The opinion of the court was delivered by: John E. Miller, District Judge.
The history of this litigation may be briefly summarized as
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
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 ...