author: McCulloch, C. J. Humphreys, J.

text:
    Clear Creek Oil & Gas Company v. Fort Smith Spelter Company.
    Opinion delivered April 18, 1921.
    1. Public service commission — review of orders. — Under Acts 1919, p. 411, the Corporation Commission acted in a quasi-judicial capacity in the matter of public utility rates, and its orders affecting property rights are subject to review by the courts in such manner as may be prescribed by the Legislature.
    2. Constitutional law — public utility — preferential contracts. —If a company incorporated to supply gas was not a public utility at the time of contracting with smelting companies to furnish them gas, giving them a preferential right to be supplied, and the contracts were not entered into in anticipation of the company becoming a public utility, but were merely private undertakings concerning a subject-matter over which the State had no control, such contracts were valid, and the obligations thereof could not be impaired by any State regulation.
    3. Gas — impairing obligations of contracts. — An oil and gas company not a public utility could not impair the obligations of its own preferential contract to furnish gas, valid at the time of its execution, by subsequently engaging in the operation of a business subject to the State’s control.
    4. Gas — authority to operate as public -utility. — Where a- gas company by its charter was authorized to operate as a public utility in the production, transportation or sale of natural gas, but was not limited to such operation, and was not bound so to operate, and it elected not to do so, it could enter into preferential private contracts not subject to public control or regulation.
    6. Corporations — legislative control. — It is not within the power of the Legislature to declare the operation of a business which is private in its nature to be public service and subject to public control.
    6. Gas — gas company as public utility. — A gas company authorized by its charter to operate as a public utility, but not bound to do so, did not become such by virtue merely of Crawford & Moses’ Digest, § 3969, empowering public utilities to exercise the power of eminent domain, the company having done nothing pursuant to the terms of that statute or in any other respect to make itself a public utility.
    7. Eminent domain — private business. — The Legislature can not confer on a private business the power of eminent domain, which can be exercised solely for the benefit of the public.

      8. Evidence — matter of common knowledge. — It is a matter of general knowledge that natural gas is a commodity which is usually developed for the purpose of distribution to the public.
    9. Gas — contracts in contemplation of becoming public utility. —Preferential contracts by a gas company to supply natural gas to several smelting companies, though executed before the gas company began operating as a public utility, held to have been made in contemplation of operation as a public utility by the gas company, and therefore to be subject to regulation by the Corporation Commission.
    10. Appeal and error — presumption in favor of judgment. — On appeal from a judgment of the circuit court dismissing a petition by a gas company to fix a new schedule of rates for the use of natural gas, there is no presumption that the lower court found the old rates to be reasonable; such judgment being based on the erroneous conclusion that the preferential contracts between the gas company and the appellees were beyond the control of the Corporation Commission.
    Appeal from Pulaski Circuit Court, Second Division; Guy Fulk, Judge;
    reversed.

      Hill & Fitshugh, for appellant.
    The record shows that the Corporation Commission was right, and the court erred in dismissing the petition, and the order of the commission should he placed in force. Appellant was a public service corporation from the beginning', and all these parties dealt with it as such, subject to the rights of the State to regulate the rates made by it. 176 Cal. 499; 169 Pac. 59; 251. U. S. 228. Condemnation proceedings can not be had in favor of a private use; the right must be public. 57 Ark. 359; 64 Id. 357; 97 Id. 86; 97 Id. 495; 99 Id. 61. The right of taking property by eminent domain may be conferred upon a pipe line company constructing a pipe for oil or gas. 1 Wyman on Public Service Corp., §■§ 59, 71; 176 Cal. 499. Under act 911 any corporation engaged in transmitting oil or gas in pipe lines is deemed a pipe line company and as such is assessed for taxation by the Arkansas Tax Commission. C. & M. Dig., §<§, 3969 to 3970. Under the Arkansas laws appellant was a public service corporation. 94 U. S. 155; lb. 162; 219 U. S. 467; 34 L. B. A. (N. S.) 671; 248 U. S. 372; 39 Sup. Ct. Bep. 117; 105 Atl. Bep. 551; act 571, Acts 1919, § 5; 100 S. E. Bep. 551; P. U. B. 1920 C, 160 to 183; lb. 1919 D, p. 252; lb. 1920 E, 911; 4 S. C. Bep. 170. See, also, 9 Am. Law Bep. Ann., p. 1165; 56 Ore. 468 ; 229 U. S. 397.
    If the Clear Creek Company was not a public service corporation at the time it made the contracts in question, it was such at the .time the Corporation Commission made the order regulating the rates in lieu of the contract rates. 175 Pac. 466 does not sustain appellees in their contentions. See 251 U. S. 228, which is in point.

      jDaily & Woods and Mehaffy, Donham & Mehaffy, for appellees.
    The Clear Creek Company was not a public service corporation at the time of the execution of the contracts. Cases in 169 Pac. Bep. 59, 61-2 are not in point. 175 Pac. 466.
    The contracts between, respondents and the Clear Creek Company were purely private contracts and not subject to control, and the order of the Corporation Commission was a legislative act prohibited by our Federal and State Constitutions. 211 IJ. S. 210, 53 Law Ed. 150. The establishment of a rate is the making of a rule for the future and a legislative act not judicial in kind. If the Clear Creek Company was a public service corporation when we contracted with them, the State had the right to regulate it, and the 'State had no power to impair the obligation of a contract between purely private parties. The Corporation Commission has wholly misinterpreted its powers under the act creating it. The findings of the circuit court on conflicting evidence are very persuasive at least. 125 Ark. 138. The findings are not against the clear preponderance of the evidence and should be sustained. 120 Id. 118. On the whole ease, both on the law and facts, the judgment is right.
   McCulloch, C. J.

Appellant is a domestic corporation, organized for the purpose of “sinking wells, boring for, providing and transporting crude oil and natural gas, coal, asphalt and any other minerals which may be found in the development of their property,” and, asserting itself to be a public utility in the operation of its business of producing, transporting and distributing natural gas, it filed its petition before the Arkansas Corporation Commission on May 13, 1920, praying that a new schedule of rates for the use of gas by smelters and other like consumers be fixed at ten cents per thousand cubic feet. Appellant also filed a petition against appellees, Fort Smith Spelter Company, Arkansas Zinc & Smelting Corporation and Athletic Mining & Smelting Company, three corporations who are customers of appellant as consumers of gas in manufacturing plants, praying for modification of the contracts with appellees for supplying gas, and the latter filed their response in the proceedings before the commission in which they claimed that appellant was not a public utility, and that they (appellees) were receiving gas from appellant under private contracts which were not subject to control by the commission. There was a hearing before the commission, the result of which was that the petition of appellant for the regulation of rates was granted by the commission over the protests of appellees, but the rate was fixed on a graduated scale according to the amount of gas consumed, and the rate so fixed is approximately nine cents per thousand cubic feet. Appellees then carried the proceedings before the circuit court of Pulaski County by appeal as provided in the statute creating' the Arkansas Corporation Commission and regulating its proceedings (Acts 1919, page 411), and on the hearing in that court there was a general finding against appellant on the petition and by the judgment of the court the petition was dismissed. An appeal has been prosecuted to this court.

Section 27 of the act referred to provides that there may be an appeal to the circuit court from orders and decisions of the commission, and that said circuit court shall have the power to “vacate or modify any such order found unreasonable or unlawful, or contrary to the evi-deuce; but no new evidence may be adduced by either party in said court, it being hereby expressly made the duty of all parties to present to the commission all evidence on which they may wish to rely in the event of an appeal to the said circuit court, and all appeals shall be tried upon the record made in the proceedings before the commission. ’ ’

Section 28 of the act provides for an appeal to the Supreme Court, and that on the hearing of such appeal ‘ ‘ the Supreme Court shall be governed by the procedure, and reviewed in the manner which is now or may hereafter be prescribed by law governing appeals from chancery courts.”

We need not concern ourselves about the particular form of the remedy prescribed by the statute, for that question is not discussed here by counsel. It is sufficient merely to observe that the commission acts in a quasi-judicial capacity, and its orders affecting property rights are subject to review by the courts in such manner as may be prescribed by the Legislature. The name given to the method of review by the Legislature is not important, since it is clear that the purpose of the statute was to provide for a review by the circuit court on the record made before the commission, and also provide for an appeal to this court, which latter provision is merely declaratory of the right of appeal conferred by the Constitution.

