SCHAUER, J. I dissent. In the briefs of the parties, the opinion of the District Court of Appeal (173 P.2d 700) and the majority opinion of this court, we find an aggre[320]gate of hundreds of pages of legal discussion. And, unfortunately, all of it together is of little benefit to the parties or to the law because in the final analysis the sole determinative question, in the view of the majority of this court, at least, relates only to sufficiency of the evidence to support findings of the trial court and its construction of a written agreement. Apologetically I add to the fruitless discussion, impelled thereto by the unrelenting conviction that the loser in any lawsuit on appeal is entitled to an adequate and fair factual statement by the reviewing court and to a decision which reckons with the record as it is.
Reading of the entire record convinces me that in reality the majority of this court reach their result not because the evidence as a matter of law is insufficient to sustain any essential finding of fact or the trial court’s construction of the agreement but because, after weighing the sharply and substantially conflicting evidence, they have concluded that, as they view it, the greater weight of the evidence favors plaintiff and, hence, that the justice of the cause demands a reversal of the judgment. I am unable to concur in a judgment of reversal which on any fair statement of the evidence can be supported on no other theory.
The facts essential to an adequate understanding of the controversy are few and simple. The plaintiff oil company is lessee by assignment under an oil lease executed by defendant owner-lessor; the lease was modified and augmented by a supplemental agreement affecting the drilling obligations of the lessee; a dispute subsequently arose as to whether the provisions of the original lease relative to the number of strings of drilling tools to be operated continuously were abrogated and replaced by a provision of the supplemental agreement relative to a minimum number of wells to be completed each year. To determine that dispute this action for declaratory relief was brought.
Since, as above indicated, the issues in this case are either actually factual or are made so by the majority opinion, it becomes important at once to recognize what those issues are, what the evidence is, and, in particular, to set out in haec verba the language which the parties used and which is the subject of construction.
Plaintiff in its petition for hearing declares that “The heart of the controversy is the clause of the original lease fixing the lessee’s drilling obligations after the discovery of oil and gas in paying quantities. That clause, No. 7, specified (1) [321]the total number of wells that the lessee was to drill—one well to each ten acres [of a 6700 acre lease]—and (2) the rate at which the lessee was to drill this number, namely: ‘Lessee agrees to continuously operate one string of tools with due diligence for the first year after such discovery, two strings of tools for the second year after such discovery, three strings of tools for the third year after such discovery, four strings of tools for the fourth year after such discovery, and five strings of tools thereafter until the drilling requirements herein specified are complied with. ’ ” The foregoing requirement for operating, progressively, one to five strings of tools “imposed on the lessee the burden of spending from $180,000 the first year to $900,000 in the fifth and each subsequent year.” The lease, as previously indicated, covers some 6,700 acres of land and, hence, unless surrendered in whole or in part, will entail the drilling of some 670 wells plus, possibly, conditionally required offset wells. Such original lease does not appear on its face to be unfair in any respect; it sets up various reciprocal rights and obligations in considerable detail; the drilling schedule above quoted is not an absolute obligation of the lessee; it can be relieved therefrom at any time by surrendering the lease and its rights thereunder; there is provision also for temporary suspension of its drilling obligations under certain specified conditions.
The actual nub of this controversy lies in the present lessee’s claim that the “Supplemental Contract” eliminates completely and permanently the above quoted original contract provisions relative to the number of strings of tools to be operated in developing the property. The language of the “Supplemental Contract” so relied upon by the plaintiff-lessee, and now by the majority of the court, is as follows: “It is agreed between Union Sugar Company . . . and E. H. Moore, Inc., . . . that oil and gas lease dated April 8, 1936, from Union Sugar Company, lessor, to Sovereign Oil Corporation, lessee ... be, and same is hereby, modified in the following respects, to-wit:
“ (1) All obligations to drill additional wells, except offset wells, are hereby suspended for a period of two years from February 1, 1940.
“(2) At the expiration of said two year period, Moore shall be obligated to complete three wells per year.
[322]“(3) Numerical Paragraph Nine (9) of the lease [relating to offset wells] of April 8, 1936, shall be modified by striking out ‘250 feet’ wherever the same appears therein, and inserting in lieu thereof ‘ 330 feet. ’
“(4) Commencing from the date of this supplemental contract, Moore agrees to pay a minimum royalty of $25,000.00 per year, payable monthly in advance, and said royalty shall be charged against the, total oil reserves during the course of the life of the lease; that is to say, Moore shall be entitled to all oil and/or gas produced from said lease, or the proceeds thereof, until it is fully reimbursed from lessors’ one-eighth royalty .interest for the minimum royalty so paid.
