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110768
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No. 110,768
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
In the Matter of the Estate of
BLANCHE A. AREA, Deceased.
SYLLABUS BY THE COURT
1.
Under K.S.A. 59-1401(c), one of the duties of an administrator of an intestate
estate is to take possession of all tangible estate property located in this state and all
intangible property wherever located to be held, administered, and finally distributed as
provided by law. The administrator, alone or with the heirs or devisees, may maintain an
action for the possession of the estate real estate or to quiet title to it under K.S.A. 59-
1401.
2.
When a lien on property has ceased to exist, or when an action to enforce a lien is
barred by a statute of limitations, the owner of the property may maintain an action to
quiet title under K.S.A. 60-1002(b).
3.
An executor or administrator stands in the shoes of the decedent in respect to
mortgages given by the decedent.
4.
Where a landowner would have standing to challenge the enforceability of a note
and mortgage in order to quiet title, the administrator as a fiduciary of the landowner's
estate stands in the shoes of the decedent and has the duty to assert the same challenge.
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5.
Just as it is with the executor of a testate estate, an administrator of an intestate
estate is in a position of trust. The position is fiduciary in character, and its holder is a
trustee for the estate and all persons interested in the estate. As the fiduciary of all
interested parties, an administrator has a duty to see that their rights are correctly
adjudicated and the laws of administration are followed.
6.
Under K.S.A. 60-511(1), an action upon any agreement, contract, or promise in
writing shall be brought within 5 years.
7.
Parties cannot be considered mortgagees in possession of real estate if they take
possession of the real estate after the note and lien from a mortgage have expired by their
own terms and are barred by the applicable statute of limitations.
8.
Kansas is a lien theory jurisdiction. Under Kansas law, a mortgage is not a
conveyance of an interest in land. The mortgagee acquires no estate whatever in the
property, either before or after any contract condition is broken, but acquires only a lien
securing the indebtedness described in the instrument. Parties must take some legal action
to protect their lien if they wish to protect their interests in the property subject to their
lien.
9.
There is no public policy in Kansas stating that different rules apply to notes and
mortgage agreements involving familial relationships. The statute of limitations, K.S.A.
60-511, does not exempt contracts between family members.
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10.
When classifying demands against a probate estate, K.S.A. 59-1301 provides that
any claim for medical assistance paid under K.S.A. 39-709(e), and the amendments
thereto, are to be allowed as first-class claims.
11.
It is a long-standing principle that equity will not lie when a legal remedy exists.
Appeal from Jackson District Court; MICHEAL A. IRELAND, judge. Opinion filed May 29, 2015.
Reversed and remanded with directions.
Clifton B. DeMoss, Jr., of Basehor, and Keith C. Sevedge, of Lenexa, for appellant administrator
David P. Mikesic.
Dennis A. White, of White Law Office, of Holton, for appellees children of decedent.
Brian M. Vazquez, of Health Care Finance Legal Group, Kansas Department of Health and
Environment, of Topeka, for appellee Estate Recovery Program.
Before HILL, P.J., STANDRIDGE and ATCHESON, JJ.
HILL, J.: This is an appeal of a district court order declaring that an administrator
of an intestate estate lacked standing to appeal a magistrate's ruling that the Estate of
Blanche A. Area was legally liable for a note. For reasons set out below, we reverse and
remand.
A lady moves from her home to assisted living.
Blanche A. Area lived in Horton and had seven children. Five of her seven adult
children agreed to lend her money to build a home in Horton. On June 27, 1995, Blanche
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signed a promissory note in favor of her five children promising to repay their loan. The
note was secured by a mortgage, which was executed and recorded on the same day. At
its creation, the note was in the amount of $53,750 with a 10 percent annual interest rate.
The note was due in full on July 1, 2005. Blanche never made a payment on this note.
More than 5 years after the note was due, Blanche moved into an assisted living
facility in November 2010. At that time, the five children took control of their mother's
home; they each contributed to an account, which provided for maintenance, taxes, and
insurance on the mortgaged property. On June 28, 2011, Blanche signed a quitclaim deed
where she and her son, Jack Area, were named as joint tenants with the right of
survivorship. Blanche, a widow, died intestate on July 4, 2011.
Her estate was opened by the State.
The Kansas Department of Health and Environment's Division of Health Care
Finance filed a petition to open Blanche's estate. The Department nominated David P.
Mikesic to act as the administrator. The court opened the estate and appointed Mikesic as
the administrator.
