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The Balmer Fund, Inc. v. City of Harper

United States District Court, D. Kansas

February 16, 2018




         This case involves a dispute regarding the demolition of a hotel and the personal property contained within the hotel. Plaintiffs, The Balmer Fund, Inc. and Rosalea Hostetler, allege that Defendant, the City of Harper, Kansas, violated their due process rights, converted their property, committed a trespass upon their property, intentionally inflicted emotional distress on Hostetler, negligently inflicted emotional distress on Hostetler, intentionally interfered with Plaintiffs' prospective business expectancy and advantage, and acted negligently when it demolished Plaintiffs' hotel and personal property contained within the hotel.

         This matter comes before the Court on Defendant's motion for summary judgment and/or motion to dismiss (Doc. 20) and Plaintiffs' motion to strike (Doc. 29). For the reasons stated below, Defendant's motion is granted in part and denied in part, and Plaintiffs' motion is denied.

         I. Factual and Procedural Background[1]

         In 1999, Rosalea Hostetler quitclaimed a hotel located at 121 West Main Street, Harper, Kansas, to The Balmer Fund, Inc., while reserving a life estate in the property. In 2013, Plaintiffs hired Engineering Consultants, P.A., to evaluate the structural integrity of the hotel. Plaintiffs' consultants confirmed that the hotel was deteriorating, found that saving the hotel would require significant money and effort, recommended various repairs, and recommended that the public not be allowed in the building or along the sidewalk near one corner of the building until repairs are completed. In 2014, the City hired D&B Engineering, LLC, to inspect the property, and on May 22, 2014, D&B performed an inspection of the exterior of the hotel. D&B determined that none of the repair work recommended in the 2013 evaluation had been started, and that protective measures for the public were needed right away.

         On June 2, 2014, a special City Council meeting was held to discuss the hotel. Plaintiffs attended the meeting. The City Council passed a resolution declaring the hotel an immediate hazard, and the City immediately padlocked the hotel and restricted access to it. On July 14, 2014, the City Council began advertising for bids to demolish the hotel, and on August 25, 2014, the City Council began opening bids for the hotel's demolition.

         Defendant sent Plaintiffs a letter on August 27, 2014, requesting that Plaintiffs provide proof of their financial ability to pay for repairs to make the hotel safe. Plaintiffs did not provide a statement documenting their ability to pay for the necessary repairs by the City Council's meeting held on September 8, 2014, and the City Council voted to accept a bid to demolish the hotel for $148, 000.

         The next day, Plaintiffs filed a Petition in the Thirtieth Judicial District, District Court, Harper County, Kansas, requesting an order temporarily restraining Defendant from taking steps to demolish the hotel. Approximately one week later, the state court issued an Agreed Journal Entry. The order included the following excerpts:

1. Plaintiffs represent that they have secured a plan from Richard B. Kraybill . . . to make the building and premises at 121 West Main Street, . . . safe . . .
2. Plaintiffs shall have until January 15, 2015 to secure $110, 000 cash to pay for the improvements and repairs needed to complete the Kraybill plan, . . .
3. Should Plaintiffs secure and document possession of the $110, 000 cash on or before January 15, 2015 then Plaintiffs will have until July 1, 2015 to complete the Kraybill plan . . . .
4. Should Plaintiffs fail to secure and document possession of the $110, 000 cash by January 15, 2015 or having successfully secured the funds fail to complete and document completion of the Kraybill plan by July 1, 2015 then the Defendant may proceed with demolition of the building at 121 West Main.
. . . .
7. Should the Plaintiffs successfully complete the Kraybill plan then this Court case will be dismissed, the planned demolition will not take place and possession to the building and property will be relinquished to Plaintiffs, otherwise Defendants shall remain in the exclusive possession of the building and premises at 121 West Main, Harper, Kansas.

         Plaintiffs did not provide notice that they had secured $110, 000 by January 15, 2015, and on January 20, 2015, the City signed a demolition contract and notice to proceed with the demolition. The City Council scheduled the demolition work to begin on February 26, 2015.

         On March 5, 2015, the City Council convened a special meeting at Plaintiffs' request. At the meeting Plaintiffs revealed that they had secured $21, 000 for repairs, but the City Council did not vote to breach the demolition contract. The City Council asked Plaintiffs if they had plans to remove property from the hotel before demolition, and Plaintiffs responded that there were no plans. The parties disagree as to when demolition actually began, but Plaintiffs allege that the hotel and all of its contents were demolished on March 6, 2015.

