Borchert v. Scott

• Decision Date: 15 June 1970
• Docket Number: No. 5--5293,5--5293
• Citation: 248 Ark. 1041,460 S.W.2d 28
• Parties: Martin BORCHERT, Appellant, v. Bob K. SCOTT et al., Appellees, and Virgil T. Fletcher, Appellant-Intervenor.
• Court: Arkansas Supreme Court

Page 28

460 S.W.2d 28

248 Ark. 1041

Martin BORCHERT, Appellant, v.Bob K. SCOTT et al., Appellees and Virgil T. Fletcher, Appellant-Intervenor.

No. 5--5293.

Supreme Court of Arkansas.

June 15, 1970.

Supplemental Opinion on Rehearing Oct. 19, 1970.

Rehearing Denied Nov. 23, 1970.

Sam Robinson, Little Rock and Talbot Field, Jr., Hope, for appellants.

Smith, Williams, Friday & Bowen, Little Rock, by Herschel H. Friday and James A. Buttry, Joe Purcell, Atty. Gen., and Lyle Williams, Little Rock, for appellees.

Eugene R. Warren, Little Rock, amicus Curiae.

BYRD, Justice.

This appeal by Martin Borchert and Virgil T. Fletcher questions the constitutional validity of the documentary tax stamp act, being Act 239 of 1969, under amendment 20 to the Constitution of Arkansas.The matter was instituted by Borchert as a property owner and taxpayer against appelleesBob K. Scott, individually and as Commissioner of Revenues for Arkansas; James C. Morris, J. A. West, L. C. Dial, J. R. McKinley, Orville I. Richolson, Ovid Switzer, and C. E. Tudor, individually and as members of the State Parks, Recreation and Travel Commission of the State; Keith Tudor, J. W. McCracken, Dr. Joseph L. Rosenzweig, Mrs. Fred MacDonald, Harold F. Ohlendorf, Gordon Gurley and James Cuthbertson, individually and as members of the Arkansas Board of Mental Retardation.Virgil Fletcher intervened.After a stipulation of the facts and issues and that all moneys received by the commissioner of revenues were to be received as paid under protest, the trial court dismissed the complaint and intervention.For reversal appellants rely upon a number of Constitutional provisions including Amendment 20, which provides that, '* * * The State of Arkansas shall issue no bonds or other evidence of indebtedness pledging the faith and credit of the State or any of its revenues for any purpose whatsoever, except by and with the consent of the majority of the qualified electors.'

The appellees contend that Amendment 20 applies only to general obligations of the State of Arkansas and that so long as the bonds authorized by the legislature are secured by revenues to be derived from a special and defined source, such as the revenues produced by Act239, Amendment 20 is not involved.In this connection they contend that there is no constitutional restriction on the power of the legislature to allocate revenues collected from a single source between 'treasury funds' and 'cash funds'.

Insofar as here pertinent Act 239 provides:

'AN ACT to Impose a Tax on the Transfer of Real Property; to Provide for Penalties for Failure to Comply With This Act; and for Other Purposes.'

Be It Enacted by the General Assembly of the State of Arkansas:

SECTION 1.There is hereby levied on each deed, * * * when the consideration for the interest or property conveyed exceeds One Hundred ($100.00) Dollars, a tax at the rate of One Dollar and Fifty Cents ($1.50) for each Five Hundred ($500.00) Dollars, or fractional part thereof.

SECTION 2.The tax imposed by this Act shall not apply to transfers of the following: * * *

SECTION 3.The tax levied by this Act applies at the time of transfer and shall be computed on the basis of the consideration for the real estate transferred.

SECTION 4.The County Recorder of Deeds shall not record any instrument evidencing a transfer subject to this Act unless the instrument shall have affixed thereto a documentary stamp or stamps evidencing the full payment of such tax. * * *

SECTION 5.The Commissioner of Revenues shall design such documentary stamps * * *.

SECTION 6.All revenues derived from the tax levied by this Act shall be paid over to the Commissioner of Revenues and shall be deposited in one or more banks selected by him and from time to time withdrawn from such banks in the proportions indicated for use for the following purposes:

(a) An amount not exceeding three percent (3%) of such deposits for payment of the expenses of the Commissioner of Revenues in administering the provisions of this Act, including the costs of designing and printing the documentary stamps, the preparation and printing of information material and of any regulations which he may promulgate with respect to the use of such stamps and their safekeeping, and for reimbursing the State Treasury for any such expenses of administration hereunder which were paid by the use of State-appropriated funds.

