Court: Supreme Court of Arkansas; November 30, 1953; Arkansas; State Supreme Court
Appellees, property owners in Street Improvement District No. 6, Searcy, Arkansas, initiated a lawsuit to compel the district and its depositories to refund a surplus fund remaining after fulfilling the district's obligations. The City of Searcy intervened, claiming entitlement to the surplus under Act 310 of 1953 for street repairs. Appellees responded with a demurrer and motion to dismiss, arguing that the city was an improper party and that the issues raised were res judicata based on a prior case. After appointing a master for an accounting, the chancellor dismissed the city's intervention, stating the surplus funds belonged to the property owners. An appeal followed, challenging the chancellor's decision and the constitutionality of Act 310 as applied to this case. The master’s report confirmed the commingling of state aid and taxpayer funds, revealing a surplus of $8,561.81, primarily from tax payments, with negligible state aid remaining. Act 310 stipulates that surplus funds should be transferred to city treasurers for street maintenance, while Arkansas Constitution Article 19, Section 27 requires majority consent for local improvement assessments, and Amendment 13 prohibits using tax or bond-raised funds for purposes other than specified.
In Paving District No. 5 v. Fernandez, the Arkansas Supreme Court ruled that a legislative act allowing the use of surplus funds from a paving district for repairs, without taxpayer consent, was unconstitutional. The court determined this act improperly diverted funds collected for one specific purpose to another. Similarly, in City of Stuttgart v. McCuing, surplus funds beyond what was necessary to retire bonds and complete projects were deemed to belong to the taxpayers, with no authority for the city to redirect them. This principle was further supported by Street Improvement District No. 419 v. Lewis. Act 310 of 1953 was found unconstitutional when applied to tax assessment funds collected from property owners, reaffirming that neither the city nor the Legislature could reallocate these funds without taxpayer consent. The chancellor's ruling declaring the act unconstitutional was thus affirmed.
