Case: 11-1342 Document: 33 Filed: 08/15/2012 Page: 1 of 30 FILED 1 NOT FOR PUBLICATION AUG 15 2012 SUSAN M SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL O F TH E N IN TH C IR C U IT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 6 In re: ) BAP No. OR-11-1342-JuMkH ) 7 SHEILA NOEL CAMPBELL, ) Bk. No. 08-65172 ) 8 Debtor. ) Adv. No. 11-06051 ______________________________) 9 ) SHEILA NOEL CAMPBELL, ) 10 ) Appellant, ) 11 ) v. ) M E M O R A N D U M* 12 ) SOUTHERN OREGON UNIVERSITY; ) 13 OREGON DEPARTMENT OF REVENUE, ) ) 14 Appellees. ) ______________________________) 15 Argued and Submitted on June 14, 2012 16 at Boise, Idaho 17 Filed - August 15, 2012 18 Appeal from the United States Bankruptcy Court for the District of Oregon 19 Hon. Frank R. Alley, III, Chief Bankruptcy Judge, Presiding 20 ____________________________ 21 Appearances: G. Jefferson Campbell, Jr., Esq. argued for appellant Sheila Noel Campbell; Stephen T. Tweet, 22 Esq. of Albert & Tweet, LLP, argued for appellees Southern Oregon University and Oregon Department 23 of Revenue. ______________________________ 24 Before: JURY, MARKELL, and HOLLOWELL, Bankruptcy Judges. 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1. Case: 11-1342 Document: 33 Filed: 08/15/2012 Page: 2 of 30
1 Discharged chapter 71 debtor, Sheila Noel Campbell, 2 reopened her bankruptcy case and filed an adversary proceeding 3 against appellees, Southern Oregon University (“SOU”) and Oregon 4 Department of Revenue (“ODR”) (collectively, “Defendants”), 5 seeking declaratory relief and asserting violations of the 6 discharge injunction under § 524(a). Defendants counterclaimed 7 for their attorneys’ fees and costs. 8 On cross motions for summary judgment, the question 9 presented was whether the debt for room and board charges and 10 miscellaneous fees2 that debtor incurred while living in the 11 dormitory at SOU and attending classes at nearby Rogue Community 12 College (“RCC”) fell within the scope of the “qualified 13 education loan” exception to discharge under § 523(a)(8)(B). 14 The bankruptcy court granted summary judgment in favor of 15 Defendants, concluding that the debt in the amount of $15,610.99 16 was presumptively nondischargeable under § 523(a)(8)(B) and, 17 therefore, not included in the discharge order. The bankruptcy 18 court also awarded SOU attorneys’ fees and costs in the amount 19 of $14,227.97. 20 For the reasons discussed below, we AFFIRM the bankruptcy 21 court’s decision granting summary judgment for Defendants but 22 1 23 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 24 “Rule” references are to the Federal Rules of Bankruptcy Procedure and “Civil Rule” references are to the Federal Rules 25 of Civil Procedure. 26 2 The miscellaneous fees included parking tickets, library 27 fines, health insurance charges, printing and copying fees, student conduct fines, “social fees”, “PE Jazz” fees, and fees 28 to cover the cost of replacing several laundry and meal cards.
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1 REVERSE the award of attorneys’ fees and costs. 2 I. FACTS 3 The facts relevant to the underlying controversy are 4 undisputed. 5 Academic Year 2004-2005 6 Debtor was a full-time enrolled student at SOU for the 7 academic school year 2004-2005, lived on the SOU campus, and 8 participated in a meal plan provided by SOU. When debtor 9 enrolled as a student, SOU automatically established a Revolving 10 Charge Account Plan (the “RCA”) for debtor that allowed her to 11 pay tuition and other charges with more flexibility than if 12 payment were required upon registration or receipt of services. 13 The RCA provided that “any credit extended . . . is an 14 educational benefit or loan” and defined a student as “[a]ny 15 person who is currently or has in the past been enrolled at 16 [SOU].” Debtor signed the RCA agreement on October 17, 2004. 17 At the end of the 2004-2005 school year, SOU placed debtor 18 on academic suspension because of poor grades. As a result, 19 debtor could take no further classes at SOU. 20 Academic Year 2005-2006 21 Debtor then enrolled at RCC in Medford, Oregon, for the 22 Fall and Winter terms for the academic year of 2005-2006. 23 Pursuant to a Memorandum Of Understanding (“MOU”) between RCC 24 and SOU, RCC students “who are dual enrolled at SOU can live on 25 the SOU campus . . .” if there was available space. Under this 26 policy as implemented, debtor sought to live in the dormitory on 27 the SOU campus and participate in a meal plan so that she could 28 stay near her friends while attending RCC.
