BETH LEWIS MAZE AND UNKNOWN SIMILARLY SITUATED PURCHASERS OF KAPT CONTRACTS APPELLANTS
BOARD OF DIRECTORS FOR THE COMMONWEALTH POSTSECONDARY EDUCATION PREPAID TUITION TRUST FUND; DAVID L. ALLEN, IN HIS OFFICIAL CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS; JOHN CHESHIRE, IN HIS OFFICIAL CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS; CHARLES VINSON, IN HIS OFFICIAL CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS; ERICA L. HORN, IN HER OFFICIAL CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS; BECKY LAMB, IN HER OFFICIAL CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS; BRENT A. MCKIM, IN HIS OFFICIAL CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS; KRISTI P. NELSON, IN HER OFFICIAL CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS; LISA PAYNE, IN HER OFFICIAL CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS; BARBARA SEXTON-SMITH, IN HER OFFICIAL CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS; J. SCOTT WANTLAND, IN HIS OFFICIAL CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS; DR. GARY S. COX, IN HIS APPELLEES OFFICIAL CAPACITY AS AN EX OFFICIO MEMBER OF THE BOARD OF DIRECTORS; DR. TODD HOLLENBACH, IN HIS OFFICIAL CAPACITY AS AN EX OFFICIO MEMBER OF THE BOARD OF DIRECTORS; DR. TERRY HOLLIDAY, IN HIS OFFICIAL CAPACITY AS AN EX OFFICIO MEMBER OF THE BOARD OF DIRECTORS; DR ROBERT KING, IN HIS OFFICIAL CAPACITY AS AN EX OFFICIO MEMBER OF THE BOARD OF DIRECTORS; DR. LORI FLANERY, IN HER OFFICIAL CAPACITY AS AN EX OFFICIO MEMBER OF THE BOARD OF DIRECTORS; KENTUCKY HIGHER EDUCATION ASSISTANCE AUTHORITY; AND THE COMMONWEALTH OF KENTUCKY, FINANCE AND ADMINISTRATION CABINET
REVIEW FROM COURT OF APPEALS CASE NO. 2016-CA-000496-MR
FRANKLIN CIRCUIT COURT NO. 15-CI-00757
COUNSEL FOR APPELLANTS: Robert Andrew Rowland
COUNSEL FOR APPELLEES: Laura Tipton Taylor Allen Payne
Assistant Attorneys General
Lewis Maze, et al. (Appellants) appeal from a decision of the
Court of Appeals which reversed the order of the Franklin
Circuit Court that granted partial summary judgment to
Appellants in a dispute concerning various statutory
amendments to the Kentucky Affordable Prepaid Tuition Fund
(KAPT) contracts previously purchased by the Appellants.
Appellees are the Board of Directors for the Commonwealth
Postsecondary Education Prepaid Tuition Trust Fund (Board)
and its individual members named in their official
capacities; the Kentucky Higher Education Assistance
Authority; and the Finance and Administration Cabinet.
Court of Appeals disagreed with the trial court's legal
conclusion regarding the retroactive application of the 2014
statutory changes affecting the 2003 contracts for prepaid
college tuition entered into by Maze and the Board. The Court
of Appeals interpreted those contracts as providing, in
association with their enabling statutes, that KAPT
participants like Maze, and others similarly situated, had
expressly agreed to be bound by amendments to the contracts
imposed by future statutory and regulatory changes. The Court
of Appeals thus concluded that the 2014 amendments validly
altered Appellants' contracts. The Court of Appeals
reversed the trial court and held that the Appellees, rather
than Maze, should have been granted summary judgment as a
matter of law.
reasons stated below, we conclude that the KAPT contracts
executed by Maze and those similarly situated, and the
underlying enabling statutes, do not authorize the
contractual changes imposed by the retroactive application of
the statutory amendments involved here, and that the
retroactive imposition of those amendments upon Maze
unlawfully impairs her contracts in violation of U.S. Const.
