Baker-McgGew Company v. Union Seed & Fertilizer Company

• Decision Date: 03 July 1916
• Docket Number: 112
• Parties: BAKER-MCGREW COMPANY v. UNION SEED & FERTILIZER COMPANY
• Court: Arkansas Supreme Court

188 S.W. 571

125 Ark. 146

BAKER-MCGREW COMPANY v. UNION SEED & FERTILIZER COMPANY

No. 112

Supreme Court of Arkansas

July 3, 1916

Appeal from Clay Chancery Court, Western District; C. D. Frierson Chancellor; affirmed.

STATEMENT BY THE COURT.

Baker & McGrew, a partnership, composed of R. L. Baker and W. R McGrew, was engaged in a general mercantile business and operated a cotton gin at Success, in Clay County, until February 1, 1912. On that date, a stock company composed of R. L. Baker and W. R. McGrew, and seven others, was organized, with a capital stock of $ 20,000, $ 13,500 of which was paid in. It was called Baker-McGrew Company and took over the mercantile business, but not the cotton gin formerly owned and operated by Baker and McGrew. On. March 25, 1913, Baker and McGrew borrowed $ 4,000 from the oil company and executed a note therefor and a contract to sell their cotton seed to the oil company and secured the note by a second mortgage on their, gin plant. Baker and McGrew operated their gin during the season of 1913 and 1914 and shipped seed to the oil company and reduced their indebtedness to about $ 1,000.

The appellee company, hereafter called the Seed Company, took over the business and the assets of the oil company including the Baker and McGrew mortgage.

The Baker-McGrew Company continued its credit mercantile business during the year 1914 and Baker and McGrew not being financially able to operate their gin and purchase cotton the Baker-McGrew Company in order to facilitate making its collections bought cotton and had it ginned by Baker and McGrew at $ 3.50 per bale and shipped a part of its cotton seed to the seed company. Part of the proceeds of the price of these seed shipments was applied by the seed company to the payment of the old account of Baker and McGrew and the right to make such application thereof is the matter involved in this suit and appeal.

The foregoing facts were alleged in the complaint and also that the Baker-McGrew Company and Baker and McGrew are in law one and the same person so far as the transactions involved are concerned, and that the seed company was entitled to credit the sums of money retained from the purchase price of the cotton seed on the old debt of Baker and McGrew. That although Baker-McGrew Company pretended to be an organization or stock company of some kind, that it was in fact a partnership virtually owned and controlled by R. L. Baker and W. R. McGrew and that the shipments of seed made to the seed company were in fact made by Baker and McGrew or on account of said partnership.

Judgment was prayed against Baker and McGrew for a balance of $ 264.17 claimed to be due and a foreclosure of the mortgage.

The defendants R. L. Baker and W. R. McGrew, admitted the execution of the note and that there was a balance due on it but denied that their firm Baker and McGrew had shipped any cotton seed to the seed company during the season of 1914 and 1915, or drawn any drafts on said company and any understanding by which any seed shipped during said season should be applied to the payment of their note. They denied the other allegations of the complaint above set out and that plaintiff was entitled to any credit upon their debt by reason of cotton seed shipped by Baker-McGrew Company.

Baker-McGrew Company filed an answer and cross-complaint, alleging that it was an association with R. L. Baker and W. R. McGrew as secretary and treasurer; the amount of its capital stock and names of the other seven stockholders; that Baker and McGrew was a partnership composed of R. L. Baker and W. R. McGrew that the two concerns were entirely separate and distinct, conducting different kinds of business under different managements and with assets separate and distinct and in no way connected. Denied that Baker and McGrew had shipped any cotton seed to the seed company for said season and that it was in any way liable for the debts of Baker and McGrew and also the right of plaintiff to apply any proceeds of its cotton seed shipped to them to the discharge of the debt owing it by Baker and McGrew. By way of cross-complaint alleged it had shipped seed during October and November, 1914, to the plaintiff for which it was indebted for a balance of $ 960.81, with interest and prayed judgment therefor.

The testimony which consisted largely of correspondence was introduced and it appears that the two companies or partnerships are in fact separate concerns, conducting different businesses and that the cotton seed shipped to the seed company in October and November, 1914, was the property of Baker-McGrew Company, which concern, it was not contended, expressly authorized the seed company to apply any part of the proceeds thereof to the payment of the account of Baker and McGrew, or that it was known to said company that it was being so applied until the letter of October 29th. Appellant says there was no contention below that Baker-McGrew Company intended to mislead the seed company and that it may be conceded here that from the time shipments of seed began until the receipt of the letter of November 18, the seed company honestly believed that Baker and McGrew and Baker-McGrew Company were one and the same and said Baker-McGrew Company believed it was selling cotton seed to the seed company for the market price and of course entitled to all of the proceeds of the sale. Other facts will be stated in the opinion.

