[CITE: Bowman v. Browning Logging & State Farm Ins., 13 CADDNAR 79 (2012)]
[VOLUME 13, PAGE 79]
Cause #: 11-211F
Caption: Bowman v. Browning Logging & State Farm Ins.
Administrative Law Judge: Lucas
Attorneys: pro se (Bowman); Miller (Browning); Bokkelen (Ins.); Boyko (DNR)
Date: Dated: November 2, 2012
INTERLOCUTORY ORDER PERTAINING TO PARTIAL SUMMARY JUDGMENT AND CLAIMS
An interlocutory order of partial summary judgment is entered with respect to the matters in Finding 32 through Finding 38. Material issues of fact remain with respect to other matters as described previously, and these require a hearing of the facts. The claim by State Farm that Bowers is statutorily estopped from causing forfeiture of the subject surety bond, based on a failure by Browning Junior to possess a bond under IC § 25-36.5-1-15, is unsupported by law and is denied.
State Farm is provided an extension of time until December 1, 2012 to file and serve any claim to relief based on termination, cancellation, or alteration of the subject surety bond. If State Farm claims estoppel against Bowers based on the facts, this claim must also be filed and served by December 1, 2012. State Farm would have the burden of proof with respect to these matters as affirmative defenses.
Following a hearing of the facts, the administrative law judge would issue findings of fact and conclusions of law with a nonfinal order that would include portions of the interlocutory order bearing upon partial denial of summary judgment. The parties would then be provided an opportunity to file objections under IC § 4-21.5-3-29 and 312 IAC § 3-1-12.
FINDINGS
A. Statement of the Case and Jurisdiction
1. On December 29, 2011, Kenneth Bowman, Jr. (“Bowman”) filed a complaint under Ind. Code § 4-21.5-3-8 (the “Complaint”) with the Natural Resources Commission (the “Commission”) in which he sought relief from Virgus Browning, Jr. (“Browning Junior”) and Virgus Browning, Sr. (“Browning Senior”), doing business as Browning Logging, under Ind. Code § 4-21.5 (sometimes referred to as the “Administrative Orders and Procedures Act” or “AOPA”). In general terms, the Complaint alleged Browning Logging harvested timber from real estate owned by Bowman at 2107 East 38th Street, Anderson, Indiana (the “subject real estate”) for which he was entitled to compensation under Ind. Code § 25-36.5 (sometimes referred to as the “Timber Buyers Act”). The Complaint identified State Farm & Casualty Company (“State Farm”) as providing the bond for Browning Logging under the Timber Buyers Act.
2. An administrative law judge was appointed to conduct a proceeding under AOPA and under rules adopted by the Commission at 312 Ind. Admin. Code § 3-1 to assist with implementing AOPA. On December 30, 2011, the administrative law judge issued a “Notice of Prehearing Conference” with service directed to Bowman, Browning Junior, Browning Senior, and State Farm. A courtesy copy of the notice was provided to the Department of Natural Resources (the “DNR”).
3. The initial prehearing conference was conducted as scheduled on February 6, 2012. Bowman appeared individually. J. Clayton Miller appeared previously as attorney for, and was present on behalf of, “Virgus Browning, Jr. and Virgus Browning, Sr., doing business as Browning Logging”. Browning Junior and Browning Senior were also present individually. Kate Van Bokkelen and Patrick P. Devine appeared previously as attorney for State Farm, and Devine was present on behalf of State Farm. With consent of the administrative law judge, all parties and attorneys participated by telephone.
4. During the initial prehearing conference, Bowman referenced claims for relief that were not identified in the Complaint, including a claim for triple stumpage value. Consequently, Miller urged there were legal deficiencies in the Complaint. The administrative law judge granted Bowman until March 5, 2012 to file and serve an amended complaint to include all damages sought in the proceeding.
5. On February 27, 2012, Bowman filed and served an amended complaint with attachments (the “Amended Complaint”). Omitting the attachments, Bowman averred in substantive parts in the Amended Complaint:
….
I am filing this administrative complaint as a result of the theft of trees not identified in a contract with a timber buyer. Please consider the following:
Name and Address of Timber Grower: Kenneth Bowman, Jr. 2107 E. 38th Street, Anderson, Indiana 46013
Name and Address of Timber Buyer: Virgus Browning Jr./Virgus Browning Sr. doing business as Browning Logging, 116 E Campbell Street, Liberty, Indiana 47353 Virgus Browning, Sr.—License #FTB000203 Buyer’s Bond—State Farm Fire & Casualty Company (Bond #94-CE74389)
Address: Centralized Bonds/One State Farm Plaza
Bloomington, IL 61710-0001
Agent: Virgus Browning, St.—Agent #FTA0000447; Virgus Browning, Jr.—Agent # FTA000794 (expired sine 1/1/2008)
Averment: I agree to sell Virgust Browning, Jr. 22 specifically identified trees for $3,636.70. Browning harvested those trees and 12 additional walnut trees. The additional trees were taken without my consent and without compensation.
Location: All of the trees were cut at my residence, 2107 E 38th Street, Anderson, Indiaan 46013
[VOLUME 13, PAGE 80]
Relevant Dates:
January 23, 2010 Contract for 22 trees was signed. Browning signed his father’s name and told me that he had Power of Attorney to do so.
February 22, 2010 Browning Logging began cutting trees
April 21, 2010 Browning Jr. ended cutting trees
April 22, 2010 I determined that Browning Logging had cut more trees than agreed and attempted to contact Virgus Browning, Jr. He did not return my call.
May 23, 2010 I contacted Indiana Conservation Officer, David Dungan (D2718) about the theft of trees.
May 25, 2010 Duane McCoy, the Timber Buyer Licensing Forester began examining the trees cut by Browning Logging
May 27, 2010 Mr. McCoy finished his study and determined that a total of 34 trees had been cut. The additional 12 trees were all walnut trees.
