# Navajo Tribe of Indians v. United States

> United States Court of Claims · January 15, 1986 · 9 Cl. Ct. 336

URL: https://www.frixlaw.com/law-library/cases/6825592

## Case

- **Full name:** The NAVAJO TRIBE OF INDIANS v. United States
- **Court:** United States Court of Claims
- **Decided:** January 15, 1986
- **Citations:** 9 Cl. Ct. 336; 1986 U.S. Claims LEXIS 920
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Lydon
- **Judges:** Lydon
- **Cited by:** 17 later opinions in the Frix Law Library

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## Opinion text

OPINION
LYDON, Judge:
In these Indian Claims Commission Act cases, 1 plaintiff, The Navajo Tribe of Indians (hereinafter the Tribe), seeks to recover damages from the United States on the ground defendant breached fiduciary duties and obligations it owed the Tribe in the management and operation of the Tribe’s forest lands at various times during the period 1880 to the present. The claim, referred to as the “Timber and Sawmill” claim by the parties, actually embraces seven categories of claims and seeks to recover over $117 million. The Timber and Sawmill claim arose out of a demand by the Tribe for a general accounting by defendant. Defendant filed, at various times since 1961, accounting reports relating to defendant’s management of the Tribal forest and attendant money matters, to which plaintiff filed exceptions. This process was finally completed in 1983. The matter was subject to trial sessions in January, February and June, 1984, at which time an extensive and voluminous trial record was compiled. The post-trial briefs and submissions of the parties consumed 853 pages, exclusive of appendices, and were followed by oral argument.
The Timber and Sawmill claim is only one of many claims asserted by the Tribe against defendant in these cases. Resolution of the Timber and Sawmill claim herein does not serve to terminate the docketed (Nos. 69 & 299) litigations. 2
*341 I.
A
The Navajo Indian Reservation was created by the 1868 Treaty between the Tribe and the United States. See 15 Stat. 677 , II Kappler 1015 (2d ed. 1904). At that time, it comprised some 3.5 million acres. Over the years, the Reservation expanded. As of 1983, it comprised over 15 million acres. The Reservation is now situated in portions of three states: northwest New Mexico, northeast Arizona, and southeast Utah.
Since the Reservation covers a large area, its topography is quite diverse. For the most part, it is located on the southern end of the Colorado Plateau. The region is generally flat, with inclusions of tilted rocky plains interrupted by canyons, buttes and mesas. The elevation of the area is from 4,500 feet mean sea level (m.s.l.) in the lower alluvial valleys of the San Juan and Little Colorado Rivers to over 9,000 feet m.s.l. in the east central mountains, the most dominant topographic features on the Reservation. Other mountain masses on the Reservation are: Navajo Mountain, Black Mesa, Carrizo Mountains, and Segi Mesa. Extremes in elevation are 2,800 feet m.s.l. at the mouth of the Little Colorado River and 10,416 feet m.s.l. at Navajo Mountain. The climate is normally arid. Temperature extremes range from -20° Fahrenheit during the winters to 100° Fahrenheit in the summers. Forty percent of the annual precipitation of at least 14 inches occurs in July, August and September. Snow blankets the forest area in winter. In accordance with elevation and climate, the vegetation on the Reservation tends to be variable in composition.
The Navajo commercial forest is situated in the east central portion of the Reservation, and is located within the counties of Apache in Arizona, and McKinley and San Juan in New Mexico. Because of its physiographical location on the Reservation, the forest receives greater amounts of precipitation than the rest of the Reservation. The forest area contains more perennial surface water than any other area on the Reservation, except for the San Juan River area. In 1983, the Navajo commercial forest covered about 690,498 acres, consisting of some 152,945 acres of non-commercial lands (pinyon, juniper, oak, rock, grass, water and brush), 31,507 acres of inaccessible areas (slopes greater than 40 percent), and about 498,897 acres of commercial timber-lands. The above figures were taken from the 1983 History Of The Navajo Commercial Forest by the Navajo Forestry Department.
The extent of the Navajo “commercial” forest at times material to these cases is disputed. 3 Plaintiff argues that the Navajo commercial forest should be deemed to be 450,000 acres for litigation purposes. However, the commercial acreage of the forest was viewed differently over time. In 1910, for example, the commercial forest was estimated to encompass 255,500 acres as a result of a survey by a Department of Interior District Forester. Another survey prior to August 13, 1946 estimated the commercial forest to consist of 270,000 acres. Presently, the commercial forest is felt to comprise some 450,000 acres. Some timbered areas of the Reservation, e.g., the Chuska mountain area, were not considered commercial acreage in the early years because of the inability to harvest the timber commercially from this area.
From a topographic point of view, the Tribal commercial forest can be divided into three units. The first unit, the Defiance Plateau unit, is located some ten miles from the Arizona-New Mexico state line. *342 It is roughly 35 miles long and varies from six to twelve miles in width. The topography in this unit is rolling and flat, with rock outcrops and steep canyons occasionally interrupting the pattern along the perimeter. The east and west boundaries of this unit are bordered by steep escarpments. The southern end of this unit fades into the pinyon-juniper woodlands, approximately ten miles south of State Highway 264. The northern boundary of this unit ends at the dropoffs of Canyon de Chelly. The range in elevation on the Defiance Plateau unit is between 7,000 and 8,500 feet m.s.l., with an average elevation figure of 8,000 feet m.s.l.
The second unit, the Tsaile-Wheatfields area, starts northward from the Canyon de Chelly-Whiskey Creek association and ends just north of Tsaile Creek. The eastern boundary is the rim of the Lukachukai-Chuska mountains; the western edge is between the upper tributaries of Canyon de Muerto and Canyon de Chelly. The entire Tsaile-Wheatfields area is almostly exclusively located in Arizona’s Apache county; only the extreme eastern edges of the unit extend into New Mexico’s San Juan county. Topography of the unit is generally level, with a gradual slope from the Lukachukai-Chuska mountains westward into the broken hills and canyons of Canyon de Chelly’s tributaries. The range in elevation is from 7,000 feet to 8,000 feet above sea level; the average elevation is 7,500 feet.
The third unit, the Lukachukai-Chuska unit, is quite mountainous. The mountain range extends some 60 miles in a northwesterly direction paralleling the Arizona-New Mexico state line. Throughout the range, the width varies between five and ten miles. Starting from the midpoint between Fort Defiance, Arizona and Tohatchi, New Mexico, the Chuskas extend northward from McKinley County, New Mexico. Midway northward, the mountains pass partially into Apache County, Arizona and San Juan County, New Mexico. East from Tsaile, Arizona, the Chuskas transcend into its subordinate Tunicha mountains. To the north, the mountain range ends with the Lukachukai Mountains and Beautiful Mountain. As previously explained, the northwestern edge of the unit adjoins the Tsaile-Wheatfields unit along the rim of the Lukachukai-Chuska mountains. The remaining southwestern boundary of the unit is along the base of the Chuska mountains. The eastern forest boundary ends with the pinyon-juniper woodland. Throughout the Lukachukai-Chuska range, the summit occurs as an extending meadow averaging two (2) miles in width. Many canyons extend inward breaking the perimeter. From the eastern plateau rim, the mountain has a sharp precipitous dropoff into a bench that parallels the entire length of the unit. Eastward from the bench, the forest steadily declines into the pinyon-juniper slopes above the desert floor below. Dominant features on the Lukachukai-Chuska unit are Twin Buttes, Chuska Peak, Washington Pass, Roof Butte, and Beautiful Mountain. The Chuskas generally start at an elevation of 8,000 feet and end with the Lukachukai mountains where the elevation exceeds 9,000 feet; average elevation is 8,500 feet. The highest point on the unit is Roof Butte at 9,784 feet.
As of 1983, the gross timber volume within the operable timberlands was comprised of 94.9 percent ponderosa pine, 4.3 percent Douglas-fir and 0.8 percent aspen. Other species (Englemann spruce, blue spruce, and corkbark fir) occur in minute quantities and in inaccessible areas so that they have little impact on the overall forest composition and thus are considered as noncommercial timber species. As of 1983, the average net volume per acre, considering all timber species in the commercial forest, was 3,942 board feet, Scribner Rule. For ponderosa pine, the average net volume per acre was 2,740 board feet, Scribner Rule. Since ponderosa pine and Douglas-fir comprise the highest percentage of the total timber volume, they were managed the most as of 1983.
As of 1983, there were two main commercial markets for timber (ponderosa pine and Douglas-fir) harvested from the Tribal commercial forest. The primary commercial market for Tribal timber was the Navajo Forest Products Industries (NFPI), a *343 Tribal enterprise that from 1962 to 1982 annually harvested and processed from 25 to 48 million board feet of lumber, although in 1977 it did harvest some 54 million board feet of lumber. In 1980, NFPI harvested 26.6 million board feet of lumber, and in 1982, it harvested 34 million board feet of lumber. NFPI is located at Navajo, New Mexico and provides substantia] employment and revenue to the Navajo Reservation’s economy. All timber harvested by NFPI is paid for at current appraised commercial stumpage rates, with the revenue generated thereby paid to the Tribe.
The second commercial market for Navajo timber products is the pulp and paper mill operated by Southwest Forest Industries located at Snowflake, Arizona. NFPI’s mill residues, such as chips and slabs, are shipped by trucks to the Snowflake plant for processing.
As of 1983, no current market existed for commercial sized timber poles. Accordingly, pole cutting permits were issued to Navajo Indians for residential or personal uses such as hogans (Indian type homes), fences and posts. As of 1983, non-commercial cutting permits were also issued for firewood and fenceposts. All members of the Navajo Tribe are permitted free and unrestricted use of all dead and down firewood material for personal use. During the Christmas season, permits are also available for Christmas trees.
Today, the Navajo commercial forest additionally offers opportunities for a wide variety of recreation during both winter and summer, e.g., camping, hiking, fishing, boating, hunting, fuelwood gathering, and ice fishing. The commercial forest has on and about it many monuments, parks, campgrounds and picnic areas. Logging operations generate dust clouds about the roads in use, but this problem is deemed localized and minor. Conflicts between recreational use and timber management activities exist, but are deemed minimal. The transportation system on the forest is developed extensively, and most areas are therefore accessible during the non-winter months.
In addition to the Tribe’s industries related to its commercial forest, livestock grazing, especially sheep, was and is an . important aspect of the Navajo economy and way of life. It is believed that the Spaniards introduced sheep and other livestock to the Indians. Some feel that the Navajos obtained the lowly Mexican breeds of charro sheep through barter. Navajo livestock ownership became even more certain after 1680. The introduction of sheep profoundly changed the lives of the Navajo Indians, and thereafter they became full-time pastoralists with dependence on hunting, gathering and horticulture secondary matters with them. To the Navajo Indian, sheep were considered gifts of God. Sheep to them were a means of subsistence as a readily available source of food, clothing and wealth. Further, sheep were mobile. Since sheep were so highly valued by the Navajo Indians and conducive to the Navajo way of life, they quickly stratified the society into a hierarchy of prestige. With the ownership of sheep, the Navajo had a sense of physical and psychological well-being. In order to protect their flocks, the practice of “hogan-grazing” evolved in the early 1700’s, i.e., sheep were corralled nightly near residents to protect them from neighboring Indian tribes, Spaniards or others. The ever increasing number of Navajo Indians along with their flocks of sheep necessitated emigration. See History Of The Navajo Commercial Forest, supra, p. 17.
Ever since the Navajo Indians emigrated to areas now within the Reservation borders in the mid and late 1700’s, the Chuska Mountain range and its adjoining range lands have been used continuously and excessively for livestock grazing, principally sheep. The lowlands are grazed year round, while the upper regions of the mountains experience seasonal use. From early times, the commercial forest area was utilized for grazing purposes. Seasonal grazing patterns were established by the early 1800’s with the occupancy of the Chuska Mountains and related areas by the Navajos and their flocks. Thus began the *344 start of the longest grazing history on any part of the Reservation. In time, grazing became a way of life for the Navajos and their flocks on other parts of the Reservation. As of 1983, the majority of the acreage in the commercial forest was still being used as range land for some 42,000 Navajo livestock along with many wildlife species. Wildlife species such as porcupine, mouse, chipmunk and prairie dog pose problems in forest management, although on a smaller scale than livestock grazing. Because of excessive livestock numbers, the range area deteriorated to the extent that during the 1930’s, a Navajo livestock reduction program along with soil and water conservation programs were instituted. However, the problem of overgrazing still exists on the Reservation at the present time, although the problem has been alleviated somewhat by the introduction of the permit system based on land carrying capacities. Following World War II, grazing control measures were not favored by many Navajos, and at their insistence were reconsidered. Thereafter, pressure was applied to permit greater latitude for Tribal management in this regard. In April 1956, with the approval of the Secretary of Interior, the Navajo Tribal Council adopted Revised Grazing Regulations for reservation range management. From at least 1956 on, it is reasonable to conclude that grazing land management was under the control of the Navajo Tribal Council. From the standpoint of forestry, grazing within the Navajo commercial forest has been a problem for over one hundred years, and it continues to be a problem today. See History Of The Navajo Commercial Forest, supra, pp. 7, 9, 19. This problem and its history is discussed in detail infra in Part II, Subpart D of this opinion.
