COMMONWEALTH OF KENTUCKY NATURAL RESOURCES AND ENVIRONMENT PROTECTION CABINET v. PAUL PELPHREY
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RENDERED: May 26, 2000; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
NO.
1999-CA-001527-MR
AND
1999-CA-001729-MR
COMMONWEALTH OF KENTUCKY
NATURAL RESOURCES AND ENVIRONMENT
PROTECTION CABINET
v.
APPELLANT/CROSS-APPELLEE
APPEAL AND CROSS-APPEAL FROM JOHNSON CIRCUIT COURT
HONORABLE JAMES KNIGHT, JUDGE
ACTION NO. 96-CI-00062
PAUL PELPHREY
APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING IN PART,
VACATING AND REMANDING IN PART
** ** ** ** **
BEFORE:
GUDGEL, Chief Judge; COMBS and MILLER, Judges.
COMBS, JUDGE: This is an appeal and cross-appeal from the
judgment of the Johnson Circuit Court affirming the final order
of the Secretary of the Natural Resources and Environmental
Protection Cabinet (the Secretary) but holding that the
collection of civil penalties assessed against Paul Pelphrey
(Pelphrey) was barred by KRS 413.120(3).
On appeal, the Natural
Resources and Environmental Protection Cabinet (the Cabinet)
contends that the circuit court erred in holding that the
collection of civil penalties against Pelphrey was time-barred
pursuant to KRS 413.120(3).
Pelphrey argues on cross-appeal that
the court should have set aside the Secretary’s findings that he
was personally liable for the mining violations as they were not
supported by substantial evidence.
We affirm in part and vacate
and remand in part.
In February 1982, the Cabinet issued Blazer Coal
Corporation (Blazer) a permit to engage in surface coal mining
activities on a fifty-two-acre site in Martin County.
Blazer
contracted out the actual the mining of the coal to Diamond P
Coal Company.
Subsequently, an application for an amendment to
Blazer’s permit was submitted to the Cabinet seeking
authorization for additional surface disturbance of approximately
fifteen acres.
The application bore the notarized signature of
Paul Pelphrey, indicating that he was the “Office Manager” for
Blazer and that he was acting on its behalf.
The Cabinet issued
an amendment to Blazer’s permit in July 1982.
The mining of coal under the amendment pertaining to
the extra fifteen acres was contracted out to Twin Star
Contracting Company.
Pelphrey owned interests in both Diamond P
Coal Corporation and Twin Star Contracting Company.
However, he
maintains that he sold his interest in Diamond P Coal in the
early 1980's and that he then started Twin Star before eventually
getting out of the mining business.
On October 16, 1986, an inspector for the Cabinet
issued a notice of non-compliance to Blazer, Pelphrey, Diamond P
Coal Corporation, and Twin Star Coal Company for failing to
eliminate a highwall on the property covered by the amendment to
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Blazer’s original permit.
A follow-up inspection revealed that
remedial measures had not been taken.
On November 18, 1986, a
Cabinet inspector issued a cessation order.
On May 18, 1988, the
Cabinet filed a formal administrative complaint against Pelphrey,
Blazer, Diamond P Coal Corporation, and Twin Star Coal Company,
alleging that the named defendants had violated KRS Chapter 350.
The Cabinet requested that civil penalties be assessed against
the defendants, that their performance bond be forfeited, and
that they be found ineligible to receive another permit under KRS
Chapter 350.
The administrative proceedings initiated by the Cabinet
moved forward.
On December 12, 1990, Blazer’s performance bond
securing its permit was ordered forfeited by the hearing officer.
Subsequently, on January 18, 1994, Blazer was dismissed from the
administrative proceedings in an interim order by the hearing
officer.
On February 8 and 9, 1995, the hearing officer
conducted a formal evidentiary hearing on the Cabinet’s
complaint.
The hearing officer rendered his report and
recommendations on December 1, 1995, concluding as follows:
(1)
that Blazer should be formally dismissed from the action; (2)
that the notice of noncompliance and the cessation order issued
to the defendants were valid; (3) that Pelphrey had sought and
obtained the amendment without Blazer’s authority; and (4) that
Pelphrey, Diamond P Coal, and Twin Star were liable for any
resulting penalties.
He recommended that a civil penalty of
$25,200 be assessed against Pelphrey, Diamond P Coal, and Twin
Star and that they be ineligible to receive another permit under
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KRS Chapter 350.
Significantly, Diamond P Coal and Twin Star
failed to make an appearance in the administrative proceedings.
On January 24, 1996, the Secretary entered a final order that
incorporated by reference and adopted the findings and
recommendations of the hearing officer.
On February 21, 1996, Pelphrey filed an appeal from the
Secretary’s order with the Johnson Circuit Court.
In June 1997,
the court ordered that the case be placed in abeyance.
The
action was subsequently taken out of abeyance and placed on the
court’s active docket in March 1999.
On May 20, 1999, the court
entered an order affirming the Secretary’s final order but
holding that the collection of civil penalties was barred by KRS
413.120(3).
The Cabinet filed a motion to alter and amend the
court’s order; that motion was denied.
This appeal and cross-
appeal followed.
The Cabinet first argues that the issue of whether a
cause of action for the enforcement of civil penalties had
accrued was not properly before the circuit court as the proper
time to address this issue would not ripen until commencement of
an action to collect the penalty imposed by the Secretary’s
order.
