VAN HOOMISSEN, Justice.
Plaintiff, Hampton Tree Farms, Inc. (Hampton), seeks review of a Court of Appeals decision reversing the trial court's grant of Hampton's motion for summary judgment as to the counterclaims of defendant Erickson Hardwood Company (EHC).
FACTS AND PROCEDURAL BACKGROUND
EHC owned a lumber and pallet manufacturing plant in Garibaldi and another plant and dry kilns in Grande Ronde. Hampton was EHC's major supplier of logs, which were essential to EHC's pallet industry. In February 1986, William Jewett obtained for Hampton's benefit an irrevocable letter of credit as security for logs sold by Hampton to EHC. The letter required the issuing bank to make immediate payment to Hampton
In October 1987, in order to induce Hampton to continue selling logs to EHC, Erickson and Jewett signed a guaranty agreement in favor of Hampton. That agreement provided that Erickson and Jewett jointly and severally guaranteed prompt payment to Hampton "at maturity of every note, check, loan, advance, contract for payment of logs and all other claims or indebtedness for which [EHC] is now liable or shall become liable to Hampton in the future." The guaranty was "continuing." It was to "remain in full force until revoked." Erickson and Jewett also agreed that, in the event of EHC's default, they personally would "pay on demand all sums due and to become due."
In December 1987, EHC filed for protection under Chapter 11 of the Bankruptcy Code. Hampton continued to supply EHC with logs, and EHC's debt grew to $810,000. In February 1988, Hampton prepared an order for approval by the bankruptcy court, containing the following terms: Hampton would continue to supply logs to EHC and, in return, Hampton would be given a post-petition first-priority security interest and lien on the logs, products, accounts, and proceeds from the sale of the products. The proposed order also provided that EHC would give Hampton projected operating cash flow budgets, weekly invoices, and monthly financial reports; that a separate account would be established for deposit of cash proceeds of Hampton's collateral; that Hampton would receive at least 40 percent of the funds deposited in the account; that, if that amount was insufficient to pay outstanding balances, then EHC would pay more, so that no invoices would be over 30 days old; and that Hampton's approval was required for any purchase by EHC over $2,000. Hampton and EHC signed the proposed order. Also in February 1988, Jewett replaced the letter of credit with a $250,000 certificate of deposit, issued in Jewett's and Hampton's names jointly, subject to the terms of a pledge agreement that gave Hampton the sole right to redeem the certificate in the event of EHC's default.
In July 1988, Smith, Hampton's vice-president, wrote a letter "To Whom it May Concern," stating in part:
EHC's Chapter 11 reorganization was confirmed by the bankruptcy court in November 1988. The plan indicated that EHC had secured a steady supply of logs from Hampton and that Hampton had "agreed to supply the logs and to receive payments only after the Debtor [EHC] is paid for the finished product." John Hampton understood the plan to require Hampton to purchase logs from outsiders for EHC's use should Hampton be unable to meet EHC's requirements. All parties understood that the success of the plan was contingent on Hampton's continuing to supply logs to EHC, because EHC had no other source of logs. John Hampton told Jewett that he believed that EHC was a viable business and, in reliance on that statement, Jewett increased the amount of his guaranty. EHC and Hampton worked together closely, and financial statements show that, by the spring of 1989, EHC's income exceeded its expenses and its debts were diminishing.
By May 1989, EHC had significantly reduced its debt to Hampton. However, EHC still owed Hampton more than $600,000. Hampton became concerned about the ratio of EHC's inventory to its receivables. During
In June 1989, John Hampton told Jewett that a deal had been made to sell the mill to Diamond Wood Products (Diamond). Later, John Hampton told Erickson that he had sold the mill to Diamond for $2.5 million. Erickson pleaded with John Hampton not to sell, arguing that the mill was becoming profitable and would succeed. John Hampton responded that EHC should seek outside financing, because Hampton was unwilling to continue supplying logs to EHC on the previously agreed terms. That same month, Hampton began reducing the supply of logs to EHC.
Erickson thereafter met with potential investors who expressed an interest in purchasing lumber from EHC and in providing financing. Erickson told them that he needed to consult with John Hampton, because Hampton was EHC's sole supplier of logs. Erickson met with John Hampton, who refused to agree to the arrangement with the potential investors. John Hampton again told Erickson that the mill had been sold to Diamond, that Diamond would get all of Hampton's logs, and that Erickson should discontinue seeking outside financing.