Because Blanche received medical assistance from the Kansas Medicaid program
for various medical expenses incurred before and when she was in assisted living, the
Kansas Estate Recovery Contractor, acting on behalf of the Kansas Department of Health
and Environment's Division of Health Care Finance, filed a petition for the allowance and
classification of its demand to recoup the medical assistance. The State's claim against
the estate, made under K.S.A. 39-709, was in the amount of $32,814.46 for her medical
assistance. The court allowed the demand and classified it as a first-class claim.
Jack Area, one of Blanche's children, also sought the allowance and classification
of a demand from the court. He claimed he was one of the holders of the promissory note
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and the amount owed on the note with accrued interest by that time was $105,943. The
administrator opposed the allowance of this claim, contending that recovery under the
note and mortgage was barred by the statute of limitations. According to the
administrator, the debt was unenforceable against the estate.
The parties asked the court for permission to sell the real estate and personal
property at a private sale. The district court authorized the sale of both. The real estate
sold for $110,000, and the five children purchased the personal property for $2,250.
The five children then petitioned the court to use the proceeds from the sale to
satisfy the unpaid note. They claimed they were holders of a valid note, which was
secured by a mortgage on the real estate, and they had possessed the real estate since
November 2010 "to protect their security." In other words, they claimed to be mortgagees
in possession. The magistrate granted their petition to pay the sale proceeds to the five
children. The administrator appealed this order to the district judge.
In due course, the district judge held that under principles of equity and public
policy the note was valid and the loan was to be repaid to the five children. The
administrator asked the judge to reconsider. In its decision on the petition to reconsider,
the district court dismissed the administrator's appeal for lack of standing and affirmed its
prior ruling.
In this appeal, the administrator of the estate contends that the district court erred
when it ruled that he had no standing to appeal the ruling of the magistrate. Also, the
administrator argues that the district court disregarded the plain language of the note and
mortgage and ignored the applicable statute of limitations when it affirmed the
magistrate's ruling. Finally, the administrator argues the district court also erred by trying
to create a public policy exception to the statute of limitations.
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The administrator of the estate had standing to appeal the magistrate's ruling.
When the administrator appealed the magistrate's order to pay the five children
from the funds obtained through the sale of the real estate, the district court affirmed the
magistrate's decision:
"It seems to this Court under the unique facts of this case the public policy for
families helping an elderly parent to live in a dignified decent manner for as long as
possible should win over the policy for the State to recover tax dollars.
"It seems to the Court the equity under these unique facts lends itself to the
position of the children and allowing them to recoup their amount under the note."
When the administrator asked the district court to reconsider, the district court, for the
first time, addressed the administrator's standing. The district court held:
"This Court continues to believe the administrator has exceeded his duties and
functions under Kansas law.
"The Court believes the administrator lacks standing to appeal [the magistrate's]
orders."
Since standing is a major component of subject matter jurisdiction, we will address this
issue first.
It is clear that when the administrator brought the appeal to the district judge he
was acting within his statutory and court-appointed authority as a fiduciary. The law
imposes great responsibilities on an administrator. K.S.A. 59-1401 lists them:
"Possession of property by executor or administrator; marshaling assets;
duties prior to final distribution. The executor or administrator shall: (a) Have a right
to the possession of all the property of a resident decedent, except the homestead and
allowances to the surviving spouse and minor children; (b) marshal all tangible personal
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property owned by a resident decedent located in the state of Kansas and all intangible
personal property owned by a resident decedent wherever located, either directly or by
ancillary administration; (c) take possession, within six months from the date of
appointment, of all tangible personal property located in this state and all intangible
property wherever located, to be held, administered and finally distributed as provided by
law, but nothing herein shall require an executor or administrator of a resident decedent
to take possession of intangible personal property being administered in another
jurisdiction, if the court in which such administration is pending refuses to authorize
delivery of possession; (d) pay the taxes and collect the rents and earnings on the
property until the estate is settled or until delivered by order of the court to the heirs,
devisees and legatees; and (e) keep in tenantable repair the buildings and fixtures under
the executor's or administrator's control and may protect them by insurance. The executor
or administrator, alone or with the heirs or devisees, may maintain an action for the
possession of the real estate or to quiet title to it."
Going further, we note K.S.A. 60-1002(b) provides: "When a lien on property has
ceased to exist, or when an action to enforce a lien is barred by a statute of limitation or
otherwise, the owner of the property may maintain an action to quiet title." In Great
Plains Trust Co. v. Wallin, No. 99,483, 2008 WL 5135043, at *5 (Kan. App. 2008)
(unpublished opinion), rev. denied 289 Kan. 1278 (2009), this court noted: "'An executor
or administrator stands in the shoes of the decedent in respect to mortgages given by the
decedent, whether in fraud of creditors or otherwise.' In re Kastner Estate, 113 Kan. 106,
107, 212 P.687 (1923)."