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1 On September 24, 2005, debtor signed a Residence Hall 2 Contract for the 2005-2006 school year for room and board at SOU 3 (the “Residence Hall Contract”). By signing the Residence Hall 4 Contract, debtor agreed that if she owed money for room and 5 board, damages or other charges, she would not be able to 6 receive her transcripts. Debtor also agreed that if she owed 7 money for room and board, damages or other charges, she would 8 pay, and SOU reserved the legal right for recovery of, 9 reasonable attorneys’ fees, court costs, and other reasonable 10 collections costs. The room and board charges were billed to 11 debtor under the RCA. 12 As a condition for living on the SOU campus, debtor was 13 required to provide verification of her full-time enrollment at 14 SOU or RCC. Debtor provided verification that she was a full- 15 time student at RCC for the Fall term on October 14, 2005. 16 Debtor attended RCC as a full-time student during the Fall 17 and Winter terms of the academic year 2005-2006, but decided to 18 take a break from her studies for the Spring term of 2006. Due 19 to the fact that she was no longer taking classes at either RCC 20 or SOU, SOU’s housing office manager advised debtor that she was 21 to vacate her room by April 24, 2006. Debtor moved out of the 22 SOU dormitory on that date. 23 Debtor did not pay her billed room and board and 24 miscellaneous charges from September 8, 2005 to June 20, 2006. 25 As of March 15, 2011, debtor owed SOU $15,610.99, consisting of 26 a principal amount of $9,581.03 plus interest due in the amount 27 28
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1 of $6,029.96.3 On December 1, 2005, SOU sent debtor’s debt to 2 the ODR for collection. 3 The Bankruptcy Proceedings 4 On December 29, 2008, debtor filed her chapter 7 bankruptcy 5 petition. In Schedule F, debtor listed the debt owed to SOU for 6 the various charges. At no time did debtor file an adversary 7 proceeding regarding the dischargeability of the debt owed to 8 SOU. On April 3, 2009, debtor obtained her discharge. 9 Following discharge, ODR sent debtor a demand for payment 10 of SOU’s delinquent student loan account on June 2, 2010. 11 Debtor requested her transcript from SOU which SOU refused to 12 release due to her outstanding bill. 13 On February 23, 2011, debtor moved to reopen her bankruptcy 14 case for the purpose of filing the declaratory relief adversary 15 proceeding. The bankruptcy court granted her motion by order 16 entered on February 24, 2011. 17 On March 4, 2011, debtor filed an adversary proceeding 18 against Defendants. In her complaint, debtor sought a 19 declaration that (1) the scheduled unsecured debt owed to SOU 20 for room and board charges4 in the amount of approximately 21 3 22 Debtor maintains that her room and board charges should only be for the period of September 2005 to April 2006 when she 23 moved out of the dormitory. Debtor points to no provision in the Residence Hall Contract that shows she was entitled to a 24 refund for the room and board charges incurred when she left prior to the end of the semester. Our independent review of the 25 contract shows that under Section XVIII ¶ C debtor was not 26 relieved of her liabilities in the event the contract was terminated. The bankruptcy court did not address this issue. 27 4 Debtor’s complaint did not differentiate between the 28 (continued...)
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1 $10,000 was discharged; (2) the § 523(a)(8) exception to 2 discharge did not apply to the charges because there was no 3 evidence of a “loan”; and (3) the collection actions taken by 4 Defendants violated § 524(a). In connection with her contempt 5 claim, debtor further sought the release of her transcript, 6 actual damages and reasonable attorneys’ fees. 7 On April 4, 2011, Defendants answered the complaint and 8 counterclaimed for attorneys’ fees and costs as authorized under 9 the SOU Residence Hall Contract. On the same day, Defendants 10 filed their motion for summary judgment (“MSJ”). Defendants 11 argued, among other things, that the debt owed to SOU for room 12 and board and miscellaneous charges was a “loan” within the 13 scope of § 523(a)(8)(B) due to debtor’s signature on the RCA and 14 Residence Hall Contract. Defendants maintained that the MOU 15 supported an interpretation of the RCA and Residence Hall 16 Contract as applicable to debtor. Therefore, they argued, the 17 debt was not subject to the discharge order.5 According to 18 Defendants, under these circumstances, they did not violate the 19 discharge injunction under § 524(a) when they sought to collect 20 the debt post-discharge. 21 Debtor responded, arguing that the debt for the various 22 charges did not meet the requirements for a “qualified education 23 loan” under § 523(a)(8)(B). Relying primarily on McKay v. 24 4 (...continued) 25 charges for room and board and other fees incurred while she was 26 living on the SOU campus. 5 27 Defendants also asserted that amounts for tuition and related fees were past due, but these amounts are not at issue 28 in this appeal.
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1 Ingleson, 558 F.3d 888 (9th Cir. 2009) for her argument, debtor 2 maintained that the terms of the RCA and the Residence Hall 3 Contract were inconsistent with a “loan” because those 4 agreements applied only to students who were enrolled at SOU.6 5 On May 12, 2011, debtor moved for partial summary judgment, 6 incorporating the substance of her response and contending that 7 she was entitled to recover compensatory damages, reasonable 8 attorneys’ fees and costs for Defendants’ willful violation of 9 the discharge injunction under § 524(a). Debtor also sought a 10 partial summary judgment ruling that Defendant SOU be required 11 to immediately release her transcript for classes previously 12 taken at SOU. 13 On June 7, 2011, the bankruptcy court granted the 14 Defendants’ MSJ and denied debtor’s motion for partial summary 15 judgment at the hearing. On June 20, 2011, Defendants filed 16 their “Statement of Attorney Fees, Costs and Disbursements” in 17 the bankruptcy court, with a supporting declaration and time 18 sheets describing the work by date. 19 On June 22, 2011, the bankruptcy court entered an order and 20 judgment in favor of Defendants: (1) declaring the debt to SOU 21 to be a qualified educational loan, nondischargeable under 22 § 523(a)(8); (2) finding that SOU’s and ODR’s actions to collect 23 the SOU debt did not violate § 524(a); (3) declaring that SOU’s 24 actions in withholding the transcripts was proper, and 25 (4) awarding SOU its attorneys’ fees, costs and disbursements 26 6 27 At issue in McKay was whether a deferment agreement signed by the debtor while she was attending Vanderbilt 28 University constituted a loan under § 523(a)(8)(A).
