CADDNAR

[CITE: Rosenbaum Farms v. A&S Logging and Capitol Indemnity, 12 CADDNAR 144 (2009)]

 

[VOLUME 12, PAGE 144]

 

 

Cause#: 09-036F

Caption: Rosenbaum Farm v. A&S Logging and Capitol Indemnity

Administrative Law Judge: Lucas

Attorneys: Howes (Rosenbaum); Wallsmith (A&S Logging); Jenks (Capitol)

Date: October 9, 2009

 

 

Final Administrative Judgment

Item (1) Rosenbaum Farms is granted an administrative judgment against A&S Logging and Sawmill in the amount of $4,500. 

 

Item (2) Rosenbaum Farms is granted an administrative judgment and is entitled to forfeiture of the bond, posted with the Department of Natural Resources under the Timber Buyer Act on behalf of A&S Logging and Sawmill, against the Capitol Indemnity Corporation in the amount of $4,500.

 

Item (3) The compensation to which Rosenbaum Farms is entitled under this administrative judgment shall not exceed the total amount of $4,500.

 

Item (4) 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

 

A. Statement of the Case

 

1. Rosenbaum Farms initiated the proceeding when, through attorney, Ralph F. Howes, it filed a “Complaint for Damages—Non Payment of Timber” (the “Complaint”) with the Natural Resources Commission (the “Commission”) on January 29, 2009 against A&S Logging and Sawmill (“A&S Logging”).  The Complaint sought relief under 312 Ind. Admin. Code § 14, rules adopted by the Commission to assist with implementation of Ind. Code § 25-36.5 (sometimes referred to as the “Timber Buyer Act”).  The Timber Buyer Act provides for the regulation of timber buyers and other persons associated with the enterprise of timber harvesting.  In addition, the Complaint identified Capitol Indemnity Corporation as the surety for A&S Logging and sought relief from Capitol Indemnity under the Timber Buyer Act.

 

2. The Complaint is procedurally governed by IC § 4-21.5 (sometimes referred to as the “Administrative Orders and Procedures Act” or “AOPA”) and rules adopted by the Commission at 312 IAC § 3-1 to assist with its implementation of AOPA.

 

[VOLUME 12, PAGE 145]

 

3. Stephen L. Lucas was appointed the Commission’s administrative law judge.  He served notice of a “Notice of Prehearing Conference”, with a copy of the Complaint attached, upon Rosenbaum Farms, A&S Logging, and Capital Indemnity Corporation. 

 

4. On February 13, 2009, Beth A. Jenks, Claims Specialist for Capitol Insurance Companies, filed correspondence which stated in substantive parts:

 

Notice of Preheaing Conference for the above-referenced matter has been acknowledged.  We are in the process of establishing a claim file and collecting all necessary underwriting information regarding the IN Timber Buyers Bond issued on behalf of our principal.  Additionally, we are pursuing A&S Logging & Sawmill demanding they resolve this claim without our further involvement.

 

This letter shall not be construed as a waiver of Capitol Indemnity Corporation’s rights or defenses, all the same being specifically reserved.

 

5. The initial prehearing conference was conducted as scheduled on February 27, 2009.  Rosenbaum Farms was present through Cynthia Rosenbaum and through its attorney.  A&S Logging was present through its attorney, Todd E. Wallsmith.  Capitol Indemnity Corporation did not appear in person or by an attorney for the prehearing conference.

 

6. Rosenbaum Farms, A&S Logging, and Capitol Indemnity Corporation are collectively the “Parties”.

 

7. The Commission is the “ultimate authority” under AOPA for an action applying IC § 25-36.5-1-3.2.  312 IAC § 14-1-2(d) and Chacon v. Richards Sawmill, et al., 10 Caddnar 311, 312 (2006).[1] 

 

8. The Commission has jurisdiction over the subject matter and over persons of the Parties.

 

9. On April 30, 2009, the administrative law judge served a “Report of Telephone Status Conference and Notice of Hearing” upon the Parties or their attorneys by which a hearing was set for June 29, 2009.  In response to the reservation of rights and defenses asserted by Capitol Indemnity Corporation in Finding 4, the notice included the following admonition: “Capitol Indemnity Corporation must appear and participate in the scheduled hearing, presenting any appropriate evidence as to rights and defenses, or the....Commission may enter an administrative judgment against Capitol Indemnity Corporation to the full extent of the Commission’s jurisdiction.”

