Ralston Investment Group v. Wenck , 27 Neb. Ct. App. 574 ( 2019 )

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RALSTON INVESTMENT GROUP v. WENCK
Cite as 27 Neb. Ct. App. 574
R alston Investment Group, Inc., a Nebraska
corporation, et al., appellants, v.
David Wenck, appellee.
___ N.W.2d ___
Filed September 17, 2019. No. A-18-718.
1 Trial: Witnesses. In a bench trial of an action at law, the trial court is
the sole judge of the credibility of the witnesses and the weight to be
given their testimony.
2. Judgments: Appeal and Error. In reviewing a judgment awarded
in a bench trial of a law action, an appellate court does not reweigh
evidence, but considers the evidence in the light most favorable to the
successful party and resolves evidentiary conflicts in favor of the suc-
cessful party, who is entitled to every reasonable inference deducible
from the evidence.
3. ____: ____. In a bench trial of a law action, the trial court’s factual find-
ings have the effect of a jury verdict and will not be disturbed on appeal
unless clearly wrong.
4. ____: ____. An appellate court independently reviews questions of law
decided by a lower court.
5. Contracts: Parties: Intent. A contract is not formed if the parties
contemplate that something remains to be done to establish contractual
arrangements or if elements are left for future arrangement.
6. Contracts. It is a fundamental rule that in order to be binding, an agree-
ment must be definite and certain as to the terms and requirements.
7. Guaranty: Promissory Notes: Contribution. A guarantor of a promis-
sory note who has made payment may seek contribution from a coguar-
antor for that party’s proportionate share of the obligation.
8. Tort-feasors: Liability: Contribution: Compromise and Settlement.
A tort-feasor who enters into a settlement with a claimant is not entitled
to recover contribution from another tort-feasor whose liability for the
injury or wrongful death is not extinguished by the settlement.
9. ____: ____: ____: ____. In order to recover on a claim for contribu-
tion among joint tort-feasors, the following elements must be shown:
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(1) There must be a common liability among the party seeking contri-
bution and the parties from whom contribution is sought; (2) the party
seeking contribution must have paid more than its pro rata share of the
common liability; (3) the party seeking contribution must have extin-
guished the liability of the parties from whom contribution is sought;
and (4) if such liability was extinguished by settlement, the amount paid
in settlement must be reasonable.
Appeal from the District Court for Douglas County: Gregory
M. Schatz, Judge. Affirmed.
Benjamin M. Belmont, Sean D. Cuddigan, Wm. Oliver
Jenkins, and Jake Houlihan, Senior Certified Law Student,
of Brodkey, Cuddigan, Peebles, Belmont & Line, L.L.P.,
for appellants.
Travis W. Tettenborn and Mark A. Grimes, of Cline,
Williams, Wright, Johnson & Oldfather, L.L.P., for appellee.
R iedmann, A rterburn, and Welch, Judges.
Welch, Judge.
INTRODUCTION
Ralston Investment Group, Inc. (RIG), and three of its share-
holders, James Linhart, Alan Bennett, and Kevin Hitzemann,
sued shareholder David Wenck for breach of contract after
he failed to contribute capital to RIG and for contribution to
reimburse them for allegedly paying more than their propor-
tional share of guaranteed debt to American National Bank
(ANB). The court found for Wenck on both counts, and RIG,
Linhart, Bennett, and Hitzemann (collectively Appellants)
appeal.
STATEMENT OF FACTS
In January 2004, Linhart, Bennett, Hitzemann, Steve Strong,
and Wenck formed RIG, a Nebraska corporation, to build and
operate a gas station and convenience store. Linhart, Bennett,
Strong, Hitzemann, and Wenck contributed capital to RIG and
received stock ownership interests in the following amounts
and proportions:
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Ownership
Investor Contribution Interest
Linhart $120,000 30%
Bennett $120,000 30%
Strong $ 80,000 20%
Hitzemann $ 40,000 10%
Wenck $ 40,000 10%
The shareholders did not execute bylaws or a shareholder
agreement.
