Boyd v. Johnson

• Decision Date: 29 September 1931
• Docket Number: 40757
• Parties: J. O. BOYD et al., Appellants, v. R. E. JOHNSON, Treasurer of State, et al., Appellees
• Court: Iowa Supreme Court

238 N.W. 61

212 Iowa 1201

J. O. BOYD et al., Appellants, v. R. E. JOHNSON, Treasurer of State, et al., Appellees

No. 40757

Supreme Court of Iowa, Des Moines

September 29, 1931

Appeal from Lee District Court.--JOHN E. CRAIG, Judge.

This is an action in equity brought by an Independent School District and a freeholder resident taxpayer of the School District for the purpose of challenging the constitutionality of Chapters 173 and 174 of the Acts of the Forty-first General Assembly and Chapters 92 and 266 of the Forty-second General Assembly commonly known as the Brookhart-Lovrien Law, which will hereafter be referred to as the "challenged act." The trial court found for the defendant and the plaintiffs appeal. The facts appear in the opinion.--Modified and affirmed.

Affirmed.

J. O Boyd and Bertha L. Pflug, for appellants.

John Fletcher, Attorney-general, Earl F. Wisdom, Assistant Attorney-general, J. M. C. Hamilton, County Attorney, D. J McNamara, Deputy County Attorney, and Sawyer & Norman, for R. E. Johnson, Treasurer of the State, and H. A. Skyles, Treasurer of Lee County, appellees.

Sawyer & Norman, for Keokuk Savings Bank & Trust Company, appellee.

OPINION

GRIMM, J.

This suit was brought on November 21, 1925. The State Treasurer, R. E. Johnson, the County Treasurer of Lee County, and the school depository, the Keokuk Savings Bank and Trust Company, were named defendants.

On August 1, 1925, the State Treasurer made a call for a diversion of interest under the challenged act. This was followed by an order by the county treasurer, on August 25, 1925. On September 3, 1925, the plaintiff school district served a written demand upon its depository that any payments which should be made must be made under protest. The depository bank made payments under protest due in September, October and November. The depository bank filed its answer on November 27, 1925. On November 30, 1925, the other defendants filed a resistance and motion to dismiss, which was overruled. On December 4, 1925, the court granted a temporary injunction. On December 10, 1925, the plaintiffs made application for an extension of the temporary injunction until final hearing.

The defendants, the treasurers, refiled a motion to dismiss. On December 24, 1925, the court directed the depository bank to withhold the interest arising from the deposit of school money until said cause should have been determined on final hearing.

On January 21, 1926, the defendants, the treasurers, filed a motion to dissolve the temporary restraining order and to dismiss plaintiff's petition. On January 21, 1928, the defendants, treasurers, filed an answer. On December 14, 1928, this court filed its decision in the case of Scott County v. Johnson, 209 Iowa 213, 222 N.W. 378. On June 23, 1930, the defendants, the treasurers, filed an application to withdraw their answer and renewed their motion to dissolve and dismiss. To this a resistance was filed. On July 24, 1930, the trial court sustained the defendants' motion to dismiss and the plaintiffs appeal.

The plaintiffs' petition and amendment cover more than forty pages of abstract. The most that we can do, within reasonable space, is to attempt to refer to most of the material claims therein made.

The plaintiff Boyd appears as a resident, freeholder and taxpayer of the Independent School District involved and brings the action on his own behalf and on behalf of all others similarly situated. It is claimed that the School District has for years operated on the "budget" plan, which has taken into account the interest on deposits, the said interest being considered as a part of the income of the school district; that by reason of said interest, the levies for school purposes are smaller than they otherwise would be: and it is alleged that if the interest on these deposits is to be taken under the provisions of the challenged act, more taxes must be levied and the plaintiff Boyd will be required to pay a greater sum as taxes, as will the other taxpayers in the School District.

It is claimed that the challenged act is an indirect method of imposing a tax upon the plaintiff taxpayer and other taxpayers, without distinctly stating the nature of the tax.

