Kape Roofing & Gutters, Inc. v. Chebultz

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NOT DESIGNATED FOR PUBLICATION

No. 113,025


IN THE COURT OF APPEALS OF THE STATE OF KANSAS

KAPE ROOFING & GUTTERS, INC., and
CHUCK COOPER,
Appellants,

v.

CHAD CHEBULTZ, an individual; and
COMMUNITY FIRST NATIONAL BANK,
a banking corporation,
Appellees.


MEMORANDUM OPINION

Appeal from Dickinson District Court; DAVID R. PLATT, judge. Opinion filed July 8, 2016.
Affirmed in part, vacated in part, reversed in part, and remanded with directions.

Caleb Boone, of Hays, for appellants.

Pedro L. Irigonegaray and Elizabeth R. Herbert, of Irigonegaray & Associates, of Topeka, and
Tim W. Ryan and Arvid V. Jacobson, of Jacobson Ryan LC, of Manhattan, for appellees.

Before HILL, P.J., STANDRIDGE and ATCHESON, JJ.

Per Curiam: Our policy in Kansas is to try lawsuits on their merits and not to
award judgments based on the inaction of trial counsel. Unfortunately, this case is an
example of the struggle a trial judge has when a lawyer fails to do what he is supposed to
do in a timely way. A Kansas judge, keeping in mind the rights of the parties, has the
authority and duty to sanction parties and lawyers as needed in order to bring a legal
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action to a just conclusion. Justice seldom arises from letting a case remain idle. In doing
so, however, the judge must establish appropriate sanctions with an eye on what was
done or not done. When setting sanctions, the judge must also consider the consequences
of that lawyer's inaction. The more flagrant, harmful, foul deserves the more serious
sanction.

We see no evidence in the record that Kape Roofing and Gutters, Inc. was
complicit in Caleb Boone's failure to appear for a pretrial conference. We vacate the
ultimate sanction of striking Kape's pleadings. We remand for reconsideration of
imposing a more reasonable sanction.

Chad Chebultz bought a house in Abilene.

In 2011, Chad Chebultz contracted to purchase a house. Three days prior to the
scheduled closing on the loan, the house suffered significant hail damage. Concerned that
the bank would not close the loan on the purchase due to the hail damage, Chebultz got a
repair estimate, in the form of a roofing contract, from Kape.

The contract total estimate from Kape was $20,226.34. It listed prices for roofing,
guttering, and some power vents. The contract stated Kape was entitled to all insurance
proceeds related to the work. On the contract there is also a check mark placed beside the
term "contractor 10% O&P" (overhead and profit) but the corresponding blank line is
filled in with the word "included." Chebultz never signed the contract. Kape, however,
knew that Chebultz was not yet the owner of the house and that the insurance proceeds
would first be paid to the original owner, Mike James, who, in turn, would give the
proceeds to Chebultz.

Chebultz bought the house on July 18, 2011. Kape completed the roofing and
guttering work on September 7, 2011, and Chebultz was satisfied with the work.
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Their relationship deteriorated when the parties began disputing the amount owed.
Kape sent Chebultz six conflicting invoices between September 2011 and February 2012.
On February 22, 2012, Chuck Cooper, the owner of Kape, sent a letter to Chebultz
demanding payment of $5,109.52 and threatened collection of the debt by his attorney.

Later, after Chebultz received a demand letter from Michael Alley, Kape's
attorney, seeking $5,109.52 and threatening legal action, Chebultz placed signs in his
yard critical of Kape's practices. Chebultz also threatened to post similar criticisms on
local billboards, with some advertisers, in newspapers, and on radio and television.

On March 23, 2012, Alley recorded a mechanic's lien where Kape claimed a lien
on the home for $5,109.52 plus interest from March 16, 2012, plus attorney fees. Alley
relied on December 20, 2011, as the completion date for the Chebultz project to file the
lien. Cooper told Alley, the attorney, that Chad Olson was a subcontractor for Kape.
Alley did not have any knowledge of the facts surrounding how Olson came on the job,
how Olson was paid, or who supervised Olson. Settlement negotiations between the
parties failed.

The lawsuit begins.

Since the heart of this appeal is the subject of court-imposed sanctions, we
elaborate on the various positions of the parties in the lawsuit. The tenor of the
arguments, and the repeated inaction of one counsel demonstrates a case history that
provides a context for our rulings. The progress of this legal action was not smooth, but
was contentious and subject to frustrating delays. To illustrate this, we relate in detail
how this action proceeded.

Kape filed a three-count petition against Chebultz and his lender, Community
First. Count I sought a permanent injunction against Chebultz to prevent any further
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display of signs and other alleged defamatory statements critical of Kape. Count II
alleged causes of action against Chebultz for defamation, tortious interference with
prospective business advantage, and breach of contract. Kape sought $7,200,000 in actual
damages. Count III sought foreclosure of its mechanic's lien against Chebultz' property.

Chebultz and Community First filed general denials as answers. Chebultz did
agree to a permanent injunction restraining him from posting any more signs but
counterclaimed for fraud, violations of the Kansas Consumer Protection Act, and the tort
of outrage.

