[CITE: Stell v. Allen, d/b/a, A& S Logging,
12 CADDNAR 124 (2009)]
[VOLUME 12, PAGE 124]
Cause #: 08-192F
Caption: Stell v.
Allen, d/b/a, A & S Logging
Administrative Law
Judge: Lucas
Attorneys: Miller
(Stell); Wallsmith (Allen); Jenks (Capitol Indemnity); Boyko (DNR)
Date: August 21, 2009
FINAL ADMINISTRATIVE
JUDGMENT
Item (1) Effective September 1,
2009, S. Cameron Stell is granted an administrative judgment against Cheyenne
Allen, doing business as A&S Logging, in the amount of $22,175.
Item (2) Effective October 1, 2009,
S. Cameron Stell is granted an administrative judgment and is entitled to
forfeiture of the bond, posted with the Department of Natural Resources under
the Timber Buyer Act on behalf of Cheyenne Allen, against the Capitol Indemnity
Corporation in the amount of $20,000.
Item (3) The compensation to which
S. Cameron Stell is entitled under this administrative judgment shall not
exceed the total amount of $22,175.
Item (4) This administrative
judgment addresses all issues of damage and responsibility over which the
Natural Resources Commission has jurisdiction, under IC § 25-36.5-1-3.2(j), and, after
completion of the opportunity for judicial review under IC § 4-21.5, may be enforced in a civil proceeding as a judgment.
FINDINGS OF FACT
WITH CONCLUSIONS OF LAW
A. Statement of the Case
1. S. Cameron Stell (the “Stell”) initiated the proceeding when, through his
attorney, Michael B. Miller, he filed a “Complaint Against Timber Buyer” (the
“Complaint”) with the Natural Resources Commission (the “Commission”) on
December 3, 2008 against Cheyenne Allen, doing business as A&S Logging
(“Allen”). The Complaint sought relief
under Ind. Code § 25-36.5 (sometimes referred to as the “Timber Buyer Act”) and
312 Ind. Admin. Code § 14, rules adopted by the Commission to assist with
implementation of the Timber Buyer Act. The
Timber Buyer Act provides for the regulation of timber buyers and other persons
associated with the enterprise of timber harvesting.
2. The Complaint is procedurally governed by IC § 4-21.5 (sometimes referred to as the “Administrative Orders and Procedures Act” or “AOPA”) and rules adopted by the Commission at 312 IAC § 3-1 to assist with its implementation of AOPA.
3. Stephen L. Lucas was appointed the Commission’s administrative law judge. He served a “Notice of Prehearing Conference” upon Stell and Allen. The initial prehearing conference was conducted as scheduled on December 29, 2008. Stell was present in person and through his attorney. Allen was present in person and through his attorney. In the “Notice of Prehearing Conference”, the administrative law judge ordered the Department of Natural Resources (the “DNR”) added as a party because the DNR is the regulatory authority responsible for administration of the Timber Buyer Act. The DNR was present at the prehearing conference through Duane McCoy, an employee of the DNR’s Division of Forestry.
4. On March 4, 2009, Stell by his attorney filed a “Motion for Leave to File Amended Complaint Against Timber Buyer and Surety”. Attached to the motion was an “Amended Complaint Against Timber Buyer and Surety” (the “Amended Complaint”). The administrative law judge made an “Entry with Respect to the Claimant’s Motion for Leave to File Amended Complaint Against Timber Buyer and Surety” on March 6, 2009 in which the existing parties and Capitol Indemnity Corporation were provided until March 20, 2009 to respond to the motion.
[VOLUME 12, PAGE 125]
5. On March 12, 2009, Beth A. Jenks, Claims Specialist for Capitol Insurance Companies, filed correspondence which stated in substantive parts:
Notice of the Motion for Leave to File Amended Complaint Against Timber Buyer and Surety…is acknowledged. We are in the process of establishing a claim file and collecting all the necessary underwriting information regarding the IN Timber Buyers Bond issued on behalf of our principal. In addition, we are pursuing [Allen], demanding that [he] resolve this claim without our further involvement.
We have no objection to the Motion however respectfully bring to your attention Cause #09-036F which remains unresolved as of this date. We wish to point out that the penal sum of the above referenced bond is $20,000.00.
This letter shall not be construed as a waiver of Capitol Indemnity Corporation’s rights or defenses, all the same being specifically reserved.
6. Neither Allen nor the DNR objected to Stell’s motion referenced in Finding 4. On March 24, 2009, the administrative granted the motion. Capitol Indemnity Corporation was added as a party and leave was granted to serve the Amended Complaint.
7. Stell, Allen, the DNR, and Capitol Indemnity Corporation are collectively the “Parties”.
8. With the omission of attachments and structural elements, the Amended Complaint provided as follows:
Comes now S. Cameron Stell, and for his amended complaint against Cheyenne Allen d/b/a A&S Logging, and Capitol Indemnity Corporation, states:
1. The plaintfiff (timber grower) S. Cameron Stell, resides at 283 E. 311 North, Valparaiso, Indiana (Porter County).
2. The defendant (timber buyer) Cheyenne Allen, has the following address: 2340 E. 800 South, North Judson, IN 46366. The timber buyer acquired timber from the timber grower under a written contract for the sale of timber without payment having been made to the timber grower as specified in the contract.
3. On or about November 7, 2007, the parties entered into a timber contract pertaining to Stell’s Porter County property…. To summarize the contract, Cheyenne Allen had the right to cut or take all useable timber on 12 acres (+or-) down to 14” on stump and everything on the ground; and in exchange he was to provide enough cherry wood (approx. 1000 board feet worth a total of $6900.00) to S. Cameron Stell to build a set of kitchen cabinets.
4. Cheyenne Allen also agreed and was otherwise obligated to clean up the woods, and grade and reseed the areas torn up by his trucks and equipment.
