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Contracts Keyed to Fuller
Bank of Kansas v. Hutchinson Health Services, Inc.
Citation:
246 Kan. 83, 785 P.2d 1349 (1990)Facts
The Bank of Kansas made three loans to Hutchinson Health Services, Inc. (HHS) totaling $281,384.58, secured by a perfected security interest in HHS’s accounts receivable, including Medicaid reimbursement funds owed by the Kansas Department of Social and Rehabilitation Services (SRS). When HHS defaulted on the loans, the Bank filed suit seeking judgment against HHS and an order requiring SRS to pay all previously withheld Medicaid payments. The Kansas Department of Human Resources (DHR) intervened, claiming that HHS owed $14,916.42 in delinquent unemployment contributions and that DHR was entitled to set off this amount against funds owed to HHS by SRS. DHR had made two separate requests for setoff to the Division of Accounts and Reports – one on December 7, 1984, for third quarter taxes, and another on January 11, 1985, for fourth quarter taxes. The Bank and DHR stipulated that DHR had acquired the funds by setoff, but reserved the right to challenge the priority of claims to these funds.
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