Court Opinion

ID: 4794730
Source: CourtListenerOpinion
Date Created: 2021-08-20 15:08:50.161192+00
Date Added: 2024-06-11T08:09:54.809782
License: Public Domain

NOT DESIGNATED FOR PUBLICATION

                                            No. 122,793

              IN THE COURT OF APPEALS OF THE STATE OF KANSAS

                                J.J. and D.J., as Next Friends for
                                          D.J., a Minor,
                                            Appellees,

                                                  v.

                                          D.N. and M.N.,
                                           Defendants,

                                                 and

              FARM BUREAU PROPERTY & CASUALTY INSURANCE COMPANY,
                                   Appellant.

                                  MEMORANDUM OPINION

       Appeal from Cherokee District Court; OLIVER KENT LYNCH, judge. Opinion filed August 20,
2021. Reversed, garnishment vacated, and case remanded with directions.

       Todd N. Thompson, of Thompson-Hall P.A., of Lawrence, for appellant.

       Julie J. Gibson, of Matteuzzi & Brooker, P.C., of Overland Park, for appellees.

Before POWELL, P.J., BRUNS, J., and STEVE LEBEN, Court of Appeals Judge Retired,
assigned.

       POWELL, J.: D.N. was convicted of aggravated indecent liberties with a child for
acts he committed against his great-granddaughter, D.J. (the child). As a result, the child's
parents, J.J. and D.J. (the parents), sued D.N. and his wife, M.N., on behalf of their
daughter. Farm Bureau Property & Casualty Insurance Company (Farm Bureau) insured

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D.N. and M.N.'s home, but it refused to defend them on the grounds that their
homeowners' insurance policy contained exclusions for "molestation or abuse" and
"intentional acts." M.N. and the parents eventually entered into a settlement agreement,
but M.N. died before the settlement agreement could be approved by the district court.
While an estate was opened for M.N., it was never substituted as a party nor was it served
with the lawsuit. At the settlement hearing, only the parents and their counsel were
present, yet the district court entered judgment against M.N.'s estate anyway and awarded
the child $1,000,000 in noneconomic damages.

       The parents then sought to collect on the underlying judgment by initiating
garnishment proceedings against Farm Bureau. Farm Bureau attacked the underlying
judgment and moved for summary judgment, arguing that the homeowners' policy
exclusions precluded coverage for M.N.'s negligence. The parents filed a cross-motion
for summary judgment, arguing that the Farm Bureau policy covered the damages
awarded in the underlying case and, therefore, the garnishment order against Farm
Bureau was proper.

       Ultimately, the district court granted the parents summary judgment on their
garnishment claim, holding Farm Bureau's policy covered the damages caused by M.N.'s
negligence. The district court ordered Farm Bureau to pay the $1 million judgment.

       Farm Bureau now appeals, raising numerous claims of error with both the
underlying judgment and the garnishment proceedings.

       We conclude that because a garnishee may collaterally challenge an underlying
void judgment and because M.N.'s estate was not substituted for M.N., the district court
lacked personal jurisdiction over M.N.'s estate, making the underlying judgment void.
Thus, we vacate the district court's garnishment order and its $1 million judgment against

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M.N.'s estate and remand the case to the district court for further proceedings consistent
with this opinion.

                        FACTUAL AND PROCEDURAL BACKGROUND

The Underlying Judgment

       In November 2015, the parents brought a lawsuit on behalf of their daughter
against D.N. and M.N. In that lawsuit, the parents brought causes of action against D.N.
and M.N. individually and jointly. Against D.N., they brought two claims: (1) sexual
assault and battery and (2) gross negligence. Against M.N., they brought a claim of
general negligence. Against D.N. and M.N. together, the parents brought a claim of
breach of fiduciary duty. The parents set forth in their petition that D.N. sexually
assaulted and lewdly fondled D.J., and the district court found that D.N. sexually
molested the child at least once when she was visiting D.N. and M.N. in late December
2013 through early January 2014. At the time, the child was six years old.

       As a result of the incident, D.N. was convicted of aggravated indecent liberties
with a child.

       The parents alleged that M.N. made promises and assurances to them that their
child would be well cared for at her and D.N.'s home. The parents alleged that M.N. had
multiple warnings of D.N.'s inappropriate behavior before he assaulted their child but that
M.N. "turned a blind eye to said signs, choosing instead to enable her husband's sexually
inappropriate perversities, by permitting him to be alone with minor children, including
[their child], in their home and in the shed on the property." They alleged M.N. knew
D.N. had sexually assaulted and molested multiple minor children while in his care and,
nevertheless, took no steps to protect her great-granddaughter or warn the child's parents.

