Lehman v. City of Topeka

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No. 109,694

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

GWENDOLYN LEHMAN,
Appellant,

v.

THE CITY OF TOPEKA, KANSAS,
Appellee.


SYLLABUS BY THE COURT

1.
A motion to dismiss for failure to state a claim under K.S.A. 2013 Supp. 60-
212(b)(6) is treated like a motion for summary judgment under K.S.A. 2013 Supp. 60-
212(d) if matters outside the pleadings are presented to and not excluded by the court.

2.
The standard of review relating to summary judgment is discussed and applied.

3.
When a suit is timely commenced and then dismissed for some reason unrelated to
its merit, K.S.A. 60-518 provides that the suit may be refiled within 6 months of the date
of dismissal even though the statute of limitations has otherwise expired.

4.
As a general rule, issues not raised before the lower court cannot be raised for the
first time on appeal.


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5.
The automatic stay provision found in the federal bankruptcy statutes at 11 U.S.C.
§ 362(a)(1) (2012) does not extend to third-party defendants or a debtor's solvent
codefendants in state court.

Appeal from Shawnee District Court; REBECCA W. CROTTY, judge. Opinion filed April 4, 2014.
Affirmed.

Lawrence W. Williamson, Jr., of Williamson Law Firm, LLC, of Kansas City, Missouri, for
appellant.

Shelly Starr, chief of litigation, City of Topeka, for appellee.

Before HILL, P.J., STANDRIDGE, J., and LARSON, S.J.

STANDRIDGE, J.: Gwendolyn Lehman appeals the district court's decision to
dismiss her negligence action against the City of Topeka (the City), arguing the court
erred in applying the Kansas saving statute, K.S.A. 60-518, in a manner that failed to
save her action filed outside the applicable statute of limitations. Lehman contends the
statute of limitations was tolled because (1) she never received notice of the dismissal of
the previous case and (2) the automatic stay that was entered in the previous case due to
the bankruptcy of one the codefendants operated as a stay of the entire case.

FACTS

The City commenced a project to widen a section of Gage Boulevard between
Southwest 10th Avenue and Southwest 12th Street. Lehman owns a home located on this
section of Gage Boulevard. During the project, a deep hole was drilled adjacent to
Lehman's home.

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On August 16, 2010, Lehman filed case No. 10-C-1150 in Shawnee County
District Court, naming the City, ONEOK, Inc. (d/b/a Kansas Gas Service), and Miller
Paving and Construction (Miller) as defendants. Lehman claimed that the hole drilled
adjacent to her home weakened the supporting structure of her home and caused flooding
and foundation issues.

On April 28, 2011, Miller filed a petition for Chapter 11 bankruptcy with the
United States Bankruptcy Court. Miller's bankruptcy petition apparently created an
automatic stay of proceedings as to Miller in case No. 10-C-1150. The district court
scheduled a pretrial conference for August 5, 2011. The City was the only party to appear
at the conference; as a result, the district court dismissed the case for lack of prosecution.

On May 16, 2012, Lehman filed case No. 12-C-555 in Shawnee County District
Court. In the petition, Lehman alleged the same facts as in case No. 10-C-1150, but only
named the City as a defendant. The City answered by filing a motion to dismiss for
failure to state a claim based on the expiration of the 6-month saving period provided in
K.S.A. 60-518. In response, Lehman argued that the stay in case No. 10-C-1150 created
by Miller's bankruptcy had stayed the entire case and, therefore, had extended the time
period for Lehman to file a new case.

The district court granted the City's motion to dismiss, ruling that (1) Lehman had
failed to file case No. 12-C-555 within 6 months of the dismissal of case No. 10-C-1150,
as required by K.S.A. 60-518 and (2) the automatic stay created by Miller's bankruptcy
only applied to Miller, not the other codefendants.

ANALYSIS

On appeal, Lehman argues the district court erred in granting the City's motion to
dismiss. Specifically, she contends the court erred in applying K.S.A. 60-518 in a manner
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that failed to save her action filed outside the applicable statute of limitations. Lehman
contends the statute of limitations was tolled because (1) she never received notice of the
dismissal of case No. 10-C-1150 and (2) the automatic stay that was entered in case No.
10-C-1150 resulting from Miller's bankruptcy operated as a stay of the entire case. Each
of these arguments is addressed in turn.

Standard of Review

Initially, the City claims that we should review this case under a summary
judgment standard of review, rather than the standard of review applicable to motions to
dismiss, because the district court considered matters outside the pleadings in making its
ruling. The City acknowledges that this issue was not raised or considered below, but
mentions it now only to establish the proper standard of review.

