Stanley Bank v. Johnny R. Parish

• Decision Date: 24 January 2014
• Docket Number: No. 104,316.,104,316.
• Parties: Stanley BANK, Appellee, v. Johnny R. PARISH, et al., Defendants, and Bazin Excavating, Inc. and Robert A. Bazin, Appellants.
• Court: Kansas Supreme Court

298 Kan. 755

317 P.3d 750

Stanley BANK, Appellee,

v. Johnny R. PARISH, et al., Defendants,andBazin Excavating, Inc. and Robert A. Bazin, Appellants.

No. 104,316.

Supreme Court of Kansas.

Jan. 24, 2014.

Syllabus by the Court

1. 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 when we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied.

2. Under K.S.A.2012 Supp. 84–9–311(a)(2), a purchase money security interest in property that is subject to any certificate-of-title law in Kansas, including automobiles, is not perfected upon attachment. Instead, it can be perfected only by compliance with K.S.A.2012 Supp. 8–135(c)(5), the Kansas statute applicable to certificates of title and security interests in motor vehicles.

3. A secured party complies with K.S.A.2012 Supp. 8–135(c)(5), and perfects its security interest in a motor vehicle, by properly completing and timely mailing or delivering a notice of security interest to the Kansas Department of Revenue.

4. K.S.A.2012 Supp. 8–135d(a) requires the Kansas Department of Revenue to electronically retain possession of a certificate of title and to create an electronic certificate of title when the vehicle at issue is subject to a lien or encumbrance.

Michael E. Millett, of Law Offices of Michael A. Millett, P.A., of Overland Park, argued the cause and was on the brief for appellant.

R. Scott Beeler, of Lathrop & Gage, LLP, of Overland Park, argued the cause and was on the brief for appellee.

The opinion of the court was delivered by MORITZ, J.:

This court granted review in this case to consider, as a matter of first impression, whether the purchaser of a vehicle who obtained a paper certificate of title from the Kansas Department of Revenue showing no existing liens could take the vehicle free of a bank's properly perfected purchase money security interest in the vehicle which was recorded in the Kansas Department of Revenue's digital records and noted on an electronic certificate of title issued in the name of the original purchasers. We conclude the Court of Appeals panel correctly considered and applied perfection and priority rules under the Uniform Commercial Code (UCC), K.S.A. 84–9–101 et seq., to conclude the purchaser did not take free and clear of the bank's security interest.

Factual and Procedural Background

On January 31, 2006, Stanley Bank (the Bank) loaned $40,000 to Johnny and Kellie Parish to purchase a 2006 GMC Yukon. As security for the loan, the Parishes gave the Bank a security interest in the Yukon. That same day, the Bank filed a notice of security interest (NOSI) with the Kansas Department of Revenue (KDOR) utilizing the KDOR's motor vehicle electronic lien filing system. On April 3, 2006, the Parishes applied for a title and registered the vehicle in their name. The KDOR provided a title and registration receipt to the Parishes reflecting the Bank's lien on the Yukon. K.S.A.2012 Supp. 8–135d requires the KDOR to retain such a lien-encumbered title electronically. It is undisputed that at all relevant times hereto, the KDOR's electronic lien system reflected the Bank's perfected lien and the Parishes' electronic title.

The Parishes defaulted on the Yukon loan in April 2007 by failing to make payments. In June 2007, Johnny Parish's former employer, Bazin Excavating, Inc. (Bazin Excavating), obtained a money judgment against Parish in an action unrelated to the Yukon. Robert Bazin (Bazin) is the president and sole owner of Bazin Excavating. To satisfy its judgment against Parish, Bazin Excavating obtained a court order authorizing the attachment of Parish's personal property, including the Yukon and a motor home. Both vehicles were seized on July 3, 2007. On or before that date, Bazin saw a copy of the Yukon's title and registration receipt reflecting the Bank's lien.

