Timber Access Industries Co. v. U.S. Plywood-Champion Papers, Inc., PLYWOOD-CHAMPION

CourtSupreme Court of Oregon
Citation503 P.2d 482,263 Or. 509
Parties, 11 UCC Rep.Serv. 994 TIMBER ACCESS INDUSTRIES CO., Respondent, v. U.S.PAPERS, INC., Appellant.
Decision Date24 November 1972

Barnes H. Ellis, Portland, argued the cause for appellant. With him on the briefs were Davies, Biggs, Strayer, Stoel & Boley, and David P. Miller and Milton R. Stewart, Portland.

James R. Moore and Ridgway K. Foley, Jr., Portland, argued the cause for respondent. With them on the brief were Souther, Spaulding, Kinsey, Williamson & Schwabe, and J. Laurence Cable, Portland.


HOLMAN, Justice.

Plaintiff, Timber Access Industries Co. (Timber Access), brought an action for breach of contract against defendant, U.S. Plywood-Champion Papers, Inc. (Plywood). From a judgment for plaintiff entered pursuant to a jury verdict, Plywood appeals.

Timber Access purchased timber at a U.S. Forest Service sale and entered into a contract to sell to Plywood therefrom, at a specific price, six million board feet of 'peeler' logs to be delivered to Plywood's Williamina plant. The contract was in writing and was signed by Frank Ramsey, president of Timber Access, and by James W. Girard, operations manager of Plywood's Willamina plant.

The contract contained the following provisions:

'4.1 Seller shall log the Timber Sale and deliver approximately 6 M M.b.f. of logs as covered by this agreement between May 2, 1966, and November 30, 1966.

'4.2 In no event shall Purchaser be required to buy logs after November 30, 1966, in excess of the 6 M M.b.f.'

During the course of the contract, the log market weakened and the price went down. On November 23, 1966, Plywood wrote a letter to Timber Access, informing it that Plywood would not accept any log deliveries after November 30. The letter was signed by Leonard Kostur, who had succeeded Girard as operations manager of the Willamina plant. By the time Plywood terminated acceptance of deliveries, it had received 4,185,910 board feet of logs. The first issue in the case is whether Plywood's obligation to purchase six million board feet of logs was unconditional or whether it was on the condition that the logs were to be delivered by November 30.

Plywood first contends that the trial court erred because it did not give judgment to Plywood upon the pleadings. It argues that the contract is not ambiguous in that it provides that before there was an obligation to take six million board feet, the logs must have been delivered by November 30. Had paragraph 4.2 not been in the contract, Plywood's contention would be correct. Paragraph 4.1 is clear enough and provides that the logs must be delivered by November 30. However, the inference of the provisions of paragraph 4.2 is that Plywood was required to accept logs after November 30 up to a total of six million board feet. Because the provisions of the two paragraphs are inconsistent, the contract is ambiguous. The trial court did not err in refusing to grant judgment on the pleadings.

Plywood next contends that a nonsuit should have been granted since the evidence bearing upon the parties' intentions indicated that the purchase was conditioned upon the delivery of the logs by November 30. We hold that the evidence was not such as to be conclusive of the parties' intent. It was a jury question.

Over defendant's objection that it was hearsay, the court permitted Ramsey, plaintiff's president, to testify that after he had received the letter from Kostur refusing to take logs after November 30, he called Girard, who was then the operations manager of Plywood's Gold Beach plant, and was told by Girard that it had been his intent to buy the logs unconditionally and that Plywood had bought and was obligated to take six million board feet of logs. Girard died prior to trial. Plywood contends the court erred in receiving this testimony.

The presently recognized definition of hearsay is stated in McCormick on Evidence § 246, at 584 (2d ed. 1972):

'* * * Hearsay evidence is testimony in court, or written evidence, of a statement made out of court, the statement being offered as an assertion to show the truth of matters asserted therein, and thus resting for its value upon the credibility of the out-of-court asserter.' (Emphasis in original; footnote omitted.)

Because the person making the statement is not under oath nor is subject to cross-examination, and the jury has no opportunity to observe or to evaluate his demeanor, the truthfulness of the statement is suspect.