The real point of the controversy between the parties is whether the contracts between appellant and appel-lees'for the sale and purchase of gas were executed by appellant when it was not acting in any public capacity, as contended by appellee, or whether appellant was from the start a public service corporation and the contracts attempted to confer preferential rights to appellees as consumers. Learned counsel for appellees candidly concede that, if appellant was organized as a public service corporation and at the time of the execution of these contracts it was operating as such public utility in the production and distribution of gas, the contracts were void, so far as they undertook to confer special privileges upon appellees, and that the schedule of rates for prices of gas is subject to control by the Corporation Commission, even though the statute authorizing such regulations was not passed until after the contracts were executed. It is unnecessary, therefore, to cite authorities on that question. Such authorities are cited on the briefs of counsel.

There is little, if any, conflict in the testimony, so far as we regard it as material.

Appellant was organized as a corporation in July, 1914, for the purposes already recited in the foregoing quotation. Soon after its incorporation, it acquired leases on a large body of land (30,000 acres or more) in Crawford County, Arkansas, and began explorations for gas. This was in wliat subsequently became known as the Kibler field, and appellant brought in its first well in November, 1915, with the initial capacity of-12,000,000 cubic feet per day. It had no market for its gas at that time and was seeking a market. Fort Smith and Van Burén, the only two cities of any considerable size in that locality, were already being supplied by a gas distributer which obtained gas from another field. Appellant began negotiating with persons who were seeking locations for manufacturing plants and made its first contract with two individuals, Buck and Kerr, who were succeeded in their rights under this contract by appellee Fort Smith Spelter Company. This contract was in writing, duly executed on March 17, 1916.

The contract is lengthy, and provides, in substance, that appellant should proceed to develop the gas field in which it had leases on approximately 30,000 acres and expected to procure more leases, and furnish the contracting parties with gas to be used in a smelting plant to be thereafter located at South Fort Smith, the price to be paid for the gas being specified at four cents per thousand cubic feet; and further provided that, after the first 160 days from the date of the -contract, appellant would furnish thereunder gas in quantities which the contracting consumers were to receive up to 5,000,000 cubic feet per day, and that the said parties should have the right to increase the amount up to 12,000,000 feet a day. It provided that the contracting purchasers should “have the first call upon the gas” produced by appellant from any lands in the counties mentioned, or any other territory which might be acquired by appellant, and that the rights of said parties to be supplied with gas should be prior and superior to any contract or agreement made by appellant with others. There is also a clause in the contract giving the contracting purchasers the right to regulate the percentage flow of gas. Another clause in the contract worthy of mention provides that, if the plant of the contracting purchasers should cease to yield a reasonable profit of six per cent, on the capital invested, appellant should make a reasonable reduction on the price of gas, and that, if appellant should sell any gas to any other consumers, except churches, schools, hospitals or charitable institutions, “ at a less rate of price than governs this contract, then in such event second party shall pay for 'all gas consumed on a price basis equal to such lower price or prices during the entire time they are in effect. ’ ’ Still another clause provides that in case of loss by the contracting purchaser on account of fire, explosion, storm, strikes, etc., said party should not be required to accept or pay for any more gas than was actually consumed.

At the time of the execution of this contract appellant had still only one well, but it proceeded thereafter with the further development and up to September, 1916, had brought in ten wells in the Kibler field. It had not contracted with any other person or corporation for the furnishing of gas, but it had obtained franchises from the incorporated towns of Alma, Conway and Clarksville to furnish gas to the inhabitants of those towns. It is not shown that appellant operated under these franchises, and they appear to have been subsequently abandoned. The Kibler field was situated northeast of the city of Van Burén, and the plants of appellees were, under tlieir contracts, to be located, and were subsequently located at South Fort Smith, a suburb on the south side of the corporate limits of the city of Fort Smith except the plant of appellee, Arkansas Zinc and Smelting Corporation, -which was established near Van Burén. In order to transport the gas from the field to the location of these plants it was, of course, necessary to lay pipe lines, and appellant constructed a ten-inch line from the field to the plant of appellee, Arkansas Zinc and Smelting Corporation, thence through Van Burén to Fort Smith and through that city to the suburb on the south where the manufacturing plants were located, a distance of about twenty miles from the gas fields. Appellant obtained franchises from the cities of Van Burén and Fort Smith on March 25,1916, and April 3,1916, respectively, to distribute and sell gas to the inhabitants of those cities.

The contract between appellant and appellee, Arkansas Zinc & Smeltering Corporation, was executed on May 3, 1916, but it is shown that the negotiations were begun much earlier and resulted in a written memorandum concerning the terms of the contract as early as March 17, 1916, the formal contract being reduced to writing and signed by the parties on May 3, 1916. In this contract it is provided that the purchasing contractor should advance funds to appellant in the sum of $45,000, to be used in the construction of a pipe line, and that said purchaser should, subject to the prior contract with the Fort Smith Spelter Company, have the next call for gas produced by appellant and supplied through the pipe line, at the same price as that specified in the contract with the spel-ter company. Appellant entered into a similar contract with appellee Athletic Mining & Smeltering Company, dated November 8, 1916, subject to the prior contracts with the other appellees. Under these contracts the Fort Smith Spelter Company has been taking gas at the rate of 3,800,000 cubic feet per day; the Arkansas Zinc & Smelting Corporation had been taking gas at the rate of from 1,250,000 to 1,500,000 cubic feet per day, and the Athletic Mining & Smeltering Company had been taking gas at the rate of from 3,500,000 to 4,000,000 cubic feet per day. As the Kibler field became depleted, according to the proof, an adjoining field, only a few miles distant, known as the Williams field, was developed, and appellant brought in its first well in January, 1919, and subsequently brought in other wells in that field, and has been furnishing gas to its customers from both fields. Appellant subsequently made contracts with nineteen other manufacturing plants at Fort Smith, but the parties to those contracts have not intervened in these proceedings.

The testimony adduced by appellant tends to establish the fact that the rate specified in these contracts with the parties mentioned is not remunerative, and the evidence is sufficient to support the finding of the commission fixing the rate at approximately nine cents per thousand cubic feet for use by the manufacturing plants. The circuit court made no finding as to the reasonableness of the rate charged. Its ground for dismissing appellant’s petition was necessarily based on the conclusion of that court that under the evidence these contracts were controlling and could not be abrogated by any regulations of the Corporation Commission.

If appellant was not a public utility at the time these contracts with appellees were entered into and the contracts were not entered into in anticipation of appellant becoming such a public utility, but were merely private undertakings concerning a subject-matter over which the State had no control, then such contracts were valid, and the obligations thereof could not be impaired by any State regulation. Neither could appellant impair the obligations of its own contract valid at the time of its execution by subsequently engaging in the operation of business subject to the State’s control. To permit that would be to allow the impairment of the contract by indirection, which could not be directly done. We are not aware of any authorities holding to the contrary on this proposition, and we deem it unnecessary to cite any authorities in.support of it.

It was within, the charter rights of appellant to operate a business as a public utility in the production, transportation or sale of natural gas, but it was not limited to such operations as a public utility and was not bound to so operate. It was authorized to do business in the production, transportation or sale of the commodities named, other than as a public utility. The question, therefore, is not merely whether appellant was authorized to operate as a public utility, but whether it elected to do_ so under the power thus conferred. It had a right to exercise those powers or not to do so, and, in the event of its election not to do so, it could enter into private contracts not subject to public control or regulation. In other words, appellant was not necessarily a public utility because its charter authorized it to become one in the operation of its business, nor was it under its charter a public service corporation merely by the operation of a private business of the ldnd enumerated.

Section 1 of a statute of this State, enacted by the General Assembly of 1905 (Acts of 1905, page 577, Crawford & Moses’ Digest, section 3969), reads as follows:

“Pipe lines — right-of-way. Any corporation organized by virtue of the laws of this State, for the purpose of developing and producing mineral oil, or petroleum, or natural gas in this State, and marketing the same, or transporting or conveying the same by means of pines from the point of production to any other point, either to refine or to market such oil, or to conduct such gas to any point or points to be used for heat or lights, may construct, operate and maintain a line or lines of pipes for that purpose along and under the public highways and the streets of cities and towns, with the consent of the authorities thereof, or across and under the waters and over any lands of the State and on the lands of individuals, and along, under or parallel with the rights-of-way of railroads, and the turnpikes of this State; provided, that the ordinary use of such highways, turnpikes and railroad rights-of-way be not obstructed thereby, or the navigation of any waters impeded, and that just compensation be paid to the owners of such lands, railroad rights-of-way, or turnpikes, by reason of the occupation of such lands, railroad rights-of-way, or turnpikes by the said pipe line or lines.”

