In re Rezendes
| Decision Date | 05 February 2004 |
| Docket Number | Adversary No. 02-6120.,Bankruptcy No. 02-61217 JPK. |
| Citation | 318 B.R. 436 |
| Parties | In re Stephen Allen REZENDES and L. Irene Rezendes, Debtors. Joint Apprenticeship Comm. of United Ass'n Local Union No 307 n/k/a Plumbers 210 Joint Apprenticeship and Journeyman Upgrade Trust Fund, Plaintiff, v. Stephen Allen Rezendes, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Indiana |
P. Jeffrey Schlesinger, Esq., Crown Point, IN, for defendant.
Thomas E. Moss, Esq., Paul T. Berkowitz & Associates, Ltd., Chicago, IL, for plaintiff.
In this case, initiated by complaint filed by the plaintiff Joint Apprenticeship Committee of United Association Local Union No. 307 n/k/a Plumbers Local Union 210 Joint Apprenticeship and Journeyman Upgrade Trust Fund ("JATC"), to which the defendant Stephen Allen Rezendes ("Rezendes") filed an answer on August 15, 2002, JATC seeks a determination that an obligation which it asserts against Rezendes is excepted from discharge under 11 U.S.C. § 523(a)(8). The Court has subject matter jurisdiction with respect to this adversary proceeding by operation of 28 U.S.C. § 1334(b), 28 U.S.C. § 157(a) and N.D.Ind.L.R. 200.1. This adversary proceeding constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(I).
Trial to the bench was conducted on July 24, 2003, and pursuant to the Court's order of July 31, 2003, the parties have submitted post-trial memoranda on certain of the issues presented to the Court in this case.
The principal issue in this adversary proceeding is whether or not the obligation asserted by JATC against Rezendes is excepted from discharge by operation of 11 U.S.C. § 523(a)(8). In response, Rezendes has raised the following issues:1
A. Did the alleged failure of a pre-supposed condition — that during his apprenticeship Rezendes would be able to find employment with a union plumbing contractor — cause agreements between JATC and Rezendes to become unenforceable under principles of contract law?
B. Did Rezendes enter into the subject agreements under duress?
The Court first compliments counsel for the parties on their pre-trial submissions and on their mutual cooperation concerning the submission of evidence at the trial. Counsel prepared a detailed pre-trial order which outlined the issues, clearly stated their respective contentions, and included stipulations as to certain facts and with respect to the admissibility of certain documents. At the trial, counsel continued to fully cooperate concerning issues regarding the admissibility of evidence, and both were respectful of each other and of their respective witnesses.
In sub-part C of their Pre-Trial Statement filed on July 23, 2003, the parties entered into certain stipulations of undisputed material facts. JATC is a "nonprofit institution" as that term is used in 11 U.S.C. § 523(a)(8), and the apprenticeship program run by JATC in which Rezendes was involved "is educational". Rezendes received the benefit of JATC's "training, instructors, services, supplies and materials for each school term," and he "entered into three apprenticeship scholarship loan agreements for the September 1997 to June 1998, September 1998 to June 1999, September 1999 to June 2000 school terms". Rezendes "thereafter breached the Scholarship Loan Agreements by accepting employment with non-signatory contractors". Due to "Rezendes' breach of his contractual obligations and his refusal to repay the monies owed pursuant to the parties' Scholarship Loan Agreements," JATC "incurred substantial legal fees and other expenses to pursue the collection of the amount due for which Defendant Rezendes was obligated to pay". JATC obtained a judgment against Rezendes in the United States District Court for the Northern District of Indiana on November 20, 2001 in case number 2:01-CV-409, in the amount of $6,254.60.
JATC derives its existence from provisions of collective bargaining agreements and trust fund agreements which have been entered into between Plumbers Local Union 210 and the plumbing contractor/employer entities which are signatories to those agreements; however, JATC is an entity which operates independently of Local 210, and it is not a subsidiary or affiliated entity with respect to the Local. Under the terms of those agreements, signatory employers fund JATC by means of payments they make independently of employment compensation paid to their employees, i.e., JATC is not funded by "checkoff" deductions made from employees' wages. The amount of these payments is provided for by the collective bargaining agreement; at time periods relevant to this case, the funding rate was $0.65 per hour for each hour worked for a signatory union employer by a journeyman plumber having 2-5 years of experience. The funding rate has been adjusted as part of negotiated collective bargaining agreements, to seek to make certain that JATC received funds sufficient for its operation. This means of funding is the exclusive source of revenue for JATC, with the exception of some interest earned on certificates of deposit and accounts into which JATC deposits certain of its funds until the funds are needed to operate its program.
