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Patrick S. Nathan and Kelsey M. Nathan, 

appellants and cross-appellees, v. Jason McDermott 

and Brandon Hoy, appellees and cross-appellants, 

and Chris Nielsen and Results Business 

Advisors LLC, appellees.

___ N.W.2d ___

Filed June 26, 2020. No. S-19-637.

1. Appeal and Error. To be considered by an appellate court, an alleged 

error must be both specifically assigned and specifically argued in the 

brief of the party asserting the error.

2. Summary Judgment: Appeal and Error. An appellate court will affirm 

a lower court’s grant of summary judgment if the pleadings and admitted evidence show that there is no genuine issue as to any material facts 

or as to the ultimate inferences that may be drawn from those facts and 

that the moving party is entitled to judgment as a matter of law.

3. ____: ____. In reviewing a summary judgment, the court views the 

evidence in the light most favorable to the party against whom the 

judgment was granted and gives such party the benefit of all reasonable 

inferences deducible from the evidence.

4. Contracts. The interpretation of a contract and whether the contract is 

ambiguous are questions of law subject to independent review.

5. ____. A contract written in clear and unambiguous language is not subject to interpretation or construction and must be enforced according to 

its terms.

6. Contracts: Words and Phrases. A contract is ambiguous when a word, 

phrase, or provision in the contract has, or is susceptible of, at least two 

reasonable but conflicting interpretations or meanings.

7. Contracts. A determination as to whether an ambiguity exists in a 

contract is to be made on an objective basis, not by the subjective 

contentions of the parties; thus, the fact that the parties have suggested 

opposite meanings of a disputed instrument does not necessarily compel 

the conclusion that the instrument is ambiguous.

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

07/17/2020 01:07 AM CDT
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8. Contracts: Fraud: Election of Remedies. A party who fraudulently 

induces another to contract and then also refuses to perform the contract 

commits two separate wrongs, so that the same transaction gives rise to 

distinct claims that may be pursued to satisfaction consecutively.

9. Pleadings: Actions: Contracts: Torts. To determine whether an action 

is based on a contract or a tort, a court must examine and construe the 

petition’s essential and factual allegations by which the plaintiff requests 

relief, rather than the legal terminology utilized in the petition or the 

form of the pleading. Consideration must be given to the facts which 

constitute the cause of action.

10. Pleadings: Actions: Breach of Contract: Torts. If the petition contains a cause of action for breach of contract, additional averments 

appropriate to a cause of action for a wrong will not change the action 

from contract to tort, and if there is a doubt as to the character of the 

action, it will be resolved in favor of an action in contract. In such an 

instance, the statements appropriate to an action in tort will be considered surplusage.

11. Promissory Notes: Words and Phrases. Absent a defense, a promissory note is ordinarily a stand-alone, unqualified, enforceable promise 

to pay.

12. Pleadings: Proof. The burden of both pleading and proving affirmative 

defenses is upon the defendants, and when they fail to do so, they cannot 

recover upon mere argument alone.

13. Limitations of Actions: Recoupment. The defense of recoupment 

survives as long as a plaintiff’s cause of action exists, even if affirmative legal action upon the subject of recoupment is barred by the statute 

of limitations.

14. Actions: Recoupment. Recoupment must arise out of the same transaction or occurrence which is the basis of a plaintiff’s action and is 

merely defensive, that is, does not seek an affirmative judgment in the 

action.

15. Claims: Recoupment: Proof. To state an affirmative defense of recoupment, the defendant must prove the elements of his claim and that it 

occurred in the very same action as the plaintiff’s claim against him.

16. Fraud: Proof. A fraudulent misrepresentation claim requires a plaintiff 

to establish the following elements: (1) A representation was made; (2) 

the representation was false; (3) when made, the representation was 

known to be false or made recklessly without knowledge of its truth and 

as a positive assertion; (4) the representation was made with the intention that the plaintiff should rely on it; (5) the plaintiff did so rely on it; 

and (6) the plaintiff suffered damage as a result.
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17. Negligence: Fraud. Negligent misrepresentation has essentially the 

same elements as fraudulent misrepresentation with the exception of 

the defendant’s mental state.

18. ____: ____. In both negligent and fraudulent misrepresentation cases, 

whether the plaintiff exercised ordinary prudence is relevant to whether 

the plaintiff justifiably relied on the misrepresentation when the means 

of discovering the truth was in the plaintiff’s hands.

19. Fraud. A plaintiff is justified in relying upon a positive statement of fact 

if an investigation would be required to discover the truth.

20. ____. In determining whether an individual reasonably relied on a 

misrepresentation, courts consider the totality of the circumstances, 

including the nature of the transaction; the form and materiality of the 

representation; the relationship of the parties; the respective intelligence, 

experience, age, and mental and physical condition of the parties; and 

their respective knowledge and means of knowledge.

21. Motions to Dismiss: Pleadings: Appeal and Error. A district court’s 

grant of a motion to dismiss on the pleadings is reviewed de novo, 

accepting the allegations in the complaint as true and drawing all reasonable inferences in favor of the nonmoving party.

22. Principal and Agent. Agency is the fiduciary relation which results 

from the manifestation of consent by one person to another that the 

other shall act on his or her behalf and subject to his or her control, and 

the consent of the other to so act.

23. ____. An agent and principal are in a fiduciary relationship such that 

the agent has an obligation to refrain from doing any harmful act to the 

principal, to act solely for the principal’s benefit in all matters connected 

with the agency, and to adhere faithfully to the instructions of the principal, even at the expense of the agent’s own interest.

24. Pleadings: Evidence: Trial. A party may at any and all times invoke the 

language of his opponent’s pleadings on which the case is being tried on 

a particular issue as rendering certain facts indisputable.

25. Pleadings: Evidence: Waiver. The pleadings in a cause are not a means 

of evidence, but a waiver of all controversy, so far as the opponent 

may desire to take advantage of them, and therefore, a limitation of 

the issues.

26. Principal and Agent. As a general rule, where an obligation is that of a 

principal, a court cannot enforce the obligation against the agent as long 

as he or she is merely acting as agent.

27. Principal and Agent: Liability. An agent may be held liable for the 

agent’s conduct, such as misrepresentation of a material fact, during a 

transaction on behalf of the principal.
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28. ____: ____. An agent can be held liable if the agent makes some representation or performs some act on the agent’s own responsibility without 

authorization from the principal.

29. Attorney Fees: Appeal and Error. On appeal, a trial court’s decision awarding or denying attorney fees will be upheld absent an abuse 

of discretion.

30. Judges: Words and Phrases. A judicial abuse of discretion exists when 

the reasons or rulings of a trial judge are clearly untenable, unfairly 

depriving a litigant of a substantial right and denying just results in matters submitted for disposition.

31. Actions: Attorney Fees: Words and Phrases. A frivolous action is one 

in which a litigant asserts a legal position wholly without merit; that is, 

the position is without rational argument based on law and evidence to 

support the litigant’s position.

32. Attorney Fees: Words and Phrases. The term frivolous connotes an 

improper motive or legal position so wholly without merit as to be ridiculous. Any doubt about whether a legal position is frivolous or taken in 

bad faith should be resolved in favor of the one whose legal position is 

in question.

Appeal from the District Court for Douglas County: Leigh 

Ann Retelsdorf, Judge. Affirmed.

James D. Sherrets and, on brief, Jared C. Olson, of Sherrets, 

Bruno & Vogt, L.L.C., for appellants.

