Hutchinson Gas & Fuel Co. v. Wichita Natural Gas Co.

• Decision Date: 17 August 1920
• Docket Number: 5535.
• Citation: 267 F. 35
• Parties: HUTCHINSON GAS & FUEL CO. v. WICHITA NATURAL GAS CO.
• Court: U.S. Court of Appeals — Eighth Circuit

267 F. 35

HUTCHINSON GAS & FUEL CO. v. WICHITA NATURAL GAS CO.

No. 5535.

United States Court of Appeals, Eighth Circuit.

August 17, 1920

[Copyrighted Material Omitted]

This is an appeal of the Hutchinson Company, a gas distributing corporation, from a decree of dismissal of its bill in equity against the Wichita Company, a natural gas producing corporation, to enjoin it from raising its rate for the sale of its gas, and from ceasing to supply it at a rate specified in the contracts between the two companies. The bill discloses these facts:

The Wichita Natural Gas Company is engaged in the business of producing and selling natural gas, and the Hutchinson Gas &amp Fuel Company is engaged in the business of selling natural gas to consumers in the city of Hutchinson, in the state of Kansas. In June, 1906, the Wichita Company controlled an acreage of gas leases with a number of gas wells thereon in the gas belt of Kansas, and J. O. Davidson was authorized by an ordinance of the city of Hutchinson for 20 years from March 29, 1906, to maintain a gas plant, to lay and use mains and pipe lines in the streets of that city, and through them to supply the inhabitants of the city with natural and artificial gas. He had constructed or was about to construct a complete system of distributing mains and pipes in that city, to comply with the terms of the ordinance and to supply the inhabitants of the city with gas.

Thereupon on June 19, 1906, he made a contract with the Wichita Company to the effect that the Wichita Company would lay a pipe line for conveying natural gas from its gas fields in the gas belt of Kansas to a point at the city limits of Hutchinson, where it would maintain a reducing and regulating station; that Davidson would lay his distributing pipes and connect them to the pipes of the gas company at the reducing station; that all these things should be done by December 31, 1906; that thereafter, as long as the wells and pipes were capable of so doing, not exceeding 20 years, the gas company would deliver sufficient natural gas to Davidson at its reducing station to meet the demands for domestic consumption thereof by the inhabitants of the city, and Davidson would receive into his pipes, and sell, deliver, and collect for this gas; that it should be sold to consumers at the rate of 30 cents per 1,000 cubic feet; that Davidson should pay over to the Wichita Company, for the gas it delivered, two-thirds of the gross sales thereof; that the Wichita Company made Davidson its exclusive agent; that the Wichita Company would not sell or deliver any of its gas to any other party in Hutchinson, and Davidson would not sell or distribute in that city any natural gas other than that of the Wichita Company.

On November 15, 1906, with the consent of the Wichita Company, Davidson sold and conveyed his interest in the ordinance, in the distributing plant, and in his contract with the Wichita Company to the Hutchinson Gas & Fuel Company, which assumed his liabilities thereunder. The distributing plant and the pipe line were constructed as agreed, and the Wichita Company and the Hutchinson Company proceeded with the delivery and sale of the gas under the Davidson contract until January 2, 1912, when they made a supplemental agreement to the effect that (1) the Hutchinson Company should not thereafter have the exclusive agency of the Wichita Company to distribute, market, or sell its natural gas to the city of Hutchinson or to its inhabitants, but the Wichita Company might appoint and use other agents for that purpose; (2) that the Hutchinson Company should on that date cease to be bound by its agreement not to handle, distribute, market, or sell within the city of Hutchinson the natural gas of any other party than the Wichita Company, and that it might thenceforth handle, distribute, market, and sell within that city the natural gas of any party other than the Wichita Company; and (3) that 'nothing in this supplemental agreement is intended or shall be construed to change, alter, or modify any or other of the terms of the said contract entered into between the first party herein and the said J. O. Davidson, on the 19th day of June, 1906.'

