Hawley v. Skradski , 304 Neb. 488 ( 2019 )


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  • Nebraska Supreme Court Online Library
    www.nebraska.gov/apps-courts-epub/
    01/24/2020 09:08 AM CST
    - 488 -
    Nebraska Supreme Court Advance Sheets
    304 Nebraska Reports
    HAWLEY v. SKRADSKI
    Cite as 
    304 Neb. 488
    Kim Hawley, appellant, v.
    John Skradski, appellee.
    ___ N.W.2d ___
    Filed November 15, 2019.   No. S-18-849.
    1. Judgments: Jurisdiction: Appeal and Error. When a jurisdictional
    issue does not involve a factual dispute, determination of a jurisdictional
    issue is a matter of law which requires an appellate court to reach a
    conclusion independent from the trial court’s; however, when a deter-
    mination rests on factual findings, a trial court’s decision on the issue
    will be upheld unless the factual findings concerning jurisdiction are
    clearly incorrect.
    2. Actions: Parties: Standing. Whether a party who commences an action
    has standing and is therefore the real party in interest presents a jurisdic-
    tional issue.
    3. Jurisdiction: Standing. Because the requirement of standing is fun-
    damental to a court’s exercise of subject matter jurisdiction, either a
    litigant or a court can raise the question of standing at any time.
    4. Standing. The stage of the litigation in which a party claims that
    its opponent lacks standing affects how a court should dispose of
    the claim.
    5. Standing: Pleadings: Words and Phrases. If a motion challenging
    standing is made at the pleadings stage, it is considered a “facial chal-
    lenge” and a court will review the pleadings to determine whether there
    are sufficient allegations to establish the plaintiff’s standing.
    6. Standing: Jurisdiction: Pleadings: Evidence: Proof: Words and
    Phrases. If a motion challenging standing, and thus the court’s subject
    matter jurisdiction, is raised after the pleadings stage and the court holds
    an evidentiary hearing and reviews evidence outside the pleadings, it is
    considered a “factual challenge” and the party opposing the challenge
    must offer evidence to support its burden of establishing subject mat-
    ter jurisdiction.
    7. Jurisdiction: Pleadings: Appeal and Error. Where the trial court’s
    decision on a question of subject matter jurisdiction is based on a factual
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    Nebraska Supreme Court Advance Sheets
    304 Nebraska Reports
    HAWLEY v. SKRADSKI
    Cite as 
    304 Neb. 488
    challenge, the court’s factual findings are reviewed under the clearly
    erroneous standard. But aside from any factual findings, the trial court’s
    ruling on subject matter jurisdiction is reviewed de novo, because it
    presents a question of law.
    8.    Actions: Parties. Neb. Rev. Stat. § 25-301 (Reissue 2016) establishes
    an absolute requirement that all actions be brought in the name of the
    real party in interest, and the only allowable exceptions to this rule are
    set forth in Neb. Rev. Stat. § 25-304 (Reissue 2016).
    9.    ____: ____. Construed together, Neb. Rev. Stat. § 25-304 (Reissue
    2016) and Neb. Rev. Stat. § 25-302 (Reissue 2016) permit an assignee
    of a chose in action to maintain an action thereon in the assignee’s own
    name when the assignment being sued upon is in writing.
    10.    Jurisdiction. Whether a court has subject matter jurisdiction is a thresh-
    old issue that should be resolved prior to an examination of the merits.
    11.    Actions: Parties: Standing. Because Neb. Rev. Stat. § 25-304 (Reissue
    2016) allows assignees of choses in action to “sue on any claim assigned
    in writing,” evidence of an oral assignment of a chose in action is insuf-
    ficient as a matter of law to confer standing to sue on the assignee.
    12.    Jurisdiction: Appeal and Error. When a lower court does not gain
    jurisdiction over the case before it, an appellate court also lacks the
    jurisdiction to review the merits of the claim.
    Appeal from the District Court for Douglas County: James
    T. Gleason, Judge. Vacated and dismissed.
    Scott A. Lautenbaugh, of Law Offices of Scott Lautenbaugh,
    for appellant.
