The majority holding is revolutionary! The reasons for my dissenting opinion:
1. The rule has always prevailed in Arkansas that a municipality possesses and can exercise only such powers as are granted in express words, or such powers as are necessarily implied from or incident to the powers expressly conferred, or such powers as are essential to the accomplishment of the declared objectives and purposes of the municipality. Bennett v. City of Hope,204 Ark. 147, 161 S.W.2d 186; McGehee v. Williams,191 Ark. 643, 87 S.W.2d 46; Cumnock v. Little Rock, 154 Ark. 471,243 S.W. 57, 25 A.L.R. 608; Argenta v. Keith,130 Ark. 334, 197 S.W. 686, L.R.A. 1918B, 888; Merrill v. Van Buren, 125 Ark. 248, 188 S.W. 537; LaPrairie v. City of Hot Springs, 124 Ark. 346, 187 S.W. 442; Willis v. City of Fort Smith, 121 Ark. 606, 182 S.W. 275; and Bain v. Fort Smith Light Tr. Co., 116 Ark. 125,172 S.W. 843, L.R.A. 1915D, 1021. See, also, 37 Am. Juris. 722.
There is no statute in Arkansas that allows a municipality to combine water improvement bonds with sewer refunding and improvement bonds. So, the majority, in allowing the City of Harrison to so combine its bond issues, is giving the City of Harrison a power that the Legislature has never granted. That the majority is doing this very thing is shown by the following quotation from the majority opinion: "We are also of the opinion that the city may, if it so elects, combine the two systems, and issue water and sewer revenue bonds with a pledge of the net revenue of both as the sole security therefor."
The Legislature has always kept water works bonds separate and distinct from sewer system bonds. Witness the fact that Act 131 of 1933 refers to water works *Page 1102 and Act 132 of 1933 refers to sewage systems. If the Legislature had intended for the two systems to be combined, it would have passed one act instead of two. Witness also the fact that in the various amendments to Act 131 of 1933 (some of such amendments are: Acts 3, 96 and 107 of 1935; Act 135 of 1939; and Act 178 of 1943) the water works act was kept separate from the sewage act. Witness also the fact that Act 297 of 1937 (which is the revenue bond refunding act) specifically preserves the distinction between Act 131 of 1933 and Act 132 of 1933. Thus, I submit that the majority is allowing the city to combine separate systems into one bond issue, in entire disregard of the legislative effort to keep the systems separate.
2. There is no statute in Arkansas allowing a city to pledge a debt-free water works system to secure an already existing bond issue on the sewer system, yet that is exactly what the majority is permitting the City of Harrison to do in the case at bar. As long as the water works system remained debt-free (or bonded only for its own improvements under Act 131 of 1933, and amendments there) them the city would have available a source of revenue to meet its other municipal requirements, under Amendment No. 10. Now, the majority is permitting that source of revenue to be mortgaged away to secure defaulted sewer bonds.
3. To sustain the pledge of excess net revenues of the water system to pay the sewer bonds, the majority cites the case of Johnson v. Dermott, 189 Ark. 830,75 S.W.2d 243. But the situation existing in the reported case does not exist in the case at bar. The net revenue of the Dermott Water Works went into the general revenue of the city and was expended therefrom. In holding that the City of Dermott might pledge the excess revenue from the water works system, we said: "But this power may not be exercised in violation of Amendment 10 to the Constitution. Any contract which the city makes in regard to uncollected revenues from any source must be construed with reference to this amendment. Parties cannot, by pleadings or stipulations of any kind, abrogate *Page 1103 this amendment which will be read into any contract which the city may make."
In the case at bar the revenue from the water works will be pledged first to secure the $140,000 of revenue bonds, and the excess net revenue from the water works, when pledged over against the sewer bonds, must be governed by Amendment 10 to the Constitution, even under the case of Johnson v. Dermott, supra, relied on by the majority.
Furthermore, the case of Johnson v. Dermott — in so far as it allowed the City of Dermott to pledge the net excess of water works revenue as security for the hospital bonds — has been considerably weakened by the later case of Mathers v. Moss, 202 Ark. 554, 151 S.W.2d 660. In that case we held that the revenues from the water system could not be devoted or appropriated to the payment of the cost of operation of the sewer system. Hence the language: "Act 132 of 1933, appearing as 9977, et seq., Pope's Digest, contemplates that revenue bonds authorized to construct sewers will be paid from the revenues derived from that service. Likewise, act 131 of 1933, appearing as 10001, et seq., Pope's Digest, contemplates that the revenue bonds authorized to construct waterworks shall be paid from the revenues derived from that system. There is nothing in either act which authorizes any part of the revenues derived from one system to be devoted and appropriated to pay the cost of construction or operation of the other."
This quoted language says that the revenues from one system are not authorized to be devoted or appropriated to the cost of the operation of the other system; and yet in the face of this quoted language the majority is granting the City of Harrison a right that was denied the City of Dumas in the reported case.
