ZB, N.A. d/b/a Zions First National Bank, Appellee,
Shayne D. Crapo, Appellant.
Direct Appeal Third District, Salt Lake The Honorable Barry
G. Lawrence No. 140907019
K. Tracy, Joshua L. Lee, Salt Lake City, for appellee
Richard J. Armstrong, Jacob A. Green, Lehi, for appellant
Justice Durrant authored the opinion of the Court, in which
Associate Chief Justice Lee, Justice Himonas, Justice Pearce,
and Judge Mortensen joined.
recused herself, Justice Durham did not participate herein;
Court of Appeals Judge David N. Mortensen sat.
Durrant Chief Justice
1 This case presents the question of whether a debtor's
receipt of an IRS Form 1099-C-a reporting tool designed to
help the IRS track lenders' debt forgiveness-creates a
genuine issue of material fact as to whether a lender has
forgiven a debt or as to whether the lender is estopped from
collecting on it. The IRS requires that a lender file a Form
1099-C with the IRS and issue a copy to the debtor when there
has been an "identifiable event." As defined by the
IRS, some "identifiable event[s]" involve an actual
discharge-i.e., cancellation or forgiveness - of debt. But
one "identifiable event, " called
"identifiable event code H, " requires the lender
to file the form upon the expiration of a 36-month period
where no payments have been made on a debt, regardless of
whether an actual discharge of the debt has
2 Shayne Crapo borrowed $250, 000 from Zions First National
Bank (Zions Bank). Mr. Crapo initially made payments on the
loan, but he eventually defaulted. After the expiration of a
36-month period with no payments being made on the loan,
Zions Bank issued Mr. Crapo a Form 1099-C. The form listed
"H" as the event code, but also listed
"FORGIVEN DEBT AMT 3 YRS NO PAYMENT" in the
"Debt description" field, and "$250,
000.00" in the "Amount of debt discharged"
field. Mr. Crapo claims that he reported the $250, 000 as
income on his tax return, which increased his tax burden for
3 Zions Bank brought a deficiency action to recover the
amount due on the loan. The district court below granted
summary judgment in favor of Zions Bank, holding that Mr.
Crapo failed to show that the evidence created a genuine
dispute of material fact as to whether Zions Bank in fact
discharged the debt or as to whether it is estopped from
collecting on it. The court accordingly entered judgment
against Mr. Crapo for the amount of the loan, plus fees,
costs, and interest. Mr. Crapo appeals, arguing that the
evidence creates a genuine dispute of material fact as to
both actual discharge and estoppel.
4 We affirm the district court on both grounds. Mr. Crapo has
failed to adduce sufficient evidence to permit a reasonable
fact finder to conclude that Zions Bank either actually
discharged or is estopped from collecting his debt.
5 In December 2006, Mr. Crapo and Zions Bank entered into a
"Home Equity Line Credit Agreement and Disclosure"
(the Note). Mr. Crapo drew upon the line of credit the same
day, withdrawing the full $250, 000 limit. The Note contains
a "Delay in Enforcement" clause (Nonwaiver Clause)
providing that Zions Bank "may delay or waive
enforcement of any of [its] rights under" the Note
"without losing that right or any other right."
6 Mr. Crapo made payments to cover the accruing interest
until September 2010, after which he made no further
payments. In October of that year, Zions Bank accelerated the
balance of the Note, demanding payment in full. In January
2011, it created an internal "Charge Off Request"
document (Charge Off Request) in which a Zions Bank
representative requested that the balance due under the Note
"be charged off due to the lack of collateral and
transferred to [the] Recovery Department for further
7 As of December 31, 2013, Mr. Crapo had not made any
payments on the Note in the preceding 36-month period. In
January 2014, Zions Bank issued an IRS Form 1099-C to Mr.
Crapo. An IRS regulation requires that a lender file a Form
1099-C whenever the lender "discharges" an
"indebtedness" of at least $600. The regulation
defines "discharge" in a way that includes more
than actual discharges. It provides that, "[s]olely for
purposes of the reporting requirements of" this
regulation, "a discharge of indebtedness is deemed to
have occurred . . . if and only if" an
"identifiable event" has occurred, "whether or
not an actual discharge of indebtedness has
occurred." The regulation then provides eight
different identifiable events. The first seven, codes A-G,
correlate to events that necessarily involve an actual
discharge of debt. The eighth, event code H, is not tied to
an actual discharge, but requires that a form be sent upon
the expiration of a "non- payment testing
period." The regulations define the non-payment
testing period as follows:
There is a rebuttable presumption that an identifiable event
. . . has occurred during a calendar year if a creditor has
not received a payment on an indebtedness at any time during
a testing period . . . ending at the close of the year. The
testing period is a 36-month period increased by the number
of calendar months during all or part of which the creditor
was precluded from engaging in collection activity by a stay
in bankruptcy or similar bar under state or local
on December 31 of any given year, there is an identifiable
event code H for each indebtedness on which the borrower has
not made a payment during the preceding 36 months.
