Court Opinion

ID: 836125
Source: CourtListenerOpinion
Date Created: 2013-03-01 21:13:01.878636+00
Date Added: 2024-06-11T13:06:13.019018
License: Public Domain

Filed:  February 7, 2002
IN THE SUPREME COURT OF THE STATE OF OREGON
NORTHWEST NATURAL GAS COMPANY,
an Oregon corporation,
	Respondent on Review,
	v.
CHASE GARDENS, INC.,
	Petitioner on Review,
	and
KEY BANK OF OREGON,
an Oregon state banking corporation;
WILLAMETTE PRODUCTION CREDIT ASSOCIATION,
an Oregon business;
CENTENNIAL BANK,
an Oregon state banking corporation;
ORIX CREDIT ALLIANCE, INC.,
an Oregon corporation;
TURCO ENGINEERING, INC.,
an Oregon corporation;
BENNO DOBBE,
dba HOLLAND AMERICA BULB FARMS,
a Washington corporation;
WESTAR MARKETING COMPANY,
abn Oregon Natural Gas Development Corporation,
an Oregon corporation;
and STATE ACCIDENT INSURANCE FUND,
an Oregon corporation,
	Defendants.
(CC 16-91-01370; CA A90481; SC S47259)
	On review from the Court of Appeals.*
	Argued and submitted May 8, 2001.
	Robert H. Fraser, of Luvass, Cobb, Richards & Fraser, PC,
Eugene, argued the cause for petitioner on review.  With him on
the briefs were Joe B. Richards and David A. Jacobs, Eugene.
	John R. Faust, Jr., of Schwabe, Williamson & Wyatt,
Portland, argued the cause and filed the briefs for respondent on
review.
	Before Carson, Chief Justice, and Gillette, Leeson, Riggs,
and De Muniz, Justices.**
	DE MUNIZ, 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.  The case is remanded to the
circuit court for further proceedings.
	*Appeal from Lane County Circuit Court, Maurice K. Merten, Judge. 164 Or App 763, 995 P2d 555 (2000).
	**Kulongoski, J., resigned June 14, 2001, and did not
participate in this decision.  Durham and Balmer, JJ., did not
participate in the consideration or decision of this case.
		DE MUNIZ, J.
		In 1991, Northwest Natural Gas (NWNG) brought an action
against Chase Gardens, Inc. (Chase) for breach of contract,
seeking to collect money that Chase owed for natural gas and
natural gas transportation services.  Chase counterclaimed,
alleging breach of contract and intentional interference with
Chase's relationship with its lender, Centennial Bank (the bank). 
The jury found for NWNG on its breach of contract claim and for
Chase on its counterclaims.  The trial court entered judgment for
NWNG on its contract claim and for Chase on its intentional
interference counterclaim.  The trial court did not enter a money
judgment on Chase's breach of contract counterclaim, because the
damages duplicated those of the tort claim.
		NWNG appealed, arguing that the evidence that Chase
presented was not sufficient to permit a jury to find that NWNG
intentionally had interfered with Chase's business relationship
with its lender or had breached any term of the agreement with
Chase.  The Court of Appeals affirmed the tort judgment,
concluding that it was unnecessary to resolve the breach of
contract counterclaim because, as noted above, the damages that
the jury assessed on each claim were duplicative.  Northwest
Natural Gas Co. v. Chase Gardens, Inc., 146 Or App 249, 933 P2d
370 (1997) (Chase I).
		This court allowed review in Chase I and reversed the
decision of the Court of Appeals, concluding that, with regard to
its intentional interference claim, Chase had failed to prove
that NWNG had used improper means that had damaged Chase's
relationship with its lender.  Northwest Natural Gas Co. v. Chase
Gardens, Inc., 328 Or 487, 982 P2d 1117 (1999) (Chase II).  This
court remanded the case to the Court of Appeals to resolve the
issues related to Chase's breach of contract counterclaim.  
		On remand, the Court of Appeals, relying in large part
on its earlier decision (Chase I) and this court's decision on
review (Chase II), concluded that Chase's breach of contract
judgment could not be sustained on either of the theories that
Chase had presented to the jury.  Northwest Natural Gas Co. v.
Chase Gardens, Inc., 164 Or App 763, 995 P2d 555 (2000) (Chase
III).  This court again allowed review, this time to consider
whether the Court of Appeals, consistent with Article VII
(Amended), section 3, of the Oregon Constitution, correctly had
concluded that there was no evidence from which a jury could find
the elements of Chase's breach of contract counterclaim.
		For purposes of this opinion, we rely primarily on the
facts set out in the Court of Appeals' statement of facts in
Chase I, which the parties do not dispute.  
