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The NE Law Express is available to members of the Nebraska State Bar at no additional charge.

Nebraska State Bar Association NE Law Express for May 30, 2008

Use our Short Cuts to link to the area of today's
NE Law Express that interests you.

Cases affecting the following practice areas are summarized in today's NE Law Express:

Administrative Law, Due Process
Administrative Law, Liquor Control Commission, Revocation of License
Cause of Action, Failure to Procure Insurance, Insurance Agent/Insurance Broker
Constitutional Law, Ordinance, Special Legislation
Dissolution, Pre-Martial Agreement, Property Division
Dissolution Decree, Motion to Vacate, Fraud
Motion to Vacate, Fraud, Due Diligence
Summary Judgment

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June 13, 2008 - NCLE Teleseminar: Ethics in Real Estate (Live Replay)
June 17, 2008 - NCLE Teleseminar: 2008 Ethics Update, Part 1
June 18, 2008 - NCLE Teleseminar: 2008 Ethics Update, Part 2
June 20, 2008 - NCLE Seminar: Making Your Case With a Better Memory
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June 20, 2008 - NCLE Teleseminar: Prudent Trustees: Duties and Liability (Live Replay)
June 27, 2008 - NCLE Teleseminar: Trust Investments: A Guide to Standards and Potential Liability (Live Replay)
July 11, 2008 - NCLE Nonprofit Corporations
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Case Summaries

Administrative Law, Due Process

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This review is of a district court’s decision upholding the revocation of the liquor license of a retailer by the Nebraska Liquor Control Commission for a sale to a minor. Here the Nebraska Supreme Court finds that the district court did not err in upholding the Commissions decision.

JCB Enters. v. Nebraska Liq. Cont. Comm., 275 Neb. 797 (2008)

Supreme Court Headnotes

Administrative Law:

1. Administrative adjudicators must avoid an appearance of impropriety.

2. Judgments: Appeal and Error. A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act may be reversed, vacated, or modified by an appellate court for errors appearing on the record. ••• When reviewing an order of a district court under the Administrative Procedure Act for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.

3. Presumptions. Administrative adjudicators serve with a presumption of honesty and integrity.

4. Liquor Licenses:

a. Evidence. The Nebraska Liquor Control Commission’s decisions in contested cases are to be decided on the evidence adduced during the proceedings involving those contested cases.

b. Public Meetings: Due Process. The Nebraska Liquor Control Commission should conduct its proceedings in such a manner as to avoid due process challenges due to a perception that commentary offered during the public meeting portion of the commission’s agenda improperly impacted the commission’s decision in a contested case.

c. Appeal and Error. When the district court conducts its review of a final decision of the Nebraska Liquor Control Commission, it is required to make independent factual determinations. ••• In its proceedings for review of a final decision of the Nebraska Liquor Control Commission, the district court shall conduct the review de novo on the record of the agency.

d. Revocation. The Nebraska Liquor Control Commission has broad discretion in deciding whether licenses should be suspended or revoked upon violations of the liquor law.

e. Statutes. The Nebraska Liquor Control Act and the Nebraska Liquor Control Commission’s rules and regulations give the commission discretion in the imposition of penalties for violations of the act and rules.

5. Due Process: Notice. Due process requires that an administrative adjudication be preceded by notice and an opportunity for the agency hearing.

Due Process:

1. Notice: Words and Phrases. The central meaning of procedural due process is that parties whose rights are to be affected are entitled to be heard, and, in order that they may enjoy that right, they must first be notified.

Statutes:

1. Presumptions: Words and Phrases. When “may” is used in a statute, permissive or discretionary action is presumed.

Records:

1. Appeal and Error. It is incumbent on the party appealing to present a record that supports the errors assigned; absent such a record, as a general rule, the decision of the lower court as to those errors will be affirmed.

Date Filed and Case No.: May 30, 2008. No. S-06-1373.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/may/may30/s06-1373.pdf

Court Appealed From: District Court for Lancaster County: Jodi Nelson, Judge.

Attorneys for the Appeal: Daniel L. Lindstrom and Justin R. Herrmann for JCB Enterprises, Inc., doing business as Bill’s Liquor West, appellant. Jon Bruning and Milissa Johnson-Wiles for Nebraska Liquor Control Commission, appellee.

Justices: Heavican, C.J., Wright, Connolly, Stephan, McCormack, and Miller-Lerman, JJ.

Not Participating: Gerrard, J.

Authored By: Miller-Lerman, J.

Summary: JCB Enterprises, Inc. (JCB) d.b.a. Bill’s Liquor West (Bill’s) was the holder of a Class D liquor license for the operation a liquor store in Kearney, Nebraska. On the evening of February 5, 2005, a sales clerk at Bill’s sold alcoholic liquor (a bottle of Jim Beam whiskey, a 60 cans of beer) to T.B. who was 18 years of age and the clerk did not ask for identification. The clerk estimated that T.B. had purchased alcohol from Bill’s approximately 10 to 20 times prior to February 5 and that on three or four prior occasions, T.B. had shown the clerk a Canadian identification card that indicated a date of birth that would make him at least 21 years of age. During the early morning of February 6, 2005, T.B. was killed while riding as a passenger OF a car driven by K.W. who was also 18 years of age. K.W. had been drinking Jim Beam whiskey prior to the accident, and officers investigating the accident reported finding nine unopened cans beer (the same type that T.B. had purchased at Bill’s) in the car at the accident scene. K.W.’s breath test was .211.

In May 2005, Bill’s failed a compliance check by Nebraska Liquor Control Commission (Commission) and admitted to this violation of selling liquor to a minor. Bill’s had a previous violation in 1997. On August 8, 2005, the Commission notified JCB that the Commission was charging it with violating § 53-180 and 237 Neb. Admin. Code, ch. 6, § 019.01A, as a result of the February 2005 incident. JCB denied the charges, and following a contested hearing the Commission ordered the revocation of JCB’s liquor license.

