Mohr v. State Bank of Stanley
| Decision Date | 07 March 1989 |
| Docket Number | 61647,Nos. 61167,TRI-COUNTY,s. 61167 |
| Parties | Gene MOHR and Tri-County Farm Equipment Co., Appellees, v. STATE BANK OF STANLEY, Kansas, Appellant, v. James B. LOYD, Appellee. KANSAS BANKERS SURETY CO., Appellant, v.FARM EQUIPMENT CO., Executive Financial Services, Inc., and SLC of North America, Inc., Appellees. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. A trial court's decision to deny a motion to intervene pursuant to K.S.A. 60-224(a) is a matter of judicial discretion. The scope of review is whether the judicial action is arbitrary, fanciful, or unreasonable or whether no reasonable person would take the view adopted by the trial court. Timeliness of a motion to intervene is to be determined from all the circumstances and is also a matter of judicial discretion.
2. A party must be the absolute and beneficial owner of a judgment before the concept of "setoff" may be applied to a judgment against that party.
3. A setoff entitlement under the "circle of indemnity" theory advanced in Dennis v. Southeastern Kansas Gas Co., 227 Kan. 872, 610 P.2d 627 (1980), requires that all participants in the "circle" must be parties to the action and all duties to indemnify must arise from the same factual situation.
4. K.S.A. 7-106, pertaining to attorney misconduct, contemplates the bringing of a separate lawsuit for recovery of damages and is not to be utilized as a method of defeating attorneys' liens. The deception referred to in the statute must be aimed at a party to an action or proceeding.
5. In a fraudulent conveyance action, fraud is never presumed and must be proved by clear and convincing evidence. The party asserting the fraudulent conveyance carries the burden of proof.
6. The determination of whether a conveyance is fraudulent is a question of fact. This court, therefore, can reverse the trial court's finding that a plaintiff did not establish a prima facie case of fraudulent conveyance only if the trial court's finding was clearly erroneous.
7. Under the established law of this state, a debtor has a right to prefer creditors, and in doing so may pay or secure one of his creditors so long as such performance is in payment of a bona fide preexisting indebtedness.
8. The question of whether a binding contract was entered into depends on the intention of the parties and is a question of fact. Only reasonable certainty is required in a purported contract, but where the purported contract is so vague and indefinite that the intentions of the parties cannot be ascertained, it is unenforceable.
9. In order for the doctrine of promissory estoppel to be invoked as a substitute for consideration, the evidence must show: (1) The promisor reasonably expected the promisee to act in reliance on the promise, (2) the promisee acted as could reasonably be expected in relying on the promise, and (3) a refusal of the court to enforce the promise would sanction the perpetration of fraud or result in other injustice.
Alan V. Johnson of Sloan, Listrom, Eisenbarth, Sloan & Glassman, Topeka, argued the cause, and Martha A. Peterson, of the same firm, was with him on the briefs for appellants.
Kenneth C. Jones of Watson, Ess, Marshall & Enggas, Olathe, argued the cause, and John J. Gardner, of the same firm, was with him on the briefs for appellees Gene R. Mohr and Tri-County Farm Equipment Co.
Gordon N. Myerson of Gordon N. Myerson, P.C., Kansas City, Mo., argued the cause, and Matthew J. Stretz, of the same firm, and Dennis Clyde of Gates & Clyde, Chartered, Overland Park, were with him on the brief for appellee SLC of North America, Inc.
Michael E. Whitsitt, Overland Park, argued the cause and was on the brief for appellee Executive Financial Services, Inc.
This appeal involves two consolidated cases arising from the same factual situation. The legal concepts interwoven into the factual fabric are intervention, setoff, attorney liens, the standard of review for involuntary dismissals, fraudulent conveyance, reliance-promissory estoppel, and debtor-creditor settlements.
State Bank of Stanley (Stanley Bank) appeals from a denial of its motion to set off a judgment against it in favor of Tri-County Farm Equipment Co. (Tri-County) (case No. 61,167). Kansas Bankers Surety Company (KBS), an appellant in both cases, appeals from a denial of a motion to intervene in case No. 61,167, and from a dismissal of another suit against Tri-County, Executive Financial Services, Inc., (EFS) and SLC of North America, Inc., (SLC) creditors of Tri-County, based on a claim of fraudulent conveyance (case No. 61,647). The trial judge in No. 61,167 was James Bouska. The trial judge in No. 61,647 was Janette Sheldon.
We find no error and affirm.
The questions for review are:
Judge Bouska's Case, No. 61,167
(1) Whether KBS should have the right to intervene in the action to determine the distribution of proceeds.
