Kentucky

DAMAGES: Restitution and effective date of interest: CHEYENNE RESOURCE, INC. ETC. V. ELK HORN COAL CORP. (SC 9/18/2008)

By Michael Stevens

CHEYENNE RESOURCE, INC.  ETC. V. ELK HORN COAL CORP.
DAMAGES:  Restitution and effective date of interest
2006-SC-000721-DG.pdf
PUBLISHED: Affirming
Opinion by Special Justice Monge; Cunningham dissents with Special Justice McDonald joining; Special Justice Mike McDonald dissents with Cunningham joining; Venters, Scott, Abramson NOT sitting
Floyd
Date Rendered: 9/18/2008

The SC affirmed the COA decision which determined that the Floyd Circuit Court had incorrectly determined the date from which interest should be calculated on a judgment of restitution.  Briefly, the Floyd Circuit Court rendered a judgment against Elk Horn Coal Corporation (?Elk Horn?) on October 14, 1998 in the amount of $9,500,000.00 plus pre-judgment interest at the rate of 8% per annum and post-judgment interest at the rate of 12% per annum. During subsequent appeals, Elk Horn posted a supersedeas bond. After the appellate process was completed, the Floyd Circuit Court entered an order enforcing its judgment which included, (pursuant to KRS 26A.300) a 10% penalty in the sum of $950,000.00.   The SC held that the statutory penalty was unconstitutional and vacated the judgment of the Floyd Circuit Court by an earlier opinion. Elk Horn then filed a Motion for Judgment of Restitution in the Circuit Court which eventually entered an Order and Judgment on August 15, 2005, awarding pre-judgment interest on the $950,000.00 from the date of June 9, 2005, the date this Court's decision became final regarding the unconstitutionality of KRS 26A.300 (as opposed to an earlier date when the restitution amount had been paid). Elk Horn appealed from that Order arguing that the interest should run from March 16, 2001, the date upon which it had paid the $950,000.00. The Kentucky Court of Appeals, relying on Alexander Hamilton Life Insurance Co. of Am. v. Lewis, 550 S.W.2d 558 (Ky.1977), agreed with Elk Horn. Cheyenne then sought discretionary review by this Court which was granted. For the reasons set forth herein, this Court AFFIRMS the judgment of the Court of Appeals.

The issue before this Court is narrow. Elk Horn Coal Corporation brought this claim as a claim for restitution. It is significant that the Floyd Circuit Court's judgment of restitution was not appealed. Thus, the matter reaches the SC as one of restitution.

Restitution is not damages.  Restitution is a restoration to prevent unjust enrichment. Restitution restores the party who has satisfied a judgment that was erroneously entered to the position which the party would have occupied but for the entry of the erroneous judgment. Here, Cheyenne Resources unquestionably had the use of the $950,000.00 from the date that it was paid, i.e., March 16, 2001, until that $950,000.00 was repaid on August 15, 2005. Likewise, Elk Horn was deprived of the use of that money during that time period. Here, Cheyenne had the unfettered use of $950,000.00 from March 16, 2001, until August 15, 2005. The amount was liquidated. There is nothing in the record that would suggest there is any equitable reason to require anything other than a full restitution. Full restitution means just that. To make Elk Horn Coal Corporation whole, Cheyenne must pay the interest on the $950,000.00 from the date that it first had use of that money.

Full post as published by Kentucky Cases on November 16, 2008 (boomark / email).