Case Name: CHEYENNE RESOURCES, INC. and PC & H Construction, Inc., Appellants v. ELK HORN COAL CORPORATION, Appellee
Court: Supreme Court of Kentucky
Jurisdiction: Kentucky
Decision Date: 2008-09-18
Citations: 265 S.W.3d 184
Docket Number: No. 2006-SC-000721-DG
Parties: CHEYENNE RESOURCES, INC. and PC & H Construction, Inc., Appellants v. ELK HORN COAL CORPORATION, Appellee.
Judges: MINTON, C.J., NOBLE and SCHRODER, JJ., and Special Justice THOMAS D. EMBERTON, concur.
Reporter: South Western Reporter Third Series
Volume: 265
Pages: 184–190

Head Matter:
CHEYENNE RESOURCES, INC. and PC & H Construction, Inc., Appellants v. ELK HORN COAL CORPORATION, Appellee.
No. 2006-SC-000721-DG.
Supreme Court of Kentucky.
Sept. 18, 2008.
Bruce Edward Cryder, Margaret Ann Miller, Greenebaum, Doll & McDonald, Lexington, KY, Attorneys for Appellants.
Maureen D. Carman, Richard C. Ward, Jeff A. Woods, Wyatt, Tarrant & Combs LLP, Lexington, KY, William S. Kendrick, Francis, Kendrick & Francis, Prestons-burg, KY, Attorneys for Appellee.

Opinion:
Opinion of the Court by
Special Justice GREGORY L. MONGE.
This matter is before the Court on the appeal of Cheyenne Resources from a decision of the Court of Appeals which determined that the Floyd Circuit Court had incorrectly determined the date from which interest should be calculated on a judgment of restitution. Thus, the issue before us is narrow and very specific. The underlying facts are more fully set forth in this Court's decision in Elk Horn Coal Corporation v. Cheyenne Resources, Inc., 163 S.W.3d 408 (Ky.2005). 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 constitutionality of the statute was challenged by Elk Horn in the Circuit Court which upheld the statute's constitutionality. That issue was appealed by Elk Horn to this Court and on June 9, 2005, we held that the statutory penalty was unconstitutional and vacated the judgment of the Floyd Circuit Court by opinion in Elk Horn Coal Corporation, supra. Elk Horn then filed a Motion for Judgment of Restitution in the Circuit Court. That court entered an initial judgment of restitution on July 22, 2005. Included in the judgment was a determination that Elk Horn was entitled to restitution of $950,000.00 (the amount of the 10% penalty) plus interest at the rate of 12% from and after July 12, 2005 (the date of the judgment of restitution) until that judgment was satisfied. The Circuit Court reserved determination as to whether or not pre-judgment interest should be awarded and if so, from what date. Following additional briefing on this issue, the Circuit Court entered an Order and Judgment on August 15, 2005, awarding prejudgment 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. 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 us as one of restitution.
Restatement (First) of Restitution, § 74 (1937) provides:
A person who has conferred a benefit upon another in compliance with a judgment, or whose property has been taken thereunder, is entitled to restitution if the judgment is reversed or set aside, unless restitution would be inequitable or the parties contract of payment is to be final.
Comment d to the Restatement further provides:
If payment has been made to the judgment creditor or to his agent, or to an officer who has paid the judgment creditor, upon reversal of the judgment the payor is entitled to receive from the creditor the amount thus paid with interest. (Emphasis supplied.)
Restatement (First) of Restitution, § 74, Comment d (1937).
Although Cheyenne argues Elk Horn should not be entitled to pre-judgment interest from March 16, 2001, because the tortious conduct of Elk Horn resulted in the underlying judgment which ultimately triggered the 10% penalty payment, we reject that argument in this case. Elk Horn paid for its conduct in satisfying a judgment that included both pre-judgment and post-judgment interest so that its payment amounted to some $14,000,000.00. Elk Horn should not be penalized in this instance by virtue of an unconstitutional statute.
Restitution requires making the paying party whole. As put by Professor Dobbs, "As we have seen, restitution is not damages; restitution is a restoration to prevent unjust enrichment." Dobbs, Law of Remedies § 4.1(1), at 556 (2d ed.1993). Here, Cheyenne Resources unquestionably had the use of the $950,000.00 from the date that it was paid, ie., 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. As pointed out by Elk Horn in citing this Court's predecessor in City of Louisville v. Henderson's Tr., 11 KY. L. Rptr. 796, 18 S.W. Ill, 112 (1890):
If, in such a case, a creditor, after the lapse of years of litigation, is not entitled to interest, then he will, in effect, lose a part of his debt. He would be kept out of the use of his money; the debtor, in the mean time, getting the benefit of it. The latter would, in effect, pay but a part of his debt.
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. As this Court said in Alexander Hamilton Life Ins. Co. of Am. v. Lewis, supra at 559, in describing the justification for restitution, "The obvious justification for restitution is that one should not be unjustly enriched at the expense of another."
While both parties cite to various portions of the Alexander Hamilton decision to support their respective positions, the most instructive part of Alexander Hamilton is its discussion of the theory and reasons for restitution:
The theory of restitution as a basis for recovery is about as old as the law itself. Though often assumed to be purely an equitable remedy, some of the earliest proceedings, both at common law and in equity, were founded upon it, and were amplified in the course of time. Restatement, Restitution, Chapter 1, Introductory note. The obvious justification for it is that one should not be unjustly enriched at the expense of another.
In Bridges v. McAlister, 106 Ky. 791, 51 S.W. 608, 21 KLR 428, 45 LRA 80 [800], 90 Am.St.Rep. 267 (1899), the accountability of a party for actions taken under authority of a judgment later set aside was discussed at some length. Among other things, the Court concluded as follows:
When a judgment is reversed, restitution must be made of all that has been received under it, but no further liability should in any case be imposed. Id., 51 S.W. at p. 605.
. Understandably, of course, the receipt and disbursement of money by someone in a fiduciary capacity could very well present a different case, but when the party who received the money by authority of the judgment has spent some or all of it at his own volition and for his own ends, we find it difficult to accept the proposition that equity diminishes his accountability.
Id.
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. Therefore, this Court AFFIRMS the judgment of the Court of Appeals and directs the Floyd Circuit Court to enter a judgment consistent with this Opinion.
MINTON, C.J., NOBLE and SCHRODER, JJ., and Special Justice THOMAS D. EMBERTON, concur.
CUNNINGHAM, J., dissents by separate opinion in which Special Justice MICHAEL o. McDonald, joins.
Special Justice MICHAEL 0. MCDONALD dissents by separate opinion in which CUNNINGHAM, J., joins.
VENTERS, ABRAMSON and SCOTT, JJ., not sitting.
. Although that date is not precisely correct, at oral argument, the parties agreed that the date March 16, 2001, was a date on which this Court, if it determined to award prejudgment interest, could do so.
. Both sides cite Nucor Corp. v. General Electric Co., 812 S.W.2d 136 (Ky.1991). Nucor did not deal with restitution and is thus clearly distinguishable from the case here.