Kansas Case Law
NEWMAN MEMORIAL HOSPIT, v. WALTON CONSTRUCTION, 94,473 (Kan.App. 1-12-2007) NEWMAN MEMORIAL HOSPITAL, d/b/a NEWMAN REGIONAL HEALTH CENTER, Plaintiff/Appellee, v. WALTON CONSTRUCTION COMPANY, INC., Defendant, EVERTON OGLESBY ASKEW ARCHITECTS, Defendant/Appellant, FAIRBURY GLASS CO., INC., d/b/a CONCORDIA MIRROR AND GLASS COMPANY, Defendant, BELLES & ASSOCIATES, INC., Defendant, and AMCO INSURANCE COMPANY, Defendant. No. 94,473. Court of Appeals of Kansas. Opinion filed: January 12, 2007.
SYLLABUS BY THE COURT
Under the facts of this case and for the reasons fully set
forth in the opinion, we hold: (1) The actions of a county
hospital in constructing and leasing a medical office
building is a proprietary and not a governmental function;
(2) pursuant to K.S.A. 60-521, the limitations periods
prescribed in Article 5 of Chapter 60 of the Kansas
Statutes Annotated apply to actions brought in the name of
the county hospital acting in a proprietary function or
activity in the same manner as to actions by private
parties; (3) equitable estoppel does not exist to prevent
an architectural firm under a written contract with the
county hospital from pleading and relying on the statute of
limitations defense; (4) the 3-year period of limitations
of K.S.A. 60-512(1) applies to and bars any recovery by the
county hospital against the architectural firm for breach
of implied warranty of workmanlike performance; (5) the
5-year period of limitations of K.S.A. 60-511(1) applies to
and bars any recovery by the county hospital against the
architectural firm for breach of the terms of a written
contract; and (6) the architectural firm is granted
judgment against the county hospital based on its statute
of limitations defenses.
Appeal from Lyon District Court; JOHN O. SANDERSON, judge.
Opinion filed January 12, 2007. Reversed.
Wyatt A. Hoch and Carolyn L. Matthews, of Foulston Siefkin
LLP, of Wichita, and James D. Oliver, of Foulston Siefkin
LLP, of Overland Park, for appellant.
Harold S. Youngentob, John A. Bausch, and Nathan D.
Leadstrom, of Goodell, Stratton, Edmonds & Palmer, L.L.P.,
of Topeka, for appellee.
Before MALONE, P.J., CAPLINGER, J., and LARSON, S.J.
LARSON, J.
This is Everton Oglesby Askew Architects’ (EOAA) direct
appeal from (1) the district court’s ruling that Newman
Memorial Hospital, d/b/a Newman Regional Health Center
(Newman) was not subject to EOAA’s statute of limitations
defense because Newman was acting in a governmental and not
a proprietary manner in building and leasing an office
building to physicians at commercial rates; (2) rulings
relating to its contract for architectural services to
Newman; (3) rulings relating to the jury trial where EOAA
was found liable for damages of $907,693; (4) denial of
EOAA’s motion for judgment as a matter of law; (5) denial of
EOAA’s motion alleging the jury’s verdict was not supported
by substantial competent evidence; and (6) jury
instructions given and denied which are claimed to
constitute reversible error.
FACTUAL AND PROCEDURAL BACKGROUND
The medical office building
Newman is a county hospital located in Emporia, Lyon
County, Kansas. It is organized and exists pursuant to the
provisions of K.S.A. 19-4601 et seq. which allow
establishment of a hospital but do not require it. There is
likewise no statutory or other legal obligations to build
and maintain an office building for physicians, but it is a
permitted activity.
In 1994, the Newman Board of Trustees began consideration
of constructing an office building next to the hospital for
rental to physicians or other tenants. The minutes of the
Newman Board of Trustees’ meeting of June 28, 1995,
contained the following statement relating to the
construction of a medical office building:
“Dr. Geitz advised he has had strong feelings about this
building for 1-1/2 years and the need to have adequate
space available for physicians being recruited. Physicians
being brought in who are not connected with any group have
no place to go. He noted the community will have a problem
over the next few years with seven primary care doctors over
the age of 60; it is already difficult for people who need
doctors to get in to see them. Dr. Geitz referred to Mr.
Hanna’s concern that this project will be harmful to local
developers; however, the need has not been met by local
developers. If the Hospital doesn’t do something, something
is going to be done. Dr. Geitz expressed his concern that
an outside agency could come into the community and build
the necessary facility, establishing
outpatient/radiology/lab services as well, and taking
business away from the community and Hospital.”
A decision was made by the Newman Board of Trustees to
proceed with the project of establishing a medical office
building.
In June 1995, Newman contracted with EOAA to provide
architectural services for the design and construction of
the medical office building. EOAA had previously provided
architectural services to Newman for a construction
project.
The agreement for architectural services
On June 15, 1995, EOAA and Newman entered into a written
agreement titled “Standard Form of Agreement Between Owner
and Architect” (hereinafter “Agreement”) which was the
standard contract published by the American Institute of
Architects, but contained numerous and substantial
modifications involving deleted language and additions
showing provisions of the Agreement had been negotiated by
the parties.
Numerous other parties became involved in the planning for
and construction of the office building. Some were initial
defendants in this case, but all except EOAA either settled
or were dismissed prior to the jury trial. We will mention
each one briefly but only as their obligations and actions
relate to the issues on appeal between EOAA and Newman.
Newman hired Walton Construction Company, Inc. (Walton) as
its construction manager for the project. Walton provided
two full-time employees to supervise the work of
contractors and assure the quality of their work. Walton
sought and obtained bids for the project, but each
contractor had its own contract with Newman, not with
Walton.
Firms hired by Walton which had contracts with Newman
included Belles & Associates, Inc. (Belles) for site
grading, foundation, and structural steel, and Concordia
Mirror and Glass Company (Concordia) to furnish and install
the windows.
Under the Agreement, Newman was required to furnish the
services of a geotechnical engineer to investigate,
evaluate, and report on soil conditions at the building
site. The Agreement (paragraph 4.9) stated EOAA was
entitled to rely on the accuracy and completeness of the
geotechnical engineer’s report. Newman contracted with
Barnett, Stuart, and Associates of Topeka, a division of
Terracon Consultants, to provide these services.
Although Newman selected and furnished the report of the
geotechnical engineer referred to above, EOAA hired
numerous other engineering consultants for the project,
including structural, mechanical, plumbing, and electrical
engineers. For structural engineering services, EOAA hired
EMC Structural Engineers, who designated Mark Buchanan as
structural engineer of record for the project.
Certain provisions of the Agreement between EOAA and Newman
are particularly applicable to the issues in this case. The
negotiated Agreement contained the following provision
dealing with the statute of limitations:
“9.3 Causes of action between the parties to this Agreement
pertaining to acts or failures to act shall be deemed to
have accrued and the applicable statutes of limitations
shall commence to run not later than either the date of
Substantial Completion for acts or failures to act
occurring prior to Substantial Completion, or the date of
issuance of the final Certificate for Payment for acts or
failures to act occurring after Substantial Completion.”
