Ord, Inc. v. AmFirst Bank

also served in Iraq in 2003. According to letters sent to the
Commission by members of Hartmann’s military unit, Hartmann
is highly regarded by those with whom he has served.
To the extent the previous denial of Hartmann’s applica-
tion was based on a lack of rehabilitation, we conclude that
Hartmann has overcome that obstacle. As noted, according to
Dr. Larson, Hartmann has successfully completed counseling
and is continuing on antidepressant medication for his psycho-
logical condition. Although the Commission’s reluctance to
grant Hartmann’s application to sit for the bar is understand-
able, the record appears to demonstrate that Hartmann has ful-
filled the conditions set forth in our prior opinion. When asked
if he perceived Hartmann “to represent a risk of engaging in a
pattern of . . . inappropriate behavior in the future,” Dr. Larson
responded that he did “not see that as likely.”
Hartmann’s rehabilitation, combined with the cited evidence
demonstrating character and fitness, is persuasive, and nothing
in the record appears to contradict the evidence Hartmann pre-
sented. We accordingly grant Hartmann’s application to sit for
the Nebraska bar examination.
CONCLUSION
Because Hartmann presented sufficient evidence that he
has resolved his psychological condition and has been reha-
bilitated as required by our earlier opinion, and because no
evidence to the contrary can be found in the record, we
now grant Hartmann’s application to sit for the Nebraska bar
examination.
A pplicAtion grAnted .
M iller-lerMAn, J., participating on briefs.
ord, inc., et Al ., Appellees , v. AMF irst BAnk
And vAn korell , AppellAnts.
758 N.W.2d 29
Filed December 5, 2008. 	No. S-06-1363.
1. Actions: Rescission: Equity: Appeal and Error. An action for rescission sounds
in equity, and it is subject to de novo review upon appeal.
OrD, INC. v. AmFIrST BANk 	781
Cite as 276 Neb. 781
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:52 AM CST

2. Contracts: Parties. Nebraska law provides that all parties to an instrument
sought to be canceled are necessary parties to the suit for cancellation, either as
plaintiffs or as defendants.
Petition for further review from the Court of Appeals, inBody,
Chief Judge, and irwin and cArlson, Judges, on appeal thereto
from the District Court for red Willow County, donAld e.
rowlAnds, Judge. Judgment of Court of Appeals affirmed.
Andre r. Barry, James m. Bausch, and Shawn D. renner,
of Cline, Williams, Wright, Johnson & Oldfather, L.L.P., for
appellants.
mark J. Appleton, of robinson, Waters & O’Dorisio, P.C.,
and ronald D. mousel, of mousel & Garner, for appellees.
H eAvicAn, c.J., connolly, gerrArd, stepHAn, MccorMAck ,
and M iller-lerMAn, JJ.
M iller-lerMAn, J.
NATUrE OF THE CASE
Appellees Ord, Inc., with kevin Ord as owner, and D&J
Trust, with Dan Liebig as trustee, purchased notes issued
by DFS Credit Corporation (DFS) from Aragon Financial
Services (Aragon) through its registered representative kent
Carter. 	Carter’s 	company 	was 	called AmFirst 	Investment
Services. 	Carter 	was 	associated 	with 	appellants, AmFirst
Bank and its president, Van korell. DFS defaulted on those
notes, and appellees filed suit in the district court for red
Willow County.
This case was previously appealed to the Nebraska Court of
Appeals, which in part reversed, and remanded for trial. Ord
v. AmFirst Invest. Servs., 14 Neb. App. 97, 704 N.W.2d 796
(2005) (Ord I). Upon remand, a jury found in favor of appel-
lees and against appellants. The district court subsequently
ruled that certain assignment and hold harmless agreements
signed by appellees were null and void and, therefore, did
not serve as an impediment to the entry of a monetary judg-
ment in favor of appellees. Appellants appealed to the Court
of Appeals. In a memorandum opinion, the Court of Appeals
affirmed the district court’s judgment. Ord, Inc. v. AmFirst
782 	276 NEBrASkA rEPOrTS

