Hearn v. Com., 2000-SC-0865-DG.

• Decision Date: 13 June 2002
• Docket Number: No. 2000-SC-0865-DG.,2000-SC-0865-DG.
• Parties: Patricia HEARN and James Hearn, Appellants, v. COMMONWEALTH of Kentucky, Appellee.
• Court: United States State Supreme Court — District of Kentucky

Page 432

80 S.W.3d 432

Patricia HEARN and James Hearn, Appellants, v. COMMONWEALTH of Kentucky, Appellee.

No. 2000-SC-0865-DG.

Supreme Court of Kentucky.

June 13, 2002.

J. Bart Adams, Louisville, KY, for appellant, Patricia Hearn.

Steven R. Romines, Romines, Weis & Young, Louisville, KY, for appellant, James Hearn.

A.B. Chandler, III, Attorney General, Frankfort, KY, Jonathan A. Dyar, Special Assistant Attorney General, Teresa Young, Assistant Commonwealth Attorney, Jeanne Deborah Anderson, Assistant Commonwealth Attorney, Louisville, KY, for appellee.

WINTERSHEIMER, Justice.

This appeal is from a decision of the Court of Appeals which reversed and remanded an order of the circuit court which had denied the motion of the Commonwealth to charge interest on court-ordered restitution in a criminal case.

The sole issue is whether the trial courts of Kentucky have the authority to order post-judgment interest to be paid on the principal amount of restitution until the amount is paid in full under KRS 533.030(3).

James and Patricia Hearn pled guilty to twelve counts of theft by failure to make required disposition of property received in violation of KRS 514.070, and one count of theft by deception under KRS 514.040. The Hearns admitted to having converted to their own use more than $300,000 that had been entrusted to Patricia as a deputy superintendent of the Jefferson County schools.

As part of her official duties, Patricia Hearn conducted business dealings with the private foundation known as the "Jefferson County Public Education Foundation," a private fund-raising organization which had been created to make possible the purchase of computers, encyclopedias and other resources for the schools of Jefferson County. Beginning in May 1994, Patricia Hearn began requesting checks from the Foundation in order to purchase encyclopedias and CD-ROM packages for the schools. Between May 1994 and September 1997, she requested and received twelve checks from the Foundation totalling over $400,000. These checks were to pay for 350 sets of encyclopedias and CD — ROM packages. At her request, the checks were made out to F.F. Enterprises and were deposited into the F.F. Enterprises bank account. F.F. Enterprises then issued checks to either James Hearn or Hearnco International, a company owned by James Hearn. The schools received only 58 sets of encyclopedias and no CD-ROM packages.

In 1999, the defendants pled guilty to the charges. The circuit judge sentenced each to ten years in prison but probated the sentences. One of the conditions of probation was that the Hearns pay restitution to the Jefferson County Public Education Foundation.

Subsequent to the guilty pleas, the trial judge recognized that counsel had agreed that $322,485 was owed in restitution, with an additional $10,000 eventually added for the accounting fees incurred by the foundation. The Commonwealth requested that the defendants be ordered to pay interest in addition to the principal amount owed, but the trial judge denied the request stating that there was no criminal statute providing for interest on restitution. The trial judge observed ". .. if this Court found existing Kentucky law to justify it, it would order the Hearns to pay interest in a heartbeat." The prosecution appealed from the order denying the motion to pay interest on restitution and the Court of Appeals reversed the relevant portions of the order and remanded for additional proceedings. This Court accepted discretionary review.

The Hearns argue that there is no statutory authority or case precedent that permits the addition of interest on orders of restitution in criminal cases. They contend that case law from other jurisdictions supports their position and that the ruling of the Court of Appeals has far reaching, negative implications. The prosecution responds that the statutes are to be liberally interpreted so as to give full effect to the intent of the legislature and that the ability of the circuit court to order interest on restitution serves both judicial economy and traditional notions of fair play and justice. Our responsibility is to interpret KRS 533.030(3).

I. Construction of Statutes

KRS 533.030 provides for restitution when a defendant is given probation or conditional discharge. KRS 533.030(3) provides in pertinent part:

When imposing a sentence of probation or conditional discharge in a case where a victim of a crime has suffered monetary damage as a result of the crime due to his property having been converted, stolen or unlawfully obtained, or its value substantially decreased as a result of the crime ... the court shall order the defendant to make restitution ... Restitution shall be ordered in the full amount of the damages .... (Emphasis added.)

The statute is silent with respect to interest. Consequently, the construction and application of the statute are matters of law which are reviewed de novo. See Bob Hook Chevrolet Isuzu, Inc. v. Commonwealth of Kentucky, Transportation Cabinet, Ky., 983 S.W.2d 488 (1998).

KRS 446.080 provides that all statutes shall be liberally construed with a view to promote their objects and carry out the intent of the legislature. It is the duty of the Court to give effect to the intent of the legislature as contained in the statutory language, considering the evil the law was intended to remedy. See Commonwealth v. Allen, Ky., 980 S.W.2d 278 (1998).

The rule of lenity is qualified by the same statute. Commonwealth v. White, Ky., 3 S.W.3d 353 (1999). Cf. Perrin v. United States, 444 U.S. 37, 100 S.Ct. 311, 62 L.Ed.2d 199 (1979), which provides that the rule of lenity applies when courts are uncertain about the statute's meaning and is not to be used in complete disregard of the purpose of the legislature.

We recognize, as did the Court of Appeals, that at common law, criminal fines and penalties were not subject to prejudgment interest. Rodgers v. United States, 332 U.S. 371, 68 S.Ct. 5, 92 L.Ed. 3 (1947). At common law, interest was not allowed on judgments either. Powell v. Bd. of Ed. of Harrodsburg, Ky.App., 829 S.W.2d 940 (1991). The issue of prejudgment interest was not the subject of this appeal so we are limiting our opinion to the matter of post-judgment interest only.

Here, KRS 533.030(3), clearly states that restitution shall be ordered in the full amount of damages. If restitution is to be considered full, it will need to include post-judgment interest in most cases. In this case, the amount of the restitution judgment and the period allowed for its payment means that the Jefferson County Public Education Foundation will suffer a substantial decrease in the value of its property and loss of the use of the funds unless interest is permitted.

The argument that there is no express statutory authority for the imposition of interest is without merit here. The courts of other states may ordain specific statutory language is necessary to require interest, see State v. Akers, 435 N.W.2d 332 (Iowa 1989), but that is not the case in Kentucky. Many federal and state courts have ordered interest on restitution without specific statutory language. As an example, we look to 18 U.S.C. § 3664(f)(1)(a), which is similar to our statute in that it requires restitution of the "full" amount of the damages. United States v. Patty, 992 F.2d 1045 (10th Cir. 1993), and United States v. Smith, 944 F.2d 618 (9th Cir.1991), upheld the payment of prejudgment interest on restitution" ordered by a trial court. See also Government of the Virgin Islands v. Davis, 43 F.3d 41 (3d Cir.1994) and United States v. Rochester, 898 F.2d 971 (5th Cir. 1990), which upheld both prejudgment and post-judgment interest on restitution orders.

A number of state courts have also decided that interest can be properly included in restitution even though the restitution statutes make no specific mention of interest. People v. Law, 459 Mich. 419, 591 N.W.2d 20 (1999), upheld the grant of interest on criminal restitution. Dorris v. State, 656 P.2d 578 (Alaska Ct.App.1982), held that interest on restitution was proper "since the purpose of the restitution statute is to make the victim whole." For other cases allowing interest as part of restitution see Ex parte Fletcher, 2001 WL 306916, ___ So.2d ___; Valenzuela v. People, 893 P.2d 97 (Colo.1995); People v. Acosta, 860 P.2d 1376 (Colo.Ct.App.1993); Ebaugh v. State, 623 So.2d 844 (Fla.Dist. Ct.App.1993); Woods v. State, 418 So.2d 401 (Fla.Dist.Ct.App.1982); State v. Brewer, 296 Mont. 453, 989 P.2d 407 (1999); State v. Meyers, 571 N.W.2d 847 (S.D. 1997); Rodriguez v. State, 710 S.W.2d 167 (Tex.App.1986).

Commonwealth v. Bailey, Ky., 721 S.W.2d 706 (1986), sets out the purpose of restitution as follows:

We also do not feel this is additional punishment exacted by the criminal justice system. It is neither imprisonment as envisioned by KRS Chapter 532, nor fine as set out in KRS Chapter 534. It is merely a system designed to restore property or the value thereof to the victim. It is not punishment to make the criminal give back something which was never his and which was obtained by him only by commission of a crime.

Money is property which is capable of being converted. See Commonwealth v. Karnes, Ky., 849 S.W.2d 539 (1993). In order to give the statute full legislative intent, this Court interprets the language of the statute to include interest as "monetary damage" which, because it resulted from the theft and conversion of the property of the victim, must be included in the full amount of damages provided by the restitution statute.

We cannot accept the argument by the Hearns to the effect that the legislature must have intended to exclude interest from other forms of restitution simply because it expressly imposed interest on restitution in the medicaid fraud statute, KRS 205.8467(1)(a). In the case of medicaid fraud, the damages can only be pecuniary. The forms of restitution contemplated by KRS 533.030...