 

[VOLUME 12, PAGE 146]

 

10. At the joint request of Rosenbaum Farms and A&S Logging, the hearing scheduled for June 29, 2009 was continued so they could pursue the conclusion of settlement negotiations.  A settlement was not ultimately achieved, and the hearing was conducted on September 10, 2009.  The hearing had been scheduled for North Judson, and Rosenbaum Farms and A&S Logging appeared as scheduled.  Capitol Indemnity Corporation did not appear.  Following a delay due to technical difficulties with the use of the Commission’s recording equipment, the participating Parties agreed to remove the hearing to the facilities of the LaPorte Circuit, LaPorte.  The hearing was conducted in LaPorte, Indiana on June 29, 2009.  Following the conclusion of the hearing, counsel for the participating Parties provided oral arguments that were not recorded.   

 

11. The proceeding is ripe for disposition under AOPA and 312 IAC § 3-1.

 

 

B. Evidence at Hearing

 

12. Cynthia Rosenbaum testified she lives at 2852 South LaPorte Road in LaPorte County.  Her husband was Keith Rosenbaum who died on September 26, 2007.  At all times pertinent to this proceeding, Keith and Cynthia Rosenbaum owned farmland in LaPorte County together with her husband’s sister and her husband’s brother-in-law.  The farmland is located in non-contiguous tracts located in Section 18 and Section 19 of Hanna Township, LaPorte County.  The more southerly tract contains roughly 200 acres.  Claimant’s Exhibit 1.  The more southerly tract is the “subject property”.  The subject property contains woodlands and was originally part of the Kankakee River marshlands. 

 

13. Rosenbaum Farms is operated as a partnership.  Cynthia Rosenbaum performs bookkeeping for Rosenbaum Farms.  She testified there were discussions concerning management of Rosenbaum Farms, and the participants agreed wooded portions should be logged out and returned to agricultural production.  Keith Rosenbaum was authorized to make arrangements to contract for harvest of standing timber.  Cynthia Rosenbaum had no personal role in soliciting a timber contract.  On cross-examination, she testified she was not present when her late husband and Cheyenne Allen negotiated the contract.  Cynthia Rosenbaum testified on direct examination that she became aware Keith Rosenbaum had come to terms on the purchase and sale of timber when he showed her an executed written contract between A&S Logging and him. 

 

14. The written contract entered between A&S Logging and Rosenbaum Farms, as described in the previous Finding, included signatures by Cheyenne D. Allen for A&S Logging and by Keith Rosenbaum for Rosenbaum Farms, and stated in substantive parts as follows:

 

[VOLUME 12, PAGE 147]

 

A & S LOGGING STANDING TIMBER CONTRACT

No. 001471

THIS AGREEMENT, by and between A & S LOGGING, hereinafter the Buyer and Rosenbaum Farms Keith and Cyndi Rosenbaum…, hereafter called the seller, WITNESSEITH:

That the Seller in consideration of the sum of Five Thousand ($5,000), the receipt of which is hereby acknowledged, does hereby agree to sell, and does by these presents, sell, bargain, and grant under the Buyer, his heirs and assigns, all usable timber or cut logs described as follows: all usable timber south of house including across tracks, as well as all usable pine.

Located upon the following described real estate in LaPorte County….

 

Seller do by these presents warrant that said tract is free of liens and encumbrances and that the Seller has the right to sell said timber and Seller agrees in the event that there is a lien or encumbrance, Seller shall furnish written consent from the lienholder to the buyer to remove said timber.

 

In the event original owner and seller desires to sell the above mentioned farm, the timber belonging to A&S LOGGING has not been removed, he must reserve same in deed to new owner, showing A&S LOGGING owning said timber.

 

Buyer shall have two years from date of the contract herein to fell and remove said timber, unless otherwise stated in this contract.

 

Seller agrees to grant unto the Buyer, his heirs assigns, employees, contractors, and agents the full and free rights of ingress and egress with trucks, tractors and other logging equipment as necessary, to and from the land of the sellers, for the purpose of cutting, felling, and removing said timber of logs during the terms fo this contract.  Seller agrees that Buyer shall have the right to pile and store cut lumber and cut logs in any reasonably location upon premises.  Further all rights herein given to the Buyer shall continue form [sic.] the date of this contract to the date that the last of the cut timber or logs are removed from said premises by the Buyer.

