Opinion
5:17-CR-226-FL
10-12-2021
UNITED STATES OF AMERICA v. BARRY JEROME PHOENIX, Defendant.
ORDER AND MEMORANDUM AND RECOMMENDATION
Robert B. Jones, Jr. United States Magistrate Judge.
This matter comes before the court on Defendant Barry Jerome Phoenix's ("Phoenix") motion to quash collection effort and for return of improperly obtained assets and alternative motion to modify restitution payment terms. [DE-48]. The Government responded in opposition to the motions, and Phoenix has replied. [DE-60, -61 ]. For the reasons that follow, the motion to quash and for return of assets is denied. Additionally, it is recommended that the district court deny Phoenix's alternative motion.
Phoenix's motion to quash collection effort and for return of improperly obtained assets [DE-48] is referred to the undersigned for a decision, but because Phoenix's alternative motion to modify restitution payment terms would modify the court's judgment, the discussion of Phoenix's alternative motion is appropriately taken up here as a memorandum and recommendation to the district court. See 28 U.S.C. § 636(b)(1)(B).
I. BACKGROUND
In June 2015, Sean Noel inherited a house located at 1460 New York Avenue, Brooklyn, New York ("the property"). [DE-60, -60-2]. In August 2015, Sean Noel conveyed the property to himself and to Phoenix for ten dollars. [DE-60, -60-3]. The same day, a mortgage was recorded in the amount of $250,000. [DE-60, -60-4]. In December 2016, the mortgagee initiated foreclosure proceedings for failure to make payments. [DE-60] at 6.
Phoenix was charged in a one-count criminal information with bank fraud and aiding and abetting, in violation of 18 U.S.C. §§ 1344 and 2, filed in the Eastern District of North Carolina on July 19, 2017. [DE-5]. On February 20, 2018, Phoenix pleaded guilty, pursuant to a written plea agreement, to bank fraud and aiding and abetting in violation of 18 U.S.C. §§ 1344 and 2. [DE-5, -22]. The plea agreement states that Phoenix agreed "to make restitution to any victim in whatever amount the Court may order, pursuant to 18 U.S.C. §§ 3663 and 3663A. Said restitution shall be due and payable immediately." [DE-24] at 1.
Phoenix's Presentence Investigation Report ("PSR") adopted by the court without change indicates that the actual loss to the victims was $187,663.18 and that the provisions of the Mandatory Victim Restitution Act of 1996 ("MVRA") apply. [DE-33] at 4. The PSR further states that "according to property records from the New York City Department of Finance, Phoenix is a joint owner of property located at 1460 New York Avenue, Brooklyn, New York." Id. at 10. However, the PSR states that Phoenix's "interest in the property and his relationship with the co-owner is unknown. His mother confirmed the defendant owned this property with a friend, but could not provide any further information." Id.
On May 24, 2018, Phoenix was sentenced to twenty-one months of imprisonment and five years of supervised release, and he was ordered to pay $187,683.18 in restitution. [DE-39] at 1-7. On the schedule of payment as part of the court's judgment, the court indicated that the "lump sum payment of $187,783.18 [is] due immediately." Id. at 9. The court also indicated "[t]he special assessment in the amount of $100.00 and restitution in the amount of $187,683.18 are due in full immediately. See Sheet 5A for additional payment instructions." Id. Sheet 5A of the judgment provides:
Payment of restitution shall be due and payable in full immediately. However, if the defendant is unable to pay in full immediately, the special assessment and restitution may be paid through the Inmate Financial Responsibility Program
(IFRP). The court orders that the defendant pay a minimum payment of $25 per quarter through the IFRP, if available. The court, having considered the defendant's financial resources and ability to pay, orders that any balance still owed at the time of release shall be paid in installments of $200 per month to begin 60 days after the defendant's release from prison. At the time of the defendant's release, the probation officer shall take into consideration the defendant's ability to pay the restitution ordered and shall notify the court of any needed modification of the payment schedule.Id. at 8.
On July 3, 2018, the Government recorded a lien on the property with the New York City Department of Finance. [DE-60-11]. On July 16, 2018, the Government filed an application for a writ of execution pursuant to 28 U.S.C. § 3203. [DE-43]. On July 17, 2018, the court issued a writ of execution commanding the United States Marshals to sell the property to satisfy Phoenix's restitution debt. [DE-44]. On July 24, 2018, the Government filed a certificate of service indicating that it mailed the application for a writ of execution, the writ of execution, and a document titled "Instructions to Defendant with Clerk's Notice of Right to Claim Exemptions and Hearing Request" to Phoenix at Edgefield Federal Correctional Institution and to Sean Noel at an address in Newport News, Virginia. [DE-45]. The United States Marshals Service posted notice of the levy on the property on July 30, 2018. [DE-46]. Neither Phoenix nor Sean Noel claimed exemptions or requested a hearing.
Phoenix was released from incarceration on August 16, 2019 and, in accordance with the court's judgment, placed on the $200 per month payment plan. [DE-48] at 14. He states in his motion that he earns $ 1, 450 after taxes each month, and his expenses, including the $200 per month payment, are $1,000 per month. Id. Phoenix also filed a monthly cash flow statement with his motion in which he states that he earns $1,444.48 in net wages and receives $300 per month from family, and his monthly expenses total $1,003, including the $200 restitution payment. [DE-49] at 11. Accordingly, after the restitution payment and other expenses, Phoenix is left with approximately either $450 or $740 per month. He states in his motion that he and his partner made the decision to have a child based on the understanding that he would only be required to pay $200 per month in restitution, and he now has a five month old daughter. [DE-48] at 14.
