746
Submitted September 2, reversed and remanded November 23, 2022
Edward LEWIS,
an individual, and
Tamara Lewis, an individual,
Plaintiffs-Respondents,
v.
Valdene Marie Leimomi VARDE,
dba Oregon Progressive Construction,
and James Varde,
Defendants-Appellants.
Washington County Circuit Court
21CV03926; A176014
521 P3d 522
In this action by plaintiffs asserting, among other claims, breach of a residential construction contract, defendants appeal, contending in a single assignment that the trial court erred in denying their petition to compel arbitration
of plaintiffs’ claims. Held: The claims have their source in the parties’ contract.
Although one of the defendants was not a signatory to the contract, he is alleged
to have been a party to the contract. In light of the provision of the contract
stating that the parties “agree to mandatory arbitration or mediation to resolve
any and all disputes that may arise from this contract,” the fact that the claims
arise from defendants’ performance under the contract, and the presumption in
favor of arbitrability, the Court of Appeals concluded that the trial court erred in
denying the petition.
Reversed and remanded.
Theodore E. Sims, Judge.
Valdene Marie Leimomi Varde and James Varde filed the
briefs pro se.
Sean J. Riddell filed the brief for respondents.
Before Tookey, Presiding Judge, and Egan, Judge, and
Kamins, Judge.
TOOKEY, P. J.
Reversed and remanded.
Cite as 322 Or App 746 (2022) 747
TOOKEY, P. J.
In this action by plaintiffs asserting, among other
claims, breach of a residential construction contract, defendants Valdene Varde and James Varde, who are sister and
brother, appeal, contending in a single assignment of error
that the trial court erred in denying their petition to compel
arbitration of plaintiffs’ claims. ORS 36.730 (providing for
appeal of an order denying petition to compel arbitration).
We conclude that the trial court erred in denying the petition and therefore reverse and remand.
For purposes of determining the arbitrability of the
dispute, we assume the truth of the allegations of plaintiffs’
complaint. Livingston v. Metropolitan Pediatrics, LLC, 234
Or App 137, 140,
227 P3d 796 (2010). Plaintiffs alleged that
“Plaintiffs and Defendants entered into a written contract
… that provided Defendants would perform construction
work for the benefit of Plaintiffs”; that they “tendered payments to Defendants … for the work under the Contract”;
that “Defendants materially breached the Contract by abandoning the construction project on the Property prior to
completion, and by failing to perform the construction work
to the standard of care previously agreed”; and that defendants misrepresented their skills and experience and ability
to complete the project and “converted” plaintiffs’ payment
to cover their personal debts. Based on those alleged facts,
plaintiffs asserted against defendants claims of breach of
contract, unlawful trade practices, conversion, fraud, and
unjust enrichment.
Defendant Valdene Varde filed a petition to compel
arbitration, noting that the parties’ contract included an
arbitration clause providing, “Both parties agree to mandatory arbitration or mediation to resolve any and all disputes that may arise from this contract.” Plaintiffs objected
to arbitration; thus, the matter was presented to the court
for decision.
ORS 36.360 provides, in part:
“(1) An agreement contained in a record to submit to
arbitration any existing or subsequent controversy arising
between the parties to the agreement is valid, enforceable
748 Lewis v. Varde
and irrevocable except upon a ground that exists at law or
in equity for the revocation of a contract.
“(2) Subject to ORS 36.625(8), the court shall decide
whether an agreement to arbitrate exists or a controversy
is subject to an agreement to arbitrate.”
Oregon courts recognize a presumption in favor of the
enforceability of an arbitration provision. Livingston, 234 Or
App at 147; see Snow Mountain Pine Ltd. v. Tecton Laminates
Corp.,
126 Or App 523, 529,
869 P2d 369, rev den,
319 Or
36 (1994) (“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[.]” (Citing
Portland Assn. of Teachers v. School Dist. No. 1,
51 Or App
321, 325,
625 P2d 1336 (1981).)). Ambiguities as to the scope
of an arbitration clause are resolved in favor of arbitration.
