Franklin College v. Turner

CourtCourt of Appeals of Indiana
Citation844 N.E.2d 99
Docket NumberNo. 03A04-0508-CV-488.,03A04-0508-CV-488.
PartiesFranklin COLLEGE, Appellant-Plaintiff, v. Shannon B. TURNER, Appellee-Defendant.
Decision Date27 February 2006

Howard Howe, Indianapolis, for Appellant.


NAJAM, Judge.


Franklin College ("Franklin") appeals from the trial court's denial of its motion to correct error in an action to collect on a delinquent student loan from Shannon B. Turner. Franklin presents two issues for review, which we restate as:

1. Whether the trial court failed to comply with applicable federal regulations when it denied Franklin's motion for summary judgment on the amount of attorney's fees1 that Franklin had requested.

2. Whether the trial court erred when it awarded attorney's fees.

We affirm.


Between March 8, 1994, and January 30, 1996, Franklin advanced student loans to Turner under the Federal Perkins Loan Program. Turner executed a promissory note, signing each time Franklin advanced loan funds. After Turner's loan became delinquent, Franklin filed a complaint on the note. Franklin served on Turner requests for admission under Indiana Trial Rule 36 at the same time it served the complaint. Turner did not respond to the discovery request, but wrote a letter to the trial court admitting to the debt and agreeing to pay the debt under whatever terms the court deemed appropriate.

Franklin filed a motion for summary judgment, requesting judgment in the amount of $8773.34 plus per diem interest. The requested judgment amount was calculated as follows: $4138.36 principal, $259.98 interest, $111 costs, and $4375 "[c]ollection costs and attorney fees." Appellant's App. at 20. The trial court granted summary judgment in part, as to the principal, interest, and $111 costs requested, but it denied the motion as to the collection costs requested and awarded only $420 for attorney's fees. The trial court denied Franklin's motion to correct error, and this appeal ensued.


We review the trial court's decision to grant or deny a motion to correct error for abuse of discretion. Sears Roebuck and Co. v. Noppert, 705 N.E.2d 1065, 1067 (Ind.Ct.App.1999), trans. denied. An abuse of discretion will be found when the trial court's action is against the logic and effect of the facts and circumstances before it and the inferences which may be drawn therefrom. Gregor v. State, 646 N.E.2d 52, 53 (Ind.Ct.App.1994).

Initially, we note that Turner has failed to file an appellee's brief. In such a case, we need not undertake the burden of developing arguments for Turner. Butrum v. Roman, 803 N.E.2d 1139, 1142 (Ind.Ct.App.2004), trans. denied. Applying a less stringent standard of review, we may reverse the trial court if the appellant establishes prima facie error. Id. "Prima facie" is defined as "at first sight," "on first appearance," or "on the face of it." Id.

Issue One: Federal Regulations

Franklin contends that the trial court erred when it denied Franklin's motion for summary judgment on the attorney's fees requested. When reviewing summary judgment, this court views the same matters and issues that were before the trial court and follows the same process. Estate of Taylor ex rel. Taylor v. Muncie Med. Investors, L.P., 727 N.E.2d 466, 469 (Ind.Ct.App.2000), trans. denied. We construe all facts and reasonable inferences to be drawn from those facts in favor of the non-moving party. Jesse v. Am. Cmty. Mut. Ins. Co., 725 N.E.2d 420, 423 (Ind.Ct.App.2000), trans. denied. Summary judgment is appropriate when the designated evidence demonstrates that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). The purpose of summary judgment is to terminate litigation about which there can be no material factual dispute and which can be resolved as a matter of law. Zawistoski v. Gene B. Glick Co., 727 N.E.2d 790, 792 (Ind.Ct. App.2000).

Franklin first maintains that the trial court erred by denying summary judgment as to the request for collection costs because federal regulations authorize the collection costs requested. Franklin also asserts that the Indiana Trial Rule 36 admissions made by Turner establish all material facts supporting the judgment as prayed for as a matter of law. We address each contention in turn.

Franklin argues that federal regulations "dictate[] collections costs and [that] the trial court had no authority to substitute its thought on this subject." Appellant's Brief at 4. United States Code Title 20 addresses collections regarding federal student loans. 20 U.S.C. § 1091a(b)(1) provides: "Notwithstanding any provision of State law to the contrary[,] a borrower who has defaulted on a loan made under [United States Code Title 20] shall be required to pay, in addition to other charges specified in this title, reasonable collection costs ...."

