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Commonwealth v. Petrick

Supreme Court of Pennsylvania

September 26, 2019


          ARGUED: May 16, 2019

          Appeal from the Order of the Superior Court at No. 619 MDA 2017 dated February 20, 2018 Affirming the Judgment of Sentence of the Court of Common Pleas of Lackawanna County, Criminal Divison, at No. CP-35-CR-0000068-2016 dated March 8, 2017.



          MUNDY, JUSTICE.

         We granted allocatur in this case to address the effect a discharge of a civil debt by a federal bankruptcy court has on the authority of a state trial court to order mandatory restitution as part of a sentence in a criminal case involving the same obligation.

         On April 14, 2015, Appellant, Joseph Petrick, contracted with a homeowner, Donna Sabia, to perform remodeling work. Under the terms of the contract, in exchange for payment of $3, 500.00, Appellant agreed to frame and sheet-rock three rooms and lower the ceiling in one room. The work was to commence on April 16, 2015, and be completed within seven days. Sabia paid Appellant a deposit of $1, 750.00 plus $300.00 to cover the cost of city permits. Appellant began some of the contracted work on April 18, 2015, at which time Sabia paid an additional $1, 750.00 to Appellant. That same day, Appellant and Sabia's son, Carmen Fazio, who also resided in the home, entered into a second contract for Appellant to do some painting in the home. As consideration, Fazio purchased a $600.00 saw for Appellant. Appellant performed additional work on April 19, 2015. Appellant and Fazio entered into a third contract to install siding on the exterior of the home. Fazio paid Appellant $2, 300.00 to purchase materials. Appellant did not return to the still uncompleted job after that date. Appellant at first advised Sabia and Fazio that he needed time to hire help, as he had another job, and would complete the jobs in May. Appellant eventually advised Sabia and Fazio that he could not complete the jobs but would refund $4, 950.00 within a week. Appellant never refunded any money or the saw, nor did he ever purchase the siding materials or obtain the permits from the city.

         On September 3, 2015, Appellant filed for Chapter 7 bankruptcy. In his petition, Appellant listed Sabia and Fazio as creditors. The bankruptcy court issued a discharge order on March 17, 2016. On October 5, 2015, Detective Jaimie Barrett, of the City of Scranton Police Department, filed a criminal complaint charging Appellant with theft by deception and deceptive business practices.[1] Following a non-jury trial, the court found Appellant guilty of theft by deception and not guilty of deceptive business practices. The court sentenced Appellant to a term of incarceration of three to eighteen months. Appellant was also ordered to pay $6, 700.00 in restitution. Appellant filed a motion for reconsideration of his sentence, which the trial court denied on March 21, 2017.

         On appeal, the Superior Court affirmed the trial court's judgment of sentence.[2] See Commonwealth v. Petrick, 185 A.3d 1133 (Pa. Super. 2018) (unpublished memorandum). Before the court, Appellant argued that the portion of his sentencing order requiring him to pay restitution is illegal because the debt was discharged in bankruptcy.[3] Appellant argued that the Bankruptcy Code specified that the filing of a petition operated as an automatic stay of any action to recover a debt that preceded the filing.

§ 362. Automatic stay
(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of--
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title

11 U.S.C. § 362(a)(6). Appellant also cited Johnson v. Lindsey, 16 B.R. 211 (Bankr. M.D. Fla. 1981), for the proposition that a state may not use criminal proceedings solely to compel payment of a debt subject to the Bankruptcy Code's automatic stay. Appellant's Brief at 19-20. In Johnson, the Bankruptcy Court entertained the debtor's request to enjoin the creditor and state prosecutors from pursuing criminal charges on the same facts underlying a listed debt in the bankruptcy proceeding. In that case, the debtor had filed a voluntary petition in bankruptcy on July 9, 1981, and notice was sent to the creditor. On September 16, 1981, the State Assistant Attorney filed an information charging the debtor with obtaining property with a worthless check. The facts supporting the information were supplied by the creditor. The court held that bankruptcy proceedings do not shield a debtor from criminal prosecution. Johnson, 16 B.R. at 212. However, it determined that use of criminal proceedings to secure repayment of a debt otherwise subject to the automatic stay would not be proper. Id. Accordingly, it enjoined the State Assistant Attorney from seeking or recommending restitution as part of any sentence that may ensue. The Court also enjoined the creditor from utilizing the criminal prosecution to recover its claim. Id.

         The Superior Court noted it had addressed this same issue in Commonwealth v. Shotwell, 717 A.2d 1039 (Pa. Super. 1998). In that case, Shotwell defrauded a victim out of more than $71, 000.00 as part of an investment scheme and then filed for bankruptcy, listing the victim as an "unsecured debt in dispute." Id. at 1046. Shotwell was subsequently charged and convicted of theft by deception and related offenses. The trial court imposed an obligation to pay restitution as part of Shotwell's sentence. On appeal, Shotwell contended that the trial court lacked authority to order restitution of a debt discharged in bankruptcy. Id. The Shotwell Court referenced Kelly v. Robinson, 479 U.S. 36 (1986), wherein the United States Supreme Court reasoned that restitution orders as part of the criminal justice system are not motivated to benefit the victim/debtor, but by the criminal justice goals a State has in deterrence, enforcement, and rehabilitation. Shotwell, 717 A.2d at 1046. Because the benefit of a restitution order inures primarily to the State, the Court in Kelly held that the obligation was not dischargeable in bankruptcy. Id. The Shotwell Court further held that a restitution order entered after the discharge by the bankruptcy court of a civil debt is distinct and does not resurrect the debt or debtor/creditor relationship in circumvention of the bankruptcy relief. Id.

