U.S. v. River Coal Co., Inc.

• Decision Date: 23 November 1984
• Docket Number: No. 83-5560,83-5560
• Citation: 748 F.2d 1103,12 Bankr.Ct.Dec. 606
• Parties: , 11 Collier Bankr.Cas.2d 1432, 12 Bankr.Ct.Dec. 606, Bankr. L. Rep. P 70,134, 14 Envtl. L. Rep. 20,866 UNITED STATES of America, Plaintiff-Appellant, v. RIVER COAL COMPANY, INC.; Polls Creek Coal Company, Inc.; New Brush Creek Mining, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1103

748 F.2d 1103

21 ERC 2147, 11 Collier Bankr.Cas.2d 1432,

12 Bankr.Ct.Dec. 606,

Bankr. L. Rep. P 70,134, 14 Envtl. L. Rep. 20,866

UNITED STATES of America, Plaintiff-Appellant, v. RIVER COAL COMPANY, INC.; Polls Creek Coal Company, Inc.;

New Brush Creek Mining, Inc., Defendants-Appellees.

No. 83-5560.

United States Court of Appeals, Sixth Circuit.

Argued Aug. 30, 1984.

Decided Nov. 23, 1984.

Louis DeFalaise, U.S. Atty., Jane E. Graham, Asst. U.S. Atty., Lexington, Ky., J. Carol Williams, David C. Shilton, Appellate Sec., Land & Natural Resources, Dept. of Justice, Christine R. Whittaker (argued), Anthony J. Steinmeyer, Dept. of Justice, Civ. Div.-Appellate Staff, Washington, D.C., for plaintiff-appellant.

John M. Lang (argued), Reece, Clark & Lang, Manchester, Ky., for defendants-appellees.

Before LIVELY, Chief Judge, MERRITT, Circuit Judge, and GIBBONS, District Judge. ^*

LIVELY, Chief Judge.

In this case we hold that a debtor, rehabilitated through Chapter XI bankruptcy proceedings, remains liable to the United States for post-petition interest on delinquent "abandoned mine reclamation fees." (Post-petition interest is that which accrues after bankruptcy proceedings are commenced.) Before reaching this conclusion it was necessary to determine that these charges, though denominated "fees" in the Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. Sec. 1201 et seq. (1982) (the Act), are in fact "taxes."

I.

One of the purposes of the Act, stated in Sec. 102(h), is to promote reclamation of those areas that were mined before passage of the Act, and which continue to degrade the environment, prevent beneficial uses of land and water resources or endanger public health. 30 U.S.C. Sec. 1202(h). The costs of this endeavor are to be paid from a trust fund established by Sec. 401 of the Act, known as the Abandoned Mine Reclamation Fund. 30 U.S.C. Sec. 1231. The fund consists primarily of money deposited by coal operators as required by Sec. 402, 30 U.S.C. Sec. 1232, which provides in pertinent part as follows:

Sec. 1232. Reclamation fee

(a) Payment; rate

All operators of coal mining operations subject to the provisions of this chapter shall pay to the Secretary of the Interior, for deposit in the fund, a reclamation fee of 35 cents per ton of coal produced by surface coal mining and 15 cents per ton of coal produced by underground mining or 10 per centum of the value of the coal at the mine, as determined by the Secretary, whichever is less, except that the reclamation fee for lignite coal shall be at a rate of 2 per centum of the value of the coal at the mine, or 10 cents per ton, whichever is less.

(b) Due date

Such fee shall be paid no later than thirty days after the end of each calendar quarter beginning with the first calendar quarter occurring after August 3, 1977, and ending fifteen years after August 3, 1977, unless extended by an Act of Congress.

All three defendants in this action removed coal from surface mines during the fourth quarter of 1977, and River Coal Co., Inc. also removed coal during the first quarter of 1978. They filed the required reports, but failed to pay the reclamation fees within 30 days after the end of the quarter as required by Sec. 402. It is agreed that the amount due was $116,345.68. In March 1978 the defendants and other related companies filed a petition in the bankruptcy court for the Southern District of New York seeking a plan of arrangement pursuant to Chapter XI of the Bankruptcy Act. The government filed a proof of claim in the bankruptcy proceedings for the delinquent reclamation fees. No interest had accrued at the time of the filing of the petition and the government made no claim in bankruptcy for interest. A plan of arrangement was worked out and confirmed by the bankruptcy court on June 9, 1981, and shortly thereafter the claim for reclamation fees was paid in full.

Meanwhile, the Secretary of the Interior issued an amended regulation which required the payment of interest on delinquent reclamation fees. Interest on delinquent fees for the fourth quarter of 1977 began to accrue, under the amended regulation, on June 15, 1978, and would run until the date of payment. 30 C.F.R. Sec. 870.15(e) (1979). This action was filed on August 25, 1982 to recover interest on the delinquent payments from June 15, 1978 to June 26, 1981, the date the reclamation fees were paid.

