CADDNAR
[CITE: Ewbank & Bishop v. Eastridge et al., 14 CADDNAR 160 (2019)]
[VOLUME 15, PAGE 59]
Cause #: 18-099F
Caption: Ewbank & Bishop v. Eastridge et al.
Administrative Law Judge: Wilson
Attorneys: A. Hoffer for Petitioner; P. Schroeder for Respondent
Date: February 27, 2019
[See Editor’s note at end of this document regarding change in the decision’s original format.]
FINAL ADMINISTRATIVE JUDGMENT
1. Petitioners, Ewbank and Bishop, are granted administrative judgment against Eastridge in the amount of $214,800.
2. Petitioners, Ewbank and Bishop, are granted an administrative judgment and are entitled to forfeiture of bond #9024164, posted with the Department of Natural Resources under the Timber Buyer Act on behalf of Dexter Eastridge d/b/a Eastridge Logging LLC, against Fidelity & Deposit Company of Maryland in the amount of $15,000.
3. Eastridge shall receive credit to the extent payment to Petitioners is made by Fidelity.
4. The compensation to which Ewbank and Bishop are entitled under this judgment shall not exceed the total amount of $214,800.
5. 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 AND CONCLUSIONS OF LAW WITH FINAL ADMINISTRATIVE JUDGMENT
Case Summary and Procedural History:
1. On August 27, 2018, Edward Ewbank (Ewbank) and Alice M. Bishop (Bishop), by Counsel C. Allan Hoffer (Hoffer) and Andrew Hoffer, filed a “Complaint for Breach of Timber Contract and Attachment of Bond” (Complaint) with the Natural Resources Commission (Commission) against Dexter Eastridge d/b/a Eastridge Logging LLC (Eastridge) and Fidelity & Deposit Company of Maryland (Fidelity).
2. Hereinafter, Ewbank and Bishop are collectively referred to as the “Petitioners”. Hereinafter, Eastridge and Fidelity are collectively referred to as the “Respondents”.
3. The Petitioners’ Complaint filed was filed in three counts. The first count identified a timber sale contract between the Petitioners and Eastridge for the harvesting of timber in Orange and Crawford County. The contract identified a list of marked trees and a set price of $102,000.
a. Count One requested damages in the amount of the contract balance, $92,000, pursuant to IC 25-36.5-1-3.2(f)(1).
b. Count Two identified a surety bond and requested that the bond carrier surrender the bond as partial payment toward the Petitioners’ damages.
c. Count Three requested triple damages for the stump value of timber pursuant to IC 25-36.5-1-3.2(f)(2).
4. Administrative Law Judge (ALJ) Dawn Wilson was appointed under IC 14-10-2-2 to conduct this proceeding.
5. Following the issuance of service of notice to the parties, the ALJ set a prehearing conference. Prior to the date and time of the prehearing conference, the Petitioners were allowed a limited opportunity to file an address for the surety conditionally named as a party. An address for the surety was filed by the Petitioners on September 11, 2018. The Petitioners appeared at the October 11, 2018 prehearing conference and no respondent appeared.
6. By order dated October 11, 2018, the parties were to exchange and file witness and exhibit lists on or before November 20, 2018. Petitioners timely filed witness and exhibit lists. Neither Respondent filed a witness and exhibit list.
7. Within the report issued following the prehearing conference, the parties were notified of a status conference scheduled for November 27, 2018. Petitioners, by counsel, filed a motion to convert the status conference to an administrative hearing. By order dated October 25, 2018, the parties were notified of a final status conference to be heard on November 21, 2018 and a November 5, 2018 deadline for a party to object to conversion of the November 27, 2018 status conference to an administrative hearing. No objection was timely filed by any party and at the final status conference on November 21, 2018, the parties were notified that the Petitioners’ motion was granted.
