McCook Nat. Bank v. Myers

• Decision Date: 23 July 1993
• Docket Number: No. S-91-316,S-91-316
• Citation: McCook Nat. Bank v. Myers, 243 Neb. 853, 503 N.W.2d 200 (Neb. 1993)
• Parties: McCOOK NATIONAL BANK, a National Banking Association, Appellee and Cross-Appellant, v. Arden E. MYERS and Edith Myers, Husband and Wife, et al., Appellants and Cross-Appellees, and Maxine E. Myers, Appellee and Cross-Appellee.
• Court: Nebraska Supreme Court

Page 200

503 N.W.2d 200

243 Neb. 853

McCOOK NATIONAL BANK, a National Banking Association, Appellee and Cross-Appellant, v.Arden E. MYERS and Edith Myers, Husband and Wife, et al., Appellants and Cross-Appellees, and Maxine E. Myers, Appellee and Cross-Appellee.

No. S-91-316.

Supreme Court of Nebraska.

July 23, 1993.

Syllabus by the Court

1.Mortgages: Real Estate: Foreclosure: Equity.A proceeding to foreclose a real estate mortgage is an equitable action.

2.Mortgages.A mortgage may be enforceable despite certain inaccuracies in its description of the debt it secures.

3.Pleadings: Appeal and Error.A trial court may conform the pleadings to the facts proved when the amendment does not change substantially the claim or defense.The decision to allow such an amendment rests with the discretion of the trial court and will not be error unless prejudice resulted.

4.Pleadings: Appeal and Error.Prejudicial error results when a pleading is allowed to be amended where the amendment changes the issues and affects the quantum of proof as to any material fact.

5.Bankruptcy: Debtors and Creditors: Liability.A discharge in bankruptcy does not extinguish the debt itself, but merely releases the debtor from personal liability and bars its enforcement against him.The debt still exists, however, and can be collected from any other entity that might be liable.

6.Collateral Estoppel.There are four conditions that must exist for the doctrine of collateral estoppel to apply: (1) The identical issue was decided in a prior action, (2) there was a judgment on the merits which was final, (3)the party against whom the rule is applied was a party or in privity with a party to the prior action, and (4) there was an opportunity to fully and fairly litigate the issue in the prior action.

7.Mortgages: Foreclosure: Receivers: Appeal and Error.Whether a receiver should be appointed in conjunction with a mortgage foreclosure action is a matter within the discretion of the trial court.On appeal, that decision will be reviewed de novo on the record and will be affirmed in the absence of an abuse of discretion.

8.Mortgages: Foreclosure: Receivers: Appeal and Error.In the appointment of a receiver, especially in a mortgage foreclosure case, very much must be left to the discretion of the district judge, and unless it is made to appear that this discretion has been exercised unwisely and to the injury of the party complaining, an appellate court will not interfere.

9.Judgments: Liens: Child Support: Alimony.The lien of a judgment for child support or alimony constitutes a lien the same as other monetary judgments and is a lien not only for past due installments but also as security for installments to fall due in the future.

10.Statutes: Liens: Mortgages: Alimony.Under the statutes of Nebraska, alimony judgments are liens, and as such, if they precede a mortgage and are of record, they have priority over the mortgage for both past and future installments.

11.Foreclosure: Liens.A junior lienholder can foreclose a senior lien only with the senior lienholder's consent.

12.Foreclosure: Liens: Parties.A senior lienholder may be made a party to a foreclosure action to determine the priority and amount of his or her lien.

Daylene A. Bennett, of Burger, Bennett & Green, P.C., McCook, for appellants.

Susan C. Williams, of Murphy, Pederson & Waite, North Platte, and Stanley C. Goodwin, McCook, for appellee McCook Nat. Bank.

George E. Clough, of Clough Law Office, North Platte, for appelleeMaxine E. Myers.

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

WHITE, Justice.

Arden Myers; his wife, Edith Myers; and Adair Myers (the Myerses), along with the Myers Brothers partnership (the Partnership), appeal the judgment of the district court foreclosing two real estate mortgages signed by the Myerses and held by appellee McCook National Bank (the Bank).The foreclosure was allowed in order to pay two of the Partnership's notes which were in default.The Bank cross-appeals, arguing that the court erred by (1) refusing to grant its request for a receiver and (2) failing to value and foreclose an alimony lien held by Adair Myers' former wife, appelleeMaxine E. Myers.We affirm as modified.