After the construction of the gas station and convenience
store was completed in early 2005, RIG borrowed $1,421,610
from ANB to provide operating cash for the business. RIG also
obtained a $50,000 line of credit from ANB. The parties testi-
fied that each shareholder guaranteed the operating loan and
line of credit at the rate of 125 percent of their ownership inter-
est percentage in RIG, which equates to the amounts shown in
the table below. These amounts were reflected in the written
guaranty agreements received into evidence with the exception
of those of Strong, whose written guaranties were not offered
nor received into evidence, and Wenck’s line of credit guar-
anty, which the parties testified could not be located:
Amount Amount
Guaranteed on Guaranteed on Total Amount
Investor $1.4M Note Line of Credit Guaranteed
Linhart $533,103.75 $18,750 $551,853.75
Bennett $533,103.75 $18,750 $551,853.75
Strong $355,402.50 $12,500 $367,902.50
Hitzemann $177,701.25 $ 6,250 $183,951.25
Wenck $177,701.25 $ 6,250 $183,951.25
The written guaranty agreements specifically indicated that the
respective shareholders unconditionally guaranteed to pay the
indebtedness incurred by RIG owing to ANB up to the stated
sum listed above, but do not reference a pro rata rate or basis
upon which the guaranteed sums were determined.
In 2006, RIG experienced cash shortfalls. Linhart, Bennett,
and Hitzemann testified that, in order to address RIG’s cash
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needs, in 2006, the parties met and orally agreed that when
RIG needed additional cash, the parties would be obligated
to contribute necessary cash to RIG in proportion to their
ownership interests in RIG. In contrast, Wenck testified that
the parties’ oral agreement was to address RIG’s capital needs
on an ongoing basis, but that he never agreed to make ongo-
ing, obligatory cash contributions to RIG in connection with
all future requests for capital calls, or “cash calls.” Instead,
Wenck testified that, on a case-by-case basis, if RIG needed
cash, he would attempt to contribute cash in proportion to his
ownership interest if he could, but that he never agreed to be
permanently obligated on all future cash calls. Wenck further
testified that, in 2006, he separately met with his own counsel
and was advised he was not legally obligated to make capital
contributions on future cash calls but could do so on a volun-
tary basis.
The parties collectively agreed that they first agreed to con­
tribute $100,000 to RIG in 2006 with each party, including
Wenck, contributing proportionately to their ownership interests
in RIG. The parties likewise agreed that all shareholders contrib-
uted, with the exception of Strong, who, in 2006, sold his own-
ership interest in RIG to Hitzemann and Wenck, with Hitzemann
and Wenck each purchasing half of Strong’s 20-percent
interest in RIG. In connection with the purchase price for
Strong’s interest in RIG, instead of paying Strong, Hitzemann
and Wenck each paid $10,000 of the purchase price to RIG
to cover Strong’s unpaid share of the capital contribution.
The purchase agreement governing Strong’s sale of his inter-
est in RIG did not reference Strong’s personal guaranty with
ANB, nor did the agreement reference Hitzemann’s or Wenck’s
assuming any of Strong’s liabilities. The parties offered no
evidence governing whether Strong’s personal guaranties with
ANB were extinguished as a part of the transaction.
RIG was never profitable for any significant length of
time. Between 2006 and 2014, the shareholders made several
more capital calls and Wenck contributed to some of them;
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however, over the life of RIG, he was $60,264.51 short of
contributing his proportional ownership interest in relation to
Linhart, Bennett, and Hitzemann, who made capital contribu-
tions in accordance with their ownership interests in RIG. In
June 2014, RIG sold the gas station and convenience store and
the proceeds of the sale were applied toward paying the debt
RIG owed to ANB.
On August 14, 2014, ANB sent a letter to the four then-
current shareholders stating that the unpaid balance of RIG’s
two loans, after applying the net sale proceeds of the gas station
and convenience store, was $828,479.47. Additionally, ANB
advised that there was a prepayment penalty of $15,431.59
which ANB offered to waive if one or more of the guarantors
voluntarily paid the balance. ANB stated it would prefer to
make arrangements to satisfy the debt with the group rather
than pursuing the matter individually; however, ANB also
reminded the current shareholders of their maximum guaran-
teed obligations on RIG’s then-current outstanding obligations
to ANB and of ANB’s right to pursue each individual up to the
amount of their full personal guaranteed sums.
