Full Opinion

NOT DESIGNATED FOR PUBLICATION No. 129,627 IN THE COURT OF APPEALS OF THE STATE OF KANSAS GARCIA'S DRYWALL, LLC, Appellee, v. INWALL SERVICES, et al., Appellants. MEMORANDUM OPINION Appeal from Johnson District Court; ROBERT J. WONNELL, judge. Oral argument held August 19, 2026. Opinion filed October 23, 2026. Affirmed. Christopher F. Burger, of Stevens & Brand, L.L.P., of Lawrence, for appellants McPherson Contractors, Inc., and Fidelity and Deposit Company of Maryland. Kurt S. Brack, of Brown & Ruprecht, PC, of Kansas City, Missouri, for appellee. No appearance by appellant Inwall Services. Before HILL, P.J., SCHROEDER and COBLE, JJ. SCHROEDER, J.: This case arises from two separate commercial contract disputes in which a small second-tier subcontractor claims it was not paid for its work. The district court found the general contractor's surety failed to investigate the subcontractor's claims to recover for its unpaid work under K.S.A. 40-256 and awarded the subcontractor's reasonable attorney fees and prejudgment interest. The general contractor and the surety timely appeal the district court's ruling. After a careful and complete review of the record, we find no error by the district court, and we affirm. 1 FACTUAL AND PROCEDURAL BACKGROUND In August 2017, McPherson Contractors, Inc. (McPherson), a general contractor, contracted with Inwall Services (Inwall), as a subcontractor, for the construction of The Vue Luxury Apartments (the Vue) in Overland Park. In November 2017, McPherson entered into another commercial contract agreement with Inwall for the construction of The Fairways at Ironhorse Senior Community Development (Ironhorse) in Leawood. Inwall hired second-tier subcontractors on both the Vue and Ironhorse projects, including Garcia's Drywall, LLC (Garcia's). McPherson and Inwall did not work well together. Inwall claimed there were many delays throughout both projects caused by McPherson and other subcontractors on the job. Inwall submitted several change orders to McPherson on both projects and had issues receiving payment related to the additional work. As a result, Inwall could not pay some of its subcontractors, including Garcia's. In September 2018, Garcia's informed Inwall it would no longer work on the projects as the work was going unpaid and it needed to be paid to stay on the job. Contrary to Garcia's claims, Inwall initially responded there were issues with Garcia's workmanship, which led to Garcia's termination. Garcia's timely filed mechanic's liens for unpaid labor and materials on both projects. The district court, upon McPherson's motion, approved a statutory bond on the Vue and approved a payment bond on the Ironhorse project to discharge Garcia's mechanic's liens. Once Garcia's left the projects, Inwall hired another drywall subcontractor to finish the work. The new subcontractor testified at the bench trial that Garcia's work was not defective and did not need correcting. The new subcontractor also claimed its work went 2 unpaid. In February 2019, McPherson terminated Inwall on the Vue project, and Inwall suspended its work on the Ironhorse project. In August 2019, Garcia's filed two petitions against Inwall, McPherson, and McPherson's surety, Fidelity and Deposit Company of Maryland (Fidelity)—one related to each of the two construction projects. Garcia's claims boiled down to breach of contract against Inwall; unjust enrichment against Inwall and McPherson in the amount of $41,570.58, plus interest on the Vue project, and $56,612.36, plus interest on the Ironhorse project; and an action on the bond against Inwall, McPherson, and Fidelity. McPherson and Fidelity together filed an answer to Garcia's petition and a cross-claim against Inwall for damages. Inwall also filed an answer and a cross-claim against McPherson and Fidelity. Inwall eventually entered into a settlement agreement with Garcia's and agreed to pay Garcia's $75,000 to dismiss the case against it with prejudice. In January 2024, the district court held a lengthy bench trial primarily over issues between Inwall and McPherson. At trial, Inwall changed its initial claims and admitted Garcia's was wrongfully terminated and had resolved all issues with its work on both projects. With respect to Garcia's claims, the district court found that Garcia's performed work for Inwall but walked off the job because it was not getting paid. Garcia's sent demand letters to McPherson and Fidelity related to both projects to collect the money owed through Fidelity, who did not pay the claims or investigate the matter. Inwall and Garcia's settled, and Inwall had 30 days after the date of the district court's decision to pay Garcia's $75,000. The district court accepted the settlement amount and entered judgment against Inwall and Fidelity, jointly and severally, in favor of Garcia's in the amount of $75,000. The district court also awarded Garcia's attorney fees and 10 percent prejudgment interest from April 8, 2019—the last date it made demand for payment on Fidelity—to July 16, 2024—when final briefs were submitted. 