MEMORANDUM AND ORDER
JOHN W. OLIVER, District Judge.
The present action pends on cross-motions for summary judgment filed by the parties under the terms of our order of May 16, 1974. As required by that order, the parties have filed a stipulation of fact, together with an agreement that the issues of liability presented in Counts I and II of plaintiff's complaint may be considered separately from the issue of damages or other relief. See Rule 56(c) of the Federal Rules of Civil Procedure. For the reasons stated below, we find and conclude that plaintiff's motion should be granted.
1. On February 16, 1917, the City of Rosedale, Kansas and the City of Kansas City, Missouri, entered into a contract (attached hereto as Appendix A) which thereafter, because of the incorporation of the City of Rosedale, Kansas into the City of Kansas City, Kansas, became an obligation of the defendant as fully as though defendant had been an original signator thereto.
2. A supplemental agreement dated the 13th day of October, 1955 (attached hereto as Appendix B) was duly entered into between plaintiff and defendant.
3. Plaintiff constructed the sewer known as the Turkey Creek Sewer to which defendant connected its own storm and sanitary sewers, with said connection being within the city limits of plaintiff. Defendant has continued and still continues to deposit its sewage into the Turkey Creek Sewer and said sewage of defendant flows through a sewage treatment system of the plaintiff and is eventually deposited into the Missouri River Channel. When the flow is in excess of two and one-half (2½) times the normal dry weather flow, such flow by-passes the treatment facility of plaintiff and makes its way back across the State line to the Kansas River.
4. Subsequent to the execution of the contract, the Congress of the United States enacted legislation known as the Federal Water Pollution Control Act and Amendments of 1972, Title 33, U.S.C.A. § 1251 et seq.
5. In compliance with the provisions of the Act, plaintiff has installed and maintained and will in the future install
6. Plaintiff has made demand upon defendant to perform and comply with the provisions of the contract and to comply with the Act applicable thereto which has become a part of the contract, and to make payment to plaintiff of the defendant's share of the cost of operation and maintenance of such waste treatment service in direct proportion to the amount of sewage discharged by defendant into plaintiff's waste treatment works. Plaintiff has further demanded that defendant protect and hold harmless plaintiff from any expense, loss, or cost arising from the cost of the treatment of defendant's sewage. Defendant has refused to make any such payment and has refused in the future to make any such payment and has refused to protect plaintiff and hold plaintiff harmless from any such expense, loss, and cost arising from the treatment of defendant's sewage, as aforesaid.
7. The "Minutes of the Kansas State Board of Health, 31 May 1974" recite in part:
8. Plaintiff's prayer for relief with regard to Count I seeks:
Section 16 of the contract of February 16, 1917, provides that:
Plaintiff argues that under the terms of this provision it was obligated only to extend to defendant the "privilege" of transmitting defendant's untreated sewage through its sewer lines for discharge into the Missouri River. Under such an analysis, it is argued that plaintiff did not assume "any obligation to perform any function with respect to defendant's sewage, treatment or otherwise . . . " Since the Federal Water Pollution Control Act and Amendments of 1972 prohibit such untreated discharges, plaintiff contends that this case falls within the rule stated in the Restatement of Contracts § 458 (1932), which provides that:
Defendant, on the other hand, argues that plaintiff's duty under the 1917 contract was to "accept" defendant's sewage and thereafter dispose of it by any method it chose. This duty has not been rendered impossible, it is argued, inasmuch as plaintiff may presently dispose of the waste by treating it as required by the Act.
After careful consideration of the cases and controlling principles of law, we conclude that plaintiff must prevail.
The fundamental rule for construing the language of a contract is to ascertain and give effect to the intent of the parties. H. K. Porter Co. v. Wire Rope Corp. of America, 367 F.2d 653
The specific language used by the parties in the 1917 contract strongly suggests that Section 16 was not intended to impose any affirmative duty on plaintiff to dispose of defendant's sewage. That provision merely gave the defendant "the perpetual right and privilege to connect" its sewers with the plaintiff's line. No "duty" was imposed on the plaintiff in this regard, other than the requirement in Section 15 that plaintiff must construct adequate sewers to carry the sewage run-off. The clear implication of this language is that plaintiff's sole obligation was to allow defendant the use of the Turkey Creek sewer to dispose of its sewage. In view of the absence of any language to the contrary, we are persuaded that the parties intended the ultimate responsibility for the disposal of such sewage to remain on defendant.
This construction of the parties' intent is consistent with the purpose of the contract which was, according to the "Recitals" in the contract, to control overflows from Turkey Creek which caused flooding within the municipal limits of both plaintiff and defendant. The apparent purpose of Section 16 was to provide defendant with an outlet for the waters so diverted. This purpose was achieved by providing defendant with access to plaintiff's Turkey Creek sewer, which was to have adequate capacity to handle the flow.
More importantly, this construction is consistent with "the rule that agreements are to be interpreted in the light of the circumstances and the intent of the parties when they enter into the agreement." Rhoden Investment Co. v. Sears, Roebuck & Co., 499 S.W.2d 375, 383 (Mo.1973). Defendant concedes that "the original contracting parties did not foresee Federal requirements of sewage treatment and the expenses attendant thereto when they entered into the original agreement." Indeed, it is apparent from reading the entire contract that the parties in fact did not foresee the possibility that any pollution controls whatever would ever be imposed.
Construing these circumstances consistently with the language used in Section 16, we must conclude that the parties did not intend to require the plaintiff to treat defendant's sewage without further compensation in order to meet federal pollution standards. Instead, we find that the plaintiff's only duty was to allow defendant to use the Turkey Creek sewer to transport the latter's sewage to the Missouri River.
The remaining question is whether this duty has, within the meaning of the language in § 458 of the Restatement, been "discharged" by supervening federal
In such situations, the rule stated in § 458 of the Restatement of Contracts, supra, is applicable. That is, when a contractual duty cannot be performed without violating the law, the duty of performance is discharged. See Ellis Gray Milling Co. v. Sheppard, 359 Mo. 505, 222 S.W.2d 742 (Mo.1949); Stein v. Bruce, 366 S.W.2d 732 (Mo.App.1963). For these reasons, we conclude that plaintiff's duty to allow defendant to use the Turkey Creek sewer to drain untreated waste into the Missouri River has been discharged.
The above conclusion is based on our finding that plaintiff's sole duty under the 1917 contract was merely to allow defendant to use the Turkey Creek sewer lines. However, even if we accept defendant's contention that plaintiff was under an affirmative duty to dispose of defendant's waste, we must conclude that plaintiff's duty has been discharged.
The gist of defendant's alternative argument is that plaintiff, being under an affirmative duty to dispose of defendant's waste, can perform its duties without violating the law by treating the waste prior to discharge. While acknowledging that this would greatly increase plaintiff's costs in handling defendant's sewage, defendant argues that this case is governed by the rule that "if a party, by his contract, charge himself with an obligation possible to be performed, he must make it good unless its performance is rendered impossible by an act of God, the law, or the other party. Unforeseen difficulties, however great, will not excuse him." Ward v. Haren, 119 S.W. 446, 448 (Mo.App. 1909). See also Ellis Gray Milling Co. v. Sheppard, supra; Kansas City Terminal Railway Co. v. Atchison, Topeka & Santa Fe Railway Co., 512 S.W.2d 415 (Mo.App.1974). We agree with defendant that this states a recognized rule of decision. We disagree with defendant, however, that the rule is applicable to the undisputed circumstances of the present case. Defendant's argument assumes that no increase in expense, regardless of its cause or its magnitude, will operate to excuse performance. That argument is untenable.
Defendant's reliance on Kansas City Terminal Railway Co. v. Atchison, Topeka and Santa Fe Railway Co., supra, is misplaced. In that case, the Terminal brought suit against twelve railway companies for a declaratory judgment concerning the rights of private parties under a contract executed in 1909. Under that contract, the expenses of the Terminal's union passenger station were to be apportioned between the various railroads on the basis of the number of cars from each road using the passenger facility. With the decline in passenger rail traffic, the burden of paying these expenses shifted to the few railroads still operating passenger trains, even though many of the facilities in the station were used by all railroads in their non-passenger operations. Those roads bearing the expense refused to pay, arguing in part that the change in circumstances had discharged them from performance of the terms of the contract.
On appeal from the trial court's ruling, the Missouri Court of Appeals, Kansas City District, found that the strict terms of the 1909 agreement remained in force, stating that:
Kansas City Terminal therefore stands for the proposition that a contractual duty of performance will not be discharged merely because a general change in economic conditions has increased the expense of performance. But this does not mean that an extreme increase in the expense of performance, occasioned by the enactment of an unforeseen federal law, can never operate to discharge a contractual duty. Indeed, as the emphasized portions of the Missouri Court of Appeals' opinion demonstrate, that court also recognized that when a party to a contract encounters extreme and unforeseen difficulties in performance due to some supervening legislative enactment, the duty of performance will be discharged. Kansas City Terminal clearly recognizes that performance may be discharged and excused if, on the facts, the difficulties arise from "an Act of God, the law or the other party."
