129 S.E.2d 166

ATLANTIC COAST LINE RAILROAD COMPANY et al. v. GEORGIA RAILROAD BANKING COMPANY.

39594.Court of Appeals of Georgia.
DECIDED NOVEMBER 30, 1962. REHEARING DENIED DECEMBER 18, 1962.

The contract here involved was intended to require deposit with the trustee of all funds derived from proceeds of sales and condemnations in which both lessor and lessees claimed rights and interests, whether jointly or separately. The separate condemnation awards considered here were, under the facts, within the contemplation of the agreement as they were sums in which both parties could claim rights and interests within the meaning of the contract being construed by the court in this declaratory judgment proceeding.

DECIDED NOVEMBER 30, 1962 — REHEARING DENIED DECEMBER 18, 1962.
Declaratory judgment; construction of lease contract. Richmond Superior Court. Before Judge Anderson.

This is a declaratory judgment action, instituted by the lessor, seeking construction of a contract between the Georgia Railroad Banking Company, lessor of the properties involved in the contract, and Atlantic Coast Line Railroad Company and Louisville Nashville Railroad Company, as lessees. There were two classifications of property leased: one, the property acquired by the lessor prior to the lease and two, that acquired subsequently to the lease. This case is concerned only with the property classified by the parties as that owned by the lessor prior to the lease. There is no dispute on that question. The purpose of this action was to have the court construe a contract entered into in 1955 to determine whether the contract contemplated condemnations brought against both parties in which separate awards and payments of compensation to cover the separate interests of the parties were made, as distinguished from awards where only one joint award was made to cover the interests of both parties. This action was necessitated by a condemnation

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proceeding instituted by the City of Atlanta in which separate awards were made to each of the parties to cover the respective interests of each. The contract, the construction of which was sought, is as follows: “Whereas, the Lessees are the successors in interest of William M. Wadley under a Lease from the Lessor to him dated May 7, 1881, of the property referred to in said Lease; and Whereas, from time to time certain parcels of real estate, constituting parts of the premises originally demised, have been sold by mutual consent of the Lessor and the Lessees, and other parts of such real estate have been condemned under power of eminent domain; and Whereas, there have in like manner also been sold or condemned other parcels of real estate which have been acquired during the term of the Lease, title to which was conveyed to the Lessor by the Lessees or by third persons at the Lessees’ instance, and held under the terms of the Lease; and Whereas, it is contemplated that in the future there may be similarly sold by mutual consent of the Lessor and the Lessees or condemned under power of eminent domain other real estate which may be portions either of the originally demised premises or of that subsequently conveyed to the Lessor by the Lessees or by third persons at the Lessees’ instance, and held under the terms of the Lease; and Whereas, both the Lessor and the Lessees claim rights and interests in the proceeds of said sales and condemnations, and desire to place such proceeds in trust with the Trustee for the uses and purposes hereinafter set forth; and whereas, both the Lessor and the Lessees claim rights and interests in the proceeds of said sales and condemnations heretofore made, and are in dispute as to the disposition of certain of them, and may have similar claims as to future sales and condemnations, and, in order to avoid litigation of these claims and disputes at this time, desire to place the proceeds of all such sales in trust with the Trustee for the uses and purposes hereinafter set forth, and, at the same time, preserve without impairment their respective contentions as to said claims; Now, therefore, in consideration of the premises and the covenants and agreements by and between the parties hereto as herein set forth, it is agreed among the parties hereto as follows: Sec. 1. The Lessor and the Lessees will deliver to the Trustee

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the proceeds of the sales and condemnations of said real estate, both such as may be now in dispute and those now in the hand of the Trustee under the provisions of a somewhat similar contract between the parties hereto, dated August 20, 1952, which is superseded by these presents, and of all future sales and condemnations of real estate, to have and to hold, in trust, for the uses and purposes hereinafter stated, and the Trustee agrees to hold the same for said uses and purposes. There shall be listed on `Exhibit A’, attached hereto, the proceeds of all sales and condemnations of such real estate as constituted a part of the premises originally demised or any timber growing thereon. There shall be listed on `Exhibit B’, attached hereto, the proceeds of all sales and condemnations of real estate acquired during the term of the lease. Sec. 2. The Trustee shall: (a) Invest such proceeds thus deposited with it in such form of property as in its discretion shall seem best, irrespective of whether it be property in which trustees or other fiduciaries are required under the laws of Georgia to invest trust or other fiduciary funds; and may from time to time, at public or private sale, without the order of any court or judicial officer, sell the property into which it has invested said funds and reinvest the proceeds in such property as described above, in its discretion; (b) Pay to the Lessees not less frequently than semi-annually the net income which shall be received from such trust funds, until the expiration of said Lease or until its prior termination for any cause; (c) Upon the expiration of said Lease or upon its prior termination for any cause; (1) Deliver the corpus of the proceeds listed on `Exhibit A’ to the Lessor. It shall be the property of the Lessor. (2) Deliver the corpus of the proceeds listed on `Exhibit B’ to the Lessor or to the Lessees or to both, all as shall be directed by the Lessor and the Lessees, the determination to be as agreed to by them or settled for them as hereinafter provided in this contract. Sec. 3. Should the Lessor and the Lessees, upon the expiration of the Lease or its prior termination for any cause, disagree as to the distribution of the corpus of the proceeds listed in `Exhibit B’, and such disagreement shall give rise to litigation, then, upon the determination of the rights of the parties to such corpus by the court of last