    Michael J. O’Bradovich, P.C., for appellee.
    Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
    Papik, and Freudenberg, JJ.
    Stacy, J.
    Kim Hawley brought this civil action against John Skradski
    for breach of contract, conversion, and tortious interference
    with a business relationship or expectation. A jury trial was
    held, and at the close of Hawley’s case in chief, the district
    court granted Skradski’s motion for a directed verdict. Hawley
    appeals. Because we find Hawley lacked standing to bring the
    action in his own name, we vacate the district court’s judgment
    and dismiss the appeal.
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    Nebraska Supreme Court Advance Sheets
    304 Nebraska Reports
    HAWLEY v. SKRADSKI
    Cite as 
    304 Neb. 488
    BACKGROUND
    Hawley’s Complaint
    Hawley filed this lawsuit against Skradski in the district
    court for Douglas County on October 28, 2015. Hawley is the
    only named plaintiff. Hawley’s complaint alleged he purchased
    a heating and air conditioning (HVAC) business from an entity
    affiliated with Skradski in 2008 and operated that HVAC busi-
    ness on premises leased from Skradski. The complaint alleged
    that in July 2011, Hawley ceased operating the HVAC business
    and vacated the leased premises. It further alleged that there-
    after, Skradski “took possession of the premises” and “[u]nbe-
    knownst to [Hawley] and without his authorization, [Skradski]
    began operating the business he had sold to [Hawley]” using
    the same premises. Hawley alleged that Skradski converted
    “payments, work orders, business lists, contacts, contracts and
    the like, and converted various other assets of the business
    to his use” and that this “caused the value of the business to
    decrease.” Hawley sought to recover damages in an unspeci-
    fied amount, relying on theories of breach of contract, con-
    version, and tortious interference with a business relationship
    or expectation.
    Skradski’s Answer
    Skradski’s answer generally denied the allegations of the
    complaint and specifically denied having sold the HVAC
    business to Hawley individually. Instead, Skradski’s answer
    alleged that in 2008, he sold the HVAC business to KNR
    Capital Corp. (KNR) and leased the business premises to the
    same corporate entity. In addition, Skradski’s answer alleged
    that Hawley’s complaint failed to state a claim upon which
    relief could be granted and that Hawley lacked standing to
    assert the claims.
    Trial Evidence
    A jury trial was held over a 2-day period in August 2018.
    Among the evidence offered and received was a copy of the
    2008 asset purchase agreement pertaining to the sale of the
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    Nebraska Supreme Court Advance Sheets
    304 Nebraska Reports
    HAWLEY v. SKRADSKI
    Cite as 
    304 Neb. 488
    HVAC business. The asset purchase agreement showed the
    HVAC business was purchased by KNR, and not by Hawley
    individually.
    During trial, Hawley testified that when the asset purchase
    agreement was signed, he and his wife each owned between
    1 and 2 percent of KNR and the remainder was held by what
    Hawley described as a “401K rollover” holding company that
    was “part of [a] trust” that Hawley was “in charge of.” Hawley
    later testified that when he and his wife subsequently divorced,
    her ownership share in KNR was “essentially nullif[ied],”
    although he did not fully explain how that occurred.
    KNR operated the HVAC business from 2008 through July
    2011. According to Hawley, he closed the HVAC business after
    learning the general manager had been “padding his numbers,”
    resulting in a shortfall of several hundred thousand dollars.
    After closing the HVAC business, Hawley, as KNR’s president,
    entered into a contract to sell the HVAC business to McCarthy
    Heating & Air Conditioning Service, Inc. (McCarthy).