Defendant's answer concedes that the Federal Water Pollution Control Act and Amendments of 1972, 33 U.S.C.A. § 1251 et seq., imposes (a) a statutory requirement that all sewage and discharge of effluents into the Missouri River by plaintiff, which includes the sewage of the defendant discharged into plaintiff's sewer treatment system, be treated so as to reduce the level of pollution to standards as set forth in said Federal Act; and (b) that any and all grants by the United States Government for the construction of sewage treatment facilities and required in order to comply with the treatment standards as set forth in said Act, shall not be granted or extended to plaintiff unless a plan has been adopted specifying and warranting that all recipients of waste treatment services, including defendant, will pay a proportionate share of the cost of operation and maintenance of such required waste treatment services.
It is clear that the only way plaintiff could "accept" and "dispose" of defendant's sewage without violating federal law would be to treat the waste prior to discharge. The added expense of such treatment would impose a very significant burden on the plaintiff. And plaintiff's expense would be greatly increased by a cut-off of federal grants because of its failure to collect the necessary assessments from defendant or its residents as required by federal law.
1. Plaintiff constructed the Blue River Sewer to which defendant has connected storm and sanitary sewers with
2. Subsequent to the initial connection of the defendant's sewers into the Blue River Sewer of plaintiff, the Congress of the United States enacted legislation known as the Federal Water Pollution Control Act and Amendments of 1972, Title 33, U.S.C.A. § 1251 et seq.
3. In compliance with the provisions of the Act plaintiff has installed and maintained and will in the future install and maintain sewage treatment facilities and sewage treatment works for the purpose of treating that sewage discharged by defendant into the Blue River Sewer, as aforesaid. In compliance with said Act, plaintiff has instituted a sewer service charge which is assessed against plaintiff's residents who use plaintiff's treatment facility and sewage treatment works as well as against other communities and the residents thereof who contract with plaintiff to use such facility. Neither defendant nor any residents of defendant whose sewage is discharged into the Blue River Sewer pay any service charge to plaintiff for the use of said sewage treatment facilities and sewage treatment works. Defendant has refused to make or permit any such payment for the purpose of defraying the cost of the treatment of its sewage.
4. Plaintiff has made demand upon defendant to comply with the Act applicable to the discharge of defendant's sewage into the Blue River Sewer and to make payment to plaintiff of the defendant's share of the cost of operation and maintenance of such waste treatment service in direct proportion to the amount of sewage discharged by defendant into plaintiff's waste treatment works. Defendant has refused to make any such payment and has refused in the future to make any such payment.
5. The discharge of defendant's sewage into plaintiff's Blue River Sewer as aforesaid is without benefit of any contractual premise therefor and the discharge of such sewage by defendant is by sufferance of plaintiff.
6. Approximately one thousand (1,000) homes and originating depositories for sewage located in Kansas City, Kansas are serviced by said Blue River Sewer.
7. Within plaintiff's limits approximately fifty (50) houses are serviced by a collection sewer which empties into defendant's sewer collection lines and which in turn is emptied into the Turkey Creek Sewer of plaintiff. Defendant does not treat such sewage as it passes through its sewer lines and no charge for the flow of said sewage through defendant's lines is made by defendant or paid by plaintiff.
8. Plaintiff's prayer for relief with regard to Count II seeks:
The stipulation and briefs of the parties establish that there is no dispute
Defendant suggests that any relief granted should be limited to plaintiff's third prayer for relief, i.e., to declare that the recipients of the sewer service "be required to pay their proportionate share of the cost of such service prospectively from the date of this Court's order." Plaintiff, on the other hand, argues that it is entitled to terminate defendant's connection with the Blue River Sewer as set forth in its second prayer for relief.
We find and conclude that plaintiff is entitled to appropriate relief in regard to Count II. We believe, however, that the relief to be granted in regard to Count II should be consistent with and keyed to the relief eventually awarded in regard to Count I. As we shall indicate in the next part of this opinion, we believe that entrance of our final declaratory judgment and final injunctive order should be deferred until after the Court has received the benefit of the views of counsel.