In July 1989, John Hampton met with Diamond to negotiate the details of the sale of EHC's mill. EHC was not informed of that meeting. John Hampton proposed that Diamond buy the mill for $1.5 million in cash and the release of Erickson and Jewett from their guarantees, and that a payment of $1 million be made later. John Hampton prepared a memorandum of understanding that included those terms, which Diamond's president signed. Diamond thereafter made a counterproposal, which it presented to John Hampton at another meeting. EHC was not informed of that meeting. Diamond's counterproposal reflected Diamond's concern that EHC's creditors would continue to have liens on EHC's equipment after the sale. Diamond proposed, therefore, that EHC should petition the bankruptcy court for modification of its reorganization plan, to require liquidation following acceptance of Diamond's offer to buy the Garibaldi mill for $800,000, or its offer to buy both the Garibaldi and the Grande Ronde mills for $1,200,000. Under Diamond's counterproposal, all but one of EHC's secured creditors would have been paid. Diamond also indicated to John Hampton that Diamond might just wait for EHC to collapse, hoping to acquire EHC's assets at a lower price. Hampton continued to assure EHC that a sale to Diamond would go through.
Because Hampton controlled EHC's log supply, EHC, Jewett and Erickson were forced to agree to sell the mill and other assets and to drop their negotiations with the potential investors. In July 1989, an earnest money agreement was executed by Diamond, EHC, Erickson, and Jewett, which provided that Diamond would pay $1,400,000 for the mills at Garibaldi and Grande Ronde, with a further payment of $900,000 to be made at a future date. The agreement contained in the earnest money agreement differed from the prior proposal of John Hampton and from Diamond's counterproposal. Thereafter, without explanation to EHC, Hampton discontinued supplying logs to EHC. By August 1, 1989, EHC closed its Garibaldi mill due to a lack of logs.
In October 1989, John Hampton advised Jewett of his intention to redeem the certificate of deposit. That same month, EHC's creditors declared a default, and EHC's Chapter 11 reorganization was converted to a Chapter 7 liquidation. EHC thereafter moved in bankruptcy court to dismiss the Chapter 7 case, stating:
None of EHC's creditors opposed the dismissal. In November 1989, the bankruptcy court dismissed the case without prejudice. Several days before the dismissal was ordered, EHC's lawyers recommended that EHC bring claims against Hampton for breach of contract and breach of fiduciary duty. In February 1990, the Small Business Administration sold both mills to Diamond for $210,000. Since that time, Hampton has supplied logs to Diamond.
In April 1990, Hampton filed this action to enforce the guaranty and pledge agreement made by Jewett. The trial court granted Jewett's motion to have EHC and Daniel Erickson joined as defendants, pursuant to ORCP 29A.
Hampton moved for summary judgment on all of EHC's claims, arguing that, in the light of EHC's representation to the bankruptcy court that it had no assets other than those pledged as collateral to the Small Business Administration, EHC should be "judicially estopped" from asserting any of its claims against Hampton. Alternatively, Hampton argued that there were no genuine issues of material fact on any of EHC's claims and that Hampton was entitled to judgment as a matter of law. On the basis of the record before it, the trial court granted summary judgment to Hampton on EHC's claims, on the ground that EHC was judicially estopped from asserting them because, before securing a dismissal of its Chapter 7 liquidation, EHC had represented to the bankruptcy court that it had no assets, knowing that it intended to assert claims against Hampton. The trial court ruled that the claims of Jewett and Erickson were derivative and that they were likewise barred. Hampton's breach of guaranty claim against Jewett
EHC, Erickson, and Jewett appealed, arguing that the trial court erred in granting summary judgment on their claims and in failing to grant their motion for a directed verdict on Hampton's claim. Hampton cross-appealed, arguing that the trial court erred in failing to award it attorney fees, because it prevailed on EHC's counterclaims. The Court of Appeals determined that the doctrine of judicial estoppel was not applicable to bar EHC from asserting claims, because Hampton had not shown that EHC had benefited by the dismissal of EHC's bankruptcy proceeding.
Hampton petitioned this court for review, arguing that the Court of Appeals erred in holding that judicial estoppel did not bar EHC's claims and in holding that Hampton was not entitled to summary judgment on EHC's claims. We allowed review and first consider the issue of judicial estoppel.
Hampton contends that the Court of Appeals erred in not applying the doctrine of judicial estoppel to EHC's claims. Hampton argues that the Court of Appeals erroneously concluded that judicial estoppel depends for its application on a showing that one party benefited from its representations to the first tribunal and that the other party "detrimentally relied" on the first party's prior representation.
