                                            No. 118,981

                IN THE COURT OF APPEALS OF THE STATE OF KANSAS

                            COMMUNITY FIRST NATIONAL BANK,
            A Corporation Existing Under the Laws of the United States of America,
                                          Appellee,

                                                   v.

            SARAH GRACE NICHOLS, aka SARA GRACE LILLICH, aka SARAH LILLICH,
                              and KURTIS LEE NICHOLS,
                                      Appellants.


                                 SYLLABUS BY THE COURT

        Banks are not included in the definition of supplier under the Kansas Consumer
Protection Act (KCPA) if the bank is subject to state or federal regulation related to
disposition of repossessed collateral.


        Appeal from Wabaunsee District Court; JEFFREY R. ELDER, judge. Opinion filed May 10, 2019.
Affirmed.


        Tai J. Vokins and Krystal L. Vokins, of Sloan, Eisenbarth, Glassman, McEntire & Jarboe, L.L.C.,
of Lawrence, for appellants.


        David P. Troup and Melissa D. Richards, of Weary Davis, L.C., of Junction City, for appellee.


Before ARNOLD-BURGER, C.J., PIERRON, J., and MCANANY, S.J.


        ARNOLD-BURGER, C.J.: This case involves the foreclosure of two mortgages.
Sarah Grace Nichols and Kurtis Lee Nichols (the Nichols) obtained two home loans from
Community First National Bank (CFNB) and granted CFNB mortgages on the homes
they purchased. When the Nichols failed to make payments on the loans, CFNB filed this

                                                   1
foreclosure action. The Nichols made several counterclaims, which raised various
violations of the Kansas Consumer Protection Act, Kansas Uniform Consumer Credit
Code, and common-law claims. The district court granted judgment in favor of CFNB
and denied the Nichols' counterclaims. The Nichols appealed and make several
arguments on appeal. Finding no reversible error we affirm.


                           FACTUAL AND PROCEDURAL HISTORY


       This case involves the foreclosure of two mortgages encumbering two houses
located in Wabaunsee County, Kansas.


       CFNB is a national banking association. In April 2010, the Nichols obtained a
$36,000 loan from CFNB to purchase a home on Main Street in Alta Vista (Home 1). The
parties executed a promissory note, designated Loan Number 32254 (2010 Loan). The
2010 Loan was a variable interest loan, with the interest rate initially set at 7.5%. Interest
was to accrue on an "Actual/365" basis. Payments for the loan were due on the 15th of
each month. Payments received more than 15 days after the payment due date were
subject to a late charge equaling 5% of the unpaid amount, up to a maximum of $25.00.
In total, the loan was estimated to require 179 monthly payments of $333.79. However,
due to the variable interest rate, the promissory note stated that this amount may change
after the 36th payment. The Nichols assigned CFNB a mortgage on the house they
purchased to secure the loan.


       The Nichols' first payment was due on May 15, 2010. However, they did not pay
until May 27, 2010—late but within the grace period. Their next payment was 29 days
late—outside the grace period. The pattern of late payments continued. By February
2014, the Nichols had made 40 payments and all but one payment was late. Many of
these late payments fell within the 15-day grace period. But some were made more than


                                              2
15 days after the due date. CFNB assessed late charges on most, but not all, of the late
payments.


       About six months after the loan was signed, in December 2010, CFNB's audit
department determined that the 7.5% interest rate was too high. CFNB thought it was
legally required to lower the interest rate to 6.25%. To rectify this mistake, the parties
executed a new promissory note in January 2011. CFNB backdated the note to the
original note date and recalculated the amount that the Nichols should have been paying.
This resulted in a $370.20 credit towards interest. CFNB applied the credit to the Nichols'
bill due on February 15, 2011. CFNB later discovered that it incorrectly interpreted the
law, and that the 7.5% interest rate was not illegal. However, CFNB continued to honor
the 6.25% interest rate provided for in the new promissory note.


       In May 2011, CFNB discovered what it believed to be another error. Until that
point, CFNB had been applying the Nichols' payments on a "bill date to bill date" basis.
This meant that the Nichols' payments were applied to the principal and to interest
accrued between bill dates. For example, their August 15, 2010 bill was for principal and
for interest accrued from July 15 through August 15, 2010. Even though they did not pay
the August 15, 2010 bill until August 27, 2010, their payment was applied to the interest
gained during the bill period and then to principal. Robert Stitt Jr., president of CFNB,
believed that because the loan was an Actual/365 loan, the bill date to bill date payment
application method was incorrect. Stitt opined that the payments should have been
applied to interest accrued between payment dates, not bill dates. After May 2011, CFNB
began applying the Nichols' payments on a payment date to payment date basis. The
Nichols' prior payment date had been May 31, 2011. Their June bill, due June 15, 2011,
showed that they needed to pay interest accrued between May 31 and June 15. However,
because they did not pay their June bill until June 30, their payment was applied to
interest accrued between May 31 and June 30, and then it was applied to principal. Each
payment after this was applied on a payment date to payment date basis.

                                              3
       In early 2012, the Nichols decided to buy a bigger house on Main Street (Home 2)
in Alta Vista to accommodate their growing family. Kurtis contacted CFNB to discuss
obtaining a new loan to finance the purchase. Kurtis testified that he asked CFNB if they
could combine his existing loan and the new loan into a 30-year mortgage because he did
not think they could afford to make two payments on two 15-year mortgages. Jay Terrill,
vice president of CFNB, denied that the Nichols requested a 30-year note. Ultimately, the
Nichols borrowed an additional $38,000 and agreed to a 15-year mortgage, designated
Loan Number 32410 (2012 Loan). The 2012 Loan had a lower interest rate, 5.5%, than
the 2010 Loan. The terms regarding interest accrual and late fees were the same. The
parties executed the promissory note for the loan in March 2012.


