which were the property of Reitz Coal Company (Reitz), Central City, Pennsylvania. The workers employed in the salvage of the coal were members of the United Mine Workers of America.
All of the coal salvaged by Dunlo as aforesaid was sold and delivered to The Florence Mining Company (Florence) and to M. F. Fetterholf Coal Co., Inc. (Fetterholf).
At trial the following additional facts were established. Historically mine refuse, which can best be described as a by-product of the coal-mining process, has been an incidental problem to the industry. It is essentially a mixture of coal and other geological (but non-combustible) minerals or elements such as rock, slate and clay. Since the amount of coal in such mixtures is proportionally low, mine operators over the years have viewed the task of separating the saleable coal from the waste elements as economically impracticable. Thus this material, when removed from the mines, is set aside usually in large piles at or near the mine from which it came. While the material has come to be known by various terms -- e.g., slag piles, rejects, rock dumps, culm banks -- we shall refer to it as refuse.
Because this refuse is not marketable for consumption it must be processed through coal preparation and treatment facilities which, in recent years, have become equal to the task. The refuse-processing operations, run by some of the larger coal operators, have the net effect of maximizing our resources because part of the refuse is recoverable as coal and then resold for use as fuel.
During the period in question Dunlo sold and delivered approximately 41,000 tons of refuse to Florence and Fetterholf part of which, after being processed, resulted in recoverable coal.
Contrary to defendants' assertion that the coal contained in this refuse had previously been assessed the prevailing royalty rate, it is apparent to the Court that someone -- Florence, Fetterholf or Dunlo -- had to pay royalty on this "processed" coal under the 1971 Agreement. We infer as much because Dunlo, in its agreement to supply Florence with refuse, bore the responsibility of paying the royalty.
While the supply contract between Dunlo and Fetterholf is silent on this subject
we believe the practice in the industry was, unless otherwise agreed, for the supplier to incur the royalty obligation. We make this finding because nowhere in the record is there even a hint that Fetterholf paid into the fund on recoverable coal. Moreover, a letter to Dunlo from Fetterholf stating that prior deliveries of refuse were found to have a recovery range between 30%-52.5% indicates that Dunlo was to pay royalty on the amount of coal recovered.
Added to all of the above is the fact that Dunlo paid royalties on the tonnages of recoverable coal in the amount of $12,507.00 in accordance with the 1971 Agreement.
Sometime in 1972, however, Dunlo stopped paying royalties into the Fund, apparently believing that such contributions were not mandated by the 1971 Agreement. The figures for clean tonnage and corresponding royalty amounts allegedly due under the contract are not disputed; thus, if Dunlo is liable for pension contributions the amount owing is $9,960.25 plus interest.
There is another important factual aspect to this case. Dunlo did not actually "salvage" refuse coal. We find that Dunlo merely acted as a middleman in transporting the refuse from Reitz to Florence and Fetterholf. Indeed, Henry F. Ghezzi, Director of Coal Preparation and Coal Purchasing for Fetterholf, stated that the refuse was merely purchased from Dunlo. It was Fetterholf who processed the refuse through its coal treatment facilities to recover coal for eventual sale to customers for fuel.
Likewise Elmer Motillo, Mine Accountant for Florence, stated that the refuse was bought from Dunlo, weighed in, refined and processed for later resale to power generating stations.
At trial Dunlo called but one witness, Mr. John J. Ondesko, to establish a factual defense that royalties had already been paid on the coal contained in the subject refuse by coal operators who had contributed to the piles. While the Court would be justified in ignoring this testimony,
we wish to note that the evidence does not substantiate Dunlo's position. Our review of the record indicates that, with few exceptions, Mr. Ondesko could not even identify the coal operators who contributed to the refuse piles in question. Thus, finding little, if any, direct evidence to support this defense we conclude that Dunlo has failed to sustain its burden of proof on the defense of payment.
The pivotal question here is whether the material which was sold and delivered by Dunlo to Florence and Fetterholf constituted "coal" within the meaning of that term as used in the 1971 Agreement. We turn to the contract.
The parties attach particular importance to the following language from Section (a) of Article XV:
During the life of this agreement, each operator signatory hereto shall pay into such Fund on each ton of . . . bituminous coal produced by such operator for use or for sale an amount as follows . . . . (Emphasis added.)
Dunlo argues that the above provision -- and therefore, the 1971 Agreement -- is inapplicable because it did not "produce" coal while plaintiffs contend that Dunlo did produce coal for use or sale as contemplated by the labor contract.
In our opinion Dunlo produced nothing. It merely purchased the refuse from Reitz, sold it to Florence and Fetterholf, and effected the deliveries. We do not believe its limited activities constitute the production of coal for use or for sale as contemplated by the above quoted passage. Our view of the matter is squarely supported by Thomas v. Blue Coal Corp., 355 F. Supp. 510 (M.D.Pa.1973), a case quite similar factually to the one before us.
In Thomas, trustees of the Anthracite Health and Welfare Fund sought to compel the defendant coal operator to pay a royalty per ton on all anthracite produced by it for use or sale. Blue Coal had purchased some 85,000 tons of coal refuse for eventual resale for fuel. This refuse had been processed by a third party before it reached Blue Coal. In holding that Blue Coal was not liable for the royalties, Judge Muir reasoned as follows:
Plaintiffs contend that Defendant Blue Coal Company "produced" the 85,281 tons of coal at issue here "for sale or for use" within the meaning of the Anthracite Wage Agreements. In my view, the coal was produced for use or for sale when it was first made marketable or usable as fuel. This occurred when it was processed through the Olyphant Coal Company breaker. Every subsequent improvement in its value or quality would not constitute production.