On September 18, 2014, ANB sent the four current share-
holders a demand letter stating that RIG was in default and
owed $848,343.53. On October 31, Wenck individually settled
his guaranteed obligation to ANB in the amount of $80,000
by agreeing to make a $1,000 downpayment and by agree-
ing to make 79 monthly payments of $1,000 thereafter for
the following 79 months. Under the terms of the settlement
agreement, Wenck would not be fully released from his full
guaranteed obligation to ANB until he made all 80 payments.
The settlement agreement provided that should Wenck fail to
make any required payment obligation, ANB reserved the right
to terminate the agreement and pursue Wenck’s full guaranteed
obligation to ANB. At the time of trial, Wenck believed he had
made roughly half of his 80 payments. The relevant portions
of the settlement agreement will be set forth in the analysis
portion of this opinion.
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In November 2014, ANB brought an action against
Appellants on the debt. The three shareholders made an initial
tender payment of $773,788.09, which Hitzemann testified
was made in order to stop interest from accruing. In December
2015, Linhart, Bennett, and Hitzemann settled the remainder
of the debt for $44,000. The relevant portions of the settle-
ment agreement will be set forth in the analysis portion of
this opinion. The following is the total settlement amount each
shareholder paid, or in Wenck’s case, was to pay, to ANB:
Shareholder Amount Paid to ANB
Linhart $316,918.42
Bennett $316,918.42
Hitzemann $183,951.25
Wenck $ 80,000.00
The record is unclear regarding the exact amount RIG owed
to ANB at the time of the settlement agreement between ANB
and Appellants or how much debt was contingently forgiven
by ANB as part of the final settlement.
In July 2016, Appellants filed a complaint against Wenck
seeking contribution from Wenck for allegedly overpaying
their allocable share of guaranteed debt to ANB. The complaint
also alleged that by failing to make capital contributions in
proportion to his ownership interest, Wenck had breached a
contract with RIG, and that Wenck owed RIG for his remaining
share of the capital contributions.
The court held a bench trial on May 10 and 11, 2018, and
found for Wenck on both counts. Regarding contribution, the
court found that no party had paid more than their pro rata share
of the original debt and that Linhart, Bennett, and Hitzemann’s
settlement with ANB had not extinguished Wenck’s liability to
ANB. Regarding the breach of contract claim, the court found
that the terms of the alleged oral contract to contribute capital
to RIG were not sufficiently specific to show a meeting of the
minds and, alternatively, the alleged oral contract was unen-
forceable because it violated the statute of frauds. Accordingly,
the court entered judgment for Wenck.
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ASSIGNMENTS OF ERROR
Appellants’ assignments of error, combined and restated, are
that the district court erred in denying their claims for breach
of contract and for contribution.
STANDARD OF REVIEW
[1-3] In a bench trial of an action at law, the trial court is
the sole judge of the credibility of the witnesses and the weight
to be given their testimony. See Liljestrand v. Dell Enters.,
287 Neb. 242, 842 N.W.2d 575 (2014). In reviewing a judg-
ment awarded in a bench trial of a law action, an appellate
court does not reweigh evidence, but considers the evidence
in the light most favorable to the successful party and resolves
evidentiary conflicts in favor of the successful party, who
is entitled to every reasonable inference deducible from the
evidence. Hooper v. Freedom Fin. Group, 280 Neb. 111, 784
N.W.2d 437 (2010). See, also, Black v. Brooks, 285 Neb. 440,
827 N.W.2d 256 (2013). In a bench trial of a law action, the
trial court’s factual findings have the effect of a jury verdict
and will not be disturbed on appeal unless clearly wrong. Black
v. Brooks, supra.
[4] An appellate court independently reviews questions of
law decided by a lower court. Jacobs Engr. Group v. ConAgra
Foods, 301 Neb. 38, 917 N.W.2d 435 (2018).
