Court Opinion

ID: 4150015
Source: CourtListenerOpinion
Date Created: 2017-03-03 14:08:27.007265+00
Date Added: 2024-06-11T14:48:33.371653
License: Public Domain

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
03/03/2017 08:08 AM CST

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                                  Nebraska Supreme Court A dvance Sheets
                                          295 Nebraska R eports
                                            O’CONNOR v. KEARNY JUNCTION
                                                  Cite as 295 Neb. 981

                          R aymond J. O’Connor               Jennifer S. O’Connor,
                                                           and
                                  husband and wife, appellees, v.     K earny
                                        Junction, L.L.C., a Nebraska limited
                                            liability company, appellant.
                                                      ___ N.W.2d ___

                                            Filed March 3, 2017.    No. S-16-230.

                1.	 Specific Performance: Equity: Appeal and Error. An action for spe-
                    cific performance sounds in equity, and on appeal, an appellate court
                    tries factual questions de novo on the record and, as to questions of both
                    fact and law, is obligated to reach a conclusion independent from the
                    conclusion reached by the trial court.
                2.	 Equity: Appeal and Error. On appeal from an equity action, when
                    credible evidence is in conflict on material issues of fact, the court con-
                    siders and may give weight to the fact that the trial court observed the
                    witnesses and accepted one version of the facts over another.
                3.	 Actions: Final Orders: Appeal and Error. The law-of-the-case doc-
                    trine reflects the principle that an issue litigated and decided in one stage
                    of a case should not be relitigated at a later stage. The doctrine requires
                    a final order. A party is not bound by a court’s findings in an order that
                    it was not required to appeal.
                4.	 Summary Judgment: Final Orders. Partial summary judgments are
                    usually considered interlocutory. They must ordinarily dispose of the
                    whole merits of the case to be considered final.
                5.	 Estoppel. When a party has unequivocally asserted a position in a
                    proceeding and a court accepts that position, judicial estoppel can bar
                    that party’s inconsistent claim against the same or a different party in a
                    later proceeding.
                6.	 ____. Judicial estoppel should be applied with caution within a sin-
                    gle action.
                7.	 Contracts: Specific Performance. In an action where specific per­
                    formance is decreed, courts ordinarily attempt to place the parties in
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             Nebraska Supreme Court A dvance Sheets
                     295 Nebraska R eports
                     O’CONNOR v. KEARNY JUNCTION
                           Cite as 295 Neb. 981

     the same position in which they would have been if the contract had
     been performed at the time agreed upon.
 8.	 Damages: Proof. While damages need not be proved with mathematical
     certainty, neither can they be established by evidence which is specula-
     tive and conjectural.
 9.	 ____: ____. Mitigation of damages is an affirmative defense, as to
     which the defendant has the burden of proof.
10.	 Vendor and Vendee: Specific Performance. The general rule is that
     from the time when a contract of sale of land should be performed the
     land is in equity the property of the vendee held by the vendor in trust
     for him, and the purchase price is the property of the vendor held in trust
     for him by the vendee, and that upon specific performance the vendor is
     liable to account for the rents and profits and the vendee for the interest
     on the purchase price.
11.	 Equity. Equity treats things agreed to be done as actually performed.
12.	 Courts: Equity. Where a situation exists which is contrary to the prin-
     ciples of equity and which can be redressed within the scope of judicial
     action, a court of equity will devise a remedy to meet the situation.

  Appeal from the District Court for Buffalo County: M ark J.
Young, Judge. Affirmed as modified.
  Kenneth F. George and Luke M. Simpson, of Ross, Schroeder
& George, L.L.C., for appellant.
   Arend R. Baack, of Leininger, Smith, Johnson, Baack,
Placzek & Allen, for appellees.
   Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy,
K elch, and Funke, JJ.
   Cassel, J.
                     I. INTRODUCTION
   The assignees of a purchase option in a lease of real estate
sought specific performance. The landlord initially resisted,
asserting that a condition precedent had not been fulfilled.
The landlord later moved for specific performance, which was
ordered, but now appeals from a judgment awarding equitable
monetary relief for lost rentals. We conclude that based on
the content of the motion and the resulting order, the landlord
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           Nebraska Supreme Court A dvance Sheets
                   295 Nebraska R eports
                 O’CONNOR v. KEARNY JUNCTION
                       Cite as 295 Neb. 981