5. The subject timber was cut by Cheyenne Allen between November 7—November 30, 2007; he cut and removed approximately 214 trees (See appraisal of Wakeland Forestry Consultants, Inc. attached hereto as Exhibit B) from Stell’s Porter County property located at 283 E. 311 North, Valparaiso, Indiana.
6. Cheyenne Allen breached the contract and his duties in the following ways:
a. He paid no consideration for the trees he took (stumpage value $20,675.00 per appraisal attached).
b. Initially, he was cleaning up as he went, but for most of the work he failed to remove tree tops, branches and debris. Later, he quoted $6500.00 to clean up the tree tops, branches and debris.
c. He failed or refused to repair the ruts in the lane caused by his trucks and equipment which cost $1000.00 to repair and regrade.
[VOLUME 12, PAGE 126]
7. As a result of Cheyenne Allen’s breach of contract and wrongful activities as aforesaid, S. Cameron Stell suffered and seeks damages pursuant to Indiana Code 25-36.5 as follows:
Compensation for damages actually resulting from wrongful activities of timber buyer/cutter:
Repair and regrade of lane $1000.00
Clean up tree tops and debris 6500.00
Appraiser Fees 1086.00
Attorney Fees and expenses 3000.00
Compensation for 3 times stumpage value of timber appropriated without payment:
3 x $20,675.00 = $62,025.00
8. Capitol Indemnity Corporation is named as a party defendant because it is surety for Cheyenne Allen d/b/a A&S Logging & Sawmill, and it is obligated to pay S. Cameron Stell all sums described above…..
Wherefore S. Cameron Stell requests the Department of Natural Resources to commence proceedings against Cheyenne Allen and Capitol Indemnity Corporation, to set this matter for trial on or about May 14, 2009, and thereafter to award judgment in favor of S. Cameron Stell for all relief requested, and any other relief that is proper.
9. The DNR did not commence a proceeding under IC § 25-36.5-1-3.2(b),[1] as may have been anticipated by Stell’s prayer in the Amended Complaint, but a timber grower is also authorized to initiate a proceeding under IC § 25-36.5-1-3.2(c). The Amended Complaint avers that Stell is a timber grower. None of the Parties objected to the matter being prosecuted under IC § 25-36.5-1-3.2(c), and the proceeding is governed accordingly.
10. The Commission is the “ultimate authority” under AOPA for an action applying IC § 25-36.5-1-3.2. 312 IAC § 14-1-2(d) and Chacon v. Richards Sawmill, et al., 10 Caddnar 311, 312 (2006).[2]
11. The Commission has jurisdiction over the subject matter and over persons of the Parties.
12. On April 20, 2009, the administrative law judge served a “Notice of Hearing” upon the Parties or their attorneys which scheduled the proceeding for hearing on May 14, 2009. In response to the reservation of rights and defenses asserted by Capitol Indemnity Corporation in Finding 5:, the notice included the following admonition: “Capitol Indemnity Corporation must appear and participate in the scheduled hearing, presenting any appropriate evidence as to rights and defenses, or the....Commission may enter an administrative judgment against Capitol Indemnity Corporation to the full extent of the Commission’s jurisdiction.”
13. A hearing was conducted as scheduled on May 14, 2009 at North Judson, Indiana. Stell and Allen were present in person and through their attorneys. The DNR and Capitol Indemnity Corporation did not attend or participate.
14. After close of the hearing, the Parties were provided until June 15, 2009 to file a brief, to propose findings of fact and conclusions of law with a nonfinal order, or to do both. On June 11, 2009, a “Post Trial Brief in Support of S. Cameron Stell’s Claims” was timely filed. No other party elected to file a brief or to propose findings of fact and conclusions of law with a nonfinal order. The proceeding is ripe for disposition.
[VOLUME 12, PAGE 127]
B. Evidence at
Hearing
15. Brian Michael McDonald (“McDonald”) testified he has lived with Stell at 283 East, Porter County Road 311 North, Valparaiso, Indiana (the “subject property”) since January 2007. The subject property contains approximately eleven acres and includes parcels described as A, 6, and 7 in a survey admitted as Claimant’s Exhibit A. Stell has owned the subject property since June 2006. His house is located on parcel 7.
16. McDonald testified he is self-employed performing “home maintenance”[3]. On cross-examination, he testified he had been doing home maintenance “for quite a while”. The work consists of “yard work and things like that”, but he is not licensed and does not do “code work” or structural work. Previously in Florida, McDonald did lawn maintenance. Ten years ago, he worked in the office of a small engineering firm doing accounting and “basic office management”, but he is not an accountant.
17. McDonald testified Stell telephoned Allen about a possible timber sale on the subject property. Stell and Allen made arrangements to meet at the subject property for the purpose of negotiating a purchase and sale. McDonald testified the meeting occurred on November 7, 2007 with Stell, McDonald, Allen, and Allen’s young son attending.
18. During the November 2007 meeting, Stell informed Allen a third person was interested in obtaining cherry wood for cabinets in exchange for the purchase of standing timber. McDonald testified Allen was informed the exchange also needed to include the labor for preparation of the cabinets. Allen responded an exchange of this nature was “not a problem. He does it all the time.” At the time of the November meeting, Stell did not know the quantity of cherry required to complete the cabinets because the third party had not “confirmed with the carpenter because she didn’t have a layout of a kitchen yet.” On cross-examination, McDonald confirmed that none of the Parties knew how much cherry lumber would be required to perform the contract. On direct examination, he testified Allen was told the third person was “on a budget” and wanted the barter exchange to provide that Allen would directly compensate the carpenter for his labor. He testified Allen said the cherry lumber would not necessarily come from the subject property, but providing Stell with appropriate cherry lumber was “not a problem”.
19. McDonald testified that in July 2008, the third person informed Stell she no longer wanted the lumber for the cherry cabinets.
20. McDonald testified a written contract was entered between Stell and Allen at the conclusion of the November 2007 meeting (the “written contract”). A copy of the written contract was admitted by stipulation of the Parties as Claimant’s Exhibit B[4]:
21. The evidence is undisputed that no written memorandum was entered regarding the terms of an agreement between Stell and Allen subsequent to entry of the written contract.
