Stansbury et al v. Hopkins Hardwoods, Inc.
Filing
150
MEMORANDUM OPINION AND ORDER Signed by Chief Judge Joseph H. McKinley, Jr. on 4/11/2017: The motion 132 for summary judgment by Defendants Donald Hayes and James C. Speaks is GRANTED. The motion 138 for summary judgment by Defendants Ho pkins Hardwoods, Inc. and Robert Henry Christ is GRANTED IN PART and DENIED IN PART. Defendants Robert Henry Christ, Donald Hayes, James C. Speaks, and Joseph P. Speaks are hereby DISMISSED from the action. The motion 135 by Hopkins Hardwoods and Christ to exclude the expert witness of Plaintiffs Richard L. and Mary Stansbury is DENIED AS MOOT. cc: Counsel (JBM)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
OWENSBORO DIVISION
CIVIL ACTION NO. 4:15-CV-00016-JHM
RICHARD L. STANSBURY and
MARY F. STANSBURY
PLAINTIFFS
V.
HOPKINS HARDWOODS, INC.,
ROBERT HENRY CHRIST, DONALD
HAYES, and JAMES C. SPEAKS
DEFENDANTS
AND
HOPKINS HARDWOODS, INC.
COUNTER-CLAIMANT
V.
RICHARD L. STANSBURY and
MARY F. STANSBURY
COUNTER-DEFENDANTS
MEMORANDUM OPINION AND ORDER
This matter is before the Court on motions for summary judgment by Defendants
Hopkins Hardwoods, Inc. and Robert Henry Christ (DN 138-1) and Defendants Donald Hayes
and James C. Speaks (DN 132), as well as a motion by Hopkins Hardwoods and Christ to
exclude the expert witness of Plaintiffs Richard L. and Mary F. Stansbury. (DN 135-1.) Fully
briefed, these matters are ripe for decision.
I.
BACKGROUND
Richard and Mary Stansbury purchased a 2,551-acre tract of land in Meade County,
Kentucky, known as the “Kimball tract” in December 2008 for $4,156,050.00. (Dep. Richard
Stansbury [DN 134-1] at 37:12, 41:18; Kimball Deed [DN 134-2] at 2–4.) Before purchasing the
Kimball tract, Stansbury had a timber cruise performed on the property by Harold Gordon.
(Dep. Richard Stansbury [DN 134-1] at 26:10; Gordon Cruise [DN 134-2] at 16–19.) This cruise
estimated that the Kimball tract contained around 6.5 million board feet of timber, and it valued
the timber at over $4.1 million. (Gordon Cruise [DN 134-2] at 16–19.) The Stansburys sold a
792-acre portion of the Kimball tract in July 2011 to Yager Family, LLC for around $1.8 million,
retaining the timber rights on the “Yager tract” for five years after the date of sale. (Dep.
Richard Stansbury [DN 134-1] at 50:11, 51:6, 57:12, 63:24; Yager Deed [DN 134-2] at 26–35.)
At some point prior to the sale of the Yager tract, it became known in Meade County that
the Stansburys were interested in selling the timber rights to both the Kimball tract and the Yager
tract. While the extent to which the Stansburys were marketing the timber rights is unclear,
Stansbury stated that he valued the timber rights at $3.5 million. (Dep. Richard Stansbury [DN
134-1] at 70:21.) A group of three individuals became interested in acquiring the timber rights:
Defendant Donald Hayes, Defendant James C. (“Jimmy”) Speaks, and Samuel Dunaway. (Dep.
Donald Hayes [DN 120-1] at 73:6; Dep. James Speaks [DN 121-1] at 71:22.) At the time,
Dunaway was the owner and president of both Dunaway Timber Company and Defendant
Hopkins Hardwoods, Inc. (Dep. Robert Christ [DN 130-1] at 18:6, 20:23.) Hopkins Hardwoods
acquires timber rights and then sells the lumber to Dunaway Timber for use at its mills. (Id.)
The three individuals agreed to hire Rick Sluss to perform his own timber cruise on the property
in February 2010. (Dep. Donald Hayes [DN 120-1] at 73:6; Dep. James Speaks [DN 121-1] at
74:15; Dep. Rick Sluss [DN 127-1] at 16:6.) Sluss sent the completed cruise to Speaks in March
2010, but instead of estimating a value on the timber, he only provided an estimate of the amount
of board feet on the Kimball tract. (Dep. Rick Sluss [DN 127-1] at 20:19.) The key document
from this timber cruise is entitled “Tract: volume, total by product and species,” as it indicates
that there are over seven million board feet on the tracts. (Sluss Cruise [DN 134-2] at 37.)
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Sam Dunaway transferred his ownership interest in Dunaway Timber and Hopkins
Hardwoods to Defendant Robert Christ in December 2010. (Dep. Robert Christ [DN 130-1] at
58:6.) Christ, as president of Hopkins Hardwoods, entered into a contract with the Stansburys in
September 2011 for the purchase of the timber rights the Stansburys possessed over the Yager
tract and almost all of the Kimball tract, agreeing to pay $2.2 million for the rights. (Dep. Robert
Christ [DN 130-1] at 179:18; Timber Rights Contract [DN 134-2] at 44.) Hopkins Hardwoods
also paid Speaks $300,000 as a finder’s fee that Christ believed was to be split evenly between
Speaks and Hayes. (Dep. Robert Christ [DN 130-1] at 182:7.) The timber contract was merged
into and superseded by a timber deed, which specified that Hopkins Hardwoods had the right to
harvest timber for a period of five years from each tract. (Timber Deed [DN 134-2] at 46–61.)
