Opinion ID: 1834018
Heading Depth: 1
Heading Rank: 2

Heading: Daphne's interest.

Text: Daphne's contention is that the court erred in restricting Daphne's interest in the transmission line to a mere right to purchase one-tenth of the gas. In replying to Daphne's contention, Fairhope relies on a single proposition of law, to wit: IN DETERMINING THE EFFECTS OF A CONTRACT THE COURT NOT ONLY HAS THE RIGHT BUT A DUTY TO PROBE BEHIND WRITTEN CONTRACTS AND TO EXAMINE ALL FACTS WHICH SHED ANY LIGHT UPON THE TRUE INTENTION OF THE PARTIES TO THE CONTRACT, AND TO CONSIDER THE CONTRACT IN ITS ENTIRETY WHERE AMBIGUITY EXISTS. It thus appears that Fairhope's argument must rest on the premise that the contract is ambiguous or contains conflicting provisions. To show this ambiguity or conflict, Fairhope makes three points. First, Fairhope says that the contracting parties did not intend that Daphne acquire ownership of any part of the transmission line because no mention is made in the preamble of the contract that Daphne shall have such ownership. [5] It is true that Daphne's ownership of the transmission line is not mentioned in the preamble, but it is also true that Daphne's ownership of a distribution system is not mentioned in the preamble. It does not appear that even Fairhope contends that Daphne shall not acquire ownership of the distribution system located in Daphne. We are advised of no rule of law which requires the preamble of a contract to mention every provision of the agreement. This contract is not a legislative act and the preamble to a contract is not the title to a bill. The preamble can hardly be expected to mention every provision of the contract; and, the mere omission from the preamble of a provision which is fully stated in the contract, cannot reasonably be said to create an ambiguity or conflict. The second point is that, in paragraph SECOND of the contract, no mention is made of Daphne owning any portion of the transmission line. A reading of paragraph SECOND scarcely supports this insistence. Paragraph SECOND is rather long and covers two transcript pages. In summary, it provides: that the object of the franchise granted by Daphne to Fairhope is to obtain a gas service for the people of Daphne; that Fairhope proposes to construct and operate a gas system for both municipalities, and others who can be economically served from its transmission lines, and to finance the same by issuing revenue anticipation bonds; that gas shall be furnished for reasonable rates, but rates within Daphne shall not be greater than rates within Fairhope; that the franchise to construct the transmission line through Daphne is irrevocable and subject only to the rights Daphne may acquire under the contract, and the franchise to construct a distribution system in Daphne is subject to the agreement providing for ultimate ownership of the Daphne system by Daphne; that if Fairhope shall not commence construction of the gas system, franchise for which was granted by Daphne to Fairhope, such franchise shall be null and void; that if such system shall be constructed and, within six months after completion of the transmission line through Daphne, Fairhope shall not have constructed or be in process of constructing a distribution system in Daphne, the franchise to construct and operate a distribution system in Daphne shall be null and void, but the franchise for the transmission line through the town of Daphne shall remain in effect; and In the event Fairhope shall construct the gas transmission pipe line through the Town of Daphne, but shall not construct a distribution system within the corporate limits of the Town of Daphne, and its franchise shall lapse as above provided, and Daphne shall t(h)ereafter determine to construct a distribution system within the corporate limits of the Town of Daphne, the City of Fairhope agrees that it will sell to the Town of Daphne a one-tenth interest in that portion of the gas transmission pipe line between the Town of Daphne and the source of supply, the purchase price to be one-tenth of the cost of the entire gas transmission pipe line as determined by the amount paid to the contractor for such construction. Here in paragraph SECOND there is clear expression of the intent that, in event Daphne acquires title to its distribution system by constructing it, Fairhope will sell to Daphne a one-tenth interest in the transmission line. There is nothing to limit the quality of Daphne's one-tenth interest to a mere right to purchase gas. The third point relied on to support Fairhope's contention is that no provision is made in the contract for payment to Daphne of any profits from the transmission line. A reading of the entire contract does not suggest that the parties expected or intended to make a profit on operation of the gas line by itself. In the entire operation, the only source of revenue is the sale of gas to consumers. The profit, if any, would have to come after the gas has left the transmission line and has gone to consumers. There is no provision for Fairhope to derive any profit from the transmission line either. In fact, the provisions of paragraph THIRD of the contract appear to negative the idea of profits from the transmission line and to provide merely that Daphne, after acquisition, shall