In re Wood
| Decision Date | 25 June 1985 |
| Docket Number | Bankruptcy No. BK83-5469. |
| Citation | 52 BR 513 |
| Parties | In re Robbie Dale WOOD, f/d/b/a a partner in the Alaco Group, the Alaco Group, Ltd., Blue Ridge Mining Co., The Alacoal Company, The Alacoal Companies, Inc., and Shiloh Mining & Coal Processors, Inc., Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Alabama |
Milton Garrett, Birmingham, Ala., trustee.
Yearout, Hardy & Myers, P.C., Birmingham, Ala., for intervenors.
This cause came on to be heard before the Court on the PETITION OF THE TRUSTEE TO COLLECT ASSETS, RESOLVE CLAIMS OF CREDITORS, RESOLVE ADVERSARY PROCEEDINGS AND CLAIMS OF PLAINTIFFS IN ADVERSARY PROCEEDING NO. 84-0014 PENDING HEREIN. The Alabama Surface Mining Commission (hereinafter called "the Commission") filed a proof of claim for $5,000.00 in Mr. Wood's Chapter 7 case on November 14, 1983 for a civil penalty which had been assessed against the various coal companies in which Mr. Wood was a part owner (Commission Docket No. F-78-049). The Trustee of Mr. Wood's Bankrupt Estate, Milton Garrett, Esquire, has objected to the allowance of this claim and has further petitioned this Court to order the Commission to discharge the sureties of certain reclamation bonds so that these sureties will in turn release an escrow fund of approximately $100,000.00 which they hold to secure their obligations under the reclamation bonds. The Trustee claims 12½% of this fund as property of the estate pursuant to 11 U.S.C. Section 541(a)(1) (1978) since this was Mr. Wood's proportionate share in the various coal companies.
The other partners in these coal companies (hereinafter called "the Intervenors") have intervened in the Trustee's counterclaim against the Commission. The Intervenors have filed an adversary proceeding in which they are seeking to have Mr. Wood's share of a certain partnership tax indebtedness declared non-dischargeable. If the reclamation bonds are released by the Commission, the sureties have agreed to release 12½% of the escrow fund to Mr. Wood's bankruptcy estate and the remainder to the Intervenors. The Intervenors will then use this fund to pay off the partnership tax debt.
A pre-trial conference was held on December 19, 1984. At this pre-trial conference, the Trustee and the Intervenors presented their argument that the Commission lacked jurisdiction over the Commission's Case No. 82-306 which was filed against the Coal Companies under the Commercial Standard1 case. The Commission through Milton McCarthy, Esquire, Assistant Attorney General, asserted that the jurisdictional requirement that a verified complaint be filed with the Commission within nine months of the completion of mining operations was subject to two exceptions: (1) acts of God and (2) extensions granted by the director for reasonable cause. See Commercial Standard Ins. Co. v. Alabama Surface Mining Reclamation Comm'n, 443 So.2d 1245, 1248 (Ala. Civ.App.1983); Ala.Code Section 9-16-39(g) (1975). Mr. McCarthy indicated that the Commission would attempt to rely on the extension exception.
All of the matters in the Trustee's petition, including the adversary proceeding filed by the Intervenors, were set for trial on January 10, 1985. The Commission and the Trustee agreed to withhold the trial on the Trustee's objection to the Commission's claim. The Intervenors also agreed to withhold the trial on their adversary proceeding. The only matters heard by the Court, then, were the Trustee's counterclaim and the claim of the Intervenors seeking to have the Commission discharge the sureties from their obligations on the reclamation bonds.
Prior to the filing of his Chapter 7 petition on October 11, 1983, Robbie Dale Wood had invested in various businesses which were primarily engaged in surface coal mining. Mr. Wood owned a 12½% interest in these businesses. The initial entity was a partnership doing business as The Alaco Group. A second partnership was called The Alacoal Companies, and the third was a corporation named The Alacoal Companies, Inc. Several other entities were either owned by or were successors of these three companies; they were Blue Ridge Mining Co., Shiloh Mining & Coal Processors, and The Alacoal Group, Limited (hereinafter, these various entities will be collectively referred to as the "Coal Companies").
