Greer v. Levee District No. 3

WOOD, J., (after stating the facts). The decree of the chancery court is correct, and should be affirmed. (1) The undisputed evidence shows that C. C. Burrow was one of the makers of the original notes to the bank in the sum of $4,000. True, the evidence also shows that it was understood among the makers of those notes at the time the same were executed that the money was being borrowed for the use and benefit of the levee district, that is for the purpose of building and repairing levees particularly in what constituted Levee District No. 5 before the county court entered the order abolishing such district, and they, the makers, contemplated among themselves that when Levee District No. 3 executed its note to cover the amount they should be released from individual liability. But the preponderance of the evidence does not warrant the conclusion that it was so understood by the officers of the bank but rather to the contrary. J. J. Scroggins, who was president of the First National Bank and also a maker of the notes, testified that after the work was finished the levee district’s notes were executed by its directors and were formerly placed in the bank in lieu of those that had been executed by the individuals, but he further says that the debt owed by the individuals on their notes had never been paid. Moose, the cashier.of the bank, who as such had in charge the making of the loan, states that the original notes of $2,000 each were the individual notes of the’makers, that “the levee district was not in it.” He states that the original notes were turned over to J. R. Stallings and Dowdle, two of the makers, with the understanding that the new notes made by the levee district were to take the place of those signed by the individuals. But later on he was asked this question, “If these new notes now are no good then do you still look to the individuals who gave the first notes and actually borrowed the money for the payment of this indebtedness1?” and he answered, “Yes, sir; they agreed to that.” He explained what he meant as follows: “I mean that Mr. Dowdle, James and Stallings told us at the time they would be just as liable under the new notes. We wanted it understood that the levee district’s notes would bind them just the same as the first notes did,” and he further states that when he “surrendered them that it was not intended to release the individuals who signed the first notes. This was so understood by the parties at the time.” (2) The knowledge of J. J. Scroggins, president of the bank, and his testimony as to the purpose of himself and co-makers in borrowing the money from the bank is not chargeable to the bank, for in that transaction where his interests conflicted with that of the bank it must be held that he was not acting for or representing the bank and his conduct could create no estoppel against the bank to enforce the payment of the notes. See Bank of Hartford v. McDonald, 107 Ark. 239; City Electric R. R. Co. v. First National Bank, 65 Ark. 543. (3) Under act 83 of the Acts of 1905 the Board of Directors of Levee District No. 3 are specially “authorized to borrow money, to issue bonds, notes, and other evidences of indebtedness ’ ’ under certain restrictions which are set out in the second section of act 83 of the Acts of 1905, page 205. The proof shows that all of these restrictions were fully complied with by the directors before the notes in this case were executed. Such compliance on the part of the directors of Levee District No. 3 with the provisions of this act constituted the notes executed by them “a charge and lien upon all of the lands of the district in proportion to the benefits et cetera,” which the owners and holders of the evidences of the indebtedness, or the board of directors, could enforce in a court of chancery for the use and benefit of such holders. (4) . As between the bank and the levee district, the act of the board of directors in borrowing the money from the bank was authorized by the statute, supra, and rendered the district' liable for its payment. The bank was not called upon to see that the funds were properly expended. This act of the board of directors was not ultra vires. It must be borne in mind that this is not a suit by land owners of Levee District No. 3 against the directors of such district for misuse or misappropriation of funds, therefore the issue as to whether the funds borrowed by the directors from, the hank were properly and legally expended, does not arise in this case. We are not called upon as we view the issue to determine on this appeal whether or not the county court had jurisdiction to abolish Levee District No. 5 and to extend the boundaries of Levee District No. 3. The decree is affirmed.