         Instantly, the Superior Court deemed Shotwell controlling. It therefore determined the restitution order in this case was legally entered.

         Appellant suggests that the issue before this Court involves balancing the protection of a State's citizens through the State's police power as expressed through its criminal justice system and the protection of debtors provided by the federal Bankruptcy Code. Appellant remarks that it has long been established that the Bankruptcy Act serves both a public and private interest by providing relief for the "honest but unfortunate debtor" who submits to the distribution of his or her property by affording a fresh start unburdened by past debt. Appellant's Brief at 13-14 (quoting Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934)). Appellant acknowledges that the authority to discharge debt is not unconstrained under the Act. Appellant notes Section 523 of the Bankruptcy Act enumerates obligations that are excepted from discharge, which includes any obligation "for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not for compensation of actual pecuniary loss." Id. at 14 (quoting 11 U.S.C. § 523(a)(7)).[4] Appellant argues that because Pennsylvania's mandatory restitution statutes, by their terms, have a core purpose to compensate victims for their losses and fail to serve any rehabilitative purpose, Section 523(a)(7) does not apply to preclude discharge of such restitution orders in Chapter 7 bankruptcy proceedings.[5] In support of this conclusion, Appellant notes that the Section 1106(c)(1)(i) of the Crimes Code was amended by the Legislature in 1995 to require restitution "regardless of the current financial resources of the defendant." Id. at 14-15 (citing 18 Pa.C.S. § 1106(c)(1)(i) and 42 Pa.C.S. § 9721(a)). Appellant notes that prior to that amendment, the Superior Court expressed the view that "[i]f the amount of restitution imposed exceeds the defendant's ability to pay, the rehabilitative purpose of the order is disserved, especially where the restitution payment is a condition of probation, for in such a case the defendant is told that he will not be imprisoned only if he somehow satisfies a condition he cannot hope to satisfy." Id. at (quoting Commonwealth v. Fuqua, 407 A.2d 24, 26 (Pa. Super. 1976)). Appellant argues that this Court's recent pronouncement in Commonwealth v. Veon, 150 A.3d 435 (Pa. 2016), that the primary purpose of restitution in Pennsylvania is rehabilitative, merely relied on pre-amendment authority and failed to consider the mandatory aspect of the current restitution requirements, which may result in the imposition of an obligation beyond a defendant's means to fulfill. Appellant's Brief at 16. Accordingly, Appellant argues the Pennsylvania restitution statutes no longer serve a rehabilitative purpose, but rather serve primarily a compensatory goal. As such, Appellant argues that the imposition of mandatory restitution in this case is in violation of the Bankruptcy Code.

         Appellant concedes that federal courts are generally reticent to interfere with state criminal matters, but argues it is nevertheless "well established . . . that the Bankruptcy Court will not permit the State to use criminal prosecution for the sole purpose of collecting a debt dischargeable in bankruptcy, or to use law enforcement as a collection agency." Id. at 19 (quoting Johnson, 16 B.R. at 212). Appellant maintains that the facts in this case establish that he filed for bankruptcy prior to the filing of the criminal complaint and that the homeowner had a full opportunity to avail herself of the protections afforded creditors under the Bankruptcy Code. He argues that criminal proceedings ought not to be used as an alternative to those protections in securing debt payment.

         Appellant argues the Superior Court's reliance on Shotwell, which in turn relied on Kelly, is misplaced. Appellant maintains the circumstances in Kelly are distinguishable from the facts in this case. Appellant notes the bankruptcy filing by the defendant in Kelly post-dated the imposition of the subject restitution order, which contrasts with the circumstances in the instant case where Appellant filed for bankruptcy before any criminal charges were filed. Additionally, Appellant notes the Connecticut restitution statute at issue in Kelly authorized an order of restitution "in an amount [the defendant] can afford to pay." Id. at 18 n.1 (quoting Conn. Gen. Stat. § 53a-30 (1985)). Thus, Appellant argues the statute was deemed to be rehabilitative rather than serving solely a compensatory purpose.

         Appellant urges this Court to adopt a balancing test, as proposed by the Amici in their supporting brief, for courts to evaluate whether a restitution order unduly burdens the interests embodied in the Bankruptcy Code. The factors proposed are the following:

(1) whether the statute, rule, or judgment imposing the restitution obligation is compensatory or rehabilitative in nature, (2) whether the proceeding resulting in the imposition of the restitution obligation was initiated at the request of private creditors of the debtor, (3) whether the prosecutor's office conducted an independent investigation into the criminal charges, (4) whether the proceeding resulting in the imposition of the restitution obligation was commenced after the debtor received a discharge in bankruptcy, and (5) whether the beneficiaries of the restitution obligation had notice of ...

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