Wayland v. Snapp

Decision Date18 April 1960
Docket NumberNo. 5-2158,5-2158
Citation334 S.W.2d 633,232 Ark. 57
PartiesPaul T. WAYLAND, Appellant, v. Maurice SNAPP, County Judge of Independence County, et al., Appellees.
CourtArkansas Supreme Court

Knox Kinney, Forrest City, for appellant.

Fuller Highsmith, Batesville, Mehaffy, Smith & Williams, Little Rock, for appellees.

WARD, Justice.

Recently the City of Batesville voted overwhelmingly to issue $1,000,000 in revenue bonds under the provisions of Act No. 9 of the General Assembly, 1st Ex.Sess., 1960, approved January 21, 1960, and Independence County (the county in which Batesville is located) voted to issue $500,000 in general obligation bonds under the provisions of Amendment No. 49 to the Constitution of Arkansas (adopted at the general election on November 4, 1958). The overall purpose of the City and County in authorizing said bond issues was to secure and develop new industries and thereby relieve unemployment. The manner in which this objective was to be achieved will be set out more fully later.

This litigation tests the legality of the above proposed bond issues and the proposed development program based thereon. A complaint was filed by Paul T. Wayland (appellant herein), a citizen and taxpayer of Batesville and Independence County, against the County Judge of Independence County and also against the Mayor, Clerk and Aldermen of the City of Batesville, all of whom constitute the appellees herein. To said complaint appellees filed a demurrer on the ground that it did not state facts sufficient to constitute a cause of action. The trial court sustained appellees' demurrer, whereupon appellant declined to plead further, and on March 3, 1960, appellant's complaint was dismissed. From such action of the trial court this appeal is being prosecuted.

Complaint. After identifying all of the parties heretofore mentioned, and after setting out portions of said Amendment No. 49 and said Act No. 9, the complaint, in substance alleges:

1. Some time ago negotiations were undertaken with Seiberling Rubber Company, Inc., a corporation with headquarters in Barberton, Ohio, and sometimes called 'Seiberling' for the location of a substantial manufacturing plant within Independence County, the purpose being to alleviate unemployment, to increase employment opportunities and to make available increased payrolls in the City of Batesville and Independence County--all for the best interest of said City and County; it was agreed that Seiberling would locate and operate an industrial plant near the City of Batesville provided the City and the County acquired the necessary land and constructed the necessary manufacturing facilities thereon; it was determined by said City and County that to obtain such objective it would be necessary for the City to issue revenue bonds in the amount of $1,000,000 and for the County to issue general obligation bonds in the amount of $500,000; the City of Batesville proposes to lease said building and premises after the completion to Seiberling and the rentals therefrom are to be applied first to the payment of principal and interest on the revenue bonds issued by the City and thereafter redeem, prior to maturity, the bonds issued by the County under Amendment No. 49; with the proceeds derived from the bonds the City proposes to acquire the necessary land and to construct the necessary manufacturing facilities thereon and then to lease the same to Seiberling with the base period of the lease to cover the life of the proposed issue and the County will levy and collect a tax of five mills on each dollar of assessed valuation to retire the General Obligation Bonds issued pursuant to Amendment No. 49. To carry out the above project the City of Batesville has adopted an ordinance calling for a special election in regard to the revenue bonds, and Independence County (through the County Court) has entered an order calling for an election with reference to said general obligation bonds, attaching copies of said ordinance and said order.

2. The issue and maturity dates of said bonds are set out and it was then alleged that the annual rental to be paid by Seiberling under said lease would not be sufficient to meet the annual principal, interest and agent's fee requirements of both the revenue and the general obligation bonds referred to above.

3. As security for the revenue bonds the City will mortgage the land and manufacturing facilities constructed thereon, the mortgage giving the bondholders the right of foreclosure in event of a default; in addition, the City will grant to a trustee for the bondholders the right to have a receiver appointed for said land and facilities with the right of lease, rent and operation of the same during the duration of any default; and also, as provided in said Act No. 9 the City will pledge all of its surplus utility revenue for the payment of the principal of and the interest on the said revenue bonds.