Here, the magistrate found the appointment of an administrator for Blanche's
estate was necessary and that Mikesic was a suitable and proper person to be appointed as
administrator, and then the magistrate granted Letters of Administration to him. Mikesic
submitted his oath of administrator on September 19, 2011. Neither the appointment nor
the suitability of Mikesic had been questioned by anyone with an interest in the estate.
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When Jack Area filed his petition on the note and mortgage following the correct
probate procedures, the administrator filed his written defenses to the demand. The
administrator had permission from the probate court to act in his capacity to defend
claims against Blanche's estate. This is how demands are contested in probate cases.
Clearly, as the landowner, Blanche Area would have had standing to challenge the
enforceability of a note and mortgage in order to quiet title. As a fiduciary of the estate,
the administrator stands in the shoes of the decedent and has the duty to assert the same
challenge. Here, the administrator had standing to pursue the claim that the statute of
limitations was applicable and the note and mortgage were unenforceable.
Without any explanation or elaboration, the district judge simply ruled the
administrator had exceeded his authority. We do not see how that occurred. Obviously
the sale proceeds of the real estate were the bulk of this estate, but the administrator was
simply defending the estate against a claim for those funds.
In re Estate of Hessenflow, 21 Kan. App. 2d 761, 909 P.2d 662 (1995), rev. denied
259 Kan. 928 (2006), is instructive. When writing about the fiduciary responsibilities of
an executor of a will, a position that is not appreciably different than an administrator of
an intestate estate, the Hessenflow court stated:
"The position of executor is a trust; it is fiduciary in character, and its holder is a
trustee for all persons interested in the estate. As the fiduciary of all interested parties, an
executor has a duty to see that their rights are correctly adjudicated. An executor is also,
in a sense, the representative of the deceased, and it is part of his or her duty to see that
any will is properly executed." 21 Kan. App. 2d 761, Syl. ¶ 6.
In our view, Mikesic, as the administrator, is in a similar office. He is a trustee and
has a fiduciary responsibility to the entire estate and the rights of all interested parties. In
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fact, if he had tried to waive the statute of limitations defense in some way, he would
have been in violation of his fiduciary duty to the estate.
The district court erred by finding the administrator lacked standing to challenge
the claim. The administrator properly asserted the statute of limitations as a defense
against the enforceability of the note and mortgage lien.
Was this note enforceable?
The administrator argues the district court erred when it affirmed the magistrate's
decision to enforce the note and mortgage against the estate. He contends the district
court disregarded the plain language of the note and mortgage, failed to apply the
governing statute of limitations, and impermissibly applied principles of equity and
public policy.
On the other hand, the five children argue the statute of limitations is inapplicable
under the principles of equity and public policy. They argue they did not have to
foreclose on their mother's mortgage in order to recover the debt. Indeed, in their view, as
a matter of public policy, they should not be forced to take action against their mother.
The five children also claim the statute of limitations does not apply because "the law
generally favors the proposition that one should pay his debts." They further contend they
were mortgagees in possession prior to the administrator's actions and the statute of
limitations did not affect the validity of the debt.
We examine the statute of limitations first.
Obviously, the application of the statute of limitations is a matter of statutory
interpretation. Interpretation of a statute is a question of law over which appellate courts
have unlimited review. Cady v. Schroll, 298 Kan. 731, 734, 317 P.3d 90 (2014). The
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most fundamental rule of statutory construction is that the intent of the legislature
governs if that intent can be ascertained. Nationwide Mutual Ins. Co. v. Briggs, 298 Kan.
873, 875, 317 P.3d 770 (2014). An appellate court must first attempt to ascertain
legislative intent through the statutory language enacted, giving common words their
ordinary meanings. Cady, 298 Kan. at 738.
The applicable limitation statute, K.S.A. 60-511(1), provides: "The following
actions shall be brought within five (5) years: (1) An action upon any agreement,
contract or promise in writing." The note here was an agreement, a contract, or a promise
in writing as contemplated by the statute and, therefore, the 5-year period set forth in the
statute of limitations was applicable. We see no exemption for family contracts in the
statute.
This promissory note was secured by a mortgage; both documents were executed
and recorded in Jackson County on June 27, 1995. According to the contract: "This note
together with accrued interest thereon shall be due and payable in full on July 1, 2005, or
in the event of my death prior to said time shall be payable on the sale proceeds of the
real estate, upon which the loan was made." The five children have signed a letter
agreeing that Blanche never made a payment on the mortgage.
