Brook Valley Ltd. Part. v. Mutual of Omaha Bank

Brook Valley limited PartnershiP, a neBraska limited
PartnershiP, and Brook Valley ii, ltd, a neBraska limited
PartnershiP, aPPellants , V. mutual of omaha Bank ,
formerly known as neBraska state Bank of omaha ,
a state Banking institution, and omaha financial
holdings , inc., a neBraska corPoration, successor
to midlands financial serVices , inc.,
a neBraska corPoration, aPPellees.
797 N.W.2d 748
Filed May 6, 2011. 	No. S-10-043.
1. Standing: Jurisdiction: Parties. Standing is a jurisdictional component of a
party’s case.
2. Jurisdiction: Judgments: Appeal and Error. Determination of a jurisdictional
issue which does not involve a factual dispute is a matter of law which requires
an appellate court to reach its conclusions independent from a trial court.
3. Contracts: Appeal and Error. The interpretation of a contract involves a ques-
tion of law, in connection with which an appellate court has an obligation to reach
its conclusions independently of the determinations made by the court below.
4. Standing. In order to have standing to invoke a tribunal’s jurisdiction, one
must have some legal or equitable right, title, or interest in the subject of the
controversy.
5. Parties: Standing. Either a party or the court can raise a question of standing at
any time during the proceeding.
Appeal from the District Court for Sarpy County: daVid
k. arterBurn, Judge. Reversed and remanded for further
proceedings.
Michael J. Mooney and Francie C. Riedmann, of Gross &
Welch, P.C., L.L.O., for appellants.
James 	B. 	Cavanagh, 	of 	Lieben, 	Whitted, 	Houghton,
Slowiaczek & Cavanagh, P.C., L.L.O., for appellees.
connolly, gerrard, mccormack , and miller-lerman, JJ.,
and irwin, Judge.
miller-lerman, J.
NATURE OF THE CASE
Appellants, Brook Valley Limited Partnership (BVLP) and
Brook Valley II, LTD (BVII) (collectively the Partnerships),
filed suit in 2004 in the district court for Sarpy County against
BROOk VALLEy LTD. PART. V. MUTUAL OF OMAHA BANk 	455
Cite as 281 Neb. 455
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:45 AM CST

Mutual of Omaha Bank, formerly known as Nebraska State
Bank of Omaha, and Omaha Financial Holdings, Inc., suc-
cessor to Midlands Financial Services, Inc. (collectively the
Banks), for, inter alia, breach of fiduciary duty and conversion.
The action stems from loans made by the Banks in July and
October 2000 which were secured by partnership property.
The real property was ultimately sold to cover payment on
the loans.
The case was tried to the court. The agreements establishing
the Partnerships (Partnership Agreements) were nearly identi-
cal. The district court determined that under the Partnership
Agreements, general partners are empowered to authorize law-
suits. The district court concluded that because the general
partners who succeeded the original general partner, Prime
Realty, Inc., had not been duly elected, they were without
power to authorize this lawsuit. The district court concluded
that the Partnerships lacked standing and dismissed the case.
The Partnerships appeal. We conclude that the issue of the
Partnerships’ standing was properly before the court and that
because the successor general partners were selected pursuant
to the Partnership Agreements, the Partnerships had standing.
Accordingly, we reverse, and remand for further proceedings.
STATEMENT OF FACTS
BVLP and BVII were created in 1993 and 1997 respec-
tively. The Partnerships were created to develop real estate
in Sarpy County, Nebraska. At the time they were created,
the general partner for both of the Partnerships was Prime
Realty. The president of Prime Realty was James McCart.
Pursuant to the Partnership Agreements, as general partner,
Prime Realty was responsible for the day-to-day management
of the Partnerships and had authority to initiate lawsuits on
behalf of the Partnerships.
