Pennsylvania Dpw v. Davenport, 495 U.S. 552 (1990)

Pennsylvania Department of Public Welfare v. Davenport

No. 89-156

Argued Feb. 20, 1990
Decided May 29, 1990
495 U.S. 552

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Syllabus

Respondents pleaded guilty to welfare fraud and were ordered by a Pennsylvania court, as a condition of probation, to make monthly restitution payments to petitioner county probation department for petitioner state welfare department. Subsequently, respondents filed a petition under Chapter 13 of the Bankruptcy Code in the Bankruptcy Court, listing the restitution obligation as an unsecured debt. After the probation department commenced a probation violation proceeding in state court, alleging that respondents had failed to comply with the restitution order, respondents filed an adversary action in the Bankruptcy Court seeking both a declaration that the restitution obligation was a dischargeable debt and an injunction preventing the probation department from undertaking any further efforts to collect on the obligation. The Bankruptcy Court held that the obligation was an unsecured debt dischargeable under Chapter 13. The District Court reversed, relying on Kelly v. Robinson, 479 U.S. 36, which held that restitution obligations are nondischargeable in Chapter 7 proceedings because they fall within Code § 523(a)(7)’s exception to discharge for a debt that is a government "fine, penalty, or forfeiture . . . and is not compensation for actual pecuniary loss." The District Court emphasized the Court’s dicta in Kelly that Congress did not intend to make criminal penalties "debts" under the Code. The court also emphasized the federalism concerns that are implicated when federal courts intrude on state criminal proceedings. The Court of Appeals reversed.

Held: The Code’s language and structure demonstrate that restitution obligations constitute "debts" within the meaning of § 101(11), and are therefore dischargeable under Chapter 13. Pp. 557-564.

(a) Section 101(11)’s definition of "debt" as a "liability on a claim" reveals Congress’ intent that the meanings of "debt" and "claim" be coextensive. Furthermore, § 101(4)(A)’s definition of a "claim" as a "right to payment" broadly contemplates any enforceable obligation of the debtor, including a restitution order. Petitioners’ reliance on Kelly’s discussion emphasizing the special purposes of punishment and rehabilitation that underlie the imposition of restitution obligations is misplaced. Unlike § 523(a)(7), which explicitly ties its application to the purpose of the compensation, § 104(4)(A) makes no reference to the objectives the State seeks to serve in imposing an obligation. That the probation department’s enforcement mechanism is criminal rather than civil also does not alter the restitution order’s character as a "right of payment" and, indeed, may make the right greater than that conferred by an ordinary civil obligation, since it is secured by the debtor’s freedom, rather than his property. Pp. 557-560.

(b) Other Code provisions do not reflect a congressional intent to exempt restitution orders from Chapter 13 discharge. Section 362(b)(1), which removes criminal prosecutions of the debtor from the operation of the Code’s automatic stay provision, is not inconsistent with granting him sanctuary from restitution orders under Chapter 13. Congress could well have concluded that maintaining criminal prosecutions during bankruptcy proceedings is essential to the functioning of government, but that a debtor’s interest in full and complete release of his obligations outweighs society’s interest in collecting or enforcing a restitution obligation outside the agreement reached in a Chapter 13 plan. Nor must § 726(a)(4) -- which in effect establishes the order for settlement of claims under such plans, assigning a low priority to a claim "for any fine, penalty, or forfeiture" -- be construed to apply only to civil fines, and not to criminal restitution orders in order to assure that governments do not receive disfavored treatment relative to other creditors. That construction conflicts with Kelly’s holding that the quoted phrase, when used in § 523(a)(7), applies to criminal restitution obligations. It also highlights the tension between Kelly’s interpretation of § 523(a)(7) and its dictum suggesting that restitution obligations are not "debts." If Congress believed that such obligations were not "debts" giving rise to "claims," it would have had no reason to except the obligations from discharge, and § 523(a)(7) would be mere surplusage. Moreover, Kelly is faithful to the language and structure of the Code: Congress defined "debt" broadly, and carefully excepted particular debts from discharge where policy considerations so warranted. In thus securing a broader discharge of debtors under Chapter 13 than Chapter 7, Congress chose not to extend § 523(a)(7)’s exception to Chapter 13. Thus, it would override the balance Congress struck in crafting the appropriate discharge exceptions to construe "debt" narrowly in this context. Pp. 560-563.

(c) This holding does not signal a retreat from the principles applied in Kelly. The Code will not be read to erode past bankruptcy practice absent a clear indication that Congress intended such a departure. However, where, as here, congressional intent is clear, the Court’s function is to enforce the statute according to its terms, even where this means concluding that Congress intended to interfere with States’ administration of their criminal justice systems. Pp. 563-564.

871 F.2d 421 (CA3 1989), affirmed.

MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, STEVENS, SCALIA, and KENNEDY, JJ., joined. BLACKMUN, J., filed a dissenting opinion, in which O’CONNOR, J., joined, post, p. 564.