8. On November 27, 2018, an administrative hearing of the facts was conducted as scheduled in Paoli, Indiana. Petitioners appeared in person and by counsel, C. Allen Hoffer. Eastridge appeared, in person, self-represented. Fidelity did not appear having notified the ALJ during the final status conference that Fidelity would not appear and would acquiesce to any decision made in this proceeding. The evidence was closed on November 27, 2018.
9. Immediately following the presentation of evidence, the parties present at the administrative hearing were notified of the opportunity to present post hearing briefs on or before January 8, 2019. On January 7, 2019, Petitioners, by Counsel C. Allan Hoffer, filed Proposed Findings of Fact and Conclusions of Law. Eastridge did not file a post hearing brief. Fidelity did not file a post hearing brief.
10. The hearing record was closed at 4:30 p.m. on January 8, 2019.
11. The instant proceeding was initiated pursuant to IC 25-36.5-1-3.2 and 312 IAC 14-6-1 and is governed procedurally by IC 4-21.5 and 312 IAC 3.
12. The Commission is the ultimate authority. 312 IAC 14-1-2(d).
13. The Commission possesses jurisdiction over the subject matter of the instant proceeding as well as the persons of the parties.
Findings of Fact and Conclusions of Law:
Findings of Fact[1]
14. Ewbank and Bishop owned adjacent properties in Crawford County and Orange County. See testimony of Ewbank.
15. Quit Claim deeds identify Crawford County and Orange County real property with particularity. A Quit Claim Deed to Edward L. Ewbank and Alice M. Bishop, as equal joint tenants in common, for “The Northeast quarter of the Northeast quarter of Section thirty two (32), Township one (1) South, Range one (1) West…..40 acres more or less.” was recorded by the Crawford County Recorder on June 6, 2006. See Ex. A.
16. A Quit Claim Deed to Edward L. Ewbank and Alice M. Bishop, as equal joint tenants in common, for “The South thirty (30) acres of the Southeast quarter of the Southeast quarter of Section twenty-Nine (29), Township One (1) South, Range One (1) West” was recorded by the Orange County Recorder on June 19, 2006. See Ex. B.
17. Ewbank and Bishop transferred their ownership interests in the Crawford and Orange County properties in 2018. At the time when the administrative hearing was conducted, Ewbank and Bishop no longer claimed an ownership interest in the properties. See testimony of Ewbank.
18. Ewbank initially discussed the potential for a timber sale with Jim Hochgesang (Hochgesang) in 2014. See testimony of Ewbank.
19. Hochgesang is a CPA who has owned and managed farms for a number of years. Hochgesang also acts as a consulting forester, for which no state issued license is required. Hochgesang operates a for-profit sole proprietorship known as “Jim Hochgesang Forestry Services”. Over the last 10 years, Hochgesang has participated in 20-50 sales of timber on his own woodland and the lands of others. He is paid for his services at an hourly rate or through a percentage of a timber sale price. See testimony of Hochgesang.
[VOLUME 15, PAGE 60]
20. Hochgesang, and his partner, Stanley Ware, accessed an area located in Crawford County and Orange County that was owned by Ewbank and Bishop. Hochgesang and Ware marked trees, both at eye level and at the base of the tree’s stump, in blue spray paint. Some trees were marked based on the tree’s value and others were marked due to the tree’s location. For the trees marked based on the tree’s location, a consideration was made for the damage that a harvest in the area would have on any particular tree. See testimony of Eubank and Hochgesang.
21. Hochgesang created a list of the trees that had been marked by number, species and board footage, to allow for a calculation of the volume of the trees. See testimony of Eubank and Hochgesang.
22. Hochgesang set a minimum price for the timber sale of the list of marked trees and solicited bids for the sale. See testimony of Hochgesang.
23. Two bids were submitted to Hochgesang. The “high bid” was submitted by Eastridge. See testimony of Ewbank.
24. Hochgesang was familiar with Eastridge, having previously worked with Eastridge on at least two other sales. See testimony of Hochgesang.
