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05/17/94 PEOPLE STATE ILLINOIS v. E & B COAL

May 17, 1994

THE PEOPLE OF THE STATE OF ILLINOIS, EX REL. RONALD MORSE, DIRECTOR OF MINES AND MINERALS, PLAINTIFF-APPELLANT,
v.
E & B COAL COMPANY, INC., AN ILLINOIS CORPORATION, MARGARET CHAMNESS, BARBARA EVERLY, AND EDWARD EVERLY, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Williamson County. No. 86-L-175. Honorable C. David Nelson, Judge Presiding.

Goldenhersh, Rarick, Maag

The opinion of the court was delivered by: Goldenhersh

JUSTICE GOLDENHERSH delivered the opinion of the court:

Plaintiff, People of the State of Illinois ex rel. Ronald Morse, Director of Mines and Minerals, filed this action to collect fines in the amount of $355,445 for violations of the Surface Coal Mining Land Conservation and Reclamation Act (the Act) (Ill. Rev. Stat. 1989, ch. 96 1/2, par. 7901.01 et seq. (now 225 ILCS 720/1.01 et seq. (West 1992)). Plaintiff appeals from a summary judgment of the circuit court of Williamson County in favor of defendant, Margaret Chamness, and an order dismissing the action against defendant, Edward Everly, for lack of personal jurisdiction. A default judgment was entered against defendant, E & B Coal Company, Inc., for the total civil penalties. In this appeal, plaintiff contends that (1) the trial court erred in granting summary judgment in favor of Margaret Chamness and misapplied the civil penalty provision of the Act; (2) the trial court erred in finding that it had no personal jurisdiction over Edward Everly; and (3) the trial court erred in allowing Edward Everly to use the fifth amendment (U.S. Const., amend. V) as a shield to avoid producing documents pursuant to plaintiff's discovery request. We affirm in part, reverse in part, vacate in part, and remand.

I

The facts of this case are largely undisputed. In 1978, Bert Chamness incorporated E & B Coal Company, Inc. (E & B). Chamness and his wife, Margaret Chamness, jointly owned all of E & B's stock. Shortly thereafter, E & B obtained permits from the Department of Mines and Minerals (the Department) to mine coal at three different sites. Pursuant to mining permit regulations, E & B obtained reclamation bonds totaling $920,555, which were later forfeited to the State. Bert Chamness died in 1981, at which time Margaret Chamness succeeded him as president of E & B. Their son-in-law, Edward Everly, was named as a director at that time and served in that capacity until July 1984. E & B operated strip mines known as Crenshaw mine, Spillertown mine, and Corinth mine. From 1981 to 1983, E & B completed existing and renewed coal contracts and short-term orders. The coal contracts began to expire in late 1983, at which time E & B received only periodic short-term orders. At the Crenshaw mine, the landowner obtained an injunction prohibiting E & B access to the site from late 1981 or early 1982, and E & B was unable to further mine that site. In 1984, the Internal Revenue Service levied on all E & B bank accounts, eliminating operating capital. Shortly thereafter, creditors foreclosed on and repossessed all of E & B's real property and equipment. From 1981 to 1985, E & B had insufficient cash to maintain equipment payments and payroll, and periodic compliance with reclamation notices was accomplished where manpower and equipment were available. Additionally, a State inspector or agent allegedly advised Margaret Chamness not to worry about reclamation because E & B had paid for bonds and the bonding company would be responsible for the reclamation.

On December 15, 1986, plaintiff filed a complaint against E & B, Margaret Chamness, Edward Everly, and Barbara Everly, seeking civil penalties pursuant to section 8.04 of the Act. (Ill. Rev. Stat. 1985, ch. 96 1/2, par. 7908.04 (now 225 ILCS 720/8.04 (West 1992)).) The complaint alleged that E & B had Violated provisions of the Act for which it received numerous notices of violation and cessation orders. The complaint also alleged that the individual defendants, as directors and/or officers of E & B, were personally liable for the civil penalties assessed against E & B since they had each "willfully and knowingly authorized, ordered and carried out the violations described in the aforementioned notices of violation and also willfully and knowingly authorized, ordered and carried out the failures and refusals to comply with the aforementioned cessation orders." E & B and Margaret Chamness were served with process. Margaret Chamness filed a motion to dismiss on the grounds that the complaint failed to state a cause of action because, inter alia: (1) on the notices of violation, the Department had expressly related the underlying violations to be the result of negligence and not knowing and wilful conduct; and (2) the complaint failed to allege notice of the notices of violation and cessation orders to any party other than E & B. On May 6, 1987, the trial court granted Margaret Chamness' motion to dismiss, and plaintiff was ordered to replead within 21 days. On May 12, 1987, the complaint was confessed against E & B, and judgment by default was entered for the total civil penalties of $355,445.

