Bourland v. First National Bank Building Company

• Decision Date: 20 February 1922
• Docket Number: 169
• Citation: 237 S.W. 681,152 Ark. 139
• Parties: BOURLAND v. FIRST NATIONAL BANK BUILDING COMPANY
• Court: Arkansas Supreme Court

237 S.W. 681

152 Ark. 139

BOURLAND v. FIRST NATIONAL BANK BUILDING COMPANY

No. 169

Supreme Court of Arkansas

February 20, 1922

Appeal from Sebastian Chancery Court, Ft. Smith District; J. V Bourland, Chancellor; affirmed.

STATEMENT OF FACTS.

Appellees describing themselves as owners of real property and taxpayers of Fort Smith, Ark., brought separate suits in equity against appellants to prevent them from carrying out a contract whereby the City National Bank was designated as a depository for the city and improvement district funds of the city of Fort Smith, for the period of two years.

In their answer, it was claimed by appellants that the commissioners had the right under the statute to select a depository, and that they had selected the City National Bank.

The cases were consolidated and tried together. While the record in this case is very lengthy, the issues presented by the pleadings and the facts may be stated in short form.

The city of Fort Smith adopted the commission form of government and the mayor and commissioners advertised under the provisions of the statute for bids from such banks as might desire to become the city depository. In response to such notice the various banks in the city of Fort Smith filed their bids. Each bid stated the rate of interest the bank would pay for the funds of the city and the various improvement districts situated therein. After opening the bids it was found that no provision had been made for the city borrowing money. For the greater part of the year the city was required to borrow large sums of money with which to meet the expenses of the city government. In order to do this, it was the practice of the city to borrow money and pay interest on the money borrowed. Hence the mayor told the bidders that the city would have to consider loans and to obtain them from whatever bank was selected as a depository that the city had to borrow considerably more money than it had to deposit; and that this was a consideration which would be expected of the depository. Each bank was asked to consider this and amend its bid by stating at what rate of interest it would lend money to the city. The meeting was adjourned until the next day so that all the banks might have a chance to make bids under the notice as amended. Some of the banks came back and changed their bids and others did not.

It was understood by all the parties concerned that the lending of money to the city by the depository would be a substantial consideration in selecting such depository. The banks in their bids adopted various rates of interest for the various funds under the control of the city and also for the money which it would lend the city. For instance, the First National Bank of Fort Smith bid a high rate of interest on the average daily balances for all the funds of the city of Fort Smith and the improvement districts therein, but bid a higher rate for the money it would loan the city with which to carry on the city government than did the City National Bank. The mayor and commissioners, however, found that the difference between the bids of the various banks and the City National Bank was very small on the various funds under the control of the city, and for the reason that the City National Bank offered a lower rate of interest on money to be borrowed by the city and because the city had to borrow more money than it deposited, the City National Bank was selected as the depository.

The above facts are established by a decided preponderance of the evidence.

The record also shows that the City National Bank had purchased the waterworks bonds, and that one of the considerations of the purchase was that the proceeds should remain in the hands of the bank until they were used in the construction of the waterworks.

The chancellor found that the selection of the City National Bank as the depository of the city of Fort Smith for the ensuing two years under the statute was an abuse of discretion on the part of the mayor and commissioner of the city, and their action therefore invalid.

The court further found that the funds of the waterworks district derived from the sale of the bonds purchased by the City National Bank should remain in the hands of said bank because the contract had been executed in part on both sides, and that no one of appellees, who were the plaintiffs in the court below, had offered to restore to the City National Bank the consideration moving to it from said waterworks district. It was therefore decreed that appellants be enjoined from entering into or carrying out a contract whereby the City National Bank should become the depository of the city of Fort Smith or any of the improvement districts of the city under the award made by the mayor and the commissioners to said bank.

The court refused to direct the mayor and board of commissioners to select either of the other banks as the depository of the city on the bid filed by such bank.

Both parties have duly prosecuted an appeal to this court.

Decree affirmed.

