Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-87-02515/USCOURTS-ca10-87-02515-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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PUBLISH 

FILED 

Unitt:d Scates Court of Appeals 

T*"rtt~1 Cn1:t 

UNITED STATES COURT OF APPEALS 

JAN 13 1S9Q 

&OBERT L. HOECKER 

Clerk FOR THE TENTH CIRCUIT 

IN RE: 

RANDALL CLARK BURNS and 

DEBORAH A. BURNS, 

Debtors. 

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CITIZENS NATIONAL BANK, 

Plaintiff-Appellee, 

RANDALL CLARK BURNS, 

Defendant-Appellant. 

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No. 87-2515 

Appeal from the United States District Court 

for the District of Colorado 

(D.C. No. 87 K 802) 

Submitted on the briefs: 

James C. Underhill, Jr., of Sterling and Miller, P.C., Denver, 

Colorado, for Defendant-Appellant. 

Paul G. Quinn, of Denver, Colorado, for Plaintiff-Appellee. 

Before HOLLOWAY, Chief Judge, SEYMOUR and ANDERSON, Circuit 

Judges. 

SEYMOUR, Circuit Judge. 

Appellate Case: 87-2515 Document: 01019297293 Date Filed: 01/18/1990 Page: 1 
Citizens National Bank brought an action under 11 U.S.C. § 

523(a)(2) (1982 & Supp. IV 1986) to have a debt which Randall 

Burns owed the Bank declared nondischargeable in Burns' bankruptcy 

proceeding. The bankruptcy court ruled that the debt was 

dischargeable but denied Burns' motion for attorney's fees under 

section 523(d). The Bank did not appeal the ruling on 

dischargeability. However, Burns appealed the denial of his 

motion for fees, and the district court affirmed the bankruptcy 

court. See Citizens Nat'l Bank v. Burns (In re Burns), 77 Bankr. 

822 (D.Colo. 1987). Burns now appeals to this court and we 

affirm, albeit on a ground different than that relied on by the 

district court.l 

Section 523(d) provides for an award of attorneys fees to a 

prevailing debtor as follows: 

"If a creditor requests a determination of 

dischargeability of a consumer debt under subsection 

(a)(2) of this section, and such debt is discharged, the 

court shall grant judgment· in favor of the debtor for 

the costs of, and a reasonable attorney's fee for, the 

proceeding if the court finds that the position of the 

creditor was not substantially justified, except that 

the court shall not award such costs and fees if special 

circumstances would make the award unjust." 

11 U.S.C. § 523(d}. The statute thus authorizes an award of fees 

if the debt is a consumer debt and the creditor's position was not 

1 After exam1n1ng the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); lOth Cir. R. 34.1.9. The cause is therefore ordered 

submitted without oral argument. 

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Appellate Case: 87-2515 Document: 01019297293 Date Filed: 01/18/1990 Page: 2 
substantially justified, unless special circumstances would make 

the award unjust. 2 In denying Burns' request for fees, the 

bankruptcy court enigmatically stated only that "this debt is not 

that type of debt upon which attorney fees should be allowed." 

Rec., vol. I, at 11. In affirming the bankruptcy court, the 

district court assumed that the debt was a consumer debt, see 77 

2 The statute mirrors the language of the Equal Access to 

Justice Act (EAJA}, which states: 

"Except as otherwise specifically provided by 

statute, a court shall award to a prevailing party other 

than the United States fees and other expenses, in 

addition to any costs awarded pursuant to subsection 

(a), incurred by that party in any civil action (other 

than cases sounding in tort), including proceedings for 

judicial review of agency action, brought by or against 

the United States in any court having jurisdiction of 

that action, unless the court finds that the position of 

the United States was substantially justified or that 

special circumstances make an award unjust." 

28 U.S.C. S 2412{d) {1) {A) {1982 & Supp. V 1987) {emphasis added). 

Contrary to the view expressed by the district court, see 

Citizens Nat'l Bank v. Burns (In re Burns), 77 Bankr. 822, 823 n.l 

(D.Colo. 1987), Congress used this language deliberately to 

indicate its intent that the EAJA standard be incorporated into 

the fee determination under section 523(d}. 

"The Committee, after due consideration, has · 

concluded that amendment of this provision to 

incorporate the standard for award of attorney's fees 

contained in the Equal Access to Justice Act strikes the 

appropriate balance between protecting the debtor from 

unreasonable challenges to dischargeability of debts and 

not deterring creditors from making challenges when it 

is reasonable to do so. This standard provides that the 

court shall award attorney's fees to a prevailing debtor 

where the court finds that the creditor was not 

substantially justified in challenging the 

dischargeability of the debt, unless special 

circumstances would make such an award unjust." 

S.Rep. No. 65, 98th Cong., lst Sess. 9-10 {1983). 

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Appellate Case: 87-2515 Document: 01019297293 Date Filed: 01/18/1990 Page: 3 
Bankr. at 822, and appeared to rest its decision on a finding that 

special circumstances would make an award unjust, id. at 823. 

Nonetheless, both parties raise the consumer-debt issue before 

this court. Determining the appropriate classification of this 

debt is a legal inquiry which we may undertake de novo. See In re 

Booth, 858 F.2d 1051, 1053 n.5 (5th Cir. 1988). Based on the 

undisputed relevant facts, we conclude that the loan at issue is 

not a consumer debt to which section 523(d) applies. 

The bankruptcy code defines a consumer debt as "debt incurred 

by an individual primarily for a personal, family, or household 

purpose."- 11 u.s.c. § 101(7) (1982). The legislative history of 

this language indicates that it was adapted from the definition 

used in various consumer protection laws, see Booth, 858 F.2d at 

1054 & n.9, and the courts have turned to the test articulated in 

cases decided under those laws to determine when a debt falls 

within the above description. See, ~, id. at 1054-55; In re 

Bell, 65 Bankr. 575, 577 (Bankr. E.D. Mich. 1986); In re 

Almendinger, 56 Bankr. 97, 99 (Bankr. N.D. Ohio 1985); see also 

Zolg v. Kelly (In re Kelly), 841 F.2d 908, 913 (9th cir. 1988) 

(relying on In re Bell). Under this standard a credit transaction 

is not a consumer debt when it is incurred with a profit motive. 

See, ~, Booth, 858 F.2d at 1055 (debt not a consumer debt if 

"incurred with an eye toward profit); Kelly, 841 F.2d at 913 (debt 

incurred for "profit-seeking activities" plainly not consumer 

debt). 

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Appellate Case: 87-2515 Document: 01019297293 Date Filed: 01/18/1990 Page: 4 
In this case, Burns testified that he wanted the loan at 

issue to obtain money to invest in the stock market, and that the 

loan proceeds were used to buy stock. 3 See rec., vol. III, at 92-

94. Taking out a loan in order to play the stock market is 

clearly a transaction entered into with a profit motive. See 

. Almendinger, 56 Bankr. at 99 (use of credit card cash advances to 

pay off investment losses and reinvest in stock market does not 

create consumer debt). Indeed Burns testified that he had planned 

to sell the stock when the price went up, pay off the loan, and 

retain the profit. Id. at 94. Accordingly, we conclude that the 

debt is not a consumer debt. Burns is not therefore entitled to 

an award of attorney fees under section 523(d). 

The judgment is AFFIRMED. 

3 Although the 

the loan proceeds 

Bank presented no 

fact obtained and 

Bank's loan officer denied that Burns told him 

were to be invested in the stock marke~he 

evidence to dispute Burns' assertion that he in 

used the money to buy stock. 

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Appellate Case: 87-2515 Document: 01019297293 Date Filed: 01/18/1990 Page: 5