Bank, No. A-06-1363, 2008 WL 1746999 (Neb. App. Apr. 8,
2008) (selected for posting to court Web site). We granted
appellants’ petition for further review. We affirm.
STATEmENT OF FACTS
In 1992, korell, as president of AmFirst Bank, met with a
registered representative of Aragon to discuss entering into
an arrangement in which an Aragon representative would sell
securities to AmFirst Bank’s retail customers. korell brought
Carter to the meeting. After the meeting, Carter took and
passed his “Series 7” securities examination and became a
registered representative of Aragon. AmFirst Bank, Carter, and
Aragon entered into an arrangement whereby Carter would
lease space at AmFirst Bank and sell securities from Carter’s
company, AmFirst Investment Services.
In 1997, Ord was the president and owner of Ord, Inc. At
that time, Ord, Inc., had $160,000 from the sale of a restau-
rant. At trial, Ord testified that he had a discussion with korell
about investing these proceeds and that korell advised him to
go to AmFirst Bank and talk with Carter. Ord testified that
when he met with Carter, Carter told Ord about DFS notes and
described them as a sound investment. DFS notes appeared
on Aragon’s approved products list. Ord ultimately purchased
$160,000 in DFS notes.
Liebig was an AmFirst Bank customer who was referred
to Carter for the purpose of purchasing investments. Liebig
purchased DFS notes from Carter. Prior to the purchase of
DFS notes, Liebig and Carter had two conversations discuss-
ing potential investments. Liebig informed Carter that he was
hoping for a safe investment for his retirement, and Carter told
Liebig that he believed DFS notes would be such an invest-
ment. Acting on this information, Liebig purchased $62,000
worth of DFS notes on June 9, 1997. Liebig subsequently
invested more of his retirement funds in DFS notes, ultimately
totaling $250,000.
Carter filled out documents for both appellees indicating
that the clients’ investment objectives were “[c]onservation of
capital with stable income.” However, without the knowledge
of either Ord or Liebig, Carter also completed portions of the
OrD, INC. v. AmFIrST BANk 	783
Cite as 276 Neb. 781

documents as to the income and net worth of Ord, Inc., and
D&J Trust in which Carter inflated the economic profile of
appellees, making them appear eligible to invest in the unreg-
istered DFS securities.
In July 2000, investors in the DFS notes received notice that
the DFS trusts that issued the notes were in default on their
obligations to pay interest. On November 15, appellees met
separately with representatives of Aragon, including Carter
and John Connealy, in the AmFirst Bank boardroom. During
the meetings, Carter and Connealy asked appellees to each
sign a document entitled “Assignment and Hold Harmless
Agreement.” The agreements assigned all of appellees’ claims
associated with the DFS notes to Aragon and in separate provi-
sions released and held harmless several individuals and enti-
ties including Aragon, AmFirst Bank, and korell from liability
related to the sale of the DFS notes. Appellees testified that
representations were made to them that the best chance for suc-
cess in recovering their money was to sign the assignment and
hold harmless agreements. Appellees testified that they were
not informed at these meetings that DFS had been a high-risk
investment and that Carter had completed documents to make
appellees appear eligible to make these investments, which
could only be sold to “accredited investors,” including individ-
uals or entities with high income and high net worth. Appellees
each signed the agreements.
On June 8, 2001, appellees filed their lawsuit in the dis-
trict court for red Willow County against AmFirst Investment
Services; AmFirst Bank; korell; Carter; Aragon; DynaCorp
Financial Strategies; DFS Credit Corporation; DFS Secured
Healthcare receivables Trusts II and IV; robert Vener; Bank of
New York Western Trust Company; Chiao, Smith & Associates;
and Buchanan, Anderson and Pratt. In their complaint, appel-
lees asserted several claims for relief against AmFirst Bank,
Carter, and Aragon, including the following: violation of the
Securities Act of Nebraska, Neb. rev. Stat. § 8-1101 et seq.
(reissue 1997 & Cum Supp. 2000); common-law negligence,
by misrepresentation; common-law fraud, by omission; breach
of contract; violation of broker-dealer registration provisions
under § 8-1103 and 15 U.S.C. § 78o (2000); violation of
784 	276 NEBrASkA rEPOrTS