B
While legal title to the Navajo Indian Reservation was held by the United States in trust for the Navajo Tribe, the Tribe was the beneficial owner, in possession, of the Reservation at all times material herein. See Navajo Tribe v. United States, 176 Ct.Cl. 502, 550-51 , 364 F.2d 320 (1966). From the creation of the Reservation in 1868, the Tribe obtained the rights to the timber on Tribal Reservation lands. Under federal law, timber on Reservation land is owned by the United States for the benefit of the Tribe and cannot be harvested for sale without the consent of Congress. White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 138 , 100 S.Ct. 2578, 2580 , 65 L.Ed.2d 665 (1980). As beneficial owner of the land and the timber standing upon it, the Tribe was entitled to the proceeds of any timber sale subject to the plenary power of control by the United States to be exercised for the benefit and protection of the Indians. United States v. Algoma Lumber Co., 305 U.S. 415, 420 , 59 S.Ct. 267, 270 , 83 L.Ed. 260 (1939). The relationship between defendant and the Tribe is a special one, and from it springs special responsibilities where defendant has control and supervision over Tribal property. This special trust relationship and the responsibilities it creates have been expressly held to extend to Tribal timber as well as other Tribal property. It has been held that this trust relationship between defendant and the Tribe engenders a fiduciary duty on the part of the defendant to account for its management of the Tribe’s timber. Navajo Tribe v. United States, 224 Ct.Cl. 171, 187 , 624 F.2d 981, 989 (1980). This holding was reinforced by the Supreme Court in United States v. Mitchell (Mitchell II), 463 U.S. 206 , 103 S.Ct. 2961 , 77 L.Ed.2d 580 (1983), aff'g, 229 Ct.Cl. 9 , 664 F.2d 265 (1981). The Court of Claims in Mitchell observed that the standard by which the Department of the Interior’s actions were to be judicially tested was “not the court’s or plaintiff’s own view of the preferable conduct, but the normal standard for government fiduciaries—were their actions in good faith and within the realm of their acceptable discretion, or were they arbitrary, capricious, in abuse of discretion, or contrary to law?” 229 Ct.Cl. at 14 , 664 F.2d at 224 .
Having determined that defendant acted as a fiduciary in its exercise of supervision and control over the Tribe’s forest property *345 only states one factor in the judgmental equation facing the court in these cases. The court must now deal with each of the categories of claims presented by plaintiff to determine if defendant did, in fact, breach the fiduciary obligations it owed the Tribe in the management of the Tribal timberlands. In considering defendant’s fiduciary obligations in this regard, the caveats of the Court of Claims in Navajo Tribe v. United States, supra, 224 Ct.Cl. at 185 , 624 F.2d at 988 are deemed appropriate. The Court of Claims, in noting that “[t]he general law of fiduciary relationship can be utilized to the extent appropriate,” stated:
This does not mean, however, that all the rules governing the relationship between private fiduciaries and their beneficiaries and accountings between them necessarily apply in full vigor in an accounting claim by an Indian tribe against the United States. We refer to such rules as the principle that once a breach of fiduciary duty is merely charged (without any supporting material), the beneficiary is entitled to recover unless the fiduciary affirmatively establishes that it properly discharged its trust, and the theory that failure to render the precise form of accounting required may be sufficient, in and of itself, to establish liability. In each situation, the precise scope of the fiduciary obligation of the United States and any liability for breach of that obligation must be determined in light of the relationships between the Government and the particular tribe.
Plaintiff presented the testimony of eight witnesses. The following individuals were its primary expert witnesses. Dr. Charles 0. Minor (Minor), who was plaintiff’s main expert witness on forest management, received a Doctor of Forestry degree in Forest Management from Duke University in 1958. He was the founder and former dean of the Northern Arizona School of Forestry at Flagstaff. The School of Forestry was founded around 1959, and in connection therewith, Minor first visited the Navajo Reservation to encourage and welcome Navajo students to enroll in the School. Thereafter, a number of Navajo students did graduate from the School, some of whom are now employed by the Navajo Forest Products Industry and one of whom was managing the sawmill at time of trial. Minor had over 25 years of academic experience relative to forestry matters. He developed site index curves for the measurement of productivity of ponderosa pine forests in the Southwest that were published by the Rocky Mountain Forest and Range Experiment Station in 1964 and which were thereafter utilized by the U.S. Forest Service throughout its Region Three. He may properly be deemed a most qualified expert on site index curves. Minor, at time of trial, was also knowledgeable about the National Forests and the Indian Forests in Arizona and New Mexico. Dr. Jean Mater (J. Mater), who received a Doctor’s degree in Forest Products from Oregon State University in 1955, and her husband Milton Mater (M. Mater), were the plaintiff’s chief expert witnesses on sawmill design, utilization and management. M. Mater was experienced in the design of sawmill machinery and the mechanization of forest products. He was retained by the Navajo Forest Products Industry (NFPI) in 1978 to do a sawmill feasibility study. Both Maters were principals in the firm of Mater Engineering, Ltd., which engaged, inter alia, in consulting work for commercial sawmills throughout the United States and in foreign countries. Dr. Don D. Dwyer (Dwyer), who received his Doctor’s degree in Range Management from Texas A & M University in 1960, was plaintiff’s main expert witness on the Regeneration claim. For the 13 years prior to trial, he had been a professor and head of the Range Science Department at Utah State University at Logan, Utah. His study of range problems on the Navajo Reservation began in 1959 and has continued on a consulting basis during his employment at New Mexico State and Utah State Universities. Paul J. Gillis (Gillis), a Certified Public Accountant in the District of Columbia and Maryland, was plaintiff’s expert witness on the Unaccounted for Sales Invoices claim. Gillis has served as an accounting *346 witness in numerous Indian cases over the course of some 20 years.
Defendant presented the testimony of seven witnesses. Dr. Robert P. Latham (Latham), who received a Doctor’s degree in Resource Economics from the University of Minnesota, was licensed as a professional forester in California and Oklahoma. He was defendant’s main expert witness on forest management. Latham worked for the U.S. Forest Service in the late 1950’s and 1960’s, during which period he worked for a time on the Coconino National Forest in Arizona. In 1972, Latham was a principal in the forestry consulting firm of Hammon, Jensen, Wallen & Associates of California where he was responsible for resource inventories, economic studies and feasibility analyses. In 1977, Latham served on the faculty of Oklahoma State University as an associate professor where he taught courses dealing with the economics and management of timber. In 1982, Latham began to devote full time to a consulting firm he had established earlier. Latham had over 25 years of experience in the forest management area, although much of his work was outside the Arizona-New Mexico area. Latham began his study of the Navajo Reservation in 1982 in preparation for his testimony. James S. Plaxico (Plaxico), who received a Doctor’s degree in Economics and Agricultural Economics, was one of defendant’s expert witness on regeneration. Plaxico was not a range scientist, but rather a range economist. Plaxico taught at Virginia State and Oklahoma State Universities and had over 25 years of academic experience as an agricultural economist with emphasis on the financial side of grazing, etc. Plaxico lacked experience in the Arizona-New Mexico area and was not familiar with the Navajo Reservation until he became connected with this litigation. He was a professor at Oklahoma State University at time of trial teaching agricultural economics. Defendant also offered George L. Cullum (Cullum) as an expert witness on regeneration. Cullum retired in September 1982 from the U.S. Forest Service where he had some 28 years of experience in developing successful regeneration techniques on the Apache-Sitgreave National Forest. His background with the Forest Service on regeneration made him an eminently qualified expert on regeneration matters, a fact admitted by Minor, plaintiff’s main expert. Llewellyn S. Kazebee (Kazebee) was defendant’s expert witness on the sawmill claim. He was a project manager for a consulting engineering firm. He had a degree in industrial engineering. During the 10 years preceding the trial, Kazebee divided his time between some eight sawmill-related projects and other work not involving the sawmill industry. Kazebee had no sawmill experience before 1973, and prior to his working on this litigation in 1983, he had never worked in Arizona, New Mexico or on an Indian Reservation. Frank C. Sapienza (Sapienza), a certified public accountant, was defendant’s expert witness on the Unaccounted for Sales Invoices claim. He was employed as an accountant by the General Services Administration, Indian Trust Accounting Division for approximately 10 years prior to date of trial. Defendant offered as a fact witness E. Reese-man Fryer (Fryer), who was Superintendent of the Navajo Reservation from 1936 through 1941. Although in his 80’s at time of trial, his testimony was credible, his memory very good, his presentation articulate and his demeanor praiseworthy. Fryer was in a position to know, and he imparted his knowledge persuasively, about the Navajo psyche relative to the regeneration issue that centered on Reservation grazing, and about a host of other matters germane to some of the other claims.
The court must state that the damage considerations in this action have been rendered very difficult by the manner in which the cases were presented. Plaintiff, in an effort to maximize its recovery, oftentimes simply passed over objective evidence that tended to lessen the magnitude of its claim. Defendant, on the other hand, was content, for the most part, in merely denying plaintiff’s entitlement to any recovery, generally ignoring that evidence which dictated a re *347 covery for plaintiff to some extent. 4 These opposite extremes and rigid positions have placed the court in the position of making determinations on a conflicting, disputed and sometimes confusing record with little constructive help from the parties. Nonetheless, the court has undertaken this task with a determined purpose to be fair and just given the record it had to work with. Whatever shortcomings there may be in the court’s opinion are to be shared by counsel as well as under these circumstances.
The court also notes that in plaintiff’s Proposed Findings of Fact, and Brief in support thereof, plaintiff tended to denigrate the defendant’s witnesses, especially its experts, while, understandably, praising its own. The experts who testified on behalf of both parties at trial were all found qualified to express opinions about matters on which they were offered as expert witnesses.
As a general statement, however, the court was of the view that the experts, to a degree, favored the party that hired them. See Seminole Indians of Florida v. United States, 197 Ct.Cl. 350, 361 , 455 F.2d 539, 545 (1972) (Nichols, J., concurring) (“The expert’s opinion slants too much towards the litigation position of the side that employs him.”) Nevertheless, on balance, the experts for both sides were all deemed competent and knowledgeable in their respective fields. Although some had more or less experience, relative to the locale of the Reservation or other matters, than others in their field, this was not deemed overly significant from the standpoint of level of weight to be accorded their testimony because of the nature of the claims, the time frames involved and the hypothetical assumptions inherent in their calculations. Minor, plaintiff’s basic expert, testified that it was difficult to evaluate the losses claimed by plaintiff on its timber management and sawmill claims. While he felt his methods of evaluation were reasonable, he recognized that economists could reasonably disagree with him. The court is thus called upon to resolve issues with respect to which reasonable men can differ.
On balance, the court has not found the witnesses of either party to be lacking in credibility. However, the court does believe that plaintiff’s witnesses were inclined to be more passionate and less objective in the assertion of plaintiff’s claims, while defendant’s witnesses were inclined to be more dispassionate and somewhat more objective.
II.
Plaintiff has advanced seven categories of claims that it alleges flow directly from defendant’s mismanagement of the Tribal commercial timberlands.
Plaintiff’s first claim category is labeled “Failure To Cut.” There are four separate subclaims in this category: (1) Failure to Cut—Breach of Contract claim; (2) Loss Due to Undercutting claim; (3) Loss of Mortality claim; and (4) Loss of Growth claim. The second claim category is denoted “Unpaid Stumpage.” The third claim category is called “Logging Waste.” The fourth claim category is headed “Lack of Regeneration.” The fifth claim category is listed as “Sawmill Mismanagement”. The sixth claim category is stated as “Processing Overmature Timber.” The seventh and final claim category is set forth as “Unaccounted for Sales Invoices.” The court will now consider each of these claims, setting forth its findings of fact in narrative form appropriate to each claim and its conclusions of law.
