Opinion
No. 107,482.
2013-03-8
STATE of Kansas, Appellee, v. David CARNELL, Appellant.
Appeal from Linn District Court; Richard M. Smith, Judge. Heather Cessna, of Kansas Appellate Defender Office, for appellant. John S. Sutherland, county attorney, and Derek Schmidt, attorney general, for appellee.
Appeal from Linn District Court; Richard M. Smith, Judge.
Heather Cessna, of Kansas Appellate Defender Office, for appellant. John S. Sutherland, county attorney, and Derek Schmidt, attorney general, for appellee.
Before ATCHESON, P.J., PIERRON, J., and LARSON, S.J.
MEMORANDUM OPINION
PER CURIAM.
David Carnell appeals the restitution order entered after he pled guilty to criminal damage to property, felony theft, and criminal trespass. Carnell admitted to stealing copper wire, copper fittings, and radiators out of equipment at the Nation Rock Company. At sentencing, as a condition of Carnell's probation, the district court ordered him to pay restitution in the amount of $22,581 to Nation Rock Company. Carnell objected to the amount of restitution as including approximately $7,000 of business losses occurring during repairs of the equipment. The district judge overruled Carnell's objection, explaining:
“I will note your objection. I would also note that because this scrapping thing is causing a lot of economic damage in the State of Kansas, the Kansas legislature specifically amended the statutes this year to make it even more clear that not only is it to be ordered as restitution, but now those kinds of losses are calculated in determining the severity level of the felony. And I think under these circumstances that it's appropriate for the victim to be made whole.
“I'm going to grant the request for the business loss, together with the actual damages; and I'm standing by my statement that the restitution in this case is $22,581.”
We find the district court's legal determination of including lost profits in the amount of restitution to be within its discretion under current Kansas statutes and caselaw, but we reverse based on an inadequate evidentiary basis in support of Nation Rock's lost profits and remand for further proceedings.
Restitution is not a part of the punishment or sanction for a defendant's conductit is to make the victim whole again from a loss or damage resulting from the defendant's crime. See K.S.A.2009 Supp. 21–4603d(b)(2). It also serves the functions of deterrence and rehabilitation of the guilty. State v. Applegate, 266 Kan. 1072, 1075, 976 P.2d 936 (1999). As our Supreme Court has recognized: “Restitution imposed as a condition of probation is not a legal obligation equivalent to a civil judgment, but rather an option which may be voluntarily exercised by the defendant to avoid serving an active sentence.” 266 at 1075.
Restitution is statutory. The applicable Kansas statutes addressing criminal restitution, K.S.A.2009 Supp. 21–4603(b)(l) and K.S.A. 21–4610(d)(l), permit the trial court to impose restitution for “damage or loss caused by the defendant's crime.” Proof of a victim's damage or loss in a criminal case does not entail the same rigidness and proof of value that lies in a civil damage suit. Yet, the court's determination of restitution must be based on reliable evidence which yields a defensible restitution figure. See State v. Casto, 22 Kan.App.2d 152, 154, 912 P.2d 772 (1996).
Our court has held that an item's fair market value is the usual standard for calculating restitution for a victim's loss of, or damage to, the item as a result of the defendant's crime. See, e.g., State v. Maloney, 36 Kan.App.2d 711, 714, 143 P.3d 417,rev. denied 282 Kan. 794 (2006); State v. Baxter, 34 Kan.App.2d 364, 365, 118 P.3d 1291 (2005); State v. Rhodes, 31 Kan.App.2d 1040, Syl. ¶ 2, 77 P.3d 502 (2003). This court has defined an item's fair market value in considering restitution as “the price that a willing seller and a willing buyer would agree upon ... in an arm's-length transaction.” Baxter, 34 Kan.App.2d at 366. Where the fair market value cannot readily be determined, a court may properly consider other factors, including the item's purchase price and condition, so long as the valuation is based on reliable evidence which yields a defensible restitution figure. Maloney, 36 Kan.App.2d 711, Syl. ¶ 5.
The amount of restitution and manner in which it is made to a victim is to be determined by the court exercising its judicial discretion. Consequently, we are subject to an abuse of discretion standard of review. See State v. Phillips, 45 Kan.App.2d 788, 793, 253 P.3d 372 (2011). However, the question of whether an item claimed by the aggrieved party as loss qualifies for inclusion in a restitution order because it was caused by the defendant's offense is a question of law. See State v. Hunziker, 274 Kan. 655, 660, 56 P.3d 202 (2002).