Claim for Damages: The total value of the stumpage value was determined to be $5,413.52 by Mr. McCoy. Consistent with statute 312 IAC 14-6-2(6)(B), I am requesting 3 times the stumpage value of trees cut without payment ($1,776.82 X 3 = $5,330.46).
In addition, I am requesting compensation for the following:
Damage to split rail fence $250
Destruction of a yard wagon $150
Damage to Jeep (dents) $750
Cost to repair damages to yard $1500
Cost to remove tree tops/debris $2500
…. The resulting claim for compensation is, consequently, $10,255.46.
….
6. During a telephone status conference held on April 30, 2012, Bowman, Browning Junior, Browning Senior and State Farm agreed and were then ordered to file and serve summary motions according to the following schedule:
(1) Any motion for summary judgment or motion to dismiss shall be filed and served by June 18, 2012.
(2) Any response to a motion under Part (1) shall be filed and served by August 10, 2012.
(3) Any reply to a response under Part (2) shall be filed and served by August 24, 2012.
7. On June 15, 2012, State Farm filed a “Motion for Summary Judgment” with a “Memorandum in Support of Motion for Summary Judgment” and “Respondent, State Farm Fire & Casualty Company’s Designation of Evidence in Support of Its Motion for Summary Judgment”.
8. After reviewing the documents filed by State Farm in Finding 7, the administrative law judge determined the DNR should be joined as a party under 312 IAC § 3-1-10 and Trial Rule 19 or Trial Rule 20.
The bond at issue is governed by [the Timber Buyers Act]. In particular, security under the Timber Buyers Act is governed by IC 25-36.5-1-3. Subsection 3(c) provides that any security required under the section shall be “made payable on demand” to the DNR Director, subject to IC 25-36.5-1, “for the use and benefit of the people of Indiana and for the use and benefit of any timber grower from whom the applicant purchased and who is not paid by the applicant or for the use and benefit of any timber grower whose timber has been cut by the applicant or registrant or his agents, and who has not been paid therefor.” Because the DNR through its Director is the entity with authority and responsibility for the disposition of any security under the Timber Buyers Act, and on demand the security is paid to the DNR, the DNR must be made a party for the purpose of any response it might have to the motion and memorandum filed by State Farm….
On June 18, 2012, the DNR was designated an “Agency Respondent” and was provided until August 10, 2012 to file a response to the documents referenced in Finding 7.
9. On June 21, 2012, the “Appearance of Counsel for Agency Respondent DNR” was filed.
10. Bowman, Browning Junior, Browning Senior, State Farm, and the DNR is each a party. They are collectively the “parties”.
11. On August 6, 2012, the “Agency Respondent DNR’s Response to Summary Judgment” was filed.
12. Also, on August 6, 2012, Bowman filed correspondence which he characterized as a “formal objection” to State Farm’s “Motion for Summary Judgment”.
13. On August 15, 2012, State Farm filed its “Reply to Agency Respondent DNR’s Response to Summary Judgment” and “Reply to Kenneth Bowman, Jr.’s Response to State Farm’s Motion for Summary Judgment”.
14. On August 27, 2012, Bowman filed correspondence in which he requested permission to add two documents to the correspondence described in Finding 12.
15. On August 29, 2012, an “Order with Respect to Request by Kenneth Bowman, Jr.” was entered concerning the correspondence referenced in Finding 14 “subject to the requirements of IC 4-21.5-3-23 and Trial Rule 56, including serving and showing service upon the other parties or their attorneys.” Bowman was provided until September 14, 2012 to file and serve the two documents.
16. On September 6, 2012, Bowman filed correspondence with photocopies of the documents attached as anticipated by Finding 15.
17. On September 7, 2012, State Farm filed a “Motion for Ruling on Summary Judgment”.
18. On September 24, 2012, the administrative law judge made an “Entry with Respect to Motions and Pleadings on Summary Judgment”. The record was closed with respect to evidentiary matters on summary judgment. The parties were provided until October 15, 2012 to submit any brief or supplemental brief. The administrative law judge expressed an intention to make an entry on the merits of summary judgment by November 30, 2012.
19. On October 15, 2012, the “Agency Respondent DNR’s Supplemental Filing” was made. On the same day, “Virgus Browning, Jr. and Virgus Browning, Sr., d/b/a Browning Logging” filed their Motion for Brief Enlargement of Time to Respond to Motion for Summary Judgment”. As a consequence of the latter, the administrative law judge entered an “Order Granting Enlargement of Time to Submit Any Brief or Supplemental Brief with Respect to State Farm’s Motion for Summary Judgment” extending the time for any party to file a brief until October 29, 2012.
20. The “Supplemental Brief of State Farm Fire & Casualty Company” was filed on October 24, 2012. On October 29, 2012, the “Agency Respondent DNR’s Second Supplemental Filing” was provided. No additional brief or supplemental brief was filed by Bowman. Browning Junior and Browning Senior have not participated in briefing directed to the merits of the “Motion for Summary Judgment”.
21. The Commission is the “ultimate authority” under AOPA for the Timber Buyers Act and 312 Ind. Admin. Code § 14, rules adopted to assist with implementation of the Timber Buyers Act. Davies v. Powers d/b/a Powers Logging & Hanover Ins. Co., 12 Caddnar 297 (2011).[1]
22. The Commission has jurisdiction over the subject matter and has jurisdiction over the persons of the parties. The proceeding is ripe for a disposition of State Farm’s “Motion for Summary Judgment”.
[VOLUME 13, PAGE 81]
B. Consideration of State Farm’s Motion for Summary Judgment
23. IC § 4-21.5-3-23 governs summary judgment under AOPA:
(b) Except as otherwise provided in this section, an
administrative law judge shall consider a motion filed under subsection (a) as
would a court that is considering a motion for summary judgment filed under
Trial Rule 56 of the Indiana Rules of Trial Procedure.
