Title: McDowell Welding & Pipefitting v. US Gypsum Co.

State: oregon

Issuer: Oregon Supreme Court

Document:

FILED: September 18, 2008
IN THE SUPREME COURT OF THE STATE OF OREGON
MCDOWELL WELDING &
PIPEFITTING, INC.,
an Oregon corporation,
Petitioner on Review,
v.
UNITED STATES GYPSUM COMPANY,
a Delaware corporation;
Port of St. Helens,
an Oregon corporation;
BE&K Construction Co., Inc.,
an Alabama corporation,
Respondents
on Review.
and

E C COMPANY,
dba Electrical Construction Co., 

Defendant.

UNITED STATES GYPSUM COMPANY,
a Delaware corporation;
BE&K CONSTRUCTION, 
CO, INC.,
an Alabama corporation,
and PORT OF ST. HELENS,
an Oregon municipal corporation,

Respondents on Review,

v.

MCDOWELL WELDING & PIPEFITTING, INC.,
an Oregon corporation,

Petitioner on Review.

(CC
01-2126; CA A125459; SC S054626)
En Banc
On review from the
Court of Appeals.*
Argued and submitted
November 7, 2007.
James T. McDermott, of
Ball Janik LLP, Portland, argued the cause and filed brief for petitioner on
review.  With him on the brief were Bruce H. Cahn and Aaron D. Goldstein.
Daniel K. Reising, of
Fucile & Reising LLP, Portland, argued the cause and filed the brief for
respondents on review United States Gypsum Company and BE&K Construction
Co., Inc.
No appearance for
respondent on review Port of St. Helens.
Walter J. Ledesma, of
Klein, Hand and Ledesma, P.C., Woodburn, filed the brief for amicus curiae
Oregon Trial Lawyers Association.
Janet Metcalf,
Assistant Attorney General, Salem, filed the brief for amicus curiae
State of Oregon.
KISTLER, J.
The decision of the
Court of Appeals is affirmed in part and reversed in part.  The judgment of the
circuit court is affirmed in part and reversed in part, and the case is
remanded to the circuit court for further proceedings.
*Appeal from Columbia
County Circuit Court, Judge Ted E. Grove. 209 Or App 441, 149 P3d 173 (2006).
KISTLER, J.
Plaintiff brought this action,
alleging that defendants had failed to pay for work that plaintiff had done on a
construction project.  Defendants denied that allegation and alleged, as an
affirmative defense, that plaintiff had agreed to release its claims against
defendants in return for defendants' paying plaintiff $896,000.  Defendants
also counterclaimed for specific performance of that settlement agreement.  On
defendants' motion, the trial court bifurcated the trial and agreed to try
defendants' counterclaim for specific performance of the settlement agreement
before trying plaintiff's claims for breach of the construction contract.
The primary question that this case
presents is whether plaintiff has a state constitutional right to a jury trial
on the factual issues that defendant's counterclaim raised.  The trial court
concluded that plaintiff had no such right and, sitting as the trier of fact,
found that plaintiff had accepted defendants' offer to settle its claims and
entered judgment accordingly.  A divided Court of Appeals affirmed the trial
court's judgment.  McDowell Welding & Pipefitting v. US Gypsum Co.,
209 Or App 441, 149 P3d 173 (2006).  We allowed plaintiff's petition for review
and now affirm the Court of Appeals decision on plaintiff's jury trial claim
but reverse its decision on a subsidiary issue regarding prejudgment interest.
The relevant facts can be summarized
briefly.  Defendant United States Gypsum (US Gypsum) was constructing a new
plant in Columbia County.  Defendant BE&K Construction Co. (BE&K) was
the general contractor on that project.  BE&K subcontracted with plaintiff
to perform work on the project.  During construction, defendants asked
plaintiff to perform additional tasks, over and above plaintiff's contractual
obligations, and defendants promised to pay plaintiff for doing so.  After
plaintiff completed its work on the project, the parties disagreed over the
amount that defendants owed for the additional work that plaintiff had
performed.
Plaintiff filed this action against
defendants, alleging breach of contract and related claims.  All of plaintiff's
claims arose out of the modification to the construction contract.  BE&K's
answer included an affirmative defense captioned "Compromise and
Settlement," alleging that plaintiff had agreed to settle its claims
against defendants. Specifically, defendants alleged:
"112.
"On February
22, 2001, Dan McDowell, President and owner of [plaintiff], agreed to a
settlement of all the claims against BE&K and US Gypsum in connection with
the US Gypsum construction project.
"113.
