In re Estate of Mouchague

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No. 118,287

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

In the Matter of the Estate of
BARBARA MOUCHAGUE.


SYLLABUS BY THE COURT


1.
Standing is a component of subject matter jurisdiction, which any party, or the
court on its own motion, may raise at any time.

2.
Whether a party has standing in a judicial action, like other jurisdictional issues,
presents a question of law over which an appellate court's scope of review is unlimited.

3.
The determination of jurisdiction and standing rests on the facts in existence at the
time of filing.

4.
Generally, the trustee, rather than a beneficiary of the trust, is the proper party to
sue or defend actions and claims affecting the trust. An exception to that rule permits a
beneficiary of a trust to sue or defend when the trustee improperly or unreasonably
refuses to do so.

5.
The Kansas Uniform Trust Code charges the trustee with a duty to prosecute or
defend legal actions to protect trust property. This duty includes taking reasonable steps
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to enforce or realize on other claims held by the trust and to defend actions that may
result in a loss to the trust estate. Reasonable steps may include appealing to a higher
court when the costs and risk of litigation make such a decision reasonable under all the
circumstances.

6.
The party seeking to avail himself or herself of an exception to a general rule
carries the burden of establishing the facts necessary to invoke the provisions of that
exception. Here, the beneficiary of the trust bears the burden to show that the trustee
improperly or unreasonably failed to protect their interest by not appealing a judgment.

7.
A party seeking attorney fees on appeal must attach to the motion an affidavit that
specifies the nature and extent of the services rendered, the time expended on the appeal,
and the factors considered in determining the reasonableness of the fee.

8.
When a fee applicant fails to submit an affidavit containing the required detail, as
required by Supreme Court Rule 7.07(b)(2) (2019 Kan. S. Ct. R. 50), this court has no
ability to determine the reasonableness of fees incurred on appeal.

Appeal from Johnson District Court; MICHAEL P. JOYCE, judge. Opinion filed May 3, 2019.
Appeal dismissed.

Mark D. Lewis, of Gardner, for appellants Patricia and Leonard Kowalski.

Michelle M. Burge, of Kirkland Woods & Martinsen LLP, of Overland Park, for appellee Terry
Diehl, executor of the Estate of Barbara Mouchague.

Before BRUNS, P.J., SCHROEDER and GARDNER, JJ.
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GARDNER, J.: This appeal pertains to ongoing litigation between Terry
Chamberlain Diehl (the executor for the estate of Barbara A. Mouchague) and Leonard
and Patricia Kowalski, beneficiaries of Mouchague's trust. In addition to the probate case,
the parties have been involved in three civil actions below which we need not detail. In
this appeal, the Kowalskis claim the probate court erred in awarding attorney fees and
expenses to Diehl resulting from one of the civil cases and for previously appealing that
case—a case to quiet the Kowalskis' claim to the title and secure Mouchague's property
as belonging to the estate. Diehl responds that the Kowalskis, as beneficiaries of
Mouchague's trust but not of the estate being litigated in probate court, lack standing to
bring this appeal. We agree, finding that the trustee is the proper party to bring an action
affecting the trust and that the Kowalskis have not shown that the trustee breached its
fiduciary duty so as to permit them to appeal instead of the trustee.

Diehl has also moved for an award of attorney fees incurred in defending this
appeal. But she has failed to include in her affidavit the specific detail required by our
Rule, so we deny that motion.

FACTUAL AND PROCEDURAL BACKGROUND

When Barbara A. Mouchague died in December 2012, Terry Chamberlain Diehl
was appointed the executor of her estate. The sole beneficiary of the estate is the Barbara
A. Mouchague Trust. The Country Club Trust Company serves as its trustee but is not a
party to this appeal. The trust names four beneficiaries: Leonard Kowalski, Patricia
Kowalski, and two charitable organizations. The parties to this appeal are Diehl, as the
executor of Mouchague's estate, and the Kowalskis, who have an 80% equitable interest
in the decedent's trust.

