B-134337, NOV. 29, 1957

B-134337, NOV. 29, 1957

TO DR. WERNER N. GRUNE:

YOUR LETTERS OF OCTOBER 28 AND SEPTEMBER 26, 1957, REFER TO YOUR INDEBTEDNESS TO THE UNITED STATES IN THE AMOUNT OF $1,000 PLUS INTEREST, RESULTING FROM TWO LOANS OF $500 EACH MADE TO YOU IN 1943 AND 1944 BY THE UNITED STATES OFFICE OF EDUCATION TO ENABLE YOU TO COMPLETE YOUR COURSE OF STUDIES AT THE UNIVERSITY OF CONNECTICUT, STORRS, CONNECTICUT, AS A FULL- TIME STUDENT IN AN ACCELERATED PROGRAM LEADING TO A DEGREE IN ENGINEERING. WHILE YOU MAINTAIN THAT YOU ARE NOT LIABLE FOR THE REPAYMENT OF THESE LOANS, YOUR LETTER OF SEPTEMBER 26 PROPOSED A COMPROMISE, IN ORDER TO AVOID COURT ACTION, WHEREUNDER YOU WOULD REPAY ONLY THE $1,000 PRINCIPAL OF THE LOAN, STARTING WITH AN IMMEDIATE PAYMENT OF $200 AND A MINIMUM OF $50 MONTHLY THEREAFTER UNTIL THE PRINCIPAL SUM IS LIQUIDATED. HOWEVER, YOUR LETTER OF OCTOBER 28, 1957, REQUESTS A REVIEW OF THE FILE, STATING THAT YOU FEEL YOU SHOULD BE VINDICATED AND PAY NOTHING.

THE INDEBTEDNESS IN QUESTION WAS REPORTED TO US FOR ACTION ON MAY 7, 1957, BY THE OFFICE OF EDUCATION, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, SINCE THE EFFORTS OF THAT AGENCY TO EFFECT COLLECTION HAD BEEN UNSUCCESSFUL. THE RECORD DISCLOSES THAT THE INDEBTEDNESS AROSE BY REASON OF THE TWO LOANS MADE TO YOU BY THE UNITED STATES OFFICE OF EDUCATION, FEDERAL SECURITY AGENCY (NOW THE DEPARTMENT OF HEALTH, EDUCATION AND WELFARE), IN ACCORDANCE WITH THE PROVISIONS OF THE ACT OF JULY 2, 1942, 56 STAT. 576. AS REQUIRED BY THE ACT, YOU EXECUTED TWO PROMISSORY NOTES PAYABLE TO THE TREASURER OF THE UNITED STATES IN THE SUM OF $500 EACH, UNDER THE DATES OF MARCH 3 AND SEPTEMBER 28, 1943, RESPECTIVELY. UNDER THE TERMS OF THESE NOTES, ADVANCES TOTALING $500 ON EACH NOTE WERE MADE TO YOU FROM TIME TO TIME. BY THE EXECUTION OF THESE NOTES, YOU AGREED TO REPAY TO THE TREASURER OF THE UNITED STATES THE PRINCIPAL SUMS ADVANCED THEREUNDER, WITH INTEREST AT 2 1/2 PERCENT PER ANNUM ON EACH ADVANCE FROM THE DATE THEREOF, IN FOUR EQUAL ANNUAL INSTALLMENTS BEGINNING ONE YEAR AFTER YOUR DISCONTINUANCE AS A FULL-TIME STUDENT IN AN ACCELERATED PROGRAM. BOTH NOTES PROVIDED THAT THEY WERE SUBJECT TO THE REGULATIONS PROMULGATED BY THE UNITED STATES COMMISSIONER OF EDUCATION GOVERNING SUCH LOANS. THE NOTES FURTHER PROVIDED, IN PART HERE PERTINENT, AS FOLLOWS:

"/2) IN THE EVENT OF THE MAKER'S SERVICE IN THE ARMED FORCES OF THE UNITED STATES DURING THE PRESENT EMERGENCY WITHIN THE TERMS OF HIS AGREEMENT HEREIN, THE TIME OF SUCH SERVICE SHALL BE EXCLUDED IN THE COMPUTATION OF THE TIMES OF MATURITY HEREINABOVE MENTIONED.

"/3) IN THE EVENT THAT, BEFORE COMPLETING HIS COURSES, THE MAKER IS ORDERED INTO MILITARY SERVICE DURING THE PRESENT WARS UNDER THE SELECTIVE TRAINING AND SERVICE ACT OF 1940, AS AMENDED, THE INDEBTEDNESS HEREUNDER SHALL BE CANCELED.'

