Case Name: City of Golden v. Western Lumber and Pole Company
Court: Colorado Supreme Court
Jurisdiction: Colorado
Decision Date: 1915-09
Citations: 60 Colo. 382
Docket Number: No. 8243
Parties: City of Golden v. Western Lumber and Pole Company.
Judges: 
Reporter: Colorado Reports
Volume: 60
Pages: 382–397

Head Matter:
[No. 8243.]
City of Golden v. Western Lumber and Pole Company.
1. Municipal Corporation — Duty to Pay Sub-Contractor Upon Public Worle. The sub-contractor upon a public work of the city, having obtained from the contractor an order upon the city for a certain amount, made service thereof on the city clerk. Held equivalent to the notice of claim required by Rev. Stat. sec. 5408. A subsequent payment of the amount to the contractor was disregarded, in an action by the sub-contractor against the city. (385.)
2. -■ Governmental or Private Capacity. A city in constoueting water works is acting in its private capacity. (387.)
3. Liability for Interest. A city which refuses or neglects payment" of a just demand is liable for interest thereon (Rev. Stat. sec. 3162). Montezuma County v. Wheeler, 39 Colo. 207, explained and distinguished. (389.)
4. Appeal and Error — Remand—Order Construed. An order remanding a cause for further proceedings, etc., construed in connection with the opinion, as requiring the court below to enter a particular judgment and not to award a new trial. (385, 386.)
Error to Jefferson District Court. Hon. H. S. Class, Judge.
Mr. John W. Barnes, Mr. William A. Dier, for plaintiff in error.
Messrs. Van Cise, Grant & Van Cise, for defendant in error.

Opinion:
Mr. Justice Bailey
delivered the opinion of the court,,
This action was commenced May 27th, 1904, in the District Court of Jefferson County, by the Western Lumber and Pole Company, defendant in error, against Ronald P. McDonald and the City of Golden,, the latter being plaintiff in error here, to recover the sum of $3,477.11, with interest, at eight per cent, a year from November 5th, 1903, alleged. to be due for fir pipe staves, sold and delivered to McDonald as principal contractor, for use in the construction of a water works system for the city. The cause was tried to the court in April, 1908, upon the issues formed by the amended complaint, the answer of the city, and replication thereto.. Upon these issues, after a full hearing on the merits, the court found that the city was not liable for the claim, and' as to it entered a judgment of dismissal. Subsequently such proceedings were had that this judgment was reversed by the Court of Appeals, and the cause remanded. See Western Lumber and Pole Co. vs. City of Golden, 23 Colo. App. 461, 130 Pac. 1027.
At a second hearing, on November 29th, 1913, upon motion, on the authority of the decision of the Court of Appeals, judgment was entered in favor of the company for the sum of $6,277.00, the aggregate of the original claim, $3,477.11, and interest, $2,799.89, to date of judgment. The case is now here for review on writ of error sued out by the city to that judgment.
There are but two questions for consideration. First. Should the case have been retried on its merits, upon the theory that it was remanded for that purpose? and, Second. Is the company entitled in any event to interest on its claim ?
The amount of the original claim is evidenced by an order in writing duly.served upon the clerk of the city on November 5th, 1903, which reads as follows:
"Golden, Colo., Nov. 5th, 1903.
To the city of Golden, W. H. Carter, Esq.,
City Clerk, Golden, Colo.
Dear Sir — You will please retain out of any estimate due me, on contract between the City of Golden and myself, the sum of thirty-four hundred seventy-seven dollars and eleven cents ($3,477.11), and pay the same to the Western Lumber & Pole Company of Denver, Colorado. Interest to .be added at rate of 8 per cent per annum from date until paid.
(Signed) R. P. McDonald."
The pleadings of the' city admit that it failed to comply with and observe the provisions of the law, upon which the company relied for recovery, and under which the city's liability was declared.