This appeal has a complicated history because in addition to the probate case, the
parties have been involved in three underlying civil cases which the district court tried
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together. One of those cases is relevant here. In 14 CV 4300, Diehl, in her capacity as
executor, sued to set aside a joint tenancy deed in the Kowalskis' and Mouchague's names
and to quiet title in the estate when she was gathering estate property. The district court
ruled in favor of Diehl on the quiet title action and then ordered the Kowalskis to pay
Diehl's attorney fees and expenses of over $60,000. The Kowalskis appealed. This court
reversed and vacated the fee award on appeal, finding that the fees could not be assessed
against the Kowalskis because no contractual or statutory basis for doing so was shown.
Diehl v. Kowalski, No. 114,706, 2016 WL 6651575, at *4 (Kan. App. 2016) (unpublished
opinion). The general rule thus applied that litigants are responsible for their own
attorney fees. Robinson v. City of Wichita Employees' Retirement Bd. of Trustees, 291
Kan. 266, 279, 241 P.3d 15 (2010). This court also stated that the fee award in the quiet
title action was not a fee award in the probate proceeding and that the district court had
expressly deferred ruling on fees in the probate case until the estate was closed. Kowalski,
2016 WL 6651575, at *1.

After this court vacated the award for attorney fees in the quiet title action, Diehl
petitioned the probate court under K.S.A. 59-1717 for payment of those same fees and
expenses. The district court again awarded Diehl the attorney fees and litigation expenses
related to the quiet title action but this time assessed them against the decedent's estate
instead of against the Kowalskis personally.

Diehl also petitioned the district court for an award of her attorney fees incurred in
defending against the Kowalskis' appeal in the quiet title action—Kowalski, 2016 WL
6651575. The court at first denied Diehl's requested appellate attorney fees, holding that
all legal fees and expenses incurred in an appeal must be addressed by appellate courts
under Kansas Supreme Court Rule 7.07 (2019 Kan. S. Ct. R. 50). Diehl then sought her
fees from the Kansas Court of Appeals under Rule 7.07 but was unsuccessful. She then
petitioned the district court again for the award under K.S.A. 59-1717, and the district
court awarded the fees.
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The Kowalskis appeal, challenging the probate court's award of Diehl's attorney
fees and expenses to pursue the quiet title action and to defend that award on appeal.
They contend that Diehl cannot seek fees now because Diehl failed to appeal from the
original fee award against the Kowalskis in 2015. Although the Kowalskis appealed that
fee award, giving rise to the quiet title action, Diehl did not. The Kowalskis also argue
that the probate court abused its discretion by not requiring proper segregation of fees,
that the amount of fees the probate court awarded was excessive and unreasonable, and
that the probate court lacked jurisdiction to award fees incurred on appeal.

We note that Diehl moved to strike the Kowalskis' notice of appeal because it
stated that the appeal was being filed on behalf of the trustee and the other beneficiaries
of the trust, but neither the Country Club Trust Company nor the beneficiaries other than
the Kowalskis joined the appeal. The district court denied Diehl's motion to strike the
appeal.

DO THE KOWALSKIS HAVE STANDING TO APPEAL THE DISTRICT COURT'S RULING IN THE
ESTATE OF BARBARA MOUCHAGUE?

Before we reach the Kowalskis' allegations of error in the probate court's award of
fees and expenses, we must address Diehl's argument that the Kowalskis lack standing to
appeal that award.

Standard of Review

Parties in a judicial action must have standing as part of the Kansas case-or-
controversy requirement imposed by the judicial power clause of Article 3, § 1 of the
Kansas Constitution. See State ex rel. Morrison v. Sebelius, 285 Kan. 875, 895-96, 179
P.3d 366 (2008). The standing inquiry asks whether a party has a sufficient stake in the
controversy to warrant invocation of jurisdiction and to justify the exercise of the court's
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remedial powers on that party's behalf. Board of Johnson County Comm'rs v. Jordan, 303
Kan. 844, 854, 370 P.3d 1170 (2016). The effect of this requirement is that standing is a
component of subject matter jurisdiction, which any party, or the court on its own
motion, may raise at any time. See Cochran v. Kansas Dept. of Agriculture, 291 Kan.
898, 903, 249 P.3d 434 (2011). Whether a party has standing in a judicial action, like
other jurisdictional issues, presents a question of law over which this court's scope of
review is unlimited. In re Care & Treatment of Emerson, 306 Kan. 30, 34, 392 P.3d 82
(2017).

