Title: MARK ALLEN DRAKE V. THE STATE OF WYOMING

State: wyoming

Issuer: Wyoming Supreme Court

Document:

MARK ALLEN DRAKE V. THE STATE OF WYOMING2008 WY 48182 P.3d 497Case Number: S-07-0092Decided: 04/22/2008
APRIL TERM, A.D. 2008

 
 
MARK 
ALLEN DRAKE,Appellant(Defendant),v.THE STATE OFWYOMING,Appellee(Plaintiff).

 
 
Appeal 
from the DistrictCourtofConverseCounty

The 
Honorable John C. Brooks, Judge

 
 

Representing 
Appellant:

Diane 
Lozano, State Public Defender; Tina N. Kerin, Appellate Counsel; and Sylvia Lee 
Hackl*, Cheyenne, Wyoming.

 
 

Representing 
Appellee:

Patrick 
J. Crank, Wyoming Attorney General; Terry L. Armitage, Deputy Attorney General; 
D. Michael Pauling, Senior Assistant Attorney General; and Dana J. Lent, 
Assistant Attorney General.

 
 
Before 
VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, 
JJ.

 
 
*Order 
Granting Counsel to Withdraw entered March 10, 2008.

 
 
HILL, 
Justice.

 
 
[¶1]      Convicted of 
larceny by bailee, Appellant, Mark Allen Drake (hereafter "Drake"), challenges 
the imposition of a restitution order.  
Complicating matters, the restitution was imposed after Drake filed a 
voluntary Chapter 7 bankruptcy petition and was granted a debt 
discharge.

 
 
[¶2]      We 
affirm.

 
 
ISSUE

 
 
[¶3]      Drake states his 
only issue as follows:

 
 

1.      
Whether 
the trial court erred in ordering [Drake] to pay restitution, since all amounts 
owed to Mr. Gulley had been discharged through the bankruptcy proceeding, and 
the restitution was intended primarily to collect a debt.

 
 
FACTS

 
 
[¶4]      This case arises 
from a failed Douglas, 
Wyoming, car dealership.  Drake and Dean Gulley (hereafter 
"Gulley") formed D&M Motors, LLC, in October of 2000, for the purpose of 
selling used cars.  To obtain 
inventory and establish a sales lot, the business secured loans from First 
National Bank.  The men opened their 
doors for business in December of 2000, but shortly thereafter, the business 
fell on hard times.  Gulley was 
seriously injured in a car accident, and, as a result, Drake began to shoulder 
much of the burden of D&M.  The 
business was ultimately unsuccessful.  
In December of 2003, First National Bank closed the doors of D&M and 
in discovering that the inventory was depleted, the bank also discovered that 
Drake was indeed selling vehicles which the bank had financed, but instead of 
paying the bank, Drake was keeping the sales proceeds.

 
 
[¶5]      Following this 
discovery, three legal actions were initiated:  a civil action, this criminal action, 
and a bankruptcy proceeding.  The 
civil proceeding began in March of 2004 when Gulley filed a civil complaint 
against Drake, alleging causes of action for conversion, negligence, fraud, and 
conspiracy.1  In August of 2004, Drake was charged 
with eight felonies: four counts of defrauding a creditor; one count of larceny 
by bailee; one count of larceny; and two counts of false swearing.   The criminal proceedings were continued 
while Drake underwent treatment for cancer.  Nevertheless, a trial was scheduled for 
February of 2006.  Meanwhile, in 
July of 2005, Drake filed a voluntary Chapter 7 bankruptcy petition in 
Colorado.  Gulley was listed as a creditor for the 
amount of $382,650.  No creditor 
objections were filed, and in November of 2005, Drake received a debt 
discharge.2

 
 
[¶6]      Instead of taking 
the criminal charges to trial, the matter was resolved by plea bargain.  In February of 2006, the State filed an 
amended information charging Drake 
with five counts:  three counts of 
defrauding a creditor, one count of larceny by bailee, and one count of false 
swearing.  On February 21, 2006, 
Drake pleaded guilty to larceny by bailee, and the other charges were 
dismissed.  The State requested that 
a restitution hearing be conducted at a later time.  Sentencing proceeded, however, and the 
court imposed a sentence of two to four years, which was suspended in favor of 
four years of supervised probation.  
Later, the court conducted multiple restitution hearings, and, in the 
end, ordered Drake to pay Gulley restitution in the amount of 
$38,890.31.

