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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Rubey v. Alaska Commission on Postsecondary Education (08/21/2009) sp-6400
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| LELAND C. RUBEY, | ) |
| ) Supreme Court No. S- 12996 | |
| Appellant, | ) |
| ) Superior Court No. 3AN- 06-12939 CI | |
| v. | ) |
| ) O P I N I O N | |
| ALASKA COMMISSION ON | ) |
| POSTSECONDARY EDUCATION, | ) No. 6400 - August 21, 2009 |
| ) | |
| Appellee. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Fred Torrisi, Judge.
Appearances: Leland C. Rubey, pro se,
Anchorage, Appellant. Mary Ellen Beardsley,
Assistant Attorney General, Anchorage, Talis
J. Colberg, Attorney General, Juneau, for
Appellee.
Before: Fabe, Chief Justice, Eastaugh,
Carpeneti, Winfree, and Christen, Justices.
WINFREE, Justice.
I. INTRODUCTION
The issue in this case is whether relevant statutes and
regulations provide for cancellation of four student loans upon
the recipients medical disability. We conclude that they do not,
and we affirm the denial of the recipients request for medical
cancellation of his loan obligations.
II. FACTS AND PROCEEDINGS
Between 1996 and 1998 Leland Rubey received four
education loans from the Alaska Commission on Postsecondary
Education (ACPE). The disbursement dates, loan amounts, and
deducted loan fees1 are set forth in the table below. None of
Rubeys promissory notes contains a provision specifically
allowing medical cancellation. Promissory notes for some pre-
1996 ACPE loans did contain provisions specifically allowing
medical cancellation.
Loan # Date Note Signed Loan Amount Loan Fee
1 January 12, 1996 $5,555.00 1% ($55.55)
2 35240 $8,500.00 5% ($425.00)
3 35514 $1,600.00 5% ($80.00)
4 35967 $1,667.00 5% ($83.35)
Loan Four was co-signed by Theresa Taylor, who later
married Rubey. She certified that she understood her liability
for Loan Four would begin when the borrowers obligation begins,
and continues even if the borrowers obligation is discharged or
canceled.
On April 10, 2006, Rubey submitted a request for
cancellation of his loans due to total and permanent disability
diagnosed in late 1998. ACPE denied Rubeys request on June 21,
2006, giving three grounds for its decision. First, ACPE found
that Rubey had some capacity to repay his loans even after
meeting all monthly expenses. ACPE noted that Rubey had
continued to incur financial obligations, including the 2004
mortgage, the 2005 real estate loan, two new credit card accounts
opened in 2005 and the March 2003 purchase of two automobiles,
for which you are current in repayment. Second, ACPE pointed out
that none of Rubeys promissory notes provided for medical
cancellation. Finally, ACPE reminded Rubey that his wifes
liability for the loan she had co-signed could not be cancelled
because of Rubeys disability.
Rubey requested a hearing to appeal the denial of his
application for medical cancellation. ACPE instructed Rubey that
the hearing would proceed under 20 Alaska Administrative Code
(AAC) 15.920(e), requiring Rubey to prove by a preponderance of
the evidence, including testimony by a qualified physician, that
[he] is disabled to the extent allowing cancellation of the
promissory note under the terms of the promissory note.
(Emphasis added.)
At a prehearing conference on September 8, 2006, the
parties agreed ACPE would file a motion for summary adjudication.
ACPE did so, primarily arguing that because [t]here is no right
to medical cancellation of education loan debt in the statutes
and regulations governing the loan program . . . eligibility is
governed solely by the terms provided in [Rubeys] loan
contract(s). In other words, ACPE contended that Rubeys loans
were ineligible for medical cancellation as a matter of law
because his promissory notes contained no medical cancellation
provisions.
Rubey responded by arguing that because ACPE had
charged him a loan origination fee and because loan origination
fees are statutorily designated to offset losses incurred as a
result of death, disability, default, or bankruptcy of the
borrower,2 cancellation due to disability should be considered an
implied benefit of his loan contract. Rubeys promissory notes
and other loan information from ACPE echoed or paraphrased the
statutory language regarding the purpose of origination fees.
