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SBC v. Cutler

Court of Appeals of Nebraska

April 19, 2016

SBC, A NEBRASKA PARTNERSHIP, APPELLANT AND CROSS-APPELLEE,
v.
WILLIAM A. CUTLER III, PERSONAL REPRESENTATIVE OF THE ESTATE OF WILLIAM A. CUTLER, JR., APPELLEE AND CROSS-APPELLANT

         As Amended June 30, 2016

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[Copyrighted Material Omitted]

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         Editorial Note:

         This opinion is not Designated for Permanent Publication.

          Appeal from the District Court for Douglas County: SHELLY R. STRATMAN, Judge.

         Jason M. Bruno and Thomas D. Prickett, of Sherrets, Bruno & Vogt, L.L.C., for appellant.

         David S. Houghton and Keith A. Harvat, of Houghton, Bradford & Whitted, P.C., L.L.O., for appellee.

         IRWIN, RIEDMANN, and BISHOP, Judges. RIEDMANN, Judge, dissenting.

          OPINION

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          [23 Neb.App. 940] Irwin, Judge.

         I. INTRODUCTION

         SBC, Inc., appeals, and William A. Cutler III, as personal representative of the estate of William A. Cutler, Jr. (the estate), cross-appeals, from an order of the district court for Douglas County, which order denied SBC's request to pierce the corporate veil of Related Investments, Inc., and hold the estate liable for a judgment previously entered against Related Investments. SBC also appeals from the district court's order which awarded the estate approximately $140,000 in attorney [23 Neb.App. 941] fees. For the reasons set forth herein, we affirm the district court's decision denying SBC's request to pierce the corporate veil of Related Investments. However,

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we reverse the court's order awarding the estate any attorney fees.

         II. BACKGROUND

         1. Procedural History

         In May 2007, the district court for Douglas County entered a judgment in the amount of $159,822.14 against Related Investments and in favor of SBC. This judgment relates to a promissory note that was signed by H. Michael Cutler (Michael) personally and as vice president of Related Investments. The promissory note provided that Michael owed a little over $150,000 to Sherrets & Boecker LLC. Michael defaulted on timely paying the amount due under the promissory note. Ultimately, Sherrets & Boecker assigned its interest in the promissory note to SBC.

         In July 2007, approximately 2 months after the judgment was entered against Related Investments, SBC filed a complaint against Michael and William A. Cutler, Jr. (William). William was Michael's father. The complaint sought to pierce the corporate veil of Related Investments to hold Michael and William personally liable for the May 2007 judgment. The complaint alleged that Michael and William were the " shareholders, principals, and alter egos of" Related Investments.

         While the action was pending in district court, both Michael and William died. Subsequent to their deaths, SBC filed a motion to revive the action against the estate, and the district court granted this motion. No action was taken against Michael's estate.

         On April 17, 2012, SBC filed an amended complaint against the estate. In the amended complaint, SBC asserted that the court should pierce the corporate veil of Related Investments to hold the estate liable for the May 2007 judgment, because William was a " shareholder, principal, and alter ego" of Related Investments and because William " disregarded corporate [23 Neb.App. 942] formalities and the corporate form, . . . exercised complete dominion and control over the entity, and [had] interests . . . that . . . were wholly intertwined and one and the same" as Related Investments.

         The estate filed an answer to the amended complaint on May 3, 2012. In the answer, the estate raised various affirmative defenses to SBC's claims, including that the claim was barred by the doctrine of unclean hands and by equitable estoppel.

         On September 4, 2012, SBC filed a motion for summary judgment, which the district court denied. The case then proceeded to a bench trial in August and September 2013.

         2. Factual Background

         The events which gave rise to this appeal began in 2006, when Michael became involved in litigation involving a certain piece of real property located in Omaha, Nebraska. Sherrets & Boecker represented Michael during this litigation. In fact, Sherrets & Boecker had been Michael's attorneys for an extended period of time and, at the time of the 2006 litigation, Michael owed the firm a little over $100,000 in past-due legal fees.

         The 2006 litigation ended when Michael and the other parties involved entered into a settlement agreement. This settlement agreement included a $310,000 payment to Michael and an option to buy certain real property at a reduced price. Related Investments was created and incorporated in conjunction with this settlement agreement for the purpose of acting on the option to purchase the real property. Evidence presented at trial revealed that Michael and William attended a meeting with an accountant in December 2006 concerning the incorporation of Related Investments.

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After this meeting, articles of incorporation were filed with the Secretary of State, but no other corporate documents were ever signed or finalized. On December 5, the option agreement was signed by William, as president of Related Investments. Of the $310,000 [23 Neb.App. 943] in settlement proceeds received by Michael, $10,000 went toward securing the option to buy the real estate.

         After the $10,000 in settlement proceeds was paid to secure the option agreement, Michael had paid Sherrets & Boecker a total of $155,000, or 50 percent of the original proceeds, pursuant to his agreement with the firm. How the remaining $145,000 in settlement proceeds was disbursed was disputed at trial.

         SBC presented evidence to demonstrate that Sherrets & Boecker should have received this money as payment for previous legal fees owed by Michael. However, Sherrets & Boecker decided to loan this money to Related Investments so that at least $100,000 could be put into an escrow account to help secure the financing to act on the option agreement. As a part of Sherrets & Boecker's agreement to loan Related Investments the remaining $145,000 in settlement proceeds, ...


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