Icon Agent v. Kanza Construction, Inc.

1

NOT DESIGNATED FOR PUBLICATION

No. 112,617

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

ICON AGENT, LLC,
Appellee,

v.

KANZA CONSTRUCTION, INC., a Kansas Corporation,
Defendant,

STEVEN HUTCHINSON and MARY HUTCHINSON,
Appellants,

and

KANZA SERVICES, LLC, a Kansas Limited Liability Company,
as Guarantors of Kanza Construction, Inc., Individually,
Defendant.


MEMORANDUM OPINION

Appeal from Labette District Court; ROBERT J. FLEMING, judge. Opinion filed January 15, 2016.
Affirmed.

Steven G. Hutchinson and Mary F. Hutchinson, appellants pro se.

Mark T. Benedict and Kyle Kitson, of Husch Blackwell LLP, of Kansas City, Missouri, and Scott
M. Esterbrook and Lauren S. Zabel, of Reed Smith LLP, of Philadelphia, Pennsylvania, for appellee.

Before MCANANY, P.J., POWELL, J., and DAVID J. KING, District Judge, assigned.

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Per Curiam: This case involves a $12.5 million loan to Kanza Construction, Inc.,
which was secured by equipment owned by Kanza Construction and guaranties from
Steve and Mary Hutchinson and Kanza Services, LLC, a sister company controlled by
Steve Hutchinson. The loan was made by a group of lenders who designated Icon Agents,
LLC, as their agent in the transaction. As the agent for the lenders, Icon was responsible
for holding the collateral and administering and enforcing the loan agreement on behalf
of its principals.

Facts

The borrower, Kanza Construction, was owned by Steve Hutchinson. Hutchinson
had more than 20 years of experience in the heavy and rail construction industries. He
was formerly licensed to practice law in the State of Texas, where he had been engaged
in commercial litigation for 3 years. Hutchinson approached Icon for working capital for
Kanza's railroad business. Kanza was a railroad contractor engaged in several lines of
business, including maintaining tamping equipment, tamping railway lines,
manufacturing and remanufacturing tamping equipment, and manufacturing and repairing
locomotive equipment. These loans were prompted by Kanza's need for cash in order to
meet its customers' timetables for the completion of new work.

In March 2012, Kanza entered into a $12.5 million Term Loan and Security
Agreement with the lenders and Icon, the lenders' agent. The loan was collateralized by a
security interest in substantially all of Kanza's property and assets, including equipment,
as well as unconditional guaranties from Kanza Services and from Hutchinson and his
wife. The loan agreement identified Icon as "ICON AGENT, LLC, a Delaware limited
liability company, as agent (in such capacity, 'Agent') for the Lenders." The loan
agreement provided that Icon had the right to "exercise all remedies given to Agent and
other Lenders with respect to the Collateral." This authority encompassed "collection,
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including deficiency collections" and "any litigation, dispute, suit, proceeding or action
. . . and an appeal or review thereof."

Icon perfected the security interest in Kanza's property by filing a UCC-1 with the
Kansas Secretary of State.

Kanza defaulted on the loans within 1 month of the closing. Starting in June 2012,
Icon made several written demands for payment and for Kanza to deliver up the
collateral. Icon also demanded payment from the guarantors on their guaranties.

Kanza entered into an auction agreement with Ritchie Brothers Auctioneers to sell
some of its equipment which was part of the collateral. The auctions took place in
August, September, and December 2012. The auction proceeds were turned over to Icon
and applied to the debt. There nevertheless remained a significant unpaid balance and in
January 2013 Icon sent a final demand letter to Kanza for payment and for Kanza to turn
over the remaining collateral.

Suit

In January 2013, Icon commenced this action against Kanza and the guarantors
and obtained possession of some of the remaining collateral pursuant to a replevin order
from the district court. This remaining collateral was sold at auction in March 2013 by
Ritchie Brothers, the same auctioneers Kanza had used earlier. This further reduced but
did not extinguish the outstanding loan balance.

Kanza and the guarantors asserted counterclaims against Icon for breach of
contract, breach of duty of good faith and fair dealing, negligent misrepresentation, and
tortious interference with business relations. Icon moved for sanctions when the
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defendants failed to fully comply with the court's discovery orders. At a hearing on the
sanctions motion, the district court ruled that the defendants would not be allowed "to
present any evidence, either by way of testimony or the introduction of exhibits, that
hasn't been specifically identified during discovery." At the time the sanctions were
issued, the defendants were represented by counsel, but counsel withdrew in January
2014 and the Hutchinsons proceeded pro se. Kanza and Kanza Services were without
counsel.