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1 incurred in the adversary proceeding. Debtor timely appealed 2 the judgment. 3 II. JURISDICTION 4 The bankruptcy court had jurisdiction over this proceeding 5 under 28 U.S.C. §§ 1334 and 157(b)(2)(I). We have jurisdiction 6 under 28 U.S.C. § 158. 7 III. ISSUES 8 A. Whether the revolving credit agreement extended by SOU 9 to debtor constitutes a “qualified education loan” under 10 § 523(a)(8)(B); and 11 B. Whether SOU is entitled to an award of its attorneys’ 12 fees and costs in defending the adversary proceeding. 13 IV. STANDARDS OF REVIEW 14 The granting of summary judgment is reviewed de novo, 15 making all reasonable inferences in favor of the non-movant to 16 determine whether there exists any genuine issue of material 17 fact precluding judgment in favor of the movant as a matter of 18 law. Valdez v. Rosenbaum, 302 F.3d 1039, 1043 (9th Cir. 2002). 19 We may affirm a summary judgment on any ground that has support 20 in the record, whether or not relied upon by the bankruptcy 21 court. Id. 22 Where the bankruptcy court grants summary judgment based on 23 its interpretation of a contract, we review the bankruptcy 24 court’s interpretation and meaning of contract provisions de 25 novo. See U.S. Cellular Inv. Co. v. GTE Mobilnet, Inc., 281 26 F.3d 929, 934 (9th Cir. 2002). The determination as to whether 27 contract language is ambiguous and whether the written contract 28 is reasonably susceptible of a proffered meaning is also a
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1 question of law reviewed de novo. Id. 2 Where the bankruptcy court grants summary judgment based on 3 its interpretation of a statute, we also use the de novo review 4 standard. Simpson v. Burkart (In re Simpson), 557 F.3d 1010, 5 1014 (9th Cir. 2009). 6 “Awards of attorney’s fees are generally reviewed for an 7 abuse of discretion. However, we only arrive at discretionary 8 review if we are satisfied that the correct legal standard was 9 applied and that none of the [bankruptcy court’s] findings of 10 fact were clearly erroneous. We review questions of law de 11 novo.” Rickley v. County of L.A., 654 F.3d 950, 953 (9th Cir. 12 2011). To the extent the issue is whether Oregon law allows the 13 award of attorneys’ fees, our review is de novo. Fry v. Dinan 14 (In re Dinan), 448 B.R. 775, 783 (9th Cir. BAP 2011). 15 V. DISCUSSION 16 Under § 523(a)(8), student loan obligations are 17 presumptively nondischargeable in bankruptcy. “Unless the 18 debtor affirmatively secures a hardship determination, the 19 discharge order will not include a student loan debt.” Tenn. 20 Student Assistance Corp. v. Hood, 541 U.S. 440, 450 (2004). 21 Therefore, an action to collect on a nondischargeable student 22 loan by a creditor after the debtor has been granted a discharge 23 cannot be a violation of the discharge injunction. McKay, 558 24 F.3d at 891. 25 However, to be nondischargeable, the debt at issue must 26 meet the requirements for a “qualified education loan” within 27 the meaning of § 523(a)(8)(B). The creditor/defendant in 28 student loan dischargeability proceedings bears the burden of
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1 proof on this issue. Plumbers Joint Apprenticeship & Journeyman 2 Training Comm. v. Rosen (In re Rosen), 179 B.R. 935, 938 (Bankr. 3 D. Or. 1995). 4 A. Section 523(a)(8)(B) 5 Section 523(a)(8)(B), which was added to the student loan 6 exception to discharge provision in 2005 with the enactment of 7 the Bankruptcy Abuse Prevention and Consumer Protection Act, 8 provides: 9 (a) A discharge under section 727 . . . of this title does not discharge an individual debtor from any debt— 10 . . . 11 (8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the 12 debtor and the debtor’s dependents, for — . . . 13 (B) any other educational loan that is a qualified 14 education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor 15 who is an individual[.] 16 Section 523(a)(8)(B) expressly provides a cross reference 17 to the Internal Revenue Code (“IRC”) of 1986 which supplies the 18 definition of a “qualified education loan” for purposes of the 19 “any other educational loan” exception to discharge. This cross 20 reference to IRC § 221(d)(1) leads us down a statutory 21 definitional path. 22 IRC § 221(d)(1)7 defines a “qualified education loan”: 23 (1) Qualified education loan.--The term ‘qualified 24 7 In computing taxable income, IRC § 221 authorizes 25 individual taxpayers an itemized deduction for interest paid by 26 the taxpayer for the taxable year on any qualified educational loan. 26 U.S.C. § 221(a). A taxpayer is entitled to a 27 deduction under § 221 only if the taxpayer has a legal obligation to make interest payments under the terms of the 28 qualified education loan. Treas. Reg. § 1.221-1.
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1 education loan’ means any indebtedness incurred by the taxpayer solely to pay qualified higher education 2 expenses- . . . 3 (C) which are attributable to education furnished 4 during a period during which the recipient was an eligible student. 5 IRC § 221(d)(2) defines “qualified higher education 6 expenses”: 7 (2) Qualified Higher Education Expense.--The term 8 ‘qualified higher education expenses’ means the cost of attendance (as defined in section 472 of the Higher 9 Education Act of 1965, 20 U.S.C. 1087ll, as in effect on the day before the date of the enactment of the 10 Taxpayer Relief Act of 1997) at an eligible educational institution . . . 11 In turn, 20 U.S.C. § 1087ll, defines “cost of attendance”: 12 (1) tuition and fees normally assessed a student 13 carrying the same academic workload as determined by the institution, and including costs for rental or 14 purchase of any equipment, materials, or supplies required of all students in the same course of study; 15 (2) an allowance for books, supplies, transportation, 16 and miscellaneous personal expenses, including a reasonable allowance for the documented rental or 17 purchase of a personal computer . . . , as determined by the institution; 18 (3) an allowance (as determined by the institution) 19 for room and board costs incurred by the student . . . .8 20 Finally, an “eligible student” within the meaning of IRC 21 § 221(d)(1)(C) is one who carries at least a one-half time 22 student workload (IRC § 25A(b)(3)) and who is enrolled in a 23 program of study at an institution of higher education (20 24 25 26 8 27 See also, McKay, 558 F.3d at 890 (concluding that arrangements for payment of tuition, and room and board, 28 constitute student loans for purposes of § 523(a)(8)(A)).
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1 U.S.C. § 1091(a)(1)).9 2 These detailed definitions inform us whether the elements 3 for a “qualified education loan” have been met in this case. 4 When Congress has enacted a definition with “detailed and 5 unyielding provisions,” as it has with the above mentioned 6 statutes, we must give effect to those definitions even when 7 “‘it could be argued that the line should have been drawn at a 8 different point.’” INS v. Hector, 479 U.S. 85, 88–89 (1986) 9 (per curiam). Given the cross references to the numerous 10 statutes cited above, a “qualified education loan” under 11 § 523(a)(8)(B) is comprised of the following elements: 12 (1) indebtedness; (2) used by the taxpayer; (3) solely for 13 “qualified educational expenses” (defined as “cost of 14 attendance” which means, among other things, an allowance for 15 transportation, room and board, and miscellaneous personal 16 expenses under 20 U.S.C. § 1087ll); and (4) that are 17 attributable to education furnished during a period during which 18 the recipient was an “eligible student” — (a) “eligible student” 19 means one who carries at least a one-half time student workload 20 and (b) who is enrolled in a program of study at an institution 21 of higher education. 22 Debtor’s primary argument on appeal is that the terms of 23 the RCA and Residence Hall Contract are inconsistent with a 24 25 9 Debtor cannot seriously contend that she was not an 26 “eligible student” within the meaning of § 221(d)(1)(C) at the time she incurred the room and board and other charges at SOU. 27 The record shows that she was enrolled at RCC in a full time course of study. Therefore, she was an “eligible student” 28 within the meaning of IRC § 221(d)(1)(C).
