In re Morrison
| Decision Date | 10 January 2011 |
| Docket Number | No. 10–10365.,10–10365. |
| Citation | 443 B.R. 378 |
| Court | U.S. Bankruptcy Court — Middle District of North Carolina |
| Parties | In re Wendy Marie MORRISON, Debtor. |
OPINION TEXT STARTS HERE
J. Marshall Shelton, Ivey, McClellan, Gatton, & Talcott, LLP, Greensboro, NC, for Debtor.Everett B. Saslow, Jr., Greensboro, NC, for Trustee.
On May 28, 2010, the United States Bankruptcy Administrator (the “BA”) filed a motion seeking to have this case dismissed pursuant to Section 707(b)(1) and (b)(3) of the Bankruptcy Code on the grounds that the case constitutes an abuse of the provisions of Chapter 7 based upon bad faith or the totality of the circumstances of the Debtor's financial situation. On September 24, 2010, both the BA and the above-referenced debtor (the “Debtor”) filed a Motion for Summary Judgment, solely on the issue of the household size of the Debtor. These matters came before the Court on October 7, 2010. Robert E. Price, Jr. appeared on behalf of the BA, and Erik M. Harvey appeared on behalf of the Debtor.
The Court has jurisdiction over the subject matter of this proceeding pursuant to 28 U.S.C. §§ 151, 157 and 1334, and the General Order of Reference entered by the United States District Court for the Middle District of North Carolina on August 15, 1984. This is a core proceeding within the meaning of 28 U.S.C. §§ 157(b)(2)(A) which this Court has the jurisdiction to hear and determine.
On February 26, 2010, the Debtor filed her Chapter 7 bankruptcy petition. Schedule A indicates that the Debtor owns a condominium in Greensboro, North Carolina, that she intends to surrender.1 Schedule F reflects $52,175.80 in unsecured debt.
Schedule I indicates that the Debtor is a supervisor at CarMax, with monthly gross income of $3,930.16. After payroll taxes and Social Security deductions of $1,049.45, insurance of $180.29, a 401(k) contribution of $196.52, a 401(k) loan repayment of $181.61, a “stock purchase” of $196.52, and “uniforms” of $47.67, the Debtor has net monthly take home pay of $2,078.11. Schedule J reflects $1,829.00 in monthly expenses, and net monthly income of $249.11. Schedule J indicates that the Debtor has no rent or mortgage payment. Rather, it states: “Debtor lives with boyfriend and he pays all rent.”
The Debtor's Form B22A shows a household size of one person and current monthly income (“CMI”) of $3,930.16. The Debtor's annualized CMI of $47,161.92 was above the applicable median family income of $38,784.00 for a household of one. Form B22A shows negative monthly disposable income of $589.22, and the Debtor maintains that there is therefore no presumption of abuse under Section 707(b)(2) of the Bankruptcy Code.
The Debtor's schedules do not include any information regarding the income and expenses of the Debtor's boyfriend. No monetary contribution by the boyfriend was shown other than the notation in Schedule J that “he pays all rent.”
At the Debtor's 341 meeting, held on March 29, 2010, the Debtor testified that the expenses shown on her Schedule J include all of the household expenses for her and her boyfriend, except for the mortgage payment. At the 341 meeting, the BA inquired into the boyfriend's employment, but the Debtor objected on relevance grounds and refused to answer the question.2
On May 28, 2010, the BA filed the motion to dismiss under Section 707(b)(1) and (b)(3). After conducting discovery, on September 2, 2010, the parties stipulated to the following facts:
1) The Debtor filed a chapter 7 petition for bankruptcy relief on February 26, 2010.
2) The Debtor's debts are primarily consumer debts.
3) Pursuant to section 707(b)(7), the Debtor's Current Monthly Income is $3,390.
4) The Debtor is single with no dependents.
5) The Debtor moved to North Carolina to take her current job in October of 2005.
6) When the Debtor moved to North Carolina, she purchased a townhouse at 25 Sidney Marie Court, Greensboro, NC.
7) In October of 2008, the Debtor realized she could not continue to afford the townhouse and moved out of the townhouse.
8) After moving out of the townhouse, the Debtor placed the townhouse on the market to sell. The Debtor has not been able to sell the townhouse. The Debtor is surrendering the townhouse.
