Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1889-01-16
OUR CITY DEBT.
TWO IMPORTANT DECI IONS IN
THE CIIY,S FAVOR.
Interest Cannot be Collected on Our
Unpaid Coupons-Hence, Nor
On Unpaid Bonds.


perior Court of this county, on Monday
| and as there were several errors ant
omissions in the copies of tn,
| decisions as they reached this Office
| and were published, we present below
the full text of both decisions. which hav,
| been carefully compared with the origina
| copies from the Clerks office. The effect.
OF these documents are far reaching in tn,
city's favor, and will he perused with grea
interest by all who are familiar with the
subject of the city debt, and equally by
those who wish 10 become SO.
The Coupon Interest Case.
In the Superior Court of the State of Califor
mia, in ana for the county of Sacramento. Hon
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, 1858, when it was succeeded by the con.
county of sacramento. During the existence
of the former municipality large amount OF
Indebtedness was incurred foi which bonds
were issued to the creditors OF the city, which
bonds bore interest at the rate of 10 per cent per
annum. 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
former indebtedness was funded by the issu-
ance of some 1850 bonds of the consolidated
government, in classes of 10000 each, with
proper coupons attached, payable respectively
in the years 1885, 1898, lSgS and 1908 with inter.
est at the rate Of 6 er cent. per annUm, payable
on the 1st day of January of each year. The
plaintiff is the owner of large number of these
coupons. amounting TO the sum of s9O49l AZ;
and which matured respectively on the LIST day
of January, 1876, ana the LIST day Of January,
1877
Bv the statute of April, 1855, creating the c3n-
solidated government, 1t was made the duty of
said government to levy an annual tax in q pre-
scribed amount for the payment of the interest
upon and tor 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
to pay the interest on said bonds as it fell due
out of the interest and sinking fund provided
for in said Act The Board of Supervisors were
required to levy, for municipal purposes upon
all taxable property within the city limits a
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 wafer
rents, and fines collected in the Mayors Court,
were to constitute fund, apportioned as fol-
lows: SIS per cent. thereof to an Interest and
sinking fund.-" to be applied to the payment of
the annual interest and final redemption of
said bonds, and the residue to the salary,
of any fiscal year, there remained surplus in
any of the last above mentioned funds, such
surplus was to be transferred to the interest
and sinking fund"
Subsequently, in April, 1868, another Act of
the Legislature was passed, incorporating the
City OF sacramento as municipal corporation,
comforting upon it all of the rights and fran
chises, and imposing upon 1t all of the obliga-
lions of the former municipality, in respect to
such bonded Indebtedness of the city of Sac
ramento.
mt Ill.
PENDANT herein, the city of Sacramento, and its
officers, have neglected to perform the duties
enjoined upon 1t by this legislation in failing to
levy the amount, or rate, of tax prescribed
or any amount, or rate, of tax sufficient to pay
the interest upon said bonds. That from April,
1881 until February, 1856. the various Treas
urers of the city refused to pay the bond cou-
pons in the order of their maturity upon pre-
sentation for payment, although there was at
the time Of such presentation money in the
proper fund sufficient for that purpose That the
defendant and its officers have refused to trans
fer to the interest and sinking fund" moneys
properly applicable thereto, whereby there has
resulted al the end of each of the different fiscal
years deficiency in said fund. That plaintiff
demanded of the Treasurer of the city of Sac
ramep to payment of the coupons sued upon
herein, on the 10th day of August, 1887 together
with legal interest thereon from the time the
same respectively became due, to wit: from
Jab uary /, 1876, to January ], 1877 and there
upon the said Treasurer offered to pay the
amount due thereon as principal, but refused to
pay the amount due thereon as interest, viz,
s30.49l A."
Whereupon the plaintiff prays judgment
against the defendant for the said amount of
s30,491 AZ, the interest accrued upon the cOu-
pons since their maturity, with additional
legal interest accruing thereon since last-men-
toned date"
This complaint was fled November, 1887, and
demurrer thereto was submitted for conSdera-
ton, for the first time, upon the commencement
of the trial of this action. Inasmuch, however,
as al answer was filed by the defendant which
not only presented the issues of the law in
volved in the demurrer, but also issues of fact
the Court reserved its ruling upon the demurrer
until after the final submission of the case in
order that the trial might proceed, and the
cause be ultimately determined upon all ques-
lions OF both law and fact arising therein. For
this 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 interest
sought 10 be recovered herein upon the matured
coupons is almost equal to the principal of said
coupons, result arising from the fact that
prior to the year 1873 the rate of legal interest
was 10 per cent. per annum; subsequently the
rae was changed to per cent per annun. So
that the amount of interest thus accrued Upon
the coupons is the arrearage OF over eleven
years upon the coupons due in 1876. and over
ten years upon the coupons due III 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 qualities of commercial paper.
When severed rom the bonds they are negOti-
able and pass by delivery. A separate action
may be maintained upon them, and the amount
for which they are issued draws interest from
their face maturity.
one secondly presented, viz: Has the plaintiff
herein right of action against the defendant
In the charter of 1858, creating the consolidated
government known as the City and County of
Sacramento, il was provided that said munich
paliiy should not be sued in any action what
ever, nor should IT'S property or revenue be sub
ject to any process, mesne or final.
The charter OF 1863 creating the present mu-
nicipality, declared that he city OF Sacramento
may be sued upon BONDS. covenants, etc, pro-
vided THAT such bond, covenant, agreement,
contract. matter or thing that vas the cause OF
action, has been made or entered into after the
passage OF this act
In view of these statutory inhibitions, it is
claimed by defendant IN this action cannot
be maintained.
Questions relating to the LIABILITY of the city
of Sacramento upon the bonds aid coupons in
question, have arisen i'll n large number o.
cases, and this subject has been prolific OF liti-
CATION. As the result OF the adj Idications in
those cases, the following principles have been
definitely st tiled:
Three questions are presented Tor determine
ton in this case.
First-Do these coupons bear legal interest
af er the date of their maturity?
Second-It they do bear legal interest can the
defendant, the city of Sacramento, be sued
therefor?
Third-If the plaintiff ever had cause OF
action against the defendant, has the same been
barred by the statute OF limitations?
First-The first question must be resolved in
the affirmative, II is now well established
rule OF law that coupons, like those in question,
possess the qualities OF commercial paDer.
When severed from the bonds they are negotis-
BILE and pass delivery. separate ac. ion may
be maintained upon them ana the amount for
which they issued draws int, rest from their face
maturity.
second-1he vital question in this case is the
one secondly presented, viz: Has the plaintiff
herein a right of action against the defendant?
In the charter of 1858, creating the consolidated
government known As the city and county OF
sacramento, 1t Was provided that sa municipal
ity should n be sued in any action whatever,
nor should its property or revenue be subject TO
any process, mesne or final.
The charter Of 1868, creating the present mum
cipality, declared that the city OF Sacramento
may be sued upon bonds covenants etc, pro.
vided, that such bono, covenant, agreement,
contract matter or thing that was the cause OF
action, has been mate or entered into after the
passage of this Act
In view of these statutory tliibiticns it is
ella med by defendant that this action cannot be
maintained.
Questions relating to the reliability of the
city of Sacramento upon the bonds and cou-
pons in question, have arisen in a large mum
Der of cases, and this subject has been prolific Of
litigation. AS the result of the adjudications in
those cases, the following principles have been
definitely settled:
/. In Meyer VS.. Porter, IS Cal o., and in Free
hill VS.. Chamberlain lib. 6tS, the right of the