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FIRST NAT. BANK OF OMAHA v. DAVEY 835

Cite as 285 Neb. 835

First National Bank of Omaha, appellant, 

v. Scott L. Davey and Deborah

A. Davey, appellees.

___ N.W.2d ___

Filed May 3, 2013. No. S-12-761.

1. Limitations of Actions. Which statute of limitations applies is a question of law.

2. Statutes. Statutory interpretation is a question of law.

3. Judgments: Appeal and Error. When reviewing questions of law, an appellate 

court has an obligation to resolve the questions independently of the conclusion 

reached by the trial court.

4. Trusts: Deeds: Foreclosure: Mortgages. The Nebraska Trust Deeds Act recognizes the existence of two different methods of foreclosing a trust deed: (1) by 

nonjudicial foreclosure, which relies upon the exercise of the trustee’s power of 

sale pursuant to the act, or (2) by judicial foreclosure in the manner of mortgages, 

which does not depend upon or use the trustee’s power of sale, but, rather, results 

in a sheriff’s sale by decree of the district court.

5. Promissory Notes: Mortgages: Foreclosure: Equity. A suit on a note, secured 

by a real estate mortgage, is a suit at law, independent, separate, and distinct from 

a suit in equity to foreclose and satisfy a mortgage.

6. Trusts: Deeds: Statutes. Because trust deeds did not exist at common law, the 

trust deed statutes are to be strictly construed.

7. Statutes. In the absence of any indication to the contrary, statutory language is to 

be given its plain and ordinary meaning.

8. Trusts: Deeds: Foreclosure. The judicial foreclosure of a trust deed does not 

result in the sale of property under a trust deed.

9. Trusts: Deeds: Foreclosure: Limitations of Actions. A deficiency action 

brought after the judicial foreclosure of a trust deed is not governed by 

the 3-month statute of limitations set forth in Neb. Rev. Stat. § 76-1013 

(Reissue 2009).

10. Statutes: Appeal and Error. When possible, an appellate court will try to avoid 

a statutory construction that would lead to an absurd result.

Appeal from the District Court for Douglas County: 

Marlon A. Polk, Judge. Reversed and remanded for further 

proceedings.

Donald J. Pavelka, Jr., and Patricia D. Schneider, of Locher, 

Pavelka, Dostal, Braddy & Hammes, L.L.C., for appellant.

Thalia Downing Carroll, of Thompson Law Office, P.C., 

L.L.O., for appellees.
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Heavican, C.J., Wright, Connolly, Stephan, Miller-Lerman, 

and Cassel, JJ.

Cassel, J.

INTRODUCTION

In this appeal, we must determine whether the special 

3-month statute of limitations on actions for deficiency set 

forth in the Nebraska Trust Deeds Act (Act)1 applies where a 

lender elects to judicially foreclose upon the real estate. We 

conclude that the special limitation applies only where the 

property has been sold by exercising the power of sale set 

forth in the trust deed. As we will explain, our conclusion follows from our previous decisions under the Act, is faithful to 

the plain language of the statute, avoids absurd results, and is 

consistent with decisions in other states. We therefore reverse 

the contrary decision of the district court.

BACKGROUND

In 2009, in exchange for a loan of money, Scott L. Davey 

and Deborah A. Davey gave a promissory note to the First 

National Bank of Omaha (First National) and secured the loan 

with a trust deed upon specific real property. When the Daveys 

defaulted on the note, First National initiated foreclosure proceedings in the district court for Washington County, Nebraska. 

Pursuant to a decree from that court, the property was sold by 

sheriff’s sale on April 28, 2011. The district court confirmed 

the sale by an order entered on May 17.

Because the proceeds of the sheriff’s sale were not sufficient 

to cover the full amount of the loan, First National filed a complaint in the district court for Douglas County to recover the 

deficiency. In the Daveys’ answer, they raised the affirmative 

defense of the statute of limitations. Both parties subsequently 

filed motions for summary judgment.