With regard to the construction phase of the project, the
Agreement provided, in relevant part:
“2.6.5 The Architect shall visit the site at intervals
appropriate to the stage of construction or as otherwise
agreed by the Owner and Architect in writing to become
generally familiar with the progress and quality of the
Work completed and to determine in general if the Work is
being performed in a manner indicating that the Work when
completed will be in accordance with the Contract
Documents. However, the Architect shall not be required to
make exhaustive or continuous on-site inspections to check
the quality or quantity of the Work. On the basis of
on-site observations as an architect, the Architect shall
keep the Owner informed of the progress and quality of the
Work, and shall endeavor to guard the Owner against defects
and deficiencies in the Work. . . .
“2.6.6 The Architect shall not have control over or charge
of and shall not be responsible for construction means,
methods, techniques, sequences or procedures, or for safety
precautions and programs in connection with the Work, since
these are solely the Contractor’s responsibility under the
Contract for Construction. The Architect shall not be
responsible for the Contractor’s schedules or failure to
carry out the Work in accordance with the Contract
Documents. The Architect shall not have control over or
charge of acts or omissions of the Contractor,
Subcontractors, or their agents or employees, or of any
other persons performing portions of the Work. However, if
the Architect becomes aware of failures of the Contractor
to carry out the Work in accordance with the Contract
Documents, the Architect shall immediately notify the Owner
of such failures.”
The last sentence of paragraph 2.6.6 was a typed-in
addition to the standard AIA contract language.
The geotechnical report, building design, and construction
Barnett’s report documented EMC’s findings based on
subsurface exploration and made recommendations for
foundation construction noting the medical office building
was planned to have a “slab-on-grade” at the first floor
level. A slab-on-grade is a concrete floor placed directly
on the soil with a structural slab being one that supports
itself without coming into contact with the soil.
Comparatively speaking, a slab-on-grade floor is very
economical in that it can cost only one-fifth of the cost
of a structural slab floor.
The Barnett report made detailed recommendations regarding
both foundation support and the preparation of the site for
that type of foundation. As to the risk of floor movement,
the report stated:
“The procedures recommended above for moisture control
during and after construction of the floor slab subgrade
and use of low plasticity and low volume change material
should reduce the potential for subgrade volume change and
floor slab movement resulting from variations in moisture
content. However, since highly plastic soils on the site
extend to a considerable depth, some long term volume
change of the subgrade could occur and should be
considered. If it is desired to further reduce the
potential for subgrade volume change, the use of a greater
thickness of low plasticity soil beneath the floor slab
would be necessary. To eliminate the risk of floor
movement, a structural slab should be considered.”
The medical office building was constructed using a
slab-on-grade on the first floor, as was an adjacent
building for which EOAA had been the architect.
Construction was completed on the medical office building
to the point where it could be occupied by tenants in late
February or early March 1997; this point and time in the
construction process is known as “substantial completion.”
The certificate of substantial completion referred to in
paragraph 9.3 of the Agreement was issued on February 18,
1997.
The record reflects that by July 17, 1997, Newman had
knowledge of water leaking through or around the windows in
the medical office building and that the leaking caused
damage to interior finishes. Concordia was the window
contractor. It is also uncontroverted that by May 5, 1998,
Newman was aware that the first floor concrete slab was
heaving, causing damage to brick veneer, floor tile, doors,
and drywall. Belles was the contractor that installed the
slab. Belles and Concordia were obligated contractually to
correct defects upon notice, which was given, and warranty
work was apparently done during late 1997 and 1998.
Filing of this lawsuit and pretrial proceedings
Although negotiations between the parties apparently
existed, the record reflects that on July 31, 2002, Newman
filed a petition against EOAA, Walton, Fairbury Glass Co.,
Inc., d/b/a Concordia Mirror and Glass Company, Belles, and
AMCO Insurance Company alleging breach of contract, breach
of express and implied warranties, negligence, and strict
liability. Newman subsequently added as defendants David J.
Sprague, d/b/a Concordia Mirror and Glass Company,
Concordia Mirror and Glass Company, Inc., Belles, Inc., and
Fidelity and Deposit Company of Maryland (Fidelity). In
their answers, the defendants, including EOAA, denied
liability and alleged affirmatively as a defense that
Newman’s causes of action were barred by the applicable
statute of limitations.
After a period of discovery, EOAA and the other defendants
filed a joint motion for summary judgment, contending
Newman’s construction and leasing of the medical office
building were proprietary functions and, therefore,
Newman’s claims were subject to the applicable statute of
limitations and time barred because they were filed after
the expiration of the longest applicable limitations period
of 5 years as provided in K.S.A. 60-511(1).
Newman responded and admitted it was aware of the window
and slab problems respectively by July 1997 and May 1998,
but considered these facts immaterial or irrelevant because
defendants continued to negotiate with Newman concerning
remedial repairs throughout 2000 and 2001. Newman did not
controvert the defendants’ statement that EOAA design
services did not include an express warranty on EOAA’s
professional services.
Additionally, Newman filed a cross-motion for summary
judgment, claiming immunity from the statute of limitations
based on the contention that its construction of the
medical office building was a governmental, not
proprietary, function. Alternatively, Newman argued if it
was not immune from the statute of limitations, its claims
of breach of contract and breach of express warranty did
not accrue until sometime after July 31, 1997, and, thus,
those claims were not time barred. Finally, Newman urged
the district court to find the defendants were estopped
from asserting a statute of limitations defense due to
their deliberate engagement in continued negotiations
regarding remedial repairs.
After a hearing on the summary judgment motions and some
additional briefing where Newman asserted its cause of
action against EOAA accrued August 13, 1999, the date EOAA
advised Newman it had contacted the window manufacturer
regarding remedying the window problems, the district court
denied the defendants’ joint summary judgment motion. In
doing so, the district court order stated:
“It is the Court’s ruling that there is an issue of
material fact whether the movants are estopped from
asserting defenses of expiration of the limitation statute.
As to Concordia Mirror and Glass and Belles & Associates,
Inc., there are material issues of fact as to whether the
statute of limitations expired on or before 31 July 2002.
“If there are material issues of fact whether the statute
of limitations expired as to Concordia Mirror and Glass and
Belles & Associates, there are material issues of fact
whether the statute of limitations expired as to the
architect and general contractor.”
The district court, however, granted Newman’s cross-motion
for summary judgment, holding Newman was not subject to the
statute of limitations defense because its construction and
leasing of the medical office building was a governmental
and not a proprietary function. In doing so, the court
relied on the language contained in a property tax
exemption statute, K.S.A. 2002 Supp. 79-201a Second. The
court stated that if narrowly construed, the statute would
apply only to ad valorem taxation but if broadly construed,
it would conclusively determine the construction and
operation of the medical office building was a governmental
function, which the district court so found.
As the result of settlements, Newman claims against Walton,
Fairbury, Sprague, Concordia, AMCO, and Belles were
dismissed with prejudice. Fidelity was later granted
summary judgment. This left EOAA as the sole remaining
defendant at the time the case went to a jury trial.