 
 
[¶7]      This appeal 
followed.

 
 

STANDARD 
OF REVIEW 

 

 

[¶8]      Typically, the 
standard of review of restitution ordered is confined to a search for procedural 
error or a clear abuse of discretion.  
Penner v. State, 2003 WY 143, 
¶ 7, 78 P.3d 1045, 1047-48 (Wyo. 2003).  However, there is a distinction between 
the standard of review of factual challenges to the amount of restitution 
ordered and challenges to the authority of the court to make a restitution 
award.  Challenges to the factual 
basis of an award of restitution can be waived if the defendant enters into a 
plea agreement and then fails to object at sentencing.  Penner, ¶ 7, 78 P.3d  at 1047.  If the defendant does not object to the 
amount of restitution ordered by the district court, the reviewing court must 
review for plain error.  If the 
defendant challenges the authority of the district court to order restitution, 
then review is under a de novo 
statutory interpretation standard because a court has only that authority to 
act which is conferred by the subject statute.  Id.

 
 
DISCUSSION

 
 
[¶9]      Drake claims that 
through his Chapter 7 bankruptcy petition, the District Court of Colorado 
Bankruptcy Court discharged his obligation to pay criminal restitution in this 
case.  Therefore, he argues that the 
restitution award is precluded by the bankruptcy discharge.  In response, the State submits that the 
district court acted within its authority in ordering 
restitution.

 
 
[¶10]   There are inherent differences 
between the creditors and debtors of bankruptcy proceedings and the victims and 
defendants of criminal proceedings. These differences are reflected in the 
goals of the different proceedings. Cabla v. State, 6 S.W.3d 543, 547-50 
(Tex.Crim.App. 1999).

 
 
[¶11]   We have addressed questions about 
restitution before.  In Abeyta v. State, 2002 WY 44, ¶ 1, 
42 P.3d 1009, 1010-11 (Wyo. 2002), we were asked to interpret the restitution 
statutes to determine whether or not settlement of civil liability claims 
extinguished a restitution order imposed against a criminal defendant during 
sentencing. The district court ruled that a civil liability settlement entered 
into by Abeyta and two victims of his criminal conduct did not extinguish the 
restitution order earlier imposed against him during sentencing for his criminal 
convictions, and the petition was denied.  
Id.  
We affirmed the district court on appeal reasoning, in part, that, 
"Uniformly, courts hold that a civil settlement or release 
does not absolve the defendant of criminal restitution."  Id. 
at ¶ 16, 42 P.3d  at 1013 (citing 
State v. DeAngelis, 329 N.J. Super. 178, 747 A.2d 289, 294 (N.J. Super. 
A.D. 2000)).  We also held that 
private parties cannot simply agree to waive the application of a criminal 
statute.  Id.

 
 
[¶12]   Abeyta also gave us the platform to 
reiterate the four purposes of sentencing: (1) rehabilitation; (2) punishment 
(specific deterrence and retribution); (3) example to others (general 
deterrence); and (4) removal from society (protection of the public).  "[R]estitution imposed by trial courts 
under these statutes is a criminal penalty meant to have deterrent and 
rehabilitative effects."  Id. at ¶ 15, 42 P.3d  at 1013.  Generally, a state criminal justice 
system that imposes restitution during sentencing as a condition of probation 
and as part of the judgment of conviction is considered a penal sanction rather 
than civil in nature.  Id.

 
 
[¶13]   In contrast to the aim of the 
criminal justice system, the goal of the bankruptcy system is not to punish, but 
to allow the honest debtor to restart his financial life.

 
 
In 
Kelly [v. Robinson, 
479 U.S. 36, 107 S. Ct. 353, 93 L. Ed. 215 
(1986)] the Supreme Court described the goal of bankruptcy proceedings.  "A bankruptcy proceeding is civil in 
nature and is intended to relieve an honest and unfortunate debtor of his debts 
and to permit him to begin his financial life anew." Kelly, 479 U.S.  at 46, 107 S. Ct. 353. The 
debtor selects the chapter of the Bankruptcy Code according to whether he needs 
to completely start over or whether he only needs to re-organize his debts. In 
the former situation, the debtor files for liquidation of his debts, or straight 
bankruptcy, under Chapter 7 of the Bankruptcy Code. "[Chapter 7's] purpose is to 
achieve a fair distribution to creditors of whatever non-exempt property the 
debtor has and to give the individual debtor a fresh start through the discharge 
in bankruptcy."  GEORGE M. TREISTER 
ET AL, FUNDAMENTALS OF BANKRUPTCY LAW, § 1.04, p. 17 (4th ed. 1996). Any person 
is eligible for a Chapter 7 liquidation.  
See id. § 3.01, at 115.

