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Updated: May 21, 2012

No. 104,916 IN THE COURT OF APPEALS OF THE STATE OF KANSAS RENE DUNN, SANDRA DUNN, PHILLIP DUNN, PATTIE PETERSON, and LINDA KNOBLAUCH, Appellants, v. DORIS E. DUNN, JEFF BREAULT, CAREY THOMAS HOOVER BREAULT, INC., and LINCOLN NATIONAL LIFE INSURANCE COMPANY, Appellees. SYLLABUS BY THE COURT

1. When the district court grants summary judgment, a reviewing appellate court considers the summary judgment motion de novo.

2. Statutes of limitations and statutes of repose express distinct concepts under the law. A statute of limitations is remedial and procedural, while a statute of repose is substantive. A statute of limitations creates a procedural barrier to bringing an action after a stated number of years. Once the time period in a statute of limitations has expired, the claim still exists but the plaintiff is barred from obtaining any relief on it. Because it is procedural in nature, the statute of limitation is waived by a defendant who fails to assert it. In contrast, a statute of repose entirely extinguishes the cause of action after the passage of time even if the cause of action has not yet accrued.

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3. A statute of limitations that predicates the accrual of a cause of action on its discoverability generally includes a statute of repose that prevents the period for bringing suit from being open-ended. A cause of action for breach of a written contract, which is controlled by the 5-year limitation period found in K.S.A. 60-511(1), accrues at the time of the breach, regardless of when the breach is discovered or is discoverable. For this reason, there is no need for a statute of repose and none exists with respect to breach of contract claims.

4. Certain tort actions controlled by the 2-year limitation period found in K.S.A. 60513(a) do not accrue until the fact of injury is discoverable. To avoid an open-ended time for bringing such actions, the legislature has created a statute of repose in K.S.A. 60513(b) that imposes a 10-year drop-dead date for commencing the action.

5. The doctrine of equitable estoppel can bar a defendant from invoking the applicable statute of limitations when sufficient facts are shown.

6. There is no definite rule governing estoppel which can be applied to every situation. Few, if any, relationships may not be effected to some degree by the principles of estoppel. But each case in which the principle of estoppel is invoked must be determined on its own individual facts.

7. The Kansas cases discussing the doctrine of equitable estoppel teach that fraud, bad faith, or the intent to deceive is not essential to create an estoppel. But using

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equitable estoppel to bar application of the statute of limitations requires an element of deception. A common factual thread running through the cases is conduct by a party that lulls the adverse party into a false sense of security, forestalling the filing of suit until the statute has run. On the other hand, equitable estoppel can arise from a party's silence when that party had a duty to speak. But in order to be estopped by silence, the defendant must have the intent to deceive, or at least a willingness that others would be deceived, and reason to believe that others would rely on such silence.

8. Equitable estoppel generally involves questions of fact and, when the facts are disputed or when necessary facts come from ambiguous documents, summary judgment is inappropriate and the factual dispute must await resolution at trial. But when the facts are undisputed, the district court may rule on the availability of the doctrine as a matter of law.

9. A fiduciary relationship may be created by contract or implied in law based upon the facts surrounding the transaction and the relationship between the parties. In determining whether a fiduciary relationship exists, one must determine whether a special confidence has been placed in one who, in equity and good conscience, is bound to act in good faith and with due regard to the interest of the one placing the confidence.

10. The continuous representation rule has been recognized in Kansas to toll the statute of limitations only in the context of legal malpractice claims.

Appeal from Sedgwick District Court, DOUGLAS R. ROTH, judge. Opinion filed May 18, 2012. Affirmed.

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Elizabeth A. Carson, of Bruce, Bruce & Lehman, L.L.C., of Wichita, for appellants.

Stephen M. Kerwick, of Foulston Siefkin LLP, of Wichita, for appellee Lincoln National Life Insurance Company.