Under K.S.A. 2013 Supp. 60-212(d), a motion to dismiss for failure to state a
claim under K.S.A. 2013 Supp. 60-212(b)(6) is treated like a motion for summary
judgment if matters outside the pleadings are presented to and not excluded by the court.
In this case, the parties attached several documents to their motions in support of and in
opposition to the City's motion to dismiss, including documents related to Miller's
bankruptcy. In addition, the City asked the district court to take judicial notice of case
No. 10-C-1150. It is evident from the district court's memorandum decision and order
dismissing the case that the court did consider matters outside of the pleadings in making
its ruling, effectively converting the City's motion to dismiss to one for summary
judgment. Thus, this court must determine if the district court's decision can be affirmed
under the standards governing summary judgments. See Davidson v. Denning, 259 Kan.
659, 667, 914 P.2d 936 (1996) (even though district court's decision did not expressly
state it considered defendants' motion to dismiss as summary judgment motion, Court of
Appeals properly treated it as such because "the court clearly considered matters beyond
the face of the petition in granting the motion"); see also Admire Bank & Trust v. City of
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Emporia, 250 Kan. 688, 692, 829 P.2d 578 (1992) (holding district court erred in not
treating motion to dismiss for failure to state claim as motion for summary judgment
because court clearly considered matters outside the pleadings, but concluding decision
could be upheld on appeal as right for wrong reason if court's granting of motion to
dismiss for failure to state a claim "withstands application of summary judgment
standards").

Accordingly, the well-known standard of review governing summary judgment
applies. This standard provides that summary judgment is appropriate only where the
pleadings, depositions, answers to interrogatories, and admissions on file, together with
the affidavits, show that there is no genuine issue as to any material fact, and that the
moving party is entitled to judgment as a matter of law. Waste Connections of Kansas,
Inc. v. Ritchie Corp., 296 Kan. 943, 962, 298 P.3d 250 (2013). Because the parties agree
there is no factual dispute, our review of the district court's order is de novo. See David v.
Hett, 293 Kan. 679, 682, 270 P.3d 1102 (2011). Additionally, to the extent that resolution
of Lehman's arguments requires statutory interpretation, our review is unlimited. See
Jeanes v. Bank of America, 296 Kan. 870, 873, 295 P.3d 1045 (2013).

Kansas saving statute, K.S.A. 60-518

Our analysis begins by considering the provisions of the Kansas saving statute,
K.S.A. 60-518, which is critical to the viability of Lehman's case. The statute provides:

"If any action be commenced within due time, and the plaintiff fail in such action
otherwise than upon the merits, and the time limited for the same shall have expired, the
plaintiff, or if the plaintiff die, and the cause of action survive, his or her representatives
may commence a new action within six (6) months after such failure." K.S.A. 60-518.

As explained by the Kansas Supreme Court,

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"'[t]he general periods of limitation are not changed by [the saving] provision, but it is
intended to give a party who brought an action in time, which was disposed of otherwise
than upon the merits after the statute of limitations had run, a [period] of grace in which
to reinstate his [or her] case and obtain a determination upon the merits.'" Seaboard
Corporation v. Marsh Inc., 295 Kan. 384, 395, 284 P.3d 314 (2012).

In order for the saving statute to apply, (1) the first suit must have been filed before the
limitations period expired, i.e., "commenced within due time," (2) the first suit must have
been dismissed for reasons other than the merits of the claim, (3) the second suit must
have been filed within 6 months of dismissal of the first suit, and (4) but for the saving
statute, the limitations period must have expired when the second suit was filed.
Campbell v. Hubbard, 41 Kan. App. 2d 1, 2-3, 201 P.3d 702, rev. denied 286 Kan. 1176
(2008).

Applying these requirements here, it is undisputed that case No. 10-C-1150 was
filed within the 2-year statute of limitations for a tort claim. And the district court
dismissed case No. 10-C-1150 for lack of prosecution, which is not a dismissal based on
the merits. Lehman alleged that the City's negligence occurred on March 23, 2009. Thus,
the 2-year statute of limitations had expired when Lehman filed the second suit.
However, Lehman did not file case No. 12-C-555 within 6 months of the dismissal of
case No. 10-C-1150. The district court dismissed case No. 10-C-1150 on August 5, 2011.
Lehman did not file case No. 12-C-555 until May 16, 2012, more than 9 months after the
dismissal of the first case. As a result, the district court correctly determined that the
saving statute did not apply to case No. 12-C-555, and the case was properly dismissed
on grounds that it was filed outside the proper statute of limitations.

Notice of dismissal

As an alternative strategy to accomplish resurrection of her claim, Lehman asserts
the district court improperly dismissed case No. 10-C-1150 because it failed to provide
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her counsel of record with notice of its intent to dismiss the case, as required by K.S.A.
2013 Supp. 60-241(b)(2). Because the court's failure to provide her counsel proper notice
renders dismissal of case No. 10-C-1150 invalid, Lehman argues the original case is still
pending and the saving statute applies to case No. 12-C-555.

