| Ark. | Jul 3, 1922
Road Improvement District No. 5 of Pulaski County was formed under a special statute (Acts 1909, p. 1151) for the purpose of improving a certain road. The statute authorized a levy of special taxes on assessed benefits for the purpose of paying for the improvement, and also authorized the commissioners to “borrow money no.t exceeding the estimated cost of the work, at a rate of interest not exceeding ten per centum per annum,” and to issue negotiable bonds for the discharge of liabilities created under the contract for constructing the improvement. The cost of the construction of the improvement and the creation of liabilities of the district therefor were limited by the statute to thirty per centum of the total assessed value of the real property in the district.
The statute contains the following provisions with reference to pledging the revenues of the district for the payment of the bonds:
‘ Section 18. That, for the payment of both principal and interest of the bonds to be issued under the provisions of this act, the entire revenues of the district, arising from any and all sources, and all real estate subject to taxation in the district is by this act pledged, and the board of directors are hereby required to set aside annually from the first revenues collected from any source whatever a sufficient amount to secure and pay the interest on said bonds, and said board shall also make due provisions for the payment of the principal thereof as the same shall become due. .
“Section 19. All bonds issued under this act shall be secured by a lien on all lands and real property in the district, and the board of directors shall annually cause the assessment to be made and the tax levied and collected under the provisions of this act, so long as it may be necessary to pay any bonds issued or obligations contracted under its authority; and the making of said as sessment or levy may be enforced by mandamus. If any bond or any interest coupon-of any bond issued by said board is not paid within thirty days after its maturity, it shall be the duty of the chancery court of the proper county, on the application of any holder of such bond or interest coupon so overdue, to appoint a receiver to collect the assessment aforesaid, and an assessor who shall make an assessment of said property; and the proceeds of such assessment and collection shall be applied, after the payment of the costs, first to the overdue interest, and then to the payment pro rata of all bonds issued by the said board which are then due and payable; and the said receiver may be directed by suit to foreclose the lien of said assessment on said property, and any suit so brought by the receiver shall be conducted in all matters as a suit by the directors, as hereinbefore provided, and with like effect, and the decrees and deeds therein shall have the same presumptions in their favor; provided, however, that when all such sums have been paid the receiver shall be discharged and the affairs of the district conducted by the board of directors as hereinbefore provided. ’ ’
It is further provided in the statute that, on default in the payment of any matured bond or bonds, a receiver may be appointed for the purpose of collecting the assessments until a sufficient sum is realized to pay the matured bonds.
The assessed value of the property in the district is shown in the present litigation to be the sum of $104,-985, therefore the statutory limit upon the amount of the bond- issue restricts the issuance of bonds to the sum of $31,495.50. There was a total issue of bonds in the sum of $28,500, and upon default in the payment of some of the bonds and interest, a receiver was appointed, pursuant to the terms of the statute, and a fund was collected by him, and the distribution of that fund.is the point at issue in the present litigation.
All of the bonds were issued and sold for the purpose of paying for the construction of the improvement, but all the bonds were not sold at the same time. Bonds aggregating the sum of $20,000 were issued and sold on October 1,1914, and these bonds are owned by appellant; the remainder of the bonds, aggregating $8,500, were issued and sold on May 1,1915, and are owned by appellee. The respective holders of the bonds are each claiming priority, and the question involved in the case is whether or not the fund in the hands of the receiver is to be distributed pro rata, or whether either of the parties is entitled to priority.
The chancellor decreed that all of the accrued interest should first be paid in full, and that the remainder of the fund should then be distributed pro rata upon all of the matured bonds held by the parties.
It is not shown that the funds now in the hands of the receiver constitute the last collection' that can be made of taxes, nor is it shown that taxes to be collected in the future will be insufficient to pay off the bonds in full. In other words, the controversy narrows down to the question of priority in the distribution of the particular funds now in the hands of the receiver.
It will also be noted that there was no excess of authority in the issuance of the bonds, for the total amount issued at both of the times mentioned was below the aggregate amount authorized by the statute.
It is contended by counsel for appellants that the case presents an instance of successive bond issues under a statute which provides that the revenue shall be pledged to the payment of the bonds, and that this necessarily creates priority in favor of the holders of the first of such successive issues of bonds. Counsel for appellees contends, on the other hand, that, if the court was not correct in the decision that there was no priority between the different bondholders, and, if there was any right of priority at all between them, the preference is in favor of the holders of the last issue of bonds.