investment adviser registration provisions under § 8-1103 and
15 U.S.C. § 80b-3 (2000); violation of securities registration
provisions under § 8-1104 and 15 U.S.C. § 77e (2000); viola-
tion of the Uniform Deceptive Trade Practices Act, Neb. rev.
Stat. § 87-301 et seq. (reissue 1999); common-law agency;
and controlling person liability provisions under §§ 8-1102 and
8-1118(3) and 15 U.S.C. §§ 77o and 78t(a) (2000). On October
9, 2001, appellees filed an amended complaint, which con-
tained essentially the same allegations. The amended complaint
was served upon the same defendants, including Aragon.
On October 26, 2001, Aragon filed an answer to appel-
lees’ amended complaint. In its answer, Aragon alleged, inter
alia, that appellees were prohibited from bringing the lawsuit
by virtue of the assignment and hold harmless agreements
that appellees had entered into with Aragon. The assignment
and hold harmless agreements were attached to Aragon’s
answer. The lawsuit proceeded for some time with Aragon’s
active participation, in which Aragon, inter alia, continued
to allege that appellees had assigned away their rights to file
suit on claims associated with their DFS investments and that
appellees had agreed to hold harmless various parties now
being sued.
On February 7, 2003, Aragon’s attorney of record filed a
motion to withdraw from representing Aragon. The motion
was granted. The parties agree that Aragon stopped actively
engaging in the litigation some time in 2003. On July 24, 2003,
AmFirst Bank, korell, and Carter filed a motion for summary
judgment. On January 5, 2004, the district court granted the
motion, stating that the assignment and hold harmless agree-
ments were valid contracts and that such agreements showed
that appellees were no longer the real parties in interest, hav-
ing assigned their interests to Aragon. The district court fur-
ther found that by signing the agreements, appellees released
AmFirst Bank and korell from any liability.
Subsequently, the district court dismissed Carter from the
action because the U.S. Bankruptcy Court for the District of
Nebraska had entered a discharge against Carter. Furthermore,
on march 5, 2004, the district court entered default judg-
ment against Aragon and in favor of Ord for $160,413.86 plus
OrD, INC. v. AmFIrST BANk 	785
Cite as 276 Neb. 781

interest at 3.016 percent per annum, and in favor of Liebig for
$280,213.04 plus interest at the same rate, based on Aragon’s
failure to respond to discovery requests. A separate judg-
ment was entered against Aragon on march 10, stating that
“ON march 5, 2004, JUDGmENT WAS rENDErED FOr
PLAINTIFFS [appellees] AGAINST ArAGON FINANCIAL
SErVICES.”
In Ord I, Ord and Liebig appealed, inter alia, the district
court’s grant of summary judgment in favor of AmFirst Bank,
korell, and Carter. On October 11, 2005, the Nebraska Court of
Appeals concluded that genuine issues of material fact existed
as to whether Ord and Liebig were fraudulently induced to
enter into the assignment and hold harmless agreements and
in part reversed the judgment and remanded the cause for trial.
Ord v. AmFirst Invest. Servs., 14 Neb. App. 97, 704 N.W.2d
796 (2005).
After the remand, on June 1, 2006, the district court granted
appellees’ motion to file a third amended complaint to add
a separate cause of action for rescission of the assignment
and hold harmless agreements. The third amended complaint
did not name Aragon, nor was Aragon served. At the trial of
this case, the district court declined to rule on the cause of
action for rescission until after the jury had rendered its ver-
dict on the claims in the earlier complaints seeking damages
for investment-related causes of action. The outcome of this
jury trial and subsequent bench trial on the rescission cause of
action gives rise to this appeal.
A jury trial on appellees’ third amended complaint began
on August 15, 2006. At the conclusion of the trial, the jury
returned a verdict finding that Carter was an agent of both
AmFirst Bank and Aragon and that Carter acted within the
scope of his authority as AmFirst Bank’s agent when he sold
DFS notes to appellees. The jury found against appellants and
for appellees on their claims of negligent misrepresentation,
fraudulent misrepresentation, and breach of fiduciary duty and
found that appellants knew, or in the exercise of reasonable
care should have known, of Carter’s claimed misconduct. The
jury returned a verdict of $110,768.78 in favor of Ord and
$204,124.25 in favor of Liebig.
786 	276 NEBrASkA rEPOrTS