At the pleading stage, the party asserting standing has the burden to establish a
prima facie case of standing, that is, a basis when viewed in the light most favorable to
the party. See In re Adoption of T.M.M.H., 307 Kan. 902, 915-16, 416 P.3d 999 (2018);
Aeroflex Wichita, Inc. v. Filardo, 294 Kan. 258, 264-65, 275 P.3d 869 (2012). The
determination of jurisdiction and standing rests on the facts in existence at the time of
filing. See Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 580, 124 S. Ct.
1920, 158 L. Ed. 2d 866 (2004) ("The time-of-filing rule is what it is precisely because
the facts determining jurisdiction are subject to change, and because constant litigation in
response to that change would be wasteful."); In re I.H.H.-L., 45 Kan. App. 2d 684, 691,
251 P.3d 651 (2011).

Discussion

Our standing analysis focuses on statutory standing. Any heir, devisee, or legatee
may prosecute or oppose the probate of a will. K.S.A. 59-2224; see Matter of Estate of
Beason, 248 Kan. 803, 806, 811 P.2d 848 (1991). This restriction is narrower than dozens
of Kansas statutes that, in other contexts, permit an appeal by an aggrieved person. See
Friends of Bethany Place v. City of Topeka, 297 Kan. 1112, 1139-40, 307 P.3d 1255
(2013) (listing those statues). Neither the Kansas Probate Code nor the Kansas Uniform
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Trust Code allows an appeal by an aggrieved person. See generally K.S.A. Chapters 58a,
59.

The Kowalskis appear to be aggrieved here because each time the executor, Diehl,
is awarded fees out of estate funds, fewer assets remain available in the estate to
distribute to the Kowalskis as some of the beneficiaries of the trust. But neither Kowalski
is, admittedly, an "heir, devisee, or legatee" of Barbara Mouchague's will, as the statute
requires. K.S.A. 59-2224. Instead, the only beneficiary of the estate is the Barbara
Mouchague Trust. Because the Kowalskis are not beneficiaries of the estate being
litigated, Diehl argues that they lack standing to bring this appeal in the probate case.

The general rule

The parties agree that generally, the trustee—and not the beneficiary of the trust—
is the proper party to sue or defend actions and claims affecting the trust. The parties
have not addressed whether the estate's executor, Diehl, is a third party for purposes of
this rule. We assume, without deciding, that she is.

This issue has not been addressed in Kansas cases. Cases from other jurisdictions
reflect the general rule that the trustee, who has legal title to the res, has standing to sue a
third party; the beneficiary does not even if the beneficiary is adversely affected.

"'The trustee's standing to sue arises out of its legal title to the res. "The trustee
has a title (generally legal title) to the trust property, usually has its possession and a right
to continue in possession, and almost always has all the powers of management and
control which are necessary to make the trust property productive and safe. Any wrongful
interference with these interests of the normal trustee is therefore a wrong to the trustee
and gives him a cause of action for redress or to prevent a continuance of the improper
conduct. Although the beneficiary is adversely affected by such acts of a third person, no
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cause of action inures to him on that account." [Citations omitted.]'" Naier v.
Beckenstein, 131 Conn. App. 638, 646, 27 A.3d 104 (2011).

Because a trustee is the appropriate party to sue third parties on behalf of trust
beneficiaries, beneficiaries generally lack standing to maintain this cause of action. See,
e.g., Glassie v. Doucette, 157 A.3d 1092, 1099-1100 (R.I. 2017); Interfirst Bank-
Houston, N.A. v. Quintana Petroleum Corp., 699 S.W.2d 864, 874 (Tex. App. 1985).

The interest of the beneficiary of a trust is merely an equitable interest. "Where the
trustee could maintain an action at law or suit in equity or other proceeding against a third
person if the trustee held the trust property free of trust, the beneficiary cannot maintain
an action at law against the third person." Restatement (Second) of Trusts § 281 (1959).

