One Note, One Transaction: Nebraska Clarifies Recoupment’s “Same Transaction” Test and Tightens Imputation for the Discovery Rule in Konecne v. Abram, LLC

Introduction

In Konecne v. Abram, LLC, 319 Neb. 966 (Neb. Sept. 26, 2025), the Nebraska Supreme Court addressed three doctrinally significant questions that frequently recur in commercial and fiduciary litigation:

• How to apply the “same transaction” requirement for the equitable-pleading defense of recoupment when a line-of-credit promissory note spans multiple business projects over many years.
• When, and to whom, knowledge is imputed for purposes of the discovery rule under the statute of limitations for breach of fiduciary duty—and, relatedly, the limits of imputing knowledge across complex family trust/LLC structures and to professional service providers with restricted roles.
• Whether “per annum” interest in a demand note implies simple or compound interest absent express compounding language.

The dispute arose from a long-running intra-family business relationship following the death of patriarch Abram Misle. Howard Misle funded the family real estate LLC, Abram, through an open line-of-credit promissory note originally executed in 2004 and later expanded in 2005. After the LLC sold its Nebraska asset (Park Place) in 2007, sale proceeds paid off “Howard’s lien” and also reimbursed Howard for a personal loan to the matriarch, Helen. In 2008 through 2016, Howard advanced additional funds on the same note to support the LLC’s Pennsylvania properties, ultimately demanding repayment in 2020.

Abram asserted the defense of recoupment on the note—claiming the 2007 sale overpaid Howard (including at an improper 9% rate rather than the note’s 3%), and filed counterclaims for breach of fiduciary duty and fraudulent concealment. The district court granted partial summary judgment rejecting recoupment, held the counterclaims time-barred after a bench trial, and adopted Howard’s interest computation without an evidentiary hearing.

The Supreme Court affirmed in part and reversed in part, clarifying Nebraska law on recoupment and discovery, and remanding on interest methodology.

Summary of the Opinion

• Recoupment:
  • Recoupment is a defense of reduction that is not time-barred and must arise from the same transaction as the plaintiff’s claim.
  • The “same transaction” here is the parties’ credit transaction—the promissory note—not the LLC’s distinct real estate ventures. Thus, the alleged 2007 overpayment to “pay off Howard’s lien” implicates the same note transaction as Howard’s 2008–2016 advances. Summary judgment rejecting recoupment on that item was error and is reversed.
  • Recoupment cannot reach Howard’s separate self-reimbursement for a personal loan to Helen; that was not the same transaction as the note. Summary judgment for Howard on that aspect is affirmed.
  • The Court disapproved reliance on Bankruptcy recoupment cases and clarified that the oft-quoted “very same transaction” formulation does not impose a cramped standard in Nebraska civil practice.
• Statute of limitations and discovery:
  • Breach of fiduciary duty (4-year period under § 25-207(3)): The discovery rule applies. The district court clearly erred imputing knowledge to Abram via (i) the trustee of the parent trust, (ii) the LLC’s accountant acting with limited authority and without the note, and (iii) the manager’s general concerns about different properties. On this record, Abram did not discover its claim until 2018–2019 when it obtained the 2004 note and the 2007 seller’s statement; limitations were therefore tolled and the claim timely. Reversed.
  • Fraudulent concealment (§ 25-207(4)): Accrual occurs upon discovery of the fraud (distinct statutory rule), but Abram failed to specifically argue the trial court’s adverse findings on concealment and diligence. The issue is not considered; the judgment is affirmed on that claim.
• Interest:
  • The parties’ stipulations and the court’s prior order established that all 2008–2016 advances were made under the note and accrue interest at 3% per annum. Abram cannot relitigate applicability of interest.
  • But whether “3% per annum” means simple or compound interest remains disputed; the issue requires litigation on remand.
• Jury vs. bench:
  • Recoupment is a rule of pleading and a defensive deduction intertwined with the legal claim; it is not a freestanding equitable claim requiring a bench determination.

