W-V Enterprises, Inc. v. Federal Sav. & Loan Ins. Corp.
| Citation | 234 Kan. 354,673 P.2d 1112 |
| Decision Date | 02 December 1983 |
| Docket Number | W-V,No. 55025,55025 |
| Parties | ENTERPRISES, INC. and E. Michael Wayland, Appellees, v. FEDERAL SAVINGS & LOAN INS. CORP., as Receiver for North Kansas Savings Association, Appellant. |
| Court | United States State Supreme Court of Kansas |
Syllabus by the Court
1. The construction of a written instrument is a question of law and the instrument may be construed and its legal effect determined by the court on appeal.
2. Where a party persuades the trial court to proceed in a particular way and invites a particular ruling, the party is precluded from asserting the issue on appeal.
3. The intent of parties to modify a contract cannot be implied from their conduct if they continue to act according to the original terms.
4. Parol evidence may be admitted to show mutual mistake or explain ambiguous terms in a written instrument.
5. While fraud cannot be specifically defined, a verdict for fraud will not be disturbed on appeal if there is substantial evidence in the record to support it.
6. Behavior, although fraudulent and deceptive, does not meet the elements of the tort of outrage unless the conduct has been so outrageous and extreme as to go beyond the bounds of decency and be regarded as atrocious and utterly intolerable. See Roberts v. Saylor, 230 Kan. 289, 293, 637 P.2d 1175 (1981).
7. There is no obligation to mitigate damages if the mitigation involves dealing with the breaching party.
8. Loss of future profits is not speculative and may be recovered when such profits are proved with reasonable certainty.
9. Damages are not allowed for emotional distress when the record is devoid of evidence showing specific acts which inflicted such emotional harm.
10. Punitive damages may be recovered for a breach of contract when an independent tort is proven. A jury may consider costs of litigation, financial condition, and the grossness of the conduct of the tortfeasor in awarding punitive damages.
11. No security may be required for a court proceeding instituted by a United States instrumentality. 28 U.S.C. § 2408.
12. A supersedeas bond is not required to stay enforcement of a judgment when an appeal is taken pursuant to the direction of any department of the state. K.S.A. 60-262(e).
13. The purpose of K.S.A. 60-701(6), which allows a plaintiff to attach the property of a defendant who has acted fraudulently, is to prevent disposal of the defendant's property before the plaintiff obtains judgment. This purpose also extends to appeals.
14. Federal law requires a receiver to assume the liabilities and claims of its predecessor.
15. An attachment order will not be dismissed if otherwise valid and the prejudice to the party opposing dismissal is substantial.
16. Issues not before the trial court cannot be raised for the first time on appeal.
W. Dennis Cross of Morrison, Hecker, Curtis, Kuder & Parrish, Kansas City, Mo., argued the cause and Martin J. Purcell, P. John Owen and John J. Benge, of the same firm, Kansas City, Mo., were with him on the briefs for appellant; Thomas P. Vartanian, Ralph W. Christy, Harvey Simon and Dorothy L. Nichols, Federal Home Loan Bank Bd., Washington, D.C., and Milo M. Unruh, Sr., of Arn, Mullins, Unruh, Kuhn & Wilson, Wichita, of counsel for appellant.
Charles D. McAtee of Eidson, Lewis, Porter & Haynes, Topeka, argued the cause and Anne L. Baker, of the same firm, Topeka, was with him on the brief for appellees.
The plaintiffs-appellees are Michael Wayland and W-V Enterprises, Inc. The defendant at trial was North Kansas Savings Association, a federally insured, state chartered savings and loan corporation. By virtue of a post-trial order of the Federal Home Loan Bank Board the defendant is in receivership, and the appellant is now the Federal Savings & Loan Insurance Corporation (FSLIC), as receiver for North Kansas Savings Association.
The appellees' cause of action for compensatory and punitive damages at issue in this appeal arose from the business relationship between the appellees and North Kansas Savings Association from 1972 through 1974. The focal point was a plan for the design, development, and marketing of pre-stressed steel apartment buildings. The appellees were induced by the appellant North Kansas Savings Association, through its officers, to participate in this business enterprise.