ALL PROVISIONS OF THESE NOTES WERE IN ACCORDANCE WITH AND CONFORMED TO THE REQUIREMENTS ESTABLISHED BY THE ACT OF JULY 2, 1942.

OUR REQUESTS FOR REPAYMENT OF THE INDEBTEDNESS ELICITED SEVERAL LETTERS FROM YOU DENYING LIABILITY FOR THE INDEBTEDNESS AND CONTENDING THAT IT SHOULD HAVE BEEN CANCELED IN ACCORDANCE WITH PROVISION (3) OF THE NOTES AS QUOTED ABOVE AND SECTION 3.8 (D) OF THE REGULATIONS GOVERNING SUCH LOANS PROMULGATED BY THE UNITED STATES OFFICE OF EDUCATION, SINCE YOU ALLEGEDLY HAD BEEN INDUCTED INTO THE ARMY BEFORE COMPLETING YOUR COURSE OF STUDY. YOU FURTHER CONTEND THAT, EVEN IF YOU WERE LIABLE FOR THE REPAYMENT OF THE LOANS, INTEREST SHOULD NOT BEGIN TO ACCRUE THEREON UNTIL JUNE 1951, AT WHICH TIME YOU GRADUATED FROM NEW YORK UNIVERSITY, BASING SUCH CONTENTION UPON THE PROVISION OF THE NOTES PERTAINING TO MATURITY DATES AND PROVISION (2) QUOTED ABOVE, AS WELL AS SECTIONS 3.8 (B) AND (C) OF THE ABOVE-CITED REGULATIONS.

THE RECORD CONTAINS A PHOTOSTAT OF A CERTIFIED TRUE COPY OF AN ORDER TO REPORT FOR INDUCTION MAILED TO YOU ON OCTOBER 11, 1944, ORDERING YOU TO REPORT TO YOUR LOCAL BOARD ON OCTOBER 26, 1944, FOR INDUCTION INTO THE ARMED FORCES. THE RECORD SHOWS YOU COMPLETED THE SUMMER SESSION OF 1944 AT THE UNIVERSITY OF CONNECTICUT BUT DID NOT ENROLL FOR THE FALL SEMESTER OF THE 1944-45 SCHOOL YEAR BECAUSE OF THE INDUCTION ORDERS. AT COMPLETION OF THE 1944 SUMMER SESSION YOU LACKED A NUMBER OF THE CREDITS REQUIRED FOR THE DEGREE TOWARD WHICH YOU HAD BEEN STUDYING AND FOR WHICH THE LOANS WERE MADE. HOWEVER, YOU STUDIED BY YOURSELF AND EARNED THE NEEDED CREDITS BY COURSE CREDIT EXAMINATION, WITHOUT THE NECESSITY OF UNDERTAKING FURTHER FORMAL STUDY AND ATTENDANCE AT THE UNIVERSITY. THE EARNED CREDITS WERE GRANTED AS OF THE SUMMER SESSION OF 1944, PRIOR TO INDUCTION, AND YOU WERE DECLARED ELIGIBLE TO RECEIVE YOUR DEGREE ON NOVEMBER 3, 1944, ONLY EIGHT DAYS AFTER INDUCTION. WHILE YOU TECHNICALLY DID NOT COMPLETE YOUR COURSES BEFORE INDUCTION--- IN THE SENSE OF FORMAL STUDY AND ATTENDANCE AT AN INSTITUTION--- IT IS APPARENT THAT YOU EARNED THE MISSING CREDITS WITHOUT SUCH FORMAL STUDY AND ATTENDANCE AND THUS ACHIEVED THE OBJECT OF YOUR STUDIES AND THE PURPOSE FOR WHICH THE LOANS WERE GRANTED. THE PROVISION OF THE ACT OF JULY 2, 1942, CANCELING THE INDEBTEDNESS OF STUDENTS ORDERED INTO MILITARY SERVICE PRIOR TO COMPLETING THEIR COURSES, AND THE IMPLEMENTING PROVISIONS OF THE PROMISSORY NOTES AND THE REGULATIONS, WERE INTENDED TO RELIEVE THOSE STUDENTS WHOSE STUDIES WERE SO INTERRUPTED BY INDUCTION THAT THEY COULD NOT ACHIEVE THE PURPOSE FOR WHICH THE LOANS WERE GRANTED WITHOUT SUBSEQUENT ADDITIONAL FORMAL EDUCATION. THE PURPOSE OF THE LOAN ACT WAS TO ENCOURAGE AND ASSIST STUDENTS TO PURSUE THEIR EDUCATION TO THE POINT OF ACQUIRING A DEGREE. THE CONGRESS GENEROUSLY INCLUDED A PROVISION RELIEVING THE REPAYMENT LIABILITY OF A BORROWING STUDENT WHOSE PURPOSE TO ACQUIRE A DEGREE WAS DEFEATED THROUGH NO FAULT OF HIS OWN BY INDUCTION INTO THE ARMED FORCES. THERE MANIFESTLY WAS NO INTENTION TO RELIEVE THE OBLIGATION OF A STUDENT ON THE BASIS OF A MERE TECHNICAL FAILURE TO COMPLETE THE COURSE WHERE, AS HERE, SUCH TECHNICAL FAILURE TO COMPLETE DID NOT DEFEAT THE PURPOSE OF THE LOAN.

