State ex rel. Stephan v. Commemorative Services Corp.

• Court: Kansas Court of Appeals
• Writing for the Court: Before LEWIS, P.J., RULON, J., and ROBERT C. HELSEL; LEWIS
• Citation: State ex rel. Stephan v. Commemorative Services Corp., 823 P.2d 831, 16 Kan.App.2d 389 (Kan. App. 1991)
• Decision Date: 31 December 1991
• Docket Number: No. 66525,66525
• Parties: STATE of Kansas, ex rel. Robert T. STEPHAN, Attorney General, Appellee, v. COMMEMORATIVE SERVICES CORPORATION, Norman Anderson, an Individual, et al., Appellants.

Page 831

823 P.2d 831

16 Kan.App.2d 389

STATE of Kansas, ex rel. Robert T. STEPHAN, Attorney General, Appellee, v. COMMEMORATIVE SERVICES CORPORATION, Norman Anderson, an Individual, et al., Appellants.

No. 66525.

Court of Appeals of Kansas.

Dec. 31, 1991.

Review Denied March 10, 1992.

Syllabus by the Court

1. Burial markers are included in the term "burial merchandise," as that term was used in K.S.A. 16-301 (Corrick) prior to the 1973 amendment of that statute.

2. Prior to its amendment in 1973, the sale of burial markers on a "pre-need basis" was controlled by the provisions of K.S.A. 16-301 (Corrick).

3. The general rule of statutory construction is that a statute will operate prospectively only in the absence of clear legislative intent to the contrary. This is particularly true when a statute is enacted which creates a new liability not existing before under the law or which changes the substantive rights of the parties.

4. The Kansas Consumer Protection Act, K.S.A. 50-623 et seq., may not be applied retrospectively to impose civil fines and penalties for wrongful acts committed prior to its enactment by the legislature.

Mark Beam-Ward, of Hill, Beam-Ward & Alberg, Overland Park, for the appellants.

Shelly Gasper, Asst. Atty. Gen., and Robert T. Stephan, Atty. Gen., for appellee.

Before LEWIS, P.J., RULON, J., and ROBERT C. HELSEL, District Judge Retired, assigned.

LEWIS, Judge:

Norman Anderson and Commemorative Services Corporation (CSC) appeal from the entry of judgment against them.

This action concerned the sale of burial markers on a pre-need basis by Anderson, CSC, and a number of related but separate corporations. The litigation has a long history, with roots reaching back to similar litigation in 1965. The present action which was filed in 1980, has been dealt with by two different district judges, one of whom is now retired. There were numerous other parties to the action, but Anderson and CSC are the only parties remaining.

This action was commenced in 1980 against several defendants. At the time the action was filed, neither Anderson nor CSC were named defendants. Over the next ten years, four amended petitions were filed, and numerous individuals, municipal corporations, and cemetery corporations, including Anderson and CSC, were added and/or dismissed as defendants. As this point, only Anderson and CSC remain.

Procedurally, the State filed for summary judgment on at least three occasions. In 1987, the State was granted summary judgment on the issue of liability by Judge Page W. Benson, who has since retired. In 1991, the matter was tried on the question of damages before Judge John E. Sanders. As a result of the last trial, damages in excess of $210,000 were assessed against Anderson personally and against CSC. This appeal is from the summary judgment determination of liability and from the damages awarded.

Anderson has been active in the business of founding, selling, and operating cemeteries for over 40 years. He has also developed and sold funeral plans and funeral and burial merchandise on a pre-need basis. His activities in the sale of pre-need funeral plans and merchandise has attracted the attention of several attorneys general in this state. Prior to 1965, Anderson was the defendant in a lawsuit similar to the present litigation. In that action, it was concluded that his activities violated several statutes of this state, including K.S.A. 16-301 (Corrick). See State, ex rel. Londerholm v. Anderson, 195 Kan. 649, 408 P.2d 864 (1965) (Anderson I ).

Between 1955 and 1962, Anderson incorporated nine cemetery corporations in the State of Kansas. The exact name of each of these corporations is unimportant, and we shall refer to them as the nine CCs. Anderson owned all of the stock in the nine CCs until 1964, when this stock was purchased by Sacred Gardens, Inc., (SGI). After the sale of stock to SGI, Anderson remained as president and CEO of the nine CCs. Anderson was also president and majority stockholder of SGI when it purchased the stock of the nine CCs, and he remained in that capacity until 1974 when SGI was dissolved.

