UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
LARRY ELMINE WILLIAMS and
VICKI LYNN WILLIAMS CASE NO. 89-00497
VICKI LYNN WILLIAMS PLAINTIFF
VS: ADV. 91-0019
COMMONWEALTH OF KENTUCKY,
NATURAL RESOURCES AND
ENVIRONMENTAL PROTECTION CABINET DEFENDANT
This matter is before the Court on the defendant's Motion for Summary Judgment. The defendant Natural Resources and Environmental Protection Cabinet ("the Cabinet") contends that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. The Cabinet has asked the Court to dismiss the plaintiff's Complaint and determine that the civil penalties owed to the Cabinet by the plaintiff are non-dischargeable pursuant to 11 U.S.C.'523(a)(7). The Cabinet has also asked for its costs in this matter. The plaintiff has not filed a response to the Motion for Summary Judgment. This Court has jurisdiction of this matter pursuant to 28 U.S.C. '1334(b); it is a core proceeding pursuant to 11 U.S.C. '157(b)(2)(I).
The plaintiff herein, Vicki Lynn Williams, filed her petition for relief in this Court on October 27, 1989. The Cabinet filed a Motion to Lift Automatic Stay in the bankruptcy case on February 7, 1990. This Court entered an Order on April 17, 1990, overruling that Motion "without prejudice to the right of the movant to raise the issue of nondischargeability of debt in the form of an adversary complaint." The plaintiff was discharged in bankruptcy on May 7, 1990. This proceeding was initiated by the filing of a Complaint by the plaintiff on January 24, 1991. The Cabinet filed its Answer on February 22, 1991, and its Motion for Summary Judgment on March 1, 1991.
The record in this case reveals that a civil penalty of $25,000.00 for violation of KRS 350.060 was assessed against Ancon Construction Co., Inc., ("Ancon"), by Order of the Secretary of the Cabinet on October 30, 1985. In a suit in Franklin Circuit Court, Civil Action No. 86-CI-1275, to enforce this Order, Summary Judgment was entered against Ancon and the plaintiff on January 17, 1987, for $30,000.00 in civil penalties. Individual liability had been sought against the plaintiff as the sole officer and shareholder of Ancon pursuant to KRS 350.990(9).
Another civil penalty in the amount of $22,500.00 had been assessed against Ancon by Order of the Secretary of the Cabinet on July 22, 1985. This penalty was for violation of 405 KAR 1:080, 405 KAR 1:120 and 405 KAR 26:001. The Cabinet sought individual liability against the plaintiff for the assessed civil penalty in Franklin Circuit Court, Civil Action No. 85-CI-1241, pursuant to KRS 350.990(9). The Franklin Circuit Court judgment was entered against Ancon and the plaintiff on October 11, 1985, for $27,500.00. This judgment was appealed to the Kentucky Court of Appeals and then to the Kentucky Supreme Court. The Supreme Court upheld the circuit court judgment in Natural Resources and Environmental Protection Cabinet v. Williams, 768 S.W.2d 47 (Ky. 1989).
There is no question that the above-stated amounts were assessed as civil penalties. There is absolutely no merit in the plaintiff's contention that these amounts are compensation for actual pecuniary loss. As the Cabinet points out, civil penalties do not reflect the cost of reclamation. Such cost is rather approximated by a surety bond posted by the permittee prior to the issuance of a permit. Upon failure to reclaim, the bond is forfeited and applied toward reclamation of the site. In addition, KRS 350.990(1), which provides that all sums collected by the Cabinet shall be placed in the state treasury, does not provide for or allow the application of sums collected as penalties to reclamation costs.
11 U.S.C.'523(a)(7) excepts civil penalties from discharge in bankruptcy. The Cabinet cites several cases in support of such exception, including In re Renfrow, 112 B.R. 22 (Bkrtcy.W.D.Ky. 1989), wherein the court analyzed the nature of the penalties assessable pursuant to KRS Chapter 350, and concluded that they were not pecuniary in nature and therefore non-dischargeable pursuant to 11 U.S.C. '523(a)(7). At 23-24. This Court must come to the same conclusion in the case at bar.
In addition, the plaintiff having raised the issue of the Cabinet's failure to object to the discharge of these debts, this Court would go on to observe that the Cabinet is correct in its assertion that pursuant to 11 U.S.C.'523(c), a complaint objecting to discharge is only required of creditors seeking such determination pursuant to '523(a))2), (4), and (6) within the allotted time. Since the exception to discharge is being sought pursuant to '523(a)(7), such requirement does not apply.
Federal Rule of Civil Procedure 56(c) provides in part that "[t]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." In addition, FRCP 56(e) provides in part that "[w]hen a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party."
, especially in view of the fact that the plaintiff has not responded in the manner required by FRCP 56(e). It is therefore the opinion of this Court that the Cabinet's Motion for Summary Judgment should be SUSTAINED.
By the Court -
Norman L. Bennett, Esq.
Charles K. Belhasen, Esq.