After a hearing, the district court concluded that First 

National’s action was governed by the statute of limitations in 

1 Neb. Rev. Stat. §§ 76-1001 to 76-1018 (Reissue 2009 & Cum. Supp. 

2010).
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§ 76-1013 and not the general statute of limitations for actions 

on written contracts in Neb. Rev. Stat. § 25-205 (Reissue 

2008). It found that the Act “is unambiguous, and therefore 

does not need any interpretation by this [c]ourt, in its expression of the statutory time period for when a deficiency action 

must be brought.” In support of its conclusion, the court cited 

to our decision in Sports Courts of Omaha v. Meginnis2 and 

the Nebraska Court of Appeals’ decision in Boxum v. Munce.

3

Because First National filed its complaint 99 days after the 

sheriff’s sale, the court held that the action was barred by 

the statute of limitations in § 76-1013. Accordingly, the court 

denied First National’s motion for summary judgment and 

granted the Daveys’ motion for summary judgment.

First National timely appeals. Pursuant to statutory authority, we moved the case to our docket.4

ASSIGNMENTS OF ERROR

First National makes five assignments of error, all of which 

essentially claim that the district court erred in applying the 

3-month statute of limitations of § 76-1013 to a deficiency 

action following judicial foreclosure of a trust deed.

STANDARD OF REVIEW

[1-3] Which statute of limitations applies5 and matters 

of statutory interpretation6 are both questions of law. When 

reviewing questions of law, an appellate court has an obligation to resolve the questions independently of the conclusion 

reached by the trial court.7

2 Sports Courts of Omaha v. Meginnis, 242 Neb. 768, 497 N.W.2d 38 

(1993).

3 Boxum v. Munce, 16 Neb. App. 731, 751 N.W.2d 657 (2008).

4 See Neb. Rev. Stat. § 24-1106 (Reissue 2008).

5 See Fitzgerald v. Community Redevelopment Corp., 283 Neb. 428, 811 

N.W.2d 178 (2012).

6 See Kaapa Ethanol v. Board of Supervisors, ante p. 112, 825 N.W.2d 761 

(2013).

7 See Spady v. Spady, 284 Neb. 885, 824 N.W.2d 366 (2012).
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ANALYSIS

Before we turn to the specific language of § 76-1013 setting forth the special statute of limitations, we first recall 

the broader statutory scheme of which it is a part. The Act 

authorizes a trust deed to be used as a security device in 

Nebraska8 and provides that real property can be conveyed by 

trust deed to a trustee as a means to secure the performance 

of an obligation.9 The Act includes detailed procedures that, 

in the event of a breach of the underlying obligation, permit 

the trust property to be sold without the involvement of any 

court.10 Specifically, the Act allows a trust deed to expressly 

confer upon a trustee the power of sale.11 Pursuant to this 

power of sale, a trustee can sell the property conveyed by 

a trust deed without any court’s authorization or direction, 

though the trustee must comply with procedural requirements 

contained in the Act.12 Because the Act allows the property 

securing an obligation to be sold without the judicial involvement that would be required to foreclose upon a mortgage, 

the proceedings surrounding a trustee’s sale pursuant to the 

Act are sometimes referred to as “nonjudicial foreclosure”13 or 

“trustee foreclosure.”14

[4] The specific statute within the Act that authorizes the 

conferral of the power of sale upon the trustee is § 76-1005. 

According to this section, under the power of sale, “the trust 

property may be sold in the manner provided in [the Act] 

after a breach of an obligation for which the trust property is 

8 See Blair Co. v. American Savings Co., 184 Neb. 557, 169 N.W.2d 292 

(1969).

9 See § 76-1002(1).

10 See §§ 76-1006 to 76-1011.

11 See § 76-1005.

12 See §§ 76-1006 to 76-1011.

13 See Westin Hills v. Federal Nat. Mortgage Assn., 283 Neb. 960, 814 

N.W.2d 378 (2012).

