KESTERSON LUMBER CORP v. FRIESLEMBEN ESTATE CO

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District Court of Appeal, Third District, California.

KESTERSON LUMBER CORP. v. FRIESLEMBEN ESTATE CO.*

Civ. 7925.

Decided: March 20, 1952

Rogers & Clark, San Francisco, Raymond A. Leonard, Oroville, Ware & Ware, Chico, for appellant. Clewe, Martin & Blade, Oroville, Rich, Weis, Carlin & Fuidge, Marysville, Winston Churchill Black, San Francisco, Manwell & Manwell, Marysville, for respondent.

Prior to May 29, 1944, respondent, Friesleben Estate Company, a corporation, hereinafter called Friesleben, was the owner of a ranch embracing approximately 1700 acres in Butte County which for long had been devoted to livestock raising and farming. On that date it entered into a contract of purchase and sale of the land, livestock, equipment and crops with appellant, Kesterson Lumber Corporation, a corporation, hereinafter called Kesterson. Under date of June 16, 1944, but in fact executed on July 22d of that year, Friesleben and Kesterson entered into a contract supplemental and amendatory to the May 29th contract covering the same subject matter. It was out of the conflicting contentions as to the proper interpretation of this latter contract that this litigation arose. Evidence was taken by the trial court of the facts and circumstances, including the negotiations of the parties, preceding and attending the execution of the contract, and of the conduct of the parties thereafter in respect to it. We shall assume, arguendo, the admissibility of this testimony. Where there is a conflict, directly or inferentially, we shall state that testimony favorably to the judgment which was rendered in favor of Friesleben and from which Kesterson appeals. The Friesleben ranch had not been farmed to profit for some time and was encumbered to the extent of $80,000 secured by a deed of trust and crop and chattel mortgage held by a bank. This creditor was presenting its demands that the security situation be bettered. Foreclosure was a possibility. Friesleben's stock was mainly held by Ella Friesleben, an elderly woman, who owned 5/757ths thereof and who depended upon these assets for her living. She was personally indebted to the same bank to the extent of some $20,000 to secure payment of which she had pledged this stock. She was further indebted to relatives for another sum of about $20,000 for which her stock had also been hypothecated by way of a second lien. Friesleben was indebted to various creditors on open account mainly for money due for work and material used in ranching operations up to the time these contracts were made. The ranch operations would require further expenditures which it was thought Friesleben could not make. The whole financial situation was precarious. The interested parties had decided to sell the corporate property.

Just prior to executing the May 29th contract, Mrs. Friesleben, with her attorney, met with Irving E. Kesterson, vice-president of Kesterson, and his attorney, to discuss a sale to Kesterson. There was some mention of a prior contract for the sale of the same property having been made with one Christenson, but Mrs. Friesleben, who was president of Friesleben, assured all present, including her counsel, that no such contract was in existence and that the corporation was free to deal with Kesterson. The contract of May 29th was executed. It was in the form of a deposit receipt commonly used in real estate transactions. It acknowledged a deposit of $50,000 by Kesterson on account of a purchase price of $225,000 for all the property. It provided that 45 days would be given the purchaser to examine title and consummate the purchase and that if title was defective and could not be perfected by Friesleben within 90 days after notice of defect, Kesterson could either accept the title in its then condition or obtain return of the deposit, whereupon the agreement should ‘cease and terminate without further liability of either party.’ Shortly after the execution of this contract Christenson sued Friesleben demanding specific performance of a prior contract he alleged existed between himself and Friesleben for the purchase and sale of the same property. Friesleben and Kesterson met again after the filing of the Christenson suit and negotiated further concerning their contractual affairs as complicated by the Christenson action. Copies of the Christenson complaint were gone over by the parties and the merits of the action were discussed. Both seller and buyer wanted to go ahead with the Kesterson agreement. The financial situation of Friesleben was talked over. Kesterson, already owning a number of ranches, wanted the Friesleben ranch as a home ranch. It was willing to cooperate in the defense of the Christenson suit. Friesleben stated it could not operate the ranch itself because of the contract, could not sell crops and was willing to go ahead with the Kesterson deal as far as possible in view of the Christenson suit. Kesterson said that if it operated the ranch it had no desire to take any money from Mrs. Friesleben but wanted to be free of any liability that would arise by its taking over the property; that it wanted the ranch as a model or key ranch and had plans for extensive improvements; but if by reason of the Christenson suit it eventually did not get the property it wanted Friesleben to stand some of the capital expense with a liability limit of $10,000. It was mutually stated that the best proposition was to do everything that could be done to turn the property over to Kesterson and let it run it as though it was the owner—turn everything over of record. Friesleben wanted to defeat Christenson and in the meantime to go through with the Kesterson deal as far as it could. These negotiations resulted in a preliminary proposed agreement and the attorneys for the parties were instructed to prepare a written agreement to embody their understandings. This was done during the interval between June 20th and July 22d and the second contract, the interpretation of which is here involved, was then executed as of June 16th.