A. Failure To Cut—Claim Period 1910—1962
As the court stated above, plaintiff’s Failure to Cut claim contains four sub-claims. None of these subclaims covers the entire period of 1910—1962, although each covers some portion of that period, *348 and all of the subclaims overlap. Plaintiff’s damage computations are somewhat unclear. Under subclaim 1, supra, plaintiff seeks to recover $1,013,044.40, plus interest (lost earnings) of $2,996,526.41, for a total claim of $4,009,570.81. Under sub-claim 2, supra, plaintiff seeks to recover $4,520,486.80, plus interest of $11,208,-400.49, for a total claim of $15,728,887.29. Plaintiff concedes that total recovery on this claim would obviate any recovery on subclaim 1, supra. Under subclaim 3, supra, plaintiff is seeking an additional $4,406,400. No interest computation was provided by plaintiff on this claim, indicating plaintiff does not seek interest thereon. Under subclaim 4, supra, plaintiff seeks to recover $2,247,750 without any interest being sought thereon. The total amount claimed by plaintiff under its Failure to Cut claim probably exceeds $23 million. Each of these four subclaims will be addressed separately below.
1. Failure to Cut—Breach of Contract (1928—1953)
As indicated above, plaintiff seeks a total of $4,009,570.81 on its Breach of Contract claim. As near as the court has been able to determine, that amount consists of the following elements. Primarily, plaintiff seeks the principal amount of $988,024.48, representing the value, as of 1933, of the timber sale contract that was not enforced. Plaintiff also seeks interest of $2,922,-576.41 on this amount. As a partial offset, plaintiff seeks $50,000 principal and $147,-900 interest on account of a performance bond issued in connection with the contract that defendant failed to enforce. Finally, plaintiff claims it is entitled to $25,000 principal and $73,950 interest relating to an extension payment promised by the contractor that defendant failed to collect. Defendant claims that its actions in this regard were reasonable and therefore denies plaintiff’s right to any recovery on this claim. For the reasons that follow, the court concludes plaintiff is entitled to $75,-000 on its Failure to Cut—Breach of Contract claim.
In reviewing plaintiff’s claim regarding defendant’s alleged failure to enforce a timber sale contract, it is first necessary to review the facts surrounding that contract. In 1928, the McGaffey Lumber Company of Albuquerque, New Mexico, contacted the Commissioner of Indian Affairs and applied to have the Navajo forest advertised for a large sale of timber. In expressing its interest in acquiring a contract to purchase plaintiff’s timber, the McGaffey Company indicated that it would be willing to construct a railroad spur into the forest.
Apparently in response to the McGaffey Company’s interest in an advertisement for sale of the Navajo timber, the Office of Indian Affairs prepared a report on the Defiance Plateau Timber Unit dated May 23, 1928. The report described the Defiance Plateau forest as being about 145,000 acres in area, a figure later revised downward to 110,000 acres, and carrying an estimated volume of 500,000,000 board feet of western yellow pine. The forest was said to be primarily composed of mature stands with generally very few trees in the 1 to 20 year age class. The report cited limited tree reproduction due to excessive livestock grazing to be discussed in more detail, infra. Given the limited reproduction, the report recommended that a maximum of 75 percent of the mature timber be cut to maintain at least minimum forest cover.
At least 75 percent of the trees on the Defiance Plateau were reported to be mature, but no decadence was found. However, due to the inferior site conditions, the trees were generally short, heavy bodied and limby, which indicated considerable defects. The quality of trees was generally quite low for yellow pine stands, but was comparable to similarly situated timber in the southwest.
The location of the trees was conducive to commercial harvest. The report concluded that the forest could be developed most economically by a railroad spur from Manuelito. This spur would run approximately 25 miles from the Santa Fe main line to the edge of the merchantable timber *349 near St. Michaels. The report anticipated no major problems in constructing the railroad spur. It found that the total cost of the job could be reasonably amortized during the harvest of the available volume. The only expensive feature of the railroad spur would come from the necessity of several spurs in the forest itself due to the limited volume of timber per acre. The use of trucks and tractors would somewhat limit the necessity of an overly extensive railroad network in the forest.
The report then appraised the value of the timber on the Defiance Plateau. The investment method of valuation arrived at a “Value of Stumpage, Log scale, on basis of eight percent overrun * * *” of $3.00 per thousand board feet (M.B.F.). 5 This value was commensurate with the price being received for similar quality timber in the southwest. The report noted that the contract form proposed by the McGaffey Company did contain provisions to allow for an increase in the price received for the stumpage to protect the interests of the Indians.
The report ultimately recommended that the timber on the Defiance Plateau Unit be placed on the market at a price of $3.00 per M.B.F. This recommendation was based on the maturity of the timber and the expression of interest by a local responsible lumber company.
Although the record is not clear on this point, apparently an advertisement was issued for the sale of the Defiance Plateau timber. As a result, on October 22, 1928, a contract was entered into between the Superintendent of the Southern Navajo Indian Agency and the McGaffey Lumber Company for the sale of about 500,000,000 board feet of timber within the Defiance Plateau Unit. The contract was supported by a bond in the amount of $50,000 with the American Employers’ Insurance Company as surety. The contract was approved by the Assistant Secretary of the Interior on December 5, 1928.
The McGaffey contract provided in pertinent part:
That the Superintendent, in consideration of the agreements by the Purchaser, agrees to sell to the Purchaser upon the terms and conditions herein stated and the Indian Service General Timber Sale Regulations approved April 10, 1920, by the Assistant Secretary of the Interior, which regulations are hereby made a part of this contract, all the merchantable dead timber, standing or fallen, and all the merchantable live timber marked or otherwise designated by the officer in charge for selective logging as required by the General Timber Sale Regulations, comprising trees approximately eighteen inches and larger in diameter at a point four and one-half feet from the ground and estimated to be five hundred million feet of western yellow pine (including so-called “bull pine”), on 145,000 acres of unallotted lands within a tract hereby designated the Defiance Plateau Timber Unit, and more particularly defined as follows: * * * 6
The contract provided that the purchaser (McGaffey Lumber Company) was to cut and remove all the timber covered by the contract prior to March 31, 1950. The schedule for such cutting was set out in pertinent part as follows:
*350 The Purchaser further agrees that he will, unless relieved by the Commissioner of Indian Affairs, cut and remove from some portion of the sale area, at least twenty-five million feet, board measure, log scale, prior to March 31, 1932, and not less than twenty-five million feet each twelve months thereafter until the contract is completed. The maximum amount cut during any twelve months shall not exceed 35,000,000 without written permission from the Commissioner of Indian Affairs.
The contract provided that until March 31, 1934, the stumpage rate would be $3.00 per M.B.F. For the following three-year period, the stumpage rate per M.B.F. could be adjusted upward based on a reappraisal by the Commissioner of Indian Affairs. The adjustment could not exceed 20 percent of the original purchase price ($3.00), and any and all of the increase could later be remitted to the purchaser “to meet unusual conditions which in the opinion of the commissioner make it impossible for the purchaser to realize a reasonable profit.” However, the price could never be reduced below the initial price at which the timber was purchased.
In addition to its $50,000 bond, the purchaser was obligated to make an initial cash deposit of $20,000 to insure that all stumpage payments that were due were paid in a timely manner. Additional deposits of $10,000 would be required to insure that the stumpage value of the timber cut and not paid for at any time did not exceed the cash deposits then on hand.
The record indicates that if the contract had been carried out in its entirety and the maximum stumpage price increases had been imposed, the sale would have produced some $2,200,000 in revenues for the Tribe. Even without increases in the initial stumpage rate ($3.00), the contracted-for cut would have returned an average minimum of $75,000 per year to the Tribe. Such a minimum return would amount to a total of $1,500,000 in income for the Tribe over the life of the contract.
On August 9, 1929, the McGaffey Lumber Company assigned its rights under the above timber contract to the Lutcher and Moore Lumber Company of Orange, Texas. For this assignment, the Lutcher and Moore Company paid the McGaffey Company $354,754. This amount included the $20,000 deposited by the McGaffey Company. The assignment stated in pertinent part:
And the said party of the second part [Lutcher and Moore Lumber Company], by the acceptance of this assignment, assumes, promises and agrees to keep, observe and perform all of the covenants, promises, agreements and conditions set forth in said timber contract which by the terms of said timber contract are made encumbent upon said party of the first part [McGaffey Lumber Company] therein to be kept, observed and performed, and that it will keep the said party of the first part, its successors and assigns, indemnified against all actions, claims and demands by reason of the non-observance of said contract, or otherwise in relation thereto.
Along with the assignment, the Lutcher and Moore Lumber Company submitted a bond dated August 17, 1929, for $50,000 with itself as principal and the Fidelity & Deposit Company of Maryland as surety. Said bond guaranteed the execution of the contract during the 5 years following the approval of the assignment by the Department of the Interior with subsequent bonds to be provided, as required, after that 5-year period. The assignment was approved by the Assistant Secretary of the Department of the Interior on August 20, 1929.
At the time the assignment was made, the McGaffey Company had not constructed a mill, begun a railroad spur, or harvested any timber. However, soon after the assignment the Lutcher and Moore Company started to acquire land for a planing mill near Gallup and began work on the railroad spur into the Defiance Plateau region. Nevertheless, it did not harvest any timber in 1929.
*351 In 1930, the prices for all lumber products dropped drastically, and it was evident that severe overproduction of lumber was occurring nationwide. As a result of the Depression and its impact on the lumber industry, Lutcher and Moore requested that it be given an extension of time before it was required to produce the minimum cut set out in the contract (25,000,000 board feet prior to March 31, 1932). Initially, the government stated that it would approve a one-year extension if the Lutcher and Moore Company paid $75,000. On May 8, 1931, however, the Lutcher and Moore Company and defendant entered into an extension agreement giving Lutcher and Moore an additional year (March 31, 1933 instead of March 31, 1932) to meet its initial cutting obligations. In exchange for this extension, Lutcher and Moore assumed all fire risk for that extended period and agreed to pay $62,500 to defendant for the benefit of the Tribe in the following installments: $12,500 prior to March 31, 1931, $25,000 on or before March 31, 1933. Plaintiffs surety agreed to this extension on May 27, 1931. The first $12,500 was paid by the company.
Apparently, the Lutcher and Moore Company continued to feel the effects of the Depression and was struggling financially. Due to these financial hardships, F.M. Far-well, Vice President of Lutcher and Moore, wrote to Mr. John Hunter, Superintendent of the Southern Navajo Agency, requesting that several modifications be made in the original timber sales contract. These requests were forwarded to the Department of the Interior, and the Commissioner of Indian Affairs ruled on the various requested changes.
First he rejected Lutcher and Moore’s request to reduce the stumpage rate per M.B.F. to $2.00 in view of a December 17, 1931 Comptroller General decision that denied such modifications without express statutory authority. Second, the Commissioner approved the company’s request that defendant waive the $25,000 payment due on March 31, 1932, for the contract extension. He cited the extreme depression of the lumber industry to support this waiver. 7 However, the Commissioner did not waive the requirement that Lutcher and Moore pay $25,000 on March 31, 1933 for the one-year extension. Third, Lutcher and Moore requested that the minimum annual cut be reduced from 25,000,000 board feet to 7,500,000 board feet. The Commissioner ruled that Lutcher and Moore would only be required to cut 10,000,000 board feet for the first 5 years of the contract beginning April 1, 1932. This partial waiver was conditioned upon a requirement that $32,500 previously paid by Lutcher and Moore as a deposit with the assignment from the McGaffey Company ($20,000) and as an advance payment for the contract extension ($12,500) would not be credited against stumpage cut prior to April 1, 1937. The Commissioner also ruled on three other requested modifications, not relevant to this claim.
Lutcher and Moore failed to make the $25,000 payment required to be made on March 31, 1933. Instead, on March 21, 1933, it wrote to the Commissioner of Indian Affairs requesting a further extension for the beginning of operations on the Defiance Plateau Unit and asking that the $25,-000 extension payment, due on March 31, 1933, be waived.