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       Farm Bureau insured D.N. and M.N.'s home. On December 17, 2015, Farm
Bureau disclaimed any coverage for the suit and refused to supply D.N. and M.N. with a
defense under their homeowner's insurance policy.

       Eventually, M.N. and the parents entered into a settlement agreement in which the
parents agreed to limit collection of any judgment they may obtain against M.N. to her
Farm Bureau policy. Before a final judgment could be entered, M.N. died on August 7,
2016. M.N.'s estate was opened on February 20, 2017.

       A settlement hearing was held on March 7, 2017. The hearing was short. D.N. did
not appear, and neither did his attorney nor an attorney representing M.N.'s estate. No
witnesses testified. The presentation of evidence was done via the admission of exhibits
consisting of police reports, affidavits, medical provider reports, and other documents,
which the district court took under consideration. None of the documents the district
court considered are included in the record on appeal. After considering the evidence, the
district court entered a judgment that totaled $1,000,000 in favor of the child against
M.N.'s estate. The judgment was comprised of $500,000 of past noneconomic damages
and $500,000 of future noneconomic damages.

       In ordering the judgment, the district court found that M.N. did not take any steps
to protect the child from D.N. Specifically, the district court found: "[M.N.] knew or had
reason to know that her husband, [D.N.], had a history of pedophilia and had molested
children in the past," that M.N. left the child alone with D.N. "despite knowing of his
history of sexual behavior towards children," and that M.N. "failed to adequately
supervise [the child] while the child was in her care." The district court concluded M.N.
owed the parents and the child a duty of care while the child was staying at M.N.'s
residence and that this duty of care was breached by:

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               "a.      Negligently allowing [the child] to be left alone with [D.N.], despite her
       knowing that [D.N.] had a history of inappropriate sexual behavior towards children;

               "b.      Negligently assuring [the child's] parents that she would be safe in her
       and [D.N.]'s care;

               "c.      Negligently failing to warn [the child's] parents that [D.N.] had a history
       of pedophilia;

               "d.      Negligently supervising [the child] while she was in her care."

       The district court further found the child had suffered substantial and permanent
harm as a direct and proximate result of M.N.'s negligence, noting that the child received
treatment from specialists and that treatment was likely going to continue in the future
"as her behaviors have changed in ways that make clear that this incident has been
branded on her emotionally."

The Garnishment Action

       On August 31, 2017, the parents requested the district court to issue an order of
garnishment against Farm Bureau for the $1,000,000 judgment entered against M.N.'s
estate. For clarity, the parents were classified as the creditors, M.N.'s estate was classified
as the judgment debtor, and Farm Bureau was classified as the garnishee holding assets
of the judgment debtor that were subject to garnishment.

       Farm Bureau answered this request by asserting that "[a]ny hypothetical liability
for mere negligence could not exist in the present case, but for the intentional acts of
sexual abuse by [D.N.]" and that the [great-grandparents'] policy excluded intentional
acts of sexual abuse. Farm Bureau also asserted that the parents' "allegations do not meet
the definition of occurrence because the definition excludes events or series of events

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which were expected or intended from the standpoint of an insured." Further, it argued
"[t]he policy Farm Bureau issued to the [great-grandparents] provides that there is no
coverage for any loss, 'damages,' or 'medical expenses' 'arising out of' any act which is
expected or intended by any insured to cause injury to any person" or "'arising out of' any
sexual abuse or molestation, harassment, corporal punishment, or physical or mental
abuse." The parents did not file a reply to Farm Bureau's answer.

       In September 2018, Farm Bureau filed a motion for summary judgment, and the
district court held a hearing on that motion in November 2018. A transcript of that
hearing is not in the record on appeal. The parents filed a response in opposition to Farm
Bureau's summary judgment motion and a cross-motion for summary judgment.
Summarized, the parents argued the event qualified as an "occurrence" under the policy
because "accident" was not defined; the policy's intentional acts and molestation
exclusions were ambiguous because of the policy's severability provision; and the
awarded damages in the underlying case were proper because no defendant requested a
reduction for noneconomic damages, nor did a defendant raise the issue of the statement
of damages being below the amount of the judgment.

