Denny v. Crump

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NOT DESIGNATED FOR PUBLICATION

No. 113,939

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

JAMES F. DENNEY III,
Appellant,

v.

KATHEY JOYCE CRUMP, a/k/a KATHY JOYCE CRUMP,
Appellee.


MEMORANDUM OPINION

Appeal from Wyandotte District Court; ROBERT P. BURNS, judge. Opinion filed July 22, 2016.
Reversed and remanded with directions.

Stanley R. McAfee, of Kansas City, for appellant.

No appearance by appellee.

Before BUSER, P.J., HILL, J., and WALKER, S.J.

Per Curiam: James F. Denney III appeals from the district court's dismissal of his
petition alleging that Kathey Joyce Crump breached her fiduciary duties to him. Because
we find that the court erred by determining when the statute of limitations commenced
rather than leaving the determination for the trier of fact, we reverse and remand the case
to the district court for trial.




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FACTS

James F. Denney III was married to Kathey Joyce Crump's sister until 2000.
Denney inherited $300,000 when his mother passed away in July 2006. On November 20,
2006, Denney opened a checking account at Industrial State Bank in Kansas City,
Kansas, in which he deposited the inheritance money.

In February 2007, two checks to Crump were issued from the account: one for
$3,000 and one for $21,000. On April 2, 2007, Denney executed a document which stated
that any money given to Crump, her husband, or her family should be considered a gift
unless otherwise stated in a written agreement. This document was notarized, but Denney
later testified that he did not recall signing it.

On July 13, 2007, Denney added Crump's name to the checking account, telling a
bank employee that he wanted Crump added to his account because she was the only
person he trusted and she helped him out a lot. Denney signed the signature card adding
Crump to the account in the presence of Tammi Davidson, a bank customer service
representative; however, Denney later testified that he did not remember adding Crump
to the account or signing anything.

On March 20, 2008, in a notary's presence, Denney executed a limited power of
attorney authorizing Crump to make all financial and banking decisions on his behalf. On
July 18, 2009, in a notary's presence, Denney executed a durable power of attorney
granting Crump general powers over his affairs including financial and general business
decisions. Denney later alleged, however, that due to certain medical conditions, he did
not recall executing these documents and he may not have been competent to do so.
Denney was an alcoholic and was undergoing rehabilitation during the time at issue in
this case and had previously suffered several hematomas. At some point, a change of
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address form was executed to send the statements to Crump's residence. As with the other
documents, Denney denied executing this form.

According to Denney, after the durable power of attorney was executed, Crump
began drawing funds from the account, but she did not use these funds to conduct
financial business on Denney's behalf. In November 2008, a check that Denney wrote on
the bank account was returned for insufficient funds. In December 2008, Denney closed
the bank account and, on March 24, 2009, he revoked Crump's powers of attorney. He
never spoke with Crump about the allegedly unauthorized transfers or inquired at the
bank about not receiving account statements.

On October 6, 2010, based on these facts, Denney filed a petition in Wyandotte
County District Court alleging that Crump breached the fiduciary duties created by
holding his power of attorney and that the breach resulted in damages. Specifically,
Denney alleged that after reviewing his financial accounts he discovered: (1) numerous
counter checks had been written, some signed by Crump and some allegedly signed by
him; (2) several transactions contained his signature, which he believed was forged; (3)
the mailing address for his financial accounts had been changed so all information would
be sent to Crump; and (4) Crump did not conduct any financial transaction on Denney's
behalf or for his benefit. Based on these allegations, Denney claimed that Crump
breached her fiduciary duties as his attorney-in-fact because she misused and depleted the
funds from his bank accounts for her financial benefit. Because Crump violated her
fiduciary duties to Denney and caused him financial loss, he requested she be ordered to
repay all of the money she took from the bank accounts and his attorney fees. Denney
requested a judgment against Crump for damages in excess of $50,000 including attorney
fees and court costs.

