Snow Mountain Pine, Ltd. v. Tecton Laminates Corp.

• Jurisdiction: Oregon
• Court: Oregon Court of Appeals
• Writing for the Court: DURHAM; LANDAU
• Citation: Snow Mountain Pine, Ltd. v. Tecton Laminates Corp., 869 P.2d 369, 126 Or.App. 523 (Or. App. 1994)
• Decision Date: 23 February 1994
• Parties: SNOW MOUNTAIN PINE, LTD., Appellant, v. TECTON LAMINATES CORP., Respondent. 91-12-10176-E, 91-10-10148-E; CA A75677. Court of Appeals of Oregon, In Banc

Page 369

869 P.2d 369

126 Or.App. 523

SNOW MOUNTAIN PINE, LTD., Appellant, v. TECTON LAMINATES CORP., Respondent.

91-12-10176-E, 91-10-10148-E; CA A75677.

Court of Appeals of Oregon,

In Banc.

Argued and Submitted Feb. 17, 1993.

Resubmitted In Banc Dec. 8, 1993.

Decided Feb. 23, 1994.

Barbee B. Lyon argued the cause for appellant. With him on the briefs were William F. Martson, Jr., James C. Loy and Tonkon, Torp, Galen, Marmaduke & Booth.

John S. Ransom argued the cause for respondent. With him on the brief was Ransom, Blackman & Weil.

DURHAM, Judge Pro Tem.

Plaintiff appeals from a judgment on an arbitration award. ORS 36.365. It assigns error to the court's orders abating the action and compelling arbitration, designating an arbitration panel ¹ and refusing to set aside the arbitration award. We reach only the first two issues. We reverse the judgment and remand for further proceedings.

The dispute in this case stems from four agreements between defendant, which owns a lumber mill that makes laminated veneer, and plaintiff, ² which owns an adjacent sawmill. Defendant's sole shareholder was the principal partner in the company from which plaintiff purchased the sawmill.

The parties entered into the agreements in connection with plaintiff's purchase of the sawmill. Two of the agreements are in dispute. The first agreement, known as the "Log Supply Agreement," provided that plaintiff would transfer to defendant certain logs that it obtained from the United States Forest Service. The agreement specified that title to the logs would pass to defendant as soon as the logs reached plaintiff's log yard, but that defendant would pay for the logs when plaintiff was required to pay the Forest Service. The second agreement, the "Log Yard Agreement," provided that plaintiff would unload, scale, sort, deck and deliver the logs that it transferred to defendant. The agreement also provided that plaintiff would deliver steam and electricity to defendant which, in exchange, would deliver all of its hog fuel (i.e., waste wood products) to help produce the steam and electricity. The parties signed all of the agreements on the same day, and each contains an "entire agreement" clause that refers to the other agreements. For example, the Log Yard Agreement provides, as material:

"Entire Agreement. This Agreement, the Lease, the Log Supply Agreement and the documents delivered in connection with the Acquisition constitute the entire agreement between the parties concerning the subject matter hereof * * *."

The Log Yard Agreement also contains an arbitration clause, which provides, in part:

"Any controversies or claims arising out of or relating to this Agreement or the breach thereof, shall be settled by arbitration in Portland, Oregon, in accordance with the then current rules of the American Arbitration Association * * *."

Although the three agreements contain several duplicated provisions, only the Log Yard Agreement contains an arbitration clause.

In 1991, plaintiff sought arbitration of a dispute under the Log Yard Agreement. Defendant raised counterclaims, some of which concerned disputes under the Log Supply Agreement. The parties agreed to submit all of the disputes to arbitration.

When additional disputes arose concerning defendant's payments under the Log Supply Agreement, plaintiff refused to deliver additional logs, declared the agreement terminated and brought this action for damages and a declaration that defendant was in breach of the contract. Defendant moved to abate the action and to compel arbitration. The trial court granted the motion and also ordered that the panel that heard the earlier dispute under the Log Yard Agreement should hear this case as well.

Plaintiff argues that the court erred in compelling arbitration, because the dispute arose under the Log Supply Agreement, and it contains no arbitration clause. It contends that the arbitration clause in the Log Yard Agreement applies only to controversies or claims arising out of that agreement, and this dispute does not meet that description.

Defendant's motion to abate plaintiff's action and to compel arbitration is governed by ORS 36.315, which provides:

"If any action, suit or proceeding is brought upon any issue arising out of an agreement which contains a provision for arbitration of the matter in controversy in such action, suit or proceeding, then, upon application, any judge of a circuit court, upon being satisfied that the issue is referable to arbitration, shall abate the action, suit or proceeding so that arbitration may be had in accordance with the terms of the agreement. The application shall be heard similarly to hearings on motions."

