Herink v. Bluestem Energy Solutions , 32 Neb. Ct. App. 410 ( 2023 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/28/2023 09:08 AM CST
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Nebraska Court of Appeals Advance Sheets
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HERINK V. BLUESTEM ENERGY SOLUTIONS
Cite as 32 Neb. App. 410Adam R. Herink, appellee and cross-appellant,
v. Bluestem Energy Solutions, LLC,
appellant and cross-appellee.
___ N.W.2d ___
Filed November 28, 2023. No. A-22-892.
1. Directed Verdict. A directed verdict is proper at the close of all the evi-
dence only when reasonable minds cannot differ and can draw but one
conclusion from the evidence, that is, when an issue should be decided
as a matter of law.
2. Directed Verdict: Appeal and Error. In reviewing a trial court’s ruling
on a motion for directed verdict, an appellate court must treat the motion
as an admission of the truth of all competent evidence submitted on
behalf of the party against whom the motion is directed; such being the
case, the party against whom the motion is directed is entitled to have
every controverted fact resolved in its favor and to have the benefit of
every inference which can reasonably be deduced from the evidence.
3. Summary Judgment: Appeal and Error. An appellate court reviews a
district court’s grant of summary judgment de novo.
4. ____: ____. An appellate court affirms a lower court’s grant of summary
judgment if the pleadings and admitted evidence show that there is no
genuine issue as to any material facts or as to the ultimate inferences
that may be drawn from the facts and that the moving party is entitled
to judgment as a matter of law. In reviewing a summary judgment, an
appellate court views the evidence in the light most favorable to the
party against whom the judgment was granted, and gives that party the
benefit of all reasonable inferences deducible from the evidence.
5. Prejudgment Interest: Appeal and Error. On appeal, awards of pre-
judgment interest are reviewed de novo.
6. Directed Verdict: Waiver: Appeal and Error. A defendant who moves
for a directed verdict at the close of the plaintiff’s evidence and, upon
the overruling of such motion, proceeds with trial and introduces evi-
dence, waives any error in the ruling on the motion.
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HERINK V. BLUESTEM ENERGY SOLUTIONS
Cite as 32 Neb. App. 4107. Contracts. A contract must receive a reasonable construction and must
be construed as a whole.
8. ____. If possible, effect must be given to every part of a contract.
9. Contracts: Intent. A contract which is written in clear and unambigu-
ous language is not subject to interpretation or construction; rather, the
intent of the parties must be determined from the contents of the con-
tract, and the contract must be enforced according to its terms.
10. Contracts: Prejudgment Interest. Neb. Rev. Stat. § 45-104 (Reissue
2021) authorizes prejudgment interest on four categories of contract-
based claims without regard to whether the claim is liquidated or
unliquidated.
11. Judgments: Interest: Prejudgment Interest: Time. Prejudgment inter-
est under Neb. Rev. Stat. § 45-104 (Reissue 2021) ends, and postjudg-
ment interest begins, on the date of entry of judgment.
Appeal from the District Court for Douglas County: Timothy
P. Burns, Judge. Affirmed.
William F. Hargens, Patrick D. Pepper, Lauren R. Goodman,
and Donald R. Rison, of McGrath, North, Mullin & Kratz,
P.C., L.L.O., for appellant.
David A. Domina, of Domina Law Group, P.C., L.L.O., for
appellee.
Riedmann, Bishop, and Arterburn, Judges.
Bishop, Judge.
I. INTRODUCTION
Adam R. Herink brought a breach of contract action against
Bluestem Energy Solutions, LLC (Bluestem), regarding
Bluestem’s determination of the purchase price for Herink’s
interest in Bluestem at the time of his termination of employ-
ment. In its counterclaim, Bluestem sought a declaratory
judgment and an order for specific performance regarding
its determined purchase price of $410,350. During the jury
trial, Bluestem motioned for a directed verdict, which was
denied. The jury ultimately found Bluestem was in breach of
contract and determined that the fair market value of Herink’s
interest in Bluestem was $2 million. The Douglas County
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HERINK V. BLUESTEM ENERGY SOLUTIONS
Cite as 32 Neb. App. 410District Court entered judgment on the verdict. The court
subsequently granted summary judgment in favor of Herink
on Bluestem’s counterclaim. The court also awarded Herink
costs, prejudgment interest, and postjudgment interest.
On appeal, Bluestem challenges the district court’s deci-
sion to deny its motion for a directed verdict on the breach of
contract claim and the court’s grant of summary judgment in
favor of Herink on Bluestem’s counterclaim. On cross-appeal,
Herink challenges the court’s determination of the prejudgment
and postjudgment interest rates. We affirm.
II. BACKGROUND
1. Procedural Background
Herink was named vice president of Bluestem in December
2015. He owned 12,150 membership units (11.9 percent) of
Bluestem at the time he received a letter dated March 26,
2020, notifying him that his employment with Bluestem was
being terminated, without cause, effective April 25. Pursuant
to Bluestem’s “Second Amended and Restated Operating
Agreement” (the Operating Agreement), upon termination of
Herink’s employment, with or without cause, Herink had to
sell and Bluestem had to buy all of Herink’s membership units
at a “price per Unit equal to the fair market value per Unit as
determined by the Manager in his sole discretion, exercised
in a commercially reasonable manner.” Bluestem’s manager,
Jon Crane (Crane), determined the aggregate purchase price of
Herink’s membership units to be $410,350 and tendered that
amount to Herink in the form of a promissory note, as allowed
under the Operating Agreement. The parties stipulated that
Bluestem attempted performance under the promissory note
in accordance with its terms and that Herink declined them.
Herink believed that Bluestem was obligated to pay him more
for his membership units than the amount set forth in the
promissory note.
On May 19, 2020, Herink filed a complaint against Bluestem
for breach of contract, alleging that he was denied a fair
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HERINK V. BLUESTEM ENERGY SOLUTIONS
Cite as 32 Neb. App. 410valuation of his ownership interests in Bluestem. Herink sought
“judgment for the commercially reasonable and fair market
value of his Bluestem membership Units,” prejudgment and
postjudgment interest, and costs.
On June 19, 2020, Bluestem filed a motion to dismiss for
failure to state a claim upon which relief may be granted, but
that motion was overruled on July 30. The district court found
that Herink alleged sufficient facts to allege a breach of con-
tract claim. The court stated that “the gravamen of Herink’s
complaint is that Bluestem did not comply with the methodol-
ogy agreed to by the parties because the determination of the
purchase price of Herink’s units was not done ‘in a commer-
cially reasonable manner.’”
In its amended answer and counterclaim filed on June
23, 2021, Bluestem denied that it breached its contract with
Herink. Bluestem sought a declaratory judgment and order
of specific performance against Herink (1) determining that
Bluestem had fully complied with the Operating Agreement
and (2) directing Herink to accept the sum of $410,350 for his
membership units.
2. Jury Trial
A jury trial was held on October 31 through November 3,
2022. Herink testified in his own behalf, and he called several
other witnesses, including an expert witness to testify about
Bluestem and the value of Herink’s membership units. After
Herink rested his case, Bluestem made an oral motion for a
directed verdict, which was overruled. After Bluestem called
its own expert witness to testify and rested its case, it renewed
its motion for a directed verdict, which was again overruled.
We summarize the relevant evidence.
(a) Bluestem’s Background
In 2008, Herink began working for Boyd Jones
Construction in a “business-development type role.” Boyd
Jones Construction was owned by Crane. Crane began explor-
ing alternative energy as a new market for the company.
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Cite as 32 Neb. App. 410Herink worked with Crane to develop a renewable energy
project for the company, and the company ultimately built,
owned, and operated a wind turbine project in Springview,
Nebraska. Between 2012 and 2015, Herink helped to develop
two additional wind turbine projects in Nebraska.
