Reynolds v. Sterling College, Inc.

Reynolds v. Sterling College, Inc. (98-396); 170 Vt. 620; 750 A.2d 1020


[Opinion Filed 28-Jan-2000]
[Motion for Reargument Denied 14-Mar-2000]


                                 ENTRY ORDER

                       SUPREME COURT DOCKET NO. 98-396

                             NOVEMBER TERM, 1999


Betty and Jay Reynolds	               }	APPEALED FROM:
                                       }
                                       }
     v.	                               }	Orleans Superior Court
                                       }	
Sterling College, Inc.	               }
                                       }	DOCKET NO. 162-7-97Oscv
  	


             In the above-entitled cause, the Clerk will enter:


       Plaintiffs Betty and Jay Reynolds appeal from a summary judgment in
  favor of defendant Sterling  College, Inc. in their action to obtain a
  partial refund of tuition paid to defendant.  In response to  plaintiffs'
  claim that defendant owed a refund under the policy in effect at the time
  they commenced  paying tuition, the court held that defendant had validly
  reserved the right to modify its tuition  reimbursement policy and had done
  so.  Accordingly, it dismissed plaintiffs' claims for breach of  contract
  and consumer fraud.  We reverse and remand.


       The complaint, answer, affidavits and depositions filed by the parties
  disclose the following facts.  In the Spring of 1995, Jay Reynolds was
  accepted to Sterling College.  Before making any  payments, Betty Reynolds,
  Jay's mother, read the catalog, which covered the years 1994 through  1996,
  particularly its policy on tuition refunds for students who withdraw before
  the end of the  academic year.  The catalog policy provided for a pro rata
  refund of prepaid tuition based on the ratio  of the number of weeks
  remaining in the academic year after withdrawal to the total number of 
  weeks in the academic year.  A footnote to this policy, however, added the
  following:

     At press time, the Tuition Refund policy is under revision to comply 
     with requirements of the federal Higher Education Amendments of 
     1992.  Please consult the refund policy accompanying all tuition bills 
     or request a copy of the policy in effect during your attendance.

  Prior to sending the $500 dollar enrollment fee on May 1, 1995, Betty
  Reynolds called defendant's  business office to inquire about the refund
  policy.  She was told that the catalog policy was still in  effect and no
  revisions had yet been made.  She stated at her deposition that she relied
  upon the  refund policy, and would not have paid the enrollment fee if she
  knew it had been modified to favor 

 

  defendant.  Along with the enrollment fee, both plaintiffs filled out and
  signed a registration form  which stated: "I have read and agreed to the
  terms of the Tuition and Refund policy."

       Betty Reynolds commenced making tuition payments in July.  No new
  refund policy accompanied  the tuition bills.  When Jay arrived on campus
  on September 25, 1995, a copy of a new refund  policy, effective July 1,
  1995, was waiting in his mail box.  Jay attended defendant college until 
  January 5, 1996, when he voluntarily withdrew.  By that time, Betty had
  paid defendant $14,104 out  of a total comprehensive fee of $18,167 for the
  year.  Under the new policy, defendant determined  that plaintiffs were
  entitled to a refund of $379 and sent them a check for that amount.  It is 
  undisputed that the refund would have been much larger under the catalog
  policy.

       Plaintiffs argued below that the tuition refund policy contained in
  the catalog was part of the contract  entered into between plaintiffs and
  defendant when Jay Reynolds enrolled, and defendant did not  have the
  unilateral power to modify it.  They also argued that the statements of
  defendant's  employees and those in its catalog "were material
  misrepresentations of the Sterling College refund  policy" that induced
  plaintiffs to enter into an enrollment agreement in violation of the
  Consumer  Fraud Act.  See 9 V.S.A. § 2453.  The superior court ruled that,
  in view of the footnote, the catalog  policy was not a contract term; the
  refund policy was not an essential term of the contract between  plaintiffs
  and defendant; and the agreement contemplated that defendant could
  unilaterally supply  this term at a later date.  Consistent with its ruling
  on the breach of contract claim, the court  dismissed the consumer fraud
  claim because there was no "unfair and deceptive act or practice." 

       In ruling on a motion for summary judgment, we use the same standard
  as the trial court.  A party  is entitled to summary judgment if there are
  no genuine issues of material fact and the party is  entitled to judgment
  as a matter of law.  See Lake v. Town of Grafton, 166 Vt. 148, 150, 689 A.2d 455, 456 (1997).

       The relevant relationship between the parties is contractual.  See
  Merrow v. Goldberg, 672 F. Supp. 766, 774 (D. Vt. 1987).  The "terms of
  the contract are contained in the brochures, course offering  bulletins,
  and other official statements, policies, and publications of the
  institution."  Id.  In this case,  the tuition refund policy was a specific
  and concrete term of the contract between plaintiffs and  defendant. 
  Defendant recognized this by specifically requiring that plaintiffs agree
  to the terms of  this policy on the registration form.  Plaintiffs are
  entitled to enforce the tuition refund policy by this  action for damages
  from defendant's alleged breach.  See Southeastern Flight Academy v.
  Hazell,  444 S.E.2d 402, 404 (Ga. Ct. App. 1994).

       At the time the contract was formed - when plaintiffs paid the
  enrollment fee and signed the  registration statement - the catalog stated
  the effective refund policy.  Thus, we do not agree with  the superior
  court that we should treat this contract as one for which the parties have
  agreed that a  term would remain open.  See, e.g., Appropriate Technologies
  Corp. v. Palma, 146 Vt. 643, 645-46,  508 A.2d 724, 725-26 (1986) (contract
  had open term as it did not include a date of payment);  Batchelder v.
  Mantak, 136 Vt. 456, 465, 392 A.2d 945, 950 (1978) (contract had open term
  because  it did not specify amount of compensation).  A refund policy was
  in effect at all times.  Even 

 

  defendant would agree that plaintiffs had a right to have tuition refunds
  calculated under the catalog  policy unless that policy was replaced by the
  new policy.

       Rather than leaving the refund policy open, defendant attempted to
  reserve to itself the unlimited  power to modify the policy.  We agree with
  the New Hampshire Supreme Court's analysis in Gamble  v. University System
  of New Hampshire, 610 A.2d 357, 361 (N.H. 1992) that this attempt to
  reserve  the power to modify created an internal inconsistency and an
  ambiguity in the contract between the  parties.  As the court implied in
  describing the University of New Hampshire's attempt to raise  tuition
  after the plaintiffs had paid under the existing tuition rate, the
  obligation of the student to  prepay tuition and the University's power
  thereafter to modify it are inconsistent.  See id. at 361.   The reasonable
  expectation of the student was that the power to raise tuition was
  extinguished once  the student paid:

     This court will, where possible, avoid construing the contract in a 
     manner that leads to harsh and unreasonable results or places one 
     party at the mercy of the other.  To interpret the contract as the 
     defendants urge us to would leave the student at the mercy of the 
     University.  The University, by the reservation of rights clause, does 
     not have the right to arbitrarily raise the tuition after the registration 
     time deadline.  It is inconceivable that the University could retain 
     carte blanche authority to raise the tuition at any time during the 
     semester for any amount it deems appropriate.

  Id. at 361 (internal citation omitted).  See also Viles v. Vermont State
  Colleges, 168 Vt. 459, 462,  724 A.2d 448, 450-51 (1998) (ambiguity in
  standardized contracts drafted by party in stronger  bargaining position
  and best able to avoid ambiguity must be resolved against drafter).  In the
  instant  case, plaintiffs commenced paying tuition with no notice of a
  change in the tuition refund  policy.(FN1)   Indeed, the paragraph inserted
  in the catalog reserving the defendant's right to modify  the tuition
  refund policy stated that those paying tuition on behalf of students would
  receive notice  of changes in the refund policy with their tuition bills. 
  However, no notice was provided until after  substantial tuition was paid. 
  As a matter of law, we construe the contract between the parties to give 
  plaintiffs the tuition refund rights provided in the catalog once they
  commenced paying tuition.(FN2)

 

       We also conclude that a unilateral modification, going to a specific
  and definite term like the amount  of tuition to be paid, must be supported
  by consideration.  See Brody v. Finch Univ. of Health  Sciences, 698 N.E.2d 257, 267 (Ill. App. Ct. 1998); see also P.F. Jurgs & Co. v. O'Brien, 160
  Vt.  294, 303, 629 A.2d 325, 331 (1993) (modification of stockholders'
  agreement to calculate equity  interest of stockholders in closely-held
  business on office-by-office basis rather than in whole  business is valid
  because consideration provided by mutuality of agreement and effect on all 
  stockholders); E.A. Farnsworth, Contracts § 7.6, at 492 (1990).  There was
  no consideration for  modification of the contract in this case.  We do not
  believe that defendant's warning that it might  attempt to modify the
  refund policy alters this analysis.

       In reaching our conclusion, we have relied only upon undisputed facts. 
  Thus, we conclude that  plaintiffs are entitled to summary judgment on
  their contract claim.  We remand for calculation of  damages and
  reconsideration of plaintiffs' consumer fraud claim in light of this
  decision.(FN3)


       Reversed and remanded.





                                       BY THE COURT:



                                       _______________________________________
                                       Jeffrey L. Amestoy, Chief Justice

                                       _______________________________________
                                       John A. Dooley, Associate Justice

                                       _______________________________________
                                       James L. Morse, Associate Justice

                                       _______________________________________
                                       Denise R. Johnson, Associate Justice

                                       _______________________________________
                                       Marilyn S. Skoglund, Associate Justice



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                                  Footnotes


FN1.  We see no distinction between this case and Gamble in the fact that
  the student in that case had  fully prepaid tuition and the student here
  was paying under an installment plan that did not require  full prepayment. 
  In either case, the inconsistency and ambiguity is the same.

FN2.  The record indicates that defendant changed its tuition refund policy
  to comply with federal  law for students receiving federal aid.  It also
  indicates, however, that plaintiffs were not subject to  the federal law
  because they were receiving no aid.  As a result, we do not consider any
  effect that  compliance with federal law might have had on defendant's
  power to unilaterally change its tuition  refund policy.

FN3.  Plaintiffs do not directly appeal the dismissal of their consumer
  fraud complaint, but argue that  its resolution is related to the
  disposition of the contract claim and should be reconsidered if the 
  dismissal of the contract claim were reversed.  We agree.