Frankel v. Board of Regents

ELDRIDGE, Judge. The University of Maryland, College Park, a State-owned and operated institution of higher education, requires that students classified with “out-of-state status” pay higher tuition fees than students classified with “in-state status.” Pursuant to the University’s tuition policy, students who are “financially independent” are eligible for in-state status upon a showing of “permanent residence” in Maryland. Students who are “financially dependent” upon an out-of-state benefactor, however, are ineligible for in-state status. The issue in this case is whether the University’s policy violates the due process and equal protection rights of bona fide Maryland residents who are financially dependent upon an out-of-state source of funds.

I. The University of Maryland, College Park, is part of the University System of Maryland. The University System of Maryland is “an independent unit of State government” established “[i]n order to foster the development of a consolidated system of public higher education” in Maryland. Maryland Code (1978, 1999 RepLVoL), §§ 12-101(a), 12-102(a)(3) of the Education Article. The University System, which is “a body corporate and politic,” is governed by the Board of Regents. § 12-102(a), (b).

As a governing body, the Board is empowered to “make rules and regulations, and prescribe policies and procedures, for the management, maintenance, operation, and control of the University System.” § 12-104(j). Pursuant ³⁰² to § 12-109(a) of the Education Article, the Board must also appoint a president for each of the eleven “constituent institutions” within the University System. 1 In turn, the president of each institution has the authority, subject to the regulations and policies of the Board, to “[s]et tuition and fees.” § 12-109(e)(7). In August 1990, the Board of Regents approved the “Policy for Student Residency Classification for Admission, Tuition and Charge Differential Purposes” (the Policy). The Policy is used by the constituent institutions which have established tuition “charge differentials” based on state residency in order to determine which applicants are, in fact, bona fide state residents.

The University of Maryland, College Park, is one of the institutions which has established tuition charge differentials between “in-state” and “out-of-state” students in accordance with the Policy. Under the Policy, a student’s “residency classification” is initially dependent upon the source of his or her financial support. A student who is “financially independent” is given the opportunity to prove bona fide state residence based on eight traditional domicile factors, set forth in Part I, subpart A of the Policy, such as place of residence, voter registration, property ownership, the state to which income taxes are paid, driver’s license, motor vehicle registration, etc. See, e.g., Stevenson v. Steele, 352 Md. 60, 69-70 , 720 A.2d 1176, 1180-1181 (1998); Blount v. Boston, 351 Md. 360, 365-373 , 718 A.2d ³⁰³ 1111, 1113-1117 (1998), and cases there cited; Toll v. Moreno, 284 Md. 425, 438-444 , 397 A.2d 1009, 1015-1019 (1979). A student who is “financially dependent,” however, is precluded from presenting evidence relating to his or her own permanent residence.

Instead, the permanent residence of the financially dependent student is deemed to be the same as that of the individual or individuals who provide the monetary support. A “financially dependent student” is defined under the Policy as either “one who is claimed as a dependent for tax purposes, or [one] who receives more than one-half of his or her support from a parent, legal guardian, or spouse during the twelve (12) month period immediately prior to the last published date for registration for the semester or session.” A “financially independent student,” on the other hand, is one who is not a dependent for tax purposes, receives less than one-half his or her support “from any other person or persons,” and “demonstrates that he or she provides through self-support one-half or more of his or her total expenses.” 2 In addition, there is a twelve-month durational residency requirement, meaning that the financially independent student, or in the case of a financially dependent student, the parent, legal guardian, or spouse, “must have resided in Maryland for at least twelve (12) consecutive months” prior to the last date of registration for the forthcoming semester in order to qualify for in-state status. ³⁰⁴ Under the “Procedures Established by the University of Maryland at College Park,” which are contained in Part II of the Policy, residency is first determined when a student applies for admission. If a student is dissatisfied with the initial residency classification, or if circumstances subsequently change, he or she “may request a re-evaluation of his or her residency status.” If the request for re-evaluation is denied, the student may appeal to the Director of the “Residency Classification Office,” and finally to the “Residency Review Committee.” While a request for re-evaluation and the appeals are pending, a student is “still obligated to pay the out-of-state tuition.” The Policy goes on to provide that “[i]f an approval is granted, then the Bursar’s Office will credit the student’s account for any excess tuition paid. The student may also request a refund directly from the Bursar’s Office.” II.

