Couch v. Natural Resources and Environmental Protection Cabinet, 98-SC-322-DG

• Decision Date: 18 February 1999
• Docket Number: No. 98-SC-322-DG,98-SC-322-DG
• Parties: Bert COUCH, Appellant, v. NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION CABINET, Appellee.
• Court: United States State Supreme Court — District of Kentucky

Page 158

986 S.W.2d 158

Bert COUCH, Appellant, v. NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION CABINET, Appellee.

No. 98-SC-322-DG.

Supreme Court of Kentucky.

Feb. 18, 1999.

As Amended Feb. 22, 1999.

Christopher M. Hill, Linda J. West, McBrayer, McGinnis, Leslie & Kirkland, Frankfort, KY, for appellant.

S. Bradford Smock, Office of General Counsel, Natural Resources and Environmental Protection Cabinet, Frankfort, KY, for appellee.

Before: GUDGEL, Chief Judge; BUCKINGHAM and KNOPF, Judges.

OPINION OF THE COURT

Having considered the arguments of the parties and the opinion of the Court of Appeals, we conclude that the opinion of the Court of Appeals is sound and well-reasoned. We, therefore, affirm and adopt the opinion of the Court of Appeals in full and set it forth as follows:

"This is an appeal from a judgment entered by the Perry Circuit Court reversing a final order, issued by the secretary of appellant Natural Resources and Environmental Protection Cabinet (cabinet), assessing civil penalties against appellee Bert Couch for certain violations of KRS Chapter 350 relating to surface coal mining. On appeal, the cabinet contends that the court erred (1) by finding that the enforcement proceeding was barred by limitations, (2) by failing to find that Couch waived a certain contention as to the applicability of KRS 350.990(9), (3) by finding that the evidence was insufficient to establish that Couch was an agent of the corporate permittee, and (4) by finding that the evidence was insufficient to establish that Couch knowingly and willfully ordered, authorized, or carried out surface coal mining activities in violation of applicable law. We agree with all of the cabinet's contentions. Hence, we reverse and remand.

"This proceeding stems from a land disturbance which took place in Perry County in 1983, allegedly for the purpose of constructing a road to a family cemetery. The record shows that on their second attempt, Couch and one Bradley Woolum obtained approval but no financial assistance for the project from the Perry Fiscal Court. G & W Construction Company (G & W) then was incorporated in July 1983, and Woolum was designated as its president, director and shareholder. Although Woolum and Couch did not apply for or receive a surface mining permit, on July 25, 1983, they obtained a Mines and Minerals license which permitted them to sell coal from the site. Couch provided the start-up capital for G & W and paid its various bills as they came due. Apparently, he expected to be reimbursed for these expenditures out of the net proceeds derived from the sale of coal removed from the project site.

"The occurrence of certain subsequent events led the cabinet to assess proposed penalties against Couch and others, and a hearing eventually followed. These events are succinctly summarized in the hearing officer's report in pertinent part as follows:

5. On July 28, 1983, Officer Addison advised Woolum of the regulatory requirement of government financing and stated that the Department thought the subject disturbance was illegal. The following day, Officer Addison advised Woolum and Couch of the requirements pertaining to permitting and exemptions. Defendants were advised not to remove coal from the site.

6. On July 30, 1983, Officer Addison flew over the site and observed that coal had been uncovered and removed.

7. On August 1, 1983, Officer Addison learned from Pine Branch Coal Sales that on July 30, some 203.88 tons of coal had been hauled and dumped on its coal yard from the Krypton site by G & W Construction Company. On August 4 an additional 182.82 tons of coal was hauled to Pine Branch Coal Company from the Krypton site.

8. On August 8, 1983, in an overflight Officer Addison observed a second pit uncovered and being removed.

9. On August 8, 1983, Notices of Noncompliance Nos. 080045 and 080044 and Cessation Order 080045 were issued to G & W Construction, Albert Engle, Albert Engle, Jr., Patricia Engle, Bradley Woolum, Bert Couch and Joe Hurt for the following violations of KRS 350 and the regulations promulgated pursuant thereto:

a. Mining without a permit, in violation of 405 KAR 7:040;

b. Failure to maintain adequate silt control, in violation of 405 KAR 16:090;

c. Failure to salvage and store all available topsoil, in violation of 405 KAR 16:050;

d. Improper spoil disposal, in violation of 405 KAR 16:130;

e. Improper blasting, in violation of 405 KAR 16:020.