It will be observed that this statute does not declare that corporations organized for the purposes mentioned therein shall be public utilities. It does not undertake to classify them as such, but merely provides that corporations organized for those purposes may construct, operate and maintain a line or lines of pipes for that purpose along and under public highways, etc.,” and may exercise the right of eminent domain for the purpose of condemning property to be used as a right-of-way. The purpose of the statute was merely to confer the right of eminent domain on a class of corporations when operating as public utilities which had not theretofore possessed such right. The purpose of the act, declared in the caption, is “to confer the right of eminent domain upon companies developing the mineral oil and natural gas resources of the State.” It is not within the power of the law makers to declare the operation of a business which is private in its nature to be public service and subject to public control. That was so decided by the Supreme Court of the United States in the case of Producers’ Transportation Co. v. R. R. Commission, 251 U. S. 228. In that case the court said: “It is, of course, true that if the pipe line was constructed solely to carry oil for particular producers under strictly private contracts and never was devoted by its owner to public use, that is, to carrying for the public, the State could not, by mere legislative fiat or by any regulating order of a commission, convert .it into a public utility or make its owner a common carrier; for that would be taking private property for public use without just compensation, which no State can consistently do with the due process of law clause of the Fourteenth Amendment. * * * On the other hand, if in the beginning or during its subsequent operation the pipe line was devoted by its owner to public use, and if the right thus extended to the public has not been withdrawn, there can be no doubt that the pipe line is a public utility and its owner a common carrier whose rates and practices are subject to public regulations.”

This was said in a case involving a statute of the State of California in many respects similar to our own statute quoted above, and the Supreme Court of California announced the same conclusion in regard to this statute as was later declared by the Supreme Court of the United States. (Producers’ Transportation Company v. Railroad Commission of California, 176 Cal. 499.) The California court in disposing of the matter in that case said: “Neither by the provision of the act in question nor the provision of the Constitution can the State subject private property to a public use, nor confer authority upon the Railroad Commission to assume control of private pipe lines engaged in the transportation of crude oil. Neither by act of the Legislature nor by declaration of the State Constitution can private property be taken for public use without compensation therefor. * * # Where, however, the owner of property voluntarily devotes it to a public use, he in effect grants to the public an interest in such use, and to the extent of the interest so devoted to the public, the public may insist upon a voice in the control and regulation thereof.”

The same principle was, in substance, announced by the Supreme Court of the United States in the case known as the Pipe Line Cases, 234 U. S. 548. In that case there was involved the interpretation of an act of Congress extending the authority of the Interstate Commerce Commission over persons and corporations “engaged in the transportation of oil or other commodity, except water and except natural or artificial gas, by means of pipe lines,” and the court decided that the Standard Oil Company was subject to that provision as a public carrier, notwithstanding the fact that it only transported oil which under its own requirements was to be sold to itself by the producer. The court decided, however, that another corporation which only transported oil from one State to another.through, its own pipe lines from its own well to its own refinery was not a common carrier within the meaning of that statute.

Our conclusion is, therefore, that appellant did not become a public utility merely by force of the statute itself, without anything being done pursuant to the terms of that statute or in any other respect to make itself a public utility. But the conclusion is inevitable from the proper construction of the statute that, if a corporation organized for the purposes ,of carrying on the business mentioned in the statute takes advantage of the terms of the statute, it becomes a public utility subject to the State’s control. Pulaski Heights Land Co. v. Loughborough, 95 Ark. 264. The statute does not declare such corporations to be public utilities merely because they operate the business mentioned, but- they can not exercise the powers conferred under that statute without being public utilities. If a business so conducted is entirely private, .it is not within the power of the Legislature to confer upon it the power of eminent domain, as that is a power which can be exercised solely for the benefit of the public. Wyman on Public Service Corporations, § 71; Ozark Coal Co. v. Pa. Anthracite Rd. Co., 97 Ark. 495. This was the effect given to the California statute by the Supreme Court of that State in the decision just referred to. That court upheld the decision of the Railroad Commission of the State in assuming jurisdiction of a corporation operating a pipe line because of the fact that the corporation had “availed itself of the right of eminent domain in condemning property for the right-of-way over which it constructed its pipe line.” The court said: “To our minds this must be deemed conclusive evidence of a dedication of such property to public use, since it could not have exercised such right other than in ‘behalf of a public use.’ ”

According to the evidence adduced before the commission in the present case, appellant had not exercised the right of eminent domain under this statute for the purpose of obtaining a right-of-way for its pipe line, but the evidence is entirely convincing that it was making preparations to do so, and these contracts on their face, and especially in the light of the testimony adduced with respect to the attitude of the parties at that time, necessarily contemplated the exercise of the right of eminent domain by appellant in equipping itself for the performance of the contracts. The gas field was about twenty miles from the place where the gas was to be delivered to the parties under these contracts. The only available means of transportation was, of course, by pipe lines running from the field to the point of delivery, and this pipe line necessarily would cross railroads and public highways and would cross the Arkansas River. Even if it be conceded that it was within the range of possibility to find some other means of transporting the gas from the field to the point of delivery without condemning a way over private property and without the granting of permits to use the public highways, it certainly was not practicable or reasonable. Nor was it reasonable to expect that the parties had in contemplation some such extraordinary means of transportation. The only reasonable conclusion is that the parties, when they contracted for delivery, meant that it was to be done by a pipe-line which was to be constructed in the exercise of the right of eminent domain over private property in case private grants could not be obtained, and over and along the public highways of the county. It is, therefore, certain that these contracts, though executed before appellant began operating as a public utility, were made in contemplation of such operations by appellant, and were intended as preferential contracts extended to the appellees in priority of any rights of the public.

Shortly after the execution of the first contract, and even before the other contracts were entered into, appellant pursued its preparations for the construction of a pipe line by the exercise of eminent domain under the statute and did in fact acquire a right-of-way under this power. And another significant fact is that it constructed a pipe-line for service under these contracts which was of a size deemed necessary in order to serve the public as well and to furnish equipment for the transportation of all the gas from the field. The second contract specified the size of the pipe-line, and, while the first contract contained no such specification, the proof shows that it was known at that time and understood that the pipe-line was to be of a size sufficient to serve áll who might wish to obtain gas at the points of delivery along the pipe-line.

There are other facts in this case which indisputably stamp these contracts as being made in contemplation of the entrance of appellant upon the operation of a business which was public in its character and was intended as a preferential right against the public. In the first place, it is a matter of general knowledge that natural gas is a commodity which is generally developed for the purpose of distribution to the public. It is not usually handled commercially as the subject-matter of private contracts. Appellees, in contracting with appellant, were bound to know that the developments were for the purpose of sale of gas publicly to all consumers within the radius of appellant’s business operations. They were bound to take notice of the fact that appellant had obtained a charter authorizing it to carry on business as a public utility. They knew, as recited in their contracts, that appellant had acquired leases for production of gas in a tremendous area of land and the contracts provided that appellant should acquire more leases and that the Contract should cover any other leases thereafter obtained. In other words, the contracts were made in contemplation of very extensive operations by appellant, •probably far in excess of the demands of each of these contracting consumers, and that necessarily meant that appellant would have to seek a market for the remainder of the gas produced, and that the market would be at the points of delivery along its pipe-line, which was to be used as equipment for service under these contracts. The acquisition by appellant of franchises in several towns and cities, while not shown to be within the actual knowledge of appellees, were matters of such common notoriety as appellees are presumed to have known of them. When these facts are considered in connection with the potent fact in the case that appellant was preparing at that time to exercise its power under the statute as a public service corporation, the conclusion is irresistible that these contracts were intended as preferential ones, and all rights under them must yield to the superior right of the public to regulate such corporations, and the contracts constituted, in effect, an invasion of the public right, though not such in express terms. Pipe Line Cases, 234 U. S. 548. It has been decided by this court that the State had the power, even under statutes enacted subsequent to the execution of contracts, to impose regulations which have the effect of changing the terms of contracts in regard to rates for public services. Camden v. Arkansas Light & Power Co., 145 Ark. 205.

We have not overlooked the decision of the Supreme Court of California in the case of Allen v. Railroad Commission, 175 Pac. 466, cited and relied on so confidently by learned counsel for appellees. We do not, however, think that that case is at all controlling in the present case. There was no indication in that case of the intention on the part of the court to impair the effect of the previous decision in the case we have cited. In that case there were private contracts intended as merely conferring private water rights to numerous parties, and the only circumstance which tended to establish the corporation under consideration as a public utility was the fact that it had been furnishing water to a small town or village which consumed less than three per cent, of the volume of water handled by the company. The court held that under the facts of that case there was no dedication of the bulk of the water handled to the public use. There was no element in that case, as was in the previous decision of that court cited, and in the present case, of the corporation having accepted the terms of a statute which necessarily made it a public service one.

