Real Estate Update By Matthew S. Gough

By Matthew S. Gough

Barber Emerson LC, Lawrence

Kansas Supreme Court

FIRST SECURITY BANK V. BUEHNE COURT OF APPEALS – AFFIRMED MEADE DISTRICT COURT – AFFIRMED NO. 121,765 – DECEMBER 30, 2021 501 P.3D 362; 2021 KAN. LEXIS 132 Statute of Limitations; Waiver

Attorneys: Zachary D. Schultz, of Schultz Law Office PA, Garden City, for appellants; James C. Dodge, of Sharp McQueen PA, Liberal, for appellee; and Kersten L. Holzhueter, of Spencer Fane LLP, Kansas City, Missouri, amicus curiae for the Kansas Bankers Association.

Facts: First Security Bank (Bank) made a loan to the Buehnes in 2005, secured by a mortgage. The Buehnes never made a payment. Bank demanded payment of the full principal balance and unpaid interest in 2009, but did not file a foreclosure action until 2014. The Buehnes asserted the statute of limitations as an affirmative defense. The note, however, contained a waiver of “any applicable statute of limitations to the full extent permitted by law.” The District Court granted the Bank’s motion for summary judgment. On appeal, the Court of Appeals affirmed.

Issue: Whether a note containing a waiver of “any applicable statute of limitations, to the full extent permitted by law,” is enforceable as a matter of public policy.

Holding: The Kansas Supreme Court affirmed the decision of the lower courts, noting that the caveat “to the full extent permitted by law” would have permitted the Buehnes to raise any number of common-law-based challenges to Bank’s attempts to enforce the Note (critically, laches and unconscionability), but the Buehnes failed to do so and could show no prejudice by Bank’s delay in enforcing its rights under the note.

Kansas Court of Appeals

WHEATLAND ELEC. COOPERATIVE INC. V. CITY OF GARDEN CITY FINNEY DISTRICT COURT – REVERSED AND REMANDED NO. 123,061 – DECEMBER 3, 2021 2021 KAN. APP. LEXIS 58 Public Utilities

Attorneys: James M. McVay, of Wheatland Electric Cooperative Inc. and Allen G. Glendenning, Watkins Calcara Chartered, Great Bend, for appellant; Timothy J. Sear, Frank Caro Jr. and Andrew O. Schulte, of Polsinelli PC,Kansas City, Missouri, and Randall D. Grisell, of Doering, Grisell & Cunningham PA, Garden City, for appellee. Facts: The Kansas Corporation Commission (KCC) assigned to Wheatland Electric Cooperative Inc. (Wheatland) the service area surrounding Garden City, Kansas, in 1977. Pursuant to the Retail Electric Suppliers Act, K.S.A. 66-1,170 et seq. (the Act), the KCC decides what entity is responsible for providing electricity to Kansas consumers located outside any incorporated city. Garden City’s former city manager arranged a handshake deal with Wheatland for Garden City to supply electricity to a proposed ethanol plant located outside city limits, without KCC approval. After a new general manager took over at Wheatland, Wheatland rejected the prior informal agreement. Garden City annexed the properties at issue, which ended Wheatland’s right to service the territory under the Act, but Wheatland filed suit for fair and reasonable compensation – in this case $7 million – pursuant to K.S.A. 66-1,176. Each party submitted motions for summary judgment. The District Court granted Garden City’s motions, and Wheatland appealed.

Issues: First, can an oral agreement between a city manager and the general manager of an electric cooperative allowing the city to provide electricity to a territory outside that city be enforceable, even though that agreement has not been approved by the KCC as required by the Act? Second, can the equitable doctrines of laches, estoppel, and waiver render such a contract valid, even though that contract is void according to the statutes? Third, may a supplier of electricity receive compensation under the Act after a city annexes part of that supplier’s territory, even if the supplier had not been serving customers in the area because of an informal agreement between the parties?

Holdings: The oral agreement is not enforceable. Equitable doctrines cannot render such an agreement valid. Heartland was entitled to compensation. The Court reversed the District Court’s grant of summary judgment to Garden City, reversed the denial of summary judgment to Wheatland, and remanded the case to the District Court with directions to enter summary judgment to Wheatland over Garden City.

IN RE WALMART STORES INC. KANSAS BOARD OF TAX APPEALS – AFFIRMED NO. 122,162 – OCTOBER 8, 2021 500 P.3D 553; 2021 KAN. APP. LEXIS 49; 2021 WL 4699199 Tax Appeal

Attorneys: Ryan L. Carpenter, assistant county counselor, for appellant Board of Johnson County Commissioners; Linda A. Terrill, of Property Tax Law Group LLC, Overland Park, for appellees Walmart Stores Inc. et al.

