Bmo Harris Bank, N.A. v. Dunn

PER CURIAM:

Appeal from Johnson District Court; Gerald T. Elliott, Judge.
James A. Kessinger and Luke A. Demaree, of Kessinger Law Firm, P.C., of Kansas City, Missouri, for appellants. Scott M. Brinkman, of Baker Sterchi Cowden & Rice LLC, of Kansas City, Missouri, and William H. Meyer, of Martin, Leigh, Laws & Fritzlen, PC, of Kansas City, Missouri, for appellee.
Before MALONE, C.J., PIERRON, J., and JAMES L. BURGESS, District Judge Retired, assigned.

MEMORANDUM OPINION

PER CURIAM:

Edwin H. Hawes, III, and William Dunn, III, appeal the district court's judgment against them in the amount of $350,000, plus interest, in favor of BMO Harris Bank, f/k/a M & I Marshall & Isley Bank (Bank). The judgment was based on a promissory note signed by Hawes and Dunn in favor of Bank. Hawes and Dunn claim: (1) The district court erred in finding that Bank was entitled to enforce their obligation to pay under the promissory note; (2) the district court erred in finding that they were not accommodation parties to the promissory note; (3) the district court erred in denying their invasion of privacy claims; and (4) the district court erred in assessing damages. For the reasons set forth herein, we affirm the district court's judgment.

Factual and Procedural Background

Hawes is a real estate developer. He and a business partner, Lawrence B. McLellan, were involved in several limited liability companies that were formed to acquire and sell or develop real estate in Oklahoma: Expert South Tulsa, LLC, Expert Owasso, LLC, and Expert SWC Rockwell Memorial, LLC (Expert companies). Hawes was a managing member and had various ownership interests in the three Expert companies. Dunn was a passive investor in the three Expert companies and also provided construction consulting services to Expert South Tulsa and Expert SWC Rockwell Memorial. Bank had a lending relationship with the three Expert companies.

In January 2007, Expert South Tulsa made a promissory note in the principal amount of $8,554,500, payable to Bank (Expert South Tulsa Note). The proceeds of the Expert South Tulsa Note were used to purchase 35 acres of commercial real estate in Tulsa, Oklahoma (South Tulsa Property). The Expert South Tulsa Note was secured by a mortgage on the South Tulsa Property.

Around the same time, Expert Owasso was attempting to obtain financing to close on a 2.59–acre parcel of land (Owasso Property) that was intended to be the cornerstone of a larger 30–acre commercial real estate development in Owasso, Oklahoma. The purchase price of the Owasso Property was approximately $1,350,000. Under Bank's lending policies, a loan could not exceed 75 percent of the purchase price or appraised value of the land. Thus, Bank would only extend a loan to Expert Owasso for $995,000. Expert Owasso made a note in that amount payable to Bank (Expert Owasso Note), secured by a mortgage on the Owasso Property.

Bank also agreed to extend a loan for the remaining $355,000, needed to purchase the Owasso Property if Hawes, McLellan, and Dunn would individually sign a promissory note for that amount. John Willis, the loan officer at Bank who was working with the Expert companies at that time, characterized the $355,000 loan as a loan to individual members of Expert Owasso to fund the equity portion of the purchase of the Owasso Property. Since there was also excess equity in the South Tulsa Property, the $355,000 note would be secured by a mortgage on the South Tulsa Property.

On September 6, 2007, Hawes. McLellan, and Dunn made a promissory note in the principal amount of $355,000 payable to Bank (Individual Note). The proceeds of the Individual Note were pooled with the proceeds of the Expert Owasso Note and wired directly to the title company for the purchase of the Owasso Property. Also on September 6, 2007, Bank and Expert South Tulsa executed a mortgage (Modified Mortgage) which increased the principal secured by the South Tulsa Property from $8,554,500, to $8,909,500, a difference of $355,000. The Modified Mortgage explicitly stated that it secured both the Expert South Tulsa Note and the Individual Note.

On October 9, 2007, Expert SWC Rockwell Memorial and Expert Owasso jointly made a promissory note in the principal amount of $3,997,500 payable to Bank (Expert SWC Rockwell Memorial Note). The proceeds of the Expert SWC Rockwell Memorial Note were used to purchase 40 acres of real estate in Oklahoma City, Oklahoma (SWC Rockwell Memorial Property). The Expert SWC Rockwell Memorial Note was secured by two mortgages. The first mortgage, executed by Expert SWC Rockwell Memorial, was on the SWC Rockwell Memorial Property. The second mortgage, executed by Expert Owasso, was on the Owasso Property. Shortly after these transactions, Willis resigned from his position as a loan officer at Bank.

The original maturity date of the Individual Note was January 25, 2008. According to Hawes, it was anticipated that the Individual Note would be repaid in a short time frame because the loan would be rolled into a development loan for the larger 30–acre project that Expert Owasso intended to develop. Otherwise, the 2.59–acre Owasso Property would be sold to one of several other parties who had expressed serious interest in the property. Because those plans had not yet materialized by the original maturity date of the Individual Note, Hawes, McLellan, and Dunn made a new promissory note renewing their obligations under the Individual Note.