We think that counsel on each side are mistaken in assuming that there were successive bond issues within the meaning of the statute. There was, in legal contemplation, only one issue of bonds,'though the total amount issued was in two allotments, made at different times. The statute provides that all bonds issued thereunder “shall be secured by a lien on all lands and real property in the district,” and it makes no mention of any priority. The power to issue bonds is, however, limited to the sole purpose of raising money for constructing the improvement. It must be, and is, conceded that it is the statute itself which creates the lien upon the revenues of the district, and not the writings which evidence the obligations. The fact therefore that the bonds themselves contain a stipulation that the revenues of the district were pledged to the discharge of the obligation adds nothing to the rights of the parties, and, since the statute creates the lien, it can only be interpreted to mean that the lien is created, without priority, in favor of all the bonds issued for the purpose named. The fact that they were issued successively in point of time does not alter the relative rights of the bondholders, for each of the holder’s derives his right to a lien from the statute itself. The pledge of the revenues declared by the statute may be likened in some respects to a mortage executed to secure numerous debts maturing at different times, and this court has held that under such a security there is no priority between holders of the different debts on account of priority in point of time of the assignment to separate parties of the different obligations. Penzel v. Brookmire, 51 Ark. 105" date_filed="1888-11-15" court="Ark." case_name="Penzel v. Brookmire">51 Ark. 105. In that case the debtor executed a. series of notes and a mortgage to secure all of them, and the mortgagee transferred the notes to different parties, and a controversy arose as to the priority under the successive assignments. Judge Battue, in delivering the opinion of the court, called attention to conflict in the authorities, which he divided into three classes: one holding that the notes should be paid in the order of their assignment; another class holding that the notes should take precedence in the order of maturity, and the third class holding that the proceeds of the sale of the mortgaged property should be applied pro rata in part payment of the several notes, irrespective of dates of maturity or assignment. The court approved the view taken by the class of authorities cited last, and in disposing of the question it was said:
‘ ‘ The comparison of a mortgage given to secure several notes to successive mortgages given to secure each of them does not support the doctrine it is made to prove. To make the case analogous, the mortgages to secure each note must bear the same date, and be executed, delivered and filed for record, and recorded, at the same time, and the property mortgaged must be the same. In the latter case the mortgages would be concurrent; neither one would have preference over the others, and all would have equal claims to be paid ratably out of the property mortgaged. If one should be transferred to a third party, it would not thereby become paramount to the others, but all would stand on an equality. Hence the comparison does not sustain the doctrine that the notes, while in the hands of different persons, are entitled to priority of payment according to the order in which they mature. We do not think that either of the doctrines laid down by the two classes of decisions first mentioned is sustained by reason or equity. The notes are secured by one mortgage executed for the equal benefit of all. ***** There can be no priority of rights in favor of one against the others, as the mortgage is one.”
The facts of that case are, of course, different from the facts in the present case, but the principle is the same, for we hold that the statute creates the lien, and only one lien, and that for the security of all the bonds issued under that particular authority — not part of them, but all of them. The decision is limited to the particular facts of this case, and reaches no further. We have no case of successive bond issues in the sense that bonds were issued at different times under different authority, nor have we a case of overlapping districts where there is a question of priority in assessment liens. We reiterate that in this case all of the bonds issued were within the single authority conferred, and we hold that they are tantamount to a single issue, even though actually successive in point of time.
The question is one of first impression in this State. Indeed, it seems not to have been decided elsewhere, so far as we are able to discover. Counsel for the respective parties, as well as the other interested counsel who have filed briefs as amici curiae, have not brought to our attention a single case in point on the question involved in this particular controversy. The only case which might appear to be in point is First National Bank v. Terry, Briggs & Co., 203 Ala. 401" date_filed="1919-06-19" court="Ala." case_name="First Nat. Bank of Abbeville v. Terry, Briggs Co.">203 Ala. 401, and an analysis of the decision will show that it has very little bearing on the particular point involved in the present case. In that case there was a levy by the county of special taxes pursuant to authority of the 'Constitution to raise a fund annually to pay for the construction, by the county, of certain local improvements, and where there were several contracts let during the same year for different improvements it was decided that the contractors were entitled to priority in point of time for the payment of the amount due out of the funds levied for that purpose. It could only have been held, and was held, to be a case of successive contracts for payment out of the same fund, and of course, when the funds were insufficient, they necessarily must be applied on the 'first obligations contracted, pursuant to the Constitution and the statute. We have no such case here, for the bonds in the present case were all issued, not only under the same authority, but for the same purpose.
The other cases cited by counsel are not in point, for they all relate either to the question of priority of liens of the assessments of different taxing districts, as in the California, Missouri and Iowa cases cited; or to the question of priority where there has been creation of obligations in excess of the authority granted by law, as in the Federal cases cited; or to the question of priority of special assessment liens over other securities, such as antecedent mortgages.
Our conclusion is therefore, after interpreting our statute to confer a single lien for the whole bond issue, there is no priority of the holders of bonds issued at different times, and that the chancellor was correct in his conclusion to that effect. Under this view of the statute, where there is authority for the issuance of bonds up to a certain amount for a given purpose, the purchasers of the bonds first delivered must take notice of the fact that there may be other bonds issued for the same purpose, standing úpon an equality with those then issued; and subsequent purchasers of bonds must take notice that there may have been prior deliveries of bonds under the same authority.
The decree of the chancery court is therefore affirmed.