McGehee v. Mid South Gas Co.

• Citation: 357 S.W.2d 282,235 Ark. 50
• Decision Date: 14 May 1962
• Docket Number: No. 5-2644,5-2644
• Parties: Wiley A. McGEHEE, Appellant, v. MID SOUTH GAS COMPANY et al., Appellees.
• Court: Supreme Court of Arkansas

Page 282

357 S.W.2d 282

235 Ark. 50

Wiley A. McGEHEE, Appellant, v. MID SOUTH GAS COMPANY et al., Appellees.

No. 5-2644.

Supreme Court of Arkansas.

May 14, 1962.

Hearing Denied June 4, 1962.

William S. Arnold of Arnold & Hamilton, Crossett, for appellant.

Mehaffy, Smith & Williams, by William J. Smith and Frank Warden, Jr., Little Rock, for appellees.

McFADDIN, Justice.

This suit is an effort by appellant, a minority stockholder, to prevent Mid South Gas Company from transferring its assets to Arkansas Louisiana Gas Company. Appellees--defendants below--are the Mid South Gas Company and its officers and directors. On motion of appellees, the Chancery Court dismissed the appellant's complaint without affording him a trial on the merits; and this appeal resulted. The background facts need to be given in some detail for a full understanding of the matter.

Mid South Gas Company (hereinafter called 'Mid South') and Arkansas Louisiana Gas Company (hereinafter called 'Arkla') were public utility corporations engaged in transmitting and selling natural gas in this State. On May 19, 1961, Mid South and Arkla entered into an 'Agreement and Plan of Reorganization', by the terms of which Arkla would issue 336,000 shares of its common stock to Mid South and would assume the debts and obligations of Mid South, all in exchange for the properties and assets of Mid South as a going concern; and with the further provision that Mid South would thereafter dissolve and distribute said stock pro rata to the holders of its common stock on the basis of one share of Arkla stock for two shares of Mid South stock. Since both Mid South and Arkla were public utility corporations, the entire Agreement and Plan of Reorganization was subject to the approval of the Arkansas Public Service Commission; and on June 8, 1961, Mid South and Arkla filed their joint application for approval of such plan and the Public Service Commission set the matter for a hearing date of June 26, 1961.

Appellant, Wiley A. McGehee, was a stockholder in Mid South; and on June 21, 1961, he filed the present case in the Pulaski Chancery Court against Mid South and its officers and directors. The complaint alleged that it was a class suit on behalf of the plaintiff and others similarly situated that the plaintiff was a minority stockholder in Mid South; that on May 19, 1961, without notice to the stockholders, the officers and directors of Mid South entered into the aforementioned agreement with Arkla; that no valid notice of a stockholders' meeting was given; that the stockholders' meeting of Mid South held on June 8, 1961 for the purpose of voting on the said Agreement and Plan of Reorganization with Arkla was illegal and void; that the proposed plan of stock distribution was illegal and inequitable; that Ark.Stats. § 64-701 et seq. (under which appellant says the merger agreement was proposed) are unconstitutional and void; that the entire Agreement and Plan of Reorganization with Arkla is void; and that Ark.Stats. § 64-110 et seq. are violative of Art. 7, §§ 1 and 15 of the Arkansas Constitution. The prayer of the petition was that Mid South and its officers and directors be enjoined and restrained from further proceeding in the agreement with Arkla. There was thus pending: (a) the suit in the Chancery Court, which involves the present appeal; and (b) the petition of Mid South and Arkla before the Public Service Commission, which latter proceeding came to us in Case No. 2699 in this Court, subsequently to be mentioned.

On the same day that the appellant filed his suit in the Chancery Court (i. e., June 21, 1961), he likewise filed before the Public Service Commission his motion for continuance, informing the Public Service Commission of the Chancery suit and praying that the Public Service Commission delay any action in regard to the contemplated Agreement and Plan of Reorganization between Mid South and Arkla until the Chancery case could be heard and decided. The appellant also filed before the Commission his response and objections to any proceedings, and presented the same questions that he had posed in the Chancery case. The Arkansas Public Service Commission proceeded to a hearing in the matter on July 5, 1961, overruled the motion for continuance, denied the objections and response of appellant, and approved in every respect the Agreement and Plan of Reorganization. ¹ The final result of the Public Service Commission proceeding will subsequently be stated.

