Green Tree Credit Corp. v. Kenyon

Annotate this Case
GREEN_TREE_CREDIT_CORP_V_KENYON.93-392; 163 Vt 631; 660 A.2d 296

[Filed 11-Apr-1995]

                                  ENTRY ORDER

                        SUPREME COURT DOCKET NO. 93-392

                                 MAY TERM, 1994

Green Tree Credit Corporation       }         APPEALED FROM:
     v.                             }         Chittenden Superior Court
Stephen and Lise Kenyon             }
                                    }          DOCKET NO. S2080-91CnC

               In the above entitled cause the Clerk will enter:

    Defendants appeal from an award of summary judgment in favor of
plaintiff Green Tree Credit Corporation and a subsequent final judgment
granting plaintiff permission to repossess a mobile home.  We affirm.
    The facts are not in dispute.  Plaintiff is a sales finance company with
offices throughout the United States.  It does not have an office in Vermont. 
Plaintiff finances consumer mobile home sales by purchasing retail
installment sales contracts from mobile home dealerships.

    In 1985, defendants agreed to buy a mobile home from Donald and Ann
Howe.  The Howes had purchased their mobile home from Brault Mobile Homes,
Inc. and made monthly payments to plaintiff.  The contract between the Howes
and Brault had been financed by and assigned to plaintiff.  It provided for
a fifteen-year term, with fixed monthly installments based on a cash price of
$25,376, increased by a financing charge of $35,303, or 15% per annum. 
Defendants negotiated for the Howes to take a second lien on the mobile home
for $2500.  To finance the balance, defendants agreed to assume the Howes'
obligations under the original installment contract.  In October 1985, the
Howes, defendants and plaintiff executed a transfer of equity agreement.  The
finance charge and number of monthly payments were unchanged. 

    Defendants failed repeatedly to meet their monthly obligations.  In
October 1991, pursuant to 9 V.S.A.  2603(c) (mobile home creditor remedies),
plaintiff initiated an action for replevin and a deficiency judgment to
enforce its contractual rights under the Motor Vehicle Retail Installment
Sales Financing Act (MVRISA), Title 9, V.S.A. chapter 59.  Defendants did not
dispute their default or the applicability of MVRISA to the substantive
provisions of the underlying contracts.  Instead, defendants argued that in
addition to MVRISA, plaintiff was also required to comply with Vermont's
Licensed Lender Act (LLA), 8 V.S.A.  2201-2238.  Section 2201 of LLA
requires persons engaged in making loans to obtain a license from the
Commissioner of Banking and Insurance.  Admittedly unlicensed under either
MVRISA or LLA, plaintiff argued that the exclusive statutory scheme governing
mobile home installment contracts was MVRISA.  Under MVRISA, plaintiff was 
not required to be licensed. 9 V.S.A.  2352.  Both parties moved for summary

    The trial court concluded that plaintiff was not engaged in the business
of making loans and therefore did not require a license.  Plaintiff then
moved for and was granted a declaratory judgment.  The court granted
defendants leave to appeal.


    The sole issue on appeal is whether plaintiff, an out-of-state sales
finance company, was required to have a license pursuant to the Licensed
Lender Act.  Section 2201(a) states:

    No person, partnership, association, or corporation other than a
    bank, savings and loan association, credit union, pawnbroker,
    insurance company or seller of the merchandise or service financed
    shall engage in the business of making loans of money, credit,
    goods or things in action and charge, contract for or receive on
    any such loan a rate of interest, finance charge, discount or
    consideration therefor greater than twelve percent per annum
    without first obtaining a license under this section, section 7002
    of this title, or sections 2352 and 2402 of Title 9 from the

8 V.S.A.  2201 (emphasis added).  Failure to obtain a license renders the
loan void and extinguishes the creditor's "right to collect or receive any
principal, interest, or charges whatsoever."  Id.  2233. 

    Assuming plaintiff's activities constituted the business of making loans
within the meaning of  2201, those activities were also clearly retail
installment transactions within the meaning of 9 V.S.A.  2351(5).  Section
2359 of Title 9 provides:

    [MVRISA] shall not affect or apply to any loans or to the business
    of making loans under the laws of this state, nor shall any of the
    provisions of the loan or interest statutes of this state affect or
    apply to any retail installment transaction.  Nothing in this
    chapter shall be construed to impair or in any way affect any rule
    of law applicable to or governing retail installment sales not
    otherwise subject hereto. This chapter shall apply exclusively to
    all retail installment transactions as defined in section 2351 of
    this title. 

(Emphasis added.)

    In matters of statutory construction, we must effectuate legislative
intent.  Burlington Elec. Dep't v. Vermont Dep't of Taxes, 154 Vt. 332, 335-
36, 576 A.2d 450, 452 (1990). Where a statute's meaning is plain upon its
face, this Court will enforce the statute according to its terms.  Id. 
Section 2359 is intended to ensure that MVRISA operates independently of loan
and loan-related statutes.  Thus,  2359 operates to exclude the application
of LLA.  It is undisputed that under MVRISA, 9 V.S.A.  2352, plaintiff, an 
out-of-state sales finance company, was not required to obtain a license.(FN1)
Thus, judgment in favor of plaintiff was proper. 

    Defendants argue that allowing plaintiff, an out-of-state lender, to
escape licensing frustrates the state's effort to ensure the solvency and
liquidity of financial institutions and to protect the public against
unconscionable lending practices.  See 8  V.S.A.  1.  Notably, LLA seeks to
regulate both in-state and out-of-state lenders.  See id.  2230 (out-of-
state lenders 


soliciting loans by mail or engaged in special financing required to be
licensed); id.  2201 (all lenders must obtain licenses; no in-state or
out-of-state distinction).  While this gap in the licensing provision may
reflect poor legislative policy, it is not something that this Court can

    Defendants also maintain that a transfer of equity is not a retail
installment contract; therefore,  2359 does not operate to exclude that
transaction from LLA's coverage.  Although a transfer of equity does not meet
the technical requirements of a retail installment contract,  9 V.S.A. 
2351(5) (defining retail installment contract), it does not amount to a loan
either.  A loan is "the creation of debt by the lender's payment of or
agreement to pay money to the debtor or to a third party for the account of
the debtor."  Black's Law Dictionary 844 (5th ed. 1979).  Here, defendants
assumed the pre-existing debt and plaintiff received the right to obtain
repayment from an additional party.  No new debt was created.  Consequently,
the transfer of equity is not a transaction within the scope of LLA.  See 8
V.S.A.  2201.

    In view of our disposition on the applicability of  2201, we do not
address defendants' argument that a violation of LLA is a per se violation of
the Consumer Fraud Act, 9 V.S.A.  2453.    



    Frederic W. Allen, Chief Justice

    Ernest W. Gibson III, Associate Justice

    John A. Dooley, Associate Justice

    James L. Morse, Associate Justice

    Denise R. Johnson, Associate Justice

FN1.  9 V.S.A. 2352(a) states: 
         A sales finance company, if an individual residing or with a place
         of business in this state, or, if other than an individual,
         residing or qualified and with a place of business in this state,
         shall not engage in the business of purchasing from one or more
         sellers retail installment contracts without first being licensed
         as provided in this chapter . . . .