YOUR CONTENTIONS REGARDING THE RUNNING OF INTEREST ON THE LOANS APPEAR TO BE BASED UPON A MISUNDERSTANDING OF THE LAW AND THE PROVISIONS OF THE NOTES AND REGULATIONS. THE ACT, THE NOTES, AND THE REGULATIONS CLEARLY PROVIDE FOR CHARGING INTEREST AT THE RATE OF 2 1/2 PERCENT PER ANNUM UPON EACH ADVANCE FROM THE DATE EACH ADVANCE IS MADE. WHILE PROVISION (2) OF THE PROMISSORY NOTES AND SECTION 3.8 (B) OF THE REGULATIONS PROVIDE THAT PERIODS OF MILITARY SERVICE BY THE BORROWER DURING WORLD WAR II ARE TO BE "EXCLUDED IN THE COMPUTATION OF THE TIMES OF MATURITY" OF THE FOUR ANNUAL PAYMENTS REQUIRED, SUCH PROVISIONS AFFECT ONLY THE DATES SUCH PAYMENTS ARE DUE, AND HAVE NO EFFECT WHATSOEVER UPON THE RUNNING OF INTEREST. IN OTHER WORDS, THE TIME OF PAYMENT IS DEFERRED BUT THE RUNNING OF INTEREST FOR THE DEFERRED PERIOD IS NOT WAIVED. THE CONTENTION THAT INTEREST SHOULD NOT BE ACCRUED UNTIL JUNE 1951, WHEN YOU GRADUATED FROM NEW YORK UNIVERSITY, IS BASED UPON A SIMILAR MISUNDERSTANDING. THE NOTES AND REGULATIONS PROVIDE THAT ANNUAL INSTALLMENTS ON THE LOANS BEGIN ONE YEAR AFTER THE BORROWER'S DISCONTINUANCE AS A FULL-TIME STUDENT IN AN ACCELERATED PROGRAM. YOU INTERPRET THIS PROVISION AS APPLYING TO YOUR STUDIES AT HARVARD AND NEW YORK UNIVERSITIES SUBSEQUENT TO YOUR MILITARY SERVICE, WHEREAS THE NOTES AND REGULATIONS CLEARLY INDICATE THAT IT REFERS TO THE DISCONTINUANCE OF THE ACCELERATED PROGRAM FOR WHICH THE LOAN WAS GRANTED AND NOT TO A POST- WAR RESUMPTION OF STUDIES. IN ANY EVENT, REGARDLESS OF THE DATE WHEN PAYMENT MAY BECOME DUE, INTEREST IS REQUIRED TO BE COMPUTED FROM THE DATE OF EACH ADVANCE AS STATED ABOVE.

IN VIEW OF THE FACTS AND CIRCUMSTANCES DISCLOSED BY THE RECORD, WE CONCLUDE THAT YOU ARE LEGALLY OBLIGATED TO REPAY TO THE UNITED STATES THE TOTAL AMOUNT OF THE TWO LOANS PLUS INTEREST AS STATED IN OUR PRIOR CORRESPONDENCE WITH YOU. SINCE IT IS NOT CLEAR FROM YOUR LETTER OF OCTOBER 28 WHETHER YOU INTENDED TO WITHDRAW THE OFFER IN COMPROMISE PROPOSED IN YOUR LETTER OF SEPTEMBER 26, WE REQUEST ADVICE AS TO YOUR INTENTION WITH REGARD THERETO. FURTHER ACTION IN THE MATTER WILL BE HELD IN ABEYANCE FOR A REASONABLE TIME PENDING YOUR REPLY.