In August 2020, the Government contacted Noel's attorney to inquire about the status of the foreclosure proceeding on the property. [DE-60] at 7. The Government learned that Noel and Phoenix were selling the property to a third party to avoid a foreclosure sale. Id. The purchase price was $760,000, the amount owed to the mortgagee was $435,762.05, and the Government was informed that Phoenix's share of the proceeds would be $97,233.29. Id. at 8. In order to maximize the amount of proceeds available to the victims, the Government agreed to release its lien for less than the full amount and allow the sale to be completed. Id. Due to a delay in closing, Phoenix's share of the proceeds was reduced to $93,606.55, which is the amount presently at issue. Id. at 9. Phoenix filed an emergency motion for an order requiring the clerk of court to hold the proceeds pending resolution of the instant motion, and the court allowed the motion. [DE-52, -59].
On November 2, 2020, Phoenix filed the instant motion to quash collection effort and for return of improperly obtained assets, or alternatively to modify restitution payment terms, and requested a hearing. [DE-48]. In the motion, Phoenix requests that the court issue an order prohibiting the Government from forcibly collecting assets from Phoenix and requiring the Government to return any funds collected by the Government in excess of the $200 per month payment. Id. at 1. Specifically, Phoenix requests the return of any funds obtained by the Government as a result of its lien on the property. Id. Phoenix alternatively moves for an adjustment of the payment terms given that his financial situation has materially changed now that he has a child. Id.
Defendant requests a hearing on the grounds that "the statutory scheme governing this issue is complex" and "this issue relates to a widespread practice in this district that the Defendant submits violates the statutory and constitutional law." Id. at 38. The Government filed a response opposing all relief sought in the motion, and the Government also states that it does not believe a hearing is necessary but has not objection to participating in a hearing. [DE-60] at 23. Because the issues presented are questions of law and the court is able to understand the parties' arguments presented in their briefs, a hearing is unnecessary. See Local Criminal Rule 47.1(f).
II. DISCUSSION
Phoenix contends that because he was placed on a $200 per month payment plan upon his release, and because he is current on the payment plan, the United States may not collect proceeds from the sale of the property. The United States contends that its lien on the property was not abrogated by the payment plan, but rather, the lien and payment plan are two separate and coexisting means of collecting restitution. The Government's reasoning is more persuasive because it more closely follows the canons of statutory construction, this court's precedent, and the policy objectives of the MVRA.
A. Canons of statutory construction require the court to read statutes as consistent with one another where possible.
Phoenix contends that because he was placed on a payment plan, the Government cannot collect proceeds from the sale of the property. The Government asks the court to read the payment plan and the lien as two means by which the Government may collect restitution.
The payment plan and the lien are both contemplated by Title 18; Phoenix contends that they cannot coexist, but the court disagrees. First, 18 U.S.C. § 3664(2) provides:
Upon determination of the amount of restitution owed to each victim, the court shall, pursuant to section 3572, specify in the restitution order the manner in which, and the schedule according to which, the restitution is to be paid, in consideration of
(A) the financial resources and other assets of the defendant, including whether any of these assets are jointly controlled;
(B) projected earnings and other income of the defendant; and
(C) any financial obligations of the defendant; including obligations to dependents.
Pursuant to 18 U.S.C. § 3664(2), Phoenix's judgment provides:
Payment of restitution shall be due and payable in full immediately. However, if the defendant is unable to pay in full immediately, the special assessment and restitution may be paid through the Inmate Financial Responsibility Program (IFRP). The court orders that the defendant pay a minimum payment of $25 per quarter through the IFRP, if available. The court, having considered the defendant's financial resources and ability to pay, orders that any balance still owed at the time of release shall be paid in installments of $200 per month to begin 60 days after the defendant's release from prison. At the time of the defendant's release, the probation officer shall take into consideration the defendant's ability to pay the restitution ordered and shall notify the court of any needed modification of the payment schedule.[DE-39] at 8.
Next, 18 U.S.C. § 3664(m)(1)(A)(i) provides that "[a]n order of restitution may be enforced by the United States in the manner provided for in subchapter C of chapter 227 and subchapter B of chapter 229 of this title; or (ii) by all other available and reasonable means." Subchapter C of chapter 227 is 18 U.S.C. § 3572 and addresses fines. Section 3572(d) largely echoes the language in 18 U.S.C. § 3664 and provides:
(1) A person sentenced to pay a fine or other monetary penalty, including restitution, shall make such payment immediately, unless, in the interest of justice, the court provides for payment on a date certain or in installments. If the court provides for payment in installments, the installments shall be in equal monthly payments over the period provided by the court, unless the court establishes another schedule.
(2) If the judgment, or, in the case of a restitution order, the order, permits other than immediate payment, the length of time over which scheduled payments will be made shall be set by the court, but shall be the shortest time in which full payment can reasonably be made.
(3) A judgment for a fine which permits payments in installments shall include a requirement that the defendant will notify the court of any material change in the defendant's economic circumstances that might affect the defendant's ability to pay the fine. Upon receipt of such notice the court may, on its own motion or the motion of any party, adjust the payment schedule, or require immediate payment in full, as the interests of justice require.