"The
settlement provided for US Gypsum to pay [plaintiff] the total of $896,000,
including direct payments to [plaintiff's] unpaid subcontractors and suppliers,
in exchange for a release of the claims [that plaintiff] is now pursuing
against BE&K.
"114.
"The agreement
reached between the parties on February 22, 2001 was a compromise of
[plaintiff's] disputed and unliquidated claims against US Gypsum and
BE&K."
BE&K also included a counterclaim
captioned "Declaratory Judgment and Specific Performance of Settlement
Agreement."  That counterclaim stated:  "As alleged above, on
February 22, 2001, the parties reached a compromise and settlement of
[plaintiff's] claims."
BE&K filed a motion asking the
trial court to bifurcate the proceedings and try its counterclaim before trying
plaintiff's claims against it.  BE&K reasoned that, if the trial court
found that plaintiff had agreed to a settle its claims, that determination
would obviate the need to try plaintiff's breach of contract claims against
BE&K and US Gypsum.  BE&K also argued that, because its counterclaim
sought specific performance, the court rather than a jury should resolve the
factual issues that the counterclaim raised.  The trial court granted
BE&K's motion.
After the trial court granted
BE&K's motion, plaintiff filed a demand for a jury trial, which BE&K
moved to strike.  BE&K reasoned that, because its counterclaim was
equitable, plaintiff had no right to a jury trial on the counterclaim.  The
trial court granted BE&K's motion to strike plaintiff's jury trial demand
and, sitting as the trier of fact, found that plaintiff had accepted
defendants' offer to settle its claims in return for defendants' promise to pay
plaintiff $800,000.(1)
Based on its resolution of
defendants' counterclaim,(2)
the trial court entered a limited judgment directing defendants to tender
$800,000 to the court clerk and directing plaintiff, after defendants tendered
that sum, to execute releases of its claims against defendants.  After the
trial court entered the limited judgment, defendants tendered $800,000 to the
court clerk and then moved for summary judgment on plaintiff's claims against
them.  The trial court granted defendants' motion and entered a general
judgment that dismissed plaintiff's claims with prejudice.
On appeal, plaintiff argued, among
other things, that the trial court had erred in denying its jury demand on the
question whether it had accepted defendants' settlement offer.  As noted, a
divided Court of Appeals affirmed.  The majority started from the proposition
that plaintiff had not assigned error to the trial court's ruling bifurcating
the trial and agreeing to try defendants' counterclaim first.  McDowell
Welding & Pipefitting, 209 Or App at 445-46.  Rather, plaintiff had
assigned error only to the trial court's ruling striking plaintiff's demand for
a jury trial.  Id.(3) 
On that issue, the majority explained that this court and the Court of Appeals
have held that there is no constitutional right to a jury trial on a claim for
specific performance of a settlement agreement.  Id. at 447.  It
followed, the majority reasoned, that the trial court had correctly denied
plaintiff's jury demand for a trial on that claim.  Id.
The dissent took a different tack. 
The dissent did not disagree that plaintiff had no right to a jury trial on
defendants' counterclaim.  The dissent, however, would have held that plaintiff
had a right to a jury trial on defendants' affirmative defense; that is, the
dissent concluded that defendants' affirmative defense would have been legal
rather than equitable when the Oregon Constitution was adopted.(4) 
Id. at 473 (Armstrong, J., dissenting).  Following the reasoning in Beacon
Theatres, Inc. v. Westover, 359 US 500, 79 S Ct 948, 3 L Ed 2d 988 (1959),
the dissent would have held that, when a legal claim (defendants' affirmative
defense) and an equitable claim (defendants' counterclaim) share common factual
issues, Article I, section 17, of the Oregon Constitution requires courts to
try the legal claim before the equitable one.  209 Or App at 461-63 (Armstrong,
J., dissenting).(5) 
It followed, the dissent reasoned, that the trial court erred in trying
defendants' counterclaim before their affirmative defense.
On review, plaintiff renews its
argument that the trial court erred in striking its demand for a jury trial. 
As we understand plaintiff's argument, it entails two separate but related
questions.  The first question is whether plaintiff had a state constitutional
right to a jury trial on defendants' counterclaim for specific performance of
the settlement agreement.  If plaintiff did not have a right to a jury trial on
the counterclaim, the remaining question is whether plaintiff had a right to a
jury trial on defendants' affirmative defense (which also is based on the
settlement agreement) and, if it did, whether the trial court should have tried
the affirmative defense to a jury before trying the counterclaim to the court. 
We begin with the question whether plaintiff had a right to a jury trial on
defendants' counterclaim.
