Opinion
Civil Action No. 04-313 (JBS).
August 4, 2004
Joseph Michael Pinto, Esquire, Polino and Pinto, P.C., Moorestown, NJ, Attorney for Plaintiff.
Peter C. Harvey, Esquire, Attorney General of New Jersey, By: Tracy E. Richardson, Esquire, Deputy Attorney General, Office of the New Jersey Attorney, Trenton, NJ., Attorney for Defendant.
OPINION
Plaintiff Thomas Dobrek, an insurance representative licensed to act as a bail bondsman in New Jersey, brings this civil action alleging that Defendant Donald Phelan, the Clerk of the Superior Court of New Jersey, is violating Plaintiff's bankruptcy discharge injunction and the protections against discriminatory treatment of debtors by refusing to reinstate Plaintiff's name in the New Jersey Bail Registry (the "Registry"). Plaintiff's name was removed from the bail registry on July 29, 2003, pursuant to N.J. Ct. R. 1:13-3(e), due to his failure to satisfy various bail bond forfeiture judgments. Plaintiff, though, asserts that he discharged the outstanding judgments in a Chapter 7 bankruptcy proceeding, so his name should be reinstated in the Registry.
This matter comes before the Court on Defendant's motion to dismiss for failure to state a claim filed on May 14, 2004, and Plaintiff's cross motion for partial summary judgment filed on June 10, 2004. The principal issue presented is whether the pre-petition forfeitures of a commercial bail bondsman are nondischargeable in bankruptcy pursuant to 11 U.S.C. § 523(a)(7). For the reasons set forth herein, this Court finds that Plaintiff's bail forfeiture judgments were not discharged in his bankruptcy. Therefore, Defendant's motion to dismiss must be granted because Plaintiff has not stated a claim upon which relief may be granted, and Plaintiff's cross motion for partial summary judgment must be denied.
I. BACKGROUND
The parties do not dispute the facts of this case for purposes of these motions. Plaintiff is an insurance representative/producer licensed to write bail bonds by the state of New Jersey. (Compl. ¶ 1; Pl. Resp. Statement of Facts ¶ 1.) Plaintiff filed a Chapter 7 bankruptcy petition on October 29, 2002, and received his discharge from the United States Bankruptcy Court for the District of New Jersey on January 25, 2003. (Compl. ¶ 3.) Plaintiff was granted his discharge under 11 U.S.C. § 727. (Compl. Ex. B.)
Defendant is the Clerk of the Superior Court of New Jersey and maintains the bail bond registry for that court pursuant to N.J. Ct. R. 1:13-3(d). (Compl. ¶ 2.) Plaintiff was registered to write bail bonds with Defendant until July 29, 2003, when the defendant removed Plaintiff's name from the Registry pursuant to N.J. Ct. R. 1:13-3(e) because of accumulated bail forfeitures resulting from bails in which Plaintiff had been the producer for corporate sureties. (Compl. ¶ 4.)
N.J. Ct. R. 1:13-3(d) provides:
Registry of Licensed Insurance Producers and Limited Insurance Representatives Authorized to Write Bail. Surety bonds for purposes of bail may be accepted only from those licensed insurance producers and limited insurance representatives who are registered by the insurance company for which they are authorized to write bail with the Clerk of the Superior Court. Such registration shall be effected by completing and submitting to the Clerk of the Superior Court an "Insurance Producer/Limited Representative Registration Form" in the form prescribed by Appendix XXI to these rules. The insurance company shall provide written notice to the Clerk of the Superior Court when any licensed insurance producer or limited insurance representative authorized to write bail is terminated.
N.J. Ct. R. 1:13-3(e) provides:
Removal from the Bail Registry. Any licensed insurance producer or limited insurance representative shall have his or her name removed from an insurance company's listing in the Bail Registry upon any of the following occurrences: (1) notice from an insurance company of the individual's termination; (2) notice from the Insurance Commissioner of the suspension or revocation of any individual's license or registration privileges; and (3) revocation or suspension of an insurance company's authority to do business in this State or of its certificate of authority to write surety instruments. Further, in the event any insurance company has failed to satisfy a judgment entered pursuant to R. 7:4-5(c), or to pay a forfeiture or to file a motion to vacate the forfeiture within forty-five (45) days of the date of the notice sent pursuant to R. 3:26-6, the names of all of its licensed insurance producers and limited insurance representatives shall be removed from the Bail Registry until such time as the judgment or forfeiture has been satisfied. In that event, the individual licensed insurance producer or limited insurance representative who acted as bail bondsman shall also have his or her name removed from all listings in the Bail Registry until such time as the judgment or forfeiture has been satisfied.