Additionally, subchapter B of chapter 229 is 18 U.S.C. § 3613, which provides generally that "[t]he United States may enforce a judgment imposing a fine in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law." More specifically, § 3613(c) provides:
An order of restitution ... is a lien in favor of the United States on all property and rights to property of the person fined as if the liability of the person fined were a liability for a tax assessed under the Internal Revenue Code of 1986. The lien arises on the entry of judgment and continues for 20 years or until the liability is satisfied, remitted, set aside, or is terminated under subsection (b).
In summary, there are two effects of the judgment entered in Phoenix's case. First, pursuant to 18 U.S.C. §3664, the court ordered that the entire restitution amount was due in full immediately, but if Phoenix was unable to pay in full, then he would be allowed to make $200 monthly payments. Second, pursuant to 18 U.S.C. § 3613(c), the order of restitution created a lien in favor of the United States on all of Phoenix's property.
Phoenix argues that because he could not pay the full restitution amount upon his release from custody, and because he is current on his payment plan, the United States may not collect his share of the proceeds from the sale of the property. The United States contends that the court should read the order of restitution in conjunction with 18 U.S.C. § 3613(c) and conclude that the payment plan and the lien are coexisting means by which the United States can collect restitution.
The court agrees that the payment plan and the lien coexist. Section 3664(m)(1)(A)(i) contemplates that restitution may be collected through a payment plan and through other means, for it provides that "[a]n order of restitution may be enforced by the United States in the manner provided for in subchapter C of chapter 227 and subchapter B of chapter 229 of this title"-i.e., an order of restitution providing for a payment plan-"or (ii) by all other available and reasonable means." Here, "all other available and reasonable means" include the lien on Phoenix's property that was created by the order of restitution pursuant to § 3613(c).
Additionally, even if § 3664(m)(1)(A) does not provide that a payment plan is one of several means by which an order of restitution may be enforced, canons of statutory construction require the court to read various statutes as consistent with one another where possible. See In re Rowe, 750 F.3d 392, 396 (4th Cir. 2014) ("Courts seek to 'interpret [each] statute as a symmetrical and coherent regulatory scheme, and fit, if possible, all parts into an harmonious whole.'" (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000))); United States v. Fisher, 58 F.3d 96, 99 (4th Cir. 1995) ("When interpreting a statute, rules of statutory construction require that we give meaning to all statutory provisions and seek an interpretation that permits us to read them with consistency") (citing United States v. Nordic Village, Inc., 503 U.S. 30, 36 (1992)); Anderson v. Fed. Deposit Ins. Corp., 918 F.2d 1139, 1143 (4th Cir. 1990) ("a court should, if possible, construe statutes harmoniously. This is especially true if the statutes deal with the same subject matter, even if an apparent conflict exists.") (citations omitted).
If the court were to adopt Phoenix's argument that the lien should be given no effect because he is participating in the payment plan, then the payment schedule contemplated by 18 U.S.C. § 3664(2) would directly conflict with and negate 18 U.S.C. §36l3(c). Rather than reading those two provisions as conflicting, the court must construe them harmoniously. The payment plan and the lien are two coexisting means by which the Government can collect restitution, and
Phoenix's participation in the payment plan does not eliminate the Government's lien.
B. Court precedent supports reading the lien and the payment plan as coexisting means of collecting restitution.
The Government cites several cases in support of its argument that the lien is not abrogated by the payment plan. [DE-60] at 13-15. Assets other than real estate, such as retirement plans and inmate trust accounts, were at issue in those cases, but two principles from the Government's cited cases are applicable here.
First, this court has held that when a judgment states that restitution is due in full immediately and also allows the defendant to make payments on a monthly schedule, the defendant's participation in a payment plan does not mean that restitution is no longer due in full immediately. See United States v. Krol, No. 5:15-CR-292-FL, 2018 WL 1792129, at *5 (E.D. N.C. Apr. 16, 2018) ("allowing the government to collect defendant's restitution judgment through garnishment does not violate the court's payment plan. The court ordered restitution 'due and payable in full immediately' (DE 55, p. 8). It need not matter that defendant is permitted to make periodic payments through the IFRP and/or monthly installment payments on any remaining balance after his release from prison."); United States v. Hill, No. 4:13-CR-28-BR, 2017 WL 2964016, at *2 (E.D. N.C. May 24, 2017) (allowing the Government's motion to authorize payment of approximately $14,000 in the defendant's inmate trust account because "the court ordered restitution paid in full immediately. As such, the fact that defendant may be making payments periodically through the IFRP or that he is required to make monthly installment payments on any balance owed within 60 days of his release is irrelevant."), aff'd, 706 F App'x 120 (4th Cir. 2017).
Accordingly, Phoenix's participation in the payment schedule does not negate the fact that his restitution is due in full immediately.