Our conclusion is that the circuit court erred in dismissing the petition of appellant. It is contended by counsel for appellees that, irrespective of the law of the case as herein declared, the circuit court is presumed to have found from the evidence a state of facts, with respect to the reasonableness of the rates sought to be established by appellant in the schedule filed with the commission, which sustains the judgment, and that we ought to affirm the judgment unless we find it to be unsupported by the evidence. The fact, however, that the court dismissed the petition of appellant, instead of modifying the rates fixed by the commission, is convincing that the court did not base its judgment on any finding as to the reasonableness or unreasonableness of the rates, but on the conclusion erroneously reached that the contracts between the parties were beyond the control of the commission. It is undisputed that the contract rate is now non-remunerative and unreasonable, but the parties are entitled to a finding by the trial court on the issue as to the reasonableness of the rate fixed by the commission — that is to say, a finding based on the evidence adduced before the commission. The judgment is therefore reversed, and the cause remanded for further proceedings.

Humphreys, J.

(concurring). I concur in the conclusion reached by the majority that appellant corporation was a public utility at the time it entered into the contracts between it and appellees, but upon entirely different grounds.

I think it extremely doubtful, in the state of the evidence reflected by this record, if the power existed in appellant corporation to elect as between its private and public status, that such election had been made at the time the contracts were entered into. At that time franchises had not been granted to appellant to furnish gas to the general public in the nearby cities of Van Burén and Fort Smith; Appellant did not possess a pipe line and had not attempted to exercise the right of eminent domain to acquire a right-of-way for one. The contracts on their face contain preferential clauses which point unerringly to the fact that it was in the minds of the parties that appellant corporation was at the time a private corporation. Such clauses as these in a contract with a public utility would have rendered the contract void. I can hardly conceive that parties of such intelligence as these entered into a contract carrying clauses which necessarily rendered the contract, from its very inception, void. The parties were certainly attempting to enter into a valid contract and could have done so only upon the theory that appellant was a private corporation, and not a public utility.

The character of business conducted by appellant was subject to regulation by the State, and, being subject to such regulation, the State might at any time convert such a corporation into a public utility by conferring upon it the power to exercise the right of eminent domain. Such right could Dot be conferred upon a private corporation any more than upon a private person; so the very act of conferring the right of eminent domain upon a private corporation, organized for the purpose of developing and marketing natural gas in the State, converts it eo mstanti into a public corporation. The power to exercise the right of eminent domain, and not the exercise thereof, is the mark which stamps its character upon it. My interpretation therefore of section 3969 of Crawford & Moses’ Digest is that all corporations, theretofore or thereafter incorporated for the purpose of developing, producing and marketing natural gas in this State, are public utilities. . Immediately upon the passage of that act, the right to exercise eminent domain vested in such a corporation and did not remain in abeyance until such corporation elected to exercise it. Any corporation organized thereafter for such' purpose became invested with such power, and the power did not remain in abeyance until it chose to exercise it. The character of a corporation must be tested by its powers, and not the exercise of them. If a corporation has the power to exercise the right of eminent domain, it is necessarily a public corporation. So long as it is a private corporation, it can not possess snob, power. Interpreting the statute as I do, appellant was a public utility by virtue of the law at the time it entered into the contracts, as it appears from the undisputed evidence that it was organized for the purpose of producing and marketing natural gas in this State.

By request, I note Mr. Justice Wood in agreement with this concurring opinion.


source: Caselaw Access Project

author: MdCulloch, C. J.

license: Public Domain

text:
    Worthen v. Smith.
    Opinion delivered April 18, 1921.
    1. Brokers — commission—instruction.—In an action for a broker’s commission, an instruction that if the broker and purchaser were associated in business engaged in buying and selling real estate as partners at the time of the sale of the lanjl by the owner to the purchaser, the broker could not recover his commission, held under the evidence to be abstract.
    2. Appeal and error — abstract instruction — prejudice.—The giving of an abstract instruction is erroneous and calls for a reversal of the judgment unless it can be seen that no prejudice could have resulted from the error.
    Appeal from Desha .Circuit Court; W. B. Sorrells, Judge;
    reversed.

      Rowell & Alexander, for appellant.
    The court erred in giving instruction No. 2 requested by appellant. It was abstract, unsupported by the evidence, misleading and prejudicial. 70 Ark. 441; 74 Id. 19; 78 Id. 177; 80 Id. 260; 88 Id. 454 ; 96 Id. 614; 117 Id. 593.

      DeWitt Po'e and Williamson & Williamson, for ap-pellees.
    1. If the objected to instruction was abstract, it was not prejudicial 'but barmless. 59 Ark. 431, 440; 103 IcL 307; 88 Id. 204. The testimony of 'Smith and appellant was in irreconcilable conflict, and the jury believed Smith, and the verdict is conclusive. 116 Ark. 82; 80 Id. 284; 75 Id. 37; 81 Id. 605. The evidence is riot all in the record, and this court mil not review its sufficiency. 54 Ark. 159; 58 Id. 134; 80 Id. 75; 136 Id. 378; 1 Crawford’s Digest, col. 1, p. 232.
    2. Those who hold themselves out to the public as partners are hound by their acts and estopped. 99 Ark. 602; 93 Id. 301. The record is incomplete, as certain documents are missing, and this court will not review the verdict.
   MdCulloch, C. J.

Appellant, Worthen, instituted this action against appellees, C. A. Smith and David Frinks, to recover a sum of money alleged to be due as commission on a sale of real estate. It is alleged in the complaint that appellees entered into a written contract with -appellant authorizing the latter to sell a farm in Desha County owned by appellees for a sum mentioned and upon stipulated terms and agreed to pay a commission for making the sale; that he produced a purchaser ready, willing and able to buy the farm on the specified terms, but that appellees refused to consummate the sale and refused to pay the earned commission. Appellees answered the complaint, setting forth several defenses. In the first place, it was denied that there was any contract between the parties for the sale of the farm, it being alleged in the answer that the writing exhibited with appellant’s complaint was signed by appellee Smith without authority of his co-appellee Frinks, and that the writing was delivered to appellant upon the express condition that it should not become a contract between the parties until it was subsequently ratified by Frinks. It was also alleged in the answer that the prospective purchaser produced by appellant was one who was in partnership with appellant in the purchase of the land, and for that reason appellees are not compelled to consummate the sale, and that appellant is not entitled to the commission. The case was tried before a jury, and the verdict was in favor of appellees.

According to the undisputed testimony, appellees owned a farm in Desha County containing 561 acres and appellee Smith signed the name of “Smith & Frinks” to the writing delivered to appellant, which authorized him to sell the farm at a price mentioned therein, and that it contained an agreement to pay a commission of ten per centum of the price. Frinks was not present when the contract was executed by Smith and was absent from the State on account of ill health. Appellant testified that Smith represented to him that he was authorized to sign Frinks’ name. On the other hand, Smith testified that he had no authority to sign Frinks’ name to the contract or to make a contract for the sale of Frinks’ interest in the land, and that he did not undertake to do so, but that he signed the contract with the distinct understanding that it was conditioned upon a subsequent confirmation by Frinks and was not to take effect unless Frinks so confirmed' it. Frinks also testified that Smith had no authority from him to enter into a contract for the sale of the land, and that he (Frinks) refused to approve the contract with appellant as soon as it was brought to his attention. It is seen from this recital of the testimony that there is' a sharp conflict on the issue as to whether or not the writing was delivered to appellant conditionally and was not to become a binding contract until approved by Frinks. This issue was submitted to the jury on appropriate instructions, and the finding must be taken as settling the issue against appellant by the verdict of the jury.

Appellant testified that he was engaged in the business of selling real estate on commission; that the office he occupied at Watson in Desha County was the one maintained by Mr. James Gould, who was engaged in the real estate business under the name of the Delta Land Company; and appellant further testified that he had no interest in the Delta Land Company except that he sold land for that concern on commission the same as he did for others. Gfould is the person with whom appellant' negotiated the sale of the land of appellees. Appellant testified that he negotiated the sale with Gould and communicated that fact to appellee Smith, who refused to consummate the sale. Mr. Gould testified that lie was in the real estate business under the name of the Delta Land Company, which was not incorporated, and maintained an office at Watson; that'appellant Worthen was under contract to sell lands for the Delta Land Company on a commission basis, but had no interest in his (Gould’s) proposed purchase of the lands of appellees. Mr. Gould testified that he tried to purchase the land for his son who had just been discharged from the army and had some money to invest, and that appellant had no interest whatever in the purchase. During the cross-examination of appellant while on the witness stand, he was asked to identify an office card of the Delta Land Company on which appeared the names of “James Gould, Secretary,” and “W. W. Worthen, Manager.” Appellant conceded the authenticity of the card, and testified tliat he was manager of the company’s office and sold land for the company on commission.

