Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1889-01-15

ii.
J. Hunt. Judge. Samuel Davis VS.. The City of
Sacramento
The complaint herein substantially AYERS that
| in March, 1851, the city of sacramento was in
corporated. This municipality existed until
| April, 1883, when 1t was succeeded by the con-
solidated government known as the city and
county of sacramento. During the existence
Of the former municipality a large amount of
| indebtedness was incurred fol which bonds
| were issued 10 the creditors of the city, which
bonds bore interest at the rate OF 10 per cent per
snnum. Under the last mentioned Act creating
the consolidated government, the latter was
obligated to assume thebonded. indebtedness of
the former municipality. to an amount not to
exceed the sum of 81 800 900. Accordingly the
former Indebtedness was funded by the issu-
ance of some $50 bonds of the consolidated
government in classes of $4,000 eaeh with
proper coupons attached, payable respectively
in the years 1855, $685. 1928 and 1903, with inter
est at the rate Of er cent. per annuIn, payable
on the LIST day of January of each year. The
plaintiff is the owner of a large number of these
coupons, amounting to the sum OF $50. 49l AZ:
and which matured respectively on the list day
1877.
By the statute OF April. 1858. creating the con-
soildated government, it was made the duty of
said government to levy an annual tax in pre-
scrlbed amount for the paymen. of the inter st
upon and for the subsequent reduction of said
bonds
BY Section 40 of the Act of 1885, it was made
the duty OF the Treasurer of the municipality
70 pay the interest on said bonds as it fell due,
for in said Act. The Board of Supervisors were
required to levy, for municipal purposes upon
all taxable property within the city limits
tax OF one dollar. on each one hundred dollars
OF valuation, and the revenues for municipal
purposes thus derived from taxes, together
with the amount of licenses, harbor dues wa er
rents, and fines collected in the Mayors Court,
were To constitute fund, apportioned as fol-
lows: 90 per cent thereof to an interest and
sinking fund.- to be applied to the payment of
the annual interest and final redemption of
OF hnradc ,t.d fl.< -.
school, and contingent funds. IT, at the close
OF any fiscal year, there remained a surplus in
any of the last above mentioned funds, such
surplus was to be transferred to the Interest
and sinking fund.-
subsequently. in April. 1863 another Act of
the Legislature was passed. incorporating the
City OF sacramento as a municipal corporation,
conferrlng upon it all of the rights and fran
chlses, and Imposing upon it all of the obliga-
tons of the former municipality in respect to
such bonded Indebtedness of the city OF Sac
ramento.
The complaint further alleges that the de-
PENDANT herein, the city of Sacramento, and its
o1ncers nave neglected to perform the duties
eDJoined upon 1t by this legislation, in failing to
levy the amount, or rate, of tax prescribed by,
or any amount, or rate, of tax sufficient to pay
the interest upon said bonds. That from April,
1851, until February. 1856 the various Treas.
urers of the city refused to pay the bond cou-
pons i'll the order of their maturity upon pre-
sentation for payment, although there was at
the time of such presentation money in the
defendant and its officers have refused to trans
fer to the interest and sinking fund moneys
properly applicable thereto, whereby there has
resulted at the end of each of the different fiscal
years deficiency in said fund.
This complaint was filed November, 1887 and
demurrer thereto was submitted for considera-
ton, for the first tine. upon the commencement
OF the trial of this action Inasmuch, however
as an answer was filed by the defendant which
not only presented the issues OF the law in
VOWED in the demurrer, but also issues of fact
ha IlrarF t-nI
until after the final submission of the case in
order that the trial might proceed and the
cause be ultimately determined upon all ones
lions of both law and fact arising therein For
thi, reason, and in view OF the conclusion here
matter reached, the demurrer is overruled and
the case will be considered and determined
upon its merits
twill be observed that the amount of interes.
sought TO be recovered herein upon the matured
coupons is almost equal to the principal of said
coupons, result arising from the fact that
prior 10 the year 1878 the rate of legal interest
was 10 per cent. per annum; subsequently the
rate was changed to per cent. per annum So
that the amount of interest thus accrued upon
the coupons is the arrearage OF over eleven
years upon the coupons Que in 1876. and over
ten years upon the coupons due in 1877, and the
rate OF interest thus claimed exceeds the rate of
interest provided for in the bond
First-The first question must be resolved in
the affirmative. 1t is now well-established
rule OF law that coupons like those in question
possess the qualitiesl of commercial paper
able and pass by delivery separate action
may be maintained upon them, and the amount
for which they are issued draws interest from
their face maturity.
