Woodcock, In re

• Decision Date: 06 January 1995
• Docket Number: No. 94-1101,94-1101
• Citation: 45 F.3d 363
• Parties: 32 Collier Bankr.Cas.2d 1341, 97 Ed. Law Rep. 133, Bankr. L. Rep. P 76,378 In re Raymond L. WOODCOCK, Debtor. Raymond L. WOODCOCK, Appellant, v. CHEMICAL BANK, NYSHESC, as servicing agent for Chemical Bank; Columbia University; University Accounting, as servicing agent for Columbia University; U.S. Attorney General, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 363

45 F.3d 363

32 Collier Bankr.Cas.2d 1341, 97 Ed. Law Rep. 133,

Bankr. L. Rep. P 76,378

In re Raymond L. WOODCOCK, Debtor Raymond L. WOODCOCK, Appellant, v. CHEMICAL BANK, NYSHESC, as servicing agent for Chemical Bank; Columbia University; University Accounting, as servicing agent for Columbia University; U.S. Attorney General, Appellees.

No. 94-1101.

United States Court of Appeals Tenth Circuit.

Jan. 6, 1995.

Raymond L. Woodcock, pro se.

Dolores B. Kopel, Denver, CO, for appellees.

Before ANDERSON, SETH, and BARRETT, Circuit Judges.

STEPHEN H. ANDERSON, Circuit Judge.

Appellant Raymond L. Woodcock (debtor) graduated from law school in 1982. He financed his legal education with four guaranteed student loans, each for $5,000. The loans were guaranteed by NYSHESC (creditor). In 1992, debtor filed bankruptcy under Chapter 7 of the United States Bankruptcy Code. He brought this adversary proceeding to determine the dischargeability of his student loans. The bankruptcy court ruled the loans are not dischargeable, 149 B.R. 957. The district court affirmed and debtor now appeals. We exercise jurisdiction under 28 U.S.C. Sec. 158(d) and affirm in part and reverse in part. ¹

Generally, student loans are not dischargeable in bankruptcy. 11 U.S.C. Sec. 523(a)(8). The Code permits such loans to be discharged, however, if they "first became due more than 7 years (exclusive of any applicable suspension of the repayment period) before the date of the filing of the [bankruptcy] petition," id. Sec. 523(a)(8)(A), or if excepting the loans from discharge "will impose an undue hardship on the debtor and the debtor's dependents," id. Sec. 523(a)(8)(B). On appeal, debtor contends that his loans are dischargeable under either exception. He also complains that the bankruptcy court improperly excluded certain evidence and improperly allowed creditor to amend its pleadings to conform to the evidence. We review the bankruptcy court's legal determinations de novo and its factual findings for clear error. Robinson v. Tenantry (In re Robinson), 987 F.2d 665, 667 (10th Cir.1993).

Turning to the first exception, we must determine when debtor's loans first became due. A loan becomes due when the first installment is due. See Nunn v. Washington (In re Nunn), 788 F.2d 617, 619 (9th Cir.1986). The four promissory notes for the loans state that repayment begins at "the end of the ninth month following the month in which I cease to be matriculated, withdraw from, or become less than a half-time student at an approved school." R.Vol. V, exhibits AA-1, AA-2, AA-3, AA-4. Repayment also begins on the date the borrower fails to "enroll for the term and in the educational institution for which the application was approved;" fails "to verify [ ] status as a student when requested;" or fails "to make required interest payments." Id. At issue is whether debtor ceased to be matriculated, withdrew from, or became less than a half-time student before April 21, 1985--seven years before he filed bankruptcy.

The relevant facts are undisputed. After graduating from law school in the spring of 1982, debtor attended business school. He graduated with his M.B.A. in January 1983. After that, he attended college on a part-time basis until 1990, taking a variety of courses. Creditor ² concedes that debtor was at least a half-time student, without a nine-month break, at all times before April 21, 1985.

Debtor argues that his loans matured nine months after he graduated from business school because after that point he "ceased to be matriculated," in the sense that he was not enrolled in a degree program. Creditor, on the other hand, claims that the term matriculated simply means enrolled. According to creditor, debtor's loans did not mature until 1991, nine months after he ceased being a half-time student.

