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O'LEARY v. MOYER'S LANDFILL

March 5, 1982

Thomas and Carol O'LEARY, et al.
v.
MOYER'S LANDFILL, INC., et al.



The opinion of the court was delivered by: POLLAK

MEMORANDUM

Private plaintiffs and plaintiff Commonwealth of Pennsylvania, Department of Environmental Resources ("DER"), *fn1" have petitioned this court to find defendants Moyer's Landfill, Inc., Grange Environmental Corporation, Howard Moyer, Jr. and Catherine Moyer ("defendants") in contempt of my Orders of June 10, 1981 and August 27, 1981. *fn2" Hearings were held on October 30, November 3, 5 and 11, 1981, and written submissions followed. The following constitutes my findings of fact and conclusions of law on plaintiffs' petitions.

 At the hearings' outset, defendants conceded, by stipulation, that they are not in substantial compliance with my June and August, 1981 orders. Defendants stipulated that leachate has been hauled away from the landfill on an irregular basis (N.T. I. 14; G-13 to G-18), *fn3" that there have been no substantial remedial measures taken other than the irregular hauling of leachate (N.T. I. 14; G-13 to G-18), and that on a number of occasions leachate was discharging and leaving the boundaries of the landfill (N.T. I. 20-21; G-16, G-17). Defendants, then, do not contest that they are in violation of my June 10 and August 27, 1981 orders. Rather, they rely on the defense of financial impossibility.

 I.

 The law is well-settled that financial impossibility is a valid defense to charges of civil contempt; it is equally well-settled that the burden of proof rests with the alleged contemnor to show his or her financial incapacity to comply with a court's order. N.L.R.B. v. Trans-Ocean Export Packing, Inc., 473 F.2d 612, 616 (9th Cir. 1973). To satisfy their burden of proof, defendants, having raised this defense, must show "categorically and in detail" why they are unable to comply. N.L.R.B. v. Trans-Ocean Export Packing, Inc., supra, at 616, quoting In Re Byrd Coal Co., Inc., 83 F.2d 256 (2d Cir. 1936). Under Pennsylvania law, upon which my August 27, 1981 order is grounded, the defense of financial incapacity is available to one who shows that all reasonable avenues for raising funds have been explored and "exhausted." Ramey Borough v. Commonwealth, DER, 466 Pa. 45, 351 A.2d 613, 616 (1976). Finally, a party claiming impossibility is under a continuing duty to comply as means become available. Maggio v. Zeitz, 333 U.S. 56, 68 S. Ct. 401, 92 L. Ed. 476 (1948); Brotherhood of Locomotive Firemen and Engineers v. Bangor & Aroostook R. Co., 127 U.S. App. D.C. 23, 380 F.2d 570 (D.C.Cir.1967); Commonwealth, DER v. Pennsylvania Power Co., 12 Pa.Cmwlth. 212, 316 A.2d 96 (1974) aff'd 461 Pa. 675, 337 A.2d 823 (1975).

 II.

 Because defendants stipulated to their non-compliance with the court's orders, hearings were limited to defendants' presentation of proof of their defense of financial impossibility. After careful consideration of the evidence and the parties' submissions, I have determined that defendants have failed to meet their respective burdens of showing that, from the dates of my June and August decrees to the time of the hearings, they were financially incapacitated from meeting their obligations under those decrees.

 A. Defendant Moyer's Landfill, Inc.

 Moyer's Landfill, Inc. ("Landfill") *fn4" provided no audited financial statement for the corporation in support of its defense of financial impossibility. (N.T. I. 25). Instead, it produced a compilation statement (D-49) for the corporation dated July 10, 1981 and prepared by Mr. Ralph Falconiero. Mr. Falconiero has served as Howard and Catherine Moyer's accountant and as accountant for Grange Environmental Corporation and for Hy-Vue Farms, Inc., a corporation of which Mr. Moyer is sole shareholder; but he has never been Landfill's regular accountant and never audited the corporation (N.T. I. 24). Mr. Falconiero testified that Landfill's compilation statement was based solely on information provided by management-i.e., information provided to Mr. Falconiero by Mr. Moyer (N.T. I. 30; D-49). Mr. Falconiero undertook no independent confirmation of any assets or liabilities of the corporation, and he could not say that the financial statement which he prepared was correct (N.T. I. 30).

 In the absence of an audited financial statement for Landfill, I find that it is impossible to make a reliable determination of the funds potentially available to that defendant, and I cannot conclude that it was financially incapacitated from making a greater contribution toward compliance with the June and August decrees than it has mustered thus far.

 B. Grange Environmental Corporation

 Mr. Moyer is the president and sole shareholder of Grange Environmental Corporation ("Grange Environmental") (N.T. II. 46). He testified that Grange Environmental was formed as part of a process whereby a Donald Nielson would purchase Moyer's Landfill, Inc., but Mr. Moyer also testified that there existed no written agreement between Mr. Moyer or any of his enterprises and Donald Nielson regarding this planned purchase (N.T. II. 46, 80-82). Like Landfill, Grange Environmental produced no audited financial statement, but instead submitted into evidence a compilation statement prepared by Mr. Falconiero from information provided solely by Mr. Moyer (N.T. I. 39, 83; D-53).

 Although it has yet to pay Mr. and Mrs. Moyer their consideration in the transaction, Grange Environmental on March 31, 1981 purchased the landfill property from the Moyers for $ 10,000. (N.T. I. 39, D-53, P-137). Indeed, Grange Environmental's compilation statement lists the landfill as its sole asset (D-53).

 I find defendants' failure to produce an appraiser's valuation of the landfill property to be a serious infirmity in their case. I find it so partly because the landfill property is encumbered by a two million dollar mortgage *fn5" to Providence Builders, Inc. *fn6" (N.T. I. 52; D-53A). The mortgage apparently was created, in part, to finance an agreement whereby Moyer's Landfill, Inc. undertook to purchase from Providence Builders, Inc. a property named Troop Farm for three million dollars (D-63). *fn7" This agreement has proved to be a somewhat spectral transaction. No money has been paid under the agreement; however, the seller, Providence Builders, Inc. has neither voided the agreement, nor declared a default, nor filed any legal action pursuant to the terms of the agreement (N.T. III. 70; D-63). Mr. Moyer testified that the Troop Farm purchase agreement and the two million dollar mortgage attending it were undertaken, in part, in order to provide Providence Builders, Inc. and Mr. Nielson with some assurance that they would be compensated for soil removed from Troop Farm by Landfill (N.T. II. 48). However, Mr. Moyer also testified that he did not know how much soil has been removed (N.T. II. 48), and that he has made no attempt to determine the amount or value of the soil (N.T. II. 84). It appears that Mr. Moyer might have considered, and ...


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