In re Saxman

• Citation: 325 F.3d 1168
• Decision Date: 14 April 2003
• Docket Number: No. 01-35620.,01-35620.
• Parties: In re Dennis Leroy SAXMAN, Debtor, Dennis Leroy Saxman, Plaintiff-Appellee, v. Educational Credit Management Corporation, Defendant-Appellant, and Department of Education, Defendant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

325 F.3d 1168

In re Dennis Leroy SAXMAN, Debtor,

Dennis Leroy Saxman, Plaintiff-Appellee, v. Educational Credit Management Corporation, Defendant-Appellant, and Department of Education, Defendant.

No. 01-35620.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 8, 2003.

Filed April 14, 2003.

COPYRIGHT MATERIAL OMITTED

Daniel Fisher, St. Paul, MN, for the defendant-appellant.

Dennis L. Saxman, Seattle, WA, pro se plaintiff-appellee.

Jeffrica Jenkins Lee, Department of Justice, Civil Division, Washington, DC, for amicus curiae United States Department of Education.

Appeal from the United States District Court for the Western District of Washington; Barbara J. Rothstein, District Judge, Presiding. D.C. No. CV 00-1609 BJR.

Before WALLACE, TROTT, and TASHIMA, Circuit Judges.

Opinion by Circuit Judge TASHIMA; Dissenting opinion by Senior Circuit Judge WALLACE.

OPINION

TASHIMA, Circuit Judge.

This case presents the question of whether an educational loan may be partially discharged consistent with 11 U.S.C. § 523(a)(8) of the Bankruptcy Code. We conclude that bankruptcy courts may partially discharge student debt pursuant to their equitable authority under 11 U.S.C. § 105(a).

BACKGROUND

On September 27, 1999, Appellee Dennis Saxman sought to discharge several of his student loans in bankruptcy on the ground that paying them off would cause him an undue hardship within the meaning of 11 U.S.C. § 523(a)(8). This case concerns two of those loans: one held by the United States Department of Education and a much larger consolidated loan held by Appellant Educational Credit Management Corporation ("ECMC").

The bankruptcy court found that Saxman would not suffer undue hardship if he was made to repay the $4,764 to the Department of Education, but that he would suffer undue hardship if he were held to his ECMC debt of $83,927. In support of its finding, the court considered that Saxman had a net income of $2,900 per month, lived a "very frugal lifestyle," and had disposable income of about $1,000 per month. The court found that under the standard 10-year repayment plan, the monthly payments of the combined ECMC and Department of Education loans would total $1,100 per month, or $100 per month more than his disposable monthly income. The court concluded that Saxman, who was 50 years of age at the time of trial, could not reasonably pay off his student loans during his working lifetime. The court added that it felt constrained by United Student Aid Funds Inc. v. Taylor (In re Taylor), 223 B.R. 747 (B.A.P. 9th Cir. 1998), to reject ECMC's suggestion that the court discharge only the portion of the loan that Saxman was unable to pay.

On appeal, the district court vacated the bankruptcy court's discharge order and remanded for further proceedings consistent with this court's intervening decision in Graves v. Myrvang (In re Myrvang), 232 F.3d 1116 (9th Cir.2000), which the district court interpreted as permitting the partial discharge of student debt. Saxman v. U.S. Dep't of Educ. (In re Saxman), 263 B.R. 342 (W.D.Wash.2001).

APPELLATE JURISDICTION

Saxman initially contends that the district court's decision to vacate the bankruptcy court's order and remand for further proceedings was not a final decision and therefore not appealable. Under 28 U.S.C. § 158(d), this court has jurisdiction to hear appeals "from all final decisions, judgments, orders, and decrees" entered by a district court on appeal from a bankruptcy court. Because of the unique nature of bankruptcy proceedings, we apply a pragmatic approach to determining finality. Vylene Enters., Inc. v. Naugles, Inc. (In re Vylene Enters., Inc.), 968 F.2d 887, 894-95 (9th Cir.1992). The factors considered in determining finality include: (1) the need to avoid piecemeal litigation; (2) judicial efficiency; (3) systemic interest in preserving the bankruptcy court's role as factfinder; and (4) whether further delay would cause either party irreparable harm. Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 2003 WL 1090176, *5 (9th Cir. Mar.13, 2003); Scovis v. Henrichsen (In re Scovis), 249 F.3d 975, 980 (9th Cir.2001); In re Vylene Enters., Inc., 968 F.2d at 895-96.

