United States of America v. Mack

Filing 24

MEMORANDUM OPINION in support of the following Order. Signed by District Judge Thomas A Varlan on 2/8/12. (c/m Lisa Mack)(ADA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
CHATTANOOGA DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
LISA M. MACK,
Defendant.

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No.:

1:11-CV-47
(VARLAN/SHIRLEY)

MEMORANDUM OPINION
This civil action is before the Court on the Motion for Judgment on the Pleadings or,
Alternatively, for Summary Judgment [Doc. 8], submitted by plaintiff, the United States of
America (the “United States”). Defendant, Lisa M. Mack, proceeding pro se, has responded
in opposition [Doc. 13], the United States has filed a reply [Doc. 15], and the motion is ripe
for adjudication. The Court has carefully considered the pending motion and the responsive
briefs, along with the relevant law and supporting materials. For the reasons set forth herein,
the Court will treat the United States’ motion as one for summary judgment and it will be
GRANTED.
I.

Relevant Facts
On or about November 2, 1999, defendant executed a promissory note to secure a

direct consolidation loan from the United States Department of Education in the amount of
$93,417.32, at 8.25% interest per annum [Doc. 7, ¶ 3; Doc. 10, ¶ 2; Doc. 10-1]. The United
States is the current holder of that promissory note [Doc. 1, ¶ 4, Docs. 1-2, 1-3]. As of

August 16, 2010, the United States claims that the total principal amount remaining due on
the loan is $93,417.32, plus accrued interest in the amount of $80,051.67, for a total amount
remaining due of $173,468.99 [Doc. 1-3; Doc. 10, ¶¶ 2, 5].
On March 3, 2011, the United States filed this action against defendant on behalf of
the Department of Education [Doc. 1], requesting that judgment be entered in favor of the
United States for the total amount of the loan, plus accrued interest on the principal amount
to the date of judgment at a rate of 8.25% interest per annum [Id.]. The defendant filed an
answer [Doc. 7], followed by an amended answer [Doc. 21], admitting that she had signed
the promissory note but stating that “[i]t was not a promissory note after the application was
accepted.” [Id., ¶ 3]. Defendant also acknowledged that a demand for payment on the loan
had been made, but that “the demands were never an amount Defendant could afford and a
lower monthly payment amount was never accepted by Plaintiff.” [Id., ¶ 5]. The United
States submits in its motion that as of July 26, 2011, defendant had paid $0.00 towards the
amount due on the loan [Doc. 9; Doc. 1-3; Doc. 10, ¶ 3].
Defendant filed a motion to amend her answer and a motion for extension of time to
complete discovery, both of which the United States opposed [Docs. 11, 12, 14]. The
magistrate judge granted defendant’s motion to amend her answer, giving her up to and
including January 27, 2012 in which to file an amended answer [Doc. 20, p. 3]. The
defendant filed her amended answer on January 31, 2012.1 The magistrate judge denied

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The Court granted defendant’s motion to file her amended answer outside of time [Doc. 23].
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defendant’s motion for extension of time to complete discovery because she failed to specify
a reason for why she was unable to present facts in opposition to the United States’ motion
and did not meet her burden of showing, “by affidavit or declaration that, for specified
reasons, [she] cannot present facts essential to justify [her] opposition.” [Id., pp. 3-4 (quoting
Fed. R. Civ. P. 56(d))].
II.

Standard of Review
The United States has moved for judgment on the pleadings. In the alternative, should

the Court find it necessary to consider the declaration of Delfin M. Reyes (the “Reyes
declaration”) [Doc. 10], the United States has moved for summary judgment pursuant to Rule
56 of the Federal Rules of Civil Procedure. As will be further explained below, because the
Court finds consideration of the Reyes declaration necessary for the United States to
establish a prima facie case, the Court will consider the motion as one for summary
judgment.
Summary judgment under Rule 56 of the Federal Rules of Civil Procedure is proper
“if the movant shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The moving party bears
the burden of establishing that no genuine issues of material fact exist. Celotex Corp. v.
Catrett, 477 U.S. 317, 330 n.2 (1986); Moore v. Phillip Morris Cos., 8 F.3d 335, 339 (6th
Cir. 1993). All facts and all inferences to be drawn therefrom must be viewed in the light
most favorable to the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986); Burchett v. Kiefer, 310 F.3d 937, 942 (6th Cir. 2002).
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“Once the moving party presents evidence sufficient to support a motion under Rule 56, the
nonmoving party is not entitled to a trial merely on the basis of allegations.” Curtis Through
Curtis v. Universal Match Corp., 778 F. Supp. 1421, 1423 (E.D. Tenn. 1991) (citing Celotex,
477 U.S. at 317). To establish a genuine issue as to the existence of a particular element, the
non-moving party must point to evidence in the record upon which a reasonable finder of fact
could find in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The
genuine issue must also be material; that is, it must involve facts that might affect the
outcome of the suit under the governing law. Id.
The Court’s function at the point of summary judgment is limited to determining
whether sufficient evidence has been presented to make the issue of fact a proper question
for the factfinder. Anderson, 477 U.S. at 250. The Court does not weigh the evidence or
determine the truth of the matter, id. at 249, nor does the Court search the record “to establish
that it is bereft of a genuine issue of material fact.” Street v. J.C. Bradford & Co., 886 F.2d
1472, 1479-80 (6th Cir. 1989). Thus, “the inquiry performed is the threshold inquiry of
determining whether there is a need for a trial—whether, in other words, there are any
genuine factual issues that properly can be resolved only by a finder of fact because they may
reasonably be resolved in favor of either party.” Anderson, 477 U.S. at 250.
III.