4. Finally, the majority says that Act 178 of 1943 "authorizes the proposed pledge of net surplus of one system to pay the bonds of the other," and cites that act as changing the rule of Mathers v. Moss, supra. Act 178 of 1943 clearly states that the determination of excess *Page 1104 revenue should be made each year. The act uses the expressions as, (a) "during the remainder of the fiscal year them current," (b) "during the fiscal year then next ensuing," (c) "during the then next present fiscal year," (d) "the next ensuing fiscal year," and other similar expressions which, beyond the peradventure of a doubt, show that the determination of whether there is a net surplus, must be made on a yearly survey; and that it is only after such annual determination has been made for the then existing fiscal year and next ensuing fiscal year, that any part of the net surplus from the water works can be used for any purpose except the retirement of the bonds. In the face of this language in Act 178, the majority in the case at bar is allowing the present city council of Harrison to make a determination now that will pledge all the excess revenues, and bind all succeeding councils for the next thirty years — since the bonds proposed to be issued have a final maturity extending for thirty years. I submit that Act 178 of 1943 does not reasonably admit of the interpretation given it by the majority.
For these reasons, I respectfully dissent.
GRIFFIN SMITH, Chief Justice, dissenting. Express provisions of Pope's Digest, 10005 — the so-called Water Act — are that bonds ". . . shall be payable solely from revenues derived from the waterworks system." Section eight of Act 297 (Pope's Digest, 11358) carries the provision that bonds ". . . shall be payable from and secured by a lien upon the revenues of the enterprise." It is my view that if effect is given these enactments the obligation to pay bonds binds only revenues arising from the particular system the securities are issued to finance.
The majority opinion in the appeal before us appears to rest upon the precarious proposition that if the city wishes to accomplish a purpose thought to be desirable by those who have acted officially, the result should not be impaired for want of legal authority.
Johnson v. Dermott, 189 Ark. 830, 75 S.W.2d 243, held that the municipality might pledge profits earned *Page 1105 by a water and light system and thereby secure bonds sold for the purpose of building a city hospital, and this case is cited by the majority. But there the bonds were not issued under provisions of a statute. Effect of the decision was to say that Dermott had power to take the questioned action regardless of the General Assembly's failure to legislate in that respect, conditioned that Amendment No. 10 should not be invaded.
The City of Harrison-Braswell opinion says that Act 178 of 1943, amending Act 131 of 1933, permits a city council to authorize application of net surpluses to any municipal purpose. I think there is a fundamental distinction between applying excess funds as a matter of administration, and in pledging such revenues. In the first case the money is used at the instance of the council as necessity may from time to time require; but where there is an irrevocable pledge, as proposed here, all surpluses are tied to the transaction consummated by the pledging council. No future administration may touch the fund, or interfere with what its predecessor has done.
Certainly there is nothing in Act 132 of 1933, (the Sewer Act) or in Act 297 of 1937, authorizing a pledge of surplus funds for the payment of securities issued by a water system; nor does Act 178 of 1943 appear to have contemplated that result. Neither was it loosely written with the idea that an avenue of entry could be found by resort to "construction" or implication, judicially invoked.
The majority says that Act 178 of 1943 — this being an amendment to the Water Act of 1933 — provides in Section 1 that ". . . if a surplus shall exist in the bond and interest redemption account, the same may be applied . . . to any other municipal purpose."1 This statement is followed by the expression: "We think this language authorizes the proposed pledge of net surplus of one system to pay the bonds of another."
This is a transposition or transportation of language so much clearer to the majority than it is to me that, in *Page 1106 attempting to follow its lead, I feel more secure in hesitating where the law has stopped, and beyond which there does not appear a tangible implication. Indeed, to concur in the result would require acquiescence in an operation sometimes spoken of as engraftation; for, after holding that surplus funds from the sewer system may be pledged as security for water bonds, the opinion applies a parity process and creates a community of interest when it says: "If the city can issue two separate series of revenue bonds and support each issue by a pledge of the surplus revenue for the other, we fail to see why the two proposed issues may not be combined into one issue with a pledge of the entire net revenue of both systems to support the revenue bonds issued for both."
The primary difficulty would seem to be that neither statute contains such a provision.
In holding that contracts such as the one now being approved are not in violation of Amendment No. 10 it is said that prior decisions sustain the point. The cases cited were decided before Acts 131 and 132 of 1933 were passed. The Dermott decision was the court's construction of the law after the 1933 legislation became effective. Mr. Justice BUTLER, speaking for the court regarding excess revenues arising from operation of the water and light systems, said:
"But this power must not be exercised in violation of Amendment No. 10 to the Constitution. Any contract which the city makes in regard to uncollected revenues from any source must be construed with reference to this amendment. . . . This amendment [provides that] no allowance shall be made `for any purpose whatsoever in excess of the revenues from all sources for the fiscal year in which said contract or allowance is made.' Beyond this inhibition there is a lack of power to contract."
The Dermott case was heard on demurrer. It admitted that the city would not exceed its budget through use of revenues in the manner they were sought to be applied.
1 There is no similar provision in Act 297 of 1937 or any other act. *Page 1107