UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

CORBIN DIVISION

IN RE:

RAY MAYNARD PHIPPS CASE NO. 88-00372

DEBTOR

RAY MAYNARD PHIPPS PLAINTIFF

VS. ADV. NO.88-0237

COMMONWEALTH OF KENTUCKY,

NATURAL RESOURCES AND

AND ENVIRONMENTAL PROTECTION CABINET DEFENDANT

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This matter came on for trial before the Court on August 30, 1990. The Court having considered the testimony offered at trial, the joint stipulation of the parties, the briefs of the parties, and the documentary and other pertinent evidence of record in this case, and being otherwise fully advised, now, in accordance with Rule 52 of the Federal Rules of Civil Procedure, makes the following Findings of Fact and Conclusions of Law.

FINDINGS OF FACT

1. Motion of the defendant, Natural Resources and Environmental Protection Cabinet ("the Cabinet") for Summary Judgment that the plaintiff's obligation to reclaim certain surface mine sites is nondischargeable pursuant to 11 U.S.C. '523(a)(6), and that the defendant's enforcement actions at issue herein do not constitute a willful violation of the stay provisions of 11 U.S.C. '362; and on the Motion of the plaintiff, Ray Maynard Phipps ("Phipps"), for Summary Judgment that the defendant failed to file a complaint or counterclaim raising the issue of the nondischargeability of his obligation to reclaim surface mine sites, that his obligation to reclaim is discharged as a matter of law, and that the defendant does not have standing to assert nondischargeability pursuant to '523(a)(6). This Court has jurisdiction of this matter pursuant to 28 U.S.C. '1334. It is a core proceeding pursuant to 28 U.S.C. '157.

The parties have memorialized Stipulations of Fact which establish that the defendant was in violation of KRS 360.060 by engaging in surface mining activities at various sites without a permit; that he filed a Chapter 7 bankruptcy petition on September 2, 1988, that he is subject to a Summary Judgment and Permanent Injunction and a Judgment and Permanent Injunction entered in Franklin Circuit Court on February 24, 1989, and October 31, 1989, respectively, which impose affirmative reclamation obligations on him; that neither the Summary Judgment and Permanent Injunction nor the Judgment and Permanent Injunction has been modified, set aside or appealed from; and that the sites in question have not been reclaimed in conformance with permanent program standards of KRS Chapter 350 and the regulations promulgated pursuant thereto.

United States vs. Whizco, 841 F.2d 147 (6th Cir. 1988), is controlling on the question of dischargeability. That case held that to the extent that fulfilling his obligation to reclaim a mine site would force the defendant to spend money, the obligation was a liability on a claim as defined by the Bankruptcy Code. Therefore, to that extent, the defendant's bankruptcy discharged his obligation to reclaim the mine site. The Cabinet contends that while the decision in Whizco may render obligations to reclaim strip mine sites as dischargeable debts, 11 U.S.C. '523(a)(6) provides an exception to such discharge in that the debtor committed willful and malicious injury to another entity or the property of another entity. In addition, the Cabinet maintains that it has standing to assert this exception to discharge. The question then becomes whether the pleadings, the admissions, and the record in this case are dispositive of the issue of whether the plaintiff herein committed willful and malicious injury to another entity or the property of another entity and the issue of whether the language of '523(a)(6) includes the concept of surface mine sites as "property" of a state government agency. This Court concludes that they are not dispositive of those issues.

In keeping with the previously stated determination that the Whizco case controls on the dischargeability issue, this Court must also conclude that the plaintiff's obligation to reclaim the surface mining sites in issue here is dischargeable as a matter of law. The plaintiff has testified that he is unable to work because of various ailments, including knee problems and gout, and that he neither owns nor has access to heavy equipment. (Depo. of Ray Maynard Phipps, pp. 5-20). The Cabinet has not brought forth specific facts which demonstrate that the plaintiff is personally able to perform his obligation. That obligation can therefore only be fulfilled by the expenditure of money, and according to the holding in Whizco is dischargeable in bankruptcy.

For the reasons set out above, it is the opinion of this Court that the defendant's Motion for Summary Judgment that the plaintiff's obligation to reclaim surface mine sites is nondischargeable pursuant to 11 U.S.C. '523(a)(6), should be, and is hereby so ORDERED, OVERRULED.

The defendant's Motion for Summary Judgment that its enforcement actions do not constitute a willful violation of the automatic stay provisions of 11 U.S.C. '362 should be SUSTAINED.

The Court having concluded that issues of fact remain to be determined in regard to the issue of the defendant's standing to assert an exception to dischargeability pursuant to '523(a)(6), the plaintiff's Motion for Summary Judgment that the defendant is not the real party in interest and does not have such standing should be, and is hereby so ORDERED, OVERRULED.

Inasmuch as the plaintiff raised the issue of dischargeability in his First Amended Complaint, his Motion for Summary Judgment that the defendant failed to file a complaint or counterclaim raising the issue of the nondischargeability of his obligation to reclaim should be, and is hereby so ORDERED, OVERRULED.

The plaintiff's Motion for Summary Judgment that his obligation to reclaim surface mine sites is dischargeable as a matter of law should be SUSTAINED.

Dated:

By the Court -

_________________________________

Judge

Copies to:

Ralph W. Hoskins, Esq.

Robin B. Thomerson, Esq.

J. Alec McKenzie, Esq.

mphipps.opi