25. Eastridge operates farming and logging operations, with his logging operation providing his primary source of income. At the time of the administrative hearing, Eastridge had allowed his logging operation, Eastridge Logging LLC, to lapse with the Indiana Secretary of State. Eastridge continues to operate without employees. See testimony of Eastridge.
26. A Timber Sale Contract (the “TSC”) was prepared by Hochgesang and dated August 23, 2015. The TSC was signed by, “Dexter Eastridge, DBA Dexter Eastridge Logging LLC, Purchaser” and “Edward L. Ewbank” and “Alice M. Bishop”, sellers. See the testimony of Eubank and Ex. C.
27. The TSC was for “all of the standing timber marked for cutting upon an area of approximately 70 acres, more or less, …further described as follows: 30 acres of land owned by the above listed sellers and located in section 29, Greenfield Twp., Orange County, Indiana and 40 acres located in section 32, Patoka Twp., Crawford County, Indiana.” See Ex. C.
28. The TSC states that $102,000, in incremental payments, was to be paid to the Sellers by the Purchaser, with $10,000 due by August 23, 2015; $50,000 due on August 31, 2017 or as soon as cutting started and the remaining $42,000 due as soon as 25% of the trees were felled. See Ex. C. See also the testimony of Eubank.
29. The TSC states that, unless otherwise agreed in writing, all timber sold under the TSC “shall be paid for, cut, and removed on or before and not later than the 31st day of August 2017 and any trees not removed shall revert to the seller.” In addition, the TSC states the following, “The total number of trees conveyed is 660 + several X trees, composed as follows: 600 regularly marked trees plus several X trees for 249,017 Board Feet. A detailed schedule of marked trees has been provided to the buyer.” The inventory of trees to be harvested was attached to the TSC and has been reproduced below for the reader’s ease. See Ex. C. See also Ex. F.
30. On August 28, 2015, check #1163 in the amount of $10,000.00 was issued to Edward Eubank and signed “Dexter Eastridge”. The check was returned by the First Savings Bank and marked “not sufficient funds” on September 15, 2015. See testimony of Eubank and Ex. D.
31. Eastridge contacted Ewbank in 2016 and asked Ewbank if he still wanted the “cut”. Ewbank responded affirmatively and accepted a check from Eastridge, in June of 2016, for $10,000. The subsequent check cleared the bank. No other payment on the TSC was remitted to either Ewbank or Bishop by Eastridge. See testimony of Ewbank and Eastridge.
32. Eastridge was aware that he needed to access the area marked, through a property owned by another, in order to complete the harvest. Hochgesang informed Eastridge that Eastridge could work out the access with Kurt Zehr (Zehr). Eastridge did make arrangements with Zehr to truck the logs through Zehr’s right of way while it was dry to avoid damage to Zehr’s property. See testimony of Eastridge.
33. Zehr did not prohibit access through the right of way and had a verbal agreement with Eastridge that allowed Eastridge the authority to cross Zehr’s right of way. See testimony of Eastridge.
34. Eastridge brought his harvesting equipment to the TSC site in 2016. See testimony of Ewbank.
35. During the summer of 2016, after two and one half (2½) or three (3) weeks, Zehr informed Eastridge that, due to rain, the ground was too soft and that Eastridge needed to stop and come back when it was drier so as to not damage the Zehr property. Eastridge did not to push the issue with Zehr and removed his equipment. See testimony of Eastridge.
36. Eastridge did not return to complete the contracted harvest in 2017. Eastridge, without inquiry, determined that no time frame in 2017 was dry enough to attempt a cut. See testimony of Eastridge.
37. Eastridge did not contact Ewbank or Bishop to attempt an extension of the TSC. In 2018, Eastridge scheduled alternative work and decided not return to the Petitioners’ property to complete the TSC. See testimony of Eastridge.
