Cause #: 00-151F
Caption: Klann, et al. v. Wright Timber & Veneer Co., Inc., et al.
Administrative Law Judge: Lucas
Attorneys: Clark; Due
Date: September 16, 2002
NONFINAL ORDER OF SUMMARY JUDGEMENT
[NOTE: ON SEPTEMBER 24, 2002, THE CLAIMANTS FILED OBJECTIONS TO THE FINDINGS AND NONFINAL ORDER OF SUMMARY JUDGMENT BY THE ADMINISTRATIVE LAW JUDGE. THE OBJECTIONS WERE SCHEDULED FOR ORAL ARGUMENT ON NOVEMBER 19, 2002, BEFORE THE NATURAL RESOURCES COMMISSION. ON NOVEMBER 18, 2002, THE PARTIES REPORTED A SETTLEMENT HAD BEEN ACHIEVED. ORAL ARGUMENT WAS CANCELED, AND THE ALJ'S NONFINAL ORDER WAS NOT ACTED UPON. INSTEAD, ON NOVEMBER 22, 2002, A FINAL ORDER OF DISMISSAL WAS ENTERED BASED UPON THE SETTLEMENT.]
The material facts are not in dispute. Summary judgment is granted in favor of Wright Timber & Veneer Company, Inc.; Imperial Lumber, Inc.; and, Safeco Insurance Company against Paula Klann and Johne Girdley based upon lack of jurisdiction in the Commission to provide the Claimants with relief under IC 25-36.5-1. The cross-claim by Wright Timber against Mary Fiscus and against Mike Fiscus is made moot and is dismissed. Entry of summary judgment is specifically made without prejudice to Paula Klann and Johne Girdley to seek relief, in a civil court, based upon waste or another legal theory other than the Timber Buyers Act.
FINDINGS OF FACT
1. Paula Klann and Johne Girdley (the "Claimants") obtained fee simple ownership of real estate containing approximately 69 acres and located in Carr Township, Jackson County, Indiana that they purchased on November 3, 1989 from Robert W. Wheeler and Shirley A. Wheeler, husband and wife (the "subject property"). Their purchase of the subject property is evidenced by a warranty deed recorded with the Jackson County Recorder in Deed Record 199, pages 227 and 228, on November 3, 1989.
2. On November 8, 1989, the Claimants granted on the subject property "a life estate for the term of her life" to Mary Evelyn Fiscus ("Mary Fiscus"). The life estate is evidenced by a warranty deed recorded with the Jackson County Recorder in Deed Record 199, pages 270 and 271, on November 10, 1989. This deed places no restrictions on Mary Fiscus on use of the land beyond those limitations that exist by operation of law.
3. A "life estate" is a freehold interest in land limited in duration to the life of the recipient of the interest. The "remainderman" is the holder of an interest in land that becomes effective immediately upon the termination of the life estate. Long v. Horton, 126 Ind. App. 651, 133 N.E.2d 568 (Ind. App. 1956) and Black's Law Dictionary, p 1293 (6th Ed., West Publishing Co., 1990).
4. With transfer of the life estate to Mary Fiscus, the interest of the Claimants in the subject property became that of remaindermen.
5. Mary Fiscus is the mother of Paula Klann. Mary Fiscus had lived on the subject property since
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1978.
6. Johne Girdley testified trees could be cut from the subject property for firewood. Johne Girdley Deposition (October 2, 2001) page 14. Paula Klann was aware trees had been cut for firewood. Paula Klann Deposition (October 2, 2001) pages 27 and 28 and pages 82 and 83. The Claimants did not specifically authorize Mary Fiscus to cut and sell timber from the subject property. Affidavit of Paula Klann (March 23, 2001) and Affidavit of Johne Girdley (March 26, 2001).
7 .Neither did the Claimants inform Mary Fiscus that she could not cause timber to be cut and sold from the subject property.
