Vandelay Investments v. Brennan ( 2016 )

IN THE NEBRASKA COURT OF APPEALS
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
(Memorandum Web Opinion)
VANDELAY INVESTMENTS V. BRENNAN
NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
VANDELAY INVESTMENTS, L.L.C., APPELLEE,
V.
MARY IRENE BRENNAN AND LARRY ROBERT BRENNAN, COTRUSTEES
OF THE MARY IRENE BRENNAN TRUST, APPELLANTS.
Filed March 8, 2016. No. A-15-269.
Appeal from the District Court for Douglas County: GREGORY M. SCHATZ, Judge.
Affirmed.
Douglas W. Ruge for appellants.
Robert S. Lannin, of Shively & Lannin, P.C., L.L.O., for appellee.
MOORE, Chief Judge, and IRWIN and BISHOP, Judges.
BISHOP, Judge.
In this quiet title action brought by Vandelay Investments, L.L.C. (Vandelay), Larry Robert
Brennan (Robert), cotrustee of the Mary Irene Brennan Trust (Trust), appeals from the order of the
district court for Douglas County overruling his motion to vacate a default judgment entered in
Vandelay’s favor. Robert maintains the district court, in ruling on his motion to vacate the default
judgment, improperly limited its analysis to Neb. Rev. Stat. § 25-2001(4) (Reissue 2008), and
failed to consider whether, under the court’s independent equity jurisdiction, the default judgment
should have been set aside. Because Robert has not established a right to have the default judgment
set aside on either statutory or equitable grounds, we affirm.
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BACKGROUND
In August 2007, Robert and his sister, Mary Irene Brennan (Mary), as cotrustees of the
Trust, purchased a property on Read Plaza in Douglas County, Nebraska, by warranty deed. Mary
occupied the property as her primary residence; Robert resided elsewhere.
The property taxes for 2008 were not paid. On March 1, 2010, the county treasurer sold
the property at a delinquent tax sale and issued a tax sale certificate. On March 13, 2013, the
purchaser of the property assigned the tax sale certificate to Vandelay. On August 28, 2013,
Vandelay obtained a treasurer’s tax deed. On February 3, 2014, Vandelay initiated this quiet title
action, naming as defendants Robert and Mary as cotrustees of the Trust.
After Vandelay unsuccessfully attempted certified mail service on Robert and Mary at the
Read Plaza address, the district court permitted service by publication. Neither Robert nor Mary
filed an appearance. On May 7, 2014, on Vandelay’s motion, the court entered default judgment
in Vandelay’s favor.
On February 6, 2015, Robert filed a motion to vacate the default judgment. He alleged
Mary passed away on December 6, 2014, and that prior to her death, she “had been going through
intensive treatment and was often disoriented.” Robert alleged he and Mary did not have “actual
notice” of the impending tax sale or of this quiet title action. According to Robert, he did not
discover the tax sale or the quiet title action until listing the property for sale as part of
administering Mary’s estate.
Along with his motion to vacate, Robert submitted a proposed answer and counterclaim in
which he alleged the “Notice of Tax Sale” was defective and the “Tax Notice” was not “properly
served” in that there “was no personal or residential service.” Robert alleged service was “in fact
perfected by publication.”
On February 13, 2015, a hearing was held at which the parties submitted affidavits and
brief argument. Vandelay submitted the affidavit of Randy James, its managing member and
attorney. In his affidavit, James stated that after obtaining the treasurer’s tax deed on August 28,
2013, he received an invoice indicating that homeowners’ association dues were unpaid as of
September 2013; according to James, this indicated defendants ceased paying the dues shortly after
issuance of the tax deed.
James further stated that after the default judgment was entered on May 7, 2014, he
received telephone calls from Mary beginning on May 23. In the calls, Mary advised James that
she was aware of the issuance of the tax deed, of the pending quiet title action, and of the entry of
judgment. In addition, Mary detailed various financial matters involving her family, including that
property taxes had been unpaid beginning in 2008.