JATC operates an apprentice training program by which individuals receive training as plumbers and pipefitters. The program is a five-year program; upon the completion of the program, the student will receive an Associate's Degree in Applied Science and will be a licensed journeyman plumber with the State of Indiana. During the years in which an individual participates in the program, students practice the trade by being employed by union signatory contractors and are paid at the rate of compensation stated in the collective bargaining agreement for their services. The students are not paid for the class time and training time during their attendance at JATC's program sessions. The training sessions involve both classroom instruction and hands-on training in the manual aspects of plumbing and pipefitting, and the "school year" is typically from late August through the end of May. Participation in the JATC program is required for individuals who wish to obtain employment through Plumbers Local Union 210 with a signatory employer, except in rare instances in which a State-licensed plumber/pipefitter who had previously worked for a nonunion contractor and possesses the level of experience which would have been obtained in the program, joins the union.
The school operated by JATC provides the physical structure in which the school is operated, which it leases; instructors; textbooks; supplies for hands-on classroom work; and the other items of overhead incurred in the operation of the program. Students are not charged a fee for attendance. However, the annual cost of providing each student with training — determined by dividing the estimated annual cost for the operation of the JATC program by the number of students in the program (usually approximately 50) — is the subject of an agreement which each student is required to sign at the beginning of each new training year. Tom Thiel, the training director for Plumbers Local 210, testified that JATC considers the provision of the costs of training to students to be a form of scholarship or extension of credit. Mr. Thiel also testified that no money or other funds are actually given directly to the apprentices.
At the beginning of each training year, apprentice trainees are required to sign a document entitled "Apprentice Scholarship Agreement Between Apprentice and Joint Apprenticeship Committee"; Rezendes signed three of these agreements, one for each of the respective training periods: September 1997 to June 1998, September 1998 to June 1999, and September 1999 to June 2000. For each of the designated training periods, Rezendes also signed a document entitled "Apprentice Promissory Demand Note for Scholarship Loan Agreement". Because these documents so clearly and specifically describe the arrangement between the parties at issue in this case, those documents are attached to this opinion as Group Exhibit "A" rather an extending this opinion with a recitation of numerous of the specific provisions of those documents.
As provided in paragraph 4 of the attached annual agreements, the amounts of the estimated annual training costs apportionable to each apprentice may be repaid either in cash or in-kind credits. As stated in paragraph 7 of each of the agreements, for each year that an apprentice works "pursuant to a collective bargaining agreement for an Employer making payments to the committee or a like Joint Apprenticeship Committee or Training Committee", the amount of the apprentice's obligation on the notes is reduced in accordance with the schedules stated in the notes. Thus, for every year that an apprentice accepts only employment with a signatory union contractor, the apprentice's obligation for repayment of the notes is reduced commensurately. However, as stated in paragraph 6 of each of the agreements, a breach of the agreement occurs "if the Apprentice accepts employment in the Plumbing and Pipe Fitting Industry from an Employer who does not have a collective bargaining agreement which provides for the payment of contributions to the Committee or like Joint Apprenticeship Committee". Paragraph 8 of each of the agreements provides that if a breach occurs, "all amounts due and owing on the Scholarship Loan, reduced by an [sic] credit received by the Apprentice pursuant to Paragraph 7 hereof, or by any cash payments made, will become immediately due and payable", together with interest, attorney's fees and court costs.
An apprentice cannot participate in the JATC program unless he/she signs the required note and agreement. As stated in paragraph 6 of the agreements, and as Mr. Thiel testified on ...
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In re Capron
...like the training in this case, was not an educational loan. In re Rezendes, 324 B.R. 689 (N.D.Ind.2004), aff'g In re Rezendes, 318 B.R. 436 (Bankr.N.D.Ind.2004). In that case, the debtor executed a series of three scholarship loan agreements with a JATC to receive technical training in the......