State ex rel. Wagner v. Amwest Surety Ins. Co.

CONCLUSION
The decision of the county court is affirmed.
A ffirmed.
STaTe ex reL. wagNer v. amweST SUreTy INS. CO. 	729
Cite as 280 Neb. 729
StAte of NebrASkA ex rel . l. tim WAgNer , director
of iNSurANce of the StAte of NebrASkA, Appellee , v.
A mWeSt Surety iNSurANce compANy, Appellee ,
ANd federAl depoSit iNSurANce corporAtioN,
receiver for NetbANk , f.S.b.,
clAimANt, AppellANt.
790 N.w.2d 866
Filed October 29, 2010. 	No. S-09-1128.
1. Insurance: Equity: Appeal and Error. an insurer liquidation proceeding lies
in equity, and an appellate court reviews a liquidation court’s determination of
claims disputes de novo on the record.
2. Contracts: Time. In the absence of a stated time for performance, the law will
imply a time of performance within a reasonable time under the circumstances.
3. Uniform Commercial Code: Security Interests: Notice. The Uniform
Commercial Code is a “pure race” statute in which a subsequent creditor’s notice
of prior creditors is irrelevant.
4. Security Interests. as to priority, conflicting perfected security interests rank in
the order in which they are filed or perfected.
5. Security Interests: Time. Delays in perfecting a security interest measured in
months or years are unreasonable.
6. Waiver: Words and Phrases. a waiver is a voluntary and intentional relin-
quishment of a known right, privilege, or claim, and may be demonstrated by or
inferred from a person’s conduct.
7. Waiver: Estoppel. To establish a waiver of a legal right, there must be a clear,
unequivocal, and decisive act of a party showing such a purpose, or acts amount-
ing to an estoppel on his or her part.
8. Waiver. a waiver requires that the waiving party have full knowledge of all the
material facts.
appeal from the District Court for Lancaster County: JohN
A. colborN, Judge. reversed and remanded.
robert B. Bernstein, of Vandenberg & Feliu, L.L.P., James
g. Powers and michael T. eversden, of mcgrath, North,
mullin & Kratz, P.C., L.L.O., and william V. Custer, Leeann
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:46 AM CST

Jones, and Jennifer B. Dempsey, of Bryan Cave, L.L.P., for
appellant.
robert L. Nefsky, John H. Binning, and Jane F. Langan, of
rembolt Ludtke, L.L.P., for appellee Director of Insurance.
heAvicAN, 	c.J., 	Wright, 	coNNolly, 	gerrArd, 	StephAN,
mccormAck, and miller-lermAN, JJ.
coNNolly, J.
SUmmary
During 1999 and 2000, NetBank, a federal savings bank;
Commercial 	money 	Center 	(CmC); 	and 	amwest 	Surety
Insurance Company (amwest) entered into seven agreements.
Under these agreements, amwest undertook the duty to perfect
NetBank’s security interests in the underlying collateral so that
NetBank would be protected from subsequent creditors or a
CmC bankruptcy. amwest never perfected the security inter-
ests, and CmC later filed for bankruptcy, leaving NetBank an
unsecured creditor in CmC’s bankruptcy. NetBank filed claims
in the amwest liquidation proceedings for amwest’s alleged
breach of contract. we are asked to decide whether a reason-
able time to perfect NetBank’s security interests had elapsed
before a subsequent surety replaced amwest.
BaCKgrOUND
In 1999 and 2000, CmC sold, transferred, and assigned to
NetBank the income streams in 641 leases. These transac-
tions were evidenced in seven sales and servicing agreements
entered into by CmC, NetBank, and amwest. CmC brought
in amwest as a surety to guarantee the income streams to
make the deal more attractive to institutional investors such as
NetBank. although amwest issued surety bonds as part of this
transaction, the Federal Deposit Insurance Corporation (FDIC)
is not asserting any claims on those bonds. FDIC is a party
to this case in its capacity as the receiver for NetBank, which
encountered its own insolvency problems in 2007. FDIC is not
asserting any type of government priority; its rights under the
agreements are exactly those that NetBank would have had.
Included within the agreements were representations regard-
ing 	Uniform 	Commercial 	Code 	(U.C.C.) 	filings. 	In 	each
730 	280 NeBraSKa rePOrTS