3 McPherson and Fidelity timely filed a motion to alter or amend judgment, for new trial, and for new findings of fact and conclusions of law. In the motion, McPherson asserted, among other things, the district court should amend its negative findings reflecting Fidelity made no investigation because the trial evidence showed that, up until Inwall entered a settlement agreement with Garcia's, Inwall consistently represented that Garcia's was not owed money and performed poor workmanship. McPherson and Fidelity contended, based on Inwall's claims, Fidelity had just cause and excuse to deny Garcia's claim for payment and, therefore, the judgment concerning a bad faith investigation should be amended. McPherson and Fidelity also claimed Inwall conclusively admitted, through requests for admissions, it did not owe Garcia's payment, and the district court erred in weighing conflicting evidence at trial. McPherson and Fidelity also filed an objection to Garcia's attorney fees. The district court denied McPherson and Fidelity's motion for new trial, motion to alter or amend, and objections to Garcia's attorney fees. The district court found McPherson and Fidelity tried to present new evidence that was under their control and available to present at trial. The district court excluded the evidence and denied the motions. Inwall is not a party to this appeal. Additional facts are set forth as necessary. ANALYSIS Fidelity failed to perform a sufficient investigation before denying Garcia's claim for unpaid work. Fidelity argues the district court erred in finding Fidelity failed to perform a sufficient investigation into Garcia's claim. Fidelity claims it had reasonable grounds, or just cause and excuse, to deny Garcia's claim for unpaid construction work. Garcia's 4 points out Fidelity does not argue on appeal the district court erred in entering a judgment in Garcia's favor for $75,000. Because Fidelity fails to challenge the judgment as a prerequisite to its next argument on attorney fees, Fidelity waives any argument of overall liability on Garcia's claim. See Russell v. May, 306 Kan. 1058, 1089, 400 P.3d 647 (2017) ("Issues not adequately briefed are deemed waived or abandoned."). The district court, as the trier of fact, determines "whether an insurance company has refused to pay the full amount of an insured's loss 'without just cause or excuse' thereby subjecting [itself] to payment of an attorney's fee under [K.S.A. 40-256]." Koch, Administratrix v. Prudential Ins. Co., 205 Kan. 561, 564, 470 P.2d 756 (1970). On appeal, we review the district court's factual findings for substantial competent evidence, which is "evidence that 'provides a substantial basis of fact from which the issues can be reasonably determined.'" Ruhland v. Elliot, 302 Kan. 405, 410, 353 P.3d 1124 (2015). When conducting our review, we do not reweigh the evidence. Peterson v. Ferrell, 302 Kan. 99, 104, 349 P.3d 1269 (2015). Because we are in the same position as the district court to examine and consider evidence when "the controlling facts are based upon pleadings, admissions, exhibits and stipulations," we have de novo review of "what the facts admitted in evidence establish." Koch, 205 Kan. at 564. K.S.A. 60-1110 provides, in relevant part: "The contractor or owner may execute a bond to the state of Kansas for the use of all persons in whose favor liens might accrue by virtue of this act . . . or to any person claiming a lien which is disputed by the owner or contractor, conditioned for the payment of such claim in the amount thereof. Any such bond shall have good and sufficient sureties, be approved by a judge of the district court and filed with the clerk of the district court." 