Bauer v. North Arkansas Highway Improvement District No. 1

• Decision Date: 16 March 1925
• Docket Number: 235
• Citation: 270 S.W. 533,168 Ark. 220
• Parties: BAUER v. NORTH ARKANSAS HIGHWAY IMPROVEMENT DISTRICT NO. 1
• Court: Arkansas Supreme Court

270 S.W. 533

168 Ark. 220

BAUER v. NORTH ARKANSAS HIGHWAY IMPROVEMENT DISTRICT NO. 1

No. 235

Supreme Court of Arkansas

March 16, 1925

Appeal from White Circuit Court; E. D. Robertson, Judge; affirmed.

STATEMENT OF FACTS.

On June 22, 1920, North Arkansas Highway Improvement District No. 1 of White County, Arkansas, by its commissioners, instituted this action in the circuit court against J. A. Bauer and others to recover the sum of $ 20,400, alleged to be due by them as sureties on a bond to said road improvement district to indemnify it against any loss by reason of depositing any funds by the commissioners with the First National Bank of Judsonia, Arkansas. The suit was defended on the ground that the sureties had been released from liability on the bond by special act of the Legislature.

The record shows that the names of all the defendants are signed to the bond. The bond was dated January 7, 1920, and the body of it is as follows:

"We the undersigned, are hereby held and firmly bound to the above-named district in the sum of $ 30,000, to indemnify said district against any loss by reason of depositing any funds by the commissioners of said district in the First National Bank of Judsonia; that said bank being selected by the commissioners of said district in pursuance to act 213 of the General Assembly of the State of Arkansas for the year 1917."

Subsequently said bank became insolvent, and, according to the proof, a large sum of money belonging to the road district was on deposit there. After the affairs of the bank were wound up and the creditors paid pro rata, there still remains due and unpaid the sum of $ 6,120 belonging to said road district.

The plaintiffs introduced proof tending to show that the defendants signed the bond. On the other hand, the defendants testified that they did not sign it, and other evidence was introduced to corroborate their testimony.

Other facts will be stated under appropriate headings in the opinion.

From a verdict and judgment in favor of the plaintiffs the defendants have duly prosecuted an appeal to this court.

Judgment affirmed.

John E. Miller, C. E. Yingling, John D. DeBois, and P. R. Andrews, for appellants.

Brundidge & Neelly, for appellee.

OPINION

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

The main reliance of the defendants for a reversal of the judgment is that they were released from liability on the bond by reason of a special act of the Legislature. The Legislature of 1917 passed an act creating North Arkansas Highway Improvement District No. 1. Acts of Arkansas, 1917 vol. 2, p. 1149.

Section 22 of the act provides that the commissioners shall select such solvent banks as depositories for the funds of the district as they may deem for the best interest thereof. The section further provides that said depositories shall be required to give bond in such amount as the commissioners shall fix, equal to or in excess of the largest amount of deposits that such depositories are expected to have, conditioned that all funds of the district placed in such depositories shall be kept and preserved by them and repaid only on the lawful orders of the board of commissioners.

Pursuant to this act, the commissioners deposited large amount of the funds of the district with the First National Bank of Judsonia and took a bond from the bank, as required by the statute. When the bank became insolvent and its affairs were wound up, it was ascertained that there remained due and unpaid of the funds of the district $ 6,120. The Legislature of 1923 passed an act to release the stockholders and bondsmen of the First National Bank of Judsonia, Arkansas, from liability to the North Arkansas Highway Improvement District No. 1 of White County, Arkansas. Special Acts of Arkansas, 1923, p. 227.

It is the contention of the defendants that this act is constitutional, and that the circuit court erred in not so holding. They base their contention on the general rule laid down by this court and various other courts of last resort to the effect that the Legislature possesses the power to cancel liabilities of officers for money lost by them, when such loss was not occasioned by their wilful misconduct. Pearson v. State, 56 Ark. 148; McSurely v. McGrew (Iowa), 140 Iowa 163, 118 N.W. 415, 132 Am. St. Rep. 248; and Miller v. Henry (Ore.), 62 Ore. 4, 124 P. 197, 41 L. R. A. (N. S.), 97.

The syllabus of the Arkansas case reads as follows:

The Legislature is not precluded from passing an act to release a county treasurer from liability for school and county funds stolen by burglars, without fault on his part, from a safe furnished him by the county, by reason of the provision of § 3, art. 14, of the State Constitution, which ordains that no school tax shall be appropriated to any other purpose than that for which it was levied, nor by the provisions of the State and Federal Constitutions that prohibit legislation divesting property rights or impairing the obligation of contracts."

All of these eases are based on the theory that the Legislature's power over taxation is only restricted by the limitations placed upon it by the Constitution, and therefore that it may relieve public officers from the loss of funds collected by general taxation where such loss is occasioned through no fault of the officer or his bondsmen. In all these cases, where the money is collected by general taxation, the individual property owners acquire no vested rights in the premises, and therefore there is no impairment of the obligation of a contract as prohibited by the Constitution of the State and by that of the United States.

A careful consideration of these cases leads us to the belief that this case does not fall within the general rule, and that the Legislature has no right to relieve the officer and his bondsmen from liability, unless the funds lost were raised by general taxation, and they must have been raised by taxation on the political subdivision of the State to be charged with the burden.

In cases where a county treasurer, a county collector, or other county or township officer having charge of public funds, loses the same by theft, or by insolvency of a bank in which he has lawfully deposited such funds, the Legislature, by its control over taxation, may relieve such officer from liability occasioned by the loss, and place the burden upon the people to replace the lost funds. Because the funds are public funds, in which no person has any vested right, the Legislature may release the claim, though legally due, if, in its opinion, it would be unjust and oppressive to collect it.

It is true that the commissioners of an improvement district are public agencies intrusted with duties to the landowners of said district, but the funds which come to their hands are not collected by general taxation, and such commissioners are not officers of any political subdivision of the State. On the other hand, improvement district taxes are special taxes levied on the theory that the landowner receives a corresponding benefit. In short, improvement district taxes can only be levied to the extent that the benefits conferred are equal to or exceed the amount of the special taxes levied. Therefore, so far as improvement districts are concerned, we conclude that the individual landowners have vested rights which cannot be impaired by subsequent legislative enactment. To illustrate:...