agreement, CmC represented that all necessary filings had
been made to grant NetBank a first priority perfected lien or
ownership interest in the leases and transferred assets and a
first priority perfected security interest in the equipment. In
reality, no such filings had been made.
Other clauses in the agreements required that CmC and
amwest take all actions necessary to obtain and maintain a
first priority protected security interest in the lease assets.
article x, section 10.2(a), of each agreement states that the
“Servicer [amwest], in all events, shall cause Seller [CmC] to
take . . . actions as to protect the Purchaser’s [NetBank’s] title
to and first priority security interest in the Transferred assets.”
Thus, some tension exists in the agreements as article x, sec-
tion 2.4, states that all filings have been made, but section 10.2
states that they will be made.
The agreements did not specify a time in which to perfect
the security interests. It is undisputed that amwest never
made any U.C.C. filings to establish NetBank’s priority in the
collateral.
also in the agreements, CmC represented to NetBank that
the surety guaranteeing the income streams would have a credit
rating of a− or better. amwest eventually fell below this mark.
Because of this, at NetBank’s request, a surety with the neces-
sary credit rating was brought in to issue additional bonds. On
January 2, 2001, the new surety, royal Indemnity Company
(royal) issued an additional 641 bonds.
Later, on June 7, 2001, the district court entered a liquida-
tion order regarding amwest.
NetBank continued to receive its payments under the agree-
ments until December 2001. around may 29, 2002, CmC filed
bankruptcy. The bankruptcy court determined that because
NetBank did not have a perfected first priority security interest
in the lease agreements, the leases were a general asset in the
bankruptcy estate. This determination left NetBank with little
recourse against CmC.
the referee’S fiNdiNgS
a few days after the CmC bankruptcy, NetBank filed its
claims with the amwest liquidator. The liquidator overseeing
STaTe ex reL. wagNer v. amweST SUreTy INS. CO. 	731
Cite as 280 Neb. 729

amwest’s estate denied NetBank’s claims. after NetBank
objected to the liquidator’s denial, a referee heard the matter
and denied the claims. The referee concluded that amwest’s
obligation to perfect security interests in the lease agreements
had merged into its obligation to provide indemnity to NetBank
under the amwest surety bonds. Further, the referee stated that
claims must be valued on the date of the liquidation order and
that no one had yet defaulted on the payments under the leases
on that date. The referee concluded that NetBank’s claims
under the bonds were not “absolute” on the liquidation order
date, stating: “On that date, the claims of NetBank may have
been ‘incurred’ because of the failure to perfect the security
interest of NetBank, but they were not known and therefore
were unreportable.” The referee stated that only claims known
on the date of the liquidation order are valid in the liquida-
tion proceedings.
the diStrict court’S fiNdiNgS
Both parties objected to the referee’s report. The district
court affirmed the referee’s denial of the claims, but for dif-
ferent reasons. The court determined that because the agree-
ments did not provide a time for the perfection to occur, it
had to occur within a reasonable time. The court ruled that the
duty to “‘obtain and maintain’” the first priority of NetBank
was a continuing obligation. The court stated that the interests
could have been perfected at any time before CmC’s bank-
ruptcy preference period, which began on or around February
27, 2002, about 18 months after the last agreement. Further,
because the court found that the contracts were still executory
at the time of the liquidation order, the liquidator, under Neb.
rev. Stat. § 44-4821(1)(m) (reissue 2001), could affirm or
disavow the contracts. The court found that the liquidator had,
in fact, disavowed the contracts. Finally, the court found that
NetBank had effectively waived any claims against amwest
under the agreements.
aSSIgNmeNTS OF errOr
FDIC assigns that the district court erred in (1) affirming
the denial of FDIC’s claims under the agreements, (2) finding
that a reasonable time to perfect the security interests had not
732 	280 NeBraSKa rePOrTS