5 Any interested party may bring suit on such bond. K.S.A. 60-1110. Because the statute covers "all persons in whose favor liens might accrue by virtue of this act," Garcia's was covered by the bond even as a second-tier contractor. K.S.A. 40-256 states, in part: "[I]f it appear[s] from the evidence that [an insurance company] has refused without just cause or excuse to pay the full amount of such loss, the court in rendering such judgment shall allow the plaintiff a reasonable sum as an attorney's fee for services in such action." Our Supreme Court explained: "Where the only issue between the parties is a factual dispute with respect to coverage under an insurance policy, and the insurer has refused to pay the full amount of the insured's loss for such reason, we are of the opinion the phrase 'without just cause or excuse' as used in K.S.A. [40-256], means a frivolous and unfounded denial of liability. However, if there is a bona fide and reasonable factual ground for contesting the insured's claim, there is no failure to pay 'without just cause or excuse.' And whether there was any reasonable ground for contesting the claim depends upon circumstances existing when payment is withheld or liability is declined. It is not necessarily determined by the outcome of the ensuing litigation. The statutory penalty is not to be imposed merely for the reason that it turned out at the trial in the district court, there was, in reality, no reason for denial of liability. The question is, how did the matter appear before the trial as judged by a reasonable and prudent [person] seeking to determine the facts of the controversy which it was [the person's] duty in good faith to investigate. [Citation omitted.]" (Emphasis added.) Koch, 205 Kan. at 564-65. Fidelity argues, "[T]he record is replete with objectively reasonable bases for denying [Garcia's] coverage" based on information from before Garcia's was terminated for cause by Inwall and up until the trial. Notably, the analysis in McPherson and Fidelity's brief on appeal relies on the facts "[a]s recited in the facts above" and fails to provide pinpoint citations to the record to support their analysis. See Supreme Court Rule 6 6.02(a)(4) (2026 Kan. S. Ct. R. at 36) ("The court may presume that a factual statement made without a reference to volume and page number has no support in the record on appeal."). Fidelity relies on Inwall's responses to requests for admissions to support its position it had reasonable grounds to deny Garcia's claims. In its requests for admissions, Inwall admitted (1) it did not owe Garcia's any payment, and (2) Garcia's was not due any amounts on the projects. K.S.A. 60-236(b), the statute on requests for admissions, states: "A matter admitted under this section is conclusively established unless the court, on motion, permits the admission to be withdrawn or amended." Inwall's admissions provide no support or guidance as to whether Fidelity performed a timely investigation into Garcia's claims when presented and are too broad to establish whether Garcia's performed quality workmanship on the projects. Evidence also shows Garcia's filed its mechanic's liens on both projects for unpaid work long before Inwall made its admissions. And the district court granted McPherson's motion to approve the statutory bonds to discharge the mechanic's liens nearly a year before Inwall executed its requests for admission. Thus, if anything, the admissions established there was a factual contention as to whether Garcia's had a legitimate claim, which should have prompted Fidelity to investigate the matter. Simply accepting Inwall's admissions as conclusive while knowing Garcia's had filed mechanic's liens on the projects for unpaid work suggests Fidelity never investigated the issue. There were insufficient grounds to deny Garcia's claim after the mechanic's liens were released and before the litigation was filed. Further, Inwall and Garcia's entered a settlement agreement before trial. At trial, an Inwall employee testified Inwall settled with Garcia's for work performed on both projects. The district court warned the parties not to address the terms of the settlement agreement but allowed testimony related to the agreement for the purpose of establishing 7 Garcia's had a cause of action to recover for unpaid work. The district court found the agreement was an admission by Inwall "that a judgment should be entered against it in favor of Garcia's in the amount of $75,000." The district court explicitly stated, "To be clear, this is not a judicial ratification of the parties' settlement agreement terms, but rather this court's acceptance of Inwall's stipulation and admission that it is liable to Garcia's." Between Inwall's requests for admission—which was admitted at trial—and the settlement agreement—which was admitted at trial for the limited purpose of establishing a cause of action for unpaid work—there were contradictory admissions before the district court. The district court, as the trier of fact, weighed the evidence and found Garcia's was entitled to a judgment for its damages against both