The hearing officer issued a decision on October 19,
2006, concluding that 20 AAC 15.920 governed eligibility for
medical cancellation of student loans. The hearing officer
determined that 20 AAC 15.920 required Rubey to prove that: (1)
after receiving the loans, he became permanently disabled to the
extent required by his promissory notes for cancellation; (2) his
disability prevented him from working or attending school; (3) if
his condition already existed when he received his loans, it
substantially deteriorated later; and (4) he could not repay his
loans without undue hardship. The hearing officer then concluded
that Rubey was ineligible because his promissory notes did not
contain a medical-cancellation provision, Rubey could not prove
the first factor. The hearing officer also concluded that the
loan origination fee statute, AS 14.43.120(u), did not provide an
independent right to medical cancellation. The hearing officer
made no findings on the other factors of 20 AAC 15.920, because
[n]o matter how the factual issues regarding Mr. Rubeys medical
or financial status were resolved, these issues could not affect
Mr. Rubeys entitlement to cancellation of his loan.
The hearing officers decision constituted final agency
action under 20 AAC 15.920(e), and Rubey appealed that decision
to the superior court. The superior court ruled that the loan
origination fee statute, AS 14.43.120(u), did not entitle Rubey
to medical cancellation of his loans. Because the superior court
disagreed with Rubeys interpretation of AS 14.43.120(u), it also
rejected his contention that 20 AAC 15.920 was inconsistent with
the statute. The superior court concluded that neither statutes
nor regulations allowed Rubey to obtain medical cancellation of
his student loans.
Rubey appeals pro se.
III. STANDARD OF REVIEW
When the superior court acts as an intermediate court
of appeal in administrative cases, we examine the merits of the
agencys decision directly.3 We may affirm the agencys decision
on any ground supported by the record.4
In Jager v. State we noted the development of four
principal standards of review for administrative decisions: the
substantial evidence test governs questions of fact; the
reasonable basis test applies to questions of law involving
agency expertise; the substitution of judgment test governs
questions of law when no expertise is involved; and the
reasonable and not arbitrary test applies to review of
administrative regulations.5 When we use our independent
judgment to interpret a statute, we adopt the rule of law that is
most persuasive in light of precedent, reason, and policy,6 after
considering: (1) the plain meaning of the statute; (2) the
legislative purpose of the statute; and (3) the intent of the
statute.7
IV. DISCUSSION
A. Does AS 14.43.120(u) Provide a Right to Medical
Cancellation of Student Loans?
Rubey argues that AS 14.43.120(u), authorizing ACPE to
charge origination fees on education loans, gives him a right to
medical cancellation of his loan obligations. Rubey suggests
that the phrase losses incurred as a result of . . . [the
borrowers] disability8 must refer to losses in the form of
medical cancellations, making medical cancellation an implied
statutory right.9
ACPE argues that AS 14.43.120(u) simply creates an
account, funded by loan origination fees, to offset ACPEs loan
losses: AS 14.43.120(u) recognizes that [ACPE] may as a
practical matter incur losses due to borrowers deaths,
disabilities, bankruptcies, or defaults due to other reasons, and
that the statute has no effect on the legal obligations of
borrowers to repay their loans. ACPE maintains that providing a
fund to offset losses does not and should not be read to imply
that ACPE must suffer those losses or that borrowers have been
given a statutory right to cause those losses.
We start by noting that the legislature has never
expressly provided for medical cancellation of student loans.10
In contrast the legislature has expressly allowed forgiveness of
student loans in other circumstances.11 The lack of an explicit
right to medical cancellation here, when the legislature has
provided for cancellation in other contexts, undercuts Rubeys
argument that this right exists.12
The legislation implementing loan guarantee fees does
not contain a specific statement of legislative intent.13 Amended
AS 14.43.120(h) states that [s]ecurity may not be required for a
loan; however, a loan guarantee fee, as specified in (u) of this
section, shall be charged at the time that the loan is awarded.14
(Amended language emphasized.) This implies that AS 14.43.120(u)
was designed to compensate for the fact that security could not
be required on ACPE loans and thus to compensate for the losses
ACPE anticipated. ACPEs interpretation is consistent with that
purpose. As the superior court noted, It simply does not follow
from the legislatures creation of a fund to offset losses that it
therefore intends to forgive a certain class of debts.
Accordingly we are persuaded that ACPEs interpretation
not only is reasonable, but also is closer to the plain meaning
of the statute, more consistent with the purpose of the statute,
and more likely the intent of the legislature. We therefore
agree with the superior court and affirm ACPEs interpretation of
AS 14.43.120(u) as not providing a right to medical cancellation
of student loans.
