United States v. Olavarrieta

• Decision Date: 09 April 1986
• Docket Number: No. 85-0438-Civ-Spellman.,85-0438-Civ-Spellman.
• Citation: 632 F. Supp. 895
• Parties: UNITED STATES of America, Plaintiff, v. Jose OLAVARRIETA, Defendant/Third Party Plaintiff, v. The BOARD OF REGENTS OF the DIVISION OF UNIVERSITIES OF the FLORIDA DEPARTMENT OF EDUCATION and/or the University of Florida, Third Party Defendant.
• Court: U.S. District Court — Southern District of Florida

632 F. Supp. 895

UNITED STATES of America, Plaintiff, v. Jose OLAVARRIETA, Defendant/Third Party Plaintiff, v. The BOARD OF REGENTS OF the DIVISION OF UNIVERSITIES OF the FLORIDA DEPARTMENT OF EDUCATION and/or the University of Florida, Third Party Defendant.

No. 85-0438-Civ-Spellman.

United States District Court, S.D. Florida.

January 14, 1986.

Order of Dismissal January 14, 1986.

Order Granting Motion for Summary Judgment April 9, 1986.

COPYRIGHT MATERIAL OMITTED

B.B. Allen, Asst. U.S. Atty., Miami, Fla., for plaintiff.

Jose Olavarrieta, pro se.

Arthur Wallberg, Asst. Atty. Gen., Tallahassee, Fla., for third party defendants.

Order of Dismissal as to the Board of Regents January 14, 1986.

Order Granting Plaintiffs Motion for Summary Judgment April 9, 1986.

MEMORANDUM OPINION AND ORDER OF DISMISSAL AS TO THE UNIVERSITY OF FLORIDA

SPELLMAN, District Judge.

THIS CAUSE is before the Court on Third Party Defendant University of Florida's Motion to Dismiss, filed on May 14, 1985. The Court will also address the memoranda submitted by the Plaintiff and Defendant/Third Party Plaintiff. The Court having reviewed the record and for the reasons set forth below, it is hereby

ORDERED AND ADJUDGED that the Motion to Dismiss is GRANTED.

This action was commenced by the United States on February 15, 1985 to recover the unpaid balance and interest on student loans made to Olavarrieta by a local bank under the mechanism set forth in the Federal Insured Student Loan Program, Tit. IV-B of the Higher Education Act of 1965, 20 U.S.C. §§ 1071-1088 (1980). Olavarrieta does not dispute the Government's allegations that he executed three promissory notes to Inter-National Bank of Miami, now known as Royal Trust Bank of Miami, for a total of $4,000.00. These notes were made January 28, 1974, July 29, 1974 and January 10, 1975, in the amounts of $1,100.00, $900.00 and $2,000.00 respectively. Each of the notes bore simple interest at the rate of 7% per annum on the outstanding balance, and each provided for repayment of principal, together with interest thereon, to begin nine months after the date on which the maker ceased to carry at least one-half the normal full-time academic workload at an eligible institution. Olavarrieta ceased to carry at least one-half the full-time workload in June, 1975. The Defendant did make a sole payment of $79.21, although when that payment was made is not clear from the record. Demands for payment were made by the bank, but to no avail. The United States then took over the task of sending demand letters, which also proved fruitless. Finally, Royal Trust Bank sought payment from the Government for the loans now in default, and was paid $4,165.45 on March 3, 1979. The Government, barely less than six years later, sought reimbursement from Olavarrieta by filing this suit.¹

Olavarrieta has taken the position that he is not obligated to pay back the Government because, he claims: the loans were illegal, the action is time barred by the statute of limitations under Florida law, there was no consideration, and that because the Defendant did not receive a Juris Doctor degree, but only a "Certificate" signifying completion of his studies in the program for which he borrowed the funds, that the funding itself was for an illegal purpose. The Defendant has filed a Third Party Complaint (and Amended Complaint) against the "Board of Regents of the Division of Universities of the Florida Department of Education, a.k.a. the Board of Regents, and/or the University of Florida." The University of Florida has moved to dismiss the Amended Complaint on the grounds that: the University does not have the capacity to sue or be sued, insufficiency of process, lack of jurisdiction by this Court under the Eleventh Amendment, statute of limitations, and failure to state a cause upon which relief can be granted. The Court need not address all of the aforementioned grounds in detail because it is clear each one would be sufficient reason for this case to be dismissed.²

Part II of Chapter 240 of the Florida Statutes discusses the State University System. The Board of Regents may sue or be sued. Fla.Stat. § 240.205(4). There is no comparable statute which empowers a University to sue or be sued. Also see Byron v. University of Florida, 403 F.Supp. 49 (N.D.Fla.1975) (an individual University lacks the capacity to be sued and must be dismissed). Thus, the University of Florida is not a proper party in this action.

