TRISH M. BROWN, Bankruptcy Judge.
This matter came before the court on the Motion for Summary Judgment (the
Kevin P. Clouser (
The Debt arises from a loan that Debtor received from Bank of America in 2003. Decl. of Kevin Clouser (ECF No. 56) ¶ 2. Debtor obtained the loan to send his son to Mount Bachelor Academy.
A court should grant summary judgment on a claim "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) (applicable to contested matters through Fed. R. Bankr. P. 9014(c) and 7056). The movant has the burden of establishing that there is no disputed issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view the facts and draw all inferences in the light most favorable to the non-moving party. Horphag Research Ltd. v. Pellegrini, 337 F.3d 1036, 1040 (9th Cir. 2003). The primary inquiry is whether the evidence presents a sufficient disagreement to require a trial, 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, 247 (1986). A party opposing a properly supported motion for summary judgment must present affirmative evidence of a disputed material fact from which a finder of fact might return a verdict in its favor. Id. at 257.
Section 523(a)(8) defines the types of student loans that are non-dischargeable unless repayment would constitute an undue hardship. In a student loan dischargeability dispute, "the lender has the initial burden to establish the existence of the debt and that the debt is an educational loan within the statute's parameters[;] [t]he burden then shifts to the debtor, to prove [undue hardship]." Roth v. Educ. Credit Mgt. Corp. (In re Roth), 490 B.R. 908, 916-917 (9th Cir. BAP 2013) (emphasis added, citations omitted). Debtor has conceded that if NCSLT carries its burden of proving that the Debt is a nondischargeable student loan, he will have to prove undue hardship through an adversary proceeding.
Three types of student loans are covered by § 523(a)(8). First are educational loans "made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution." 11 U.S.C. § 523(a)(8)(A)(i). Second are "obligation[s] to repay funds received as an educational benefit, scholarship or stipend." Id. § 523(a)(8)(A)(ii). The final type of nondischargeable loans are "qualified educational loans" as defined in 26 U.S.C. § 221(d)(1). Id. § 523(a)(8)(B). Unlike the other species of loans covered by § 523(a)(8), qualified educational loans must be incurred to pay for attendance at an institution of higher education. See 26 U.S.C. §§ 221(d)(2), 25A(f)(2).
The Loan Documents contain a choice-of-law provision that purports to apply both federal and California law. Cummins Decl., Exh. A at 4. Because dischargeability is purely a matter of federal bankruptcy law, I conclude that the effect of the contractual choice-of-law provision is as follows: issues concerning formation or interpretation of the parties' contract are governed by California law; whereas, any issues directly relating to dischargeability of the Debt are governed by federal law. See Double Bogey, L.P. v. Enea, 794 F.3d 1047, 1050 (9th Cir. 2015) (existence of fiduciary relationship for purposes of § 523(a)(4) is question of federal law); Am. Express Travel Related Servs. Co. v. Hashemi (In re Hashemi), 104 F.3d 1122, 1126 (9th Cir. 1997) ("[T]he question of the applicability of the bankruptcy laws to particular contracts is not a question of the enforceability of a contract but rather involves a unique, separate area of federal law." (quoting Collingwood Grain, Inc. v. Coast Trading Co. (In re Coast Trading Co.), 744 F.2d 686, 693 (9th Cir. 1984) (internal quotation marks omitted)).
NCSLT seeks summary judgment based on its contention that the Debt is a non-dischargeable student loan. The primary argument advanced in NCSLT's Motion is that Debtor labeled the Debt as a student loan in his bankruptcy schedules, which were executed under penalty of perjury. Motion at 3. NCSLT argues that this characterization is conclusive and dispositive of the entire dispute.
It is true that Debtor's description in his schedules is consistent with the Loan Documents, which describe the transaction as an "Education Loan." Cummins Decl., Exh. A at 5. However these labels are not binding on the court. See Wetherbee v. Willow Lane, Inc. (In re Bestway Prods.), 151 B.R. 530, 541 (Bankr. E.D. Cal. 1993) (bankruptcy court may take judicial notice of debtor's petition and schedules, but "[t]he fact that the documents are genuine does not mean that the court can automatically accept as true the facts contained in such documents."). Perhaps more importantly, even though Debtor's schedules do constitute an admission, this admission is not enough to carry NCSLT's evidentiary burden because the terms "student loan" and "education loan" are not coextensive with nondischargeable loans covered by § 523(a)(8). To cite just one hypothetical: a bank loan that is used to pay secondary school tuition, but which is neither made nor guaranteed by a nonprofit or governmental agency, would qualify in common parlance as a student loan, but would not fit under any of the three subparagraphs of § 523(a)(8).
NCSLT must do more than point to the generic label of "student loan." The creditor does not specify which subparagraph of § 523(a)(8) supposedly applies to the Debt, so I will consider each statutory provision separately.
NCSLT alleges that repayment of the Debt was guaranteed by The Education Resources Institute, Inc. (
Section 523(a)(8)(A)(ii) covers obligations to repay funds received as an educational benefit, scholarship, or stipend. Unlike other types of student loans, this statutory provision applies only to transactions where the debtor actually receives a transfer of funds. Institute of Imaginal Studies v. Christoff (In re Christoff), 527 B.R. 624, 630 (9th Cir. BAP 2015). Here, the Loan Documents indicate that all of the loan proceeds were transferred to Mount Bachelor Academy, and Debtor received no funds. Cummins Decl., Exh. A at 6-7. Accordingly, the NCSLT has not proven that the Debt is nondischargeable under § 523(a)(8)(A)(ii).
As noted previously, a qualified educational loan must be incurred to pay "qualified higher education expenses." 26 U.S.C. § 221(d)(1). NCSLT has produced no evidence indicating that Debtor's son received accredited higher education courses at Mount Bachelor Academy. Thus, NCSLT has not proven that the Debt is nondischargeable under § 523(a)(8)(B).
NCSLT bears the burden of proving that the Debt is within the scope of § 523(a)(8). In seeking to prove its case, NCSLT has offered evidence that suggests the Debt was incurred for educational purposes, but has not directly addressed the important questions concerning the application of § 523(a)(8). Debtor has disputed several important elements of NCSLT's case, and as the non-movant, all reasonable factual inferences must be drawn in his favor. I find that there are genuine disputes concerning material facts in this matter.
For the reasons set forth herein, the Motion is DENIED.