However, Hopkins Hardwoods was not to harvest any trees with a diameter smaller than fourteen
inches at a height of twelve inches off the ground on the Yager tract, and it was not to do the
same on the Kimball tract to any tree smaller than fourteen inches at stump height. (Id. at 46–
47.) Further, Hopkins Hardwoods was to keep gates locked at all times and not harvest any cedar
trees, among other provisions. (Id. at 47–48.) Hopkins Hardwoods began work at the Kimball
and Yager tracts shortly thereafter in January 2012. (Dep. Robert Christ [DN 130-1] at 225:1.)
Stansbury alleges that all of the above provisions of the timber deed have at some point been
violated, as well as alleging that rock from the creek bed on the property was taken without
permission. (Compl. [DN 1] ¶¶ 38–45.)
In January 2015, Richard Stansbury was contacted by Gary Gouvas, an ex-son-in-law of
Donald Hayes. Gouvas informed Stansbury that he believed Hayes had shown Stansbury an
altered version of the Sluss Cruise that Gouvas had created. (Dep. Richard Stansbury [DN 1341] at 90:20; Dep. Gouvas [DN 112] at 44:13.) This “Gouvas Cruise” appears very similar to the
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Sluss Cruise document entitled “Tract: volume, total by product and species,” except it states that
there are only about 5 million board feet on the Kimball and Yager tracts, instead of the 7 million
originally included in the Sluss Cruise. (Gouvas Cruise [DN 134-2] at 38.) Gouvas stated that
he was asked by Hayes to change the numbers in a spread sheet in March 2010 while Jeanette
Hayes, Donald’s wife, and Jimmy Speaks were present, and that Donald Hayes told him that the
new spreadsheet was just to be used for Donald’s personal use. (Dep. Gouvas [DN 112] at
31:23, 34:8, 48:11.) Sluss indicated that he did not prepare the inventory sheet that states there
are only 5 million board feet. (Dep. Rick Sluss [DN 127-1] at 117:2.)
The Stansburys filed this action originally against Hopkins Hardwoods, alleging fraud
(Count I), breach of contract (Count II), misappropriation, theft, and trover/conversion (Count
III), tortious interference with a potential contract (Count IV), unjust enrichment (Count V),
trespass (Count VI), harvesting trees in violation of KRS 364.130 (Count VII), and violation of
state constitutional rights entitling them to injunctive relief (Count VIII), and seeking further
injunctive relief (Count IX) and punitive damages (Count X). (Compl. [DN 1] ¶¶ 30–76.) They
later amended their complaint to add Christ, Hayes, and Speaks as Defendants and now allege
that all Defendants violated the Racketeer Influence and Corrupt Organization Act (RICO)
(Count XI), that all Defendants conspired to violate RICO (Count XII), and that all defendants
either committed common law fraud or aided and abetted each other in doing so (Count XIII).
(Am. Compl. [DN 27] ¶¶ 88–113.) The Court denied the Plaintiffs’ request for a preliminary
injunction directing Hopkins Hardwoods to abide by the terms of the timber deed. (DN 12.)
However, after the Stansburys hired a security guard to keep Hopkins Hardwoods and its
subcontractors off of the Kimball and Yager tracts, the Court granted Hopkins Hardwoods
motion for a preliminary injunction prohibiting the Stansburys from interfering with Hopkins
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Hardwoods timber operations on the tracts.
(DN 67.)
Hopkins Hardwoods also filed a
counterclaim against the Stansburys, alleging conversion (Counterclaim Count I), breach of
contract (Counterclaim Count II,) interference with business relationships (Counterclaim Count
III), and unjust enrichment (Counterclaim Count IV), and seeking punitive damages
(Counterclaim Count V). (DN 69.) All Defendants have now moved for summary judgment as
to all of the Stansburys’ claims as they pertain to each Defendant. (DN 132, 138-1.) Hopkins
Hardwoods and Christ have also moved to exclude the testimony of the Plaintiffs’ expert
witness, Vance Mosely. (DN 135-1.) Further facts will be discussed as they are pertinent to
each party’s argument.
II.
STANDARD OF REVIEW
Before the Court may grant a motion for summary judgment, it must find that there is no
genuine dispute as to any material fact and that the moving party is entitled to judgment as a
matter of law. Fed. R. Civ. P. 56(a). The moving party bears the initial burden of specifying the
basis for its motion and identifying that portion of the record that demonstrates the absence of a
genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the
moving party satisfies this burden, the non-moving party thereafter must produce specific facts
demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
252 (1986).
Although the Court must review the evidence in the light most favorable to the nonmoving party, the non-moving party must do more than merely show that there is some
“metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986). Instead, the Federal Rules of Civil Procedure require the nonmoving party to present specific facts showing that a genuine factual issue exists by “citing to
5
particular parts of materials in the record” or by “showing that the materials cited do not
establish the absence . . . of a genuine dispute[.]” Fed. R. Civ. P. 56(c)(1). “The mere existence
of a scintilla of evidence in support of the [non-moving party’s] position will be insufficient;
there must be evidence on which the jury could reasonably find for the [non-moving party].”
Anderson, 477 U.S. at 252.
III.