In August 2003, Plaintiff's counsel spoke to Defendant and instructed him that Plaintiff had been discharged of all pre-petition debt by the bankruptcy court and asked that Plaintiff's name be reinstated to the registry upon payment of any post-petition bail forfeitures. (Compl. ¶ 5.) The Defendant informed the Plaintiff that he would only restore Plaintiff's name to the Registry if he received notice form a court administrator in each court where bail had been forfeited that the forfeited bail had been satisfied. (Compl. ¶ 7.) As a result, Plaintiff attempted to have a court administrator in each court in which bail had been forfeited provide notice to Defendant that bail had been satisfied. (Compl. ¶ 8.) At least two separate administrators denied Plaintiff's request, and there is no record that any administrator granted Plaintiff's request. (Compl. ¶¶ 9,10.) On December 10, 2003, Defendant sent a letter to Plaintiff's counsel reiterating that Plaintiff would not be reinstated until the outstanding bail forfeiture judgments were satisfied in accordance with N.J. Ct. R. 1:13-3(e). (Compl. ¶ 11.)
Plaintiff's counsel responded on December 16, 2003, with a letter attaching receipts showing payment of post-bankruptcy forfeitures and advising Defendant that his refusal to reinstate Plaintiff to the Registry violated the Bankruptcy Code because it was based on pre-bankruptcy forfeitures. (Compl. ¶ 12.) Plaintiff then filed this complaint on January 27, 2004, alleging that Defendant is violating Plaintiff's bankruptcy discharge injunction pursuant to 11 U.S.C. § 524(a) and the protections against discriminatory treatment of debtors afforded under 11 U.S.C. § 525(a). (Compl. ¶ 14.) Plaintiff further alleges that Defendant's actions violate his civil rights pursuant to 42 U.S.C. § 1983 and constitute either intentional or negligent infliction of emotional distress. (Compl. ¶¶ 17,19.) Plaintiff demands that the Court find Defendant in contempt for violating §§ 524(a) and 525(a), enjoin the defendant from further violations, and sanction the defendant. (Compl. ¶¶ 15,17,19.) Plaintiff also demands compensatory and punitive damages, counsel fees, costs, and any other relief the Court deems equitable and just. (Id.)
Plaintiff claims that his Chapter 7 bankruptcy discharges him from his obligation to satisfy his bail forfeiture judgments. Defendant, claiming that such forfeitures are nondischargeable pursuant to 11 U.S.C. § 523(a)(7), filed a motion to dismiss for failure to state a claim on May 14, 2004. Plaintiff responded to that motion, arguing that the forfeitures are dischargeable, and filed a cross motion for partial summary judgment on June 10, 2004.
II. DISCUSSION
As set forth below, the Court finds that Plaintiff has not stated a claim upon which relief may be granted because bail forfeiture judgments are not dischargeable in bankruptcy pursuant to § 523(a)(7). Because Plaintiff's claim does not survive a motion to dismiss he is likewise not entitled to judgment as a matter of law; thus, it is not necessary to address Plaintiff's cross motion for partial summary judgment directly. The Court will therefore consider the case according to the standard for a motion to dismiss for failure to state a claim.
A. Standard for a Rule 12(b)(6) Motion to Dismiss
A Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted must be denied "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Fed.R.Civ.P. 12(b)(6). A district court must accept any and all reasonable inferences derived from those facts. Unger v. Nat'l Residents Corp. v. Exxon Co., U.S.A., 761 F. Supp. 1100, 1107 (D.N.J. 1991); Gutman v. Howard Sav. Bank, 748 F. Supp. 254, 260 (D.N.J. 1990). Further, the court must view all allegations in the complaint in the light most favorable to the plaintiff. See Scheuer, 416 U.S. at 236; Jordan v. Fox, Rothschild, O'Brien Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).