In connection with Count I plaintiff prayed for a judgment which would declare that the defendant be required to hold plaintiff harmless of and from any expense, loss, or cost arising from the treatment of sewage deposited by defendant in the Turkey Creek Sewer, and that the defendant be ordered and decreed to bear its proportionate share of the increased treatment costs occasioned by that deposit. Plaintiff also prayed in the alternative for a judgment declaring that any obligation on the part of plaintiff to continue to receive defendant's sewage into the Turkey Creek Sewer be determined to be at an end. Plaintiff also prayed, as a still further alternative, for a judgment declaring that plaintiff's receipt of defendant's sewage into the Turkey Creek Sewer be conditioned upon an order of court declaring that defendant should bear its equitable and proportionate share of the increased treatment costs. Plaintiff's prayer for relief in connection with Count II, which relates to the Blue River Sewage system, follows a similar pattern.
We believe that it would not be appropriate to enter any final judgment without affording the parties an opportunity to convene and to attempt to agree upon a form of judgment which they deem to be appropriate under the circumstances. We do not believe it would be proper for this Court to fail to recognize that the parties are municipalities which have entered into many agreements over the years to solve the problems which arise by reason of the fact that each lie in a different State.
Both parties have demonstrated an exemplary spirit of cooperation in the processing of the relatively unique questions of law presented in this case. We believe that it is entirely possible that an agreement could be reached in regard to the preferable form of judgment, now that this Court has determined the questions of law presented. We do not suggest that the defendant may not wish to appeal the judgment of this Court when finally entered. Even if defendant may wish to appeal, we are confident that the parties should be afforded a reasonable opportunity to confer, and to recommend to the Court the most practicable form of judgment which should be entered in light of this Court's determination of the question of law presented in this case.
For the reasons stated, it is
Ordered (1) that within twenty (20) days, counsel for the respective parties shall confer, and shall thereafter present their suggestions to the Court in regard to the form of final judgment to be entered under the circumstances. It is further
THIS AGREEMENT, made and entered into this 16th day of February, 1917, by and between the City of Rosedale, a municipal corporation of Kansas, party of the first part, and Kansas City, a municipal corporation of Missouri, party of the second part, WITNESSETH:
Turkey Creek flows through the limits of Rosedale, in the State of Kansas, into Kansas City, in the State of Missouri, thence through the limits of Kansas City, and again into the State of Kansas and the Kansas River. It frequently overflows its banks and causes great damage to property in Rosedale and Kansas City. The alteration, straightening and improvement of the channel of Turkey Creek and the diversion of the waters thereof into the Kansas River at a point north of Rosedale, and the construction of a sewer in Kansas City to carry the sewage which now flows in Turkey Creek would protect from future overflow the property both in Rosedale and Kansas City heretofore affected by overflows of said creek. Rosedale desires for the protection of property within its limits to alter, straighten and improve the channel of said creek and to construct a dam across said creek near Valley Street in Rosedale, a tunnel through certain hills, commonly called "Greystone Heights," to the Kansas River and a ditch connecting the present channel of said creek above the dam with said tunnel, and to divert Turkey Creek by means of such dam and ditch into and through said tunnel, and into the Kansas River, and has prepared and adopted a comprehensive general plan for such entire improvement. It is unwilling to construct a part of said improvement only, and intends to construct the entire improvement, but has not on hand or available, funds sufficient for that purpose, and has requested Kansas City to contribute a part of the cost thereof. Kansas City is willing to contribute a part of the cost thereof under the following conditions:
Therefore it is agreed:
(1) Altered, changed and diverted northward at a point near the intersection of said creek with Valley Street, in Rosedale, by means of a dam and ditch into and through a tunnel under the hills, commonly called "Greystone Heights," into the Kansas River and beginning at the point where the St. Louis-San Francisco Railway Company crosses said creek near the Southwest Boulevard in Rosedale, said creek shall be straightened, cleaned and diked down to the point of diversion; and
(2) Said channel shall be altered, straightened and improved between the crossing of Turkey Creek and said railway immediately
Within forty-five (45) days after Rosedale shall submit to Kansas City certified copies of the written consents of the municipalities, counties, persons and authorities necessary under the laws of Kansas to divert the creek, and shall notify Kansas City it is ready to let a contract to do the work provided in clause 1 of paragraph 1 hereof, Kansas City shall deposit with the Commerce Trust Company of Kansas City, Missouri, an amount of money equal to the estimated cost of said improvement and all the cost and expenses for which Kansas City is obligated under this contract, to meet the requirements of this contract.
If at any time it should appear that said estimated amount so deposited is not sufficient to meet all the obligations by Kansas City assumed under this contract, then Kansas City shall at once deposit with said Trust Company such additional sum or sums as will fully meet all such obligations.