On May 23, 1933, John Collier, Commissioner of Indian Affairs, responded to Lutcher and Moore’s requests of its March 21, 1933 letter. Due to the serious conditions confronting the lumber industry and *352 despite the Navajo Indians’ need for funds derived from their timber, the Commissioner waived the requirement that Lutcher and Moore cut 10,000,000 board feet by March 31, 1933, but required the company still to cut 50,000,000 board feet by April 1, 1937. He also waived the requirement that Lutcher and Moore pay the $25,000 amount due on March 31, 1933. All of these extensions were again approved by the lumber company’s surety.
On August 8, 1933, the Acting Solicitor General, Charles Fahy (Fahy), wrote a letter to the Secretary of the Interior expressing his legal opinion regarding modifications attempted to have been made to timber contracts on Indian lands since the passage of the Act of March 4, 1933. Fahy pointed out that the timber contracts were entered into under the authority of the Act of June 25, 1910, 36 Stat. 855 -857. That act provided in pertinent part:
Sec. 7. That the mature living and dead and down timber on unallotted lands of any Indian reservation may be sold under regulations to be prescribed by the Secretary of the Interior, and the proceeds from such sales shall be used for the benefit of the Indians of the reservation in such manner as he may direct * * *.
Congress subsequently passed the Act of March 4, 1933, 47 Stat. 1568 . That act provided in pertinent part:
That the Secretary of the Interior, with the consent of the Indians involved, expressed through a regularly called general council, and of the purchasers, is hereby authorized and directed to modify the terms of now existing and uncompleted contracts of sale of Indian tribal timber: * * * [Emphasis added.]
This act was apparently passed to permit modifications to timber sale contracts that were necessitated by the economic conditions of that time period. As part of his August 8, 1933 opinion letter, Fahy expressed his views regarding the modifications to the Lutcher and Moore contract entered into after the passage of the March 4, 1933 Act.
Regarding the post-March 4, 1933 modifications to the timber contract at issue, Fahy stated:
On May 23, 1933, the Lutcher & Moore Lumber Company was relieved of the requirement that it cut 10 million feet of timber in the year ending March 31, 1933, and was relieved of making a payment of $25,000 due on or before March 31,1933. The original contract called for certain payments based primarily upon the interrelation of stumpage prices with cutting requirements, each of those elements being, to certain extents, variables within the discretion of the Commissioner. Those clauses, however, have been superseded in a certain degree by those of the supplemental agreement of May 8, 1931. That agreement became, and is, a part of the working contract. Under its provisions an extension of time for cutting was allowed to the purchaser and $62,500 was to be paid in three installments by the purchaser, namely: $12,500 prior to March 31, 1931; $25,000 on or before March 31,1932; and $25,000 on or before March 31, 1933.
By letter dated February 18, 1932, the payment of the $25,000 due on March 31, 1932, was waived. It is to be noted that this waiver expressly stipulated:
“This action will not affect the requirement that $25,000 be paid on or before March 31, 1933.”
Such was the status of the contract on March 4, 1933. It called for certain nutting of timber and the $25,000 payment under the supplemental agreement of May 8, 1931. It was those requirements which the attempted modification of May 23, 1933, sought to affect. The attempted modification, then, is a modification of the contract itself and is within the purview of the act of March 4, 1933. Nor is the modification made under the valid waiver of February 18, 1932, for that waiver expressly excluded the 1933 payment from its application. Consequently I am of opinion that the release from the payment due March 31, 1933, and from *353 the cutting requirement as contained in the office letter of May 23, 1933, is subject to the act of March 4, 1933, and is invalid for lack of consent of the Indians.
Based on this opinion, the Commissioner of Indian Affairs advised Lutcher and Moore that the order of May 23, 1933 was revoked because the nullifications were deemed invalid by the Department of the Interior due to a lack of consent to said modifications by the Navajo Tribal Council.
In response to this revocation of the modifications and the potential for being found in breach of its contract, Lutcher and Moore wrote a letter to Senator Bronson M. Cutting. The October 14, 1933 letter indicated the lumber company’s desire to begin harvesting the timber as soon as business conditions permitted. It pointed out the necessity for cutting the timber at the earliest possible time and claimed that “there is no other company with the means and organization which can cut it and pay for it at as early date as can the Lutcher and Moore Lumber Company.” It emphasized that the delay in commencing operations was only caused by market conditions, and Lutcher and Moore claimed that it had a moral right to cut the timber.
Sometime in late October 1933, Lutcher and Moore submitted a request to the Navajo Tribal Council that it consent to its proposed extension to perform the terms of the contract. It pointed out the economic hard times it and the lumber industry in general were enduring and asked the council not to cancel the contract because of circumstances beyond the company’s control. Lutcher and Moore requested that the Navajo Tribal Council consent to the contract modifications needed by the company or, if the council decided to cancel the contract, the company asked the council to pass a resolution requesting that Congress refund Lutcher and Moore the $475,000 it had already invested due to the timber contract. The lumber company also suggested, if consent was withheld, that the council consider utilizing portable sawmills capable of producing 20,000,000 to 24,000,-000 board feet of lumber annually. Lutcher and Moore offered to enter into a contract with the Indians to provide such mills along with the necessary management to run the mills. The lumber company would provide the equipment and services at a fixed cost per M.B.F., but the business would be owned by the Indians. The Navajo Tribal Council rejected both Lutcher and Moore’s request for consent to the contract modifications and its suggestion that it supply the Tribe with portable sawmills at a special session meeting held on November 1, 1933 to be discussed infra.
On October 23, 1933, the Department of Interior, Solicitor, informed the Commissioner of Indian Affairs that Lutcher and Moore had breached the timber contract at issue. The Solicitor concluded that the breach occurred on April 1, 1933 when the lumber company failed to pay the $25,000 installment or harvest the required 10,000,-000 board feet by March 31, 1933. The Solicitor stated that, as soon as notice of revocation was given to the lumber company, the government could arrange a new timber sale contract, or the Indians were free to set up their own logging operation.
The Solicitor pointed out in revoking the contract, because Lutcher and Moore was in breach, that the Indians were entitled to retain the $32,500 already deposited by the lumber company. He also set out the proper measure of damages if a breach of contract action were pursued by the Indians. He stated that the damages would include the following:
As to that timber which should have been cut by the time of breach, the difference between the contract price of that timber and its market value at the time of breach; as to that timber required by the contract to be cut at times subsequent to the date of breach, the difference between the contract price of that timber and its market value as of the time set for performance * * *. Since most of the timber, according to the contract, would have been cut subsequent to the date of breach, the market value of the timber would be most pertinent in determining the advisability of *354 suing for damages. If the market value is now or will be in the near future close to the contract price, then suit would not be worthwhile.
The Solicitor also pointed out in his memorandum that the government could continue to deal with Lutcher and Moore under the existing contract.
In addition to the Solicitor’s views regarding a potential suit for damages, further support for finding Lutcher and Moore liable for damages resulting from its failure to comply with the terms of the contract can be found in the “General Timber Sale Regulations” that were made a part of the original contract by reference. Section 52 of those regulations provided in pertinent part:
Persistent failure to comply with any one of the requirements of the contract or regulations after written notice addressed to the purchaser by the superintendent or the officer in charge will be ground for revocation by the officer approving the contract of all rights of the purchaser under this and other contracts and the forfeiture of his bond and of all moneys paid, and the purchaser will be liable for all damage resulting from his breach of contract.
Section 56 of the same regulations stated:
Failure of the purchaser to complete his contract or to log promptly an area damaged by fire, wind, insects, or other causes, or the commission by him of any act for which the officer approving his contract shall declare the contract forfeited, will render the purchaser and his bondsmen liable for the depreciation in the value of the remaining timber on an estimate of value and quantity to be made under the direction of the officer approving this contract.
Upon learning that Lutcher and Moore was considered to be in breach of its timber contract, the Commissioner of Indian Affairs informed the Navajo Council of this ruling. The council then voted in favor of cancelling the contract. On December 7, 1933, the Commissioner by letter to the Secretary of the Interior recommended that the contract be declared forfeited. This letter was approved by the Assistant Secretary on January 4, 1934, but no action was taken by the Indian office or the Department of the Interior prior to the issuance of a formal legal opinion by the Solicitor, dated April 27, 1935. The company, however, was aware that forfeiture was being considered. After the Solicitor’s April 27,1935 opinion was issued, informal discussions between Lutcher and Moore and the Office of Indian Affairs were held. On June 12, 1935, the lumber company was given 30 days to show cause why the contract should not be declared forfeited. On July 26,1935, formal notice was issued to Lutcher and Moore that its timber contract was cancelled due to its “persistent failure to comply with the requirements of the contract.” The company was informed that all of its rights under the contract were revoked, that its bond and all moneys paid were declared forfeited, and that it would be held liable for all damages resulting from the breach.
At the November 1, 1933 special session meeting held by the Navajo Tribal Council during which the council voted to cancel the Lutcher and Moore contract and retain the $32,500 already deposited by the company into Tribal funds, the council also approved the following motion:
The question is that the Secretary of the Interior and the Commissioner of Indian Affairs be requested to proceed with the collection of the $25,000 due [as payment for contract extension] and also whatever damages that might have accrued in the breach of contract.
During the meeting, the Commissioner of Indian Affairs had recommended that the Tribe request that the Secretary of the Interior take appropriate action to recover the $25,000 and to determine whether a suit for recovery of additional damages was justified by the facts.
After the notice of cancellation was issued on July 26, 1935, the Commissioner of Indian Affairs clearly contemplated seeking court action as requested by the Tribal Council. Evidence of his feelings is found *355 in an August 28, 1935 memorandum to the Secretary of the Interior. He pointed out that the Lutcher and Moore Lumber Company had already paid to the Tribe a total of $34,406. 8 Regarding any court action to collect damages resulting from Lutcher and Moore’s breach, the Commissioner stated:
It should be made clear to the Navajos that the company is not held blameworthy; that, on the contrary, it is viewed with favor and esteem by the Department. A continued effort should be made to procure the capital for a modest (but not unpractically modest) lumbering and remanufacturing operation, and if this is obtained, the Lutcher and Moore Lumber Company can make a proposition to the Navajo tribe, whether to become sales agent for the tribe, or to become a management corporation for a stated term of years, charged under contract with the development of the project toward Indian management.
The company might desire to make some other kind of proposition, such as the loan of capital to the tribe, at a stated rate of interest and for other considerations such as those mentioned above.
Should negotiations go forward to the appropriate stage and receive Departmental approval, then any court action looking to the collection under the bond could be suspended.
Though the record indicates that some negotiations occurred between Lutcher and Moore and the Department of the Interior, it is apparent that serious consideration of such an arrangement was not being made. In a May 8, 1936 letter to the lumber company from the Secretary of the Interi- or, the Secretary confirmed that the contract had been cancelled and that the Government intended to retain for the Indians the moneys that Lutcher and Moore had already deposited. However, the Secretary stated:
2. It is not the present intention of the Government to sue The Lutcher and Moore Lumber Company on its bond for any damages which may have resulted due to the non-performance of the contract, but the right to do so in the event such action becomes necessary is reserved.
The Secretary also mentioned that the Department had not yet determined whether it would enter into a new contract with Lutcher and Moore. This would appear to be inconsistent with the view of the Commissioner of Indian Affairs, who stated in his August 28, 1935 memorandum that court action would be suspended if negotiations between the government and Lutcher and Moore went forward to the appropriate stage and received departmental approval.
Based on these facts, the court’s finding is that defendant did have a duty to bring legal action on behalf of plaintiff against Lutcher and Moore for its breach of contract. The facts surrounding this contract claim place it within the parameters of the fair and honorable dealings provision in 25 U.S.C. § 70a (1982) and defendant’s obligations as a fiduciary. See F. Cohen, Handbook of Federal Indian Law 567 (1982 ed.). Defendant awarded this timber sale contract on behalf of the Tribe without its consent. Defendant also modified the contract without the Tribe’s consent. When Lutcher and Moore was unable to perform, the Commissioner of Indian Affairs recommended that the Tribe cancel the contract, and the government would then take appropriate action to recover the damages resulting from the breach. The General Timber Sale Regulations (sections 52 and 56) clearly indicate that Lutcher and Moore would have been liable for such damages. Considering all of these facts, the court concludes that defendant had a fiduciary obligation to recover, on behalf of the Tribe, any damages resulting from the lumber company’s breach of contract; its failure so to act was *356 a breach of that fiduciary duty. See II A. Scott, Law of Trusts § 177 (1967).