 

Seller agrees to grant unto the Buyer a reasonable right-of-way over which to remove said timber or logs from the places where said timber is cut to the public highway during the terms of the contract and Seller hereby acknowledges the receipt of One Dollar ($1.00) in payment for granting of this right-of-way.  In the event that Buyer must take legal action to enforce the terms of this contract, Seller herein agrees the Seller shall pay the cots of such action including reasonable attorney fees.

 

It is further agreed that upon the removal of all timber sold under this contract, such rights given to the buyer under this contract shall cease and be of no further effect.

 

Received from Cheyenne Allen the sum of $500.00 as payment on timber or logs described above.  Balance to be paid before timber or logs are removed from the woods or farm where it is now located.  Balance $4,500.00.

 

IN WITNESS WHEREOF, we have hereunto set our hands this 31 day of March, 2007….

 

[VOLUME 12, PAGE 148]

 

This document is the “subject written contract”.  During subsequent direct examination by Rosenbaum Farms, Cheyenne Allen indicated that he was authorized to sign on behalf of A&S Logging.  The evidence suggests A&S Logging & Sawmill is a business name for Cheyenne Allen.

 

15. Cynthia Rosenbaum testified she received $500 from Cheyenne Allen but never received the outstanding amount of $4,500.  In his testimony, Allen agreed that he paid $500 but not the remaining contractual amount of $4,500.  These amounts are not in factual dispute.

 

16. In early 2009, Cynthia Rosenbaum consulted with Ralph Howes concerning several legal matters.  Among these was payment of the outstanding amount of $4,500.  As a consequence of their consultation, Howes mailed a letter to A&S Logging and Cheyenne Allen dated January 14, 2009 which stated in substantive part as follows.

 

Dear Mr. Allen:

 

I am writing on behalf of Rosenbaum Farms, a party with whom you contracted in March, 2007 for the cutting and removal of standing timber.  For your reference, a copy of your contract is enclosed.

 

As you may or may not know, Mr. Rosenbaum passed away very suddenly in September, 2007.  His widow, Cynthia and his sister, Ellaine Halbadier, are the partners who now own the farm upon which the timber was located.

 

I am informed that you have removed the timber from the Rosenbaum farm property and have yet to pay the balance of $4,500 despite the contract provision that required payment in full prior to the removal of the logs.

 

Please consider this as demand for immediate payment.  Your certified check should be made payable to Rosenbaum Farms and remitted directly to my office.  Thank you for your immediate attention to this oversight.

 

Claimant’s Exhibit 4.

 

17. The letter described in Finding 16 was sent by certified mail to Cheyenne Allen.  Allen received the letter as demonstrated by a return receipt, and as indicated through his testimony, although the return receipt does not state the date of receipt.

 

[VOLUME 12, PAGE 149]

 

18. Before the letter described in Finding 16 was sent, Cynthia Rosenbaum observed considerable logging activity on the subject property.  For several trees, logs had been removed and only tops remained.  On cross-examination, she testified that with her husband she saw the logs on the ground but did not observe the harvest process or the removal of logs from the subject property.  On direct examination, she testified she did not meet or speak with Cheyenne Allen before the hearing was held on September 10, 2009.  She testified neither Allen nor anyone from A&S Logging contacted her as a result of the letter described in Finding 16.

 

19. Duane McCoy is the Licensed Timber Buyer Forester for the Division of Forestry, Department of Natural Resources, State of Indiana.  His responsibilities include licensure of timber buyers, under the Timber Buyer Act and 312 IAC § 14, and assistance to the Division of Forestry and the public in administering these laws.   He has a Bachelor’s Degree in Forest Management and a Master’s Degree in Forest Management.  He has worked with industry to coordinate training for safety and timber productivity.

 

20. As a result of requests for assistance from Rosenbaum Farms, he visited the subject property on June 4 and again on June 9, 2009.  He surveyed three tracts and evaluated the remains of 31 trees that had been harvested.  These included eleven white oaks, 13 black cherries, two chinquapin oaks, four black oaks, and one red oak.  Although his best recollection was that three to six logs may have remained at the time of his survey, each of the logs from the 31 trees had been removed from the subject property.  McCoy testified he did not conduct an appraisal of the value of the harvested trees.

