August 5, 2013
STATE OF NEW JERSEY, Plaintiff-Respondent,
HANAN M. BAKHOUM, Defendant-Appellant.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted May 20, 2013
On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Municipal Appeal No. 48-2011.
Santo J. Bonanno, attorney for appellant.
Andrew C. Carey, Acting Middlesex County Prosecutor, attorney for respondent (Brian D. Gillet, Special Deputy Attorney General/Acting Assistant Prosecutor, of counsel; Susan L. Berkow, of counsel and on the brief).
Before Judges Ashrafi and Espinosa.
Defendant Hanan Bakhoum appeals from a judgment of the Superior Court, Law Division, finding her guilty on de novo review of a bad check charge prosecuted in the Woodbridge Township Municipal Court. She contends there was insufficient evidence of her guilt and the court violated the Supremacy Clause of the United States Constitution in ordering her to pay restitution despite her bankruptcy discharge. We affirm.
The evidence at the municipal court trial showed that defendant was the sole shareholder of a corporation that owned a grocery store in Roselle. On or about December 10, 2010, a potential buyer of the business gave defendant a check for $10, 000 as a deposit toward purchasing the store. Defendant deposited the buyer's check into the corporation's checking account with Bank of America on December 13, 2010. The $10, 000 deposit raised the balance of the checking account on that date to $11, 847.30.
According to the testimony of defendant's husband at the trial, the buyer agreed that $5, 000 of the deposit money could be used to replenish inventory in the store before completion of the sale and purchase. However, the corporation's bank statement for December 2010 showed that, within two days of the deposit, $11, 600 was withdrawn from the account in cash, one withdrawal of $1, 800 the same day as the deposit and the second for $9, 800 on the following day, December 14, 2010. From the latter date to the end of the month, the account never had a balance greater than $269.76.
On December 22, 2010, the attorney for defendant's corporation notified the buyer by letter that defendant and her husband were canceling the deal for the sale of the grocery store, and also that the attorney was withdrawing from representing the corporation.
On January 1, 2011, the buyer went to the grocery store and confronted defendant about returning his deposit money. Defendant wrote a check to him for $10, 000 on the corporate account. She back-dated the check to December 7, 2010, and also requested that the buyer not deposit the check until January 3rd. The buyer deposited the check on the latter date, but it was dishonored because of insufficient funds in the account. The buyer returned to the store to demand refund of his deposit, but, according to his testimony at trial, defendant's husband told him defendant had gone to Egypt and he would not be repaid.
The buyer never received a refund of his deposit money. On January 21, 2011, he swore to a criminal complaint against defendant, alleging a violation of N.J.S.A. 2C:21-5, "Bad Checks."
Before she was tried on the bad check charge, defendant filed a petition for bankruptcy in April 2011. The buyer's claim was included in the list of defendant's debts, and the buyer was given notice of a creditors' meeting. He attended the meeting but did not file an objection to the proposed discharge of the debt to him. On June 17, 2011, the federal bankruptcy court entered judgment discharging defendant's debt to the buyer, among other debts.
The municipal court trial on the bad check charge was held in September 2011. Defendant claimed in her testimony that her husband operated the store and she did not have knowledge of the store's or the corporation's financial affairs. When asked specifically about the withdrawal of $9, 800 from the corporation's bank account on December 14, 2010, she said she did not remember it.
The municipal judge found the testimony of defendant and her husband not to be credible. Reviewing the bank record in detail, and focusing on the withdrawal of $9, 800 from the account one day after the deposit was made, the judge found defendant guilty of knowingly issuing a bad check to the buyer as a refund of his money. The municipal judge sentenced defendant to a fine of $1, 006, restitution of $10, 060 to be paid to the buyer within sixty days, twenty days of community service, fifteen days in jail if the restitution was not paid and the community service was not completed as ordered, and other lesser statutory money penalties and court costs.
Defendant appealed her conviction under Rule 3:23 to the Superior Court, Law Division. On de novo review of the record, the Law Division judge also found defendant guilty and re-imposed the sentence of restitution, as well as other penalties.
On appeal to this court, defendant argues:
THE DEBT THAT FORMED THE BASIS OF THE CRIMINAL RESTITUTION OBLIGATION WAS DISCHARGED IN BANKRUPTCY AND THE ORDER OF THE RESTITUTION VIOLATES THE SUPREMACY CLAUSE OF THE UNITED STATES CONSTITUTION.
1. The $10, 000 debt was actually discharged through bankruptcy prior to the conviction and order to pay restitution.
THE RESTITUTION OBLIGATION WAS DISCHARGEABLE IN BANKRUPTCY BECAUSE IT WAS PAYABLE TO THE BENEFIT OF THE COMPLAINANT AS COMPENSATION FOR ACTUAL PECUNIARY LOSS AND NOT TO AND FOR THE BENEFIT OF ANY GOVERNMENTAL UNIT.
THE COURT ERRED IN AFFIRMING THE CONVICTION SINCE IT WAS AGAINST THE WEIGHT OF THE EVIDENCE AND IT IMPROPERLY RELIED UPON A STATUTORY PRESUMPTION.
