Pennsylvania DPW v. Davenport
495 U.S. 552 (1990)

Annotate this Case

U.S. Supreme Court

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. 495 U. S. 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

Page 495 U. S. 553

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. 495 U. S. 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. 495 U. S. 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

Page 495 U. S. 554

concluding that Congress intended to interfere with States' administration of their criminal justice systems. Pp. 495 U. S. 563-564.

Page 495 U. S. 555

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. 495 U. S. 564.

Justice MARSHALL delivered the opinion of the Court.

In Kelly v. Robinson,479 U. S. 36, 479 U. S. 50 (1986), this Court held that restitution obligations imposed as conditions of probation in state criminal actions are nondischargeable in proceedings under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 701 et seq. The Court rested its holding on its interpretation of the Code provision that protects from discharge any debt that is "a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss." § 523(a)(7). Because the Court determined that restitution orders fall within § 523(a)(7)'s exception to discharge, it declined to reach the question whether restitution orders are "debts" as defined by § 101(11) of the Code. In this case, we must decide whether restitution obligations are dischargeable debts in proceedings under Chapter 13, § 1301 et seq. The exception to discharge relied on in Kelly does not extend to Chapter 13. We conclude, based on the language and structure of the Code, that restitution obligations are "debts" as defined by § 101(11). We therefore hold that such payments are dischargeable under Chapter 13.

I

In September 1986, respondents Edward and Debora Davenport pleaded guilty in a Pennsylvania court to welfare

Page 495 U. S. 556

fraud, and were sentenced to one year's probation. As a condition of probation, the state court ordered the Davenports to make monthly restitution payments to the county probation department, which in turn would forward the payments to the Pennsylvania Department of Public Welfare, the victim of the Davenports' fraud. Pennsylvania law mandates restitution of welfare payments obtained through fraud, Pa.Stat.Ann., Tit. 62, § 481(c) (Purdon Supp.1989), and directs the probation section to "forward to the victim the property or payments made pursuant to the restitution order," 18 Pa.Cons.Stat. § 1106(e) (1988).

In May, 1987, the Davenports filed a petition under Chapter 13 in the United States Bankruptcy Court for the Eastern District of Pennsylvania. In their Chapter 13 statement, they listed their restitution obligation as an unsecured debt payable to the Department of Public Welfare. Soon thereafter, the Adult Probation and Parole Department of Bucks County (Probation Department) commenced a probation violation proceeding, alleging that the Davenports had failed to comply with the restitution order. The Davenports informed the Probation Department of the pending bankruptcy proceedings and requested that the Department withdraw the probation violation charges until the bankruptcy issues were settled. The Probation Department refused, and the Davenports filed an adversary action in 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.

While the adversary action was pending, the Bankruptcy Court confirmed the Davenports' Chapter 13 plan without objection from any creditor. [Footnote 1] Although notified of the

Page 495 U. S. 557

proceedings, neither the Probation Department nor the Department of Public Welfare filed a proof of claim in the bankruptcy action. Meanwhile, the Probation Department proceeded in state court on its motion to revoke probation. Although the court declined to revoke the Davenports' probation and extended their payment period, it nonetheless ruled that its restitution order remained in effect.

The Bankruptcy Court subsequently held that the Davenports' restitution obligation was an unsecured debt dischargeable under 11 U.S.C. § 1328(a). 83 B.R. 309 (ED Pa. 1988). On appeal, the District Court reversed, holding that state-imposed criminal restitution obligations cannot be discharged in a Chapter 13 bankruptcy. 89 B.R. 428 (ED Pa.1988). The District Court emphasized the federalism concerns that are implicated when federal courts intrude on state criminal processes, id. at 430, and relied substantially on dicta in Kelly, supra, 479 U.S. at 479 U. S. 50, where the Court expressed "serious doubts whether Congress intended to make criminal penalties debts'" under the Code, 479 U.S. at 479 U. S. 50. The Court of Appeals for the Third Circuit reversed, concluding that "the plain language of the chapter" demonstrated that restitution orders are debts within the meaning of the Code, and hence dischargeable in proceedings under Chapter 13. In re Johnson-AIlen, 871 F.2d 421, 428 (1989).

To address a conflict among bankruptcy courts on this issue, [Footnote 2] we granted certiorari, 493 U.S. 808 (1989).