At the end of August 2007, Bazin Excavating obtained a court order authorizing the sale of the Yukon and the motor home, and filed a notice of sale with the district court indicating the vehicles would be sold at auction on September 21, 2007. Bazin Excavating also sent notice of the sale to the Bank and published notice in a Wyandotte County paper.

On September 20, 2007, Bazin, acting on behalf of Bazin Excavating, drove to the KDOR's motor vehicle office in Topeka, showed the clerk some court documents related to the money judgment against Parish, and requested titles for the Yukon and the motor home so he could sell them at auction. The clerk gave Bazin a paper certificate of title for each vehicle. The Yukon's paper title reflected an application and purchase date of September 19, 2007, and a printed date of September 20, 2007. Further, the title indicated that Bazin Excavating owned the Yukon and that it was not subject to any liens.

On September 21, 2007, Bazin, acting on behalf of himself rather than Bazin Excavating, purchased the Yukon and the motor home at auction for $62,000, paying $23,000 for the Yukon.

In March 2008, after Bazin Excavating failed to respond to demand letters from the Bank requesting that Bazin Excavating turn over the proceeds from the sale of the Yukon to the Bank, the Bank filed suit against Bazin Excavating and Bazin (collectively, “the defendants”). The Bank sought a declaratory judgment as to the superiority of its perfected purchase money security interest over any interests held by the defendants (Count I) and an order striking the sale of the Yukon based on Bazin Excavating's failure to comply with the notice requirements of K.S.A. 60–2406 and K.S.A. 60–2409 before conducting the sale (Count II). Further, the Bank named the Parishes as the defendants and sought to foreclose its lien against them (Count III). Additionally, citing its superior security interest, the Bank claimed Bazin Excavating unlawfully converted the proceeds from the sale of the Yukon (Count IV) and that Bazin Excavating and/or Bazin unlawfully converted the Yukon (Count V). In June 2008, the Bank obtained a default judgment against the Parishes on Count III, and that count was not at issue on appeal.

Ultimately, the Bank and the defendants filed cross-motions for summary judgment. After hearing oral argument, the district court adopted the Bank's uncontroverted facts and granted summary judgment in favor of the Bank on Counts I, II, IV, and V for the reasons argued in the Bank's motion. The court awarded the Bank $23,000 in damages, i.e., the proceeds of the sale. The court denied the defendants' summary judgment motion “for the reasons previously stated.” Although those reasons are not entirely clear from the court's ruling, it appears the district court found it significant that Bazin had prior knowledge of the Bank's lien and failed to provide that information to the KDOR when he obtained the “clean” title.

The defendants appealed, and the Court of Appeals affirmed the district court's grant of summary judgment in favor of the Bank on three claims: (1) the Bank's request for a declaratory judgment indicating its superior security interest in the Yukon, (2) the Bank's claim that Bazin Excavating converted the proceeds from the sale of the Yukon, and (3) the Bank's claim that Bazin converted the Yukon. The panel vacated the district court's grant of summary judgment on the Bank's claims that Bazin Excavating failed to provide proper notice before the sale and that Bazin Excavating converted the Yukon. Stanley Bank v. Parish, 46 Kan.App.2d 422, 435, 264 P.3d 491 (2011).

This court granted the defendants' petition for review of the Court of Appeals' decision under K.S.A. 20–3018(b), obtaining jurisdiction under K.S.A. 60–2101(b). The Bank did not cross-petition for review from the Court of Appeals' decision rejecting its notice claim and its conversion claim as to Bazin Excavating. Therefore, those issues are not before this court. See Supreme Court Rule 8.03(g)(1) (2013 Kan. Ct. R. Annot. 74); State v. Allen, 293 Kan. 793, 795–96, 268 P.3d 1198 (2012).

The District Court did not Err in Granting the Bank's Summary Judgment Motion

The defendants seek review of two issues: (1) whether the district court erred in granting the Bank's summary judgment motion and (2) whether the district court erred in denying the defendants' summary judgment motion. The defendants recognize that the second issue was raised on appeal but not decided by the Court of Appeals.

Standard of Review

Our review of summary judgment motions is well known.

“ ‘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...