Two provisions of the Oregon
Constitution bear on that question.  Article I, section 17, of the Oregon
Constitution provides:  "In all civil cases the right of Trial by Jury
shall remain inviolate."  Article VII (Amended), section 3, provides in
part that, "[i]n actions at law, where the value in controversy shall
exceed $750, the right of trial by jury shall be preserved."  Reading
those provisions together, this court has explained that Article I, section 17,
"guarantees a jury trial 'in those classes of cases in which the right [to
a jury trial] was customary at the time the [Oregon] [C]onstitution was adopted
or in cases of like nature.'"  Lakin v. Senco Products, Inc., 329
Or 62, 69, 987 P2d 463 (1999) (quoting Molodyh v. Truck Insurance Exchange,
304 Or 290, 295, 744 P2d 992 (1987)).  The right to a jury trial, however, does
not extend to cases that would have been tried to an equity or an admiralty
court in 1859.  See State v. 1920 Studebaker Touring Car et al,
120 Or 254, 259, 261-62, 251 P 701 (1927).
To determine whether a claim is legal
or equitable, the court looks to the pleadings.  See Thompson v. Coughlin,
329 Or 630, 637-38, 997 P2d 191 (2000) (test for determining whether
jurisdiction is in law or equity generally turns on the nature of the relief
sought in the pleadings); Huebner v. Chinn, 186 Or 508, 519, 207 P2d
1136 (1949) (in deciding whether Article I, section 17, jury trial right
applies, court must "determine whether the pleadings presen[t] a cause of
equitable [or legal] cognizance").  The label that a party places on a
claim is not necessarily dispositive.  See Thompson, 329 Or at 638 (so
holding).  For example, the plaintiff in Thompson sought an accounting
to resolve a dispute among partners, which is ordinarily an equitable claim
that would not entitle a party to a jury trial.  However, in determining
whether the plaintiff's claim should have been tried to a jury, this court
explained that it had long recognized that, when "adequate relief may be
obtained in law, * * * equitable jurisdiction will not be invoked."  Id. 
Because the "accounting" that the plaintiff sought in Thompson involved
only two transactions, the court concluded that a legal action provided
adequate relief, that the plaintiff's claim was not equitable, and that the
trial court had erred in denying the plaintiff's demand for a jury trial.  Id.
at 640.
In arguing that, under Thompson,
it is entitled to a jury trial on defendants' counterclaim, plaintiff does not
dispute that "suits in equity, including suits for specific performance of
contracts, are ordinarily to be tried to a court without a jury and that the
constitutional right to trial by jury does not apply to suits in equity." 
See Phillips v. Johnson, 266 Or 544, 549, 514 P2d 1337 (1973) (so
holding).  Plaintiff argues, however, that specific performance is available
only when the remedy at law is inadequate and that, in this case, defendants
have an adequate remedy at law.  Cf. Thompson, 329 Or at 638-40
(reaching a similar conclusion regarding the plaintiff's request for an
accounting).  In plaintiff's view, a declaratory judgment that the parties had
entered into a settlement agreement would suffice to give effect to the
settlement agreement, that claim would have been cognizable at law, and the equitable
remedy of specific performance therefore was not necessary.  It follows,
plaintiff concludes, that the trial court erred in denying its demand for a
jury trial despite the fact that defendants sought specific performance of the
settlement agreement.
We note, as an initial matter, that
plaintiff's argument is at odds with this court's practice.  This court
repeatedly has entertained suits for specific performance of settlement
agreements without suggesting that resort to equity was unnecessary because the
parties had an adequate remedy at law.  See Michel v. ICN Pharmaceuticals,
274 Or 795, 797, 549 P2d 519 (1976) (determining on de novo review, in a
suit for specific performance of a settlement agreement, whether the parties
had entered into an enforceable settlement agreement); Brown v. Denton,
257 Or 161, 162, 477 P2d 710 (1970) (same); Chambers v. Zipper, 225 Or
333, 334, 357 P2d 1105 (1960) (same).  Those decisions, however, did not
expressly consider the argument that plaintiff raises here.  And, while those
decisions may suggest an answer, we hesitate to give them controlling effect
without examining the premises of plaintiff's argument more closely.  See
Coast Range Conifers v. Board of Forestry, 339 Or 136, 148-49, 117 P3d 990
(2005) (declining to give controlling effect to an unconsidered assumption in a
prior decision).  We accordingly turn to the question that the dissenting
opinion in the Court of Appeals addressed -- whether an action to enforce the
settlement agreement that defendants alleged would have been cognizable in law
or equity when the Oregon Constitution was adopted.
