Western Natural Gas Co. v. Cities Service Gas Co.

• Decision Date: 12 October 1966
• Citation: Western Natural Gas Co. v. Cities Service Gas Co., 223 A.2d 379 (Del. 1966)
• Parties: WESTERN NATURAL GAS COMPANY, Defendant Below, Appellant, v. CITIES SERVICE GAS COMPANY, Plaintiff Below, Appellee.
• Court: Supreme Court of Delaware

Page 379

223 A.2d 379

66 P.U.R.3d 218

WESTERN NATURAL GAS COMPANY, Defendant Below, Appellant, v. CITIES SERVICE GAS COMPANY, Plaintiff Below, Appellee.

Supreme Court of Delaware.

Oct. 12, 1966.

Rehearing Denied Nov. 1, 1966.

Clair John Killoran and Courtney H. Cummings, Jr., of Killoran & VanBrunt, Wilmington (Lidden, Austin, Dawson & Sapp, Houston, Tex., of counsel), for appellant.

John J. Morris, Jr., Howard L. Williams, and Henry N. Herndon, Jr., of Morris, James, Hitchens & Williams, Wilmington (Charles V. Wheeler, Oklahoma City, Okl., of counsel), for appellee.

WOLCOTT, C.J., and CAREY and HERRMANN, JJ., sitting.

CAREY, Justice.

The sole issue presented in this appeal from the Superior Court is whether the undisputed evidence in the record justifies the holding that a contract existed between the parties whereby Western Natural Gas Company (Western) is obligated to repay Cities Service Gas Company (Cities) the amount of certain overpayments for natural gas.

Prior to the present appeal, the case was before us upon a different issue, i.e., whether Cities was entitled to recover the overpayments upon a theory of restitution because they were made under duress or business compulsion. See Del., 201 A.2d 164. The majority of the Court then held that the record was insufficient to justify summary judgment upon that ground. Although the present contract theory was argued, we declined to pass upon it because the question had not been decided by the Court below and was not raised here until reargument. Following an unsuccessful attempt by Western to have the matter reviewed by the United States Supreme Court, 379 U.S. 905, 85 S.Ct. 189, 13 L.Ed.2d 177, additional affidavits were filed in Superior Court, after which Cities renewed its motion for summary judgment on the contract theory. That Court ruled in Cities' favor.

Because many of the facts have been set forth in our previous opinion, supra, we will state only those presently pertinent. The parties, prior to January 1st, 1954, were bound by a contract whereby Western supplied natural gas to Cities from the Hugoton Field at a price of 8cents per thousand cubic feet. That contract was subject to all 'valid orders, rules and regulations of any regulatory body having jurisdiction'. Effective as of that date, the Corporation Commission of Kansas promulgated an order setting a minimum price of 11cents per M.C.F. for gas produced from the Hugoton Field. Cities immediately filed suit challenging the validity of that order and was ultimately successful in having it declared invalid. Cities Service Gas Company v. State Corporation Commission, 355 U.S. 391, 78 S.Ct. 381, 2 L.Ed.2d 355.

On January 21st, 1954, before making any payments at the 11cents rate, Cities wrote the following letter to Western:

'The State Corporation Commission of the State of Kansas by Order dated December 2, 1953, in Docket No. 44099--C (C--3216) directed that on and after January 1, 1954, as a condition precedent for withdrawal of gas from the Hugoton Gas Field in Kansas, there shall be paid therefor or attributed thereto, at the wellhead, a minimum price of not less than eleven cents (11cents) per M.c.f. (14.65 pounds p.s.i.a.).

'Cities Service Gas Company and certain other parties filed Petitions in the District Court of Finney County, Kansas, for a judicial review of the said Order.

'Pending final judicial determination of the said Order and beginning January 1, 1954, Cities Service Gas Company intends to pay for all gas purchased by it in the Kansas Hugoton Field in strict compliance with the terms and conditions of the said Order. Such compliance with said Order by this Company, however, is made to avoid the penalties provided by the Kansas statutes for a violation thereof, and the payments made to you in compliance with said Order pending its final judicial determination are to be considered and accepted by you as involuntary payments on our part, without prejudice to our rights in said litigation, and in no event as an acquiescence by us in the validity of said Order.

'In the event the said Order is finally judicially modified or declared to be invalid in whole or in part, as a result of which you have been overpaid for gas purchased during the interim aforesaid, Cities Service Gas Company will expect you to refund to it the amount of said overpayments.'

Thereafter, payments by Cities were made at the rate of 11cents by monthly checks which were received and cashed by Western without comment. To each check was attached a voucher which contained a statement that the payment was made subject to the provisions of the letter of January 21, 1954.

After the decision in Cities Service Gas Company v. State Corporation Commission, supra, was handed down in January 1958, Cities resumed making payments at the 8cents rate, and demanded the refund of the 'excess' which it now seeks to recover in this action.

Cities presently relies upon the theory that the letter of January 21st, 1954 constituted an offer which was accepted by the receipt and cashing of the checks, whereby a contract, or a modification of the original contract, was created under which Western agreed to repay the excess if and when the Kansas Order was found invalid. The Court below accepted that theory.

Western denies that any refund contract was created. It argues that the letter of January 21, 1954 was nothing more than a statement by Cities of its intent to pay the 11cents rate; that its language was inadequate to put Western on notice of any intent to make an offer or to call upon Western to agree or disagree; that the language on the check vouchers was insufficient to bind Western in any way; and that prior and subsequent conduct of the parties demonstrates the lack of an intent by either party to create a refund contract.

Cities cites two cases which it contends involved the same factual situation; Western contends that they are basically different and in fact lend no aid to Cities. Those cases are Cities Service Gas Company v. United Producing Company, D.C., 212 F.Supp. 116, and Northern Natural Gas Company v. Landon, D.C., 212 F.Supp. 856, affd. 10 Cir., 338 F.2d 17, cert. den. 381 U.S. 914, 85 S.Ct. 1529, 14 L.Ed.2d 435. Both of them were suits for refunds of alleged overpayments made because of the same price order of the Kanses Corporation Commission. We pause to examine them.

In the United case, Cities wrote to United exactly the same letter on the same date as the one written to Western. Shortly thereafter United suggested a modification which was refused by Cities, whereupon United accepted the terms originally proposed with a minor change ¹ which Cities apparently did not accept. Cities then proceeded to make payments by voucher checks precisely like those sent to Western, the vouchers referring to Cities original letter of January 21, 1954. The Court made this finding:

'Plaintiff's letter dated January 21, 1954, plaintiff's Exhibit 4, constituted a tender of the minimum price of 11cents per Mcf upon condition that the difference between the contract price, 7cents per Mcf, 16.4#psia, and the price paid in compliance with the invalid Kansas Order, be refunded by defendant to plaintiff if and when that Order should be adjudged invalid. The subsequent acceptance by defendant of the monthly payments tendered by voucher check, containing a notation that payment was made subject to the terms of the January 21 letter, constituted an acceptance by defendant of plaintiff's offer to pay upon said condition or refund. Therefore, there is a binding contract between the parties for defendant to make the refund sued for here.'

Western contends that the United decision is not persuasive here because United in fact treated Cities' letter as an offer which it accepted, whereas Western did not consider it to be an offer and did not accept it. It will be noted, however, that the Court's finding made no mention of United's letters but expressly based its conclusion of acceptance upon the original letter and the acceptance of the voucher checks. We cannot surmise that this was an oversight on the Court's part; the finding may be explainable by the fact that United's last letter...