Jury trial proceedings
Newman’s claims against EOAA were based at trial on breach
of contract and breach of implied warranty of performance
in a workmanlike manner of the contract for architectural
services in the following ways:
“1. Defective design which did not properly take into
consideration expansive soil on site;
“2. Providing inadequate design details;
“3. Failure to follow up on soil report and to properly
take the expansive nature of the soil under the site into
consideration in the design of the building;
“4. Improperly allowing the concrete slab to be placed
directly upon soil despite knowledge of soil movement;
“5. Improperly inspected work of contractors;
“6. Improperly allowed installation of grade beams without
requiring they be tied to piers;
“7. Improperly gave certification for payment of work of
contractors when such work was defective and deficient; and
“8. Improperly accepted building despite defects in design
and work.”
Newman primarily contended the design of the building was
defective, EOAA failed to take into account the expansive
soil at the building site and improperly called for
slab-on-grade under those conditions, and improperly
inspected the work of contractors, especially that dealing
with the installation of windows.
EOAA denied that it breached the design contract; alleged
it was contractually entitled to and did rely on Barnett’s
geotechnical report which included recommendations for a
slab-on-grade construction; and with respect to the
inspection allegation, contended it notified Newman and
Walton when it became aware of the leaking windows and is
not responsible under the design contract for the
contractors’ failure to follow the contract documents.
Trial testimony
The jury trial covered a 9-day period with numerous expert
witnesses testifying and a large number of exhibits
presented, including the contract for architectural
services between Newman and EOAA.
It is not necessary for the result we reach to detail the
testimony of each witness, but we will highly summarize
Newman’s main contentions and the evidence presented
relative thereto and EOAA’s numerous defenses and the
applicable evidence supporting them.
Central to Newman’s claims that EOAA’s building design was
faulty was the usage of slab-on-grade flooring which had
heaved up 2 inches, causing substantial damage to the
building. Evidence showed the architect knew that soil
movement can be counteracted by use of caissons, a raised
structural slab which supports itself or the removal of
elastic soil under a building and its replacement with
engineered-approved fill soil.
Newman’s expert, Stan Pedersen, a Kansas licensed
architect, testified the design team failed to fully
consider Barnett’s report which suggested use of structural
slab to eliminate movement and further did not adequately
inquire as to the magnitude of expected soil movement.
Mark Peterman, a licensed structural engineer, testified
for Newman and opined the design team failed to design for
ground movement, failed to even consider a structural slab
and that it was a departure from standard engineering
practice to design the floor without so inquiring.
Newman argues on appeal that the testimony of EOAA’s
structural engineer, William Francis O’Donnell, did not
reflect much disagreement with their expert. O’Donnell
testified his design was based on not over 1/2 inch of soil
movement but faulted the Barnett report for not providing
proper recommendations.
Newman also presented a soil engineer, Ron Reed, who
concluded the damage to the first floor was caused by
expansive clay under the slab. He testified the Barnett
report was sufficient without specifying the amount of soil
movement expected. Reed opined that a much larger
replacement of the clay soil should have been utilized, up
to 12 to 14 feet.
EOAA countered by showing EOAA and Barnett had both worked
on an adjacent building in which a slab-on-grade floor had
been used successfully with a replacement of 24 inches of
low plasticity. On the medical office building, the Barnett
report had recommended only replacement of a minimum of 18
inches of low plasticity soil although up to 4 feet of soil
had ultimately been replaced.
EOAA further showed that although Peterman testified the
slab-on-grade should be replaced with a structural slab in
a letter to Newman, he had indicated that such a
replacement was “not economically feasible.” Peterman
acknowledged another building which was adjacent to the
medical office building had been built with a slab-on-grade
first floor and did not experience significant slab
movement. In addition, Newman’s architectural expert
Pedersen testified he has not recommended the use of a
structural slab for a building in the past 10 years.
EOAA said the Barnett report had suggested the structural
slab to eliminate the risk of soil movement but did not
affirmatively recommend implementation of a structural slab
on the project. Central to EOAA’s defense was the fact its
agreement with Newman stated it should “rely upon both the
accuracy and completeness of [geotechnical report].”
As to damages, EOAA contended Newman’s evidence was
premised on tearing out the entire first floor and
replacing it with a structural slab floor, which EOAA
claimed was not intended or practical. Half of the first
floor had been completed slab-on-grade without any problem
and the testimony of Newman’s expert, Philip Schultze, of a
general contracting firm, was “preliminary,” could be off
plus or minus 20 to 30 percent and did not properly
calculate the floor to be replaced.
Newman countered the EOAA’s damage arguments by pointing to
the testimony of Schultze being admitted showing his
estimate of the cost of making the building “right,” the
testimony of Peterson as to the cost of the structural
slab, and the testimony of Harold Blits, Newman’s director
of facility management, concerning the costs of repairs
taken and those needed.
It is sufficient to say there was conflicting testimony as
to the building design and the damages or absence thereof.
The legal effect of the contractual language was a question
for the court and not the jury.
There was also conflicting evidence as to the
responsibility for and the inspection of the installation
of the windows. Newman presented testimony showing the
windows were not installed as required by the
manufacturer’s instructions and that EOAA’s on-site
architect, Sam Anderson, should have viewed an installation
in detail, which he failed to do. Newman’s testimony was
that EOAA should have performed 28 visits over “80-some-odd
man days” but only 13 observation reports of the required
28 contractual visits could be found.
EOAA’s testimony showed that adequate and sufficient
inspections were made, Newman received reports as soon as
defects were known, primarily the alleged defects in the
windows were the result of Newman’s contract with the
window installer, and the specific provision of the
agreement between Newman and EOAA stated that EOAA “shall
not be responsible for the contractor’s . . . failure to
carry out the work in accordance with the contract
documents.”
There were numerous trial rulings and instructions which
were objected to by EOAA which we need not now detail but
which were reserved and raised.
At the conclusion of the trial, the jury found EOAA
breached both its contract with Newman and the implied
warranty of workmanlike performance. The jury awarded
damages of $1,059,289 for the cost of repairs to the
medical office building and $133,404 for loss of rental
income. The verdict was accepted, but the district court
found EOAA was entitled to a credit of $285,000 against the
jury’s award of damages for amounts received by Newman in
settlements with other parties. The judgment entered was
for $907,693 plus costs.
Posttrial proceedings
Although EOAA had unsuccessfully moved for judgment as a
matter of law after Newman concluded its presentation of
evidence contending as a matter of law it was not
contractually responsible for the contractors’ faulty work
on windows and masonry and, further, it was contractually
entitled to rely on the accuracy and completeness of the
geotechnical engineer’s report regarding the slab, EOAA
again moved posttrial for judgment for the same reasons.
In the alternative, EOAA moved for a new trial challenging
the court’s admission of damages relating to the costs of a
structural slab, asserting violations of an order in
limine, challenging the failure to give a betterment
instruction, and challenging the changing of an instruction
regarding the contract after defense counsel completed his
closing argument.