Analysis

Precedents Cited and Their Influence

• Foundations of Recoupment:
  • Pinkham v. Pinkham, 61 Neb. 336, 85 N.W. 285 (1901): A canonical statement that statutes of limitation may deprive a suitor of the sword but never the shield—recoupment as a defensive deduction is not time-barred. The Court relies on Pinkham (and related Nebraska authority) to reaffirm that defendants can defensively reduce a plaintiff’s recovery even if an affirmative claim is time-barred.
  • Ed Miller & Sons, Inc. v. Earl, 243 Neb. 708, 502 N.W.2d 444 (1993); Kaup v. Schinstock, 88 Neb. 95, 129 N.W. 184 (1910): Nebraska’s consistent distinction between recoupment (defensive, same transaction) and counterclaims (affirmative, can be different transactions), and recognition that limitations do not bar recoupment.
  • In re Estate of Massie, 218 Neb. 103, 353 N.W.2d 735 (1984): Often quoted for “very same transaction.” The Court clarifies that “very” was descriptive, not a signal to construe “same transaction” narrowly; modern Black’s omits “very.”
  • Mettlen v. Sandoz, 131 Neb. 625, 269 N.W. 98 (1936); Mobil Oil Corp. v. Grantham, 200 Neb. 782, 265 N.W.2d 669 (1978): Recoupment as a defense of reduction—particularly apt where the defendant shows a prior payment to reduce the current balance on the same obligation.
• Bankruptcy Recoupment (Rejected as Controlling):
  • In re University Medical Center, 973 F.2d 1065 (3d Cir. 1992); U.S. v. Dewey Freight, 31 F.3d 620 (8th Cir. 1994): These apply stricter, code-specific constraints on recoupment in bankruptcy given the special role of setoff/recoupment vis-à-vis estate administration. The Court distinguishes them as inapplicable in ordinary Nebraska civil actions, where recoupment operates under common-law joinder principles rather than Bankruptcy Code policies.
• Discovery Rule and Accrual:
  • Spath v. Morrow, 174 Neb. 38, 115 N.W.2d 581 (1962); Alston v. Hormel Foods, 273 Neb. 422, 730 N.W.2d 376 (2007): Nebraska’s discovery rule tolls the running until discovery (or when facts would put a prudent person on inquiry leading to discovery).
  • Gering–Ft. Laramie Irr. Dist. v. Baker, 259 Neb. 840, 612 N.W.2d 897 (2000): Defines “discovery” as knowledge of facts constituting the basis of the cause of action or awareness of facts sufficient to put a reasonable person on inquiry.
  • Norfolk Iron & Metal v. Behnke, 230 Neb. 414, 432 N.W.2d 18 (1988): Illustrates that discovery turns on awareness of specific facts tied to the claim, not merely general suspicion; used here to show why Linda’s concerns about unrelated property management did not trigger discovery about the 2007 sale distributions.
  • § 25-207(4) (fraud): The statute does not “toll” limitations; it delays accrual until discovery of fraud. The Court notes the doctrinal distinction and ultimately applies preservation rules to affirm based on inadequate briefing.
• Agency and Imputation:
  • RM Campbell Indus. v. Midwest Renewable Energy, 294 Neb. 326, 886 N.W.2d 240 (2016); Koricic v. Beverly Enters.–Neb., 278 Neb. 713, 773 N.W.2d 145 (2009): Definitions and fact-intensive nature of agency and scope of authority.
  • Nebraska Pub. Emp. v. Otoe Cty., 257 Neb. 50, 595 N.W.2d 237 (1999): Notice to an agent is notice to the principal only when within scope of authority; knowledge must be tied to the transaction and the agent’s authorized role.
  • Blue J Feeds, Inc. v. Scottsbluff Nat. Bank, 156 Neb. 84, 54 N.W.2d 404 (1952): An officer/agent’s authority in corporate funds matters depends on authority conferred by the corporation—underscoring why an accountant with limited instructions does not impute full knowledge.
  • Roos v. KFS BD, Inc., 280 Neb. 930, 799 N.W.2d 43 (2010): Separate corporate entities are distinct; knowledge of a parent/trustee is not automatically imputed to a subsidiary LLC.
  • Kelly Klosure v. Johnson Grant & Co., 229 Neb. 369, 427 N.W.2d 44 (1988): Parties are bound by knowledge of specific facts within specific timeframes—supporting the Court’s granular approach to discovery.
• Interest:
  • Lincoln Lumber Co. v. Fowler, 248 Neb. 221, 533 N.W.2d 898 (1995); Ashland State Bank v. Elkhorn Racquetball, Inc., 246 Neb. 411, 520 N.W.2d 189 (1994): Nebraska precedent relevant to interest calculations and compounding. The Court signals that “per annum” does not, by itself, settle the compound vs. simple question and directs litigation of that issue on remand.

