Newcastle Homes v. Thye

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No. 103,205

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

NEWCASTLE HOMES, LLC,
Appellant,

v.

DENNIS F. THYE and DIANNA L. THYE,
Appellees,

and

THOMAS J. DRESSLER and ALPHA HOMES, LLC,
Defendants.


SYLLABUS BY THE COURT

1.
An appellate court's review of a trial court's decision on a motion for summary
judgment is well established. When 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,
summary judgment is appropriate. The trial court is required to resolve all facts and
inferences which may reasonably be drawn from the evidence in favor of the party
against whom the ruling is sought. When opposing a motion for summary judgment, an
adverse party must come forward with evidence to establish a dispute as to a material
fact. In order to preclude summary judgment, the facts subject to the dispute must be
material to the conclusive issues in the case. On appeal, the same rules apply; summary
judgment must be denied if reasonable minds could differ as to the conclusions drawn
from the evidence.

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2.
An appellant has the burden to designate a record sufficient to establish the
claimed error. In the absence of such a record, the claim of error fails.

3.
An agreement of rescission is an agreement where each party agrees to discharge
all of the other party's remaining duties of performance under an existing contract. Such
an agreement discharges all remaining duties of performance of both parties.

4.
A contract may be discharged at any time before performance is due by a new
agreement which has the effect of altering the terms of the original agreement or
rescinding it altogether. The promise of one party to forego any rights under a contract is
sufficient consideration for the promise of the other party to forego any contract rights.

5.
Notwithstanding the general liberality of notice pleading, a plaintiff alleging fraud
as a cause of action must state the circumstances constituting fraud with particularity
under K.S.A. 60-209(b).

6.
The power of a party to avoid a contract for misrepresentation or mistake is lost if
after the party knows of a fraudulent misrepresentation or knows or has reason to know
of a nonfraudulent misrepresentation or mistake the party does not within a reasonable
time manifest to the other party the intention to avoid it.

7.
Based on the circumstances present in this case, the trial court properly granted
summary judgment to the defendants where (1) the plaintiff failed to provide the
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contracts on which its claims centered; (2) the plaintiff and defendants entered into
cancellation and mutual release agreements that rescinded the contract on which its
causes of action were based and released the parties from any liability and claim for
damages arising from the contract; (3) the plaintiff did not properly plead its fraudulent
inducement claim with particularity, as required by K.S.A. 60-209(b); (4) the plaintiff's
evidence did not establish a genuine issue of material fact as to the elements of fraud; and
(5) the plaintiff did not manifest its intention to avoid the cancellation and mutual release
agreements to the defendants within a reasonable time.

8.
The right to appeal is purely statutory, and if the record shows that the appellate
court does not have jurisdiction, the appeal must be dismissed. Whether jurisdiction
exists is a question of law over which an appellate court's scope of review is unlimited.

9.
An appellate court has a duty to question jurisdiction on its own initiative. When
the record discloses a lack of jurisdiction, it is the duty of the appellate court to dismiss
the appeal.

10.
K.S.A. 2009 Supp. 60-2102(a)(4) gives this court jurisdiction to review a final
decision in any action, except in an action where a direct appeal to our Supreme Court is
required by law. A final decision generally disposes of the entire merits of the case and
leaves no further questions or the possibility of future directions or actions by the court.

11.
Under the facts of this case, this court has jurisdiction to decide the present appeal
where a notice of appeal was filed within 30 days of the final decision in the case.

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Appeal from Leavenworth District Court; DAVID J. KING, judge. Opinion filed October 15, 2010.
Affirmed.

Jeffrey A. Sutton, of Gibbon, Sutton & Sonntag, L.L.C., of Basehor, for appellant.

Michael Crow, of Crow & Associates, of Leavenworth, for appellees.

Before HILL, P.J., GREEN and BUSER, JJ.

GREEN, J.: Newcastle Homes, LLC (Newcastle), appeals from the trial court's
decision granting summary judgment to Dennis Thye and Dianna Thye on Newcastle's
breach of contract, fraud, and tortious interference claims. For the following reasons, we
affirm the trial court's grant of summary judgment to the Thyes: (1) Newcastle failed to
provide the May 2005 sales contract and the May 2005 builders contract on which
Newcastle's claims centered; (2) Newcastle and the Thyes entered into cancellation and
mutual release agreements that rescinded the May 2005 sales contract on which
Newcastle's causes of action were based and released the parties from any liability and
claims for damages arising from the contract; (3) Newcastle did not properly plead its
fraudulent inducement claim with particularity, as required by K.S.A. 60-209(b); (4)
Newcastle's evidence did not establish a genuine issue of material fact as to the elements
of fraud; and (5) Newcastle did not manifest its intention to avoid the cancellation and
mutual release agreements to the Thyes within a reasonable time. Accordingly, we
affirm.

On May 17, 2005, the Thyes entered into a residential new construction sale
contract with Newcastle for the purchase of land and the construction of a house at 2250
Valley View Drive in Tonganoxie, Kansas, for the price of $215,900. The Thyes put
down $5,000 as earnest money towards the purchase price of the home. The initial
closing date for the contract was set for September 30, 2005.

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John W. Barnes, Sr., was the principal and owner of Newcastle. Barnes started
Newcastle to function as a general contractor for the sales and construction of custom-
built homes. In May 2005, Newcastle entered into a contract with Alpha Homes, LLC
(Alpha Homes), to provide and oversee the personnel and manpower necessary to
construct custom-built homes, including the construction of the house at 2250 Valley
View Drive.

