First State Bank Neb. v. MP Nexlevel, LLC
| Decision Date | 18 September 2020 |
| Docket Number | No. S-19-543.,S-19-543. |
| Citation | 948 N.W.2d 708,307 Neb. 198 |
| Parties | FIRST STATE BANK NEBRASKA, appellant, v. MP NEXLEVEL, LLC, appellee. |
| Court | Nebraska Supreme Court |
Brandon R. Tomjack and Nicholas A. Buda, of Baird Holm, L.L.P., Omaha, for appellant.
Michael S. Degan, of Kutak Rock, L.L.P., Omaha, for appellee.
Anthony Schutz, for amicus curiae Commercial Law Amicus Initiative.
Robert J. Hallstrom and Gerald M. Stilmock, of Brandt, Horan, Hallstrom & Stilmock, Syracuse, for amicus curiae Nebraska Bankers Association, Inc.
Funke, J. First State Bank Nebraska (First State) challenges the district court's order dismissing its claims against MP Nexlevel, LLC. MP Nexlevel contracted to pay Husker Underground Utilities & Construction, LLC (Husker Underground), for certain construction services. First State held a security interest in Husker Underground's accounts due to separate loan agreements. When Husker Underground failed to meet its loan obligations, First State sought direct payment of MP Nexlevel's obligations under the contract by sending MP Nexlevel notices of Husker Underground's default. Despite the notices, MP Nexlevel continued to submit its payments to Husker Underground, and First State brought suit against MP Nexlevel for performance under the contract.
First State challenges the district court's finding that it lacked standing because it was not a party to the contract, Neb. U.C.C. § 9-607(a) (Reissue 2001 & Cum. Supp. 2018) did not authorize it to enforce MP Nexlevel's obligations under the contract, and Neb. U.C.C. § 9-406(a) (Reissue 2001 & Cum. Supp. 2018) did not apply, because First State held a security interest rather than an assignment of Husker Underground's rights to payment under the contract. For the reasons set forth herein, we reverse the judgment of the district court and remand this matter for further proceedings consistent with this opinion.
First State is a domestic bank chartered by and registered in the State of Nebraska. MP Nexlevel is a Minnesota limited liability company performing excavation, trenching, and other services for Nebraska customers as well as customers in other states.
In January 2018, MP Nexlevel and Husker Underground entered into a subcontract agreement whereby Husker Underground promised to perform certain construction services.
As Husker Underground performed these services, it would submit invoices to MP Nexlevel for payment. MP Nexlevel was generally required to pay these amounts within 45 days of approval. Husker Underground performed these services throughout 2018. First State was not a party to the subcontract or any other agreement between MP Nexlevel and Husker Underground.
Between May and June 2016, First State loaned money to Husker Underground pursuant to various promissory notes and agreements. These agreements included a May promissory note executed in the original principal amount of $50,000, a June promissory note in the original principal amount of $635,500, and a May business manager agreement with business and professionals in which First State agreed, in part, to purchase certain accounts receivable from Husker Underground. Husker Underground secured these agreements by granting First State a security interest in virtually all of its assets, including its accounts and accounts receivable. First State filed three financing statements with the Nebraska Secretary of State to perfect these security interests. MP Nexlevel was not a party to any agreement between First State and Husker Underground and had no actual knowledge of the two parties’ relationship.
Husker Underground failed to make payments to First State when due, including failing to pay the May note in full upon maturity. As such, in August 2018, First State filed a lawsuit against Husker Underground, alleging Husker Underground was in default under the agreements and seeking a judgment for the payment of the remaining obligations. On January 23, 2019, the district court entered a stipulated order, signed by Husker Underground representatives, granting summary judgment in favor of First State.
Prior to filing suit against Husker Underground, First State sent three notices to MP Nexlevel in May, July, and August 2018. These notices alleged that Husker Underground had defaulted on loans from First State, that Husker Underground had granted First State a security interest in its accounts, and that Husker Underground assigned First State its rights to receive payments from MP Nexlevel as a result of its default. The notices directed MP Nexlevel to pay all amounts owed on Husker Underground's accounts to First State directly and warned that failure to do so could result in adverse consequences for MP Nexlevel. Attached was a copy of a Uniform Commercial Code (UCC) financing statement identifying the security interest in Husker Underground's accounts.
Hobelman, First State's general counsel and a senior vice president, stated:
... I received a telephone call from ... Carlson with MP Nex[l]evel who[ ] acknowledged receipt of [First State's] May Notice and otherwise stated that MP Nexlevel would be cooperating with the Notice and sending payments on the Accounts directly to [First State]. After our call, I sent ... Carlson two emails ... following-up our conversation confirming that [MP Nexlevel] would send [First State] all funds owed to Husker Underground on the Accounts.