Chebultz alleged for his consumer protection count that Kape committed deceptive
acts by:

(1) attempting to obtain payments for overhead and profit when the contract
specified that such payments (10 percent O&P) were included in the
contract;
(2) representing Olson's work as its own to both extend the time for the filing
of a mechanic's lien and to increase its entitlement to overhead and profit
payments; and
(3) billing for both the materials already included in the contract, and for work
not contemplated by the contract.

Chebultz also alleged that Kape's intentional outrageous conduct in filing a
mechanic's lien and seeking foreclosure and sale of Chebultz' home unnecessarily caused
Chebultz extreme and severe emotional distress. Chebultz subsequently amended his
counterclaims for fraud and outrage to include claims seeking punitive damages.



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Chebultz seeks partial summary judgment claiming the lien was filed out of time.

On January 27, 2014, Chebultz and Community First filed a joint motion for
partial summary judgment, arguing that Kape had filed an untimely mechanic's lien
because Kape could not establish a subcontractor relationship with Olson, whose work it
relied upon to file its lien. Kape did not respond.

Then, on March 7, 2014, Kape's counsel, Caleb Boone, failed to appear at the
scheduled pretrial conference. Chebultz and Community First moved to dismiss Kape's
case for failure to appear. The district court struck the pleadings for Count II in Kape's
petition as a sanction for not appearing and dismissed it for failure to prosecute. These
were the claims for defamation, tortious interference, and breach of contract.

The court noted that Kape had not responded to Chebultz' and Community First's
joint motion for partial summary judgment despite having received an extension of time
to do so. The court granted their joint motion and then set a date of April 18, 2014, to
hear evidence on Chebultz' remaining counterclaims. The journal entry reflecting the
court's rulings noted that Kape's pleadings had been stricken for "failure to prosecute"
and was filed on March 13, 2014.

After that, Kape filed a "MOTION TO DISMISS DEFAULT JUDGMENT
PROCEEDINGS AND/OR MOTION FOR RELIEF FROM JUDGMENT OR ORDER
OF DEFAULT BY FAX." In it, Kape argued:

(1) the March 13, 2014, journal entry was not proper because Kape had not
received proper statutory notice of the March 7, 2014, hearing under K.S.A.
2012 Supp. 60-255;
(2) it was entitled to a jury trial;
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(3) Kape's counsel was out of state on March 7, 2014, and simply failed to file
an agreed motion and order to continue; and
(4) the district court should grant permission to file an interlocutory appeal.

In response, Chebultz argued that Kape was not entitled to an interlocutory appeal
because the district court did not enter a default judgment at the March 7, 2014, hearing.
Chebultz also argued:

(1) the district court's order striking Kape's pleadings was an authorized
sanction;
(2) Kape lost its right to a jury trial when its pleadings were stricken as a
sanction;
(3) no statutory notice error occurred at the March 7, 2014, hearing because no
default judgment was entered;
(4) there was no evidence of excusable neglect justifying Kape's failure to
timely move for a continuance of the March 7, 2014, hearing.

The district court grants Kape no relief.

The court denied Kape's request to reconsider its March 13, 2014, order striking
Kape's pleadings on Count II. The district court found that Kape suffered no prejudice for
being sanctioned at the March 7, 2014, hearing given that:

(1) there was no proof of excusable neglect for Kape not being present at the
hearing;
(2) Kape had not controverted Chebultz' and Community First's joint motion
for partial summary judgment; and
(3) there was no request for a continuance before the district court.
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The district court denied certification for an interlocutory appeal, noting that no
final judgment had been entered at that point—only sanctions were ordered.

We pause to note here that the court had imposed sanctions on Kape before this. In
April 2013, in an order compelling discovery, the court noted that Kape's counsel had
failed to appear at the hearing for Chebultz' and Community First's motion to compel
discovery. The day before the hearing, Kape's counsel sought to continue the matter but
Chebultz' and Community First's attorneys had not consented to a continuance. The court
ordered the discovery to be provided within 10 days and ordered Kape to pay almost
$2,500 in attorney fees as a sanction. The court also ruled: "If Plaintiffs fail or refuse to
provide the entire discovery within that time period, Plaintiffs' action will be dismissed,
i.e., all pleadings stricken."

After reaffirming the striking of Kape's pleadings, the court determined that
Chebultz, as Kape requested, would have a jury trial on his counterclaims and whether
punitive damages should be awarded. A status conference for those issues was set for
June 25, 2014, and a jury trial was set for July 17, 2014. Counsel were instructed to, prior
to the status conference, "File and exchange your proposed instructions."

On June 24, 2014, Chebultz filed his proposed jury instructions. Kape did not file
any proposed jury instructions. Instead, on June 25, 2014, Kape filed a motion for
summary judgment seeking dismissal of Chebultz' counterclaims.

In that summary judgment motion, Kape argued that:

(1) Chebultz could not bring a consumer protection claim against Kape because
Chebultz did not enter into a consumer transaction with Kape and was not a
real party in interest;
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(2) no outrageous conduct occurred because Kape acted in good faith to file the
mechanic's lien or, in the alternative, it was entitled to the "advice of
counsel" defense to both the filing of the mechanic's lien and Chebultz'
claim of outrage.