Although the sentencing court has considerable discretion in determining the amount of criminal restitution, this court has recently rejected restitution for lost profits. In two cases, both relied upon by Carnell, this court reversed a sentencing court's granting of criminal restitution for lost profits. The Kansas Supreme Court has received petitions for review in both cases—State v. Hall, 45 Kan.App.2d 290, 247 P.3d 1050 (2011), rev. granted September 23, 2011, and State v. Behrendt, 47 Kan.App.2d 396, 274 P.3d 704 (2012), petition for review filed May 10, 2012. See Kansas Supreme Court Rule 8.03(i) (2012 Kan. Ct. R. Annot 72.) (if a petition for review is granted in the Kansas Supreme Court, a Court of Appeals decision has no force or effect.). However, the review of Hall and Behrendt will be taken in light of Hunziker, 274 Kan. 655, which appears to control and permit restitution for lost profits.
In Hall, a secretary for a veterinary clinic was convicted of stealing veterinary products from the office. Hall objected to restitution for the retail value of the inventory, arguing she should only be required to pay the clinic's actual cost for the inventory. In holding that the trial court had erred when it based restitution on the inventory's retail value, instead of its wholesale cost, the Hall court relied on Illinois Cent. R. Co. v. Crail, 281 U.S. 57, 50 S.Ct. 180, 74 L.Ed. 699 (1930). In that case, the United States Supreme Court had to decide whether the plaintiff should be compensated based on the wholesale market price of undelivered coal or should be compensated on the retail market price. The plaintiff sued, maintaining that it should be awarded the retail value of the undelivered coal. Noting that the plaintiff purchaser “lost no sales by reason of [the delivery shortage],” and finding that plaintiff could have purchased the missing coal at the wholesale price, the Court awarded damages based on the wholesale market price. 281 U.S. at 63–65.
Recently in Behrendt, this court relied on Hall and Illinois Central in rejecting restitution for lost profits after the theft of beer. The Behrendt court held that the actual loss suffered was the fair market value—the wholesale market value—that the liquor store paid for the beer taken by the defendant, not the amount the liquor store would have received had its customers been able to purchase the beer at retail prices. 47 Kan.App.2d at 401–02. The Behrendt court stated that restitution for retail value would have resulted in a “windfall” to the liquor store. 47 Kan.App.2d at 402. See United States v. Cummings, 798 F.2d 413, 416 (10th Cir.1986) (discusses difference between retail merchant and wholesale merchant).
Although the Behrendt court denied restitution for lost profits, the court left the door open for an alternative ruling. The court finished its substantive analysis with the disclaimer that “[a]ssuming arguendo that City Beverage is entitled to seek lost profits,” then City Beverage failed to produce sufficient evidence of its lost profits anyway. 47 Kan.App.2d at 403. Furthermore, Behrendt was also a split decision with Judge Hill dissenting and holding to the position that City Beverage was entitled to restitution for lost profits and there was sufficient evidence to prove them:
“The more modern view takes into account lost profits as part of a fair restitution order. This is reflected by appellate court holdings in Florida, Idaho, and Georgia in which the courts directed that the retail value should be assigned to retail goods when determining restitution. See J.C. v. State, 3 So, 3d 346 (Fla.Dist.App.2008); Garrett v. State, 175 Ga.App. 400, 333 S.E .2d 432 (1985); State v. Smith, 144 Idaho 687, 169 P.3d 275 (2007).
“When analyzing this issue of determining restitution, the 10th Circuit Court of Appeals, in a case cited by the majority, said it best: Thus where the victim is a retail merchant, the market value is the retail sales price [citation omitted], and where the victim is a wholesale merchant, the market value is the wholesale price.' U.S. v. Cummings, 798 F.2d 413, 416 (10th Cir.1986).” 47 Kan.App.2d at 407. (Hill, J., dissenting).
With Hall and Behrendt in mind, the question is whether Nation Rock's stoppage of work or its inability to conduct business and make a profit as a result of the theft of the copper wiring and radiators is the same as the lost profits of beer sales in Behrendt and sale of veterinary products in Hall. The Kansas Supreme Court in Hunziker supports our decision that lost profits should be allowed in this case.