was judicially estopped from asserting the condition precedent
in avoidance of equitable monetary relief. Because we also
conclude that the landlord was entitled to offset the monetary
award with the interest on the unpaid purchase price, we
modify that part of the judgment. As so modified, we affirm
the court’s judgment.
                       II. BACKGROUND
   Kearny Junction, L.L.C. (Landlord), leased commercial real
estate to a third party (Tenant), who was not a party to this
suit. The lease agreement provided an option to purchase “con-
ditional upon [Tenant’s] full and faithful performance of all
of [Tenant’s] duties and obligations under the Lease.” These
words created a condition precedent.
   In 2007, Tenant assigned this purchase option to Raymond
J. O’Connor and Jennifer S. O’Connor, husband and wife
(Assignees). At the time, Tenant had fully performed all obliga-
tions under the lease.
   But for several years after the assignment, Tenant paid less
than the full amount of the rent. The parties disputed who
discovered the underpayment. But Landlord conceded that it
had agreed Tenant could pay the delinquent rent and continue
the lease. Tenant did so and thereafter paid the full monthly
rental payments.
                   1. Assignees’ Attempt to
                        Exercise Option
   In October 2013, Assignees attempted to exercise the pur-
chase option. At the time of the attempted exercise, no rent
was past due. Nonetheless, Landlord rebuffed their attempt,
returning their tendered downpayment. Landlord maintained
that because of the rental underpayments, Tenant had failed to
satisfy the condition precedent. Further, Landlord maintained
that the condition precedent could never be met.
   Assignees objected and argued that the default had been
cured. But Landlord contended that with respect to the pur-
chase option, the acceptance of rent did not waive the default.
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           Nebraska Supreme Court A dvance Sheets
                   295 Nebraska R eports
                 O’CONNOR v. KEARNY JUNCTION
                       Cite as 295 Neb. 981

                   2. Settlement Negotiations
                           and Lawsuit
   Assignees and Landlord attempted to resolve the dispute
by negotiating through counsel. After these negotiations were
unsuccessful, Assignees filed a complaint in March 2014 and
sought (1) a declaratory judgment determining that they had
a valid purchase option and had duly exercised that option to
purchase and (2) specific performance of the purchase option
and costs associated with the action. Landlord filed an answer
that asserted the option was lost and forfeited upon the default
in rent.
   Despite its stated position, Landlord offered in October
2014 to sell the property to Assignees and value the property
pursuant to the terms of the purchase option by averaging
three appraisals. However, a disagreement arose as to the
selection of the three appraisers and the negotiations appar-
ently halted.
   In November 2014, Assignees obtained permission to amend
their complaint. Before they filed their amended complaint,
Landlord filed a motion. The district court treated it as a
motion for summary judgment. We pay particular attention to
its content.
   Landlord’s motion requested the court to declare that
“[Assignees] have an option to purchase from [Landlord]
the real property” and that “[Assignees] have duly exercised
the Option.” Landlord stated that it was making the motion
“[n]otwithstanding the affirmative defense specifically and par-
ticularly alleged in [p]aragraph 17” of its earlier answer.
   Assignees then filed their amended complaint that pur-
ported to add a third “cause of action” that sought “damages”
for Landlord’s delay in allowing Assignees to exercise the
purchase option. Landlord filed an answer to the amended
complaint, once again denying that Assignees had a right to
exercise the purchase option. But in this answer, Landlord sug-
gested that it had “consented to [Assignees’] exercise of the
option” and requested that “both parties should be specifically
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           Nebraska Supreme Court A dvance Sheets
                   295 Nebraska R eports
                  O’CONNOR v. KEARNY JUNCTION
                        Cite as 295 Neb. 981

