In re: Kathryn Macewen Conti v. Arrowood Indemnity Company

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 20a0380p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
IN RE: KATHRYN MACEWEN CONTI,
Debtor.
___________________________________________
KATHRYN MACEWEN CONTI,
Appellant,
v.
ARROWOOD INDEMNITY COMPANY,
Appellee.
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No. 20-1172
Appeal from the United States District Court for the Eastern District of Michigan at Detroit;
No. 2:18-cv-13467—Terrence George Berg, District Judge.
United States Bankruptcy Court for the Eastern District of Michigan at Detroit;
2:17-ap-04711; 2:17-bk-48277—Marci B. McIvor, Judge.
Argued: November 18, 2020
Decided and Filed: December 14, 2020
Before: COLE, Chief Judge; DONALD and READLER, Circuit Judges.
_________________
COUNSEL
ARGUED: Austin C. Smith, SMITH LAW GROUP LLP, New York, New York, for Appellant.
Britton C. Lewis, CARRUTHERS & ROTH, P.A., Greensboro, North Carolina, for Appellee.
ON BRIEF: Austin C. Smith, SMITH LAW GROUP LLP, New York, New York, Guy T.
Conti, CONTILEGAL, Ann Arbor, Michigan, for Appellant. Britton C. Lewis, CARRUTHERS
& ROTH, P.A., Greensboro, North Carolina, Paul R. Hage, JAFFE RAITT HEUER & WEISS,
P.C., Southfield, Michigan, for Appellee.
>

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No. 20-1172 MacEwen Conti v. Arrowood Indemnity Co. Page 2
_________________
OPINION
_________________
COLE, Chief Judge. After filing for Chapter 7 bankruptcy, Kathryn MacEwen Conti
commenced an adversary proceeding against Arrowood Indemnity Co. seeking to determine that
loans she incurred while enrolled at the University of Michigan were not “qualified education
loan[s]” under 11 U.S.C. § 523(a)(8)(B) and were thus dischargeable in bankruptcy. The
bankruptcy court granted summary judgment to Arrowood, concluding that the plain language of
the loan documents demonstrated they were qualified education loans. Because the bankruptcy
court’s conclusion was correct, we affirm its summary judgment in favor of Arrowood.
I. BACKGROUND
Kathryn MacEwen Conti attended the University of Michigan (“Michigan”) from 1999 to
2003, obtaining a bachelor’s degree in musical arts. In order to finance three years of her
education, Conti applied for five private loans from Citibank (the “Citibank loans”), totaling
$76,049.
Conti’s loan applications are all expressly “[f]or students attending 4-year colleges and
universities.” (E.g., Ex. 2, R. 7-2, PageID 2838.) They request information regarding the
school’s identity, the academic year for which the funds are intended, and the amount of the loan
requested. And they specify that the student may “borrow up to the full cost of education less
any financial aid [they] are receiving.” (E.g., id. § B.) The applications include a section where
the school financial aid office can certify the student applicant’s year, enrollment status, loan
amount (not to exceed the cost of education when combined with other financial aid), and
recommended disbursement dates. Each application incorporates by reference an attached
promissory note as the “entire agreement” between Citibank and the debtor. (E.g., id. § F.) The
promissory notes state that “the proceeds of this loan are to be used for specific educational
expenses.” (E.g., id. at PageID 2834.)
Citibank appears to have disbursed each loan to Michigan directly. The record discloses
that none of the loan amounts exceeded the cost of attendance at Michigan for the relevant

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No. 20-1172 MacEwen Conti v. Arrowood Indemnity Co. Page 3
enrollment period minus the maximum sum of a federal Pell grant for the same period, which is
the only other financial aid Conti remembers receiving.
For several years from around 2011 to early 2016, Conti made payments on the Citibank
loans, which were eventually assigned to Arrowood. In May 2017, Conti filed for voluntary
Chapter 7 bankruptcy in the Eastern District of Michigan. See In re Conti, No. 2:17-bk-48277
(Bankr. E.D. Mich. filed May 31, 2017). She listed the five Citibank loans as dischargeable,
claiming that they were not excepted under 11 U.S.C. § 523(a)(8). In October 2017, Conti filed
this adversary proceeding seeking to determine the same. See Conti v. Arrowood Indemnity Co.
(In re Conti), Case No. 2:17-ap-04711 (Bankr. E.D. Mich. filed Oct. 10, 2017).
The parties cross-moved for summary judgment. After a hearing, the bankruptcy court
granted summary judgment to Arrowood and denied it to Conti. (See Summ. J. Hr’g, R. 7-1,
PageID 2767, 2812.) On appeal, the district court affirmed. Conti v. Arrowood Indemnity Co.,
612 B.R. 877, 878 (E.D. Mich. 2020). Conti timely appealed to this court.
II. ANALYSIS
A. Standard of review.
When considering a further appeal of a bankruptcy court decision, we “directly review
the decision of the bankruptcy court rather than the district court’s review of the bankruptcy
court’s decision.” Poss v. Morris (In re Morris), 260 F.3d 654, 662 (6th Cir. 2001). “[B]ecause
a grant of summary judgment presents a pure question of law,” our court reviews the bankruptcy
court’s grant of summary judgment de novo. Id. at 663. In bankruptcy adversary proceedings
“[s]ummary judgment is appropriate ‘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.’” Hagan v. Baird (In
re B & P Baird Holdings, Inc.), 759 F. App’x 468, 473 (6th Cir. 2019) (quoting Fed. R. Civ. P.
56(a) and citing Fed. R. Bankr. P. 7056). We “must view all facts and inferences in the light
most favorable to the non-moving party.” Id. at 474 (quoting Hall v. Spencer Cty., 583 F.3d 930,
933 (6th Cir. 2009)).