In March 2008, a different version of the Modified Mortgage was filed with the registrar of deeds (Impugned Modified Mortgage). The Impugned Modified Mortgage eliminated some of the language in the Modified Mortgage explicitly stating that the mortgage secured both the Expert South Tulsa Note and the Individual Note. The signatures on the Impugned Modified Mortgage were different than the signatures on the Modified Mortgage. The Modified Mortgage was signed on behalf of Bank by Willis, whose signature was notarized on September 6, 2007, and was signed on behalf of Expert South Tulsa by Hawes, whose signature also was notarized on September 6, 2007. But the Impugned Modified Mortgage was signed on behalf of Bank by Gray Lewis, another loan officer at Bank. Lewis' signature was notarized on March 24, 2008. Hawes' signature also was contained on the Impugned Modified Mortgage, and the signature was allegedly notarized on September 6, 2007. In later testimony, Hawes strongly denied authorizing or signing the Impugned Modified Mortgage. Hawes believed that the Impugned Modified Mortgage had been fraudulently created by Lewis, who had impermissibly altered the terms of the Modified Mortgage and had copied and pasted Hawes' signature from the Modified Mortgage onto the Impugned Modified Mortgage.

In April 2008, Expert South Tulsa and Bank entered into a loan modification agreement, whereunder the principal owed under the Expert South Tulsa Note was increased to $12,329,500 as part of a development loan. Hawes believed that the Individual Note was supposed to be rolled into this larger development loan. When Hawes learned that the Individual Note had not been paid off by the development loan, he approached Lewis. According to Hawes, Lewis told him that the Individual Note was unsecured. Hawes stated that he never received any documents or other notification that the collateral securing the Individual Note had been released.

Both Hawes and Dunn testified that they would not have signed the Individual Note if they had known that Bank could release the collateral without their authorization and without any notice. Nevertheless, Expert Development, LLC, the fmancial arm of the Expert companies, began making interest payments on the Individual Note. Hawes, McLellan, and Dunn made further renewals of the Individual Note in July 2008 and January 2009.

During the latter part of 2008, development began on the South Tulsa Property. Two pad sites were sold for a total of approximately $2.5 million, and the proceeds of those sales were applied by Bank to the amount due under the Expert South Tulsa Note. As of January 2009, payments were current on the Expert Owasso Note and the Expert SWC Rockwell Memorial Note. The Expert South Tulsa Note was in default, but the parties were negotiating a renewal of that note.

During the first quarter of 2009, Bank offered for sale a portfolio of various loans and Bank-owned real estate. Bank contracted with broker Cushman & Wakefield to market and perform the sale, which was advertised as a nonperforming loan sale. Cushman & Wakefield prepared an executive summary based on information provided by Bank. The executive summary specifically listed the Expert South Tulsa Note, the Expert SWC Rockwell Memorial Note, and the Expert Owasso Note as for sale. The Individual Note was not specifically listed as for sale, and Bank denied that the Individual Note was offered for sale. In addition to the items listed for sale, the executive summary contained pertinent financial information. It listed the net worths of Hawes and McLellan. It also incorrectly listed Dunn as a personal guarantor of the Expert SWC Rockwell Memorial Note.

In February 2009, a representative of OKL 18, LLC, called Hawes and informed him that Bank was offering a loan sale that included items associated with the Expert companies. McLellan found the loan sale executive summary on the Internet, which included information about Hawes' and McLellan's net worths and erroneously indicated that Dunn had personally guaranteed the Expert SWC Rockwell Memorial Note. Dunn also was notified about the prospective loan sale. Dunn contacted Bank about the inaccurate information related to his guarantee of the Expert SWC Rockwell Memorial Note, but Bank told Dunn it could not do anything about the inaccurate information. In later testimony, Dunn was unable to give any specific examples of damage to his reputation or lost business opportunities as a result of the inaccurate information.

On March 20, 2009, OKL 18 entered into a loan sale with Bank to purchase the Expert South Tulsa Note, Expert SWC Rockwell Memorial Note, and Expert Owasso Note for $4,514,273.49. In connection with the loan agreement, Bank executed general assignments to the three Expert Notes and the associated mortgages, including the Modified Mortgage. The amount secured by the Modified Mortgage—$8,909,500, which included the $355,000, owed under the Individual Note—was not reduced prior to the assignment of the Modified Mortgage. The Individual Note was not listed in the loan sale agreement, and Bank denied that it sold or assigned the Individual Note. Bank retained possession of the Individual Note and renewals.

