Walton v. Arkansas Const. Commission

• Citation: 80 S.W.2d 927
• Decision Date: 01 April 1935
• Docket Number: No. 4-3914.,4-3914.
• Parties: WALTON v. ARKANSAS CONST. COMMISSION.
• Court: Supreme Court of Arkansas

Page 927

80 S.W.2d 927

WALTON v. ARKANSAS CONST. COMMISSION.

No. 4-3914.

Supreme Court of Arkansas.

April 1, 1935.

Appeal from Pulaski Chancery Court; Frank H. Dodge, Chancellor.

Suit by Fred W. Walton against the Arkansas Construction Commission. From a judgment for defendant, plaintiff appeals.

Affirmed.

Sam Rorex, of Little Rock, for appellant.

Rose, Hemingway, Cantrell & Loughborough, of Little Rock, for appellee.

BAKER, Justice.

Amendment No. 20 of the Constitution was adopted November 6, 1934 at the general election. It is as follows: "Except for the purpose of refunding the existing outstanding indebtedness of the State and for assuming and refunding valid outstanding road improvement district bonds, the State of Arkansas shall issue no bonds or other evidence of indebtedness, pledging the faith and credit of the State or any of its revenues for any purpose whatsoever, except by and with the consent of the majority of the qualified electors of the State voting on the question at a general election or at a special election called for that purpose."

The plaintiff in this suit invoked the said amendment to prevent the delivery of bonds issued by the state of Arkansas in the sum of $1,327,000 to complete the State Hospital for Nervous Diseases near Benton. The appellee is the Arkansas Construction Commission, having the power and duty of the construction of said hospital.

These bonds were sold by the state to the Public Works Administration in July, 1934. They were duly lithographed, signed by the Governor, the treasurer of the state, and the chairman of the Arkansas construction commission, and duly attested by the secretary of the state, and the great seal of the state was affixed.

After the aforesaid bonds had been duly signed as aforesaid, they were registered by the state auditor, as provided by section 14 of Act No. 180, p. 891, of the Acts of 1929. The sale so made by the Arkansas construction commission to the Public Works Administration was in conformity to a contract, dated April 24, 1934, under which agreement Public Works Administration contracted to pay par for the bonds, and contemplated that, in addition to proceeds arising from the sale of said bonds, a grant to be made of approximately 30 per cent. of the costs of the completion of the work, which 30 per cent. would amount to approximately $440,000. Act 4, approved April 18, 1934, expressly authorized the sale of the bonds to the United States or to any of the governmental agencies.

Before the actual sale to the Public Works Administration, and in accordance with a request made by the Public Works Administration, the bonds were duly advertised for sale, but no bid was received therefor.

It was contracted and agreed that delivery of the bonds would be made in installments, or blocks, as the money might be needed by the construction commission, whereby interest would be saved to the state.

Immediately after the sale of the bonds to the Public Works Administration was definitely closed, in accordance with the contract previously entered into, the construction commission entered into contracts for the completion of the hospital. These contracts so entered into at that time involved the expenditure of not only the amount of the bond issue, but a considerable sum in addition, in all aggregating approximately $1,444,000. These contracts had been duly authorized and were valid outstanding contracts of the state at the time of the adoption of said Amendment No. 20. In accordance with the aforesaid contracts so entered into by the construction commission, approximately $400,000 worth of material had been bought and actual work had been done at the time of the adoption of Amendment No. 20, and the state had been furnished or supplied with $264,000 by the Public Works Administration, in payment upon the bonds aforesaid, and early in December, 1934, the P. W. A. approved for payment requisitions amounting to $214,000. A large portion of the work has been done toward the completion of the buildings for the hospital, but such buildings have not approached a degree of completion so that they may be used at this time. Much more work is necessary for the completion of the hospital before it can be occupied or used by the state.

After the execution of the aforesaid bonds, as hereinbefore stated, and after the registry by the state auditor, as required by law, the bonds were placed as if in escrow with the Federal Reserve Bank for safe-keeping, and for delivery from time to time as money might be furnished to the state by the Public Works Administration. The said bonds remained with the Federal Reserve Bank for several months, but finally the bank, fearing some liability might accrue by reason of its custody of the bonds, requested a removal of the bonds, and they were then deposited with the treasurer of the state for delivery to the Public Works Administration, as provided by the contract.

Although such deposit of the bonds with the Federal Reserve Bank did not constitute in all respects a legal escrow, nor make the Federal Reserve Bank in strict legality an escrow agent, it was the intention of the construction commission to so regard the Federal Reserve Bank and the state treasurer upon the deposit of the bonds in that office.

The appellant filed this suit in the chancery court of Pulaski county, praying for an order restraining the construction commission from delivering the bonds, and particularly the block of $440,000, which the construction commission intends to deliver, in accordance with the contract, for money ready to be paid over on requisition of the construction commission.

Answer was filed admitting the above and foregoing facts, that the commission intended to deliver the bonds, and pleading also that it intended to deliver from time to time, in accordance with the terms and conditions of the contract, as money might be required and bonds be paid for under the aforesaid contract entered into between the construction commission and the Public Works Administration, and pleading further the contracts of the state as valid and binding, and constituting an outstanding indebtedness at the time of the adoption of the amendment, and that on account thereof the said issue of bonds was expressly exempted from the effect of the Constitutional Amendment No. 20.

The facts were agreed upon, and the contract between the Arkansas construction commission and Public Works Administration became a part of the stipulation, together with other facts substantially as hereinbefore stated. One of the matters stipulated is as follows:

"All contracts for completion of the work on the hospital at Benton have been let, and the work is in progress, and the total expended and to be expended since the sale of said bonds to the Government, in July, 1934, will aggregate approximately $1,650,000 to $1,750,000, the cost of which will be paid by the proceeds of said sale of said bonds to the Government, and approximately $440,000 of grant to be made by the Government under its contract.

"That of the said bond issue, the Government has paid for $264,000 of bonds, and bonds Nos. 1 to 264, inclusive, have been delivered to the Government.

"That on November 2, 1934, there was due and owing by the State on the contracts for completion of the building approximately $400,000, being for work done and material furnished under the construction contracts in the sum of $1,449,828.90 let on July 6, 1934 and other contracts let shortly after that date but before November 6, 1934."

Upon trial in the chancery court, the court denied the relief prayed...