B. Do Applicable Regulations Provide a Right to Medical
Cancellation of Student Loans?
20 AAC 15.920(a) states, [A]n application to cancel a
promissory note under a term of the promissory note permitting
cancellation for medical disability is governed by this section.
(Emphasis added.) Rubey is not eligible for loan cancellation
under terms of his promissory notes permitting medical
cancellation because his notes lack such terms. Rubeys
eligibility may thus be governed by 20 AAC 15.915(c), which
provides that [t]he appellant has the burden to prove by a
preponderance of the evidence that the appellant is entitled to
the requested result under the statutes and regulations governing
the Alaska education loan programs. But we already have affirmed
ACPEs conclusion that AS 14.43.120(u) does not entitle Rubey to
medical cancellation of his loans, and Rubey has advanced no
other statutory or regulatory basis for medical cancellation of
his loans.
Rubey therefore has not proven a right to medical
cancellation under either regulation neither 20 AAC 15.920 nor
20 AAC 15.915 entitles Rubey to medical cancellation of his
student loans.
C. Are ACPEs Actions Consistent with Its Statutory
Authority?
Rubey makes two intertwined arguments that ACPE is
acting outside the scope of its statutory authority by denying
medical cancellation of his loans. Citing Jerrel v. State,
Department of Natural Resources,15 Rubey argues that the decision
to stop placing provisions for medical cancellation in promissory
notes was a policy change requiring Administrative Procedures Act
rulemaking. Rubey also argues that 20 AAC 15.920 is not a valid
regulation because it arbitrarily makes medical cancellation
available only to students who have a permissive term in their
promissory notes.16
ACPE contends that making medical cancellations
available for some loans was an exercise of ACPEs discretion and,
conversely, that limiting medical cancellations likewise was an
exercise of its discretion. ACPE defends its limitation of
medical cancellations as necessary to ensure a solvent loan
program for education loans at the lowest possible interest
rates. ACPE further contends that AS 14.42.030(e)(1)17 authorizes
ACPE to promulgate regulations to carry out the purposes of its
education loan programs and that 20 AAC 15.920 is consistent
with and reasonably necessary to those purposes.
We agree with ACPE. As we have already concluded,
there is no statutory directive that ACPE provide for medical
cancellations of education loans. ACPE has broad discretion to
exercise its business judgment in managing its funds and
education loan programs. The decision to include medical
cancellation provisions in some promissory notes prior to 1996,
and the decision to eliminate such provisions in all promissory
notes beginning in 1996, both fall within the scope of ACPEs
discretionary business judgment18 and cannot fairly be considered
policies requiring compliance with formal rulemaking procedures.19
20 AAC 15.920 is a properly promulgated regulation providing the
mechanics for holders of education loans containing medical
cancellation provisions to apply for medical cancellations.
Because ACPE may extend loans with or without medical
cancellation provisions, there is nothing arbitrary or capricious
in limiting the scope of 20 AAC 15.920s application to loans with
medical cancellation provisions. We accept 20 AAC 15.920 as a
valid exercise of ACPEs statutory authority.
V. CONCLUSION
Because there is no statutory or regulatory right to
medical cancellation, Rubey is not entitled to have his student
loan obligations cancelled due to medical disability. We
therefore AFFIRM the denial of Rubeys application for medical
cancellation of his education loans.
_______________________________
1 Former AS 14.43.120(u) provided a guarantee fee to
offset losses incurred due to student loan debt cancellation as a
result of death, disability, or bankruptcy. Ch. 63, 38, SLA
1993. In 1996 the statute was amended, renaming the fee an
origination fee to offset losses incurred as a result of death,
disability, default, or bankruptcy of the borrower. Ch. 5, 14,
SLA 1996.
2 AS 14.43.120(u).
3 Premera Blue Cross v. State, Dept of Commerce, Cmty. &
Econ. Dev., Div. of Ins., 171 P.3d 1110, 1115 (Alaska 2007).
4 Benavides v. State, 151 P.3d 332, 334 (Alaska 2006).
5 537 P.2d 1100, 1107 n.23 (Alaska 1975).
6 Benavides, 151 P.3d at 334-35 (internal quotation marks
omitted) (quoting State, Dept of Rev. v. Mun. of Anchorage, 104
P.3d 1120, 1122 (Alaska 2004)).
