Arkansas National Bank v. School District No. 99

• Decision Date: 20 March 1922
• Docket Number: 240
• Citation: 238 S.W. 630,152 Ark. 507
• Parties: ARKANSAS NATIONAL BANK v. SCHOOL DISTRICT NO. 99
• Court: Arkansas Supreme Court

238 S.W. 630

152 Ark. 507

ARKANSAS NATIONAL BANK v. SCHOOL DISTRICT NO. 99

No. 240

Supreme Court of Arkansas

March 20, 1922

Appeal from Washington Chancery Court; Ben F. McMahan, Chancellor affirmed.

STATEMENT OF FACTS.

The Arkansas National Bank brought suit in the circuit court against Common School District No. 99 and certain individuals to recover on a note alleged to be due it in the sum of $ 1,000 and the accrued interest.

Judgment was rendered by default in favor of the plaintiff against the defendants, and at the same term of the court, on motion of School District No. 99, the judgment was set aside. The cause was then transferred to equity, where it was tried.

According to the evidence adduced in favor of the plaintiff, W. W Coffey, and the other directors of School District No. 99, a common school district, applied to the Arkansas National Bank to borrow money for the purpose of building a schoolhouse. The bank refused to make the loan without the indorsement of certain individuals. The bank loaned the district $ 1,000 and took a promissory note dated June 30, 1918, and due one year after date, payable to the order of the Arkansas National Bank, with interest from date until paid at the rate of 10 per cent. per annum. The note was signed as, "District No. 99, W. W. Coffey", and it was indorsed by twelve persons.

According to the testimony of M. H. Cate, he was one of the persons who indorsed the note. W. W. Coffey, Lige Sharp and M. H. Cate were the directors at the time the note was made. W. W Coffey signed for the district, and the others indorsed the note on the back. The money was used to build a schoolhouse in the district. The house was economically constructed. The old schoolhouse was about rotted down and was hardly fit for anything. It would have been a waste of money to repair it. The schoolhouse was worth more than the amount of money it took to build it. It was used by the district as its schoolhouse after it was constructed.

At the annual school meeting, a vote of the property owners was taken on the question of building a new schoolhouse and of borrowing money for that purpose. Every property owner in the district but three voted to build the schoolhouse and borrow the money. The records of the quorum court showed that upon the director's report of District No. 99 a levy of 6 mills for "building tax" was made for the year 1917.

The chancellor found that the school district had no power to borrow money, and that the note given by it for money so borrowed could not be ratified, and that the note sued on was void.

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

Decree affirmed.

B R. Davidson, for appellant.

The directors had power to borrow money for building a schoolhouse, especially when authorized by a vote of the entire district.

The act creating common school districts authorizes them to contract, sue and hold in their corporate name title to lands, to purchase or lease sites designated by a majority of votes, to build schoolhouses with funds provided by the district for that purpose. Kirby's Dig., 7541-2, 7614. Necessarily, by implication they would have the power to borrow money. 70 Ark. 291 holds that by implication they can employ an attorney, and 95 Ark. 26, that they have the power to purchase desks. Powers that are necessary to the exercise of granted powers are necessarily implied from those expressly granted. 95 Ark. 6; 120 Ark. 426; 140 Ark. 405.

The necessary preliminaries were complied with by submitting the question to the annual election, but, even if it had not been, the acquiescence of the public and acceptance of the building makes the contract binding. 81 Ark. 143; 82 Ark. 531; 95 Ark. 26; 67 Ark. 236; 87 Ark. 389; 98 Ark. 38; 110 Ark. 262; 111 Ark. 151; 129 Ark. 221.

A corporation is estopped, the same as an individual, where it knows its name has been signed to a bond without authority, and it remains silent without protest. 77 Ark. 355; 50 Ark. 450; 36 Ark. 663; 57 Ark. 355.

Under a contract which is absolutely void, recovery may be had when the money or benefit has been received and retained. 87 Ark. 389; 141 F. 944; 111 F. 682. The corporation cannot plead ultra vires. 47 Ark. 269. 48 Ark. 254; 70 Ark. 232; 74 Ark. 377; 81 Ark. 244. Especially is this true where it will accomplish a wrong. 74 Ark. 190; 89 Ark. 95; 91 Ark. 367; 96 Ark. 308; Id. 594; 247 F. 423.

The only irregularity in the transaction was possibly in the manner of signing the note, but such irregularities will not be considered where the money has been received and spent. 36 Ark. 446; 80 Ark. 425; 105 Ark. 77.

R. J. Wilson, for appellee.

The note in suit was the individual obligation of the party signing it and the indorsers thereon, and not of the district. The attempted signature of the district by W. W. Coffey "Sec." was invalid, since a common school district cannot employ a secretary from the membership of its directors and pay him a salary, 84 Ark. 516; nor is the act binding on the district because not signed by at least two of the directors as such directors. 45 Ark. 450.

The note was executed without lawful authority and was beyond the power conferred upon the directors, and was therefore null and void. 94 Ark. 583; 25 Ark. 261; 95 Ark. 26. Contracts made by directors of common school districts, without first having been authorized by vote at the annual election, are void. 49 Ark. 94; Kirby's Dig., § 7629.

A contract void in the beginning for want of power to make it cannot be ratified. 82 Ark. 531; 94 Ark. 583; 129 Ark. 211.

OPINION

HART, J., (after stating the facts).

The decision of the chancellor was correct. It is the settled rule in this State that school districts have and can exercise only such powers as are expressly granted and such incidental ones as are necessary to make those powers available and effective. It is equally well settled that all persons who deal with school officers are presumed to have knowledge of the extent of their powers. First National Bank of Waldron v. Whisenhunt, 94 Ark. 583, 127 S.W. 968.

Our statute does not give the directors of common school districts the power to borrow money. The note was given for the purpose of borrowing money with which to build a schoolhouse. It may be also stated that the bank knew that the money was to be used for that purpose, and it does not appear from the record that the directors had been given the power to construct a schoolhouse. It is not shown that the directors gave notice before the annual meeting that the electors would vote on the question of raising money to build a schoolhouse. It necessarily follows that the school district is not liable on the note sued on.

The authority of common school districts to build schoolhouses is derived from secs. 8926 and 8942 of Crawford & Moses' Digest. Sec. 8926 reads as follows: "The directors shall give notice of each annual meeting by posting notices thereof, at least 15 days previous to such meeting, in three or more conspicuous places within the district; but it shall not be lawful for a district at any annual meeting to fix a site for a schoolhouse, or to raise money for building or purchasing a schoolhouse, unless the directors shall have particularly set forth in the previous notice given of such meeting that these matters were to be submitted for their consideration and action."

We have copied the section correctly, although there is a mistake in inserting it in Crawford & Moses' Digest. It will be noted that the words, "but it shall not be lawful for a district" are left out and the following words, "at any annual meeting" are changed to "at the annual meeting" and these words are added, "an estimate of the expense of the district."

This statute was construed in Fluty v. School Dist., 49 Ark. 94, 4 S.W. 278, where the court held that the directors of a school district have no power to build a schoolhouse with the funds of the district unless authorized to do so by the...