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January 30, 1950


The opinion of the court was delivered by: John E. Miller, District Judge.

The history of this litigation may be briefly summarized as follows.

Complaint was filed August 7, 1947, by plaintiffs, Ralph P. Kistler, R.P. Kistler, Daisy M. Kistler and R.P. Kistler, Jr., doing business as R.P. Kistler and Sons, against defendant H.F. McMahon individually and defendants H.F. McMahon, H.J. Gingles and H.W. Anderson, partners, doing business under the name of Rock Island Coal Company, to recover from each of them the unpaid rentals in the sum of $12,500.00, with interest thereon from April 23, 1947, and $2,604.16, with interest from July 7, 1947, at 6%, under a certain coal mining lease, and the sum of $5,000,00 as damages for the failure of defendants to return the mine in a workable condition.

On November 20, 1947, defendants, Gingles and Anderson, filed their answer which was in effect a general denial. By amended answer filed December 18, 1947, defendants, Gingles and Anderson, asserted as a complete defense that there at no time existed a general partnership between the defendants but that it was in fact a limited partnership, duly organized under the Limited Partnership Act of Arkansas, and by virtue thereof they were liable only to the extent of their original contribution and were not liable to these plaintiffs. By amendment to amended answer filed January 24, 1948, defendants, Gingles and Anderson, asserted that plaintiffs had waived any right to hold defendants liable as general partners, and by plaintiffs' acts the latter were estopped to claim that defendants were liable as general partners. The cause was tried to the court on February 25, 26 and 27, 1948. At that time counsel for the plaintiffs waived their second cause of action set forth in the complaint (the claim for $5,000.00 damages to the mine). At the conclusion of that trial the court filed its findings of fact and conclusions of law, separately stated. Judgment was entered based thereon holding that defendants, Gingles and Anderson, were not liable to the plaintiffs as general partners, having substantially complied with the Arkansas law pertaining to the formation of limited partnerships, and the complaint of plaintiffs was dismissed as to those defendants. Judgment was rendered against defendant H.F. McMahon for the total sum of $15,854.53 and costs.

The court at that time did not pass specifically on defendants' defense of waiver and estoppel, but did make the following findings of fact that pertain thereto. Finding of Fact No. 17 reads as follows: "The plaintiff, R.P. Kistler, had actual notice of the existence of the limited partnership and was sent by the partnership to Washington, D.C., in early January, 1946, for the purpose of obtaining the approval of the application of the partnership for a loan from the Smaller War Plants Corporation as a limited partnership. At the time the plaintiff Kistler was sent to Washington, D.C., he knew that the Smaller War Plants Corporation had required as a condition of making the loan that all of the defendants be bound jointly and severally, and further knew that the said corporation was requiring some additional action relative to the original lease that Kistler had obtained from the Choctaw and Chickasaw Indians. As one of the results of the trip by the plaintiff, R.P. Kistler, to Washington, D.C., an amended application for a loan of $60,000.00 was approved without requiring the signatures of the defendants Gingles and Anderson, but notwithstanding the waiver of such requirement the loan was not consummated. In all dealings of the plaintiff R.P. Kistler with the Rock Island Coal Co., the defendants, Gingles and Anderson, never at any time represented that they were general partners or that their liability was other than as outlined in the partnership agreement."

Finding of Fact No. 18 reads:

"Defendants, H.J. Gingles and H.W. Anderson, did not, for themselves, or either of them, by word spoken or written, or by conduct, represent either as a general partner to anyone, nor consented to any other person representing either to anyone, as such general partner, in an existing general partnership.

"Plaintiffs did not give credit or sustain injury on the faith of any representation that the defendants, or either of them, were general partners."

The plaintiff appealed and the Court of Appeals for the Eighth Circuit held: "They (Gingles and Anderson) simply did not comply with the statute and the conclusion that they had substantially complied was erroneous. It may not be sustained." Kistler et al. v. Gingles et al., 171 F.2d 912, 915.

The judgment as to defendants, Gingles and Anderson, was reversed and the case remanded.

It was urged before the Court of Appeals that the court could affirm on the waiver and estoppel contention even though this court did not pass specifically thereon, but in refusing to so do, the Court of Appeals stated, 171 F.2d at page 915:

"It is contended for appellees however that even if the judgment may not be sustained on the ground upon which the trial court rendered it, it should nevertheless be affirmed on the ground that the evidence and the findings of the trial court supported by evidence established that Kistler had with full knowledge waived any right to assert and was estopped to assert against Gingles and Anderson the claim that they were general partners of Rock Island Coal Company or liable as such for the unpaid rent.

The appellate court set forth in its opinion the provisions of the Limited Partnership Act, Ark.Stats. (1947) Sec. 65-209, relied upon by plaintiffs for recovery, "* * * and if any false statement be made in such certificate or affidavit, all the persons interested in such partnership shall be liable for all the engagements thereof, as general partners", and made the following comment in regard thereto: "That section, it appears, has not been considered by the Supreme Court of Arkansas in relation to issues of waiver or estoppel, so that to determine such issues here this court would be required to make original declaration both of the law of Arkansas which controls on these issues in the case, and also original findings of the facts to be inferred from the evidence. That is beyond the function of the appellate court in the situation presented."

After the case was remanded, the attorneys for the parties entered into the following stipulation, filed October 12, 1949:

"It is stipulated and agreed by and between counsel of the respective parties hereto that said cause shall be tried, heard and finally submitted to the court, jury being waived, upon the record herein, of the first trial of said cause, as prepared and filed in the United States Court of Appeals, Eighth Circuit, upon appeal, and the same may be considered and treated as containing all the evidence in said ...

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