ANALYSIS
Breach of Contract
Appellants contend that Wenck breached his contract by
failing to make all capital contributions to RIG in propor-
tion to his ownership interest in RIG when the other investors
made capital contributions to RIG. Appellants’ contract claim
is based upon a meeting allegedly held in 2006 in which the
shareholders discussed RIG’s need for cash. Under Appellants’
version of the agreement, a contract was formed during that
2006 meeting whereby the parties agreed to make future
cash contributions in proportion to their respective ownership
interests in RIG whenever the shareholders agreed RIG was
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in need of cash. Appellants’ theory of the case is based upon
a single agreement stemming from a 2006 meeting and is to
be distinguished from a claim that, from time to time, Wenck
agreed to make specific capital contributions but failed to do
so. Conversely, Wenck claims he agreed to a contribution in
2006, made that contribution, and agreed he would participate
in future contributions if he was able, but never agreed to
make all future cash contributions whenever cash was needed
by RIG.
[5,6] To create a contract, there must be both an offer and
an acceptance; there must also be a meeting of the minds or a
binding mutual understanding between the parties to the con-
tract. Gibbons Ranches v. Bailey, 289 Neb. 949, 857 N.W.2d
808 (2015). A contract is not formed if the parties contemplate
that something remains to be done to establish contractual
arrangements or if elements are left for future arrangement. Id.
It is a fundamental rule that in order to be binding, an agree-
ment must be definite and certain as to the terms and require-
ments. MBH, Inc. v. John Otte Oil & Propane, 15 Neb. Ct. App.
341, 727 N.W.2d 238 (2007).
The trial court, in its role as fact finder, determined that
there was insufficient evidence adduced to conclude that a
contract which obligated the parties to contribute to all future
cash calls was formed. As the trial court noted, Appellants did
not provide any evidence of certain key terms of the alleged
contract, including but not limited to, how the need for capital
contributions was to be determined in the future. The question
of whether a 2006 oral contract was formed by the parties was
a question of fact. In a bench trial of a law action, the trial
court’s factual findings have the effect of a jury verdict and
will not be disturbed on appeal unless clearly wrong. Black v.
Brooks, 285 Neb. 440, 827 N.W.2d 256 (2013).
Here, Wenck’s version of what took place during the 2006
meeting among the parties was certainly reasonable. Wenck
testified that in connection with the then-current cash situa-
tion involving RIG, he separately consulted with his counsel
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and learned that he was not legally obligated to make future
cash contributions to RIG and that future contributions were
voluntary. Wenck testified he had to borrow the initial $40,000
he invested in RIG and agreed that he would contribute in the
future if he was financially able to do so, but that he did not,
and could not, agree to make a blanket agreement to make all
future cash contributions whenever RIG needed cash. There
was likewise a sparse amount of evidence of what a cash call
would look like, including but not limited to, whether cash
calls were to be dictated by the board or the shareholders,
what percentage vote was needed, or other important param-
eters that would typically be associated with raising cash for
a business. The trial court was not clearly wrong in finding
that Appellants failed to prove the terms or formula of an
alleged 2006 oral contract to perpetually contribute fund-
ing to RIG. Thus, this assignment of error fails. Because we
find Appellants failed to prove the formation of an alleged
oral contract in 2006, we need not address the court’s alter-
nate finding that the alleged oral contract was unenforceable
because it violated the statute of frauds.
Contribution
Appellants next argue that the district court erred in finding
that they could not recover under their contribution cause of
action. In so finding, the court first found that neither Linhart,
Bennett, nor Hitzemann paid more than the amount stated in
his personal guaranty to ANB in connection with their settle-
ment with ANB and none paid more than their “pro-rata share
of the initial guaranteed corporate debt, based on his owner-
ship interest in RIG.” The court held that “[b]ecause no indi-
vidual shareholder paid more than his pro-rata share of the
initial guaranteed corporate debt, none may seek contribution
from any other.” Second, the court found:
[Appellants] have further failed to prove that [Wenck’s]
liability to ANB has been extinguished by their pay-
ments to ANB. [Wenck] settled his guaranty obligation to
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ANB, and [Wenck] has yet to pay the settlement in full,
and should [Wenck] default in his settlement agreement
with ANB, there is nothing to stop ANB from seeking
[Wenck’s] total liability under his personal guaranty to
ANB. None of [Wenck’s] liability to ANB has been extin-
guished by any of [Appellants].
