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Harrod Concrete & Stone Co. v. Crutcher

Supreme Court of Kentucky

April 2, 2015

HARROD CONCRETE AND STONE CO., APPELLANT
v.
B. TODD CRUTCHER, ETC., ET AL, APPELLEES

Released for Publication April 23, 2015.

Page 291

[Copyrighted Material Omitted]

Page 292

COUNSEL FOR APPELLANT: Robert W. Kellerman, Sarah Jackson Bishop.

COUNSEL FOR APPELLEES: J. Robert Lyons, Jr.

All sitting. Minton, C.J.; Abramson, Barber, Keller, and Noble, JJ., concur. Venters, J., dissents by separate opinion.

OPINION

Page 293

CUNNINGHAM, JUSTICE

B. Todd Crutcher, individually, and as trustee of the B. Todd Crutcher Living Trust, and his brother, James Donald Crutcher (collectively " the Crutchers" ), own and possess 36 acres of unimproved land in Franklin County. The Crutchers' property borders a 500-acre tract of land owned by Harrod Concrete and Stone Co. (" Harrod" ), which Harrod operates as an underground limestone quarry. In 2002, while mining its own property, Harrod trespassed and removed approximately 164,000 tons of limestone from 300 feet below the surface of the Crutchers' land. In 2010, after many years of litigation, a Franklin Circuit Court jury unanimously awarded the Crutchers $36,000 in compensatory damages and $902,000 in punitive damages.

The trial court sustained the compensatory award but reduced the punitive damages to $144,000. A unanimous Court of Appeals panel partially reversed and vacated the circuit court's decision, and remanded the case for further proceedings. We granted discretionary review. After reviewing the record and the law, we reverse the decision of the Court of Appeals.

Tendered Jury Instructions

The jury received separate instructions for compensatory and punitive damages. Upon finding a trespass, Instruction No. 3 required the jury to " determine the reduction in the fair market value of the Plaintiffs' property caused by the trespass of the Defendant." That instruction permitted the jurors to consider " the reduction in mineable limestone by applying a royalty value per ton of stone taken by the Defendant . . . ." In addition to the compensatory damages authorized under Instruction No. 3, Instruction No. 4 authorized the jury to award punitive damages based on clear and convincing evidence that " the Defendant acted in reckless disregard for the property of others, including Plaintiffs . . . ."

We agree with the Court of Appeals that an instruction authorizing a determination of recklessness was appropriate. However, the tendered instructions contained errors of sequence and substance that irreparably tainted the jury's actual finding of recklessness and, most importantly, the amount of damages awarded as a result. Accordingly, we cannot salvage the jury's determination in whole or part and must remand for a new trial implementing jury instructions that comport with the following analysis.

Page 294

Mineral Trespass Actions

We begin by noting that this is not a pure trespass case; rather, it is a trespass/conversion hybrid that is analogous to cases involving the unauthorized removal of minerals. Our jurisprudence frames these types of controversies as trespass actions because the gravamen involves subsurface resources that were once in place. Unlike typical trespass cases, however, the damage sustained to the surface may be negligible or non-existent compared to the damage resulting from removal of the natural resources that lay beneath. Once the resources are removed from their native state, they become personal property and are sold at market by the trespasser.

While the trespass triggers the injury to the landowner, it is the conversion that creates the actual or enhanced value of the extracted resources. Therefore, our precedent seeks to strike a balance between the conversion and trespass measures of damages while incorporating one critical factor--the willfulness of the conduct. The following cases demonstrate the evolution of this unique component of tort law and instruct our decision in the present case.

Historical Background and Current Kentucky Rule

Early English and American cases involving the unauthorized removal of minerals applied the conversion standard of damages, thus allowing the injured landowner to recover the market value of the minerals converted without deduction for extraction expenses. E.g., Martin v. Porter, 151 Eng. Rep. 149 (1839); Blaen Avon Coal Co. v. McCulloh, 59 Md. 403 (1883). By the early Twentieth Century, however, our predecessor Court had rejected the automatic application of this so called " penal rule." In Sandy River Cannel Coal Co. v. White House Cannel Coal Co., the Court first articulated a more tempered approach that endures today. 72 S.W. 298, 24 Ky.L.Rptr. 1653 (Ky. 1903). This newly established paradigm was summarized in North Jellico Coal Co. v. Helton :

we deem it proper to say that the measure of damages for coal taken from another's land through an honest mistake is the value of the coal taken as it lay in the mine, or the usual, reasonable royalty paid for the right of mining. On the other hand, where the trespass is willful, and not the result of an honest mistake, the measure of damages is the value of the coal mined at the time and place of its severance, without deducting the expense of severing it
219 S.W. 185

This approach is now well-established. Thus, the amount of damages to which an injured property owner is entitled is dependent upon whether the trespass was innocent or willful. Damages provided under the latter category reflect the punitive conversion measure once embraced in all cases without exception. In contrast, damages resulting from an innocent ...


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