The majority opinion erroneously states: "It is insisted, however, that the State may ratify and has ratified these unauthorized contracts to the extent that they cease to be the subject of set-off, and has directed its agents to pay all claims otherwise valid, and the correctness of this contention is the controlling point of difference between the majority and minority of this court. The majority concedes that the State may ratify these contracts and direct the payment of warrants issued under them, but we insist that it has not done so.
"It is the opinion of the majority that this has not been done and the State has only authorized the payment of valid claims. If it was intended that all claims, whether valid or not, should be paid, the Audit Commission has been deprived of its chief function."
Later on the opinion refers to the subject-matter of this suit and the supposed contention of the minority in this way: "The only other act cited as sustaining that the State has ratified these illegal contracts," etc. *Page 158
It is upon this premise that the majority bases its contention and found its argument in support of the conclusion "that, while provision has been made for the payment of all valid demands against the State, the right of set-off has not been abandoned."
With deference, I submit that the opinion misstates the position taken by the minority, misunderstands the contention of the appellant and rests upon a wholly false premise. The minority do not contend that the State "has ratified unauthorized contracts and has directed its agents to pay them." Neither do we admit that the warrants should be classed with "other illegal contracts," as the opinion seems to imply. On the contrary, we insist that the State has not attempted to ratify unauthorized contracts or warrants issued thereunder, but has only protected bona fide holders for value of valid warrants properly issued for just claims on legal contracts. That it, acting through its Legislature, has done this four times, we maintain.
It is apparent that the excerpts from the several acts quoted in the majority opinion are not persuasive of the contrary view, but support and affirm our contention. The purpose for the creation of the Audit Commission, with respect to that part of its duties relating to demands against the State, was to inquire into and audit those which were questionable, either as to amount or validity. Surely its services are not required with respect to a warrant issued for the correct amount and based upon a claim arising out of a valid contract when there is no contention otherwise but which is expressly admitted.
Section 1 of act No. 18, p. 69, of the acts of the first extra session of 1933, quoted in the majority opinion, authorizing the Refunding Board "to compromise or settle any suit or claim, etc. * * * growing out of any contract between the Highway Commission and any person * * * ,"can only relate to disputed matters and clearly has no reference to those admittedly correct. How this provision, or the one in the same section referred to by the majority, providing that funds due the Highway *Page 159 Commission on any settlement or compromise shall be paid into the State Treasury for credit of the Bond Refunding Fund, gives any support to the conclusion reached, I do not understand. The opinion, after citing these above provisions, cites as conclusive of the conclusion reached, section 4, act 18, supra, which provides that" this act shall not validate any claim, etc. * * * issued under, or pursuant to any illegal contract * * *." In what matter is this authority? I insist that, notwithstanding repeated intimations in the opinion to the contrary the warrant involved is expressly admitted to be regular and valid in every particular, and therefore all the provisions quoted have no application, for they deal with claims, the validity of which are brought in question. What I have just said is apposite to section 15 of act No. 11, supra, quoted and relied upon by the majority opinion. The provisions quoted are those which empower the Refunding Board to refer claims to the Audit Commission growing out of any contract between the Highway Commission and any person, to the end that the Audit Commission may investigated and report "as to the validity of any such item." Later in the opinion, section 10 of act No. 11 is quoted and cited, this being in effect the same as the provisions of section 4 of act No. 18, which I have already noted. The majority cite and quote in full the preamble of act No. 14 of the Acts of 1933 as persuasive of the position taken. It will be seen from this preamble that the appropriation provided by the act relates only to the contest of invalid claims or those which may be thought to be such and which are being contested in the courts.
From the whole argument made in the majority opinion and from an examination of the provisions of the statute cited, it seems obvious that the majority have misconceived both the nature of the subject-matter of this suit and the view entertained by the minority. We emphasize again that there has never been any contention that the State has validated claims otherwise invalid, nor has any one ever thought, except the majority, that the warrant involved should be gassed with "other illegal contracts." It is expressly admitted in the complaint, *Page 160 as quoted in the majority opinion, that "the complaint alleged that the warrant was issued to the contractors for construction work performed under a valid contract upon a voucher duly and legally issued by the Arkansas State Highway Commission and was, on the same date of its issuance, indorsed and delivered to the People's National Bank in due course of business and for value."
The minority merely insist that, since the warrant was properly and regularly issued, based upon a valid contract, the State has on four occasions by legislative enactment guaranteed to the holders of that class of claims the right to have the same refunded in the manner prescribed by law. By section 17 of act No. 15 of the Acts of 1932, by sections 1 and 5 of act No. 167 of the Acts of 1933, by section 2 of act No. 18 of the Special Session of 1933, and by section 39 of act No. 11 of the Special Session of 1934, the settled policy of the State has been declared in unequivocal language to be (section 9, act No. 11, Special Session 1934, the latest expression of the legislative will) that "the legal holders of all valid claims against the Highway Commission growing out of contracts for the construction and maintenance of highways shall be entitled, upon presentation to the Refunding Board of such short term notes, State bonds, or other evidences of said claims, to receive in exchange therefor funding notes of the character hereinafter provided for in this section in an amount equal to so much of the face value of such short term notes, State warrants, or claims presented, payment of which is not otherwise provided for by this act." The language just quoted was but a re-enactment and re-statement of the privilege given to legal holders of valid warrants provided for in the acts cited, supra, dealing with that subject.
The overpayment under an invalid contract which is sought as a set-off to the warrant involved was made at least a year and six months before the issuance of the warrant held by the People's National Bank. The State therefore had ample opportunity to determine the amount of overpayment before the issuance of the $2,500 *Page 161 warrant, admittedly valid, which is sought to be refunded. The State ought not, by reason of the dereliction of its officers, to insist now on having the set-off against a valid warrant in the hands of an innocent purchaser. The moral obligation rests upon it, as well as individuals, to do justice. This obligation has been recognized by its Legislature in the provision of the acts last above referred to, and no judicial interpretation ought to refine away its express purpose. To do so, I submit, turns the law awry and violates principles of natural justice.
I am authorized to say that Justices MEHAFFY and McHANEY join in the dissent, and concur in the views I have expressed.