But Lehman failed to raise this issue before the district court. The only issue
Lehman argued in her motion in opposition to the City's motion to dismiss was that the
stay resulting from Miller's bankruptcy proceeding caused a stay of the entire case. Issues
not raised before the district court cannot be raised on appeal. See Wolfe Electric, Inc. v.
Duckworth, 293 Kan. 375, 403, 266 P.3d 516 (2011). Although there are several
exceptions to the general rule that a new legal theory may not be asserted for the first
time on appeal, Lehman does not acknowledge that she failed to raise this issue below or
otherwise allege that any of these exceptions apply to warrant this court's review of her
argument. See In re Estate of Broderick, 286 Kan. 1071, 1082, 191 P.3d 284 (2008), cert.
denied 555 U.S. 1178 (2009) (listing exceptions to general rule that new legal theory may
not be asserted for first time on appeal). Supreme Court Rule 6.02(a)(5) (2013 Kan. Ct.
R. Annot. 39) requires an appellant to explain why an issue that was not raised below
should be considered for the first time on appeal. See State v. Breeden, 297 Kan. 567,
574, 304 P.3d 660 (2013) (declining to consider issue for this reason). Given Lehman did
not properly preserve this issue, we decline to address it on appeal.

The automatic stay resulting from Miller's bankruptcy only applied to Miller

Lehman contends the automatic stay that was entered in case No. 10-C-1150 as a
result of Miller's bankruptcy created a stay of the entire case that was applicable to all
defendants. Lehman claims the case was stayed until she received notice that Miller
would be selling all of its assets.

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Under 11 U.S.C. § 362(a)(1) (2012), a bankruptcy petition "operates as a stay,
applicable to all entities," of:

"(1) the commencement or continuation, including the issuance or employment
of process, of a judicial, administrative, or other action or proceeding against the debtor
that was or could have been commenced before the commencement of the case under this
title, or to recover a claim against the debtor that arose before the commencement of the
case under this title."

The automatic stay provision of 11 U.S.C. § 362(a) is one of the fundamental protections
provided to a bankruptcy debtor. It stops collection efforts for all antecedent debts and
gives the debtor a fresh start, free from the immediate financial pressures that caused the
debtor to go into bankruptcy. United Northwest Fed'l Credit Union v. Arens, 233 Kan.
514, 515, 664 P.2d 811 (1983). The automatic stay is in force from the moment the
bankruptcy petition is filed and terminates automatically when the bankruptcy proceeding
is closed or dismissed. 233 Kan. at 516. "It is settled that acts done in violation of the stay
are 'void and without effect.'" 233 Kan. at 516.

While it does not appear that Kansas state courts have addressed the effect of an
automatic stay on the debtor's codefendants, federal courts follow the general rule that the
stay provision extends only to the debtor, not to the debtor's solvent codefendants. See,
e.g., Okla. Federated Gold & Numismatics v. Blodgett, 24 F.3d 136, 141 (10th Cir.
1994); see also Fortier v. Dona Anna Plaza Partners, 747 F.2d 1324, 1330 (10th Cir.
1984) ("The language of [11 U.S.C. § 362] extends stay proceedings only to actions
'against the debtor.' There is nothing in the statute which purports to extend the stay to
causes of action against solvent co-defendants of the debtor." [citing cases from other
circuits]); In re Sprint Corp. Securities Litigation, 232 F. Supp. 2d 1193, 1200 (D. Kan.
2002) ("The rule followed in the Tenth Circuit is that the stay provision does not extend
to the third party defendants or a debtor's codefendants."). This general rule is
overwhelmingly supported by federal caselaw and is further strengthened by the plain
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language of the statute, which clearly focuses on the insolvent party, i.e., the "debtor."
See 11 U.S.C. § 362(a)(1); Wedgeworth v. Fibreboard Corp., 706 F.2d 541, 544 (5th Cir.
1983) ("To read the 'all entities' language as protecting co-debtors would be inconsistent
with the specifically defined scope of the stay 'against the debtor,' § 362[a][1]."). In
comparison, Chapter 13 specifically authorizes the stay of actions against codebtors. See
11 U.S.C. § 1301(a) (2012). Conversely, "[n]o such shield is provided Chapter 11 co-
debtors by § 362(a)." 706 F.2d at 544.

A limited exception allows a stay to be imposed against the debtor's codefendants
under 11 U.S.C. § 362(a)(1) in "unusual circumstances," as "when there is such identity
between the debtor and the third-party defendant that the debtor may be said to be the real
party defendant and that a judgment against the third-party defendant will in effect be a
judgment or finding against the debtor." A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994,
999 (4th Cir.), cert. denied 479 U.S. 876 (1986). Other courts have noted that another
narrow exception may apply if the bankruptcy proceedings would be adversely impacted
if the case is not stayed as to the debtor's codefendants or if the stay would contribute to
the debtor's efforts to reorganize. See Matter of Zale Corp., 62 F.3d 746, 761 (5th Cir.
1995); Teachers Ins. & Annuity Ass'n of America v. Butler, 803 F.2d 61, 65 (2d Cir.
1986).

We find persuasive the reasoning of the federal courts in the cases set forth above
and adopt it as the law in Kansas. Applying this new legal principle to the facts presented
here, we hold the stay provision in this case extended only to the debtor (Miller) and not
to the debtor's solvent codefendants. Moreover, there is nothing in the record to support,
and Lehman does not allege, application of the limited exceptions described above to the
present case. Accordingly, 11 U.S.C. § 362(a)(1) did not operate to stay Lehman's claims
against the City.

Affirmed.