       At the time the Nichols got their new house, they intended to rent their old house
to a family member. However, that did not occur. The Nichols failed to make payments
on the 2010 Loan, so CFNB sent them a notice of right to cure default. The Nichols asked
CFNB for a deferral on the 2010 Loan to allow them time to look for another renter. In
June 2012, CFNB agreed to defer payment for two months. The deferral agreement stated
that the $502.10 payments due on May 15, 2012, and June 15, 2012, would be deferred to
the maturity of the note in April 2025. The Nichols would have to pay $200 towards
escrow on June 29, 2012, and their next regularly scheduled payment of $502.10 would
be on July 15, 2012. The deferral agreement stated that "[e]xcept as specifically amended
by this agreement, all other terms of the original obligation remain in effect."


       The Nichols were unable to rent or sell Home 1 by the end of the deferral
agreement. So, they entered into a second deferral agreement with CFNB for the 2010
Loan. In the second deferral agreement, CFNB agreed to defer four payments due
between July 2012 and October 2012. On the same day, the parties executed a deferral
agreement for the 2012 Loan under which CFNB agreed to defer the Nichols' August and
September payments until the maturity of the note in April 2027.


                                              4
       The Nichols resumed their payments at the end of the deferral period. They
contacted CFNB, confused as to why their payments were only being applied to interest.
Terrill explained that they were paying the interest that accrued during the deferral
period. The Nichols believed that the extension agreements stopped interest from
accruing.


       Kurtis met with Terrill at the bank in June 2013. Kurtis had just noticed how
CFNB handled the $370.20 credit it had granted him after recalculating the interest rate,
and Kurtis disagreed with how CFNB applied the credit. Several people at the bank spent
two days calculating by hand the effect of the reduced interest rate. They concluded that
the Nichols were billed appropriately. But, the Nichols continued to disagree.


       On August 15, 2013, the Nichols filed a complaint with the Office of the
Comptroller of Currency (OCC). They did not agree with the way CFNB handled the
$370.20 credit it granted them after changing the interest rate from 7.5% to 6.25%. They
also thought CFNB inappropriately allowed interest to accrue on the loans during the
deferral periods.


       Unaware of the OCC complaint, CFNB sent the Nichols a letter on August 23,
2013, to address the disputed accounting. CFNB explained again how it applied the
$370.20 credit. Then, CFNB addressed the Nichols concern that interest accumulated
during the deferral period. CFNB disputed that it agreed to defer interest accumulation
during the period, explaining that it only deferred the Nichols' obligation to make
payments on the interest and principal. In order to accommodate the misunderstanding,
CFNB offered the Nichols a $958.58 credit to offset the interest that accrued during the
deferral period. To conclude the letter, CFNB reminded the Nichols that they were past
due by four months on the 2010 Loan and by two months on the 2012 Loan. It threatened
to begin the collection process if the Nichols did not pay all of their past due payments.


                                             5
         Due to what the Nichols believed was a deteriorating relationship with the bank,
they stopped making payments on the loans. On March 24, 2014, CFNB's attorneys sent
the Nichols a letter stating that CFNB had referred the Nichols' loans to them for
foreclosure. The letter informed the Nichols that they were in default on both of their
loans and that CFNB had chosen to accelerate the amounts due. At the time, the Nichols
owed $33,359.40 on the 2010 Loan and $37,273.39 on the 2012 Loan. The Nichols were
also delinquent on a checking reserve overdraft line and overdrawn on a checking
account.


         On April 2, 2014, Kurtis brought cash to the bank with the intention of making his
past due payments. According to Kurtis, he asked the bank teller how much he owed on
each loan and paid that amount for a total payment of $5,855.94. Kurtis received four
receipts from the transaction. One stated that $3,152.74 was applied to the 2010 Loan.
The other three showed various amounts paid toward the 2012 Loan: $2,500.00, $47.26,
and $155.94.


         Several days later the bank sent the Nichols a letter acknowledging the payment
and informing them that they were still past due on both of the notes. The letter stated
that the bank applied the $5,885.94 as follows:


 Pay off of unrelated account                     $337.79
 Payments due for [2010 Loan]                     $2,693.40
 Late charges for [2010 Loan]                     $202.05
 Payments due for [2012 Loan]                     $2,401.70
 Late charges for [2012 Loan]                     $221.00
 Total                                            $5,855.94




                                              6
The way that the payment was allocated left the Nichols owing $459.34 on the 2010 Loan
and $301.50 due on 2012 Loan. CFNB directed the Nichols to catch up on the payments
in full in order to avoid foreclosure.


       At trial, CFNB admitted that the bank did not apply the $5,855.94 as Kurtis
directed the teller. Terrill explained that bank tellers do not have the authority to apply
payments. When the payment was accepted, it went to the loan operations department.
The loan operations department discovered a special warning on the loans, and asked Stitt
how they should apply the payments that Kurtis made. Stitt was unaware of the
conversation that Kurtis had with the bank teller. Stitt did not immediately inform the
Nichols that he changed the way the payments were applied until the letter sent several
days later.


       The Nichols never responded to CFNB's letter. They stopped making payments on
the loans. This prompted CFNB to file a petition against the Nichols on May 11, 2015—
over a year after their last payment. CFNB asked the court to order the Nichols to pay the
full principal balance, interest, escrow, and late charges accrued on each loan. It also
asked the court for leave to foreclose against the two properties subject to the mortgages.


       In their answer, the Nichols alleged that CFNB was the first party to breach the
agreements, and that CFNB's breach of contract excused the Nichols' obligations under
the contract. The Nichols also made several counterclaims, including breach of contract,
breach of duty of good faith and fair dealing, several Kansas Consumer Protection Act
(KCPA) violations, and Kansas Uniform Consumer Credit Code (UCCC) violations.


