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decided: March 18, 1983.


Appeal from the Order of the Environmental Hearing Board in the case of Ohio Farmers Insurance Company v. Commonwealth of Pennsylvania, Department of Environmental Resources, No. 80-041-G.


Stephen C. Braverman, with him John M. Elliott and Roy Alan Cohen, of counsel: Dilworth, Paxson, Kalish & Kauffman, for petitioner.

Peter Shelley, Assistant Counsel, for respondent.

Judges Rogers, Williams, Jr. and Craig, sitting as a panel of three. Opinion by Judge Craig.

Author: Craig

[ 73 Pa. Commw. Page 19]

Ohio Farmers Insurance Company appeals from an Environmental Hearing Board (EHB) adjudication, sustaining a Department of Environmental Resources (DER) action*fn1 which declared as forfeit $254,750 worth of surety bonds issued by the insurance company and posted by Ralph A. Veon, Inc. (Veon) for five surface mining sites in Little Beaver Township.

Although the EHB did not make findings of fact concerning reclamation conditions at the Veon sites, uncontroverted testimony of record provides a sufficient basis for reconstructing the events which led to DER's forfeiture action.

Veon has been in operation as a surface coal and clay mining company since 1954, first under the control of Ralph Veon and later under the ownership and management of three other individuals.*fn2 From 1969 until his retirement in January of 1978, DER mining inspector Herbert Strum monitored the Veon pits. Sometime thereafter, John Meehan inspected the sites until 1979, when DER replaced him with Merle Urey.

Inspector Urey first inspected the five Veon sites in 1979, observing that some of the pits were inactive and thus in need of reclamation. He therefore cited

[ 73 Pa. Commw. Page 20]

Veon for backfilling violations and presented it with a reclamation schedule.

By letter dated October 30, 1979 to Veon's president, DER suspended three of the company's mining permits because of backfilling reclamation violations*fn3 and further ordered the company to cease and desist from all mining activities unrelated to backfilling and restoration at those three sites.*fn4

DER did not forward a copy of that October 30, 1979 letter to Ohio Farmers.

On October 31, 1979, Veon filed a voluntary petition of bankruptcy in the United States Bankruptcy Court for the Western District of Pennsylvania.

DER notified Veon's president of its forfeiture decision on February 13, 1980 and sent a copy of that letter to Ohio Farmers.

In its notice of appeal and in its pre-hearing memorandum,*fn5 Ohio Farmers argued that it has been discharged from any liability on the bonds because Veon's backfilling and reclamation violations were the result of the Commonwealth's alleged failure to (1) monitor Veon's operations and secure compliance with the reclamation laws and (2) notify the surety of violations earlier, when the insurance company allegedly

[ 73 Pa. Commw. Page 21]

    could have required Veon to comply with the law and when Veon allegedly possessed the financial resources to do so.*fn6

Discharge Through Negligent Inspection

Relying upon the rule of law that "a surety will be discharged from liability whenever the creditor or obligee does anything prejudicial to the rights of the surety," P.L.E. Suretyship ยง 78, Ohio Farmers contends that for almost two years,*fn7 from 1978 to 1979, DER failed to enforce section 4.3 of the Act as it was then in effect,*fn8 and that as a result, DER "materially

[ 73 Pa. Commw. Page 22]

    prejudiced" the rights of the insurance company. We disagree.

Section 4.3 of the Act provided, in pertinent part:

Any mine conservation inspector directed by the department shall have the right to enter upon and inspect all stripping operations for the purpose of determining conditions of safety and for compliance with the provisions of this act, and all rules and regulations promulgated pursuant thereto. Should an operator fail to comply with the requirements of this act, or any rules or regulations promulgated thereto, the mine conservation inspector shall report the matter to the secretary who shall immediately notify the operator by registered mail of such failure. Unless the operator complies with the act, and such rules and regulations, within thirty (30) days from the receipt of such notice, the secretary may, after hearing and final determination, suspend the open pit mining operator's license of the operator and issue a cease and desist order requiring the operator to immediately cease open pit mining within this Commonwealth until such time as it is determined by the secretary that the operator is in full compliance. A mine conservation inspector shall have the authority to order the immediate stopping of any operation that is started by an unlicensed operator,

[ 73 Pa. Commw. Page 23]

    or without the operator thereof having first obtained a permit as required by this act, or in any case where safety regulations are being violated or where the public welfare or safety calls for the immediate halt of the operation until corrective steps have been started by the operator to the satisfaction of the mine conservation inspector.

As it was then in effect, section 4.3's terms, for the most part, conferred powers rather than duties. The legislature vested the secretary of DER with discretion to suspend a mining operator's license for non-compliance and vested inspectors with the authority -- but not an absolute obligation -- to order the immediate cessation of mining operations under certain enumerated circumstances. The legislature described only two non-discretionary functions, that an inspector report instances of non-compliance to the secretary and that the secretary notify the operator of his failure to comply.

Although the EHB did not make findings with regard to whether or not DER's inspectors failed to report instances of non-compliance to the secretary, we note that Ohio Farmers had the burden of proving DER's negligence and that the record is devoid of testimony or documentary evidence that mining inspectors failed to monitor the Veon company or report their findings to the secretary between 1977 and 1979. Indeed, although Mr. Veon testified that inspectors would not monitor the sites on a regular basis but intentionally would arrive unannounced at irregular intervals, he also testified that all three inspectors visited the Veon pits, and that the company may have been the subject of an enforcement action as early as late 1978 or early 1979. From the record, it appears that the only period of potentially lax monitoring activity may have occurred during Inspector Meehan's

[ 73 Pa. Commw. Page 24]

    tenure; however, Ohio Farmers did not call him as a witness or provide any evidence that he failed to report instances of non-compliance to DER.

Finally, Ohio Farmers has failed to direct our attention to any provision in the Act which requires enforcement action beyond that which DER appears to have taken here. Cf. American Casualty Co. v. Department of Environmental Resources, 65 Pa. Commonwealth Ct. 223, 441 A.2d 1383, 1388 (1982) (DER owed surety no duty of active diligence beyond that actually required by Anthracite Act).*fn9

In City of Harrisburg v. Guiles, 192 Pa. 191, 44 A. 50 (1899), our Supreme Court rejected an argument similar to the one advanced here by Ohio Farmers, noting that a surety is not relieved of its obligations even in a situation where a government has been indifferent to negligent enforcement of the law:

Both [Harrisburg and tax collector Guiles] were alike to blame, but neither can be found to have been guilty of fraud or crime. At the most, there were serious irregularities, but of these the city was under no obligation to notify the sureties. It was precisely against such lapses that the sureties' obligation was intended to protect the city.

192 Pa. at 198-99, 44 A. at 51.

[ 73 Pa. Commw. Page 25]

We therefore affirm the decision of the EHB, but with a modification as to the amount. Both parties agree that the EHB overstated the correct amount of Bond 435721 for Permit No. 40-19 (Curatola Pit) by $2,000. The correct amount for that bond should be $14,000, not $16,000. Therefore, the total amount in question here is $252,750. Our order will state that figure.


Now, March 18, 1983, the order of the Environmental Hearing Board, dated August 25, 1981, is affirmed, subject to the modification that Ohio Farmers Insurance Company make full and prompt payment to DER in the amount of $252,750.


Affirmed as modified.

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