Whepley Oil Co. v. Associated Oil Co.

Appellate District. No. 1332. Fourth [Civ. April 11, 1935.] (a WHEPLEY OIL Corporation), Respondent, COMPANY (a Corporation), v. ASSOCIATED OIL COMPANY Appellant. Doyle

Humphrey, Searles, & MacMillan, Robert M. Searles, John Parks Davis and W. F. Kiessig Appel- lant. H. Orrick, Dahlquist

W. Stammer and Palmer & for Re- spondent.

JENNINGS, J. Plaintiff instituted this action for purpose recovering specified from defendant sum of money casing- which was claimed to be due gas head from natural derived from an oil plaintiff’s well located on been land had leased plaintiff provisions agreement Certain to defendant. plaintiff’s for of lease formed the basis claim that the de- pay legally obligated to the amount fendant was for whose brought. Upon the recovery suit conclusion of a the was complaint by plaintiff’s de- and trial the issues raised of findings made the court answer thereto trial fendant’s plaintiff legal the conclusion fact from which drew accordingly judgment entered and was entitled succeed 98

for the ren- judgment amount demanded. From thus the dered prosecutes appeal. the defendant

The on executed lease contract between was lessor, agreed 10, November plaintiff, 1924. itBy as located to lease land lessee, defendant a tract of as comprising County in the Kings Kettleman Hills district in 160 of the con- a years. purpose acres for term of 20 The oil explore drill tract ivas and to enable the lessee to pos- if hydro-carbon land other substances on the Oil produce sible to and extract oil and substances. such 1930, 16, when August discoAmredon the land until producing brought de- well was in. About this date Pro- agreement fendant entered an into the Los Nietos ducing Ltd., whereby latter Refining Company, company produced agreed process gas wet and treat pay plaintiff’s defendant to defendant on land and to proceeds from royalty 50 derived per therefor cent of This gas. extracted from such sale of the present action agreement latter the time the was in effect at plaintiff’s period mentioned instituted and Com- Nietos complaint from the Los the defendant received 50 from the sale pany per proceeds derived cent of the gasoline which gas. was thus extracted from From per royalty cent which was thus obtained the defendant regularly paid plaintiff one-eighth royalty per of 35 proceeds cent of gasoline, derived from the sale retaining plaintiff thus for itself from royalty free proceeds. plaintiff’s cent contention It that it was entitled receive a Nietos paid cent defendant Com- entire Los pany. provision entered into the lease contract plain- the basis which formed

plaintiff defendant manu- casinghead gasoline is “If claim is as follows: tiff’s elsewhere, by the. premises, or factured the demised Lessee wells, then said Lessee, gas produced from from pay one-eighth (1/8) to the Lessors shall gather- less the entire the sale handling manufacturing, selling ing, same. sixty-five per hereto that agreed gas extracted from (65%) covering the entire considered as premises shall be demised

99 selling gathering, handling manufacturing, and said gasoline and remaining thirty-five per (35%) cent shall parties he divided between the of one- hereto on the basis eighth (l/8th) seven-eighths (7/8th) to the Lessors and right Lessee. The for Lessee shall have the to contract casinghead gas gasoline manufacture of from men- premises on the demised on the same basis hereinabove tioned, is, sixty-five per (65%) party manu- to the cent facturing gasoline thirty-five per (35%) cent to be divided one-eighth hereto on the basis of (l/8th) seven-eighths (7/8th) Lessors Lessee.” interpreted

The trial above-quoted court language upon placed by plaintiff accordance with construction it plaintiff royalty decided that was entitled to receive a one-eighth proceeds of the entire obtained the defend- ant casinghead from the sale of appellant’s