Although the University does not have the capacity to be sued in its own name, the Court notes that even if it did, service of process has been ineffective. The Defendant/Third party Plaintiff served a copy of the Complaint on the resident agent of the University of Florida Central Florida Gator Club, Inc. This organization is made up of Gators (the name of the football team at the university) fans and is not related to the University in any other respect.

It appears that the statute of limitations would bar Olavarrieta's action against the University of Florida, should he be able to sue it in the first place. In his Complaint, the Defendant alleges that the University breached a contract it had with him, and that the school violated the intent and requirements of the Higher Education Act of 1965. Because the contract is apparently an oral one, it would fall under the four year limitation pursuant to Fla.Stat. § 95.11(3)(k). Although it is not totally clear, the Complaint intimates that these oral promises were made prior to the Defendant's enrollment in the program. Thus, the action accrued in 1975 at the latest, and is clearly time barred. As for the Defendant's allegations that the University "violated Federal Rules and Regulations" (emphasis in the original), the Court simply cannot discern a cause of action. It is possible that the Defendant is alleging that, by virtue of the school's failure to award him a J.D. or academic credits, the University had in effect breached an agreement with the federal government. In fact, Olavarrieta claims that he is a "beneficiary" of the Federal Financial Assistance program. Given tremendously liberal application of the law of contracts, the Defendant is still time barred from bringing this action under Fla.Stat. § 90.11(3)(k).

Finally, the Court notes that even if the allegations in the Third Party Complaint were true, and even if the Defendant were not precluded from bringing suit against the University, the Defendant's claim would fail. The United States' obligations under the Federal Insured Student Loan Program bring it squarely within hornbook definitions of a guarantor. United States v. Bellard, 674 F.2d 330, 333 (5th Cir.1982) (footnote omitted). As guarantor, the United States' obligation arise only upon the principal's failure to perform. United States v. Griffin, 707 F.2d 1477, 1480 n. 3 (D.C.Cir.1983). It is undisputed that Olavarrieta defaulted on the loan, the bank sought payment from the United States, and the government now seeks reimbursement from the Defendant. The University does not have a role to play in this action. One of the few cases in which a defaulting student raises defenses to the demand for reimbursement is anomalous to the case at hand. In Griffin, supra, the student had received the loan directly from a for-profit vocational school, and had raised certain defenses to repayment directly with the school's collection agency. It was later discovered that the school had numerous problems of which the government was aware. The government nonetheless paid the school for the defaulted loan. The Court in Griffin, supra, held that the court below had erred in granting summary judgment in favor of the government since Griffin had raised his defenses against the school prior to payment by the government, thus preserving them. Although the facts in Griffin differ significantly from those before the Court, the case does make one point clear. The defaulting student's defenses are to be made against the government, not the school, regardless of the school's status as lender. Once the defaulted loan is paid, the government, as guarantor, is the party Olavarrieta must deal with, not the University or the bank. The Third Party Plaintiff fails to cite any authority under which he may have a cause of action against the Third Party Defendant, or under which the Third Party Defendant is or may be liable to him for the amount claimed by the government against him.

In considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6) the Complaint is liberally construed and viewed in the light most favorable to the plaintiff. Stephenson v. Gaskins, 539 F.2d 1066 (5th Cir. 1976). Where the plaintiff appears pro se, allegations in the Complaint are held to a less stringent standard than formal pleadings drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972), reh'g denied, 405 U.S. 948, 92 S.Ct. 963, 30 L.Ed.2d 819 (1972). These well settled tenets do not, however, preclude dismissal of a Complaint that cannot withstand any legal scrutiny. This is, in effect, what is before the Court. The Third Party Complaint fails to withstand the motion to dismiss, and therefore must be dismissed.³

ORDER OF DISMISSAL AS TO THE BOARD OF REGENTS

THIS CAUSE is before the Court on the Motion to Dismiss filed by the Third Party Defendant, the BOARD OF REGENTS ("Board") and the Defendant/Third Party Plaintiff's, JOSE OLAVARRIETA ("Olavarrieta") response thereto. For judicial economy's sake, the Court hereby incorporates the factual background provided in this order's companion order dismissing the University of Florida from the suit.

Initially, the Board's assertion that the Third Party Complaint must be dismissed because the Eleventh Amendment divests the Court of jurisdiction is without merit. There is no question that under Fla.Stat. § 240.205 (1979), the Board has the "capacity to sue or be sued." Additionally, it appears that the case law cited is...