Court Opinion

ID: 7923215
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:28:26.134969+00
Date Added: 2024-06-11T16:33:07.970940
License: Public Domain

Greene, C.J.,
dissenting: I respectfully dissent because I believe the majority has fundamentally erred in dismissing the appeal based solely on the perception that the consent judgments have become dormant. First, I suggest that the dormancy period has been tolled by K.S.A. 60-2403(c) as a result of and ever since this court’s decision in Associated Wholesale Grocers, Inc., v. Americold Corp., 261 Kan. 806, 934 P.2d 65 (1997) (Americold I). Second, the dormancy or extinction of the consent judgments was an affirmative defense that was never pled or preserved in the pretrial order by Northwestern Pacific Indemnity Company (NPIC) and has been waived as a matter of law. Third, even if there was no tolling or waiver, the plaintiffs have always held direct assignments of Americold’s rights against its insurers and could pursue NPIC without regard to the consent judgments. This case has been pending since 1991, has absorbed thousands of attorney hours and a ton of judicial effort, has at stake $58,000,000 plus interest thereon approaching $40,000,000, and should be decided on its merits.

The Period Within Which Action Must be Taken to Prevent Dormancy Was Tolled

The first basis for my dissent is K.S.A. 60-2403, which since 1991 has included the following subsection:
“(c) The time within which action must be taken to prevent a judgment from becoming dormant does not run during any period in which the enforcement of the judgment by legal process is stayed or prohibited.”
Examining this provision carefully, the time to take action to prevent dormancy does not run during the entire period in which the judgment creditor cannot enforce its judgment rights because of a stay or because such action is otherwise prohibited. Critical is that not only a formal judicial stay—such as a bankruptcy filing— *649triggers such tolling; but tolling is also triggered if the- judgment creditor is in any way. “prohibited” from enforcement by legal process.
Our court has held that virtually any reason that squelches enforcement rights should be viewed as sufficient for tolling. See, e.g., Bank IV Wichita v. Plein, 250 Kan. 701, 830 P.2d 29 (1992) (default judgment in mortgage foreclosure case prohibited hen creditor from enforcing his lien rights until the default was set aside, even though Hen creditor could have filed an execution in the case from which his hen arose). And in a case prior to the 1991 amendment, our Court of Appeals essentially grafted a judicial tolling provision onto tire statute in holding that the dormancy period begins to run when each installment for periodic child support and alimony is due and it becomes possible to collect it by legal process. Justice Larson explained the preamendment judicial tolling and associated need for enforcement action as follows:
“This general principle has been stated as follows: ‘Such statute will not run against a judgment. . . during any time it is impossible to enforce it by final process.’ 49 C.J.S., Judgments § 532, p. 985.
“An execution and garnishment or other legal process attempting collection would not only have been purposeless conduct, which Kansas has expressly not required (see Carpenter v. Riley, 234 Kan. 758, 762, 675 P.2d 900 [1984]), it might have subjected [the judgment creditor] to liability for wrongful conduct. As to the judgment payable in installments, the dormancy period commenced as to each installment when it became due and was collectable by execution or other legal process. The judgment did not become dormant and legal action was taken within the necessary period so that the judgment remained in full force and effect.” Wichita Fed. Sav. & Loan Ass’n v. North Rock Rd. Ltd. Partnership, 13 Kan. App. 2d 678, 683-84, 779 P.2d 442, rev. denied 245 Kan. 788 (1989).
So, the fundamental question before us here is whether it was possible for plaintiffs to take enforcement action by legal process after the mandate and during the remand of Americold 1.1 contend it was not, and the district court so found. When NPIC sought dismissal in the district court in late 2005 due to dormant consent judgments, the district court held:
“This court finds that the timing provisions of K.S.A. 60-2403 and K.S.A. 60-2404 do not apply to the judgments at issue because pursuant to K. S .A. 60-2403(c) *650the time within which action must be taken to prevent a judgment from becoming dormant does not run during any period in which the enforcement of the judgment by legal process is stayed or prohibited.
“This court further finds that the directions to the trial court by the Kansas Supreme Court on remand has, in effect, stayed the time provisions of these two statutes and in effect has prohibited the plaintiffs from executing on said judgments.” (Emphasis added.)