We think it necessary to an understanding of the issues as to the proper interpretation of this contract that in the main part it be quoted in haec verba. We shall italicize certain parts around which the controversy centers. After reciting the situation of the parties, the existence of the May 29th contract, the pendency of the Christenson suit, the claim of Friesleben that the suit was without foundation, and Friesleben's representation to Kesterson accordingly, the contract continued:

‘1. Seller agrees forthwith to deliver to the Purchaser the Bill of Sale and Chattel Mortgage Search covering the personal property described in said agreement dated May 29, 1944, and contemporaneously therewith the Purchaser agrees to pay to or for the account of the Seller as part payment of the purchase price of $225,000.00 stipulated in said agreement dated May 29, 1944, the sum of $50,000.00 upon the understanding that the whole of said sum of $50,000.00 shall be applied in the reduction of the indebtedness owing from the Seller to’ the creditor Bank.

‘2. Seller also agrees forthwith to deliver to Purchaser the immediate possession of all of said property, real and personal, described in said agreement dated May 29, 1944, with the same force and effect as though said agreement dated May 29, 1944 had been consummated in accordance with its terms, and in this connection the Seller hereby agrees to indemnify and save harmless the Purchaser of and from any and all claims and demands which may be asserted against the Purchaser by said Arnold E. Christensen, the plaintiff in said action, and all persons claiming through or under him and all persons whomsoever, to the end that the Purchaser shall be entitled to the exclusive use and benefit of said property and the income, rents, issues and profits thereof, free of charge, from and after the date of this agreement, as though all of said property had been actually conveyed to the Purchaser free and clear of all liens and encumbrances whatsoever, except current taxes not delinquent. Taxes, rents, insurance premiums and operating expenses shall be prorated as of June 16, 1944.’

Friesleben agreed to quiet title to all of the property as soon as it could either by defending the Christenson suit or bringing an action to quiet title, or both, and the parties then agreed that: ‘If judgment shall be so rendered against the Seller, then the Seller shall forthwith cause to be paid over into escrow, at the main office of Bank of America N. T. & S. A., in San Francisco, California, for the benefit of the Seller and the Purchaser, any and all sums payable to the Seller by said plaintiff, all of which sums are hereby presently specifically assigned to said Bank, as such escrow holder, and out of which sums Purchaser shall be entitled to immediate reimbursement for said sum of $50,000.00 hereinabove referred to, plus any sums, up to but not exceeding $10,000.00, expended by Purchaser for capital improvements on said property, and plus any sums expended by Purchaser in settling or defending any claims or demands from which Seller has agreed to indemnify Purchaser as above provided; and the remaining balance shall be paid over to Seller.’

