In re Pinkham, Bankruptcy No. 97-47679-293
| Decision Date | 01 May 1998 |
| Docket Number | Bankruptcy No. 97-47679-293,Adversary No. 97-4300-293. |
| Citation | 224 BR 728 |
| Parties | In re Scott B. PINKHAM, Debtor. Scott B. PINKHAM, Plaintiff, v. UNITED STATES of America, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Missouri |
Neil Weintraub, St. Louis, MO, for Debtor.
Wesley D. Wedemeyer, Asst. U.S. Atty., St. Louis, MO.
Leslie A. Davis, Chapter 7 Trustee, Clayton, MO.
This Court has jurisdiction over the parties and subject matter of this proceeding pursuant to 28 U.S.C. §§ 1334, 151, and 157 and Local Rule 9.01 of the United States District Court for the Eastern District of Missouri. This is a "core proceeding" pursuant to 28 U.S.C. § 157(b)(2)(I), which the Court may hear and determine.
1. Scott J. Pinkham, Debtor, filed a petition seeking relief under Chapter 7 of the Bankruptcy Code (11 U.S.C. §§ 101-1330) on August 8, 1997.
2. On December 17, 1997, Debtor initiated this adversary complaint seeking to discharge what he pleaded was the $300,000.00 claim of the Defendant, United States of America. Debtor maintained that the dischargeability
of Defendant's claim, which was based upon a loan the Government insured under its Health Education Assistance Loan program (HEAL), is governed by 42 U.S.C. § 292f(g).1 Debtor asserted that the factual circumstances of his case satisfy the conditions to discharge of a HEAL loan set forth in 42 U.S.C. §§ 292f(g)(1), (2) and (3).
3. The United States answered Debtor's adversary complaint on February 11, 1998. In its answer, Defendant denied that the facts in Debtor's case satisfy the conditions to discharge a HEAL. The Government also refuted Debtor's assertion that its claim was valued at $300,000.00, stating that its claim was based upon two judgments totaling $132,886.79, inclusive of interest through December 27, 1997.
4. On March 6, 1998, Defendant filed its Motion for Summary Judgment supported by a Memorandum of Law. In its Memorandum, Defendant recounted that it holds two judgments against Debtor totaling $132,886.79. The Government maintains that to meet section 292f(g)(2)'s standard of "unconscionable," the nondischarge of a debt must be "shockingly unfair, harsh or unjust, excessive, unreasonable or outrageous." Defendant argues that, even taking the facts alleged by Debtor as true, denying a discharge of its claim does not lead to an unconscionable result. Defendant maintains that section 292f(g)(2)'s "unconscionability" standard for discharge of a HEAL loan is higher than the Bankruptcy Code's "undue hardship" standard by which the determination of the dischargeability of other student loans is measured.
When deciding a motion for summary judgment, a court must view the facts in the light most favorable to the non-moving party. Rabushka, ex rel. United States v. Crane Co., 122 F.3d 559, 562 (8th Cir.1997). For purposes of deciding this Motion, the Court accepts as true the following facts:
1. Debtor borrowed money under the HEAL program to obtain chiropractic schooling.
2. For five years, Debtor attempted to build a chiropractic practice.
3. Unable to build his chiropractic practice, Debtor accepted employment as a high school science teacher.
4. Debtor currently earns approximately $40,000.00 a year from teaching.
5. Debtor does not anticipate earning significantly more money in the foreseeable future.
6. Debtor supports his wife, a fifteen-year-old son, and an eleven-year-old son.
7. Debtor is 43 years old.
8. More than seven years has elapsed, exclusive of any deferments, since Debtor was first obligated to make payments on Defendant's loan.
9. The Secretary of Health and Human Services has not waived her right to apply subsection f of 42 U.S.C. § 292 to Debtor.
A court may grant summary judgment only if a review of the full record reveals that there is no material issue of fact, and the moving party is entitled to judgment as a matter of law. Opus Corp. v. International Business Machines, 141 F.3d 1261, 1264 (8th Cir.1998) (citations omitted). The grant of summary judgment does not, however, mean that the parties have been "denied their day in court" or been barred from "telling their stories." To the contrary, the court thoroughly evaluates the entire record, including the pleadings on file, and any affidavits the parties have submitted to determine:
In this case, the Court has considered the entire record, including the parties' factual assertions and legal arguments, and concluded that Defendant is entitled to summary judgment.