After the jury returned its verdict, the district court consid-
ered the rescission cause of action. The court concluded that
appellees had clearly and convincingly established that Carter
was guilty of both fraudulent concealment and fraudulent
misrepresentation when he sold the notes to appellees and
that before signing the assignment and hold harmless agree-
ments, appellees justifiably relied on Carter, who did not tell
them that the notes were high-risk investments. On October
30, 2006, the court entered an order rescinding the assign-
ment and hold harmless agreements signed by appellees. In
this same order, the district court denied appellants’ motion
for judgment notwithstanding the verdict or, in the alternative,
a new trial. The district court reduced appellees’ judgment
against appellants in response to a remittitur filed by appel-
lants and entered monetary judgment in favor of appellees and
against appellants.
In this current appeal, AmFirst Bank and korell appealed to
the Nebraska Court of Appeals, asserting that the district court
erred (1) by submitting appellees’ claims to the jury, because
they had assigned those claims to Aragon; (2) by entering an
order rescinding the assignment and hold harmless agreements
signed by appellees; (3) by denying appellants’ motions for
directed verdict and judgment notwithstanding the verdict,
because there was no evidence that Carter acted as the agent of
AmFirst Bank; and (4) by failing to give appellants’ requested
jury instructions on agency. In a memorandum opinion filed
April 8, 2008, the Court of Appeals affirmed the judgment of
the district court. Ord, Inc. v. AmFirst Bank, No. A-06-1363,
2008 WL 1746999 (Neb. App. Apr. 8, 2008) (selected for
posting to court Web site). Appellants petitioned this court for
further review, which we granted.
ASSIGNmENTS OF ErrOr
In their petition for further review, appellants, AmFirst Bank
and korell, assert that the Nebraska Court of Appeals erred
(1) by applying the doctrine of collateral estoppel based on
the prior appeal; (2) by disregarding the requirement that all
parties to an instrument sought to be canceled be named and
served as necessary parties to the suit for rescission; (3) by
OrD, INC. v. AmFIrST BANk 	787
Cite as 276 Neb. 781

failing to give appropriate weight to the written agreement
between AmFirst Bank and its lessee, Carter, and concluding
that there was substantial evidence to support the jury’s verdict
that Carter was an agent of AmFirst Bank; and (4) by con-
cluding that their proposed jury instructions on the subject of
agency “‘would only serve to mislead and confuse the jury on
the law of agency,’” because they used the term “‘employee’”
rather than “‘agent.’”
We granted the petition for further review because we
deemed appellants’ assignment of error claiming that the
Court of Appeals erred by disregarding the requirement that
all parties to an instrument sought to be canceled are neces-
sary parties to the suit for cancellation merited discussion.
Because we conclude that the Court of Appeals properly
resolved the remainder of appellants’ assigned errors, we
decline to address those claims.
STANDArD OF rEVIEW
[1] An action for rescission sounds in equity, and it is sub-
ject to de novo review upon appeal. Schuelke v. Wilson, 255
Neb. 726, 587 N.W.2d 369 (1998).
ANALYSIS
In their petition for further review, appellants, AmFirst
Bank and korell, assert that although the Court of Appeals
correctly quoted Nebraska law to the effect that “[a]ll par-
ties to an instrument to be canceled are necessary parties to
the suit for cancellation,” see Ord, Inc. v. AmFirst Bank, No.
A-06-1363, 2008 WL 1746999 at *5, the Court of Appeals
ignored this rule when it affirmed the district court’s decision
to rescind the assignment and hold harmless agreements at a
point in the litigation at which judgment against Aragon had
already been entered. Appellees, Ord and Liebig, argue that
Aragon was not required to be in the action at the time the
district court ordered the contract rescinded, because Aragon
had gone out of business and was insolvent. We do not adopt
the reasoning of the parties, but, nevertheless, for the reasons
stated below, affirm.
[2] An action for rescission sounds in equity, and it is sub-
ject to de novo review upon appeal. Schuelke v. Wilson, supra.
788 	276 NEBrASkA rEPOrTS