9) To help cover expenses, the Debtor was able to rent the townhouse for enough to cover the mortgage from approximately October 2008 until October 2009.
10) The Debtor moved in with her boyfriend in October of 2008.
11) The Debtor's boyfriend is currently employed.
12) The boyfriend is purchasing the house in which he and the Debtor are living. The Debtor is not liable on the note. The Debtor is not on the deed or the Deed of Trust.
13) The mortgage payment on the property is $1,200 per month.
14) The Debtor has investigated the cost for her to rent an apartment and has found that the average rent for an apartment that would meet her needs is $700.00 per month.
15) The Debtor and her boyfriend agreed that each would pay one half of the expenses of living together.
16) The current average combined utilities, food and mortgage is as follows:
+-----------------------------------------------+
¦ ¦Mortgage on current residence ¦$1,200 ¦
+------+------------------------------+---------¦
¦ ¦Food/household goods ¦$ 400 ¦
+------+------------------------------+---------¦
¦ ¦Electric/gas ¦$ 250 ¦
+------+------------------------------+---------¦
¦ ¦Television ¦$ 140 ¦
+------+------------------------------+---------¦
¦ ¦Internet ¦$ 35 ¦
+------+------------------------------+---------¦
¦ ¦Water ¦$ 35 ¦
+------+------------------------------+---------¦
¦ ¦Phone ¦$ 95 ¦
+------+------------------------------+---------¦
¦ ¦Total ¦$2,155 ¦
+------+------------------------------+---------¦
¦ ¦Debtor's 1/2 ¦$1,077.50¦
+-----------------------------------------------+
17) For simplicity of record keeping the Debtor pays the utilities and buys food and household goods for both of them. The boyfriend pays the mortgage. The result is that the Debtor is responsible for paying approximately $955 per month, and generally does so.
18) The Debtor and her boyfriend have no joint financial accounts.
19) The Debtor and her boyfriend have no joint debts.
20) The Debtor and her boyfriend have not cosigned or guaranteed any debts of the other.
21) The Debtor and her boyfriend file separate tax returns.
22) All other expenses on Schedule J as filed by the Debtor are accurate as of the date of the filing of the petition. The rent, food and utilities entries reflect the Debtor's actual expenses, based on her agreement with her boyfriend. Therefore, she has no rent or mortgage payment, but food and utilities expenses for the both of them.
23) The amounts indicated on the Debtor's filed Schedule I are accurate for the Debtor individually, as of the date of the filing of the petition.
Stipulation, ECF No. 28 (September 2, 2010).
On September 24, 2010, the BA filed a Motion for Summary Judgment, seeking entry of summary judgment solely on the issue of household size. On that same date, the Debtor filed a Motion for Summary Judgment on the same issue. On October 7, 2010, a hearing was held, and the Court took both matters under advisement.
On December 7, 2010, the parties submitted a letter to the Court, indicating that both parties agreed that the “economic unit” test was the appropriate test to determine household size. Stipulation, ECF No. 40 (December 7, 2010). They agreed that “[w]here there are more shared expenses and/or income, it is more likely that those persons constitute a household, and the converse is equally true.” Id. However, they disagree as to the result of the application of the “economic unit” test to the facts of this case. The BA argues that the Debtor's household size is two persons, while the Debtor maintains that it is only one.
The standard for summary judgment is set forth in Rule 56 of the Federal Rules of Civil Procedure, which is made applicable to this adversary proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure. Rule 56 provides that the moving party will prevail on a motion for summary judgment 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 that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). When considering a motion for summary judgment, a court is required to view the facts and draw reasonable inferences in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.1994), cert. denied, 513 U.S. 813, 115 S.Ct. 67, 130 L.Ed.2d 24 (1994). The moving party has the burden of establishing that there is an absence of any genuine issue of material fact, and all reasonable inferences must be drawn in favor of the nonmoving party. Celotex, 477 U.S. at 323, 106 S.Ct. 2548.
The sole issue before this Court is whether the Debtor has a household of one person or two.3 To decide this matter, the Court must determine the meaning of the word “household” as it appears in the Bankruptcy Code.
“The starting point in discerning congressional intent is the existing statutory text.” Lamie v. U.S. Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004). “It is well established that ‘when the statute's language is plain, the sole function of the...
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