Kansas City Gas Co. v. Kansas City

Decision Date02 March 1912
Docket Number3,793.
Citation198 F. 500
CourtU.S. District Court — Western District of Missouri
PartiesKANSAS CITY GAS CO. v. KANSAS City et al.

[Copyrighted Material Omitted]

By ordinance passed September 27, 1906, and approved September 27, 1906, the city of Kansas City authorized Hugh J. McGowan Charles E. Small, and Randal Morgan, the survivors or survivor of them, and their or his assigns, to lay, acquire and maintain pipes in Kansas City, for the purpose of supplying natural gas to said city and its inhabitants. This ordinance was duly accepted in writing, as therein required and thereupon became a contract between the city and said grantees. This contract was for a full period of 30 years, and provided that the grantees might convey all their rights and privileges therein granted to a corporation, its successors or assigns, to be organized by them under the laws of the state of Missouri for the purpose of acquiring, building, constructing, and operating a gas plant authorized under that ordinance. The complainant is such corporation, and has succeeded to all the rights conferred upon the original grantees.

The ordinance, by section 5 thereof, further provided that 'said grantees shall at all times keep and maintain such pressure of gas in all places where the same may be furnished to Kansas City and its inhabitants as may be required by ordinance; provided the pressure so required shall be reasonable and practicable. ' This provision was contained in two prior ordinances known as 'model ordinances,' passed by the common council of Kansas City, and duly approved, which were intended to operate as a guide in the preparation of any ordinance-contract thereafter to be entered into authorizing the actual supplying of natural gas to the city.

Section 10 provided that: 'For the purpose of enforcing the provisions of this ordinance and securing the correct measurement of gas furnished under the same and the proper pressure of said gas, with due regard to the reasonableness results with least consumption of gas, with due regard to the reasonableness and practicability of such pressure, and to prevent the waste thereof and to protect the city in its corporate rights, and to protect the consumers in their rights, the city shall have the right to provide, by ordinance, for the appointment of one or more inspectors or measurers of gas, and to prescribe their duties by ordinance, and to pass such ordinances as may be necessary to enforce the provisions of this ordinance.'

Section 13 provided that: 'The said grantees shall be entitled to charge and collect from consumers of such gas, during the period of five years from and after natural gas is first furnished hereunder at the rate of not to exceed twenty-five cents per thousand cubic feet, and during the period of five years next thereafter at the rate of not to exceed twenty-seven cents per thousand cubic feet, and thereafter during the period of the aforesaid grant at the rate of not exceeding thirty cents per thousand cubic feet. ' And further that: 'Under the permission and authority hereby granted, the grantees shall furnish natural gas for illuminating, heating and mechanical purposes, which shall at all times be of the same character and quality as when it comes from the earth; and it shall not be mixed with air or otherwise adulterated.'

Section 14 provided that: 'Should the supply of natural gas, obtainable by grantees reasonably accessible, be, at any time hereafter during the life of this ordinance, inadequate to warrant them in continuing to supply natural gas under the terms of this ordinance, or should the common council of Kansas City so find at any time (and in the event of a disagreement as to the facts in this respect either party or a gas consumer may have recourse to the courts to establish the facts), they shall not be longer required to do so, but shall manufacture and furnish manufactured gas to said city and its inhabitants through said mains and pipes under the provisions of this ordinance as far as applicable and subject to all the terms and provisions contained in the ordinance number 6,658 granted to Milton J. Payne and others, passed August 24, 1895, and the ordinance number 6,125 granted to Robert M. Snyder and others, passed January 10, 1895, and ordinance number 8,033, entitled: 'An ordinance granting the consent of Kansas City to the consolidation of the Missouri Gas Company and the Kansas City Gas Company,' until the expiration of said ordinance and no longer, except as to price which shall be settled by arbitration (as thereafter provided). The grantees shall not discontinue furnishing natural gas without serving at least six (6) months' written notice upon the mayor of Kansas City of their intention so to do.'

Section 17 provided that: 'If the said grantees shall do or cause to be done any act or thing by this ordinance prohibited, or shall fail, refuse or neglect to do any act by this ordinance required, they shall forfeit all rights and privileges granted by this ordinance, and this franchise and all rights thereunder granted shall ipso facto cease, terminate and become null and void, provided such failure to comply with the conditions of this ordinance shall continue unrectified for sixty (60) days after written notice thereof from the board of public works of said city, or the common council of said city.'

By section 20 it was provided that the grantees might acquire the ownership or use or control, by purchase, lease, agreement, or otherwise, of the pipes and property of the Kansas City Missouri Gas Company aforesaid, subject to the right of the city to purchase the same under the special provisions of the several ordinances under which said company was then operating, as set out above. Such pipes and property were subsequently acquired under this provision. By said section 20 it was further provided that: 'Grantees covenant that their contract for gas supply is with the Kaw Gas Company and the Kansas City Pipe Line Company (corporations), that under the terms thereof, after two years from the time natural gas is first furnished to Kansas City thereunder, the division of the gross income received for said gas between the distributing company and the supply company shall be in the proportion of thirty-seven and one-half cents out of each dollar to the former, and sixty-two and one-half cents to the latter; and covenant for themselves, their successors and assigns, that none of the terms of that contract agreement shall be changed without consent of Kansas City expressed by ordinance; and grantees agree for themselves, their successors and assigns, that if Kansas City shall acquire said plant and property they will on demand transfer free of cost to Kansas City all their rights under said contract; and grantees further agree to procure from said two corporations and file with the city clerk within ninety days from the time this ordinance becomes a law, a written agreement in form to be approved by the city counselor, agreeing that they (said two corporations) will, if Kansas City shall acquire said plant as aforesaid, upon demand, furnish and continue to furnish during the remaining period of this franchise gas to Kansas City on the same term as they have agreed to furnish it to the grantees, their successors and assigns. ' Kansas City further agreed not to exercise its right to purchase for the period of 10 years, unless grantees shall before that time have 'ceased to furnish natural gas as required by this ordinance.'

The written agreement referred to, in form approved by the city counselor, was duly filed. The city counselor also approved the form of contract between the grantees and the supplying corporations. All the rights of the supplying corporations have been acquired and are now owned and controlled by the Kansas Natural Gas Company, a foreign corporation. This supply contract between the supplying companies of the first part and the grantees, now the Kansas City Gas Company, of the second part, in so far as it bears upon this controversy provides as follows: 'The party of the first part hereby agrees that it will during the period of such ordinance, or any extension or renewal thereof, or of any ordinance which may be obtained, either in the interest of the party of the second part, or of its property, supply and deliver through its said pipe line or lines, to said party of the second part, or any successor in the ownership of the property for the distribution of gas for Kansas City, Missouri, at a pressure of twenty (20) pounds at the point of delivery above mentioned, natural gas in such amount as will at all times fully supply the demand for all purposes of consumption, as provided in this contract, for the consideration hereinafter mentioned. However, as the production of gas from the wells and the conveying of it from long distances is subject to accidents and interruptions and failures, the party of the first part does not under this contract undertake to furnish the party of the second part with an uninterrupted supply of gas for the period named herein, but only to furnish such supply for such a period of time as the wells and pipe lines of the party of the first part and such other resources as the party of the first part shall be able to command are capable of supplying. And it is expressly understood and agreed by the party of the second part that the party of the first part shall not be liable for any loss, damage or injury that may result either directly or indirectly from such shortages or interruptions, but said party of the first agrees to use diligence to supply the party of the second part with a constant and sufficient quantity of merchantable gas for all consumers. So long as the party of the first part...

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