James Hagan, Louis Miller, Gerald Timmel and James Wafzig are granted an administrative judgment against Jerry Lewis and Estin E. Martin in the amount of $37,000 (rounded). The bonds posted by Cincinnati Insurance Company and US Fidelity & Guaranty Company with the Department of Natural Resources in 1990 on behalf of Jerry Lewis and Estin E. Martin were in effect at the time the illegal timber cut was made. Jerry Lewis and Estin E. Martin will receive credit to the extent of payments made by the appropriate surety. This administrative judgment addresses all issues of damage and responsibility 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
1. The administrative law judge (alj) issued these findings as interim findings as to stumpage on August 28, l996.
2. At a status conference on October 1, l996, the parties asked that the interim findings be entered as the "Report, Findings of Fact, and Nonfinal Administrative judgment of the Administrative Law Judge" as required by IC 4-21.5-3-27 so as to receive a final order from the "ultimate authority" for the Department of Natural Resources (the "Department").
3. In accordance with IC 14-10-2-3 the Natural Resources Commission (the "Commission") is the ultimate authority for the Department under IC 4-21.5 (The Administrative Orders and Procedures Act (AOPA)).
4. This case was initiated by the claimant's filing of a Complaint for Violation of IC 25-36.5-1 et seq. with the Commission's Division of Hearings on August 18, l995.
5. The Commission assigned Tim Rider as the alj to examine the Complaint.
6. During the course of this litigation numerous conferences were conducted in Jeffersonville, Indiana.
7. At these conferences it was ascertained that the respondent timber buyers/cutters (Mr. Lewis and Mr. Martin) did cut the claimant's trees and that they were cutting under the direction of Mr. Claude R. Fitzpatrick who was a landowner of property adjacent to property owned by the claimants.
8. Mr. Fitzpatrick had sold trees to Mr. Martin's firm and had identified the claimant's trees as his own.
9. Prior to this action Mr. Fitzpatrick passed away. Therefore, the respondents attempted to join the Estate of Mr. Fitzpatrick and his personal representative (PR) Christopher Renn Fitzpatrick as a party to this action. Such a joinder was initially approved by the administrative law judge.
10. Counsel for the Estate objected to the joinder and the parties agreed to present the issue of whether or not a claim against the Estate could be had to the Clark Circuit Court.
11. The Clark Circuit Court issued a ruling on May 16, l996 as CAUSE NO. 10C01-9412-ES-229.
12. On May 23, l996, counsel for the Estate moved to dismiss his client as a party to this case.
13. Subsequently Mr. Martin objected to the motion to dismiss a party and maintained that the Clark Circuit Court finding was not binding upon the Commission.
14. The alj examined the decision rendered by Judge Donahue of the Clark Circuit Court. Judge Donahue stated that "the Court having heard the argument of counsel, and having taken the matter under advisement, finds that the claim filed by the claimant should be denied".
15. Judge Donahue therefore ordered, adjudged and decreed that the claim of the Claimant, Estin E. Martin is hereby denied and barred. (Emphasis added).
16. The administrative law judge found it difficult to consider a motion to ignore this finding by the Clark Circuit Court after the parties had delayed this proceeding to obtain such a ruling.
17. Clearly, if the administrative law judge ignored the Judge's ruling any award against the Estate would be overturned on judicial review or at least rendered uncollectable.
18. Accordingly, the administrative law judge granted the motion to dismiss the Estate of Claude R. Fitzpatrick as a party to this action.
19. On May 30, l996, Mr. Martin filed a
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Motion to Dismiss this Proceeding claiming that prior to the enactment of Public Law 220-1993 which contained the changes which constitute the current Timber Buyers Statute (IC 25-36.5) a timber grower had no standing to bring a proceeding before the Commission.
20. While this case was presented to the Commission in 1995 the timber cutting took place in 1990.
21. The alj examined the version of the Timber Buyers Statute in effect at the time this cutting took place and cases contained in CADDNAR (Contested Administrative Decisions of the Department of Natural Resources) and then denied the Motion to Dismiss the proceeding because such action was allowed prior to 1993 and several such cases were contained in CADDNAR.
22. A hearing was conducted on May 30, l996, in Jeffersonville to present evidence to the alj as to the stumpage value of the trees belonging to the claimants that were cut by Mr. Lewis and Mr. Martin.
23. At hearing each side of this case produced an expert witness to present an opinion as to the stumpage value of the trees cut.
24. The claimants' expert, Mr. Joe Schuerman, conducted a tree-by-tree appraisal in July of 1993. He claimed to be able to match tops to stumps for 299 out of 300 trees in question.
25. Mr. Schuerman presented to the court a detailed valuation of the trees cut which came to a total stumpage value of $15,211.
26. Mr. Schuerman testified that he used a formula called the "Doyle Rule" to arrive at his valuation. He identified the Doyle Rule as the standard used in the Midwest to perform this type of calculation.
27. Since the timber was cut in 1990 and the appraisal was performed in 1993, Mr. Schuerman applied a timber index obtained from Purdue University. He testified that the 1993 value must be multiplied by a factor of .813 to arrive at a 1990 value.
28. The 1990 value according to Mr. Schuerman's appraisal is $15,211 times .813 or $12,367.
29. The respondents' expert, Mr. Randy Moser, performed his appraisal in 1995.
30. By 1995 the area was grown over. Mr. Moser testified that it was impossible to do as thorough a count as was done in 1993 by Mr. Schuerman.
