Memphis Trust Co. v. Board of Directors of St. Francis Levee District

• Decision Date: 27 April 1901
• Citation: 62 S.W. 902,69 Ark. 284
• Parties: MEMPHIS TRUST COMPANY v. BOARD OF DIRECTORS OF ST. FRANCIS LEVEE DISTRICT
• Court: Arkansas Supreme Court

62 S.W. 902

69 Ark. 284

MEMPHIS TRUST COMPANY v. BOARD OF DIRECTORS OF ST. FRANCIS LEVEE DISTRICT

Supreme Court of Arkansas

April 27, 1901

Appeal from Pulaski Circuit Court, JOSEPH W. MARTIN, Judge.

STATEMENT BY THE COURT.

The legislature of Arkansas in 1897 passed an act authorizing the Board of Directors of the St. Francis Levee District to issue bonds for the purpose of building and maintaining certain levees in said district. Afterwards the board of directors made a contract with the Memphis Trust Company, a corporation organized under the laws of Tennessee, whereby the Trust Company agreed to purchase of the board bonds to the amount of $ 10,000, and pay therefor par value with accrued interest. The contract to purchase was made on condition that the bonds were "valid obligations of the board of directors of the St. Francis Levee District." The Trust Company on investigation declined to take the bonds, on the ground that they were not valid. The board of directors tendered the bonds, and brought this action on the contract to recover their face value with interest. The Trust Company filed its answer, alleging in substance that the Board of Directors of the St. Francis Levee District is a municipality, and as such prohibited by the constitution of the state from issuing bonds or other interest-bearing evidences of indebtedness, and that for this reason the bonds offered by it were invalid, and not binding upon the board or district. The board filed a demurrer to this answer. On the hearing the circuit court sustained the demurrer, and, the Trust Company declining to amend, but standing on its answer the court gave judgment against it for $ 10,935, that sum being the face value of the bonds with accrued interest. The Trust Company appealed.

Judgment affirmed.

John H Watkins, for appellant.

The board of directors in this ease was a "municipality," within the meaning of art. 16 § 1, of the constitution of Arkansas, and the bonds are invalid. And. Law Dict. "Municipality." Cf. 55 Ark. 148.

R. J. Williams and Norton & Prewett, for appellees.

The board of directors in this case was not a municipality, because it exercises none of the usual functions thereof. It is merely the agent of the property owners, exercising powers delegated to it by the legislature; and hence the bond issue is valid. 55 Ark. 148; S. C. 17 S.W. 702; 48 S.W. 629, 635.

OPINION

RIDDICK, J., (after stating the facts).

The only question presented by this appeal is whether the "St. Francis Levee District," or "the Board of Directors" thereof, is a "municipality," within the meaning of the provision of our constitution which prohibits a municipality from issuing interest-bearing bonds. The provision referred to declares that "neither the state nor any city, county, town or other municipality in this state shall ever loan its credit for any purpose whatever; nor shall any county, city, town or municipality ever issue any interest-bearing evidences of indebtedness," except to provide for the payment of existing indebtedness. Const. Ark. art. 16, § 1.

Counsel for appellant contends that the board of directors of the St. Francis Levee District is a municipality, and therefore, under the language of the constitution quoted, has no power to issue interest-bearing bonds. But the well-established legal meaning of the term "municipality" is a public corporation created for governmental purposes, and having local powers of legislation and self-government,--such, for instance, as an incorporated town or city. Rapalje & Lawrence's Law Dict.; Andersons Law Diet.; Century Dict.; Heller v. Stremmel, 52 Mo. 309.

Now while every municipality is a public corporation, yet every public corporation is not a municipality, for, as defined above, a municipality is not only a public corporation; it is such a corporation created for governmental purposes, and having, to a large extent, local powers...