The district court denied EOAA’s motion for judgment as a
matter of law, finding the jury was properly instructed and
there was substantial evidence to support the jury’s
verdict. The court refused to grant a new trial, finding
because the damage award was less than what was requested
by Newman, the court would not speculate as to the type of
floor the jury considered in determining the amount of
damages for the first floor repairs.
EOAA has timely appealed, raising numerous issues.
THE APPEAL
Issues raised on appeal
EOAA raises the following issues on appeal:
“1. [Newman] filed this action after the statute of
limitations expired.
“A. Did the trial court err in holding that constructing
and owning a medical office building for lease to
commercial tenants was a governmental function in which
plaintiff was immune from a statute of limitations defense?
“B. Did the trial court err in holding that EOAA was
estopped to assert a limitations defense when the purported
ground for the estoppel was conduct of other defendants
(e.g., investigation of a bond claim by a subcontractor’s
surety)?
“2. [Newman] claimed EOAA was liable for . . . (leaking
windows damage) resulting from breach of contract by the
construction manager/general contractor and its
supplier/installation subcontractor in installing windows
and masonry.
“A. Did the trial court err in denying architect EOAA
judgment as a matter of law because its contract with
plaintiff expressly provided (1) that EOAA was not liable
for the contractors’ failure to carry out the work in
accordance with their contracts and (2) that EOAA only
agreed to inspect for purposes of being `generally
informed’ of progress and to report defects actually known?
“B. Did plaintiff fail to prove the essential element of
damages because it had no evidence of any separate damages
attributable to the architect’s alleged failure to
adequately inspect?
“3. The geotechnical engineer’s report gave specific
directions it deemed adequate for installing a
slab-on-grade first floor. [Newman] claimed [EOAA] . . .
should have discovered that the report was inaccurate and
incomplete and, upon requesting additional information,
should have recommended construction of a much more costly
structural slab floor.
“A. Did the trial court err in denying EOAA judgment as a
matter of law because EOAA’s contract with plaintiff
expressly provided that EOAA could rely on both the
`accuracy and completeness’ the geotechnical engineer’s
report?
“B. Did plaintiff fail to prove an essential element of a
breach of contract claim because it did not prove any
compensable damages, claiming instead damages for an
upgrade or betterment not contracted for which no witness
recommended and was admitted to be `not economically
feasible’ by plaintiff’s own expert?
“4. In addition or in the alternative, should the court
reverse judgment because the verdict was not supported by
substantial evidence?
“5. In addition to or in the alternative, . . . should the
court reverse and remand for a new trial based on numerous
trial court errors in rulings of law, jury instructions,
and admissions of evidence?”
Newman, as would be expected, argues that it is immune from
the statute of limitations for its cause of action arising
out of the construction of the medical office building;
K.S.A. 60-521 is inapplicable as its construction and
operation of the medical office building is a governmental
function under the KPERS test; the legislature has not
waived immunity from the statute of limitations for actions
related to real estate; substantial evidence at trial
supports the jury verdict finding the architect breached
its contract; damages awarded by the jury were supported by
substantial competent evidence; and there were no trial
errors requiring reversal and, if there were errors, they
were harmless.
Standards of review
As the standards of review differ as to each issue raised,
they will be set forth as we consider the issues in our
opinion.
ARGUMENTS, ANALYSIS, AND DECISION
Summary of arguments EOAA first argues the trial court
erred in entering summary judgment in favor of Newman and
against EOAA on its contention that the 5-year statute of
limitations applicable to contract claims (K.S.A.
60-511[1]) barred Newman’s contract cause of action. EOAA
further contends Newman’s claim for breach of the implied
warranty of workmanlike performance is subject to a 3-year
statute of limitations as provided by K.S.A. 60-512(1),
relying on Zenda Grain & Supply Co. v. Farmland Industries,
Inc., 20 Kan. App. 2d 728, 742, 894 P.2d 881 (1995).
The specific district court ruling EOAA claims to be
erroneous is that Newman’s construction and leasing of the
medical office buildings constituted a governmental
function, leaving Newman immune from the applicable statute
of limitations, K.S.A. 60-521. EOAA specifically takes
issue with the district court’s exclusive reliance on
language found in a tax exemption statute, K.S.A. 2005
Supp. 79-201a Second.
EOAA relies on the uncontroverted facts that substantial
completion of performance under the architectural services
contract occurred no later than March 1997 and the alleged
breaches of contract by EOAA (failure to properly inspect
window installation and failure to design a structural slab
floor) all occurred prior to the date of substantial
completion of the medical office building.
Finally, EOAA disputes Newman’s estoppel argument, claiming
it did nothing to induce delay and/or inaction by Newman
and that it is not chargeable with the acts or actions of
other parties Newman contracted directly with. Therefore,
EOAA maintains Newman’s claims were and are time barred.
Newman strongly argues K.S.A. 60-521 is not applicable
because its construction and operation of the medical
office building is a governmental function, leaving Newman
not subject to any limitations period. Newman argues health
care is an essential governmental function, relying on
K.S.A. 2005 Supp. 76-3302(a)(1) and the provisions of
K.S.A. 79-201a Second which specifically state that the
lease of real property to provide office space necessary
for the performance of medical services “shall be construed
to be a governmental function.”
EOAA recites the K.S.A. 60-256 language as to the granting
of summary judgment being proper where there is no genuine
issue as to any material fact found in Bracken v. Dixon
Industries, Inc., 272 Kan. 1272, 1274-75, 38 P.3d 679
(2002). Newman suggests there is no dispute as to the
material facts by either party, making our court’s review de
novo, citing Ekan Properties v. Wilhm, 262 Kan. 495, 501,
939 P.2d 918 (1997). While these issues may have been
initially raised by summary judgment motions, they are in
reality issues of law and statutory construction over which
we have unlimited review. See T.S.I. Holdings, Inc. v.
Jenkins, 260 Kan. 703, 716, 924 P.2d 1239 (1996).
Governmental or proprietary function
K.S.A. 60-521 provides (subject to two exceptions not
applicable here) that
“[a]s to any cause of action accruing to the state, any
political subdivision, or any other public body, which
cause of action arises out of any proprietary function or
activity, the limitations prescribed in this article shall
apply to actions brought in the name or for the benefit of
such public body in the same manner as to actions by
private parties. . . .”
Thus, by negative implication, K.S.A. 60-521 “retains
governmental immunity from the statute of limitations for
causes of action arising out of a governmental function.
[Citations omitted.]” State ex rel. Stovall v. Meneley, 271
Kan. 355, 384, 22 P.3d 124 (2001). The rationale behind
K.S.A. 60-521 is rooted in the public policy that “public
rights and causes of action should not be lost by the acts
or admissions of public officers. [Citations omitted.]
Public rights, however are not at issue when a
municipality’s cause of action arises out of a proprietary
function.” City of Wichita, Kan. v. U.S. Gypsum Co., 828 F.
Supp. 851, 861-62 (D. Kan. 1993) (quoting in KPERS v.
Reimer & Koger Associates, Inc., 262 Kan. 635, 660, 941
P.2d 1321 [1997]).
This brings us to the controlling question. Was Newman’s
construction and leasing of the medical office building a
governmental or a proprietary function or activity?