In April 2009, after the loan sale, Lewis approached Hawes and informed him that the Individual Note was about to mature and needed to be renewed again. Hawes thought that the Individual Note had been sold to OKL 18, but Lewis told him that Bank still owned the Individual Note and that the Individual Note was unsecured. Hawes sought further information from Bank regarding the details of the loan sale and which notes were sold. Hawes also wanted information regarding whether and when the Individual Note had become unsecured by the Modified Mortgage, which was transferred to OKL 18 in the loan sale. Hawes contended that Bank never provided him the requested information. Nevertheless, Hawes stated that he, McLellan, and Dunn signed further renewals in April, July, and October 2009 based on Bank's representations that the Individual Note was unsecured and that Bank would look to them individually for recourse. Lewis passed away in May 2009 and another loan officer at Bank was assigned to communicate with Hawes. During this time period, a principal payment of $5,000 and interest payments were made on the Individual Note.

Around December 2009, Hawes and his family members were able to repurchase the Expert South Tulsa and Expert Owasso Notes from OKL 18, and the Expert SWC Rockwell Memorial Note was satisfied after the SWC Rockwell Memorial Property was sold. Based on the documentation Hawes received from OKL 18, including the Modified Mortgage that had been assigned from Bank to OKL 18, Hawes believed that he also was the owner of the Individual Note.

The Individual Note under the last renewal matured on January 25, 2010. Hawes, McLellan, and Dunn made no further payment to Bank under the Individual Note, so Bank sent notices of default to the three individuals.

On April 27, 2010, Bank filed suit against Hawes, McLellan, and Dunn for payment under the Individual Note as subsequently renewed. Hawes, McLellan, and Dunn countersued for invasion of privacy based on Bank's dissemination of their personal and financial information in connection with the loan sale. Dunn also countersued for invasion of privacy based on the dissemination of inaccurate information that Dunn had personally guaranteed the Expert SWC Rockwell Memorial Note.

A bench trial was held on October 17–19, 2011. At the outset, the district court noted that proceedings against McLellan were stayed because he had filed for bankruptcy protection. Thus, the case proceeded against only Hawes and Dunn.

Hawes and Dunn advanced several theories as to why Bank could not enforce the Individual Note against them. They argued that under K.S.A. 58–2323, the assignment of any mortgage carries with it the debt that the mortgage secures. Although there was no evidence that Bank explicitly transferred the Individual Note or renewals, it was undisputed that Bank transferred the Modified Mortgage to OKL 18. Hawes and Dunn argued that the Modified Mortgage carried with it the debt that it secured, including the $355,000 owed under the Individual Note. Therefore, they argued that Bank no longer had any beneficial interest in the debt and could not collect on the debt by enforcing the Individual Note. Hawes and Dunn also argued that the circumstances showed that they signed the Individual Note only as accommodation parties. Because Bank impaired the collateral securing their obligation to pay under the Individual Note, Hawes and Dunn argued that their liability as accommodation parties was discharged.

Bank contended that it never transferred the Individual Note or renewals and that it was entitled to enforce the Individual Note against Hawes and Dunn. It argued that the debt owed under the Individual Note was not transferred by operation of law under K.S.A. 58–2323 when Bank assigned the Modified Mortgage to OKL 18. Bank argued that Hawes and Dunn had waived any protection under that statute by clear language in the Individual Note and renewals allowing Bank to waive or release any security with or without substitution of new collateral and with or without any notice. Furthermore, Bank argued that K.S.A. 58–2323 did not apply to situations where a single mortgage secures more than one debt. Finally, even if the debt owed under the Individual Note was transferred when Bank assigned the Modified Mortgage, Bank argued that it was still the holder of the Individual Note and renewals and was entitled to enforce the Individual Note under K.S.A. 84–3–301. Bank also argued that the Individual Note and renewals clearly indicated that Hawes, McLellan, and Dunn were the primary and only obligors and that they did not sign as accommodation parties. Thus, Bank argued that any defense of discharge of an accommodation party was inapplicable.

After hearing evidence and considering posttrial briefing, the district court ruled in favor of Bank. The district court found that Bank had assigned the Modified Mortgage to OKL 18 as part of the loan sale. In the assignment, Bank warranted that no debts secured by the Modified Mortgage had been reduced, released, or otherwise severed from the mortgage. Bank also warranted that the Modified Mortgage did not secure any other debts held by Bank. There was no evidence that Bank reduced the debt secured by the Modified Mortgage, and no evidence that the Modified Mortgage had been released or partially released as security for the Individual Note before the Modified Mortgage was assigned to OKL 18. Thus, under K.S.A. 58–2323, the assignment of the Modified Mortgage carried with it the debt thereby secured, including the debt owed under the Individual Note. But even though Bank no longer had a beneficial interest in the debt underlying the Individual Note, Bank was the holder of the Individual Note and could enforce it under K.S.A. 84–3–301. The district court found that the actual instrument the Bank was suing to enforce was the Individual Note as last renewed in October 2009, the original of which Bank had produced at trial. Thus, it was irrelevant that Bank had been unable to produce the original of the Individual Note as first executed in September 2007.