As appellants correctly note, Nebraska law provides that all
parties to an instrument sought to be canceled are necessary
parties to the suit for cancellation, either as plaintiffs or as
defendants. See, Rumbel v. Ress, 166 Neb. 839, 91 N.W.2d
36 (1958); Shaul v. Brenner, 10 Neb. App. 732, 637 N.W.2d
362 (2001). In applying this principle in Rumbel, we cited a
supplemental opinion in Cunningham v. Brewer, 144 Neb. 211,
219, 16 N.W.2d 533, 534-35 (1944), which explained that “all
persons whose rights, interests or relations with or through the
subject matter of the suit would be affected by the cancella-
tion or rescission should be brought before the court so that
they can be heard in their own behalf.” It has been observed
that where the rights derived from a contract are at issue, “a
contracting party is the paradigm of an indispensable party.”
Travelers Indem. Co. v. Household Intern., Inc., 775 F. Supp.
518, 527 (D. Conn. 1991). Although the Court of Appeals did
not directly rule that the rescission claim could go forward
without Aragon, its opinion implies that Aragon’s absence was
not an impediment to the rescission case, thus implicitly reject-
ing appellants’ claim of necessary party. See, e.g., Dawes v.
Wittrock Sandblasting & Painting, 266 Neb. 526, 667 N.W.2d
167 (2003), disapproved on other grounds, Kimminau v. Uribe
Refuse Serv., 270 Neb. 682, 707 N.W.2d 229 (2005); Olson v.
Palagi, 266 Neb. 377, 665 N.W.2d 582 (2003).
As noted, appellees filed their third amended complaint con-
taining the cause of action for rescission after judgment had
been entered against Aragon, and Aragon was not named in
or served with a copy of the third amended complaint. In this
appeal, we are asked to determine whether the district court’s
order of rescission of the assignment and hold harmless agree-
ments to which Aragon was a party was proper where Aragon
was not named or served with the rescission cause of action
but had previously participated in the case. Under the unique
facts and unusual procedural history of this case, including
Aragon’s initial participation in the litigation during which it
attempted to assert the protections of the hold harmless provi-
sions of the agreements, we conclude that the district court did
not err in granting rescission, and the Court of Appeals did not
err in affirming the district court’s order.
OrD, INC. v. AmFIrST BANk 	789
Cite as 276 Neb. 781

In considering appellants’ rescission-related argument, it is
first necessary for us to examine what rights were in fact trans-
ferred to Aragon upon entering into the assignment and hold
harmless agreements, and whether Aragon had an opportunity
to be heard on its own behalf with respect to the rescission of
those rights. See Cunningham v. Brewer, supra.
The agreement states in relevant part:
1. Assignment. Investor hereby assigns and conveys
to Aragon all of its rights and interests in and to any
and all claims or causes of action or other rights of
recovery associated with its investment in the Securities
(“Claims”). . . .
. . . .
3. release and Hold Harmless. Investor hereby agrees,
on behalf of itself and all who may claim through it,
to release and hold the released Parties (as hereinafter
defined) harmless from and against all claims, causes
of action, debts, liabilities, obligations or expenses, of
any nature, that arise out of or in any way relate to the
offer and/or sale of the Securities . . . . For purposes of
this Agreement, “released Parties” means and includes
Aragon . . . and every bank or other financial institution
with which Aragon contracted, or which participated or
acted together with Aragon, in any capacity, in connection
with the offer and/or sale of the Securities.
This contract has two elements: First, it assigns all of appel-
lees’ rights and interests in claims associated with the DFS
notes to Aragon, and second, it holds harmless, among others,
Aragon and appellants in relation to the sale of the DFS secu-
rities. An examination of these agreements shows that with
respect to the assignment portion, appellees in effect assigned
to Aragon their rights to sue numerous entities, including
Aragon itself. In its initial participation in this litigation,
Aragon could have—but did not—take steps to sue the various
entities involved in this dispute. Aragon had an opportunity to
exercise its right to assert claims against others and chose to
forgo this right. As to Aragon’s right to sue itself, we believe
that this portion of the assignment was essentially meaningless.
Thus, the failure, if any, of appellees to notify Aragon of their
790 	276 NEBrASkA rEPOrTS