At the status conference held the same day, the district court changed the
scheduled jury trial for July 17, 2014, to a bench trial because Kape had failed to file any
proposed jury instructions. The district court clarified that it had not granted default
judgment against Kape on March 7, 2014, and reconfirmed that it would not change its
decision to strike Kape's pleadings for failing to appear at the pretrial conference. The
district court also ruled that it would not consider Kape's June 25, 2014, motion for
summary judgment because it was untimely. The district court, however, noted that it
would still consider arguments on any legal issue after presentation of the evidence at
trial.

On June 27, 2014, Kape moved to dismiss Chebultz' counterclaims. This motion
mirrored the arguments from its June 25, 2014, motion for summary judgment. Five days
later, Kape filed a factual statement based in part on Chebultz' pretrial questionnaire to
support its motion to dismiss.

Chebultz responded by arguing that Kape's motion:

(1) was untimely because the motion was filed beyond the ordered time for the
filing of dispositive motions;
(2) was an attempt to present the same arguments that were raised in its
untimely June 25, 2014, motion for summary judgment; and
(3) converted to a motion for summary judgment because Kape's factual
statement relied on a pretrial questionnaire or matters outside the pleadings.

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Chebultz also maintained that he was afforded the protections of the Consumer
Protection Act and argued that Kape's contention that he was not a real party in interest
under the Act went to the question of jurisdiction and, thus, was not subject to dismissal
and required the presentation of evidence.

The court tried the counterclaims.

The district court conducted a bench trial. Chebultz testified extensively about
how he had been emotionally, physically, and financially harmed by the lawsuit and the
filing of the mechanic's lien. The parties stipulated to admit into evidence Alley's and
Olson's depositions.

The district court granted judgment in favor of Chebultz. It rejected Kape's advice
of counsel defense and reaffirmed its previous finding that the mechanic's lien claim was
improper and out of time. The district court found that Chebultz was a true party in
interest or a consumer. The district court also found that:

(1) Kape caused Chebultz substantial financial loss;
(2) Kape's actions constituted outrageous conduct; and
(3) Kape intentionally and maliciously committed deceptive acts.

The district court ordered Kape to pay compensatory damages of $88,000 and
punitive damages of $10,000 based on Kape's outrageous conduct, a civil penalty of
$10,000 under the Act, and $20,000 for attorney fees. The district court adopted
Chebultz' proposed findings of fact and conclusions of law as its own.

On November 5, 2014, the district court entered its final judgment under K.S.A.
2012 Supp. 60-254 granting Chebultz and Community First's joint motion for partial
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summary judgment on Count III—the mechanic's lien foreclosure. The order was filed on
December 5, 2014.

After that, the district court denied Kape's motion to alter or amend, ruling that
Kape's advice of counsel defense was inapplicable as a complete defense to the claims of
outrage and the alleged Act violations. Specifically, the district court found that Alley
would not have considered Olson a subcontractor and filed the mechanic's lien had Kape
given Alley accurate information concerning its relationship with Olson. The district
court also reaffirmed its previous ruling that Kape met the threshold for committing
outrageous conduct.

Kape makes four claims in this appeal. First, the grant of default judgment was
void because of lack of notice. Second, the court erred in granting judgment under the
consumer protection act as Chebultz was not a consumer. Third, the court erred by
granting judgment and punitive damages for the tort of outrage. Finally, Kape contends
the court erred when it denied its advice of counsel defense. We will address the issues in
that order.

The court did abuse its discretion in entering its sanction.

Kape mistakenly argues that the court erroneously granted default judgment
without first giving the statutorily required notice set out in K.S.A. 2012 Supp. 60-255(a).
Twelve pages of its brief is devoted to this claim. The trouble with this argument is that
this was not a default judgment proceeding that the court takes up when a party fails to
answer. Instead, it was the imposition of a sanction after a party failed to appear at a
required pretrial conference. Kape's argument is irrelevant. We view this as a matter of
discretion on the part of the trial court.

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Whether a district court erred in striking pleadings is reviewed for an abuse of
discretion. Wallace, Saunders, Austin, Brown & Enochs, Chtd. v. Louisburg Grain Co.,
250 Kan. 54, 63-64, 824 P.2d 933 (1992). A judicial action constitutes an abuse of
discretion if the action (1) is arbitrary, fanciful, or unreasonable; (2) is based on an error
of law; or (3) is based on an error of fact. Northern Natural Gas Co. v. ONEOK Field
Services Co., 296 Kan. 906, 935, 296 P.3d 1106 (2013). Additionally, an abuse of
discretion occurs if discretion is guided by an erroneous legal conclusion or goes outside
the framework of or fails to consider proper statutory limitations or legal standards.
Graham v. Herring, 297 Kan. 847, 853-54, 305 P.3d 585 (2013).