Judicial estoppel is a common law equitable principle that has no single, uniform formulation in the several jurisdictions in which it has been recognized. See generally Note, Judicial Estoppel: The Refurbishing of a Judicial Shield, 55 Geo Wash L Rev 409 (1987) (summarizing approaches used by courts). The purpose of judicial estoppel is "to protect the judiciary, as an institution, from the perversion of judicial machinery." Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir.1982). The doctrine may be invoked under certain circumstances to preclude a party from assuming a position in a judicial proceeding that is inconsistent with the position that the same party has successfully asserted in a different judicial proceeding. See generally Caplener v. U.S. National Bank, 317 Or. 506, 516, 857 P.2d 830 (1993) (stating principle); Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 417 (3d Cir.) cert. den. 488 U.S. 967, 109 S.Ct. 495, 102 L.Ed.2d 532 (1988) (same).
In this case, the Court of Appeals concluded that an essential component of the defensive application of judicial estoppel is that the party sought to be estopped must have benefited as a result of its earlier assertion of an inconsistent position in a different judicial proceeding. Hampton Tree Farms, 125 Or. App. at 188-89, 865 P.2d 420. Although this court has never specifically stated that the party sought to be estopped must have benefited as a result of its earlier assertion of an inconsistent position taken in a different judicial proceeding, in the only case in which this court has discussed the doctrine of judicial estoppel, Caplener, this court considered the fact that the party sought to be estopped had benefited from its prior inconsistent position in a different judicial proceeding. In Caplener, the party against whom judicial estoppel was asserted had its debts discharged in bankruptcy. Caplener, 317 Or. at 509, 857 P.2d 830. The issue was whether that party's underdisclosure in bankruptcy court of its state court claims against one of its creditors precluded the party from later increasing the amount of those claims in a civil action. This court stated:
Thus, the party being estopped in Caplener had benefited as a result of its earlier assertion of an inconsistent position taken in the bankruptcy court, first by being able to obtain interim financing, and later by having all its debts discharged without disclosure of its $11 million claim against the bank. Notwithstanding, in Caplener, this court made no attempt to formulate the general principles of the doctrine of judicial estoppel.
We can find no evidence in the record from which the trial court could have concluded as a matter of law that EHC obtained any benefit by having its Chapter 7 proceeding dismissed without prejudice. The dismissal of its Chapter 7 proceeding without prejudice did not discharge EHC's debts, and it provided EHC with no protection from enforcement of its creditors' claims. In fact, it would appear that EHC only increased its exposure to its creditors by leaving the protective cloak of bankruptcy. Compare Caplener, 317 Or. at 509, 857 P.2d 830 (debts of party being judicially estopped had been discharged in bankruptcy). Because we conclude that Hampton has not shown that EHC benefited in the bankruptcy proceeding, we need not determine whether the Court of Appeals correctly determined that Hampton had not shown that EHC's position in the bankruptcy proceeding was "inconsistent" with its position in this case. Accordingly, we hold that the trial court erred in granting summary judgment for Hampton on EHC's claims on the ground that EHC was judicially estopped from bringing those claims.
Before proceeding to consider the trial court's summary judgment rulings on their merits, we note that in dictum the Court of Appeals recognized a requirement that the party raising judicial estoppel as an affirmative defense must also show "that it relied to its detriment on the position taken by the other party in the earlier proceeding." Hampton Tree Farms, 125 Or.App. at 187, 865 P.2d 420. Although this court in Caplener considered the fact that the bank would not have offered interim financing in the bankruptcy had the Capleners' claim been fully disclosed and, thus, might be said to have "detrimentally relied" on the underdisclosure, this court did not hold in that case that detrimental reliance was a necessary component of judicial estoppel. Because judicial estoppel is primarily concerned with the integrity of the judicial process and not with the relationship of the parties, it does not depend for its application on a showing that the party raising judicial estoppel as an affirmative defense detrimentally relied on the other party's prior inconsistent position. We now specifically reject the Court of Appeals' suggestion that the party raising judicial estoppel as an affirmative defense has the burden to show that it relied to its detriment on the inconsistent position taken by the other party in the earlier judicial proceeding. See Ward Cook, Inc. v. Davenport, 243 Or. 301, 310-11, 413 P.2d 387 (1966) (plaintiff is bound by choice of a substantive right in earlier judicial proceeding and, thus, is precluded