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resort in which such case is litigated, or upon the expiration of the time of appeal or when the time for a petition for certiorari or rehearing shall have expired after the rendition of a judgment in such case in a lower court, the parties shall direct the Trustee to make delivery of the corpus of the proceeds listed on `Exhibit B’ in the manner which shall be directed by such judgment or decree, and the Trustee will be relieved of all further obligations upon complying with such instructions. Said proceeds listed on `Exhibit B’ shall stand in lieu of the property so sold or condemned; and the rights of the parties thereto shall be considered as if the Lease had terminated for any cause immediately prior to such sale or condemnation; provided, however, that this agreement as to the final distribution of such proceeds in the manner herein set forth shall not prejudice the rights of either party in their respective contentions in claiming such proceeds, nor shall anything herein constitute a waiver or estoppel of either party hereto in any contest respecting the ownership of such proceeds. Sec. 4. If at any time before the expiration or earlier termination of said Lease for any cause it shall, in the opinion of the Lessees, become necessary, in the operation of the railroad properties operated by them under the terms of said Lease, to restore or replace any of the property, including facilities for railroad purposes, sold or condemned or in any way to substitute therefor new property, including such facilities, or to acquire property of a similar category, the Trustee, out of the funds deposited with it in accordance with the provisions of Section 1 hereof, shall, from time to time, make payment to the Lessees of sufficient amounts to repay them for the costs and expenses of such restorations, replacements, substitutions or acquisitions upon the presentation to it by the Lessees of satisfactory evidence that such costs and expenses have been incurred in accordance with the provisions of this Section 4; and the Trustee shall encroach on the funds from `Exhibit A’ and `Exhibit B’, as the case may be, so that restorations, replacements, substitutions or acquisitions shall be of property in a similar category as that which was sold or condemned; provided, however, that nothing herein shall prejudice the rights or obligations of either party with respect to any claim which either

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may have under the Lease at its expiration or earlier termination for any cause for the cost of such restorations, replacements, substitutions or acquisitions in excess, if any, of the amount received from the Trustee under this paragraph; and provided, further, if the property or facilities are restored or replaced or acquired in accordance with the provisions of this Section 4, nothing herein shall prejudice the claim of the Lessees that they should be paid therefor at the expiration or prior termination of the Lease, or if the Lessor shall fail to pay therefor, nothing herein shall prejudice the claim of the Lessees that the property and/or facilities should be conveyed to them, nor shall anything herein prejudice the rights of the Lessor to resist such claims. Sec. 5. Neither party hereto shall assign, transfer, convey or in any manner alienate, as security or otherwise, its rights to, and undivided interest in, the trust fund created hereunder or any part thereof. Sec. 6. In the making of investments of the funds in its hands the Trustee may commingle the proceeds of the two funds listed on `Exhibits A’ and `B’, respectively, but shall at all times keep such records as will show that amounts of said funds which are invested came from and belong to the proceeds listed on `Exhibits A’ and `B’, respectively, so that said amounts may be traced into the common fund so invested. Sec. 7. The Trustee is relieved from making bond, and from making any returns or reports to any court, and from obtaining any order of any court in making and/or changing the investment of such funds. Sec. 8. This agreement shall stand in lieu of and supersede the Agreement between the Lessor and the Lessees, dated August 20, 1952, relating to the deposit and investment of the proceeds of said sale and condemnation “of real estate.”

The trial judge rendered a judgment declaring that the 1955 agreement by its terms was applicable to the condemnation money paid by the City of Atlanta and that such money is payable to the Georgia Railroad Bank Trust Company, as trustee, under this agreement. The lessor and lessees were both ordered to pay to the trustee the respective sums received as a result of the condemnation proceeds. The lessees excepted to this judgment on numerous grounds, which in essence were to

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the effect that the agreement did not cover these sums of the condemnation proceeds which arose from awards separately made to the respective parties as each award was a separate and distinct compensation for damages flowing from the condemnation and taking of the interests of each, respectively; and that in these sums each had no interest in the award made to the other.