         On February 24, 2017, Plaintiffs filed this action alleging violations of Plaintiffs' due process rights, conversion, trespass, intentional infliction of emotional distress, negligent infliction of emotional distress, intentional interference with prospective business advantage, and negligence.

         II. Legal Standards

         A. Motion for Summary Judgment

         Summary judgment is proper if the moving party demonstrates that there is no genuine issue as to any material fact, and the movant is entitled to judgment as a matter of law.[2] A fact is “material” when it is essential to the claim, and issues of fact are “genuine” if the proffered evidence permits a reasonable jury to decide the issue in either party's favor.[3] The movant bears the initial burden of proof and must show the lack of evidence on an essential element of the claim.[4] If the movant carries its initial burden, the nonmovant may not simply rest on its pleading, but must instead “set forth specific facts” that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant.[5] These facts must be clearly identified through affidavits, deposition transcripts, or incorporated exhibits- conclusory allegations alone cannot survive a motion for summary judgment.[6] The Court views all evidence and reasonable inferences in the light most favorable to the non-moving party.[7]

         B. Motion to Dismiss

         Under Rule 12(b)(6), Defendant may move for dismissal of any claim where Plaintiffs have failed to state a claim upon which relief can be granted. Upon such motion, the Court must decide “whether the compliant contains ‘enough facts to state a claim to relief that is plausible on its face.' ”[8] “[T]he mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.”[9] The Court does not “weigh potential evidence that the parties might present at trial, ” but “assess[es] whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted.”[10] In determining whether a claim is facially plausible, the Court must draw on its judicial experience and common sense.[11] All well-pleaded facts in the complaint are assumed to be true and are construed in the light most favorable to Plaintiffs.[12]Allegations that merely state legal conclusions, however, need not be accepted as true.[13]

         III. Analysis

         Defendant argues that Plaintiffs' claims are barred by the Rooker-Feldman doctrine, res judicata, accord and satisfaction, the statute of limitations, and equitable estoppel, and that Plaintiffs' damages should be limited as a matter of law. Further, Defendant argues that even if Plaintiffs' action survives these doctrines, several of Plaintiffs' claims fail to state a claim for which relief can be granted. Plaintiffs respond by arguing that none of the doctrines identified by Defendant bar their claims. Instead of substantively responding to Defendant's arguments that several of their claims fail to state a claim, however, Plaintiffs move to strike this portion of Defendant's motion. The Court will begin its analysis by addressing the doctrines Defendant argues bar Plaintiffs' claims, as well as its argument in favor of limiting damages. The Court will then address Defendant's assertion that several claims in the Complaint fail to state a claim for which relief can be granted, and Plaintiffs' motion to strike those arguments.

         A. Motion for Summary Judgment

         1. The Rooker-Feldman doctrine

         “Federal courts are courts of limited jurisdiction, ” and “possess only that power authorized by Constitution and statute.”[14] The Rooker-Feldman doctrine precludes lower courts from “exercising appellate jurisdiction over final state-court judgments.”[15] Application of the doctrine extends only to “cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.”[16] In addition to claims actually decided by a state court, the doctrine also applies to “claims inextricably intertwined with a prior state-court judgment.”[17]

         “ ‘[T]he type of judicial action barred by Rooker-Feldman consists of a review of the proceedings already conducted by the [state] tribunal to determine whether it reached its result in accordance with law.' ”[18] The doctrine prohibits a “federal action that tries to modify or set aside a state-court judgment because the state proceedings should not have led to that judgment, ”[19]and only applies “if ‘an element of the claim is that [a prior state-court] judgment was wrongful.' ”[20] Accordingly, for the doctrine to apply, the injury alleged in the federal suit must have been caused by the state-court judgment.[21] “Seeking relief that is inconsistent with the state-court judgment is a different matter.”[22] Indeed, attempts to relitigate an issue previously determined by a state court should be analyzed under principles of issue or claim preclusion.[23]

         The Tenth Circuit has previously addressed a case involving similar facts as those presented here, and held that the Rooker-Feldman doctrine did not deprive the district court of jurisdiction to hear the plaintiff's claims.[24] In Bolden, the plaintiff had purchased two houses at a sheriff's sale that, unbeknownst to him, were set to be demolished because they were unfit for human habitation and beyond repair. When Bolden learned of the planned demolition he sought injunctions in state court to prevent the demolition of the properties.[25] The state court denied his requests for injunctions, and ordered that the city could proceed with the planned demolitions. Bolden later filed suit in federal court pursuing various actions against the city, and, under the Rooker-Feldman doctrine, the district court dismissed Bolden's claims that arose out of the city's demolition of his properties. The Tenth Circuit reversed.

         In its decision, the Tenth Circuit reasoned that “Bolden's federal suit did not seek to overturn the state-court judgment, ” and that his claims did not rest “on allegations that the state-court proceedings or judgment violated federal law, or that the judgment itself inflicted an injury.”[26] Further, the state-court judgment did not cause Bolden's injury because “all the state-court judgment did was permit the City to demolish Mr. Bolden's buildings-it did not require their demolition.”[27] Thus, even if a judgment in Bolden's favor would be inconsistent with the state-court judgment or deny a legal conclusion of the state court, because Bolden did not seek to overturn the state-court judgment, the Tenth Circuit found Rooker-Feldman inapplicable.[28]

         Defendant's attempt to distinguish Bolden mischaracterizes its holding by suggesting that the Tenth Circuit's decision relied on the term “inextricably intertwined, ” which Defendant asserts “had no real meaning at the time the Bolden decision was reached.” The Tenth Circuit, however, did not rest its holding on any definition, or lack thereof, of the term “inextricably intertwined.” Rather, it found that Bolden did not ask the district court to overturn the state-court judgment, allege that the state-court proceedings or judgment violated federal law, or allege that the judgment itself inflicted an injury.[29]

         Like the defendant in Bolden, Defendant argues that to the extent Plaintiffs seek relief from this Court for the demolition of the hotel, this Court lacks jurisdiction under the Rooker-Feldman doctrine. And, like the plaintiff in Bolden, Plaintiffs do not seek to undo the state-court judgment issued here, allege that the state-court proceedings violated federal law, or allege that the state-court judgment caused the injuries alleged here. The facts of this case are not materially different than those before the Court in Bolden. Accordingly, following the Tenth Circuit's decision in Bolden, the Court rejects Defendant's argument that the Rooker-Feldman doctrine deprives this Court of jurisdiction to hear Plaintiffs' claims.

         2. Res judicata

         Federal courts must afford a “state-court judgment the same preclusive effect as would be given that judgment under the law of the State in which the judgment was rendered.”[30] Because the City seeks to impute preclusive effect to a Kansas state court's decision, Kansas preclusion principles govern the Court's analysis. Under Kansas law, the doctrine of res judicata has two aspects-claim preclusion and issue preclusion. Claim preclusion prevents parties from relitigating a cause of action that has been finally adjudicated, whereas issue preclusion prevents parties from relitigating issues conclusively determined in a prior action.[31] Defendant argues that claim preclusion applies here.

         “Kansas law is explicit and harsh in invoking claim preclusion to bar splitting a cause of action.”[32] Claim preclusion bars a party from pursing claims in a second lawsuit and has four elements: “(a) the same claim; (b) the same parties; (c) claims that were or could have been raised; and (d) a final judgment on the merits.”[33] “‘[A] judgment which is not final and does not adjudicate the rights in litigation in a conclusive and definitive manner cannot' ” support the application of claim preclusion to bar a subsequent action.[34] Plaintiffs challenge the first and fourth elements. Because the Court is without sufficient information to determine whether the Agreed Journal Entry constitutes a final judgment, it need not address the first element.

         Relying on a Kansas Supreme Court decision, [35] Defendant argues that settlement agreements approved and journalized by a state court constitute final judgments on the merits. But Honeycutt does not command the result Defendant desires. Rather, it states that “[a] voluntary dismissal of a case with prejudice, based on a settlement agreement that is approved by the court and journalized, is a final judgment on the merits.”[36] Thus, Honeycutt simply informs the Court that an agreement between the parties that is encompassed in a court order can serve as a final judgment on the merits-it does not require that every agreement between parties and journalized by the Court constitutes a final judgment. Here, unlike Honeycutt, the Agreed Journal Entry did not voluntarily dismiss the case with prejudice. Rather, it plainly contemplated future dismissal by stating that if “Plaintiffs successfully complete the Kraybill plan then this Court case will be dismissed.” Defendant has not presented any evidence to suggest that Plaintiffs' claims were dismissed or that the state-court case has terminated.

