Shakir v. Mae (In re Shakir), Case No. 12-41817 (NHL)

• Decision Date: 29 March 2013
• Docket Number: Case No. 12-41817 (NHL),Adv. Proc. No. 12-01130 (NHL)
• Parties: In re: Isis Shakir, Debtor. Isis Shakir, Plaintiff, v. Sallie Mae, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of New York

In re: Isis Shakir, Debtor.

Isis Shakir, Plaintiff,

v.Sallie Mae, Defendant.

Case No. 12-41817 (NHL)

Adv. Proc. No. 12-01130 (NHL)

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK

Dated: March 29, 2013

Chapter 7

MEMORANDUM OPINION DENYING MOTION

FOR SUMMARY JUDGMENT

Before the Court is the motion of plaintiff, Isis Shakir (the "Plaintiff" or "Debtor"), seeking summary judgment declaring that defendant, Sallie Mae (the "Defendant"), cannot prove the existence of any sum claimed to be owed by Plaintiff to Defendant (the "Motion"). Defendant opposes the Motion. For the reasons set forth below, Plaintiff's Motion is denied as a matter of law.

Jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b), and the Eastern District of New York standing order of reference dated August 28, 1986, as amended by order dated December 5, 2012. This matter is a core proceeding under 28 U.S.C. § 157(b)(2). This decision constitutes the Court's findings of fact and conclusions of law to the extent required by Rule 7052 of the Federal Rules of Bankruptcy Procedure.

Procedural History

Debtor filed a pro se petition under Chapter 7 of the Bankruptcy Code on March 14, 2012 (the "Petition"). On April 9, 2012, Debtor commenced this adversary proceeding pro se by filing a Complaint under section 523(a)(8) of the Bankruptcy Code seeking to have the educational loan debt owed to Defendant discharged on the ground that excepting such debt from discharge would impose an undue hardship on the Debtor. The following day an amended verified Complaint was filed pro se (the "Amended Complaint"¹ ). (Docket #4) After acquiring pro bono counsel to represent her, Debtor sought leave of this Court to amend the Amended Complaint, which was granted over Defendant's objection at a hearing on December 11, 2012. The Motion was filed on December 18, 2012. Defendant filed its response on January 8, 2013. The Court held a hearing on the Motion on January 15, 2013, and heard oral arguments from counsel for both the Plaintiff and Defendant (the "Hearing").

Facts

The facts relevant to the Motion are not in dispute. On June 27, 2008, Plaintiff completed and signed a Tuition Loan Answer Application (the "TLAA") with Defendant, for a loan of $29,000 (the "Debt"). (12-1130, Docket #29-1) The TLAA was a 12-page document, sequentially numbered. The first three pages are in the form of an application that required Plaintiff to fill in data about herself ("The Application"). The remainder of the TLAA bore the subhead "PromissoryNote" ("the Note"). Plaintiff was asked to execute the TLAA on page 3; no other signature was required anywhere else in the TLAA. Above the signature line bearing Plaintiff's signature on page 3 is a section that begins with the words "Promise to pay" and above that are three columns of type. The left-hand column states:

I understand I am not required to fax my signature on this Application/Promissory Note to the Lender. If I choose to fax my signature on this Application/Promissory Note to the Lender, I intend: (i) my fax signature to be binding on me and to be an electronic signature under applicable federal and state law. . ..

In the center column, under Notice to Customer subdivision (a), the following language appears:

(a) Do not sign this before you read the Promissory Note even if otherwise advised.

(12-1130, Docket #29-1 p.3)

In the right-hand column, the following is recited:

I have read and agree to the terms of the Promissory Note accompanying this application.

(Id.)

Beneath these three columns of type and above the signature line bearing Plaintiff's signature, there is a promise to pay, which reads as follows:

Promise to pay: Jointly and severally with the other signers below, I promise to pay the lender or any other holder of this loan all sums disbursed under the terms of the Promissory Note, plus interest and all other charges that may become due. The term and conditions set forth in the Promissory Note constitute the entire agreement between us.

("Promise to Pay") Id. Immediately after this statement and just above the signature line bearingPlaintiff's signature, the following language appears in capital letters and in bold type:

CAUTION - IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT BEFORE YOU SIGN IT.

(Id.)

