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Bank of Blue Valley v. Duggan Homes

April 26, 2013

BANK OF BLUE VALLEY, APPELLEE,
v.
DUGGAN HOMES, INC., ET AL., DEFENDANTS, (TORY GRAHAM, INC., ET AL.,) APPELLANTS.



Appeal from Johnson District Court; THOMAS M. SUTHERLAND, judge.

SYLLABUS BY THE COURT

SYLLABUS BY THE COURT 1. 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, summary judgment is appropriate. 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. To preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, the same rules apply; summary judgment must be denied if reasonable minds could differ as to the conclusions drawn from the evidence. 2. In the absence of a pretrial order, the issues raised by the facts alleged in the petition control the scope of the lawsuit. 3. A trial court has no jurisdiction to hear issues which are not raised by the pleadings or defined at a pretrial conference unless the parties consent to the new issues. 4. A trial court cannot supply a cause of action when it is clear from reading the entire pleading that it was not meant to be pleaded and it was not contained in the pleading in any understandable form. 5. K.S.A. 60-1002(b) extends the right to the property owner to bring an action to quiet title against any and all types of liens which have ceased to exist or which have become barred, whether the lien was that of a mortgage or of some other character. 6. Only through a foreclosure action can a senior lienholder strip the real property of known or recorded junior liens.

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

Reversed and remanded.

Before BRUNS, P.J., GREEN and BUSER, JJ.

This is a summary judgment case involving a foreclosure action by the Bank of Blue Valley (the Bank). Over the course of several years, Duggan Homes granted multiple mortgages to the Bank in part consideration for loans to fund its real estate development projects in Johnson County. The loans were also secured by personal guaranties from John Duggan and his spouse. Duggan Homes later defaulted on the loans, and the Bank sued to collect on the notes and the Duggans' guaranty agreements. The Bank also sought to foreclose on the mortgages. After the suit was filed, the Bank and the previously mentioned parties entered into a settlement agreement. Under the terms of the settlement agreement, Duggan Homes agreed to convey several properties to the Bank in full satisfaction of the indebtedness. The Bank took the properties subject to the judgment liens of several subcontractors of Duggan Homes.

Later, the Bank filed an amended petition naming the subcontractors as defendants. The amended petition sought to foreclose the mortgages that were included in the Bank's and Duggan Homes' settlement agreement.

The Bank moved for summary judgment, and the subcontractors also filed a cross-motion for summary judgment. The subcontractors maintained that the Bank was not entitled to foreclose on its mortgages. The trial court held that although the Bank "identifies the cause of action as a foreclosure," the Bank "simply desires to quiet title to the property." As a result, the trial court granted summary judgment in favor of the Bank and quieted title to the real property in the Bank. On appeal, the subcontractors contend that the trial court erred in granting summary judgment in favor of the Bank based on a quiet title theory that was never requested nor pleaded by the Bank. We agree. Accordingly, we reverse and remand.

The Bank entered into three separate loan agreements with Duggan Homes. The Bank loaned money for home construction of three properties in Johnson County, Kansas.

First, on January 6, 2004, Duggan Homes executed a promissory note for Loan Number 9226510 in favor of the Bank in the principal amount of $210,000. To secure this loan, Duggan Homes executed a construction mortgage in this same amount in favor of the Bank, which was recorded on January 13, 2004, with the Johnson County Register of Deeds regarding 23854 W. 126th Terrace, Olathe, Kansas.

Second, on April 5, 2007, Duggan Homes executed a promissory note for Loan Number 9242350 in favor of the Bank in the principal amount of $306,360. To secure this obligation, Duggan Homes executed a mortgage in favor of the Bank in the same principal amount, which was recorded on April 9, 2007, with the Johnson County Register of Deeds regarding property located at 3203 West 155th Terrace, Overland Park, Kansas.

Finally, on April 5, 2007, Duggan Homes executed a promissory note for Loan Number 9242360 in favor of the Bank in the principal amount of $340,760. Duggan Homes executed a mortgage in the same principal amount in favor of the Bank, which was recorded on April 9, 2007, for property located at 3107 West 155th, Overland Park, Kansas.

As additional security for the Duggan Homes' notes, the Bank obtained guaranty agreements from John Duggan and his spouse. Sometime after the execution of these three transactions, Duggan Homes defaulted on all three notes. On December 19, 2008, the Bank sued Duggan Homes seeking to collect on the notes and Duggans' guaranty agreements. The Bank also sought to foreclose on the three mortgages.

In December 2009, the Bank and Duggan Homes reached a written settlement agreement. As consideration for the settlement agreement, the Bank agreed to accept the conveyance of the Dugan Homes' properties along with a workout note "in full satisfaction of and payment of the Duggan Homes Notes and any and all indebtedness of Duggan Homes under the Duggan Homes Loan Documents." Moreover, Duggan Homes and its guarantors agreed to release any and all claims against the Bank under the terms of the settlement agreement. In exchange for these promises, the Bank agreed to release Duggan Homes and its ...


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