CADDNAR
[CITE: DNR v. 9 West Timer & Veneer, Inc. et al., 15 CADDNAR 92 (2020)]
[VOLUME 15, PAGE 92]
Cause #: 17-102F
Caption: DNR v. 9 West Timer & Veneer, Inc. et al.
Administrative Law Judge: D. Wilson
Attorneys: I. Boyko for Petitioner; G. Koch for Respondent (9 West Timber)
Date: March 31, 2020
[Editor’s Note: Final Order follows Findings of Fact and Conclusions of Law.]
FINDINGS OF FACT AND CONCLUSIONS OF LAW WITH
FINAL ADMINISTRATIVE JUDGMENT
Case Summary and Procedural History:
1. On September 8, 2017, the Department of Natural Resources (Department), by Counsel Ihor Boyko, filed a “Complaint for Damages against Timber Buyer and Surety” (Complaint) with the Natural Resources Commission (Commission) against 9 West Timber and Veneer, Inc. (9 West) and Platte River Insurance Company (Platte River).
2. On October 11, 2017, the Department filed its “Amended Complaint for Damages against Timber Buyer, Surety and Bank” (Amended Complaint) against 9 West, Platte River and Old National Bank (Old National).
3. The Department’s Amended Complaint avers the following: “While cutting timber on the adjoining property, persons working under the direction and control of Respondent 9 West wrongfully and unlawfully appropriated and cut approximately 41 trees from Petitioner’s State Forest without making payment to Petitioner DNR.” The Amended Complaint also states that Platte River holds a surety bond for 9 West in the amount of $20,000, and Old National assigned a Certificate of Deposit (CD) in the amount of $2,000 as collateral security for the performance of obligations by 9 West. See the Amended Complaint, p. 2.
4. The Department’s Amended Complaint requests damages equal to three times the stumpage value of cut trees and damages in compensation for damages actually resulting from the wrongful activities of 9 West on Department property. In addition, the Department requests forfeiture of the surety bond held by Platte River and the CD held by Old National.
5. Administrative Law Judge (ALJ) Dawn Wilson was appointed under IC 14-10-2-2 to conduct this proceeding.
6. The ALJ set a prehearing conference and then rescheduled the event in order to serve all parties through alternative addresses that were provided by the Department. Following the issuance of service of notice to all parties, between December 6, 2017, and February 6, 2020, numerous conferences were heard by the ALJ. All parties appeared at one or more of the conferences.
7. On January 10, 2018, Glen Koch filed his appearance on behalf of 9 West.
8. On January 11, 2018, 9 West, by counsel, filed “Respondent, 9 West Timber & Veneer, Inc’s Answer to Plaintiff’s Amended Complaint (Answer).
9. On January 11, 2018, 9 West, by counsel, filed a motion to dismiss this proceeding. Thereafter, the Department timely filed its response. On February 22, 2018, the ALJ denied the motion to dismiss.
10. On May 22, 2018, Zachary LaGrange filed his appearance on behalf of Old National.
11. On May 31, 2019, the parties were ordered to exchange and file final witness and exhibit lists on or before July 12, 2019. The Department timely filed its final witness and exhibit lists. No Respondent filed a final witness or exhibit list.
12. On May 31, 2019, the parties were notified that a hearing of the facts was set to be heard on September 26, 2019, at the Commission’s Division of Hearings office in Indianapolis, Indiana. Thereafter, the ALJ granted the Department’s motion to reset the hearing date, due to unavailability of witnesses on the original date, and rescheduled the hearing to be heard on February 18, 2020. Upon further motion by the Department, the ALJ revised the hearing location to the Brown County Public Library in Nashville, Indiana, consistent with IC 25-36.5-1-3.2(i) and 312 IAC 14-6-5.