Did the mandate and remand of Americold I truly prohibit enforcement action by legal process on the consent judgments? Careful reading of this court’s opinion in Americold I leads to an inescapable conclusion: this court did not limit its mandate and remand to an inquiry whether NPIC was bound by the settlement but rather essentially required that the entire underlying settlement, including consent judgments, be reopened and examined for validity. This court found that “material issues of fact remain as to the reasonableness and good faith of the agreement” and that the inquiry on remand was to include an examination of whether the settlement was collusive. 261 Kan. at 810, 829. In fact, this court found that the settlement “may or may not raise concerns of collusion.” 261 Kan. at 840. This court summarized its holdings as follows: “Based on the above reasoning, the consent judgments could be enforceable against NPIC, if NPIC’s denial of coverage and rejection of the policy limits settlement offer were in bad faith and the amount of the consent judgments is reasonable.” (Emphasis added.) 261 Kan. at 850.
Thus, the consent judgments themselves were at issue in the remand, and until the district court on remand addressed the concerns of this court, they were not enforceable against NPIC, and that was the only enforcement alternative under the comprehensive settlement because of its inclusion of a covenant not to execute against the judgment debtor. In fact, this court went on to suggest that a host of factors be considered in determining the overall reasonableness of the comprehensive settlement, including bad faith, collusion, or fraud. 261 Kan. at 841. Obviously, if the district court on remand determined that the entire setdement was collusive or fraudulent, the consent judgments would have to be set aside, because this court recognized that the judgments were a critical com*651ponent of the settlement. 261 Kan. at 810; see Stegman v. Professional & Business Men's Life Ins. Co., 173 Kan. 744, 751, 252 P.2d 1074 (1953) (“fraud vitiates whatever it touches including final judgments”).
The majority contends that “the efficacy of the judgments . . . could not and should not have been determined in the garnishment litigation.” This is an interesting academic proposition, but this is not what happened. This court indeed required the entire settlement — including the consent judgments — to be reopened and examined for validity on remand because the settlements and resulting judgments may have been the product of collusion or fraud. Even if the consent judgments were unassailable prior to Americold I, they were certainly no longer final and enforceable thereafter by judicial fiat.
On the question of the mandate’s effect on the judgments themselves, it is alarming to observe NPIC’s initial answer to this question. In connection with NPIC’s motion to prohibit interest claims filed in 2005, NPIC argued that the effect of Americold I was to vacate the consent judgments. The memoranda filed by NPIC in district court on this issue included the following:
“The effect of the Supreme Court’s vacation of the October 12, 1995 Journal Entry of Judgments, and its remand of this matter for complete factual hearings on the reasonableness of the settlement and on the claim of bad faith against NPIC, is to nullify and render moot the 1994judgments .... [Thus,] there are no judgments rendered by courts of this state upon which interest may accrue.” (Emphasis added.)
In fact, although not raised on appeal, I would argue that NPIC should be bound by judicial estoppel from now claiming that the consent judgments have become dormant when it argued vociferously in district court that those judgments had been vacated. Given that NPIC did not specify the earlier order of the district court denying its argument for dormancy in its notice of appeal, there is nothing amiss in appellate review of the point. See In re Estate of Broderick, 286 Kan. 1071, 1082, 191 P.3d 284 (2008) (An appellate court may consider an issue first raised on appeal for various reasons, including if it serves “the ends of justice.”). NPIC has now taken two wholly inconsistent positions in the same pro*652ceedings in an intentional effort to mislead or confuse the court on the full impact or effect of Americold I on the consent judgments. See 28 Am. Jur. 2d, Estoppel and Waiver §§ 33, 67 (judicial estoppel focuses on the relationship between tire litigant and the judicial system and is designed to prevent litigants and counsel from playing fast and loose with the courts).
Thus, I conclude that the mandate and remand of Americold I called into question the fundamental validity of the consent judgments and therefore prohibited any enforcement action thereon during the pendency of these proceedings at all times thereafter. Again, this court expressly held that the consent judgments “could be enforceable” if and only if the district court on remand found the amount of these judgments to be reasonable and they were not the product of fraud or collusion. (Emphasis added.) 261 Kan. at 850. They were not enforceable against NPIC, and they were not enforceable as to any other person or entity due both to having been undermined by this court’s mandate and remand, and due to the associated covenants not to execute, which were given by plaintiffs to Americold in consideration for these judgments.
