Morton v. DARDANELLE SPECIAL SCHOOL DIST. NO. 15

• Citation: 121 F.2d 423
• Decision Date: 30 June 1941
• Docket Number: No. 11793.,11793.
• Parties: MORTON et al. v. DARDANELLE SPECIAL SCHOOL DIST. NO. 15 OF YELL COUNTY, ARK., et al.
• Court: U.S. Court of Appeals — Eighth Circuit

121 F.2d 423 (1941)

MORTON et al. v. DARDANELLE SPECIAL SCHOOL DIST. NO. 15 OF YELL COUNTY, ARK., et al.

No. 11793.

Circuit Court of Appeals, Eighth Circuit.

June 30, 1941.

James B. McDonough, of Fort Smith, Ark., and S. L. White, of Little Rock, Ark. (House, Moses & Holmes, of Little Rock, Ark., on the brief), for appellants.

Wallace Townsend and Lee Cazort, Jr., both of Little Rock, Ark., for appellees.

Before SANBORN, WOODROUGH, and JOHNSEN, Circuit Judges.

JOHNSEN, Circuit Judge.

The question for decision is whether, under the law of Arkansas, a pledge of the general tax revenues of an urban special school district, made by the school board in some bonds and a deed of trust issued in 1926 for building purposes, is valid and enforcible. The trial court held that the pledge was void, and the trustee for the bondholders has appealed.¹

We agree with the decision of the trial court. We have previously expressed ourselves upon the general proposition involved, in Women's Catholic Order of Foresters v. Special School District of North Little Rock, 8 Cir., 105 F.2d 716. The statute now before us (Act 248 of 1905, as amended by Act 160 of 1917, Crawford & Moses Dig.Ark. §§ 8977, 8978, 9010) is practically identical with the one involved in that case. We there held that, under the decisions of the Supreme Court of Arkansas, in Schmutz v. Special School District of Little Rock, 1906, 78 Ark. 118, 95 S.W. 438; American Exchange Trust Co. v. Truman Special School District, 1931, 183 Ark. 1041, 40 S.W.2d 770; Horne v. Paragould Special School District, 1933, 186 Ark. 1000, 57 S.W.2d 568, and Pledger v. Cutrell, 1934, 189 Ark. 562, 74 S.W.2d 646, 75 S.W.2d 76, the authority of the board of directors of an urban special school district, under the statutes involved, to issue bonds on behalf of the district without a vote of its electors, did not include the power to pledge the general tax revenues of the district, and that an attempt by the board to create a lien upon any part of such revenues was void. Except as to the lien existing under the deed of trust upon the school building itself, the bondholders in this case are therefore, as declared in our previous decision (page 720 of 105 F.2d), "in effect left * * * in the position of common creditors of the district."

The Women's Catholic Order of Foresters case disposes of all the contentions here, except the claimed violation of the contract clause (Const. Art. 1, § 10) and the due process clause (14th Amend. It is argued that Schmutz v. Special School District of Little Rock, supra, in effect recognized the right of the school board of an urban special school district to pledge the tax revenues of the district, and that the subsequent decisions of the Supreme Court of Arkansas, made since these bonds were issued, have changed the rule of the Schmutz case, to the bondholders' prejudice. With this construction, we do not agree. We think, as indicated in the Women's Catholic Order of Foresters case (page 720 of 105 F.2d), that the later decisions have attempted rather to clarify the ambiguities of the Schmutz opinion, than to change its rule. But, even if the court had changed its previous statutory construction, this would not have constituted a violation of the contract and due process clauses of the Federal Constitution. The prohibition against impairing the obligation of contracts has no application to mere changes in judicial decisions. People's Banking Co. v. Sterling, 300 U.S. 175, 57 S.Ct. 386, 81 L. Ed. 586; Tidal Oil Co. v. Flanagan, 263 U.S. 444, 44 S.Ct. 197, 68 L.Ed. 382; 12 Am.Jur. 26, § 398.

It is further contended that the contract obligation of the 1926 bonds was impaired by the subsequent adoption of Amendment No. 11 to the Constitution of Arkansas. Art. 14, § 3, of the Constitution of 1874, as amended in 1917, which was in effect at the time the bonds were issued, contained the following provision: "Provided, the General Assembly may by general law authorize school districts to levy by a vote of the qualified electors of such districts a tax not to exceed twelve mills on the dollar in any one year for school purposes. Provided, further, that no such tax shall be appropriated for any other purpose nor to any other district than that for which it was levied." (Italics added). Amendment No. 11, adopted in 1926, after the issuance of the bonds, changed the first proviso in Art. 14, § 3, supra, to read as follows: "Provided, that the General Assembly may, by general law, authorize school districts to levy by a vote of the qualified electors of such districts a tax not to exceed eighteen mills on the dollar in any one year for the maintenance of schools, the erection and equipment of school buildings and the retirement of existing indebtedness for buildings." (Italics added). The proviso that no tax could be appropriated to any other purpose than that for which it was levied remained unchanged.

Adapting the argument to the views which we have expressed above, its purport is that Amendment No. 11 restricted the power and ability of the board of directors to make...