As we discuss more fully below, a
settlement agreement may take one of three forms:  an executory accord, an
accord and satisfaction, or a substituted contract.  As we also discuss below,
when the Oregon Constitution was adopted, only a court of equity would enforce
an executory accord.  The law courts would not enforce executory accords
because they suspended the underlying obligation; they did not discharge it. 
By contrast, an accord and satisfaction and a substituted contract discharged
the underlying obligation, albeit for different reasons, and both were
enforceable in the law courts.  It follows that the question whether the
agreement that gave rise to defendants' counterclaim would have been cognizable
in law or equity turns, at least initially, on whether it is an executory
accord, an accord and satisfaction, or a substituted contract.  We first
describe the distinctions among those types of settlement agreements before
considering which type of settlement agreement defendants alleged.
An executory accord is "an
agreement for the future discharge of an existing claim by a substituted
performance."  Arthur Linton Corbin, 6 Corbin on Contracts § 1268, 71
(2d ed 1962).  Usually, an executory accord is a bilateral agreement; the
debtor promises to pay an amount in return for the creditor's promise to
release the underlying claim.  When the parties enter into an executory accord,
the underlying claim "is not [discharged] until the new agreement is
performed.  The right to enforce the original claim is merely suspended, and is
revived by the debtor's breach of the new agreement."  Savelich Logging
v. Preston Mill Co., 265 Or 456, 462, 509 P2d 1179 (1973).
Because an executory accord does not
discharge the underlying claim but merely suspends it, the law courts refused
to allow it to be pleaded as a bar to the underlying claim.  See Samuel
Williston, 15 Williston on Contracts § 1842, 520 (3d ed 1972)
(describing basis for that conclusion); Smith v. Foster, 5 Or 44, 46
(1873) (executory accord was not cognizable as a defense at law); Ford v.
Beech, 116 Eng Rep 693, 698-701 (1848) (same).  Only the equity courts
would enforce executory accords.  See 6 Corbin on Contracts §
1273 (so stating); Very v. Watkins, 18 Ark 546, 552 (1857), aff'd,
64 US 469, 16 L Ed 522 (1860) (recognizing that executory accords were
"strictly of equitable cognizance"); Beech v. Ford, 68 Eng Rep
85, 88 (1848) (holding that, unlike the law courts, equity courts could give
effect to executory accords; they could suspend the underlying obligation and
then revive it if the debtor breached his or her promise).
Once the promised performance
occurs, the accord has been executed or satisfied and the underlying claim is discharged,
resulting in an accord and satisfaction.  See State ex rel. v. Funk,
105 Or 134, 152, 199 P 592, 209 P 113 (1922) (explaining accord and
satisfaction); 6 Corbin on Contracts § 1276 at 115 (same).(6) 
Because an accord and satisfaction discharges the underlying claim, that
defense is legal, not equitable.  6 Corbin on Contracts § 1276 at 115; see
Smith, 5 Or at 46 (explaining that the defendant's allegations were
insufficient to allege a bar to a legal action because the defendant had
alleged an executory accord, not an accord and satisfaction).
Finally, the parties may enter into a
substituted contract; that is, the parties may agree to substitute the new
agreement for the underlying obligation.  6 Corbin on Contracts § 1293
at 185.  A substituted contract differs from an executory accord in that the
parties intend that entering into the new agreement will immediately discharge
the underlying obligation.  See Eagle Industries, Inc. v. Thompson, 321
Or 398, 408-12, 900 P2d 475 (1995) (summarizing law regarding substituted
contracts and novations); Ohlson v. Steinhauser, 218 Or 532, 539, 315
P2d 136, 346 P2d 87 (1959) (distinguishing substituted contracts from executory
accords); 6 Corbin on Contracts § 1293 at 185-88 (describing
substituted contracts).(7) 
A substituted contract discharges the underlying obligation and could be
asserted as a bar to an action at law.  See Samuel Williston, Accord
and Satisfaction, 17 Harv L Rev 459, 467 (1904).