Pending the outcome of the action, Friesleben agreed to deliver a proper grant deed in escrow with instructions to deliver it to Kesterson whenever policy of title insurance in the full amount of the purchase price could be issued and Kesterson agreed on receiving written notice that the policy was ready for issuance to pay the balance of the purchase price, that is, $175,000, within 30 days. The contract then continued: ‘5. In the event that said action is not finally determined within eighteen (18) months from the date hereof, then and in that event the Seller agrees on demand to repay to the Purchaser said sum of $50,000.00 and other expenditures hereinabove referred to, unless the Purchaser at its option extends said eighteen (18) months' period. Pending said eighteen (18) months' period, or any extension thereof, the Seller shall be permitted to increase its indebtedness to said bank secured by the Deed of Trust above referred to in the aggregate amount of $10,000.00, to be used for Seller's corporate purposes, but shall not be permitted otherwise to encumber the title to said property. At any time after the expiration of said eighteen (18) months' period that Seller shall deliver to Purchaser the written legal opinion of any two of the following, Theo. J. Roche, A. Crawford Greene or Herbert C. Clark, attorneys now practicing law in San Francisco, California, to the effect that further efforts to clear the title to said real property, either by defending said action numbered 9028, or by prosecuting a suit to quiet title, or otherwise, would be without success, then the delivery of such opinion shall have the same effect as though said eighteen (18) months' period had expired without extension.’

It was agreed that when the sum of $50,000 had been paid in reduction of the bank's indebtedness that Friesleben should cause the bank to release the crop and chattel mortgage. A short form of agreement was provided for between the parties which could be recorded, describing the real property and incorporating the June 16th contract by reference and Friesleben agreed to furnish an interim title insurance policy insuring Kesterson in the amount of $50,000, that the short form agreement was ‘a first lien on said real property’, subject only to taxes, the bank's deed of trust and the Christenson suit. Kesterson stipulated that otherwise the title was then acceptable to him. It was then stipulated as follows:

‘7. Purchaser agrees not to resell any ranch equipment now located on said real property pending the outcome of said action numbered 9028; but Purchaser may resell all livestock and crops located thereon, as Purchaser's own property, without any liability to account to seller for any proceeds of such resale.

‘8. Except as modified hereby, said agreement dated May 29, 1944, shall be and remain in full force and effect.’

After the contract was executed, the $50,000 was paid and the bill of sale was delivered. Kesterson went into possession, completed the production and harvesting of the crops of that season, farmed the land for the following year and during the 18 months' period sold all of the livestock and all of the crops it obtained. Its total receipts amounted to about $112,000; its total expenses to about $60,000. The trial court found that the excess of receipts over expenditures was $52,327.12 and that the farm equipment retained by Kesterson under a claim of ownership was of the value of $3,500. It compelled Kesterson to account for all receipts, charged it with the net sum of $55,827.12, as demanded by Friesleben's counter-pleadings and cross-complaint, and set off against this sum the $50,000 demanded by Kesterson in its complaint. Judgment was rendered against Kesterson for the sum of $5,827.12, together with interest from December 17, 1945, the date that Kesterson demanded the return of its $50,000.

Kesterson throughout claimed that by the plain terms of the June 16th contract it became the absolute owner of the personal property, had the absolute right to the occupancy and use of the real property free of charge during the period it should so occupy and use the same, and was therefore entitled to judgment as prayed for by it for the sum of $50,000, which it contends Friesleben unconditionally agreed to repay if it failed to clear title within 18 months. Friesleben on the other hand contended throughout that although it was obligated to return the $50,000 when Kesterson made its demand therefor it was also at that same time entitled to have Kesterson account for all of the benefits it had received which included the net receipts from the use and occupancy of the land, the value of the retained farm equipment and the proceeds of the livestock and other personal property sales. This construction was in practical effect adopted by the court and is reflected in the judgment.

