Libby Creek Logging, Inc. v. Johnson

• Decision Date: 30 December 1960
• Citation: 358 P.2d 491,225 Or. 336
• Parties: LIBBY CREEK LOGGING, INC., an Oregon Corporation, Appellant, v. Dirk JOHNSON, doing business as J. & S. Timber Company, Respondent.
• Court: Oregon Supreme Court

Page 491

358 P.2d 491

225 Or. 336

LIBBY CREEK LOGGING, INC., an Oregon Corporation, Appellant, v. Dirk JOHNSON, doing business as J. & S. Timber Company, Respondent.

Supreme Court of Oregon, Department 2.

Argued and Submitted Dec. 14, 1960.

Decided Dec. 30, 1960.

Dale Pierson, Salem, argued the cause and filed a brief for appellant.

Robert L. Miller, Gold Beach, argued the cause for respondent. On the brief were Taylor & Miller, Gold Beach.

Before McALLISTER, C. J., and WARNER, SLOAN, O'CONNELL and HOWELL, JJ.

HOWELL, Justice pro tem.

Plaintiff brought an action at law against the defendant upon a promissory note. The defendant, in its answer, admitted the execution of the note and alleged three further and separate defenses including a counterclaim for fraud. The jury awarded the defendant the amount demanded in the counterclaim and plaintiff appeals.

The plaintiff owned certain timberland in Curry county and, after some negotiations, entered into a written contract to sell the timber to defendant. The final contract provided that the defendant was to pay $18,500 for 'all logs removed up to and including 1,000,000 board feet' and $18.50 per thousand for all logs removed over and above one million board feet. The defendant paid $15,000 of the $18,500 in cash and gave plaintiff a promissory note for the balance of $3,500. The note is the subject of this action.

The defendant contends the plaintiff represented the timber had been cruised and that there was at least one million feet of merchantable timber on the property. When defendant logged the property it yielded only 504,250 board feet of logs.

Plaintiff's brief states that two questions are presented for decision on this appeal. (1) Does the contract require the payment of $18,500 for all the logs removed up to and including one million board feet regardless of the amount actually logged, or is the contract ambiguous and, in effect, a timber cutting contract at $18.50 per thousand board feet for the amount actually logged? (2) Was the contract induced by fraudulent representations about the amount of timber on the property?

As plaintiff's first assignment of error it claims the trial court erred in overruling an objection to the introduction of any evidence relating to the defendant's first, second and third answer and counterclaim on the ground that none of them stated facts sufficient to constitute a defense.

The first affirmative answer alleged the contract is ambiguous and should be interpreted as a timber cutting contract based upon a price of $18.50 per thousand board feet of logs and not as a sale in gross for $18,500 for all logs removed up to and including one million board feet. Defendant attached a copy of the agreement and incorporated it by reference. The trial court found that the contract was ambiguous and submitted the construction of the contract to the jury as a question of fact. Exception was taken to this instruction and forms the basis for plaintiff's fourth assignment of error. We shall consider these two assignments together as both raise the question of ambiguity of the contract.

If the provisions of the contract are plain and unambiguous, it is the function of the court to interpret the contract and declare its legal effect. Morey, Administratrix v. Redifer et al., 204 Or. 194, 264 P.2d 418, 282 P.2d 1062; Columbia Digger Sand & Gravel Co. v. Ross Island Sand & Gravel Co., 145 Or. 96, 25 P.2d 911; Wallace v. American Life Ins. Co., 111 Or. 510, 225 P. 192, 227 P. 465.

If the language of the contract is ambiguous, or if technical words, terms of art, or local phrases are used, evidence showing the meaning or interpretation of the contract may be admitted. In such event, the jury should determine the intention of the parties. Dorsey v. Oregon Motor Stages, 183 Or. 494, 194 P.2d 967; Turner v. Jackson, 139 Or. 539, 4 P.2d 925, 11 P.2d 1048; Salem King's Products Co. v. Ramp, 100 Or. 329, 196 P. 401; Henry v. Barker, 61 Or. 276, 118 P. 205, 122 P. 298; Longfellow v. Huffman, 55 Or. 481, 104 P. 961.

It is not necessary to set forth the agreement in full. While the contract mentions the vendor shall pay the taxes; that the timber shall be logged in a good workmanlike manner; the agreement cannot be assigned; and the vendee shall vender an accounting each month, these provisions were pertinent to the logging to be accomplished at $18.50 per thousand for all timber over one million board feet.

We believe that the following provision clearly and unequivocally sets forth the intention of the parties as to the first million board feet of logs:

'* * * said payment of eighteen thousand five hundred dollars ($18,500) previously agreed to, constitutes full and complete payment for all logs removed up to and including 1,000,000 board feet.'

The contract is subject to only one interpretation. It constitutes an agreement to sell all the timber on the property up to and including one million board feet for $18,500. It is not a cutting contract for logs at $18.50 per thousand. Had the parties intended a per-thousand price for the first 'up to and including one million board feet' as they did for the excess over one million, they could have stated it in the same simple terms.

While the first affirmative answer and defense alleged the contract was ambiguous, the defendant attached and incorporated a copy of the contract to the answer. The contract attached prevails over the allegations as to its legal effect. Kelley et ux. v. Mallory et ux., 202 Or. 690, 697, 277 P.2d 767; Strong et al. v. Moore et al., 118 Or. 649, 245 P. 505; Young v. Evans, 104 Or. 619, 208 P. 741. As the contract on its face did not support the allegation of ambiguity, the objection challenging the sufficiency of this defense should have been sustained.

For the same reasons the trial court should not have submitted the interpretation of the contract to the jury.

The plaintiff's objection to the evidence on the second and third affirmative defense and counterclaim for fraud is not tenable. The objection appears to be based upon a claim that damages were not alleged. The counterclaim is in three separate counts and incorporates by reference certain paragraphs of the second further and separate answer and defense. The defendant's pleading in all three defenses falls short of being a model but the plaintiff did not demur or move against them prior to trial. We conclude that the defendant's answer and counterclaim did allege a counterclaim for fraud including the element of damages.

Plaintiff's next assignment of error is that the court should have required the defendant to elect to stand upon the defense of ambiguity alleged in the first separate answer or the defense of fraud. As we have concluded, the contract was not ambiguous, and we need not determine whether defendant could have been forced to elect between these two defenses if the contract had been ambiguous.

The last assignment of error is based upon the refusal of the trial court to grant a nonsuit against defendant's counterclaim for the reason the defendant did not prove the allegations of fraud.

The counterclaim alleges, in substance, that the plaintiff misrepresented the amount of the timber upon the land and the boundary lines of the tract involved.

The...