(c) Service of the motion and any response to the
motion, including supporting affidavits, shall be performed as provided in this
article.
(d) [IC § 4-21.5-3-28 and IC § 4-21.5-3-29] apply to an
order granting summary judgment that disposes of all issues in a proceeding.
24. Summary judgment should be granted if the evidentiary material shows there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Auto-Owners Insurance Co. v. United Farm Bureau Insurance Co., 560 N.E.2d 459 (Ind. App. 1990).
25. In determining if a genuine issue of material fact exists to preclude summary judgment, all doubts must be resolved against the nonmoving party. Facts set forth by a party opposing the motion must be taken as true. Terry v. Indiana State University, 666 N.E.2d 87 (Ind. App. 1996).
26. “A fact is ‘material’ for summary judgment purposes if it helps to prove or disprove an essential element of the plaintiff’s cause of action.” Graham v. Vasil Management Co., Inc. 618 N.E.2d 1349 (Ind. App. 1993). “A factual issue is ‘genuine’ for purposes of summary judgment if the trier of fact is required to resolve an opposing party’s different versions of the underlying facts.” York v. Union Carbide Corp., 586 N.E.2d 861 (Ind. App. 1992).
27. Supporting and opposing summary judgment affidavits must present admissible evidence that follows substantially the same form as though the affiant were giving testimony in court. Capital Drywall Supply, Inc. v. Jai Jagdish, Inc., 934 N.E.2d 1193 (Ind. App. 2010).
28. “The purpose of summary judgment is to terminate litigation about which there can be no factual dispute and which may be determined as a matter of law.” Wells v. Hickman, 657 N.E.2d 172, 175 (Ind. App. 1995).
29. Summary judgment is a lethal weapon. In considering whether to grant summary judgment, the adjudicator must consider its aims and targets and must avoid overkill. Hutchens v. MP Realty Group-Sheffield Square Apartments, 654 N.E,2d 35 (Ind. App. 1995), trans. denied. Caution must be exercised to ensure a party the right to a fair determination of genuine issues. E.Z. Gas, Inc. v. Hydrocarbon Transp., Inc., 471 N.E.2d 316 (Ind. App. 1984).
30. A party moving for summary judgment has the burden of proof with respect to summary judgment, regardless of whether the party would have the burden in an evidentiary hearing. Regina Bieda v. B & R Development and DNR, 9 Caddnar 1 (2001). See, also, Jarboe v. Landmark Community Newspapers, 644 N.E.2d 118, 123 (Ind. 1994).
31. Once the party moving for summary judgment establishes a lack of material fact, the party responding to the motion must disgorge sufficient facts to show the existence of a genuine triable issue. Cowe by Cowe v. Forum Groups, Inc. 575 N.E.2d 630, 633 (Ind. 1991).
C. Undisputed Facts
32. State Farm issued a surety bond (the “subject surety bond”) to Browning Senior, doing business as Browning Lumber, on November 13, 1997. A true and accurate copy of the subject surety bond was attached as Exhibit A to Respondent State Farm Fire & Casualty Company’s Designation of Evidence in Support of Its Motion for Summary Judgment”. The subject surety bond states in substantive parts as follows:
SURETY BOND
Covering the Purchasing of Timber from “Timber
Growers” by a Licensed Timber Buyer or His Agents
KNOW ALL MEN BY THESE PRESENTS:
That we, Virgus Browning Sr DBA Browning Lumber of the City of Liberty County of Union, State of Indiana as Principal, and State Farm Fire and Casualty Company, as Surety are held and firmly bond unto the State of Indiana in the sum of Ten Thousand Dollars ($10,000.00) to the payment whereof the Principal and Surety bind themselves, their heirs, executors, administrators, successors, and assigns jointly and severalty [sic.], firmly by these presents. The sum shall be for the use or benefit of any Timber Grower from whom the Principal above named may purchase or cut timber, and who is not paid by the Principal therefore.
WHEREAS, the above named Principal has applied to the Director of the Indiana Department of Natural Resources for a LICENSE to engage in the business of buying timber from “timber growers” in the State of Indiana pursuant to all the provisions of Acts of 1972, Public Law 190, and subject to all rules and regulations as made by the Department of Natural Resources to carry out these provisions.
NOW THEREFORE, THE PROVISIONS OF THIS OBLIGATION ARE SUCH, that the Principal herein shall: (a) pay for all timber purchased as per agreement with a “timber grower”, (b) cut only that that timber which is lawfully purchased or which the Principal has a legal right to cut, (c) give no false statements in connection with his application for license, bond or other information required by the Department of Natural Resources, (d) honestly account to the “timber growers” or the Department of Natural Resources for timber purchased or cut, and (e) refrain from committing and fraudulent act in connection with the purchasing or cutting of timber.
The Surety’s obligation may be terminated by the Surety giving sixty (60) days prior written notice to the State of Indiana, Department of Natural Resources, Division of Forestry, and to the Principal. Such notice shall terminate the Surety’s future liability only commencing sixty (60) days from the date of mailing or delivering said notice.
Otherwise, this obligation shall remain in full force and effect.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed our seals this 13th day of NOVEMBER, 1997.
[VOLUME 13, PAGE 82]
33. The subject surety bond references Acts of 1972, Public Law 190 which provides in pertinent parts:
Sec. 1. When used in this chapter, unless the context otherwise requires, the term:
“Person” means any person, partnership, firm, association, business trust or corporation.
“Timber” means trees, standing or felled, and logs which can be used for sawing or processing into lumber for building or structural purposes or for the manufacture of any article….
“Timber buying” means any person engaged in the business of buying timber from the timber growers thereof for sawing into lumber, for processing or for resale, but does not include an person who occasionally purchases timber for sawing or processing for his own use and not for resale.
