Case No. 96-20227, Chapter 7, Adversary No. 96-1005United States Bankruptcy Court, D. Wyoming
October 31, 1996
OPINION ON COMPLAINT TO DETERMINE DISCHARGEABILITY OF DEBT
PETER McNIFF, United States Bankruptcy Judge.
THIS MATTER came before the court on the complaint and motion of the plaintiff/debtor, Sheldon A. Merritt, for entry of judgment. The defendant, Mark Newell, has not answered or responded to the summons. The court has reviewed the pleadings of record, the facts alleged by the plaintiff, and the applicable law, and being fully advised, enters its opinion and judgment.
The court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 157 and 1334. This is a proceeding to determine the dischargeability of a debt under 11 U.S.C. § 523(a) and as such is a core proceeding. 28 U.S.C. § 157(b)(2)(I). The matter before the court, the dischargeability of state court ordered restitution, is one over which this court has concurrent jurisdiction with state courts. 11 U.S.C. § 523(c).
Default
In this case, the defendant was served by mail in accordance with Fed.R.Bankr.P. 7004 and has failed to plead, and the clerk of court has entered his default. Thus, the plaintiff seeks a default judgment against him.
The entry of a default does not entitle the non-defaulting party to a judgment as a matter of right. Rather the court has discretion to require some proof of the facts necessary to a valid cause of action. In re Villegas, 132 B.R. 742, 747 (9th Cir. Bankr. 1991). Further, the factual allegations, even though uncontested, must still provide a legitimate basis for entry of judgment. In re Hunt’s Health Care, Inc., 161 B.R. 971, 979 (Bankr.N.D.Ind. 1993).
In this case, the issues can be determined as a matter of law. However, due to the court’s conclusion that the plaintiff has failed to provide a legal basis to sustain his complaint, the court declines to enter a default judgment against the defendant.
Findings of Fact
The following facts are taken from the unproved allegations of the plaintiff in his complaint and memorandum in support of his motion for a default judgment.
On June 7, 1995, Mr. Merritt waived his right to counsel and pleaded guilty to violations of two misdemeanors under Wyoming Statutes §§31-4-103 and 31-5-970. He was sentenced by the County Court of the Third Judicial District Court for the State of Wyoming. In the sentence, Mr. Merritt was placed on probation and was ordered to pay restitution to the victim in the stipulated amount of $30,462.50. The victim, Mark Newell, is the defendant in this case.
Apparently, Mr. Merritt did not consult counsel until Mr. Newell began execution proceedings in order to collect the court ordered restitution. Mr. Merritt then filed a motion in the county sentencing court alleging that it did not have subject matter jurisdiction to enter a judgment of restitution exceeding its civil jurisdictional limits. The motion was denied and no appeal was taken.
Despite the restitution order, Mr. Newell filed a personal injury action against Mr. Merritt. Mr. Merritt filed his voluntary petition for relief under chapter 7 on March 11, 1996. Mr. Newell did not challenge the dischargeability of either the personal injury claim or the order of restitution. This action followed.
Conclusions of Law
The plaintiff raises two issues of law: first, that the county court exceeded its civil jurisdictional limit or its criminal penalty limit when it ordered the restitution and, therefore, at least part of the restitution judgment is dischargeable; and second, even if valid, the restitution is dischargeable because state ordered restitution in Wyoming does not fall within the parameters of § 523(a)(7).
The plaintiff is essentially contesting the subject matter jurisdiction of the county court. In Wyoming, the county courts have civil jurisdiction over certain enumerated matters in an amount not exceeding $7,000.00. Wyo. Stat. § 5-5-131(a) (1992). The county court’s criminal jurisdiction is not limited to a specific dollar amount, but rather is limited to jurisdiction over misdemeanors. Wyo. Stat. §5-5-133(1992). An award of restitution is made pursuant the Criminal Procedure code found at Wyoming Statutes § 7-9-101 et seq. (Supp. 1994), which does not limit the amount by jurisdiction.
The Wyoming Supreme Court has held on numerous occasions, both in criminal and civil cases, that the right to challenge subject matter jurisdiction cannot be waived, but may be raised at any stage of the proceedings. Taylor v. State, 658 P.2d 1297, 1301 (Wyo. 1983). A challenge to subject matter jurisdiction may be asserted at any time before final judgment, in a motion for relief from judgment, or on appeal. In Interest of MFB, 860 P.2d 1140, 1146 (Wyo. 1993).
In Mr. Merritt’s case, he did raise the issue at the county court by an admittedly untimely motion. The court denied the motion and Mr. Merritt did not appeal. This court is not an appellate court to the criminal courts of the State of Wyoming. Even if the county court judgment is void, the judgment is res judicata and a collateral attack here is impermissible. 1B J. Moore Moore’s Federal Practice ¶ 0.405[4.-1] (2d ed. 1995); Badura v. State, 832 P.2d 1390, 1393 (Wyo. 1992).
Mr. Merritt next argues that the criminal restitution ordered by the county court is dischargeable. Restitution ordered as part of a state court criminal judgment is generally not dischargeable under § 523(a)(7) which states that a debtor is not discharged 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[.]”
Since the decision of the United States Supreme Court in Kelly v. Robinson, 479 U.S. 36, 107 S.Ct. 353 (1986), nearly every court addressing the issue has held that criminal restitution is not discharged in chapter 7. In Kelly, the Court discussed the historical refusal of bankruptcy courts to discharge restitution based on the unwillingness of federal courts to invalidate state criminal proceedings. Id. at 360. The Court held that “§ 523(a)(7) preserves from discharge any condition a state criminal court imposes as part of a criminal sentence.” Id. at 361.
Mr. Merritt seeks to distinguish this case from Kelly because the Wyoming procedure setting restitution requires a court to consider the victim’s actual pecuniary loss, an exception found in § 523(a)(7). However, the court sees the requirement as an administrative procedure providing standards for the sentencing court. The Wyoming procedure does not preclude a personal injury action for actual compensatory damages set after a trial on the merits, and the victim had no control over the amount of restitution ordered.
Therefore, the court concludes that even though the victim’s actual losses are considered by the sentencing court, the judgment is still one of a penal nature, intended to further the state’s interests in punishment and rehabilitation. The court agrees with other courts holding that similar judgments are criminal adjudications, even if the restitution is proportional to the harm caused and payable to the victim. See In re Steiger, 159 B.R. 907 (9th Cir. Bankr. 1993); In re Zajder, 154 B.R. 885 (Bankr.W.D.Pa. 1993).
Accordingly, the court concludes that the county court criminal sentence is valid and is not dischargeable under § 523(a)(7). The court will enter a judgment in conformance with this opinion.