CITY OF LOS ANGELES v. LOS ANGELES COUNTY (1937)

This is an appeal from a judgment in eleven consolidated actions against the County of Los Angeles and Los Angeles Railway Corporation and the latter's predecessor in interest. The action was for the recovery of approximately $100,000, representing collections of franchise charges which the County of Los Angeles had received from the railway and its predecessors over a period of about twenty years on account of eleven street railway franchises which had been issued by the county.

To each of the separate actions the county answered, alleging, among other things, that the major portions of the items of plaintiff's claims were barred by the provisions of section 4075 of the Political Code and by subdivisions 1 and 3 of section 338, subdivision 1 of section 339, and section 343 of the Code of Civil Procedure. The railway answered by general denials and also defended upon the grounds of agency, impairment of contract, double payment for its use of the streets, estoppel, failure of notice, laches, and various statutes of limitation.

It appears from the evidence that the supervisors of the County of Los Angeles in 1906 granted to the predecessor of the railway certain franchises for the use of the highways lying in portions of the then unincorporated area of the county. In 1907, 1909, and 1923 other franchises were granted. Subsequent to the issuance of these franchises the areas in which the franchises were granted were annexed to the City of Los Angeles. Each of the franchises so granted expressly reserved in the county, in the event of municipal annexation, the right to collect and receive the percentage of gross receipts payable thereunder for the use of the franchise. Following the annexation, a controversy arose between the city and the county with respect to the validity of these reservations, the railway having made the payments of the percentage of gross earnings specified in each of the franchises to the county, up to and including the year 1930, after which time all payments have been made to the city.

In 1930 and 1931 claims were presented to the board of supervisors by the city for all of the money received by the company arising from annexed territory. These claims were denied by the board and in due time these actions were brought.

After trial the court found in favor of the railway, holding that no cause of action was shown against it by the record; that the gist of the action was for money had and received by the county which belonged to the city and under no theory could the railway be held accountable. The city contends that, in effect, the trial court held that the railway was not liable in this action because of misjoinder, but we believe the trial court held, and properly so, that upon the record as submitted no liability was found to exist against the railway and that the city had selected as its debtor the County of Los Angeles. The railway had made all payments required of it and no evidence was offered by the city against the railway as to such payments, the basis of plaintiff's action being, as the trial court said, the receipt by the county of money belonging to the city. The record discloses that the railway had not received any money belonging to the city nor was there any showing of a trust relationship nor of fraud of any kind.

As to the county, the court refused to make any finding as to the application of the various statutes of limitation pleaded by the county as a bar, holding that statutes of limitation did not operate against a municipality as a litigant, and therefore as a conclusion of law and not as a finding of fact the right of plaintiff to recover was not barred by any such statutes.

Inasmuch as all parties to this litigation are in accord that the decision in San Francisco–Oakland Terminal Railways v. County of Alameda, 66 Cal.App. 77, 225 P. 304, has determined all questions on appeal except that of limitations, but two questions are presented here for consideration: First, may a claim of a municipality against a county be barred by a statute of limitations; and, secondly, does section 4075 of the Political Code apply to demands of a city against a county so as to bar those items under the facts of this case?

Appellant County of Los Angeles, in a very able and exhaustive brief, claims that the action here is one in which the city seeks to recover upon a money demand which inures to the city in its private right for the benefit of itself in its corporate capacity, and is not seeking to recover upon behalf of the people of the state, and quotes from McQuillin on Municipal Corporations, § 2653: “It is generally held that the Statute of Limitations may be interposed as a defense in an action by a municipal corporation to enforce rights held by it in its private or corporate capacities, but it is no defense in actions by the municipality involving public or governmental rights.”

On the general question as to the applicability of statutes of limitation to actions brought by municipalities, the county cites, among others, the case of Brown v. Board of Education, 148 Okl. 97, 298 P. 249. That was an action by the board of education against Brown as county treasurer and the board of county commissioners to recover on behalf of the school department interest which had accrued by reason of the deposit in banks by the county of school money belonging to the school district. There the court held the action involved an accounting between two municipalities of the state, that the adjustment of fiscal errors on the part of the municipalities of the state required prompt proceedings on the part of the one aggrieved, and such actions could not be postponed beyond the statute of limitations, supporting their holding by very cogent and practical reasons for such a rule. To the same effect were Board of County Commissioners v. City of Marlow, 148 Okl. 126, 298 P. 255, and School District No. 34 v. Joint School District No. 34, 156 Okl. 5, 9 P.(2d) 771.

