Republic Power & Service Company v. Gus Blass Co.

• Decision Date: 16 June 1924
• Docket Number: 51
• Citation: 263 S.W. 785,165 Ark. 163
• Parties: REPUBLIC POWER & SERVICE COMPANY v. GUS BLASS CO
• Court: Arkansas Supreme Court

263 S.W. 785

165 Ark. 163

REPUBLIC POWER & SERVICE COMPANY v. GUS BLASS CO

No. 51

Supreme Court of Arkansas

June 16, 1924

Appeal from Ouachita Chancery Court, Second Division; George M LeCroy, Chancellor; affirmed.

STATEMENT OF FACTS.

The Republic Power & Service Company brought this suit in the chancery court against Gus Blass Company and Joe House, Jr.

According to the allegations of the complaint, on May 27, 1919, eight persons, including S. R. Morgan, entered into a written agreement to associate themselves together for the purpose of securing leases for oil and gas in Ouachita County, Arkansas. The leases were to be taken in the name of J. W. House, Jr. and held by him for the benefit of all of them. It was agreed that all advances made by the parties to carry out the provisions of the contract between them should be made to J W. House, Jr., and that he should, keep an account of the moneys received. They secured oil and gas leases in the name of J. W. House, Jr., for the benefit of the other persons in interest, to numerous tracts of land in Ouachita County Arkansas. On the 30th day of June, 1920, S. R. Morgan executed what is called a bill of sale to Morgan & Company of Delaware to his one-eighth undivided interest in said oil and gas leases, which aggregate about 20,000 acres, and the title to which is in the name of J. W. House, Jr., as trustee for himself, for S. R. Morgan, and the other interested parties. The bill of sale was acknowledged before a notary public in the city of Little Rock, Pulaski County, Arkansas, on the same day. It was then delivered in Little Rock to a representative of the grantee. The grantee was a foreign corporation, and, at that time, had not complied with the laws of the State of Arkansas with reference to foreign corporations doing business in the State. Subsequently the Republic Power & Service Company succeeded to the rights of Morgan & Company and complied with the statutes of the State with reference to doing business in the State.

On May 3, 1921, the Gus Blass Company recovered judgment against S. R. Morgan in the Pulaski Circuit Court. On May 14, 1921, an execution was issued and returned nulla bona. The Gus Blass Company then brought suit in the chancery court against S. R. Morgan and J. W. House, Jr., to subject the interest of S. R. Morgan in said oil and gas leases to the payment of its judgment against him in the sum of $ 604.15. A decree was obtained in favor of the Gus Blass Company, and the one-eighth interest of S. R. Morgan was duly sold for the satisfaction of said judgment, and the Gus Blass Company became the purchaser at the sale for the amount of its judgment and the costs.

Morgan & Company complied with the law with regard to foreign corporations doing business in the State, and received its certificate to that effect on September 26, 1921. Morgan & Company was chartered as a corporation in the State of Delaware on the 14th day of May, 1920. On January 9, 1922, the name of this corporation was changed to the Republic Power & Service Company.

The prayer of the complaint in this case is for a partition of said oil and gas leases between the plaintiff, Republic Power & Service Company, and the other parties interested therein.

It is also asked that the claim of the defendant, the Gus Blass Company, be canceled and held for naught in said oil and gas leases; that said J. W. House, Jr., be restrained from recognizing or attempting to recognize the right or claim of the said Gus Blass Company, and that, if it be held that the lien of the said Gus Blass Company be superior to the right of the plaintiff, an adjudication of the amount be had, and that, upon payment of the amount thereof by plaintiff, its title and interest in said oil and gas leases be confirmed and quieted.

Upon the facts stated and proved, the chancellor was of the opinion that the complaint should be dismissed for want of equity. A decree was entered of record accordingly, and the plaintiff has duly prosecuted an appeal to this court.

Decree affirmed.

Carmichael & Hendricks, for appellant.

The plaintiff was entitled to maintain the suit. The sale by Morgan of his interests in certain lands, made in St. Louis, to a foreign corporation not authorized yet to do business in Arkansas, was in the nature of interstate business. Appellant should prevail under the authority of 151 Ark. 269 and 157 Ark. 121. Judgment liens are subject to valid liens on the land at the time the judgment is rendered, whether recorded or not. 33 Ark. 328. Appellant was never made a party to the suit, which was to set aside a fraudulent conveyance. Land conveyed for the purpose of defeating creditors is not subject to the lien of a judgment, and a fortiori, if there was a conveyance in good faith, the vendee's rights would be superior to those of a judgment creditor. 111 Ark. 11; 67 Ark. 325; 113 Ark. 109.

Hamp Smead, Coleman, Robinson & House, and Smead Powell, for appellee.

Appellant can claim no rights under the bill of sale because it was not authorized to engage in business in this State at the time of its execution. Section 1832, C. & M. Digest. The transaction was had in Arkansas, and was in line with the particular business of the foreign corporation, and therefore void. 98 So. 787. There was ample evidence to sustain a finding that the bill of sale was made with intent to defraud creditors. Retention of possession by a grantor is a badge of fraud. 88 Ark. 433; 50 Ark. 289; 55 Ark. 116. See also 12 R. C. L., p. 480, § 12; 106 Ark. 230; 73 Ark. 174. While Morgan could sell his interest, such sale did not necessarily make the purchaser a partner of the others, as the purchaser has only a right to an accounting and settlement of the partnership affairs. 20 R. C. L. § 217. Appellant is concluded by the judgment against Morgan, as its rights had not then vested. 23 Cyc. 1253, 1260.

HART J. MCCULLOCH, C. J., dissenting.

OPINION

HART, J., (after stating the facts).

It is well settled that the only limitation upon the power of the State to exact conditions upon which foreign corporations may transact business within its borders is where such corporations are engaged in interstate commerce, and that this limitation arises only because the Federal Constitution has committed to Congress the power to regulate commerce between the States. Kansas City Structural Steel Co. v. State, 161 Ark. 483, 256 S.W. 845; Browning v. Waycross, 233 U.S. 16, 58 L.Ed. 828, 34 S.Ct. 578, and Mitchell Furniture Co. v. Selden Breck Construction Co., 257 U.S. 213.

Our statutes prescribing the conditions upon which foreign corporations may be authorized to do business in this State are contained in Crawford & Moses' Digest, §§ 1825-1832, inclusive.

Section 1832 provides that any foreign corporation which shall fail to comply with the provisions of the act, and which shall do any business in this State, shall be subject to a fine as provided in the act.

The section further provides that, as an additional penalty, any foreign corporation which shall fail or refuse to file its articles of incorporation or certificate, as aforesaid, cannot make any contract in this State which can be enforced by it, either in law or in equity, and that compliance with the provisions of the act after the date of any such contract, or after any suit is instituted thereon, shall in no way validate said contract.

At the time Morgan & Company purchased the one-eighth interest of S. R. Morgan in the oil and gas leases referred to in our statement of facts, it was a foreign corporation, and had not complied with the provisions of our statute with reference to doing business in this State. It had therefore, under the statute, no legal right to make any contract in this State which could be enforced by it, either in law or in equity. By the terms of the statute it has no recognition in the courts of this State, and the plaintiff, which is its assignee, acquired no greater rights.

It is well settled by the authorities cited above, and other decisions from these courts, that the States have the power to impose such conditions as they please upon foreign corporations seeking to do business within their borders.

In the decision cited from this court a review of our former decisions is made, and the distinction is pointed...