Alabama-Tennessee Natural Gas Co. v. City of Huntsville

• Decision Date: 11 April 1963
• Docket Number: ALABAMA-TENNESSEE,8 Div. 112
• Citation: 275 Ala. 184,153 So.2d 619
• Parties: , 49 P.U.R.3d 399 NATURAL GAS CO. v. CITY OF HUNTSVILLE.
• Court: Alabama Supreme Court

Page 619

153 So.2d 619

275 Ala. 184, 49 P.U.R.3d 399

ALABAMA-TENNESSEE NATURAL GAS CO. v. CITY OF HUNTSVILLE.

8 Div. 112.

Supreme Court of Alabama.

April 11, 1963.

Rehearing Denied May 30, 1963.

Moore, Thomas, Taliaferro, Forman & Burr, Birmingham, for appellant.

Lanier, Price, Shaver & Lanier, Huntsville, for appellee.

MacDonald Gallion, Atty. Gen., and J. Taylor Hardin, Asst. Atty. Gen., for Ala. Public Service Comm., amicus curiae.

Bishop & Carlton, Birmingham, for Muscle Shoals Nat. Gas Corp., amicus curiae.

PER CURIAM.

This is an appeal from a declaratory judgment or decree entered by the Circuit Court of Madison County, Alabama, in Equity, purporting to declare the rights, duties, status and legal relations of the parties to this cause under and arising from an agreement termed a 'Gas Sales Contract.'

The matter in dispute is the sales area of appellee, City of Huntsville, granted to it in a contract between appellee and appellant, Alabama-Tennessee Natural Gas Company.

Appellant, a Delaware corporation, operated a natural gas line in interstate commerce, serving appellee and other communities in Alabama, Tennessee and Mississippi with natural gas, and is subject to jurisdiction of, and under rates approved by, the Federal Power Commission.

Appellee is a municipal corporation in Madison County and is engaged in the operation of a natural gas distribution system within its corporate limits and in certain surrounding territory; and it purchases natural gas from appellant and sells it under rates fixed by city ordinance.

The original contract between the parties was executed in June, 1950, and although certain modifications have been made since then, the same area of service section has been carried forward in all subsequent contracts. It reads:

'The area of service of the Buyer, for the purpose of this agreement only shall consist of--the area within the corporate limits of the City of Huntsville, Alabama. In addition to this area, Buyer shall have the exclusive right to sell gas in Madison County, Alabama except to other municipalities and within their police jurisdiction. However, if Buyer does not enter into an agreement to serve any customer within 120 days after application for service, its exclusive right to serve that customer shall cease.'

The controversy and the dispute as to the interpretation of the contract arose when the United States requested both appellant and appellee to quote rates for the supplying of natural gas for use at Redstone Arsenal. Appellee contends that the contract gives it the exclusive right to serve Redstone Arsenal if an application for service is made. Appellant contends that its rights are not limited by the contract and that it has the right to deal directly with the government.

Sometime during the period between 1942 and 1943, the United States Government acquired certain lands approximating 44,000 acres in Madison County, Alabama, by purchase and condemnation for the purpose of erecting and maintaining thereon arsenals, magazines and other needful buildings of a military nature. This purchase was made in accordance with and under the authority of the Constitution of the United States, Art. I, Sec. 8, Clause 17.

By two patents, dated respectively 2 November 1942 and 9 April 1943, the State of Alabama ceded jurisdiction over said lands to the United States. Said cession was made pursuant to Tit. 59, §§ 18 and 19, Code 1940.

The bill further alleged that in the last several years, Redstone Arsenal has become the principal center for experimental and testing projects on rockets, missiles and other weapons of an advanced scientific nature. Because of this increase in these operations in and around the Huntsville and Redstone area, larger amounts of natural gas for varied purposes are in demand. Any agency proposing to furnish gas for such fuel purposes must have available at all times a sufficient and dependable supply of gas.

The bill prayed for a final decree declaring the rights, duties, status and legal relations of the parties and particularly adjudicating and declaring the following:

(a) That the Service Agreement creates no right in respondent of such nature that complainant cannot sell or furnish gas to the United States Government for use in Redstone Arsenal, or of such nature that complainant cannot do so without breaching a legal duty to the city, and that an agreement so providing would be void as against public policy and contrary to the public interest.