The court, over appellant’s objection, gave the following instruction:

“If you find from the evidence that plaintiff and James Gould, the party to whom plaintiff claims to have sold the property, were associated in business engaged in buying and selling real estate as partners at the time of the sale by plaintiff to said Gould, then your verdict will be for the defendant Smith, unless you further find that this particular sale was excluded from their other transactions.”

The sole ground urged here for reversal is that the instruction copied above was an abstract one without any testimony to support it, and that it constituted prejudicial error for the court to give it. We have concluded that the contention of counsel is correct in this respect, and that the instruction is without any testimony to support it and is prejudicial, or at least was calculated to prejudice the rights of appellant before the jury in determining the issues of fact. There is no testimony whatever that there was a partnership existing between appellant and Mr. Gould, or that appellant was interested with. Mr. G-ould in the purchase of this land. The office card introduced in evidence tends to prove nothing further than the fact that appellant had some sort of a business arrangement there with Mr. Gould in operating the real estate business under the name of the Delta Land Company. It does not tend to prove that there was a partnership or any community of interest between Gouland appellant in the purchase of this land. Appellant testified that he merely made sales of land for the Delta Land Company on a commission basis. Gould testified to the same fact, and stated that appellant had no interest in this purchase and that he (Gould) was buying the land for his son. Gould is a disinterested witness, and there is nothing to show that he has any interest in the result of this case, which is one for the recovery of the commission alleged to be due. Gould does not claim to have, any binding contract for the purchase of the land, and he is not affected by the result of this suit.

It is contended by counsel for appellees that, even if the instruction was abstract, it was not prejudicial, and does not call for a reversal of the judgment. We can not agree to this, because it has often been held by this court that the giving of an abstract instruction is erroneous and calls for a reversal of the judgment unless it can be seen that no prejudice could have resulted from the error. Numerous cases on this subject are cited on the brief of counsel. The jury may have assumed from this instruction that the court was holding that the evidence was legally sufficient to justify a finding that appellant was interested with Gould in the purchase, and they may have assumed from the giving of this instruction that they were at liberty to draw the inference from the language of the office card introduced in evidence that appellant was interested with Gould. Learned counsel for appel-lees argue her e that the evidence was sufficient, and doubtless the counsel who tried the case below made the argument to the jury. For aught we know to the contrary, the verdict of the jury may have been founded on this particular feature of the case.

For the error in giving this instruction the judgment must he reversed and the cause remanded for a new trial. It is so ordered.


author: McCulloch, C. J. Hart, J.

text:
    Southern Trust Company v. American Bank of Commerce & Trust Company.
    Opinion delivered April 18, 1921.
    1. Banks and banking — forged indorsement of check — liability of drawee. — The payee of an unaccepted check can not maintain an action upon it against the bank on which it is drawn, and the unauthorized payment by the bank on a forged indorsement does not constitute an acceptance.
    2. Banks and banking — liability on forged indorsement.— Where a bank, by direction of a depositor, issued a cashier’s check to a creditor of such depositor, but, through negligence or mistake, delivered the check to another person who impersonated the payee, and the bank subsequently paid the money out on a forged indorsement of the check by the person to whom the check had been delivered, the bank did not become liable to the creditor; there being no acceptance of the check.
    Appeal from Pulaski Chancery Court; J. E. Mar-tinecm, Chancellor;
    affirmed.

      S. L. White, for appellant.
    At the time garnishment was served on appellee it had money in its hands for the purpose of paying Smith and it had never been paid out on his check or order and Smith had a right of action against the hank. 69' Ark. 43; 216 S. W. 717; 5 Cyc. 548; 92 Tenn. 154; 183 S. W. 684. See, also, 70 Penn. Sup. Ct. 34. The exact question here has been settled by this court. 98 Ark. 1; 100 Id. 537; 133 Id. 498. Appellee is indebted to Smith and (2) between 'Smith 'and appellee there was and is privity. Smith could maintain suit against appellee, and appellant acquired this right against appellee. Appellee still has in its harids money deposited to pay Smith. This was a trust fund for Smith against which it issued its own checks or obligations, which have never been paid Smith, but paid some one else on forged indorsements, and appellee has recourse on the banks that cashed them.

      Moore, Smith, Moore & Trieber, for appellee.
    The transmittal of the telegraphic orders to and the receipt by the bank in no way operated to create any relation of privity between the bank and Sam Smith or Sam W. Smith. The bank paid the money to the party designated and charged it to him. The fact that the order was sent direct to the bank, instead of the payee, created no difference in legal effect. 130'Pac. 29.. The precise question here has been determined by this court. 98 Ark. 1; 100 Id. 537; 133 Id. 498. The giving a. cheek upon a bank is not assignment pro tanto■ to the payee upon which he can bring suit against the bank for payment, there being no privity between the drawee bank and the holder or owner af the check until the check is accepted. 133 Ark. 498 and cases supra. See, also, 136 Pae. 935; 79 S. !W. 968. This case is ruled by 100 Ark. 537 and 133 Ark. 498.
   McCulloch, C. J.

Each of the parties to this appeal is a banking corporation doing business in the city of Little Rock. Appellant obtained a decree in the chancery court of Pulaski County on October 11, 1920, for the recovery of the sum of $9,655.55 against Sam W. Smith and Arthur Nicholl, and later sued out a writ of garnishment directed to' appellee commanding the latter to answer what funds and property of Sam W. Smith it held in its possession. Appellee answered that it had no property or funds of Smith in its possession, and appellant filed a reply, which framed the issue tried by the lower court, resulting in a decree of the court discharging appellee as garnishee.

The primary question in the case is whether or not Sam-W. Smith had a right of action against appellee, for appellant’s right to recover from the garnishee is dependent upon the right of Smith, one of the defendants in the judgment. The material facts are undisputed. Nicholl wag the Little Bock agent of Shepherd & Gluck of New Orleans, and Smith had dealings with Shepherd & Gluck through Nicholl whereby Shepherd & Gluck became indebted to Smith on January 9, 1920, in the sum of three thousand and fifty-six dollars and fifty-six cents. Shepherd & Gluck had a checking account with appellee, and on the date last mentioned they sent to appellee from their office in New Orleans a code telegraphic message directing appellee to pay to Sam Smith the sum of $3,-056.56, and charge the same to their account. The telegram also stated that they were transferring to their credit at appellee’s bank the sum of $3,000 from another bank in Little Bock to cover the draft. Before the receipt of this telegram by appellee, Nicholl telephoned to appellee’s assistant cashier, who handled such matters, stating that he (Nicholl) was expecting that appellee would receive a wire that day from Shepherd & Gluck to pay Sam Smith $3,056.56 and asked that he be informed by telephone when the message came, and when the message came the assistant cashier telephoned the information to Nicholl, who replied that he would send Smith around to the bank at once to receive the money. This employee of the bank was a witness in the case and testified that he did not know Smith and so informed Nich-oll. but that the latter described Smith to him, and a few minutes afterward a man came into the bank representing himself as Sam Smith and produced a note from Nicholl identifying him as Sam Smith and directing that the sum be paid to him. The assistant cashier, not doubting that the individual who presented himself was Sam Smith, gave him what is termed a cashier’s check for said amount, i. e., a check signed by the cashier on 'that bank for the amount specified. The individual who received the check was not, according to the testimony, the Sam W. Smith who was entitled to receive it, but he afterward deposited the check with another bank in Little Bock, who presented it to appellee, and it was collected, the check having been properly indorsed by someone under the name of Sam Smith.

There was another transaction of precisely the same kind which took place on February 19, 1920, involving the sum of four hundred twenty-nine dollars and seventy-two cents. In this instance the man presenting himself as Sam Smith was sent around to the bank by Nicholl with a note identifying him, directing the payment of the sum to him, the same as in the former instance. Sam W. Smith testified as a witness in the case, and it is shown by his testimony that he had never received either of the amounts specified above, which were due him originally by Shepherd & G-luck, and which sums were specified in the two messages above.

