016,853.75. The court required that the Company elect
to purchase Steven’s shares within 45 days of the date of the
order. This appeal followed.
ASSIGNMENTS OF ERROR
The appellants assign that the county court erred in (1)
determining that the RSPA contained a latent ambiguity;
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Cite as 31 Neb. App. 250(2) rewriting the RSPA to reflect its view of a fairer bar-
gain; (3) admitting extrinsic evidence to vary, change, add to,
and render meaningless terms of the RSPA, including admit-
ting inadmissible opinion evidence; (4) rejecting what the
parties to the RSPA intended by their agreement, including
the meaning given to the agreement by the parties themselves
while engaged in their performance of the agreement before
any controversy arose; and (5) failing to consider or account
for the discounts for the minority interest and lack of market-
ability of the shares of stock valued by the court and in totally
disregarding the testimony and expert opinions of a certain
expert witness. They further assign that the county court’s
decision is contrary to the evidence and the law and constitutes
an abuse of discretion.
On cross-appeal, Jelayne assigns that the county court erred
when it did not resolve the ambiguity in the RSPA by utilizing
the fair market value established by her experts.
STANDARD OF REVIEW
[1] The interpretation of a contract and whether the con-
tract is ambiguous are questions of law subject to independent
review. Bierman v. Benjamin, 305 Neb. 860, 943 N.W.2d
269 (2020).
ANALYSIS
Before we reach the merits of the appeal, we pause to
address whether the order from which the appeal was taken is
a final, appealable order. We asked the parties to address this
issue when briefing the case. After our review, we conclude
that the September 9, 2021, order is final and appealable, and
thus, we have jurisdiction over the appeal.
[2,3] It is the power and duty of an appellate court to
determine whether it has jurisdiction over the matter before
it, irrespective of whether the issue is raised by the parties. In
re Estate of McKillip, 284 Neb. 367, 820 N.W.2d 868 (2012).
Generally, for an appellate court to acquire jurisdiction of an
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IN RE ESTATE OF CLARK
Cite as 31 Neb. App. 250appeal, there must be a final order entered by the court from
which the appeal is taken. Id.[4,5] Under Neb. Rev. Stat. § 25-1902 (Cum. Supp. 2020),
the three types of final orders that an appellate court may
review are (1) an order that affects a substantial right and that
determines the action and prevents a judgment, (2) an order
that affects a substantial right made during a special proceed-
ing, and (3) an order that affects a substantial right made on
summary application in an action after a judgment is rendered.
In re Estate of McKillip, supra. A probate proceeding is a spe-
cial proceeding. See id. Therefore, the question is whether the
September 9, 2021, order affected a substantial right.
[6,7] A substantial right under § 25-1902 is an essen-
tial legal right. Western Ethanol Co. v. Midwest Renewable
Energy, 305 Neb. 1, 938 N.W.2d 329 (2020). A substantial
right is affected if an order affects the subject matter of
the litigation, such as diminishing a claim or defense that
was available to an appellant before the order from which
an appeal is taken. Id. Substantial rights under § 25-1902
include those legal rights that a party is entitled to enforce or
defend. Western Ethanol Co. v. Midwest Renewable Energy,
supra. A substantial right is not affected when that right can
be effectively vindicated in an appeal from the final judg-
ment. In re Estate of Potthoff, 273 Neb. 828, 733 N.W.2d 860(2007). As one commentator has observed, in the context of
multifaceted special proceedings that are designed to admin-
ister the affairs of a person, an order that ends a discrete
phase of the proceedings affects a substantial right because
it finally resolves the issues raised in that phase. See John
P. Lenich, What’s So Special About Special Proceedings?
Making Sense of Nebraska’s Final Order Statute, 80 Neb. L.
Rev. 239 (2001).
The Nebraska Supreme Court has recognized that “we have
decided several cases involving finality in probate orders.
In doing so, we have generally noted that a consideration
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IN RE ESTATE OF CLARK
Cite as 31 Neb. App. 250regarding finality is whether the order ended a discrete—that
is, separate and distinct—phase of the proceedings.” In re
Estate of Beltran, 310 Neb. 174, 180, 964 N.W.2d 714, 719
(2021).
