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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

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
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     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


) Supreme Court No. S- 12996
) Superior Court No. 3AN- 06-12939 CI
v. )
) O P I N I O N
POSTSECONDARY EDUCATION, ) No. 6400 - August 21, 2009
          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

          Before:    Fabe,  Chief  Justice,   Eastaugh,
          Carpeneti, Winfree, and Christen, Justices.

          WINFREE, Justice.

          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.
          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
          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
          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.
          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
     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
          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.
          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

     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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