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Chicot County Drainage District v. Baxter State Bank
United States Supreme Court
308 U.S. 371 (1940)
Chicot County Drainage District (Chicot) (defendant) filed an action in the United States District Court for the Western Division of the Eastern District of Arkansas for modification of its debt as permitted by the Act of May 24, 1934 allowing “Municipal-Debt Readjustments.” The court followed the procedures set out in the statute and readjusted Chicot’s debt. The decree entered in March 1936 created a fund for the payment of old obligations, but required that all such obligations be brought to the court within one year. Baxter State Bank and others (Baxter) (plaintiffs) sued Chicot for preexisting bonds on July 24, 1937. Chicot raised a defense of res judicata based on the earlier decree, and Baxter demurred. At the bench trial, evidence proved that Baxter was given notice of the earlier proceedings but did not appear. The court found for Baxter, and the Circuit Court of Appeals affirmed on the basis of a United States Supreme Court decision declaring unconstitutional the statute under which the readjustment action was decided. Chicot petitioned the United States Supreme Court for certiorari, which was granted.
Rule of Law
Holding and Reasoning (Hughes, C.J.)
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