Nebraska Supremes: Special 3-Month Statute Of Limitations When Seeking Deficiency Judgments Applies Only To Non-Judicial Foreclosures; Lenders That Go To Court Seeking Trust Deed Enforcement Get Five Years To Initiate Deficiency Proceedings

From Justia.com US Law:

• Defendants gave a promissory note to Bank and secured a loan with a trust deed on real property. Defendants defaulted on the note, and Bank initiated foreclosure proceedings. The property was sold after a sheriff's sale. Bank subsequently filed a complaint to recover the deficiency.
  
  The district court granted Defendants' motion for summary judgment, holding that because Bank filed its complaint ninety-nine days after the sheriff's sale, the action was barred by the three-month statute of limitations in Neb. Rev. Stat. 76-1013.
  
  The Supreme Court reversed, holding (1) the special three-month statute of limitations on actions for deficiency set forth in the Nebraska Trust Deeds Act applies where a lender elects to judicially foreclose upon the real estate, but the special limitation applies only where the property has been sold by exercising the power of sale set forth in the trust deed; and (2) because the judicial foreclosure of the trust deed in this case did not result in the sale of property under a trust deed, it did not fall under the statutory language in section 76-1013, and the deficiency action was governed by the general statute of limitations for actions on written contracts.(1) Remanded.

Source: Opinion Summary - First Nat'l Bank of Omaha v. Davey.

For the court ruling, see First Nat'l Bank of Omaha v. Davey, 285 Neb 835 (Neb. May 3, 2013).

(1) Excerpts from the court ruling's Introduction and Conclusion:

• In this appeal, we must determine whether the special 3-month statute of limitations on actions for deficiency set forth in the Nebraska Trust Deeds Act (Act)[1] applies where a lender elects to judicially foreclose upon the real estate. We conclude that the special limitation applies only where the property has been sold by exercising the power of sale set forth in the trust deed.
  
  As we will explain, our conclusion follows from our previous decisions under the Act, is faithful to the plain language of the statute, avoids absurd results, and is consistent with decisions in other states. We therefore reverse the contrary decision of the district court.

***

• Based on a previous interpretation by this court, we conclude that the statute of limitations in § 76-1013 applies only to deficiency actions filed after the exercise of the power of sale provided in a trust deed.
  
  A deficiency action brought following the judicial foreclosure of a trust deed is governed by the general 5-year statute of limitations for actions on written contracts in § 25-205.
  
  Because First National's deficiency action was brought within 5 years of the judicial sale of the real property, the district court erred in granting the Daveys' motion for summary judgment on the ground that the action was barred as untimely. Accordingly, we reverse the judgment and remand the cause for further proceedings consistent with this opinion.