[CITE: Prohosky v. DNR and Prudential Insurance, 5 CADDNAR 193 (1991)]
[VOLUME 5, PAGE 193]
Cause #:89-061W
Caption: Prohosky
v. DNR and Prudential Insurance
Administrative Law Judge: Teeguarden
Attorneys: Muenich; McInerny, DAG; Ponader
Date: February 1, 1991
[NOTE: JUDICIAL REVIEW WAS
TAKEN ON JUNE 20, 1991 TO THE NEWTON SUPERIOR COURT IN CAUSE NO. 56D019106CP50.
THE NEWTON SUPERIOR COURT GRANTED A MOTION TO DISMISS FILED BY THE DEPARTMENT;
AND PROHOSKY APPEALED. THE COURT OF APPEALS REVERSED AND REMANDED IN PROHOSKY
V. DNR AND PRUDENTIAL INSURANCE (56A03-9203-CV-83). DECISION ON THE MERITS IS
AWAITED. PRESUMED DISMISSED.]
ORDER: Robert and Wanda Prohosky,
claimants, are denied recovery or relief provided by IC 13-2-2.5-10.
FINDINGS OF FACT:
1. The department of natural resources (DNR) is an agency within the meaning of IC 4-21.5.
2. IC 4-21.5, IC 13-2 and 310 IAC 0.6 apply to this proceeding.
3. The natural resources commission (NRC) is the ultimate authority within the meaning of IC 4-21.5 for administrative appeals of DNR decisions.
4. The DNR is the agency responsible for administering IC 13-2-2.5 the Indiana Ground Water Emergency Act (GWEA).
5. On August 17, 1988, Robert and Wanda Prohosky (Prohosky), residents of Newton County, Indiana, filed a complaint with the DNR pursuant to the GWEA.
6. This complaint alleged a failure of a well on Prohosky's property.
7. Prudential Insurance company of America (PIC) operates Fair Oaks Farms in Newton County, Indiana and in conjunction with the farm operates a registered significant ground water withdrawal pumping system for irrigation.
8. Pursuant to the GWEA, the DNR promptly conducted an onsite investigation and determined that the well in question failed as a result of the lowering of the groundwater level which exceeded normal fluctuations.
9. The Director of the DNR declared a ground water emergency existed in portions of Jasper and Newton Counties pursuant to the GWEA on August 18, 1988.
10. Prohosky was a beneficiary of the August 18, 1988 declaration, and pursuant to the GWEA, the Director ordered the operator of significant ground water withdrawal facilities to immediately provide temporary water supplies to Prohosky and others.
11. Further investigation led the DNR to conclude that Prohosky's well declined 90 feet during the summer of 1988 and that the continued ground water withdrawal by significant users would exceed the recharge capability of the aquifer.
12. This is not the first dispute of this type for Prohosky and PIC. Prior to the passage of the portion of the GWEA which provides remedies for well owners (1985), Prohosky and PIC were parties in a significant water rights case eventually decided by the US 7th Circuit Court of Appeals.[FOOTNOTE 1]
13. One of the results of that lawsuit was a nine-page settlement agreement signed by both Prudential and PIC.
14. In part, this agreement provided for the payment by PIC of $90,000 jointly to Prohosky and another plaintiff.
15. PIC agreed to curtail irrigation in the future to the extent ordered by the DNR.
16. PIC agreed not to install any additional irrigation systems.
17. PIC agreed to limit the amount of acreage irrigated during July, August, and early September.
18. Prohosky agreed to release PIC from all liabilities, claims, and causes of action to date and "... all damages which may be hereinafter incurred...". Damages from future water pumping were also released.
19. Prohosky also agreed not to institute any further proceedings relating to PIC's water pumping operations on Fair Oaks Farm.
20. The DNR investigation of significant water withdrawals of August, 1988, initially led the staff to the conclusion that PIC should bear 93.5% of the total cost of providing temporary water and a new well to Prohosky under the GWEA.
21. On March 1, 1989, the staff of the DNR wrote a recommendation to the NRC that because of the settlement agreement between Prohosky and PIC, there should be no compensation under IC 13-2-2.5-10 awarded Prohosky from PIC.
22. On March 28, 1989, the NRC adopted the above "no compensation" recommendation as its initial
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determination in this matter.
23. On April 21, 1989, Prohosky filed an administrative appeal of this determination.
24. PIC moved to intervene on May 12, 1989, and intervention was granted.
25. The underlying facts of this cause have been stipulated by all parties; and thus, summary judgment under the provisions of IC 4-21.5-3-23 is appropriate.
26. Prohosky
contends as follows:
a. Since the GWEA was not adopted at the time of the District Court action or settlement thereof, rights given by the GWEA could not be contracted away or released.
b. Prudential has breached the February 22, 1985, settlement agreement; and thus, the NRC and DNR cannot invoke it against Prohosky.
c. The ultimate determination by the NRC to adopt the March 1, 1989 recommendation denying compensation was done without proper notice and contrary to Statute and DNR rules.
27. PIC contends that the NRC correctly concluded the February 22, 1985, settlement agreement released PIC from paying further compensation to Prohosky.
28. The GWEA was first passed in 1982 and became effective February 15, 1982.
29. IC 13-2-2.5-3 requires an onsite investigation to be made by the
Director of the DNR within 24 hours after receiving a written complaint that a
well has failed because of the withdrawal of water by a significant ground
water facility.
