Twin City Pipe Line Co v. Harding Glass Co

• Citation: 83 A.L.R. 1168,51 S.Ct. 476,283 U.S. 353,75 L.Ed. 1112
• Decision Date: 04 May 1931
• Docket Number: No. 330,330
• Parties: TWIN CITY PIPE LINE CO. et al. v. HARDING GLASS CO
• Court: United States Supreme Court

283 U.S. 353

51 S.Ct. 476

75 L.Ed. 1112

TWIN CITY PIPE LINE CO. et al.

v HARDING GLASS CO.

No. 330.

Argued March 17, 18, 1931.

Decided May 4, 1931.

Messrs. Harry P. Daily and J. P. Woods, both of Ft. Smith, Ark., for petitioners.

Messrs. Joseph R. Brown and James B. McDonough, both of Ft. Smith, Ark., for respondent.

Mr. Justice BUTLER delivered the opinion of the Court.

The Twin City Pipe Line Company is a public utility. The Industrial Oil & Gas Company is a producer of natural gas in Arkansas. The majority of the stock of these companies is owned by the same shareholders. The respondent operates a large glass factory at Ft. Smith. The pipe line company takes all the gas produced by the oil company, transports it by pipe line from the fields to Ft. Smith, and there furnishes it at prices fixed by public authority to industrial consumers and to another utility, the Ft. Smith Light & Traction Company, which distributes it to domestic and commercial consumers.

Three suits, in which all the above-named companies and one Hale were parties, were commenced in the latter part of 1925. Two were brought by the pipe line company to recover for gas furnished to the glass company. The other was a suit in equity in which the glass company was plaintiff and the other companies and Hale were defendants. At that time gas for the operation of the glass plant was being furnished from a main of the pipe line company laid in a street on which the site of the plant abuts. The plant was the largest consumer of gas in Ft Smith, and required a dependable supply of from a million to a million and a half cubic feet per day. In its complaint the glass company alleged that the petitioners discriminated against it and failed to furnish an adequate supply; it asserted that the pipe line company was bound to construct a line about half a mile in length to connect a main, used to deliver gas to the traction company, with the glass plant and to drill additional gas wells to provide an adequate supply. The traction company objected to the proposed connctio n on the ground that the pressure and supply of gas available for the service of its customers thereby would be impaired. The suits were consolidated and tried. July 26, 1926, the court entered its decree denying the glass company the relief sought in its suit, giving to the pipe line company judgment against the glass company for $17,155.46, to the latter judgment over against Hale and to him judgment over against the oil company for the same amount. The glass company and the oil company appealed.

By written instrument dated August 30, 1926, the parties settled all matters involved in the litigation. It was agreed that all judgments be satisfied and canceled, that all existing contracts between the parties be abrogated, and that the appeals and suits be dismissed. The pipe line company agreed to build the additional line for the service of the glass company. The latter agreed to take all its requirements of gas so long as the pipe line company could adequately supply them and to pay the rates then in effect or thereafter fixed by public authority. The glass company agreed that, in the event of a shortage of gas so that there was not enough adequately to supply domestic consumers, the pipe line company might discontinue serving the glass company upon condition that the same character of service be given to it that was given to other industries.

All the agreements, save that of the glass company to continue to take its requirements of gas from the pipe line company, have been fully performed. The cost of the additional line constructed to serve the glass plant was $4,489.92. The oil company brought in seven wells while the suits were pending and twelve more after the contract was made. The gas from these was made available to the pipe line company for the service of its customers, inculding the glass company. The latter took gas as agreed until January 2, 1929. About that time a company controlled by it completed a pipe line from gas fields to the glass plant. The glass company asserted that the contract was invalid because contrary to public policy, and began to take practically all the gas it needed from its own subsidiary.

Petitioners brought this suit to enjoin the glass company from taking gas from any one other than the pipe line company and to require it specifically to perform the contract. The District Court entered its decree granting the relief prayed. The Circuit Court of Appeals reversed and remanded the case, with directions to dismiss the bill. 39 F.(2d) 408.

The question is whether the contract is unenforceable because contrary to public policy of Arkansas.

The general rule is that competent persons shall have the utmost liberty of contracting and that their agreements voluntarily and fairly made shall be held valid and enforced in the courts. Printing Company v. Sampson, L. R. 19 Eq. 462, 465; Baltimore & Ohio Southwestern Ry. v. Voigt, 176 U. S. 498, 505, 20 S. Ct. 385, 44 L. Ed. 560. The meaning of the phrase 'public policy' is vague and variable; courts have not defined it, and there is no fixed rule by which to determine what contracts are repugnant to it. The principle that contracts in contravention of public policy are not enforceable should beapplied with caution and only in cases plainly within the reasons on which that doctrine rests. It is only because of the dominant public interest that one who, like respondent, has had the benefit of performance...