Bowen v. Westerhaus

• Citation: 578 P.2d 1102,224 Kan. 42
• Decision Date: 06 May 1978
• Docket Number: No. 48606,48606
• Parties: George BOWEN and Farmers Insurance Group, Appellants, v. W. H. WESTERHAUS d/b/a Westerhaus Motor Company and Universal Underwriters Insurance Co., Appellees.
• Court: Kansas Supreme Court

Page 1102

578 P.2d 1102

224 Kan. 42

George BOWEN and Farmers Insurance Group, Appellants, v. W. H. WESTERHAUS d/b/a Westerhaus Motor Company and Universal Underwriters Insurance Co., Appellees.

No. 48606.

Supreme Court of Kansas.

May 6, 1978.

Syllabus by the Court

1. In considering a motion for summary judgment a trial court must give to a litigant against whom judgment is sought the benefit of all inferences that may be drawn from the admitted facts under consideration.

2. A court should be cautious in granting a motion for summary judgment when resolution of the dispositive issue necessitates a determination of the state of mind of one or both of the parties.

3. The doctrine of equitable estoppel is based upon the principle that a person is held to a representation made or a position assumed when otherwise inequitable consequences would result to another who, having the right to do so under all the circumstances, has in good faith relied thereon.

4. A party can be equitably estopped from reliance on the statute of limitations as a defense to the claim against him.

5. In an action to recover on an insurance subrogation claim the record on appeal is examined and it is held the trial court erred in granting a motion for summary judgment in favor of defendants.

David S. Knudson, of King, Stokes, Knudson & Nitz, Chartered, Salina, argued the cause and was on the brief for appellants.

Christopher Randall, of Turner, Hensley & Boisseau, Chartered, Great Bend, argued the cause and was on the brief for Universal Underwriters Insurance Company, appellee.

John V. O'Donnell, Ellsworth, was on the brief for W. H. Westerhaus d/b/a Westerhaus Motor Company, appellee.

FROMME, Justice:

The plaintiffs appeal from a summary judgment entered by the trial court. The trial court concluded the action was barred by the statute of limitations. The plaintiffs claim the defendants were estopped from defending on the basis of the statute of limitations.

The claim arose from the following facts gleaned from the pleadings, depositions and correspondence between the parties, which correspondence became part of the depositions of the parties.

George Bowen and his insurer, Farmers Insurance Group, brought an action against a garage owner, W. H. Westerhaus, and his insurer, Universal Underwriters Insurance Company. Bowen left his car with Westerhaus for repairs. The Westerhaus garage caught fire and the car was destroyed on January 4, 1971. Bowen was paid by his insurer, Farmers, for the loss of the car. Farmers became subrogated under the policy to Bowen's damage claim against Westerhaus. Demand was made upon Westerhaus and the demand was turned over to his insurer, Universal. Universal wrote to Farmers requesting a proof of loss be filed with supporting papers. On March 31, 1971, Farmers submitted the proof of loss to Universal. Farmers requested a status report regarding the claim in May. In June Universal responded and advised Farmers there was some dispute between Universal and Travelers Insurance Company over primary coverage. Universal advised that this dispute was being decided by the insurance commissioner. Letters requesting a status report were sent by Farmers to Universal in September, October and December.

Across the face of the December letter sent by Farmers, Universal made a handwritten response which states: "Suit has been filed to determine whether our company or Travelers policy apply." Thereafter Farmers received no response from Universal to its letters requesting status reports on their $5,005.99 subrogation claim until November, 1972.

On November 16, 1972, Universal wrote a long letter to Farmers in which it apologized for failure to answer Farmers' letters and explained that a wrong claim number had been used and the letters had become temporarily misplaced. Universal attached copies of papers indicating that the other insurance company, Travelers, had issued a second garage keeper's liability policy to Westerhaus. Universal further stated:

". . . We, therefore, contend that both Travelers and UUIC (Universal) had GKLL coverage in effect on the date of loss, 1-4-71.

"We have always been ready to pay our half of your loss, or $2,503.00 but Travelers has been unwilling to pay their half . . . ."

