U.S. Nat. Bank of Oregon v. Caldwell

• Citation: 60 Or.App. 639,655 P.2d 180
• Decision Date: 23 February 1983
• Docket Number: No. 80-84,80-84
• Parties: UNITED STATES NATIONAL BANK OF OREGON, as Personal Representative of the Estate of Anthony Brandenthaler, Deceased, and Mary Brandenthaler, Respondents, v. Harold D. CALDWELL, Appellant, and Ann Anderson and Ronald A. Barnes, Appellants. ; CA A21083.
• Court: Court of Appeals of Oregon

Page 180

655 P.2d 180

60 Or.App. 639

UNITED STATES NATIONAL BANK OF OREGON, as Personal

Representative of the Estate of Anthony

Brandenthaler, Deceased, and Mary

Brandenthaler, Respondents, v. Harold D. CALDWELL, Appellant, and Ann Anderson and Ronald A. Barnes, Appellants.

No. 80-84; CA A21083.

Court of Appeals of Oregon.

Argued and Submitted March 12, 1982.

Decided Dec. 8, 1982.

Reconsideration Denied Jan. 28, 1983.

Review Denied Feb. 23, 1983.

Robert J. Miller and William L. Larkins, Jr., Portland, argued the cause for appellants. With them on the briefs was Black, Kendall, Tremaine, Boothe & Higgins, Portland.

Susan M. Hammer, Portland, argued the cause for respondents. On the brief was Phillip D. Chadsey, Portland.

Before BUTTLER, P.J., and WARREN and ROSSMAN, JJ.

ROSSMAN, Judge.

This dispute involves an agreement for the development of mineral properties in Baker and Grant Counties. Plaintiffs, the personal representative of the estate of Anthony Brandenthaler and Mary Brandenthaler, sought and the trial court granted a decree declaring the forfeiture of the rights of defendant Caldwell under the agreement and granting restitution of the properties. ¹ Anderson and Barnes, investors in the mining operations, are defendants-in-intervention. ² Defendant and intervenors contend that defendant complied with the terms of the agreement and that the declaration of forfeiture was error. The requested relief is equitable in nature; therefore, we review de novo. Although we are not bound by the trial court's findings, considerable weight must be accorded those findings where the testimony, or the inferences to be drawn from it, are in dispute, because of its opportunity to see and hear the witnesses. Hampton v. Sabin, 49 Or.App. 1041, 1047, 621 P.2d 1202 (1980), rev. den. 290 Or. 519 (1981).

THE PURCHASE AGREEMENT

On April 20, 1979, the Brandenthalers entered into a "Purchase Agreement" with defendant. ³ It provided that the Brandenthalers would sell their interests in "mineral This dispute concerns defendant's alleged failure to follow through with the gold extraction operations. The controlling provisions are not models of clarity:

properties" they owned or controlled through various lease-option agreements to defendant for $1,600,000, to be paid from the net proceeds of gold mining operations ("placering" and "leaching") to be established at the Virtue mine, one of the subject properties. When the full price had been paid, the Brandenthalers were to turn over their interests to defendant. Until that occurred, the agreement was, in effect, a mineral lease. Defendant also agreed to obtain public liability and workers' compensation insurance and [60 Or.App. 642] to indemnify the Brandenthalers against claims arising out of expenses and debts of the development. ⁴

"5. CALDWELL shall complete above mentioned leach circuits for operations.

"6. CALDWELL shall construct two additional leach pads at the Virtue after said operation and test runs have proved to be satisfactory and feasible for profit to all parties concerned.

"7. CALDWELL shall move in equipment and personnel necessary to commence said operation within 60 days of the signing of this contract to process said dump in fulfillment of his obligation."

" * * *

"12. If operations are not commenced with[in] 60 days of the signing of this agreement and carried forward as an operation completing leaching of the estimated 200,000 ton dump, or if operations are abandoned for any reason, CALDWELL'S right to further operations shall terminate and CALDWELL shall give peaceful possession of said properties immediately to BRANDENTHALERS without recourse or process of law."

Defendant's duties under paragraphs 5 and 6 are not in dispute. The parties do not agree, however, on the performance required by paragraphs 7 and 12. Defendant argues that, because he "did move in equipment and personnel necessary to put the leaching circuit in operation within 60 days of April 20, 1979, * * * [he] was in compliance with paragraphs 7 and 12." He contends that any ambiguity should be resolved against the Brandenthalers, who drafted most of the provisions. The parties' intention is found in the language used and the surrounding circumstances. Spooner v. Polk County, 19 Or.App. 557, 562, 528 [60 Or.App. 643] P.2d 597 (1974). We must construe the agreement as a whole, employing reasonable methods of interpretation so that we may give effect to every word and phrase, if possible, New Zealand Ins. v. Griffith Rubber, 270 Or. 71, 75, 526 P.2d 567 (1974), and we must attempt to read the paragraphs together and to give a meaning to each that does not defeat the purpose of the others. Cleveland v. Scio School Dist., 30 Or.App. 945, 949, 569 P.2d 35 (1977).