The petitioner, Jeremy Frankel, was born in Annapolis, Maryland, in 1977. He grew up in Montgomery County, Maryland, where he lived until September 1991. At that time, his mother, who was divorced from his father, remarried and moved to Rhode Island, and Jeremy went with her, “against [his] will.” Three years later, in September 1994, Jeremy moved back to Maryland alone and enrolled at the University of Maryland, College Park. He lived year-round in College Park for the four years he was attending the University.

He was a registered Maryland voter; he was employed part-time and paid income taxes to the State of Maryland, and he had a Maryland driver’s license. Although the record is unclear as to the degree to which Jeremy was supported by his parents during this time, it is undisputed that over one-half of his expenses were paid through a bank account at the NASA Federal Credit Union, in Maryland, which Jeremy owned with his parents. When Jeremy applied for admission to the University in December 1993, before he had moved back to Maryland, he did not seek resident status for tuition purposes. He listed his residence as that of his father, in the District of Columbia. ³⁰⁵ Consequently, he and his parents paid the higher out-of-state tuition.

After his second year at the University, however, Jeremy submitted an application for in-state status to begin in the Fall 1996 semester. Although Jeremy claimed that he was a financially independent permanent resident, his application for reclassification was denied. On appeal to the “Residency Classification Office,” he was told that in-state status had been denied because he failed to show that “he financed through self-support one-half or more of his total expenses.” Jeremy was classified as a financially dependent student, and, because his parents lived out-of-state, he was deemed a nonresident. Finally, Jeremy appealed to the “Residency Review Committee,” submitting bank statements, copies of income tax returns, driver’s license, and voter’s registration card.

His appeal was denied on January 29,1997. After Jeremy had exhausted his administrative appeals within the University System, he and his father, David Frankel, filed in the Circuit Court for Montgomery County a complaint for a declaratory judgment and other relief. The Frankels named the Board of Regents and the President of the University of Maryland, College Park (hereinafter collectively referred to as “the Board”) as defendants. In the complaint, the Frankels asked the Circuit Court to declare that: (1) Jeremy was entitled to in-state tuition under the Policy because he was “financially independent” as defined therein, or (2) the Policy’s nonresidency presumption, based on financial dependency, was in violation of Jeremy’s rights to due process and equal protection of the laws and thus was unconstitutional.

The Board filed a motion to dismiss or for summary judgment, and the Frankels filed a cross-motion for summary judgment. After a hearing on the motions, the Circuit Court granted summary judgment in favor of the Board and filed a declaratory judgment holding that the decision to classify Jeremy as financially dependent was “not arbitrary and capricious, illegal, or unreasonable.” The court declared that the Policy did not violate due process principles and did not violate Jeremy’s right to equal protection of the law because the distinction ³⁰⁶ “between a financially independent student whose residence is considered for in-state status, and a financially dependent student whose residence is not considered, is certainly a distinction that has a rational basis.” The Frankels appealed to the Court of Special Appeals which, in an unreported opinion, affirmed the judgment of the Circuit Court. Jeremy Frankel then filed a petition for a writ of certiorari which this Court granted. Frankel v. Univ. of Maryland, 354 Md. 112 , 729 A.2d 404 (1999).

Shortly thereafter, the Board filed a motion to dismiss. This Court deferred action on the motion.