The district court rejected the argument that Hawes and Dunn had signed the Individual Note only as accommodation parties and were therefore discharged from liability under K.S.A. 84–3–605. It found that under K.S.A. 84–3–419, the alleged accommodation party and the allegedly accommodated party must be parties to the same instrument. Because it was clear under the Individual Note and renewals that Hawes, McLellan, and Dunn were the primary and only obligors and that Expert Owasso (the allegedly accommodated party) was not a party to the Individual Note or renewals, there was no basis to consider parol evidence showing otherwise. Furthermore, it found that Hawes and Dunn could not be accommodation parties under K.S.A. 84–3–419 because proceeds received under the Individual Note were used to invest in a business entity in which they had ownership and investment interests and, therefore, they were direct beneficiaries of the proceeds received under the Individual Note.

Finally, the district court denied Hawes' and Dunn's counterclaims for invasion of privacy. It found that Bank did not prepare the executive summary and was not involved in the distribution of the executive summary. Furthermore, no evidence was presented regarding to whom the executive summary was disseminated or what protections were in place to control dissemination. With respect to Dunn, no evidence was presented that his personal financial information was disseminated to anyone. And even though the executive summary incorrectly stated that Dunn was a guarantor of the Expert SWC Rockwell Note, no evidence was presented that Dunn had lost any business opportunities or suffered any damage to his reputation as a result of the false statement. The district court found that because the only statements that allegedly invaded Hawes' and Dunn's privacy involved their business interests rather than their private affairs, they had no viable claim for invasion of privacy. Furthermore, any statements about Hawes' and Dunn's finances were qualifiedly privileged. Finally, Hawes and Dunn failed to show that their private information had been disseminated or that they suffered any damage as a result. The district court assessed damages in favor of Bank in the principal amount of $350,000, plus interest. Hawes and Dunn timely appealed the district court's judgment.

Was Bank Entitled to Enforce the Individual Note?

Hawes and Dunn argue that the district court erred in finding that Bank was entitled to enforce their obligation to pay under the Individual Note. They do not dispute on appeal that Bank was generally entitled to enforce the Individual Note under K.S.A. 84–3–301. But they argue that even if a person is generally entitled to enforce an instrument, K.S.A. 84–3–308(b) states that the person's entitlement to payment under the instrument is still subject to defenses. And Hawes and Dunn contend that they proved a defense cutting off Bank's entitlement to payment under the Individual Note because under K.S.A. 58–2323 Bank transferred its beneficial interest in the underlying debt to OKL 18 when it assigned the Modified Mortgage as part of the loan sale. Hawes and Dunn also briefly argue that even if Bank was entitled to enforce their obligation to pay under the Individual Note, the Individual Note was a lost instrument under K.S.A.2012 Supp. 84–3–309 and the district court's judgment failed to adequately protect them from further liability.

Bank argues that the district court properly found that Bank was entitled to enforce Hawes' and Dunn's obligation to pay under the Individual Note. It contests the district court's finding that under K.S.A. 58–2323 Bank had transferred its beneficial interest in the underlying debt when it assigned the Modified Mortgage to OKL. But it argues that even if it no longer had a beneficial interest in the underlying debt, that does not constitute a defense cutting off its entitlement to enforce Hawes' and Dunn's obligation to pay. Bank also contends that the Individual Note was not a lost instrument under K.S.A.2012 Supp. 84–3–309 and thus the district court had no obligation to adequately protect Hawes and Dunn from further liability. But in any case, Bank argues that Hawes and Dunn waived their adequate protection argument because they failed to object below to the district court's allegedly inadequate findings and conclusions.

Whether the district court correctly determined that Bank could enforce Hawes' and Dunn's obligation to pay under the Individual Note involves a mixed question of fact and law. When reviewing a mixed question of fact and law, an appellate court reviews the district court's factual findings for substantial competent evidence and reviews de novo the district court's legal conclusions. Landmark Nat'l Bank v. Kesler, 289 Kan. 528, 533, 216 P.3d 158 (2009). To the extent that resolution of this issue requires the interpretation of several Kansas statutes, an appellate court's review is unlimited. Unruh v. Purina Mills, 289 Kan. 1185, 1193, 221 P.3d 1130 (2009). Finally, to the extent that resolution of this issue requires the interpretation and legal effect of written instruments, an appellate court's review is also unlimited. Osterhaus v. Toth, 291 Kan. 759, 768, 249 P.3d 888 (2011).

The parties do not dispute on appeal that the Individual Note is a negotiable instrument subject to Article 3 of the Kansas Uniform Commercial Code (UCC), K.S.A. 84–3–101 et seq.K.S.A. 84–3–301 governs who is entitled to enforce a negotiable instrument. It states:

“ ‘Person entitled to enforce’ an instrument means (a) the holder of the instrument, (b) a nonholder in possession of the instrument who has the rights of a holder, or (c) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to K.S.A. 84–3–309 or 84–3–418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.”

But as Hawes and Dunn argue, even if a person is generally entitled enforce an instrument, that person's entitlement to payment under the instrument is still subject to defenses. K.S.A. 84–3–308(b) states in relevant part:

“(b) If the validity of signatures is admitted or proved ..., a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument ..., unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights of a holder in due course which are not subject to the defense or claim.” (Emphasis added.)

