Indus. Natural Gas Co. v. Sunflower Natural Gasoline Co.

• Decision Date: 20 January 1947
• Docket Number: Term No. 46F9.
• Parties: INDUSTRIAL NATURAL GAS CO. v. SUNFLOWER NATURAL GASOLINE CO. et al. (FIRST NAT. BANK OF PHILADELPHIA et al., Intervenors).
• Court: United States Appellate Court of Illinois

330 Ill.App. 343

71 N.E.2d 199

INDUSTRIAL NATURAL GAS CO.

v.SUNFLOWER NATURAL GASOLINE CO. et al. (FIRST NAT. BANK OF PHILADELPHIA et al., Intervenors).

Term No. 46F9.

Appellate Court of Illinois, Fourth District.

Jan. 20, 1947.

Appeal from Circuit Court, Marion County; James G. Burnside, Judge.

Action by Industrial Natural Gas Company against Sunflower Natural Gasoline Company and others, for specific performance of contract for sale of natural gas and other relief, wherein First National Bank of Philadelphia, trustee, and others intervened, claiming a lien on proceeds of any recovery by plaintiff. From that portion of the decree which awarded damages to plaintiff, defendants appeal.

Affirmed.Brown, Fox and Blumberg, of Chicago, Brown, Hay & Stephens, of Springfield, and John L. Kagy, of Salem (Charles L. Brown, of Chicago, Robert A. Stephens, Jr., of Springfield, and David F. Matchett, Jr., of Chicago, of counsel), for appellant.

Frank R. Hurlbutt, of New York City, Wham & Wham, of Centralia, and Raymond O. Horn, of Salem, for appellee.

BARTLEY, Justice.

This is an appeal by the defendants, Sunflower Natural Gasoline Company, Sunflower Gasoline Corporation and Sunflower Petroleum Products Corporation, hereinafter called the defendants, (Whenever this opinion refers to defendant or defendants, it is meant to refer to the defendant or defendants to which the circumstances may apply.) from that portion of a decree of the Circuit Court of Marion County which awarded damages to the plaintiff-appellee, Industrial Natural Gas Company, hereinafter referred to as plaintiff, in the sum of $200,000., for a breach of contract of July 21, 1942 providing for the sale by the defendants to the plaintiff of natural gas. The appellees, First National Bank of Philadelphia, et al. were intervening plaintiffs and anywhere in this opinion that it may be necessary to refer to them, they will be particularly identified.

A complaint was filed March 14, 1944 and alleged, among other things, that by a certain Agreement dated July 21, 1942 between the plaintiff and two of the defendants, Sunflower Natural Gasoline Company and Sunflower Gasoline Corporation, plaintiff agreed to buy and the defendants agreed to sell certain quantities of natural gas; that subsequent to the execution of said agreement, the defendant, Sunflower Petroleum Products Corporation, by merger, consolidation or otherwise, acquired all of the assets of defendants, Sunflower Natural Gasoline Company and Sunflower Gasoline Corporation, and assumed their obligations including the said Agreement of July 21, 1942; that the plaintiff was engaged in the business of buying natural gas and distributing and selling same to industrial consumers; that said Agreement of July 21, 1942 is the only agreement which plaintiff had, or at any time has had, for the purchase of natural gas and constitutes the sole scource of supply of natural gas available to plaintiff for delivery and sale by plaintiff to its customers; that the plaintiff entered into business in reliance on said Agreement of July 21, 1942 and in reliance thereon, entered into an agreement with Mount Vernon Car Manufacturing Company and J. P. Devine Manufacturing Company, Inc., for delivery and sale to them of natural gas at their plants in Mount Vernon, Illinois, to the extent of the entire fuel requirements of said Companies.

The complaint further alleged that, as contemplated in the Agreement of July 21, 1942, plaintiff constructed and put into operation a pipe line for the purpose of supplying said Car Companies at a cost of approximately $120,000. and thereafter purchased and constructed other pipe lines and equipment at a cost of approximately $50,000. and incurred great additional expense to procure and arrange to serve plaintiff's customers; that the plaintiff has procured and is now serving several industrial consumers in addition to the Car Companies and has been requested by numerous other industrial consumers to supply them with natural gas; that its present customers require a daily delivery in excess of 3,500,000 cubic feet of natural gas and that plaintiff has a potential market of another 2,500,000 cubic feet of natural gas per day; that since November 3, 1943 defendant has never furnished plaintiff more than 2,500,000 cubic feet on any one day and since that date the quantities of natural gas furnished have constantly decreased until plaintiff at the time of filing the Complaint, was furnishing to its customers less than an average of 750,000 cubic feet per day; and that at least since November 3, 1943 defendants failed to deliver to plaintiff the quantities of natural gas to which the plaintiff is entitled pursuant to the provisions of the Agreement of July 21, 1942; that plaintiff made numerous demands to defendants to supply the gas required by said Agreement of July 21, 1942 but that defendants have failed and refused to do so; that plaintiff has, at all times, been ready and willing to accept delivery of and pay for all natural gas required to supply the demands of plaintiff's customers.