II

Our construction of the term "debt" is guided by the fundamental canon that statutory interpretation begins with the

Page 495 U. S. 558

language of the statute itself. Landreth Timber Co. v. Landreth,471 U. S. 681, 471 U. S. 685 (1985). Section 101(11) of the Bankruptcy Code defines "debt" as a "liability on a claim." This definition reveals Congress' intent that the meanings of "debt" and "claim" be coextensive. See also H.R. Rep. No. 95-595, p. 310 (1977); S.Rep. No. 95-989, p. 23 (1978), U.S.Code Cong. & Admin.News 1978, p. 5787. Thus, the meaning of "claim" is crucial to our analysis. A "claim" is 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."

11 U.S.C. § 101(4)(A) (emphasis added). As is apparent, Congress chose expansive language in both definitions relevant to this case. For example, to the extent the phrase "right to payment" is modified in the statute, the modifying language ("whether or not such right is . . . ") reflects Congress' broad, rather than restrictive, view of the class of obligations that qualify as a "claim" giving rise to a "debt." See also H.R.Rep. No. 95-595, supra, at 309, U.S.Code Cong. & Admin.News 1978, p. 6266 (describing definition of "claim" as "broadest possible" and noting that Code "contemplates that all legal obligations of the debtor . . . will be able to be dealt with in the bankruptcy case"); accord, S.Rep. No. 95-989, supra, at 22, U.S.Code Cong. & Admin.News 1978, p. 5808.

Petitioners maintain that a restitution order is not a "right to payment," because neither the Probation Department nor the victim stands in a traditional creditor-debtor relationship with the criminal offender. In support of this position, petitioners refer to Kelly's discussion of the special purposes of punishment and rehabilitation underlying the imposition of restitution obligations. 479 U.S. at 479 U. S. 52. Petitioners also emphasize that restitution orders are enforced differently from other obligations that are considered "rights to payment."

In Kelly, the Court decided that restitution orders fall within 11 U.S.C. § 523(a)(7)'s exception to discharge provision, which protects from discharge any debt

"to the extent

Page 495 U. S. 559

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."

In reaching that conclusion, the Court necessarily found that such orders are "not compensation for actual pecuniary loss." Rather, "[b]ecause criminal proceedings focus on the State's interests in rehabilitation and punishment," the Court held that "restitution orders imposed in such proceedings operate for the benefit of' the State" and not "`for . . . compensation' of the victim." 479 U.S. at 479 U. S. 53.

Contrary to petitioners' argument, however, the Court's prior characterization of the purposes underlying restitution orders does not bear on our construction of the phrase "right to payment" in § 101(4)(A). The Court in Kelly analyzed the purposes of restitution in construing the qualifying clauses of § 523(a)(7), which explicitly tie the application of that provision to the purpose of the compensation required. But the language employed to define "claim" in § 101(4)(A) makes no reference to purpose. The plain meaning of a "right to payment" is nothing more nor less than an enforceable obligation, regardless of the objectives the State seeks to serve in imposing the obligation.

Nor does the State's method of enforcing restitution obligations suggest that such obligations are not "claims." Although neither the Probation Department nor the victim can enforce restitution obligations in civil proceedings, Commonwealth v. Mourar, 349 Pa.Super. 583, 603, 504 A.2d 197, 208 (1986), rev'd on other grounds, 517 Pa. 83, 534 A.2d 1050 (1987), the obligation is enforceable by the substantial threat of revocation of probation and incarceration. That the Probation Department's enforcement mechanism is criminal rather than civil does not alter the restitution order's character as a "right of payment." Indeed, the right created by such an order made as a condition of probation is in some sense greater than the right conferred by an ordinary civil obligation, because it is secured by the debtor's freedom,

Page 495 U. S. 560

rather than his property. Accordingly, we do not regard the purpose or enforcement mechanism of restitution orders as placing such orders outside the scope of § 101(4)(A).

III

Moving beyond the language of § 101, the United States, appearing as amicus in support of petitioners, contends that other provisions in the Code, particularly the exemption to the automatic stay provision, § 362(b)(1), and Chapter 7's distribution of claims provision, § 726, reflect Congress' intent to exempt restitution orders from discharge under Chapter 13. We are not persuaded, however, that the language or the structure of the Code as a whole supports that conclusion.

