CADDNAR

[CITE: Henze v. Powers Logging & Timber, 12 CADDNAR 188 (2009)]

 

 

 

[VOLUME 12, PAGE 188]

 

Cause #: 09-072F

Caption: Henze v. Powers Logging & Timber

Administrative Law Judge: Lucas

Attorneys: pro se (Henze); pro se (Powers Logging); pro se (Hanover Ins.)

Date: December 2, 2009

 

 

FINAL ADMINISTRATIVE JUDGMENT

 

Item (1) Effective January 1, 2010, Robert D. Henze is granted an administrative judgment against Scott L. Powers, doing business as Powers Logging & Timber, in the amount of $908.

 

Item (2) Effective February 1, 2010, Robert D. Henze 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 Scott L. Powers, against the Hanover Insurance Company in any amount not previously satisfied by Powers under Item (1) but not to exceed $908.

 

Item (3) 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 WITH CONCLUSIONS OF LAW

 

A. Statement of the Case and Jurisdiction

1. Robert D. Henze (“Henze”) initiated the proceeding on April 9, 2009 when he filed correspondence (the “Complaint”) with the Natural Resources Commission (the “Commission”) against Scott L. Powers, doing business as Powers Logging & Timber (“Powers”); the Hanover Insurance Company (“Hanover Insurance”) as the surety for Powers; Paul Stuehrenberg, doing business as Tree City Sawmill (“Stuehrenberg”; and, Fidelity & Deposit Company of Maryland (“Fidelity”) as the surety for Stuehrenberg.  As memorialized in a “Post-Hearing Entry (Including Final Orders of Dismissal with Respect to Paul Stuehrenberg, d/b/a Tree City Sawmill and Fidelity & Deposit Company of Maryland” entered on November 2, 2009, Henze moved to dismiss Stuehrenberg and Fidelity, and the motion was granted.  Stuehrenberg and Fidelity are not subsequently considered in this administrative judgment.   Henze, Powers, and Hanover Insurance are collectively the “Parties”.

 

2. The Complaint sought relief under Ind. Code § 25-36.5-1 (sometimes referred to as the “Timber Buyer Act”) and 312 Ind. Admin. Code § 14, rules adopted by the Commission to assist with implementation of 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.

 

3. 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.

 

4. 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] 

 

5. Stephen L. Lucas was appointed the Commission’s administrative law judge.  He served a “Notice of Prehearing Conference” upon Powers.  The initial prehearing conference was conducted as scheduled on May 15, 2009 at Edinburg, Indiana.  Powers appeared in person.  Powers also participated in a telephone status conference held on June 16, 2009 and in a second telephone status conference held on August 17, 2009. 

 

[VOLUME 12, PAGE 189]

 

6. Henze and Powers identified Hanover Insurance as the surety for Powers under the Timber Buyer Act.  On May 21, 2008, the administrative law judge notified Hanover Insurance of the pending proceeding and of a second status conference which was set for June 16, 2009.  During the second status conference, Henze stated he had spoken with representatives of Hanover Insurance and told them that they could participate in the proceeding, but Hanover Insurance did not appear for the second status conference.  Notice was then sent by the administrative law judge to Hanover Insurance by certified mail with return receipt requested, as well as by First Class U.S. Mail, of the “Report of Second Telephone Status Conference and Notice of Hearing” which scheduled this proceeding for a hearing on October 30, 2009.  Return of the proof of service for the certified mailing was obtained showing delivery upon Hanover Insurance on August 18, 2009.  In addition, the notice sent by First Class mail to Hanover Insurance was not returned by the U.S. Post Office showing a failure of delivery.

 

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

 

 

B. Evidence

 

8. On August 17, 2009, the administrative law judge sent a “Report of Second Telephone Status Conference and Notice of Hearing” which included service to each of the Parties.  The hearing was conducted as scheduled on October 30, 2009.  Henze appeared in person, but neither Powers nor Hanover Insurance appeared in person or by an attorney.