The issue with which the court must now grapple is the proper measure of damages due plaintiff for this breach of fiduciary duty. This has proven to be a difficult task given the record in this case. There is no question that plaintiff is entitled to the $25,000 payment which Lutcher and Moore was obligated to make and defendant failed to collect. The court also concludes that plaintiff is entitled to the $50,000 represented by the bond taken out by the lumber company to insure faithful performance of all the terms of the contract. Section 52 of the General Timber Sale Regulations provided for the forfeiture of the company’s bond and all moneys paid and, in addition, provided that the company would be liable for all damages resulting from its breach of contract. The bond was penal in nature, and thus the lumber company was required to forfeit the entire amount in addition to paying any damages arising from its breach. Plaintiff concedes that any recovery on the basis of the $50,000 bond should be deducted from any damages due for breach of the timber contract. The court accepts this concession and will adjust any damage award accordingly. Presumably, plaintiff’s concession in this regard is based on the rule that penal bonds are generally unenforceable. See C. McCormick, Law of Damages 601-03 (1935). As to the other damages involved in this claim, the more complex damage issue revolves around Lutcher and Moore’s failure to harvest the amount of timber specified in the contract.
The record indicates that Lutcher and Moore was in breach of the timber sale contract as of April 1, 1933. As of that time it had failed to make the $25,000 contract extension payment, discussed above; nor had it harvested the 10,000,000 board feet of timber as it was obligated to do as of 1933. Damages arising from Lutcher and Moore’s failure to cut the 10,000,000 board feet prior to the date of breach equal the contract price ($3.00 per M.B.F.) minus the market value at the time of the breach. See Annot., 44 A.L.R. 215 , 217-18 (1926). See also McCormick, Law of Damages, supra, at 588-91. Plaintiff, in its computation, utilizes this damage computation formula. This damage formula raises the issue as to the market value of plaintiff's timber at the time of the breach and thereafter.
Plaintiff contends that the stumpage value of its timber in 1933 was zero because of the poor economic conditions and limited markets available. Plaintiff reasons that these conditions would have rendered a sale of all of its stumpage impossible. The court recognizes the fact that the timber industry was in a state of serious economic distress in 1933. However, the testimony cited by plaintiff referred to the sale of all of the stumpage on the Reservation. The court is only concerned with the value of the 10,000,000 board feet on the date of the breach, April 1, 1933.
Although that time period was economically grim, the court finds, on this record, that the market could have absorbed this 10,000,000 board feet. However, the court also finds that the market value most probably was less than the $3.00 per M.B.F. contract price. While determination of what an actual stumpage market price should have been at that time is difficult on this record, the court finds it reasonable to utilize a $2.00 per M.B.F. figure based on the totality of the record. The record indicates that stumpage rates of $1.50 to $3.00 were being applied to the timber harvested from the Navajo forest in the early 1930’s. The $3.00 rate, however, was applied primarily to smaller sales, although the court does note that plaintiff’s expert utilized a $3.00 figure throughout the 1930’s damage calculations. It is also noted that Lutcher and Moore in October 1931 sought to reduce the contract stumpage rate from $3.00 per M.B.F. to $2.00 per M.B.F., indicating the market would, in its view, support such a stumpage figure for 10 million board feet. Lutcher and Moore, like the rest of the industry, was experiencing hard times during the height of the Depression in the early 1930’s and its willingness to continue the contract with a $2.00 per M.B.F. figure *357 instead of the $3.00 per M.B.F. figure strongly suggests that the $2.00 figure was a viable figure. As indicated previously, this request was turned down. The court finds it reasonable, on this record, to use the $2.00 per M.B.F. figure as the stumpage market value on April 1, 1933.
Utilizing this $2.00 figure, the court finds that plaintiff is entitled to $1.00 ($3.00 contract price minus $2.00 stumpage market value) per M.B.F. or $10,000 for the lumber company’s failure to cut prior to the date of breach, i.e., April 1, 1933.
The court must next consider the damages arising from Lutcher and Moore’s failure to harvest any timber after the date of breach, i.e., April 1, 1933. The court concludes that the breach subsequent to April 1, 1933, should be deemed to be an anticipatory breach. See United States v. Harris, 100 F.2d 268, 277 (9th Cir.1938).
Plaintiff argues that a market value of zero for stumpage as of April 1, 1933 should be utilized to calculate the damages arising from Lutcher and Moore’s breach of its contractual obligation to harvest a specified amount of timber over the remaining life of the contract. In support of this argument plaintiff cites In re Marshall’s Garage, Inc., 63 F.2d 759 (2d Cir.1933). In that case the lessee, Marshall’s Garage, Inc., was adjudicated an involuntary bankrupt. The lessor brought suit, in part, on the lessee’s anticipatory breach of a contract to purchase leased land at the termination of the lease. The court first concluded that the lessee’s bankruptcy was an anticipatory breach. Id. at 762 . The court then addressed the issue of damages.
Regarding damages resulting from an anticipatory breach, the Second Circuit stated:
The fact that an anticipatory repudiation is a breach of contract does not cause the repudiated promise to be treated as if it were a promise to render performance at the date of the repudiation. * * * In the Contracts Restatement, last cited, it is explained (pages 548, 549) that the rules for determining the damages recoverable for an anticipatory breach are the same as in the case of a breach at the time fixed for performance, and if trial is reached before the time fixed for performance, then the value of the promised performance and the extent of the future harm must be reached by prediction. In the case at bar the damages which the lessor vendor would suffer from nonperformance by the lessee vendee at the appointed time is the difference between the market value of her land on October 9, 1936 (when she had contracted to convey it, but would retain it), and the purchase price she was to receive under the contract. [Id. at 762-63] [citations omitted].
The court then went on to find that the market value of the leased land had been proven as of the date of trial (January 1930) and since there was no method to forecast the value of the land in the future (October 9, 1936, the proposed date of sale) the court accepted the value at the date of trial.
Plaintiff agrees that its damages should reflect the difference between the contract price ($3.00 per M.B.F.) and the market value of the stumpage. Plaintiff argues that a breach of contract trial could have taken place on April 1, 1933 and, based on In re Marshall’s Garage, Inc., supra, that the market value of the timber on the Reservation as of that date should be utilized to calculate the damages arising from Lutcher and Moore’s anticipatory breach. As indicated above, plaintiff argues that because of market conditions, the value of the stumpage as of April 1, 1933 should be deemed to be zero. Thus, plaintiff maintains that it is entitled to recover damages of $3.00 per M.B.F. ($3.00 contract price minus zero market value). Utilizing the $3.00 per M.B.F. figure and the stumpage that should have been cut under the contract until it expired in 1953, plaintiff computes $988,024.48 as its final contract damage figure. Plaintiff arrives at this figure by concluding it would have received $75,-000 during each year of the contract, representing $3.00 times a cut of 25 million board feet per year (average annual cut *358 derived from dividing the total contract required cut of 500 million board feet by the number of years (20) of the contract). Multiplying $75,000 by 20 years equals $1,500,000, which plaintiff asserts it would have received if the contract had been performed. Plaintiff determined the 1933 value of these payments, utilizing a 4 percent discount rate and taking into consideration the $32,500 deposited by Lutcher and Moore, to be $988,024.48. Plaintiff computed interest on this amount up to January 1, 1984 of $2,922,576.41. Thus, the claim under subclaim 1 is $3,910,600.
If a $2.00 per M.B.F. stumpage market value (as of date of breach) were utilized, the 1933 value of the contract would be approximately $647,849.63 and the diminution in its value, ie., the measure of damages, about $340,174.85 ($988,024.48-647,-849.63). At best, this damage figure is much more reasonable than plaintiffs $988,024.48 figure.
Plaintiffs zero market value position ignores the substance of the ruling in the very case relied on by it. The court, in In re Marshall’s Garage, Inc., supra, stated that the proper measure of damages in the case of an anticipatory breach is the difference between the market value of property on the date of sale, ie., date of performance, and the contract price.
Id., 63 F.2d 762 -63. In that case, the problem was that the trial preceded the date of sale by over 6 years, thus making the prediction of value as of the date of performance difficult. However, in the case at bar, the actual trial occurred long after performance, ie., the harvesting of plaintiffs timber, was due, and there is, therefore, no reason not to use the value of the performance at the date it was due to be rendered. “If the time for performance comes due before the trial, then the value of performance * * * should be taken as it was at the time when performance came due, and not at the time of the repudiation in advance.” McCormick, supra, at 591 (citing Roehm v. Horst, 178 U.S. 1, 20 , 20 S.Ct. 780, 787 , 44 L.Ed. 953 (1900)). See also 5A. Corbin, Corbin on Contracts § 1053, pp. 310-13 (1964). This appears to be the generally preferred rule (McCormick, supra, at 591), and one that the court views as more accurately reflecting the damages incurred. Following this general rule, the court rejects plaintiffs position regarding damages arising from the lumber company’s anticipatory breach.
Having rejected plaintiff’s damage computation, the court believes the following damage computation reasonably comports with case law and the record in this case relative to the damages flowing from the anticipatory breach of contract by Lutcher and Moore. The record in this case describes the dire economic situation in which lumber companies found themselves during the 1930’s, but it fails to set out any specific market values for stump-age during that time period. The court has already concluded that $2.00 per M.B.F. was a reasonable valuation figure for April 1, 1933. Although hard times continued after that date, 1933 appeared to be a very low point economically for the timber industry. The court finds it reasonable to conclude, however, that a value of $2.00 per M.B.F. represents a fair valuation of plaintiff’s timber up until, at the latest, April 1, 1937. Lutcher and Moore was obligated to have harvested 50,000,000 board feet, by that date including the first 10.000. 000 already addressed. That leaves 40.000. 000 board feet that the company was required to harvest by April 1, 1937. Utilizing $2.00 per M.B.F. as the market value and $3.00 per M.B.F. as the contract price results in $40,000 in damages that plaintiff is entitled to receive due to Lutcher and Moore’s failure to cut 40,000,000 board feet from April 1, 1933 until April 1, 1937. Adding to this $40,000 figure for past breach damages the sum of $10,000, previously discussed, for pre-breach damages results in total damages for the period 1929-1937 of $50,000.
Regarding the lumber company’s failure to cut after April 1, 1937, the court finds that plaintiff is entitled to no additional damages. The record indicates that as the national economy gradually began to recov *359 er, the timber industry did so as well. The record indicates that demand began to increase and prices began to rise gradually after the mid-1930’s. The court finds it entirely reasonable to conclude that as of mid-1937 the market value of plaintiff’s stumpage equalled or exceeded the $3.00 per M.B.F. contract price. At that point, under the damage computation formula utilized by plaintiff, plaintiff is entitled to no further damages to make it whole. 9
The total contractual damages resulting from Lutcher and Moore’s failure to cut is therefore $50,000. However, from this amount must be subtracted the $20,000 (see supra note 7) the lumber company deposited to insure future stumpage payments. Plaintiff concedes that such an adjustment to the damages must be made. However, plaintiff subtracted $32,500 from the damages it felt it was entitled to, but the court disagrees with this figure. A portion of the $32,500 ($12,500) was an initial payment for the contract extension and thus not a deposit. The other $20,000, however, must be subtracted from the damages awarded, leaving a total net award of $30,-000. See McCormick, supra, at 614-16.
The court accordingly concludes that plaintiff is entitled to $25,000 representing the uncollected contract extension payment and $50,000 from the uncollected bond. The $30,000 in damages resulting from Lutcher and Moore’s breach of its obligation to harvest the specified amounts of timber is reduced to zero because of plaintiff’s recovery of the entire $50,000 bond. This makes plaintiff’s total recovery on its contract claim $75,000.