In 
contrast, the debtor files for adjustment of his debts under Chapter 13 of the 
Bankruptcy Code. Chapter 13 is a rehabilitation vehicle for an individual with a 
regular income. The debtor's future earnings are budgeted to pay the creditors 
in whole or in part, and the debtor gets a fresh start from the discharge 
granted at the end of the case. See id. § 1.04, at 19. A person must have 
a regular income with unsecured debts of less than $250,000 and secured debts of 
less than $750,000 to qualify for a Chapter 13 adjustment. See id. § 
3.01, at 117. An individual debtor or sole proprietor of a small business with a 
regular income may seek an arrangement with creditors under Chapter 13 in order 
to continue to operate his or her business. See BENJAMIN WEINTRAUB, ET 
AL, BANKRUPTCY LAW MANUAL ¶ 1.02[2], at 1-5 (3rd ed. 1992).  The goal of a bankruptcy 
proceeding is to relieve the debtor of his financial obligations and permit 
the debtor to start his or her financial life over. The goals and purposes of 
restitution and bankruptcy differ greatly.

 
 

Cabla, 6 W.S.3d at 546-547 (footnote 
omitted).

 
 
[¶14]   In reconciling the criminal system 
with the bankruptcy system, it is commonly recognized that "criminal restitution 
may generally be imposed despite a previous discharge of the underlying 
debts in bankruptcy[.]"  
Cabla, 6 S.W.3d  at 550 (Meyers, J. concurring).  New Mexico, in State v. Muzio, 732 P.2d 879, 882 (N.M. App. 1987), recognized this very principle.  The Muzio court acknowledged that "[t]he provisions of the Bankruptcy Act are not so intrusive so 
as to pardon a bankrupt from the consequences of a criminal offense," and 
concluded that "[t]he filing by a defendant for bankruptcy or the obtaining of a 
discharge in bankruptcy does not void a restitution order imposed as a condition 
of probation under a state criminal judgment." Id. at 732 P.2d., 
881-82.

 
 
[¶15]   When faced with a similar situation 
in Kelly v. Robinson, 479 U.S. 36, 47, 107 S. Ct. 353, 93 L. Ed. 2d 216, (1986), the United States Supreme Court concluded that a Chapter 7 
liquidation of debt proceeding in bankruptcy cannot discharge a restitution 
obligation, especially when considering the inherent differences between the 
goals of the bankruptcy system and the goals of a restitution order.  In Kelly, the question was whether or not a 
state court restitution order imposed on a criminal defendant as a condition of 
probation in a larceny case involving the wrongful receipt of welfare benefits 
constituted a nondischargeable fine or penalty as opposed to compensation for 
actual pecuniary loss. Because criminal proceedings focus on the state's 
interests in rehabilitation and punishment, rather than the victim's desire for 
compensation, the court concluded that restitution orders imposed in criminal 
cases are nondischargeable penalties payable for the benefit of a governmental 
unit and are not compensation for actual pecuniary loss.

 
 
[¶16]   Several courts interpreting 
Kelly and 11 U.S.C. § 523(a)(7) have held that an order of criminal 
restitution payable to a governmental entity is exempt from discharge in 
bankruptcy.  See In re Thompson, 16 F.3d 576, 577-78 (4th Cir. 1994), cert. denied, 512 U.S. 1221, 114 S. Ct. 2709, 129 L. Ed. 2d 836 (1994) (holding that any condition a state criminal 
court imposes as part of a criminal sentence is not dischargeable in 
bankruptcy); United States v. Vetter, 895 F.2d 456, 459 (8th Cir. 1990) 
(stating that criminal restitution orders are exempt from discharge in 
bankruptcy proceedings); In re Warfel, 268 B.R. 205, 213 (B.A.P. 
9th Cir. 2001) (holding that because the restitution was ordered as part of a 
state criminal prosecution, it was excepted from discharge in bankruptcy); Steiger v. Clark County (In re Steiger), 
159 B.R. 907, 913 (B.A.P. 9th Cir. 1993) (concluding that order of 
restitution imposed as part of a criminal sentence was non-dischargeable in 
bankruptcy).

