ELK HORN COAL CORP. V. CHEYENNE RESOURCE INC, ET AL
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RENDERED : MAY 19, 2005
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2002-SC-743-DG
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THE ELK HORN COAL CORPORATION
V.
APPELLANT
ON APPEAL FROM COURT OF APPEALS
2001-CA-0783
FLOYD CIRCUIT COURT NO. 97-CI-00634
CHEYENNE RESOURCES, INC ., AND
PC&H CONSTRUCTION, INC.
APPELLEES
OPINION OF THE COURT BY JUSTICE KELLER
REVERSING
I. INTRODUCTION
Appellant unsuccessfully sought discretionary review in this Court of a decision of
the Court of Appeals affirming a $9.5 million judgment awarded against it. Appellant
had stayed enforcement of the judgment during the appellate process by posting a
supersedeas bond, and because the discretionary review motion further delayed
enforcement of the judgment, the trial court, pursuant to KRS 26A.300, assessed as
additional damages a penalty equal to 10% of the superseded judgment. Appellant now
appeals the 10% penalty, presenting us with a single issue: the constitutionality of KRS
26.A.300. We hold that KRS 26A.300 violates the equal protection provisions of both
the Kentucky and United States Constitutions and that it also violates the separation of
powers provisions of the Kentucky Constitution. We thus vacate that part of the
judgment imposing the 10% penalty.
II. BACKGROUND
The genesis of this appeal is a coal-mining contract between Appellant, Elk Horn
Coal Corporation, and Appellees, Cheyenne Resources, Inc. and PC&H Construction,
Inc . Appellees filed an action against Appellant alleging that Appellant fraudulently
induced Appellees to enter into a coal lease and further alleging that Appellant was
guilty of wrongfully terminating or breaching the lease. Following a jury trial and verdict,
Appellees were awarded a judgment against Appellant, totaling $9 .5 million . In addition
to the principal amount awarded, the judgment provided that the award would bear
prejudgment interest of 8% from the date the action was originally filed, and that the
judgment itself would bear post-judgment interest of 12%. 1 Appellant appealed as a
matter of right2 to the Court of Appeals and stayed enforcement of the judgment during
the appellate process by posting a supersedeas bond . The Court of Appeals affirmed in
a two-to-one split decision . Appellant then sought discretionary review in this Court,
which was denied by an evenly divided court, three-to-three (with one justice not sitting) .
Thereafter, Appellees moved the trial court to enforce its judgment against
Appellant's surety on the supersedeas bond . As part of its motion, Appellees requested
that the trial court also assess against Appellant pursuant to KRS 26A .300 a penalty of
10% of the amount of the original judgment since Appellant delayed the case beyond
the first appeal when it moved this Court to grant discretionary review of the Court of
Appeals's decision . Appellant responded to Appellees' motion by challenging the
constitutionality of KRS 26A.300 . Without specifically addressing the constitutionality of
KRS 360.040 ("A judgment shall bear twelve percent (12%) interest
compounded annually from its date .") .
2 KY. CONST . § 115 .
KRS 26A.300, the trial court awarded Appellees a judgment of $14,500,000, the bond
amount, against Appellant's surety . However, the total judgment, which included the
original award, prejudgment and post-judgment interest thereon, and the 10% penalty of
$950,000 imposed under KRS 26A.300, exceeded the bond by approximately $145,000
because of the penalty. Appellant itself paid this additional sum directly to Appellees
and repaid its surety the money paid to Appellees on Appellant's behalf. Appellant
appealed to the Court of Appeals, challenging the constitutionality of KRS 26A.300 and
the penalty assessed thereunder . The Court of Appeals affirmed in a unanimous
opinion, and we granted discretionary review.
111. ANALYSIS
A. Equal Protection
Appellant is entitled to equal protection of the law under the 14th Amendment to
the United States Constitution and under Sections 1, 2, and 3 of the Kentucky
Constitution . Equal protection of the law essentially means "that all persons similarly
situated should be treated alike." 3 Appellant contends that KRS 26A.300 violates the
Equal Protection provisions of the Constitutions because the statute "is not rationally
related to any legitimate state interest" and it is arbitrary in assessing an appeal penalty
in second appeals only on unsuccessful appellants from superseded money judgments .
KRS 26A.300 provides :
(1) When collection of a judgment for the payment of
money has been stayed as provided in the Rules of Civil
Procedure, there shall be no damages assessed on the first
3 Cleburne v. Cleburne Living Center , 473 U .S . 432, 439, 105 S .Ct. 3249, 3254,
87 L . Ed .2d 313, 320 (1985).
appeal as a matter of right contemplated by Section 115 of
the Constitution of Kentucky.
(2) When collection of a judgment for the payment of
money has been stayed as provided in the Rules of Civil
Procedure pending any other appeal, damages of ten
percent (10%) on the amount stayed shall be imposed
against the appellant in the event the judgment is affirmed or
the appeal is dismissed after having been docketed in an
appellate court .
(3) Similar damages of ten percent (10%) shall be
imposed when a petition for writ of certiorari, petition for
rehearing, or other petition which stays collection of a
judgment for the payment of money is denied by an
appellate court under circumstances not constituting a first
appeal under subsection (1) of this section .
(4) No additional penalty shall be imposed upon a
party as a consequence of a review subsequent to a petition
or a second appeal.
(5) Damages imposed under subsection (2) or (3) of
this section shall not be payable and shall be void if the
decision of the trial court awarding the payment of money is
ultimately reversed .
Statutory provisions providing for a penalty if a money judgment4 is affirmed or
dismissed on appeal have been part of the law of this Commonwealth since its infancy. 5
But the long existence of an appeal penalty as a part of the law of this state does not
4 See BLACK'S LAw DICTIONARY 848 (7th ed . 1999) (defining "money judgment" as
"[a] judgment for damages subject to immediate execution, as distinguished from
equitable or injunctive relief') .
5 Phillips v. Green , 288 Ky. 202, 155 S.W .2d 841, 843 (1941) ("It is of interest to
note that the first act establishing the Court of Appeals, in 1792, provided that an
appellant should give bond `to the appellee for the due prosecution of an appeal,' the
penalty to be 'a reasonable sum in the discretion of the court.' It was further provided
that if the judgment should be affirmed the appellant should pay the appellee 10 per
cent . on the sum due thereby and his costs.").
insulate it from a constitutional challenge, although KRS 26A.300, like all statutes, is
presumed to be valid .