There is no doubt that the testimony in question is hearsay. Girard's out-of-court statement was used for the purpose of proving that Plywood unconditionally agreed to purchase six million board feet of logs. Therefore, unless the testimony came within an exception to the hearsay rule, it was not admissible. The exceptions to the rule usually encompass situations in which the out-of-court statements are made under circumstances which guarantee the probable trustworthiness of the statements.

Plaintiff first argues that Girard's statement comes within the vicarious admission exception to the hearsay rule because it was made by Girard as Plywood's agent. McCormick points out that in the past most cases have held that the admissibility of an agent's statement against the principal is governed by the same test used to determine the substantive liability of the principal for the agent's acts. In other words, the determining factor was whether the admission was spoken within the scope of the authority of the agent to speak or to write for his employer. This principle was most frequently applied to postaccident admissions made by agents involved in the accident. The statements usually have been held inadmissible on the basis that the uttering of admissions for their principals was outside the scope of their employment. McCormick states at 641, § 267:

'* * * This is the logical application of these tests, but the assumption that the test for the master's responsibility for the agent's Acts should be the test for using the agent's statements as Evidence against the master is a shaky one. The rejection of such post-accident statements coupled with the admission of the employee's testimony on the stand is to prefer the weaker to the stronger evidence. The agent is well informed about acts in the course of the business, his statements offered against the employer are normally against the employer's interest, and while the employment continues, the employee is not likely to make the statements unless they are true. Moreover, if the admissibility of admissions is viewed as arising from the adversary system, responsibility for statements of one's employee is a consistent aspect. Accordingly, the trend is in the direction of broader admissibility of admissions by agents, exemplified by the Model Code provision which lets in the agent's statement, if 'the declaration concerned a matter within the scope' of the declarant's employment 'and was made before the termination of the agency or employment. Cases in increasing number support this wider test. Its acceptance by courts generally seems expedient.' (Emphasis in original; footnotes omitted.)

The present state of the Oregon law is illustrated by Hansen v. Oregon-Wash. R. & N. Co., 97 Or. 190, 218--219, 188 P. 963, 972, 191 P. 655 (1920). This court said:

'* * * Stated broadly, the rule which allows admissions of an agent in an action against his principal applies only in two cases: (1) Where the agent is authorized to make an admission, as, for example, an attorney in the course of a trial; and (2) 'where the admission is in the form of a declaration made by an agent, while acting within the scope of his agency, and about the business of his principal, concerning such business.' A declaration made by the agent Dum fervet opus tends to characterize the act which the agent is doing for his principal at the time, and is admissible on the theory that the whole transaction ought to appear, including not only what was done, but also what was said. Where, however, the declaration related to a past transaction in which the agent has acted for the principal, it is a mere historical narrative, and is inadmissible, unless the agent is empowered to make the admission for his principal * * *.'

By virtue of his transfer to Gold Beach, Girard was no longer acting within the scope of his agency to conduct Plywood's business at Willamina at the time he made the statement. Had he continued as manager of the Willamina plant during the fulfillment of the contract and during which it was his business to act for Plywood in relation to the contract, his statement would have been admissible against Plywood, even under the restrictive Oregon rule. However, it is doubtful whether even the Model Code provision would admit the evidence in question because of the requirement of the Code that the declaration be made before the termination of the agency or employment.

Plaintiff contends that Girard had apparent authority to speak concerning the contract when he made the statement. There is no factual basis for believing that Girard had such authority, nor was there any evidence of action by plaintiff in reliance upon the statement.

Plaintiff further contends that the testimony comes within the spontaneous declaration exception to the hearsay rule which admits declarations of a state of mind to show memory or belief as proof of a previous happening. Plaintiff claims that Girard's statement was admissible as a declaration of his mental state or belief, at the time he spoke the words to Ramsey, that he, Girard, had unconditionally purchased for Plywood six million board feet of logs. Plaintiff then argues it may be inferred from this present mental state that at the time of making the contract Girard did so unconditionally buy the logs. Generally speaking, courts have not...

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