       CFNB filed a motion for partial summary judgment arguing that it was not subject
to the KCPA. The KCPA prohibits suppliers from engaging in deceptive acts or practices
or from engaging in unconscionable acts or practices in connection with a consumer
transaction. K.S.A. 2018 Supp. 50-626; K.S.A. 50-627. The Act defines "supplier" as:

                                              7
       "a manufacturer, distributor, dealer, seller, lessor, assignor, or other person who, in the
       ordinary course of business, solicits, engages in or enforces consumer transactions,
       whether or not dealing directly with the consumer. Supplier does not include any bank,
       trust company or lending institution which is subject to state or federal regulation with
       regard to disposition of repossessed collateral by such bank, trust company or lending
       institution." K.S.A. 2018 Supp. 50-624(l).


CFNB argued that it was not a supplier as defined by the KCPA because it is a bank
subject to state or federal regulation with regard to disposition of repossessed collateral.


       The district court granted CFNB's motion for partial summary judgment. It
dismissed all of the Nichols' counterclaims brought under the KCPA, holding that CFNB
was not a supplier within the meaning of the Act. The district court also granted judgment
in favor of CFNB in the amount of $37,330.96 plus any interest accrued after August 30,
2016, for the 2010 Loan and $40,543.46 plus interest accrued after August 30, 2016, for
the 2012 Loan. The district court did not include late fees in its award. The court also
granted CFNB's foreclosure claims and allowed them to begin the foreclosure process.


       The Nichols' counterclaims for breach of contract, breach of the covenant of good
faith and fair dealing, violations of the UCCC, and fraud proceeded to trial by the court.
As explained more fully below, at the conclusion of the trial, the district court granted
judgment in favor of CFNB on all claims.


       The Nichols appealed.




                                                     8
                                         ANALYSIS


The district court did not err in holding that CFNB was not a supplier as defined in the
KCPA.


       The Nichols' first argument is that the district court erred when it held that CFNB
was not a "supplier" as defined by the KCPA.


       Interpretation of a statute is a question of law over which appellate courts have
unlimited review. Neighbor v. Westar Energy, Inc., 301 Kan. 916, 918, 349 P.3d 469
(2015).


       The most fundamental rule of statutory construction is that the intent of the
Legislature governs if that intent can be ascertained. State ex rel. Schmidt v. City of
Wichita, 303 Kan. 650, 659, 367 P.3d 282 (2016). An appellate court must first attempt to
ascertain legislative intent through the statutory language enacted, giving common words
their ordinary meanings. Ullery v. Othick, 304 Kan. 405, 409, 372 P.3d 1135 (2016).
Where there is no ambiguity, the court need not resort to statutory construction. Only if
the statute's language or text is unclear or ambiguous does the court use canons of
construction or legislative history to construe the Legislature's intent. 304 Kan. at 409.


       The Kansas Legislature enacted the KCPA in 1973 with the objective of
"protect[ing] consumers from suppliers who commit deceptive and unconscionable
practices." K.S.A. 50-623(b). The KCPA is to be construed liberally to promote this
policy. Stair v. Gaylord, 232 Kan. 765, 775, 659 P.2d 178 (1983).


       The KCPA prohibits suppliers from engaging in deceptive acts or practices or
from engaging in unconscionable acts or practices in connection with a consumer
transaction. K.S.A. 2018 Supp. 50-626; K.S.A. 50-627. The Act defines "supplier" as:

                                              9
       "a manufacturer, distributor, dealer, seller, lessor, assignor, or other person who, in the
       ordinary course of business, solicits, engages in or enforces consumer transactions,
       whether or not dealing directly with the consumer. Supplier does not include any bank,
       trust company or lending institution which is subject to state or federal regulation with
       regard to disposition of repossessed collateral by such bank, trust company or lending
       institution." (Emphasis added.) K.S.A. 2018 Supp. 50-624(l).


The district court held that CFNB was not a supplier because, as a national banking
association, it is subject to state or federal regulations with regard to disposition of
collateral. The parties dispute whether CFNB is a supplier within the meaning of the
statute.


       The Nichols argue that the exception in the definition of supplier should be
narrowly construed. They assert that banks should be considered suppliers unless the
consumer transaction at issue relates to disposition of repossessed collateral. Interpreting
the statute to exempt all banks subject to state or federal regulations, the Nichols argue,
would render the phrase "with regard to disposition of repossessed collateral by such
bank" meaningless. They also assert that the legislative history of the statute supports a
narrow interpretation of the exclusion.


       The language at issue was added to the definition of supplier in 2005. L. 2005, ch.
22, § 1. The key is whether the language "with regard to disposition of repossessed
collateral by such bank" defines banks or limits the exemption from the definition of
supplier to banks only when they are disposing of repossessed collateral. L. 2005, ch. 22,
§ 1.


       Federal courts have examined whether banks are excluded from the KCPA. The
federal bankruptcy court for the District of Kansas examined these cases and concluded
that "[i]n every instance where a bank's status as 'supplier' under the KCPA was directly
before it, the United States District Courts have held that regulated banks are excluded
                                                    10
from the definition, regardless of whether the case actually involves a disposition of
repossessed collateral." In re Larkin, 553 B.R. 428, 444 (Bankr. D. Kan. 2016); see
Kalebaugh v. Cohen, McNeile & Pappas, P.C., 76 F. Supp. 3d 1251, 1260 (D. Kan.
2015) (holding that "Discover Bank is not a supplier under the KCPA if it is subject to
state or federal regulation"); Kastner v. Intrust Bank, No. 10-1012-EFM 2011 WL
721483, at *2 n.3 (D. Kan. 2011) (unpublished opinion) (noting that "K.S.A. § 50-624(l)
appears to exclude banks and lending institutions that are subject to state and federal
regulation from the definition of 'supplier'").