K.S.A. 84–3–305 sets forth the defenses that may cut off a person's entitlement to payment under an instrument. It states in relevant part:

“(a) Except as stated in subsection (b), the right to enforce the obligation of a party to pay an instrument is subject to the following:

....

(2) a defense of the obligor stated in another section of this article or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract ....

....

“(b) The right of a holder in due course to enforce the obligation of a party to pay the instrument ... is not subject to defenses of the obligor stated in subsection (a)(2)....” (Emphasis added.)

Hawes and Dunn do not dispute the district court's finding that Bank was generally entitled to enforce the Individual Note under K.S .A. 84–3–301. Their primary argument is that, by operation of K.S.A. 58–2323, Bank transferred its beneficial interest in the underlying debt to OKL 18 when it assigned the Modified Mortgage as part of the loan sale and the district court erred in refusing to apply that defense to cut off Bank's entitlement to payment under the instrument.

The law of negotiable instruments under Article 3 of the UCC differs from common law contract principles in that K.S.A. 84–3–301 specifically confers standing to enforce an instrument regardless of whether the plaintiff is the owner of the instrument or has a beneficial interest in the underlying debt:

“No distinction is drawn by the [UCC] in terms of whether the ‘holder’ is the holder for his or her own use and benefit or whether the holder holds as a fiduciary for another. Thus, the fact that a holder is not the owner who is entitled to keep the proceeds for his or her own personal use does not affect the holder's right as holder to sue on the instrument. A holder may sue in his or her own name alone although holding the paper as a fiduciary for another, and there is no obligation to join such other party as a co-plaintiff. This is true even though the holder does not have any express authorization from the beneficial owner of the paper to bring suit....

....

“The fiduciary holder may be a formal fiduciary, as a trustee, or merely a person under a fiduciary duty, as an agent. The fact that the holder is merely an agent for collection for the benefit of a third person does not constitute a defense when suit is brought on the paper.” (Emphasis added.) 5A Anderson, Uniform Commercial Code § 3–301:7, pp. 569–70 (3d ed.1994).

In Bank of America v. Inda, 48 Kan.App.2d 658, ––– P.3d –––– (2013), the bank holding the note and the mortgage on the defendant's home filed a foreclosure action after the defendant defaulted on the note. The defendant challenged the bank's standing to foreclose, alleging that the bank was merely the servicer and not the owner of the note. The bank acknowledged that it was not the owner of the note and that it had sold its beneficial interest in the note to a third party. But the bank argued that it had standing to foreclose based simply on its holding of both the note and the mortgage. The bank produced the original note, endorsed in blank, and the assignment of the mortgage. The district court granted summary judgment in favor of the bank, reasoning that the bank was the holder of the note and therefore had the authority to enforce the note and the mortgage. This court affirmed on appeal, explicitly adopting the principal that a person who is entitled to enforce a negotiable instrument under K.S.A, 84–3–301 remains entitled to enforce the instrument regardless of whether he or she is the owner of the instrument or the beneficial interest therein. Since the bank was the undisputed holder of the note, it was entitled to enforce the note even though it did not own the beneficial interest in the underlying debt. See 48 Kan.App.2d 658, Syl. ¶ ¶ 10–12. See also In re Martinez, 455 B.R. 755, 762–63 (Bankr.D.Kan.2011).

Returning to this case, it is clear that Bank was entitled to enforce the Individual Note under K.S.A. 84–3–301, regardless of whether it had a beneficial interest in the underlying debt. Hawes' and Dunn's argument that Bank lacked a beneficial interest in the underlying debt is simply not a defense as contemplated in K.S.A. 84–3–308(b) and K.S.A. 84–3–305, and as a matter of law the district court did not err in refusing to apply that argument to cut off Bank's entitlement to payment under the Individual Note.

We reject the argument that K.S.A. 58–2323 provides a defense to the enforcement of the Individual Note. K.S.A. 58–2323 provides that the “assignment of any mortgage as herein provided shall carry with it the debt thereby secured.” But this statute does nothing to contradict the plain language of K.S.A. 84–3–301, which provides that the holder of an instrument is entitled to enforce the instrument even if it is “not the owner of the instrument or is in wrongful possession of the instrument.” We do not interpret K.S.A. 58–2323 in the manner that Hawes and Dunn suggest, i.e., that Bank lost its rights to enforce the debt under the Individual Note when it transferred the Modified Mortgage to a third party. The Modified Mortgage secured a note that Bank did in fact transfer to the third party. But under the facts of this case, it is clear that Bank never transferred and never intended to transfer the Individual Note and its right to enforce the debt under the Individual Note when it assigned the Modified Mortgage to OKL 18.