When a postsecondary school institutes an action to collect on a delinquent Perkins loan, 34 C.F.R. § 674.46(b) provides that the institution "shall assess against and attempt to recover from the borrower (1)[a]ll litigation costs, including attorney's fees, court costs and other related costs, to the extent permitted under applicable law; and (2)[a]ll prior collection costs incurred and not yet paid by the borrower." The regulations also provide the formula to determine collection costs accrued prior to the filing of the collection action:

The institution shall determine the amount of collection costs that shall be charged to the borrower for actions required under this section, and §§ 674.44 [address searches], 674.46 [litigation procedures], 674.48 [use of contractors to perform billing and collection or other program activities], and 674.49 [bankruptcy of borrower], based on either —

(i) Actual costs incurred for these actions with regard to the individual borrower's loan; or

(ii) Average costs incurred for similar actions taken to collect loans in similar stages of delinquency.

34 C.F.R. § 674.45(e)(2).

A postsecondary institution need not pursue a collection action itself. Instead, it has the option of assigning the account to the Secretary of Education for collection or to a collection firm. 34 C.F.R. §§ 674.45(c)(1)(iii), 674.45(a)(2)(ii). In the event that the Secretary institutes an action to recover a delinquent federal student loan, federal regulations dictate how to calculate collection costs and when such costs may be imposed:

(b) Notwithstanding any provision of State law, if the Secretary uses a collection agency to collect a debt on a contingent fee basis, the Secretary charges the debtor, and collects through the agency, an amount sufficient to recover—

(1) The entire amount of the debt; and

(2) The amount that the Secretary is required to pay the agency for its collection services.


(1) The amount recovered under paragraph (b) of this section is the entire amount of the debt, multiplied by the following fraction: 1/1-cr

(2) In paragraph (c)(1) of this section, cr equals the commission rate the Department pays to the collection agency.

34 C.F.R. § 30.60(b), (c).

Franklin contends that the collection costs it may recover are to be calculated using the formula set out in 34 C.F.R. § 30.60. But we agree with the trial court that 34 C.F.R. § 30.60 is not the regulation that applies in this case. 34 C.F.R. § 30.60 defines collection costs for cases in which the Secretary of Education is collecting the delinquent student loan.2 Here, Franklin, a postsecondary institution, did not assign the account but litigated to collect the delinquent loan. Thus, Franklin's collection costs must be calculated as directed under 34 C.F.R. § 674.46(b), as further defined by 34 C.F.R. § 674.45(e)(2).

Having determined the applicable federal regulations, we next consider whether the trial court complied with those regulations when it determined the attorney's fees award to be $420. We have already noted that the calculation of attorney's fees in this case is governed by 34 C.F.R. Part 674. And, as we have also noted, the institution that litigates to recover a delinquent Perkins loan "shall assess against and attempt to recover from the borrower [a]ll litigation costs, including attorney's fees, court costs, and other related costs, to the extent permitted under applicable law ...." 34 C.F.R. § 674.46(b)(1).

Franklin argues that the federal law and regulations, not state law, control the determination of the attorney's fee award. We cannot agree. The opinion of Trustees of Tufts College v. Ramsdell, 28 Mass.App. Ct. 584, 554 N.E.2d 34 (1990), review denied, is instructive, and provides in relevant part:

20 U.S.C. § 1087dd(c)(1)(H) requires that any agreement between an educational institution and a student receiving a Perkins loan include a provision for the student to pay a charge for failing to pay an installment when due including "the expenses reasonably incurred in attempting collection of the loan ...." 20 U.S.C. § 1091a(b) (1988) provides in pertinent part: "Notwithstanding any provision of State law to the contrary ... a borrower who has defaulted on a loan made under this subchapter ... shall be required to pay... reasonable collection costs ...." The Secretary of Education (Secretary) promulgated regulations under the statute which appear in 52 Fed.Reg. 45552 (1987). Title 34 C.F.R. § 674.45 (1989) is entitled "Collection procedures," and 34 C.F.R. § 674.46 (1989) is entitled "Litigation procedures."

The regulation relating to "collection procedures" provides that when a student defaults, an educational institution must report the defaulted account to a credit bureau and collect the account either by using the institution's own personnel or by engaging a collection firm for that purpose. If a collection firm is used, "the institution shall assess against the borrower all reasonable costs incurred by the institution with regard to [the] loan...

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