JCB filed a motion for rehearing raising two arguments. First, JCB noted that immediately prior to its contested hearing, the Commission had held a public meeting where, Diane Riibe, the executive director of an advocacy group made unsworn comments seeking the revocation of JCB’s liquor license. Riibe sought the revocation because of the sale of liquor to T.B., who had “paid a price that far exceeds any that will be imposed today on” JCB. JCB argued on that Riibe’s comments were unsworn ex parte comments that had been improperly considered by the Commission.

For its second argument, JCB claimed that the Commission’s decision to revoke the license of JCB was inappropriate and too severe. In support of this argument, JCB offered the affidavit of Hobert Rupe, the executive director of the Commission. In his affidavit, Rupe stated that there were a total of 1,057 “Sale to Minor Convictions” of licensees in the time period from 2001 through 2005 and that during that time period, the Commission had imposed revocation as a penalty twice, including the revocation of JCB’s license in the instant case.

The Commission overruled JCB’s motion for rehearing and again ordered JCB’s liquor license revoked.

JCB filed a petition for review with the district court. In its petition, JCB effectively raised two arguments. First, JCB claimed that in reaching its decision, the Commission had improperly considered Riibe’s unsworn ex parte comments made during the public meeting portion of the agenda prior to the contested hearing in this matter. Second, JCB claimed that the revocation of its liquor license was an inappropriate penalty. Following a hearing the district court affirmed the revocation order of the Commission. JCB appealed.

Did the Commission improperly considered Riibe’s statements? JCB claimed that it was unfairly prejudiced by the Commission’s receipt of Riibe’s unsworn ex parte comments directed at JCB’s case. The Court noted that the Commission’s receipt of Riibe’s unsworn comments during the public meeting portion of the Commission’s agenda, which were directed to the merits of a contested matter set to be heard by the Commission immediately following the public meeting, was inappropriate. The Commission’s decisions in contested cases are to be decided on the evidence adduced during the proceedings involving those contested cases and it is prudent that the Commission conduct its proceedings in such a manner as to avoid due process challenges due to a perception that commentary offered during the public meeting portion of the Commission’s agenda improperly impacted the Commission’s decision in a contested case.

However, when the district court conducts its review of a final decision of the Commission, it is required to make independent factual determinations and conduct the review de novo on the record of the agency. In this case, the district court stated in its order that when it conducted its de novo review, it specifically had not considered any evidence which was not received at the actual hearing in this matter which took place before the Commission. Thus, any irregularities before the Commission were cured when the district court ignored Riibe’s comments in its de novo review of the record here. Accordingly, because the Court’s consideration of this appeal is limited to the propriety of the district court’s ruling, they concluded that JCB’s first assigned error is without merit.

Did the district court err in affirming the Commission’s penalty of revocation?

Encompassed in its second group of claimed errors is JCB’s assertion, for numerous reasons, that the JCB raises several arguments to the effect that the Commission erroneously considered JCB’s character and reputation in reaching its decision that a violation occurred and that the revocation of JCB’s license was an inappropriate penalty. The Court considered JCB’s arguments and determined that none of the arguments have merit.

Conclusion: The Nebraska Supreme Court concluded that the district court did not err when it affirmed the order of the Commission that revoked JCB’s liquor license. AFFIRMED.

Administrative Law, Liquor Control Commission, Revocation of License

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JCB Enters. v. Nebraska Liq. Cont. Comm., 275 Neb. 797 (2008)

Supreme Court Headnotes

Administrative Law:

1. Administrative adjudicators must avoid an appearance of impropriety.

3. Presumptions. Administrative adjudicators serve with a presumption of honesty and integrity.

4. Liquor Licenses:

a. Evidence. The Nebraska Liquor Control Commission’s decisions in contested cases are to be decided on the evidence adduced during the proceedings involving those contested cases.

d. Revocation. The Nebraska Liquor Control Commission has broad discretion in deciding whether licenses should be suspended or revoked upon violations of the liquor law.

5. Due Process: Notice. Due process requires that an administrative adjudication be preceded by notice and an opportunity for the agency hearing.

Due Process:

Statutes:

1. Presumptions: Words and Phrases. When “may” is used in a statute, permissive or discretionary action is presumed.

Records:

Date Filed and Case No.: May 30, 2008. No. S-06-1373.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/may/may30/s06-1373.pdf

Court Appealed From: District Court for Lancaster County: Jodi Nelson, Judge.

Justices: Heavican, C.J., Wright, Connolly, Stephan, McCormack, and Miller-Lerman, JJ.

Not Participating: Gerrard, J.

Authored By: Miller-Lerman, J.

The Commission overruled JCB’s motion for rehearing and again ordered JCB’s liquor license revoked.

Did the district court err in affirming the Commission’s penalty of revocation?

Conclusion: The Nebraska Supreme Court concluded that the district court did not err when it affirmed the order of the Commission that revoked JCB’s liquor license. AFFIRMED.

Cause of Action, Failure to Procure Insurance, Insurance Agent/Insurance Broker

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In this case, an insurance agent (or was he an insurance broker?) was sued for breach of an agreement to procure insurance coverage, on the allegation that the defendant failed to obtain the insurance he had agreed to procure. In this appeal of a summary judgment, the Nebraska Supreme Court concludes that the threshold issue of law here is whether the personal representative had stated a valid cause of action. They recognize a breach of contract action for "failure to procure" for claims against a broker acting on behalf of an insured, but not against an agent acting solely on behalf of a disclosed insurer. As the summary judgment was issued without answering that agent/broker question, the judgment is reversed and remanded.

Broad v. Randy Bauer Ins. Agency, 275 Neb. 788 (2008)

Supreme Court Headnotes

Summary Judgment.

1. Summary judgment is proper when the pleadings and evidence admitted at the hearing disclose no genuine issue regarding any material fact or the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.

