APPEAL from the Circuit Court of Cook County; the Hon. JOSEPH
M. WOSIK, Judge, presiding.
MR. JUSTICE WILSON DELIVERED THE OPINION OF THE COURT:
This is an appeal from an order construing certain provisions of a trust agreement. Plaintiffs 2416 Corporation and Lois Beck, as revenue bondholders of the Chicago Transit Authority (CTA), brought a petition for supplemental relief asserting that CTA has failed to deposit certain moneys into the modernization fund called for under their interpretation of the trust agreement, and seeking an accounting. The First National Bank of Chicago as trustee (Trustee) responded to the petition, claiming that it is uncertain as to the meaning of the trust agreement and requesting instructions from the court. Defendant CTA filed its response to the petition for supplemental relief and its motion for summary judgment. After considering the motions, pleadings, affidavits and arguments, the trial court entered an order denying defendant CTA's motion for summary judgment and further ordering a construction of the trust agreement from which the CTA appeals under Supreme Court Rule 304(a) (Ill. Rev. Stat. 1977, ch. 110A, par. 304(a)). On appeal, defendant CTA contends that the court misconstrued provisions of the trust agreement in entering its order. We affirm in part and reverse in part.
The controversy involves paragraphs 1, 2 and 3 of the order, entered November 15, 1978, which state:
"1. The Chicago Transit Authority shall hereafter deposit in the Modernization Fund, created by the Trust Agreement between the Chicago Transit Authority and The First National Bank of Chicago, as Trustee, dated July 1, 1947, the moneys received by the Chicago Transit Authority from or on account of any damage, loss or casualty to property of the Chicago Transit Authority in excess of the outside incurred costs and expenses of making satisfactory restoration or replacement of the specific property damaged, lost or subject to casualty, all moneys received by the Chicago Transit Authority from or on account of the damage, loss or casualty to that property shall be deposited by the Chicago Transit Authority in the Modernization Fund.
2. The Chicago Transit Authority shall hereafter deposit in the Modernization Fund moneys received by the Chicago Transit Authority from or on account of the liquidation, conversion or disposition of any Chicago Transit Authority real or personal property or assets: (a) after deducting the outside incurred reasonable and customary expenses of liquidation, conversion or disposition such as title or appraisal expenses as to real property, including outside incurred reasonable and customary removal costs but excluding outside attorneys fees, and (b) in excess of the costs of replacing the specific property liquidated, converted or disposed of. Replacement shall not include new and different property which would substitute for the same function, purpose or utility afforded by the old property being retired. Should the Chicago Transit Authority Board or its delegates determine not to replace the property or other assets liquidated, converted or disposed of, all the net proceeds shall be deposited by the Chicago Transit Authority into the Modernization Fund.
3. The Chicago Transit Authority shall make an accounting to the Court and 2416 Corporation, Lois Beck and The First National Bank of Chicago of the Chicago Transit Authority's disposition of moneys received by it from or on account of the liquidation, conversion or disposition of any Chicago Transit Authority property or assets or any damages, loss or casualty to Chicago Transit Authority property since 1972 until the date of this Order. Since February 1, 1973, the Chicago Transit Authority has been obligated to deposit to the Modernization Fund moneys from those sources in the amounts determined in accordance with paragraphs one (1) and two (2) above. The Chicago Transit Authority shall have until May 15, 1979 to complete the accounting. Thereafter, to the extent deemed necessary by the parties and allowed by the court, the 2416 Corporation, Lois Beck and The First National Bank of Chicago shall have discovery into the accounting submitted by the Chicago Transit Authority."
The trust agreement has been construed in another case involving the same parties as are involved in the present suit. (2416 Corp. v. Chicago Transit Authority (1976), 26 Ill. App.3d 468, 325 N.E.2d 692, aff'd (1976), 64 Ill.2d 364, 356 N.E.2d 20.) The supreme court there held that the First National Bank, as Trustee, has first priority to and a vested claim on behalf of the revenue bondholders against all moneys properly depositable by CTA, under the terms of the trust agreement, in the modernization fund and depreciation reserve fund, other than the proceeds of gifts, loans and grants, if and whenever moneys in CTA's transit revenue fund are insufficient to provide for the various debt service payments required by the trust agreement. Nevertheless, that case did not address the question of what moneys belong in the modernization fund. That question is the issue raised in this appeal. After the supreme court rendered its decision in the 2416 Corp. v. Chicago Transit Authority case, the litigation was reinstated in the trial court and CTA was directed to turn over to the Trustee money from the modernization fund and the depreciation reserve fund to be used for debt service.
