Chadron Energy Corp. v. First Nat. Bank of Omaha

• Decision Date: 31 August 1990
• Docket Number: No. 88-095,88-095
• Citation: 459 N.W.2d 718,236 Neb. 173
• Parties: , 12 UCC Rep.Serv.2d 1183 CHADRON ENERGY CORPORATION, a Nebraska Corporation, Appellee, v. FIRST NATIONAL BANK OF OMAHA, a National Bank, Appellant.
• Court: Nebraska Supreme Court

Page 718

459 N.W.2d 718

236 Neb. 173, 12 UCC Rep.Serv.2d 1183

CHADRON ENERGY CORPORATION, a Nebraska Corporation, Appellee, v. FIRST NATIONAL BANK OF OMAHA, a National Bank, Appellant.

No. 88-095.

Supreme Court of Nebraska.

Aug. 31, 1990.

Syllabus by the Court

1. Directed Verdict. In order to sustain a motion for a directed verdict, the court resolves the controversy as a matter of law and may do so only when the facts are such that reasonable minds can draw but one conclusion.

2. Directed Verdict. In considering the evidence for the purpose of a motion for directed verdict, the party against whom the motion is made is entitled to have the benefit of every inference which can reasonably be drawn from the evidence; if there is any evidence in favor of the party against whom the motion is made, the case may not be decided as a matter of law.

3. Verdicts: Appeal and Error. As a general rule, in determining the sufficiency of the evidence to sustain a verdict in a civil case, this court considers the evidence most favorably to the successful party and resolves evidential conflicts in favor of such party, who is entitled to every reasonable inference deducible from the evidence.

4. Verdicts: Appeal and Error. A civil jury verdict will not be disturbed on appeal unless clearly wrong. A verdict is not to be set aside where the evidence is in conflict or where reasonable minds may reach different conclusions or inferences, as it is within the jury's province to decide issues of fact.

5. Uniform Commercial Code: Sales: Juries. The issue of whether a sale was commercially reasonable under the Uniform Commercial Code is a question of fact for a jury to decide.

6. Juries: Evidence. It is for the jury, as trier of the facts, to resolve conflicts in the evidence and to determine the weight and credibility to be given to the testimony of the witnesses.

7. Uniform Commercial Code: Sales: Words and Phrases. Additional surplus is the difference between the price actually received and the price that could have been obtained if the sale had been conducted in a commercially reasonable manner.

8. Appeal and Error. This court will not consider assignments of error which are not discussed in the brief.

9. Jury Instructions: Proof: Appeal and Error. In order to establish as error the trial court's refusal to give a requested instruction, an appellant is under a threefold burden to show that he or she was prejudiced by the court's refusal, that the tendered instruction is a correct statement of the law, and that the instruction is applicable to the evidence in the case.

10. Uniform Commercial Code: Sales: Debtors and Creditors: Notice. A creditor conducting a sale under the Uniform Commercial Code must give the debtor reasonable notice, and, ordinarily, a minimum of 3 business days is required.

11. Uniform Commercial Code: Security Interests. Under Neb.U.C.C. § 9-503 (Reissue 1980), unless otherwise agreed, on default a secured party has the right to take possession of the collateral securing the indebtedness.

12. Uniform Commercial Code: Security Interests. Under Neb.U.C.C. § 9-504(2) (Reissue 1980), after default a secured party may sell, lease, or otherwise dispose of any or all of the collateral, and no distinction is made between secured parties of graduated priorities. There is no requirement that the secured party hold first priority status.

13. Uniform Commercial Code: Foreclosure: Security Interests: Notice. After a foreclosure sale under Neb.U.C.C. § 9-504(1) (Reissue 1980), the proceeds are to be applied to the reasonable expenses of the sale, the satisfaction of the indebtedness secured by the security interest under which the disposition is made, and the satisfaction of indebtedness secured by any subordinate security interest in the collateral if written notice of demand is made before distribution of the proceeds is completed. The code does not require distribution of proceeds to the satisfaction of senior security interests when a junior secured party conducts a foreclosure sale.

14. Contracts: Bailment: Liability: Conversion. A special contract of bailment prevails in determining the liabilities 15. Uniform Commercial Code: Security Interests: Liens: Foreclosure. Under Neb.U.C.C. § 9-504(4) (Reissue 1980), only subordinate security interests and liens are cut off. A senior party's interest in the collateral is not discharged by a junior secured party's foreclosure sale, and, generally, the collateral in the hands of the purchaser is subject to the senior secured interest.

of the parties, as against general principles of law applicable in the absence of express agreement. When a bailee disposes of property without authority of the bailor, the bailee may be guilty of conversion.