2. Appeal and Error. In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence.

Complaints:

1. Appeal and Error. Whether a complaint states a cause of action is a question of law, which requires an appellate court to reach a conclusion independent of the trial court.

Insurance:

1. Brokers: Principal and Agent. Whether an insurance intermediary is an agent of the insured or the insurer is generally a question of fact.

Contracts:

1. Principal and Agent: Liability. When a party contracts with a known agent acting within the scope of his or her authority for a disclosed principal, the contract is that of the principal only and the agent cannot be held personally liable thereon, unless the agent purports to bind himself or herself, or has otherwise bound himself or herself, to performance of the contract.

Breach of Contract:

1. Insurance: Principal and Agent: Liability. An action for breach of contract to procure insurance is inappropriate when brought against an insurer’s agent who, within the scope of his or her authority, contracted on behalf of the disclosed principal and did not bind himself or herself personally.

Actions:

1. Breach of Contract: Insurance: Brokers. A claim against a broker for breach of contract to procure insurance is a valid cause of action.

Date Filed and Case No.: May 30, 2008. No. S-06-844.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/may/may30/s06-844.pdf

Court Appealed From: District Court for Scotts Bluff County: Brian C. Silverman, Judge. Reversed and remanded for further proceedings.

Attorneys for the Appeal: John F. Simmons and Steven W. Olsen for Mary E . Broad, Successor Personal Representative of the Estate of David D. Schekall, Deceased, appellant. Michael J. Javoronok for Randy Bauer Insurance Agency, Inc., and Randy S. Bauer, appellees.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack, and Miller-Lerman, JJ.

Authored By: Connolly, J.

Summary: In August 2003, David D. Schekall and a passenger were killed in an automobile accident. The personal representative sued Randy S. Bauer and the Randy Bauer Insurance Agency, Inc. (collectively Bauer), for breach of an agreement to procure insurance coverage for David. The personal representative alleged Bauer failed to obtain the insurance he had agreed to procure and, as a result, David’s estate had to pay $165,000 to settle a suit by the passenger’s estate.

David’s parents, Jim and Donna Schekall, had a 9-year insurance relationship with Bauer and had met on December 31, 2002 with Bauer to review their insurance coverage. Having recently moved back to Hemmingford, Nebraska, to start his own farming operation, David also attended the meeting. According to Jim, the parties agreed at the meeting that Bauer would obtain the same coverage and policies for David that he had obtained for Jim and Donna with only a change in David’s personal liability umbrella coverage. Bauer’s claimed that David told him he had homeowners and automobile insurance with an independent insurance agent and never requested Bauer’s advice on the adequacy of that insurance, on umbrella policies, or the adequacy of any other insurance that he had.

Bauer issued David a farm and ranch premises/personal liability policy effective December 31, 2002. On July 10, 2003, Bauer issued a separate “farm/ranch” policy to David because David had mortgaged farm equipment that required a different type of coverage than a farm and ranch premises/personal liability policy.

The district court granted Bauer’s motion for summary judgment, concluding that David should have read his policies. According to the court, either David read the policies and was satisfied with their coverage or he did not read them. The court reasoned that Bauer was insulated from liability if David failed to read the policies.

David’s estate appealed.

Did the personal representative state a valid cause of action? The Nebraska Supreme Court concluded that the threshold issue of law in this case, is whether the personal representative has stated a valid cause of action. Here, the personal representative alleged Bauer’s breach of contract, but what was the contract Bauer allegedly breached? The amended complaint alleged that Bauer breached an agreement “to provide personal liability coverage that would have provided coverage in the case of an automobile accident, and would have provided additional coverage to pay the wrongful death claim.” The Court did not read this as an allegation that Bauer promised David he was immediately insured for automobile accident, instead they read the personal representative’s complaint to allege a breach of a contract to procure the allegedly requested personal liability coverage. Recognized the distinction between a “broker” (the insured’s agent) and an “agent” (the insurer’s agent), the Court concluded that an insurance agent’s mere promise to procure requested coverage through his sole principal is insufficient to create the agent’s personal liability because that promise is clearly within the scope of the agent’s authority and an action for breach of contract to procure insurance is inappropriate.

However, the Court said they will recognize a cause of action against a broker for breach of contract to procure insurance because the broker is the insured’s agent.

Did a question of fact remain regarding whether the personal representative’s claim was a valid claim against Bauer? In the amended complaint, the personal representative alleged that Bauer’s “business is to market, advise, recommend, and sell policies of insurance and coverages through State Farm Insurance Company.” This statement may suggest that Bauer was an agent solely for State Farm Insurance Company, acting within the scope of his authority, when he allegedly agreed to procure personal liability coverage for David. If true, the personal representative’s breach of contract claim against Bauer does not state a valid cause of action as the pleadings fail to show that Bauer expressly agreed to undertake a broader duty that would have rendered him personally liable on that agreement. But the personal representative’s statement in the complaint is the extent of information in the record regarding Bauer’s relationship to an insurer and an issue of material fact remains regarding whether Bauer was solely the insurer’s agent or an independent broker.

As such, the Court could not determine whether the personal representative properly stated a claim against Bauer. Therefore, the Court had to reverse and remand the case to resolve this factual issue. If Bauer was an agent solely for State Farm Insurance Company, and was acting within the scope of his authority when he allegedly contracted with David, the personal representative’s breach of contract action against Bauer would fail for that reason alone. Because this threshold issue of fact has not been resolved, they declined to decide whether an insured’s failure to read a policy would be a valid defense in a contract action for a broker’s failure to procure requested coverage.

Conclusion: The Court declined to recognize a cause of action for an insured’s allegations against an insurance agent acting solely on behalf of a disclosed insurer that the agent breached an agreement to procure the insured’s requested coverage. They did, however, recognize such a claim against an insurance broker acting on behalf of the insured. The Court also declined to decide whether an insured’s failure to read a policy is a valid defense in a contract action against a broker for failure to procure requested insurance coverage. As a threshold factual issue regarding the agency relationship has not been resolved the Court reversed the district court’s summary judgment and remanded the cause for further proceedings. REVERSED AND REMANDED FOR FURTHER PROCEEDINGS.

