Todd v. Meserve

In this action plaintiff prays judgment against defendants in the sum of $20,302.28, and defendants Shirley E. Meserve, Robert B. Moran, and T. Howard Knight, individually and as trustees of an express trust, by way of cross-complaint pray judgment against plaintiff in the sum of $100,000.

About July 27, 1923, plaintiff, W. O. Todd, and defendants, Shirley E. Meserve, T. Howard Knight, and Robert B. Moran, as trustees of an express trust, entered into a written contract by the terms of which W. O. Todd agreed to drill an oil-well by the rotary method to be known as " Meserve-Knight-Moran No. 1” upon property in the so-called Signal Hill oil-field. This contract provided, among other things, that the trustees should furnish at the location of the well a complete derrick, boilers (to be set up and connected and steam line carried to the derrick

For the completion of the well below the approximate depth of 3,500 feet the contract provided that Todd “furnish all of his equipment, tools and appliances to the trustees, until said well is completed, for the rental of twenty-five ($25.00) dollars per day and shall perform the necessary labor for drilling said well, and said trustees agree to pay for all of contractor’s (Todd’s) labor and drilling crews, until such well is completed, at the rate of $.... per day, together with the necessary supplies and the cost of the proper and necessary insurance, compensation or otherwise, after the drilling in of said well after the landing of the water string.”

The contract further provided that the depths mentioned therein were approximate only, and that drilling was to be stopped or continued as directed by the trustees, and

The work of rigging up the well was started on July 15 or 16, 1923, and the well was spudded in and drilling operations commenced on July 31, 1923. On September 11, 1923, a depth of 3,456 feet had been reached and the 8¼-inch water string was landed and cemented at that depth on September 13, 1923. This completed the first stage of the work under the contract. There is no contention that the landing of the water string at the depth of 3,456 feet instead of at the depth of 3,500 feet as provided in the contract was not a satisfactory performance by Todd of his obligations under the contract with respect to the landing of this string, or that Todd was upon the landing of the water string at that depth not entitled to the consideration which it was provided in the contract he should be entitled to receive upon the landing of the water string. The complaint alleges—and it is not denied in the answer— that Todd landed the water string at approximately 3,456 feet, “which was the depth then and there designated by the first parties to said drilling contract.”

Upon the landing of the water string the drilling of the well proceeded and a 6¼-inch casing was landed at a depth of 4,165 feet. On February 17, 1924, the well had been drilled to a depth of 4,761 feet and on that day an attempt was made to run a 4%-inch oil string into the hole. This oil string stuck at a depth of 230 feet from the bottom of the hole. The following day and while an effort was being made to work this oil string loose the oil string parted, leaving approximately 194 feet of the oil string in the bottom of the hole. This necessitated the drilling of a new hole past the portion of the oil string lost in the bottom of the first. hole. This work of side

For the drilling of the well below the depth of 3,456 feet plaintiff claims the following amounts: (1) amounts paid by him for labor and drilling crews $31,644.11; (2) rental of his equipment, tools and appliances at the contract rate of $25 per day for 223 days, $5,575; (3) amounts paid by him for necessary supplies, $447.92; (4) amounts paid by. him for workmen’s compensation insurance, $1,469.82; making a total of $39,136.85.

Appellants urge that respondent under the contract was required to furnish equipment; that the salary of J. P. Evans (foreman or “tool pusher”) is not included in the contract as part of the labor appellants had agreed to pay; respondent was negligent in landing the oil string; appellants were wrongfully charged for labor while men were playing cards; refusal of instructions; the evidence is insufficient to sustain the verdict, and errors in admission of evidence.

The first two assignments may be considered together. Paragraph “eighth,” which has to do with the completion of the well below the 3,500-foot depth, is as follows: “That it shall be particularly understood between the parties hereto that for the completion of said well below the approximate depth of 3500 feet, contractor shall furnish all of his equipment, tools and appliances to trustees, until said well is completed, for the rental of twenty-five dollars ($25.00) per day, and shall perform the necessary labor for drilling said well, and said trustees agree to pay for all of contractor’s labor and drilling crews, until such well is completed,^ at the rate' of $.... per day, together with the necessary supplies and the cost of proper and necessary insurance, compensation or otherwise, after the

Appellants urge that Todd was under paragraph “eighth” of the drilling contract obligated to furnish for the drilling of the well below the depth of 3,456 feet all of the machinery, equipment and tools which he was under paragraph “fourth” of the contract required at any time to furnish for the drilling of the well down to a depth of 3,456 feet, and cite section 1641 of the Civil Code and other authorities upon the proposition that the whole of a contract is to be taken together so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other. No exception, of course, can be taken to this fundamental rule. An application of this rule does not in this case, however, obtain the result contended for by appellants.

