Wilkinson Development v. Ford & Ford Investments

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
05/20/2022 08:06 AM CDT
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Nebraska Supreme Court Advance Sheets
311 Nebraska Reports
WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
Cite as 311 Neb. 476Wilkinson Development, Inc., appellee,
v. Ford & Ford Investments, a general
partnership, appellee, and PSK, LLC,
a Nebraska limited liability
company, appellant.
___ N.W.2d ___
Filed April 28, 2022. No. S-21-496
1. Motions to Vacate: Appeal and Error. The decision of a district
court to deny the vacation of its order will be affirmed absent an abuse
of discretion.
2. Statutes: Property. The interpretation of a statute, including the inter-
pretation of the lis pendens statute, is a question of law.
3. Judgments: Appeal and Error. On a question of law, an appellate court
is obligated to reach a conclusion independent of the determination
reached by the court below.
4. Actions: Property: Notice: Words and Phrases. The term “lis ­pendens”
literally means a pending lawsuit. Under this common-law doctrine, the
pendency of a suit affecting title to real property is constructive notice
to the world of the disputed claim.
5. Actions: Property: Words and Phrases. Lis pendens is a procedural
mechanism intended to alert prospective purchasers about property dis-
putes and protect the status quo until the parties’ substantive property
rights can be determined in litigation.
6. Property: Intent. The purpose of lis pendens is to prevent third persons,
during the pendency of litigation involving a property dispute, from
acquiring interests in the disputed land which would preclude the court
from granting the relief sought.
7. Property: Jurisdiction: Statutes: Intent. The lis pendens statute serves
to hold disputed property within the court’s jurisdiction until the parties’
rights are finally determined.
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Nebraska Supreme Court Advance Sheets
311 Nebraska Reports
WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
Cite as 311 Neb. 476Appeal from the District Court for Dawson County: James
E. Doyle IV, Judge. Affirmed.
Blake E. Johnson, of Bruning Law Group, for appellant.
Allen L. Fugate for appellee Wilkinson Development, Inc.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Papik,
and Freudenberg, JJ., and Schreiner, District Judge.
Heavican, C.J.
INTRODUCTION
Wilkinson Development, Inc. (Wilkinson), filed an action
for specific performance of a real estate contract concerning
the purchase of commercial real estate located in Lexington,
Nebraska. The district court found in favor of Wilkinson and
against the seller, Ford & Ford Investments (Ford). PSK, LLC,
a subsequent purchaser of the real estate in question, then filed
a motion to vacate the decree of specific performance and
also sought an order of joinder. The district court denied that
motion. PSK appeals. We affirm.
BACKGROUND
Wilkinson, as buyer, and Ford, as seller, entered into a con-
tract on August 30, 2019, for the purchase of commercial real
estate located in Dawson County, Nebraska. The sale price was
$325,000, and the transaction was set to close on November
20. Wilkinson sought an extension of the closing date, which
was permitted by the parties’ contract assuming that Wilkinson
advanced earnest money to Ford. That advance was made, and
closing was set for December 4.
On November 21, 2019, the real estate agent who had been
representing both buyer and seller informed Wilkinson that the
agreement had been declared void by Ford. During the same
time period, the agent was communicating with PSK about the
possibility of PSK purchasing the property.
On November 21, 2019, Wilkinson delivered the full pur-
chase price to the closing agent and notified the agent that
- 478 -
Nebraska Supreme Court Advance Sheets
311 Nebraska Reports
WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
Cite as 311 Neb. 476it had done so. On November 22, a purchase agreement between
PSK and Ford was signed at a price of $365,000, with closing
set for November 26. There is evidence in the record indicating
that at that time, Wilkinson was unaware of the negotiations or
agreement Ford had reached with PSK.
On November 25, 2019, Wilkinson filed a complaint for spe-
cific performance. On November 26, Wilkinson filed a notice
of lis pendens with the Dawson County register of deeds. Also
on November 26, Ford and PSK entered into a second purchase
agreement with a closing date of December 17. On December
4, the closing agent for the PSK/Ford agreement informed the
parties to that agreement that it could not offer title insurance
because of the existence of the Wilkinson/Ford agreement.
Ford was served with a summons for the specific performance
complaint on December 6.
PSK and Ford closed the sale for the property on December
16, 2019. On December 19, a partnership warranty deed from
Ford to PSK was recorded with the Dawson County register
of deeds.
On March 4, 2021, the district court granted Wilkinson’s
complaint for specific performance. Ford did not appeal this
determination and does not appear in this appeal. On March 26,
PSK sought vacation of the decree and an order of joinder. A
hearing was held on that motion and evidence was offered. The
district court denied PSK’s motion. PSK appeals.
ASSIGNMENTS OF ERROR
PSK assigns that the district court erred in determining that
(1) joinder of PSK was not necessary to provide the court with
subject matter jurisdiction; (2) the Nebraska lis pendens stat-
ute eliminated Wilkinson’s and the court’s obligation to join
PSK; (3) knowledge of a third party’s interest in the subject
property, acquired after the commencement of the action, does
not give rise to the compulsory joinder requirement of Neb.