It is instructive to first examine the uncontroverted facts
concerning Newman and the planning for, construction of,
and leasing and operation of the medical office building
which are central to this case.
Newman is a county hospital authorized but not required to
be operated pursuant to K.S.A. 19-4601 et seq. Newman had
the right but not the legal obligation to build and lease
office space for physicians.
The minutes of the Newman Board of Trustees recognized the
medical office building would aid in recruiting new
physicians to Emporia but would compete with private
individuals, groups, or other entities who might compete
with the hospital.
The medical office building was financed by the sale of
taxable revenue bonds. No tax revenues have been used to
pay interest, principal, or other expenses of the medical
office building.
The medical office building generated gross profit
(operating revenue less operating expenses) for Newman in
years 1999, 2000, and 2002. Medical office building tenants
are not required to be members of the Newman medical staff
and pay rent to Newman at the market rent of $12.50 per
square foot per year in accordance with written lease
agreements. Federal law requires the leases to be set at
fair market value to avoid criminal prosecution under the
federal anti-kickback statute. See 42 U.S.C. §
1320a-7b (2000); 42 U.S.C. § 1395nn (2000); and 42
U.S.C. § 1320a-7(a)(1) (2000).
The purpose of the medical office building is to provide
needed health care to Emporia, Lyon County, and the
surrounding community. The use of the medical office
building for rental to physicians fulfills a recognized
public benefit. Newman’s services are open to all persons
in Kansas without regard to their locality and Newman
renders emergency services without regard to the ability of
the person needing such services to pay.
In explaining the difference between what is a governmental
versus what is a proprietary function, our Supreme Court
succinctly said in State ex rel. Stovall v. Meneley, 271
Kan. at 384:
“Governmental functions are those performed for the general
public with respect to the common welfare for which no
compensation or particular benefit is received. Proprietary
functions, on the other hand, are exercised when an
enterprise is commercial in character or is usually carried
on by private individuals or is for the profit, benefit, or
advantage of the governmental unit conducting the activity.
McAfee, 2 Kan. App. 2d at 276. See also International Ass’n
of Firefighters v. City of Lawrence, 14 Kan. App. 2d 788,
Syl. § 3, 798 P.2d 960 rev. denied, 248 Kan. 996
(1991) (governmental powers are exercised to `administer
the affairs of the state and promote the public welfare
generally’).”
The International Ass’n of Firefighters v. City of
Lawrence, 14 Kan. App. 2d 788, 798 P.2d 960 (1990), cited
above, set forth the same basic difference between
governmental and proprietary functions when it opined:
“Governmental or legislative powers are exercised to
administer the affairs of the state and promote the public
welfare generally. [Citation omitted.] Proprietary or
administrative powers are exercised to accomplish private
corporate purposes in which the public is only indirectly
concerned and as to which the municipality is regarded as a
legal individual. [Citation omitted.]” 14 Kan. App. 2d at
794.
Newman strongly points us to the statement from KPERS v.
Reimer & Koger Associates, Inc., that “[a] statute of
limitations does not run against the state unless expressly
so provided, and all doubts as to whether it shall run are
to be resolved in favor of the state.” 262 Kan. 635, Syl.
§ 4. However, it must be pointed out the facts in
KPERS are completely different from our case with clear
state action there involved while we consider the
construction and leasing of a medical office building for
what is basically commercial purposes. In addition, the
KPERS opinion quoted in detail and at length from City of
Wichita, Kansas v. United States Gypsum Co., 828 F. Supp. at
861-62, where it was said that a favorable resolution of
“all doubts” was not required. The full discussion is set
forth in KPERS, 262 Kan. at 660, but concludes: “‘The court
concludes that no rule of law favors either defendants or
plaintiff in determining whether plaintiff’s cause of
action arises out of a proprietary or governmental
function.'”
We have fully considered, but will not needlessly repeat in
this opinion, all of the cases cited and the accompanying
discussions on the governmental versus proprietary question
found in KPERS, 262 Kan. at 648-65.
There are, however, two Kansas cases which have a direct
application to our case, as they involve whether actions of
hospitals located in Kansas are governmental or proprietary
in nature. While both involve immunity rather than
limitations questions, they are on point as to the
proprietary versus governmental function we face.
The Kansas Supreme Court has twice held that when a
governmental entity operates a hospital, it acts in a
proprietary function. In Stolp v. City of Arkansas City,
180 Kan. 197, 303 P.2d 123 (1956), the court held that the
operation of a hospital by a city was a proprietary
function rather than a governmental function and, therefore,
not immune from tort liability. In Carroll v. Kittle, 203
Kan. 841, 849-50, 457 P.2d 21 (1969), the Kansas Supreme
Court extended Stolp by holding that the Kansas Board of
Regents’ operation of the University of Kansas Medical
Center is a proprietary function. The court stated: “[W]e
see no reason why the rule applied to city hospitals in the
Stolp case should not now be given general application.”
203 Kan. at 850.
In the Stolp case, the proprietary finding appears to have
been based in part on the contractual relationship between
the hospital and a patient, as the court said:
“[T]he type of municipal hospital provided here is one
which possesses the elements of a proprietary rather than a
governmental function in that primarily any contract
between a patient and the city is one of a private and
personal nature for pay and the proceeds are placed in a
hospital fund which provides a direct profit, benefit, or
advantage to the city and its inhabitants as against a
benefit to the public in general.” 180 Kan. at 203-04.
In Carroll, which is better known for the Kansas Supreme
Court’s abolishment of the judicially created doctrine of
governmental immunity, the opinion was firm in its holding
that operating the hospital was a proprietary function and
opined:
“We have no hesitancy in concluding that in the operation
of the hospital at the University Medical Center the Board
of Regents was engaged in a proprietary rather than a
governmental function. The operation of a hospital is
usually carried on by private individuals or private
companies; private patients in the University hospital paid
rates comparable to those which were charged in private
hospitals; the hospital was receiving an annual income of
approximately $6,000,000.00 a year from private patients,
and obtained 97 doctors for the medical school’s faculty at
a nominal salary of $3,600.00 a year because of the
hospital facilities furnished them for their private
patients.” 203 Kan. at 850.
Newman argues that it provides services to all residents of
Kansas. It must then also be in competition with hospitals
operated by private individuals or corporations which are
located in our state. The Newman trustees were concerned
about competitive actions of private groups. All of these
factors weigh heavily for a finding that Newman is acting in
a proprietary manner in the construction and leasing of the
medical office building at issue in our case.
We take guidance as our Supreme Court did in KPERS v.
Reimer from immunity cases where the governmental versus
proprietary question was at issue and, while Carroll and
Stolp are not controlling, they demonstrate that a hospital
owned by a governmental entity can and often does engage in
proprietary functions.