14 See, e.g., PSB Credit Servs. v. Rich, 251 Neb. 474, 558 N.W.2d 295 

(1997).
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conveyed as security.”15 But this section also states that a trust 

deed “may be foreclosed in the manner provided by law for 

the foreclosure of mortgages on real property.”16 In this way, 

the Act recognizes the existence of two different methods of 

foreclosing a trust deed: (1) by nonjudicial foreclosure, which 

relies upon the exercise of the trustee’s power of sale pursuant 

to the Act, or (2) by judicial foreclosure in the manner of mortgages, which does not depend upon or use the trustee’s power 

of sale, but, rather, results in a sheriff’s sale by decree of the 

district court.17

[5] If the proceeds from the sale in a judicial foreclosure 

are not sufficient to cover the full amount of the underlying obligation, the creditor is permitted to bring an action 

to recover the deficiency.18 And we have held that “a suit on 

a note, secured by a real estate mortgage, is a suit at law, 

independent, separate[,] and distinct from a suit in equity to 

foreclose and satisfy a mortgage.”19 In contrast, a deficiency 

action is specifically authorized by § 76-1013 following the 

exercise of the power of sale of a trust deed under the Act. 

Section 76-1013 provides as follows: “At any time within 

three months after any sale of property under a trust deed, as 

hereinabove provided, an action may be commenced to recover 

the balance due upon the obligation for which the trust deed 

was given as security . . . .” We have interpreted this statute 

as creating a statute of limitations.20 It necessarily follows that 

this statute of limitations applies only to the action created by 

§ 76-1013 and not to the “independent, separate, and distinct” 

15 § 76-1005. 

16 Id.

17 See, e.g., Bank of Papillion v. Nguyen, 252 Neb. 926, 567 N.W.2d 166 

(1997); PSB Credit Servs. v. Rich, supra note 14.

18 See, e.g., Carman v. Gibbs, 220 Neb. 603, 371 N.W.2d 283 (1985).

19 Federal Farm Mtg. Corporation v. Thiele, 137 Neb. 626, 632, 290 N.W. 

471, 473 (1940).

20 See, e.g., Sports Courts of Omaha v. Meginnis, supra note 2.
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action at law upon a promissory note following the completion of a judicial foreclosure.21

In the instant case, First National filed an action to recover 

the deficiency remaining on the obligation after sale of the 

Daveys’ property in judicial foreclosure. The action was filed 

more than 3 months after the sheriff’s sale, and the Daveys 

raised the statute of limitations as an affirmative defense. 

Because First National foreclosed upon the relevant trust deed 

as if it were a mortgage instead of following the procedures 

for nonjudicial foreclosure provided in the Act, First National 

argued that the general 5-year statute of limitations for actions 

on written contracts applied, under which its action would 

have been timely.22 Essentially, the parties disagreed as to 

whether the statute of limitations in § 76-1013 applied to deficiency actions brought after either kind of foreclosure allowed 

by the Act or only to deficiency actions filed after the sale of 

property pursuant to the trustee’s power of sale. The district 

court held that the 3-month statute of limitations in § 76-1013 

applied to deficiency actions filed after both types of foreclosure, thereby making First National’s deficiency action 

untimely. We must now decide whether the court properly 

reached this conclusion.

[6,7] In considering this question, we interpret and apply 

the language of § 76-1013, specifically the language “sale of 

property under a trust deed, as hereinabove provided.” The Act, 

of which this statute is a part, “authorizes the use of a security device which was not available prior to its enactment.”23

Because the Act made a change in common law, we strictly 

construe the statutes comprising the Act,24 as have previous 

courts interpreting the Act.25 Thus, because trust deeds did not 

21 See Federal Farm Mtg. Corporation v. Thiele, supra note 19.

22 See § 25-205.

23 Blair Co. v. American Savings Co., supra note 8, 184 Neb. at 558, 169 

N.W.2d at 294.