As a final matter, Hawes and Dunn briefly contend that the Individual Note was only enforceable as a lost instrument subject to the provisions of K.S.A.2012 Supp. 84–3–309 because Bank failed to produce at trial the Individual Note as first executed in September 2007. They argue that under K.S.A.2012 Supp. 84–3–309(b), the district court was required but failed to adequately protect them from further liability in case of a claim by another person entitled to enforce the instrument. But they ignore the district court's explicit finding that Bank's suit was on the Individual Note as last renewed in October 2009, the original of which Bank did produce at trial. Since they do not contest this finding, the lost instrument provisions of K.S.A.2012 Supp. 84–3–309 are inapplicable, and the district court did not err in failing to protect them from further liability.

In summary, there is no factual or legal dispute that Bank was generally entitled to enforce the Individual Note under K.S.A. 84–3–301. As a matter of law, Bank's alleged lack of beneficial interest in the underlying debt could not cut off its entitlement to enforce Hawes' and Dunn's obligation to pay under the Individual Note. Furthermore, the district court's failure to protect Hawes and Dunn from further liability under the Individual Note was irrelevant where the Individual Note was not being enforced as a lost instrument. Therefore, the district court did not err in finding that Bank was entitled to enforce the Individual Note.

Accommodation Parties

Hawes and Dunn next argue that they signed the Individual Note as accommodation parties and that the district court erred in finding that they were not accommodation parties. They further argue that their obligation to pay as accommodation parties was discharged under K.S.A. 84–3–605 because Bank impaired the collateral securing the Individual Note. Bank contends that the district court correctly determined that Hawes and Dunn were not accommodation parties, but even if they were, they remained liable under the Individual Note.

Whether the district court correctly determined that Hawes and Dunn were not accommodation parties is a question of fact. See K.S.A. 84–3–419, Official UCC Comment 3. An appellate court reviews the district court's factual findings for substantial competent evidence. Landmark Nat'l Bank, 289 Kan. at 533. To the extent that resolution of this issue requires statutory interpretation, an appellate court's review is unlimited. See Unruh, 289 Kan. at 1193. Finally, to the extent that resolution of this issue requires the interpretation and legal effect of written instruments, an appellate court's review is also unlimited. Osterhaus, 291 Kan. at 768.

K.S.A. 84–3–419 defines accommodation within the meaning of Article 3 of the UCC. It states in relevant part:

“(a) If an instrument is issue for value given for the benefit of a party to the instrument (‘accommodated party’) and another party to the instrument (‘accommodation party’) signs the instrument for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument, the instrument is signed by the accommodation party ‘for accommodation.’

....

“(c) A person signing an instrument is presumed to be an accommodation party and there is notice that the instrument is signed for accommodation if the signature is an anomalous endorsement or is accompanied by words indicating that the signer is acting as surety or guarantor with respect to the obligation of another party to the instrument.”

Here, the district court found that Hawes and Dunn were not accommodation parties to the Individual Note because the allegedly accommodated party, Expert Owasso, was not a party to the Individual Note either as originally executed or subsequently renewed. Expert Owasso did not sign the Individual Note in any capacity and the Individual Note could not be enforced against Expert Owasso. The primary and only obligors on the Individual Note were Hawes, McLellan, and Dunn.

Hawes and Dunn claim that the district court erred by looking only at the Individual Note itself in finding they were not accommodation parties. They contend that the district court should have looked at the surrounding circumstances and related documents, specifically the Modified Mortgage and the Expert Owasso Note, to find that the parties intended for Hawes and Dunn to be accommodation parties. They point to pre-UCC Kansas caselaw in which the court found that a party was an accommodation party notwithstanding that it was not a signatory to the instrument being enforced. They also note that Kansas caselaw allows one contract to be assembled from multiple documents. Furthermore, they rely on K.S.A.2012 Supp. 84–1–106, which sets forth a rule of construction for the UCC allowing the singular to include the plural and vice versa, unless the statutory context otherwise requires. They therefore argue that the district court erred in construing K.S.A. 84–3–419 to require that the accommodated party and the accommodation party be parties to a single instrument.

These arguments are without merit. It is clear from the plain language of K.S.A. 84–3–419 that the accommodated party and the accommodation party must be parties to a single instrument. This is illustrated in Official UCC Comment 3 to K.S.A. 84–3–419, which states in part:

“An accommodation party is always a surety. A surety who is not a party to the instrument, however, is not an accommodation party. For example, if M issues a note payable to the order of P, and S signs a separate contract in which S agrees to pay P the amount of the instrument if it is dishonored, S is a surety but is not an accommodation party.”

Courts of other jurisdictions have repeatedly found that under Article 3 of the UCC, the accommodation party and the accommodated party must be parties to a single instrument. See, e.g., Uniwest Mortgage Co. v. Dadecor Condominiums, Inc., 877 F.2d 431, 434–35 (5th Cir.1989) (“The UCC rule is apparently intended to promote the free negotiability of the promissory note. If the guaranty is included within the four corners of the negotiable instrument itself, then whoever receives the negotiable instrument in the stream of commerce immediately becomes aware of the guarantor's existence.”).