The promissory notes do not define the term matriculate. The bankruptcy court noted that the dictionary offers both parties' definitions for matriculate: to enroll at a college or university, or to be accepted as a student or candidate for a degree. Without determining whether the term is ambiguous, the bankruptcy court concluded that "to be matriculated" within the meaning of the promissory notes, debtor only had to be enrolled in school. Alternatively, the court reasoned that even if "matriculated" required enrollment in a degree program, debtor had not ceased matriculating after he graduated from business school because "[w]ith all the courses he was taking he would have eventually qualified for some degree...." R.Vol. I, doc. 29 at 7. In its order denying debtor's motion for a new trial, the bankruptcy court also concluded that, in any case, debtor is estopped from claiming he ceased matriculating because he did not inform creditor of that fact, as was required by the promissory notes. On appeal, the district court agreed with the bankruptcy court's primary holding that matriculate means to enroll in school.

Interpretation of the promissory notes is governed by state law. See Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 917-18, 59 L.Ed.2d 136 (1979) (property interests of the parties to a bankruptcy proceeding are "created and defined by state law"). New York law, which governs the interpretation of the notes, instructs that the terms of a contract should be construed in light of the whole contract. See W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 565 N.Y.S.2d 440, 443, 566 N.E.2d 639, 642 (1990). Courts resort to extrinsic evidence only when the contract is ambiguous. See id.; see also Vermejo Park Corp. v. Kaiser Coal Corp. (In re Kaiser Steel Corp.), 998 F.2d 783, 789 (10th Cir.1993). Whether a contract is ambiguous is a question of law. In re Kaiser Steel Corp., 998 F.2d at 789. Interpretation of the unambiguous terms of a contract is also a question of law. Id.

We hold that the bankruptcy court erroneously interpreted "matriculate" to mean enroll and that the term unambiguously requires enrollment in a degree program. Our interpretation does not offend other provisions of the notes. The notes list "failure to enroll for the term and in the educational institution for which the application was approved" as a separate event which triggers repayment. R.Vol. V, doc. AA-1. Moreover, the notes explicitly require repayment on the date the borrower fails to enroll, which contradicts the requirement to repay nine months after the borrower ceases to be matriculated, should matriculated be interpreted to mean enrolled. Another provision uses the terms matriculate and enroll in the same sentence: "I understand that I must report to the lending institution ... [i]f I fail to enroll, leave school for any reason or cease to be matriculated...." Id., doc. AA-5. These provisions indicate that matriculate is not synonymous with enroll. The wording of another provision, whereby the borrower agrees to sign a promissory note no later than four months after he or she "cease[s] being matriculated or at least a half-time student," indicates that matriculation is more than simple enrollment.

Further, our interpretation is supported by a common-sense reading of the phrase "cease to be matriculated, withdraw from, or become less than a half-time student at an approved school." The first clause of that phrase sets out the general rule that the educational loan should be repaid when the borrower, for whatever reason, has stopped pursuing a degree. The second and third clauses identify circumstances in which the borrower's progress toward a degree will be deemed insufficient to delay maturity of the loan: the loan will mature if the borrower withdraws from school or the borrower pursues the degree too slowly, by enrolling less than half time.

Even if the term matriculate were ambiguous, the extrinsic evidence supports our conclusion. When debtor obtained his guaranteed student loans, government-backed student loans established by Title IV of the Higher Education Act of 1965, 20 U.S.C. Secs. 1070-1097, eligibility was conditioned upon the student "maintaining satisfactory progress in the course of study he is pursuing." 20 U.S.C. Sec. 1088f(e)(1) (1976); cf. 20 U.S.C. Sec. 1091(a) (1993 Supp.) (current version, conditioning eligibility on "enroll[ment] or accept[ance] for enrollment in a degree, certificate, or other program ... leading to a recognized educational credential"). See generally In re Pelkowski, 990 F.2d 737, 739-40 (3d Cir.1993) (discussing guaranteed student loan program). Since debtor had to pursue a course of study to obtain the loans, it is not surprising that maturity would be measured by whether he continued to pursue a course of study.

Trial testimony of creditor's employee confirms that the term matriculate was meant to require pursuit of a degree. When asked what the term meant, as it was used in the promissory notes, Frederick Nick, creditor's senior student loan control representative, testified that matriculation referred to "whether or not a student's intent down the line is to attain a degree." R.Vol. III at 18. He explained that educational institutions throughout the nineteen seventies and early eighties determined whether a student was matriculating, but some schools no longer make that determination. Id. at 17-18. He stated that because not all schools determine whether students are matriculating, creditor stopped gauging maturity of student loans by whether students had ceased matriculating. Id. at 18. Matriculation was "a standard that ceased to be workable." See id. at 19.

A party cannot, of course, unilaterally modify even unworkable provisions of a contract. Maturity of the loans is strictly governed by the terms of the promissory notes. We hold as a matter of law that debtor's loans matured nine months after he failed to enroll in a degree program. Debtor's uncontradicted testimony establishes that after he graduated from business school, he did not enroll in a degree program. There is no...