MOTION FOR SUMMARY JUDGMENT
A. COUNTS I AND XIII – FRAUD
The Stansburys argue that each Defendant is liable for fraudulently inducing the sale of
the timber rights to the Kimball and Yager tracts for substantially less than their true market
value. They argue that the Defendants aided and abetted each other in creating the Gouvas
Cruise, which understated the amount of board feet located on the Stansburys’ property, and that
the Gouvas Cruise induced them to sell the property for $2.5 million, $1 million less than
Richard Stansbury’s original valuation. Richard Stansbury stated that he originally valued the
timber rights at $3.5 million, but that he ultimately accepted $2.2 million from Hopkins
Hardwoods after receiving the Gouvas Cruise from Hayes that indicated less board feet than the
Gordon Cruise had previously indicated. (Dep. Richard Stansbury [DN 134-1] at 77:8, 79:23.)
He further stated that he arrived at the $2.2 million figure because the Gouvas Cruise showed
about two-thirds the amount of board feet as the Gordon cruise, and $2.2 million roughly equated
to two-thirds of $3.5 million. (Id. at 98:2.)
Under Kentucky law, a claim for fraud requires proof of six elements:
“(1) that the
declarant made a material representation to the plaintiff, (2) that this representation was false, (3)
that the declarant knew the representation was false or made it recklessly, (4) that the declarant
induced the plaintiff to act upon the misrepresentation, (5) that the plaintiff relied upon the
misrepresentation, and (6) that the misrepresentation caused injury to the plaintiff.” Flegles, Inc.
6
v. TruServ Corp., 289 S.W.3d 544, 549 (Ky. 2009) (citing United Parcel Service Company v.
Rickert, 996 S.W.2d 464 (Ky. 1999)). “The plaintiffs reliance, of course, must be reasonable, or,
as the Restatement [(Second) of Torts] states, ‘justifiable.’” Id. (citations omitted). The Flegles
Court summarized a plaintiff’s “duty to protect themselves” by stating that “the law imposes
upon recipients of business representations a duty to exercise common sense.” Id.
The Defendants argue that Plaintiff’s fraud claims must fail because, among other
reasons, any reliance Richard Stansbury placed on the Gouvas cruise was unreasonable. The
Court agrees. Stansbury indicated that he “trusted the valuation and the appraisal” Gordon
performed in 2008. (Id. at 100:11.) Yet, instead of approaching the Gouvas Cruise and its lower
estimates with suspicion, Stansbury based the sale price of the timber rights solely on the Gouvas
Cruise and ignored the Gordon Cruise. Stansbury could have done a number of “common sense”
tasks to protect himself. He could have contacted Gordon to see if he could explain the
discrepancies between the two cruises. He could have requested the full cruise from Hayes,
rather than just a one-page summary, to see if the cruises relied on different methods for arriving
at their totals. He could have had another cruise completed. But he did none of these, making
his reliance on the Gouvas Cruise unjustifiable. (Id. at 99:9.) See Buridi v. Branch Banking and
Trust Co., 654 F. App’x 802 (6th Cir. 2016) (plaintiff unreasonably relied on representations
made by defendant, as plaintiff failed to perform due diligence by investigating the basis for the
figures provided to them, defeating claim for fraud under Kentucky tort law).
The Plaintiffs point to a line of Kentucky cases that stand for the proposition that a
“defrauding party cannot escape [liability] on the ground that the complaining party should not
have trusted him, or was negligent in so doing.” Meyers v. Monroe, 226 S.W.2d 782, 785 (Ky.
1950) (citing Great A. & P. Co. v. City of Lexington, 76 S.W.2d 894 (Ky. 1935)). However,
7
even if this line of cases has never been explicitly overruled, the proposition for which these
cases stand is contradicted by the Kentucky Supreme Court’s more recent opinion in Flegles, as
that case clearly imposes a requirement that reliance be reasonable.
No reasonable jury would conclude that Stansburys’ reliance on the allegedly fraudulent
representations made in the Gouvas Cruise was reasonable; thus, the Stansburys have no viable
claim for fraud. As such, there is no underlying claim in which any Defendant could have aided
or abetted. Therefore, the Defendants’ motions for summary judgment as to Counts I and XIII
for fraud are GRANTED.
B. COUNTS XI AND XII - RICO
The Stansburys allege that the Defendants violated the Racketeer Influence and Corrupt
Organizations Act (RICO) through the creation of the Gouvas Cruise and its use in inducing the
Richard Stansbury to lower the sale price of the timber rights to the Kimball and Yager tracts.
They also allege that the Defendants formed an unlawful conspiracy to commit acts in violation
of RICO. The Defendants argue that these claims must fail since the Plaintiffs have failed to
establish a “pattern of racketeering activity” as required under RICO, among other arguments.
RICO provides, in pertinent part, that it “shall be unlawful for any person employed by or
associated with any enterprise engaged in . . . interstate or foreign commerce, to conduct or
participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of
racketeering activity . . .” 18 U.S.C. § 1962(c). “‘Racketeering activity’ encompasses many
criminal acts, including those indictable for mail or wire fraud.” Grubbs v. Sheakley Group Inc.,
807 F.3d 785, 804 (6th Cir. 2015) (citing 18 U.S.C. § 1961(1)). A “pattern” of racketeering
activity requires at least two acts of racketeering within a ten year period, 18 U.S.C. § 1961(5),
but even then, “two acts of racketeering activity within ten years will not generally give rise to
8
liability. Predicate acts of racketeering must be both continuous and related to combine to
produce a pattern.” Grubbs, 807 F.3d at 804 (citations and quotations omitted).
Taking the evidence in a light most favorable to the Stansburys, their claims under RICO
must fail, as there is insufficient evidence to support more than one predicate act of racketeering.