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B. Merits.
1. Legal framework
This appeal concerns whether Conti’s Citibank loans are “qualified education loan[s]”
under 11 U.S.C. § 523(a)(8)(B) that are non-dischargeable in Chapter 7 bankruptcy (save for
“undue hardship” for the debtor, which Conti does not claim). In any § 523(a) analysis, “[t]he
creditor . . . bears the burden of proving by a preponderance of the evidence that a debt is
excepted from discharge.” Meyers v. IRS (In re Meyers), 196 F.3d 622, 624 (6th Cir. 1999)
(citing Grogan v. Garner, 498 U.S. 279, 290–91 (1991)).
Subsection (8)(B) was enacted as part of the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23. It expanded to private
student loans § 523(a)(8)’s existing discharge exception for government- and non-profit-backed
educational loans. See 4 Collier on Bankruptcy ¶ 523.14[2] (Lexis 2020). Subsection (8)(B)
defines qualified education loans by cross-reference to the tax code, which in turn defines them,
in relevant part, as: “any indebtedness incurred by the taxpayer solely to pay qualified higher
education expenses.” 26 U.S.C. § 221(d)(1). That same section further defines qualified higher
education expenses, in relevant part, as “the cost of attendance (as defined in section 472 of the
Higher Education Act of 1965, 20 U.S.C. 1087ll . . .) at an eligible educational institution,
reduced by the sum of” applicable scholarships or financial aid. § 221(d)(2). Finally, 20 U.S.C.
§ 1087ll lists a series of expenses that comprise the “cost of attendance,” including sums for
tuition & fees, room & board, books, materials, supplies, transportation, and “miscellaneous
personal expenses” for enrolled students, in amounts determined by the university. In sum, the
issue here is whether Conti’s Citibank loans were “incurred . . . solely to pay” her “cost of
attendance” at Michigan (as determined by the university) minus any applicable scholarships or
aid.
Both parties argue that the court should look to the initial purpose of Conti’s loans, rather
than their actual uses, to determine whether they fall within the scope of (8)(B). We agree that
this is the proper inquiry. First and foremost, the statutory definition of qualified education loan
specifically focuses on whether the loan was “incurred . . . to pay” qualified higher education

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expenses, rather than on its ultimate uses. See 26 U.S.C. § 221(d)(1); cf. Murphy v. Smith, 138 S.
Ct. 784, 787 (2018) (observing that Congress uses infinitival phrases to express purpose).
Second, concerns that have long motivated other circuits to adopt a purpose test for “educational
loans” under § 523(a)(8)(A) apply with equal strength for qualified education loans under
subsection (8)(B). See, e.g., Busson-Sokolik v. Milwaukee Sch. of Eng’g (In re Sokolik),
635 F.3d 261, 266 (7th Cir. 2011) (adopting the purpose test for § 523(a)(8)(A) loans, following
Murphy v. Pennsylvania Higher Education Assistance Agency (In re Murphy), 282 F.3d 868 (5th
Cir. 2002)). Most notably, allowing debtors to discharge their student loans simply because they
misuse the funds for non-educational expenses would not further Congress’ goal of preserving
the financial integrity of the student loan system. See Murphy, 282 F.3d at 873; see also
Andrews Univ. v. Merchant (In re Merchant), 958 F.2d 738, 742 (6th Cir. 1992).
2. Purpose of the Citibank loans
The bankruptcy court correctly concluded that the sole purpose of the Citibank loans was
to pay the cost of attendance at Michigan minus the maximum amount of other financial aid
Conti received.
A loan’s purpose is centrally discerned from the lender’s agreement with the borrower.
Cf. Busson-Sokolik, 635 F.3d at 266–67. Here, the applications and promissory notes expressly:
tie the loans to Conti’s student status at Michigan for a given enrollment period; limit the loan
amount to the “full cost of education less any financial aid you are receiving”; limit use of the
loan to “specific educational expenses”; and include an area for Michigan to certify the above
information, including that the loan amount in combination with Conti’s other financial aid will
not exceed Michigan’s cost of education. (E.g., Ex. 2, R. 7-2, PageID 2834, 2838.) To the
extent we need to look beyond those documents to determine the loan’s purpose, Citibank
appears to have disbursed the loans to Michigan directly, and the loan amounts did not exceed
the cost of attendance at Michigan minus Conti’s only applicable scholarships and financial aid
(one or more Pell grants). With no contrary evidence in the record, these facts suffice to
establish that Conti incurred the Citibank loans “solely to pay qualified higher education
expenses” at Michigan. See 26 U.S.C. § 221(d)(1).

