Content-Type: text/html 02-011f.v9.html

CADDNAR


[CITE: Beeman v. Pendley & Zurich N. Amer., 9 CADDNAR 53 (2002)]

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Cause #:02-011F
Caption: Beeman v. Pendley & Zurich N. Amer.
Administrative Law Judge: Lucas
Attorneys: pro se (Beeman); pro se (Pendley)
Date: April 30, 2002

FINAL ADMINISTRATIVE JUDGMENT

1. The stumpage value is $800 for the trees taken unlawfully from Jesse Beeman by Tom Pendley. Beeman is entitled to three times stumpage value from Pendley. Accordingly, Beeman has an administrative judgment against Pendley in the total amount of $2,400.

2. Jesse Beeman is entitled to an administrative judgment against Zurich North America in the amount of $800. Zurich North America has no liability to Beeman except to any extent Pendley does not satisfy the $2,400 judgment against him. To the extent Zurich North America is required to satisfy the judgment, it may seek indemnification against Pendley as authorized by contract or statute.

3. 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 AND CONCLUSIONS OF LAW

1. Jesse A. Beeman ("Beeman") initiated the proceeding when he filed correspondence with the Natural Resources Commisssion (the "Commission") on January 15, 2002 outlining a claim against Thomas Pendley ("Pendley").

2. At issue in Beeman's claim was a contention he was entitled to relief against Pendley for timber cut and harvested in violation of IC 25-36.5-1. This statutory chapter provides for the regulation of timber buyers (the "Timber Buyers Act"). The trees were harvested in late September 2001 on property owned by Beeman in Columbia Township, Jennings County, Indiana (the "subject property").

3. Pendley is a "timber buyer" as the term is used under the Timber Buyers Act. IC 25-36.5-1-1 and IC 25-36.5-1-3.2(a)(1).

4. Pendley is registered as a timber buyer under the Timber Buyers Act. IC 25-36.5-1-2.

5. Every person registered as a timber buyer is required by IC 25-36.5-1-3 to post a bond or other appropriate surety to provide compensation to a timber grower if the timber buyer: (a) fails to pay when due any amount due a timber grower for timber purchased; (b) fails to pay legally determined damages for timber wrongfully cut by a timber buyer or his agent; or, (c) commits any violation of the Timber Buyers Act.

6. Zurich North America is the surety for Pendley.

7. In September 2001, Pendley owned property adjacent to the subject property.

8. Acting under a mistaken belief as to the location of the property line, Pendley directed Rodney Sloan Logging to cut three red oaks and one white oak (the "subject trees") that were on the subject property. Subsequent to the cutting, Pendley retained the services of a surveyor who confirmed the error.

9. Beeman did not authorize the subject trees to be harvested.

10. Pendley and Beeman agree the subject trees were cut under instructions by Pendley and without authorization by Beeman.

11. Pendley and Beeman do not agree as to the value of the subject trees. Also, they do not agree upon whether Beeman

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is entitled to three times the stumpage value for the subject trees under IC 25-36.5-1-3.2(f)(2).

12. A. Brian Cruser, Certified Forester, doing business as ABC Forest Management, on October 31, 2001 prepared an appraisal of the subject trees on behalf of Beeman. The appraisal was attached to Beeman's request for administrative review. The parties stipulated to admission of the Cruser appraisal into evidence.

13. C. Sam Bond, Forester, doing business as C. S. Bond Forest Management, on January 23, 2002 prepared an appraisal of the subject trees on behalf of Pendley. This appraisal was filed in open court during a prehearing conference. The parties stipulated to admission of the Bond appraisal into evidence.

14. A hearing was conducted as scheduled on March 19, 2002 to receive evidence as to the value of the subject trees and as to whether Beeman is entitled to three times the stumpage value for the subject trees.

15. A. Brian Cruser ("Cruser") testified when he performs an appraisal of timber, he determines the value of the trees standing in the woods before a determination of expenses associated with timber preparation. The valuation is intended to reflect the price he would expect to obtain working as a consultant for a landowner in a willing sale by the timber grower to a timber buyer. In other words, his appraisal seeks to identify the sum a landowner would receive directly from a sale.

16. Cruser recommends to landowners that standing timber be offered for sale to timber buyers using sealed bids. Offered into evidence as Claimant's Exhibit 1 was a list of timber sale receipts from late 2001 and early 2002 identifying bids by timber buyers on particular parcels. Although the particular amounts set forth in the bids are irrelevant to a valuation of the subject trees, they do demonstrate a considerable variation in the range of offers from timber buyers between high and low bids. The high bid may exceed the low bid by 80% or more, and Cruser testified these kinds of variations were typical of timber sales by sealed bids where he has served as a landowner's consultant.

17. Cruser is experienced as a forester consultant for the sale of timber from the area including Decatur, Ripley, and Jennings Counties. In this area, the use of sealed bids has proven favorable to landowners because there is significant competition for the purchase of timber, and timber buyers are willing to participate in the sealed bid process. Because the subject property is located in Jennings County, Beeman could reasonably be expected to benefit from the competitive market resulting from the sealed bid process in timber sales.

18. Cruser contrasted the market conditions in the counties described in Finding 17 with those in Lawrence County, where Bond typically operates and where timber buyers may be reluctant to participate in sealed bidding for timber purchases. As a result, he reflected Bond worked in a market that was less favorable to timber sellers and where timber sales prices were lower. He testifid he "could say from experience," the timber values in the area described in Finding 17 are generally greater than the timber values in Lawrence County. His testimony in this regard was unrefuted.