13. On February 13, 2020, Glen Koch filed his appearance on behalf of Platte River.
14. On February 18, 2020, an administrative hearing of the facts was conducted as scheduled in Nashville, Indiana. The Department appeared by Counsel Ihor Boyko and by its representatives. Respondents 9 West and Platte River appeared by Counsel Glen Koch. No representative of 9 West or Platte River appeared. Old National failed to appear.
15. Following the presentation of evidence, the parties were allowed the opportunity to file post hearing briefs on or before February 28, 2020. On February 25, 2020, 9 West and Platte River, by Counsel Koch, filed “Respondent, 9 West Timber & Veneer, Inc.’s and Platte River Insurance Company’s Post-Trial Brief”. On February 28, 2020, the Department, by Counsel Boyko, filed “Petitioner DNR’s Post-Hearing Brief”. Old National did not file a post hearing brief. The hearing record was closed on February 28, 2020.
16. The instant proceeding was initiated pursuant to IC 25-36.5-1-3.2 and 312 IAC 14-6-1 and is governed procedurally by IC 4-21.5 and 312 IAC 3.
17. The Commission is the ultimate authority. 312 IAC 14-1-2(d).
18. The Commission possesses jurisdiction over the subject matter of the instant proceeding as well as the persons of the parties.
Findings of Fact and Conclusions of Law:
Findings of Fact[1]
19. Platte River and 9 West do not dispute that 9 West went over the line into the area alleged by the Department in its Amended Complaint, Yellowwood State Forest (Yellowwood).
20. The following individuals provided witness testimony at the administrative hearing: Duane McCoy (McCoy), Mike Spaulding (Spaulding) and Frank Ballintyn (Ballintyn).
21. McCoy earned a bachelor’s degree and a master’s degree in forest management from Oregon State. McCoy has been a Department staff member since 1996. He has been in his current position as the “Timber Buyer Licensing Forester” for the Department’s Division of Forestry since 2006. In his current position, he maintains the Department’s timber buyer licensing and agent records and the Department’s timber buyer and agent database. He also assists conservation officers, land owners and companies when there is a dispute regarding a wrongful cutting or the value of one or more trees. In those situations, McCoy commonly prepares appraisals. See testimony of McCoy.
22. Michael Spaulding (Spaulding) earned a bachelor’s degree in forest management in 2005 from Purdue University. He has been a staff member of the Department’s Division of Forestry since 2007 and a Yellowwood forester since 2013. Spaulding currently oversees forest management efforts, conducts public outreach and supervises staff as a “Resource Supervisor Forester 2” for Morgan Monroe and Yellowwood. In his current position, he is aware of all outstanding timber contracts for the area he manages. Spaulding’s duties also include marking state property lines for timber buyers, as a service. See testimony of Spaulding.
23. Frank Ballintyn (Ballintyn) earned an associate’s degree in forest management in New York and bachelor’s degrees in forest management and land surveying management from Purdue University. He obtained an Indiana Land Surveyor license in 1990, License #LS0009. He became a Department staff member 1974 and he is currently a “Surveying Forester” with the Department’s Division of Forestry. His current duties include boundary management. See testimony of Ballintyn.
24. On March 30, 2012, a “Collateral Assignment of Certificate of Deposit” (Assignment) was signed by “Josh P. Cruse, Member”, for a CD carried by Old National. The Assignment was issued for the following purpose: “the undersigned pursuant to obligations set forth in I.C. 25-36.5-1, does hereby assign, transfer to, and pledge with the director of the Department of Natural Resources all right, title and interest of the undersigned in and to the Certificate of Deposit issued by or carried with Old National Bank…number #93207877, in the face value of $2,000….” The Assignment was “collateral security for performance of the assignor’s obligations under I.C 25-36.5-1….” On May 6, 2012, as a part of the Assignment, a “Signature Guarantee and Undertaking by the Financial Institution” was signed on behalf of Old National. The Department provided written acknowledgment and receipt of the Assignment on May 21, 2012. See Exhibit A.