In 2012, Crane and his wife started a renewable energy com-
pany separate from Boyd Jones Construction, and that renew-
able energy company ultimately became known as Bluestem
at the end of 2015. Herink was both an employee of and an
investor in Bluestem. Pursuant to agreements entered into on
December 24, 2015, Crane was named president of Bluestem
and Herink was named vice president. Herink purchased
10,000 (10 percent) of the membership units of Bluestem, with
options to purchase additional units in the future. He exercised
his purchase option in 2016, purchasing an additional 2,150
units. As an employee of Bluestem, Herink was paid $125,000
per year until the end of 2018, when his annual salary was
increased to $300,000.
Herink testified that Bluestem put together a team of senior
consultants (former utility executives) and a sales team, “get-
ting ready to go for growth,” and traveled to conferences and
built a database of potential customers around the country.
Herink testified, “Reception was great”; utilities “wanted to get
some sort of low-carbon energy.” Bluestem initially focused
on wind energy, completing seven such projects in Nebraska,
and then started focusing more on solar energy. By late 2018
or in 2019, Bluestem began its first solar energy project (in
Illinois) and then its first solar battery storage project, using
a Tesla battery pack (in Burt County, Nebraska). Bluestem
was the developer and owner of all its projects, and it entered
long-term, 25- to 30-year, revenue contracts with utilities;
Bluestem used Boyd Jones Construction for all construction
and some of the maintenance on the projects. Bluestem also
had other projects in development, including some for which
it had land lease arrangements or ground holes dug (the holes
allowed a “safe harbor to secure the tax credits,” making a
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HERINK V. BLUESTEM ENERGY SOLUTIONS
Cite as 32 Neb. App. 410project more valuable). However, Crane testified that some
of those projects in development were either “mired down in
litigation,” “completely dead,” or in the bidding process.
Herink testified that at the end of 2019, Bluestem was
“continuing growth and picking up customers on a consistent
basis” and was having conversations with potential customers
in numerous different states. However, another Bluestem exec-
utive testified that 2019 and the early portion of 2020 were
“years of struggle.” And Crane testified that in November
2019, he met with Herink “[b]ecause we had to get the horse
out of the ditch, as they say. We had lost momentum, we’d lost
people, and we had to do something, or the future for Bluestem
was not very bright.” Crane said that part of the problem was
that Bluestem was not getting enough projects “across the
finish line” fast enough. In his testimony, Herink agreed that
it can take years to develop a project and that it might not
turn into an actual, operating project; “[t]hat happens with all
renewable energy companies.” He explained that developing
a project means Bluestem was “contracted to develop a proj-
ect, to put together the pieces so they could present the final
project and price to the customer, but there was a contract,” a
development services agreement; the customer did not have to
go through with the project.
(b) Herink’s Employment Terminated
Herink received a letter dated March 26, 2020, inform-
ing him that Bluestem was exercising its right to terminate
his employment without cause and that the termination was
effective April 25. Pursuant to § 7.03(a) of the Operating
Agreement,
[u]pon the occurrence of a Mandatory Operative Event
[including termination of employment for any reason, with
or without cause,] the Company shall pay the Member a
purchase price per Unit equal to the fair market value per
Unit as determined by the Manager in his sole discretion,
exercised in a commercially reasonable manner.
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HERINK V. BLUESTEM ENERGY SOLUTIONS
Cite as 32 Neb. App. 410At the time of his employment’s termination, Herink owned
12,150 Bluestem membership units. In the termination let-
ter, Crane stated that “as Manager of the Company,” he had
determined the fair market value and “the aggregate purchase
price for all of [Herink’s] 12,150 Units is . . . an amount equal
to $ 410,350.” In determining that value, Crane relied upon
a business valuation generated by his brother, James Crane
(Jamie), who was the director of finance and compliance for
Bluestem. Bluestem tendered that amount to Herink in the
form of a promissory note, as allowed under the Operating
Agreement. The parties stipulated that Bluestem attempted
performance under the promissory note in accordance with
its terms and that Herink declined them. Herink believed that
Bluestem was obligated to pay him more for his membership
units than the amount set forth in the promissory note.
(c) Herink’s Testimony of Valuation
Herink testified that he knew the value of his units “was a
heck of a lot higher than what was put in front of [him].” The
company had occasionally been valued, and Herink had the
benefit of that information “[i]n [his] head”; he also had the
benefit of his experience in the market and what was going
on in the industry. He believed that the company was “worth
hundreds of millions of dollars” and that the value of his
interest in the company was more than $10 million; he later
said $25 million.
Additionally, when being questioned about a loan applica-
tion he made and problems with one of his tax returns, Herink
testified, “When Bluestem closed me out of the company,
they filed their tax return to say they paid me $2 million.”
When asked how much he got, Herink replied, “Zero. But to
the IRS, it looks like I owed 5-, $600,000 in taxes.” When
asked if he was referring to an Internal Revenue Service (IRS)
schedule K-1, Herink replied, “Yes,” his “2020 K-1.” He said,
“The K-1 closes me out of the [capital] account and, yes, the
way the IRS reads it, I was paid . . . around $2 million.”
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HERINK V. BLUESTEM ENERGY SOLUTIONS
Cite as 32 Neb. App. 410(d) Crane’s and Jamie’s
Testimony of Valuation
Crane’s position was that Bluestem tendered an appropri-
ate purchase price to Herink under the terms of the Operating
Agreement. When asked what he did to fulfill his role under
§ 7.03(a) of the Operating Agreement to make that valuation
determination, Crane replied, “I asked Jamie . . . to do a busi-
ness valuation and I told him to include, in addition to the
seven operating projects we had, the two other projects we
were working on” in Illinois and Burt County. These projects
“were either operating . . . or I felt they had a high likeli-
hood of success in the near future and . . . they were projects
that had been started and developed while [Herink] was with
Bluestem.” Crane did not tell Jamie that he was valuing
Herink’s interest, because he “didn’t think it was necessary.”
Crane told Jamie to “value the company at this point in time
using a fair value method.” Crane “presumed” Jamie would use
a discounted cashflow method.
When asked why he picked Jamie to do the valuation, Crane
replied:
Because I thought he was very qualified, in my judg-
ment, to do it. He had generated all the financial models
for all the projects that were up and running, and worked
with — been vetted by third party tax equity inves-
tors and bankers and accountants and so he knew better
than anyone.
Crane took Jamie’s valuation, “did the math, came up with
the [amount per] unit, and then . . . added some,” “roughly
$50,000,” because “we had worked together a long time and
[Herink] and I really were the guys that started this”; “it’s so
hard to let someone go and, and I just wanted to give him extra
money.” The aggregate purchase price, as set forth in the ter-
mination letter, was $410,350.
Jamie testified that he was the director of finance and
compliance for Bluestem. He had an undergraduate degree in
accounting and business administration, as well as an “MBA”;
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HERINK V. BLUESTEM ENERGY SOLUTIONS
Cite as 32 Neb. App. 410Jamie was not a certified public accountant. He stated his pri-
mary duties for Bluestem, where he had worked for “[a]bout
5 years,” included creating financial models for projects and
compliance reporting for operating projects. Jamie did an
updated valuation model for Bluestem dated March 25, 2020;
he included the nine projects he was directed by Crane to
include in the valuation. Jamie agreed that there were prob-
ably other projects in development at the time, but stated
that neither they nor nonoperating assets (e.g., solar panels
earmarked for specific projects already included in the analy-
sis) were included. Jamie did a discounted cashflow analysis
and used a 10-percent discount rate, and he subtracted the
debt outstanding on the projects. Jamie did not research the
appropriate discount rates. According to Jamie, the discount
rate used was “based on discussions with [Crane] as well as
based on our interest rates that current investors and potential
investors were willing to charge us” for a money loan. Jamie
said the March 2020 valuation model was representative of
the type of modeling he did on a regular basis in his posi-
tion at Bluestem; the corresponding types of models “would
have been reviewed, vetted, and approved by all the finan-
cial partners involved in the project, so our bank, our tax
equity investors.”