    Hawley testified that before closing on the contract to sell
    the HVAC business to McCarthy, he and the president of
    McCarthy visited the HVAC business premises to examine
    the inventory. During that October 2011 visit, Hawley saw
    people who had been employed by the HVAC business during
    the time he operated it, and it appeared to Hawley they were
    operating an HVAC business from the premises. Hawley also
    testified that while he was on the premises, he saw a work
    chart, evidence of billings, an employee gathering materials
    to return to a vendor for credit, and a compact disc copy of
    the HVAC business’ customer database. Skradski and other
    witnesses generally refuted Hawley’s account of what he saw
    during the October visit to the business premises. And Skradski
    denied operating an HVAC business from the premises during
    October 2011.
    Hawley testified that as a result of the October visit,
    McCarthy learned KNR had suffered a “substantial loss of the
    inventory” and the sale price for the HVAC business dropped
    from $100,000 to $50,000.
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    Nebraska Supreme Court Advance Sheets
    304 Nebraska Reports
    HAWLEY v. SKRADSKI
    Cite as 
    304 Neb. 488
    During his direct examination, Hawley was asked, “What
    eventually happened to [KNR]?” and he replied, “We eventu-
    ally closed it down . . . and transferred the remaining assets to
    myself.” He testified that the remaining assets were “the rights
    to pursue this case” against Skradski, and then reiterated that
    he “assigned that to myself.” He offered no further details on
    how the alleged assignment from KNR to Hawley occurred.
    Oral Motion to Amend Pleadings
    On the morning of the second day of trial, after offering
    testimony about an assignment from KNR, Hawley made an
    oral motion to “amend the pleadings to comport with the evi-
    dence.” Hawley sought to amend his complaint to add an alle-
    gation that KNR assigned its claim against Skradski to Hawley.
    Alternatively, Hawley sought to add KNR as a party plaintiff.
    Skradski opposed the requested amendments on grounds they
    were untimely.
    The court refused Hawley’s request to add KNR as a party
    plaintiff. It reasoned there was evidence that KNR made an
    “oral assignment” to Hawley of any claim it had against
    Skradski, and it found this evidence tended to show that
    Hawley, and not KNR, was the proper plaintiff. But the court
    granted Hawley’s motion to conform the pleadings to the evi-
    dence for purposes of alleging an assignment from KNR to
    Hawley of any claim KNR had against Skradski. After indicat-
    ing on the record that such an amendment would be allowed,
    the court instructed Hawley’s counsel, “You may file an appro-
    priate pleading,” to which counsel replied, “Thank you, [y]our
    honor.” No amended pleading appears in our record, but the
    parties thereafter treated the assignment from KNR to Hawley
    as having been raised in the operative pleading.1
    Motion for Directed Verdict
    After the close of Hawley’s case in chief, Skradski moved
    for a directed verdict, arguing Hawley had failed to meet his
    1
    See Neb. Ct. R. Pldg. § 6-1115.
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    Nebraska Supreme Court Advance Sheets
    304 Nebraska Reports
    HAWLEY v. SKRADSKI
    Cite as 
    304 Neb. 488
    burden of proof on all three theories of recovery: breach of
    contract, conversion, and tortious interference with a business
    relationship or expectation. The district court agreed, and with-
    out expressly ruling on whether Hawley had proved standing to
    bring suit in his own name, the court granted the directed ver-
    dict and dismissed the action. Hawley filed this timely appeal,
    which we moved to our docket on our own motion.
    ASSIGNMENTS OF ERROR
    Hawley assigns, restated, that the district court erred in (1)
    granting Skradski’s motion for directed verdict, (2) finding
    there was insufficient evidence of conversion, and (3) finding
    there was insufficient evidence of tortious interference with a
    business relationship or expectation.
    STANDARD OF REVIEW
    [1] When a jurisdictional issue does not involve a factual
    dispute, determination of a jurisdictional issue is a matter of
    law which requires an appellate court to reach a conclusion
    independent from the trial court’s; however, when a determi-
    nation rests on factual findings, a trial court’s decision on the
    issue will be upheld unless the factual findings concerning
    jurisdiction are clearly incorrect.2
    ANALYSIS
    Standing and Real Party in Interest
    [2,3] Although neither party raises the issue on appeal,
    we must first determine whether Hawley has standing and is
    the real party in interest for purposes of bringing this action
    against Skradski. Whether a party who commences an action
    has standing and is therefore the real party in interest presents
    a jurisdictional issue.3 Because the requirement of standing is
    fundamental to a court’s exercise of subject matter jurisdiction,
    2
    Jacobs Engr. Group v. ConAgra Foods, 
    301 Neb. 38
    , 
    917 N.W.2d 435
        (2018).