The drilling contract relates to two distinct operations: First, to the drilling of the well to a depth of 3,500 feet (by mutual agreement fixed at 3,456 feet), and, second, to the drilling of the well below that depth. The consideration which Todd was to receive is separately apportioned to these two distinct operations. For the drilling of the well to a depth of 3,456 feet the contract provided that Todd should receive $22',500 in cash and a twelve and one-half per cent interest in the net proceeds of all oil and gas produced from the well. The contract expressly provided that should Todd fail to reach this depth and land the water string at this level, he should not receive any compensation whatever, and that upon reaching such depth he should turn over and deliver the hole to the trustees with casing properly set and open to the full diameter for the full length. For the drilling of the well below the depth of 3,456 feet the contract provided for an entirely different scheme of compensation. Todd was to “furnish all of his equipment, tools and appliances . . . for the rental of $25.00 per day” and perform the necessary labor for the drilling of the well and the trustees were to pay for all of Todd’s labor and drilling crews and for all necessary supplies and for the cost of proper

The distinction between the two methods of compensation so clearly stated in the contract of itself indicates that the parties must have intended that Todd’s obligations for the drilling of the well down to the depth of 3,456 feet would be different from his obligations for the drilling of the well below that depth. The first stage of the work was to be accomplished by Todd for a lump sum. He was to be entitled to the sum of $22,500 and to an assignment of a twelve and one-half per cent interest in the net proceeds of all oil and gas produced only in the evmt that he drilled the well to the depth stated and landed the 8¼-inch casing at that depth. There can be no dispute that Todd was obligated to provide his own means for accomplishing this portion of the work with the exception of those things which it was expressly provided the trustees should furnish, that is, the derrick, boilers, steam line connections, water, fuel, lights and casing. Whatever tools, materials, equipment and supplies were required for this portion of the drilling, Todd, was himself—with the exceptions noted— bound to procure and pay for. With respect to the second stage of the drilling, however, the method of determining Todd’s compensation itself indicates that the obligations of the parties to the contract were entirely different. It is clear that under the contract Todd was during this second stage of the work to be entitled to compensation at a given rate and upon a stated basis irrespective of the depth drilled below 3,500 feet. Below that depth he did not in effect guarantee to reach any given level as a condition precedent to his right to compensation.

It follows, therefore, that appellants’ endeavor to interpret paragraph “eighth” of the contract in the light of paragraph “fourth” of the contract is not proper, if the contract is to be taken as a whole and effect given to its every part. Paragraph “fourth” deals with Todd’s obligations during the first stage of the drilling. Paragraph

It is not difficult to arrive at a fair and reasonable interpretation of the language of paragraph “eighth” declaring that the contractor shall “furnish all of his equipment, tools and appliances” to the trustees. This paragraph of the contract became effective for the first time when the well had been drilled to a depth of 3,456 feet. The situation of the parties was then altogether different from the situation of the parties at the commencement of drilling operations. It must be assumed that the parties when they entered into the contract knew that when this depth was reached Todd would have at the location of the well or at his immediate command certain equipment, tools, and appliances, the greater part of which he had been using in the drilling operations to that point. The fair and reasonable meaning of this language is that it was only such equipment, tools, and appliances which Todd was to be obligated to furnish in the prosecution of future drilling operations. The use of the word “Ms” is significant in this connection. Had the construction contended for by appellants been contemplated, this clause would have read “all equipment, tools, and appliances necessary at any time thereafter for the drilling of said well,” instead of the clause which was in fact used, viz., “all of Ms equipment, tools, and appliances.”

