ARk.j OLIVER V. WESTERN CLAY DRAIN-AGE 'D 'IST. 539 ; OLIVER V. WESTERN CLAY DRAINAGE DISTRICT. 4-3050. • Opinion delivered June 5, 1933. 1: PLEADING—EFFECT OF GENERAL DEMURRER.—Under Crawford iz Moses' Dig., § .1190, a general demurrer stating that a -cross-corn-plaint did not state: facts sufficient • to constitute a ground, for relief did not raise the objection that there was a deiect of parties. 2. PLEADING—ADMISSION B'Y DEMURRER.—A general demurrer admits facts properly pleaded. „ ' 3. • DRAINS—CONTRACTg .—Acts 1907, No. 368, under which bonds and contracts of a drainage district were executed, became a part thereof. , 4. DRAINS—APPLICATION OF PROCEEDS OF, BONDS. MOney received, from the sale of bondS of a drainage district held a special fund : for the purpose of paying for the iMprovements authorized' thereby, and pUrchasers of the bonds had no lien 'or claim on such fund,: which could not proPerly be applied to the payment of bonds,. . • • • • ; 5. DRAINS—DIVERSION OF PROCEEDS OF , Bo/cos.—Where proceeds of, sale of a drainage district bonds Were Wrongfully , diverted to the : -pa • yment of 'its bends, leaVing imprOvement Work unpaid Yer, the
;-- holder of a judgment for .sfich unpaid work -iS entitled to • -have 'a
sufficient amount of the annual assessments pledged for .payrnellt •of such bonds to replace t ' he •amount so diverted. DRAINS—SET OFF OF ASSESSMENTS *—A property owner in a drain age 'district holding a judgMent against Ole' district 'tor ment work was entitled- to have the amount of drainage aSsesS • ments due on -his lands credited on his judgment where proceeds . • of -sale of the district's bonds had been wrongfully . diverted AO payment of its bends. . . 7. DRAINS—DIVERSION OF PROCEEDS OF BONDS.—Where proceeds 7(.4 sale of a drainage district's bonds were wrongfully diVerte'd payment of the bonds, instead of to payment fel' the improvement Work, bondholders could- not- defeat - the riga ,of the • liolder • of :a' judgment recovered for improVernent-werk -to .have such, fun& • so diverted replaced: from assessments ,by .paying assessments, in past due bonds. ' , .• Appeal from Clay Chancery:::• ourt, iWestern,:-Dis", trict ; J. M. Futrell, Chancellor.; :reversed, on. appeal ;:af -firmed . on cross-appeal. - Oliver (14. Oliver .,:for appellant. •, ! 1: ,•-•) - J. L.-Taylor, for -appellee..„„ .•.';,• -..„ .MEHAFEV, ' J. 7 The . Western Clay Drainage District: was formed by special act of the LegislMure-in:1907."The.
540 OLIVER V. WETERN CLAY DRAINAGE DIST. [187 directors were authorized to divide the territory included in said district into subdistricts, and it was divided into five subdistricts. Subdistrict five began suit in 'Clay County againSt nunierons persons to foreclose its lien for annual assessments. • , G. B. Oliver, 'one of the appellants, owned considerable . propertY in subdistrict 5, and the partnership of Oliver & Oliver, coMposed of 0- B OliVer, Sr., and G. B. Olivei, J ' r., owned one-half of a judgment which was rendered .against the district April 29, 1929, the other half of said judgment having been settled. Nothing had ever been paid on the half of the judgment belonging to Oliver & Oliver, and there waS a balance dile them of $10,018.53 at. the time:die suit was filed. The appellants filed a cross-complaint, alleging that they owned the judgment against the district, and asked that the amount of taxes due the district from Oliver be ereclited on, the judgment. , • They, alleged in the cross-complaint that one W. R. Brown, doing business as Clay County Dredge Company, entered into a contract with *subdistrict 5 for the construction of drains and , leVies . in said subdistrict ; that, nnder.the contract, esfimates of the work done were to. be 'made from time to time as the work ptogressed, and that Brown was to be, paid the amount of estimates, lesS 15 per c'ent. until the work was completed. When the work was completed, this 15 per cent. was to be paid to Brown. . On the completion of the work, the district refused to pay Brown, giving as a reason that the work had -not been completed within the time prescribed. Brown assigned his cause of action to W. D. Polk. Polk brought suit and recovered a judgment for Polk and Brown for $16,559.67, With interest at 6 per cent. from April 29, 1929, to' date of judgment. Appellants further alleged in their cross-complaint that one-half of the judgment had been sold by the receiver who had been appointed to take charge of Polk's property, and that, under an order of the chancery court, one : half Of the judgment was assigned to the appellants,
