Opinion ID: 450493
Heading Depth: 1
Heading Rank: 2

Heading: the accrued interest claim

Text: 14 At a bench trial, the district court found an enforceable oral agreement between Georgia Railroad, the Corporation, and the Receiver. The court found that the Corporation and the Receiver orally agreed to pay Georgia Railroad's claim for accrued interest if it was a valid non-contingent balance sheet liability. The district court then proceeded to interpret the quoted language purely as a matter of law, and in so doing, we hold that the district court applied an erroneous legal standard. 15 In interpreting a contract that is controlled by Georgia law, the rules of contractual construction as expounded by the Georgia courts are properly applicable in federal court. See Boston Ins. Co. v. Gable, 352 F.2d 368 (5th Cir.1965). 3 Under Georgia law, [t]he cardinal rule of construction is to ascertain the intention of the parties. Ga.Code Ann. Sec. 13-2-3. The courts are to afford greater regard to the clear intent of the parties than to any particular words which they may have used in expressing their intent. Carter v. Marble Products, Inc., 171 Ga. 49, 154 S.E. 891 (1930). However unskillfully prepared a particular instrument or agreement may be, the courts are to discover and give effect to the intent of the parties if possible. Skinner v. Bearden, 77 Ga.App. 325, 48 S.E.2d 574 (1948). Similarly, words in a contract are to be construed in the sense in which they are mutually employed by contracting parties, irrespective of the proper and logical meaning those words might otherwise carry. Brooks v. Folds, 33 Ga.App. 409, 126 S.E. 554 (1925). 16 The existence vel non of an ambiguity is a question of law for the court. Cassville-White Assoc. v. Bartow Assoc., 150 Ga.App. 561, 258 S.E.2d 175 (1979). In the instant case, the term non-contingent balance sheet liability is, at the very least, ambiguous. That being the case, it became incumbent upon the district court to apply the cardinal rule of contractual construction in Georgia, i.e., to determine the intent of the parties. In order to ascertain that intent, the language of the agreement should be considered in light of all the surrounding circumstances, and the court should place itself as nearly as possible in the situation of the parties in seeking the true meaning and correct application of the contractual language. Aetna Life Ins. Co. v. Padgett, 49 Ga.App. 666, 176 S.E. 702 (1934). 17 We conclude that the district court applied erroneous legal standards in finding that the Receiver had violated an oral agreement to pay the interest obligation. As indicated above, the district court made a fact finding that the Corporation and the Receiver orally agreed to study Georgia Railroad's interest claim and orally agreed to pay it if the interest obligation was a valid non-contingent balance sheet liability. Instead of ascertaining what the parties intended by the term, valid non-contingent balance sheet liability, the district court erroneously substituted what it deemed to be the legal meaning of that term. 4 As discussed above, the appropriate inquiry would have been to determine that the term was ambiguous, and then to determine what the parties intended. 18 Ordinarily we would remand to permit the district court to determine in the first instance what the parties intended when they agreed that the Receiver and Corporation would pay the accrued interest if it was determined that the same was a valid non-contingent balance sheet liability. In this case, however, the only factual issue on remand would involve the determination of what the parties meant by the ambiguous term, and the evidence is clear that the ambiguous term did not include Georgia Railroad's subordinated claim for interest. A contrary holding would be clearly erroneous. There is no dispute in the evidence that the principal amount of Georgia Railroad's debt, $350,000, was not to be certified as a valid non-contingent balance sheet liability, because of its subordinated status. Georgia Railroad had requested that its principal debt be certified, and that request was expressly rejected because of its subordinated status. This course of dealing between the parties clearly establishes that the ambiguous term was not intended to include subordinated debts, whether interest or principal. Because a contrary holding would be clearly erroneous, we find no need to remand for findings by the district court on this issue. 5 Concluding as we do that the Receiver and the Corporation did not violate the oral agreement, we remand with instructions that the district court enter judgment on this issue in favor of the Receiver and the Corporation. 19