Road Improvement District No. 1. v. Delinquent Lands

• Court: Arkansas Supreme Court
• Writing for the Court: MCCULLOCH, C. J.
• Citation: Road Improvement District No. 1. v. Delinquent Lands, 249 S.W. 367, 158 Ark. 58 (Ark. 1923)
• Decision Date: 02 April 1923
• Docket Number: 267
• Parties: ROAD IMPROVEMENT DISTRICT NO. 1. v. DELINQUENT LANDS

249 S.W. 367

158 Ark. 58

ROAD IMPROVEMENT DISTRICT NO. 1. v. DELINQUENT LANDS

No. 267

Supreme Court of Arkansas

April 2, 1923

Appeal from Independence Chancery Court; Lyman F. Reeder Chancellor; reversed.

Decree reversed and cause remanded.

Chas F. Cole, Rose, Hemingway, Cantrell & Loughborough, for appellant.

Even though the bonds were sold below par, contrary to the provisions of the statute, it would not affect the liability of the district to pay for the improvement made. Hitchcock v. Galveston, 96 U.S. 341; Fitzgerald v. Walker, 55 Ark. 148; Searcy v. Yarnell, 47 Ark. 269; Railroad v. Stancell, 43 Ark. 275; Book v. Polk, 81 Ark. 244; Altheimer v. Plum Bayou Levee Dist., 79 Ark. 229; Forrest City v. Bank of Forrest City, 116 Ark. 377; Houston & T. C. Ry. v Texas, 177 U.S. 67; District of Columbia v Lyon, 161 U.S. 200; Little Rock v. National Bank, 98 U.S. 308; Ft. Worth City Co. v. Smith Bridge Co., 151 U.S. 294; Richeson v. National Bank of Mena, 96 Ark. 594; Dunbar v. Cazort & McGehee Co., 96 Ark. 308. Bonds in fact were not sold below par. Arkansas Foundry Co. v. Stanley, 150 Ark. 127. A sale to the contractor would have been justified under the circumstances. Hopson v. Hellums, 111 Ark. 421. The payment to the contractor in settlement of his claim for damages was a fair compromise, and will be upheld. First National Bank v. Mena, 141 Ark. 328; Bankers' & Planters' Mutual Ins. Assn. v. Archie, 145 Ark. 481; Fair v. Beal-Burrow Dry Goods Co., 148 Ark. 340. A sale of the bonds below par in violation of the act will not vitiate bonds in the hands of innocent purchasers. 2 Dill. Mun. Corp. 1401, sec. 895 and 918, p. 1440; Woods v. Lawrence Co., 1 Black 386, 410; Richardson v. Lawrence Co., 154 U.S. 536; Mercer Co. v. Hackett, 1 Wall. 83, 96; Mayer v. Roy, 19 Wall. 468, 478; Commissioners v. Aspinwall, 21 How. 539; Cromwell v. County of Sac., 96 U.S. 31; Montpelier, etc. v. Home Board Education, 62 F. 778 Ct. App.; Citizens' Savings Bank v. Town, 65 N. E. (N. Y.) 978; St. Paul Light Co. v. Village of Sandstone, 75 N.W. 1050. Fact that selling broker split his fee with purchaser does not affect validity of bonds.

Earl C. Casey and J. A. Watkins, for appellee.

The bonds were sold for less than par, in violation of the statute, and are void. Sec. 8, p. 885, Acts 1919; Abbott's Public Securities, 492; Village of Ft. Edward v. Fish, 50 N.E. 973; State v. Delafield, 8 Paige 527; Hunt v. Fawcett, 36 Pa. 318; Wilson v. Herbert, 174 S.W. 861; Uhler v. Olympia, 151 P. 117. The court's attention is especially invited to this case, and also Spear v. Bremerton, 156 P. 825. In case of Hitchcock v. Galveston, 96 U.S. 341, relied on by appellant, and the Arkansas cases cited, decided on same principles, the suits were for the value of the work done or service rendered. Here the work was not completed. Bonds issued in violation of law can not be collected. Lindsay v. Rottaken, 32 Ark. 634; Arkansas Foundry Co. v. Stanley, 150 Ark. 127. The seller of the bonds split his fee with the purchaser, a flagrant evasion of the statute. The bond issue is invalid, and the judgment should be affirmed.

OPINION

MCCULLOCH, C. J.

This is an action instituted in the chancery court of Independence County by appellant, the board of improvement of a local improvement district created by special act of the General Assembly, to enforce payment of unpaid assessments.

It appears from the pleadings that the assessment of benefits was duly made in accordance with the terms of the statute that a tax thereon was levied to pay the cost of the improvement, that a contract was let for the construction of the improvement, that bonds were issued and sold in the sum of $ 100,000 to raise funds to pay the cost of the improvement as the work progressed, and that the improvement was completed.

Owners of lands in the district filed answer, setting up as a defense that the bonds of the district were illegally sold for less than par, in violation of the statute requiring that the bonds should not be sold for less than par, and that for this reason there should be no collection of assessments to pay the bonds.

The court overruled appellant's demurrer to this part of the answer, and there was a trial, which resulted in a decree dismissing the complaint for want of equity.

The court found from the evidence that the bonds had been sold for less than par, and decided that this rendered the bond issue void, and that there could be no recovery of assessments.

It appears from the proof adduced that the bonds were first sold to a certain bond-buyer at a price above par, but that the buyer later refused to accept the bonds, and the sale was not consummated. In the meantime there had been a depreciation in the price of bonds of this character, and they could not be sold in the market at par value. A contract had been let, and the contractor was proceeding with the work, and, in order to secure a sale of the bonds, the contractor undertook to sell the bonds for the district, and did so at a price less than par, but the district allowed the contractor a brokerage fee of five per centum on the face of the bonds, and also made certain other allowances, which, after being deducted from the face of the bonds, made it possible for a sale at a price offered by a bond dealer.

The contention is that the allowance of a brokerage fee and other items of credit to the contractor so as to effect a sale of the bonds constituted an evasion of the statute and rendered the bond sale void. This subject is fully discussed, and the law in reference thereto stated, in the recent case of Arkansas Foundry Co. v. Stanley, 150 Ark. 127, 233 S.W. 922.

There was also testimony introduced...