III

In the motion to dismiss, the Board argued that the case became moot once Jeremy graduated from the University of Maryland, College Park, in May 1998. The Board made the same argument before the Court of Special Appeals, which had held that the University’s “refusal to grant Jeremy instate status is a live controversy to the extent that he may now be entitled to an excess tuition refund.” Although we shall reverse the judgment of the Court of Special Appeals on the merits, we agree with its holding on the issue of mootness. There remains a justiciable controversy between Jeremy Frankel and the Board. In the Frankels’ initial complaint, they requested, inter alia, that the Circuit Court declare that they were entitled to a refund for “the difference between the amount [they had] paid for tuition and the amount that would have been paid for tuition based on in-state status.” Thereafter, in their amended complaint, they simply requested “[a]n award of any other and further relief that the court considers proper.” Despite the broad request for relief in the Frankels’ amended complaint, the Board argues that the petitioner in the amended complaint “abandoned his claim to a tuition refund,” and that, as a result, there is no justiciable controversy between the parties.

The Board contends that Jeremy was required to abandon the claim for a refund because it was ³⁰⁷ barred by sovereign immunity and that, because he has graduated, he cannot claim that his rights will be violated in the future. Consequently, the Board’s argument continues, even if this Court were to hold that the Policy was unconstitutional, the right to a refund could be enforced only through “a yet-to-be-filed contract action,” which would be barred by the one year statute of limitations set forth in Code (1984, 1999 RepLVol.), § 12-202 of the State Government Article. According to the Board’s argument, “sovereign immunity bars the Frankels’ retrospective claims and mootness bars their prospective claims.” Contrary to the Board’s position, we do not believe that the wording change in the amended complaint, from a request for a declaration concerning a refund to a request for “other and further relief that the court considers proper,” constituted an abandonment of a claim for a refund. If a declaration concerning a refund were appropriate at this stage of the controversy, it would be encompassed by the language of the amended complaint.

Moreover, the matter of a refund is not being raised too late, as contended by the Board. Instead, any decision concerning the grant of Jeremy’s refund claim would seem to be premature. Under the Policy and the procedures therein set forth, a student is obligated to pay the higher out-of-state tuition during the pendency of a request for re-evaluation and all appeals. Until there is a proper re-evaluation, approval of the request, and a change in status, there would appear to be no entitlement to a credit or a refund.

If, as we shall hold, the Policy provided for, and the administrative officials used, legally impermissible criteria in denying Jeremy’s request for in-state status and claim for a refund, those officials will be obligated to reconsider his request and claim using permissible criteria. A refund under the Policy cannot be made until the appropriate officials properly rule upon Jeremy’s request for in-state status, employing legally permissible criteria. In addition, nothing in the Policy provides that the entitlement to a refund ceases immediately upon the student’s graduation. The alternative provisions in the Policy for a ³⁰⁸ credit to the student’s account or a refund suggest that a refund is the appropriate remedy when the student is no longer enrolled at the University and thus no longer has an account with the University which can be credited.

Furthermore, “the General Assembly has now provided broad ... refund remedies covering every type of tax, fee, or charge improperly collected by a Maryland governmental entity.” Bowman v. Goad, 348 Md. 199, 204 , 703 A.2d 144, 146 (1997). Although one must follow the appropriate administrative remedy to be entitled to a refund, Bowman v. Goad, supra, 348 Md. at 204 , 703 A.2d at 146 , Jeremy has meticulously followed the applicable administrative procedures required by the University. Finally, there is no merit in the suggestion that Jeremy’s claim is barred by governmental immunity. Even if the only basis for the claim were the general waiver of governmental immunity in contract actions set forth in Code (1984, 1999 Repl.Vol.), §§ 12-201 through 12-204 of the State Government Article, Jeremy’s claim would not be barred by the one year period of limitations in § 12-202.

Jeremy filed this action within a year from the final administrative decision denying his request for in-state status and his claim for a refund. As previously discussed, he did not abandon his claim for a refund. There are, moreover, grounds for Jeremy’s claim other than §§ 12-201 through 12-204 of the State Government Article. It may be that Code (1988, 1997 RepLVol., 1999 Supp.), § 13-901(a) of the Tax General Article, is applicable when a state college or university charges a student more for tuition than is legally payable.