North Kansas was affiliated with a number of corporations which had dealings, directly and indirectly, with the appellees. The most important of these affiliates and subsidiaries were North Kansas Service Corporation and Trans-Western, Inc. North Kansas Service Corporation, a Kansas corporation, was a wholly owned subsidiary of North Kansas Savings Association. The service corporation was authorized to engage in business activities and "risk ventures" which the savings and loan association could not undertake on its own behalf.
Although Trans-Western, Inc. was created for the purpose of becoming the holding company of North Kansas Savings Association, that plan never came about. At the time North Kansas Savings Association applied for approval of Trans-Western as its holding company, federal regulations provided only two percent of the total assets of the savings association could be invested in risk ventures of a related service corporation and its subsidiaries. North Kansas Savings Association had greatly exceeded the two percent limitation. The reason given for the denial of Trans-Western's application for holding company status by the Federal Home Loan Bank Board was that no certified audit could be provided.
Against this background, while North Kansas was creating an interlocking corporate pyramid, Michael Wayland became acquainted with Roger Chester, president of North Kansas Savings Association. Wayland did business as Wayland Construction Company. In 1972 Wayland was constructing a steel building to house a mobile home manufacturing plant in Lincoln, Kansas. Wayland had been in the construction business since early 1956. He had become an authorized Behlen Steel distributor in 1965. In addition, Wayland was a fifty percent owner in Colby Steel Corporation, which was also an authorized Behlen Steel distributorship. Colby Steel engaged in marketing and installing grain handling equipment.
After seeing the Wayland project in Lincoln, Chester became interested in using the Behlen free-standing structural steel concept in the design and construction of apartment complexes. Chester believed spiraling lumber and construction costs made such buildings cost efficient. Chester proposed Wayland build a "pilot project" as a "showcase" to demonstrate design and cost efficiency in selling packages to investors, developers, and contractors.
At that time, Chester was working with Carl VanDalsem on a multimillion dollar gasoline filling station project. At a meeting held at the offices of North Kansas in Beloit, Wayland became reacquainted with VanDalsem, whom he had previously known in school. Both Chester and VanDalsem became interested in the plan for the nationwide marketing of steel apartment buildings. Chester urged Wayland and VanDalsem to incorporate as a vehicle to facilitate that plan. They complied by incorporating W-V Enterprises on January 12, 1973. The incorporators were Michael Wayland, Carl VanDalsem and their spouses.
After a plan to build the pilot structure in Colby fell through, Concordia was selected as the site. An appraisal indicated the project was feasible there. Chester promised Wayland North Kansas would provide interim and long-term financing for the construction. In spite of Chester's assurances of complete financing, on March 1, 1973, North Kansas issued a commitment for only permanent financing. Thereafter Wayland and VanDalsem made arrangements with Citizens Savings Association for interim construction financing in the amount of $300,000. Citizens Savings agreed to provide the interim construction financing conditioned on the reissuance of the March 1 commitment letter from North Kansas Savings Association to provide the long-term, take-out financing flowing directly to Citizens Savings. This resulted in a second commitment letter, dated March 14, 1973, which provided upon completion of the project North Kansas Savings Association would provide $300,000 in permanent financing. The commitment was unrestricted. W-V paid a commitment fee of $3,000 to North Kansas. The real property in Concordia was purchased by W-V for $7,500 on March 6, 1973, and the project began shortly thereafter. Wayland informed North Kansas he estimated the cost of the Concordia Project would be $295,000 for materials alone. According to Chester, W-V would receive a six percent development fee and a six percent construction fee when the project was sold.
At the request of Roger Chester, and to accommodate his plan that the Concordia complex be a "showcase" for potential investors, Wayland redesigned it to give it a more attractive mansard roof. This change increased the cost by $10,000 per unit. Chester orally committed North Kansas to provide additional financing in the amount of $30,000.
Wayland and the employees of Wayland Construction Company devoted approximately one and one-half years to the drafting of some twenty-one designs for structural steel apartment complexes in preparation for North Kansas' nationwide marketing plan.
On June 20, 1983, just three months after issuing its commitment letter, Carl VanDalsem was informed by Don Tompkins, vice-president of North Kansas, that North Kansas might not be in a position financially to provide any financing on the Concordia Project. When Wayland confronted Chester, he was informed there was no basis for the letter. Wayland was assured by Chester if the apartments were not sold to one of Chester's investor contacts by the time they were completed, North Kansas would place the Concordia Project in one of its subsidiary or affiliated corporations.
In the meantime Carl VanDalsem had gone...
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