Second-The vital question in this case is the
one secondly presented. viz: Has the plaintiff
herein right of action against the defendant?
In the charter OF 1853, creating the consolidated
government known as the City and County of
sacramento. it was provided thai said munich
pality should not be sued in any action what
ever nor should its property or revenue be sub
10 ffn
The charter of 1863 creating the present mu-
mclpallty, declared that the city of Sacramento
may be sued upon bonds. covenants, etc, pro-
vided THAT such bond, covenant agreement
contract. matter or thing that was the cause of
action has been made or entered into after the
passage OF this Act"
In view of these statutory inhibitions il is
claimed by defendant that this action cannot
be maintained.
Questions relating to the liability of the CITY
of Sacramento upon the bonds and coupons in
question, have arisen in large number of
cases, and this subject has been prolific of liti-
CATION. As the result of the adjndications in
those cases, the following principles have been
definitely settled:
l. In Meyer VS.. Porter, 65 Cal e. and in Free
Mill VS.. Chamberlain I'D. SOB, the right of the
bondholders by writ of mandamus, to compel
the Treasurer of the city of Sacramento to pay
out OF the interest and sinking fund, when
there were sufficient funds for that purpoee the
amount due upon matured coupons, was sus-
tanned. In Meyer VS.. Brown, 65 Cal. 1853, SINH
lar writ to compel the City Trustees to levy a
tax, as required by the Act of 1855, was main
tanned.
8. In Freehill vs.. Chamberlain, supra, it was
held that the bondholders right to payment of
matured coupons did not accrue until there was
money III the treasury properly applicable to
the payment thereof. and. until that time, the
statute OF limitations did not commence to run
In favor OF the city against the coupons.
4. Ia Bates VS.. Porter, Is Pac. Rep 1872. in con-
STRUNG that portion of the Act of 1868, which
provided for the interest and sinking fund it
was decided that the apportionment of fifty-five
per cent to said fund, so far 1t related to
water rates, applied to the gross and not the
net, receipts OF the WaterwoTks
3. In Davis vs. Porter, Treasurer, 65 Cal, 65S
au attempt was made to compel the Treasurer
TO pay interest on overdue coupons through the
medium of writ OF mandamus, the relief thus
sought being the precise relief here asked. The
Supreme Court denied the application, because
neither the act of 1858, nor the Act of 1863 i'm
posed upon the Treasurer the duty of paying
more than the principal. or face, of the coupons
IL Is true in the opinion in that case, there was
a statement Of Justice Thornton to the effect
that, an action to recover judgment for the
amount OF interest due" is the proper remedy of
the bondholder. This intimation can be re-
garded, however, simply dictum, inasmuch
as Its expression was in no manner necessary
to. or involved in, the decision of the pivotal
point of the case: nor did the learned Justice re
fer to the legislative inhibition upon suits by
bondholders against the city.
The Court must, therefore, determine the
question now presented in view of the priuci-
pies heretofore established, and in the light of
the foregoing authorities.
In Kennedy VS.. the City of Sacramento, 10
Sawyer, 20 Judge Sawyer of the United States
Circuit Court, in an able opinion, held that
under the Act OF 1858 one OF the conditions upon
which the bonds in question were issued py the
city, and accepted by the bondholders was that
no suit should be maintained thereon against
the city by the bondholders, either upon the
bonds or coupons: that the only remedy is to
proceed by mandamus against the officers of the
city personally to compel them, in proper cases.
to perform the duties prescribed by the legisia-
ton preyiou- |, referred to. The supreme Court
of this State, in FreehiIl VS.. Chamberlain supra
also held that, according to the Act OF April 25
1868, no action can be maintained against the
city upon these bonds or coupons
The plaintiff' S counsel, while recognizing the
binding force of these afjudications, seeks to
escape from the principle there enunciated by
claiming that the present action is based upon
liability arising after the passage of the Act OF
1888, and hence. that, under the provisions of
sa Act, allowing the defendant to be sued upon
any contract, matter or thing made or entered
into after the passage" of said Act this action is
maintuinable- His contention is that his sut
differs from the Kennedy suit, in that il is not
suit upon coupons, but for interest and damages
arising from the defendants failure to provide
for the payment of the coupons at maturity
that the action herein is not upon contract. but
upon a liability srising by operation of law
which liability results from the defendants de-
fault in the non performance OF its obligations
to its creditors.
The evidence sustains the contention of