expired, (3) finding that amwest was terminated as servicer
on January 2, 2001, (4) finding that NetBank had waived its
claims, and (5) concluding that the liquidator had effectively
disavowed the agreements.
STaNDarD OF reVIew
[1] an insurer liquidation proceeding lies in equity, and we
review a liquidation court’s determination of claims disputes de
novo on the record.1
aNaLySIS
A reASoNAble time to perform hAd elApSed
as noted, the district court found that the duty to perfect
NetBank’s security interests was a “continuing obligation”
under the agreements. It stated that the financing statements
could have been filed at any time up to February 27, 2002,
when CmC’s bankruptcy preference period began. The last
agreement was entered into in early September 2000. So,
according to the district court’s order, a reasonable time for
performance had not elapsed despite the passing of nearly
18 months.
FDIC argues that amwest breached the agreements by not
perfecting the security interests in the income streams. It
argues that this should have occurred, at the latest, shortly after
the closing. It is undisputed that the agreements imposed a duty
to perfect upon amwest. and it is undisputed that no perfection
ever occurred. The question is whether amwest was in breach
of the contract before its defenses of waiver or disavowal
became applicable.
[2] The agreements do not state a time within which amwest
had to perfect the security interests. The parties agree that “in
the absence of a stated time for performance, the law will
imply a time of performance within a reasonable time under
the circumstances.”2
1 State ex rel. Wagner v. Amwest Surety Ins. Co., 274 Neb. 110, 738 N.w.2d
805 (2007).
2 Davco Realty Co. v. Picnic Foods, Inc., 198 Neb. 193, 199, 252 N.w.2d
142, 147 (1977).
STaTe ex reL. wagNer v. amweST SUreTy INS. CO. 	733
Cite as 280 Neb. 729

[3,4] In analyzing what is a “reasonable time” to perfect a
security interest, we begin by noting that the U.C.C. is a “pure
race” statute in which a subsequent creditor’s notice of prior
creditors is irrelevant.3 as to priority, conflicting perfected
security interests rank in the order in which they are filed or
perfected.4 “Filing” refers to the filing of an effective financing
statement; “perfection” refers to the acquisition of a perfected
security interest.5 Depending on the collateral secured, perfec-
tion can occur in different ways. For example, some interests
are perfected automatically upon attachment.6 Others require
a filing.7 Still others require that the secured party control
the collateral to perfect its interest.8 Perfection by any means,
however, requires that the security interest attach to the collat-
eral.9 attachment is governed by Neb. U.C.C. § 9-203 (reissue
2001). and the parties do not appear to dispute that the inter-
ests had attached.
Under the U.C.C., a creditor can file its financing statement
before he has extended any credit to the debtor.10 In other
words, a party can file a financing statement before the security
interest attaches. If a filing predates the attachment, perfection
will relate back to the filing.11 This effectively eliminates any
risk of subsequent creditors arising between the time that credit
was extended and later perfection. Commentators have referred
to the ability to file a financing statement before a party
extends credit as “[o]ne of the greatest boons to the secured
creditor under article 9 . . . .”12
3 See Todsen v. Runge, 211 Neb. 226, 318 N.w.2d 88 (1982).
4 Neb. U.C.C. § 9-322 (reissue 2001).
5 Id., comment 4.
6 Neb. U.C.C. § 9-309 (reissue 2001).
7 Neb. U.C.C. § 9-310 (reissue 2001).
8 Neb. U.C.C. § 9-314 (reissue 2001).
9 Neb. U.C.C. § 9-308 (reissue 2001).
10 1 Barkley Clark, The Law of Secured Transactions Under the Uniform
Commercial Code ¶ 2.13[1] (rev. ed. 2000).
11 Id.
12 Id. at 2-208.
734 	280 NeBraSKa rePOrTS