24 See Blaser v. County of Madison, ante p. 290, 826 N.W.2d 554 (2013).

25 See State Bank of Trenton v. Lutz, 14 Neb. App. 884, 719 N.W.2d 731 

(2006).
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exist at common law, the trust deed statutes are to be strictly 

construed.26 In the absence of any indication to the contrary, 

we also give the language of § 76-1013 its plain and ordinary meaning.27

Although § 76-1013 includes the special statute of limitations, its language sets forth numerous requirements bearing 

on the determination of a deficiency after the exercise of the 

power of sale. Section 76-1013 provides:

At any time within three months after any sale of 

property under a trust deed, as hereinabove provided, 

an action may be commenced to recover the balance due 

upon the obligation for which the trust deed was given as 

security, and in such action the complaint shall set forth 

the entire amount of the indebtedness which was secured 

by such trust deed and the amount for which such property was sold and the fair market value thereof at the date 

of sale, together with interest on such indebtedness from 

the date of sale, the costs and expenses of exercising the 

power of sale and of the sale. Before rendering judgment, 

the court shall find the fair market value at the date of 

sale of the property sold. The court shall not render judgment for more than the amount by which the amount of 

the indebtedness with interest and the costs and expenses 

of sale, including trustee’s fees, exceeds the fair market 

value of the property or interest therein sold as of the 

date of the sale, and in no event shall the amount of said 

judgment, exclusive of interest from the date of sale, 

exceed the difference between the amount for which the 

property was sold and the entire amount of the indebtedness secured thereby, including said costs and expenses 

of sale.

(Emphasis supplied.)

This court has already interpreted the key phrase “sale of 

property under a trust deed” as used in § 76-1013. In Bank of 

26 Id.

27 See In re Interest of Christopher T., 281 Neb. 1008, 801 N.W.2d 243 

(2011).
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Papillion v. Nguyen,

28 we held that “[t]he phrase ‘sale of property under a trust deed’ contained in § 76-1013 clearly refers 

to the exercise of the power of sale conferred by the trust deed 

upon the trustee pursuant to the statutory authority contained 

in § 76-1005.” Thus, as previously interpreted by this court, 

the language of § 76-1013 indicates that the 3-month statute of 

limitations applies only to deficiency actions filed after the sale 

of property pursuant to the trustee’s power of sale conveyed in 

a trust deed.

[8,9] In judicial foreclosure, the sale of property is ordered 

by the court.29 The sale does not rely upon the exercise of 

the trustee’s power of sale, but is conducted by a sheriff or 

another authorized person.30 Consequently, under the reasoning of Bank of Papillion v. Nguyen,

31 the judicial foreclosure 

of a trust deed does not result in the “sale of property under 

a trust deed.” Because it does not fall under the statutory 

language in § 76-1013, a deficiency action brought after the 

judicial foreclosure of a trust deed is not governed by the 

3-month statute of limitations. Rather, it is governed by the 

general statute of limitations for actions on written contracts 

in § 25-205.

The Daveys’ arguments on appeal do not dissuade us from 

this conclusion. They argue that § 76-1013 should apply to 

deficiency actions following judicial foreclosure as well as 

nonjudicial foreclosure, because the phrase “as hereinabove 

provided” in the statute refers back to § 76-1005, which section allows for the sale of property either by trustee’s sale or 

in the manner of a mortgage. Because § 76-1005 is before—or 

above—§ 76-1013 within the Act and allows for two types of 

sale, the Daveys contend that the statutory language referring 

to the sale of property “as hereinabove provided” refers to both 

methods of foreclosure. We find this argument unpersuasive for 

three reasons.

28 Bank of Papillion v. Nguyen, supra note 17, 252 Neb. at 933, 567 N.W.2d 

at 170.

29 See Neb. Rev. Stat. § 25-2138 (Reissue 2008).

30 See Neb. Rev. Stat. § 25-2144 (Cum. Supp. 2012).

31 See Bank of Papillion v. Nguyen, supra note 17.
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First, the language of § 76-1013 demonstrates that the statute’s applicability is limited to deficiency actions brought after 

nonjudicial foreclosure by a trustee. As interpreted by this 

court in Bank of Papillion v. Nguyen,

32 the phrase “under a 

trust deed” limits the 3-month statute of limitations to actions 

commenced after a trustee’s sale. Furthermore, § 76-1013 

explicitly states that the “costs and expenses of sale” include 

trustee’s fees. Such fees are incurred only when a trustee 

renders services.33 And as noted previously, a trustee is not 

involved in the sale of property in a judicial foreclosure. 