Constitutional Law, Ordinance, Special Legislation

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Appellants brought this action in the district court against appellee City of Omaha contending that the City’s ordinance prohibiting smoking was unconstitutional. The district court concluded the ordinance was constitutional but the Nebraska Supreme Court found that the district court erred in finding that exemptions to the ordinance were not “special legislation” in violation of the Nebraska Constitution. The Court found the ordinance itself constitutional, because the exemptions, could be severed.

Hug v. City of Omaha, 275 Neb. 820 (1983)

Supreme Court Headnotes

Summary Judgment.

Constitutional Law:

1. Ordinances: Appeal and Error. The constitutionality of an ordinance presents a question of law, in which an appellate court is obligated to reach a conclusion independent of the decision reached by the trial court.

2. Statutes: Special Legislation. The focus of the prohibition against special legislation is the prevention of legislation which arbitrarily benefits or grants special favors to a specific class. A legislative act constitutes special legislation if (1) it creates an arbitrary and unreasonable method of classification or (2) it creates a permanently closed class.

Statutes:

1. Legislature: There is a distinction between legislative history made contemporaneously with the passage of legislation and statements made subsequently to the passage of legislation.

a. Words and Phrases. Legislative history is defined as the background and events leading to the enactment of a statute, including hearings, committee reports, and floor debates.

Date Filed and Case No.: May 30, 2008. No. S-07-324.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/may/may30/s07-324.pdf

Court Appealed From: District Court for Douglas County: John D. Hartigan, Jr., Judge.

Attorneys for the Appeal: K.C. Engdahl and Karisa D. Johnson for Michelle Hug and Henstock, Inc., appellants. Thomas O. Mumgaard and Jo A. Cavel for City of Omaha, appellee.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack, and Miller-Lerman, JJ.

Authored By: Heavican , C. J.

Quote Worth Remembering: “To sum up,” wrote Justice Connolly in his concurring opinion, “the City’s exemptions have sucked the air out of an otherwise constitutional ordinance.” (the purpose in the ordinance itself: to guarantee the right to breathe smoke-free air.)

Summary: On June 20, 2006, the Omaha City Council voted to adopt an ordinance prohibiting smoking in most public places and places of employment within its city limits. Under the ordinance, certain facilities were exempted from the operation of the ordinance until May 14, 2011. Those facilities included stand-alone bars, keno establishments which applied for their license on or before June 8, 2006, and horseracing simulcasting locations. Also exempted under the ordinance are tobacco retail outlets, defined under the ordinance to include establishments that sell not only tobacco products, but also “other products that are incidental to the tobacco sales.” Tobacco-only retail establishments are not regulated under the City’s ordinance.

Michelle Hug and Henstock, Inc. (collectively Hug) owns the Marylebone, a bar located in the City. Marylebone, which provides some food service, is covered by the prohibition against smoking and is not currently eligible for any of the exemptions provided under the ordinance. Hug filed suit against the City challenging the constitutionality of the ordinance. In particular, Hug argued that the exemptions provided under the ordinance amounted to special legislation under Neb. Const. art. Ill, § 18.

The district court noted that the classification drawn by the Ordinance is reasonably connected to the legitimate purpose of promoting the public health and is based on substantial differences between the regulated public gathering places and the temporarily exempted businesses. The court added that, notwithstanding Hug’s assertions, the Ordinance is not arbitrary simply because it does not prohibit smoking in all places immediately. There is no permanently closed class, rather is a temporary classification which goes out of existence in 2011.

Further, the court wrote that it is possible that other locations can join the class, thus increasing its size. In so finding, the district court relied upon exhibits 3 and 4, affidavits by Omaha City Council members James Suttle and Franklin Thompson detailing the reasoning behind the exemptions to the ordinance. The district court concluded that the ordinance was constitutional and dismissed Hug’s complaint. Hug appealed and the Nebraska Supreme Court clarified the appeal by writing that Hug was not asking them to find the smoking ban itself unconstitutional, but, rather, that the exemptions to the ban are unconstitutional.

Did the district court err in utilizing an equal protection, rather than special legislation, standard when conducting its analysis? The Court wrote that even assuming that Hug is correct that the standard actually applied by the district court was an equal protection standard (and therefore incorrect), the primary issue presented by this appeal is a question of law. As a question of law, the Court conducted a de novo review of the claim that the ordinance is unconstitutional special legislation. In conducting such a review, they would make their own independent determination as to the ordinance’s constitutionality. As such, the standard utilized by the district court is of no consequence to the analysis and the Court did not further address this assignment of error.

Did the district court err in admitting Exhibits 3 and 4? Hug argues that exhibits 3 and 4, Suttle's and Thompson's affidavits, are inadmissible because the ordinance itself sets forth its purposes and no other evidence is necessary, or indeed relevant, to determine that purpose and the admission of the affidavits was in error.

The Court wrote that generally, outside of the plain language used in legislation, a legislative body’s purpose or intent in enacting legislation is determined through an examination of the legislative history of a particular enactment. “However, we conclude that the affidavits in question do not qualify as legislative history” they wrote.

The record in this case clearly established that the affidavits were not made contemporaneously with the enactment of the ordinance, and instead were “postenactment views.” The affidavits in question reflected the viewpoints of Suttle and Thompson, and not of the entire Omaha City Council. Because the affidavits were made subsequently to the passage of the ordinance, and because they reflect the viewpoints of just two of the seven members of the Omaha City Council, the Court concluded that the district court erred in receiving exhibits 3 and 4.