In February 2014, Icon moved for summary judgment. In May 2014, the
Hutchinsons filed their response to the motion. That same day, Kanza filed a document
purporting to assign its claims against Icon to Steve Hutchinson.

The Hutchinsons' response to the summary judgment motion completely ignored
Supreme Court Rule 141 (2015 Kan. Ct. R. Annot. 242). Their response also purported to
respond on behalf of Kanza and Kanza Services. Although Steve Hutchinson had
previously been licensed to practice law, he was not a licensed attorney at the time of the
instant action, so the district court refused to permit Kanza and Kanza Services to
proceeding pro se or to permit Hutchinson to represent them.

At the hearing on Icon's summary judgment motion, the court found that the
corporate defendants had not submitted a response and granted summary judgment
against them.

Steve Hutchinson presented the court with the so-called assignment to him of the
corporate defendants' counterclaims against Icon. The assignment had not been disclosed
during discovery, as required by the court's earlier sanctions order. Icon argued that a
corporation cannot assign its claims to an individual in order to circumvent the
requirement that a corporation be represented in court by counsel. The district court
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rejected the assignment of claims, ruled that the Hutchinsons' response to the summary
judgment motion did not comply with Supreme Court Rule 141, and found that the facts
were uncontroverted. The court granted summary judgment in favor of Icon on all issues
except whether the March 2013 auction sale of the remaining collateral was
commercially reasonable.

At the bench trial on this remaining issue, the acting regional sales manager for
Ritchie Brothers testified about the auction procedure, that Ritchie Brothers was the
world's largest industrial auction company, and about the prior sales Ritchie Brothers had
conducted for Kanza. Icon introduced evidence showing total proceeds of the March
2013 auction of $1,375,250 gross and $1,185,827.67 net, including a breakdown of the
price per item.

Steve Hutchinson, the only defendant to appear at trial, testified in his own
defense. The district court excluded on hearsay grounds two appraisals that Hutchinson
offered as evidence of the value of the collateral. The district court provisionally allowed
Steve Hutchinson, as Kanza's sole stockholder, to render an opinion on the value of the
collateral Kanza owned before the auction. But the district court found Hutchinson's
opinion not to be credible and lacking in foundation because it was based on the
previously excluded reports rather than his own opinion and experience.

At the conclusion of the trial, the district court entered a deficiency judgment in
favor of Icon in the amount of $7,224,613.59 and found that the collateral had been sold
in a commercially reasonable manner. The Hutchinsons appeal.

Analysis

With respect to the Hutchinsons' complaints about the summary judgment
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proceedings, we consider the substance of the motion de novo and apply the same
standards which the district court applied. Those standards are well known to the parties
and are set forth in detail in Stanley Bank v. Parish, 298 Kan. 755, 759, 317 P.3d 750
(2014).

 Standing

The Hutchinsons argue that the district court erred in granting Icon summary
judgment on the Hutchinsons' affirmative defense that Icon had no standing to pursue the
claims of the lenders.

An action must be prosecuted in the name of the real party in interest. K.S.A. 2014
Supp. 60-217 defines parties who may bring suit in their own name, even when the suit is
for the benefit of another, without joining the party for whose benefit the action is
brought. K.S.A. 2014 Supp. 60-217(a)(1)(H) specifically permits a party to sue in its own
name if it is "a party with whom or in whose name a contract has been made for another's
benefit." Icon did not enter into the loan agreement for its own benefit, but for the benefit
of the lenders whom it represented.

In Curo Enterprises v. Dunes Residential Services, Inc., 51 Kan. App. 2d 77, 83-
85, 342 P.3d 948 (2015), the court held that an agent may sue in its own name to enforce
an agreement made on its principal's behalf. As is the case with Icon, the agent in Curo
disclosed that it was suing to enforce the contract on behalf of its principal and the
contract expressly authorized the agent to enforce the contract on the principal's behalf.