 

21. On direct examination by the Rosenbaum Farms, Cheyenne Allen testified he caused the removal of logs from the subject property. 

 

22. On cross-examination, Allen testified Keith Rosenbaum directed him to first harvest timber on the western side of the subject property because Rosenbaum Farms had determined to return this area to cropland as soon as practicable.  In this area, A&S Logging cut “everything we could get a log out of.  It didn’t matter what species or what value it had to it.  He just wanted them cut down and got out of there.”  Allen also testified he was never able to access a portion of the subject property to harvest trees.  He testified he had paperwork that would indicate the value of the 31 trees which he harvested, but he could not testify as to their exact value.  He estimated their value at roughly $2,000 but less than $3,000.  Allen testified a man who lived on the subject property cut some timber for firewood, but he did not observe anything to cause him to believe a timber harvest occurred closely in time to the harvest by A&S Logging.

 

23. On direct examination by A&S Logging, Allen testified he harvested timber from the subject property in April or April and May 2007.  He never returned to the subject property for logging following the spring of 2007.

 

[VOLUME 12, PAGE 150]

 

C. Responsibility of A&S Logging to Rosenbaum Farms under the Subject Written Contract

 

24. The Timber Buyer Act provides that a timber grower may commence a proceeding against a timber buyer if there is 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 having been made to the timber grower as specified in the contract.  IC § 25-36.5-1-3.2(b)(1) and IC § 25-36.5-1-3.2(c).  The Commission adopted rules at 312 IAC § 14-6-1 and 312 IAC § 14-6-2 to help implement these statutory provisions.  In addition, a timber buyer may include a surety for a timber buyer as a party to the proceeding.  IC § 25-36.5-1-3.2(c)(1) and 312 IAC § 14-6-4.

 

25. “Timber grower” includes the owner of land in Indiana “who has an interest in, or is entitled to receive any part of the proceeds from the sale of timber gown in Indiana and includes persons exercising lawful authority to sell timber for a timber grower.”  312 IAC § 14-2-12.  Rosenbaum Farms was the owner of the subject property and Keith Rosenbaum was its agent for the entry of the subject written contract.

 

26. “Timber buyer” includes to “a person engaged in the business of buying timber from timber growers for sawing into lumber, processing, or resale.”  312 IAC § 14-2-10.  A&S Sawmill is a timber buyer and is licensed by the Department of Natural Resources under the Timber Buyer Act.  Cheyenne Allen was acting for A&S Logging for the entry of the subject written contract.

 

27. As provided in IC § 14-26-1-3, Capitol Indemnity Corporation was the surety for Cheyenne Allen, doing business as A&S Logging and Sawmill, under the Timber Buyer Act at the time of enter of the subject written contract.

 

28. The terms of the subject written contract are unambiguous as to compensation owed by A&S Logging to Rosenbaum Farms.  A&S Logging was to pay Rosenbaum Farms $5,000 for the harvested timber.  Of the amount of $5,000, $500 was due on entry of the subject written contract, and the outstanding amount of $4,500 was to be paid before timber or logs were removed from the subject property.  A&S paid to Rosenbaum Farms the amount of $500 that was required on entry of the subject written contract.  A&S Logging harvested timber from the subject property in April or May 2007 and removed the harvested logs from the subject property.  The harvest consisted of at least 31 merchantable trees.  A&S Logging was obliged under the subject written contract to have paid the outstanding amount of $4,500 before removal of the logs in April or May 2007.  A&S Logging has never paid the outstanding amount of $4,500 and is in breach of the subject written contract. 

 

29. Rosenbaum Farms is entitled to an administrative judgment against A&S Logging in the amount of $4,500 based upon the terms of the subject written contract.

 

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D. Responsibility of A&S Logging to Rosenbaum Farms for Stumpage Value

 

30. Apart from the remedy available to a timber grower against a timber buyer, where a timber buyer has failed to make payment as anticipated by a written contract, a timber buyer may seek recovery if either there is no written contract or if the written contract does not specify the sale price for the timber.  IC § 25-36.5-1-3.2(b)(2).  The evidence does not support relief under subsection (b)(2) because a written contract existed between A&S Logging and Rosenbaum Farms, and the subject written contract specified the sale price for the timber.  The exclusive remedy available to Rosenbaum Farms is the remedy provided under IC § 25-36.5-1-3.2(b)(1) as discussed in Finding 24 through Finding 29.