Section 5408, Revised Statutes 1908, provides:
"Any person to whom a contractor may be indebted, may file with the clerk of such city his claim. If such claims tally with statement of contractor the amount claimed shall be paid directly to claimant, and shall be deducted out of sum to be paid contractor "
The facts essential to recovery under the law on the merits were conclusively shown by testimony at the original trial, and no testimony was introduced to. overcome, disprove or challenge the same. But the trial court misapplied the law and determined, regardless of the proofs, that under the statute and as matter of law there was no liability against the city under the circumstances shown. On the contrary, however, the Court of Appeals in its opinion determined that the right of the company to. recover from the city had been fully established, and remanded the case, in this language:
"Entertaining no doubt as to the validity of the statute and the right of the Lumber Company to invoke its provisions, the judgment of the trial court must be reversed and the case remanded for further proceedings in harmony with the views herein expressed."
Just what the Court of Appeals did determine as to plaintiff's right of recovery is shown in the following extracts from the opinion rendered. At page 463, (130 Pac. 1027), this was said:
"The contractor became indebted to the Lumber Company for the material which it had furnished him, and which he and another firm of contractors, who. completed the water works after the termination of the McDonald contract, used in the construction of the plant. For this indebtedness, amounting to over $3,000, after all proper credits were allowed, the contractor gave an order to the plaintiff'in error on the city. In fact he gave two such orders, one signed by himself, and one signed by himself and his manager. These orders appear to have been delivered to the city clerk There was other evidence, such as correspondence, clearly indicating knowledge on the part of the city officials that the contractor was not making satisfactory settlements with the Lumber Company for material which the latter was furnishing the former."
On pages 469, 470 (130 Pac. 1027), it is further said:
"It is conceded that the city made no attempt whatever to comply with the provisions of this statute or any thereof. Section 5408 of the act, in unequivocal terms, commands the city to pay the money due the claimant .directly to him, when by agreement or judgment that amount shall have been ascertained."
After saying that equity considers that as done which ought to have been done, the opinion proceeds as follows, at page 475 (130 P. 1031) :
"This wholesome rule of equity requires us to hold that neither the city's duty nor the Lumber Company's right have been in any manner altered by the unauthorized payment by the city of McDonald's claim, and that the Lumber Company may yet look to the city for its pay for the material furnished the contractor, precisely as it might have done had no such payment been made by the city to him."
It is clearly evident that when the contractor, McDonald, gave the order to the company, that was an admission by him of the amount due the latter. In other words, the written order by the contractor, when served on the city on November 5th, 1903, was in every way equivalent to a compliance by the creditor with the requirements of section 5408. The city had notice of the claim and the amount there" of, and in the absence of fraud, and there is no suggestion of that, was bound thereby, as to the amount of the claim. The opinion of the Court of Appeals plainly determines that the plaintiff was entitled to recover under the statute, upon the merits of the case. Nothing therefore was left to be done but to remand the cause to the trial court for entry of the judgment which it should have entered originally, and as we construe the remanding order, considered in connection with the context of its opinion, the Court of Appeals intended that the trial court should do precisely what it did do.
Having determined that the city is liable, shall it pay interest on the claim from the time of the presentation of the order and demand for payment, November 5th, 1903, or at all ? The 'sections of the statute involved in this consideration are 3162, 3163 and 3164, Revised Statutes 1908, which -read as follows:
3162. "Creditors shall be allowed to receive interest when there is no agreement as to the rate thereof, at the rate of eight per centum per annum, for all moneys after they become due, on any bond, bill, promissory note or other instrument of writing, or on any judgment recovered before any court or magistrate authorized to enter up the same within this state, from the day of entering up said judgment until the satisfaction thereof be made; also, on money due on mutual settlement of accounts from the date of such settlement, on money due on account from the date when the same became due, and on money received to the use of another and retained without the owner's knowledge."
3163. "The parties to any bond, bill, promissory note, or other instrument of writing, may stipulate therein for the payment of a greater or higher rate of interest than eight per centum per annum, and any such stipulation may be enforced in any court of competent jurisdiction in the state."