During 1947, 1952 and 1963 CTA issued a total of $135,000,000 in revenue bonds, of which $38,606,000 are outstanding. The funds obtained by the sale of the bonds have been totally expended. Three trust agreements, executed July 1, 1947, July 1, 1952, and October 1, 1953, between CTA and the Trustee, secured the payment of principal and interest on the three bond series. Although the agreements established separate interest and retirement accounts, all series are to share pro-rata in any distributions made to the accounts. The July 1, 1947, agreement is controlling as its terms are incorporated by reference into the two subsequent agreements. "Trust agreement" in this opinion refers to all three trust agreements and all section references are to the July 1, 1947, agreement. In the original trust agreement, a system of accounts was set up through which all of CTA's revenues and income pass. Article 7 of the trust sets forth the procedure for the disbursement of all receipts of the CTA. Section 701 states in pertinent part:
"The revenue or income of the Authority [which must be deposited in the Transit Revenue Fund and then used for the payments set forth in paragraphs (2) through (7) herein] shall mean and include any and all funds received by the Authority from any source whatever, except moneys received by the Authority from or on account of
(a) the liquidation, conversion or disposition of any property or assets;
(b) any damage, loss or casualty to property;
Moneys received by the Authority from sources specified in the foregoing clauses (a) and (b) shall be paid by it to the Trustee and be by it deposited in the Modernization Fund * * *." (Emphasis added.)
Sections 702 and 703 of the trust agreement provide for certain priorities as to the expenditure of the funds of CTA. All of CTA's income or revenue, including fare box receipts, is to be deposited by the Trustee into the transit revenue fund. From the transit revenue fund the Trustee is to transfer amounts specified by written orders of the CTA Board into CTA's working cash account to cover current operation and maintenance expenses. *fn1 Then, to the extent there are moneys available, the Trustee is to transfer surplus money from the transit revenue fund into a revenue bond interest fund, *fn2 a revenue bond maturity fund, *fn3 a revenue bond sinking fund, *fn4 a revenue bond reserve fund, *fn5 the depreciation reserve fund, *fn6 the operating expense reserve fund, *fn7 the municipal compensation fund, *fn8 and the modernization fund. *fn9 The funds established under sections 703(b) through 703(e), inclusive, relate to the payment of interest on and the retirement of outstanding revenue bonds. These funds have priority over the remaining funds in receiving deposits from the Trustee. As indicated, the supreme court opined in the 2416 Corp. v. Chicago Transit Authority case, that section 705 and 803(6) *fn10 of the trust agreement directs the Trustee to use any money in the modernization fund, except for the proceeds of gifts, loans and grants, for the payment of debt service on the revenue bonds in the event the CTA fails to provide other money for the purpose. *fn11
Article 10 of the trust agreement provides for the damage, loss or casualty to property, as follows:
"The Authority covenants to obtain from responsible insurance companies and to maintain insurance to the reasonable insurable value of the properties of the transportation system against loss by fires, wind, storms, explosions, burglary, theft and other damage and losses to the extent that property of similar character is usually insured by utility enterprises similarly situated and operating like properties and that full and complete schedules of all such policies of insurance and of the renewal certificates and policies as soon as and whenever such insurance is effected will be filed with the Trustee; provided, the Authority may elect partially or wholly to provide such insurance by means of an insurance fund or otherwise * * *. All insurance premiums and all insurance fund moneys in connection with the foregoing shall be paid by the Board from the Working Cash Account as an operating expense.
All insurance moneys and such additional moneys as may be necessary to defray the cost of the restoration or replacement of properties damaged or destroyed shall be paid out on the written order of the Board, but if the Board determines that such property is not to be restored or replaced, or if there be any balance of insurance moneys remaining after making satisfactory restoration or replacement then such moneys or such balance thereof, as the case may be, shall be placed in the Modernization Fund." (Emphasis added.)
Moreover, article 11 of the trust agreement, section 1102, states in relevant part:
"The Authority, subject to the conditions and limitations in this Trust Agreement prescribed and in the manner provided and to the extent permitted by law, may sell or otherwise dispose of property owned by it whenever the Board shall have determined that such property is not necessary, appropriate, profitable to, or for the best interests of the Authority and the transportation system, or that it is not adapted to the proper operation and maintenance thereof . . . The proceeds of such sale or disposal shall be deposited with the Trustee and shall be by the Trustee placed in the Modernization Fund." (Emphasis added.)
Defendant CTA concedes that sections 701 and 1102 of the trust agreement provide for the CTA to deposit the "proceeds" of the "liquidation, conversion or disposition of any property or assets" and "moneys" received for "any damage, loss or casualty to property" into the modernization fund. Further, CTA admits that since February 1, 1973, it has received moneys from the aforementioned sources, but has not deposited these moneys into the modernization fund because its interpretation of the trust agreement does not require it to do so. However, proceeds received by CTA from the sale of real property were deposited by CTA into the modernization fund and are not in issue in this proceeding, except insofar as the trial court adopted a construction of "net" proceeds with respect to such sales.
Before considering defendant CTA's contentions, we must address ourselves to the threshold question of whether we have jurisdiction to consider this appeal. Although neither of the parties initially briefed this question, we requested at oral argument that they submit points and authorities on this matter. Both sides responded to our request, by supplemental briefs, and each expressed the belief that we did have the power to hear this case since the November 15 order was a final and appealable order within the meaning of Supreme Court Rule 304(a) (Ill. Rev. Stat. 1977, ch. 110A, par. 304(a)). They essentially argued that the November 15 order decided the only substantial issue in controversy: what moneys should be deposited in the modernization fund, under the trust agreement; and reserved only ministerial or incidental matters such as an accounting as to the ...