In addition to what has been said as to the situation and motivations of the parties, it appears that Friesleben desired to consummate its sale to Kesterson because of certain advantages which would accrue to it by so doing, over and above the benefits it would receive from the contract which Christenson claimed to have executed with it. In the main these advantages were as follows: First, the gross price to be paid by Kesterson was $10,000 more than that to be paid by Christenson. Next the Christenson contract segregated the values of the property, putting a value of $150,000 on the real property, $44,000 upon the growing crops of that year and $21,000 on the livestock and farming equipment. Consummation of this contract it was believed by Friesleben would entail heavy payments of income taxes by reason of the excessive value attributed to the growing crops. Next the Kesterson contract, being a cash deal, the clearing of the title from the bank's lien would be a simple matter, whereas the Christenson contract would compel Friesleben to clear the title when only $25,000 had been paid in, from which a real estate commission was to be subtracted, thus rendering it difficult, if not impossible, for Friesleben to comply with the demands of the Christenson agreement. Friesleben considered that it could defeat the Christenson suit, statements having been made by its representatives to the effect that the action was in the nature of a nuisance suit which would easily and promptly be disposed of and it appears that, bases upon factual representations made to it concerning the action by Friesleben, Kesterson was of like opinion. But of course both parties must be held to have realized the uncertainties that attend litigation and this is clearly evidenced by the engagements they undertook when they decided to go forward notwithstanding the Christenson suit; and both parties apparently realized that whatever they did by way of consummation of the agreement between them would be under the shadow of the Christenson claims. It is clear that they sought by their contract to carefully and adequately provide their respective obligations and their respective rights in view of the varying situations that might arise. They agreed upon what should be done if in the end Christenson prevailed. They agreed upon what should be done if in the end Christenson was defeated or his claims otherwise disposed of. They certainly attempted to declare what should be done if Friesleben failed to get Christenson out of the way within 18 months; or if, after that time had been extended, it should conclude it could not be successful and had received the stipulated legal advice to that effect; but the parties disagree as to what those provisions meant.

The complaint of Kesterson was simple. Attaching a copy of the June 16th agreement to the Complaint by way of exhibit, Kesterson alleged the execution thereof; that the Christenson suit was still pending and undetermined upon the 17th of December, 1945, 18 months after June 16, 1944; that on that day plaintiff demanded that defendant pay it the sum $50,000; that the demand was refused; and that the whole sum was due, owing and unpaid. It added a second count to the complaint wherein it sued for money had and received. Friesleben answered, denying only that by the contract it had agreed ‘unconditionally to repay said sum of $50,000.00’ under the conditions set up in the complaint. It denied generally the allegations of the common count. Affirmatively it pleaded that the contract was invalid in that the repayment of the $50,000 and the retention by Kesterson of all the personal property would amount to forfeiture of the personal property; and that Kesterson had rescinded the contract by demanding repayment of the $50,000. The court found against Friesleben as to these two affirmative defenses. Friesleben further affirmatively pleaded that the contract as executed did not contain various provisions orally agreed upon and intended to be included therein. Speaking generally, these allegations may be designated as allegations of fraud and mistake whereby the contract executed was not the contract agreed upon. Again speaking generally, it may be said that the trial court found against these allegations save as they contained conclusions as to the proper construction of the agreement as written. The contract then remained to be interpreted and enforced according to its terms.

The trial court found the execution of the written agreements; that Kesterson paid the sum of $50,000 as agreed upon; that it was applied to Friesleben's indebtedness to the bank; that pursuant to the permission contained in the contract Friesleben thereafter borrowed $10,000 from the bank and expended the sum for its corporate purposes; that Friesleben executed and delivered to Kesterson a bill of sale covering all the personal property, obtained the release of the crop and chattel mortgage held by the bank and delivered to Kesterson possession of all the real and personal property; that it deposited in escrow the grant deed as provided for with the agreed instructions. The court then made the following findings: That the parties agreed to Kesterson's immediate possession of the real and personal property ‘as though it was the owner’ but agreed that the sale would not actually by completed until the Christenson claim was eliminated (this finding is supported since it is apparent that title had to be made good before that part of the contract involving the purchase and sale of the land could be completed; and this could not be done except by elimination of the Christenson claim on the land); that the sale proposed was a sale of the real and personal property together in that there would be no sale unless the Christenson claim was eliminated as to all of the property (this finding is not supported by the express terms of the contract nor is it touched upon directly or inferentially by the testimony. The instrument declares the parties are completing the contract as far as they can and nothing prevented them from transferring presently to Kesterson everything agreed to be transferred save only the land); that the sale of the personal property was to be dependent upon that of the real property (the instrument does not say so); ‘that it was not the intention of the parties that Kesterson could demand the repayment of the sum of $50,000.00 without restoring the benefits received by it from the said contract’ (the contract contains no such express statement; contrarywise, it sets up the conditions precedent to the obligation of Friesleben to repay that sum, i. e., elapse of 18 months without clear title being accomplished and is silent as to, and therefore excludes, the added condition of restoration). The court found that Kesterson took over possession of all the property and retained the exclusive control and possession of it up to December 17, 1945, during which time it harvested and sold the crops of 1944, planted, harvested and sold the crops of 1945, disposed of all the personal property except the farm equipment and then notified Friesleben that because the Christenson action had not been determined within the 18 months' period elapsed, it demanded repayment of the $50,000, and was surrendering the possession of the real property; that it did surrender the property except that it retained the farm equipment and ‘the proceeds from all of said remaining personal property.’ The court found that Friesleben had retained the $50,000 but ‘subject to an accounting by Kesterson from the benefits received by him from said contract.’ (What has been just said is applicable to this quoted finding.) The court found that though the Christenson suit had not been disposed of but was still pending yet Friesleben had diligently contested the same and was continuing to contest it when the notice was given and the real property was surrendered; that the parties had not intended by their contract to covenant that Kesterson should have no liability whatever to account in any way to Friesleben for said crops or personal property or any of the proceeds thereof; that Friesleben had not become indebted to Kesterson for the $50,000 and that nothing was owing by it to Kesterson; that it had not agreed ‘unconditionally’ to repay the $50,000 on demand on the expiration of 18 months ‘without Kesterson returning or accounting for the personal property received by it, and without it accounting to Friesleben for its operation of said real property’; and that by the contract the parties had agreed ‘that Kesterson would not demand back said $50,000.00 without accounting for the personal property received by it and for the use of said real estate.’