Factors which have been utilized by Kansas courts in
determining whether a governmental entity is carrying on a
proprietary or governmental function include (1) whether
the activity is for the state as a whole or special local
benefit (in our case, the economic benefit of the medical
office building flows to Newman and Lyon County); (2)
whether the activity arises out of a statutory duty or a
privilege granted (in our case, it was a permitted and not
a mandated duty); (3) whether the activity is normally done
by private entities (in our case, Newman charges market
rates and normally makes a gross profit-indicia of a
proprietary business); and (4) whether the entity’s actions
were commercial in nature (in our case, the leasing of a
building is a commercial act). These factors all point to
requiring a holding that the actions of Newman in this case
were proprietary in nature.
Statutory provisions
Newman raises three statutory provisions in its defense of
the district court’s holding that Newman’s construction of
the medical office building was a governmental function.
The provisions of K.S.A. 2005 Supp. 76-3302(a)(1) and
K.S.A. 2005 Supp. 79-201a Second were raised below and will
be considered. K.S.A. 60-509 is raised for the first time
on appeal and will not be considered. See Board of Lincoln
County Comm’rs v. Nielander, 275 Kan. 257, 268, 62 P.3d 247
(2003).
In asserting the preservation of public health and
providing health care are essential governmental functions,
Newman relies on the language of K.S.A. 2005 Supp.
76-3302(a)(1) that states: “Provision of health care is an
essential governmental function protecting and promoting
the health and welfare of the citizens of the state of
Kansas.” This statement is made, however, in the narrow
context of a 1998 act establishing and creating the
“University of Kansas Hospital Authority.” See K.S.A. 2005
Supp. 76-3301 et seq.
The language relied on by Newman is further explained as
relating to education and research at a teaching hospital
and such functions are specifically stated to be deemed
“matters of public necessity for the entire state.” K.S.A.
2005 Supp. 76-3302(b).
This policy statement is limited to the creation of a
specific instrumentality of the State of Kansas in the
establishment of a specific hospital authority and is not
controlling in the determination of whether Newman’s
construction and leasing of the medical office building is
a proprietary or governmental act. What we must look to and
evaluate are all of the facts and circumstances regarding
the reasons for and the effects of Newman’s decision to
establish the medical office building.
The other statutory provision in issue, K.S.A. 2005 Supp.
79-201a Second, is a tax exemption provision amended by the
legislature in 1994 to give tax exempt status to medical
office buildings. The district court relied on its language
solely in upholding Newman’s summary judgment motion.
K.S.A. 2005 Supp. 79-201a contains 20 subsections
designating property that is exempt from property and ad
valorem taxes. The first sentence of K.S.A. 2005 Supp.
79-201a identifies the scope of the provision: “The
following described property, to the extent herein
specified, shall be exempt from all property or ad valorem
taxes levied under the laws of the state of Kansas.” K.S.A.
2005 Supp. 79-201a Second then provides:
“All property used exclusively by the state or any
municipality or political subdivision of the state. All
property owned, being acquired pursuant to a lease-purchase
agreement or operated by the state or any municipality or
political subdivision of the state, including property
which is vacant or lying dormant, which is used or is to be
used for any governmental or proprietary function and for
which bonds may be issued or taxes levied to finance the
same, shall be considered to be used exclusively by the
state, municipality or political subdivision for the
purposes of this section. The lease by a municipality or
political subdivision of the state of any real property
owned or being acquired pursuant to a lease-purchase
agreement for the purpose of providing office space
necessary for the performance of medical services by a
person licensed to practice medicine and surgery or
osteopathic medicine by the board of healing arts . . .
shall be construed to be a governmental function, and such
property actually and regularly used for such purpose shall
be deemed to be used exclusively for the purposes of this
paragraph.” (Emphasis added.)
Interestingly, the L. 1997, ch. 126, sec. 36, added
dentistry, optometry, and podiatry services and L. 1998,
ch. 146, sec. 1, added psychology services to the
professions whose leasing of office space from a
municipality or political subdivision of the state is exempt
from property or ad valorem taxes.
The district court, in its opinion, opined there was no
evidence the legislature intended to overrule Stolp and
Carroll but that the intent was a response to several Board
of Tax Appeals and court rulings, Salina Airport Authority
v. Board of Tax Appeals, 13 Kan. App. 2d 80, 761 P.2d 1261
(1988), and Tri-County Public Airport Auth. v. Board of
Morris County Comm’rs, 245 Kan. 301, 777 P.2d 843 (1989),
that government property used for proprietary uses would be
subject to ad valorem taxes. This is our long-time rule.
There is no evidence these amendments were in any way
intended to apply to any of the provisions of the Code of
Civil Procedure and simply provided a tax benefit to
certain health care professionals.
In utilizing only the statement that for tax exemption
purposes, a proprietary usage would be construed, the
district court failed to acknowledge language that the
property at issue might “be used for any governmental or
proprietary function” as was stated in the preceding
sentence. We question whether the language utilized by the
district court should be given the broad and binding effect
that it was given in the courts below.
The arguments of the parties to us on appeal are
predictable. EOAA challenges the district court’s sole
reliance on K.S.A. 2005 Supp. 79-201a Second and contends
it relates only to a tax exemption and has nothing to do
with a statute of limitations question under K.S.A. 60-521.
Newman maintains the district court’s reliance on K.S.A.
2005 Supp. 79-201a Second was proper and that such
provision can be regarded as in pari materia with K.S.A.
60-521.
In discussing when statutes are deemed to be in pari
materia, 2B Singer, Statutes and Statutory Construction
§ 51:03, p. 202 (6th ed. 2002) (hereinafter
“Singer”) teaches us:
“Statutes are considered to be in pari materia when they
relate to the same person or thing, to the same class of
persons or things, or have the same purpose or object . . .
[c]haracterization of the object or purpose is more
important than characterization of subject matter in
determining whether different statutes are closely enough
related to justify interpreting one in light of the other.”
The Kansas case relied on by Singer in discussing whether
statutes “have the same purpose or object” is State v.
Bradley, 215 Kan. 642, 527 P.2d 988 (1974), which states in
syllabus § 5:
“Where two statutes are enacted in the same session of the
legislature, have the same effective date and relate to
public employees performing dangerous and vital duties,
having a common purpose to protect that class of persons,
they are in pari materia and must be read together when
interpreting them.”
State v. Bradley was also discussed in In re Adoption of
Baby Girl H, 12 Kan. App. 2d 223, 227-28, 739 P.2d 1
(1987), which recited similar language to that previously
set forth in Singer that is attributed to Clark v. Murray,
141 Kan. 533, 537, 41 P.2d 1042 (1935):
“Statutes in pari materia are those which relate to the
same person or thing, or to the same class of persons or
things, or which have a common purpose, and although an act
may incidentally refer to the same subject as another act,
it is not in pari materia if its scope and aim are distinct
and unconnected. It is a well-established rule that in the
construction of a particular statute, or in the
interpretation of its provisions, all statutes relating to
the same subject, or having the same general purpose,
should be read in connection with it, as together
constituting one law, although they were enacted at
different times, and contain no reference to one another.”
