Ferris v. Stewart

• Decision Date: 20 May 1940
• Docket Number: No. 4-6038.,4-6038.
• Citation: 140 S.W.2d 431
• Parties: FERRIS v. STEWART, County Judge.
• Court: Arkansas Supreme Court

140 S.W.2d 431

FERRIS v. STEWART, County Judge.

No. 4-6038.

Supreme Court of Arkansas.

May 20, 1940.

Appeal from Sharp Chancery Court, Northern District; A. S. Irby, Chancellor.

Suit by Walter Ferris against Lester Stewart, county judge, to enjoin issuance of refunding bonds to cover defaulted county bonds and other indebtedness. From a decree dismissing the petition and complaint as being without equity, complainant appeals.

Affirmed.

Sidney A. Kelley, of Hardy, for appellant.

Shelby C. Ferguson, of Ash Flat, for appellee.

FRANK G. SMITH, Justice.

Pursuant to the power conferred by amendment No. 10 to the constitution, the county court of Sharp county made, on July 20, 1925, an order to fund its outstanding indebtedness. The apprehension appears to have been rather general that the amendment became effective on October 7, 1924, the date of the election at which the amendment was submitted to the electors of the state. It was later held, in the case of Matheny v. Independence County, 169 Ark. 925, 277 S.W. 22, that the amendment became effective, not on October 7, the date of the election, but on December 7, 1924.

Proceeding under the apprehension that the amendment became effective October 7, the county court of Sharp county caused an audit to be made of the county's fiscal affairs, which showed the outstanding indebtedness of the county as of that date to be $20,000, and upon this finding bonds were issued in the sum of $20,000. The amendment provided that to secure the payment of such bonds a general tax of 3 mills on the dollar of assessed values might be levied, and continued until the bonds so issued had been paid, both principal and interest. Serial bonds were issued, the first to mature February 1, 1927, being for $500. There were maturities of $2,500 on February 1, 1937, and maturities for the same amount on February 1, 1940, these being the last maturities. A levy of 2 mills only was thought sufficient to mature these bonds, and only that number of mills was or has ever been levied. This levy proved sufficient to pay maturities, with interest, until February 1, 1937, when default was made. A second default occurred February 1, 1940, so that $5,000 worth of the bonds remain unpaid and are now in default.

It is now proposed to refund these defaulted bonds and to extend the maturity dates thereof. The right to do so presents no serious question. It was expressly held, in the case of Talkington v. Turnbow, 190 Ark. 1138, 83 S.W.2d 71, that the power to issue bonds in the first instance includes the power to refund them, provided the refunding bonds do not increase the amount of the outstanding bonds or the rate of interest. Pope county had issued bonds under the authority of amendment No. 10, and it was held in the case just cited that the county had the authority to refund these bonds under amendment No. 10 and the enabling act 210 of the Acts of 1925, p. 608, which was "An Act to Facilitate the Funding of the Debts of Counties, Cities and Incorporated Towns."

It is true Sharp county has heretofore levied only 2 mills against the assessed values of the county to redeem these bonds; but that fact has not exhausted, indeed, has not affected, the power and the duty of the county to pay these bonds. The county, not only has the power, but is under the duty, to levy the entire 3 mills, if necessary, to retire these bonds.

In the case of Missouri Pacific Railroad Co. v. Fish, 181 Ark. 863, 28 S.W.2d 333, it was sought to enjoin the county from levying a 3-mill tax, upon the ground that a rate this high was not required to retire the bonds issued under the authority of amendment No. 10. It was held that the rate to be levied was a matter within the discretion of the levying court, and that the question could only be raised before the levying court when the rate was fixed; but that it was always the duty, and the county court could be compelled to levy such rate as was necessary to pay the bonds, not exceeding 3 mills on the dollar, citing Stranahan, Harris & Oatis, Inc., v. Van Buren County, 175 Ark. 678, 300 S.W. 382.

Refunding of the defaulted bonds is not, however, all Sharp county is proposing to do. The county court found that between October 7 and December 7, 1924, the county incurred indebtedness of $5,117.59, which had not been funded into bonds and is still outstanding, and it is proposed that the new issue shall cover this sum as well also as the amount of the bonds in default, and to service the payment of the new bonds by a tax levy of 3 mills on the dollar. The petition and complaint of a...