Robinson v. McGuiganRobinson v. McGuigan
Lead Opinion
Plaintiff Carolyn Robinson, convicted of larceny in state court and ordered, as a condition of the probation to which she was sentenced, to repay the amount wrongfully received to the Connecticut Office of Adult Probation (“COAP”), appeals from a judgment of the United States District Court for the District of Connecticut, T.F. Gilroy Daly, Chief Judge, declaring that her obligation to make the criminal restitution payments to COAP was not discharged by the order of discharge granted Robinson in her subsequent bankruptcy proceeding under Chapter 7 of the Bankruptcy Code,
I. BACKGROUND
The material facts are not in dispute. In 1980, Robinson was convicted of larceny in the second degree for wrongfully receiving $9,932.95 in Public Assistance benefits
On February 5, 1981, Robinson filed a voluntary petition under Chapter 7 in the United States Bankruptcy Court for the District of Connecticut. Part of that petition was a schedule of creditors which listed, inter alios, CDIM as having a claim of $6,000 for “public assistance” and COAP as having a claim of $9,932.95 for “restitution.” On February 20, 1981, the bankruptcy court notified both COAP and CDIM of Robinson’s Chapter 7 petition, and informed them that April 27, 1981, was the last day for the filing of objections to discharge and “complaints to determine the dischargeability of any debt pursuant to
On May 20, 1981, Robinson’s attorney wrote COAP, stating that the Discharge Order discharged Robinson’s obligation to make restitution payments to COAP and that Robinson had been advised by the attorney that she need make no further restitution payments. The letter urged COAP, if it disagreed with the view that Robinson’s obligation had been discharged, to contact the attorney immediately. COAP apparently did not respond, and Robinson ceased making restitution payments.
Nearly three years later, in February 1984, COAP informed Robinson that its policy was “that the condition of probation concerning restitution is valid and not dis-chargeable,” that it “intend[ed] to enforce the [restitution] order to the fullest extent possible,” and that it was requesting that Robinson resume payment. Robinson responded by filing the present adversary proceeding in bankruptcy court against COAP, CDIM, and other state officials, seeking a judgment, inter alia, declaring that the Discharge Order had discharged her restitution obligations to COAP and CDIM, enjoining defendants from taking any steps to obtain further restitution payments, and awarding her compensatory and punitive damages and attorney’s fees. Robinson moved for preliminary injunctive relief against defendants’ taking steps to enforce payment, revoke probation, or report a violation of probation.
Following a brief trial on the merits, the bankruptcy court, Alan H.W. Shiff, Judge, entered a brief Memorandum and Proposed Order, reported at
[t]he State court’s order that the plaintiff make restitution to the State of Connecticut of $9,932.95 as a condition of probation following the plaintiff’s larceny conviction did not create a “debt” as defined in Code§ 101(11) . Therefore the plaintiff’s obligation to pay restitution was unaffected by this court’s May 14, 1981 discharge order.
Assuming arguendo that the state court’s order of restitution did create a “debt” within the purview of the Bankruptcy Code, such a debt is a “penalty” and therefore excepted from discharge under§ 523(a)(7) .
On this appeal, Robinson contends that her restitution obligation was a debt within the meaning of
II. DISCUSSION
Chapter 7 of the Bankruptcy Code allows an individual debtor who meets certain criteria, not in issue here, to obtain a discharge in bankruptcy which, “[e]xcept as provided in
(1) void[] 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 debt discharged undersection 727 ...; [and to]
(2) operate[] as an injunction against the commencement or continuation of an action, the employment of process, or any act, to collect, recover or offset any such debt as a personal liability of the debtor, or from property of the debtor____
The applicability of
A. The Restitution Obligation as a Debt
“Debt” is defined in the Code as “liability on a claim.”
(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or
(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured____
In ruling that Robinson’s criminal restitution obligation was not a debt, the bankruptcy court adopted the opinion in In re Pellegrino,
it would defy both logic and reason to allow a convicted person, who has been ordered to make restitution to his victim in lieu of incarceration, to use the Bankruptcy Code to escape the consequences of his crime. The definition of debt must therefore be read in the context of that policy in order to avoid that anomalous result.
In re Pellegrino,
We disagree with the reasoning and the conclusions of the Pellegrino line of cases. First, the literal terms of
1. The Breadth of the Definition of “Claim”
The legislative history of the Code reveals that in enacting
H.R. 8200 abolishes the concept of provability in bankruptcy cases. All claims against the debtor, whether or not contingent or unliquidated, will be dealt with in the bankruptcy case____ The proposed law will permit a complete settlement of the affairs of a bankrupt debt- or, and a complete discharge and fresh start.
