In re Renshaw, Bankruptcy No. 97-60985
| Decision Date | 05 February 1999 |
| Docket Number | Adversary No. 97-70114A.,Bankruptcy No. 97-60985,BAP No. 98-50024 |
| Parties | In re Kevin RENSHAW, Debtor. Cazenovia College, Plaintiff-Appellee, v. Kevin Renshaw, Defendant-Appellant. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Tenth Circuit |
COPYRIGHT MATERIAL OMITTED
Stephen M. O'Neill, Lacy, Katzen, Ryen & Mittleman, LLP, Rochester, New York, for Cazenovia College, plaintiff-appellant.
Robert H. Lawler, Dewitt, New York, for Kevin Renshaw, debtor-appellee.
Before: NINFO, GALLET and BUCKI, JJ.
This appeal arises from the March 9, 1998 Memorandum-Decision, Findings of Fact, Conclusions of Law and Order of Chief Bankruptcy Judge Stephen D. Gerling of the United States Bankruptcy Court for the Northern District of New York (the "Bankruptcy Court Order"). The Bankruptcy Court Order: (1) denied a Motion for Summary Judgment brought by Cazenovia College ("Cazenovia"); and (2) dismissed the Complaint of Cazenovia in its "Adversary Proceeding" against the debtor, Kevin Renshaw ("Renshaw"), to have a debt determined to be nondischargeable pursuant to Section 523(a)(8).1 The Motion was denied and the Complaint dismissed because the Court found that the debt due to Cazenovia was not the result of an educational benefit overpayment or an educational loan made by Cazenovia to Renshaw as part of a program. For the reasons set forth below, we AFFIRM the Bankruptcy Court Order.
On February 8, 1992, Renshaw, then a high school senior, signed and returned to Cazenovia a "Reservation Agreement" which had been previously executed on behalf of Cazenovia by its Vice-President/Enrollment Manager. By executing the Reservation Agreement, which incorporated certain provisions from Cazenovia's "Catalog," Renshaw, and all other incoming students, agreed: (1) to pay a $285.00 reservation fee when the executed Reservation Agreement was returned; (2) to pay $1,695 for tuition, room and board for the 1992 summer session, or whatever charges were in effect on the date of registration for the summer session; (3) to pay $12,980 for tuition, room and board for the 1992-93 academic year, or whatever charges were in effect on the dates of registration for the Fall 1992 and Spring 1993 Semesters; (4) to be bound by the Refund Policy set forth on the back of the Reservation Agreement; (5) as required by the Catalog, to pay the tuition, room and board due for the Fall 1992 semester by no later than September 1, 1992, and the tuition, room and board due for the Spring 1993 semester by no later than January 1, 1993; (6) as specifically provided in the Catalog that "no student may register, graduate, receive grades or transcript of school records, or participate in room drawing until all family payments owed to the college have been made"; and (7) as required by the Catalog, to pay a "Service Charge" of 1.6% per month with an effective annual rate of 19.2%, if any amounts due on his student account, including tuition, room and board, were not paid by the due date as billed. By executing the Reservation Agreement, it does not appear that Cazenovia agreed or promised to do anything except: (1) to hold a place for Renshaw for the Summer Session and the 1992-1993 Academic Year, provided that he paid the amounts billed on his student account when due; and (2) not to charge Renshaw more for tuition, room and board than the amount in effect on any applicable registration date if those amounts were paid when due.
Although Renshaw did not pay the charges for tuition, room and board when due, Cazenovia allowed him to register, live and eat at the college and attend classes for the 1992 Summer Session and the 1992 Fall Semester. However, he did not return for the Spring 1993 Semester.
On March 17, 1993, after all payments and credits2 were made to his student account, Renshaw still owed Cazenovia $5,027.16.3 On December 4, 1996, Cazenovia obtained a Default Judgment against Renshaw (the "Cazenovia Judgment") in the amount of $9,999.87, which included a total of $3,169.99 in accrued Service Charges at 19.2% per annum from July 1993 and an attorney fee award of $1,339.18.
On February 25, 1997, Renshaw filed a petition initiating a Chapter 7 case, and on May 8, 1997, Cazenovia filed its Complaint initiating the Adversary Proceeding.