38. Most, but not all, of the trees that were marked by Hochgesang and included in the list attached to the TSC were harvested during the summer of 2016. See testimony of Ewbank.
39. The State’s District Forester, Janet Eger, completed a Classified Forest inspection in 2016. After her inspection, District Forester Eger contacted Hochgesang and informed Hochgesang that a “large portion” of the trees had been cut. See testimony of Hochgesang.
40. After being notified, Hochgesang personally inspected the TSC area and found that the marked trees listed in the TSC had been “substantially” cut. Hochgesang determined that, while quite a few trees remained, the TSC area was substantially cut because approximately 80% of the value of the trees listed had been cut. See testimony of Hochgesang.
41. Eastridge disputed the characterization of the timber harvest as “substantially” complete. Eastridge testified that he was unable to determine a percentage of the trees that were cut because he drove the truck and had someone else fell the trees. Eastridge stated that he would need to count the remaining trees to confirm a percentage of the marked trees that he harvested. Eastridge hauled the felled trees to his yard and stated that he has receipts for his timber sales but did not produce any receipt. Eastridge disputed that he could cut 80% of the trees listed in the TSC in a two or three week period of time. Eastridge disputed that 80% of the number of marked trees were harvested. However, Hochgesang’s conclusion related to the percentage of value, not the percentage of trees that had been cut. See testimony of Eastridge.
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42. Insufficient evidence was presented to support a finding contrary to Hochgesang’s determination that 80% of the value of the trees under the TSC had been cut.
43. Eastridge acknowledges that he has not paid the TSC in full. See testimony of Eastridge.
44. Eastridge stated he is not opposed to paying for the trees that he cut. Eastridge stated his opposition to paying for trees that he “will never get his hands on”. See testimony of Eastridge.
45. At the time of the timber harvest Eastridge held a valid timber buyer’s registration issued in accordance with IC 26.5. As a part of the registration process, Eastridge had obtained a surety bond. See testimony of Eastridge.
46. On February 28, 2013, Dexter Eastridge, as the Principal, obtained a Surety Bond from “Fidelity & Deposit Company of Maryland”, #09024164, in the amount of $15,000, for “the use or benefit of any Timber Grower from whom the Principal above named may purchase or cut timber, and who is not paid by the Principal therefore.” Zurich is identified as the “insurance company” in the document. Stipulated Exhibit I.
47. Eastridge reported that the bond company cancelled the bond in 2018. At the time when the bond was cancelled, Eastridge determined that he did not need the bond, because he had no employees and was contracting work from a person who had a valid bond. During the timber harvest at issue in this proceeding, the bond was in effect. See testimony of Eastridge.
48. The Surety Bond states the obligation is subject to termination with 60 days advance notice to the Department and to Eastridge and states, “Such notice shall terminate the Surety’s future liability only commencing sixty days (60) from the date of mailing or delivering such notice. Otherwise, this obligation shall remain in full force and effect.” Stipulated Ex. I.
Conclusions of Law
Timber Buyer & Timber Grower
49. A “Timber buyer” is “a person engaged in the business of buying timber from timber growers for sawing into lumber, processing, or resale, but does not include a person who occasionally purchases timber for sawing or processing for his own use and not for resale.” IC 25-36.5-1-1.
50. Eastridge signed a contract with the Petitioners for the purchase of standing timber. Hochgesang had previous involvement with Eastridge for other timber sales prior to the time when Eastridge contracted with the Petitioners for the timber sale at issue in this proceeding.
51. At the time of the TSC, Eastridge was registered as a timber buyer with the Department of Natural Resources.
52. Eastridge is a timber buyer.
53. A “Timber grower” is “the owner, tenant, or operator of land in this state who has an interest in, or is entitled to receive any part of the proceeds from, the sale of timber grown in this state and includes persons exercising lawful authority to sell timber for a timber grower.” 312 IAC 14-2-12, “timber grower”.
