Montgomery Light & Power Co. v. Montgomery Traction Co.

191 F. 657 | U.S. Circuit Court for the District of Middle Alabama | 1911

JONES, District Judge

(after stating the facts as above). The demurrer, of course, admits the truth of all the facts well pleaded in the bill. We have then this case: The complainant, a quasi public corporation, engaged in the business of generating and supplying electrical current for lighting and power purposes to individuals and the public herd', has a contract with the Traction Company, another quasi public corporation, engaged in the street car business, whereby the Power Company agrees, in substance, .to sell and deliver for a certain price, and the Traction Company agrees to purchase and receive from it exclusively, for a period of 15 years, 7 of which have not expired, such direct electrical current as may be required for propelling its cars and those of any other corporation which it may operate or permit to use its tracks, and for lights for parks, places of amusement, offices, etc.

The complainant, immediately upon the execution of the contract, began to furnish, and the Traction Company to receive, the electrical current contracted for, and has expended some $200,000 in machinery and apparatus to enable it the better to carry out the terms of the contract, and has at. all times faithfully lived up to the terms and provisions of the contract, and is ready, able, and desirous to carry out every stipulation of the contract until it expires, as required by its terms. The defendant Traction Company is about to discontinue receiving electrical current from the complainant and to take it from another source, in disregard of its contractual obligation, and without excuse for its breach.

If the Traction Company is permitted to do this, complainant will have no adequate remedy at law for the recovery of the damages it will suffer from the respondent’s causeless breach of the contract. .The extent of defendant’s business, the lines it would construct or operate, the number of cars it would use, the conditions under which it would run them, the places of amusement it would operate, and the quantity of electrical energy it would consume, during the ensuing seven years of the life of the contract, are uncertain and speculative, and could not be recovered in an action at law. Irreparable injury would therefore be inflicted upon the complainant if the defendant be permitted to breach the contract without just cause, by refusing to take electrical power exclusively from the complainant. It would be a reproach to justice, under such circumstances, if a court of equity were powerless to intervene and charge the conscience of the defendant with the duty of not wantonly inflicting such irreparable injury upon the other party to the contract, and the court ought to prevent it, if it can give any relief, consistent with the settled principles of equity and the rights of the parties under the contract, as they themselves have therein measured and determined them.

Although counsel for respondent necessarily admit, in the present posture of the case, that there is no excuse for defendant’s refusal to receive electricity from the complainant, they insist, notwithstanding, that there is no equity in the bill, as the relief sought practically amounts to specific performance of the contract, extending over a term of years, requiring the exertion of skill and the performance_ of personal services, which the court would be compelled to supervise, and defendant could not have a decree against the complainant for the specific performance of the contract on its part; and further that the court cannot grant an injunction against the refusal to carry out the contract, for its unexpired term, when by its terms the acts of the parties might lawfully terminate it before the date fixed in the contract for its expiration. They further insist under the .term of the contract, “that should said Power Company fail, from any cause whatever, to carry out'the terms of this contract or to furnish the current required hereunder from any other source for a period of ten days, said Street Railway may, at its election, thereupon either terminate this contract or await the making of such repairs” ; that the parties deliberately contracted that the Traction Company (the successor of the Street Railway Company) might judge for itself whether the contract had been violated, and has the right at its peril, if it judges wrongfully, to refuse to carry it out, and subject itself only to such damages as may be recoverable in a court of law; and that by preventing defendant from refusing to receive the current, in the' face of the provisions of the contract, pending an investigation whether its refusal was wrongful, would be adding a terra to the contract, and give the complainant a right against the defendant which the contract did not secure to it.

It suffices to sav of this objection that, on demurrer, it is admitted that there has beén no breach of the contract, and that the condition súbsequent, upon which the defendant would have the right to terminate it, has not happened. Compelling the defendant to continue receiving the electrical current, therefore, could not possibly violate any legal or equitable right belonging to it. Besides, a court will not adopt any construction of a contract which permits a contracting party to take advantage of his own wrong to terminate it, or to inflict irreparable injury on the other party to the contract by wrongfully refusing to perform it, unless the terms of the contract are so plain and explicit to that effect that the court, in view of the situation of the parties and the subject-matter of the contract, is driven to the conclusion that such was the intention of the parties. It is apparent, from reading this carefully drawn contract with its numerous mutual covenants and stipulations, which go to the consideration of the contract as an entirety, that it was not contemplated that either party might terminate it, unless the facts occurred, upon the happening of which it was stipulated that the aggrieved party should have a right to put an end to the contract. It does not disclose any purpose that either of them, in the event the other attempted a wrongful breach of the contract, should be precluded from asserting any right, it might otherwise have, to resort to a court of equity to compel performance of the contract, and thus prevent the infliction of irreparable injury on the other party by a causeless breach of it.

