Black Fire Coal Co. v. Commonwealth, Energy & Environment Cabinet
2012 Ky. App. LEXIS 327
| Ky. Ct. App. | 2012Background
- Black Fire appeals a cabinet final order forfeiting four surface mining reclamation bonds and revoking its permit.
- Permit No. 826-0600 was issued June 22, 2006 for Hobbs Property in Clay County, Kentucky.
- Bond increments were secured by letters of credit: Increment 1 $1,200; Increment 2 $5,600; Increment 3 $43,700; Increment 4 $5,600.
- Notices of Noncompliance and Cessation Orders were issued in 2008 (Nos. 63-1726, 63-0536) after multiple violations, leading to enforcement and final orders.
- The Cabinet sought forfeiture of all four bonds and permit revocation; Community Trust Bank issued the letters of credit but was not named as a party; an administrative hearing occurred Oct. 29, 2009 with a final order May 26, 2010; circuit court affirmed in 2011.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether notice to the bond issuer is required for forfeiture. | Black Fire says 405 KAR 10:050 requires notice to bond issuers. | Cabinet says notice to financial institutions is not required. | No notice required to bank; bonds forfeitable without bank notice. |
| Whether bond forfeiture criteria were met given access denial to the property. | Black Fire contends court orders barred access precluded remediation. | Cabinet applied KRS 350.280 easement mechanism; no easement obtained. | Cabinet properly found criteria for forfeiture met despite access issues. |
| Whether the Cabinet bore the burden to prove bond forfeiture under 405 KAR 7:092. | Black Fire argues insufficient proof to meet forfeiture standards. | Cabinet presented inspector, owners, and supervisor testimony; Black Fire offered no contrary evidence. | Cabinet met its burden; Black Fire failed to counter evidence. |
| Whether the court correctly affirmed the final agency order. | Black Fire seeks reversal of the Cabinet's final order. | Cabinet's decision supported by substantial evidence and statutory authority. | Circuit Court affirmed; final order upholding forfeiture and permit revocation stands. |
Key Cases Cited
- Association de Azucareros de Guatemala v. U.S. Nat. Bank of Or., Portland, Or., 423 F.2d 638 (9th Cir. 1970) (guarantor vs. surety distinction; contract collateral to underlying obligation)
- Citizens Fidelity Bank & Trust Co. v. Lamar, 561 S.W.2d 326 (Ky.App. 1977) (distinguishes surety and bank performance bonds)
- Natural Res. and Envtl. Prot. Cabinet v. Whitley Dev. Corp., 940 S.W.2d 904 (Ky.App. 1997) (notice/party involvement in bond forfeiture not required for bank/creditor)