The telegraphic' message from Shepherd & Gluck can only be treated either as a private direction from the former to the latter as their agent, or as the equivalent of a written check or order for the payment of the money. In neither event was there any privity between Smith, the payee, and appellee, the drawee of the check, so as to give Smith a right of action against appellee for the recovery of the amount. We think that the message was the equivalent of a written check for the payment of the money, and that its effect was the same as if it had been delivered to Smith, instead of being sent direct to appellee. Treating it in this way, the check did not operate as an assignment of the funds, so as to empower Smith to sue for the amount. It has become the settled doctrine of this court, announced in repeated decisions, that the payee of an unaccepted check can not maintain an action upon it against the bank on which it is drawn, and that the unauthorized payment by the bank on a forged indorsement does not constitute an acceptance. Sims v. American National Bank, 98 Ark. 1; Rogers v. Farmers Bank, 100 Ark. 537; State v. Bank of Commerce, 133 Ark. 498. In thus holding to this rule we have followed the Supreme Court of the United States in the case of First National Bank v. Whitman, 94 U. S. 343, and what appears to be the great weight of American authority. The case of Schaap v. First National Bank, 137 Ark. 251, is in no wise against this rule, and the facts of that case are distinguished from the facts of the other cases now cited. In the Schaap case a hank other than the drawee, bank cashed checks upon unauthorized endorsements and collected the same from the drawee bank. We held that the owner of the checks had a right to repudiate the endorsement without repudiating the collection, which was for his benefit, and that he could recover from the collecting bank the amount received on the checks from the drawee bank.

In reaching that conclusion, we said with reference to the other decisions and the Whitman case, supra, this: “In that case the court held that payment to a stranger upon an unauthorized indorsement does not operate as an acceptance of the check, so as to authorize an action by the real owner to recover its amount as upon an accepted check. We do not think that our holding in our own cases above cited or the holding in the Whitman case is in conflict with our holding in the present case. * * * As we have already seen, Slates, the agent of the plaintiff, had no right to indorse the checks in the plaintiff’s name, and the plaintiff’s right to the checks remained precisely as it was before Slates undertook to endorse them for him. The checks therefore, when received by the defendants, were the property of the plaintiff, and in that case he may, as we have seen, ratify the action of the banks in receiving the checks and collecting their proceeds without ratifying the unauthorized act of his agent in indorsing the checks in the name of the principal.”

But counsel for appellant, conceding such to be the rule of our court, contends that the issuance of the cashier’s check in the name of Smith, the true owner of the original check, was equivalent to an acceptance of the original check and converted, the funds into a deposit to the credit of Smith, the real owner. The frailty of this contention is that, while the bank, through negligence or mistake, delivered to another person, who falsely impersonated Sam W. Smith, the check which was intended for the said Smith, yet the bank delivered the check to the particular individual it intended to receive it and paid it on the indorsement of that person. The fact that a mistake was made in delivering it to the wrong person does not alter the material circumstance that the hank paid the money out on the check to the person to which it had originally delivered it, and it was therefore not liable to the real owner. The case in this respect is ruled by our decision in the recent case of Cureton v. Farmers’ State Bank, 147 Ark. 312. In that case a depositor gave a check through mistake to one who was falsely impersonating the man whose name was written in the check as payee, and, in a suit by the depositor against the bank to recover the amount of money paid out on the forged indorsement, we held that there was no liability for the reason that, notwithstanding the mistake of the depositor in giving the check to the wrong* person, the bank had paid it out to the person to whom the depositor had given the check. The same rule of reasoning is, by analogy, applicable to the facts of this case for, notwithstanding the fact that appellee made a mistake in giving the check to the wrong person, it paid the funds out to that person on the check, and it can not be said that the delivery of the check to another person would constitute a deposit of the funds in the name of the party to whom the original check belonged. See, also, following cases: First Nat. Bank v. Bank, 170 N. Y. 88; Slattery & Co. v. Bank, 186 N. Y. Supp. 679; Robertson v. Coleman, 141 Mass. 231; Heavey v. Com. Nat. Bank, 27 Utah, 222. 101 Am. St. 966. By no process of reasoning can it be said under these circumstances that the true owner of the original check can affirm the receipt of the cashier’s check b}r the impostor and thereby become the owner of the deposit. If there could be any theoretical ratification at all by the owner of the original check, it was merely a ratification of the act of the false impersonator in receiving the check, and, if there be such a ratification, he could look alone to that person for reimbursement. Certainly the act of the bank in giving the cashier’s check to the false impersonator could not be ratified so as to constitute tlie bank the bolder of tbe deposit for tbe benefit of tbe owner of tbe original check. Tbe net of tlie bank in delivering- tbe cashier’s check to 'H' ''th’s fa’se impersonator was of tbe same effect as if it ~¿ui . aid ..he money dhvetlv, instead of giving a check to tbe impersonator, and for the reasons stated in our former decisions such a payment can not be treated as an acceptance of tbe check.

Our conclusion is, therefore, that ffie decree of tbe chancellor is correct, and tbe same is affirmed.

Hart, J.

(dissenting). It seems to me that tbe principles of law decided in tbe cases cited in tbe majority opinion, when applied to tbe facts presented by tbe record, warrant a reversal of tbe judgment.

This court has held that there is no privity of contract between tbe bolder of a check or draft which has been paid by tbe drawee bank upon the forged indorsement of tbe payee, which would entitle him to bring suit against tbe drawee bank, and that its action in tbe payment of such draft does not constitute an acceptance thereof which releases tbe drawer from its payment. Sims v. American National Bank of Fort Smith, 98 Ark. 1, and State v. Bank of Commerce, 113 Ark. 498.

So in this case, if Shepard & Gluck had drawn a draft on tbe American Bank of Commerce & Trust Company in favor of Sam Smith for tbe amount they owed him, and this draft bad been persented to tbe bank by an-’ other Sam Smith and cashed, tbe bank would not have been liable to the real Sam Smith. ¡Because tbe bank paid tbe draft on a forged indorsement of tbe payee’s signature to a person not authorized to receive the money, it does not follow that tbe bank promised tbe payee to pay the money again to him, on tbe presentation of tbe cheek by him for payment.

In tbe instant case, however, tbe facts are essentially different. Shepard & Gluck in each instance telegraphed tbe bank at Little Bock to pay a stated sum of money to Sam Smith and charge their account with it. Shepard & Gluck actually transmitted the money to the hank. . The hank drew a cashier’s check in favor of Sam Smith and credited the man supposed to he Sam Smith with the amount represented 'by the check. The account of Shepard & Gluck was charged with the amount. The issuance of the cashier’s check charging the amount to the account of Shepard & Gluck fixed the liability of the hank. The issuance of a cashier’s check by the hank charging the amount to the account of Shepard & Cluck constituted an accepted order for the money.

Neither do the facts of this case bring it within the rule announced in Cureton v. Farmers’ State Bank, 147 Ark. 312. If Shepard & Gluck had drawn a check on ap-pellee hank in favor of Sam Smith and delivered it to an impostor, who had presented it to the hank and obtained payment thereon, the case in question would be applicable. In such a case the bank would pay the check to the person the drawer of the check had intended it to pay, although the drawer of the check had made a mistake and had drawn the check to the wrong person. The facts in the present case are altogether different. Shepard & Gluck did not draw a check in favor of Sam Smith and deliver it to the supposed Sam Smith who in turn presented it to the bank for payment. But Shepard & Gluck directed the bank to pay Sam Smith, their debtor, and the bank paid the money out to another person. It did not pay the money to the person whom Shepard & Gluck directed it to pay.

Therefore, the bank, having charged the amount to Shepard & Gluck, is liable to the real Sam Smith, or his assignee.


author: Hart, J.

text:
    FERGUSSON v. FERGUSSON.
    Opinion delivered April 18, 1921.
    1. Wills — intention—CONSTRUCTION.—All the provisions of a will should be construed together in order to give effect to the manifest intention of the testator as shown by the language of the will in the light of the surrounding circumstances.