[VOLUME 12, PAGE 128]
22. McDonald testified the written contract was developed on a form provided by Allen and that the hand-written additions to the form were also provided by Allen.
23. McDonald testified the phrase “to build” in the written contract expressed an understanding by Stell and Allen that the contract included the cost of the carpenter’s labor to construct the cabinets.
24. McDonald testified Allen said he would harvest any timber with a diameter of 14 inches or more, and the harvest would consist mostly of cherry. “He would clean as he went, and the only thing that would be left would be the stumps because he does not do stump grinding.” No stump would be more than 12 inches above the ground. Allen “indicated that he would clean up anything that was left over—that he wouldn’t leave anything behind.” He added that included in the clean up would be trees near Stell’s house previously taken down by another person. McDonald testified the reference by Allen to “everything on ground” was discussed by Allen, Stell, and him in early November and referred to Allen’s commitment to repair “the lane and fix the field”.
25. McDonald testified Allen began timber harvesting activities approximately one week after their November 7, 2007 meeting. “We had a pile of brush” near the house, and Allen “brought a chipper out, and he brought his crew, and he said he would be cleaning up, and for the first week or so, they chipped that whole pile up.” After the first week, Allen removed the chipper from the subject property, but Allen told Stell and him that “they would be bringing it back and chipping as they went.” There was no subsequent clean up.
26. McDonald testified the timber harvest diminished the aesthetic values of the woods because tree tops were not cleaned up. He also testified his opinion is that the tree remnants cause the subject property to be unsafe.
27. Allen’s attorney stipulated that treetops were left behind but urged this occurrence was not compensable under the Timber Buyer Act.
28. McDonald testified Allen and his employees left containers and cans on the subject property. These included discarded spray cans, oil cans, and large plastic containers containing hydraulic and transmission fluid. See, also, Claimant’s Exhibit F (multiple photographs).
29. McDonald testified Allen said he would bring in large semi-trucks to haul out the timber. Allen reflected this activity would cause ruts but he would repair the ruts, add gravel as needed, and regrade and seed the field across which timber would be hauled.
30. McDonald testified Allen did not provide any compensation before the timber was removed from the subject property.
31. McDonald testified ruts were created in the lane and damage to the field occurred as a result of Allen’s logging operations. These were not repaired by Allen. “We had to have the lane re-rocked because where the semis were coming in was so compacted it caused…where the tires would go were sunk way down. We had to have that filled with rock.”
32. A neighbor’s friend performed the repairs with a “Bobcat at a cost of $1,000” which included time and labor, as well as equipment. The payment was made by check. Claimant’s Exhibit G.
33. McDonald testified the timber cutting took place in November and December 2007. Logs were stacked at the subject property, and Allen’s employees loaded the logs in a semi in the first week of March 2008 and removed the logs.
34. McDonald testified Allen returned to the subject property on a Friday in May 2008 and told McDonald he would “fix the field.” McDonald went into the house and had Stell join him for additional conversations with Allen. McDonald testified Allen then told Stell and him “that it’s standard they don’t clean up the tops. They don’t clean up anything. It’s not his responsibility, and he’s done. All he is going to do is just grade the field, and that is it.” McDonald testified one-half hour later, Allen returned and said he would not clean “the whole ten acres”, but he would repair the damages and clean tops in the immediate vicinity of the house. McDonald told Stell of his conversation with Allen, and Stell then telephoned Allen. McDonald testified Stell and Allen agreed to have another meeting at the subject property on the following Monday morning to resolve their differences.
35. McDonald testified that on the following Monday morning, Allen arrived with trucks and equipment, including a chipper and a Bobcat. Allen was accompanied by several employees and began marking trees with spray paint. McDonald had previously told Allen there were trees over a drain field that needed to be removed, and Allen said “he would take care of it.” McDonald testified Stell said he would not pay Allen to perform clean up on the subject property, and Allen then directed his employees to leave. Allen said, if Stell was not going to pay him $6,500, he would do no more than grade and seed the field. Allen left saying he would return to perform grading and seeding, but he never returned.
36. On April 28, 2009, Stell obtained an estimate from C&J Affordable Tree Service in the amount of $13,500 to cut up all tops of trees, chip all brush, and leave wood for approximately 60 trees on the subject property. Claimant’s Exhibit H. Allen testified the amount of the estimate was not an unreasonable amount for the work that C&J Affordable Tree Service would be required by Stell to perform.
[VOLUME 12, PAGE 129]
37. McDonald testified that in January 2008, Stell obtained an estimate from the third person’s carpenter that he would require 12,000 board feet of cherry to construct her cabinets. Stell then telephoned Allen and stated he required 12,000 board feet. Allen refused and said that was “way more than it would take” to construct the cabinets. Allen told Stell approximately 3,000 board feet would be required to do a kitchen. Stell returned to the carpenter and conveyed Allen’s statement, but the carpenter affirmed that he required 12,000 board feet of cherry lumber. On cross-examination, McDonald testified Allen told Stell that Allen would provide 3,000 board feet of cherry.
38. Bruce Wakeland (“Wakeland”) testified he is a consulting forester. “As a consulting forester, I do tree plantings…, and we do maintenance of those plantings. We do a process known as ‘timber stand improvement work’, and that is where we do thinnings and such in natural woodlands. And that’s usually done with chain saws and chemicals to kill undesirable trees. We do well over a thousand acres of that each year, as well. Then we do the two things that we’re here for today. We do timber sales. Landowners hire us to select which trees should be sold out of the woods, and then we advertise them to timber companies who might be licensed timber buyers in Indiana. And we conduct sealed-bid timber sales, and we help provide contracts with the successful bidder. If the landowner needs, we would then be involved in inspecting the logging. Well, I say ‘we’ because up until a year-and-a-half ago, I had four other professional foresters working with me full time. A year-and-a-half ago, I decided to downgrade, and now it’s just myself, so I’m the only professional in my business…. Then we also do appraisals, which is why I’m here today. I don’t do land appraisals, but I do timber appraisals.” Wakeland testified he has been performing timber appraisals since graduation from Purdue University in 1972, first as an assistant to an experienced appraiser and since 1976 through his own company. He testified he has a B.S. in Forest Management from Purdue University. Wakeland annually performs five to twelve appraisals of harvested timber. He is a Registered Michigan Forester, but Indiana does not have a registration law for professional foresters. He is also a member of several professional forester associations.