It appears that frequently casings are lost and the drill pipe or drill stem breaks in the hole and special equipment is required to remove it; that certain accidents in well drilling happen which might reasonably be anticipated to require the use of special implements not ordinarily owned by the drilling contractor. The Baash Boss cutter is an example of this. It appears that this device cannot be purchased, but must be obtained upon a rental basis. It is used in cutting off and removing from the hole portions of a drill pipe broken off and lost in the hole. It appears from the testimony of plaintiff that between September 13,

That Todd drilled the well to the depth of 3,456 feet—a depth which is admitted by the pleadings to be the depth agreed upon by the trustees as the equivalent of the depth of the 3,500 feet mentioned in the contract—in a manner entirely satisfactory to the trustees, and that for this portion of the work the trustees voluntarily paid him the full compensation which they had agreed to pay for this stage of the work, is not disputed. Todd testified that at the depth of 3,456 feet he had at the well all necessary and proper rotary machinery, drill pipes, tool joints, drilling engines, pumps and all other necessary rotary equipment and tools for the drilling of the well below that depth, and that at that depth he furnished to the trustees for futjire drilling operations his equipment, tools, and appliances which he had at the well at that depth.

One of the important matters in dispute is the meaning of the phrase “necessary supplies,” which in the contract the trustees agreed to pay for, as also for all the contractor’s labor and drilling crews until such well was completed. Appellants object to certain bills which they claim respondent should pay, which are for rentals and equipment which was rented and used upon and in drilling the well and also repairs to tools; for tools and equipment bought by respondent for replacement or addition and for transportation. If these items are included in the phrase “necessary supplies,” it is clear that under the contract the trustees were required to pay for them. Respondent contends that these items come under “necessary supplies” in well-drilling contracts. It is axiomatic that where the language of a written contract is ambiguous, extrinsic evidence is admissible for the purpose of disclosing the

In Hind v. Oriental Products Co., Inc., 195 Cal. 655 , 667 [ 235 Pac. 438 , 443], the court says: “It is the general rule that when there is a known usage of the trade, persons carrying on that trade are deemed to have contracted in reference to the usage unless the contrary appears; that the usage forms a part of the contract, and that evidence of usage is always admissible to supply a deficiency or as a means of interpretation where it does not alter or vary the terms of the contract (Brown v. Howard, 1 Cal. 423 ; Taylor v. Castle, 42 Cal. 367 ; Burns v. Sennett, 99 Cal. 371 [ 33 Pac. 916 ]; Union Ins. Co. v. American Ins. Co., 107 Cal. 333 [ 48 Am. St. Rep. 140 , 28 L. R. A. 692 , 40 Pac. 431 ]; 6 Cal. Jur. 315, and cases cited; Miller v. Germain etc. Co., 193 Cal. 62 [ 32 A. L. R. 1215 , 222 Pac. 817 ]).”

There is positive evidence to the effect that the term “supplies” has a particular meaning in the oil business. R. E. Stearns, field manager of the Universal Consolidated Company, who testified that he had been in the oil business about 30 years and had had experience in all branches of this business from roustabout and dresser of tools to superintendent and manager, testified that the term “supplies” meant anything used in connection with the drilling or maintenance of an oil-well; that it included rent of tools; that it included replacements of parts which were used in the drilling of a well; that this term would include pipe, fittings, cordage—in fact anything that was used around a well. Ralph Winger, superintendent of drilling and producing for the Standard Oil Company in the northern Santa Fe fields, testified that he had been in the oil business all his life and had drilled 90 wells in Santa Fe Springs and 140 wells on the Murphy lease, and further testified that anything that was taken out to a rig during drilling or operation was charged as “supplies”; that dump carts,

It can hardly be contended that defendant trustees were not at the time they entered into the drilling contract familiar with this meaning. The trustees were three in number: Shirley E. Meserve, T. Howard Knight, and Robert B. Moran. Mr. Meserve testified that he had been in the drilling business for a period; Mr. Knight was connected with the Rio Brave Oil Company, and Mr. Moran, as already noted, was an expert petroleum engineer and geologist. The jury was therefore justified in finding that the term “necessary supplies” had a particular meaning according to the usage of the oil business, and that this meaning was known to the defendant trustees at the time they entered into the drilling contract. In using this term in the drilling contract the parties must be deemed to have used it in accordance with the meaning given it by this usage. Evidence of this usage was admissible despite the fact that such usage had not been pleaded (Becker v. Incorporated Town of Churdan, 175 Iowa, 159 [ 157 N. W. 221 ]; Globe and Rutgers Fire Ins. Co. v. David Moffat Co., 154 Fed. 13 , 22; McDonald v. Union Hay Co., 143 Minn. 40 [ 172 N. W. 891 ]).

