Schmutz v. Special School District of Little Rock

• Citation: 95 S.W. 438,78 Ark. 118
• Parties: SCHMUTZ v. SPECIAL SCHOOL DISTRICT OF LITTLE ROCK
• Decision Date: 03 March 1906
• Court: Supreme Court of Arkansas

95 S.W. 438

78 Ark. 118

SCHMUTZ v. SPECIAL SCHOOL DISTRICT OF LITTLE ROCK

Supreme Court of Arkansas

March 3, 1906

Appeal from Pulaski Chancery Court; Jesse C. Hart, Chancellor affirmed.

STATEMENT BY THE COURT.

In 1905 the Legislature of this State passed an act to authorize the Special School District of Little Rock to borrow money to erect, complete and equip a new high school building. Afterwards the board of directors of the district passed a resolution and undertook to issue 160 bonds of the district of the denomination of $ 500 each, bearing interest at 6 per cent each as set forth in the bonds. These bonds were to be secured by a mortgage upon block 20 of the City of Little Rock owned by the district, that block being the one upon which the high school building was located.

Thereupon F. J. Schmutz, a citizen of Little Rock and taxpayer of the district, brought this action to enjoin the school district from executing the mortgage and issuing the bonds, on the ground that the statute under which the bonds were about to be issued was invalid, and that the district had no authority to issue bonds, and for other reasons. The district filed an answer, denying that the statute under which the bonds were issued was invalid, and denying that the board of directors of the district had not properly authorized the issuance of the bonds.

On the hearing the chancellor entered a judgment in favor of the defendant which recites the following finding of facts by the court:

"It finds that the act in question, which became a law on the 24th day of February, 1905, was duly and lawfully passed that the defendant has authority to issue the bonds with coupons attached, as set out in the resolution of its board of directors adopted on the 18th day of January, 1906, a copy of which is exhibited with the bill of complaint herein; that the defendant has authority to execute the mortgage provided for in said resolution, and that its execution and the execution of said bonds had been duly and properly authorized by the board of directors of said district; that the notice of the meeting of said board of directors at which said resolution was passed was duly given as required by law, and that the directors of said district had authority to pledge its revenue to secure the payment of said loan."

The complaint was dismissed for want of equity, and the plaintiff appealed.

Judgment affirmed.

Rose, Hemingway, Cantrell & Loughborough, for appellant.

1. The act was never lawfully passed.

2. No county, city, town or municipality in this State can issue interest-bearing evidences of debt. Const. 1874. The special school district is a component part of, and co-extensive with, the city. If the city as a whole can not issue interest-bearing evidences of debt, neither can the district. See 37 Iowa 542; 62 Iowa 102.

3. Defendant has no authority to issue negotiable bonds with coupons attached. 21 How. 547; 103 U.S. 102; 106 U.S. 185; 156 U.S. 709; Dillon, Mun. Corp. § 507, et seq.

4. Defendant has no power to mortgage its property. 2 Dill. Mun Corp. § 579. Property needed for public uses can not be mortgaged without express legislative sanction. 24 Cal. 585.

5. Proceedings of a school board are void unless all the members have notice of the meeting.

6. The directors had no authority to pledge the revenue of the district to secure the loan.

Mehaffy & Armistead, and Bradshaw, Rhoton & Helm, for appellee; Taylor & Jones and Bridges & Wooldridge, of counsel.

1. The presumption is in favor of the validity of the act.

2. A school district is not a municipality within the meaning of the Constitution. Being a completely organized body within itself, it has power to issue interest-bearing evidences of debt. Kirby's Digest, §§ 7668-70; 70 Ark. 451; 55 Ark. 148; 69 Ark. 284. See also 102 Iowa 5; 19 A. 1038; 52 Mo. 309; 54 Mo. 458; 11 Kan. 23; 25 Am. & Eng. Enc. Law, 31. School districts are by statute quasi public corporations. 38 Ark. 452. See also 1 Dillon, §§ 23, 24; 42 Ark. 54.

3. The express power to borrow money is held to include the power to issue negotiable bonds. 1 Dillon, Mun. Corp. §§ 125, 127. The act of 1905 grants specific authority to issue notes and execute mortgage to secure the same. The acts of the Legislature will not be declared unconstitutional, unless clearly so. 32 Ark. 131. It is probable that under the general law the board would have this right. 1 Reed, Corp. Fin. § 257; Kirby's Digest, § 7684.

OPINION

RIDDICK, J. (after stating the facts).

This is an appeal from a judgment of the chancery court of Pulaski County refusing to enjoin the Special School District of Little Rock from issuing certain bonds of the district. The question involves the validity of the act of the Legislature authorizing the district to borrow money for the purpose of erecting a high school building, and the further question whether the act, if valid, authorized the issuance of the bonds.

Now, the act expressly authorizes the district to borrow money for the purposes named in the act, to issue evidences to debt therefor, and to mortgage the real property of the district as security for the loan. Acts 1905, c. 55, p. 154. The express power to borrow money and to issue evidences of indebtedness therefor, we think, includes the power to issue negotiable bonds of the district with interest coupons attached. 1 Dillon, Municipal Corporations, § 127, and cases cited.

The power to issue these bonds having been granted by this act, if the act was valid, the district, in attempting to issue the bonds for the purpose of completing the high-school building, was acting under the authority of law, and should not be enjoined.

So far as we can see, the act was regularly passed, and the only objection urged against its validity is that it would be in violation of a provision in the State Consti...