The commentary to § 281(1) explains:

"a. The interest of the beneficiary of a trust is an equitable interest, and ordinarily is
protected by suits in equity rather than by actions at law. . . .
"b. Tort claims. If a third person commits a tort with respect to the trust property, the
beneficiary, if he is not in possession, cannot maintain an action at law against him. . . .
"c. Contract claims. If a contract right is held in trust, the beneficiary cannot maintain an
action at law against the promisor.
"d. Other claims. If a right other than for tort or in contract arises against a third person
from the holding of title to the trust property, the beneficiary cannot maintain an action at
law to enforce it." Restatement (Second) of Trusts § 281(1), comments a-d (1959).

Restatement (Third) of Trusts § 107(1), comment b (2012) reiterates this principle:

"As holder of the title to trust property . . . and as the representative of the trust and its
beneficiaries, the trustee is normally the appropriate person to bring . . . an action against
a third party on behalf of the trust. . . . [A] beneficiary has no standing to sue a third party
on behalf of the trust."
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See Bogert's The Law of Trusts and Trustees, § 869, at 112-16 (2d ed. rev. 1995) ("In the
absence of special circumstances, the beneficiary is not eligible to bring or enforce these
causes of action which run to his trustee. Thus in the usual case he cannot sue a third
person to recover possession of the trust property for himself or the trustee, or for
damages . . . .").

We recognize that treatises, restatements, and cases from other jurisdictions
provide only persuasive authority and are not controlling here, but we are persuaded by
them and believe it a sound practice to recognize this general rule, as well as its
exception, which we discuss below.

The exception

The Kowalskis rely on an exception that permits the beneficiaries of the trust to
act on behalf of the trust and the other beneficiaries in some cases.

The statutory approach

The Kowalskis cite a treatise to establish that the Country Club Trust Company
has a duty to appeal adverse judgments if it would be unreasonable not to do so. They do
not, however, specifically allege that the trustee breached any duty listed in the Kansas
Uniform Trust Code.

Nonetheless, we find that such a duty may exist under Kansas statutes. Under our
trust code, a trustee's violation of a duty the trustee owes to a beneficiary is a breach of
trust. K.S.A. 58a-1001(a). The Kansas Uniform Trust Code charges the trustee with a
duty to prosecute or defend legal actions to protect trust property. K.S.A. 58a-816(24).
The extent of that duty is explained in the Restatement:
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"The duty of protecting the trust estate includes taking reasonable steps to
enforce or realize on other claims held by the trust and to defend actions that may result
in a loss to the trust estate. Reasonable steps may include taking an appeal to a higher
court, compromise or arbitration of claims by or against the trust, or even abandoning a
valid claim or not resisting an unenforceable claim if the costs and risk of litigation make
such a decision reasonable under all the circumstances." (Emphasis added.) Restatement
(Third) of Trusts § 76(2), comment d (2007).

Under this approach, the Kowalskis have the burden to show that the Country Club Trust
Company's decision not to appeal the executor's fee award was unreasonable, considering
all the circumstances.

The equitable approach

The Kowalskis also rely on an equitable approach outlined in the Restatement
(Third) of Trusts § 107 (2012):

"(1) A trustee may maintain a proceeding against a third party on behalf of the trust and
its beneficiaries.
"(2) A beneficiary may maintain a proceeding related to the trust or its property against a
third party only if:
(a) the beneficiary is in possession, or entitled to immediate distribution, of the
trust property involved; or
(b) the trustee is unable, unavailable, unsuitable or improperly failing to protect
the beneficiary's interest."

Under this approach, the Kowalskis, as beneficiaries of the trust, could maintain a
proceeding related to the trust property (this appeal) if they show the trustee is improperly
failing to protect their interest as beneficiaries. See Browning v. Brunt, 330 Conn. 447,
195 A.3d 1123 (2018); Slaughter v. Swicegood, 162 N.C. App. 457, 465, 591 S.E.2d 577
(2004).
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This equitable right to sue for the benefit of a trust exists independently of the
beneficiaries' rights under the Kansas Uniform Trust Code.