In arguing that it would be unconscionable not to discharge the debt he owes Defendant, Debtor relies on Roa-Moreno v. U.S. Dept. of Health and Human Services, 208 B.R. 488 (Bankr.C.D.Cal.1997). Essentially, Debtor argues that not discharging his indebtedness to Defendant would be unconscionable under the standard set forth in Roa-Moreno because he has limited income on which he must support a four-person household. Further, Debtor argues that because the debt he owes Defendant is three times his annual income, he will never be able to repay it and that not discharging it would bar him from accumulating property during his lifetime.
The debtor in Roa-Moreno sought to discharge $33,893.36 of HEAL loans she owed to the United States Department of Health and Human Services. Id. at 490. Both parties moved for summary judgment. Id. The Roa-Moreno court began its analysis of the parties' motions by considering whether it would be unconscionable to refuse to discharge Roa-Moreno's HEAL loan debt by defining unconscionable. Id. at 493. The court rejected the definition of unconscionable provided by Black's Law Dictionary because it "defines unconscionable in the context of contract law." Id. That court next noted that most courts applying section 292f(g)(2) define unconscionable as "shockingly unfair or unjust," the definition found in Webster's Ninth New Collegiate Dictionary.2 Id. Apparently unsatisfied with Webster's definition because it lacked an objective component, the court expressed how it was "troubled" that the term unconscionable in section 292f(g) was "vague and undefined." Id.
The Roa-Moreno court looked to a list of eight factors the Bankruptcy Court for the Middle District of Florida purportedly had distilled from cases that had considered the dischargeability of HEAL loans. Id. (citing In re Quinn, 102 B.R. 865, 866 (Bankr. M.D.Fla.1989)). The Roa-Moreno court, unlike the In re Quinn court, rejected the idea that "unconscionability" standard of 42 U.S.C. § 292f(g) is a higher standard than the "undue hardship" standard for discharge of non-HEAL student loans found in section 523(a)(8) of the Bankruptcy Code. Ultimately, the Roa-Moreno court endorsed a two-step procedure for determining whether the non-discharge of a debt would be unconscionable. First, the court would determine whether the debtor's income and resources place debtor's household below the Poverty Guidelines published annually by the United States Bureau of Census. Id. Second, if debtor's household income and resources fall below the Poverty Guidelines, the court should apply the factors outlined in In re Quinn. Id. The factors outlined by the In re Quinn court are as follows:
The Roa-Moreno court ultimately denied the Government's motion, finding that there were material issues of fact that precluded the entry of summary judgment. Id. at 494.
The Roa-Moreno court, however, represents a minority position. As that court recognized, the majority of courts that have compared the standard for discharge under 42 U.S.C. § 292f(g) with the standard for discharge of non-HEAL student loans under section 523(a)(8) of the Bankruptcy Code have determined that "unconscionable" is a significantly higher burden than "undue hardship." See Rice v. United States (In re Rice), 78 F.3d 1144, 1148 (6th Cir.1996); In re Malloy, 155 B.R. 940, 945 (E.D.Va.1993), aff'd, 23 F.3d 402 (4th Cir.1994) (Table); Steuber v. United States Dept. of Education ( In re Steuber), 200 B.R. 31, 34 (Bankr. W.D.Mo.1996); Hines v. United States (In re Hines), 63 B.R. 731, 736 (Bankr.D.S.D.1986). This Court believes the majority view is better reasoned and will adhere to it.
The Court adopts the reasoning of the majority of courts and finds that unconscionable, as used in 42 U.S.C. § 292f(g)(2), means "shockingly unfair, harsh or unjust." See In re Rice, 78 F.3d at 1144 (); Matthews v. Pineo, 19 F.3d 121, 124 (3rd Cir.1994) (). Unconscionability is an "extreme" standard, see 78 F.3d at 1149, and the Court has only found two cases in which debtors have prevailed under 42 U.S.C. § 292f(g).
One case where a court concluded that not discharging a debtor's HEAL obligations would be unconscionable is Kline v. United States (In re Kline), 155 B.R. 762 (Bankr. W.D.Mo.1993). Before filing her bankruptcy, Kline had incurred HEAL loan debt when she attended pharmacy college. Kline, however, did not receive her degree. Id. at 763. The court recounted in great detail the tragedies that had befallen...
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