       In Larkin, Judge Robert E. Nugent, citing to grammar treatises and Bryan Garner's
Manual on Legal Style, described the grammatical makeup of the provision as indicative
of a blanket exclusion.


       "[T]he 'subject to state or federal regulation' exclusion is introduced by the relative pronoun
       'which,' a word that is usually employed to introduce a non-restrictive or independent clause.
       Here, 'which' refers to the words 'any bank, trust company or lending institution.' As various
       grammarians note, an independent clause is one whose removal from a sentence does not change
       the sentence's meaning. Thus, the 'which' clause does not restrict or condition the exclusion of
       these institutions from being 'suppliers.' Even if it did, nearly every secured creditor's conduct in
       connection with the disposition of repossessed collateral is at a minimum governed by the Kansas
       Uniform Commercial Code and the Kansas Uniform Consumer Credit Code, two detailed and
       integrated schemes of state regulation." 553 B.R. at 443.


In Kalebaugh, Judge Thomas Marten found no legal support—"statutory or otherwise"—
for the plaintiff's contention that a bank was a supplier under the KCPA for all purposes
except when dealing with repossessed collateral. 76 F. Supp. 2d at 1260.


       But "a Kansas state court is not bound by a federal court's interpretation of Kansas
law, and our Supreme Court is the final authority on Kansas law for all state and federal
courts." Bonura v. Sifers, 39 Kan. App. 2d 617, 635, 181 P.3d 1277 (2008). The Nichols

                                                    11
ask this court to interpret the statute more narrowly than the federal courts. They assert
that this court has already "disposed of the 'blanket exemption' argument by examining
the facts at issue, and holding banks are suppliers under the KCPA, except in cases
dealing with the 'disposition of repossessed collateral.'" In support of their argument, they
cite Kahn v. Denison State Bank, No. 113,248, 2016 WL 687728 (Kan. App. 2016)
(unpublished opinion). Although it is an unpublished opinion, we will further examine
the Kahn case.


       In Kahn, Terry Lee Kahn purchased a house from Denison State Bank (the Bank).
Kahn gave the Bank a mortgage on the home as well as her personal residence. Kahn
later sued the Bank alleging, among other things, that the Bank violated the KCPA. The
district court granted the Bank's motion to dismiss, and Kahn appealed. The Bank argued
that it was not a supplier as defined by the KCPA because the home it sold was
repossessed collateral. 2016 WL 687728, at *8. This court found that the home was not
repossessed collateral. Then, without further analysis, this court concluded that the Bank
qualified as a supplier under the KCPA. 2016 WL 687728, at *8.


       This court later distinguished Kahn in White v. Security State Bank, No. 115,179,
2017 WL 5507943, at *7 (Kan. App. 2017) (unpublished opinion). In White, Kyle and
Sharene White sued Security State Bank (the Bank) to resolve a dispute over a note and
mortgage transaction between the parties. The Whites alleged that the Bank violated the
KCPA. The district court dismissed the Whites' KCPA claims, holding that the Bank was
not a supplier under the KCPA because it is subject to regulation. The Whites appealed.
This court believed that "[t]he critical issue is whether the exclusion in the KCPA for
regulated banks applies to the Whites' loan transaction since there was no repossessed
collateral at issue." 2017 WL 5507943, at *6. As in this case, the Whites argued that
banks were only exempted from application of the KCPA when the bank is actually
disposing of repossessed collateral. The Bank made the same argument as CFNB makes


                                             12
here—that the KCPA exclusion applies to regulated banks regardless of the nature of the
transaction.


       The Whites relied on Kahn to support their argument. However, this court rejected
the comparison. 2017 WL 5507943, at *7. It stated:


               "The Whites point out that our court in [Kahn] . . . ruled that a bank which sold
       real estate was a supplier under the KCPA because it did not repossess the property it
       sold, but rather repurchased it as part of a settlement of a lawsuit the property owner had
       against the bank. 2016 WL 687728, at *8.


               "From our reading of [Kahn], however, it is unclear whether the issue of statutory
       construction which is presented to our court in this case was raised before our court
       in [Kahn]. On the contrary, it appears the bank's argument was that the property at issue
       in [Kahn] was, in fact, repossessed property which put the bank squarely within the ambit
       of the exclusion. [Kahn], on the other hand, challenged that characterization and argued
       that the property was not repossessed property but simply property obtained by the bank
       as part of a civil settlement. In other words, it does not appear the bank ever broadly
       argued (as the Bank contends here) that it should come under the KCPA exclusion simply
       because it was, in a general sense, a regulated bank in matters relating to the disposition
       of repossessed collateral. In short, we question whether [Kahn] really addressed the legal
       issue before us in this appeal.


               "Additionally, our court's holding in [Kahn] was brief, without any statutory
       interpretation of K.S.A. 2016 Supp. 50-624(l), and limited to a review of the district
       court's factual determination that the property in question was collateral. See 2016 WL
       687728. Given these circumstances and given that unpublished opinions are not binding
       precedent and are only cited for persuasive authority, we do not consider [Kahn's] ruling
       dispositive or persuasive on the particular legal question before us in this appeal. See
       Kansas Supreme Court Rule 7.04(g)(2)(A) and (B) (2017 Kan. S. Ct. R. 45)." 2017 WL
       5507943, at *7.




                                                    13
This court then examined federal decisions regarding the statute, specifically Larkin and
Kalebaugh. White, 2017 WL 5507943, at *7-8. As discussed above, the federal courts
have held that the KCPA does not apply to regulated banks. Ultimately, this court ruled
in favor of the Bank, holding that the plain language of the KCPA provides that "if a
bank is generally subject to regulations pertaining to disposition of repossessed collateral,
the bank is excluded as a supplier under the nomenclature and reach of the KCPA." 2017
WL 5507943, at *7.