Industra/Matrix Joint Venture v. Pope & Talbot,
341 Or 321,
332-33,
142 P3d 1044 (2006).
ORS 36.625(1) provides:
“On petition of a person showing an agreement to arbitrate and alleging another person’s refusal to arbitrate
pursuant to the agreement:
“…
“(b) If the refusing party opposes the petition, the
court shall proceed summarily to decide the issue … and
order the parties to arbitrate unless it finds that there is no
enforceable agreement to arbitrate.”
The trial court summarily considered the petition to compel
arbitration and denied it for two reasons that we reject:
First, the court reasoned that compelling arbitration was “problematic” because the parties had failed to
designate an arbitrator, rendering the arbitration provision
ambiguous and unenforceable. The court was mistaken.
Under ORS 36.645(1), if the parties to an agreement to arbitrate have not agreed on a method for appointing an arbitrator, “the court, on petition of a party to the arbitration proceeding, shall appoint the arbitrator.” The parties’ failure
to designate an arbitrator for their dispute did not render
the arbitration provision unenforceable. The court therefore
Cite as 322 Or App 746 (2022) 749
erred in denying the petition to compel arbitration on that
ground.
Second, the court reasoned that compelling arbitration was “problematic” because defendant James Varde
was not a signatory to the contract, and plaintiffs’ claims
against him therefore would proceed to trial, resulting in a
splitting of the action. However, as plaintiffs have alleged in
the complaint, James Varde, although not a signatory, was
a party to the alleged contractual agreement. Thus, if, as we
have concluded, the arbitration provision is enforceable, the
claims against James Varde that arise from the contract are
also subject to arbitration.
But even if James Varde is not a party to the contract,
we would conclude that the arbitration clause itself—which
covers claims that “arise from” the contract—plausibly
encompassed the claims against James Varde and was
therefore enforceable as to him. In Livingston, the plaintiff
brought claims of interference with economic relationships
against defendants who were not parties or signatories to
the plaintiff’s employment contract, and its included arbitration clause. The arbitration clause in Livingston provided, “Any controversy, dispute or disagreement arising
out of or relating to this Agreement, or the breach thereof,
shall be resolved by arbitration.” 234 Or App at 146, The
plaintiff contended that, as nonsignatories to the employment contract, those defendants had no right to enforce the
arbitration provision. In rejecting that argument, we cited,
among other authorities, the rule that an arbitration clause
will apply if it can plausibly be so construed.1
Id. at 147. We
reasoned that the broad text of the arbitration clause could
plausibly be interpreted such that the parties intended it to
apply to any claim that the plaintiff might have arising out
of or relating to his employment pursuant to the agreement,
and not just claims between the signatories.
Id. We noted
that, as here, the claims by the plaintiff signatory against
the nonsignatory defendants “depend on the same allegations made against [the signatory defendant] and have as
1
We also explained that “[c]ourts have relied on a number of rationales
for permitting nonsignatory defendants to invoke arbitration clauses in claims
against them by signatories to a contract.” Livingston, 234 Or App at 149.
750 Lewis v. Varde
their source the identical circumstances of plaintiff’s claims
against” the signatory defendant.
Id. at 150. In light of those
circumstances, and in view of the presumption in favor of
arbitrability, we held that the clause applied to the signatory plaintiff’s claims against the nonsignatory defendants.
Id. at 151.
Similarly here, the claims against James Varde
have as their source both defendants’ failure to perform
under the contract. And similarly here, the broad language
of the arbitration agreement is plausibly susceptible to the
construction that it also applies to claims against James
Varde, in addition to claims against Valdene Varde, arising
from the work that James performed under the construction
contract. For those additional reasons, and because of the
presumption in favor of arbitration, the trial court erred in
denying the petition to compel arbitration.
Reversed and remanded.