At the time of trial, the Myerses owned the mortgaged land, which was located in Red Willow and Hitchcock Counties, as tenants in common.A portion of the land was subject to Maxine's alimony lien, which was created by an August 16, 1979, divorce decree and provided alimony until her death or remarriage.

On the date the mortgages were executed, the Partnership owed the Bank $1,235,000 pursuant to two promissory notes.In August 1984, at the request of the Bank, the Myerses executed the two mortgages on the subject land.However, in their description of the debt secured, the mortgages indicated that the two notes were signed by the Myerses in their individual capacity.In August and December 1985, the Partnership executed two more promissory notes to the Bank, renewing the obligations under the previous notes.The Partnership defaulted on the renewal notes in 1986.

In May 1987, the Partnership filed for relief under chapter 12 of the Bankruptcy Code.Ultimately, the bankruptcy court confirmed the Partnership's debtor's plan but not before two versions had been submitted.Summarized, the following relevant facts occurred during the bankruptcy: The Partnership's initial plan recited an overall indebtedness to the Bank of $1,237,931.73.The plan then segmented the debt, listing the appraised values of the various assets which secured the debt and proposing to pay the Bank the amount of its secured claim in accordance with those appraised values.Although the payment periods and interest rates vary as to each secured amount, the plan divided the debt as follows: $163,400 for the debt secured by the Partnership's equipment; $60,160 for the debt secured by the Partnership's cattle; $33,428 for the debt secured by a government payment due the Partnership; $6,400 for the debt secured by the Partnership's wheat crop; and $447,647 for the debt secured by the real estate, the value of which real estate was reached by subtracting a specified amount for Maxine's alimony lien.The total proposed repayment under the plan was $711,035.

Following submission of the plan, the Bank objected to it.After reviewing a statement of facts submitted by the Partnership, the bankruptcy court ruled that the real estate was not subject to the bankruptcy proceeding.The Partnership then submitted two more versions of the debtor's plan, the second of which was confirmed by the bankruptcy court.Under its amended versions, the plan no longer included the real estate as security for any debt and listed only the Partnership's chattels as security.The plan proposed to pay only that portion of the debt secured by the Partnership's chattels, an amount which would result in a return of approximately $300,000 to the Bank.At the time of the trial in the present action, the Partnership was in full compliance with that plan.

In September 1989, the Bank filed the present suit, seeking foreclosure of the mortgages.The Bank's petition stated that "the [Myerses] executed and delivered to [the Bank] two promissory notes in the amount of $1,235,000.00" that were subsequently renewed by notes signed "Myers Brothers by Adair Myers."The petition then noted that the Myerses had executed two mortgages on land they owned "to secure the payment of the indebtedness now evidenced by [the aforementioned] notes."Although the petition included copies of the renewed notes and the mortgages, which still described the debt as being personal to the Myerses, the prayer for relief made no mention of reformation.The Bank also requested appointment of a receiver.

In their amended answer, the Myerses denied their individual indebtedness to the Bank.The defendants also raised several affirmative defenses, including that (1) the Partnership's debt had been discharged in bankruptcy and (2) the Bank was collaterally estopped, through the bankruptcy decision, from claiming that the Myerses were indebted on the notes.At trial, after the parties had rested, the Bank requested that its petition be conformed to the proof.The district court sustained the motion.

In its order, the district court first held that the mortgages were made with the intent to secure the Partnership's notes.Additional rulings by the court included that (1) the applicable statute of limitations was foreclosure; (2) there was no res judicata; (3) estoppel had not been pled; (4) although the Partnership's debt was discharged, the mortgage was not; and (5) no receiver should be appointed.

With regard to Maxine's lien, the court held that it was a superior lien to the Bank's on the Red Willow County real estate and that the lien secured $35,621 in past alimony.The court also held that the amount of Maxine's future lien was not determinable and that thus foreclosure of the lien could not be made without her consent.However, the court ruled that the property could be sold subject to Maxine's lien.

The court then ruled that the Bank was entitled to a decree of foreclosure and sale.The court awarded the Bank a judgment of $1,419,405.52 and ordered the defendants' interest in the land foreclosed.The Partnership was given 20 days to pay the debt or the property would be sold, subject to Maxine's superior lien on the applicable portion of the land.

Summarized, the Myerses and the Partnership argue that the court erred by (1) determining that the Bank had properly pled its cause of action and permitting amendment of the pleadings at the end of the trial; (2) determining that reformation is not a separate cause of action and need not be specifically pled; (3) not holding that reformation was barred by the statute of limitations; (4) failing to determine that the Bank did not meet its...