According to Richard Stansbury, Don Hayes sent him via mail the Gouvas Cruise in the fall of
2011. (Dep. Richard Stansbury [DN 134-1] at 77:8.) Assuming that this would constitute
indictable mail fraud, this amounts to one act of racketeering. But the Stansburys have offered
no evidence of any other act of racketeering that would even require the Court to evaluate the
continuity and relatedness of the individual acts. The Amended Complaint is in no way specific
as to what the Defendants actually did other than “preparing and then transmitting information
by wire and/or mail to the Plaintiffs,” (Am. Compl. [DN 27] ¶ 94), and the Plaintiffs’ response to
the present motions points to “follow-up” communication that the Defendants made after the
Gouvas Cruise was allegedly sent. (Pl.’s Resp. to Def. Mot. for Summ. J. [DN 143] at 12.) But
Stansbury offers no specifics in his deposition about the time, place, and nature of these
discussions, instead repeatedly just referring to them as “negotiations” and offering contradictory
statements about who those negotiations were with.
(Id. at 97:14 (“the only person that
negotiated that price was Henry Christ”), 98:15 (“I’m sure Henry, Don Hayes, and Jimmy
[negotiated the price]”).) And his testimony even casts doubt on whether the price was actually
ever negotiated, as Stansbury gives no specifics about the content of those negotiations but
speaks with certainty about how he calculated the sales price down from $3.5 million to $2.2
million on his own after receiving the Gouvas Cruise.
(Id. at 98:4, 174:17.)
Thus, the
Stansburys have failed to provide sufficient evidence that two or more racketeering activities
took place that gave rise to a pattern of racketeering activity.
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Further, the Stansburys have also failed to offer sufficient evidence of a RICO
conspiracy, as prohibited under 18 U.S.C. § 1962(d).
To prove a conspiracy under RICO, the
plaintiff must show that “(1) the defendant agreed . . . to participate in the affairs of an enterprise
through a pattern of racketeering activity, and (2) the defendant further agreed that someone
would commit at least two predicate acts to accomplish those goals.”
United Food and
Commercial Workers Union and Employers Midwest Health Benefits Fund v. Walgreen Co., 719
F.3d 849, 856 (7th Cir. 2013) (citations and quotations omitted). Again, there is no evidence of a
second act of racketeering activity that was even contemplated by the Defendants, much less
agreed to and completed. Therefore, the Defendants’ motions for summary judgment as to
Counts XI and XII for violations of RICO are GRANTED.
C. COUNT II – BREACH OF CONTRACT
The Stansburys assert that Hopkins Hardwoods breached the terms of the timber deed by
(1) failing to keep gates to the property locked at all times, (2) harvesting cedar trees, (3)
harvesting undersized trees from both the Yager (under fourteen inches at twelve inches above
the ground) and Kimball (under fourteen inches at stump height) tracts, and (4) taking rock from
the creek beds for use in constructing roads on the properties.1 (Compl. [DN 1] ¶¶ 38–45.)
Hopkins Hardwoods has moved for summary judgment on each issue.
1. FAILURE TO LOCK GATES
The timber deed states that Hopkins Hardwoods “shall keep all gates locked when it is
not on the subject lands.” (DN 134-2, at 47.) Richard Stansbury stated in a declaration early in
this case that he has “personally observed that the gates to the Lapland2 property have been left
1
The Stansburys have conceded their claim that the contract was breached when Hopkins Hardwoods failed to
adhere to the Kentucky State Best Management Practices.
2
The Kimball tract is also known locally as Lapland, and the two have been used interchangeably throughout this
litigation.
10
unlocked, by the HHI crews conducting timber harvesting operations on the property, after
working hours.” (Decl. Richard Stansbury [DN 10-1] ¶ 7.) However, counsel for the Stansburys
conceded that this was merely proof that the gates were left unlocked, not that Hopkins
Hardwoods left them unlocked.3
In response, Hopkins Hardwoods notes that it is not in
exclusive possession of the property, as the Stansburys allow individuals to hunt on the property.
(Dep. Richard Stansbury [DN 134-1] at 46:14.)
Further, Hopkins Hardwoods and its
subcontractors have had numerous locks cut off of the gates, possibly by trespassers. (Dep. John
Williams [DN 123-1] at 50:14; Dep. Joseph Speaks [DN 124-1] at 38:10.)
A claim for breach of contract requires proof of three elements: “(1) a contract between
the parties; (2) a breach of that contract; and (3) damages caused by the breach.” Texas Capital
Bank, N.A. v. First Am. Title Ins. Co., 822 F. Supp. 2d 678, 682 (W.D. Ky. 2011) (citations
omitted). Taking the evidence in a light most favorable to the Plaintiffs, there is a genuine
dispute as to whether Hopkins Hardwoods failed to keep all gates locked when it was not on the
property. There is evidence that the gates were left unlocked, as well as evidence that any failure
to keep the gates locked was not caused by Hopkins Hardwoods.
While the Stansburys’
evidence is circumstantial, it is not so thin that no reasonable juror could conclude that Hopkins
Hardwoods breached the contract. With both sides having met their evidentiary burden, summary
judgment is inappropriate, and Hopkins Hardwoods’ motion for summary judgment as to failing
to lock the gates is DENIED.
3
At the hearing on the Stansburys’ motion for a preliminary injunction, the Court asked in relation to the declaration
whether their only proof as to the gates being unlocked was just “proof that you found the locks opened? I guess the
gates opened?” Counsel for the Stansburys replied, “That would be correct.” (Prelim. Inj. Hr’g Tr., June 10, 2016
[DN 62] at 16:7.)