The only case cited by the Hutchinsons to support their position is an Alabama
bankruptcy court decision which was reversed. See In re O'Dell, 251 B.R. 602 (Bankr.
N.D. Ala. 2000), rev'd 268 B.R. 607 (N.D. Ala. 2001). In reversing the decision, the court
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in the second O'Dell case held that "[a]n agent authorized by its principal to pursue and
protect the interests of the principal's claim can lawfully defend an objection to said claim
on behalf of the principal." 268 B.R. at 619.

In their reply brief, the Hutchinsons cite Landmark Nat'l Bank v. Kesler, 289 Kan.
528, 216 P.3d 158 (2009), which involved the Mortgage Electronic Registration System.
But in Landmark the court found MERS, the purported agent, to be "more akin to that of
a straw man rather than to a party possessing all the rights given a buyer." 289 Kan. at
539. This was because "the mortgage document consistently refers only to rights of the
lender, including rights to receive notice of litigation, to collect payments, and to enforce
the debt obligation. The document consistently limits MERS to acting 'solely' as the
nominee of the lender." 289 Kan. at 539-40. Unlike MERS, Icon was expressly given the
right to pursue all remedies on behalf of the lenders.

Icon is the agent disclosed in the contract with actual and apparent authority to
represent the interests of the lenders. Icon's actions were expressly authorized under the
terms of the loan agreement and under K.S.A. 2014 Supp. 60-217(a)(1)(H). The
Hutchinsons did not point to any facts to dispute Icon's position that it was expressly
acting as the lenders' agent and had standing to bring suit on behalf of the lenders. The
district court properly granted summary judgment to Icon on this affirmative defense.

 Valid Security Interest

The Hutchinsons assert that the court erred in granting summary judgment
dismissing their defense that Icon did not have a valid security interest in the collateral.
The Hutchinsons' entire argument on this issue is as follows: "Plaintiff Agent, merely an
'agent' of the secured Lenders, had no valid security interest in Defendant Kanza's
equipment and no right to seize Defendant Kanza's equipment in the name of Plaintiff
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Agent. The analysis in Issue '1' above is hereby adopted and incorporated by reference."
Issue 1 is the real party in interest issue which we have already addressed.

K.S.A. 2014 Supp. 84-9-102(72)(E) provides that a security interest may be held
by "a trustee, indenture trustee, agent, collateral agent, or other representative in whose
favor a security interest . . . is created or provided for."

The paucity of the Hutchinsons' briefing on this issue indicates that the issue has
been abandoned. See Friedman v. Kansas State Bd. of Healing Arts, 296 Kan. 636, 645,
294 P.3d 287 (2013). The district court properly granted summary judgment to Icon on
this issue.

 Consideration for the Guaranty of Mary Hutchinson

The Hutchinsons claim the court erred in dismissing the defense that there was no
consideration for Mary Hutchinson's guaranty. They argue that she "'had nothing to do
with the transaction'" and she "'had no participation in Kanza, and she received nothing
from this transaction.'"

Consideration for a contract "is presumed unless the lack of consideration is raised
as an affirmative defense and is proved by substantial competent evidence." State ex rel.
Ludwick v. Bryant, 237 Kan. 47, 50, 697 P.2d 858 (1985); see K.S.A. 16-107; K.S.A. 16-
108. A contract must be supported by consideration in order to be enforceable. 237 Kan.
at 50; Mitchell v. Miller, 27 Kan. App. 2d 666, 672, 8 P.3d 26 (2000). Consideration is
defined as some right, interest, profit, or benefit accruing to one party, or some
forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.
17A Am. Jur. 2d, Contracts § 102. To satisfy the requirement of consideration, "it is not
necessary that a benefit should accrue to the promisor; it is sufficient that something
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valuable flows from the person to whom the promise is made and that the promise is the
inducement to the transaction." 17A Am. Jur. 2d, Contracts § 113.

Consideration need not be something of pecuniary value or reducible to such value
in order to support a contractual promise. See In re Estate of Shirk, 186 Kan. 311, 321-
22, 350 P.2d 1 (1960); Murphy v. Convey, No. 90,125, 2004 WL 421991, at *3 (Kan.
App. 2004) (unpublished opinion), rev. denied 278 Kan. 846 (2004). Here, the district
court concluded that the consideration for Mary's guaranty was the agreement of the
lenders to loan $12.5 million to Kanza. Under a surety agreement, the consideration that
is provided to the principal is the consideration that supports the surety. The
consideration need not flow, and generally does not, directly to the surety. Rather,
sufficient consideration exists when a contract of guaranty is made contemporaneously
with and is part of the principal contract. Douglass v. Midland Oil Co., 121 Kan. 448,
Syl. ¶ 3, 247 P. 1048 (1926). "Where a third party promises in writing to pay the debt of
another any benefit or inconvenience or detriment to the creditor is a sufficient
consideration to support such promise or guaranty." Woodman v. Millikan, 126 Kan. 640,
Syl. ¶ 3, 270 P. 584 (1928).

