Mackiewicz v. J.J. & Associates, S-92-583

• Decision Date: 08 April 1994
• Docket Number: No. S-92-583,S-92-583
• Parties: Alan J. MACKIEWICZ, Trustee, et al., Appellants, v. J.J. & ASSOCIATES, a Nebraska General Partnership, et al., Appellees.
• Court: Nebraska Supreme Court

Page 613

514 N.W.2d 613

245 Neb. 568

Alan J. MACKIEWICZ, Trustee, et al., Appellants, v. J.J. & ASSOCIATES, a Nebraska General Partnership, et al., Appellees.

No. S-92-583.

Supreme Court of Nebraska.

April 8, 1994.

Syllabus by the Court

1. Actions: Foreclosure: Equity. A foreclosure action is grounded in equity.

2. Actions: Liens: Equity. An action to determine the priority of liens is grounded in equity.

3. Equity: Appeal and Error. In an appeal of an equity action, an appellate court tries the factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court, provided, where credible evidence is in conflict on a material issue of fact, the appellate 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.

4. Appeal and Error. Regarding a question of law, an appellate court has an obligation to reach a correct conclusion independent of that reached by the court below.

5. Mortgages: Liens: Title. In a mortgage, the mortgagor subjects his or her property to a lien as security for a debt, but retains title and right to possession of the property.

6. Mortgages. A mortgage is a mere pledge or collateral security for the payment of money.

7. Contracts: Real Estate: Sales: Title. As in a mortgage, one selling under an installment land contract agrees to accept payments from the buyer, generally by a series of installments over time, until the purchase price as established by the contract has been paid. When the contract price has been paid, the seller must deliver a deed of title to the buyer.

8. Contracts: Real Estate: Sales: Title. Under an installment land contract, the seller retains the legal title as security for the deferred installments of the purchase price, and the buyer acquires equitable ownership of the property.

9. Contracts: Real Estate: Sales: Title. The net result of an installment land contract is that the seller holds the legal title in trust for the buyer.

10. Contracts: Real Estate: Sales. Under an installment land contract, the buyer in possession is, for all practical purposes, the owner of the property, with all the rights of an owner, subject only to the terms of the contract.

11. Conveyances: Property: Intent: Equity. In construing instruments conveying property, equity concerns itself with the substance and not the form of the transaction, and the particular form or words of a conveyance are unimportant if the intention of the parties can be ascertained.

12. Equity: Courts. A court of equity will look to the substance of the transaction, rather than give heed to the mere form it may assume.

13. Contracts: Mortgages: Intent. If an instrument executed by parties is intended by them as security for a debt, whatever may be its form or name, it is in equity a mortgage.

14. Contracts: Real Estate: Sales: Title. Where the owner of real estate enters into a contract of sale, retaining legal title until purchase money is paid, the ownership of the realty passes to and vests in the purchaser, and the interest or estate acquired by the buyer is land, and the rights conferred by the contract upon and vested in the seller are personal property.

15. Contracts: Real Estate: Sales: Escrow: Deeds: Title. Where a land contract has an escrow provision stating that the deed will be held in escrow until payment of the purchase price, the grantor of an instrument held in escrow loses control over it so long as the grantee does not default, even though the grantor retains bare legal title in the land as security for payment of the purchase price.

16. Mortgages: Liens: Intent. Where the holder of a senior mortgage discharges it of record and contemporaneously takes a new mortgage, the holder will not, in the absence of paramount equities, be held to have subordinated his or her security to an intervening lien unless the circumstances of the transaction indicate this to have been the holder's intention, or such intention upon the holder's part is shown by extrinsic evidence.

17. Mortgages: Title: Presumptions: Intent. Ordinarily, it is presumed that where it was essential to one's security against an intervening title, one must have intended to keep alive the mortgage title; this presumption applies although one, through ignorance of such intervening title, may have actually discharged the mortgage and canceled the notes and intended to extinguish them.

18. Contracts: Real Estate: Sales: Title: Liens: Mortgages. Because a seller in a land contract retains the title as security for the unpaid purchase money and has an equitable lien on the land to the extent of the debt, a seller has, for all intents and purposes, a purchase-money mortgage.

19. Trial. Where facts are conceded, undisputed, or are such that reasonable minds can draw but one conclusion therefrom, it is the duty of the court to decide the question as a matter of law.

20. Accord and Satisfaction: Words and Phrases. An accord and satisfaction is a discharge of an existing indebtedness by the rendering of some performance different from that which was claimed as due and the acceptance of such substituted performance by the claimant in full satisfaction of the claim.