We do not agree with appellants’ contention that the salary of J. P. Evans is not included as a part of the labor which appellants had agreed to pay. Paragraph “eighth” of the drilling contract obligated appellant trus

In Kritzer v. Tracy Engineering Co., 16 Cal. App. 287 [ 116 Pac. 700 ], where plaintiff had acted as foreman or superintendent of construction work in connection with the erection and construction of a power plant upon a millsite, which case involved the same principle confronting us here, the court says: “It is finally contended that plaintiff could have no lien upon the property for work and labor performed in the construction of the plant so contracted to be erected upon the property by the Tracy Engineering Company, for the reason that said work and labor was done and performed as foreman. . . . This question was before the supreme court of Nevada (Capron v. Strout, 11 Nev. 310 ), and the court there said, Beatty, Judge, writing the opinion: ‘It is argued that the intention of the law was to secure those only who performed labor upon the mine with their hands; that to give it a wider construction, one that will make it include wages of a foreman like Stuart, will make it cover the case of a general superintendent and other officers of a corporation, and thereby impair the remedy of those who are the special

If the testimony of respondent is to be believed— and his credibility is entirely a question for the jury or the trial court—the defendant trustees reasonably anticipated at the outset that they would be charged for Evans’ services. Respondent testified that prior to the execution of the contract he had a conversation in Dr. Knight’s office at which Dr. Knight, Mr. Shirley Meserve, Mr. Wagner and possibly Mr. Bremner and Mr. Moran were present; that the cost of the well below the 3500-foot mark was discussed; that Dr. Knight asked-him: “What are you going to charge for the tool pusher?” and that he replied that he paid the tool pusher $500 a month, and that he (Todd) also stated: “If I am drilling more than one well there I will prorate his time.” ¡

Commencing with the time the well was drilled below the depth of 3,456 feet, the evidence is clear that the trustees knew that Evans was performing services as “tool pusher” in connection with the drilling operations below that depth. They were constantly receiving carbon copies of orders upon supply houses and well reports signed by Evans. Furthermore, it appears that defendant trustees paid cash in full settlement of all statements rendered prior to November 21, 192'3; that for a period of more than two months after the commencement of the second stage of the drilling they paid statements which included an itemized charge for the salary of Evans. It is apparent, therefore, that appellants placed the construction on the contract here indicated with reference to the meaning of the terms “labor” and “necessary sup

There is no merit in appellants’ assignment that respondent was negligent in landing the oil string. The testimony is that Todd discussed his plan with trustee Moran, who is a geologist and mining engineer and who looked after the work for defendant trustees, and Moran testified: “I told him (Todd) that that was satisfactory to me, if he thought that would accomplish the end. I told Mr. Todd both at the beginning of the conversation and at the end of it that his experience in matters of handling pipe was much greater than my own and I preferred to defer to him in such matters. . . . The last thing he (Todd) said when I left—I believe the conversation took place down in the field—that the pipe would be run with a cased end, and the two joints of black pipe on the end of it, and I told him that that was all right with me, but if he figured out a better way to do it before I would come out that he would—would it be all right for him to do it.” Mr. McCutcheon, the vice-president of Pormax Oil Company, testified that he had “lowered several strings where we closed the bottom of the pipe in a torpedo shape,” exactly in the manner shown by defendant’s exhibit 2. Mr. Stearns, field manager of the Universal Consolidated Oil Company, testified that the use of a “sealed shoe” was not confined to instances where there was some obstruction in the hole; that “it is customary for me to use a pointed sealed shoe and every one of those I used is still in the well. I didn’t use an open shoe in any of the wells I drilled in Los Angeles county— nor in Torrance nor Santa Pe Springs.” Mr. Wing'er, superintendent of drilling and' producing for the Standard Oil Company, stated that he used' closed ends like that

