State v. Foley

• Decision Date: 25 November 1987
• Docket Number: No. 87-0510-CR,87-0510-CR
• Citation: State v. Foley, 142 Wis.2d 331, 417 N.W.2d 920 (Wis. App. 1987)
• Parties: STATE of Wisconsin, Plaintiff-Respondent, v. Scott FOLEY, Defendant-Appellant.
• Court: Wisconsin Court of Appeals

Page 920

417 N.W.2d 920

142 Wis.2d 331

STATE of Wisconsin, Plaintiff-Respondent, v. Scott FOLEY, Defendant-Appellant.

No. 87-0510-CR.

Court of Appeals of Wisconsin.

Submitted on Briefs Oct. 6, 1987.

Opinion Released Nov. 25, 1987.

Opinion Filed Nov. 25, 1987.

[142 Wis.2d 333] John C. Albert and Smoler & Albert, S.C., Madison, for defendant-appellant.

Donald J. Hanaway, Atty. Gen., and Paul Lundsten, Asst. Atty. Gen., for plaintiff-respondent.

Before GARTZKE, P.J., and EICH and SUNDBY, JJ.

SUNDBY, Judge.

Scott Foley appeals an order under sec. 973.09(1)(b), Stats., requiring him to make restitution as a condition of probation upon conviction of two counts of theft by contractor, contrary to sec. 779.02(5) and 943.20(1)(b), Stats. Section 973.09(1)(b) provides:

If the court places the person on probation, the court shall require restitution designed to compensate the victim's pecuniary loss resulting from the crime to the extent possible, unless the court finds there is substantial reason not to order restitution as a condition of probation....

The trial court entered an order requiring Foley to make restitution to the owners who had advanced him moneys on two home improvement contracts and to persons who had provided Foley with labor and materials on the contracts.

The issues are: (1) Does the restitution order violate the supremacy clause, art. VI, cl. 2, of the federal constitution because it includes debts discharged in bankruptcy? (2) Was the discharge in bankruptcy of Foley's debts to persons who provided labor and materials a substantial reason under sec. 973.09(1)(b), Stats., to not order restitution as a condition of probation? (3) Did the trial court deny Foley his right to trial by a jury when it required restitution in an amount exceeding the misappropriations determined by the jury? (4) Did the trial court deny Foley his right to trial by a jury when it included as victims to whom Foley must make restitution, persons not named in the charging documents? (5) Does sec. 973.09(1)(b) permit the sentencing court to require restitution to persons not named in the charging documents? (6) Did the trial court err when it determined the amount and method of payment of restitution without considering Foley's financial resources and future ability to pay?

Because we conclude that the trial court failed to consider Foley's financial resources and future ability to pay, as required by sec. 973.09(1m)(a), Stats., when it determined the amount and method of payment of the restitution it ordered, we reverse the restitution order and remand and direct that the trial court reconsider the order, taking these factors into consideration. We resolve the remaining issues against Foley.

I. BACKGROUND OF THE CASE

Foley was employed as contractor by two home owners, the Straubs and the Andersons, to make improvements to their homes. They advanced funds to Foley, who employed suppliers, subcontractors and laborers on each contract. He was not able to complete the contracts. His debts to the persons who provided labor and materials on both projects were discharged in bankruptcy. He was subsequently found guilty by a jury of misappropriating the amounts advanced him by the Straubs and the Andersons. After a hearing held over several separate dates, the trial court entered an order that Foley make restitution to the owners and the laborers, suppliers and materialmen on both contracts.

II. DISCHARGE IN BANKRUPTCY

The jury found that Foley misappropriated $13,830.57 on the Straub contract, and $4,347.49 on the Anderson contract. Foley acknowledges that these misappropriations were not discharged in his bankruptcy proceedings because "[t]he bankruptcy policies do not include allowing individuals who intentionally commit criminal acts to be forgiven." He contends, however, that the pecuniary losses to suppliers, subcontractors and laborers are "debts" which were discharged in his bankruptcy. Foley notes that none of these creditors objected to his discharge. He argues that the restitution order, insofar as it requires him to repay discharged debts, attempts to supersede the federal bankruptcy laws and violates the supremacy clause, art. VI, cl. 2, United States Constitution. ¹

Foley's argument requires that we construe sec. 973.09, Stats., and the federal bankruptcy laws in relation to each other and in relation to the facts. Such construction presents questions of law which we determine without deference to the trial court. State v. Vonesh, 135 Wis.2d 477, 480, 401 N.W.2d 170, 172 (Ct.App.1986).