Did the district court err in finding that the exemptions provided for by the ordinance, were not special legislation in violation of the special privileges and immunities clause of Neb. Const. Art. Ill, § 18? As noted above, in this case, the Court was asked to determine whether the exemptions to the City’s smoking ban, and not the smoking ban itself, are special legislation. In making such determination, they focused the inquiry on the City’s purpose behind exempting certain entities and decided whether there is a substantial difference of circumstances between exempted and nonexempted facilities which would suggest the expediency of diverse legislation.

In determining the City’s purpose in enacting the ordinance, the Court did not consider the reasoning set forth in exhibits 3 and 4 and instead focused upon the purpose in the ordinance itself: the prohibition of smoking in public gathering places and in places of employment in order to protect the public health and welfare and to guarantee the right to breathe smoke-free air.

Here, the challenged exemptions to the ordinance include standalone bars, keno establishments, horseracing simulcasting locations, and tobacco retail outlets. Here, the stated purpose of the ordinance is to recognize the right of everyone to breathe smoke-free air in order to protect the public health and welfare. However, there was nothing in the ordinance’s stated purpose which would explain why employees of the exempted facilities or members of the public who wish to patronize those establishments are not entitled to breathe smoke-free air or to have their health and welfare protected. Nor did the City offer any other admissible evidence which might support this distinction.

Therefore, the Court determined that on the record before them, there is no “substantial difference of circumstances to suggest the expediency of diverse legislation.” As such, they concluded that the district court erred in finding the exemptions to the ordinance were not special legislation. “We do not hold that similar exemptions could not be constitutionally justified” they wrote “—just that, given the record in this instance, the exemptions in this particular case are not.”

Because they concluded that the exemptions to the City’s ordinance create an arbitrary and unreasonable method of classification, the Court said it need not address whether the exemptions also create one or more permanently closed classes. They also considered, but rejected on this record, the City's contention that it is permitted to enact its smoking ban in phases.

As an additional matter, the Court noted that the Omaha Mun. Code provided an article so that the exemptions to the ordinance are severable from the remainder of the ordinance, and the remaining provisions continue to have full force and effect.

Conclusion: The district court erred in admitting exhibits 3 and 4. Moreover, because there is no “substantial difference of circumstances to suggest the expediency of diverse legislation,” the Court concluded that the exemptions set forth in the ordinance are special legislation. Therefore the district court also erred in finding the exemptions to be constitutional, and in granting the City’s motion for summary judgment and denying Hug’s motion. REVERSED AND REMANDED WITH DIRECTIONS.

Connolly, J., CONCURRING wrote separately to emphasize that the fundamental purpose of the prohibition against special legislation is to prevent the enactment of laws bestowing economic favors on preferred groups or classes. Here, the City created exemptions bestowing economic favors on specific types of businesses: tobacco-only retail outlets, keno establishments, stand-alone bars providing limited food service, and horseracing operations. Here, Omaha’s smoking ban ordinance does not state the City’s purpose for exempting stand-alone bars, keno establishments, horseracing operations, and tobacco retail outlets. But common sense dictates that exempted businesses will receive a significant economic benefit because smokers are more likely to patronize exempt businesses over those subject to the ban. “To sum up,” wrote Justice Connolly, “the City’s exemptions have sucked the air out of an otherwise constitutional ordinance.”

Dissolution, Pre-Marital Agreement, Property Division

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This appeal of a divorce action where the parties had entered into a pre-marital agreement regarding the division of the property, the Nebraska Supreme Court affirms a trial court’s division of property which, despite the p.m.a., added gains to retirement accounts which grew from marital assets. While the appellant argued the Uniform Premarital Agreement Act describes “property” as an interest, present or future in real or personal property, including income and earnings, all increases in value of the retirement savings plans should not be considered marital property, the Court noted that a similar definition o “property” was not included in the p.m.a.

Sitz v. Sitz, 275 Neb. 832 (2008)

Supreme Court Headnotes

Divorce:

1. Child Custody: Child Support: Property Division: Alimony: Attorney Fees: Appeal and Error. In an action for the dissolution of marriage, an appellate court reviews de novo on the record the trial court’s determinations of custody, child support, property division, alimony, and attorney fees; these determinations, however, are initially entrusted to the trial court’s discretion and will normally be affirmed absent an abuse of that discretion.

2. Property Division. As a general rule, all property accumulated and acquired by either spouse during the marriage is part of the marital estate, unless it falls within an exception to the general rule.

3. Attorney Fees: Appeal and Error. In an action for dissolution of marriage, the award of attorney fees is discretionary with the trial court, is reviewed de novo on the record, and will be affirmed in the absence of an abuse of discretion.

Judgments:

1. Words and Phrases. An abuse of discretion occurs when a trial court’s decision is based upon reasons that are untenable or unreasonable or if its action is clearly against justice or conscience, reason, and evidence.

Property Division.

1. Under Neb. Rev. Stat. § 42-365 (Reissue 2004), the equitable division of property is a three-step process. The first step is to classify the parties' property as marital or nonmarital. The second step is to value the marital assets and liabilities of the parties. The third step is to calculate and divide the net marital estate between the parties in accordance with the principles contained in § 42-365.

Alimony:

1. In determining whether alimony should be awarded, in what amount, and over what period of time, the ultimate criteria is one of reasonableness.

2. Appeal and Error. In reviewing an alimony award, an appellate court does not determine whether it would have awarded the same amount of alimony as did the trial court, but whether the trial court’s award is untenable such as to deprive a party of a substantial right or just result.

Attorney Fees.

1. The award of attorney fees depends on multiple factors that include the nature of the case, the services performed and results obtained, the earning capacity of the parties, the length of time required for preparation and presentation of the case, customary charges of the bar, and general equities of the case.

Date Filed and Case No.: May 30, 2008. No. S-07-395.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/may/may30/s07-395.pdf

Court Appealed From: District Court for Loup County: Karin L. Noakes, Judge.