       We find the reasoning in White is more convincing and relevant to deciding the
issue in this case than the Kahn decision. The plain text of the KCPA states that banks are
not included in the definition of supplier if the bank is subject to state or federal
regulation related to disposition of repossessed collateral. Because the statute is
unambiguous, this "court does not need to speculate further about legislative intent and,
likewise, the court need not resort to canons of statutory construction or legislative
history." State v. Coman, 294 Kan. 84, 92, 273 P.3d 701 (2012). The Nichols do not
dispute that CFNB is a bank subject to regulation. Therefore, the district court's decision
that CFNB is not a supplier as defined by the KCPA was not error. If the Legislature
deems this to be contrary to its intention, it is free to change the statute to reflect its
intention. We simply interpret the words as they are currently written.


CFNB's transition from applying the Nichols' payments from "bill date to bill date" to
"payment date to payment date" did not constitute fraud, breach of contract, or a
violation of the KCPA.


       Next, the Nichols argue that the district court erred in holding that CFNB did not
violate the law in changing the date it applied their payments from "bill date to bill date"
to "payment date to payment date." The Nichols allege that CFNB's actions constituted
fraud, breach of contract, and a violation of the KCPA. As discussed in the previous


                                               14
section, CFNB is not subject to the KCPA. Thus, we will only address the fraud and
breach of contract claims.


       CFNB asserted that it changed the manner in which it applied the Nichols'
payments because the loan was an "Actual/365" loan, also called a 365/365 loan. During
his testimony, Stitt contrasted the Actual/365 loan with a 360/360 loan, which he also
called a scheduled or periodic loan. Stitt explained that CFNB's computer system had
been crediting the Nichols' payments as though they had been paid on the due date.
However, he insisted that because the loan was an Actual/365 loan the payments should
have been allocated to interest gained between payment dates. The error, Stitt testified,
created a net benefit to the Nichols of $230.00.


       The district court adopted CFNB's assertions that changing the payment allocation
method was required because the loan was an Actual/365 loan. The court noted that the
365/365 and 360/360 terms are defined by the UCCC. The UCCC provides:


                 "(2) The finance charge on a consumer loan or consumer credit sale shall be
       computed in accordance with the actuarial method using either the 365/365 method or, if
       the consumer agrees in writing, the 360/360 method:
                 (a) The 365/365 method means a method of calculating the finance charge
       whereby the contract rate is divided by 365 and the resulting daily rate is multiplied by
       the outstanding principal amount and the actual number of days in the computational
       period.
                 (b) The 360/360 method means a method of calculating the finance charge
       whereby the contract rate is divided by 360 and the resulting daily rate is multiplied by
       the outstanding principal amount and the number of assumed days in the computational
       period. For the purposes of this subsection, a creditor may assume that a month has 30
       days, regardless of the actual number of days in the month." K.S.A. 16a-2-103(2).


The district court continued to hold that "the computation of interest by this method is
neither a breach of contract nor contrary to law. Similarly, Defendants fail to establish
                                                   15
how treatment in accordance with the terms of the contract regarding daily accrual
increases the effective interest rate."


       Breach of Contract


       The Nichols argue that "Actual/365" only refers to the number of days interest is
charged in a calendar year, not the method in which a consumer's payments are applied.
They assert that the contract is ambiguous as to how their payments should have been
applied. They ask this court to reverse the district court's finding that the contract was not
ambiguous and to remand the case to the district court for a factual determination of what
the parties actually agreed to with the aid of parol evidence.


       The appellate court exercises unlimited review over the interpretation and legal
effect of written instruments, and the appellate court is not bound by the lower court's
interpretation of those instruments. Prairie Land Elec. Co-op v. Kansas Elec. Power Co-
op, 299 Kan. 360, 366, 323 P.3d 1270 (2014). The question of whether a written
instrument is ambiguous is a question of law subject to de novo review. Waste
Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 964, 298 P.3d 250 (2013).


       A contract "is ambiguous when the application of pertinent rules of interpretation
to the whole 'fails to make certain which one of two or more meanings is conveyed by the
words employed by the parties. [Citations omitted.]'" Central Natural Resources v. Davis
Operating Co., 288 Kan. 234, 245, 201 P.3d 680 (2009) (quoting Wood v. Hatcher, 199
Kan. 238, 242, 428 P.2d 799 [1967]).


       The Nichols have a persuasive argument that the contract is ambiguous. While the
loans clearly provide for interest to accrue on a 365/365 basis, they are silent as to how
payments should be applied. The UCCC provision cited by the district court, K.S.A. 16a-
2-103(2)(a), does not support its holding. This statute defines how interest is calculated

                                             16
using the 365/365 method. While the definition refers to a "computational period," it does
not specify whether the computational period is from payment date to payment date or
bill date to bill date. See K.S.A. 16a-2-103(2)(a).


       The Nichols assert that the contract provided for payments to be applied to interest
accumulated between bill dates, and CFNB asserts that the contract provided for
payments to be applied to interest accumulated between payment dates. It is not possible
to tell from the face of the contract which party is correct. Therefore, the district court
erred in finding that the contract was not ambiguous.


       While the district court erred, this error is harmless in light of the district court's
award. Using the payment date to payment date method, CFNB provided evidence that
the Nichols owed $38,028.01 in principal and interest as of August 30, 2016. If it had
used the bill date to bill date method as requested by the Nichols, the Nichols would have
owed $37,648.04 on that date. Thus, if the Nichols are correct regarding the payment
allocation method it would appear that they suffered damages in the amount of $379.97.
However, the district court adopted the trial master's findings. The trial master found that
the Nichols owed $37,330.96 as of August 30, 2016, and the district court entered
judgment in favor of CFNB for that amount. Thus, the amount the Nichols were
ultimately ordered to pay was less than the amount they would have paid had their
payment been applied on a bill date to bill date basis. For this reason, it is unnecessary to
remand the case for determination of this issue.