The defendants denied liability, contending that no post-petition interest accrued as a matter of law on delinquent fees which were paid in full under the Chapter XI plan of arrangement. The defendants also asserted that the government was estopped to make a claim for post-petition interest after having participated in negotiations for the plan of arrangement without ever indicating that it was claiming anything other than the delinquent reclamation fees. The defendants alleged in their answer that they had relied, reasonably, on the position of the plaintiff in assuming that no claim would be made for interest, and that it would be inequitable to permit recovery of interest after the plan of arrangement was approved and the bankruptcy proceedings were closed.

The parties filed cross-motions for summary judgment, agreeing that there were no genuine issues of material fact to be decided. The district court entered judgment for the defendants upon concluding as a matter of law that, having received full payment of the delinquent fees pursuant to the plan of arrangement, the government was not entitled to post-petition interest. In reaching this conclusion the district court followed an earlier decision by another judge of the same court. See In re Vaughan, 292 F.Supp. 731 (E.D.Ky.1968).

II.

The district court and the government proceeded in this case on the assumption that the abandoned mine reclamation fees are taxes. Under Sec. 17 of the Bankruptcy Act, ¹ 11 U.S.C. Sec. 35(a)(1) (1976), a discharge in bankruptcy does not release a debtor from "taxes which became legally due and owing by the bankrupt to the United States ... within three years preceding bankruptcy." On appeal the defendants argue that the "fees" are just that, not "taxes," and therefore are not nondischargeable debts within Sec. 17. In making this argument the defendants liken the reclamation fees to permit fees which a coal operator must pay for the privilege of conducting surface mining. 30 U.S.C. Sec. 1252(a).

The fact that Congress labeled the reclamation charge a fee rather than a tax is not controlling. In National Cable Television Assn., Inc. v. United States, 415 U.S. 336, 94 S.Ct. 1146, 39 L.Ed.2d 370 (1974), the Supreme Court identified some of the differing characteristics of taxes and fees. Congress may impose a tax without regard to the benefits bestowed on the taxpayer, considering only the need for revenue to fund the government's public functions. "A fee, however, is incident to a voluntary act, e.g., a request that a public agency permit an applicant to practice law or medicine or construct a house or run a broadcast station. The public agency performing these services normally may exact a fee for a grant which, presumably, bestows a benefit on the applicant, not shared by other members of society." Id. at 340-41, 94 S.Ct. at 1148-49. The test has been variously stated, but the chief distinction is that a tax is an exaction for public purposes while a fee relates to an individual privilege or benefit to the payer. In a case in which it determined that "premiums" under a worker's compensation law were "taxes" for purposes of priority under the Bankruptcy Act, the Court of Appeals for the First Circuit found the test to be "whether the government compelled the employer to pay the exaction and whether the payment was for a public purpose." In re Pan American Paper Mills, Inc., 618 F.2d 159, 162 (1st Cir.1980).

There is a clear distinction between the permit fee requirements of the Act and abandoned mine reclamation fees. The permit fee is charged for the privilege of carrying on mining operations. The permit is issued at the request of an operator and bestows an individual benefit--the privilege of operating a surface mine--on the applicant. It is similar to a license to practice a profession or to conduct a broadcast station. The abandoned mine reclamation fee is quite different. It is imposed as an additional charge on operators who have already received permits. Unlike the permit fee, the reclamation fee does not confer a benefit on the operator different from that enjoyed by the general public when environmental conditions are improved. On the contrary, it is an involuntary exaction for a public purpose--to create a fund to be used for "reclamation and restoration of land and water resources adversely affected by past coal mining." 30 U.S.C. Sec. 1231(c)(1). The reclamation fee has the essential characteristics of a tax, and we conclude it is a "tax" for the purposes of Sec. 17 of the Act.

III.

The "general rule" that a creditor is allowed interest on his debt only to the time a petition in bankruptcy is filed has no application to nondischargeable debts being asserted against the bankruptcy debtor and not against the bankruptcy estate. In Bruning v. United States, 376 U.S. 358, 84 S.Ct. 906, 11 L.Ed.2d 772 (1964), the Supreme Court distinguished nondischargeable debts from others in permitting recovery of post-petition interest:

In most situations, interest is considered to be the cost of the use of the amounts owing a creditor and an incentive to prompt repayment and, thus, an integral part of a continuing debt. Interest on a tax debt would seem to fit that description. Thus, logic and reason indicate that post-petition interest on a tax claim excepted from discharge by Sec. 17 of the Act should be recoverable in a later action against the debtor personally, and there is no evidence of any congressional intent to the contrary.

376 U.S. at 360, 84 S.Ct. at 907. As in Bruning, the...