OPINION
SMITH, J.
Appellants, who are citizens and taxpayers of Washington
County, filed a complaint on October 7, 1931, in which they
alleged that on July 6, 1931, a day of the July, 1931, term
of the county court, there was entered upon the records of
that court the following order:
"NOTICE
"The
Washington County Court, July term, 1931, first day, July 6,
1931, in the matter of the debt of Washington County,
Arkansas, due December 7, 1924.
"Declaration
of indebtedness and order.
"This,
the Washington County Court, having made a thorough
examination and investigation of the indebtedness of
Washington County, Arkansas, existing on the 7th day of
December, 1924, being the day when amendment No. 11 to the
Constitution of the State of Arkansas was adopted and became
effective, finds and declares that the indebtedness of
Washington County existing on the 7th day of December, 1924,
amounted to the sum of $ 65,000, still exists, is still
outstanding, and on this date remains unpaid.
"The
clerk of this court is directed to publish for one insertion,
in some newspaper having a bona fide circulation in
the county, a copy of this order, to the end that any person
who desires to question the correctness of the finding here
made may bring suit for that purpose within thirty days after
such publication.
"Done
and ordered in open court, this the 6th day of July, 1931.
"J.
Lona Slaughter, Judge."
A copy of this order, duly certified by the clerk
of the county court, was published in
a weekly newspaper published in that county on July 6, 1931,
and on August 10, 1931, bonds were issued in the name of
Washington County in the sum of $ 65,000, and sold for that
amount.
On the
date of the issuance and sale and delivery of these bonds,
the following order was made and entered of record in the
county court:
"Washington
County Court, July term, 1931, August 10, 1931. In the matter
of the transfer of surplus funds in the bond account to the
county general account.
"Now
on this, the 10th day of August, 1931, comes on to be heard
the matter of transferring funds from the bond account to the
county general account, and the county treasurer, Chas. S.
Stearns, being present in person, and, upon the evidence
adduced at the hearing, the court finds:
"That
on August 10, 1931, a bond issue was made for Washington
County, Arkansas, in the sum of $ 65,000, and that on the
10th of August, 1931, the treasurer of said county received
the proceeds of said bond issue in the sum of $ 65,000; and
the court further finds that the purpose of said bond issue
was to pay off the indebtedness of said county as of date
December 7, 1924, and that warrants issued and then existing
for said indebtedness have heretofore been paid by the
treasurer of said county out of the general funds belonging
to said county, and that there is now a surplus in the bond
account in the sum of $ 65,000, and that there is now no
outstanding warrants against said account, and that by virtue
of the authority of act No. 30, of the Acts of the General
Assembly for the State of Arkansas, in the year 1927, and
under the law, said bond account should be transferred to the
county general account and the county reimbursed.
"That
the warrants drawn on the following funds are payable out of
the county general account, county general, pauper, jail and
inquisition, justice of the peace and circuit court funds.
"Therefore it is considered, ordered and
adjudged by the court that the sum of $ 65,000, together with
the interest on daily balances on said amount since the 10th
day of August, 1931, be and the same is hereby transferred,
and the county treasurer is hereby ordered to transfer on his
books said amount from the bond account to the county general
account and pay warrants drawn on the above named funds out
of the county general account.
"J.
Lona Slaughter, Judge."
It was
alleged by the citizens and taxpayers in their complaint that
this order of July 6, 1931, was false and fraudulent, in that
there was no indebtedness then outstanding of the county
which had been incurred prior to December 7, 1924. It was
prayed that the court appoint a master to inquire into and
report upon the state of the county's finances, and that
the order of the county court be held to be illegal,
fraudulent and void, and that the county treasurer be
enjoined from paying any of said bonds.
A
demurrer was filed alleging five grounds therefor, and the
court sustained the 3d, 4th and 5th grounds. The demurrer
reads as follows:
"Come
now the defendants in the above entitled action and demur to
the complaint as amended of the plaintiffs in said action
upon the following grounds:
"1st.
