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Klein v. Oakland/Red Oak Holdings, LLC

Supreme Court of Nebraska

August 26, 2016

Jeremy L. Klein and Kimberly J. Klein, Husband And Wife, And Robert D. Lynch And Elainem. Lynch, Husband And Wife, Appellees,
v.
Oakland/Red Oak Holdings, LLC, a Nebraska Limited Liability Company, Appellant.

         1. Trusts: Equity. An action to set aside a trustee's sale sounds in equity.

         2. Equity: Appeal and Error. On appeal from an equity action, an appellate court tries factual questions de novo on the record and, as to questions of both fact and law, is obligated to reach a conclusion independent of the conclusion reached by the trial court, provided that where credible evidence is in conflict in a material issue of fact, the appellate court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another.

         3. Evidence: Stipulations: Appeal and Error. In a case in which the facts are stipulated, an appellate court reviews the case as if trying it originally in order to determine whether the facts warranted the judgment.

         4. Trusts: Deeds: Sales. The Nebraska Trust Deeds Act, Neb. Rev. Stat. § 76-1001 et seq. (Reissue 2009), authorizes a trust deed to be used as a security device in Nebraska and provides that real property can be conveyed by trust deed to a trustee as a means to secure the performance of an obligation.

         5. __: __: __ . The Nebraska Trust Deeds Act, Neb. Rev. Stat. § 76-1001 et seq. (Reissue 2009), includes detailed procedures that, in the event of a breach of the underlying obligation, permit the trust property to be sold without the involvement of any court.

         6. __: __: __ . The Nebraska Trust Deeds Act, Neb. Rev. Stat. § 76-1001 et seq. (Reissue 2009), allows a trust deed to expressly confer upon a trustee the power of sale.

         [294 Neb. 536] 7. ___:__:__. Pursuant to the power of sale, a trustee can sell the property conveyed by a trust deed without any court's authorization or direction, though the trustee must comply with procedural requirements contained in the Nebraska Trust Deeds Act, Neb. Rev. Stat. § 76-1001 et seq. (Reissue 2009).

         8. Trusts: Deeds: Foreclosure: Mortgages: Words and Phrases. Because the Nebraska Trust Deeds Act, Neb. Rev. Stat. § 76-1001 et seq. (Reissue 2009), allows the property securing an obligation to be sold without the judicial involvement that would be required to foreclose upon a mortgage, the proceedings surrounding a trustee's sale pursuant to the act are sometimes referred to as "nonjudicial foreclosure" or "trustee foreclosure."

         9. Trusts: Deeds: Statutes. Because trust deeds do not exist at common law, the trust deed statutes are to be strictly construed.

         10. Real Estate: Notice. A purchaser of real estate is required to take notice of instruments properly placed of record in the office of the register of deeds.

         11. Deeds: Warranty: Title. Increased diligence, alertness, and scrutiny in searching for the facts are expected of a purchaser who accepts a deed that is less than a general warranty with full covenants of ownership and title.

         12. Title. Fundamental to the law of registry is the principle of establishing priority of title.

         13. Judicial Sales: Negligence: Fraud. The doctrine of caveat emptor applies to all judicial sales, subject to the qualification that the purchaser is entitled to relief on the ground of after-discovered mistake of material facts or fraud, where the purchaser is free from negligence.

         14. Trusts: Sales. The doctrine of caveat emptor applies in trustee's sales.

         15. Taxes: Deeds: Title: Liens. A treasurer's tax deed, issued pursuant to Neb. Rev. Stat. § 77-1837 (Cum. Supp. 2012) and in compliance with Neb. Rev. Stat. §§ 77-1801 to 77-1863 (Reissue 2009 & Cum. Supp. 2012), passes title free and clear of all previous liens and encumbrances.

         Appeal from the District Court for Phelps County: Stephen R. Illingworth, Judge.

          Mark J. LaPuzza and Ashley Dieckman, of Pansing, Hogan. Ernst & Bachman, L.L.P, for appellant.

          Natalie G. Nelsen, of Dier, Osborn, Cox & Nelsen, PC. L.L.O., for appellees.

         [294 Neb. 537] Heavican, C.J., Wright, Connolly, Miller-Lerman, Cassel, and Stacy, JJ.

          Miller-Lerman, J.

         NATURE OF CASE

         Jeremy L. Klein and Kimberly J. Klein, husband and wife, and Robert D. Lynch and Elaine M. Lynch, husband and wife, (both couples collectively the appellees) purchased a trust deed at a trustee's sale for certain real estate. Prior to the trustee's sale, treasurer's tax deeds for the same real estate had been issued to a third party. By operation of law, a treasurer's tax deed passes title free and clear of all previous liens and encumbrances, and therefore, the treasurer's tax deeds had divested the trust deed of title. The treasurer's tax deeds were recorded prior to the trustee's sale, but the appellees failed to examine the record prior to the trustee's sale. The appellees brought this action in equity against Oakland/Red Oak Holdings, LLC (Oakland), the appellant, which was the beneficiary of the trust deeds, seeking to set aside the sale and to be reimbursed the purchase price of $40, 001. The district court determined that the trustee's sale was void and ordered that Oakland return the purchase price to the appellees. Oakland appeals. For the reasons set forth below, we determine that the district court erred in its determination, and we reverse, and remand with directions.

         STATEMENT OF FACTS

         Our statement of facts is taken from the parties' stipulated statement of facts on which the case was tried to the district court. The parties' stipulated statement of facts provided as follows:

1. Oakland State Bank was the beneficiary under five deeds of trust from David Sickels and Debra Sickels. The Deeds of Trust are ...

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