... [Section 101(4) ] adopts an even broader definition of claim than is found in the present debtor rehabilitation chapters ____ By this broadest possible definition, and by the use of the term throughout the title 11, ... the bill contemplates that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case. It permits the broadest possible relief in the bankruptcy court.
House Report at 180, 309 (emphasis added; footnotes omitted), reprinted in 1978 U.S. Code Cong. & Ad.News 5963, 6141, 6266. The Senate Report that accompanied S.2266, reprinted in Bankruptcy Reform Act of 1978: Hearings on S.2266 and H.R. 8200 Before the Subcomm. on Improve-
Consistent with the congressional intent evinced by the legislative history, courts construing
Nonetheless, as indicated above, the majority of courts that have considered whether an obligation to make criminal restitution is a debt within the meaning of the Code have concluded that it is not. The lone exception, so far as we are aware, is In re Brown,
We agree with the general principle enunciated in Brown —although our analysis proceeds along somewhat different lines — and disagree with the majority view that an obligation to make criminal restitution payments is not a debt under the Code unless it is enforceable by the victim of the crime. As we read the language of
Nor do we see any indication that Congress intended some rights to restitution but not others to be within the definition of claim. There is no suggestion in the language of
Finally, we note that, by giving “claim” the broadest possible definition and defining “debt” in terms of a “claim,” Congress also sought to give the term “debt” its broadest possible scope. Thus, the congressional reports accompanying the proposed section that becam'e
In sum, we see no support in the language, the legislative history, or the statutory scheme as a whole for the view adopted by the Pellegrino line of cases that unless the victim of the crime has a right of payment, a criminal restitution obligation is not a debt within the meaning of the Code. We think the interpretation that more faithfully reflects Congress’s intent is the one we adopt here: that any right to the payment of restitution is a claim within the meaning of the Code; and that if any person or entity has a right to receive a payment of restitution from the bankruptcy debtor, the obligor has a debt within the meaning of the Code.
The court of appeals cases cited to us by defendants in support of their position that a criminal restitution obligation is not a debt within the meaning of the Bankruptcy Code are inapposite. In United States v. Brown,
2. “A Haven for Criminal Offenders”
Nor are we persuaded by the reasoning in the Pellegrino line of cases that because Congress stated that it did not intend the bankruptcy laws to provide a haven for criminals the Code’s definition of “debt” must be read as excluding an obligation to make restitution of unlawfully gained funds. The quotation from the legislative history upon which those cases rely as evidence of Congress’ concern in this area is drawn not from Congress’ discussion of the definitions of debt and claim, but from a discussion of the automatic stay of pending actions provided for in
Indeed, the scheme devised by Congress to prevent the bankruptcy laws from providing a haven for criminals reveals that Congress did not intend so to restrict its deliberately broadened definitions of those terms. Thus, one of the methods chosen to deny criminals a bankruptcy ploy was the provision in
Finally, it is plain that Congress was attentive to the possibility that the bankruptcy laws might be invoked by criminals in an effort to retain their unlawful gains, and it enacted both provisions that thwart those efforts and provisions that, despite those efforts, give precedence to the bankruptcy laws’ aim to provide relief for financial overextension. Thus, as noted,
Thus, Congress drew such lines as it thought appropriate to grant or deny criminals the benefits of the bankruptcy laws. Where Congress has carefully considered a particular policy and, in a complex and carefully drawn statute, has established a balance between that policy and other competing legislative goals, it is inappropriate for a court, based on its own view as to the relative importance of that policy, to create judicial exceptions to the clear language of the statute that are warranted neither by that language nor by the legislative history. See Central Trust Co. v. Official Creditors’ Committee of Geiger Enterprises, Inc.,
3. COAP’s Right to Payment
Having concluded that if any entity has a right to payment of a criminal restitution obligation that obligation is a debt within the meaning of the Code, the only remaining question in our analysis of whether or not Robinson’s obligation was such a debt is the question of whether COAP has such a right. We conclude that it does.
The Connecticut sentencing court, acting pursuant to
Plainly, then, COAP has the right to receive payment from Robinson and the power to seek enforcement of its right. The fact that the amount of money it has the right to receive has been fixed by the court is irrelevant to the existence of the right. Nor is it relevant that the right is enforceable by the threat of revocation of probation and incarceration rather than by the threat of levy and execution on the debtor’s property. The right is not the less cognizable because the obligor must suffer loss of freedom rather than loss of property upon failure to pay.
