J. P. BUTLER, Plaintiff and Respondent, v. Edward NEPPLE, Defendant and Appellant.
J. P. BUTLER, Raymond C. Turnbull and Cecil O. Basenberg, Cross-Defendants and Respondents, v. Edward NEPPLE, Cross-Complainant and Appellant.
NEPPLE PARTNERSHIPS A, B, C & D, Third Party Claimants and Appellants, v. J. P. BUTLER, Raymond C. Turnbull and Cecil O. Basenberg, Plaintiff, Cross-Defendants and Respondents,*
Plaintiff-respondent J. P. Butler, a duly licensed collection agent, brought this action against defendant and appellant Edward Nepple on May 24, 1957, for a money judgment in the amount of $18,000 plus interest (being six months' rent claimed due) upon an assignment of oil and gas lease covering certain oil bearing lands in the Santa Fe Springs oil field in Los Angeles County.
The original lease (hereinafter referred to as the Johnson lease) was executed on December 6, 1955, by and between Johnson and certain described owners and Cecil O. Basenberg, part of whose interest was subsequently assigned to Raymond C. Turnbull, both Turnbull and Basenberg being cross-defendants and respondents.
Although plaintiff Butler purported to represent only Raymond C. Turnbull as his assignor in his allegations in the complaint, actually the cause of action was owned one-fourth by Turnbull and three-fourths by his associate Basenberg. Turnbull was a promoter. He had previously sold defendant Nepple an oil lease in the Santa Fe Springs oil flelds known as the Pedro lease. Basenberg had acquired the Johnson lease, which is the lease subject of this action, with no idea of drilling it himself, but with the idea of selling it for a profit. Turnbull contacted Basenberg with the idea of selling the Johnson lease to Nepple, and for the purpose of said sale said lease was assigned by Basenberg to Turnbull on March 7, 1956, and on March 9, 1956, Turnbull assigned it to Nepple, collecting the sum of $15,000 as consideration for the assignment. In addition thereto, Turnbull reserved an overriding royalty of nine per cent on top of the 4 1/3 per cent previously reserved by Basenberg, making a total of 13 1/3 per cent, which said parties agreed to divide between them. The assignment from Turnbull to Nepple, which is the principal instrument in question in this case, was made subject to all of the terms of the original oil and gas lease.
The complaint in this action alleges, and respondents here contend, that Nepple did not, within six months from April 1, 1956, commence the drilling of a well, nor did he, within said time or until on or about March 20, 1957, reassign said oil and gas lease, and by reason thereof there became due and owing to said Turnbull as rent the sum of $3,000 on the first day of each month from October 1, 1956, through March 1, 1957, inclusive; that although demand for payment of said amount was made upon appellant, appellant failed to pay any part thereof.
Nepple's answer alleged that drilling operations were in fact commenced within said period and by special defense claimed that under the force majeure clause of the original lease, the obligations of Nepple were suspended when he was prevented from complying with the terms of the lease by matters beyond his control (inability to procure well casing during steel strike); that a modification agreement was prepared and submitted to plaintiff's assignor for the execution of the original lessors modifying the depth to which the well should be drilled and Nepple was accordingly excused from specific performance of the agreement.
Defendant Nepple filed a cross-complaint against Turnbull, Basenberg and plaintiff as cross-defendants, claiming that the lease required an 8,200-foot well; that a modification to a depth of 5,000 feet was orally agreed upon and also to correct an alleged error in the description of the property covered by the lease; that cross-defendants obtained such a modification of the lease but refused to deliver it to the cross-complainant unless they were paid certain moneys; that by reason of the failure of cross-defendants to deliver the modification to cross-complainant he was prevented from pursuing drilling operations and was required to reassign the lease to cross-defendant Turnbull to his damage in the sum of $15,970; and that the cross-defendants' refusal to deliver the modification was part of a willful, false and fraudulent conspiracy to cause cross-complainant to lose the lease. In their answer to the cross-complaint, Turnbull and Basenberg denied the allged unavailability of casing but admitted that cross-complainant requested, and that they obtained, a modification of the lease which they refused to deliver to the cross-complainant unless he would pay them certain moneys claimed due under the rent clause.