The court examined the parties' pleadings and agreements to determine whether the action was "referable to arbitration" under the statute. The complaint alleges, as material:

"5.

"Paragraph 5(a) of the Log Supply Agreement requires Tecton to pay SMP [plaintiff] for associated species logs [ASL] acquired by SMP directly from the United States Forest Service in accordance with the schedule contained in paragraph 5(a). Specifically,

" 'Tecton [defendant] shall pay (i) SMP's Allocated Stumpage Costs with respect to ASL delivered during any month on or before the 25th day of the following month, and (ii) the Log Yard and Logging Costs and Reasonable Administrative Fees (A) on or before the 25th day of the month in which the ASL is delivered, with respect to ASL delivered on or after the first day to and including the 15th day of each month, and (B) on or before the 10th day of the month following the month in which the ASL is delivered, with respect to ASL delivered on or after the 16th day of the month to the end of the month.'

"6.

"SMP asserts and Tecton denies that Tecton has breached its obligation to SMP under paragraph 5(a) of the Log Supply Agreement in at least the following particulars:

"a. Tecton has failed to pay SMP, on or before September 25, 1991, for SMP's Log Yard and Logging Costs and Reasonable Administrative Fees, for logs delivered during the first half of September, in the amount of $75,577.45.

"b. Tecton has failed to pay SMP, on or before October 10, 1991, for SMP's Log Yard and Logging Costs and Reasonable Administrative Fees for logs delivered in the latter half of September, in the amount of $62,923.46.

"c. Tecton has failed to pay SMP, on or before October 25, 1991, for SMP's Allocated Stumpage Costs with respect to ASL delivered during September, in the amount of $42,915.47.

"d. Tecton has failed to pay SMP, on or before October 25, 1991, for SMP's Log Yard and Logging Costs and Reasonable Administrative Fees for logs delivered in the first half of October, in the amount of $63,445.77 "e. Tecton has failed to pay SMP, on or before November 10, 1991, for SMP's Log Yard and Logging Costs and Reasonable Administrative Fees for ASL delivered during the latter half of October, in the amount of $67,401.14.

"f. Tecton has failed to pay SMP, on or before November 25, 1991, for SMP's Allocated Stumpage Costs with respect to ASL delivered during October, in the amount of $22,602.49.

"g. Tecton has failed to pay SMP, on or before November 25, 1991, for SMP's Log Yard and Logging Costs and Reasonable Administrative Fees for ASL delivered during the first half of November, in the amount of $72,838.44."

The complaint also generally alleges that plaintiff had performed all conditions precedent to defendant's performance, and that defendant's material breaches entitles it to damages and to relief from any future obligations under the Log Supply Agreement.

Plaintiff asserts that the Log Supply Agreement is the only agreement that is relevant to the dispute described in the complaint, and it does not contain an arbitration clause. That begs the question of what is the parties' agreement. When parties contemporaneously execute multiple agreements that address interrelated subjects, we are bound to construe them together as one contract to discern the parties' intent. Hays v. Hug, 243 Or. 175, 177, 412 P.2d 373 (1966); Waxwing Cedar Products v. C & W Lumber, 44 Or.App. 167, 170, 605 P.2d 719 (1980).

"When a written instrument refers in specific terms to another writing as containing part of the agreement, the other writing is itself a part of the contract between the parties." Weber v. Anspach, 256 Or. 479, 483, 473 P.2d 1011 (1970).

The Log Supply Agreement and Log Yard Agreement recite that they "constitute the entire agreement between the parties concerning the subject matter hereof * * *." We will construe them together to determine whether the parties intended to arbitrate any issues arising out of the agreement that contains the arbitration clause.

We are bound to construe the arbitration agreement liberally to enhance arbitrability.

"Oregon's policy is to construe general arbitration agreements broadly to enhance arbitrability of disputes. Cf. Abbott v. Bob's U-Drive, et al, 222 Or 147, 153-55, 352 P2d 598, 81 ALR 2d 793 [1960] (arbitration statutes liberally construed); Corvallis Sch. Dist. v. Corvallis Education Assn., 35 Or App 531, 535, 581 P2d 972 (1978) (arbitration clauses to be interpreted in manner which favors coverage of the dispute)." Budget Rent-A-Car v. Todd Investment Co., 43 Or.App. 519, 524, 603 P.2d 1199 (1979).

Under that policy, arbitration is required, unless we can say with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute, and we resolve all doubts in favor of coverage. Portland Assn. of Teachers v. School District No. 1, 51 Or.App. 321, 325, 625 P.2d 1336 (1981).

"The presence of ambiguous language in a contract, whether in the arbitration clause or the substantive portions of the contract itself, is precisely the situation in which the question of arbitrability is one to be decided by the arbitrator." 51 Or.App. at 327, 625 P.2d 1336.

In determining whether an...