It is arguable that plaintiff's entire recovery on this contract claim should be $55,000, i.e., its actual damages ($25,000 plus $30,000), as opposed to the $75,000 the court is awarding to plaintiff on this contract claim. This approach would reject the validity and legal applicability of the penal bond of $50,000. However, the court finds it reasonable to conclude, given the magnitude of the contract involved, the uncertain nature of any damages that might have resulted from a failure to perform, and the court’s view that $50,000 was a fair and reasonable attempt to fix compensation for anticipated losses caused by a breach of the contract, that the $50,000 bond constituted liquidated damages and thus served as the limit on damages that plaintiff is entitled to recover as a result of the breach. See Priebe & Sons v. United States, 332 U.S. 407, 410-12 , 68 S.Ct. 123, 125-26 , 92 L.Ed. 32 (1947); JMNI, Inc. v. United States, 4 Cl.Ct. 310, 315 (1984); International Electronics Corp. v. United States, 227 Ct.Cl. 208, 228 , 646 F.2d 496, 508 (1981); Jennie-O Foods, Inc. v. United States, 217 Ct.Cl. 314, 337 , 580 F.2d 400, 414 (1978); Higgs v. United States, 212 Ct.Cl. 146, 151-52 , 546 F.2d 373, 376-77 (1976). The court concludes that the fact that the actual damages incurred were less than the $50,000 bond does not affect characterizing the bond as a liquidated damages provision. See Priebe & Sons v. United States, supra, 332 U.S. at 412 , 68 S.Ct. at 126 . The fact that the bond was labeled “penal” does not mean that it cannot be considered a liquidated damages provision. See McCormick, supra, 607. The court finds this to be a liquidated damages provision covering a breach of the lumber company’s obligation to perform the terms of its contract, but it was not intended to cover the contract extension payment of $25,000. The court therefore concludes that plaintiff is entitled to $75,-000 on its Failure to Cut—Breach of Contract claim. As set forth, infra, no interest is allowed on either of these elements.
2. Failure to Cut—Loss Due to Undercutting (1920-1962)
The next claim under the general category of defendant’s Failure to Cut is a claim for losses due to undercutting during the period of 1921-1962. Plaintiff’s damage claim covers the period from 1921,. when *360 plaintiff argues defendant should have conducted an annual timber harvest of 28 million board feet, to 1962, when the Tribe established a modern sawmill operation. Plaintiffs contention is that it lost a great deal of annual income because of defendant’s failure to harvest plaintiff’s forest in a manner consistent with contemporary technical knowledge and consistent with defendant’s practices on other southwest Indian reservations and nearby national forests. Plaintiff asserts that defendant was obligated based on its general fiduciary duty and applicable regulations to: (1) conduct an inventory of plaintiff’s forest; (2) establish an annual allowable cut 10 ; (3) harvest this allowable cut; and (4) develop markets for this harvest. Plaintiff maintains that if defendant had acted properly it would have established an allowable cut of 28 million board feet in 1920 and harvested at least that amount of timber from 1921 until 1962. If such a cutting schedule had been carried out, plaintiff asserts it would have received an additional $4,520,-486.80 in revenue. If that income had been deposited such that it was earning the proper interest, plaintiff contends it would have received a total of $11,208,400.49. Plaintiff seeks to recover this amount under its Loss Due to Undercutting claim.
In considering this claim, it is necessary to set out the facts in some detail to show defendant’s actions throughout the period in question.
As early as 1871, a report from the Commissioner of Indian Affairs to the Secretary of the Interior pointed out the interest a Navajo agent had in utilizing some of the timber found on the Navajo Reservation. The report stated:
There are large forests of good pine timber, which, if mills were furnished to saw, would supply the tribe with lumber for all time to come: and in this connection I would say that in case of putting up new buildings at this place and school houses in different parts of the reservation, it would be a matter of economy for the Government to furnish at least one saw-mill [sic], as lumber is by no means the least expensive article found in this country * * *.
After a delay of 6 years, the government finally provided a sawmill, and the Commissioner reported in 1880 that it had already cut 20,000 board feet.
This sawmill, intended only to supply lumber for the Indians’ own use, ran smoothly until 1883 when it fell into a state of disrepair, apparently due to the lack of a roof to protect it from the elements. The government failed to repair the mill, and its interest in continuing to run the mill waned. However, in 1886, the Commissioner’s Report again expressed an interest in acquiring a new sawmill to be used to produce the lumber and shingles needed by the agency. The report pointed out the substantial savings such a mill could produce, i.e., $5.00 per M.B.F. as opposed to $35.00 to $60.00 per M.B.F.^ for lumber purchased from off the Reservation. A new sawmill was supplied by the government sometime in 1889.
By 1891, the Navajo agent was recommending that the capacity of sawmill be increased. The record indicates that improvements may have been made, and through the 1890’s mill production was up to an approximate annual average of 150,-000 to 200,000 board feet. Such lumber was utilized entirely to meet the building needs of the Navajo Indians. That mill was destroyed by fire in 1905 and was promptly replaced by an improved mill. A second sawmill was also installed in 1906.
In 1909, Congress appropriated money to create the Branch of Forestry within the Indian Department. The Act of March 3, *361 1909, 35 Stat. 781 (1909 Act), provided funds:
To enable the Commissioner of Indian Affairs, under the direction of the Secretary of the Interior, to make investigations on Indian reservations and take measures for the purpose of preserving living and growing timber, and removing dead timber, standing or fallen; to advise the Indians as to the proper care of forests, and to conduct such timber operations and sales of timber as may be deemed advisable and provided for by law. * * *
In a letter dated May 16, 1910, Joe Worris, a Department of the Interior Inspector, probably in response to the 1909 Act, reported the existence of a great deal of “splendid pine timber” on the Navajo Reservation. Although he concluded that at that time no real profitable use, except for local purposes, could be made of the timber because of the lack of railroad facilities, he did feel it should be supervised in order to protect the forest. On January 5,1910, the Navajo Superintendent reported to the Commissioner of Indian Affairs that there was up to 2,000,000,000 board feet of timber on the Navajo Reservation. He also recommended that measures be taken to protect the forest, which served as a moisture conserver in the arid country of the Reservation. He recommended that five men be hired to act as forest guards for a portion of the year.
In 1910, G.A. Gutches (Gutches), a district forester, prepared a more detailed study of forest conditions on the Navajo Reservation. The report was dated December 12, 1910. In the report, Gutches discussed two types of yellow pine trees found on the reservation. The first type, which he labeled “Merchantable Yellow Pine,” was located in an area of 255,500 acres. He calculated that there were 850,-000,000 board feet of merchantable timber in this area with a healthy underground of Black Jack (young trees) to replace it when it was harvested. He recommended that the mature timber be sold as soon as a good market became available. He felt that this mature timber could remain a few years before much deterioration set in. He also reported that logging this “type” of yellow pine would not be difficult due to the fact that the ground was level. However, he did note that it would be necessary to construct a railroad to the timber (65 miles from Gallup'to the north end of the timber) in order to put it on the market at a reasonable rate. He also reported that a portion of this type of timber was inaccessible at that time.
The second type of yellow pine he labeled “Scattered Yellow Pine”. These pine trees were located in a 490,000 acre area, only 50 percent of which was covered by such trees. The remainder of this area was covered with open grassland, pinon, juniper, young poplar and scrub oak. Gutches reported that this 490,000 acre area was very rough mountainous country with small scattered merchantable areas. He felt that these topographical conditions would necessitate costly logging roads and the use of small mills. Some of the scattered area could not be considered merchantable. Gutches reported that there would be approximately 700,000,000 board feet of this yellow pine that should be sold as soon as a market became available.
One problem Gutches did note in his report was that the current reproduction rate for yellow pine trees on the Reservation was very poor. He attributed this problem to excessive sheep and goat grazing. The Indians apparently allowed their stock to enter the forest and graze on the pine saplings, thereby destroying most of them. Due to this problem, Gutches believed that grazing supervision would be necessary whenever large areas of yellow pine were cut over to ensure perpetuation of the forest. 11
*362 Prior to Gutches’ report, Congress passed an Act (1910 Act), which in pertinent part provided:
Sec. 7. That the mature living and dead and down timber on unallotted lands of any Indian reservation may be sold under regulations to be prescribed by the Secretary of the Interior, and the proceeds from such sales shall be used for the benefit of the Indians of the reservation in such manner as he may direct: * * * [Pub.L.No. 313 § 7, 36 Stat: 855, 857, 25 U.S.C. § 407 (1983)] 12
Through this Act, “Congress * * * sought to provide for harvesting timber ‘in such a manner as to conserve the interests of the people on the reservation, namely, the Indians.’ ” Mitchell II, supra, 463 U.S. at 220 , 103 S.Ct. at 2969 .
“From the outset, the Interior Department recognized its obligation to supervise the cutting of Indian timber.” Id. In June of 1911, the Secretary of the Interior issued regulations promulgated by the Office of Indian Affairs. These regulations provided in pertinent part:
Section 1. The superintendent of each reservation will be expected and required to do all in his power to secure a wise and advantageous use of forest resources. * * *
Section 2. * * * [Officers in charge of forests on Indian Reservations among other things] shall thoroughly familiarize themselves with all phases of forestry work * * * including a knowledge of boundaries, of the number of acres of timberland, of the total stand of timber, of the relative quantity, rapidity of growth, seeding qualities, character of reproduction, adaptability to location, etc. of the different species found. They must also acquaint themselves with the cost of logging and manufacture under different systems, local markets and the possibilities of developing the same, and all other practical and technical work which will aid the office in so managing the Indian forests as to obtain the greatest revenue for the Indians consistent with proper protection and improvement of the forests.
Section 3. Forest guards shall * * * patrol their districts to prevent and report trespass, fires, violations of agreements by those conducting timber operations, [and] the commission of waste by Indians or others * * *. Under the direction of the forest officer in charge, or the superintendent, [the forest guards] shall perform the duties of line riders and stock-men in exercising a proper control of grazing * * *.
Section 9. Large sales of timber will be made from unallotted lands as occasions arise. Such sales will receive special consideration, and a regular contract will be executed, accompanied by a bond when necessary. However, small operations should be allowed in order to meet the needs of the Indians or to satisfy the requirements of white persons living upon reservations or of settlers living in the vicinity of the same.
Where the amount of timber available is no greater than is needed by the Indians, no sales should be made. All expenses connected with the sale of timber from unallotted lands may be paid from the proceeds of the sale, but the net proceeds shall be deposited as “Indian Moneys— Proceeds of Labor. [Emphasis added.]
These regulations were promulgated pursuant to the 1910 Act and had the force and effect of law. See Barclay v. United States, 166 Ct.Cl. 421, 436 , 333 F.2d 847, 856 (1964).
Prior to the issuance of the above regulations, the Office of Indian Affairs had already begun to take action pursuant to the directives in the 1910 Act. In a letter dated February 23, 1911, the Assistant Commissioner brought the 1910 Act to the *363 attention of Peter Paquette (Paquette), Superintendent of the Navajo Indian School. Regarding the Act, the letter stated in pertinent part:
Indian timber lands should be so managed as to afford a constant revenue which may be utilized for the benefit of the Indians. If the tribal forest lands are of limited extent, large sales cannot be made, but by judicious management a small return may be derived from products which are ordinarily allowed to waste. If the tribal forests are extensive, sales of timber should be made whenever a market is available and the conditions of the forest will not be injured by cuttings. [Emphasis added.]
The letter concluded by urging Paquette to make every effort to protect the Navajo forest and to report to the Office of Indian Affairs when he felt timber should be sold and a market was available.
The court also notes that this February 23, 1911 letter mentioned a Comptroller ruling which concluded that “Indian Moneys, Proceeds of Labor” derived from sales under section 7 of the 1910 Act could be used to fund educational programs on the Reservation. The letter also cited a second Comptroller decision, dated September 15, 1910, which stated in pertinent part:
* * * the Secretary of Interior is authorized in his discretion to direct the use of “Indian Moneys, Proceeds of Labor” in the purchase of supplies or the payment of employees, which he thinks necessary for the benefit of the Indians on whose account the funds were collected and covered into the Treasury, where no appropriations are available for such purposes, and the Government is not bound by law, treaty or agreement to defray such expenses.
These references to Comptroller decisions indicates that a portion of the proceeds from any timber sales could be utilized to fund the timber operations themselves since the 1910 Act did not impose a duty on the government to fund the timber sales on the Reservation. 13
After the issuance of the 1911 regulations in June of 1911, the Office of Indian Affairs received a July 21,1911 letter from Mr. D.R. Johnson, presumably a lumberman, requesting information about a timber sale on the Navajo Reservation. At that juncture, the Assistant Commissioner responded in a July 29, 1911 letter that no large timber sales on the Navajo Reservation had been contemplated. He did state, however, that “if there is sufficient demand for a sale to make it probable that satisfactory prices can be received, steps will be taken to facilitate a sale.” At that point, he indicated that in case of a sale it would be an advertised sale under sealed bids.