39. Wakeland met with Stell on June 2, 2008 and agreed upon a contract to perform a timber appraisal for the subject property. He performed the timber appraisal on June 6, 2008. A written memorial entitled “Appraisal of Harvested Trees” was admitted into evidence as Claimant’s Exhibit I. The written memorial provides in substantive part as follows:
On June 6, 2008 I met with Cameron Stell to inspect his approximately 11 acre woodland located in Section 17 of Washington Township, Porter County, Indiana. According to the owner the woods had been harvested during the fall of 2007 and most of the harvested logs had been removed from the site. Our purpose was to determine what trees had been harvested, what the merchantable volume of those trees was, and to estimate what the stumpage timber value of the harvested trees was during November of 2007. On June 10, 2008 I returned to the site with one field assistant to complete the fieldwork for this timber appraisal of harvested trees.
Inventory
Because the harvest had just recently been completed it was possible to locate and identify the trees that were part of this harvest. Harvested trees were located by finding stumps and matching stumps to the treetops that go with those stumps as much as possible. During the logging in this woods more tree tops than normal were moved from where they would have fallen. Many tops were moved by the log skidder while access and skidding other trees, when pulling down trees hung up in other trees, and while pulling trees and tops from the wet area, adjoining properties, or open areas. During the inventory I found several stumps from harvested trees that were older and not part of this harvest, and were not included in our inventory.
Data Collection – We found 212 tree stumps that were part of this most recent harvest and two other harvest sized trees damaged beyond value by the logging. During the field inspection data collected to help determine the timber volumes and value of these 214 harvested or damaged trees included, tree species, stump diameters inside the bark and root flares, stump heights, stump defects, and when possible the distance from stump to the tree top, and the diameter inside the bark of the tree top at the cut off. I also observed the quality, diameters, tapers, and tree heights of the remaining trees in the woods to better understand and predict the volume and quality of the harvested trees.
During the inventory I found one large red oak tree that was harvested, split in half, and left on site. I found a red oak that was harvested and left lying in the wet area. I found a 16 inch DBH sugar maple still standing but with the tree top completely broken off. I found a 13 inch DBH basswood and a 14 DBH cherry that were broken off above the ground as a result of the logging. I found a 19” DBH black cherry that was harvested but left in the woods. These trees were included as part of the 214 trees inventoried and appraised.
[VOLUME 12, PAGE 130]
Tree Volumes
To determine the volumes of the harvested and damaged trees I used the Doyle tree scale. Tree scale uses a trees merchantable height and its DBH (diameter at 4.5 feet above ground) to determine volume. In appraisals such as this a trees merchantable height is usually determined by measuring from the stump to the treetop. When treetops are moved from where they would have normally fallen during logging, an average merchantable tree height is used. To determine an average merchantable tree height I use the average from treetops that were not moved, and I measure tree heights from residual trees that are still standing in the woods. I determined the average merchantable tree height in the woods to be 36 feet. The diameter at breast height of each tree was estimated by measuring stump heights, stump diameters, and by using average tree tapers. After merchantable tree length and DBH have been estimated the tree volume can then be obtained by using a volume table.
Volume Estimate Summary
212 harvested trees plus 2 damaged trees
Species # of Trees Estimated Bd. Ft. Volumes Doyle
Black Cherry 123 18372
Red Oak 41 11042
Cottonwood 26 6662
American Elm 6 1113
Sugar Maple 7 1008
Basswood 3 376
Soft Maple 1 363
Beech 1 359
White Ash 2 314
Butternut Hickory 2 225
Totals 214 39834
Tree Quality
Tree quality is very important when appraising timber value, but difficult to determine with the trees being gone. We have several ways to determine the quality of harvested and removed trees. I used observations of the quality of remaining and surrounding trees. I looked for signs of defects in tree stumps and considered stump diameters and stump heights. I also used my knowledge of the general timber quality in this part of Porter County and on these soil types. I determined that the quality of the harvested trees was fairly good, but the small diameters of many of the trees would reduce their value. I considered the cottonwood, elm, and beech to be #3 grade or pallet quality.
Appraisal
To estimate the stumpage timber value for the 214 harvested and damaged trees I used values from 16 comparable timber sales which were selected from over 100 sealed bid timber sales that we have conducted and sold for clients in that time period. Stumpage value means the harvest value of trees still standing in the woods and before the costs associated with harvest are added. Based on comparable sales, and my knowledge of timber markets and values, and my volume and quality estimates, I would appraise the stumpage value of these 214 trees as follows.
214 trees 39759 Bd.Ft. @ $.52/Bd.Ft.=$20,675
[VOLUME 12, PAGE 131]
40. Wakeland’s testimony at hearing was consistent with his written memorial described in Finding 39.
41. Among the points from the written memorial Wakeland illuminated during testimony was that “Less common in this harvest, but more common in most harvests, the top [of a tree] is usually pretty much where it fell. The trees fell, and they cut the top free and limbs, and they dragged the logs away…. In this particular case, there was a much higher incidence of tree tops not being where they fell. I don’t have a percentage, but it was like half of them were moved.” He said there were a variety of reasons why tops might be separated from stumps. In felling a tree, one tree might become hung up with another so the timber cutter would pull the harvested tree to “get it down”. Also, the remnants of some trees were in the way of logging activities and had to be relocated.