ordered to perform all of the terms and provisions of the
Purchase Option.”
                      3. Partial Summary
                        Judgment Order
   After a hearing on Landlord’s motion, the district court
issued an order sustaining it. Landlord’s counsel prepared both
the motion and the order. The order declared that “[p]ursu-
ant to the Lease . . . [Assignees] have an option to purchase
. . . and [Assignees] have duly exercised the Option to pur-
chase.” It also ordered specific performance by both parties
pursuant to the purchase option agreement in the lease. The
order continued a previously scheduled trial, apparently on
the third “cause of action,” to be rescheduled “upon motion of
either party.”
   Pursuant to this order, the purchase price was calculated by
averaging three appraisals. Landlord then sold the property to
Assignees, and the sale closed in March 2015. The matter pro-
ceeded to trial on the remaining issue of monetary relief.
                            4. Judgment
   After the trial, the district court entered a judgment, styled
as an order, in Assignees’ favor. The court found that the sum-
mary judgment order had already determined that Assignees
had a purchase option and that they had exercised it. And the
court stated that its previous determination was “the law of
the case.”
   The judgment also required Landlord to pay “damages”
of $135,426 to Assignees. This figure represented lost prof-
its between May 1, 2014—“the date provided for closing in
[the purchase option]”—and the date when the sale closed—
which was March 18, 2015 (although the court once referred
to March 10, which appears to be a scrivener’s error). The
amount was calculated by subtracting the costs of maintaining
the property from the total lost rents.
   Landlord filed a motion for new trial, requesting a new
trial or, in the alternative, to amend or alter the district court’s
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               Nebraska Supreme Court A dvance Sheets
                       295 Nebraska R eports
                       O’CONNOR v. KEARNY JUNCTION
                             Cite as 295 Neb. 981

judgment. The district court revised minor details of the judg-
ment but in all material aspects overruled the motion. Landlord
timely appealed, and we granted its petition to bypass review
by the Nebraska Court of Appeals.
               III. ASSIGNMENTS OF ERROR
   Landlord assigns that the district court erred in (1) finding
that the Assignees had duly exercised the purchase option “as
a matter of right”; (2) finding that under the law-of-the-case
doctrine, the Assignees had a right to exercise the option
“as a matter of law”; and (3) awarding damages of $135,426
plus costs.
                 IV. STANDARD OF REVIEW
   Although Assignees characterized their claim as three “causes
of action” (for declaratory judgment, specific performance,
and damages), in substance, they asserted only one cause of
action—for specific performance of the purchase option. This
subsumed both the declaratory and the monetary relief. In that
light, we recite the appropriate standard of review.
   [1,2] An action for specific performance sounds in equity,
and on appeal, an appellate court tries factual questions de
novo on the record and, as to questions of both fact and law,
is obligated to reach a conclusion independent from the con-
clusion reached by the trial court.1 On appeal from an equity
action, when credible evidence is in conflict on material issues
of fact, the court considers and may give weight to the fact that
the trial court observed the witnesses and accepted one version
of the facts over another.2
                         V. ANALYSIS
                      1. Law of the Case
  [3] The law-of-the-case doctrine reflects the principle that
an issue litigated and decided in one stage of a case should

 1	
      Ficke v. Wolken, 291 Neb. 482, 868 N.W.2d 305 (2015).
 2	
      Id.
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                       295 Nebraska R eports
                       O’CONNOR v. KEARNY JUNCTION
                             Cite as 295 Neb. 981

not be relitigated at a later stage.3 The doctrine requires a final
order.4 A party is not bound by a court’s findings in an order
that it was not required to appeal.5
   [4] But, here, before the judgment, there was no final,
appealable order. Partial summary judgments are usually con-
sidered interlocutory.6 They must ordinarily dispose of the
whole merits of the case to be considered final.7 Here, the
summary judgment order did not decide the issue of monetary
relief. Between the filing of the motion and the order sustain-
ing it, Assignees filed their amended complaint. And the sum-
mary judgment order expressly reserved the unresolved issue
of the third “cause of action.” Thus, it did not dispose of the
whole merits of the case and was not a final, appealable order.
It necessarily follows that the law-of-the-case doctrine did
not apply.
   [5,6] Although the law-of-the-case doctrine did not apply,
another rule of law dictated the same result. When a party has
unequivocally asserted a position in a proceeding and a court
accepts that position, judicial estoppel can bar that party’s
inconsistent claim against the same or a different party in a
later proceeding.8 Although we have said that judicial estop-
pel should be applied with caution within a single action,9 the
circumstances here support its use.
   Landlord’s motion and the resulting order established
both elements of judicial estoppel. In its motion, Landlord
admitted that Assignees “h[ad] an option to purchase” and
that they had “duly exercised the Option.” If the condition