It is not necessary for the plaintiff to plead evidence or to plead the facts that serve as the basis for the claim. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir. 1977); In re Midlantic Corp. Shareholder Litigation, 758 F. Supp. 226, 230 (D.N.J. 1990). The question before the court is not whether plaintiffs will ultimately prevail; rather, it is whether they can prove any set of facts in support of their claims that would entitle them to relief. Hishon v. King Spalding, 467 U.S. 69, 73 (1984).
Therefore, in deciding a motion to dismiss, a court should look to the face of the complaint and decide whether, taking all of the allegations of fact as true and construing them in a light most favorable to the nonmovant, plaintiff's allegations state a legal claim. Markowitz v. Northeast Land Company, 906 F.2d 100, 103 (3d Cir. 1990). Only the allegations in the complaint, matters of public record, orders, and attached exhibits, are taken into consideration. Chester County Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990).
B. Analysis
The issue in this case is whether bail forfeiture judgments against commercial sureties are dischargeable in bankruptcy or whether they are not dischargeable because they fall under 11 U.S.C. § 523(a)(7), which provides in pertinent part:
(a) A discharge under section 727 . . . of this title does not discharge an individual debtor from any debt —
. . . .
(7) 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, other than a tax penalty. . . .11 U.S.C. § 523(a)(7)(1993). The Third Circuit has held that § 523(a)(7) applies to bail forfeiture judgments against a family surety. In re Gi Nam, 273 F.3d 281 (3d Cir. 2001) (holding that a bail bond forfeiture against a father who had posted bail for his son is not dischargeable in bankruptcy). The question for this Court is whether the Third Circuit's reasoning in Gi Nam applies to commercial sureties as well.
The Fourth and Fifth Circuits have held that bail bond forfeiture judgments against commercial sureties are dischargeable in bankruptcy because § 523(a)(7) was not intended to cover such debts. In re Hickman, 260 F.3d 400 (5th Cir. 2001); In re Collins, 173 F.3d 924 (4th Cir. 1999), cert. denied, 528 U.S. 1073 (2000). Furthermore, the Third Circuit noted in Gi Nam that Collins and Hickman were "inapplicable to the case at bar in part because those cases involved commercial bail bondsmen." Gi Nam, 273 F.3d at 294 n. 9.
Plaintiff's bail bond judgment is payable to the State of New Jersey, for the benefit of the State of New Jersey, and is not compensation for actual pecuniary loss. The statute's applicability to Plaintiff's bond forfeiture debt, like the family surety's debt in Gi Nam, thus turns on the meaning of the phrase "fine, penalty, or forfeiture" within the context of § 523(a)(7). The Court finds that the plain language of the statute, the legislative history of New Jersey's bail forfeiture law, and public policy considerations establish that Plaintiff's pre-bankruptcy bail forfeitures to the State of New Jersey were not dischargeable pursuant to § 523(a)(7) of the Bankruptcy Code.
1. Plain Language
The Third Circuit in Gi Nam began by interpreting the plain language of the statute, noting that "following the teaching of the Supreme Court, we have held that the starting point of any statutory analysis is the language of the statute itself." Gi Nam, 273 F.3d at 286 (citing Pa. Dept. of Pub. Welfare v. Davenport, 495 U.S. 552, 557-558 (1990)). Reviewing the statute on its face, the court held that a forfeiture judgment "seems to come within the plain meaning of the term `forfeiture.'" Gi Nam, 273 F.3d at 286. Citing Black's Law Dictionary andWebster's Dictionary the court defined a "forfeiture" as "`the loss of property or money on account of one's breach of the terms of an agreement, bond, or other legal obligation.'" Gi Nam, 273 F.3d at 286 (quoting Webster's Third New International Dictionary (1971)). The court held that the bail bond judgment against the family surety clearly fit this definition. Id.