Scott D. Jochim and Matthew W. Harris, of Croker, 

Huck, Kasher, DeWitt, Anderson & Gonderinger, L.L.C., for 

appellees.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, 

Papik, and Freudenberg, JJ.

Cassel, J.

I. INTRODUCTION

The buyers of a business pursuant to a written purchase 

agreement sued the sellers and their agents on various contract 

and tort theories, and the sellers counterclaimed for amounts 

owing under promissory notes. From a dismissal under Neb. 

Ct. R. Pldg. § 6-1112(b)(6) of the agents and a summary 
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judgment for the sellers, the buyers appeal. The sellers crossappeal the denial of attorney fees.

We resolve three broad issues. First, because the agreement’s 

indemnification clause—particularly, the word “aware”—was 

unambiguous and the misrepresentation claim arose from identical facts, undisputed facts supported the summary judgments 

for the sellers. Second, where the complaint admitted the 

agency relationship with the sellers, the agreement incorporated in the buyers’ complaint disclaimed reliance on the 

agents’ representations, and the complaint lacked an allegation 

of action beyond the scope of the relationship, the complaint 

stated no claim against the agents. Third, the trial court, resolving doubt of the buyers’ legal positions in their favor, did not 

abuse its discretion in denying attorney fees to the sellers. We 

affirm the judgment below.

II. BACKGROUND

In this section, we summarize only the central facts and procedures. Additional background will be set forth in the analy

sis section.

Jason McDermott and Brandon Hoy were the sole former shareholders of Nebraska Medical Mart II, Inc. (NMM). 

In April 2015, McDermott and Hoy hired Results Business 

Advisors LLC (RBA) to broker a sale of NMM. Chris Nielsen 

of RBA represented McDermott and Hoy.

In June 2015, Patrick S. Nathan and Kelsey M. Nathan 

communicated with RBA and entered into negotiations for the 

purchase of NMM. During the negotiations, most communications with the Nathans went through Nielsen. During the due 

diligence period, McDermott and Hoy sent several financial 

statements to the Nathans. These statements were unaudited.

In July 2015, the Nathans executed an agreement with 

McDermott and Hoy to purchase all the shares of NMM for 

$1.1 million. The Nathans paid $990,000 at the time of closing and executed promissory notes to McDermott and Hoy for 

the remaining balance. McDermott’s promissory note was for 
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$66,000, and Hoy’s note was for $44,000. The Nathans made 

no payments on the promissory notes.

The district court’s order stated, “After gaining control of 

NMM, the Nathans reviewed NMM’s books and financial 

records and discovered that the information and documents 

provided during negotiations contained misrepresentations 

about NMM’s financial situation.” In mid-October 2015, the 

Nathans emailed documents detailing the financial discrepancies to their attorney. In mid-December 2015, the Nathans’ 

attorney sent a formal notice of their claims and a demand for 

indemnification to McDermott and Hoy.

In the amended complaint, the Nathans sought damages for 

breach of contract, bad faith, misrepresentation, and breach of 

fiduciary duty against McDermott, Hoy, RBA, and Nielsen. In 

McDermott and Hoy’s answer, they counterclaimed for breach 

of contract concerning the promissory notes.

The parties filed several motions. RBA and Nielsen filed a 

motion to dismiss the Nathans’ complaint for failure to state a 

claim. McDermott and Hoy filed a motion for summary judgment on all claims and counterclaims and sought attorney fees. 

The Nathans filed a motion for partial summary judgment on 

their claims against McDermott and Hoy.

The district court granted RBA and Nielsen’s motion to dismiss. The district court granted McDermott and Hoy’s motion 

for summary judgment on all claims and counterclaims. It 

denied McDermott and Hoy’s motion for attorney fees.

The Nathans moved to alter or amend the district court’s 

order on summary judgment. The court granted the motion in 

order to address the affirmative defense of recoupment but did 

not modify the judgment, because, the court concluded, the 

Nathans were not entitled to recoupment.

The Nathans filed a timely appeal, and McDermott and 

Hoy cross-appealed. We moved the case to our docket. 1

1 See Neb. Rev. Stat. § 24-1106(3) (Cum. Supp. 2018).
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As authorized by court rule, we submitted the case without 

oral argument. 2

III. ASSIGNMENTS OF ERROR

The Nathans assign, reordered and restated, that the district 

court erred in (1) granting McDermott and Hoy’s motion for 

summary judgment by finding that (a) the Nathans failed to 

meet the notice requirements of § 7.6 in the purchase agreement and (b) § 7.6 of the purchase agreement barred the 

Nathans’ misrepresentation claim; (2) awarding McDermott 

and Hoy monetary damages on their motion for summary 

judgment on their counterclaims; (3) disregarding the Nathans’ 

affirmative defense of offset, setoff, and recoupment; (4) 

weighing evidence and evaluating the reasonableness of the 

Nathans’ action on a motion for summary judgment; (5) granting the motion to dismiss as to RBA by finding that (a) RBA 

did not owe the Nathans any fiduciary duties, (b) the claims 

against RBA were barred by §§ 3.5 and 9.2 of the purchase 

agreement, and (c) the Nathans could not rely on any factual 

misrepresentations made by RBA regarding the purchase of 

NMM; and (6) denying the Nathans’ motion for summary 

judgment without a hearing.

On cross-appeal, McDermott and Hoy assign that the district 

court erred in failing to sanction the Nathans for knowingly 

submitting false testimony to the court and in failing to award 

McDermott and Hoy attorney fees.

IV. ANALYSIS

[1] Before we delve into the parties’ arguments on appeal, 

we quickly dispose of the Nathans’ last assignment of error: 

The district court erred in denying their motion for summary judgment without a hearing. This assignment was not 

argued in the Nathans’ brief. To be considered by an appellate court, an alleged error must be both specifically assigned 

2 See Neb. Ct. R. App. P. § 2-111(B)(1) (rev. 2017).
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and specifically argued in the brief of the party asserting the 

error. 3 We do not consider it.

1. Claims Involving McDermott and Hoy

(a) Additional Background

(i) Pleadings

In the amended complaint, the Nathans alleged that 

McDermott and Hoy made several material misrepresentations regarding NMM’s finances, which the Nathans relied 

upon to purchase NMM. They alleged that McDermott and 

Hoy breached several warranties and refused to indemnify 

the Nathans as the purchase agreement required. Further, they 

alleged that McDermott and Hoy breached a duty of good 

faith and fair dealing by making multiple misrepresentations, 

breaching warranties, and refusing to indemnify. As a result of 

the misrepresentations and breaches of contract, the Nathans 

claimed, they suffered a loss of no less than $695,000.

In McDermott and Hoy’s answer to the amended complaint, 

they asserted counterclaims for breach of promissory notes. 

They alleged that they each were the holder and payee of a 

promissory note, they performed and satisfied their obligations 

under the notes, the Nathans defaulted on the notes by failing 

to make payment when due, the Nathans failed to cure the 

default, and McDermott and Hoy were entitled to payment of 

the outstanding amount plus interest.

The Nathans filed a reply to McDermott and Hoy’s counterclaims (styled as a response) 4 and an alleged affirmative 

defense, including “setoff, offset, and recoupment against all 

amounts purportedly due and owing to [McDermott and Hoy] 

as a result of the misrepresentations and wrongdoing asserted 

in the [amended complaint].”