“(5) Except insofar as the provisions of the lease of April 8, 1936, are in conflict herewith, the same shall remain in full force and effect. ’ ’
Particularly is it to be noted that the above-quoted supplemental agreement is utterly silent as to the number of strings of tools to be operated after the drilling holiday. It provides that “(1) All obligations to drill additional wells, except offset wells, are hereby suspended for a period of two years from February 1, 1940.” (Italics added.) The holiday, according to its terms, is a temporary suspension or moratorium, not an abrogation for the entire remaining term of the lease. But the effect of the majority holding is not to enforce any two-year suspension of the terms of the original lease; it is rather to permanently abrogate, insofar as the terms of the original lease are concerned, “All obligations to drill additional wells, except offset wells ’ ’; that is to say, by the majority holding the drilling obligations (other than for offset wells) declared in the original lease are completely eliminated and the only drilling obligation (except for offset wells) now operative is that stated in the “Supplemental Contract,” which is to “complete three wells per year.” (Whether in the view of the majority any offset wells completed during a year should be credited on the “complete-three-wells” program does not clearly appear.) The supplemental agreement language is: “ (2) At the "expiration of said two year period, Moore shall be obligated to complete three wells per year.” (Italics added.) This language, viewed in its context, would seem to me to mean that “at the expiration” of the two-year suspension of “All obligations to drill additional wells, except offset wells,”' the lessee was to be obligated, regardless of the price of.oil, of the number of strings of tools otherwise required to be operated, of the depth of hole required, of the [323]character of formation encountered, or, etc., to, at the least, “complete three wells per year.” (The same paragraph of the lease (No. 7) which provides for the number of strings of tools to be continuously operated after discovery of oil also provides that “The Lessee shall be entitled to drill as many additional wells on said land and premises as .it desires.”)
Certainly it cannot successfully be contended that the language of the supplemental contract precludes the meaning above suggested. If that meaning is not precluded by such language we are bound to accept it for it’was found by the trial court to be the true meaning of the language and the ' true agreement of the parties arid such finding is amply supported by both direct and circumstantial evidence. As recounted hereinafter in more detail the record shows that Mr. Cooke, a director of defendant-lessor who participated in the negotiations leading up to the modification agreement, testified in respect to the terms agreed upon that “if we were going to give them a release on drilling of wells for two years . . . that they had to start and drill at least—I want to make particular emphasis on that word ‘at least’—three wells a year. . . . [And] if the price of oil was more than 60 cents ... we expected them to go ahead on the original lease, under that Clause Seven. . . . [Italics added.] [T]hree wells were to be drilled [per year] . . . Regardless of whether the price of oil was 60 cents or less.” Likewise, as hereinafter shown in more particularity, the witness Cross testified as to the terms of modification agreed upon that “if they were given a two year suspension, would.have to agree to drill and complete at least three wells per year if the price of oil was under sixty cents. . . . There was absolutely no discussion of Paragraph seven of the lease. ...” Any failure to discuss paragraph 7 at this time would seem to me to indicate that the repeated earlier refusals of defendant’s directors to modify the drilling covenants beyond the two-year moratorium were accepted by Mr. Martin as final; and insofar as Martin may have again attempted to bring the subject up the positive refusal by defendant’s directors to give it further consideration (as suggested by evidence hereinafter quoted) is likewise suggestive that the supplemental agreement means what it says rather than what the majority now interpolate into it.
I look in vain to the supplemental agreement for a provision saying that “the suspension of ‘All obligations to drill [324]additional wells, except offset wells’ is hereby made permanent”; or that “the provisions of the original lease requiring the continuous operation with due diligence of five strings of tools ‘until the drilling requirements herein specified [one well to each 10 acres] are complied with, ’ ” are suspended and inoperative not only for two years but for the entire remainder of the term of the lease. I look in vain for the above but I find, “ (5) Except insofar as the provisions of the lease of April 8, 1936, are in conflict herewith, the same shall remain in full force and effect. ’ ’
It is obvious from an inspection of the original lease and of the supplemental agreement that the latter on its face, construed as it must be with the document which it avowedly supplements, does not purport to support the theory of, or the result reached in, the majority opinion; it does not appear to be ambiguous or uncertain or to admit of the construction or effect now urged by plaintiff; on its face it does appear to fully sustain the construction given it by the trial court. Nevertheless, says plaintiff, if the extrinsic evidence is considered,1 the only reasonable conclusion which can be drawn from it is that the parties to the lease really agreed to modify and supplement it in one element at least which is drastically different from anything which the language used seems calculated to delineate. In fact, the plaintiff urges, and the majority opinion now argues, that the major object which the plaintiff2 sought to obtain in consenting to any change in the original lease was a permanent release, rather than a two-year suspension, of its drilling obligations as provided in the original lease. The vast difference between a two-year suspension of the agreed drilling obligations and complete release therefrom with substitution of a mere three-well yearly completion schedule will at once be apparent to anyone who has any intimate acquaintance with the oil production business and who pauses to consider the facts of this case.