With the adoption of the Judicial Article,' effective January 1, 1976, Kentucky's
Constitution was amended to allow one appeal as a matter of right from a judgment .8
Along with other enactments implementing the Judicial Amendment, the Legislature
enacted KRS 26A.300,9 which narrowed the class of cases for which an appeal penalty
was allowed, but continued in effect an appeal penalty that was first enacted when the
Legislature prescribed the rules of practice and procedure for Kentucky's Courts,' ° as
well as the appellate jurisdiction of our predecessor, the Court of Appeals ." Under the
law in effect before the enactment of KRS 26A.300, a 10% penalty was recoverable in
all cases upon affirmance or dismissal of qny appeal from a superseded judgment for
6 Commonwealth v. Halsell , 934 S .W.2d 552, 554 (Ky. 1996) ("A well-established
principle of constitutional law is that a statute carries a presumption of
constitutionality .").
KY. CONST. §§ 109-124.
8 KY. CONST. § 115 ("In all cases, civil and criminal, there shall be allowed as a
matter of right at least one appeal to another court . . . .") .
9 1976 Ky. Acts ch . 59, § 1 .
1°
Hoskins v. Maricle, 150 S.W .3d 1, 32 -34 (Ky. 2004) (Keller, J. concurring in
part, dissenting in part) (discussing the promulgation of the civil and criminal rules prior
to the adoption of the Judicial Amendment) .
11
KY. CONST. § 110 (repealed effective January 1, 1976, with the adoption of the
Judicial Amendment) ("The court of appeals shall have appellate jurisdiction only, which
shall be coextensive with the state, under such restrictions and regulations not
repugnant to this Constitution, as may from time to time be prescribed by law."); Cullins
v. Williams , 156 Ky. 57, 160 S .W. 733, 736 (1913) ("[T]he right of appeal is purely a
matter of legislative discretion . . . ."); Burton v. Mayer, 274 Ky. 263, 118 S .W .2d 547,
549 (1938) ("So long as the rules of practice fixed by the Legislature accord with the
proper and effective administration of justice, they should be, and they are, followed to
the letter.") ; Federal Land Bank of Louisville, Ky. v. Crombie , 258 Ky. 383, 80 S .W.2d 39,
40-41 (1935) (discussing the right of the Legislature under our Constitution to prescribe
rules of procedure and practice).
the payment of money . 12 KRS 26A.300, however, deleted the penalty "on first appeals
as a matter of right contemplated by Section 115 of the Constitution of Kentucky."
Additionally, a petition for rehearing of a first appeal does not trigger the penalty. 13 But
since a discretionary review motion "stays collection of a judgment . . . under
circumstances not constituting a first appeal ,"14 KRS 26A.300's penalty is assessed
when a motion for discretionary review is denied by this Court . 15 When applicable, the
assessment of the penalty is automatic and mandatory . 16 Accordingly, the trial court in
12 KRS 21 .130 (repealed 1976 by 1976 Ky. Acts ch . 59, § 3) ("Upon the
affirmance of an appeal, or the dismissal of an appeal after it has been docketed in the
Court of Appeals, where the appeal is from a judgment for the payment of money, the
collection of which, in whole or in part, has been superseded, as provided in the Rules
of Civil Procedure, 10% damages on the amount superseded shall be awarded against
the appellant ."). For the rule prior to enactment of KRS 21 .130, see Code of Practice in
Civil Cases § 764 (amended and transferred to Kentucky Revised Statutes by 1952 Ky.
Acts ch . 84, §§ 1, 35), which provided : "Upon the affirmance of, or the dismissal of an
appeal from, a judgment for the payment of money, the collection of which, in whole or
in part, has been superseded . . ., 10 per cent damages of the amount superseded shall
be awarded against the appellant ."
13
Ash v. Security Nat. Ins. Co. , 574 S .W .2d 346, 351 (Ky.App. 1978) ("We
believe that the provision of the Constitution takes precedence over the statute and that
damages under KRS 26A.300 do not accrue when a petition for rehearing has been
filed in this court .").
14 W
ells v. Southern Ry . Co . , 633 S.W.2d 406, 408 (Ky. 1982) ("[A]Ithough not an
appeal, the motion for discretionary review filed by the administratrix of the estate of
David L . Wells presents circumstances not constituting a first appeal . The facts of the
subject action fit the provisions of subsection (3) and the 10% penalty applies .").
15 _Id
. ; accord Coomer v. Gray, 750 S .W.2d 424, 427 (Ky. 1988) ("Gray took the
additional step of seeking review by this Court and his motion was denied . His action
therefore delayed Coomer's access to sums of money to which he had been adjudged
entitled . Gray's motion for discretionary review was at his peril .") ; accord Fred Clements
Heating and Air Conditioning Co. v. Janes, 576 S.W.2d 280, 281 (Ky.App . 1979)
("[D]amages under K.R .S . 26A .300 are properly awarded when a motion for
discretionary review is denied."); CR 76 .20(9)(a) ("If the [discretionary review] motion is
denied the decision shall stand affirmed, and if a supersedeas bond has been executed,
damages for delay shall be recoverable pursuant to KRS Chapter 26A .").
16
Ash v. Security Nat . Ins. Co. , 574 S.W .2d 346, 348 (Ky. App. 1978) ("Kentucky
also imposed mandatory damages under former KRS 21 .130. Even with the enactment
this case properly applied the unambiguous and mandatory language of KRS 26A.300
and assessed a 10% penalty against Appellant, leaving unanswered, however, the
question regarding the constitutionality of the statute .
The ten percent penalty provisions of KRS 26A.300 apply only to unsuccessful
appellants in second appeals from superseded money judgments . Notably, a penalty is
not assessed against other unsuccessful appellants in second appeals, e.g .,
unsuccessful plaintiff-appellants, unsuccessful defendant-appellants who do not
supersede a money judgment awarded against them, and unsuccessful appellants from
non-money judgments . Clearly KRS 26A.300 does not treat all unsuccessful appellants
in second appeals the same, and, as such, it is discriminatory . But the state may
discriminate in certain matters if there is a rational basis for such discrimination : "In
areas of social and economic policy, a statutory classification that neither proceeds
along suspect lines nor infringes fundamental constitutional rights must be upheld
against an equal protection challenge if there is any reasonably conceivable state of
facts that could provide a rational basis for the classification .