30. IC 13-2-2.5-3-5 gives the Director of the DNR the power to restrict the quantity of ground water pumped by a significant ground water facility when a ground water emergency is declared.
31. The 1982 legislation did not give the DNR any jurisdiction over compensation.
32. In 1985, the legislature passed IC 13-2-2.5-10, 11 and 12 which became effective on September 1, 1985.
33. IC 13-2-2.5-10 and 11 give the NRC the right to order timely and reasonable compensation. The NRC is required to give all affected persons the opportunity to contribute before entering an initial determination. A final order can only be issued under IC 4-21.5-3.
34. Prohosky contends that the ultimate determination by the DNR was done improperly. Even assuming proper notice was not given to Prohosky that the NRC was going to recall this matter after lunch on March 28, 1988, the contention fails in that the NRC did not make a final determination. The decision made on that date was an initial decision under both 13-2-2.5 and IC 4-21.5. An ultimate or final determination can only be made upon completion of a hearing conducted under IC 4-21.5.
35. One of the purposes of an administrative hearing is to allow the agency an opportunity to correct any mistakes. An administrative hearing under IC 4-21.5 is generally de novo and as such, any prior procedural errors of the type here are cured by the hearing. Prohosky cannot prevail on this argument.
36. The next issue to be determined is the effect of the settlement agreement.
37. The DNR was not a party to the settlement agreement.
38. Prohosky contends that since the compensation sections of GWEA were not yet law, rights conveyed by the act could not be waived.
39. The settlement agreement could hardly contain less ambiguous language than paragraph 9 does: "The Prohoskys ... release and forever discharge Prudential.... from all liabilities, claims, and causes of action... and for all damages which may be hereinafter incurred as a result of Prudential's water pumping and irrigation operations..." Likewise in paragraph 10, Claimants agree "they will not institute or participate in any further proceedings,...relating to Prudential's irrigation and water pumping operations ..."
40. On its face, the settlement agreement appears to prohibit the bringing of a complaint for further damages.
41. Further, the 1982 GWEA set up the basic standards and procedures for the declaration of a ground water emergency in Jasper and Newton Counties.
42. Prohosky had some rights protected under this statute when the Federal District Court suit was brought and when it was settled.
43. The subsequent amendment of the GWEA to allow the NRC to grant limited relief to well owners including financial awards only changes the forum for the exercise of Prohosky's rights.
44. The conclusion is thus drawn that in settling their prior claim for $90,000, the Prohoskys contracted away their right to bring further GWEA complaints for compensation, whether in a court of record or in an administrative hearing.
45. Prohosky also contends that the DNR does not have jurisdiction to construe the settlement agreement because neither the DNR nor NRC is not a party.
46. In general, this contention is valid, however in this case, the issue arose as an integral part of a GWEA case.
47. There is no question that the NRC has jurisdiction over disputes involving the GWEA.
48. Shlens v. Egnatz, 508 N.E.2d 44 (1987) enunciates a principle that is basic to administrative law. If it is necessary
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to the resolution of an administrative case to decide a collateral matter normally not within the jurisdiction of the agency, the agency has the right to make a decision on that matter.
49. To decide whether or not compensation is due Prohosky, the agreement must be construed, so the NRC has the power to construe the settlement.
50. The one remaining issue deals with the breach of the settlement agreement by PIC.
51. If PIC has violated the settlement agreement, Prohosky has a right of action for breach of contract independent of any action or non-action of the DNR or NRC. Such a determination is probably not necessary for the agency to determine the present matter.
52. Nevertheless, PIC is required by the settlement agreement to curtail irrigation to the extent ordered by DNR and to monitor the ground water resources in the area. PIC is also prohibited from adding irrigation systems and limited to the acreage to be irrigated from July 1 to September 15 each year.
53. Nothing in the stipulated facts or published depositions indicate that PIC has failed to monitor, failed to curtail pumping when ordered to by DNR, added irrigation systems which mine the aquifer, or violated the July 1 through September 15 provision as to acreage irrigated. In short, no evidence of such a clear cut breach of the agreement as to allow Prohosky to retain $90,000 and be relieved of any further duties under the agreement has been shown.
54. Of interest is the DNR case of Kuss v. DNR and Prudential Insurance Company, 5 Caddnar 51, (1989). Kuss involves the same area of Indiana and the same time period as Prohosky. In July of 1988, the Director declared a ground water emergency in an area in which Kuss had a well. Kuss was a party to the 1982 Federal Court suit and signed a similar agreement as Prohosky signed.
55. Kuss raised the issues of breach of settlement by Prudential and the fact that the settlement agreement could not be applied to claims not in existence at the time of the settlement.
56. The NRC found that Prudential had not breached the settlement agreement [in Kuss] and curtailed pumping when ordered to do so by the DNR.
57. The NRC also found that the settlement agreement [in Kuss] specifically covered future damages.
58. Accordingly, Prudential is entitled to
judgment (in this proceeding].
FOOTNOTE:
(1) See Prohosky v. Prudential Insurance
Company, 767 F.2d 387 (1985) and Prohosky
v. Prudential Insurance Company, 584 F.Supp. 1337 (N.D. Ind. 1984).