In July and October 2000, McCart, on behalf of Prime
Realty, obtained loans from the Banks. The loans were secured
by real property belonging to the Partnerships. A loan officer
from the Nebraska State Bank of Omaha testified at trial that at
the time the Banks made the loans to McCart, bank representa-
tives were aware that McCart had overdrawn his accounts by
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over $2 million as a result of a check-kiting scheme. The loan
officer testified that the July and October loans were made in
part to assist McCart in covering his overdrafts.
A federal indictment was filed against McCart in the U.S.
District Court for the District of Nebraska, based on the check-
kiting scheme. Representatives from the Nebraska State Bank
of Omaha participated in the prosecution of McCart, and
McCart was convicted.
There was testimony at trial that in March 2002, Prime
Realty and McCart declared bankruptcy. Ultimately, the Banks
sold the real property owned by the Partnerships to mitigate
their losses based on McCart’s inability to pay back his July
and October 2000 loans.
At some point, the limited partners became aware of the
July and October 2000 loans, the March 2002 bankruptcy fil-
ing, and the legal issues involving McCart and Prime Realty.
At meetings conducted on August 21, 2002, the limited part-
ners of BVLP selected Harrison Street Brook Valley Limited
Management Company, LLC, as general partner of BVLP and
Brook Valley on Giles Road Management Company, LLC, as
general partner of BVII. The Banks argued, and the district
court found, that the August meetings were for the purpose of
removing Prime Realty as general partner and that the removal
was not effective due to insufficient notice to Prime Realty.
After the bench trial, the district court filed an opinion
and order on December 14, 2009, in which it dismissed the
case for lack of standing. The district court determined that
Prime Realty had not been properly removed as general part-
ner under the terms of the Partnership Agreements and that
because the lawsuit had not been authorized by Prime Realty,
the Partnerships lacked standing to bring the lawsuit. The
Partnerships appeal.
ASSIGNMENTS OF ERROR
The 	Partnerships 	claim, 	restated 	and 	summarized, 	that
(1) because the Banks are not signatories to the Partnership
Agreements, they have no basis to complain about purported
irregularities under the Partnership Agreements in replacing
Prime Realty as general partner and (2) in any event, because
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the new general partners were selected in accordance with
the Partnership Agreements after Prime Realty’s bankruptcy
caused it to involuntarily withdraw, the district court erred
when it determined that Prime Realty was improperly removed,
that the lawsuit was not authorized, and that the Partnerships
lacked standing.
STANDARDS OF REVIEW
[1,2] Standing is a jurisdictional component of a party’s
case. Countryside Co-op v. Harry A. Koch Co., 280 Neb. 795,
790 N.W.2d 873 (2010). Determination of a jurisdictional issue
which does not involve a factual dispute is a matter of law
which requires an appellate court to reach its conclusions inde-
pendent from a trial court. Id.
[3] The interpretation of a contract involves a question of
law, in connection with which an appellate court has an obli-
gation to reach its conclusions independently of the determi-
nations made by the court below. Albert v. Heritage Admin.
Servs., 277 Neb. 404, 763 N.W.2d 373 (2009).
ANALySIS
As an initial matter, the Partnerships assert that because the
Banks were not signatories to the Partnership Agreements, they
were not in a position to raise the issue of compliance with
the Partnership Agreements in connection with the method
used to select the new general partners, Harrison Street Brook
Valley Limited Management Company, LLC, and Brook Valley
on Giles Road Management Company, LLC. The Partnerships
therefore claim that the district court erred when it examined
the standing of the Partnerships at the Banks’ urging. Although,
for reasons explained later in this opinion, we disagree with
the district court’s conclusion that the Partnerships lacked
standing, it was not error for the district court to examine the
Partnerships’ standing as a jurisdictional component of the
Partnerships’ case.
In support of their argument challenging the district court’s
consideration of the Partnerships’ standing, the Partnerships
rely on cases where nonpartners unsuccessfully challenged
partnership agreement compliance. For example, in Baird Ward
Printing v. Great Recipes Pub. Assoc., 811 F.2d 305 (6th Cir.
