Garden v. Cent. Nebraska Hous. Corp.

• Decision Date: 07 August 2013
• Docket Number: No. 12–2344.,12–2344.
• Citation: 719 F.3d 899
• Parties: Richard P. GARDEN, Jr., Trustee, Plaintiff–Appellee v. CENTRAL NEBRASKA HOUSING CORP., Defendant–Appellant Pinnacle Bank, of Newcastle Wyoming; Security First Bank, Defendants Rick Roberts; Loretta Sue Roberts, Defendants–Appellees John Zapata; Coljo Investments, LLC, Defendants–Appellants Pinnacle Bank; Unverzagt Feed Lot, Defendants.
• Court: U.S. Court of Appeals — Eighth Circuit

719 F.3d 899

Richard P. GARDEN, Jr., Trustee, Plaintiff–Appellee

v. CENTRAL NEBRASKA HOUSING CORP., Defendant–AppellantPinnacle Bank, of Newcastle Wyoming; Security First Bank, DefendantsRick Roberts; Loretta Sue Roberts, Defendants–AppelleesJohn Zapata; Coljo Investments, LLC, Defendants–AppellantsPinnacle Bank; Unverzagt Feed Lot, Defendants.

No. 12–2344.

United States Court of Appeals, Eighth Circuit.

Submitted: Jan. 17, 2013.

Filed: June 27, 2013.

Rehearing and Rehearing En Banc Denied Aug. 7, 2013.

Robert A. Mooney, argued, Michael J. Whaley, on the brief, Omaha, NE, for appellants.

Joe M. Hawbaker, argued, Omaha, NE, for appellees.

Before WOLLMAN, GRUENDER, and SHEPHERD, Circuit Judges.

WOLLMAN, Circuit Judge.

Richard Garden, acting as trustee for certain farm property pursuant to a deed of trust, brought this interpleader action seeking a determination of rights to the sales proceeds from an auction of the farm. Central Nebraska Housing Corp. (CNH) and John Zapata challenge the district court's ¹ orders: 1) denying CNH's partial motion for summary judgment, in which CNH argued that it had a contract to purchase the farm for $113,000; 2) granting Rick and Loretta Robertses' partial motion for summary judgment concerning whether the sale of the farm to Gittaway Ranch, LLC could be set aside; 3) granting in part the Robertses' second motion for partial summary judgment concerning the reduction of CNH's secured claim; and 4) awarding sanctions against Zapata and CNH. We affirm.

I. Background

The Robertses owned a farm in Sheridan County, Nebraska. On January 22, 2010, they filed for Chapter 7 bankruptcy, claiming a homestead exemption in the farm under Nebraska Revised Statutes §§ 40–101 to 40–108. On May 19, 2010, Zapata's company, CNH, acquired a first deed of trust in the farm by virtue of a post petition assignment of a promissory note and trust deed. The trust deed granted the trustee a power of sale and secured, among other things, the following:

Payment of any sums advanced by Beneficiaries or Trustee (with interest as herein provided), which sums are reasonably necessary or incidental to improvement or protection of the Trust Property; or which sums are expended in the exercise of rights granted herein. These sums include, but are not limited to, sums advanced for payment of taxes, insurance, abstracting, survey, recording, publication expense, court costs, expenses of litigation (including any fees of an attorney to the extent authorized by law), and expenses of sale.

The trust deed provided beneficiaries with the right to “inspect the Trust Property at any reasonable time and [to] perform any acts authorized hereunder.”

On June 1, 2010, the Robertses defaulted on their obligations arising under CNH's trust deed, thereby triggering the trustee's authority to sell the farm. On July 15, 2010, CNH obtained relief from the automatic bankruptcy stay and filed a proof of claim asserting a secured claim. On July 20, 2010, CNH filed notices of default and elections to sell the farm.

On November 15, 2010, Greg Frayser, acting as the representative for the trustee, conducted an auction to sell the farm. Rick Roberts and representatives from Pinnacle Bank, CNH, Coljo Investment, and Gittaway Ranch, LLC attended the sale. Before the auction opened, Frayser read aloud a bid sheet that stated, in part, “The Trustee's Sale will remain open for ten (10) minutes and I will accept any bids offered during that time.” Frayser did not announce that he would close the sale immediately upon the expiration of ten minutes and refuse to accept any further bids.

CNH opened the bidding, and thereafter Pinnacle Bank, CNH, Coljo Investments, and Gittaway Ranch bid against each other. Immediately before the ten-minute period expired, CNH bid $113,000. Frayser then announced the expiration of the ten-minute period. Frayser did not issue a warning that the ten-minute period was about to expire, nor did he solicit any additional bids before closing the auction. Frayser did not announce that the property was sold to CNH. Pinnacle Bank protested the auction's conclusion. After Frayser consulted with the trustee, he accepted additional bids, over CNH's protestation. CNH bid $166,100, but its bid was topped by a $166,500 bid by Gittaway Ranch. Frayser recorded Gittaway Ranch as the “highest and prevailing bidder” on the bid sheet. Gittaway Ranch assigned its successful bid to Coljo Investments (owned by Zapata and his wife), which paid the trustee $166,500 for the farm.

