Kreuzman Farms is denied any relief against Kirk E. Jones and Pike Lumber Company based upon the complaint filed on April 17, 1995. A final agency action is rendered in favor of Kirk E. Jones and Pike Lumber Company, pursuant to IC 25-36.5-1-3.2(j), on all issues of damage and responsibility.
FINDINGS OF FACT
1. The department of natural resources (the "department") is an agency as defined in IC 4-21.5-1-3.
2. Adjudicatory proceedings of the department are governed by IC 4-21.5, the Administrative Orders and Procedures Act (AOPA).
3. As defined in IC 4-21.5-1-15, the natural resources commission (the "commission") is the ultimate authority for the department for this proceeding. See formerly IC 14-3-3-21(a) and now recodified at IC 14-10-2-3.
4. The commission conducts any hearing for the department which is governed by the AOPA. See formerly IC 14-3-3-25 and now recodified at IC 14-11-3-2.
5. On April 17, 1995, Kreuzman Farms ("Kreuzman") filed a complaint with the commission's division of hearings against Pike Lumber Company ("PIKE") and its employee, Kirk E. Jones.
6. The complaint alleged that Pike violated the terms of its timber buyers contract with Kreuzman by failing to restore the area in a proper manner.
7. The commission appointed Tim Rider as administrative law judge for this case.
8. The surety for Pike, Fidelity & Deposit Company of Maryland, was originally named as a party but was later dismissed by the administrative law judge. The dismissal is discussed beginning at Finding 18.
9. Prior to hearing, Pike filed a motion to dismiss alleging that the commission had no jurisdiction over this complaint. That motion was denied by the administrative law judge. Denial of Pike's motion is discussed beginning at Finding 11.
10. In addition to IC 4-21.5 and it procedural rule (310 IAC 0.6), IC 25-36.5 (the "statute") and 310 IAC 23 (the "rule") apply to this proceeding. The Uniform Commercial Code ("UCC"), as codified in Indiana at IC 26-1, also applies.
MOTION TO DISMISS FOR LACK OF JURISDICTION
11. In its motion to dismiss, Pike advanced the theory that under the statue and the rule a dispute as to the sale of timber must be present before the commission can entertain jurisdiction of a complaint.
12. The administrative law judge denied this motion because the law does not support that theory.
13. IC 25-36.5-1-3.2(c) allows a proceeding at the request of a timber grower.
14. IC 25-36.5-1-3.2(f) allows for damages other than for wrongfully taken timber.
15. 310 IAC 23-6-2(6) repeats the language of the statue in allowing a damage claim other than for wrongfully taken timber.
16. The Indiana Court of Appeals, Third District, held in Roberts v. Voorhees, (1983 Ind. App.) 453 N.E.2d 342, 343 (1983) that IC 25-36.5-1 "was enacted to protect owners of land containing standing timber referred to as timber growers. The provisions of the act operate to protect the timber grower in two ways. Primarily, the act insures that a timber grower will be paid for any timber sold to a registered timber buyer. A secondary goal of the act is to protect the timber grower from damage to his land resulting from improper logging methods. . . ." Emphasis added.
17. Accordingly, the administrative law judge determined that the commission's jurisdiction encompasses this type of complaint.
MOTION TO DISMISS SURETY AS A PARTY
18. In its motion to dismiss, the surety advanced the theory that it had no liability for damages resulting from acts other than the wrongful taking of timber.
19. As previously
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noted by the administrative law judge, the statue allows a complaint for two types of damages: compensation for damages actually resulting from wrongful activities of a timber buyer or cutter (IC 25-36.5-3.2(f)(1); and, damages fro timber that is wrongfully cut or appropriated without payment (IC 25-36.5-3.2(f)(2)).
20. Also as previously noted, the statue does not preclude compensation for damages resulting from a violation of IC 25-36.5-3.2(f)(1) even if the timber taken was paid for.
21. As stated in IC 25-365.5-3.2(g), the statue provides: "Notwithstanding subsection (f), the liability on the surety bond of a timber cutter is limited to the value of any timber wrongfully cut or appropriated."
22. Clearly, the legislature envisioned that the surety would not be responsible for wrongful acts of a timber cutter other than those relating directly to inadequate payment or nonpayment of timber.
23. The timber cutter is "on his own" with regard to wrongful acts not related to payment of timber.
24. Since in the case at bar there is no allegation of timber not paid for, the surety can have no liability. For this reason, the administrative law judge dismissed Fidelity & Deposit Company of Maryland as a party.
EXAMINATION OF THE EVIDENCE PRESENTED AT HEARING
25. The only factual issue in this case is whether or not Pike properly restored Kreuzman's land upon completion of timber cutting.
26. A trier of fact must first look to any contract between the parties for express language governing the responsibility for restoration.
27. The parties executed two documents. A document executed on March 15, 1993 was superseded by a document entered on March 17, 1993. The second document is referred to here as the "contract".
28. In the contract, Pike agreed to "repair any fence that is damaged during logging back to their (sic) original condition".
29. The only other contract provision dealing with site restoration reads, "The harvesting of this timber will proceed in a workman like and husband like manner."
30. Evidence presented at hearing must be applied to the substantive law which governs contracts for the sale of timber in order to render a final disposition.
31. 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 (1874), 46 Ind. 488, 508 and 509, 5 Am. Rep. 295.