With that background in mind, we turn
to the question whether defendants pleaded an executory accord, an accord and
satisfaction, or a substituted contract.  Here, defendants alleged that they
agreed to pay plaintiff $896,000 in exchange for a release of plaintiff's
claims against them.  Defendants did not allege that they had paid plaintiff
the promised sum -- an allegation necessary for an accord and satisfaction.  See
Harding v. Bell, 265 Or 202, 210, 508 P2d 216 (1973) (holding that, when
one party contends that they discharged the prior obligation, "complete
cancellation of the prior obligation is an essential element of [the] defense
and must be pleaded by clear expression, not vague allusion"); Smith,
5 Or at 46 (party failed to allege satisfaction and thus failed to state a
cognizable defense to a legal action).  Nor did they allege that, by entering
into the settlement agreement, they extinguished the underlying obligation --
an allegation necessary to allege a substituted contract.  See Abrahamson
v. Brett, 143 Or 14, 24, 21 P2d 229 (1933) (noting that one essential
requisite of a substituted contract is "the extinguishment of the old
contract"); cf. Harding, 265 Or at 210 (cancellation of the
prior obligation must be pleaded by clear expression).  Rather, defendants
alleged that plaintiff agreed to release its claims only after defendants made
the promised payment.  In short, defendants alleged an executory accord.(8)
As noted, the dissenting opinion in
the Court of Appeals reached a different conclusion.  Applying certain
evidentiary presumptions, the dissent concluded that it was ambiguous whether
defendants had alleged an executory accord or a substituted contract, an
ambiguity that the dissent would have resolved in favor of the right to a jury
trial.  The difficulty with the dissent's reasoning is that the Oregon Rules of
Civil Procedure require a party to allege ultimate facts.  See Davis v. Tyee
Industries, Inc., 295 Or 467, 476, 668 P2d 1186 (1983) (describing Oregon's
fact pleading requirement).  In this case, defendants alleged the elements of
an executory accord.  They did not allege the one key element, "the
extinguishment of the old contract," that distinguishes a substituted
contract from an executory accord.  Abrahamson, 143 Or at 24 (noting that
one essential requisite of a substituted contract is "the extinguishment
of the old contract"); see Harding, 265 Or at 210 (stating
that pleading requirement).  Without that allegation, there is no ambiguity: 
Defendants alleged an executory accord, not a substituted contract.
Plaintiff, for its part, does not
argue that defendants alleged a substituted contract rather than an executory
accord.  Rather, plaintiff's brief touches on that issue only once.  Plaintiff
argues that "there is no dispute that [plaintiff's] original cost-overrun
claims against BE&K and US Gypsum entitled [plaintiff] to a jury, including
the factual determination of the existence of the settlement agreement alleged
by BE&K and US Gypsum."  The fact that plaintiff's contract claims
against defendants would have been cognizable at law when the Oregon
Constitution was adopted does not mean that an executory accord, asserted as
defense, also would have been cognizable at law.  As explained above, precisely
the opposite was true.  When the Oregon Constitution was adopted, an executory
accord was not recognized as a defense to an action at law.  It could be
enforced only in equity.  See Smith, 5 Or at 46 (executory accord not a
defense to an action at law on a note); Ford v. Beech, 116 Eng Rep at
701 (same).  It necessarily follows that the substance of defendants'
counterclaim, as they have alleged it, sounded only in equity without regard to
the nature of the relief that they sought.  The trial court correctly rejected
plaintiff's argument that it had a constitutional right to a jury trial on an
executory accord.
Plaintiff advances an alternative
argument.  It contends that, even if it had no constitutional right to a jury
trial on defendants' counterclaim, it had a right to a jury trial on
defendants' affirmative defense.  Plaintiff assumes that defendants'
affirmative defense presents a legal claim that would have been tried to a jury
in 1859.  Plaintiff then reasons that, in interpreting Article I, section 17,
of the Oregon Constitution, we should follow the United States Supreme Court's
interpretation of the Seventh Amendment in Beacon Theatres; that is,
plaintiff argues that, when a case includes an equitable claim and a legal
claim and those claims share common factual issues, Article I, section 17,
requires that a court try the legal claim first in order to give effect to the
parties' right to a jury trial.
Plaintiff recognizes that the Seventh
Amendment does not apply to the states and that we interpret state
constitutional provisions independently of their federal counterparts. 
Plaintiff argues, however, that the Court's reasoning in Beacon Theatres is
persuasive and urges us to adopt that reasoning in interpreting Article I,
section 17.  Applying that reasoning, plaintiff argues that the trial court
should have tried defendants' affirmative defense to a jury before trying
defendants' counterclaim to the court.
