Court Opinion

ID: 9771244
Source: CourtListenerOpinion
Date Created: 2023-08-29 16:37:41.783962+00
Date Added: 2024-06-11T07:31:27.438236
License: Public Domain

SUPPLEMENTAL OPINION ON DENIAL OF REHEARING MARCH 9, 1993 Robert H. Dudley, Justice. On petition for rehearing, the City of Fayetteville and Arvest Trust Company, N.A., contend in separate petitions that the majority opinion contains both factual and legal errors. The facts stated in the majority opinion are correct, and we need not discuss the facts. The petitions also allege that the majority opinion contains a legal error because it misapplies the case of Hartwick v. Thorne, 300 Ark. 502, 780 S.W.2d 531 (1989). The facts in Hartwick were that, in 1975, the citizens of North Little Rock approved an ad valorem tax sufficient to pay the principal and interest on $2,605,000 in bonds issued for the construction of public improvements. The election was called, and the bonds were issued pursuant to Amendment 13 to the Constitution of Arkansas, which has now been repealed by Amendment 62. The city ordinance calling for the election and the ballot title both specifically proposed the construction of a drainage canal as a part of the public improvements. The City commenced construction of all the improvements except the canal, which was to be constructed with the assistance of the federal government. At that time, 1976, the City placed $700,000 of the bond proceeds in a special account for the City’s share of the cost of the canal. The interest earned was to remain in the account. The other improvements were completed, but several years later, the United States Army Corps of Engineers determined that the canal was not feasible and the United States would not share in the cost of construction. In 1987, twelve years after the collection of the tax had commenced, the City sought to use the $700,000 principal, plus the $1,100,000 in accrued interest, for the construction of curbs and gutters and published an ordinance to that effect. Some taxpayers filed suit that same year, 1987, and sought a refund of the $1,800,000 in principal and interest.  The taxpayers did not seek to stop the collection of the tax for perhaps either of two reasons. First, after so many years, the bond issue may have been paid in full and the tax collections may have ceased. The opinion does not expressly state that such was the case, but the opinion clearly implies that it was the case because it provides: “The Bell opinion was almost directly on point with respect to the present case when it stated: ‘[W]e have held that the taxpayers, in instances of bond surpluses accumulating as a result of the retirement of the original bond issue, are entitled to a refund.’ ” Id. at 509, 780 S.W.2d at 534 (emphasis supplied). Second, even if the bond issue had not been paid in full at the time the taxpayers filed the suit for the refund, they may well have determined that they would be estopped from contesting the tax after so many years. See Lawrence County v. Townsend, 202 Ark. 887, 154 S.W.2d 4 (1941). After a trial on the merits, the chancellor ruled that an illegal exaction had occurred and ordered a refund. We affirmed and held that an illegal exaction occurs when the purpose of a tax cannot be accomplished and the government retains the tax funds. In the case at bar, we correctly cited Hartwick for the proposition that an illegal exaction occurs when a primary purpose for a tax cannot be accomplished. In this case, the City of Fayetteville inextricably linked the vote on the tax with the bonds to be issued to finance buildings for the local school district. The school district bonds were a primary purpose of the tax. The City decided not to issue bonds to construct or finance buildings for the local school district. The taxpayers filed this suit to enjoin the future collection of the tax within the same year that the City made it known that it would not issue bonds to construct or finance buildings for the local school district. The taxpayers filed this suit to enjoin the future collection of the tax. We held the injunction should issue. The petitioners for rehearing contend the holding is inconsistent with Hartwick v. Thorne because, they contend, under that case we should have only enjoined the collection of that portion of the sales tax which would have been required to pay the estimated debt service on the bonds to have financed the school buildings. The argument is without merit for a number of reasons, but the primary one is that Hartwick v. Thorne simply does not contain a holding about when an injunction against a tax should or should not issue. The taxpayers in Hartwick v. Thorne did not ask for an injunction against further collection of the tax, the trial court did not rule on such an issue, and we made no holding on such an issue. The opinion in that case discussed a remedy in light of a “surplus accumulating as a result of the retirement of the original bond issue.”  In the case at bar, the vote for or against the tax was inextricably linked to the bonds to finance buildings for the local school district. Those who voted in favor of the tax solely or primarily in order to finance or construct buildings for the local school district were misled. Soon after they discovered that they had been misled, they filed this suit to enjoin further collection of the tax. They are entitled to such relief. See Arkansas-Missouri Power Co. v. City of Rector, 214 Ark. 649, 217 S.W.2d 335 (1949). This is not a case involving a surplus accumulating as a result of the original bond issue. Petition for rehearing denied. Hays and Glaze, JJ., dissent.