City of Centerville v. Turner County

• Decision Date: 05 April 1910
• Citation: 126 N.W. 605,25 S.D. 300
• Parties: CITY OF CENTERVILLE, Plaintiff and respondent, v. TURNER COUNTY, Defendant and appellant.
• Court: South Dakota Supreme Court

25 S.D. 300, 126 N.W. 605 (1910)

CITY OF CENTERVILLE, Plaintiff and respondent v TURNER COUNTY,

Defendant and appellant

South Dakota Supreme Court

Appeal from Circuit Court, Turner County, SD

Hon. E. G. Smith, Judge

On rehearing, Affirmed

L. L. Fleeger

Attorney for appellant.

Alan Bogue, Jr.

Attorney for respondent.

Opinion filed April 5, 1910

(See 23 S.D. 424, 122 N.W. 350)

McCOY, J.

This cause was before this court and judgment of the lower court affirmed in part and modified, including in the judgment only such sums as accrued within six years next preceding the commencement of the cause of action. The former opinion is in 23 S.D. 424, 122 N.W. 350. Rehearing was granted, and the cause is again before us; the only question being presented is as to the applicability of the statute of limitations.

It is conceded that the moneys involved in this suit are a part of a trust fund. The facts being fully stated in the former opinion, it will not be necessary to again state them in full. The trust relation here involved is an implied or constructive trust, and is classified by our statute (section 1609, Civ. Code) as an involuntary trust, arising by operation of law. It is distinguished from a voluntary trust, which includes direct and express trusts, which are only created by direct contracts or by direct acts of the parties. 28 Am. & Eng. Ency. 865; 2 Story, Eq. Jur. 283; Wood v. Supervisors, 50 Hun, 1, 2 N.Y. Supp. 369; Strough v. Supervisors, 50 Hun, 55, 3 N.Y. Supp. 110; Strough v. Supervisors, 119 N.Y. 212, 23 N.E. 552; Dearborn County v. Lods, 9 Ind. App. 369, 36 N.E. 772; Reynolds v. Summer, 126 Ill. 58, 18 N.E. 334, 1 L.R.A. 327, 9 Am.St.Rep. 523, and note; 2 Bouv. Dic. 1144. A trust created by operation of law stands on the same basis as any other constructive trust, as to the remedy for a violation thereof, which must be sought in the same courts and under the same rules as any other trust, just the same as like trusts between individuals. Wood v. Supervisors, supra. This must necessarily be so in the case at bar, as the Constitution and the statutes creating this trust have pointed out no other remedy, thus leaving the question of redress and remedy to the general laws as established by the Legislature or as practiced by the courts. Otherwise there would be no remedy.

Prior to 1890 the fee for collecting city taxes by the county was 4 per cent. under a general law, but by a law in relation to cities passed in 1890 the fee for such collection was reduced to 1 per cent. of the tax collected. The county treasurer being compensated by salary, the amount of fees thus collected went into the salary fund, to be used by the county in paying salary; the excess, if any, being turned into the county general fund. The law of 1890 did not expressly repeal the general law allowing 4 per cent. for collecting city taxes, but only repealed it by implication, and many county treasurers, not knowing which law to follow still continued to retain for the county the 4 per cent., but with the full knowledge of the city authorities that it was so doing, and with full knowledge on the part of the city why it was so doing. Under section 1265, Pol. Code, the county treasurer was required to settle with and pay over to the city treasurer the amount of city taxes collected each month, and the city authorities could not help but know that the county was so retaining the 4 per cent., and why it was so doing. The county retained this excess over 1 per cent. publicly and openly and above board, claiming the absolute right in good faith to do so under the law. Under these circumstances, we are of the opinion that the statute of limitations is operative and runs against each amount so retained and misappropriated by the county from the date of each settlement with the city treasurer, and that back of six years, from the time of the commencement of this action, the statute of limitations is a bar to recovery. It seems to be a well-settled rule that some trusts are not within the bar of the statute of limitations, and that no lapse of time is a bar to a direct or express trust as between the trustee and the beneficiary; but this rule has exceptions, and is subject to limitations. It seems to be held everywhere, and in almost all jurisdictions, that when a trustee unequivocally repudiates the trust, and sets up open, public, adverse claim against the beneficiary, and openly repudiates the trust, the statute of limitations begins to run from the time such knowledge is brought home to him. 25 Cyc. 1169; Cone v. Dunham, 59 Conn. 145, 20 Atl. 311, 8 L.R.A. 647, and exhaustive note; United States v. Taylor, 104 U.S. 222, 26 L. Ed. 723; Speidel v. Henrici, 120 U.S. 377, 7 S.Ct. 610, 30 L. Ed. 718; Perkins v. Cartmell, 4 Har. (Del.) 270, 42 Am.Dec. 758; Ricords v. Watkins, 56 Mo. 554; Merriam v. Hassam, 14 Allen (Mass.) 522, 92 Am.Dec. 795; Wright v. Ross, 36 Cal. 433; Spencer v. Duncan, 107 Cal. 423, 40 Pac. 549; Reynolds v. Sumner, 126 Ill. 58, 18 N.E. 334, 1 L.R.A. 327; Thomas v. Merry, 113 Ind. 83, 15 N.E. 244; Campbell v. McFadden (Tex. Civ. App.) 31 S.W. 436; Horne v. Ingraham, 125 Ill. 198, 16 N.E. 868; Fawcett v. Fawcett, 85 Wis. 332, 55 N.W. 405 39 Am.St.Rep. 844; Meacham v. Bunting, 156 Ill. 594, 41 N.E. 175, 28 L.R.A. 620, 47 Am.St.Rep. 239; Johnston v. Johnston, 107 Minn. 109, 119 N.W. 652; Montague v. Priester, 82 S. C. 492, 64 S.E. 393; Bond v. Poindexter (Tex. Civ. App.) 116 S.W. 395; Garvey v. Garvey, 52 Wash. 516, 101 Pac. 45; Norton v. Bassett, 154 Cal. 411, 97 Pac. 894; Weltner v. Thurmond, 17 Wyo. 268, 98 Pac. 590; Carr v. Craig, 138 Iowa, 526, 116 N.W. 720. The defendant county, in the case at bar, having retained the money sought to be recovered in this action, openly and publicly under an adverse claim of right thereto, with full knowledge thereof on the part of the city, makes the foregoing principle as to the statute of limitations directly applicable to this case. It must necessarily be implied that the portion of the city taxes allowed by law for collecting the same did not become a part of the trust fund, otherwise the retaining of even 1 per gent. thereof would be in violation of a constitutional provision (section 8, art. 11, State Const. ), and the county would be required to collect the city tax for nothing, but it was only the net sum realized after the expense of collecting that should be paid to the city treasurer every 30 days that constituted the trust fund, and, when the defendant retained the 4 per cent. under claim of right, it was in open hostility and in repudiation of the trust as to the money sought to be recovered in this action.

Another plain reason why the statute of limitations should apply in this case is because the trust here involved is not a direct or express trust, but is a constructive or implied trust. The case of Wood v. Supervisors, 50 Hun. 1, 2 N.Y. Supp. 367, and the two cases of Strough v. Supervisors, one reported in 50 Hun, 55, 3 N.Y. Supp. 110, and the other in 119 N.Y. 212, 23 N.E. 552, are each cases precisely in point in principle with the case at hand. These cases were instituted by the township board of supervisors against the county board of supervisors to recover certain taxes collected by the county as the collecting agent of the township, a portion of which was misapplied by the county and converted to the use and benefit of the county innocently and without intent to defraud. In these cases the courts held that the county was the agent of the township for the purpose of collecting the tax, and that the funds in the hands of the county were trust funds under an implied constructive trust. In Wood v. Supervisors the court said:

"This brings us to the question: Can the county plead as a defense in bar of a recovery the statute of limitations, or is it precluded from so doing? The law supports the contention that it may. To prevent the application of the statute in favor of a trustee the trust must be created by the direct act of the parties, and, when a person is charged as trustee by implication or constructive trust of law, he may claim the protection and benefit of the statute. It is only where there is an actual, continuing and subsisting trust that the trustee is precluded from setting up the statute of limitations. The trial court held that the provisions of the statute barring the right of action in six years were applicable to the facts in this case. In this conclusion we concur. The only relief demanded against the county was a money judgment based on the alleged fact that it had illegally and unlawfully applied to its own use the trust funds."

In Strough v. Supervisors, 119 N.Y., 23 N. E., supra, the court said:

"The plaintiff insists that the action is for breach of trust and the misuse of trust funds, and that the statute does not commence to run against such a cause of action until there is a denial of the right of the beneficiary. The duty imposed, on the treasurer was, in a general sense, a trust duty. This is true of every duty imposed on a public officer, but persons injured by a violation of the duty for which they may maintain an action at law must pursue their remedy within the period of limitations of legal actions. The legal remedy here was adequate, and the cause of action was definite and distinct as to each misappropriation at its date, and we can see no escape from the conclusion that the limitation is governed by section 382, and consequently no recovery can be had back of six years."

The rule that the statute of limitations applies as a bar for violation of implied or constructive trusts is well stated in 25 Cyc. 1155. This rule was applied in the very similar case of Dearborn County v. Lods, 9 Ind. App. 369, 36 N.E. 772. This rule seems not to apply where there has been a fraudulent misappropriation and concealment, or where the trustee admits that the fund was a trust fund, and makes no...