from making wholly inconsistent claim in a subsequent judicial proceeding; detrimental reliance not required); Bakker v. Baza'r, Inc., 275 Or. 245, 272 n. 15, 551 P.2d 1269 (1976) (Tongue, J., dissenting) (detrimental reliance not required); Oneida Motor Freight, Inc., 848 F.2d at 419 (judicial estoppel looks to the connection between the litigant and the judicial system, while equitable estoppel focuses on the relationship between the parties); Konstantinidis, 626 F.2d at 937 (judicial estoppel does not require proof of privity, reliance, or prejudice); 1 B., Moore's Federal Practice § 0.405 (1994) (a party may invoke the doctrine without having to show reliance or prejudice); Note, Judicial Estoppel: The Refurbishing of a Judicial Shield, 55 Geo.Wash.L.Rev. at 416-17 (in contrast to equitable estoppel, judicial estoppel requires neither privity, nor reliance, nor detriment). The harm to the judicial system that arises from allowing a party in a later judicial proceeding to contradict a position successfully taken in an earlier judicial proceeding arises whether or not there is any
On review of a summary judgment, this court determines whether there was a genuine issue as to any material fact and whether the moving party was entitled to judgment as a matter of law. ORCP 47 C. In reviewing a trial court's ruling on a motion for summary judgment, this court views the evidence and all reasonable inferences to be drawn from it in the light most favorable to the nonmoving party, including all reasonable inferences of fact therefrom. On Hampton's motion for summary judgment, the burden falls on Hampton even though EHC would have had the burden of establishing its claims at the time of trial. Welch v. Bancorp Management Services, 296 Or. 713, 716, 679 P.2d 866 (1984). The record on summary judgment consists of all exhibits and depositions submitted by the parties in support of, or in opposition to, the motion for summary judgment, and that is the record that we review here. Fields v. Jantec, 317 Or. 432, 437, 857 P.2d 95 (1993).
BREACH OF CONTRACT
Hampton contends that the Court of Appeals erred in reversing the trial court's award of summary judgment to Hampton on EHC's claim for breach of contract to supply logs.
Viewing the record on summary judgment in the light most favorable to EHC, there is evidence in the record to support EHC's claim that a contract to supply EHC with logs was formed. That evidence includes the 1988 order prepared by Hampton and presented to the bankruptcy court, Hampton's acceptance of EHC's approved Chapter 11 reorganization plan that reiterated Hampton's commitment to supply logs, and Hampton's 1988 "To Whom it May Concern" letter soliciting business for EHC. There also is evidence from which a jury could find that the alleged contract to supply logs was intended to continue until EHC had satisfied its debt to Hampton and the mill had become profitable. Moreover, in May 1989, John Hampton told EHC that Hampton would not renege on its agreement to supply logs and in return EHC agreed to increase the percentage of its receivables to be paid to Hampton and provided other security for its debt.
Hampton argues in the alternative that, because no time period was specified regarding how long Hampton would supply logs, no contract exists. However, the absence of an explicit term regarding the time period of a contract is not necessarily fatal. See ORS 72.2040; ORS 72.3090.
BREACH OF DUTY OF GOOD FAITH AND FAIR DEALING
Hampton contends that the Court of Appeals erred in reversing the trial court's award of summary judgment to Hampton on EHC's claim for breach of the duty of good faith and fair dealing. Hampton argues that there was no duty of good faith and fair dealing, because there was no contract to supply logs. Hampton makes no argument with respect to whether the record supports EHC's claim on its merits.
The law imposes a duty of good faith and fair dealing in the performance and enforcement of every contract. That duty serves to effectuate the objectively reasonable expectations of the parties. Pacific First Bank v. New Morgan Park Corp., 319 Or. 342, 349-53, 876 P.2d 761 (1994); Sheets v. Knight, 308 Or. 220, 233, 779 P.2d 1000 (1989); Best v. U.S. National Bank, 303 Or. 557, 561-64, 739 P.2d 554 (1987).
We already have concluded that summary judgment was inappropriate on EHC's claim for breach of contract to supply logs. Viewing the record on summary judgment in the light most favorable to EHC, there is evidence in the record from which a jury could find that, with respect to the alleged contract to supply logs, Hampton did not at all times act in good faith and deal fairly with EHC. For example, after an earnest money agreement was executed in July 1989 for Diamond to buy both mills, Hampton, without explanation, discontinued supplying logs to EHC, resulting in the closure of the Garibaldi mill by August 1. A jury could find that Hampton's unilateral action in discontinuing to supply logs frustrated EHC's objectively reasonable expectation that Hampton would continue to supply logs. We hold that the trial court erred in granting summary judgment to Hampton on EHC's claim for breach of the duty of good faith and fair dealing.