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25. On February 1, 2013, Surety Bond #41267743 (Surety Bond), in the amount of $20,000, was issued between 9 West and its surety, Platte River. The Surety Bond was issued for the following stated purpose: “the use and 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”. The “Corporate Acknowledgement” was signed on February 13, 2013, by “Joshua P. Cruse, President and CEO Secretary of 9 West Timber & Veneer, a Corporation, Principal….” See Exhibit B.
26. Josh Cruse was an agent for one or more timber buyers prior to obtaining a license[2] for 9 West from the Department. Josh Cruse submitted both the Surety Bond and Assignment to the Department to satisfy 9 West’s licensing requirements. See testimony of McCoy and Exhibits A and B.
27. All or a portion of Yellowwood is located in Brown County, Indiana.
28. Private property identified as the Gallahue Girl Scout Camp (Girl Scout) property is adjacent to and east of a portion of Yellowwood.
29. Through a “Letter of Agreement for Temporary Use of State Forest Land for the Purpose of Ingress and Egress” (Use Agreement), the Department allowed the removal of trees harvested from the Girl Scout property through a portion of Yellowwood on a skid trail and authorized two staging areas. The Use Agreement allowed for the temporary use of specific Yellowwood property, “in the NW1/4 of Section 18, T-10N, R-2E, of Brown County, Indiana in Yellowwood State Forest.” The permittee identified in the Use Agreement is “Clay Cruse Timber Management of Indiana.” See Exhibit D.
30. The Use Agreement was effective from February 11, 2013 to July 11, 2013. The Use Agreement was extended by correspondence dated July 29, 2013, to December 20, 2013. See Exhibits D and E.
31. Josh Cruse, on behalf of 9 West, contacted McCoy by telephone to report that he did not believe he had received a fair value from his contractors for the cut trees. See testimony of McCoy.
32. In March of 2014, as a part of a standard rotation, Spaulding remarked Yellowwood boundary lines for an area within his management authority. Spaulding personally repainted known corners and used GPS to check boundary line locations that had no markers. See testimony of Spaulding.
33. When Spaulding remarked the Yellowwood boundary lines, he was aware of the Use Agreement and multiple contracts for the sale of timber within Yellowwood. Id.
34. When Spaulding remarked the Yellowwood boundary lines, 9 West had no contract with the Department for the sale of timber. In addition, no representative of 9 West had obtained permission, without a contract, to harvest timber from Yellowwood.
35. No representative or contractor of 9 West submitted any request to the Department to have the property line boundary between the Girl Scout property and Yellowwood marked. Id.
36. As Spaulding remarked Yellowwood’s boundary line, he observed a potential overcut. In some areas, Spaulding observed that trees had been cut from Yellowwood, from the property line to metal tags that were used to mark trails within the forest. Spaulding contacted McCoy and reported that he had discovered a trespass and potential overcut. In addition, Spaulding, or his immediate supervisor, requested a survey to determine the extent of the harvest from within Yellowwood. Id.
37. In May and December of 2016, McCoy conducted multiple site visits to Yellowwood as property lines were physically marked by carsonite posts. McCoy observed that the majority of the trees on the Girl Scout property had been cut. See testimony of McCoy.
38. McCoy estimated that trees harvested from Yellowwood were within 100-200 feet from the Yellowwood boundary line that is adjacent to the Girl Scout property. At a location where the Yellowwood property line forms a corner, McCoy discovered a concentration of cut timber. During the administrative hearing, McCoy marked one or more general locations at which he observed cut trees that he appraised. He marked the general locations of stumps in blue on Exhibit J. Id.
39. Yellowwood trees were harvested primarily from the N.E. ¼ of Section 13, T.10N, R.1E. See the testimony of McCoy and Exhibit D and J.
40. On June 6, 2017, McCoy completed his appraisal of 41 trees harvested from Yellowwood. His appraisal included “16 Black Oak, 10 Red Oak, 9 White Oak, 2 Scarlet Oak, 2 Chestnut Oak, 1 Hickory and 1 American Beech…” McCoy estimated the total board feet at 24,236, and a total value of $9,874.55 for the cut trees. His appraisal included a value for one tree that was on the property line. For that tree, he included half of the volume and half of the value in his appraisal. See the testimony of McCoy and Exhibit C.
41. McCoy’s appraisal was uncontested during the administrative hearing.
42. Over a period of approximately four years, due to other pending assignments, Ballintyn prepared a survey of portions of Yellowwood. He currently intends to complete a survey that includes the acreage relevant to this proceeding, plus other acreage. See testimony of Ballintyn.
43. Ballintyn reviewed the deed grant issued to Indiana from the United States. Ballintyn applied his surveying knowledge, skills and experience and applied deed language to acreage descriptions. Id.
44. Ballintyn sought out but found no recorded survey in county records for the relevant tracts. However, he reviewed deed record maps, created in the 1950s and 1960s, that are updated when appropriate and made available by the Department’s Division of Forestry. See the testimony of Ballintyn and Exhibit F.
45. Ballintyn performed a visual inspection of the area, recovered stones and concrete monuments and recorded appropriate coordinates. He also set rebar as a part of his survey. See the testimony of Ballintyn and Exhibits F and G.
46. Ballintyn prepared a draft survey. His survey does not yet include his survey notes and has not yet been filed in the county records. For these reasons, his survey is identified as a draft. See the testimony of Ballintyn and Exhibit J.
47. Ballintyn marked an area[3] on Exhibit J during the administrative hearing where he observed two large white oaks that were cut from within the fence line in Yellowwood. The trees were not appraised by McCoy and are not included within the Department’s damage request. Id.
Conclusions of Law
Timber Buyer & Timber Grower
48. The Answer filed by 9 West, by counsel, admits that 9 West is a “timber buyer” and the Department is a “timber grower”, as alleged within the Department’s Amended Complaint. In addition, 9 West’s Answer filed in this proceeding admits the Indiana Secretary of State website lists Joshua Cruse as the president and registered agent for 9 West.
49. A “Timber buyer” is “a person engaged in the business of buying timber from timber growers….” IC 25-36.5-1-1 and 312 IAC 14-2-10.
50. A “Timber Cutter” is “a person who cuts timber but who is not a timber buyer.” 312 IAC 14-2-11.
51. 9 West obtained a registration certificate to engage in the business of buying timber.
52. 9 West engaged in cutting timber, with or without a contract, on property adjacent to Yellowwood, known as the Girl Scout property.
53. Respondent 9 West is a timber buyer or a timber cutter.
54. A “Timber grower” is “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.” 312 IAC 14-2-12.
55. The State of Indiana is the owner of Yellowwood and the area is managed by the Department.
56. The Department is a timber grower.
Petitioners’ Right to Damages: IC 25-36.5-1-3.2(f)(1)
57. A complaint filed by a timber grower against a timber buyer may seek “[d]amages in compensation for damage actually resulting from the wrongful activities of a timber buyer or timber cutter.” IC 25-36.5-1-3.2(f)(1).
58. The Department’s Amended Complaint requests “Damages in compensation for damage actually resulting from the wrongful activities of Respondent 9 West on Petitioner DNR’s property”. See the Amended Complaint, page 3.
59. The wrongful activities of a timber buyer could result in the assessment of costs for repairing fences, repairing ruts, and removing felled but unharvested trees and debris might appropriately be included. The costs for replacing felled trees would not. Wright v. Reuss, 434 N.E.2d 925, 930 (Ind. App. 1982).
60. The Commission has previously determined that, “[t]he application of IC § 25-36.5-1-3.2(f)(1) is stated in Roberts v. Voorhees, 453 N.E.2d 342, 343 (Ind. App. 1983) as the secondary goal of the Timber Buyers Act. The primary goal of the Timber Buyer Act is to insure a landowner is compensated for the harvest of standing timber. The secondary goal is to protect the landowner ‘from damage to his land resulting from improper logging methods.’” O’Neal v Bowers and Spurgeon, 13 CADDNAR 64, 68 (2012).