The issue presented by the parties on appeal is whether the Bankruptcy Court erred in determining that the amounts due on the Cazenovia Judgment were dischargeable because they were not, as required by Section 523(a)(8),4 a debt for an educational benefit overpayment or loan made by Cazenovia as part of a funded program.5
Rule 8013 of the Federal Rules of Bankruptcy Procedure determines this Panel's review of a Bankruptcy Judge's judgment, order or decree.6 Accordingly, a Bankruptcy Court's findings of fact may not be set aside unless clearly erroneous, and a Bankruptcy Judge's legal conclusions are reviewed de novo. Maxwell Communication Corp. v. Societe Generale (In re Maxwell Communication Corp.), 93 F.3d 1036 (2nd Cir.1996).
The granting of a motion for summary judgment is also reviewed de novo. Sierra Steel, Inc. v. S & S Steel Fabrication (In re Sierra Steele, Inc.), 96 B.R. 271, 273 (9th Cir. BAP 1989); Bender v. Tobman (In re Tobman), 107 B.R. 20, 22 (S.D.N.Y.1989).
In the Bankruptcy Court Order, Judge Gerling found that in order for the Cazenovia Judgment to be excepted from discharge, Cazenovia, a nonprofit institution, was required to show, by a preponderance of the evidence, that it had made an educational benefit overpayment or an educational loan to Renshaw as part of a program, and he determined that Cazenovia had not met its burden to show that the debt was an educational benefit overpayment or educational loan and incurred as part of a program.
We agree with the Bankruptcy Court that in 1990 when Congress amended Section 523(a)(8),7 it extended nondischargeability to debts for educational benefit over-payments made, but not for any debt which may have resulted from the debtor having received some consideration which could be considered to be an educational benefit.8 To hold that Section 523(a)(8), as amended, extends to debts for all educational benefits would not be consistent with either the legislative history to the 1990 Amendment or a plain reading of the statute, as amended.9
We also agree with the Bankruptcy Court that when Cazenovia provided Renshaw with certain goods and services (classes, room and board), which resulted in an unpaid balance due on Renshaw's student account, it did not make an educational loan which would be nondischargeable under Section 523(a)(8).
As a starting point to determine whether a transaction is a loan, we look to the commonly accepted definition used by the United States Court of Appeals for the Second Circuit in In re Grand Union Co., 219 F. 353 (2nd Cir.1914) ("Grand Union").10 This definition requires that the lender and borrower intended the transaction in question to be a loan transaction, rather than, for example, a contract for the sale of goods and services for cash or as a credit sale, and that, in substance, there has been a transfer of funds from the lender to the borrower which the borrower has agreed to repay.
We believe that a plain reading of the Reservation Agreement, an agreement drafted by Cazenovia, indicates that when it was forwarded to Renshaw by the enrollment department, not the financial aid office, it was nothing more than an offer by Cazenovia to sell him, and the other incoming students, goods and services (classes, room and board) at the specific prices stated in the Agreement, or those in effect on any of the three registration dates referred to in the Agreement. The Reservation Agreement provided that: (1) the sales of the goods and services were to be cash sales because the amounts were to be paid in advance on or before the applicable registration date; (2) Cazenovia reserved the right to unilaterally extend any of the payment due dates and provide all or a portion of the goods and services on credit, thereby converting the contemplated cash sales into credit sales; and (3) in the event that Cazenovia exercised its unilateral right to convert the contemplated cash sales into credit sales, it could bill Renshaw for any unpaid portion of the sales price together with a Service Charge at the rate of 19.2% per annum.
When Renshaw executed and returned the Reservation Agreement, the parties had, at most, entered into a contract for the sale of goods and services for cash in advance, or, at Cazenovia's sole option, a credit sale11 should Renshaw fail to complete the terms of the cash sales by paying the sales prices on or before the applicable registration date. This contract was enforceable by Cazenovia once it had provided Renshaw with all or any portion of the goods and services contracted for (classes, room or board).
We agree with the Bankruptcy Court that Cazenovia and Renshaw intended the transaction evidenced by the Reservation Agreement to be a contract for the sale of goods and services, and not an educational loan, for several reasons.
First, the Reservation Agreement, by incorporating the terms of the Catalog, specifically provided that, if Renshaw failed to complete the contemplated cash sales by paying the amounts due for tuition, room and board on or before any registration date and Cazenovia unilaterally elected to convert the cash sale into a credit sale, the unpaid purchase price would accrue Service Charges at 19.2% per annum. This provision for Service Charges at a rate in excess of the 16% per annum interest permitted for loans by Section 5-501 of the New York General Obligations Law (the "General Obligations Law"), clearly indicated that Cazenovia intended this transaction to be a...
To continue reading
Request your trial