Thomas Dressler was the managing partner and authorized agent of Alpha Homes
at all times relevant to the contract with Newcastle. According to Barnes, Dressler drew
the construction plans and front elevation drawings for the home at 2250 Valley View
Drive. Moreover, Dressler compiled a handwritten materials list and identified and
provided quotes for costs and allowances to be included in the agreement for the house at
2250 Valley View Drive. Barnes stated in his affidavit that in Newcastle's contract with
Alpha Homes, Alpha Homes reserved for itself the exclusive authority to direct, control,
and supervise the working assignments for personnel necessary for construction
purposes. In addition, Barnes stated that Dressler made all of the decisions concerning the
assignment of the workers for the construction of the house at 2250 Valley View Drive.

According to Barnes, as construction began on the house at 2250 Valley View
Drive, questions immediately arose concerning the adequacy of the lot. After testing was
done on the property, it was determined that the property was unstable and unsuitable for
construction purposes in its present condition. According to Barnes, because a contractor
was called in to compact the subsoil to achieve the appropriate structural integrity
necessary to support the foundation for the house, the extension of the original closing
date became necessary.

According to Barnes, during the second and third week of December 2005, he
began noticing that individual and overall phases of construction for the house at 2250
Valley View Drive were taking longer than anticipated and many of them were not being
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completed. Barnes stated that he discussed this issue repeatedly with Dressler, but that
Dressler always made excuses. According to Barnes, he believed that the Thyes had
apparently struck an agreement with Dressler for changes in the design and additions to
the house. Barnes asserted that there were material changes made, without his knowledge
or consent, during the construction period for the house, which required a substantial
amount of time and included a new backyard fence, a deck roof, sheet rock and insulation
installation in the basement, stereo wiring throughout the house, alteration of the deck
design, additional windows installed, and additional bricking of the front elevation of the
house.

According to Dressler's affidavit, however, during the construction of the house,
Newcastle constantly shifted Alpha Homes' employees from house to house, which led to
delayed completion dates for the house at 2250 Valley View Drive. Dressler further
stated that Barnes would initiate discussions with him about increasing costs on the
property and attempted on several occasions to unnecessarily increase labor costs.

On August 29, 2005, the Thyes and Newcastle agreed to extend the closing date to
December 30, 2005. In December 2005, Newcastle requested and obtained an agreement
by the Thyes to extend the closing date to January 23, 2006.

According to the Thyes, in November 2005, they started D & D Homes, LLC (D
& D Homes), for the purpose of paying for the expenses of construction and
improvements on the property at 2250 Valley View Drive. The Thyes paid approximately
$21,000 in expenses and improvements on the property out of D & D Homes' checking
account and their own personal accounts. The Thyes stated that they painted the inside of
the property at 2250 Valley View Drive in order to speed up the completion date.
According to Dressler, the Thyes were greatly involved in attempting to complete the
property by the closing dates. Dressler stated that the Thyes did not attempt to delay or
influence the delays in the completion of the property.
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According to affidavits filed by the Thyes, in January 2006 they formed the
opinion that the property would not be completed by January 23, 2006. The Thyes
asserted that Barnes came to the property in January 2006 while they were painting and
loudly complained that the property would not be completed by the January 23, 2006,
closing date. The Thyes then decided that if the property was not completed by January
23, 2006, they would cancel the contract and find another property.

According to Barnes' affidavit, Dressler approached Barnes around January 17,
2006, and demanded his scheduled payment under his contract with Newcastle, even
though the required work had not been completed. Barnes stated that Dressler told him
that Alpha Homes did not have the money to pay its employees and that if Barnes did not
make the scheduled payment, he would pull all of his employees off the project.
According to Barnes, he paid Alpha Homes the requested payment, but Dressler still
pulled all of his employees from the construction project on January 18, 2006.

On January 21, 2006, Newcastle requested a third extension of the closing date to
February 8, 2006, but the Thyes would not agree to the extension. On January 23, 2006,
the property was not completed, and closing did not occur. According to Dianna,
Newcastle began to show the property to other buyers in January 2006. Nevertheless,
Barnes stated in his affidavit that the realtors, on their own initiative, showed the property
and that they had never contacted him or requested permission to show the property. On
January 24, 2006, the Thyes entered into a real estate contract with Donal Dominick for
the purchase of an unimproved lot in Jarbalo Estates in Tonganoxie.

According to Barnes, around January 19, 2006, the Thyes' realtor contacted him
and said that if Newcastle did not let the Thyes out of their contract because of
Newcastle's unwillingness or inability to complete the construction of the home, then
they would place a lien on the property for the expenses that they had incurred in relation
to the construction of the home. Barnes stated that he met with Dennis Thye and the
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Thyes' realtor around January 20, 2006, and declined to rescind the contract. Instead,
Barnes offered the Thyes a $3,000 reduction in the contract price for the house.

On February 13, 2006, Newcastle, Barnes, and the Thyes signed two cancellation
and release agreements that cancelled and rescinded the rights, duties, and obligations
under the Residential New Construction Contract. Specifically, Newcastle, Barnes, and
the Thyes agreed that the contract for the sale and purchase of the property at 2250
Valley View in Tonganoxie, Kansas, "is canceled and the parties release all of their rights
and interest in the Contract." The other agreement stated that the Thyes had paid others
besides the seller to make upgrades, additions, and improvements to the home that the
seller had built at 2250 Valley View Drive in an amount the Thyes claimed to be
$21,916.84, including $5,000 in earnest money that was paid when the Residential New
Construction Contract was signed.

