Schuelke v. Wilson
| Decision Date | 11 December 1998 |
| Docket Number | No. S-97-827,S-97-827 |
| Citation | 587 N.W.2d 369,255 Neb. 726 |
| Court | Nebraska Supreme Court |
| Parties | Dennis D. SCHUELKE, Appellant, v. David L. WILSON, Appellee. |
Syllabus by the Court
1. Breach of Contract: Damages. A suit for damages arising from breach of a contract presents an action at law.
2. Judgments: Appeal and Error. In a bench trial of a law action, a trial court's factual findings have the effect of a jury verdict and will not be set aside unless clearly erroneous.
3. Contracts: Action: Pleadings. A counterclaim may be asserted by a defendant against a plaintiff in the same action where the counterclaim arises from the same contract or transaction set forth in the plaintiff's petition as the foundation of the plaintiff's claim.
4. Contracts: Pleadings. Matters which seek to avoid a valid contract are affirmative defenses.
Pleadings: Proof. The burden of proving an affirmative defense rests upon the party alleging the defense.
6. Res Judicata. Under the traditional rule of res judicata, sometimes called claim preclusion, any rights, facts, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which a judgment or decree is rendered upon the merits is conclusively settled by the judgment therein and cannot again be litigated by the parties and privies.
7. Proof: Trial: Appeal and Error. All matters expressly or by necessary implication adjudicated by the Nebraska Supreme Court become the law of the case on remand for new trial and will not be considered again unless it is shown that the facts presented and the second trial are materially and substantially different from the facts presented at the first trial. The burden of showing a material and substantial difference in the facts is on the party asserting the difference.
8. Contracts: Pleadings: Consideration. Generally, there is an entire failure of consideration where property purchased is entirely worthless, but there is not failure of consideration if the property is not entirely worthless or if it has any substantial value although less than the consideration paid, as 9. Attorney Fees: Appeal and Error. An appellate court may award attorney fees on appeal regardless of whether they were requested or ordered in the trial court.
where, by reason of some unsoundness or imperfection, it is merely diminished in value.
10. Actions: Words and Phrases. An action is frivolous or in bad faith when a party attempts to relitigate the same issue previously resolved in an action involving the same parties or when a legal position is wholly without merit, that is, without rational argument based on law and evidence to support a litigant's position.
11. Attorney Fees: Actions. Any doubt as to whether a legal position is frivolous so as to warrant an award of attorney fees should be resolved in favor of the party whose legal position is in question.
Terry K. Barber, Lincoln, for appellant.
Mark J. Peterson, of Erickson & Sederstrom, P.C., Omaha, for appellee.
Dennis D. Schuelke appeals a judgment of the Lancaster County District Court, ordering him to pay David L. Wilson $268,607 plus interest, in connection with two promissory notes which Schuelke executed in favor of Wilson for the purchase of a business. We affirm.
In October 1989, Schuelke entered into a contract with Wilson for the purchase of a Maaco automobile painting business that Wilson had owned in Lincoln, Nebraska, since 1980. The sales agreement between Schuelke and Wilson was the product of at least 4 months of discussion between the parties. The purchase price upon which they agreed was $250,000. Schuelke paid Wilson $140,000 in cash at the time of purchase. Schuelke executed two promissory notes in favor of Wilson to finance the remainder of the purchase price.
Schuelke executed both promissory notes on October 6, 1989. One note was in the principal amount of $65,000. The first payment on this note was $15,000, due on June 12, 1991. This note provided that interest would accrue at the rate of 16 percent per annum on all overdue installment payments. The second promissory note was for the principal sum of $45,000, all of which was due and payable on October 6, 1994. The second note also provided for interest accruing on unpaid sums due and owing at the rate of 16 percent per annum.
Schuelke assumed operation of the Maaco business in mid-October 1989. Within less than a month, Schuelke sent a letter to Wilson, stating that he desired to rescind the sales contract. Schuelke claimed that Wilson had materially misrepresented, inter alia, the revenue and operating costs of the Maaco business in order to induce Schuelke to purchase it. Wilson refused to consent to Schuelke's request to rescind the contract.
Schuelke operated the Maaco business from October 1989 through June 1990, at which time he closed and abandoned the business premises. Maaco Enterprises, Inc., which authorized Schuelke to operate the Lincoln business, terminated his franchise agreement.