In In re Estate of Rose, 273 Neb. 490, 730 N.W.2d 391(2007), a surviving spouse elected to take her elective share
of 50 percent of the augmented estate and requested a family
allowance. The probate court included certain property in the
augmented estate and ordered the personal representative to pay
a monthly family allowance, but the court did not make a final
determination of the augmented estate. The Supreme Court
determined that the probate court’s treatment of items relevant
to the calculation of the augmented estate could be effectively
considered on an appeal from the final establishment of the
augmented estate, and it noted that the determinations made by
the court were “preliminary to a complete determination of the
size of the augmented estate which was the fundamental issue
before the county court.” Id. at 495, 730 N.W.2d at 395. As
such, the order appealed from was not final.
Conversely, in In re Estate of Potthoff, supra, the Supreme
Court found that the probate court’s order determining that a
decedent’s notice of severance of joint tenancy was ineffective
and that awarding the wife all of the property as the sole sur-
viving joint property owner was a final order. In reaching its
decision, it stated that the order
resolved the separate issue of whether [the decedent’s]
interest in the property was part of the probate estate, and
following the county court’s order, there was nothing left
to be determined on that issue. Moreover, unlike In re
Estate of Rose, the rights involved in this case cannot be
effectively considered in an appeal from the final judg-
ment in which the probate estate is finally established. It
is not uncommon for the probate of an estate to remain
open for years. If that were to be the case here, by the
time the probate estate is finally settled, the property in
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IN RE ESTATE OF CLARK
Cite as 31 Neb. App. 250question may have been disposed of or the value of the
property may be substantially reduced.
In re Estate of Potthoff, 273 Neb. at 832, 733 N.W.2d at 865.
In the present case, the valuation of the stock does not neces-
sarily create the same risk as did the property in In re Estate of
Potthoff, because its value is purportedly set by contract based
on a prior balance sheet. Regardless, because the Company is
not a beneficiary of the estate and its right to purchase Steven’s
shares is purely contractual, valuing the shares and granting the
Company its right to purchase them is a separate issue from the
probate of the estate. And the September 9, 2021, order finally
resolved the issues raised in that phase and likely resolved any
issues involving the Company, leaving solely the distribution
of Steven’s estate among his wife and children. In that sense,
we find it to be a discrete phase of the proceeding. Therefore,
the order is a final, appealable order.
We now turn to the errors assigned on appeal. The appellants
assign that the county court erred in finding that the RSPA con-
tained a latent ambiguity and in considering extrinsic evidence
to ascertain the parties’ intent rather than enforcing the RSPA
solely according to its terms. Jelayne argues that the appellants
are estopped from appealing the issue of ambiguity because
they failed to appeal from the April 2018 order in which the
county court first determined that an ambiguity existed. We
disagree that the April order was an appealable order.
As set forth in our analysis above, the proceeding was a spe-
cial proceeding, so the question is whether the April 2018 order
finding an ambiguity affected a substantial right of the parties.
In its determination that an ambiguity existed, the county court
did not resolve that ambiguity; rather, it indicated that extrinsic
evidence was necessary to resolve the ambiguity as to whether
the formula was one for fair market value or book value. Had
the appellants appealed following the April order, we would
have dismissed the appeal for lack of jurisdiction because no
substantial right of the parties had yet been affected.
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IN RE ESTATE OF CLARK
Cite as 31 Neb. App. 250Turning to the appellants’ assignment of error that the
county court erred in finding a latent ambiguity and in consid-
ering extrinsic evidence rather than enforcing the RSPA solely
according to its terms, we agree.
[8-11] A contract written in clear and unambiguous lan-
guage is not subject to interpretation or construction and must
be enforced according to its terms. Benjamin v. Bierman, 305
Neb. 879, 943 N.W.2d 283 (2020). The fact that the parties
have suggested opposite meanings of a disputed instrument
does not necessarily compel the conclusion that the instru-
ment is ambiguous. Id. A court is not free to rewrite a con-
tract or to speculate as to terms of the contract which the
parties have not seen fit to include. Id. Extrinsic evidence is
not permitted to explain the terms of a contract that is unam-
biguous. Id.[12] A latent ambiguity exists when collateral facts make the
meaning of the contract uncertain. Kluver v. Deaver, 271 Neb.
