Burr & Ladd, Inc. v. Marlett

• Decision Date: 05 November 1964
• Citation: 230 Cal.App.2d 468,41 Cal.Rptr. 130
• Parties: BURR AND LADD, INC., a corporation, Everett L. Burr and James M. Ladd, Individuals, Plaintiffs and Appellants, v. Phyllis Yelkin MARLETT and Walter Marlett, her husband, Defendants and Respondents. Civ. 28109.
• Court: California Court of Appeals Court of Appeals

Page 130

41 Cal.Rptr. 130

230 Cal.App.2d 468

BURR AND LADD, INC., a corporation, Everett L. Burr and James M. Ladd, Individuals, Plaintiffs and Appellants, v. Phyllis Yelkin MARLETT and Walter Marlett, her husband, Defendants and Respondents.

Civ. 28109.

District Court of Appeal, Second District, Division 1, California.

Nov. 5, 1964.

Trapp & Kirk and Daniel J. Kirk, Santa Maria, for appellants.

James M. DeLoreto, Santa Barbara, for respondents.

LILLIE, Justice.

Plaintiffs, who are building contractors and land developers, sued for specific performance of an agreement relating to the sale of property in Santa Maria where it was planned to construct a shopping center. By its judgment the trial court upheld the material denials and the affirmative defenses in defendants' answer; it also quieted Mrs. Marlett's title in the subject premises, as prayed for by way of cross-complaint, and awarded her damages for loss of rentals therefrom. Plaintiffs appeal from such adverse judgment.

The parties first met in December of 1959 at defendants' Inglewood home when plaintiffs inquired about leasing or buying Mrs. Marlett's Santa Maria property. Upon plaintiffs' representations that they could develop the area into a shopping center yielding large returns, defendants agreed to transfer the property to a corporation (later to be organized) in partial consideration of which she was to receive one-third of the company's stock. The following month, January of 1960, the parties, apparently without any outside assistance, prepared and executed an agreement outlining generally their mutual understandings discussed preliminarily the previous month. Thereafter the individual plaintiffs consulted their own attorney regarding the formation of plaintiff corporation. The same attorney also prepared for the signature of all parties a document entitled 'Supplemental Agreement to Preincorporation Agreement' which makes reference to the January contract and declares that it is the parties' purpose to 'restate and further define the rights and duties' therein set forth. Among numerous other provisions, this supplemental agreement provided that '[s]aid land shall be conveyed to the corporation free and clear of all encumbrances except non-delinquent taxes and easements of record, and with the exception of rights to oil, gas and other hydrocarbon substances.' The agreement was signed by the parties on June 13.

Subsequently an escrow was opened. The escrow instructions, apparently prepared by plaintiffs or their attorney, read in pertinent part that 'Deed is to recite 'Together with Grantor's interest in and to that certain Oil and Gas Lease recorded in book 395, page 296, Official Records of Santa Barbara County, California.' Seller will hand you for delivery to Buyer, Seller's copy of Oil and Gas Lease of record together with an assignment of same to Burr and Ladd, Inc., which documents are subject to Buyer's approval.' This instruction was striken by appropriate deletion marks and the initials of all parties appear in the margin. However, there was also this instruction (which was not deleted): 'Seller will cause to be handed you a document from the Signal Oil and Gas Company sufficient to enable the title company to show in their title policy that the owner of the subject property has the surface rights to the same to a depth of five hundred feet. Said document subject to the approval of the Buyer * * *.' In this latter connection, there was evidence that since May of 1947 Signal Oil and Gas had held an oil and gas lease on Mrs. Marlett's property and actually had a pumping rig for an active oil well on the parcel of land to be conveyed. In due time Mrs. Marlett obtained a quitclaim deed from Signal as provided by the instruction quoted above. She tetified that the sole purpose of this deed was for the removal of the pump which would thus enable work to proceed on the shopping center.

Upon the close of the escrow (October 7, 1960), plaintiffs thereby became obligated to secure a 'substantial' tenant within one year or reconvey the property. They entered into negotiations with Shell Oil Company for the construction of a service station. Although the individual plaintiffs by the terms of the June, 1960, agreement had undertaken to use their 'personal credit and the credit of any companies under their control to assist in obtaining the necessary loans for construction.' the construction of the Shell service station was sought to be financed by borrowing money on the land conveyed to the corporation by Mrs. Marlett. The title company refused to issue a policy for the loan unless Mrs. Marlett and her relatives quitclaimed their oil rights to a depth of five hundred feet. Subsequently the title company indicated it would issue the necessary policy if Mrs. Marlett would quitclaim her 50% interest in such oil rights. This she refused to do. More than one year having passed from the close of the escrow, defendants tendered back the stock they had received and demanded a reconveyance of the subject property. Plaintiffs declined to reconvey and then instituted the present action.

After allegations to the effect that plaintiffs several affirmative defenses, among covenants required of them under the contract, and specifically the acquisition of a long-term lease with Shell Oil Company, the complaint alleged that 'in order to complete performance of said agreements, it is necessary that the defendants convey to the plaintiff corporation all of their right, title and interest in and to the surface and subsurface to a depth of 500 feet below the surface of the premises described in said agreements' in order to obtain necessary financing for the construction of rental buildings to be placed upon the premises. It is further alleged that defendants knew of the necessity for obtaining such surface and sub-surface rights, had informed plaintiffs that they would so convey but had refused so to do.

As mentioned earlier, defendants interposed several affirmative defenses, among which was the allegation that '[t]he written agreements contained in Exhibits A and B of said complaint are not certain enough for the granting of specific performance.' The issue thus raised and to be decided was made a part of the joint pretrial statement: 'Whether the defendants promised plaintiffs that they would convey to plaintiff corporation whatever surface rights and subsurface rights to a depth of 500 feet either one might have in all oil, gas, mineral and other hydrocarbon substances including the right of surface entry'; and '[w]hether, as to the Exhibits referred to herein, as A and B, the terms are so uncertain as to...