Bates v. Gregory , 3 Cal. Unrep. 170 ( 1889 )

FOX, J.

This was an application for a writ of mandate to compel the defendants, as trustees of the city of Sacramento, to issue to petitioner new bonds of the city in accordance with the provisions of the act of March 22, 1864. in exchange for unpaid bonds held by him, which were issued under the provisions of the acts of April 26, 1853, and April 10, 1854. The defendants, in their answer, and upon the trial, contended that the claims were stale, and barred by the' statute of limitations. This contention prevailed, and resulted in a judgment for the defendants, from which, and an order denying a new trial, plaintiff appeals.

March 26, 1851, the city of Sacramento was incorporated by an act of the legislature, passed on that date, entitled “An act to incorporate the city of Sacramento”: Stats. 1851, p. 391. By this act the government of the city was placed in the hands of a mayor, recorder, and a common council, who were constituted a body politic under the name of the “Mayor and Common Council of the City of Sacramento,” with authority to sue and be. sued; to borrow money, and pledge the faith and credit of the city therefor; and to levy and collect taxes. April 26, 1853, another act was passed entitled “An act to extend and better define the powers and duties of the common council of the city of Sacramento, and to authorize the establishment of free schools in said city” (Stats. 1853, p. 117), which conferred upon the mayor and common council the power to issue bonds for the purpose of raising funds to pay the then existing indebtedness of the city. In the exercise of the power thus granted, the mayor and common council of the city of Sacramento issued a certain bond dated the sixth day of May, 1854, and numbered 418, for the sum of $544.45, and made payable to Jonathan Williams or bearer on the first day of July, 1874, unless sooner called in, together with forty semi-annual coupons thereto attached for $27.22 each. Another act was passed April 10, 1854, entitled “An act authorizing the mayor and common council of the city of Sacramento to issue bonds for certain purposes” (Stats. 1854, p. 196), under which the mayor and common council of the city of Sacramento issued two certain bonds for the sum of $1,000 each, respectively numbered 361 and 384, and dated 24th and 26th of April, 1854,- and attached to each bond were forty semi-annual coupons for $50 each. Both bonds were made payable on the first day of July, 1874, unless sooner called in. Bond No. 361 was made payable to Edward McGowan or bearer, and No. 384 to Stow and English or bearer. April 24, 1858, another act was passed, which consolidated the city of Sacramento 'with the county, under the corporate name of the “City and County of Sacramento.” This act vested all the revenue and property of the city of Sacramento in the consolidated government, and provided for the funding of all claims existing against the city on the first day of January, 1859, and fixed the time at June 1, 1859, within which the holders of such demands might present them for funding. This time was thereafter extended to the first day of October, 1859 (Stats. 1859, p. 359), and subsequently to January 1, 1862 (Stats. 1861, p. 308). April 25, 1863, an act entitled “An act to incorporate the city of Sacramento” (Stats. 1863, p. 415) was passed, creating the present “City of Sacramento.” This last act provided, among other things, that all the property and revenue which belonged to the mayor and common council of the city of Sacramento on the thirtieth day of April, 1858, should become the property of the city of Sacramento, and that it should have power to sue and be sued, and defend, upon any obligation; provided, that such obligation was. not made or entered into prior to the passage of the act. On the twenty-second day of March, 1864, an act was passed entitled “An act to provide for the liquidation of the indebtedness of the city of Sacramento which accrued prior to January 1, 1859” (Stats. 1864, p. 217). By this last act the board of trustees of the city were empowered to issue to all holders of claims against the city which accrued prior to January 1, 1859, bonds payable to bearer on February 1, 1903, to bear date of May 1, 1864, and bear interest from January 1, 1859, at six per cent per annum, payable annually, after the first six years, on the first day of January, at the office of the city treasurer. The act prescribed no time within which creditors should present their demands for liquidation, but provided that bonds should be issued for all claims which accrued prior to January 1, 1859, that the board of trustees, upon examination, should consider “legal and just.”

The petitioner, on October 17, 1887, presented the three bonds above described to the defendants for funding, and demanded in lieu thereof, under the act of 1864, the issuance of bonds to him equal in amount to the principal and interest due on the bonds which he offered to surrender. This demand was refused by the defendants. The appellant, upon these facts, argues that the statute of limitations was suspended by the acts of 1858, 1863, and 1864, as to all persons holding claims who might choose at any time to accept their provisions; and that the act of 1864 is a continuing offer held out to the creditors of the city of Sacramento which can only be withdrawn by a repeal of the act; and all who have claims such as are mentioned in the act, and accept its terms, can enforce the funding of their obligations by mandamus. It is conceded by respondents that mandamus is the proper remedy, if the claims of the petitioner are not stale or barred.