       Fraud


       The Nichols also assert that CFNB committed fraud or fraud by silence when it
changed the way it applied the payments. Both of these claims require the Nichols to
prove damages. See Kelly v. VinZant, 287 Kan. 509, 515, 197 P.3d 803 (2008) (listing
elements of fraud); Stechschulte v. Jennings, 297 Kan. 2, 21, 298 P.3d 1083 (2013)

                                               17
(listing elements of fraud by silence). For the reason discussed above, the district court's
award negated any damages the Nichols may have incurred, so this claim also fails.


The district court did not err in holding that CFNB did not commit fraud or violate the
UCCC in applying the Nichols' $370.20 credit.


         The Nichols assert that CFNB committed fraud and violated the UCCC in the way
it handled the $370.20 credit that CFNB awarded the Nichols after lowering the interest
rate. They assert that CFNB misrepresented to them that they only needed to pay $69.00
for their January 2011 payment. The Nichols cite testimony from Terrill and Stitt that the
$370.20 credit was supposed to be applied in January 2011 but was not applied until
February 2011. This, the Nichols argue, "resulted in a full month of unpaid interest to
accrue between January 15, 2011 (the due date), and February 14, 2011." They assert that
interest would not have accrued on the loan if they had made a January payment, and that
by paying in February their payment went to interest instead of reducing the principal.


         "The existence of fraud is normally a question of fact. Therefore, upon appeal, our
standard of review is limited to determining whether the district court's findings of fact
are supported by substantial competent evidence and whether the findings are sufficient
to support the district court's conclusions of law." Waxse v. Reserve Life Ins. Co., 248
Kan. 582, 586, 809 P.2d 533 (1991). Fraud must be proven by clear and convincing
evidence. 248 Kan. at 586.


         The Supreme Court has enumerated the elements necessary to establish a claim of
fraud.


         "(1) [F]alse statements were made as a statement of existing and material fact; (2) the
         representations were known to be false by the party making them or were recklessly
         made without knowledge concerning them; (3) the representations were intentionally


                                                     18
       made for the purpose of inducing another party to act upon them; (4) the other party
       reasonably relied and acted upon the representations made; and (5) the other party
       sustained damage by relying upon them." Kelly, 287 Kan. at 515.


The Nichols do not perform an element-based analysis of this issue. It appears that they
are alleging that CFNB made a false representation when it said it would apply the
$370.20 credit to the Nichols' January 2011 payment. CFNB knew that this
representation was false, and it made the representation intentionally to induce the
Nichols not to pay their full January 2011 payment. The Nichols did not make a full
January payment in reliance upon the representation. And, they were damaged because
CFNB's failure to apply the credit to the January 2011 payment caused interest to accrue
between January 15 and February 14, 2011.


       But the Nichols' assertions are unsupported by the record. The billing records
show that the Nichols owed $224.02 in interest for the January bill, which reflected
interest gained between December 15, 2010, and January 15, 2011. Between January 16,
2011, and February 14, 2011, the Nichols accrued an additional $216.41 in interest. This
led to a total interest charge of $440.43 on the February 2011 bill. CFNB subtracted
$69.00 from the interest charge due to an unrelated error, leaving an interest charge of
$371.43. Finally, CFNB applied the $370.20 credit to the bill, leaving a total of $1.23
interest due between December 15, 2010, and February 14, 2011.


       If CFNB had applied the credit in January instead of February, the same result
would have occurred. The Nichols owed $224.02 in interest gained between December
15, 2010, and January 15, 2011. Because the $370.20 credit was due to interest
overpayment, it was only applied to interest. Had CFNB applied the credit to the January
2011 bill as the Nichols insist they should have, the Nichols would have had a $146.18
credit remaining for their February bill. Contrary to the Nichols' assertion, the principal
would have continued to gain interest every day because the loan is an Actual/365 loan.

                                                  19
Thus, they still would have gained $216.41 in interest between January 16, 2011, and
February 14, 2011. Applying the $69.00 credit for bank error and the remaining $146.18
credit for the changing interest rate would have left the Nichols owing $1.23. This is
exactly the same amount that they owed when the bank credited their account in February
2011.


        The district court held that if the Nichols "would have made their February 15,
2011 payment on time, [the Nichols] would have had exactly the same principal balance
as if all of the payments had been reversed manually and reapplied at the 6.25% rate."
There is substantial competent evidence in the record to support this assertion. The
Nichols provided no evidence, and certainly not clear and convincing evidence, to
contradict this conclusion either at trial or on appeal.


        The Nichols' UCCC argument is premised on the same idea—that CFNB violated
the law by representing to the Nichols that it would apply the credit to their January 2011
payment. They rely on K.S.A. 16a-2-104(1), which provides: "[a] creditor shall credit a
payment to the consumer's account on the date of receipt, except when a delay in
crediting does not result in a finance charge or other charge." The Nichols argue that
because CFNB did not credit the payment in January 2011, it allowed interest to accrue
from January 15 to February 14, 2011. This claim fails for the same reason that the
Nichols' fraud claim fails—CFNB did apply the credit to the Nichols' January 2011
interest, and because the loan was an Actual/365 loan, interest would have accrued
between January 15 and February 14 regardless of when CFNB applied the credit to the
Nichols' account. Because the delay did not result in a finance charge or other charge,
CFNB did not violate the UCCC.




                                              20
The district court did not err in finding that CFNB did not violate the UCCC based on its
charge of late fees.


       The Nichols next argue that "[t]he district court misinterpreted Kansas law in
finding that [CFNB] did not violate the UCCC when it charged improper late fees—
despite [CFNB]'s explicit admissions that it charged late fees improperly." There are two
late fees at issue: a $16.68 late fee charged in December 2010 which should have only
been $15.43, and a $15.43 fee assessed in May 2012.