,17
Thus, since in the
present case no fundamental right is at stake and no "suspected class" is implicated,
KRS 26A .300 must be upheld "if there is a 'rational basis' for the classification .08 But,
of KRS 26A .300, damages are automatically conferred upon the affirmance or dismissal
of appeals other than the first appeals ."); Watts v. Laboratory Corp. of America , 139
S .W .3d 534, 535 (Ky. App. 2004).
17
F .C.C. v. Beach Communications, Inc. , 508 U .S. 307, 313, 113 S .Ct. 2096,
2101, 124 L.Ed .2d 211 (1993).
18
Preston v. Johnson County Fiscal Court , 27 S.W.3d 790, 795 (Ky. 2000) (citing
General Motors Corp . v. Tracy, 519 U .S . 278, 311, 117 S .Ct. 811, 830, 136 L .Ed .2d 761
(1997)); accord Popplewell's Alligator Dock No . 1, Inc . v. Revenue Cabinet, 133 S .W.3d
456, 466-67 (Ky. 2004).
as the United States Supreme Court made clear in Lindsey v. Normet,19 "arbitrary and
irrational" discrimination violates the Equal Protection Clause even under the rationalbasis standard of review .
The primary, if not the sole purpose of KRS 26A .300's penalty provisions is to
prevent frivolous appeals :
The legislative policy underlying enactment of statutes
imposing damages for delay is well-stated in Phillips v.
Green , 288 Ky. 202,155 S .W.2d 841, 843 (1941), as
follows :
What is denominated "damages" on a
supersedeas bond is not strictly so, for it is at
the same time a penalty . "It is a penalty or tax
imposed by legislative enactment upon the
unsuccessful litigant for having delayed the
litigation, and for having kept the successful
litigant from sooner collecting his debt--a
panacea, as it were, for the law's delay . It is
not laid upon the litigant because of any wrong
done, or duty violated, but for the sole purpose
of preventing useless and frequently vexatious
delays in the termination of litigation . Some
means had to be adopted that would tend to
put an end to useless appeals, which would
more frequently than otherwise be brought fo
the purpose of delay and annoyance . To meet
this necessity, the Legislature passed the act
imposing upon the unsuccessful appellant from
a judgment for the payment of money a penalty
in the shape of damages, equal to 10 per cent.
of the judgment appealed from . 21
Penalty statutes, like KRS 26A .300, are not intended to compensate an appellee
for delay in receiving a money judgment; rather, such statutes are intended to
19
2°
405 U .S. 56, 92 S .Ct. 862, 31 L.Ed .2d 36 (1972).
Id . at 79, 92 S.Ct at 877.
Coomer v. Gray , 750 S .W.2d 424, 427 (Ky. 1988) .
21
discourage frivolous appeals . And although an unsuccessful appeal where a
supersedeas bond has been posted will necessarily result in delay in the collection of a
money judgment, post-judgment interest-"twelve percent (12%) interest compounded
annually" 23 in Kentucky-more than adequately compensates for the delay . 24
In Lindsey , the United States Supreme Court addressed the constitutionality of
Oregon's Forcible Entry and Wrongful Detainer ("FED") Statute that required tenants
challenging eviction proceedings to post a surety bond of twice the amount of rent
expected to accrue pending appellate review . The bond was forfeited to the landlord if
the appeal was unsuccessful . Part of the rationale for the double bond requirement
under the FED statute, like the 10% penalty here, was explained by the Oregon
Supreme Court : "That the bond must provide for double the rental value was, no doubt,
intended to prevent frivolous appeals for the purpose of delay. If there were not some
added cost or restriction every ousted tenant would appeal, regardless of the
justification ." 25 The Supreme Court, after recognizing that an appeal was not
constitutionally mandated, made clear that "[w]hen an appeal is afforded, however, it
cannot be granted to some litigants and capriciously or arbitrarily denied to others
5 Ann. JUR . 2D. Appellate Review § 937 (1995); cf. Watts v. Laboratory Corp . of
America , 139 S .W .3d 534, 538 (Ky.App . 2004) ("[T]he purpose of KRS 26A.300 is to
impose a penalty upon an appellant who pursues an unsuccessful second appeal and
thereby delays the plaintiffs collection of his or her judgment.").
22
23
KRS 360 .040 ("A judgment shall bear twelve percent (12%) interest
compounded annually from its date . . . . Provided, that when a claim for unliquidated
damages is reduced to judgment, such judgment may bear less interest than twelve
percent (12%) if the court rendering such judgment, after a hearing on that question, is
satisfied that the rate of interest should be less than twelve percent (12%) .").
24 5
AM . JUR . 2D. Appellate Review § 937 (1995) .
25
Lindsey, 405 U .S . at 76, 92 S .Ct at 875.
without violating the Equal Protection Clause.
,26
It then concluded that Oregon's statute
denied FED appellants equal protection under the law because the discrimination
against the class of FED appellants was arbitrary and irrational:
The claim that the double-bond requirement operates
to screen out frivolous appeals is unpersuasive, for it not
only bars nonfrivolous appeals by those who are unable to
post the bond but also allows meritless appeals by others
who can afford the bond . The impact on FED appellants is
unavoidable : if the lower court decision is affirmed, the entire
double bond is forfeited ; recovery is not limited to costs
incurred by the appellee, rent owed, or damage suffered . No
other appellant is subject to automatic assessment of
unproved damages . We discern nothing in the special
purposes of the FED statute or in the special characteristics
of the landlord-tenant relationship to warrant this
discrimination .
We do not question here reasonable procedural
provisions . . . to discourage patently insubstantial appeals, if
these rules are reasonably tailored to achieve these ends
and if they are uniformly and nondiscriminatorily applied .
Moreover, a State has broad authority to provide for the
recovery of double or treble damages in cases of illegal
conduct that it regards as particularly reprehensible, even
though posting an appeal bond by an appellant will be
doubly or triply more difficult than it otherwise would be. In
the case before us, however, the State has not sought to
protect a damage award or property an appellee is right-fully
entitled to because of a lower court judgment . Instead, it has
automatically doubled the stakes when a tenant seeks to
appeal an adverse judgment in an FED action . The
discrimination against the poor, who could pay their rent
pending an appeal but cannot post the double bond, is
particularly obvious . For them, as a practical matter, appeal
is foreclosed, no matter how meritorious their case may be .