"In equity, trust beneficiaries may bring a suit for the benefit of a trust when the
trustees refuse to do so. See Moore v. 1600 Downing Street, Ltd., 668 P.2d 16, 19 (Colo.
App. 1983) ('"It is fundamental to the law of trusts that cestuis have the right "upon the
general principles of equity" . . . and "independently of [statutory] provisions . . . to sue
for the benefit of the trust on a cause of action which belongs to the trust if" the trustees
refuse to perform their duty in that respect."') (quoting Riviera Congress Assocs. v.
Yassky, 18 N.Y.2d 540, 277 N.Y.S.2d 386, 223 N.E.2d 876, 879 [1966]); see also Brown
v. Dolese, 154 A.2d 233, 239 (Del. Ch. 1959) ('[A] trust beneficiary may sue if the trustee
refuses to sue.'). Such a suit is analogous to a shareholder derivative suit on behalf of a
corporation. See Velez v. Feinstein, 87 A.D.2d 309, 451 N.Y.S.2d 110, 114 (N.Y. App.
Div. 1982)." Saunders v. Muratori, 251 P.3d 550, 553 (Colo. App. 2010).

Diehl suggested at oral argument that the Kansas Uniform Trust Code creates an
exclusive, statutory remedy, which would preclude this equitable remedy, but neither
party briefed that issue. Instead, we find that the Kowalskis could pursue this
independent, equitable means of acting in place of the trustee if they show the trustee is
improperly failing to protect their interest as beneficiaries.

DID THE KOWALSKIS SHOW THE COUNTRY CLUB TRUST COMPANY ACTED IMPROPERLY
OR UNREASONABLY?

The Kowalskis attempt to meet their burden by contending that the trustee of the
Mouchague trust:

 refused to perform its duty to protect the trust property from Diehl's "repeated and
improper" claims for fees;
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 consistently declined to oppose or even question the fees submitted to the probate
court by Diehl and her counsel;
 twice told them it would not appeal the lower court's award of fees to Diehl and
her attorney; and
 failed to submit a brief in this appeal to explain how it is properly meeting its
fiduciary duties.

But these arguments merely try to shift to the trustee the burden of showing the
propriety of its acts. We believe the burden instead rests on the Kowalskis to show the
acts that trigger the exception they invoke to the general rule—that the trustee is
improperly failing to protect their interest. Clubb v. Hetzel, 165 Kan. 594, 601, 198 P.2d
142 (1948) (stating the "'[p]arty seeking to avail himself of any exception to general rule
carries burden of establishing facts necessary to invoke provisions of exception,'" quoting
Hunter v. American Ry. Express Co., 4 S.W.2d 847 [Mo. App. 1928]); see generally
Keiswetter v. State, 304 Kan. 362, 368, 373 P.3d 803 (2016) (finding in Kansas Tort
Claims Act cases that the State has the burden to establish it is immune from liability
under an exception to the general statutory rule of liability); Messner v. Continental
Plastic Containers, 48 Kan. App. 2d 731, 751, 298 P.3d 371 (2013) (holding in workers
compensation cases that once the claimant shows a right to benefits, the burden shifts to
the employer to show an exception barring compensation applies); cf. State v. Estrada-
Vital, 302 Kan. 549, 552, 356 P.3d 1058 (2015) (noting in criminal cases that the burden
of proof is on those seeking to invoke an exception to the general rule requiring a search
warrant).

The Kowalskis offer no facts in support of their assertion that the trustee acted
unreasonably or improperly by not appealing. Instead, they rely solely on the fact that the
trustee did not appeal and on the assumption that the trustee has the burden to show how
not opposing Diehl's many fee requests meets its fiduciary duty. We can deduce from the
trustee's failure to file a timely appeal and its absence in these proceedings, that despite
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the Kowalskis' urging to do so, the trustee was unwilling to pursue an appeal on the trust's
behalf against Diehl's fees. Yet nothing of record shows us why the trustee did not do so.
The trustee was active in other matters even though it decided not to appeal, and it has a
duty to consider the interests of all beneficiaries, not just the Kowalskis. Perhaps the
trustee was unwilling to appeal because doing so would necessarily incur even more
fees—or perhaps it reasonably believed an appeal would be futile—or perhaps the other
beneficiaries of the trust directed it not to appeal. We do not know, yet we need to know
so we can determine if the costs and risk of litigation make such a decision improper or
unreasonable under all the circumstances.

