State ex rel. First National Bank v. Cook

Irvine, C. This is an original application for a writ of mandamus to compel the respondent-, treasurer of the city of York, to pay a warrant alleged to have been issued by the authorities of that city in favor of the relator for $1,789. It is alleged that this warrant was drawn on the water fund, and that the respondent has in his possession over $3,000 in said water fund applicable to the payment of the warrant. The warrant is dated August 15, 1889, and indorsed as having been presented on the same day, and not paid for want of funds. The answer admits that the treasurer now holds in his possession more than enough to pay the warrant, belonging to what is denominated the water fund, and derived from taxes collected under the levy of 1889; admits that the warrant was drawn as alleged; that it was presented and payment refused. As grounds for refusing to pay the warrant the respondent alleges: First, that the warrant does not in form comply with the requirements of the law; second, that there was no valid appropriation against which the warrant could be drawn; third, that no authority was ever granted to issue the warrant to the relator; fourth, that the city of York had entered into a contract with one Strang and another, granting to them a franchise for a system of water-works, contracting with them to lease a certain number of hydrants at a certain rental, and agreeing that in case Strang and McConnell should issue mortgage bonds upon said water works, a sufficient sum from the hydrant rentals to discharge the interest upon such bonds should be paid to the trustees under the mortgage as the rentals became payable; that this franchise passed to a corporation known as the York Water-works Company, which made its mortgage securing bonds amounting to $60,000, and that the- agreement of the city referred to was, by its clerk, certified upon such bonds; that the water-works company, about July 1, 1889, filed its claim — 321 — --against the city for hydrant rentals for the past six months; that its claim was allowed in the sum of $1,789, and that the warrant in question was drawn for that claim; that Strang, one of the original grantees of the franchise, a stockholder in and the agent of the water-works company,in order to procure the allowance of the claim referred to, represented that all the interest coupons on said bonds, up to July 1, 1889, had been paid and canceled, and, relying upon that representation, the claim was allowed; whereas, in fact, said coupons had not been paid, but are still outstanding, and the holders thereof demand payment from the city; that on May 22, 1890, the city council passed a resolution, set out in the answer, that no further payments -be authorized on account of hydrant rentals until a settlement should be had between the water-works company and its bond-holders, and all coupons surrendered to the city, and directed the treasurer not to pay the warrant in question until such settlement should be had; that the trustee of the mortgage had brought suit-in the circuit court of the United States to foreclose the same on account of default in the payment of said interest coupons; fifth, that for certain reasons set out in the answer the contract, with reference to hydrant rentals, was without legal authority •and void; sixth, that no estimate had been made or published, as required by statute, of the expenses of the city •government. We have very briefly stated the nature of some of these ' defenses for the reason that it will not be necessary to con-aider them all. The referee appointed for the purpose has reported his findings of fact, the sufficiency of the.evidence to sustain which is not questioned. From these findings it appears that the claim was presented, allowed, and the warrant issued for the purpose stated in the answer; that the plaintiff purchased the claim after its allowance, and befóte the warrant was drawn, without actual notice of the issuance of the bonds; that the bonds and mortgage were — 322 — made and issued as alleged in the answer, and that the contract of the city was as therein set out; that when the warrant was issued Strang represented to the council that the bonds had not been sold; that an action is pending in the federal court as charged in the answer, and that the city has been cited to appear in said case and show cause why it has not paid the past due coupons to the trustee, and that, the rescinding resolution set out in the answer was passed as alleged. The report of the referee finds on all the other-issues, but the facts already stated are sufficient to control the case. It has been held that mandamus will lie to compel the payment by a treasurer of warrants legally issued upon accounts duly audited and allowed, when such warrants have been presented and payment refused, and there-are sufficient funds in the treasury to pay said warrants after the payment of all warrants drawn against that fund prior to the same. (State v. Gandy, 12 Neb., 232.) It will be observed that this rule is restricted to the case of warrants legally issued. It is well settled that such instruments are not negotiable instruments, and that a purchaser thereof does not take the same discharged of any equities-existing against the original holder. (School District v. Stough, 4 Neb., 357; Union P. R. Co. v. Buffalo County, 9 Neb., 449; Burlington & M. R. Co. v. Clay County, 13 Neb., 367.) The reason given in some of the best considered cases for holding such instruments non-negotiable is that a municipal corporation has no power in the absence-of an express grant to issue unimpeachable evidences of indebtedness. Thus, in Police Jury v. Britton, 15 Wall. [U. S.], 566, Mr. Justice Bradley says: “It is one thing for county or parish trustees to have the power to incur obligations for work actually done in behalf of the county or parish, and to give proper vouchers therefor, and a totally different thing to have the power of issuing unimpeachable paper obligations which may be multiplied to an indefinite extent.” And in Mayor of Nashville