BREACH OF FIDUCIARY DUTY
Hampton contends that the Court of Appeals erred in reversing the trial court's award of summary judgment to Hampton on EHC's claim for breach of fiduciary duty. Hampton argues that, because the relationship between the parties was a relationship of debtor and creditor, their relationship was "the antithesis of a fiduciary" relationship and that nothing Hampton did could transform it into a fiduciary relationship.
EHC's theory was that the parties had "agreed that John Hampton would investigate the possibility of selling the Erickson Hardwood mill," and that Hampton undertook to sell the Erickson Hardwood mill on behalf of and for the benefit of and therefore as an agent and fiduciary of EHC.
This court's decision in Georgetown Realty v. The Home Insurance Co., 313 Or. 97, 106, 831 P.2d 7 (1992), is the starting point for determining whether a tort claim is available to a contracting party:
"The lesson to be drawn from this court's cases discussing the choice between contract and tort remedies is this: When the relationship involved is between contracting parties, and the gravamen of the complaint is that one party caused damage to the other by negligently performing its obligations under the contract, then, and even though the relationship between the parties arises out of the contact, the injured party may bring a claim for negligence if the other party is subject to a standard of care independent of the terms of the contract. If the plaintiff's claim is based solely on a breach of a provision in the contract, which itself spells out the party's obligation, then the remedy normally will be only in contract, with contract measures of damages and contract statutes of limitation. That is so whether the breach of contract was negligent, intentional, or otherwise. In some situations, a
Here, EHC and Hampton allegedly were contracting parties, inasmuch as they had an agreement to buy and sell logs. A fiduciary relationship did not arise simply from that agreement. The dispositive issue is whether Hampton was subject to a standard of care independent of the contract. If Hampton was not subject to a standard of care independent of the contract, then no tort claim is available against it.
As noted, EHC claimed the existence of a principal-and-agent relationship between EHC and Hampton. An agent owes duties of care and loyalty to the principal. Onita Pacific Corp. v. Trustees of Bronson, 315 Or. 149, 161, 843 P.2d 890 (1992). An agent must exercise reasonable care on behalf of the principal's interest. Id. at 160, 843 P.2d 890. An agent thus is subject to a standard of care independent of the terms of an agreement between the parties.
This court has defined "agency" as follows:
In reviewing a trial court's ruling on a motion for summary judgment, this court views the evidence and all reasonable inferences to be drawn from it in the light most favorable to the nonmoving party. Fields, 317 Or. at 437, 857 P.2d 95. If facts were established from which we could infer that a principal-and-agent relationship existed, then, EHC's claim for breach of fiduciary duty would survive this motion for summary judgment.
There is evidence in the record from which one could infer that Hampton had consented and undertaken to act as EHC's agent to sell the mill and that EHC retained some control over Hampton in that regard. John Hampton stated in his deposition that he understood that he was "to go out and try to find a buyer for the mill," but that he lacked the authority to sell the mill. John Hampton did find a buyer for the mill. One reasonably could infer, based on that evidence, that John Hampton consented to act on behalf of EHC to find a buyer for the mill and that EHC retained some element of control over the actual sale of the mill.
We next turn to whether EHC consented to having John Hampton act as its agent. Such a "manifestation of consent by one person to another that the other shall act on his behalf and subject to his control" is necessary to find an agency relationship between the parties. Ruddy, 179 Or. at 702, 174 P.2d 603. There is evidence in the record from which one reasonably could infer that EHC consented to Hampton's acting as its agent. One could infer, from the statements made in John Hampton's deposition, that John Hampton understood EHC to have consented to his acting as EHC's agent for the sale of the mill. Those statements create a question of fact as to whether EHC consented to have Hampton act as its agent, sufficient to defeat a motion for summary judgment.
On summary judgment, EHC has established facts from which one reasonably could infer that a principal-and-agent relationship existed between the parties for the sale of the mill, that such a relationship imposed a standard of care independent of the terms of the parties' alleged contract to sell logs, and that, accordingly, the trial court erred in granting summary judgment to Hampton on EHC's claim for breach of fiduciary duty.
On review in this court, Hampton argues that EHC's claim for negligence based on the relationship between the parties should fail, for the sole reason that no fiduciary relationship existed between the parties. Because there was evidence from which a trier of fact reasonably could find a principal-and-agent relationship, we conclude that there is evidence in the record—the same evidence discussed with respect to the previous
In summary, Hampton was not entitled to summary judgment on EHC's counterclaims on the basis of judicial estoppel. Except on EHC's claim for breach of contract to sell the mill, the trial court erred in granting summary judgment to Hampton on EHC's claims.
The decision of the Court of Appeals is affirmed. 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.
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