IRVINE v. GIBSON

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District Court of Appeal, Third District, California.

IRVINE v. GIBSON, County Treasurer, et al.

Civ. 6484

Decided: July 31, 1940

W. Coburn Cook, of Turlock, for petitioner. Horace B. Wulff, of Sacramento, Thomas Rutledge, of Colusa, Huston, Huston & Huston, of Sacramento, and Hudson Ford, of Colusa, for respondents. Milton T. Farmer, of San Francisco, amicus curiae for respondents.

By means of a writ of mandamus the petitioner seeks to compel the Treasurer of Reclamation District No. 108 to pay interest on sixteen reclamation bonds of the face value of $1,000 each for the period of time following their maturity until they are actually paid. The bonds matured January 1, 1936. All interest-bearing coupons have been detached and fully paid. April 26, 1939, there was paid on account of the principal amount due on said bonds, the sum of $10,400, leaving a balance of $5,600 thereof unpaid. No interest on any of the bonds was paid after their maturity on January 1, 1936. The treasurer refused to pay interest on the bonds after their maturity, and also refuses to pay the balance of the principal sum due thereon until the bonds are surrendered.

It is contended that reclamation bonds bear interest at the rate specified therein “until paid” even after maturity of the bonds and all interest-bearing coupons have been detached and paid.

A general and special demurrer to the petition for a writ of mandamus was filed on the grounds that the petition fails to state facts sufficient to constitute a cause of action, and that the proceeding is barred by the statute of limitations. More than four years elapsed after the maturity of the bonds before the claim for interest after that date was made. The petition contains no allegation of facts which would toll the statute of limitations. An answer to the petition was also filed denying the material allegations thereof.

The petition alleges the due organization of Reclamation District No. 108; the qualification of California Gibson, Treasurer of Colusa County, as treasurer of the district; the issuing and sale of bonds of the denomination of $1,000 each with their attached interest-bearing coupons payable in January and July of each year at the annual rate of 6 per cent interest payable semi-annually, as provided by section 3480 of the Political Code; that the petitioner owns sixteen of such bonds which matured January 1, 1936; that all of said bonds became due and payable on the last-mentioned date and all interest-bearing coupons have been detached therefrom and paid; that on April 26, 1939, $10,400 was paid on account of the principal on said bonds, leaving a balance thereof unpaid in the sum of $5,600 which the Treasurer is ready and willing to pay upon surrender of the bonds; that she has paid no interest on any of said bonds after their maturity and refuses to do so on the claim that the bonds do not bear interest after the date when they became due. The petition prays for a peremptory writ of mandamus compelling the Treasurer to pay the balance of the principal sum due on the bonds, together with semi-annual interest at the rate of 6 per cent on $10,400 from January 1, 1936, until that sum was paid April 26, 1939, and interest on $5,600 from January 1, 1936, until said sum is paid in full.

We are of the opinion this cause of action is barred by the provisions of section 337 of the Code of Civil Procedure, and that the petition fails to state a cause of action for the reason that the bonds do not bear interest after maturity.

Clearly, this claim for interest on reclamation bonds after the date of their maturity if under any circumstances it is valid, is based on a “contract, obligation or liability founded upon an instrument in writing”. Under sections 335 and 337 of the Code of Civil Procedure such actions must be commenced within four years from the time the claims accrue, unless the statute is tolled for lack of funds to pay the claim or otherwise. Curtis v. Rialto Irrigation District, 44 Cal.App. 738, 742, 187 P. 117; Hewel v. Hogin, 3 Cal.App. 248, 84 P. 1002; Moody v. Provident Irrigation District, 12 Cal.2d 389, 395, 85 P.2d 128; Meyer v. City & County of San Francisco, 150 Cal. 131, 88 P. 722, 10 L.R.A.,N.S., 110.

Section 337.5 of the Code of Civil Procedure, which provides that “An action upon any bonds or coupons issued by the State of California” must be commenced within ten years, has no application to this case for the reason that the bonds in question were not issued by the state of California.

It is true that the running of the statute of limitations would be suspended during the period of time following the maturity of bonds when the district is without funds with which to pay them. Moody v. Provident Irrigation District, supra. When a complaint shows on its face that the cause of action would ordinarily be barred by the statute of limitations, a special demurrer on that ground should be sustained unless circumstances are also alleged which toll the statute. Sullivan v. Shannon, 25 Cal.App.2d 422, 428, 77 P.2d 498; Pleasant v. Samuels, 114 Cal. 34, 38, 45 P. 998. In the Sullivan case, supra, suit was brought to recover the balance due on a bond. The complaint showed on its face that more than four years had expired since the maturity of the bond. No facts were alleged to indicate the tolling of the statute of limitations. It was contended on appeal that the running of the statute had been suspended by the absence of the defendant from the state. A special demurrer on the ground that the action was barred by the provisions of section 337 of the Code of Civil Procedure was sustained. The court held that when the complaint affirmatively alleges facts showing that the statute of limitations under ordinary circumstances will have expired, in the absence of a recitation of further facts indicating that the statute, for some valid reason, ceased to run, the action must be deemed to be barred.