In Hunziker, the defendant was convicted of criminal damage to property and theft. Part of the damage was to the victim's backhoe tractor. The trial court granted restitution involving the backhoe of $9,311.32 for repairs; $ 1,018.97 to replace and mount new tires; $2,115 for lost work; $400 to hire someone to complete jobs; $125.88 in towing expenses; $272.80 in mileage to check the repairs; $21.97 for touch-up paint; and $700 for private attorney fees. Based on testimony from the victim, the sentencing court found that the victim lost $2,115 in gross revenue and then subtracted one-third for expenses to permit a net loss of $1,410 for restitution.
On Hunziker's direct appeal, this court, although with limited comment on the issue, affirmed the restitution order and the granting of restitution for lost work. State v. Hunziker, 30 Kan.App.2d 279, 41 P.3d 880 (2002). This court analogized the situation to an employee's lost wages:
“Now we turn our attention to the issue of lost work. The restitution order for lost work to a business would be analogous to restitution orders for lost wages to an employee. Our Supreme Court has allowed such orders. See State v. Beechum, 251 Kan. 194, 202–03, 833 P.2d 988 (1992) (defendant murdered ex-wife; as a result of the murder, victim's son went to New York to live with his father; the court affirmed the trial court's restitution orders that defendant pay the airfare expenses and the father's lost wages to accompany the son to New York). As a result, the trial court properly ordered restitution for lost work or profits.” 30 Kan.App.2d at 283.
The Kansas Supreme Court in its review of Hunziker's case recognized that Hunziker did not challenge the Court of Appeals decision upholding the district court's award of restitution for lost work. 274 Kan. at 662. However, the Kansas Supreme Court discussed the broad nature of a restitution determination and the lack of any restriction on what specifically can be awarded for restitution. Ultimately, the Hunziker court held that the district court did not err by directing Hunziker to pay restitution for losses caused by his crime in addition to the physical damage to the backhoe. 274 Kan. at 664.
Based on Hunziker, we hold the sentencing court is not statutorily limited in its determination of what “damage or loss” is caused by a defendant's criminal activity. Clearly, the State would need to meet the causation requirement of K.S.A.2009 Supp. 21–4603d(b)(2) and K.S.A. 21–4610(d)(1) before restitution could be awarded. The evidentiary proof of restitution is what causes us pause in this case.
Here, we have an evidentiary problem similar to the one occurring in Hall. There, the exhibits offered during the restitution hearing that apparently reflected the veterinary clinic's cost for the inventory were not a part of the record on appeal. The Hall court held the record was unclear what portion of the trial court's restitution order was attributable to the retail cost of the inventory versus its wholesale cost and the testimony about the exhibits was “difficult to follow without those exhibits.” 45 Kan.App.2d at 305. The Hall court vacated the restitution order and remanded the case for the recalculation of the amount of restitution due using the clinic's wholesale cost for the inventory instead of its retail cost. 45 Kan.App.2d at 305. Speaking hypothetically, the court in Behrendt echoed a similar evidentiary requirement:
“Behrendt's responsibility for the loss of the beer did not relieve City Beverage of its obligation to show that there were customers for the stolen beer. City Beverage retained the responsibility to produce sufficient evidence of its lost profits. Although mathematical precision was not required in calculating lost profits, a restitution award must yield a defensible figure in the evidence. We conclude, given the absence of the price paid for the beer and what City Beverage's customers were willing to pay for the beer had it not been stolen, that the evidence of lost profits was speculative. Hence, the trial court erred in awarding lost profits to City Beverage.” 47 Kan.App.2d at 403.
A sentencing court's determination of restitution must be based on reliable evidence which yields a defensible restitution figure. See Casto, 22 Kan.App.2d at 154. The record before us in the present case contains no evidence concerning the determination of restitution. At sentencing, the transcript mentions an “application for restitution.” This document is not contained in the record. There also does not appear to be a hearing where the State presented evidence of any amount of restitution, let alone proof of lost profits. The measure of restitution is the amount that reimburses the victim for actual loss suffered. See Applegate, 266 Kan. at 1079. Under the current state of the record, we are unable to make a determination of Nation Rock's lost profits. Therefore, we reverse in part and vacate the restitution awarded and remand for a justifiable determination of restitution based on reliable evidence and supported by sufficient findings of fact and conclusions of law.
Affirmed in part, reversed in part, and remanded with directions.