ARK.] OLIVER V. WESTERN CLAY DRAINAGE DIST. 541 and that nothing has been paid on said. judgment ; that the subdistrict sold bonds of the face value Of .$110,000, receiving therefor :$106,000 in-cash; that $140,000 of benefits! was 'assessed against the-property in t the sub-district. The act authorized the'subdistrict to sell bonds for the purpose of the construction of the improvenients, and it is alleged that they sold bonds sufficient to pay for the eónstruction work : and all incidental : expenses, but that the district, s withont,the knowledge of appellants, or their priVies, wrongfully and. unlawfully transferred $10,- 679.44 of the funds received for construction; and : wrong-fulbr and unlawfully -Used the same to :make payments to the bondholders of subdistrict-5 ;. that the :amount of taxes collected froM the:lands in subdistrict 5: athotinted to $107,380.56, but that the subdistrict paid to the .; bond-holders $118,060, and : the district has paid" for construction,- maintenance, and all '.expenses Only. the , sum ,of $91,000; 'that theY also collected by lending. the prOceedS of the sale of its bonds a large sum of money ; that:said district has no Means with which. to pay the judgment of appellants, except from the annual taxes- collected. They ask thafthe taxes 'due. frorn GIB. Oliver, Sr.,1to the district be credited on the jUdgmentowned by appei-lants ; That the treasurer and directors . of the district be restrained from receiving hi:pap:tent 6f taxes anything except money imtil . aPpellants have been paid in-full, and that the directors be ordered to restore to the construction -fund aiid pay ta aPpellants all'inoney redeived'uirfil their judgment is fully satisfied; and 'that they be -restrained froM : paYing any inOney tO. the.'bOndhOlders until said judgment is paid. ' ."' Appellees demurred to the cross-complaint of ap-, pellants ,, , and the court, sustained ;the :demurrer, except he found that the ' taxes, due :on the lands should be credited on the judgment. The case is here , on appeal. The appellees contend that the, bondholders should be made parties. This question was ! not :raised 'in ;the court below,- : and 1189 of Crawford & Moses' Digest provides that the defendant may demur-to the comPlaint,
549 OLIVER" V. WESTERN CLAY" DRAINAGE DIST: [-187 where it appears,: on its face tha.t _there is :a defect: of,- parties-plaintiff -or defendant: - •- Section 1190 proVide§: . "The demurrer shall distinctly specify-the grounds of objection to the complaint; unlesS •t-does -so, it .shall be regarded as , objeCting. only that the, complaint does not state -facts -sufficient to constitute, a, cause : of action." The appellees- filed a general demurrer, :but did not specify,. as required by. the statute,' the . grounds Of objection .to the , complaint, except'to - State that the cross-complaint- did . 1-iot -state facts saficient, to constitute-A ground for the relief prayed: Sullivan v..Arkansas Vat-ley-Bank, 176 Ark.- 278, 2 S. W. (2d) 1096; Fitzhugh v. First National Bunk of Batesville, 177 Ark. 328, - 6 S. W. (2d) . .308. - A:general demurrer to A:cornplaint ,admit's- the- faCts-properly pleaded . therein. :Ritchie Grocer Co. . ,;'Texazi käna-,482 Ark.. 137 . , .30 .S. W. .(2d) . 213 ; Tyler -v. Citizen's' Bank, 184! Ark:. 3'32, 42 S. (2d)•,385; -Boone County Bd. of Ed.N. Taylor, 185• Ark. , 869, 50 S. .W. (2d) 241.. • The act creating tfie'Western Clay Drainage DiStrict authorizes the dirk-tors:of. the district to contract for the construction . of,the improvements provided for in the act,. and :authorizes the, ,district .to -borrow -money, ancI issAr its , 1nterest-bearing certificates of- indebtedness for any of its:current ,obligations, , , and .also .:authorizes the: district to issue bonds in order to make present payment of . all:e.xpenses authorized by; this act. _ : Section 12 . , act: 368, of the Acts of 1907. : . Bonds, could not have , been, sold by . the diStrict .for any other purpose, and it was flerefore known _by the district at..the time it sola the , bonds, and also by the piirchasers O -f . -the bonds, 'that „ the Money- receiVed -f rom the sale of the bOnds . 'was th be used for ,-the'paynient of the expell8es authoriZed' by :the "a„A.' • It could 'not "he JAW= fully used for ahy other purpose.' . The , - act 'alSo provides' for -the' assessment- of beriefits annually for the-purpose -Of 'paying -the- bOnds, and _the' act- pledges to - the payment of any :bonds issued paid installments- of the assessments.