It is appeal first contention on the language of provided the lease which payment royalty of a gasoline on plain is and unam biguous, clearly arbitrary provides it that an figure per of 65 cent covering should be considered as the cost of gasoline and that paid should be amounting such one- eighth remaining per arbitrary cent after the pro portion deducted from is the total amount of gasoline produced. such In connection with this contention may it remarked likewise contends language unambiguous clear but arrives at the exactly opposite conclusion that it was entitled to receive one-eighth of the entire 50 cent which was shown to have by appellant been obtained under its contract with Los Company. Nietos interpretation is our conclusion that the which the trial gave above-quoted language

court to the clearly is not so un- obviously tenable and so with the inconsistent intent of the language manifested agreement of their that we are in disturbing warranted though even it be as- language capable sumed that the interpretation contends. provision contains three sen- tences. The plainly first if lessee, appellant, states that itself manufactures either on or off from drilled premises gas produced wells demised pay lessors respondent’s land, the lessee shall from the sale of the' derived manufacturing, gathering, the entire cost of less words, handling selling In if the same. other obligated pay itself manufactured respondent one-eighth proceeds to the net derived the gasoline the sale of the the net would be and manufacture, amount which the entire cost of remained after gross amount handling and sale deducted from the obviously be dispute obtained. is no and there could There dispute meaning The lan- no as sentence. this guage employed explicit dispute. too The is to admit of parties sixty- provides agree second sentence that that be (65%) gasoline per five cent extracted shall gathering, manufac- covering as entire cost of considered handling gasoline remain- turing, selling said and ing thirty-five per (35%) shall cent be divided between one-eighth (1/8) to parties on the the lessors basis language seven-eighths (7/8) This is like- to lessee. meaning. can no doubt to its explicit wise there be as Taking together that the two sentences is manifest should parties that if the lessee to contract intended th.e gasoline it lessors pay itself manufacture the would proceeds remaining net royalty a manufacturing, arbitra- after the entire cost of which was gross proceeds, rily per cent of the was deducted fixed at provides that lessee therefrom. The third sentence for right have the to contract the manufacture “shall men- gasoline ... on hereinabove the same basis party sixty-five (65%) manu- tioned, per is cent thirty-five (35%) cent facturing gasoline per parties hereto on the of one- be basis divided seven-eighths eighth (7/8th) (l/8th) lessors language employed in this is The sentence the lessee”. By possibility it the plain appel- and definite. likewise party a might lant with third for the manufacture contract than engaging rather itself specifically it was into account and manufacture was taken provided privileged this a certain should be do exactly same so arbi- basis far as definite basis which was trary allowance for the cost of manufacture is concerned provided should appellant as had been itself the event perform work must given language appellant observed that was not right to contract for the manufacture definitely basis other than that which described. is so However, appellant neither of contends could properly the manufacture on a different specifically than stated. basis that which so question presented appellant which here is whether might basis contract with on a more favorable third per than yet pay cent-35 cent division and arbitrary on the of an based allowance figure of 65 cost manufacture. We are not prepared to declare that the construction for which contends is an Equally unpre unreasonable construction. pared interpretation are we to declare that drawn the trial clearly court is unreasonable or or untenable so inconsistent intent disclosed language their interpre we must substitute therefor the tation for situation, contends. In such a reviewing it justified is settled that a court is not in dis turbing adopted the construction the. trial court. (Adams Midway Co., Ltd., v. Petroleum 205 221 Cal. [270 ; Co., Pac. Kautz v. Gen. & 212 Zurich A. Ins. Cal. L. 668] 582 576, 34]; Manley Pac. Mill v. & Timber [300 Pacific Co., 641, 79 App. 648 710].) Cal. Pac. [250 herein, however, record shows that action theory above-quoted was on the tried that the provision of unambiguous the lease contract was not clear and that the trial evidence, court received without objection, negotiations which took place parties prior agreement to the execution purpose for the of dis covering what the respect intention of the was with happening contingency which was shown taken place. have

