Lugo v. PaulsenLugo v. Paulsen
SCIRICA, Circuit Judge.
The issue before us is whether an insurance surcharge, levied by the State of New Jersey on persons convicted of driving while under the influence of intoxicating liquor, may be discharged under Chapter 7 of the Bankruptcy Code. The district court determined that the surcharge qualified as “debt,” but fell within the exception to discharge in
I.
On June 5, 1985, Roberto Lugo was convicted in the Municipal Court of East Rutherford, New Jersey of driving while under the influence of intoxicating liquor in violation of
On January 12, 1986, the New Jersey Division of Motor Vehicles (DMV) billed Lugo $3000, payable over three years, under the New Jersey Merit Rating Plan (
Accordingly, Lugo‘s surcharge bill included a “Notice of Proposed Suspension,” which stated:
This bill is a notice of proposed suspension of your driving privileges pursuant to P.L.1983 C.65; N.J.S.A. 17:29A-33 et seq. and N.J.S.A. 39:5-30. Your payment must be received within 30 days of the bill datе. Failure to pay by Feb. 11, 1986 will result in the suspension of your driver‘s license until full payment is made.
Lugo failed to pay the $3000 surcharge. On July 30, 1986, he filed a petition under Chapter 7 of the Bankruptcy Code, listing in his debt schedule the $3000 surcharge owed to the JUA and listing the DMV and its subdivision, Automobile Insurance Surcharge and Collections, as scheduled creditors. After learning of Lugo‘s bankruptcy petition, the DMV restored his driving privileges in October, 1986. On December 12, 1986, Lugo received his discharge in bankruptcy. Notice of discharge was sent to all listed creditors by the Bankruptcy Court.
Following discharge, Lugo received another surсharge bill from the DMV, which again included a notice of proposed suspension of driving privileges for failure to pay the surcharge. In response to inquiry by Lugo‘s attorney, a representative of the DMV stated that Lugo‘s driver‘s license would be suspended if he did not pay the surcharge notwithstanding his discharge in bankruptcy.
Consequently, on February 19, 1988, Lugo re-opened his Chapter 7 bankruptcy petition, and filed an adversary proceeding seeking to have the surcharge discharged as a pre-petition debt. The Bankruptcy Court reviewed his complaint, and, on cross motions for summary judgment, held that the surcharge was not a “debt” within the meaning of the Bankruptcy Code and therefore was not subject to discharge. Lugo v. Paulsen, No. 88-0127, slip op. (Bankr.D.N.J.1988).
On appeal, the district court found that the surcharge was a “debt” within the meaning of the Bankruptcy Code. The district court held, however, that the surcharge was non-dischargeable under the exception to discharge in Sec. 523(a)(9) of the Bankruptcy Code,
II.
We must first determine whether the Merit Rating Plan surcharge levied by the DMV is a pre-petition “debt” that may be discharged in Chapter 7 under
On this issue, the district court disagreed with the Bankruptcy Court, and held that the surcharge was properly characterized as a pre-petition debt under the Bankruptcy Code. We agree with the district court.
The Bankruptcy Code defines “debt” as a “liability on a claim,”
Appellees urge us to adopt the finding of the Bankruptcy Court that the Merit Rating Plan surcharge was not a “debt” under Sec. 101(11), claiming that these surcharges are post-petition “insurance payments.” They argue that the State of New Jersey, in levying the surcharge, is not attempting to collect a prе-petition debt, but rather is relying on the debtor‘s pre-petition driving history to determine the cost of insuring the future operation of a motor vehicle by that person.5 Appellees rely on In re A.C. Williams Co., 51 B.R. 496 (Bankr.N.D.Ohio 1985), and In re Primrose Bedspread Corp., 67 B.R. 659 (Bankr.D.N.J.1986), to suggest that the imposition of the surcharge is indistinguishable from an insurance company‘s reliance on a debtor‘s pre-petition driving record to determine the cost of future driving insurance.
