Exchange Trust Co. v. Drainage District No. 7

Background

A group of landowners challenged foreclosure decrees obtained by the St. Francis Levee District that had been placed against certain lands. The dispute reached the Court after briefing and argument, and the levee district’s counsel consented to the Court’s entry of the order described here. The United States’ role appears through a final certificate whose timing affects whether the levee district may tax the lands.

Reasoning

The Court granted the landowners’ request to cancel the foreclosure decrees and declared those decrees to be clouds on the land titles. It permanently barred the St. Francis Levee District from taxing or attempting to tax the lands to pay for improvements or administrative or other expenses that were incurred before the United States issued its final certificate. The Court also made clear that lands remain subject to tax for improvements or expenses that the levee district contracted for after that federal certificate was issued. The Supreme Court of Arkansas’ judgment was reversed to the extent it conflicted with these conclusions, and the case was sent back for further steps consistent with this ruling.

Real world impact

Affected landowners now have the foreclosure decrees removed as clouds on their titles and are protected from taxation by the levee district for expenses incurred before the United States’ final certificate. The levee district retains the ability to tax only for costs tied to contracts made after that certificate. The Court directed that a mandate issue and sent the case back to the Arkansas court for further proceedings consistent with this decision.