		On review, Chase asserts that, in setting aside the
jury verdict on its breach of contract counterclaim, the Court of
Appeals did not review the evidence in the manner that Article
VII (Amended), section 3, of the Oregon Constitution prescribes. (1) 
Chase contends that, had the Court of Appeals done so, it would
have concluded that there was evidence in the record to support
the jury's verdict on its breach of contract counterclaim. 
		NWNG does not quarrel with this court's
constitutionally limited function in reviewing the record for
evidence to support the jury's verdict.  Rather, it argues that,
for various but related reasons, the Court of Appeals correctly 
set aside the jury's verdict on Chase's breach of contract
counterclaim.
		As a preliminary matter, NWNG asserts that this court
does not need to review the record for evidence to support the
jury's verdict.  NWNG contends that the cause of Chase's damage
under either theory -- tort or contract -- was the same, that
this court's first decision establishes that NWNG's lien caused
the bank to withdraw the line of credit, and that the lien is
what caused Chase to close its doors.  In support of that
assertion, NWNG relies on two statements contained in Chase II
regarding the cause of Chase's damage.  NWNG points out that, in
Chase II, this court stated that, "[b]ased on our review of the
record, we conclude that there was no evidence presented at trial
that NWNG's conduct caused Chase's damage."  328 Or at 501. 
Later, this court stated that, "Chase failed to prove that NWNG's
[January 9] letter caused the bank to revoke Chase's line of
credit."  328 Or at 502. 
		 We reject NWNG's argument that Chase II  resolved any
issue related to the breach of contract counterclaim, and, as
explained below, we also reject the assertion that the jury had
to find that the cause of Chase's damages was the same under both
claims.  The statements from Chase II that NWNG relies on dealt
only with the elements of Chase's intentional interference
counterclaim.  In that opinion, this court refrained from
addressing Chase's breach of contract counterclaim.  As part of
the disposition of that case, this court stated that remand was
necessary "for consideration of the issue presented on appeal
related to Chase's breach of contract claim," and, "[a]s to that
issue, we express no opinion."  328 Or at 503.  Those
dispositional remarks demonstrate unequivocally that this court
considered the breach of contract counterclaim to involve
separate issues that were not resolved in the decision regarding
Chase's intentional interference counterclaim. 
		As noted, on remand, the Court of Appeals relied on its
earlier decision (Chase I) and this court's decision on review
(Chase II) to set aside the jury's verdict on Chase's breach of
contract counterclaim.  First, the court held that, because NWNG
legally was permitted to file the lien, doing so did not violate
any contractual promise, e.g., "we will work with you," that NWNG
allegedly had made to accommodate Chase's agricultural revenue
cycles.  Second, the court held that, even if NWNG had breached
its implied contractual obligation to act in good faith by
"demanding an excessive deposit in the January 9[, 1991,]
letter," there was no evidence that the January 9 letter caused
the bank to withdraw Chase's line of credit and that, "without a
causal connection between NWNG's alleged breach of the implied
duty of good faith and the bank's action, there [was] no basis
for an award of damages."  Chase III, 164 Or App at 767-68.  
		For reasons explained below, we reject the Court of
Appeals' conclusion that the jury's verdict could not be
sustained without evidence of a "causal connection between NWNG's
alleged breach of the implied duty of good faith and the bank's
action."  Id.  We conclude that there is evidence to support the
jury's verdict that NWNG breached its contractual obligation of
good faith and that that breach damaged Chase.  Accordingly, we
confine our analysis to that allegation of breach. 
		Because the jury returned a verdict for Chase, this
court must, in accordance with Article VII (Amended), section 3,
uphold the jury's verdict, unless our review of the record
reveals that there is no evidence from which the jury could have
found the facts necessary to establish the elements of Chase's
breach of contract counterclaim.  See Brown v. J. C. Penney Co.,