One of the cancellation and release agreements contained the following provisions
relating to the rescission of the Residential New Construction Contract and the payment
of $20,000 to the Thyes:

"1. The Residential New Construction Contract and any additions, addendums and
extensions thereto are hereby cancelled and rescinded.
"2. Each party hereby releases the other from any liability, claim for damages and
damages, that they now have or may in the future have against any party to this
Agreement arising out of the Residential New Construction Contract dated May 17, 2005,
and any additions, addendums or extensions thereto and for any items the Buyers added
to said house.
. . . .
"4. The Seller will pay to the Buyers the sum of $18,000 $20,000.00 [amended/initialed
by parties] upon execution of this Agreement by all parties. All upgrades, additions and
other improvements to the home located at 2250 Valley View Drive, Tonganoxie,
Leavenworth County, Kansas 66086, shall remain with the real property and become the
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property of the Seller. This includes the wooden fence that fences a portion of the yard at
2250 Valley View Drive, Tonganoxie, Leavenworth County, Kansas 66086."

On February 13, 2006, Newcastle presented a $20,000 check to the Thyes as
payment in full for the Thyes' interest in the property.

The construction of the home at 2250 Valley View Drive was completed in March
2006 by C.J. McDaniel. According to Barnes, he did not take any steps to secure the
property at 2250 Valley View Drive to the exclusion of Dressler until March 3, 2006,
after receiving a letter from an attorney on behalf of Alpha Homes making certain
demands against Newcastle. Barnes stated that by the terms of the subcontractor's
agreement with Dressler, the agreement did not terminate until completion of the
construction by Alpha Homes, a condition that never occurred. Thus, according to
Barnes, Alpha Homes never severed its contractual ties with Newcastle because it never
completed its obligations under the subcontractor's agreement.

According to Barnes, the Thyes never completed the painting at the house, and the
painting that they did complete on the interior of the house was of such a shoddy
condition that the entire interior of the house had to be professionally repainted.
Newcastle sold the home on March 16, 2006, for $229,950. Barnes alleged that as a result
of rescinding the contract, he sustained damages in excess of $63,300 that were used "to
pay for the extras that had been improperly included in the construction of the Newcastle
home and to pay contractors to come in and finish the work that Alpha [H]omes and/or
Thomas Dressler failed to complete."

According to the Thyes, Dressler came to them in February 2006 and stated that
he was no longer under contract with Newcastle and that he had been locked out of the
property. Dianna stated in her affidavit that Dressler requested that he be allowed to
construct another house for them personally. According to both the Thyes and Dressler,
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although they had many conversations before being released from their contract with
Newcastle, they never discussed the construction of a separate house aside from the
property at 2250 Valley View Drive.

According to Dominick, however, he had a conversation on January 14, 2006,
with Dennis about purchasing the lot in Jarbalo Estates. Dominick stated in his affidavit
he told Dennis that in order to purchase the lot, the Thyes needed to be prepared to close
on the lot within 30 days from when they entered into a contract. Dominick further stated
that Dennis assured him that they would be able to close on the lot within 30 days, that
they already had a builder, whom Dennis identified as Dressler, that they had contracted
with Dressler to build the house, and that they needed only to contact their mortgage
company to finalize the paperwork.

According to affidavits filed by the Thyes, in February 2006, after being released
from their contract with Newcastle, they entered into an oral contract with Dressler for
the construction of a new house on the lot purchased in Jarbalo Estates. The Thyes closed
on the property in Jarbalo Estates on March 3, 2006. Dressler began construction on the
house in Jarbalo Estates in March 2006, and the Thyes moved into the house in October
2006.

In June 2007, Newcastle sued the Thyes, Dressler, and Alpha Homes. In an
amended petition, Newcastle asserted claims of breach of contract, fraud, tortious
interference with a contract, and tortious interference with expected business relations
against the Thyes. In addition, Newcastle asserted claims of breach of contract, fraud,
tortious interference with a contract, breach of fiduciary duty, and violation of the Kansas
Consumer Protection Act against Dressler and Alpha Homes. Although Newcastle moved
to file an amended complaint in November 2008, the trial court never granted
Newcastle's motion. The Thyes filed an answer to Newcastle's petition and asserted
counterclaims of breach of contract and negligent misrepresentation against Newcastle.
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In October 2008, the Thyes moved for summary judgment on all of Newcastle's
claims. The Thyes asserted the following arguments as to why Newcastle had not
established a genuine issue of material fact on the claims against them: (1) Newcastle had
cancelled the May 2005 contract with the Thyes and released the Thyes from all liability
stemming from the contract; (2) Newcastle suffered no damages as a result of the alleged
breach of contract by the Thyes and in fact sold the property for $14,050 more than was
due under the contract; (3) Newcastle failed to plead its fraud claim with particularity; (4)
Newcastle could not prove its fraud claim because the Thyes never made a false
representation of material fact or attempted to induce Newcastle to rely upon any of their
statements; and (5) the Thyes did not tortiously interfere with any existing or future
contracts of Newcastle.

In responding to the Thyes' motion for summary judgment, Newcastle did not
respond specifically to each of the Thyes' 43 contentions of uncontroverted facts. Instead,
the Newcastle made its own statements of fact, some of which were additional statements
of fact and some of which allegedly controverted various paragraphs of the Thyes'
uncontroverted facts. Newcastle argued that it had created genuine issues of material fact
as to all of its claims against the Thyes.