12 Kan. App. 2d at 227.
In resolving these principles and deciding whether statutes
should be read in pari materia, Singer further suggests:
“Although broad categories are obviously not helpful for
determining what statutes should be construed in pari
materia, the principle that related statutes, or statutes
on the same subject or having the same purpose should be
construed together does not show on its face how broadly or
narrowly the classification should be defined. The guiding
principle, however, is that if it is natural and reasonable
to think that the understanding of members of the
legislature or persons to be affected by a statute, be
influenced by another statute, then a court called upon to
construe the act in question should also allow its
understanding to be similarly influenced. Because this is a
pragmatic kind of test, the best way to understand and
predict what statutes the courts would consider closely
enough related is by examining and comparing examples of
the kinds of statutes that have been held to be in pari
materia and those which were held not to be.” 2B Singer,
§ 51.03, pp. 212-13.
The following Kansas cases are then listed as those where
statutes have been considered to be in pari materia:
“Kansas. General Motors Corp. v. State Commission of
Revenue and Taxation, 182 Kan. 237, 320 P.2d 807 (1958);
Fincher v. Fincher, 182 Kan. 724, 324 P.2d 159 (1958); In
re Smith’s Estate, 183 Kan. 158, 325 P.2d 63 (1958); Custom
Built Homes Co. v. Kansas State Commission of Revenue and
Taxation, 184 Kan. 31, 334 P.2d 808 (1959).
“Recidivism statute and statute concerning length of
sentence for crime. Robertson v. State, 206 Kan. 320, 478
P.2d 196 (1970).
“Survival statute and wrongful death statute. Flowers v.
Marshall, 208 Kan. 900, 494 P.2d 1184 (1972).
“Conveyancing and recordation statutes. Luthi v. Evans, 223
Kan. 622, 576 P.2d 1064 (1978).
“Retail Sales Tax Act and Compensating Tax Act (statute
that equalizes tax liability for out-of-state sales) should
be construed together. Appeal of K-Mart Corp., 238 Kan.
393, 710 P.2d 1304 (1985).
“General mechanics lien statutes and statutes dealing
specifically with oil and gas properties should be
construed harmoniously. Interlake, Inc. v. Kansas Power &
Light Co., 7 Kan. App. 2d 16, 637 P.2d 464, 33 U.C.C. Rep.
Serv. 171 (1981), judgment rev’d on other grounds 231 Kan.
251, 644 P.2d 385 (1982).” 2B Singer, § 51.03, p.
221.
The General Motors Corporation v. State Commission of Rev.
& Taxation, 182 Kan. 237, 320 P.2d 807 (1958), case
involved the sales tax and the use tax; the Fincher v.
Fincher, 182 Kan. 724, 324 P.2d 159 (1958), case found
statutes relating to divorce and residence, both in chapter
60 should be construed together; although listed above as In
re Smith’s Estate, the correct case name actually is Smith
v. Kansas Turnpike Authority, 183 Kan. 158, 325 P.2d 63
(1958), and it held two statutes enacted together dealing
with the taking of private property for public use were in
pari materia; and Custom Built Homes Co. v. Kansas State
Commission of Rev. and Taxation, 184 Kan. 31, 334 P.2d 808
(1959), cited the General Motors case and construed together
taxation statutes.
We need not discuss each case factually further or in more
detail, as they all show the closeness that must exist
where statutes are construed to be in pari materia. It is
clear to us that the scope and aim of a taxation exemption
statute (K.S.A. 2005 Supp. 79-201a Second) is distinct and
unconnected from a Code of Civil Procedure statute (K.S.A.
60-521), and the clear connectivity which is shown by the
cases cited above do not exist under the facts we face in
our case. Based on this analysis, the two statutes in issue
in our case are not in pari materia. We are not required to
override all of the overwhelming facts showing the
construction and leasing of the medical office building to
be a proprietary function by the single statutory provision
relied on by the district court.
We need not restate all the facts and circumstances
surrounding Newman’s construction and leasing of the
medical office building which demonstrate Newman’s actions
were proprietary and not governmental. When these facts and
circumstances are unchanged by any applicable statutory
enactment, we hold that pursuant to K.S.A. 60-521 the 5-year
statute of limitations period of K.S.A. 60-511(1) applied
to Newman’s contract cause of action against EOAA and the
district court erred in holding otherwise.
As we have previously stated, the contract for
architectural services between Newman and EOAA was the
subject of apparent negotiations, with language added and
provisions struck, but contained a specific agreement as to
the date from which any applicable statute of limitations
would run as was set forth in paragraph 9.3 of the
agreement which states:
“Causes of action between the parties to this Agreement
pertaining to acts or failures to act shall be deemed to
have accrued and the applicable statutes of limitations
shall commence to run not later than either the date of
Substantial Completion for acts or failures to act
occurring prior to Substantial Completion, or the date of
issuance of the final Certificate for Payment for acts or
failures to act occurring after Substantial Completion.”
Based on the specific time established for a cause of
action to accrue, it is uncontroverted that the date of
substantial completion of construction of the medical
office building took place on February 17, 1997, and under
the facts, no later than the end of March 1997. Neither
party has discussed the time the certificate of payment was
issued which is not a question we must consider. It is
clear that the alleged breach of contract by EOAA, failure
to witness and properly inspect window installation, and
failure to design a suitable slab floor, occurred on or
before the date of substantial completion which we establish
as being uncontroverted to have occurred prior to March 31,
1997.
The present action was filed by Newman on July 31, 2002.
This is clearly 4 months beyond the latest time in which
Newman had to bring a claim for breach of contract against
EOAA, and the district court erred in failing to find
Newman’s breach of contract claim under the agreement for
architectural services was barred by the provisions of the
applicable statute of limitations, K.S.A. 60-511(1).
The district court found in ruling on the joint motion for
summary judgment of EOAA and other defendants that it was
not disputed that (1) construction was substantially
completed on the medical office building in late February
or early March 1997; (2) Newman was aware of the window
leaks and resulting damage by July 17, 1997; and (3) Newman
was aware by May 5, 1998, that the concrete floor was
heaving and causing other damage. With Newman’s claim for
breach of implied warranty of workmanlike performance being
subject to a 3-year statute of limitations provided in
K.S.A. 60-512(1), it is clear that this limitation period
had also expired by the time Newman filed its petition
against EOAA on July 31, 2002.
Unfortunately, the district court faced an extremely
difficult task in considering a joint summary judgment with
defendants subject to different contractual terms and
different actions in response to the problems the
construction of the medical office building presented. In
denying the joint defendant motion for summary judgment, the
district court erroneously found there were issues of
material fact regarding whether the statute of limitations
had expired as to Newman’s claims against EOAA. The court
specifically based this finding on a determination there
were material issues of fact with respect to whether the
statute of limitations had expired as to Newman’s claim
against Concordia and Belles and then ruled: “If there are
material issues of fact whether the statute of limitations
expired as to Concordia Mirror and Glass and Belles and
Associates, there are material issues of fact whether the
statute of limitations expired as to the architect and
general contractor.” This is simply an incorrect conclusion,
as there is no mention of material issues of fact as to
EOAA and no legal or contractual relationship between EOAA
and Concordia or Belles upon which this conclusion could be
based.