Rev. Stat. § 25-323 (Reissue 2016); (4) PSK had no interest in
the subject property so as to require joinder; (5) PSK knew a
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Nebraska Supreme Court Advance Sheets
311 Nebraska Reports
WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
Cite as 311 Neb. 476valid, binding contract existed between Ford and Wilkinson at
the time it executed the PSK contract; and (6) PSK knew that
Wilkinson had paid the full purchase price for the property to
the escrow agent at the time it executed the PSK contract.
STANDARD OF REVIEW
[1-3] The decision of a district court to deny the vacation of
its order will be affirmed absent an abuse of discretion. 1 The
interpretation of a statute, including the interpretation of the lis
pendens statute, is a question of law. 2 On a question of law, an
appellate court is obligated to reach a conclusion independent
of the determination reached by the court below. 3
ANALYSIS
PSK’s primary argument on appeal is that the district court
erred in not vacating the decree of specific performance and
remanding the matter for further proceedings on the basis that
Wilkinson was required to join PSK as a necessary and indis-
pensable party. PSK argues that Wilkinson and the court had an
obligation to join it, irrespective of the fact that Wilkinson had
filed a notice of lis pendens.
Lis Pendens Propositions of Law.
[4] The term “lis pendens” literally means a pending law-
suit. Under this common-law doctrine, the pendency of a suit
affecting title to real property is constructive notice to the
world of the disputed claim. 4 This principle has been codified
in Nebraska statute. Neb. Rev. Stat. § 25-531 (Reissue 2016)
provides, as relevant:
In all actions brought to affect the title to real property,
the plaintiff may either at the time of filing his or her
1
See Kibler v. Kibler, 287 Neb. 1027, 845 N.W.2d 585 (2014).
2
Brown v. Jacobsen Land & Cattle Co., 297 Neb. 541, 900 N.W.2d 765(2017).
3
Id.4
Id.- 480 -
Nebraska Supreme Court Advance Sheets
311 Nebraska Reports
WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
Cite as 311 Neb. 476complaint or afterwards, . . . file with the clerk or register
of deeds of each county in which the real estate thus to
be affected, or any part thereof, is situated, a notice of the
pendency of such action. . . . From the time of filing such
notice the pendency of such action shall be constructive
notice to any purchaser or encumbrancer to be affected
thereby. Every person whose conveyance or encumbrance
is subsequently executed or subsequently recorded shall
be deemed to be a subsequent purchaser or encumbrancer
and shall be bound by all proceedings taken in the action
after the filing of such notice to the same extent as if he
or she were made a party to the action.
[5-7] Lis pendens is a procedural mechanism intended to
alert prospective purchasers about property disputes and pro-
tect the status quo until the parties’ substantive property rights
can be determined in litigation. 5 “Generally speaking, the pur-
pose of lis pendens is to prevent third persons, during the pend­
ency of litigation involving a property dispute, from acquiring
interests in the disputed land which would preclude the court
from granting the relief sought.” 6 “[T]he lis pendens statute
serves to hold disputed property within the court’s jurisdiction
until the parties’ rights are finally determined.” 7 In Hadley v.
Corey, we noted:
“In a legal sense the term (lis pendens) is equivalent
to the maxim that pending the suit nothing should be
changed (pendente lite nihil innovetur); and the doctrine
of lis pendens is that one who acquires any interest in
property during the pendency of litigation respecting
such property from a party to the litigation takes subject
to the decree of judgment in such litigation and is bound
by it.” 8
5
Id.6
Id. at 551, 900 N.W.2d at 772.
7
Id.
8
Hadley v. Corey, 137 Neb. 204, 215, 288 N.W. 826, 832 (1939).
- 481 -
Nebraska Supreme Court Advance Sheets
311 Nebraska Reports
WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
Cite as 311 Neb. 476It is undisputed that Wilkinson filed a notice of lis pendens
with the Dawson County register of deeds on November 26,
2019, and that PSK recorded its deed to the property in that same
office on December 19. Thus, for purposes of Nebraska’s lis
pendens statute, § 25-531, the lis pendens notice was “construc-
tive notice” and PSK a “person whose conveyance [was] sub-
sequently executed or subsequently recorded shall be deemed
to be a subsequent purchaser . . . and shall be bound by all
proceedings taken . . . after the filing of such notice to the
same extent as if he or she were made party to the action.”
Equitable Conversion.
Still, PSK makes several arguments as to why the notice
of lis pendens was insufficient notice. First, relying on the
doctrine of equitable conversion, PSK argues that it obtained
“equitable title” to the property as of November 22, 2019, the
date of its purchase agreement with Ford, which was prior to
the filing of the notice of lis pendens and that as such, it was
not bound by that notice. 9
We reject this assertion. Generally speaking, this equitable
doctrine provides that
“if the owner of real estate enters into a contract of sale
whereby the purchaser agrees to buy and the owner agrees
to sell it and the vendor retains the legal title until the
purchase money or some part of it is paid, the ownership
of the real estate as such passes to and vests in the pur-
chaser, and that from the date of the contract the vendor
holds the legal title as security for a debt as trustee for
the purchaser.” 10
But PSK overlooks certain exceptions to that rule:
“[W]here the third-party purchaser is (1) made a party
to the suit before rendition of judgment, or (2) has
9
Brief for appellant at 16.
