Filing and recording of a deed omitting a seller's
reservation of a mineral interest, at a minimum, clouds the
seller's title and causes an immediate substantial,
Whether a substantial injury is "reasonably
ascertainable" under K.S.A. 60-513(b) is a question of
fact, not resolvable as a matter of law under the
constructive notice provision in K.S.A. 58-2222. The filing
and recording of a deed is only one piece of relevant
evidence to be considered by the fact-finder in deciding
whether a substantial injury caused by the deed's
omission of a seller's reserved mineral interest is
of the judgment of the Court of Appeals in 53 Kan.App.2d 651,
390 P.3d 571 (2017).
from Rice District Court; Steven E. Johnson, judge..
B. Stull, of Stull, Beverlin, Nicolay & Haas, LLC, of
Pratt, argued the cause, and Joshua V.C. Nicolay, was on the
briefs for appellants.
William P. Denning, of Sanders Warren Russell & Scheer
LLP, of Overland Park, argued the cause, and Jeffrey C.
Baker, and Kaitlin M. Marsh-Blake, were with him on the
briefs for appellee.
appeal examines summary judgment granted to a title company
on negligence and breach of fiduciary duty claims, which
arose out of the company's 2008 omission of a reserved
mineral interest in a deed and its handling of a 2014
conveyance. The district court judge ruled that the claims
were launched too late.
of our Court of Appeals reversed, and we granted the title
company's petition for review. We now hold that summary
judgment was granted in error, although our reasoning in
support of that conclusion differs somewhat from that of the
panel. We reverse the judgment in favor of the title company
on the negligence and breach of fiduciary duty claims and
remand the case to the district court for further
and Procedural Background
way to summary judgment in district court, third-party
defendant Rice County Abstract & Title Co., Inc. (RCAT),
set forth 22 paragraphs of what it asserted were
uncontroverted facts. Defendants/third-party plaintiffs (the
Falens), successors in interest to the Mary Louise
Falen-Olsen Trust (the Trust), attempted to contest seven of
the paragraphs, and the district judge assumed the
Falens' versions were true for purposes of ruling on the
motion. See Drouhard-Nordhus v. Rosenquist, 301 Kan.
618, 622-23, 345 P.3d 281 (2015) (district court required to
resolve all facts and inferences that may reasonably be drawn
from the evidence in favor of nonmoving party). The Falens
also listed 56 additional paragraphs of what they asserted
were uncontroverted facts. Although RCAT, in turn, attempted
to challenge certain of those 56 paragraphs, we have
carefully reviewed all of the parties' pyrotechnic tit
for tat, and we perceive no disputes on core facts necessary
to resolution of this appeal, other than as specifically
roots of this case can be traced to November 20, 2007, when
the Trust entered into a contract to convey approximately 200
acres of Rice County land to Sammy Dean. The Trust had owned
all of the surface rights and an undivided one-half mineral
interest in the land. The contents of the listing agreement,
an advertising brochure, and the eventual sale contract are
consistent in reflecting the contemporaneous intention of the
Trust and Dean that the Trust would sell the surface rights
and retain the mineral interest.
was the closing agent and the title insurer on the sale. It
charged half of its fee to Dean and the other half to the
Trust. It did not include any reference to the mineral
reservation in the deed it prepared, although it had a copy
of the sale contract.
has asserted that it sent the deed to third-party plaintiffs
Gregory A. Falen and Julie D. Falen, co-trustees of the
Trust, for "review and signature," but Gregory and
Julie have asserted that the deed was sent to them by RCAT
only for signature. Neither Gregory nor Julie nor any other
representative of the Trust asked RCAT about the mineral
reservation before Gregory and Julie executed the deed. The
deed was filed and recorded in Rice County on January 18,
the Trust's sale of the land to Dean, the Trust
transferred what all concerned believed was still its mineral
interest to the Trust's beneficiaries. The beneficiaries,
in turn, made several additional transfers of the interest
among themselves, executing and recording mineral deeds and
quitclaims with the Rice County Register of Deeds. On March
6, 2008, Dean conveyed his interest in the property to SDM
Properties2, LLC (SDM2), evidently an entity owned, at least
in part, by Dean.
January 2008 until August 2014, the Trust and then its
successors in interest continued to be paid royalties for
mineral production from the land sold to Dean. The Trust and
then its successors in interest also continued to pay all
property taxes associated with that production.
