Court Opinion

ID: 9843295
Source: CourtListenerOpinion
Date Created: 2023-09-24 02:32:37.822754+00
Date Added: 2024-06-11T09:16:37.620877
License: Public Domain

HAMILTON, Senior Circuit Judge,
concurring in part and dissenting in part:
I join Part II of the majority opinion which holds that we review de novo the determination of whether a debtor has met the undue hardship standard of 11 U.S.C. § 523(a)(8) (Bankruptcy Code 523(a)(8)) and review the factual underpinnings of that legal conclusion for clear error. However, I am compelled to dissent from the majority opinion’s reversal of the district court’s affirmance of the bankruptcy court’s order discharging Sandra Jane Frushour’s (Frushour) student loan debt pursuant to Bankruptcy Code § 523(a)(8).
After observing first-hand Frushour’s demeanor and hearing her testimony, the bankruptcy court found that additional circumstances existed indicating that Frush-our’s dire state of financial affairs is likely to persist for a significant portion of the repayment period of her student loan debt {Brunner’s second prong) and found that Frushour had made good faith efforts to repay her student loan debt (Brunner’s third prong). Brunner v. N.Y. State Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2d Cir.1987) (setting forth three-prong test for proving entitlement to undue hardship discharge of student loan debt pursuant to Bankruptcy Code § 523(a)(8)). That the majority opinion rejects these findings as clearly erroneous (an act the majority unsuccessfully attempts to deny), on the record before us and the reasonable inferences to be drawn therefrom, is beyond all reason. Such rejection constitutes “an excellent example of the folly of courts in the role of philosopher kings.” American Acad, of Pediatrics v. Lungren, 16 Cal.4th 307, 66 Cal.Rptr.2d 210, 940 P.2d 797, 890 (1997) (Brown, J., dissenting). The Supreme Court has repeatedly reiterated the extremely deferential nature of the clearly erroneous standard of review: “ ‘[a] finding is “clearly erroneous” when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm *405conviction that a mistake has been committed.’ ” Anderson v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)). Here, a thorough review of the entire record, stripped from any philosophical preconceived notions about the role of and strictures on government-aided education in our society, far from leaves one with a definite and firm conviction that the bankruptcy court’s factual findings with respect to Brunner’s second and third prongs are mistaken.
When the majority opinion is disrobed of its philosophic meanderings, that the majority opinion does nothing more than high handedly second guess the bankruptcy court’s factual findings on two of the factual issues critical to Frushour’s attempt to discharge her student loan debt pursuant to 11 U.S.C. § 523(a)(8) is patently obvious. In so doing, the majority opinion has quite blatantly ignored Bankruptcy Rule 8013, which provides that “due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.” Bankruptcy Rule 8013. See also Dunning v. Simmons Airlines Inc., 62 F.3d 863, 868 (7th Cir.1995) (“We refuse to second-guess the court’s credibility determinations because the judge has had the opportunity to observe the verbal and nonverbal behavior of the witnesses focusing on the subject’s reactions and responses to the interrogatories, their facial expressions, attitudes, tone of voice, eye contact, posture and body movements, rather than looking at the cold pages [of a transcript].”).
For these reasons and those that follow, I am constrained to dissent from the majority opinion’s reversal of the district court’s affirmance of the bankruptcy court’s discharge of Frushour’s student loan debt pursuant to Bankruptcy Code § 523(a)(8).
I.
Quite remarkably, the majority misapplies the proper standard of review regarding the bankruptcy court’s findings with respect to the Brunner prongs. The proper standard of review plainly requires us to review the bankruptcy court’s findings with respect to the Brunner prongs for clear error. In applying the Brunner test in the Chapter 13 context in Ekenasi v. Educ. Res. Inst., 325 F.3d 541, 546-49 (4th Cir.2003), we unequivocally treated the bankruptcy court’s findings with respect to Brunner’s three prongs as factual findings and held that at least two of those findings were clearly erroneous. Id. at 547 (“[W]e conclude that the bankruptcy court clearly erred in finding that [debtor] met his burden of establishing the Brun-ner factors and, therefore, erred in discharging the student loan obligations based upon the record before it.”); id. at 548 (“Presented with this evidence, we are satisfied that the bankruptcy court clearly erred in finding that [debtor] had sufficiently proven that he would be unable, two years in the future, to maintain a minimal standard of living for himself and his dependents for a significant portion of the repayment period of the student loan.”); id. at 549 (‘We also conclude that [debtor] failed to prove that he ‘has made good faith efforts to repay the loans,’ Brunner, 831 F.2d at 396, and that the bankruptcy court clearly erred in finding otherwise.”).