10. The Notices of Noncompliance and Cessation Order were delivered on site to Bradley Woolum and were mailed by certified mail to G & W, Bradley Woolum, Bert Couch, Albert Engle, Albert Engle, Jr., Patricia Engle and Joe Hurt at P.O. Box 12, Bonneyman, KY, the corporation's address.

11. In disregard of these notices and order to cease mining, defendants Woolum and Couch hauled coal from the site from dusk until the early morning hours of August 9, 1983. On August 9, Officer Addison observed a new pit of coal had been removed.

The hearing officer recommended that the secretary enter a final order finding that G & W violated KRS 350.060, that Woolum and Couch were G & W's officers or agents, and that Woolum and Couch were individually liable for willfully and knowingly authorizing, ordering, or carrying out G & W's violations. KRS 350.990(9). Subsequently, the secretary adopted the hearing officer's report and recommendations, and issued a final order imposing a $50,000 penalty against G & W, as well as a $50,000 joint and several penalty against Woolum and Combs.

"Couch appealed to the Perry Circuit Court and the order, insofar as it affected Couch, was vacated and set aside. The court found that insufficient evidence was adduced to establish either that Couch was G & W's agent, that Couch knowingly and willfully ordered, authorized, or carried out surface coal mining violations within the meaning of KRS 350.990(9), or that Couch was subject to penalties pursuant to KRS 350.990(9). This appeal followed.

"First, the cabinet contends that the court erred by finding that the administrative proceeding below was barred by the statute of limitations applicable to collection actions. The cabinet asserts that Couch waived any limitations defense to the proceeding by failing to raise it prior to filing his exceptions to the hearing officer's report. However, even if we assume that the limitations issue was not waived, we agree with the cabinet's contention that the court erred by finding that the proceeding is barred by limitations.

"KRS 413.120(3) requires a penalty or forfeiture action to be commenced "within five years after the cause of action accrued." KRS 350.028(4) empowers the cabinet "[t]o issue, after an opportunity for a hearing, a final order imposing civil penalties for violations of this chapter." However, 405 KAR 7:092 ¹ plainly indicates that if an administrative hearing is conducted to review a proposed penalty assessment, any such penalty is not due and payable until thirty days after entry of the secretary's final order. Only at that point do penalties become "recoverable in an action brought in the name of the Commonwealth of Kentucky by the cabinet's Department of Law." KRS 350.990(1).

"Here, the cabinet's December 1983 request for a formal hearing was initiated approximately four months after the underlying citations were issued. However, until such time as the secretary's final order assessing a penalty against Couch was entered in June 1995, no penalty was due and payable by Couch, and no cause of action accrued by which the penalty's collection could be pursued. Cf. Natural Resources and Environmental Protection Cabinet v. Whitley Development Corp., Ky.App., 940 S.W.2d 904 (1997) (cause of action did not accrue until sureties were called upon to honor their obligations as sureties but refused to do so); Lexington-Fayette Urban County Government v. Abney, Ky.App., 748 S.W.2d 376 (1988) (for limitations purposes, government's claim for recovery of unpaid license fees accrued when fees became delinquent on the day following their due date). As any applicable limitations statute therefore did not begin to run until after the secretary's final order was entered in June 1995, it follows that the trial court erred by finding that the instant proceeding was barred by limitations.

"Next, the cabinet contends that the court erred by failing to find that Couch waived his contention that he was not liable as a corporate agent because G & W was not a corporate permittee. See KRS 350.990(9). We agree.

"KRS 350.032(2) states that whenever a party seeks judicial review of a final order of the cabinet, "[n]o objection to the order may be considered by the court unless it was urged before the cabinet or there were reasonable grounds for failure to do so." Here, until he filed his reply brief before the circuit court, Couch did not specifically raise any issue as to whether G & W was a corporate permittee. Moreover, contrary to the trial court's conclusion, the objection was not adequately preserved for review by Couch's general statement, in his exceptions to the hearing officer's report and recommendations, that the findings therein were contrary to "the law and to the facts, to KRS Chapter 350, and to the administrative regulations issued pursuant to KRS Chapter 350." See Challinor v. Axton, 246 Ky. 76, 54 S.W.2d 600 (1932). Further, we are not persuaded by Couch's argument that Reis v. Campbell County Board of Education, Ky., 938 S.W.2d 880 (1996), compels us to reach a different conclusion. Finally, we note in any event that there is no merit to appellee's argument that because G & W never obtained a surface coal mining permit, it was not subject to statutory provisions pertaining to "permittees." Indeed, 405 KAR 8:001 § 1(77) specifically defines a permittee as "an operator or a person holding or required by KRS Chapter 350 or 405 KAR Chapters 7 through 24 to hold a permit to conduct surface coal mining and reclamation...