Attorneys for the Appeal: Barry D. Geweke for William Jacob Sitz, appellant and cross-appellee. Cheryl C. Guggenmos for Ellen Katherine Sitz, appellee and cross-appellant.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack, and Miller-Lerman, JJ.

Authored By: Wright, J.

Summary: After 10 years of marriage, William Jacob Sitz sought a dissolution of his marriage to Ellen Katherine Sitz and a division of the marital property. William and Ellen had a premarital agreement, which stated that William and Ellen wanted to “set apart” the property that was accumulated by each of them prior to their marriage. The parties disclaimed any right of inheritance or any interest in the property of the other that was accumulated prior to the marriage. Each party represented that they had made full disclosure of all property they currently held. The agreement provided that property then held in the individual names of each party would remain their sole and separate property. The agreement, which was offered at trial, contained attachments that purportedly listed the property of the parties at the time of the marriage.

At trial, Ellen claimed that the premarital agreement was not enforceable because it did not disclose ranch owned by William, a Pfizer annuity, and a property settlement debt to William’s first wife. The trial court found that even if William’s property statement did not disclose ownership of the ranch, there was no doubt that Ellen was aware William owned the ranch. The court also concluded there was no evidence to suggest that Ellen would have refused to sign the agreement had she known the ranch was to be considered premarital property. William Pfizer annuity had a vested accrued monthly benefit of $1,269 that would commence when he turned age 65. William stated he was not aware of the annuity when the premarital agreement was executed. The property settlement debt from William’s previous marriage was approximately $33,750, which the trial court found to be a relatively small percentage of his premarital estate. Although the Pfizer annuity and the property settlement debt owed by William were not disclosed in the agreement, the court determined that the nondisclosure of these facts did not result in the agreement’s being unenforceable.

The trial court awarded the ranch to William subject to all encumbrances. The court concluded that Ellen was not entitled to a share of the increased value of the ranch because it was premarital property and there was no evidence that her contributions to managing and operating the ranch resulted in an increased value. However, evidence was presented concerning improvements to the ranch that were made with assets earned through the effort of both parties during the marriage ($32,500), and the trial court awarded Ellen a percentage of these improvements. The $1,269 monthly benefit from the Pfizer annuity was premarital property, however, during the marriage, William earned an additional monthly benefit of $2,549. The court awarded Ellen one-half of the benefit earned during the marriage ($1,274 per month) to begin when William turned 65. William was ordered to prepare a qualified domestic relations order to effectuate the above transfer of the annuity. A Pfizer savings plan was included in William’s property statement attached to the premarital agreement. The approximate value of the savings plan on the date of the marriage was $28,631. The trial court awarded William this amount and the interest on such amount as premarital property. Because the court had no evidence as to earnings on the investment, the court applied a rate of return of 6 percent per year and determined that the approximate earnings on that investment during the marriage were $52,563. The value of the savings plan as of December 1, 2005, was $371,817. During the marriage, contributions to the Pfizer savings plan were made by William’s employer and through deductions from his paychecks which the trial court held were marital property. It deducted the above-described $52,563 to obtain the marital value of the savings plan, which the court found was $319,254. Ellen was awarded $159,627, or one-half the net value of the savings plan.

William was ordered to prepare a QDRO to reflect the above divisions. William was ordered to pay $13,939 to the clerk of the court as a property settlement, to be payable to Ellen at $583 per month commencing on the first of each month beginning May 1, 2007, until paid. The trial court ordered William to pay alimony of $750 per month commencing May 1 for a period of 24 months. Finally William was ordered to pay $5,000 in costs within 120 days of the entry of the decree, as well as $5,000 of Ellen’s attorney fees in addition to any temporary allowance of such fees taxed as additional costs. William appealed and Ellen cross appealed.

Did the trial court err in dividing the benefits of the Pfizer savings plan? William asserted that the intent of the premarital agreement was that Ellen would not share in the benefits of his Pfizer savings plan. He argued that because the savings plan was described in the premarital agreement and because the Uniform Premarital Agreement Act describes “property” as an interest, present or future in real or personal property, including income and earnings, all increases in value of the Pfizer savings plan should not be considered marital property. The Nebraska Supreme Court disagreed pointing out that while the definition of “property” in the Uniform Premarital Agreement Act is simply a definition of the term as it is used in the act, however, that definition was not incorporated into the parties’ premarital agreement. The agreement said nothing about property acquired during the marriage, and the record reflects that the parties combined their incomes in a joint account and acted as if both parties had a right to the money.

Accordingly, the contributions to the savings plan made during the marriage and the returns earned during the marriage were subject to division by the trial court. Thus, because the court merely awarded Ellen one-half of the benefits earned during the parties’ marriage, the Court found no abuse of discretion.

Did the trial court err in awarding Ellen a division of Pfizer annuity? William argued that the trial court erred in awarding Ellen a portion of the Pfizer annuity, again relying upon his interpretation of the word “property” in the premarital agreement. As pointed out above, the premarital agreement did not allow each party to keep the benefits earned through his or her employment during the marriage. Therefore, the general rule regarding the division of retirement plans applies (Neb. Rev. Stat. § 42-366(8) (Reissue 2004)) and the court’s division of this benefit was not an abuse of discretion.

Did the trial court err in incorporating the value of improvements made to ranch? William argued that the trial court erred in finding that Ellen was entitled to one-half the value of the well that was added to the ranch and one-third of the value of the improvements made to the home located on the ranch. He claimed that because Ellen did not contribute any of her earnings toward these improvements to the ranch, she should not share in the value of the improvements to his premarital property. The Court said that these improvements were paid for with funds earned during the course of the marriage and were therefore marital property that was subject to division. The Court could not say that the trial court abused its discretion in making this small award regarding improvements to the ranch.