That the court has no jurisdiction of the persons of the
defendants or of the subject-matter of the action.
"2d.
That there is a defect of parties defendant.
"3d.
That the complaint does not state facts sufficient to
constitute a cause of action.
"4th.
That the complaint shows upon its face that the cause of
action attempted to be stated by the complaint as amended is
barred by the statute of limitations.
"5th.
That the complaint shows upon its face that the alleged cause
of action attempted to be stated therein has been adjudicated
by the county court of Washington County, Arkansas."
From the decree of the court sustaining the
demurrer to the complaint upon the grounds above stated is
this appeal.
This
appeal challenges the validity of the bonds issued and sold
on August 10, 1931, pursuant to the order of the court made
and entered on July 6, 1931.
In
making the order of July 6, 1931, the court acted under the
authority of the amendment to the Constitution adopted at the
general election held in 1924, and which has frequently been
referred to as amendment No. 11. Owing to the confusion
arising from the fact that certain amendments to the
Constitution had been numbered in the order of their
submission, rather than in the order of their adoption, the
Secretary of State has compiled a list of the amendments now
in force, and this list, as thus compiled, has been published
in vol. 184 of the reports of this court, pages XIX, et
seq., and the amendment heretofore frequently referred
to as No. 11 has been given No. X, and we employ that number
in referring to it.
It was
held in the case of Matheny v. Independence
County, 169 Ark. 925, 277 S.W. 22, that amendment No. X
(there referred to as amendment No. XI) became effective
December 7, 1924, and that it was self-executing, even
without an enabling act.
By this
amendment to the Constitution, the counties of the State (as
well as cities and incorporated towns) were given authority *
* * "to secure funds to pay indebtedness
outstanding at the time of the adoption of this amendment, *
* *" by issuing interest-bearing certificates of
indebtedness or bonds, for the payment of which authority was
conferred to levy a tax, in addition to the taxes theretofore
authorized, not exceeding three mills, and to levy and
collect such tax until such indebtedness was paid.
At the
ensuing session of the General Assembly an enabling act was
passed, entitled, "An Act to Facilitate the Funding of
the Debts of Counties, Cities and Incorporated
Towns." Act 210, Acts of 1925, page 608. Section 1 of
this act provides as follows:
"Before
the issue of any county or city bonds under this act, the
county court shall, by order entered upon its records,
declare the total amount of such indebtedness or the city or
town council shall by ordinance declare the total amount of
such indebtedness. Such order of the county court shall be
published immediately for one insertion in some newspaper
published in the county, and such ordinances of the city or
town council shall be immediately published in some newspaper
issued in such city or town, if there be one, and, if not, in
some newspaper published in the county; and any property
owner who is dissatisfied may, by suit in the chancery court
of the county, brought within thirty days after the
publication of such order or ordinance, have a review of the
correctness of the finding made in such order or ordinance;
but if no such suit is brought within thirty days, such
finding shall be conclusive of the total amount of such
indebtedness, and not open to further attack, and if said
suit is brought the adjudication shall settle the question,
and appeal therefrom must be taken and perfected within
thirty days. If any officer of such county, city or town
shall wilfully make any false statement as to the amount of
its indebtedness, he shall forfeit his office and be
ineligible to hold any other office of profit or trust in
this State."
Other
sections of the statute provide that the bonds thus
authorized to be issued shall be negotiable coupon bonds,
payable serially, through a period not exceeding forty years,
and shall bear interest at a rate not exceeding six per
cent.; that the bonds shall not be sold at less than par, but
with the privilege of converting into bonds bearing a lower
rate of interest, and for the levy of a tax to pay the bonds.
A
penalty is prescribed against any officer who shall include
in the debt to be funded any debts which were not due in good
faith at the time of the adoption of the
amendment, and the fiscal year is made coincident with the
calendar year.
These
provisions are not here involved and need not be enlarged
upon.
It will
be observed that, under § 1 of the act of 1925, copied
above,...
