County of Keith v. Fuller

• Decision Date: 23 February 1990
• Docket Number: No. 88-300,88-300
• Parties: COUNTY OF KEITH, Nebraska, Appellee, v. Norman K. FULLER et al., Appellees, Adams Bank & Trust, Appellant.
• Court: Nebraska Supreme Court

Page 25

452 N.W.2d 25

234 Neb. 518

COUNTY OF KEITH, Nebraska, Appellee, v. Norman K. FULLER et al., Appellees Adams Bank & Trust, Appellant.

No. 88-300.

Supreme Court of Nebraska.

Feb. 23, 1990.

Syllabus by the Court

1. Foreclosure: Equity. An action to foreclose a lien is grounded in equity.

2. Equity: Appeal and Error. In an appeal of an equity action, this court tries factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court, provided, when credible evidence is in conflict on a material issue of fact, this court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another.

3. Mortgages: Merger. A mortgage does not merge in the fee title when there is no identity of ownership of the mortgage and the fee title.

4. Mortgages: Loans. A mortgage is a mere security and has no efficacy if unaccompanied by a debt or obligation. There must be an agreement, either express or implied, on the part of the mortgagor, or someone in whose behalf the mortgage is executed, to pay to the mortgagee a sum of money either on account of a preexisting debt or present loan. Although money need not be loaned at the time the mortgage is given, there must still be an obligation at the time the mortgage is executed for future advances of funds.

5. Mortgages: Intent: Words and Phrases. Mortgage clauses, known as dragnet clauses, which undertake to secure subsequent debts will, in the absence of other legal prohibition, be enforced to the extent they are determined to have been within the intent of the parties.

6. Contracts: Mortgages. The rules governing interpretation of contracts are applicable to mortgages.

7. Contracts. The terms of an instrument are to be accorded their plain and ordinary meaning as ordinary, average, or reasonable persons would understand them.

8. Mortgages: Liens. Where there are several joint mortgagors, a subsequent note executed by one of the mortgagors does not create a lien against the property interests of the mortgagors who are not parties to the subsequent note.

Neil E. Williams and Tanya L. Dillow, of McGinley, Lane, Mueller, O'Donnell & Williams, P.C., Ogallala, for appellant.

Firmin Q. Feltz, Ogallala, for appellee Santero.

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

FAHRNBRUCH, Justice.

Adams Bank & Trust (Adams Bank) appeals a foreclosure decree wherein the Keith County District Court held that Barbara L. Santero's marriage dissolution judgment lien was viable and had priority over two mortgages wherein the bank was the mortgagee. We affirm.

On appeal, Adams Bank claims the trial court erred in failing to find that (1) Santero's judgment lien merged with the fee title to the real estate involved here, (2) it was inequitable for Santero to attempt to enforce her judgment lien after the bank had executed a release in her favor, (3) a 1973 mortgage in its favor is a valid lien against the property here involved, and (4) a 1984 note in the favor of the bank was secured by mortgages executed and delivered to the bank in 1974 and 1977.

An action to foreclose a lien is grounded in equity. Production Credit Assn. of the Midlands v. Schmer, 233 Neb. 749, 448 N.W.2d 123 (1989). In an appeal of an equity action, this court tries factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court, provided, when credible evidence is in conflict on a material issue of fact, this court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another. Id.

On June 28, 1973, Barbara L. Fuller, now known as Barbara L. Santero, and her then husband, Norman K. Fuller, executed and delivered their $100,000 real estate mortgage to Keith County Bank & Trust Company, which later merged with Adams Bank & Trust. The mortgage described:

All of Block Forty-two (42), Aufdengarten's First Addition to Ogallala, Keith County, Nebraska, and that part of the land included within the exterior boundaries thereof which was dedicated to the public use as an alleyway in the original Dedication of Aufdengarten's First Addition to Ogallala, Nebraska, except a tract of land located in the North Half of said Block 42 described as follows: Commencing at the Northwest corner of said Block 42; thence running easterly along the North line of said Block, a distance of 250.0 feet; thence Southerly along the East line of said Block 42, a distance of 2.2 feet; thence Southwesterly along an 11,419.2' radius curve to the left, a distance of 250.3 feet; thence northerly along the West line of said Block, a distance of 9.1 feet to the point of beginning and containing 0.032 acres, more or less.