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1 “loan” because those agreements only applied to students who 2 were enrolled at SOU. Debtor’s argument thus raises the issue 3 of whether she was legally obligated under the agreements when 4 she was not a student at SOU at the time she incurred the 5 expenses. 6 The term “indebtedness” as used in the Revenue Act has been 7 construed to mean an “unconditional and legally enforceable 8 obligation for the payment of money.” Investors Ins. Agency, 9 Inc. v. Comm’r, 677 F.2d 1328, 1333 (9th Cir. 1982). There is 10 no requirement that money change hands, as revolving lines of 11 credit may constitute a “qualified education loan” so long as 12 the student uses the line of credit solely to pay qualifying 13 educational expenses. 34 AM . JUR . 2D Fed. Taxation ¶ 18410 14 (2012); see also McKay, 558 F.3d at 890 (revolving credit 15 accounts are considered loans for purposes of § 523(a)(8)). We 16 therefore consider whether the various agreements which 17 Defendants rely upon show that debtor legally incurred liability 18 for the debt, as a matter of law.10 19 Here, the RCA and Residence Hall Contract are the two 20 agreements signed by debtor. Debtor established and signed the 21 RCA when she was enrolled at SOU as a student and later signed 22 the Residence Hall Contract when she was enrolled at RCC. 23 Because Oregon is the relevant jurisdiction, we look to Oregon 24 law for the interpretative rules pertaining to contracts. 25 26 10 Both the Revolving Charge Account Program and the 27 Residence Hall Contract are governed by the Or. Admin. Rules promulgated by the Oregon State Board of Education at Or. Admin. 28 R. 571-060-0040 and 573-070-0011, respectively.
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1 Oregon follows the objective theory of contracts; that is, the 2 existence of a contract does not depend on the parties’ 3 uncommunicated subjective understanding but on their objective 4 manifestations of intent to agree to the same express terms. 5 Dalton v. Robert Jahn Corp., 146 P.3d 399, 406 (Or. Ct. App. 6 2006). 7 In a dispute over the meaning of a contract, a party is 8 entitled to summary judgment only if the terms of the contract 9 are unambiguous. Milne v. Milne Constr. Co., 142 P.3d 475, 479 10 (Or. Ct. App. 2006). A term in a contract is ambiguous if, when 11 examined in the context of the contract as a whole, including 12 the circumstances in which the agreement was made, it is 13 susceptible to more than one plausible interpretation. Batzer 14 Constr., Inc. v. Boyer, 129 P.3d 773, 779 (Or. Ct. App. 2006). 15 If the term or provision is unambiguous, the court construes it 16 as a matter of law, and the analysis ends. Yogman v. Parrot, 17 937 P.2d 1019, 1021 (Or. 1994). 18 Debtor has couched the interpretative problem as centering 19 on whether the RCA and Residence Hall Contract apply only to 20 registered SOU students rather than to registered SOU and RCC 21 students, such as herself. In doing so, debtor would have us 22 ignore the circumstances surrounding her signature on the 23 agreements and instead rely exclusively on the select language 24 in the agreements attributed to her interpretation. However, 25 our interpretation of the agreements involves more than the mere 26 construction of terms and ordinary words. In determining 27 whether debtor is legally bound by the agreements, we also 28 consider the surrounding circumstances at the time of
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1 contracting and the positions and actions of the parties. 2 We cannot ignore the factual circumstances under which 3 debtor signed the Residence Hall Contract. Debtor could no 4 longer attend SOU because of her grades; she enrolled at the 5 nearby community college, RCC; and she took advantage of the 6 consortium agreement between SOU and RCC that allowed her to 7 live in the dormitory on the SOU campus and participate in a 8 meal plan. These undisputed facts show that debtor used the RCA 9 for living and other miscellaneous expenses as part of her 10 broader effort to obtain an education at RCC. 11 Moreover, on these facts, debtor’s reading of the Residence 12 Hall Contract as applying only to registered SOU students leads 13 to an unreasonable result. The Residence Hall Contract cannot 14 plausibly be read to apply only to registered SOU students when 15 the MOU between SOU and RCC contemplates collaboration between 16 the two institutions for the benefit of students in the Medford 17 area, including the use of the SOU dormitories by RCC students — 18 a benefit which debtor took advantage of. 19 Debtor’s proposed interpretation is not only inconsistent 20 with the MOU, but also inconsistent with the enrollment 21 verification letters sent to her. The first letter sent dated 22 October 11, 2005 stated in part: “In order to live in the 23 residence halls, you must be a registered student . . . .” The 24 letter then required verification of the “Fall term class 25 schedule from either SOU or RCC” to remain in the residence 26 halls. Debtor responded to the letter by verifying that she was 27 a registered student at RCC so that she could continue living in 28 the SOU dormitory.
