Griffin v. Little Red River Levee District

• Decision Date: 19 March 1923
• Docket Number: 244
• Citation: Griffin v. Little Red River Levee District, 157 Ark. 590, 249 S.W. 16 (Ark. 1923)
• Parties: GRIFFIN v. LITTLE RED RIVER LEVEE DISTRICT
• Court: Arkansas Supreme Court

249 S.W. 16

157 Ark. 590

GRIFFIN v. LITTLE RED RIVER LEVEE DISTRICT

No. 244

Supreme Court of Arkansas

March 19, 1923

Appeal from White Chancery Court; John E. Martineau, Chancellor affirmed.

Decree affirmed.

Culbert L. Pearce, Brundidge & Neeley, for appellant.

The reference in the levee and drainage bonds to the resolutions authorizing their issuance makes them a part thereof as though they were set out therein, and the negotiability of the bonds are limited thereby. The resolution sets out the exact per centum levied and to be collected each year from 1917 to 1941, and states: "This in lieu of all previous levies." After the bonds were sold the commissioners of the district twice raised the rate of taxation, which we contend they were without authority to do, notwithstanding the increased rates were within the total assessed benefits to the lands enhanced in the respective districts. 3 R. C. L 844, § 20; Ib. 1076, § 281; 19 R. C. L 989, § 286; 3 R. C. L. 870, § 54 and cases cited. 19 R. C. L. 1009, § 302; Ib. 1014, § 306. 28 Cyc 1610-1624, Municipal Bonds; 8 C. J. 196-202, Bills & Notes; 9 C. J. 47-49, Bonds. McClellan v. Norfolk Southern Ry., 18 N.E. 277. 1 L. R. A. 299; McClure v. Oxford, 94 U.S. 429, 24 L. ed. 129; National Salt Co. v. Ingraham, 122 F. 41. Notes to Klots Throwing Co. v. Manufacturers' Commercial Company, 179 F. 813; 30 L. R. A. 41. Myrick v. Purcell, 95 Minn. 113; Ann. Cases, 148; Richardson v. Thomas, 28 Ark. 387; Rector v. Strauss, 134 Ark. 374. Interest can be required paid on all unpaid portions of assessed benefits. Oliver v. Whittaker, 122 Ark. 291; Jones v. Fletcher, 132 Ark. 328.

Stephen Moore of Nashville, Tenn.; Maurice A. Wear, of Cassville, Mo., for appellees, Little Red River Dist. 2 and directors.

The board of directors of the district had authority to increase the rate of taxation. Sec. 6826 Crawford & Moses' Dig., but not in excess of assessed benefits for any purpose. Rule expressed in Oliver v. Whittaker, 122 Ark. 291; Jones v. Fletcher, 132 Ark. 328, not applicable to levee districts.

Lamb & Frierson, appellees for Mississippi Trust Company.

The commissioners of the district had authority to raise the rate of taxation to any extent short of exceeding the amount of benefits assessed against the lands. § 3617 C. & M. Dig.; Ib. 3620. Had authority also to raise rates on levee bonds. Secs. 6826, 6830 C. & M. Dig.; Hoehler v. Worthen, 243 S.W. 822. See Minden-Edison Light Company v. Minden, 142 N.W. 673. Ralls County Court v. U. S., 105 U.S. 733, 26 L. ed. 1220, 11 Rose's Notes 872; City of Little Rock v. Board of Improvement, 42 Ark. 152. The rights of bondholders are controlled by the law, not by resolution of the board. Carville v. Road Dist. 2, Craighead Co., 152 Ark. 487, 238. S.W. 777; Hoehler v. Worthen, supra. The one limitation upon amount that can be taxed as a special assessment for a local improvement is that it shall not exceed the amount of betterments. Cribbs v. Benedict, 64 Ark. 555. Hopgood v. Seattle, 125 P. 965.

Rose, Hemingway, Cantrell & Loughborough, for appellees.