(b) The remainder thereof, but not less than ninety-seven per cent (97%) shall be deposited by the Commissioner of Revenues as follows:

(1) Twenty per cent (20%) shall be deposited by the Commissioner of Revenues in the State Treasury and credited to the County Aid Fund and distributed at the end of each month to the respective counties from which the revenues originated.

(2) Forty per cent (40%) thereof to the Arkansas Children's Colony Board(the 'Colony Board').Funds so remitted to the Colony Board are hereby specifically declared to be cash funds and shall not be deposited in the State Treasury but shall be deposited in trust in a bank or banks in this State, as the Colony Board may from time to time select and used by the Colony Board, as it shall determine, to operate, maintain, develop and improve institutional and community facilities and services for the mentally retarded, and all or any part may be pledged to and used for the payment of revenue bonds issued by the Colony Board pursuant to Act 186 of 1963, as and to the same extent as the charges referred in Section 7 of Act 186 of 1963.So long as any revenue bonds are outstanding, to the payment of which revenues derived from the tax levied by this Act are pledged, the tax levied by this Act shall continue to be collected and the revenues derived therefrom shall continue to be deposited as provided in this Act and to be pledged to and used for the payment of the outstanding bonds, principal and interest, until the outstanding bonds are fully paid or adequate provision made therefor; and

(3) Forty per cent (40%) thereof to the State Parks, Recreation and Travel Commission of the State of Arkansas(the 'Commission').Funds so remitted to the Commission are hereby specifically declared to be cash funds and shall not be deposited in the State Treasury but shall be deposited in trust in a bank or banks in this State as the Commission may select, and used by the Commission as it shall determine, to operate, maintain, develop and improve the Public Parks system of the State, and all or any part may be pledged and used for the payment of revenue bonds, issued by the Commission pursuant to ActNo. 539 of 1953, as amended, as and to the same extent as revenues derived from the properties and equipment of the State Parks System.So long as any revenue bonds are outstanding, to the payment of which revenues derived from the tax levied by this Act are pledged, the tax levied by this Act shall continue to be collected and the revenues derived therefrom shall continue to be deposited as provided in this Act and to be pledged to and used for the payment of the outstanding bonds, principal and interest, until the outstanding bonds are fully paid or adequate provision made therefor.

Act 186 of 1963 referred to in Section 6(b)(2) provides that, 'bonds issued under the provisions of this act shall be general obligations only of the Board, and in no event shall they constitute an indebtedness for which the faith and credit of the State of Arkansas or any of its revenues are pledged * * *.'Act 399 of 1953 referred to in Section 6(b)(3) contains a similar provision.

Amendment No. 20 has been before this Court in a number of cases.SeeMiles v. Gordon, 234 Ark. 525, 353 S.W.2d 157(1962);Holmes v. Cheney, 234 Ark. 503, 352 S.W.2d 943(1962)andMcArthur v. Smallwood, 225 Ark. 328, 281 S.W.2d 428(1955).Commencing with Davis v. Phipps, 191 Ark. 298, 85 S.W.2d 1020(1935), we have consistently held that revenue bonds based upon revenues of an agency in the nature of 'cash funds' could be pledged for the payment of bonds issued by a state agency without violating Amendment No. 20, so long as the faith and credit of the State of Arkansas was not pledged.However in each case thus far decided, when discussing the sources of the pledged revenue, we have been careful to point out out that the revenue source involved was not taxes.In the McArthurcase, supra, we pointed out that the funds there involved were special funds not otherwise available for the general purposes of the state.

The distinction between 'cash funds' and 'taxes' as public revenues was made in Gipson v. Ingram, 215 Ark. 812, 223 S.W.2d 595(1949).There the sole issue was whether a legislative appropriation, pursuant to Article V, § 29, was a prerequisite to payment by an agency from an accumulated cash fund, derived from various sources such as student fees, dormitory charges, etc.We held that no appropriation was necessary, after determining that no part of the funds were derived from taxes.

In Moore v. Alexander, 85 Ark. 171, 107 S.W. 395(1908), we had before us'An Act to Provide for the Completion of the State Capitol Building' which levied a tax of one-half mill on each dollar of taxable property to be 'continued to be levied and collected and appropriated * * * until said Capitol is fully completed.'We there held the continuing appropriation to be violative of Article V, § 29, which provides that '* * * no appropriation shall be for a longer period than two years.'This court in Dickinson, State Auditor v. Edmondson, 120 Ark. 80, 178 S.W. 930(1915), commented upon Moore v. Alexander, above, as follows:

'* * * We are unwilling to recede from the position taken in that case, for it is plain that the framers of the Constitution intended to place an unmistakable limitation upon the authority of public officials in paying out public funds and to declare that all the state funds which are within the purview of that provision must be held in the treasury,...