The Court therefore finds that [Appellants] have
failed to prove their [contribution] cause of action of
their Complaint.
Appellants argue that both of the court’s findings are erroneous.
The concepts discussed by the court stem from pronounce-
ments by the Nebraska Supreme Court in Exchange Elevator
Company v. Marshall, 147 Neb. 48, 22 N.W.2d 403 (1946);
Rodehorst v. Gartner, 266 Neb. 842, 669 N.W.2d 679 (2003);
and Estate of Powell v. Montange, 277 Neb. 846, 765 N.W.2d
496 (2009). In Exchange Elevator Company v. Marshall,
supra, the Nebraska Supreme Court outlined the general
rule of contribution involving joint debtors. The Supreme
Court held:
The rule likewise is stated: “Unless otherwise agreed,
a person who has discharged more than his proportionate
share of a duty owed by himself and another as to which,
between the two, neither had a prior duty of perform­
ance, is entitled to contribution from the other, except
where the payor is barred by the wrongful nature of his
conduct.” And “The rule applies where two or more per-
sons sign a note as makers for their joint benefit . . . .”
Restatement of the Law, Restitution, § 81, p. 360. See,
also, 10 C. J. S., Bills and Notes, § 37, p. 466. “Every
joint debtor who has been compelled to pay more than
his share of the common debt has the right of contribution
from each of his codebtors.” 18 C. J. S., Contribution, § 9,
p. 12. See, 13 C. J., Contribution, § 13, p. 826. We have
stated the rule as follows: “. . . in equity a surety paying
a judgment against himself and his principal is entitled to
be subrogated to the rights of the original creditor, and to
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have the judgment assigned to him or to some one else
for his benefit.” Kramer v. Bankers’ Surety Co., 90 Neb.
301, 133 N.W. 427.
The rule as to the amount that can be recovered where
contribution is sought has been stated by the authorities.
“A person who has discharged more than his proportion-
ate share of a duty owed by himself and another, as to
which neither of the two had a prior duty of perform­
ance, and who is entitled to contribution from the other
under the rules stated in sections 81-84, is entitled to
reimbursement, limited (a) to the proportionate amount
of his net outlay properly expended . . . . A surety or
other co-obligor becoming such without the fault of a
co-obligor is entitled to no more by way of contribu-
tion than will put him on an equality of loss with others
in view of his share of the obligation undertaken. This
is true even though he obtains an assignment from the
creditor . . . . In the first case he may be entitled to
proportionate reimbursement only to the extent that pay-
ment to the creditor diminishes the debt of the other . .
. .” Restatement of the Law, Restitution, § 85, p. 375. “A
party who has made a partial payment is not entitled to
contribution, even though the others have paid nothing,
until his own payment exceeds his proportionate share
of the whole debt, and he is then entitled to collect a
proportionate share only of the excess, from each party,
the proportionate share in each case being determined
by dividing the total sum in question among the number
of solvent parties within the jurisdiction of the court.” 5
Pomeroy, Equity Jurisprudence (2 ed.), § 2341, p. 5178.
“This right of contribution is one which belongs to
one of two or more joint obligors. It is a right which
grows out of the relation of the parties to the contract.
It is a right given to protect one of the joint obligors
in the event he has been compelled to discharge the
whole debt, or more than his proportionate part of the
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whole debt. The right of contribution is an individual
and personal right. It grows out of what the individual
himself does. It is a right which accrues to one or more
individuals (out of the whole number bound) who pay
the debt for which they are all bound. Each one paying
is entitled to recover from the others the amount which
he has paid in excess of his own proportionate part. His
right to recover is dependent upon the excess which he
himself pays. In other words, the act is individual, and
the right of contribution is individual. The right of con-
tribution rests upon an implied contract to repay, which
contract the law itself implies from the relationship of
the parties.” 2 Story, Equity Jurisprudence (14 ed.),
§ 648, p. 63.
Exchange Elevator Co. v. Marshall, 147 Neb. 48, 60-62, 22
N.W.2d 403, 410-11 (1946).