Appellant maintains that the evidence thus for received arriving purpose interpretation at a correct entirely support contract fails to trial court’s construc- compels tion. Examination of the record the conclusion that this contention is untenable. The produced a 102 attorney the trustees

witness who was the counselor lease was the stockholders of at the time witness, part prominent executed. took a This who negotiations lease, testified preceded making which whom representative positively appellant execution prior he to its provisions discussed the of the lease for cost arbitrary stated that 65 allowance of merely guaranty appellant of manufacture would was not take more than 65 and that if the cost of per cent arbitrary manufacture not amount allowance should provided therefor, respondent would receive remaining deducting the net after the actual appellant of manufacture. The evidence contrary 65 cent for showed the allowance of árbitrary figure cost of manufacture set an which govern should whether itself manufactured party or contracted with a third its manufacture. presented It is idle to contend the evidence which was respect preced to the trial court with to the circumstances ing conflicting. the execution of the contract was apparent direct conflict. evidence the. Hence, estops reviewing the familiar rule which from court disturbing interpretation language an of doubtful mean conflicting ing prevail. evidence must which is drawn (Laidlaw 170, Marye, 391]; 133 179 v. Cal. Pac. Slama [65 Ritchie, App. Tire Protector v. 555 Pac. Co. Cal. [161 Co., App. 25]; Hasendahl v. J. D. Halstead Lumber Cal. In (2d) Pac. connection, 577]. [22 be noted that is conceded that the lease should supervisor prepared of lands and leases corporation. performing In task of inter undoubtedly language preting the of the lease the trial court interpretation provides applied the familiar rule of that, uncertainty, language in cases of of a contract against interpreted strongly most shall be who uncertainty exist. Under the circumstances caused the justified applying amply in the court was above-men unequivocally by principle which is declared both tioned Code), (sec. 1654, by Civ. numerous decisions. statute Marye, supra; Tremper, Robert Marsh & Co. (Laidlaw v. v.

103 572, Boas, 213 950]; 210 Cal. 574 v. Cal. Pac. Cockrill [292 490, (2d) 493 774].) Pac. [2 complains number of

Appellant particularly of a which, findings by With the trial fact were made court. respect findings, exception to all of the with the criticised one, complaint they the cause mere are conclu findings sions of fact law and insufficient therefore in principle accordance in with the familiar announced Jurisprudence, 969, following lan page California guage: “It law follows that statements of conclusions . . . findings.” are insufficient as finding object appellant’s

The first which is the above- stated attack is one found whereby simply the trial court allegations that all the paragraphs of the first seven respondent’s complaint paragraph are true. Reference VII of complaint set shows therein interpretation forth language its of the of the which lease provided payment gaso- of a paragraph line allegation concludes with plaintiff is, “that mentioned, and has at all herein been times entitled to receive from under one- defendant said lease eighth of said entire proceeds so received defendant sale of said gasoline”. one-half of said complaint

Examination of the discloses that the con- lease upon tract which the cause of action pleaded, was based was first, by attaching complaint by proper reference thereto, copy contract, second, of such and, setting forth its substance and legal effect thereof as contended respondent. No valid pleading criticism to this method of apparent. (Santa the instrument Paxton, Rosa Bank v. 195, 193].) Cal. Pac. an- Examination [86 allegations swer shows that met the of the afore- paragraph complaint by setting mentioned forth its interpretation disputed language of the of the lease and its legal conclusion effect thereof. is obvious that important interpreta- feature the whole ease was the language Respondent tion of the contract. claimed interpreted should be certain manner. Appel- entirely lant contended that an different construction should placed upon it. parties produced Both evidence objection interposed pur- the trial to which no 104