Before addressing defendant's challenge to the sentence of restitution, we briefly comment upon and reject defendant's third argument point, the sufficiency of evidence for conviction. Defendant claims that the evidence was insufficient to prove that she knew the Bank of America checking account of the corporation lacked sufficient funds to cover the $10, 000 check she issued to the buyer on January 1, 2011. However, she asked the buyer not to deposit the check until January 3rd because she knew the funds were not in the account. Based on the surrounding circumstances, the municipal judge reasonably inferred that defendant was well-aware of the corporation's financial inability to honor the check. The municipal judge made credibility determinations adverse to defendant and her husband after reviewing the bank record. He noted that the deposit money was withdrawn immediately after it was received and defendant and the corporation never had sufficient funds to cover the check defendant issued. The judge found defendant's protestations of ignorance not to be believed and inferred that defendant and her husband intended to defraud the buyer. On de novo review, the Law Division judge agreed with those findings and conclusions. We see no reason to disturb the fact findings and credibility determinations of the two judges who found defendant guilty of the bad check offense. See State v. Locurto, 157 N.J. 463, 471 (1999); State v. Johnson, 42 N.J. 146, 162 (1964).
With respect to the sentence imposed, defendant argues that the bankruptcy discharge eliminated the debt to the buyer, and so, the state courts erred in ordering her to pay restitution on a non-existent debt. She cites several federal cases for the proposition that a discharge in bankruptcy supersedes the power of a state criminal court to order restitution and that state courts must defer to the Supremacy Clause of the United States Constitution and refrain from ordering restitution of a debt that has been discharged. See, e.g., In re Johnson-Allen, 871 F.2d 421 (3d Cir. 1989); In re Redenbaugh, 37 B.R. 383 (Bankr. C.D. Ill. 1984).
More authoritative precedents, however, allow restitution as part of a criminal sentence, in particular, where the criminal charge precedes the bankruptcy petition and is not utilized merely to collect a debt for the benefit of the creditor.
In Kelly v. Robinson, 479 U.S. 36, 107 S.Ct. 353, 93 L.Ed.2d 216 (1986), the Court held that discharge of debts in bankruptcy court did not affect the obligation of a defendant to pay restitution as part of a sentence of probation. Reiterating "the fundamental policy against federal interference with state criminal prosecutions[, ]" id. at 47, 107 S.Ct. at 360, 93 L.Ed.2d at 227 (quoting Younger v. Harris, 401 U.S. 37, 46, 91 S.Ct. 746, 751, 27 L.Ed.2d 669, 676 (1971)), the Court held that the federal Bankruptcy Code, specifically 11 U.S.C.A. § 523(a)(7), provides that a state criminal sentence of restitution is not discharged in bankruptcy. Kelly, supra, 479 U.S. at 52, 107 S.Ct. at 362, 93 L.Ed.2d at 230. The federal statute exempts from discharge any debt "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." 11 U.S.C.A. § 523(a)(7). Interpreting the statute, the Court reasoned that:
Because criminal proceedings focus on the State's interests in rehabilitation and punishment, rather than the victim's desire for compensation, we conclude that restitution orders imposed in such proceedings operate "for the benefit of" the State. Similarly, they are not assessed "for . . . compensation" of the victim. The sentence following a criminal conviction necessarily considers the penal and rehabilitative interests of the State. Those interests are sufficient to place restitution orders within the meaning of § 523(a)(7).
[Kelly, supra, 479 U.S. at 53, 107 S.Ct. at 362-63, 93 L.Ed.2d at 230-31 (footnote omitted).]
Defendant's argument is of no avail that in reaching these conclusions the Supreme Court of the United States "torture[d] the plain and unambiguous language" of the statute.
Nor are we confined to the specific factual circumstances of Kelly in concluding that the sentence of restitution was permissible in the circumstances of this case. In In re Thompson, 418 F.3d 362 (3d Cir. 2005), the United States Court of Appeals for the Third Circuit applied the holding of Kelly in factual circumstances essentially the same as the facts of this case.
In Thompson, the defendant was charged with theft by deception for diverting payments made to him on a home-building contract. Id. at 363. He then filed a petition for bankruptcy and listed the debt. The creditor received notice of the bankruptcy petition and participated in the proceedings, but the debt was discharged by the bankruptcy court. Id. at 363-64. Subsequently, the defendant pleaded guilty to issuing bad checks and was ordered to pay restitution of $22, 785 as a condition of his sentence of probation. Id. at 364. The Court of Appeals identified the issue it was deciding as follows: "whether a restitution order from a state criminal prosecution for theft by deception, which directs payment to the fraud victim, is exempt from a Chapter 7 bankruptcy discharge under 11 U.S.C. § 523(a)(7)." Thompson, supra, 418 F.3d at 363.
Applying Kelly, the court noted that Congress had accepted "the judicially-created exception of state criminal restitution orders from discharge in bankruptcy liquidations." Id. at 368 (citing Kelly, supra, 479 U.S. at 53, 107 S.Ct. at 362-63, 93 L.Ed.2d at 230-31). It held that the restitution order was not dischargeable in bankruptcy although the money was payable directly to the creditor. Ibid. The court's holding was not affected by the fact that the bankruptcy discharge had preceded the sentence of restitution the state court had imposed.
The Court of Appeals in Thompson also distinguished prior precedents that reached seemingly contrary conclusions. It stated that In re Rashid, 210 F.3d 201 (3d Cir. 2000), and In re Towers, 162 F.3d 952 (7th Cir. 1998), cert. denied, 527 U.S. 1004, 119 S.Ct. 2340, 144 L.Ed.2d 237 (1999), did not invoke the federalism concerns that the Supreme Court expressed in Kelly with respect to state criminal prosecutions. In re Thompson, supra, 418 F.3d at 367.
Kelly and Thompson compel our affirmance of the judgment of restitution in the circumstances of this case. Like those cases, the bankruptcy court's discharge of the debt in this case did not preclude imposition of an order of restitution.