Mound Valley Vitrified Brick Co. v. Mound Valley Natural Gas & Oil Co.

• Decision Date: 01 May 1911
• Citation: 258 F. 936
• Parties: MOUND VALLEY VITRIFIED BRICK CO. v. MOUND VALLEY NATURAL GAS & OIL CO. et al.
• Court: U.S. District Court — District of Kansas

258 F. 936

MOUND VALLEY VITRIFIED BRICK CO. v. MOUND VALLEY NATURAL GAS & OIL CO. et al.

United States Circuit Court, D. Kansas, Third Division.

May 1, 1911

Farrelly & Evans, of Chanute, Kan., and John Madden, of Wichita, Kan for plaintiff.

Jepson & Jepson, of Sioux City, Iowa, and Glasse & Burton, of Parsons, Kan., for defendants.

POLLOCK District Judge.

This action at law was brought by plaintiff against defendants jointly to recover damages for breach of contract to supply plaintiff with natural gas used by it in its work of manufacturing brick. A trial before the court and jury was had, resulting in a verdict in favor of plaintiff against defendants, jointly, for the sum of $15,000. On the return of the verdict, the court, on its own motion, directed the clerk to not enter judgment thereon until certain matters of law might be presented and determined by the court. Separate motions of defendants, raising questions of law on the record, have been filed and presented in oral argument and on briefs of counsel, and now await decision.

The facts necessary to a decision of the pending motions may be briefly stated, as follows: The plaintiff, being about to construct a plant for the purpose of engaging in the manufacture of brick, and being desirous of obtaining in advance a supply of fuel used in such business, on February 13, 1904, entered into the following contract in writing with defendant the Bankers' National Development Company (hereinafter called the 'Development Company'):

'This contract and agreement made and entered into this 13th day of February, 1904, by and between the Bankers' National Development Company, a corporation, organized and existing under the laws of the state of South Dakota, and doing business under the laws of the state of Kansas, and having an office for the transaction of business in the city of Mound Valley, Labette county, Kan., its successors and assigns, party of the first part, and the Mound Valley Vitrified Brick Company, a corporation organized under the laws of the state of Kansas, and doing business in Labette County, Kan., and having an office in the city of Mound Valley, Kan., its successors and assigns, party of the second part, witnesseth:

'(1) That the party of the first part hereby agrees to undertake to furnish to party of the second part natural gas from the wells in the field owned, leased, and operated by them in Labette county, Kan., in sufficient quantities to operate the brick plant now owned by the second party near Mound Valley, Kan., located on the north fractional part of the west half of the southeast one-fourth of section 35, township 32, of range 18, formerly known as the I. M. Hinds land, to lay and maintain a pipe line to said brick plant, including one three-inch high pressure gas regulator, and two two-inch low pressure regulators, and furnish sufficient gas to furnish the power to operate all machinery used by said second party in operating its said brick plant; also to supply gas for all drier houses, and also gas to burn two kilns of brick at the same time at full heat; that is to say, said party of the first part, its successors and assigns, undertake to furnish to said second party natural gas in sufficient quantities to enable the said second party to run and operate its brick plant at full capacity and at the same time to furnish gas for all drier houses and for the burning of two kilns of brick at full heat at all times day and night, and at all seasons of the year, and for lighting and heating said brick plant, when required by said second party, during the existence of this contract.

'(2) The party of the second part agrees to receive and use gas for the purposes above named, and to use all reasonable means and modern appliances, so as not to waste any gas, and to pay to said first party, its successors and assigns, for said gas used, at the rate of 60 cents per 1,000 brick burned, and to pay for the same on the 15th day of each month after the kilns are emptied; and the party of the first part may shut off the gas if the party of the second part shall fail to pay for the same as herein provided within five days after the same is due and payable.