         Plaintiffs allege that the state-court case has not terminated.[37] Plaintiffs quote the following language from the Tenth Circuit to explain when state-court proceedings have ended: “state proceedings have not ended when (1) the state court issues only an interlocutory order (as opposed to a judgment) and (2) the state-court litigation is still ongoing when a party challenges that interlocutory order in federal court.”[38] Plaintiffs argue that the Journal Entry is an interlocutory order, and that the state-court case never terminated.[39] Defendant responds by suggesting that the state-court case ended because it reached the point where neither party sought further action. Defendant, however, has provided no evidence to support its argument.

         The parties disagree as to the status of the state-court action, and neither party has offered evidence regarding the status of the case. Accordingly, there is a factual dispute as to the finality of the state-court proceedings, and summary judgment is not proper.

         3. Accord and satisfaction

         Under Kansas law, “to constitute an accord and satisfaction there must be an offer in full satisfaction of the obligation accompanied by such acts and declarations or under such circumstances that the party to whom the offer is made is bound to understand that if he accepts it, it is in full satisfaction of and discharges the original obligation.”[40] Defendant bears the burden of proof on its accord and satisfaction defense.[41]

         Defendant's motion barely even attempts to demonstrate how the doctrine of accord and satisfaction applies to the facts of this case-its analysis consists of two conclusory sentences. Its reply brief improperly focuses on Plaintiffs' failure to deny the existence of the elements of accord and satisfaction identified in a Tenth Circuit case. First, the Tenth Circuit case cited by Defendant applied Utah law-not Kansas law-and is not controlling here.[42] Second, Defendant first argued that the elements of accord and satisfaction are satisfied in its reply-it is not Plaintiffs' responsibility to anticipate and respond to arguments that Defendant first asserts in its reply. Third, Defendant has not identified uncontroverted facts that satisfy the requirements for accord and satisfaction. Defendant has failed to demonstrate how accord and satisfaction applies here, and has failed to meet its burden to show that the doctrine bars Plaintiffs' claims.

         4. Statute of limitations

         Defendant argues that although Plaintiffs assert claims based on actions taken in March 2015, the applicable two-year statute of limitations[43] for Plaintiffs' claims really began to run either in June 2014 (when Defendant originally decided to demolish the hotel), in September 2014 (when Defendant accepted a bid for demolition), or on January 20, 2015 (when Defendant signed a notice to proceed with the demolition). It argues that “[t]he nut of Plaintiff's [sic] complaint is that they have been deprived of their property, ” and that this occurred in June 2014, when Defendant took control of the building by padlocking it and excluding Plaintiffs, and that it was reasonably ascertainable that the hotel would be destroyed in June 2014, September 2014, or, at the latest, January 2015.

         Plaintiffs' response consists of three arguments: (1) “[t]he injury in this case was the destruction of the hotel and the loss of thousands of historic artifacts, memorabilia, museum pieces and personal items belonging to Plaintiffs, ” (2) Defendant did not finally decide to demolish the hotel and personal property until the City Council meeting on March 5, 2015, and (3) K.S.A. § 60-519 tolls the running of the statute of limitations from September 16, 2004, to July 1, 2015.[44]

         a. State law claims

         K.S.A. § 60-513(b) instructs that a cause of action for trespass upon real property, for taking, detaining, or injuring personal property, and for an injury to the rights of another (not arising on contract or otherwise specifically enumerated) “shall not be deemed to have accrued until the act giving rise to the cause of action first causes substantial injury, or, if the fact of injury is not reasonably ascertainable until some time after the initial act, then . . . [when] the fact of injury becomes reasonably ascertainable to the injured party.”

         “In construing the statute of limitations for tort actions, ” the Kansas Supreme Court has consistently “interpreted the phrase ‘substantial injury' to mean ‘actionable injury.' ”[45]Consistent with this phrase, Kansas courts have held that when determining when an action accrues, the “true test . . . is that point in time at which plaintiff could have first filed and prosecuted an action to a successful conclusion.”[46] “[A] cause of action does not accrue until all of the essential elements are satisfied.”[47] Thus, where a defendant's actions allegedly cause an injury, those actions do “not become actionable until the plaintiff sustains damages as a result.”[48]

         Defendant has failed to identify any caselaw supporting its argument that the decision to commit a tortious act, as opposed to the actual commission of the tortious act, starts the running of the statute of limitations. Likewise, Defendant has made no attempt to show that all of the elements of any of Plaintiffs claims had been established prior to the actual demolition of the hotel and its contents, such that Plaintiffs could have pursued their claims prior to March 2015. Although Plaintiffs could and did file an action seeking to enjoin Defendant's ...

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