As the district court noted, by the plain language of the Individual Note (both as originally executed and subsequently renewed), the only parties to the Individual Note are Hawes, McLellan, and Dunn as borrowers/obligors and Bank as lender/obligee. There is simply no basis for finding that Hawes and Dunn signed the Individual Note as accommodation parties for Expert Owasso, and the district court correctly concluded that they were not accommodation parties within the meaning of K.S.A. 84–3–419. Accordingly, their argument that their obligation as accommodation parties was discharged under K.S.A. 84–3–605 also fails.

Lastly, Hawes and Dunn briefly argue that Dunn was an accommodation party for Hawes, who was also party to the Individual Note, and that they were therefore somehow both discharged from liability under K.S.A. 84–3–605 when Bank impaired the collateral securing the Individual Note. But Hawes and Dunn did not include this legal theory in their pleadings or in the pretrial order. The pretrial order under K.S.A. 60–216 controls the course of the action unless modified to prevent manifest injustice. An issue or claim for relief that is not contained in the pretrial order should not be entertained by the district court. McCain Foods USA, Inc. v. Central Processors, Inc., 275 Kan. 1, 18–19, 61 P.3d 68 (2002). The district court appropriately refused to consider the theory that Dunn was an accommodation party for Hawes.

Invasion of Privacy Claims

Hawes and Dunn next argue that the district court erred in denying their invasion of privacy claims. As to both Hawes and Dunn, they argue that they proved invasion of privacy for giving unreasonable publicity to their private lives where Bank published their personal financial information as part of the loan sale. As to Dunn, they argue that they proved invasion of privacy for giving publicity placing Dunn in a false light where Bank wrongfully stated as part of the loan sale that Dunn had personally guaranteed the Expert SWC Rockwell Memorial Note. They contend that they did not need to prove any damage to reputation. They also contend that the district court erred in concluding that Bank's publication of their personal financial information was qualifiedly privileged and argue the defense of qualified privilege does not apply to false-light invasion of privacy.

Bank argues that the district court correctly denied Hawes' and Dunn's invasion of privacy claims because they failed to produce evidence showing that Bank was responsible for publishing any private information about Hawes and Dunn, failed to show exactly what private information was published, failed to show who received such information, and failed to show whether there were any protections in place to prevent improper publication. Bank also argues that the district court correctly found that the publication of Hawes' and Dunn's financial information could not support an unreasonable publicity of private life claim because the information related to their business, not private, interests and because the information was qualifiedly privileged.

Whether the district court erred in denying Hawes' and Dunn's invasion of privacy claims involves a mixed question of fact and law. When reviewing a mixed question of fact and law, an appellate court reviews the district court's factual findings for substantial competent evidence and reviews de novo the district court's legal conclusions. Landmark Nat'l Bank, 289 Kan. at 533.

Invasion of privacy for unreasonable publicity of private life is defined as follows:

“ ‘One who gives publicity to a matter concerning the private life of another is subject to liability to the other for invasion of is privacy, if the matter publicized is of a kind that

(a) would be highly offensive to a reasonable person, and

(b) is not of legitimate concern to the public.' “ Werner v. Kliewer, 238 Kan. 289, 295, 710 P.2d 1250 (1985) (quoting Restatement [Second] of Torts § 652D [1976] ).

With respect to Dunn, neither his net worth nor any other personal financial information was included on the executive summary prepared as part of the loan sale, and he presented no other evidence that his personal financial information was ever published. There is simply no evidence upon which an actionable claim for invasion of privacy for unreasonable publicity of private life could be based, and the district court did not err in denying Dunn's claim.

With respect to Hawes, the only personal financial information allegedly published by Bank was Hawes' estimated net worth in the executive summary prepared as part of the loan sale. Even assuming that the publication was attributable to Bank, the district court reasonably concluded that the limited information disclosed, in the context of a commercial loan sale involving notes that Hawes had personally guaranteed, involved Hawes' business interests and not his private life. Cf. Dotson v. McLaughlin, 216 Kan. 201, 208–09, 531 P.2d 1 (1975) (any invasion of privacy by bank when it forcibly took over plaintiff's business operations was not actionable because intrusion did not concern plaintiff's private affairs). Hawes has made no argument that the publication of his net worth is the kind of information that, if publicized, would be highly offensive to a reasonable person. In short, Hawes did not produce evidence or make arguments upon which an actionable claim for invasion of privacy for unreasonable publicity of private life could be based, and the district court did not err in denying Hawes' claim.

Furthermore, the district court found that any publication of Hawes' or Dunn's personal financial information by Bank was qualifiedly privileged because it was made in the context of a loan sale to prospective purchasers and the information was relevant and limited to that purpose.

“A communication is qualifiedly privileged if it is made in good faith on any subject matter in which the person communicating has an interest, or in reference to which he has a duty, if it is made to a person having a corresponding interest or duty. The essential elements of a qualifiedly privilege communication are good faith, an interest to be upheld, a statement limited in its scope to the upholding of such interest and publication in a proper manner only to proper parties.” Senogles v. Security Benefit Life Ins. Co., 217 Kan. 438, Syl. ¶ 3, 536 P.2d 1358 (1975).