Second, courts have held that a payment plan contemplated by a restitution order is but one means by which the Government can collect restitution, and there are various other avenues the Government could pursue. See Carpenter v. Comm 'r of Internal Revenue, 152 T.C. 202, 214 (T.C. 2019) ("When payment of restitution is ordered due immediately, as it was in this case, numerous Federal courts have held that the Government is not limited by judicially crafted payment schedules and may freely pursue other means of securing restitution, including a writ of garnishment.") (collecting cases), aff'd, 788 Fed.Appx. 187 (4th Cir. 2019); United States v. James, 312 F.Supp.2d 802, 806-07 (E.D. Va. 2004) ("At sentencing, however, it was made clear to defendant that restitution of the full $93,053 was 'due and payable immediately' While a schedule of $ 150 per month was put in place in the event restitution was not paid immediately, the existence of this schedule does not mean that the government is precluded from pursuing other avenues of ensuring that defendant's restitution obligation is satisfied. Court-imposed payment schedules are merely one means available to enforce a restitution judgment."); United States v. Otter, No. 2:09CR25, 2011 WL 1843191, at *l (W.D. N.C. May 16, 2011) ("The Defendant's Judgment specifically orders that restitution is due immediately and is also combined with payment on a monthly basis upon release .... The existence of this [payment] schedule, however, 'does not mean that the Government is precluded from pursuing other avenues of ensuring that defendant's restitution obligation is satisfied. Court-imposed payment schedules are merely one means available to enforce a restitution judgment.'" (quoting James, 312 F.Supp.2d at 807)); United States v. Hawkins, 392 F.Supp. 2d 757, 759 (WD. Va. 2005) ("The defendant argues that as long as she is in compliance with the installment schedule created by the sentencing court under the MVRA's mandate, the government has no power to pursue other means of enforcing the restitution order. I disagree, however, and join with other district courts in holding that these '[c]ourt-imposed payment schedules are merely one means available to enforce a restitution judgment' and do not prevent the government from pursuing other lawful enforcement methods." (quoting James, 312 F.Supp.2d at 807)). In United States v. Blondeau, this court allowed garnishment of a retirement account to satisfy a restitution debt over the defendant's arguments that garnishment would be inappropriate because he was on a payment plan. No. 5:09-CR-117-H, 2011 WL 6000499, at *4 (E.D. N.C. Nov. 2011), adopted by 2011 WL 6001281 (E.D. N.C. Nov. 30, 2011). The court held:
Defendant reads the judgment too narrowly and ignores its express language making the restitution award 'due and payable in full immediately' Aug. 10, 2010 Judgment [DE-41]. The fact that the Court allowed any remaining balance owed to be paid over time through the Inmate Financial Responsibility Program and, postrelease, through installments of $200.00 per month, does not preclude the government from immediately collecting restitution from non-exempt assets.Id.; see also United States v. Smalls, No. 196CR00075MRDLH1, 2016 WL 6582473, at *1 (W.D. N.C. Nov. 4, 2016) (authorizing payment from the defendant's inmate trust account towards his restitution debt because 18 U.S.C. § 3613(c) "provides that a sentence imposing restitution constitutes a lien in favor of the Government against all of a defendant's property and rights to property," including the trust account.); United States v. Scarboro, 352 F.Supp.2d 714, 716-17 (E.D. Va. 2005) ("The criminal restitution order already creates a lien in favor of the United States on 'all property and rights to property' of the Defendant, and therefore a separate civil judgment is unnecessary. Title 18 U.S.C. § 3613 merely provides the government another method by which to enforce a judgment.").
Phoenix distinguishes Blondeau by arguing that the asset at issue in that case-the retirement account-could satisfy Blondeau's entire restitution debt, but the asset at issue in this case-the property-cannot satisfy Phoenix's entire debt. However, that is an immaterial distinction. The holding of Blondeau was not that the defendant never should have been placed on a payment plan, given that he had a retirement account that could satisfy the entire restitution debt; rather, the court's holding was that the Government could garnish his retirement account despite his participation in the payment plan. Whether the asset at issue can satisfy the entire restitution debt is not dispositive because the issue is not whether ownership of the asset makes the restitution debt due in full immediately, or, stated differently, whether the payment plan is triggered; instead, as discussed above, the debt is due in full immediately if the order so states regardless of whether a defendant participates in a payment plan, so the ability of an asset at issue to satisfy the entire debt is immaterial. Accordingly, the Government's arguments that (1) when a judgment states that restitution is due in full immediately, the defendant's participation in a payment plan does not mean that restitution is no longer due immediately, and (2) the payment plan is but one means by which the Government can collect restitution, are well-supported.
Phoenix also cites several cases in support of his argument that the payment plan abrogates the Government's lien, but those cases are critically distinguishable. [DE-48] at 25-26. First, in United States v. Grant, the Fourth Circuit held that the district court erred in "impos[ing] a substantial new restitution payment obligation on Grant without making any inquiry regarding what effect it would have on her and her family." 715 F.3d 552, 559 (4th Cir. 2013). Grant is distinguishable because in that case, the district court modified the conditions of Grant's probation to include a requirement that she pay income received from tax refunds towards her restitution debt. Id. at 555-56. The Fourth Circuit reasoned that 18 U.S.C. § 3664(o) provides that an order of restitution is a final judgment that can only be modified in a handful of enumerated exceptions, and while 18 U.S.C. § 3664(k) allows the court to adjust the payment schedule or require immediate payment in full if there is a material change in the defendant's economic circumstances, the district court in Grant did not find that Grant's circumstances had changed, so it abused its discretion in modifying the conditions of her probation. Id.
