Foundation Property Investments v. Ctp, LLC, 96,697.

• Decision Date: 25 May 2007
• Docket Number: No. 96,697.,96,697.
• Citation: 159 P.3d 1042
• Parties: FOUNDATION PROPERTY INVESTMENTS, LLC, Appellee, v. CTP, LLC, Appellant.
• Court: Kansas Court of Appeals

159 P.3d 1042

FOUNDATION PROPERTY INVESTMENTS, LLC, Appellee, v. CTP, LLC, Appellant.

No. 96,697.

Court of Appeals of Kansas.

May 25, 2007.

Joshua M. Ellwanger, of Blackwell Sanders Peper Martin LLP, of Kansas City, Missouri, for appellant.

Amy Fellows Cline and Rachael K. Pirner, of Triplett, Woolf & Garretson, LLC, of Wichita, for appellee.

Before McANANY, P.J., GREEN and CAPLINGER, JJ.

GREEN, J.

CTP, LLC (CTP) appeals from a summary judgment granted in favor of Foundation Property Investments, LLC (Foundation) in Foundation's action to foreclose a promissory note between it and CTP. This litigation arises out of a loan made by Foundation to CTP. CTP signed a promissory note for the loan. After receiving 10 late payments from CTP, Foundation accelerated the note and sued to recover the entire balance owed on the note. The ultimate question is whether Foundation waived its right to accelerate the promissory note by accepting late payments from CTP. Because we determine that Foundation waived the condition of prompt payment, we reverse and remand to the trial court with instructions to enter judgment in favor of CTP.

In April 2004, CTP, an Iowa limited liability corporation, purchased a truck stop in South Hutchinson, Kansas. As part of the transaction, CTP borrowed $96,000 from Foundation, a Kansas limited liability corporation, to purchase the truck stop. The loan was evidenced by a promissory note, which provided:

"FOR VALUE RECEIVED, the undersigned [CTP] promises to pay to the order of Foundation Property Investments, L.L.C., the sum of Ninety Six Thousand Dollars ($96,000.00) with interest thereon from April 26, 2004, payable monthly at the rate of Five and Three Quarters Percent (5.75%) per annum as follows:

"Six Hundred Seventy Three Dollars and Fifty Four Cents ($673.54) including interest, on or before the 1st day of June, 2004, and Six Hundred Seventy Three Dollars and Fifty Four Cents ($673.54) including interest, on or before the 1st day of each and every month thereafter until June 1, 2009 when all sums due hereunder are due and payable in full.

"Interest shall first be deducted from the payment and any balance shall be applied on principal.

"Principal and interest not paid when due shall draw interest at the rate of twelve percent (12%) per annum. Upon default in payment of any interest, or any installment of principal, the whole amount then unpaid shall become immediately due and payable at the option of the holder without notice. The undersigned, in case of suit on this note, agrees to pay attorney's fees.

"Makers, endorsers and sureties waive demand of payment, notice of non-payment, protest and notice. Sureties, endorsers and guarantors agree to all of the provisions of this note, and consent that the time or times of payment of all or any part hereof may be extended after maturity, from time to time, without notice."

CTP paid the first four installments on or before their due date. Beginning in October 2004, however, CTP was late in making the next 10 payments. A history of the payments is as follows:

                Payment Due Date Date Payment Received
                   June 1, 2004        June 1, 2004
                   July 1, 2004        July 1, 2004
                   August 1, 2004      July 28, 2004
                   September 1, 2004   September 1, 2004
                   October 1, 2004     October 4, 2004
                   November 1, 2004    November 29, 2004
                   December 1, 2004    December 3, 2004
                   January 1, 2005     January 7, 2005
                   February 1, 2005    February 18, 2005
                   March 1, 2005       March 11, 2005
                   April 1, 2005       May 23, 2005
                   May 1, 2005         May 23, 2005
                   June 1, 2005        June 15, 2005
                   July 1, 2005        July 15, 2005
                

In a letter dated July 8, 2005, Foundation's counsel wrote a letter to CTP's manager. The letter stated that the note was in default and that Foundation was "exercising its option to declare all of the unpaid principal and interest immediately due and payable." Foundation demanded full payment of the note by July 31, 2005. In response, CTP's counsel asserted that because Foundation had continually accepted late payments, the parties had established a course of dealing permitting payments to be made beyond their contractual due dates.