Here we have a 6,700 acre lease with the lessee obligated, by the terms of the lease as originally executed, to develop the land with reasonable expedition by continuous operation during the fifth and subsequent years after discovery of oil [325]or gas in paying quantities, of five strings of tools “with, due diligence.” How many wells might be completed each year by the operation of five strings of tools is, of course, a variable. Whether one hole can be completed in three weeks, three months or three years depends not only on the diligence and skill of the workers but also on the type of equipment used,- the character of the geological formations encountered and the depth of the oil sand from which production, if any, eventually is obtained. There is evidence here that the operation of five strings might produce as many as 15 wells a year; it could, of course, complete less than three. At 15 wells a year to fully develop the lease (without allowance for unusual delays) would require approximately 45 years. If plaintiff prevails and can maintain the lease by completing only three wells a year—if that is tantamount to saying it need drill only three holes a year—it will require 223 years to put defendant’s land on full production! With such a seemingly absurd result, from defendant’s standpoint, to be made possible from the interpretation urged by plaintiff, and with that interpretation to be read into language which does not, by itself, even remotely suggest it, one should expect that the evidence requiring such a construction (if, indeed, there be any known theory of law which permits it) must indeed be overwhelming and without conflict. But in truth the most that can be said for plaintiff is that the evidence is in sharp conflict.
The majority opinion on its very face recites evidence which, if fairly analyzed, according to all heretofore accepted standards would require that the findings of the trial court and its construction of the contracts be sustained. Such discussion of the evidence as appears in the majority opinion, insofar as it is objective, is obviously argumentative as to the differing inferences which may be drawn from the evidence. In other words the thesis of the majority opinion constitutes a mere argument on the weight of the evidence, the resolution of its conflicts, and the selection of inferences to be drawn therefrom, matters which are no concern of a reviewing court. But my greatest quarrel with the majority opinion comes not from evidence which it discusses but, rather, from evidence which it leaves unquoted.
The record discloses that at the time of the negotiations for the modifications to the lease the following circumstances existed: The then lessee, E. H. Moore, Incorporated, a one-[326]man. corporation, was dissatisfied with marketing conditions at the defendant’s field. Moore was dissatisfied largely because the present lessee (plaintiff here) was the only crude oil purchaser available and, as such, had fixed an arbitrarily low price which Moore had no alternative but to accept if he was to produce and market oil in that field. By way of remedying .that situation- Moore conceived the plan of building a refinery at the field so that he could handle his own production. According to the record a two-year moratorium or “holiday” in drilling requirements would enable him to devote toward the building of a refinery some. $1,800,000 in cash which otherwise might have to be expended in drilling new wells. Although at that time the oil company was offering less than 60 cents a barrel for the oil being produced by Moore from defendant’s field, and although the obligation of the lessee to operate the five strings of tools ■ was suspended while the price was below 60 cents, there was, of course, nothing to prevent the oil company from raising the price to 60 cents or more at any time it saw fit ¡so to do. To the end of securing some modification in the drilling program—-at least security against having to drill any but offset wells for a two-year period during which a refinery might be built—Moore commenced negotiations with representatives of defendant. In most of these negotiations Moore was represented by Mr. Villard Martin, an attorney at law. In the initial negotiations Mr. Martin broached the matter to Mr. Edmunds Lyman, who was then president of the defendant lessor; Mr. Lyman referred Mr. Martin to Mr. T. A. Twitehell, an attorney at law; Mr. Martin thereupon conferred with Mr. Twitehell and stated the desires of the Moore Company; Mr. Twitehell then prepared a memorandum of the proposition suggested by Martin and forwarded it to the offices of the lessor at San Francisco. This proposition is sometimes referred to in the record and herein as the “Twitehell deal” or proposal, and because of the repeated references to it by some of the witnesses at the trial its substance is of importance to bear in mind in any appraisal of the sufficiency or weight of the evidence relative to supporting or failing to support the judgment.
Mr. Twitehell, in his report to the lessor (under date of October 14, 1939, received in evidence as plaintiff’s Exhibit No. 5), said: “Mr. Villard Martin, attorney for Mr. Moore, was here Thursday discussing the possibility of modifying [327]the oil and gas lease between the company as lessor, and Mr. Moore as lessee. Mr. Moore desires to construct a topping plant to handle the oil from the lease, but does not desire to spend the money required to build this plant if he has to comply with the existing drilling requirements of the lease. If Moore constructs a topping plant it will be to the advantage of the Union Sugar Company because it will create an outlet for oil, and this in turn will mean immediate revenue for the company as lessor. ...
“I informed Mr. Martin that I would submit the proposal to you, and that you in turn would submit it to the Board of Directors.
“Mr. Martin originally proposed to modify the drilling requirements so that Mr. Moore would only be required to develop the lease in accordance with good oil field practice. Many old oil leases did not contain any express drilling requirements, and in those leases the Courts uniformly held that there was an implied obligation to drill when conditions warranted further drilling. . . .
“I informed Mr. Martin that I could not recommend that the lease be modified in this way. After discussion, we arrived at the following tentative plan:
“1. The Union Sugar Company shall agree to suspend all drilling obligations for a period of two years, except the obligation to drill offset wells. ...
“2. The existing proven area, comprising some 400 acres, would be zoned and in that zone, after two years, Moore would be required to drill 3 wells per year, provided that the price of oil is 60c or more per barrel at the well. . . .
“The provision calling for three wells per year was inserted because three wells per year would be all that Moore would be required to drill, assuming that he was operating with one string of tools. Martin said he might desire to drill three wells all at one time under contract, rather than to allow 90 days to elapse between wells, as provided in the lease.