The district court has broad discretion in the handling of the pretrial conference.
Burkhart v. Philsco Products Co., 241 Kan. 562, 565, 738 P.2d 433 (1987). Pretrial
conferences are controlled principally by K.S.A. 2012 Supp. 60-216 and Supreme Court
Rule 140 (2015 Kan. Ct. R. Annot. 239). K.S.A. 2012 Supp. 60-216(f) authorized the
district court to impose a sanction after giving Kape the opportunity to be heard for
failing to appear at a pretrial conference. Among the sanctions authorized is "striking
pleadings in whole or in part." K.S.A. 2012 Supp. 60-237(b)(2)(A)(iii).

Here, the district court's sanction was authorized under K.S.A. 2012 Supp. 60-
237(b)(2)—the statute for sanctions to be imposed where a party has not complied with
discovery orders. Thus, in addressing the appropriateness of the sanction here, we can
look for guidance at the legal principles surrounding appeals involving the imposition of
sanctions and discovery. The Kansas Supreme Court has clarified

"'where there is evidence that a party has acted in deliberate disregard of reasonable and
necessary orders of a court, and where such party is afforded a hearing and an
opportunity to offer evidence of excusable neglect, the imposition of a stringent sanction
will not be disturbed.' [Citation omitted.] Additional principles to aid in ascertaining
whether the district court abused its discretion emerge from decisions involving the
sanction of default judgment. The sanction should be designed to accomplish the objects
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of discovery rather than for the purpose of punishment. [Citation omitted.] Where the
party failed to comply due to inability to do so rather than bad faith, a severe sanction
such as dismissal or default probably would be inappropriate. [Citation omitted.]'"
(Emphasis added.) Shay v. Kansas Dept. of Transportation, 265 Kan. 191, 194, 959 P.2d
849 (1998).

In finding that Kape had not presented evidence of excusable neglect, the district
court focused on the fact that the case "had gone on for quite some time," Kape's failure
to appear at the pretrial conference, and Kape's failure to move for a continuance.

"Inexcusable neglect," however, has been defined as "reckless indifference." It
implies something more than the unintentional inadvertence or neglect common to all
who share the ordinary frailties of mankind. "Excusable neglect" is not susceptible to
clear definition and must be determined from the unique circumstances of each case.
Jenkins v. Arnold, 223 Kan. 298, 299, 573 P.2d 1013 (1978).

On appeal, Kape summarizes the reasons it offered at the hearing on its motion to
set aside the default judgment for failing to appear at the pretrial conference:

"Counsel for the Plaintiffs was in Eastern Pennsylvania on March 7th. Counsel for
the Plaintiffs had informed the court and other counsel of that fact sometime before
March 7, 2014.
"Counsel for the Plaintiffs was in the process of preparing the Journal Entry of
Continuance but did not have at hand the new hearing date. Plaintiffs' Counsel therefore
had contacted opposing counsel and the Court's administrative assistant to determine that
date by telephone. Despite making these telephone calls, Counsel for the Plaintiff did not
receive return telephone calls with this information.
"Counsel for the Plaintiffs was attempting to comply with the Court's orders and
was simply trying to complete the drafting of the order for continuance and had
inadvertently misplaced the note containing the correct new date and time for the hearing.
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"When Counsel contacted the Court's Administrative Assistant, the
Administrative Assistant did not have the new date and time and so Plaintiffs' Counsel
contacted Defense Counsel to obtain that date, as stated above."

Chebultz generally does not dispute Kape's actions in not filing a timely motion for
continuance, except to point out that Kape could have done more to ensure that the matter
was put before the court.

Clearly, Kape did not appear at the pretrial conference, which is sanctionable,
especially in light of the previous sanctions the court imposed. Yet Chebultz does not
dispute that it had previously agreed to a continuance of the pretrial conference, and
Kape's counsel did provide an explanation for his failure to not move for a continuance
while he was in Pennsylvania. The record does not support a finding that Kape's counsel
deliberately disregarded his obligation to be at the pretrial conference. See Shay, 265
Kan. at 194. The district court also declined to address Kape's suggestion that it impose a
less severe sanction.

In our view, Caleb Boone failed to appear at a pretrial conference. To his credit, he
had spoken with opposing counsel beforehand and ascertained that they did not object to
a continuance of the conference if Boone prepared a motion and order. This he did not
do.

The day came for the conference; one side appeared. Kape, represented by Boone,
did not. This failure to appear came on the heels of Boone failing to file any response to
Chebultz' motion for summary judgment. Evidently, that failure came after Boone's client
had been previously sanctioned almost $2,500 in attorney fees for his failure to comply
with discovery requests. We note that was another hearing that Boone failed to attend.

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Contemplating this string of not doing things when they needed to be done makes
us understand why the judge was exasperated with Boone's recurrent inattention to the
case and his duty to move it forward. We understand the frustration the trial judge
experienced when counsel delayed the resolution of this lawsuit.

We cannot tell from this record whether Boone did all of this deliberately or was
simply negligent. If it was deliberate, then he was disrespectful of the very system he has
sworn to uphold. If he was negligent, then he did his client a grave disservice.

Further, we cannot tell from this record if Boone's client participated in a strategy
of delay. This concerns us because the sanction of striking its pleadings affects Kape the
most. Should a litigant be penalized for the negligence of its agent? If Kape was in no
way responsible for Boone's inaction, failure to appear, or move for a continuance, is it
reasonable to punish his client? If there is evidence of complicity then we see where
imposing the ultimate sanction is appropriate. We just cannot affirm such an action with
the record we have before us.

