Voyles v. Garcia, No. 84
| Decision Date | 05 January 2001 |
| Docket Number | No. 504, No. 84, No. 728. |
| Citation | 28 Kan. App.2d 462,17 P.3d 947 |
| Parties | THOMAS D. VOYLES, Plaintiff/Appellant/Cross-appellee, v. ERNESTO M. GARCIA, Defendant, and TRADERS INSURANCE COMPANY, Garnishee/Appellee/Cross-appellant. |
| Court | Kansas Court of Appeals |
Timothy J. King, of Speth & King, of Wichita, for appellant/cross-appellee.
Paul Hasty, Jr., and Kyle N. Roehler, of Wallace, Saunders, Austin, Brown & Enochs, Chartered, of Overland Park, for appellee/cross-appellant.
Before BEIER, P.J., GERNON, J., and JANICE D. RUSSELL, District Judge, assigned.
This appeal arises from attempts to enforce a judgment in a tort case.
Thomas D. Voyles and Ernesto M. Garcia were involved in an automobile accident. Voyles obtained a default judgment against Garcia for $100,000, plus court costs.
This controversy involves Voyles' claim that Traders Insurance Company (Traders) is liable for the judgment against Garcia under a policy issued to Garcia's father, Ramon Garcia.
Traders contends that the policy issued to Ramon Garcia was procured by fraud. Traders returned the premium to Ramon Garcia and rescinded the policy ab initio. Ramon Garcia accepted the return of the premium check, endorsed it, and cashed it.
Voyles sought to collect the default judgment by garnishment of Traders. Voyles filed a motion for summary judgment, arguing that an insurer could not rescind a policy ab initio to the detriment of a third party. Voyles' motion was denied.
Traders then filed a motion for summary judgment, reasserting its position concerning the fraudulent procurement and rescission of the policy. The trial court granted Traders' motion, finding that the policy was procured through fraud and that Ramon Garcia, the named insured, had accepted a refund of all policy premiums. Voyles appeals.
The issues on appeal focus on the garnishment attempts, an interpretation of K.S.A. 1999 Supp. 40-2,118, and Traders' cross-appeal for costs.
Voyles sought to enforce his judgment through a garnishment order served on Traders on May 14, 1998. Traders timely answered on June 3, 1998, that it was not indebted to Garcia. Voyles contended he did not receive the answer and moved for judgment on the garnishment on July 15, 1998. On July 20, 1998, Traders served a response with a copy of the first garnishment answer. On July 22, 1998, Voyles' counsel informed Traders, by letter, that he would abandon the first garnishment order and file a new one. On July 30, 1998, Voyles garnished Traders for the second time, and Traders answered on August 19, 1998, again denying that it held any property of or was indebted to Garcia. The garnishment statute, K.S.A. 1999 Supp. 60-718, and the available case law lead us to conclude that the allegations of Traders' first answer were conclusive. K.S.A. 1999 Supp. 60-718(c) states, in relevant part:
See Phelps v. Schmuck, 151 Kan. 521, 526, 100 P.2d 67 (1940).
The garnishment question does not end there, however. The district court granted an oral motion by Voyles for leave to reply out of time. Neither the record on appeal nor the journal entry on this ruling articulate a basis for the ruling.
The cases available for guidance on this issue include: Bank of Whitewater v. Decker Investments, Inc., 238 Kan. 308, 315, 710 P.2d 1258 (1985) (); Boyce v. Boyce, 206 Kan. 53, 55-56, 476 P.2d 625 (1970) (); Phelps v. Schmuck, 151 Kan. at 526 (); Kansas Sand & Concrete, Inc. v. Lewis, 8 Kan. App.2d 91, 96-97, 650 P.2d 718 (1982) ().
The problem, as we see it, is that the rule in Phelps regarding the conclusiveness of an answer clashes with the discretion allowed under K.S.A.1999 Supp. 60- 206(b) to allow a reply to the answer out of time upon a showing of failure to act was the result of excusable neglect.
Several facts weigh in on our decision here. Voyles' record on appeal does not provide a statement as to the "excusable neglect" he asserts. We further note that in the cases we examined, the party asserting excusable neglect immediately sought relief, sometimes within hours. Here, the passage of so much time leads us to the conclusion that the trial court should not have allowed Voyles the opportunity to reply to the first garnishment.
Voyles learned of the answer to the first garnishment no later than July 22, 1998, the date of his attorney's letter acknowledging receipt of a copy. He did not move to file a reply out of time to the original answer of the garnishee until he made an oral motion on October 22, 1998. Prior to July 22, Voyles' failure to act may have been a result of excusable neglect. However, beyond July 22, it is hard to imagine that a reasonable person could find Voyles' course of action constituted excusable neglect. The proper procedure would have been to immediately move to reply out of time, and Voyles simply chose not to follow it. K.S.A. 1999 Supp. 40-2,118(c)
Our ruling on the garnishment issue, coupled with our reading of K.S.A. 1999 Supp. 40-2,118(c), leads us to conclude that Traders' position should prevail here.
In 1991, the Kansas Supreme Court held that K.S.A. 1990 Supp. 40-3118(b) controlled rescission of mandatory liability coverage, leaving an insurance company only the right to rescind nonliability features of the policy. Continental Western Ins. Co. v. Clay, 248 Kan. 889, 896, 811 P.2d 1202 (1991). The court went on to explain that those features could be severed and the liability provisions left in effect as follows:
"Where claims have been made by both the insured acquiring the insurance through fraudulent misrepresentation and an injured innocent third party, severance of the nonliability, noncompulsory features of the policy is proper, thereby permitting rescission ab initio as to the claim of the insured involving provisions not mandated by the Kansas Automobile Injury Reparations Act." 248 Kan. at 896.
An amendment to K.S.A. 40-2,118 followed in 1994. Prior to the amendment, the statute consisted of a single section which simply defined the term "fraudulent insurance...
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Iron Horse Auto v. Lititz Mut. Ins. Co.
...of case precedent. For instance, the Insurance Company believes that the district court misread the holding in Voyles v. Garcia, 28 Kan.App.2d 462, 17 P.3d 947, rev. denied 271 Kan. 1042 (2001), to incorrectly find that the purpose of the 1994 amendments was to correct the result in Contine......