WIXLIB

FILEDLucindaB.L.Rauback,ClerkSamuelKay, ClerkUnited States Bankruptcy CourtAugusta, GeorgiaBy jpayton at 10:02. am, Oct 25, 2013IN THE UNITEDSTATESBANKRUPTCYCOURTFOR THESOUTHERN DISTRICTOF GEORGIAAugusta DivisionChapter 7 CaseIN RE:Number 12-11122STACY C.DAVIS,DebtorORDERBefore the Court is a Motion for Partial Summary ekingadetermination of the threshold issue of whether the debts of StacyC.Davis("Debtor")are primarily consumer debts and thereforesubject to his §707(b) Motion to Dismiss.Debtor argues the debtsare primarily business debts and therefore not subject to §707(b).The Trustee also filed a Motion to Strike the Affidavit of Debtorcontending it is a "sham affidavit."This is a core proceedingpursuant to 28 U.S.C. §157(b)(2) and the Court has jurisdictionunder 28 U.S.C.§1334.For the following reasons,the Trustee'sMotion for Summary Judgment and his Motion to Strike the Affidavitare denied.UNDISPUTEDDebtor is a pediatrician.Ex. 1, 4:13. AO 72A(Rev. 8/82)FACTSDep. of Debtor, Dckt. No. 74,Prior to construction of Debtor's current home, Debtor

and her former husband Reginald Davis ("Mr. Davis") and their minorchild were living with Debtor's sister.Id.at 6-7:25-4.Debtorstated that living with her sister was cramped and so when Debtorbecame pregnant with her second child,the couple looked to buy ahome, but ultimately decided to build a home.Id. at 7:16-23.Mr.Davis served as the general contractor even though he had no priorexperience.Id.at 6:4-7.In 2005,construction loan from First Bank.Debtor first obtained aId.at9:3-8.The loan wassubsequently transferred to SunTrust Mortgage, Inc. ("SunTrust").The construction loan with SunTrust was in the amount of 650,000.Id.The SunTrust security deed has an occupancy clause whichstates:6. Occupancy. Borrower shall occupy, establish,and use the Property as Borrower's principalresidence within 60 days after the execution ofthis Security Instrument and shall continue tooccupy the Property as Borrower's principalresidence for at least one year after the dateof occupancy, unless Lender otherwise agrees inwriting,whichconsentshallnotbeunreasonably withheld, or unless extenuatingcircumstances exist which are beyond Borrower'scontrol.Dckt. No. 83, Ex. 1.RidgeDriveDebtor and Mr. Davis built the home on Heggiesin Appling,Georgia.Costoverrunscausedtheconstruction loan to be exhausted prior to completion of the home.To fund the completion of the home, Debtor contends her ex-husband AO 72A(Rev. 8/82)

diverted funds from her medical practice without her ebtorincurredlargeAstaxDckt. No. 74, Ex. 2, Response to Interrogatories, p.1.Debtor filed a chapter 13 bankruptcy petition on June 26,2012 and checked the box indicating that her debts were primarilyconsumer debts.Dckt. No.test.1 at 40-46.Dckt. No.1, at 1.Debtor also completed a meansDebtor's debts exceeded the statutorydebt limits for a chapter 13, as a result confirmation was deniedand Debtor wasdismissed.givenDckt. No.1426.daystoconvertorthecasewould beDebtor converted her case to a chapter 7case and filed an amended petition and chapter 7 means test nowdeclaring for the first time that her debts are not primarilyconsumer debts.Dckt. Nos.27, 34 and 40.With the exception ofdeclaring the presumption of abuse does not arise and that the debtsare non-consumer debts, Debtor did not fully complete the amendedmeans test form.1Dckt.No.40.At the request ofDebtor filed an amended chapter 7 means test.amendeddebts.meanstestdoesDckt. No. 49.notdeclarethethe Trustee,Dckt. No. 49.debtsareThisnon-consumerIn her reply brief, Debtor asserts that even1 As discussed in the Conclusions of Law section,if the debtsare not primarily consumer debts, Debtor is not required to completethe means AO 72A(Rev. 8/82)test.