The nonindigent FED appellant also is confronted by a
substantial barrier to appeal faced by no other civil litigant in
Oregon . The discrimination against the class of FED
appellants is arbitrary and irrational, and the double-bond
requirement of [the FED statute] violates the Equal
Protection Clause.
26
27
Id . a t 77, 92 S .Ct at 876.
Id. at 78-79, 92 S .Ct at 876-77 (emphasis added) .
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Sixteen years later in Bankers Life and Casualty Co . v. Crenshaw,28 the Supreme
Court again scrutinized an appellate penalty statute for an equal protection violation .
There, an unsuccessful defendant-appellant challenged Mississippi's appellate penalty
statute "which requires unsuccessful appellants from money judgments, as well as from
several other categories of judgments whose value may readily be determined, to pay
an additional assessment of 15% of the judgment. ,29 The Supreme Court, noting that
the Mississippi Supreme Court had explained that the state interest, inter alia,
expressed by the statute was to "discourag[e] frivolous appeals," 30 stated that the
legitimacy of such an interest cannot be seriously doubted ,31 and therefore, the statute
"offends the Equal Protection Clause only if the legislative means that Mississippi has
chosen are not rationally related to those legitimate interests ." 32
28 486 U .S. 71, 108 S.Ct. 1645, 100 L .Ed . 2d 62 (1988) .
29 Id . at 80, 108 S.Ct. 1651-52 .
30 _Id
. at 81, 108 S .Ct. 1652 ; see also id . a t 81-82, 108 S .Ct. at 1652 ("The state
interests assertedly served by the Mississippi statute were detailed by the Mississippi
Supreme Court in Walters v. Inexco Oil Co., 440 So.2d 268 (1983) . The penalty
statute, some version of which has been part of Mississippi law since 1857, `expresses
the state's interest in discouraging frivolous appeals . It likewise expresses a bona fide
interest in providing a measure of compensation for the successful appellee,
compensation for his having endured the slings and arrows of successful appellate
litigation .' _Id ., at 274-275. In a similar vein, the statute protects the integrity of
judgments by discouraging appellant-defendants from prolonging the litigation merely to
`squeeze a favorable settlement out of an impecunious' appellee . _Id ., at 275 . Also, the
penalty statute "tells the litigants that the trial itself is a momentous event, the
centerpiece of the litigation, not just a first step weighing station en route to endless
rehearings and reconsiderations ." Ibid . Finally, in part because it serves these other
goals, the penalty statute furthers the State's interest in conserving judicial resources .
Ibid .") .
31
_Id . at 82, 108 S.Ct. at 1652 ("The legitimacy of these state interests cannot
seriously be doubted, and this Court has upheld statutes that serve similar interests .") .
32
Id ., 108 S.Ct at 1653 .
The Bankers Life appellant relied on Lindsev, as does Appellant here, in support
of its "argu[ment] that the penalty statute violates the Equal Protection Clause of the
Fourteenth Amendment . . . ." 33 The Bankers Life Court, however, distinguished
Lindsev , pointing out that the statute involved there "bore `no reasonable relationship to
any valid state objective,
,,34
whereas there is a rational connection between the
Mississippi "statute's objective and Mississippi's choice to impose a penalty only on
appellants from money judgments or judgments the money value of which can readily
be determined ." 35 Accordingly, LindseY was held inapplicable to Mississippi's statute :
As Lindsev demonstrates, arbitrary and irrational
discrimination violates the Equal Protection Clause under
even our most deferential standard of review . Unlike the
statute in Lindse , however, Mississippi's penalty statute
does not single out a class of appellants in an arbitrary and
irrational fashion . First, whereas the statute in Lindsev
singled out the narrow class of defendant-tenants for
discriminatory treatment, the sweep of [Mississippi's statute]
is far broader : the penalty applies both to plaintiffs and
defendants, and it also applies to all money judgments as
well as to a long list of judgments whose money value may
readily be determined . Second, and more generally, there is
a rational connection between the statute's objective and
Mississippi's choice to impose a penalty only on appellants
from money iudgments or judgments the money value of
which can readily be determined . If Mississippi wanted
similarly to deter frivolous appeals from other kinds of
judgments, it either would have to erect a fixed bond that
bore no relation to the value of the underlying suit, or else it
would have to set appropriate penalties in each case using
some kind of individualized procedure, which would impose
a considerable cost in judicial resources, exactly what the
statute aims to avoid . Mississippi instead has chosen a
partial solution that will deter many, though not all, frivolous
appeals without requiring a significant commitment of
33
34
Id. at 81, 108 S .Ct at 1652 .
Id. at 83, 108 S .Ct at 1653 .
35
Id.
-12-
governmental resources. Appellants from money judgments,
and from the other types of judgments delineated in the
statute, are a rational target of this scheme because the
value of their claims, and thus of a proportional penalty, may
be readily computed without substantial judicial intervention .
The Constitution does not prohibit Mississippi from singling
out a group of litigants that it rationally concludes is most
likely to be deterred from bringing meritless claims at the
least cost to the State.
In addition, Mississippi's statute is less likely than was
the statute in Lindsey to discourage substantial appeals
along with insubstantial ones . Because the penalty operates
only after a judgment has been affirmed without modification,
there is less risk than in Lindsey of discouraging appellants
who believe they have meritorious appeals but simply lack
the funds to post a substantial bond during the appellate
process . And whereas the assessment in Lindsey
"automatically doubled the stakes," the 15% penalty here is
a relatively modest additional assessment. Although
Mississippi may not have succeeded in eliminating all
danger of deterring meritorious claims, we cannot say that
the residual danger is sufficient to render the statutory
scheme irrational.
Appellant argues that [Mississippi's statute]
impermissibly burdens some litigants' access to the State's
appellate system . Although the Court indicated in Lindsey
that the effective foreclosure of a state right to appeal as to
some litigants only--for example, indigent litigants--might well
violate equal protection guarantees under even deferential
scrutiny, appellee rightly notes that appellant lacks standing
to challenge [Mississippi's statute] on this basis, because
appellant has not alleged that its own right to appeal has
been foreclosed by the statute.