       After nine months, Farm Bureau's motion for summary judgment was denied in
August 2019. In its order, the district court simply "adopt[ed] the arguments and
authorities set out in [the parents'] Memorandum in Opposition to the Motion." However,
the district court did not issue a ruling on the parents' cross-motion for summary
judgment.

       Another six months passed before the parents filed a motion requesting a ruling on
their cross-motion for summary judgment. The next day, the district court adopted the
parents' proposed order, granting their motion for summary judgment in the garnishment
action. The district court held that the insurance policy provided coverage for M.N.'s
negligent acts because the insurance policy included a severability clause that mandated

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the exclusions be applied to each insured separately. Because the underlying judgment as
to the conduct of M.N. arose from negligence, not from conduct for which an exclusion
in the Farm Bureau policy would apply, her acts were covered by the policy. The district
court concluded its order: "The Court hereby finds that Defendant Farm Bureau owes
insurance coverages as to the Judgment for Plaintiffs that was entered on March 7, 2017.
Consequently, the Court enters Judgment for Plaintiffs and against Defendant Farm
Bureau Property & Casualty Insurance Company." The result of the grant of summary
judgment in favor of the parents meant that the previously ordered garnishment order
against Farm Bureau took effect.

       Farm Bureau appeals the denial of its motion for summary judgment and the
district court's garnishment order.

                                        ANALYSIS

       Farm Bureau raises eight issues on appeal. Its allegations of error include
assertions that the district court conducted the garnishment proceedings improperly,
making the garnishment order invalid; the district court misconstrued the insurance
policy by holding that it covered M.N.'s negligence; and the district court wrongly
enforced an invalid and void underlying judgment. We choose to focus on one issue
because it is dispositive, namely, that the underlying judgment is void making it
unenforceable, thus making the garnishment order invalid.

Standard of Review

       The garnishment order was issued due to the summary judgment granted to the
parents and against Farm Bureau, suggesting the standard of review for appeals of the
district court's summary judgment is in order. But a bifurcated standard of review is
employed when reviewing a garnishment order.

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       "Under a bifurcated standard,

       '[t]he function of an appellate court is to determine whether the trial court's findings of
       fact are supported by substantial competent evidence and whether the findings are
       sufficient to support the trial court's conclusions of law. Substantial evidence is such legal
       and relevant evidence as a reasonable person might accept as sufficient to support a
       conclusion. An appellate court's review of conclusions of law is unlimited. The appellate
       court does not weigh conflicting evidence, pass on credibility of witnesses, or
       redetermine questions of fact.' [Citations omitted.]" Geer v. Eby, 309 Kan. 182, 190-91,
       432 P.3d 1001 (2019).

       But where the facts have been stipulated to or are undisputed, like appeals of
summary judgments, our review is de novo. 309 Kan. at 191.

       Kansas law allows a garnishment order to be issued to aid in the execution of a
judgment. K.S.A. 2020 Supp. 60-731(a). Intangible property, funds in a financial
institution, and earnings may be garnished. See K.S.A. 60-732 (intangible property other
than earnings); K.S.A. 2020 Supp. 60-733 (funds in a financial institution); K.S.A. 2020
Supp. 60-734 (earnings). "Garnishment is a procedure whereby the wages, money or
intangible property of a person can be seized or attached pursuant to an order of
garnishment issued by the court under the conditions set forth in the order." K.S.A. 2020
Supp. 60-729(a). Because the creditor stands in the shoes of the debtor in a garnishment
proceeding, the creditor-garnishor may enforce rights of the judgment debtor, including
claims a judgment debtor may have against an insurance company. See Geer, 309 Kan. at
191. "When a garnishee is an insurer of the judgment debtor, the garnishee-insurer has
the burden to prove any affirmative policy defense. [Citation omitted.]" 309 Kan. at 191.

       Here, Farm Bureau attacks the underlying judgment, arguing there was no
substitution of parties after M.N.'s death as required by K.S.A. 2020 Supp. 60-225(a). As
a result, it argues the underlying case should have been dismissed, thus rendering the

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garnishment order invalid. The parents reply that Farm Bureau failed to raise this issue
below and that M.N.'s estate voluntarily submitted to the jurisdiction of the district court.