It is true that the bill prays for a temporary injunction, and for a final decree preventing defendant from accepting or using electrical power' from any other source than complainant pending the unexpired term of the contract, and that upon final hearing the injunction be made perpetual. Obviously, no court could grant such relief, regarding the performance of a contract which is liable to be terminated at any time by the default of the complainant. It could never be known, until the date the contract fixed for its expiration arrived, whether it would continue in force for the full term thus fixedl, since it is liable to be terminated at any time by the default in its performance and the election given the defendant, in that event, to terminate it. There is, however, a prayer for general relief, as to the irreparable injury the complainant would suffer, if the court of equity does not afford such preventive relief as may be required in view of the situation disclosed by the bill.

The earlier authorities, and some comparatively late ones in this state, bear out the contention of the defendant that the court ought not to specifically enforce the negative covenant arising from the contract here, to take exclusively from complainant. The fundamental doctrines upon which courts of the United States administer equity must be the same in every state, and cannot be changed by state decisions or state statutes. Kirby v. Lake Shore R. R. Co., 120 U. S. 138, 7 Sup. Ct. 430, 30 L. Ed. 569. The decisions of the Supreme Court upon such questions necessarily control this court.

[1] It is said in 2 High on Injunctions, § 1164, that:

“While in eases of contracts containing both affirmative and negative stipulations the authorities are exceedingly conflicting and, irreconcilable as to whether equity may interfere by injunction to prevent a breach of the negative covenant, when the affirmative is of such a nature that it cannot be specifically enforced by a judicial decree, yet the later and better considered doctrine is that equity may thus interfere to restrain the violation of the negative stipulation, although it cannot specifically enforce the affirmative one.”

And the statement is sustained by the numerous citations in the notes to the text.

In Waterman on Specific Performance of Contracts, §§ 203, 204, p. 271, it is said:

“It has been observed, with particular reference to specific performance, that in the increasing complexities of modem business relations equitable remedies have necessarily and steadily expanded, and no inflexible rule has been permitted to circumscribe them. The jurisdiction of courts of equity is not now, therefore, confined in the narrow limits that once bound it; but the constant tendency has been to broaden their power, and especially has this been true in suits for specific performance.”

Pomeroy, in his work on Equity Jurisprudence (section 769), says:

“The frequent statement of the rule of mutuality — ‘that the contract to be specifically enforced must, as a general rule, be mutual, that is to say, such that it might, at the time it was entered into, have been enforced by either of the parties against the other’ — is open to so many exceptions that it is of little value as a rule.”

Touching the same subject, he says, in his work on Specific Performance, (section 169) :

“It is evidently based on no principle of abstract justice or right, hut at most upon notions of expediency, and the arguments offered in its support are but mere repetition of time-honored verbal formula!, which when closely analyzed are found to lie of little or no force or meaning.”

[2] A clear statement of the rule is found in- Northern Central Railway Company v. Walworth, 193 Pa. 207, 44 Atl. 253, 74 Am. St. Rep. 683:

“The principle that contract's must be mutual, must bind both parties or neither, does not mean that, in every case each party must have the same remedy for a breach by the other. Covenant: may lie against one, where only assumpsit can be maintained against the Qther. * * * The mutuality required is that which is necessary for creating a contract on both sides in some manner, but not necessarily enforceable on both sides by specific performance.”

Other courts have met the objection (when lack of mutuality is urged to the indirect enforcement of a contract by an injunction against tlie violation of the negative clause of the defendant’s agreement) by a conditional decree (an injunction good so long as plaintiff contiuues to do his part, but dissolvable on his failure to perform). Though clearly lack of mutuality may exist in the terms of the agreement, inasmuch as some of the terms are unenforceable in equity, yet the final test shows that the remedy of a conditional decree does not leave the defendant to a legal remedy, as plaintiff must give performance as long as he receives it. See Pomeroy’s Equity Jurisprudence, § 775, and the authorities in the note. The doctrine thus laid down has received the approval of the Supreme Court in three late cases, specifically enforcing contracts similar in character to that involved here. Franklin Telegraph Co. v. Harrison, 145 U. S. 459, 12 Sup. Ct. 900, 36 L. Ed. 776; Joy v. St. Louis Railroad Co., 138 U. S. 1, 11 Sup. Ct. 243, 34 L. Ed. 843; and Union Pacific Railroad v. Chicago Ry. Co., 163 U. S. 564, 601, 16 Sup. Ct. 1173, 41 L. Ed. 265. See, also, Donovan v. Pennsylvania R. R. Co., 199 U. S. 279, 26 Sup. Ct. 91, 50 L. Ed. 192; Walla Walla City v. Walla Walla Water Co., 172 U. S. 1, 19 Sup. Ct. 77, 43 L. Ed. 341; Beck v. Indianapolis L. & P. Co., 36 Ind. App. 600, 76 N. E. 312; Columbia Ave. Sav. Fund v. City of Dawson (C. C.) 130 Fed. 153; and General Electric Co. v. Westinghouse Electrical Co. (C. C.) 151 Fed. 664.

