Starr Farms, Inc. v. Southwestern Elec. Power Co.

• Decision Date: 17 November 1980
• Docket Number: No. 80-183,80-183
• Citation: Starr Farms, Inc. v. Southwestern Elec. Power Co., 607 S.W.2d 391, 271 Ark. 137 (Ark. 1980)
• Parties: STARR FARMS, INC., et al., Appellants, v. SOUTHWESTERN ELECTRIC POWER COMPANY, Appellee.
• Court: Arkansas Supreme Court

Page 391

607 S.W.2d 391

271 Ark. 137

STARR FARMS, INC., et al., Appellants, v. SOUTHWESTERN ELECTRIC POWER COMPANY, Appellee.

No. 80-183.

Supreme Court of Arkansas.

Nov. 17, 1980.

Blair, Cypert, Waters & Roy, Springdale, for appellants.

Greenhaw & Greenhaw, Fayetteville, and Little, McCollum, & Mixon, Bentonville, and Richard L. Arnold, Texarkana, for appellee.

GEORGE ROSE SMITH, Justice.

Three companion suits, consolidated below, were brought by the appellants in the Washington chancery court, seeking to enjoin Southwestern Electric Power Company, a licensed foreign corporation, from trespassing upon the plaintiffs' lands and to recover a total of $175,000 as damages for past trespasses. SWEPCO defended its entry upon the plaintiffs' lands as having been made under the authority of circuit court orders by which SWEPCO's wholly owned subsidiary, a domestic corporation, had condemned a right of way for the construction of electrical transmission lines across the plaintiffs' lands. The case was tried on admissions and other conceded facts, without testimony. The chancellor dismissed the complaints for want of equity. The appeal comes to this court under Rule 29(1)(a).

The ultimate question is whether SWEPCO should be permitted to use its subsidiary, Southwest Arkansas Utilities Corporation, to condemn a right of way so that SWEPCO itself can construct its transmission lines upon the plaintiffs' lands. That precise question was answered in the affirmative in earlier cases involving this same parent corporation and this same subsidiary, though SWEPCO has changed its name slightly since then. Patterson Orchard Co. v. Southwest Ark. Utilities Corp., 179 Ark. 1029, 18 S.W.2d 1028, 65 A.L.R. 1446 (1929); Southwestern Gas & Elec. Co. v. Patterson Orchard Co., 180 Ark. 148, 20 S.W.2d 636 (1929). Both the Patterson Orchard cases arose, as did this one, from that section of our Constitution denying to foreign corporations the right of eminent domain. Ark.Const., Art. 12, § 11 (1874).

The first Patterson Orchard case is almost indistinguishable from the case at bar. There SWEPCO's predecessor, a Delaware corporation, was relocating an interstate transmission line when it reached the Patterson property and was unable to get permission to cross the orchard. On March 17, 1928, the company filed a condemnation action in the circuit court and obtained an order permitting it to enter the land and construct its line. The landowner at once protested on the ground that Southwestern Gas & Electric was a foreign corporation without power to condemn a right of way. The company, however, went ahead and practically completed its construction.

Three days later, on March 20, the landowner presented its protest to the circuit judge, who suspended his earlier order and set the matter for a hearing on March 24. In that four-day interval Southwestern Gas & Electric hastily formed its present subsidiary, Southwest Arkansas Utilities, whose corporate purpose as stated in its charter was to generate and transmit electricity for public use. The parent company conveyed part of the new transmission line, including the segment across the orchard, to the subsidiary in exchange for all its capital stock except two qualifying shares. The parent company then leased the line from the subsidiary, which intervened in the case on March 24. After the parent company abandoned its original condemnation effort the case was transferred to chancery and resulted in a decree condemning a right of way for the subsidiary company. The landowner appealed to this court.

We stated much the same question that is again presented in the case at bar: "Could the appellee, a domestic utilities corporation, clothed with the power of eminent domain, exercise that power for the benefit of a like foreign corporation which had complied with the general laws of the state prescribing upon what terms a foreign corporation might do business therein?" It was argued there, as it is here, that the creation of the subsidiary "was but a subterfuge for acquiring a right-of-way indirectly" for the parent company, which could not be done directly because of the constitutional prohibition.

We followed the great weight of authority in upholding the right of a foreign corporation to exercise the power of eminent domain through a domestic subsidiary. The opinion discussed cases from Iowa, Utah, and New York,...