Fischer v. UNIPAC Service Corp.

• Decision Date: 27 July 1994
• Docket Number: No. 93-390,93-390
• Citation: 519 N.W.2d 793
• Parties: 93 Ed. Law Rep. 318 Timothy L. FISCHER, Appellant, v. UNIPAC SERVICE CORPORATION and Student Loan Marketing Association (Plus), Appellees.
• Court: Iowa Supreme Court

Page 793

519 N.W.2d 793

93 Ed. Law Rep. 318

Timothy L. FISCHER, Appellant, v. UNIPAC SERVICE CORPORATION and Student Loan Marketing Association (Plus), Appellees.

No. 93-390.

Supreme Court of Iowa.

July 27, 1994.

Donald L. Carr, II, of Smith, Schneider, Stiles, Wimer, Hudson, Serangeli, Robinson, Mallaney, Shindler & Scalise, P.C., Des Moines, for appellant.

Roger T. Stetson and Margaret C. Callahan of Belin Harris Lamson McCormick, P.C., Des Moines, for appellees.

Considered by HARRIS, P.J., and LARSON, NEUMAN, SNELL, and ANDREASEN, JJ.

ANDREASEN, Justice.

The question presented here is whether, under the federal guaranteed student loan program, defendants wrongfully denied plaintiff a second year of deferment on two student loans. Plaintiff brought this action for damages allegedly caused by a declaration of default on the loans. The district court granted defendants' motion for summary judgment on all claims. Because we find the court correctly applied the law, we affirm.

I. Background.

In 1984, Timothy L. Fischer took out two guaranteed student loans for $3000 each from Norwest Bank, Des Moines, N.A. to assist in financing his medical education at the Iowa College of Osteopathic Medicine in Des Moines. In 1985, Norwest Bank sold the loans to the Student Loan Marketing Association (a/k/a "Sallie Mae"). UNIPAC Service Corporation (UNIPAC) serviced the loans for Sallie Mae.

Fischer graduated from medical school in 1987. By graduation he had incurred student loans in excess of $150,000 to finance his education. After graduation Fischer entered a two-year combined internship and residency program in family practice at Des Moines General Hospital. Because payments on Fischer's student loans were to begin June 15, 1987, he sought a one-year deferment of his repayment obligations. See generally 20 U.S.C. § 1077(a)(2)(C) (1988 & Supp.1994) (loan deferment options). To support his deferral request Fischer submitted a letter from the Iowa State Board of Medical Examiners (Board) certifying that one year of postgraduate medical training is required to receive a medical license in Iowa. Id. § 1077(a)(2)(C)(vii) (internship deferment permitted to complete professional recognition requirements). Each of the financial institutions servicing Fischer's loans, including UNIPAC, approved his request for deferral of installment payments from July 1, 1987 to June 30, 1988.

In order to complete the family practice program at Des Moines General, Fischer sought a second year of deferral in July 1988. On July 7 Fischer sent a deferment form to UNIPAC by certified mail indicating that he was serving in an internship or residency program from July 1, 1988 to June 30, 1989. Fischer admits that at the time he requested the extended deferment he did not qualify under the statute. However, Congress amended the internship deferment provision on July 18 to permit deferment for up to two years, regardless of the loan enrollment date, for qualified borrowers "serving in an internship or residency program leading to a degree or certificate awarded by ... a hospital ... that offers postgraduate training." See Pub.L. No. 100-369, § 11(b), 102 Stat. 835, 838 (1988) (codified as amended at 20 U.S.C. § 1077(a)(2)(C)(vii)). UNIPAC denied Fischer's request for deferment on the basis that federal law limited internship or residency deferment to the minimum period required to obtain a professional license. According to Fischer, UNIPAC was the only lending institution which denied the additional year of deferral.

Believing he was entitled to the second year deferment on these two loans, Fischer retained the services of attorney Donald L. Carr II to resolve the matter with UNIPAC. In September Carr informed UNIPAC that all communications concerning Fischer's loans should be sent directly to him. Between July 1988 and May 1989, however, UNIPAC contacted Fischer on numerous occasions by telephone and by letter regarding repayment of the loans. During this same period Carr wrote a number of letters to UNIPAC asserting that Fischer was entitled to an extension on his deferment period and urging that his request form be processed accordingly. In response UNIPAC continued to deny the deferment request on the same grounds.

UNIPAC sent Fischer a final demand letter on January 4, 1989. When he failed to begin repayment on the loans UNIPAC declared Fischer's loans in "default." On February 16 UNIPAC made a claim on behalf of Sallie Mae against the loan guarantor, the Iowa College Aid Commission (Commission). The Commission paid the claim in April, thereby becoming the owner of the loans and underlying promissory notes. Between February and May, Carr continued to protest UNIPAC's denial of deferment and to demand that the default status on the loans be removed. In May UNIPAC made a default report on Fischer's loans to a credit reporting agency.