The existing record does not resolve the material question of whether the trustee is
improperly failing to protect the beneficiary's interest in the trust, which is the standard
set out in Restatement (Third) of Trusts §107(2), comment c, for allowing a beneficiary
to proceed on its own. Nor does it show that the trustee's decision not to appeal the
executor's fee award was unreasonable, considering all the circumstances. The Kowalskis
have failed to meet their burden to show that the Country Club Trust Company failed in
its fiduciary duties. As a result, the Kowalskis lack standing to appeal. That right remains
solely with the trustee.

IS DIEHL ENTITLED TO ATTORNEY FEES FOR THIS APPEAL?

After oral argument of this appeal, Diehl moved this court for statutory attorney
fees in the amount of $12,519.75 for defending this appeal. The Kowalskis have filed no
response to that motion.

In support of her motion, Diehl shows the court the following:

 under Rule 7.07(b) an appellate court may award attorney fees for services on
appeal in any case in which the trial court had authority to award attorney fees;
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 an attorney for an estate handled the defense of this appeal thus the trial court had
the authority to award attorney fees under K.S.A. 59-1717;
 upon receiving the Kowalskis' Notice of Appeal, Diehl, as executor, sought
instruction from the probate court and was specifically authorized to defend the
appeal through the estate;
 the probate court authorized Diehl and counsel to defend the appeal in accordance
with the fee and representation agreement Diehl submitted to the court for
approval; and
 Diehl's attorney did defend the appeal.

The motion attached several documents which establish to our satisfaction that
Diehl is entitled to attorney fees. But the motion failed to attach any detailed affidavit
setting out the factors we must consider in determining the reasonableness of the fee.
Rule 7.07(b)(2) requires a party seeking attorney fees on appeal to attach to the motion an
affidavit that specifies the nature and extent of the services rendered, the time expended
on the appeal, and the factors considered in determining the reasonableness of the fee
under Kansas Rule of Professional Conduct 1.5(a) (2019 Kan. S. Ct. R. 300). Diehl's
affidavit attached to the motion fails in each of those requirements.

Instead, Diehl's affidavit merely recites the facts showing its defense of the
Kowalskis' appeal was authorized then conclusorily states: "Fees in the amount of
$12,519.75 have been incurred as a result of defending the appeal of the Kowalskis." The
affidavit does not state how much time was spent on what tasks by which persons, nor
does it address the eight factors we need to consider in determining the reasonableness of
a fee. No invoices or other details are attached to the affidavit. Because Diehl's affidavit
fails to meet the requirements of Supreme Court Rule 7.07, we cannot determine
reasonableness under KRPC 1.5, as is our duty.

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We recognize that we have wide discretion in determining the amount and
recipient of attorney fees. Wittig v. Westar Energy, Inc., 44 Kan. App. 2d 216, 228, 235
P.3d 535 (2010). This is partly because the appellate court is an expert on the
reasonableness of attorney fees, Johnson v. Westhoff Sand Co., 281 Kan. 930, 959, 135
P.3d 1127 (2006), and "can draw on and apply its own knowledge and expertise in
determining their value." Freebird, Inc. v. Cimarex Energy Co., 46 Kan. App. 2d 631,
639-40, 264 P.3d 500 (2011). But the "burden to prove the reasonableness of the fees and
expenses requested is upon the party making the request." Wittig, 44 Kan. App. 2d at 210.
Under Kansas authority, we have the discretion to determine the reasonableness of
Diehl's requested attorney fees even though the Kowalskis have not objected. See Brand
v. Pharmacare Management, Inc., No. 118,421, 2018 WL 4939246, at *7 (Kan. App.
2018) (unpublished opinion). And we have the duty to enforce our rules, which for good
reason require an affidavit. Because we have read Diehl's brief on appeal, have heard her
oral argument, and see her attorney's hourly rate stated in the attachments to her motion,
we could speculate about some amount of fees that may be reasonable. But any such
speculation is prohibited by our Supreme Court Rule requiring the movant to file an
accompanying affidavit with specificity. For that reason, we deny the motion for attorney
fees on appeal.

We dismiss the Kowalskis' appeal for lack of standing and deny Diehl's motion for
attorney fees on appeal.