though she completed a chapter 7 means test form at the request ofthe Trustee, she did not abandon her position regarding the natureof her debts and the purpose of the construction loan.79,Dckt.No.at 2.TheTrusteefiled amotiontodismisspursuantto11U.S.C. §707(b), and is seeking a partial summary judgment on whetherDebtor's debts are primarily consumer debts.The parties agree thatthe determination turns on whether Debtor's debt to SunTrust is aconsumer debt.At her deposition, when questioned about the purpose ofbuilding the home, Debtor stated,n[W]e were looking at hopefullybuilding a house lower than the amount that we could get the loanfor, and utilize that money to -- as business purposes."Debtor, Dckt. No. 74,Ex.1,6:8-10.Dep. ofWhen questioned about thebusiness purpose, Debtor explained, " [W]e're looking at that perhapsthe house could be flipped for business purposes, and then be ableto utilize those funds to pay back monies that were -- that were duefor other, I guess -- let me make sure I'm answering the questionthat you asked."Id. at 9:18-22.needed a place to stay.Debtor further explained, "[W]eBut then we felt like maybe if we built ahouse that did not cost the amount to construct the home,then wewould have equity in it, and then be able to have a different place fcAO 72A(Rev. 8/82)

to live.So it was kind of a business -- it was a business ventureto be able to try to get equity,maybe have a home that we caneither sell or flip, and then be able to get to have a place that wecould stay."Id.at 11:1-7.When questioned on whether Debtor always intended to moveinto the home once it was built, Debtor stated that they did notintend to move in until they realized that the debt was going toexceedtheincreased.valueoftheId. at 11:8-18.homebecauseconstructioncostshadIt was at that point that they decidedto reside in the home, when they realized they would not be able tosell it for a profit.wastheId. at 11:8-18.home you intended to liveThe Trustee asked,in?"Id.at"And that12:6.Debtorreplied, "or flip, or to be able to, you know, get equity in thehome, and perhaps live in a different place."Id. at 12:7-8.Trustee then stated,and I don't want to"would it be fair to say,Theput words in your mouth, correct me if I am wrong -- would it befair to say that you constructed the home to live in and buildequity in, and perhaps sell for a profit later?"Debtor replied,"yes."Id. at 12:9-12.Id. at 12:13-15.In Debtor's response to Request for Admissions,states,Debtor"[T]he house and lot located at [] Heggies Court go back tothe years 2005 and 2006 in the heyday of the real estate boom and hAO 72A(Rev. 8/82)

the concept offlipping.The purpose ofconstructing the house,which was supposed to be worth about 650,000, was that it would bebuilt for less than 500,000 and there would be either 120,000 tobe used as a second mortgage to pay off Internal Revenue Servicedebt or it would be flipped and the Debtor would make a profit. . Obviously, the crux of the case as to whether this is consumer orbusiness is a mortgage of 620,000.Debtor states that the purposeof this construction was not for building a residential propertythat she could live in,income."Dckt. No.74,but for flipping to generate additionalEx.3, p.1-2.CONCLUSIONS OFLAWSummary judgment is appropriate when"the pleadings,depositions, answers to interrogatories, and admissions on file,together with the affidavits, if any, show that there is no genuineissue as to any material fact and that the moving party is entitledto a judgment as a matter of law."Fed. R. Civ. P. 56(c) ;2 see alsoCelotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).[A] party seeking summary judgment always bearsthe initial responsibility of informing the .courtofthebasisforitsmotion,andidentifying those portions of the pleadings,depositions, answers to interrogatories, and2 Pursuant toFederal Rule ofBankruptcy Procedure 7056,Rule 56 of the Federal Rules of Civil Procedure is applicable inbankruptcy adversary proceedings.% A0 72A(Rev. 8/82)