    3
    
    Id. - 494
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    Nebraska Supreme Court Advance Sheets
    304 Nebraska Reports
    HAWLEY v. SKRADSKI
    Cite as 
    304 Neb. 488
    either a litigant or a court can raise the question of standing at
    any time.4
    [4-6] The stage of the litigation in which a party claims that
    its opponent lacks standing affects how a court should dispose
    of the claim.5 If a motion challenging standing is made at the
    pleadings stage, it is considered a “facial challenge” and a
    court will review the pleadings to determine whether there are
    sufficient allegations to establish the plaintiff’s standing.6 But
    if the challenge to standing, and thus the court’s subject matter
    jurisdiction, is raised after the pleadings stage and the court
    holds an evidentiary hearing and reviews evidence outside the
    pleadings, it is considered a “factual challenge” and the party
    opposing the challenge must offer evidence to support its bur-
    den of establishing subject matter jurisdiction.7
    [7] Where the trial court’s decision on a question of subject
    matter jurisdiction is based on a factual challenge, the court’s
    factual findings are reviewed under the clearly erroneous stan-
    dard.8 But aside from any factual findings, the trial court’s rul-
    ing on subject matter jurisdiction is reviewed de novo, because
    it presents a question of law.9
    Here, the district court heard evidence on the issue of
    Hawley’s standing to bring suit in his own name. We there-
    fore review its factual findings on this jurisdictional issue for
    clear error, and we review de novo the ultimate question of
    Hawley’s standing.
    Real Party in Interest Statutes
    At trial, Hawley admitted it was KNR that purchased the
    HVAC business from Skradski and sold the HVAC business
    4
    
    Id. 5 Id.
    6
    See   
    id. 7 See
      
    id. 8 See
      
    id. 9 See
      Bohaboj v. Rausch, 
    272 Neb. 394
    , 
    721 N.W.2d 655
    (2006).
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    Nebraska Supreme Court Advance Sheets
    304 Nebraska Reports
    HAWLEY v. SKRADSKI
    Cite as 
    304 Neb. 488
    to McCarthy. Hawley testified that he was one of several
    shareholders of KNR when it purchased the HVAC business
    in 2008 and that he was the sole shareholder of KNR when
    it sold the HVAC business in 2011. But Hawley did not bring
    this action in his capacity as an officer of KNR—he brought
    it individually. And even where one person owns all the stock
    of a corporation, property belonging to the corporation does
    not become the property of such person.10 On this record, any
    chose in action against Skradski belonged to KNR, not to
    Hawley individually. Hawley apparently recognized this and
    claimed to be prosecuting this action as the assignee of KNR’s
    chose in action against Skradski.
    [8] Nebraska’s real party in interest statute provides that
    “[e]very action shall be prosecuted in the name of the real
    party in interest except as otherwise provided in section
    25-304.”11 We have recognized that § 25-301 establishes an
    absolute requirement that all actions be brought in the name
    of the real party in interest and that the only allowable excep-
    tions to this rule are set forth in Neb. Rev. Stat. § 25-304
    (Reissue 2016).12
    [9] Section 25-304 states in relevant part: “Assignees of
    choses in action assigned for the purpose of collection may
    sue on any claim assigned in writing.” A related statute, Neb.
    Rev. Stat. § 25-302 (Reissue 2016), states: “The assignee of a
    thing in action may maintain an action thereon in the assign-
    ee’s own name and behalf, without the name of the assignor.”
    Construing these statutes together, Nebraska law permits an
    assignee of a chose in action to maintain an action thereon
    in the assignee’s own name when the assignment being sued
    upon is in writing. As such, Hawley could establish standing
    to bring this action in his own name, and thus show the court
    10
    See State ex rel. Sorensen v. Weston Bank, 
    125 Neb. 612
    , 
    251 N.W. 164
         (1933).