ported to show the the execu circumstances surrounded tion of the theory lease under the that these circumstances would light language throw of .instrument thus enable the interpret language trial court accordance parties they with the intention of the at time made the contract. theory Since the action tried on the meaning language construction of the of contract were doubtful and re that extrinsic evidence was quired to properly enable the trial interpret court language appears and since it also that the extrinsic evidence produced which was conflicting, the determination of finding (Brett conflict resulted in pure of fact v. Van Producers, omar App. 286, 758]). Cal. Pac. [187 Appellant’s finding contention that the more amounts to no than a of conclusion law is may therefore untenable and not be sustained. reasoning applicable same remaining findings fact by which ap are criticised pellant ground on the they merely are conclusions of law therefore insufficient findings of fact. Each of findings upon is based the trial interpretation court’s disputed language the lease which was reached conflicting determination extrinsic evidence parties purpose for the enabling the court perform necessary interpretation. task of It is observed by appellant portions findings of these unnecessary, are since the facts which are there found are admitted portions answer. is obvious that such are harmless. Appellant complain has no reason to because the court has the existence certain found facts which admits are true. As to the trial fourth finding court’s of fact a different presented. particular This finding attack states that that, during is not true the life of the contract between the parties, gathering, cost manufacturing, handling, and casinghead gasoline selling the premises from leased or has fluctuated other contracts cost manu- facturing has been a matter of dis- oil-producing companies pute and their lessors or that the clause of the lease contract between the disputed language which contains the was inserted in said purpose avoiding any for the dispute manufacturing, han- gathering, as to the cost of selling or dling, casinghead gasoline. part finding

It is finds conceded that the first of this casing- that it is untrue that the head premises has the leased fluctuated allegation life of the lease inserted meet an however, answer that ob- there was such fluctuation. It is served that the specifically finding court re- limited its spect casinghead gasoline pro- fluctuation of cost to the whereas, urged duced on the that the premises, leased it is allegation manufacturing answer of the is that the cost casinghead gasoline appel- generally has fluctuated and that trial, attempted general during prove lant fluctuation the permitted but was not so. do language

The of the answer is follows: defend- “This alleges during ant further that lease con- life said tract plaintiff gather- between the and defendant cost ing, manufacturing, handling selling and gasoline ours). (italics has fluctuated” remainder in paragraph allegation which the is above is contained following language: in the “and in other has fre- contracts quently dispute been a matter oil producing companies lessors; and their that said clause above referred quoted to and from said lease was inserted therein for the express purpose any dispute of avoiding between plain- tiff defendant as gathering, to the cost of manufactur- ing, handling selling casinghead gasoline, said binding parties, and conclusive on both irrespective of cost whether the to defendant gathering, of such manufac- turing, handling selling

sixty-five per derived therefrom or greater or lesser sum”. is evident that the trial court entertained

opinion fluctuation of casing- of manufacturing gasoline, generally head was immaterial to the issues of the pending then action before it. In arriving at this conclu sion we cannot declare that the trial court committed error. faced The court was with the task of interpreting certain language of the contract which related to the cost manu facturing gasoline gas extracted which premises. on the produced leased Appellant was in-

sisting arbitrary language an allow- meant ance of 65 cent of the total amount such parties was fixed of manufacture whether as the cost manufacturing engaged itself in the business of such or for its manu- contracted with a third facture. To evidence sustain this contention negotiations be- during which tended to oral show parties tween con- preceded execution of the particular tract matter was discussed and agreed Certainly arbitrary percentage allowance. evidence which tended to show that after the lease contract executed and was- general its existence there in was a fluctuation the cost light such no could throw essential element intention of the at the time the lease was executed. If the had evidence been admitted appear and it had been made to therefrom that there was general fluctuation of court cost the would have de- performance rived no assistance therefrom the task its interpretation. Furthermore, justified we think the taking court was language respecting view answer fluctua- casinghead tion of related to the manufacture gaso- cost finding. premises in so The produced line on the leased and grammatical construction of the sentence is indicative employment The an intent. of the article “the” modi- “casinghead gasoline” phrase significant. is In fying immediately preceding paragraph that in which the allegation casinghead relating found, to fluctuation of cost is accompanied mentioned in each instance gasoline is twice adjective may It modifying “said”. not denied by the referred, casinghead thereby not to appellant that casinghead gasoline pro- particular generally, but respondent. When, there- leased the land duced during the life of the lease that next states fore, appellant has the cost continuing it to that assume reasonable it is fluctuated casinghead gasoline on the very to to refer land. leased it it states because that criticised finding is further The gathering, manu- contracts in other that is untrue

107 facturing, handling selling and has been dispute oil-producing matter between the com- panies their and lessors.