8. Paula Klann testified that when she gave Mary Fiscus the right to live on the subject property, there were "no specific instructions" as to what she could or could not do. "She's my mother. She wanted to live there, so Johne [Girdley] built a house and she lived on the property. They took an interest in it in that if people were dumping on the property they would call the property authorities and try to get that trash removed. As far as any specific instructions, do this or don't do that, because she's my mother, I guess we never felt we needed to give any special instructions like you might do for someone, a tenant, someone that was living on the property and paying rent." Paula Klann Deposition pages 32 and 33.
9. When the life estate was transferred to Mary Fiscus, there was no discussion as to what she could or could not do with the subject property. Mary Fiscus Deposition (December 18, 2001) pages 10 and 11.
10. In response to a question as to whether any conditions were placed on Mary Fiscus when she was deeded a life estate on the subject property, Johne Girdley answered: "No, not really. It was Paula's mom and usually if she needed something she would ask me and, you know, we would do it, which wasn't ever very much, gravel for the road or this or that like that." Johne Girdley Deposition page 13.
11. While Mary Fiscus lived on the subject property, she sold timber [as part of a transaction not at issue in this proceeding] in order to obtain money to repair her back porch. She initially sold what she recalled to be 20 trees for $2,000. Mary Fiscus Deposition pages 12 and 13. In response to a questions as to whether she asked the Claimants for permission to sell the 20 trees, Mary Fiscus responded: "No 'cause I didn't think I needed permission, 'cause I was fixing the porch. I have never asked for permission." She used the money not only to repair the porch but also to fix the driveway. Mary Fiscus Deposition page 15.
12. A visitor to her residence "fell through" the front porch, and Mary Fiscus determined in 1998 she also needed funding for its repair. Mary Fiscus Deposition pages 18 and 19.
13. Mickel J. Fiscus, the son of Mary Fiscus, testified that he recommended his mother sell timber from the subject property to address financial circumstances that had become "pretty grim". He stated: "I'm the one that brought it up. Just sell some of the trees and take care of what you need to take care of." Mickel J. Fiscus Deposition (December 18, 2001) page 9.
14. Mary Fiscus testified she read an advertisement by Wright Timber & Veneer Co., Inc. ("Wright Timber") for timber purchases in the Banner newspaper and decided to contact Wright Timber. She later entered into discussions with an agent for Wright Timber concerning a possible purchase and sale. Mary Fiscus Deposition pages 18 through 20.
15. On December 10, 1998, Wright Timber entered into a written "Timber Purchasing Contract" with Mary Fiscus for the purchase and sale of standing timber located on the entire tract of the subject property.
16. The Timber Purchasing Contract provided for the sale of standing timber 18 "inches and larger saw cut at the stump. This measurement
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is the largest diameter outside the bark when a tape is laid across the cut stump. Stump height may be at ground level or higher depending on terrain, tree size, or merchantability. Top logs may be taken down to 6 inches in diameter outside the bark."
17. The Timber Purchasing Contract provided payment: "For the sum of Four Thousand Two Hundred Dollars ($4,200.00). Five Hundred Dollars ($500.00) is being paid as a down payment which applies toward the purchase price. This down payment is considered liquidation damages if the timber is not purchased. The timber will be paid for in full before a tree is cut."
18. In the Timber Purchasing Contract, Mary Fiscus covenanted that she was "the lawful owner" of the timber, "that there is no indebtedness or encumbrances" against the timber, and that she "has the legal right to sell said timber. If encumbered," the Timber Purchasing Contract provided Mary Fiscus "must obtain permission to cut the timber before accepting full payment."
19. Mary Fiscus was questioned in her deposition:
Q It says the seller covenants that they are the lawful owner of the above selected timber.
A Yea, I thought I was.
Q So the time Exhibit "1" [Timber Purchasing Contract] was entered into, you felt that you were the lawful owner of the four acres?
A No, I didn't own it, but with a life estate, I thought I would have the right to cut timber and keep the place up. It wasn't like I was going to sell it and buy a new car or anything. I just wanted to fix the back porch. And then the front porch fell in later.
Mary Fiscus Deposition page 23.
20. The parties cite reported Indiana decisions from the 18th century and the early 19th century that consider the relationship between the holder of a life estate and the remaindermen with respect to timber harvests.
