Nightingale v. N.C. State Educ. Assistance Auth. (In re Nightingale)

• Decision Date: 20 April 2015
• Docket Number: Case No. 13–10834,Adversary No. 13–02060
• Citation: 529 B.R. 641
• Court: U.S. Bankruptcy Court — Middle District of North Carolina
• Parties: In re: Alice Marie Nightingale, Debtor. Alice Marie Nightingale, Plaintiff, v. North Carolina State Education Assistance Authority, Defendant.

529 B.R. 641

In re: Alice Marie Nightingale, Debtor.Alice Marie Nightingale, Plaintiff

v.North Carolina State Education Assistance Authority, Defendant.

Case No. 13–10834

Adversary No. 13–02060

United States Bankruptcy Court, M.D. North Carolina, Greensboro Division.

Signed April 20, 2015

Phillip E. Bolton, Greensboro, NC, for Plaintiff.

Brent D. Kiziah, Research Triangle Park, NC, for Defendant.

MEMORANDUM OPINION DENYING SUMMARY JUDGMENT

BENJAMIN A. KAHN, UNITED STATES BANKRUPTCY JUDGE

This case is before the Court on the Defendant's Motion for Summary Judgment [Adv. No. 13–02060, Doc. # 19] filed on November 3, 2014 [Adv. No. 13–02060, Doc. # 19] (the “Motion for Summary Judgment”). The Defendant, the North Carolina State Education Assistance Authority (“NCSEAA”), also filed a Brief in Support of its Motion for Summary Judgment on November 3, 2014 [Adv. No. 13–02060, Doc. # 20] (“NCSEAA's Brief”). Plaintiff Alice Marie Nightingale (“Plaintiff” or “Nightingale”), filed a Brief in Opposition to the Motion for Summary Judgment on December 5, 2014 [Adv. No. 13–02060, Doc. # 21] (the “Response”).¹ Pursuant to Local Rule 7007–1(d), the Court has considered the Motions on the pleadings, admissible evidence in the record, and motion papers and briefs without hearing or oral argument. On April 1, 2015, the Court entered its Amended Order granting the Motion for Summary Judgment in part, and denying the remainder of the motion.² This opinion sets forth the bases for the Court's ruling.

JURISDICTION

This Court has jurisdiction pursuant to 11 U.S.C. § 1334 because this matter arises in a case under title 11. See Harvey v. Dambowsky (In re Dambowsky), 526 B.R. 590 (Bankr.M.D.N.C.2015). This Court has statutory authority pursuant to 11 U.S.C. § 157 and Local Rule 83.11 for the United States District Court for the Middle District of North Carolina. Finally, this Court has constitutional authority to enter final order in this dischargeability action. See In re Dambowsky, 526 at 590.

FACTS

1. On June 25, 2013, Plaintiff Alice M. Nightingale filed a voluntary petition (the “Petition”) under Chapter 7 of the United States Bankruptcy Code (the “Code”) in this Court [Bankr.No. 13–10834, Doc. # 1].

2. On October 7, 2013, the Court issued an order granting the Plaintiff a discharge (the “Discharge”) pursuant to Section 727 of the Code [Bankr. No. 13–10834, Doc. # 20]. On October 15, 2013, the Court issued a Final Decree closing the Debtor's Chapter 7 case [Bankr.No. 13–10834, Doc. # 22]. The Final Decree was then vacated on October 18, 2013 due to the Plaintiffs forthcoming adversary proceeding regarding the Debts [Bankr.No. 13–10834, Doc. # 24].

3. On October 24, 2013, the Plaintiff commenced the current adversary proceeding by filing a Complaint [Adv. No. 13–02060, Doc. # 1] (the “Complaint”) seeking a discharge of student loan debts (the “Debts”) held by the Defendant and College Foundation, Inc. (“CFI”). On October 30, 2013, CFI assigned all of its rights and interests in the Debts to the Defendant [Adv. No. 13–02060, Doc. # 10, Exhibit A].

4. According to the Complaint, the exemption of the Debts from the Chapter 7 discharge imposes an undue hardship on the Plaintiff (Complaint ¶ 17) pursuant to 11 U.S.C. § 523(a)(8)(A)(i).

5. The Plaintiff is approximately sixty-six years old and currently resides in Albuquerque, New Mexico. [Adv. No. 13–02060, Doc. # 19–3, Exhibit 30J]. She is unemployed as a result of various physical disabilities.³ She retired from Guilford County Schools in June of 2014 after being on short-term disability. [Adv. No. 13–02060, Doc. # 19–2, Exhibit 29N].

6. Between August 2005 and August 2008, the Plaintiff received $48,255.94 (the “Total Principal”) in student loans while pursuing a Master's degree in Special Education at the University of North Carolina at Greensboro. [Adv. No. 13–02060, Doc. # 19–3, Exhibit 30F; Doc. # 19–8, Exhibit 47E]. These loans, which have accrued interest and now constitute the Debts, were made by College Foundation Inc. (“CFI”). The loans were backed by the United States Government, and the Plaintiff executed a Federal Stafford Loan Promissory Note on June 5, 2005. [Adv. No. 13–02060, Doc. # 19–8, Exhibit 2A].