3 Adair Holdings v. Johnson, 304 Neb. 720, 936 N.W.2d 517 (2020).

4 See Neb. Ct. R. Pldg. § 6-1107.
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(ii) Purchase Agreement

In the purchase agreement, McDermott and Hoy represented that all the financial statements provided were prepared 

in accordance with “GAAP,” which the agreement defined 

as “United States generally accepted accounting principles 

consistently applied and maintained throughout the applicable 

periods”; were complete and consistent with the books and 

records of NMM; and, “in light of the circumstances under 

which such statements were made, true, correct and complete 

in all material aspects.”

Section 7 of the purchase agreement set forth the indemnification provisions. The parties agreed that except for fraud 

claims, their exclusive remedy for a breach of the agreement was the indemnification provisions. McDermott and Hoy 

agreed to indemnify the Nathans from all losses incurred by 

the Nathans or NMM resulting from “any material breach of 

any representation or warranty of [McDermott and Hoy].” A 

party claiming a loss under the agreement was required to send 

notification “in writing within forty-five (45) days after the 

[claiming party] becomes aware, or should have reasonably 

been aware, of any such claim.” The agreement required the 

notice to describe any claim in reasonable detail.

(iii) Evidence of Financial Discrepancies

Prior to closing, the Nathans received an email from their 

lender. From NMM’s financial documents provided by the 

Nathans, the lender detailed several financial discrepancies. 

The balance sheets showed a negative change in net worth 

of about $275,000. The lender commented that with so many 

changes from year to year on NMM’s profit and loss statements, “it is very hard to trust a lot of their numbers.” It 

detailed that the “realtor has over calculated the actual cash 

flow of the business.” It discussed that the “realtor’s” financial stabilization statement of actual cash flow and his narrative cannot be supported by the income tax returns and balance sheets submitted. It noted a discrepancy based on how 
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NMM handled leased equipment and stated that the Nathans 

“could find out too late that [NMM] actually did not properly 

account for these lease sales and the business is not nearly 

as profitable as [NMM] made it out to be.” Lastly, the lender 

described that the “previous owner” may not have accounted 

for all his tax liability for the company.

In the preclosing communication, the lender made several 

recommendations. It recommended asking for a reduction in 

the purchase price, adding a provision in the purchase agreement that McDermott and Hoy are responsible for anything 

arising out of income tax returns before 2016, adding a provision that further negative accounting discrepancies will be 

reduced from the remaining price owed, and postponing closing 

in order to have an independent accountant look at the past and 

present books of NMM. According to the lender, “[McDermott 

and Hoy] are wanting a premium price for this business, but 

they have not supported this [in] the accounting, unreliable 

business records, and reduced net worth of the business and 

in my opinion do not deserve the large premium that they are 

presently asking.”

But on July 17, 2015, the Nathans closed the purchase of 

NMM. Ten days later, the Nathans received an email from their 

lender. The lender stated concerns that the inventory, accounts 

receivable, and accounts payable were not reconciled from 

the previous balance sheet to the closing date. It requested the 

Nathans to provide “a copy of the audit that was supposed to 

have been completed by an independent contractor on all of the 

Inventory of the business.”

On October 9, 2015, the Nathans sent their attorney an email 

outlining the discrepancies they found in the accounts payable, 

cash projection comparison, inventory, and loans. It detailed 

discrepancies of $3,500 of missing inventory, the accounts 

payable were off by $30,910.39, there were mischaracterized 

payments of $62,566.10, and cash projections were off for the 

first 2 months by $30,000 on the low end and $48,000 on the 

high end.
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On December 15, 2015, the Nathans sent an indemnification demand letter to McDermott and Hoy. The letter detailed 

all the accounting discrepancies discussed in the October 2015 

email. It further included discrepancies in the depreciation 

schedules of $85,292. The total demand for indemnification 

owed to the Nathans was $212,268.49.

(iv) District Court’s Orders

In the district court’s order on McDermott and Hoy’s motion 

for summary judgment, it summarized the requirements for 

indemnification under the purchase agreement. The district 

court analyzed “whether the Nathans complied with the requirement of giving notice of the breach of contract claim within the 

required forty-five day timeframe.” It began by interpreting the 

purchase agreement’s phrase “becomes aware, or should have 

reasonably been aware, of any such claim.” The court acknowledged that the term “aware” did not indicate knowledge was 

required and that the provision further mandated the notice 

shall describe the claim in “reasonable detail.”

It relied on a case from the U.S. Supreme Court where the 

Court interpreted “becoming aware” in the context of a bond. 

There, the Court explained,

[T]he obvious meaning of “becoming aware,” as used in 

this bond, is “to be informed of,” or, “to be apprised of,” 

or, “to be put on one’s guard in respect to,” and that no 

other meaning is equally admissible under the terms of 

the instrument. These are the definitions of the lexicographers, distinctly deducible from the derivation of the 

word “aware,” and that is the sense in which they are 

here employed. 5

Relying on this authority, the district court rejected the Nathans’ 

argument that the term “aware” should be interpreted as having precise knowledge or a full grasp of the facts supporting a 

claim for indemnification.

5 Guarantee Co. v. Mechanics’ &c. Co., 183 U.S. 402, 420, 22 S. Ct. 124, 

46 L. Ed. 253 (1902).
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After interpreting “becomes aware,” the district court determined when the Nathans became aware of their claims. The 

Nathans sent an email to their attorney listing financial discrepancies, but it was not until December 15, 2015, when the 

Nathans sent the letter to McDermott and Hoy outlining the 

same discrepancies and demanding indemnification. It concluded that at the latest, the Nathans became “aware” of their 

claims by October 9, 2015, and that notice was not sent within 

45 days. Therefore, the court found no genuine issue of material fact and ordered that McDermott and Hoy were entitled to 

summary judgment regarding the breach of contract claim.

The district court then analyzed whether the Nathans could 

maintain a theory of recovery for fraudulent misrepresentation. 

The court contrasted our decisions in Cimino v. FirsTier Bank 6

and deNourie & Yost Homes v. Frost.

 7 The court reasoned 

that like the situation in Cimino and in contrast to the circumstances in deNourie & Yost Homes, the Nathans’ allegations for 

fraudulent misrepresentation and negligent misrepresentation 

were based on the same conduct that formed their breach of 

contract claim. It found that because the financial information 

contained in the documents was subject to written representations in the purchase agreement, the Nathans failed to plead 

their misrepresentation claim based on independent facts from 

their breach of contract claim. The court granted McDermott 

and Hoy’s motion for summary judgment concerning the misrepresentation claim.

In a separate order, the district court considered McDermott 

and Hoy’s counterclaims. The district court found that 

McDermott and Hoy presented prima facie evidence of breach 

of the promissory note. It granted both McDermott’s and Hoy’s 

counterclaims and ordered the Nathans to pay $113,541.53 to 

McDermott and $75,694.35 to Hoy.

6 Cimino v. FirsTier Bank, 247 Neb. 797, 530 N.W.2d 606 (1995).

7 deNourie & Yost Homes v. Frost, 295 Neb. 912, 893 N.W.2d 669 (2017).
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In the district court’s order on the motion to alter or amend, 

it acknowledged that it had not addressed the Nathans’ affirm

ative defense. The court determined that because it found for 

McDermott and Hoy on their counterclaims, the Nathans’ 

recoupment defense survived. This was true, the court found, 

because the Nathans’ recoupment defense arose out of the same 

transaction as the counterclaims.