Here, however, the issue is not that the court modified Phoenix's supervised release conditions without first finding that his economic circumstances had changed. Rather, the issue is whether Phoenix's participation in the payment plan abrogates the Government's § 3613(c) lien. There is no statutory requirement that the Government must investigate a defendant's financial circumstances before recording a lien; 18 U.S.C. § 3613(c) provides that the lien is simply created by an order of restitution. Accordingly, the Fourth Circuit's holding in Grant that a district court must comply with § 3664(k) and find that a defendant's economic circumstances have materially changed before modifying the conditions of probation is inapplicable to the present case.
Next, Phoenix cites United States v. Bratton-Bey, 564 Fed.Appx. 28, 29 (4th Cir. 2014). In that case, the district court held that cash seized from the defendant during his arrest could be applied to his restitution debt pursuant to 18 U.S.C. § 3664(n), which provides: "If a person obligated to provide restitution, or pay a fine, receives substantial resources from any source, including inheritance, settlement, or other judgment, during a period of incarceration, such person shall be required to apply the value of such resources to any restitution or fine still owed." Id. at 28-29. The Fourth Circuit held that the district court erred because "a court may accelerate a restitution order under Section 3664(n) only if the defendant is under a current obligation to satisfy the order," and "Bratton-Bey was under no obligation to pay restitution until his release from imprisonment." Id. at 29-30. The Fourth Circuit noted that the written judgment omitted any information about whether the restitution was due in full immediately, which would ordinarily mean that restitution was due immediately by default, but the oral pronouncement of Bratton-Bey's sentence stated otherwise, and when there is a conflict, the oral sentence controls. Id. at 30 n.2 (citing United States v. Osborne, 345 F.3d 281, 283 n.l (4th Cir. 2003)). The Fourth Circuit further held that in order to modify Bratton-Bey's restitution schedule, § 3664(k) requires the court to find that his economic circumstances had materially changed, and it failed to do so. Id. at 30. Bratton- Bey is distinguishable from the present case because § 3664(n), which addresses income received by a defendant while incarcerated, and § 3664(k), which allows the court to modify a payment schedule when the defendant's economic circumstances are materially changed, are not at issue here. Rather, the issue is whether the payment schedule abrogates the Government's § 3613(c) lien. Additionally, unlike in Bratton-Bey, the court indicated on Phoenix's judgment that payment was due in full immediately.
Phoenix also cites United States v. Rush for the proposition that "[r]ecently, the Fourth Circuit has twice vacated district court rulings allowing the government to access funds outside of the payment schedule set forth in the judgment." No. 5:I4CR00023, 2016 WL 3951224, at *2 (W.D. Va. July 20, 2016). However, it appears that Phoenix's memorandum has taken that statement out of context. While the court in Rush acknowledged Grant and Bratton-Bey, it distinguished and declined to follow them, holding:
These cases teach that the court must [fi]rst look to the language of the judgment and the statute in question. Here, [unlike in Grant and Bratton-Bey., ] the judgment provides that the criminal monetary penalties are due immediately and that the payment schedule does not preclude enforcement under 18 U.S.C § 3613. That statute provides that an unpaid fine constitutes a lien in favor of the United States. As such, the United States seeks to execute its lien on Rush's inmate trust account. Both the text of the judgment and the statute in question support the position of the government in executing its lien.Rush, 2016 WL 3951224, at *3. Accordingly, taken in full context, it appears that Rush actually supports the Government's argument that when the judgement states that restitution is due in full immediately, the Government may pursue various statutory avenues of collecting restitution, including a § 3613 lien, notwithstanding a payment schedule.
Lastly, Phoenix cites United States v. Roush, a case where the Government sought to garnish bank accounts pursuant to § 3613 to satisfy the defendant's restitution debt. 452 F.Supp.2d 676, 680 (N.D. Tex. 2006). The court held that the Government could not garnish the bank accounts because restitution was "not presently due under the judgment"; the court had checked a box indicating that restitution would be made by "Payment in equal Monthly .. . installments of $ 750.00 over a period ... to commence 60 . .. [days] after release from imprisonment." Id. at 678. The court in Roush noted that there was a check-box on the judgment form by which the sentencing court could have indicated that restitution would be due in full immediately, but the court did not check that box. Id. at 681 n.9. Accordingly, when the Government sought to garnish the bank accounts, "there [was] nothing for the government to enforce by garnishment." Id. at 681.
This court has already distinguished Roush in a case where the restitution order stated that payment was due in full immediately United States v. Woods, No. 5:07-CV-187-BR, 2008 WL 9375548, at *l (E.D. N.C. Dec. 10, 2008) ("although the terms of defendants' restitution orders permit payment in installments, the terms also provide that the entire amount is "due and payable in full immediately[, ]" making defendants' citation to United States v. Roush, 452 F.Supp.2d 676, 678 (N.D. Tex. 2006)-a case in which the restitution order did not consider any part of the debt to be due until after the defendant's release to a term of supervision-inapposite."). Here, unlike in Roush, there is something for the government to enforce. See Roush, 452 F.Supp.2d at 681. Phoenix's judgment states several times that restitution is due in full immediately, and, as discussed above, other cases have held that allowing a defendant to make payments if he is unable to pay in full does not negate the fact that judgment is due in full. See Krol, 2018 WL 1792129, at *5; Hill, 2017 WL 2964016, at *2. Because Phoenix's restitution debt is presently due, notwithstanding the payment plan, the Government does have a debt to enforce by its lien on the house, and in that regard, the present case is critically distinguishable from Roush.