The Third Circuit in Gi Nam next rejected the premise that Supreme Court precedent and traditional cannons of construction require that § 523(a)(7) exempts from discharge only those forfeitures that are penal in nature, meaning that all other forfeitures could be discharged. id. at 286-288. Citing Kelly v. Robinson, 479 U.S. 36 (1986), the District Court in Gi Nam had followed the Fourth Circuit in Collins, and the Fifth Circuit in Hickman in holding that Supreme Court precedent requires that § 523(a)(7) exempts from discharge only those forfeitures which are penal sanctions resulting from the debtor's wrongdoing. However, the Third Circuit in Gi Nam explicitly stated that "to the extent the Fourth Circuit so interpretedKelly in In re Collins, we decline to adopt a similar rule here," Id. at 287, holding instead that § 523(a)(7) "expressly excepts [from discharge] forfeitures without regard to penal nature." Id.
Furthermore, the Third Circuit also rejected the reasoning that either the cannon ejusdem generis or noscitur a sociis requires that forfeitures be penal in nature to be nondischargeable under the statute. The court thus held that according to the plain language of the statute, the bail bond forfeiture judgment against the family surety in Gi Nam was a type of forfeiture Congress intended to cover in § 523(a)(7) and render nondischargeable in bankruptcy under § 727. Both the Fourth Circuit in Collins and the Fifth Circuit in Hickman relied on the requirement that a forfeiture be penal in nature to be nondischargeable under § 523(a)(7); therefore, Plaintiff cannot rely on either Hickman or Collins because the Third Circuit has explicitly denied adopting similar reasoning.
According to ejusdem generis, "`where general words follow specific words in a statutory enumeration, the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words.'" Gi Nam, 273 F.3d at 287 (quoting United States v. Weadon, 145 F.3d 158, 160 (3d Cir. 1998), cert. denied, 525 U.S. 916 (1998)). The court in Gi Nam stated that ejusdem generis was inapplicable to its case and further stated that even if it were applicable it could not be used to read the meaning of `forfeiture' completely out of the statute because ejusdem generis `cannot be employed to render general words meaningless.'" Gi Nam, 273 F.3d at 287 (quoting United States v. Alpers, 338 U.S. 680, 682 (1950)).
The Fifth Circuit in Hickman based its reasoning in part on the canon noscitur a sociis, "a word is known by the company it keeps." Hickman, 260 F.3d at 403 (quoting Gustafson v. Alloyd Co., Inc., 513 U.S. 561 (1995)). The court in Gi Nam stated that were the maxim applicable to § 523(a)(7), "it would indeed be possible to hold that the term `forfeiture' should be read as `penal forfeiture' in light of the term's proximity to the word `penalty.'" Gi Nam, 273 F.3d at 288. However, the Third Circuit explicitly rejected the reasoning employed by the Fifth Circuit in Hickman, stating "noscitur a sociis can have no application in this context because `[w]hen Congress has separated terms with the conjunction `or,' it is presumed that Congress intended to give the terms `their separate, normal meanings.'" Id. (quoting Garcia v. United States, 469 U.S. 70, 72 (1984)).
With regard to the plain language of the statute, there is no difference between a bail bond posted by a family surety and one posted by a commercial surety. Whether a father, like the one inGi Nam, posts a bail bond for his defendant son or an insurance representative licensed to write bail bonds, like the plaintiff in this case, posts a bail bond for a defendant in exchange for a fee, the contractual relationship with the state and the result of the defendant's failure to appear in court are the same.
In each situation, "[t]he bond is a contract between the surety and the government that if the latter will release the principal from custody the surety will undertake that the principal will appear personally at any specified time and place to answer."United States v. Davis, 202 F.2d 621, 625 (7th Cir. 1953),cert. denied, 345 U.S. 998 (1953). In each situation, if the defendant fails to appear, a judgment is entered against the surety and he becomes liable for the full amount of the bail.
The commercial surety being unrelated to the defendant and the surety's receipt of a fee in exchange for his services does not change the fact that he has incurred a debt that is a "forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss." Therefore, the Third Circuit's reasoning in Gi Nam with regard to the plain language of the statute applies to a commercial surety in the same way that it applies to a family surety.
2. State Law Context and Legislative History
The Third Circuit's reasoning in Gi Nam, New Jersey law, and the legislative history of § 523(a)(7) also ensure that bail bond forfeiture judgments against commercial sureties are nondischargeable under the § 523(a)(7). In Gi Nam, the Third Circuit considered whether the bail bond forfeiture judgments are considered `forfeitures' under state law and whether the legislative history of § 523(a)(7) supports the inference that Congress intended to exclude such judgments from discharge in bankruptcy.