Turning to the merits of the recoupment defense, the district 

court analyzed whether the Nathans could meet their burden 

of proving misrepresentation. As required on summary judgment, the court viewed the evidence in the light most favorable to the Nathans. The court focused on whether the Nathans 

reasonably relied on the misrepresentations, which, the court 

acknowledged, required the court to examine the totality of the 

circumstances. The court explained that because, prior to closing, the Nathans received a letter from the lender outlining recommended steps regarding the purchase of NMM and did not 

act on any of them, no reasonable fact finder could determine 

that the Nathans’ reliance on McDermott and Hoy’s representations was reasonable. It granted the motion to alter or amend 

to the extent that it would address recoupment, determined that 

the Nathans could not have been entitled to recoupment, and 

ordered that the judgment not be modified.

(b) Standard of Review

[2,3] An appellate court will affirm a lower court’s grant 

of summary judgment if the pleadings and admitted evidence 

show that there is no genuine issue as to any material facts 

or as to the ultimate inferences that may be drawn from 

those facts and that the moving party is entitled to judgment 

as a matter of law. 8 In reviewing a summary judgment, the 

court views the evidence in the light most favorable to the 

party against whom the judgment was granted and gives such 

8 Merrick v. Fischer, Rounds & Assocs., 305 Neb. 230, 939 N.W.2d 795 

(2020).
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party the benefit of all reasonable inferences deducible from 

the evidence. 9

(c) Contract Interpretation

[4-7] Before addressing the Nathans’ specific arguments, we 

recall general principles of contract interpretation. The interpretation of a contract and whether the contract is ambiguous 

are questions of law subject to independent review. 10 A contract 

written in clear and unambiguous language is not subject to 

interpretation or construction and must be enforced according 

to its terms. 11 A contract is ambiguous when a word, phrase, 

or provision in the contract has, or is susceptible of, at least 

two reasonable but conflicting interpretations or meanings. 12

A determination as to whether an ambiguity exists in a contract is to be made on an objective basis, not by the subjective contentions of the parties; thus, the fact that the parties 

have suggested opposite meanings of a disputed instrument 

does not necessarily compel the conclusion that the instrument 

is ambiguous. 13

The Nathans do not point to a conflicting definition or 

meaning of the term “aware.” They simply argue that because 

there is no definition in the purchase agreement or a legal 

definition, the word “aware” is ambiguous. And based on their 

assertion that the lack of definition makes the term ambiguous, they argue it is a question of fact for the jury to decide. 

We disagree.

As stated earlier, the interpretation of a contract and whether 

it is ambiguous are questions of law for the court to decide. It 

was within the province of the court to determine if the agreement’s language was ambiguous. The court determined it was 

not. We agree.

9 Id.

10 DH-1, LLC v. City of Falls City, 305 Neb. 23, 938 N.W.2d 319 (2020).

11 Id.

12 Id.

13 Id.
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We determine the meaning of “aware” in the context of the 

entire purchase agreement. The agreement provided that the 

claiming parties must give notice within 45 days after they 

become aware or reasonably should have been aware of their 

claim and that the notice must describe the claim in “reasonable detail.” Viewing the agreement as a whole, the term 

“aware” means something more than mere notice of a claim. 

And we agree that because the parties specifically defined 

“knowledge” but did not define “aware,” “[t]o be aware is not 

the same as to have knowledge.” 14

The Nathans argue that the U.S. Supreme Court did not 

actually define the term “aware” and only distinguished it 

“somewhere in the nebulous space between ‘notice’ and 

‘knowledge.’” 15 The Court did define “becoming aware” as “‘to 

be informed of,’ or, ‘to be apprised of,’ or, ‘to be put on one’s 

guard in respect to.’” 16 The Oxford English Dictionary defines 

“aware” as “[i]nformed, cognizant, conscious, sensible.” 17 This 

plain and ordinary meaning of “aware” supports the Court’s 

interpretation. We accept these definitions as the unambiguous 

meaning of “aware.”

Because the meaning of “aware” is unambiguous, we next 

turn to whether there was a genuine issue of material fact as to 

when the Nathans became aware of their claim. The evidence 

presented to the district court showed that the Nathans were 

informed, conscious, and cognizant of their claim by October 

9, 2015. On that date, the Nathans detailed and reconciled 

several accounting discrepancies. The December indemnification letter reiterated several bases and amounts for the claim 

in the October email. We agree with the district court that at 

the latest, the Nathans were aware of their claim by the time 

of the October email. Because the Nathans were aware of their 

14 See Guarantee Co. v. Mechanics’ &c. Co., supra note 5, 183 U.S. at 420.

15 Brief for appellants at 19.

16 Guarantee Co. v. Mechanics’ &c. Trust Co., supra note 5, 183 U.S. at 420.

17 “Aware,” Oxford English Dictionary Online, http://www.oed.com/view/

Entry/13892 (last visited June 17, 2020).
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claim at the time of the October email, they had 45 days to 

send written notice of the claim to McDermott and Hoy. The 

Nathans sent the indemnification demand letter on December 

15, 2015. The indemnification demand letter was clearly 

beyond the 45-day timeframe. Therefore, the Nathans were 

precluded from recovering the breach of contract claim.

The amended complaint included two theories for breach of 

contract: breach of warranty and bad faith. Because the indemnification letter was not sent within 45 days, it precluded every 

breach of contract claim.

(d) Tort Claim

The Nathans argue that the district court mischaracterized 

their misrepresentation claim as a contract claim. They assert 

that their amended complaint and evidence provided an independent ground for recovery under fraudulent or negligent 

misrepresentation. They contend that the conduct to support the 

misrepresentation claim arose before the purchase agreement 

was executed and, therefore, could not rise to the same conduct 

as a breach of contract.

[8] It is certainly possible to assert independent contract and 

misrepresentation claims. A party who fraudulently induces 

another to contract and then also refuses to perform the contract commits two separate wrongs, so that the same transaction gives rise to distinct claims that may be pursued to satisfaction consecutively. 18

[9,10] But merely alleging both theories does not make 

them separate wrongs. To determine whether an action is 

based on a contract or a tort, a court must examine and 

construe the petition’s essential and factual allegations by 

which the plaintiff requests relief, rather than the legal terminology utilized in the petition or the form of the pleading. 

Consideration must be given to the facts which constitute the 

cause of action. 19 If the petition contains a cause of action for 

18 deNourie & Yost Homes v. Frost, supra note 7.

19 Cimino v. FirsTier Bank, supra note 6.
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breach of contract, additional averments appropriate to a cause 

of action for a wrong will not change the action from contract 

to tort, and if there is a doubt as to the character of the action, 

it will be resolved in favor of an action in contract. In such an 

instance, the statements appropriate to an action in tort will be 

considered surplusage. 20

In order to apply these precepts, we first examine our decisions which were contrasted by the district court. We then note 

a federal appeals court decision applying our law.

In Cimino,

 21 a seller sued a bank for breach of contract and 

several other tort actions based on its failure to approve the 

sale of a company. The bank moved to strike several factual 

paragraphs and all the tort claims. The district court granted the 

motion and dismissed the tort claims. On appeal, we discussed 

whether the seller pled independent facts sufficient to sustain 

separate contract and tort actions. We reasoned that each allegation pled in the tort claims related directly to the contract 

claim. We agreed with the district court that the seller failed 

to allege separate and distinct facts that could stand alone as a 

tort action.