Disregarding the testimony of Mr. Kesterson, Mr. Rogers and Mr. Wolf, who testified generally that during the negotiations preceding the execution of the contract Kesterson insisted that in return for the financing requested by Friesleben and the additional time granted to it in which to clear title that he should have the use of the Friesleben ranch and the outright ownership of the crops and other personalty without any liability to account to Friesleben therefor irrespective of how the Christenson suit might turn out, we find that no testimony directly or inferentially supporting the foregoing findings was given. To be sure, the Friesleben attorney who joined in the drafting of the instrument stated that nothing was said by Mr. Kesterson or Mr. Rogers, his attorney, or by anyone ‘that if the Christenson suit was won by Christenson the personal property and equipment would be the personal property of Mr. Kesterson.’ This is a denial of the testimony of Mr. Kesterson, Mr. Rogers and Mr. Wolf to the contrary, but it does not support a finding that the parties agreed that in the event that Christenson won his suit Kesterson would have to return or account for the personal property and the use of the land or that the title to the personal property was not intended to pass to Kesterson or that he was not to receive the free use of the land. We must assume that Kesterson said he did not want to make money out of Mrs. Friesleben by reason of the operation of the ranch, although he says he did not say that, but such a general statement affords no support for any of the findings now being discussed. We must assume against his denial that he further said that he would not take advantage of Mrs. Friesleben. This likewise does not support the findings, for no man can be accused of taking advantage of another who stays all the time within the bounds of his contractual engagements with that other. On the contrary, Mrs. Friesleben, when shown the bill of sale she executed for Friesleben, said ‘That is my signature. Mr. Kesterson took over all the inventory, everything that was growing on the ranch.’ Mr. Brereton, secretary for Friesleben, said that when he signed the contract he read and understood the provision that Kesterson was not to account to Friesleben for any of the proceeds from the crops and livestock; and when his attention was directed to that part of the agreement that there should be forthwith delivered to Kesterson the bill of sale and chattel mortgage search covering the personal property described in the agreement of May 29th that he understood therefrom that ‘the bill of sale to the personal property and the crops was to be delivered outright to Kesterson upon his paying the $50,000’; and when his attention was called to the provisions of the contract as to Kesterson being ‘entitled to the exclusive use and benefit of said property and the income, rent, issues and profits thereof, free of charge’, and he was asked, ‘Am I not correct in stating you understood from that, Mr. Brereton, rent free?’ he answered ‘Yes'. If we ignore the foregoing testimony, still the only result is that the findings of the court now under discussion are left to depend for their validity upon a construction of the terms of the contract as written and they can find no support therein.