Judgment was rendered in favor of the seed company, from which this appeal is prosecuted.

Judgment affirmed.

G. B. Oliver, for appellant.

Appellee has utterly failed to make out a case of equitable estoppel; it has wholly failed by a preponderance of the evidence to establish any one of the five essentials of an equitable estoppel. No one represented that the partnership and the company were one and the same concern. Appellee knew better. There was neither misrepresentation, deceit nor fraud, nor any concealment of facts. It knew the facts or had the means of knowledge of the real facts. 16 Cyc. 722 (A); Ib. 726; Pom. Eq. Jur., § 805; 97 Ark. 43-49; 16 Cyc. 748-k. The burden was on appellee and it has wholly failed. The decree should be reversed and judgment rendered here for $ 1,009.84, with interest for appellant.

Cockrill & Armistead, for appellee.

Even looking upon Baker & McGrew and Baker-McGrew Co. as entirely distinct and separate concerns, the company so held itself out and dealt with appellee as to estop it from afterwards claiming that the seed company had no right to credit the $ 1,000 on the partnership account. But independent of estoppel the company is responsible for the company's acts. There is no proof of incorporation. Articles of agreement were entered, but not filed. The scheme known as the Massachusetts Trust was followed, which will not work as a corporation in Arkansas. It was not a corporation nor statutory joint stock company. 220 U.S. 178. It was simply a partnership. Cook on Corp., § 508; 17 A. & E. Enc. Law, 636; 30 Cyc. 397-8; 72 S.W. 875; 62 Ark. 229, 234; 35 Id. 144; 35 Id. 366; 19 A. & E. Enc. 337, etc.

2. A clear case of equitable estoppel is made. 16 Cyc. 723, 728, 730, 772; 97 Ark. 49; 89 Id. 349-352; 11 Id. 249; 33 Id. 465; 96 Id. 350; 85 Id. 144, 156; 29 Id. 512; 80 Id. 23; 93 Id. 301; 83 Id. 548; 55 Id. 296; 39 Id. 134.

3. Injury was shown. 62 Ark. 316; 101 Id. 135; 36 Id. 96-114; 82 Id. 367; 16 Cyc. 742; 81 Cal. 584; 3 Hun. 744; 132 La. 60; 120 S.W. 407; 24 Ark. 371; 38 Id. 571; 48 Id. 409; 64 Id. 213; 74 Id. 136.

OPINION

KIRBY, J. (after stating the facts).

It is contended by appellant that there is no showing of any ground of estoppel of it to recover the proceeds of the seed shipped by it to appellee company, nor authorizing the appropriation of the price thereof by said seed company to the payment of its debt against Baker and McGrew, but the majority do not agree with this contention.

It is true that the seed company did not pay any more than the market price for the cotton seed purchased, but it claims that because of the dullness and inactivity in the market of its products that it would not have purchased the seed at all from Baker-McGrew Company, had it known that a portion of the proceeds thereof could not be applied upon their debt against Baker and McGrew. In other words, commercial conditions were such and their supply of manufactured products, that they would not have purchased seed at the market price except from their customers, who were indebted for advances and in order to facilitate the collection of such debts.

Cyc. defines an equitable estoppel: as follows: "The effect of the voluntary conduct of a party whereby he is absolutely precluded both at law and in equity, from asserting rights which might perhaps have otherwise existed, either of property, of contract or of remedy as against another person who in good faith relied upon such conduct and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right either of contract or of remedy." 16 Cyc. 722-A.

An estoppel in pais may arise from a transaction in which a party has led another into the belief of a particular state of facts by conduct of culpable negligence, which has been the proximate cause of leading, and has led such other party to act by mistake upon such belief to his prejudice, and gross negligence has been held evidence of an intent to deceive. 16 Cyc. 772; Arkansas National Bank v. Boles, 97 Ark. 43, 133 S.W. 195.

In Jett v. Crittenden, 89 Ark. 349, 116 S.W. 665, the court said: "The rule broadly stated is that a person who intentionally by culpable negligence induces another to act on his representations will be estopped from denying their truth." See also 16 Cyc. 732.

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