Court Opinion

ID: 6816744
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:02:13.293205+00
Date Added: 2024-06-11T16:03:54.838085
License: Public Domain

Chinn, J.,
dissenting:
I can add nothing to the force of what Judge Mc-Lemore has said in his opinion, and hastily add the following thought as merely supplementary to what. I consider to be his unanswerable conclusions.
It appears to be conceded that at the time the contract of lease was made neither of the parties had in mind the specific possibility that an income tax might-be subsequently assessed against the Danville Company or either of them. It may, perhaps, be also conceded that the covenant of the Southern Company to pay all taxes, assessments, etc., “which may be made upon the Danville Company,” when the language of the covenant is considered by itself, imposes no obligation upon the Southern Company to pay the tax now assessed upon the income of the Danville Company by the United States Government. Placing ourselves in the position then occupied by the contracting parties, however, and considering the object and purpose of the-lease as gathered from the whole instrument when all its provisions are read together, it is apparent that the-parties intended that the Southern Company should, pay all taxes of whatever character with which the Danville Company might be thereafter assessed or which might be imposed upon it, and intended by the comprehensive language employed in the covenant, above mentioned to provide for the payment by the. Southern of all such taxes. Looking at this provision in the lease in the light of the general purpose of the contract and reading it in connection with the covenant-therein providing for the payment of the contingent rental, it seems to me clear that it was the intention of the parties that the common stockholders of the Dan-ville Company should receive their share of the net *717earnings declared by tbe Southern Company on the combined common stock of the two companies free from the imposition of any charges thereon in the nature of taxes or otherwise.
After providing that whenever the Southern Company shall declare a dividend upon its 120 millions of common stock, it should at the same time pay the Danville Company a sum equal to 218/12000 of the gross sum of the dividend paid on the 120 millions of the common stock of the Southern Company, the contract provides: “But such contingent rental shall be paid upon the express understanding and covenant of the Danville Company, as special consideration moving the Southern Company to make said payments as aforesaid, that the gross sum so received by the Dan-ville Company is by that company to be used for and applied so far as may be lawful to the payment of dividends upon its common stock, which is at no time to exceed $2,180,000.00.”
The holders of the common stock of both railroad companies had pooled their interests by and under the lease in the operation of the two railroads, but the Danville Company was to preserve its corporate existence throughout the term of the lease. It is, therefore, manifest that the above quoted provision was to insure to the common stockholders of the Danville Company the distribution among them by its proper authorities of their share of the total net earnings of the two corporations whenever the Southern Company should declare them for the benefit of its own stockholders. While a Federal income tax was not within the contemplation of the parties at the time, it is plain from the above provision that it was intended that the common stockholders of both railroads should stand on an equal footing under all contingencies and circum*718stances whenever the Southern Company undertook a distribution of these net earnings, and in order to avoid the possibility of any misunderstanding of the purpose of the contract in the event that any contingency such as this should arise which might under the intention of the parties be doubtful, the same covenant goes on to expressly declare the intention of the parties tobe: “That each of the 21,800 shares of the common • stock of the Danville Company shall receive the same advantage by way of dividends as shall be given to any of the 1,200,000 shares of the Southern Company now outstanding.” This is not an “omnibus” declaration of intention but an express declaration of the purpose and intention of the parties as to how the net earnings at any time declared by the Southern Company were • to be divided between the common stockholders of ■each company, and was put into the contract for the purpose of removing any doubt that might at any time arise as to the intention of the contract upon that specific point and no other. The intention thus declared cannot be ignored when plainly and positively declared for a specific purpose; more especially is this so when it is in harmony with the general purpose and scope of the contract and there is nothing in the contract inconsistent with it. To do so would be to make a contract which the parties themselves expressly declare they did not intend to make and which would be out of harmony with the purpose of the parties as disclosed by the general scheme of the instrument.
Stress has been laid upon the words “gross sum.” I can see no significance in the use of word “gross,” in the connection in which it is used. Taking into consideration the fact that the parties did not have the payment of an income tax in contemplation, the word could not have been used in reference to the payment *719of such a tax, but simply meant that the dividend to be paid over to the Danville Company for distribution among its stockholders was to be paid by the Southern Company in one amount, and was used in the sense of “total sum” as applied to the dividend to be paid to the stockholders of the Southern Company. I do not think the use of such a synonymous term should be employed as an argument to place a construction upon the contract which is contrary to the declared and manifest purpose of the parties themselves. The decision of the majority of the court gives the holders of the common stock of the Southern Company an advantage in the payment of all such dividends as have been and may be declared by the leasing company during the life of the lease and its renewals, in violation of the express agreement between the parties as stated in their written contract.