“3. Moore would not be obligated to drill any additional wells . . . outside of the proven area, unless oil should be discovered on the property or or adjacent property at such locations that it would appear probable that oil could be discovered and produced from a portion of the unproven area. . ..
“I also believe that it would be advisable to provide that the agreement would be null and void if Moore assigned or transferred the lease to some third person. ...”
[328]It is obvious from mere perusal of the above-quoted report that even the “Twitchell deal,” although it definitely called for a modification of the five-strings-of-tools development program, certainly contemplated more extensive drilling obligations than the three-wells-a-year now held by the majority to have been agreed upon. But as will appear from evidence hereinafter quoted the “Twitchell deal” was rejected by the defendant’s directors because they would not grant such an extensive release from the drilling obligations declared in the original lease. Following the Twitched report Mr. Lyman was succeeded by Mr. Tognazzini as president of the Union Sugar Company, and Mr. Martin arranged for a conference directly with Mr. Tognazzini. The latter called in Mr. Cooke and Mr. Cross, directors of the defendant company, and the conference was held at the Stock Exchange Club in San Francisco, on December 20, 1939.
According to Mr. Tognazzini’s testimony Mr. Martin “asked me about the modification, what action had been taken on the proposal that had been submitted to us by Mr. Twitched. . . . And I told him that the proposition had been turned down cold by the Board of Directors. . . . Mr. Martin opened up the subject again about a modification and he elaborated at length on the large amount of money that had been expended by E. H. Moore, Incorporated, and the difficulties that they had encountered in disposing of the oil, stating that the arrangements as they existed in the Santa Maria Field by virtue of the only outlet being that of the Union Oil Company, had made it unsatisfactory. ... He stated that they needed to obtain an outlet and one method would be to establish a refinery or some similar institution of their own; that they had gone to the expense of discussing the same with a firm of engineers in Los Angeles; that they were prepared to go ahead with that, but in view of the large sum of money that would have to be expended for the erection of a refinery, and that he thought there was a possibility of the price of oil going up again, that he wished to have the lease modified so that there would be a complete suspension of drilling operations for two years. ... I told him that most of the leases in the Santa Maria Valley Field were more favorable to the lessor than that which the Union Sugar Company had. ... I told him further, as I recall, that the Union Oil Company controlled that field, that I was indignant over the attitude of the Union Oil Company who [329]had had a posted price of seventy cents in that field; . . . that any analysis disclosed that there were twenty-three or twenty-four oil fields throughout the State of California the price on which oil of comparable gravity was within a few cents of this seventy cent range; that the Union Oil Company, for reasons best known to themselves, arbitrarily reduced the price of oil in this particular field which they controlled to below fifty cents; that in no other field in the State of California would you find a comparable reduction or price for comparable oil. ... I told him further that he might be of the opinion that the price of oil would go up, which would necessitate a resumption of drilling, but I was going to protect the interests of the Union Sugar Company in the event the price of oil did not go up. So I made it very clear to him that so far as we were concerned, we would permit, if all parties could agree upon the terms and conditions of this two year suspension. They were under no obligation to drill anyway. It was only on a basis of an anticipated increase in the price of oil that they might have to drill at this particular stage of the game. I told him that in the event we could agree that there must be a provision whereby there would be the drilling of three wells per year when the price of oil was below sixty cents. We did not arriv.e at that particular meeting at the monetary consideration to be paid to us. I advanced the theory that there was proven production and whatever monetary consideration would be given to us was really not a consideration for the reason that it would be only an advance of money to us on our own production or proven oil reserves to be charged against those reserves as time went on. That statement came about in answer to this unit plan or some such plan that had been discussed in the Twitehell letter and again had been discussed almost verbatim at this meeting. ...”
The witness continued, “Since Twitehell’s letter is in the testimony, I guess we can refer to it. In the Twitehell letter there was a statement made that they be permitted, or that there be a suspension of drilling requirements for two years and at the expiration of that time, if the price of oil be sixty cents or more, that three wells be drilled.
“Q. Yes? A. At this meeting I took just the opposite position because we turned down that proposition cold, that at the expiration of two years three wells must be completed if the price of oil be below sixty cents. That’s all we were talking [330]about. That’s all that I was talking about, and that there be this minimum revenue coming in, not only during the two years which was a condition for the suspension for a two year period in order to give relief in the event the price of oil went up, in view of the contemplated erection of a refinery, that at the expiration of that'two year period if the price of oil still be below sixty cents, then I wanted three wells to be drilled on that property per year. . . .
“Q. Was anything said during that discussion as to what drilling requirements would be if the price of oil was above sixty cents after the expiration of the two year period ? A. No, nothing whatsoever. We had turned down the proposition that there be three wells drilled if the price were over sixty cents. The lease provisions prevailed if the price were over sixty cents. What was being asked was a respite for two years because of the fear that the price of oil was going to go up again which then would require the drilling and producing of that field. Now that’s what the whole discussion was about at this particular meeting and, the proposition was made, or the play on our sympathies was made, showing how much money had been expended, how they were unable to have an outlet because of the activities of the Union Oil Company in that particular field and how therefore" it was necessary for them to erect a refinery in order to obtain an outlet of their own. And while they were erecting all that, going to all that further expense, Mr. Martin stated definitely he anticipated an increase in the price of oil. In that respect he was correct, because there was an increase in the early part of 1941.