“Timber grower” means the owner, tenant or operator of land in this state who has an interest in, or is entitled to receive any part of the proceeds from the sale of timber grown in this state and includes persons exercising authority to sell timber.
“Department” means the department of natural resources of the State of Indiana.
“Employee” means any person in service or under contract for hire, expressed or implied, oral or written, who is engaged in any phase of the enterprise or business at any time during the license year.
Sec. 2. On or after the effective date of this chapter no person shall engage in the business of timber buying in the State of Indiana without a registration certificated issued by the department….
Sec. 3. Every person registered as a timber buyer shall have on file with the department a surety bond signed by the person to be registered as principal and a good and sufficient corporate surety authorized to engage in the business of executing surety bonds within the State of Indiana as surety thereon…. The funds shall be made payable upon demand to the director, subject to the provisions of this chapter, for the use and benefit of any timber grower from whom the applicant purchased and who is not paid by the applicant or for the use and benefit of any timber grower whose timber has been cut by the applicant or registrant or his agents, and who has not been paid therefor.
Such bond shall be in the principal amount of five hundred dollars ($500) for an applicant who paid timber growers five thousand dollars ($5,000) or less for timber during the immediate preceding year, and an additional one hundred dollars ($100) for each additional one thousand dollars ($1,000) or fraction thereof paid to timber growers for timber purchase during the preceding year, but shall not be more than ten thousand dollars ($10,000)….
Such bond, or surety thereon, shall not be cancelled or altered during the period for which the certificate to the applicant was issued except upon at least sixty (60) days’ notice in writing to the department.
Bonds shall be in such form, contain such terms and conditions as may be approved from time to time by the director, be conditioned to secure an honest cutting and accounting for timber purchased by the registrant, secure payment to the timber growers and to insure the timber growers against all fraudulent acts of the registrant in the purchase and cutting of the timber of this state.
In the event the timber buyer fails to pay when due any amount due a timber grower for timber purchased, or fails to pay legally determined damages for timber wrongfully cut by a timber buyer or his agent, or commits any violation of this chapter, then an action on the bond for forfeiture may be commenced. Such action is not exclusive and is in addition to any other legal remedies available….
1972 Ind. Acts, Pub. Law 190 (97th General Assembly, Second Regular Session, Legislative Council, p. 920 (1972)).
34. The provisions of Acts of 1972, Public Law 19, as amended and codified, are today set forth in the Timber Buyers Act. With respect to the responsibilities of a timber buyer and the surety for a timber buyer, IC § 25-36.5-1 provides:
Sec. 1. As used in this
chapter:
“Person” means an individual, partnership, firm,
association, business trust, limited liability company, or corporation.
“Timber” means trees, standing or felled, and logs
which can be used for sawing or processing into lumber for building or
structural purposes or for the manufacture of any
article….
“Timber buyer” means a person engaged in the business of buying timber from
timber growers for sawing into lumber, processing, or resale, but does not
include a person who occasionally purchases timber for sawing or processing for
his own use and not for resale.
“Timber grower” means the owner, tenant, or operator of
land in this state who has an interest in, or is entitled to receive any part
of the proceeds from, the sale of timber grown in this state and includes
persons exercising lawful authority to sell timber for a timber grower.
“Department” means the department of natural resources.
“Director” means the director of the department of
natural resources.
….
“Buying” means acquiring an interest in property by the
payment of a price, value, or other consideration.
Sec. 2. (a) On and after July 28, 1972, no person shall
engage in the business of timber buying in the state of Indiana without a
registration certificate issued by the department. Application for Indiana
registration to engage in the business of timber buying shall be filed with the
department. Such application shall set forth the name of the applicant,
its principal officers if the applicant is a corporation, its managers and
members if the applicant is a limited liability company, or the partners if the
applicant is a partnership, the location of any principal office or place of
business of the applicant, the counties in this state from which the applicant
proposes to engage in the business of timber buying and such additional
information as the department by regulation may require.
(b) The application shall set forth the aggregate
dollar amount paid to timber growers for timber purchased in this state during
the applicant’s last completed fiscal or calendar year. In the event the
applicant has been engaged as a timber buyer for less than one (1) year, his
application shall set forth the dollar amount paid to timber growers for the
number of completed months during which the applicant has been so
engaged. If the applicant has not been previously engaged in buying
timber in this state, the application shall set forth the estimated aggregate
dollar amount to be paid by the applicant to timber growers for timber to be purchased
from them during the next succeeding year.
(c) The registrations of any persons registered as
timber buyers under any prior law in this state shall remain valid until the
expiration date of that certificate, unless suspended or revoked. After
the expiration of such registrations, all persons engaged in the business of
timber buying must be registered under this chapter.
Sec. 3. (a) Every person
registered as a timber buyer shall file with the department an effective surety
bond issued by a corporate surety authorized to engage in the business of
executing surety bonds in Indiana.
(b)….
(c) The security required under subsection (a)…shall be made payable upon demand to the director, subject to this chapter, for the use and benefit of the people of Indiana and for the use and benefit of any timber grower from whom the applicant purchased and who is not paid by the applicant or for the use and benefit of any timber grower whose timber has been cut by the applicant or registrant or his agents, and who has not been paid therefor.
[VOLUME 13, PAGE 83]
(d) The security required under subsection (a)…shall be
in the principal amount of two thousand dollars ($2,000) for an applicant who
paid timber growers five thousand dollars ($5,000) or less for timber during
the immediate preceding year, and an additional one hundred dollars ($100) for
each additional one thousand dollars ($1,000) or fraction thereof paid to
timber growers for timber purchased during the preceding year, but shall not be
more than twenty thousand dollars ($20,000). In the case of an applicant not
previously engaged in business as a timber buyer, the amount of such bond shall
be based on the estimated dollar amount to be paid by such timber buyer to
timber growers for timber purchased during the next succeeding year, as set
forth in the application.