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2. HARVESTING CEDAR TREES
The timber deed states that “[n]o cedar is to be harvested” on either tract.” (DN 134-2, at
47.) Richard Stansbury testified that he does not know the number of cedar trees that have been
cut, but he has provided photographic evidence of what he claims to be cedar trees that have
been felled on his property. (Dep. Richard Stansbury [DN 134-1] at 140:22; Photos [DN 134-2]
at 78–79.) Robert Christ testified that at least five cedar trees have been removed for various
reasons related to the overall timber operation. (Dep. Robert Christ [DN 130-1] at 238:16.)
Hopkins Hardwoods argues that any cedar trees that were cut down did not violate the contract,
as they were removed for legitimate purposes such as to clear space for a roadway or to gain
access to hillside timber, and that the cedar trees were never actually harvested because they
remained on the property. (Id. at 238:16; Dep. Joseph Speaks [DN 124-1] at 24:24.)
Taking the evidence in a light most favorable to the Stansburys, there is a genuine dispute
as to whether Hopkins Hardwoods harvested any cedar trees. The Stansburys have met their
evidentiary burden by presenting credible evidence that cedar trees were cut down on the
property. Hopkins Hardwoods makes mostly legal arguments in opposition, asserting that no
cedars were actually “harvested” since they were not carried off the property and that it had the
right to cut down the cedars that it did. However, Hopkins Hardwoods offers no guidance to the
Court as to how it should interpret the contract, or what legal doctrines should be relied upon, so
as to reach this interpretation. Instead, it merely asserts that this interpretation is the correct one.
Without a sufficient explanation as to why the Court should interpret the term “harvest” to
require the carrying away of the tree or find some implied right to remove cedar trees for certain
purposes, the Court will decline to do so at this time. Therefore, the motion for summary
judgment as to the claim for harvesting cedar trees is DENIED.
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3. HARVESTING UNDERSIZED TREES
The timber deed states that Hopkins Hardwoods may remove timber from the Yager tract
that is “not less than 14 inches in diameter at a point not less than one foot from the ground.”
(DN 134-2, at 46.) It further states that Hopkins Hardwoods may remove timber from the
Kimball tract that is “not less than 14 inches in diameter at the stump.” (Id. at 47.)
Again,
while Stansbury is not certain of the total number of trees that were removed, he has provided
photographic evidence tending to show that trees were cut down that were smaller than these
prescribed standards. (Dep. Richard Stansbury [DN 134-1] at 143:7; Photos [DN 134-2] at 71–
76.) However, Vance Mosely, an expert retained by the Stansburys to perform an evaluation of
the premises, stated, “That stuff before 14 inches, there wasn’t much of it. I’m saying there’s
very little impact from that.” (Dep. Vance Mosely [DN 133-1] at 66:25.) Hopkins Hardwoods
argues that their removal of undersized trees was permissible, and that the Stansburys have
presented no evidence as to their damages from the removal of undersized trees.
Taking the evidence in a light most favorable to the Stansburys, there is a genuine dispute
as to whether Hopkins Hardwoods cut down any undersized trees on either tract. Again, the
Stansburys have met their evidentiary burden by presenting credible evidence that undersized
trees were cut down on the property. Hopkins Hardwoods argues that the contract permitted its
removal of certain undersized trees, but again, it does not offer the Court any guidance as to how
it should interpret the contract so as reach that conclusion. Thus, the Court will again decline to
interpret the contract in such a manner at this time. And as to the issue of damages, Hopkins
Hardwoods misstates the testimony of Mosely by asserting that he “found Plaintiffs incurred no
damages as to any undercuts on the Property.” (Mot. for Summ. J. [DN 138-1] at 23.) While
Mosely testified that there “wasn’t much” removal of undersized trees, he did not categorially
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deny the existence of any and all damages from their removal. While the ultimate damages may
be minimal, the Stansburys have met their burden at this stage.
However, the Court does find that the Stansburys have failed to present evidence of
damages for any undersized trees cut from the Yager tract. The timber deed prohibits Hopkins
Hardwoods from cutting any undersized tree from the Yager tract, and if it did in fact cut any
from that tract, it would be a breach. But the Stansburys did not have any right to cut undersized
trees from the Yager tract, either, as the deed for the sale of the Yager tract from Stansbury to
Yager Family, LLC only reserves to the Stansburys the timber rights for all trees that are
fourteen inches wide at twelve inches off the ground. (Yager Deed [DN 134-2] at 33.) Therefore,
the Stansburys do not have any damages from undersized trees being cut down from the Yager
tract, as they have no interest in those trees. The Stansburys have presented no other evidence of
damages, so their claim for breach of contract as to any undersized trees on the Yager tract fails.
Therefore, the motion for summary judgment as to the claim for cutting undersized trees
from the Kimball tract is DENIED. The motion for summary judgment as to the claim for
cutting undersized trees from the Yager tract is GRANTED.
4. REMOVAL OF ROCK FROM CREEK BEDS
Finally, the Stansburys argue that Hopkins Hardwoods breached the terms of the timber
deed by removing rock from the creek bed and using it to build and maintain roads on the
property. The timber deed is silent as to any permissible use of the rock in the creek bed, and the
Stansburys do not explain what contractual provisions would govern the removal of the rock.
The Stansburys have property rights in the rock and any cause of action for a violation of those
rights would lie in tort, not contract. Therefore, the motion for summary judgment as to breach
of contract claim for the removal of rock is GRANTED.
