Court Opinion

ID: 9584640
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:51:01.697227+00
Date Added: 2024-06-11T15:11:11.692648
License: Public Domain

Moss, Justice.
The Inman-Campobello Water District in Spartanburg County was created by an Act of the General Assembly of this State, approved April 23, 1954. 48 Stats. 2553. Thereafter, by an Act approved May 4, 1955, the Act creating the District was amended so as to provide for the area of the District and the functions and powers committed to the District. 49 Stats. 1389. By the aforesaid Act, the District was given the authority to build, construct, operate, and mainain water lines and water mains throughout the District, and had the authority to “purchase, or otherwise acquire, a supply of water for its water distribution system, * * * and to enter into contracts for the purchase of water at wholesale.”
Section 59-536, as amended, of the 1952 Code of Laws of South Carolina, authorized the City of Spartanburg, or those in charge of its public works, to contract with persons without the corporate limits for the furnishing of water either for domestic or industrial purposes, or both, upon such terms, rates and charges as may be fixed by the contract or agreement between the parties for a period not exceeding fifty years.
Pursuant to the aforesaid authority, the Inman-Campobello Water District did, on August 31, 1955, enter into a contract with the Commissioners of Public Works of the City of Spartanburg, by the terms of which the Commission agreed to furnish water to the District for a period of thirty years in accordance with the various terms and conditions set forth in said agreement. This contract provided, in paragraph three thereof, the following :
. “3. The District agrees to pay the Commission for water at monthly intervals. The rate shall be 10^ per thousand gallons or the published rate, whichever may be lower. The Commission’s published rates are hereto attached and made a part of this Agreement. It is further agreed that this *159contract is made subject to the rules and regulations of the Commission, and such rules and regulations and the water ratés above referred to shall at all times be subject to any change made by the commission affecting all consumers of the same class.”
It appears from the record that on April 30, 1957, the Commissioners raised the rate for the water furnished to the District from 10í/‘ per thousand gallons to 12^^ per thousand gallons. The higher rate was paid under protest by the District.
This action was instituted by the Commissioners of the Inman-Campobello Water District, the appellants herein, against the Commissioners of Public Works of the City of Spartanburg, the respondents herein, for the purpose of obtaining an interpretation of paragraph three above quoted of the agreement between the parties and for a refund of all amounts paid by the District in excess of 10^ per thousand gallons of water. The respondents, by answer, assert that under the terms of the agreement they had the right to change the price charged the District at any time provided such charge affected all consumers of the same class.
This case came on to be heard before the Honorable Julius B. Ness, Presiding Judge of the Seventh Judicial Circuit, and a jury, at the 1961 January term of the Court of Common Pleas for Spartanburg County. During the trial of the case both parties agreed that the Court should interpret the aforesaid agreement in accordance with the facts and the law applicable thereto. Thereupon, the jury was excused and the case was tried before the Judge without a jury. The trial Judge, on August 29, 1961, passed an order in which he held that the respondents had the authority, under the agreement heretofore referred to, to charge the appellants a water rate of 12*4‡ per thousand gallons or the rate charged all consumers of the same class.
The appellants are before this Court upon exceptions to the order of the trial Judge. By these exceptions, two ques*160tions are raised: (1) Was the agreement between the Water District and the Commissioners of Public Works of the City of Spartanburg ambiguous and, if so, did the Court below erroneously exclude evidence showing the facts and circumstances surrounding the execution of the contract? (2) Does the agreement between the Water District and the Commissioners of Public Works of the City of Spartanburg put a ceiling of 10‡ per thousand gallons on the water rate which can be charged the Water District?