 

9. By a stipulation entered during the initial prehearing conference, and which included Henze and Powers, Timber Contract No. 000060 (“the written contract”) between Henze and Powers was entered into evidence as Stipulated Exhibit I.  See “Report of Initial Prehearing Conference and Notice of Telephone Status Conference” dated May 20, 2009.  The written contract provided as follows:

 

                                                                                    No. 000060

 

TIMBER CONTRACT

812-621-2360

 

Robert Henze of Ripley County, State of Indiana, here sells to Scott Powers Logging, Osgood, IN 47037 for the sum of 60% [-] 40%... the receipt of 60% [-] 40%... of which amount is hereby acknowledged, the standing timber described as follows: 60% Landowner [and] 40% Powers Logging located upon the following described real estate in Ripley County, State of Indiana to wit: [no real estate description]

 

POWERS LOGGING, its agents, subcontractors, and assigns shall have the full and free rights of ingress and egress with trucks, tractors and other logging equipment, to and from and upon the land of the sellers, for the purpose of cutting, felling and removing said timber, and unless otherwise stated in this contract, is granted a period of [no number stated] years from this date to remove same.  The seller and owner of said land on which timber is located expressly warrants title and rights to sell the timber herein, referred to, and that there are no liens or mortgages of any kind against same.  In the event the original owner and seller desires to sell the above mentioned farm, the timber belonging to POWERS LOGGING, has not been removed, he must reserve same in deed to new owner, showing POWERS LOGGING, as owning said timber.

 

Witness our hand this 7^th day of March 2009.

 

Witness:            [signed Scott Powers]

                        [signed Robert D. Henze]

 

This contract drawn up by: Scott Powers

 

10. The written contract was confirmed in evidence during the hearing.

 

11. Henze and Powers do not dispute that Powers provided Henze with two checks for payment directed to the written contract, one in the amount of $2,000 and the second in the amount of $400.  The total amount of $2,400 represents 60% of the amount of $4,000 for which Powers resold the timber.  Claimant’s Exhibit 2.

 

[VOLUME 12, PAGE 190]

 

12. At the completion of the hearing on October 30, 2009, Henze stated he had held the two checks from Powers pending completion of the hearing process.  In an email sent later on October 30, Henze stated he had presented the checks for payment.  The bank honored the $2,000 check, but the bank did not honor the $400 check upon informing Henze that Powers had closed the account.

 

13. During the hearing, Henze presented an appraisal of harvested timber by Duane A. McCoy, a professional forester employed by the Department of Natural Resources, Division of Forestry.[2]  Claimant’s Exhibit 1.  The appraisal stated in substantive parts as follows:

 

On October 28, 2009 I visited [Henze’s] property and appraised 25 trees that were cut on your property in Ripley County.  Assuming that all of the property lines marked are correct and that the land and trees are [Henze’s] property, I appraised the trees for the values below.  I certify that I appraised 6 Yellow Poplar, Black Oak, 6 White Oak, 2 Black Walnut, 2 Red Oak, 1 Chinkapin [sic.] Oak, 1 Sugar Maple, and 1 Black Cherry trees that were harvested from the property and estimate that these 25 trees contained a total of 17,809 board feet with a total stumpage value of $4,846.67.

 

This value is based on the 2008 Price Reports for Delivered Saw logs by Dr. William Hoover of Purdue University.

 

 

C. Application of Uniform Commercial Code and Timber Buyer Act to Financial Responsibility of Powers

 

14. “Timber contracts are contracts for the sale of goods and governed by the Uniform Commercial Code” pursuant to UCC § 2-107. Williams v. J.W. Black Lumber Co., 628 S.W.2d 13, 16 (Ark. 1982).  To the same effect is Mills v. New River Wood Corp., 77 N.C. Ap. 576, 335 S.E.2d 759 (N.C. Ap. 1985).

 

15. The Indiana version of the Uniform Commercial Code is set forth at IC § 26-1.  More particularly, the statutory chapter that governs the sale of goods under the Uniform Commercial Code is IC § 26-1-2.  This chapter is cross-referenced in the Timber Buyer Act as governing the valuation of timber.  IC § 25-36.5-1-3.2(b).

 

16. “Goods” includes “growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (IC § 26-1-2-107).”  IC § 26-1-2-105(l).

 

17. IC § 26-1-2-107(2) provides that “A contract for the sale apart from the land of timber to be cut is a contract for the sale of goods within IC § 26-1-2 whether the ... [timber] is to be severed by the buyer or seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.” Schneider v. Grosnickle and Cincinnati Insurance Company, 9 Caddnar 180, 184 (2004) and Maloney v. Grant and Southern Indiana Timber, Inc. and DNR, 6 Caddnar 83 (1992).