In In re A.C. Williams Co., a corporation emerging from a Chapter 11 reorganization6 requested that the Bankruptcy Court enjoin the Ohio Bureau of Workers’ Compensation from using the corporations’ pre-petition claims experience in calculating its experience rating and the resulting premiums owed the Bureau. The court refused, holding that the Bureau, by relying on the employer‘s past claims experience, was not attempting to collect a pre-petition debt. 51 B.R. at 501. The court declined “to read the Code so broadly as to include the pre-petition claim experience within its definition of ‘claim.’ ” Id. Similarly, in In re Primrose Bedspread Corp., the Bankruptcy Court allowed the use of the corporation‘s pre-petition experience in determining the rate of its unemployment tax contributions. 67 B.R. at 660.
We find In re A.C. Williams and In re Primrose Bedspread inapposite. The imposition of the surcharge in this case did not result from evaluation of Lugo‘s pre-petition safety record and a subsequent determination of a premium rate by which Lugo may avail himself of automobile insurance post-petition. Indeed, Lugo has no need to avail himself of automobile insurance, because under New Jersey law, only owners of vehicles are required to have insurance as a condition to lawful operation. See In re Robert Bill, 90 B.R. 651, 654-55 (1988). Lugo did not own an automobile at the time he was convicted of drunk driving, nor does he own one now. The Merit Rating Plan surcharge is imposed on a driver convicted under
Appelleеs also argue that the Plan surcharge is not a “debt” because it cannot be reduced to a money judgment and therefore does not constitute a “right to payment” under the definition of claim in
The decisions in In re Villarie, 648 F.2d 810, 812 (2d Cir.1981), and In re Pellegrino, 42 B.R. 129, 133 (Bankr.Conn.1984), cited by appellees, do not persuade us otherwise. The Villarie court held that an employee‘s pre-petition loan from his retirement fund did not constitute a “debt” dischargeable in bankruptcy because the fund had no means to enforce its right to payment. Instead, its available remedy was merely to offset the borrowed amounts against the employee‘s future benefits from the fund. In Pellegrino, the Bankruptcy Court addressed the question whether a criminal defendant‘s obligation under Connecticut law to make restitution tо the crime victim gives rise to a “claim” by the victim in bankruptcy. The court found that no right to payment existed because “[u]nder the [Connecticut] penal code, a victim cannot enforce a court‘s order of restitution if the criminal defendant fails to make payments to the [probation office].”9 42 B.R. at 132. Unlike the retirement fund in Villarie and the crime victims in Pellgrino, the DMV does have a method to enforce the surcharge obligation, that is, revocation of the driver‘s license.
Having determined that the surcharge is a “debt,” we next consider whether the obligation to pay the surcharge arose pre-petition.10 “While federal lаw controls which claims are cognizable under the Code, the threshold question of when a right to payment arises, absent overriding federal law, ‘is to be determined by reference to state law.’ ” Matter of M. Frenville Co. Inc., 744 F.2d at 337 (citing Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 161, 67 S.Ct. 237, 239, 91 L.Ed. 162 (1946)); see also In re Remington Rand Corp, 836 F.2d 825, 832 (3d Cir.1988). Under the New Jersey Merit Rating Plan, the DMV‘s right to payment arises when a driver is convicted under
III.
Our determination that the insurance surcharge is a pre-petition debt under the Bankruptcy Code does not conclude our inquiry. Section 523 of the Code lists exceptions to discharge in Chapter 7 for certain debts. In particular, Sec. 523(a)(7) excepts from discharge a debt for a fine, penalty or forfeiture payable to and for the benefit of a governmental unit, and Sec. 523(a)(9) excepts from discharge a debt arising from a judgment for driving while intoxicated. The district court held that the Merit Rating Plan surcharge does not fall within the exception to discharge under Sec. 523(a)(7). Because we hold that the surcharge falls within the exception to discharge contained in Sec. 523(a)(9), we need not address Sec. 523(a)(7). Therefore, we turn to a discussion of the applicability of Sec. 523(a)(9).
