City of Little Rock v. Community Chest of Greater Little Rock

• Decision Date: 22 June 1942
• Docket Number: 4-6857
• Parties: CITY OF LITTLE ROCK v. COMMUNITY CHEST OF GREATER LITTLE ROCK
• Court: Arkansas Supreme Court

163 S.W.2d 522

204 Ark. 562

CITY OF LITTLE ROCK v. COMMUNITY CHEST OF GREATER LITTLE ROCK

4-6857

Supreme Court of Arkansas

June 22, 1942

Appeal from Pulaski Circuit Court, Second Division; Lawrence C Auten, Judge; reversed.

Judgment reversed and cause dismissed.

John Sherrill and Howard Cockrill, for appellant.

Wallace Townsend and Owens, Ehrman & McHaney, for appellee.

OPINION

MCHANEY, J.

Appellee is a benevolent corporation, caring for the sick and needy in the city, and brought this action against appellants, city of Little Rock and the board of commissioners of the Little Rock Municipal Water Works. The complaint alleged that the city owns the waterworks system and that the commissioners have full and complete authority to manage and operate the waterworks system and, under Act 288 of 1941, have authority to obligate the city by making subscriptions to appellee and to obligate the city for payment of same from the waterworks funds; that the commissioners executed a pledge for $ 1,350, which is past due, unpaid and payment refused; that all principal and interest maturities on outstanding obligations of the waterworks have been paid and all sinking fund requirements met; and that payment of the pledge could be made without impairing other outstanding obligations.

Appellants answered, first, that they are prohibited by § 5 of art. XII of the constitution of this state from appropriating public money to appellee; second, that on February 1, 1936, the city issued its trust indenture to a named trustee whereby it pledged all its income and revenue from its waterworks system to secure the payment of $ 6,590,000 of water revenue bonds, the greater part of which are still outstanding in the hands of investors; that by the terms of said trust indenture it is provided that, after setting aside sums for repairs, replacements and depreciation to cover costs of maintenance and operation, all income and other funds of the plant shall be placed in the Water Revenue Bonds Fund and used solely for the purpose of paying principal and interest upon the bonds, issued and secured by the trust indenture; that no funds derived from the waterworks are to be used for any other purpose than operation, maintenance and payment of bonds; that all bonds and interest maturities have been paid, but bonds maturing from 1943 to 1976, inclusive, are outstanding and unpaid, and appellants cannot make gifts to charity until said bonds are retired; that the laws in force at the time of the execution of the trust indenture became a part of the indenture and no subsequent act can impair same; and that Act 288 of 1941 is unconstitutional in that it contravenes § 5, art. XII, of the constitution of this state and 10, art. 1, constitution of the United States.

The case was submitted to the trial court upon stipulation as follows: "It is hereby agreed and stipulated that the trust indenture securing the bonds of the Little Rock Municipal Water Works provides in § 1 of art. III that certain rates therein set out shall be charged for water furnished by the waterworks system; that § 2 of said art. III provides, in part, as follows: '. . . provided, however, that if at any time after February 1, 1921, the moneys in the Water Revenue Bonds Fund shall equal or exceed the total amount required for making all principal and interest payments during the succeeding twelve months on account of the bonds issued under and secured by this indenture and then outstanding, such rates may be reduced by such percentage thereof that, on the basis of the average annual earnings of the waterworks system for the three fiscal years immediately preceding, such reduced rates will produce funds sufficient to provide for the payment of the bonds, both principal and interest, as the same fall due, and also sufficient to provide funds for depreciation and for operation and maintenance equal to the average annual expenditures for each of such purposes, etc.

"' . . and provided further that the minimum rates which may be charged at any time while any of the bonds issued under and secured by this indenture shall be outstanding, shall be and are hereby fixed at sixty-six and two-thirds per centum of the rates set forth in § 1 of this article.'

"It is further stipulated that in accordance with the above provisions of said trust indenture the water rates in the city of Little Rock were reduced in an average amount of approximately $ 75,000 per year, or an average rate reduction of about twelve per cent; that the gross reduction allowed under the trust indenture is 33 1/3% of the rates outstanding and in effect at the time of the execution of the trust indenture; that on March 31, 1942, the said Little Rock Municipal Water Works had on hand $ 315,055.06 in the bond reserve fund, meeting the full requirements of § 6, art III, of said trust indenture. Section 9, art. III of said trust indenture requires that a fund equivalent to a full year's operation and maintenance cost must be on hand in this fund before any money from this fund may be transferred to the depreciation fund or the Water...