Columbian Fuel Corp. v. Superior Court In and For New Castle County

• Decision Date: 25 February 1960
• Citation: 52 Del. 365,158 A.2d 478,2 Storey 365
• Parties: , 52 Del. 365, 33 P.U.R.3d 370 COLUMBIAN FUEL CORPORATION, a Delaware corporation, Texaco, Inc., a Delaware corporation, and Pan American Petroleum Corporation, a Delaware corporation, Petitioners, v. SUPERIOR COURT OF the State of DELAWARE, in and FOR NEW CASTLE COUNTY, and The Honorable Andrew D. Christie, sitting as a Judge of that Court, Respondents, and Cities Service Gas Company, a Delaware corporation, Intervening Respondent.
• Court: Supreme Court of Delaware

Page 478

158 A.2d 478

2 Storey 365, 52 Del. 365, 33 P.U.R.3d 370

COLUMBIAN FUEL CORPORATION, a Delaware corporation, Texaco Inc., a Delaware corporation, and Pan American Petroleum Corporation, a Delaware corporation, Petitioners, v. SUPERIOR COURT OF the State of DELAWARE, in and FOR NEW CASTLE COUNTY, and The Honorable Andrew D Christie, sitting as a Judge of that Court, Respondents, and Cities Service Gas Company, a Delaware corporation Intervening Respondent.

Supreme Court of Delaware.

Feb. 25, 1960.

James M. Tunnell, Jr., of Morris, Nichols, Arsht & Tunnell, Wilmington, for petitioners.

Clark, Carr & Ellis, New York City, for petitioner Columbian Fuel Corp.

Paul F. Schlicher, New York City, and Alfred C. De Crane, Jr., Houston, Tex., for petitioner Texaco, Inc.

W. W. Heard, Tulsa, Okl., for petitioner Pan American Petroleum Corp.

Howard L. Williams, and Henry N. Herndon, Jr., of Morris, James, Hitchens & Williams, of Wilmington, and C. C. Mount, of Oklahoma City, Okl., and Jack Werner, of Washington, D. C., for intervening respondent Cities Service Gas Co.

Edmund D. Lyons, Washington, D. C., of Morris, James, Hitchens & Williams, of Wilmington, and John T. Grant, of Omaha, Neb., for Northern Natural Gas Co., amicus curiae.

SOUTHERLAND, C. J., and WOLCOTT and BRAMHALL, JJ., sitting.

SOUTHERLAND, Chief Justice.

The petition attacks the jurisdiction of the court below to entertain four actions at law brought by Cities Service Company against three defendants, the petitioners above named. In these actions Cities seeks to recover from defendants large sums of money representing part of the payments made by Cities to defendants for natural gas between January 1, 1954 and late 1957.

The factual background of the claims is as follows:

Cities is a natural gas pipeline company. It transports natural gas from Hugoton Field in Kansas, in interstate commerce, to local distributing companies. Defendants are producers of natural gas from that field.

In 1949, 1950 and 1951 Cities and the defendants entered into contracts for the sale of gas by defendants to Cities at prices less than eleven cents a thousand cubic feet, measured on a pressure base of 14.65 pounds per square inch absolute. Since the execution of these contracts defendants have supplied Cities with gas from the Hugoton Field.

Prior to the execution of these contracts Congress had adopted the Natural Gas Act. Act of June 21, 1938, 15 U.S.C.A. § 717. The Federal Power Commission was empowered to regulate the sale in interstate commerce of natural gas for resale. Because of an exemption in the act the Federal Power Commission thereafter disclaimed jurisdiction over sales by producers, such as defendants.

On December 2, 1953, the Corporation Commission of the State of Kansas promulgated an order, effective January 1, 1954, fixing a minimum price of not less than 11cents per M. c. f., measured on a pressure base of 14.65 p. s. i. a., to be paid for natural gas produced by defendants from the Hugoton Field. Cities and others filed suit in the Kansas courts for a judicial review of the order.

On January 21, 1954, Cities wrote a letter to each of the defendants with respect to the Kansas Commission order. After stating that Cities had filed suit to obtain judicial review of the order, Cities notified the defendants that it intended to pay for gas purchased from the Hugoton Field in strict compliance with the terms of the order; that such compliance was made to avoid the penalties provided by the Kansas statutes for violation; and that payments to the defendants 'are to be considered and accepted by you as involuntary payments on our part, without prejudice to our rights in said litigation * * *'. Cities added:

'In the event the said Order is judicially modified or declared to be invalid in whole or in part, as a result of which you have been overpaid for gas purchased during the interim aforesaid, Cities Service Gas Company will expect you to refund to it the amount of said overpayments.'