Art. I § 10, cl. 1. and Ky. Const. § 19.
Accordingly, we reverse the Court of Appeals and reinstate
the judgment of the trial court.
FACTUAL AND PROCEDURAL BACKGROUND
material facts are not in dispute and may be summarized as
follows. In 2000, the Kentucky General Assembly enacted KRS
164A.700-164A.709, establishing the Commonwealth
Postsecondary Education Prepaid Tuition Trust Fund, also
known as the Kentucky Affordable Prepaid Tuition Fund, or
KAPT. This program allowed and encouraged Kentucky families
with pre-college aged children to contract with the KAPT
Board to "lock in" the current tuition rates for
future attendance at a public university in
Kentucky. Allowing the prepayment of college tuition
permitted the parents of young children to insure against
future increases in tuition rates. KRS 164A.701(2)(b)
identifies KAPT's primary goal as, "providing]
students and their parents economic protection against rising
tuition costs." In addition to the statutory provisions
of KRS Chapter 164A, KAPT contracts are governed by the KAPT
"Master Agreement" whose provisions track the
enabling statutory language, generally providing that a
contract participant will be guaranteed the state college
tuition rate existing at the time the participant entered
into the program.
crucial significance to our analysis, KRS 164A.705(1)
expresses an unequivocal assurance to plan participants that
they will receive the benefits they purchased as promised:
"The prepaid tuition contract entered into by the
purchaser and the board shall constitute an irrevocable
pledge and guarantee by the fund to pay for the tuition of a
qualified beneficiary upon acceptance and enrollment at an
eligible educational institution in accordance with the
tuition plan purchased."
January 2003, Maze purchased a KAPT "Standard Plan"
contract for the benefit of each of her three sons. She
listed their Projected College Entrance Years (PCEY) as 2008,
2010, and 2013, respectively. The Standard Plan contracts
permitted purchasers to pre-pay at the time of purchase up to
five years of tuition at the then-current cost of full-time
tuition at Kentucky's most expensive public university.
The payments could be paid in a single lump sum, or through a
monthly payment plan. The Plan covered both undergraduate and
graduate school tuition.
those purchases, Maze entered into a Master Agreement which
incorporated "the terms and provisions of KAPT
Regulations and KRS 164A.700-709, as may be amended from time
to time." At the time of Maze's purchase, neither
the KAPT contracts themselves nor the statutes governing KAPT
contained a time limitation within which the prepaid tuition
must be used; nor did the contracts and governing statutes
provide a time limit after which the plan would cover
something less than the full cost of tuition at any of
Kentucky's public universities. Maze fulfilled all of her
obligations under the KAPT agreements. When their time of
college enrollment came, two of Maze's sons received
substantial academic scholarships, and they did not need
immediate use of their prepaid tuition. They intended to
apply their KAPT funds toward graduate school tuition.
2014, with the enactment of House Bill 279, the General
Assembly made several significant changes to the KAPT program
that affected the contracts Maze had purchased eleven years
earlier. Among the amendments was the imposition of a newly
devised "utilization period," which for the first
time imposed time limitations upon the KAPT contracts. The
legislation defined the "utilization period" as
"the period of time in which a prepaid tuition contract
is to be used beginning with the projected college year and
continuing for the number of prepaid tuition years
purchased." KRS 164A.700(18).
statutorily imposed condition operated retroactively to cover
the contracts that Maze, and others, had purchased and paid
for. Under this new provision, a KAPT plan participant who
had purchased four years of prepaid tuition, with a projected
college entry year of 2008, would have to use up the prepaid
tuition before the end of 2012. Under the statutory change,
plan participants lost the option of reserving their use of
prepaid tuition for tuition needs beyond the
statutory changes also added a limit on the extent to which a
purchased plan would cover the inflation of future college
tuition. Maze's KAPT contracts had no such limitation.