Did the trial court err in awarding aliomony? William argued that the trial court erred in ordering him to pay $750 per month in alimony for 24 months. The Court found that the argument had no merit. The record reflected that in 2005, Ellen earned $30,146 while William earned $122,242. Ellen had moved from Kearney, Nebraska, to Loup County to live on the ranch. She invested time in assisting with the ranch and supporting William’s career. The Court said that the substantial disparity in the parties’ income, combined with the support Ellen provided to the ranch and William’s career, demonstrate that the trial court’s award of alimony was reasonable under the circumstances.

Did the trial court err in awarding attorney fees to Ellen? The award of attorney fees depends on multiple factors that include the nature of the case, the services performed and results obtained, the earning capacity of the parties, the length of time required for preparation and presentation of the case, customary charges of the bar, and general equities of the case. In its review, the Court concluded the trial court did not abuse its discretion in ordering William to pay $5,000 in attorney fees.

Cross-Appeal

Ellen assigned on cross-appeal that the trial court erred in failing to credit her for William’s premarital debt paid with marital funds? Ellen asserted that although she brought debt into the marriage and that that debt was paid with marital funds, her debt was disclosed in the premarital agreement, thereby making payment of her premarital debt with marital funds significantly different than the payment of William’s premarital debt. Here, the Court found that both parties had premarital liabilities that were paid from marital funds. The record showed that the trial court excluded all premarital debt from its calculations, regardless of the parties’ disclosure and the Court concluded that the trial court did not abuse its discretion in not allowing Ellen to receive a credit in the amount of the marital funds used by William to pay his undisclosed premarital debt.

Conclusion: Finding no merit to the errors assigned on appeal and cross-appeal, the Court affirmed the judgment of the district court dissolving the marriage, dividing the property between the parties, and awarding alimony and attorney fees. AFFIRMED.

Dissolution Decree, Motion to Vacate, Fraud

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The personal representative of a deceased divorcee’s (the wife’s) estate petitioned to vacate the marital estate distribution in a 1989 dissolution decree. The Estate claimed that the husband obtained the decree by fraud and that the parties' property settlement agreement did not accurately reflect the marital estate's value. The district court dismissed the Estate's petition concluding that the Estate failed to prove that Barbara acted with due diligence in determining the value of the marital estate during the divorce proceeding. The Nebraska Supreme Court agreed with the district court and affirmed.

Nielsen v. Nielsen, 275 Neb. 810 (2008)

Supreme Court Headnotes

Motions to Vacate:

1. Proof: Appeal and Error. An appellate court will reverse a decision on a motion to vacate or modify a judgment under Neb. Rev. Stat. § 25-2001 (4)(b) (Cum. Supp. 2006) only if the litigant shows that the district court abused its discretion.

Courts:

1. Judgments: Fraud: Proof. A party seeking to set aside a judgment after term for fraud under Neb. Rev. Stat. § 25-2001 (4)(b) (Cum. Supp. 2006) must prove that he or she exercised due diligence at the former trial and was not at fault or negligent in the failure to secure a just decision.

Date Filed and Case No.: May 30, 2008. No. S-07-312.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/may/may30/s07-312.pdf

Court Appealed From: District Court for Cuming County: Robert B. Ensz, Judge.

Attorneys for the Appeal: Richard J. Thramer for Don Duane Nielsen, Personal Representative of the Estate of Barbara Jean Nielsen, appellant and cross-appellee. Mark D. Fitzgerald for Donald E. Nielsen, appellee and cross-appellant.

Justices: Heavican, C.J., Wright, Connolly, Stephan, McCormack, and Miller-Lerman, JJ.

Not Participating: Gerrard, J.

Authored By: Connolly, J.

Summary: Donald E. and Barbara Jean were married in 1951. They had three sons. The couple ran a business which they had incorporated in the early seventies. About 1980, Barbara was diagnosed with breast cancer. In 1988, she met with an attorney to discuss estate planning, that she felt that Donald was hiding assets from her and the possibility of pursuing a divorce. In September 1989, Barbara filed for divorce. William Line represented Barbara, and Clarence Mock represented Donald.

In November, the parties signed a property settlement agreement awarding most of the parties’ real and personal property to Donald and requiring Donald to pay (1) $625,000 cash to Barbara; (2) $15,000 in attorney fees to Barbara’s attorney, Line; and (3) Barbara’s medical expenses for the remainder of Barbara’s life. The settlement agreement included an acknowledgment that each party was aware of the other’s financial position and that there had been a full disclosure of the financial assets of both parties.

Barbara’s health was deteriorating, and she could not attend the final hearing on November 20, 1989. At the hearing, Donald testified that the settlement agreement fully, fairly, and equitably divided the marital estate. The parties’ attorneys stipulated, that from their independent investigations, the value of the marital estate was between $1 million and $3 million. The court entered a decree approving the settlement agreement. The same day, Donald paid Barbara the $625,000 and Barbara executed a will devising all her property to the couple’s three sons. On July 24, 1990, Barbara died.

Almost 15 years later, in March 2004, the Estate petitioned to vacate the dissolution decree alleging that Donald obtained the decree by fraud. The Estate’s petition requested that the court vacate and set aside the decree’s distribution of the marital estate and that it determine a fair and equitable division of the marital estate. Donald moved for summary judgment which was granted by the district court. The Estate appealed.

In an unpublished decision, the Nebraska Court of Appeals reversed the district court’s entry of summary judgment. Viewing the evidence in the light most favorable to the Estate, the court concluded that deposition testimony presented by the Estate, presented material issues of fact. The Court of Appeals determined that material issues of fact existed regarding the true value of the marital estate and whether Barbara was fully aware of that value.

After a bench trial following remand, the district court entered judgment for the Estate in December 2006. The court decided that the Estate proved by clear and convincing evidence the theories of fraudulent concealment and fraudulent misrepresentation. The court determined that Donald underrepresented the marital estate’s value and that a more accurate representation “would have been conservatively $4 million.” The court rejected Donald’s affirmative defenses.

