Kirk v. Denver Pub. Co.

Decision Date23 September 1991
Docket NumberNo. 88SA405,88SA405
Citation818 P.2d 262
PartiesDewayne C. KIRK, Plaintiff-Appellant, v. The DENVER PUBLISHING COMPANY, a Colorado corporation, Defendant-Appellee.
CourtColorado Supreme Court

Pryor, Carney and Johnson, P.C., W. Randolph Barnhart, Arlene V. Dykstra, Thomas L. Roberts, Richard V. Hess, Englewood, for plaintiff-appellant.

Gale A. Norton, Atty. Gen., Raymond T. Slaughter, Chief Deputy Atty. Gen., Timothy M. Tymkovich, Sol. Gen., Dianne Eret, First Asst. Atty. Gen., Denver, for amicus curiae State of Colo.

Justice QUINN delivered the Opinion of the Court.

This case involves a challenge to the constitutionality of section 13-21-102(4), 6A C.R.S. (1987), which was enacted in 1986 as part of tort-reform legislation and requires a party receiving an exemplary damages award to pay one-third of all such "damages collected ... into the state general fund." 1 DeWayne C. Kirk filed a tort claim against Denver Publishing Company doing business as The Rocky Mountain News, and was awarded a judgment for exemplary damages in the amount of $118,980. In a post-trial motion Kirk unsuccessfully challenged the constitutionality of the one-third payment requirement and thereafter filed this appeal. We conclude that section 13-21-102(4) effectuates a forced taking of the judgment creditor's property interest in the judgment and does so in a manner and to a degree unrelated to any constitutionally permissible governmental interest served by the taking and, therefore, violates the federal and state constitutional proscriptions against the taking of private property without just compensation. U.S. Const. amends. V & XIV; Colo. Const. art. II, § 15. We accordingly reverse that part of the judgment upholding the constitutionality of section 13-21-102(4), and we remand the case to the district court with directions to conform its judgment to the views herein expressed.

I.

Although this case has a lengthy procedural history, the basic facts can be briefly stated. Kirk, who owned and operated an independent newspaper distributorship, purchased newspapers from The Rocky Mountain News and resold them to newspaper carriers, stores, and to the public through newspaper racks. In November 1979, Kirk terminated his relationship with Denver Publishing Company, but withheld payment for part of his September and all of his October billings in order to achieve leverage in his final accounting with Denver Publishing Company.

Because Kirk and the company were unable to settle a final accounting, Denver Publishing Company sued Kirk for the balance allegedly owed by him. Kirk counterclaimed for outrageous conduct and willful and wanton breach of contract. In the first trial, the court granted Kirk's motion for a directed verdict on Denver Publishing Company's claim for monies due on open account, directed a verdict against Kirk on his counterclaim for outrageous conduct, and entered a judgment of $910.26 for Kirk on the jury's verdict returned in his favor on his claim for willful and wanton breach of contract. The court of appeals affirmed the trial court's directed verdicts on Denver Publishing Company's open account claim and Kirk's counterclaim for outrageous conduct, and also affirmed the judgment of liability on Kirk's counterclaim against Denver Publishing Company for willful and wanton breach of contract, but remanded the case for a new trial "on the issues of actual damages, damages for emotional distress, and exemplary damages" on Kirk's contractual claim. Denver Publishing Co. v. Kirk, 729 P.2d 1004, 1009 (Colo.App.1986).

Upon remand of the case for a new trial, Kirk was realigned as the plaintiff and was permitted to add a claim for malicious prosecution. The case was retried in 1988, and the jury awarded Kirk compensatory damages in the aggregate amount of $288,000 and exemplary damages in the amount of $160,500 on Kirk's claim for malicious prosecution. The exemplary damages award, at the request of Kirk, was subsequently reduced to $118,980 so as not to exceed the amount of actual damages on Kirk's claim for malicious prosecution. 2 After the jury verdict, Kirk filed a post-trial motion in which he requested the district court to invalidate, as violative of several provisions of both the United States and Colorado Constitutions, the statutory requirement of section 13-21-102(4) that he pay one-third of any collected exemplary damages award to the state general fund. The district court denied the motion.