It is alleged that the law is not of equal and uniform operation upon all of the people paying taxes in Iowa. It is also claimed that the challenged act indirectly takes the property of the plaintiff taxpayers and other taxpayers without due process of law.

It is alleged that the school district had accumulated property specially dedicated for the use of the taxpayers and residents of the school district; that from time to time some of this property was sold, some of it was rented, and by various means an income was derived therefrom; that a substantial income arose from tuition from pupils residing outside the school district and in other states; that it received substantial sums in the way of federal aid; that it also received a substantial income from tuitions to a night school and from admissions for extra-curricular activities, from borrowed money in anticipation of taxes, from the issuance of obligations of the school district: and the plaintiffs claim that all money so derived was held by said school district in its proprietary capacity.

It is claimed that the interest arising from said proprietary funds belonged to the district in such a way as that it could not be lawfully diverted under the provisions of the challenged act. It is also claimed that the school board held in trust a fund known as the Kilbourne Prize Fund. The school district had received this money under the terms of a will. A certain portion of the interest of the fund was to be given in prizes to students in the school district under provisions specified in the will and the balance of the interest was to be added to the original fund.

It is alleged that the challenged act was in violation of several provisions of the Constitution of the State of Iowa.

Six errors are relied upon for reversal. We shall not find it necessary to deal with all of them. The first error relied upon for reversal raises the question whether either plaintiff had sufficient interest in the controversy to entitle him to challenge the constitutionality of the act.

It will be recalled that the plaintiff Boyd as a freeholder claims if the act operates as to the funds of the school district, it will necessitate the payment of more taxes by Boyd. The school district alleges it has a proprietary right in the funds and in the interest accruing thereon and also that the district holds certain specially dedicated property in trust.

I. Before and at the time of the enactment of said Chapter 173 of the Acts of the Forty-first General Assembly, the following sections of the statute were in force as existing law: Sections 7404, 5651, 5548 and 4319, of the Code of 1924. We set them forth herein:

"7404. Deposits by County Treasurer. The county treasurer shall, with the approval of the board of supervisors as to place of deposit, by resolution entered of record, deposit state, county, or other funds in any bank or banks in the state to an amount fixed by such resolution at interest at the rate of at least two and one-half per cent per annum on ninety per cent of the daily balances payable at the end of each month, all of which shall accrue to the benefit of the general county fund."

"5651. Deposit of funds. Treasurers of cities and towns shall, with the approval of the council as to place and amount of deposit, by resolution entered of record, deposit city and town funds in any bank or banks in the city or town to which the funds belong, at interest at the rate of not less than two and one-half per cent per annum on ninety per cent of the daily balances, payable at the end of each month. Interest shall accrue to the benefit of the general fund."

"5548. Deposit of funds. He shall deposit all funds coming into his hands by virtue of his office, in a bank conveniently located, each deposit to be in the name of his township and at a rate of interest not less than two and one-half per cent per annum on ninety per cent of the daily balances, payable at the end of each month, which interest shall accrue to the benefit of the township road fund."

"4319. Deposit of funds. It is hereby made the duty of the treasurer of each school corporation to deposit all funds in his hands as such treasurer in some bank or banks in the state at interest at the rate of at least two per cent per annum on ninety per cent of the daily balances payable at the end of each month, all of which shall accrue to the benefit of the general fund of such school corporation; but before such deposit is made, such bank shall file a bond with sureties to be approved by the treasurer and the board of directors of such corporation in double the amount deposited, conditioned to hold the school corporation harmless from all loss by reason of such deposit or deposits; provided that in cases where an approved surety company's bond is furnished, said bond may be accepted in an amount equal to ten per cent more than the amount deposited. Said bond shall be filed with the president of the school board and action may be brought thereon either by the treasurer or the school corporation as the board may elect."

Chapter 173 of the Acts of the Forty-first General Assembly is in part as follows:

"An act to create a state sinking fund for public deposits and to provide a method for the payment of public funds deposited as provided by law, in banks which have since become insolvent to provide a manner of collecting the sinking fund and of making disbursements therefrom; to provide for the subrogation of the treasurer of state to the rights of the holders of deposits of...