 3	
      In re 2007 Appropriations of Niobrara River Waters, 283 Neb. 629, 820
N.W.2d 44 (2012).
 4	
      Id.
 5	
      Id.
 6	
      Big John’s Billiards v. State, 283 Neb. 496, 811 N.W.2d 205 (2012).
 7	
      Id.
 8	
      TFF, Inc. v. SID No. 59, 280 Neb. 767, 790 N.W.2d 427 (2010).
 9	
      See id.
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                Nebraska Supreme Court A dvance Sheets
                        295 Nebraska R eports
                       O’CONNOR v. KEARNY JUNCTION
                             Cite as 295 Neb. 981

precedent had not been satisfied, there would have been no
contract and, thus, nothing to exercise. But Landlord’s motion
expressly stated otherwise. In this regard, Landlord’s position
was unequivocal. And by ordering the sale, the district court
accepted Landlord’s position.
   In arguing that the condition precedent was not satisfied,
Landlord merely attempts to escape the consequences of the
unequivocal position taken in its motion. Because the court
accepted Landlord’s position, Landlord was estopped from
later asserting an inconsistent position.
                 2. Equitable Monetary R elief
   [7,8] In an action where specific performance is decreed,
courts ordinarily attempt to place the parties in the same posi-
tion in which they would have been if the contract had been
performed at the time agreed upon.10 While damages need not
be proved with mathematical certainty, neither can they be
established by evidence which is speculative and conjectural.11
The term “damages” is not precisely correct in this context.
Because the monetary relief flows from a claim for specific
performance and not for breach of contract, it is not “legal
damages” or awarded as a matter of a right. It is equitable
compensation to make the injured party whole.
   Landlord assigns that the district court erred in awarding
compensatory damages of $135,426 plus costs. In its brief,
Landlord sets forth three supporting arguments.
                 (a) Mitigation of Damages
   [9] Landlord argues that Assignees failed to offer evi-
dence showing that they attempted to mitigate their damages.
However, mitigation of damages is an affirmative defense, as
to which the defendant has the burden of proof.12 Therefore,

10	
      III Lounge, Inc. v. Gaines, 227 Neb. 585, 419 N.W.2d 143 (1988).
11	
      Gary’s Implement v. Bridgeport Tractor Parts, 281 Neb. 281, 799 N.W.2d
249 (2011).
12	
      Roth v. Wiese, 271 Neb. 750, 716 N.W.2d 419 (2006).
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                        295 Nebraska R eports
                       O’CONNOR v. KEARNY JUNCTION
                             Cite as 295 Neb. 981

Landlord, not Assignees, was required to present evidence of
Assignees’ failure to mitigate. This argument lacks merit.

                  (b) Calculation of Ownership
                       Expenses and Costs
   Landlord argues that the monetary award was improper
because the district court did not account for all the costs
and expenses associated with obtaining the rents and profits.
Specifically, Landlord argues that the court failed to subtract
from the award the monthly interest charges the Assignees
would have had to pay on a loan for the purchase money
between May 2014 and March 2015 as “costs associated
with purchasing and owning the Property in order to col-
lect rent.”13
   Landlord relies upon our decision in III Lounge, Inc. v.
Gaines.14 There, we articulated a rule that “governs the ven-
dor’s right to allowance for expenses.”15 In that context, we
stated that “if the [purchaser] is awarded rents, rental value, or
profits from the premises during the delay [in performance],
the [vendor] may deduct from them ordinary carrying charges
he may have paid during the delay, including taxes, insurance,
utilities, and reasonable repairs.”16 But Landlord focuses on
the language that followed immediately after the rule, where
we explained that “if the [purchaser] were awarded rents or
profits, [the purchaser] would also be saddled with expenses
associated with obtaining the rents or profits.”17 Landlord
is arguing that as part of these expenses, Assignees should
have proved what their mortgage interest payments would
have been.