Crump filed an answer to Denney's petition on October 22, 2010. She admitted
that she had made withdrawals from an account she held jointly with Denney but denied
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making withdrawals from multiple accounts and denied that Denney was not aware of the
extent of the withdrawals she was making. Crump denied the rest of Denney's allegations
that she improperly withdrew funds from his bank accounts and breached her fiduciary
duties.

Crump also raised several affirmative defenses in her answer, including: (1)
Denney's petition failed to state a claim upon which relief could be granted; (2) if money
was spent by Crump for her personal or private use, it was done with Denney's
knowledge, permission, and approval; (3) if money was spent by Crump for her personal
or private use, the money was a gift from Denney; (4) Denney's claims were barred by
the doctrine of estoppel because he executed documents giving her control over the funds
at issue; (5) Denney's claims were barred by the doctrine of laches; and (6) Denney's
claims were barred by the statute of limitations. Crump requested that the district court
dismiss Denney's petition and order Denney to pay her attorney fees.

Crump filed a motion for summary judgment or partial summary judgment and for
costs and attorney fees on May 10, 2011. This was denied by District Judge
Constance M. Alvey at a hearing held on September 1, 2011, and the matter was
originally set for jury trial on January 30, 2012, but a subsequent continuance moved the
trial to April 2, 2012.

Shortly before trial, on March 8, 2012, Crump filed a motion to dismiss and for
costs, along with a renewal of the motion for summary judgment. In the motion, Crump
argued that Denney had knowledge of any alleged suspicious activity with the account in
January 2007, at which time Denney's wife discussed with Denney a $3,000 check
Crump had written to Crump Liquor Store. Further, Crump argued that Denney's wife
was also aware of two checks on the account bouncing in May and July 2008 and that
Denney's wife had spoken with Denney about it in June 2008. Thus, Crump argued that
Denney had knowledge of suspicious activity involving the account as early as January
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2007 and as late as May to July 2008. In order to comply with the statute of limitations
for breach of fiduciary duties, Crump argued that Denney needed to file his petition
before January 2009. Because his petition was filed on October 2010, Crump argued that
the district court must dismiss the case.

On March 20, 2012, Denney filed a response to Crump's motion to dismiss.
Denney argued that only a single check bounced in May 2008 and one in July 2008. In
between these times, other checks were written from the account and did not bounce and
checks written after July 2008 did not bounce either. Denney argues that because he had
not authorized Crump to withdraw any funds from the account, he had no reason to know
why the checks bounced. Therefore, Denney argued that he did not become aware of any
suspicious activity until multiple checks bounced in November 2008. Because of this,
Denney argues that he did not become sufficiently aware of the depletion of funds until
October or November 2008 and this was when the statute of limitations began running.

Alternatively, Denney argued that when the depletion of funds became sufficiently
ascertainable as to trigger the statute of limitations was a disputed issue. Because the
issue was disputed Denney argued that it must be decided by the trier of fact and not the
district court via a motion to dismiss.

Judge Alvey held a hearing on the motion to dismiss on March 21, 2012. The
parties renewed the arguments they made in their filings to the court. Crump also argued
that because there was not a factual dispute about what transpired with the account, the
question of when the statute of limitations started was not a question of fact for the jury.
After hearing the arguments of the parties, the district court denied the motion to dismiss.
The court held that the statute of limitations began running at the knowledge of the fact of
injury, not knowledge of the extent of the injury occurring. However, the district court
found that the question of whether there was a substantial injury and when Denney would
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have had knowledge of the injury was a question for the jury. On this basis, the district
court denied Crump's motion to dismiss.

After the denial of Crump's motion to dismiss, the case was continued numerous
times. Judge Alvey held a hearing on September 15, 2014, at which Denney's temporary
guardian and conservator appeared and informed the court that because of recent medical
complications Denney had suffered, the guardian had questions about Denney's ability to
communicate and how responsive he was. As a result, the district court decided to
continue the jury trial scheduled for that day. Crump objected to the continuance.

Crump's attorney and the district court had a heated exchange regarding the events
that led to the continuance. As a result of this exchange, Crump moved for a change of
judge. On November 19, 2014, Judge Alvey recused herself and the case was transferred
to Judge Robert P. Burns.