In his two affidavits, Robert stated the following. Prior to Mary’s death, she underwent
extensive medical treatment for a period of 21 months and was often disoriented. Neither Robert
nor Mary was aware of the impending tax sale or the quiet title action. The property was purchased
in 2007 with cash from Robert and Mary’s father and had no loans or security interests associated
with it. At all times, Robert, Mary, and their father had substantial cash reserves exceeding the
obligations at issue.
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Robert further stated in his affidavits that he had “a hard time believing [Mary] spoke with
Randy James in May and June 2014.” According to Robert, Mary was in continual contact with
Robert and her father during this period and never brought up the tax sale or this action. Robert
stated that, knowing his sister, he believed she would have mentioned these matters. Furthermore,
had Robert or his father been aware of any delinquent taxes, either of them would have paid the
taxes immediately. According to Robert, allowing Vandelay to acquire the property for payment
of taxes would result in a substantial windfall and unjust enrichment.
At the conclusion of the hearing, the court took the matter under advisement. On February
26, 2015, the court entered an order overruling Robert’s motion to vacate the default judgment.
The court noted that because Robert filed his motion outside of the term in which the court entered
the default judgment and more than 6 months after its entry, the court’s inherent power to vacate
or modify its judgments, as provided in § 25-2001(1), did not apply.
The court then observed that under § 25-2001(4)(d), it could vacate or modify its own
judgments after the term at which such judgments were made “for erroneous proceedings against
an infant or person of unsound mind if the condition of such defendant does not appear in the
record of the proceedings.” The court reasoned that the only evidence that Mary was of unsound
mind during the proceedings was Robert’s statement in his affidavit that prior to her death, Mary
underwent extensive medical treatment for a period of 21 months and was often disoriented. The
court cited James’ affidavit as contrary evidence, because it detailed telephone conversations with
Mary in May and June 2014, in which Mary expressed awareness of the delinquent taxes, the tax
sale, and the default judgment. The court found there was insufficient evidence to establish that
Mary was of unsound mind, making the exception in § 25-2001(4)(d) inapplicable.
Robert timely appeals to this court.
ASSIGNMENTS OF ERROR
Robert assigns the district court erred (1) in ruling that it did not have the power to vacate
the default judgment and in failing to vacate the default judgment, and (2) in ruling that it was
constrained by § 25-2001 and that no exceptions applied to allow the court to vacate the default
judgment.
STANDARD OF REVIEW
An appellate court reviews a decision on a motion to vacate or modify a judgment for an
abuse of discretion, where the decision on the motion was an exercise of the trial court’s statutory
authority. Hornig v. Martel Lift Systems, 258 Neb. 764, 606 N.W.2d 764 (2000). Where a decision
on a motion to vacate or modify a judgment was an exercise of the trial court’s independent equity
jurisdiction, 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. Id.
ANALYSIS
Robert’s assignments of error and arguments on appeal primarily focus on whether the
district court, in ruling on his motion to vacate the default judgment, improperly limited its analysis
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to § 25-2001(4), and failed to consider whether, under the court’s independent equity jurisdiction,
the default judgment should have been set aside as an equitable remedy.
Section 25-2001(4) grants a district court authority to vacate or modify its judgments or
orders after the term at which such judgments or orders were made on seven distinct grounds. In
this case, the district court addressed the applicability of § 25-2001(4)(d), which permits a
judgment or order from a prior term to be vacated or modified “for erroneous proceedings against
an infant or person of unsound mind if the condition of such defendant does not appear in the
record of the proceedings.” None of the other grounds in § 25-2001(4) were applicable.
However, the Nebraska Supreme Court “has repeatedly recognized that a court’s
jurisdiction based on § 25-2001 is concurrent with a court’s independent equity jurisdiction.” In
re Estate of West, 226 Neb. 813, 833, 415 N.W.2d 769, 783 (1987). Stated another way, “[t]he
power of a district court under its equity jurisdiction to set aside a judgment or an order as an
equitable remedy is not limited by [§ 25-2001].” § 25-2001(2).