21. Most of these early decisions are directed to the responsibility of the holder of the life estate not to commit "waste" to the detriment of the remaindermen. A widow who receives a life estate from her deceased husband is liable to the remaindermen for the value of trees cut and removed from the land. Modlin et ux. v. Kennedy et al., 53 Ind. 267 (Ind. 1876). A widow who receives a life estate may use timber to repair buildings, fences, and similar improvements to the land, but she is liable to the remaindermen if she commits waste. Miller v. Shields et al., 55 Ind. 71 (Ind. 1876). The remaindermen may enjoin a life tenant from cutting and removing trees from the land, as constituting waste, if the activity will cause irreparable injury to the fee simple. Robertson v. Meadors, 73 Ind. 43 (Ind. 1880). The remaindermen may, by injunction, prohibit the life tenant from cutting and removing timber from their land. Richmon Nat. Gas Co. v. Davenport, 37 Ind. App. 25, 76 N.E. 525 (Ind. App. 1905).
22. One of the decisions reflected generally upon the common law rights of the life tenant then found that a remainderman was without legal authority to enter upon the land and harvest trees during the life tenancy. "At common law the life tenant, as compensation for the duty of keeping the premises in repair, had the right to cut
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timber for use upon the land, for the repair of buildings, for fuel, for house-bote, and for the erection of hedges and fences. If the holder of the life estate exceeded the amount necessary for these purposes he was deemed guilty of waste and liable to the reversioner for damages." A remainderman cannot enter land in possession of the life tenant for the purpose or removing timber because the action would be a trespass. Brugh, et al. v. Denman, 38 Ind. App. 486, 78 N.E. 349 (Ind. App. 1906).
23. The central element of this proceeding is not, however, an action by the remaindermen (the Claimants) seeking relief against the holder of the life estate (Mary Fiscus). Rather it is centered upon the Claimants' contention that Mary Fiscus was not a timber grower who could sell the timber. The Claimaints argue they are instead the timber grower, and as a consequence of the allegedly wrongful sale by the holder of the life estate, entitled to relief against Wright Timber under IC 25-36.5-1 (the "Timber Buyers Act").
24. The subject matter jurisdiction of the Natural Resources Commission (the "Commission") is here founded solely upon the Timber Buyers Act. More particularly, IC 25-36.5-1-3.2 establishes a process for Commission review under IC 4-21.5 where a timber grower files a complaint alleging a "timber buyer" or a another person has wrongfully cut timber on the timber grower's land. With their "Complaint for Damages" filed on August 17, 2000, the Claimants sought relief under the Timber Buyers Act. Where jurisdiction is conferred by the Timber Buyers Act, the Commission may, in a proper case, also determine other related claims and cross-claims among the parties, including those derived from common law, based upon the "doctrine of primary jurisdiction".
25. The doctrine of primary jurisdiction is an invention of the United States Supreme Court to address the problem that arises when the courts and an agency both have claims to jurisdiction in a case. Under the doctrine, the judicial process may be suspended or await completion of the administrative process, and the agency may review matters ordinarily outside its subject matter jurisdiction, in order to develop a comprehensive record for ultimate judicial review. The doctrine of primary jurisdiction is prudential rather than jurisdictional. Austin Lakes Joint Venture v. Avon Util., 648 N.E.2d 641, 645 (Ind. 1995).
26. If the Timber Buyers Act is inapplicable, the Commission has no basis for considering the parties' other claims for relief. All other claims rest within the exclusive jurisdiction of the courts, and the doctrine of primary jurisdiction has no application. A threshold determination, ripe for consideration upon summary judgment, is then whether the Claimants have stated a claim upon which the Commission can grant relief under the Timber Buyers Act.
27. This determination requires a review of the common law pertaining to the holders of life estates, remaindermen, and their efforts to sell standing timber to third persons.
28. The parties to this proceeding cite no cases where the Indiana courts have determined the right of remaindermen to bring a civil action against a timber buyer for timber sold by the holder of the life estate. More directly on point, the parties cite no cases where Indiana courts have determined the right of remaindermen to bring an action, under the Timber Buyers Act, against a timber buyer for timber sold by the life tenant. Similarly, extensive research efforts by the Administrative Law Judge suggest the case is one of first impression in Indiana.