In short, unlike the double-bond provision condemned
in Lindsey, the means chosen in [Mississippi's statute] are
reasonably related to the achievement of the State's
objectives of discouraging frivolous appeals, compensating
appellees for the intangible costs of litigation, and conserving
judicial resources . It of course is possible that Mississippi
might have enacted a statute that more precisely serves
these goals and these goals only; as we frequently have
explained, however, a state statute need not be so perfectly
calibrated in order to pass muster under the rational-basis
test. We are satisfied that the means that the State has
chosen are "reasonably tailored to achieve [the State's
legitimatel ends ."
This Court, however, is "not bound by decisions of the United States Supreme
Court when deciding whether a state statute impermissibly infringes upon individual
rights guaranteed in the State Constitution so long as state constitutional protection
does not fall below the federal floor, meaning the minimum guarantee of individual rights
under the United States Constitution as interpreted by the United States Supreme
Court. ,37 The Kentucky Constitution's equal protection provisions, Sections 1, 2, and
3,3s are much more detailed and specific than the Equal Protection Clause of the United
States Constitution. Moreover, the equal protection provisions of the Kentucky
Constitution are enhanced by Section 59 and 60.4° Section 59 prohibits, inter alia , the
General Assembly from enacting special legislation : "The General Assembly shall not
pass local or special acts concerning any of the following subjects, or for any of the
following purposes, namely: . . . Twenty-ninth: In all other cases where a general law
can be made applicable, no special law shall be enacted ." Section 60 reiterates the
prohibition against special legislation, providing that "[t]he General Assembly shall not
36 _Id . at 83-85, 108 S .Ct. at 1653-54 (footnotes and citations omitted ; emphases
added) .
37 Commonwealth v. Wasson, 842 S .W.2d 487, 492 (Ky. 1992)(citing Oregon v.
Hass, 420 U .S. 714, 719, 95 S .Ct. 1215, 1219, 43 L.Ed .2d 570, 575 (1975)) .
38 Section 1 provides : "All men are, by nature, free and equal, and have certain
inherent and inalienable rights . . . ." Section 2 provides : "Absolute and arbitrary power
over the lives, liberty and property of freemen exists nowhere in a republic, not even in
the largest majority ." And Section 3 provides : "All men, when they form a social
compact, are equal; and no grant of exclusive, separate public emoluments or privileges
shall be made to any man or set of men, except in consideration of public services . . . ."
39 Tabler v. Wallace , 704 S .W.2d 179, 183 (Ky. 1986) .
40
Wasson , 842 S .W .2d at 500.
- 1 4-
indirectly enact any special . . . act by the repeal in part of a general act . . . ." As we
stated in Perkins v. Northeastern Log Homes:4'
Many [states] have general protection against
"arbitrary power" as we have in Kentucky Constitution § 2,
and guarantees of "equal" rights and protection against
"grant" of "separate . . . privileges" as we have in Kentucky
Constitution § 3. But few have additional protection against
local and special legislation as we have in Kentucky
Constitution § 59. So far as we can determine, none has
anything like the combination of broad constitutional
protection of individual rights against legislative interference
vouchsafed by our 1891 Kentucky Constitution .
Because of this additional protection, we have elected at times to apply a guarantee of
individual rights in equal protection cases that is higher than the minimum guaranteed
by the Federal Constitution. Instead of requiring a "rational basis," we have construed
our Constitution as requiring a "reasonable basis" 43 or a "substantial and justifiable
reason"44 for discriminatory legislation in areas of social and economic policy. Cases
applying the heightened standard are limited to the particular facts of those cases.
We need not decide, however, whether the facts of this case require us to invoke
Kentucky's heightened standard because we hold that KRS 26A.300 fails the rational
41
42
808 S .W .2d 809 (Ky. 1991) .
Id . at 818 .
43
Tabler v . Wallace, 704 S .W.2d 179, 187 (Ky. 1985) ("Where to draw the line as
to what constitutes a "reasonable basis" for otherwise discriminatory legislation is a
difficult matter ."); id . at 185 ("The fundamental question is whether the General
Assembly had a reasonable basis for this legislation . . . .").
44 _Id
. at 186 (Ky. 1985) ("Defense counsels' arguments throughout have been to
the effect that any reason however imaginative that could have existed requires us to
uphold otherwise discriminatory legislation . On the contrary, there must be a
substantial and justifiable reason apparent from legislative history, from the statute's
title, preamble or subject matter, or from some other authoritative source .") . '
-1 5-
basis test, which is sufficient to show a violation of the equal protection provisions of
both Constitutions .
The granting of discretionary review is, as the name indicates, a matter of
discretion and "will be granted only when there are special reasons for it."45 Thus, even
though a discretionary review motion may demonstrate that reversible error may have
occurred in a lower court, discretionary review may still be denied unless this Court
determines that "special reasons for it" are present.46 Consequently, only a small
percentage, approximately 15% ,4' of discretionary review motions are granted in civil
cases, and as a result the great majority of second-appeals, to which the penalty is
applied, are generally unsuccessful motions for discretionary review in this Court .48
45
CR 76 .20(1).
46
See CR 76 .20(9)(a) ("The denial of a motion for discretionary review does not
indicate approval of the opinion or order sought to be reviewed and shall not be cited as
connoting such approval ."); 7 KURT A. PHILIPPS, .1R ., KENTUCKY PRACTICE, RULES OF CIVIL
PROCEDURE ANNOTATED, Rule 76 .20, cmt. 1 (5th ed . West Group 1995) ("Normally, a
claim that the Court of Appeals merely erred in its decision will not be a special reason
to grant a motion for discretionary review . . . . In articulating the reasons for granting
review, a party should be aware that the court will normally be looking for a cogent and
special reason other than the case should be decided differently.").
47
This is based on 2003 statistics showing that we granted only 56 of 356
motions for discretionary review in civil cases. In 2003, the Court of Appeals disposed
of 1,556 civil appeals, which means that a motion for discretionary review is filed in just
under 23% of civil cases.
48 See supra notes 14, 15 . We recognize that CR 62 .03, which allows the stay of
a judgment by the giving of a supersedeas bond, is not limited to appeals from circuit
court judgments . Thus, if the Court of Appeals denies discretionary review of or affirms
an appeal from a circuit court judgment in a case appealed to it from a superseded
district court judgment, then the penalty is applicable . Such a scenario is so unlikely to
occur or occurs so rarely that it is not a consideration in addressing the issues in this
case. We note that CR 72 .02 makes only CR 73.02, 73.03, and CR 74 applicable to
appeals from district court, but CR 73.04, the appellate rule concerning the posting of a
supersedeas bond, is not made applicable to an appeal from district court. CR 73 .04,
however, refers to CR 62 .03 and therefore a district court money judgment may be
superseded .