The difficulty with plaintiff's
argument is its premise.  As explained above, both defendants' affirmative
defense and their counterclaim allege an executory accord and were cognizable
only in equity when the Oregon Constitution was adopted.  Contrary to the
premise of plaintiff's argument, the trial court was not faced with a choice
between trying a legal defense before an equitable counterclaim.  Rather,
because defendants' affirmative defense and their counterclaim were both
equitable, the principle that plaintiff urges us to adopt from Beacon
Theatres is inapposite.(9)
There is some suggestion in
plaintiff's brief on the merits that the reasoning in Beacon Theatres required
the trial court to try plaintiff's breach of contract claims, which were
concededly legal, before trying defendants' equitable counterclaim.  To the
extent that plaintiff makes that argument, it fails for three reasons.  First,
the premise of Beacon Theatres is that the legal and equitable claims
share common issues of fact.  359 US at 503-04.  Plaintiff's breach of contract
claim, however, is factually separate from defendants' counterclaim for
specific performance of the settlement agreement; the two claims arise out of
separate agreements.  Plaintiff's breach of contract claim arises from the
modification to the construction contract.  Defendants' counterclaim, as well
as their affirmative defense, arises from the settlement agreement.  Without a
common factual issue, Beacon Theatres does not apply.
The second reason follows from the
first.  If, as the trial court found, plaintiff agreed to settle its claims
(and defendants subsequently performed their part of the settlement agreement),
then the executed settlement would obviate any need to try the factually
separate question whether plaintiff is entitled to prevail on the underlying
agreement.  Trying plaintiff's claims for breach of the construction contract
first would serve no purpose if, as the trial court found, plaintiff promised
to release those claims as part of a later settlement agreement.
Third, as the Court of Appeals
majority observed and as plaintiff has not disputed, plaintiff did not assign
error to the trial court's ruling bifurcating the trial and deciding to try
defendants' counterclaim for specific performance of the settlement agreement
before trying plaintiff's claims against defendants.  If plaintiff did not
assign error to that ruling, then plaintiff necessarily failed to take the steps
necessary to pursue any argument that the trial court should have tried its
contract claims before trying defendants' counterclaim.  Having considered
plaintiff's arguments, we hold that Article I, section 17, of the Oregon
Constitution did not require the trial court to try either defendants'
counterclaim or their affirmative defense to a jury.
Plaintiff raises an alternative issue
on review.  Plaintiff argues that, if we affirm the trial court's ruling on its
jury trial claim, then we should reach the issue whether the trial court erred
in denying plaintiff prejudgment interest.  Regarding that issue, the trial
court found that, on February 22, 2001, plaintiff agreed to release its claims
against defendants in return for a payment of $800,000.  The parties also
agreed that, to the extent that plaintiff owed money to its suppliers,
defendants would issue joint checks to plaintiff and its suppliers out of the
$800,000 payment.  Defendants asked plaintiff to provide them with the
suppliers' names and the amount that plaintiff owed each supplier so that
defendants could prepare joint checks.  Approximately a week later, plaintiff
repudiated the settlement agreement; plaintiff took the position that the
parties' discussions on February 22, 2001, had not resulted in a final, binding
agreement.
When defendants submitted a
proposed judgment to the trial court, plaintiff objected because the judgment
entered in 2004 did not require defendants to pay prejudgment interest on the
$800,000 that defendants had promised to pay plaintiff in 2001.  The trial
court overruled plaintiff's objection, and the Court of Appeals affirmed that
ruling without discussion.  McDowell Welding & Pipefitting, 209 Or
App at 444.  On review, plaintiff renews its claim that the trial court should
have awarded it prejudgment interest.
Plaintiff's claim for prejudgment
interest arises in a different posture than many prejudgment interest claims. 
Typically, the person from whom prejudgment interest is sought has breached
some duty; that is, the person has failed to pay money when due or wrongfully
retained money, and prejudgment interest is available either under ORS 82.010
or to remedy a breach of a fiduciary duty.  See ORS 82.010(1)(a)
(authorizing prejudgment interest on "[a]ll moneys after they become
due"); ORS 82.010(1)(b) (authorizing prejudgment interest for
"[m]oney received to the use of another and retained beyond a reasonable
time without the owner's express or implied consent"); Stephan v.
Equitable S & L Assn., 268 Or 544, 573-74, 522 P2d 478 (1974)
(providing for recovery of interest as a remedy for a breach of a fiduciary
duty).  In those cases, the person from whom prejudgment interest is sought has
breached a duty to pay or return money and the question usually reduces to whether
the amount due is readily ascertainable.  See, e.g., Public Market
Co. v. Portland, 171 Or 522, 625, 130 P2d 624, 138 P2d 916 (1943) (holding
that prejudgment interest is available on unliquidated damages as long as the
amount due is readily ascertainable).
