Brown v. Waterworks Improvement District No. 1, of Fort Smith

• Court: Arkansas Supreme Court
• Writing for the Court: WOOD, J.
• Citation: Brown v. Waterworks Improvement District No. 1, of Fort Smith, 228 S.W. 371, 147 Ark. 584 (Ark. 1921)
• Decision Date: 07 March 1921
• Docket Number: 213,219
• Parties: BROWN v. WATERWORKS IMPROVEMENT DISTRICT NO. 1, OF FORT SMITH

228 S.W. 371

147 Ark. 584

BROWN v. WATERWORKS IMPROVEMENT DISTRICT NO. 1, OF FORT SMITH

No. 213, 219

Supreme Court of Arkansas

March 7, 1921

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

Decree affirmed.

Daniel Hon, for appellants.

There is no law or statute in this State that authorizes Waterworks Improvement District No. 1 to place any incumbrance on the waterworks plant without legislative authority, and the mortgage was in violation of article 19, § 27 Constitution, and void, and the maintenance and upkeep of the plant must be performed by the city of Fort Smith, which is operating the plant, under Kirby's Digest, § 5675; Act 158, Acts 1911. The statutes only provide for one assessment, except that § 5716, Kirby's Digest provides that, if the first assessment is insufficient to complete the improvement, the board shall report the deficiency to the city council and it shall enter an assessment for the sum sufficient to complete the improvement. See, also, Kirby's Digest, §§ 5720-1, 5664. See 109 Ark. 99; 50 Id. 116; 112 Id. 259. Defendants were without power to execute the mortgage, and the court erred in refusing the relief prayed by plaintiffs.

The district was without authority to make the repairs or borrow the money.

Dailey & Woods, of counsel for appellants.

A. A McDonald and J. B. McDonough, for appellees.

1. The Waterworks District of Fort Smith, under the facts, stands in a class of its own. It has power to maintain the works and the power to mortgage. The money to make repairs and replacements was used to pay bonds and interest, and, under the act, one exercise of the power to borrow money did not exhaust the power. 44 F. 224; 86 Iowa 1. Act 158 gives the power to borrow money, and it did not restrict the district to a single mortgage. This case falls within the rule. 217 S.W. 795.

2. Even if the district is without power to "maintain" the system of waterworks, nevertheless, under the law and the facts, it has the power to mortgage the plant as security to repay the money, thus enabling the city to maintain the system. Kirby's Digest, § 5675; act 158, Acts 1911; 117 Ark. 93. See, also, 70 N.J.L. 98; 170 Ind. 113; 89 N.J.L. 418.

3. The borrowing of $ 200,000 by the Waterworks Improvement District No. 1 did not call for or require any additional assessment against the property in the district.

4. The improvement district has ample power under the law to borrow the money and secure its repayment by the execution of the mortgage. From the undisputed facts and what has been stated before, it is clear there is no violation of article 19, § 27, of the Constitution, and the board has power to execute a second mortgage. 109 Ark. 90; 50 Id. 116; Acts 1911, p. 415; 160 Cal. 30; 161 P. 722; 71 S.E. 654; 88 Ia. 154. Under act 158, Acts 1911, and also prior acts, the district had power to mortgage the water system to secure money to build and maintain the system.

5. The power of Waterworks Improvement District No. 1 to mortgage the water system is not taken away, under the facts of this case, by Kirby's Digest, § 5675.

6. There is no showing in the record that the improvements contemplated are anything other than a part of the original plans. 218 S.W. 381, did not decide the questions raised here.

7. The district was organized to acquire and maintain. 118 Ill. 446; 151 Ill. 634; 140 Mass. 329; 16 Okla. 436; 101 S.W. 414; 133 S.W. 953; 170 U.S. 744.

8. We also rely on the doctrine of estoppel. 117 Ark. 93; 131 Id. 77; 150 Id. 116.

9. The city is not borrowing money, and is not issuing interest-bearing evidences of indebtedness.

WOOD J. MCCULLOCH, C. J., dissenting.

OPINION

WOOD, J.