Cases cited by the majority are not applicable under these circumstances. In DeKalb Swine Breeders, Inc. v. Woolwine Supply Co., 248 Kan. 673, 678, 809 P.2d 1223 (1991), this court held that a pending garnishment proceeding does not toll the dormancy period. But NPIC does not argue and the district court did not find that the pending garnishment proceeding should operate to toll the running of tire time limit for dormancy. What tolls the dormancy period is this court’s mandate to generally reexamine the underlying settlements and consent judgments, thus prohibiting further enforcement action. The holding in DeKalb is simply inapplicable here because tolling based on a remand mandate was not an issue there. Clark v. Glazer, 4 Kan. App. 2d 658, 660, 609 P.2d 1177 (1980), was decided prior to the legislative action amending K.S.A. 60-2403 to add the tolling provisions in subsection (c). If the amendment had been in place when Glazer was decided, tolling would have saved that judgment because the judgment provided that no execution could be levied until the judgment debtor’s income was more than $700 per month. Thus, enforce*653ment action by legal process was arguably impossible until such time as the judgment debtor knew or should have known that the condition precedent to execution was satisfied; instead, the court did not focus on the possibility of enforcement and declared the judgment dormant at the end of the dormancy period because there was no need to examine the possibility of execution during that period. The majority swims in dangerous waters in relying on preamendment case law in construing and applying the amendment. See Ft. Hays St. Univ. v. University Ch., Am. Ass’n of Univ. Profs, 290 Kan. 446, 464, 228 P.3d 403 (2010) (when the legislature revises an existing law, the court should presume that the legislature intended to change the law as it existed prior to the amendment).
And finally, on the question of tolling, our first task is to ascertain the legislature’s intent through the statutory language it employs, giving ordinary words their ordinary meaning. Phillips v. St. Paul Fire & Marine Ins. Co., 289 Kan. 521, Syl. ¶ 2, 213 P.3d 1066 (2008). Granted, the term “stayed” in the statute contemplates a formal judicial “stay” or automatic stay by law, but the addition of the term “prohibited” must mean something. See State v. Hendrix, 289 Kan. 859, 863, 218 P.3d 40 (2009) (court rejects an interpretation that would render distinction of terms superfluous); Board of Sumner County Comm'rs v. Bremby, 286 Kan. 745, 754, 189 P.3d 494 (2008) (legislature does not intend to enact useless or meaningless legislation).
Our legislature, in its wisdom, did not just provide for tolling in case of a formal judicial stay, but also provided for tolling if enforcement was otherwise “prohibited.” K.S.A. 60-2043(c). Again, to hold that “prohibited” does not include an agreement not to execute is a naked suggestion contrary to the rules of statutory construction. The term must mean something beyond a formal judicial stay, and it would be just as true to say we have nothing to suggest that the term “prohibited” should be read as merely equivalent to “stayed” when the additional term by its ordinary meaning has as synonyms “prevented,” “hindered,” “precluded,” or “made impossible.” See Black’s Law Dictionary, 1381 (9th ed. 2009); Webster’s Third New International Dictionary 1813 (1993); State *654v. Gracey, 288 Kan. 252, 257, 200 P.3d 1275 (2009) (in construing legislative intent, ordinary words are to be given their ordinary meaning); State v. Manbeck, 277 Kan. 224, 228-29, 83 P.3d 190 (2004) (conjunctions are not to be ignored). I respectfully suggest that the latter truism is consistent with our established rules of statutory construction. See State ex rel. Topeka Police Dept. v. $895.00 U.S. Currency, 281 Kan. 819, Syl. ¶ 3, 133 P.3d 91 (2006) (statute not to be read to omit what as a matter of ordinary English language is in it).
Finally, the majority suggests that a covenant not to execute does not “prohibit” execution on other assets of Americold. But would not such efforts constitute a breach of the agreement? If so, would such breach excuse performance by the insurers? And would execution on the questionable judgments after Americold I and its mandate constitute wrongful execution and expose plaintiffs to liability? And, finally, would the majority’s suggestion of such execution efforts be consistent with our oft-stated policy encouraging and protecting settlements? See Tilzer v. Davis, Bethune & Jones, 288 Kan. 477, 496, 204 P.3d 617 (2009) (the law and policy of this State is to favor out-of-court settlements of disputed claims). To encourage a settlement only to judicially declare that a covenant not to execute within a settlement means nothing when it comes to dormancy and reviver obligations is akin to biting the hand that feeds you. Surely the legislature did not intend that tolling not apply when an execution is not only contractually prohibited, but the judgment itself remains subject to pending judicial proceedings and execution efforts thereon would create potential liability for the judgment creditor. I contend that the above are precisely what was intended by use of the term “prohibited” in the 1990 amendment to K.S.A. 60-2403.
Americold I placed in grave question the validity of the consent judgments and made them subject to being set aside for collusion or fraud. Moreover, this court expressly held that they “could” be enforceable only if certain findings were made on remand. 261 Kan. at 850. By reason of the covenants not to execute, which were the principal consideration for the consent judgments, plaintiffs were prohibited from taking any enforcement action by legal pro*655cess against any person or entity other than NPIC after the settlement by TIG Insurance Company (TIG). Thus, plaintiffs were prohibited from enforcement action at all times since the mandate of Americold I, and the dormancy period was clearly tolled by virtue of K.S.A. 60-2403(c) when that subsection is properly construed and applied.

