In re Godfrey

• Decision Date: 11 June 1979
• Docket Number: Civ. A. No. 79-10-N.
• Citation: 472 F. Supp. 364
• Parties: In re Ernest Gordon GODFREY, Sr., Individually and d/b/a Auto Mart of Montgomery and d/b/a Auto Mart Transportation, Bankrupt. James H. EVANS, District Attorney, Fifteenth Judicial Circuit of Alabama, Appellant, v. Ernest Gordon GODFREY, Sr., Individually and d/b/a Auto Mart of Montgomery and d/b/a Auto Mart Transportation, Appellee.
• Court: U.S. District Court — Middle District of Alabama

472 F. Supp. 364

In re Ernest Gordon GODFREY, Sr., Individually and d/b/a Auto Mart of Montgomery and d/b/a Auto Mart Transportation, Bankrupt.

James H. EVANS, District Attorney, Fifteenth Judicial Circuit of Alabama, Appellant, v. Ernest Gordon GODFREY, Sr., Individually and d/b/a Auto Mart of Montgomery and d/b/a Auto Mart Transportation, Appellee.

Civ. A. No. 79-10-N.

United States District Court, M. D. Alabama, N. D.

June 11, 1979.

H. Lewis Gillis, Deputy Dist. Atty., Fifteenth Judicial Circuit of Alabama, Montgomery, Ala., for appellant.

Carl O. Pilgrim, Montgomery, Ala., for appellee.

MEMORANDUM

JOHNSON, District Judge.

James H. Evans, District Attorney for the Fifteenth Judicial Circuit of Alabama, has appealed the order entered on November 28, 1978, by Bankruptcy Judge Rodney R. Steele. Before reaching the issues presented by this appeal, it is necessary to review the prior history of this case in some detail. On March 3, 1978, Ernest Gordon Godfrey, Sr., individually and doing business as Auto Mart of Montgomery and as Auto Mart Transportation, filed a voluntary petition of bankruptcy. At that time he filed a schedule of his debts, and listed the following, among others, as creditors having unsecured claims without priority: P. W. Echols (Echols), Capitol Motor Company (Capitol), Brewbaker Buick (Brewbaker), Neil Huffman Volkswagen Corporation (Huffman), and McConnell Dodge, Inc. (McConnell). On March 9, 1978, the bankruptcy judge entered an order setting March 20 as the first meeting of creditors and April 19 as the deadline for filing complaints objecting to the discharge of the bankrupt and complaints seeking a determination of the dischargeability of any debts. A copy of this order was mailed to each creditor listed by Godfrey. On April 19, two creditors—but none of the creditors named above—requested an extension of time for filing complaints to determine dischargeability and discharge. An extension was granted and one creditor filed a complaint in May.

Though notices had been mailed to all Godfrey's creditors, including Echols, Capitol, Brewbaker, Huffman, and McConnell, these five creditors filed no complaints with the bankruptcy court alleging that Godfrey's debts to them were non-dischargeable and filed no objections to his discharge. Earlier Echols, Brewbaker, Huffman, and McConnell had brought actions in the District Court of Montgomery County, Alabama, against Godfrey for issuing worthless checks. After a hearing on March 24, 1978, the state district court judge dismissed the charges relating to Brewbaker, Huffman, and McConnell. On the same day Echols dismissed five worthless check charges against Godfrey. The state proceedings did not terminate then, however. These creditors, or their agents, testified against Godfrey before the state court grand jury.¹ On July 18, 1978, the grand jury returned nine indictments against Godfrey alleging that he had violated the Alabama Worthless Check Act, Ala.Code § 13-4-110 through 122 (1975), by drawing eleven checks without sufficient funds on deposit or credit and with the intent to defraud. These checks totaled approximately $31,000. The amount of each check corresponded to a check Godfrey had given to one of the five creditors named above—Echols, Capitol, Brewbaker, Huffman, and McConnell. The witnesses through whom the state proposed to prove its case were principals or agents of these five creditors.

At this point Godfrey sought a temporary restraining order and a preliminary injunction against the district attorney, James H. Evans, and the five creditors to prevent the prosecution of the charges referred to in the indictments. After a hearing at which testimony was presented by agents of the creditors and by an investigator from the office of the district attorney, the bankruptcy judge concluded that the district attorney was prosecuting these charges in good faith and not for any unlawful purpose. The bankruptcy judge found that the creditor complaining witnesses, however, had taken out warrants or testified before the grand jury for the purpose of collecting the bad checks Godfrey had issued to them. He further noted that if a bankrupt were convicted of uttering bad checks and sentenced to make full restitution to the complaining witnesses this would conflict with an order of the bankruptcy court discharging the bankrupt of his debts. Accordingly, he entered the following order on August 28, 1978: (1) he denied Godfrey's motion to enjoin the district attorney from continuing the pending criminal prosecution; (2) he issued a permanent injunction restraining Godfrey from paying and Huffman, McConnell, Brewbaker, Capitol, and Echols from receiving any sum of money in satisfaction of the debts represented by the bad checks which were the basis of the pending criminal action.

