UNIVERSITY PLAZA v. THE STATE OF ILLINOIS (2000)

ORDER ON MOTION TO DISMISS

This is an assignee's claim to collect $29,199 of student financial aid ... loans and grants that are administered and disbursed by respondent's Northern Illinois University (NIU or the University)(Compl., ff 1, 4, 5), and is before us on respondent's motion to dismiss.

Nature of the Claim

Claimant, an Illinois limited partnership that operates a for-profit dormitory near the NIU campus, accepted assignments of various student aid entitlements from 23 University students in part payment of their room and board charges. (Compl., ff4-7; see Exh. 3, detailing the specific amounts but not the specific charter or source] of the 23 assignment, totaling $29,199.32; the form of the assignments are pleaded in f7 and Exhs. 1 and 2.) The University rejected the claimant's payment demands. The claimant timely brought its claims in this court seeking (Count I) $29,199 in payment of the assigned entitlements, and (Count II) a declaratory judgement that NIU is obligated to make payments directly to University Plaza pursuant to the students directions and assignments.

The Motion to Dismiss

The respondant's/2-619 motion to dismiss this landlord-assignee's claim, as argued, is both a/2-619 and a/2-615 motion and raises four issues

1. Failure to exhaust alternative source of payment, as required by/25 of the Court of Claims Act (705 ILCS 505/25). The issue is whether the landlord-assignee must exhaust its potential remedies against the 23 student-assignors before seeking an award against the State in this court.

2. Non-assignability of the student aid, loans, and grants. The issue presented whether as a matter of public policy, student financial aid, loans and grants and assignable by the students to whom they are granted.

3. No State Liability; no claim against the respondent. This issue, belatedly raised, is whether the allegedly assigned financial aid, student loans and grants are State liabilities (or State debts) so as to be actionable in this court.

4. Lack of jurisdiction to render a declaratory judgment. The issue is whether the Court II claim for declaratory judgment must be dismissed due to this court's lack of equitable jurisdiction.

The claimant has filed objections to respondent's motion. We take up these issues seriatim.

Respondent's Exhaustion Motion

Respondent contends that the landlord-claimant must first sue the 23 students, who received the room and board benefits and who assigned their student aid/loan/grant benefits to the claimant Respondent argues that the student are liable for their room and board debts, and are thus an alternative source of payment for the debt, which must be fully exhausted under the alternative source exhaustion requirement (/25, Court of Claims Act) before the State can be held liable for any portion of that debt by this court.

Claimant replies that the respondent disregards the nature of an assignment, and contends in effect that the students are not alternative payment sources for NIU's liability on the aid/grants/loans.

Both sides arguments have merit, but like ships passing in a fog never quite interest.

Respondent's exhaustion argument is well taken but as to a different claim than the one brought here. This is not a room-and-board claim despite respondent's effort to characterize it as such. Claimant is not suing on students debts. Although the students debt to their landlord may be the genesis of this case, and although payment of that debt may be the intended use of the funds bought here, this claim is purely to enforce the rights assigned by the students. Their room-and-board debt was only the consideration for their assignments to the landlord-claimant.

Because this claim is solely upon the allegedly assigned rights, the failure-to-exhaust motion is ultimately predicted upon the assignors being liable for the payment of those same aid/grant/loan liabilities: if they are, then the claimant must exhaust against the student-assignors; but if not, then there is nothing to exhaust. The alternate source exhaustion analysis, as always, first examines the liability of the putative third-party payment source.

In this case, the assignors are not alternative payment sources of the assigned benefits because the assigned benefits are obligations to them. Simply put, the students cannot be an alternative source of payment to themselves. If the assignments are valid, then the claimant assignee stands in the shoes of the student-assignors on their claim against the party (allegedly NIU that is liable to pay the assigned benefits. See, e.g., Community Bank of Greater Peoria v. Carter 283 Ill.App.3d 505, 669 N.E.2d 1317 (1st Dist. 1996); Board of Managers of Medina on Lake Homeowners Ass'n v. Bank of Ravenswood, 295 Ill.App.3d 131, 692 N.E.2nd 402 (3d Dist. 1998) Serosberg v. Brauvin Realty Services, 295 Ill.App.3d 17, 691 N.E.2d 834 (1st Dist. 1998).

Standing in those shoes standing alone at least is not a position from which the assignee can sue the former wearers of those shoes. The students do not become liable to pay their benefits of virtue of having assigned them. Finally, the respondent has advanced no independent legal basis on which the students might be liable to pay the assigned ad/loan/grant/benefits.

We conclude that the students are not alternate sources of payment of these liabilities and that the/25 alternative source exhaustion requirement does not apply to these circumstances.

Non-Assignability of Student Entitlements

Respondent urges a series of cogent public policy arguments to the effect that student loans grants and financial aid generally should not be assignable. However, respondents cites no statutory regulatory or judicial authority for the proposition that such loans, grants and financial aid are unassignable as a matter of law, either generally - as the University urges or as to any particular student aid.

Claimant relies on the well-settled proposition that claims against the State are generally assignable as a matter of law, citing People ex rel. Stone v. Nudelman, 376 Ill. 535, 34 N.E.2d 851 1940) and 6 Am.Jur.2d/66 (for the general American rule). This court has also recognized and applied the general rule of assignability of claims against the State, see, Clark and Trooper Lodge No. 41. Fraternal Order of Police v. State of Illinois, 38 Ill.Ct.Cl. 213 (1985), citing Terminal Bank v. State of Illinois, 12 Ill.Ct.Cl. 491 (1943). However, as respondent points out, those decisions did not address the peculiar student aid issues and policy concerns that the University raises in this case although they recognize a strong and seemingly across-the-board policy of assignability.