This case arises in a different
posture.  In this case, defendants did not breach any duty that they owed
plaintiff under the settlement agreement.  Rather, plaintiff had repudiated the
settlement agreement, excusing defendants from fulfilling their promise to pay
$800,000.  See Howard v. Thomas, 270 Or 6, 14-15, 526 P2d 552
(1974) (holding that, when defendants refused to consummate sale, plaintiffs
were excused from making promised payment).  Because defendants had no
obligation under the settlement agreement to pay plaintiff, plaintiff may not
recover prejudgment interest under the usual theories; that is, plaintiff may
not recover prejudgment interest because defendants failed to pay money when
due or wrongfully retained plaintiff's funds.  See ORS 82.010(1)(a) and
(b) (stating those grounds for recovering prejudgment interest).  Nor may
plaintiff recover prejudgment interest to remedy a breach of a fiduciary duty;
defendants did not breach any fiduciary duty they owed plaintiff.
Plaintiff argues, however, that
defendants had the use of the $800,000 from the time that the parties entered
into the settlement agreement in 2001 until the court issued its judgment in
2004.  Plaintiff contends that conditioning the judgment entered in 2004 on
defendants' paying plaintiff in 2001 dollars fails to take into account the
time value of money, unjustly enriching defendants.  Plaintiff reasons that,
once defendants chose to seek the benefits of the settlement agreement and
asked the trial court to order specific performance, the trial court should
have conditioned plaintiff's performance of the settlement agreement on
defendants' payment of the agreed sum plus interest.  See Wittick v. Miles,
268 Or 451, 455, 521 P2d 349 (1974) (so requiring); Restatement (Second) of
Contracts § 358(1) (discussing trial court's authority to condition
the terms of an order requiring specific performance of a contact).
Wittick is squarely on point
and supports plaintiff's argument.  In Wittick, the plaintiffs
sought specific performance of an earnest money agreement for the sale of
land.  268 Or at 452.  The plaintiffs had paid approximately one third of the
purchase price and were willing and able to pay the balance on the defendant's
tender of the deed and title insurance, as the earnest money agreement
provided.  Id.  When the defendant refused to tender the deed and
repudiated the contract, the plaintiffs brought an action for specific
performance.  Id.  In upholding the plaintiffs' claim for specific
performance, this court explained that, as a condition of seeking specific
performance, plaintiffs would be required to pay the amount of money still
owing under the earnest money agreement plus either interest or rents and
profits (depending on whether the plaintiffs were or were not in possession).  Id.
at 455.  As this court explained, "[w]hatever adjustment needs to be made
between plaintiffs and defendant with respect to interest and rents and profits
can be made as part of the decree."  Id.
In Wittick and also in this
case, the party seeking specific performance of the agreement had not breached
its terms, and the party against whom enforcement of the agreement was sought
had repudiated it.  In Wittick, even though the plaintiff had not
breached the agreement, this court held that specific performance of the
agreement should be conditioned on plaintiff's paying the money due under the
agreement plus interest (or rents and profits).  Once the plaintiffs in Wittick
chose to overlook the defendant's repudiation and seek specific performance of
the settlement agreement, payment of prejudgment interest was necessary to give
the defendant the benefit of the bargain that the plaintiffs chose to enforce. 
It follows that, under the reasoning in Wittick, the trial court should
have conditioned its judgment granting specific performance of the settlement
agreement on defendants' paying $800,000 plus interest from the date of the
agreement.(10)
Defendants argue that, even if they
otherwise would be liable for prejudgment interest, they tendered payment to
plaintiff and thus cut off plaintiff's right to seek prejudgment interest.  See
Bembridge v. Miller, 235 Or 396, 402-03, 385 P2d 172 (1963) (recognizing
the effect of tender).  Defendants note that the trial court found that
defendants "were ready, willing and able to perform and plaintiff was
denied access to the money because of its wrongful refusal to perform under the
terms of the settlement agreement."  To constitute a tender of money,
however, the money "must actually be produced and made available for the
acceptance and appropriation of the person to whom it is offered."  Id.
at 402.  Alternatively, "[a]n offer in writing to pay a particular sum of
money * * * is, if not accepted, equivalent to the actual production and tender
of the money * * *."  ORS 81.010; see Bembridge, 235 Or at 402
(discussing that statute).
The trial court's findings do not
show that defendants tendered payment to plaintiff.  Rather, as the trial court
found, the record reflects that the parties entered into a settlement
agreement, that defendants requested information that would permit them to
issue checks to plaintiff and its suppliers in the future, and that defendants
were prepared to do so.  The prospect, however, that payment might occur at
some point in the future is not sufficient to defeat plaintiff's claim for
prejudgment interest.