(e) Herink’s Expert
John Agogliati III works for a valuation firm that has
offices in several cities across the United States. Agogliati
testified that he specializes in business valuation, “but the firm
itself really covers a spectrum of valuation assignment from
real estate, machinery and equipment” and has “a specialized
infrastructure in the renewable sector that focuses on wind
and solar projects as well.” Agogliati has “two of the highest”
certifications or credentials in the valuation industry. He has
“a CFA, chartered financial analyst,” and “an ASA[,] which is
accredited senior appraiser” in business valuation.
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Cite as 32 Neb. App. 410Agogliati testified regarding two different functions he per-
formed for Herink’s case: first, a critique of Jamie’s analysis,
and second, a full valuation of Bluestem and of Herink’s inter-
est in Bluestem (“about 11.78 percent”) as of March 26, 2020.
(i) Agogliati’s Critique of
Jamie’s Analysis
First, Agogliati reviewed Jamie’s analysis that was used by
Crane to determine whether it was done in a commercially
reasonable manner; “It was not.” Agogliati explained that there
are three different approaches to value any asset: cost, market,
and income. He said that Jamie “used an income approach
and the method within that is called a discounted cash flow”
and that Jamie “didn’t even consider any other approaches.”
However, Agogliati agreed that a discounted cashflow method-
ology was a commonly accepted valuation method.
When Agogliati went through Jamie’s analysis, Agogliati
“noted a number of things” that he “felt didn’t make it in
accordance with standard valuation procedure,” the main points
being the lack of independence (Jamie was Crane’s brother
and a Bluestem employee); the lack of consideration of future
projects (Bluestem was an ongoing business); the determina-
tion of the discount rate (too high in Agogliati’s opinion, which
was that it should have been 9.5 percent); and the subtraction
of future debt (something Agogliati said “you don’t typi-
cally do . . . as of a valuation date for a number of reasons”).
Agogliati agreed that his inclusion of future projects was the
biggest difference between his valuation and Jamie’s analysis,
but specified that the inclusion of nonoperating assets was
another difference.
In his critique of Jamie’s valuation, Agogliati was not
determining the fair market value. Rather, Agogliati “showed
corrections to show the impact of the errors [he] found in
Jamie’s approach” because Jamie’s analysis “was not com-
mercially reasonable”; the calculated impact of the errors
was a range of approximately $1.7 million to $3 million for
Herink’s interest.
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Cite as 32 Neb. App. 410(ii) Agogliati’s Full Valuation
Second, Agogliati performed a full valuation of Bluestem
and of Herink’s interest in Bluestem, and he testified as to
how he did that valuation. In his full valuation, Agogliati
ultimately determined that Herink’s 12,150 membership units
were worth a total of approximately $7.06 million to $10.08
million. When asked if the “fair market value commercially
reasonably determined would be somewhere between the top
and bottom end of that range,” Agogliati replied, “That’s cor-
rect.” On cross-examination, when asked if he attempted to
incorporate into his valuation any discretion by Bluestem’s
manager, Agogliati replied, “I don’t even know how you
would do that.”
(f) Bluestem’s Expert
James Krillenberger testified that he is the managing mem-
ber of a company that does business valuations. Krillenberger,
like Agogliati, has a “CFA” designation and an accredited
senior appraiser designation. Krillenberger estimated that he
had done over 1,500 business valuations, including valua-
tions of energy companies, over the course of his career. He
stated, “I valued renewable energy companies, I valued utili-
ties that have coal generation plants and natural gas genera-
tion plants.”
Krillenberger testified that he was asked three questions in
his work on this case: “One is what’s the fair market value of
a 12,000-plus unit interest in Bluestem”; Krillenberger opined
that the fair market value of Herink’s interest as of March
26, 2020, was $353,000. “The second was please provide
observations about [Jamie’s] analysis”; Krillenberger opined
that Jamie conducted his work in a commercially reason-
able manner. “[A]nd the third is please provide observations
about . . . Agogliati’s valuation.” As to Agogliati’s full valua-
tion, Krillenberger stated, “[Agogliati] includes future projects
and I think if [his] report had included the adjustments . . .
— income taxes, recognition of government subsidies as they
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Cite as 32 Neb. App. 410were known at the time and, very importantly, development
expenses, . . . — that report would indicate a value closer
to mine.”
As to Agogliati’s critique and correction of Jamie’s val-
uation, Krillenberger’s “observation mostly focused around
[Agogliati’s] report’s inclusion of future projects”; “it was
unclear to me how some of those numbers were derived or
their reliability.”
In his own valuation, Krillenberger included the nine
installed projects. He considered the other development proj-
ects but “assigned them a negligible value”; “the actual indi-
cation came up negative so we set it to zero.” When asked
if “[i]t’s true that [he] knew that the previous appraisal used
by these gentlemen included consideration and valuation of
projects in development, 27 in number,” Krillenberger replied,
“I’ve read this page [of that appraisal] and it says what you
said.” Krillenberger did not include nonoperating assets in
his valuation.
3. Jury Verdict and
Judgment on Verdict
The jury was asked to decide whether Herink had met his
burden to prove his breach of contract claim, i.e., that the
purchase price offered by Bluestem under § 7.03(a) of the
Operating Agreement was less than the “purchase price per
Unit equal to the fair market value per Unit as determined by
the Manager in his sole discretion, exercised in a commercially
reasonable manner” on the date of Herink’s termination of
employment. If the jury found that Herink had met his burden
of proof, then it was to determine the fair market value of the
12,150 membership units Herink owned on the date of the ter-
mination. On November 3, 2022, the jury returned a verdict in
Herink’s favor, and it determined the fair market value of his
units was $2 million. The district court entered judgment on
the verdict for Herink on November 7.
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Cite as 32 Neb. App. 4104. Posttrial Motions and Rulings
On November 8, 2022, Herink filed a motion for sum-
mary judgment on Bluestem’s counterclaim, alleging there
was no genuine issue as to any material fact concerning the
counterclaim.
Also on November 8, 2022, Herink filed a “Motion to Tax
Costs & Prejudgment Interest & Bill of Costs.” Herink sought
a prejudgment interest rate of 12 percent pursuant to Neb.
Rev. Stat. § 45-104 (Reissue 2021). Herink noted that the
postjudgment interest began to accrue at the rate published on
the Nebraska Supreme Court website and that “[the] rate is
5.981%.” The district court treated this motion as a motion to
alter or amend the judgment.
In its amended order entered on December 2, 2022, the dis-
trict court sustained Herink’s motion for summary judgment,
awarded prejudgment interest at the rate established by the par-
ties’ contract (1.53 percent), and awarded postjudgment interest
at that same rate.
Bluestem appeals, and Herink cross-appeals.
III. ASSIGNMENTS OF ERROR
Bluestem assigns that the district court erred in (1) deny-
ing its motion for a directed verdict and (2) granting summary
judgment in favor of Herink on its counterclaim.
On cross-appeal, Herink assigns that the district court erred
when it determined that (1) the prejudgment interest rate should
be 1.53 percent, not 12 percent as provided by § 45-104, and
(2) the postjudgment interest rate should be 1.53 percent, not
5.981 percent.
IV. STANDARD OF REVIEW
[1] A directed verdict is proper at the close of all the evi-
dence only when reasonable minds cannot differ and can draw
but one conclusion from the evidence, that is, when an issue
should be decided as a matter of law. Carson v. Steinke, 314
Neb. 140, 989 N.W.2d 401 (2023).
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Cite as 32 Neb. App. 410[2] In reviewing a trial court’s ruling on a motion for
directed verdict, an appellate court must treat the motion as an
admission of the truth of all competent evidence submitted on
behalf of the party against whom the motion is directed; such
being the case, the party against whom the motion is directed
is entitled to have every controverted fact resolved in its favor
and to have the benefit of every inference which can reason-
ably be deduced from the evidence. Id.[3,4] An appellate court reviews a district court’s grant of
summary judgment de novo. Pine Tree Neighborhood Assn.
v. Moses, 314 Neb. 445, 990 N.W.2d 884 (2023). An appel-
late court affirms a lower court’s grant of summary judgment
if the pleadings and admitted evidence show that there is no
genuine issue as to any material facts or as to the ultimate
inferences that may be drawn from the facts and that the
moving party is entitled to judgment as a matter of law. Id.In reviewing a summary judgment, an appellate court views
the evidence in the light most favorable to the party against
whom the judgment was granted, and gives that party the
benefit of all reasonable inferences deducible from the evi-
dence. Id.[5] On appeal, awards of prejudgment interest are reviewed
de novo. BCL Properties v. Boyle, 314 Neb. 607, 992 N.W.2d
440 (2023).