v. Ray, 19 Wall. — 323 — [U. S.], 468, the following is said in regard to the nature of such warrants: “Vouchers for money due, certificates of indebtedness for services rendered, or for property furnished for the uses of the city, orders or drafts drawn by one city officer upon another, or any other device of the kind, used for liquidating the amounts legitimately due to public creditors, are of course necessary instruments for carrying on the machinery of municipal administration,, and for anticipating the collection of taxes. But to invest such documents with the character and incidents of commercial paper, so as to render them in the hands of bona fideholders absolute obligations to pay, however irregularly or fraudulently issued, is an abuse of their true character and purpose. It has the effect of converting a municipal organization into a trading company, and puts it in the power of corrupt officials to involve a political community in irretrievable bankruptcy. No such power ought to exist, and in our opinion no such power does legally exist, unless conferred by legislative enactment, either express or clearly implied.” It is also said in that case that the officers of a city have no authority to issue warrants for an illegal purpose, and that their acts cannot create an estoppel against the city. ' ' In the absence of a statute conferring special characteristics upon warrants the authorities are practically unanimous that such instruments are merely devices for properly drawing money from the treasury; they are little more than certificates of indebtedness. “The warrant is-not intended to constitute a new debt or evidence of a new debt, * * * but is the prescribed means the law has devised for drawing money from the county treasury.” (Dana v. City of San Francisco, 19 Cal., 486.) An indorsee may sue upon such warrant, not because he has title-under the law merchant, but because the indorsement amounts to an assignment of the debt upon which the warrant is issued. The auditing of claims and issuing war — 324 — rants therefor are not such settlements as to have the force of a judicial proceeding or to estop the corporation issuing the warrant. (Shirk v. Pulaski County, 4 Dill. [U. S.], 209; citing numerous cases.) This must be true when the body-allowing the claim has, not been given authority to act judicially in determining the legality of the claim. While money remains in the possession of the treasurer, the authorities having the power of disposing of the same have entire control of it, and the rescission of an order directing its payment before the payment is in fact made, is as between the holder and the treasurer a defense to the latter. (Tucker v. Justices of Iredell County, 13 Ired. Law [N. Car.], 434; Dey v. Lee, 4 Jones Law [N. Car.], 238.) The case of People v. Klokke, 92 Ill., 134, is very instructive with reference to the question before us. That case was an application to compel the county clerk to issue a warrant and to compel the treasurer to countersign and pay the same. There had been a disputed account between the county and the relator. In the course of the controversy a proposition was made to compromise by the payment of a certain sum, and a resolution had been passed authorizing the payment of another sum. Before the proposition to compromise had been accepted, the commissioners rescinded this resolution, and the court held that under the circumstances the clerk and treasurer would not be compelled by mandamus to issue or pay the warrant. It was further held that whether the board could rightfully rescind the order could not be determined in that action, but that the clerk and treasurer were merely ministerial officers, and whether or not the board could rightfully rescind the order, the resolution rescinding it deprived these officers of their only authority in the premises. In People v. Johnson, 100 Ill., 537, a county warrant had been issued to one Comiskey. Comiskey indorsed it in blank and lost it. It subsequently came into the hands of the relator who purchased it for value without notice of — 325 — the defective title. In the meantime Comiskey had procured a duplicate warrant which was paid. The court said that the drawing of the order did not operate as a payment or change the character of the indebtedness; that such orders are given simply as a part of the system provided for paying county indebtedness; that the loss of the order could not have affected Comiskey’s rights, that while, as a general rule, mandamus will lie to compel the payment of orders legally drawn, still where by reason of extraneous circumstances a well founded doubt arises either as to the right of the applicant to receive the fund or the duty of the officer to pay it, mandamus is not the proper remedy. The claimants must resort to some other appropriate action. Applying these principles to the case before us, we think it plain that the writ must be denied. The issuing of the warrant did not change the nature of the indebtedness. The bank took it subject to all defenses which might have been urged had it been issued to the water-works company. Before its payment the council learned that it had been induced to allow the claim by reason of false representations made on behalf of the water-works company. It then directed its ministerial officer not to pay the warrant. Another action is pending whereby other persons seek to enforce payment to them of the same claim. It is not for the treasurer to review the action of the council and determine for himself whether or not a claim is justly payable to a particular person. He acts only under the authority given by the council acting in accordance with law, when he makes the payment. Without such authority a payment by him would be wrongful and subject him to personal liability. We cannot, in an application for a mandamus against him, undertake to try the disputed claims of the relator and the bond-holders. The bond-holders are not parties to this suit, and the city is not a party. The relator has not shown a clear legal right. Whit denied. Post, J., not sitting.