A.
As in all cases of statutory interpretation, the starting point must be the statutory language itself. United States v. Ron Pair Enterprises, --- U.S. ----, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989); Consumer Product Safety Comm. v. GTE Sylvania, 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). “The strоng presumption [is] that Congress expresses its intent through the language it chooses.” INS v. Cardoza-Fonseca, 480 U.S. 421, 107 S.Ct. 1207, 1213 n. 12, 94 L.Ed.2d 434 (1987).
Section 523(a)(9) of the Bankruptcy Code excepts from discharge a debt
to any entity, to the extent that such debt arises from a judgment or consent decree entered in a court of record against the debtor wherein liability was incurred by such debtor as a result of the debtor‘s operation of a motor vehicle while legally intoxicated under the laws or regulations of any jurisdiction within the United States or its territories wherein such motor vehicle was operated and within which such liability was incurred; ...
Lugo structures his argument by parsing the statute into discrete elements. First, Lugo contends that the element of a “judgment” required by the section is absent, claiming that the municipal court judgment entered against Lugo does not suffice. Specifically, Lugo argues that his conviction does not fulfill the requirement of a “judgment” because it was not a judgment “wherein liability was incurred,” as stated in Sec. 523(a)(9). We conclude, however, that the Municipal Court judgment of conviction did impose “liability,” which has a broad application. See Black‘s Law Dictionary 823 (5th ed. 1979) (” ‘Liability” ... has been referred to as of the most comprehensive significance, including almost every character of hazard or responsibility, absolute, contingent, or likely.“); cf. In re Bennett, 80 B.R. 800, 801 (Bankr.E.D.Va.1988) (“There is no distinction between judgments [under Sec. 523(a)(9) ]; it is all-inclusive.“). Contra In re Rose, 86 B.R. 86, 88 (Bankr.E.D.Mich.1988). Moreover, it is a judgment “entered in a court of record” (the Municipal Cоurt), as required by Sec. 523(a)(9).
Second, Lugo argues that, through the use of the word “wherein” in the statute, Congress intended that the nondischargeable liability be found in the judgment. Since Lugo‘s municipal court judgment did not impose the Merit Rating Plan surcharge, Lugo contends that Congress did not contemplate its discharge under Sec. 523(a)(9). Lugo also argues that the surcharge does not “arise from” the judgment because the surcharge originated from the New Jersey Merit Rating Plan, rather than from the municipal court judgment. We conclude, however, that the statutory requirements have been met. The statutory provision that imposes the surcharge,
Finally, citing Gleason v. Thaw, 236 U.S. 558, 35 S.Ct. 287, 59 L.Ed. 717 (1915), Lugo contends that we must construe the section narrowly. Although we recognize that exceptions to discharge must be narrowly construed, Congress’ use of the words “to any entity” does not support an interpretation limiting the section‘s applicability to tort judgments only. See Lugo v. Paulsen, 94 B.R. at 342. Indeed, in construing a statute, we must give effect to “every clause and word” which Congress used. United States v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 520, 99 L.Ed. 615 (1955). Therefore, we conclude that the Merit Rating Plan surcharge falls within the statutory language of Sec. 523(a)(9).
B.
Lugo further contends that the district court‘s interpretation of Sec. 523(a)(9) conflicts with the section‘s legislative history, which, according to Lugo, demonstrates that Congress intended Sec. 523(a)(9) to except from discharge only civil tort liability resulting from drunk driving accidents. Therefore, we will review the history of the еnactment of Sec. 523(a)(9) to ensure that our reading of the statute is not plainly contradicted by clearly expressed legislative intent. I.N.S. v. Cardoza-Fonseca, 107 S.Ct. at 1213 n. 12; see also Mastro Plastics Corp. v. NLRB, 350 U.S. 270, 285, 76 S.Ct. 349, 359, 100 L.Ed. 309 (1956) (quoting United States v. Heirs of Boisdore, 8 How. 113, 122, 12 L.Ed. 1009 (1849) (” ‘In expounding a statute, we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy.“). Before proceeding, however, we note that we must not allow analysis of the legislative history to distort a clear statutory purpose. United States v. Martinez-Zayas, 857 F.2d 122, 129 (3d Cir.1988).