From the plain language of the note, the entire loan with interest was due on July
1, 2005. No payments were ever made. As of July 1, 2010, some action on the loan—
such as any payments or foreclosure—needed to occur in order to avoid the effect of the
5-year statute of limitations. The five children did not take any action until November
2010. The only actions the five children took were paying the taxes, insurance,
maintenance, and marketing the property for sale after their mother was hospitalized. The
district judge clearly ignored the language of the note.
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The five children argue they became mortgagees in possession in order to protect
their interests. The five children did not "possess" the property until November 2010—
after the 5-year limitation on the enforcement of the note had expired. The five children
could not be mortgagees in possession because the note and the mortgage were no longer
valid after July 1, 2010.
The expression "mortgagee-in-possession" has been adopted by the courts and law
writers as a convenient phrase to describe the condition of a mortgagee who is in
possession of mortgaged premises under such circumstances as to make the satisfaction
of the mortgagee's lien a prerequisite to the mortgagee being dispossessed of the
property. Mid Kansas Fed'l Savings & Loan Ass'n v. Zimmer, 12 Kan. App. 2d 735, 739-
40, 735 P.2d 1352 (1988). In other words, if you want possession of the real estate, you
must first satisfy the mortgagee's lien.
Kansas is a "lien theory" jurisdiction. See Hoelting Enterprises v. Trailridge
Investors, L.P., 17 Kan. App. 2d 777, 782-83, 844 P.2d 745, rev. denied 252 Kan. 1092
(1993). In a lien theory jurisdiction, the five children cannot simply claim to possess the
real estate in order to protect their interests in the note and mortgage—they must take
some legal action to protect their lien. See 17 Kan. App. 2d 777, Syl. ¶¶ 1, 3-5. Under
Kansas law, a mortgage is not a conveyance of an interest in land. The mortgagee
acquires no estate whatever in the property, either before or after any contract condition
is broken, but acquires only a lien securing the indebtedness described in the instrument.
17 Kan. App. 2d at 783. The five children here had taken no legal action to enforce their
lien until they filed their claim in their mother's estate. Because the statute of limitations
had expired, the note and mortgage were unenforceable. See K.S.A. 60-511(1); cf.
Hoelting, 17 Kan. App. 2d 777, Syl. ¶¶ 3-5. Said plainly, if there is no enforceable
mortgage lien, these five children cannot be mortgagees in possession.
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The district court asserts public policy without showing authority for the assertion.
While the district court said its ruling was based on principles of equity and public
policy, it failed to provide any support that it had the authority to make this ruling. In its
memorandum decision, the district court cited Griffith v. Robertson, 73 Kan. 666, 671, 85
P. 748 (1906), stating that "the [Griffith] Court noted a 'wise and beneficent public policy,
designed to protect and preserve the relations which belong to home and the family
fireside . . . .'" We point out that in Griffith the court allowed a claim in an intestate estate
by a daughter for her nursing and care for her mother for several years, including the
mother's last sickness, under an express contract that payment for such services would be
provided for in her mother's will. The "wise and beneficent policy" referred to by the
Griffith court pertains to the presumption that the performance of such nursing services
are solely from considerations of filial affection and duty. See 73 Kan. at 671. We fail to
see how this presumption affects a note and mortgage signed by a mother to her five
children.
The district court did not believe the five children should have to sue their mother
to foreclose a mortgage and held the note was still valid and should be repaid. The district
court held: "It seems to this Court under the unique facts of this case the public policy
for families helping an elderly parent to live in a dignified decent manner for as long as
possible should win over the policy for the State to recover tax dollars." The district
judge pointed to no unique facts and to no written public policy. Usually such
expressions come from statutes or from Supreme Court opinions. In effect, the district
judge ignored the law and replaced it with a view that the five children ought to be
repaid. But more accurately, the court's ruling was that five of the seven children should
be paid with 10 percent interest.
We see no authority for the district court to rule that as a matter of public policy
different rules apply to note and mortgage agreements involving familial relationships.
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"Under the Kansas Constitution, the primary lawmaking body is the legislature.
Courts must respect legislative expressions when determining or forming public policy.
Given the right to form public policy by the legislature, courts are faced with three
different situations: (1) The legislature has clearly declared the public policy of the state;
(2) the legislature, though not directly declaring public policy, has enacted statutory
provisions from which public policy may reasonably be implied; or (3) the legislature has
not made a clear statement of public policy or such a policy cannot be reasonably
implied." Woodruff v. City of Ottawa, 263 Kan. 557, Syl. ¶ 4, 951 P.2d 953 (1997).