3164. "County orders and warrants, town and city and school orders and warrants, and other like evidences or certificates of municipal indebtedness, shall bear interest at the rate of six per centum per annum from the date of the presentation thereof for payment at the treasury where the same may be payable, until there is money in the treasury for the payment thereof, except when otherwise specially provided by law, and every county treasurer, town treasurer and city treasurer to whom any such county, town, city or school order or warrant is presented for payment, and who shall not have on hand the funds to pay the same, shall endorse thereon the rate of interest said order or warrant will draw, and the date of such presentation, and subscribe such endorsement with his official signature; Provided, That, all such orders and warrants may be made to bear a lower rate of interest than above specified, by special agreement between such counties, towns and cities issuing the same, and the person to whom such orders or warrants are issued."
It has long been recognized that a distinctively municipal corporation acts in a two-fold manner, namely, in a governmental or political capacity, and in a ministerial or private or business capacity. In this case the city was acting in a purely ministerial or business capacity. This court has recognized this doctrine. In Denver v. Maurer, 47 Colo. 209, it is said at page 212 (106 Pac. 875, 876):
"The authorities agree that two classes of general duties are imposed upon a municipal corporation. One is governmental, and the municipality is not liable for negligence of employes occuring in the performance thereof. The other is private and corporate, and the municipality is liable for negligence of employes occurring in the performance thereof. City of Denver v. Davis, 37 Colo. 370," (86 Pac. 1027, 6 L. E. A. (N. S.) 1013, 119 Am. St. 293, 10 Ann. Cas. 187.) In City of Denver v. Rhodes, 9 Colo. 554, 13 Pac. 729, it was declared that a municipality undertaking a public improvement, such as the construction of a sewer, is liable like an individual for damages resulting from negligence or omission of duty.
Explaining fully the distinction, based upon authorities quoted therein, in Esberg Cigar Co. v. City of Portland, 34 Oregon 282, 55 Pac. 961, 43 L. R. A. 435, 75 Am. St. 651, it was held, in substance, that water works belonging to a city in its private, rather than its public capacity, so as to make it liable for injury for the negligent construction or maintenance thereof, even though the legislature determines upon the necessity for such works and selects certain persons as agents of the city by whom the work shall be undertaken.
In Shipley v. Hacheney, 34 Oregon 303, this is said, at page 307, 55 Pac. 972:
"So it is said, in manifest harmony with this distinction, that the rule in respect to the corporate indebtedness of the municipality does not ordinarily differ from that which applies to individuals; Dillon, Mun. Corp. sec. 506. The doctrine is also sustained and promulgated by judicial utterances. In Murphy v. City of Omaha, 33 Neb. 402, 408, 50 N. W. 267, it is said: 'In the absence of any contract that payment shall be delayed, the city will be liable for interest like any. other debtor. In its business transactions a city should be required to conform to the ordinary rules and all exemptions claimed which would work injustice should be denied.' Upon the same principle, interest was allowed against the town in Langdon v. Town of Castleton, 30 Vt. 285. See, also, Pruyn v. City of Milwaukee, 18 Wis. 367; City of Grand Rapids v. Blakely, 40 Mich. 367, 29 Am. Rep. 539; State ex rel. v. Trustees of Town of Pacific, 61 Mo. 155; City of Scranton v. Hyde Park Gas Co., 102 Pa. St. 382:"
Even in Illinois, where the decisions in this particular seem to be favorable to the city, they do not go so far as to hold that cities are not chargeable with interest. In Conway v. City of Chicago, 237 Ill. 128, at page 137 (86 N. E. 623), the court said:
"The general rule as to the liability of municipalities is, that they are not liable on their contracts for interest in the absence of an express agreement to pay it, yet where money is wrongfully obtained, or where it is lawfully obtained, and unlawfully and wrongfully withheld, the municipality is liable for interest to the same extent as a private person."
City of Shawnee v. Freauff, 36 Okla. 280, 128 Pac. 255; 28 Cyc., page 1754.