Kirk thereafter filed this appeal and invokes several federal and state constitutional provisions in challenging the one-third payment requirement of section 13-21-102(4). Denver Publishing Company takes no position on the constitutionality of the statute. The Attorney General, however, has intervened as amicus and has filed a brief in support of the district court's declaration of constitutionality. We find it unnecessary to address all of Kirk's claims, as we conclude that the mandatory one-third payment requirement of section 13-21-102(4) violates the Taking Clause of the United States and Colorado Constitutions. 3 Our conclusion derives from the nature of an exemplary damages award as a private property right, the confiscatory character of the "taking" mandated by the statute, and the manifest absence of a reasonable nexus between the statutory taking of one-third of the exemplary damages award and the cost of any governmental services that arguably might support a significantly smaller forced contribution.

II.

We begin our analysis by examining the nature of an award for exemplary damages.

A.

Tort law generally provides for two types of monetary remedies for a civil wrong. Compensatory damages are intended to "make [the plaintiff] whole," Bullerdick v. Pritchard, 90 Colo. 272, 275, 8 P.2d 705, 706 (1932), while exemplary damages are intended to punish the wrongdoer and deter similar conduct in the future, Seaward Construction Co., Inc. v. Bradley, 817 P.2d 971, 974 (Colo.1991), Leidholt v. District Court, 619 P.2d 768, 770 (Colo.1980); Mince v. Butters, 200 Colo. 501, 503, 616 P.2d 127, 129 (1980). This is not to say that these two remedies are totally unrelated to and independent of each other. We implicitly recognized the interrelationship between compensatory and exemplary damages in Palmer v. A.H. Robins Co., Inc., 684 P.2d 187, 213-14 (Colo.1984), where we observed that a claim for exemplary damages is not "a separate and distinct cause of action," but rather "is auxiliary to an underlying claim for actual damages" and thus can be entered only in conjunction with an underlying and successful claim for actual damages assessed against a wrongdoer for a legal wrong to the injured party. So also, a claim for exemplary damages contemplates "tortious conduct," Mortgage Finance, Inc. v. Podleski, 742 P.2d 900, 902 (Colo.1987), and in that respect, requires, as does a claim for compensatory damages, some measure of legal fault. See Harding Glass Co., Inc. v. Jones, 640 P.2d 1123, 1126-27 (Colo.1982). Thus, while a compensatory damages award serves the reparative function of making the injured party whole, it also performs the secondary function of discouraging "a repetition of [the defendant's] wrongful conduct" by serving as a "warning to others who are inclined to commit similar wrongs." C. Morris, Punitive Damages in Tort Cases, 44 Harv.L.Rev. 1173, 1174 (1931). 4 In a somewhat similar fashion, a claim for exemplary damages, while clearly designed to punish and deter, contemplates that the trier of fact will fix the award only after giving due consideration to the severity of the injury perpetrated on the injured party by the wrongdoer.

B.

In 1986, as part of tort-reform legislation, the General Assembly modified the preexisting statutory scheme for exemplary damages. Chap. 106, sec. 1, § 13-21-102, 1986 Colo.Sess.Laws 675-76. Section 13-21-102(1)(a), which substantially follows the initial Colorado exemplary damages statute enacted in 1889, 5 see 1889 Colo.Sess.Laws 64-65, states as follows:

In all civil actions in which damages are assessed by a jury for a wrong done to the person or to personal or real property, and the injury complained of is attended by circumstances of fraud, malice, or willful and wanton conduct, the jury, in addition to the actual damages sustained by such party, may award him reasonable exemplary damages.

The term "willful and wanton conduct" is defined as conduct "purposefully committed which the actor must have realized as dangerous, done heedlessly and recklessly, without regard to consequences, or of the rights and safety of others, particularly the plaintiff." § 13-21-102(1)(b), 6A C.R.S. (1987). The 1986 statute states that the amount of reasonable exemplary damages "shall not exceed an amount which is equal to the amount of the actual damages awarded to the injured party." § 13-21-102(1)(a), 6A C.R.S. (1987). In keeping with the somewhat interrelated functions served by both compensatory and exemplary damages, however, the statutory scheme permits a court to increase an award of exemplary damages to a sum not to exceed three times the amount of actual damages if it is shown that the defendant during the pendency of the action has continued the injurious behavior against the plaintiff or others in a willful and wanton manner or has willfully and wantonly further aggravated the damages to the plaintiff when the defendant knew or should have known that such action would produce aggravation. § 13-21-102(3)(a) & (b), 6A C.R.S. (1987). 6

The focal point of this case is section 13-21-102(4), 6A C.R.S. (1987), which states:

One-third of all reasonable damages collected pursuant to this section shall be paid into the state general fund. The remaining two-thirds of such damages collected shall be paid to the injured party. Nothing in this subsection (4) shall be construed to give the general fund any interest in the claim for exemplary damages or in...

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