“Q. Did they, as a matter of fact, erect a refinery? A. Ño.”
In corroboration of the testimony of Mr. Tognazzini we find the testimony of Mr. Cooke:
“As I say, we were gathered downstairs, and Mr. Martin said he had come here at the instance of Mr. Moore to see if something could not be' done to help out the situation, which was getting rather critical at that time.
“Q. Did he explain in what respect the situation was getting critical, do you recall? A. Yes, the oil situation had changed there and he found he needed relief, one way or another ; had to have relief from drilling some oil wells he should have to drill under his contract, and he stressed quite a point on that; that he would like us to consider making some [331]change in that, and that he would probably have to put in a refinery. That was the thing that struck me. There were two or three things Martin had on his mind. One was, he figured, he tried to get it over to all of us, that Mr. Moore would have to spend a lot of money for this refinery, and if he did that he felt he should have some relief on the drilling of the wells.
“Q. Did he explain why he thought he would have to have a refinery ? A. Yes, there was no way of getting his oil out at that time; the marketing conditions bothered him. Mr. Tognazzini did most of the talking to him at that time. We really sat back and listened, except when it got near the end we went in on a few things, made some suggestions and 'worked them out, and as far as I remember—do you want me to try and dig up some of the statements 1
“Mr. Brandt : As far as the sum and substance of it goes. A. (Continuing:) The sum and substance was: You must realize we had had nothing under this oil business, and we felt that we should have an adjustment made there that was fair to us and fair to the Moore people. If I remember rightly, they started to and drilled approximately, when they asked for this meeting, I think it was twelve wells, and out of these 12 wells, I think 10 were operating and 2 were dry, or not in good condition. I don’t know the technical condition, but they were not on production, let’s say that, and he, Mr. Martin, seemed to feel that we should give them this 2-year extension whereby they didn’t drill any wells. They wanted relief. Well, we didn’t give them any definite answer at that time, because there were other things he was going to bring up—Mr. Tognazzini was going to bring- up—and that was the matter of us getting some money on a royalty basis. We felt we should have that, and also we felt if we were going to give them a release on drilling of wells for two years, that under no circumstances were we going to allow them at the end of that time not to live up to their agreement, that-they positively had to live up to their agreement, which was, in fact, that they had to start and drill at least— I want to make particular emphasis on that word ‘at least’— three wells a year.
“Q. At the end of the two years? A. At the end of the two years. . . .
- - “Q. Did Mr. Tognazzini in the conversation refer to [332]the extent of the acreage leased? A. Yes, I think he mentioned that we had leased Mr. Moore some 6700 acres.
“Q. That they were included in the lease? A. Included in the lease.
“Q. Do you recall whether anything was said concerning the then price of oil? A. He was very insistent on that point, because, as I remember, he made the statement that no matter what the price of oil was, that the Moore Company were still obligated to drill three wells—at least three wells—a year, irrespective of the price of oil. . . .
“Q. And did Mr. Martin, as you recall, mention the possibility that oil might increase in price while building their refinery ? A. Yes, he did.
“Q. What did he say in that connection? A. He said that he would like to have two years and be released from that drilling, but he said the oil might go up—I don’t think he said any particular price as to what the oil might go up tó—but we came right back to the same thing, that irrespective of the price of oil we still say you will have to drill at least three wells a year.
“Q. Now, during the conversation was there anything that you recall, Mr. Cooke, mentioned concerning the number of drilling rigs at any time ? A. No, no.
“Q. Was there any mention that you can now recall concerning Paragraph Seven of the lease as such? A. I think that was a clause—Seven, was it?
“Q. Clause Seven? A. Clause Seven; no, no mention at all.
“Q. Was there any discussion about the number of rigs that were to be used after the expiration of the 2-year period ? A. No sir.
“Q. Did Mr. Martin state to you people, you directors there and to Mr. Tognazzini, that he wanted a suspension of drilling operations for two years, and on top of that wanted a new agreement with respect to future operations ? . . . A. No.
“Q. Did Mr. Martin ask that in addition to suspension, that the lease be modified to reduce the number of strings of tools required to be used or the number of wells to be drilled? A. No.
‘ ‘ Q. Did Mr. Martin say at that time that it was his purpose to secure a complete suspension for two years, and thereafter secure a modification of the lease, so that they would only be required to complete three wells a year? A. No.
[333]“Q. Did he say, did Mr. Martin say, he wanted to get the lease modified so that they would not be required to keep the number of strings of tools busy as provided in Paragraph Seven of the lease? A. No.”
On cross-examination of Mr. Cooke by plaintiff’s counsel, he was shown a copy of Mr. Martin’s testimony as given in a deposition and an effort was made to break down his testimony. The record reflects the following:
“Q. I will again refer to Mr. Martin’s deposition on page 70. Mr. Martin stated; ‘I told them I was up there to get a modification of that lease.
“ ‘Q. What kind of a modification did you tell them you were after ?