When we remember the situation in which these parties found themselves upon the filing of the Christenson suit; when we consider the object and purpose of the June 16th contract which was intended to fix their rights and obligations in respect of their going forward under the shadow of the Christenson claims; when we consider further that attorneys having acknowledged skill and experience represented the two parties, and that after more than a month, during which time the proposed writing was drafted and redrafted, discussed and rediscussed, these attorneys produced the solemn integration which the parties thereafter executed, we think it must be concluded Kesterson has the better of the argument as to what was done by and under this contract. We are unable to interpret express provisions that Kesterson could, with the exception of the farm equipment, ‘resell’ the personal property covered by the unconditional bill of sale it received therefor, without any liability to account to Friesleben, as meaning that it must account; or to interpret provisions that it might use the real property and receive the rents, issues and profits thereof for its own exclusive benefit free of charge as meaning that the fruits of its husbandry must thereafter be paid over to Friesleben. It is not competent under the guise of interpretation to insert what has been omitted or omit what has been inserted. (C.C.P. Sec. 1856.)

The court in its memorandum opinions declared that what the agreement said was that Kesterson should have the use of the ranch and personal property ‘as though’ they had actually been conveyed, which implied that all of the property was still under contract of sale and purchase and that the contract meant nothing more than that Kesterson should have the right to use the land and personal property ‘without interference’. There is more to the same effect, but it adds up to interpretation by the court which in reality makes the positive declarations we have noted little more than sham and pretense spoken to enable Kesterson to deal with the rest of the world freely and without interference in respect of crops and livestock and use of the property; and that though the contract declared that the crops and livestock might be resold, yet the provisions should be read that it could be resold ‘as though they were Purchaser's own property’, though not in fact its own, the emphasized words being added by the court. The court stated that the contract did not unequivocally declare that the crops, livestock and farm equipment did belong to Christenson and that ‘because of its failure to do so and because of the use of terms that indicate the right to deal with the property as an owner rather than terms that would indicate ownership, the contract implies that Kesterson should return not only the possession of the real property but the personal property and crops as well, or their equivalent, as a condition for demanding the repayment of the $50,000.’ The court concluded that Kesterson ‘having chosen to come into Court to terminate the contract and compel Friesleben to account for the $50,000, he is under obligations to account for the benefits received by him.’ The court further concluded that by this agreement the parties deliberately limited the remedies of Kesterson to the sole remedy of restitution burdened with the implied condition of restoration. Of course the contract does not say so expressly and no one has claimed that it does.

We can attach no significance to the fact that the contract does not state that if Friesleben failed to clear title within 18 months and Kesterson demanded return of the $50,000 it should also redeliver possession of the realty. We think the parties assumed that so ordinary and usual a condition was clearly implied and well understood. It was competent for the parties to allow Kesterson to put an end to the time Friesleben should have to clear title and so to end its obligation to stand ready to pay out; it was equally competent for the parties to allow Friesleben to put an end to its obligation to fight the Christenson suit. Both matters were provided for, as to Kesterson by an optional time limit, and as to Friesleben by permitting it to end its further obligations with respect to the litigation by submitting the opinion of the named attorneys that further litigation would be unsuccessful. When Kesterson elected not to extend the stipulated period, just as would have been the case had Friesleben submitted the opinion as to ultimate success, the contract was at an end; and the contract unequivocally provided that Friesleben should then repay the $50,000. This interpretation is fortified by the provisions of the contract as to what would happen if the litigation were pursued to the ultimate end and Friesleben should lose. It would then be obliged to convey the realty to Christenson and Christenson would be obligated to pay for it. Friesleben agreed that in that event the Christenson payment would go into escrow for the mutual benefit of the parties and the exact distribution was agreed upon, which was the return of the $50,000 to Kesterson, the payment to it of any capital expenses up to $10,000 and the reimbursement of Kesterson for losses it might have suffered and for which the contract indemnified it. Only the balance would be given to Friesleben. These provisions were not burdened with any expressed conditions that before it could enjoy the benefits thereof Kesterson must account for its use of the real property and its disposition of the personal property.