The court stated that state law is helpful "in determining the generic nature of such debts under the law that most directly governs their creation, e.g., whether they are penal or civil, fines or forfeitures." Gi Nam, 273 F.3d at 288. While the court considered Pennsylvania law in Gi Nam, New Jersey law also indicates that bail bond forfeitures should be nondischargeable. Like the Pennsylvania Court Rules, New Jersey Court Rules refer to the entry of judgment for breach of condition of recognizance as an order of "forfeiture." See N.J. Ct. R. 3:26-6.
The court in Gi Nam also held that the legislative history of § 523(a)(7) supported the conclusion that forfeiture judgments against family sureties are not dischargeable. Gi Nam, 273 F.3d at 289-290. The purpose of denying discharge of certain debts is to express "`Congressional policy that certain debts should be excluded from discharge because of overriding public policy relating to the type of the debt, the manner in which liability for it was incurred, or the underlying social responsibility that it represents.'" Id. at 289 (quoting Bankruptcy Service, Lawyers Edition, Ch. 27: Code 523, § 27:4 at 27-90 (West 1999)).
The court noted that in enacting § 523(a)(7) of the current Bankruptcy Code in 1978, Congress was codifying certain case law that exempted from discharge certain penalties and forfeitures under the former Bankruptcy Act of 1898. Gi Nam, 273 F.3d at 290. Furthermore, this codified case law "included a line of authority holding that obligations against sureties arising from forfeited bail bonds were nondischargeable." Id. After analyzing the rationale behind this codification, the court noted that "`most courts refused to allow a discharge in bankruptcy to affect the judgment of a state criminal court." Id. (quotingKelly, 479 U.S. at 45).
New Jersey state law and the legislative history behind § 523(a)(7) apply to commercial sureties in the same way that they apply to family sureties. As noted above, the posting and forfeiture of the bond is the same in each instance, and there is no reason according to state law or the legislative history to apply § 523(a)(7) differently to a forfeiture judgment against a commercial surety.
Moreover, the Third Circuit in Gi Nam reviewed the pre-1978 case law authority and confirmed the general acceptance of the dischargeability exception for penalties and forfeitures.See Gi Nam, 273 F.3d 290-292; In re Caponigri, 193 F. 291, 292 (S.D.N.Y. 1912) (holding that "recovery on a recognizance for bail is essentially the recovery of a penalty, and is a forfeiture"); In re Weber, 212 N.Y. 290 (1914) (disallowing a claim for forfeited bail bond, but also ruling that the disallowed obligation was nondischargeable). Based on the district court's refusal to rely on this same "pre-Code jurisprudence," the Third Circuit criticized the district court for its reliance on a case that conflicts with "all other judicial and scholarly authority which recognized the exception to dischargeability for penalties and forfeitures." Gi Nam, 273 F.3d at 292.
Both In re Caponigri and In re Weber involved cases where sureties posted bond for a criminal defendant. The rationale behind these cases, and the Third Circuit's reliance on them inGi Nam, applies equally to the Plaintiff as a commercial surety as it did to the family surety in Gi Nam.
3. Public Policy Considerations
The only real difference between the application § 523(a)(7) to a family surety and to a commercial surety exists in the public policy considerations behind rendering a forfeiture judgment against a surety nondischargeable. Although the rationale is different, public policy supports the application of § 523(a)(7) to commercial sureties.
The court in Gi Nam noted that important concerns are the principles of federalism and comity that must be considered to avoid interference with States' criminal justice systems. Gi Nam, 273 F.3d at 293. The court stated that "`we must consider the language of § 523 in light of the history of bankruptcy court deference to criminal judgments and in light of the interest of the States in unfettered administration of the their criminal justice systems.'" Id. (quoting Kelly, 479 U.S. at 43-44). Indeed, this court has noted:
In the abstract, comity means a "proper respect for state functions, a recognition of the fact that the entire country is made up of a Union of separate state governments, a continuance of the belief that the National Government will fare better if the States and their institutions are left free to perform their separate functions in their separate ways."Capital Bonding Corp. v. New Jersey Supreme Court, 127 F. Supp. 2d 582, 590 (D.N.J. 2001) (declining bonding company's attempt to stay N.J. Ct. R. 1:13-3(e) from going into effect because the suit presented an exceptional circumstance that favored federal court abstention) (quoting Younger v. Harris, 401 U.S. 37, 44 (1971)).
