N. Am. Sav. Bank v. Volkland, 112,097.
| Decision Date | 02 October 2015 |
| Docket Number | 112,097. |
| Parties | NORTH AMERICAN SAVINGS BANK, Appellee/Cross Appellant, v. Douglas O. VOLKLAND, et al., Appellants/Cross Appellees. |
| Court | Kansas Court of Appeals |
Kevin J. Odrowski, of Kansas City, Missouri, for appellants/cross appellees.
Thomas M. Franklin, of The Franklin Law Firm, of Kansas City, Missouri, for appellee/cross appellant.
Before PIERRON, P.J., McANANY, J., and BURGESS, S.J.
Douglas O. Volkland and Janet Swinson, husband and wife, signed two promissory notes with North American Savings Bank (NASB), secured by two mortgages on three properties in Johnson County, Kansas. Douglas' father, E. Keith Volkland, guaranteed the notes. NASB determined Keith's death in May 2012 triggered a default on the notes. Attempts to modify the notes and cure the alleged default were unsuccessful and Douglas and Janet stopped paying on both notes. The second note matured and Douglas and Janet still failed to pay. NASB made a formal demand request, which went unanswered. NASB then filed a foreclosure action. The district court allowed NASB to foreclose and awarded NASB attorney fees. The court declined to refuse to foreclose and provide equitable relief to Douglas and Janet. The court also modified the money judgment entered against Douglas and Janet to include additional interest through the trial after this appeal had been docketed.
Douglas and Janet appealed, citing numerous alleged errors in the district court's decisions. NASB cross-appealed, citing additional errors. We affirm the district court's decision determining NASB was entitled to foreclose on the mortgages.
On March 2, 2004, Douglas and Janet executed their first promissory note (Note 1) for $590,000 payable to NASB. Note 1 was to mature on April 1, 2034. It indicated it was governed by the laws of Missouri. Note 1 identified the following as “Loan Documents” that secured the note: “A Kansas Future Advance Mortgage; ... Guaranty Agreements from E. Keith Volkland.” Note 1 indicated it was to be used “solely for business purposes.” Upon the occurrence of a default, the interest rate automatically adjusted to the default rate.
Note 1 also included the following provision:
“Maker ... shall pay to Lender all ... attorneys' fees incurred by Lender in connection with the making, origination or administration of the loan or indebtedness evidenced hereby or in collecting, enforcing or protecting this Note or any other Loan Document, whether incurred in or out of court, including probate proceedings, appeal, and bankruptcy proceedings.
Note 1 indicated multiple events which constituted a default. The following are relevant to this appeal:
“Each of the following events or occurrences shall constitute an ‘Event of Default’ hereunder: (a) if default is made in the payment of any installment hereunder, or of any monetary amount payable hereunder, under the terms of any Loan Document, or under the terms of any other obligation of Maker to Lender, when the same is due; ... [or] (c) if any person liable hereon, ... shall die ....“ (Emphasis added.)
So, under Note 1, a default on the accompanying mortgage was considered a default under Note 1.
Note 1 provided that upon an occurrence of default NASB, “may declare the entire balance of this Note, all accrued interest, costs, expenses, charges, disbursements and fees payable by [Douglas and Janet] hereunder or under any other Loan Document and any other indebtedness evidenced hereby to be immediately due and payable ...”
On March 2, 2004, Douglas and Janet also signed a mortgage (Mortgage 1) with NASB. The mortgage covered three tracts of land:
Tract III was released after Douglas and Janet sold the property and made a principal pay down.
Mortgage 1 also provided multiple events of default, including the following: “The death of any Grantor or Guarantor ”.... (Emphasis added.)
Keith personally guaranteed Note 1 (Guaranty 1). The guaranty agreement provided that Keith “unconditionally guarantee[d] the payment and performance, upon demand, of all Obligations of Borrower to Lender.” Keith was “cumulativel [y] and not alternativel[y]” liable for all indebtedness under the note. The guaranty also indicated it was governed by the laws of Missouri.
On January 9, 2006, Douglas and Janet executed a second promissory note (Note 2) for $155,000 payable to NASB. Note 2 originally matured on February 1, 2007. The parties agreed Note 2 included virtually identical events constituting a default. The parties also agreed to extend the maturity date on more than one occasion, and its final maturity date was October 1, 2012.
Douglas and Janet signed a second mortgage (Mortgage 2) with NASB. Mortgage 2 covered three tracts of land—the two Moonlight Road Tracts and “Tract III: Lot 425, Leawood Estates, a subdivision in the City of Leawood, Johnson County Kansas.” (Belinder House). Mortgage 2 did not include a provision of default based upon anyone's death.
Keith also guaranteed Note 2 (Guaranty 2). It included the same relevant guaranties as the guaranty of Note 1.
On May 2, 2012, Keith died. On May 14, 2012, Douglas emailed Michael Braman to inform him of Keith's death.
Michael Braman is the chief planning officer for NASB. Braman was the servicing manager for Douglas' and Janet's loans. Braman primarily dealt with Douglas regarding their loans. After Keith's death, Douglas requested a “break” on “late charges and reporting .” Braman accommodated Douglas's request.
Braman indicated NASB worked with Douglas and Janet for “a while following [Keith's] death because they were having difficulty in obtaining the funds necessary to make that payment.” Douglas indicated he was struggling to find the paperwork necessary to access his father's funds, which he needed to make the payment since Douglas' and Janet's funds were insufficient.
On July 11, 2012, Douglas and Janet made a single payment for the May, June, and July payments owed on both notes. On August 10, 2012 and September 10, 2012, Douglas and Janet made respective monthly payments on both. The September payments were the last payment that Douglas and Janet paid to NASB.
On September 18, 2012, Braman sent notice to Douglas that they needed to work together to cure the default and requested more information about Keith's trust. Braman did not name Keith's death as the event constituting default. Though Douglas responded to some of Braman's questions about the trust, he never addressed the default or request to cure.
Braman and Douglas spoke a couple times over the next few weeks. The conversations were not documented, but their trial testimony reveals the two largely disagreed about the nature of what had transpired. Braman requested Douglas and Janet make a large pay down on Note 1 and pay off Note 2 upon maturity in order to prevent foreclosure proceedings. Note 2 matured soon and NASB did not wish to extend Note 2 further. Braman could not recall specific details, but viewed the conversation as a “proposal”—an attempt at a modification to cure the default. In their brief, Douglas and Janet claim “Braman did not deny that the $400,000 payment was a demand on behalf of NASB to the borrowers.” The statements they cited to support their claim that NASB did not deny the request was a demand are as follows:
Douglas and Janet mischaracterize the back and forth communication between their attorney and Braman. Douglas' and Janet's attorney never asked Braman whether the request for a pay down was a demand. Braman's responses clearly indicate his perspective that he was trying to negotiate a modification in order to cure the default and prevent NASB from foreclosing, not making a formal demand.
Douglas viewed NASB's proposal as an improper demand and acceleration of the note, which constituted a breach.
Douglas testified he was “told that [NASB was] going to require a $400,000 paydown on [Note 1], and we were told that they weren't going to renew [Note 2.]” Douglas said he “had...
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