Heyman, Abram, Young, Hicks Maloof, Herman Heyman, Joseph Lefkoff, Fulcher, Fulcher, Hagler Harper, W. M. Fulcher, for plaintiffs in error.

Cumming, Nixon, Eve, Waller Capers, Joseph B. Cumming,
contra.

FELTON, Chief Judge.

The facts stated in this opinion are based on admissions in the pleadings or stipulations by the parties. The 1955 contract by its terms supersedes a contract made in 1952. We think the 1955 contract is clear, plain and unambiguous even without reference to the 1952 contract. The body of the 1955 contract provides that all future sales and condemnations of real estate classified as property originally leased shall be the property of the lessor. The word “all” excludes exceptions. If the parties had desired to except from the provisions of the 1955 contract condemnations wherein separate awards were made to the respective parties the exception could have been easily expressed. The use of the word “similarly” before the word “sold” in the preamble cannot reasonably be held to mean joint sales or condemnations (1) because it only modifies “sold” and does not affect condemnations even if it means joint sales and (2) because the statements in the preamble must give way to the unambiguous and all-inclusive undertaking in the body of the contract. The same is true of any other similar expression in the preamble. The stipulation of facts shows that in all sales or condemnations prior to the 1955 contract the sales or condemnations were in fact or effect joint sales or resulted in a single award, and lessees contend that these facts show that separate award transactions were not contemplated. Just for the purpose of answering the lessees’ contention and not necessarily to support our conclusion, though indeed it does strengthen it, we shall refer to the precedents in sales and condemnations,

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the 1952 contract and its purpose. The history of the disposition of funds received from the sale or condemnation of land owned by lessor and under lease to lessees is substantially as follows: prior to the contract of 1952 such funds were generally held by the lessees for the account of the lessor. For a while such funds were held in what was called a “real estate account” and were used to purchase other property. The lessees had the use of the funds or property bought with the real estate funds in the same way as they had use of the property sold or condemned. Prior to the agreement of 1952 these funds were either held by the lessees for the account of the lessor, the lessees receiving the income therefrom, or held by the lessor with the income therefrom payable to the lessees for the remainder of the lease. There are frequent statements in the statement of facts that various proceeds from the sales and condemnations of particular tracts were to stand, or stood, in lieu of the property sold or condemned. The 1952 agreement made formal the informal arrangement above described. In a recital in the 1952 agreement there is the expression “proceeds of such sales or condemnation proceedings, which represent and stand in place and stead of the real estate so sold or condemned.” In the body of the 1952 agreement there is the expression “The corpus of the proceeds of sales or condemnations of property shall stand in lieu of said property.” There was no disagreement of the parties as to the construction of the 1952 agreement except as to whether or not land which had been acquired by the lessees subsequently to the lease occupied the same status as the land originally included in the lease or agreed to be considered as being originally included. The 1955 agreement was entered into to incorporate the 1952 agreement with only two differences: (1) the 1955 agreement was not revocable by either party and (2) there was postponed until the expiration of the lease the question whether or not the land acquired by the lessees subsequently to the original lease should be considered in the same category as the land originally leased with reference to the final disposition of the proceeds from sales or condemnations. The 1955 agreement provided that proceeds of sales and condemnations of property originally leased should belong to the lessor and that the disposition of proceeds of property acquired subsequently to

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the original lease would be decided upon after the expiration of the lease.

While it is true that the sales and condemnation proceedings did not involve the receipt by the parties of separate sums, such fact does not preclude the idea that the parties intended that the agreements would apply to sales and condemnations where the parties received separate sums in cases of sales or condemnations. The parties could not control how a court would order the condemnation money paid. In a condemnation such as the one here involved, and every such case where one party holds a fee simple title and others own leases or lesser interests, both parties are interested in the proceeds of the total amount required to be paid by the assessors or court. The proceeding is an integral thing, even if the various parties holding different interests get different amounts. The parties are charged with a knowledge of the law and that separate sums could be awarded. Furthermore, if the agreements are construed as the lessees contend, it would be in the power of either party to circumvent the agreement by a refusal to sell jointly or to receive a joint award or judgment. There is no contention that in any of the joint sales or awards made the sums due the lessor and lessees respectively could not have been arrived at, otherwise the agreement that both were interested in the joint proceeds is without any foundation and is a hypothetical stipulation. In every condemnation case both parties could have insisted on separate awards or judgments. There is nowhere in either agreement an exception in cases of separate awards. The 1952 agreement certainly has no exception; neither has the agreement of 1955. We are of the opinion that the 1952 and 1955 agreements intended that all proceeds from all kinds of sales and condemnations of lands originally leased belonged to the lessor and that such income after the time of the execution of the lease belonged to the lessees. There is no way in which it can be ascertained whether the agreements here involved would in the long run be more favorable to one party or the other. In one condemnation or sale the lessor’s interest may be the greater and in another that of the lessees. The last condemnation happened to be favorable to the lessees. However, the next one may heavily

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favor the lessor. We do not see how the ultimate fairness or unfairness of the agreements can affect their intended meaning especially when the question of fairness cannot possibly be determined since the lease has about 20 more years to run.