On July 7, 1961, the appellees herein, being Mid South and its officers and directors, filed in the Chancery Court their motion to dismiss the complaint of McGehee, alleging: that McGehee had entered his appearance before the Public Service Commission in the Arkla-Mid South matter; that he had filed a response; that he had participated in the hearing; that the same questions raised in the Chancery case were likewise presented in the hearing before the Public Service Commission; that the Public Service Commission had ruled adversely to McGehee; that he could appeal that ruling; and that his remedy at law by appeal was adequate and complete. The motion was supported by copies of the pleadings filed by McGehee before the Public Service Commission, the order of the Commission, and excerpts from the record of testimony before the Public Service Commission. To the motion to dismiss Appellant McGehee filed a response, claiming that the Public Service Commission was without jurisdicton to hear the matter; that his rights of appeal from the Public Service Commission were not adequate and complete; and that the Public Service Commission was merely an administrative tribunal and had no authority to adjudicate the questions raised in the Chancery case. On September 25, 1961, the Chancery Court sustained the motion to dismiss and McGehee duly prosecutes the appeal to this Court.

So much for the background facts. In sustaining the motion to dismiss the petition, the Chancery Court found 'that the plaintiff has an adequate remedy at law by way of appeal from the Order of the Public Service Commission as provided by law. * * *' We recognize that equity has jurisdiction in a case of this kind if there is no adequate remedy at law; and that the mere existence of a remedy at law does not deprive equity of jurisdiction unless such remedy is 'clear, adequate and complete.' Ex parte Conway, 4 Ark. 302; Chapman & Dewey Land Co. v. Osceola District, 127 Ark. 318, 191 S.W. 220; Bassett v. Mutual Benefit Ass'n, 178 Ark. 906, 12 S.W.2d 893; Little Red River Dist. No. 2 v. Thomas, 154 Ark. 328, 242 S.W. 552; Meriwether, etc. v. State, 181 Ark. 216, 26 S.W.2d 57; and Consumers Co-op. v. Hill, Ark., 342 S.W.2d 657. See also 19 Am.Jur. 118, 'Equity' § 114; and 30 C.J.S. 'Equity' §§ 25 et seq., p. 347. Therefore, in order to sustain the ruling of the Chancery Court, we must determine (a) that the Public Service Commission had jurisdiction; and (b) that McGehee's remedy, before the Public Service Commission and by appeal from its order, afforded him full, adequate, complete, and expeditious relief.

That the Public Service Commission had jurisdiction to inquire into the contract between Mid South and Arkla must be conceded, since each is a public utility and since § 73-253 Ark.Stats. provides that only with the consent and approval of the Public Service Commission may two or more utilities consolidate or one utility acquire the stock of another utility. The same section prescribes the procedure under which public utilities may obtain such consent and approval of the Public Service Commission; so this statute establishes that the Public Service Commission had jurisdiction. The next and more serious question is whether the jurisdiction of the Public Service Commission afforded McGehee a full, adequate, complete, and expeditious remedy: i. e., could every objection that he listed in the Chancery case be likewise presented and decided before the Public Service Commission or by appeal from its order to the Circuit Court and to this Court. In 30 C.J.S. 'Equity' § 23, p. 345, cases are cited from many jurisdictions to sustain this statement:

'When jurisdiction has become concurrent through statutory enlargement of the legal remedy, a court of equity, although recognizing the existence of its jurisdiction, will generally decline to exercise it where the remedy at law is complete and adequate, and no special circumstances exist demanding the interference of equity.'

As heretofore stated, McGehee alleged: that there was no valid meeting of the stockholders of Mid South; that the proposed plan between Mid South and Arkla was illegal and inequitable; that § 64-701 et seq. Ark.Stats. were unconstitutional and void; that the entire agreement between Mid South and Arkla was void; and that § 64-110 et seq. Ark.Stats. were violative of Art. 7, §§ 1 and 15 of the Arkansas Constitution. Did McGehee have a full, adequate, complete, and expeditious remedy to present each of these attacks before the Public Service Commission and, on appeal, to the Circuit Court and to this Court? We unhesitatingly answer this question in the affirmative. We have a series of cases which show the extent of issues that may be presented in a hearing before the Public Service Commission and on appeal therefrom. Some of these cases are: Southwestern Gas & Elec. Co. v. City of Hatfield, 219 Ark. 515, 243 S.W.2d 378; City of Ft. Smith v. Southwestern Bell Telephone Co., 220 Ark. 70, 247 S.W.2d 474; Arkansas Power & Light Co. v. Arkansas Public Service Commission, 226 Ark. 225, 289 S.W.2d 668; and Incorporated Town of Emerson v. Arkansas Public Service Commission, 227 Ark. 20, 295 S.W.2d 778.

In Southwestern Gas & Elec. Co. v. City of Hatfield, supra, one of the questions presented was whether the Town Council of Hatfield had validly approved the sale of the electric distribution system from Southwestern to Rich Mountain Co-op.; and we held that the...