Because we conclude that plaintiff is
entitled to prejudgment interest, we reverse the Court of Appeals decision and
the trial court's judgment on that issue so that the trial court can determine
that amount of prejudgment interest owed and condition plaintiff's specific
performance of the settlement agreement on defendants' payment of $800,000 plus
interest.  In all other respects, the Court of Appeals decision and the trial
court's judgment are affirmed.
The decision of the Court of Appeals
is affirmed in part and reversed in part.  The judgment of the circuit court is
affirmed in part and reversed in part, and the case is remanded to the circuit
court for further proceedings.
1. Although defendants alleged that they promised to pay plaintiff
$896,000 in return for plaintiff's promise to release its claims against them, defendants
proved and the trial court found that defendants had promised to pay only
$800,000.
2. After plaintiff filed its complaint, US Gypsum filed for bankruptcy
and the case proceeded only against BE&K.  Midway through the proceeding,
the bankruptcy court lifted the automatic stay.  US Gypsum adopted BE&K's
pleadings and participated in the bifurcated trial on what became both
defendants' counterclaim.
3. The
Court of Appeals majority understood the dissent to be arguing that Article I,
section 17, which guarantees the right to a jury trial in civil cases, required
the trial court to try plaintiff's claims before defendants' counterclaim. 
Starting from that understanding, the majority found it significant that
plaintiff had not assigned error to the ruling bifurcating the trial and
agreeing to try plaintiff's claims second.   See McDowell Welding
& Pipefitting, 209 Or App at 446 ("[T]he 'big picture' questions
raised and resolved by the dissent simply are not in play.").
4. In reaching that conclusion, the dissent observed that the settlement
agreement, as alleged, could be either an executory accord or a substituted
contract.  209 Or App at 470 (Armstrong, J., dissenting).  The dissent noted
that, when the Oregon Constitution was adopted, an executory accord could be
enforced only in equity while a substituted contract was a legal defense.  Id.
at 468.  Applying certain evidentiary presumptions and resolving perceived
ambiguities in favor of a jury trial, the dissent would have held that
defendants' affirmative defense alleged a substituted contract, not an
executory accord, and thus presented a legal claim to which the state
constitutional right to a jury trial attached.  Id. at 472-73.
5. The dissent refers to defendants' affirmative defense as if it were
part of plaintiff's claims and also refers to trying plaintiff's claims before
trying defendants' counterclaim.  See, e.g., 209 Or App at 463
(Armstrong, J., dissenting).  As explained below, defendants' affirmative
defense is not part of plaintiff's claims; rather, it is a defense to those
claims and arises out of a separate agreement.  The relevant comparison, for
the purposes of Beacon Theatres, is between defendants' affirmative
defense and their counterclaim, and we understand the dissent's reasoning
ultimately to turn on that comparison.
6. An accord and satisfaction may occur in one of two ways:
"The two parties may first make an accord
executory, that is, a contract for the future discharge of the existing claim
by a substituted performance still to be rendered.  When this executory
contract is fully performed as agreed, there is said to be an accord and
satisfaction, and the previously existing claim is discharged.  It is quite possible,
however, for the parties to make an accord and satisfaction without any
preliminary accord executory or any other executory contract of any kind.  [For
example, a] debtor may offer the substituted performance in satisfaction of his
debt and the creditor may receive it, without any binding promise being made by
either party."
Corbin on Contracts § 1276 at 115-16
(footnote omitted); see also Coover v. G & J Electric, 285 Or 247,
249-50, 590 P2d 720 (1979) (describing two types of accord and satisfaction).
7. Corbin explains that:
"[t]he reason that [an executory accord] is not in
itself at once operative as a discharge of the claim is that the agreement does
not so provide.  If it does so provide, it operates accordingly and is a
substituted contract."
Corbin on Contracts § 1269 at 75.
8. We note that the limited judgment that the trial court entered is
consistent with an executory accord and inconsistent with an accord and
satisfaction and also with a substituted contract.  The limited judgment
directed defendants to pay $800,000 to the court clerk, which would have been
unnecessary if defendants had already satisfied their promise to pay that
amount.  Similarly, if the parties had entered into a substituted contract, the
court would not have conditioned plaintiff's obligation to release its claims
on defendants' payment of the funds to the court clerk.  Rather, plaintiff's
release of its claims would have occurred when the parties entered into the
settlement agreement.
9. We express no opinion on whether the reasoning stated in Beacon
Theatres applies under Article I, section 17.  This case does not require
us to decide that issue.
10. Because the amount that defendants owe under the agreement is readily
ascertainable, that condition poses no bar to requiring payment of prejudgment
interest.