458 	281 NEBRASkA REPORTS

1987), the U.S. Court of Appeals for the Sixth Circuit deter-
mined that a creditor of a limited partnership did not have
standing to challenge the withdrawal and replacement of a
general partner. The court stated that the creditor
was in no position to challenge the internal operation of
the limited partnership, either by reliance upon the provi-
sions of the agreement itself or the statute. Only parties
privy to the partnership agreement are in a position to
bring such a challenge, since the various rights and duties
created by the agreement and the statute were intended to
inure only to parties to the agreement.
Id. at 309. The court in Baird Ward Printing continued that
there are “numerous situations where parties do not have stand-
ing to claim the benefit of protections designed for others”
and that “[t]he formation of the limited partnership . . . was
the product of a written agreement creating rights and duties
among its signator[ie]s. There is no indication in the partner-
ship agreement of any intent to create rights in favor of third
party creditors.” Id. See, similarly, Swain v. Wiley College,
74 S.W.3d 143, 148 (Tex. App. 2002) (stating that it appears
“settled . . . that the legality of actions taken at a shareholders’
meeting is not open to collateral attack by nonshareholders on
any ground of informality or irregularity”).
Along with the Partnerships, we agree with the legal propo-
sitions in the foregoing opinions, but we do not agree that such
authorities control this case. Specifically, we disagree with the
Partnerships who claim that such authority supports their posi-
tion that the district court in this case should not, at the urging
of the Banks, have examined the actions of the Partnerships
in connection with the selection of the successor general part-
ners, as such selection bore a relation to the standing of the
Partnerships to bring this lawsuit.
[4] The propositions on which the Partnerships rely arose
in cases in which the challenge to partnership agreement
compliance was made by nonpartners suing as plaintiffs. In
order to have standing to invoke a tribunal’s jurisdiction,
one must have some legal or equitable right, title, or inter-
est in the subject of the controversy. Spring Valley IV Joint
Venture v. Nebraska State Bank, 269 Neb. 82, 690 N.W.2d
BROOk VALLEy LTD. PART. V. MUTUAL OF OMAHA BANk 	459
Cite as 281 Neb. 455

778 (2005). Generally, apart from some obvious prejudice or
enforceable right to engage in the general partner selection
process, collateral attacks on the operations of the partnership
by nonpartners suing as plaintiffs are not allowed. There is
nothing in the record which demonstrates partnership rights in
favor of the Banks or a satisfactory assumption of partnership
rights by the Banks which would give the Banks authority to
claim the benefits of the Partnership Agreements. The Banks
are not signatories of the Partnership Agreements. The Banks’
commercial relationship to the Partnerships derives not from
participation in the Partnerships but from the secured loans
made in July and October 2000. In any event, the Banks did
not initiate this lawsuit or raise the Partnerships’ standing
issue as plaintiffs.
In contrast to the procedural posture of the authorities on
which the Partnerships rely, the standing issue was raised in
the Banks’ answers as a defense in an action brought by the
Partnerships serving as plaintiffs. In their answers, the Banks
disputed the Partnerships’ entitlement to invoke the jurisdiction
of the court to bring their conversion and other claims.
[5] Standing is a jurisdictional component of a party’s
case, because only a party who has standing may invoke the
jurisdiction of a court; determination of a jurisdictional issue
which does not involve a factual dispute is a matter of law
which requires an appellate court to reach its conclusions
independent from a trial court. See Countryside Co-op v.
Harry A. Koch Co., 280 Neb. 795, 790 N.W.2d 873 (2010).
