Insights

One of my favorite sayings is "I have never seen anyone punished for doing the right thing." I have had many opportunities to share this advice with others, and it's true.  The people who will judge your conduct later will ultimately measure you against their own set of beliefs regarding what is right and what is wrong.  These standards are basic and universal.  The odds are in your favor if you are doing what you honestly believe is the right thing to do, based on what you know at that time.  You should proceed with confidence, knowing that when the dust settles, you will be vindicated in the eyes of the law and have the respect of the people whose opinions matter.  I have been accused of being naïve for believing this, but every now and then I see something happen which reinforces my belief in this principle. 

A recent appellate case involving a school offers an example of how this process unfolds in real life. 

The Office of Student Financial Services (SFS) receives a loan application from the student's mother and forwards it to the lender for processing.  Because the borrower's credit and income met the lender's known criteria for approval, SFS informs the College's Office of Student Accounts (SA) that it has received an approved application, whereupon SA credits the student's account for the amount of the loan in anticipation of the college receiving the funds. 

And then the situation escalates.  (Plot twist!)  The lender informs SFS that the loan application was denied because the student's mother signed the loan agreement with a pencil.  SFS attempts to correct this error by asking the student's mother to re-sign the loan agreement in ink.  This continues for months, with SFS sending multiple letters to the student's mother insisting that she re-sign the loan agreement, to no avail.  In fact, she never responds.  Unfortunately, SFS also fails to inform SA of what is happening, and the student's account still shows a zero balance.  This is the student's last year, and he is ready to graduate.  Not realizing that the student still owed tuition, the college awarded him a degree.

The college eventually filed suit for the amount due, based on the student's breach of contract, breach of implied contract, and unjust enrichment.  In defense, the student argued that the college should be equitably estopped from claiming an amount due, based on the account statement from the time of his graduation, which showed a zero balance.  In addition, the student argued that the college waived the amount due when it awarded him a degree, citing the following statement contained in the Undergraduate Program Catalog: "[t]he College will not issue transcripts or confer the student's degree until the student satisfies all financial obligations to the college."  The Trial Court disagreed and rendered judgment against the student.

The Court of Appeals also disagreed, and ruled that equitable estoppel did not apply to the facts which would have created an injustice to the college.  "The purpose of equitable estoppel is to prevent actual or constructive fraud and to promote the ends of justice."¹  The Court of Appeals declared that "permitting appellant to retain the benefits of his degree without fully paying for it would directly contravene the ends of justice."²  The Court of Appeals then turned its discussion to the college handbook, and distinguished it from the student's situation, involving a mistakenly awarded degree:

"The provision in the student catalog does not state that conferring a degree relieves the student of all financial obligations. The provision does not state that if appellee confers a student's degree, then the student necessarily fulfilled all financial obligations. The provision states that the college will not confer a degree unless the student has fulfilled all financial obligations. The provision does not absolutely prohibit the college from conferring a degree when a student has outstanding financial obligations. In short, the provision does not mean that if the college confers a degree, then the student necessarily fulfilled all financial obligations. Circumstances may arise, like in the case sub judice, when the college may confer a degree, but be mistaken as to whether all financial obligations have been fulfilled. Conferring a degree does not indicate that the college waives its right to seek unpaid financial obligations, or that it promises not to pursue a student for outstanding financial obligations."³ 

The Court concluded that the college's attempts to obtain the student's mother's signature on the loan agreement demonstrated its non-waiver of the requirement.

The court's ruling is also consistent with other cases involving requirements contained in student handbooks which are not followed, by mistake.⁴  Moreover, the decision is also consistent with the general rule followed in many other jurisdictions across the U.S., that "[t]he basic legal relation between a student and a private university or college is contractual in nature. The catalogues, bulletins, circulars, and regulations of the institution made available to the matriculant become a part of the contract."⁵  If the "catalogues, bulletins, circulars, and regulations of the institution" are what establish the terms of the contract between a university and its students, then the other rules of contract, such as those prohibiting a party from taking advantage of another's unilateral mistake, should also apply, and govern the parties’ behavior during subsequent legal proceedings brought based upon an alleged breach by either the university or the student. 

At the end of the day, the end result may have been driven more by the "wrongful-ness" of the student's attempt to rely upon an obvious mistake, but it was right for the college to include the prohibition in its Undergraduate Catalog, and it was right to confront the borrower afterwards and insist upon re-submission of a properly signed loan agreement.  …And no one was punished for doing the right thing.

¹ 2013-Ohio-5405, at *24, quoting Doe v. Archdiocese of Cincinnati, 116 Ohio St.3d 538, 540, 2008-Ohio-67, 880 N.E.2d 892, and Ohio State Bd. of Pharmacy v. Frantz, 51 Ohio St.3d 143, 145, 555 N.E.2d 630 (1990).
² Id., at *25.
³ Id., at *31.
⁴ See, Prince v. Kent State Univ., 2012-Ohio-1016, 10th Dist. No. 11AP-493 (Mar. 13, 2012), see, also, Waliga v. Board of Trustees, 22 Ohio St. 3d 55, 57, 488 N.E.2d 850, 852 (1986) ("We consider it self-evident that a college or university acting through its board of trustees does have the inherent authority to revoke an improperly awarded degree…")
⁵ Zumbrun v. University of Southern California, 25 Cal. App. 3d 1, 10 (Cal. App. 2d Dist. 1972); see, also, Wilson v. Illinois Benedectine College, 112 Ill. App. 3d 932, 445 N.E.2d 901, 68 Ill. Dec. 257 (Ill. App. Ct. 1983); Lexington Theological Seminary, Inc. v. Vance, 596 S.W.2d 11, 12 (Ky. Ct. App. 1979); Dinu v. President & Fellows of Harvard College, 56 F .Supp. 2d. 129, 130 (D. Mass. 1999); Matter of Carr v. St. John's Univ., N.Y., 17 A.D.2d 632, 633 (N.Y. App. 1962).