54. At the time of the TSC between the Petitioners and Eastridge, the Petitioners were the owners of the Indiana property in Orange County and Crawford County, on which timber was to be harvested under the TSC.
55. Ewbank and Bishop are timber growers.
Petitioners’ Right to Damages: IC 25-36.5-1-3.2(f)(1)
56. A petition filed by a timber grower against a timber buyer may seek “[d]amages in compensation for damage actually resulting from the wrongful activities of a timber buyer or timber cutter.” IC 25-36.5-1-3.2(f)(1).
57. In Count One of the Complaint, the Petitioners seek an “[o]rder awarding them the balance of $92,000.00, pursuant to Ind. Code 25-36.5-1-3.2(f)(1)[2], and for all other just and proper relief in this matter.” See the Complaint, page 2.
58. The wrongful activities of a timber buyer could result in the assessment of costs for repairing fences, repairing ruts, and removing felled but unharvested trees and debris might appropriately be included. The costs for replacing felled trees would not. Wright v. Reuss, 434 N.E.2d 925, 930 (Ind App 1982).
59. The Commission has previously determined that, “[t]he application of IC § 25-36.5-1-3.2(f)(1) is stated in Roberts v. Voorhees, 453 N.E.2d 342, 343 (Ind. App. 1983) as the secondary goal of the Timber Buyers Act. The primary goal of the Timber Buyer Act is to insure a landowner is compensated for the harvest of standing timber. The secondary goal is to protect the landowner ‘from damage to his land resulting from improper logging methods.’” O’Neal v Bowers and Spurgeon, 13 CADDNAR 64, 68 (2012).
60. The Petitioners failed to identify any damages related to the Petitioners’ property as a result of Eastridge’s harvest under the TSC.
61. The Petitioners are not entitled to an award for damages pursuant to IC 25-36.5-1-3.2(f)(1).
Petitioners’ Right to Damages: IC 25-36.5-1-3.2(f)(2)
62. The Department or a timber grower may commence a proceeding against a timber buyer upon reason to believe “the timber buyer has acquired timber from a timber grower under a written contract for the sale of the timber without payment …to the timber grower as specified in the contract.” IC 25-36.5-1-3.2(b) and (c).
63. A petition may seek “[d]amages 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” cause. IC 25-36.5-1-3.2(f)(2).
64. In Count One of the Complaint, the Petitioners seek an “[o]rder awarding them the balance of $92,000.00, pursuant to Ind. Code 25-36.5-1-3.2(f)(1)[3], and for all other just and proper relief in this matter.” See the Complaint, page 2.
65. In Count Three, the Petitioners seek “a judgment against…Eastridge in the amount of $276,000.00 which equals triple stump value pursuant to Ind. Code 25-[36.5] 1-3.2(f)(2).” See the Complaint, page 4.
66. A tree wrongfully cut would include a tree that was cut and not marked or otherwise included in the list identified within the TSC. No evidence in the record supports a conclusion that Eastridge cut any tree that was not identified in the TSC. Therefore, the Petitioners are not entitled to damages for timber wrongfully cut.
67. A determination concerning timber appropriated without payment is necessary to determine if a justification for damages has been presented in this proceeding by the Petitioners.
68. Petitioners, as timber growers, and Eastridge, as a timber buyer, entered into a contract for the sale of marked standing timber identified by a list attached to the TSC in exchange for total compensation of $102,000.
69. The bid offered by Eastridge and accepted by the Petitioners is determined to equal the total value of the trees identified within the TSC.
70. According to the terms of the TSC, full payment became due in 2016.
71. In 2016, Eastridge paid $10,000 to the Petitioners toward the amount due under the TSC.
72. Testimony is undisputed that the amount left unpaid under the TSC ($102,000-$10,000) is $92,000.
73. In 2016, Eastridge harvested approximately 80% of the value of the marked trees identified within the TSC. Eighty percent of the amount due under the TSC in 2016, is $81,600 (80% of $102,000).
