Hatcher v. State, 1538-6318.

• Decision Date: 10 April 1935
• Docket Number: No. 1538-6318.,1538-6318.
• Citation: 81 S.W.2d 499
• Parties: HATCHER et al. v. STATE et al.
• Court: Texas Supreme Court

Page 499

81 S.W.2d 499

HATCHER et al. v. STATE et al.

No. 1538-6318.

Commission of Appeals of Texas, Section B.

April 10, 1935.

Error to Court of Civil Appeals of Third Supreme Judicial District.

Suit by the State of Texas, on the relation of the trustees of certain common school districts in Lamar County, against W. Gregory Hatcher and others. To review a judgment of the Court of Civil Appeals , affirming in part and reversing in part a judgment of dismissal, W. Gregory Hatcher and others bring error.

Judgment of the Court of Civil Appeals reversed, and judgment of District Court affirmed.

George E. Shelley and S. L. Staples, both of Austin, and J. L. Zumwalt, of Dallas, for plaintiffs in error.

Dohoney, Beauchamp & Lawrence, Moore & Moore, Long & Wortham, A. P. Dohoney, and S. B. M. Long, all of Paris, for defendants in error.

SMEDLEY, Commissioner.

The nature of the case is thus correctly stated in the carefully considered opinion of the Court of Civil Appeals by Chief Justice McClendon, 52 S.W.(2d) 794, 795:

"The state, upon the relation of the trustees of several common school districts in Lamar county, sued W. Gregory Hatcher and his surety (American Surety Company of New York) upon his official bond as state treasurer for negligent failure to collect a certified check and bank draft which had been remitted to him in his official capacity to pay off certain bonds issued by the several school districts and owned by the permanent school fund. The trial court sustained a general demurrer and several special exceptions to plaintiff's petition, and overruled several special exceptions to the answers of defendants. Plaintiff declined to amend, and has appealed from a judgment of dismissal.

"The suit is predicated upon the following facts disclosed by the petition:

"The permanent school fund held bonds of the several districts, of the aggregate principal and interest accruing to April 10, 1926, of $19,948; on which date some of the bonds matured and others did not. March 8, 1926, application was made to the board of education to pay the principal of the nonmaturing bonds on April 10, 1926, under R. S. art. 2787a. This permission was granted. April 10, 1926, the First State Bank of Paris (later herein called the Paris bank), which was county depository of Lamar county school fund, drew a draft on the Republic National Bank of Dallas (later herein called the Dallas bank), in favor of the state treasurer for $19,948; and delivered it to the county auditor, who mailed it to the state treasurer. Funds to meet the draft were deposited in the Dallas bank in the following manner: The county auditor presented warrants to the county treasurer (who was also cashier of the Paris bank), aggregating $19,948; and the county treasurer drew a check upon the Dallas bank, where the Lamar county school fund was (without the knowledge of the county commissioners) deposited, and had the amount of the check transferred on the books of the Dallas bank from the account of the school fund to that of the Paris bank. The latter closed its doors on May 26, 1926, up to which time the state treasurer had taken no steps to collect the draft; and the amount thereof was thereby lost to the school districts.

"The cashier's check was issued May 8, 1926, by the Paris bank in favor of the state treasurer for $903.75 to cover bonds and interest due on that date, and owned by the permanent school fund. It was handled in the same manner as the draft and met a like fate."

The Court of Civil Appeals affirmed the trial court's judgment as to the certified check, but in all other respects reversed the judgment of the trial court and remanded the cause. 52 S.W.(2d) 794.

Among the special exceptions urged to plaintiff's petition and sustained by the trial court were exceptions on behalf of both defendants to the effect that it affirmatively appeared from the petition that the cause of action stated was barred by the statute of limitations of two years, in that the petition sought the recovery of damages arising out of the alleged negligence of the defendant Hatcher in failing to collect the draft and check before the closing of the Paris bank on May 26, 1926, which was more than two years before the suit was filed.

Defendants in error as well as plaintiffs in error assumed in their briefs filed in the Court of Civil Appeals that the general limitation statutes of this state were available to defendants in a suit of this character, the point of difference between the parties being in those briefs as to which limitation statute applied, that of two years (article 5526, Rev. St.) or that of four years (article 5527). The Court of Civil Appeals held the four-year statute rather than the two-year statute to be applicable, and that the trial court erred in sustaining the exceptions raising the question of limitation.