Schuelke filed an action against Wilson in the district court for Lancaster County on January 12, 1990, to compel rescission of the sales contract. Wilson counterclaimed, alleging that he was entitled to an award of damages occasioned by Schuelke's default on the terms of the two promissory notes, by Schuelke's failure to continue operating the Maaco business, by Schuelke's sale without notice to Wilson of collateral that Schuelke had pledged to secure his debt to Wilson, and by filing of the action seeking rescission of the sales contract. Schuelke denied Wilson's counterclaim, and he affirmatively alleged that Wilson's right to recover on the promissory notes was barred by a failure of consideration, as well as Wilson's alleged fraudulent representations to Schuelke, which were described in detail in Schuelke's petition seeking rescission of the contract. The parties' claims against each On appeal, in Schuelke v. Wilson, 250 Neb. 334, 549 N.W.2d 176 (1996), this court reversed the trial court's rescission order. We found that Schuelke had failed to prove by clear and convincing evidence that Wilson intended for Schuelke to rely upon certain representations, and we further held that Schuelke's reliance upon these representations was neither justified nor undertaken in an ordinary and prudent manner. We concluded Schuelke by reversing the rescission order entered by the trial court and remanding the cause to the trial court to address Wilson's counterclaim for payment of the promissory notes.
other were tried to the court during an 8-day trial in late 1992. In an order filed on October 8, 1993, the trial court ordered rescission of the sales contract between Schuelke and Wilson on the basis of fraudulent misrepresentation.
On remand, the district court conducted a trial of Wilson's counterclaim for payment of the promissory notes on February 5, 1997. In a brief hearing, counsel for the parties agreed that the trial court could decide the counterclaim based upon the evidence submitted in the 1992 trial of Schuelke's rescission claim, all of which was contained in the 10-volume bill of exceptions submitted on appeal in Schuelke. The parties jointly introduced one new exhibit, a stipulation signed by counsel for both parties which stated that as of the date of trial, no money payments had been made by Schuelke to Wilson to satisfy either of the promissory notes executed by Schuelke in favor of Wilson.
In an order filed on May 29, 1997, the trial court noted that with the exception of the parties' written stipulation that no money payments had been made by Schuelke to Wilson on the promissory notes, no evidence submitted on remand was "materially and substantially different from the evidence considered by the Supreme Court in Schuelke [v. Wilson, 250 Neb. 334, 549 176 (1996) ]." On the basis of the law-of-the-case doctrine, the trial court held that Wilson was entitled to payment by Schuelke of $268,607, plus interest accruing on the judgment at the rate of $75.98 per day from and inclusive of February 6, 1997, the day after the trial on Wilson's counterclaim. Schuelke appeals.
Schuelke claims, restated, that the trial court erroneously failed to consider, and to find, that Schuelke's "legal" defenses to Wilson's claim for payment of the promissory notes were valid and precluded the judgment rendered against him for default on the promissory notes.
A suit for damages arising from breach of a contract, including breach of the terms of a promissory note, presents an action at law. Production Credit Assn. v. Eldin Haussermann Farms, 247 Neb. 538, 529 N.W.2d 26 (1995). In a bench trial of a law action, a trial court's factual findings have the effect of a jury verdict and will not be set aside unless clearly erroneous. Richardson v. Mast, 252 Neb. 114, 560 N.W.2d 488 (1997).
Schuelke's assigned errors regarding his "legal" defenses to Wilson's claim for damages due to Schuelke's default on the notes necessitate that we commence our analysis by distinguishing the nature of the claims asserted by the parties against each other.
Schuelke initiated this action by seeking rescission of his contract with Wilson for the purchase of the Maaco business. An action for rescission sounds in equity, and it is subject to de novo review upon appeal. Schuelke v. Wilson, 250 Neb. 334, 549 N.W.2d 176 (1996). In a rescission case, a party alleging fraud as the basis for rescission must prove all of the elements of the fraudulent conduct by clear and convincing evidence. Id., Kracl v. Loseke, 236 Neb. 290, 461 N.W.2d 67 (1990).
Wilson counterclaimed against Schuelke for an award of money damages based upon Schuelke's breach of two promissory notes. Wilson's counterclaim constituted an action at law. ...
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