In summary, the cases cited by Phoenix generally address the court's ability to modify a payment schedule pursuant to § 3664(k), but that is not what happened here. The issue is not whether the court improperly modified Phoenix's payment schedule without considering his economic circumstances; rather, it is whether the payment schedule and the § 3613(c) lien coexist as various means by which the Government can collect restitution. The Government has persuasively cited cases supporting its argument that a payment schedule is but one means by which it can collect restitution, and there are other statutory avenues available. Accordingly, in addition to the court's obligation to read statutes as consistent where possible rather than conflicting, precedent indicates that the payment schedule does not abrogate the § 3613(c) lien on the property.
C. The purpose of the MVRA is to maximize the restitution available to victims, and allowing Phoenix to keep a windfall of more than $93,000 would frustrate that purpose.
The Government contends that the purpose of the MVRA and the payment plan is to compensate victims for their losses, and allowing Phoenix to keep the proceeds from the sale of the property would be contrary to that goal. [DE-60] at 15-16.
The underlying policy of the MVRA is "to ensure that the loss to crime victims is recognized, and that they receive the restitution that they are due." S. Rep. No. 104-179, 1996 U.S.C.C.A.N. 924, 925. This policy would be undermined if the court-imposed payment schedule created a right in the defendant to pay no more than the ordered installments. The better view is that a payment schedule simply serves as another collection method for the benefit of the victim rather than as a benefit to the defendant. Hawkins, 392 F.Supp.2d at 759; see also Grant, 715 F.3d at 558 ("There is no question that the primary purpose of the MVRA was to ensure that victims are made whole."); United States v. Robers, 698 F.3d 937, 943 (7th Cir. 2012) ("The MVRA's overriding purpose is 'to compensate victims for their losses."' (quoting United States v. Pescatore, 637 F.3d 128, 138 (2d Cir. 2011))), aff'd, 572 U.S. 639(2014).
In this case particularly, allowing Phoenix to keep a windfall of more than $93,000 while making payments of only $200 per month would be absurd. See United States v. Sawyer, 521 F.3d 792, 797 (7th Cir. 2008) ("Let's not kid ourselves: One reason defendants want judges to set schedules is to avoid paying what they owe."). Phoenix paid only ten dollars for his interest in the property, [DE-60-3], and his share of the proceeds from its sale is $93,606.55, [DE-60] at 9. If this court were to give no effect to the Government's lien, then Phoenix would receive a windfall while his victims wait for their losses of more than $187,000 to be repaid at a rate of $200 per month. The court agrees with the Government that reading the payment plan and the lien as two coexisting means of collecting restitution is more in line with the purposes of the MVRA.
D. Phoenix's constitutional arguments are unpersuasive.
Phoenix contends that the Government's lien violates the Constitution's delegation of judicial authority in Article III as well as the Fifth, Sixth, and Eighth Amendments. [DE-48] at 25, 28-30.
First, Phoenix argues that interpreting the judgment as "creating a current debt that would render all of the Defendant's assets subject to collection at the Government's election" would effectively delegate the sentencing court's Article III authority to the Government. Id. at 28. However, the court, not the Government, decided in Phoenix's case that restitution was due in full immediately; the judgment states as much in three separate instances. [DE-39] at 8-9. As discussed above, courts have held that a defendant's participation in a payment plan does not mean that restitution is no longer due in full immediately when the judgment states that it is due in full. See Krol, 2018 WL 1792129, at *5 ("allowing the government to collect defendant's restitution judgment through garnishment does not violate the court's payment plan. The court ordered restitution 'due and payable in full immediately' (DE 55, p. 8). It need not matter that defendant is permitted to make periodic payments through the IFRP and/or monthly installment payments on any remaining balance after his release from prison."). The lien created by the court-issued judgment pursuant to 18 U.S.C. § 3613(c) is merely a manner of collection; it is not a sentence imposed by the Government. See Sawyer, 521 F.3d at 794, 797 ("In civil litigation, a judgment creditor chooses how soon (if at all) to collect; no one thinks of this as a delegation of judicial power to a private litigant."). Accordingly, there was no delegation of sentencing authority here, for the court's judgment, not any action by the Government, is what renders Phoenix's restitution due.
Next, Phoenix contends that the lien violates the Fifth Amendment because "it would require the defendant to pay criminal penalties based on an order that does not comply with the relevant statute, and because it would constitute an imposition of a criminal sanction upon the defendant... without a hearing." [DE-48] at 31. As described above, the judgment in this case was issued pursuant to 18 U.S.C. § 3664(2), which requires the court to determine the manner and schedule by which restitution is to be paid. The court did so here, finding that restitution was due in full immediately and, if Phoenix could not pay the full amount, he could pay in $200 per month installments. Additionally, 18 U.S.C. § 3664(m)(1)(A)(i) provides that the United States may enforce a restitution order, and it cross-references 18 U.S.C. § 3613, which allows the Government to enforce a judgment through means available to a civil judgment creditor. In particular, 18 U.S.C. § 3613(c) states that an order of restitution is a lien on all of a defendant's property.