In a supplemental argument filed in the Supreme Court, defendants in error take the position that limitation may not be pleaded as a defense, because the suit is for the recovery of funds which the school districts hold in trust for the benefit of their schools, and because in holding and preserving such funds the school districts are exercising the attribute of sovereignty. It becomes necessary, therefore, to determine first whether limitation is available as a defense in this suit.

The real plaintiffs in the suit, which is brought in the name of the state for their use, are several common school districts of the county of Lamar. These school districts, or to speak more accurately in the language of the statute (R. S. 1925, art. 2748), the trustees of the several districts, are bodies politic and corporate, which may contract and be contracted with, sue and be sued. School districts, whether independent districts or common school districts, are not primarily agencies of the state, but they are local public corporations of the same general character as municipal corporations. While they are state agencies in the sense that they are employed in administering the state's system of public schools, their operations are in a limited sphere, and in holding property and funds in trust for school purposes, they are immediately trustees for the local public. Love v. City of Dallas, 120 Tex. 351, 366-369, 40 S.W.(2d) 20.

Thus school districts fall within the same class as cities, and the rule applicable to cities, that is, that the general limitation statutes may be invoked against them, is ordinarily applicable to school districts. Mellinger v. City of Houston, 68 Tex. 37, 3 S. W. 249, 250; 37 C. J. p. 718, § 32; 17 R. C. L., pp. 972, 973, § 346. In Mellinger v. City of Houston, supra, the court citing a Missouri case, City of Jefferson v. Whipple, 71 Mo. 519, said: "As against a state, limitation does not run unless permitted by statute, while, as against a municipal corporation, it will run unless restrained by statute."

Municipal corporations and school districts are not, like counties, essentially instrumentalities of the state. Chief Justice Phillips, when explaining in Bexar County v. Linden, 110 Tex. 339, 345, 220 S. W. 761, 763, the fundamental differences between the characteristics and functions of municipalities and those of counties, said with reference to municipalities: "Their purpose, chiefly, it is important to remember, is to regulate and administer the local and internal affairs of the particular community. Their main and essential purpose, in a word, is the advantage which will ensue from them to their inhabitants. As Judge Dillon has put it: `The primary and fundamental idea of a municipal corporation is an institution to regulate and administer the internal concerns of the inhabitants of a defined locality in matters peculiar to the place incorporated, or at all events not common to the State or people at large.' The affairs of a municipality are municipal affairs, their concerns are municipal—those merely of the community, and the powers they exercise are municipal powers."

Because they are of such nature, cities and school districts do not enjoy the immunity from suit and from the operation of laws of limitations that is accorded the sovereign.

It is to be noted in this connection that, notwithstanding the fact that counties, as held in Bexar County v. Linden, supra, are essentially instrumentalities of the state, used "as efficient and convenient means for the discharge of the State's duty in their regard to all the people," the general limitation statutes are with certain defined exceptions available in defense of suits by counties. See Houston & T. C. Ry. Co. v. Travis County, 62 Tex. 16; Harris County v. Charlton, 112 Tex. 19, 243 S. W. 460, 245 S. W. 644; Bitter v. Bexar County (Tex. Com. App.) 11 S.W.(2d) 163; McKenzie v. Hill County (Tex. Civ. App.) 263 S. W. 1073 (application for writ of error refused); Caldwell County v. Harbert, 68 Tex. 321, 4 S. W. 607; Linz v. Eastland County (Tex. Com. App.) 39 S.W. (2d) 599, 77 A. L. R. 1466.

It is held that, in the absence of a statute denying to delinquent taxpayers the right to plead limitation, the two-year statute of limitations is available in defense of suits by irrigation districts and levee districts for the collection of taxes. Texas & Pacific Ry. Co. v. Ward County Irr. Dist. (Tex. Com. App.) 270 S. W. 542; Rutledge v. State, 117 Tex. 342, 292 S. W. 164, 7 S.W.(2d) 1071; State v. Glenn, 118 Tex. 334, 13 S.W.(2d) 337, 15 S.W.(2d) 1028.

The same decision has been made with reference to limitation in suits by school districts for the collection of taxes. Prior to September 1, 1925, the effective date of the Revised Statutes of 1925, the two-year statute of limitations could be urged as a defense to suits by independent school districts for the collection of delinquent taxes, but certain articles of that revision of the statutes had the effect of depriving delinquent taxpayers of such school districts of the defense of limitation. Hereford Independent...