13	
      Brief for appellant at 22.
14	
      III Lounge, Inc. v. Gaines, supra note 10.
15	
      Id. at 592, 419 N.W.2d at 148 (emphasis supplied).
16	
      Id.
17	
      Id.
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               Nebraska Supreme Court A dvance Sheets
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                       O’CONNOR v. KEARNY JUNCTION
                             Cite as 295 Neb. 981

   But, here, Landlord is mixing apples and oranges. Read
in context, we were explaining the rule governing the ven-
dor’s right to expenses. Assignees were the purchasers, not
the vendor. The rule allows the vendor to deduct its expenses
during the period of delay so that it disgorges only the net
rentals it collected during the delay. And our language makes
clear that it applies only to those costs actually expended by
the vendor.
   The district court allowed Landlord to deduct its real estate
taxes and insurance. The court excluded the evidence of any of
Landlord’s other expenses. No error is assigned to those evi-
dentiary rulings. Thus, Landlord failed to prove that it had any
other expenses. This argument also lacks merit.

              (c) Equitable Placement of Parties in
                  Grant of Specific Performance
   Third, Landlord argues the court failed to place both par-
ties in the same position they would have been if the purchase
option had been exercised in October 2013. Landlord argues
that Landlord should have received interest on the purchase
money between May 2014 and March 2015. We agree.
   [10,11] Long ago, we articulated a rule derived from basic
underlying principles. The general rule is that from the time
when a contract of sale of land should be performed the
land is in equity the property of the vendee held by the ven-
dor in trust for him, and the purchase price is the property
of the vendor held in trust for him by the vendee, and that
upon specific performance the vendor is liable to account for
the rents and profits and the vendee for the interest on the
purchase price.18 In other words, Landlord owes Assignees
the property’s rents and profits and Assignees owe Landlord
interest on the purchase price. These consequences flow from

18	
      Russell v. Western Nebraska Rest Home, Inc., 180 Neb. 728, 144 N.W.2d
728 (1966). See, also, Sechovec v. Harms, 187 Neb. 70, 187 N.W.2d 296
      (1971).
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                        O’CONNOR v. KEARNY JUNCTION
                              Cite as 295 Neb. 981

the idea that equity treats things agreed to be done as actu-
ally performed.19
   Once again, we stated this rule somewhat differently in
III Lounge, Inc. v. Gaines.20 There we said, “If the delay in
the performance of a contract was caused by the vendor, and
the purchaser is not awarded rents, rental value, or profits, and
has not been in possession of the property during the delay,
the purchaser is not liable for interest on the unpaid purchase
money.”21 But our language in that case was focused on a
situation where the purchaser was not awarded rents. In the
present case, rents were awarded. Thus, under the general rule,
Assignees are liable to account for the interest on the pur-
chase price.
   We have treated rents and profits as analytically distinct
from interest on the purchase price. Other jurisdictions some-
times blend these concepts. Thus, some jurisdictions allow a
vendor to offset an award of ancillary damages in a decree
for specific performance with expenses of owning the prop-
erty, as well as the legal rate of interest on the sale price
since the scheduled closing date.22 But where the vendor
wrongfully delayed performance, the vendor will typically
not be allowed to collect interest that exceeds the ancillary

19	
      See Dixon v. O’Connor, 180 Neb. 427, 143 N.W.2d 364 (1966).
20	
      III Lounge, Inc. v. Gaines, supra note 10.
21	
      Id. at 595, 419 N.W.2d at 149.
22	
      See, generally, Qantum Communications Corp. v. Star Broadcasting, 491
F. Supp. 2d 1123 (S.D. Fla. 2007); Lewis v. Lockhart, 379 P.2d 618
      (Alaska 1963); Dato v. Mascarello, 197 Ill. App. 3d 847, 557 N.E.2d
181, 145 Ill. Dec. 411 (1989); Crockett v. Gray, 39 Kan. 659, 18 P. 905
      (1888); Wilcox v. Commonwealth R. & T. Co., 248 Mich. 527, 227 N.W.
678 (1929); Bonds v. Rhoads, 203 Miss. 440, 35 So. 2d 437 (1948); Volk
      v. Atlantic Acceptance & Realty Co., 142 N.J. Eq. 67, 59 A.2d 387 (1948);
      Leafgreen v. Drake’s Exrs., 300 Pa. 369, 150 A. 656 (1930); Greensleeves,
      Inc. v. Smiley, 942 A.2d 284 (R.I. 2007); Amoss v. Bennion, 23 Utah 2d 40,
      456 P.2d 172 (1969); Barnett v. Cloyd’s Ex’rs, 125 Va. 546, 100 S.E. 674
      (1919).
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                         O’CONNOR v. KEARNY JUNCTION
                               Cite as 295 Neb. 981

