Kentucky Natural Gas Corp. v. Indiana Gas & Chemical Corp.

• Decision Date: 06 July 1942
• Docket Number: 7961.,No. 7960,7960
• Citation: 129 F.2d 17,143 ALR 484
• Parties: KENTUCKY NATURAL GAS CORPORATION v. INDIANA GAS & CHEMICAL CORPORATION (two cases).
• Court: U.S. Court of Appeals — Seventh Circuit

143 ALR 484, 129 F.2d 17 (1942)

KENTUCKY NATURAL GAS CORPORATION v. INDIANA GAS & CHEMICAL CORPORATION (two cases).

Nos. 7960, 7961.

Circuit Court of Appeals, Seventh Circuit.

July 6, 1942.

Paul Y. Davis, Ernest R. Baltzell, and Gustav H. Dongus, all of Indianapolis, Ind., for appellant.

Harry T. Ice, James A. Ross, Merle H. Miller, and Norman Brennan, all of Indianapolis, Ind. (Ross, McCord, Ice & Miller, of Indianapolis, Ind., of counsel), for appellee.

Before EVANS and MAJOR, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Defendant insists that the District Court erred in (1) declaring a certain contract between the parties terminated, (2) awarding plaintiff damages for defendant's breach and (3) failing to declare that plaintiff had repudiated the agreement prior to October 7, 1938, and, was, therefore, unable to maintain the suit. Plaintiff, in a cross-appeal, asserts inadequacy of damages allowed.

Plaintiff had brought suit praying (a) a declaration that plaintiff had effectuated annulment of the contract on December 7, 1938; (b) that if the court should determine affirmatively, it award plaintiff judgment for balance due from defendant for gas at the rate of 35 cents per M. C. F. furnished subsequent to December 7, 1938; (c) that, in the alternative, if the agreement had not been terminated, plaintiff have judgment for the balance due for minimum quantities of gas which by the contract defendant was required to buy from plaintiff after April 1, 1939 and (d) in the further alternative, if the agreement had not been brought to an end, that it or its restrictive clauses be held void, because of a provision forbidding plaintiff to sell natural gas to persons other than defendant in the Terre Haute district, in violation of the Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note.

At the trial, plaintiff offered no evidence in support of cause for cancellation of the contract prior to December 31, 1940, but the court held it terminated as of the latter date and in full force and effect until then, and entered judgment against defendant for $10,294.61 for damages resulting from its breach in failing to take the minimum requirements.

Under the contract, plaintiff agreed to sell and defendant to purchase all of defendant's requirements of natural gas, for the purpose of producing manufactured gas which defendant was required to furnish under its then existing arrangements with two utility companies, defendant covenanting that it would purchase at least 500 cubic feet of natural gas for each 1000 cubic feet of manufactured gas sold to its two customers.

On October 7, 1938, plaintiff advised defendant that it had elected to terminate the contract because of alleged misrepresentations and because the agreement violated the Anti-Trust Act. Defendant thereupon sought to enjoin plaintiff from refusing to furnish gas, insisting that the agreement was in full force and effect. Shortly later plaintiff informed defendant that it would continue to furnish gas as provided in the contract but not "at the low price stated therein but at our regularly established rates now prevailing." From that time until December 31, 1940, plaintiff supplied gas, billing defendant therefor at the rate of 35 cents instead of 30 cents per unit. Defendant paid for all gas received, 30 cents per unit, and the difference of 5 cents per unit accumulated as a disputed demand upon plaintiff's part against defendant.

Until May, 1939, defendant received and paid for at least 500 feet of natural gas for each 1,000 feet of gas manufactured by it, as bargained, but after that date, until cessation of deliveries, defendant failed to take the minimum requirements by a total of 181,982 units. For defendant's failure to take these minimum amounts the court awarded damages.

Defendant claims that plaintiff can not properly recover upon the contract for the reason that it was not ready, willing and able to deliver goods upon the terms specified, relying upon the premise that readiness and willingness to perform in accord with the terms of the contract is, under elementary principles, essential to the right of recovery of one suing to recover the purchase price of goods sold. Schreiber v. Butler, 84 Ind. 576; Magic Packing Co. v. Stone-Ordean Wells Co., 158 Ind. 538, 64 N.E. 11. Inasmuch as plaintiff had repudiated the bargain in October 1938, says defendant, it could not thereafter be awarded damages for breach thereof. This is sound doctrine, generally speaking, but the question here is whether the facts are such as to relieve plaintiff of the prohibition. At all times subsequent to plaintiff's announcement that it considered the contract at an end, defendant took the position that it remained in full force and effect and insisted upon performance by plaintiff. In effect, plaintiff said to defendant, "we think we have a right to cancel our contract; we shall furnish you gas as provided therein but we shall expect you to pay more than the specified price," and defendant replied, "we shall accept the gas in accord with our agreement, which we insist remains in full force, and pay therefor at the contract price." In such situation the parties' minds did not meet in any new compact and their respective rights and obligations must be fixed in the light of these facts.

A purchaser, when the vendor refuses to perform in accord with the provisions of a contract, may acquiesce in the repudiation. He may elect, however, to treat the agreement as in full force and effect and to have his rights thereunder. Roehm v. Horst, 178 U.S. 1, at page 11, 20 S.Ct. 780, 44 L.Ed. 953. Declaration of the vendor that he repudiates, rescinds or cancels does not of itself terminate the contractual relationship; for one party can not, by himself, do away with it. By his wrongful act he merely gives to his adversary an election (Roller v. George H. Leonard & Co., 4 Cir., 229 F. 607, at page 615) under which the purchaser may waive the vendor's repudiation. Bierce v. Hutchins, 205 U.S. 340, at page 347, 27 S.Ct. 524, 51 L.Ed. 828. Waiver is usually said to be an intended abandonment or relinquishment of a known right, — the voluntary giving up of an existing right. When the term is used with reference to a breach, it includes giving up the right to treat the contract as discharged because of the breach of the adversary. Page on Contracts, Sec. 3037. Ordinarily, if the party who is not in default has induced the adversary to continue performance, or otherwise to alter his position, in reliance upon continued recognition of the existence of the contract by the party who is not in...