In the present proceeding the petition alleges facts definitely showing that the suit was not commenced for more than four years after the maturity of the bonds in question. No facts are recited which indicate the suspending of the statute. The demurrer on that ground should therefore be sustained. The petitioner would be granted leave to amend his petition in that regard except for the fact that we are of the opinion he may not recover on the merits of his cause for the reason that the bonds do not bear interest after their maturity.

Reclamation bonds issued under the provisions of section 3480 of the Political Code do not bear interest after their date of maturity. Such bonds and the interest due thereon are payable only from a special fund created by statute for that express purpose. The attached coupons indicate the measure of responsibility for interest which is payable only “upon the presentation of the proper coupons therefor”. The section of the code, construed as a whole, clearly indicates that liability for the payment of interest ceases at the date of the maturity of the bonds. Meyer v. City & County of San Francisco, 150 Cal. 131, 88 P. 722, 10 L.R.A.,N.S., 110; Davis v. Porter, 66 Cal. 658, 6 P. 746; Bates v. Gerber, 82 Cal. 550, 22 P. 1115; Engebretson v. City of San Diego, 185 Cal. 475, 197 P. 651; Sawyer v. Colgan, 102 Cal. 283, 36 P. 580, 583, 834, 27 A.L.R. 94, note. The case last cited holds that: “The state is not liable to pay interest on its debts, unless its consent to do so has been manifested by an act of its legislature, or some lawful contract of its executive officers.”

In the present case section 3480 of the Political Code provides for the payment of interest on the bonds semi-annually only “upon the presentation of the proper coupons therefor”. It specifically provides that “Coupons for each installment of interest shall be attached to said bonds”. In this case all of the interest-bearing coupons have been detached, presented and paid. No coupons for interest after the maturity of the bonds have been provided for by law, and no coupons can be presented for that purpose. The form of the interest-bearing coupons to be attached to the bonds as provided by the act specifies the exact amount of interest to be paid. It reads:

“The county treasurer of _ County, California, will pay to the holder hereof on the _ day of _, 19_, at his office in said county of _, the sum of $_ in gold coin of the United States out of the funds of reclamation district No. _ for interest on bonds of said district numbered _.”

The case of Kendall v. Porter, 120 Cal. 106, 45 P. 333, 52 P. 143, upon which the petitioner relies in support of his claim of interest on the bonds after their maturity, is clearly distinguishable from the proceeding in this case. Justices McFarland and Van Fleet rendered an able dissenting opinion thereto. That particular case was in fact distinguished by the Supreme Court in the case of Meyer v. City & County of San Francisco, supra, holding that the statute is the measure of the bondholder's rights to interest on the bonds and that in the absence of a provision for the payment of interest after maturity of the bonds no such payments could be allowed. In distinguishing the Kendall case the court said [150 Cal. 131, 88 P. 724, 10 L.R.A.,N.S., 110]: “We think, however, that the act there construed is easily distinguishable from that here involved. The bonds there under consideration were the general bonds of the City of Sacramento, and both the principal and the interest [were] to be paid out of a certain fund consisting of a certain proportion of the general annual revenues of the city. This revenue would, of course, continue indefinitely after the maturity of the bonds as well as before. There was not in that case separate taxes for the interest and the principal, to be applied exclusively for the purposes for which it was levied, nor a specified number of levies to be made for a specified number of years. There was no certainty that the fund provided in that case from the annual revenues of the city would be sufficient to pay the bonds at or before their maturity, as is the case here.”

It is true that municipal bonds which are payable from the general funds of a city, the acquiring of which funds are not limited by statute, may create a liability for the payment of interest after their maturity. That was the principle on which the Kendall case was decided, but it has no application to the present situation where the liability is limited to a special fund created by the levying of assessments only for the payment of particular bonds with their attached interest-bearing coupons in a specified aggregate sum. The liability for the payment of interest on ordinary municipal bonds from general municipal funds which are unlimited by statute, upon which rule the petitioner relies, is concisely stated in 6 McQuillin's Municipal Corporations, 2d Ed. (Rev. vol. 6), page 134, section 2431, as follows: “Municipal bonds ordinarily bear interest. And moreover it should be said that interest does not stop running at the maturity of the bonds, and this is so although the coupons attached do not extend beyond the maturity of the bonds. The interest, as to coupon bonds, is represented by the coupons, and such coupons in turn bear interest from the time they become due, at the rate fixed by the law of the place where payable.”

The statement of law announced in the preceding quotation is not in conflict with the Meyer case heretofore cited. On the authority of that case the peremptory writ of mandamus is denied.

The petition for a rehearing is denied; the amended petition for a writ of mandamus is denied without prejudice.

THOMPSON, Acting Presiding Justice, delivered the opinion of the Court.

We concur: PAULSEN, Justice pro tem.; TUTTLE, J.