Inwall and Fidelity. We do not reweigh the evidence. Peterson, 302 Kan. at 104. McPherson and Fidelity filed a motion to alter or amend judgment and asked the district court to make additional and new findings of fact and conclusions of law. McPherson and Fidelity also filed a motion in opposition of Garcia's attorney fees. Fidelity contends it investigated Garcia's claims against the surety bond through Garcia's counsel, and the district court had to consider the evidence Fidelity presented at the attorney fees hearing. We review the district court's denial of a motion to alter or amend for abuse of discretion. Exploration Place, Inc. v. Midwest Drywall Co., 277 Kan. 898, 900, 89 P.3d 536 (2004). A district court abuses its discretion if its decision is based on an error of fact or law or is arbitrary, fanciful, or unreasonable. Wiles v. American Family Life Assurance Co., 302 Kan. 66, 81, 350 P.3d 1071 (2015). K.S.A. 60-259(a)(2) states: "After a nonjury trial, the court may, on motion for a new trial, open the judgment if one has been entered, take additional testimony, amend findings of fact and conclusions of law or make new ones and direct the entry of a new 8 judgment." An application for attorney fees may be made after the entry of judgment. See Bussman v. Safeco Ins. Co. of America, 298 Kan. 700, 719-20, 317 P.3d 70 (2014). Here, the attorney fees hearing stemmed from Fidelity's motion to alter or amend the district court's judgment and to raise objections to Garcia's attorney fees. The hearing primarily centered on whether Fidelity investigated Garcia's claim, which is part of the attorney fees analysis under K.S.A. 40-256. A motion to alter or amend "allow[s] a district court to correct a prior error. It is not an opportunity to present additional evidence that could have been previously submitted." Ross-Williams v. Bennett, 55 Kan. App. 2d 524, 564, 419 P.3d 608 (2018). The district court may deny a motion to alter or amend if the moving party could have, with reasonable diligence, presented the evidence before final judgment. 55 Kan. App. 2d at 564. The district court denied Fidelity's motion to alter or amend, finding the additional evidence presented—letters from Fidelity to Garcia's acknowledging receipt of the surety claim—was not newly discovered evidence under K.S.A. 60-259, and the evidence was under Fidelity's control and available for use at trial. The claim arising under K.S.A. 40- 256 relating to attorney fees was not a surprise as it was raised in the pretrial order. The district court also found Fidelity relied on Inwall's admissions submitted during the litigation to support Fidelity's position it had just cause to deny the claim, but Inwall responded to Fidelity's requests for admissions well after Fidelity sent a letter acknowledging the Vue claim and denying the Ironhorse claim. That is, Fidelity could not deny the claim based on Inwall's admissions because the admissions were not made until after the litigation was filed. 9 The district court did not abuse its discretion in denying Fidelity's motion to amend as the newly presented evidence Fidelity relied upon could have, with reasonable diligence, been presented at trial. See Ross-Williams, 55 Kan. App. 2d at 564. At trial, a foreman from Garcia's testified she was unaware of any investigation by Fidelity into Garcia's claim. Fidelity could have cross-examined the foreman on this issue and could have called one of its representatives to provide rebuttal testimony about the letters acknowledging Fidelity investigated Garcia's claim. It did neither. Fidelity next argues the district court erred in shifting the burden of proof, requiring Fidelity to prove there was an investigation rather than requiring Garcia's to prove bad faith or denial of the claim without just cause. Under K.S.A. 40-256, prevailing on the coverage issues is not enough. Plaintiffs—here, Garcia's—must establish "that the refusal to pay was without just cause or excuse. K.S.A. 40-256." Johnson v. Westhoff Sand Co., 281 Kan. 930, 946, 135 P.3d 1127 (2006). Fidelity continuously asserts the only evidence of whether it investigated the claim came from Garcia's foreman, who testified she was unaware of an investigation. Again, Fidelity heavily relies on Inwall's admissions that Garcia's was not owed anything on the projects as proof of an investigation. But, as discussed above, Inwall provided its admissions after Garcia's had filed both of its surety claims and this litigation. Therefore, Fidelity could not have relied on those admissions as reasonable grounds to deny Garcia's claims before the litigation was initiated. Under these facts and circumstances, Garcia's established Fidelity's refusal to pay was "without just cause or excuse." See K.S.A. 40- 256; Johnson, 281 Kan. at 946. Substantial competent evidence supports the district court's findings that Fidelity failed to conduct a sufficient investigation into Garcia's claims and Fidelity inexcusably refused to pay Garcia's claim for services rendered. 