The entire TLAA, comprising both the Application and the Note, were faxed to Defendant on June 30, 2008, along with a facsimile cover sheet bearing the Plaintiff's name, address, telephone number, and social security number. (Id. #29-1,5) The cover sheet reflects that nineteen pages are being faxed to Sallie Mae Tuition Answer Loan Processing to the attention of the Loan Processing Department and also identifies eight different documents, including, inter alia, "1) Executed Application;" and "2) Promissory Note[.]" (Id. #29-5) At the bottom of the cover sheet is a June 30, 2008 date of receipt imprinted by Defendant's fax at 6:33 p.m. (the "Time Stamp") and the page number "1." (Id.) The same Time Stamp appears on every other page of the fax, including pages 1-3 of the TLAA, renumbered by the faxing process as page numbers 2 through 4 of the fax (Id. #29-1), and pages 4-12 of the TLAA , renumbered by the faxing process as page numbers 5 through 13 of the fax. The remaining pages of the fax included a co-signer's bank statement and tuition bills.

It is not disputed that Plaintiff later received the funds from Defendant, used them toward her education (12-1130, Docket #29-3), and began repaying some of the Debt. (12-1130, Docket #4 ¶4) The third paragraph of the Amended Complaint describes the Debt as follows:

3. Loan Breakdown. One of the unsecured debts owing by the Debtor and listed in Schedule F is a PRIVATE student loan(s) owing to Defendant Sallie Mae:

Sallie Mae Account # [xxxxxxx]177-1 [account number redacted in this quote, from Plaintiff's original filings, Pursuant to Bankruptcy Rule 9037(A)(4)].

. . .This loan was incurred to pay expenses at La Guardia Community College and a Post-Secondary Institute.

(Id. ¶3)

With the Petition, Debtor filed the required Schedule F-Creditors Holding Unsecured Nonpriority Claims, where she listed the Debt as owed to Defendant for a January 2008 private student loan in the amount of $21,520.² Debtor amended Schedule F on December 13, 2012, just prior to filing the Motion, to reflect that she now disputes the validity of the Debt, and to provide an additional caption for the creditor's name as Sallie Mae, Inc. (12-41817, Docket # 30)

Plaintiff attached as an exhibit to the Motion the Note, Defendant's responses to Plaintiff's first request for document production, and an Affidavit signed by Debtor stating she has never "seen this 'Promissory Note' before, referring to pp. 4-12 of the TLAA, and never signed this document or agreed to it." (12-1130, Docket #26) Plaintiff did not include pages 1-3 of the TLAA, the Application, with the Motion. The Defendant's Response did include the entire TLAA, both the Application and the Note.

Arguments

The Motion does not seek the same relief sought in the Amended Complaint. The latter sought a judgment declaring the loan dischargeable based upon the undue hardship provision of section 523(a)(8) of the Bankruptcy Code. The Motion, instead, asserts that the issue of undue hardship is irrelevant because there is no binding obligation. Plaintiff's reasoning is that Defendant has not and cannot establish the existence of the Debt because the Note was not signed by the Plaintiff; neither Plaintiff's name or Defendant's name can be found on the Note; and the Note does not contain any loan amount or terms that would link the Plaintiff to the Note. In the Response,Defendant argues that because the TLAA consists of both the Application and the Note, and since the Application portion of it contains language explicitly incorporating the Note portion of the document by reference, the Application and the Note together create and evidence the valid and binding indebtedness.

Standard for Summary Judgment

A Court may grant 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 judgment as a matter of law." FED. R. BANKR. P. 7056(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "If, as to the issue on which summary judgment is sought, there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party, summary judgment is improper." Here, the material facts, as outlined above, are not in dispute. Therefore the Court must determine the legal issue of whether the Plaintiff's signing of the Application portion of the TLAA was sufficient to create a debt obligation from Plaintiff to Defendant on the terms set forth in the Note section of the TLAA.

Legal Analysis

Choice of Law

The Note contains a provision stating that "the lender is located in the state of Utah" and that "the provisions of this note will be governed by federal laws and the laws of [Utah]." (12-1130, Docket 29-1 ¶O.1) "[A] choice-of-law clause in a contract will apply to disputes about the existence or validity of that contract[.]" Motorola Credit Corp. v. Uzan, 388 F.3d 39, 50 (2d Cir. 2004).

The Application and Note Are Enforceable Under Utah Law

Plaintiff argues the Note, and therefore the Debt, is unenforceable because she did not sign it, cannot be linked to it, and did not see or read it. Under Utah law, a credit agreement is enforceable if it

(A) is in writing;

(B) expresses consideration;

(C) sets forth the relevant terms and conditions; and

(D) is signed by the party against whom enforcement of the agreement would be sought.

UTAH CODE ANN. § 25-5-4 (2)(b)(i)(West 2012). Under this statutory provision the TLAA qualifies as a credit agreement by a financial institution to lend money, and meets the requirements for...