However, Pelphrey had raised the statute of limitations
argument before the hearing officer as a defense to the
administrative action, claiming that the administrative
proceeding was moot and unenforceable.
We disagree and find that
review of the administrative hearing was properly before the
court and that it had jurisdiction to review this matter.
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The Cabinet next argues on appeal that the court erred
in holding that the collection of civil penalties was barred by
KRS 413.120(3), which provides that an action for a penalty or
forfeiture must be commenced within five years of the date that
the cause of action accrued.
The Cabinet maintains that its
cause of action to enforce penalties did not accrue until
Pelphrey was actually assessed the penalties; that is, when the
Secretary entered his final order on January 24, 1996.
Pelphrey
disagrees and argues that the Cabinet’s cause of action accrued
on the date of the alleged violation; i.e., the earlier date on
which the notice of noncompliance was issued.
We find that the cases of Couch v. Natural Resources
and Environmental Protection Cabinet, Ky., 986 S.W.2d 158 (1999),
and Vanhoose v. Commonwealth, Ky. App., 995 S.W.2d 389 (1999) are
dispositive of this issue.
In Vanhoose, this court specifically
addressed this issue and held that a cause of action for the
enforcement of civil penalties accrues upon entry of the
Secretary’s final order imposing penalties.
We stated that:
[T]here has been established an extensive
administrative process for the fair and just
imposition of liability upon coal mining
permittees. As such, to comport with due
process requirements, we hold that a cause of
action for the enforcement of civil penalties
begins to run when the liability for, and
amount of, the penalties have been
conclusively and finally established, i.e.
upon the Secretary’s final order imposing the
penalties.
Vanhoose, Ky., 995 S.W.2d at 392.
Subsequently, the Supreme
Court reviewed the issue of accrual.
The Supreme Court adopted
this court’s opinion in Vanhoose that any applicable limitation
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statute does not begin to run until after entry of the
Secretary’s final order.
In the case before, the Secretary entered his final
order on January 24, 1996, assessing and imposing civil penalties
against Pelphrey.
The Cabinet’s cause of action for the
enforcement of those penalties accrued upon entry of that order
and was not time-barred.
Therefore, the court erred in holding
that collection of the civil penalties against Pelphrey was
barred by the five-year limitation in KRS 413.120(3).
Pelphrey argues on cross-appeal that the hearing
officer’s finding (which was ultimately adopted by the Secretary)
that he signed the application for the amendment to Blazer’s
permit was not supported by substantial evidence.
Thus, he
contends that the court erred in affirming the Secretary’s order.
Throughout the administrative and court proceedings, Pelphrey
maintained that he did not sign the application for the
amendment and that someone forged his signature.
“When the findings fact of an administrative commission
are supported by substantial evidence of probative value, the
findings are binding upon a reviewing court.”
Department of
Education v. Kentucky Unemployment Insurance Commission, Ky.
App., 798 S.W.2d 464, 467 (1990).
Evidence is substantial if,
when taken alone or in the light of all the evidence, it has
sufficient probative value to induce conviction in the minds of
reasonable persons.
Kentucky State Racing Commission v. Fuller,
Ky., 481 S.W.2d 298 (1972).
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In this case, the hearing officer found that Pelphrey
had applied for the amendment to Blazer’s permit without any
authorization from Blazer.
In reaching this conclusion, the
hearing officer relied on testimony from Beth Van Hoose, a former
notary public; Robert Hiller, the president and part owner of
Blazer; and Dewey Bocook, the engineer who had prepared the
application for the amendment.
Ms. Van Hoose testified that it
was her signature that had notarized Pelphrey’s signature and
that while she could not specifically remember notarizing the
signature in dispute, it was her consistent practice only to
notarize signatures made in her presence.
Hiller testified that
the amendment was obtained without his consent or knowledge.
The hearing officer found that Hiller’s assertion that
he had not participated in applying for the amendment was
supported by Bocook’s testimony.
Bocook testified that when he
had discussed the amendment with Hiller after it had been issued,
Hiller appeared surprised and called the amendment "illegal."
The hearing officer also noted that the agreed order between
Blazer and Pelphrey entered on March 8, 1985, stated that “an
application for amendment to Permit No. 080-00095 was applied for
by Paul Pelphrey in the name of [Blazer] and issued to [Blazer].”
This order was signed by Pelphrey’s attorney at that time.
The
hearing officer noted in his report that he generally found the
testimonies of Van Hoose and Hiller more credible than that of
Pelphrey.
We cannot conclude that the hearing officer’s
determination is not supported by substantial evidence.
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In summary, we find that the circuit court erred in
holding that collection of civil penalties against Pelphrey was
barred by the statute of limitations.
The court otherwise
properly reviewed and correctly affirmed the findings of the
Secretary’s order.
Accordingly, we affirm in part and vacate and
remand in part the order of the circuit court.
ALL CONCUR.
BRIEF AND ORAL ARGUMENT FOR
APPELLANT/CROSS-APPELLEE:
BRIEF AND ORAL ARGUMENT FOR
APPELLEE/CROSS-APPELLANT:
S. Bradford Smock
Frankfort, KY
J. Bradford Derifield
Frankfort, KY
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