It is appellant prove declared other that offered to oil gas and leases which were executed between and permitted not to do so. that this evidence preliminary to showing disputes that had arisen companies oil between regarding and their lessors gasoline. of casinghead manufacture The record shows that appellant sought to introduce which tend evidence would prove that, during period years approximately six after agreement execution of the lease between parties present action, appellant had other made two respect contracts with to the manufacture of definitely The the rea record further shows that given son seeking this that introduce evidence was provisions if the of one of such affected contracts which territory near the Keitleman oil had been written into field the contract action actually $41,000 would have as received less cas inghead gasoline they than did receive under the cent-35 appellant. basis contended objection record shows that made the introduction ground of the offered on the evidence related to subsequent execution of other contracts to the execution of the lease could any light therefore shed on the intention making agreement present basis of formed the suit evidence was further imma irrelevant and tending terial any an show isolated contract without preliminary showing had connection lease respondent. contract between There showing was no prelimi the evidence was offered as a nary step disputes a showing had arisen between oil companies and regarding their lessors the manufacture of casinghead gasoline. have determining We no means for whether the offered evidence have would tended slightest degree to such disputes show that had arisen. We can, rejection however, declare do that of and declare evidence, bearing single given offered in mind the reason offer, for its was correct. positive

Appellant complains made a that the court finding in the cost that it was not other contracts true n manufacturing gasoline matter casinghead had been a companies lessors dispute oil-producing and between before oil-bearing and that there was no evidence lands finding is justify finding court such a pro “oil fatally appear uncertain it what because does not ducing con companies lessors,” what “other their or finding. in tracts” are referred to complaint wholly portion of untenable. If the is objection uncertainty raised finding to which is importance, designed it has it is obvious that allegation appellant’s positive meet the in answer to manufacturing effect that “in contracts” the other “frequently had of dis been a matter companies producing and their lessors”. between the oil pute alleged affirmatively that such was the Since had allega upon supp'ort positive it rested its case the burden by competent appears, evidence. far as made tion So may complain now that the trial no effort to do so and not regard by making in this taken note of its failure court has finding. apparent negative Furthermore, is inconsequential finding wholly unim itself manufacturing casing- portant. Whether or not the cost frequent disputes given rise to had between head companies generally and their lessors oil-producing is a slightest pertinent degree matter which is interpretation present which was question of involved action. complains

Appellant part also that the final finding specifically criticised states that it is not true that provided the lease for the the clause payment was inserted any dispute avoiding purpose for the manufacturing casing- as to the cost head portion finding wholly

It is declared evidence to which unjustified because certain reference is to the contract discussed the showed made the cost of matter of t representative said that appellant’s tha “there would cent and would receive of split”. gasoline was questions from then to how the no on as insufficiency of the evidence Appellant’s complaint for the observation support finding may with the be dismissed was the matter respecting that the this feature of evidence evidence conflicting. Furthermore, there is not an iota of deliberately tending inserted to show that the clause dispute purpose avoiding any for the future manufacturing gaso- as manufactured in should be line the event such might for such appellant a third with whom finding Finally, observed that the manufacture. it should be in accordance importance. is of no If the court had found appellant’s that the clause was inserted contention purpose that the failed and purpose stated obvious disputed language .of the contract would have been respect by finding clarified in no that the inserted a purpose avoiding possibility clause dispute regarding casing- future cost of head