In Re Lennon, 166 U. S. 548, 556, 17 Sup. Ct. 658, 661, 41 L. Ed. 1110, the jurisdiction of a court of equity to order an injunction to prevent an arbitrary discontinuance of a custom of two railroads to interchange traffic with another came under discussion, and the court said:

“Perhaps, to a certain extent, the injunction may be termed mandatory, although its object was to continue the existing state of tilings, and to prevent an arbitrary breaking off of the current business connections between the two roads. But it was clearly not beyond the power of a court of equity, which is not always limited to the restraint of a contemplated or threatened action, but may even require affirmative action, where the circumstances of the case require it.”

In Union Pacific Railroad Co. v. Chicago Ry. Co., supra, the Supreme Court says:

“Tlie jurisdiction of courts of equity to decree the specific performance of agreements is of a very ancient date, and rests on the ground of the inadequacy and incompleteness of the remedy at law. Its exercise prevents the intolerable travesty of justice involved in permitting parties to refuse performance of their contracts at pleasure by electing to pay damages for the breach. * * * It must not be forgotten that in the increasing complexities of modern business relations equitable remedies have necessarily and steadily been expanded, and no inflexible rule has been permitted to circumscribe them. As has been well said, equity has contrived its remedies ‘so that they shall correspond both to the primary right of the injured party and to the wrong by which that right has been violated’; and ‘has always preserved the elements of flexibility and expansiveness, so that new ones may be invented, or old ones modified, in order to meet the requirements of every case, and to satisfy the needs of a progressive social condition, in which new primary rights and duties are constantly arising and new kinds of wrongs constantly committed.’ ”

The court then quotes and approves what Pomeroy says (Equity Jurisdiction, § 111) in discussing the tendency of courts to indulge more liberality than formerly, by injunctive relief where contracts are involved.

[3] Under the authorities and in the light of reason, the court has no doubt of its jurisdiction to prevent the irreparable injury threatened by defendant’s arbitrary refusal to receive the electric current, and that it is its duty to do so in the present posture of the case, to the extent of enjoining the defendant from refusing to receive the electric current until it has been judicially ascertained, by some tribunal, either in this court by the taking of proof or by judgment in some other court, that the defendant has the right to treat the contract as abrogated, because complainant has not performed it.. If the court refuses to grant relief to that extent, and allows respondent to breach the contract, pending a dispute as to the right to do so, the complainant will suffer irreparable injury, if the contract is breached. On the other hand, if the respondent has the right to breach the contract, it will not suffer any irreparable injury by being prevented from refusing .to take the current from the complainant until its right to do so has been ascertained. No such issue arises on the demurrers, but counsel have argued thé case in the view that such an injunction might improperly prevent the defendant from getting its electrical current elsewhere, and cause it irreparable injury in the interval in which it was restrained, pending a decision as to the rightfulness of its contention.

Defendant cannot suffer irreparable injury in such event. Continuing to take the electrical current under the order of the court, if it turned out to be improper, the damage which it would suffer in the interval would not be speculative, and would be easily ascertainable and recoverable in an action at law. The occurrences which fix.the measure of damages will all have taken place, while the contract is being temporarily enforced under the orders of the court, and their full measure could be ascertained and adjudged by a court of law' on the dissolution of the injunction, or the court of equity might itself ascertain them if it be so provided in the order and bond exacted to authorize the issuance of the injunction. On the other hand, if the injunction be improperly refused, it would subject the complainant to irreparable injury, for it could not recover the full measure of the injuries inflicted upon it by a wrongful breach of the contract in an action at law. In such a situation it is the duty of the court to preserve the status quo, until it can ascertain the facts which must determine whether the decree shall go for or against the complainant on the final hearing. Pending the dispute between the parties as to their respective rights, the court should make such decree as will save both the parties harmless, no matter what may be the final result, rather than make one which may irreparably injure one of the parties to the suit, if its contentions turn out to be correct. When the actual situation is disclosed by the answer and the complainant takes issue upon it, the nature of the relief which may be proper can better be determined. No order will be made now except that the demurrers be overruled, and that respondent, according to the agreement of counsel, file its answer within five days from this date.