ORDER:
1. The stumpage value of the trees belonging to Guy W. Pollock and Dorothy Cobern which were taken illegally by Dale Coats is found to be $14,297.06.
2. The stumpage value will be doubled and Pollock and Cobern are awarded $28,594.12.
3. The liability of Coats' surety, Ohio Casualty Insurance Company, is limited to the stumpage value of $14,297.06 or the value of Coats' surety bond, whichever is less.
4. 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. Indiana Code (IC) 25-36.5 (the "Statute") and 312 Indiana Administrative Code (IAC) 14 (the "Rule") govern disputes regarding timber buyers regulated by the Department of Natural Resources (the "Department").
2. 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)).
3. This case was initiated by Guy E. Pollock and Dorothy Cobern (the "claimants") filing a Complaint for Compensation for Wrongful Activities of Timber Cutter (Dale Coats) with the Commission's Division of Hearings on January 5, l998.
4. The Commission assigned Tim Rider as the administrative law judge (alj) to examine the Complaint.
5. In their Complaint the claimants charged that Coats, while cutting trees for another landowmer, had crossed a property line and cut trees belonging to Pollock and Cobern.
6. The alj checked the records of the division of forestry, department of natural resources and ascertained that Coats was licensed by State of Indiana (Y562) and that his surety was the Ohio Casualty Insurance Company. The surety was joined as a party to this action.
7. During the course of this litigation several conferences were conducted. At these conferences it was ascertained that Coats did cut the trees in question but that the parties could not agree on a stumpage figure to be awarded or on an amount that would be needed to repair damage done by Coats to the claimants' land.
8. At hearing the only issues litigated were the stumpage value of trees cut and the applicability of the treble damage provision of the Statute.
9. Regarding the stumpage value the choices presented as evidence were as follows:
a. The claimants presented, as claimants' exhibit 13, a timber analysis performed by Craig A. Wilson who is a licensed timber cutter. Wilson testified that he did his best to evaluate the stumps but admitted he was not an expert in that regard. Wilson's value of stumpage was $12,900.
b. The claimants also presented an analysis performed by Thomas Rathert who earned a degree in forestry from Purdue University, previously worked for the department of natural resources, and is a private forestry consultant. This analysis was claimants' exhibit 14. Rathert defined the value of the trees as "the cash price which the standing timber would bring at a well advertised sale." The method used as specified in exhibit 14 appeared to be of industry standard. The valuation presented was $14,297.06.
c. The respondents presented a stumpage figure of $8,933.25. This valuation was arrived at by calculating what Coats had received at the mill for all trees cut from the claimants' land. The lower figure was justified by claiming that most of the wood was low grade due to mineral streaks, knots and double textures and that these flaws cannot be seen until the timber is cut. Some of the evidence had to be estimated by Coats because he had no receipts for some sales and other receipts pertained the timber cut from other locations as well as from the claimants' land.
10. Of the three valuations presented above, the one performed by Thomas Rathert is clearly the most
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reliable. He performed his analysis using accepted industry methods. Rathert is an expert who is familiar with the area in question as he has done business in this area since 1980.
11. Wilson is a timber cutter but admittedly not an expert in stumpage valuation.
12. Coats' use of sales receipts and estimates is not accurate and further, the claimants should be able to expect payment which most closely represents the value of the trees "standing on their property" because that is the state the trees were in when illegally cut by Coats.
13. In previous timber cases heard by the Commission, valuation of timber has been made primarily using value of timber stand at the time of the cutting (See Hagan, et. al. v. Lewis, Cincinnati Insurance Co., Martin and US Fidelity & Guaranty Co., 7 CADDNAR 146 (1996).
14. Further, Black's Law Dictionary, Sixth Edition at 1424, defines stumpage as "The sum agreed to be paid to an owner of land for trees standing (or lying) upon his land... in other words, it is the price paid for a license to cut." Generally, you cannot sell the trees first and then negotiate a price with the timber grower in a lawful transaction regarding stumpage. Accordingly, you certainly cannot illegally cut a timber grower's trees and then offer him what you got at the mill by arguing that once cut the trees were undervalued because of some imperfection. Stumpage is the value standing (or lying) in the woods.
15. The best estimate of value standing in the woods is that made by Rathert. In their posthearing brief, the claimants claim that the Rathert estimate is $14,297.06. However, an examination of Exhibit 14 shows the total Rathert estimate to be $12,221.65. An examination shows that the total contains a math error and $14,297.06 is the correct figure.
16. The other question to be addressed is whether or not the stumpage figure should be increased up to three times its value.
17. In Hagan, supra, the Commission examined the Statute in terms of how three times stumpage should be awarded.
18. The current version of the Statute (IC 25-36.5) was enacted into law by P.L. 220-1993 on July l, l993. At that time the Indiana Legislature made significant changes in the way timber claims are handled.
19. One change dealt with how treble damages are awarded. The old version mandated treble damages and, for the most part, Indiana Courts have agreed. The new version allows treble damages to be sought (sec 3.2(f)(2)). This language appears to give the Commission discretion in awarding more than stumpage but less then three times stumpage.
20. In addition, the new version of the Statute holds the surety liable only for the value of the timber wrongfully cut (See sec 3.2(g)).
21. When a sum greater than stumpage is awarded, courts have generally held the penalty to be civil in nature. The penalty is "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 (1982), Ind. App., 434 N.E.2d 925.
22. Accordingly, the Commission can examine the care taken by the timber cutter and then determine an appropriate penalty, while keeping in mind the need for landowner protection.
23. In this case, Coats made an effort to cut the trees for which he had contracted. Evidence was that he consulted with an immediate adjacent neighbor, that he identified the southeast corner stone and that he used a compass in order to determine the line between the real estate owned by the claimants and the real estate owned by Gail Littell and Gary Reynolds, for whom he was cutting at the time.
24. The evidence indicates that Coats did not do a good job of handling the compass. He admits that he made a mistake but asked the Commission to forgive him and to not administer any penalty. However, to do so would be unfair to the claimants as they are entitled to something more than the value of the timber that was illegally cut.
25. Accordingly, a fair award under this set of circumstances would be two times stumpage.
This would adequately penalize Coats for his careless compass work and would fairly
compensate the claimants by paying them twice as much as the trees were worth standing.