(b) That said agreement, insofar as it may pertain to areas not within the corporate limits and not now served with natural gas by the City of Huntsville, is indefinite, illusory, lacking in mutuality, and therefore void as an executory contract.

(c) That Redstone Arsenal is not a part of Madison County within the meaning of said agreement.

(d) That said agreement insofar as it may pertain to areas outside the built-up areas or suburbs immediately adjacent or contiguous to the City of Huntsville is ultra vires of the City of Huntsville and therefore void.

(e) That said agreement insofar as it may pertain to such subject matter, is void as an unreasonable restraint of trade.

(f) That said agreement does not apply to the United States Government so as to give the respondent any exclusive right to sell natural gas to it under any circumstances or at any place.

(g) That complainant has a right to enter into an agreement to furnish and sell natural gas to the United States Government at any point in the police jurisdiction of the Town of Madison, and may rightfully agree that title to the gas is to pass at a meter situated at such point, without regard to where the United States Government thereafter pipes or otherwise transports it, and without regard to the manner or place where it is thereafter used or consumed; and complainant will incur no liability to respondent if it so furnishes and sells gas.

(h) That the alleged right of respondent, if any, to serve exclusively the United States Government with natural gas for use in Redstone Arsenal, has ceased by reason of the respondent's failure to enter into a contract with the United States Government for the furnishing of natural gas to Redstone Arsenal within 120 days after its request for service.

(i) That the City of Huntsville has no power to expend any of its funds to finance the construction of a gas distribution system to serve areas beyond its corporate limits and the build-up areas or suburban fringe adjoining such limits.

The bill concluded with a prayer for general relief and an offer to do equity.

After demurrer to the bill was overruled and answer filed, the parties entered into a stipulation of certain facts. In addition to all the necessary jurisdictional and formal allegations of the bill and answer, it was stipulated that the United States Government has requested both Alabama-Tennessee and the city to quote rates, statements of availability and conditions of supply in connection with furnishing natural gas to the United States Government for use in Redstone Arsenal as shown by the respective exhibits to the bill of complaint and answer. The stipulation stated that the population of the Town of Madison as shown by the latest Federal Census is 1,435 and the population of the City of Huntsville is more than 73,000. It also stipulated that in 1950, the corporate limits of the City of Huntsville were approximately two miles from Redstone Arsenal at the nearest point and approximately five miles of the boundary of the Redstone Arsenal were within three miles of the corporate limits of the city and within its police jurisdiction.

Trial was had on September 20, 1961.

Appellant offered in evidence certain specifications and maps and the stipulation already referred to and rested. Appellee called several witnesses and there was no rebuttal. The court rendered its decree on March 21, 1962, and held that the agreement between the parties is not void as against public policy or contrary to the public interest; that it is a valid executory contract and is not indefinite, illusory or lacking in mutuality in any respect; that Redstone Arsenal is a part of Madison County within the meaning thereof; that said agreement is in no respect ultra vires; that it is not void as an unreasonable restraint of trade; that the city has the exclusive right to sell natural gas to the United States Government for use in Redstone Arsenal, provided it enters into a contract with the government within a period of 120 days after its application for service; that Alabama-Tennessee has no right to enter into an agreement to furnish and sell natural gas to the United States Government at any point in the police jurisdiction of the Town of Madison and cannot pass title to gas to the government at a meter situated at such point for distribution by the United States Government to the area embraced within Redstone Arsenal; that the city's exclusive right to serve the government with natural gas for use in Redstone Arsenal has not ceased by reason of any failure by the city to enter into a contract within 120 days after a request for service; and that Alabama-Tennessee is not a proper party to question the city's power to expend its funds to finance construction of additions to its gas distribution system.

Assignment of error 54 reads:

'For that the court below erred in failing to hold that said public policy makes illegal and unenforceable any agreement between sellers of utility services that one shall have any exclusive right to furnish such services for use on a federal military reservation.'

It should be borne in mind that neither the United States Government nor any of its agencies are parties to this suit. The Federal Government may contract for service for natural gas with any party it should choose. The trial court could not and did not attempt to say what individuals, corporations or departments of government, not parties to this suit,...