Opinion ID: 440314
Heading Depth: 2
Heading Rank: 1

Heading: Dr. Freeman's Liability for Unpaid Tuition, Fees and Expenses

Text: 35 On appeal, the Dr. Franklin Perkins School alleges that the jury verdict finding Dr. Freeman not liable to the School for unpaid tuition, fees and expenses for the 1979-1980 and 1980-1981 academic years is against the manifest weight of the evidence. The School asserts that the weight of the evidence demonstrates that an implied-in-fact contract was established between Dr. Freeman and the Perkins School and that the district court erred in denying of the School's motion for judgment notwithstanding the verdict or, in the alternative, a new trial. 36 Initially, we agree with both parties' conclusion that the law of Massachusetts controls this issue. 19 The School asserts that an implied-in-fact contract existed between the parties making Dr. Freeman liable for the 1979-80 increase in tuition. Under Massachusetts law, an implied-in-fact contract is an agreement which is inferred from the conduct of the parties. Grant v. Carlisle, 328 Mass. 25, 101 N.E.2d 376, 379 (1951). It is established when a promiser's assent to the contract is manifested in conduct or surrounding circumstances such as a course of dealings, Restatement (Second) of Contracts Sec. 4 comment a (1979), and it contains the same elements as an express contract. It differs from other contracts only in that it has not been committed to writing or stated orally in express terms, but rather is inferred from the conduct of parties in the milieu in which they dealt. In re D. Federico Co., Inc., 8 B.R. 888, 897 (Bankr.D.Mass.1981). 37 The School argues that the evidence overwhelmingly establishes an implied contract wherein Dr. Freeman agreed to pay the complete tuition for 1979-1980. In support of its position, the School points to the fact that prior to 1979-1980, Dr. Freeman paid the School for amounts not covered by Illinois or the Evanston school district. It is asserted that this established a course of dealings and thus an implied-in-fact contract to pay all amounts not covered by the State of Illinois. Although we agree that a contract implied-in-fact was established between the Freemans and the School, the scope of the contract is narrower than that asserted by the School. 38 The contention that Dr. Freeman is liable for retroactive increases in tuition is not supported by the manifest weight of the evidence. It ignores the fact that Dr. Freeman had never previously been billed for a retroactive increase in tuition. Although Dr. Freeman made periodic payments to cover April's room and board, a course of dealings with regard to retroactive tuition increases had not been established and therefore could not constitute the basis of a contract implied-in-fact. 39 The School also emphasizes that contracts may be implied-in-fact where a defendant continued to use a service with full knowledge of the amount to be paid for such services. Bates Block Associates, Inc. v. Milady's Shop, Inc., 3 Mass.App. 776, 333 N.E.2d 214, 215 (1975). This rationale is clearly inapplicable to the present case since it assumes that the party had full knowledge of the charges while he used the service. It is apparent from the record in this case that the Freemans were never notified of, nor could they have expected, such a large retroactive increase of $10,000 to $17,000 in tuition during the 1979-1980 school year. Although the tuition increase was approved in January 1980, the amount of this increase was not communicated to the Freemans even after the State of Illinois refused to grant an adjustment in the Illinois rate in April of 1980. The first indication the Freemans had that the School was in financial trouble was June 28, 1980, when Dr. Spencer called and informed them that April could not return to School unless a satisfactory arrangement for payment of tuition could be arranged. Even at that time Dr. Spencer did not specifically mention the amount of the retroactive increase in tuition, nor did he state the balance supposedly owed by the Freemans. The first time that the Freemans were informed of the actual amount of the retroactive rate increase was via a bill mailed to Dr. Freeman in November of 1980. We hold no contract was implied-in-fact from continued use of the service under the circumstances presented in this case. 40 In the alternative the School argues that the weight of the evidence demonstrates that the School is entitled to payment of the balance due for the 1979-1980 tuition on a contract implied-at-law or quantum meruit theory. In order to recover in quantum meruit it must appear that the work was performed under circumstances warranting a finding that the plaintiff expected that the defendant would pay for the work, that the defendant acted with that expectation and that the defendant allowed plaintiff to so act without objection. Home Carpet Cleaning Co. v. Baker, 1 Mass.App. 879, 307 N.E.2d 346, 347 (1974). 41 Such relief is not appropriate in this case since we are unable to find any support in the record that the School acted with the expectation that the Freemans would pay the retroactive increase in tuition. The evidence indicates to the contrary that the School officials in fact believed that the State of Illinois rather than the Freemans would increase its reimbursement rate to correspond with the retroactive increase imposed by Massachusetts. The Freemans were not billed for the increase until approximately eleven months after the fact. Moreover, they were given no opportunity to object to the rate increase or withdraw April from the School since they had no prior notice of the amount of the increase. Under these circumstances, we hold that the School has failed to establish a right to quantum meruit relief for the unpaid tuition, fees and expenses for the 1979-80 academic year. 42 The School also asserts that it is entitled to restitution on the theory that the Freemans have been unjustly enriched at the School's expense. Restatement of Restitution 1 (1936 & 1979 Supp.). It is asserted that under Illinois law Dr. Freeman has the primary rights and duties with respect to the care, education, custody and control of his daughter, accord Interest of Wheat, 68 Ill.App.3d 471, 25 Ill. Dec. 7, 386 N.E.2d 278, 282 (1st Dist.1979), and that since the School discharged those duties for him, equity requires that he reimburse the School for the value of the services rendered. 