The original lease between Johnson and others to Basenberg is on a basic form known as ‘Oil Age 86–C Revised’ which form is customarily used in the oil industry. Certain modifications have been made to this form to meet the particular agreements of the parties, but these modifications do not change the portions of the lease pertaining to the requirements for deferring drilling. Paragraph six of the original lease provides that:
‘The Lessee may elect not to commence or prosecute the drilling of a well on said land as above provided, and thereupon this lease shall terminate.’
The authorities of this state support the trial court's conclusion that this clause in the original lease created an ‘unless' lease rather than a ‘drill or pay’ lease and that under such circumstances if the lessee fails to drill the lease ordinarily terminates and no rental accrues. See Walston v. Flintridge Oil Co., 133 Cal.App.2d 660, 284 P.2d 895; Norris Oil Co. v. Von Glahn, 104 Cal.App.2d 159, 230 P.2d 885; 31 Cal.L.Rev. 357, 393, 402–404.
Although the assignment from Turnbull to Nepple brings into existence certain rights and duties between the parties which were not a part of the original lease and which thus actually constitute a sublease, we will refer to it as an assignment. Hartman Ranch Co. v. Associated Oil Co., 10 Cal.2d 232, 242, 73 P.2d 1163. The first question then to be decided, in determining whether the defendant Nepple in under any circumstances obligated to pay rental to the plaintiffs-assignors, is whether or not this assignment is of the variety known as an ‘unless' lease or a ‘drill or pay’ lease. In Richfield Oil Corp. v. Bloomfield, 103 Cal.App.2d 589, 591, 229 P.2d 838, 841, it is said:
‘From the nature of the ‘unless' type of lease, it carries within its own phraseology an automatic termination which clicks when the lessee fails to commence drilling operations within the time specified and also fails to exercise his privilege of paying delay rentals in advance.’
Because of the similarity of the language which is used in creating both types of leases, a careful analysis is often required to distinguish them, and the inquiry in each case is whether the particular language of the instrument must be interpreted as creating a right or estate in the lessee which lapses upon the failure of the lessee to either commence drilling or pay rent, or whether the language amounts to a promise upon the part of the lessee to pay in the event he does not drill.
The next question then presented is whether the terms of the written assignment changed the lease into a ‘drill or pay’ instrument. It recites:
‘1. Subject to the rights, privileges, elections and immunities of the Lessee under said Oil and Gas lease, Assignee hereby assumes and agrees to perform each and all of the terms and provisions of the above described Oil and Gas Lease.’
Paragraph six of the assignment requires assignee to deposit a quitclaim deed in escrow which would effect a surrender of the lease in the event he failed to drill within the term thereof. Paragraph three reads:
‘3. Commencing with six (6) months from April 1, 1956, if the Assignee has not theretofore commenced drilling operations upon the above described lands or reassigned all of his right, title and interest hereunder to the Assignor, the Assignee shall pay or tender to the Assignor monthly in advance, as rental, the sum of Three Thousand Dollars ($3,000.00) per month until drilling operations are commenced or until the Assignee shall have reassigned his hights hereunder to the Assignor; provided, however, that the Assignee cannot defer the commencement of drilling operations by the payment of rental hereunder for a period extending beyond one (1) year from date hereof. The Assignor agrees to pay to the Lessor any rental payments required under the terms and provisions of the above described Lease during such time as the Assignee retains his rights hereunder for a period, however, of not to exceed one (1) year from date hereof.’
It is Nepple's claim that he was bound by the provisions of the original lease; that Turnbull could not change them and exact of him a different agreement, and, even if he could, it would constitute an ‘unless' type of lease because, under it he could either (a) commence drilling operations within six months after April 1, 1956, in which event there would be no rental to pay; (b) pay $3,000 per month for each month he desired to extend the term of the sub-lease therefor, but not to exceed six months; or (c) reassign his interest to the assignor. Citing such authority as Fritsch v. Fisher, 151 Cal.App.2d 732, 312 P.2d 21 and Pellissier v. Pan-American Petroleum Co., 62 Cal.App. 543, 217 P. 570.
