Southern Bell Telephone and Telegraph Co. v. Florida East Coast Ry. Co.

• Decision Date: 29 August 1968
• Docket Number: No. 25440.,25440.
• Parties: SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY, Appellant, v. FLORIDA EAST COAST RAILWAY COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

399 F.2d 854 (1968)

SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY, Appellant, v. FLORIDA EAST COAST RAILWAY COMPANY, Appellee.

No. 25440.

United States Court of Appeals Fifth Circuit.

August 29, 1968.

Gerald Bard Tjoflat, Earl B. Hadlow, Jacksonville, Fla., for appellant, Mahoney, Hadlow, Chambers & Adams, Nathan H. Wilson, Jacksonville, Fla., of counsel.

Chester Bedell, Robert P. Smith, Jr., Jacksonville, Fla., for appellee.

Before POPE^*, TUTTLE and CLAYTON, Circuit Judges.

TUTTLE, Circuit Judge:

This appeal involves a dispute as to the terminability of a contract which the two parties entered into in 1917, and which contains no express term during which it was to run. Florida East Coast Railway Company (FEC) now seeks to terminate, and has refused to abide by its terms since March 1, 1965. Southern Bell brought this action in the district court seeking enforcement of the agreement. The district court denied Southern Bell's claim and entered a final judgment upholding FEC's right to terminate the agreement and dismissing Southern Bell's complaint.

The basic issue for determination is whether the agreement, which contains no express terms as to duration, is terminable by either party upon giving reasonable notice or whether it shall continue in force for an indefinite period.

The contract establishes detailed procedures and specifications for the placement of Southern Bell's telephone and telegraph lines over and under FEC's tracks.¹ Before FEC's chief engineer will grant approval of a placement, the plans are submitted to him for his review. In this manner, FEC is able to insure that Southern Bell's line placements do not interfere with the railroad's operations. In addition, the agreement provided for Southern Bell's indemnification of any damage suffered by FEC as a result of the line crossings. It also provides indemnification for any damage resulting from crossings that had already been made when the contract was executed. Southern Bell pays no money to Florida East Coast Railroad for these crossings.

Without the agreement, Southern Bell could still obtain the right to cross the railroad by invoking statutory eminent domain procedures.² In addition, at the time the agreement was signed, Southern Bell claimed a common law right to cross the railroad without its approval if made at a "public crossing." Therefore, although Southern Bell could cross FEC's land without the agreement, the contract avoids the need for continuous litigation (there are now over 1,000 such crossings) and establishes orderly procedures governing the many questions which could arise out of the compelled relationship between the two parties.

The agreement has worked well, and there seems to have been only one incident, in 1930, in which there was a dispute and that was resolved. Now, however, FEC wants out of the agreement. Although there is no evidence in the record why they do, it appears that FEC has offered to enter into a new agreement with Southern Bell on substantially the same basis as before, except that Southern Bell would now pay compensation to FEC for the crossings at the same rate charged other utilities for their crossings. In addition, Florida East Coast has complained that the rapid expansion of the number of such crossings has thrown an intolerable burden on the railroad. Therefore, it does appear that a major (if not the sole) motivating force is FEC's desire for additional revenue to compensate it for its alleged increased cost due to the expansion in the number of such crossings. Since FEC terminated the agreement, the parties have agreed to a number of additional crossings at a cost to Southern Bell of $50 for the first year and $20 for each succeeding year for each crossing, subject to a final accounting according to the outcome of this litigation.

The agreement, by its express terms, does not state when, how, or even if, it can be terminated. The district court found that the contract is silent as to whether and when it could be terminated by either party.

It is axiomatic that the first task of a court in contract interpretation is determining from the agreement itself and the surrounding circumstances what the intent of the parties was. If, after examining all these sources of information, it is still not possible to determine the intent of the parties, courts can rely on rules of law which purport to determine what, in certain circumstances the parties intended, when, in fact, no one really knows what was intended or that the parties even thought about the matter. What that presumption is, according to Florida law, is an important matter because, as will be seen, an examination of the contract and its surrounding circumstances makes it very difficult to conclude what the parties intended as to how the contract could be terminated.

