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Summary Judgment
On May 23, 2008, the Kansas Court of Appeals affirmed the Douglas County District Court's summary judgment in favor of Argent Mortgage Company, LLC/Ameriquest Funding II REO Subsidiary, LLC ("Argent") on an appeal brought by the assignee of a supervised loan in Independent Financial, Inc. v. Ronald A. Wanna, et al, No. 98,761, 2008 WL 2150899.
Robert D. Kroeker, a partner in Martin, Leigh, Laws & Fritzlen, P.C. (the "Firm") wrote the winning motion for summary judgment as well as the appellate briefs and also argued the matter before both courts. This is the first time the Kansas Consumer Credit Code's provision requiring assignees of supervised loans to be licensed has been interpreted by this state's appellate courts.
Independent Financial, the appellant, a California-based entity, was an assignee of a supervised loan and attempted to collect on the note and to foreclose on the mortgage securing the note. However, the appellant failed to first obtain a license as a supervised lender. A "supervised loan" is defined as a loan charging in excess of a 12 % interest rate. The appellant failed to secure a license within the three-month "safe harbor" after acquiring the loan and consequently, the Firm filed a motion for summary judgment on behalf of Argent. Independent Financial argued that the proper and sole remedy in the case was governed by the provision pertaining to the consumer's remedies which provided for a refund of twice the amount of any excess interest charged.
Agreeing with the lower court's decision and Argent's arguments, the Court of Appeals held that it was clear that the legislative intent was to require a license before the assignee could enforce the supervised loan. This condition on enforcement enables the state to "police assignees that engage in the business of taking and collecting on assignments of supervised loans." The statute provides that an assignee can act to enforce the note within three months of the date of assignment if it promptly obtains the supervised lender's license. The Appellate Court held that the consumer's remedies did not pertain to assignees of supervised loans and further determined that to permit an unlicensed assignee to collect on the supervised loan only at peril of having to pay twice the amount of any excess interest charged as provided for in the consumer remedies section of the statute would render the language requiring the license meaningless.
The decision clears up any ambiguity in the statute and serves as a warning to all assignees of high interest rate loans that they must obtain a supervised lender's license in the state of Kansas within three months of the assignment. Otherwise, such assignees may not collect on the note. More broadly, the case serves as a reminder to all parties interested in enforcing loans outside of their home state to be sure that they are compliant with the laws of the state in which they want to enforce the loan. Otherwise, as a practical matter, the asset, i.e. note and mortgage, may be worthless.
Inquiries may be directed to Robert D. Kroeker at Martin, Leigh, Laws & Fritzlen, P.C. or by calling Mr. Kroeker at 816.221.1430.
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