Benedict v. Columbus Construction Co.

The fourth and last section of the act declares an emergency, the effect of which was that the act took effect immediately upon

its passage.

After the enactment of this statute, one Egbert Jamieson, who was a stockholder in the Indiana Natural Gas and Oil Company, brought suit in the circuit court of Porter county, in the State of Indiana, against the company in which he was a stockholder and the Columbus Construction Company.

In his complaint, in that suit, he alleged the incorporation of the defendant companies and the contract between them, and that work was being done under that contract, and continued in this language:

"And that by reason of the distance and natural low pressure at which the gas flows from the wells in the Indiana fields, including those to be furnished under said contract, which does not exceed, to wit, three hundred and twentyfive pounds to the square inch, it is, and always will be, impossible to transport such gas to said city of Chicago, and there deliver it for use in quantities and with a pressure sufficient to make it commercially available and profitable, unless the same is transported through the said pipe line at a pressure greatly exceeding the natural flow and pressure of the gas from said well, and in excess of three hundred pounds to the square inch, which said additional pressure can only be obtained and maintained by the use of pumping machines and other artificial devices, apparatus and appliances such as the defendant the Columbus Construction Company has undertaken to furnish and erect in connection with said pipe line and wells in and by said contract, and which said pumping machines and other artificial devices, in order to be used to any advantage, must be erected and used upon the said pipe line and within the territorial limits and jurisdiction of the State of Indiana.

"Plaintiff further avers that the said defendant the Indiana Natural Gas and Oil Company, upon the completion of said contract and delivery to it of said natural gas plant and system, will have no other property or assets than such natural gas plant and system, and no means whatever of paying either the principal or interest of said bonds which are to be issued to said Columbus Construction Company therefor, or of redeeming its capital stock, except the said natural gas plant and system, and the revenues, tolls, income and profits to be earned thereby in the transportation and sale of natural gas in the city of Chicago, and that the sole value of its stock will depend upon the right and ability of said defendant to engage in and carry on, by means of its said natural gas plant and system, the business of transporting its natural gas to Chicago and there selling the same; that its said natural gas plant and system, constructed upon the plan and for the purpose provided by said contract, cannot be put to any other commercially profitable use than that of transporting natural gas to Chicago, and can only be used to advantage and profit by the

Benedict v. Columbus Construction Co.

use as aforesaid of said pumping machines and other artificial devices, so that if said defendant the Indiana Natural Gas and Oil Company, by reason of the statute aforesaid, is prohibited from transporting said gas through said pipe line at more than the natural flow and pressure, or at a pressure in excess of three hundred pounds to the square inch, or from using any artificial device to increase or maintain the natural flow of the gas, the natural gas property and plant contracted to be furnished and delivered to the defendant as aforesaid will be of no value for the purpose of such plant, and of little or no value for any purpose to said defendant, and the stock and bonds of the defendant will be wasted and the said company deprived of all means of effecting the objects and purposes of its incorporation and be rendered entirely insolvent.

"Plaintiff further avers and charges that the statute aforesaid has made it unlawful for the defendant, or any other person in the State of Indiana, to transport natural gas through said pipe line at a pressure exceeding three hundred pounds to the square inch, or the natural flow and pressure of such gas, or to use in such transportation any artificial device for the purpose, or which shall have the effect, of increasing or maintaining the natural flow and pressure of such gas.”

He further averred that he demanded an abandonment of the enterprise and contract, and that such demand was refused.

He asked that the contract be declared "null and void" and cancelled, and that the Indiana Natural Gas and Oil Company be enjoined from further proceeding in the execution of the contract, and from issuing and delivering to the Columbus Construction Company the stock and bonds which, upon the execution of the contract, it would, by the contract, be required to give, and from violating the statute of March 4th, 1891.

The defendant companies answered this complaint by admitting its allegations concerning their incorporation and the contract between them, and by affirming that they intended to transport natural gas through pipes, tested to stand a pressure of one thousand pounds to the square inch, at a pressure not exceeding six hundred pounds to the square inch, which pressure would be produced by artificial means, and that such conduit would be entirely safe and in no way injurious to the people of the State of Indiana nor to the rights of private property; that their proposed action would be but a reasonable exercise of their rights of property in transporting gas to Chicago for sale, and that their property was acquired and scheme entered into prior to the pasof the act of March 4th, 1891.

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Benedict v. Columbus Construction Co.

The plaintiff demurred to this answer, and the circuit court of Porter county overruled his demurrer.

The case was then carried by the plaintiff to the supreme court of Indiana, where the judgment of the circuit court was reversed by a divided court.