We have no hesitancy, therefore, in holding, upon the weight of authority, that towns and cities in business transactions are liable for interest, in the absence of statute or decisions of our courts putting them on a different basis, the same as private corporations or individuals. In this connection it is contended by counsel for the city that this court, in the case of Montezuma County v. Wheeler, 39 Colo. 207, 89 Pac. 50, has laid down a rule based upon the construction of our statutes, which puts towns and cities in a different position respecting interest than obtains generally.
The opinion in question ought no.t to be given such construction. There it was attempted to collect interest from a county upon a bill of a water commissioner, which the county refused to pay. It was sought to recover interest on the amount from the date the bill was presented and payment demanded. The liability of the county for interest, under such circumstances, was denied, upon the theory that counties are involuntary organizations, civil divisions of the state, created by general law to aid in the administration. of state government, and therefore not liable for interest, except by agreement, or unless specifically made so by statute.
A city is a voluntary organization created for local convenience, advantage and interests, and acts in a private as well as a' public capacity, and an entirely different rule applies to it with respect to liability to pay interest in business transactions. This distinction is clearly recognized and pointed out in the decision under consideration. Besides, that portion of the opinion which it is sought to apply in this case, was in no sense necessary for the decision of that case, the matter in question being purely argumentative, and expressly used, as stated in the opinion itself,, to strengthen the conclusion, based on an entirely different line of argument, which had been reached. After the court had determined the case upon the theory that the county was an involuntary corporate body, a division of the state, created purely as an agency or instrumentality of the state for general governmental purposes, and subject to like rules and restrictions governing its liability for interest as the state, and therefore not bound by statute to pay interest unless expressly designated therein, the court made use of this language:
"The foregoing we believe to be the correct doctrine as to the allowance of interest upon claims against a county. We are strengthened in the belief that it was not the intention of the legislature to allow interest upon claims against counties by virtue of sec. 2252 Mills' Ann. Stats. (Sec. 3162, R. S. 1908), because sec. 2254 provides that: 'County orders and warrants and other like evidences or certificates of indebtedness shall bear interest at the rate of eight per cent.' If it was intended that obligations of the county other than those mentioned in sec. 2254 should draw interest as provided in sec. 2252, the enactment of the latter section would have been idle, because the earlier section provides for the allowance of interest 'on any bond, bill, promissory note or other instrument of writing,' which expressions are broad enough to include county orders and warrants, and other like evidences of municipal indebtedness. The rule being that counties may not have liabilities imposed upon them in the absence of a statute, and the fact that the legislature provided that county orders, warrants and other like evidences of municipal indebtedness shall bear interest, it must have intended to exclude all obligations other than those mentioned. Expression unius est exclusio alterius."
In argument counsel for the city say, having reference to that part of the decision above quoted, "The reasoning of that opinion would seem to apply as well to cities and towns." Undoubtedly this would be true if the reasoning thus put forth had been essential to the conclusion there reached, or if that particular portion of the opinion could fairly be said to be other than argument or clicta.
The evident intent of section 3164 was, first, to place a uniform rate of interest upon a specific class of obligations; and second, to make it impossible for county, town, city or school district officials to agree, as otherwise under section 3163, supra, they might do., to pay a higher rate of interest upon such securities than that fixed by statute. We are unwilling to accept the suggestion that it was the intention of the legislature by the enactment of section 3164 to preclude the recovery of interest, except by express agreement, on all other county, city, town or school district indebtedness. Section 3164 in no manner limits, qualifies or changes the effect and purpose of section 3162, except as to a particular class of securities. By section 3162 creditors are entitled to interest on claims therein mentioned at the rate of eight per cent, per annum from all debtors. The conclusion reached in Montezuma County v. Wheeler, supra, therefore, has no bearing upon' the question of the liability of towns and cities for interest. Any other holding would have the effect to exempt cities and towns from the payment of interest on judgments against them. Section 3162 plainly applies to cities and towns, and gives a creditor the right to recover interest, upon claims growing out of business transactions with them, whenever, under like circumstances, he might lawfully do so from a private corporation or individual.
There appearing to be no error in the judgment, it is affirmed.
Decision en banc.
Chief Justice Gabbert and Mr. Justice Garrigues dissent.