10 Garcia's was entitled to its reasonable attorney fees. Fidelity argues the district court only granted Garcia's request for attorney fees under K.S.A. 40-256 "as a direct result of [Garcia's counsel] misleading the district court." Fidelity asserts Garcia's counsel "was actively involved in Fidelity's investigation and caused the witness to testify so as to intentionally mislead the district court [which] precludes the fruits of the violation." In response, Garcia's denies the claim of dishonesty and further asserts Fidelity never raised an issue below as to Garcia's counsel's alleged misconduct in misleading the district court. But Fidelity, in its motion to alter or amend, claimed the trial evidence showed it received a surety demand from Garcia's and analyzed and denied the demand. In making this assertion, Fidelity cited the Kansas Rules of Professional Conduct 3.3 (2026 Kan. S. Ct. R. at 389) (candor toward the tribunal). The issue was therefore raised below. We review the district court's decision to award attorney fees under K.S.A. 40-256 for an abuse of discretion. Wiles, 302 Kan. at 81. The district and appellate courts are both "experts on the reasonableness of attorney fees. However, we [will] not substitute our judgment for that of the district court . . . ." Johnson, 281 Kan. at 940. Diana Garcia, a former foreman for Garcia's, testified at trial on Garcia's behalf. Diana explained Garcia's was a family company, and her day-to-day duties were to check on employees, make sure the employees were completing their work, write down information for payroll, and make sure invoices were turned in. On direct examination, Diana was asked if she was "aware of any investigation [Fidelity] performed in this matter?" Diana responded, "No." Diana testified she had her attorney send Fidelity demand letters. Diana was therefore likely a point of contact between Garcia's and Garcia's attorney during litigation. But that does not necessarily mean Diana provided 11 untruthful testimony based on her recollection of events at the time of trial. Fidelity even acknowledged in the first issue of its brief on appeal that Diana's testimony "would be evidence [Garcia's] had no knowledge one way or the other and [the testimony] is tantamount to an 'I don't know' answer." Fidelity also could have provided rebuttal testimony by having one of its own representatives testify at trial and admit into evidence the letters Fidelity sent to Garcia's attorney about Garcia's claim. Instead, Fidelity tried to enter such evidence into the record after the fact through a motion to alter or amend judgment. As explained previously, the unrebutted evidence as presented at trial supports a finding Fidelity "refused without just cause or excuse" to pay Garcia's claim for work performed. See K.S.A. 40-256. Fidelity agreed, "hypothetically, should Garcia's be found to be entitled to fees[,] a reasonable attorney's fee would be no greater than $59,546.22." The district court awarded Garcia's attorney fees in the amount of $85,702.53. Fidelity's argument on appeal stops short of providing an analysis as to whether the district court's award of attorney fees to Garcia's was reasonable. Fidelity merely provides eight reasonableness factors the district court can consider in deciding whether an attorney fee award is reasonable without providing any analysis into the reasonableness of Garcia's award of attorney fees. Fidelity waives and abandons any argument related to the reasonableness of Garcia's attorney fees. See Russell, 306 Kan. at 1089. The conflicts with the settlement agreement do not violate the subcontractors' agreements. Fidelity suggests the settlement agreement between Inwall and Garcia's released Fidelity from liability. In response, Garcia's requests that we not consider this issue as it was raised for the first time on appeal. Fidelity, in its reply brief, asserts the application 12 of contract terms is a pure question of law and can be raised for the first time on appeal to serve the ends of justice. "When appellants raise an issue for the first time on appeal, Rule 6.02(a)(5) requires them to brief an exception to the preservation rule in the opening brief. The failure to do so cannot be cured in the reply