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D. COUNT III - MISAPPROPRIATION, THEFT, OR TROVER/CONVERSION
Count III of the Complaint alleges that Hopkins Hardwoods unlawfully obtained
undersized trees, cedar trees, and creek bed rock from the Stansburys’ property. (Pl.’s Compl.
[DN 1] ¶¶ 46–49.) While the Stansburys assert numerous torts, the parties’ briefs focus solely on
conversion. The elements of a claim for conversion are:
(1) the plaintiff had legal title to the converted property;
(2) the plaintiff had possession of the property or the right to possess it at the time of the
conversion;
(3) the defendant exercised dominion over the property in a manner which denied the
plaintiff's rights to use and enjoy the property and which was to the defendant's own use
and beneficial enjoyment;
(4) the defendant intended to interfere with the plaintiff's possession;
(5) the plaintiff made some demand for the property's return which the defendant refused;
(6) the defendant's act was the legal cause of the plaintiff's loss of the property; and
(7) the plaintiff suffered damage by the loss of the property.
Jasper v. Blair, 492 S.W.3d 579, 582 (Ky. Ct. App. 2016) (citations omitted).
The Stansburys argue that Hopkins Hardwoods committed the tort of conversion when it
cut down undersized and cedar trees from the property. However, “[a]t common law, cutting
someone else’s timber would be treated as a trespass,” not conversion. Meece v. Feldman
Lumber Co., 290 S.W.3d 631, 632 (Ky. 2009) (citing Hurst v. Com., 125 S.W.2d 772 (Ky.
1939)). Therefore, the motion for summary judgment as to the claim of conversion of the
undersized and cedar trees is GRANTED.
The Stansburys also allege that the rock from the creek bed was converted when it was
taken and allegedly used to make roads throughout the properties. First, the Stansburys have no
rights in the creek bed rock on the Yager tract, so they likewise have no cognizable claim for
15
conversion of that rock. Turning to the creek bed rock on the Kimball tract, the Stansburys claim
must fail for a lack of damages. Hopkins Hardwoods argues that the rock was only used to
improve the existing roads on the property or create new ones, and the Stansburys’ expert
witness testified that he “didn’t see anything damaged” when he was evaluating the property.
(Dep. Vance Mosely [DN 133-1] at 72:11.) The Stansburys do not respond to this argument that
no damages were incurred from the movement of the rock from the creek bed to the roads, other
than making the conclusory statement that Hopkins Hardwoods has “not established an
entitlement to Summary Judgment upon Count 3” but pointing to no evidence in the record to
suggest otherwise. (Pl.’s Resp. to Def.’s Mot. for Summ. J. [DN 143] at 17.) Based on this lack
of response, the only evidence as to damages this Court will consider is the testimony of Vance
Mosely, who indicated that the use of the rock caused no damage to the property or the
Stansburys’ interests.
Therefore, the motion for summary judgment as to the claim for
conversion of the creek bed rock is GRANTED.
E. COUNT IV - TORTIOUS INTERFERENCE WITH A POTENTIAL CONTRACT
In its response to Hopkins Hardwoods’ motion for summary judgment, the Stansburys
have conceded their claim for tortious interference with a potential contract. Therefore, the
motion for summary judgment as to that count is GRANTED.
F. COUNT V – UNJUST ENRICHMENT
The Stansburys argue that “as a result of Defendant’s misappropriation, theft, trover
and/or conversion of the harvested trees under 14 inches in diameter and the cedar trees
harvested from Lapland, as well as the rock taken from creek beds on Lapland . . . Defendant has
been unjustly enriched at the expense of Plaintiffs.” (Compl. [DN 1] ¶ 55.) “In order for a party
to prevail under a theory of unjust enrichment, it must prove three elements: (1) benefit conferred
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upon defendant at plaintiff’s expense; (2) a resulting appreciation of benefit by defendant; and
(3) inequitable retention of benefit without payment for its value.” Furlong Dev. Co. LLC v.
Georgetown-Scott Cty. Planning and Zoning Comm’n, 504 S.W.3d 34, 39–40 (Ky. 2016)
(citations and quotations omitted). However, “unjust enrichment is unavailable when the terms
of an express contract control.” Id. at 40. In this case, the terms of the timber deed explicitly
prohibit the harvesting of undersized and cedar trees. Those terms control, and there is no claim
for unjust enrichment for any unauthorized harvesting of trees. And as to the creek bed rock, it
cannot be said that a benefit was conferred on Hopkins Hardwoods when it used the creek rock
to make and improve roads on the property. The evidence submitted by both parties indicates
that the use of the rock to improve the roads increased the value of the property for the
Stansburys, and no benefit was conferred upon Hopkins Hardwoods for which equity would
require payment. Therefore, the motion for summary judgment as to the claim for unjust
enrichment is GRANTED.
G. COUNT VI– TRESPASS
Count VI of the Complaint asserts that Hopkins Hardwoods trespassed when it cut down
undersized and cedar trees and took rock from the creek beds. The parties have provided no
guidance to the Court as to whether these claims are to be considered a trespass upon the land or
upon a chattel. However, because Hopkins Hardwoods had a right to be present on the Yager
and Kimball tracts through the timber deed, the Court will consider the claim to be one upon the
chattels of the Stansburys. Hopkins Hardwoods could still trespass upon the undersized and
cedar trees and the creek rock, so long as there has been sufficient “intermeddling with the
chattel in the possession of another.” Madison Capital Co, LLC v. S & S Salvage, LLC, 794 F.
