Cnty. of Dakota v. Milan (In re Milan)
| Decision Date | 01 March 2016 |
| Docket Number | ADV 15–3034–KAC,BKY 14–34685–KAC |
| Citation | 546 B.R. 187 |
| Parties | In re: Jacob Jerome Milan and Ashley Kaye Milan (aka Ashley Kaye Hagen), Debtors. County of Dakota, Plaintiff, v. Jacob Jerome Milan and Ashley Kaye Milan (aka Ashley Kaye Hagen), Defendants. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
Jeffrey A. Timmerman, Dakota County Attorney's Office, Hastings, MN, for Plaintiff.
Kenneth Corey-Edstrom, Larkin Hoffman Daly & Lingren Ltd., Minneapolis, MN, for Defendants.
This case presents an issue of first impression in the District of Minnesota, whether costs charged to inmates under Minnesota's "pay to stay" program2 are excepted from the bankruptcy discharge. It is presented on cross motions for summary judgment and based on undisputed material facts. Jeffrey Timmerman appeared for the plaintiff, the County of Dakota ("Dakota County"). Kenneth Corey–Edstrom appeared for the defendants, Jacob and Ashley Milan (the "Milans").
This court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157(b)(1) and 1334, and Local Rule 1070–1. It is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I). For the reasons discussed below, the obligations of Jacob Milan to Dakota County for "pay to stay" costs are dischargeable pursuant to 11 U.S.C. § 523(a)(7).3 Judgment will be entered in favor of the Milans.
The Dakota County Sheriff's Office ("DCSO") is a branch of Dakota County and operates the Dakota County Jail. Under the authority of Minn.Stat. § 641.12, subd.3, the DCSO charges convicted persons for incarceration expenses including room and board, medical expenses, and other miscellaneous costs through a "pay to stay" program.
The "pay to stay" policy's statement of purpose provides, "The pay [to] stay policy is designed to assist Dakota County RECOUP A PORTION of the costs of the offender's room and board, clothing and other correctional services" (emphasis in original). This statement is also contained in the Dakota County Sheriff's Office Correctional Facility Policy and Procedure.5
As of July 2015, the DCSO charged room and board "costs" of $25.00 per day. This rate is set by the Dakota County Board of Commissioners, which adopts a fee schedule proposed by the DCSO. Dakota County only attempts to recoup a portion of their costs through the room and board per diem. The actual cost currently exceeds $100.00 per day per inmate.
"Pay to stay" fees are administered by the DCSO. The DCSO does not administer court ordered costs, such as fines, surcharges, court costs, assessment fees, and restitution. Collection of court ordered costs are administered by the district court collector. The district court collector does not administer pay to stay charges. "Pay to stay" fees collected by the DCSO, or on its behalf, are deposited in a DCSO budgetary account for use in covering the cost of the inmate's stay while in custody. The court ordered costs are not deposited in the DCSO budgetary account, except for restitution for damages to property of the Dakota County Jail.
If an inmate of Dakota County fails to pay a "pay to stay" charge imposed by Minn.Stat. § 641.12, the consequence imposed by Dakota County is referral to Minnesota's "revenue recapture" program.6 Revenue Recapture diverts tax refunds, rent credits, and lottery winnings to Minnesota governmental agencies to satisfy the inmate's "pay to stay" debt.7
As a result of criminal convictions, Jacob Milan was incarcerated a total of 179 days between January 2006 and November 2012. To recover a portion of its expenses incurred for housing Jacob Milan, the DCSO billed Jacob Milan $3,583.00 for room and board and $22.43 for medical expenses pursuant to the "pay to stay" statute.
The Milans filed a Chapter 7 bankruptcy petition on November 25, 2014. A discharge under 11 U.S.C. § 727 was granted to the Milans on February 18, 2015. In Schedule F of their bankruptcy petition, the Milans described Dakota County's claims as unsecured nonpriority claims and as "Various Dates Pay to Stay & Booking Fee" ($3,649.46), and "March 2013 Booking Fee" ($25.00). The parties now agree that as of the bankruptcy petition date, $3,504.77 in room and board charges and $9.69 in medical expenses (collectively, the "Incarceration Costs") remained outstanding.
Dakota County commenced this adversary proceeding seeking a determination that the Incarceration Costs are nondischargeable pursuant to 11 U.S.C. § 523(a)(7) and that Dakota County may continue its collection attempts. Prior to this proceeding, Dakota County did not assert that it considered the Incarceration Costs a part of Jacob Milan's "punishment."8
None of the court orders entered against Jacob Milan (the "Sentencing Orders") include any reference to room and board or medical costs.9 But for his court imposed criminal sentence, the DCSO would not have charged him for these costs. Dakota County is not aware of any instance in which the Minnesota First Judicial District Court for Dakota County included "pay to stay" room and board or medical costs in a court order.
In re Juergens, No. 12–21841–DRD, 2014 WL 978156, at *1 (Bankr.W.D.Mo. Mar. 11, 2014)citing Celotex v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Matsushita Elec. Indus. Co., Ltd. V. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
"Summary judgment is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, demonstrates that there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law." Juergens, 2014 WL 978156, at *1 ; citing Freyermuth v. Credit Bureau Serv., Inc., 248 F.3d 767, 770 (8th Cir.2001) ; Fed.R.Civ.P. 56(c). There is no issue as to any material fact in this proceeding. Accordingly, summary judgment is appropriate.
Section 727(b) of the Bankruptcy Code provides that a discharge in a Chapter 7 case discharges the debtor from all debts that arose before the case was filed, except the kinds of debts listed in § 523. 11 U.S.C. § 727(b). Section 523(a) provides exceptions to discharge. All but three are self-effectuating.10 "Self-effectuating" means the applicable creditor need not take any action before the discharge is entered. In re Petty, 491 B.R. 554, 558 (8th Cir. B.A.P. 2013). "The[se] debts are excepted from discharge simply because of the nature of the debts." Id . Debts included in § 523(a)(7) are included in this category of automatically nondischargeable debts. See Kelly v. Robinson, 479 U.S. 36, 42, 107 S.Ct. 353, 93 L.Ed.2d 216 (1986) ; Petty, 491 B.R. at 558. As a matter of first impression, Dakota County argues that "pay to stay" charges are nondischargeable debts pursuant to § 523(a)(7).
The second prong is conceded and satisfied in this case; the Incarceration Costs are "payable to and for the benefit of a governmental unit," Dakota County.11 The first and third prongs form the substance of the contest here. They should be reviewed mindful of the principle that In re Hickman, 260 F.3d 400, 404 (5th Cir.2001).
Minnesota's "pay to stay" statute12 allows counties to assess incarceration expenses to inmates convicted of crimes:
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...bankruptcy, exceptions to discharge are construed strictly against the creditor and liberally in favor of the debtor."). 219. In re Milan, 546 B.R. 187, 198 (Bankr. D. Minn. 2016), aff'd, 556 B.R. 922 (B.A.P. 8th Cir. 2016) ("[T]he Incarceration Costs are compensation for actual pecuniary l......