       Interpretation of a statute presents a question of law, and this court exercises
unlimited review over it. Foster v. Kansas Dept. of Revenue, 281 Kan. 368, 374, 130 P.3d
560 (2006).


       The Nichols assert that CFNB violated K.S.A. 16a-2-502. The relevant section of
this statute provides: "The parties to a consumer credit transaction may contract for a
delinquency charge on any installment not paid in full within 10 days after its scheduled
or deferred due date in an amount not exceeding 5% of the unpaid amount of the
installment or $25, whichever is less." K.S.A. 16a-2-502(1). CFNB complied with this
statute. The terms of both the 2010 Loan and the 2012 Loan provide for a late charge of
5% of the unpaid amount, up to a maximum of $25.00, to be assessed on the portion of
any payment made more than 15 days after it is due. Thus, CFNB complied with K.S.A.
16a-2-502(1).


       The Nichols also allege that the district court misapplied the remedies available in
the UCCC. First, they cite K.S.A. 16a-5-201(4). This section provides:


                "If a creditor has contracted for or received a charge in excess of that allowed by
       this act, or if a consumer is entitled to a refund and a person liable to the consumer
       refuses to make a refund within a reasonable time after demand, the consumer may


                                                    21
       recover from the creditor or the person liable in an action other than a class action a
       penalty in an amount determined by the court not less than $100 or more than $1,000."
       K.S.A. 16a-5-201(4).


They also cite K.S.A. 16a-5-201(3), which provides that "[a] consumer is not obligated to
pay a charge in excess of that allowed by this act, and if the consumer has paid an excess
charge the consumer has a right to a refund of twice the excess charge."


       While it is true that CFNB erroneously charged the Nichols a late fee in excess of
that allowed for by the UCCC, that does not necessarily mean that the Nichols are
entitled to the remedies therein. The UCCC also provides:


               "If a creditor establishes by a preponderance of evidence that a violation is
       unintentional or the result of a bona fide error of law or fact notwithstanding the
       maintenance of procedures reasonably adapted to avoid any such violation or error, no
       liability is imposed under subsections (1), (2), and (3), the validity of the transaction is
       not affected, and no liability is imposed under subsection (4) except for refusal to make a
       refund." K.S.A. 16a-5-201(7).


CFNB established by a preponderance of the evidence that the excess late fee violations
were unintentional.


       The first late fee at issue is a $16.68 late fee charged in December 2010. The fee
should only have been $15.43, which means the Nichols were overcharged by $1.25. The
district court found that this error was inadvertent. The error occurred when CFNB was
recalculating the amounts due under the new 6.25% interest rate. The Nichols do not cite
anything to controvert the district court's finding. Because the error was unintentional, the
remedies of the UCCC do not apply. See K.S.A. 16a-5-201(7).




                                                     22
       The second overcharge occurred in May 2012. This was at the very beginning of
the deferral period. The late fee was charged because the deferral agreement was not
processed until the 16th day after the bill was due. This too is an unintentional error, and
CFNB should not be penalized under the UCCC because of it. Ultimately, CFNB waived
two late fees that it could have charged (totaling $30.86) to make up for its mistakes. This
resulted in a net benefit to the Nichols of $14.18.


       CFNB showed that the improper late fees were unintentional errors. It accounted
for the mistakes by waiving late fees that it could have charged. Thus, the district court
did not err in holding that the Nichols could not recover damages under the UCCC for the
assessment of improper late fees.


CFNB did not breach the deferral agreement by allowing interest to accrue during the
deferral period.


       The Nichols allege that CFNB violated the terms of the deferral agreement by
allowing interest to accrue during the time that payments were deferred.


       "'The primary rule for interpreting written contracts is to ascertain the parties'
intent. If the terms of the contract are clear, the intent of the parties is to be determined
from the language of the contract without applying rules of construction.'" Stechschulte,
297 Kan. at 15. The appellate court exercises unlimited review over the interpretation and
legal effect of written instruments, and the appellate court is not bound by the lower
court's interpretation of those instruments. Prairie Land Elec. Co-op, 299 Kan. at 366.


       In this case, the district court correctly interpreted the deferral agreement. It held:


       "The Agreements on their face plainly state that they do not alter the original notes or
       agreements, and that the Bank is deferring payments, not that it was forgiving interest. As

                                                   23
       a result, the extension agreements extended the payments, but did not alter the note terms
       regarding daily accrual and did not extend interest during the deferral periods."


A review of the record shows that the district court was correct. The deferral agreements
state that they are extending the due dates of certain payments. They specify that
"[e]xcept as specifically amended by this agreement, all other terms of the original
obligation remain in effect." This includes the interest accrual terms.


       Furthermore, CFNB agreed to waive all of the interest accumulated during the
deferral period. Because of this, the district court held that the issue was moot. The
Nichols do not challenge the district court's mootness determination. When a district
court provides alternative bases to support its ultimate ruling on an issue and an appellant
fails to challenge the validity of both alternative bases on appeal, an appellate court may
decline to address the appellant's challenge to the district court's ruling. See National
Bank of Andover v. Kansas Bankers Surety Co., 290 Kan. 247, 280, 225 P.3d 707 (2010).


       In their reply brief, the Nichols make a different argument. There, they assert that
they are not arguing that interest should not have accrued during the deferral period, only
that the interest should not have been made due at the end of the deferral period.
However, the district court's mootness ruling, which the Nichols do not challenge on
appeal, disposes of this issue. For that reason, the district court did not err in denying the
Nichols' claims regarding the deferral agreements.


The district court did not err in holding that CFNB did not act illegally in applying the
Nichols' April 2014 payment.


       Finally, the Nichols argue that CFNB's application of their $5,855.94 payment on
April 2, 2014, violated the KCPA and the UCCC and resulted in fraud.



