UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

ASHLAND DIVISION

IN RE:

WHITE CLOUD MINING COMPANY, INC. CASE NO. 92-10195

DEBTOR

MEMORANDUM OPINION

The Debtor filed this Chapter 11 proceeding on May 14, 1992. At that time, there was pending in the Floyd Circuit Court (Kentucky) an action filed by The Elk Horn Coal Corporation ("Elk Horn") seeking a money judgment against Debtor as well as a determination that a lease entered into between the parties dated February 1, 1992 was terminated.

On May 18, 1992 Elk Horn filed its Motion to Modify Automatic Stay and its Request for Entry of Ex Parte Order Modifying Automatic Stay Pursuant to 11 USC Section 362(f). The undersigned judge to whom the case had been assigned was unavailable to hear the ex parte motion and, pursuant to the practice of the Court, the other regular judge of the district, Chief Judge Lee, conducted a hearing on the matter on that same day. Counsel for the debtor was present for that hearing, having been given about one and one-half hours notice of the hearing by the movants. The corporate representative of the Debtor was not present and it does not appear that it would have been physically possible for that representative to have been present since he resides and works some two hours driving distance from the site of the hearing in Lexington. As a result of the hearing an order was entered, also on May 18, 1992 modifying the stay to allow Elk Horn to proceed with its pending action in the Floyd Circuit Court.

Subsequent to the Court's order of May 18, 1992, Elk Horn obtained a hearing date from the Floyd Circuit Court and a hearing was conducted by that Court. As a result of that hearing, injunctive relief was granted to Elk Horn prohibiting the Debtor from going on the premises which are the subject of the lease and requiring Elk Horn to post a bond in the amount of $1 million. That bond was posted by Elk Horn and remains in effect.

The Debtor filed its Motion to Reinstate Automatic Stay on May 20, 1992 and, after some initial scheduling problems, the matter was scheduled for hearing on June 5, 1992 and a hearing was conducted on that date at which time the Court heard witnesses for both parties. Elk Horn has filed its Objection to the Debtor's Motion and its Preliminary Memorandum and its Substituted Preliminary Memorandum addressing the matter.

Elk Horn first argued that the relief granted by the Court on May 18, 1992 was not ex parte in nature and thus the Court could not consider the Debtor's Motion to Reinstate Automatic Stay pursuant to Bankruptcy Rule 4001. This argument was based on the Debtor's attorney's attendance at the hearing. This court ruled on this aspect of the matter at the June 5, 1992 hearing, holding that the May 18, 1992 hearing conducted by Judge Lee with one and one-half hours notice was an ex parte hearing despite the attendance of Debtor's counsel since to hold otherwise would simply encourage non-movant's counsel to deliberately absent himself from all such hearings and thus preserve its opportunity to ask the Court to reconsider its order. The position of Elk Horn on this matter would also, if upheld, encourage attorneys to be less than frank with their opponents and the Court concerning their availability for such hearings.

The matter remaining before the Court is whether this Court should reinstate the automatic stay and thus undertake to decide the dispute between the parties which is now before the Floyd Circuit Court. In that action the Debtor has set out its counterclaims against the Plaintiff and a bond which would appear to protect the Debtor has been filed pursuant to the order of that Court. This Court certainly has no more expertise in trying Kentucky mineral lease disputes than has the Floyd Circuit Court. The Debtor may, in that action, assert all of the same defenses and counterclaims that it could assert in this Court. No evidence has been offered that litigation of this matter in the state court will delay or impede the progress of the Debtor's Chapter 11 proceeding in this Court.

For the foregoing reasons it appears that the Debtor's Motion to Reinstate Automatic Stay should be overruled and a separate Order will be entered herein.

BY THE COURT

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UNITED STATES BANKRUPTCY JUDGE

COPIES TO:

Sam P. Burchett, Esq.

John Morgan, Esq.