 
 
[¶17]   Drake seeks to distinguish his case 
from the likes of Kelly and Cabla.  
He directs our attention instead to In re Brinkman, 123 B.R. 318, 319 
(Bkrtcy. D.Minn. 1991).  In Brinkman, the issue was whether the 
bankruptcy court could enjoin a criminal prosecution which had been filed within 
two weeks of the debtor's bankruptcy petition.  The debtor argued that the prosecution 
was nothing more than "the commencement or continuation of an action  to 
collect."  Id. at 321.  The court applied the "principal 
motivation test" to determine whether or not the purpose of the prosecution was 
simply to collect a debt.

 
 
            
If it appears that the criminal prosecution has been instituted primarily 
to vindicate the rights of the public by punishing criminal conduct and to 
discourage such criminal conduct by others, the bankruptcy court will usually 
not interfere with the criminal process.  
However, if it appears that the principal motivation is not punishment or 
prevention but to recover a dischargeable debt either by a negotiated compromise 
of the criminal charge or by obtaining an order of restitution after conviction, 
the bankruptcy court may enjoin criminal prosecution.

 
 

Brinkman, 123 B.R.  at 322 (quoting In re Kaping, 13 B.R. 621, 623 (Bkrtcy. 
D.Or. 1981)).

 
 
[¶18]   Drake encourages us to apply the 
same test to the facts here.   
However, we are unable to make that application for two main 
reasons.  "First, the court's 
authority for [the principal motivation test] was a Bankruptcy Court decision, 
In re Kaping, 13 BR 621, 623 (Bkrtcy. 
D.Or. 1981), which pre-dated both the Kelly v. Robinson decision in 1986 and 
the Congressional alterations of the Bankruptcy Code in 1990."  Cabla, 6 S.W.3d 549, n.5.  
Even in Kaping, the 
bankruptcy court acknowledged that it does not generally issue orders which 
would interfere with the enforcement of the criminal law.  In re Kaping, 13 BR at 622 (quoting 11 
U.S.C. § 362(b)(1)).  "The first 
exception is of criminal proceedings against the debtor.  The bankruptcy laws are not a haven for 
criminal offenders, but are designed to give relief from financial 
over-extension.  Thus, criminal 
actions and proceedings may proceed in spite of bankruptcy.  House Report No. 95-595, 95th 
Cong., 1st Sess. (1977) 342-3; Senate Report No. 95-989, 
95th Cong., 2nd Sess. (1978) 
51-2[.]"  Id. at 
623.

 
 
[¶19]   Secondly, we cannot apply the 
principal motivation factor test because we are constrained by plain error 
review, the first prong of which Drake has not satisfied.  We recently stated in Harris v. 
State, 2008 WY 23, 
¶ 12, 177 P.3d 1166, 1170 (Wyo. 2008), that plain 
error review requires the appellant to prove the 
following:

 
 
(1)  [T]he 
record is clear as to the alleged error; (2) a clear and unequivocal rule of law 
was transgressed; and (3) the appellant suffered material prejudice to a 
substantial right.

 
 
After 
reviewing the record, we are unable to find any error, let alone a "clear and 
unequivocal rule of law" that was "violated in a clear and obvious way."  Drake was criminally charged on October 
13, 2004, which was well before he filed for bankruptcy on July 18, 2005.  It cannot be said that the pursuit of 
those criminal charges was simply an effort to collect restitution, as Drake 
suggests.  Instead, Drake admitted 
to spending company funds for personal use, though he insisted his actions were 
not improper.

 
 
[¶20]   Restitution was ordered under the 
court's discretion.  See Frederick v. State, 2007 WY 27, 
¶ 15, 151 P.3d 1136, 1141 (Wyo. 2007) (district court has the authority to 
impose restitution in a criminal case in accordance with the power afforded by 
statute).  We conclude that Drake's 
previous Chapter 7 bankruptcy discharge did not discharge the district court's 
restitution order and, hence, we affirm the district 
court.

 
 
FOOTNOTES

 
 

1Drake filed 
an answer to Gulley's complaint and amended complaint, but it appears there has 
been no further action on the civil case.

 
 

2There is no 
official record reference to this bankruptcy.  However, because the parties both agree 
that the proceeding occurred and Drake was indeed granted a discharge, we 
proceed with that fact in mind.