The Hutchinsons cite 12 C.F.R. § 202.7(d) in support of their argument. But this
regulation relates to the Equal Credit Opportunity Act, it does not deal with the issue of
consideration of a guarantor, and it therefore is irrelevant. The $12.5 million loan to
Kanza was sufficient consideration under Kansas law for Mary's guaranty.

 Necessary Parties

The Hutchinsons assert that the lenders are necessary parties to this action. But they
merely reassert the argument raised on the last two issues without any additional
authorities or arguments. This argument fails.
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 Exclusion of Evidence in Summary Judgment Proceedings

The Hutchinsons contend the district court erred in applying Supreme Court Rule
141 (2015 Kan. Ct. R. Annot. 242) and excluding its exhibits and affidavits from
evidence during its consideration of the summary judgment motion.

The substance of Supreme Court Rule 141 is well known to the parties and need
not be spelled out here. In responding to the motion, the Hutchinsons failed to controvert
the facts asserted by Icon by including a concise summary of conflicting testimony or
evidence; by including any additional genuine issues of material fact which would
preclude summary judgment; and by making precise references to the transcripts,
depositions, interrogatories, admissions, affidavits, exhibits, or other supporting
documents in the record. Thus, the district court adopted Icon's statement of material
uncontroverted facts as admitted by the Hutchinsons and rejected the Hutchinsons'
unsupported claimed facts.

Pro se litigants are not excused from compliance with Rule 141. As stated in
Mangiaracina v. Gutierrez, 11 Kan. App. 2d 594, 595-96, 730 P.2d 1109 (1986):

"A pro se litigant in a civil case is required to follow the same rules of procedure and
evidence which are binding upon a litigant who is represented by counsel. Our legal
system cannot function on any basis other than equal treatment of all litigants. To have
different rules for different classes of litigants is untenable. A party in civil litigation
cannot expect the trial judge or an attorney for the other party to advise him or her of the
law or court rules, or to see that his or her case is properly presented to the court. A pro se
litigant in a civil case cannot be given either an advantage or a disadvantage solely
because of proceeding pro se."

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The fact that the Hutchinsons were pro se does not excuse them from compliance with
Rule 141, particularly when Steve Hutchinson was formerly a licensed and practicing
attorney. See O'Neill v. Herrington, 49 Kan. App. 2d 896, 906-07, 317 P.3d 139 (2014),
rev. denied 301 Kan. ___ (January 15, 2015). The district court did not abuse its
discretion in admitting all of Icon's uncontroverted facts and in excluding the
Hutchinsons' exhibits and affidavits from consideration.

 Choice of Law

The Hutchinsons contend that the district court erred in applying Kansas rather
than New York law in granting summary judgment to Icon. The loan agreement contains
a choice-of-law provision designating New York law. But no issue arises when the laws
of the two states do not differ on matters at issue. State v. Francis, 282 Kan. 120, 134,
145 P.3d 48 (2006); AT&SF Ry. Co. v. Stonewall Ins. Co., 275 Kan. 698, 731, 71 P.3d
1097 (2003).

Here, the Hutchinsons contend that there were oral agreements and additional
proposals that altered the terms of the loan agreement. Steve Hutchinson claimed that
New York law applied to the statute-of-frauds question. When the court asked him how
the New York statute of frauds differed from the Kansas statute of frauds, Hutchinson
responded: "I do not [know]. I assume that there is [a difference], or counsel would have
asserted New York law. They're very sharp. But I do not know."