Consequently, trustee’s fees are incurred only in a nonjudicial 

foreclosure. Section 76-1013 also requires a court to find the 

fair market value of the property before rendering judgment in 

a deficiency action. In judicial foreclosure proceedings, this 

determination is implicitly made when the sale is confirmed by 

the court.34 The sale confirmation statute speaks of the court’s 

being satisfied that the property sold for “fair value.”35 Where 

the evidence establishes that the sale price was inadequate, it is 

the duty of the court to deny confirmation of the judicial sale.36

Thus, in a judicial foreclosure, the determination of value has 

already been made before the commencement of any action 

for deficiency. The finding of fair market value required by 

§ 76-1013 is only necessary during a deficiency action when 

the trust deed was nonjudicially foreclosed. Taken together, 

these specific provisions clearly dictate that § 76-1013 applies 

only to deficiency actions brought after a trustee’s sale, in 

which case the specific phrase “as hereinabove provided” 

refers to the statutory procedures for trustee’s sale as set forth 

in the Act.

[10] Second, the Daveys’ interpretation of § 76-1013, if 

adopted, could lead to an absurd result. Unlike the trustee’s 

sale in a nonjudicial foreclosure, a sheriff’s sale must be 

32 See id.

33 See Arizona Motor Speedway v. Hoppe, 244 Neb. 316, 506 N.W.2d 699 

(1993).

34 See Neb. Rev. Stat. § 25-1531 (Reissue 2008).

35 See id.

36 First Nat. Bank of York v. Critel, 251 Neb. 128, 555 N.W.2d 773 (1996).
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confirmed by the court.37 The debtor must be given 10 days’ 

notice of any hearing on the confirmation of the sale.38 And 

the debtor can petition the court to set aside the sale for up 

to 60 days after a sale is confirmed.39 At oral argument, the 

Daveys contended that the 3-month statute of limitations in 

§ 76-1013 would begin to run on the date of sale even where 

confirmation of sale is required. They also acknowledged 

that if this statute were applied to deficiency actions filed 

after a judicial foreclosure, the statute of limitations could 

run before a sale is confirmed. Although they asserted that a 

confirmation could be routinely obtained within the 3-month 

period, we do not share their conviction. As such, under the 

Daveys’ interpretation, a debtor could deprive a creditor of 

the ability to bring a deficiency action simply by challenging the validity of a sale or its confirmation so as to run out 

the statute of limitations. When possible, an appellate court 

will try to avoid a statutory construction that would lead 

to an absurd result.40 The Daveys’ interpretation permits an 

absurd result.

Third, despite the Daveys’ argument to the contrary, the 

cases they use to support their interpretation do not directly 

speak to the issue raised in this appeal. They cite to Sports 

Courts of Omaha v. Meginnis41 and Boxum v. Munce42 for 

the proposition that “the court must look to the obligation to 

determine application of §76-1013.”43 While this is an accurate 

statement from these cases, it must be viewed within the context of the precise issue before those courts.

In Sports Courts of Omaha v. Meginnis,

44 this court defined 

the deficiency action governed by § 76-1013 as an action 

37 See § 25-1531.

38 See id.

39 See id.

40 Bacon v. DBI/SALA, 284 Neb. 579, 822 N.W.2d 14 (2012).

41 Sports Courts of Omaha v. Meginnis, supra note 2.

42 Boxum v. Munce, supra note 3.

43 Brief for appellees at 8.

44 Sports Courts of Omaha v. Meginnis, supra note 2.
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brought on the underlying obligation and not on the trust 

deed. We rejected the argument that the statute of limitations 

in § 76-1013 did not apply to actions brought against parties 

who had no interest in the property identified in the trust deed, 

holding that the statute of limitations in § 76-1013 applied 

to actions brought to recover a deficiency on the underlying obligation. Therefore, since the deficiency action was 

brought against an individual who was a comaker of the original promissory note, the statute of limitations in § 76-1013 

applied even though he had no interest in the property that had 

been foreclosed.