Appellant’s complaint final is that the trial court’s finding respondent accept monthly pay did by appellant ments made under the lease contract in full royalties of all appellant satisfaction due from on account casinghead gasoline produced premises on the leased lacking evidentiary support. respect royalty payments The evidence with may be Beginning summarized as follows: September 20, 1930, and day on or about the twentieth succeeding month payable each drew check Security-First order the Fresno branch National Angeles Bank of Los and caused check to be delivered bank. Attached to each of such Fresno checks was showing money payable a statement the amount to re- gasoline produced spondent proportion for its on the days premises during preceding 30 leased and another dry gas payable for its share of amount total two period. same of these money represented by the amount of amounts constituted the voucher was attached. The voucher the cheek to which respondent. On detached check and sent following ap- the reverse side statement of each check the peared payee guarantees : cheek “Endorsement of this acceptance of init full settlement of account as stated on acknowledges accompanying to have voucher which he received and Each fol- detached.” check was endorsed as lows: “Deposited to the Oil Whepley credit of Co. Fresno Angeles.” Branch, Security-lst National Bank of After Los being deposited thus endorsed each check then payee credit So far bank. record respondent shows no officer director or saw royalty of these However, checks. time at the check complete showing produc- was drawn a statement total gas tion dry preceding month, royalty for the one-eighth payable respondent amount to and the total gas treated, amount of gasoline wet the amount of therefrom, gasoline extracted revenue amounting per to 35 gasoline cent payable royalty extracted and to re- spondent amounting one-eighth to of the 35 cent of the total amount of extracted was prepared and to sent respondent. The undisputed respondent evidence of showed knowledge that respondent had no of the existence of the con- Producing tract between the Los Company Nietos appel- whereby appellant lant 50 per received of 35 per instead cent thereof until April, month Appellant thereupon about the 1931. was respondent contending it notified that was entitled royalty to receive a of the 50 cent derived by appellant casinghead gasoline. July 1931, 2, On requested that matter be submitted to a provided arbitrators as was contract. board of three an thereafter effort made to For several months select might controversy to whom the be three sub- arbitrators 29, effort mitted. was unsuccessful and on December into a formal 1931, entered one of the controversy that a provisions of stated had arisen be- payment royal- to the method basis of tween them as might and that either ties on controversy institute to action determine such thereafter delivery ap- to prior submission arbitration. The without representing monthly payments pellant of the checks Security-First royalties the Fresno branch of the- Na-

Ill accomplished accord- Angeles Los Bank of tional “The lessee the lease: following provision of with the ance on the twentieth the Lessors agrees payment make royalty all substances day month for (20th) of each calendar pre- the Lessors the Lessee from purchased royalty for month, payment to Lessors ceding said calendar moneys paid monthly and, are to or rentals substances Bank, Savings & the Pacific Southwest Trust be made agent for Branch, or the successors of bank Fresno as Lessors, receipt agent, Bank and the of said as shall be as if the and taken be the same Lessors themselves had acknowledged responsible proper and shall for the dis- moneys paid.” tribution of the

Appellant foregoing contends that evidence showed complete that there was a accord and full each agreed satisfaction month of the amount be due royalty casinghead gasoline. It is there- urged findings specifically that the trial nega- fore court’s tiving wholly such accord and satisfaction are unsupported judgment the evidence and that therefore, should reason, be reversed.

From the above recital stated of the evidence which re- payment royalty, lated to the apparent that the first payments seven were accepted by respondent received and without knowledge information respecting that revenue ap- derived pellant from the sale of which appeared monthly by appellant in the statements rendered was untrue. noted, of monthly heretofore each such As statements con- unequivocal plain, declaration tained a that the revenue by appellant from during preceding derived was based on calculation per month of 35 cent of the total gasoline produced during of amount such month. all of this appellant

conceded time actually a revenue from derived which was per a calculation 50 of cent of the based total amount under contract with the Los Nietos Producing Company. that, during our conclusion