RR. OLIVER V. ' WE s ' 'iERN CLAY DRAINAGE DIS'1% 543 In other .words, the act authorizes the Sale Of bonds for the special purpose of paying for the improvements authorized, and pledges the asSessMents fer the• purpose of paying the bonds.: The aet does not pledge any other property of the district to the payment of the bonds. Tbe money received from the sale of bonds is a special fund for the purpose of paying for . the improvements authorized to be Made, and the purchasers of the' bonds had no lien or claim on this fund. On the contrary, the purchasers knew that this ' fund- was-to be uSed to pay for the iMprovements, and their debt Was,Secured by a. mortgage on the aSsessments. • Bond§ and contracts authorized -by statute and executed as. required by the statute, are to be conStined, as respects the rights of 'all 'parties'-to -such • contracts, aS though the law requiring and regulating them were'. Written in them. • The statute becomes A part . nf the bond: and' a part of the contract -for the improvements , the :. same a's -if written into the 'contract, and the'Statilte provides, amolig other things: "The said corporation , may isSue bonds in order to Make present payment of all expenses authorized by this act" Therefore the money ree.i . ved iron y the -sale of tbe bonds was to make payment 2 for all expenses authorized by the act; and neither the pnrchasers ,of- the 'bonds, mot any other person, had any-right to this fund, except in payment of the expenses incurred .under the provisions of the act. Appellees call attention to the case Of Kochtitsky v. Mercantile Trust Co., •16 Fed. -(2S.),, , 2271. 'The statute construed by .the -court there, however;. contained the following provision: "TO the payment of both the principal . and interest, of the bonds to be issned Under the provisions of this act, the entire revenne of , the , district arising from any and all sonrces, and all the real estate,, railroads' and tramroads subject to taxation in the district, are by this-act:pledged ; and the. :board of directors ate hereby required to, set aside annually,,from_the fi .rst. revennes
544 --OLIVER v. WESTERN CLAY . DRAINAGE -DIST: [187 -- lected from any source whatever, a sufficient amount to secure and pay the interest on said bonds, and a -sinking fund.". Crawford & Moses' Digest, § 3634: - The court, in commenting on this provision of the statute, said in substance 'that no discretion was left the officers of the district ; that they were required to make the specific disposition annually, of the funds. The court also said that this provision applied without exception or qualification to the. payment of interest on such bonds. The court . also said, to make such assurance more, complete, that requirement attaches to revenues collected from any source whatever. There is . no such provision in the statute creating the -Western Clay Drainage District, nor is there any such provision in the amendMent of 1909. The law construed by • the federal court in. the case above mentioned of course became a part of the contract. Our attention has not heen. called to any case that would authorize a ,distriet to, take a fund specially provided by. tho sale ,of bonds to pay for the improvement and apply-it to the payment of bonds.,:It -would be. mani, festly: unjust and inequitable to procure a fund for the payment of the improvement and permit the purchasers of the bonds, who held a mortgage on all the assessments, to .take- the fund provided for paying ,the expenses and then take all the Assessments on which they, had a lien and• prevent the contractors, from being paid , at all. Taking A sufficient amount of the a gsessments to replace the money wrongfully taken from the construction fund'and. paid to the purchasers of the bonds will not prevent the' bondholders from getting their money. It will simply be taking' from the assessments the amount of money paid to them that should have been paid to the contractors,, And will not deprive them of anything to which they were entitled under .the law. They still have a lien on all the assessments,. and there is ample provision in the law to compel the collection of the assessments. -. - Taking this fund out of the assessments collected will simply be returning to the constiniction fund the
amount -wrongfully: taken from it, and. will in no way reduce-the amount that the bondholders are , entitled to -under the law: . • .- Numerous 'authorities Are 'referred to by the parties, but we think the statitte itself is.plain and unambiguOu& Appellees prosecute a cross-appeal to• reverse the. decree •of the chancellor giving credit to appellants for, the ambunt of taxes due on Oli'ver'sland. What we Iii-tve" already said disposes . of this gnestion.. • It follows .alSo that the holders , of bonds cannot•defeat appellant!s• claim :by paying the taxes-in Past-drie bends. . • -• • • • • • .-•• • • The. only •real •queStion in the cage is• 'Whether the e:ress-complainf_ states' facts' sufficient tO constitute a Cause. of action, 'and 'Nre-hold. that- it ' does: • . • . The decree' of the chancellor is therefore affirmed OIT cross-appeal and:reversed on .appeal and. reinanded, 'with directions ,to :oVerrule the' demurrer.: • --JonNsox C.. J.; and SMITH and INICHANEY; dis4ent. •
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.