Case Reviews

Mutual of Omaha Bank v. Kassebaum

Nebraska Supreme Court

Case Citation: 283 Neb. 952 (June 1, 2012)

Background:  The Kassebaums are the owners of residential real estate located in Seward County, Nebraska.  Financing was obtained through a series of promissory notes and deeds of trust.  The Kassebaums had difficulty paying the amounts due on the notes and ultimately refinanced the notes and executed two more notes and deeds of trust. At the same time, the Kassebaums executed an assign­ment of settlement proceeds or monetary judgment in favor of the Bank.  At the time they executed the assignment, the Kassebaums had pending in federal court a lawsuit against Bausch and Lomb, Inc.  The Kassebaums eventually settled the suit, and the proceeds were deposited to the trust account of the Kassebaum’s counsel in the litigation.

Subsequently, the Bank filed a declaratory judgment action seeking that the balance of the funds held in trust be distributed to the Bank as required by the assign­ment.  The Kassebaums filed a motion to dismiss and/or a motion for summary judgment contending that the assignment occurred before the “claims were liquidated by settlement or judgment” and that the assign­ment was “against the public policy . . . and void as a matter of law.”

The district court ruled that the assignment was not invalid.  Following a jury trial, the court accepted the verdict and entered a judg­ment in favor of the Bank. 

Issue:  Whether an assignment of proceeds made at a time when the amount to be assigned was unliquidated is valid and enforceable under Nebraska law?

Analysis:  This is an issue of first impression in Nebraska.  There is a split of authority regarding whether an assign­ment of the proceeds of litigation violates the common-law prohibition.  In addition to discussing the cases for and against the assignment of proceeds, the Court also discussed Neb. Rev. Stat. § 25-1563.02 (Reissue 2008), which provides that lump-sum or periodic payment settlements made as compensation for personal injury or death shall be exempt from attachment, garnishment, or other legal or equitable process and from all claims of creditors.  However, this section protects these proceeds “unless a written assignment to the contrary has been obtained.”

While the Legislature enacted § 25-1563.02 to provide some protection to certain types of personal injury “proceeds” similar to the ones at issue in this case, it did not see fit to prohibit writ­ten assignment of those proceeds.

Thus, where only the proceeds of the litigation, and not control of the litigation, have been assigned, there is little or no concern of intermed­dling as a reason for declining to allow the assignment of the claim.  Therefore the Kassebaums’ assignment is valid and enforceable under Nebraska law.

Judgment: AFFIRMED, holding that the unliquidated proceeds of personal injury litigation are assign­able.

To see the Court's complete opinion, please click here.