Common sense and simple logic support Ekenasi’s treatment of the bankruptcy court’s findings with respect to Brunner’s three prongs as factual findings subject to the clearly erroneous standard of review. For example, the first Brunner prong, which asks whether the debtor can main*406tain, based upon current income and expenses, a minimal standard of living for herself and her dependents if forced to repay her student loan debt, necessarily asks the bankruptcy court to answer a factual question, albeit in the nature of a factual prediction of the future based upon current and reasonably foreseeable circumstances. Juries are routinely called upon to make similar factual predictions of the future based upon the evidence presented. For example, in a personal injury action involving a plaintiff who has suffered permanent injury and established liability, the jury is asked to predict the plaintiffs future medical expenses as an element of recoverable damages.
In sum, our role on appeal is to determine with respect to each Brunner prong, whether, although there is evidence to support the bankruptcy court’s factual finding on that prong, we are left with a definite and firm conviction that the finding is wrong. Anderson, 470 U.S. at 573, 105 S.Ct. 1504. Cf. Carolin Corp. v. Miller, 886 F.2d 693, 702 (4th Cir.1989) (bankruptcy court’s ultimate finding that Chapter 11 filing was not in good faith constitutes finding of fact subject to clearly erroneous standard of review). Indeed, the clearly erroneous standard required the district court as well as requires this court to give great deference to the bankruptcy court with respect to findings of fact. In the Matter of Love, 957 F.2d 1350, 1354 (7th Cir.1992). As the Seventh Circuit has succinctly stated: “Under the clearly erroneous standard, if the bankruptcy court’s factual findings are plausible in light of the record viewed in its entirety, a reviewing court may not reverse even if it would have weighed the evidence differently.” Mungo v. Taylor, 355 F.3d 969, 974 (7th Cir.2004).
Our review under the clearly erroneous standard is similar in nature to a sufficiency of the evidence inquiry, where we routinely give deference to the findings of the trier of fact even though we would reach a different result if we reviewed the evidence on our own in the first instance. See, e.g., United States v. Burgos, 94 F.3d 849, 862 (4th Cir.1996) (“A reviewing court, therefore, may not overturn a substantially supported verdict merely because it finds the verdict unpalatable or determines that another, reasonable verdict would be preferable. Rather, we shall reverse a verdict if the record demonstrates a lack of evidence from which a jury could find guilt beyond a reasonable doubt.”).
Our de novo review comes into play to determine whether the bankruptcy court, having made the factual findings that it did with respect to the Brunner prongs, properly discharged or properly refused to discharge the debtor’s student loan debt.
In footnote 1 of the majority opinion, the majority denies overturning any factual findings of the bankruptcy court as clearly erroneous and asserts that it has accepted every factual finding made by the bankruptcy court. (Majority Op. at 12-13 n. 1). From these premises, the majority goes on to conclude that Frushour failed to proffer sufficient evidence to support two of Brun-ner’s three prongs.
While the majority expressly states that it accepts the bankruptcy court’s factual findings, its actions speak much louder than its words. In fact, in a not-so-clever sleight of hand, the majority implicitly holds that two critical factual findings of the bankruptcy court are clearly erroneous. So why does the majority engage in this act of legerdemain. The answer: the majority’s position simply does not hold water if any deference is paid to the bankruptcy court’s factual findings. I will now proceed to analyze the Brunner prongs, giving the proper deference that is owed to the bankruptcy court’s factual findings.
*407II.
The first prong of Brunner’s three prong test for proving entitlement to an undue hardship discharge of student loan debt, pursuant to Bankruptcy Code § 523(a)(8), asks whether the debtor can maintain, based on the debtor’s current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the student loan debt. Brunner, 831 F.2d at 396. Here, the bankruptcy court found that Frushour could not maintain even a minimal standard of living for herself and her small child if forced to repay her student loan debt. Although the majority opinion does not decide whether this finding is clearly erroneous, the issue is necessarily addressed in my dissent.
