Greer v. Blocker

• Decision Date: 22 January 1951
• Docket Number: No. 4-9336,4-9336
• Citation: Greer v. Blocker, 218 Ark. 259, 236 S.W.2d 68 (Ark. 1951)
• Parties: GREER et al. v. BROCKER et al.
• Court: Arkansas Supreme Court

Page 68

236 S.W.2d 68

218 Ark. 259

GREER et al. v.BROCKER et al.

No. 4-9336.

Supreme Court of Arkansas.

Jan. 22, 1951.

A. F. Triplett, Pine Bluff, A. F. House, Little Rock, for appellant.

Quinn & Williams, Texarkana, Atchley & Vance, Texarkana, Tex., and Shaver, Stewart & Jones, Texarkana, for appellee.

McFADDIN, Justice.

This litigation is an effort by bondholders of a drainage district to collect unpaid bonds and interest.McKinney Bayou Drainage District of Miller County, containing approximately 31,893 acres, was organized by order of the County Court on May 4, 1923, under the provisions of the General Drainage Law, as now found in Sec. 21-501 et seq., Ark.Stats.The assessment of benefits, totaling $1,045,246.00 ¹ was confirmed by order of the County Court on August 21, 1923.

The cost of the improvement, as reflected by the records of the District, was $450,000.00.To pay such cost the Commissioners of the District, at a meeting on January 14, 1924, adopted a resolution ² for the issuance of bonds totaling $450,000.00, to be dated January 1, 1924, and bear interest at 5 1/2 per cent. per annum, with interest payable semi-annually, and the first bond to be due August 1, 1928 and the others serially annually thereafter.Accordingly, on January 14, 1924, the County Court of Miller County duly entered an order levying and assessing a tax of $943,274.75 on the benefits, to pay the bond issue and interest thereon: the Court order reading in part: 'It is further considered, ordered and adjudged that the said tax hereinbefore assessed shall be divided into installments, and that the said installments shall be due and payable as follows: For the year 1924 Five and Forty-Three Hundreths (5.43%) per centum of the assessed benefits, producing for the said year 1924 the sum of Fifty-Six Thousand Seven Hundred Fifty-Six and 85/100 Dollars ($56,756.85); for each of the years 1925 and 1926 Two and Six-Tenths (2.6%) per centum of the assessed benefits, producing for each of said years 1925 and 1926 the sum of Twenty-Seven Thousand, One Hundred Seventy-Six and 39/100 Dollars ($27,176.39); and for each of the years 1927 to 1948 inclusive, Three and Seventy-Six Hundredths (3.76%) per centum of the assessed benefits producing for each of said years the sum of Thirty-Nine Thousand, Three Hundred One and 25/100 Dollars ($39,301.25); which collections shall be credited first upon the interest accruing upon the said levy.'

It will be observed that this Court order levied a tax of $943,274.75 which was 93.35 per cent. of the total assessed benefits of $1,045,246.00.If every property holder had paid the annual installment when due, $943,274.75 would have been collected by 1948; and such amount, as calculated in 1924, would have been sufficient:

(a) to pay the 5 1/2 per cent. interest promptly when due on each outstanding bond;

(b) to pay the $450,000.00 bonds promptly as due; and

(c) to provide 10 per cent. of the total of said bonds and interest for unforeseen contingencies.The bonds and interest were secured by pledge or mortgage to the Trustee of '* * * all uncollected assessments levied by the County Court upon the real property, public roads, railroads and tramroads in said District, together with all assessments that may hereafter be levied thereon, * * *.'

On August 6, 1928(five days after the maturity of BondNo. 1 of the District) the Commissioners of the McKinney Bayou Drainage District filed a petition in the Miller Chancery Court, praying that a Receiver be appointed for the District in order to prevent a multiplicity of suits by the Bondholders.The petition alleged, inter alia, that the District should have collected by August 1, 1928 a total of $150,410.88, but in fact had collected only $119,748.43; that due to delinquencies in collection the District was unable to meet its maturing bonds, and interest.C. M. Blocker was appointed Receiver of the District on August 7, 1928 and took charge of the drainage system and all assets of the District, and has continued as such Receiver up to this date.