-1 6-
Thus, in actual practice, the penalty is limited to unsuccessful movants for discretionary
review who have posted a supersedeas bond, a quite limited subclass of unsuccessful
appellants .
Generally a supersedeas bond is posted at or near the time that the notice of
appeal is filed . Both the appellant and a "good and sufficient surety" sign the bond. The
bond stays execution of the judgment and is conditioned on the "satisfaction of the
judgment in full . . . if the judgment is affirmed" on appea1 .49 In other words, it is simply
a promise by an appellant and the surety to pay the judgment if it is affirmed . Because
of the risk they take, sureties naturally charge a fee for executing a supersedeas bond .
A party, however, does not need to post a supersedeas bond to take an appeal from a
judgment. The failure to post a bond, however, leaves the party who obtained the
judgment free to execute on it, though the party who executes on a judgment during the
pendency of an appeal of the judgment does so at his or her own risk because, if the
judgment is reversed, any benefits obtained by virtue of the execution must be restored
to the adverse party .5° But the person failing to supersede the money judgment
49 CR 73.04(1) ("The bond shall be in a fixed amount and conditioned for the
satisfaction of the judgment in full together with costs, interest and damages for delay, if
the appeal is dismissed or if the judgment is affirmed, and to satisfy in full such
modification of the judgment and such costs, including costs on the appeal and interest
as the appellate court may adjudge.").
50 Walter v. Moore, 198 Ky. 744, 249 S .W. 1041, 1043 (1923) ("The judgment is
affirmed so far as it relates to the brooch in question, but is reversed with directions to
enter a judgment requiring the defendant to restore the ring, if she has it, and, if not, to
adjudge the plaintiff the value thereof.") ; Webb v. Webb's Guardian , 178 Ky. 152, 198
S .W. 736, 740 (1917) ("[I]f the purchaser at a judicial sale, either under execution or a
decree, is a party to the record who procured the erroneous judgment, or his attorney,
or assignee before the sale, when it is reversed upon appeal, if the property sold is in
the hands of such party, he may be required to make restitution of the property, and if
not, he can be made liable for its value, or at least all which he received from the sale .");
Aune v. B-Y Water Dist . , 505 N .W .2d 761, 765 (S.D. 1993) ("[O]ne who executes on a
-1 7-
"suffers" the risk of getting the money back if the judgment is reversed .51 Furthermore,
satisfaction of the judgment by execution, in the absence of sufficient assets, could
result in the loss of the judgment debtor's home or business during the appeal .
Obviously, then, the benefit of a supersedeas bond to an appellant is that it stays
execution on the judgment and thereby avoids the risks associated with the adverse
party executing on the judgment. The party executing on the judgment benefits from
having the immediate use of the money and eliminates the risk of not being able to get
the money if the judgment is affirmed, but by doing so, the judgment creditor creates the
risk of having to restore any benefits obtained by reason of the execution on the
judgment and loses the judgment interest that would otherwise accrue during the
appeal .
As earlier noted, the goal of the Legislature in enacting KRS 26A.300 was to
prevent frivolous appeals . While this is certainly a legitimate state interest, the question
remains whether a rational relationship exists between the statute and its goal. As a
practical matter, the statute applies mainly to unsuccessful discretionary review motions
to this Court from superseded judgments . Thus, it actually impacts only a small number
judgment during the pendency of an appeal of the judgment does so at his own risk. If
he obtains benefits from the execution and the judgment is subsequently reversed,
those benefits must then be restored to the adverse party."); Ann. JUR . 2D Appellate
Review §433 (1999) ("One who executes upon a judgment from which an appeal has
been taken does so at his or her own risk ; if he or she obtains benefits from the
execution, those benefits must be restored to the adverse party in the event the
judgment is reversed on appeal .") .
51
Koster & Wythe v. Massey, 262 F .2d 60, 62 (9th Cir. 1958) ("A person who
cannot furnish supersedeas bond does not lose his right to appeal . What he suffers is
that he takes the risk of getting the money back again if the judgment is reversed .") .
- 1 8-
of appellants, and it imposes a substantial penalty52 on those appellants if their
discretionary review motion-regardless of its merits-is denied by this Court, which is
the most likely result.53
Because of the low likelihood of success coupled with the cost normally
associated with preparing a discretionary review motion and with then preparing and
submitting a brief if the motion is granted, a party is naturally deterred by the process
itself from filing a frivolous discretionary review motion . 54 Additionally a money
judgment bears 12% interest; this may discourage a solvent judgment debtor from filing
a frivolous appeal and allowing the 12% interest to continue accruing on the judgment .55
And we also have a civil rule, CR 73 .02(4), that directly targets frivolous appeals . CR
73.02(4) provides : "If an appellate court determines that an appeal or motion is frivolous,
it may award just damages and single or double costs to the appellee or respondent .
An appeal or motion is frivolous if the court finds that it is so totally lacking in merit that it
appears to have been taken in bad faith ." The rule allows this Court to adequately
deter, and to punish if necessary, any appellant filing a frivolous appeal or discretionary
review motion . For these reasons, judgment debtors are understandably deterred from
filing frivolous motions for discretionary review in this Court, regardless of whether the
52
Though the Bankers Life Court stated that the 15% penalty involved therein
was "a relatively modest additional assessment," Bankers Life and Cas. Co. v.
Crenshaw , 486 U .S. 71, 84,108 S .Ct. 1645, 1654 (1988), we fail to see any modesty in
the imposition of a $950,000 penalty, as was the case here .
53
See supra note 47 .
54
Parties seek discretionary review in approximately 23% of civil cases decided
by the Court of Appeals. See supra note 47.
55
More than three million dollars in post-judgment interest accrued during the
appeals in this case.
- 1 9-
judgment has been superseded and regardless of the appeal penalty mandated by KRS
26A .300.