Legal Reasoning

The Court’s analysis proceeds from first principles. Recoupment is a defensive mechanism allowing a defendant to show that the plaintiff’s claim should be reduced based on matters arising from the same transaction. Because recoupment is a shield, not a sword, it is not barred by limitations; it travels with the plaintiff’s claim for as long as that claim exists.

Crucially, the Court re-centers the “same transaction” test on the transaction between the litigants, not on the borrower's varied uses of funds. Here, the transaction between Howard (lender) and Abram (borrower) was a single, open line-of-credit promissory note first executed in 2004 and later expanded. The 2007 “payoff of Howard’s lien” was a payment on that same note. Therefore, a claimed overpayment at that juncture bears directly on the calculation of the balance due when Howard later sued on the note for advances made between 2008 and 2016.

The district court’s contrary approach—segmenting advances by the LLC’s underlying real estate projects (Park Place vs. Pennsylvania properties)—misframed the transactional inquiry. Whether advances funded one property or another did not alter the singular credit relationship embodied in the note. Equally important, the Court disavowed the district court’s reliance on bankruptcy recoupment jurisprudence. Bankruptcy recoupment operates under different policies and a stricter standard rooted in the Bankruptcy Code; Nebraska’s civil “same transaction” standard is not so constrained.

On limitations and discovery, the Court separates two legal tracks:

• Breach of fiduciary duty (§ 25-207(3)): The judicially recognized discovery rule tolls the running until the claimant discovers, or should discover through reasonable inquiry, the facts constituting the cause of action. The Court undertakes a careful imputation analysis:
  • Marsha (trustee of the Misle Trust, which owned the LLC) was not Abram’s agent; one cannot impute knowledge to a subsidiary LLC from the trustee of its parent trust. That agency finding was “clearly wrong.”
  • Linda (manager from 2010) was Abram’s agent, but her knowledge concerned operational mismanagement of Pennsylvania properties, not the 2007 Park Place sale proceeds distribution. Suspicion about an unrelated decision does not equate to awareness of specific facts underlying the fiduciary-duty claim about the sale—distinguishing Norfolk Iron’s extreme facts.
  • The accountant, even if an agent, acted within tight constraints: he handled closing logistics and carried out instructions; he never had the note and had no auditing mandate. Absent authority over the note terms or duty to verify interest rates or balances, his knowledge of disbursement figures was not imputed to the LLC for discovery of a fiduciary breach tied to the note and sale distributions.
• Fraudulent concealment (§ 25-207(4)): The statute delays accrual until discovery of the fraud, but does not “toll” the period otherwise. The Court does not reach the merits because Abram inadequately briefed its challenge to the trial court’s findings on concealment and due diligence—reaffirming Nebraska’s strict preservation rules.

Finally, on interest, the Court upholds the application of 3% “per annum” to all 2008–2016 advances (based on stipulations and rulings that these were under the note), but recognizes a live controversy over compounding. Nebraska precedent does not presume compounding absent clear contractual language; therefore, the question is remanded for development.

Impact

The decision carries notable implications for Nebraska commercial litigation, fiduciary disputes, and drafting/administration practices:

• Recoupment Scope Expanded in Practical Terms:
  • When a creditor sues on a line-of-credit note, the debtor can invoke recoupment based on payments and credits across the lifespan of the same note—even if they occurred many years earlier and even if an affirmative counterclaim would be time-barred. This aligns litigation with the true arithmetic of the balance due.
  • Plaintiffs pursuing old notes should anticipate defensive proofs of prior overpayments and credits.
• Entity Governance and Imputation Limits:
  • Knowledge does not migrate up or down complex corporate/trust chains by osmosis. Trustees of owning trusts are not agents of subsidiary LLCs absent evidence of authority and control.
  • Professional service providers’ knowledge is not imputed carte blanche. If an accountant’s engagement is limited to carrying out instructions and the professional lacks the governing instrument (here, the note), the principal is not charged with knowledge of issues beyond that scope.
  • Managers’ general dissatisfaction or litigation brainstorming about one business decision does not trigger discovery of a different claim from a different timeframe without specific facts pointing to that claim.
• Discovery Rule Precision:
  • The Court insists on “specific facts in specific timeframes” as the trigger for discovery. This precision will likely curb overbroad “you should have known” defenses and refocus discovery disputes on what documents and facts a particular agent had within the scope of their authority.
• Drafting and Interest Computations:
  • Drafting clarity matters: if parties intend compounding, the instrument should say so clearly. Ambiguous “per annum” language invites litigation.
  • Operationally, creditors should retain and share governing instruments with agents handling closings. Absence of the note at a sale closing contributed to later disputes about rate and payoff accuracy.
• Litigation Strategy:
  • Recoupment is a jury-triable defensive matter tied to the legal claim, not a separate equitable cause. Litigants should prepare to present recoupment evidence in the same trial as the contract claim.
  • Appellate preservation remains unforgiving: issues must be specifically assigned and argued, as the fate of the fraudulent concealment counterclaim illustrates.

Complex Concepts Simplified

• Recoupment vs. Setoff vs. Counterclaim:
  • Recoupment: A defense to reduce the plaintiff’s recovery arising from the same transaction (here, the same promissory note). It does not seek affirmative relief and is not barred by statutes of limitation.
  • Setoff: Typically involves mutual debts from different transactions; often subject to statutory and timing constraints.
  • Counterclaim: An affirmative claim for relief; may or may not arise from the same transaction; subject to limitation periods.
• “Same Transaction” Test:
  • Focuses on the parties’ transactional relationship forming the basis of the plaintiff’s claim, not the defendant’s internal or downstream use of funds. Here, it was the single note and line of credit.
• Discovery Rule (Breach of Fiduciary Duty):
  • The limitations period starts when the plaintiff knows, or should know, specific facts that, if investigated, would reveal the claim. Generalized concern about other matters is not enough.
• Fraudulent Concealment (§ 25-207(4)):
  • By statute, the cause of action accrues upon discovery of the fraud (the period doesn’t “toll” in the same sense). The plaintiff must also show due diligence and specific concealment; such allegations must be pleaded and argued with particularity.
• Agency and Imputation:
  • Knowledge is imputed to a principal only when the agent is acting within the scope of authority on the matter. Separate entities (trusts, LLCs, corporations) are distinct; a trustee of a parent trust is not automatically an agent of a subsidiary LLC.
  • Independent contractors and professionals with narrow assignments may not be agents for imputation on issues outside their engagement.
• Interest: “Per Annum”:
  • “Per annum” denotes an annual rate; it does not automatically indicate compounding. Unless the instrument specifies compounding (e.g., “compounded annually/monthly”), Nebraska law often treats interest as simple. The Court leaves this for proof on remand.
• Recoupment and Factfinder:
  • Recoupment is a defensive deduction intrinsically tied to the legal claim. It is not a separate equitable cause that must be tried to the bench.

Conclusion

Konecne v. Abram, LLC delivers two clarifying rules for Nebraska law:

• For recoupment, the “same transaction” is the parties’ credit instrument and relationship, not the borrower’s different business uses of the funds. A single line-of-credit note is a single transaction for recoupment purposes. Consequently, a defendant sued on a note may defensively reduce the claim by proving prior overpayments on that note, regardless of the age of those payments.
• For the discovery rule, knowledge is imputed only when an agent acts within the scope of authority on the relevant matter, and complex entity hierarchies do not automatically carry knowledge across. Discovery requires awareness of specific facts tied to the claim—generalized concerns about other subjects do not trigger accrual.

The Court’s careful doctrinal calibration promotes fairness and accuracy in calculating balances under long-lived credit instruments while safeguarding limitations defenses from erosion by expansive, non-specific imputation theories. It also underscores the ongoing importance of precise drafting (especially on interest compounding), rigorous document retention, and disciplined briefing on appeal. The judgment is affirmed in part and reversed in part, with remand for further proceedings on recoupment related to the 2007 lien payoff, the breach of fiduciary duty counterclaim under the discovery rule, and the simple-versus-compound interest question under the note.