The facts essential to resolution of the standing issue are not
in dispute. Because standing is an aspect of jurisdiction and
the challenge to the Partnerships’ standing had been raised in
the Banks’ answers, the issue of standing of the Partnerships’
suing as plaintiffs was necessarily before the district court for
resolution as an initial matter at the trial. Either a party or
the court can raise a question of standing at any time during
the proceeding. See Central Neb. Pub. Power Dist. v. North
Platte NRD, 280 Neb. 533, 788 N.W.2d 252 (2010). We there-
fore reject the Partnerships’ assignment of error in which it
claimed that the district court erred when, at the urging of the
Banks, it considered the standing of the Partnerships to invoke
460 	281 NEBRASkA REPORTS

the jurisdiction of the court to pursue their conversion and
other claims.
Upon consideration of the substance of the standing issue,
the district court focused on article XII of the Partnership
Agreements, “Removal of General Partner,” and concluded
that under section 12.1, the limited partners failed to give the
general partner the notice required to effectuate its removal.
The district court determined that the limited partners failed
to comply with the Partnership Agreements with respect to the
removal and replacement of Prime Realty as the general part-
ner; the successor general partners were not properly “elected”;
and because the lawsuit was not authorized by a proper general
partner, the Partnerships lacked standing. As asserted by the
Banks, and as implicitly found by the district court, “Prime
Realty clearly remained as general partner of each partnership
after the lawsuit . . . .” Brief for appellees at 38.
In contrast to the position of the Banks and the findings of
the district court, the Partnerships claim, relying on various
sections of the Partnership Agreements, that the general partner
was not removed under section 12.1 but, instead, because of
its bankruptcy, the general partner, Prime Realty, involuntarily
withdrew under section 9.2(b) and the Partnerships continued
to operate after the successor general partners were properly
selected under section 8.3(b). The Partnerships assert that the
new general partners were authorized to initiate the lawsuit
filed by the Partnerships and that the Partnerships had stand-
ing to invoke the jurisdiction of the court. We agree with the
Partnerships’ interpretation of the Partnership Agreements. We
thus conclude that the district court’s interpretation was incor-
rect as a matter of law and that it erred when it concluded that
the Partnerships lacked standing.
Our analysis of the standing issue is made by reliance on
the Partnership Agreements and undisputed facts. The inter-
pretation of a contract involves a question of law, in connec-
tion with which an appellate court has an obligation to reach
its conclusions independently of the determinations made by
the court below. Albert v. Heritage Admin. Servs., 277 Neb.
404, 763 N.W.2d 373 (2009). The sections of the Partnership
Agreements that are relevant to our analysis are quoted below.
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Section 2.6 defines an “‘Event of Bankruptcy,’” and Prime
Realty’s bankruptcy was encompassed in the definition of
an “‘Event of Bankruptcy.’” Section 2.7 defines an “‘Event
of Dissolution’” as including “the dissolution and liquida-
tion, Event of Bankruptcy, or removal of a General Partner or
any successor.”
Section 	9.2(b) 	covers 	the 	“Involuntary 	Withdrawal 	or
Assignment by a General Partner” and states in part:
In the event of any other occurrence described as an Event
of Dissolution applying to a General Partner, and the
Partnership being continued in accordance with Section
8.3, the representative of the former General Partner shall
continue to hold its or his interest in the Partnership, but
forthwith shall cease to have any other rights or power as
a General Partner.
Section 8.2 covers the “Termination of the Partnership”
and states:
The Partnership shall be terminated upon the happen-
ing of any of the following events, whichever shall
first occur:
(a) An event of dissolution with respect to any General
Partner, unless upon the occurrence of any such event of
dissolution the Partnership is continued in accordance
with the provisions of Section 8.3 of this Agreement[.]