For the two calendar years preceding the trial in this case (2002 and 2003), Frushour and her young son lived below the poverty guideline for a two person household set by the United States Department of Health and Human Services. In 2002, Frushour’s gross income was $7,738.00, while the applicable poverty guideline was $11,940.00. In 2003, Frush-our’s gross income was $11,589.00, while the applicable poverty guideline was $12,120.00. The record is also undisputed that at the time of the trial in this case (July 2004), Frushour’s estimated gross income for calendar year 2004 was $11,976.00, still below the applicable poverty guideline of $12,490.00. As of March 14, 2004, Frushour owed Educational Credit Management Corporation (ECMC) $12,148.70 on her student loan debt.
Notably, ECMC does not deny or dispute that Frushour lived below the applicable poverty guideline for the two and one half years prior to trial. However, ECMC strenuously objects to Frushour availing herself of a § 523(a)(8) discharge on the basis, inter alia, that Frushour’s current minimal lifestyle is voluntarily self-imposed, a rather absurd assumption that Frushour would “voluntarily” choose to live below the poverty guidelines. According to the logic of ECMC, the bankruptcy court’s finding that Frushour could not maintain even a minimal standard of living for herself and her small child, if forced to repay her student loan debt, is clearly erroneous because Frushour voluntarily chose a career which is significantly lower paying than her previous career in the restaurant and tourism industry. ECMC’s other main argument, in challenge of the bankruptcy court’s Frushour-favorable finding with respect to Brunner’s first prong, is that Frushour failed to prove that her expenses would increase commensurate with any increases in her income. Both of these arguments are without merit.
Necessarily implicit in the bankruptcy court’s finding that Frushour could not maintain even a minimal standard of living for herself and her small child, if forced to repay her student loan debt, is its finding that Frushour was maximizing her income potential. At the evidentiary hearing in this case, in response to the question of whether she had received any recent job offers or knew of any opportunities where she could earn significantly more income while covering for additional childcare cost, Frushour testified that “[she] found that” even if she took a job that would give her more income or worked a second job, she would only break even because of the required childcare expense. (J.A. 14).
In its discussion of Brunner’s second prong, the majority opinion dismisses any ability of the bankruptcy court to rely on this testimony based upon its opinion that such testimony is founded on little more than speculation. This farfetched opinion is simply belied by the record. This testimony, which on its face bespeaks of a basis *408of personal knowledge, is supported by-common sense and experience, upon which the bankruptcy court is entitled to rely as the finder of fact. Bose Corp. v. Consumers Union of U.S., Inc., 466 U.S. 485, 501 n. 17,104 S.Ct. 1949, 80 L.Ed.2d 502 (1984) (application of ordinary principles of logic and common experience are ordinarily entrusted to trier of fact); Chapman & Cole v. Itel Container Int’l, Corp., 865 F.2d 676, 683 (5th Cir.1989) (“As the finder of fact, a judge must rely upon his or her experience and common sense.”). First, very few persons would voluntarily choose to live below the poverty guideline, especially a loving mother with a young child. One cannot reasonably dispute that because Frushour is a single parent with absolutely no copa-rental support, her working a full-time or even a part-time job in the restaurant and tourism industry would require her to pay a third party to care for her young son during non-school hours. As it stands now, Frushour’s current self-employed situation allows her the flexibility to care for her young son at no expense to her. In contrast, common sense and experience demonstrate that the restaurant and tourism industry routinely requires its employees to work nights and weekends, a time when childcare cost is at a premium.* In sum, the record here, as obviously augmented by the bankruptcy court’s common sense and experience, abundantly supports the bankruptcy court’s implicit finding that Frushour was maximizing her income potential and, thus, such finding is not clearly erroneous.