Loans are not made unless there is a margin of security. Improvement districts can not borrow the full amount of the assessed benefits. The assessed benefits mark the limit of possible taxation. Kirst v. Imp. Dist. 20, 86 Ark. 2; McDonnell v. Imp. Dist. 97 Ark. 243; Withrow v. Nashville, 145 Ark. 342. Whether anticipated benefits are realized or not furnishes no escape from payment of assessments thereafter. Salmon v. Long Prairie Dist., 100 Ark. 366; Board of Directors v. Dunbar, 107 Ark. 290. Assessments of benefits in levee districts also bear interest. Sec. 3643, Crawford & Moses' Digest. Russell v. Board of Improvement, 110 Ark. 20; Young v. Red Fork Levee Dist., 124 Ark. 63; Guaranty Loan & Trust Co. v. Helena Improvement Dist., 148 Ark. 56.

Buzbee, Pugh & Harrison, for appellee Holt, receiver, Judsonia Drainage District.

County court had authority to increase rate of taxation or levy of percentage of assessed benefits. Sec. 3620, Crawford & Moses' Digest; sec. 1, act 136, Acts 1911; Act May 27, 1909. Laws under which bonds issued and providing for payment also read into bonds. 19 R. C. L. 1009, No. 302. McClure v. Oxford, 94 U.S. 429. See also Waite v. Santa Cruz, 184 U.S. 302. Resolution of board of directors does not limit provisions of § 3620, Crawford & Moses' Digest.

J. C. Counts, of Oswego, Kansas, and G. D. Henderson, amici curiae.

We contend notes or per centum of assessed benefits to be collected annually as fixed by resolutions of the board of commissioners and board of directors are not subject to be increased. Sec. 3620, Crawford & Moses' Digest, does not authorize it when properly construed. It provides for making additional levies for completing improvements or paying bonds when tax first levied proves insufficient. We find no provision in the law authorizing an increase of the rate of levy because collections inadequate. The bondholders should be required to put in operation and rely upon the machinery provided by law for enforcing collection of the assessment, and not that provided for making the assessment. Argument applies with equal force to § 6826, Crawford & Moses' Digest, also. The board could only act by resolution, and the resolutions being legislative in scope, have effect of laws. Abbott, Municipal Corporations, § 514; Mason v. City of Shawnee, 77 Ill. 533; Abbott on "Public Securities," 300-2; sec. 40 Ib. 304. Resolutions part of contract. 5 Cyc. 750. Abbott on Public Securities, 575, 509. The resolutions nowhere provide for an acceleration of the rate of taxation, and the holders took the bonds with knowledge of the resolutions and the rate of taxation therein fixed.

HUMPHREYS, J. Mr. Justice HART dissented.

OPINION

HUMPHREYS, J.

This suit was instituted in the White Chancery Court by appellants, who are taxpayers in "Little Red River Levee District Number Two," and in "Judsonia Drainage District," against the directors of said levee district and the commissioners of said drainage district, to enjoin them from raising the rates of taxation above the rate originally specified in resolutions adopted by the boards of the respective districts, and referred to in the face of the bonds issued by said boards for the construction of improvements in each district. Each district was organized under the general laws authorizing the creation of levee and drainage districts.

The board of directors of the levee district issued three installments of bonds, totaling $ 145,000, and the board of commissioners of the drainage district issued two installments of bonds, totaling $ 120,000. Reference was made in the face of the bonds to resolutions adopted by each board prior to the issue thereof, in which rates, or per centum, of the assessed benefits to be collected annually for the purpose of paying the bonds were fixed. The resolutions provided a rate in the levee district not to exceed 4.3 per centum of the assessed benefits annually from 1920 to 1935 and 2.2 per centum annually from 1936 to 1941, and a rate in the drainage district not to exceed 3.3 per centum of the assessed benefits annually from 1920 to 1923, and 3.6 per centum from 1924 to 1936, inclusive. The Mercantile Trust Company of St. Louis, Missouri, was named as trustee in the bonds, and deeds of trust were executed to it pledging the entire assessment of benefits against the lands in the respective districts to the payment of the respective obligations. Thereafter the bonds were placed upon the market and sold by the trustee to various purchasers. In 1920 the board of directors of the levee district raised the rate from 4.3 to 4.8 per centum, and in 1921 from 4.3 to 5 per centum. In 1920 and 1921 the board of commissioners of the drainage district raised the rate from 3.3 to 4.1 per centum. This acceleration in rates became necessary in order to meet the payments due upon the bonds, as the revenues derived from the original levies provided in the resolutions were insufficient to do so. The increased rates were within the total assessed benefits to the lands embraced in the respective districts. The facts thus detailed are a summary of the allegations contained in the bill of appellants. To this bill separat...