The court in Gi Nam further addressed the "potentially grave concrete consequences for the States' administration of their respective criminal justice systems and the proper functioning of the bail systems." Gi Nam, 273 F.3d at 293. The court cautioned that a ruling that forfeiture judgments are dischargeable would create "perverse incentives" for sureties who are relatives of defendants to help their relatives flee. Id. However, the court also noted that "these concerns do not come into play when a professional bail bondsman acts as surety for a criminal defendant." Id. at 294 n. 9.
The defendant argues that while a commercial bail bondsman does not have the same "perverse incentives" to assist in a defendant's flight, similar public policy concerns support a finding that Gi Nam applies to commercial sureties as well. When a bail bondsman writes a bond, his obligation is not only to produce the defendant for court appearances, but also to recapture a defendant if he should fail to appear. In re Preclusion of Brice, 366 N.J. Super. 519, 524 (App.Div. 2004),certification denied, 180 N.J. 354 (2004). If professional bail bondsmen receive a discharge of all pre-petition forfeiture obligations, there would be little incentive for the bondsmen to track criminal defendants and ensure their appearances in court. Similarly, there would be reduced incentive for the commercial bondsmen to carefully assess the defendant's risk of flight. By contrast, a holding that bail bondsmen receive no discharge of forfeiture obligations would simply confirm the bondsmen's duties. Defendant argues that just as Brice confirmed the personal liability of an individual bondsman for forfeiture judgments, so should Gi Nam be deemed to extend to professional sureties to prevent discharge.
Plaintiff argues, though, that New Jersey has a system of regulation in place that the eliminates the possibility that a dischargeability ruling would place the bail bond system in jeopardy. (See Pl. Resp. at 3-9.) Plaintiff asserts that New Jersey law places stringent requirements on insurance companies desiring to do business in New Jersey. See N.J. Stat. Ann. §§ 17:17-1, 17:17-6 to 17:17-10 (requiring that company desiring to be authorized to write bonds to have capital stock of at least $3,500,000 and a surplus of at least $2,750,000). Additionally, § 17 places restrictions and fines on companies that fail to satisfy forfeited bonds. Id. § 17:31-11(b).
However, Plaintiff also admits that there are not the same requirements for an insurance producer or limited representative to maintain any certain financial or solvency status or post any security, bond, or deposit as there are for insurance companies. Surety bonds may only be accepted from a licensed insurance producer or limited representative registered with an approved insurance company. N.J. Ct. R. 1:13-3(d). Plaintiff admits that he is an insurance representative/producer licensed to write bail bonds by the State of New Jersey. (Pl. Statement of Facts ¶ 1.)
Furthermore, Plaintiff argues that excepting the obligation of professional bondsmen from discharge will put a strain on the bail system; thus, professional bondsmen will be hesitant to write bonds resulting in an overcrowding of prisons. Plaintiff cites a decision of the Bankruptcy Court for the Middle District of Georgia as a response to Defendant's arguments against dischargeability. In re Geeslin, 296 B.R. 70 (Bankr. M.D. Ga. 2003) (hereinafter "Geeslin"), rev'd on other grounds sub nom. Skandalakis v. Geeslin, 303 B.R. 533 (M.D. Ga. 2004). The court in Geeslin stated:
[Defendant's] concern must be balanced with the potential harm to the bail system if professional bail bondsmen are not allowed to discharge their business debt. Such an outcome could lead to the collapse of the bail system because bondsmen could perceive the risk of doing business as too high. Accordingly, a policy of not allowing discharge of bail bond forfeitures, when the debtor is a professional bail bondsman, could be detrimental to the bail system, rather than in furtherance of the policies behind the bail system.Geeslin, 296 B.R. at 79.