However, following Donald’s motion for a new trial in a March 2007 order, the court sustained Donald’s motion. The court stated that the reasoning in its December 2006 order was flawed in that it provided an incomplete analysis in that its prior order focused on Donald’s conduct and did not consider whether Barbara acted with due diligence as required by Eihusen v. Eihusen, 272 Neb. 462, 723 N.W.2d 60 (2006). Upon further consideration, the court determined Barbara did not exercise due diligence to determine the entire marital estate. According to the court, Barbara failed to do discovery that should have led to the disclosure of assets and their valuations. The court dismissed the Estate’s petition and the Estate appealed.

Did the district court err in concluding that Barbara failed to exercise the requisite due diligence during the divorce proceeding? The Nebraska Supreme Court began by setting out that under Neb. Rev. Stat. § 25-2001(4)(b), a district court may vacate or modify its own judgments or orders after term for fraud practiced by the successful party in obtaining the judgment or order. But noted they have held that a party seeking to set aside a judgment after term for fraud under this section must prove that he or she exercised “due diligence” at the former trial and was not at fault or negligent in the failure to secure a just decision.

Here, the Estate must prove that the alleged failure to secure a just decision was attributable only to Donald’s misrepresentation or concealment, and not to any fault or negligence of Barbara. Reviewing cases that have dealt with similar facts, the Court disagreed with the Estate’s attempt to distinguish its decisions in Caddy v. Caddy, 218 Neb. 582, 358 N.W.2d 184 (1984)and Eihusen.

The Estate contends that the appellants in those cases were aware of the allegedly concealed property at the time of the divorce proceedings but had failed to determine the property’s value at that time. The Estate argues that here, Barbara was unaware of the existence of many assets. The Court found this distinction of little import. Although Barbara may not have been aware of all the assets in the marital estate, the evidence showed that a year before she filed for divorce, she had suggested to her attorney at the time, that she suspected Donald was hiding assets from her. Yet, the evidence failed to show that Barbara acted on those suspicions and exercised due diligence to determine the value of the marital estate during the settlement negotiations or divorce proceedings.

The Court recognized that Barbara’s health was fragile, but she was represented by legal counsel during all the relevant proceedings. And although the Estate alleged that Barbara’s attorney, Line, was involved in a conspiracy to conceal the value of the marital estate, the district court determined the evidence did not support such a finding. The Estate did not assign error to that determination and the Court’s review of the record did not show that a conspiracy to conceal had occurred.

The Estate also contended that Barbara had a right to rely on the district court’s order restraining the parties from transferring or concealing real or personal property assets. The Estate, however, failed to provide any authority supporting its contention that the order excused Barbara from conducting an independent investigation. A year before the divorce proceeding, Barbara suspected that Donald was hiding assets. The record, however, does not establish that she or Line made sufficient efforts to determine the value of the marital estate during the settlement negotiations or divorce proceedings. Without further evidence of Barbara’s or Line’s efforts to determine the marital estate’s value, the Court could not conclude that the Estate proved Barbara exercised the requisite due diligence. The record showed that Barbara’s failure to secure a more favorable result was attributable to her failure to use discovery methods to uncover the assets and their value. “And this failure to conduct discovery may have been intentional given her circumstances” wrote the Court.

Admittedly, the record reflected that the marital estate might have been greater than the $1- to $3-million range stipulated by Line at the final hearing. “But we cannot conclude that Line was negligent in representing Barbara.” The evidence suggested that settling for the lesser amount may have been Barbara’s strategy because of her impending death. “A reasonable inference is that Barbara agreed to the property settlement to complete the divorce before her impending death” said the Court. “Perhaps this strategy to quickly settle explains why neither Barbara nor Line conducted extensive discovery.”

Conclusion: The Nebraska Supreme Court concluded that the Estate did not prove that Barbara exercised due diligence during the divorce proceeding. Nor did the Estate prove that the alleged failure to secure a just decision was not attributable to the fault or negligence of Barbara. Therefore, the district court did not abuse its discretion in denying the Estate’s petition to vacate. Because they affirmed the dismissal of the petition, they need not reach the Estate’s other assignments of error or Donald’s assignments of error on cross-appeal. AFFIRMED.

Motion to Vacate, Fraud, Due Diligence

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Nielsen v. Nielsen, 275 Neb. 810 (2008)

Supreme Court Headnotes

Motions to Vacate:

Courts:

Date Filed and Case No.: May 30, 2008. No. S-07-312.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/may/may30/s07-312.pdf

Court Appealed From: District Court for Cuming County: Robert B. Ensz, Judge.

Justices: Heavican, C.J., Wright, Connolly, Stephan, McCormack, and Miller-Lerman, JJ.

Not Participating: Gerrard, J.

Authored By: Connolly, J.

Summary Judgment

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Broad v. Randy Bauer Ins. Agency, 275 Neb. 788 (2008)

Supreme Court Headnotes

Summary Judgment.

Complaints:

1. Appeal and Error. Whether a complaint states a cause of action is a question of law, which requires an appellate court to reach a conclusion independent of the trial court.

Insurance:

1. Brokers: Principal and Agent. Whether an insurance intermediary is an agent of the insured or the insurer is generally a question of fact.

Contracts:

Breach of Contract:

Actions:

1. Breach of Contract: Insurance: Brokers. A claim against a broker for breach of contract to procure insurance is a valid cause of action.

Date Filed and Case No.: May 30, 2008. No. S-06-844.

Internet Address: http://www.supremecourt.ne.gov/opinions/2008/may/may30/s06-844.pdf

Court Appealed From: District Court for Scotts Bluff County: Brian C. Silverman, Judge. Reversed and remanded for further proceedings.

Justices: Heavican, C.J., Wright, Connolly, Gerrard, Stephan, McCormack, and Miller-Lerman, JJ.

Authored By: Connolly, J.

David’s estate appealed.

However, the Court said they will recognize a cause of action against a broker for breach of contract to procure insurance because the broker is the insured’s agent.