(e)
The security required under subsection (a)…shall not be cancelled or altered
during the period for which the certificate to the applicant was issued except
upon at least sixty (60) days notice in writing to the department.
(f) Security shall be in such form, contain such terms
and conditions as may be approved from time to time by the director, be
conditioned to secure an honest cutting and accounting for timber purchased by
the registrant, secure payment to the timber growers, and insure the timber
growers against all fraudulent acts of the registrant in the purchase and
cutting of the timber of this state.
(g) If a timber buyer fails to pay when due any amount due a timber grower for
timber purchased, or fails to pay legally determined damages for timber
wrongfully cut by a timber buyer or his agent, or commits any violation of this
chapter, an adjudicative proceeding on the bond for forfeiture may be commenced,
and notice of the proceeding shall be provided, under IC 4-21.5-3-6.
A surety or person in possession of the security provided under subsection (a)
or (b) is entitled to notification of the proceeding. If a final agency
action is entered by the department under this subsection against the timber
buyer, the surety or other person in possession of the security shall deliver
the amount of the security identified in the order. A proceeding for forfeiture
of a timber buyer's bond under IC 4-21.5 is the exclusive remedy under law
for the forfeiture of the bond.
35. The Timber Buyers Act was amended in 1981 to require licensure of an “agent” for a timber buyer. As defined in IC § 25-36.5-1-1, an “agent” is “an individual who represents a timber buyer in effecting or attempting to effect purchases of timber.” IC § 25-36.5-1-15 provides:
Sec. 15. (a) An individual who acts
as the agent of a timber buyer must have an agent’s license and carry the
agent’s card that verifies the license.
(b) An agent's license may be granted only:
(1) to qualified individuals;
(2) at the written application
of the timber buyer who the agent is to represent; and
(3) under that timber buyer’s
registration certificate.
(c) The application for an agent’s license must contain
the agent's full name, address, and other information as required by the
department on forms supplied by the department. Each timber buyer is
responsible for all of the agent's activities performed while acting under the
timber buyer's registration certificate as they pertain to this chapter.
(d) An application fee of ten dollars ($10) for each
agent shall be charged for the license and agent’s card. However, each timber
buyer shall designate a qualified individual to be licensed as its principal
agent at no additional charge.
(e) An agent's license may be revoked by the department
under IC 4-21.5 if the agent does not comply with this section.
(f) An agent may have a license to represent only one
(1) timber buyer; however, upon surrendering the agent's card and license under one (1) timber buyer, an individual may be licensed as
an agent of another timber buyer.
(g) A timber buyer may not be licensed as an agent
except as the principal agent of that timber buyer.
(h) A timber buyer may not effect or attempt to effect
[sic.] a purchase except through an
agent.
(i) A timber buyer may
terminate an agency relationship by notifying in writing the agent and the
department. Termination of an agency relationship revokes the agent's license.
(j) A person who acts as an agent without a license
commits a Class B misdemeanor.
36. Under IC § 25-36.5-1-15, the DNR issued License No. FTA000794 to Browning Junior on January 10, 2006. License No. FTA000794 expired on December 31, 2007 and was not renewed. Exhibit E attached to Respondent State Farm Fire & Casualty Company’s Designation of Evidence in Support of Its Motion for Summary Judgment”. Although specifying an expiration date of January 1, 2008, the Amended Complaint (Exhibit C) is in material accord with Exhibit E.
37. Browning Junior has criminal convictions for attempting to purchase timber without a license in Union County and Wayne County, Indiana; possession of a controlled substance, cocaine; possession of a concealed weapon (October 3, 2007); check deception (December 15, 2006); and operating a vehicle while intoxicated with endangerment and possession of controlled substances (September 24, 2009).
38. Browning Logging began cutting trees from the subject real estate on February 22, 2010. Browning Junior ended cutting trees on April 21, 2010. Amended Complaint (Exhibit C attached to Respondent State Farm Fire & Casualty Company’s Designation of Evidence in Support of Its Motion for Summary Judgment”) and Exhibit E.
39. An interlocutory order of partial summary judgment should be entered with respect to the matters in Finding 32 through Finding 38.
D. Evaluation and Identification of Controverted Facts
40. As applied through AOPA, Trial Rule 56(C) provides in part:
…. A summary judgment may be rendered upon less than all the issues or claims, including without limitation the issue of liability or damages alone although there is a genuine issue as to damages or liability as the case may be. A summary judgment upon less than all the issues involved in a claim or with respect to less than all the claims or parties shall be interlocutory unless the [administrative law judge] in writing expressly determines that there is no just reason for delay and in writing expressly directs entry of judgment as to less than all the issues, claims or parties. The [administrative law judge] shall designate the issues or claims upon which it finds no genuine issue as to any material facts. Summary judgment shall not be granted as of course because the opposing party fails to offer opposing affidavits or evidence, but the [administrative law judge] shall make its determination from the evidentiary matter designated to the [administrative law judge].
41. A timber grower claiming damages against a timber buyer has the “burden of going forward” and the “burden of persuasion” (commonly referred to collectively as the “burden of proof” with respect to the claim. Damages include compensation for any harm actually resulting from the wrongful activities of a timber buyer or timber cutter. IC § 25-36.5-1-3.2(f)(1). Zwahlen v. McDurmon and Ohio Casuality Ins. Co., 7 Caddnar 45, 46 (1994). In this proceeding, Bowman generally has the burden of proof. Bowman is cautioned that consideration of State Farm’s “Motion for Summary Judgment” offers incidental and only minimal advancement toward establishing the elements needed to meet his burden.
42. The evaluation and identification of controverted facts considers State Farm’s “Motion for Summary Judgment”. The evaluation is directed to three subjects:
· Coverage of the subject surety bond.
· Cancellation or alteration of coverage by State Farm.