This court declines to address this issue at this time. First, we need not do so to resolve the pending motion to dismiss. Second, we do not believe this general issue is ripe for decision as now presented. This court would not take up this general proposition until the specific assignability or non-assignability of the individual student grant, loan and other aid programs are first determined in accordance with their own terms. Those individual programs may well carry their own assignment policies and restrictions, and may generate particular policy concerns none of which has been presented to this court. Indeed, at this juncture the court is not even informed of the identity of the programs involved in this case.

The State/University Liabilities Issue

Respondent next raises the fundamental question of whether the financial aid, student loan and grants that are the subject of this claim are indeed financial liabilities of the University and hence of the State. This issue is fundamental because it is jurisdictional to adjudicate it under/8 of the Court of Claims Act (705 Il.CS 505/8), which is now the sole source of this court's purely statutory jurisdiction.

Nevertheless, we are troubled by the respondent's raising of this issue without evidential support in its reply to the claimant's memorandum. The respondent discusses various federal and private student financial aid programs that may be involved here and that respondent contends do not involve State liabilities although they may be administered, in part at least, by the University. In the absence of evidence, that discussion of non-State programs is speculation. For this reason, and because the claimant has not had an opportunity to reply, we will not treat this aspect of the motion to dismiss as a/2-619 motion. Instead, we take up this jurisdictional issue solely on the face of the complaint, i.e., as a/2-615 motion.

As a pleading matter, respondent's point is well taken: The claimant has alleged only that the student aid/loans/grants that are the subject of this claim are administered and disbursed by the University and may have been grant [ed] by the University (see, compl., ff4, 5). The complaint not allege any University contracts or commitments to pay or fund any of the 23 allegedly assigned aid, loan and grant benefits. This omission, we conclude, is fatal to the complaint.

There is no way for this court to ascertain whether the vaguely alleged financial aid _: loans and grants that are administered and disbursed by NIU are State programs funded by the State funds, or whether some or all are federal, private or other governmental programs funded by _ authority may, or may not generate a University obligation that is enforceable against the respondent. Pleading a due claim against the State is the claimant's burden, notwithstanding our unhappiness at the University's failure to document the particular programs involved.

Because the complaint fails to assert an ascertainable State liability -- presumably one arising of State law, as the complaint asserts jurisdiction under/8 (a) of the Court of Claims Act (705 Il. CS. 505/8(a)) instead of/8(c), which would be the jurisdictional basis of a contractual claim as respondent correctly notes -- it fails to state a claim in this court and must be stricken. Presumably, any of the 23 assignments involves a University obligation on the assigned student aid commitments the claimant will be able to make adequate allegations in an amended complaint.

The Declaratory Judgement Issue

As respondent finally notes, this court has held that it has authority to issue declaratory assignments within the scope of its adjudicatory jurisdiction established (currently) by/8 of the Court of Claims Act (705 ILCS 505/8). See, Ace Coffee Bar, Inc. v. Board of Trustees of the University of Illinois 51-7 Ill.Ct.Cl.395 (99 CC 2001, May 14, 1999); Orr Construction Co. v. State of Illinois 30 Ill.Ct.Cl.266 (1975); Hartford Accident & Indemnity Co. v. State of Illinois 31 Ill.Ct.Cl. (1978). Judge Holderman stated for the court in Hartford Accident & Indemnity, supra at 215:

Respondent argues that this legislative grant of exclusive jurisdiction [/8(b) of the Court of Claims Act] should be interpreted to exclude jurisdiction of all claims which cannot be resolved by awarding or denying monetary relief. If the legislature had intended such a result, it would seem that the grant of jurisdiction to decide claims against the State founded upon any contract would have been expressed in a much more restrictive manner.

The court also observes, in passing that the initial argument against declaratory judgement jurisdiction advanced in this case -- that this courts lack of equitable jurisdiction precludes statutory judgement jurisdiction -- is historically and analytically incorrect. Declaratory judgements are creatures of statute or court rule, not of equity jurisprudence.

In its reply, the respondent seemingly abandons its broadside attack on this court's declaratory judgment authority, and more narrowly argues that no declaratory judgement may be rendered if the assigned student financial aid benefits are determined not to be a debt or liability of the State. That, of course, is a jurisdictional issue as we concluded above: if a State liability is not alleged or is not ultimately proven, that will end the claim in this court.

Conclusion

For the foregoing reasons, it is hereby ORDERED:

1. Respondent's motion to dismiss theses claims for failure to exhaust remedies against the 23 student-assignors under/25 is denied;

2. Respondent's motion to dismiss these claims based on the per se unassignability of student aid benefits is denied as premature, without prejudice;

3. Respondent's motion to dismiss these claims for failure to state a State liability or debt is granted in part;

4. Respondent's motion to dismiss Court II of the complaint for want of jurisdiction grant a declaratory judgement is denied; and

5. The complaint is stricken, and claimant is granted leave to file an amended complaint, in conformance with this order, within 28 days after the date of this order.

EPSTEIN, J.