Fadjo Cravens, Cravens, Oglesby & Cravens and James B. McDonough, for appellants.

1. In the matter of selecting a depository the law confers a discretionary power upon the board of commissioners, and before the court could grant the relief prayed for, the plaintiffs must both have alleged and proved an abuse of that discretion. Acts 1913, p. 80, §§ 21, 24; 125 S.W 1140; 227 S.W. 974; 229 S.W. 663; 94 Ark. 311.

2. The courts will not enjoin public officers restraining them from the exercise of their discretionary powers. 94 Ark. 422; 85 Id. 156; 226 S.W. 758; 269 F. 712; 64 S.E. 1074; 183 Ill.App. 506; 81 Kan. 153; 25 L. R. A. (N. S.) 228; 140 P. 1051.

Where no abuse of discretion is shown, injunction will not lie to control the act of a board or officer. 130 N.Y.S. 216; 234 U.S. 627. See also 69 So. 554; 182 S.W. 29; 94 S.E. 229; 183 P. 134; 99 S.E. 119; 180 P. 229; 14 Cyc. 383.

3. The interest rate alone does not control. Acts 1913, p. 80, supra; 227 S.W. 974.

4. In determining the questions involved in this case the question whether or not the city has power to pay interest on money borrowed, is not material. None of the plaintiffs are in a position to urge that question. See 94 Ark. 311.

Daily & Woods, for appellees.

There can be no answer to the judgment of the trial court that the act of the defendants in declaring the City National Bank the depository of the city and of each of the improvement districts, and in awarding to it the funds of the city and of said districts for the ensuing two years, was unwarranted, improvident and an abuse of discretion. Under the act, the only discretion vested in the commissioners is to pass upon the relative security of the banks. If, in their judgment, one of the banks is a stronger or a safer bank, they no doubt have the right to select such bank, even though it offers a lower rate of interest; but this discretion must be exercised within reasonable limits. But the evidence, and the findings of the chancellor based thereon, show that the commissioners did not exercise a discretion within the meaning of the law, but acted arbitrarily and without warrant, and for reasons that were either arbitrary, capricious or illegal. Plaintiffs' suits are brought to prevent political favoritism in the handling of the funds of the city and of its various improvement districts. They ask that the commissioners be enjoined from letting a contract to the poorest bidder, and that each fund be awarded to the bank which was the highest bidder for that particular fund. They insist on what this court has declared the law to be in Grant County Bank v. McClellan, 112 Ark. 550, viz: "The whole theory and purpose of such legislation is to secure the highest returns for the use of public funds," and, "that there should be competition and not favoritism." See also 199 S.W. 250; 214 S.W. 528; 94 Ark. 311.

OPINION

HART, J. (after stating the facts).

The city of Fort Smith adopted the commission form of government for cities of the first class. Under the statute a board of commissioners, consisting of the mayor and others, is the governing body of the city. The mayor and commissioners also constitute the board of improvement for all improvement districts existing or created in the city. The statute provides for the selection of a city depository for all the various funds under the control of the board of commissioners. Acts of 1913, p. 48.

The issues raised by this appeal depend upon the construction to be given to secs. 21 and 24 of the act.

Sec. 21 provides for the selection of a city depository, and is as follows:

"The board of commissioners shall advertise for proposals for the custody of city funds from any bank or trust company located in said city. The board shall advertise for sealed bids for keeping the said funds for a term of two years and until a new selection shall be made. The bank or trust company offering the best inducements as to interest and security shall be selected as such depository. The rate of interest allowed on average daily balances shall be stated in all bids. Other things being equal, that bank or trust company shall receive preference which allows the city the highest rate of interest. The board shall have the right to reject any and all bids. A bond shall be executed by the depository selected by the city in such sums as will equal double the amount of estimated largest deposit, conditioned that it will safely keep all funds deposited, and pay on presentation all vouchers drawn on it when the money is on deposit, with the sureties approved by said board. Interest shall be computed on average daily balances, payable to the city monthly, and the minimum rate of interest accepted shall be two per cent. on...