It is respondent the time of fact ignorant appellant was actually receiving per cent instead of 35 cent 50 production the total 112 casinghead gasoline, may successfully not be contended royalty receipt payments percentage established basis the smaller

calculated on the agreement respondent accept smaller amount. an legal strange magic is no in the doctrine

There ac agreement An accord. accord is an satisfaction and something obligation, different from cept, extinction of an accept person agreeing to to which the or less than (Civ. Code, 1521; sec. Sierra etc. P. Co. v. is entitled. 376, 76].) Co., 197 386 Universal Elec. etc. Cal. Pac. [241 applicable appear In the doctrine shall order that be must dispute parties there is a between the as to the amount Lane, 443, (Berger 45].) 190 due. v. Cal. 447 Pac. [213 an The intention essential element Co., v. (Everhardy doctrine. Union Finance App. Cal. (2d) 460, 1024].) Pac. signifies an Accord [1 agreement parties, the primary principles govern law contracts necessarily applicable are arriving question at determination as to whether or there was an accord and satisfaction. One of such principles is the fundamental rule that there must be a meeting contracting of the minds of the parties in order that a contract shall come into existence. Since it is un knowledge denied that had no of the existence appellant of the contract between and the Los Nietos Com whereby pany, appellant 50 received gross cent of the casinghead gasoline produced amount of prem the leased April, 1931, ises until it is idle to accept contend that the royalties receipt ance based on a 35 per prior to this date agreement amounted to accept an percentage as a basis the smaller royalty. calculation of (Meyer Henry v. Co., Cowell Lime etc. App. Cal. 602, 604 611].) Up Pac. to the time apprised [132 appellant’s third there was and dispute could no to this action toas due on Appellant makes suggestion respondent’s some relative to opportunity to have than it discovered sooner did that receiving 50 per per cent rather than 35 cent. We are unable to in of this discover facts case reason to apply opportunity discovery doctrine that equivalent is the knowledge. presented not de- circumstances here do The application suggested principle. mand was the evidence

We likewise fail to discover that took satisfaction sufficient to establish that an accord and accept monthly- to place when continued in payments percentage after it was based on the smaller actually receiving larger appellant formed that was clearly percentage. evidence showed that position promptly advised it took royalty to was entitled receive a cent rather based royalty made than the on 35 seasonable based cent and request controversy be submitted to as arbitrators provided in the lease contract. The evidence also shows acquiesced proposal in the for arbitration and parties period several months the endeavored to select a board provided of three arbitrators as was in the developed finally lease. When it that a third arbitrator mutually acceptable selected, to both could agreed matter that the should be submitted to acceptance by respondent court. The of amounts smaller demanding than it was negotiations the time when being arbitration were carried is not indicative may argued respond an accord. not be successfully that who, during period, insisting ent all of this that it was royalty larger payments, entitled evidenced an intention acceptance to abandon its its claim of smaller amounts. Our findings conclusion that negativing the trial court’s existence of an supported accord satisfaction are been evidence has reached respond- without consideration of ent’s contention that the bank which received the agree checks was not accept authorized the payments respondent’s full settlement of only claim. The evidence scope respecting the agency of the bank’s pre- which was sented trial court quoted consisted of the hereinabove language of respecting the lease making royalty pay- agent ments to the bank “as for the pro- Lessors” which receipt “the vided that of said Bank agent, as shall be and taken be the same if the Lessors had themselves ac- knowledged Taking it”. language entirety its appear empowered would that the bank to do no more acknowledge than receive and payments described. heretofore manner to in the were delivered it knowledge of the the had bank is not contended Producing Nietos appellant Los and the contract between respondent became informed prior Company to the time duty its to advise question No of the bank’s existence. its therefore could this contract principal the existence of arise. judgment is affirmed. herein the the stated