21. Accord and Satisfaction. To constitute an accord and satisfaction, there must be (1) a bona fide dispute between the parties, (2) substitute performance tendered in full satisfaction of the claim, and (3) acceptance of the tendered performance.

22. Liability: Debtors and Creditors: Contracts. Two conditions must be met in order for an agreement to constitute a novation: (1) The agreement must completely extinguish the existing liability, and (2) a new liability must be substituted in its place.

Alan J. Mackiewicz of Lich, Herold & Mackiewicz, Omaha, for appellants.

G. Michael Wiseman of Wiseman Law Office, Fremont, for appellees Wiseman and Resolution Trust Corp.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, FAHRNBRUCH, LANPHIER and WRIGHT, JJ.

CAPORALE, Justice.

I. STATEMENT OF CASE

In this foreclosure action, the plaintiff-appellant trustee, Alan J. Mackiewicz, and the plaintiffs-appellants vendors and trustees-beneficiaries, George D. Goos and George W. Venteicher, seek to enforce the terms of the deeds of trust executed by the defendant-appellee purchaser, J.J. & Associates, a partnership. The district court determined that the lien of the defendant-appellee Resolution Trust Corporation (RTC), for which the defendant-appellee G. Michael Wiseman serves as successor trustee, was superior to those of Goos-Venteicher and ordered foreclosure in accordance with that determination. Goos-Venteicher then undertook this appeal, persuading us, pursuant to the provisions of Neb.Rev.Stat. § 24-1106(2) (Cum.Supp.1992) and Neb.Ct.R. of Prac. 2 B (rev. 1992), to bypass the Nebraska Court of Appeals. The appellants' assignments of error combine to claim, in summary, that the district court mistakenly determined (1) that they were not entitled to liens with priority over RTC's lien and (2) that even if they were entitled to priority, there had been an accord and satisfaction between them and J.J. & Associates. RTC argues that even if there had been no accord and satisfaction, there was a novation precluding Goos-Venteicher from asserting prior liens. We affirm as modified.

II. SCOPE OF REVIEW

A foreclosure action is grounded in equity, Metropolitan Life Ins. Co. v. Kissinger Farms, 244 Neb. 620, 508 N.W.2d 568 (1993), as is an action to determine the priority of liens, Reilly v. First Nat. Bank & Trust Co., 220 Neb. 443, 370 N.W.2d 163 (1985).

In an appeal of an equity action, an appellate court tries the factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court, provided, where credible evidence is in conflict on a material issue of fact, the appellate 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. How v. Mars, 245 Neb. 420, 513 N.W.2d 511 (1994); Fritsch v. Hilton Land & Cattle Co., 245 Neb. 469, 513 N.W.2d 534 (1994); Lange Indus. v. Hallam Grain Co., 244 Neb. 465, 507 N.W.2d 465 (1993).

However, regarding a question of law, an appellate court has an obligation to reach a correct conclusion independent of that reached by the court below. Powell v. American Charter Fed. Sav. & Loan Assn., 245 Neb. 551, 514 N.W.2d 326 (1994); Jasa v. Douglas County, 244 Neb. 944, 510 N.W.2d 281 (1994).

III. FACTS

On December 21, 1987, Goos-Venteicher sold two lots to J.J. & Associates under separate installment land contracts which were recorded on December 30, 1987. According to the terms of the contracts, J.J. & Associates paid $10,000 down on each lot, and the balances of $33,000 and $34,500 were to be paid in three subsequent installments, the first installment becoming due on December 21, 1988. Contemporaneously with the execution of the land contracts, Goos-Venteicher executed warranty deeds to J.J. & Associates for each lot, and J.J. & Associates executed quitclaim deeds for the lots to Goos-Venteicher. All four deeds were placed in escrow; under the terms of the land contracts, the warranty deeds were to be delivered to J.J. & Associates upon payment in full of the purchase price; the quitclaim deeds were to be recorded upon written notification to the escrow agent that J.J. & Associates had defaulted.

Unknown to Goos-Venteicher, J.J. & Associates executed, on May 10, 1988, a promissory note to Occidental Nebraska Federal Savings Bank in the amount of $500,000, together with a deed of trust covering four lots, the two Goos-Venteicher lots and two Occidental lots. This Occidental deed of trust was recorded on June 9, 1988. J.J. & Associates used the Occidental loan to refinance the purchase price and improvements on the two Occidental lots and to provide...