The trial Judge held that the agreement between the appellants and the respondents was unambiguous. The appellants assert this to be error. An ambiguous contract is one capable of being understood in more senses than one, an agreement obscure in meaning, through indefiniteness of expression, or having a double meaning. Whiting Stoker Co. v. Chicago Stoker Corp., 7 Cir., 171 F. (2d) 248. Where a written instrument is ambiguous parol testimony is admissible to show its true meaning. Breedin v. Smith et al., 126 S. C. 346, 120 S. E. 64; DeVore v. Piedmont Ins. Co., 144 S. C. 417, 142 S. E. 593. Where the language of a contract is free from ambiguity its construction is for the Court. Charleston & W. C. Rwy. Co. v. Joyce, 231 S. C. 493, 99 S. E. (2d) 187. Where the terms of a written instrument are unambiguous, clear and explicit, extrinsic evidence of statements of any of the parties to it, made contemporaneously with or prior to its execution, is inadmissible to contradict, add to, subtract from, vary or explain its terms, in the absence of fraud, accident or mistake in its procurement. Chapman v. Metropolitan Life Ins. Co., 172 S. C. 250, 173 S. E. 801; Rhame v. National Grange Mutual Ins. Co., 238 S. C. 539, 121 S. E. (2d) 94. We should point out that the appellants make no claim of any fraud, accident or mistake in the making of the contract.
Having reviewed the contract between the parties to this action and particularly paragraph 3 thereof, we agree that such is unambiguous. The construction of the unambiguous written contract was, therefore, a matter for the trial Judge.
*161Contracts, where there is no ambiguity, must be construed according to the terms which the parties have used, to be taken and understood in their plain, ordinary and popular sense. Inman et al. v. Life Ins. Co. of Virginia, 223 S. C. 98, 74 S. E. (2d) 423. It is axiomatic that the intent and purport of a written contract or agreement has to be gathered from the contents of the entire agreement and not from any particular clause or provision thereof. The parties have the right to make their own contracts, and when such contracts are capable of clear interpretation, the Court’s province is confined to the enforcement thereof. The Court cannot exercise its discretion as to the content of such contract or substitute its own construction for the agreement clearly entered into between the parties. Sloan v. Colonial Life & Accident Ins. Co., 222 S. C. 248, 72 S. E. (2d) 446. The purpose of all rules of construction is to ascertain the intention of the parties to the contract. The subject matter of the contract and the purpose of its exception are material to the ascertainment of the intention of the parties and the meaning of the terms they use. In construing the contract the Court will ascertain the intention of the parties, and to that end will, as .far as possible, determine the situation of the parties, as well as the purposes had in view at the time the contract was made. All contracts should receive a sensible and reasonable construction, and not such a one as will lead to absurd consequences or unjust results. Three States Coal Co. v. Mollohon Mfg. Co., 137 S. C. 345, 135 S. E. 380. The purpose of the agreement between the Water District and the Commissioners of Public Works of the City of Spartanburg was to enable the District to obtain an adequate supply of water for its water distribution system. The necessity for obtaining such adequate water supply was brought about because the District’s own water supply was inadequate. The District was given statutory authority to enter into a contract for the purchase of water at wholesale. After negotiations between the parties to this action, the contract heretofore referred to was duly made. At the time of the *162making of the contract, it was agreed that the District would pay to the respondents 10‡ per thousand gallons of water or the published rate, whichever was lower. If the foregoing provision was all that was contained in the contract pertaining to water rates, then the position of the appellants would be sound. However, we must consider all of the language used by the parties in order to arrive at a proper construction and interpretation of the agreement. It was further agreed that the contract was made subject to the rules and regulations of the Commission and that “the water rates above referred to shall at all times be subject to any change made by the Commission affecting all consumers of the same class.”