Griffin v. Kent, 111 Cal.App. 569, 295 P. 854, concerned a lease which, taken as a whole, is not dissimilar to the assignment here under consideration. Title Insurance & Trust Co. v. Amalgamated Oil Co., 63 Cal.App. 29, 218 P. 71, holds that in the absence of an express provision in the lease providing that it terminate if the lessee fails to drill or to pay rent required, the lease should be interpreted as implying a promise by the lessee to pay rent in the event he does not drill. In the cases relied upon by appellant, it was spelled out in the instruments that if the lessee failed to commence drilling operations or to tender the delay rental before the date specified, the lease terminated. Nowhere in the assignment here under consideration is the commencement of drilling or payment of rent defined as a condition the failure of performance of which would result in a termination of the assignee's rights, nor are there provisions from which any such condition can be implied. In fact, it provides that ‘the Assignee shall pay or tender to the Assignor monthly in advance, as rental, the sum of Three Thousand Dollars ($3,000.00) per month until drilling operations are commenced or until the Assignee shall have reassigned his rights hereunder to the Assignor * * *.’ There is no provision which states, either directly or by implication, that failure to drill or pay rent automatically terminates the lease. The absence of such provisions clearly classifies the assignment as a ‘drill or pay’ type of instrument and the court was authorized to consider this assignment as binding on Nepple regardless of the provisions of the original lease.
The trial court found that Nepple did not commence drilling operations within the time provided under the terms of the original lease or the assignment. There is considerable confusion in the evidence as to why drilling was not commenced within the six months' period. Nepple's story is that Turnbull sold him the Pedro lease and knew Nepple had to commence operation on it prior to July 1, 1956 and drill a well to the depth of 9,000 feet; that he (Nepple) accumulated the necessary casing to drill it; that he also, during this period, accumulated some casing for the Johnson lease; that the casing situation became acute by reason of the steel strike which occurred in July 1956 and it thereafter became virtually impossible to obtain on the open market the N–80 casing required; that his assignors knew of this shortage and unsuccessfully endeavored to assist him to locate it; that his engineer informed all of them that a depth of 8,200 feet had no geological meaning; that the well should be either taken to a zone of 5,000 feet, where there was known production, or to the Santa Fe zone below 9,000 feet; that he (Nepple) completed the Pedro well as a producing well in December 1956 and thereafter immediately commenced Pedro Well No. 2; that some time in September 1956, Turnbull and Basenberg contacted him and offered to sell him an additional five-acre lease adjacent to the Johnson lease and at that time the casing situation and a modification of the agreement were discussed; that his attorney prepared the proposed amendment providing for a 5,000-foot well and on October 12, 1956, it was forwarded to Turnbull; that Turnbull and Basenberg advised him that they could secure the execution of the amendment by the original lessors and that nothing was said about rent payments; that, relying on that fact, about September 30, 1956, he commenced drilling operations on the Johnson lease by having a suveyor survey and stake the location; that he filed the required notice of intention to drill and a drilling bond; and that on October 1 he moved a small portable rig onto the property to dig a cellar and shored it with wooden plank, dug a 21-foot hole, set 25 feet of large-size conductor pipe and cemented it to the gound; that no portable drilling rig was moved into the lease but he said he had made arrangements to have a rig available for a 5,000-foot well if casing for an 8,200-foot well was not obtainable and the lease was accordingly modified. He testified he was financially able to drill the well, which would cost about $150,000, and had just spent over $800,000 in drilling three wells in Santa Fe Springs and that Turnbull profited therefrom from to some extent.
About November 1, 1956, Basenberg wrote Nepple to the effect that he could deliver the signed amendment to the original lease but he set forth certain conditions: (1) that rental payments were to be reinstated as of November 1, 1956, with a payment of $3,000 due November 1 and actual drilling in the ground commenced ten days after delivery of the modification, or (2) that payment of $3,000 be made on November 1, 1956 and that rental thereafter would be reduced to $1,500 per month until such time as the drilling in the ground was commenced. About November 15, 1956, they discussed this proposition and no further negotiations ensued until Basenberg engaged an attorney, and, as a result, a reassignment of the lease back to the assignors was execusted by Nepple about February 2, 1957. Turnbull also demanded the rental claimed due under the lease assignment.
Respondents point to certain evidence indicating Nepple spent only $970 in preparation for drilling operations and contend that his activities amounted to only a ‘flurry’ of activity at the last minute in an attempt to comply with the agreement; respondents argue that after this so-called ‘flurry’ all further activity ceased and no immediate resumption followed, nor was any contemplated during the next six months he retained possession; that appellant did not have funds actually available to him to finance the well during that period since he was expending all available funds on other wells and that Nepple lost interest in this lease because his own engineer had advised him that it was not a valuable economic prospect for a deep well.