Supp. 2d 735, 740 (W.D. Ky. 2011) (quoting Caldwell’s Kentucky Form Book, § 126.00 (2010)).
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The Court will first look to the claim for trespass as to the trees. Again, it must be noted
that the deed conveying the Yager tract to Yager Family, LLC, only gave the Stansburys the
timber rights to the property for five years as to “timber which must not be less than 14 inches in
diameter at a point not less than one foot from the ground.” (Yager Deed [DN 134-2] at 33.)
Therefore, the Stansburys possessed no right to the undersized trees on the Yager tract, and they
have no cause of action in trespass for any undersized trees that were cut from the Yager tract.
But as to the undersized trees on the Kimball tract, the Stansburys have submitted sufficient
evidence to avoid summary judgment by demonstrating that undersized trees were cut down on
the tract. The same is true to the cedar trees on both the Yager and Kimball tracts. The
Stansburys have demonstrated that at least some cedar trees were cut down. Cutting the timber
of another is sufficient “intermeddling” with their property to sustain a claim for trespass.
Meece, 290 S.W.3d at 632. Just as with the claims for breach of contract, Hopkins Hardwoods
argues that it was permissible to cut the trees that it did in order to gain access to other parts of
the property. But because it does not offer the Court any guidance as to how it should interpret
the contract so as reach that conclusion, the Court will again decline to interpret the contract in
such a manner at this time. Therefore, the motion for summary judgment as to the cedar trees
and the undersized trees on the Kimball tract is DENIED.4 The motion for summary judgment
as to the undersized trees on the Yager tract is GRANTED.
Turning to the creek rock, the Court previously determined that the claim for the
conversion of the creek bed rock was not viable, as the Stansburys failed to rebut the evidence
4
The parties’ briefs did not discuss whether the Stansburys’ claims for trespass would sustain a challenge under the
independent legal duty doctrine. See Mims v. Western-Southern Agency, Inc., 226 S.W.3d 833, 836 (Ky. Ct. App.
2007) (“The failure to perform a contractual obligation typically does not give rise to a cause of action in tort . . .
However, if a plaintiff can establish the existence of an independent legal duty, he may maintain an action in tort
even though the acts complained of also constitute a breach of contract”); Lewis v. Ceralvo Holdings, LLC, 2012
WL 32607, at *5–6 (W.D. Ky. Jan 6. 2012). Whether this doctrine applies to the Stansburys’ trespass claims
remains an issue that the Court may need to address before these claims reach final resolution at trial.
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that they incurred no damages from the use of the rock to make or improve roads on the
property. Unlike a claim for trespass to land, trespass to chattels requires proof of damages. See
Restatement (Second) of Torts § 218 cmt. e (“The interest of a possessor of a chattel in its
inviolability, unlike the similar interest of a possessor of land, is not given legal protection by an
action for nominal damages for harmless intermeddlings with the chattel”). As with the claim
for conversion, the Stansburys have offered no evidence as to the damages they incurred when
the rock was moved from the creek. Therefore, the motion for summary judgment as to the
trespass claim of the creek bed rock is GRANTED.
H. COUNT VII –TRESPASS TREBLE DAMAGES
The Stansburys argue that they are entitled to recover treble damages for all trees that
were cut down without permission under KRS 364.130. That statute states that
any person who cuts or saws down, or causes to be cut or sawed
down with intent to convert to his own use timber growing upon
the land of another without legal right or without color of title in
himself to the timber or to the land upon which the timber was
growing shall pay to the rightful owner of the timber three (3)
times the stumpage value of the timber and shall pay to the rightful
owner of the property three (3) times the cost of any damages to
the property as well as any legal costs incurred by the owner of the
timber.
KRS 364.130(a). Hopkins Hardwoods argues that it did not have the requisite intent to convert
the undersized and cedar trees for its own use. In Penix v. Delong, 473 S.W.3d 609, 614 (Ky.
2015), the Kentucky Supreme Court interpreted the statute so as to require “a specific intent here
to do wrong.” The court clarified this requirement by stating, “We hold that the trespasser must
have intended to cut timber which he knows he is unauthorized to cut.” Id. at 615. The court
made clear that it was not “interpret[ing] the statute to read that only the unauthorized cutting of
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the timber itself must be intentional,” since “[t]o do so would make it a strict liability statute”
due to conversion already requiring an intent to exercise dominion and control. Id. at 614.
Thus, the Court must apply the statute and this heightened requirement of intent to the
present case. Hopkins Hardwoods had no legal right to remove the undersized or cedar trees, but
it argues that the removal of these trees was permissible under the timber deed out of necessity to
gain access to other trees and move vehicles through the property. However, it points to no deed
provisions or legal doctrines for this Court to determine if such an exception to the clear
language of the deed regarding undersized and cedar trees is applicable. Thus, Hopkins
Hardwoods have offered no evidence that it was acting under color of title either. See Meece,
390 S.W.3d at 631 (“Color of title is not based on a subjective belief, but on objective evidence
of title from which a subjective belief may be founded”). Further, the Stansburys have presented
evidence that undersized and cedar trees were cut.