Consequently, even though the district court properly exercised its discretion in
imposing a sanction against Kape for failing to attend the pretrial conference, the striking
of pleadings as a sanction was too severe. We vacate the sanction and remand the matter
for a judicial determination of a more reasonable sanction.

The court properly granted summary judgment to Chebultz on the mechanic's lien.

Kape argues that the district court erred in granting partial judgment to Chebultz
and Community First on Count III of Kape's petition—the foreclosure of the mechanic's
lien.

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Chebultz and Community First alleged in their joint motion that Kape's cause of
action for foreclosure of the mechanic's lien could be disposed of on summary judgment
because Kape could not establish that the relationship between Olson and Kape met the
criteria for a subcontractor relationship, thus making the filing of the mechanic's lien
untimely under K.S.A. 60-1102. Kape does not dispute that it filed nothing in response to
Chebultz and Community First's joint motion before the district court considered the
motion at the March 7, 2014, scheduled pretrial conference.

The standards governing whether the district court properly granted summary
judgment are well known.

For summary judgment to be appropriate, the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits must show that there
is no genuine issue as to any material fact and that the party seeking summary judgment
is entitled to judgment as a matter of law. Stanley Bank v. Parish, 298 Kan. 755, 759, 317
P.3d 750 (2014). In short, the movant argues there is nothing for a jury or trial judge
sitting as factfinder to decide that would make any difference. When opposing a motion
for summary judgment, an adverse party must come forward with evidence to establish a
dispute as to a material fact. In order to preclude summary judgment, the facts subject to
the dispute must be material to the conclusive issues in the case. 298 Kan. at 759.

In addressing a request for summary judgment, the district court must resolve all
facts and inferences that may reasonably be drawn from the evidence in favor of the party
opposing the motion. Stanley Bank, 298 Kan. at 759. However, if a party opposing
summary judgment fails to identify evidence disputing a particular factual representation
made in support of summary judgment, the district court may treat that fact as admitted
for purposes of deciding the motion. See Seitz v. Lawrence Bank, 36 Kan. App. 2d 283,
289-90, 138 P.3d 388, rev. denied 282 Kan. 791 (2006); Supreme Court Rule 141 (2015
Kan. Ct. R. Annot. 242). Moreover, a party opposing summary judgment may not rely on
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mere allegations in his or her petition. K.S.A. 2012 Supp. 60-256(e)(2); Carr v.
Vannoster, 48 Kan. App. 2d 19, 21, 281 P.3d 1136 (2012).

Because appellate courts apply the same standard, we are guided by these rules
here. Therefore, in this case, if there is no genuine issue of material fact regarding Olson's
lack of status as a subcontractor for Kape, then Chebultz and Community First are
entitled to judgment as a matter of law.

Finally, whether a mechanic's lien statement complies with statutory requirements
is a question of law over which appellate review is unlimited. Buchanan v. Overley, 39
Kan. App. 2d 171, Syl. ¶ 1, 178 P.3d 53 (2008); see K.S.A. 60-1102.

Chebultz and Community First properly supported their joint motion by directing
the district court to evidentiary materials attached to the motion consisting of the roofing
contract, various depositions, and exhibits. And the supplement to their joint motion
provided a copy of Kape's general liability insurance policy detailing requirements for
subcontractors.

For purposes of this appeal, because Kape made no effort to respond and point to
evidence calling into question any of the material factual representations made in support
of Chebultz and Community First's joint motion, we will construe the evidentiary
material against Kape in determining whether partial summary judgment was properly
granted to Chebultz and Community First. See Stanley Bank, 298 Kan. at 759.

We deem the following facts to be true: The initial roofing contract does not refer
to interior work. Kape's agents gave Chebultz' contact information to Olson. Olson
discussed the nature of, and corresponding bids, for the interior work with Chebultz, not
Kape. Olson was not working for Kape and considered Chebultz to be his contractor.
Chebultz made all payments to Olson and purchased all of the supplies for the interior
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work that Olson completed. Olson received his final payment on December 30, 2011, for
work he completed. Kape completed all of its work at the Chebultz home on September
7, 2011. Kape did not have a certificate of insurance for Olson demonstrating a
subcontractor relationship. Kape relied on Olson's completion date to file a lien on March
23, 2012.

The district court, in considering these facts and granting partial summary judgment
to Chebultz and Community First, concluded

"it seems pretty clear to me, in reviewing everything, that there wasn't a contractual
situation where Olson was the subcontractor. There was not work performed within the
statutory period for the mechanic's lien for [Kape]; therefore, clear to this Court, based on
the uncontroverted information before the Court, that Count 3 . . . would be dismissed, of
[Kape's] petition, concerning the foreclosure of mechanic's lien."