7. The Plaintiff worked as a teacher at Southeast Guilford High School in Greensboro, North Carolina, while pursuing her Master's degree. Of the Total Principal, $31,925.04 constituted student loan refunds (the “Refunds”) that were not applied to the Plaintiff's tuition charges. [Adv. No. 13–02060, Doc. # 19–9, Exhibit # 1; Doc. # 19–8, ¶ 4]. Instead, the Plaintiff used the Refunds for living expenses and to supplement her income, particularly during the summer months in which she was not working as a teacher. The Plaintiff contributed $19,749 to charity between 2006 and 2013. [Adv. No. 13–02060, Doc. # 19–3, Exhibit 30E]. The Plaintiff graduated with her Master's degree in Education in 2011. [Adv. No. 13–02060, Doc. # 19–2, Exhibit 29L].

8. The Debts were originally serviced by CFI. On October 30, 2013, CFI transferred the entirety of its rights and interests in the Debts to the Defendant. [Adv. No. 13–02060, Doc. # 10, Exhibit A]. As of October 2014, the outstanding amount due on the Debts totaled over $59,000 with interest. [Adv. No. 13–02060, Doc. # 19–8, ¶ 33].

9. The Plaintiff entered into the Income–Based Repayment (“IBR”) Program in 2013. [Adv. No. 13–02060, Doc. # 19–11, Exhibit # 19]. She began making payments under the IBR Program in April of 2013. [Adv. No. 13–02060, Doc. # 19–8, ¶ 31]. Under this program, the Plaintiff made monthly payments, based on her income, of $133.31 towards the Debts. At the time, the Plaintiff was receiving short-term disability income that totaled $26,813.02 annually. [Adv. No. 13–02060, Doc. # 19–11, Exhibit 5H].

10. The Plaintiff's payments on the Debts total $11,416.04. Of this, the Plaintiff paid $10,349.56 prior to filing the Complaint. [Adv. No. 13–02060, Doc. # 19–8, ¶ 25].

11. In June of 2014, the Plaintiff experienced a significant decrease in income when she retired and ceased to receive short-term disability payments. Her approximate current monthly income as provided in answers to interrogatories consists of Social Security benefits and state retirement benefits of approximately $1,645.91. [Adv. No. 13–02060, Doc. # 19–3, Exhibit # 30C]. She receives $820.00 per month in Social Security and $825.91 per month from Guilford County Schools. As of September 29, 2014, as stated also in interrogatories, the Plaintiff's approximate expenses totaled $1,417.00. [Adv. No. 13–02060, Doc. # 19–4, Exhibit # 30P]. The Plaintiff's current annual income totals $19,750.92.

12. The Plaintiff contends that she does not expect her income to increase in the future due to limited employability. [Adv. No. 13–02060, Doc. # 19–3, Exhibit # 29T, ¶ 17].

13. The Complaint asserts that: (i) the Debts impose an undue hardship upon the Plaintiff and (ii) the Debts should be discharged accordingly under Section 523(a)(8) of the Code. (Complaint ¶ 17).

DISCUSSION

Summary judgment is appropriate when the matters presented to the Court “show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c) ; Fed. R. Bankr. P. 7056 ; Celotex Corp. v. Catrett, 477 U.S. 317, 322 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Although a debtor seeking discharge of student loans bears the burden of proving an undue hardship, 11 U.S.C. § 523(a)(8), in considering a motion for summary judgment, the Court must construe the “facts and inferences drawn therefrom in the light most favorable to the non-moving party.” Seabulk Offshore, Ltd. v. Am. Home Assur. Co., 377 F.3d 408, 418 (4th Cir.2001). The party moving for summary judgment has the initial burden of proving the absence of a genuine issue of material fact based on the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. Once this initial burden has been met, the nonmoving party must then set forth specific facts sufficient to raise a genuine issue for trial. Matsushita Elect. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Without weighing the evidence or making findings of fact, the Court must determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Here, the moving party must demonstrate an absence of any genuine dispute as to any material fact where a material fact is one of those necessary to establish the elements of the cause of the action. Id. at 248. Furthermore, in order to be entitled to summary judgment, the uncontested facts as established by the movant must entitle the movant to judgment. In re Smith, 231 B.R. 130, 134 (Bankr.M.D.Ga.1999) (when Trustee's statement of facts, though undisputed, came up short of establishing that a preferential transfer occurred, the court could not grant summary judgment; it is the movant's burden to establish all facts necessary to prevail under substantive law). Finally, “[a]lthough the burden is on the Debtor to establish that the student loan debt is dischargeable, the burden is on the Defendant as the moving party to establish an entitlement to summary judgment that the debt is excepted from discharge.” In re Macon, Bankr.Case No. 12–42846–PWB, Adv. Pro. No. 13–4014, 2014 WL 5080410 (Bankr.N.D.Ga. October 6, 2014).

Motion for Summary Judgment

I. Dischargeability of Educational Loan Debts Based on the Brunner Standard

In a Chapter 7 bankruptcy case, educational loan debts are excepted from discharge, “unless excepting such debt from discharge ... would impose an undue hardship on the debtor and the debtor's dependents.”⁴ 11 U.S.C. § 523(a)(8)(A)(i). The term ...