The trial court declared in its opinion that by this contract the parties had agreed that restitution was the sole remedy given to Kesterson if Friesleben should fail to defeat Christenson within the 18 months' period; and that since they had agreed upon restitution as such sole remedy they had likewise agreed that this right of restitution should be conditioned upon restoration. We cannot assent. It is of course true that the remedy of restitution of benefits enforced involves restoration of benefits by the party claiming restitution and to that extent it approximates the remedy of rescission. (Restatement of the Law of Contracts, Sec. 349, Comment on Subsection (1).) It is of course competent for the parties by contract to confine the remedy for breach to restitution as the sole remedy. But this contract contains no express provisions limiting Kesterson's remedy to restitution and to imply such is to go against the plain provisions of the instrument to the contrary. ‘A condition cannot be read into a contract as to which the parties might well be deemed to have remained intentionally silent. Foley v. Euless, 214 Cal. 506, 511, 6 P.2d 956. With citation of that and other cases, the court in Cousins Inv. Co. v. Hastings Clothing Co., 45 Cal.App.2d 141, 149, 113 P.2d 878, 882, summarized the rules when covenants may be implied as follows: ‘(1) The implication must arise from the language used or it must be indispensable to effectuate the intention of the parties; (2) it must appear from the language used that it was so clearly within the contemplation of the parties that they deemed it unnecessary to express it; (3) implied covenants can only be justified on the grounds of legal necessity; (4) a promise can be implied only where it can be rightfully assumed that it would have been made if attention had been called to it; (5) there can be no implied covenant where the subject is completely covered by the contract.’' Emphasis ours. Stockton Dry Goods Co. v. Girsh, 36 Cal.2d 677, 681, 227 P.2d 1, 3.

For the theory of the trial court to be valid this contract must be construed as containing an implied agreement on the part of Kesterson that if the title was not cleared in the 18 months' period and Kesterson should elect not to extend the time, then it might demand repayment to it of $50,000, but only on the condition that it thereby became obligated to account to Friesleben. Reading this condition into the contract as executed by these parties violates all of the rules laid down by the cited authorities. Restoration cannot be implied where it must consist, if required, of charges for the use of land agreed to be free and of turning over of proceeds of sales of personal property for which the contract declared the party making the sales should not be liable to account.

We have heretofore said that, arguendo, we would assume the admissibility of oral testimony as an aid in the interpretation of the contract, but we think it apparent from what has been said that the document signed by the parties was a clear integration of their understandings and that the testimony was erroneously received. Even when that testimony is considered it does not add to or detract from the plain terms used. The document is the plain terms used. The documents is was no occasion for oral testimony.

The judgment as rendered must be reversed. However, there remains for disposition other issues presented by the case which have not been disposed of and in the disposition of which some relief may be given to Friesleben if the trial court shall find, interpreting the contract as we have interpreted it, Friesleben will suffer a forfeiture or a loss in the nature of forfeiture or Kesterson will be unjustly enriched by the enforcement of its terms. See Civil Code Sec. 3275; Gonzalez v. Hirose, 33 Cal.2d 213, 200 P.2d 793; Barkis v. Scott, 34 Cal.2d 116, 208 P.2d 367; Baffa v. Johnson, 35 Cal.2d 36, 216 P.2d 13, and Freedman v. Rector, 37 Cal.2d 16, 230 P.2d 629. Whether or not enforcement of the contract according to its terms as interpreted by this court here would result in such forfeiture, or loss in the nature of forfeiture, or unjust enrichment, are matters which obviously were not passed upon by the trial court; for, interpreting the contract as the trial court did, it could not be said that through enforcement any such loss would be suffered by Friesleben or any unjust enrichment to Kesterson could result. While the court, as noted, found against the plea of forfeiture advanced by Friesleben in its pleadings, it is apparent that this finding was based upon the court's interpretation of the contract. If, however, the contract be considered as we have interpreted it, then a very different picture is presented and findings favorable to Friesleben's plea would find support in the record as it now stands. The trial court's finding on this plea of Friesleben's cannot, therefore, justly be treated as a finding of fact adverse to the plea.

The judgment is reversed.

VAN DYKE, Justice.

SCHOTTKY, J. pro tem., and PEEK, J., concur.