At the hearing on the Thyes' motion for summary judgment, the trial court
inquired and the parties agreed that Newcastle's claims centered on whether there were
tortious acts committed by the Thyes, Dressler, and Alpha Homes that caused a breach of
the May 2005 contract. The trial court discussed in detail the facts set forth by the Thyes
and Newcastle and set forth which facts were uncontroverted and which facts were
immaterial. The trial court ultimately determined that there was no evidence to support
tortious conduct by the Thyes in their relationship with Newcastle or with Dressler and
Alpha Homes and that the parties had settled their issues concerning the breach of
contract by the February 2006 cancellation and mutual release agreement. As a result, the
trial court granted summary judgment to the Thyes on all of Newcastle's claims against
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them. In addition, the trial court granted summary judgment to Newcastle on all of the
Thyes' counterclaims.

A. Standard of Review

On appeal, Newcastle argues that the trial court erroneously granted summary
judgment to the Thyes. This court's review of a trial court's decision on a motion for
summary judgment is well established. When 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, summary judgment is appropriate. The trial court is required to resolve
all facts and inferences which may reasonably be drawn from the evidence in favor of the
party against whom the ruling is sought. When opposing a motion for summary
judgment, an adverse party must come forward with evidence to establish a dispute as to
a material fact. In order to preclude summary judgment, the facts subject to the dispute
must be material to the conclusive issues in the case. On appeal, the same rules apply;
summary judgment must be denied if reasonable minds could differ as to the conclusions
drawn from the evidence. Miller v. Westport Ins. Corp., 288 Kan. 27, 32, 200 P.3d 419
(2009).

B. No Contract in the Record

When determining that the Thyes were entitled to summary judgment in this case,
the trial court went into a detailed analysis of the facts and circumstances set forth by the
parties and determined which facts were uncontroverted and which facts were immaterial.
In arguing that the trial court erroneously granted summary judgment to the Thyes,
Newcastle similarly goes through the particular facts and circumstances and argues that it
has brought forth direct and circumstantial evidence to demonstrate genuine issues of
material fact to support its claims against the Thyes.
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Nevertheless, a review of the appellate record reveals that one of the main
problems in this case is that Newcastle has not provided the actual May 2005 contract
between it and the Thyes. The contract was not attached to Newcastle's petition, and
Newcastle has not quoted any language from the May 2005 contract in its petition. As a
result, this court is unaware of the actual provisions of the May 2005 contract.

Newcastle's claims against the Thyes were all based upon the Thyes' alleged
breach of the May 2005 contract. For example, Newcastle's attorney conceded at the
summary judgment hearing that Newcastle's claims centered on whether there were
tortious acts committed by the Thyes, Dressler, and Alpha Homes that caused a breach of
the May 2005 contract. Newcastle's attorney agreed that its allegations were that there
were delays in completing the construction of the house that prevented the closing on the
contract closing date and that the Thyes, Dressler, and Alpha Homes had engaged in a
deliberate course of action to delay the completion of the home so that the Thyes could
escape from their obligation under the May 2005 contract. Newcastle further agreed that
it was alleging that the Thyes had made changes to the construction plans, which caused
the delays in constructing the house and a breach of the contract.

In order to determine whether there was a genuine issue of material fact
established on any of Newcastle's claims centering on the breach of the May 2005
contract, this court would need to see the actual contract and determine whether a breach
did occur under the terms of the contract. Without a contract, it is unknown whether the
Thyes were authorized to make changes to the construction plans under the contract or
whether they were responsible for certain aspects of the construction and additions to the
house. Moreover, it is unknown whether, under the May 2005 contract, the Thyes had an
absolute right to obtain rescission of the contract under certain circumstances, such as
when the builder failed to meet the second extension of the contract deadline. In short,
without the May 2005 contract, it would be sheer speculation to determine that the Thyes'
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actions were not authorized under the contract and that a breach of the May 2005 contract
had occurred.

Further, in order to evaluate whether there was a genuine issue of material fact
established as to Newcastle's claims against the Thyes of tortious interference with a
contract and tortious interference with a business relationship, this court would need to
evaluate the May 2005 contract that existed between Newcastle and Alpha Homes. Based
on the pleadings and the evidence produced at the summary judgment stage, Dressler's
and Alpha Homes' business relationship with Newcastle stemmed from Newcastle's May
2005 contract with Alpha Homes to construct custom built homes, including the house at
2250 Valley View Drive. Without being able to construe the terms of that May 2005
contract, this court is unable to determine whether the Thyes' alleged actions in
requesting additions to the construction plans constituted tortious interference with the
contract or with Alpha Homes' and Dressler's business relationship with Newcastle.

As an appellant, Newcastle had the burden to designate a record sufficient to
establish the claimed errors. In the absence of such a record, the claims of error fail. See
Kelly v. VinZant, 287 Kan. 509, 526, 197 P.3d 803 (2008). Here, where Newcastle's
claims against the Thyes were based on a breach of the May 2005 sales contract and the
May 2005 construction contract between Alpha Homes and Newcastle, the failure of
Newcastle to provide those May 2005 contracts at the summary judgment stage was fatal
to its claims. Without the May 2005 sales contract between the Thyes and Newcastle and
the May 2005 construction contract between Alpha Homes and Newcastle, Newcastle has
failed to establish a genuine issue of material fact that there was a breach of the May
2005 sales contract or that the Thyes had tortiously interfered with the May 2005
construction contract or Dressler's and Alpha Homes' business relationship with
Newcastle.

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C. Rescission Agreements

In addition, the undisputed facts in this case establish that Newcastle and the
Thyes executed two cancellation and release agreements that cancelled and rescinded the
May 2005 contract and any additions, addendums, and extensions. Moreover, under the
cancellation and release agreements, the Thyes and Newcastle agreed to release each
other from any liability or claims for damages arising out of the May 2005 contract and
any additions, addendums, or extensions to that contract.