Paragraph 5 required that defendant complete the construction of the first leach circuit to the extent that it would be capable of extracting gold from the dump rock. ⁵ We construe "said operation" in paragraph 6 to mean the operation of that circuit. Once the first circuit was operational, defendant was to determine whether it would function satisfactorily and whether the dump material could be leached at a profit and was then to construct two more pads. We construe "said operation" in paragraph 7 as we construed that phrase in paragraph 6 to mean the cyanide leaching First, substantial work had been done on the first leach circuit before the parties entered the agreement. Vern Jacobson, a mining engineer who had originally undertaken the construction of the Virtue leach system for the Brandenthalers, testified that, as of April, 1979, completion of the system would have taken "probably two to three weeks." The "sprinkler system" and the "carbon recovery units" had to be completed and, except for "sprinkler heads," the required materials were at the site. ⁶ Second, Brandenthaler held the Virtue mine under a lease-option contract, a copy of a portion of which was attached to the parties' agreement. To exercise the option to purchase, he had to give notice by January 29, 1980, and had to pay approximately $70,000 had to be paid by April 30, 1980. ⁷ Leaching could not be carried out at the Virtue in the winter months. Testing the profitability of that process was to precede full-scale production. Nothing in the record indicates that such testing could have been accomplished other than by using a completed circuit and material from the Virtue dump. ⁸ On the assumption that the profitability of the process would be of crucial concern to the parties in determining whether to exercise the option to purchase, they had less than nine months from the date the agreement was signed to complete the testing. Third, because the parties intended the net profits from the mining operations to fund the purchase, they would want to get into production as soon as possible. Less than 30 days after the signing of the agreement defendant had workers at the site and according to defendant, his employees had the first leach circuit "completed and ready to go" by June 20, 1979. The conduct of the parties to an agreement is strong evidence of their interpretation of it. Aspgren v. City of Columbia City, 34 Or.App. 991, 1000, 581 P.2d 536 (1978). We construe paragraph 7 to mean that defendant was to bring to the site the equipment and personnel required to have the first leaching circuit operating within 60 days of the date the agreement was signed.

of dump material using the first leach circuit and pad. Given the language of the paragraph and the surrounding circumstances, we believe that the parties intended defendant to have the first circuit running within 60 days.

There is no reason to conclude that the parties intended to establish a 60-day time limitation in paragraph 12 different from that in paragraph 7. Therefore, the "operations" to be commenced under paragraph 12 refer, as in paragraph 7, to the operation of the first leaching circuit. Defendant contends that "commence operations" has a particular meaning "in mining parlance":

"Commencement on an operation which has been debated is when you open a bank account you start employees, you are commencing and you put geologists out in the field."

Jacobson testified that the phrase meant the construction of equipment for mineral extraction. Assuming "commence operations" is a term of art, as defined by defendant, it is not controlling here. The parties used the phrase "said operation" to refer to the operation of the first leach circuit. "[C]ommence said operation" means to begin the operation of that circuit.

There is no need to resort to "mining parlance" to discern the parties' intent. In construing the remaining requirements of paragraph 12, we refer to paragraphs 5, 6 and 7; i.e., the "operations" are "carried forward as an operation completing the leaching of the * * * dump [material]" by following the sequence of performance and development set out in those paragraphs. Once underway, the leaching was to continue until the "estimated 200,000 ton[s]" of dump material had been processed.

With the exception of the requirement that the first leach circuit be operational by June 20, 1979, there are no specific deadlines for the performance of defendant's duties; however, defendant was not free to proceed at his leisure. Fremont Lbr. Co. v. Starrell Pet. Co., 228 Or. 180, 364 P.2d 773 (1961), involved the leasing of land for the purpose of developing oil, gas and minerals, and the principal consideration was to be royalties from the minerals extracted. The court held that, because of the nature of the agreement, there existed an implied promise by the lessee "to proceed with reasonable diligence to obtain production." 228 Or. at 199. See also, Bussard v. Binder, 277 Or. 21, 23, 558 P.2d 845 (1977); Yeadon v. Graham, 273 Or. 234, 236, 540 P.2d 1007 (1975); Bennett v. Hebener, 56 Or.App. 770, 774-76, 643 P.2d 393 (1982). The court concluded that the defendant's failure to pursue...