      2. Trusts — authority op trustee to execute mortgage. — Under a will conveying the testator’s property to his son in trust for the son’s children, giving the trustee full power and authority to sell and dispose of all property, and to manage, handle and deal with it the same as in his discretion may seem best, the trustee was authorized to mortgage a farm to procure necessary funds to operate it.
    Appeal from Jefferson Chancery Court; John M. Elliott, Chancellor;
    affirmed.
    STATEMENT OE PACTS.
    Appellants brought this suit in equity against ap-pellee to enjoin him from mortgaging the land described in the complaint.
    The complaint alleges that the appellants are the owners of the land described therein which appellee holds in trust for them by virtue of a will executed by their grandfather and duly probated after his death. A portion of the will in question is as follows:
    “I give, devise and bequeath to my son, John P. Fergusson, as trustee, all the property of every nature and kind, real, personal, and mixed, of which I may die seized or possessed, or in which I may have an interest at the time of my death. To have and to hold unto the said trustee for the following uses and purposes:
    ‘ ‘ Said trustee shall invest $10,000 in real estate, such investment to be agreed upon by the trustee and my brother, Van L. Fergusson. The title to said property shall be taken in the name of the trustee, hut the management of the place shall be left to my brother, Van, who shall have all the rents and profits and emoluments arising from the said property and it's use for the use of himself and my mother, Laura J. Kincheloe. Upon the death of either my mother or my brother, the rents, profits, and emoluments of said land shall thereafter belong to the survivor of them. Upon the death of both my brother and my mother, the rents, profits and emoluments of the land shall revert to-the trustee. The trustee shall pay $50 on the first day of each month to my brother, Van L. Fergusson, during the time between my death, and the purchase of the $10,000 worth of real estate, but such payments shall cease when the real estate is purchased and turned over to my brother. If the real estate so purchased shall prove unprofitable, the trustee shall have the power, with and by the consent of my brother, Van, to sell said property and reinvest the proceeds in other property which shall thereupon be delivered .to my brother and used by him the same as. above stipulated for the original investment. During the time between the sale of one piece of property and the purchase of another, the trustee shall pay over to my brother, Van, $50 on the first day of each month.
    “I give and bequeath to said John P. Fergusson, as trustee, full power and authority to sell, and dispose of any or all of the property bequeathed to him, and to manage, handle, and deal with the same as in his discretion may seem best. He is to hold the same for the use and benefit of his children, John Wright Fergusson and James McFerrin Fergusson, and all other children which may hereafter be born to him. At the death of my said son, all property remaining in his hands as trustee shall immediately vest in his children, share and share alike. During his life, my said son may use and expend the rents, profits, income and emoluments of said property for maintenance, support, and education of his children in such a manner as to him shall seem best, and may invest the surplus at his discretion, and, upon his death, 'the division of the property then remaining in his hands as trustee shall be equal among his children without taking account of the amount theretofore expended for the use of each child. ’ ’
    The record shows that appellee and his father each owned an undivided one-half interest in the land described in the complaint; that the father devised his interest to appellee in trust as set out in the will above; that 497 bales of cotton were raised on the place during the year 1920, and that appellee was unable to sell them to any advantage on account of existing conditions; that it was necessary to borrow money with which to run the place during the present year; that he desires to borrow money and run the place in the way in which it has been run during past years and in which other places of similar character in that vicinity are operated; that it is highly essential that the place be cultivated in order to prevent great deterioration of the land and the improvements thereon; that the laborers on the place would leave and it would be very difficult to get them back and to restock the place with farming implements, feed and mules.
    The chancellor found that under the terms of the will of J. W. Fergusson, deceased, appellee was authorized to mortgage the land in question. The chancellor further found that it was to the best interest of the trust estate and of appellants that the loan contemplated be made, and that such action was necessary to preserve the property from waste.
    It was, therefore, decreed that the complaint of appellants be dismissed for want of equity, and that ap-pellee be authorized to borrow the money to enable him to cultivate the land in question for the current year.
    The case is here on appeal.

      Danaher & Dcmaher, for appellants.
    Under the terms of the will the trustee had no power to mortgage the trust estate. The word ‘‘mortgage” is not used in the will, and the words ‘‘sell and dispus ■ of” do not include the power to mortgage. 31 Cyc. 1080.
    The appellee, pro se.

    The cases cited by appellant do not apply, as the case here is different. The will gives the trustee power “to sell and dispose of” the lands and to manage, handle and deal with same as his discretion may deem best, and this includes the power to mortgage. 39 Cyc. 382; 115 Ill. App. 284; 124 Iowa 296; 15 La. Ann. 386; 3 Tenn. Chy. 124; 62 Tes. 642.
   Hart, J.

(after stating the facts). In Heiseman v. Lowenstein, 113 Ark. 404, the court held that a mere power given to a trustee, under a will, to sell and convey the trust property, does not include the power to mortgage it. The court, however, in that case adhered to the cardinal principle that, in construing a power, the intention of the donor is of paramount importance and recognized that the power to sell in connection with other language used may include the power to mortgage. All the provisions of the will should be construed together in order to give effect to the manifest intention of the testator, as shown by the language of the will in the light of the surrounding circumstances.

Applying this test to the will in the present case, we are of the opinion that the intent of the testator was to give his son, as trustee under the will, power to mortgage the property as well as to sell and convey it. The terms of the will show that the testator reposed great confidence in his son. It gave him power to sell the real estate if it should prove unprofitable and invest the proceeds in other property. Then he uses this language: “I give and bequeath to said John P. Fergusson, as trustee, full power and authority to sell, and dispose of any and all of the property bequeathed to him, and to manage, handle, and deal with the same as in his discretion may seem best. He is to hold the same for the use and benefit of his children, John Wright Fergusson and James McFerrin Fergusson, and all other children which may hereafter be born to him.”

The power to manage and deal with the land for the benefit of the sons of the trustee and the grandsons of the testator was the primary object of the creation of the trust and the paramount duty of the trustee. The father confided the full management and control of the property to his son for the benefit of his grandchildren, and left him to use his best judgment and discretion in the matter. Under the power conferred by the will, if he. thought it would be to the advantage of the children for him to sell and dispose of the land, he had the power to do so. In connection with the power to sell and dispose of any or all of the property, he was given the power to manage, handle, and deal with the same as in his discretion may seem best. This included tbe power to improve and operate tbe farm and necessarily called for tbe exercise of discretion in the premises. In tbe exercise of this discretion appellee deemed it to tbe advantage of tbe beneficiaries that be procure tbe necessary funds to operate tbe farm by mortgaging tbe land. Tbe language used shows that tbe testator intended to invest tbe trustee with broad and discretionary powers in tbe control and management of tbe property in order to make tbe land productive and profitable to the objects of bis bounty. Otherwise, tbe trustee might be compelled to sell tbe land for tbe payment of tbe debts already incurred, even though this course would be ruinous to tbe best interests of all parties concerned, and even though it might be greatly to tbe advantage of tbe beneficiaries for tbe trustee to retain tbe management of tbe farm and incur further indebtedness in making tbe present crop. These views are supported by tbe following cases: Hamilton v. Hamilton (Iowa), 128 N. W. 380; Kent v. Morrison (Mass.), 10 L. R. A. 756; Faulk v. Dashiell, 62 Tex. 642, 50 Am. Repts. 542; Lardner v. Williams, 98 Wis. 514; re Phillip Lueft, Jr. (Wis.), 7 L. R. A. (N. S.) 263; Roberts v. Hale, 124 Iowa 296; Funkhouser v. Porter (Ky.), 107 S. W. 202; Loebenthal v. Raleigh, 36 N. J. Equity 169, and Hamilton v. Mound City Mutual Life Ins. Co., 3 Tenn. Chy. Repts. 124.

It follows that the decree must be affirmed.


text:
    Ferguson v. Guydon.
    Opinion delivered April 18, 1921.
    1. Estoppel — REPRESENTATION.—Where plaintiff informed defendant that hé contemplated purchasing land and asked if defendant had a vendor’s lien thereon, and defendant replied that he had not, and that plaintiff would be safe in purchasing it, and, relying upon that representation, plaintiff purchased the land, an equitable estoppel in plaintiff’s favor was created.