By rescinding the May 2005 contract and any additions, addendums, and
extensions, the Thyes and Newcastle agreed to discharge each other's duties under the
contract. An agreement of rescission is an agreement where "each party agrees to
discharge all of the other party's remaining duties of performance under an existing
contract." Restatement (Second) of Contracts § 283(1) (1979). Thus, an agreement of
rescission "discharges all remaining duties of performance of both parties." Restatement
(Second) of Contracts § 283(2). Restatement (Second) of Contracts § 283, comment a,
further explains as follows:

"Nature of agreement of rescission. Sometimes the parties to a contract that is at
least partly executory on each side make an agreement under which each party agrees to
discharge all of the other party's duties of performance. Such an agreement is called an
'agreement of rescission' in this Restatement. Consideration is provided by each party's
discharge of the duties of the other. This is so even though one or both parties have partly
performed their duties or one or both have a claim for damages for partial breach."

Thus, under an agreement of rescission, the parties can agree to discharge the duties of
the other under the contract, even though one or both parties have partly performed their
duties or one or both parties have a claim of damages for partial breach.

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Our Supreme Court has recognized that "a contract may be discharged at any time
before performance is due by a new agreement with the effect of altering the terms of the
original agreement or of rescinding it altogether. (17 C.J.S., Contracts, § 394.)" State, ex
rel., v. Board of Education, 155 Kan. 754, 758, 129 P.2d 265 (1942), overruled on other
grounds Singer v. City of Topeka, 227 Kan. 356, 607 P.2d 467 (1980). "The promise of
one party to forego his [or her] rights under a contract is sufficient consideration for the
promise of the other party to forego his [or her] rights. (3 Williston on Contracts, §
1826.)" State ex rel., 154 Kan. at 758.

Here, there was sufficient consideration for the agreements of rescission because
both the Thyes and Newcastle agreed to release their rights and interests in the contract
and to release each other from any liability under the contract. In addition, Newcastle
provided consideration by promising to pay $20,000 to the Thyes for the improvements,
upgrades, and additions made to the property, and the Thyes agreed that such
improvements, upgrades, and additions would remain with the property and become the
property of Newcastle.

Once the Thyes and Newcastle executed the agreements of rescission, neither
party owed any other duties under the May 2005 contract or under any additions,
addendums, or extensions to the contract. Moreover, the Thyes and Newcastle agreed to

"release[] the other from any liability, claim for damages and damages, that they
now have or may in the future have against any party to this Agreement arising out of the
Residential New Construction Contract dated May 17, 2005, and any additions,
addendums or extensions thereto and for any items the [Thyes] added to said house."
(Emphasis added.)

Under the plain terms of the cancellation and release agreements, the Thyes owed
no further duties under the May 2005 contract and could not be held liable for any claim
for damages arising out of the May 2005 contract and any items that the Thyes added to
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the house. Thus, the Thyes could not be held liable by Newcastle for any alleged breach
of the May 2005 contract or for any additions that they made to the construction of the
house at 2250 Valley View Drive.

D. Fraudulent Inducement

In an apparent attempt to get around the rescission agreements, Newcastle argued
before the trial court, at the summary judgment stage, that the Thyes had fraudulently
induced it to enter into the rescission agreements. There are two problems with this
argument. First, Newcastle did not properly plead this cause of action for fraudulent
inducement. Second, the evidence presented by Newcastle at the summary judgment
stage failed to establish a genuine issue of material fact as to the elements of fraud.

1. Failure to Plead Fraudulent Inducement with Particularity

Early on in the case, in its answer to Newcastle's amended petition, the Thyes
asserted the defense that Newcastle had failed to adequately state a claim for fraud with
particularity against them. Later, at the hearing on the motion for summary judgment, the
Thyes again asserted that Newcastle never met the specificity in pleading requirements
for fraud. This same argument is made by the Thyes in their appellate brief.

Generally, the Kansas Rules of Civil Procedure permit notice pleading. In other
words, a pleading is sufficient if it contains "[a] short and plain statement of the claim
showing that the pleader is entitled to relief" and "a demand for judgment." K.S.A. 60-
208(a). Notwithstanding the general liberality of notice pleading, a plaintiff alleging
fraud as a cause of action must state the circumstances constituting fraud with
particularity. K.S.A. 60-209(b).

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Kansas case law demonstrates that the statutory requirement to plead fraud with
particularity is strictly enforced. See Palmer v. Brown, 242 Kan. 893, 901, 752 P.2d 685
(1988) (upholding dismissal of fraud claim for failure to plead fraudulent inducements
with particularity); McGill v. Kuhn, 186 Kan. 99, 104, 348 P.2d 811 (1960) (holding that
fraud claim was insufficiently pled because it did not allege knowledge by plaintiffs of
alleged intent to defraud defendant); Vondracek v. Mid State Co-op, Inc., 32 Kan. App.
2d 98, 103, 79 P.3d 197 (2003) (where petition stated pled only two elements of fraud
with particularity, trial court did not err in granting summary judgment for failing to
plead fraud with particularity).

According to the Pattern Instructions for Kansas, PIK Civ. 4th 127.40, the
essential elements required to sustain an action for fraud are:

"1. That false (or untrue) representations were made as a statement of existing
and material fact.
"2. That the representations were known to be false (or untrue) by the party
making them, or were recklessly made without knowledge concerning them.
"3. That the representations were intentionally made for the purpose of inducing
another party to act upon them.
"4. That the other party reasonably relied and acted upon the representations
made.
"5. That the other party sustained damage by relying upon them.
"A representation is material when it relates to some matter that is so substantial as to
influence the party to whom it was made."