Por reasons Barnard, J., P. concurred. upon Concurring. the

MARKS, J., This casewas tried governing oil the provisions of the lease theory that the by respondent on paid the manufacture royalty to be ambiguous casinghead gas were uncertain and gasoline from permitted to parol introduction of evidence and the interpreting provi these in them. If trial court aid the effectually dis foregoing opinion regarded, the sions be so that the evidence does poses the contention question judge trial on this support the views judgment. findings the as disclosed lease, regard My interpretation of the terms ambiguous, is being uncertain and somewhat different their parties during put upon them counsel for both from that opinion language my paragraph In of this trial. royalty paid pertaining to to be manufacture of read in connection gasoline, when with balance of the part, sufficiently is lease of which is a clear certain interpreted language should from that without bearing upon evidence need of the intention of the using it. place, paragraph,

In the first under right gas permissive extract from the is upon duty placed produce it. appel- no is If right produce gasoline itself of the lant avails from cas- inghead gas, either one of two governing conditions determining due is con- method first, templated; when manufactured lessee either second, premises, and, the leased or off when extracted party. If the lessee casing- third elects to extract itself it it must pay is clear head sale of derived from lessor gathering, manufactur- cost less “the entire ing,' is handling selling arbi- This same”. trarily sixty-five per so ex- fixed at cent of the gas. right, which given tracted from the The lessee exercise, contracting required it is not a third party advantage to extract this If it elects to take right, given privilege paying of this further contracts, sixty-five per with which it cent of the gasoline so manufactured as the cost of manufacture. The right pay sixty-five per permissive only to so cent is this and duty upon pay percentage no is the to such a cast lessee gasoline to the The lessee availed the manufacturer. given lease, right, itself of the it in the to with a party gasoline to the third extract but did not exercise right sixty-five pay the per gasoline cent of the manu- the factured as cost of It manufacture. is therefore evi- quoted paragraph dent that the clearly provides while respondent’s gasoline of the (1) share in the instances where gasoline itself, manufactured the (2) and where party agreed it contracted with a third give and the sixty-five per manufacturer gasoline cent of the as the cost manufacture, contingencies neither of these arose as contracted with a third for the manufacture of the agreed gasoline pay it, sixty-five, not fifty but per gasoline manufactured, cent of the as the of manufac- Therefore, I ture. must the paragraphs examine other the lease in order to determine if provi- the other applicable sions are to this situation which evidently is not paragraph covered specifically pertaining to the manufacture gave right

The lease to “the Lessee exploiting for, developing, drilling producing, extracting, bringing to surface, obtaining, taking, storing, removing and carrying oil, away gas, natural petroleum, naphtha, and other mineral oil, hydrocarbon in, upon substances land, and from said ” required It also pay . . . lessee to the “a lessor eighth (l/8th) royalty of one of the net petro- amount of all hydrocarbon leum, naphtha and other oil substances which may produced and saved from prem- demised ises, ...”

I gasoline within term understand that is included gen- is hydrocarbon expression “other as that substances” erally Therefore, to be used oil leases. if paid gasoline manufactured dealing specifically paragraph covered royalty provi- subject, general it should be determined just quoted. lease “net” is com- sions term remaining deduct- profit mon use after clear means the producing ing expense all expenses. The gasoline fifty per paid cent was the company fifty per cent manu- which left hydrocarbon as the of . “net amount . . other factured . . substances . demised saved that, under premises”. therefore seems clear to me clearly expressed language lease, respondent en- one-eighth fifty titled to of the cent by appellant, sold, or, received had been fifty of this the sale gave judgment it. April 11, Appellate District. No. 1379. Fourth 1935.] [Civ. BURNETT, Estate of W. I. Matter of the Deceased. In the BURNETT, Appellant, BURNETT, v. G. C. LUCENA Executor, al., Respondents. etc., et

Case Details

Case Name: Whepley Oil Co. v. Associated Oil Co.

Court Name: California Court of Appeal

Date Published: Apr 11, 1935

Citation: 44 P.2d 670

Docket Number: Civ. 1332

Court Abbreviation: Cal. Ct. App.