Kendall v. Porter

THE COURT. This cause was submitted in Bank, and on June 9, 1896, the following decision was rendered: “HENSHAW, J.—This is an application for a writ of mandate to compel the respondent, as treasurer of the city of Sacramento, to pay the plaintiff the principal of certain overdue bonds of the city of Sacramento, with interest thereon from the date of their maturity. A demurrer to the petition was sustained by the trial court, and judgment thereupon entered against plaintiff, from which judgment he prosecutes this appeal. “The question thus presented is whether the bonds of the city of Sacramento, issued under the provisions of the act of April 25, 1858 (Stats. 1858, p. 267), bear interest after their maturity. “Various questions touching the construction of the act of 1858. under which these bonds were issued, and the rights of the bondholders thereunder, have been decided by this and other courts. (Meyer v. Brown, 65 Cal. 583; Davis v. Porter, 66 Cal. [108] 658; Bates v. Porter, 74 Cal. 224; Bates v. Gerber, 82 Cal. 550; Davis v. Sacramento, 82 Cal. 562; Kennedy v. Sacramento, 10 Saw. 29.) By these cases it is held that the act constitutes a contract between the city and the bondholders, and that the bondholders’ rights upon.the one hand, and the duties of the city and its officers upon the other, are measured by the terms of the statute. Thus in Davis v. Porter, supra, the court decided that the treasurer of" the city was not authorized to pay interest on coupons after they had matured and remained unpaid, holding that the overdue coupons did not bear interest, because the act nowhere in its terms provided for the payment of interest upon interest. Bates v. Gerber, supra, affirmed the case of Davis v. Porter, supra, and the court said: ‘The statute under and by virtue of which the bonds were issued was the basis of and became part of the contract, and the bondholders must be held to have taken the bonds with the understanding and agreement that they were only" entitled to the principal and the annual interest, and that, if the fund provided for the payment thereof should be insufficient to meet the same that no interest on the coupons was provided for or could be recovered.’ “The statute being thus the measure of the bondholders’ rights, it becomes important to consider its provisions in relation to the interest upon the bonds, for the bondholders will be entitled to just such interest and no other as by a fair intendment the statute provides that they shall have. Section 37 of the act authorizes the city of Sacramento to issue bonds, not exceeding the sum of one million six hundred thousand dollars, Tearing interest at the rate of six per cent per annum from the first day of January, 1859, and payable at the office of the treasurer. . . . . The interest on said bonds shall be made payable at the office of the treasurer, on the first day of January of each year.....Coupons for the interest shall be attached to each bond so that they may be removed without injury to the bond. Said coupons consecutively numbered shall be signed by the treasurer.’ Section 38 provides: ‘The annual interest and principal of all bonds issued for claims against said city shall be paid from the interest and sinking fund provided by section 35, and in the manner otherwise provided in this act.’ Section 40 provides: ‘It shall be the [109] duty of the treasurer to pay the interest on said bonds, when the same falls due, out of the interest funds, as provided in this act/ Section 35 of the act creates the interest and sinking fund, and declares that the fund ‘shall be applied to the payment of the annual interest, and the final redemption of bonds issued for city indebtedness/ It is by this language specifically declared that the bonds shall bear interest; that the interest shall be payable annually from the date of their issuance, and that the interest shall be made a charge upon and payable out of a fund created by and designated in the act. There is no suggestion or intimation that the interest is to cease upon the maturity of the bond. It is a rule so general and well established that it is not even controverted by respondents in this case that interest bearing coupon bonds continue to bear interest after their maturity. (People v. Getzendaner, 137 Ill. 234; Pruyn v. Milwaukee, 18 Wis. 367; Cromwell v. County of Sac, 96 U. S. 51; Beckwith v. Hartford etc. R. R. Co., 29 Conn. 268; 76 Am. Dec. 599; Stats. 