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On appeal, Conti claims that the specific recipient of the loan disbursements and the
precise cost of attendance and applicable financial aid are in dispute, as are her and Michigan’s
status as an “eligible” student and educational institution. But Conti has forfeited any dispute as
to these facts by failing to raise them below. See Niecko v. Emro Mktg. Co., 973 F.2d 1296,
1299 (6th Cir. 1992) (“It is well settled law that this court will not consider an error or issue
which could have been raised below but was not.”). Moreover, Conti fails to point to any
evidence in the record, beyond allegations in her complaint, that creates a dispute regarding these
facts. Conti further argues that her non-receipt of IRS 1098-E forms and Michigan’s failure to
certify three of the five loans are also disputed material facts. But the only dispute regarding
these facts concerns their legal relevance, and the bankruptcy court correctly concluded they
were not material to determining whether Conti’s loans are dischargeable.
Conti’s other objections to summary judgment for Arrowood fail as well. Drawing from
the tax context, Conti argues her Citibank loans are not qualified education loans because she
never filed an IRS Form W-9S expressly certifying that the loans were incurred to pay “qualified
higher education expenses” and she never received a Form 1098-E that would follow that
certification. Conti reasons that because subsection (8)(B) defines qualified education loans by
cross-reference to the tax code, bankruptcy courts should adopt the same express certification
requirement that the IRS established for claiming interest deductions on private student loans.
This argument is not persuasive. Conti offers no authority for the general proposition that
importing a definition from a separate statutory context should entail importing any attendant
regulations as well, let alone any support for doing so in this specific context. In fact, the
regulations Conti relies on expressly state that the certification requirement has import “for
purposes of section 6050S and this [tax regulation] section,” which have nothing to do with
bankruptcy. 26 C.F.R. § 1.6050S-3(e)(2) (emphasis added). Moreover, it would make little
sense for Congress to except private student loans from discharge if debtors could render the
loans dischargeable simply by failing to file a certification form.
Alternatively, Conti argues that a debt is not a qualified education loan unless it
“very, very specific[ally]” outlines the various educational expenses for which it was incurred,
citing to our court’s opinion in Shaffer v. Block, 705 F.2d 805 (6th Cir. 1983). (Oral Argument

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No. 20-1172 MacEwen Conti v. Arrowood Indemnity Co. Page 7
at 4:14–28; cf. Appellant Br. at 13–14.) Shaffer, however, is not a bankruptcy case—rather, it
considered regulations for federal Supplemental Nutrition Assistance Program (“SNAP”)
eligibility. 705 F.2d at 809. The regulation at issue in Shaffer, moreover, expressly required that
reimbursements be “specifically earmarked” for permissible educational expenses for them not
to count as income for the purposes of SNAP eligibility. Id. at 813–14 (quoting 7 C.F.R.
§ 273.9(c)(5) (1982)). No similar requirement applies here. And Conti offers no other reason
why a “very specific” enumeration of permissible expenses should be required for a loan to fall
within the scope of (8)(B).
Finally, we see no reason why the “cost of education” and “specific educational
expenses” referenced in the Citibank loans indicate anything beyond the university’s “cost of
attendance” and its enumerated educational expenses detailed in 20 U.S.C. § 1087ll. Especially
so when the loan amounts fall within the total cost of attendance, minus any other applicable
financial aid.
The undisputed evidence in the record thus establishes that Conti incurred the Citibank
loans solely to pay her qualified higher education expenses at Michigan. See 26 U.S.C.
§ 221(d)(1)–(2). As such, the loans are qualified education loans under 11 U.S.C.
§ 523(a)(8)(B).
III. CONCLUSION
For the foregoing reasons, we affirm the judgment of the bankruptcy court.

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