42. On cross-examination, Wakeland testified that in performing appraisals following a timber harvest he would typically find the stumps still present and not removed. He agreed that leaving stumps and tree tops in the woods was the industry standard. Typically when assisting a landowner with a timber sale, the bid proposal would be for treetops and tops left in the woods and not removed. He testified that in Indiana he knew of no timber buyer that, in 2007, would routinely remove stumps, tree tops, or clean up woods as part of a sale. In the 1970s, however, there was a period when treetops were often sold as firewood.
43. Wakeland testified concerning his use of the Doyle tree scale. Timber is measured by volume stated in terms of board feet. A board foot is “a one-inch thick piece of wood [that is] one foot square.” With the possible exception of harvesting pine trees, “almost everybody uses the Doyle scale” in Indiana to determine board feet of standing timber. Another scale is used to determine log volumes. Timber buyers, timber cutters, and sawmills typically use “log scale” to determine the volume of logs. For his timber appraisal of the subject property, and typically in performing appraisals of standing timber, Wakeland uses the Doyle tree scale. “You measure the diameter at breast height. That’s 4 ½ feet above the ground to measure the diameter of the tree, and then you estimate the total merchantable height. You use those two numbers, and you can look it up on the table that is produced from formulas, and you can get an estimate of volume. The way I put a value on these sales is that I use comparable sales. All of my comparable sales are derived” using the Doyle tree scale.
44. Wakeland testified he examined 16 comparable timber sales “from an appropriate time period” to establish values. All but two of the sales were from nearby sites in northern Indiana. The other two were from Cass County, Michigan, a county which borders Indiana. He testified he went through office records for all his clients, and he typically has about 200 clients annually, in choosing comparable sales for the subject property. The 16 comparables chosen for his appraisal of standing timber were those sales that seemed most similar “in some way”. Wakeland testified he determined a value of 52 cents a board foot, and this valuation was lower than most among the comparable sales. “The reason that it’s lower than a lot of those is…I was trying to allow for the fact that it’s smaller material [at the subject property. Small trees bring] a lesser value.”
45. Wakeland testified stumpage value refers to the value of trees standing in the woods. The price is that at which a landowner would sell standing timber in a sale. “It’s the buyer’s responsibility to harvest and remove them.” He testified the value he affixed to the trees at the subject property was stumpage value. “My appraised value for the 214 trees (stumpage value) was $20,675 in the fall of 2007.”
46. On cross-examination, Wakeland testified the most accurate estimate he could reasonably provide, as a professional forester experienced in the area and knowledgeable of the time frame for the harvest on the subject property, was plus or minus 10%. “That’s what I think I would be, but I don’t know of any statistical way of calculating it.” On a few occasions, Wakeland testified he has had an opportunity to check the accuracy of his appraisal. He was unaware of any check where his appraisal was outside 10% accuracy.
47. Cheyenne Allen testified he is the Respondent and is doing business as A & S Logging in North Judson.
48. Allen testified the first day he visited the subject property was when he met McDonald and Stell. He testified he told Stell that because he had his young son with him, he could not inspect the subject property and determine the value of timber in the woods. He would need to return another day when his son was not with him. Allen testified he was working on another timber harvest a mile or two from the subject property, and a few days after his initial visit, he returned to review the standing timber. He drafted the written contract on the day of his return visit.
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49. Allen testified that McDonald and Stell were provided with the draft written contract. He observed Stell read the terms of the written contract. “About the only thing he mentioned was about the Thanksgiving. He said he didn’t want anybody working there the week of Thanksgiving. I said that’s not a problem.” This condition is referenced at the bottom of Claimant’s Exhibit B “to make it binding” that A & S Logging would not be working at the subject property on Thanksgiving Weekend. He disagreed with testimony by McDonald saying Allen agreed to clean everything up. Allen testified he has never performed a contract for the purchase of timber where he agreed, without compensation, to remove tree tops and clean up the site following a timber harvest. Allen testified he did not agree to compensate for the labor to prepare a set of cherry lumber cabinets “because there is no way I would have known what the labor would have been.” Allen testified he told Stell “I would supply enough cherry lumber in exchange for the woods for a set of kitchen cabinets, but I also did tell him that I wasn’t 100% sure that I could use the cherry lumber, that I was harvesting off his property, to make the boards with.” He added, “I at no time ever agreed to pay a carpenter to build the cabinets for them.”
50. Allen testified the only way he knew the third person, who had wanted cherry lumber to construct a set of kitchen cabinets, had changed her mind was that either Stell or McDonald told him. He testified he did not know the woman and has never met her.
51. Allen characterized the stated need of 12,000 board feet of lumber to construct kitchen cabinets as “ridiculous”. He testified 3,000 square feet would be sufficient to build a large set of cabinets, and “there would be lumber left over.” Wakeland also testified 12,000 board feet was a “lot of lumber”.
52. Allen testified he tendered to Stell 3,000 square feet of cherry lumber to build the kitchen cabinets. When Allen made the tender, Stell and McDonald told him the third person was no longer interested in building cherry cabinets. “I asked them where they wanted the lumber put at because I was going to bring it up there in my semi and drop it off. He said, ‘We don’t need the lumber now. We’re not building a house here now. She’s not building a house so we don’t need the lumber for anything.’” Allen testified Stell did not then say Stell wanted cash instead of cherry lumber.
53. Allen testified he agreed with the testimony by Wakeland that timber buyers ordinarily do not remove stumps and ordinarily do not remove tops from woods following a timber harvest.
54. Allen testified Wakeland’s estimate of board feet harvested from the subject property “was kind of a high estimate.” Allen testified he believes he harvested between 25,000 and 28,000 board feet but offered no documentation to support the testimony. He agreed with Wakeland’s estimate that 52 cents a board foot was the approximate value of the harvested timber.
