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Universal Gas Co. v. Central Illinois Public Service Co.

February 3, 1939

UNIVERSAL GAS CO.
v.
CENTRAL ILLINOIS PUBLIC SERVICE CO. ET AL.



Appeal from the District Court of the United States for the Southern District of Illionis; Charles G. Briggle, Judge.

Author: Major

Before EVANS, MAJOR, and TREANOR, Circuit Judges.

MAJOR, Circuit Judge.

This is an appeal from a decree of the District Court, dismissing plaintiff's suit, after a hearing on its amended and supplemental bill in equity and of the answers thereto. The complaint alleged that Indiana Consumers' Gas and By-Prouducts Company (the predecessor of Universal Gas Company, herein referred to as plaintiff), on or about June 25, 1932, entered into a contract with Central Illinois Public Service Company, one of the defendants, by which it agreed to sell and deliver to said defendant, in its pipe line at the Indiana-Illinois state line, all natural gas required by said defendant in the operation of defendant's gas public utilities in the Cities of Paris, Charleston, Mattoon, Effingham and other cities, villages and communities in Illinois, along and adjacent to defendant's gas transmission line for a period of fifteen years. The contract in question, as well as the supplemental contract dated July 12, 1932, was attached as exhibits to the complaint. At the time of the execution of these contracts, plaintiff was supplying manufactured gas to the defendant for distribution in this same territory under contracts, the terms of which did not expire until November 1, 1949.

By the contract in suit, the parties expressed their desire to substitute natural for manufactured gas and provided that their obligations under the manufactured gas contract should cease as of that date upon which delivery of natural gas by plaintiff to defendant should commence under the agreement. Provisions were made with respect to quality, price, measurement, terms of sale, failures in delivery, for action in case of seller's inability to perform conditions and various other details regulating the rights and obligations of the parties subsequent to the commencement of delivery. The contract, as alleged in the complaint, then concluded as follows:

"15. The term of this agreement shall be the period of fifteen (15) years next following the date hereof.

"16. This agreement is entered into by Central Illinois subject to the approval of the Illinois Commerce Commission, and delivery of natural gas by Indiana Comsumers, and acceptance thereof by Central Illinois, under this agreement shall commence as soon as practicable and within sixty (60) days next following such approval."

The plaintiff alleged that after the execution of said agreement said defendant filed with the Illinois Commerce Commission a petition for approval thereof; and that, while said petition was pending, said defendant began receiving natural gas from plaintiff instead of the artificial gas which defendant had previously received; and that defendant continued to receive natural gas and to pay plaintiff therefor the price fixed in said contract until some time in the year 1936, when the Illinois Commerce Commission entered an order disapproving the contract; and that by reason thereof, defendant had waived the condition in the contract requiring approval by the Commission.

By supplemental bill, plaintiff added to its complaint an allegation that defendant had refused to pay the cost of operating a compressor which plaintiff ahd installed at Paris, Illinois, for the purpose of increasing the amount of gas converyed through defendant's pipe line west of that point. The defendant answered denying that it had waived the requirement for approval of the contract by the Illinois Commerce Commission and denying that anything that had been done was intended or understood by either of the parties as waiving that requirement, and alleging that the plaintiff was obligated to pay the cost of operating the compressor above mentioned.

The case was heard and decided upon the oral testimony of witnesses and numerous exhibits in connection with an interpretation of the contract in question. The issues were determined in favor of the defnedant and as a result, plaintiff brings this appeal.

The contested issue revolves largely about the construction to be given Paragraph 16 of the contract. It is the contention of the plaintiff that the language in such paragraph "subject to the approval of the Illinois Commerce Commission" constitutes a condition precedent, and that defendant, by its acceptance of natural gas prior to the approval of the Commerce Commission, waived such provision and therefore it can not be relied upon as a defense, and that in any event, defendant, by its acts and conduct, is estopped from denying such waiver. On the other hand, it is defendant's contention that the language in controversy was intended as a continuing requirement, but even if the provision be construed as a condition precedent, there was no intention on the part of the defendant to waive it and in fact, no waiver was shown, and that the plaintiff is in no position to invoke the doctrine of estoppel as to defendant's right to deny waiver. There is also involved as a contested issue, the question as to whether plaintiff or defendant assumed the burden of increasing the pressure on defendant's pipe line and the cost of operating the compressor installed for such purpose.

For the purpose of our discussion, we shall assume that plaintiff's contention that "subject to the approval of the Illinois Commerce Commission" is a condition precedent. In fact, we think it is such a condition. If such it be, then plaintiff's action is maintainable only upon the theory that such condition was waived by the defendant. In order to establish such waiver, plaintiff relies largely upon the act of the defendant in accepting natural gas from the plaintiff prior to the approval of the contract by the Commerce Commission and for nearly four years continuing to accept gas, and a recognition by the defendant of the terms of the contract in various particulars and by the further claim that the defendant misled the Commerce Commission as to the adequacy of the gas supply furnished by the plaintiff so as to prevent an approval of the contract by the Commerce Commission. Inasmuch as the question of waiver is generally one of fact (Vol. 27, R.C.L. 912), and under the well established rule*fn1 that this court is bound by the finding of the trial court upon such questions, where predicated upon substantial evidence, it becomes important to consider the conclusion of the trial court in this respect.

Finding No. 16 is: "that by receiving natural gas instead of artificial gas before said contract had been approved by the Illinois Commerce Commission, Central Illinois Public Service Company did not intend to, and did not, waive or modify the express provision of said contract of June 25, 1932 that it was made and entered into subject to approval by said Commission; and that neither of said parties understood or intended that the delivery and acceptance of natural gas prior to such approval by the Illinois Commerce Commission should alter the contract of June 25, 1932, or that it should constitute a waiver of the express proviso or condition of that contract with reference to approval by said Commission, but that both said parties intended that for the time being they should proceed in accordance with the provisions of that contract until the Illinois Commerce Commission should reach a decision as to the approval of said contract, and each of them intended to take their chances upon ultimate approval of said contract by said Commission."

Finding No. 19 is: "That subsequent to the 11th day of August, 1932, there was no conduct, representation or action by either of the parties to said contract of June 25, 1932, constituting any waiver by Central Illinois Public Service Company of the provision of said contract making it subject to the approval of the Illinois Commerce Commission nor which would estop said Central ...


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