attempt to rescind the assignment portion of the agreements is
of no consequence.
With respect to the hold harmless portion of the agreements,
appellees agreed to hold Aragon and others harmless. In order
for the court to properly rescind this portion of the agreements,
it was necessary that Aragon be made aware of appellees’ effort
to ignore the hold harmless provisions by seeking judgment
against Aragon for its alleged wrongdoing and that Aragon
have an opportunity at some point in the lawsuit to enforce the
agreements and to assert its claimed right to be held harmless.
Therefore, the issue before us is whether Aragon had an oppor-
tunity in this lawsuit to be heard on its own behalf with respect
to appellees’ effort to rescind the hold harmless portion of the
agreements and seek judgment against it and the other various
people and entities encompassed by the agreements.
A review of the record shows that in 2001, Aragon had the
requisite opportunity and placed its claim to be held harmless
and its objection to rescission squarely at issue in this lawsuit.
It is clear that appellees’ effort to avoid the hold harmless
provisions as to Aragon by filing suit against Aragon and
others was apparent to Aragon, and the record shows that as
early as 2001, Aragon had an opportunity to and in fact did
challenge what was effectively appellees’ effort to rescind the
hold harmless provisions. Specifically, on October 26, 2001,
Aragon answered appellees’ amended complaint and alleged
an affirmative defense based on the assignment and hold
harmless agreements. In its answer, Aragon objected to appel-
lees’ suit and alleged that it should be held harmless under
the agreements at issue. The agreements were attached to
Aragon’s answer. Although Aragon was served with numerous
pleadings in this case, Aragon stopped actively participating in
the litigation in 2003. A judgment was entered against Aragon
on march 10, 2004, and Aragon did not seek to have this judg-
ment set aside.
Based on this record, Aragon was fully on notice that appel-
lees did not deem the agreements to be valid, was afforded
an opportunity to be heard, and did in fact invoke the hold
harmless protections of the agreements in this lawsuit. Instead
of pursuing its right to be held harmless as set forth in the
OrD, INC. v. AmFIrST BANk 	791
Cite as 276 Neb. 781

agreements, Aragon abandoned the issue by failing to partici-
pate in the litigation, which ultimately resulted in a judgment
against it. In sum, although not named and served with the
third amended complaint, Aragon was in fact on notice as a
party in this lawsuit that appellees believed the agreements
to be invalid. Under the unique facts of this case, Aragon had
an opportunity to, and did in fact, oppose appellees’ efforts
at rescission and we, therefore, find no fault in the Court of
Appeals’ claimed failure to discuss the issue of whether Aragon
was a necessary party to the district court’s consideration of
appellees’ rescission claim.
CONCLUSION
Because we conclude that Aragon had an opportunity to be
heard on its own behalf with respect to its rights under the
assignment and hold harmless agreements in this lawsuit, we
conclude that the Court of Appeals did not err in upholding
the district court’s decision rescinding the agreements. We
conclude that the Court of Appeals did not err in any respect
challenged on further review and, therefore, affirm.
AFFirMed.
wrigHt, J., not participating.
skyline woods HoMeowners A ssociAtion, inc., et Al .,
Appellees And cross -AppellAnts , v. dAvid A.
BroekeMeier , An individuAl , et Al .,
AppellAnts And cross -Appellees.
pAisley, llc, A neBrAskA liMited liABility coMpAny,
Appellee And cross -AppellAnt, v. liBerty Building
corporAtion, A neBrAskA corporAtion,
AppellAnt And cross -Appellee .
758 N.W.2d 376
Filed December 5, 2008. 	Nos. S-07-952, S-07-953.
1. Equity: Appeal and Error. A case in equity is reviewed de novo on the
record, subject to the rule that where credible evidence is in conflict on mate-
rial issues of fact, the appellate court considers and may give weight to the fact
792 	276 NEBrASkA rEPOrTS