Section 362(a) automatically stays a wide array of collection and enforcement proceedings against the debtor and his property. [Footnote 3] Section 362(b)(1) exempts from the stay "the commencement or continuation of a criminal action or proceeding against the debtor." According to the Senate Report, the exception from the automatic stay ensures that "[t]he bankruptcy laws are not a haven for criminal offenders." S.Rep. No. 95-989, supra, at 51, U.S.Code Cong. & Admin.News 1978, p. 5837. Section 362(b)(1) does not, however, explicitly exempt governmental efforts to collect restitution obligations from a debtor. Cf. 11 U.S.C. § 362(b)(2) ("collection of alimony, maintenance, or support" is not barred by the stay). Nonetheless, the United States argues that it would be anomalous to construe the Code as eliminating a haven for criminal offenders under the automatic stay provision while granting them sanctuary from restitution obligations under Chapter 13.

We find no inconsistency in these provisions. Section 362(b)(1) ensures that the automatic stay provision is not construed to bar federal or state prosecution of alleged criminal

Page 495 U. S. 561

offenses. It is not an irrational or inconsistent policy choice to permit prosecution of criminal offenses during the pendency of a bankruptcy action and, at the same time, to preclude probation officials from enforcing restitution orders while a debtor seeks relief under Chapter 13. Congress could well have concluded that maintaining criminal prosecutions during bankruptcy proceedings is essential to the functioning of government but that, in the context of Chapter 13, 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 the Chapter 13 plan.

The United States' reliance on § 726 is likewise unavailing. That section establishes the order in which claims are settled under Chapter 7. Section 726(a)(4) assigns a low priority to

"any allowed claim, whether secured or unsecured, for any fine, penalty, or forfeiture . . . to the extent that such fine, penalty, forfeiture, or damages are not compensation for actual pecuniary loss suffered by the holder of such claim."

The United States argues that the phrase "fine, penalty, or forfeiture" should be construed to apply only to civil fines, penalties, and forfeitures, and not to criminal restitution obligations. Otherwise, State and Federal Governments will receive disfavored treatment relative to other creditors both in Chapter 7 and Chapter 13 proceedings, see § 1325(a)(4) (a Chapter 13 plan must ensure that unsecured creditors receive no worse treatment than they would under Chapter 7), a result the United States regards as anomalous, given the strength of the governmental interest in collecting restitution payments.

The central difficulty with the United States' construction of § 726(a)(4) is that it conflicts with Kelly's holding that § 523(a)(7), the exception to discharge provision, applies to criminal restitution obligations. 479 U.S. at 479 U. S. 51 (§ 523(a)(7) "creates a broad exception for all penal sanctions"). The United States acknowledges that the phrase "fine, penalty,

Page 495 U. S. 562

or forfeiture," as it appears in § 726(a)(4), must have the same meaning as in § 523(a)(7). We are unwilling to revisit Kelly's determination that § 523(a)(7) "protects traditional criminal fines [by] codif[ying] the judicially created exception to discharge for fines." Ibid. (emphasis added). Thus, we reject the view that §§ 523(a)(7) and 726(a)(4) implicitly refer only to civil fines and penalties. [Footnote 4]

The United States' position here highlights the tension between Kelly's interpretation of § 523(a)(7) and its dictum suggesting that restitution obligations are not "debts." See supra at 495 U. S. 557. As stated above, Kelly found explicitly that § 523(a)(7) "codifies the judicially created exception to discharge" for both civil and criminal fines. 479 U.S. at 479 U. S. 51. Had Congress believed that restitution obligations were not "debts" giving rise to "claims," it would have had no reason to except such obligations from discharge in § 523(a)(7). Given Kelly's interpretation of § 523(a)(7), then, it would be anomalous to construe "debt" narrowly so as to exclude criminal restitution orders. Such a narrow construction of "debt" necessarily renders § 523(a)(7)'s codification of the judicial exception for criminal restitution orders mere surplusage. Our cases express a deep reluctance to interpret a statutory provision so as to render superfluous other provisions in the same enactment. See, e.g., Mackey v. Lanier Collection Agency & Service, Inc.,486 U. S. 825, 486 U. S. 837 (1988).

Moreover, in locating Congress' policy choice regarding the dischargeability of restitution orders in § 523(a)(7), Kelly is faithful to the language and structure of the Code: Congress defined "debt" broadly, and took care to except particular debts from discharge where policy considerations so warranted.

Page 495 U. S. 563

Accordingly, Congress secured a broader discharge for debtors under Chapter 13 than Chapter 7 by extending to Chapter 13 proceedings some, but not all, of § 523(a)'s exceptions to discharge. See 5 Collier on Bankruptcy

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