Facts: This case represents a continuation of an ongoing dispute in the appraisal industry over the appropriate methodology to use in valuing real property associated with The REPorTer 3

the operation of what are known as big-box retail stores. The 11 tracts of real property at issue were used for the operation of either a Walmart or a Sam’s Club store. Walmart appealed the 2016 appraised valuations of these properties in Johnson County to the Kansas Board of Tax Appeals (BOTA). BOTA heard numerous expert witnesses from both sides, and ultimately adopted the valuation approach that Walmart’s experts advocated for, with some variation. Both parties requested that BOTA make a full and complete opinion, which the County appealed to the Court.

Issues: First, whether BOTA erroneously interpreted and applied Kansas law in reaching its final decision. Second, whether there is substantial competent evidence — when viewed in light of the record as a whole — to support BOTA’s final decision. Third, whether BOTA’s final decision is unreasonable, arbitrary, or capricious.

Finding: The Court (and BOTA) cited existing Kansas precedent, namely In re Prieb Properties LLC, 47 Kan. App. 2d 122, 275 P.3d 56 (2012) and In re Equalization Appeal of Target Corporation, 55 Kan. App. 2d 234, 410 P.3d 939 (2017) in finding that Walmart’s approach to valuation was more persuasive than the County’s. The County essentially requested that the Court overturn its prior decision in Prieb, and the Court declined to do so. The Court affirmed BOTA’s decision and held that decision not to be unreasonable, arbitrary or capricious.

Dissent: Judge Leben wrote a dissenting opinion and argued that the Court should overturn the Prieb decision, in order to “… let the tax valuation of real estate be decided on a level playing field before the Board of Tax Appeals, which has the expertise to fairly judge the real-estate appraisal testimony presented to it.”

Kansas Court of Appeals – Summary of Unpublished Opinions

LOYD V. RURAL WATER DISTRICT NO. 2 JEFFERSON DISTRICT COURT – AFFIRMED IN PART, REVERSED IN PART AND REMANDED WITH DIRECTIONS NO. 123,464 – FEBRUARY 25, 2022 2022 KAN. APP. UNPUB. LEXIS 108; 2022 WL 570851 Offer of Judgment, Attorneys’ Fees

Attorneys: Jonathan Sternberg, of Jonathan Sternberg, Attorney PC, Kansas City, Missouri, and Joel E. Cape, pro hac vice, of Cape Law Firm PLC, Fayetteville, Arkansas, for appellants; Todd A. Luckman, of Stumbo Hanson LLP, Topeka, for appellee.

Short Summary: In a dispute over rural water meters, the rural water district (RWD) served an offer to allow judgment to be granted in favor of the plaintiffs under K.S.A. 60-2002(b). Plaintiffs accepted the offer and then sought recovery of court costs and attorneys’ fees on the basis of being the prevailing party. The District Court denied recovery of both costs and attorneys’ fees. On appeal, the Court of Appeals analyzed the plaintiff’s arguments, some of which stemmed from existing case law applying the Kansas Consumer Protection Act (see Richardson v. Murray, 54 Kan. App. 2d 571, 402 P.3d 588 (2017)), and held that under the facts of this case, the plaintiffs were not entitled to recover attorneys’ fees, but were entitled to recover their court costs.

MATHEWS V. CITY OF MISSION HILLS JOHNSON DISTRICT COURT – AFFIRMED NO. 122,710 – FEBRUARY 11, 2022 2022 KAN. APP. UNPUB. LEXIS 85; 2022 WL 414255 Appeal of Land Use Decision

Attorneys: Patrick B. Hughes, of Adams Jones Law Firm PA, Wichita, for appellant; George F. Verschelden and Anna M. Krstulic, of Stinson LLP of Kansas City, Missouri, for appellee.

Short Summary: Mathews opposed efforts by Kansas City Country Club to obtain a permit for the installation of an electrical fan and supportive electrical equipment on the 12th hole of the golf course. When the City of Mission Hills granted the permit, Mathews sued the City in District Court. Mathews claimed that the City’s Architectural Review Board (ARB) failed to follow proper procedure, and argued that the ARB acted unreasonably by concluding that the installation of the fan would not adversely affect the surrounding property values. The District Court found in favor of the City. Mathews appealed, and the Court of Appeals affirmed.

EVERETTE V. BARTON & ASSOCIATES WYANDOTTE DISTRICT COURT – AFFIRMED NO. 122,628 – JANUARY 7, 2022 2022 KAN. APP. UNPUB. LEXIS 2; 501 P.3D 378; 2022 WL 68329 Scope of Duty

Attorneys: Mark E. Parrish and Raymond Salva, pro hac vice, of Boyd Kenter Thomas & Parrish LLC, Independence, Missouri, for appellants; Sean P. Edwards, of Sanders Warren Russell & Scheer LLP, Overland Park, for appellee Safeguard Properties Management LLC.

Short Summary: Smith and Everette appealed the District Court’s grant of summary judgment in favor of Safeguard Properties Management, a property preservation company. They argued that two claims in their petition — negligence and negligent misrepresentation — should have proceeded to trial because they turned on disputed facts. The District Court found as a matter of law that Safeguard did not owe any legal duty to Smith and Everette, and Smith and Everette have not demonstrated that they reasonably relied on any of Safeguard’s representations. The Court affirmed.