[7] In Rodehorst v. Gartner, 266 Neb. 842, 848-50, 669
N.W.2d 679, 685 (2003), the Nebraska Supreme Court
explained:
A guaranty is a collateral undertaking by one person
to answer for the payment of a debt or the performance
of some contract or duty in case of the default of another
person who is liable for such payment or performance in
the first instance. Northern Bank v. Dowd, supra; Chiles,
Heider & Co. v. Pawnee Meadows, 217 Neb. 315, 350
N.W.2d 1 (1984). . . .
. . . In Mandolfo v. Chudy, supra, we held that under
Exchange Elevator Company v. Marshall, 147 Neb. 48,
22 N.W.2d 403 (1946), a guarantor of a promissory
note who had made payment could seek contribution
from a coguarantor for that party’s proportionate share of
the obligation.
[8,9] In further defining the right of contribution, albeit in
the context of joint tort-feasors, the Nebraska Supreme Court
stated in Estate of Powell v. Montange, 277 Neb. 846, 851, 765
N.W.2d 496, 500-01 (2009):
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Although this court has recognized a right of contri-
bution among joint tort-feasors who share a common
liability, we have not specifically addressed whether a
tort-feasor who enters into a settlement with the claimant
can recover contribution from another tort-feasor whose
liability for the injury or wrongful death is not extin-
guished by the settlement.
Noting that the Nebraska Legislature had not established rules
of contribution among joint tort-feasors, the court in Estate
of Powell analyzed provisions from the Uniform Contribution
Among Tortfeasors Act (UCATA), 12 U.L.A. § 1 et seq. (2008),
or versions of the UCATA adopted in a number of states. In
doing so, the court in Estate of Powell stated that in addition to
the UCATA corresponding with the Nebraska Supreme Court’s
general recognition of a right to contribution,
the UCATA also places limits on the right of contribu-
tion. Only a tort-feasor who has paid more than his or her
pro rata share of the common liability may seek contribu-
tion, and recovery is limited to the amount paid in excess
of his or her pro rata share. No tort-feasor is compelled to
make contribution beyond his or her own pro rata share
of the entire liability. UCATA § 1(b), 12 U.L.A. 201.
This also corresponds with our requirement set forth in
Royal Indemnity.
The right of contribution is not available in all instances
or circumstances. The UCATA places restrictions on con-
tribution if a settlement has been entered into. “A tortfea-
sor who enters into a settlement with a claimant is not
entitled to recover contribution from another tortfeasor
whose liability for the injury or wrongful death is not
extinguished by the settlement nor in respect to any
amount paid in a settlement which is in excess of what
was reasonable.” UCATA § 1(d), 12 U.L.A. at 202.
277 Neb. at 851-52, 765 N.W.2d at 501. After reviewing this
and other authorities, the court ultimately held:
We now hold that in order to recover on a claim
for contribution among joint tort-feasors, the following
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elements must be shown: (1) There must be a common
liability among the party seeking contribution and the
parties from whom contribution is sought; (2) the party
seeking contribution must have paid more than its pro
rata share of the common liability; (3) the party seeking
contribution must have extinguished the liability of the
parties from whom contribution is sought; and (4) if such
liability was extinguished by settlement, the amount paid
in settlement must be reasonable.
Id. at 855-56, 765 N.W.2d at 504.
Although the court in Estate of Powell defined these ele-
ments in connection with claims of contribution among joint
tort-feasors, the principles apply equally to claims of contribu-
tion among codebtors. But applying those principles here has
led to confusion among the litigants. Although both Wenck
and Appellants recognize that a party cannot pursue contribu-
tion until he or she has paid more than his or her “pro rata
share of the common liability,” there is disagreement on how
that applies in the context of coguarantors. Where, as here,
the coguarantors guaranteed a specific amount of the original
underlying debt, the questions become: What is their pro rata
share of the common liability? Is their pro rata share a per-
centage of their personally guaranteed amount in relation to
the total personally guaranteed debt of all guarantors? Is their
pro rata share their percentage ownership in the corporation?