The act of incorporation of the city of Sacramento of 1851, and the acts of 1853 and 1854, under which the bonds of petitioner were issued, expressly authorized suits against the corporation upon such obligations. The inhibition of the act of 1858, in the first section thereof, is that “the city and county shall not he sued in any action whatever, nor shall any of its lands, buildings, improvements, property, franchises, taxes, revenues, actions, choses in action, and effects be subject to any attachment, levy, or sale, or any process whatever, either mesne or final”; and that prescribed in the first section of the act of 1863- is that the city may “sue and be sued, and defend, upon any bond, covenant, agreement, contract, matter, or thing whatever, of which courts of law or equity have jurisdiction: provided, however, that such bond, covenant, agreement, contract, matter, or thing that is the cause of action has been made or entered into after the passage of this act.” These inhibitions clearly applied only to obligations of the city and county and city respectively, incurred after the passage of the several acts. The restriction in the first act was to prevent the city and county of Sacramento from being sued upon any obligation incurred b.y it as such; and that in the second act, to protect the city of Sacramento against suits upon claims for which the former city and county had alone become .liable. The act of 1864 did not enlarge or affect these restrictions in any way, The rule is, as stated by Judge Dillon in his work on Municipal Corporations (volume 1, section 69), that “if a municipal corporation becomes indebted, the rights of the creditors cannot, it is clear, be impaired by any subsequent legislative enactment”: Meyer v. Brown, 65 Cal. 583, 4 Pac. 25, 625, 26 Pac. 281. The bonds of petitioner were issued under the acts of 1853 and 1854, under which the city could sue and be sued, and the privilege to sue thereby became a part of and entered into the contract of the city with the holders of such bonds. Petitioner’s bonds are therefore within the above rule, and the protection of the state and federal constitutions, which prohibit the passage of laws impairing the obligations of contracts; therefore the right to recover upon the bonds by suit after they matured remained unaffected by the acts of 1858 and 1863. If, however, the petitioner had surrendered his bonds under the acts of 1858 or 1864, in exchange for those provided for in said acts, the inhibition against suing thereon, contained in the act of 1858, would have become as much a part of the new contract thus created as the privilege to sue granted by the acts of 1851, 1853, and 1854 did of the bonds in question here: Kennedy v. City of Sacramento, 10 Saw. 33, 19 Fed. 580; Meyer v. Porter, 65 Cal. 67, 2 Pac. 884; and Meyer v. Brown, supra.

The claim of petitioner, that the act of 1864 was a continuing offer which he could take advantage of at any time before such offer" should be withdrawn by repeal, cannot be supported. The purpose of the legislators in passing the act of 1864 was merely to complete the funding of the city indebtedness, not to withdraw claims founded on such indebtedness from the operation of the statute of limitations. This is manifest when the act is construed in connection with the legislation bearing on the same subject, beginning with the act of 1858; all of which show a complete plan to fund and adjust certain indebtedness of the city. As an inducement for its creditors to co-operate with it in the accomplishment of this object, the act of 1858 held out the opportunity, if taken advantage of before June 1, 1859, subsequently extended to January 1, 1862, to obtain bonds in exchange for the old ones, in one of four classes, that would run, respectively, until 1888, 1893, 1898, and 1903, dependent upon the order of issuance. These bonds would run from fourteen to twenty-nine years longer than the old bonds, and would draw interest at the rate of six per cent per annum, payable annually, and carried with them the pledge of an annual tax for municipal purposes, and an interest and sinking fund to pay the interest on the bonds as it accrued, and to effect the redemption of the bonds at maturity. The same opportunity was again renewed by the act of 1864, except that all new bonds issued thereunder were to run until 1903, or twenty-nine years longer than the bonds held by petitioner; and the interest would be payable from January 1, 1859, and annually after the first six years. The benefit of the interest and sinking fund was a material advantage that could be gained by a surrender of the old bonds, as they were mere naked promises to pay, for which the general faith and credit of the city alone was pledged, and upon which the payment of interest stopped in 1858; no provision for the payment thereof having been made in the act of 1858, or any subsequent legislation, which we think is a circumstance showing a desire on the part of the legislature to compel creditors to fund their claim. Therefore, to say that the act of 1864 was intended to withdraw all claims therein mentioned from the operation of the statute of limitations would be to ignore the object of the legislation referred to, and encourage the holders of such claims to defeat the efforts of 'the city to adjust and fund its indebtedness. Besides, as the bonds of petitioner had yet ten years to run before maturing, when the act of 1864 was passed, there was no necessity for a suspension of the statute of limitations; and, aside from what seems to us to be the object of the act, it is not reasonable to impute to the legislators who passed it an intention to provide for a necessity which did not exist, when they- failed to give any expression in their act from which such an intention might be inferred. Again, it is a well-settled rule that the repeal of statutes by implication is not favored, and we are of the opinion that the same principle should apply with equal force to the suspension of the operation of statutes. It was, of course, optional with the petitioner to exchange the bonds or not; but having refused to exchange them from 1858 to 1874, and waited thirteen years longer before offering to do so, his right to have his bonds funded is now barred, if it is within the provisions of sections 337 and 338 of the Code of Civil Procedure, pleaded in defendant’s answer to his petition.

The Code of Civil Procedure (section 337) provides that an action must be commenced within four years “upon any contract, obligation, or liability founded upon an instrument in writing executed in this state.” "When petitioner, by his assignors, accepted the bonds from the city of Sacramento, a contract was thereby created between them whereby the city ' became obligated to pay the principal and interest of the bonds on or before the first day of July, 1874. This contract, it will be observed, was in writing, and was evidenced by the bonds. The right to maintain an action upon the bonds after July 1, 1878, four years after the maturity thereof, therefore depended upon whether the plea of the statute of limitations would be made. The statute of limitations is a personal privilege that may be used as a means of defense by pleading it; otherwise, it is waived: Grant v. Burr, 54 Cal. 298. In this ease this defense was not waived, the defendant having specially pleaded the bar of said section 337, and it constitutes a complete defense to this action. It follows that the judgment and order appealed from must be affirmed. So ordered.

We concur: McFarland, J.; Sharpstein, J.; Works, J.; Paterson, J.

Beatty, C. J., took no part in the decision of the above cause