595, 714 N.W.2d 1 (2006). For example, the Supreme Court,
in a contested will case, explained that if two or more persons
satisfy a description of one devisee, there is a latent ambiguity,
and extrinsic evidence is admissible to disclose and remove
that ambiguity. Id. In such a case, extrinsic evidence becomes
necessary to properly construe the contract. Id.In the present case, the county court found a latent ambigu-
ity because, although the RSPA defines fair market value, the
definition provided was actually the formula for calculating
book value. See, also, Smith v. Fettin Roofing Co., 213 Neb.
184, 328 N.W.2d 470 (1982) (generally, book value of stock
in corporation means figure obtained by dividing difference
between assets and liabilities by number of outstanding shares
of stock). According to the county court, fair market value
and book value are “radically different concepts, and language
defining one as the other leaves an ambiguity.” The court
therefore concluded that the RSPA was ambiguous because
it was unclear whether the parties intended the value of the
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Cite as 31 Neb. App. 250shares to be calculated using the commonly understood defini-
tion of fair market value or using book value.
We disagree that a latent ambiguity exists here. The RSPA
provides a formula for calculating the value of Steven’s shares
of stock, and there is no dispute as to the resulting value
utilizing that formula. In other words, the parties agree that
subtracting liabilities from assets using the figures from the
Company’s previous yearend balance sheet and dividing by
the number of outstanding shares of stock results in a total
value for Steven’s shares of $723,113.10. Even though the
RSPA classifies the formula as one for calculating fair market
value, which is contrary to the commonly understood defini-
tion of that term, we do not find that this discrepancy creates
a latent ambiguity. The parties were free to define terms in
their agreement, and those terms are to be enforced according
to their contractual definitions. See Fokken v. Steichen, 274
Neb. 743, 744 N.W.2d 34 (2008) (contracts are to be construed
according to sense and meaning of terms which parties have
used). See, also, Jones v. Shelter Mut. Ins. Cos., 274 Neb.
186, 738 N.W.2d 840 (2007) (upholding restrictive definition
of word contained within contract despite it generally having
broader application); Kingsley Properties v. San Jacinto Title,
501 S.W.3d 344 (Tex. App. 2016) (when contracting parties
set forth their own definitions of terms they employ, courts
are not at liberty to disregard these definitions and substitute
other meanings); 2 Restatement (Second) Contracts § 201 at
83 (1981) (stating that “[w]here the parties have attached the
same meaning to a promise or agreement or a term thereof, it
is interpreted in accordance with that meaning”).
Specifically, the Nebraska Supreme Court has held that
the term “fair market value” is not a term of art necessitat-
ing reliance on factors outside of an agreement. See Benjamin
v. Bierman, 305 Neb. 879, 943 N.W.2d 283 (2020). There,
the Supreme Court held that the plain language of the rel-
evant agreements set forth how fair market value was to be
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Cite as 31 Neb. App. 250determined, and as such, the court need not rely on anything
further to interpret the agreements’ definition of that term. See
id. Likewise, here, the RSPA defines fair market value, and
the definition is written in clear, unambiguous language. How
to follow that formula is not in dispute; rather, the parties dis-
agree on whether they are required to follow the formula.
Moreover, the Supreme Court has continuously upheld the
freedom of contract right, under which people have the right to
enter into binding private agreements with others. See, State ex
rel. Wagner v. United Nat. Ins. Co., 277 Neb. 308, 761 N.W.2d
916 (2009); Black’s Law Dictionary 807 (11th ed. 2019). And
courts construe contracts according to the meaning of the terms
the parties have used. See Gage County v. Employers Mut.
Cas. Co., 304 Neb. 926, 937 N.W.2d 863 (2020) (refusing to
apply definitions from case law to phrase which parties had
defined in contract). If the definitions in a contract are clearly
stated and unambiguous, the parties are entitled to have such
terms enforced. See Hillabrand v. American Fam. Mut. Ins.