In alleging its action for fraud against the Thyes, Newcastle made conclusory
statements that merely set forth the elements of fraud and did not state with particularity
the circumstances constituting fraud. Specifically, Newcastle outlined its fraud claim as
follows:

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"31) Newcastle adopts by reference, all allegations contained in paragraphs 1 through 30,
above, as though fully set forth herein.
"32) That false or untrue representations were made by the Thyes as a statement of
existing and material fact to Newcastle concerning the Thyes Agreement.
"33) That the representations made by the Thyes concerning the Newcastle were known
by them to be false or untrue . . . when they made them.
"34) That the representations were intentionally made by the Thyes for the purpose of
inducing Newcastle to act upon them.
"35) That Newcastle reasonably relied and acted upon the representations made [by] the
Thyes concerning the Thyes Agreement.
"36) That Newcastle sustained damage by relying upon the representations made by the
Thyes concerning their agreement with Newcastle."

Although Newcastle specifically adopted by reference the allegations contained in
paragraphs 1 through 30, none of those allegations even mention the February 2006
cancellation and release agreements, which are what Newcastle now seeks to avoid with
its fraudulent concealment claim. There are no allegations within Newcastle's fraud claim
or the previous paragraphs as to what false or untrue representations were made by the
Thyes. In addition, there are no particular facts or circumstances alleged regarding what
representations induced Newcastle to enter into the February 2006 cancellation and
release agreements. Finally, Newcastle has not set forth particular facts or circumstances
as to how it justifiably relied on the Thyes' representations or as to its damages in this
case. As a result, Newcastle failed to meet the specificity in pleading requirements for its
fraudulent concealment claim.

2. No Genuine Issue of Material Fact as to Fraudulent Inducement
In addition, based upon Newcastle's argument before the trial court and the
evidence presented at the summary judgment stage, Newcastle failed to establish a
genuine issue of material fact as to some of the elements of fraudulent concealment,
including that a false or untrue representation was made by the Thyes, and that Newcastle
20

sustained damages by reasonably relying and acting upon the false or untrue
representation made.

a. No False or Untrue Representation Made

Newcastle apparently argued before the trial court that the Thyes had made a false
or untrue representation that they wanted to rescind the contract because the construction
had not been completed by the second extension date of January 23, 2006. The evidence
presented at the summary judgment stage, however, failed to show that the Thyes had
made a false or untrue representation.

Based on the evidence presented by the parties, the Thyes had agreed to two
extensions of the construction completion date, but they refused to agree to a third
extension of the construction completion date. The Thyes' realtor contacted Barnes and
requested that Newcastle let them out of the contract based on Newcastle's unwillingness
or inability to complete the home. The construction completion date, January 23, 2006,
came and went without the construction being completed. The Thyes and Newcastle later
entered into the rescission agreements to cancel and rescind the May 2005 sales contract
and its additions, addendums, and extensions.

Newcastle points to no false or untrue representations that were made by the
Thyes. The facts presented by the parties were that the Thyes would not agree to a third
extension date, that the construction was not completed by the second extension date of
January 23, 2006, and that the Thyes wanted out of the May 2005 sales contract. Under
those facts, Newcastle has not shown any false or untrue representations made by the
Thyes.

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b. No Reasonable Reliance to Newcastle's Detriment

Additionally, Newcastle has not shown that it sustained damages by reasonably
relying upon any representations made by the Thyes.

In Barnes' affidavit, he alleged that as a result of rescinding the contract, he had
sustained damages in excess of $63,300. Barnes asserted that this money had been used
"to pay for the extras that had been improperly included in the construction of the
Newcastle home and to pay contractors to come in and finish the work that Alpha Home
and/or Thomas Dressler failed to complete." Further, in arguing before the trial court,
Newcastle's attorney contended that the Thyes' additions to the construction plans
constituted a breach of the May 2005 sales contract. Newcastle's attorney also contended
that the $20,000 it paid to the Thyes under the second rescission agreement was part of its
damages in the case.

Nevertheless, upon signing the rescission agreements, Newcastle (through Barnes)
had notice that the Thyes had made additions to the property at 2250 Valley View Drive.
Specifically, the second cancellation and release agreement provided as follows:

"4. The Seller will pay to the Buyers the sum of $18,000 $20,000.00 [amended/initialed
by parties] upon execution of this Agreement by all parties. All upgrades, additions and
other improvements to the home located at 2250 Valley View Drive, Tonganoxie,
Leavenworth County, Kansas 66086, shall remain with the real property and become the
property of the Seller. This includes the wooden fence that fences a portion of the yard at
2250 Valley View Drive, Tonganoxie, Leavenworth County, Kansas 66086."

Moreover, there was also evidence that Barnes had been at the property at 2250 Valley
View Drive during January 2006 when the Thyes were painting the property. Indeed,
Barnes exclaimed that the home could not be completed by the second extended closing
date of January 23, 2006.
22

With this information, Barnes had the knowledge that the Thyes had allegedly
gone outside of the contract and made additions to the construction plans. Barnes cannot
now argue that the Thyes were not allowed, under the contract, to make the additions to
the contract when he signed off on the rescission agreement that specifically stated that
he was paying $20,000 for the improvements to the property. Moreover, as discussed
previously, Newcastle has not even brought forth the May 2005 sales contract to show
that the Thyes went outside of the terms of the contract.