In City of Chicago v. Chicago & N. W. Ry. Co., 163 Ill.App. 251, the distinction between public rights and local or municipal rights with respect to the application of the statute of limitations as here contended for by the county is set forth quite fully. The court there said: “The well settled law in this state is that the statute of limitations will not run against a municipal corporation in actions involving strictly public rights. Brown v. Trustees of Schools, 224 Ill. 184 [79 N.E. 579, 115 Am.St.Rep. 146, 8 Ann.Cas. 96], and cases there cited. Controversies over the application of this rule more frequently arise from a failure to understand what are and what are not ‘public rights,’ than from a failure to understand the rule. In a sense, every right possessed by a municipal corporation is a public right, and every class of property held by it is held in its public capacity, and for public use, but for the purpose of distinguishing such rights, as only that part of the public included within the corporate limits of a municipality are interested in, from such rights in which all the people of the State are interested, the former class is designated by law writers and courts as ‘private rights,’ and the terms ‘public rights,’ ‘public uses' and ‘public capacity’ are used only with reference to such rights, uses and capacities, as all the people of the State are alike interested in. To actions brought in relation to ‘public rights,’ using the term to indicate such rights as belong to all the people of the State alike, the statute of limitations does not apply, while as to actions brought in relation to ‘private rights,’ using that term to designate such rights as are limited to some local subdivision or municipality, such as a city, village, school district or the like, the statute of limitations applies to the same extent as to individuals.”

In Brown v. Trustees of Schools, 224 Ill. 184, 79 N.E. 579, 580, 115 Am.St. Rep. 146, 8 Ann.Cas. 96, it is pointed out that the use of streets and highways, while maintained by municipalities, are not for the use of the inhabitants of the city alone, but are maintained for the free use of all of the people of the state. “Such rights,” the court there said, “are clearly distinguishable from the rights or interest of the inhabitants of a locality and property acquired for a mere local use, such as city offices, a library site, or the use of a fire department. Such property is held and used for strictly local purposes.” While we do not adopt the distinction between public and private rights as there defined, nevertheless this classification of streets and highways is in accord with the rule in California. In Phillips v. Leininger, 280 Ill. 132, 117 N.E. 497, the same distinctions are applied; also in Payette v. Marshall County, 180 Iowa, 660, 163 N.W. 592.

In City of Fullerton v. County of Orange, 140 Cal.App. 464, 35 P.(2d) 397, also cited and discussed by appellant, the court quotes with approval from City of Chicago v. Chicago & N. W. Ry. Co., supra, adopting the rule that as to actions brought in relation to “public rights,” that is such rights as belong to all the people of the state alike, the statutes of limitation do not apply, but to actions brought in relation to private rights, meaning thereby such rights as are limited to some city or district, or affecting a restricted number of the people of the state, the statutes of limitation are applied the same as to an individual, and supports the adoption of this distinction with citations of numerous authorities from other states. While recognizing that this definition is supported by able authority, we believe a different classification has already been recognized and accepted in California. In Board of Education v. Martin, 92 Cal. 209, 28 P. 799, 801, the adverse possession of certain lands of a school district were involved, and the court there said:

“In all matters relating to such government and management they are but agencies of the state, with an authority limited to the territory designated in their organization. The property which is intrusted to their management is not divested of its public character, nor is it any the less subject to the control of the state, or to the rules which are applicable to other property of the state, because it is situated within the boundaries of such corporation. * * * The proprietary interest in all such property belongs to the public, and, whether the legal title to such property be in the municipality or any of its officers or departments, it is at all times held by it or them for the benefit of the whole public, and without any real proprietary interest therein. * * *

“This rule is universal in its application to all property set apart or reserved for public use, and the public use for which it is appropriated is immaterial. The same principles which govern in the adverse holding of a street, a public square, a quay, a wharf, a common, apply to the adverse holding of a court–house, a jail, or school–house. The public is not to lose its rights through the negligence of its agents, nor because it has not chosen to resist an encroachment by one of its own number, whose duty it was, as much as that of every other citizen, to protect the estate in its rights. This question has been determined, and these principles have already been established in this state in the case of County of Yolo v. Barney, 79 Cal. 375, 21 P. 833 [12 Am.St.Rep. 152].”