Based on the facts, the district court correctly concluded that Olson was not a
subcontractor and that Kape missed the statutory deadline for filing a mechanic's lien.
K.S.A. 60-1102(a) allows a contractor to file a lien within 4 months after the last work is
done "under the contract." Because Olson was not a subcontractor for Kape, any
mechanic's lien filed by Kape had to be filed within the 4-month period after September
7, 2012, or before January 7, 2013. Thus, Kape did not file the mechanic's lien before the
statutory deadline under K.S.A. 60-1102(a). As we have noted, Kape made no effort to
satisfy the requirement of presenting admissible evidence establishing a dispute as to a
material fact. On that basis alone, there was no evidence properly before the district court
to suggest Kape had filed a timely mechanic's lien under K.S.A. 60-1102(a). See Stanley
Bank, 298 Kan. at 759. Chebultz and Community First, therefore, were entitled to
summary judgment.



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We address the applicability of the Consumer Protection Act.

Kape essentially argues Chebultz had no standing to bring a claim under the Act
because he was not a consumer. Kape asserts that Chebultz did not sign the written
contract, did not have access to the insurance proceeds intended to pay for the contract,
did not purchase Kape's services, and did not own the home where the work was
performed.

In resolving questions of statutory interpretation, this court is mindful of the
following rules of statutory construction. First, we attempt to ascertain legislative intent
through the statutory language enacted, giving common words their ordinary meanings.
Second, when a statute is plain and unambiguous, we should not speculate about the
legislative intent behind that clear language, and should refrain from reading something
into the statute that is not readily found in its words. Lastly, where there is no ambiguity,
this court need not resort to statutory construction. Only if the statute's language or text is
unclear or ambiguous does this court use canons of construction or legislative history to
construe the legislature's intent. Cady v. Schroll, 298 Kan. 731, 738-39, 317 P.3d 90
(2014).

The Act's protection from a deceptive act or practice is limited to "'consumers'
engaged in 'consumer transactions' with 'suppliers.'" Berry v. National Medical Services,
Inc., 41 Kan. App. 2d 612, 621, 205 P.3d 745 (2009), aff'd on other grounds 292 Kan.
917, 257 P.3d 287 (2011) (citing K.S.A. 50-623[b]; K.S.A. 50-624, comment [c]; K.S.A.
50-626[a]). A consumer is defined as "an individual . . . who seeks or acquires property
or services for personal, family, household, business or agricultural purposes." K.S.A.
2012 Supp. 50-624(b).

A consumer transaction is a sale, lease, assignment, or other disposition for value
of property or services within Kansas (except insurance contracts regulated under state
19

law) to a consumer; or a solicitation by a supplier with respect to any of these
dispositions. K.S.A. 2012 Supp. 50-624(c). Kape does not dispute, and we assume
arguendo, that Kape is a "supplier" as contemplated by the Act. Finally, "the guiding
principle to be applied in interpreting the KCPA is that the act is to be liberally construed
in favor of the consumer." State ex rel. Stephan v. Brotherhood Bank and Trust Co., 8
Kan. App. 2d 57, 60, 649 P.2d 419 (1982); K.S.A. 50-623.

To have standing to sue under the Act, Chebultz must be a consumer. To be a
consumer, one must have been a party to the contract for purchase. First Nat'l Bank of
Anthony v. Dunning, 18 Kan. App. 2d 518, 524, 855 P.2d 493, rev. denied 253 Kan. 857
(1993). The Act's protection is limited to individuals who directly contract with suppliers
for goods or services. Ellibee v. Aramark Correctional Services, Inc., 37 Kan. App. 2d
430, 432, 154 P.3d 39 (2007). There are three inquiries in determining consumer status
under the Act: "(1) to whom were the representations made; (2) who suffered damages;
and (3) who was affected by the defendant's alleged misconduct." 37 Kan. App. 2d at
432.

The district court, in rejecting Kape's argument that Chebultz was not a true party
in interest, first pointed out that Kape sued Chebultz. The district court then found that
Chebultz was a consumer who had an oral contract with Kape based upon the terms in the
proposed roofing contract.

Kape attempts to avoid the obvious by asserting that there was no direct sale or
exchange of value between it and Chebultz. Kape maintains that Chebultz did not
purchase Kape's services because the insurance proceeds, which Chebultz received
through James, paid for the contract. However, the fact that the source of the payments to
Kape was insurance proceeds first conveyed from James to Chebultz does not affect the
determination of Chebultz' status as a consumer. "The source of the funds has no bearing
on who is a consumer under the KCPA." Hayes v. Find Track Locate, Inc., 60 F. Supp.
20

3d 1144, 1152 (D. Kan. 2014). Moreover, there is evidence in the record on appeal that
Kape made a representation directly to Chebultz on June 2, 2011.

Chebultz had direct contact with Kape in negotiating the contract and was a
contracting party. And there is no dispute that Chebultz, as the individual acquiring a
service, was the party that suffered the damages or was affected by Kape's misconduct.

We must also point out that Kape cannot have it both ways. Kape argues that it
should avoid the statutory penalties under the Act because Chebultz did not have a
contract. Yet, Kape seeks reversal of the district court's decision to strike its breach of
contract claim in Count II of its petition so it can move forward with that claim. Kape
asks this court to consider its agreement with Chebultz as a contract for purposes of
enforcing a mechanic's lien. Accordingly, Chebultz is a consumer under the Act. See
Ellibee, 37 Kan. App. 2d at 432.