Hawes and Dunn argue that because the executive summary was made available on the Internet, it is impossible to know whether the persons who received their personal financial information had an interest corresponding to Bank's interest in the loan sale and thus the district court erred in ruling that the communications were qualifiedly privileged. But they cite no authority for such a broad proposition- i.e., that a communication available on the Internet cannot be qualifiedly privileged-and in any case the only evidence at trial that the executive summary was available on the Internet was Hawes' testimony that he believed that McLellan had downloaded it from the Cushman & Wakefield website. In this context, it cannot be said that the district court erred in concluding that any communication of Hawes' and Dunn's personal financial information included on the executive summary was qualifiedly privileged.

Finally, as to Dunn's claim of invasion of privacy based on publicity placing another in a false light, such an action is defined as follows: “ ‘One who gives to another publicity which places him before the public in a false light of a kind highly offensive to a reasonable man, is subject to liability to the other for invasion of his privacy.’ “ Dominguez v. Davidson, 266 Kan. 926, 937, 974 P.2d 112 (1999).

The district court did not address this theory in its journal entry of judgment. Dunn failed to object or file a motion for more definite findings. Generally, litigants and their counsel bear the responsibility of objecting to inadequate findings of fact and conclusions of law in order to give the district court the opportunity to correct them. Where no objection is made, an appellate court will presume the district court found all facts necessary to support its judgment. An appellate court may consider a remand if the lack of specific findings preclude meaningful review. O'Brien v. Leegin Creative Leather Products, Inc., 294 Kan. 318, 361, 277 P.3d 1062 (2012).

Remand is not necessary in this case. It is undisputed that Dunn was erroneously listed in the executive summary as a guarantor on the Expert SWC Rockwell Memorial Note, which involved a nearly $4 million loan that was being marketed as nonperforming. But in the context of Dunn's defamation claim (which he has not appealed), the district court found that Dunn had failed to produce evidence that it was Bank, as opposed to Cushman & Wakefield or some other third party unrelated to Bank, who was responsible for this false statement. Dunn does not specifically contest this finding on appeal. Furthermore, contrary to Dunn's assertion, the defense of qualified privilege may be applied to false-light invasion of privacy claims. Dominguez, 266 Kan. at 938. And as discussed above, Dunn has failed to show that the district court erred in finding that the communications made in the executive summary were qualifiedly privileged. For all these reasons, the district court did not err in denying Hawes' and Dunn's invasion of privacy claims.

Assessment of Damages

Finally, Hawes and Dunn argue that the district court erred in assessing damages in the principal amount of $350,000, plus interest. They contend that the district court should have taken into account evidence of payments made on the Individual Note after the sale of the Modified Mortgage and evidence that Bank could or should have applied proceeds from the sale of pad sites on the South Tulsa Property to pay down the Individual Note, which was secured by a mortgage on the South Tulsa Property.

Bank argues that it produced at trial a complete accounting of all monies it disbursed and collected with respect to the Individual Note, which provided a substantial basis for the district court's assessment of damages in the amount of $350,000, plus interest. It further argues that because it never foreclosed on its mortgage on the South Tulsa Property, there is no legal basis for finding that it should have applied the proceeds from the sale of the pad sites on the South Tulsa Property to the debt owed under the Individual Note. Finally, it contends that when it assigned the Modified Mortgage to OKL 18 as part of the loan sale, it received far less money than the amount outstanding on the Expert South Tulsa Note, which the Modified Mortgage secured. Accordingly, there were no proceeds left over to apply against the Individual Note.

A determination whether the district court applied the correct measure of damages is a question of law over which an appellate court has unlimited review. Evenson v. Lilley, 43 Kan.App.2d 573, 575, 228 P.3d 420 (2010), aff'd295 Kan. 43, 282 P.3d 960 (2012). Damages need not be established with absolute certainty. The trier of fact can determine damages using a reasonable basis for computation and the best evidence available under the circumstances. However, claims for damages that are conjectural and speculative cannot form a sound basis for an award. See McKissick v. Frye, 255 Kan. 566, 591, 876 P.2d 1371 (1994).

Bank produced at trial an accounting of all payments applied against the Individual Note, including payments made after Bank assigned the Modified Mortgage in March 2009. Furthermore, a Bank representative testified as to the principal balance and accruing interest due at the time payments on the Individual Note ceased. This evidence supports the district court's award of damages in the principal amount of $350,000, plus interest. As to Hawes' and Dunn's argument that Bank could or should have applied proceeds from the sale of pad sites on the South Tulsa Property against the Individual Note, there is no evidence that Bank was required to do so. Instead, the evidence showed that Bank applied those proceeds against the Expert South Tulsa Note, which Hawes conceded Bank was “entitled” to do. For all these reasons, the district court did not err in assessing damages in the principal amount of $350,000, plus interest.

Affirmed.