· Responsibilities of Browning Senior under the subject surety bond for agents and employees.
Coverage of the Subject Surety Bond
43. State Farm emphasizes what the company asserts are the coverage limits of the subject surety bond. State Farm urges that these limits are provided in the clause:
…[T]he Principal herein shall: (a) pay for all timber purchased as per agreement with a “timber grower”, (b) cut only that that timber which is lawfully purchased or which the Principal has a legal right to cut, (c) give no false statements in connection with his application for license, bond or other information required by the Department of Natural Resources, (d) honestly account to the “timber growers” or the Department of Natural Resources for timber purchased or cut, and (e) refrain from committing and fraudulent act in connection with the purchasing or cutting of timber.
[VOLUME 13, PAGE 84]
44. State Farm ignores language which states the subject surety bond is derived from “the provisions of Acts of 1972, Public Law 190, and subject to all rules and regulations made by the Department of Natural Resources to carry out these provisions.” State Farm misinterprets coverage of the subject surety bond.
45. Although a bond is ordinarily a private contract between the parties, “a statutory bond to the public given for the observance of a law is to be read, construed, and enforced in connection with, and according to, the statute pursuant to which it is given, and to be interpreted according to the purpose and meaning of the legislative enactment.” 12 Am. Jur. 2d Bonds § 2 (2009). The subject surety bond is a statutory bond that is designed and intended to implement the “Acts of 1972, Public Law 190”.
46. The purpose and meaning of Public Law 190 was to require a bond “to secure an honest cutting and accounting for timber purchased” by the bonded timber buyer, to “secure payment to the timber growers and to insure the timber growers against all fraudulent acts” of a bonded timber buyer “in the purchase and cutting of the timber of this state.” If a “timber buyer fails to pay when due any amount due a timber grower for timber purchased, or fails to pay legally determined damages for timber wrongfully cut by a timber buyer or his agent, or commits any violation of [Public Law 190], then an action on the bond for forfeiture may be commenced.”
47. Public Law 190 established a structure to help protect timber growers from timber buyers that, through fraud or failure to meet legal commitments, do not make appropriate payment for harvested timber. The law provides protection to timber growers. Elements of the protection require timber buyers to be licensed and bonded, with the bond establishing a financial resource.
48. Public Law 190 is today codified as the Timber Buyers Act. IC § 25-36.5-1-3(f) and IC § 25-36.5-1-3(g) provide the requisite statutory bond is “to secure an honest cutting and accounting for timber purchased by the [timber buyer], secure payment to the timber growers, and insure the timber growers against all fraudulent acts of the registrant in the purchase and cutting of the timber of this state…. If a timber buyer fails to pay when due any amount due a timber grower for timber purchased, or fails to pay legally determined damages for timber wrongfully cut by a timber buyer or his agent, or commits any violation of this chapter, an adjudicative proceeding on the bond for forfeiture may be commenced….” Roberts v. Voorhees, 453 N.E.2d 342 (Ind. App. 1983).
49. A bond should be construed to effectuate its purpose so far as it is within the statute. Fry v. P. Bannon Sewer Pipe Co., 101 N.E.10, 179 Ind. 309 (Ind. 1913). The intention with which statutory bonds are executed cannot be mistaken because they are prescribed by statute for a particular purpose. Connor v. Paxson, 1 Blackford 207 (Ind. 1822). If a bond is required by statute, the statutorily mandated terms are read into the bond, regardless of whether the bond actually contained those terms. Morton’s of Chicago v. Industrial Com’n, 304 Ill. Dec. 508, 853 N.E.2d 40, 45 (Ill. App. 2006). Restatement (Third) of Suretyship & Guardianship § 71 (1995). A statutory bond must be construed for the purposes contained in the statute. Jasper v. Smith, 540 N.W.2d 399 (S.D. 1995). A statute mandating a bond is part of the bond contract and is controlling. Hartford Cas. Ins. Co. v. State, 159 S.W.3d 212, 217 (Texas App 2005).
50. The coverage of the subject surety bond is controlled by IC § 25-36.5-1-3(f) and (g). The subject bond is to help secure an honest cutting and accounting for timber purchased by Browning Senior, to secure payment to timber growers, and to insure timber growers against wrongful acts of Browning Senior in the purchase and cutting of Indiana timber. If Browning Senior fails to pay when due any amount due a timber grower for timber purchased, fails to pay legally determined damages for timber wrongfully cut by a Browning Senior or his agents, or commits any violation of IC § 25-36.5-1, an adjudicative proceeding may seek bond forfeiture.
51. The language cited by State Farm and set forth in Finding 43 does not define coverage of the subject surety bond. On its face, the language describes the responsibilities of the “Principal”—in other words, the responsibilities of Browning Senior, as a timber buyer. The language essentially restates a timber buyer’s responsibilities under the Timber Buyers Act:
…[T]he Principal herein shall: (a) pay for all timber purchased as per agreement with a “timber grower”, (b) cut only that that timber which is lawfully purchased or which the Principal has a legal right to cut, (c) give no false statements in connection with his application for license, bond or other information required by the Department of Natural Resources, (d) honestly account to the “timber growers” or the Department of Natural Resources for timber purchased or cut, and (e) refrain from committing and fraudulent act in connection with the purchasing or cutting of timber.
52. State Farm would apparently have the Commission read the cited language to state additionally:
If the Principal fails to meet any of these responsibilities, State Farm has no responsibility on the bond to a timber grower.
First of all, the language set forth in Finding 43 does not speak to or about timber growers. It may help define the responsibilities of Browning Senior to State Farm, but the language has no application to State Farm’s responsibilities to timber growers on the statutory bond.
53. Secondly, in addition to urging an interpretation that is unsupported by the wording, State Farm’s interpretation would conflict with the Timber Buyers Act. State Farm’s interpretation would emasculate the subject surety bond and the protections intended by the Indiana General Assembly. As a statutory bond, even if State Farm sought to limit coverage with the wording or similar wording to Finding 52, the statute governs and would supersede any conflicting language offered by State Farm.
54. As urged in the “Agency Respondent DNR’s Supplemental Filing” of October 15, 2012:
…State Farm’s position can only be interpreted as suggesting that it wrote and sold a useless surety bond since its entire premise is that there can be no set of circumstances under which it could ever be liable under the bond due to the quoted bond provisions which merely parrot statutory language applicable to timber buyers found in I.C. 25-36.5-1-4 relating to unlawful acts. Such a result would be absurd, violate and frustrate applicable statutory provisions found in I.C. 25-365., and also be contrary to public policy. Veness v. Midland Risk Ins. Co., 732 N.E.2d 209 (Ind. Ct. App. 2000). Adult Group Properties, Ltd. v. Imler, 505 N.E.d2d 459 (Ind. Ct. App. 1987).
55. Nothing in the subject surety bond supports a legal conclusion that coverage for a timber grower is limited in the manner urged by State Farm. The subject surety bond is unambiguous. The language construed by State Farm does not define its responsibilities to timber growers. Coverage is governed by the Timber Buyers Act. But even if ambiguous, the ambiguity must be construed against State Farm and in favor of timber growers. State Auto. Mut. Ins. v. Flexdar, Inc., 964 N.E.2d 845 (Ind. 2012) and American States Insurance Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996).
Cancellation or Alteration of Coverage by State Farm
56. State Farm is not without remedy if the company determines the conduct of Browning Senior poses an unreasonable risk under the subject surety bond.
57. The subject surety bond provides:
The Surety’s [State Farm’s] obligation may be terminated by the Surety giving sixty (60) days prior written notice to the State of Indiana, Department of Natural Resources, Division of Forestry, and to the Principal [Browning Senior]. Such notice shall terminate the Surety’s future liability only commencing sixty (60) days from the date of mailing or delivering said notice.
Compliance or failure by Browning Senior to comply with the language in Finding 43 may be relevant to termination of State Farm’s responsibilities under the subject surety bond.
58. This language in the subject surety bond is consistent with Public Law 190 which provided a bond could not “be cancelled or altered during the period for which the certificate to the applicant was issued except upon at least sixty (60) days’ notice in writing to the department.”
59. Language in the subject bond concerning termination of coverage is also consistent with IC § 25-36.5-1-3(e) which provides: “The security…shall not be cancelled or altered during the period for which the certificate to the applicant was issued except upon at least sixty (60) days notice in writing to the” DNR.
60. The “Motion for Summary Judgment”, and seemingly the Commission’s administrative record, is silent concerning whether State Farm has sought to terminate, cancel, or alter its obligations under the subject surety bond. If State Farm has implemented the remedy, the company would not be responsible to Bowman for activities by Browning Senior following the effective date of a termination. A termination of responsibility by State Farm under the subject surety bond would not, however, relieve any responsibility by Browning Senior to Bowman.
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61. Any relief to State Farm based upon termination, cancellation, or alteration of the subject surety bond is in the nature of an affirmative defense as applied to this proceeding. Affirmative defenses are governed by IC § 4-21.5-3-14(c) and 312 IAC § 3-1-4. Belcher & Belcher v. Yager-Rosales, 11 Caddnar 79, 85 (2007). Bowman does not have the burden of proving a negative; Bowman is not required to prove State Farm did not terminate, cancel, or alter the subject surety bond. State Farm has the burden of proof to show termination, cancellation, or alteration of the subject surety bond.
62. Ordinarily, a party is required to disclose an affirmative defense not later than the initial prehearing conference. The evolution of this proceeding requires that State Farm should be provided an extension until December 1, 2012 to file and serve any claim to relief based upon termination, cancellation, or alteration of the subject surety bond.
Responsibilities of Browning Senior under the Subject Surety Bond for Agents and Employees
63. State Farm urges in its “Reply to Kenneth Bowman, Jr.’s Response to State Farm’s Motion for Summary Judgment” that Browning Junior “was not licensed and was unauthorized under Indiana law to take timber from Bowman’s premises. Such actions voided coverage under the [subject bond] by its terms.” Similarly, State Farm urges in its “Reply to Agency Respondent DNR’s Response to Summary Judgment”:
First, Browning Jr. is not personally named as being covered under the Bond. Second, Browning [Junior] could not act on behalf of Browning Lumber or Browning [Senior] by virtue of the fact that he would be in violation of Indiana law which requires an individual who acts as an agent of a timber buyer to have an agent’s license and carry the agent’s card that verifies the license. IC § 25-36.15-1-15 [sic.]. Third, even if Browning [Junior’s] actions could be imputed to Browning, [Senior] or Browning Lumber, there is no coverage under the terms of the [subject bond] for his actions, because those actions would have violated the terms of the [subject bond], which required the principal [Browning Senior] has a legal right to cut, and to refrain from committing any fraudulent act in connection with purchasing or cutting the timber. Simply put, if the argument is that [Browning Junior] acted wrongfully, and that his conduct should be imputed to [Browning Senior] or Browning Lumber, there is no coverage under the [subject bond] for such a claim. [Emphasis supplied by State Farm.]
64. In the “Supplemental Brief of State Farm Fire & Casualty Company”, State Farm urges:
Indiana Code § 25-36.5-1-15(a) provides that “[a]n individual who acts as the agent of a timber buyer must have an agent’s license and carry the agent’s card that verifies the license.” Any argument for coverage under the [subject bond] by the DNR, Bowman or any other party argument strictly fails by statute. There is no dispute that Browning, Jr. was unlicensed at the time he cut the trees from Bowman’s property. Because Browning, Jr. was unlicensed he is statutorily estopped from being or acting as an agent for Browning Lumber or Browning, Sr. As such, there can be no set of circumstances in which coverage is provided under the Bond for the actions of a third-party, Browning, Jr. Thus there has been no wrongful conduct on behalf of the Principal or any lawful agent of the Principal that can be compensated by State Farm. [Emphasis supplied by State Farm.]