In 1990 UNIPAC contacted Carr twice regarding a proposed settlement and repurchase agreement. Fischer took no steps to follow through with the proposal. To date Fischer has made no payments on the two loans and defendants claim he now owes in excess of $12,000.

On January 30, 1991, Fischer filed a six-count petition against UNIPAC and Sallie Mae seeking damages caused by the alleged wrongful declaration of default and the subsequent report of default to a credit bureau. Fischer claimed that (1) denial of the internship deferment violated the Higher Education Act of 1965; (2) UNIPAC's debt collection practices violated the Iowa Consumer Credit Code and the federal Fair Debt Collection Practices Act; (3) Sallie Mae breached the loan agreements; (4) the defendants intentionally interfered with his prospective contractual and business relationships; and (5) the false credit report constituted defamation with malice.

Defendants subsequently filed a motion for summary judgment. Following a hearing the district court granted defendants' motion on all counts. The court concluded as a matter of law that (1) Fischer did not qualify for a second year of internship deferment at the time he made his request; (2) federal regulations pre-empted state law as to permissible debt collection practices on federally insured student loans; (3) federal restrictions on debt collection efforts did not apply to UNIPAC and in any event his claim was time barred; (4) Fischer failed to identify conduct constituting a breach of contract; (5) Fischer presented no evidence of an improper purpose behind defendants' actions; and (6) the credit report did not constitute defamation. Fischer appeals from the district court's ruling and judgment.

On appeal Fischer claims the deferment controversy was not properly resolved by summary judgment because fact questions remain as to his entitlement to the deferment under federal law, the propriety of defendants' debt collection practices, and the defendants' knowledge and motives. Additional facts relevant to the claims will be discussed in our consideration of the legal issues presented.

II. Scope of Review.

Our review of the court's summary judgment ruling is for correction of errors at law. Iowa R.App.P. 4. Summary judgment is appropriate only when the entire record before the court shows there are no genuine issues of material fact in dispute and that the court correctly applied the law. Iowa R.Civ.P. 237(c); see Hoefer v. Wisconsin Educ. Ass'n Ins. Trust, 470 N.W.2d 336, 338 (Iowa 1991); Behr v. Meredith Corp., 414 N.W.2d 339, 341 (Iowa 1987).

"The defendants, as the moving parties, carry the burden of showing that no issue of material fact exists." Hoefer, 470 N.W.2d at 338. "An issue of fact is 'material' only when the dispute is over facts that might affect the outcome of the suit, given the applicable governing law." Fees v. Mutual Fire & Auto. Ins. Co., 490 N.W.2d 55, 57 (Iowa 1992). Although we view the evidence in the light most favorable to the resisting party, that party "may not rest upon the mere allegations or denials of his pleading, but ... must set forth specific facts showing that there is a genuine issue for trial." Iowa R.Civ.P. 237(e).

The summary judgment record here includes the pleadings, depositions, affidavits, and exhibits.

III. Higher Education Act.

The fighting issue on appeal is whether UNIPAC's denial of Fischer's request for a second year of internship deferment on two student loans violated federal law governing educational opportunity grants at postsecondary institutions. See 20 U.S.C. § 1077(a)(2)(C)(vii); 34 C.F.R. § 682.210(a)(7) (1993). Fischer claims the record clearly establishes that defendants knew or should have known he was eligible for the extended deferment. The district court concluded Fischer was not entitled to the second year deferment because the relevant statutory amendment became effective eleven days after he requested the deferment.

The Higher Education Act of 1965 (HEA) sets forth terms and conditions for student borrowers of federally insured educational loans. See generally 20 U.S.C. §§ 1070-1099. Section 1077(a)(2)(C) of the HEA provides for deferral of repayment obligations on such loans under certain circumstances. Fischer relies on the internship or residency provision which provides for a deferral period

not in excess of 2 years during which the borrower is serving an internship, the successful completion of which is required in order to receive professional recognition required to begin professional practice or service ..., or serving in an internship or residency program leading to a degree or certificate awarded by an institution of higher education, a hospital, or a health care facility that offers postgraduate training.

Id. § 1077(a)(2)(C)(vii) (emphasis added).

While Fischer concedes that on July 7 the degree or certificate provision did not apply to loans taken out before July 1, 1987, he argues that his attorney made additional requests for deferment after the July 18 amendment. See Higher Education Technical...