It is unclear to the court which "relevant statute" Phoenix contends was violated here. It appears that the judgment and the lien are both in compliance with Title 18. Additionally, Phoenix had a sentencing hearing before the court issued the restitution order, which created the Government's lien. [DE-3 5]. Even though the Government did not sell the property itself pursuant to the writ of execution because Phoenix sold the property to a third party, Phoenix had an opportunity to request a hearing. The Government's certificate of service indicates that it mailed the application for a writ of execution, the writ of execution, and a document titled "Instructions to Defendant with Clerk's Notice of Right to Claim Exemptions and Hearing Request" to Phoenix at Edgefield Federal Correctional Institution. [DE-45]. Phoenix therefore had an opportunity to contest the restitution order that created the Government's lien at his sentencing hearing, and he had an opportunity to contest the writ of execution. Accordingly, it is unclear how he was denied a hearing.
Third, Phoenix argues that the lien violates the Sixth Amendment because giving effect to the lien "amounts to an effective sentence modification," to which he has a right to counsel. [DE-48] at 32. However, the opposite is true. The lien was created by the order of restitution, issued following Phoenix's sentencing hearing at which he was represented by counsel. See 18 U.S.C. § 3613. Giving effect to the lien is not a modification of his sentence. Because the restitution order created the lien, if anything, abrogating the lien would be a modification.
Fourth, Phoenix argues that the lien violates the Eighth Amendment because it is an excessive fine. [DE-48] at 33. However, the lien does not deprive Phoenix of his livelihood, as he implies by citing Timbs v. Indiana, 139 S.Ct. 682, 687-88 (2019). Giving effect to the lien does not change Phoenix's monthly cash flow. If anything, selling the house helped Phoenix financially, for he is no longer responsible for a mortgage he could not pay. Phoenix does not contend that he lived in the house or that he collected any income from it. Accordingly, it is unclear how selling the house and giving effect to the Government's lien would affect Phoenix's monthly finances. As discussed above, abrogating the lien would give Phoenix a windfall of more than $93,000 from the sale of a house he acquired for only ten dollars. The Eighth Amendment does not require as much. See, e.g., United States v. Dubose, 146 F.3d 1141, 1146 (9th Cir. 1998) ("in the restitution context, because the full amount of restitution is inherently linked to the culpability of the offender, restitution orders that require full compensation in the amount of the loss are not excessive"); United States v. Dean, 949 F.Supp. 782, 786 (D. Or. 1996) (holding that restitution is not excessive and noting that "[w]here the amount of restitution is geared directly to the amount of the victim's loss caused by the defendant's illegal activity, proportionality is already built into the order. Had the defendant set fire to a garbage can, his restitution obligation might be in the range of $25; had the defendant set fire to an office building, he could have faced a restitution obligation in the multi-millions. By choosing his target, the defendant is the one who essentially determines his restitution obligation."), aff'dsub nom. United States v. Dubose, 146 F.3d 1141 (9th Cir. 1998). The restitution ordered in Phoenix's case was directly based upon the loss to the victims; accordingly, it was not excessive, and giving effect to the Government's lien created by the restitution order is not a violation of the Eighth Amendment.
Lastly, Phoenix analogizes the lien to a mortgage and contends that because he was current on his restitution payments, the lien should be given no effect. [DE-48] at 4. Following through with the analogy, however, leads to the conclusion that the lien should be given effect. Even when a person is current on his mortgage payments, selling the property subject to the mortgage does not eviscerate the mortgage. Likewise, here, the fact that Phoenix has been making payments does not mean that he can sell the house without giving effect to the Government's lien, particularly considering that, unlike a mortgage, Phoenix's payment plan and the lien are separate means by which the restitution debt may be satisfied. Even under Phoenix's mortgage analogy, the lien should not be eliminated by the sale of the house.
E. It is recommended that the alternative motion to modify payment terms be denied.
Phoenix requests that if the court determines that his restitution obligation is due immediately, the court modify the restitution payment terms pursuant to 18 U.S.C. § 3664(k). [DE-48] at 37-39. Phoenix contends that there has been a material change in his economic circumstances that might affect his ability to pay restitution because he now has a daughter. Id. at 37. Section 3664(k) provides:
A restitution order shall provide that the defendant shall notify the court and the Attorney General of any material change in the defendant's economic circumstances that might affect the defendant's ability to pay restitution. .. . Upon receipt of the notification, the court may, on its own motion, or the motion of any party, including the victim, adjust the payment schedule, or require immediate payment in full, as the interests of justice require.18 U.S.C. § 3664(k). "In evaluating whether a party's economic circumstances have materially changed, courts undertake 'an objective comparison of a defendant's financial condition before and after a sentence is imposed.'" United States v. Rainey, No. 5:10-CR-199-D, 2019 WL 10886813, at *l (E.D. N.C. Mar. 1, 2019) (quoting Bratton-Bey, 564 Fed.Appx. at 30). The burden of demonstrating a change in economic circumstances is on the defendant. United States v. Caudle, 710 Fed.Appx. 124, 125 (4th Cir. 2018) (citing 18 U.S.C. § 3664(e) ("The burden of demonstrating the financial resources of the defendant and the financial needs of the defendant's dependents, shall be on the defendant.")).