Each voucher check sent to each of the defendants in payment of gas purchased during the period involved in these suits contained a notation that payment was made subject to the provisions of the letter of January 21, 1954. Each defendant accepted its checks and cashed them, and made no objection to the conditions on which they were tendered.

For the sake of convenience we shall refer to these documents as 'the refund contracts', recognizing that the defendants do not concede their legal effect.

On June 7, 1954, the Supreme Court of the United States, reversing a decision of the Federal Power Commission, held that rates of 'all wholesales of natural gas in interstate commerce,' including rates of producers, were subject to the Commission's jurisdiction. Phillips Petroleum Co. v. State of Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035.

The Natural Gas Act requires natural gas companies to file rate schedules with the FPC, under such regulations as the Commission may prescribe. § 717c(c).

On July 16, 1954, the Commission issued order No. 174, later replacing it or supplementing it with orders No. 174-A and No. 174-B. These orders dealt with the regulation of 'independent producers' under the Natural Gas Act. These producers were required to apply for certificates of public convenience and necessity, and were directed to file with the Commission 'rate schedules as defined in Section 154.93 hereof, setting forth the terms and conditions of service and all rates and charges for such transportation or sale effective on June 7, 1954.' By § 154.93 a rate schedule was defined as 'the basic contract and all supplements or agreements amendatory thereof, effective and applicable on and after June 7, 1954.'

Defendants duly filed the application and documents required. These documents included copies of the contracts with Cities, copies of the Kansas Price Order, and statements showing that the price to Cities on June 7, 1954, was 11cents per M. c. f. at the specified pressure.

As these documents were filed, the Commission duly convened and voted to accept them for filing. The Commission so notified each defendant that its schedules had been accepted without constituting the acceptance as approval of any rate or charges, and without prejudice to any orders of the Commission that might affect the company so filing.

In 1956 the Supreme Court of Kansas sustained the validity of the Kansas Corporation Commission's order of December 2, 1953 (Cities Service Gas Company v. State Corporation Commission of Kansas, 180 Kan. 454, 304 P.2d 528), but on appeal the Supreme Court of the United States on January 20, 1958, reversed (355 U.S. 391, 78 S.Ct. 381, 2 L.Ed.2d 355), citing the Phillips decision and the decision in Natural Gas Pipe Line Co. v. Panoma Corporation, 1955, 349 U.S. 44, 75 S.Ct. 576, 99 L.Ed. 866.

In the Panoma case the Supreme Court had held in 1955 that a similar price fixing order of the Oklahoma Corporation was void. From the dissenting opinion of Mr. Justice Douglas, it seems clear that the order was held void ab initio.

Applying these decisions the Supreme Court of Kansas on April 11, 1959, held that the Kansas Commission's order was void ab initio. 184 Kan. 540, 337 P.2d 640.

In 1958 Cities filed the four suits which are now before us. The complaints are substantially the same. They set forth the original gas contracts between the parties; the facts concerning the issuance of the Kansas price-fixing order; the refund contracts; the increased prices for gas effected by the Kansas order; and the invalidation of that order by the Supreme Court of the United States.

By reason of these facts, it is alleged that defendants agreed in writing to refund plaintiff the over-payments; that such payments were made under compulsion; that defendants are justly indebted to plaintiff in the amount of such overpayments; and that to permit defendants to retain such overpayments would constitute unjust enrichment.

The answers deny the legal effect of the refund contracts and deny that the payments were made involuntarily. The answers further set forth the facts with respect to the assumption of jurisdiction over defendants' rates of the Federal Power Commission and the filing of defendants' rate schedules, and their acceptance by the Commission. The answers further allege that the filed rate has never been decreased; that the exclusive means authorized by the Natural Gas Act and the rules of the Commission have never been utilized to contest or challenge the rate schedules; and that the rate schedules have at all times remained the legally effective rate for the sales of gas by defendants to Cities.

Subsequently the parties supplemented the record by discovery proceedings and by affidavit, and the defendants moved for summary judgment. The grounds for the motion were that the only lawful price for the sales of natural gas during the period prior to July 16, 1954, was that fixed by the Kansas order; and that during the period after July 16, 1954, the only lawful price was that fixed by the rate filed and accepted by the Commission.

Defendants' contention in support of this motion was stated in the alternative: If Cities was seeking to recover payments in excess of the contract price, it had no case, since the only lawful price for gas sold by them during the periods in question was fixed by the Kansas price order and by the rate schedules filed by the Commission. If, on the other hand, the Natural Gas Act excluded the Kansas order, then Cities was seeking to recover payments allegedly in excess of natural gas rates, in which event jurisdiction to determine the claims was vested exclusively in the federal courts by the express provisions of the Natural Gas Act.

The trial court held that the actions were suits founded on the contracts to refund excessive payments, and not on the Natural Gas Act. Agreeing with the defendants that the only legal rate is...