                                                   24
       "The existence of fraud is normally a question of fact. Therefore, upon appeal, our
standard of review is limited to determining whether the district court's findings of fact
are supported by substantial competent evidence and whether the findings are sufficient
to support the district court's conclusions of law." Waxse, 248 Kan. at 586. Fraud must be
proven by clear and convincing evidence. 248 Kan. at 586.


       Again, our Supreme Court has enumerated the elements necessary to establish a
claim of fraud.


       "(1) [F]alse statements were made as a statement of existing and material fact; (2) the
       representations were known to be false by the party making them or were recklessly
       made without knowledge concerning them; (3) the representations were intentionally
       made for the purpose of inducing another party to act upon them; (4) the other party
       reasonably relied and acted upon the representations made; and (5) the other party
       sustained damage by relying upon them." Kelly, 287 Kan. at 515.


       In ruling on this issue, the district court focused on the fifth element of fraud:
damages. The court held that CFNB's allocation of the payment in a manner different
than the Nichols directed did not harm the Nichols. This is because CFNB had
accelerated the loans and made a demand for payment prior to the Nichols' April 2, 2014
payment. The court noted that the Nichols "plainly did not submit funds sufficient to
satisfy all of these claims . . . . Since these obligations were due and not contested by the
[Nichols] as valid obligation, application of the payment in this manner caused no harm."


       The Nichols disagree with the court's holding. They assert that the manner in
which CFNB applied the payment "resulted in [CFNB] demanding over $700 in
additional payment, and led to the foreclosure of [the Nichols'] homes." While the
Nichols briefly address the damages element of fraud, they do not address the other
elements. However, because this issue can be decided under the damages element alone,
it is unnecessary to explore the other elements of the Nichols' fraud claim.
                                                   25
       Generally, "a debtor who owes two or more accounts to a creditor may direct to
which account any money which he voluntarily pays shall be applied." Lumber Co. v.
Workman, 105 Kan. 505, 509, 185 P. 288 (1919). Assuming without deciding that the
rule applies in this case and that CFNB violated the rule, the district court's holding
regarding damages is still supported by substantial competent evidence. CFNB's
attorneys sent the Nichols a letter on March 24, 2014, stating that CFNB had accelerated
both loans and begun the foreclosure process. To accelerate a loan means "[t]he
advancing of a loan agreement's maturity date so that payment of the entire debt is due
immediately." Black's Law Dictionary 14 (10th ed. 2014). At that time, the Nichols owed
$33,359.40 on the 2010 Loan and $37,273.39 on the 2012 Loan. Even if CFNB had
allocated the payments exactly as Kurtis directed, they still would have been tens of
thousands of dollars short of satisfying their debt. The March 24, 2014 letter stated that
CFNB directed its attorneys to file a lawsuit to collect the Nichols' debts and to foreclose
the real estate mortgages. CFNB's application of the April 2, 2014 payment is not what
led to the foreclosure of the Nichols homes—their failure to make timely, complete
payments on the loans led to foreclosure of their homes.


       The Nichols also claim that CFNB's allocation of the payments violated the
UCCC. First, they allege a violation of K.S.A. 16a-3-205 by failing to provide them with
accurate receipts of the $5,855.94 in payments. This provision of the UCCC provides that
"[t]he creditor shall deliver or mail to the consumer, without request, a written receipt for
each payment by coin or currency on an obligation pursuant to a consumer credit
transaction." K.S.A. 16a-3-205(1). The district court held that the bank teller did provide
the Nichols with receipts. This is supported by substantial competent evidence, as the
receipts are part of the record on appeal. The district court went on to explain that the
Nichols' complaint was not that they did not get a receipt, but that CFNB later applied the
funds differently than the Nichols believed they would be applied.




                                             26
       The Nichols assert that "receipts provided by the creditor should accurately reflect
the amount(s) paid and the account(s) those payments are applied to." However, the
statute does not say this. It simply says that the creditor must give the consumer a written
receipt for each cash payment made on an obligation pursuant to a consumer credit
transaction. K.S.A. 16a-3-205. It does not state that there is a penalty for error in the
receipt. And, it does not state that the receipt must show exactly how payments are
applied. Even if it did, the April 8, 2014 letter provided the Nichols with a written receipt
showing how the money was apportioned to their various obligations. Furthermore, even
if CFNB failed to provide an accurate receipt, the Nichols fail to cite a provision of the
UCCC which would enable them to recover damages for the miscommunication.


       Finally, the Nichols allege that CFNB violated K.S.A. 16a-2-502(5). This section
provides: "For delinquency charge purposes, a payment made prior to the due date of the
next installment payment shall be applied to the previous installment. For all other
purposes, payments are applied to installments in the order in which they fall due."
K.S.A. 16a-2-502(5). The Nichols conclusively assert that this language prohibits CFNB
from collecting late fees until all missed payments are made. Due to the conclusory
nature of their argument, it is difficult to comprehend how the Nichols believe that CFNB
violated this statute. Furthermore, the Nichols' argument is contradicted by another
provision in the statute. This provision states: "A delinquency charge may be collected
only once on an installment however long it remains in default. A delinquency charge
may be collected at the time it accrues or at any time thereafter." K.S.A. 16a-2-502(3).


       In response to the Nichols' argument on this point, the district court held that the
purpose of this statute is to "ensure that the non-payment of a delinquency fee in a late
payment is not the means to add another delinquency fee on the account." This holding is
supported by the text of the statute, and the comments accompanying it. See K.S.A. 16a-
2-502, cmt. 2 (stating this section is aimed at preventing the practices of assessing
"multiple delinquency charges stemming from a single delayed payment"). The Nichols

                                              27
do not allege that CFNB engaged in the prohibited practice of assessing multiple late fees
for a single instance of failing to make a timely payment. Thus, their claim of error under
K.S.A. 16a-2-502 must fail.


       In sum, we find that the district court did not commit any reversible error in its
holdings in this case.


       Affirmed.




                                             28