On February 4, 1974, and March 1, 1977, Barbara and Norman Fuller and Fuller Co., Inc., executed and delivered Small Business Administration promissory notes and mortgages to Keith County Bank. The 1974 note and mortgage were for $100,000, and the 1977 note and mortgage were for $30,000. The mortgages were promptly recorded after they were delivered. The two mortgages described:

All of Block Forty-two (42), Aufdengarten's First Addition to Ogallala, Keith County, Nebraska, and that part of the land included within the exterior boundaries thereof which was dedicated to the public use as an alleyway in the original Dedication of Aufdengarten's First Addition to Ogallala, Nebraska, except a tract of land located in the NorthHalf of said Block 42 described as follows: Commencing at the Northwest corner of said Block 42; thence running easterly along the North line of said Block, a distance of 250.0 feet; thence Southerly along the East line of said Block 42, a distance of 2.2 feet; thence Southwesterly along an 11,419.2' radius curve to the left, a distance of 250.3 feet; thence northerly along the West line of said Block, a distance of 9.1 feet to the point of beginning and containing 0.032 acres, more or less, also except lots five (5) and six (6) in said Block 42, Aufdengarten's First Addition to Ogallala, Keith County, Nebraska.

Barbara and Norman Fuller, beginning in 1972, had held Block 42, Aufdengarten's First Addition, as joint tenants with rights of survivorship and not as tenants in common. In 1974, 1976, and 1978, Barbara Fuller signed a number of personal guaranties in favor of Keith County Bank for Fuller Co. Leasing, Inc.; Fuller Co., Inc.; and Norman Fuller.

On December 7, 1979, the district court for Keith County entered a decree dissolving the marriage of Barbara and Norman Fuller. The court ordered Norman Fuller to pay Barbara Fuller the sum of $149,834.16 in accordance with a property settlement agreement, which was incorporated by reference into the dissolution decree. By joint stipulation dated December 10, 1981, this amount was increased to $164,002.66. On December 7, 1979, in consideration of $1 and the property settlement agreement, Barbara Fuller conveyed by quitclaim deed to Norman Fuller the real estate described in the 1974 and 1977 mortgages.

Under the property settlement agreement, Norman Fuller agreed to attempt to secure the removal of Barbara Fuller as signatory and/or guarantor on all promissory notes, mortgages, and loans which Barbara Fuller had signed or guaranteed. On April 11, 1980, a partial release was obtained by which Keith County Bank, except for any SBA loans existing on December 7, 1979, discharged Barbara Fuller from liability in connection with all promissory notes and personal guaranties which she had executed in favor of the bank.

Thereafter, on June 3, 1980, Norman Fuller executed and delivered a mortgage on the real estate described in the 1974 and 1977 mortgages to Keith County Bank to secure an indebtedness of $100,000. The mortgage was recorded on June 5, 1980. On December 4, 1984, Norman Fuller, as president of Fuller Co., Inc., executed and delivered to Keith County Bank a promissory note for sums not exceeding a maximum principal amount at any time outstanding of $200,000.

Due to delinquent real estate taxes, Keith County became the owner and holder of a tax sale certificate describing the following real estate:

Lots 1, 2, 3, 4, 7, 8, 9, and 10, Block 42 of Aufdengarten's First Addition to Ogallala, Keith County, Nebraska, and that part of the land included within the exterior boundaries thereof which was dedicated to the public use as an alley way in the original dedication of Aufdengarten's First Addition to Ogallala, Nebraska, except that portion thereof conveyed to the State of Nebraska, by a warranty deed recorded in book 5, of deeds, page 639 of the records of Keith County, Nebraska and except that portion thereof conveyed to the City of Ogallala, Nebraska by deeds recorded in book 14 of the deeds, page 555 and 556 of the records of Keith County, Nebraska....

On June 19, 1986, Keith County filed an action to foreclose the tax sale certificate. In its second amended cross-petition, Adams Bank, which had merged with Keith County Bank, sought to foreclose its four mortgages and asked the trial court to establish that its mortgages were first in priority. Barbara Santero filed an amended answer and cross-petitioned for foreclosure of her dissolution judgment lien. The parties stipulated that Keith County's tax lien had first priority on the proceeds of the foreclosure sale.

The evidence shows that at time of trial Norman Fuller owed to Adams Bank, including interest, $26,311.99 on the 1974 note, $9,414.53 on the 1977 note, and $52,663.64 on the 1984 note. The record also reflects that under the dissolution decree, as modified, Norman Fuller owed to Santero at the time of the foreclosure decree $89,043.50 and that $37,730 was due Keith County for real estate taxes involved in the tax foreclosure.

The foreclosure decree canceled the 1973 mortgage because there was...