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1 Likewise, we cannot interpret the RCA as applying only to 2 registered SOU students. The RCA mentions the consortium 3 agreement between SOU and RCC in ¶ 8. Moreover, the purpose and 4 structure of the RCA is set forth by Or. Admin. R. 573-015-0010. 5 Paragraph 2(b) of that rule provides: 6 (2) The following are eligible to participate in the Revolving Charge Account program: 7 (a) Students enrolled at Southern Oregon University; 8 (b) Any person who incurs charges, fines, or penalties 9 at Southern Oregon University, including, but not limited to library fines, parking tickets, facilities 10 rental charges, program user charges, and lease agreements. 11 12 When debtor incurred the room and board charges pursuant to 13 the Residence Hall Contract, she fell into category (2)(b); she 14 was “any person” (a registered RCC student) who incurred charges 15 at SOU. Furthermore, the RCA defines a “student” as “[a]ny 16 person who is currently or has in the past been enrolled at 17 Southern Oregon University.” Debtor would fit into this 18 definition as well because she was a person who “in the past” 19 was enrolled at SOU. 20 After a thorough examination of the RCA, the Residence Hall 21 Contract, the MOU and the verification letters, and giving due 22 consideration to the circumstances under which the agreements 23 were made, we conclude there is no ambiguity in any of the 24 documents. Debtor’s proposed interpretation of the various 25 agreements is neither sensible nor reasonable. Deerfield 26 Commodities v. Nerco, Inc., 696 P.2d 1096, 1105 (Or. Ct. App. 27 1985) (“A contract provision is ambiguous if . . . it is capable 28 of more than one sensible and reasonable interpretation; it is
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1 unambiguous if its meaning is so clear as to preclude doubt by a 2 reasonable person.”). Accordingly, we hold the RCA and Resident 3 Hall Contract were legally enforceable against debtor for the 4 room and board and other listed charges. 5 Even so, IRC § 221(d)(1) requires that debtor use the 6 credit extended by SOU solely to pay for qualified education 7 expenses. We do not find any genuine dispute that debtor used 8 the credit extended by SOU for costs associated with her 9 attendance at RCC. There is no dispute that the room and board 10 charges fall squarely within the scope of 20 U.S.C. § 1087ll(3). 11 Moreover, as more fully discussed below, we conclude that the 12 miscellaneous charges debtor incurred also qualify as costs of 13 attendance because those charges were associated with debtor’s 14 living in the dormitory at SOU and attendance at school. 15 Accordingly, the revolving line of credit established by SOU was 16 used to fund debtor’s “cost of attendance.” As such, these 17 costs were “qualified higher education expenses” within the 18 meaning of IRC § 221(d)(2). 19 The dissent disagrees with our conclusion, contending that 20 the parking and other fines, medical costs, and “recreational” 21 Jazzercise classes were not a “cost of attendance”. Thus, the 22 dissent argues that the RCA was not a “qualified education loan” 23 for purposes of § 523(a)(8)(B). Relying on Treas. Reg. § 1.221- 24 1(e)(4), Example 6, the dissent concludes that the revolving 25 line of credit offered by SOU is a “mixed use loan” which is not 26 considered a qualified education loan. Example 6 states: 27 Mixed-use loans. Student J signs a promissory note for a loan secured by Student J’s personal residence. 28 Student J will use part of the loan proceeds to pay
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1 for certain improvements to Student J’s residence and part of the loan proceeds to pay qualified higher 2 education expenses of Student J’s spouse. Because Student J obtains the loan not solely to pay qualified 3 higher education expenses, the loan is not a qualified education loan.11 4 5 However, the facts of this case do not fall close to those in 6 the example. Moreover, although a revolving credit agreement 7 offered by an eligible education institution may include a 8 variety of charges, that does not transform every revolving 9 credit agreement into a “mixed use loan”. In the end, the 10 example cited by the dissent provides little guidance as to 11 whether the revolving line of credit here is a qualified 12 education loan. 13 Moreover, the dissent’s analysis regarding “mixed use 14 loans” ignores the fact that the term “cost of attendance” which 15 qualifies as a “higher education expense” encompasses more than 16 room and board. 20 U.S.C. § 1087ll defines the “cost of 17 attendance” with a broad list of items to include tuition and 18 fees and an allowance for books, supplies, transportation and 19 miscellaneous personal expenses. Read together, all the items 20 listed have a relationship to the student’s attendance at school 21 (home improvements do not). 22 Here, we conclude that the miscellaneous charges have the 23 necessary relationship to debtor’s attendance at school. She 24 would have had no need to use the library (and incur the fines), 25 copy or print items at SOU (and incur the fees), or replace meal 26 11 27 Nonetheless, under this example the borrower may still be eligible to take a deduction on interest paid when the “loan” 28 was secured by his or her personal residence.
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1 and laundry cards (and incur the fees for doing so) had she not 2 been attending school.12 If Congress included certain allowances 3 for expenses as serving an educational purpose in the student 4 loan tax statutes, we should assume it also interpreted those 5 allowances as having an educational purpose in the Bankruptcy 6 Code. See Murphy v. Pa. Higher Educ. Assistance Agency (In re 7 Murphy), 282 F.3d 868, 872-73 (5th Cir. 2002). Because the 8 various expenses were incidental to debtor’s education, the 9 revolving line of credit was not a “mixed use loan” so as to 10 take it outside the definition of a “qualified educational 11 loan”. 12 We also find support for our interpretation in the case 13 law. Those Courts of Appeal which have addressed a similar 14 issue have found that the educational nature of the loan should 15 be determined by focusing on the substance of the transaction 16 creating the obligation. See Dustin Busson-Sokolik v. Milwaukee 17 School of Eng’g (In re Sokolik), 635 F.3d 261, 266 (7th Cir. 18 2011) (holding that it is the “purpose of the loan which 19 determines whether it is ‘educational’.”); In re Murphy, 282 20 F.3d at 870 (same); McKay v. Ingleson, 366 B.R. 144, 147 (D. Or. 21 2007) aff’d 558 F.3d 888 (9th Cir. 2009) (in determining whether 22 a “loan” falls within the scope of § 523(a)(8)(A), the nature of 23 the debt, if for some clear educational benefit to the debtor, 24 25 12 While the dissent places emphasis on the Jazzercise 26 charges, from what we can tell out of a total of three charges, two were credited back to the debtor. At most, there is one $80 27 charge associated with the “PE Jazz” entry. Further, the PE indicates that perhaps the class was not simply “optional” or 28 “recreational”.