297 Or 695, 705, 688 P2d 811 (1984) (illustrating proposition). 
Under that constitutional mandate, our review of the record is
circumscribed by the case actually presented to the jury through 
pleadings, evidence, and jury instructions.
		Chase alleged, as part of its breach of contract
counterclaim, that NWNG had breached the agreement of good faith
and fair dealing by asserting orally and in its letter of January
9, 1991, that it would not release a $49,000 lien that it held
against Chase, unless Chase paid NWNG $100,000.  Chase relied on
that theory at trial.  Indeed, Chase's counsel advanced that
theory to the jury during closing argument, asserting that NWNG
had not acted in good faith by making an excessive demand in the
letter of January 9, by requiring Chase to pay NWNG $100,000 to
secure the release of the $49,000 lien, and by refusing to
negotiate the release of the lien for less than that amount.  
		With regard to that allegation, the trial court
instructed the jury that "Chase Gardens has alleged that
Northwest Natural Gas breached the implied duty of good faith and
fair dealing that exists in every contract in Oregon."   The
court also instructed the jury that "[t]he implied duty of good
faith in every contract is to be applied in the manner that will
effectuate the objectively reasonable expectations of the parties
to the contract."  The trial court provided no further definition
of the implied obligation of good faith, and NWNG took no
exception. (2)  Thus, it was left to the jury to decide how to
construe the letter, NWNG's surrounding conduct, whether NWNG's
conduct was inconsistent with its duty to "effectuate the
objectively reasonable expectations of the parties to the
contract," and, if so, whether Chase was harmed by that conduct.
		On the merits, NWNG first argues that the contents of
its January 9, 1991, letter cannot be "found to be the 'excessive
demand' Chase claims it to have been" and, second, "even if it
were, it did not cause and could not have caused Chase's damage." 
With regard to the first argument, NWNG asserts that the January
9 letter was "unequivocally a proposal for continuation of gas
service" and said nothing about what NWNG demanded for
satisfaction of the lien or what it would do if the validly
liened amount were tendered.  Thus, NWNG maintains that the
January 9 letter could not be construed as an "excessive demand"
and could not, as a matter of law, constitute a breach of the
contract with Chase.  
		The jury was not required to construe the January 9,
1991, letter as NWNG asserts.  Instead, the jury could have found
that the letter involved much more than whether NWNG would
continue gas service.  NWNG knew that Chase's revenue was
cyclical when it entered into the contract and it also knew that
Chase needed the Valentine's Day season to survive.  Further,
there is evidence that, before writing the January 9 letter,
NWNG's credit manager warned his superiors that, if Chase stayed
in business, NWNG would have to deal with Chase again the next
year.  The jury could have found that the January 9 letter was an
"excessive demand," because the letter revealed an intent on
NWNG's part not to accept less than twice what NWNG was entitled
to as a condition for removing the lien and not to negotiate a
removal of the lien for less, because NWNG's intended purpose was
to close Chase down rather than to continue the existing
relationship.  We conclude that there is evidence in the record
to support a finding by the jury that NWNG breached its implied
obligation of good faith.
		Turning to NWNG's second argument, it contends, as
noted above, that the cause of Chase's damages under its tort or
contract counterclaim was the same.  Therefore, NWNG argues that
the Court of Appeals was correct on remand when it held that,
even if NWNG did breach its obligation of good faith, "the
Supreme Court's conclusion that there is no evidence that the
January 9 letter caused the bank to withdraw Chase's line of
credit means that the breach did not cause Chase any harm. * * * 
[W]ithout a causal connection between NWNG's alleged breach of
the implied duty of good faith and the bank's action, there is no
basis for an award of damages."  Chase III, 164 Or App at 767-68. 
We disagree.
 	The intentional interference counterclaim focused on
the effect that NWNG's conduct had on the relationship between
Chase and the bank, its lender.  The breach of contract