In sum, we conclude that since the judgment creating Robinson’s obligation to make restitution to COAP created a concomitant right in COAP to payment of that obligation, Robinson’s obligation to make those restitution payments was a debt
B. The Dischargeability of the Restitution Debt
The final question is whether Robinson’s restitution debt to COAP was dischargeable.
(a) A discharge undersection 727 ... of this title does not discharge an individual debtor from any debt—
(2) for obtaining money, property, services, or an extension, renewal, or refinance of credit, by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition; or
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for obtaining such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with the intent to deceive;
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;
(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss____
While at first glance all three subsections seem to have at least potential applicability to Robinson’s debt, only subsection (a)(7) need concern us on this appeal. Although Robinson’s obtaining Public Assistance benefits to which she was not entitled may well have occurred as a result of false representations within the meaning of subsection (a)(2), and although she was convicted of larceny, which is covered by subsection (a)(4), the Code does not exclude debts within these subsections from discharge if the creditor does not object to discharge. Thus,
the debtor shall be discharged from a debt specified in paragraph (2), (4), or (6) of subsection (a) of this section, unless, on request of the creditor to whom such debt is owned [sic ], and after notice and a hearing, the court determines such debt to be excepted from discharge under paragraph (2), (4), or (6), as the case may be, of subsection (a) of this section.
In the present case, the bankruptcy court gave COAP and CDIM notice in February 1981 that their claims were listed in Robinson’s petition; that April 27, 1981, was the last day for filing objections to discharge or complaints to determine dischargeability under
Under the Connecticut probation scheme, the state court is given discretion to order an offender to “make restitution of the fruits of his offense or make restitution, in an amount he can afford to pay or provide in a suitable manner, for the loss or damage caused thereby ”.
The fact that Connecticut’s probation scheme includes possible conditions of probation that are not compensatory does not detract from the conclusion that criminal restitution, to the extent that it does not exceed the amount of the loss and eventually goes to the victim of the loss, is compensatory. Neither are we persuaded that because the restitutionary condition itself, like other probationary conditions, is intended in part to punish the defendant and to foster his rehabilitation, it may not also be “compensation for actual pecuniary loss” within the meaning of
We conclude that a debt that has compensation for actual pecuniary loss as at least one of its purposes is not, to the extent that it does not exceed the amount of the loss, excepted from discharge by
There being no properly invoked provision that prevented the discharge of Robinson’s restitution debt, that debt was discharged by the Discharge Order.
C. Relief on Remand
In addition to requesting a judgment declaring that her restitution obligation had been discharged by the Discharge Order, Robinson sought an order enjoining defendants from taking any steps to recover further restitution payments and an order adjudging defendants in contempt of the Discharge Order and the automatic injunction imposed by
operates as an injunction against the commencement or continuation of an action, the employment of process, or any act, to collect, recover or offset any ... debt [discharged under§ 727 ] as a personal liability of the debtor, or from property of the debtor
Robinson also sought an award of compensatory and punitive damages, costs, and attorney’s fees.
Since we have determined that Robinson’s restitution debt was discharged by the Discharge Order, that Discharge Order automatically operated as an injunction against defendants’ taking any steps to recover further restitution payments from Robinson. Thus, Robinson’s claim for an injunction may be viewed as a request for clarification and particularization of the
Because defendants have raised various defenses and claims of immunity with respect to Robinson’s other claims, none of which has been addressed by the district court, we remand to the district court for consideration of those claims.
CONCLUSION
We reverse the judgment of the district court declaring that Robinson’s restitution obligation was not discharged and remand to the district court for (1) an order declaring Robinson’s restitution obligation discharged, (2) an order enjoining defendants from taking any steps to recover further restitution payments, and (3) further proceedings not inconsistent with this opinion.
Concurrence Opinion
(concurring):
I concur in Judge Kearse’s thorough and carefully considered opinion. At the same time I cannot refrain from expressing concern at the unfortunate result compelled by the language of the relevant provisions of the Bankruptcy Code. The effect in many instances will be to stultify and render useless criminal restitution payments as a means of punishing persons convicted of felonies involving theft or fraudulent procurement of money or property, in this case wrongfully obtaining $9,932.95 in Public Assistance benefits. The convicted criminal will simply use bankruptcy to escape the obligation to make criminal restitution payments ordered by the court. The court will accordingly be forced to impose punishment in the form of a “fine, penalty or forfeiture payable to and for the benefit of a governmental unit” in order to render the obligation non-dischargeable under
For these reasons I hope that Congress will remedy this unfortunate loophole by amending