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1 should be the principal focus). Although these cases 2 interpreted § 523(a)(8)(A), we extrapolate from them to 3 incorporate a compatible standard for interpreting 4 § 523(a)(8)(B). Bankruptcy courts have followed a similar 5 approach when determining whether a “loan” is a “qualified 6 education loan” for purposes of § 523(a)(8)(B). 7 In Rumer v. Am. Educ. Servs. (In re Rumer), 469 B.R. 553 8 (Bankr. M.D. Penn. 2012), the debtors maintained they were 9 entitled to summary judgment in their favor because the lenders 10 had not offered proof that the proceeds of the loans were used 11 by them to pay for “costs of attendance” such as tuition, books, 12 room and board, etc. Relying on In re Sokolik, 634 F.3d 261, 13 and In re Murphy, 282 F.3d 868, the bankruptcy court rejected 14 the debtors’ “narrow construction” of the term “costs of 15 attendance”. In analyzing whether a loan is a qualified 16 educational loan, the Rumer court observed that the focus under 17 § 523(a)(8) was on the stated purpose for the loan when it was 18 obtained, rather than how the proceeds were actually used by the 19 borrower. Id. at 562. The bankruptcy court found that the 20 loans in question were “educational loans” for purposes of 21 § 523(a)(8) because the lenders were providers of educational 22 loans, debtors applied to each lender in its capacity as a 23 student loan provider; and each loan was entered into when 24 debtors were college students. Id. at 562-3. 25 In Noland v. Iowa Student Loan Liquidity Corp. (In re 26 Noland), 2010 WL 1416788 (Bankr. D. Neb. 2010), the debtor 27 certified on each promissory note that he would use the proceeds 28 for qualified higher education expenses or for costs associated
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1 with his attendance at school. The debtor moved for summary 2 judgment, arguing that because some of the funds were used for 3 dining out, purchasing gifts, paying for expenses including 4 travel, car insurance, and gas, and for mental health treatment 5 and medication, the loans were not “qualified education loans” 6 and therefore were dischargeable. Id. at *4. The bankruptcy 7 court rejected the debtor’s interpretation because such an 8 interpretation would subvert the intent of [§ 523(a)(8)]: 9 Permitting students to discharge student loans in bankruptcy because the student spent the money on 10 social uses, alcohol, or even drugs would create an absurd result. Students who used the loan proceeds to 11 finance an education would retain the burden of paying them even after a chapter 7 discharge; irresponsible 12 students who abused the loans would gain the benefits of discharge. 13 14 Id. at *4 (quoting In re Murphy, 282 F.3d at 873). 15 Although none of the above cited cases are directly on 16 point, collectively they support a broad interpretation of what 17 constitutes a “qualified educational loan” under § 523(a)(8)(B). 18 Here, as in Rumer, SOU provided the revolving line of credit to 19 debtor because — at least initially — she was an registered 20 student at SOU. Moreover, she could not live at the dormitory 21 at SOU unless she was a registered student at SOU or RCC. Her 22 room and board charges and other charges incurred under the RCA 23 related to her attendance at school. In addition, because the 24 miscellaneous charges involved fines and other penalties, our 25 broad interpretation also avoids the absurd result illustrated 26 by the Murphy court. 27 For all these reasons, we conclude that the bankruptcy 28 court did not err in finding that, as a matter of law, the debt
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1 owed to SOU fell within the scope of § 523(a)(8)(B) and was 2 therefore presumptively nondischargeable. 3 B. Attorneys’ Fees And Costs 4 Under Cohen v. de la Cruz, 523 U.S. 213, 118 S. Ct. 1212, 5 140 L. Ed. 2d 341 (1998) attorneys’ fees may be awarded and 6 declared nondischargeable in an action to determine 7 dischargeability of debt. However, this Panel’s prior decisions 8 clarify that: (1) an underlying contract or nonbankruptcy law 9 must provide a right to recover attorneys’ fees, and (2) the 10 issues litigated in the dischargeability action must fall within 11 the scope of the contractual or statutory attorneys’ fees 12 provision. See In re Dinan, 448 B.R. at 785 (9th Cir. BAP 2011) 13 (“under Cohen, the determinative question for awarding 14 attorneys’ fees is whether the creditor would be able to recover 15 the fee outside of bankruptcy under state or federal law”). 16 Accord, Bertola v. N. Wis. Produce Co. (In re Bertola), 317 B.R. 17 95, 99–100 (9th Cir. BAP 2004); AT&T Universal Card Servs. Corp. 18 v. Pham (In re Pham), 250 B.R. 93, 98-99 (9th Cir. BAP 2000); 19 see also Kilborn v. Haun (In re Haun), 396 B.R. 522, 528 (Bankr. 20 D. Idaho 2008) (holding that, in light of Cohen, Pham and 21 Bertola, bankruptcy court should inquire whether creditor “would 22 be entitled to fees in state court for establishing those 23 elements of the claim which the bankruptcy court finds support a 24 conclusion of nondischargeability.”), cited with approval in 25 In re Dinan, 448 B.R. at 785. 26 In Oregon, absent an applicable statutory or contractual 27 provision, attorneys’ fees will not be awarded. Mattiza v. 28 Foster, 803 P.2d 723, 725 (Or. 1990). A party seeking to
