US v. Davis, Civ. A. No. 91-T-868-N.

• Decision Date: 08 March 1993
• Docket Number: Civ. A. No. 91-T-868-N.
• Citation: 817 F. Supp. 926
• Parties: UNITED STATES of America, Plaintiff, v. Charlotte J. McClendon DAVIS, Defendant.
• Court: U.S. District Court — Middle District of Alabama

817 F. Supp. 926

UNITED STATES of America, Plaintiff, v. Charlotte J. McClendon DAVIS, Defendant.

Civ. A. No. 91-T-868-N.

United States District Court, M.D. Alabama, N.D.

February 22, 1993.

Order March 8, 1993.

James E. Wilson, U.S. Atty., Patricia Conover, Montgomery, AL, for U.S.

Lawrence Gardella, Montgomery, AL, for Charlotte J. McClendon Davis.

MEMORANDUM OPINION

MYRON H. THOMPSON, Chief Judge.

In this lawsuit, plaintiff United States of America seeks to recover a defaulted student loan from defendant Charlotte J. McClendon Davis. The court has jurisdiction over this action pursuant to 28 U.S.C.A. § 1345. On June 29, 1992, this court entered an order holding that, as a result of the 1991 Amendments to the Higher Education Act of 1965, the government's lawsuit was not time-barred.¹ See United States v. Davis, 801 F.Supp. 581 (M.D.Ala.1992) (Thompson, J.). On November 9, 1992, a non-jury trial was held to determine whether the government is entitled to collect on Davis's loan. Based on the evidence presented at trial, the court concludes that the government is entitled to collect from Davis the entire amount of her defaulted student loan plus interest and costs.²

I.

At trial, Davis maintained that she neither applied for the student loan at issue in this case nor did she execute the promissory note to secure the loan. She also contended that she never received the proceeds of the loan nor did she receive any educational services from the school. However, based on the evidence presented at trial, the court finds the facts are as follows.³

In December 1972, Davis applied for a student loan of $1,475 to enroll in a correspondence course offered by the Institute for Continuing Education. She also executed a promissory note to secure the loan from the Beverly Hills National Bank in California. Pursuant to Davis's signed authorization, the bank paid the loan proceeds directly to the school. The United States Department of Education guaranteed the loan under the Federally Insured Student Loan Program (FISLP), as authorized by the Higher Education Act of 1965.⁴

According to the terms of the loan, Davis's note became due in October 1974, nine months after Davis ceased to be at least a half-time student. In August 1974, Davis was sent payment instructions and a payment book by Avco Savings and Loan Association (AVCO), which had been assigned the loan by the Beverly Hills National Bank. Davis failed to make her first payment on October 1, 1974. Between October 1974 and February 1975, AVCO sent a collection notice to Davis each month. Because of Davis's failure to make any payments on her student loan, AVCO filed a claim for federal insurance on Davis's defaulted loan. In October 1978, the United States Department of Education paid AVCO's claim for insurance, and AVCO assigned to the Department of Education all rights to the note. Between October 1978 and March 1979, the Department of Education made several attempts to contact Davis about her defaulted loan. In 1990, the Department again initiated efforts to collect on the loan, but without success. Because of Davis's failure to make any payments on her loan, the United States filed this lawsuit in June 1991.

II.

In her trial brief, Davis raised two affirmative defenses to be applied in the event that the court found that she had applied for and received the loan. First, Davis contends that the government is not entitled to collect on the loan because of a lack of consideration. Davis maintains that the school either failed to provide any educational services or provided services that were not adequate to entitle it to the proceeds of the student loan at issue in this case. According to Davis, under 34 C.F.R. § 682.518 (1981), the government is required to refrain from collecting against her to the extent of any defense that she might have against the school.⁵ However, the evidence presented at trial does not convince the court that there was, in fact, lack of consideration. Davis, as stated, applied for and received the loan through her school. However, because there is no evidence that she ever enrolled in the school, the court cannot say that her failure to receive an education was not her own fault. The court, therefore, rejects this defense.⁶

Second, Davis maintains that the government's suit is barred by the doctrine of laches. Davis contends that the government's failure to institute this proceeding within a reasonable time after paying the bank's default claim has denied her a full and fair opportunity to present any defenses she might have to repaying her loan, such as her assertion of lack of consideration. However, the doctrine of laches is generally inapplicable to a suit brought by the United States to enforce its rights.⁷Costello v. United States, 365 U.S. 265, 281, 81 S.Ct. 534, 543, 5 L.Ed.2d 551 (1961); United States v. Summerlin, 310 U.S. 414, 415, 60 S.Ct. 1019, 1020, 84 L.Ed. 1283 (1940); United States v. Menatos, 925 F.2d 333, 335 (9th Cir.1991); United States v. Arrow Transp. Co., 658 F.2d 392, 395 (5th Cir. Unit B Oct. 1981), cert. denied, 456 U.S. 915, 102 S.Ct. 1769, 72 L.Ed.2d 174 (1982).⁸