8 IRS Form 1099-C itself contains a section called
"Instructions for Debtor, " which explains the
reason for its being sent. The form states:
You received this form because . . . a lender has
discharged (canceled or forgiven) a debt you owed, or
because an identifiable event has occurred that either is
or is deemed to be a discharge of a debt of $600 or more.
If a creditor has discharged a debt you owed, you are
required to include the discharged amount in your income. .
. . However, you may not have to include all of the
canceled debt in your income.... If an identifiable event
has occurred but the debt has not actually been discharged,
then include any discharged debt in your income in the year
that it is actually discharged . . . .
instructions on the form also state that "Box
6"-which is titled "Identifiable event
code"-"[m]ay show the reason your creditor has
filed this form." The form then provides a description
of each event code, including "H - Expiration of
nonpayment testing period." The form also states that
"[i]f you are required to file a return, a negligence
penalty or other sanction may be imposed on you if taxable
income results from this transaction and the IRS determines
that it has not been reported."
9 In the particular Form 1099-C sent to Mr. Crapo, box 6,
labeled "Identifiable event code, " states
"H." Box 4, labeled "Debt description, "
states "FORGIVEN DEBT AMT 3 YRS NO PAYMENT." Box 1,
the "Date of identifiable event" field, lists
"12/31/2013." Box 2, labeled "Amount of debt
discharged, " lists "$250, 000.00." Mr. Crapo
alleges that he reported the $250, 000 as income, increasing
his tax burden for that year. The record contains no specific
evidence of the amount of tax burden this imposed on Mr.
Crapo. Instead, it contains an affidavit from Mr. Crapo that
states: "Following the instructions in the 1099-C, I
included the full $250, 000.00 value of the loan in my gross
income for the tax year 2013. As a result, my tax burden
increased for that year." The record contains no
indication that Mr. Crapo consulted with Zions Bank or sought
advice about the implications of the Form 1099-C he received.
10 Zions Bank brought a deficiency action to recover the
amount due on the loan, and at the close of discovery the
parties filed cross-motions for summary judgment. Zions Bank
argued that because Mr. Crapo's default on the debt was
undisputed, the court should enter judgment against him for
the amount of the loan plus costs, fees, and interest. Mr.
Crapo made two arguments. First, that the Form 1099-C was
prima facie evidence that Zions Bank in fact discharged the
debt, and second, that Zions Bank was estopped from
collecting the debt. The district court rejected both of Mr.
Crapo's arguments and granted summary judgment in favor
of Zions Bank. Mr. Crapo appeals that determination. On
appeal, he argues that the Form 1099-C creates a genuine
dispute of material fact as to both the actual discharge and
11 "Summary judgment is appropriate when the evidence
'shows that there is no genuine dispute as to any
material fact and the moving party is entitled to judgment as
a matter of law.'" "An appellate court reviews
a [district] court's legal conclusions and ultimate grant
or denial of summary judgment for correctness and views the
facts and all reasonable inferences drawn therefrom in the
light most favorable to the nonmoving
12 Mr. Crapo argues that summary judgment was improper on two
grounds. First, he claims there is a genuine dispute of
material fact as to whether Zions Bank actually discharged
the Note. Second, he claims there is such a dispute regarding
whether Zions Bank is estopped from collecting on the Note.
We conclude that neither issue presents a genuine dispute of
fact because Mr. Crapo's evidence is insufficient to
permit a reasonable fact finder to conclude that Zions Bank
actually discharged or is estopped from collecting the Note.
We therefore conclude that the district court properly
granted judgment as a matter of law for Zions Bank.
13 Regarding actual discharge, Mr. Crapo's evidence is
reduced to merely the words "FORGIVEN DEBT" listed
on a form that Zions Bank sent to satisfy an IRS reporting
obligation. Mr. Crapo presents no other evidence that Zions
Bank actually discharged his debt. In these circumstances, no
reasonable fact finder could conclude that the debt ...