brief." Schutt v. Foster, 320 Kan. 852, 857, 572 P.3d 770 (2025). We, therefore, exercise our discretion and decline to review this unpreserved claim. See State v. Rhoiney, 314 Kan. 497, 500, 501 P.3d 368 (2021). Fidelity also argues the underlying construction agreement—presumably the subcontract agreement between Inwall and McPherson—was not satisfied and cannot support a judgment in Garcia's favor, and a second-tier subcontractor cannot recover from the general contractor directly. This issue was also raised for the first time on appeal, and we decline to address it. See 314 Kan. at 500. Even so, Garcia's is not a party to the subcontract agreement and cannot be bound by its terms and conditions. The subcontract agreement was exclusively between Inwall and McPherson, and any dispute related to the subcontract agreement remains between Inwall and McPherson. Garcia's had an oral contract with Inwall. Garcia's, as an interested party claiming a lien against the general contractor for labor and materials used in the projects, could sue Fidelity on its bonds. See K.S.A. 60-1110. The district court did not enter an award that irreconcilably conflicted with the settlement agreement and violated the subcontractors' agreement. Garcia's was entitled to prejudgment interest. Fidelity argues the district court erred in granting Garcia's prejudgment interest past the date Inwall and Garcia's entered a settlement agreement in November 2023. 13 Fidelity claims the settlement agreement "simultaneously released the other parties and all claims on the projects at issue," while also acknowledging it was not a party to the agreement. The district court's award of prejudgment interest is reviewed for abuse of discretion. Blair Constr., Inc. v. McBeth, 273 Kan. 679, 689, 44 P.3d 1244 (2002). K.S.A. 16-201(a) states, in relevant part: "[C]reditors shall be allowed to receive interest at the rate of 10% per annum when no other rate of interest is agreed upon, for any money after it becomes due." Garcia's asked for 10 percent interest on the amounts owed for its unpaid work. "[P]rejudgment interest is [generally] allowable on liquidated claims. 'A claim becomes liquidated when both the amount due and the date on which such amount is due are fixed and certain or when the same becomes definitely ascertainable by mathematical calculation.' [Citation omitted.]" McBeth, 273 Kan. at 689. Here, Garcia initially claimed it was owed $41,570.58 on the Vue project and $56,612.36 on the Ironhorse project. Inwall settled with Garcia's for a total principal amount of $75,000. The district court ultimately found Garcia's was owed $75,000 instead of $98,182.94—the sum of the amounts owed on the Vue and Ironhorse projects. The district court awarded Garcia's "prejudgment interest from April 8, 2019, the last date [Garcia's] made demand upon Fidelity for payment, to July 16, 2024," when final briefs were submitted. Because Fidelity was not a party to the settlement agreement, it does not receive the benefit of a prejudgment interest cut-off date when the settlement agreement became effective. The claims became liquidated when the amount due—$75,000—and the date on which it was due—July 16, 2024—were fixed and certain. We observe no error when the district court awarded Garcia's prejudgment interest beyond the date of the settlement agreement. 14 Garcia's is entitled to appellate attorney fees. Garcia's filed a motion for appellate attorney fees under Supreme Court Rule 7.07(b)(1) (2026 Kan. S. Ct. R. at 52) in the amount of $29,986.30, including $568.80 in costs. McPherson and Fidelity did not respond. Rule 7.07(b)(1) provides: "An appellate court may award attorney fees for services on appeal in a case in which the district court had authority to award attorney fees." Here, the district court had authority to award Garcia's attorney fees and chose to do so. We, therefore, also have authority to award attorney fees. Garcia's counsel provided time records related to the appeal and asserted the "billing entries truly and accurately reflect the services rendered by [his] firm in the litigation." But the invoice total, including attorney fees and costs, amounted to $27,766.30—a difference of about $2,220 from what Garcia's requests. While we do not find the amount of appellate attorney fees Garcia's requests to be supported by the record, we grant Garcia's appellate attorney fees and costs totaling $27,766.30. We find, after considering Kansas Rules of Professional Conduct Rule 1.5(a) (2026 Kan. S. Ct. R. at 332), the amount requested is reasonable based on the nature and extent of the services rendered. Affirmed. 15