V. ANALYSIS
1. Bluestem’s Appeal
(a) Motion for Directed Verdict
At issue in this breach of contract action is the provision
in § 7.03(a) of Bluestem’s Operating Agreement that upon
termination of Herink’s employment, with or without case,
Herink had to sell and Bluestem had to buy all of Herink’s
membership units at a price “equal to the fair market value
per Unit as determined by the Manager in his sole discretion,
exercised in a commercially reasonable manner.”
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Cite as 32 Neb. App. 410After Herink rested his case, Bluestem made a motion for
a directed verdict. Bluestem argued:
As the court is well aware, the operating agreement has
a specific, mandatory provision on determining the price
of fair market value — fair market value exercised in
the sole discretion of the manager in a commercially
reasonable manner. The evidence in the case that is
presented by [Herink] excludes the sole discretion of
the manager of Bluestem. In anticipating the respond-
ing argument from [Herink], I anticipate they will say
this is a circular argument and the sole discretion of
the manager of Bluestem assumed its own conclusion.
Now that we are at the proof stage, that argument fails.
[Herink] had every opportunity in a deposition and with
. . . Crane on the stand to examine the issues of discre-
tion and where he exercised it. They could have identi-
fied those discretionary decisions and built their fair
market value in a commercially reasonable manner based
upon those discretionary decisions. They chose not to
and their argument to this court and to this jury is the
jury chooses the fair market value, excluding the sole
discretion of Bluestem’s manager. That doesn’t follow
the contract and, as a matter of law, there should be a
directed verdict.
The district court overruled the motion, at which time Bluestem
proceeded with its case and called Krillenberger as its expert
witness. After Bluestem rested its case, it renewed its motion
for a directed verdict “for the same reasons that were previ-
ously argued, that the evidence does not support any determi-
nation that the fair market value as determined by the operat-
ing agreement has been proven to be not what was offered”;
the motion was denied.
[6] On appeal, Bluestem assigns as error that the district
court erred in overruling its motion for a directed verdict at
the close of Herink’s case in chief and at the close of all the
evidence. However, a defendant who moves for a directed
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Cite as 32 Neb. App. 410verdict at the close of the plaintiff’s evidence and, upon the
overruling of such motion, proceeds with trial and introduces
evidence, waives any error in the ruling on the motion. Bradley
T. & Donna T. v. Central Catholic High Sch., 264 Neb. 951,
653 N.W.2d 813 (2002). By proceeding with trial and introduc-
ing evidence, Bluestem waived any error in the district court’s
ruling on its motion for a directed verdict made at the close
of Herink’s case. However, Bluestem also claims the district
court erred in overruling its motion for a directed verdict at
the close of all the evidence. We therefore limit our analysis
to Bluestem’s motion for a directed verdict at the close of all
the evidence.
Bluestem argues that “[a]ny valuation which fails to account
for . . . Crane’s sole discretion would deprive Bluestem of the
benefit of its bargain under the Operating Agreement.” Brief
for appellant at 15. And “[e]ach effort by Herink to establish
a fair market value per unit of Bluestem failed to include
Crane’s discretion, and that causes Herink’s claims to fail.”
Id. “Here, the only evidence of a valuation that was performed
in a manner consistent with the Operating Agreement was
introduced by Bluestem.” Id. at 16. Therefore, “the district
court erred in failing to enter a directed verdict in favor of
Bluestem.” Id. at 17.
[7-9] A contract must receive a reasonable construction and
must be construed as a whole. Brush & Co. v. W. O. Zangger &
Son, 314 Neb. 509, 991 N.W.2d 294 (2023). If possible, effect
must be given to every part of a contract. Id. A contract which
is written in clear and unambiguous language is not subject to
interpretation or construction; rather, the intent of the parties
must be determined from the contents of the contract, and the
contract must be enforced according to its terms. Id.Additionally, Bluestem states that in Benjamin v. Bierman,
305 Neb. 879, 943 N.W.2d 283 (2020), the Nebraska Supreme
Court “recognized that a party to an operating agreement
that sets forth a method for valuing his interest in a limited
liability company is bound by that methodology.” Brief for
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Cite as 32 Neb. App. 410appellant at 15. Like the district court, we agree with Bluestem
that the parties here agreed to a methodology for determin-
ing the unit price—i.e., under § 7.03(a) of the Operating
Agreement, a price “equal to the fair market value per Unit
as determined by the Manager in his sole discretion, exercised
in a commercially reasonable manner”—and that Herink is
bound by that methodology. But we also agree with the dis-
trict court that “the gravamen of Herink’s complaint is that
Bluestem did not comply with the methodology agreed to by
the parties because the determination of the purchase price
of Herink’s units was not done ‘in a commercially reason-
able manner.’”
Whether the determination of the purchase price of Herink’s
units was done in a commercially reasonable manner is a ques-
tion of fact. See Chadron Energy Corp. v. First Nat. Bank,
236 Neb. 173, 459 N.W.2d 718 (1990) (issue of whether sale
of collateral was done in commercially reasonable manner
under Nebraska’s version of Uniform Commercial Code is
question of fact for jury to decide; because jury found bank
failed to conduct foreclosure sale of secured stock in com-
mercially reasonable manner, debtor was entitled to damages
in amount of additional surplus it would have received if sale
had been conducted in commercially reasonable manner).
In this case, Crane, as manager, determined that $410,350
was the fair market value of Herink’s interest in Bluestem.
Crane relied on Jamie’s valuation analysis to determine the
purchase price of Herink’s membership units of Bluestem.
Crane told Jamie which of Bluestem’s projects to include in
his valuation analysis but left the methodology of the valua-
tion up to Jamie. Jamie used a discounted cashflow analysis
to determine valuation. Crane said he took Jamie’s valuation,
“did the math, came up with the [amount per] unit, and then
. . . added some,” “roughly $50,000,” because “we had worked
together a long time and [Herink] and I really were the guys
that started this”; “it’s so hard to let someone go and, and I
just wanted to give him extra money.” Accordingly, Crane
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Cite as 32 Neb. App. 410determined that the aggregate purchase price for Herink’s
interest in Bluestem was $410,350.
Herink’s expert, Agogliati, agreed that a discounted cash-
flow methodology was a commonly accepted valuation method.
However, going through Jamie’s analysis, Agogliati “noted a
number of things” that he “felt didn’t make it in accordance
with standard valuation procedure,” the main points being
the lack of independence (Jamie was Crane’s brother and a
Bluestem employee), the lack of consideration of future proj-
ects (because Bluestem was an ongoing business), the deter-
mination of the discount rate (too high in Agogliati’s opinion),
and the subtraction of future debt (something Agogliati said
was not typically done at the valuation date). In his critique
of Jamie’s valuation, Agogliati was not determining the fair
market value. Rather, Agogliati “showed corrections to show
the impact of the errors [he] found in Jamie’s approach”
because Jamie’s analysis “was not commercially reasonable.”
The point was “to correct noncommercially reasonable [sic]
and remove bias as well.” Agogliati calculated the impact of
the errors in Jamie’s approach was a range of approximately
$1.7 million to $3 million for Herink’s interest.
Additionally, when being questioned about a loan applica-
tion he made and problems with one of his tax returns, Herink
testified, “When Bluestem closed me out of the company,
they filed their tax return to say they paid me $2 million.”
When asked how much he got, Herink replied, “Zero. But to
the IRS, it looks like I owed 5-, $600,000 in taxes . . .” When
asked if he was referring to an IRS schedule K-1, Herink
replied, “Yes,” his “2020 K-1.” He said, “The K-1 closes me
out of the [capital] account and, yes, the way the IRS reads it,
I was paid . . . around $2 million.”