Several sections of the U.C.C. provide guidance on what
constitutes a reasonable time. Neb. U.C.C. § 9-312(e), (f), and
(g) (reissue 2001) provide for either automatic perfection or
continuing perfection for a short period before the lender needs
to perfect by other means. This period of automatic perfection
lasts for 20 days, during which time the lender must perfect in
another way to maintain his priority after the 20-day period.
Similarly, Neb. U.C.C. § 9-315(d) (reissue 2001) provides that
a perfected security interest in proceeds expires after 20 days
unless certain conditions are met. Comment 8 to § 9-312 states
that 20 days “is the time period generally applicable in this
article.” From these “grace periods,” we infer that the drafters
of the U.C.C. considered 20 days to be a sufficient time within
which to perfect a security interest.
Other sections in the U.C.C. provide for periods longer than
20 days.13 These longer periods, however, are only applicable
in situations different from what is at issue in this appeal.
[5] Case law also aids us in determining what constitutes
a reasonable time. Courts that have considered this issue and
others like it have concluded that perfection should follow
shortly after the closing. In Waldrop v. Hurd,14 former clients
of an attorney brought a malpractice action for an attorney’s
failure to perfect the clients’ security interests. The court dis-
missed the suit as untimely. But in discussing at what point
the statute of limitations began running, the court noted that
the filing “should have coincided close in time to the closing
of the sale.”15 The appellate Court of Connecticut held that
8 days was an unreasonable delay in recording a real estate
mortgage.16 The court noted that in other decisions, delays of
a day or two had been held to be reasonable, but that “delays
measured in months and years [are] unreasonable.”17
13 E.g., Neb. U.C.C. § 9-316 (reissue 2001).
14 Waldrop v. Hurd, 907 So. 2d 890 (La. app. 2005).
15 Id. at 894.
16 Cottiero v. Ifkovic, 35 Conn. app. 682, 647 a.2d 9 (1994).
17 Id. at 690, 647 a.2d at 13.
STaTe ex reL. wagNer v. amweST SUreTy INS. CO. 	735
Cite as 280 Neb. 729

Commentators and practice guides also support the view
that several months is an unreasonable time to wait to perfect.
Commentators are adamant that filing should occur quickly.
One commentator warns that a delay in filing can be “painful”
or even “fatal” if subsequent creditors arise or if the debtor
declares bankruptcy.18 most authorities suggest filing before the
interest attaches. “In most cases, financing statements are filed
at the close of a secured transaction. However, it is advisable
to file financing statements . . . before the loan closing.”19 Still
others maintain “it is a good habit to engage in the pre-filing of
financing statements.”20
as mentioned, the district court concluded that a reason-
able time had not yet passed until the CmC bankruptcy period
began, which was about 18 months after the parties entered
into the last agreement. Perfection grants a level of protection
against subsequent creditors and the possibility that the debtor
might go bankrupt. either could occur moments after the loan
is made or not for decades. The failure to perfect a security
interest within a reasonable time creates a ticking timebomb.
Because of the unpredictable nature of the risk and what is at
stake—millions of dollars—we conclude that waiting months
to perfect a security interest is unreasonable. The district court
erred in finding that a reasonable time had not elapsed.
eveN if NetbANk WAived further performANce ,
it did Not WAive itS clAim for the breAch
[6-8] The liquidator argues that NetBank waived amwest’s
future performance of the agreements when it accepted surety
bonds from royal and replaced amwest with royal as surety.
“a waiver is a voluntary and intentional relinquishment of a
known right, privilege, or claim, and may be demonstrated by
18 1 Clark, supra note 10, ¶ 2.13[1] at 2-209.
19 Texas Secretary of State, Information on the Texas Business and Commerce
Code, http://www.sos.state.tx.us/ucc/tbc-code.shtml (last visited Sept. 9,
2010).
20 C. grice mcmullan & Kimberly a. Taylor, The New UCC article 9:
a Primer on attachment and Perfection Under the 2001 revised Law
of Secured Transactions for real estate Lawyers, http://state.vipnet.org/
vsbar/sections/rp/articles/mcmullan.html (last visited Sept. 28, 2010).
736 	280 NeBraSKa rePOrTS