April 2014, LCL, LLC, a company formed by Ron Laudick and
Cheryl Armstrong, agreed to buy the property from SDM2.
Before this conveyance was finalized, Laudick sent Dean an
e-mail acknowledging "that the mineral rights do not go
with the property."
again acted as the closing agent and title insurer for the
2014 transaction. Again, the deed prepared to record the
conveyance did not note the Trust's 2008 mineral right
the 2014 sale closed, Laudick contacted RCAT about the
mineral rights on the property. He asked about the
discrepancy between Dean's understanding of the ownership
and RCAT's title commitment. RCAT conducted a title
search and discovered that the 2008 deed had not included the
reservation of the Trust's mineral interest. RCAT did not
contact the Trust or its successors in interest, but it asked
LCL to sign a corrected deed to remedy the omission. LCL
refused. The Trust's successors in interest first learned
of the brewing dispute in August 2014, when the company
operating the oil and gas lease on the property contacted
Gregory about LCL's claim of ownership and the right to
receive royalties. Royalty payments to the Trust's
successors in interest were suspended by August 21, 2014.
filed a petition to quiet title on the mineral interest on
September 22, 2014. It named as defendants the Trust's
successors in interest-Gregory; Julie; James W. Falen, in his
capacity as sole trustee of the James W. Falen Living Trust
U/A dated April 30, 2007; and Maryl M. Wesolowski. LCL
asserted that its interest in the mineral rights was superior
to the interest claimed by any defendant.
December 1, 2014, the Falens filed an answer denying
LCL's ownership of the mineral interest and a
counterclaim to quiet title in their favor, based in part on
the assertion that LCL did not qualify as a bona fide
purchaser because it had actual notice that the mineral right
was not included with the land. The same day, the Falens also
filed a third-party petition against RCAT, alleging RCAT had
been negligent and had breached an implied contract by
failing to include the mineral reservation in the deed it
prepared and recorded for the 2008 sale.
moved for summary judgment on the Falens' third-party
claims. It argued that any injury to the Trust and the Falens
occurred in January 2008 and thus the applicable two-year
statute of limitations had expired. See K.S.A. 60-513(a)(4).
Specifically, RCAT argued that the "the uncontroverted
facts establish that the [Trust] knew or could have known of
the error in the deed in January 2008" because Gregory
and Julie had received the 2008 deed two days before they
executed it and returned it to RCAT. In the alternative, RCAT
argued that K.S.A. 58-2222 charged the Trust and its
successors in interest with constructive notice of the
contents of the 2008 deed as it was filed and recorded.
days later, the Falens moved to amend their third-party
petition, seeking to add allegations regarding the 2014 sale
and a claim for breach of fiduciary duty by RCAT. Although
this motion was never ruled upon, the district judge
thereafter treated the amended petition as the controlling
pleading for the Falens' third-party claims.
their response to the RCAT motion for summary judgment, the
Falens argued that the "clear language of K.S.A.
§60-513(b) indicates the limitation period is triggered
by both the act which causes injury and the
existence of substantial injury." They also argued that
"'in a tort action where the evidence is in dispute
as to when substantial injury first appears or becomes
reasonably ascertainable, the issue is for determination by
the trier of fact.'" They asserted that a genuine
issue of material fact exists in this case on when their
injury from RCAT's omission of the mineral reservation in
the 2008 deed became reasonably ascertainable.
respect to RCAT's argument that the Falens had
constructive notice under K.S.A. 58-2222, the Falens cited
Luthi v. Evans, 223 Kan. 622, 629, 576 P.2d 1064
(1978), for the proposition that the purpose of the recording
statute is to "'impart to a subsequent purchaser
notice of instruments which affect the title to a specific
tract of land in which the subsequent purchaser is interested
at the time.'" Because they did not qualify as
subsequent purchasers, the Falens argued, they were not in
the class of individuals whom the Legislature intended to
charge with constructive notice under K.S.A. 58-2222.
district judge bifurcated the quiet title action between LCL
and the Falens from the Falens' third-party claims
against RCAT. LCL and the Falens entered into a confidential
settlement, and the judge dismissed the quiet title action on
November 23, 2015.
reply in support of its motion for summary judgment, filed in
December 2015, repeated its actual and constructive notice
claims, adding that any allegation that Gregory and Julie
were inexperienced with reviewing deeds was irrelevant
because the standard for whether the Falens' substantial