32. The common law has been changed in Indiana and other states by the enactment of the UCC. "Timber contracts are contracts for the sale of goods and governed by the UCC pursuant to UCC Sec. 2-107". Williams v J.W. Black Lumber Co. (Ark. 1982), 628 S.W.2d 13, 16. Also see Mills v New River Wood Corp. (1985), 77 N.C.Ap.576, 335 S.E.2d 759. In accord is Malone v. Grant and Southern Timber, Inc. and DNR, 6 Caddnar 83, 84, (1982).
33. The Indiana version of the UCC is set forth in IC 26-1.
34. The statutory chapter that deals with the sale of goods in IC 26-1-2.
35. IC 26-1-2 governs the sale of timber by Kreuzman to Pike.
36. IC 26-1-2-202 deals with "Final written expression: parol or extrinsic evidence."
37. As set forth in Section 202, when the parties set forth in writing a "final expression of their agreement" the court will not contradict the terms contained in the writing by any parol evidence. Parol evidence consists of any prior agreement or contemporaneous oral agreement.
38. Section 202 does, however, allow the terms of an agreement to be explained or supplemented:
a. by course of dealing or usage of trade (IC 26-1-1-205), or
b. by course of performance (IC 26-1-2-208).
39. The timber buyer's contract for this transaction contains only one express provision regarding site restoration, that being the one dealing with fence repair.
40. A determination of the sufficiency of Pike's cleanup hinges on the words "workman like and husband like manner".
41. The administrative law judge, as the trier of fact, must weigh expert testimony presented by the parties so as to determine what the contract language means in terms of "usage of the trade".
42. It is undisputed that Pike Lumber Company is a licensed timber buyer and that Kirk Jones was Pike's agent for the contract.
43. The
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Kreuzman property contains 215 acres of which 35 acres is woodland.
44. This property has been timbered many times in the past and prior logging roads have been developed.
45. Pike was entitled to take the trees in question during a 24 month period from the date the contract was signed (March 17, 1993).
46. Kreuzman urges Pike was delinquent in logging. The evidence reveals, however, that Pike performed logging in a timely fashion on March 14 through March 16, 1995.
47. Kreuzman contends the field was too wet to log. Pike disputes the claim, and the evidence does not support Kreuzman's contention.
48. Kreuzman points out that Pike did not use the logging yard designated when the contract was signed. Kreuzman admits, however, that permission was given to Pike to use an alternate logging yard.
49. Kreuzman also states that Pike used any path it desired to haul logs rather than the established ones. Pike's evidence indicates that logical paths were used to haul from site of cutting to the logging yard.
50. Kreuzman seeks damages as follows:
Cost of removing tops from a ravine -$ 960.00
Cost of repairing area damaged by dozing - 1050.00
Cost to haul in riprap/top soil/#2 stone - 3209.00
Cost to loosen compacted area - 1000.00
Cost of fixing fence - 50.00
Lost alfalfa crops - 1216.00
Lost corn crops - 452.00
TOTAL CLAIM -$7937.00
51. Pike contends that no damages are due because the fence in question was repaired by Jones and is now in better condition than it was prior to being cut. Pike contends the site conforms to industry standards for this type logging operation.
52. Kreuzman offered one nonparty witness, Mike Gribben, a district conservationist in Franklin County employed by the Natural Resource Conservation Service.
53. Gribben testified to his observations of the Kreuzman property made during a March 22, 1995 visit.
54. Gribben noted some damage to corn and alfalfa fields and also to a waterway and to a fence.
55. Gribben's testimony was of limited use in determining what is customary for the trade in regard to site restoration.
56. Pike offered several witnesses in support of its position.
57. Three of the witnesses for Pike were its employees. Each of the employees testified that the effort at site restoration was exemplary. The interest of these witnesses in the outcome of the case and the potential for bias may properly be considered in weighing their testimonies.
58. A fourth witness for Pike was Joe Schuerman, and he is not a Pike employee. Schuerman's education, experience, ability to observe, lack of apparent bias, and general demeanor made his testimony highly credible.
59. Schuerman is a consulting forester who was employed by the department for 17 1/2 years before taking the position as chief forester for the country of Nigeria.
60. Schuerman left Nigeria during period of unrest and is now a private consultant.
61. Schuerman testified that he analyzed all data pertaining to the job in question, viewed the site, and in applying industry standards, graded the job as an outstanding "10".
62. Mr. Schuerman further testified as follows:
a. Trees tops can properly be left in ravines, although they should not generally be allowed to remain in waterways. Tree tops do no damage in a ravine, and the damage caused to land in removing them would be extensive. He noted that on the Kreuzman property he saw tree tops in a ravine but saw none in any waterway.
b. The waterway was working well even though the fields were lower than the waterway. He stated that the fields had been lower than the waterway for approximately six to ten years and that this situation was not caused by the job in question. He summed by saying that no riprap or stone was necessary and its
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addition would be useless.
c. There was no compaction damage that needed to be repaired. The corn appeared to be growing well. The fescue was also growing well and was sufficient to control erosion.
d. The fence appeared to have been repaired so as to be superior to its prior condition.
63. Pike also offered the testimony of James Overmeyer, who is a local farm manager and real estate broker. Overmeyer echoed much of what Schuerman had offered.
64. In particular, Overmeyer stated that he saw no problem with the corn crop and that the soil in this area was difficult to compact.
65. The weight of the evidence presented at hearing clearly indicates that Pike has followed "usage of the trade" in its cleanup.
66. Additionally, Pike satisfied its responsibility under the contract to "proceed in a workman like and husband like manner".