In re Frech, Bankruptcy No. 3-83-1879
| Decision Date | 28 May 1986 |
| Docket Number | Bankruptcy No. 3-83-1879,Adv. No. 3-84-0003. |
| Citation | 62 BR 235 |
| Parties | In re Steven Jacob FRECH, Debtor. NORTH DAKOTA STATE BOARD OF HIGHER EDUCATION, Plaintiff, v. Steven Jacob FRECH, Defendant. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
Rick D. Johnson, Asst. Atty. Gen., Bismarck, N.D., for plaintiff.
Freya O. Hanson, Pine Island, Minn., for defendant.
This adversary proceeding came on before the undersigned United States Bankruptcy Judge for trial at St. Paul, Minnesota, on April 24, 1986. Plaintiff appeared by its attorney, Rick D. Johnson, Assistant Attorney General. Defendant Steven Jacob Frech (hereinafter "Debtor") appeared personally and by his attorney, Freya O. Hanson. Upon the evidence adduced at trial, trial briefs, arguments of counsel, and all of the other files, records, and proceedings herein, the Court makes the following Findings of Fact, Conclusions of Law, and Order for Judgment.
Debtor is a doctor of veterinary medicine who filed a Voluntary Petition under Chapter 7 of the Bankruptcy Code in this Court on November 4, 1983. Debtor's bankruptcy schedules alleged that on that date he had no debt entitled to priority under the Bankruptcy Code, and only one secured debt, a loan from Norwest Bank Minneapolis secured by a 1983 Ford Ranger pickup truck. A complete summary of Debtor's scheduled unsecured debts is as follows:
State of North Student Loan $20,276.22
Dakota Board of
Higher
Education
Bank of North Student Loan 17,173.49
Dakota
United Accounts, Open Account 262.14
Inc
Souris River Open Account 240.34
Telephone Co
Sears Open Account 627.73
__________
Total $38,579.92
The first debt noted above is the subject of these adversary proceedings. Plaintiff1 is a governmental entity of the State of North Dakota. It holds four promissory notes in its favor executed by Debtor, which are summarized as follows:
Original Principal
Date Amount
September 19, 1978 $3,456.00
September 17, 1979 3,879.00
September 29, 1980 4,200.00
June 15, 1981 6,185.00
Pursuant to their terms, all of these notes bear interest at the rate of 4% per year. The total principal and interest outstanding on these notes as of August 23, 1985, was $21,457.86; with interest accruing since that date, the total outstanding balance as of April 24, 1986 was $21,932.36.
Debtor is a thirty-five-year-old single man who at the date of trial resided in Princeton, Minnesota. He has no obligation of support to an ex-spouse or minor children. He is a native of Washington State, having graduated from high school there in 1968. He is a veteran of the United States Army, having served two years, six months in the Army Veterinary Service both in the United States and overseas.
Since his high school graduation, Debtor has been employed as a cabinet-maker and as a laborer and manager in several agricultural supply businesses; he has also worked at various odd jobs. He attended a total of approximately four years of college classes at Everett, Washington Community College and North Dakota State University at Fargo in the mid-1970's. In 1977 he applied for admission to veterinary school through the "Reciprocal Higher Education Agreement" program established by the North Dakota State Legislature.2 Under this program, he was accepted for admission by the University of Minnesota Veterinary School. He commenced a four-year course of study there in the fall of 1978, and graduated with a D.V.M. degree in 1982.