Similarly, in Boxum v. Munce,

45 the Nebraska Court of 

Appeals clarified that § 76-1013 does not cover actions brought 

on a guaranty, even if it guarantees payment of the obligation 

that was foreclosed. In defining the specific issue before the 

court, the Court of Appeals stated as follows:

The key to the issue before us is recognition that the 

3-month limitation is applicable to a suit which seeks a 

deficiency judgment on a particular obligation that was 

secured by the particular trust deed that was foreclosed. 

The 3-month statute of limitations applies only when the 

suit for deficiency is on the obligation for which the foreclosed trust deed was given as security.46

Thus, the courts in both Sports Courts of Omaha v. Meginnis47

and Boxum v. Munce48 were deciding what constitutes a deficiency action as contemplated by § 76-1013. To decide this, 

the courts did “look to the obligation,” as the Daveys argue,49

but neither of these cases addressed the precise question at 

issue in the present appeal—whether § 76-1013 applies to the 

judicial foreclosure of a trust deed. Furthermore, the properties in both of the cases cited by the Daveys were sold by 

trustee’s sale, further limiting the applicability of these cases to 

45 Boxum v. Munce, supra note 3.

46 Id. at 738, 751 N.W.2d at 662.

47 Sports Courts of Omaha v. Meginnis, supra note 2.

48 Boxum v. Munce, supra note 3.

49 Brief for appellees at 8.
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the instant appeal, which involves a judicial foreclosure. The 

cases cited by the Daveys do not affect our determination of 

whether § 76-1013 applies to deficiency actions brought after 

the judicial foreclosure of a trust deed.

The Daveys’ arguments for a broader interpretation of 

§ 76-1013 do not persuade us to depart from the interpretation previously adopted by this court in Bank of Papillion v. 

Nguyen.

50 Under that precedent, we are bound to find that the 

statute of limitations in § 76-1013 does not apply to deficiency 

actions brought following the judicial foreclosure of a trust 

deed, but only to deficiency actions filed after the sale of property pursuant to the trustee’s power of sale. The district court 

erred in concluding otherwise.

We find further support for this conclusion in the decisions 

of other states having similar statutes. An Idaho court addressing the precise issue rejected the approach now urged by the 

Daveys.51 The Supreme Court of Utah considered an analogous 

question of which attorney fees statute applied to a trust deed 

judicially foreclosed as a mortgage.52 The Utah court observed 

that the Utah statute made it optional with the beneficiary of 

the trust deed whether to foreclose the trust property after a 

breach of an obligation in a manner provided for foreclosure 

of mortgages or to have the trustee proceed under the power of 

sale provided therein. The court rejected the debtors’ argument 

that the smaller amount dictated by the attorney fee provision 

of their trust deed act controlled the fees for a judicial foreclosure. This reasoning is consistent with the language of the Act 

and bolsters our conclusion.

CONCLUSION

Based on a previous interpretation by this court, we conclude that the statute of limitations in § 76-1013 applies only 

to deficiency actions filed after the exercise of the power of 

sale provided in a trust deed. A deficiency action brought 

50 Bank of Papillion v. Nguyen, supra note 17.

51 Thompson v. Kirsch, 106 Idaho 177, 677 P.2d 490 (Idaho App. 1984).

52 Security Title Company v. Payless Builders Supply, 17 Utah 2d 179, 407 

P.2d 141 (1965).
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following the judicial foreclosure of a trust deed is governed 

by the general 5-year statute of limitations for actions on written contracts in § 25-205. Because First National’s deficiency 

action was brought within 5 years of the judicial sale of the 

real property, the district court erred in granting the Daveys’ 

motion for summary judgment on the ground that the action 

was barred as untimely. Accordingly, we reverse the judgment 

and remand the cause for further proceedings consistent with 

this opinion.

 Reversed and remanded for

further proceedings.

McCormack, J., participating on briefs.