Grider v. Cavazos

• Decision Date: 20 September 1990
• Docket Number: No. 90-8166,90-8166
• Citation: 911 F.2d 1158
• Parties: -5631, 90-2 USTC P 50,512, 62 Ed. Law Rep. 485 David GRIDER and Leon Gladecki, Plaintiffs-Appellants, v. Lauro CAVAZOS, Secretary of the United States Department of Education, Defendant-Appellee. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1158

911 F.2d 1158

66 A.F.T.R.2d 90-5631, 90-2 USTC P 50,512,

62 Ed. Law Rep. 485

David GRIDER and Leon Gladecki, Plaintiffs-Appellants, v. Lauro CAVAZOS, Secretary of the United States Department of

Education, Defendant-Appellee.

No. 90-8166

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Sept. 20, 1990.

Fred Fuchs, Legal Aid Soc. of Cent. Texas, Austin, Tex., for plaintiffs-appellants.

Janet E. Bauerle, Asst. U.S. Atty., Ronald F. Ederer, U.S. Atty., San Antonio, Tex., Barbara C. Biddle, U.S. Dept. of Justice, Civil Div., Jennifer H. Zacks, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Western District of Texas.

Before GEE, SMITH and WIENER, Circuit Judges.

WIENER, Circuit Judge:

Appellants, David Grider ("Grider") and Leon Gladecki ("Gladecki") appeal the district court's grant of summary judgment in favor of Lauro Cavazos, in his capacity as Secretary of the United States Department of Education ("Secretary"), dismissing Grider's and Gladecki's declaratory judgment action that sought to recover tax refunds intercepted by the Internal Revenue Service ("IRS"). ¹ Grider's and Gladecki's overpayments of income taxes had been offset in partial satisfaction of their defaulted student loans. Also appealed is the district court's grant of summary judgment in favor of the Secretary on his counterclaim against Gladecki for the unpaid balance of his student loan.

I.

The parties stipulated to the following undisputed facts:

1. On January 9, 1974, Grider executed a promissory note to Sinclair Community College under the National Direct Student Loan ("NDSL") Program to attend said institution. In the note, Grider promised to pay the lending institution the sum of such amounts as were advanced to him and endorsed in the schedule of advances, together with all attorneys' fees and other costs and charges necessary for the collection of any amount not paid when due.

2. Grider received the following four advances: $300.00 on January 9, 1974; $69.50 on March 25, 1974; $160.50 on March 25, 1974; and $70.00 on May 1, 1974. The amount of the advances totaled $600.00.

3. Grider defaulted on the promissory note on October 1, 1975.

4. On July 20, 1979, Grider's defaulted note was assigned by Sinclair Community College to The Department of Education (the "Department").

5. From July 11, 1968, through May 20, 1969 Gladecki executed promissory notes to Yale University under the NDSL Program to attend said institution. In the notes, Gladecki promised to pay the lending institution a sum of such amounts as were advanced to him and endorsed in the schedule of advances, together with interest and all costs of collection, including reasonable attorneys' fees.

6. Gladecki received the following advances: $300.00 on July 11, 1968; $200.00 on January 9, 1969; $400.00 on May 22, 1969; and $625.00 on August 13, 1969. Gladecki received advances totaling $1,525.00.

7. Gladecki defaulted on the promissory notes on April 2, 1971.

8. On May 31, 1979, Gladecki's defaulted note was assigned by Yale University to the Department.

9. The IRS offset Grider's tax refund in the amount of $805.35 for taxable year 1986, which was credited by the Department to Grider's student loan account on or about March 9, 1987.

10. The outstanding balance owed by Grider as of October 30, 1989, was $4.69. The outstanding balance includes principal in the amount of $3.24, interest in the amount of $0.30, and a collection fee of $1.15.

11. The IRS offset Gladecki's tax refund in the amount of $317.25 for taxable year 1986, which was credited by the Department to Gladecki's student loan account on or about March 4, 1988.

12. The outstanding balance owed by Gladecki as of October 30, 1989, was $1,536.59. The outstanding balance includes principal in the amount of $1,215.00, interest in the amount of $316.34, and a collection fee of $5.25.

13. At the time of the offsets cited above the Secretary had not sued and obtained judgments against Grider or Gladecki for the amounts of their defaulted loans.

II.

