Court Opinion

ID: 4245013
Source: CourtListenerOpinion
Date Created: 2018-02-14 19:00:30.026307+00
Date Added: 2024-06-11T14:43:31.972123
License: Public Domain

FILED
                                                            United States Court of Appeals
                             UNITED STATES COURT OF APPEALS         Tenth Circuit

                                   FOR THE TENTH CIRCUIT                February 14, 2018
                                 _________________________________
                                                                       Elisabeth A. Shumaker
                                                                           Clerk of Court
In re: BILLY RUSSELL DAMPIER,
JR.,

             Debtor.

------------------------------                               No. 17-1160
                                                         (BAP No. CO-16-020)
MEDICAL LIEN MANAGEMENT,                                       (BAP)
INC.; CREDIT INVESTMENTS,
INC.,

             Plaintiffs - Appellees,

v.

BILLY RUSSELL DAMPIER, JR.,

             Defendant - Appellant.
                         _________________________________

                                    ORDER AND JUDGMENT *
                                 _________________________________

Before MATHESON, BACHARACH, and PHILLIPS, Circuit Judges.
               _________________________________

*
      All parties requested oral argument, but we do not believe that it
would materially help us to decide this appeal. As a result, we are deciding
the appeal based on the briefs. See Fed. R. App. P. 34(a)(2); 10th Cir. R.
34.1(G).

      This order and judgment does not constitute binding precedent except
under the doctrines of law of the case, res judicata, and collateral estoppel.
But the order and judgment may be cited for its persuasive value under
Fed. R. App. P. 32.1(a) and 10th Cir. R. 32.1(A).
      The bankruptcy court granted summary judgment to Medical Lien

Management, Inc. and Credit Investments, Inc., holding that a Colorado

state court’s order to Mr. Dampier for criminal restitution was not

dischargeable under 11 U.S.C. § 523(a)(7). We affirm.

I.    Background

      The facts are undisputed. Mr. Dampier was convicted of theft for

stealing from his employers, and the court ordered restitution of

approximately $197,000. The following year, Mr. Dampier filed

bankruptcy, listing his restitution debt. Shortly thereafter, the employers

sought a determination that the restitution obligation was not dischargeable

under § 523(a)(7).

      The bankruptcy court held that Mr. Dampier could not discharge the

restitution obligation and granted the employers’ motion for summary

judgment. The Bankruptcy Appellate Panel affirmed.

II.   Standard of Review

      In this appeal, we engage in de novo review of the bankruptcy court’s

decision, applying the same standard used by the Bankruptcy Appellate

Panel. Jubber v. SMC Elec. Prods., Inc. (In re C.W. Mining Co.), 798 F.3d
983, 986 (10th Cir. 2015). When the bankruptcy court has granted summary

judgment, “we . . . review the record de novo, examining the evidence in

the light most favorable to [the nonmoving party] to determine whether

[the moving party] established that there was no genuine dispute as to any

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material fact and it was entitled to judgment as a matter of law.” Id.

(internal quotation marks omitted).

III.   Forfeiture Regarding Statutory Standing

       Section 523(a)(7) states in pertinent part: “A discharge under

[Chapter 7] does not discharge an individual debtor from any debt . . . 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.” 11 U.S.C. § 523(a)(7).

       Mr. Dampier argues that the employers lack standing to pursue an

exception to discharge under § 523(a)(7) because they are not

governmental units. This argument has been forfeited.

       On appeal, we generally consider only those arguments that have

been preserved in the debtor’s summary judgment briefs filed in

bankruptcy court. In re C.W. Mining Co., 798 F.3d at 987. An exception

exists for Article III standing, which can be raised at any time. New Eng.

Health Care Emps. Pension Fund v. Woodruff, 512 F.3d 1283, 1288

(10th Cir. 2008). But when the challenge to standing involves a statutory

ground, rather than Article III, the challenge can be forfeited. Niemi v.

Lasshofer, 770 F.3d 1331, 1345 (10th Cir. 2014). Because the debtor’s

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challenge rests on statutory grounds, the challenge has been forfeited. 1

IV.   Dischargeability

      Mr. Dampier’s challenge is invalid on the merits because his

restitution debt is nondischargeable under Kelly v. Robinson, 479 U.S. 36

(1986), and Troff v. Utah (In re Troff), 488 F.3d 1237 (10th Cir. 2007).