The initial legislative proposals in this area were never enacted. In 1982, Senator Danforth proposed a bill that would have added a subsection (e) to Sec. 523:
Any injury resulting in a judgment based upon liability of the debtor where, in connection with such liability such debtor was found to have operated a motor vehicle while legally intoxicated shall be deemed to be a willful and malicious injury for purposes of subsection (a)(6) of this section.
128 Cong.Rec. 2846 (March 2, 1982). Thereafter, a version of section 523(a)(9) was introduced by Senator Dole as part of the Omnibus Bankruptcy Improvements Act of 1983 (the Omnibus Act). S. 445, 129 Cong.Rec. 9953, 9957 (April 27, 1983). After Senator Dole introduced the Omnibus Act, Senator Danforth remarked: “Subtitle D is a modified versiоn of S. 605, a bill I introduced earlier this session ... [which] would have defined drunk driving as a willful and malicious offense for purposes of the bankruptcy statute. The provision in the bill before us achieves the same result by specifically stating that debts arising from drunk driving shall be nondischargeable.” 129 Cong. Rec. 9998 (April 27, 1983).
In his remarks accompanying the Omnibus Act, Senator Metzenbaum described the section on the dischargeability of debts incurred as a result of driving while intoxicated:
Also contained in this package is a modified version of a bill introduced by Senator Danforth which provides that a debt incurred as a result of drunk driving is not dischargeable. Under existing law, a debt resulting from a tortious act is nondischargeable only if the debt is the result of a “willful and malicious injury” to the property or person of another. In most States, the act of the drunk driver is grounded in negligence and is, thus, dischargeable. By making such debts nondischargeable, we can protect victims of the drunk driver and deter drunk driving.
129 Cong.Rec. 9974 (April 27, 1983)(statement of Senator Metzenbaum); see also 129 Cong.Rec. 9996 (April 27, 1983)(statement of Senator Heflin). The Report of the Senate Judiciary Committee on Senator Dole‘s Omnibus Act, entitled “Amendments Relating to the Discharge of Debts Incurred by Persons Driving While Intoxicated,” mirrors Senator Metzenbaum‘s statement, and concludes that “[w]here a debt was incurred by the debtor as a result of an act of drunk driving, that debt will not be dischargeable regardless of any court finding that willful, wanton, or reckless behavior was or was not involved.” Sen.Rep. No. 98-65, 98th Cong., 1st Sess. 43-44 (1983).
Although the Omnibus Act was not enacted, Sec. 523(a)(9) was eventually enacted as part of the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353, 98 Stat. 333 (1984). Accompanying the Act is the statement of Congressman Rodino: “Subtitle D clarifies present law relating to the nondischargeability of debts incurred by drunk drivers. Debts incurred by persons driving while intoxicated are presumed to be willfully and maliciously incurred under this provision.” 130 Cong.Rec. H7489 (daily ed. June 29, 1984), reprinted in 1984 U.S.Code Cong. & Admin.News 576, 577.
