So close... and yet so far away.

Student loans are a contract, like any other contract -- a phrase I just wrote for the first time in my life but which I imagine I'll have to say a lot, in the future, as student loans begin to be more aggressively collected, defaulted, and hence litigated.  (I say that because I've spent the past five years telling many judges that "mortgages are contracts just like any other," with varying degrees of success at applying contract law and ordinary rules of evidence to mortgage contracts, which many judges still treat as though they're a uniquely rare bird not subject to our laws.)

And the fact that student loans are a contract like any other means that rules of contract law and evidence will apply to them just like every other deal you make with someone -- and that means that student loan lenders, like any other party to a contract, might mess things up and not be able to collect.

Unless, of course, the debtor messes up worse than the lender, which is what happened in Wisconsin Higher Education Corporation v. La Barge, an unpublished student loan case decided by the Wisconsin Court of Appeals way back in 1988.

Facts are sparse in the opinion -- as is the case with unpublished opinions, which are usually authored by an unelected, unaccountable lawyer working for the Court.  Keep that in mind, election reformers: A great many public policy issues are decided by someone you don't know who has never run for office.  Here's what we know:

 The Wisconsin Higher Education Corporation appeals and Gerald La Barge cross-appeals a judgment on the corporation's claim that La Barge defaulted on several student loans. According to the terms of the loans, La Barge should have started monthly repayments in December, 1975 and continued them until the principal and interest was paid. La Barge did not begin paying until February, 1977 and made no payments after September, 1981. 

 So it's a collection action, and La Barge doesn't want to pay.  Ho, hum... let's see what else is... hold up, what's this?

The trial court found, however, that it was either the corporation's negligence or policy decision that permitted La Barge to avoid payments before February, 1977 and between September, 1981 and January, 1983. The court therefore concluded that the corporation was equitably estopped from assessing its seven percent interest charge during those periods, although the corporation received judgment for the principal and remaining accrued interest.

That's all we've got: Tell me more! I wanted to shout, but the Court of Appeals from 1988 can't hear me, so I didn't bother.

That's kind of a victory; we don't know how much the interest was but La Barge didn't have to pay 7% interest for about four years or so; that's not bad.  But then he appeals, and the Board appealed, and:

We conclude that the court erred by denying judgment for the interest that accrued during the periods of nonpayment even though the corporation may have been responsible for them. We also conclude that the issues that La Barge raises on cross-appeal are either waived or have no merit.

Again, I have to take issue with the use of the phrase "no merit."  No merit means, literally, no merit: that the claim shouldn't have been brought, at all.  As I recently convinced a court on a similar issue, losing does not equate to frivolous.  The failure to convince a court doesn't mean you have no merit to your case.

Consider the burden of proof - -in civil cases, a preponderance of the evidence.  So I have to have 50%+1 of the evidence to win -- you have to just barely be convinced that I should win and I win.

I was in Court once challenging whether a complaint had been served properly on my client.  The judge said this:  "I find each side equally credible.  I don't know who to believe."

With that, he looked at me and said "But it's your burden of proof, so you lose."

Did my case have no merit?  NO! It was equally convincing... and so I lost.

La Barge's claims were deemed to have no merit by a Court of Appeals' staff lawyer -- but the Circuit Court found they had plenty of merit, in some cases.

Anyway, here's what the Court of Appeals did:

It found that La Barge couldn't prove estoppel because he has to show that his reliance was detrimental, but, the Court said,

  The court erred by estopping the corporation from collecting interest during the periods it allowed La Barge to avoid or suspend loan payments. To invoke estoppel, the court had to find that La Barge detrimentally relied on the corporation's action. Mercado v. Mitchell, 83 Wis.2d 17, 26-27, 264 N.W.2d 532, 537 (1978). There was, however, no detriment to La Barge. The corporation's failure to enforce its loan terms allowed La Barge to continue using a substantial amount of money he otherwise would have been repaying in monthly installments. The corporation is therefore entitled to all the interest that accrued on the loans regardless of who bears the blame for postponing or suspending the payment schedule.

That's faulty reasoning -- by that reasoning, no lender could ever be estopped unless the borrower went on paying during the period of alleged estoppel, which in turn means that no borrower can ever take advantage of a lender's forbearance offer.

Consider: A borrower says "Hey, I can't make payments for three months, can you help me out?" So the lender says "Yeah, we'll suspend payments for those three months and add them to the principal amount and begin repayment in three months," and the borrower says "Hey, thanks great!" and the lender then after two months sends a notice of default and sues and the borrower defends with "But they promised me..." and trails off in defeat as he realizes the Court of Appeals (staff lawyer) is going to say "Yeah, but you had all that money you otherwise would've had to pay."

See the problem?

The rest of the case was lost because La Barge did, as I said, mess up worse than the lender.  He didn't bring to the trial court's attention a lack-of-standing argument (which likely wouldn't have won as the Board could've just substituted the plaintiff), didn't have his counterclaim properly before the circuit court and so couldn't get a default judgment on it (but he wouldn't have, anyway, he'd have had to move for judgment on the pleadings) and then didn't provide a transcript to the Court so he couldn't prove that the evidence was insufficient to prove his "no revocation of consent to not pay" defense.

The moral? Get a transcript, and hope you get a full appellate panel.