In their response to Icon's summary judgment motion, the Hutchinsons had the
burden to establish their choice-of-law argument. Because they failed to identify any
difference between Kansas law and New York law, they waived this issue. See Stanley
Bank, 298 Kan. at 759. The district court did not err in granting summary judgment to
Icon on the Hutchinsons' counterclaims.
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 Ignored Issues of Material Fact

The Hutchinsons' entire argument on this issue follows:

"Defendants incorporate by reference the Analysis above in Issue '6'. Assuming
Defendants are allowed to offer Affidavit and Exhibit evidence in response to Plaintiff
Agent's Motion for Summary Judgment, then the Trial Court erred in failing to recognize
numerous genuine issues of material fact in elements of Plaintiff Agent's Motion for
Summary Judgement and Defendants' Counterclaims and Affirmative Defenses."

First, we have already dealt with this issue and resolved it against the Hutchinsons.
Further, their vague assertion in their brief does not satisfy the requirement that an issue
be adequately briefed in order to avoid being deemed abandoned or waived. A point
incidentally raised in a brief is insufficient to preserve the issue for review. Friedman,
296 Kan. at 645.

 Assignment of Defenses and Counterclaims

The Hutchinsons argue that the district court erred in rejecting the assignment of
Kanza's affirmative defenses and counterclaims to Steve Hutchinson. The district court
rejected Kanza's purported assignment of claims for two reasons: (1) The document was
filed after the close of discovery and violated previously imposed sanctions against
Hutchinson for discovery violations; and (2) the purported assignment was an attempt to
circumvent the rule that a corporate entity must be represented by counsel.

The sole authority cited by the Hutchinsons is Bolz v. State Farm Mut. Ins. Co.,
274 Kan. 420, Syl. ¶ 1, 52 P.3d 898 (2002), which provides the general rule that all
choses of action, except for torts, are assignable. But they provide no contrary authority
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that addresses the district court's specific reasoning in this case—that the assignment
violated the discovery order and that the purported assignment was made to circumvent
the attorney representation rule.

The Hutchinsons have not appealed the district court's sanctions order and have
provided no argument that the district court abused its discretion by enforcing its
discovery order. The district court acted within its discretion as provided in K.S.A. 2014
Supp. 60-237(b)(2).

Further, Kansas law requires that a corporation must be represented by a Kansas
licensed attorney. Babe Houser Motor Co. v. Tetreault, 270 Kan. 502, 503, 14 P.3d 1149
(2000); Atchison Homeless Shelters, Inc. v. Atchison County, 24 Kan. App. 2d 454, 455,
946 P.2d 113, rev. denied 263 Kan. 885 (1997). Courts from other jurisdictions have
rejected similar attempts to avoid the requirement of legal counsel for corporations in
court. See Biggs v. Schwalge, 341 Ill. App. 268, 271, 93 N.E.2d 87 (1950) (the plaintiff
could not, by the subterfuge of an assignment from the corporation, avoid the prohibition
against a corporation's acting in court by an attorney in fact but not in law); Yogi Bear
Membership Corp v. Stalnaker, 571 N.E.2d 331, 333-34 (Ind. App. 1991) (the record
contained no evidence that the assignment of debt to a corporate employee was anything
other than an attempt to circumvent the attorney representation requirement); Property
Exchange & Sales v. Bozarth, 778 S.W.2d 1, 2-3 (Mo. App. 1989) (corporation could not
avoid the general rule against allowing it to appear by a nonattorney by assigning its
cause of action to one of its officers in his individual capacity). In GLN Compliance
Group, Inc. v. Ross, 482 Fed. Appx. 313, 314 n.1 (10th Cir. 2012) (unpublished opinion),
the court stated:

"[T]he rule in this circuit is that a corporation may appear in federal court only through
an attorney See Tal v. Hogan, 453 F.3d 1244, 1254 (10th Cir. 2006). Naekel claims that
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GLM transferred to him all rights, obligations, and responsibilities relating to this civil
action; however, courts have rejected such assignments as 'no more than a procedural
subterfuge to avoid court rules prohibiting corporations from appearing without legal
representation.' [Citations omitted.]"

The district court did not err in rejecting the assignment of Kanza's affirmative
defenses and counterclaims to Hutchinson.

 Restricting the Trial to Commercial Reasonableness of Sale

It is unclear whether the Hutchinsons are objecting to the district court's ruling at
summary judgment that the trial would be limited to the commercial reasonableness of
the March 2013 sale or whether the Hutchinsons are objecting to evidentiary rulings at
trial.

Because their issue statement refers to the "'commercial reasonableness' of
numerous forced sales," it appears at first glance that the Hutchinsons are objecting to the
district court's ruling on summary judgment that the trial would be limited to the
commercial reasonableness of the March 28, 2013, sale. But then the other sales were
conducted pursuant to contracts between Kanza and Ritchie Brothers.