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1 recover attorneys’ fees must plead the grounds that would permit 2 their recovery. Mulier v. Johnson, 29 P.3d 1104, 1108 (Or. Ct. 3 App. 2001). Here, in their counterclaim, Defendants referred to 4 the terms of ¶¶ XII and XXI in the Residence Hall Contract, 5 which entitled them to recover fees incurred as “collection 6 costs” or incurred in an action brought by SOU to recover 7 possession of student housing or to enforce the terms of the 8 Residence Hall Contract. Paragraph XII, entitled “Payments” 9 provides in relevant part: 10 E. . . . SOU also reserves the legal right for recovery of reasonable attorney fees, courts costs, 11 and other reasonable collection costs . . . . 12 Paragraph XXI, entitled “Legal Costs” provides in relevant part: 13 I understand that I shall pay all costs of proceedings by SOU to recovery [sic] of the possession of the 14 premises, or for the enforcement of any of the terms and conditions of this lease, including reasonable 15 attorney’s fees. 16 The scope of these attorneys’ fees provisions is a matter 17 of contract interpretation, which in turn depends upon the 18 parties’ intent. Quality Contractors, Inc. v. Jacobsen, 911 19 P.2d 1268, 1271-72 (Or. Ct. App. 1996). To determine the 20 parties’ intent, the court must look to the language of the 21 contract, and also may look to the surrounding circumstances. 22 Id. The court also might construe an ambiguous contract term 23 against the drafter. Id. 24 We conclude that the issue addressed in Campbell’s 25 adversary proceeding was not within the scope of the Residence 26 Hall Contract’s attorneys’ fees provisions. Campbell did not 27 dispute that she was liable under the Residence Hall Contract or 28 the amount of that liability. Rather, the dispute centered on
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1 whether her obligations under the Residence Hall Contract 2 constituted a “qualified education loan” for purposes of 3 § 523(a)(8)(B). 4 Accordingly, the adversary proceeding was an action to 5 determine the status of the loan, not to collect it. As this is 6 merely an action to declare the status of the loan, it is not a 7 “collection action” or within the scope of an action to enforce 8 the terms of the Residence Hall Contract. Under In re Haun, 396 9 B.R. 522, Defendants would not have been entitled to contractual 10 attorneys’ fees for establishing in state court that Campbell’s 11 Residence Hall Contract obligations constituted a “qualified 12 education loan” within the meaning of § 523(a)(8)(B). 13 Our view is consistent with Oregon case law. Under Oregon 14 law, contracting parties are free to limit the right of the 15 prevailing parties to recover attorneys’ fees to certain 16 instances. Harris v. Cantwell, 614 P.2d 124, 126-27 (Or. Ct. 17 App. 1980). Consequently, Oregon courts will deny attorneys’ 18 fees claims when the claim is based upon an action that is 19 beyond the scope of the subject contractual fees provision. 20 See, e.g., Greenwade v. Citizens Bank of Or., 624 P.2d 610, 615 21 (Or. Ct. App. 1981); Harris, 614 P.2d at 126-27. 22 Nor does citation to Or. Rev. Stat. § 20.096.(1)13 advance 23 13 24 Or. Rev. Stat. § 20.096(1) states: 25 In any action or suit in which a claim is made based 26 on a contract that specifically provides that attorney fees and costs incurred to enforce the provisions of 27 the contract shall be awarded to one of the parties, the party that prevails on the claim shall be entitled 28 (continued...)
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1 the attorneys’ fees claim, because that statute does not provide 2 an independent basis on which to claim attorneys’ fees; rather, 3 it simply makes certain unilateral attorneys’ fees clauses 4 reciprocal. See Jacobsen, 911 P.2d at 1270; Bliss v. Anderson, 5 585 P.2d 29, 31 (Or. Ct. App. 1978). 6 The parties here could have set forth in their Residence 7 Hall Contract a broad-based right to attorneys’ fees by 8 providing for the recovery of attorneys’ fees in any litigation 9 arising out of the Residence Hall Contract, or by using any 10 other similarly-broad language. Instead, the contract uses much 11 narrower language, limited to collection actions and actions to 12 enforce the terms of the contract. No where is litigation over 13 the status or characterization of the loan mentioned. 14 Especially given the summary judgment setting, this factual 15 issue as to the intent and meaning of the attorneys’ fees clause 16 requires further development. See Jacobsen, 911 P.2d at 1271. 17 In sum, Campbell’s adversary proceeding did not contest her 18 liability, but rather only asserted that her obligations under 19 the Residence Hall Contract had been discharged in her 20 bankruptcy case because they did not constitute a 21 nondischargeable student loan within the meaning of the 22 Bankruptcy Code. Moreover, the only issue addressed on summary 23 judgment was whether Campbell’s debt to Defendants was a 24 25 13 (...continued) 26 to reasonable attorney fees in addition to costs and disbursements, without regard to whether the 27 prevailing party is the party specified in the contract and without regard to whether the prevailing 28 party is a party to the contract.
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1 “qualified education loan” under § 523(a)(8)(B). Under these 2 circumstances, we conclude that Defendants were not entitled to 3 their reasonable attorneys’ fees and costs. 4 VI. CONCLUSION 5 For the reasons stated, we AFFIRM the bankruptcy court’s 6 decision granting summary judgment for Defendants but REVERSE 7 the award of attorneys’ fees and costs. 8 9 MARKELL, Bankruptcy Judge, dissenting: 10 11 I respectfully dissent. I disagree with the majority’s 12 conclusion that the debt Campbell incurred under both the RCA 13 and the Residence Hall Contract was a “qualified education loan” 14 within the meaning of § 523(a)(8)(B).1 15 The majority indicates that Campbell’s debt arose from a 16 combination of two contracts Campbell signed: (1) the RCA, and 17 (2) the Residence Hall Contract. Opinion at pp. 3-6. The 18 Defendants’ memorandum filed in the bankruptcy court in support 19 of their summary judgment motion confirms this point.2 20 As the majority acknowledges, to be nondischargeable under 21 22 1 I adopt the definitions used in the majority opinion. 23 2 The identification of the agreements from which the 24 indebtedness arose is essential to establishing that a “loan” has been made for purposes of § 523(a)(8), especially when, as 25 here, no money actually changed hands. See McKay v. Ingleson, 26 558 F.3d 888, 890 (9th Cir. 2009); see 4 COLLIER ON BANKRUPTCY ¶ 523.14[1] (Alan N. Resnick & Henry J. Sommer, eds., 16th ed. 27 2012) (“To constitute a ‘loan,’ the creditor must have actually transferred funds to the debtor or the parties must have entered 28 into an agreement for the extension of credit.”).