61. The Petitioners failed to identify any damages related to the State’s property as a result of the harvest of timber from Yellowwood.
62. The Petitioners are not entitled to an award for damages pursuant to IC 25-36.5-1-3.2(f)(1).
Petitioners’ Right to Damages: IC 25-36.5-1-3.2(f)(2)
63. If there is no written contract, the Department or a timber grower may commence a proceeding against a timber buyer or cutter if there is reason to believe the timber buyer or cutter cut timber or acquired timber from the timber grower without payment having been made to the timber grower equal to the value of the timber. IC 25-36.5-1-3.2(b).
64. A complaint may seek “[d]amages 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” cause. IC 25-36.5-1-3.2(f)(2).
65. In the Department’s Amended Complaint, the Department seeks, “Damages equal to three (3) times the stumpage value of timber that was wrongfully cut and appropriated from Petitioner DNR’s property without payment by Respondent 9 West….” See the Amended Complaint, page 3.
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66. The Indiana Court of Appeals previously examined the award of treble damages and deemed it to be a "civil penalty, not criminal penalty, to insure that timber buyers will exercise care in cutting of timber and to protect landowners from careless felling of their timber". Wright v. Reuss, supra at 926.
67. 9 West, including 9 West’s representatives and contractors, crossed the line into Yellowwood when the Girl Scout property was harvested.
68. The Department did not contract with 9 West for the harvest of timber from Yellowwood and the Department did not grant permission to any member of 9 West to harvest trees from Yellowwood.
69. Both of the post-hearing briefs submitted in this proceeding, acknowledge that mistake of fact as to the ownership of real property where timber is located is not a defense to a claim for treble damages. This conclusion is supported by previously issued Commission decisions. McClure v Perry & Richardson, 13 CADDNAR 96, 98 (2013), citing Beeman v Marling[4], 646 N.E. 2d 382 (Ind. App. 1995).
70. The Commission may require less than the full impact of the treble-damages clause where the imposition of treble damages would cause an injustice. Hagan, et al. v. Lewis, Cincinnati Insurance Co., Martin and US Fidelity & Guaranty Co., 7 CADDNAR 146 (1996); Guy W. Pollock v. Dale Coats, 8 CADDNAR 124 (1999); and Booker, et al v. Mason and Shorter, 10 CADDNAR 1 (2005). See also, McClure v Perry & Richardson, supra at 98.
71. The Commission has used its discretion to determine less than the full impact of the treble damages clause. The Commission previously awarded less than treble damages for the harvesting of trees on property not owned by a landowner with whom the timber buyer contracted, when the timber buyer conducted due diligence, but because of misdirection or connivance of another was caused to err. Gallien v. Sloan Logging, Pendley & Zurich N. Am., 9 CADDNAR 40, 43 (2002).
72. However, “[a] timber buyer is responsible to apply due diligence in determining whether a described parcel of real estate is the site where a timber harvest is to occur. If the services of a registered land surveyor, a licensed attorney, or another professional are required to be assured the timber buyer knows who owns a parcel of real estate, then obtaining those services is an element of due diligence.” McClure v Perry & Richardson, supra at 98 (2013). See also, O’Neal v Bowers and Spurgeon, 13 CADDNAR 64, 67 (2012).
73. Despite the assertion by 9 West and Platte River, by counsel, that the property line was difficult to determine, the Respondents offered no alternative survey or other mechanism used by 9 West to determine the location of the boundary line.
74. Respondent 9 West had the opportunity to contact the Department and to enlist the Department’s assistance to determine the location of the property line. 9 West was in a positon to avoid this entire situation. However, 9 West, including 9 West’s representatives and contractors, did not ask to have the property boundary line between the Girl Scout property and Yellowwood marked or otherwise identified.