But the Hutchinsons state in their brief that the trial court erred in refusing to
allow testimony at trial on the commercial reasonableness of these other sales. That is the
extent of their argument on the issue, other that their citation to cases that state the rule
that collateral must be sold in a commercially reasonable manner before a deficiency
judgment can be entered. The Hutchinsons provide no argument as to how the earlier
sales were not commercially reasonable. Thus, they have failed to show that the district
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court erred by restricting the trial to the issue of the commercial reasonableness of the
final replevin sale.

 Commercial Reasonableness of the Final Collateral Sale

The Hutchinsons argue that the district court erred in entering a deficiency
judgment in favor of Icon when there was no evidence offered to support the
commercially reasonable value of the assets sold.

When reviewing a mixed question of fact and law, we apply a bifurcated review
standard. The trial court's factual findings are reviewed under the substantial competent
evidence standard. Its conclusions of law based on those facts are subject to unlimited
review. See Gannon v. State, 298 Kan. 1107, 1175-76, 319 P.3d 1196 (2014).

The Hutchinsons do not point to evidence in the record supporting their position
that the sale was not commercially reasonable. Rather, they cite the following: (1) Craig
Jackson, managing director of Icon, was unable testify to the fair market value of the
equipment at the time the loan was made; and (2) Al Engelstad, acting regional sales
manager with Ritchie Brothers, was not an expert on the specific pieces of equipment
sold and the value of those pieces at the time of the final sale.

K.S.A. 2014 Supp. 84-9-627(b) provides:

"Dispositions that are commercially reasonable. A disposition of collateral is
made in a commercially reasonable manner if the disposition is made:
(1) In the usual manner on any recognized market;
(2) at the price current in any recognized market at the time of the disposition; or
(3) otherwise in conformity with reasonable commercial practices among dealers
in the type of property that was the subject of the disposition."
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In Westgate State Bank v. Clark, 231 Kan. 81, 92-95, 642 P.2d 961 (1982), our
Supreme Court set out nine nonexclusive factors to consider in determining whether a
sale was commercially reasonable:

(1) the duty to clean up, fix up, and paint up the collateral;
(2) whether disposition was made public or private;
(3) whether the collateral was disposed of wholesale or retail;
(4) whether the collateral was disposed of by unit or in parcels
(5) the creditor's duty to publicize the sale;
(6) the length of time the collateral is held prior to the sale;
(7) the creditor's duty to give notice of the sale to the debtor and competing
secured parties;
(8) the actual price received at the sale; and
(9) other factors such as the number of bids received and the method employed to
solicit bids.

"The determination of whether such a sale is commercially reasonable must be made on a
case-by-case basis considering the Westgate factors and the aggregate of circumstances
shown." Union Nat'l Bank of Wichita v. Schmitz, 18 Kan. App. 2d 403, 411, 853 P.2d
1180 (1993). The fact that a better price could have been obtained at a different time or
by using a different method is not sufficient to show that the sale was not commercially
reasonable. Westgate, 231 Kan. at 92; see K.S.A. 2014 Supp. 84-9-627.

The Hutchinsons argue that absent evidence of the exact value of the equipment
sold there is "no way to determine the commercial reasonableness of the price received at
the fire sale auction." But our UCC statute on commercially reasonable dispositions
expresses the factors establishing a commercially reasonable sale in the alternative.

17

Here, the evidence at trial established that the sale was conducted in the usual
manner for the market for such equipment and was in conformity with reasonable
commercial practices among dealers in the type of property that was being sold. There
was testimony that Icon selected Ritchie Brothers to perform the sale based on its
experience auctioning heavy and rail equipment. There were at least 200 rail-related
companies that had either attended its sales or were part of its database of equipment
buyers. There was testimony that Ritchie Brothers is the world's largest industrial auction
company, conducting several auctions a year at each of its auction sites where it
assembles heavy equipment from numerous sources. It establishes set auction dates in
order to permit it to assemble a sufficient volume of equipment to attract buyers. Ritchie
Brothers had prior experience selling railroad construction equipment. Icon introduced
exhibits showing data from the sale as well as marketing that occurred prior to the sale.
Icon presented evidence of the sale price of each and every item of collateral sold at the
auction and compared those prices to certain values asserted by Hutchinson.