CSC is a California corporation. In 1972, CSC purchased the stock of SGI. When SGI was dissolved in 1974, CSC took over direct ownership of the stock in the nine CCs. Although Anderson was a shareholder and a director in CSC when it purchased SGI, he was not an officer of CSC until 1977. In 1977, Anderson purchased the majority stock of CSC and became its president and CEO. He remains, at this time, president and CEO of CSC.

Between 1955 and 1973, the nine CCs formed by Anderson entered into 1,247 contracts for the sale of pre-need burial markers and other merchandise. These contracts were computed to have a wholesale cost of $173,332. Three of these contracts are included in the record, two from 1967 and one from 1962. Each contract contained a "guarantee of performance" clause, which read:

"That in order to assure performance of the delivery of the merchandise and service covered by this Agreement, the Company agrees that it will set aside and place in a Trust Fund, separate and apart from all other funds, sufficient money, based on its present wholesale price with reliable manufacturers, to pay for said merchandise and services when delivered." (Emphasis added.)

It is conceded that, after 1965, no trust fund was established as required by the guarantee of performance clause. Indeed, no monies to fund the purchase of burial markers sold had been set aside as required by the contract and the clause, which is quoted above, when this action was filed.

Between 1974 and 1977, CSC sold the nine CCs to third parties. None of these purchasers is a party to the present action. According to Anderson, the purchaser of each CC was advised of the outstanding marker liability on pre-need contracts sold by that particular corporation. At the time of sale of each CC, the purchaser of that corporation agreed to accept the liability of that corporation with regard to pre-need burial markers sold.

It should be pointed out that some of the markers sold on a pre-need basis have been supplied. It does not appear that there was any evidence of a refusal or failure to supply any markers upon a demand being made.

The State contended that the failure to place in trust the funds collected from the sale of pre-need burial markers violated K.S.A. 16-301 (Corrick), and this action was filed to recover damages under that statute. The State also contends that the actions of Anderson and CSC violated the Kansas Consumer Protection Act (KCPA) (K.S.A. 50-623 et seq.) and sought to recover civil penalties and costs of the action under that Act.

The trial court granted the relief sought by the State. It granted an award of damages under 16-301 in the amount of $173,332. These damages were calculated by arriving at the wholesale cost of the burial markers sold by Anderson on a pre-need basis. The order of the trial court required Anderson to place the amount of funds awarded as damages in trust to fund the purchase of burial markers sold on a pre-need basis.

In addition to granting damages under 16-301, the trial court assessed a civil penalty, or fine, under the KCPA in the amount of $31,175 and awarded the attorney general the sum of $10,000 for expenses incurred in the investigation and trial of the lawsuit.

Although the contracts in question were all negotiated by the various CCs in question, the court assessed personal liability for damages and fines against Anderson. It also held CSC to be liable for the judgment granted.

The defendants raise various issues on this appeal.

IS K.S.A. 16-301 (CORRICK) APPLICABLE?

As originally written, K.S.A. 16-301 (Corrick) read as follows:

"Any agreement, contract or plan requiring the payment of money in a lump sum or installments which is made or entered into with any person, association, partnership, firm or corporation for the final disposition of a dead human body, or for funeral or burial services, or for the furnishing of personal property or funeral or burial merchandise, wherein the delivery of the personal property or the funeral or burial merchandise or the furnishing of professional services by a funeral director or embalmer is not immediately required, is hereby declared to be against public policy and void, unless all money paid thereunder shall be paid to and held by a bank or trust company which is authorized to do business in this state, and subject to the terms of an agreement for the benefit of the purchaser of said agreement, contract or plan." (Emphasis added.) L.1953, ch. 54, § 1.

During the time the pre-need burial markers involved in this litigation were sold, the statute remained in the form quoted above. In 1973, the following sentence was added to K.S.A. 16-301:

"For the purposes of this act, personal property or funeral or burial merchandise shall include caskets, vaults and all other articles of merchandise incidental to a funeral service, but shall not include grave lots, grave spaces, grave memorials, tombstones, crypts, niches and mausoleums." (Emphasis added.) L.1973, ch. 86, § 1.

With this addition, and some changes not pertinent herein, the statute remained essentially as originally written.

It is not contested by any party to this action that, since 1973, burial merchandise does not include burial markers. As a result, the sale of burial markers on a pre-need basis after 1973 would not violate the statute.

In this case, the alleged violations of 16-301 all took place prior to the 1973 amendment of the statute. The question before the trial court was whether 16-301, as it read prior to 1973, controlled the "pre-need" sale of burial markers. The trial court held that it did and that the failure to comply with the trust fund provisions of 16-301 in the sale of pre-need burial markers was a violation of the statute.

The defendants argue that 16-301 has never applied to the sale of...