10
DeBoer v. Oakbrook Home Assn., 218 Neb. 813, 816, 359 N.W.2d 768,
771 (1984).
- 482 -
Nebraska Supreme Court Advance Sheets
311 Nebraska Reports
WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
Cite as 311 Neb. 476knowledge of the adverse claim at the time of signing of
the executory contract, or (3) has paid only a portion of
the purchase price before the lis pendens is filed.” 11
The facts show that at the very least, PSK was aware that
there was a purchase agreement between Wilkinson and Ford
that predated PSK’s own purchase agreement with Ford. As
such, we conclude that PSK had knowledge of Wilkinson’s
adverse claim. Nor is there any evidence in the record that PSK
had paid the entire purchase price in advance of Wilkinson’s
filing of its notice of lis pendens. For these reasons, we decline
to apply the doctrine of equitable conversion on these facts and
find no merit to this assertion by PSK.
Knowledge of Interest in Property.
PSK also contends that the lis pendens notice did not relieve
Wilkinson of the obligation to join it once it learned of PSK’s
purported interest. We disagree.
It is undisputed that Wilkinson was, at some point, aware
that Ford and PSK had entered into a separate purchase agree-
ment on the property. But when that knowledge was gained
impacts our analysis. Assuming, without deciding, for example,
that Wilkinson had been aware of the PSK/Ford agreement at
the time it filed the lis pendens notice, the lis pendens would
have been insufficient notice to PSK that it would be consid-
ered a subsequent purchaser. But there is no evidence in the
record that Wilkinson had such knowledge at the time of the
filing of the lis pendens.
PSK relies on Brown v. Jacobsen Land & Cattle Co. 12
and Munger v. Beard & Bro. 13 to support its assertion that
Wilkinson had a duty to join PSK once it became aware
11
DeShields v. Broadwater, 338 Md. 422, 445, 659 A.2d 300, 311 (1995)
(quoting Meyering v. Russell, 53 Mich. App. 695, 220 N.W.2d 121 (1974),
reversed on other grounds 393 Mich. 770, 224 N.W.2d 280).
12
Brown v. Jacobsen Land & Cattle Co., supra note 2.
13
Munger v. Beard & Bro., 79 Neb. 764, 113 N.W. 214 (1907).
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Nebraska Supreme Court Advance Sheets
311 Nebraska Reports
WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
Cite as 311 Neb. 476of the PSK/Ford purchase agreement, at whatever point that
might be. However, those cases do not stand for that proposi-
tion; rather, the cases support only a conclusion that what mat-
ters is the plaintiff’s knowledge at the time of the filing of the
lis pendens. There is nothing in those cases that would support
a conclusion that in the aftermath of a lis pendens notice, a
plaintiff has a continuing obligation to join potential parties.
Necessary and Indispensable Parties.
PSK also directs us to § 25-323, as well as this court’s deci-
sion in Midwest Renewable Energy v. American Engr. Testing. 14
There, we discussed necessary and indispensable parties. PSK
contends that it is a necessary and indispensable party, that
Wilkinson’s specific performance action cannot be litigated
without affecting PSK’s rights, and that as such, PSK should
have been joined. Even assuming that PSK would be consid-
ered a necessary and indispensable party—an analysis we do
not undertake here—we still disagree that there was error on
the part of the district court in failing to join PSK.
PSK’s reliance on § 25-323 to support the conclusion that
it must be joined would read out of existence the portion of
§ 25-531 that holds that anyone recording an interest in prop-
erty after the filing of a notice of lis pendens is considered a
subsequent purchaser and “shall be bound by all proceedings
taken in the action after the filing of such notice to the same
extent as if he or she were made a party to the action.” We
have repeatedly held that when there is a conflict between two
statutes on the same subject, the specific statute controls over
the general. 15 Here, we conclude that the lis pendens statute,
which is specific to notice afforded to subsequent purchasers
in the event of litigation regarding real property, is the more
specific over the general joinder statute.
14
Midwest Renewable Energy v. American Engr. Testing, 296 Neb. 73, 894
N.W.2d 221 (2017).
15
See, e.g., Becher v. Becher, 299 Neb. 206, 908 N.W.2d 12 (2018).
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Nebraska Supreme Court Advance Sheets
311 Nebraska Reports
WILKINSON DEVELOPMENT v. FORD & FORD INVESTMENTS
Cite as 311 Neb. 476Intervention.
PSK could have sought to intervene, but declined to do so.
It argues on appeal that its failure to intervene does not excuse
the failure to join it. But there was no failure in not joining it.
On the other hand, seeking to intervene would have preserved
PSK’s assertion that it should have been heard in the under­
lying specific performance action.
There is no merit to any of PSK’s assignments of error. We
therefore affirm the district court’s denial of PSK’s motion
to vacate.
CONCLUSION
We affirm the decision of the district court.
Affirmed.
Funke, J., not participating.