Section 8.3 covers “Continuation of Partnership Upon Certain
Events,” and section 8.3(b) states:
Upon the occurrence of any event or events provided in
Section 8.2(a) of this Agreement with respect to a sole
General Partner, the Limited Partners shall have the right
to continue the business of the Partnership in accordance
with the terms of this Agreement and the Uniform Limited
Partnership Act for the State of Nebraska upon the selec-
tion by such Limited Partners, within ninety [90] days of
such occurrence, of a new General Partner and upon such
new General Partner executing this Agreement and the
certificate amendment and agreeing to be bound by all of
the terms and provisions hereof; provided, however, that
counsel to the Partnership determines that such continu-
ation would not result in the Partnership being classified
462 	281 NEBRASkA REPORTS

for federal income tax purposes as an association taxable
as a corporation and not as a partnership.
Reading 	the 	foregoing 	provisions 	of 	the 	Partnership
Agreements together, it is clear that Prime Realty was not
removed—much less improperly removed—as urged by the
Banks and found by the district court. Instead, Prime Realty
involuntarily withdrew as general partner due to its bankruptcy,
and, pursuant to the Partnership Agreements, the successor
general partners were selected. The record shows that Prime
Realty was involved in a bankruptcy in March 2002, and such
action was an “‘Event of Bankruptcy’” as defined in section
2.6. An “‘Event of Bankruptcy’” is included in the definition
of an “‘Event of Dissolution’” found in section 2.7. Once the
general partner was involved in the bankruptcy, rather than dis-
solution or termination of the partnership, under section 8.3(b),
the limited partners had the right to continue the business of
the Partnerships upon the selection of a new general partner
within 90 days. If this process is undertaken, then pursuant to
section 9.2(b), the general partner is deemed to have involun-
tarily withdrawn and the general partner “shall cease to have
any other rights or power as a General Partner.”
Thus, in this case, after the general partner, Prime Realty,
became involved in bankruptcy proceedings and involuntarily
withdrew as general partner, the limited partners continued the
Partnerships by selecting, not removing and electing, new gen-
eral partners, and the process of replacing the general partner
was completed pursuant to the Partnership Agreements. The
new general partners had the authority to authorize the bringing
of the instant lawsuit.
We note that Prime Realty’s bankruptcy occurred in March
2002 and that the meeting resulting in the selection of new
general partners was conducted in August. This meeting was
not conducted within the 90 days specified in section 8.3(b) of
the Partnership Agreements. The Banks were not prejudiced by
this delay, and they are not in a position as nonshareholders to
assert a collateral attack or assert procedural defects. See Swain
v. Wiley College, 74 S.W.3d 143 (Tex. App. 2002). Similarly,
the Banks are not in a position to object to a failure of timely
adherence to the Partnership Agreements’ requirements. See
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Genet Co. v. Annheuser-Busch, Inc., 498 So. 2d. 683 (Fla. App.
1986). Under the facts of this case, we determine that exceed-
ing the 90-day selection provision was a de minimis technical
breach about which no limited partner in this case has objected
and did not defeat the selection of the new general partners.
See Odmark v. Mesa Ltd. Partnership, No. 94-10784, 1995 WL
413035 (N.D. Tex. June 19, 1995) (unpublished disposition
listed in table of “Decisions Without Published Opinions” at 59
F.3d 1241 (5th Cir. 1995)). The district court’s determination
that the general partner was improperly removed was error, and
its decision that the Partnerships lacked standing based thereon
was further error and must be reversed.
CONCLUSION
The district court properly considered the standing of the
Partnerships to bring this lawsuit. The district court erred when
it determined that the general partner, Prime Realty, was not
properly removed and that the successor general partners could
not authorize the lawsuit and thus the Partnerships lacked
standing. Instead, we conclude that the limited partners effec-
tively complied with the Partnership Agreements in selecting
the new general partners after the previous general partner,
Prime Realty, involuntarily withdrew due to its bankruptcy.
The district court erred when it concluded that the Partnerships
lacked standing and dismissed the lawsuit. Accordingly, we
reverse the order of dismissal and remand the cause to the dis-
trict court for a decision on the merits.
reVersed and remanded for
further Proceedings.
heaVican, 	C.J., 	and 	wright 	and 	stePhan, 	JJ., 	not
participating.
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