Toivo Pottala Logging, Inc. v. Boise Cascade Corp. , 112 Idaho 489 ( 1987 )

HUNTLEY, Justice.

In July 1976, Boise Cascade entered into a contract with the State of Idaho to purchase five units of timber in Valley County in the Kennally Creek area. Under the contract, Boise Cascade was obligated to cut all designated logs, but it only had to pay for those logs which were delivered to the mill; Boise Cascade was not charged for those logs which were cut and left in the woods. Before selling the timber in the Kennally Creek area to Boise Cascade, the State conducted a timber “cruise,” which is an inspection of the property with reference to the potential timber yield. The State’s timber “cruise” was made available to Boise Cascade, and it revealed that red rot was present in the Kennally Creek area.

Because Boise Cascade’s saw mill in Valley County had filled its requirement for lodgepole pine, Boise Cascade sold the timber from the Kennally Creek sale to Wickes Forest Industries. Boise Cascade and Wickes agreed that Wickes would pay only for the merchantable timber actually delivered.

In June 1979, Toivo Pottala Logging, Inc. (Pottala) was contacted by Boise Cascade and was asked to log the lodgepole pine at Kennally Creek and deliver it to Wickes mill. Pottala was told that there were 3.3 million board feet of lodgepole pine to be harvested.

In July 1979, Pottala and Boise Cascade entered into an agreement whereby Boise Cascade assigned the contract to harvest 3.3 million board feet of lodgepole to Pottala. He would be paid $18.11 a ton. In addition, Pottala was to cut the trees, skid them tree length to the landing, where they were to be trimmed and cut to designated lengths. After this process was completed, Pottala was to haul the logs to the mill.

Clauses (2) and (4) of the Boise Cascade/Pottala contract provided:

(2) Contractor will cut and log all designated merchantable timber in the contract area, herein called “covered timber”, in a continuous, diligent and workman-like manner and in accordance with the terms and provisions of the Kennally Creek state timber sale contract, herein called “Timber Sale Contract,” and deliver covered timber in accordance with the terms and conditions hereinafter contained, at its own costs and expense as follows: 3300M at the rate of 1000M (000) board feet per month, subject to company’s right to adjust the rate of delivery as market conditions at company delivery points and other factors necessitate____

(4) Company shall pay contractor on or about the one and fifteen days of each month, the agreed compensation for all covered timber delivered and scaled for the prior period as follows:

Rate of payment: $18.11 per ton — total logging price — included HAUL LOGS delivered to the Wickes Corporation log yard.

After Pottala began logging, it became evident that one out of three trees was extensively infected by red rot, which is a wood decay caused by various pore fungi. Boise Cascade would not permit the infected timber to be hauled to the mill for scaling and payment if the defect constituted more than sixty-six and two-thirds percent. Therefore, Boise Cascade refused to pay Pottala for a substantial portion of the trees which he had cut, skidded, trimmed, and skidded to the landing. In October 1979, a memorandum agreement was executed between the parties to increase Pottala’s payment for logging from $18.11 a ton to $20.08 a ton because of the extensive red rot. Despite this increase, Pottala’s gross revenue was reduced by 39.4%. Although Pottala logged all the trees which Boise Cascade had designated, Pottala was paid for less than two-thirds of the lumber he cut. Pottala asserts that Boise Cascade was aware of the amount of red rot in Kennally Creek’s timber units, but failed to disclose this information to him.

In July 1982, Pottala filed a complaint alleging that he had logged over 3.3 million board feet, but he had only been paid for 1.85 million board feet. He further alleged that Boise Cascade’s failure to pay for the full 3.3 million board feet was a violation of I.C. § 38-1202(c). In January of 1984, Pottala filed an amended complaint which added an action for fraud and tortious violation of an implied covenant of good faith and fair dealing.

Boise Cascade’s motion for summary judgment on the interpretation of I.C. § 38-1202(c) was granted. Boise Cascade’s motion for summary judgment on the ground that the statute of limitations had run on the new cause of action in the amended complaint was denied. A jury trial was held and a verdict was rendered in favor of Boise Cascade. Both parties appeal.