What facts constitute commencement of drilling operations in any given case is open to discussion. See 36 Cal.Jur.2d 660, 661, sec. 56, where it is said:
‘But the general rule as to what constitutes commencement of drilling seems to be that actual drilling is unnecessary. Under this rule the location of wells, hauling of lumber onto the premises, erection of derricks, providing of a water supply, moving of machinery onto the premises, and similar acts preliminary to the beginning of the actual work of drilling, when performed with a bona fide intention to proceed with diligence toward completion of the well, constitute the beginning of drilling operations.
‘Of course, the parties to the lease may expressly provide what is to be considered the commencement of drilling and what is not.’
See also Wilcox v. West, 45 Cal.App.2d 267, 271, 114 P.2d 39; 2 Summers Oil and Gas, 459, sec. 349.
The original lease provided:
‘6. The Lessee agrees to commence drilling operations on said land * * * from the date hereof * * * and to prosecute the same with reasonable diligence until oil or gas is found in paying quantities * * *. No implied covenant shall be read into this lease requiring the lessee to drill or to continue drilling on said land, or fixing the measure of diligence therefor * * *.’
Paragraph 25 reads:
‘The words ‘drilling operations' as used herein shall be held to mean any work or actual operations undertaken or commenced in good faith for the purpose of carrying out any of the rights, * * * of the Lessee * * * followed diligently and in due course by the construction of a derrick and other necessary structures for the drilling of an oil or gas well, and by the actual operation of drilling in the ground.’
Under the evidence and the authorities cited, the trial court might well have found that appellant did commence drilling operations within the period prescribed. It is quite apparent that Nepple did not prosecute the same with reasonable diligence. In 2 Summers Oil and Gas, 459, 467–468, sec. 349, due diligence is discussed. It is there said:
‘In addition to the provision of the drilling and rental clauses of a lease requiring the lessee to commence the drilling of a well within a stated time to escape the payment of delay rental or prevent termination of the lease, the lease may further expressly provide that the drilling be continued to completion with due diligence. In the absence of such express statement requiring due diligence in completion of the well such duty would be implied, although it is not always necessary in reaching a proper result to do so. If the lessee has not continued the drilling with due diligence, this is evidence to show that the commencement of the well was not done in good faith, hence he may lose his lease or be forced to pay delay rental.’
See also Louis Richardson Ranch, Inc. v. Gibson, 40 Cal.App.2d 520, 105 P.2d 143 and Barnard v. Gibson, 100 Cal.App.2d 527, 224 P.2d 90. Accordingly there was sufficient evidence to support the finding of the trial court that there was a violation of the lease in this respect.
The court did find to be untrue appellant's claim that he had commenced drilling operations as provided in the lease and assignment. This would natually negative appellant's claim of good faith or estoppel in respect to any delay or for his failure to prosecute drilling operations with reasonable diligence.
This brings us to the question of respondents being estopped to claim a breach of the agreement by reason of alleged representations made to appellant that the agreement would be modified so that he would be obligated to drill only to a depth of 5,000 feet. The evidence on this question is not clear and in some respects is in conflict. Basenberg testified that about November 5, 1956, there was a conversation with Nepple in which he inquired of Nepple about proceeding with the drilling on the Johnson lease and he said he would cooperate with Nepple if he could to ‘get you out of the bind’ and Nepple said he was then drilling another well and he would thereafter drill the Johnson well; that Nepple did mention that pipe was scarce and that he had some trouble lining it up; that he said if he had some stipulation in reference to the reduction in drilling depth he would be in a better position to drill; that Nepple was not critical of any of the conditions that had been agreed upon for the delivery of the modification, but he felt respondents were pressing him to an unwarranted degree, at that time, to drill the Johnson well and he would drill it as soon as he got around to it and suggested they leave him alone until he finished the present well on which he was then working. Nepple testified nothing was said as to any conditions to be attached to the delivery of the modified assignment and that he knew nothing of them until he received the modified assignment by mail about November 1, 1956. Apparently Nepple did not sign the modified assignment and never answered the letter or stated his reaction to the conditions contained therein until after December 17 when Basenberg notified Nepple that the offer was withdrawn. Considerable correspondence followed in an endeavor to reach some agreement between the parties, but to no avail.