Appellants’ complaint that they were wrongfully charged for labor while the men were playing cards may be answered by the testimony of the drillers engaged in drilling the well. Mr. Dellinger testified that he observed the men playing poker; that “every few days they would play,” but that it was customary for members of the crew to play cards or amuse themselves in some way during their shifts when not actually engaged in work; that during a shift when a well is being drilled there was not work for each and every member of the crew at all times during each shift; that at the times when he saw members of the crew playing cards there was no work which they could do; that when running a Hughes bit a driller could sometimes spare four of the crew for the entire eight-hour shift, but that it was necessary to have those men there during that shift, even though they were not actively engaged in some work connected with the drilling, in ease some trouble should occur—“a twist-off or engine breakdown or something like that”; that when running a Hughes rock bit the motion of the machinery was very, very slow and that at such times one man could operate the machinery and bit; that when running with that bit, on a day shift, the other members of the crew could probably be doing something around the derrick, but that on the night shift it was not customary for them to do that; that during the time when there was daylight there was not always something for the men to do around the derrick when they were not actually required on the drilling of the hole. Mr, Hamilton testified that he did not remember that there was any poker playing on the derrick when he was in charge; that he did not himself play poker when he was on the job. The witness, however, testified that while he was operating the rock bit his men were not at all times engaged in some work; that if there weren’t anything

Appellants urge error in refusing defendants’ proposed instructions numbered 1, 3, 6, 7, 8, 9, 14, 18, 19, 20, and 21. By instruction 1 defendants requested the court to instruct the jury without qualification that the items of defendants’ counterclaim, amounting to $11,771.56, were proper charges in favor of defendant trustees and that they were entitled to recover on their counterclaim this exact amount. Included in this amount there were numerous items for which upon any interpretation of the contract defendant trustees were bound to pay. As to the refusal of instruction 3, it may be said that the jury found that plaintiff was not negligent in failing to land the 4¾-inch oil string. If this finding is supported by the evidence, then this instruction is immaterial, and its refusal is not reversible error. Further defendants sought in .this instruction to have the court declare to the jury that under their cross-complaint defendants were claiming $14,753.04 on account of oil which would have been produced between February 19, and April 23, 1924, less the cost of production and maintenance. Defendants’ contention is that but for the negligence of

As to appellants’ assignment that the evidence is insufficient to sustain the verdict, it may be said that we think there is no merit in the contention. The only question raised which has not been touched upon is the question of the premiums paid on compensation insurance. Appellants make the contention that the verdict is not sustained by the evidence in regard to these charges; that

It is true that these policies of insurance covered Todd’s employees engaged in his entire business operations whercever such operations might have been conducted. However, it is provided in these policies that the premium shall be based upon the entire remuneration earned during the policy period by all employees engaged in Todd’s business operations described in the policy and covered thereby. The rate stated in these policies for employees is the same in each policy, viz., $5.02 per $100 of remuneration. This rate was called to the attention of the court at the time these policies were introduced in evidence. It is conceded that the entire time consumed in drilling the well below the depth of 3,456 feet was 223 days. The drilling operations were continuous for a period of 24 hours per day and were divided into three shifts or “tours” of eight hours each, so that during each 24-hour period three separate crews were employed in the drilling operations. The testimony is clear and undisputed that during this entire period there were five members of a drilling crew employed on each shift or tour, viz., a driller, a derrick man, a cat-head man, a fireman, and a floor man, and that the driller received $15 a day, the derrick man $7.50 a day, the cat-head man $7.50 a day, the fireman $7 a day and floor man $7 a day. The amount of these wages paid during this period is fixed by stipulation of counsel. The aggregate wage paid to a crew of five men for a single tour was therefore $44. Since there were three tours during each 24-hour day, the aggregate wage paid to the members of all crews employed during a given day was $132. Since the entire period involved was '223 days, the aggregate amount of wages paid to members of the drilling crews during the entire period was $29,436. The salary paid to J. P. Evans as foreman during this period of 223 days was $2,537.31. This makes a total of $31,973.31, and this amount exceeds the amount actually claimed by Todd on account of amounts paid by him for labor and drilling crews. The daily well reports or drilling reports covering this entire period of 223 days were offered and received in

Appellants under their assignment “Errors in Admission of Evidence’’ enumerate a' great many instances in which it is claimed that the court erred in admitting evidence over their objections. They do not, however, argue their objections in their brief nor cite any authorities, and therefore these objections are not to be considered (People v. Hayes, 72 Cal. App. 292 , 297 [ 237 Pac. 390 ]).

This disposes of the points urged by appellants, and as we find no error in the record calling for a reversal, the judgment is affirmed.

Tyler, P. J., and Knight, J., concurred.