65. As set forth in Finding 43 through Finding 55, State Farm misinterprets the coverage of the subject surety bond.
66. A “timber buyer” is “a person engaged in the business of buying timber from timber growers for sawing into lumber, processing, or resale, but does not include a person who occasionally purchases timber for sawing or processing for his own use and not for resale.” The term “buying” refers to “acquiring an interest in property by the payment of a price, value, or other consideration.” An “agent” is an individual who represents a timber buyer in effecting or attempting to effect purchases of timber.” IC § 25-36.5-1-1.
67. The Timber Buyers Act regulates the business of timber buying. The activities of timber buyers, their agents, cutters, and employees may be considered. Stell v. Allen, d/b/a, A& S Logging, 12 Caddnar 124 (2009) and Schneider v. Grosnickle and Cincinnati Ins. Co., 9 Caddnar 180 (2004).
68. Under State Farm’s legal theory, a timber buyer may shield (by design or gratuitously) a surety from liability by engaging agents or employees who act unlawfully. State Farm cites no authority for the proposition an unlicensed agent “is statutorily estopped from being or acting as an agent” for a timber buyer so as to shield a bond from a complaint by a timber grower. No such legal authority is believed to exist. None of the definitions in IC § 25-36.5-1-1 limit regulation of the business to timber buyers or agents who conduct their activities lawfully or competently. The legislative purpose is quite the opposite. The Timber Buyers Act is intended to protect timber growers that are harmed by timber buying activities which are unlawful or incompetent.
69. As noted previously, the purpose of a bond is to “secure an honest cutting and accounting for timber purchased” by the timber buyer who obtains the bond, to “secure payment to the timber growers,” to “insure the timber growers against all fraudulent acts” of the timber buyer “in the purchase and cutting of the timber” in Indiana. “If a timber buyer fails to pay when due any amount due a timber grower for timber purchased, or fails to pay legally determined damages for timber wrongfully cut by a timber buyer or his agent,” a timber grower may initiate an AOPA proceeding to seek recovery, including forfeiture of the bond. IC §25-36.5-1-3(e) and IC § 25-36.5-1-3(g).
70. The wrongful act of a timber buyer (or a person acting as a timber buyer without registration under the Timber Buyers Act) subjects the wrongdoer to a variety of sanctions. The DNR may seek to revoke the registration. IC § 25-36.5-1-12. The DNR may issue a notice of violation and seek a civil penalty. IC § 25-36.5-1-4 and IC § 25-36.5-1-13.5. The DNR may seek an injunction in a civil court. IC § 25-36.5-1-13. Through a prosecutor, the State of Indiana may pursue a Class A misdemeanor or a Class D felony for certain violations. IC § 25-36.5-1-10. Similarly, the DNR and a prosecutor may pursue sanctions against an agent acting wrongfully. IC § 25-36.5-1-15. These sanctions are the prerogative of the DNR or the State of Indiana. None of these sanctions release a bond posted for the benefit of timber growers. None of these sanctions release State Farm from its obligations to timber growers under the subject surety bond.
71. Citing Menard, Inc. v. Dage-MTI, Inc., 726 N.E.2d 1206, 1211-12 (Ind. 2000), the “Agency Respondent DNR’s Response to Summary Judgment” urged a material issue of fact exists as to whether Browning Senior may be obliged for the actions of Browning Junior under common law principles of agency law. DNR observed the Amended Complaint (Exhibit C) avers that on January 23, 2010, Browning Junior signed Browning Senior’s name on a contract with Bowman stated he had a power of attorney to do so. The Amended Complaint also avers that Browning Logging began cutting trees on February 22, 2010. DNR observed State Farm also designates an IDNR Law Enforcement Incident Report Form as Exhibit B. According to page 5 of the report, the check to pay for the remainder of the trees cut that Bowman received on February 18, 2010 was in the name of both Browning Junior and Browning Senior.
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72. The “Agency Respondent DNR’s Supplemental Filing” urged Bowman “submitted new documentation that was unavailable to him that directly links [Browning Senior] to the timber transaction at issue in this proceeding. The ALJ should fully review and consider this new information and deny summary judgment in favor of Respondent State Farm.” The new documentation consists of a “Timber Contract” that appears to bear the signature of Browning Senior and check 4254 from the account of “VIRGUS BROWNINGS, SR. BROWNING EXPORT” that appears to bear the signature of Browning Senior.[2]
73. The actions of Browning Junior are not necessarily attributable to Browning Senior or to Browning Logging. The business relationship between Browning Junior and Browning Senior, if any, is fact sensitive. The record is insufficient to characterize the relationship under Trial Rule 56. Material issues of fact remain. An evidentiary hearing is required to determine whether Browning Junior was acting with or for Browning Senior in his negotiations with Bowman.
[1] As provided in IC § 4-21.5-3-32, an agency is required to index final orders and may rely upon indexed orders as precedent. The Commission adopted Caddnar in November 1988 as its index of agency decisions.
[2] Several of the exhibits offered on summary judgment are photocopies of originals or of microfilms that are significantly flawed because they are marginally legible or illegible. These include the “Timber Contract” offered by Bowman. They also include portions of State Farm’s Exhibit A: A November 7, 1997 license application and a November 3, 1997 indemnity agreement. State Farm’s Exhibit F was copied so as to omit text in the right column. These exhibits are inadequate to form a basis for summary judgment, but the “Timber Contract” offers sufficient materiality to support a conclusion summary judgment would be inappropriate. The parties are admonished that unless legible documents can be provided at a hearing of the facts, the exhibits may be deemed inadmissible.