In S.E.R., Jobs for Progress, Inc., 759 F.2d 1, 7 (Fed.Cir.1985), the court of appeals noted that some relaxation of the principle that laches is not a defense against the government may be developing and that exceptions to the rule might be approved in certain cases. However, the court in S.E.R. also recognized that most courts that have considered the issue have found that the facts did not justify invoking an exception to the rule. Moreover, the court noted that many courts have continued to adhere to the traditional rule that laches is not a defense against the government, absent a clear manifestation of congressional intent to the contrary. See, e.g., Arrow Transp. Co., 658 F.2d at 395.

In this case, Congress has not indicated that the United States should be subject to the defense of laches in actions brought to recover defaulted student loans. In fact, Congress's retroactive elimination of all statutes of limitations for actions to recover defaulted student loans appears to indicate precisely the opposite intent. That is, by retroactively eliminating all statutes of limitations and reviving claims previously time-barred by statutes of limitations, see Davis, 801 F.Supp. at 583-84, Congress sought to erase obstacles that the government might encounter in collecting defaulted loans. To apply the doctrine of laches in this case would thus undermine Congress's intent in eliminating the statute of limitations.

Finally, even if the doctrine of laches were applicable in this case, Davis has failed to prove the elements necessary to prevail on the defense of laches, an equitable doctrine committed to the sound discretion of the trial court. Envtl. Defense Fund v. Alexander, 614 F.2d 474, 477-78 (5th Cir.), cert. denied, 449 U.S. 919, 101 S.Ct. 316, 66 L.Ed.2d 146 (1980). To invoke the doctrine of laches, a "defendant must show: (1) a delay in asserting a right or claim; (2) that the delay was not excusable; and (3) that there was undue prejudice to the party against whom the claim is asserted." Id. 614 F.2d at 478. See also Ambrit, Inc. v. Kraft, Inc., 812 F.2d 1531, 1545 (11th Cir.1986), cert. denied, 481 U.S. 1041, 107 S.Ct. 1983, 95 L.Ed.2d 822 (1987). A classical showing of undue prejudice would be that the delay "has subjected the defendant to a disadvantage in asserting and establishing his claimed right or defense." Law v. Royal Palm Beach Colony, Inc., 578 F.2d 98, 101 (5th Cir.1978).

Although Davis has shown a significant delay in the government's assertion of its claim against her—the government was assigned the loan in 1978 but did not institute judicial action to recover the defaulted loan until June 1991—the court recognizes that to some extent the government's delay is excusable. For a period of time, the government was unable to institute a judicial enforcement action because a six-year limitations period was in effect that barred the action. Prior to the passage of the 1991 Amendments to the Higher Education Act of 1965, which eliminated all statutes of limitations, the 1985 Amendments to the Act established a six-year limitations period from the date of assignment of the student loan to the Department of Education.⁹ Additionally, before the 1985 Amendments were in effect, courts applied the federal statute of limitations period for actions brought by the United States on contracts in writing, 28 U.S.C.A. § 2415, to actions to recover defaulted student loans. The limitations period under this statute was also six years, which courts calculated from the date of assignment. See, e.g., United States v. Olavarrieta, 812 F.2d 640, 644 (11th Cir.) (per curiam), cert. denied, 484 U.S. 851, 108 S.Ct. 152, 98 L.Ed.2d 107 (1987); United States v. Tilleraas, 709 F.2d 1088 (6th Cir. 1983); United States v. Bellard, 674 F.2d 330 (5th Cir.1982). Therefore, prior to the passage of the 1991 Amendments, which revived the government's claim against Davis, the government was time-barred from bringing any action after October 1984. However, the government could have initiated a suit at any time between October 1978 and October 1984, yet it failed to do so.

But more importantly, Davis has failed to demonstrate that she was materially prejudiced by the government's delay in bringing the enforcement action. Although Davis asserts a defense of lack of consideration, the court cannot say that her failure to receive an education was not her own fault—that is, because she failed to enroll—rather than the school's. Moreover, she has failed to indicate how the government's delay in bringing this action has affected this defense. The defense appears to be merely one of conjecture and speculation, rather than grounded in specific facts or evidence. This conclusion is supported by the fact that there is no evidence that Davis ever pursued any claims...