Court Opinion

ID: 9723062
Source: CourtListenerOpinion
Date Created: 2023-08-26 10:01:25.721382+00
Date Added: 2024-06-11T18:24:44.295211
License: Public Domain

Caporale, J.,
dissenting in part.
I agree that the operative petition of Sanitary and Improvement District No. 272 of Douglas County misjoins parties and causes of action. I further agree with the majority’s conclusion that Neb. U.C.C. § 8-202 (Reissue 1980) validates defective governmental investment securities only in the hands of purchasers for value and without notice. I part company with the majority only as to the burden of pleading, and ultimately the burden of proof, imposed by § 8-202 in a suit for declaratory judgment.
The majority reasons that as the petition “alleges nothing from which it can be inferred that each holder defendant gave value for the warrant or warrants he or she possesses,” the district has alleged “a colorable defense to its obligation on the warrants” and has thus stated a cause of action. This approach overlooks the unique posture of this case, in which the district seeks a declaration that it is excused from paying the warrants in the hands of the holder, or demurring, defendants. It seems to me that because the district seeks such a declaration, it must affirmatively allege either that such defendants did not pay value for the warrants in their hands or that they had notice of the claimed defect in the issuance of the warrants.
By analogy, if an insurer seeks a judgment declaring that it has no duty to defend or indemnify an insured, the insurer has the burden of estabhshing that the event falls within the policy’s exceptions to or exclusions from coverage. This is so because, in filing a petition for declaratory judgment relieving it of liability *47on the policy, the insurer is relying on what would otherwise be an affirmative defense. See, Concord Insurance Co. v. Miles, 118 N.J. Super. 551, 289 A.2d 267 (1972); Republic Casualty Company v. Obregon, 290 S.W.2d 267 (Tex. Civ. App. 1956) (writ of error refused).
In so saying, I am not unmindful that Neb. U.C.C. § 8-105 (Reissue 1980) provides, in any action on a security after it is shown that a defense or defect exists, “the plaintiff has the burden of establishing that he or some person under whom he claims is a person against whom the defense or defect is ineffective.” I recognize, too, that the comments following this section of the code state that the above language makes the rule stated in Neb. U.C.C. § 3-307 (Reissue 1980), dealing with negotiable instruments, applicable to securities. Section 3-307(3) provides: “After it is shown that a defense exists a person claiming the rights of a holder in due course has the burden of establishing that he or some person under whom he claims is in all respects a holder in due course.” However, the foregoing statutory language and comments contemplate the usual litigation posture in which the holder plaintiff seeks to recover on a security in his or her hands, and the issuer defendant seeks to avoid liability by raising a defense or defect. In such an instance, it becomes the plaintiff’s burden to show that he or she is a purchaser for value and without notice. Here, however, the posture is the reverse of the usual situation: the issuer district has sued for a judgment declaring it is not liable. Logic therefore dictates that the burdens of pleading and proof be reversed as well.
By asserting that none but the perpetrators of the fraud could have known of its existence, the district has alleged, in effect, that the demurring defendants had no notice of the fraud. That leaves the question of what in the petition asserts that the demurring defendants did not pay value for the warrants they possess. The answer is — nothing. Nor does the majority pretend otherwise. Indeed, the petition itself acknowledges that at least some of the demurring defendants may be purchasers for value, as it prays that certain other defendants indemnify the district from any liability it may be found to have to “an innocent holder.”
*48Accordingly, the operative petition fails to state a cause of action, and the court below correctly dismissed it. The judgment below should therefore be affirmed in its entirety.
Shanahan, J., joins in this dissent.