In this letter Universal went on to explain the position being taken by Travelers, and indicated that Universal was in the process of filing a declaratory judgment action against Travelers to establish the respective liabilities of the two companies. In concluding the letter to Farmers, Universal stated:

". . . Considering the above, we are sure that you can understanding our dilemma in that we want to pay our half of the losses involved, but do not know how we can do this as we could not obtain a release for our insured for 50% of the loss. Unfortunately, this will probably force litigation on the unwilling parties since it is doubtful that the DJ can be concluded within the next few weeks. We would appreciate your thoughts in regard to this problem."

On November 28, Farmers responded to the letter and advised Universal that it would advise Travelers of its claim and attempt to elicit cooperation. Correspondence between Farmers and Universal concerning the status of the declaratory judgment action against Travelers continued through 1973. Universal advised it anticipated trial within that year.

However, on December 11, 1973, Universal advised Farmers that the declaratory action was still pending and it hoped to get an answer within ninety days. The three-year statute of limitations expired on January 4, 1974. Six months elapsed, during which time Farmers wrote two letters to Universal. In the last letter it referred to a previous telephone conversation, the substance of which is not disclosed in the record.

Farmers requested that Universal advise as to Universal's position regarding the claim. On June 20, 1974, Universal advised Farmers that the court's decision in the declaratory judgment action was adverse to Universal. In this letter Universal further advised Farmers:

". . . I believe Kansas has a three-year statute of limitation provision for contractual obligations. In view if that fact, the statute has run on your claim. Since the statute has tolled, I must respectfully decline payment of your subrogation claim."

The two insurance companies are the real parties in interest in the matter and although Bowen and Westerhaus were named as parties plaintiff and defendant along with their respective insurers we will refer to the parties bringing the suit as Farmers and the parties defending the suit as Universal. On November 9, 1974, Farmers filed suit alleging liability on the part of Universal as the insurer of Westerhaus for the covered loss of Bowen's car. Farmers alleged that Universal engaged in acts and conduct to procure plaintiff's delay of this litigation for the purpose of pursuing a declaratory judgment action against a third party; that relying upon the acts and conduct of Universal plaintiff was induced to delay filing its claim in court until after the statute of limitations had run; that Universal had always acknowledged and agreed to pay one-half of plaintiff's loss in the amount of $2,503.00, but requested delay in filing any claim until Universal could conclude the declaratory judgment action; and that Universal was estopped from asserting that the claim is barred by the Kansas statute of limitations.

Universal answered admitting that Bowen's car was destroyed by fire through the negligence of the employees while being repaired in Westerhaus' garage and the car had a reasonable market value of $5,005.99. Universal stated that its offer to pay one-half of the claim had been refused by Farmers; it denied it ever requested delay in filing plaintiff's claim; and it alleged that plaintiff's claim was barred by the statute of limitations.

After the pleadings were filed and depositions taken the trial court scheduled a pretrial conference to define the controverted issues. Prior to the conference the defendants filed a motion for summary judgment. The pretrial conference was never held. Instead the court heard arguments on the motion then took the matter under advisement and later entered summary judgment for defendants.

In considering a motion for summary judgment a trial court must give to a litigant against whom judgment is sought the benefit of all inferences that may be drawn from the admitted facts under consideration. (Timi v. Prescott State Bank, 220 Kan. 377, Syl. P 2, 553 P.2d 315 (1976).) A court should be cautious in granting a motion for summary judgment when resolution of the dispositive issue necessitates a determination of the state of mind of one or both of the parties. (Henrickson v. Drotts, 219 Kan. 435, 438, 548 P.2d 465 (1976).) Whether a party acts in good faith depends not only on the facts and circumstances but also on his state of mind.

Under the facts disclosed by the pleadings in this case the three-year statute of limitations for an action brought on contract (see Continental Ins. Co. v. Windle, 214 Kan. 468, 520 P.2d 1235 (1974)) would have expired on or about January 4, 1974. The plaintiffs pled that defendants were estopped to take advantage of the statute. The doctrine of equitable estoppel is based upon the principle that a person is held to a representation made or a position assumed when otherwise inequitable consequences would result to another who, having the right to do so under all the circumstances, has in good faith relied thereon. (Maurer v. J. C. Nichols Co., 207 Kan. 315, 485 P.2d 174 (1971).)

This court has further said:

"The doctrine of equitable estoppel requires consistency of conduct, and a litigant is estopped and precluded from maintaining an attitude with reference to a transaction involved wholly inconsistent with his previous acts and business connection with such transaction." (Browning v. Lefevre, 191 Kan. 397, Syl. P 2, ...