Lone Star Gas Co. v. Municipal Gas Co.

• Decision Date: 07 March 1928
• Docket Number: (No. 4168.)
• Citation: 3 S.W.2d 790
• Parties: LONE STAR GAS CO. v. MUNICIPAL GAS CO.
• Court: Texas Supreme Court

Page 790

3 S.W.2d 790

LONE STAR GAS CO. v. MUNICIPAL GAS CO.

(No. 4168.)

Supreme Court of Texas.

March 7, 1928.

Error to Court of Civil Appeals of Fifth Supreme Judicial District.

Action by the Municipal Gas Company against the Lone Star Gas Company, in which Levi Brashear and others intervened. Judgment for defendant was reversed in part, and the cause remanded in part, with instructions by the Court of Civil Appeals (259 S. W. 684), and defendant brings error. Affirmed.

Karl Griffith and Lawther, Pope, Leachman & Lawther, all of Dallas, for plaintiff in error.

Hamp P. Abney, of Sherman, for interveners.

Merritt & Leddy, of Dallas, for intervener City of McKinney.

Charles L. Harty and J. W. Hassell, both of Dallas, for defendant in error.

PIERSON, J.

Plaintiff in error, Lone Star Gas Company, and defendant in error, Municipal Gas Company, entered into four certain contracts, of different dates, in which plaintiff in error contracted to furnish and supply to defendant in error all the gas needed and required for it to supply its customers in certain towns and cities of the state, and likewise defendant in error contracted to receive from plaintiff in error all gas needed to supply its customers in said towns and cities, and a basis of settlement was agreed to be a certain per cent. of the gross proceeds of the sale of said gas to the consumers. Plaintiff in error had large holdings of gas leases, gas wells, and other gas properties in the counties of Clay and Palo Pinto in the state of Texas, and defendant in error had gas franchises and pipe distributing systems in numerous towns of the state for supplying the consumers of said cities and towns with natural gas, and in the contracts obligated itself to secure certain other franchises, and to build distributing systems under them. The cities and towns and villages to be thus served by both companies included the following: Byers, Petrolia, Wichita Falls, Bellvue, Bowie, Alvord, Sunset, Decatur, Rhome, and other towns along the pipe line system leading to or adjacent to said cities and towns; also Sherman, Denison, Denton, and towns along that line; also McKinney; and, again, the cities and towns of Corsicana, Hillsboro, Cleburne, Ennis, Waxahachie, Granbury, Itasca, Italy, Milford, West, and other cities and towns located on, or adjacent to, that line. The contracts contain various clauses and provisions looking to the performance of said contracts by each party, and, among other things, contain a right of forfeiture clause in the following language:

"If either party shall willfully violate any of the covenants undertaken herein, or any of the duties imposed upon it by this contract, such willful violation shall entitle the other party to terminate this contract, provided that the party desiring to terminate for such cause shall give the offending party at least thirty days' written notice specifying the particulars wherein it is claimed that there has been a violation hereof; and if at the end of such time the party notified has not removed the cause of complaint, or remedied the purported violation, then the termination of this contract shall be deemed complete."

On June 23, 1921, plaintiff in error addressed a communication to defendant in error, in which it declared a forfeiture of each of the four contracts, and in which the grounds of forfeiture of the first three contracts were stated to be:

"That your company has failed and refused to use reasonable diligence in maintaining and operating its various distributing systems in an efficient manner, and has failed and refused to prevent an unreasonable leakage, wastage, and escape of gas in said distributing systems, and that there has been a failure to keep said distributing plants in good operating condition; and, further, that your company has failed and refused to make payment to this company for gas sold and purchased within the time specified by said contracts."

The ground of forfeiture of the fourth contract was stated to be:

"First, that your company has failed and refused to construct or even commence the construction of distributing plants in the towns of Granbury, Itasca, Italy, Milford, and West; second, that your company has failed and refused to construct an adequate distributing plant in the city of Waxahachie, and has failed and refused to make extensions of the distributing systems now constructed in order to encourage the use of natural gas and secure as large a sale thereof as is possible; third, that your company has failed and refused to make payment to this company for gas sold and purchased within the time specified in said contract."

Defendant in error, Municipal Gas Company, filed this suit in the district court of Dallas county, in which it denied that it had breached any of the terms of any of the contracts, and prayed for an injunction restraining plaintiff in error from declaring a forfeiture of the contracts and from disconnecting its pipe lines from defendant in error's distributing systems in the different towns and cities, and, in addition, prayed for specific performance of its said contracts with plaintiff in error. With leave of the court, certain individual consumers of gas in certain of the cities mentioned, and the city of McKinney, intervened in said suit.

Upon hearing, the district court sustained plaintiff in error's general demurrer and three special demurrers to defendant in error's petition, and likewise sustained a general demurrer to the petitions of interveners. Defendant in error and interveners declined to amend, and the case was dismissed by the trial court, from which actions defendant in error and interveners appealed to the Court of Civil Appeals for the Fifth Supreme Judicial District of Texas.

The Court of Civil Appeals in its very clear and able opinion found that the trial court had based its rulings upon four certain holdings, each of which it found to be erroneous, to wit:

First. That the trial court erred in holding that defendant in error did not show any equity that would entitle it to relief, either in the form of an injunction restraining plaintiff in error from forfeiting its contracts, or for an affirmative decree enforcing specific performance thereof.

Second. That it erred in holding that the relief of specific performance could not be granted on the alleged ground that defendant in error's pleadings did not show that plaintiff in error is able to furnish the natural gas from the two fields mentioned.

Third. That the trial court erred in holding that specific performance could not be granted because the contracts extend over a long period of time, involve the exercise of personal skill and scientific knowledge and ability, and call for, and require, the expenditure of large sums of money.

Fourth. That the trial court erred in holding that specific performance could not be granted because the contracts disclose on their face that they are wanting in mutuality to the extent that specific performance of same could not be enforced against defendant in error.

The Court of Civil Appeals held that all of the necessary elements were shown in the petition to entitle defendant in error, Municipal Gas Company, to the relief it sought, and, if upon hearing it sustained its allegations, it was entitled, not only to an injunction restraining plaintiff in error from disconnecting its pipe lines from defendant in error's distributing systems and cutting off its supply of gas, but, in addition, was entitled, upon said proof, to a decree of specific performance of the contracts as alleged. It also held that the contention of plaintiff in error "that the state Legislature, by valid enactment, abrogated all existing contracts in reference to the sale and delivery of natural gas by a producing company to a distributing company, and that, by reason thereof, the courts are without power to enforce specific performance of these contracts, and that the parties must be relegated to the Texas Railroad Commission for a settlement of all differences that may arise under these contracts," was not well taken, and that the enactment of the Thirty-Fifth Legislature, known as the "Cox Pipe Line Bill" (chapter 30), could have no effect upon these contracts, in that there was no issue as to rates charged the public and no issue of the adequacy of the service to the public involved, and that the jurisdiction of the Railroad Commission had not been invoked, and in no wise attached to the subject-matter of these contracts. The Court of Civil Appeals affirmed the judgment of the trial court dismissing the...