House Bill (HB) 279 amended KRS 164A.705(7) to provide:
During an account's utilization period, the value of the
prepaid tuition account shall increase consistent with
tuition rates for the applicable tuition plan and academic
year. If all tuition benefits have not been used at the
conclusion of [the utilization] period, the account value
shall increase at a rate of three percent (3%) per annum or
the applicable tuition plan value increase, whichever is
less, for a period not to exceed two (2) additional years. No
additional value shall be added to a prepaid tuition account
after two (2) years past the utilization period [(2014 for
Maze's oldest child)].
the 2014 amendments also set June 30, 2028 as the termination
date of the KAPT program, requiring that any prepaid tuition
not used by that date be refunded to the purchaser. KRS
legislative actions appear to have been an attempt to correct
for a significant miscalculation in the financial viability
of the program from its inception. In the years following the
creation of the KAPT program, college tuition for public
universities in Kentucky increased at rates well beyond what
was anticipated and well beyond the growth of the fund
managed by the KAPT Board, resulting in a substantial
unfunded liability in the program.
14, 2015, Maze filed a Complaint and Petition, on behalf of
herself and "Unknown Similarly Situated Purchasers of
KAPT Contracts, "seeking declaratory and injunctive relief
against the enforcement of the 2014 amendments. At the time
of her Complaint, unused KAPT funds remained available in all
three of her accounts. Maze asserts that her sons intended to
apply the funds in their KAPT accounts to their graduate
school tuition, which would fall outside of the
"utilization period" established under the 2014
KAPT amendments. Citing this provision and the newly imposed
cap on the growth- rate value of her accounts, she alleges
that the 2014 amendments to KAPT unconstitutionally impaired
the value and obligations of her contracts with the Board.
parties filed cross-motions for summary judgment. The trial
court overruled the Board's motion and granted summary
judgment to Maze. The trial court agreed with Maze that the
language of the KAPT Master Agreement and its underlying
enabling statutes do not demonstrate an intention of the
parties that amendments of the kind enacted by the 2014
legislation would retroactively apply to their 2003 contract.
Proceeding to the constitutional question, the trial court
concluded that the 2014 amendments to KAPT were an
unjustified and unconstitutional impairment of her contract
rights under the Master Agreement.
contrast, the Court of Appeals interpreted the applicable
contracts as expressing the parties' agreement that
subsequent amendments to the governing statutes and
regulations would change the terms and conditions of their
existing contracts, thus interpreting the retroactive
application of the 2014 amendments as permissible.
Accordingly, the Court of Appeals reversed the summary
judgment granted to Maze and ordered the entry of judgment
for the Board. We granted discretionary review.
summary judgment involves only legal questions and the
existence of any disputed material issues of fact, an
appellate court need not defer to the trial court's
decision and will review the issue de novo." Lewis
v. B & R Corporation, 56 S.W.3d 432, 436
(Ky. App. 2001). Since no material issues of fact are in
dispute, our review involves a de novo review of the
applicable KAPT enabling statutes and the terms of the Master
Agreement. CR 56.03.
interpretation of a contract, including determining whether a
contract is ambiguous, is a question of law to be determined
de novo on appellate review. Abney v. Nationwide
Mutual Insurance Company, 215 S.W.3d 699, 703 (Ky.
2006); Kentucky Shakespeare Festival, Inc. v.
Dunaway, 490 S.W.3d 691, 694-95 (Ky. 2016).
review requires the interpretation of various KAPT statutory
provisions contained in KRS Chapter 164A and contractual
provisions contained in the Master Agreement. A basic rule of
contract interpretation requires that preference be given to
the "interpretation which gives a reasonable, lawful,
and effective, meaning to all the terms" over a reading
"which leaves a part unreasonable, unlawful, or of no
effect." Comstock & Co., Inc. v. Becon Const.
Co., 932 F.Supp. 948, 967 (E.D. Ky. 1994) (quoting
Restatement (Second) of Contracts § 203(a) (1979)).