 

18. Reference is properly made to IC § 26-1-2 and the Uniform Commercial Code in determining the treatment and sale of timber harvested from the subject property.  Stell v. Allen, d/b/a, A&S Logging, 12 Caddnar 124, 133 (2009).

 

19. IC § 26-1-2-204(1) provides that “A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.”

 

20. A contract for the sale of goods may be made in any way sufficient to show the parties to the contract recognized the existence of an agreement.  Even if a contract form used does not establish a binding contract, the conduct of the parties can make a contract binding.  Gumz v. Starke Cty. Farm Bureau Co-op Assn., 395 N.E.2d 257, 262 (Ind. 1979) applying IC § 26-1-2-204(1).

 

21. IC § 26-1-2-204(3) states that “Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.”

 

22. Here the written contract provided Henze was entitled to 60% of the value of the “standing timber” and Powers was entitled to 40%, but neither the written contract nor testimony in evidence establish how the value was to be determined.

 

23. The Commission may grant relief to a complaint by a landowner against a timber buyer under the Timber Buyer Act where the evidence demonstrates “there is a written contract for the sale of the timber but the contract does not set forth the purchase price for the timber”.  IC § 25.36.5-1-3.2(b)(2)(B).  A contract based upon percentage shares between a landowner and a timber buyer, where the basis for calculating the shares is not identified, is a contract for the sale of timber which does not set forth the purchase price.  The written contract at issue has open price terms.

 

[VOLUME 12, PAGE 191]

 

24. The Uniform Commercial Code addresses open price terms at IC § 26-1-2-305.  In particular, subdivision (1) of § 305 provides:

 

Sec. 305. (1) The parties if they so intend can conclude a contract for sale even though the price is not settled.  In such a case the price is a reasonable price at the time for delivery if
    (a) nothing is said as to price; or
    (b) the price is left to be agreed by the parties and they fail to agree; or
    (c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.

 

25. The Uniform Commercial Code Comment states that IC § 26-1-2-305 “applies when the price is left open on the making of an agreement which is nevertheless intended by the parties to be a binding agreement.”  An open price contract provides a reasonably certain basis for granting an appropriate remedy, and should be enforced if the parties intended to make a contract, even though the price term is not settled.  Wagner Excello Foods, Inc. v. Fearn International, Inc., 235 Ill. App. 3d 224, 601 N.E.2d 956 (1992 Ill. App.).

 

26. Duane McCoy is a professional forester who provided evidence that a reasonable value for the standing timber harvested by Powers was in the amount of $4,846.67 based upon a calculation of 17,809 board feet of timber.  This valuation is the only one provided by a person without a personal stake in the outcome of the proceeding and the only one based upon a calculation of timber harvested (as contrasted with lumber delivered to a sawmill). 

 

27. IC § 26-1-2-305 does not indicate how a reasonable price is to be determined for an open ended price term, apparently because the drafters wanted to give an adjudicatory body “great leeway in making that determination.”  1 Uniform Commercial Code Series ¶ 2-305:3 (West 2002).  Stell v. Allen, cited previously, at 134.  In the absence of contrary evidence, the McCoy appraisal of $4,846.67 provided a reasonable price. 

 

28. In addition, where a contract contains an ambiguity, the ambiguity should typically be construed against the person who drafted the contract.  Trinity Homes, LLC v. Fang, 845 N.E.2d 1065 (Ind. 2006).  Powers drafted the written contract, and any ambiguity should be construed against him and in favor of Henze.

 

29. Henze is entitled to compensation from Powers for 60% of $4,846.67 which percentage is in the amount of $2,908.  Henze has been paid $2,000 and is entitled to an administrative judgment against Powers for the outstanding amount of $908.

 

 

D. Applicability of Timber Buyer Act to Financial Responsibility of the Hanover Insurance Company

30. For the period in question, the Hanover Insurance Company provided a surety bond for Powers under the Timber Buyer Act. 

 

31. 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 Powers on the subject property is in the amount of $4,846.67.  The amount for which Henze was entitled to payment was 60% of $4,846.67 or $2,908.  Powers has already satisfied $2,000 of the amount of $2,908 so the outstanding amount yet due to Henze is $908.  To any extent that Powers does not satisfy the outstanding amount of $908, the Hanover Insurance Company is responsible to Henze.