NPIC Has Waived Dormancy as a Defense Because It Was Not Pled or Otherwise Presented

The second basis of my dissent is that because NPIC failed to plead or to preserve the issue of dormancy in the pretrial order and failed to preserve this issue in its notice of appeal, it has either waived this defense or we are without jurisdiction to address it.
Because K.S.A. 60-2403 qualifies as a statute of limitation contemplated under K.S.A. 60-208(c), NPIC’s failure to plead the dormancy/extinction of judgment as an affirmative defense is fatal to its claim. See Turon State Bank v. Bozarth, 235 Kan. 786, 788, 684 P.2d 419 (1984) (affirmative defenses must be set forth in a responsive pleading or they are deemed waived); Washington Avenue Investments, Inc. v. City of Kansas City, 213 Kan. 269, 269-70, 515 P.2d 744 (1973). Moreover, because the pretrial order failed to list this issue or reference any such contention, the trial court has no jurisdiction to hear or decide the issue. See Febert v. Upland Mutual Ins. Co., 222 Kan. 197, 200, 563 P.2d 467 (1977). Finally, NPIC failed to appeal from the district court order rejecting its dormancy defense, and we have no jurisdiction to address the issue on appeal. See Gates v. Goodyear, 37 Kan. App. 2d 623, 629, 155 P.3d 1196, rev. denied 284 Kan. 945 (2007).
The defense of dormancy should be considered a statute of limitation, especially after the amendment in 1991 adding the tolling provisions. I contend NPIC should have known this fact from the outset of this prolonged litigation and should have pled the defense from the beginning. In Director of Property Valuation v. Golden Plains Express, Inc., 13 Kan. App. 2d 48, Syl. ¶ 2, 760 P.2d 1227 (1988), the Court of Appeals panel held that “[t]he dormant judgment statute, K.S.A. 1987 Supp. 60-2403, is a statute of limitations.” This court has never addressed this precise issue. Therefore, *656even the most basic search of Kansas law after 1988 would have revealed this singular appellate precedent and should have prompted the pleading of judgment dormancy as a defense.
Moreover, when the legislature added the tolling provisions of K.S.A. 60-2403(c) to the statute, it became even clearer that the defense of dormancy was becoming more like a statute of limitation. An earlier Court of Appeals case had held that the dormancy statute was “not like ordinary statutes of limitation because “[o]nce a judgment is extinguished there is nothing on which equitable doctrines such as estoppel may operate.” Clark, 4 Kan. App. 2d 658, Syl. ¶ 2. After the legislature added the tolling provisions, however, the dormancy statute certainly became more like a statute of limitation because there were equitable considerations to be made in applying the tolling provisions before declaring the judgment dormant. Moreover, although there is a split of authority, many jurisdictions consider judgment dormancy provisions to be a statute of limitation. See, e.g., Davis Intern., Inc. ex rel Patel v. Berryman, 730 So. 2d 242, 244 (Ala. Civ. App. 1999); Corvin v. Debter, 281 Ga. 500, 639 S.E.2d 477 (2007); State ex rel. West Virginia Dept. of Health and Human Resources v. Varney, 221 W.Va. 517, 525, 655 S.E.2d 539 (2007); 46 Am. Jur. 2d, Judgments §421.
And even if there was no waiver by reason of the failure to plead dormancy as an affirmative defense, the omission of this defense from die pretrial order herein should bar its assertion at this late date. The pretrial order herein expressly provided that “[t]he trial of this case shall be limited to the issues, witnesses and exhibits listed, and no deviation therefrom shall be permitted” unless by special order of the court. That pretrial order fails to mention dormancy as an issue or as a finding or conclusion sought by NPIC.
Finally, NPIC’s notice of appeal was restricted to “the Journal Entries of Final Judgment dated August 27, 2007 [and] August 28, 2007,” whereas the district court’s order rejecting NPIC’s dormancy argument was entered on January 19, 2006. Plaintiffs have argued since the outset of this appeal that the notice was defective and does not preserve an appeal on the dormancy issues. I agree and would hold that this serves as yet another procedural and ju*657risdictional defect that precludes our dismissal of the litigation on the sole basis of judgment dormancy.
