339 U.S. 667 (1950), 221, Skelly Oil Co. v. Phillips Petroleum Co.

Docket Nº:No. 221
Citation:339 U.S. 667, 70 S.Ct. 876, 94 L.Ed. 1194
Party Name:Skelly Oil Co. v. Phillips Petroleum Co.
Case Date:June 05, 1950
Court:United States Supreme Court
 
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Page 667

339 U.S. 667 (1950)

70 S.Ct. 876, 94 L.Ed. 1194

Skelly Oil Co.

v.

Phillips Petroleum Co.

No. 221

United States Supreme Court

June 5, 1950

        Argued December 9, 1949

        CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

        Syllabus

        Respondent oil company had contracts with three producers to purchase gas for resale to a pipeline company which had applied to the Federal Power Commission for a certificate of public convenience and necessity under the Natural Gas Act. Each contract provided for termination by the producer upon notice to the respondent at any time after December 1, 1946, "but before the issuance of such certificate." On November 30, 1946, the Commission ordered that a certificate of public convenience and necessity be issued to the pipeline company, upon specified terms and conditions. The order was not made public until December 2, 1946, on which day the producers severally notified respondent of the termination of their contracts. Alleging that a certificate of public convenience and necessity, "within the meaning of said Natural Gas Act and said contracts," had been issued prior to the attempt to terminate the contracts, respondent sued the three producers in the Federal District Court under the Declaratory Judgment Act for a declaration that the contracts were still "in effect and binding upon the parties thereto." The decree of the District Court that the contracts had not been effectively terminated, and were still in full force and effect, was affirmed by the Court of Appeals.

        Held:

        1. The matter in controversy as to which the respondent asked for a declaratory judgment is not one that "arises under" the laws of the United States, and since,.as to two of the defendant producers, there was no diversity of citizenship, the proceedings against them should have been dismissed for want of jurisdiction. Pp. 671-674.

        (a) By the Declaratory Judgment Act, Congress enlarged the range of remedies available in the federal courts, but did not extend their jurisdiction. Pp. 671-672.

        (b) Where the existence of a federal question is the basis of federal jurisdiction, such a federal question must be presented

Page 668

by the plaintiff's claim itself, unaided by allegations in anticipation of defenses which might be interposed. P. 672.

        2. There being diversity of citizenship in the case of the third producer defendant, the District Court had jurisdiction of the suit as to it. P. 674.

        (a) There being diversity of citizenship between respondent and this defendant, and the venue being properly laid in the State where the suit was brought, the case was properly in the District Court. P. 674.

        (b) That the declaratory remedy which may be given by the federal court may not be available in the state courts is immaterial. P. 674.

        3. As to the third producer defendant, the judgment of the Court of Appeals is vacated and the cause is remanded in order that the Court of Appeals, either itself or by sending the case back to the District Court, may further explore the issues through ways that may be appropriate. Pp. 674-679.

        In a suit under the Federal Declaratory Judgment Act, the District Court decreed that the contracts between respondent and petitioners had not been terminated and remained in full force and effect. The Court of Appeals affirmed. 174 F.2d 89. This Court granted certiorari. 338 U.S. 846. As to one of the petitioners, the judgment is vacated and the cause remanded; as to the other two petitioners, the judgment is reversed with directions that the cause be dismissed. P. 679.

Page 669

        FRANKFURTER, J., lead opinion

        MR. JUSTICE FRANKFURTER delivered the opinion of the Court.

       In 1945, Michigan-Wisconsin Pipe Line Company sought from the Federal Power [70 S.Ct. 878] Commission a certificate of public convenience and necessity, required by § 7(c) of the Natural Gas Act, 52 Stat. 825, as amended, 15 U.S.C. § 717f(c), for the construction and operation of a pipeline to carry natural gas from Texas to Michigan and Wisconsin. A prerequisite for such a certificate is adequate reserves of gas. To obtain these reserves, Michigan-Wisconsin entered into an agreement with Phillips Petroleum Company on December 11, 1945, whereby the latter undertook to make available gas from the Hugoton Gas Field, sprawling over Kansas, Oklahoma, and Texas, which it produced or purchased from others. Phillips had contracted with petitioners, Skelly Oil Company, Stanolind Oil and Gas Company, and Magnolia Petroleum Company, to purchase gas produced by them in the Hugoton Field for resale to Michigan-Wisconsin. Each contract provided that,

in the event Michigan-Wisconsin Pipe Line Company shall fail to secure from the Federal Power Commission on or before [October 1, 1946] a certificate of public convenience and necessity for the construction and operation of its pipeline, Seller [a petitioner] shall have the right to terminate this contract by written notice to Buyer [Phillips] delivered to Buyer at any time after December 1, 1946, but before the issuance of such certificate.

        The legal significance of this provision is at the core of this litigation.

        The Federal Power Commission, in response to the application of Michigan-Wisconsin, on November 30, 1946, ordered that

A certificate of public convenience and necessity be and it is hereby issued to applicant [Michigan-Wisconsin], upon the terms and conditions of this order,

        listing among the conditions that there be no transportation

Page 670

or sale of natural gas by means of the sanctioned facilities until all necessary authorizations were obtained from the State of Wisconsin and the communities proposed to be served, that Michigan-Wisconsin should have the approval of the Securities and Exchange Commission for its plan of financing, that the applicant should file for the approval of the Commission a schedule of reasonable rates, and that the sanctioned facilities should not be used for the transportation of gas to Detroit and Ann Arbor except with due regard for the rights and duties of Panhandle Eastern Pipe Line Company, which had intervened before the Federal Power Commission, in its established service for resale in these areas, such rights and duties to be set forth in a supplemental order. It was also provided that Michigan-Wisconsin should have fifteen days from the issue of the supplemental order to notify the Commission whether the certificate "as herein issued is acceptable to it." Finally, the Commission's order provided that, for purposes of computing the time within which applications for rehearing could be filed,

the date of issuance of this order shall be deemed to be the date of issuance of the opinions, or of the supplemental order referred to herein, whichever may be later.

        5 F.P.C. 953, 954, 956.

        News of the Commission's action was released on November 30, 1946, but the actual content of the order was not made public until December 2, 1946. Petitioners severally, on December 2, 1946, gave notice to Phillips of termination of their contracts on the ground that Michigan-Wisconsin had not received a certificate of public convenience and necessity. Thereupon Michigan-Wisconsin and Phillips brought suit against petitioners in the District Court for the Northern District of Oklahoma. Alleging that a certificate of public convenience and necessity "within the meaning of said Natural Gas Act and said contracts" had been issued prior to petitioners' attempt

Page 671

at termination of the contracts, they invoked the Federal Declaratory Judgment Act for a declaration that the contracts were still "in effect and binding upon the parties thereto." Motions by petitioners to have Michigan-Wisconsin dropped as a party plaintiff were sustained, but motions to dismiss the complaint for want of jurisdiction were denied. The case then went to the merits, [70 S.Ct. 879] and the District Court decreed that the contracts between Phillips and petitioners have not been "effectively...

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