On February 10, 2015, Crump filed a motion requesting that the new district court
judge reconsider her motion to dismiss. The district court held a hearing on the motion to
reconsider on March 10, 2015. Crump reasserted her arguments as to when the statute of
limitations began to run. Denney objected to the request to reconsider. Denney reasserted
his arguments regarding when checks began to bounce consistently and it being a
disputed issue to be determined by the trier of fact. Crump also reasserted her argument
that there was no dispute of fact in this case and the court could decide when the statute
of limitations started to run.

The district court ruled that it had the authority to reconsider the motion and was
not acting as an appellate court. The district court held that the check Crump wrote to a
liquor store in January 2007 did not trigger the statute of limitations. However, the
district court held that Denney should have been aware of a substantial injury no later
than July 2008 based on the two checks that bounced in May and July 2008. Because
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Denney failed to file suit within 2 years of July 2008, the district court held that the
statute of limitations barred Denney's claim, so it granted Crump's motion to dismiss with
prejudice. Denney filed a timely notice of appeal.

ANALYSIS

The first argument that Denney raises on appeal is that the district court erred
when it agreed to reconsider Crump's motion to dismiss after the case was transferred to
another judge. Specifically, Denney argues that the district court improperly exercised
quasi-appellate review over the previous district court judge's ruling because no new
evidence was presented in the motion to reconsider and because he was already preparing
for trial.

Denney also argues that it was error to reconsider the motion because it was not
filed within a reasonable time as required by K.S.A. 2015 Supp. 60-260(c) or because it
was not filed within the 1-year timeline for a motion to alter, amend, or set aside a
judgment under K.S.A. 2015 Supp. 60-260(b). Crump did not file an appellate brief and
does not respond to Denney's argument.

The only case Denney relies on for his position that the district court acted
improperly as a quasi-appellate court is Finley v. Estate of DeGrazio, 36 Kan. App. 2d
844, 148 P.3d 1284 (2006). However, this Court of Appeals decision was reversed by the
Kansas Supreme Court in Finley v. Estate of DeGrazio, 285 Kan. 202, 170 P.3d 407
(2007). In fact, the Supreme Court found that the quasi-appellate argument was moot and
declined to address it. 285 Kan. at 213. Because the sole case Denney relies on was
reversed by our Supreme Court, Denney's argument that the district court improperly
acted as a quasi-appellate court is without support.

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Denney's argument has also been rejected by this court and our Supreme Court. In
Hogue v. Johnson, 28 Kan. App. 2d 334, 339, 17 P.3d 364 (1999), this court held: "The
ability of a trial judge to change a previous ruling is clearly within the judge's discretion.
Furthermore, the appointment of a new judge does not alter this discretion." Just as in the
present case, the ruling that was changed in Hogue was a decision of whether the
applicable statute of limitations was tolled. 28 Kan. App. 2d at 338. Our Supreme Court
also has held that a prior denial of a motion for summary judgment does not prohibit a
later assigned district court judge from rehearing and sustaining the motion. Cooper v.
RE-MAX Wyandotte County Real Estate, Inc., 241 Kan. 281, 283, 736 P.2d 900 (1987).
Based on this court's ruling in Hogue and our Supreme Court's ruling in Cooper, the
district court did not err when it reconsidered Crump's motion to dismiss.

Denney's arguments that Crump's motion to reconsider should not have been heard
because it was not timely filed under K.S.A. 2015 Supp. 60-260(b) or (c) may not be
raised on appeal because they were not raised before the district court. Wolfe Electric,
Inc. v. Duckworth, 293 Kan. 375, 403, 266 P.3d 516 (2011) (issues not raised before trial
court cannot be raised on appeal). While there are three exceptions to this general rule,
Denney does not argue that any of the exceptions apply to his case. See In re Estate of
Broderick, 286 Kan. 1071, 1082, 191 P.3d 284 (2008) (providing exceptions to the
general rule), cert. denied 555 U.S. 778 (2009). An issue not briefed by the appellant is
deemed waived and abandoned. Superior Boiler Works, Inc. v. Kimball, 292 Kan. 885,
889, 259 P.3d 676 (2011). Because Denney did not raise his timeliness arguments before
the district court and makes no argument why they should be considered for the first time
on appeal, they are not properly preserved for appellate review and will not be
considered.

Even if this court were to consider this argument, it is meritless. K.S.A. 2015
Supp. 60-260(b) provides grounds for which a party may obtain relief from a final
judgment, order, or proceedings. K.S.A. 2015 Supp. 60-260(c) provides timelines for
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filing a motion for relief from a final judgment, order, or proceedings under K.S.A. 2015
Supp. 60-260(b). K.S.A. 2015 Supp. 60-254(a) defines judgment as "the final
determination of the parties' rights in an action." Denial of a motion to dismiss is not a
final determination of the parties' rights because the action is not resolved and the case
continues to proceed toward trial. Therefore, reconsidering the denial of Crump's motion
to dismiss does not fall under K.S.A. 2015 Supp. 60-260(b) or (c) because it is not a final
judgment.

The second argument that Denney raises on appeal is that it was error for the
district court to determine when the statute of limitations commenced because the
evidence regarding this issue would require the trier of facts to resolve the issue. Denney
argues the fact that two district court judges in this case reached different decisions
regarding commencement of the statute of limitations shows that the evidence was
sufficiently in dispute to require the trier of fact to make the determination.

An action for breach of fiduciary duty is subject to a 2-year statute of limitations
under K.S.A. 60-513(a)(2). Mynatt v. Collis, 274 Kan. 850, 866, 57 P.3d 513 (2002). The
statute of limitations does not accrue until either substantial injury occurs or the injury
suffered becomes reasonably ascertainable. K.S.A. 60-513(b). Full knowledge of the
extent of the injury is not necessary for the statute of limitations to accrue. Michaelis v.
Farrell, 48 Kan. App. 2d 624, 630-31, 296 P.3d 439 (2013) (citing Roe v. Diefendorf,
236 Kan. 218, 222, 689 P.2d 885 [1984]). All that is necessary for the statute of
limitations to accrue is for the plaintiff to have sustained a sufficient reasonably
ascertainable injury. 48 Kan. App. 2d at 631.

The central issue here is whether the district court or the trier of fact should decide
when Denney's injury became reasonably ascertainable. If the evidence showed that
Denney clearly had knowledge of Crump's depletion of the funds, the district court could
determine that the depletion was reasonably ascertainable and commenced the statute of
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limitations. However, if the evidence of when the depletion of funds became reasonably
ascertainable is in dispute, the trier of fact must make the determination of when the
depletion was reasonably ascertainable. 48 Kan. App. 2d at 631.

The key to this case is when Denney can reasonably be said to have obtained
knowledge that Crump was depleting his funds. Many of the specific factual points in the
history of the case are not disputed. Denney and Crump agree that a check was first
written to Crump from the account in January 2007. They also agree that Denney wrote a
check from the account that bounced in May 2008 and a second check he wrote bounced
in July 2008. Finally, Crump and Denney agree that multiple checks bounced in October
or November 2008.

The important question left to resolve is the dispute as to which of the agreed-upon
events provided Denney with sufficient notice to make the depletion of the funds
reasonably ascertainable and to trigger the statute of limitations. As we know, Judge
Burns determined as a matter of law that the May and June 2008 checks were the events
which made the depletion of funds reasonably ascertainable to Denney, thus commencing
the statute of limitations. Denney challenges this finding, arguing that the district court
invaded the province of the trier of fact as to when the depletion by Crump was
reasonably ascertainable by Denney.