       The parents have a point. The general rule is that issues not raised below may not
be raised for the first time on appeal. Gannon v. State, 303 Kan. 682, 733, 368 P.3d 1024
(2016). A review of the record shows that nowhere did Farm Bureau's garnishment
answer raise the allegation of a void judgment on the grounds that M.N.'s estate was not
substituted as a party to the underlying action. It merely alleged that M.N.'s estate had no
obligation to pay any portion of the judgment. Moreover, while Farm Bureau's motion for
summary judgment did allege that the underlying judgment was defective, it claimed the
judgment was void on the grounds that the damages were improperly entered.

       But

       "'there are several exceptions to the general rule that a new legal theory may not be
       asserted for the first time on appeal, including: (1) the newly asserted theory involves
       only a question of law arising on proved or admitted facts and is finally determinative of
       the case [and] (2) consideration of the theory is necessary to serve the ends of justice or
       to prevent denial of fundamental rights.'" In re Estate of Broderick, 286 Kan. 1071, 1082,
       191 P.3d 284 (2008).

Both such exceptions appear to be applicable here. But our Supreme Court has said that a
party failing to raise an issue below must invoke one of the exceptions to the general rule
barring consideration of an issue for the first time on appeal. State v. Williams, 298 Kan.
1075, 1086, 319 P.3d 528 (2014); Supreme Court Rule 6.02(a)(5) (2021 Kan. S. Ct. R.
35). Farm Bureau fails to invoke any exception justifying our consideration of the issue
for the first time on appeal.

       What saves Farm Bureau is the well-established rule that "[a] void judgment is a
nullity and may be vacated at any time." Bazine State Bank v. Pawnee Production

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Service, Inc., 245 Kan. 490, 496, 781 P.2d 1077 (1989). The gravamen of Farm Bureau's
argument is that M.N.'s estate was never substituted for M.N. or served in the underlying
action, meaning the district court never had personal jurisdiction over the estate to impose
a judgment against it. See In re Marriage of Salas, 28 Kan. App. 2d 553, 557, 19 P.3d
184 (2001) (divorce decree properly challenged nearly 9 1/2 years later due to lack of
personal jurisdiction). Because we are loathe to uphold a $1 million garnishment order
based upon a void judgment, we will consider the merits of Farm Bureau's argument. See
State v. Lawson, No. 114,343, 2016 WL 2610151, at *2 (Kan. App. 2016) (unpublished
opinion) (appellant's failure to comply with Rule 6.02[a][5] overlooked because merits
easily addressed).

       A void judgment is subject to collateral attack by a garnishee. "A judgment is void
when the district court lacked personal or subject matter jurisdiction or acted in a manner
inconsistent with due process." Crist v. Hunan Palace, 277 Kan. 706, 718, 89 P.3d 573
(2004). Because a judgment is either valid or void as a matter of law, our review of such
a question is unlimited. In re Marriage of Gerleman, 56 Kan. App. 2d 578, 582, 435 P.3d
552 (2018).

       Substitution of a party is purely a matter of statutory law and strict compliance
with its provisions is required. Gatewood v. Bosch, 2 Kan. App. 2d 474, 476, 581 P.2d
1198 (1978). K.S.A. 2020 Supp. 60-225(a)(1) provides:

               "If a party dies and the claim is not extinguished, the court must on motion order
       substitution of the proper party. A motion for substitution may be made by any party or
       by the decedent's successor or representative. If the motion is not made within a
       reasonable time after service of a statement noting the death, the action by or against the
       decedent must be dismissed."

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In the absence of a voluntary appearance, any nonparty, including the decedent's
successor or representative, must be personally served. See K.S.A. 2020 Supp. 60-
225(a)(3); Gatewood, 2 Kan. App. 2d at 476.

       Farm Bureau is correct that no substitution of M.N.'s estate was made for M.N.
Nor was M.N.'s estate ever served with the underlying lawsuit. The parents try to get
around this deficiency by claiming that M.N.'s estate voluntarily submitted to the
jurisdiction of the district court. However, we see no evidence in the record supporting
that proposition. As a result, we have no choice but to conclude the district court lacked
personal jurisdiction over M.N.'s estate when it entered its judgment, making the
underlying judgment supporting the garnishment order void. Because the underlying
judgment is void, the district court erred in issuing its garnishment order against Farm
Bureau. Thus, we reverse the judgment against M.N.'s estate, vacate the garnishment
order, and remand the case to the district court for further proceedings consistent with
this opinion.

       Reversed, garnishment vacated, and case remanded with directions.

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