The tort of outrage claim is unsustainable with this record.

In Taiwo v. Vu, 249 Kan. 585, 593, 822 P.2d 1024 (1991), the touchstone case on
the tort of outrage, the Kansas Supreme Court found that the evidence sustained a jury
verdict for the plaintiff on an outrage claim when "[r]easonable people could regard
[Vu's] behavior as atrocious and utterly intolerable in a civilized society." What did Vu
intentionally and maliciously do to the Taiwos?

"She assaulted, battered, and falsely imprisoned Mrs. Taiwo; she first lied to a law
enforcement officer when she called the police and then she lied to [another officer], both
times claiming Mr. Taiwo had vandalized her van; she filed a false police report against
the Taiwos concerning her Cadillac; Ms. Vu then induced an employee to lie to the police
about the Taiwos' involvement in vandalism and when she was confronted, she
challenged [the detective] to prove the Taiwos had not committed the vandalism." 249
Kan. at 593.
21

However, the majority of intentional infliction of emotional distress cases in
Kansas have generally held in favor of defendants, finding the conduct alleged by
plaintiff was insufficiently outrageous to support a claim. See Lindemuth v. Goodyear
Tire & Rubber Co., 19 Kan. App. 2d 95, 100-01, 864 P.2d 744 (1993); see also Moore v.
State Bank of Burden, 240 Kan. 382, 388, 729 P.2d 1205 (1986) (no outrage claim where
bank erroneously set off funds against a legitimate indebtedness owed to bank), cert.
denied 482 U.S. 906 (1987); Burgess v. Perdue, 239 Kan. 473, 475-77, 721 P.2d 239
(1986) (no outrage claim where doctor phoned mother after son's death to tell her she
"'had her son's brain in a jar'"); Neufeldt v. L.R. Foy Constr. Co., 236 Kan. 664, 668-69,
693 P.2d 1194 (1985) (no outrage claim allowed by a wife recovering from a miscarriage
who was falsely told that an arrest warrant had been issued for her husband); Roberts v.
Saylor, 230 Kan. 289, 295, 637 P.2d 1175 (1981) (no outrage claim where doctor
expressed dislike of patient prior to patient undergoing surgery); Ely v. Hitchcock, 30
Kan. App. 2d 1276, 1289, 58 P.3d 116 (2002) (funeral director allowing plaintiff to view
his mother's body with a cut to her forehead and blood on her face and hair not sufficient
to support claim of outrage); Henderson v. Ripperger, 3 Kan. App. 2d 303, 305-06, 594
P.2d 251 (1979) (waitress falsely accusing patron of leaving without paying in front of
other customers not sufficient to support a claim of outrage); but see Gomez v. Hug, 7
Kan. App. 2d 603, 609-11, 645 P.2d 916, rev. denied 231 Kan. 800 (1982) (issue of
material fact existed on outrage claim regarding employer's constant, targeted verbal
abuse and threats of violence over several days).

We recognize that another tort could be considered here—slander of title. Slander
of title is defined as a false and malicious statement, oral or written, made in
disparagement of a person's title to real or personal property, causing him or her injury.
Saddlewood Downs v. Holland Corp., Inc., 33 Kan. App. 2d 185, 198, 99 P.3d 640
(2004). Filing a patently insufficient mechanic's lien with the requisite malicious intent
constitutes an actionable slander of title. See Comely-Neff Lumber Co. v. Ross, 190 Kan.
734, 740, 378 P.2d 178 (1963).
22

We mention this tort to illustrate our doubts concerning the outrageousness of
Kape's conduct here rising to the level necessary for the tort of outrage. Kape filed a false
affidavit in a vain attempt to claim a mechanic's lien. We have no doubt that such an
action is reprehensible conduct, even actionable, but it is not so extreme as to be
"intolerable in a civilized society."

Perhaps in some extreme case, the filing of or the refusal to release a factually
insupportable mechanic's lien might give rise to a claim for outrage against the filer. In
Dawson v. Associates Financial Services Co., 215 Kan. 814, 825, 529 P.2d 104 (1974),
the case recognizing the tort of outrage in Kansas, the court found Dawson had presented
a submissible claim for outrage. There, a finance company continually dunned Dawson
on a car loan even though she and her physician had told the company the high-pressure
tactics were aggravating her multiple sclerosis and she informed the company she had
requested the loan be paid off through the credit life insurance policy she purchased when
she took out the loan.

The circumstances are not similar here. While Chebultz suffered significant
emotional upset as a result of the mechanic's lien and the ongoing dispute with Kape, the
company had no direct knowledge of his situation akin to what the finance company
knew about Dawson.

We reverse the tort of outrage judgment.

Advice of counsel is no defense to any claim here.