 

31. IC § 25-36.5-1-3.2(f)(2) provides 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”.  The treble-damages clause is not a remedy determined from an amount stated in a written contract but rather is dependent upon an affirmative showing of stumpage value.

 

32. Although the evidence supports a finding that A&S Logging harvested merchantable timber from the subject property, there is no evidence as to the stumpage value of the timber.  The only evidence of valuation was provided by Cheyenne Allen.  He testified to a rough estimate that the harvested timber brought a return of $2,000.  This estimate falls short of a determination of stumpage value.

 

33. Even if Allen’s rough estimate of $2,000 were considered a stumpage value, based on his testimony of valuation, the compensation owed by A&S Logging to Rosenbaum Farms would be the same as set forth in Finding 29. 

 

34. A&S Logging previously paid $500 to Rosenbaum Farms for purchase of timber from the subject property.  The outstanding responsibility of A&S Logging based on the rough estimate of value by Allen would then be $1,500.  If this amount were considered stumpage value and if Rosenbaum Farms were entitled to the full potential of the treble-damages clause, Rosenbaum Farms would be entitled to three times $1,500 or $4,500.

 

 

E. Attorney Fees and Litigation Expenses

35. Rosenbaum Farms seeks attorney fees and litigation expenses in its pursuit of an administrative judgment against A&S Logging for the value of timber harvested from the subject property.

36. Indiana does not ordinarily allow for the recovery of litigation expenses as damages. “Expenses of litigation and attorney fees may not be included in damages unless they are provided for by some prior contract or statutue.”  Bituminous, Inc. v. Culligan Fyrprotexion, Inc., 437 N.E.2d 1360, (Ind. App. 1982).

 

[VOLUME 12, PAGE 152]

 

37. Generally, awards of attorney fees in Indiana “are governed by the American Rule, under which each party bears its own costs. However, exceptions to the American Rule exist where certain fee-shifting statutes give a court or agency discretion to order one party to pay another party's reasonable attorney fees.”  Indiana Department of Natural Resources v. Hoosier Environmental Council, Inc., 831 N.E.2d 804 (Ind. App. 2005). Citations omitted.

38. A state administrative agency has only the powers conferred on it by the Indiana General Assembly.  Powers not within the agency’s legislative grant of authority may not be assumed by the agency nor implied to exist in its powers.  Bell v. State Board of Tax Commissioners, 615 N.E.2d 816, 819 (Ind. Tax Ct. 1995), citing Fort Wayne Education Association, Inc. v. Aldrich, 527 N.E.2d 201, 216 (Ind. Ct. App. 1988).  The Department of Natural Resources and the Commission, on administrative review, have only the powers granted to them specifically by the Indiana General Assembly.  Pratt v. Indianapolis Water Co. and DNR, 9 Caddnar 17 (2001).

39. The Indiana General Assembly has conferred power upon the DNR and upon the Commission to award litigation expenses in some instances.  Under proper circumstances, the Commission may award litigation expenses in its administration of statutes pertaining to surface coal mining, oil and gas production, entomology, and the possession of wild animals. These statutory authorities are coordinated and implemented, by rule, at 312 IAC § 3-1-13.

40. The Indiana General Assembly has not authorized the Commission to award litigation expenses under the Timber Buyer Act. The Commission lacks the legal authority under the Timber Buyer Act to grant attorney fees.  Fischer v. Stodghill and Hartford Fire Insurance Company 10 Caddnar 147, 163 (2005); and Pike Lumber Co., Inc. v. Cruse Timber, et al., 10 Caddnar 28 (2005).

41. Rosenbaum Farms is not awarded attorney fees or other litigation expenses.

F. Financial Responsibility of the Surety, Capitol Indemnity Corporation, to Rosenbaum Farms

42. Capitol Indemnity Corporation provided a surety bond for A&S Logging under the Timber Buyer Act in the penal sum of $20,000. 

43. 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.  The value of timber cut by A&S Logging on the subject property is $4,500.

 

44. The liability of Capitol Indemnity Corporation to Rosenbaum Farms is $4,500.