Turnbull claims he sent bills for back rental to Nepple after October 1. Exhibits indicate one was sent on December 4, 1956, for rent for the months of October, November and December at $3,000 per month, and one on February 13, 1957, for a five-month period. Nepple denied anything was due under the terms of the lease because drilling had been commenced before the expiration of the six months's period and later, on February 15, 1957, he claimed he was prevented from so doing because of his inability to obtain pipe and, never having received the modification agreement, he would have to quitclaim the lease back to the assignors.
The trial court found that it was true that appellant requested that Turnbull and Basenberg secure from lessors an agreement modifying the terms thereof to reduce the required depth of the first well and that Turnbull and Basenberg did obtain from said lessors an agreement wherein they consented to the reduction in the depth of said well and further found as true that Basenberg refused to agree with appellant to the modification of said oil and gas lease as requested by the appellant, except upon the condition that appellant pay to him a portion of the delay rental then claimed to be in default and agree to commence drilling operations within a certain time; and that appellant refused to accept said offer or to so modify said lease upon said conditions. The court also found as untrue that the refusal of Basenberg to agree to modify the oil and gas lease as requested by appellant, except upon the conditions referred to, prevented appellant from commencing or pursuing drilling operations upon said oil and gas leasehold and found as untrue that the appellant and cross-complainant was damaged by such refusal in any amount whatsoever; that it was untrue that respondents conspired to withhold from the appellant an agreement modifying said oil and gas lease as alleged in the cross-complaint.
It might well appear that respondents did promise, as found by the court, that a modification of the agreement would be made; that the modification was offered to Nepple subject to certain conditions which he rejected and the modified agreement was never effected. While the trial court might well have found otherwise, its findings negative any claim of estoppel and, being supported by substantial evidence, the determination of the trial judge of this factual question must be sustained. Estoppel does not appear as a matter of law. In re Estate of Bristol, 23 Cal.2d 221, 143 P.2d 689; Bancroft-Whitney Co. v. McHugh, 166 Cal. 140, 134 P. 1157.
Next it is argued that the force majeure clause of the lease relieved appellant of the necessity of drilling within the period prescribed and also from the payment of rent under the assignment. The clause provided that:
‘The obligations of the Lessee hereunder shall be suspended while the Lessee is prevented from complying therewith, in whole or in part, by strikes * * * actions of the elements * * * or other matters or conditions beyond the control of the Lessee, whether similar to the matters or conditions herein specifically enumerated or not.’ (Italics ours.)
It is argued that the steel strike in July 1956 created a scarcity of N–80 casing and it was practically impossible to obtain it in the usual supply places or at the market price. The evidence on this question was varied and difficult to fully analyze. Turnbull testified Nepple did speak to him on October 1, and said he was trying to obtain the casing required for that well and appellant asked him if he knew where any could be obtained; that he, Turnbull, then knew that N–80 casing was in short supply; that he told appellant he would look around and see if he could find someone who could supply it for him; that he assumed from the general conversation that appellant was delayed by lack of casing; that he, at that time, asked appellant about the rentals that were then, or would be, payable and that appellant told him to ‘Keep off my back’; that in response to his suggestion he mailed Nepple a letter containing the mames of persons who, to his knowledge, had casing available for an 8,200-foot well and later told Mr. Mead, appellant's engineer at the Pedro Well, of this fact, and also told him of another potential source of supply for casing, giving the name of the merchant, the telephone number, amount of pipe available and the price; that he heard nothing from appellant or Mead in regard to this information; that appellant had never before told him that he was being delayed by shortage of casing and that never before was any indication made to him that appellant was not going to drill the well.
Basenberg corroborated this testimony to a great extent and said Nepple then told him that he was having or had had trouble lining up casing for Pedro No. 1, being drilled to the greater depth, but apparently Nepple was successful in obtaining it; that about 20 other wells, requiring that type of casing, were being drilled in that district at the time or during that period; that he had no occasion to use that type in his drilling but other companies were using it during this period. He testified he made inquiry of a major steel pipe supply company, naming it, and he indicated he could probably obtain some casing but no specific delivery date was involved; that he did not communicate this fact to Nepple because he (Nepple) had evinced no interest to drill at all at any time.