On July 28, 2005, Foundation sued CTP to collect the full amount due under the note. CTP's answer alleged that Foundation had waived its right to accelerate the note due to its prior acceptance of late payments. Moreover, CTP asserted that Foundation's action was barred by the doctrines of estoppel, laches, and unclean hands.

Foundation later moved for summary judgment; in response, CTP filed a "cross-motion for summary judgment." The trial court granted Foundation's summary judgment motion. In its holding, the trial court found that the language of the note permitted Foundation to exercise the option to accelerate. The court further held that Foundation's repeated acceptance of late payments did not constitute a waiver of the option to accelerate and determined that Foundation was entitled to payment of the loan's principal in full, including accrued interest and attorney fees and costs, for a total amount of $110,975.58.

Standard of Review

"`"Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. 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. On appeal, we apply the same rules and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied." [Citations omitted.]'" State ex rel. Stovall v. Reliance Ins. Co., 278 Kan. 777, 788, 107 P.3d 1219 (2005).

The relevant facts in the present case are uncontroverted. When there is no factual dispute, appellate review of an order regarding summary judgment is de novo. Roy v. Young, 278 Kan. 244, 247, 93 P.3d 712 (2004).

I. Does Iowa Law Apply to the Present Case?

CTP contends that because the promissory note was signed in Iowa, the trial court erred in not applying Iowa law. CTP relies primarily on Dunn v. General Equities of Iowa, Ltd., 319 N.W.2d 515 (Iowa 1982), for the proposition that an acceleration clause may be waived based on a previous course of dealing between the parties.

In granting Foundation's summary judgment motion, the trial court acknowledged that CTP alleged that Iowa law should apply, but did not directly address the merits of this argument. Instead, the court relied upon the Kansas authorities cited in Foundation's brief to support its conclusion that Foundation did not waive its right to accelerate payment of the note. Therefore, the trial court implicitly rejected CTP's argument that Iowa law should apply. As a result, we must determine whether the court properly applied Kansas law to the facts in this case. The determination of which state's law applies is a question of law over which this court has unlimited review. Resolution Trust Corp. v. Atchity, 259 Kan. 584, 590, 913 P.2d 162 (1996).

In determining what state's law applies to a contractual dispute, Kansas follows the Restatement First of the Conflict of Laws. Accordingly, Kansas applies the lex loci contractus doctrine and applies the law of the state where the contract is made. A contract is made where the last act necessary for its formation occurs. Novak v. Mutual of Omaha Ins. Co., 29 Kan.App.2d 526, 534, 28 P.3d 1033, rev. denied 272 Kan. 1419 (2001). "Generally the party seeking to apply the law of a jurisdiction other than the forum has the burden to present sufficient facts to show that other law should apply." Layne Christensen Co. v. Zurich Canada, 30 Kan.App.2d 128, 143-44, 38 P.3d 757 (2002). CTP contends that Iowa law governs this dispute because its manager, John Daniels, signed the note in Iowa. Daniels was the sole signatory on the note.

CTP's argument is flawed. The mere fact that the note was signed in Iowa does not mean that the contract was formed there. Closing for the purchase of the truck stop, which was the subject of the loan secured by the note, occurred in Kansas. Daniels delivered the note to Kansas for closing. The promissory note had no legal effect until the closing occurred. Additionally, CTP entered into a management services agreement with Foundation Properties Corporation (FPC), a separate legal entity from plaintiff Foundation. FPC was placed in charge of managing and operating the truck stop. While the promissory note is silent on the issue of which state's law governs, CTP's management services agreement provided that the agreement be construed in accordance with Kansas laws. CTP has failed to present sufficient facts which would warrant the application of Iowa law. As a result, the trial court properly applied Kansas law in deciding the case.

II. Did the Trial Court Err in Determining that Foundation had not Waived its Right to Accelerate the Promissory Note by Repeatedly Accepting Payments after their Due Date?

Next, CTP argues that regardless of which state's law applies, Foundation waived its right of acceleration by repeatedly accepting late payments from CTP.

Promissory notes and mortgages are contracts between the parties, and ordinary rules of construction applicable to contracts apply to them. Mark Twain Kansas City Bank v. Cates, 248 Kan. 700, 709, 810 P.2d 1154 (1991). "The interpretation and legal effect of written instruments are matters of law, and an appellate court exercises unlimited review. Regardless of the construction given a...