In deNourie & Yost Homes,

 22 buyers defaulted on loans 

owed to a contractor for construction of a new home. The 

contractor brought an action alleging several theories of 

recovery, including fraud and breach of contract. We discussed maintaining tort and contract claims in the context of 

the election of remedies doctrine. We stated, “‘“A party who 

fraudulently induces another to contract and then also refuses 

to perform the contract commits two separate wrongs, so that 

the same transaction gives rise to distinct claims that may be 

pursued to satisfaction consecutively.”’” 23 We reasoned that 

20 Id.

21 Id.

22 deNourie & Yost Homes v. Frost, supra note 7.

23 Id. at 929, 893 N.W.2d at 682 (quoting Davis v. Cleary Building Corp., 

143 S.W.3d 659 (Mo. App. 2004)).
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the breach of contract action was based on the buyers’ failure 

to pay the amounts due and that the fraudulent concealment 

action was based on the false representations made by the 

buyers, which induced the contractor to complete the home. 

“Because the causes of action were based on different obligations and were not repugnant to one another, [the contractor] 

could pursue both.” 24

In Oriental Trading Co., Inc. v. Firetti,

 25 the Eighth Circuit 

discussed our case law on maintaining contract and tort 

actions. Third-party officers of a seller made false representations about “anti-dumping duties” on goods shipped from 

overseas, which induced the buyers to advance funds. 26

Relying on several of our cases, 27 the court reasoned that the 

fraudulent misrepresentation claim did not arise out of the 

contract. The court explained that the claims were distinguishable because the claims against the third-party officers arose 

not out of the terms of the contract with the seller but from 

representations they made which caused the buyers to advance 

and lose funds. The court concluded that Nebraska law did 

not bar the buyers from maintaining the fraudulent misrepresentation claim.

Here, the Nathans’ breach of contract and tort claims derive 

from the same factual basis. Their contract claim stemmed 

from allegedly false financial representations, which breached 

the purchase agreement’s warranties and, in turn, breached the 

indemnification clause, which, under the agreement, was their 

sole remedy. In their attempt to assert tort theories, they 

24 Id. at 930, 893 N.W.2d at 683.

25 Oriental Trading Co., Inc. v. Firetti, 236 F.3d 938 (8th Cir. 2001).

26 Id. at 941.

27 See, Streeks v. Diamond Hill Farms, 258 Neb. 581, 605 N.W.2d 110 

(2000), overruled in part on other grounds, Knights of Columbus Council 

3152 v. KFS BD, Inc., 280 Neb. 904, 791 N.W.2d 317 (2010); Cimino v. 

FirsTier Bank, supra note 6; Gibb v. Citicorp Mortgage, Inc., 246 Neb. 

355, 518 N.W.2d 910 (1994).
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alleged that because McDermott and Hoy provided false 

financial representations and the Nathans relied upon them, 

they were damaged by purchasing NMM for more than it was 

worth. In other words, both claims stem from and depend 

solely upon the allegedly false financial representations. In 

this instance, the averments of fraudulent misrepresentation do not change the action and were correctly considered 

as surplusage.

Therefore, the Nathans did not present facts sufficient to 

sustain an independent tort action. We conclude that the district 

court did not err in granting summary judgment for McDermott 

and Hoy on the Nathans’ amended complaint.

(e) Counterclaims and Affirmative Defense

The Nathans argue that the district court erred in ordering 

damages on McDermott and Hoy’s counterclaims because, they 

reason, damages are a question of fact for the jury and they 

dispute the amount due to McDermott and Hoy.

[11] Absent a defense, a promissory note is ordinarily a 

stand-alone, unqualified, enforceable promise to pay. 28 The evidence presented showed that the Nathans executed two promissory notes: one to McDermott and one to Hoy. The promissory 

notes were for a specified amount subject to interest of 16 

percent per annum. The Nathans failed to pay on the notes and 

defaulted. McDermott and Hoy presented prima facie evidence 

of a breach of the promissory notes.

The Nathans assert that their defense of recoupment raised 

a genuine issue of material fact as to the amount of damages. 

They argue that the district court should not have evaluated 

the reasonableness of their reliance on the misrepresentations, 

because the evidence presented disputed whether their reliance 

was reasonable.

In order to determine whether the district court properly granted summary judgment on McDermott and Hoy’s 

28 Schuyler Co-op Assn. v. Sahs, 276 Neb. 578, 755 N.W.2d 802 (2008).
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counterclaims and ordered damages, we must first examine 

the recoupment defense.

[12] Of course, the Nathans bore the burden of establishing the defense. The burden of both pleading and proving 

affirmative defenses is upon the defendants, and when they 

fail to do so, they cannot recover upon mere argument alone. 29

Regarding McDermott and Hoy’s counterclaims, the Nathans 

were the “defendants” for the purpose of that rule of law.

[13] As the district court correctly recognized, the Nathans’ 

recoupment defense was not precluded by their untimely 

request for indemnification. The defense of recoupment survives as long as a plaintiff’s cause of action exists, even if 

affirmative legal action upon the subject of recoupment is 

barred by the statute of limitations. 30 Because McDermott and 

Hoy (the “plaintiffs” on their counterclaims) presented prima 

facie evidence of their breach of contract claim, the Nathans’ 

defense of recoupment survived.

[14] The Nathans’ defense met the “same transaction or 

occurrence” test; recoupment must arise out of the same transaction or occurrence which is the basis of a plaintiff’s action 

and is merely defensive, that is, does not seek an affirmative 

judgment in the action. 31 In response to the counterclaims, 

the Nathans pled that they were “entitled to setoff, offset, and 

recoupment against all amounts purportedly due and owing to 

[McDermott and Hoy] as a result of the misrepresentations and 

wrongdoing asserted in the [amended complaint].” It is clear 

that the Nathans alleged that McDermott and Hoy’s misrepresentations arose out of the sale of NMM shares and execution 

of the promissory notes. We agree with the district court that 

the Nathans’ recoupment defense arose out of the same transaction as the counterclaims.

29 Funk v. Lincoln-Lancaster Cty. Crime Stoppers, 294 Neb. 715, 885 

N.W.2d 1 (2016).

30 Becker v. Hobbs, 256 Neb. 432, 590 N.W.2d 360 (1999).

31 Ed Miller & Sons, Inc. v. Earl, 243 Neb. 708, 718, 502 N.W.2d 444, 452 

(1993).
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[15-17] To state an affirmative defense of recoupment, 

the defendant must prove the elements of his claim and that 

it occurred in the very same action as the plaintiff’s claim 

against him. 32 A fraudulent misrepresentation claim requires 

a plaintiff to establish the following elements: (1) A representation was made; (2) the representation was false; (3) when 

made, the representation was known to be false or made recklessly without knowledge of its truth and as a positive assertion; (4) the representation was made with the intention that 

the plaintiff should rely on it; (5) the plaintiff did so rely on 

it; and (6) the plaintiff suffered damage as a result. 33 Negligent 

misrepresentation has essentially the same elements as fraudulent misrepresentation with the exception of the defendant’s 

mental state. 34

[18-20] In both negligent and fraudulent misrepresentation cases, whether the plaintiff exercised ordinary prudence 

is relevant to whether the plaintiff justifiably relied on the 

misrepresentation when the means of discovering the truth 

was in the plaintiff’s hands. 35 A plaintiff is justified in relying 

upon a positive statement of fact if an investigation would be 

required to discover the truth. 36 In determining whether an 

individual reasonably relied on a misrepresentation, courts 

consider the totality of the circumstances, including the nature 

of the transaction; the form and materiality of the representation; the relationship of the parties; the respective intelligence, experience, age, and mental and physical condition 

of the parties; and their respective knowledge and means 

of knowledge. 37

32 Qualsett v. Abrahams, 23 Neb. App. 958, 879 N.W.2d 392 (2016).

33 Cullinane v. Beverly Enters. - Neb., 300 Neb. 210, 912 N.W.2d 774 

(2018).