pay one-tenth of cost of operating the transmission line and the cost of gas metered to Daphne. The concluding sentence of paragraph THIRD recites: Daphne will pay one-tenth of the cost of operating, repairing and maintaining such gas transmission pipe line and one-tenth the cost of odorizing gas therein, and one-tenth the cost of insurance thereon, and for all gas metered to it (Daphne), plus its proportionate part of the gas lost in transmission, payments hereof shall be made upon presentation of bill therefor. (Par. Supplied) The trial court decreed correctly that Daphne will pay to Fairhope for all gas metered to it at the same rate that the said Respondent purchases gas (for) from the source of supply. (Par. Supplied) Thus there will be no profit from operation of the transmission line per se, and, therefore, no reason to provide in the contract for distribution of such nonexistent profits to either party. To support the conclusion that the parties intended that Fairhope retain complete ownership of the transmission line, but to allow Daphne to purchase an interest in the gas delivered up to 1/10th of the volume of gas, two isolated sentences which appear near the end of paragraph THIRD are relied on. [6] Paragraph THIRD deals with Daphne's acquiring ownership of the Daphne distribution system and one-tenth of the transmission line located between the source of supply and Daphne. The first sentence in the paragraph requires that, until Daphne shall acquire the distribution system and interest in transmission line, the revenue from the system shall be used as provided by the ordinance authorizing issue of the bonds and the deed of trust executed to secure the bonds. We interpolate here that paragraph TENTH provides that nothing in the agreement between Fairhope and Daphne shall invalidate or abridge the rights of the bond holders. The next sentence of paragraph THIRD provides three alternate methods by which Daphne shall acquire the ownership of the natural gas distribution system within the corporate limits of Daphne and one-tenth interest in that portion of the natural gas transmission pipe line lying between the Town of Daphne and ... the source of supply ... (Emphasis Supplied.) The next sentence requires that when Daphne shall acquire ownership of said distribution system and interest in said transmission pipe line, (Emphasis Supplied.) Fairhope will convey the same to Daphne by appropriate instrument. Next are the two sentences relied on to support the conclusion that Fairhope retain complete ownership of the pipe line. The first sentence provides that, after Daphne has acquired ownership of the distribution system and the interest in the transmission pipe line, (Emphasis Supplied.) Daphne shall be entitled to one-tenth of the gas delivered by the source of supply into the pipe line. The second sentence relied on provides that Fairhope shall continue to operate the line and make one-tenth of the gas available to Daphne. The next sentence is the last in paragraph THIRD and provides that Daphne will pay one-tenth of cost of operating and maintaining the line and odorizing the gas, one-tenth of cost of insurance, and for all gas metered to Daphne plus its proportionate part of gas lost in transmission. The two sentences relied on contain nothing inconsistent with the previously expressed intent that Daphne is to acquire unqualified ownership of one-tenth of that portion of transmission line located between source of supply and Daphne. Daphne's ownership is to be one-tenth of the line; and, of the gas transmitted Daphne is to have one-tenth available to it and is to pay one-tenth of the cost of operating and maintaining the line and for the gas metered to Daphne. There is no conflict between the intent that a party shall own one-tenth of the transmission line and the intent that such owner shall have available to it one-tenth of the gas transmitted and shall pay the cost of such gas and the cost of making that proportion of the gas available to the one-tenth owner. The right to such use and the obligation to pay such costs, here conferred on Daphne, are merely the consequences which usually and ordinarily accompany ownership of an interest in property. Even if there were conflict between the two sentences and the previously expressed intention that Daphne should acquire ownership, the intention first expressed must control. The rule declared by this court is that if there exists inconsistency between two clauses of a contract which cannot be reconciled, the inconsistency must be resolved in favor of the prior clause, unless an intention to thereafter qualify is plainly expressed. Lowery v. May, 213 Ala. 66, 104 So. 5; Epperson v. Stacey, 266 Ala. 396, 397, 96 So.2d 750. The prior sentences of paragraph THIRD say, without qualification, that Daphne shall acquire the ownership. The subsequent two sentences relied on certainly do not plainly express an intention to cut down or qualify Daphne's ownership of one-tenth of the transmission line. All the provisions of a contract must be construed together so as to give harmonious operation to each of them, so far as their language will reasonably permit. Manchester Sawmills Co. v. A. L. Arundel Co., 197 Ala. 505, 73 So. 24. Paragraph THIRD provides three