In its brief, Bluestem points to Agogliati’s testimony when,
upon being asked if he attempted to incorporate into his
valuation any discretion by Bluestem’s manager, Agogliati
replied, “I don’t even know how you would do that.” However,
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Cite as 32 Neb. App. 410that question and response were in relation to Agogliati’s own
determination of the fair market value of Herink’s interests
(between $7.06 million and $10.08 million), rather than his
critique of Jamie’s valuation.
Although Bluestem presented evidence that Crane’s deter-
mination of $410,350 for the aggregate purchase price for
Herink’s interest in Bluestem was in accordance with § 7.03(a)
of the Operating Agreement—i.e., a price “equal to the fair
market value per Unit as determined by the Manager in
his sole discretion, exercised in a commercially reasonable
manner”—Herink presented evidence to the contrary. As noted
above, Agogliati reviewed Jamie’s analysis, which was the
basis for Crane’s determination of value, and testified that
Jamie’s analysis “was not commercially reasonable.” In par-
ticular, Agogliati noted that Jamie’s analysis lacked indepen-
dence, lacked consideration of future projects, used too high
of a discount rate, and subtracted future debt. Agogliati calcu-
lated that the impact of the errors in Jamie’s approach was a
range of approximately $1.7 million to $3 million for Herink’s
interest. Moreover, as noted above, Herink testified that his
2020 IRS schedule K-1 reflects a $2 million closeout of his
capital account with Bluestem.
Herink was entitled to have every controverted fact resolved
in his favor and have the benefit of every inference which
can reasonably be deduced from the evidence. See Carson v.
Steinke, 314 Neb. 140, 989 N.W.2d 401 (2023). In so doing,
reasonable minds could differ and draw more than one conclu-
sion as to whether Bluestem was in breach of contract when
it offered Herink $410,350 for his interest in the company.
Because reasonable minds could differ, a directed verdict
would not have been proper. See id. Therefore, the district
court did not err in denying Bluestem’s motion for a directed
verdict at the close of all the evidence. Additionally, we
note that the jury’s subsequent determination that Herink’s
membership units had a value of $2 million falls within the
range that Agogliati calculated after he corrected for errors in
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Cite as 32 Neb. App. 410Jamie’s valuation, as well as correlating to the amount Herink
testified appeared in his 2020 IRS schedule K-1.
(b) Summary Judgment
Following the jury’s verdict in his favor and the district
court’s entry of judgment on the verdict, Herink filed a motion
for summary judgment on Bluestem’s counterclaim for declara-
tory judgment and specific performance. Herink alleged there
was no genuine issue as to any material fact concerning the
counterclaim. At the hearing on the motion for summary judg-
ment, Herink’s counsel stated, “I’m just looking for a way
to get rid of that declaratory judgment action claim which I
think goes away as a matter of law based on what’s already
happened.” The district court stated, “I think we all agree that
[Bluestem’s] counterclaim has been taken care of by the jury
verdict.” The court subsequently entered a written order sus-
taining Herink’s motion for summary judgment.
Bluestem argues that the district court erred in granting
summary judgment in favor of Herink on Bluestem’s counter-
claim “[f]or the same reasons” that a directed verdict should
have been entered in favor of Bluestem. Brief for appellant
at 13. However, we have already found that a directed verdict
would not have been proper in this case. Bluestem acknowl-
edges that “[t]he parties and the district court understood going
into the trial that Bluestem’s counterclaim was the flip side of
Herink’s claim” and that “once the jury concluded that Herink
had prevailed on his claim it necessarily followed that the
counterclaim should be dismissed.” Reply brief for appellant at
7. Accordingly, we find that the district court did not err when
it sustained Herink’s motion for summary judgment.
2. Herink’s Cross-Appeal
Neither party disputes that prejudgment and postjudgment
interest were due and owing in this case; the parties dis-
pute only the applicable rates of interest. Bluestem believed
the interest rate in the contract, 1.53 percent, applied to
both prejudgment and postjudgment interest. Herink, on the
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Cite as 32 Neb. App. 410other hand, believed that the statutory rates—12 percent for
prejudgment interest and 5.981 percent for postjudgment
interest—should apply because the jury found that Bluestem
had breached the contract. The district court awarded prejudg-
ment and postjudgment interest at the contract rate of 1.53
percent. Herink claims that the court “chose the wrong rate”
for prejudgment and postjudgment interest. Brief for appellee
on cross-appeal at 37, 38.
(a) Prejudgment Interest
[10] Pursuant to § 45-104:
Unless otherwise agreed, interest shall be allowed at
the rate of twelve percent per annum on money due on
any instrument in writing, or on settlement of the account
from the day the balance shall be agreed upon, on money
received to the use of another and retained without the
owner’s consent, express or implied, from the receipt
thereof, and on money loaned or due and withheld by
unreasonable delay of payment. Unless otherwise agreed
or provided by law, each charge with respect to unsettled
accounts between parties shall bear interest from the date
of billing unless paid within thirty days from the date
of billing.
(Emphasis supplied.) See, also, Weyh v. Gottsch, 303 Neb. 280,
929 N.W.2d 40 (2019) (§ 45-104 authorizes prejudgment inter-
est on four categories of contract-based claims without regard
to whether claim is liquidated or unliquidated).
Section 7.03(e) of Bluestem’s Operating Agreement states in
relevant part:
Purchases of Units by the Company and payment of the
purchase price under this Section 7.03 may be . . . pay-
ment by delivery of a promissory note from the Company
(“Promissory Note”) to the Member (or Member’s estate)
providing for payment in three (3) equal annual install-
ments commencing one year from the occurrence of
the Mandatory Operative Event or Optional Operative
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Cite as 32 Neb. App. 410Event, as applicable. The Promissory Note shall bear
interest on the unpaid principal balance at an interest
rate per annum equal to the Applicable Federal Rate for
Mid-term obligations, as published by the [IRS]for the
month of the Mandatory Operative Event or Optional
Operative Event, as applicable. Each installment or prin-
cipal and accrued interest shall be paid annually on the
anniversary of the date of the Promissory Note, and the
Company shall have the right to prepay the Promissory
Note at any time without premium or penalty.
(Emphasis supplied.) Thus, the Operating Agreement reflects
an agreement on interest that is different from the 12-percent
rate provided in § 45-104. An exhibit received into evidence
at the hearing regarding interest and costs showed that the
annual “Applicable Federal Rate[]” for “Mid-term” obliga-
tions in March 2020 was 1.53 percent. This was also the inter-
est rate noted in Bluestem’s April 25, 2020, promissory note
to Herink.
As noted by Bluestem in its appellate brief, stipulations were
made regarding the promissory note. At trial, Herink’s counsel
said, “[W]e’ll stipulate that Bluestem attempted perform­ance
under the promissory note in accordance with its terms, and
that . . . Herink declined them. So, there’s no claim that
Bluestem breached its obligations under the note. The claim
is that Bluestem breached under the contract and it’s the price
that’s wrong.” Bluestem accepted the stipulation, and the dis-
trict court said the stipulation would be accepted.
Herink argues that because the jury found that Bluestem
breached its contract, Bluestem was precluded from benefit-
ing from the contract interest rate, which was lower than the
statutory interest rate. “Herink urges the Court to conclude
that one who breaches a contract cannot claim benefits or
advantages under the contract it breached if doing so provides
benefits to the breaching party. He contends a party may
not breach a contract and recover benefits under it as well.”
Brief for appellee on cross-appeal at 39. In support of his
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Cite as 32 Neb. App. 410argument that a party cannot claim benefits of a contract it
breached, Herink cites to numerous cases, but those cases do
not address how, if at all, a breach affects the determination
of the applicable prejudgment interest rate that is at issue in
the instant case.
We find that Prudential Ins. Co. v. Greco, 211 Neb. 342,
318 N.W.2d 724 (1982), is more to the point. In that case,
the appellant was found liable to the appellee for certain
amounts due under the terms of a lease. The district court
entered an order awarding the appellee prejudgment interest.
