Erin B. Nypaver
Appearances: Lauren M. Lamb, Esq. for the Movant Erin. B. Nypaver
Jason A. Spak, Esq. for the Respondent Thomas J. Nypaver
MEMORANDUM OPINION
Following the closure of this case the Respondent, Thomas J. Nypaver – the Debtor‘s father – obtained a default judgment against the Debtor in state court. The Debtor, believing the debt upon which the default judgment was based to have been discharged in bankruptcy, successfully moved to reopen the case and then subsequently filed a Motion for Determination of Dischargeability of Debt Claimed in Proof of Claim 1-1 (Dischargeability Motion) at Document No. 52 to which the Respondent filed his Response at Document No. 57.1
The Parties have both agreed that an evidentiary hearing is not necessary in this instance and have stipulated to all material facts.
Oral argument on these motions was held and for the reasons set forth below, the Court finds that the debt in question was discharged and grants summary judgment for the Debtor. In reaching the conclusions found herein, the Court has considered all of the evidence, exhibits, and arguments of Counsel, regardless of whether they are specifically referred to in this Opinion.
FACTS
Debtor began attending Seton Hill University in the fall of 2008, at which time the Respondent also began funding her education with federal “Parent PLUS” loans. On April 29, 2011, the Debtor signed a promissory note prepared by the Respondent in which the Debtor agreed to pay her father for the principal sum of all current and future Parent PLUS loans taken out by him on her behalf, plus interest. The promissory note called for payments to be made in monthly installments to begin upon her withdrawal or graduation from Seton Hill University‘s undergraduate program, requiring the entire balance to become due if the Debtor defaulted. In their Joint Pretrial the Parties stipulated that they intended the agreement found in the promissory note to be a “loan,” and hereinafter, the agreement and the accompanying debt will be referred to as “the Loan.” The Debtor graduated in May 2014 with a music degree. She made payments to the Respondent on the Loan according to the terms of the promissory note from May 2014 through December 2014, at which point her payments ceased.
PROCEDURAL HISTORY
The Respondent commenced a civil lawsuit against the Debtor on February 3, 2015 in the Allegheny County Court of Common Pleas at Case No. GD-15-001862 based on her default on the Loan. On September 9, 2016, the Debtor filed a Chapter 7 bankruptcy petition, staying the Allegheny County action, and she was eventually granted a discharge pursuant to
On May 18, 2017, a hearing was held on the Debtor‘s Motion to Reopen and Motion to Enforce the Discharge. The Order from the May 18th hearing (Doc. No. 45) granted the Motion to Reopen and required the Respondent to either file a proof of claim as to the debt represented by the state court default judgment or file a notice acknowledging that the debt had been discharged. The Respondent subsequently filed a proof of claim for $88,325.04, stating the claim was based on a “money loan for educational benefit.” The Debtor then filed her Dischargeability Motion. At the initial hearing on the Dischargeability Motion the Respondent, who prior thereto had been acting pro se, was represented by Counsel. This hearing resulted in the Court issuing its standard Pretrial Scheduling Order entered at Document No. 61, allowing for a period of discovery.2 Thereafter
SUMMARY JUDGMENT STANDARD
For purposes of resolving a summary judgment motion,
DISCUSSION
The narrow issue for the Court is whether the Loan that Respondent made to the Debtor to finance her college education was discharged in her bankruptcy. The Bankruptcy Code includes a lengthy list of different types of debt that are excepted from discharge. See
Courts construe exceptions to discharge narrowly against the creditor in consideration of the underlying rehabilitative policy of the Bankruptcy Code. In re Mehta, 310 F.3d 308, 311 (3d Cir. 2013); In re Pelkowski, 990 F.2d 737, 744 (3d Cir. 1993). The Supreme Court has stated that exceptions to discharge “should be confined to those plainly expressed.” Kawaauhau v. Geiger, 523 U.S. 57, 62 (1998); Gleason v. Thaw, 236 U.S. 558, 562 (1915). See also Bullock v. BankCampaign, N.A., 569 U.S. 267, 275 (2013).
Also of relevance here are the rules for statutory interpretation. In interpreting a statute, a court must begin its inquiry with the statute‘s text, since the plain language of the statute is the best indicator of Congress‘s intent. Mehta, supra, 310 F.3d at 311. The terms of a statute must be read in a way that is consistent and avoids absurd results. In re Klaas, 858 F.3d 820, 829-30 (3d Cir. 2017). Furthermore, the text of a statute must be read as a whole, with the entire statute and its overall context an important consideration. Dolan v. U.S. Postal Service, 546 U.S. 481, 486 (2006).
With the above principles in mind, the Court turns its attention to
a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt–...