Southern Bell contends that the language of the contract and the circumstances surrounding its making demonstrate that the parties intended the contract to have an indefinite duration. Hence, it would not be terminable at will by either party,³ and there is no need to rely on legal presumptions to ascertain intent.

Southern Bell complains of the district court's judgment which was that, inasmuch as Florida law avoids conferring a right in perpetuity unless it is compelled by the unequivocal language of the contract to do so, and there was no such language here, the contract could not be construed as continuing indefinitely.

FEC says no evidence was presented which would show an intention to create an agreement of indefinite duration. It contends that in such cases (where no period of duration is expressed or can be implied from the nature of the contract or its surrounding circumstances) the Florida law allows the contract to be terminated at will upon the giving of reasonable notice.

Southern Bell cites five examples in the language of the agreement and contemporaneous correspondence which indicates an intent that the contract was not of limited duration.

First, the agreement states that "the parties hereto deem it to their mutual interest and advantage to make and enter into an agreement with respect to such crossings as may heretofore have been and will hereafter be made * *" (Emphasis added.)

Second, the agreement also says "That the Railway Company will * * * grant unto the Telephone Company the right * * * to construct its said telephone wires across said right of way * * * whenever in the construction of telephone lines it may be necessary * * *." (Emphasis added.)

Third, the agreement states that "in the event the Telephone Company shall at any time hereafter desire to effect a crossing * * * such crossings shall be deemed to be covered by this agreement * * *." (Emphasis added.)

Fourth, a letter from FEC's general counsel to Southern Bell's general counsel, written before the agreement was finally signed, stated:

"I imagine that we will have no serious difficulty in arriving at a general contract to cover all cases which may hereafter arise." (Emphasis added.)

Fifth, additional evidence offered by Southern Bell to prove that the parties intended a contract of indefinite duration included a letter from FEC's vice president to Southern Bell's general counsel, accompanying the signed contract, which stated:

"In connection with the above mentioned subject, I attach hereto a fully executed copy of contract entered into with respect to wire crossings heretofore installed or that will hereafter be made by the Southern Bell * * *" (Emphasis added.)

From this language, Southern Bell concludes that the parties had no definite termination date in mind and did not intend the contract to be of limited duration. On the contrary, the parties intended and purposefully bargained for an indefinite term.

The fact that a long duration of a specific number of years was not mentioned is explained by Southern Bell on the grounds that there was no way of estimating when the "object of their agreement will have been fulfilled."

Furthermore, Southern Bell says that if the contract was understood to be terminable at will, it would have been a nullity and neither party would have signed it.

Finally, Southern Bell notes, as has already been stated, there is no language in the agreement which gave FEC the right to terminate at will.

FEC does not directly answer Southern Bell's arguments based on the language of the agreement and the related documents. Instead, FEC notes that the agreement contains no clause as to expiration and simply concludes, without explaining what the language quoted above might mean if it disagrees with Southern Bell's interpretation, that the absence of a duration or terminability clause means that the parties intended the agreement to continue only so long as the parties were satisfied with it. When the agreement was no longer satisfactory, it could be terminated.

The district court held that "Construction of a contract conferring a right in perpetuity is to be avoided unless compelled by the unequivocal language of the contract. Freeport Sulphur Co. v. Aetna Life Insurance Co., 206 F.2d 5 (5 Cir., 1953); Fla.-Ga. Chem. Co., Inc. v. National Laboratories, Inc., 153 So.2d 752 (Fla.App.1963); Collins v. Pic-Town Water Wks., Inc., 166 So.2d 760 (Fla.App.1964) * * * No language in the contract provides that the option given to Southern Bell should exist perpetually. No other evidence before the court reflects such a purpose on the part of either Southern Bell or FEC."

It is, indeed, difficult to see just what the parties intended...