31. Mr. Moser made a cursory examination of the area. He testified he could not see the entire area. He calculated a value of about $30 per tree and, using Mr. Scheurman's count of 300 trees, arrived at an estimated stumpage valuation of $9,000.
32. While both experts testified honestly and dispassionately, Mr. Schuerman's valuation was much more detailed and his inspection was made two years closer to the time the timber was cut.
33. Accordingly, Mr. Schuerman's estimate (adjusted to 1990) of $12,367 is more likely to be an accurate valuation of stumpage than Mr. Moser's estimate of $9,000.
34. Subsequent to the hearing the parties briefed the issue of how the stumpage figure should be adjusted, (e.g. awarding interest, awarding treble damages, etc.).
35. The applicable law is provided in IC 25-36.5 (the Statute').
36. As previously noted, the current version of the Statute was enacted into law by P.L. 220-1993 on July 1, l993. At that time the legislature made significant changes to the way timber claims are handled.
37. For instance, the old version of the Statute mandated treble damages and, with one exception, Indiana Courts have agreed. (Case law will be discussed later).
38. Under the new version treble damages are not mandated but can be sought (sec 3.2(f)(2)). This language appears to give the administrative law judge some discretion in awarding more than stumpage but less than triple stumpage.
39. In addition, the new version holds the surety liable only for the value of timber wrongfully cut. (See sec 3.2(g)). Any damages awarded which exceed stumpage would be the responsibility of the buyer/cutter.
40. In the old version the surety liability appears to be limited only by bond amount but is not clearly defined.
41. While the procedural aspects of the current version of the Statute and 310 IAC 23 (the "Rule"), which was promulgated post 1993, should be applied to all new adjudicative proceedings against a timber buyer/cutter, the version of the Statute in effect at the time an alleged illegal cut was made must be applied to determine penalties.
42. The illegal cut in question here was made in 1990. The version of the Statute in effect at that time reads at Sec. 17: "A person who cuts or causes to be cut any timber which he has not previously purchased shall, in lieu of the normal penalties of this chapter, pay the owner of the cut or appropriated timber three (3) times the stumpage value of the timber." The operative word of shall as
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mandated above leaves the alj no discretion in the matter of a treble damage award.
43. Respondent Estin E. Martin, in his brief, objects to the award of treble damages to the claimants. He maintains that since the timber was paid for, even though the payment was not made to owners of the trees, it was "previously purchased" as defined above.
44. Indiana Courts have apparently construed the treble damage question three times in this regard.
45. In wright v. Reuss (1982), Ind.App., 434 N.E.2d 925, the Court of Appeals of Indiana, First District examined the treble damage portion of the Statute 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". Id. at 926.
46. The Court in Wright goes on to note that since treble damages is not a criminal penalty no mens rea need be shown. The Court draws the conclusion that the defense of mistake is not available because the plain language of the statute "does not require the person to have intentionally or willfully cut timber which he or she has not previously purchased". Id. at 929.
47. The next court ruling in regard to the Statute was made by the Indiana Supreme Court in Baxter v. Lyttle (1985), 475 N.E.2d 675. In Baxter a timber cutter purchased timber from a property owner but failed to record the contract. Prior to the timber being cut the property owner sold the property to another. The cutter then harvested the trees and the new landowner requested treble damages.
48. The Court examined the facts in Baxter and determined that treble damages were not appropriate. It states at 677 "[w]e are constrained to interpret the statute according to its plain and unambiguous meaning, and consequently hold that appellant had previously purchased the timber within the meaning of the statute, and therefore is not liable for the statutory treble damages."
49. At this point in the law it appears to be an open question as to how far the "previously purchased" examination in Baxter should be applied.
50. The Respondents have requested that it be applied to the situation at bar where the timber was previously purchased but not from a person who was ever an owner of the trees.
51. It should be emphasized that the actual timber purchase in Baxter was made from the rightful owner who then sold the property prior to the cut.
52. The open question appears to have been answered by the Court of Appeals of Indiana, Fourth District in Beeman v. Marling (1995), Ind.App., 646 N.E.2d 382. (Note that transfer was denied on June 13, 1995).
53. In Beeman the timber cutter purchased timber from a person who misrepresented herself as having an ownership interest in the tract of land. The rightful owner obtained a jury award of treble damages. The cutter appealed claiming that since the timber had been previously purchased, the award of treble damages was contrary to law as established by the Indiana Supreme Court in Baxter.
54. The Court, in upholding the treble damage award draws a distinction between Baxter and Wright as follows: "We disagree with the Timber Co.'s contention that Baxter precluded the imposition of treble damages where a timber cutter purchased timber from a third party who is not the true owner. When Baxter is read in light of its factual situation, the supreme court's use of the language relied upon by the Timber Co. becomes clear. Baxter purchased the timber from the true owners of the land. However, before Baxter had harvested the timber, the landowners conveyed the land to a third party who was without knowledge of the contract. These facts are contrasted to those in Wright where the timber cutter had strayed onto the wrong property and felled trees which he had not purchased at all. Id. at 384, 385."
55. The Court goes on to reiterate the holding in 56. The fact situation in the instant case is very similar to Beeman in that the cutters purchased the trees from Mr. Fitzpatrick believing that he was the rightful owner which he was not. 57. The Court in Wright and more recently in Beeman has determined that the burden is on the timber buyer/cutter to ascertain the true owner of the timber. That was done in Baxter so treble damages were not appropriate. 58. Here Jerry Lewis and Estin Martin believed the timber had been purchased from the rightful owner but it had not.
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Accordingly, three times the stumpage value must be awarded under the provisions of the old version of the Statute.