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United Building Centers v. Ochs

March 31, 2010

UNITED BUILDING CENTERS, PLAINTIFF AND APPELLEE,
v.
DAVID OCHS, DEFENDANT AND APPELLANT.



APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT BROWN COUNTY, SOUTH DAKOTA HONORABLE JACK R. VON WALD Judge.

The opinion of the court was delivered by: Gilbertson, Chief Justice

CONSIDERED ON BRIEFS ON JANUARY 11, 2010

[¶1.] United Building Center (UBC) filed a complaint under SDCL 23A-28-1 to have a criminal restitution order converted into a civil judgment in its favor after David Ochs (Ochs) failed to submit all payments as ordered. Ochs denied the complaint and claimed the restitution order entered as part of his state criminal conviction was discharged in his Chapter 7 federal bankruptcy proceedings. The circuit court concluded a restitution order entered as part of a criminal penalty for violation of state law was not dischargeable in a federal bankruptcy proceeding. It also concluded the criminal restitution order satisfied the United States Supreme Court's three-part test in Kelly v. Robinson, 479 US 36, 107 SCt 353, 93 LEd2d 216 (1986). However, the circuit court did not analyze whether the conversion of the restitution order into a civil judgment by a victim of the criminal activity was permitted under state law, or whether it satisfied the three-part Kelly test. Ochs appeals. We affirm in part, reverse in part, remand, and vacate the circuit court's civil judgment and order in favor of UBC.

FACTS

[¶2.] On January 26, 2001, Ochs passed an insufficient funds check to UBC for $25,336.42. On December 6, 2001, Ochs filed for Chapter 7 bankruptcy and listed UBC as an unsecured creditor in his filings. The bankruptcy trustee timely notified UBC of the bankruptcy filing, but UBC elected not to file any motions or adversarial actions against Ochs. On March 5, 2002, the federal bankruptcy court entered the Chapter 7 discharge of debtor order, which included the UBC debt.

[¶3.] On March 13, 2002, eight days after the federal bankruptcy court entered the discharge order in the Chapter 7 proceedings, Ochs pleaded guilty in circuit court to violating SDCL 22-41-1, currently SDCL 22-30A-24 transferred by SL 2005, ch 120, § 139, by passing the insufficient funds check to UBC. He also pleaded guilty to two additional counts of passing an insufficient funds check to two other victims. The circuit court entered an order suspending the imposition of sentence and placing Ochs on probation for five years on condition that Ochs pay court costs, serve ten days in the Brown County jail, and make full restitution to the three victims.

[¶4.] On August 5, 2002, the circuit court entered an order approving the restitution plan for $31,236.70. Of that amount, $30,711.36 represented restitution for the insufficient funds check passed to UBC. The balance represented restitution for the insufficient funds checks passed to the other two businesses for $475.34, and $50.00.

[¶5.] The order approving the restitution plan required Ochs to remit $250.00 monthly payments to the Brown County Clerk of Courts commencing September 5, 2002. The circuit court ordered Ochs to make full restitution by March 13, 2007. The order further stated that failure to comply with the terms of the restitution plan constituted a violation of the conditions of probation.

[¶6.] Ochs made payments to the Brown County Clerk of Courts totaling $1,100.00 before making no further attempt to satisfy the restitution order. On January 13, 2003, the circuit court entered an order revoking Ochs' suspended sentence and probation for failing to make full restitution as ordered. As a result, the circuit court ordered Ochs to serve two years in the state penitentiary with all but ninety days suspended.

[¶7.] On May 19, 2005, UBC filed a complaint under SDCL 23A-28-1 to have the restitution order transformed into a civil judgment. SDCL 23A-28-1 provides:

It is the policy of this state that restitution shall be made by each violator of the criminal laws to the victims of the violator's criminal activities to the extent that the violator is reasonably able to do so. An order of restitution may be enforced by the state or a victim named in the order to receive the restitution in the same manner as a judgment in a civil action. (Emphasis added.) At the time UBC filed its complaint, the unpaid balance totaled $27,651.63 exclusive of interest.

[¶8.] In his answer, Ochs admitted the restitution order existed, but maintained the Chapter 7 bankruptcy proceedings discharged the debt he owed UBC and, therefore, the restitution order was also discharged. Ochs also argued that the conversion of a restitution order into a civil judgment by the victim of the criminal activity did not satisfy the three-part test in Kelly, 479 US 36, 107 SCt 353, 93 LEd2d 216. He also filed a counterclaim alleging UBC's actions violated 11 USC § 524(a)(2) and (3).*fn1 Ochs requested damages for contempt and attorney fees with sanctions under SDCL 15-6-11(c).

[¶9.] UBC moved for summary judgment and the parties submitted the matter to the circuit court on stipulated facts. The circuit court concluded the restitution order, authorized by SDCL 23A-28-1, was exempt from discharge under the federal bankruptcy code. It also concluded that the restitution order itself satisfied the United States Supreme Court's three-part test in Kelly, 479 US 36, 107 SCt 353, 93 LEd2d 216. However, the circuit court did not analyze whether the conversion of the restitution order into a civil judgment was permitted by state law. It also did not analyze whether such a conversion passed the three-part test in Kelly.

The circuit court then entered an order converting the restitution order to a civil judgment ...


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