16. Uniform Commercial Code: Security Interests: Foreclosure. Unlike the continuing security interest in the collateral, under Neb.U.C.C. § 9-306(2) (Reissue 1980) whether a sale was authorized does not affect the secured party's continuing interest in the proceeds of a foreclosure sale.

17. Uniform Commercial Code: Security Interests: Foreclosure. When the disposition of the collateral is by a junior secured party, generally the security interest of the senior secured party continues only in those proceeds of the disposition that are received by the debtor.

18. Subrogation: Words and Phrases. Subrogation is the substitution of one person in the place of another with reference to a lawful claim, demand, or right, so that the one who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies, or securities.

19. Subrogation: Words and Phrases. Subrogation is the right of one, who has paid an obligation which another should have paid, to be indemnified by the other.

20. Subrogation: Liability. The doctrine of subrogation includes every instance in which one person pays a debt for which another is primarily liable, and which in equity and good conscience should have been discharged by the latter, so long as the payment was made under compulsion or for the protection of some interest of the one making payment and in discharge of an existing liability.

21. Subrogation. The doctrine of subrogation applies where a party is compelled to pay the debt of a third person to protect his or her own rights or interest, or to save his or her own property.

22. Subrogation: Liability. Subrogation is not allowed where the debt paid is one for which the payor is primarily liable.

23. Trial: Evidence. The admission or exclusion of evidence is initially left to the discretion of the trial court, which must determine the relevancy and possible prejudicial effects of the proffered evidence.

24. Trial: Evidence: Damages. Under the collateral source rule, the fact that the party seeking recovery has been wholly or partially indemnified for a loss by insurance or otherwise generally cannot be set up by the wrongdoer in mitigation of damages.

James B. Cavanagh, of Erickson & Sederstrom, P.C., for appellant.

M.J. Bruckner, of Bruckner, O'Gara, Keating, Sievers & Hendry, P.C., Lincoln, for appellee.

Before HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.

HASTINGS, Chief Justice.

This is the second appearance of this case in this court. Our former opinion may be found in Chadron Energy Corp. v. First Nat. Bank, 221 Neb. 590, 379 N.W.2d 742 (1986) (CEC I ). As a result of that opinion, the cause was remanded to the district court for trial on two general issues: (1) whether the sale of secured stock by the defendant here was conducted in a commercially reasonable manner and, if not, the damages, if any, sustained by Chadron Energy Corporation (CEC), and (2) a redetermination of the damages for conversion sustained by Gordon C. Shaffer, Jr., Marian Shaffer, and Leslie Kleman, to be At the trial out of which this appeal arises, the jury found that FNBO failed to conduct a commercially reasonable foreclosure sale and that the reasonable value of the stock had the sale been commercially reasonable would have been $2,353,200, rather than the $1,410,000 which the sale actually brought. Following that verdict, the district court determined that FNBO had no claim to certain interpleaded funds.

computed as of October 1982 rather than November 1980. Before the new second trial, the Shaffers and Kleman settled their claims against the First National Bank of Omaha ^BO and are no longer parties to this litigation.

This litigation is based on a series of involved and somewhat complicated transactions.

In March 1979, the First National Bank of Chadron ^B-Chadron was a national banking corporation which had issued and outstanding 2,000 shares of capital stock. On March 6, 1979, six individuals represented by George Wulf (Wulf Group) entered into a stock purchase agreement for 1,990 shares of FNB-Chadron stock. The sale price was $5 million, part of which was to be paid in cash at the time of the closing and the balance of which was to be represented by notes from the individual members of the Wulf Group. Of the 1,990 shares of stock to be purchased, 1,815 would be purchased from the Shaffers and Kleman. In order to obtain the necessary cash to make the downpayment to the Shaffers and Kleman, the Wulf Group borrowed $2.1 million from FNBO. The Shaffers received $860,000 in cash plus notes totaling $2,102,500, and Kleman received $1,180,000 in cash plus notes totaling $395,000.

Both the loan from FNBO and the notes to the Shaffers and Kleman were secured by 1,850 shares of FNB-Chadron stock. (The discrepancy between the number of shares purchased from the Shaffers and Kleman and the number of shares securing the debts to FNBO, the Shaffers, and Kleman is unexplained in the record.) By agreement among all parties, FNBO was designated as the senior lienholder at that time and the Shaffers and Kleman as junior lienholders.

FNBO took physical control of six individual...