Having already established that the bankruptcy court’s implicit finding that Frushour was maximizing her income potential is not clearly erroneous, ECMC’s argument that Frushour failed to prove that her expenses would increase commensurate with any increases in her income disappears. The record is undisputed that Frushour’s sole means of transportation is an exceptionally old (fourteen years) vehicle with extremely high mileage (250,000). The only reasonable inference from these facts is that, in the near future, Frushour will incur significant transportation expenses either in the form of substantial car repairs or the purchase of another vehicle. In either situation, she will almost certainly have to finance the cost over a number of years. The record is also undisputed that Frushour pays only $200 per month in rent. Common sense and experience also dictate that her housing expenses will only increase and perhaps significantly so given the extremely low amount of rent she currently pays. Moreover, according to her Schedule J, Frushour presently claims no medical expenses as part of her monthly living expenses. Given that Frushour has no health insurance and children being children, one can only reasonably expect that her medical expenses will increase during the foreseeable future. The very idea that Frushour’s expenses would not increase commensurate with any increases in her income is patently absurd. Indeed, one should be definitely and firmly convinced that a mistake had been committed if the bankruptcy court had found that Frushour’s expenses would not increase commensurate with any increases in her income.
In sum, there is simply no sound basis to hold that the bankruptcy court was clearly erroneous in finding that Frushour could not maintain even a minimal standard of living for herself and her small child, if forced to repay her student loan debt.
*409III.
Brunner’s second prong asks whether additional circumstances exist indicating that Frushour’s current state of financial affairs is likely to persist for a significant portion of the repayment period. At trial, Frushour testified that the repayment period for the entire amount of her student loan debt, plus continuing interest, is approximately eight more years.
While “recognizing] that Frushour’s circumstances are far from ideal,” (Majority Op. 11), the majority opinion implicitly holds that the bankruptcy court’s finding in favor of Frushour with respect to Brun-ner’s second prong is clearly erroneous because Frushour has provided no additional circumstances beyond the debt itself that show her hardship is undue. Indeed, implicit in this holding is the majority opinion’s assertion that Frushour’s hardship is but a “garden variety type.”
Once again, the record belies this assertion. How much clearer does the record have to be to plainly show that Frushour’s hardship far exceeds the garden variety type given the following facts: (1) Frush-our and her young son have lived below the applicable poverty guideline for the two and one half years immediately preceding the trial in this case; (2) Frushour receives no child support from the child’s father or help from her family; (3) the other jobs which Frushour is skilled to perform do not pay enough to offset the childcare expenses she would necessarily incur; (4) Frushour has no money budgeted for medical expenses; (5) she has no health insurance; and to top it all off, (6) Frushour’s sole means of transportation is a fourteen year old car with a whopping 250,000 miles on it. Given that the hopelessness and dire nature of Frushour’s situation screams off the pages of the record on appeal, how can we not accept the bankruptcy court’s first-hand impression of the same?
Notably, in implicitly holding the bankruptcy court’s finding with respect to Brunner’s second prong is clearly erroneous, the majority opinion credits and largely relies upon ECMC’s argument that a voluntarily underemployed debtor cannot take advantage of Bankruptcy Code § 523(a)(8). As already explained above, the record abundantly supports the bankruptcy court’s implicit finding that Frush-our has and is' maximizing her income potential under the totality of the circumstances. Accordingly, the majority opinion’s implicit clearly erroneous holding with respect to Brunner’s second prong relies upon a fallacious basis.
In sum, given the largely undisputed factual circumstances of her financial condition and the very doubtful chances for improvement in the foreseeable future, the abstract legal conclusion drawn by the majority in implicitly holding that the bankruptcy court’s finding with respect to Brunner’s second prong is clearly erroneous is simply not sustainable, its philosophic meanderings notwithstanding.
IV.
Brunner's third prong asks whether the debtor has made good faith attempts to repay her student loan debt. Brunner, 831 F.2d at 396. Here, after considering the documentary evidence and Frushour’s testimony at trial, the bankruptcy court found that Frushour made good faith efforts to repay her student loan debt.
Because the record solidly supports this finding, the finding is not clearly erroneous. Frushour applied for and obtained forbearance of her student loan payments until August 1998. She then made twenty-three consistent payments of $113.41 or $189.00 until approximately June 2000. Subsequently, Frushour began to fall on *410hard times, with her annual income dropping approximately $5,000 to $15,000 between the years 2000 and 2001. From then on she has lived below the applicable poverty guideline. Finally, there is no evidence in the record to suggest that Frush-our took out her student loans with any intention of defaulting. These undisputed facts support the bankruptcy court’s finding that Frushour made good faith attempts to repay her student loan debt.