Pinnacle, CNH, and Security First made competing claims to the sales proceeds. The trustee then filed an interpleader action in the bankruptcy court seeking a determination of the claims. The bankruptcy court found that it lacked jurisdiction over the interpleader complaint and transferred the case to the district court.

CNH and the Robertses filed cross motions for partial summary judgment. CNH argued that it had purchased the farm for $113,000 and that $53,500 of the sales proceeds should be returned to it. The Robertses argued that the district court should uphold the sale of the farm to Gittaway Ranch. The district court denied CNH's motion and granted the Robertses' motion.

The Robertses later filed a second motion for partial summary judgment, arguing that their homestead exemption entitled them to $60,000 from the sales proceeds and disputing, among other things, the amount of CNH's secured claim. Specifically, the Robertses argued that CNH's claims for $17,426 for monthly inspections of the farm and for $7,553.57 in attorney's fees were not part of its secured claim. The district court granted the Robertses' motion in part, finding that CNH's inspections of the farm before July 15, 2010, were attempts to further encumber the farm and were void as being in violation of the automatic stay; that the Bankruptcy Code allowed the Robertses to avoid the inspection fees occurring after July 15, 2010; and that CNH had failed to set forth evidence that the attorney's fees should be included as part of its secured claim.

Following the receipt of briefs and affidavits, the district court issued findings of fact and conclusions of law concerning the parties' rights to the remaining sales proceeds. The Robertses then filed an amended motion seeking sanctions against Zapata and CNH for violating the automatic stay and the bankruptcy court's discharge order and for failing to admit and deny discovery questions. The district court, relying on an affidavit from the Robertses' attorney and an accompanying invoice, granted the Robertses' motion in part, finding that as a result of CNH's and Zapata's violation of the automatic stay, the Robertses had incurred $25,792.25 in actual damages in the form of attorney's fees incurred from November 16, 2010 through January 31, 2012.

II. Discussion

CNH challenges the district court's rulings, arguing that it had a contract to purchase the farm for $113,000 and that it had established that the sale to Gittaway Ranch should be set aside. CNH also argues that the district court erred in its ruling concerning the amount of CNH's secured claim and that the district court abused its discretion in imposing sanctions.

A. Summary Judgment Orders

We review de novo the district court's grants of summary judgment and may affirm the district court on any basis supported by the record. Hohn v. BNSF Ry. Co., 707 F.3d 995, 1000 (8th Cir.2013). “Summary judgment is appropriate if there are no genuine disputes of material fact and the moving party is entitled to judgment as a matter of law.” Id. (citing Fed.R.Civ.P. 56).

1) Whether CNH had a valid contract to purchase the farm

CNH argues that a contract was formed between the trustee and CNH when CNH made its $113,000 bid immediately before the close of the ten-minute bidding period. CNH, as the entity seeking to enforce the alleged contract, bears the “burden of proving there was a definite offer and an unconditional acceptance.” Marten v. Staab, 249 Neb. 299, 543 N.W.2d 436, 443 (1996) (quoting Satellite Dev. Co. v. Bernt, 229 Neb. 778, 429 N.W.2d 334, 337 (1988)). That is, CNH must demonstrate that “a valid, legally enforceable contract exists.” Id. (quoting Bernt, 429 N.W.2d at 337).

Generally speaking, there are two types of auctions that give rise to a contract for the sale of property: those without reserve, and those with reserve. Id. In an auction without reserve, the seller is the offeror and the bidder is the offeree. Id. “[T]he contract is consummated with each bid, subject only to a higher bid being received.” Id. (quoting Pitchfork Ranch Co. v. Bar TL, 615 P.2d 541, 548 (Wyo.1980)). “In this type of sale, the seller may not withdraw his property once any legitimate bid has been submitted[.]” Id. (quoting Pitchfork, 615 P.2d at 548).

The roles of the seller and bidder are reversed in an auction with reserve, with the bidder acting as the offeror and the seller as the offeree. Id. “[T]he auctioneer, as agent of the seller, invites bids (offers) with the understanding that no bargain exists until the seller has made a further manifestation of assent; the auctioneer may reject all bids and withdraw the goods from sale until he announces completion of the sale.” Id. (quoting Rosin v. First Bank of Oak Park, 126 Ill.App.3d 230, 81 Ill.Dec. 443, 466 N.E.2d 1245, 1249 (1984)). “[A]uctions are presumed to be with reserve unless they are expressly stated to be without reserve.” Id. (quoting Cuba v. Hudson & Marshall, Inc., 213 Ga.App. 639, 445 S.E.2d 386, 387 (1994)).

CNH contends that the following language on the bid sheet created an auction without reserve: “The Trustee's Sale will remain open for ten (10) minutes and I will accept any bids offered during that time.” This language, however, does not constitute an express statement that the auction would be without reserve. Instead, the language indicates a “preliminary negotiation, not intended and not reasonably understood to be...