In an October 1915 report, Otis Goodall, Supervisor of Indian Schools, expressed the need for better homes for the Indians and his hope that the government sawmill would produce the necessary material. He reported that it was advisable to utilize lumber from the Reservation given the fact that estimates submitted by the Forest Bureau indicated that there were 3 billion board feet of merchantable timber on the Reservation. Such an estimate indicates that at least a cursory inspection of the Navajo forest had taken place.
In response to a letter from the Office of Indian Affairs regarding supplying the Indians with homes built from lumber milled on the Reservation, Superintendent Paquette expressed his concerns about the inability of the present government sawmill to meet the Indians’ needs for materials for housing, schools and other Agency needs. It was clear at the time of Paquette’s February 16, 1916 letter that the primary concern on the Reservation at that time was meeting the needs of the Indians and not producing revenue from large timber sales.
An April 25, 1918 letter from the Assistant Commissioner indicates that a sale of not more than 250,000 board feet was ap *364 proved to a W.D. Lovell. Lovell was required merely to execute an enclosed contract to close the deal. The contract required a payment of $5.00 per M.B.F. and required cutting and removal to be completed by April 30, 1919. The contract specified the size of trees to be cut, the use diameter at the top of the trees cut, as well as requirements for cleaning up after cutting. ' There is no evidence in the record whether or not this sale ever went through.
The record indicates that through the approximate period of 1911 to 1921, sales of lumber produced by the government’s sawmill on the Reservation were being made to Indians, whites, and missions. However, the record indicates that poor bookkeeping was conducted, and thus the extent of the sales is unclear. The evidence does indicate that most of the lumber being provided or sold by the mill to both Indians and non-Indians was being provided or sold below the cost of production. Paquette was directed to increase the prices to reflect more accurately the costs incurred. The record indicates that although Paquette tried to supervise the sawmill’s operations, his efforts were less than exemplary.
On June 11, 1924, the sawmill and a great deal of lumber and logs were destroyed by fire. The record indicates that Paquette and the Office of Indian Affairs acted quite quickly to replace the sawmill so that the lumber needs of the Indians could again be met. Paquette also proposed the purchase of a second used sawmill to meet the needs of the Indians in a July 29, 1924 letter to the Commissioner of Indian Affairs. The record does not indicate whether this sale went through, or what funds were utilized to purchase this equipment.
In September of 1925, E.M. Pryse (Pryse), a forest examiner for the Office of Indian Affairs, spent several days on the Navajo Reservation inspecting the forest. He filed a report, dated March 3, 1926, setting out his observations. Pryse found about 450,000 acres of forest containing at least 1,500,000,000 board feet of timber, principally yellow pine. He observed that most of the merchantable timber (yellow pine) was located in a 185,000 acre section of the Reservation on the Fort Defiance plateau. Regarding this timber, he stated:
A good portion of this yellow pine is ripe for cutting. The amount of overripe timber is negligable [sic ] and there appears to be no urgent reason why the timber should be placed on the market in the near future. * * * Timber like this of such great potential wealth and other values should have adequate protection, especially protection from destructive grazing and fires. I believe more study should be given to the Navajo forest resources.
aje ?j< >jc jjc $ $
The yellow pine is the only specie that may be properly considered commercially important at present. The Navajo yellow pine is valuable chiefly as box and tie timber. * * * As a basis for comparison, the Navajo pine is about on par with the Jicarilla Reservation pine. Considering the inaccessibility of this timber, apparently it could not be sold for more than $2.25 to $2.50 per M feet, B.M. The nearest railroad point, Gallup, New Mexico, on the Santa Fe system, is approximately 35 miles. Wagon roads are poor.
Pryse reported no appreciable insect infestation problems in the forest, although he did observe substantial mistletoe (Razoumofskya Cryptopoda) and heart rot (Polyporous Sulphureus) parasite problems. He observed the very serious consequences of livestock overgrazing in the forest that had resulted in very little reproduction and a great deal of soil erosion due to a lack of undergrowth to hold the soil. He also observed the ravages of the 23,000 acre forest fire that occurred in 1922. He strongly urged that improvement of the fire protection program, which was lacking the needed equipment to function adequately.
Pryse also inspected the Agency sawmill while at the Reservation. His inspection came shortly after the fire that destroyed the mill, and he was impressed with the sawyer’s efforts in rebuilding it. He rec *365 ommended the acquisition of some additional equipment so that the mill could continue to meet the needs of the Tribe and the Agency. Pryse found the harvesting practices related to the Agency sawmill to be satisfactory, although he felt a few more mature trees could be left standing to produce seed.
Regarding timber sales, Pryse reported:
There is no timber sale in effect on the Navajo. Considering the distance from a railroad point and other economic factors, it will probably be a number, of years before it is possible to make a sale of any size. Other than the need of tribal money for the Navajos’ indusrrial [sic ] development there appears to be no need of placing this timber on the market in the near future.
In a July 29, 1927 letter, apparently in response to an inquiry about a potential timber sale, the Superintendent of the Southern Navajo Agency advised a Mr. Cleaveland of El Paso, Texas, that “so far no effort has been made to market this timber.” He then gave an estimate of the timber available in his jurisdiction (36,000,-000 board feet, 25 percent of which was ripe), but cautioned that it was only an estimate because it had never been cruised. The Superintendent explained that consent of the Tribal Council was needed for any sale, but if Mr. Cleaveland was interested, the Superintendent recommended that he contact the Commissioner of Indian Affairs.
In 1928, the sale of 500,000,000 board feet of timber to the McGaffey Lumber Company took place. See supra subpart A.1 of Part II of this opinion. It was clear in the case of the McGaffey sale that the company had contacted the government and not vice versa. Why such a sale did not take place earlier is unclear. The record indicates that the lack of accessibility and the comparative low quality of the Navajo timber may have contributed to the delayed sale. However, the record also indicates that the Navajo timber did compare with some of the timber sold earlier, and a sale of timber from the Fort Apache Reservation took place in 1919 that necessitated the construction of 70 miles of railroad as opposed to the approximately 35 miles of railroad needed to reach the edge of the Navajo forest. In any event, even though a timber sale finally materialized, as indicated earlier, the purchaser never did harvest the timber it was obligated to cut.
In 1930, Donald Harbison (Harbison), Deputy Supervisor of Forests, Department of the Interior, prepared a fire protection plan for the Navajo forest. The plan was dated May 1, 1930. In the plan, Harbison noted that due to livestock overgrazing of forest areas there was very little undergrowth to catch fire. Thus, the Navajo forest was not as great a fire hazard as might have been expected. At the time of the report, one fire tower was already in existence from which it was possible to observe the Fort Defiance plateau region. This tower was manned during the fire season, i.e., May and June and sometimes in September and October. At the time of the report, the forestry force possessed two pick-up trucks for transportation and other tools necessary to fight fires. The major causes of fires were lightning, which generally caused smaller fires due to the sparser growth at higher elevations, and sheep herders, usually children, who started camp fires that spread and burned larger areas.
Harbison’s recommendation included $2,500 in funding to purchase an 80-foot tower, a firetruck, and firefighting tools. Because logging operations were anticipated in the near future, the need for fire protection had become greater. In addition, he recommended an intensive education program to develop a “fire conscience” in the Navajo adults and children. Harbison also recommended a forest protection force chain of command to aid in fighting fires.
In the 1931 Annual Forest Report from the Southern Navajo Reservation, it was reported that a new fire tower had been purchased but apparently not yet installed. The report did point out the insufficiency *366 of the fire protection program and urged that more funds be provided to improve the system. The annual report also noted that over 1,300,000 board feet of lumber had been produced by the Agency sawmill and the Tohatchi portable mill. This lumber was produced at a loss, although Indians were employed in the process. The report also emphasized the overgrazing problem with its resulting erosion and lack of reproduction. Apparently, a grazing management plan had been developed to address the problem of overgrazing, the detrimental impact of which was not appreciated by the Indians, who thought “as long as there is green stuff on the ground the animals should thrive.”
A September 15, 1931 report regarding the operation of the two sawmills on the Reservation reflected improved operation, improved cutting practices and effective use of the cut timber. The report recommended expanding the capacity of the Agency sawmill or adding additional portable mills to meet the expanding lumber needs of the Tribe. No source of funding was mentioned. The report also recommended scattering the limbs and brush, removed from the cut trees, on the ground to help reproduction and reduce the impact of grazing. The report did mention that the sawyers were doing the marking of the trees, and Indian contractors were doing the cutting. Apparently, the sawyers were not the best markers, and a letter from the Assistant Commissioner of Indian Affairs ordered that the trained foresters do the marking on the Reservation at all times subsequent thereto. 14 Although the report noted some problems, overall it indicated improvement and pointed out that many Indians were being employed in the process, which was an important goal of the development of a timber industry on the Reservation.
In an August 17, 1932 letter, John Hunter, Superintendent of the Southern Navajo Agency, requested a $12,000 appropriation to expand and modernize the Agency sawmill. The Tohatchi sawmill had been abandoned because no money had been appropriated for its operation, probably due to the high cost of production associated with portable mills. Part of the funds requested would also be utilized to purchase new harvesting equipment, i.e., a tractor and two trucks. Apparently, the demand for lumber on the Reservation was far outstripping the capacity of the Agency sawmill. The same demands for expanded sawmill capacity were expressed in the 1934 forestry report submitted by the Forest Supervisor.
“Over time, deficiencies in the Interior Department’s performance of its responsibilities [use of Indian forests] became apparent. Accordingly, as part of the Indian Reorganization Act of 1934, C. 576, 484 Stat. 984 [ 25 U.S.C. § 461 , et. seq.], Congress imposed even stricter duties upon the Government with respect to Indian timber management [as compared to the 1910 Act].” Mitchell II, supra, 463 U.S. at 220 , 103 S.Ct. at 2970 . In adding to the 1910 Act, Congress provided in section 6 of the. Reorganization Act, 25 U.S.C. § 466 (1983), the following:
§ 466. Indian forestry units; rules and regulations
The Secretary of the Interior is directed to make rules and regulations for the operation and management of Indian forestry units on the principle of sustained-yield management, to restrict the number of livestock grazed on Indian range units to the estimated carrying capacity of such ranges, and to promulgate such other rules and regulations as may be necessary to protect the range from deterioration, to prevent soil erosion, to as *367 sure full utilization of the range, and like purposes.
This provision was intended “ ‘to assure a proper and permanent management of the Indian Forest’ under modern sustained-yield methods so as to ‘assure that the Indian forest will be permanently productive and will yield continuous revenues to the tribes.’ 78 Cong.Rec. 11730 (1934).” Mitchell II, supra, 463 U.S. at 220-21 , 103 S.Ct. at 2970 (citation omitted). It is to be noted that the Navajo Tribe voted against application of the provisions of the 1934 Act to the Navajo Reservation. The parties disagree on the applicability of the sustained yield provisions of the 1934 Act to the Navajo Reservation as a result of the above vote. Resolution of this disagreement is not vital since, in any event, defendant was obligated to manage the Navajo forest prudently in a manner consistent with the economic, social and technological constraints of the times and circumstances. Nonetheless, it appears as if the provisions of the 1934 Act were not applicable. See Kerr-McGee Corp. v. Navajo Tribe of Indians, — U.S.-, 105 S.Ct. 1900, 1902 , 85 L.Ed.2d 200 (1985) (“the terms of the IRA do not govern tribes, like the Navajo, which declined to accept its provisions. 25 U.S. § 478.”).
Perhaps partially in response to the Indian Reorganization Act of 1934, the Office of Indian Affairs developed a “Navajo Policies and Program” paper dated May 1, 1935. In addition to dealing with roads, livestock reduction, 15 land management, 16 health, education and other issue areas, the paper addressed forestry management. The forestry portion of the paper stated in pertinent part:
The basic principle of the forestry policy on the Navajo Reservation is to make it possible for the Navajos to use their timber perpetually. This will only be possible if the forests are used in moderation. The essential elements in the program are: (a) Strict cutting regulations enforced on all employees and work agencies; (b) Purchase and operation of portable sawmills with which to cut the lumber needed by the Navajos; (c) Management of all logging operations necessary to supply logs to the sawmills in a way which will not damage the forest; (d) Keeping out all livestock except horses from areas recently cut over; (e) Establishment of community forests for those communities which have forest lands, from which local timber and fuel needs may be met, but only in a way which will not damage the forests. * *; (f) Protection of all forest land from fire and overcutting; * * * (h) The training of Indians to handle the conservation of their forests and range.