It is important to note that the bankruptcy court's opinion inGeeslin relies on the Fourth and Fifth Circuit holdings, stating "debtor's position is analogous to the Hickman andCollins cases." Id. (citing Hickman, 260 F.3d at 401;Collins, 173 F.3d at 926). As noted above, the Third Circuit has explicitly rejected the reasoning of Hickman and Collins, holding that a forfeiture judgment does not have to be penal in nature to be exempted from discharge under § 523(a)(7).
Moreover, the public policy of the commercial bail bond system in New Jersey is not to maximize the availability of commercial bail bondsmen but to reasonably assure that persons released on surety bond will appear and honor their obligations to the court. Furthermore, before the Third Circuit rendered its assessment of the public policy considerations in rendering a forfeiture judgment nondischargeable it had already determined the matter, stating that "[t]he clarity and weight of the judicial authority discussed supra are great enough that such authority provides a sufficient basis for deciding this appeal."Gi Nam, 273 F.3d at 292.
The public policy considerations and the Third Circuit's ruling in Gi Nam are balanced against allowing the discharge of Plaintiff's pre-petition forfeiture judgments. Principles of federalism and comity still apply, regardless of whether the surety is commercial or familial. As such, this Court should ensure the unfettered administration of the State's criminal justice system.
Furthermore, the policy against discharge is evident. If the bondsman could discharge the forfeiture in bankruptcy, the State would have no incentive to accept a bond from such an individual as they would be at no risk of loss. The bondsman could collect a premium to issue a bail piece for a criminal defendant. If the defendant appears in court there is no problem for the bondsman. If the defendant fails to appear, the bond is forfeited, and the bondsman would not have to pay the judgment but could eventually discharge it, and others like it, in bankruptcy. This strains the bail bond system far more than bondsmen perceiving the risk of doing business as too high, especially where such risk can be reflected in the premium charged, and the debt can be eliminated by recapturing the defendant.
According to principles of federalism and comity, the potential affects a dischargeability ruling could have on the State bail bond system, and the Third Circuit's reasoning in Gi Nam, public policy considerations support exempting from discharge bail bond forfeiture judgments against commercial sureties pursuant to § 523(a)(7).
Plaintiff has also argued that this Court should find bond obligations are dischargeable in a Chapter 7 proceeding because professional bail bondsmen could file bankruptcy petitions under Chapter 13, which does not except from discharge debts of the kind set forth in § 523(a)(7). See 11 U.S.C. § 1328(a). Specifically, Plaintiff asserts, only obligations of the kind provided under §§ 1322(b)(5), 523(a)(5), 523(a)(8), and 523(a)(9) and restitution and/or criminal fines included in a sentence on the debtor's conviction of a crime are exempted from discharge under Chapter 13. Plaintiff's argument that bail bondsmen could discharge their forfeiture judgments in a Chapter 13 proceeding is inapplicable to this case and does not present grounds for this Court to ignore § 523(a)(7) and discharge the forfeiture judgment against him under Chapter 7.
C. Plaintiff's Cross Motion for Summary Judgment
In response to Defendant's motion to dismiss for failure to state a claim Plaintiff also filed a motion for partial summary judgment based solely on the argument that forfeiture judgments against commercial sureties are dischargeable. As this Court has granted Defendant's motion to dismiss because Plaintiff's forfeiture judgments are not dischargeable, this Court must deny Plaintiff's cross motion for summary judgment.
III. CONCLUSION
For the foregoing reasons, this Court finds that bail bond forfeiture judgments against commercial sureties are not dischargeable in bankruptcy pursuant to 11 U.S.C. § 523(a)(7); therefore, this Court will grant Defendant's motion to dismiss and deny Plaintiff's motion for summary judgment.
ORDER
This matter having come before the Court upon Defendant Donald F. Phelan's motion to dismiss for failure to state a claim upon which relief may be granted and Plaintiff Thomas L. Dobrek motion for partial summary judgment; and the Court having reviewed the submissions of the parties; and for the reasons stated in the Opinion of today's date; and for good cause shown;
IT IS this 4th day of August, 2004, hereby
ORDERED that Defendant's motion to dismiss for failure to state a claim upon which relief may be granted [Docket Item No. 5] is GRANTED, and that Plaintiff's complaint is DISMISSED; and,
IT IS FURTHER ORDERED that Plaintiff's motion for partial summary judgment [Docket Item No. 7] is DENIED.