While a court’s jurisdiction under § 25-2001 is concurrent with its equity jurisdiction, this
does not mean a party can seek to set aside a judgment or order as an equitable remedy where a
remedy exists under the statute. Rather, “a litigant seeking to proceed in equity must show that
§ 25-2001 is not applicable, because equitable relief does not lie where there is a remedy at law.”
Western Fertilizer v. City of Alliance, 244 Neb. 95, 101, 504 N.W.2d 808, 813 (1993). See, also,
Hornig, supra (affirming a court’s exercise of equity jurisdiction to vacate a judgment where it
was clear that none of the provisions in § 25-2001(4) could have served the parties seeking to
vacate the judgment).
We note that Robert’s motion to vacate the default judgment did not make clear whether
Robert was relying upon § 25-2001(4)(d) or upon the court’s equity jurisdiction. Thus, we cannot
fault the district court for addressing the motion pursuant to § 25-2001(4)(d) rather than pursuant
to its equity jurisdiction. However, we need not decide how the court should have addressed the
motion, because Robert has not established a right to have the default judgment set aside on
statutory or equitable grounds.
Assuming Robert’s motion invoked § 25-2001(4)(d), we agree with the district court that
Robert did not present sufficient evidence to establish that Mary was of unsound mind, such that
Robert did not prove his right to relief under the statute. Furthermore, as Vandelay points out,
Robert failed to follow the procedure outlined in Neb. Rev. Stat. § 25-2002 (Reissue 2008), which
requires a proceeding to set aside a judgment or order on any of the grounds listed in § 25-2001(4)
to be commenced by filing a complaint and serving summons.
Likewise, assuming the district court should have considered Robert’s motion under its
equity jurisdiction, Robert has not established a right to equitable relief. We may address Robert’s
claim to equitable relief because, once an appellate court acquires equity jurisdiction, it can
adjudicate all matters properly presented and grant complete relief to the parties. In re Estate of
McKillip, 284 Neb. 367, 820 N.W.2d 868 (2012).
A party seeking relief in equity from a default judgment must show that he or she has a
meritorious defense to the action. Forker Solar, Inc. v. Knoblauch, 224 Neb. 143, 396 N.W.2d 273
(1986); Seward v. Churn Ranch Co., 136 Neb. 804, 287 N.W. 610 (1939); Western Assurance Co.
of Toronto v. Klein, 48 Neb. 904, 67 N.W. 873 (1896). A treasurer’s tax deed is presumptive
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evidence that all things whatsoever required by law to make a good and valid tax sale and vest title
in the purchaser were done. Hauxwell v. Henning, 291 Neb. 1, 863 N.W.2d 798 (2015). Thus, for
Robert to show he had a meritorious defense in the quiet title action, he was required to show that
there was some basis to attack the validity of the treasurer’s tax deed. See id. A meritorious defense
“means one which is worthy of judicial inquiry because it raises a question of law deserving some
investigation and discussion or a real controversy as to the essential facts”; a party “is not required
to show that he will ultimately prevail, but only that he has a recognized defense that is not
frivolous.” State on behalf of A.E. v. Buckhalter, 273 Neb. 443, 451, 730 N.W.2d 340, 347 (2007).
Robert contends he had a meritorious defense because (1) Vandelay’s service of the
“Notice of Tax Sale” failed to comply with “Neb. Rev. Stat. § 77-1832,” which according to Robert
required personal service, residential service, or service by certified mail; and (2) Vandelay’s
“Notice of Tax Sale did not comply with Neb. Rev. Stat. § 77-1831 in that it did not contain the
requirements of subsection 1 and subsection 6 and did not otherwise comply with that statute.”
Brief for appellant at 12-13. As we explain, neither of the grounds cited by Robert establishes the
existence of a meritorious defense.
The Nebraska Legislature has specifically provided that “[t]ax sale certificates sold and
issued between January 1, 2010, and December 31, 2014, shall be governed by the laws and
statutes that were in effect on December 31, 2009, with regard to all matters relating to tax deed
proceedings, including noticing and application, and foreclosure proceedings.” Neb. Rev. Stat.