The major issue presented for resolution is whether Boise Cascade failed to comply with the guidelines of I.C. § 38-1202(c), which provides a forest products measurement system for the purpose of determining proper compensation:

38-1202. Definitions. — As used in this act, unless the context or subject matter requires otherwise:

(c) Forest Products Measurement. For the purpose of payment for logging or hauling logged forest products only, forest products shall be measured by gross weight, or by gross volume converted to gross decimal “C”. Measurement may be determined by a sampling process.

Pottala argues that I.C. § 38-1202(e) prohibits a merchantability standard from being imposed upon products where the contract provides that payment shall be calculated on a gross weight scale.

The legislative history provides a foundation for understanding the legislature’s intent in enacting I.C. § 38-1202(e). Prior to the enactment of I.C. § 38-1202(c), loggers had complained to the state legislature that saw mill owners were scaling delivered logs unfairly. Therefore, in 1978 the Idaho legislature considered a bill which would require payment on the basis of gross weight; i.e., Senate Bill No. 1543. Although that bill failed, the legislature established a special committee to review log scaling statutes and practices.

The special committee found that use of the Scribner Decimal C Scale did not accurately calculate the board footage of the logs measured by that scale. Further, the committee found that the Scribner Decimal C Scale required a significant amount of human judgment to the point that it did not consistently reflect the board footage. Therefore, the committee recommended that a gross weight scaling method be adopted. Acting upon that recommendation, Senate Bill 1108 was introduced to amend the log scaling law to a gross weight or gross volume system of measurement. The bill was passed and signed into law as I.C. § 38-1202(c).

Therefore, it is evident that the Idaho legislature sought to guarantee that loggers were paid more fairly for the logs hauled and delivered for scaling. The legislature did not, however, specifically provide that loggers should be free to deliver all logs, brush, forest growth, and timber in all forms (defective or not) and be paid for the weight of such products. Further, the legislation did not specifically prohibit the logger and the purchaser of timber from negotiating a standard of merchantability.

By amending the log scaling law, the legislature merely substituted a faulty system of measurement by replacing it with a verifiable method of measurement. This the legislature accomplished by altering the system of measurement to a gross scale, but the legislature did not address the question of merchantability and contracting for merchantability.

The Court is aware of the injustices which may arise when the logger is required to cut and skid logs that he will not be paid for because of disease or damage. The legislature enabled the logger to be paid for more of his work by amending the log scaling law to a gross weight measurement system. If there is to be additional law providing more adequate compensation for the logger’s labor, it must come from the legislature. This Court cannot interpret I.C. § 38-1202(c) as enabling loggers to disregard merchantability standards contracted for with the mill owner. Therefore, the contract entered into by Pottala and Boise Cascade is not contrary to the language of I.C. § 38-1202(c).

Pottala also contends that the court erred when it failed to submit to the jury the plaintiff’s instructions dealing with fraud, negligent misrepresentation, constructive fraud and contractual obligations of good faith and fair dealing. We have examined the instruction and conclude the trial court accurately instructed the jury on the law relating to these issues. If when viewed as a whole, the trial court’s instructions correctly state the issues and the law, there is no error. In Garrett v. Nobles, 102 Idaho 369, 374, 630 P.2d 656, 671 (1981), this Court stated that “[wjhere ... the substance of a party’s proposed instructions are adequately covered elsewhere, the trial court does not err in refusing the proposed instruction.” See Quincy v. Joint School Dist. No. 41, Etc., 102 Idaho 764, 640 P.2d 304 (1981). In addition, this Court stated in Mann v. Gonzales, 100 Idaho 769, 771, 605 P.2d 947, 950 (1980) that “[t]he substance of that proposed instruction was adequately covered elsewhere and, hence, the trial court did not err in refusing to give appellant’s proposed instruction.” The instructions given in the instant action, when read as a whole, correctly state the issues and the relevant law. Garrett v. Nobles, 102 Idaho 369, 630 P.2d 656 (1981); Mann v. Gonzales, 100 Idaho 769, 605 P.2d 947 (1980).

In that we have disposed of the major issues in favor of Boise Cascade, this Court need not reach the issue of whether the trial court erred in denying defendant’s motion to dismiss the causes of action of fraud and negligence as being time-barred.

Costs to respondent. No attorney fees on appeal.

SHEPARD, C.J., and DONALDSON and BAKES, JJ., concur.