7 Premera Blue Cross, 171 P.3d at 1115 (citing W. Star
Trucks v. Big Iron Equip., 101 P.3d 1047, 1050 (Alaska 2004)).
8 See supra note 1. Rubey argues that both versions of
the statute envisioned cancellation for disabilities, and ACPE
argues that neither version contained a statutory right to
medical cancellation. Although the 1993 version contains
explicit reference to debt cancellations, the analysis that
follows demonstrates that such language is insufficient to create
a right to medical cancellation. If there were a statutory right
to medical cancellation, it would exist in both versions of the
statute.
9 Rubey cites ACPE testimony before Alaska House
Committees to show that the origination fee was intended to
provide borrowers an insurance-like benefit. ACPE contends the
testimony shows only that ACPE considered the fees to be a form
of self-insurance that is, insurance benefitting ACPE. We do
not find the testimony particularly conclusive, but we note
Rubeys loan applications stated plainly that the guarantee and
origination fees did not provide the borrower any loan insurance
and did not constitute loan insurance.
Rubey also contends that the phrase of the borrower in
AS 14.43.120(u) means that the origination fee paid by a specific
borrower is to be used to offset potential loss from that
borrowers individual death, disability, default, or bankruptcy,
further implying a right to medical cancellation. Although
statutes should be interpreted so that each word has meaning,
see, e.g., Homer Elec. Assn v. Towsley, 841 P.2d 1042, 1045
(Alaska 1992) (noting the general rule that statutes should be
construed so that . . . no part will be inoperative or
superfluous (internal quotation marks and citations omitted)), we
find the weight of an implied individual right to medical
cancellation too great to hang on the fragile hook of the
definite article in the borrower.
10 The legislature did provide a statutory right to
medical deferment as distinct from cancellation in AS
14.43.120(k)(8). Rubeys deferment eligibility is not before us.
11 See, e.g., AS 14.43.305(e) (governing forgiveness of
memorial education loans); AS 14.43.510(b) (governing forgiveness
of medical education loans); AS 14.43.640(b) (governing
forgiveness of loans for rural teachers).
12 The canon of statutory construction known as expressio
unius est exclusio alterius provides that to express or include
one thing implies the exclusion of the other. Blacks Law
Dictionary 620 (8th ed. 2004). We infer that the absence of an
explicit medical cancellation provision is deliberate.
13 Ch. 63, 38, SLA 1993.
14 Ch. 63, 37, SLA 1993. Although the quotation refers
to former AS 14.43.120, the current version of the statute is not
substantively different. The current version of AS 14.43.120(h)
reads: Security may not be required for a loan; however, a loan
origination fee, as specified in (u) of this section, shall be
deducted at the time that the loan is disbursed.
15 999 P.2d 138, 143 (Alaska 2000) (holding that a
regulation requiring livestock to be marked could not, without
passing a new APA regulation, be interpreted to require permanent
marks visible from twenty feet).
16 The validity of a regulation depends on the regulation
being (1) consistent with and reasonably necessary to carry out
the purpose of the authorizing statute, and (2) reasonable and
not arbitrary. Kelly v. Zamarello, 486 P.2d 906, 911 (Alaska
1971). The burden of demonstrating invalidity falls on the party
challenging the regulation. Lakosh v. Alaska Dept of Envtl.
Conservation, 49 P.3d 1111, 1114 (Alaska 2002); Grunert v. State,
109 P.3d 924, 928-29 (Alaska 2005).
17 This section authorizes ACPE to adopt regulations to
carry out the purposes of AS 14.43.091 through14.43.750,
including the statutes authorizing financial aid programs (and
education loans) for postsecondary education.
18 See, e.g., Vick v. Bd. of Elec. Examrs, 626 P.2d 90, 93
(Alaska 1981) (noting that courts are unlikely to intrude on
matters normally within an agencys discretion, unless the area of
discretion is novel or questionable).
19 We note that ACPE did not formally adopt a regulation
authorizing the insertion of medical cancellation provisions or
governing the insertion of those provisions in some but not other
promissory notes. If ACPEs decision to stop inserting medical
cancellation provisions in promissory notes was a policy decision
necessitating formal rulemaking, then surely so was ACPEs
original decision to include those provisions in some promissory
notes. In that case, ACPEs decision to eliminate medical
cancellation provisions would seem to be an appropriate remedy
for the original error.
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