4. There is widespread unemployment in Independence County which would be alleviated by the subject project, however, the actions of the defendants in calling an election for the purposes above stated, the issuance of said bonds and the levying and collection of taxes for the payment of the same and entering into a long-time lease with Seiberling, are all in violation of the Constituion and laws of the State of Arkansas in the following respects:

(The complaint here sets out several specific Constitutional and legal objections. These are not copied for the reason that included therein are the points relied on by appellant for a reversal of this case. These points will be discussed later in the opinion.)

5. In the prayer of the complaint the trial court is asked to declare that the actions heretofore taken by appellees and actions proposed to be taken by them are unauthorized by and are contrary to the laws and Constitution of the State of Arkansas.

For a reversal appellant relies upon the following points: The proposed issuance of bonds by appellees constitutes a violation of Article 12, Section 5, and Article 16, Section 1, as amended by Amendment No. 13, of the Arkansas Constitution; Act No. 9 authorizes municipalities and counties to engage in activity and issue bonds for purposes which are not public, and, thus, is contrary to the Arkansas Constitution; The proposed action of Independence County in making available proceeds of bonds issued under Amendment No. 49 for the construction of facilities to be owned by the City of Batesville is unauthorized by and contrary to said Amendment No. 49; Since Act No. 2, Acts 1960, 1st Ex.Sess., requires that counties and municipalities engaging in cooperative efforts to secure industry form compacts, the failure to do so in this case causes the proposed method of financing to be invalid. The contemplated pledge of surplus municipal utility revenues is contrary to Amendment No. 10 to the Arkansas Constitution; The proposed granting of a forecloseable mortgage lien and the right to appointment of a receiver are contrary to the laws of the State of Arkansas; The representation that the manufacturing facilities in question will be exempt from ad valorem taxation and the proposed action of the City and County to implement the representation are contrary to Article 16, Sections 5 and 6, of the Arkansas Constitution; and The proposed method of financing, constructing, leasing, taxing and applying funds and lease rentals is unauthorized and contrary to the Constitution and laws of the State of Arkansas.

We have given careful consideration to the exhaustive and well-presented arguments and authorities contained in the brief of appellant and the brief of appellees, but find ourselves in disagreement with appellant's conclusions on each and every point. There being no issue of fact involved, we proceed now to examine separately each of the points relief upon by appellant for a reversal:

The proposed issuance of bonds by appellees constitutes a violation of Article 12, Section 5, and Article 16, Section 1, as amended by Amendment No. 13 of the Arkansas Constitution. Although appellant, in the above statement, uses the plural in referring to appellees we will assume that his main contention relates to the City and not to the County. We say this because it is hard to understand how it could be logically contended that Amendment No. 49 conflicts with or in any way violates the sections of the Constitution referred to. It is understood by all, of course, that the general obligation bonds which the County proposes to issue are being issued under the authority granted in Amendment No. 49.

As it relates to the revenue bonds to be issued by the City of Batesville, Article 12, Section 5 of the Constitution, in all parts material here, reads: 'No county, city, * * * shall become a stockholder in any company, association or corporation; or obtain or appropriate money for, or loan its credit to, any corporation, association, institution or individual.' Article 16, Section 1 of the Constitution, in all parts material here, reads: 'Neither the State nor any city * * * in this State, shall ever lend its credit for any purpose * * *' For the purpose of this opinion Amendment No. 13 to the Constitution reads the same as Article 16, Section 1.

The revenue bonds to be issued by the City of Batesville in this instance are not, of course, a general obligation of the City. That is, the bonds will not be retired by levying any kind of tax upon the people of Batesville, but they will be retired from revenues derived from lands, buildings, and facilities as well as from surplus revenues derived from certain utilities owned by the City (as described in Section 6 of said Act No. 9). Revenue bonds, as distinguished from general obligation bonds, have been approved many times by this Court for public financing. Among other cases see Jernigan v. Harris, 187 Ark. 705, 62 S.W.2d 5; McGehee v. Williams, 191 Ark. 643, 87 S.W.2d 46; Robinson v....

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