(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor‘s dependents, for–
(A)(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in
section 221(d)(1) of the Internal Revenue Code of 1986 , incurred by a debtor who is an individual;
Although it is less apparent from the face of the statute itself, the Parties also agree that the Loan does not fit within
The Respondent argues that
There is a split of authority on the question of whether the term “educational benefit” in
In urging the adoption of the Broad View, the Respondent relies heavily upon, Beesley v. Royal Bank of Canada (In re Beesley), 2013 WL 5134404 (Bankr. W.D. Pa. 2013), a case from this District. The Beesley court found that, pursuant to
The Beesley court found that funds received for an educational benefit included loans, generally, stating that the appropriate focus of the inquiry was the purpose of the transaction, i.e., whether it was to secure an educational benefit. Id. at *4. Since the debtor‘s loan was used to pay educational expenses, the Beesley court found that the loan at issue was excepted from discharge under
The remaining Broad View cases upon which the Respondent relies both utilize the same approach as Beesley, focusing solely on the purpose of the debt at the time it was incurred,
and whether that
The primary support cited by the Debtor in her argument for application of the Narrow View, i.e., the term “educational benefit” in
discharged. Two defendants sought dismissal of the complaint based on their belief that the bar exam loan was excepted from discharge under
The court in Campbell also relied on the statutory canon of construction of noscitur a sociis. Id. This canon, which literally means “a word is known by the company it keeps,” posits that when words are in a list, each word is presumed to have a similar meaning. Based on this canon, the court deduced that an educational benefit should be interpreted along the lines of a scholarship or stipend, which are funds that are usually not required to be repaid, contrary to a loan. Id.
The Campbell court also cited to legislative history in support of its conclusion, noting that from its adoption in 1978 through 1990 the various iterations of
Even more recent is the decision in Dufrane v. Navient Solutions, Inc. 566 B.R. 28, 50 (C.D. Cal. 2017), where the court agreed with the reasoning of Campbell and found that
Having carefully considered both lines of authority as to the proper construction to be given to the discharge exception found in
Although both the [Broad View] and [Narrow View] decisions on this issue are thoughtfully written and strive to implement Congress‘s intent, the Court finds the [Narrow View‘s] position more faithful to the actual language of the statute enacted by Congress.
Essangui, 573 B.R. at 622. The Essangui court came to this conclusion after engaging in an extensive review of the history of
First, the subject of
Second,
Third, and perhaps most significantly, interpreting
In contrast to the problems associated with the Broad View as expressed in these cogent observations, the Narrow View not only gives meaning to all of the subsections of
As noted above, such a problematic result would occur in this instance if the Court were to adopt the Respondent‘s proposed treatment of the Loan. If this Court were to determine that an “educational benefit” includes a loan between a father and daughter, the specific exclusion of loans between family members from the definition of a “qualified educational loan” in
At argument on the motions for summary judgment, the Court asked the Respondent how the Loan could be excepted
Even though the relevant sections are in the disjunctive, broadening
In attempting to distinguish the cases relied upon by the Debtor, the Respondent also argued that the loans examined in those cases were not for an “educational benefit” under
In Campbell and Dufrane, the courts did not rely on the “educational purpose” test in arriving at a decision, but instead analyzed what the phrase “educational benefit” was intended by Congress to encompass. In each circumstance, the court found it was not intended to include the loan at issue. Campbell, 547 B.R. at 62; Dufrane, 566 B.R. at 40. In each of these cases the courts never reached the issue of whether the loans involved an educational benefit, since their inquiries ended once the loans were found to be outside the ambit of
The Court in Nunez, on the other hand, did take a closer look at the “educational purpose” test but under its facts the primary inquiry went to the status of the lender under
I see no basis to untether the language in § 523(a)(8)(A)(ii) to apply the student loan exception to discharge to “all obligations to repay funds received as an educational benefit, scholarship or stipend,” without limitation. Such an interpretation would render § 523(a)(8)(B), the provision that Congress added to § 523(a)(8) in BAPCPA, superfluous and makes no sense. After all, if any educational loans of any kind are excepted from discharge by § 523(a)(8)(A)(ii),
what addition does excepting qualified educational loans under the Internal Revenue Code make to the discharge exception? The educational loans excepted from discharge under § 523(a)(8)(B) would be no more than a subset of such loans already excepted from discharge under § 523(a)(8)(A)(ii). Accordingly, I reject the conclusion of some courts that the addition of letter subsection identifiers and a semicolon to familiar language in § 523(a)(8) “must be read as encompassing a broader range of educational benefit obligations.”
527 B.R. at 415. As acknowledged by the Nunez court, it was undisputed that the loans in question were used solely for educational purposes, but since the court found
CONCLUSION
The Respondent‘s belief that the monies he advanced to his daughter, the Debtor, should be excepted from discharge pursuant to
In light of the issues presented, and as the Court indicated at the time of argument, despite the Debtor‘s requested relief of attorney fees and sanctions in her Motion to Enforce Discharge Order, under the circumstances of the issues involved in this case, the Court finds no bad faith on behalf of the Respondent for his prior pursuit of the state court action following entry of the Debtor‘s discharge. No sanctions will therefore be assessed. Although the status of the Debtor‘s earlier filed Motion to Enforce Discharge Order was not specifically raised in either motion for summary judgment, that Motion will be denied as moot because of the findings and conclusions contained in this Memorandum Opinion.
An order will be entered consistent with this Opinion.
Dated: March 7, 2018
Thomas P. Agresti, Judge
United States Bankruptcy Court
Case administrator to serve:
Debtor
Lauren M. Lamb, Esq.
Jason A. Spak, Esq.