“ ‘A. I told them I wanted to get that lease modified so that we would not be required to keep the number of strings of tools busy that are provided for in Paragraph Seven of the lease. ’
“A. My answer to that is ‘no.’
“Q. That he didn’t make that statement? A. No, he did not make that statement. . . .
“Q. And I will also ask you, then, if you recall, or if you are prepared to state, that he didn’t state at the conference as follows: . . . ‘ The discussion there was that after the expiration of the 2-year period under this proposal that we made there and this supplemental agreement we had submitted, we were going to have to drill three wells each year, regardless.
“ ‘Q. It was your proposition, then, to them that you have a limit as to the number of wells after the expiration of the two years?’
‘ ‘ The Witness : No, no.
“Mr. Powell : I am just reading, I have not come to the point as yet in the question asked Mr. Martin in his deposition.
“ ‘A. That is right, three wells a year after the expiration of the two years was the limit of our drilling requirements. ’
‘ ‘ The Witness : Oh no, no.
“Mr. Powell: Q. You are prepared to say definitely? A. He is confused on that.
“Q. Are you prepared to say that Mr. Martin did not make that statement? A. Yes. . . .
“Q. Then I will ask you, Mr. Cooke, if at this conference Mr. Martin stated that the only change in the lease they [334]wanted was a suspension of two years in drilling? A. Two years ?
“Q. A two years ’ suspension in drilling obligations ? A. I think that is correct, yes.
“Q. He stated that was all .that he was seeking ? A. At that time, yes.
“Q. A two years’ suspension in drilling, nothing else? A. No. . . .
“Q. What was to happen if the price was more than 60 cents? A. That wasn’t referred to at all. We expected them to go ahead on the original lease, under that Clause Seven that you speak of, but Moore never mentioned Clause Seven.
“Q. You stated just now that three wells were to be drilled regardless of the price of oil, I think that is your precise language. Do you mean regardless of whether the price was less or more than 60 cents a barrel ? A. Regardless of whether the price of oil was 60 cents or less.”
The foregoing quoted matters from the testimony of the witness Cooke are only a part, but a fairly illustrative part, of his positive and material testimony which the majority opinion dismisses as insufficient to create a' substantial conflict in the evidence of surrounding circumstances from which circumstances such opinion interprets the “Supplemental Contract” to mean what the witness Martin asserts he asked for but which the contract does not state and which the witness Cooke, as well as the witness Tognazzini, testified Martin in part did not ask for and in part asked for but was refused.
And the gist of the testimony of the witnesses Tognazzini and Cooke is corroborated by another witness, Mr. Francis L. Cross, a member of the State Bar and a director of the defendant-lessor. Mr. Cross was among those present at the San Francisco conference, which lasted “from around noon to three-thirty, a quarter to four, sometime there.” The transcript shows: “Q. Now can you give us, in substance, Mr. Cross, 'your recollection of that discussion ? What did Mr. Martin, in substance say, and what did Mr. Tognazzini, in substance say ?
■ “A. Well sir, Mr. Martin discussed the question of the oil lease he had with us and that at the time it was very onerous; that they had spent a substantial amount of money on this lease and they weren’t very happy in that regard. That was the- sum and substance of what he had to say.
[335]“Q. Did he say anything about a refinery! A. Tes, he spoke of building a refinery in rather positive terms, had an engineering architect who was going ahead with this refinery.
“Q. Yes, well, did he make any suggestions as to what he wanted! A. Mr. Martin spoke of these matters first and stated that they wanted a two year suspension of a drilling clause.
“Q. Yes! A. They wanted relief for two years from having to drill. That was the sum and substance of his entire conversation, the crux of it.
“Q. What, if anything, did Mr. Tognazzini say! A. Well, Mr. Tognazzini did quite a bit of talking and told Mr. Moore that he was new in the Union Sugar Company, which was a fact, and was looking after the interests of the Union Sugar Company and he went into great lengths to show what had happened in the Gato Ridge to his cousin, Lario Tognazzini, and he was not going to allow the Union Sugar Company to get in that same position; that he wanted some payment. No payment was mentioned,'—no specific payment was mentioned but that he wanted some payment and that in any event the Oil Company, B. H. Moore, Inc., if they were given a two year suspension, would have to agree to drill and complete at least three wells per year if the price of oil was under sixty cents.
“Q. And was there any discussion as to what drilling would be required at the expiration of the two year period,' during the period when the price was above sixty cents! A. There was absolutely no discussion of that at all. It wasn’t mentioned.
“Q. Was there any discussion that you recall concerning Paragraph Seven of the lease! A. There was absolutely no discussion of Paragraph Seven of the lease.
“Q. Was there anything said that you recall at that conference concerning the number of drilling rigs to be used! A. No, I don’t recall any mention of any drilling rigs or anything like that.”
It is also significant to note that on cross-examination of Mr. Cross the following appears: “Now, Mr. Cross, I understand from you that all Mr. Martin wanted was a two year suspension in drilling; nothing else!
