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PBS COALS v. BURNHAM COAL COMPANY (05/10/89)

filed: May 10, 1989.

PBS COALS, INC., A PENNSYLVANIA CORPORATION, APPELLEE,
v.
BURNHAM COAL COMPANY, A PENNSYLVANIA CORPORATION, APPELLANT



Appeal from the Judgment entered July 11, 1988 in the Court of Common Pleas of Somerset County, Civil Division at No. 286 Civil 1981.

COUNSEL

Richard Disalle, Pittsburgh, for appellant.

Anthony J. Polito, Pittsburgh, for appellee.

Del Sole, Johnson and Montgomery, JJ.

Author: Del Sole

[ 384 Pa. Super. Page 324]

This is an appeal from a final decree in equity entered in a declaratory judgment action. Appellee, PBS Coals, Inc.,

[ 384 Pa. Super. Page 325]

(PBS) sought a declaration that it was not responsible for the costs of correcting a mine drainage problem where the agreement transferring interests in the subject properties did not include specific language allocating such a burden. The trial court determined that the agreement imposed no obligation upon PBS to treat the after-discovered drainage problem. We reverse.

The record reveals that Appellant, Burnham Coal Company, (Burnham) drafted an agreement by which it transferred its interests in certain strip-mining properties to PBS. One of the properties being transferred was in need of reclamation work, and the parties acknowledged the estimated cost of reclamation by agreeing upon a reduced price for a piece of equipment to be sold as part of the transaction. The agreement also acknowledged that any obligations owed by Burnham to property owners under previous agreements would be assumed by PBS. An inspection of the dragline to be sold to PBS was made by a PBS official while the equipment sat on snow-covered property which was also to be transferred by the agreement. After the agreement was executed, Burnham withdrew from the property, and PBS began the process of reclaiming the land.

It was not until the Spring thaw that an acid water discharge was discovered on one of the transferred properties, that which a PBS official had visited earlier in order to inspect the equipment being sold by Burnham. The parties agree that if the problem existed at the time the agreement was signed, neither was aware of it. After the drainage was discovered, the parties met at the site and discussed various options for treating it. Although PBS denied that it was responsible for correcting the situation because it had never mined the property and Burnham had, the fact that PBS had men and equipment on site and that a generally amicable business relationship still existed between the parties caused PBS to make the initial efforts to correct the situation. PBS, by this course of conduct, also hoped to prevent the drainage problem from adversely affecting the other five permits issued on the transferred properties. If

[ 384 Pa. Super. Page 326]

    a violation had been discovered on property covered by one of the permits, all other permits issued under the same mine drainage permit would have gone into violation; such an occurrence would have prevented PBS from mining any remaining coal and would have resulted in the loss of revenue it expected to gain when it entered into the agreement with Burnham. Because the DER will not issue a permit to any coal company whose operations are in violation of DER regulations, PBS would have been significantly impaired in its coal mining operations if it had been required to have the permit covering the subject property placed in its name. Because of the drainage problem, PBS refused to tender the $276,000 balance which it owed Burnham for the equipment transferred earlier as part of the transaction. Discussions took place between the parties regarding the outstanding debt, the drainage problem and the DER permits. A letter was eventually signed by both parties in an effort to resolve the situation. Burnham agreed to maintain the relevant DER permit in its name, and PBS agreed to remit the balance of its outstanding debt.

Upon discovery of the discharge by the Pennsylvania Department of Environmental Resources (DER), Burnham was advised that penalties would be assessed against it pursuant to the Pennsylvania Clean Streams Law, 35 P.S. § 691.1 et seq. and the Surface Mining Conservation and Reclamation Act, 52 P.S. § 1396.1 et seq. unless measures were taken to correct the problem. Burnham notified PBS that when such penalties were assessed, Burnham would seek to enforce the agreement, which it asserted, placed responsibility for complying with leasehold obligations, including environmental laws, upon PBS. PBS subsequently instituted this action, and Burnham filed a counterclaim seeking reimbursement for the costs incurred in treating the discharge under a consent adjudication with the DER. The trial court found the agreement ambiguous and admitted ...


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