Court Opinion

ID: 5449050
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:16:07.832553+00
Date Added: 2024-06-11T08:32:16.365153
License: Public Domain

McFARLAND, J., dissenting.
I dissent, and am of the opinion that the judgment of the court below should he affirmed.
The rights which the appellant has against the city are not those of a general creditor. He could not recover a judgment against the city, upon his bonds, for a single dollar; for the bonds were issued and accepted by the bondholders under a statute which. provides that the city “shall not he sued in any action whatever.” The complaint does not show the form of the bonds; but, assuming that they are on their face similar to ordinary bonds issued by corporations, they do not in themselves constitute complete and independent contracts. They are only parts of the contract which was made between the bondholders and the city by the passage of the act of April 24, 1858, and the issuance and acceptance of the bonds according to the provisions of that act—a contract, as was said in Meyer v. Brown, 65 Cal. 589, “as *112solemn and binding .... as it wordd have been if made between private persons.” By that contract they waived all rights as general creditors under their old floating demands against the city, which were of uncertain value, and agreed to rely upon a special trust fund to consist of fifty-five per cent of the revenue derived by the city from certain enumerated sources, which substantially included all sources of revenue, and waived all right to sue the city. The contract was undoubtedly a good one for the bondholders; and this court has construed it very liberally in their favor. For instance, it was held in Bates v. Porter, 74 Cal. 224, by a majority of the court, that fifty-five per cent of the “revenue derived'” from “water rents" meant fifty-five per cent of the gross receipts of the city’s waterworks. But their legal remedies are confined to proceedings to compel the officers of the city to perform the duties enjoined upon them by the said act of 1858, and other supplementary acts not important here. The question, then, is not whether, under general law, coupon bonds bear interest after the exhaustion of the coupons for which judgment may be recovered, but whether under the said statutes, the payment of interest on the bonds other than that evidenced by the coupons is “an act which the law specially, enjoins” upon the city treasurer “as a duty resulting from” his office, and which he may be compelled to perform by mandamus. Section 40 provides that the treasurer shall pay “the interest” on said bonds “as provided in this act”; and section 37, in which authority for the issuance of the bonds is given, provides that “the interest” shall be payable annually at the office of the treasurer; but the latter section also provides that “coupons for the interest shall be attached to each bond”; and the whole tenor of the act seems to me to be clearly to the effect that it is not the duty of the treasurer, nor has he the power, to pay any interest other than that represented by the coupons. I think that the correct construction of the act is expressed in the opinion of Fox, J., in Bates v. Gerber, 82 Cal. 553, as follows: “It did not provide for either principal or interest bearing interest after maturity, and provided no fund to meet such added liability.” The treasurer is nowhere required, in the event of the bonds not being satisfied at maturity, to pay interest by way of damages. This is the view that must have been entertained in Davis v. Porter, 66 Cal. 658, where it was held that it *113was not the duty of the treasurer to pay interest on overdue coupons; and it is conceded that, under the general authorities, interest on matured and unpaid coupons stands in the same category with interest on the principal of a coupon bond after the exhaustion of the coupons. Moreover, in that case the view of the court must have been the same as that hereinabove stated, for in the opinion of the court it is expressly said: “The court cannot, therefore, issue any command to the defendant to pay beyond the annual interest evidenced by the coupons involved in this proceeding,” and cites Soher v. Supervisors, 39 Cal. 134, and Beals v. Supervisors, 28 Cal. 449; and those cases are, I think, clearly in accordance with the views above expressed. In the Beals case, interest was claimed upon an overdue debt of the county of Amador; but the amount was to be paid out of a special fund as provided by an act of the legislature, and the court say: “Nothing is said about the addition of other amounts resulting as damages for default in payment,” and the claim for interest was denied. And so in the case at bar there is no provision for the payment out of the special fund of anything other than the coupons and the principal of the bonds. While the bondholders, if they could sue the city, might recover judgments for interest accruing after the maturity of the bonds, there is no provision in the act for the payment of such interest by the city treasurer out of the special trust fund. When the bondholders entered into the contract they anticipated, no doubt, as they well might, that the enormous trust fund created by the act, into which more than one-half of all of the revenues of the city went, would be amply sufficient to pay the coupons as they should fall due and the principal of the bonds when they should mature; and therefore no provision was made for the payment out of the trust fund of interest as “damages in default of payment” in the event that the fund would not be sufficient to satisfy the principal at maturity. I think that in the ease at bar the majority opinion treats this proceeding as an action against the city by a general creditor to recover a judgment for interest on overdue bonds; but, in that view, appellant could not recover either the principal or interest of his bonds, for both would be barred by the statute of limitations.