or inferred from a person’s conduct.”21 “[T]o establish a waiver
of a legal right, there must be a clear, unequivocal, and decisive
act of a party showing such a purpose, or acts amounting to an
estoppel on his or her part.”22 a waiver requires that the waiv-
ing party have “full knowledge of all the material facts.”23
The liquidator argues that a waiver occurred in early January
2001. The liquidator points to a document signed by NetBank’s
chief financial officer that states amwest was relieved as serv-
icer and royal was appointed as servicer. But the liquidator’s
argument hinges upon a conclusion that a breach had not yet
occurred. as we discussed earlier, amwest was already in
breach by this time; whether amwest was released from future
performance is irrelevant.
So, the relevant question is not whether NetBank waived
further performance, but rather, whether it waived its cause of
action for breach of contract. To show waiver, the liquidator
would have to establish that NetBank knew of amwest’s failure
to perfect the security interests. The liquidator does not point
to anything in the record that shows that NetBank was aware
of amwest’s failure to perfect the security interests before
CmC’s bankruptcy proceedings. Nor has our review of the
record uncovered anything showing NetBank’s awareness of
that failure. Further, nothing exists in the record, before or after
the CmC bankruptcy proceedings, that we interpret as a “clear,
unequivocal, and decisive” act by which NetBank waived its
claims. The liquidator has failed to show that NetBank waived
or abandoned its claims for breach of contract.
the liquidAtor could Not diSAvoW the AgreemeNtS
becAuSe A mWeSt WAS A lreAdy iN breAch
The liquidator also argues that he effectively disavowed
amwest’s contract with NetBank. Because we have already
determined that amwest had breached the agreements before
the liquidation order was entered, amwest had no duty of
21 Daniels v. Allstate Indemnity Co., 261 Neb. 671, 675, 624 N.w.2d 636,
640-41 (2001).
22 Id. at 675, 624 N.w.2d at 641.
23 17B C.J.S. Contracts § 423 at 43 (1999).
STaTe ex reL. wagNer v. amweST SUreTy INS. CO. 	737
Cite as 280 Neb. 729

further performance. There was no contract at that point for the
liquidator to disavow. In fact, during oral argument before this
court, counsel for the liquidator conceded that if the contracts
were breached before the liquidation order, “disavowal would
not become an issue.”
CONCLUSION
we conclude that amwest breached its obligation to perfect
NetBank’s interests in the collateral. we also conclude that
amwest does not have any meritorious defenses. we reverse,
and remand to the district court for proceedings consistent with
this opinion.
reverSed ANd remANded.
StAte of NebrASkA, Appellee , v.
Jeffrey A. lAmb, AppellANt.
789 N.w.2d 918
Filed October 29, 2010. 	No. S-09-1201.
1. Courts: Appeal and Error. Both the district court and the Nebraska Supreme
Court generally review appeals from the county court for error appearing on
the record.
2. Criminal Law: Courts: Appeal and Error. In an appeal of a criminal case from
the county court, the district court acts as an intermediate court of appeal, and as
such, its review is limited to an examination of the county court record for error
or abuse of discretion.
3. Judgments: Statutes: Appeal and Error. Statutory interpretation is a matter of
law in connection with which an appellate court has an obligation to reach an
independent, correct conclusion irrespective of the determination made by the
lower courts.
4. Statutes: Appeal and Error. Statutory language is to be given its plain and ordi-
nary meaning, and an appellate court will not resort to interpretation to ascertain
the meaning of statutory words which are plain, direct, and unambiguous.
5. Criminal Law: Sentences: Judgments. In a criminal case, entry of judgment
occurs with the imposition of a sentence.
6. Sentences: Probation and Parole: Appeal and Error. The imposition of the
sentence, absent the pendency of an appeal, concludes the “proceedings” referred
to in Neb. rev. Stat. § 60-6,197.09 (Cum. Supp. 2008).
7. Standing: Words and Phrases. Standing is the legal or equitable right, title, or
interest in the subject matter of the controversy which entitles a party to invoke
the jurisdiction of the court.
738 	280 NeBraSKa rePOrTS