Board of Com'Rs v. Board of Directors

• Decision Date: 19 May 1930
• Docket Number: No. 342.,342.
• Citation: 28 S.W.2d 721
• Parties: BOARD OF COM'RS OF McKINNEY BAYOU DRAINAGE DIST. v. BOARD OF DIRECTORS OF GARLAND LEVEE DIST.
• Court: Arkansas Supreme Court

28 S.W.2d 721

BOARD OF COM'RS OF McKINNEY BAYOU DRAINAGE DIST. v. BOARD OF DIRECTORS OF GARLAND LEVEE DIST.

No. 342.

Supreme Court of Arkansas.

May 19, 1930.

Rehearing Denied June 23, 1930.

Appeal from Chancery Court, Miller County; C. E. Johnson, Chancellor.

Suit by the Board of Directors of Garland Levee District, wherein the Board of Commissioners of McKinney Bayou Drainage District and another were made parties defendant. From a decree in favor of plaintiff, defendant named appeals.

Reversed and remanded with directions.

H. M. Barney and W. H. Arnold, both of Texarkana, for appellant.

Henry Moore, Jr., of Texarkana, for appellee.

McHANEY, J.

The principal question presented by this appeal, if not the only one, is that of priority of liens, if any, for taxes on assessed benefits or betterments in overlapping improvement districts, organized by legislative authority at different times and under different acts of the Legislature. Appellants will hereafter be referred to as the drainage district and appellee as the levee district.

The levee district was created by Special Act No. 311, Pub. & Priv. Acts of 1913, p. 1267, and the provisions thereof were re-enacted and the district validated by Special Act No. 56, Pub. & Priv. Acts 1917, p. 235. Additional bonds were authorized by Act No. 451, Sp. Acts 1921, p. 944, and by Act No. 516, Sp. Acts 1923, p. 1113. The validity of the levee district was sustained by this court in Dorsey Land & Lumber Co. v. Board of Directors of Garland Levee Dist., 136 Ark. 524, 203 S. W. 33.

The drainage district was created by order of the county court of Miller county, Ark., on May 4, 1923, under and by virtue of the provisions of the general drainage district laws, known as the alternative system, section 3607 et seq. C. & M. Digest of the Statutes of this state.

The levee district, prior to the organization of the drainage district, had issued bonds in the sum of $267,500, of which amount $150,000 are still outstanding. A levee was built along the west bank of Red river, connecting with another levee on the north and running southerly to McKinney Bayou, near the hills, but left a gap between the south end and the hills of about one-fourth mile. About 45,000 acres of land are in the levee district. The drainage district is composed of the south two-thirds of the lands in the levee district, about 30,000 acres, and was organized to supplement the work of the levee district by building a levee along the bank of McKinney Bayou in a southeasterly direction and connecting with the south end of the levee built by the levee district, which protected the lands in both districts from overflow through the gap heretofore referred to. Ditches were also constructed to drain off the surface water and flood gates constructed to let the water through to the bayou. Improvements made in the drainage district cost approximately $450,000 and large bond issues are now outstanding. Having defaulted in the payment of bonds, it is now in the hands of a receiver. The levee district is also in default.

Certain of the levee district taxes for 1926 not having been paid, it brought suit to collect same. Decree of foreclosure was had in July, 1928, and the delinquent lands ordered sold by a commissioner appointed for the purpose. The commissioner reported on July 28, 1928, that he had advertised said delinquent lands for sale, had publicly offered same, but that, although parties were present, "no one offered to purchase for the levee taxes subject to the lien of the existing drainage district taxes in favor of McKinney Bayou Drainage District, and your commissioner, in accordance with section 3646 of Crawford & Moses' Digest, reports the above facts to the court that the court may take proper action thereon." At the suggestion of the levee district. an attorney ad litem was appointed to notify the drainage district, its receiver, and the trustee for its bondholders that it was the intention of the levee district to proceed further in said suit according to the provisions of section 3646, C. & M. Digest. Thereafter the drainage district and the trustee for bondholders were made parties to the suit to foreclose. An order was sought directing a sale of the lands for the delinquent levee tax for 1926, free from the lien of the drainage district assessments, but subject to future taxes in the levee district. Appellants opposed the procedure and contested the right of the levee district to a superior lien on any grounds, but on a trial, the court held with appellee that its lien was superior to that of the drainage district, and again ordered the land sold for delinquent levee taxes for 1926, but free of incumbrances of the assessment of benefits and drainage tax of appellant district, but subject only to subsequent installments of benefits in the levee district, in accordance with the court's view of the proper construction to be placed on section 3646, C. & M. Digest. This appeal followed.

Said section of the statute is as follows: "On sales of land condemned to be sold for the taxes of drainage districts and other improvement districts in this State the land shall first be offered subject to the lien of all improvement district assessments then existing thereon. If no one will purchase on those terms, the commissioner appointed to make the sale shall report that fact to the court and the land shall not again be offered for sale until after the lapse of one year, nor until an attorney ad litem has been appointed to notify the commissioners or directors of other improvement districts and the trustees of all bondholders having liens thereon that said lands have been offered for sale on those terms, and that no purchaser therefor has been found. Upon the coming in of the report of such attorney ad litem, showing in detail the notice that he has given to the commissioners or directors of other improvement districts having liens upon the property, and to the trustees of the bondholders of all districts having liens on the property, the court shall make an order for the sale of the lands free of incumbrances of the assessments of all other improvement districts that are subordinate to the lien that is foreclosed, but subject to subsequent installments of the assessments of benefits in the plaintiff district. And when such sale is made, any balance that may remain after paying the cost of foreclosure and the amount of the lien that is foreclosed, shall be distributed by the court in such manner as may be found equitable. If the board of commissioners or directors of any drainage district having a lien on the lands or the trustee of any bondholders having such lien is not notified of the application for such sale, they may on motion at any time within three years have the sale set aside and the lands resold."

It becomes necessary to determine the meaning of said section. We have never had the exact question as now presented before us heretofore, and this court has never been called upon in any other case to construe this section of the Act of 1913, section 14, Pub. & Priv. Acts 1913, p. 738. It was evidently enacted to cure a defect in the drainage district law, and its provisions were made broad enough to include all other improvement districts which overlap each other, such as the case now before us. Many such districts were in existence at...