At least one legislator‘s statement accompanying the current version of Sec. 523(a)(9) suggest that Congress was concerned with the dischargeability of judgments in which the debtor had been held liable for an injury resulting from an act of drunk driving.11 See 130 Cong.Rec. S8887 (daily ed. June 29, 1984)(remarks of Senator Heflin), reprinted in 1984 U.S.Code Cong. & Admin.News 585 (“There is a modified version of a bill introduced by Senator Danforth which provides that a debt incurred as a result оf an accident caused by drunk driving is not dischargeable.“). The legislative history does not indicate, however, that this was the only type of debt that Congress intended to except from discharge under Sec. 523(a)(9). Indeed, Congress eventually enacted a much broader exception to discharge than that originally proposed by Senator Danforth, under whose bill “[a]ny injury resulting in a judgment based upon liability of the debtor where, in connection with such liability such debtor was found to have operated a motor vehicle while legally intoxicated shall be deemed to be a willful and maliciоus injury.” S.2159, 97th Cong., 2d Sess. In addition, the remarks of legislators suggest that their concern with the dischargeability of debts resulting from acts of drunk driving stemmed as much from a desire to deter drunk driving as to protect the victims of accidents. See, e.g., 129 Cong.Rec. 9947 (April 27, 1983)(statement of Senator Metzenbaum); 129 Cong.Rec. 9953, 9957 (April 27, 1983) (statement of Senator Danforth upon Senator Dole‘s introduction of Omnibus Act)(“The provision in the bill before us achieves the same result [as the bill earlier introduced by Senator Danforth] by specifically stating that debts arising from drunk driving shall be nondischargeable.“). See also In re Hudson, 859 F.2d 1418, 1422 (9th Cir.1988)(“Statements of ... legislators bear out the contention that combating drunk driving, and not protecting judgments, was the paramount concern of Congress.“). We also note that the Ninth Circuit, in addressing the dischargeability provision of Sec. 523(a)(9), found it “evident that Congress sought three objectives when it adopted Sec. 523(a)(9): (1) to deter drunk driving; (2) to ensure that those who caused injury by driving drunk did not escape civil liability through the bankruptcy laws; and (3) to protect victims of drunk driving.” In re Hudson, 859 F.2d at 1423.
We conclude that nothing in the congressional record suggests that Congress intended to limit application of Sec. 523(a)(9) solely to civil tort judgments. We also conclude that Cоngress intended Sec. 523(a)(9) to act as a deterrent to drunk driving. We recognize that Merit Rating Plan surcharges are civil and remedial, rather than punitive, in nature. Nevertheless, they do arise as a consequence of driving while intoxicated, and therefore may serve to deter drunk driving.
C.
As a final matter, in reaching our holding, we have not lost sight of the principle that the exceptions to discharge contained in Sec. 523(a) must be narrowly construed so as not to conflict with the underlying purpose of the Bankruptcy Code to give debtors a “fresh start.” See Perez v. Campbell, 402 U.S. 637, 648, 91 S.Ct. 1704, 1710-1711, 29 L.Ed.2d 233 (1971). There may be some circumstances where a debt that ultimately results from a drunk driving accident may not fall within Sec. 523(a)(9).12 See, e.g., In re Gill, 93 B.R. 684 (Bankr.W.D.Mo.1988) (fact that debtor “totaled” his car in accident while driving intoxicated did not render his debt to seller of car for purchase price nondischargeable under Sec. 523(a)(9)).
VI.
For the foregoing reasons, we hold that the surcharge levied under New Jersey‘s Merit Rating Plan,
We will therefore affirm the judgment of the district court.
Each side to bear its own costs.
Notes
(b) (repealed)
(2) Plan surcharges shall be levied for convictions under R.S. 39:4-50 [Operating under the influence of liquor or drugs] ... for violations occurring on or before January 1, 1983. Surcharges under this paragraph shall be levied annually for a three-year period, and shall not be less that $1000.00 per year for each of the first two convictions....
If, upon written notification from the Division of Motor Vehiсles, mailed to the last address of record with the division, a driver fails to pay a surcharge levied under this subsection, the license of the driver shall be suspended forthwith until the surcharge is paid to the Division of Motor Vehicles; ...
Id. Sec. 17:29A-35(b)(2) (West 1985), as amended Sec. 17:29A-35(b)(2) (West Supp.1989).
(1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any dеbt discharged under section 727 ..., whether or not such discharge is waived; [and]
(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived; ....
11 U.S.C. Sec. 524(a)(1) & (2) (Supp. V 1988).