The "Reciprocal Program" was established in the mid-1950's. Neither of the North Dakota state university systems has a veterinary school; thus, the North Dakota Legislature created the "Reciprocal Program" to allow North Dakota state residents access to veterinary medicine programs in the state university systems of neighboring states. North Dakota negotiates reservations of a set number of positions in each entering class in participating veterinary schools. Under the program, a North Dakota resident accepted into an out-of-state veterinary school pays the instate tuition rate to that school, and the State of North Dakota reimburses the school for the difference between the instate and out-of-state tuition rates. In 1963, the State of North Dakota enacted a requirement that all participating students execute promissory notes in favor of the State of North Dakota at yearly intervals for all amounts so disbursed by it. Under the notes and the terms of the "Policy Manual" for the program, the State of North Dakota gave the prospective veterinarian the opportunity to obtain a partial or full forgiveness of liability on the note by returning to North Dakota and practicing there for a period of one to three years. If the veterinarian did not elect to do so, Plaintiff scheduled the note for repayment over a term of years. Prior to October, 1982 the maximum length of this term under Plaintiff's "policies" was three years; thereafter it was six years. By legislation approved on March 4, 1983, the North Dakota Legislature abolished the note requirement entirely for students entering or continuing in veterinary and other professional programs after that date. However, this legislation provided:
Section 2. For notes executed prior to July 1, 1983, the provisions of section 15-10-28.1 of the North Dakota Century Code as it exists on June 30, 1983, shall govern until the terms of such notes are fulfilled.
N.D.Sess.L.1983, ch. 198. Under this provision, all pre-July 1, 1983 notes were not forgiven and were to be enforced by the North Dakota State Board of Higher Education.
Debtor executed the four aforementioned notes pursuant to the statutory provisions in effect when he was in veterinary school. He also financed his course of study through G.I. Bill assistance for his first two years of study, and through federally insured student loans from the Bank of North Dakota.
Upon graduation, Debtor decided to return to North Dakota to commence his veterinary practice. His job search revealed only one opening for a new veterinary graduate, a position with an established veterinarian in Towner, North Dakota.3 He was offered and given this position at an annual salary of $22,000.00. After practicing several months with this veterinarian, Debtor became dissatisfied with what he perceived as grossly unsanitary working conditions, lack of concern over sanitary measures in treatment, and a lack of professional standards in the performance of certain semi-official duties, though he now acknowledges that this employer's quality of medical treatment was "all right." His growing dissatisfaction caused Debtor considerable stress; he finally concluded that his working and living conditions were intolerable. After eight months on this job he resigned, before locating new employment.4 After another search, Debtor concluded he would not find another veterinary position in North Dakota; he then took employment with a veterinarian in Pine Island, Minnesota at an annual salary of $18,000.00. The bulk of the Pine Island practice was in "large animal" veterinary services; his new employer required Debtor to purchase a pick-up truck and furnish it with a "veterinary unit" for the transportation, storage, and maintenance of his veterinary implements, refrigeration equipment, and water supply. Debtor purchased a brand-new pick-up truck with four-wheel drive and a new "veterinary unit"; he had to obtain financing for both purchases.5
Debtor was laid off from this employment in April, 1984, after his employer concluded that his practice was not generating sufficient income to retain a second veterinarian. From April, 1984 through the date of trial Debtor was employed in a three-veterinarian practice in Princeton, Minnesota, again mainly in "large animal" treatment, at an annual salary of $24,000.00. At trial he testified that he had just submitted his resignation from this position, to be effective May 2, 1986. He did this because his employer had advised him that he would not be able to give Debtor a pay raise for at least three years. Debtor now intends to seek employment in "small animal" veterinary practices in the Minneapolis-St. Paul urban area; as of the date of trial he also had interviewed with one or more rural Minnesota veterinarians with "large animal" practices. Debtor has allowed his North Dakota veterinary licensure to lapse and he is now licensed only in Minnesota.
At trial Debtor declined to state whether he himself would demand any particular salary level for a new job. He believes that, were he to continue to practice as an employee of another established veterinarian, he could expect never to make more than the present equivalent of $30,000.00 per year. It does appear, however, that his prospects for finding employment with an established veterinarian have been improved by his four years of practical experience. Debtor's only other option in veterinary medicine is to establish his own practice. He does not believe that this alternative is feasible for him, given the large initial capital requirements and the negative effect which his bankruptcy filing has had on his personal creditworthiness. Plaintiff's own witness, the North Dakota State Veterinarian, admitted that income prospects in the near future for rural veterinarians in the Upper Midwest are marginal to poor, given the continued erosion of the agricultural economy and the...
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