Before sentencing, Phoenix did not complete a personal financial statement, but the PSR indicates that due to his incarceration, he had no monthly income or expenses. [DE-33] at 10. On October 27, 2020, Phoenix completed a monthly cash flow statement in support of the present motion. [DE-49] at 10-11. On that form, he indicates that he earns $1,444.48 in net wages and receives $300 from family, bringing his total monthly income to $1,744.48. He does not pay rent or a mortgage, and he pays $400 for groceries, $180 for electricity, $80 for water and sewer, $50 for a cell phone, $93 for auto insurance, $115 annually (or $9.58 monthly) for homeowner/rental insurance, and $200 for restitution. [DE-49] at 11. He states that his monthly cash flow is $0, but by the court's calculation, Phoenix's monthly income of $1,744.48 minus his total monthly expenses of $1,012.58 is $731.90. Id.
In his motion, Phoenix alleges that he is left with around $400 per month for supplies for his daughter, transportation expenses, clothes, and medical expenses. [DE-48] at 14. However, the motion conflicts with Phoenix's monthly cash flow statement, which was filed as an exhibit to the motion, in several respects. First, the motion states that Phoenix's income is $1,450, but the exhibit indicates that Phoenix receives an additional $300 monthly gift from family. Second, the motion implies that Phoenix has additional expenses for transportation, clothing, and medical treatment, but on the Monthly Cash Flow Statement, Phoenix wrote "N/A" in the fields for public transportation, car payments, commuting expenses, and medical, implying that he does not have those expenses, and he left the clothing field blank. Because the monthly cash flow statement is more detailed and because it was signed by Phoenix himself while the motion was written by Phoenix's attorney, the court finds that the monthly cash flow statement is a more reliable indicator of Phoenix's economic circumstances than the motion.
In comparing Phoenix's circumstances before and after sentencing, he has not shown a material change in circumstances that would affect his ability to pay restitution. See Caudle, 710 Fed.Appx. at 125 (noting that the defendant bears the "burden of demonstrating that his current financial condition is materially different than when the court originally imposed the restitution order"); Bratton-Bey, 564 Fed.Appx. at 30 (holding that there was no change in economic circumstances when the defendant had the same interest in funds that he had at the time of his sentencing); United States v. Johnson, No. 4:OICR64, 2014 WL 4824321, at *2 (E.D. Va. Sept. 24, 2014). Before sentencing, Phoenix had no income or obligations, so his net cash flow was $0. Presently, his net cash flow is $731.90 per month. Phoenix argues that the birth of his daughter was a material change in his circumstances, but his daughter was born before he completed the monthly cash flow statement in October 2020, so his obligations to his daughter are presumably accounted for in the statement. The statement indicates that after all of Phoenix's expenses- including groceries and the restitution payment-he is left with $731.90 per month. Additionally, Phoenix states in his motion that he and his partner made the decision to have a child with the understanding that they would be required to pay $200 per month in restitution. [DE-48] at 13. Accordingly, it is recommended that the court deny Phoenix's motion to modify the restitution schedule because he has not met his burden of showing a material change in circumstances that would affect his ability to pay $200 per month. See United States v. Picklesimer, No. 3:OOCROOO8, 2010 WL 2572850, at *2 (W.D. N.C. June 24, 2010) (finding that there has been no material change in economic circumstances where "Defendant's financial statement shows that her lifestyle has not been at all impacted by her efforts to repay her debt. She is well able to meet her reasonable living expenses, and in fact has ample discretionary income to provide for nonessential items .... While Defendant may not be leading an outrageously extravagant lifestyle, she certainly is not making all possible efforts to pay restitution. Should the Court entertain Defendant's claim of hardship, the burden is on Defendant to show her actual resources and needs. Here, Defendant has not shown the Court that she suffers any actual hardship." (citing 18 U.S.C. § 3664(e))).
III. CONCLUSION
In summary, the Government's lien on the property was created by the order of restitution pursuant to 18 U.S.C. § 3613(c). The payment plan and the lien are two co-existing means by which the Government can collect restitution. Accordingly, Phoenix's participation in the payment plan does not abrogate the Government's lien, and Phoenix's motion to quash collection effort and return for improperly obtained assets [DE-48] is DENIED.
Additionally, for the reasons stated above, it is RECOMMENDED that Phoenix's alternative motion to modify restitution payment terms [DE-48] be DENIED because he has not shown a material change in economic circumstances that would affect his ability to pay restitution.
IT IS DIRECTED that a copy of this Memorandum and Recommendation be served on each of the parties or, if represented, their counsel. Each party shall have until January 22, 2021 to file written objections to the Memorandum and Recommendation. The presiding district judge must conduct his or her own review (that is, make a de novo determination) of those portions of the Memorandum and Recommendation to which objection is properly made and may accept, reject, or modify the determinations in the Memorandum and Recommendation; receive further evidence; or return the matter to the magistrate judge with instructions. See, e.g., 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3); Local Civ. R. 1.1 (permitting modification of deadlines specified in local rules), 72.4(b), E.D. N.C. Any response to objections shall be filed within 14 days of the filing of the objections.
If a party does not file written objections to the Memorandum and Recommendation by the foregoing deadline, the party will be giving up the right to review of the Memorandum and Recommendation by the presiding district judge as described above, and the presiding district judge may enter an order or judgment based on the Memorandum and Recommendation without such review. In addition, the party's failure to file written objections by the foregoing deadline will bar the party from appealing to the Court of Appeals from an order or judgment of the presiding district judge based on the Memorandum and Recommendation. See Wright v. Collins, 766 F.2d 841, 846-47 (4th Cir. 1985).
So ordered.