Co., 271 Neb. 585, 713 N.W.2d 494 (2006).
In the context of an insurance policy, the Supreme Court
rejected arguments suggesting that the court apply definitions
of the term “professional services” from case law because the
parties’ contract defined the term, and thus, that definition
resolved the case. See Gage County v. Employers Mut. Cas.
Co., supra. The Supreme Court observed that contracts are
to be construed according to the meaning of the terms that
the parties have used. Id. Applying definitions from case law
rather than the definitions the parties used would result in the
court rewriting the policies, and the Supreme Court reiterated
that it is imperative that the contract made by the parties be
respected and that a new contract is not interpolated by con-
struction. Id.
Similarly, in Jones v. Shelter Mut. Ins. Cos., 274 Neb. 186,
738 N.W.2d 840 (2007), the Supreme Court considered whether
the definition of “use” of a motor vehicle in an insurance policy
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Cite as 31 Neb. App. 250violated the public policy embodied in Nebraska statutes. The
court recognized that an insurance policy is a contract between
an insurance company and an insured, and as such, the insur-
ance company has the right to limit its liability by including
limitations in the policy definitions. Id. And if the definitions
in the policy are clearly stated and unambiguous, the insurance
company is entitled to have such terms enforced. Id.The Jones court ultimately held that the insurance com-
pany had chosen to limit its coverage for a person “using” the
vehicle and that such limitation did not violate public policy
expressed in Nebraska statutes. Or, as succinctly stated in the
concurrence, because of the language of the relevant Nebraska
law, the insurance company was left free to define “‘use’” in
a way that was inconsistent with the well-established meaning
of the word and in a way that would not have met the mini-
mum standards required nearly everywhere else. Id. at 197, 738
N.W.2d at 848 (Gerrard, J., concurring). Thus, the court was
required to apply the definition as set forth in the policy.
In the instant case, although the RSPA’s definition of fair
market value is inconsistent with the commonly understood
definition of the term, the parties were free to agree to a dif-
ferent definition. And because that definition is written in clear
and unambiguous language, it is to be enforced. We are less
focused on the parties’ use of the term “fair market value” than
we are on the language of the RSPA as a whole.
[13-15] A contract must receive a reasonable construction,
and a court must construe it as a whole and, if possible, give
effect to every part of the contract. Hearst-Argyle Prop. v.
Entrex Comm. Servs., 279 Neb. 468, 778 N.W.2d 465 (2010).
And a contract is viewed as a whole in order to construe it. Id.Whatever the construction of a particular clause of a contract,
standing alone, may be, it must be read in connection with
other clauses. Id.Reading the RSPA as a whole, we understand that despite
the label used, the parties intended that the value of the
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Cite as 31 Neb. App. 250decedent’s shares be calculated by utilizing the formula pro-
vided, completed by using information set forth on the previ-
ous yearend balance sheet. Stated differently, we construe the
RSPA in its entirety as providing a formula for calculating the
price at which the Company may purchase Steven’s or Brian’s
shares of stock in the event of the death of either man. And
even though the formula was labeled as a formula for calculat-
ing the fair market value, the parties were free to agree to a
definition of fair market value, and because that definition is
clear and unambiguous, we are required to enforce it as defined
by the RSPA. To hold otherwise would require us to disregard
paragraph 3 of the RSPA in which the parties agreed to the
formula establishing how “[f]air market value” for the stock
would be determined.
As such, we disagree with the county court’s conclusion that
the RSPA contains a latent ambiguity and its use of extrinsic
evidence to ascertain the value of Steven’s shares. We therefore
reverse the court’s order and remand the cause with directions
for the court to set the value of Steven’s shares following the
formula in the RSPA for a total value of $723,113.10. Given
this conclusion, we need not address the remaining arguments
raised on appeal or cross-appeal. See Mays v. Midnite Dreams,
300 Neb. 485, 915 N.W.2d 71 (2018) (appellate court not obli-
gated to engage in analysis not necessary to adjudicate case
and controversy before it).
CONCLUSION
For the foregoing reasons, the decision of the county court is
reversed and the cause is remanded with directions.
Reversed and remanded with directions.