Analysis
A.

Prima Facie Case – Student Loan Claim

In the motion, the United States contends that it has sufficiently established a prima
facie right to recovery and that the defenses raised by defendant are without merit and
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insufficient to withstand summary judgment. In her response, defendant admits that she paid
for her education with student loans and that she applied to have those student loans
consolidated through the Federal Direct Consolidation Loan program [Doc. 13-1, ¶ 1; Doc.
13, pp. 3-4]. Defendant asserts, however, that no promissory note was formed through her
completion of the application [Doc. 13, pp. 1-4]. She asserts that even if a promissory note
was formed, there is a factual dispute as to the amount demanded by the United States [Id.].
Defendant does not, however, dispute the certification in the Reyes declaration that defendant
has never made a payment towards the repayment of her consolidated loan [Id.; Doc. 21, ¶
5]. Specifically, defendant asserts that:
[P]ayment had been made, however, the demands were never an
amount Defendant could afford and a lower monthly payment amount
was never accepted by Plaintiff.
[Doc. 21, ¶ 5].
As an initial matter, in a case arising out of a claim on a student loan, the Court must
determine whether the United States has met its prima facie burden. “To recover on a
promissory note the government must first make a prima facie showing that (1) the defendant
signed it, (2) the government is the present owner or holder and (3) the note is in default. For
that purpose the government may introduce evidence of the note and a sworn transcript of
the account or certificate of indebtedness. “ United States v. Petroff-Kline, 557 F.3d 285, 290
(6th Cir. 2009) (citations omitted).
In this case, defendant admits that she “signed a promissory note which was attached
to an application for a consolidation loan[,]” but that “[i]t was not a promissory note after the
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application was accepted.” [Doc. 21, ¶ 3]. Upon consideration, the Court does not find this
assertion that acceptance rendered the application and promissory note “not” a promissory
note because “disputing the overall validity of the note is not tantamount to denying that one
signed them.” United States v. Crowe, No. 3:08-CV-308, 2009 WL 677384, at *2 (E.D.
Tenn. Mar. 10, 2009) (J. Phillips); see also Fed. R. Civ. P. 8(b)(6) (“An allegation . . . is
admitted if a responsive pleading is required and the allegation is not denied.”). Furthermore,
through the Reyes declaration and certifications therein, the United States has introduced into
evidence the application and promissory note, dated and executed by defendant [Doc. 10, ¶¶
1-2; Doc. 10-1]. Defendant has not disputed the existence or contents of this application and
promissory note. Accordingly, the Court finds that the United States has satisfied the first
element.
As to the second and third elements, the United States may establish these elements
when a loan analyst certifies under penalty of perjury that a borrower has defaulted on a loan
and that the loan was assigned to the United States. United States v. Davis, 28 F. App’x 502,
503 (6th Cir. 2002). Here, the United States has presented the Reyes declaration—a
declaration of a loan analyst—which states that as of the date of declaration, (1) defendant
had made no payments towards the loan, (2) defendant defaulted on her loan obligation on
March 4, 2011, and (3) the loan was to secure a direct consolidation loan from the
Department of Education [Doc. 10, ¶¶ 1, 3, 4]. The United States has also submitted a
certificate of indebtedness stating that the Department of Education is the holder of the
promissory note at issue and that defendant is indebted to the United States for the amount
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of the loan plus additional interest [Doc. 1-3]. Under Petroff-Kline, this introduction of the
application and promissory note by the United States, along with the sworn transcript of
account and certificate of indebtedness is sufficient to establish the second and third
elements. See id., 557 F.3d at 290.
Accordingly, the Court concludes that the United States has met its burden of
establishing a prima facie case.
B.