In North Slope Borough v. Barstow (In re MarkAir, Inc.), 308 F.3d 1057 (9th Cir.2002), we summarized the law as follows:

If the matters on remand concern primarily factual issues about which there is no dispute, and the appeal concerns primarily a question of law, then the policies of judicial efficiency and finality are best served by our resolving the question now. On the other hand, if the district court remands for further factual findings related to a central issue raised on appeal, the district court's decision is usually not final. Even when the remand involves factfinding on a central issue, we may nonetheless exercise jurisdiction if that issue is legal in nature and its resolution either (1) could dispose of the case or proceedings and obviate the need for factfinding; or (2) would materially aid the bankruptcy court in reaching its disposition on remand.

Id. at 1060 (internal quotation marks and citations omitted).

In the present case, the district court remanded for further proceedings consistent with Myrvang, 232 F.3d 1116, specifically instructing the bankruptcy court to abandon its all-or-nothing approach and to calculate the portion of the ECMC loan that Saxman could pay without causing him an undue hardship. In short, the remand order only requires the bankruptcy court to calculate how much Saxman could reasonably pay per month; it does not require anything beyond the task of computing the partial discharge of Saxman's loan.

As noted in In re Fox, 762 F.2d 54 (7th Cir.1985), "if all that remains to do on remand is a purely mechanical [or] computational ... task," such that the proceedings on remand are highly unlikely to generate a new appeal or to affect the issue that the disappointed party wants to raise on appeal, then immediately deciding the issue will save time without raising the spectre of piecemeal appeals. Id. at 55. In such circumstances, the decision of the district court is final for purposes of subject matter jurisdiction. Id.

This appeal also presents an independent question of law. See Zolg v. Kelly (In re Kelly), 841 F.2d 908, 911 (9th Cir. 1988). This case is therefore distinguishable from those cases in which we declined jurisdiction because the district court's remand order required factual development to clarify a central legal issue. See Walthall v. United States, 131 F.3d 1289, 1293 (9th Cir.1997) (declining jurisdiction because district court remanded for a "factual determination of whether damages and attorneys' fees should be awarded"); King v. Stanton (In re Stanton), 766 F.2d 1283, 1287 (9th Cir.1985) (declining jurisdiction because the BAP remanded for factual development of issues involved in a counterclaim that was improperly dismissed by the bankruptcy court). In those cases, we declined jurisdiction on the theory that we would be faced with an inadequate factual record, "making it difficult to identify the controlling legal issues." Id. However, in this case, the resolution of the legal issue is entirely independent of the factual issues, which, in any event, are admitted as true and not in dispute. See Crevier v. Welfare & Pension Fund for Local 701 (In re Crevier), 820 F.2d 1553, 1555 (9th Cir. 1987) (asserting jurisdiction where the facts in the complaint are admitted as true and where no factual issues are pending that would impede the review of the legal issues); Turgeon v. Victoria Station Inc. (In re Victoria Station Inc.), 840 F.2d 682, 684 (9th Cir.1988) (similar).

Because this appeal concerns a question of law and the remand concerns only the calculation of a partial discharge, we conclude that the policies of judicial efficiency and finality weigh in favor of our resolving the question now. DeMarah v. United States (In re DeMarah), 62 F.3d 1248, 1250 (9th Cir.1995) ("If the matters on remand concern primarily factual issues about which there is no dispute, and the appeal concerns primarily a question of law, then the `policies of judicial efficiency and finality are best served by our resolving the question now.'") (quoting In re Kelly, 841 F.2d at 911).

STANDARDS OF REVIEW

We review the district court's decision on appeal from a bankruptcy court de novo. In re MarkAir, Inc., 308 F.3d at 1059. "We independently review the bankruptcy court's decision and do not give deference to the district court's determinations." Preblich v. Battley, 181 F.3d 1048, 1051 (9th Cir.1999) (internal quotation marks and citation omitted). We review de novo questions of statutory interpretation. Sea-Land Serv., Inc. v. Lozen Int'l, 285 F.3d 808, 813 (9th Cir.2002).

DISCUSSION

An educational loan is dischargeable in bankruptcy if "excepting such debt from discharge ... will impose an undue hardship on the debtor and the debtor's dependents." 11 U.S.C. § 523(a)(8); Rifino v. United States (In re Rifino), 245 F.3d 1083, 1087 (9th Cir.2001). To determine if excepting student debt from discharge will impose an undue hardship, we apply the three-part test first enunciated by the Second Circuit in Brunner v. New York State Higher Education Services Corp. (In re Brunner), 831 F.2d 395, 396 (2d Cir.1987). United Student Aid Funds, Inc. v. Pena (In re Pena), 155 F.3d 1108, 1112 (9th Cir.1998). Under the Brunner test, the debtor must prove: (1) that she cannot maintain, based on current income and expenses, a "minimal" standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans. Id. at 1111; In re Brunner, 831 F.2d at 396.

The bankruptcy court concluded that Saxman had satisfied ...