Court Opinion

ID: 9571853
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:35:45.423791+00
Date Added: 2024-06-11T12:31:05.759749
License: Public Domain

LANDAU, J.,
dissenting.
This case presents a straightforward question of contract construction: Does plaintiffs lawsuit arise out of or relate to a Log Yard Agreement, which contains an arbitration clause, or a Log Supply Agreement, which does not? The *534majority concludes that the lawsuit arises out of or relates to the Log Yard Agreement, and so it is subject to the arbitration clause. The problem with that conclusion is that it cannot be squared with the nature of the parties’ dispute, the language of their agreements and the law under which those agreements should be interpreted. In my view, a correct reading of the complaint and the agreements leads to the conclusion that the lawsuit arises out of the Log Supply Agreement only and, consequently, it is not subject to arbitration. Accordingly, I respectfully dissent.
To understand the proper disposition of this case, more about the contracts at issue and the nature of the parties’ dispute must be understood than is set out in the majority’s opinion. The parties in this case executed four separate agreements in connection with the purchase of a sawmill. Two of the agreements are relevant in this case.
First, in the Log Supply Agreement, plaintiff agreed to sell to defendant logs that plaintiff obtained from the United States Forest Service (Forest Service). The agreement provides that, although title to the logs would pass to defendant when they were unloaded and scaled, defendant was not required to pay for them until the date plaintiff had to pay the Forest Service. Second, in the Log Yard Agreement, plaintiff agreed to lease defendant a place to store the logs and to provide certain services related to the processing of those logs.
Both agreements contain payment provisions. The Log Supply Agreement contains the following provision at paragraph 5:
“[Defendant] shall pay (i) [plaintiffs] Allocated Stumpage Costs * * * (ii) the Log Yard and Logging Costs and Reasonable Administrative Fees * *
“Allocated Stumpage Costs,” “Logging Costs” and “Reasonable Administrative Fees” are defined in the Log Supply Agreement. The “Log Yard” costs that defendant must pay under the Log Supply Agreement are defined by cross-reference to the Log Yard Agreement, “whether or not the Log Yard Agreement is then in effect.” The Log Yard Agreement provides that defendant will pay plaintiff, ‘ ‘to the extent *535not paid under the Log Supply Agreement,” a fee of $8 per thousand board feet of logs.
Both agreements contain multiple provisions that are identical to one another. For example, both contain identical provisions concerning the status of parties, notice, applicable law, waiver, assignments, third-party beneficiaries, severability, integration and force majeure. Of the two agreements, however, only one — the Log Yard Agreement —contains an arbitration clause, which provides:
“Any controversies or claims arising out of or relating to this Agreement or the breach thereof, shall be settled by arbitration * *
In 1991, defendant encountered financial difficulties, which precipitated several disputes with plaintiff. In one of those disputes, not the subject of this action, plaintiff complained that defendant had failed to perform certain obligations under the Log Yard Agreement. Because the dispute arose out of the Log Yard Agreement, it went to arbitration. Defendant asserted a number of counterclaims in the arbitration, at least one of which arose out of the Log Supply Agreement. Plaintiff acquiesced in the arbitration of all of those claims and counterclaims.
Another dispute arose out of defendant’s failure to make the payments for logs delivered in accordance with paragraph 5 of the Log Supply Agreement. When defendant became insolvent, plaintiff demanded adequate assurances under ORS 72.6090 before delivering any more logs to defendant. When it received no such assurances, plaintiff demanded payment in advance of delivery. Meanwhile, plaintiff stored the logs it purchased from the Forest Service at a satellite log yard.
Plaintiff then initiated this action for breach of contract and declaratory judgment. In its complaint, plaintiff alleged that it had delivered logs to defendant, as required in the Log Supply Agreement. It alleged that it had invoiced defendant for those logs, in accordance with the Log Supply Agreement, and that defendant had failed to make the payments required under the Log Supply Agreement. It further alleged that it had provided defendant with all appropriate *536notices required by the Log Supply Agreement, that defendant’s actions constituted a breach of the Log Supply Agreement, and that the court should declare the Log Supply Agreement terminated.
The complaint does not mention the Log Yard Agreement.
