105 F.2d 716 (8th Cir. 1939), 11444, Women's Catholic Order of Foresters v. Special School Dist. of North Little Rock, Pulaski County, Ark.
|Citation:||105 F.2d 716|
|Party Name:||WOMEN'S CATHOLIC ORDER OF FORESTERS v. SPECIAL SCHOOL DIST. OF NORTH LITTLE ROCK, PULASKI COUNTY, ARK., et al.|
|Case Date:||July 27, 1939|
|Court:||United States Courts of Appeals, Court of Appeals for the Eighth Circuit|
Rehearing Denied Sept. 5, 1939.
Thomas Mason, of Chicago, Ill. (Leo J. Hassenauer, of Chicago, Ill., and E. L. McHaney, Jr., of Little Rock, Ark., on the brief), for appellant.
Wallace Townsend, of Little Rock, Ark. (Thomas F. Digby, of North Little Rock, Ark., on the brief), for appellees.
Before GARDNER, and THOMAS, Circuit Judges, and WYMAN, District Judge.
GARDNER, Circuit Judge.
This was a suit in equity brought by appellant against the appellees, including the school district and all of its officers and directors, for the purpose of securing a judgment against the district for interest coupons past due and in default appurtenant to unmatured bonds issued by the district, and for a decree of specific performance requiring the district and its officers and directors to pay in full all of appellant's interest coupons unpaid and to pay in full all other of appellant's bonds and interest coupons as the same mature, or for a permanent injunction restraining the district, its officers and directors, and their successors, from diverting or using any revenues, funds or taxes belonging to the school district until the appellant shall have been paid in full.
It will be convenient to refer to the parties as they appeared below.
The defendants by their answer did not question the validity of the bonds, but denied the right of the plaintiff to any priority over other bondholders and alleged that plaintiff should be required to share ratably with the other bondholders in the funds available for the payment of bonded indebtedness.
On March 1, 1924, the defendant school district issued and sold its bonds amounting in the aggregate to $225,000. These bonds were issued for the purpose of building and equipping new school buildings. Plaintiff, on October 17, 1924, purchased $25,000 of these bonds. The defendant school district defaulted in the payment of interest on all plaintiff's bonds commencing with the interest coupons maturing on March 1, 1933, and all interest coupons thereafter maturing. The bonds were authorized by a resolution of the board of directors of the school district, which purported to pledge the 'first revenues' of the district, derived from any and all sources, to the payment of said bonds and interest coupons. The resolution in form authorized the execution of a mortgage or deed of trust on the real estate of the school district. The mortgage or trust deed likewise pledged the 'first revenues' of the district, derived from any and all sources, to the payment of the bonds and interest coupons.
Plaintiff's bonds mature in 1947, 1948 and 1949. The total annual collections of the district are not sufficient to pay the bonds and interest coupons as they mature, and continue operation of the schools, under the present levy voted by the district. The total outstanding bonds of the district is $1,045,500. Plaintiff's bonds are part of a senior issue. The electors of the district have voted a levy of seven mills for building purposes, but, as observes, this is insufficient to pay interest and principal according to the terms of the bonds of plaintiff, unless they be given priority.
The trial court found that the bonds were duly issued, but that at the time the district did not have authority to vote for a continuing millage tax for a building fund, and that there was no certain millage or other revenue that could be pledge for the bonds, but that their payment depended upon taxes being voted from year to year by the electors of the district. A judgment for the amount due was entered, but no other relief was granted, except to
give plaintiff its pro rata share of money set aside to pay bonded indebtedness.
On this appeal plaintiff contends that there was a valid pledge of revenues of the district, with the right of priority of payment; and that the laws and decisions of the Supreme Court of Arkansas at the time of the issuance of plaintiff's bonds had established the right of the directors of a city special school district to create a building fund from the first revenues of the district and pledge that fund to the payment of such bonds, which laws and decisions became a part of the contract between it and the plaintiff which could not thereafter be impaired either by legislative enactment or judicial decision. Plaintiff relies largely upon the decisions of the Supreme Court of Arkansas in Schmutz v. Special School District, 78 Ark. 118, 95 S.W. 438, and American Exchange Trust Co. v. Trumann Special School District, 183 Ark. 1041, 40 S.W.2d 770.
By Act of the Legislature of Arkansas approved February 7, 1913, it was provided among other things as follows: 'All special school districts in the State of Arkansas are hereby authorized an empowered, for the purpose of raising funds for the erection and equipment of necessary school buildings, to borrow money and mortgage the real property of the district as security therefore, under such conditions and regulations as to amount, time and manner of payment as the board of directors of paid school district shall prescribe, and renew and extend from time to time any evidence of indebtedness or mortgage, or both, issued or made by virtue thereof, and to refund such indebtedness and execute new evidences of indebtedness and mortgages therefor. ' C. & M. Digest, 1921, Sec. 8977.
The Act of May 6, 1905, as amended by Act of March 1, 1917, contained provision that: 'The said evidences of indebtedness, whether warrants or promissory notes, or both, and mortgages, shall be in form in all respects as other investments of like kind are required by law to be, and shall have the same force and effect as they would if executed by natural persons, and the warrants shall have the same validity as they would if there were money in the county treasury to pay the same at the time they were drawn and may be drawn payable in the future, and need not be...
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