optional methods for Daphne to acquire ... the ownership of the natural gas distribution system within the corporate limits of Daphne and one-tenth interest in that portion of the natural gas transmission pipe line lying between the Town of Daphne and the United Gas pipe line, the source of supply of natural gas.... Daphne elected to acquire such ownership by purchase under option (2). We conceive no reason to suppose that, by mentioning one thing first and another second, the parties intended to convey ownership of the first item mentioned and something less than ownership of the second item. The usual and ordinary meaning of an agreement whereby the first party agrees to sell to the second party ownership of a horse and a cow is that the second party shall acquire ownership of both animals, not merely ownership of the horse and something less than ownership of the cow, such as the right merely to pay for feeding the cow and to purchase her milk. In paragraph FIFTH, see note 2, Fairhope grants to Daphne the right to purchase ... that portion of the said proposed natural gas distribution system within the corporate limits of the Town of Daphne and a one-tenth interest in that portion of the gas transmission pipe line lying between the Town of Daphne and ... the source of supply ... upon ... Daphne's paying to ... Fairhope one-tenth of the principal remaining of the unpaid bonds... and one-tenth of accrued interest to the date of execution and delivery of a proper instrument passing ownership thereof to the Town of Daphne.... (Emphasis Supplied.) Paragraph FIFTH makes no distinction between ownership of a portion of the distribution system and a portion of the transmission line. The quality of interest to be conveyed is the same for both items. Paragraph SEVENTH provides: Whenever Daphne acquires the ownership of the said portion of transmission line and the distribution system within the Town of Daphne ... Fairhope will pay over to Daphne all customer's deposits held by it for ... users within ... Daphne ... (Emphasis Supplied.) Paragraph NINTH provides: ... If Daphne's increased needs shall require the transmission line to be enlarged before Daphne shall have acquired ownership ... the cost of such increased needs shall be added to the cost to Daphne in the acquisition of ownership ... (Emphasis Supplied.) If the parties had intended for Daphne to acquire ownership of that portion of the distribution system located in Daphne, but something less than ownership of a one-tenth interest in that portion of the transmission line located between Daphne and the source of supply, the parties could and doubtless would have so provided by appropiate language in this carefully drawn contract. We are of opinion that there is no competent evidence in this record which tends to show the intention of the parties except the language of the contract itself. For the reasons we have undertaken to express, we are of opinion that the intent of the parties clearly expressed in the entire contract is that Daphne should acquire unqualified ownership of both the one-tenth interest in that portion of the transmission line located between Daphne and source of supply and that portion of the distribution system located in Daphne. Of the $66,240.53 constituting the total purchase price, an unspecified portion of $29,486.53 is for 10% of the cost of the first transmission line; all of $26,244.00 is for 12.15% of the cost of the second line. Daphne agreed to pay these substantial sums for purchase of ownership of interest in the line, not for the mere right to be allowed to purchase an interest in the gas delivered. Contracts must be construed as the parties made them. To cut down Daphne's interest in the transmission lines to a mere right to purchase gas, it is necessary to write language into the contract which the parties themselves did not put there. We reverse the decree insofar as it holds Daphne's interest in the transmission lines to be less than unqualified ownership. The decree is affirmed insofar as it fixed the amount to be paid by Daphne at the sum of $66,240.53. The decree is reversed insofar as it declares that Fairhope shall convey to Daphne less than ownership of an interest in the transmission lines running from the source of supply to Daphne, and the cause is remanded with directions that a decree be entered declaring that Fairhope shall convey to Daphne unqualified ownership of a one-tenth interest in the first transmission line and an interest of 12.15% in the second transmission line. The decree should provide that Daphne shall pay one-tenth of the cost of operating and maintaining the first transmission line and 12.15% of the cost of operating and maintaining the second transmission line. In the respect declaring that Daphne shall pay for all gas metered to it at the same rate that Fairhope purchases gas for from the source of supply, the decree is affirmed. Daphne should pay its proportionate share of the cost of gas lost in transmission and of all expenses connected therewith as provided in the contract. The costs of appeal are taxed equally against both parties. Affirmed in part. Reversed in part and remanded with directions. LAWSON, SIMPSON, GOODWYN, MERRILL, and HARWOOD, JJ., concur. LIVINGSTON, C. J., dissents.