      In Kelly the bankruptcy debtor pleaded guilty to larceny based on

wrongful receipt of welfare, and the plea resulted in a prison sentence.

Kelly, 479 U.S. at 38. But the court suspended execution of the sentence

and placed the debtor on probation for five years, ordering her to make

monthly restitution payments to a state agency. Id. at 38-39. Shortly

thereafter, Ms. Robinson filed bankruptcy. Id. at 39.

      Although the agency was listed as a creditor, it did not file a proof of

claim or otherwise appear in the bankruptcy proceeding. Id. Ms. Robinson

obtained a discharge, and she made no further restitution payments. Id.

After the probation department informed her that it considered the

restitution obligation nondischargeable, Ms. Robinson sought a declaratory

judgment to determine the issue. Id. at 39-40.

1
      Characterization as statutory standing is misleading because the
challenge ultimately involves the availability of private cause of action
under § 523(a)(7). Lexmark Int’l, Inc. v. State Control Components, Inc.,
134 S. Ct. 1377, 1387 n.4 (2014); Safe Streets All. v. Hickenlooper,
859 F.3d 865, 887 (10th Cir. 2017). The availability of a private cause of
action involves the sufficiency of a cause of action rather than the court’s
power to act. Safe Streets All., 859 F.3d at 887.

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      The bankruptcy court held that Ms. Robinson’s restitution obligation

was nondischargeable under § 523(a)(7), and the Supreme Court agreed:

“[W]e hold that § 523(a)(7) preserves from discharge any condition a state

criminal court imposes as part of a criminal sentence.” Kelly, 479 U.S. at

40, 50. The Court explained that even though “restitution is forwarded to

the victim,” § 523(a)(7) does not “allow[] the discharge of a criminal

judgment that takes the form of restitution” because “[t]he criminal justice

system is not operated primarily for the benefit of victims, but for the

benefit of society as a whole.” Id. at 52.

      The Supreme Court concluded that state law had authorized the

“judge to impose any of eight specified conditions of probation, as well as

any other conditions reasonably related to [the defendant’s] rehabilitation.”

Id. (internal quotation marks omitted). Restitution was among the eight

conditions specified in the statute, which allowed the court to fix the

amount and manner of payment “in an amount [the defendant] can afford to

pay . . . for the loss or damage caused thereby.” Id. (internal quotation

marks omitted). Because the state criminal proceedings focused 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 such proceedings operate for the benefit of [a governmental

unit], the State.” Id. at 53 (internal quotation marks omitted).

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      In Troff, the debtor pleaded guilty to arson. Troff, 488 F.3d at 1238.

As part his sentence, the Utah state court placed Mr. Troff on probation

and set a probationary requirement to pay $239,696 through monthly

installments. Id. These installments were paid to the state, which

forwarded the payments to the victim. Id. At the end of probation, the

amount of unpaid restitution was converted to a civil judgment in favor of

the victim. Id.

      Mr. Troff filed bankruptcy and we held that the debt was not

dischargeable under § 523(a)(7), reasoning that Kelly had clarified that any

obligation would be nondischargeable when it came as part of a criminal

sentence. Id. at 1240. The fact that the restitution payments in Troff were

forwarded to the victim did not alter the fact that they were part of a state

criminal sentence, which prevented discharge under § 523(a)(7). Id. at

1240-41. And the ultimate conversion of the unpaid obligation to a civil

judgment did not change the outcome: “Although this conversion may alter

the consequences for Mr. Troff’s non-payment, it does not change the fact

that the court-imposed restitution was part of his criminal sentence.” Id. at

1241 n.1.

      Kelly and Troff squarely apply here, where the restitution obligation

arose from Mr. Dampier’s criminal sentence. See People v. Rogers, 20 P.3d
1238, 1239 (Colo. App. 2000) (holding that “[r]estitution as a condition of

probation is as much a part of a criminal sentence as a fine or other

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penalty”). Because the restitution obligation arose from the criminal

sentence, Kelly and Troff apply and § 523(a)(7) precluded discharge of

Mr. Dampier’s restitution obligation.

V.   Conclusion

     We conclude that Mr. Dampier forfeited his challenge to the

employers’ statutory standing to contest discharge of the restitution debt.

On the merits, we conclude that discharge of the debt is foreclosed under

11 U.S.C. § 523(a)(7). Thus, we affirm.

                                        Entered for the Court

                                        Robert E. Bacharach
                                        Circuit Judge

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