Upon said fund being deposited by Kansas City as above set forth, the City of Rosedale shall immediately procure the necessary lands and rights of way by purchase, condemnation proceedings, or otherwise, for the construction of the improvement specified in clause 1, paragraph 1, hereof, and shall change and re-establish the grade of Valley Street as may be necessary on account of the construction of said improvement, and shall, as soon as it can legally be done after the payment of said money to said depositary, advertise for and let a contract or contracts to the lowest responsible bidder for the construction and completion of said improvement, in accordance with said plans and specifications.
The contract price of the improvement specified in clause 1, paragraph 1, hereof, shall be paid exclusively from the fund hereby created and in the manner herein provided, and not from any general revenue or special fund of the City of Rosedale. Such contractor or contractors shall give bond for the protection of materialmen and laborers as required by the laws of Kansas, and a good and sufficient surety bond in the penal sum of the amount of the contract, conditioned for the faithful and expeditious performance of said contract or contracts and to hold Rosedale harmless from loss or damage by breach thereof.
In consideration of being permitted to use said sewer, the City of Rosedale hereby agrees that it will, at all times, protect and hold Kansas City harmless and free from damages and expenses and against any loss, cost or expense of any nature to property and persons arising out of or connected with the making and maintaining of its connections with said sewer.
IN WITNESS WHEREOF, the parties have executed this instrument subject to approval by ordinance of the City of Rosedale and Kansas City.
I, J. A. Bermingham, the duly appointed, qualified and acting City Clerk of Kansas City, Missouri, do hereby certify that the annexed and foregoing is a true and correct copy of the original contract dated February 16, 1917, between Kansas City, Missouri, and the City of Rosedale, Kansas, relating to the diversion of the flood waters of Turkey Creek as the same remains of record and on file in my office in the City Hall, Kansas City, Missouri, and which was duly confirmed by the Common Council of Kansas City, Missouri, by ordinance No. 29086, approved on the 7th of March, 1917.
THIS AGREEMENT, made and entered into as of the _______ day of October, 1955, by and between KANSAS CITY, KANSAS, a municipal corporation of the State of Kansas, and herein called the FIRST PARTY, and KANSAS CITY, MISSOURI, a municipal corporation of the State of Missouri, herein called the SECOND PARTY,
WHEREAS, the Second Party entered into a contract dated February 16, 1917, with the City of Rosedale, a municipal corporation of Kansas, relating to the improvement of Turkey Creek and the improvement of an outlet therefor, through the City of Rosedale, and
WHEREAS, the First Party now includes and has succeeded to the rights of the City of Rosedale under said contract, and
WHEREAS, pursuant to paragraph 17 of said contract, provision was made for the repair of the improvement specified in clause 1, paragraph 1 of said contract and the deposit of the estimated cost thereof, by Second Party with the depository designated in Section 3
WHEREAS, said paragraph 3 of the contract, provided that the funds deposited by the Second Party should be credited by the Commerce Trust Company aforesaid, with interest on the daily balance, at the rate of 2.23 per cent per annum, and said Commerce Trust Company, in spite of having accepted the trust imposed by said agreement is nevertheless now prohibited by the Banking Laws of the United States, from paying the interest provided in said agreement, and the said agreement, therefore, cannot be carried out in accordance with the express terms thereof, and
WHEREAS, the Second Party is ready to deposit the estimated cost of presently required repairs in the amount of $58,240.89.
IT IS THEREFORE AGREED BY THE PARTIES HERETO AS FOLLOWS:
The Agreement entered into under date of February 16, 1917, between the City of Rosedale and Kansas City, Missouri, is hereby modified by striking out of said agreement the said paragraph 3, entitled "The Depositary — Funds Paid Out — How", and in lieu thereof, the following Section shall be incorporated in said agreement as follows, to-wit:
All other provisions of said contract shall remain in effect.
IN WITNESS WHEREOF, the City of Kansas City, Kansas, as successor in interest to the City of Rosedale, Kansas, has caused this agreement to be executed by its Mayor and attested by its City Clerk, and the City of Kansas City, Missouri, has caused the same to be executed by its Mayor and attested by its City Clerk, all pursuant to Ordinances duly enacted by said representative cities.
We find that argument to be untenable in light of the admission made in defendant's answer. We further find and conclude that, even assuming no cut-off in federal funds would result, the added expense imposed on plaintiff to treat defendant's sewage is required by law and is so substantial as to require that plaintiff's duty of performance be discharged.