The majority opinion conveniently overlooks this evidence of Frushour’s good faith efforts at repayment; choosing to focus instead on Frushour’s desire to emerge from bankruptcy with a completely fresh start, unencumbered by any obligations to repay her student loan debt under the income contingent repayment plan belatedly offered through the William D. Ford Direct Loan Consolidation Program. Indeed, this is the majority opinion’s only rationale for implicitly holding the bankruptcy court’s finding, regarding Frushour’s good faith efforts at repayment, is clearly erroneous.
Review of the record plainly shows why the majority’s implicit holding is not sustainable. First, the record contains no evidence to suggest that Frushour knew of the between zero and five dollars income contingent repayment option under the William D. Ford Direct Loan Consolidation Program prior to her seeking to discharge her student loan debt through the present adversary proceeding. Second, and more importantly, when the bankruptcy court specifically asked ECMC’s attorney at the adversary proceeding whether she believed it (ie., the bankruptcy court) needed to look at undue hardship on Frushour in the context of the low monthly contingent repayment amount or whether she believed it should look at undue hardship on Frushour in the context of the total debt, counsel for ECMC emphatically answered: “The total debt, Your Honor. That was just for purposes of options that are available.” (J.A. 27). This answer by ECMC’s counsel necessarily steered the bankruptcy court to consider the good faith inquiry in the context of Frushour’s good faith efforts to repay her student loan debt as it was presently constituted, not upon the income contingent repayment plan.
To overturn the bankruptcy court’s good faith finding on this record is simply beyond the purview of appellate review. Particularly outrageous is the majority opinion’s total disregard of the bankruptcy court’s first-hand opportunity to observe Frushour’s demeanor and genuineness on the witness stand. This is a good faith inquiry! First hand impressions greatly matter! In sum, given Frushour’s not insubstantial repayment history and the bankruptcy court’s ability to make a firsthand assessment of her demeanor and genuineness in testifying about her student loan repayment history and dire financial condition, I would uphold the bankruptcy court’s finding that Frushour has satisfied Brunner’s third prong.
V.
To summarize my dissenting views, Brunner called for the bankruptcy court to make findings of fact with respect to each of its three prongs. As the trier of fact, the bankruptcy court obviously made its findings with respect to these three prongs based upon reasonable inferences founded on common sense and experience from the direct and circumstantial evidence in the case. For the reasons above set forth, these findings are not clearly erroneous. The majority opinion’s implicit holdings otherwise with respect to Brunner’s second and third prongs plainly exceed the limits of our circumscribed standard of review in reviewing a bankruptcy court’s *411findings of fact for clear error. Accordingly, I would affirm the district court’s affir-mance of the bankruptcy court’s order discharging Frushour’s student loan debt pursuant to Bankruptcy Code § 523(a)(8).
If, as the majority posits, it has not found any of the bankruptcy court’s findings of fact clearly erroneous, it is incredulous that the majority would find the bankruptcy court’s legal conclusions drawn from those facts, as found by the bankruptcy court and affirmed by the district court, as insufficient to support an undue hardship discharge of Frushour’s remaining student loan debt. When all the camouflage is stripped away from the majority’s position, it is quite apparent that its philosophical scruples are offended over the thought that one should seek a discharge, under any circumstances, of a student loan debt. The majority simply finds it repugnant that anyone would seek discharge of his or her student loan debt, even under the most dire financial circumstances.
With all respect due the majority opinion, its reasoning is subtly fallacious in implicitly concluding that the bankruptcy judge was clearly erroneous in finding in favor of Frushour with respect to Brun-ner’s second and third prongs. Should this irrational reasoning become pervasive, it would trump the reasonable interpretation of undue hardship and Bankruptcy Code § 523(a)(8) would become a nullity by judicial fiat.

 While not a part of the record, my adult children tell me that it is not uncommon for babysitters to charge as much as $10 per hour while caring for a single child.