Empire Redwood Co. v. Hall

SCHOTTKY, J. In 1949Empire Redwood Company (referred to hereafter as Empire) held a contract to purchase 26,000 acres of land and the timber thereon. On August 20th of that year Empire and S. J. Hall simultaneously executed several documents pertaining to the land and timber, all as part of one transaction. Empire assigned all of its rights in the purchase contract to Hall. He paid Empire $150,000 and agreed to pay the balance payable under the land purchase contract. Empire was given for a period of 25 years the exclusive right to log and manufacture all old growth timber located on the land. It was to pay Hall 10 per cent of the amount realized by it for redwood and pine lumber and 8 per cent of the amount realized for fir lumber. The tenth paragraph of the agreement also provided:

“It is recognized by the parties hereto that 25 years covers a long period of time, that the percentages of stumpage to sales value may change wtih the years and they agree that once in every five years in the life of this contract the question of percentage of sales for stumpage shall be revised by mutual agreement. If no agreement can be reached, the question shall be submitted to arbitration. ...”

Empire conducted logging operations until 1953, at which time it leased its mill to Alvin M. Boldt and gave him the right to log the timber on the property. The agreement provided that Boldt would get “all the benefits and privileges” of the cutting contract between Empire and Hall.

In 1954 Hall, acting for Gualala Redwoods, a partnership which had succeeded to Hall’s interest, hereinafter called Gualala, began correspondence with Empire regarding a revision of the stump age-sale percentages. These negotiations failed to result in any agreement, and Hall then proposed [825]arbitration. Hall proposed that the arbitrators fix a revised percentage for the period August 20, 1954, to August 19, 1959, that is, for the second five-year period of the contract. Each party named one arbitrator, but were unable to agree on a third, and the proposed arbitration failed.

In October, 1954, Empire filed a complaint for declaratory relief. Boldt, who was named as a defendant, cross complained, as did Gualala. The cause was tried and the court entered a judgment from which all the parties have appealed.

The major question determined by the court was the new price to be paid Gualala for the timber. During the trial of this issue Empire sought to introduce parol evidence of the proceedings leading up to the execution of the documents to explain what the parties meant by the provision that ‘ ‘ once in every five years in the life of this contract the question of percentage of sales for stumpage shall be revised. ...” The trial court refused to accept parol evidence because the court did not believe the agreement was uncertain. The court ruled that Empire was attempting to vary the terms of an integrated agreement in violation of the parol evidence rule. The court said in its order for findings: