Clem v. Cooper Communities, Inc.

• Decision Date: 27 June 1972
• Docket Number: No. B-71-C-26.,B-71-C-26.
• Citation: 344 F. Supp. 579
• Parties: Warren D. CLEM et al., Plaintiffs, v. COOPER COMMUNITIES, INC., et al., Defendants. Charles S. Graves et al., Intervenors.
• Court: U.S. District Court — Eastern District of Arkansas

344 F. Supp. 579

Warren D. CLEM et al., Plaintiffs, v. COOPER COMMUNITIES, INC., et al., Defendants Charles S. Graves et al., Intervenors.

No. B-71-C-26.

United States District Court, E. D. Arkansas, N. D.

June 27, 1972.

Terry L. Mathews of Wright, Lindsey & Jennings, Little Rock, Ark., for plaintiffs.

Leon B. Catlett of Catlett & Henderson, Herschel H. Friday of Smith, Williams, Friday, Eldredge & Clark, Little Rock, Ark., John Mac Smith, West Memphis, Ark., for defendants.

J. E. Lightle, Jr. of Lightle, Tedder & Hannah, Searcy, Ark., for intervenors.

Before MATTHES, Chief Circuit Judge, HENLEY, Chief District Judge, and WILLIAMS, District Judge.

HENLEY, Chief District Judge:

Plaintiffs in this class action attack the constitutionality of Arkansas Act 41 of 1941, as amended, Ark.Stats., Ann., § 20-701 et seq., which provides for the creation and operation of suburban and rural improvement districts in Arkansas, on the ground that it is violative of the Equal Protection Clause of the Fourteenth Amendment to the Constitution of the United States. The defendants are Cooper Communities, Inc., formerly John A. Cooper Land Co., and the three Commissioners of Cherokee Village Road and Street, Recreational and Fire Department Suburban Improvement District No. 1. Plaintiffs are the owners of property within the District. Six hundred and forty-three other property owners have intervened in the case and have aligned themselves on the side of the defendants. American Civil Liberties Union of Arkansas, Inc. has been permitted to file an amicus curiae brief.

Since Act 41, including amendments, is a statute of State wide application and since plaintiffs seek to enjoin the Commissioners of the District from operating under the statute on the ground that it is unconstitutional, the case has been heard by this three judge court. 28 U.S.C.A. § 2281.¹

The constitutional claim put forward by plaintiffs, which will be stated in due course, is a serious one in the abstract. However, we are persuaded that on the record before us and for reasons to be stated plaintiffs are not entitled to any relief and we dismiss the complaint.

The District involved in this case was formed in 1969 and is co-terminous with the residential development known as Cherokee Village. Cherokee Village is an unincorporated community consisting of several thousand acres of land located in Sharp and Fulton Counties, Arkansas; the greater part of the land is in Sharp County. The development was established in 1954 by the John A. Cooper Land Co.² and is sometimes referred to as a "retirement village" since the developer's design was to sell the lots in the development to persons for use as homes after retirement.

Company subdivided the area into a great many individual lots of which about 23,000 have been sold. Most of them were sold on installment credit with legal title being retained by Company during the lives of the contracts. When a purchaser completes his payments, he receives a deed to the property. The record reflects that as of March 1, 1972, 22,948 lots had been sold, and that deeds covering 9,142 of those lots have been executed and delivered.

According to the deposition of John A. Cooper, Jr., in late April 1969 there were 1,111 dwellings in Cherokee Village of which 404 were occupied full time; the rest were occupied on a part time basis. As to the 404 dwellings that were occupied all of the time, Mr. Cooper estimated that each of those dwellings housed from two to three individuals. Doubtless, there has been additional construction in the development since 1969.

As part of the development Company constructed and paved certain streets and also constructed substantial recreational facilities including a country club and a riding stable. The initial cost of the improvements, including the recreational facilities, was passed on to lot purchasers, but Company has been maintaining the facilities at substantial cost to itself each year. Company has been maintaining the roads and streets and has provided at least some degree of police protection to residents. Company has also provided a garbage collection system and has installed a sewer system. Residents obtain their water from Quapaw Water Co., a wholly owned subsidiary of Company; they obtain electricity, gas, and telephone service from private utilities in which Company has no interest. What businesses there are in the development are owned by Company.

It is probably fair to say that John A. Cooper is the dominating figure in Company. The individual defendant, John A. Cooper, Jr., is his son, and the individual defendant, Joe Basore, is his son-in-law; both of those defendants are Company executives. The third individual defendant, Joseph Basehart, is a retired person who has no connection with Company. The three individuals just mentioned own property in Cherokee Village and collectively make up the Board of Commissioners of the District and have full control of its affairs.

The District was created by order of the Circuit Court of Sharp County in the summer of 1969 for the purposes of building and maintaining roads and streets, taking over, maintaining and operating the recreational facilities that have been mentioned, and providing fire protection for residents. As far as the recreational facilities are concerned, Company proposes to donate them to the District, and the Commissioners propose to accept the donation and maintain and operate the facilities by means of funds derived from assessments against all of the lots located in the District, including unsold lots still belonging to Company. There is no question that the objects of the District are authorized by Act 41, and there is no question that the Commission is proceeding or is about to proceed unless enjoined in the manner authorized by the Arkansas statutes.

In accordance with the statute the Commissioners were appointed by the Circuit Court. They have no fixed terms and can be removed only upon the petition of persons owning property in the District representing more than two-thirds of the assessed valuation of all of the land in the District. If a vacancy occurs on the Board of Commissioners, it is filled by the remaining Commissioners. Subject to certain restrictions in the statutes, the Commissioners have broad fiscal and managerial powers with respect to the District, its affairs, and property.

Plaintiffs commenced this action originally for the limited purpose of restraining the Commissioners from accepting Company's proposed donation of the recreational facilities and thereafter maintaining and operating them by means of assessments against lots of Cherokee Village. However, the final position assumed by plaintiffs is that Act 41 itself is unconstitutional as being violative of the Equal Protection Clause, and they now seek an adjudication to that effect and an injunction restraining the Commissioners from taking any official action whatever under that Act.

The Equal Protection argument of plaintiffs may be summarized substantially as follows: Cherokee Village is a "de facto city," and the powers vested in the appointed Commissioners by the statutes are actually governmental powers usually exercised in incorporated cities and towns by elected officials. In such circumstances the Equal Protection Clause requires that the Commissioners be chosen originally by a conventional elective process incorporating the one man, one vote principle, and that thereafter they be subject periodically to the judgment of the electors as to whether they should continue in office. The plaintiffs contend that the system established by Act 41 unconstitutionally discriminates against "small landowners" in the District; they also contend that the statutory scheme discriminates against all inhabitants of an Act 41 district in that they are governed by appointed officials whereas inhabitants of regularly incorporated cities and towns are governed by persons elected by popular vote. As to this particular District plaintiffs argue that in view of the relationship between Messrs. Cooper and Basore, on the one hand, and Company, on the other hand, the District is but the alter ego of Company, and that Company will remain in effective control of the District even after all of the lots in Cherokee Village have been sold. Plaintiffs are supported in their position by the amicus.

The defendants and intervenors deny that plaintiffs' constitutional claims have merit, they also contend that the constitutional claim of plaintiffs could have been put forward in litigation in the State courts of Arkansas which culminated in the decision of the Arkansas Supreme Court in Cherokee Village Homeowners Protective Association v. Cherokee Village Road and Street Improvement District No. 1, 1970, 248 Ark. 1055, 455 S.W.2d 93,³ and they plead that decision as res judicata here. We find it convenient to consider that plea first.

It is fairly inferable that the continued maintenance and operation of the recreational facilities in Cherokee Village is vital to the maintenance of property values there, but when the development was first established in 1954 no provision was made for maintenance and operation after all of the lots should be sold. While the facilities themselves produce some income, they have been operated with substantial deficits every year which deficits have been made up by Company. However, at least as far as the present record shows, Company is not under any obligation to lot purchasers to continue to maintain them and will have no financial interest in doing so after it finally disposes of all or substantially all of its lots. The problem of the facilities has been recognized for a number of years by Company and by lot owners, and by about 1967 it had been determined that the best way to solve the problem would be to form an Act 41 district and turn the improvements over to it.

As of that time Act 41 was not broad enough to authorize a...