Defendant moved for an order abating the action on the ground that the controversy was subject to arbitration. According to defendant, when the Log Yard Agreement provided for arbitration of controversies or claims arising out of or relating to “this Agreement,” it meant all of the agreements that were executed in connection with the purchase of the sawmill, not just the Log Yard Agreement. The trial court disagreed with defendant’s reading of the arbitration clause. It found that
“if we’re starting with a clean slate I would agree with Plaintiffs position, at least so far as the — the fact that at least on the face of the agreements it appears that since it’s a matter of contract, the — language of the agreements show that they do not have the same subject matter, and at least from my point of view they’re not intertwined in a manner that would force arbitration.”
Nevertheless, the trial court granted defendant’s motion. It decided that, although the language of the arbitration provision in the Log Yard Agreement did not appear to require arbitration of disputes arising under the Log Supply Agreement, the fact that the parties had previously agreed to arbitrate a Log Supply Agreement dispute was evidence that the parties intended the arbitration clause in the Log Yard Agreement to apply to disputes arising out of both contracts.
On appeal, plaintiff argues that the trial court erred in ordering the parties to arbitrate plaintiffs claim that defendant had breached the Log Supply Agreement, because that agreement contains no arbitration clause. Defendant argues, as it did before the trial court, that the arbitration clause in the Log Yard Agreement should be construed to apply even to Log Supply Agreement disputes, because both *537agreements are really part of a single agreement for the purchase and sale of the sawmill.1
We are always constrained to construe contracts so that all parts are given effect and none are ignored. Automotive Equipment Co. v. 3 Bees Logging Co., 251 Or 105, 111, 444 P2d 1019 (1968); Standley v. Standley, 90 Or App 552, 556, 752 P2d 1284, rev den 306 Or 413 (1988). We are, likewise, to avoid creating inconsistencies or interpreting contract terms in a manner that cannot reasonably be supported by the language to which the parties actually agreed. Swanson v. Warner, 125 Or App 524, 528, 865 P2d 493 (1993). Construing the reference to “this Agreement” in the Log Yard Agreement to mean all four agreements executed in connection with the purchase runs afoul of these basic principles of construction.
The language of the Log Yard Agreement makes clear that disputes “arising out of or relating to this Agreement” refers to the Log Yard Agreement alone. At one point in the Log Yard Agreement, for example, a distinction is drawn between “[t]his Agreement, the Lease, the Log Supply Agreement and the documents delivered in connection with the Acquisition” of the sawmill. “This Agreement” is not the Log Supply Agreement, nor is it the lease agreement or the purchase agreement; those are separately referenced by name. To construe “this Agreement” as defendant suggests would mean that the clause really means “the Log Supply Agreement, the Lease, the Log Supply Agreement and the documents delivered in connection with the Acquisition.” That makes no sense.
Similarly, the notice clause in the Log Yard Agreement specifies how notice must be given in case of breach of *538specified paragraphs that are unique to “this Agreement.” Moreover, the notice clause in the Log Yard Agreement requires that notice given pursuant to “this Agreement” be accomplished in a different manner than is described in the other agreements. If “this Agreement” means “the Log Supply Agreement, ’ ’ or worse, all four agreements, the reference becomes absurd.
In the same manner, the assignment clause in the Log Yard Agreement provides for transfers of interest pursuant to section 6(f) of “this Agreement.” The words “this Agreement” must refer to the Log Yard Agreement only, because there is no section 6(f) in the other agreements.
In short, every reference to “this Agreement” in the Log Yard Agreement clearly and unambiguously refers to the Log Yard Agreement, and not to the other instruments executed the same day. To adopt defendant’s proposed construction of the arbitration clause would require us to ignore that fact. It would require us either to construe “this Agreement” to refer to all four related contracts whenever the phrase appears in the Log Yard Agreement or to construe the same phrase to mean one thing on one paragraph and another thing in another paragraph. Neither alternative is reasonable.
The majority posits an alternative theory for requiring arbitration in this case, albeit one that was not argued by the parties. According to the majority, even if the reference to “this Agreement” in the arbitration clause of the Log Yard Agreement refers only to that agreement, the parties’ dispute in this case arises out of or relates to that agreement. The majority reasons that, although the complaint alleges only that defendant failed to pay amounts due under paragraph 5 of the Log Supply Agreement, one of the amounts due under paragraph 5 is defined by cross-reference to the Log Yard Agreement, and that makes plaintiffs dispute one “arising out of or relating to” the Log Yard Agreement. I have several problems with that reasoning.