§ 77-1837.01(2) (Cum. Supp. 2014). The tax sale certificate in this case was sold and issued on
March 1, 2010; thus, the statutes in effect on December 31, 2009, govern.
On December 31, 2009, Neb. Rev. Stat. § 77-1832 (Reissue 2009) provided, in pertinent
part, that service of the notice required by Neb. Rev. Stat. § 77-1831 (Reissue 2009) “shall be
made by certified mail, return receipt requested, upon the person in whose name the title to the
real property appears of record to the address where the property tax statement was mailed.” Also
on that date, Neb. Rev. Stat. § 77-1834 (Reissue 2009) provided, in pertinent part, that “[i]f the
person in whose name the title to the real property appears of record . . . cannot, upon diligent
inquiry, be found, then such purchaser or his or her assignee shall publish the notice in some
newspaper published in the county and having a general circulation in the county.”
Robert contends that the “Notice of Tax Sale,” which refers to the notice required by
§ 77-1831, was not properly served because it was not served by personal service, residential
service, or certified mail. It appears Robert is relying upon an amended version of § 77-1832,
which provides for service by any of these methods, see § 77-1832 (Cum. Supp. 2014), rather than
on the version of § 77-1832 in effect on December 31, 2009, which permitted service by certified
mail only. See § 77-1832 (Reissue 2009). Furthermore, Robert ignores that on December 31, 2009,
§ 77-1834 permitted service by publication. Indeed, Robert alleged in his proposed answer and
counterclaim that service of the notice was “in fact perfected by publication.” Therefore, Robert
has not set forth a meritorious defense to the quiet title action based upon allegedly defective
service of the notice required by § 77-1831.
Robert also contends the “Notice of Tax Sale” did not comply with § 77-1831 in that it
“did not contain the requirements of subsection 1 and subsection 6 and did not otherwise comply
with that statute.” Brief for appellant at 13. Again, Robert appears to be relying on an amended
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version of the statute, which was not in effect on December 31, 2009. The amended version
enumerates six items that must be included in the notice. See § 77-1831 (Cum. Supp. 2014).
Subsection (1) of the amended version requires the notice to contain “the following statement in
sixteen-point type: UNLESS YOU ACT YOU WILL LOSE THIS PROPERTY.” § 77-1831(1).
Subsection (6) of the amended version requires the notice to contain three statements, one of which
is a statement that “the issuance of a tax deed is subject to the right of redemption under sections
77-1824 to 77-1830.” § 77-1831(6).
However, the version of § 77-1831 in effect on December 31, 2009, contained no separately
enumerated requirements, and did not require the statements listed in subsections (1) and (6) of
the amended statute; the applicable 2009 version provided:
No purchaser at any sale for taxes or his or her assignees shall be entitled to a deed from
the treasurer for the real property so purchased unless such purchaser or assignee, at least
three months before applying for the deed, serves or causes to be served a notice stating
when such purchaser purchased the real property, the description thereof, in whose name
assessed, for what year taxed or specially assessed, and that after the expiration of three
months from the date of service of such notice the deed will be applied for.
§ 77-1831 (Reissue 2009). In other words, the only alleged defects cited by Robert were items not
required to be included in the notice. Regardless, Robert did not submit a copy of the allegedly
defective notice to the district court, and it is not in the record before us. Therefore, Robert has not
set forth a meritorious defense to the quiet title action based upon any defect in the notice required
by § 77-1831.
In sum, although the outcome is understandably harsh from Robert’s perspective, we are
unable to provide any relief since Robert has failed to show that he has a meritorious defense to
the quiet title action. Therefore, even assuming the district court should have considered Robert’s
motion to vacate the default judgment under its equity jurisdiction, Robert has not established a
right to equitable relief. Because Robert did not establish a right to set aside the default judgment
on statutory or equitable grounds, the district court properly overruled Robert’s motion to vacate
the default judgment.
CONCLUSION
For the foregoing reasons, we affirm the judgment of the district court for Douglas County.
AFFIRMED.
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