      2. Estoppel — elements op equitable estoppel. — An equitable estop-pel requires, as to the persons against whom the estoppel is claimed, opportunity to speak, duty to speak, failure to speak, and reliance in good faith upon such failure.
    3. Estoppel — evidence.—A finding of the chancellor that a' vendor toid one purchasing from the vendee that he had no lien on the property held not against the preponderance of the evidence.
    4 Appeal and ERROR — conclusiveness op chancellor’s finding.— A finding of fact by a chancellor will not be disturbed on appeal unless against the clear preponderance of the evidence.
    Appeal from Monroe Chancery Court; John M. Elliott, Chancellor;
    affirmed.
    STATEMENT OE EAOTS.
    Jesse Guydon brought this suit in equity against S. W. Ferguson and J. L. Simpson to set aside a decree in their favor against I. W. Carter in the same chancery court to foreclose a. vendor’s lien on certain property in the city of Clarendon, Monroe County, Arkansas, and to quiet his title in said property.
    The defendants denied all the material allegations of the complaint, and defended on the ground that they had a vendor’s lien on said property for the unpaid purchase money.
    The material facts are as follows: Jennie Teasley owned the property in controversy and exchanged it to I. W. Carter for certain property owned by him. By his direction she executed a deed to the property to S. W. Ferguson and J. L. Simpson on February 12, 1919. She lived on the property at the time she executed the deed, and it was known as the Jack Brown place. In a few days Carter told her that he had bought the property back and wanted to sell it to Jesse Guydon. She saw Jesse Guydon and made an agreement to sell the place to him for $600. On the 24th day of February, 1919, S. W. Ferguson and J. L. Simpson conveyed said property to I. W. Carter and their wives relinquished their dower in the deed which recited that it was executed in consideration of $150 paid by I. "WV Carter and $300 evidenced by his promissory note bearing interest at 10 per cent. and due on the 20th day of November, 1919. The deed was duly filed for record on the same day. On the 24th day of February, 1919, I. W. Carter executed a deed to said property to Jesse G-uydon, and it was filed for record on the 28tli day of May, 1919. The deed recited a cash consideration of $200 and the balance in two notes for $100 and $300 due, respectively, on the 20th day of May, 1919, and the 20th day of November, 1919. The first note for $100 was duly paid by Jesse Guydon to I. W. Carter in person when it became due. The second note for $300 was paid by Jesse Guydon to Jennie Teasley for Carter about the time it became due.
    According to the testimony of Jennie Teasley, when Jesse Guydon came to pay the second note, she asked Carter if he had paid Ferguson & Simpson all the purchase price for the place and found out that Carter owed a balance of $300 on the purchase money. She loaned Carter $50 and directed him to take this, together with $220 which Guydon had paid for him on the purchase price of the lots and go to Ferguson and finish paying for the lots. Carter left her house, and she watched him go toward Ferguson’s store. That night he came back and showed her a receipt signed by S. W. Ferguson as follows: “Received of I. W. Carter in full up to date.” Carter left town that night and has not been heard of since. He is reputed to be dead.
    According to the testimony of Lee Guydon and Jesse Guydon, the former is the father of the latter. When Jesse Guydon began to negotiate for the purchase of the property in question from I. W. Carter, he learned that S. W. Ferguson had a vendor’s lien upon it for the unpaid purchase money. The father and son approached Ferguson on the street and told him that the son contemplated purchasing’ the property from Carter and asked him if he bad any lien on it. Ferguson replied that he did not have any lien on the property, and that they would be perfectly safe in purchasing it from Carter so far as be was concerned. Relying on this assurance from Ferguson, the son went ahead and completed his contract for the purchase of the property. They did not find out 'that there was any hen on the property for the unpaid purchase money until they had finished paying for it in November, 1919, and Carter had left for parts unknown.
    S. W. Ferguson was a witness for himself. According to his testimony, he did not know that Jesse G-uydon had purchased the property in controversy from I. W. Carter and did not tell him and his father that he had no lien on the property for the purchase money. He and Simpson.deposited the note which Carter gave them for the unpaid purchase money with a bank in the city of Clarendon as collateral security and paid their note to the bank in the early part of January, 1920. Carter never at any time paid them any part of the $300 note which he gave them for the balance of the purchase price for the property in question. After Carter left they brought a suit against him to foreclose their vendor's lien on the property and obtained service by the publication of a warning order on the ground, that he was a nonresident of the State. They obtained a decree of foreclosure prior to the institution of the present action. No personal service was obtained on Carter in that action, and Jesse Guydon was not a party to it.
    The chancellor found the issues in favor of the plaintiff, and it was decreed that the lien retained in the deed executed by S. W. Ferguson and J. L. Simpson to I. W. Carter to the property in question be canceled, and that the title to said property should be quieted and confirmed in the plaintiff, Jesse Guydon, free from all claims of the defendants, S. "W. Ferguson and J. L. Simpson, under and by virtue of the lien retained in their deed to I. W. Carter.
    The defendants have appealed.

      Bogle & Sharp, for appellants.
    ' The findings of the chancellor on the question of equitable estoppel are against the clear preponderance of the evidence. 97 Ark. 49 ; 65 N. W. >604; 83 Fed. 725-34; 21 C. J. 1120; 54 Ark. 499; 49 Id. 218. Ferguson is not estopped by any misrepresentations of facts, as they did not exist at the time of the alleged misrepresentations. There must be a motive. 83 Fed. 733. There must be a false representation of existing facts or fraudulent concealment of same intended to be acted upon, and there was not. 16 Cyc. 726, 732 ; 53 Ark. 196; 54 Id. 508; 48 Id. 426; 18 Wall. 255, 271; 117 ü. S.'567, 580; 2 Pom., Eq. Jut., 686-8; 89 Ark. 349-53; 93 U. S. 335.
    The burden was on appellee to show that the note had been paid. 67 Ark. 69; 64 Id. 466; 123 Id. 261.

      Lee & Moore, for appellee.
    Appellee was misled to his injury and has suffered loss, and this constitutes equitable estoppel. 39 Ark. 131; 33 Id. 465 ; 48 Id. 409; 89 Id. 349. The rule as to equitable estoppel is well settled and sustained. 33 Ark. 465; 39 Id. 134; 125 Id. 150; 99 Id. 260; 128 Id. 409; 131 Id. 82.
    The findings of the chancellor are sustained by the clear preponderance of the testimony.
   Hart, J.

(after stating the facts). It may be stated at the outset that S. W. Ferguson and J. L. Simpson obtained a decree of foreclosure of the unpaid purchase money against I. W. Carter in the same chancery court in which the present suit is pending. This decree was obtained by the publication of a warning order against Carter, and the decree was entered of record before the present suit was instituted. Jesse Guydon was not a party to that suit and is in no wise bound by the decree entered therein. His rights must be determined by the record in the present case.

The record in the present case shows that the deed from S. W. Ferguson and J. L. Simpson to I. W. Carter was executed on the 24th day of February, 1919, and the deed recites unpaid purchase money in the sum of $300 due by Carter which is evidenced by his promissory note of the same date as the deed, and due on the 20th day of November, 1919. Jesse Guydon also obtained his deed from Carter on the 24th day of February, 1919. According -to the testimony of himself and his father, they had heard that S. "W. Fergnson had a lien on the property. They met Fergnson on the street and asked him if he had a lien on the property for the unpaid par-chase money, giving as a reason for asking that Jesse contemplated purchasing it. Fergnson replied that he had no lien, and that they would he safe in purchasing the property so far as he was concerned. This testimony, if true, is sufficient to create an equitable estoppel in favor of Jesse Gruydon against the defendants, S. W. Ferguson and J. L. Simpson.

It has been well said that an equitable estoppel requires as to the persons against whom the 'estoppel is claimed, opportunity to speak, duty to speak, failure to speak, and reliance in good faith upon such failure. Fagan v. Stuttgart Normal Institute, 91 Ark. 141; Cox v. Harris, 64 Ark. 213; Rogers v. Galloway Female College, 64 Ark. 627; Gill v. Hardin, 48 Ark. 409, and Thompson v. Wilhite, 131 Ark. 77.

This rule was recognized in Scott v. Orbison, 21 Ark. 202, where the court held that if a vendor, having an equitable lien upon land for the purchase money, induces a third person to believe that he does not look to the land, but to other means for payment, and, in consequence thereof, he purchased the land, the vendor will be estopped from setting up his vendor’s lien.

Again this rule was recognized in a vendor’s lien case in Wilson v. Shocklee, 94 Ark. 301, but the estoppel was denied because the facts did not warrant its application. But it is strongly insisted that the evidence is not sufficient to warrant a finding in behalf of the plaintiff in this respect. Counsel for the defendants point to the fact that Ferguson in positive terms denied that he had made any such representations to Lee and Jesse Gruydon, or that he would have any motive in saying that he had no vendor’s lien on the property for the unpaid purchase money when, as a matter of fact, he did have such a lien.

There does not seem to have been any motive on either side to have deceived the other. It would have been easy for Jesse Guydon to have protected himself if he had known that Carter owed Ferguson $300 as a balance of the purchase money of the property. He could liave seen that the money lie paid Carter in November, 1919, was applied by the latter toward the payment of the unpaid purchase money due to Ferguson.

We are confronted with a finding in behalf of the plaintiff by the chancellor, and it can not be said that his finding is against the preponderance of the evidence. According to the uniform current of decisions in this State, the findings of fact made by a chancellor will not be disturbed on appeal unless they are against the preponderance of the evidence.

Therefore the decree will be affirmed.