On appeal, the appellee challenged the amount of prejudg-
ment interest. The Nebraska Supreme Court noted that the
parties’ lease provided for a 9-percent interest rate on rent or
other sums not paid under the lease within 15 days after the
same were due and payable. The court said § 45-104 provides
that “‘[u]nless otherwise agreed, interest shall be allowed at
the rate of twelve per cent per annum . . . .’” Prudential Ins.
Co. v. Greco, 211 Neb. at 347, 318 N.W.2d at 727 (emphasis
in original). The court then stated that because the parties
“‘otherwise agreed,’ the provisions of § 45-104 were super-
seded” by the terms of the lease. Prudential Ins. Co. v. Greco,
211 Neb. at 347, 318 N.W.2d at 727. “‘Thus, if the contract
provides for a certain rate of interest until the principal sum
is paid . . . the contract governs until the payment of the
principal or until the contract is merged in a judgment.’”
Id. at 347-48, 318 N.W.2d at 728 (quoting 47 C.J.S. Interest
& Usury § 40 a. (1982)). The court stated that prejudgment
interest should have been awarded at a rate of 9 percent.
Prudential Ins. Co. v. Greco, supra.In the instant case, the Operating Agreement provided
for an interest rate of 1.53 percent, as that was the annual
“Applicable Federal Rate” for “Mid-term” obligations in
March 2020. Thus, because the parties otherwise agreed,
the provision of § 45-104 was superseded by the terms of
the Operating Agreement and the district court did not err in
awarding prejudgment interest at a rate of 1.53 percent.
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Cite as 32 Neb. App. 410We further note with regard to prejudgment interest, that
the only issue raised to the district court and on appeal is the
interest rate, not the date on which the prejudgment interest
accrued. Section 7.03(c) of the Operating Agreement states
that the company had the option to purchase Herink’s member-
ship units (1) “in a single sum payment made to Member on
the one year anniversary of the Member’s date of termination
of employment” or (2) “through delivery of a promissory note
and payment in accordance with Section 7.03(e)”; § 7.03(e)
provided for payment by delivery of a promissory note allow-
ing payment in three equal annual installments commencing
1 year from the occurrence of the mandatory event. Although
the above language suggests there would not have been any
interest accruing for the first year after Herink’s termination
of employment, and therefore arguably no prejudgment inter-
est for that period, that issue was not raised by either party
and does not rise to the level of plain error. See County of
Lancaster v. County of Custer, 313 Neb. 622, 985 N.W.2d 612(2023) (plain error is error plainly evident from record and of
such nature that to leave it uncorrected would result in damage
to integrity, reputation, or fairness of judicial process).
(b) Postjudgment Interest
[11] Neb. Rev. Stat. § 45-103 (Reissue 2021) describes how
to calculate the statutory postjudgment interest rate, which
is “fixed at a rate equal to two percentage points above the
bond investment yield, as published by the Secretary of the
Treasury of the United States . . . in effect on the date of entry
of the judgment.” At the time of entry of judgment in the pres-
ent case, the statutory postjudgment interest rate was 5.891
percent. “Interest as provided in section 45-103 shall accrue
on decrees and judgments for the payment of money from
the date of entry of judgment until satisfaction of judgment.”
Neb. Rev. Stat. § 45-103.01 (Reissue 2021). Further, the
Nebraska Supreme Court has stated, “Construing § 45-103.01
and § 45-104 together, we hold that prejudgment interest
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Cite as 32 Neb. App. 410under § 45-104 ends, and postjudgment interest begins, on
the date of entry of judgment.” Weyh v. Gottsch, 303 Neb.
280, 316, 929 N.W.2d 40, 64 (2019). However, § 45-103 also
states that “[t]his interest rate shall not apply to . . . [a]n action
founded upon an oral or written contract in which the parties
have agreed to a rate of interest other than that specified in
this section.”
Bluestem contends that “a rate of interest has been agreed
upon, and the same contract that Herink sued upon is the con-
tract that contains the interest rate.” Reply brief for appellant
at 18. “Accordingly, the district court did not err when it fol-
lowed . . . § 45-103 and enforced the parties’ agreement on the
applicable interest rate.” Reply brief for appellant at 18.
Herink argues that the contract’s 1.53-percent interest rate
“cannot stand for all the reasons argued concerning [the pre-
judgment interest rate].” Brief for appellee on cross-appeal at
44. He contends that Weyh v. Gottsch, supra, “mandates that
the prejudgment interest rate continues until the judgment
is entered [and that] [t]hen, the post-judgment law applies.”
Brief for appellee on cross-appeal at 44. He further argues that
“interest is accruing on a Judgment, not a contract.” Reply
brief for appellee on cross-appeal at 8 (emphasis in original).
Herink contends that the parties did not contract for a post-
judgment interest rate and that therefore, the statutory judg-
ment interest rate should control.
Herink states that “[n]o direct Nebraska precedent has been
located on the governing post-judgment interest rate,” but
that federal courts “permit parties to contract for a post-
judgment interest rate which differs from the federal rate that
would ordinarily apply, as long as they do so through ‘clear,
unambiguous and unequivocal language’ and those rates do
not violate state usury or other applicable laws.” Reply brief
for appellee on cross-appeal at 9. See, FCS Advisors, Inc.
v. Fair Finance Co., Inc., 605 F.3d 144, 149 (2d Cir. 2010)
(in addressing whether federal or state postjudgment inter-
est should be applied, held: (1) “In diversity cases such as
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Cite as 32 Neb. App. 410this, post-judgment interest should ordinarily be calculated in
accordance with the federal rate,” and (2) “[a]lthough parties
may agree to a different rate by contract, absent ‘clear, unam-
biguous and unequivocal’ language expressing an intent that a
particular interest rate apply to judgments or judgment debts, a
general choice-of-law provision such as the one at issue here
does not alter the application of the federal rate to the calcula-
tion of post-judgment interest”); Westinghouse Credit Corp.
v. D’Urso, 371 F.3d 96, 102 (2d Cir. 2004) (parties’ yearly
interest rate specified in purchase agreement applied from date
payment due to date payment made; parties failed to state rate
would apply to judgments rendered on award and therefore did
not contract out of federal postjudgment interest rate; general
rule under New York and federal law is that debt created by
contract merges with judgment entered on contract, so contract
debt is extinguished and only judgment debt survives; under
New York law, contract language stating that particular inter-
est rate will accrue on debt until date of payment is interpreted
as applying to debt itself, and not judgment into which debt is
merged; if parties want to override general rule on merger and
specify postjudgment interest rate, they must express intent
through “‘clear, unambiguous and unequivocal’ language”);
In re Riebesell, 586 F.3d 782 (10th Cir. 2009) (parties did not
contract for postjudgment interest rate percentage; therefore,
federal rate applies; general rule that cause of action reduced
to judgment merges into judgment and contractual interest rate
disappears for postjudgment purposes; if parties want to over-
ride general rule on merger and specify postjudgment interest
rate, they must express intent through clear, unambiguous and
unequivocal language); Jack Henry & Assocs., Inc. v. BSC,
Inc., 487 F. Appx. 246 (6th Cir. 2012) (default contractual
interest rate, without more, cannot govern postjudgment inter-
est rate because, upon reduction to judgment, original claim
no longer exists; agreement’s bare choice-of-law provision
insufficient to replace default rule that federal rate applies to
calculation of postjudgment interest in diversity cases).
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Cite as 32 Neb. App. 410Herink urges this court “to adopt the federal rule.” Reply
brief for appellee on cross-appeal at 10. We find the federal
approach to be consistent with the legal principle that when
a contract is reduced to a judgment, the contract ceases to
exist and the contract governs only until payment of prin-
cipal or until the contract is merged into a judgment. See,
American Nat. Bank v. Medved, 281 Neb. 799, 801 N.W.2d 230(2011) (as general rule, when claim on contract is reduced to
judgment, contract between parties is voluntarily surrendered
and canceled by merger in judgment and ceases to exist);
Prudential Ins. Co. v. Greco, 211 Neb. 342, 318 N.W.2d 724(1982) (contract governs until payment of principal or until
contract is merged in judgment). The federal approach is also
consistent with § 45-103(2) in that it allows parties to agree to
a rate of interest other than the statutory postjudgment rate.