Subsequent to the judgment against E & B and over the course of the litigation, the remaining counts of the complaint were amended and/or exhibits added as to Margaret Chamness and as to Edward Everly. On May 25, 1990, plaintiff's final amended complaint against the individual defendants was filed. According to the amended complaint, the Department issued to E & B 20 notices of violation and proposed penalties ranging from $300 to $1,530 for violations of the Act. Attached to the complaint were the notices of violation, which stated the nature of the violation, the area of operation affected, the remedial action to be taken, the time frame for abatement of the violation, and the calculation of the penalty. Examples of these violations were: (1) failing to monitor surface water for the months of July through September 1983 at the Corinth and Crenshaw mines; (2) failing to regrade land within 11 months of active mining; (3) discharging toxic water which did not meet applicable environmental standards which affected the holding pond at E & B's # 2 mine; and (4) conducting mining operations outside the permit area.

The complaint further alleged that 15 cessation orders were subsequently issued to E & B for failing to take the corrective action required by the notices of violation to abate the violation, such as failing to treat or cover and revegetate exposed toxic areas, or failing to begin grading of affected area within the time limit. Each cessation order carried a penalty of $22,500. The sum was calculated as a minimum $750 penalty for each day (up to 30 days) during which there was a failure to take the corrective action indicated by the notice of violation.

The notices of violation and the cessation orders were sent by certified mail, addressed to Margaret Chamness and E & B. Margaret Chamness acknowledged service by signing 35 return receipts. As to the individual defendants' status with E & B, the complaint alleged that Margaret Chamness was president, registered agent, and director; that Barbara Everly was secretary-treasurer and director; and inter alia, that Edward Everly was shareholder, director, and officer of E & B prior to its involuntary dissolution. The complaint alleged that each continued to act as an agent of E & B thereafter. In response to pleading challenges by Edward Everly, the complaint further alleged:

"In his various capacities with defendant E & B Coal Co., Inc., defendant Edward Everly attended meetings in Carterville, Illinois of the board of directors of defendant E & B Coal Co., Inc. on September 10, 1981 and December 15, 1982; wrote letters to plaintiff on March 31, 1983, July 29, 1983 and March 9, 1984; personally received in Williamson County, Illinois an earlier notice of violation and cessation order from plaintiff on March 30, 1983; accompanied plaintiff's representative on March 31, 1983 on an inspection of one of defendant E & B Coal Co., Inc.'s mines in Williamson County, Illinois; met at plaintiff's office in Marion, Illinois on July 28, 1983 with plaintiff's inspector; and made a complaint by telephone to plaintiff on January 3, 1984 on behalf of defendant E & B Coal Co., Inc. In addition, as its attorney, defendant Edward Everly represented defendant E & B Coal Co., Inc. on June 8, 1984 in an administrative hearing in Springfield, Illinois regarding the earlier cessation order. After April 1, 1985 defendant Edward Everly continued to act as an agent of the dissolved defendant E & B Coal Co., Inc. and carried on its business.

The respective counts further alleged, as to each of E & B's agents:

"[The defendant] willfully and knowingly authorized, ordered and carried out the failures and refusals to pay the penalties assessed as [a] result of the aforementioned Notices of Violation and also willfully and knowingly authorized, ordered and carried out the failures and refusals to comply with the aforementioned Cessation Orders and to pay the penalties assessed as [a] result thereof."

Pursuant to the Act, judgment on the civil penalties against the individual defendants was requested. In addition to counts II and IV seeking civil penalties, count V further alleged that defendants are required by section 8.06 of the Act (Ill. Rev. Stat. 1989, par. 7908.06 (now 225 ILCS 720/8.06 (West 1992))) to reclaim the subject mined land pursuant to the notices of violation and cessation orders previously issued; that their failure to reclaim the land has caused irreparable damage to the People; and that based ...


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