Potter v. City of New Whatcom , 1899 Wash. LEXIS 208 ( 1899 )

The opinion of the court was delivered hy

Reavis, J.

Action on warrants drawn against a street improvement fund assessment district in the city of Hew Whatcom. The city of Hew Whatcom had entered into a contract for improving streets, and, in discharge of the contracts with the contractors, delivered warrants. drawn payable out of street improvement funds for the assessment districts in which the improvement was done. These warrants were assigned to the respondent. The city answered and pleaded (1) the statute of limitation of two years, and (2) that of three years, and set forth that the city treasurer collected large sums of money due to various funds and accounts on various street assessment districts, as well as for other purposes, and that a portion of the money so collected, was represented by tbe amounts named in the complaint; tbat tbe city treasurer did not, however, cover tbe money, or any part thereof, in tbe treasury of tbe city, but converted tbe same to bis own use, and tbat none of tbe money ever came into tbe bands of tbe appellant; tbat such facts became known to tbe city about tbe 1st day of September, 1893, and tbe respondent was informed of it as early as tbe 1st of January, 1894, and bad full knowledge of tbe conversions and defalcations of tbe city treasurer, and was apprised tbat tbe money bad been wrongfully and unlawfully converted by tbe treasurer; and further set out tbat tbe city took steps to collect on tbe bond of tbe treasurer tbe money referred to in tbe complaint, together with other moneys then due, and tbat an adjustment was made by which property was turned over, exhausting tbe treasurer and bondsmen to tbe extent of their liability, and tbat appellant has set apart such property for a special fund, and proposes to pay it out pro rata to the various funds with which tbe treasurer was chargeable, and tbat none of tbe property has so far been converted into money; and all of these facts were known to tbe respondent more than three years before tbe commencement of tbe suit. Tbe respondent demurred to tbe answer on tbe ground tbat it did not state facts sufficient to constitute a defense, which demurrer was sustained; and appellant, declining to plead further, brings tbe cause here, and assigns as error tbe judgment sustaining tbe demurrer to tbe answer.

Without reviewing specifically tbe various errors assigned upon tbe order sustaining tbe demurrer to tbe defenses, it may be declared tbat tbe action is upon a written contract, tbe nature of which was very well defined in Union Savings Bank & Trust Co. v. Gelbach, 8 Wash. 497 (36 Pac. 467):

“How a warrant, under our statutes, is a promise to pay it, in its order of issue, when money applicable to it comes into the treasury; and its maturity, by analogy with a note, is the time when the treasurer gives notice of his readiness to pay it, and stops the interest.”

In the case at bar, manifestly the statute of limitations could not begin to run until there was money in the treasury applicable to the payment of the warrants, and the holder of the warrants had such notice as would enable him to present them to the treasurer for payment. But the answer further disclosed that the money was collected By the city treasurer, but afterwards converted to his own use, and that the city then made a composition with the treasurer and his sureties, by which it accepted property in lieu of the money which the treasurer had wrongfully converted to his own use. The city, as a trustee for the ■warrant holder, could not make such composition, and then avoid the payment of the warrants. It could take nothing but money, consistent with its trust. It cannot require the warrant holder to wait until it may convert property into money. Its duty was to collect the money in the treasury. This seems to have been done in the first instance, for there is no doubt but the authorized collection of the assessment by the city treasurer was the act of the city; and when the money was collected, as between the city and a warrant holder, the city was responsible for its custody and payment upon the warrants. The city charter, under which these assessments were made, provided: “The money collected upon assessments for the improvement of streets and alleys shall be kept as a separate fund, and in no wise used for any other purpose whatever.” Charter of Whatcom (Laws 1883, p. 153, § 15).

Certainly, the city did not regard the collection of these assessments as made by the city treasurer as an individual only, because it afterwards held him and his sureties responsible for this money, and took property from them to the extent of their liability, in satisfaction of the defaults and conversions of the city treasurer. If no assessment had been made under the contracts for the local improvements, and no money collected, the action would not lie; but, as the money has been collected and misapplied by the city, it can be recovered by the warrant holder.

“ Municipal corporations, like individuals, are liable for neglect or omissions resulting in injury or damages.” Dillon, Municipal Corporations, 968.

The judgment of the superior court is affirmed.

Gordon, C. J., and Dunbar and Anders, JJ., concur.