Nepple testified generally, in this respect, that some time prior to October 1 (about Aprill or May 1956), he had been endeavoring to purchase a string of the casing required but he was not offered any N–80 casing. He testified Turnbull gave him the names of possible suppliers of such casing but they had none; that in June 1956 he made arrangements for the purchase of 1,600 feet of used surface casing for the commencement of drilling operations on this well and 4,100 feet of J–55 casing, and he presented paid bills so indicating. He testified he had over a one-quarter million dollar credit with the supply houses and that as early as April 1956 he delegated his engineer, Mead, to locate casing for this and other jobs.
The evidence shows that in May 1956 one firm reported to Nepple that it would be wise to consider the purchase of 3,500 feet of N–80 casing on hand, due to the possibility of a shortage occurring in the last quarter of the year. Nepple testified he did purchase it, but used it on Pedro Lease No. 1 where he was obligated under his contract to commence drilling by July 1, 1956. Later he siad he was confused and corrected his former testimony about being furnished pipe for Pedro No. 1 and said it was furnished for Pedro No. 2 and the larger oil companies made arrangements to procure casing for him provided he used it in those wells where they held options to purchase the gas and oil. He did not remember where the casing he then purchased went, but he claims he stored a portion of it, awaiting the drilling operations on this well. He produced a witness, a supplier of steel, who testified as to the steel strike in July 1956 and of the scarcity of steel generally and in particular the N–80 type; that Nepple purchased a string of N–80 casing in June 1956, paid cash for it and that his credit reputation in the industry was very good.
Appellant produced an independent oil producer who testified that in August and September 1956 he was thus engaged in drilling more than 20 wells in Kern County; that he ordered tubular steel from Young-stown Steel Company by letter and was told it could not be supplied until December 1956 and that the company would not be able to furnish him with such steel until after the early part of 1957. Appellant's engineer testified of his unsuccessful attempts to obtain steel during 1956 and 1957 by contacting the suppliers who ordinarily supplied it and corroborated Nepple's testimony to a great extent. He further pointed out that larger oil companies had supplies of this N–80 steel committed to them during the strike period but that such casing was not available to independent operators. Respondents produced no witnesses in contradiction to appellant's testimony in this regard.
Suffice it to say, had the trial court predicated Nepple's failure to comply on his inability to obtain casing, such a finding might well have been supported by the evidence. Prairie Oil Co. v. Carleton, 91 Cal.App.2d 555, 205 P.2d 81. However, it specifically found this claim was untrue. The court may well have found that his failure to commence drilling was partially due to other causes, i.e., that it was beginning to look unprofitable to drill the well to the greater depth and that delay in commencement of drilling was partially due to his anticipation that the agreement would be unconditionally modified so he could drill to the lesser depth.
Regardless of the finding of the trial court in this respect, it appears to us that the evidence affirmatively shows that the delay in commencement of drilling was also due, at least in part, to appellant's inability to obtain steel casing and that this inability continued for some period of time after October 1, 1956 and that the trial court's finding is lacking in substantial evidentiary support. In In re Dennis, 51 Cal.2d 666, 335 P.2d 657, it was held that when evidence is uncontradicted and entirely to the effect that the accused is insane, the presumption of sanity may not be permitted to prevail. Accordingly, under the agreement, the time for commencement of drilling would be extended under the force majeure clause and would be suspended while the lessee was thus prevented from complying with the obligations arising under it until such material was available. Just when that was is not indicated by the evidence. Possibly it was not before the date of the reassignment.
Respondents, in support of the court's finding, argue that, under the agreement of assignment, appellant had only three options: (1) commence drilling within six months; (2) reassign; or (3) pay monthly $3,000 until drilling operations commenced; that even though appellant's obligation to drill may have been suspended, he was still obligated to pay rent or reassign within the six months' period because he was able to fulfill one of those obligations within that period. Citing Restatement of Contracts, 888, sec. 469 and sec. 1451, Civil Code. Apparently the trial court gave consideration to this argument. No authorities are cited which are directly in point. Much depends upon the language of the instrument creating the suspension and its application to the obligations involved.