Further, as an experienced contractor for the sales and construction of custom-built
homes, Barnes, as the principal and agent of Newcastle, would have been able to inspect
the property and determine that additional work and repair of the Thyes' additions to the
construction plans would need to be done before the property could be sold. See
Katzenmeier v. Oppenlander, 39 Kan. App. 2d 259, 268, 178 P.3d 66, rev. denied 286
Kan. 1178 (2008) (in determining that the plaintiff purchasers could not reasonably rely
on the representations of the defendant seller, this court considered the fact that the
plaintiffs were experienced owners and managers of multifamily dwellings); Boegel v.
Colorado Nat'l Bank of Denver, 18 Kan. App. 2d 546, 549-52, 857 P.2d 1362, rev.
denied 253 Kan. 856 (1993) (in case involving fraudulent concealment claim, this court
determined that it would have been reasonable for plaintiff, who was experienced
irrigation farmer and experienced businessman in seed and fertilizer business and custom
farming business, to inspect irrigation equipment while it was operating and to ask
questions about wells before purchasing property).

Based on the uncontroverted evidence in this case, Barnes would have had
complete access to the property by January 23, 2006, to determine what additional work
would need to be done to complete the construction. Barnes' affidavit established that
Dressler pulled his workers from the construction project on January 18, 2006. Further,
Barnes apparently concedes that the construction was not completed by January 23, 2006,
and that the closing did not occur. Barnes maintained in his affidavit that the painting
23

done by the Thyes to the interior of the house was of such a shoddy condition that the
entire interior of the house had to be professionally repainted. If this were true, Barnes
should have been put on notice that additional work would need to be performed on the
house in order to sell it to another purchaser. As an experienced contractor of the
construction of the house, Barnes should have been able to ascertain what had been done
to the house, what had been done in contravention of the Thyes' and Alpha Homes'
contracts with Newcastle, and what still needed to be completed or repaired before he
entered into the rescission agreements.

In summary, any reliance by Barnes was unreasonable. As stated earlier, he had no
right to rely that no improper upgrades had been made to the house when the alleged
upgrades were within his knowledge before he signed the rescission agreements on
February 13, 2006, and paid the Thyes $20,000 for the alleged upgrades. Under the
circumstances present in this case, Newcastle has not established a genuine issue of
material fact that it sustained damages by reasonably relying upon any representations
made by the Thyes.

E. Avoidance

Finally, it is apparent that the doctrine of avoidance, as set forth in Restatement
(Second) of Contracts § 381 (1979), would bar Newcastle's attempts to avoid the
February 2006 rescission agreements.

Under Restatement § 381(2), "[t]he power of a party to avoid a contract for
misrepresentation or mistake is lost if after he knows of a fraudulent misrepresentation or
knows or has reason to know of a non-fraudulent misrepresentation or mistake he does
not within a reasonable time manifest to the other party his intention to avoid it."
Restatement § 381, comment a, further explains: "A party who has the power to avoid a
contract may lose that power by delay alone, even without such conduct as amounts to
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affirmance (§ 380). Under the rule stated in this Section the power is lost if it is not
exercised within a reasonable time."

The application of this doctrine to contracting parties is contained in an example
set forth in Illustration 1 to Restatement § 381:

"1. A is induced by B's misrepresentation to contract in January to sell B 1,000
shares of stock in the X Corporation for $100,000, delivery and payment to be on May1.
A discovers the fraud in February but does not manifest his intention to avoid the
transaction until April. In view of the extent to which A's delay of two months enabled
him to speculate at B's expense, A has lost his power of avoidance, and his manifestation
is not effective to avoid the transaction."

Here, similar to the above illustration, Newcastle claims that it was induced by the
Thyes' misrepresentations to contract in February 2006 to rescind the May 2005 sales
contract. Newcastle should have discovered the alleged fraud and damages at the very
latest when it was doing the extra work on the property, which would have occurred
between the time when Barnes signed the February 2006 rescission agreements and when
Newcastle sold the property on March 16, 2006. Newcastle, however, did not file suit and
manifest its intention to avoid the February 2006 rescission agreements until June 2007.
In view of Newcastle's delay of 16 months in attempting to avoid the rescission
agreements, Newcastle lost its power of avoidance. As a result, its attempt to avoid the
rescission agreements were not effective.

If Newcastle wanted to avoid the February 2006 rescission agreements, it could
have contacted the Thyes in February or March 2006 when it was doing all the extra
work on the property to sell it. At that point, Newcastle would have been aware of the
extra money that it had "to pay contractors to come in and finish the work that Alpha
homes and/or Thomas Dressler failed to complete" and of any additions that the Thyes
had made that were not authorized by the contract. Newcastle could have offered to
25

tender the custom-built home back to the Thyes and place them in the same position that
they had been in before the rescission agreements were signed. Nevertheless, it seems
that Newcastle chose to make the improvements and to speculate on getting a better sale
price for the property, which, in fact, it ultimately did receive. As a result, Newcastle
should not be allowed, 16 months after the February 2006 rescission agreements were
signed, to avoid the agreements and claim that the Thyes breached the May 2005 sales
contract. See Hoke v. Stevens-Norton, Inc., 60 Wash. 2d 775, 778-79, 375 P.2d 743
(1962) (where defendant failed to make demand upon defendant for rescission when he
learned true character of transaction, he waived any right to rescind or for damages).

F. Reinstatement of Appeal

Next, the Thyes contend that Newcastle's appeal, after being dismissed by the trial
court, was never properly reinstated under Supreme Court Rule 5.01 (2009 Kan. Ct. R.
Annot. 33) and Rule 5.051 (2009 Kan. Ct. R. Annot. 36). Therefore, the Thyes argue that
the present appeal should be dismissed for lack of jurisdiction.