The Wichita Company had laid its pipe line and built its reducing station, the Hutchinson Company had laid its lines and pipes and completed its distributing system, they had connected their pipes and commenced to deliver natural gas through them, and to sell it under the contract of 1906, as early as 1907, and had continued so to do thereafter, so that when the supplemental contract was made all the covenants of the parties under the contract of 1906 had been performed, except the executory contract relating to the delivery, distribution, and sale of the natural gas of the Wichita Company subsequent to January 2, 1912. They continued to handle and sell the natural gas of that company in the same way as theretofore until the early part of 1919, when the Wichita Company notified the Hutchinson Company that the supply of gas from the Kansas wells and fields described in the original contract had been exhausted; that it was compelled to obtain its gas from more distant fields in Oklahoma at a greatly increased expense; that it could not and would not henceforth furnish its natural gas to the Hutchinson Company unless a charge of 45 cents, instead of 30 cents, per 1,000 cubic feet for natural gas for domestic purposes was made to and collected from the consumers of natural gas in Hutchinson; that the contract between them did not require it to furnish gas from other than the Kansas fields and belt described therein; that the contract was illegal; and that the Wichita Company would cease to supply natural gas thereunder at an early date unless the 45-cent rate was adopted and used.

Thereupon the Hutchinson Company filed the bill in equity in this case against the Wichita Company, in which it alleged the facts which have been stated, and prayed for a temporary and a permanent injunction 'restraining the defendant from violating the provisions of said contract and from refusing to perform the same,' from increasing the price of gas to the Hutchinson Company, from disturbing that company's rights to market and deliver natural gas to the consumers in Hutchinson as the agent of the Wichita Company, and for other like relief. A restraining order was issued against the Wichita Company, and thereupon it moved to dismiss the bill, because it did not state any equity sufficient to entitle it to the relief against that company for which the complainant prayed. After a hearing and consideration of this motion the court rendered a decree of dismissal of the bill on its merits for want of equity and dissolved the restraining order. From the decree of dismissal of the bill the Hutchinson Company has appealed.

H. L. McCune, of Kansas City, Mo. (McCune, Caldwell & Downing, of Kansas City, Mo., on the brief), for appellant.

Joseph G. Carey, of Wichita, Kan., and Robert A. Brown, of St. Joseph, Mo. (John H. Brennan, of Bartlesville, Okl., R. R. Vermilion, Earle W. Evans, and W. F. Lilleston, all of Wichita, Kan., and H. O. Caster, of Bartlesville, Okl., on the brief), for appellee.

Before SANBORN and CARLAND, Circuit Judges, and TRIEBER, District judge.

SANBORN Circuit Judge (after stating the facts as above).

The relief sought by the Hutchinson Company in this case is an injunction against the violation of any of the terms of the contract of June 9, 1906, and of any of the terms of any contract resulting from the supplemental contract of January 2, 1912.

An injunction against the breach of a contract is a negative decree of a specific performance thereof, and the general rule is that the power and duty of a court of equity to grant the former are governed by the same principles, rules, and practice as are its power and duty to grant the latter relief. Shubert et al. v. Woodward et al., 167 F. 47, 53, 92 C.C.A. 509, 515; Pantages v. Grauman et al., 191 F. 317, 323, 112 C.C.A. 61, 67; 2 Pomeroy's Equity Jurisprudence (3d Ed.) Sec. 1341; General Electric Co. v. Westinghouse Electric & Mfg. Co. (C.C.) 144 F. 458, 463. The question here is, therefore: Was the court below in error in its conclusion that, under the rules and principles of equity applicable to suits for the specific performance of contracts, it was not its duty, in view of the two contracts in issue, to compel the Wichita Company to continue to supply the Hutchinson Company until December 31, 1926, with natural gas for two-thirds of the 30 cents per 1000 cubic feet named in the contracts?

The contract of 1906, if it was not violative of the anti-trust laws of Kansas (Keene Syndicate v. Wichita Gas, Electric Light & Power Co., 69 Kan. 284, 76 P. 834, 67 L.R.A. 61, 105 Am.St.Rep. 164, 2 Ann.Cas. 949; Landon v. Public Utilities Commission of Kansas (D.C.) 245 F. 954, 955), was a valid and enforceable agreement. But, if it is not obnoxious to the anti-trust legislation, when it is read with the supplemental contract of 1912, and their provisions are carefully studied and compared, the question of the mutuality of the new agreement which resulted from the adoption of the agreement of 1912 arises, persists, and will not down; for 'an agreement, when changed by the mutual consent of the parties, becomes a new agreement, which takes the place of the old, and consists of the new terms and as much of the old agreement as the parties have agreed shall remain unchanged.' 13 C.J. Sec. 615.

It is the general rule that specific performance of a contract will not ordinarily be decreed by a court of equity in favor of a party against whom that court cannot efficiently compel its performance. The obligation and the remedy must be mutual. Shubert v. Woodward, 167 F. 47,...