However, the federal authority set forth above also requires
that for contract terms to override the general rule on merger
and the application of a statutory postjudgment interest rate,
the contract must express that intent through clear, unam-
biguous, and unequivocal language. See, FCS Advisors, Inc.
v. Fair Finance Co., Inc., 605 F.3d 144 (2d Cir. 2010);
Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96 (2d Cir.
2004); In re Riebesell, 586 F.3d 782 (10th Cir. 2009). While
it certainly makes sense to require the contract to set forth
a statutory postjudgment interest rate unambiguously and
unequivocally rather than just generally setting forth an inter-
est rate for amounts due and unpaid, we have been unable to
find any Nebraska precedent requiring such specificity in the
contract for postjudgment interest purposes. In fact, in the
Nebraska cases we found that touched on the postjudgment
interest issue before us presently, the Supreme Court and this
court construed generally asserted contract interest rates to be
appropriately applied, if not required, for postjudgment inter-
est purposes.
In one case involving multiple apartment construction proj-
ects, judgments were entered against the defendants based
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Cite as 32 Neb. App. 410on written and oral contracts and prejudgment and postjudg-
ment interest was awarded to the plaintiff for some of the
projects. See Folgers Architects v. Kerns, 262 Neb. 530,
633 N.W.2d 114 (2001). Regarding two apartment projects,
the written contracts stated that payments due and unpaid
would “‘bear interest from the date payment is due at the
rate entered below, or in the absence thereof, at the legal rate
prevailing.’” Id. at 540, 633 N.W.2d at 122. Although no
interest rate was stated in the contract, testimony established
that the prevailing interest rate was 18 percent per annum.
Prejudgment interest was awarded by the district court, and
postjudgment interest was awarded at 18 percent per annum.
The prejudgment interest was reversed on appeal to this court,
and on petition for further review, the Nebraska Supreme
Court agreed.
In considering arguments related to the prejudgment inter-
est issue, the Supreme Court pointed out that § 45-103(2)
“expressly provides that the general statutory rate does not
apply to a ‘written contract in which the parties have agreed
to a rate of interest other than that specified in this section.’”
Folgers Architects v. Kerns, 262 Neb. at 541, 633 N.W.2d
at 123. The court also pointed out that § 45-104 similarly
allows for the parties to agree to an interest rate other than
the 12-percent interest rate set forth in that statute. Therefore,
when addressing the issue of prejudgment interest, the court
found that the statutory language allowed parties to contract
for the rate of interest to be applied to unliquidated and liq-
uidated claims. However, the court agreed with this court that
the statutory conditions for awarding prejudgment interest
were not met, because the claims were unliquidated. (We note
here that the Supreme Court has since held Neb. Rev. Stat.
§ 45-103.02 (Reissue 2021) and § 45-104 to be alternate and
independent statutes authorizing the recovery of prejudgment
interest and that § 45-104 authorizes prejudgment interest on
certain categories of contract-based claims without regard to
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Cite as 32 Neb. App. 410whether the claim is liquidated or unliquidated. See Weyh v.
Gottsch, 303 Neb. 280, 929 N.W.2d 40 (2019)).
In attempting to bolster its argument related to allowing
prejudgment interest, the plaintiff in Folgers Architects v.
Kerns argued that “the Court of Appeals allowed postjudg-
ment interest at the contract rates” (18 percent) and that “such
an allowance” was “‘wholly inconsistent’” with the court’s
“refusal to allow prejudgment interest at the contract rates.”
262 Neb. at 543, 633 N.W.2d at 124. In response, the Supreme
Court pointed out that postjudgment interest is awarded pur-
suant to § 45-103.01, which states that interest “provided in
section 45-103 shall accrue on decrees and judgments for the
payment of money from the date of entry of judgment until
satisfaction of judgment.” The court further stated:
The reference in [§ 45-103.01] to § 45-103 allows the
provision in the written contract as to rate of interest to
apply, just as in § 45-103.02. The difference, however,
is that § 45-103.01 contains no further conditions on the
award of postjudgment interest, in contrast to § 45-103.02
regarding prejudgment interest. Consequently, there is no
inconsistency in the application of the contract rate for
postjudgment interest.
Folgers Architects v. Kerns, 262 Neb. 530, 544, 633 N.W.2d
114, 124-25 (2001) (emphasis supplied). Our reading of the
italicized language above is that the contract interest rate
related to amounts owed under the contract should also be
applied as the postjudgment interest rate. And, at least at
this time in Nebraska, this determination is made (1) without
consideration of whether the parties specified a postjudg-
ment interest rate through clear, unambiguous, and unequivo-
cal language, see federal authorities previously cited and (2)
without regard for the legal principle that when a claim on
contract is reduced to judgment, the contract is canceled by
merger in judgment and ceases to exist. See, American Nat.
Bank v. Medved, 281 Neb. 799, 801 N.W.2d 230 (2011) (as
general rule, when claim on contract is reduced to judgment,
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Cite as 32 Neb. App. 410contract between parties is voluntarily surrendered and can-
celed by merger in judgment and ceases to exist). See, also,
Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96 (2d Cir.
2004) (debt created by contract merges with judgment entered
on contract; contract interest rate accrues on debt itself, but not
judgment into which debt is merged unless intent to override
general rule on merger is expressly stated); In re Riebesell,
586 F.3d 782 (10th Cir. 2009) (contractual rate disappears for
postjudgment purposes unless expressed through clear, unam-
biguous, and unequivocal language).
We also observe that in Heritage Bank v. Bruha, 283 Neb.
263, 812 N.W.2d 260 (2012), the parties agreed that a default
contract rate of 11.75 percent per annum would be used for
postjudgment interest purposes; the Supreme Court referenced
that agreement and then confirmed that the prejudgment inter-
est awarded in that case should be included in the final judg-
ment for purposes of calculating postjudgment interest.
Finally, in an unpublished opinion, this court reversed a
district court’s order that had applied the statutory postjudg-
ment interest rate instead of the contract rate set forth in
the promissory notes at issue. See Schmidt v. Sportsman’s
Gallery, LLC, No. A-21-008, 2022 WL 29478 (Neb. App. Jan.
4, 2022) (selected for posting to court website). In Schmidt v.
Sportsman’s Gallery, LLC, three promissory notes executed
by the appellants in favor of a bank included an agreed-upon
interest rate for the unpaid principal balance. The district
court calculated prejudgment interest using the interest rates
in the promissory notes but ordered postjudgment interest at
the statutory judgment interest rate. This court pointed out
that each of the promissory notes at issue had an agreed-upon
interest rate for the unpaid principal balance and that there-
fore, “[t]he district court should have awarded postjudgment
interest based upon these agreed upon interest rates, rather
than upon the judgment rate set forth in § 45-103.” Schmidt v.
Sportsman’s Gallery, LLC, 2022 WL 29478 at *8.
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Cite as 32 Neb. App. 410In the instant case, the Operating Agreement provided for an
interest rate of 1.53 percent, as that was the annual “Applicable
Federal Rate” for “Mid-term” obligations in March 2020,
the month that Herink’s employment was terminated. Thus,
because the parties otherwise agreed, and based upon the
Nebraska cases set forth above, we conclude that § 45-103 was
superseded by the terms of the Operating Agreement and that
the district court did not err in awarding postjudgment interest
at the contract rate of 1.53 percent.
VI. CONCLUSION
For the reasons stated above, we affirm the decision of the
district court.
Affirmed.
Riedmann, Judge, concurring in part, and in part dissenting.