A notice of appeal shall “designate the judgment or part thereof appealed from.” K.S.A. 60-2103(b); Supreme Court Rules 2.01 (2010 Kan. Ct. R. Annot. 9) and 2.02 (2010 Kan. Ct. R. Annot. 10). Utilization of “catch-all” language, such as “and from each and every order or ruling entered against the appellant” has been recognized as sufficient, but no such language was included in NPIC’s notice. See, e.g, Fletcher v. Anderson, 27 Kan. App. 2d 276, 283-84, 3 P.3d 558 (2000). Although this court has often been willing to read a notice of appeal broadly, we have not yet addressed a clear omission of the judgment sought to be appealed in a notice that otherwise is specific as to the judgments subject to appeal; the Court of Appeals, however, has held that in such instance, the deficient notice of appeal restricts the court’s jurisdiction to the specific judgments appealed from and no others. See Gates, 37 Kan. App. 2d at 629. Thus, the defective notice of appeal further buttresses my belief that we should not address the question of dormancy.
Therefore, I contend that NPIC has waived, failed to preserve, and failed to appeal the defense of judgment dormancy or extinction. I would not permit its being raised on appeal, and I respectfully suggest we have no jurisdiction to consider it. It certainly should not be the sole basis for a dismissal of these protracted and highly significant proceedings.

Dormancy of the Consent Judgments Should Not Preclude a Merits Decision

As my third and final reason for dissent, I believe that dormancy of the consent judgments should not preclude a decision by this court on the merits of this appeal. The majority erroneously concludes that “[bjecause Americold was not legally obligated to pay an unenforceable judgment, NPIC was no longer indebted to Americold under its contract to pay the judgments for which Americold was legally hable.” This is fallacious. The contract obligations of NPIC arise from a contract of insurance and are not conditioned on or exclusive to the consent judgments; those contractual obli*658gations are not defeated merely by an extinction of the consent judgments.
As a condition of the global settlement, plaintiffs not only required the consent judgments but also procured “an assignment of Americold’s claims against its excess insurers [including NPIC].” 261 Kan. at 810. Thus, it is beyond dispute that plaintiffs, as assignees of Americold’s rights and as third-party beneficiaries of Americold’s contract of insurance with NPIC, have rights against NPIC that are independent of the consent judgments. Obviously, it was far more convenient for plaintiffs to proceed against NPIC in a garnishment proceeding, but the alternative of a direct action has not been precluded.
The majority suggests that Americold’s legal liability is extinguished upon the dormancy and extinction of the consent judgments, but this is a fundamental misreading of the settlement agreement. That agreement’s principal purpose was to assign Americold’s claims against its liability insurers. Although the agreement provides that plaintiffs “may” present the setdement to obtain judgments, there is no basis to suggest that the dormancy or extinction of the judgments should extinguish all contractual liability under the agreement. In fact, the agreement expressly contemplates otherwise. If the contractual covenants somehow “merged” into the consent judgments, this court’s dissection of both the agreement and the judgments in Americold I was purely academic and improper.
In theory, a direct action by plaintiffs against NPIC would look different from this garnishment action. There would be no consent judgment establishing the amount of the loss and NPIC might have other defenses under its contract of insurance. But at this late date, some 20 years after the fire that arguably triggered coverage, and three trips to the Supreme Court, those nuances have begun to fade. When this court in Americold I remanded to the district court with directions to examine the entirety of the settlement between the plaintiffs and Americold, virtually any issue that would control a direct action was on the table. This court mandated that the reasonableness of the settlement, including the amounts, the coverage issues, and NPIC’s bad faith, would be included in the scope *659of remand. If for no other reason than judicial economy, this court should address the merits framed by this appeal in the hope of precluding an altogether new action being filed with near identical issues. See Bush v. Strain, 513 F.3d 492, 500 (5th Cir. 2008) (an appellate court may act in the name of judicial efficiency to reach issues not framed by parties rather than remanding for initial disposition below — thereby inviting another round of appellate briefing and delay).
Kansas law has long reflected a definite preference for merits resolution of litigation rather than strained technical outcomes. See, e.g., Slayden v. Sixta, 250 Kan. 23, 30, 825 P.2d 119 (1992). For all these reasons, I would not dismiss this appeal based purely on the purported but specious argument that the consent judgments have become extinct.
In conclusion, this case should not be dismissed based on the belated assertion that consent judgments have become extinct or the erroneous conclusion that dormancy has not been tolled. For any of the three reasons outlined above, this court should address the appeal on its merits and provide to all parties a full and complete adjudication of the issues that have been framed and bring to an end this 20-year dispute on its merits rather than a jurisdictionally defective defense.
Rosen, J., joins in the foregoing dissenting opinion.