55. With respect to McDonald’s testimony concerning conversations in May 2008, Allen testified that after leaving the subject property on a Friday, Stell telephoned him. He told Stell that Allen’s “understanding” was Stell wanted him to clean up the subject property for the fee of $6,500. Allen told Stell he would “clean all the tops, chip all the brush, cut all the tops up into firewood, stack them into reasonable piles. And I told him that I would do all that and him render the lumber to me so that I wouldn’t owe him anything when I left there, but everything would be cleaned up just exactly the way he wanted it. When I got there then he came outside and said, ‘No, I didn’t agree to that. I went to Rigg’s Mowers in Valparaiso and rented a Bobcat, or, actually, it was a TrakCat with forks and a bucket on it. I had to bring it to the job site and drop it off. And I rented their chipper, which is the same chipper that I had rented prior to that, on [the subject] property.” Stell informed Allen “he wasn’t paying us anything. So, I said, ‘Well, if you’re not going to pay us anything, then I’m not going to do the work.’ So, I took all the equipment back to Rigg’s Mowers in Valparaiso, and I left.”
56. Allen testified that prior to beginning the timber harvest, there was “a big huge pile of brush and limbs and stuff where they had had prior tree work and probably from storm damage or whatever” at the entrance which would be used for the haul road to bring in equipment and haul out logs. “But it was right in the way from where there was only about enough room to pull the semi in, but you really couldn’t make a turn and come back out with it.” Allen testified he “volunteered” and used a chipper to clean things up “so that we could get in and out of there with trucks and everything. That was the only reason that that pile was ever touched.”
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57. Allen testified that addressing compression or ruts in the lane “was never mentioned. I did tell them that I would, when I got done with the little grassy area that I was using for my lane, that I would drag it down, you know, back level and reseed it at no cost to them.” He testified he took a loader and back-dragged the area. The area was not reseeded because of the subsequent verbal disagreement at the subject property between Stell and him.
58. Allen testified Stell never offered him compensation to change the terms of the written contract.
D. Written Contract and Compensation to Stell
59. Under Indiana common law, standing timber was considered realty rather than
as goods or personalty. “Growing trees are regarded as part of the land to
which they are attached…. Trees cannot
be levied upon and sold as personal property.”
Once severed from the realty, timber was considered personalty. Owens v. Lewis, 46 Ind. 488, 508 and
509, 15 Am. Rep. 295 (Ind. 1874).
60. The common law pertaining to timber sales was modified in Indiana and other states by enactment of the Uniform Commercial Code. “Timber contracts are contracts for the sale of goods and governed by the Uniform Commercial Code” pursuant to UCC § 2-107. Williams v. J.W. Black Lumber Co., 628 S.W.2d 13, 16 (Ark. 1982). To the same effect is Mills v. New River Wood Corp., 77 N.C. Ap. 576, 335 S.E.2d 759 (N.C. Ap. 1985).
61. The Indiana version of the Uniform Commercial Code is set forth at IC § 26-1. More particularly, the statutory chapter that governs the sale of goods under the Uniform Commercial Code is IC § 26-1-2. This chapter is cross-referenced in the Timber Buyer Act as governing the valuation of timber. See IC § 25-36.5-1-3.2(b) cited in Footnote 1.
62. “Goods” includes “growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (IC § 26-1-2-107).” IC § 26-1-2-105(l).
63. IC § 26-1-2-107(2) provides that “A contract for the sale apart from the land of timber to be cut is a contract for the sale of goods within IC § 26-1-2 whether the ... [timber] is to be severed by the buyer or seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.” Schneider v. Grosnickle and Cincinnati Insurance Company, 9 Caddnar 180, 184 (2004) and Maloney v. Grant and Southern Indiana Timber, Inc. and DNR, 6 Caddnar 83 (1992).
64. Reference is properly made to IC § 26-1-2 and the Uniform Commercial Code in determining the treatment and sale of timber harvested from the subject property.
65. IC § 26-1-2-204(1) provides that “A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.”
66. A contract for the sale of goods may be made in any way sufficient to show the parties to the contract recognized the existence of an agreement. Even if a contract form used does [sic., not] establish a binding contract, the conduct of the parties can make a contract binding. Gumz v. Starke Cty. Farm Bureau Co-op Assn., 395 N.E.2d 257, 262 (Ind. 1979) applying IC § 26-1-2-204(1).
67. IC § 26-1-2-204(3) provides that “Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.”
68. The consideration to be provided by Allen to Stell for the right to harvest timber from the subject property was stated in the written contract as “lumber to build a set of cabinets for kitchen”. The written contract did not state the wood species to be used, but Allen and Stell agreed the species was cherry. Beyond these parameters, there were no specifications regarding the lumber for kitchen cabinets. McDonald testified that the contract was to include the labor of a carpenter to construct the cabinets, and Allen testified that labor was not included. The phrase “lumber to build” in the written contract is consistent with either testimony. The phrase might mean Allen would cause the cabinets to be built or it might mean the cherry needed to be of a quality suitable for building kitchen cabinets. The phrase is ambiguous. McDonald testified a reason the amount of lumber was not stated was that the cabinets had not yet been designed when the written contract was entered. McDonald testified a carpenter informed Stell after entering the written contract that 20,000 board feet would be required, but Allen testified 3,000 board feet was sufficient to construct a large set of kitchen cabinets and characterized the amount of 20,000 board feet as “ridiculous”. The record does not disclose Stell ever obtained or shared a cabinet design with Allen. The third person who expressed interest in the cherry kitchen cabinets subsequently decided not to go forward with her plans to build a house with cherry cabinets. The evidence in this proceeding does not provide any rational basis for determining the amount of cherry lumber to which Stell was entitled or whether Stell was entitled to a carpenter’s labor to convert the cherry lumber into cabinets.