34 Zawaideh v. Nebraska Dept. of Health & Human Servs., 285 Neb. 48, 825 

N.W.2d 204 (2013).

35 Lucky 7 v. THT Realty, 278 Neb. 997, 775 N.W.2d 671 (2009).

36 Id.

37 Id.
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Here, again, the district court correctly recognized that summary judgment required the court to view the evidence in the 

light most favorable to the Nathans. We must do likewise. In 

order to uphold the summary judgment against the Nathans 

on their recoupment defense, the evidence must be such that 

no reasonable fact finder could conclude that they exercised 

ordinary prudence in order to justifiably rely on the misrepresentations when the means of discovering the truth was in 

their hands.

In several cases, we have discussed the extent of ordinary 

prudence required to justify reliance on misrepresentations. 

In Lucky 7 v. THT Realty,

 38 a buyer sought fraudulent and 

negligent misrepresentation claims against the seller for a 

commercial real estate transaction. It was later discovered that 

two sections of roof were partially deteriorated, even though 

the areas of the roof visible from the ground were recently 

replaced. We reasoned that justifiable reliance was a case-bycase analysis and that the court should consider the totality of 

the circumstances. We agreed with the district court’s findings 

that the buyer was unreasonable in relying on the representations, because the buyer had experience buying commercial 

property, the contract explicitly stated that the purchase was 

based on the buyer’s inspection, the purchase agreement provided for an inspection period, the buyer could have observed 

the roof’s condition, and the warranty provided that the roof 

was replaced 3 years prior. We reasoned that the buyer understood the importance of inspecting the property and that an 

inspection would not have posed any hardship. We affirmed the 

district court’s dismissal.

Schuelke v. Wilson 39 presented a similar factual scenario. 

A buyer sought rescission of a contract for the purchase 

of a business by fraudulent misrepresentation. The district 

court granted the rescission based on misrepresentations about 

38 Id.

39 Schuelke v. Wilson, 250 Neb. 334, 549 N.W.2d 176 (1996).
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the profitability of an owner-operated versus absentee-owner 

franchise. It determined that the seller tried to couch his 

misrepresentations about the adjusted statements of profit as 

“‘“guesstimates’”” in an attempt to deflect any conclusion 

that the buyer was justified in relying on the representations. 40

It found that the seller made the representations knowingly 

and that the buyer relied on them based on the seller’s years 

of experience.

In Schuelke, we reasoned that the district court erred in 

granting rescission because the buyer did not prove each element of fraudulent misrepresentation by clear and convincing 

evidence. We focused on the justified reliance element and the 

duty of ordinary prudence. We reasoned that the buyer was not 

justified in relying on the seller’s representations, because the 

buyer expressed concern over adjusted statements of profit, the 

seller recommended verifying the figures with an accountant, 

the buyer was in possession of the documents, and the buyer 

took no further action. We concluded that under the circumstances, the buyer did not act with ordinary prudence, and that 

therefore, the record did not support rescission.

We acknowledge that both of those cases were decided after 

a trial and not on summary judgment. But that does not mean 

that a summary judgment cannot stand.

Here, the undisputed evidence showed that the Nathans 

received a letter from their lender detailing several recommendations prior to closing. The letter listed numerous financial 

discrepancies found in NMM’s financial documents and recommended two additional clauses in the purchase agreement: 

one for past tax liability and one for further negative accountings that would reduce the amount owed on the promissory 

notes. It further recommended postponing closing, hiring an 

independent accountant to look into NMM, and requesting a 

price reduction. Instead, the Nathans agreed to move up closing by 2 weeks and did not hire an independent accountant.

40 Id. at 341, 549 N.W.2d at 181.
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Kelsey Nathan testified that the lender recommendations 

were only one reason for requesting a price reduction before 

closing. She indicated that the same discrepancies were found 

across the financial statements. She confirmed that there were 

accounting issues that could have been audited during the due 

diligence period.

Viewing the evidence in the light most favorable to the 

Nathans, we agree with the district court’s conclusion that 

they did not exercise ordinary prudence when relying on the 

representations of McDermott and Hoy. Once inspected, the 

financial discrepancies were obvious to both the Nathans and 

the lender. Because the Nathans came across the same financial 

discrepancies, did not hire an independent accountant, ignored 

the recommendations of the lender, and closed the purchase 2 

weeks early, no reasonable finder of fact could find that the 

Nathans exercised ordinary prudence and were justified in relying on McDermott and Hoy’s misrepresentations. We conclude 

that the district court did not err in finding that the Nathans 

failed to meet their burden of proof and, thus, were not entitled 

to recoupment.

Accordingly, because the Nathans were not entitled to the 

affirmative defense of recoupment, the district court did not 

err in granting summary judgment on McDermott and Hoy’s 

counterclaims. McDermott and Hoy’s undisputed evidence presented prima facie evidence of breach of contract and damages. 

The Nathans point to no evidence, other than their recoupment defense argument, to dispute the amount of damages. 

Therefore, the district court did not err in granting summary 

judgment and awarding damages.

2. Claims Involving RBA and Nielsen

(a) Additional Background

(i) Amended Complaint

In the amended complaint, the Nathans alleged the following: McDermott and Hoy retained RBA and Nielsen to act 

as brokers for the sale of NMM to the Nathans. McDermott 
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and Hoy made the majority of their communications to the 

Nathans through Nielsen. Throughout the course of the negotiations, RBA and Nielsen made several misrepresentations by 

providing documents and statements with inaccurate financial 

information. The Nathans raised several concerns about the 

veracity and accuracy of the statements. RBA and Nielsen, the 

Nathans claim, made several assurances to the Nathans that 

“the documents and statements provided by them and those 

provided by McDermott and Hoy [were] true and accurately 

depicted NMM’s financial situation.”

The amended complaint also set forth four allegations: RBA 

and Nielsen, as representatives of McDermott and Hoy, had a 

reckless disregard for the truth of the documents given to the 

Nathans. RBA and Nielsen intended for the Nathans to rely on 

the statements to purchase NMM. The Nathans could not have 

discovered that the documents were false until they had “time 

to review NMM’s confidential financial records and books.” 

The Nathans relied on the misrepresentations of RBA and 

Nielsen to purchase NMM.

In a separate count, the Nathans alleged that RBA and 

Nielsen made several representations that they were looking 

out for the best interests of all the parties. The Nathans allegedly relied on the representations to reasonably believe that 

RBA and Nielsen were acting as fiduciaries for them. They 

asserted that RBA and Nielsen owed and breached their fiduciary duties of honesty and loyalty to the Nathans when they 

were aware of and failed to disclose several misrepresentations 

made by McDermott and Hoy. The Nathans claimed that as a 

result of the misrepresentations and breach of fiduciary duty, 

they suffered a loss of no less than $695,000.