Is the “common liability” the original debt, the debt obliga-
tion remaining on the original debt, or the settlement amount
when the common liability is extinguished by settlement? How
are these issues to be resolved when the parties do not have
a separate agreement allocating these rights and obligations
among them? The parties spend a significant amount of time
in their briefs arguing for different application of these prin-
ciples; however, we need not address those arguments here,
because we find that on this record, the parties seeking con-
tribution failed to extinguish the liability of Wenck, the party
from whom contribution was sought.
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RALSTON INVESTMENT GROUP v. WENCK
Cite as 27 Neb. Ct. App. 574
The parties’ original guaranties were for the following
amounts:
Original $50,000 Line
$1,421,610 of Credit: Percent in
Debt: Amount Amount Percent in Relation to
Personally Personally Relation to Original
Guaranteed Guaranteed Guarantors Debt
Linhart $  533,103.75 $18,750  30% 37.5%
Bennett 533,103.75 18,750  30% 37.5%
Strong 355,402.50 12,500  20% 25.0%
Hitzemann 177,701.25 6,250  10% 12.5%
Wenck    177,701.25   6,250 10% 12.5%
Amount
Guaranteed $1,777,012.50 $62,500 100% 125.0%
In formulating this summary, we first note that Strong’s
personal guaranty was not made part of the record, and
we list his personally guaranteed dollar amount based upon
unrefuted oral testimony that he personally guaranteed 125
percent of his 20-percent interest in relation to the original
corporate debt of $1,421,610 and the line of credit of $50,000.
Accordingly, although each original investor guaranteed a
higher percentage interest in the original corporate debt and
the line of credit than their ownership percentage interest in
RIG, their personal guaranties in relation to each other were
the same as their ownership interest in RIG. We next note
that the record is devoid of what happened to Strong’s guar-
anty when he sold his ownership interest to Hitzemann and
Wenck in 2006. Although Hitzemann and Wenck each pur-
chased half of Strong’s 20-percent ownership interest in RIG,
neither assumed Strong’s debt obligations, and the record is
completely silent as to whether Strong remained a guaran-
tor to ANB following the sale of his ownership interest to
Hitzemann and Wenck.
Following the sale of Strong’s ownership interest, and after
the business was sold and the proceeds applied to the out-
standing corporate debt, there remained a deficiency on the
corporate debt which ANB desired to pursue. In August 2014,
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RALSTON INVESTMENT GROUP v. WENCK
Cite as 27 Neb. Ct. App. 574
ANB sent a letter to Linhart, Bennett, Hitzemann, and Wenck,
but not Strong, stating that the then-unpaid balance of RIG’s
two loans, after application of the net sale proceeds of the col-
lateral, was $828,479.47, which sum did not include a prepay-
ment penalty of $15,431.59. In the letter, ANB stated it would
prefer to make arrangements to satisfy the debt as a group
rather than pursuing the matter individually, but the letter
reminded the group of their maximum guaranteed individual
amounts and ANB’s right to pursue each individual up to the
amount of his full personal guaranty.
In September 2014, the group received a demand let-
ter requesting the then-outstanding balance of $848,343.53.
Subsequent to that letter, Wenck settled with ANB for the sum
of $80,000 subject to a payment plan to be discussed below.
On November 14, 2014, ANB filed a lawsuit against
Appellants for $871,334. Linhart, Bennett, and Hitzemann made
a tender payment of $773,788.09 in order to reduce accruing
interest. One year later, in December 2015, Appellants settled
the lawsuit for another $44,000, for a total of $817,778.09.
Between the two payments, Linhart and Bennett each con-
tributed $316,918.42 and Hitzemann contributed $183,951.25
toward the settlement. In July 2016, Linhart, Bennett, and
Hitzemann filed a complaint against Wenck seeking contribu-
tion from Wenck in the amount of $99,557.61.
Critical to our analysis here are the terms of ANB’s settle-
ments with Wenck and Appellants. Under the terms of ANB’s
settlement with Wenck, Wenck was to pay $1,000 upon execu-
tion of the agreement and make 79 consecutive monthly
payments of $1,000 each, commencing December 1, 2014.
