Opinion
Hearing Granted by Supreme Court June 24, 1929
Appeal from Superior Court, Orange County; R.Y. Williams, Judge.
Action by the Sun Oil Company of California against the Union Drilling & Petroleum Company. Judgment for plaintiff, and defendant appeals. Reversed in part.
COUNSEL
Newby & Newby and Nathan Newby, Jr., all of Los Angeles, for appellant.
John B. Haas, John D. Home, and Oliver O. Clark, all of Los Angeles, for respondent.
OPINION
McLUCAS, Justice pro tem.
Defendant appeals from a judgment granting a permanent injunction restraining defendant from entering upon the land of plaintiff and from interfering with, operating, or drilling a certain oil well located on said premises, except a portion of said judgment awarding defendant the sum of $5,000, the value of casing placed in said well.
On February 7, 1924, plaintiff and defendant entered into a written contract whereby defendant agreed to deepen an oil well 2,914 feet in depth, and owned by the plaintiff, to an approximate depth of 3,600 feet. The defendant deepened the well to 3,300 feet, and on or about July 15, 1924, made a production test, resulting in an aggregate production in two months of approximately 1,322 barrels of oil, which the plaintiff received and sold, paying the defendant 50 per cent. of the sale value as provided in the contract. The well did not produce much oil; it repeatedly sanded up and was repeatedly cleaned out by the defendant. Defendant never drilled the well to 3,600 feet. On or about December 8, 1924, a restraining order was served upon defendant, restraining defendant from further operating or drilling said well; and on December 24, 1924, a temporary injunction was granted, restraining defendant from operating or drilling the said well, which injunction was made permanent on April 9, 1926.
A dispute arose between the parties as to the meaning of the word "approximately," as used in the contract, and also as to whether defendant was required by the terms of the contract to pay for the cost of an additional string of casing required to deepen the well to an actual depth of 3,600 feet. Appellant claims that, in the event a satisfactory production of oil was not secured at a depth of 3,300 feet, the defendant was at all times willing to deepen the well to an actual depth of 3,600 feet, provided plaintiff would pay for the additional string of casing; but that, at all events, defendant was denied the opportunity to recoup its expenses by deepening the well to 3,600 feet, the well having failed of production at 3,300 feet. Appellant contends that it was error for the trial court to exclude evidence showing the conduct and understanding of the parties in regard to the deepening of another well under a similar contract in the same field. Defendant offered to show that prior to entering into the contract concerned in this case the parties discussed the deepening of an adjoining well known as No. 6, and that Mr. Mellon, president of the plaintiff company, stated they would be liberal in the interpretation, just as they were in No. 6, in which there was a variation of 230 feet from the stipulated depth. Defendant further offered to show that defendant, with the approval of the state mining bureau, placed in well No. 6 one combination string of 4¾ inch casing, as provided in the present contract, and that was what the parties had in mind when they executed the present contract. Defendant also offered to prove the circumstances surrounding the transaction, including a statement of the condition of the well furnished by plaintiff as to the requirements for casing materials.
A contract may be explained by reference to the circumstances under which it was made and the matter to which it related. Civ.Code, § 1647. According to the terms of the contract, the defendant agreed to deepen the well "to a depth of approximately 3,600 feet." In Ross v. Keaton Tire & Rubber Co., 57 Cal.App. 50, 206 P. 645, the trial court was directed to take evidence of the surrounding circumstances of the transaction in order to determine the meaning of the parties in using the word "approximately." The court said, at page 56 (206 P. 648): "The judgment is reversed and a new trial ordered, if the parties are so advised, wherein, if had, the trial court is directed to construe the clause specifying a building ‘to cost approximately $21,000’ as an agreed estimate of such cost, the variation from which should be determined upon proper and competent evidence received touching the surrounding circumstances of the transaction; practical construction of the lease by the parties, if any; amount of increased cost of the building due to defendant’s acts in changing the plans and specifications, if any, and for which, under the circumstances made to appear, it should be required to respond, and such other evidence as the court may deem proper." One of the issues in the instant case is whether the defendant was required by the terms of the contract to deepen the well to an actual depth of 3,600 feet or suffer forfeiture. Evidence showing the conduct and understanding of the parties under a similar contract was relevant to the issue. Lobree v. White Lumber Co., 53 Cal.App. 85, 199 P. 821. Any evidence showing the probability or improbability of an issue of fact is relevant to the issue. Moody v. Peirano, 4 Cal.App. 411, 420, 88 P. 380. If the evidence excluded by the trial court had been received, we are not prepared to hold that a different decision of the case might not have been reached and the injunction denied. Having reached the conclusion that this error was prejudicial, it becomes unnecessary to discuss other questions raised on the appeal.
The judgment is reversed, except that portion thereof awarding defendant the sum of $5,000 for casing.
We concur: HOUSER, J., Acting P.J.; YORK, J.