Before determining whether the district court acted properly in granting dismissal
of Denney's claim, it is important to understand the nature of a fiduciary relationship
underlying a claim of breach of fiduciary duty. Our appellate courts have held:

"'While there is no invariable rule which determines the existence of a fiduciary
relationship it is manifest that there must not only be confidence of one in another, but
there must also exist a certain inequality; dependence; weakness of age, mental strength,
business intelligence, knowledge of the facts involved, or other conditions, giving to one
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an advantage over the other.'" Olson v. Harshman, 233 Kan. 1055, 1059, 668 P.2d 147
(1983) (quoting Cornett v. Roth, 233 Kan. 936, Syl. ¶ 1, 666 P.2d 1182 [1982]).

This is the standard we apply to the parties in this case.

We begin our analysis of this issue by assuming that Crump had a fiduciary duty
to Denney, which is not disputed by the parties and is readily apparent from the facts
recited above. We note that several of the factors which are mentioned in Cornett and
Olson as characteristic of the relationship between fiduciary and beneficiary are present
in this case. In particular, it is clear that Crump was in a decidedly advantageous position
to Denney with respect to his financial affairs. She was on the signature card of his bank
account, possessed a durable power of attorney on his financial and business decisions,
and had all banking documents sent to her personal address. Because of Denney's long-
term alcoholism, requiring recurrent placement in rehabilitation, as well as his overall
mental and physical deterioration, his ability to give attention to even rudimentary
aspects of his financial affairs appears highly suspect.

The district court, after hearing the arguments of counsel at the hearing on the
motion to dismiss, concluded that the bounced checks of May and June 2008 should have
alerted Denney to potential misconduct by Crump, thus making his financial injuries
reasonably ascertainable and therefore starting the clock on the statute of limitations. We
disagree with this conclusion for three reasons.

First and foremost, the clear imbalance in financial sophistication between Denney
and Crump meant that Crump possessed a virtual monopoly on Denney's financial
dealings. Because of her status as Denney's former sister-in-law, she was in a unique
position to be aware of Denney's personal travails. Having been gifted with $24,000 by
Denney shortly after his mother died and then given a "hold harmless" document for any
gifts of money to herself or her husband, Crump may have concluded that there was to be
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little or no oversight of her activities. Once she was ultimately given all the tools
necessary to access and manage Denney's money, including his $300,000 inheritance
from his mother, Crump may have felt that she was on a very long leash, indeed.

Second, by having all bank records sent to her exclusively, Crump was in a unique
position to restrict the flow of financial information to Denney. There is no evidence in
the record that duplicate copies of any financial documents were being provided to
Denney or his family members. Perhaps evidence would show Denney should have been
more concerned about Crump's activities at a time earlier than May or June 2008. On the
other hand, perhaps the evidence would show that Denney's multiple physical and
medical issues were such an impediment to his perceiving events that he could not be
expected to understand even the basics of the financial matters he had relegated to
Crump. For example, Denney did not recall a number of specific financial documents he
had signed, even when those had been officially witnessed and testified to by bank
personnel.

Finally, the two bounced checks which the district court found to be the critical
tipoffs to financial impropriety by Crump were preceded by, and followed in succession
by, other checks which did not bounce. It was not until in November 2008 that Denney
became sufficiently concerned to close the account and cancel Crump's authority to act
on his behalf. Crump has argued, and the judge has implicitly found, that a person with
basic financial acumen would certainly have felt alarm in May or June 2008 about the
bounced checks and contacted the bank to inquire about the problem. But we believe it is
a much closer question whether Denney, debilitated by severe mental and physical
ailments, was capable of registering the same degree of alarm as an ordinary person. This
is particularly true since not all of his checks were being rejected by the bank. Reasonable
minds can disagree about the meaning of these events, which is ultimately the very
essence of a question for the trier of fact.

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In short, we are persuaded that it was error for the district court to conclude, as a
matter of law, that there could not be a reasonable dispute about when Denney had
knowledge of Crump's depletion of funds. We believe this is an issue for the trier of fact.

The third issue Denney raises in his brief is whether the district court abused its
discretion by rehearing Crump's motion to dismiss and deciding when the statute of
limitations commenced. In light of our ruling on the prior issue, this argument is moot.

Reversed and remanded for trial.