(ii) Motion to Dismiss

By a motion to dismiss pursuant to § 6-1112(b)(6) of the 

rules of pleading, RBA and Nielsen sought dismissal from the 

case for failure to state a claim. The district court sustained 

their motion.
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In the district court’s order, it relied upon §§ 3.5 and 9.2 of 

the purchase agreement to resolve the misrepresentation claim. 

It found that pursuant to § 3.5, the Nathans agreed that they 

were “not relying on any statements, information or representations of [RBA] or any of RBA’s agents, employees, representatives or affiliates, with respect to [the Nathans’] evaluation 

of [NMM] or of the Shares.” The court reasoned that because 

§ 3.5 expressly stated that the Nathans conducted their own 

due diligence and were not relying on RBA’s representations 

and because § 9.2 affirmed that the purchase agreement was 

the entire agreement, fraud could not occur, because there was 

no reliance. Likewise, the court ruled, there could not be negligent misrepresentation, because this claim had essentially the 

same elements and the Nathans disclaimed reliance on RBA 

and Nielsen.

Lastly, the district court found that RBA did not breach 

a fiduciary duty, because it was undisputed that RBA and 

Nielsen were acting as agents for McDermott and Hoy, not 

the Nathans. The Nathans could not show, as a matter of law, 

that RBA and Nielsen owed any duty, contractual or otherwise, 

to them. The district court granted the motion to dismiss with 

prejudice. It overruled the Nathans’ motion for summary judgment, as to RBA and Nielsen, as moot.

(b) Standard of Review

[21] A district court’s grant of a motion to dismiss on the 

pleadings is reviewed de novo, accepting the allegations in 

the complaint as true and drawing all reasonable inferences in 

favor of the nonmoving party. 41

(c) Fiduciary Duty

The Nathans argue that they pled sufficient facts to show 

that RBA and Nielsen held themselves out as a joint agent 

and fiduciary for McDermott, Hoy, and the Nathans. They 

contend that pleading that “Nielsen and RBA made multiple 

41 Rutledge v. City of Kimball, 304 Neb. 593, 935 N.W.2d 746 (2019).
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representations to the [Nathans] that they were looking out 

for the best interests of all parties involved, including the 

[Nathans],” was sufficient to establish a fiduciary relationship. 

They assert that the district court improperly dismissed the 

claim by finding that RBA could not represent both parties 

when no legal authority precludes such an arrangement.

[22,23] Agency is the fiduciary relation which results from 

the manifestation of consent by one person to another that the 

other shall act on his or her behalf and subject to his or her 

control, and the consent of the other to so act. 42 An agent and 

principal are in a fiduciary relationship such that the agent 

has an obligation to refrain from doing any harmful act to the 

principal, to act solely for the principal’s benefit in all matters connected with the agency, and to adhere faithfully to the 

instructions of the principal, even at the expense of the agent’s 

own interest. 43

[24,25] In the amended complaint, the Nathans specifically 

admit that “McDermott and Hoy agreed to and did retain RBA 

and Nielsen to act as brokers for the sale of NMM to the 

[Nathans].” A party may at any and all times invoke the language of his opponent’s pleadings on which the case is being 

tried on a particular issue as rendering certain facts indisputable. 44 The pleadings in a cause are not a means of evidence, 

but a waiver of all controversy, so far as the opponent may 

desire to take advantage of them, and therefore, a limitation of 

the issues. 45 It is abundantly clear from the pleadings that RBA 

and Nielsen had a fiduciary relationship with McDermott and 

Hoy. Because RBA and Nielsen were fiduciaries to McDermott 

and Hoy, they owed a duty to act solely for the benefit of 

McDermott and Hoy as their principals.

42 Deutsche Bank Nat. Trust Co. v. Siegel, 279 Neb. 174, 777 N.W.2d 259 

(2010).

43 Archbold v. Reifenrath, 274 Neb. 894, 744 N.W.2d 701 (2008).

44 TNT Cattle Co. v. Fife, 304 Neb. 890, 937 N.W.2d 811 (2020).

45 Id.
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The Nathans’ allegation that RBA and Nielsen “were looking out for the best interests of all parties” was not sufficient 

to plead the presence of a fiduciary relationship when the 

amended complaint showed that RBA and Nielsen already had 

a fiduciary relationship with the opposing party. We agree with 

the district court that the Nathans “cannot show as a matter of 

law that RBA and Nielsen owed any duty, contractual or otherwise, to [the Nathans].”

Here, the Nathans’ attempt to assert a duty owed to them 

by RBA and Nielsen is defeated by the admission in their own 

pleading. Even if it is possible for a broker to represent both 

parties in a business transaction, the amended complaint here 

did not raise a plausible claim of the existence of such a relationship. Upon our de novo review, we agree that the Nathans 

failed to plead the existence of a fiduciary relationship with 

RBA and Nielsen. Therefore, the district court did not err in 

dismissing the claim for breach of fiduciary duty.

(d) Tort Claim

The Nathans argue that the district court erred in dismissing the misrepresentation claim against RBA and Nielsen 

because it was contrary to “overwhelming Nebraska law.” 46

They contend that the presence of a disclaimer does not relieve 

a principal or agent for fraudulent representations made by 

the agent concerning the subject matter of a contract. 47 They 

assert that RBA and Nielsen are liable for their own fraudulent 

conduct.

The purchase agreement precluded claims for misrepresentation against RBA and Nielsen. The clear and unambiguous 

language of the agreement showed that the Nathans expressly 

disclaimed any reliance on representations made by RBA and 

Nielsen. Additionally, the agreement explicitly stated that it 

46 Brief for appellants at 32.

47 See Gibb v. Citicorp Mortgage, Inc., supra note 27.
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was the entire contract between the parties and that it superseded “any prior understandings, agreements or representations by or among the parties, whether written or oral, that 

may have related in any way to the subject matter hereof.” We 

must enforce the agreement, a contract, in accordance with 

the plain meaning of its words. 48 As the Delaware Supreme 

Court explained:

“To fail to enforce non-reliance clauses is not to promote a public policy against lying. Rather, it is to excuse 

a lie made by one contracting party in writing—the lie 

that it was relying only on contractual representations 

and that no other representations had been made—to 

enable it to prove that another party lied orally or in a 

writing outside the contract’s four corners. For the plaintiff in such a situation to prove its fraudulent inducement claim, it proves itself not only a liar, but a liar in 

the most inexcusable of commercial circumstances: in a 

freely negotiated written contract. Put colloquially, this is 

necessarily a ‘Double Liar’ scenario. To allow the buyer 

to prevail on its claim is to sanction its own fraudulent conduct.” 49

The Delaware court distinguished fraud claims based on representations made outside of a merger agreement—which can be 

disclaimed through nonreliance language—from fraud claims 

based on false representations of fact made within the contract 

itself—which cannot be disclaimed. 50 Because the purchase 

agreement is unambiguous that the Nathans disclaimed any 

reliance on representations made by RBA and Nielsen and 

that the statements made in the agreement supersede all prior 

48 See McCully, Inc. v. Baccaro Ranch, 284 Neb. 160, 816 N.W.2d 728 

(2012).

49 RAA Management v. Savage Sports Holdings, 45 A.3d 107, 117 (Del. 

2012) (quoting ABRY Partners V, L.P. v. F & W Acquis. LLC, 891 A.2d 

1032 (Del. Ch. 2006)).

50 Id.
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statements, the Nathans, as a matter of law, cannot state a 

claim for misrepresentation.