There was substantial evidence to support the conclusion that the sale was
conducted in a commercially reasonable manner.

 Expert Testimony

The Hutchinsons claim that the district court erred in admitting expert testimony
of Engelstad, an employee of Ritchie Brothers, because he testified that he was not an
expert on the specialized equipment being sold and he did not have any expertise on the
value of the equipment. The Hutchinsons complain that "[a]bsent knowledge of the
equipment being sold and its value, the Expert had no reasonable factual basis for his
opinions."

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Expert opinion testimony is generally admissible if it aids the factfinder with
unfamiliar subjects or in interpreting technical facts or if it assists the factfinder in arriving
at a reasonable factual conclusion from the evidence. State v. Gaona, 293 Kan. 930, 948,
270 P.3d 1165 (2012). To testify as an expert, the witness must be professionally skilled
or experienced in the subject about which the expert is testifying. 293 Kan. at 948; see
K.S.A. 2014 Supp. 60-456 (generally governing the admissibility of lay and expert
opinion testimony).

At trial, Engelstad testified as an expert in the marketing, auction, and sale of
equipment, not as an expert on the value of the individual pieces of equipment. Engelstad
had worked 43 years in the heavy equipment industry. His job duties included overseeing
the equipment auction process from the first inspection of the equipment through the sale
at auction. His experience included sales and auctions of heavy equipment for both
lenders and owners. The district court properly admitted this testimony.

 Rejection of Claimed Business Records

The Hutchinsons claim the district court erred in rejecting on hearsay grounds an
appraisal of the equipment sold which was offered into evidence by Steve Hutchinson.
Hutchinson claimed the appraisal, prepared by someone else, qualified as a business
record. But he failed to lay a proper foundation for admission of the document as a
business record.

"Evidence of a statement which is made other than by a witness while testifying at
the hearing, offered to prove the truth of the matter stated, is hearsay evidence and
inadmissible." K.S.A. 2014 Supp. 60-460. A party alleging that a document is a business
record must lay a proper foundation to bring the hearsay evidence within the business
records exception. State v. Brown, 15 Kan. App. 2d 465, 468, 809 P.2d 559, rev. denied
19

248 Kan. 997 (1991); see K.S.A. 2014 Supp. 60-460(m). The foundation must include
testimony from someone who is "'qualified by knowledge of the facts.'" 15 Kan. App. 2d
at 468 (quoting State v. Cremer, 234 Kan. 594, 601, 676 P.2d 59 [1984]). None of this
was done.

The case cited by the Hutchinsons is irrelevant. See Mooney v. City of Overland
Park, 283 Kan. 617, 153 P.3d 1252 (2007). It does not involve the business records
exception to the hearsay rule.

The district court acted within its discretion in excluding the appraisal under the
hearsay exception.

 Attorney Fees and Costs

There is presently outstanding a motion filed by Icon for attorney fees pursuant to
Supreme Court Rule 7.07(b)(1) (2015 Kan. Ct. R. Annot. 72). In support of its motion,
Icon has provided us with an affidavit indicating the nature and extent of the services
rendered, the time expended on the appeal, and the factors considered in determining the
reasonableness of the fee. They refer to the loan document which requires the borrower to
pay reasonable attorney fees. But Icon seeks fees against the guarantors, not the
borrower. The guarantors guaranteed payment of obligations of the borrower for the loan.
Icon's fees and expenses were incurred as a result of this appeal. But the borrower has not
appealed; it was the guarantors who appealed in this case.

But Hutchinson, one of the guarantors and the president and sole stockholder of
Kanza, has asserted claims in this appeal which, if successful, would have vitiated Icon's
judgment on Kanza's promissory note. For example, the Hutchinsons challenge:

20

Icon's standing in this action;
the validity of the security interest in Kanza's property;
the failure to join the lenders as necessary parties;
improper choice of laws;
exclusion of evidence at the summary judgment proceedings and at trial; and
the assignment of Kansa's defenses and counterclaims.

Icon was required to defend against these claims of error to protect its judgment against
Kanza. Accordingly, we conclude that an award of attorney fees and costs for the
disposition of this appeal is appropriate under the circumstances of this case.

Icon is awarded attorney fees of $470.78 and costs of $52,667 against appellants
for the disposition of this appeal.

Affirmed and attorney fees and costs awarded.