By the language here used and by the later references to this case we see that the Supreme Court of this state has definitely repudiated the rule that when the inhabitants of a municipality alone have an interest in the subject–matter, it shall then be considered as being of a private nature and that it shall be considered as a public right when the public at large have the principal use or interest. Following the Martin Case, supra, the designation of rights as proprietary in character, that is when done or exercised for the private advantage of the governmental agency, and as governmental when the municipality is exercising powers essentially public, has become fixed in our legal terminology and conflicts with the holding of other jurisdictions which classify such rights on a different basis. Chafor v. City of Long Beach, 174 Cal. 478, 163 P. 670, L.R.A.1917E, 685, Ann. Cas.1918D, 106. The right claimed by the city here is of a governmental nature, being the right to collect certain payments required by the Legislature to be paid to the proper public body for the use of the public streets by a street railway, an incident of the right to grant franchises. It thus appears that the right of the city here asserted, being of a governmental nature as we have come to understand the meaning of that term, statutes of limitation do not apply.

Let us now consider the application to respondent of the various statutes cited by appellant. The principle of law that general words in statutes do not apply to municipal corporations unless expressly made so applicable is so well established by the decisions of this state that the citation of authority in support thereof is hardly necessary. Such a rule will be found expressed in the cases of Mayrhofer v. Board of Education, 89 Cal. 110, 26 P. 646, 23 Am.St.Rep. 451; Skelly v. Westminster School District, 103 Cal. 652, 37 P. 643; Reclamation District No. 551 v. County of Sacramento, 134 Cal. 477, 66 P. 668; City of Inglewood v. County of Los Angeles, 207 Cal. 697, 280 P. 360. This also constitutes another ground of distinction between the rule in California and in Illinois, and in studying the cases cited from the latter state it should be kept in mind that the rule of construction in Illinois is just contrary to California in this regard. People v. Deep Rock Oil Corporation, 343 Ill. 388, 175 N.E. 572. It therefore follows from the application of this principle that sections 337 to 344 of the Code of Civil Procedure, which prescribe the limitations upon the commencement of civil actions would not apply to the state, counties, or municipalities, unless expressly made applicable, and the sections are not so drawn. Applying this rule to section 345 of the Code of Civil Procedure, we find that this section also is not made applicable to municipal corporations. Section 345 of the Code of Civil Procedure provides: “The limitations prescribed in this chapter apply to actions brought in the name of the state or for the benefit of the state, in the same manner as to actions by private parties.”

In Re Estate of Houk, 186 Cal. 643, 200 P. 417, the court had before it section 1313 of the Civil Code. It appears that the city of Oceanside was made a beneficiary of a certain fund for the erection of a municipal pier. The executor refused to pay over this bequest on the ground that the deceased had made the same less than thirty days before his death. Section 1313 required such bequests must be made thirty days before death for such bequest to be valid. To this requirement there was the express exception: “That bequests and devises to the state or to any state institution or for the use or benefit of the state or any state institution, are excepted from the restrictions of this section.”

The city of Oceanside contended it was within this exception, but the court held that a municipal corporation was not embraced therein, being neither a state nor a state institution. The doctrine of statutory construction of the Houk Case was approved and followed in Re Estate of Johnston, 197 Cal. 28, 239 P. 397.

Appellant also relies upon section 4075 of the Political Code, contending that section bars recovery of any payments entered upon the county's books more than one year after the preceding payment. Section 4075 refers only to certain conditions precedent to the filing of a suit with which certain classes of persons and entities must comply. However, the right to sue a county does not rest upon the provisions of this section but is a right conferred by the Legislature. Furthermore, this section was amended in 1931 (St.1931 p. 197), but statutes of limitation do not act retroactively, as was held in Nelson v. Nelson, 6 Cal. 430, and later in Swamp Land District v. Glide, 112 Cal. 85, 44 P. 451. Prior to this amendment also the city had filed a claim with the county in compliance with section 4075 as it then read, giving the board of supervisors an opportunity to pay the demand if it saw fit. However, the language of section 4075, not expressly including municipalities, is, under the rule heretofore considered, immune from general limitations.

The judgment from which this appeal is taken should be affirmed, and it is so ordered.

Mr. Presiding Justice PULLEN delivered the opinion of the court.

We concur: THOMPSON, J.; PLUMMER, J.