Although I agree with the majority’s opinion regarding the
appeal of Bluestem Energy Solutions, LLC (Bluestem), I dis-
agree with its analysis of Adam R. Herink’s cross-appeal. The
majority cites § 7.03(e) of the parties’ “Second Amended and
Restated Operating Agreement” (the Operating Agreement) to
conclude that “the Operating Agreement reflects an agreement
on interest that is different from the 12-percent rate provided
in [Neb. Rev. Stat.] § 45-104 [(Reissue 2021)].” When I
read § 7.03 as a whole, however, I reach a different conclu-
sion. As pertinent to my analysis, § 7.03 of the Operating
Agreement provides:
(a) Upon the occurrence of a Mandatory Operative
Event under Section 7.02(a), or if the Company exer-
cises its option to purchase any Units pursuant to Section
7.02(b), the Company shall pay the Member a purchase
price per Unit equal to the fair market value per Unit as
determined by the Manager in his sole discretion, exer-
cised in a commercially reasonable manner. . . .
....
(c) In the event of a purchase of Units pursuant to
Section 7.02(a)(ii) payment because of the termination
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Cite as 32 Neb. App. 410of employment of the Member, at the Company’s option,
payment for the purchased Units may be made: (i) in
a single sum payment made to Member on the one
year anniversary of the Member’s date of termination of
employment, or (ii) through delivery of a promissory note
and payment in accordance with Section 7.03(e) below.
....
(e) . . . Purchases of Units by the Company and pay-
ment of the purchase price under this Section 7.03 may
be, at the option of the Company, either (i) by payment
of the entire price by cash or check (if the single sum
payment option is elected by the Company), or (ii) pay-
ment by delivery of a promissory note from the Company
(“Promissory Note”) to the Member (or Member’s estate)
providing for payment in three (3) equal annual install-
ments commencing one year from the occurrence of the
Mandatory Operative Event or Optional Operative Event,
as applicable. The Promissory Note shall bear interest on
the unpaid principal balance at an interest rate per annum
equal to the Applicable Federal Rate for Mid-term obli-
gations, as published by the Internal Revenue Service for
the month of the Mandatory Operative Event or Optional
Operative Event, as applicable.
The majority concludes that because Bluestem opted to
tender a promissory note, the applicable interest rate was
provided in the Operating Agreement, and that therefore, the
statutory rate contained in § 45-104 is inapplicable. Section
45-104 states:
Unless otherwise agreed, interest shall be allowed at
the rate of twelve percent per annum on money due on
any instrument in writing, or on settlement of the account
from the day the balance shall be agreed upon, on money
received to the use of another and retained without the
owner’s consent, express or implied, from the receipt
thereof, and on money loaned or due and withheld by
unreasonable delay of payment. Unless otherwise agreed
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Cite as 32 Neb. App. 410or provided by law, each charge with respect to unsettled
accounts between parties shall bear interest from the
date of billing unless paid within thirty days from the
date of billing.
Giving plain meaning to the language of the Operating
Agreement, the parties agreed that Bluestem could pay Herink
the fair market value of his membership units either with a
single payment 1 year following his termination of employ-
ment or through a promissory note in which payment would
be made annually in three equal installments beginning on the
1-year anniversary of such termination. It is only under this
second method that the parties agreed that a set interest rate
would apply to the unpaid sums.
This language is considerably different from the contractual
language applied by this court in Ramaekers, McPherron &
Skiles, P.C. v. Ramaekers, No. A-93-068, 1994 WL 466476(Neb. App. Aug. 30, 1994) (not designated for permanent pub-
lication), in which we modified a judgment to award a contrac-
tual interest rate. The agreement before us there unequivocally
set forth an interest rate to be paid under the only method for
payment provided in the agreement, stating:
“All sums due the shareholder pursuant to paragraph 2
for the value of the stock as therein defined shall be paid
by the corporation to the shareholder or his estate, as the
case may be, in 120 equal monthly installments plus inter-
est at ten percent (10%) per annum, which interest shall
commence on the twentieth day after the shareholder’s
termination, with the first payment of principal plus inter-
est to be paid commencing fifty days following the share-
holder’s termination.”
Id. at *11 (emphasis omitted). Based upon the plain language
of the agreement, we determined that the parties agreed that
interest would accrue on the unpaid sums at the rate of 10 per-
cent per annum.
The majority relies upon Prudential Ins. Co. v. Greco,
211 Neb. 342, 318 N.W.2d 724 (1982), to conclude that the
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Cite as 32 Neb. App. 410contractual rate in the Operating Agreement was the applicable
prejudgment interest rate. However, the applicable contractual
language in Prudential Ins. Co. stated:
“If any rent or other sums due and payable under this
lease are not paid by the Tenant within fifteen (15) days
after same are due and payable, it is agreed that the rent
or other sums payable . . . shall bear interest at the rate of
nine percent (9%) per annum from fifteen (15) days after
same are due and payable until paid.”
211 Neb. at 346-47, 318 N.W.2d at 727. Hence, a set interest
rate on any unpaid sum was unequivocal and the Nebraska
Supreme Court aptly applied the contractual rate despite its
being lower than the statutory rate.
While I agree that Prudential Ins. Co. v. Greco, supra,negates Herink’s argument that one who breaches a contract
cannot claim benefits or advantages under the contract it
breached, I disagree that it guides our decision in the pres-
ent case, due to the difference in the contractual language. In
Prudential Ins. Co., the lease at issue set forth an interest rate
on any rent or other sums due and payable if not paid within
15 days. The Operating Agreement before us sets forth no
explicit interest rate on amounts due; rather, an interest rate
applies only if Bluestem elects to pay fair market value for
Herink’s membership units pursuant to a promissory note.
Section 7.03(a) required Bluestem to pay “a purchase price
per Unit equal to the fair market value per Unit as determined
by the Manager in his sole discretion, exercised in a com-
mercially reasonable manner.” Sections 7.03(c) and 7.03(e)
gave Bluestem two payment options, a lump-sum payment
or a 3-year promissory note that included a specified interest
rate. Although Bluestem tendered a promissory note, it was
not based upon the fair market value of Herink’s member-
ship units; therefore, Bluestem’s promissory note did not meet
the requirements of § 7.03 and the interest rate contained in
§ 7.03(e) is not applicable. Unlike the parties in Prudential Ins.
Co., Herink and Bluestem did not agree to a specified interest
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Cite as 32 Neb. App. 410rate on any unpaid sums; rather, they agreed that if a promis-
sory note were issued for the fair market value of the units,
interest would accrue at an agreed rate.
A series of hypothetical questions further illustrates the
illusory nature of an agreed-upon interest rate: Had Bluestem
opted to tender a lump-sum payment under the first payment
option, would it then be assessed the statutory interest rate
because the Operating Agreement is silent as to an interest rate
for a lump-sum payment? And if so, can it be said that the par-
ties “otherwise agreed” to an interest rate as contemplated by
§ 45-104 when the rate is dependent upon a future unilateral
decision by the breaching party? Does that interest rate apply
when the promissory note fails to equal a fair market sum? I
posit that the parties agreed to an interest rate on a promissory
note offering fair market value of the units; where no such
promissory note was tendered, no agreement on the interest
rate exists.
Based upon a reading of § 7.03 of the Operating Agreement
as a whole, Bluestem was required to purchase Herink’s mem-
bership units at a price equal to the fair market value per unit
as determined by the manager in his sole discretion, exercised
in a commercially reasonable manner. Payment was to be
made either in a single-sum payment on the 1-year anniver-
sary of Herink’s termination of employment or through deliv-
ery of a promissory note providing payment in three equal
annual installments commencing 1 year from such termination
date and bearing interest on the unpaid principal balance at a
rate set forth therein. Although Bluestem tendered a promis-
sory note, it was not for the fair market value of Herink’s
membership units; therefore, the contractual interest rate that
the parties agreed upon for a promissory note equal to the fair
market value of a member’s units is inapplicable.
Because my reading of § 7.03 of the Operating Agreement
leads me to conclude that the parties did not “otherwise
agree” to an interest rate as contemplated by § 45-104, nei-
ther prejudgment nor postjudgment interest is governed by
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Cite as 32 Neb. App. 410the Operating Agreement. I would reverse that portion of the
district court’s order awarding interest based upon the parties’
alleged agreement and instead apply the applicable statutory
rates. I agree with the remainder of the majority’s opinion.