74. Eastridge appropriated timber without payment in the amount of $71,600. This amount is determined to be the value of the trees appropriated, $81,600, less Eastridge’s payment of $10,000.
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75. The Indiana Court of Appeals previously examined the award of treble damages and deemed it to be a "civil penalty, not criminal penalty, 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, supra at 926.
76. The Commission 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); and Booker, et al v. Mason and Shorter, 10 CADDNAR 1 (2005).
77. The Commission has used its discretion to determine less than the full impact of the treble damages clause when the imposition would work an injustice. The Commission previously awarded less than treble damages for the harvesting of trees on property not owned by a landowner with whom the timber buyer contracted, when the timber buyer conducted due diligence, but because of misdirection or connivance of another was caused to err. Gallien v. Sloan Logging, Pendley & Zurich N. Am., 9 CADDNAR 40, 43 (2002).
78. Eastridge obtained permission to traverse the property of another in order to access the area from which timber was to be harvested under the TSC. Eastridge harvested and removed a large portion of the trees identified within the TSC. Eastridge failed to return to the area described in the TSC within the remaining term of the TSC to remove the remaining trees and failed to render payment for the trees he harvested and removed.
79. The weight of the evidence for consideration in this proceeding does not support a finding that injustice would be served by the application of the treble-damages clause.
80. The Petitioners are entitled to damages of $214,800, three times the stumpage value of the timber appropriated without payment ($71,600).
Petitioners’ Right to Bond Forfeiture: IC 25-36.5-1-3.3(g)
81. Persons registered with the Department as timber buyers are required to file a bond or other security with the Department. IC 25-36.5-1-3
82. If a timber buyer fails to pay any amount due a timber grower for timber purchased, an adjudicative proceeding on the bond for forfeiture may be commenced and the surety or other person in possession of the security is entitled to notification of the proceeding. “A proceeding for forfeiture of a timber buyer’s bond under IC 4-21.5 is the exclusive remedy under law for the forfeiture of the bond.” IC 25-36.5-1-3(g).
83. In Count Two, the Petitioners “pray the court set administrative hearing before the Indiana Department of Natural Resources to surrender the referenced bond pursuant to Ind. Code 4-21.5-3-6, and after hearing to order the bond carrier to surrender the full value of its bond for distribution to Plaintiffs to pay partially for the damage caused by cutter Eastridge.” See the Complaint, page 3.
84. The Petitioners submitted their request for administrative review to the Natural Resources Commission. In error, the Petitioners identified adjudication before the Department of Natural Resources in their Complaint caption and in their request for relief. Jurisdiction for the disputed issues in this proceeding are appropriately before the Natural Resources Commission and are properly adjudicated within this cause.
85. Fidelity provided a surety bond, #09024164, for Eastridge under the Timber Buyers Act in the penal sum of $15,000.
86. Fidelity’s security bond, #09024164, was an effective security bond at the time of the TSC.
87. Fidelity was identified as a party to this proceeding and has received notification of the proceeding.
88. 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.
89. The liability of Fidelity is further limited to the lesser of the penal sum on the bond, $15,000, or the value of the timber appropriated without payment, $71,600. The lesser amount is the penal sum on the bond, $15,000.
[EDITOR’S NOTE: The original format of the Administrative Law Judge’s Findings of Fact, Conclusions of Law, and Final Order has been modified to correspond with CADDNAR format. The Final Order, Paragraphs have been relocated to the “FINAL ADMINISTRATIVE JUDGMENT” section at the beginning of this document.]
[1] Findings of fact that may be construed as conclusions of law and conclusions of law that may be construed as findings of fact are so deemed.
[2] The request for damages identified in Count One will also be analyzed under IC 25-36.5-3-2(f)(2) below.
[3] The request for the damages identified in Count One is also analyzed under IC 25-36.5-3-2-(f)(1) above.