Finally, Kape argues that the district court should have applied its defense of
advice of counsel to Chebultz' counterclaims. In Kansas, the defense of advice of counsel
is recognized only as a complete defense to malicious prosecution of a criminal charge or
civil action. See Bartal v. Brower, 268 Kan. 195, 197, 993 P.2d 629 (1999) (finding that
23

the advice of counsel in initiating a civil action is a complete defense to malicious
prosecution); Hunt v. Dresie, 241 Kan. 647, 659-60, 740 P.2d 1046 (1987) (setting forth
the elements for defense of advice of counsel in a civil proceeding).

Chebultz correctly notes that Kape has presented no authority in Kansas law for
the proposition that advice of counsel is a complete defense to a claim of outrage or to
allegations under the Act. However, the Tenth Circuit has touched on the question
whether the defense of advice of counsel can be applied outside the context of malicious
prosecution.

In Vulcan Materials Co. v. Atofina Chemicals Inc., 355 F. Supp. 2d 1214, 1244
(D. Kan. 2005), the court considered the question whether the defense of advice of
counsel, in addition to being a complete defense to a claim of malicious prosecution in
Kansas, was a defense to a claim of fraud. The plaintiff had sought to exclude testimony
of any evidence on behalf of the defendant "which would suggest that its decisions were
rendered by the advice of counsel." 355 F. Supp. 2d at 1244. Relying on Rea v. Wichita
Mortgage Corp., 747 F.2d 567 (10th Cir. 1984), the court found that while evidence of
advice of counsel is not a complete defense to claims of fraud, the defense, nevertheless,
may be introduced at trial to demonstrate whether or not the defendant acted with
fraudulent intent. Vulcan, 355 F. Supp. 2d at 1244-45.

In Rea, the Tenth Circuit Court of Appeals pointed to numerous federal appellate
decisions involving cases such as unfair labor practices, negligence and misconduct, tax
evasion, and mail fraud and observed that "reliance on the advice of legal counsel is
recognized as a valid defense in both civil and criminal contexts. While such reliance is
not an absolute defense, it is a factor to be considered in determining a defendant's good
faith, willfulness, or illegal intent." 747 F.2d at 576.

24

Both Rea and Vulcan indicate that a defendant may introduce evidence of advice
of counsel as a defense at trial to the element of intent when the state of mind is relevant
to the issue of liability.

We question then, whether this is pertinent to consumer complaints. The Act does
not require a proof of intent to establish a violation. In Willman v. Ewen, 230 Kan. 262,
267, 634 P.2d 1061 (1981), the court ruled "there may be liability [under the KCPA] even
though the deception or unconscionable practice was performed innocently and without
the intent to injure the consumer"; see Haag v. Dry Basement, Inc., 11 Kan. App. 2d 649,
650, 732 P.2d 392, rev. denied 241 Kan. 838 (1987).

The district court indicated that it had reviewed Alley's deposition and he had
testified to relying upon Kape to inform him that Olson was its subcontractor. The district
court ruled that nothing in Alley's deposition would alter its prior determination that the
mechanic's lien was improper and out of time because the advice given by Alley was
based upon the false information Kape provided.

Kape could not avail itself of the advice of counsel defense at trial. The defense is
conditioned on Kape having fully disclosed to Alley all the material facts within its
knowledge. See Hunt, 241 Kan. at 659. Kape also had to disclose to Alley all material
facts that it could have learned with diligent effort. See Nelson v. Miller, 227 Kan. 271,
279, 607 P.2d 438 (1980). Olson was not a subcontractor, and Kape's work was
completed on September 7, 2011, not December 30, 2011. Therefore, in seeking advice
from Alley to file the mechanic's lien, Kape did not make "a full and honest disclosure of
all the material facts within [Kape's] knowledge or belief" regarding the status of Olson.
Hunt, 241 Kan. at 659. As such, the district court's factual findings are supported by
substantial competent evidence on this issue. We find no error here.


25

We are concerned about the denial of a jury trial.

Without elaboration, the trial court denied a jury trial on the remaining issues
simply because Kape did not file any proposed jury instructions. Our problem with this
sanction is that we know of no statute, rule, or case that requires a party to submit
proposed jury instructions and thus the failure to do so would constitute a waiver of a
party's right to a jury trial. K.S.A. 2012 Supp. 60-251(b)(3) states clearly that a judge
shall instruct the jury. Thus, the duty to instruct falls on the court, not the parties. We
recognize, of course that wise counsel would almost always submit proposed instructions
that they deem favorable to their client's case, but there is no rule compelling them to do
so.

Accordingly, upon remand, if any of Kape's issues in Count II are legally
submissible to a jury, they can be tried to a jury.

We affirm the district court's grant of summary judgment holding that Kape's
mechanic's lien was unenforceable because it was not timely filed.

We affirm that Boone's failure to appear at the pretrial conference was subject to
sanction. But we vacate the striking of all of Kape's pleadings on Count II as
unreasonable in the light of the record submitted on appeal and remand the matter for the
court's reconsideration of a more appropriate sanction.

We affirm the district court's ruling that Chebultz was a consumer and that this
transaction was governed by the Kansas Consumer Protection Act. We do not address
Chebultz' consumer protection judgment as that was not raised as an issue in this appeal.

We reverse the tort of outrage judgment.

26

Affirmed in part, vacated in part, reversed in part, and remanded with directions.