Obviously, in drafting K.S.A. 60-511(1), the legislature did not declare special
rules for familial contracts based on a matter of public policy, and it could have easily
done so. Instead, the legislature enacted the following language: "An action upon any
agreement, contract or promise in writing." (Emphasis added.) K.S.A. 60-511(1). The use
of the word "any" prevents the district court from ruling as a matter of public policy
because, clearly, matters of public policy may not reasonably be implied.
The district court also erred by ruling that as a matter of public policy family
contracts should be favored over payments to the State. The State's Medicaid claim was
classified as a first-class demand. K.S.A. 59-1301 provides:
"If the applicable assets of an estate are insufficient to pay in full all demands
allowed against it, payment shall be made in the following classified order:
"First class, the expenses of an appropriate funeral in such amount as was
reasonably necessary . . . and . . . any claim for medical assistance paid under subsection
(e) of K.S.A. 39-709 and amendments thereto. . . .
. . . .
"Third class, judgments rendered against decedent in the decedent's lifetime, all
judgments or liens upon the property of the decedent shall be paid in the order of their
priority."
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K.S.A. 39-709(e) and the amendments thereto address the "[r]equirements for
medical assistance for which federal moneys or state moneys or both are extended."
Because the legislature granted the State priority in recouping its claims, the district court
cannot claim a contrary public policy that the State should be paid after indebtedness
involving children and their parents.
The five children argue that matters involving the statute of limitations are
equitable in nature. In order to support their argument, the five children quote single
sentences from cases where the term "equity" is used. However, they fail to expand on
their arguments and take the quotations out of context.
For example, the five children first quote the court in Erskine v. Dykes, 158 Kan.
788, 794, 150 P.2d 322 (1944): "[S]uits to quiet title had their origin in equity
jurisprudence."
The actual quotation is as follows:
"It may be observed that suits to quiet title had their origin in equity
jurisprudence. In many jurisdictions, as in Kansas, provisions were made for statutory
actions to quiet title. Whether such statutory actions entirely supplanted and displaced
suits in equity need not be discussed, but that in such statutory actions in this state
equitable principles have been applied is beyond question." 158 Kan. at 794.
In Erskine, our Supreme Court also noted:
"Although the general rule is that a judgment in a foreclosure action is conclusive
on all persons properly made parties to the action and that those who are not parties are
not concluded [citation omitted,] yet there can be no doubt of the power of the legislature
to provide statutes of limitations in which, under varying states of fact, actions for
recovery of possession must be brought. [Citations omitted.] While such statutes are
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entitled to a liberal interpretation in order that their purposes may be served, where by
their terms they designate particular subjects or classes of persons, ordinarily application
will be restricted to such subjects or classes of persons unless there is a clear
manifestation of a contrary intent. [Citation omitted.]" 158 Kan. at 793.
Simply put, Erskine is unpersuasive support because in Erskine the appellee was never
served and was never a party to the foreclosure action. Our Supreme Court did not allow
the statute of limitations to run against persons named as a party in a suit but who were
never served with a summons to offer a defense. 158 Kan. at 794. These facts are
obviously distinguishable from this case, where the five children never took any action to
enforce this note until they filed a demand in their mother's intestate estate.
The district court also erred by applying principles of equity in this case.
Generally, equitable remedies are not available if there is an adequate remedy at law. See
Mid-America Pipeline Co. v. Wietharn, 246 Kan. 238, 242, 787 P.2d 716 (1990). This
rule has become established in the jurisprudence of this state. In Rex v. Warner, 183 Kan.
763, 769, 332 P.2d 572 (1958), our Supreme Court said:
"No doctrine of equity jurisprudence is better settled than the rule that in the
absence of the existence of a statute of limitations, the time in which a party will be
barred from relief in a court of equity must necessarily depend to a certain extent upon
the facts of each case as they may arise; but, when the statute has fixed the period of
limitations under which the claim, if interposed in a court of law, would be barred, courts
of equity by analogy follow the limitations provided by law. [Citations omitted.]"
It is a long-standing principle that equity will not lie when a legal remedy exists. See
Howe Machine Co. v. Miner, 28 Kan. *441, *445 (1882). Here, the statute of limitations
was applicable and provided a legal remedy for the five children to take action on the
note within the statutory period of 5 years. The five children failed to do so, and the
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district court could not disregard the statute of limitations based on unidentified equitable
consideration.
The district court erred in affirming the magistrate's decision that the five children
were entitled to payment. The district court further erred by finding the administrator
lacked standing to challenge the enforceability of the note and mortgage. The statute of
limitations was applicable to the note and mortgage, the note and mortgage were
unenforceable, and the five children were not mortgagees in possession.
Reversed and remanded to the probate division of the district court with directions
to deny the five children's claim on the note and mortgage.