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U.S. v. SOUTHWESTERN ELEC. CO-OP.

December 28, 1987

UNITED STATES OF AMERICA, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION AND SOYLAND POWER COOPERATIVE, INC., PLAINTIFFS,
v.
SOUTHWESTERN ELECTRIC COOPERATIVE, INC., DEFENDANT/COUNTER-PLAINTIFF, V. SOYLAND POWER COOPERATIVE, COUNTER-DEFENDANT.



The opinion of the court was delivered by: Stiehl, District Judge:

MEMORANDUM AND ORDER

Before the Court are the parties cross-motions for summary judgment.

This cause was filed by the United States of America on behalf of the Rural Electrification Administration (REA), The National Rural Utilities Cooperative Finance Corporation (CFC), and Soyland Power Cooperative, Inc. (Soyland), seeking a declaratory judgment that the Wholesale Power Contract between Soyland and Southwestern Electric Cooperative, Inc. (Southwestern) is binding and enforceable. Count II of the complaint for declaratory judgment was previously dismissed by this Court.

Plaintiffs seek summary judgment on Count I of the complaint. Southwestern has filed a cross-motion for partial summary judgment on paragraphs 35 and 37 of plaintiffs' complaint.

Southwestern has filed a counterclaim seeking a declaratory judgment that the wholesale Power Contract is void, because of mutual mistake of fact in Count I, and frustration of purpose in Count II.

Fed.R.Civ.P. 56(c) provides that a district court shall grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." In determining whether a district court properly granted summary judgment, "[a]ll factual inferences are to be taken against the moving party and in favor of the opposing party." International Administrators, Inc. v. Life Insurance Co. of North America, 753 F.2d 1373, 1378 (7th Cir. 1985). In instances in which "inferences contrary to those drawn by the trial court might be permissible," a district court's grant of summary judgment must be reversed. Munson v. Friske, 754 F.2d 683, 690 (7th Cir. 1985). Once a motion for summary judgment has been made and properly supported, however, the nonmovant does have the burden of setting forth specific facts showing the existence of a genuine issue of a material fact for trial. See Rule 56(e); Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir.), cert. denied, 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983), (noting that "a bare contention that an issue of fact exists is insufficient to raise a factual issue"). Although a requisite, the existence of a factual dispute, nonetheless, is not, standing alone, sufficient to bar summary judgment. It is well settled that a "factual dispute does not preclude summary judgment unless . . . the disputed fact is outcome determinative under the governing law." Egger v. Phillips, 710 F.2d 292, 296 (7th Cir.), cert. denied, 464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983), as cited in Shlay v. Montgomery, 802 F.2d 918, 920 (7th Cir. 1986).

Plaintiffs have asserted that there is no genuine issue of material fact as to the validity and enforceability of the all-requirements contract, and that, therefore, they are entitled to summary judgment. Southwestern asserts that material issues of fact exist by claiming the contract is "void" on the bases of mutual mistake of fact and/or frustration of purpose, and that a jury should determine whether these defenses do, in fact, exist.

The matter is before this Court on diversity jurisdiction, therefore this Court will apply the choice-of-law rules of the State of Illinois. Baltimore Orioles v. Major League Baseball Players, 805 F.2d 663, 681 (7th Cir. 1986) cert. denied, ___ U.S. ___, 107 S.Ct. 1593, 94 L.Ed.2d 782 (1987). The parties are in agreement that the contract in question was entered into, and is currently being performed, in Illinois, therefore, Illinois contract law principles control this issue. The basic issue underlying these motions is whether the contract between Soyland and Southwestern is binding and enforceable, or whether it is subject to rescission under either the doctrine of mutual mistake of fact, or frustration of purpose.

MISTAKE OF FACT

It should initially be noted that defendants seek to have this Court render the Soyland/Southwestern contract void on the basis of mutual mistake of fact. It is clear from both the Restatement of Contracts and Illinois case law that a contract may be voidable or subject to rescission on this basis, but it is not void on its face.

The Restatement of Contracts 2d at § 151 defines "mistake" as a "belief that is not in accord with the facts." Further, § 152 details when a mistake of both parties makes a contract voidable:

  (1) Where a mistake of both parties at the time
  of contract was made as to a basic assumption on
  which the contract was made has a material effect
  on the agreed exchange of performances, the
  contract is voidable by the adversely affected
  party unless he bears the risk of the mistake
  under the rule stated in § 154.
  (2) In determining whether the mistake has a
  material effect on the agreed exchange of
  performances, account is taken of any relief by
  way of reformation, restitution or otherwise.

§ 154 provides:

A party bears the risk of a mistake when

  (a) the risk is allocated to him by agreement of
  ...

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