In re Mehta, CIV. No. 00-5448(WHW).

• Decision Date: 10 May 2001
• Docket Number: CIV. No. 00-5448(WHW).
• Citation: 262 BR 35
• Parties: In re Rajesh MEHTA, Debtor. Boston University, Plaintiff/Appellant, v. Rajesh Mehta, Defendant/Appellee.
• Court: U.S. District Court — District of New Jersey

262 B.R. 35 (2001)

In re Rajesh MEHTA, Debtor.

Boston University, Plaintiff/Appellant, v. Rajesh Mehta, Defendant/Appellee.

CIV. No. 00-5448(WHW).

United States District Court, D. New Jersey.

May 10, 2001.

Louis Rubino, White and Williams LLP, Westmont, NJ, Attorneys for Appellant Boston University.

Theodore Kozlowski, Morristown, NJ, Attorney for Appellee Rajesh Mehta.

OPINION

WALLS, District Judge

Creditor/appellant Boston University appeals from the grant of partial summary judgment to the debtor/appellee Rajesh Mehta by the United States Bankruptcy Court, Hon. Novalyn Winfield, clarified by an Amended Order of Clarification. This appeal is decided without oral argument. The Bankruptcy Court's grant of partial summary judgment is affirmed.

BACKGROUND

Debtor Rajesh Mehta ("debtor") filed a voluntary Chapter 7 bankruptcy petition with the United States Bankruptcy Court, District of New Jersey, on April 29, 1997. The debtor listed Boston University ("BU") as a general unsecured creditor on Schedule F of his bankruptcy petition in the amount of $15,434.00. On March 30, 1999, the debtor filed an adversary complaint to determine the dischargeability of debt owed by the debtor to the defendant under 11 U.S.C. § 523(a). BU opposed the dischargeability of the debt owed under 11 U.S.C. § 523(a)(8).

Mehta attended BU in Fall 1993 after he pre-registered for courses in the Spring of 1993. Although he failed to complete registration, failed to make payments on the tuition balance due and was denied financial assistance, he did attend the entire Fall 1993 semester and received grades and credits for three out of the four courses for which he was registered.¹ The university did not transfer any funds to the debtor; nor did he make any promise to repay any funds. The debtor did not sign any agreement or promissory note with regard to the tuition balance and at no time was asked to agree orally to repay the tuition. Nor did BU refuse to allow the debtor to attend class until he received financial aid or request that he sign any promissory note to evidence a loan as to the tuition balance. The debtor incurred charges for tuition and other expenses for a total of $9,331.00, which increased to $12,953.73 with interest and late fees.

In the adversary proceeding, Mehta moved for summary judgment, and BU cross-moved for summary judgment. The parties agreed that $2000.00 of the debt was an educational loan, and as to that the bankruptcy court granted partial summary judgment to BU, holding that the portion of the debt which was an educational loan was non-dischargeable. BU argued that the remaining tuition account balance was also a non-dischargeable educational loan under Section 523(a)(8). The bankruptcy court determined that the portion of the tuition account balance not attributable to a student loan or promissory note was not dischargeable under 523(a)(8) and granted partial summary judgment to the debtor on this portion of the claim. BU appeals.

JURISDICTION

This Court has jurisdiction pursuant to 28 U.S.C. § 158(a), because the Amended Order for Summary Judgment disposed of all issues raised by the adversary complaint and is a "final order."

STANDARD OF REVIEW

On review of a bankruptcy court's decision on conclusions of law, including a grant of summary judgment, a district court exercises plenary review. Sharon Steel Corp. v. National Fuel Gas Distribution Corp., 872 F.2d 36, 38-39 (3d Cir.1989); Brown v. Pennsylvania State Employees Credit Union, 851 F.2d 81, 84 (3d Cir.1988); In re Parker, 250 B.R. 512, 515 (M.D.Pa.2000), citing Rosen v. Bezner, 996 F.2d 1527, 1530 (3d Cir.1993); RD & J Communications, Inc. v. Maggio, No. Civ. A. 96-2155, 1996 WL 904754, *1 (D.N.J. Nov.20, 1996). A district court reviews a bankruptcy court's findings of fact under a clearly erroneous standard. Bankruptcy Rule 8013; American Flint Glass Workers Union v. Anchor Resolution Corp., 197 F.3d 76, 80 (3d Cir.1999); In re Krystal Cadillac Oldsmobile GMC Truck, Inc., 142 F.3d 631, 635 (3d Cir.1998); Brown v. Pennsylvania State Employees Credit Union, 851 F.2d 81, 84 (3d Cir.1988); RD & J Communications v. Maggio, 1996 WL 904754, at *1. "A finding is `clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948); RD & J Communications v. Maggio, 1996 WL 904754, at *1.