During the entire course of the receivership annual reports have been rendered, listing all items of receipts and disbursements, and the total of outstanding and unpaid bonds and interest.As to the correctness of the figures in these annual reports, no question is presented.Each such report was approved by the Chancery Court without objection, save the one filed for the annual period ending July 31, 1949.³In that report the Receiver stated: that under the County Court order of January 14, 1924, taxes were to be collected through 1948; that he had so collected the taxes and some property holders had paid in full the entire twenty-five annual installments; that other property holders had defaulted and the District held title to approximately 13,000 acres of land purchased at the foreclosure sales for delinquent assessments; that there were no more taxes to be collected under the 1924 levying order; that he had only $18,282.47 on hand in cash, together with the title to 13,000 acres of land, and the unforeclosed delinquencies for 1947 and 1948 assessments; ⁴ and that the unpaid bonds of the District are $175,772.08 and the unpaid interest on the bonds is $132,380.00, making a total of unpaid bonds and interest of $308,152.08.The Receiver asked directions of the Chancery Court and, in effect, sought permission to be allowed to distribute the lands and the money on hand to the Bondholders pro rata, and thereby close the receivership and liquidate the District.The 1949 report precipitated this litigation.

The Trustee⁵ for the Bondholders, together with parties holding the greater portion of all the outstanding bonds, filed pleadings in the Chancery Court, naming as defendants the Receiver, Blocker, and also ten Landowners in the District as a group to represent and defend for all the Landowners.⁶The pleadings of the Trustee and the Bondholders alleged: that all the assessed benefits had not been levied--i. e., only 93.35 per cent. had been levied by the County Court order; that the assessment of benefits bore interest, as provided by Act 177 of 1913 and Act 467 of 1919; that the Chancery Court should direct the Receiver to apply to the County Court for a levying order on the balance of the unused benefits and on the interest of the benefits; and that the Receiver, from collections so made, should pay the outstanding bonds and interest thereon.

The Receiver, by his answer, presented these issues:

(1)--that either by cash, or by taking of property, he had collected all the twenty-five annual installments of tax that had been levied and the power to tax had been exhausted; and

(2)--that interest on the benefits was calculated and included in the assessed benefits and cannot be again collected.

The defendant Landowners adopted the Receiver's defenses and also presented these additional issues:

(3)--that 6.65 per cent. of the original assessed benefits is all that could possibly remain due on the assessed benefits on any tract of land;

(4)--that the Bondholders' right to recover on bonds and interest is limited (by Sec. 37-209, Ark.Stats.) to those bonds which became due within five years before the filing of the Bondholders' petition in this case(which date was November 2, 1949);

(5)--that the right to collect any deferred installment of interest on the benefits is limited (by Sec. 20-1128, Ark.Stats.) to the interest due within three years before the filing of suit therefor; and

(6)--that 'the Receiver * * * holds * * * more than 10,000 acres of land * * * bought * * * in at foreclosure * * * for delinquent taxes * * * and said lands should be ordered sold * * * prior * * * to any additional levy of taxes * * *'.

A trial in the Chancery Court resulted in an opinion by the Chancellor, stating in part: '* * * that in the place of asking for an additional levy which would result in another forfeiture of the 13,000 acres of land and an additional debt to be later retaxed, * * * it is the duty of the bondholders to take the assets of the District and take such remedy as they desire or may be entitled to under the law to dispose of the assets and pay their debt.'

The decree of the Chancery Court, pursuant to the foregoing opinion, dismissed the pleadings of the Trustee and the Bondholders; and they have appealed, being here styled appellants.The Receiver, Blocker, and the Landowners are here styled appellees.Each of the said six issues, made by the pleadings of the Receiver and the Landowners, is presented here; and we will discuss and decide such of the issues as require decision at this time.

I.Appellees' Claim: 'Power to Tax is Exhausted'.This is the Receiver's first issue.The appellees quote Sec. 21-542, Ark.Stats.: 'The county court shall * * * enter * * * an order * * *, providing that there shall be assessed upon the real property of the district a tax sufficient to pay the estimated cost of the improvement, with ten (10) per cent added for unforeseen contingencies; * * *.' and urge that the italicized language fixes the maximum of tax liability.Appellees claim: that the proceeds of the $450,000.00 bond issue went to pay the cost of the improvement; that the full amount of interest on that bond issue (as calculated at the time of the levying order) was $407,522.50, making a total of bond issue and interest of $857,522.50; that the 10 per cent. of the last mentioned figure is $85.752.25; and that the bond issue, together with interest to pay all bonds at maturity thereof, and also with the 10 per cent. added for unforeseen contingencies, was thus $943,274.75.This last named figure--say the appellees--is the maximum figure which the law--i. e., Sec. 21-542, Ark.Stats., as quoted--allows to be collected for the improvement.Therefore, the appellees most earnestly urge that when the County Court order of January 14, 1924 levied a tax of $943,274.75 on the assessed benefits, such...