For some of the same reasons, i .e ., associated cost and low likelihood of
success, many discretionary review motions with merit are also understandably not
filed . But, logically, even additional meritorious motions for discretionary review are
deterred by the possibility, if not the probability of the substantial penalty-almost
$1,000,000 in this case-imposed by KRS 26A.300 . Worse still, the statute may very
well fail to achieve its primary purpose because parties who cannot pay, or cannot pay
without difficulty, a money judgment will not be deterred from filing a frivolous appeal .
Such borderline judgment creditors will be unable to post a supersedeas bond . But
since they have not posted the bond, they have nothing to lose by filing an appeal
because they will not be subject to an appeal penalty. As such, the statute simply fails
to stop these truly frivolous appeals .
Ultimately, the problem with the statute is that while it may deter a small number
of frivolous appeals-though, more likely than not, these appeals would already be
deterred by the other provisions-it deters even more meritorious appeals . And,
because it applies to such a narrow class-defendant money judgment creditors, as
opposed to all judgment creditors, the value of whose judgment can be quantified (as in
Banker's Life )-it violates Lindsey's command that an appeal right "cannot be granted to
some litigants and capriciously or arbitrarily denied to others without violating the Equal
Protection Clause .
,56
Distinguishing between defendant money judgment creditors and
other money judgment creditors, or judgment creditors, the value whose judgments can
56
Lindsey v. Normet, 405 U .S . 56, 77, 92 S .Ct. 862, 876, 31 L .Ed .2d 36 (1972).
-20-
be quantified, is arbitrary and capricious . As such, by focusing on such a narrow
class, the statute is the sort of arbitrary statute covered by Lindsey's understanding of
"rational basis."
The alternate means established by this Court, i.e., CR 73.02(4), for deterring
frivolous appeals to this Court is sufficient and does not discriminate against
unsuccessful appellants who have superseded a money judgment . We note that KRS
360 .040, which provides judgment interest, and was enacted to compensate for delay,
also acts to deter frivolous appeals . The relationship between KRS 26A.300 and its
goal is "so attenuated as to render the statute arbitrary and irrational ." 57 We thus
conclude that the goal of KRS 26A.300, although laudable, is not rationally related to
the statute, and that KRS 26A .300 denies Appellant equal protection . It, therefore, fails
constitutional scrutiny.
B . Separation of Powers
"it is well settled law in the state of Kentucky that one branch of Kentucky's
tripartite government may not encroach upon the inherent powers granted to any other
branch ." 58 Sections 27 and 28 are "clear and explicit on this delineation ." 59 "[T]he
framers of Kentucky's constitution . . . were undoubtedly familiar with the potential
damage to the interests of the citizenry if the powers of government were usurped by
one or more branches of that government." 6° Thus, "it has been our [predecessor's]
57
City of Cleburne, Tex . v. Cleburne Living Center, 473 U .S. 432, 446,105 S.Ct.
3249, 3258 (1985).
58
Smothers v . Lewis , 672 S .W.2d 62, 64 (Ky.,1984) .
59 Ky. Alcoholic Beverage Control Bd . v. Klein, 301 Ky. 757, 192 S.W .2d 735, 738
(1946).
60
Legislative Research Comm'n v. Brown, 664 S.W.2d 907, 911-12 (Ky. 1984) .
-21-
view [and our view], in interpreting Sections 27 and 28, that the separation of powers
doctrine is fundamental to Kentucky's tripartite system of government and must be
`strictly construed . -61 One branch, therefore, is not empowered to exercise power
properly belonging to another branch simply because the other branch is "along for the
ride." 62 Because of the judiciary's unique position as the final unchecked arbiter of
constitutional disputes, we "should be particularly vigilant to restrain [our] own exercise
of power. ,63 It is important that the powers of the Legislature should not "stand or fall
according as they appealed to the approval of the judiciary ; else one branch of
government, and that the most representative of the people, would be destroyed, or at
least completely subverted to the judges ."6a
Except for matter of right appeals, which are expressly provided for, the
Kentucky Constitution undeniably delegates exclusively to this Court the authority to
adopt rules of practice and procedure for the Court of Justice and rules governing our
appellate iurisdiction . 66 By statute, the Legislature has recognized this delegation of
61
62
Id . at 912 .
Prater v. Commonwealth, 82 S .W.3d 898, 907 (Ky. 2002).
63
Kuprion v. Fitzgerald , 888 S .W .2d 679, 699 (Ky. 1994) ; accord Manning v.
Sims , 308 Ky. 587, 213 S .W.2d 577, 580 (1948) ("It is essential that the sharp
separation of the powers of government be preserved carefully by the courts . Those
which are judicial must not be permitted to encroach upon those which are legislative.").
64 E .
Ky. Coal Lands Corp. v. Commonwealth, 127 Ky. 667,106 S.W. 260, 275
(1907).
65
See KY. CONST. § 110(2)(b) ("Appeals from a judgment of the Circuit Court
imposing a sentence of death or life imprisonment or imprisonment for twenty years or
more shall be taken directly to the Supreme Court .").
66
§ 116 ("The Supreme Court shall have the power to prescribe rules
governing its appellate jurisdiction . . . .") ; see also KY. CONST. § 110(2)(b) ("In all other
cases, criminal and civil, the Supreme Court shall exercise appellate jurisdiction as
provided by its rules.") ; O'Bryan v. Hedgespeth, 892 S .W .2d 571, 576 (Ky. 1995)
KY. CONST.
-22-
power s' Just as it would be a violation of separation of powers for this Court to
exercise power properly belonging to another branch, e.g., adopting substantive law
under the guise of enacting a procedural rule68 since the enactment of substantive law
is the exclusive prerogative of the Legislature under our Constitution ,s9 a similar
constitutional violation of separation of powers occurs when the Legislature promulgates
rules of practice and procedure for the Court of Justice or rules governing the appellate
jurisdiction of this Court .'°
("Kentucky Constitution Section 116 vests exclusive jurisdiction in the Supreme Court to
prescribe `rules of practice and procedure for the Court of Justice."') ; Huff v.