counterclaim, however, presented a separate theory of liability
to the jury concerning the relationship between Chase and NWNG
directly.  As noted, the trial court instructed the jury that the
obligation of good faith is implied in every contract in Oregon. 
Also, the trial court instructed the jury, in part, that it could
award damages to Chase if it found that "Chase Gardens was
actually damaged by Northwest Natural Gas Company's breach of a
term in any agreement that existed." (3)  Under that theory and
given those instructions, the jury was entitled to determine
whether NWNG's conduct, as evidenced by the January 9, 1991,
letter, played a role in the demise of the business. (4)  Therefore,
the lack of any connection between the January 9, 1991, letter
and the bank's withdrawal of the line of credit was not
dispositive of Chase's breach of contract counterclaim.  The
Court of Appeals' conclusion to the contrary was incorrect.
		Nevertheless, NWNG argues that there is no evidence in
the record that Chase understood the January 9 letter to be a
refusal to lift the lien for the lawful amount -- which Chase
could have compelled -- or that the alleged "excessive demand"
influenced Chase to shut off the gas and close down the business. 
		In exercising review under Article VII (Amended),
section 3, we do not weigh evidence; rather, we consider the
evidence, including inferences, in the light most favorable to
the party that prevailed before the jury.  See Jacobs v.
Tidewater Barge Lines, 277 Or 809, 811, 562 P2d 545 (1977) (so
stating).  In this case, that was Chase.  
		On cross examination, in response to a question about
the cause of the closure of Chase Gardens, President William
Chase testified that, "when I got the message that there was
absolutely no negotiations and opportunity to remove the crop
lien that had killed our line of credit, that was what did it
right there."  As noted above, there was evidence that NWNG was
made aware of the cyclical nature of Chase's revenue prior to
entering into the contract with Chase, knew that Chase was
vulnerable financially, and knew that Chase needed the
Valentine's Day returns to survive.  From that evidence and Mr.
Chase's testimony, the jury could have found that NWNG's
excessive demand in the January 9th letter precipitated the
closure of the business.  Given the instructions that the jury
received, that was all that the jury was required to find in
order to determine that NWNG had breached its implied obligation
of good faith and that the breach actually harmed Chase. 
Therefore, under Article VII (Amended), section 3, we are
required to sustain the jury's verdict on the breach of contract
counterclaim.  
		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.  The case is remanded to
the circuit court for further proceedings.



1. 	Article VII (Amended), section 3, of the Oregon       
Constitution provides:

		"In actions at law, where the value in controversy
shall exceed $750, the right of trial by jury shall be
preserved, and no fact tried by a jury shall be
otherwise re-examined in any court of this state,
unless the court can affirmatively say there is no
evidence to support the verdict."

(Emphasis added.)

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2. 	No question regarding the accuracy or appropriateness
of the instruction relating to the implied obligation of good
faith is before us in this case.

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3. 	The entire jury instruction provided:

	     "In order for Chase Gardens to recover on its
claim of breach of contract, you must find the
following elements have been proven by Chase Gardens by
a preponderance of the evidence:  That there was a
contract containing the terms that Chase Gardens claims
was breached; that Chase Gardens performed its
obligations under any agreement that existed; that
Northwest Natural did not perform its obligations under
any agreement that existed; and that Chase Gardens was
actually damaged by Northwest Natural Gas Company's
breach of a term in any agreement that existed." 
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4. 	NWNG did not argue in the trial court and does not
argue on appeal that Chase's theories of recovery were 
inconsistent factually; neither did NWNG take exception to the
jury's separate verdicts on that ground.
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