First Sec. Bank v. Buehne
Decision Date | 30 December 2021 |
Docket Number | No. 121,765,121,765 |
Citation | 501 P.3d 362 |
Parties | FIRST SECURITY BANK, Appellee, v. David BUEHNE and Linsay Buehne, et al., Appellants. |
Court | Kansas Supreme Court |
Zachary D. Schultz, of Schultz Law Office, P.A., of Garden City, argued the cause and was on the briefs for appellants.
James C. Dodge, of Sharp McQueen, P.A., of Liberal, argued the cause and was on the brief for appellee.
Kersten L. Holzhueter, of Spencer Fane LLP, of Kansas City, Missouri, for amicus curiae Kansas Bankers Association.
After a panel of the Kansas Court of Appeals affirmed the district court's entry of summary judgment for First Security Bank ("FSB") in its foreclosure action against David and Linsay Buehne, the Buehnes petitioned this court for review. First Sec. Bank v. Buehne , No. 121,765, 2020 WL 5580498 (Kan. App. 2020) (unpublished opinion). The Buehnes raised two issues for our consideration, both relating to the statute of limitations.
We conclude that the specific contractual clause waiving the defense of the statute of limitations, as set forth in the Buehnes' commercial promissory note with FSB, was not void as against public policy. Consequently, we do not address the district court's conclusions that the five-year statute of limitations relating to FSB's action, K.S.A. 60-511(1), only began to run in 2014. We thus affirm the Court of Appeals and the district court.
The facts set forth by the panel are not disputed by the parties, and we incorporate them by reference. Briefly stated, the Buehnes executed a commercial promissory Note with FSB in June of 2005. The Note was secured in part by a security agreement and in part by a mortgage covering certain real property in Meade County, Kansas. The Note included a provision labeled "Waiver of Certain Rights," which read:
(Emphasis added.)
In the Note, a box marked "obligation is payable on demand" was checked. The Note otherwise set forth a schedule of payments including "4 payments of interest only beginning 7-28-05, 240 payments of $2,524.09 beginning 11-28-05."
The Buehnes made no payments on the Note. Beginning on May 26, 2006, FSB sent the Buehnes a series of overdue notices by mail. FSB continued to send notices at somewhat irregular periods over the next several years.
FSB ultimately filed suit on May 21, 2014, and filed a motion for summary judgment on September 4, 2018. The Buehnes moved for summary judgment on January 31, 2019, focusing on the statute of limitations. In particular, the Buehnes claimed FSB exercised its option to accelerate the debt in 2006 and that the Note was "payable on demand" under K.S.A. 84-3-108(c).
After a hearing on the parties' summary judgment motions on March 5, 2019, the district court rejected the Buehnes' contention that the Note was payable on demand. The court also ruled that FSB never gave a "clear expression of their intent to accelerate and declare a default" until 2014, when FSB filed the underlying foreclosure action, thus the period of limitations began to run. On this basis, the court granted FSB's motion for summary judgment and denied that of the Buehnes. The court subsequently entered judgment in favor of FSB. The Buehnes then appealed.
On appeal, the Court of Appeals panel assumed, without deciding, that the statute of limitations began to run when FSB "declared the loan to be in default and demanded payment in full in 2006." Buehne, 2020 WL 5580498, at *4. Even if this were the case, the panel reasoned, the Buehnes waived their right to raise the statute of limitations by the terms of the Note itself. 2020 WL 5580498, at *4. The panel further concluded that this waiver was not void as against public policy. 2020 WL 5580498, at *5-7. Based on the waiver, the panel affirmed the district court's entry of summary judgment in FSB's favor. 2020 WL 5580498, at *8. The Buehnes then petitioned this court for review.
The Buehnes first challenge the panel's conclusion that the provision in the Note waiving the statute of limitations in advance was not void as against public policy.
Standard of review
The Buehnes' challenge implicates both the standard applicable to the review of a district court's entry of summary judgment and the standard applicable to the review of contracts. As the court recently observed:
See, e.g., Found. Prop. Invs., LLC v. CTP, LLC , 286 Kan. 597, 600, 186 P.3d 766 (2008) () .
As mentioned above, the contract in this case states that the Buehnes "waive any applicable statute of limitations to the full extent permitted by law." The Buehnes claim that this provision violates public policy and may not be enforced. If we disagree and conclude that this provision does not violate public policy, FSB may proceed with its lawsuit. If we agree with the Buehnes that this provision violates public policy, further investigation is needed to ascertain whether we can find that the Bank's foreclosure action is untimely as a matter of law.
So what is "public policy" anyway? "Public policy consists of the ‘principles and standards regarded by the legislature or by the courts as being of fundamental concern to the state and the whole of society.’ " Bolz v. State Farm Mut. Auto. Ins. Co. , 274 Kan. 420, 424, 52 P.3d 898 (2002).
Petty v. City of El Dorado , 270 Kan. 847, 854, 19 P.3d 167 (2001).
The doctrine of public policy is limited by the caveat that "[t]oo frequently it is urged in desperation and at a time when all other helpers fail." Wible v. Wible , 153 Kan. 428, 433, 110 P.2d 761 (1941). The Wible court itself quoted a portion of what has been called "the most oft-quoted sentence on the doctrine of public policy to date":
(Emphasis added.) Richardson v. Mellish , (1824) 130 Eng. Rep. 294, 303 (C.P.) (Burrough, J.).
See Ghodoosi, The Concept of Public Policy in Law: Revisiting the Role of the Public Policy Doctrine in the Enforcement of Private Legal Arrangements , 94 Neb. L. Rev. 685, 693 (2016).
Contracts are presumed legal; the burden to prove otherwise—including a claim that a contract violates public policy—rests on the party challenging the contract. Nat'l Bank of Andover v. Kansas Bankers Sur. Co. , 290 Kan. 247, 257, 225 P.3d 707 (2010). A contract's "illegality must be made to appear from the facts and circumstances involved." Stewart v. Fourth Nat'l Bank , 141 Kan. 175, 181, 39 P.2d 918 (1935). Despite the general presumption of contracts' legality, "An agreement violates public policy if it is ‘injurious to the interests of the public, contravenes some established interest of society, violates some public statute, or tends to interfere with the public welfare or safety.’ " In re Marriage of Traster , 301 Kan. 88, 105, 339 P.3d 778 (2014) (quoting Brenner v. Oppenheimer & Co. , 273 Kan. 525, 548, 44 P.3d 364 [2002] ). Still, Kansas courts have long recognized that, although freedom of contract "is limited by other public policy and legislation ... ‘the paramount public policy is that freedom to contract is not to be interfered with lightly.’ " Marshall v. Kansas...
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