Opinion ID: 769836
Heading Depth: 3
Heading Rank: 1

Heading: Renshaw

Text: 33 Cazenovia relies on the Reservation Agreement that Renshaw signed before enrollment as evidence of a loan. The Agreement lists fees and charges and recites that Cazenovia has a security interest in the diploma and transcript, but it does not state that the student is entitled to attend any classes or obtain any other services without paying the charges when they are due. Its apparent purpose is to notify the student of the college's fees and to obligate him to pay those fees even if he later stops attending classes. 34 The Agreement specifies penalties for failure to pay fees when due. Significantly, it does not obligate Cazenovia to permit a student with unpaid bills to attend classes or to obtain other services from the college. Even if allowing a student to attend classes without prior payment can be characterized as an extension of credit, Cazenovia never promised to extend such credit to Renshaw, and it certainly did not reach a prior or contemporaneous agreement with Renshaw on the amount of credit to be extended. 35 Cazenovia's practice in executing the Reservation Agreements further undercuts its position. It routinely executes identical Agreements with each of its incoming students, without making any inquiry into their financial needs, creditworthiness, or intent to pay the college's fees on time. In addition, after listing the fees for the academic year, the Agreement expressly states [t]he above does not reflect financial aid, if any. These circumstances indicate that the Agreement is not intended to create an educational loan. The bankruptcy appellate panel correctly characterized the Agreement as constituting Cazenovia's offer to sell the student goods and services at the specified prices rather than as an offer to make a loan. See In re Renshaw, 229 B.R. at 557. 36 The appellate panel also observed that were it to construe the transaction in Renshaw as a loan, the 19.2 percent annual interest rate specified in the Agreement (in the form of service charges) would violate state law that sets an upper limit for loans at 16 percent annual interest. See Renshaw, 229 B.R. at 557, citing N.Y. Gen. Oblig. Law § 5-501 (McKinney 1989); see also N.Y. Comp. Codes R. & Regs. tit. 3, § 4.1 (1999) (setting out maximum permissible interest rates under § 5-501). Not only is this argument forceful, but Cazenovia's response reinforces our decision. The college declares that the service charges are not usurious because New York's usury statutes do not apply to defaulted obligations. Because the service charge accrues from the due date of Cazenovia's bill to the student, this statement suggests that the obligation is in default as soon as the due date has passed. The student's obligation therefore is simply to pay tuition on the due date, not to repay a loan. Renshaw's default on his tuition obligation created a debt. However, this debt did not arise out of a contract whereby Cazenovia College transferred money, goods, or services to Renshaw in return for his agreement to pay for them at some later date. Rather, the debt arose out of Renshaw's failure to pay tuition on the due date, contrary to his agreement with Cazenovia College. Without an agreement by the lender to make a transfer in return for a future payment, we cannot find a loan. Renshaw's default may not be construed after the fact to find a loan.