It is further alleged that because of the breach by the defendants of said Agreement of July 21, 1942, plaintiff has been unable to supply even the minimum requirements of its present customers; that as a result, plaintiff has irretrievably lost some of its actual market and is continuing to lose more and that its business is being rapidly destroyed, and will be completely destroyed unless the defendants be required to perform and carry out their obligation under said Agreement of July 21, 1942; that apart from the loss of plaintiff's investment, if said Agreement is not substantially performed, the actual losses previously suffered and which may hereafter he suffered, and in addition thereto, the loss of profits previously suffered and which may hereafter be suffered, on the quantities of natural gas which plaintiff could have sold and could hereafter sell throughout the term of the Agreement of July 21, 1942 if such quantities should be available, would constitute the major part of plaintiff's damages; that plaintiff has at all times performed, is now performing, is ready, willing and able to continue to perform its part of the Agreement of July 21, 1942.

The complainant's prayer for relief, among other things, asks that defendants or one or more of them be required to specifically perform all of the terms of said Agreement of July 21, 1942; that defendant be required to account to plaintiff for losses and damage plaintiff has sustained and will sustain throughout the term of said Agreement of July 21, 1942 whether or not said Agreement shall be specifically enforced; that the plaintiff have judgment against the defendants for all losses and damages which the plaintiff has heretofore or will hereafter sustain on account of the failures and defaults of the defendants and that the plaintiff have such further and general relief as equity will require.

The answer of the defendant sets up as defenses to the Complaint, that it is not under any obligation by virtue of said Agreement of July 21, 1942 or supplements thereto, to deliver to plaintiff any natural gas except such residue gas as the defendant has available for sale in accordance with the written contract which it has with the producers of casinghead gas; that under and by virtue of said Agreement, it was not obliged to deliver to plaintiff any natural gas in excess of the amount of residue gas available for sale by it in accordance with the provisions of the casinghead gas contracts under which it acquired the casinghead gas, from which said residue gas was left; that at the time of entering into the said Agreement of July 21, 1942, the defendants had available for sale to plaintiff, residue gas in excess of 5,000,000 cubic feet per day and had the same available until the Fall of 1943; that since July 21, 1942 there has been a steady depletion of the casinghead gas available in the Salem, Illinois Field through conditions over which the defendant had no control; that with the decline in the production of oil and casinghead gas the operators and owners of wells, who are the sellers under the casinghead gas contracts, have been demanding back the full amount of residue gas to which they are entitled for the development and operation of their leases under the provisions of the casinghead gas contracts; that this has reduced the volume of residue gas which defendant has for sale to plaintiff, which at the time of the filing of the Answer, was approximately 250,000 cubic feet per day; which said residue gas was all that the defendant can procure for delivery to plaintiff; that there is no other source of natural gas in the Salem, Illinois Field from which the defendant could procure gas to sell to the plaintiff; that the depletion of the casinghead gas available in the Salem, Illinois Field caused the shut-down by the defendant of its plant designated as Sunflower No. 1 and that the depletion now threatens the shut-down of Sunflower Plant No. 2 and the complete cessation of all operations of defendant in the Salem, Illinois Field; that the provision of said Agreement of July 21, 1942 calling for the furnishing of 5,000,000 cubic feet per day is not binding upon the defendant in case of a depletion in the Salem, Illinois Field, arising out of causes beyond the control of the defendant; that the defendant is fulfilling all of its obligations to the plaintiff under the provisions of said Agreement of July 21, 1942 for the reason that Section 18 of said Agreement expressly provides that the defendants should not be liable for failure to furnish gas pursuant to the provisions of said contract where said failure arises because of the depletion of said gas supply and that the failure of the defendant to furnish more gas than is now being furnished is due entirely to the depletion of the supply available and to causes beyond its control; and that...