Randall K. Rathbun, of Depew Gillen Rathbun & McInteer LC, of Wichita, for appellees Jeff Breault and Carey Thomas Hoover Breault, Inc.

Before STANDRIDGE, P.J., MCANANY and ATCHESON, JJ.

McANANY, J.: The suit that resulted in this appeal was prompted by a stepmother who her stepchildren claim cheated them out of their inheritance. The stepchildren (referred to as the children) obtained what may be a worthless judgment against their stepmother. This suit is against the insurance company and others who, according to the children, were complicit in the loss. The issue before us is whether the district court erred in granting summary judgment in favor of the defendants because the children's claims were barred by the applicable statutes of limitations or statutes of repose.

STANDARDS FOR SUMMARY JUDGMENT

The parties are well acquainted with the standards for granting summary judgment and our standard for reviewing the ruling on appeal, all of which can be found in K.S.A. 60-256; Supreme Court Rule 141 (2011 Kan Ct. R. Annot. 232); and in Osterhaus v. Toth, 291 Kan. 759, 768, 249 P.3d 888 (2011); Kuxhausen v. Tillman Partners, 291 Kan. 314, 318, 241 P.3d 75 (2010); and Mitchell v. City of Wichita, 270 Kan. 56, 59, 12 P.3d 402 (2000). We need not repeat them here, other than to note that our review of the parties' summary judgment motions is de novo.

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THE VARIOUS MOTIONS AND RESPONSES

We turn to the record on appeal for the parties' motions, statements of uncontroverted facts, and briefs which were before the district court. They consist of the following:

4/27/10 Lincoln National Life Insurance Company's (Lincoln National) motion for summary judgment and supporting memorandum which includes its statement of uncontroverted facts.

4/28/10 Jeff Breault's and his securities brokerage firm's (Carey Thomas Hoover Breault, Inc.) motion for summary judgment and supporting memorandum and statement of uncontroverted facts.

6/3/10 The children's response to Lincoln National's motion, their response to Lincoln National's statement of uncontroverted facts, and their own statement of additional uncontroverted facts. (There is no response in the record from Lincoln National to the children's statement of additional uncontroverted facts regarding Lincoln National.)

6/3/10 The children's response to Breault's and his firm's motion, their response to Breault's and his firm's statement of uncontroverted facts, and their own statement of additional uncontroverted facts regarding Breault and his firm.

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6/21/10 Breault's and his firm's reply brief to the children's brief in opposition to the motions for summary judgment and their reply to the children's statement of additional uncontroverted facts with respect to Breault.

BACKGROUND FACTS

Our first task is to identify the uncontroverted facts. The parties' statements of uncontroverted facts do not fully frame the factual background of the case. From their briefs, however, we have put together the following scenario over which we find no disagreement, though the parties have not formally spelled it out pursuant to Supreme Court Rule 141.

Lynn Dunn died on September 12, 1993. He was survived by his wife, Doris Dunn, and his five adult children from a prior marriage--Phillip Dunn, Rene Dunn, Sandra Dunn, Pattie Peterson, and Linda Knoblauch. These children are the plaintiffs in the present suit.

Lynn's will was submitted for probate administration. It directed Lynn's heirs to spend no more than $375,000 to buy an annuity that would provide Doris, then age 59, with income of approximately $2,500 per month to age 62, and $1,825 per month thereafter for the remainder of her life. Upon her death, the remainder would be divided among his children per stirpes.

Unfortunately, the amount available in Lynn's estate was insufficient to carry out this provision in his will. So securities broker Breault was contacted to obtain an investment vehicle that would come as close as possible to accomplishing Lynn's wishes. Breault proposed replacing the fixed annuity called for in the will with a variable annuity

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consisting of investments in stocks and bonds, the values of which, and the resulting value of the annuity, would fluctuate with the market. The family agreed, so Doris and the children entered into a family settlement agreement reflecting the change. The family settlement agreement provided for purchase of an annuity policy through Lincoln National. Doris and Phillip were to be the joint owners of the annuity, and Phillip and his four siblings were to be designated irrevocable beneficiaries. The family settlement agreement also provided that Doris and Phillip would determine the initial allocation of the annuity investments and withdrawals. "Thereafter, any changes in the allocation or amount of withdrawals shall be made only upon the joint signature of both of such coowners."