hichitbelievesdemonstrate the absence of a genuine issue ofmaterialCelotex,477 U.S.fact.at 323(internal quotations omitted).Once themoving party has properly supported its motion with such evidence,thepartyopposingthemotion"mayallegations or denials of his pleading,notrestuponthemerebut . . . must set forthspecific facts showing that there is a genuine issue for trial."Anderson v. Liberty Lobby,Nat'lBank of Arizona v.(1968); Fed. R. Civ.Inc., 477 U.S. 242, 248CitiesP. 56(e).Servs.Co.,(1986); First391 U.S.253,288-89"In determining whether the movanthas met its burden, the reviewing court must examine the evidence inalight mostfavorableto the opponent ofthe motion.Allreasonable doubts and inferences should be resolved in favor of theopponent."Amey,Inc. v. Gulf Abstract & Title. Inc., 758 F.2d1486, 1502 (11th Cir. 1985)(citations omitted).TheissueinthisSunTrust is a consumer debt.caseiswhetherthedebtowedtoIf it is then, Debtor's debts in thiscase are "primarily consumer debts" and subject to a §707 motion todismiss.The Trustee argues it is a consumer debt because Debtorincurred the loan with the intent of living in the home hoping tobuild equity and sell it some day for a profit which is the desireof most homeowners.« AO 72A(Rev. 8/82)Conversely, Debtor argues that at the time the

loan was incurred Debtor and Mr. Davis intended to build the home asan investment.She contends they intended to construct the home ata cost well below its value and then to "flip" or sell the house fora profit.Debtor further contends that when this did not occur andwhen Debtor recognized they could not sell the house for a profit,they decided to live in the home.Pursuantto11U.S.C.§707(b)(l),"after noticeand ahearing, the court, on its own motion or on a motion by the UnitedStates Trustee, trustee .or any party in interest may dismissa case filed by an individual debtor under this chapter whose debtsare primarily consumer debts." 11 U.S.C. §707(b)(l).A "consumerdebt" is a "debt incurred by an individual primarily for a personal,family, or household purpose."11 U.S.C. §101(8).If the debts arenot "primarily consumer debts" then a debtor is not required tocomplete the means test.M.D.N.C. June 10,property,In re Woodard, 2009 WL 1651234 *2 (Bankr.2009) ."With respect to debt secured by realif the debtor's purpose in incurring the debt is topurchase a home or make improvements to it, the debt is clearly forfamily or household purposes and fits squarely within the definitionof a consumer debt under §101(8)."(B.A.P. 8th Cir. 2004) citing908, AO 72A(Rev. 8/82)913 (9th Cir.1988) .In re Cox,315 B.R.850,855Zolg v. Kellv (In re Kelly) , 841 F.2dThe proper inquiry is to examine the

debtor'spurposeatthetimethe debtwhether the debt is a consumer debt.bearstheburden ofproofprimarily consumer debts.toisId.incurred toThe Trustee as the movantestablish thatIn re Ades,determineDebtor'sdebtsare2009 WL 6498520 *4 (Bankr.N.D. Ga. July 2, 2009)("Movant had the burden of proving that morethan half of Debtors's debts are consumer debts.");Johnson,318B.R.907,914(Bankr.N.D.Ga.see also In re2005) (findingthetrustee had established the first prerequisite that the debtor'sdebt was primarily "consumer debt").The TrusteeshowsDebtor'sintentcontends Debtor'swhenshedeposition unambiguouslypurchasedtheloan.Atthedeposition the Trustee asked, "would it be fair to say, and I don'twant to put words in your mouth, correct me if I am wrong-would itbe fair to say that you constructed the home to live in and buildequity in, and perhaps sell for a profit later?"Dckt. No.74, Ex. 1, 12:9-12.intention.Id. at 12:13-15.Debtor replied,However,Dep. of Debtor,"yes",that was herupon review of the entiredeposition and Debtor's discovery responses, the testimony is notunambiguous.Several times during the course of her deposition aswell as in her discovery responses, Debtor states she intended to"flip" the house and did not intend to move into the home until theyrealized the costs to construct the home exceeded the value. AO 72A(Rev. 8/82)Dep.