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1 § 523(a)(8)(B), the debt must constitute a “qualified education 2 loan, as defined in section 221(d)(1) of the Internal Revenue 3 Code of 1986.” § 523(a)(8)(B).3 In turn, IRC § 221(d)(1) 4 provides in relevant part that “[t]he term ‘qualified education 5 loan’ means any indebtedness incurred by the taxpayer solely to 6 pay qualified higher education expenses.” 26 U.S.C. § 221(d)(1) 7 (emphasis added). 8 In my view, the majority trivializes this statutory 9 restriction; instead of honoring Congress’ use of a strict nexus 10 test – signaled by the use of “solely” – it develops its own 11 relatedness test to see if credit extended qualifies as 12 nondischargeable debt. It exacerbates this error by evaluating 13 its relatedness test as a matter of law, rather than of fact. 14 My review begins by noting that the RCA is broader than 15 required by the relevant statutes; that is, it picks up expenses 16 other than qualified higher education expenses. As a result, 17 the indebtedness incurred under it should not fall within IRC 18 § 221(d)(1)’s definition, as such debt is not incurred “solely” 19 to pay qualified higher education expenses.” Even a cursory 20 glance at the RCA confirms this point. The RCA provides that 21 essentially any “student” who incurs charges, fines and 22 penalties at SOU can and does establish a revolving charge 23 3 24 Section 523(a)(8)(B) was added to the Bankruptcy Code in 2005 to extend the nondischargeability of student loans to such 25 loans when made by private, for-profit lenders. Bankruptcy 26 Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 220, 119 Stat. 23, 59 (2005); see also Rafael I. 27 Pardo & Michelle R. Lacey, The Real Student-loan Scandal: Undue Hardship Discharge Litigation, 83 AM . BANKR . L.J. 179, 181 & n.12 28 (2009).
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1 account. RCA at ¶¶ 1-2. The RCA also defines the term 2 “student” very broadly, to include: “[a]ny person who is 3 currently or has in the past been enrolled at [SOU].” Id. at 4 ¶ 9 (emphasis supplied). 5 The RCA is also overbroad in a further, fatal, way. It 6 provides: “As a student, any credit extended to you is an 7 educational benefit or loan.” Id. at ¶ 1. But saying an 8 extension of credit is a educational benefit or an education 9 loan doesn’t make it so.4 Campbell’s student loan invoices 10 covered not only room and board, but parking tickets, library 11 fines, health insurance charges, medical care, “social fees,” 12 printing fees, copying fees, Jazzercise courses,5 student 13 conduct fines, and fees to cover the cost of replacing several 14 laundry and meal cards. In short, SOU maintained a revolving 15 credit account for Campbell. 16 In creating this revolving type of credit, the RCA covers 17 far more debt than is included in IRC § 221(d)(1)’s definition 18 of “qualified educational loan.” Such arrangements are not 19 uncommon, and are called “mixed use loans.” The relevance of 20 that classification here is that such mixed use loans do not 21 4 22 Much like the colloquy often posed by Abraham Lincoln; he would relate a story about a “boy who, when asked how many legs 23 his calf would have if he called its tail a leg, replied, ‘Five,’ to which the prompt response was made that calling the 24 tail a leg would not make it a leg.” REMINISCENCES OF ABRAHAM LINCOLN BY DISTINGUISHED MEN OF HIS TIME 242 (Allen Thorndike Rice, ed., new 25 and rev. ed. 1909), available at 26 http://quod.lib.umich.edu/l/lincoln2/BCC9571.0001.001/262?rgn=fu ll+text;view=image. 27 5 At least, that’s what I think they are. The invoice 28 entry merely reads “PE Jazz.”
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1 meet the requirements to be a “qualified educational loan.” 2 Treas. Reg. § 1.221-1(e)(4) (Ex. 6) (2004); id. § 1.221-2(f) 3 (Ex. 6). See also 69 Fed. Reg. 25489, 25491 (May 7, 2004); T.D. 4 9125, 2004-1 C.B. 1012 (2004). The reason that such loans 5 cannot qualify is that if the loan is for a “mixed” use, its 6 proceeds cannot be used “solely” for educational purposes. As a 7 consequence, any debt incurred under such a loan is 8 dischargeable. 9 As one treatise explains: 10 Mixed use loans aren’t qualified education loans. 11 Illustration Student signs a promissory note for a loan secured by student’s personal residence. Part 12 of the loan proceeds will be used to pay for certain improvements to student’s residence and part of the 13 loan proceeds will be used to pay qualified higher education expenses of student’s spouse. Since the 14 loan isn’t incurred by student solely to pay qualified higher education expenses, the loan isn’t a qualified 15 education loan. 16 Similarly, revolving lines of credit generally aren’t qualified education loans, unless the borrower uses 17 the line of credit solely to pay qualifying education expenses. Such revolving lines of credit include, for 18 example, credit card debt and a university’s in-house deferred payment plan which is a revolving credit 19 account that can include a variety of expenditures in addition to qualified higher education expenses. 20 21 34 AM. JUR . 2D, Fed. Taxation, at ¶ 18410 (2012) (footnotes 22 omitted and emphasis added) (citing Treas. Reg. § 1.221-1(e)(4), 23 Ex (6)). 24 Defendants cannot seriously contend that Campbell used the 25 RCA solely to pay “qualified education expenses.” Nor can they 26 seriously contend that the scope of the RCA was restricted 27 “solely” to qualified educational expenses. While the Internal 28 Revenue Code defines “qualified education expenses” broadly, see
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1 26 U.S.C. § 221(d)(2) and 20 U.S.C. § 1087ll, it would defy 2 credulity for Defendants to claim that, for example, Campbell’s 3 parking fines or her medical expenses or her Jazzercise classes 4 were a “cost of attendance” under 20 U.S.C. § 1087ll, or 5 otherwise were a “qualified education expense” under 6 § 221(d)(2). 7 The majority explains this difference away by sweeping 8 these unrelated expenses into the category of miscellaneous 9 expenses related to the cost of allowable “miscellaneous 10 personal expenses.” In this regard, the majority seems to 11 substitute a requirement that the expenses merely be related for 12 the statutory requirement that such expenses be incurred 13 “solely” for educational purposes. Opinion at 19-20. 14 The simple response is that this is not the statutory test. 15 But its use raises another problem for this appeal. The 16 bankruptcy court granted summary judgment, meaning that there 17 were no contested material issues of fact. But whether medical 18 expenses, Jazzerize classes and parking fines are allowable 19 “miscellaneous personal expenses” seems to be an issue of 20 determining whether Campbell’s and the Defendants’ actions 21 qualify or satisfy certain legal standards, a classic factual 22 inquiry. As such, I am doubly perplexed as to how the majority 23 can sustain the summary judgment on appeal. 24 Under these circumstances, it was error to find that 25 Campbell’s debt was nondischargeable under § 523(a)(8)(B). 26 27 28
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