1850, p. 92; Civ. Code, secs. 1917, 1918; Kohler v. Smith, 2 Cal. 597; 56 Am. Dec. 369; Nash v. Eldorado Co., 24 Fed. Rep. 252.) “To take these bonds out of the operation of this rule there must be pointed out some language in the statute evincive of an intent so to do, some declaration which will justify the court in saying that it was designed that the interest should cease upon the maturity of the bond. That this intent can be deduced from the fact that the coupons attached to the bonds extended only to maturity is a proposition met and disposed of by People v. Getzendaner, supra, and Pruyn v. Milwaukee, supra. The attached coupons never extend beyond the maturity of the bond. The presumption is always that a contract will be performed, not violated. It is presumed, therefore, that the bonds will be met and paid at maturity. “When we come to scan the language of the act above quoted, we find that the bonds are to bear annual interest from the date of their issuance, without any limitation upon the length of time that annual interest is to run. We find that the interest is payable at the office of the treasurer on the first day of January of each year. We find also that a fund is created which is to be devoted to the payment of the annual interest and to the final [110] redemption of the bonds, and, finally, that it is made the duty of the treasurer to pay the interest on the bonds, when it falls due, out of the interest funds provided in the act. These terms not only show no intention to terminate the interest upon the maturity of the bonds, which intention must be expressed if this contract is to be made an exception to the general rule, but, to the contrary, they indicate with some clearness the intent that the bonds shall bear annual interest from the date of their issuance until the time they are actually paid. Kor can there be discerned in this any hardship upon the city. It is but the application of the general statutory rule allowing interest for the detention of moneys due. “In Beals v. Amador County, 28 Cal. 449, which is relied upon by respondent, the question under consideration by the court involved and was determined upon an entirely different principle from that which governs this consideration, and this was pointed out by the learned author of that opinion in Nash v. El Dorado County, 24 Fed. Rep. 252. In Beals v. Amador County, supra, an equitable demand growing out of the division of a county had been recognized by the legislature, which had imposed upon the new county an obligation to pay a specific sum. The obligation extended no further than the law expressly required, and the general principle here is as declared in the case of Whiteman v. United States, 23 Ct. of Cl. 144, that from a legal obligation created solely by statute no obligation to pay interest will ordinarily arise. In the case at bar, however, the obligation to pay interest is itself a part of the contract. “The declaration in Soher v. Calaveras County, 39 Cal. 134, that interest was not provided for after the maturity of the bonds, is explicitly made to rest upon the authority of Beals v. Amador County, supra, but as has been said, and as was pointed out by the learned author of the opinion in Beals v. Amador County, supra, the case is not authority for such a doctrine. “The question whether or not there was money in the treasury to pay the bonds at the time they became due, and that thus the holder of a matured bond who had failed to present it at maturity could not recover interest, does not here arise. If such be the facts, they might constitute a defense to the present action, [111] but they cannot he considered upon demurrer. The treasurer is specially charged with the duty of paying the interest. If he can make a valid and sufficient Showing why that interest should not he paid, he may make it in his return,' but under the facts here pleaded, as it is made the explicit duty of the treasurer to pay the interest upon these bonds as it becomes due, mandamus may be employed to compel him to perform that duty. “It follows, therefore, that the demurrer was improperly sus- ' tained. The judgment is reversed and the cause remanded, 'with directions to the trial court to overrule the demurrer to the petition, with leave to the treasurer to make his answer or return thereto. “Garoutte, J., Temple, J., and Harrison, J., concurred.” Thereafter, upon petition of attorneys' for defendant, a rehearing in Bank was granted, and upon further argument the cause was again submitted. After due consideration, we are satisfied that the opinion heretofore rendered in Bank is sound, and for the reasons therein set forth it follows that the demurrer was improperly sustained. Therefore the judgment is reversed and the cause remanded, with directions to the trial court to overrule the demurrer to the petition, with leave to the treasurer to make his answer or return thereto.