To begin with, I harbor some misgivings about the majority deciding this matter of contract construction on a basis that was not argued to us. It is inconsistent with a substantial body of law holding that the parties to an appeal *539are restricted to the theory upon which their case was argued. See, e.g., Millers Mut. Fire Ins. Co. v. Wildish Const. Co., 306 Or 102, 107, 758 P2d 836 (1988); Kentner v. Gulf Ins. Co., 298 Or 69, 74, 689 P2d 955 (1984); Leiser v. Sparkman, 281 Or 119, 122, 573 P2d 1247 (1978); Bergman v. Holden, 122 Or App 257, 260, 857 P2d 217, rev den 318 Or 170 (1993). Moreover, it strikes me as risky business to attempt to construe complex and highly technical agreements without the benefit of briefing and argument by the parties to the agreements.
Further, the majority’s line of reasoning ignores the nature of plaintiffs complaint and flatly conflicts with the language of both agreements. The only dispute alleged in plaintiff’s complaint involves defendant’s failure to pay “Allocated Stumpage Costs * * * Log Yard and Logging Costs and Reasonable Administrative Fees.” The obligation to make those payments arises only under paragraph 5 of the Log Supply Agreement, not the Log Yard Agreement. To reach that conclusion requires no exercise in contract construction; it is what the Log Supply Agreement says. Not even defendant suggests otherwise.
To be sure, the Log Supply Agreement describes the amount due for one of the categories of payments — Log Yard Costs — by way of cross-reference to the Log Yard Agreement, which specifies a payment of $8 per thousand board feet of lumber. The majority theorizes that the reference to Log Yard Costs must mean that there is a dispute about whether the parties performed their obligations under the Log Yard Agreement. I do not understand why that is so. Plaintiff alleges a breach of defendant’s obligation to pay Log Yard Costs as stated in the Log Supply Agreement, not the Log Yard Agreement. Indeed, the Log Supply Agreement provides that the Log Yard Costs are to be whatever amount is stated in the Log Yard Agreement “whether or not the Log Yard Agreement is then in effect.” In other words, as far as payments due under the Log Supply Agreement are concerned, obligations under the Log Yard Agreement are irrelevant.
That the obligation to pay the Log Yard Costs under paragraph 5 of the Log Supply Agreement arises out of that agreement, and no other, is further borne out by the Log Yard *540Agreement itself, which says that an obligation to pay Log Yard Costs is imposed by the Log Yard Agreement only “to the extent [Log Yard Costs are] not paid under the Log Supply Agreement.” Again, that reading of the language in the agreements requires no exercise of construction of ambiguous terms. It is what the agreements say. And no party suggests otherwise.
Even if the majority is correct that the dispute arising out of defendant’s failure to pay the Log Yard Costs is arbitrable, I do not understand why it makes plaintiffs entire case subject to arbitration. Plaintiffs complaint alleges that defendant breached the Log Supply Agreement by failure to pay “Allocated Stumpage Costs * * * Log Yard and Logging Costs and Reasonable Administrative Fees.” Even if the failure to pay Log Yard Costs arguably implicates the Log Yard Agreement, the failure to pay other costs does not. Those costs are defined by the Log Supply Agreement. The obligation to pay them arises under the Log Supply Agreement. And the services for which they are required are described in the Log Supply Agreement. At the very least, the trial court erred in ordering the entire case arbitrated when, even under the majority’s analysis, only one portion of it arguably arises under the Log Yard Agreement.
Warren, Deits and Edmonds, JJ., join in this dissent.

 Defendant also argues that, because plaintiff previously acquiesced to arbitration of a claim brought under the Log Supply Agreement, it should be judicially estopped from taking a different position in this case. ‘ ‘Judicial estoppel’ ’ precludes a party from successfully asserting one position in court and then later taking a contradictory position on the same issue. Caplener v. U.S. National Bank, 317 Or 506, 518, 857 P2d 830 (1993); see also Stevens Technical Services, Inc. v. SS Brooklyn, 885 F2d 584, 588 (9th Cir 1989); Allen v. Zurich Ins. Co., 667 F2d 1162, 1167 (4th Cir 1982). The doctrine applies only when the party asserting it establishes that it detrimentally relied on the position taken in the earlier proceeding. Marshall v. Korpa, 118 Or App 144, 148, 846 P2d 445, rev den 316 Or 528 (1993). Here, defendant makes no argument that it has detrimentally relied on a position that plaintiff previously asserted in court.