SHELTON V. CHACKO BARBER DISTRICT COURT – AFFIRMED NO. 123,092 – JANUARY 7, 2022 2022 KAN. APP. UNPUB. LEXIS 12; 501 P.3D 909; 2022 WL 67881 Trespass; Adverse Possession; Fence Boundary Line Dispute

Attorneys: John D. Beverlin II, of Stull, Beverlin, Nicolay & Haas LLC, Pratt, for appellant; Hannah L. Brass, Medicine Lodge, for appellee.

Short Summary: This is an adverse possession case. Two properties, formerly under common ownership, were separated by a fence. The fence was not located on the boundary line stated on the vesting deeds. Rather, the fence encroached upon Shelton’s property. Shelton sued Chacko for trespass and to quiet title, and Chacko counter-claimed seeking declaratory judgment that he owned the disputed property by adverse possession. The District Court held that Chacko met his burden of proof of adverse possession. The Court of Appeals affirmed.

HACKNEY V. ALLEN BROWN DISTRICT COURT – AFFIRMED NO. 122,023 – DECEMBER 3, 2021 2021 KAN. APP. UNPUB. LEXIS 696; 499 P.3D 1158; 2021 WL 5758244 Specific Performance

Attorneys: William C. O’Keefe, of O’Keefe Law Office, Seneca, for appellants; Matthew R. Bergmann, of Frieden & Forbes LLP, Topeka, for appellees Joseph R. Hackney and Joni M. Hackney.

Short Summary: The Hackneys executed a written real estate contract to purchase real estate owned by the Allens. The Allens’ son signed the contract as attorney-in-fact, under a Nebraska power of attorney. Allens then received a higher price offer from the Retteles, which Allens accepted and closed upon without notifying the Hackneys. The Hackneys attempted to close on the original written contract as of the closing date, and learned at that time that the property had been sold to the Retteles. Hackeys sued the Allens and the Rettelles. The District Court granted specific performance to Hackneys and voided the quitclaim deed to the Rettelles. The Court of Appeals affirmed.

LACOST V. BOOT HILL CASINO & RESORT FORD DISTRICT COURT – AFFIRMED NO. 123,873 – NOVEMBER 19, 2021 2021 KAN. APP. UNPUB. LEXIS 670; 499 P.3D 512; 2021 WL 5409684 Premises Liability

Attorneys: Peter J. Antosh, of Garcia & Antosh LLP, Dodge City, for appellant; Penny A. Calhoun, of Wallace Saunders Chartered, for appellee Boot Hill Casino & Resort; and Michael J. Norton, of Foulston Siefkin LLP, Wichita, for appellee Steve’s Welding.

Short Summary: Lacost slipped and fell in the parking lot of the Boot Hill Casino & Resort (Boot Hill), injuring herself. Lacost filed a premises liability lawsuit against Boot Hill and Steve’s Welding (the Contractor), the private contractor hired to remove snow from the lot. The District Court granted summary judgment for Boot Hill and the Contractor based on the winter storm doctrine. Lacost appealed and the Court of Appeals affirmed.

BANK OF NEW YORK MELLON V. LUNA JOHNSON DISTRICT COURT – AFFIRMED NO. 123,524– NOVEMBER 19, 2021 2021 KAN. APP. UNPUB. LEXIS 667; 2021 WL 5409672 Reformation and Mortgage Foreclosure

Attorneys: Charles S. Scott Jr., Shawnee, for appellants; Aaron M. Schuckman, of Millsap & Singer LLC, St. Louis, Missouri, for appellee.

Short Summary: The Lunas failed to make payments on a mortgage held by the Bank of New York Mellon (Bank). The Bank filed a petition for foreclosure on the property subject to the mortgage. Prior to the District Court’s decision in the foreclosure action, the Lunas clandestinely conveyed that property to Las Cumbres LLC (Las Cumbres) through a quitclaim deed. Guillermo Luna is a registered agent of Las Cumbres. The District Court granted the Bank’s motion for summary judgment on the foreclosure action and the Lunas filed a motion for relief from judgment, arguing they were not subject to judgment because they no longer owned the property. Their motion was denied. The Lunas present two arguments on appeal: First, they contend that the District Court’s judgment is invalid because at the time it entered its order, the Lunas no longer had standing, and the Court no longer had subject matter jurisdiction based on the conveyance of the property; Second, they argue that error occurred when the District Court failed to add Las Cumbres as a necessary party to the action in violation of K.S.A. 2020 Supp. 60-219. The Court of Appeals affirmed and held that although Las Cumbres may be considered a necessary party to obtain clear title, error did not result from its absence from the action.

About the Author

Matthew S. Gough, Lawrence, is a member of Barber Emerson LC. His practice includes real estate, land use, corporate and banking law.

Gough received his Juris Doctor from the University of Kansas School of Law and his Bachelor of Arts from the University of Kansas School of Business. Gough is admitted to the bar in Kansas and Missouri.