    11
    Neb. Rev. Stat. § 25-301 (Reissue 2016).
    12
    Orr v. Knowles, 
    215 Neb. 49
    , 
    337 N.W.2d 699
    (1983).
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    HAWLEY v. SKRADSKI
    Cite as 
    304 Neb. 488
    had subject matter jurisdiction, if he proved by a preponder-
    ance of the evidence13 the existence of a written assignment
    under § 25-304.14
    Hawley Failed to Prove Written
    Assignment Under § 25-304
    The only evidence of an assignment from KNR was
    Hawley’s testimony, and it was sparse. During Hawley’s direct
    examination, he was asked, “What eventually happened to
    [KNR]?” and he responded, “We eventually closed it down . . .
    and transferred the remaining assets to myself.” Hawley then
    explained that the only assets that were transferred were “the
    rights to pursue this case,” and again said he “assigned that”
    to himself. Hawley did not produce a written assignment from
    KNR, and his testimony did not expressly reference a writ-
    ten assignment.
    [10] After hearing Hawley’s testimony about the assignment,
    the district court found KNR had made an “oral assignment”
    to Hawley of any claim it had against Skradski. Although the
    court did not expressly rule on whether the oral assignment
    gave Hawley the requisite standing to support the exercise of
    subject matter jurisdiction, it found Hawley was the proper
    plaintiff, and it reached the merits of Hawley’s claims and
    granted Skradski’s motion for a directed verdict on those
    claims. Whether a court has subject matter jurisdiction is a
    threshold issue that should be resolved prior to an examination
    of the merits,15 and we therefore conclude the court implicitly
    found it had subject matter jurisdiction.
    13
    See, Wetovick v. County of Nance, 
    279 Neb. 773
    , 
    782 N.W.2d 298
    (2010);
    Pallas v. Dailey, 
    169 Neb. 533
    , 
    100 N.W.2d 197
    (1960).
    14
    See Archer v. Musick, 
    147 Neb. 1018
    , 1027, 
    25 N.W.2d 908
    , 913 (1947)
    (“‘assignees of choses in action assigned for the purpose of collection’”
    are considered real parties in interest and authorized to maintain actions
    thereon as such).
    15
    See, generally, Holmstedt v. York Cty. Jail Supervisor, 
    275 Neb. 161
    , 
    745 N.W.2d 317
    (2008).
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    Nebraska Supreme Court Advance Sheets
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    HAWLEY v. SKRADSKI
    Cite as 
    304 Neb. 488
    As noted, we review factual findings related to the court’s
    subject matter jurisdiction for clear error16 and the court’s
    ultimate determination as to subject matter jurisdiction de
    novo.17 On this record, it was not clearly erroneous to find
    that KNR made an oral assignment to Hawley of its claim
    against Skradski.
    [11] But because § 25-304 allows assignees of choses in
    action to “sue on any claim assigned in writing,” we find on
    de novo review that evidence of an oral assignment of a chose
    in action is insufficient as a matter of law to confer standing
    to sue on the assignee. Because Hawley failed to prove he
    was the assignee under a written assignment from KNR of a
    chose in action against Skradski, Hawley failed to prove his
    standing to bring this suit in his own name under § 25-304. As
    such, the district court lacked subject matter jurisdiction over
    the cause.
    CONCLUSION
    [12] When a lower court does not gain jurisdiction over the
    case before it, an appellate court also lacks the jurisdiction to
    review the merits of the claim.18 We thus vacate the district
    court’s judgment and dismiss the appeal for lack of subject
    matter jurisdiction.
    Vacated and dismissed.
    16
    See Jacobs Engr. Group, supra note 2.
    17
    See Bohaboj, supra note 9.
    18
    State ex rel. Rhiley v. Nebraska State Patrol, 
    301 Neb. 241
    , 
    917 N.W.2d 903
    (2018).