lease agreement containing an amortization schedule deemed clearly a sale in violation of Article 16, § 1
How later courts described this case
- lease agreement containing an amortization schedule deemed clearly a sale in violation of Article 16, § 1
- equipment purchases by local government
Written by the judges who cited it.
Later courts went against this
Questioned by Opinion No. (1994)
The validity of a nonappropriation clause in the lease-purchase contract may also have been called into question by the Supreme Court's recent decision in Brown v. City of Stuttgart, 312 Ark. 97,847 S.W.2d 710 (1993).
The opinion
Steele Hays, Justice, dissenting. Whatever else may be said of this agreement, the City of Stuttgart is not bound by it if, during any fiscal year, the city lacks the funds needed to meet its obligations under the lease. That, in my view, renders the agreement permissible under Act 508 of 1991 and conformable with Ark. Const, art. 12, § 4. Whether the arrangement more nearly resembles a sale than a lease need not concern us in the slightest, so long as its terms and conditions are within the bounds of the law.
It seems odd the majority would include a reference to Reuven Mark Bisk, State and Municipal Lease-Purchase Agreements: A Reassessment, 7 Harvard J.L. Pub. Pol’y 521, 534 n. 74 (1984). Under section E (p. 536) Mr. Bisk discusses those cases upholding lease-purchase agreements with a nonappropriation clause, observing that:
No general obligation constitutional debt arises under lease-purchase agreements with a nonappropriation mechanism, Wisconsin’s approach teaches, because the very existence of that obligation is contingent upon the city’s exercise of an option fully within its own control.
Mr. Bisk discusses the lease-purchase issue, which so absorbs the majority in this case:
The Wisconsin approach “dismisses the ‘bona fide’ lease versus purchase installment issue as largely irrelevant to the context of state and municipal debt limitations once a nonappropriation mechanism has been introduced. The Wisconsin court does not consider these principles invalid but rather inapplicable. Instead, it speaks directly to the nature of constitutionally restricted debt. Debt, we are told, arises under any instrument, including a lease-purchase agreement, only when there is a promise to pay sums such as rents accruing in the future whether funds are available that year or not." [My emphasis.]
The majority dismisses the provision in the lease for termination with the comment that it would result in lost equity and interest. But we have often said (and often disregarded) that the prudence of the acts and measures of other branches of government are not within the purview of this branch. Arkansas State Highway Commission v. White, 273 Ark. 264 , 620 S.W.2d 280 (1981); Commissioner of Revenues v. Dillards, Inc., 224 Ark. 826 , 276 S.W.2d 424 (1955). I would affirm the chancellor’s order.