Schoenhoeft v. The Board of County Commissioners of The County of Kearny

• Decision Date: 07 December 1907
• Docket Number: 15,256
• Citation: 76 Kan. 883,92 P. 1097
• Parties: JOHN F. SCHOENHOEFT v. THE BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF KEARNY
• Court: Kansas Supreme Court

92 P. 1097

76 Kan. 883

JOHN F. SCHOENHOEFT v. THE BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF KEARNY

No. 15,256

Supreme Court of Kansas

December 7, 1907

Decided July, 1907.

Error from Kearny district court; WILLIAM EASTON HUTCHISON, judge.

Judgement affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

MUNICIPAL CORPORATIONS--Bonded Indebtedness--Limitation of Actions. The rule of law that the statute of limitations does not begin to run in favor of a municipal organization on its outstanding warrants until it has money in its treasury to redeem them does not apply to its ordinary bonded indebtedness represented by negotiable bonds and interest coupons.

T. F Garver, and J. B. Larimer, for plaintiff in error.

E. R. Thorpe, Harkless, Crysler & Histed, and Frank P. Lindsay, for defendant in error.

OPINION

BURCH, J.:

The plaintiff sued for the interest due upon certain municipal bonds represented by interest coupons, one of which, typical of the others, reads as follows:

"No. 25. July 1, 1899.

"The township of Lakin, Finney county, state of Kansas, will pay to bearer, at the fiscal agency of the state of Kansas, in the city of New York, seven dollars and fifty cents, being six months' interest on funding bond No. 1 for $250.

Attest: A. B. BOYLAN, trustee.

F. C. KENNEDY, tp. clerk."

The date stated is that of the maturity of the coupon. Proper allegations were made showing that the defendant had succeeded to the liability of Lakin township in Finney county. When the action was commenced more than five years had elapsed since the maturity of the coupons, and to avoid the effect of the statute of limitations the following allegations were inserted in each cause of action of the petition:

"That when said coupon by its terms became due and payable the same was duly presented at the place of payment therein mentioned and payment demanded, but was refused because said defendant had not, and did not have at any time before or since, any funds at said place for the payment thereof, nor has said defendant, at any time, made any levy for taxes or provided funds out of which said coupon could be paid."

A demurrer to the petition was sustained, and the question is if the matter quoted can have the effect claimed for it. The plaintiff argues that the rule which governs the liability of a municipality upon treasury warrants should apply to its ordinary bonded indebtedness. The rule with respect to warrants is stated in School District v. Bank, 63 Kan. 668, 66 P. 630, as follows:

"Orders were drawn by the proper officers of a school district on the treasurer for the payment of money out of a designated fund. In an action against the district on the warrants, it appeared that at no time since the debt was created had there been any money in the treasurer's hands applicable to the payment of the orders. Held, that the school district was estopped from interposing the defense that the action was barred by the statute of limitations." (Syllabus.)

In Hubbell v. South Hutchinson, 64 Kan. 645, 68 P. 52, it was said:

"The statute of limitations will not begin to run in favor of a city on its outstanding warrants until it has money in its treasury to satisfy such obligations." (Syllabus.)

Although warrants may take the form of negotiable paper and be made payable at a specific date, they are not negotiable in the commercial sense, belong in a class by themselves, and are fundamentally different from ordinary municipal bonds and coupons representing installments of interest upon such bonds. This is made clear by the general law relating to the issuing, registration and order of payment of municipal warrants. All warrants must specify out of what fund they are payable and the nature of the claim or service for which they are issued. The clerk and the treasurer of the municipality both make a record of them before delivery. It is the treasurer's duty to pay them on presentation, provided, however, he has sufficient money in the fund on which they are drawn to do so. If the treasurer cannot pay on presentation he stamps them "Presented and not paid for want of funds" (Gen. Stat. 1901, § 6011) and registers them. Thereafter they are to be paid in the order of registration, and as funds come in the treasurer sets apart a sufficient sum to take them up. At stated times the treasurer publishes a call for the redemption of as many warrants as he can pay, and interest upon them ceases after publication of the call. (Gen. Stat. 1901, ch. 87.) Under this statute warrants are simply drafts on anticipated revenue (City of Burrton v. Savings Bank, 28 Kan. 390; School District v. Bank, 63 Kan. 668, 66 P. 630), which, whatever the form or expressed date of maturity, are not in law or in fact payable except as from time to time money to meet them is received into the specific fund of the treasury upon which they are drawn. A judgment upon a warrant merely establishes the claim against the municipality, and it is still payable only in the order of its registration from the fund designated for the purpose.

Obligations of the character of those in suit are general promises to pay at all events upon a certain day. True, a fund must be created by taxation to meet coupons representing the interest upon bonded indebtedness; but no particular fund is, at the time of their issue, expressly pledged in advance to their payment, and whether or not money has been raised to meet them they are due and payable absolutely upon the stated days of their maturity. Perhaps under exceptional circumstances warrants may sometimes become payable when funds to meet them ought to be in the treasury, but ordinarily it is the condition of the public treasury which matures them. Unless the circumstances be decidedly exceptional bonds and their attendant coupons mature according to contract.

The foregoing being true, it may properly be said the legislature intended that the statute of limitations should be regarded as commencing to run upon a warrant from the time funds are in the treasury, and not from the date of the instrument or from the nominal date of maturity expressed on its face. In any event a municipality with power to provide the funds necessary to mature its outstanding warrants should not be allowed to assert its own neglect to take steps to that end for the purpose of raising the bar of the statute. But since all the reasons upon which such conclusions are based fail in respect to ordinary negotiable bonds and coupons, they must be left to be governed by the law applicable to instruments of the class to which they belong.

The plaintiff's argument presumes largely upon general statements made in decisions referring to particular obligations governed by particular statutes. Thus the language of this court in the opinion in the case of Hubbell v. South Hutchinson, 64 Kan. 645, 68 P. 52, is quoted as if decisive of this one. It was there said:

"This action was based upon certain written obligations and, in the absence of intervening circumstances, would become barred...