Holmes Eureka Lumber Co. v. Mitchell-Dorr Realty Co.

In the year 1941 appellees were owners of merchantable redwood timber situate on land in Humboldt County, California. Appellant was engaged in a sawmill operation. Appellees entered into a written contract with appellant to sell standing timber to it. The instant case stems from a dispute as to the meaning of a clause of that contract which provides for an extra payment for the timber, known as additional stumpage, in the event appellant should realize large profits in a given year from operations in which timber cut from appellees’ land was utilized. Appellees’ claim, successfully asserted in the trial court, is that a tax refund on account of an earlier year’s operations (1944) resulting from a loss in a subsequent year (1946) should be applied in reduction of taxes in the earlier year, thereby increasing profits for the earlier year and the amount of additional stumpage payable. In making this claim appellees urge that this case is concerned solely with an interpretation of the contract and that a proper construction thereof sustains their claim. We agree that this is a contract case but do not agree with the construction appellees place thereon.

The terms of the contract,…