One of the primary means through which the government hoped to obtain the goals it had for the Navajos was an Extension Program. Such a program would educate the Indians regarding problems that they often did not perceive existed. The extension programs would include informing the Indians about stock reduction, see supra note 15, improvement of herds, and farming techniques as well as forest management.
*368 The record indicates that by the end of 1936, the economic ravages of the Depression had begun to subside, and the demand for lumber had begun to increase. Even the Lutcher and Moore Lumber Company, which had failed to meet its obligations under the timber sale contract assigned to it in 1929, expressed an interest in harvesting timber from the Navajo forest in a July 27, 1936 letter. The company pointed out that economic conditions were improving while the Navajo timber deteriorated due to its maturity. These two factors again made harvesting the Navajo forest attractive to Lutcher and Moore.
The record also indicates that plans for a forest survey (inventory) were underway in 1936. Upon completion of the inventory, a forest management plan was to be developed. The Regional Conservator of the Soil Conservation Service stated in a March 27, 1936 letter to the Director of Forestry, Office of Indian Affairs, that the office should consider “operating this timber on a sustained-yield basis, although it does not necessarily follow that sustained yield should be practiced.”
Perhaps reflecting the increased concern regarding the Reservation forests demonstrated by Superintendent E. Reeseman Fryer (Fryer), the Tribal Council passed a September 15, 1935 Resolution authorizing the use of $15,000 in Tribal funds for the purpose of forest fire suppression to be used when fires were in progress. Also reflecting increased Indian interest in the Navajo forest and its potential source of income are the statements made by the Chairman of the Indian Council, Henry Taliman, at the September 15, 1938 meeting:
Now the Government has made statements such as the timber. Now up to this time they don’t know how much timber there is. They do not know how much timber is to be cut and used. In the past the Government forest men who were heads of the departments at Fort Defiance in the time of Mr. Hunter until last year, they have told us that we have so much timber that should be cut. Now, we understand that they do not know very much about it. It seems like the study that they had in the past they could tell us from that how much timber should be cut. Such things like this are discouraging. * * *
In 1939, plans for developing the Navajo forest were progressing. In an August 1939 letter from the Commissioner of Indian Affairs to Senator Morris Sheppard, the Commissioner responded to a request for information regarding the use of the Navajo forest as a source of timber for a lumber manufacturing plant. The Commissioner stated:
For many years the Navajo Indian economy has been intimately concerned with grazing to the extent that the reservation has been heavily overgrazed. The grazing area embraces a large portion of the timbered area and excessive grazing in the past has resulted in preventing or retarding forest reproduction.
Land management plans have been developed for the Navajo Reservation and they are being placed in operation as rapidly as conditions will permit. A phase of these plans contemplates a reduction in the use of the timbered area for grazing livestock so as to permit satisfactory natural reproduction of the forest. Until natural reproduction can be assured and the forest can be developed in accordance with the sustained yield management plan, it is not desirable to consider cutting a large volume of timber. As the condition of the forest improves, we believe that so far as practicable the Navajo Indians should develop their own forest resources so as to improve their economic condition. Plans are now under way to develop a tribal lumbering and sawmill enterprise on an area of the forest which can be safely developed. In the circumstances we do not consider it advisable to encourage the sale of a large volume of timber on the Navajo Reservation at this time.
During 1939, an inventory of a portion of the Navajo forest was completed. Only 160,000 acres of the 450,000 acres of potentially commercially viable forests were in *369 ventoried. Although not entirely clear from the record, the evidence indicates that only this 160,000 acre area, made up principally of the Fort Defiance plateau and the Tsaile unit, 17 was inventoried because it was considered the only commercially viable portion of forest due to its mild terrain as compared with the remainder of the forest topography. Apparently, the rough terrain where the remainder of the forest was located was comprised of steep slopes over which the vehicles of that day had difficulty travelling. There was also concern that logging such steeply sloped areas would cause a great deal of erosion.
After the inventory data was assimilated, a forest management plan was developed. The plan, dated January 24, 1940, established an annual net allowable harvest of 13,000,000 board feet. This figure was applicable only to the 160,000 acres inventoried. The introduction of the plan pointed out the circumstances that necessitated the forestry program proposed. The introduction stated in part:
Due to the overmaturity of the present stand of saw timber, one of the purposes of this plan is to provide for removal of the most decadent portion of the merchantable timber before further serious losses in volume occur. It should also be realized that the Ponderosa pine stands of the Defiance and Tsailee Units have little or no reproduction. The plan, therefore, provides for leaving an adequate number of seed trees which will, it is hoped, with necessary grazing controls, assure the eventual establishment of reproduction.
A stand of sufficient volume will be left to allow a future cut to be made at an undetermined time. The major purpose of this plan is to provide over a 25-year period for salvage of overmature timber and perpetuation of the stand by the establishment of satisfactory reproduction. When reproduction is obtained further surveys should be made and a long-time management plan prepared by the Indian Service.
Such a program can be viewed as “sustained-yield management” as that term was defined by the Society of American Foresters in 1958. The Society defined the term as follows: “Management of a forest property for continuous production with the aim of achieving, at the earliest practicable time, an approximate balance between net growth and harvest, either by annual or somewhat longer periods.” K. Davis, Forest Management: Regulation and Valuation 6 n. 1 (2d ed.1966). 18
The primary aims and guidelines of the management plan were to: (1) harvest the overmature timber as rapidly as possible 19 consistent with economic conditions and highest land use values; (2) cut for the period of the plan no more than 55 percent of the total gross volume of all tree classes; and (3) apply proper silviculture measures to the Ponderosa pine stands. The plan was designed to provide the greatest possible return to the Indians while maintaining and perpetuating the forest. *370 20 The plan designated certain areas that were in need of early harvesting, while adjusting cutting practices to accommodate seasonal grazing practices. The management plan also dealt with the issue of grazing control and set out a program designed to improve herds while aiding forest regeneration.
A new Agency sawmill was installed in 1939-1940 that was designed to meet the needs of the Indians as well as produce some additional lumber for sale by the Indians off the Reservation. 21 The mill ran into early problems due to the inadequacy of the loan received to meet the costs of equipment, which apparently soared after the loan was issued. The mill was therefore make-shift in design and not as efficient as possible.
In 1941, the demand for lumber increased dramatically due to the war effort. The Agency sawmill was unable to meet this demand, and a request was submitted for a $300,000 appropriation to improve the mill. Instead of an appropriation from government funds, the government permitted the Tribe to utilize $165,000 of its own funds on deposit for the purpose of improving the mill. 22
Although output continued to improve and cutting was occurring in the forests, by 1944 the Reservation sawmills had still not sold any lumber in the open market. Sales up to that point had been either local to residents on the Reservation, to the Navajo Service or to other Indian Agencies or box shook sales to box factories. Contract sales of lumber also took place, but were apparently considered surplus sales to the above two types of sales. In 1949, however, the Tribal sawmill began selling its products on the open market. At that time it became a member of the Western Pine Association.
Harvesting and manufacturing continued on the Reservation. However, due to changing forest management concepts and the Forest Service’s conclusion that “Ponderosa pine stands could not be realistically managed for sustained yield in 50 percent or higher volume removal as had been done in the past,” a new comprehensive inventory of the entire 450,000 acres of commercial forest on the Reservation was conducted by photogrammetric means. Utilizing this 1951-1952 inventory, a “Master Plan for Timber Management” for the Reservation was completed in 1953. The new plan called for an annual allowable cut of 28,000,000 board feet based on a 35 percent cut of net volume and a 25-year cutting cycle, 1953-1977. This allowable cut only included Ponderosa Pine.
In 1956, a forest management consulting firm inspected the Navajo forest region and reported that the timber was predominantly overmature and that mortality was nearly equalling the growth rate. The firm recommended that the Tribe construct a new lumber manufacturing facility with the capacity of processing 34,000,000 board feet annually. Subsequent reports suggested that the Tribe own and operate such a facility by creating an entity separate from the Tribe. A plan along these lines was approved by the Commissioner for Indian Affairs in 1959. Construction of the Navajo Forest Product Industries (NFPI) plant began in 1960 and was completed in June of 1962. In 1963, the Tribal sawmill, *371 opened in 1940, was closed down and its crew transferred to the new plant.
The 1953 Management Plan was revised in 1960. The 1960 plan called for an allowable cut of 34,000,000 board feet per year to the end of 1977. This figure was subsequently revised upward to 39,000,000 board feet due to substantial undercutting from 1953 to 1959. This annual allowable cut was to end in 1977. In 1965, logging on the Fort Defiance plateau was completed, 25 years after the 1940 plan was instituted. Logging operations were then moved to the Tsaile unit. There, harvesting continued, and the timber was then processed in the NFPI plant.
Based on this history of harvesting timber on the Navajo forest, or the lack thereof, plaintiff contends that it is entitled to damages due to defendant’s failure to ensure that the proper amount of timber was cut. One of the bases for plaintiff’s claim for damages under its general Failure to Cut claim is lost Tribal income due to undercutting of timber from 1921 to 1962.
Plaintiff contends that the 1910 Act and the regulations promulgated thereunder imposed a duty upon defendant to utilize the most up to date technology to conduct harvests that would produce the greatest revenue for the Indians. Section 7 of the 1910 Act did permit, presumably for the first time on a general basis, the sale of “mature living and dead and down timber” on unallotted Indian lands in a manner consistent with regulations to be promulgated by the Secretary of the Interior. In promulgating the 1911 regulations to carry out the directive of Congress, the Secretary directed the officers in charge of the Indian forests to “familiarize themselves with all phases forestry work,” including what appeared to be a directive to: (1) survey their respective forest; (2) determine reproductive capacity; (3) estimate costs of logging and manufacturing; and (4) investigate development of local markets. The regulations generally directed forest officials to acquaint themselves with the practical and technical work that would contribute to “managing” the Indian forests as to obtain the greatest revenue for the Indians consistent with proper protection and improvement of the forests. (Section 2 of 1911 regulations.)
Plaintiff maintains that by 1920 the use of forest inventories to determine annual allowable cut was well established. The record supports such a contention. The record indicates that the Forest Service had established regulations for the national forest working toward a sustained-yield system by 1915. However, the record indicates that such regulations were far from perfected, and in 1931 one author wrote: “As each [national] forest perfects its markets, roads and silviculture, the final phase of regulation [looking toward sustained-yield management] will be entered on.” M. Chapman, Forest Management at 457 (1931). In any event, the basic technology regarding inventories of forests had been established by 1920, although the record indicates that as of 1931 management of forests had still not been perfected.
Plaintiff argues, however, that no later than 1920-1921, defendant had a duty to conduct a “state of the art” inventory of the entire Navajo commercial forest, i.e., all 450,000 acres. Based on this inventory, plaintiff asserts that, using the data acquired therefrom, defendant could have, and had a duty to, prepare a management plan along the lines of the plans developed in 1940 and 1953 for the Navajo forest. If such a plan had been developed in 1920 from an inventory of the entire Navajo forest, plaintiff claims that an annual allowable cut of 28,000,000 board feet would have been established. Such an allowable cut was the same one arrived at in the 1953 Master Plan utilizing technology that plaintiff contends was available in 1920.
Plaintiff’s next contention is that, beginning in 1921, defendant had a duty to cut 28,000,000 board feet each year or at least to contract with a private company to sell that much timber each year. Section 9 of the 1911 regulations did require large sales of timber from unallotted Indian lands “as occasions arise.” [Emphasis added.] Plaintiff argues that if the 28,000,000 *372 board feet had been harvested by defendant and sold, or sold to a lumber company that subsequently did the harvesting, the Tribe would have received a great deal of revenue. The record preponderates in favor of a finding that a market did not exist for disposal of a yearly cut of 28 million board feet of Navajo timber during the period 1920 to the late 1930’s. Indeed, it should be noted that plaintiff in its computation in support of its claim discussed in Part II, subpart A.1, supra, contended that its timber had a zero market value in 1933, suggesting that a cut of 28 mi

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/6825592. Public record. Not legal advice.