The district court approved the family settlement agreement on December 5, 1994. Doris and Phillip then purchased the variable annuity through Breault for $241,307.62. Doris began receiving $2,000 per month beginning January 5, 1995.

In June 2009 the children filed suit, claiming damages of $642,484.99. In their second-amended petition, they asserted the following claims:  Count I: breach of contract and conversion by Doris.  Count II: breach of agency duties by Breault and his firm.  Count III: vicarious liability of Lincoln National for Breault's conduct.  Count IV: breach of contract by Lincoln National.  Count V: conversion by Lincoln National.  Count VI: failure of Lincoln National to inform the joint account owner of account activity.

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The children moved for summary judgment against Doris and ultimately were awarded a judgment of $321,242.49 against her. That summary judgment proceeding is separate and apart from the issues presented in this appeal.

UNCONTROVERTED FACTS

This brings us to the summary judgment motions filed by Lincoln National and Breault and his firm, which we must consider de novo. Turning to the parties' statements of uncontroverted facts, we first note that the defendants are united in interest with respect to the issues raised in the defendants' summary judgment motions and at stake in this appeal: whether the children's claims are barred by the applicable statutes of limitation or statutes of repose. Accordingly, we will combine the uncontroverted facts they set forth in the various briefs to determine whether there remains any genuine issue of material fact and whether under the uncontroverted facts these defendants are entitled to judgment as a matter of law. (We have no response in the record from Lincoln National addressing the children's statement of additional uncontroverted facts asserted in their response to Lincoln National's summary judgment motion, so we consider those additional facts as uncontroverted.) We have paraphrased the uncontroverted facts and placed them in chronological order as follows, with the caveat that not all of them may be relevant to the issues before us:

1. Breault recommended that Doris and Phillip, her stepson, purchase the Lincoln National annuity. Breault met with representatives of the children only once: when the decision was made to buy the Lincoln National annuity.

2. Doris and Phillip applied for the annuity contract on December 14, 1994, and the annuity was issued December 16, 1994. Breault set up the annuity account on terms designed to effectuate the family settlement agreement. The Lincoln

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National annuity conformed to the order of the district court and to the family settlement agreement. (We accept this as uncontroverted for purposes of the motions, though the annuity seems to be at odds with the family settlement agreement to the extent that a contract rider appears to disenfranchise Phillip as a coowner.)

3. Breault was both the sales agent and the servicing agent on the account. He received a commission of $11,341.46 when the annuity was issued and thereafter received quarterly "trail commissions" of .25% of the account value beginning in the second year of the annuity.

4. Phillip was a joint owner of the annuity with Doris and was also an irrevocable beneficiary along with his four sisters. Phillip was age 28 at the time and had a high school education. He had no experience investing in securities or annuities and had no understanding of the agent's duties to him.

5. Under the terms of the annuity, none of the beneficiaries had any right to recover anything or take any action on the contract during Doris' life. (The children controvert this because they claim it is not a statement of fact but a legal conclusion.)

6. Breault assisted Doris in handling issues she had with the administration of payments during the life of the annuity. None of the children asked Breault for financial guidance after he initially sold the annuity. Breault received statements from Lincoln National during the life of the annuity.

7. The Lincoln National annuity is considered a security under the Securities Act of 1933. Under the rules of the National Association of Securities Dealers (NASD) a

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securities firm is required to provide notices of account activity on a quarterly basis. Breault was required to be a NASD member to sell this annuity.