The first email Hobelman referenced in her affidavit apologized for missing Carlson's initial call and stated, "Please make the checks payable to First State ... as requested in the letter." The second email thanked Carlson for calling back, explaining,
As to MP Nexlevel's communication with Husker Underground, Carlson asserted that Husker Underground disputed the claim that it assigned its rights to receive MP Nexlevel payments to First State. Husker Underground, instead, demanded MP Nexlevel continue to make the payments to it under terms of the subcontract agreement. Carlson claimed that Husker Underground never directed MP Nexlevel to make payments to First State, that MP Nexlevel was never provided an assignment of Husker Underground's rights to payment under the subcontract, that MP Nexlevel was not notified of a judgment in favor of First State against Husker Underground, and that MP Nexlevel was not provided copies of the notes or agreement between First State and Husker Underground. As such, MP Nexlevel continued making its payments directly to Husker Underground. MP Nexlevel's discovery responses show MP Nexlevel made payments totaling $412,302.59 to Husker Underground after receiving the May 2018 notice. There are no outstanding invoices of Husker Underground for MP Nexlevel to pay.
In August 2018, 6 days after bringing suit against Husker Underground, First State filed a complaint against MP Nexlevel and, thereafter, filed a motion for summary judgment. First State alleged that because Husker Underground was in default of the notes and agreement and First State had a security interest in Husker Underground's accounts receivable, it had a right to enforce this security interest and foreclose upon the same pursuant to §§ 9-406(a) and 9-607(a). First State further alleged that once First State sent its May 2018 notice to MP Nexlevel, MP Nexlevel could discharge its obligations under the subcontract only by paying the invoiced amounts directly to First State. First State claimed that because MP Nexlevel continued paying the invoiced amounts to Husker Underground, MP Nexlevel breached its obligations under the subcontract, and that First State is entitled to payment of the delinquent amounts.
MP Nexlevel resisted First State's motion and filed a cross-motion for summary judgment. MP Nexlevel argued First State lacked standing to enforce the subcontract agreement, because there was no contractual relationship between First State and MP Nexlevel. Although MP Nexlevel received the notices, MP Nexlevel argued it properly continued to pay Husker Underground, because Husker Underground contested First State's assertions and there was insufficient documentation that Husker Underground's rights to payment under the subcontract were assigned to First State.
The district court overruled First State's motion for summary judgment and granted MP Nexlevel's cross-motion, dismissing the case with prejudice. First, the court held that § 9-607 does not give rise to a claim by a secured creditor against an account debtor where the debtor is not in default and has not otherwise agreed. As such, because the record demonstrated that Husker Underground denied being in default at the time of First State's notices and First State did not obtain its judgment against Husker Underground until January 23, 2019, First State did not have a cognizable claim against MP Nexlevel under § 9-607 for MP Nexlevel's performance under the subcontract. Additionally, the court determined that § 9-406(a) required receipt of notification of assignment in order to...
To continue reading
Request your trial
-
Hauptman, O'Brien, Wolf & Lathrop, P.C. v. Auto-Owners Ins. Co.
...was granted and gives that party the benefit of all reasonable inferences deducible from the evidence. First State Bank Neb. v. MP Nexlevel , 307 Neb. 198, 948 N.W.2d 708 (2020).ANALYSISStatement of Errors.We first address the law firm's cross-appeal, as resolution of that issue potentially......
-
Johnson v. Frakes
...that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law. First State Bank Neb. v. MP Nexlevel, 307 Neb. 198, 948 N.W.2d 708 (2020). In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party......
-
Equestrian Ridge Homeowners Ass'n v. Equestrian Ridge Estates II Homeowners Ass'n
..., 305 Neb. 780, 943 N.W.2d 231 (2020).4 See Nolasco v. Malcom , 307 Neb. 309, 949 N.W.2d 201 (2020).5 First State Bank Neb. v. MP Nexlevel , 307 Neb. 198, 948 N.W.2d 708 (2020).6 Id.7 Id. See, also, Neb. Rev. Stat. § 25-301 (Reissue 2016).8 First State Bank Neb. , supra note 5.9 See, genera......
-
State v. Seth C. (In re Interest of Seth C.)
...(2019).5 Ash Grove Cement Co. v. Nebraska Dept. of Rev. , 306 Neb. 947, 947 N.W.2d 731 (2020).6 Id.7 Id.8 First State Bank Neb. v. MP Nexlevel, 307 Neb. 198, 948 N.W.2d 708 (2020).9 In re Interest of Veronica H. , 272 Neb. 370, 721 N.W.2d 651 (2006).10 See id. See, also, Neb. Rev. Stat. § 4......