75. No evidence was provided to show due diligence by 9 West in determining the location of the property boundary line between the Girl Scout property and Yellowwood.
76. The weight of the evidence presented in this proceeding does not support a finding that injustice would be served by the application of the treble-damages clause.
77. Uncontested evidence supports a conclusion that the value of the trees harvested trees from Yellowwood is $9,874.55.
78. The Department is entitled to damages three times the stumpage value of the timber appropriated without payment, of $29,623.65.
Petitioners’ Right to Bond Forfeiture: IC 25-36.5-1-3(g)
79. Persons registered with the Department as timber buyers are required to file a bond or other security with the Department. IC 25-36.5-1-3.
80. The Timber Buyers Act provides for forfeiture of a bond or other security filed with the Department in some situations. If a timber buyer…fails to pay legally determined damages for timber wrongfully cut by a timber buyer or the timber buyer's agent, or commits any violation of this chapter, an adjudicative proceeding on the bond for forfeiture may be commenced…. A proceeding for forfeiture of a timber buyer's bond under IC 4-21.5 is the exclusive remedy under law for the forfeiture….” IC 25-36.5-1-3(g).
81. The Department’s Amended Complaint identifies a security bond provided for 9 West by Platte River and a CD held by Old National as assigned security. The Department requests “all other just and proper relief and damages, including forfeiture of the surety bond…and the Certificate of Deposit”. See the Amended Complaint, p. 4.
82. Platte River provided Surety Bond #41267743 for 9 West under the Timber Buyers Act in the penal sum of $20,000.
83. Platte River’s security bond, #41267743, was an effective security bond at the time of the Yellowwood harvest.
84. Platte River is a party to this proceeding and has received notification of the proceeding.
85. The liability on a surety bond of a timber cutter is limited to the value of any timber wrongfully cut or appropriated. IC 25-36.5-1-3.2(g).
86. The liability of Platte River is further limited to the lesser of the penal sum on the bond, $20,000, or the value of the timber appropriated without payment, $9,874.55. The lesser amount is the value of the timber appropriated without payment, $9,874.55.
87. Josh Cruse assigned CD #93207877, held by Old National as collateral security under the Timber Buyers Act to secure performance obligations by 9 West, in the penal sum of $2,000.
88. Old National’s assignment was effective at the time of the Yellowwood harvest.
89. Old National is a party to this proceeding and has received notification of the proceeding.
90. As provided in IC 26-36.5-1-3.2(g), liability on the security is limited to the value of any timber wrongfully cut or appropriated.
91. The liability of Old National is further limited to the lesser of the penal sum of the security, $2,000, or the value of the timber appropriated without payment, $9,874.55. The lesser amount is the penal sum of the security, $2,000.
FINAL ADMINISTRATIVE JUDGMENT
1. Petitioner Department, is granted administrative judgment against 9 West in the amount of $29,623.65.
2. Petitioner Department is granted an administrative judgment and is entitled to forfeiture of bond #41267743, posted with the Department under the Timber Buyers Act on behalf of 9 West, against Platte River in the amount of $9,874.55.
3. Petitioner Department is granted an administrative judgment and is entitled to forfeiture of CD #93207877, posted with the Department under the Timber Buyer Act on behalf of 9 West, by Josh Cruse, against Old National in the amount of $2,000.00.
4. 9 West shall receive credit to the extent payment to Petitioner Department is made by Platte River and Old National.
5. The compensation to which the Department is entitled under this judgment shall not exceed the total amount of $29,623.65.
6. 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.
[1] Findings of fact that may be construed as conclusions of law and conclusions of law that may be construed as findings of fact are so deemed.
[2] Otherwise known as a "registration certificate”.
[3] In red.
[4] Cited within the post-hearing brief submitted by Respondents, 9 West and Platte River, as “Vieman v Marling, 646 N.E.2nd 382 (Ind. Ct. App. 1995).