The appellant instituted this action against the Waterworks Improvement District No. 1 of the city of Fort Smith, Arkansas (hereafter called district) and the commissioners of the city of Fort Smith, who were also ex-officio commissioners of the district. He alleged that the district was duly established by ordinance of the city council of the city of Fort Smith, February 4, 1907; that a board of improvement and a board of assessors for the district were duly elected; that on January 6, 1911, an assessment was duly made on the real estate in the district; that on April 3, 1911, an ordinance was duly passed transferring to the district an option, which was then held by the city of Fort Smith, to purchase a waterworks system of the Municipal Waterworks Company (hereafter called company), then owning and operating a waterworks plant in the city of Fort Smith; that by special act No. 158 of the General Assembly of the State, approved March 30, 1911, the district purchased and took title to the waterworks plant formerly owned by the company, and to secure money necessary to pay the company for the plant and to make further improvements contemplated, the district mortgaged the plant to the Mercantile Trust Company for $ 750,000, of which amount still remains unpaid the sum of $ 664,000; that the city, in the transfer of its option to the district, reserved the right and has the right by law, and is now operating and maintaining the waterworks system, and under act No. 158 of the Acts of 1911, was using the revenues from the waterworks to pay the debt to the Mercantile Trust Company in addition to the use authorized by section 5675 of Kirby's Digest; that the commissioners of the district, pursuant to a resolution passed by them and an ordinance of the city of Fort Smith, were about to issue bonds in the sum of $ 200,000 and to mortgage the waterworks plant to secure said sum in order to make certain improvements, reconstructions and enlargements; that these improvements were no part of the original plans of the district and should be made and maintained by the city alone; that assessments for these improvements were not authorized by law nor by consent of the majority of the property owners in the district and were, therefore, in violation of article 19, section 27, of the Constitution. The appellant alleged that he was a landowner and taxpayer in the district, and he instituted the action in behalf of himself and all other interested property owners of the district, and he prayed that the appellees be enjoined from creating a debt against the district and issuing bonds and mortgaging the property of the district to secure the payment of the same, and for all proper relief. The resolution of the commissioners of the district setting forth the necessity for the improvements and the issuance of bonds, and the ordinance of the city authorizing the district to issue bonds in the sum of $ 200,000 to raise money for the improvements set forth in the resolution of the commissioners of the district and to mortgage the property of the district to secure the payment of the same, were made exhibits to the complaint.

The appellees, the district, and its commissioners filed separate answers in which they denied that they are intending to enlarge the waterworks plant, but allege that they intend only to maintain it up to the standard of efficiency required by the obligations of the mortgage and pledge to the Mercantile Trust Company. They deny that the improvements contemplated in the organization of the original district were all completed and allege that the improvements now contemplated are a necessary part of the original plant, although to some extent they increase the original plant. They deny that it is the duty of the city to make the improvements now contemplated. They deny that the borrowing of the money and the issuance of a mortgage and pledge to secure the payment of the same will incumber the property of the district illegally and unlawfully, and allege that the borrowing of the money will enable the district to fulfill its obligations to the first bondholders and keep the water plant in proper condition and up to the standard of efficiency required. They set up that, without objection of any property owner in the district, the revenues of the district had been used in part payment of the purchase money of the waterworks plant; that no installments of assessments had been made since installment No. 1; that during the time that these installments were not made, the city had collected $ 397,000, net revenues, from the waterworks system, which, with the consent of all property owners of the district, had been used for the purpose of paying the principal and interest on the purchase money bonds. It was alleged that in the mortgage and pledge of the district to the Mercantile Trust Company for the purchase money, the district obligated itself to maintain the waterworks system in good condition. It was denied that the city, under the transfer of title of the waterworks system to the district, reserved the right to use the income and revenues of the waterworks system for the payment of the purchase money, and denied that the district or the city had any right or power to waive the collection of the assessments, and alleged that the $ 397,000, revenues from the waterworks system, should have been applied to the making of improvements necessary to keep the plant in good condition and repair; that, as a result of the payment of this sum on the purchase money bonds instead of necessary repairs, it was now necessary for the city to expend approximately $ 200,000 for that purpose; that the city had no title to the waterworks plant, and, in order to raise the money to make these necessary improvements, the district would have to mortgage its plant, as the city had no title to the property.

It is averred in the answers that under act No. 158 the district has power to borrow money to make these improvements which are indispensable to the welfare of the city. It is also alleged that...