8. Lincoln National was required to send a report to the owners of the annuity at least once each year. Lincoln National did not include Phillip's address in the relevant account information. Lincoln National never mailed any statements or correspondence to Phillip.

9. The family settlement agreement required the signature of both owners to change investment allocations. Breault changed investment allocations in the annuity but without obtaining the signature of Phillip for the changes.

10. Doris told Breault she wanted to move the policy.

11. On November 1, 1997, Doris wrote to Lincoln Life and said she was dissatisfied with Breault and Lincoln Life would be hearing from him in the near future. Doris fired Breault about that time or shortly thereafter.

12. Breault's firm received its last "trail commission" on December 31, 1997.

13. Doris cashed in the annuity on March 12, 1998. Lincoln National paid Doris the value of the account. Lincoln National did not obtain the consent of Phillip or of any of his siblings to terminate the annuity. Breault received notice that Doris had surrendered the annuity. He did not notify Phillip of this event.

14. A broker with Equiselect gave Doris help and advice in moving the money from the annuity account.

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15. Doris spent all the money obtained from cashing in the annuity.

16. Rene Dunn learned that Doris had terminated the annuity when she first inquired about the annuity in February or March 2009.

17. The children filed this suit on June 19, 2009. They claim Lincoln National breached the annuity contract and Lincoln National is vicariously liable for Breault's conduct. The children also claim that Breault and his firm had a broker/customer relationship with Doris and Phillip. They claim that Breault fraudulently concealed or acted with reckless disregard (1) in failing to provide Lincoln National with information about the probate estate and its terms and (2) in failing to notify the children when Doris cashed in the annuity. Breault strenuously denies these claims.

DISCUSSION

Ripeness

As a preliminary matter, the defendants assert that this case is not ripe because the irrevocable beneficiaries have no rights to the funds in the annuity until Doris' death. But in oral argument they apparently abandon this point and request that we decide the case on the merits of their defenses under the statutes of limitation and statutes of repose. We will do so.

Statutes of Limitation and Statutes of Repose

The children's claims arising out of the annuity contract are subject to the 5-year limitation period found in K.S.A. 60-511(1): "The following actions shall be brought

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within five (5) years: (1) An action upon any agreement, contract or promise in writing." They also bring claims that are limited by the 2-year limitation period found in K.S.A. 60-513(a), which provides:

"(a) The following actions shall be brought within two years: .... (2) An action for taking, detaining or injuring personal property, including actions for the specific recovery thereof. (3) An action for relief on the ground of fraud, but the cause of action shall not be deemed to have accrued until the fraud is discovered. (4) An action for injury to the rights of others, not arising on contract, and not herein enumerated."

The 2-year statute of limitations, K.S.A. 60-513, also contains a statute of repose:

"(b) Except as provided in subsections (c) and (d), the causes of action listed in subsection (a) shall not be deemed to have accrued until the act giving rise to the cause of action first causes substantial injury, or, if the fact of injury is not reasonably ascertainable until some time after the initial act, then the period of limitation shall not commence until the fact of injury becomes reasonably ascertainable to the injured party, but in no event shall an action be commenced more than 10 years beyond the time of the act giving rise to the cause of action." (Emphasis added).

The defendants assert that K.S.A. 60-513(b) precludes the children's claims. However, the children's contract claims are not controlled by K.S.A. 60-513(b). The limitation period for claims on a written contract is found in K.S.A. 60-511, which contains no statute of repose.

Statutes of limitations and statutes of repose express distinct concepts under the law. Harding v. K.C. Wall Products, Inc., 250 Kan. 655, 662, 831 P.2d 958 (1992); see

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Martin v. Naik, 43 Kan. App. 2d 591, 595-97, 228 P.3d 1092 (2010), rev. granted on other grounds 291 Kan. 911 (2011) (pending). A statute of limitations is remedial and procedural, while a statute of repose is substantive. Harding, 250 Kan. 655, Syl.

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