Here, the obligation was (1) to commence drilling within the six months' period, (2) reassign, or (3) pay $3,000 per month until drilling operations commenced or until reassignment was executed. It reasonably appears from this agreement that if the time for commencement of drilling was rightfully suspended under the force majeure clause, no rental accrued until that condition was removed. This leaves only one remaining condition and that is the obligation to reassign within the six months' period and thus forfeit the $15,000 consideration paid for the assignment on the theory that this obligation had not been suspended by reason of the steel strike and appellant's inability to obtain steel casing. It will be noted that the paragraph of the original lease recites that the ‘obligations' (plural) of the lessee hereunder shall be suspended while the lessee is prevented from complying therewith, in whole or in part, by strikes, etc. It would seem reasonable that the obligation to pay rental in case a reassignment is not made within that period is likewise suspended, particularly under the conditions here presented. To hold that Nepple did not have the right to make the election to commence drilling operations and thereafter rely on and enjoy the full rights and obligations given him under the lease, would be to deprive him of one of the rights given to him under the lease. Under the assignment, assignor assigned to assignee all right and title in the lease, together with the rights and privileges therein, and the lease and all of its terms shall be binding upon the assignee of the parties. It is true that the assignment did not contain a force majeure clause but the assignee was entitled to all such rights as were conferred upon him by the original lease. In view of this construction of the lease, which appears from the instruments being considered, section 1451, Civil Code, is not applicable since a contrary intention is therein manifested. Restatement of Contracts, 888, sec. 469.
Under the conclusions here reached, no rental payments became due as of October 1, 1956, since the obligation for payment thereof was suspended during the period in question and accordingly the judgment should be reversed.
On the appeal from the order denying the third party claim, appellants and third party claimants Nepple Partnerships A, B, C and D claim that pursuant to a writ of attachment issued in this action, plaintiff levied upon two bank accounts in a bank in Bakersfield. One stood in the name of Edward Nepple, individually, in which funds in the amount of $1,862.26 were attached, and the other in the name of Nepple Partnership, in the amount of $15,495.95. Appellants and claimants filed a third party claim to such funds under section 689, Code of Civil Procedure. A hearing was had and the trial court found that all such moneys were and had been the separate and individual property of Nepple alone and subject to the execution and levy and ordered delivery of such funds to the sheriff. This appeal is from that general order. The third party claimants consist of four separate limited partnerships, each of which is a distinct entity. Each has the same general partner, Edward Nepple, and to a great extent the same limited partners. All have joined to file a single claim alleging the property belonged to these limited partnerships. The evidence indicates that prior to 1957, Nepple was a general partner or manager of eight different partnerships. A separate partnership bank account was maintained for only one of them. The funds of all others, including these third party claimants, were deposited in his personal account at this bank and were co-mingled with his personal funds. In March 1957 he opened a second account in this bank, designated ‘Nepple Partnership’ account. He opened it with his personal check in the amount of $25,000, drawn on this personal account, in response to his auditor's suggestion that he owed his various partnerships a sum in excess of $25,000 in the aggregate but the sum each was entitled to was not indicated. The account was not opened on a ‘partnership’ card but on a type employed by the bank for an account of an individual doing business under a fictitious name. It declared thereon that Nepple was the sole owner of the funds deposited in the account. The banker testified this was according to Nepple's instructions; that Nepple said there were no general partners in this particular account; that he told Nepple a partnership account required the signatures of all general partners, and that Nepple demanded that this account be in his name only, and accordingly it was opened as a fictitious name account. Thereafter Nepple continued to use his other personal account as the repository of incoming partnership funds for the various partnerships and at various times transfers were made from it to this so-called fictitious name account. None of the books of the various partnerships nor of Nepple were so set up as to reflect the fictitious account as a repository of the partnership funds and it was not possible to determine from either the partnership books or Nepple's books that any given amount in the account, at any particular time, belonged to any particular partnership. Suffice it to say all funds in these two accounts stood in the name of Nepple individually or were taken therefrom, and none could be traced back to an origin in any specific partnership or to these particular claimants. The finding of the trial court as to ownership of the bank account is supported by sufficient evidence.
However, due to the conclusion heretofore reached, the order must be reversed because the amount of the judgment, if any, rendered in the future would materially affect the amount of the claim allowable.
Judgment and order reversed.
GRIFFIN, Presiding Justice.
SHEPARD and COUGHLIN, JJ., concur.