Modoc Mineral & Oil Co. v. Cal-Vada Drilling & Exploration Co., CAL-VADA

• Decision Date: 30 August 1965
• Docket Number: CAL-VADA
• Citation: 46 Cal.Rptr. 508,236 Cal.App.2d 868
• Court: California Court of Appeals Court of Appeals
• Parties: MODOC MINERAL & OIL COMPANY, a corporation, Plaintiff, Cross-Defendant and Respondent, v.DRILLING & EXPLORATION COMPANY, R. C. Reeves and Archie C. Myers, Defendants, Cross-Complainants and Appellants. Civ. 10793. . California

Page 508

46 Cal.Rptr. 508

236 Cal.App.2d 868

MODOC MINERAL & OIL COMPANY, a corporation, Plaintiff, Cross-Defendant and Respondent, v. CAL-VADA DRILLING & EXPLORATION COMPANY, R. C. Reeves and Archie C. Myers, Defendants, Cross-Complainants and Appellants.

Civ. 10793.

District Court of Appeal, Third District. California.

Aug. 30, 1965.

Robert E. Krause, Long Beach, and Paul B. Baker, Alturas, for appellants.

Daly B. Robnett, Alturas, for respondent.

PIERCE, Presiding Justice.

Defendants appeal from a judgment granting plaintiff rescission of an oil well drilling contract and awarding plaintiff $32,815.25 in damages.

Defendants' principal argument on appeal is that the trial court acted on insufficient evidence in finding that a certain written instrument entitled a 'lease agreement' dated June 9, 1960, was not the true agreement between the parties. All other arguments, excepting one to be noted below, rest upon the existence and binding effect of that agreement.

The facts found by the trial court include the following: that prior to June 9, 1960, defendant Reeves, acting for himself and his joint venturer, defendant Myers, solicited a contract from plaintiff (acting through Oliver Armstrong, its vicepresident, and W. F. Ash, its secretary-treasurer). Defendants agreed to drill an oil well for plaintiff on lands which plaintiff had under lease. That lease required plaintiff to cause an oil or gas well to be drilled upon the premises within one year. In the event the well had not been drilled within that period the lease would automatically expire. Reeves represented that he and Myers had had broad and successful experience in drilling oil and gas wells in various parts of the United States and particularly in California, that they had the ability to furnish, install and operate all necessary, proper and adequate equipment including drilling rig, drill pipe, tools and other necessary and proper equipment for efficient drilling; that they could and would skilfully drill on said leased lands a well to a depth of 5,000 feet. On June 9, 1960, Reeves told Ash that it would take him and his associate a little time to assemble the equipment and in the meantime he would like to have Ash sign a written instrument which he had prepared so that he, Reeves, could present it to Myers to show there was a 'possible' deal. The instrument presented was the 'lease agreement' referred to above. The agreement names Cal-Vada Drilling & Exploration Co. (the fictitious name under which Peeves and Myers operated) as lessor and plaintiff as lessee. It is not an agreement to dig a well but a printed form agreement for the leasing of equipment. It states that the equipment had been delivered and 'Lessee acknowledges receipt' thereof, agreeing that rental would start immediately. The form states: 'Lessee covenants and agrees that at and before the execution hereof he had made a complete inspection and examination of said equipment and Lessee hereby acknowledges said equipment to be in good, safe and serviceable condition and fit for its intended uses,' etc.

The court found that when this instrument was presented to Ash he pointed out to Reeves that plaintiff had no intention of leasing drilling equipment, knew nothing about such equipment or how to operate it and that the only type of written agreement plaintiff would enter into would be one with a qualified skilled oil well driller who could and would furnish all necessary and proper equipment and labor and who would drill a well to a depth of 5,000 feet. Ash also stated that he was only the secretary-treasurer of the corporation and had no authority on behalf of the corporation to execute the document presented. Upon Reeves' request, however, Ash signed his name to the 'lease agreement,' with the understanding it would only be used for the purposes requested and that any written document thereafter agreed upon between the parties would be formally executed. None of the defendants ever signed this agreement.

No other written agreement was ever signed. The court found: 'The so-called Lease Agreement (Exhibit 'A') was not intended to be a lease of drilling equipment, nor was the transaction itself a lease transaction, but that, on the contrary, it was the understanding and agreement of the parties that the defendants were to furnish all necessary and adequate equipment and labor and drill the said well for the Plaintiff, which Defendants actually undertook to do, and that the equipment furnished and the labor and services were furnished by Defendants as a part of their agreement to drill a well for the Plaintiff * * *.'

Although contending the evidence does not support the foregoing findings, it is clear both from defendants' briefs and from the oral argument of their counsel that what they seek from this reviewing court is a reweighing of the evidence. This we have no power to do. (Estate of Bristol, 23 Cal.2d 221, 223, 143 P.2d 689; Overton v. Vita-Food Corp., 94 Cal.App.2d 367, 370, 210 P.2d 757; 3 Witkin, Cal.Proc., p. 2246.) ¹ The testimony of both Ash and Armstrong supports the court's finding, and to some extent their evidence is corroborated by the fact that the lease was never signed by any of defendants; also by the circumstance that some of its recitals were obviously untrue, it being undisputed that at the time the document was signed by Ash no one connected with plaintiff corporation had ever seen any of the equipment which the written instrument states had already been received, inspected and found usable. Moreover, Reeves and Myers did not have a license to contract jointly to drill in the State of California (a fact unknown to plaintiff), and it is at least inferable that Reeves selected the 'lease agreement' form to conceal the true status of defendants as independent contractors operating illegally. Also the activities after drilling commenced showed that the parties contemplated something other than a leasing of equipment. Defendants furnished a work crew and Myers directed the entire operations.

Since the finding that the 'lease agreement' was not the true agreement between the parties is supported by substantial evidence, we are obligated to, and do, disregard all contentions made by defendants which depend upon its validity.

On or about July 1, 1960, defendants went onto the leased property, set up a drilling rig and commenced drilling operations. Myers had charge of the work which continued until about July 28, 1960, when plaintiff, having discovered the defects hereinafter to be noted, stopped the work. At that time the well had been drilled to a depth of 2,111 feet.

The court found that plaintiff had relied and acted upon defendants' representations hereinabove and hereinafter related. It also found the representations were false. Substantial evidence supports those findings.

Reeves had represented to plaintiff that defendants' equipment was new. Virtually all of it was old, badly worn and not in good repair. There was evidence that 'distinctive and decisive' uneven wear on the drill pipe proved almost positively that the hole being dug was crooked. The equipment was inadequate to drill a well to a depth of 5,000 feet. In fact it was so small and light that it could not efficiently drill a well to a depth greater than 3,000 feet. These matters were the subject of competent testimony. The judge viewed the premises and observed the equipment (still in place). This itself was evidence. (See: Witkin, California Evidence, p. 359, and cases there cited.) ²

In an action to enforce rescission the successful plaintiff is entitled to recover the consideration he gave and any other compensation necessary to make him whole. (Civ.Code sec. 1692; Utemark...