43 However, it is well established that he who comes into equity must come with clean hands. Weintraub v. L & F Realty Co., 331 Mass. 711, 122 N.E.2d 379, 381 (1954); Dobbs, Remedies Sec. 2.4 at 45 (1973). Under the circumstances, it is clear that the School was attempting to penalize the Freemans for its own negligence and inattention to the application requirements that must be fulfilled in order to be reimbursed by the State of Illinois. 44 When the Illinois rate was set on August 22, 1979, the School was notified that any appeals of the rate must be made within 60 days. The School knew that the Massachusetts rate was likely to be increased during the course of the school year and yet it made no effort to notify the Illinois Review Board that an increase might be required. The School submitted an application for an administrative adjustment to increase its Massachusetts rate in mid-October of 1979. At that point in time, no effort was made to apply for a similar rate adjustment in Illinois. The School apparently disregarded the 60-day appeal period. Although the School may have discharged a duty that Dr. Freeman was legally obligated to perform, we deem it would be manifestly unfair to charge Dr. Freeman for costs incurred because of the negligence and simple inattention to detail on the part of the Perkins School. We, therefore, hold that the weight of the evidence does not demonstrate that the elements of (1) a contract implied-in-fact or (2) a contract implied-in-law have been established with respect to Dr. Freeman's liability for the retroactive increases in tuition for the 1979-80 academic year. 45 Thus, we hold that the district court properly denied the School's motion for judgment notwithstanding verdict 20 and, in the alternative, a new trial. 21
46 The School also asserts that the jury verdict finding Dr. Freeman not liable to the School for unpaid tuition, fees and expenses for his daughter for the 1980-1981 academic year was against the manifest weight of the evidence. The School argues that the evidence demonstrates an implied-in-fact contract between Dr. Freeman and the Perkins School and that the district court erred in denying the School's motion for a judgment notwithstanding the verdict or, in the alternative, a new trial. 47 Dr. Franklin Perkins School asserts that Dr. Freeman had a continuing obligation to cover any amounts that the State of Illinois did not cover with regard to April's care and education. Although we rejected this reasoning with regard to the retroactive tuition increase imposed in 1979-1980, a different situation existed with regard to the 1980-1981 school year. Dr. Freeman was notified on June 28, 1980 that there was a problem with obtaining full reimbursement from Illinois. The course of dealings between the parties changed in that telephone conversation when Dr. Freeman stated that he would assume responsibility for the difference between the Massachusetts rate and the Illinois reimbursement. Although Dr. Spencer testified that Dr. Freeman never expressly agreed to pay the difference between the Massachusetts and Illinois rate for the 1980-1981 school year, Dr. Freeman's testimony that he did agree to pay the difference in tuition rates, subsequent communications between Dr. Freeman and the School, including Mildred Levinson's conversation with Dr. Spencer over the July 4, 1980 weekend, and the fact that Dr. Freeman returned April to School with full knowledge that the School was experiencing difficulty in obtaining full reimbursement for tuition from Illinois and that the tuition had been increased and would continue to increase, indicate that an implied-in-fact contract existed as of June 28, 1980 to furnish April with an education at the Perkins School at the increased cost. 48 Although Dr. Freeman admits that a contract existed as a result of the June 28, 1980 conversation, he asserts that the School's breach of this contract disposed of his obligations to pay for any of the 1980-1981 school year tuition. Dr. Freeman contends the terms of the agreement were that Dr. Spencer was to allow April to continue at the Perkins School and the School was to apply for reimbursement from Illinois, while Dr. Freeman would pay the full tuition for the summer session and the difference between the Illinois and Massachusetts rates for the normal 1980-1981 school year. Dr. Freeman argues that the School's failure to apply for reimbursement from Illinois constituted a material breach of the June 28, 1980 agreement, and thus Dr. Freeman was discharged from the obligation to perform any conditions under the contract. 49 We reject this contention. The evidence, even when considering it most favorably to Dr. Freeman, is insufficient to support a verdict finding him not liable to the School for any portion of the unpaid tuition, fees and expenses for the 1980-1981 academic year. Although the School failed to apply for reimbursement from the State of Illinois, failure of a term or condition of an agreement does not necessarily relieve a party from his obligation to perform unless it materially alters the contract. Here, the essence of the contract was that the School promised to provide for the care and education of April while Dr. Freeman agreed to pay for that portion not reimbursed by the State of Illinois. One of the conditions of the contract was for the School to apply for the aid. The failure of the School to do so did not deprive Dr. Freeman of any benefit under the contract since the School continued to educate and care for April. See Restatement (Second) of Contracts, Secs. 237, 241(a). Thus, any claimed breach of the contract by the School in not applying for aid was not a material breach which would excuse Dr. Freeman from rendering his promised performance. The fact that the School did not apply for reimbursement from Illinois does not alter Dr. Freeman's obligation to pay the full tuition for the 1980 summer session and the difference between the Illinois and Massachusetts rates for the 1980-1981 school year. In contrast to our earlier holding where we stated that there was no evidence demonstrating the Freemans had assumed any obligation for the increase tuition, here Dr. Freeman admits that he agreed to pay for the difference in tuition for the 1980-1981 academic year. We, therefore, reverse the district court on this issue and remand for a determination of the amount Dr. Freeman would have been obligated to pay had the School applied for reimbursement from Illinois. 22 50