The only issue that remains is whether Hopkins Hardwoods intended to convert the
timber for its own use. In Penix, the court found that there was no evidence of an intent to
convert, based on the facts that the harvesters were from Ohio and not familiar with the property
line, a survey was done prior to starting that demonstrated a respect for property lines, and
testimony that the encroachment had been an honest mistake. Id. at 615. In comparison, the
Kentucky Court of Appeals found in Bryson v. The Alma D. Roberts Revocable Living Trust,
2017 WL 129072, at *2 (Ky. Ct. App. Jan. 13, 2017), that treble damages were appropriate, as
the fact that timber was cut after the defendant had been notified of a property line dispute
demonstrated that the defendant intended to cut timber he knew he was not authorized to cut.
The present case, though, is not one of a failure to respect a property line. Hopkins
Hardwoods asserts that any undersized or cedar trees that were cut were done so because of their
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location: they needed to be removed to either reach other harvestable trees or to allow vehicles
through to the harvesting sites. This would seem to indicate that, if the trees were cut without
authorization, it was not done with the intent to convert them for Hopkins Hardwoods own use,
but rather merely out of convenience. However, Richard Stansbury testified that he regularly
saw undersized trees in log yards that were to be taken off the premises and likely sold to
Dunaway timber. (Dep. Richard Stansbury [DN 134-1] at 143:19.) Based on this evidence,
there is a genuine factual dispute as to whether Hopkins Hardwoods acted with the intent to cut
timber that it knew it was not authorized to cut and did so to convert it for its own use.
Therefore, summary judgment is not appropriate, and the motion for summary judgment as to
treble damages is DENIED.
I. COUNT VIII – CONSTITUTIONAL VIOLATIONS
Finally, Hopkins Hardwoods moves for summary judgment on Count VIII for injunctive
relief related to violations of the Kentucky Constitution. The Stansburys argue that Hopkins
Hardwoods has not properly moved for summary judgment as to Count VIII as it failed to raise
the issue in its original motion. Hopkins Hardwoods first moved for summary judgment on this
count in its reply, giving the Stansburys no chance to respond. Therefore, the Court will not
consider the argument. Harrington v. DH Capital Mgmt., Inc., 2014 WL 5776203, at *5 (W.D.
Ky. Nov. 5, 2014).
J. SUMMARY
To summarize, the Court grants summary judgment on Counts I and XIII for fraud in
favor of all Defendants. The Court also grants summary judgment on Counts XI and XII for
RICO violations in favor of all Defendants. Since this disposes of all claims that were asserted
against Christ, Hayes, and Speaks, they are dismissed from the action.
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The Court grants summary judgment on Count II for breach of contract as it relates to
removing the creek bed rock and cutting down undersized trees located on the Yager tract in
favor of Hopkins Hardwoods; it denies summary judgment on Count II as it relates to failing to
keep the gates locked, cutting down cedar trees located on both tracts, and cutting down
undersized trees located on the Kimball tract.
The Court grants summary judgment on Count III for conversion, Count IV for tortious
interference with a potential contract, and Count V for unjust enrichment in favor of Hopkins
Hardwoods.
The Court grants summary judgment on Count VI for trespass as it relates to cutting
down undersized trees on the Yager tract and removing the creek bed rock in favor of Hopkins
Hardwoods; it denies summary judgment on Count VI as it related to cutting down the cedar
trees on both tracts and the undersized trees on the Kimball tract.
The Court denies summary judgment on Count VII for treble damages.
IV. MOTION TO EXCLUDE PLAINTIFFS’ EXPERT WITNESS
Hopkins Hardwoods and Christ have also moved to exclude testimony of the Stansburys’
expert witness, Vance Mosely, on the grounds that his testimony is unreliable. (DN 135-1.) The
grounds for this motion rest entirely on the method in which Mosely calculated the Stansburys’
damages as it related to how the Gouvas Cruise affected the sales price of the timber rights to
Hopkins Hardwoods. All counts related to that transaction (Counts I, XI–XIII) have been
dismissed. Therefore, the motion to exclude the testimony is DENIED AS MOOT.
V. SUBSTITUTION OF PARTIES
As one final matter, the Court must address an issue regarding the proper named
Defendant in this case. In their Amended Complaint, the Stansburys asserted claims against a
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“Joseph P (‘Jimmy’) Speaks.” (DN 27.) James C. Speaks, who is known as Jimmy, answered,
stating that “Joseph P. Speaks is not a proper party to this action. Joseph P. Speaks is the brother
of James C. (‘Jimmy’) Speaks. James C. (‘Jimmy’) Speaks is the proper party to this action.”
(Answer [DN 32] ¶ 25.) James C. Speaks further asked the Court to “substitute James C. Speaks
as the proper party in place of his brother, Joseph P. Speaks.” (Id.) It is clear from the record
that James C. Speaks was the individual whom the Stansburys intended to bring into this action
as a Defendant, and they have failed to prosecute any claims against Joseph P. Speaks.
Therefore, pursuant to Fed. R. Civ. P. 21, Joseph P. Speaks is DISMISSED from the action as a
Defendant.
VI. CONCLUSION
For the reasons set forth above, IT IS HEREBY ORDERED that the motion for
summary judgment by Defendants Donald Hayes and James C. Speaks (DN 132) is GRANTED.
The motion for summary judgment by Defendants Hopkins Hardwoods, Inc. and Robert Henry
Christ (DN 138-1) is GRANTED IN PART and DENIED IN PART. Defendants Robert
Henry Christ, Donald Hayes, James C. Speaks, and Joseph P. Speaks are hereby DISMISSED
from the action. The motion by Hopkins Hardwoods and Christ to exclude the expert witness of
Plaintiffs Richard L. and Mary Stansbury (DN 135-1) is DENIED AS MOOT.
April 11, 2017
cc:
Counsel of Record
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