Contracts II, Pages 1018–1038

City of Vernon v. City of Los Angeles

Supreme Court of California, In Bank, 1955

Facts:

In 1909, plaintiff contracted with defendant to pipe its sewage to defendant for it to dispose of in exchange for up to $13,300. The contracts were usually indefinite, with some being for the lifetime of defendant's outfall sewer system, and none had a provision allowing the contract to be canceled if defendant needed the capacity for its own residents.

Defendant disposed of the sewage by piping it raw into the bay 900 offshore. In 1922, the State Department of Public Health required that defendant build facilities to screen the sewage and pipe it a mile offshore, which would have cost approximately $41 million. Defendant failed to comply with these requirements and the state suspended defendant's permit unless it immediately begin plans for the the works, which it did not. After various negotiations and another lawsuit, plaintiff paid defendant $135,356.60 to discharge more sewage.

The state then brought an abatement action which was granted and affirmed. While defendant and the other cities contracting made other plans, plaintiff did not, claiming it was defendant's responsibility. The abatement action required each city to provide for its own sewage's disposal or to finance its share of the cost, but plaintiff refused and was held in contempt of the abatement injunction.

Plaintiff sues for a declaration that it is entitled to discharge a certain amount of sewage for free, injunctive enforcement of its contracts, and damages in the amount of the judgment against it for being held in contempt.

Procedural History:

Trial court decreed that plaintiff is not entitled to relief and that the contracts had been invalid since before the abatement action due to impracticability due to unreasonable expense.

Issue:

Did the contract become impracticable?

Rule:

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'A thing is impossible in legal contemplation when it is not practicable; and a thing is impracticable when it can only be done at an excessive and unreasonable cost.'

Explanation:

Not just more expensive

Reasoning:

When the parties were contracting, they assumed that they could continue to use defendant's facilities without completely disproportionate expense, even if defendant's officials were trying to finance new sewage disposal facilities. Just because the parties agreed to continue disposing of it while defendant was working on what to do does not mean that defendant assumed the risk that it would have to pay for the $41 million facilities itself.

Holding:

The requirement to build new facilities made the contract impracticable. Affirmed.

Dissenting Opinion:

Carter: Trial court erred. Just because the contract became more expensive to fulfill does not make it impracticable. Defendant should have been aware of the conditions it was contracting in. It would have to be many times greater cost than usual to excuse performance, such as 10 or 12 times greater. Plaintiff paid defendant a total of $296,801.50. While defendant expected to pay $41 million for its new facilities and $5 million per year to operate them, they would handle 260 million gallons sewage per day. Plaintiff has only had 10 million allotted, so defendant's only cost is 10 million gallons per day, which presumably would be slight. Certainly it would not be 10 or 12 times greater than the $300,000 it would have taken to perform the contract without the abatement.

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