Opinion ID: 836017
Heading Depth: 2
Heading Rank: 3

Heading: Takings and Tax Claims

Text: We address together the certified questions whether ORS 18.540 constitutes a taking of property without compensation in violation of Article I, section 18, of the Oregon Constitution, or whether that statute constitutes a revenue bill or tax in violation of Article IV, section 18, and Article IX, sections 1 and 3, of the Oregon Constitution. [13] With respect to both issues, plaintiffs assert that they have a vested property right in the punitive damages awarded in this case. Therefore, they argue that ORS 18.540 either constitutes a taking of, or a tax on, their property. The state argues that plaintiffs' claims have no merit because plaintiffs never acquired a vested property interest in that portion of the punitive damages award that ORS 18.540 reserved for the Criminal Injuries Compensation Account. Again, we agree with the state and, as a consequence, also conclude, with respect to the certified questions, that ORS 18.540 does not violate Article I, section 18, Article IV, section 18, or Article IX, sections 1 or 3. Article I, section 18, provides that [p]rivate property shall not be taken for public use    without just compensation[.] Although this court has held that a judgment is personal property, giving rise to vested rights which the legislature cannot, by retroactive law, either destroy or diminish in value, State ex rel. v. Kiessenbeck, 167 Or. 25, 30, 114 P.2d 147 (1941), this case does not involve the retroactive diminishment in value of a vested judgment. The statute at issue, ORS 18.540, took effect before plaintiffs filed their complaint and, from the outset, subjected any potential judgment for punitive damages to partial defeasance upon the entry of a verdict. The question is whether a vested property right in a punitive damages award can accrue before entry of a final judgment for the purposes of Article I, section 18. The answer is that it cannot. As we explained previously in this opinion, a plaintiff has no right or entitlement to punitive damages as a remedy under Article I, section 10, and, as a result, the jury has complete discretion not to award punitive damages, even if a plaintiff successfully proves all elements of a claim. See 334 Or. at 444-45, 51 P.3d at 1243. Consequently, before entry of a final judgment, a plaintiff in Oregon always has had, at most, an expectation of such an award. Moreover, in this case, in which the tort that gave rise to plaintiffs' claim occurred after ORS 18.540 was enacted, plaintiffs cannot credibly argue that they had any expectation interest in the portion of the punitive damages award that the statute directs to the Criminal Injuries Compensation Account. `A vested right must be something more than a mere expectation based upon the anticipated continuance of existing laws; it must have become a title legal or equitable to the present or future enjoyment of property.' Coshun v. Hurlburt et al., 102 Or. 240, 243, 201 P. 870 (1921) (quoting Black, Constitutional Law 430). We therefore hold that plaintiffs do not have a vested prejudgment property right in punitive damages. [14] Plaintiffs' arguments to the contrary are not persuasive. They cite no Oregon case law in support of their claim that punitive damages are the property of plaintiffs before judgment. Instead, they first rely upon two United States Supreme Court decisions that, in their view, provide some authority for the proposition that a property right protected by the takings clause of the Fifth Amendment to the United States Constitution may vest in a party to an action at a time before the property comes into existence or is subject to state control. In Phillips v. Washington Legal Foundation, 524 U.S. 156, 118 S.Ct. 1925, 141 L.Ed.2d 174 (1998), and Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 101 S.Ct. 446, 66 L.Ed.2d 358 (1980), the Supreme Court concluded that the owners of funds deposited with state entities had a property right in the future interest earned on those funds, if and when it accrued. See Phillips, 524 U.S. at 172, 118 S.Ct. 1925 (with respect to funds deposited with state-adopted lawyer trust account program); Webb's, 449 U.S. at 161-62, 101 S.Ct. 446 (with respect to interpleader funds deposited with courts). Plaintiffs urge this court to apply similar reasoning to find a property right in a future punitive damages award under Article I, section 18, if and when a jury decides to include such an award in a verdict. We do not consider Webb's and Phillips to be relevant here. As those cases emphasize, the existence of a property interest is determined by reference to `existing rules or understandings that stem from an independent source such as state law.' Phillips, 524 U.S. at 164, 118 S.Ct. 1925 (quoting Board of Regents of State Colleges v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972)). See also Webb's, 449 U.S. at 161, 101 S.Ct. 446 (stating same). In both Webb's and Phillips, the Supreme Court grounded its recognition of a property right in the interest follows principal rule, which ha[d] been established under English common law since at least the mid-1700's, and was firmly embedded in the common law of the various States. Phillips, 524 U.S. at 165, 118 S.Ct. 1925. Put another way, the Supreme Court held that interest earned on principal was private property subject to a takings claim only because it was a traditional property interest[ ] long recognized under state law. Id. at 167, 118 S.Ct. 1925. In contrast, as we have explained, there is no long-recognized private property interest in an Oregon punitive damages award before judgment; it always has been, at most, an expectation. [15] Plaintiffs next rely upon Kirk v. Denver Publishing Co., 818 P.2d 262, 270-72 (Colo. 1991), in which the Supreme Court of Colorado concluded that a plaintiff possessed a vested property right to a punitive damages award in its entirety and that Colorado's split-recovery statute, which would have allocated one third of that award to a state general fund, amounted to an unconstitutional taking under the state and federal constitutions. [16] The Kirk decision, however, is distinguishable from this case. There, the court emphasized that Colorado's split-recovery statute affirmatively disavowed any state interest in the judgment before payment becoming due. Kirk, 818 P.2d at 272. The court then concluded that such a repudiation affirmatively belie[d] any notion that the judgment creditor's property interest in the judgement [was] less than total. Id. at 272. In other words, [Colorado's] asserted interest [was] not in the judgment itself but in the monies collected on the judgment, and that interest [arose] only at a point in time after the judgment creditor's property interest in the judgment ha[d] vested by operation of law.  Id. (emphasis added). Regardless of our view of the soundness of the conclusions in Kirk, [17] unlike the split-recovery statute at issue in that case, ORS 18.540 does not disavow an interest in a judgment for punitive damages until monies are collected. Rather, it asserts that the state has an interest immediately upon entry of a verdict. Contrary to plaintiffs' contentions, that is a significant distinction that the Kirk majority itself acknowledged. See Kirk, 818 P.2d at 272 (without statutory repudiation of state interest in judgment, split-recovery statute might be read to defeat any reasonable economic expectation on the part of the judgment creditor to the total judgment). Oregon's split-recovery statute never allows a plaintiff to obtain a reasonable economic expectation of a punitive damages award in its entirety. Thus, there is no ground similar to that in Kirk upon which to conclude that a plaintiff obtains a vested property right in a punitive damages award. [18] Plaintiffs' other arguments in support of their position are not well taken. We conclude that a party never obtains a prejudgment property interest in a punitive damages award and, therefore, that ORS 18.540, by allocating 60 percent of such an award to the state, is not taking private property without compensation in violation of Article I, section 18, of the Oregon Constitution. It also follows from that conclusion that ORS 18.540 is neither a tax in violation of Article IX, sections 1 and 3, see Perry v. State Tax Commission, 245 Or. 483, 486, 422 P.2d 578 (1967) (property not subject to taxes if not held by person with possession or right to possession of property), nor a revenue bill enacted in violation of Article IV, section 18, see Northern Counties Trust v. Sears, 30 Or. 388, 401-02, 41 P. 931 (1895) (characterizing revenue bill as one that imposes tax on property). [19]