[336]“A. Mr. Martin talked about getting relief for two years. It is true that during this conversation he brought up the Twitchell deal, that they had been trying to put through with Twitchell. Mr. Tognazzini told him unequivocally that that was out. ’ ’ The unequivocal refusal to. consider ‘ ‘ the Twitched deal” imports a refusal by defendant-lessor to consider the three-well-a-year proposal as a substitute for the more specific drilling operations provided for in the lease.
Again on cross-examination Mr. Cross was asked, “Now did Mr. Martin ask for any reduction in the drilling requirements at the expiration of the two years 1 ’ ’ And he answered, “No,” with the explanation that “He . . . tried to bring it [the Twitched deal] up again, the deal that he wanted to put over with the Union Sugar Company that was turned down. He again brought that up and was again turned down. ...”
In what is essentially an argument directed at the weight of conflicting evidence Justice Traynor declares, ‘ ‘ Only if the letters are disregarded could an inference be drawn from the testimony with respect to the San Francisco conference, that the parties never considered the modification of paragraph 7 and consequently did not intend clause 2 of the Supplemental Contract to be the measure of the lessee’s drilling obligations. The letters cannot be disregarded, for the trial court found that they were mailed and received. There is no authority for the proposition that such an inference must be drawn to sustain the judgment.” The above-quoted argument misses the point completely. The evidence in the record which I have above referred to and quoted in part was not relied on by the trial judge, as “support for an inference that the parties never considered such a modification. ’ ’ Exactly the contrary is true. The evidence is positive to the point that Mr. Martin, representing Mr. Moore, requested “such a modification” originally and repeatedly and that such request was rejected and refused by the directors of defendant corporation. Only in the sense that they absolutely refused such proposal by Mr. Martin did they decline to "consider” it. They did so refuse to consider it, in that sense, and apparently they continued to so refuse down to and including the time when the modification agreement was executed.
The oral testimonies of the directors show the terms of the agreement which were discussed and tentatively accepted; such testimonies show what was refused and what was not [337]refused; their version of the conference corresponds with the terms of the “Supplemental Contract” as it actually was finally drafted and executed, not as plaintiff would now have us “construe” or interpolate it. Obviously the inferences to be drawn from such evidence, within all reasonable limits, were for the trial court, not this court, to determine; and surely it is within reasonable limits to draw the inference that a proposed modification which was requested by Mr. Martin and absolutely and positively rejected and refused by the three directors of defendant corporation at the principal conference held would not be gratuitously or otherwise revived and granted by those same directors when they came to actually authorizing the amending contract. And, furthermore, if Tognazzini, acting alone, did talk about the matter further, by letters or otherwise, it was for the trial judge to determine from all the evidence (if any was admissible under the circumstances) what terms were finally agreed upon. The contract is itself evidence of its terms and of what the parties intended; in its final form it was drafted by Martin; the language was in large part the same as he had previously proposed; language which he previously had proposed to secure more extensive modifications, or an abrogation, of the drilling requirements of paragraph 7, significantly, was omitted from the final draft. The weight of the contract itself as evidence is completely ignored in the majority opinion but its significance as evidence is corroborated by the testimonies of Cooke and Cross and Tognazzini and by circumstantial evidence.
The fact that the court found that certain letters “were mailed and received” does not appear to me to add anything to the significance of those letters as evidence. Their weight or significance here depends not on the fact of their having been mailed and received but on what the trial court believed, and was. supported by the evidence in believing, the writer of the letters and their recipient understood was being agreed upon by way of modification of or supplement to the original lease. Just why statements in letters by Mr. Tognazzini should be overwhelming in weight while the oral testimonies of Mr. Tognazzini, Mr. Cooke and Mr. Cross as to what was tentatively agreed upon and what was positively rejected should be entitled to no weight at all is beyond me. The fact is that the testimonies of Mr. Cross and Mr. Cooke support strongly (and amply as regards the duty of an appel[338]late court to affirm) the terms of the agreement as stated in the language of the contract as executed and as found by the trial court. The letters are not the contract which was executed. They are in evidence, like the oral testimony, simply as parts of the surrounding circumstances. The letters themselves are not free from ambiguities and self-contained conflicts. They are entitled to no greater weight than the trial judge, in the light of all the evidence including his view of the parties, gave to them. Surely the formally executed contract, supported by the oral testimonies of the several witnesses, should be as competent evidence of what was meant by the letters as the letters are of what was meant by the contract. Surely, also, the persuasiveness of such evidence was a question for the trial court, not for us. The oral testimony is entitled to just as much weight, as far as we are concerned, as. the written letters. The oral testimony strongly indicates that the true contract is that which was actually reduced to writing rather than that which is now by judicial fiat interpolated therein.