29. Similar facts were, however, considered in a recent case from the state of Mississippi. There the remaindermen sought relief under that state's timber buyer statute against the timber buyer and the holder of the
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life estate. The Court of Appeals of Mississippi determined relief was not available under the timber buyer's statute in Twin States Land & timber Co. v. Chapman, 750 So.2nd 567 (Miss. App. 1999):
The first question before the Court in this appeal is whether a remainderman may recover statutory damages and penalties [under the Mississippi's timber buyer statute] from the life tenant (or those acting under authority of the life tenant) for alleged wrongful harvesting of timber. We determine that a remainderman may not maintain such an action, but that his sole remedy is the common law action of waste.
The statute in question...imposes liability on "any person [who] shall cut down...or take away any tree without the consent of the owner of such tree..." The statute provides damages of double the value of the timber together with certain costs associated with reforestation of the land....
The Mississippi Supreme Court has said that an earlier version of the statute was highly penal in nature and, therefore, subject to strict construction in its application.... We are satisfied that the present version of the statute is also highly penal and, therefore, understand our obligation to strictly interpret the statute's provisions....
. . . .
The life tenant, in the enjoyment of his tenancy, may harvest the timber under certain circumstances without the consent or cooperation of the remaindermen. These circumstances include (a) when necessary to raise funds to pay the taxes on the property, (b) to provide timber for repair of fences and other improvements on the property, and (c) such harvesting as is indicated in the proper management and preservation of the property.... It is only when the life tenant has been found to be harvesting the timber solely as a commercial enterprise, thereby damaging the value of the remaindermen's estate, that the life tenant may be enjoined from further cutting and also be made to respond in damages for the diminished value of the remainder interest under principles of common law waste.
Nevertheless, even in that circumstance, the life tenant's liability does not arise based upon his lack of any ownership interest in the unsevered timber comprising a part of the land. Rather, the liability arises because the life tenant has abused those ownership rights that arise under his tenancy to the detriment of the remainder estate.... [Citations omitted. Emphasis supplied by the Court.]
30. The reasoning in Twin States Land & Timber Company, Inc. v. Chapman is found to be persuasive. In Indiana, a "timber grower" refers to the "owner, tenant, or operator of land who has an interest in, or is entitled to receive any part of the proceeds from, the sale of timber grown in this state." IC 25-36.5-1-1. The holder of a life estate qualifies as a
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timber grower. Mary Fiscus is a timber grower under the Timber Buyers Act. As with its counterpart in Mississippi, Indiana's Timber Buyers Act provides for compensation that is penal in nature (three times stumpage value) and must be strictly construed. If the life tenant has liability for unsevered timber, the liability is based upon abuse of ownership rights under the tenancy to the detriment of the remainder estate. The liability does not arise based upon a lack of ownership interest by the holder of the life estate. The Timber Buyers Act does not confer authority in the Commission to provide relief to a remainderman against a timber buyer for the harm attributed to a sale by the life tenant. If the Claimants have a valid claim, it is upon a civil action against Mary Fiscus for waste.
31. The deposition of Mary Fiscus suggests she may believe she is aggrieved by the actions of Wright Timber or another person. Mary Fiscus has not, however, initiated a proceeding before the Commission nor has she filed a cross-claim or counterclaim.
32. Summary judgment must properly be granted in favor of Wright Timber and against Paula Klann and Johne Girdley based upon lack of jurisdiction in the Commission to provide them relief under the Timber Buyers Act. Similarly, summary judgment must be granted to Imperial Lumber, Inc. and Safeco Insurance Company against Paula Klann and John Girdley. The cross-claim by Wright Timber against Mary Fiscus and Mike Fiscus is mooted. Entry of summary judgment must properly be made without prejudice to Paula Klann and Johne Girdley to seek relief, in a civil court of competent jurisdiction, based upon waste or another legal theory other than the Timber Buyers Act.