We conclude that because "federal bankruptcy courts should not invalidate the results of state criminal proceedings," Kelly v. Robinson, 479 U.S. 36, ----, 107 S.Ct. 353, 360, 93 L.Ed.2d 216, 227 (1986), restitution ordered under sec. 973.09, Stats., is unaffected by bankruptcy proceedings.

Foley argues that Kelly v. Robinson does not apply because, unlike the debts involved in that case, Foley's debts were already discharged when the restitution order was entered. ² We agree that the probationer's claim in Kelly v. Robinson was made in a factual context different from this case. We do not agree, however, that the principles of that decision have no application to this case.

In Kelly v. Robinson, 479 U.S. at ----, 107 S.Ct. at 359, 93 L.Ed.2d at 227, the Court noted that the current bankruptcy code was enacted against the background of an established judicial exception to discharge for criminal sentences under the Bankruptcy Act of 1898. The reasoning behind the judicial exception was:

A discharge in bankruptcy has no effect whatsoever upon a condition of restitution of a criminal sentence. A bankruptcy proceeding is civil in nature and is intended to relieve an honest and unfortunate debtor of his debts and to permit him to begin his financial life anew. A condition of restitution in a sentence of probation is a part of the judgment of conviction. It does not create a debt nor a debtor-creditor relationship between the persons making and receiving restitution. As with any other condition of a probationary sentence it is intended as a means to insure the defendant will lead a law-abiding life thereafter.

Id. at ----, 107 S.Ct. at 359, 93 L.Ed.2d at 226, quoting State v. Mosesson, 78 Misc.2d 217, 356 N.Y.S.2d 483, 484 (1974) (citations omitted).

In Kelly v. Robinson, the court found an "absence of any significant evidence that Congress intended to change the law in this area," and concluded that therefore federal bankruptcy courts should not impede the state's right to formulate and enforce penal sanctions. Id., 479 U.S. at ----, ----, 107 S.Ct. at 363, 360, 93 L.Ed.2d at 231, 227. ³

Foley argues that his situation is different because ordering restitution of debts which have been discharged frustrates the bankruptcy code's purpose to give the debtor a "fresh start." We disagree. In a criminal justice system which focuses upon the offender and not the victim, ordering the offender to make restitution to his victim has a rehabilitative effect which is not incompatible with a "fresh-start" approach. It is doubtful, however, that the Supreme Court in Kelly v. Robinson would have reached the result it did if Connecticut's criminal justice system had focused on compensation to the victim rather than rehabilitation of the offender. The Court emphasized that the Connecticut statute focuses "upon the offender and not on the victim, and ... restitution is part of the criminal penalty rather than compensation for a victim's actual loss." Kelly v. Robinson, 479 U.S. at ----, 107 S.Ct. at 357, 93 L.Ed.2d at 223, quoting In re Pellegrino, 42 B.R. 129, 137 (Bankr.D.Conn.1984).

We consider therefore the focus of sec. 973.09, Stats. In Huggett v. State, 83 Wis.2d 790, 798-99, 266 N.W.2d 403, 407 (1978), the court discussed restitution as a condition of probation as follows:

Restitution can aid an offender's rehabilitation by strengthening the individual's sense of responsibility. The probationer may learn to consider more carefully the consequences of his or her actions. One who successfully makes restitution should have a positive sense of having earned a fresh start and will have tangible evidence of his or her capacity to alter old behavior patterns and lead a law-abiding life. Conditioning probation on making restitution also protects the community's interest in having the victims of crime made whole. However, conditioning probation on the satisfaction of requirements which are beyond the probationer's control undermines the probationer's sense of responsibility.

See also Kelly v. Robinson, 479 U.S. at ---- n. 10, 107 S.Ct. at 360 n. 10, 93 L.Ed.2d at 228 n. 10 (restitution is an effective rehabilitative penalty and has a more precise deterrent effect than a traditional fine).

When Huggett was decided, sec. 973.09(1), Stats. (1977), empowered the trial court to impose any reasonable and appropriate condition on the grant of probation. Restitution was such a condition. Id., 83 Wis.2d at 796, 266 N.W.2d at 406.

Section 973.09, Stats., has been extensively amended since Huggett. Restitution is now a mandatory condition of probation "to compensate the victim's pecuniary loss ... to the extent possible, unless the court finds there is substantial reason not to order restitution as a condition of probation." Sec. 973.09(1)(b). If the court does not require restitution, it must state its reasons on the record. Id.

Unquestionably, requiring restitution to the victim as a condition of probation reflects the legislature's increasing concern for the rights of victims but the requirement does not shift the focus from the state's interests in rehabilitation and punishment to the victim's interest in compensation. The legislative decision to require restitution is not inconsistent with the penal goals of the state, which are dual: rehabilitation of the offender and protection of the state and community interest. State v....