(2) Whether the trial court erred in denying Stanley Bank's motion for setoff and in refusing to conduct an evidentiary hearing on the issue of the Bank's right to setoff.
(3) Whether the trial court erred in determining that Tri-County's attorney's lien was valid.
(4) What is the proper standard of review for an involuntary dismissal pursuant to K.S.A. 60-241(b)?
(5) Whether the trial court erred: (a) in finding that KBS did not establish a prima facie case of fraudulent conveyance; (b) in finding that the settlement agreement between Tri-County, EFS, and SLC was in accord with normal business procedures; (c) in determining that the agreement between Tri-County's attorney and John Deere's attorney was illusory; (d) in finding that John Deere's attorney unreasonably relied on the statements of Tri-County's attorney; and (e) in ruling that EFS and SLC, creditors of Tri-County, are entitled to have their claims satisfied.
The facts underlying these multi-party consolidated appeals are complicated. This appeal is the third review we have extended to controversies arising from the difficulties encountered by Tri-County, a John Deere farm implement dealership. Mohr v. State Bank of Stanley, 241 Kan. 42, 734 P.2d 1071 (1987) (Mohr I ), provides a background of the events leading up to the present litigation. See also Executive Financial Services, Inc. v. Loyd, 238 Kan. 663, 715 P.2d 376 (1986).
Gene Mohr and James Loyd were co-owners of Tri-County. During 1982, Loyd embezzled money from Tri-County by endorsing checks made out to the company and depositing the proceeds into his personal account. He also assigned various fraudulent notes to John Deere and diverted installment payments due John Deere. The checks bearing forged endorsements were all paid by or through the First National Bank of Olathe B and the Stanley Bank.
Tri-County sued FNB, seeking recovery on the forged checks, on September 8, 1983. A similar action was filed against Stanley Bank on October 11, 1983. A $450,000 settlement was ultimately reached in the action against FNB. The action against the Stanley Bank proceeded to trial, resulting in a judgment in favor of Tri-County. The Stanley Bank case was affirmed, in part, by this court in Mohr I, 241 Kan. 42, 734 P.2d 1071.
In May 1983, John Deere had reached an agreement with Mohr and Tri-County. John Deere foreclosed upon certain Tri-County inventory in which John Deere had a security interest and Mohr (who had personally guaranteed the debts of Tri-County) conveyed certain real estate to John Deere. In addition, Tri-County and Mohr agreed to assist John Deere in collecting accounts receivable and to cooperate in the investigation or prosecution of Loyd.
Following the May 1983 agreement, counsel for John Deere and counsel for Tri-County and Mohr corresponded concerning claims against FNB and Stanley Bank arising out of the forged checks. John Deere's counsel claimed that John Deere had a "proceeds" interest in some of the forged checks and sought a percentage of Tri-County's recovery from the banks. Tri-County sought to keep John Deere from intervening in the state court actions against FNB and Stanley Bank. Although the negotiations between the attorneys continued for over two years, no written settlement was ever reached and John Deere never intervened in the state court claims against the banks. John Deere did, however, bring a separate action against Tri-County and the two banks in United States District Court on October 31, 1984.
John Deere's lead attorney testified in Judge Sheldon's case, No. 61,647, that the only reason the federal action was filed was to toll the statute of limitations. On December 3, 1984, counsel for John Deere informed the attorney for FNB that John Deere would oppose being joined as a party in Tri-County's state action against FNB and indicated that John Deere would give credit to FNB on any judgment received in federal court to the extent that such judgment represented double recovery. On April 1, 1985, Tri-County's counsel wrote to John Deere's attorney, "I will contact you prior to executing any settlement agreement with the First National Bank of Olathe."
On July 3, 1985, FNB, through its surety, KBS, filed a petition for involuntary bankruptcy against Tri-County in the United States Bankruptcy Court for the District of Kansas. KBS and Fidelity and Deposit of Maryland (F & D) first became involved in their capacity as surety companies for the Stanley Bank and FNB. John Deere, EFS, and SLC petitioned as creditors in the bankruptcy action. EFS claimed a judgment against Tri-County in the amount of $104,367.33. Executive Financial Services, Inc. v. Loyd, 238 Kan. 663, 715 P.2d 376. SLC claimed that Tri-County was indebted to it in excess of $800,000 pursuant to various lease agreements. John Deere claimed that Tri-County was indebted to it in excess of $1,000,000.
On July 11, 1985, FNB and Tri-County reached a settlement in their state court litigation. At the time of the...
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