Commonwealth , 763 S .W .2d 106, 108 (Ky. 1988) (Gant, J., concurring) ("Section 109
provides that judicial power shall vest in the Supreme Court, and Section 116 empowers
the Supreme Court to make all rules of practice and procedure ."); Smothers v. Lewis ,
672 S.W.2d 62, 64 (Ky. 1984) ("Section 116 of the Constitution of Kentucky's `Judicial
Article' which was approved by the voters in 1976 provides that: `The Supreme Court
shall have the power to prescribe rules governing its appellate jurisdiction . . ..' Thus, the
source of the Court's rule making power is firmly rooted within the Constitution.") .
s' KRS 21 A.050 (2) ("The method of bringing a judgment, order or decree of a
lower court to the Supreme Court for review shall be established by Supreme Court
rule . The procedures for appellate review shall be established by the Rules of Civil
Procedure, Rules of Criminal Procedure and other rules promulgated by the Supreme
Court.").
s$ Richey v. Richey 389 S.W.2d 914, 919 (Ky. 1965) ("Rules of court are
,
procedural . They cannot affect substantive law."); Lunsford v. Commonwealth , 436
S .W .2d 512, 514 (Ky. 1969) ("The power (that is, the jurisdiction) of a court or
magistrate to take away a person's liberty is a matter of substance, and cannot originate
from the judicial power to regulate practice and procedure in the courts .").
69 KY. CONST. § 27 ; 16A AM. JUR . 2D Constitutional Law § 275 (1998) ("Legislative
power includes the power to make laws . . . ."); id . § 286 ("[W]hether legislative action is
appropriate involves the distinction between substance, which is a legitimate subject of
legislative action, and procedure, which is under the exclusive jurisdiction of the
courts . )
§ 116 ; Commonwealth v. Reneer, 734
S .W .2d 794, 796 (Ky. 1987) ("The Supreme Court of this Commonwealth has the
authority to prescribe rules of practice and procedure in the courts of this
Commonwealth . Because K.R.S . 532.055 is a legislative attempt to invade the rule
making prerogative of the Supreme Court by legislatively prescribing rules of practice
'° KY. CONST. § 110(2)(b) ; KY. CONST.
-23-
Consistent with the Constitutional delegation of power to this Court "to prescribe
rules governing [our] appellate jurisdiction,"" we have promulgated CR 76 .20(1) which
provides :
A motion for discretionary review by the Supreme
Court of a decision of the Court of Appealso . . . shall be
prosecuted as provided by this Rule 76 .20 and in
accordance with the Rules generally applicable to other
motions . Such review is a matter of judicial discretion and
will be granted only when there are special reasons for it.
And in aid of our discretionary appellate jurisdiction and pursuant to our authority to
prescribe "rules of practice and procedure," we adopted CR 73.02(4) to deter frivolous
appeals or motions for discretionary review to this Court :
If an appellate court determines that an appeal or
motion is frivolous, it may award just damages and single or
double costs to the appellee or respondent . An appeal or
motion is frivolous if the court finds that it is so totally lacking
in merit that it appears to have been taken in bad faith .
KRS 26A .300, as discussed supra, deters discretionary review motions-both
frivolous and meritorious-and it thereby limits or restricts the Kentucky Supreme Court
in exercising its jurisdiction to review cases from lower courts . By so doing, it invades
the constitutional power assigned exclusively to the Kentucky Supreme Court to
"exercise appellate jurisdiction as provided by its rules.
,72
We note, however, that CR
76 .20(9)(a), a rule promulgated by this Court, provides that upon the denial of a
discretionary review motion "if a supersedeas bond has been executed, damages for
and procedure, it violates the separation of powers doctrine enunciated in Section 28 of
the Kentucky Constitution ." (citation omitted)).
" KY. CONST. § 116 .
72
KY. CONST. § 110(2)(b) (emphasis added).
-24-
delay shall be recoverable pursuant to KRS Chapter KRS 26A ." But, this rule, itself,
does not impose a penalty on an unsuccessful Appellant ; rather the quoted language
was included simply for the purpose of referencing KRS 26A .300, which was enacted by
the Legislature . By referencing KRS Chapter 26A, we did not place the Court's
imprimatur on KRS 26A.300. Thus, because KRS 26A.300 violates the separation of
powers provisions of the Kentucky Constitution, it is unconstitutional .
Finally we would note that this separation of powers issue was not raised in the
lower courts, but rather it was raised sua sponte by members of this Court during oral
argument. The parties addressed the issue and we have confined ourselves to the
record . Thus we are not precluded by any rule or constitutional provision from
addressing this issue . 73
IV. CONCLUSION
Because we hold that KRS 26A.300 denies Appellant equal protection in violation
of both the Kentucky and Federal Constitutions and that the statute also violates the
separation of powers provisions of the Kentucky Constitution, we reverse the Court of
73
Priestley v. Priestley , 949 S .W.2d 594, 596 (Ky. 1997) ("So long as an
appellate court confines itself to the record, no rule of court or constitutional provision
prevents it from deciding an issue not presented by the parties ." (citations omitted));
Mitchell v. Hadl, 816 S.W.2d 183 (Ky. 1991) ; Elery v. Martin , 4 S.W.3d 550, 551
(Ky .App . 1999) (addressing constitutional issue raised sua sponte by the court) . But see
16 C .J.S . Constitutional Law § 92 (2004) ("As a general rule, a court will not inquire into
the constitutionality of a statute . . . on its own motion, but only those constitutional
questions which are duly raised and insisted on, and are adequately argued and briefed
will be considered . . . . This is not an inflexible rule, however, and in some instances
constitutional questions inherently involved in the determination of the cause may be
considered even though they may not have been raised as required by orderly
procedure.") .
-25-
Appeals and vacate the judgment of the Floyd Circuit Court imposing a penalty under
KRS 26A.300 .
Lambert, C .J . ; Cooper, Graves, Johnstone and Wintersheimer, JJ ., concur. Scott,
J ., not sitting .
COUNSEL FOR APPELLANT :
Virginia Hamilton Snell
Wyatt, Tarrant & Combs
2600 PNC Plaza
500 West Jefferson Street
Louisville, Kentucky 40202-2898
Richard C. Ward
Wyatt, Tarrant & Combs
1700 Lexington Financial Center
250 West Main Street
Lexington, Kentucky 40507
Deborah H. Patterson
Wyatt, Tarrant & Combs
2600 PNC Plaza
500 West Jefferson Street
Louisville, Kentucky 40202
COUNSEL FOR APPELLEE :
Bruce E . Cryder
Greenebaum, Doll & McDonald
1400 Vine Center Tower
Lexington, Kentucky 40507
David Austin French
333 West Vine Street
Suite 1400
Lexington, Kentucky 40507-1665
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