Opinion
Case No. 95-10468-AM, Adversary Proceeding No. 95-1118-AM
February 5, 1996
Robert R. Gregory, Esquire, Voss and Gregory, P.A., Manassas, VA, for the debtor-defendant
Robert S. Perry, Esquire, Fairfax, VA, for the plaintiff
MEMORANDUM OPINION
Before the court is the plaintiffs motion for summary judgment. A hearing was held on January 23, 1996, at which both parties waived oral argument and submitted the matter on the pleadings. The court then took the matter under advisement.
Factual Background
The debtor, Gary Puckett, filed a voluntary chapter 7 petition in this court on February 7, 1995, and received a discharge on June 7, 1995. On April 20, 1995, Household Finance Corporation filed a timely complaint to determine the dischargeability of $2,400 in cash advances obtained within 60 days of the filing of the bankruptcy petition. The debtor filed an answer admitting the advances were obtained in the amount and at the time stated but denied that the resulting debt was nondischargeable. The debtor also pleaded that he had made a preferential payment to the plaintiff in the amount of $4,902.19 on November 21, 1994, which the plaintiff should be required to turn over to the chapter 7 trustee for distribution; that he used the $2,400 cash advance to pay other debts that could not have been discharged in chapter 7; and that to be denied a discharge with respect to the $2,400 "would work a severe hardship on his finances."
On September 11, 1995, the chapter 7 trustee moved to intervene with respect to the preference claim. After a hearing, this court, by order dated November 8, 1995, ruled that the estate's claim to recover a preference was not a counter-claim, defense or offset to a creditor's action to determine the dischargeability of its claim; denied the trustee's motion to intervene without prejudice to his bringing a separate preference complaint; and struck the defense of preference from the debtor's answer.
The docket reflects that the trustee has never done so.
On December 8, 1995, the plaintiff filed the motion for summary judgment that is currently before the court. The plaintiff contends that the debtor's answer admits all elements of the plaintiff's nondischargeability claim. No affidavits or exhibits were attached to the motion, and the motion is essentially one for judgment on the pleadings. The debtor's opposition asserts that there are two disputed issues of fact: first, whether a determination of nondischargeability "would work a hardship on [the debtor] under his current financial situation;" and second, whether the plaintiff had breached an agreement to dismiss its complaint.
Conclusions of Law and Discussion
This court has jurisdiction over this controversy under 28 U.S.C. § 1334 and 157(a) and the general order of reference entered by the United States District Court for the Eastern District of Virginia on August 15, 1984. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I). Venue is proper in this district under 28 U.S.C. § 1409(a).
Under Fed.R.Civ.P. 56(c), made applicable to bankruptcy proceedings by F.R.Bankr.P. 7056, a party is entitled to 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." A "material" fact is one that would affect the outcome of the litigation; put another way, a disputed fact is not material, and the existence of the dispute does not constitute a defense to a summary judgment motion, if it would not constitute a defense at trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2509, 91 L.Ed.2d 202 (1986).
The plaintiff's cause of action arises under § 523(a)(2), Bankruptcy Code, which provides that a chapter 7 discharge does not discharge an individual debtor from a debt
for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by —
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition.
Section 523(a)(2)(C) further provides that "for the purpose of § 523(a)(2)(A),
consumer debts owed to a single creditor and aggregating more than $1,000 for "luxury goods or services" incurred by an individual debtor on or within 60 days before the order for relief under this title, or cash advances aggregating more than $1,000 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 60 days before the order for relief under this title, are presumed to be nondischargeable.
(emphasis added). Section 523(a)(2)(C) is not an independent category of nondischargeable debt but rather simply creates a presumption to be applied in determining whether the debt is nondischargeable under § 523(a)(2)(A). The presumption is rebuttable; however, the debtor has the initial burden of producing evidence to rebut the presumption. Barnett Bank of Pinellas County v. Tinney (In re Tinney), 188 B.R. 1015, 1019 (Bankr. M.D. Fla. 1995).
In the present case, the debtor's answer admits all the facts giving rise to the presumption, and the debtor has not produced any facts by way of affidavit or otherwise that would rebut the presumption. Anderson v. Liberty Lobby, supra, 477 U.S. at 248, 106 S.Ct. at 2509 (party may not rest upon mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial). Additionally, the pleaded affirmative defense of undue hardship is simply not a defense. The only types of otherwise non-dischargeable debts as to which the resulting financial hardship to the debtor is a defense are student loans under § 523(a)(8) and debts, other than support debts, arising under separation agreements or divorce decrees under § 523(a)(15). No authority has been cited, and the court is aware of none, that would make inability to pay a defense to any other category of nondischargeable debt. Finally, the debtor's pleaded affirmative defense that he used the cash advance to pay other debts that were nondischargeable likewise is not legally a defense to a nondischargeability action under § 523(a)(2)(A). Again, no authority has been cited for such a proposition, and the court is aware of none.
Not dischargeable in first seven years "unless . . . excepting such debt from discharge . . . will impose an undue hardship on the debtor and the debtor's dependents." § 523(a)(8)(B).
Not dischargeable "unless . . . the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor . . ." § 523(a)(15)(A).
The one issue that remains is the debtor's assertion that subsequent to the filing of the complaint, the plaintiff had agreed to dismiss the complaint but "backed out" of the agreement after the chapter 7 trustee moved to intervene. No affidavits are provided to describe the circumstances under which the alleged agreement was reached or what the consideration, if any, would have been for the agreement (or whether the doctrine of promissory estoppel would compel its performance in the absence of actual consideration). Accordingly the court is unable to determine on the present (essentially non-existent) record whether there is genuinely a triable issue of fact. Since the debtor has not presented any affidavits or pointed to other evidence of record to support his assertion, the court would be justified in summarily rejecting it. Nevertheless, out of an abundance of caution, and since the issue has not previously been raised by the pleadings (or for that matter denied by the plaintiff), the court will reserve it for trial. Indeed, it will be the only issue at trial, since the court has ruled in favor of the plaintiff on all other issues.
Trial is set for March 14, 1996.
For the foregoing reasons, a separate order will be entered granting summary judgment in favor of the plaintiff, subject to the court's determination at trial of whether there is an enforceable settlement agreement.