Wenck’s $80,000 settlement was less than his guaranteed
sum to ANB of $183,951. Notably, the settlement agree-
ment stated:
3. Release of Wenck. Upon receipt of the total sum of
$80,000.00, Lender will fully and finally release, acquit
and forever discharge Wenck from all claims, liabilities,
damages, actions, causes of actions of any kind and of
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RALSTON INVESTMENT GROUP v. WENCK
Cite as 27 Neb. Ct. App. 574
every nature whatsoever which Wenck ever had, or may
have, whether known or unknown, regarding any indebt-
edness now owing by Wenck to Lender.
4. Default procedures.
....
b. Consequences of Default. In the event that Wenck
defaults in payment of the monthly installments as pro-
vided herein and fails to timely cure after notice any
such defaults, Lender may in its sole discretion terminate
this Agreement without further notice to Wenck. Upon
termination, the obligations of Wenck on his guarantees
of the RIG loans shall be fully reinstated; and Lender
shall be entitled to immediately pursue recovery from
Wenck by all lawful means, including an action at law
on his Commercial Guaranty(s) of the loans of RIG, for
the entire remaining outstanding balances unpaid on the
RIG Loans, limited however to the extent of Wenck’s
aggregate guarantee liabilityof [sic] $183,951, as reduced
by payments received by Lender under the terms of
this Agreement.
As such, ANB reserved its right to pursue any deficiency in
RIG’s loan obligation up to Wenck’s full guaranteed amount if
he defaulted on any payment obligation.
In its December 2015 settlement agreement with Appellants,
ANB further stated:
4. Upon timely receipt of payment of the Settlement
Amount of $44,000.00 from the Majority Guarantors, the
Bank, the Ralston Group, and Majority Guarantors shall
execute a stipulated motion to dismiss the action filed
in the District Court of Douglas County, Nebraska, and
entitled, American National Bank vs. Ralston Investment
Group, Inc., Alan D. Bennett, James B. Linhart, and
Kevin J. Hitzemann (Case No. CI 14-8883), in the follow-
ing manner:
a) All claims asserted by the Bank in its Second
Amended Complaint against the Majority Guarantors,
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together with all Counterclaims asserted by the Majority
Guarantors shall be dismissed with prejudice; and
b) All claims asserted by the Bank in its Second
Amended Complaint against the Ralston Group shall be
dismissed without prejudice, and the Bank shall retain
the original Promissory Notes of the Ralston Group. The
Bank expressly reserves and preserves all claims that it
has against shareholder David Wenck under the Wenck
Agreement and Commercial Guaranty of the Ralston
Group Loans executed and delivered to the Bank by
David Wenck.
The settlement agreement does not expressly state how
much of the outstanding indebtedness was being released as
part of the $44,000 settlement between ANB and Appellants,
and it is not possible to calculate the exact number from the
record before this court. That said, whatever the number, ANB
expressed its right in both settlement agreements to pursue
that contingently forgiven sum against Wenck up to the full
amount of his guaranty if he ever defaulted on any of his pay-
ment obligations. At the time of trial, Wenck had completed
only about half of his payments under the terms of his settle-
ment agreement. Taken together, it is clear that Appellants, the
parties seeking contribution, failed to extinguish the liability
of the party from whom contribution was sought. Thus, no
matter how the parties’ pro rata share of the common liability
is calculated, Appellants failed to establish a critical element
to recover on their claim of contribution. Following their
settlement with Appellants, ANB reserved the right to pursue
a claim against Wenck up to the full amount of his personal
guaranty, and Wenck was not obligated to contribute beyond
his pro rata share of the entire liability which remained possi-
ble here with ANB reserving its rights against him. See Estate
of Powell v. Montange, 277 Neb. 846, 765 N.W.2d 496 (2009).
Because Appellants failed to extinguish the liability of Wenck
to ANB with their settlement, we hold the court did not err in
denying Appellants their contribution claim.
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CONCLUSION
We hold that the district court was not clearly wrong in find-
ing that there was no oral contract formed among the parties
requiring them to fund all future capital contributions to RIG.
We further hold that the district court did not err in finding
that Appellants have no right of contribution against Wenck,
because they did not extinguish Wenck’s liability to ANB in
connection with their settlement. Both assignments of error
fail, and we affirm the order of the district court.
A ffirmed.