DISCUSSION

I. Summary Judgment Standard

"Summary judgment is proper `if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law.'" Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed. R.Civ.P. 56(c)). In deciding a motion for summary judgment, the Court must construe the facts and inferences in a light most favorable to the non-moving party. Pollock v. American Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir.1986). The role of the court is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine issue of material fact exists only if the evidence presented would enable a reasonable jury to return a verdict for the nonmovant. See Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Summary judgment must be granted if no reasonable trier of fact could find for the non-moving party. See id. at 249, 106 S.Ct. 2505.

To defeat summary judgment, an issue of fact in dispute must be one which a reasonable factfinder could base a verdict for the non-moving party and one which is essential to establishing the claims. See Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The non-moving party may not defeat summary judgment by simply resting on the argument that the record contains fact sufficient to support his claims. See Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1362 (3d Cir.1992), cert. denied, 507 U.S. 912, 113 S.Ct. 1262, 122 L.Ed.2d 659 (1993); O'Donnell v. U.S., 891 F.2d 1079, 1082 (3d Cir.1989). Rather, the non-moving party must go beyond the pleadings and, by affidavits or other evidence, designate specific facts showing that there is a genuine issue for trial. Celotex, 477 U.S. at 324, 106 S.Ct. 2548; Fed.R.Civ.P. 56(e).

Appellant BU argues that the following two findings of fact should be reversed as clearly erroneous:

1. The portion of BU\'s claim not covered by an actual loan document or promissory note guaranteed by the federal government is not a "loan" as that term is used in § 523(a); and

2. The portion of BU\'s claim not covered by an actual loan document or promissory note guaranteed by the federal government is not an "educational benefit overpayment" as that term is used in § 523(a).

II. Analysis

Under 11 U.S.C. § 523(a), an individual will not be discharged from any debt

for 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 a nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship or stipend. . . .

11 U.S.C. § 523(a)(8). This provision has been amended a number of times. In 1990, Congress substituted the phrase "for an educational benefit overpayment or loan made" for "for an educational loan made." See Federal Debt Collection Procedures Act of 1990, Pub.L. No. 101-647, § 3621(a), 104 Stat. 4933, 4964-65 (1990).²

Congress enacted Section 523(a)(8) because there was evidence of an increasing abuse of the bankruptcy process that threatened the viability of educational loan programs and harm to future students as well as taxpayers. Congress recognized that this is an instance where a creditor\'s interest in receiving full payment of the debt outweighs the debtor\'s interest in a fresh start.

In re Renshaw, 222 F.3d 82, 87 (2d Cir. 2000), citing Report of the Commission on the Bankruptcy Laws of the United States, H.R. Doc. No. 93-137, pt. I at 11, 170, 176-177; pt. II Sec. 4-506(8) & note (1973), reprinted in Collier on Bankruptcy, app. pt. 4(c) at 4-253, 4-422, X-XXX-X-XXX; 4-7-6, X-XXX-X-XXX (Lawrence P. King ed., 15th ed. rev.1996); and collecting cases.

Courts generally construe the statutory exceptions to discharge in bankruptcy "narrowly against the creditor and in favor of the debtor." In re Pelkowski, 990 F.2d 737, 744 (3d Cir.1993); In re: Decker, 595 F.2d 185, 187 (3d Cir.1979); In re: Alibatya, 178 B.R. 335, 337 (Bankr. E.D.N.Y.1995). This reflects the purpose of the Bankruptcy Code to "`relieve the honest debtor from the weight of oppressive indebtedness and permit him to start afresh.'" In re Renshaw, 222 F.3d at 86, quoting Williams v. U.S. Fidelity & Guar. Co., 236 U.S. 549, 554-555, 35 S.Ct. 289, 59 L.Ed. 713 (1915).

Because bankruptcy is both a right of the debtor, and a remedy for the creditor, . . . a proper balancing of those competing interests requires the creditor to prove by a preponderance of the evidence that its claim is one that is not dischargeable.

In re Renshaw, 222 F.3d at 86, citing Grogan v. Garner, 498 U.S. 279, 287, 291, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). However, because Section 523(a)(8) departs from the general policy to allow a "fresh start" to enforce an "overriding public policy" which favors enforcement of certain educational debt, a court "`can construe this provision no more narrowly than the language and legislative history will allow.'" In re Alibatya, 178 B.R. at 338, quoting In re Pelkowski, 990 F.2d at 745.

The Bankruptcy Court determined that the debtor's unpaid tuition did not fall within the...