damages awarded to the purchaser or the purchaser may
waive reasonable rents so as not to pay interest on the
sale price.23
   Of course, these jurisdictions are applying equitable prin-
ciples to specific situations, as we are here. We perceive two
common threads in the case law. First, the vendor should not
profit from its own delay. Second, the purchaser should not
receive a windfall that unfairly penalizes the vendor. This
aligns with our understanding of the applicable equitable prin-
ciples and is compatible with our case law.
   With this understanding, we turn to the specific remedy
applicable to this appeal. Assignees have already received
specific performance of the conveyance. At this point, we are
concerned only with the accounting attributable to the delay
in performance.
   As we have already explained, equity requires us to treat
the real estate as held by Landlord in trust for Assignees.
Accounting for the net rents and profits is straightforward.
The district court awarded rents, net of taxes and insurance, of
$135,426. Other than Landlord’s argument regarding Assignees’
interest expenses, which we have rejected, it does not quarrel
with this aspect of the equitable accounting.
   But the other side of the equitable accounting requires us
to hold Assignees liable for interest on the purchase price.
There may be circumstances where a vendor’s conduct in
delay of performance is so egregious that equity would deny
any interest on the purchase price. That is not the situa-
tion here.

23	
      See, id. See, also, Reis v. Sparks, 547 F.2d 236 (4th Cir. 1976) (within trial
      court’s discretion to award or deny interest to vendors on purchase price);
      A., T. & S.F. R.R. Co. v. C. & W.I. R.R. Co., 162 Ill. 632, 657, 44 N.E.
823, 830 (1896) (disallowing interest entirely where vendor “willfully”
      and “wrongfully” delayed performance of contract); Coal Co. v. Findley,
      128 Iowa 696, 105 N.W. 206 (1905) (disallowing interest entirely where
      vendor delayed performance of contract).
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                       O’CONNOR v. KEARNY JUNCTION
                             Cite as 295 Neb. 981

    The difficulty stems from the imprecise evidence regarding
an appropriate rate of interest. While mathematical certainty is
not required for Assignees’ remedy, the mathematics of inter-
est requires a rate. Ordinarily, the interest rate on a purchase
price is set forth in the contract between the parties. Here, the
parties failed to agree upon a rate.
    [12] Where a situation exists which is contrary to the prin-
ciples of equity and which can be redressed within the scope
of judicial action, a court of equity will devise a remedy to
meet the situation.24 One option would be a legal rate. In
Nebraska, the legal interest rate is 6 percent.25 But to allow
Landlord to offset the award to Assignees with interest at a
rate of 6 percent would reward it for the delay in performance.
There is no evidence that it could have invested the purchase
price at that rate. However, not allowing Landlord to offset the
award with at least some interest on the unpaid purchase price
would grant a windfall to Assignees. One of the Assignees tes-
tified that the interest rate on the loan to purchase the property
was more than 3 percent and that he was unsure whether it
was less than 4 percent. This provides some evidence of a rate
of interest on the purchase price.
    Upon our de novo review and in order to ensure an equi-
table result, we reduce the Assignees’ monetary relief by the
amount of $65,000, which approximates interest on the pur-
chase price of $2.4 million, less the $50,000 deposit, for the
period of delay, at a rate somewhat in excess of 3 percent. We
modify the district court’s judgment in this respect and subtract
this interest from the award to Assignees, thereby reducing
the monetary relief granted to Assignees from $135,426 to
$70,426 and the taxable costs in the district court.

24	
      Strunk v. Chromy-Strunk, 270 Neb. 917, 708 N.W.2d 821 (2006).
25	
      Neb. Rev. Stat. § 45-102 (Reissue 2010).
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                       VI. CONCLUSION
   Because Landlord’s motion admitted that Assignees had
an option and that the option was exercised and because the
district court expressly entered an order relying upon these
admissions, Landlord was judicially estopped from asserting
its inconsistent position that the condition precedent was not
satisfied. We also conclude that Landlord was entitled to inter-
est on the purchase price for the period of delay and reduce
the monetary relief granted to Assignees from $135,426 to
$70,426 and the taxable costs in the district court. As so modi-
fied, we affirm the judgment of the district court.
                                        A ffirmed as modified.