Under the Alabama law that was in effect at the time of these transactions2 anyone wishing to engage in coal surface mining must first obtain a license and permits from the Alabama Surface Mining Commission (hereinafter called "the Commission") pursuant to Alabama Code sections 9-16-35 to -37 (1975). Further, an applicant was required to post performance bonds for each permit to insure that the mined land was properly reclaimed. See Ala.Code Section 9-16-44 (1975). Unless the operator wanted to deposit cash or certain negotiable instruments in lieu of a bond, the bond must have been executed by the operator and a corporate surety. See id. at 9-16-44(c).3
The Coal Companies obtained the required licenses and permits and posted the necessary reclamation bonds. These bonds, which are at the heart of this controversy, were executed by two corporate sureties Morrison Assurance Company and Northwestern National Insurance Company. These sureties required the Coal Companies to put up collateral to secure the sureties' obligations under the bonds. Mr. Gerald Trevarthen, an agent for Commercial Insurance Management Agency and for Northwestern National Insurance Company, testified that the sureties are holding $73,200.00 in principal which has been in an interest bearing account since 1978 or 1979. The parties estimate that including accrued interest this collateral fund is worth approximately $100,000.00.
On March 31, 1982, Mr. Kenneth Cagle, an Inspector for the Commission filed a verified complaint with the Commission in which he alleged that the Coal Companies had violated the surface mining laws of the State of Alabama by failing to reclaim the land covered by several permits. On the face of this complaint, it appears that "all operations had ceased within the first quarter of 1980 and (sic) no further mining activities have occurred since that time." On April 2, 1983, Mr. Marlin V. McLaughlin, Jr., the Chief Hearing Officer issued a CITATION AND ORDER citing the Coal Companies for the violations alleged in the verified complaint and ordering the Coal Companies to appear at a public hearing to be held on October 14, 1983 to show cause why they should not be found "subject to all legal sanctions including civil penalties and action on the reclamation bond."
On October 20, 1983, the Coal Companies filed a MOTION TO DISMISS the proceeding, Case No. 82-306, "including any and all requirements . . . against each and every defendant-respondent and sureties to perform or do certain things . . . including . . . reclamation, and to dismiss any claim against any of the said respondents in any way arising out of mining operations of the Coal Companies, and all . . . claims on all permits and bonds of said respondents. . . ." Citing the case of Commercial Standard Ins. Co. v. Alabama Surface Mining Reclamation Comm'n, 443 So.2d 1245 (Ala.Civ.App.1983), cert. denied 443 So.2d 1245 (Ala.1984), cert. denied ___ U.S. ___, 104 S.Ct. 3514, 82 L.Ed.2d 822 (1984), the Coal Companies contend in their MOTION TO DISMISS that the Commission never acquired jurisdiction since the verified complaint in Case No. 82-306 was not filed within nine months after the completion of operations.4
Apparently recognizing that the Commercial Standard case was "on all fours" with Case No. 82-306, Mr. McLaughlin entered an order on November 14, 1983 continuing the case generally "pending the final resolution of the matters addressed in the case of Commercial Standard Insurance Co. v. Alabama Surface Mining Commission presently on appeal. . . ." Mr. McLaughlin further ordered:
That following the completion of the Appellate process resulting either the affirmation of the decision of the Alabama Court of Civil Appeals or the rendering of a differing opinion by the Alabama Supreme Court, the aforesaid Motion to Dismiss shall either be set for oral argument or an appropriate decision rendered by the Hearing Officer.
No further action has been taken, however, in the Commission's Case No. 82-306 against the Coal Companies and their sureties on the bonds; and the Commission refuses to discharge the sureties from their obligations under the reclamation bonds even though writs of certiorari have been denied by both the Alabama Supreme Court, Commercial Standard Ins. Co. v. Alabama Surface Mining Reclamation Comm'n, 443 So.2d 1245 (Ala.1984), and by the Supreme Court of the United States, Commercial Standard Ins. Co. v. Alabama Surface Mining Reclamation Comm'n, ___ U.S. ___, 104 S.Ct. 3514, 82 L.Ed.2d 822 (1984).
Mr. Dennis Purdy Willett, Jr., Director of the Alabama Surface Mining Commission, appeared at the trial and testified. On examination by Gusty Yearout Esquire, attorney for the Intervenors, Mr. Willett demonstrated that he continued to espouse the "continuing violation" approach to an operator's failure to reclaim surface mined land. Mr. Willett further demonstrated that he was under the mistaken impression that the decision of the Alabama Court of Civil Appeals was not final after both the Alabama and United States Supreme Courts denied writs of certiorari.5 Mr. Willett also testified that the coal companies did not request nor receive any extensions of time for reclamation and that there were no acts of God which would have prevented the reclamation from being done.
The Commission filed a proof of claim in this case for $5,000.00. The Commission's claim is based upon a civil penalty which was assessed on October 12, 1978 for violation of the Alabama Surface Mining Reclamation Act of 1975. This penalty was to be suspended upon the reclamation of the...
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