The 1955 agreement by its express and unambiguous terms demanded the finding of the trial judge. The history of the dealings between the parties, the 1952 contract, its content and purpose, as well as the consideration of the other factors stated in the opinion, strengthen and support his judgment.

The court did not err in rendering the judgment excepted to.

Judgment affirmed. Nichols, P. J., Frankum, Eberhardt and Russell, JJ., concur. Carlisle, P. J., Bell, Jordan and Hall, JJ., dissent.

BELL, Judge dissenting.

Speaking for myself and three other members of the court, we vigorously dissent from the majority opinion.

Ascertainment of the intention of the parties is the cardinal rule of construction of a contract, and the intention must be ascertained from the entire contract construed as a whole. Code
§§ 20-704 and 20-702. It is the duty of the court to put a fair and reasonable construction upon a contract. Whitney v. Hagan, 65 Ga. App. 849, 850 (16 S.E.2d 779). Where two constructions are possible, one unreasonable and the other reasonable, it is necessary to look to the purpose intended and to give to the instrument the reasonable construction which would serve to put into effect the evident purpose of the agreement. Empire Mills Co. v. Burrell Engineering c. Co., 18 Ga. App. 253, 254
(89 S.E. 530). Interpretation which results in a more reasonable and more probable construction should be adopted while a construction leading to an unreasonable result should be avoided. Hutto v. Snap-On Tool Corp., 71 Ga. App. 245 (30 S.E.2d 510). All of the facts and circumstances regarding the parties at the time of the making of the contract are to be resorted to in determining the intention of the parties. Griffin v. Burdine, 89 Ga. App. 391, 393 (79 S.E.2d 562). See also Hanson v. Stern, 102 Ga. App. 341
(116 S.E.2d 237).

The preamble to the contract before us recites that both the lessor and lessees claim rights and interests in the proceeds of

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sales and condemnations of property either originally demised or acquired during the term of the lease and used for its purposes, and that the parties claim rights and interests in those proceeds, and are in dispute as to the disposition of certain of them, and may have similar claims as to further sales and condemnations, and, in order to avoid litigation and disputes, desire to place the proceeds of all such sales in trust with the trustee for the uses and purposes thereafter set forth, and to preserve without impairment their respective contentions as to their claims.

The introductory paragraph of the 1955 contract clearly recites that it is the desire to place in trust proceeds in which both the lessor and lessees claim rights and interests. While section 1 of the contract provides that the lessor and the lessees will deliver to the trustee the proceeds of the sales and condemnations of said real estate, it would appear that the word “said” relates back to the introductory paragraph and, therefore, the intent was to place in trust the proceeds of only those sales and condemnations in which both the lessor and the lessees claim rights and interests. As we see it, this contract does not reach out to encompass the separate awards of damages here in dispute which were granted as damages for the respective interests of the parties in the property condemned.

By the terms of the condemnation judgment, the lessor received the full damage for its loss, and its interests in the property taken were completely satisfied. The lessee has no interest in the award given to the lessor. The money awarded to the lessor belongs to it alone, and no valid reason appears from the terms of the contract why the lessees should be held to be entitled to receive interest on the lessor’s money for the remaining 18 years of the term. Yet this result is a holding of the majority opinion.

Similarly, the award to the lessees was for damages inflicted to the leasehold interests and was substituted for the leasehold value of the property taken. This sum belongs to the lessees alone as it is nothing more than recompense for the loss of use of the lease property during the remainder of the term. It appears to us to be a ridiculous distortion of the plain meaning

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of the terms of the agreement, as well as a debasing of elemental property law, to hold, as the majority does, that the lessor has an interest in money awarded to the lessee as the value of the leasehold interest taken through condemnation proceedings.

Each party has been paid for damages to its realty interests condemned, and neither has any claim in the sole interest of the other.

These separate condemnation awards were not within the contemplation of the 1955 agreement as they were not sums in which both parties could claim rights and interests.

We would reverse the judgment.

Presiding Judge Carlisle and Judges Jordan and Hall concur in this dissent.