Grider and Gladecki filed suit in state court in Texas, challenging the intercept of their income tax refunds for 1986. The Secretary removed the case to the district court, and subsequently filed an answer as well as a counterclaim against Gladecki for the remaining balance on his defaulted student loans. Gladecki answered the counterclaim, asserting that it was barred by the statute of limitations and, alternatively, that the Secretary's recovery could not exceed Gladecki's recovery. After the parties stipulated the facts set forth above, each filed motions for summary judgment (the Secretary did not actually file a motion for summary judgment but filed a memorandum in support of his cross motion for summary judgment).

On December 7, 1989, the district court signed a final judgment denying Grider's and Gladecki's summary judgment, granting the Secretary's cross-motion for summary judgment, thereby entitling the Secretary to retain the offsets to Grider's and Gladecki's tax refunds, and granting the Secretary's counterclaim against Gladecki for all sums remaining unpaid under his student loans. Grider and Gladecki filed timely notices of appeal.

III.

This court reviews the grant of summary judgment motion de novo, using the same criteria used by the district court in the first instance. Walker v. Sears, Roebuck & Co., 853 F.2d 355, 358 (5th Cir.1988). We "review the evidence and inferences to be drawn therefrom in the light most favorable to the non-moving party." Baton Rouge Bldg. & Constr. Trades Council v. Jacobs Constructors, Inc., 804 F.2d 879, 881 (5th Cir.1986) (per curiam) (citing Southmark Properties v. Charles House Corp. 742 F.2d 862, 873 (5th Cir.1984)). Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "Material facts" are "facts that might affect the outcome of the suit under the governing law." Id.

The creditor on a delinquent student loan may assign it to the Secretary. The Secretary may file suit for a money judgment against the borrower at any time during the first six years following the date on which the student loan is assigned, transferred or referred to the Secretary. 20 U.S.C. Sec. 1091a(a)(4)(C). In the instant case A Federal agency that is owed a "past-due legally enforceable debt" may refer the debt to the IRS for tax intercept. 31 U.S.C. Sec. 3720A(a), (d); 26 U.S.C. Sec. 6402(d). Neither of the cited statutes defines "legally enforceable debt." Because the Grider and Gladecki debts had been assigned more than six years earlier and thus were not legally enforceable by lawsuit, the Secretary could only prevail in this case if the debts in question were "legally enforceable" by some means other than a lawsuit for a money judgment, and then only if such other means were employed before they became time barred.

no such suit was filed within six years following the assignment of either the Grider or the Gladecki loans.

The statute authorizing offset by tax intercept directed the Secretary of the Treasury to issue regulations prescribing the time or times at which agencies must submit notices of past due legally enforceable debts, the manner in which such notices must be submitted, and the necessary information that must be contained in or accompany the notices. 31 U.S.C. Sec. 3720A(d). Accordingly, a Treasury Regulation, 26 C.F.R. Sec. 301.6402-6(T)(b)(2) (the "Regulation"), was enacted. Among other things it defined "past-due legally enforceable debt" and established a ten-year period of limitation. In pertinent part, the Regulation states:

(b) Past-due legally enforceable debt eligible for refund offset. For purposes of this section, a past-due legally enforceable debt which may be referred by a Federal agency to the Service for offset is a debt--

. . . . .

(2) Which, except in the case of a judgment debt, has been delinquent for at least three months but has not been delinquent for more than ten years at the time the offset is made; (emphasis in original).

The courts have recognized correctly that, for purposes of the IRS offset collection procedure, the fact that a suit for a money judgment on an unpaid education loan may be time barred by the six-year statute of limitations does not prevent it from being a "past-due legally enforceable debt." See Thomas v. Bennett, 856 F.2d 1165 (8th Cir.1988); Hurst v. U.S. Dept. of Educ., 695 F.Supp. 1137 (D.Kan.1988), aff'd, 901 F.2d 836 (10th Cir.1990). To the contrary, such a debt continues to meet the definition, and thus be eligible for offset collection through intercept, for a period of ten years following the date upon which it became "delinquent."

All parties to the instant case concede that the six-year statute of limitations has long since barred the Secretary from filing suits for money judgments against Grider and Gladecki. Their debts, then, could only be classified as "past-due legally enforceable" for purposes of tax intercept if they had not been delinquent for more than ten years prior to the time the IRS executed the intercept.

As stipulated, both loans had been assigned to the Secretary more than eight years prior to the tax intercept. Moreover, Gladecki's loans had been delinquent for more than fifteen years, and Grider's loan had been delinquent for more than eleven years. How, then, could the district court reject Grider's and Gladecki's motion for summary judgment and sustain the validity of the intercept...