Northern Natural Gas Co. v. Saturn Oil and Gas Co.
| Decision Date | 02 April 1965 |
| Citation | 240 F. Supp. 89 |
| Parties | NORTHERN NATURAL GAS COMPANY, a Corporation, Plaintiff, v. SATURN OIL AND GAS COMPANY, Inc., a Corporation, Defendant. |
| Court | U.S. District Court — District of Nebraska |
Roach, Grant & McCarthy, and J. C. Osborne and J. B. Will, Omaha, Neb. and Crosby, Pansing & Guenzel and Donn E. Davis, Lincoln, Neb., for plaintiff.
Flavel Wright, Lincoln, Neb., for defendant.
This is an action instituted by Northern Natural Gas Company, a corporation organized and existing under the laws of the State of Delaware with its principal place of business in the State of Nebraska against Saturn Oil and Gas Company, a corporation organized and existing under the laws of Kansas with its principal place of business in that state. The plaintiff Northern is attempting to recover alleged overpayments of purchase price of natural gas purchased from the defendant Saturn in the sum of $29,327.51. Saturn has counterclaimed for alleged underpayments of purchase price in an amount in excess of $69,000. Since there is diversity of citizenship and the amount in controversy exceeds $10,000, this Court has jurisdiction by virtue of 28 U.S.C.A. § 1332.
The facts in this case are best set out in chronological order. On December 1, 1951, Northern as buyer and Saturn as seller entered into a written purchase agreement concerning natural gas produced by Saturn from certain wells in the Kansas Hugoton Field. This contract provides that during the five year period commencing January 1, 1952, and ending December 31, 1956, Northern would pay Saturn for all gas purchased under the agreement at a rate of 11¢ per thousand cubic feet Mcf, measured at a pressure base of 16.4 pounds per square inch absolute p. s. i. a.. For the five year period beginning January 1, 1957 and ending December 31, 1961 and for each subsequent five year period, the contract further provides that prices will be renegotiated with arbitration used in case of inability to agree. During any period of disagreement, gas would continue to be supplied at the then effective price with any subsequently agreed upon price to apply retroactively within the period in question.
On December 2, 1953, the Kansas Corporation Commission issued a Minimum Price Order which was to take effect on January 1, 1954. This Order set a price of 11¢ per Mcf at 14.65 p. s. i. a. as a minimum for any gas taken out of the Kansas Hugoton Field. Since the volume of gas varies inversely with the amount of pressure being applied to it, the effect of this Order was to increase the price that Northern was paying Saturn for natural gas.
When the Order went into effect, Northern began stamping a condition of endorsement and acceptance on the backs of the checks which it sent to Saturn. This stamp read as follows:
"Endorsed and accepted subject to conditions of a letter dated February 23, 1954, received by payee from payor pertaining to the wellhead price order of the Kansas Commission dated December 2, 1953."
The letter of February 23, 1954, was basically a protest letter indicating that Northern would pay the increased price out of necessity and in compliance with the law but would expect refund to be made by Saturn for any overpayment resulting from subsequent decision that the Kansas Order was invalid or for any other reason. Identical stamps were placed on all subsequent checks through February of 1955.
On June 7, 1954, the Supreme Court of the United States, in Philips Petroleum Co. v. State of Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035, held that sales of gas such as the one involved here were subject to the jurisdiction of the Federal Power Commission. In August of 1954, the Federal Power Commission issued Order 174-A which required Saturn and other producers of gas to be sold in interstate commerce to file their rate schedules with the F.P.C. Saturn thereupon filed the contract of December 1, 1951, and the Kansas 11¢ Order.
On April 22, 1955, Northern sent another letter to Saturn requesting proof that Saturn had filed its rates, including the Kansas Order with the F.P.C. The letter reiterated Northern's position with respect to any possible refund by reason of any "payments which may prove to have been erroneously or wrongfully made, either by way of a disallowance of such payments or any part thereof as operating expense in rate proceedings of this Company before the Federal Power Commission or otherwise." Each check sent to Saturn by Northern in payment for gas from March, 1955, to November, 1957, was accompanied by the letter of April 22, 1955 and was also stamped in the same manner explained above. All of the checks during this period of time were accepted and endorsed by Saturn.
On January 1, 1957, the starting date for a new five year period under the 1951 contract, the parties had not yet renegotiated a price nor had arbitration been requested. On or about this time, both parties were interested in certain activities that were going on in the Congress of the United States concerning natural gas producers. Believing that any new price could possibly cause reconsideration of possible legislation that both parties were much interested in, Northern and Saturn entered into a letter agreement on March 27, 1957.
The pertinent two paragraphs of that letter agreement read as follows:
Following this agreement, Northern continued to stamp its checks as before and Saturn continued to accept and endorse them.
On January 20, 1958, the Supreme Court of the United States held that the Kansas 11¢ Order was void ab initio since it was in conflict with federal legislation in the field. Cities Service Gas Company v. State Corporation Commission of Kansas, 355 U.S. 391, 78 S.Ct. 381, 2 L.Ed.2d 355. By letters of January 24 and February 24, 1958, Northern repeated its protest of payments at the Kansas 11¢ Order level while waiting for the issuance of the Mandate in the Cities Service case.
By letter of March 24, 1958, Northern informed Saturn that payments for gas purchased in February, 1958, and thereafter would be made at the price stipulated in the contract of 1951, or 11¢ per Mcf at 16.4 pounds p. s. i. a.
On July 31, 1958, Northern wrote another letter to Saturn demanding a refund of $29,327.51. This amount is the difference between payments made under the Kansas 11¢ Order between January, 1954, and January, 1958, and the amount that would have been paid under the 1951 contract for that same period of time. On August 14, 1958, Saturn refused Northern's demand and demanded that Northern resume paying for gas at the price indicated in the Kansas 11¢ Order.
Saturn has now counterclaimed for $69,074.10 which is the difference between 1 the amount that would have been paid during the...
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Saturn Oil and Gas Co. v. Northern Natural Gas Co.
...a jury. The court's findings of fact, conclusions of law and basis of decision are set forth in its memorandum opinion reported at 240 F.Supp. 89. This suit was originally filed in the state court and was properly removed. Jurisdiction in the trial court, based upon diversity of citizenship......