The right to appeal is purely statutory, and if the record shows that the appellate
court does not have jurisdiction, the appeal must be dismissed. Alliance Mortgage Co. v.
Pastine, 281 Kan. 1266, 1271, 136 P.3d 457 (2006). Whether jurisdiction exists is a
question of law over which an appellate court's scope of review is unlimited. Shipe v.
Public Wholesaler Water Supply Dist. No. 25, 289 Kan. 160, 165, 210 P.3d 105 (2009).
An appellate court has a duty to question jurisdiction on its own initiative. When the
record discloses a lack of jurisdiction, it is the duty of the appellate court to dismiss the
appeal. State v. Gill, 287 Kan. 289, 294, 196 P.3d 369 (2008).

Here, Newcastle filed its notice of appeal from the trial court's March 17, 2009,
written decision granting summary judgment to the Thyes on April 20, 2009. On July 15,
2009, the Thyes moved to dismiss Newcastle's appeal based on Newcastle's failure to
26

timely file the docketing statement. The Thyes argued that as of the date of the filing of
their motion to dismiss, Newcastle's docketing statement was over 2 months out of time.
On October 8, 2009, the trial court filed a journal entry in which it dismissed Newcastle's
appeal based on its failure to timely file a docketing statement.

On September 23, 2009, Newcastle filed a second notice of appeal from the trial
court's March 17, 2009, decision. On October 14, 2009, Newcastle filed its docketing
statement. On November 20, 2009, the Thyes moved for an involuntary dismissal of
Newcastle's appeal. The Thyes argued that this court should dismiss Newcastle's appeal
because Newcastle had not objected to the dismissal of its appeal and had not moved for
reinstatement of its appeal under Rule 5.051.

In its written response to the Thyes' motion for involuntary dismissal, Newcastle
contended that when it filed its April 2009 notice of appeal, such notice was premature as
there were still claims pending against Dressler and Alpha Homes in the case. Indeed,
Dressler was not dismissed from the action until May 13, 2009. The remaining claims
against Alpha Homes were resolved by default and were reduced to a judgment on
August 28, 2009.

This court denied the Thyes' motion to dismiss and determined that this court did
not obtain jurisdiction until a final judgment was entered on August 28, 2009. This court
further noted that the Thyes' motion to dismiss was unsigned.

K.S.A. 2009 Supp. 60-2102(a)(4) gives this court jurisdiction to review "[a] final
decision in any action, except in an action where a direct appeal to the supreme court is
required by law." A final decision generally disposes of the entire merits of the case and
leaves no further questions or the possibility of future directions or actions by the court.
Varney Business Services, Inc. v. Pottroff, 275 Kan. 20, 29, 59 P.3d 1003 (2002). In
27

addition, in any appeal or cross-appeal from a final decision, any act or ruling from the
beginning of the proceedings shall be reviewable. See K.S.A. 2009 Supp. 60-2102(a)(4).

K.S.A. 2009 Supp. 60-2102(c) sets out a procedure for making application for an
interlocutory appeal, and this court has the discretion to permit or deny the application.
Rodriguez-Tocker v. Estate of Tocker, 35 Kan. App. 2d 15, 24-25, 129 P.3d 586, rev.
denied 281 Kan. 1379 (2006). Nevertheless, no application for an interlocutory appeal
was made in this case. Moreover, although the trial court has the option of granting a
K.S.A. 60-254(b) certificate, that is, "the court may direct the entry of a final judgment as
to one or more but fewer than all of the claims or parties only upon an express
determination that there is no just reason for delay and upon an express direction for the
entry of judgment," the court did not issue a K.S.A. 60-254(b) certificate in this case. As
a result, the time for Newcastle to file an appeal in this case was 30 days from the entry
of the final judgment.

Here, the final judgment disposing of all claims in the case was not entered until
August 28, 2009, when the trial court entered a default judgment against Alpha Homes.
Thus, when Newcastle filed its first notice of appeal on April 2009, there was no final
judgment from which to appeal.

Under Rule 2.03 (2009 Kan. Ct. R. Annot. 10), a premature notice of appeal is to
be treated as if the notice of appeal had been filed simultaneously with the entry of
judgment:

"A notice of appeal filed subsequent to an announcement by the judge of the
district court on a judgment to be entered, but prior to the actual entry of judgment as
provided in K.S.A. 60-258, shall be effective as notice of appeal under K.S.A. 60-2103 if
it identifies the judgment or part thereof from which the appeal is taken with sufficient
certainty to inform all parties of the rulings to be reviewed on appeal. Such advance filing
shall have the same effect for purposes of the appeal as if the notice of appeal had been
28

filed simultaneously with the actual entry of judgment, provided it complies with K.S.A.
60-2103(b)."

Our Supreme Court has extended Rule 2.03 to hold that "if a judgment is entered
disposing of all claims against one of multiple parties, and a premature notice of appeal
has been filed and has not been dismissed, then a final judgment disposing of all claims
and all parties validates the premature notice of appeal concerning the matters from
which the appellant appealed." Honeycutt v. City of Wichita, 251 Kan. 451, 462, 836 P.2d
1128 (1992). Thus, under Honeycutt, Newcastle's April 2009 notice of appeal, if it had
not been dismissed by the trial court, would have been validated when the trial court filed
its final judgment that finally disposed of all claims in the case on August 28, 2009.

Because the trial court in this case dismissed Newcastle's April 2009 notice of
appeal, it was proper for Newcastle to file a new notice of appeal after the trial court
entered a final judgment in the case. Newcastle's September 2009 notice of appeal was
properly filed within 30 days from "entry of the judgment" as required by K.S.A. 60-
2103(a) and adequately satisfied the requirements of K.S.A. 60-2103(b). Under such
circumstances, this court had jurisdiction over Newcastle's appeal.

Affirmed.