Burke v. Gullege , 184 Ark. 366 ( 1931 )

STATEMENT BY THE COURT.

This appeal challenges the correctness of a judgment of the circuit court upholding the validity of certain warrants of Phillips County alleged to be void as having been issued contrary to the provisions of amendment No. 13 to the Constitution after the revenues of the county for the fiscal year 1929-30 were expended and exhausted.

The appellees on the 14th day of April, 1931, filed separate petitions in the Phillips Circuit Court for mandamus against Rebecca Thompson, treasurer of Phillips County, to compel her to pay certain county warrants held by them. The cases were consolidated for trial.

Respondent, Rebecca Thompson, as treasurer refused to defend the suit alleging she was only a nominal party and prayed that the county judge, A. G. Burke, and Phillips County, be made parties in order to protect the county's interest. Thereupon A. G. Burke, county judge, filed his petition praying that he and Phillips County be made parties defendant in order to protect the interest of the taxpayers of Phillips County, and the court ordered it done.

Appellee Gullege alleged that he was the legal holder and owner of four county warrants aggregating the sum of $4,518.43; and appellee Lewis Supply Company alleged it was the legal holder and owner of seven County warrants aggregating the sum of $579.01, all of said warrants bearing the date of November 12, 1930.

The response filed by the county judge and the county admitted the issuance of the county warrants, but denied they were valid legal obligations of the county, alleging that they were invalid and void being issued for an indebtedness contracted during the fiscal year 1929-30 and at the time of their issuance the revenues of the county for the fiscal year had been exhausted and expended, and that the allowance of the claims upon which the warrants were issued subsequently by the county clerk were in excess of the revenues of the county and void under the provisions of amendment No. 13 of the Constitution of the State. That the warrants were void at the time of their issuance, the appropriation for the fiscal year 1929-30 having been expended, and were issued in violation of the terms of the statute, 1976, Crawford Moses' Digest. It further alleged a statement of the financial condition of the county at the time of the allowance and issuance of the warrants showing the county court was without authority to allow such claims and the county clerk violated in the issuance of said warrants the provisions in the amendment to the Constitution.

It appears from the testimony that Phillips County issued $200,000 in bonds for discharging its indebtedness under amendment No. 10 to the Constitution. The present county judge, appellant, upon assuming the duties of his office after election, discovered the condition of the county's finances, and called upon the auditorial department of the State to make an audit of its fiscal affairs. This was done, and the audit reflects that during the fiscal year of 1929-30 all of the accounts had been overdrawn and the revenues entirely exhausted and expended with outstanding warrants issued in excess of the revenues of the said fiscal year amounting to the sum of $21,604.52. It was also shown that appellee Gullege furnished the county a large quantity of bridge lumber during said year, and that appellee, Lewis Supply Company, furnished various items of hardware and other supplies, and they filed their claims regularly against the county. The claims were not allowed during the fiscal year but were carried over into the fiscal year of 1930-31, all were allowed in fact on the 12th day of November, 1930. The fiscal year of the county as prescribed under the existing law began on the first Monday in November and ended the first Monday in November of the following year. On the date of the issuance of the said warrants the revenues of the county for the fiscal year of 1929-30 had been exhausted and expended, all the warrants in controversy and many others issued on that date were in excess of the revenues and were all drawn on the "Special County Road Tax Fund." This fund, as maintained in the county during that said year, was composed of revenues from several sources: discount on oils, depository interest, severance tax, dog tax, back taxes, land redemptions, State turnback, delinquent personal taxes for 1928, gasoline refund from State, and special three-mill road tax. During said year there was credited to said fund the sum of $53,923.33, and at the end of the year there only retained a small balance therein of $122.10; notwithstanding which the county court on the said 12th day of November, 1930, allowed claims for the said past fiscal year of 1929-30 in the sum of $14,285.25. The auditor making the audit for the State Department testified that each warrant held by the appellees was in excess of the revenues of the county for the fiscal year, and stated further that the gross revenues of the county from all sources during said fiscal year was $164,944.10, and the total expenditures for the fiscal year was $186,548.62, and that the warrants sued on together with other warrants issued exceeded the revenues of the county in the sum of $21,604.52.

The appellees contended that, regardless of the fact that the warrants were in excess of the revenues from all sources, their warrants were payable out of the funds received on the 8th day of April, 1931, by the county treasurer of Phillips County from the State Treasury under the provisions of act No. 63 of 1931.

The court refused to declare the law as asked by appellant and on the 18th day of May, 1931, directed the treasurer to pay the warrants in controversy out of the fund derived by the county under the appropriation made by said Act 63 of 1931, from which the respondents appealed. (after stating the facts). The contention that this court is without jurisdiction to review the judgment appealed from, because the county treasurer against whom the original mandamus was sought and finally ordered did not appeal, is without merit. The county treasurer responded to the petition alleging that she was only a nominal party, and asked that the county judge and the county be made parties in order that the interests of the taxpayers and the county could be protected, and an order was made making them parties for the purpose of defending the suit upon their appearing and asking that it be done. The suit then proceeded as though the county judge and county were the only parties defendant and without regard to whether the judgment pronounced was against them as such or an order directing the treasurer to pay the warrant, it was but a judgment in fact against the county and from which the county judge could appeal as was done. Section 2293, Crawford Moses' Digest; Ouachita County v. Rolland, 60 Ark. 516,31 S.W. 144.

It was the duty of the judge of the county court to defend, since the interest of the taxpayers was affected by the litigation, the treasurer having refused to defend against it, and he could either have done so for the treasurer in his name or by becoming a party thereto as was done herein.

The undisputed testimony shows that the warrants issued were in excess of the county revenues of the year in which they were issued and upon a fund which was composed of revenues of the county derived from various sources, as well as from the turn back from the State Highway Fund. Such being the case the warrants were void within the prohibition of the Constitutional Amendment No. 13, as has been repeatedly held by this court. Nelson v. Walker, 170 Ark. 170, 279 S.W. 11; McGregor v. Miller, 173 Ark. 459, 293 S.W. 30; Luter v. Pulaski County Hospital Assn., 182 Ark. 1099, 34 S.W.2d 770. In the last cited case many cases on this question were reviewed, and the court there held that the amendment should be construed as it reads — literally.

In Anderson v. American State Bank, 178 Ark. 652,11 S.W.2d 444, it was held, however, that a warrant could be issued under a contract to be paid out of the Highway Fund derived from the State revenues if it required all of such funds on hand to make the first payment with the deferred payments to be made in the following years out of such fund, the creditor taking a chance of getting the money due him out of the fund after it came into the county treasury. These warrants having been issued to be paid out of the "Special County Road Fund," which was composed largely of county revenues, were void, and the court erred in not so holding. Since, however, under the law the county was entitled to certain income from the State Highway Fund to be returned to it under said act of the Legislature (act 63 of 1931), the county court was authorized to make the contract for the payment of these supplies out of such fund, as it did in fact do herein, and the creditor or holder of warrants held void as issued against the revenues of the county contrary to the provisions of the said amendment No. 13 to the Constitution was entitled to payment of his said claim out of such fund when returned to the county treasury, and the right to such payment is not affected by the holding of the warrants, wrongfully issued as already indicated, invalid.

The warrants being void as issued for an amount in excess of the revenues of the county for the fiscal year, the court erred in holding otherwise, and in directing a mandamus to compel their payment. The judgment is reversed accordingly, and the cause dismissed.