The position of the appellants is that the agreement between the parties to this action put a ceiling of 10^ per thousand gallons on the water rate which could be charged the District. The trial Judge, in refusing to so hold, held that he must ascertain the intention of the parties from the whole instrument and effect should be given, if practicable, to every clause and word in it. He further held that he should give such a construction to the contract as would not lead to absurd consequences or unjust results. He found:
“Applying the foregoing law to the case at hand this Court finds that the plaintiffs’ interpretation of the agreement must be denied as being a very unfair and unreasonable construction and interpretation thereof. It would most certainly bring about- a very inequitable result to the defendants. It would result in the plaintiffs obtaining an unfair and unreasonable advantage over the defendants and one which was never intended by the parties hereto. In our constantly changing and inflated economy which affects all types of businesses, including the water works system of the City of Spartanburg, it would be most difficult, if not impossible for this Court to conceive of duly elected public servants tying their hands with a set water rate for a period of thirty years to the detriment of the citizens of the City of Spartanburg for whom the water works was originally created.”
*163He concluded:
“It necessarily follows that the only reasonable construction which the Court can place on this entire agreement and contract is that the defendants have the authority under the terms of the contract to charge the plaintiffs the same water rates that it charges other consumers of the same class, which rates, of course, are subject to any increase or decrease affecting all consumers of the same class. It is the Court’s opinion that this construction carries out the intention of the parties; is in accord with the purposes of the parties to the contract; is fair and is a sensible and reasonable construction and such as would not lead to absurd consequences or unjust results.”
The provision in paragraph 3 that “the water rates above referred to shall at all times be subject to any change made by the Commission affecting all consumers of the same class” is known in law as an “escalator clause”. The Courts have recognized the necessity for such a clause because of the sharply inflationary and changing economic conditions prevailing in this country for the past several years. As a means of coping with such changing economic conditions, with resultant price variations, many contracts fix a base price but contain a provision whereby the seller may raise such price. The necessity for this type clause was brought about because of long term contracts when the parties thereto could not anticipate all price factors which might occur during the existence of the said contract. Attention is direced to an annotation in 63 A. L. R. (2d) 1337, which deals with “escalator” price adjustment clauses. In the case of Bethlehem Steel Co. v. Turner Construction Co., 2 N. Y. (2d) 456, 161 N. Y. S. (2d) 90, 141 N. E. (2d) 590, 63 A. L. R. (2d) 1331, it was held that an escalator clause, giving the producer of building materials the right to increase the price under the contract if it changed its prices generally, did not render the contract invalid for lack of mutuality, the Court noting that the increases or decreases must be in accordance with the changes of the producer’s regular prices to *164all purchasers of its product. We quote from the opinion in such case, the following:
“* * * In other words, appellants are saying that the contract lacks requisite mutuality and that an escalation clause, in order to be valid, must be based on some extrinsic standard by which escalation can be determined. However, this escalation clause provided for increases or decreases in accordance with changes in Bethlehem’s regular prices to all purchasers of plain steel products and such a provision does not give Bethlehem undue power of determination of the contract price * *
The provision in paragraph 3 of the contract here under consideration gave to the respondents the right to revise the water rates in the event of a general rate change to all consumers of the same class. This right to make a price adjustment was a contractual one and did not conflict with the provision governing the basic rate charged for water at the time of the execution of the contract.
We should point out that the record shows that the increase applied to the appellants was the same as was applied to all consumers of the same class. It should also be noted that the appellants make no contention that the rate charged by the respondents was arbitrary or unreasonable.
We conclude that the trial Judge correctly construed and interpreted paragraph three of the contract here under consideration. His construction appears to us to carry out the intention and to be in accordance with the purposes of the parties to the contract as is evidenced by an examination of the entire agreement. It seems to us that if the parties had intended to place a ceiling of 10‡ per thousand gallons as water rate to be charged the District, an agreement clearly expressing this purpose could and would have been executed.
The conclusions that we have reached do not require us to determine the question of whether the trial Judge committed error in settling the case on appeal by granting amendments proposed by the respondents.
*165The exceptions of the appellants are overruled and the judgment below is affirmed.
Affirmed.
Taylor, C. J., and Lewis, J., concur.
Bussey and Brailsford, JJ., dissent.