That section broadly authorizes a refund claim against the State by a claimant who “(1) erroneously pays to the State a greater amount of ... fee, [or] charge ... than is properly and legally payable.” Under § 13-1104(a), a claimant has three years from the date of payment to file “a claim for refund under this article ...,” and Jeremy clearly filed his claim and brought this action within that time. If the statutory refund remedy in §§ 13-901(a)(l) and 13-1104(a) of the Tax General Article is inapplicable to this case, ³⁰⁹ the result would be no different. The General Assembly delegated to the Board very broad authority over tuition and fees (§ 12-109(e)(7) of the Education Article), and the Board adopted a Policy and regulations entitling a student to a credit or refund of tuition upon re-classification from out-of-state status to in-state status. It has long been settled in Maryland that when one pays to a state government agency or a local government more in taxes, fees, or charges than the government is entitled to, and when the law specifically authorizes “a refund, although no particular statutory remedy is provided,” a common law contract “action ... is available.” Apostol v. Anne Arundel County, 288 Md. 667, 672 , 421 A.2d 582, 585 (1980); See, e.g., White v. Prince George’s Co., 282 Md. 641 , 653-654 n. 7, 387 A.2d 260 , 267 n. 7 (1978) (where the law “provided that the [claimant] was entitled to a refund but did not contain a special statutory remedy, ... an action in assumpsit could be maintained”); Baltimore v. Household Finance Corp., 168 Md. 13, 14 , 176 A. 480, 481 (1935) (a law, providing that one who paid “more money for taxes or other charges than was properly and legally chargeable” was entitled to a refund, “changed the common law rule that taxes [or other charges] paid under a mistake of law could not be recovered,” and therefore the plaintiff could bring an action in assumpsit, subject to the statute which “provides that suits in assumpsit shall be commenced within three years after the cause of action accrued”); Baltimore v. Home Credit Co., 165 Md. 57, 65 , 166 A. 604 , 607-608 (1933) (same); George’s Creek Coal & Iron Co. v. County Com’rs of Allegany County, 59 Md. 255, 260-261 (1883) (same).

Apart from the general waiver of governmental immunity for contract actions in §§ 12-201 through 12-204 of the State Government Article, and the law concerning refunds of overpayments to governmental agencies, the General Assembly has authorized the Board to “[s]ue and be sued.... ” Code (1978, 1999 RepLVol.), § 12-104(b)(3) of the Education Article. Although a “sue and be sued” provision ordinarily does “ ‘not alone constitute a general waiver of [governmental] immuni ³¹⁰ ty,’ ” it does waive immunity in actions concerning matters within the scope of the governmental agency’s “ ‘duties and obligations.’ ” Jackson v. Housing Opportunities Comm’n, 289 Md. 118, 124 , 422 A.2d 376, 379 (1980), quoting Board of Trustees of Howard Community College v. John K. Ruff, Inc., 278 Md. 580, 590 , 366 A.2d 360, 366 (1976), and Katz v. Washington Suburban Sanitary Comm’n, 284 Md. 503, 512 , 397 A.2d 1027, 1033 (1979). See O & B, Inc. v. Maryland-Nat’l Capital Park & Planning Com’n, 279 Md. 459, 466-468 , 369 A.2d 553, 557-558 (1977); Weddle v. School Commissioners, 94 Md. 334 , 51 A. 289 (1902). The Board has a duty to “prescribe policies and procedures” for the University System, and, in order to carry out that power and “accomplish the purposes of the University,” the Board was granted the authority to “[e]nter into contracts of any kind.” § 12-104(b)(5) and (j) of the Education Article.

As earlier mentioned, the Board is expressly granted the authority to set “tuition and fees.” § 12-109(e)(7) of the Education Article. Although the Board’s waiver of governmental immunity for actions filed in tort may be limited “to the extent of any applicable liability insurance,” the waiver of immunity for other actions is not so limited. See § 12-104(b) and (i) of the Education Article. Under all of the circumstances, the statutory authorization to “be sued” waives any governmental immunity in declaratory judgment and contract actions to recover tuition overcharges which the Board might otherwise have enjoyed.

Accordingly, we reject the Board’s argument that this case should be dismissed.

IV

A. Turning to the merits of the case, the petitioner argues that the Board’s definitions of and use of “financial dependence” and