The Existence, Extinguishment, or Variance in Payment of the Obligation

If the United States produces “sufficient evidence to satisfy its summary judgment
burden, the burden shift[s] to [defendant] to ‘set forth specific facts showing that there is a
genuine issue for trial,’ not just to ‘rest upon the mere allegations or denials of the adverse
party’s pleadings.’” United States v. Lawrence, 276 F.3d 193, 197 (5th Cir. 2001) (citing
Resolution Trust. Corp. v. Camp, 965 F.2d 25, 29 (5th Cir. 1992) (quoting Fed. R. Civ. P.
56(e))). See also United States v. Davis, 28 F. App’x at 503. If the United States establishes
a prima facie case for payment of an obligation, defendant then “has the burden of proving
the existence, extinguishment or variance in payment of the obligation.” Petroff-Kline, 557
F.3d at 290.
Here, while defendant gives several reasons in support of her argument that a genuine
issue of material fact exists as to her obligation to pay the amount of the debt given in the
United States’ motion, the Court finds each argument unavailing.
First, defendant has not disputed the statement in the Reyes declaration that the
application and promissory note, which contain defendant’s name and signature, is a true and
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correct copy of the application and promissory executed by defendant. Defendant has also
not disputed that she applied for a consolidation loan and that she signed the promissory note
which was part of an application for a consolidation loan [Doc. 13-1, p. 1; Doc. 13-1, ¶ 2;
Doc. 10; Doc. 10-1]. Rather, defendant argues that she disputes the formation of the
promissory note and whether the application “contains the essence of a contract, and whether
the contract was ever formed by the payment of consideration.” [Doc. 13, pp. 1-2]. Upon
review of the application and promissory note, along with the Reyes declaration and
defendant’s own statement that she signed the promissory note, the Court does not find
defendant’s general denial that a promissory note was validly executed, without more, to
raise a genuine issue of disputed material fact as to the existence of the debt.
Second, defendant argues that the application and promissory note are not valid
because she lacked notice that a promissory note was formed from the application [Doc. 131, ¶¶ 4-8]. However, as pointed out by the United States, the language of the promissory
note, which defendant admits signing, belies this argument. Section F of the promissory
note, which appears immediately above defendant’s signature, contains the following
language:
I UNDERSTAND THAT THIS IS A FEDERAL LOAN THAT I
MUST REPAY.
[Doc. 10-1, p. 3]. Above this statement is the following language:
I understand that this is a Promissory Note. I will not sign this note
before reading it, including the text on the reverse side, even if I am
advised not to read the note . . . . My signature certifies that I have
read, understand, and agree to the terms and conditions of this note [.]
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[Id.]. This section also provides that by signing her name on the promissory note, this “will
serve as [defendant’s] authorization to pay off the balance(s) of the loan(s) selected for
consolidation as provided by the holder(s) of such loan(s).” Id. Given the foregoing, the
Court finds unpersuasive defendant’s argument that she lacked notice that the executed
application was a promissory note.
Finally, the Court does not find defendant’s unsupported assertion of a factual dispute
regarding the amount owed on the promissory note to constitute a genuine issue of material
fact as to whether defendant can prove the nonexistence, extinguishment, or variance in
payment of the obligation [see Doc. 13, p. 3]. See United States v. Johnson, No. 02-75044,
2005 WL 1355097, at *3 (E.D. Mich., May 4, 2005) (“[T]he defendant must produce specific
and concrete evidence of the nonexistence, payment, discharge, or deferment of the debt.
Cancelled checks, bank statements, tax records, and sworn affidavits may be acceptable
evidence of payment.”) (citing United States v. Durbin, 64 F. Supp. 2d 635, 636 (S.D. Tex.
1999)). Here, defendant has admitted to signing the application and promissory note. Her
specific argument as to the amount of the debt is that “the demands were never an amount
Defendant could afford and a lower monthly payment amount was never accepted by
Plaintiff.” [Doc. 21, ¶ 5]. This is not evidence which creates a genuine issue of disputed fact
that would constitute specific, concrete evidence to rebut the prima facie case established by
the United States. Defendant provides no evidence that the amount given in the Reyes
declaration is inaccurate, that the amount given on the face of the application and promissory

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note is inaccurate, or that any amount in the certificate of indebtedness is inaccurate. As
such, the Court also finds this argument to be without merit.
IV.

Conclusion
For the reasons set forth herein, the United States’ Motion for Judgment on the

Pleadings or, Alternatively, for Summary Judgment [Doc. 8] will be GRANTED to the
extent that summary judgment will be ENTERED in favor of the United States. The United
States will be AWARDED a total of $173,468.99, plus accrued interest from August 16,
2010 through the date of judgment at the rate of 8.25% on the principal amount of
$93,417.32, plus interest from the date of judgment at the legal rate. An appropriate order
will be entered.
ORDER ACCORDINGLY.

s/ Thomas A. Varlan
UNITED STATES DISTRICT JUDGE

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