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69. The written contract anticipated a barter of goods for goods. Consideration for a sales contract governed by the Uniform Commercial Code includes one with an exchange of goods. IC § 26-1-2-304(1). Stell was to provide standing timber to be harvested and used or resold by Allen as logs. The written contract provided particularity as to the timber for harvest. The timber was any located on the subject property, which was at least 14 inches on the stump, and included timber already on the ground prior to the harvest. Allen was to provide cherry lumber for kitchen cabinets, but the requirements for cherry lumber and cabinets were an open price term.
70. The Uniform Commercial Code addresses open price terms at IC § 26-1-2-305. In particular, subdivision (1) of § 305 provides:
71. The Uniform Commercial Code Comment states that IC § 26-1-2-305 “applies when the price is left open on the making of an agreement which is nevertheless intended by the parties to be a binding agreement.” With § 305 the common law is rejected “that ‘an agreement to agree is unenforceable,’ if the case falls within subdivision (1) of this section, and rejects also defeating such agreements on the ground of ‘indefiniteness’.”
72. IC § 26-1-2-305 should be read as an amplification of IC § 26-1-2-204(3). Section 305 indicates that an open price contract does provide a reasonably certain basis for granting an appropriate remedy, and should be enforced if the parties intended to make a contract, even though the price term is not settled. Wagner Excello Foods, Inc. v. Fearn International, Inc., 235 Ill. App. 3d 224, 601 N.E.2d 956 (1992 Ill. App.)
73. Determining that parties intended to make a contract can be challenging in many applications of the Uniform Commercial Code. A breach may be anticipatory and neither party may yet have performed. In this proceeding, the parties never questioned the existence of a contract, only the terms of the contract. Additionally, Stell has already completed his responsibility by making available standing timber accessible to Allen and by allowing Allen to remove the harvested timber as logs. For Allen to receive the logs without compensating Stell would result in an unjust enrichment to Allen and in harm to Stell. The Uniform Commercial Code is supplemented by principles of equity. IC § 26-1-1-103. To deny Stell compensation for the logs would be inequitable. The evidence supports a conclusion that Stell and Allen intended to make a contract.
74. IC § 26-1-2-305 does not indicate how a “reasonable price” is to be determined for an open ended price term, apparently because the drafters wanted to give an adjudicatory body “great leeway in making that determination. In most situations, the reasonable price will be the market price….” 1 Uniform Commercial Code Series ¶ 2-305:3 (West 2002).
75. Wakeland is a professional forester experienced in the performance of timber appraisals. The methods he used to evaluate the timber harvested from the subject property are consistent with methods previously approved by the Commission. Goldasich v. Hites, et al., 11 Caddnar 165 (2007). Allen testified Wakeland’s valuation estimate of 52 cents a board foot was reasonable. Allen testified Wakeland’s estimate of timber quantity was somewhat high, but Allen provided no documentation or specifics by which to find a smaller quantity. Wakeland testified to a professional opinion that his estimate was accurate within a tolerance of 10%. A factual basis was not provided for reducing or increasing his estimate, and to make a modification without a foundation would only increase the likelihood the calculation exceeds a 10% deviation from accuracy. Wakeland performed his calculation for pricing in 2007 when the timber harvest occurred. Wakeland determined the market price for standing timber harvested (including damaged timber) was $20,675.
76. A reasonable price for the timber harvested and damaged
by Allen is $20,675. The amount of $20,675
should be the price term determined under the Uniform Commercial Code in favor
of Stell for the harvested timber.
Terms
with respect to which the confirmatory memoranda of the parties agree or which
are otherwise set forth in a writing intended by the parties as a final
expression of their agreement with respect to such terms as are included
therein may not be contradicted by evidence of any prior agreement or of a
contemporaneous oral agreement but may be explained or supplemented:
(a) by course of dealing or
usage of trade (IC § 26-1-1-205) or by course of performance (IC § 26-1-1-205); and
(b) by evidence of consistent
additional terms, unless the court finds the writing to have been intended also
as a complete and exclusive statement of the terms of the agreement.
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78. The only confirmatory memorandum in this proceeding is the written contract. The written contract is properly construed through IC § 26-1-2-202.
79. The written contract is found not to have been intended by Stell and Allen as a complete and exclusive statement, under IC § 26-1-2-202(b), of the terms of their agreement. The evidence supports the conclusion that the written contract was not a complete and exclusive statement of the terms of the agreement. For example, the written contract anticipates the receipt by the Seller (Stell) of the required consideration immediately upon signature, but Stell and Allen acted consistently with the premise the consideration would be provided at an unspecified future date. Another example is that the written contract does not require consideration for the timber harvest would consist of cherry lumber. The reference is more generally to “lumber” necessary to build a set of kitchen cabinets. If the confirmatory memorandum had been intended as a complete and exclusive statement of the terms of their agreement, the kitchen cabinets could have been constructed of oak, hickory, or arguably even cottonwood. Yet both Stell and Allen acted upon the premise that the kitchen cabinets were to be constructed exclusively from cherry lumber.
80. Allen and Stell had not engaged in the purchase and sale of standing timber prior to the written agreement for the subject property. They have no course of dealing under IC § 26-1-1-205.
81. McDonald’s testimony is unconvincing that the phrase “every thing on the ground” in the written contract was intended to require Allen to remove tops and otherwise generally clean up limbs or other natural materials left in the process of the timber harvest. The written contract is unambiguous that the clause “every thing on the ground” was a grant by Stell in favor of Allen rather than an obligation upon Allen. Allen received the right to harvest everything on the ground. Leaning trees had threatened the integrity of Stell’s house, and those trees were felled shortly before Allen’s harvest. The evidence supports a conclusion the purpose for the phrase was to clarify Allen was entitled to timber already on the ground. Even in the absence of this evidence, however, the language is unambiguous and creates no benefit to Stell.