A further example of weakness in the majority opinion is found in its effort to explain away application of section 1654 of the Civil Code providing that ‘ ‘ In cases of uncertainty not removed by the preceding rules [including section 1647 that a contract may be explained by reference to the circumstances under which it was made], the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist. The promissor is presumed to be such party. ...” After quoting the section as above, Justice Tray-nor’s opinion asserts that “This rule on its face cannot sup.pprt the judgment in the present case. Clearly it cannot be .applied against the lessee as the promissor, for a basic issue .in the case is who was the promissor. Nor can it be said that the lessee caused the uncertainty to exist, for the evidence is without conflict that the precise modification was suggested by defendant’s president in language that was copied almost verbatim into the formal document.*” (Italics added.) It is true that the language “almost verbatim” is to be found in'the letter written by “defendant’s president.” But it requires very little more diligence in examining the record to ascertain that an earlier source of the same language is a letter written by plaintiff’s Mr. Martin to defendant’s Mr. Tognazzini. Mr. Martin there says: “Dear Mr. Tognazzini: Delay in writing you has been due to Mr. Moore’s and my absence from Tulsa. [339]... I reported to him the substance of my conversation with you and Messrs. Cook and Cross, and he asked that I write you outlining briefly the terms of a supplemental contract along the line of my conversation with you.
“We proposed to embody the following in said supplemental contract: . . . All obligations to drill additional wells, except offset wells, are hereby' suspended for a period of two years from the date of this contract.
“At .the expiration of said two year period, Moore shall be obligated to drill three wells per year in any area consisting of approximately 400 acres, being that part of the leased premises which is considered proven territory . . . except that Moore shall not be obligated to drill during the existence of either of [certain enumerated conditions]. . . .
“There shall be no obligation to drill any additional wells on that part of the leased property outside of the proven area . . . unless oil is discovered on said property. ...
“Except insofar as the provisions of the lease of April 8, 1936, are in conflict herewith, the same shall remain in full force and effect.”
Mr. Tognazzini replied as follows: “In response to yours of the 11th, may I first advise that the terms and conditions contained therein are unsatisfactory.
“It was my impression from past conversations you had with my predecessor, and more recently, with Messrs. Cooke, Cross, and me that it was the desire of E. H. Moore Inc. to obtain a modification of the present oil and gas lease existing between E. H. Moore Inc. and the Union Sugar Company. In this connection, I expressed to you at our recent meeting that Union Sugar Company was desirous of cooperating with E. H. Moore Inc., but only to the extent that both parties were to benefit mutually by said modification. ” It is only after the above-quoted introductory statements, and in the light of all the preceding negotiations of the parties, that Mr. Tognazzini went on to summarize what he understood to be Mr. Martin’s “desire” and what he understood was the “desire” of the defendant lessor, and after such statement of what obviously had been largely opposing “desires,” he concluded with the following suggestion: “Both you and I, in obtaining a modification, desire to reduce it to its simples [sic] form and to this extent I suggest the following, to-wit:
“(1) The suspension of all obligation to drill additional [340]wells, except offset wells, for a period of two years from date of the modification,
“ (2) The modifying of the paragraph 9, by striking out 250 feet and inserting in lieu thereof, 330 feet, and in addition thereto, appropriate language to provide that when offset wells are being produced within said range, more or less, E. H. Moore Inc. likewise produce,
“ (3) At the expiration of the two year period, E. H. Moore Inc. shall be obligated to drill three wells per year.
“The consideration for the above will be the paying of a minimum royalty of $25,000. per year, said royalty payable monthly in advance.”
Regardless of who originated the form of language used in the “Supplemental Contract” it was Mr. Martin, acting for the plaintiff’s predecessor, who finally drafted the contract; and it was the same Mr. Martin, acting in the same capacity, who was at all times the moving and pressing party in seeking a lease modification. Concerning Mr. Martin, and in the exercise of those fact finding prerogatives which are properly a function of the trial court, rather than of this court, the learned trial judge, in his memorandum opinion, says: “As the Court has intimated, it is inconceivable to it that E. H. Moore’s Inc. able and experienced counsel would fail to provide, in plain and unambiguous terms, the present contentions of the plaintiff herein, had they been those now contended for.” Certainly the quoted observation of the trial judge indicates not misconduct or error, as suggested by the majority opinion, but, rather, an entirely proper appreciation of the significance of circumstantial as well as direct evidence. And, in truth, the letter from Mr. Tognazzini to Mr. Martin, which Justice Traynor seizes upon as overwhelming substantially all other evidence in the record, is but a part—a greater part or a lesser part, as various fact finders might respectively view it—of a record which discloses with absolute certainty, to a reviewing court, only one thing: a substantial conflict in the evidence.
I have not herein, by any means, related every detail of evidence, either direct or circumstantial, which supports the trial court’s findings and construction but what has been set forth above is ample, under any pertinent rules of law which ever heretofore have been followed in this state, not only to support, but to demand that we sustain, the lower court in its findings and conclusions.
[341]For adequate treatment of those of the points briefed which I have not found it necessary or desirable to discuss in a dissenting opinion reference is made to the opinion prepared by Mr. Justice Wilson for the District Court of Appeal, Second Appellate District, Division Two, reported in 173 P.2d 700.
The judgment should be affirmed.
Shenk, J., and Carter, J., concurred.
Respondent’s petition for a rehearing was denied February 9, 1948. Shenk, J., Carter, J., and Schauer, J., voted for a rehearing.
For the purposes of this dissent the admissibility of such extrinsic evidence is assumed but this does not imply accord with the holding that it was properly admitted.
The word plaintiff is used herein interchangeably as denoting either the present plaintiff or its predecessor in interest under the lease from defendant.