19. The loss of personal property is determined by its fair market value at the time of the loss. The "fair market value" is the price at which a willing seller and willing buyer will trade. Bottoms v. B. & M. Coal Corp., 405 N.E.2d 82 (Ind. 1980). A contract for the sale of timber to be cut is a contract for the sale of goods, whether the timber is to be cut by the landowner or a timber buyer. IC 26-1-2-107(2).

20. In determining the fair market value of the timber, consideration may properly be given to the normal conduct of the trade in a particular vocation or community. The usage must be fair and familiar within the community. IC 26-1-1-205(2). Hawkland, Uniform Commercial Code Series, Section 1-205 (1992).

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21. The loss of the subject timber is determined by its fair market value in September 2001. Cruser determined the value of the subject timber based on local market conditions as they existed in October 2001. The market conditions in October 2001 are sufficiently proximate in time to those in September 2001.

22. The methodology used by Cruser is consistent with the normal conduct of the trade for timber sales in Jennings County and is reasonably calculated to determine the fair market value of the subject trees.

23. C. Sam Bond did not attend the hearing and was unavailable for questioning as to basis for his appraisal of the subject trees. This absence seriously compromises the probative value of his appraisal. There is no way to determine when the sales took place on which he determined market conditions. Neither can it be ascertained where the sales occurred. Bond may have used comparable sales from Lawrence County or another site where, based upon the unrefuted evidence before the Commission, market conditions differ significantly from those in Jennings County and counties neighboring Jennings County.[FOOTNOTE A]

24. Presumptions made by Cruser in determining the volume of marketable timber cut from the subject trees suggest an analysis very favorable to Beeman, and more likely than not, somewhat inflated. In particular, the determination of likely tree taper appears excessively optimistic. For these reasons, the preponderance of the evidence is found to support $800 as the fair market value of the subject trees.

25. Beeman seeks relief against Pendley under IC 25-36.5-1-3.2(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."

26. Before 1993, the treble damages clause provided a timber buyer or timber cutter who "cut 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."

27. The purpose of the treble damages clause 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, 434 N.E.2d 925, 22 (Ind. App. 1982).

28. The treble damages clause does not allow a timber buyer or a timber grower the defense of mistake of fact as to ownership of real estate where timber is located. Neither is a timber grower required to show the person who wrongfully cut timber acted with malicious intent. Beeman v. Marling, 646 N.E.2d 382 (Ind. App. 1995).

29. Amendments made to the Timber Buyers Act in 1993 made a number of fundamental changes. Among these was to replace the mandatory structure for treble stumpage damages with a new arrangement by which a timber grower may seek treble damages through an adjudicatory proceeding before the Commission. Since 1993, the Commission has exercised discretion to demand less than the full impact of the treble damages clause where doing so would work an injustice. Hornaday v. Ammerman cited previously and Pollock v. Coats, 8 Caddnar 124 (1999). Commission discretion may most appropriately be applied where the timber buyer or timber cutter acts with all due diligence, but because of misdirection or connivance of another, is caused to err. Gallien v. Sloan Logging, Pendley & Zurich N. Am., 9 Caddnar 40 (2002).

30. In this proceeding, neither Pendley nor Beeman knew the exact location of the property line before Rodney Sloan Logging began the timber harvest on Pendley's property. Pendley was both a timber buyer and a property owner who owned lands adjacent to the subject property.

31. Pendley walked the common property line with Carl Beeman-brother-in-law of the Claimant--but no similar activity

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was undertaken with the Claimant, Jesse Beeman.

32. Pendley testified timber cutting activities took place at the site for four weeks, and Jesse Beeman did not complain those activities had crossed their mutual property line.

33. Jesse Beeman testified he rarely visited the property.

34. The primary responsibility under the Timber Buyers Act does not rest with an adjacent property owner to complain when a timber buyer crosses the line to cut timber. The responsibility rests with the timber buyer who must exercise due diligence to assure activities are restricted to lands where the timber buyer is authorized to harvest timber.

35. There is nothing in the record to demonstrate Pendley made any significant effort to determine where the property line with Beeman was located before Pendley authorized the harvest of timber. A survey was conducted only after the harvest was completed to facilitate a sale of Pendley's real estate to a third person. Efforts by Pendley fall well short of the due diligence required by the Timber Buyers Act.

36. Beeman is entitled to an administrative judgment against Pendley for triple stumpage value for the subject trees in the total amount of $2,400. 37. Beeman is also entitled to an administrative judgment against Zurich North America. The amount of his judgment against Zurich North America is limited by IC 25-36.5-1-3.2(g) to $800. Zurich North America has no liability to Beeman except to any extent Pendley does not satisfy the $2,400 judgment against him. Also, to the extent Zurich North America is required to satisfy the judgment, it may seek indemnification against Pendley as authorized by contract or statute.

FOOTNOTE

A. Carl Beeman testified he observed C. Sam Bond conduct the site survey upon which he appraised the subject trees. Carl Beeman indicates Bond did not measure the distance from the stumps to the tree tops. Pendley testified he accompanied Bond when the survey was conducted, and Bond used a tape to measure distance. The subject of these conflicting testimonies is not critical to the disposition of this proceeding, but it does underline the problem with Bond's absence. Bond himself is in the best position to testify how he performed the appraisal, and as an experienced independent professional his testimony would ordinarily be entitled to credibility. Having Pendley testify on behalf of Bond is not equivalent. Pendley is a party and directly concerned with the outcome of the hearing. The worth of having Bond offer independent professional expertise is significantly diminished.