On September 1, 1978, Godfrey filed a notice of appeal of the August 28 order. He withdrew his appeal on October 18. No other party appealed.

On September 8, 1978, the bankruptcy court granted a discharge to Godfrey.

On October 10, 1978, Godfrey entered a guilty plea to the nine worthless check charges in the Circuit Court of Montgomery County. On October 27, he was sentenced to two years' imprisonment in each case, but the sentence was suspended and he was placed on probation on the condition that he pay a total of $31,000 in restitution at the rate of $200 per month.

Subsequent to the sentence, James H. Evans, the district attorney, filed a motion on October 31, 1978, seeking to amend the injunction which had been entered on August 28. He sought to have lifted the order restraining Huffman, McConnell, Brewbaker, Capitol, and Echols from receiving payment in satisfaction of the worthless checks; he also sought to have the bankruptcy proceeding reopened and the debts represented by the worthless checks designated as non-dischargeable. He based his motion on the discovery of "new evidence not heretofore discoverable by due diligence on behalf of all defendants." The "new evidence" was the guilty plea entered by Godfrey on October 10, 1978.

On November 9, 1978, Godfrey filed an opposition to the motion submitted by Evans and also filed his own motion seeking "relief and protection." In support of his motion Godfrey alleged that prior to sentencing he had informed the circuit court judge of the injunction entered by the bankruptcy court prohibiting him from paying restitution and his creditors from receiving it. He sought to enjoin the judge who had sentenced him and all the other judges of the Fifteenth Judicial Circuit of Alabama from (1) requiring him to pay restitution as a condition of his probation, and (2) revoking his probation for failure to pay restitution. He also sought to have the bankruptcy court review the terms and conditions of his sentence, asserting that eighteen years' probation was excessive and was imposed solely to require restitution of the whole amount of $31,000.² Additionally, he alleged that the motion filed October 31, 1978, by Evans was an attempt to harass Godfrey into paying restitution, and sought to enjoin Evans from further attempts to secure restitution of Godfrey's debts which had been discharged in bankruptcy.

On November 28, 1978, the bankruptcy judge entered an order denying the motions of Evans and Godfrey. In the order he ruled that Evans had no standing to seek the determination of the dischargeability of the debts of Godfrey. He based that ruling on the statutory provision which specifies that a bankrupt or a creditor may file an application to determine the dischargeability of a debt. Further he ruled that no new evidence had been presented. He pointed out that the indictments had already been returned when the August hearing was held and the injunction entered prohibiting repayment of discharged debts. He noted that in prosecuting the case the district attorney had to be prepared to prove all the elements of the crimes with which Godfrey had been charged. Thus, he concluded, the guilty plea did not produce new evidence, but rather made presentation of proof of the crimes unnecessary. He further ruled that even if Godfrey's guilty plea were evidence in the form of an admission of intent to defraud, this evidence fell short of that required to render a debt non-dischargeable. He based that ruling on an examination of the intent to defraud required by the Worthless Check Act of Alabama, Ala. Code § 13-4-118 (1975), and the intent to defraud required by the non-dischargeability section of the Bankruptcy Act, 11 U.S.C. § 35(a)(2) (1976). He concluded that the requisite intent was different in each, noting that the bankruptcy act requires a "specific positive intent to cheat or swindle" and "a fraud in fact and not one implied in law," whereas the worthless check act concerns a "technical statutorily defined offense" in which "the fraud is implied." Order of November 28, 1978, at 3-4.

The bankruptcy judge reiterated that the district attorney had represented that in prosecuting the criminal charges against Godfrey he had no interest in seeking collection of any debts, but simply intended to vindicate the worthless check laws of Alabama.³ However, the bankruptcy judge recognized that the 1977 amendment to the worthless check act requires a judge to order a person convicted under that statute to make full restitution to the complaining parties. Ala.Code § 13-4-123 (Supp.1978). Although the Alabama statute requires restitution, the bankruptcy judge nevertheless ruled that restitution—if it required this bankrupt to pay to his creditors, the complaining witnesses, the same amount he owed them stemming from the debts which had been discharged in the bankruptcy proceeding —would impermissibly interfere with the order of discharge which had been entered in this case on behalf of the bankrupt. Accordingly, he held that in order to protect the integrity of the bankruptcy proceedings the injunction entered in August, 1978,...