It appears that in analyzing whether the statute of
limitations had expired, the district court looked only to
paragraphs 12.2.2 and 13.7.1.2 of Newman’s contract with
the contractors and did not acknowledge the fact that
EOAA’s contract with Newman contained entirely different
language. Newman’s contracts were direct with Belles and
Concordia and provided in paragraph 13.7.1.3 that as to acts
or failures to act occurring after the issuance of the
certificate for payment, the statutory limitations period
commenced to run
“not later than the date of any act or failure to act by
the Contractor pursuant to any warranty provided under
Paragraph 3.5, the date of any correction of the Work or
failure to correct the Work by the Contractor under
Paragraph 12.2, or the date of actual commission of any
other act or failure to perform any duty or obligation by
the Contractor or Owner, whichever occurs last.”
The above language and paragraphs referred to by the
district court are not included in or made a part of the
contract for architectural services between EOAA and
Newman.
We hold the language of Newman’s agreements with Walton,
Belles, or Concordia has no legal effect on EOAA’s
arguments concerning the applicability of the statute of
limitations. The applicable statute of limitations has run
against both of the claims which were tried to the jury in
this case unless EOAA is estopped from asserting such a
defense as the result of its actions.
Estoppel
As we have previously stated, Newman argued in its
cross-motion for summary judgment below that EOAA and the
other defendants should be equitably estopped from
asserting a statute of limitations defense due to their
continued actions regarding remedial repairs. The district
court only found in paragraph 10 of its ruling that “[t]here
is a material issue of fact whether the actions taken by
Concordia Mirror and Glass after the date of substantial
completion constitutes a waiver, which estops them from
relying on the defense of limitations. Iola State Bank, 233
Kan. at 458 and 459.”
No finding was made that specifically related to EOAA, but
in its ruling the district court stated: “[T]here is an
issue of material fact whether the movants are estopped
from asserting defenses of expiration of the limitation
statute.” On appeal, EOAA argues it is not estopped from
pleading the statute of limitations, contending it took no
action that induced delay or inaction and mere negotiations
regarding settlement do not result in an estoppel.
Newman did not address this issue in its brief on appeal
although it is properly raised by the appellant. In
considering this issue, we will look to and consider all
the arguments made in Newman’s brief on its cross-motion
for summary judgment in the district court.
We consider this issue as it is properly raised by EOAA and
a remand is not necessary because the record in our case
contains sufficient factual information for us to reach a
decision. See Wright v. U.S.D. No. 379, 28 Kan. App. 2d
177, 14 P.3d 437, rev. denied 270 Kan. 904 (2000). Our
standard of review is as has been previously set forth.
In discussing equitable estoppel, Rockers v. Kansas
Turnpike Authority, 268 Kan. 110, 116, 991 P.2d 889 (1999),
states:
“‘A party asserting equitable estoppel must show that
another party, by its acts, representations, admission, or
silence when it had a duty to speak, induced it to believe
certain facts existed. It must also show it rightfully
relied and acted upon such belief and would now be
prejudiced if the other party were permitted to deny the
existence of such facts.’ United American State Bank &
Trust Co. v. Wild West Chrysler Plymouth, Inc., 221 Kan.
523, 527, 561 P.2d 792 (1977).
Each element of estoppel must be proven or the claim will
fail. Estoppel will not be held to exist where facts are
ambiguous or subject to more than one construction. Ram Co.
v. Estate of Kobbeman, 236 Kan. 751, Syl. § 5, 696
P.2d 936 (1985).
“Equitable estoppel can be applied to bar a party from
relying on the defense of the statute of limitations. Where
a defendant has `by deception or in violation of his duty
toward plaintiff, caused him to subject his claim to the
statutory bar, defendant must be charged with having
wrongfully obtained an advantage . . . and this can be done
by his silence when under an affirmative duty to speak.
[Citation omitted.]’ Klepper v. Stover, 193 Kan. 219, 222,
392 P.2d 957 (1964).”
As was stated in Coffey v. Stephens, 3 Kan. App. 2d 596,
599, 599 P.2d 310 (1979), to establish estoppel, plaintiff
must prove “some representation or course of conduct which
amounts to affirmative inducement sufficient to cause
plaintiff to delay bringing the action.” The affirmative
inducement must have been relied on in good faith by
plaintiff. Coffey, 3 Kan. App. 2d at 597.
A review of the uncontroverted facts demonstrates Newman
failed to establish the requisite elements of estoppel as
pertains to the actions of EOAA. In asserting its estoppel
argument below, Newman, in its brief, largely refers to the
actions of the defendants generally and fails to specify
any actions taken by EOAA upon which Newman allegedly relied
in delaying filing of this suit.
The district court found that Concordia Glass had
represented it would fix window problems under its warranty
and sent workers to do remedial work as late as October
1998 and Newman issued work orders to Belles in December
1997 and January 1998, but these findings have nothing to
do with EOAA and do not, in any event, support an estoppel.
The uncontroverted facts, at best, tested by the standards
of review of summary judgment motions, do show a claim of
reliance as to Concordia and/or Walton only. Paragraph 38
of the uncontroverted facts as stated in Newman’s
cross-motion for summary judgment referenced only those two
defendants within the context outlining Newman’s decision to
take legal action. Paragraph 38 stated:
“The first time Terry Lambert recalls the Board talking
about legal action was in 1999 or 2000, but it may have
been in 2001 because they kept trying to get a resolution
of the problem so Newman Memorial kept thinking that it
could get this worked out. Newman Memorial kept discussing
it with Concordia and Walton was involved and Newman
Memorial kept thinking it was going to get this fixed
somehow.”
There is mention that EOAA was involved in some discussions
regarding remedial repairs but under the Coffey test,
EOAA’s mere involvement in those discussions is grossly
insufficient to warrant the application of equitable
estoppel to any actions by EOAA. Newman presented no
evidence that EOAA ever requested that Newman delay filing
suit against them. In fact, Newman’s witness, Lambert,
admitted in a deposition that he knew of no promise made to
plaintiff to prevent it from filing a lawsuit.
It is clear from the uncontroverted facts that Newman’s
estoppel claim may have raised triable issues as to other
defendants but totally lack any merit when tested against
EOAA’s actions. The district court erred in finding there
was any genuine issue as to a material fact relating to
EOAA and its determination as to the existence of equitable
estoppel to assert a statute of limitations defense by EOAA
is reversed.
There are a multitude of other issues raised by EOAA which
we need not reach or consider in light of the result we
have reached.
In summary, we hold the actions of Newman in constructing
and leasing the medical office building at issue in this
case is a proprietary function making Newman subject to the
limitations periods prescribed in Article 5 of Chapter 60
of the Kansas Statutes Annotated; equitable estoppel does
not exist to prevent EOAA from pleading and relying on the
statute of limitations defense; and, the 3-year period of
limitations of K.S.A. 60-512(1) and the 5-year period of
limitations of K.S.A. 60-511(1) apply to and bar any
recovery by Newman under the two theories of recovery,
breach of implied warranty of workmanlike performance and
breach of a written contract, tried in this case.
The judgment of the district court is reversed, and EOAA is
granted judgment against Newman based on its statute of
limitations defenses.