The opinion of the court (12 Lawy. Ann. Rep. 652) was delivered by Judge Elliott, who expressly defined the limits of the court's consideration and conclusions in this language: "We adjudge that the complaint is to be construed as charging that the contract of the corporation of which the appellant is a member, with the construction company, is incapable of performance, because it requires a violation of the act of March 4th, 1891, in this, that it provides for and requires that natural gas be transported in pipes at a greater pressure than the natural pressure, or at an artificial pressure exceeding three hundred pounds to the square inch. We may further affirm it to be our judgment upon this phase of the case, that there is here no question as to the right of a stockholder to maintain such a suit as this, for no such question is presented by the briefs or arguments, and we say, still further, that the essential and controlling question presented by the ruling upon the complaint is, whether a contract, which cannot possibly be performed without a direct violation of a statute, is invalidated by the enactment. The complaint avers and the demurrer admits, that the performance of the contract is impossible without violating the statutory provision that no greater pressure than three hundred pounds to the square inch shall be put upon pipes used for the transportation of natural gas. We are careful to state the questions upon which we give judgment, and to declare the construction which we give to the complaint upon which those questions arise, so that there may be no misconception of our decision.”

The court did not pass upon the constitutional question, urged in this suit as hereinafter stated, whether that part of the act of March 4th, 1891, which forbids maintenance of a pressure along the entire pipe line, by artificial means, of at least three hundred pounds to the square inch, is invalid as placing a restrictive burden upon interstate commerce. That question was not con

sidered or necessarily involved in its decision. Having it in view, however, and its lack of pertinency to the issue presented, Judge Elliott farther said: "We preface our discussion of the principal question stated, by saying that we are here concerned only with the general question of the power to regulate the pres-sure of natural gas in pipes, for, according to the averments of the complaint, whether natural or artificial pressure be employed, the contract between the two corporations named cannot be made effective without violating the act of 1891 by using more pressure than three hundred pounds to the square inch." And Judge McBride, who concurred in the conclusion reached by the majority of the court, in explaining his vote, even more explicitly disclaimed intention to pass upon it, in this language: "The legislature may undoubtedly provide for the regulation of the mode of procuring, using and transporting natural gas in so far as the act of March 4th, 1891, attempts to do this. It is a legitimate exercise of the police power of the state, and not an interference with the power of congress to regulate interstatecommerce. Section 1 of the act, however, contains a provision,. which, literally construed, forbids the transportation of natural gas through pipes, otherwise than by the natural pressure of the gas flowing from the wells, and section two contains a provision, which, similarly construed, declares it to be unlawful to use any device or artificial process or appliance to maintain the natural flow of natural gas. These provisions are not in the nature of regulation, but are prohibitory in their character. There are, however, independent provisions which may be eliminated from the statute without materially impairing its sufficiency, if its purpose is simply to regulate the production, transportation and use of natural gas. As I understand the principal opinion, it holds that, notwithstanding the provisions of the statute, artificial pressure may be applied, provided it does not exceed three hundred pounds to the square inch. Whether this conclusion is reached by construction, or by eliminating the objectionable features of the statute, is not material. I concur in the conclusion reached."

Benedict v. Columbus Construction Co.

After the decision in the Jamieson suit, one Elbert W. Shirk brought suit in the circuit court of Cass county to restrain the Indiana Natural Gas and Oil Company and the Columbus Construction Company from entering upon his lands in the exercise of any right of eminent domain, alleging in his complaint substantially the facts above stated, and that the object to be accomplished by the companies seeking to exercise power of condemnation of his lands was unlawful under the act of March 4th, 1891. In this suit a preliminary injunction was obtained which the court, on the 19th day of October, 1891, on motion in behalf of the companies injured, refused to dissolve.

Notwithstanding the decisions in the Jamieson and Shirk cases, the directors of the construction company, supported by a majority of the stockholders, are still prosecuting the work which that company contracted to perform.

In September, 1891, at a special meeting of the stockholders of the construction company, called for that purpose, the directors were authorized, against the protest of the complainants, by at least a majority in interest of all the stockholders, to levy an assessment of twenty per cent. upon all its unpaid stock. Forty per cent. only of the par value of a majority of the stock held by the complainants has been paid.

The directors, Charles Hequembourg, Charles T. Yerkes, Warren F. Furbeck, George T. Yuille and Sidney A. Kent, who are defendants herein, have levied the assessment authorized, and propose to collect it and apply the moneys they receive from such collection to the payment of the construction company's obligations, and, as well, the prosecution of its work under its contract with the Indiana Natural Gas and Oil Company.

The complainants insist that natural gas cannot be transported from the gas fields in Indiana to the city of Chicago, a distance of one hundred and thirty-six miles, by natural pressure from the gas wells at the entrance to the pipes, where the pressure shall not exceed three hundred pounds, and in support of their insistment produce the affidavits of a number of persons who profess to be familiar with the gas wells of Indiana, their working, and the philosophy of transportation of natural gas through