"'in the absence of ambiguity, a written instrument
will be enforced strictly according to its terms,' and a
court will interpret the contract's terms by assigning
language its ordinary meaning and without resort to extrinsic
evidence." Wehr Constructors, Inc. v. Assurance
Company of America, 384 S.W.3d 680, 687 (Ky. 2012)
(quoting Frear v. P.T.A. Industries, Inc., 103
S.W.3d 99, 106 (Ky. 2003)). "A contract is ambiguous if
a reasonable person would find it susceptible to different or
inconsistent interpretations." Hazard Coal
Corporation v. Knight, 325 S.W.3d 290, 298 (Ky. 2010)
no ambiguity exists in the contract, we look only as far as
the four corners of the document to determine the
parties' intentions." 3D Enterprises Contracting
Corporation v. Louisville and Jefferson County Metropolitan
Sewer District, 174 S.W.3d 440, 448 (Ky. 2005) (citation
omitted). If the language is ambiguous, the court's
primary objective is to effectuate the intentions of the
parties. Cantrell Supply, Inc. v. Liberty Mutual
Insurance Company, 94 S.W.3d 381, 384 (Ky. App. 2002).
"The fact that one party may have intended different
results, however, is insufficient to construe a contract at
variance with its plain and unambiguous terms."
Abney, 215 S.W.3d at 703 (Ky. 2006) (quoting
Cantrell, 94 S.W.3d at 385).
construing a statute, it is fundamental that our foremost
objective is to determine the legislature's intent in
enacting the legislation. "To determine legislative
intent, we look first to the language of the statute, giving
the words their plain and ordinary meaning."
Richardson v. Louisville/Jefferson County Metro
Government, 260 S.W.3d 777, 779 (Ky. 2008). That is, we
construe a "statute only as written, and the intent of
the Legislature must be deduced from the language it used,
when it is plain and unambiguous . . . ." Western
Kentucky Coal Co. v. Nail & Bailey, 14 S.W.2d 400,
401-02 (Ky. 1929). Therefore, when a statute is unambiguous,
we need not consider extrinsic evidence of legislative intent
and public policy. County Bd. of Educ. Jefferson County
v. Southern Pac. Co., 9 S.W.2d 984, 986 (Ky. 1928).
However, if the statutory language is ambiguous, we will look
to other sources to ascertain the legislature's meaning,
such as legislative history and public policy considerations.
MPM Financial Group Inc. v. Morton, 289 S.W.3d 193,
198 (Ky. 2009). Further, we "read the statute as a
whole, and with other parts of the law of the Commonwealth,
to ensure that our interpretation is logical in
context." Lichtenstein v. Barbanel, 322 S.W.3d
27, 35 (Ky. 2010); Pearce v. University of Louisville, by
and through its Board of Trustees, 448 S.W.3d 746, 749
THE KAPT CONTRACTS EXECUTED BY THE PARTIES DO NOT CONFER THE
UNLIMITED AUTHORITY TO THE LEGISLATURE TO RETROACTIVELY AMEND
Court of Appeals concluded, and the Appellees continue to
argue, that the KAPT statutes and associated Master Agreement
that existed in 2003 when Maze purchased her plans express
her agreement to accept any subsequent legislative
changes to the terms and conditions of the KAPT program,
including the retroactive application of the 2014 legislative
changes. Appellees contend that the 2014 amendments fall
squarely within the language of the applicable 2003 KAPT
statutes and associated Master Agreement.
Appellees are correct in their construction of the relevant
statutory and the Master Agreement language, our inquiry
ends. If the plan participants had agreed that such changes
would be accepted, the retroactive amendments would be
clearly applicable. Maze's claim would fail, and we would
not reach the constitutional question. Therefore, we begin
our analysis with an examination of the text of the Master
Agreement and the associated statutory enabling language to
see if the KAPT program includes ...