[26-28] Moreover, as a general rule, where an obligation 

is that of a principal, a court cannot enforce the obligation 

against the agent as long as he or she is merely acting as 

agent. 51 An agent may be held liable for the agent’s conduct, 

such as misrepresentation of a material fact, during a transaction on behalf of the principal. 52 An agent can be held liable 

if the agent makes some representation or performs some act 

on the agent’s own responsibility without authorization from 

the principal. 53

Although RBA and Nielsen are not parties to the purchase 

agreement, we cannot enforce an obligation of the principal 

against an agent, as long as he or she is merely acting as an 

agent. 54 In the amended complaint, the allegations for misrepresentation against RBA and Nielsen are nearly identical 

to those against McDermott and Hoy. The allegations admit 

that documents and assurances provided by McDermott and 

Hoy were made “directly and through RBA and Nielsen.” 

Because the Nathans admitted that RBA and Nielsen were 

acting as agents when sending financial documents and assurances, we cannot enforce McDermott and Hoy’s representation 

against them.

The amended complaint fails to allege any statements or 

documents that RBA and Nielsen made that were independent 

of the assurances and documents given to them by McDermott 

and Hoy. We conclude that the district court did not err in dismissing the Nathans’ claim for misrepresentation against RBA 

and Nielsen.

51 Suzuki v. Gateway Realty, 207 Neb. 562, 299 N.W.2d 762 (1980).

52 Edwin Bender & Sons v. Ericson Livestock Comm. Co., 228 Neb. 157, 421 

N.W.2d 766 (1988).

53 Id.

54 See Gibb v. Citicorp Mortgage, Inc., supra note 27.
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3. Cross-Appeal

(a) Additional Background

McDermott and Hoy made two motions for summary judgment. In the district court’s first order on summary judgment, 

it relied on Kelsey Nathan’s affidavit for determining if a genuine issue of material fact existed under the 45-day timeframe 

for notice of indemnification. Her affidavit stated:

[W]e only discovered these misrepresentations in or 

about December of 2015, after thorough investigation of 

NMM’s records which were kept in electronic databases 

. . . . We were not given access to [these databases] prior 

to executing the [purchase agreement,] and we could not 

have discovered these misrepresentations without access 

to those records.

Relying on this evidence, the court initially found that “a 

genuine issue of material fact remain[ed] as to whether [the 

Nathans] should have reasonably been aware of their claims 

within forty-five days of signing the [purchase agreement].”

In the second motion for summary judgment, McDermott 

and Hoy moved for an award of attorney fees and court costs 

incurred after the denial of the first motion. They asserted 

that they were entitled to such fees and costs as a sanction 

against the Nathans, pursuant to Neb. Rev. Stat. § 25-824 

(Reissue 2016).

In the district court’s order on attorney fees, it outlined 

McDermott and Hoy’s argument that Kelsey Nathan knowingly made false statements in her affidavit about the date the 

Nathans became aware of the misrepresentations. It acknowledged that the parties disagreed over the definition of the 

term “aware” in the purchase agreement. It explained that the 

Nathans argued being “aware” meant to have knowledge or 

a full grasp of the claims and that from their interpretation, 

they waited to bring their claims until they were certain of the 

figures. It reasoned that although this was an incorrect interpretation of “aware,” “the Nathans brought an action with that 
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interpretation in mind, which is not so irrational or ridiculous 

[as] to render the action frivolous.” It denied McDermott and 

Hoy’s request for sanctions and attorney fees.

(b) Standard of Review

[29,30] On appeal, a trial court’s decision awarding or denying attorney fees will be upheld absent an abuse of discretion. 55

A judicial abuse of discretion exists when the reasons or rulings of a trial judge are clearly untenable, unfairly depriving a 

litigant of a substantial right and denying just results in matters 

submitted for disposition. 56

(c) Attorney Fees

On cross-appeal, McDermott and Hoy argue that the district 

court erred in denying their motion for attorney fees because 

the Nathans knowingly made a false statement to the court, 

which precluded their first motion for summary judgment. 

McDermott and Hoy assert this was the “sole basis for denying 

summary judgment in favor of the [sic] McDermott and Hoy 

(on all claims and counterclaims) at that time.” 57 They contend 

that because the Nathans were aware of their claims by the 

October 2015 email, they knowingly gave false testimony to 

the court, in violation of Neb. Rev. Stat. § 25-1336 (Reissue 

2016). They claim that they have incurred significant expenses 

since the denial of the first motion for summary judgment. 

McDermott and Hoy argue that because the Nathans intentionally lied to the court, the court abused its discretion in denying 

the motion for attorney fees.

[31,32] Section 25-824(2) allows a court to award attorney fees and court costs “against any attorney or party who 

has brought or defended a civil action that alleges a claim or 

defense which a court determines is frivolous or made in bad 

faith.” A frivolous action is one in which a litigant asserts a 

55 Seldin v. Estate of Silverman, 305 Neb. 185, 939 N.W.2d 768 (2020).

56 Id.

57 Brief for appellees McDermott and Hoy on cross-appeal at 9.
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legal position wholly without merit; that is, the position is 

without rational argument based on law and evidence to support the litigant’s position. The term frivolous connotes an 

improper motive or legal position so wholly without merit as 

to be ridiculous. 58 Any doubt about whether a legal position is 

frivolous or taken in bad faith should be resolved in favor of 

the one whose legal position is in question. 59

McDermott and Hoy further direct our attention to § 25-1336.

Should it appear to the satisfaction of the court at any 

time that any of the affidavits . . . are presented in bad 

faith or solely for the purpose of delay, the court shall 

forthwith order the party employing them to pay to the 

other party the amount of the reasonable expenses which 

the filing of the affidavits caused him to incur, including 

reasonable attorney’s fees, and any offending party or 

attorney may be adjudged guilty of contempt. 60

The district court’s reasoning to deny attorney fees was 

not clearly untenable. It noted the Nathans consistently, albeit 

incorrectly, argued that they became “aware” of all their claims 

“in or about December 2015.” Consistently with each motion 

for summary judgment, they did not change their position of 

when they became “aware” of their claims. We agree with 

the district court that although the Nathans’ interpretation of 

“aware” was incorrect, they brought their action with the interpretation in mind. The Nathans’ statement of fact was made 

with a good faith argument about the interpretation of “became 

aware,” and they did not submit affidavits to the court in bad 

faith. Accordingly, the district court did not abuse its discretion 

in denying the motion for attorney fees.

V. CONCLUSION

We conclude that because there was no genuine dispute of 

material fact, the district court did not err in granting summary 

58 Seldin v. Estate of Silverman, supra note 55.

59 Id.

60 § 25-1336.
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judgment in favor of McDermott and Hoy on all claims. The 

evidence presented showed that the Nathans became aware 

of their claims more than 45 days before the indemnification 

letter was sent; the breach of contract claim and misrepresentation claim were based upon the same operative facts; and 

the Nathans could not have reasonably relied on the representations to sustain an affirmative defense of recoupment. The 

district court did not err in dismissing the claims against RBA 

and Nielsen, because the Nathans failed to plead the existence 

of a fiduciary duty; under the purchase agreement, they disclaimed any reliance on representations made by RBA and 

Nielsen; and they failed to plead how the representations were 

made outside the scope of the agency relationship. Further, we 

conclude that the district court did not abuse its discretion in 

denying attorney fees, because the Nathans’ affidavits were 

submitted with a good faith interpretation of the agreement in 

mind. We affirm the judgment of the district court.

Affirmed.