82. In addition, the testimonies by Allen and Wakeland are unrefuted. The trade usage in timber harvesting is that stumps and treetops generally are not removed from woods following the harvest. Stell cites Wright v. Ruess, 434 N.E.2d 925, 930 (Ind. App. 1982) and Rose Acre Farms, Inc. v. Ault and Curry, 8 Caddnar 138 (1999) as standing for the proposition that the cost of removing treetops is compensable. Stell’s reliance upon these decisions is misdirected. Wright primarily addressed the application of triple stumpage value provisions in the Timber Buyer Act and made only passing mention of “felled trees and debris” left in the woods. Trade usage was not an issue, and whether “debris” was the equivalent of “treetops” is problematic. Rose Acre Farms addressed trade usage and concluded costs for the removal of treetops from a waterway was compensable, but treetops not in a waterway should be “left in place to avoid further damage to the land.” Rose Acre Farms at 144 citing Kreuzman Farms v. Jones and Pike Lumber, 7 Caddnar 122, 124 (1995). In this proceeding, there is no evidence that treetops were left in a waterway. The usage in the trade under IC § 26-1-1-205 is that treetops are not removed from the site of a timber harvest. Allen was acting consistently with the usage of trade when he left the treetops on the subject property, and Stell is not entitled to compensation for their removal.
83. Rose Acre Farms and Kreuzman Farms do support Stell’s proposition that he is entitled to compensation for repairing the lane and regrading the field. Where ruts are excessive, the trade usage is that they are to be repaired. Similarly, excess compaction is a subject for mitigation following a timber harvest. Stell’s payment of $1,000 to repair the lane and regrade the field was a reasonable expenditure and one for which he is entitled to reimbursement.
84. The preponderance of the evidence is that Allen and his employees left containers and cans on the subject property. These included discarded spray cans, oil cans, and large plastic containers containing hydraulic and transmission fluid. The Commission has previously found this conduct violates several state statutes and is inconsistent with industry standards. Goldasich v. Hites, cited previously, at 177. By leaving containers and cans on the subject property, Allen acted contrary to the usage of trade. Stell is entitled to compensation of $500 for Allen leaving these potential pollutants on the subject property.
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E. Triple Stumpage
Value
85. Stell seeks relief under IC § 25-36.5-1-3.2(f)(2) for “Damages equal to three (3) times the stumpage value of any timber that is wrongfully cut or appropriated without payment.” This remedy is sometimes referred to as the “treble-damages clause”.
86. Before 1993, the treble-damages clause provided a timber buyer who cuts “any timber which he has not previously purchased shall, in lieu of the normal penalties” pay the timber grower “three (3) times the stumpage value of the timber.”
87. The purpose of the treble-damages clause was “to insure that timber buyers will exercise care in cutting of timber and to protect landowners from careless felling of their timber.” Wright v. Reuss, cited previously, at 929.
88. Amendments to the Timber Buyer Act in 1993 made a number of fundamental changes. Among these was to replace the mandatory structure for treble stumpage damage with a new arrangement, by which a timber grower may seek treble damages, through an adjudicative proceeding before the Commission.
89. Since 1993, the Commission has consistently found that it may require less than the full impact of the treble-damages clause where the imposition of treble damages would cause an injustice. Hagan, et al. v. Lewis, Cincinnati Insurance Co., Martin and US Fidelity & Guaranty Co., 7 Caddnar 146 (1996); Guy W. Pollock v. Dale Coats, 8 Caddnar 124 (1999); Gallien v. Sloan Logging, Pendley & Zurich N. Am., 9 Caddnar 40 (2002); and Booker, et al v. Mason and Shorter, 10 Caddnar 1 (2005).
90. Requiring Allen to compensate Stell for triple stumpage value would cause an injustice. Allen harvested timber from the subject property not with malice or by mistake. He performed the harvest according to the written contract with Stell. This proceeding did not arise from Allen’s right to harvest under the written contract but rather as a result of an open price for goods to be provided by Allen to Stell. Allen tendered his understanding of an appropriate consideration, but his tender was rejected Stell. Allen offered 3,000 board feet of cherry lumber. Because Stell believed he was entitled to 20,000 board feet following labor for their construction as kitchen cabinets, or because he no longer had any need for kitchen cabinets, he rejected the tender. Either way, Stell has not demonstrated by a preponderance of the evidence that his interpretation of the open price is more convincing than Allen’s. Compensation to Stell of $20,675 for the timber harvest is a reasonable price under the Uniform Commercial Code that prevents harm to Stell and unjust enrichment to Allen. The evidence does not support the imposition of treble damages for stumpage in favor of Stell.
F. Financial
Responsibility of Allen to Stell
91. Allen is responsible to Stell in the amount of $20,675 as a reasonable price for the standing timber harvested from the subject property.
92. Allen is responsible to Stell in the amount of $1,000 to reimburse expenses incurred to repair to the lane and regrade the field.
93. Allen is responsible to Stell in the amount of $500 for Allen’s failure to remove from the subject property discarded spray cans, oil cans, and large plastic containers containing hydraulic and transmission fluid.
94. Stell is entitled to an administrative judgment against Allen in the total amount of $22,175.
G. Financial Responsibility of the
Surety, Capitol Indemnity Corporation, to Stell
95. Capitol Indemnity Corporation provided a surety bond for Allen under the
Timber Buyer Act in the penal sum of $20,000.
96. As provided in IC § 26-36.5-1-3.2(g), the liability on the surety bond is limited to the value of any timber wrongfully cut or appropriated. The value of timber cut by Allen on the subject property is $20,675.
97. The liability of Capitol Indemnity Corporation is limited to the lesser of the penal sum on the bond or the value of the timber. The lesser amount is $20,000.
98. The value of timber cut by Allen on the subject property
was determined in this proceeding through application of the Uniform Commercial
Code but was previously undetermined as a price left open in the written
contract. If Allen fails to make timely
compensation to Stell for the full amount of the administrative judgment, the
timber is deemed to be wrongfully appropriated.
Upon notification by Stell to the DNR of failure to make such timely
compensation, the DNR shall cause the bond to be delivered to Stell in an
amount not to exceed the lesser of the amount of $20,000 or the amount
outstanding on the administrative judgment in favor of Stell and against Allen.