'(3) It is expressly agreed and understood by and between the parties hereto that gas for domestic purposes shall be reserved over and above the uses of gas for manufacturing purposes; and should the gas supply of the party of the first part be not sufficient to furnish gas for heating and lighting and for the operating of the brick plant belonging to the party of the second part as above provided, then and at that time the party of the first part will drill in other and sufficient wells on the lands leased then held and operated by them, and to use all diligent effort to supply the deficiency, and in conjunction with the board of directors of the party of the second part, to make all reasonable effort in their power to make the supply sufficient for the needs of the party of the second part. The party of the first part shall not be liable for a failure to furnish gas to second party as herein provided, after due diligence shall have been used by first party in the way of securing the necessary quantity of gas.

'(4) It is further agreed to by party of the first part that if they should, at any time after the date of this contract, agree to furnish gas to any other party or parties for manufacturing purposes, and the gas supply should fail so that there would not be a sufficient quantity of gas to supply all so contracted with, and it should cause the supply furnished the party of the second part to be insufficient for the needs of the second party, then the party of the first part are to cease to furnish (for manufacturing purposes only) to party or parties contracted with subsequent to the date of this contract, until sufficient gas has been secured to reinforce the supply until there shall be sufficient gas for all; in other words, the party of the second part are to be furnished gas by the party of the first part in preference to others contracted with after the date of this contract, except as to domestic users.

'(5) It is expressly agreed and understood by and between the parties to this agreement, in case that the party of the first part shall, at any time during the existence of this contract, fail to furnish the said party of the second part sufficient gas for the purposes above named, and in the manner above named, and in the quantities required in this contract for a period of fifteen days, the said second party shall have the right to terminate this contract at any time after such failure, upon written notice deposited in the post office, addressed to the secretary of the party of the first part.

'(6) It is further expressly understood by and agreed to by the parties to this contract, that its terms, conditions, premises and duties to be performed by each and both of the parties hereto, shall be for the term of fifteen years from the date of the execution hereof.

'In witness whereof, the parties hereto have each caused this contract and agreement to be executed by its president, attested by its secretary and the corporate seal attached, this 13th day of Feb., 1904. Bankers' National Development Co., by A. D. Jones, President. Attest: Geo. F. Hammar, Secty. Mound Valley Vitrified Brick Co., by E. R. Dickerson, Pres. Attest: James Lear, Jr., Secty.'

The respective obligations of this contract were fully performed by the parties thereto until May 4, 1904, on which day the Development Company assigned its rights under the contract to defendant the Mound Valley Natural Gas & Oil Company, (hereinafter called the 'Gas Company') by the following assignment in writing:

'In consideration of one dollar and other valuable considerations in hand paid by the Mound Valley Natural Gas & Oil Company, the receipt of which is hereby acknowledged, we hereby sell, assign and transfer all our right and title to the within contract unto the said Mound Valley Natural Gas & Oil Company. Bankers' National Development Company, A. D. Jones, President. (Seal.) Attest: Geo. F. Hammar, Secretary. 'State of Kansas, Labette County-- ss.:

'Be it remembered that on this 2d day of May, A.D. 1904, before me, the undersigned, a notary public in and for said county and state aforesaid, came A. D. Jones, president of the Bankers' National Development Company, and Geo. F. Hammar, secretary of the Bankers' National Development Company, who are personally known to me to be the same persons who executed the above instrument of writing, and who duly acknowledged the execution of the same.

'In testimony whereof, I have hereunto set my hand and affixed my official seal the day and year last above written.

'(Seal.)

H. T. Swain, Notary Public.

'My commission expires July 30, 1917.'

Thereafter the Gas Company proceeded with performance of the conditions of the contract obligatory on the part of the Development Company to be performed, and received from plaintiff the consideration expressed in the contract for the performance of such service until the month of December, 1908, when it refused longer to perform said contract. Whereupon this action was brought by plaintiff against both the Development Company and the Gas Company, jointly, to recover damages sustained by reason of such breach.

The question of law on which the court requested advice of counsel on return of the verdict by the jury is this: May the plaintiff in this action, as a matter of law, proceed against both defendants jointly under the terms of the contract and its assignment, and hold both liable for damages sustained by it by reason of the breach? If not, which of defendants is liable to plaintiff for the amount of damages as...