State ex rel. Central Auxiliary Corporation v. Rorabeck

• Decision Date: 18 December 1940
• Docket Number: 8113.
• Parties: STATE ex rel. CENTRAL AUXILIARY CORPORATION v. RORABECK, County Treasurer of Golden Valley County, et al. (PHILLIPS INV. CO., et al., Interveners).
• Court: Montana Supreme Court

108 P.2d 601

111 Mont. 320

STATE ex rel. CENTRAL AUXILIARY CORPORATION v. RORABECK, County Treasurer of Golden Valley County, et al. (PHILLIPS INV. CO., et al., Interveners).

No. 8113.

Supreme Court of Montana

December 18, 1940

As Amended on Denial of Rehearing Jan. 3, 1941.

Appeal from District Court, Fourteenth District, Golden Valley County; F. C. Husband, Judge.

Mandamus proceeding by the State of Montana, on the relation of the Central Auxiliary Corporation, against Ralph E. Rorabeck, as County Treasurer of Golden Valley County in the State of Montana, and ex officio custodian of the funds of the Franklin Irrigation District, and others, to compel payment of certain bonds and coupons of the Franklin Irrigation District, wherein the Phillips Investment Company and the Securities Service intervened. From an adverse judgment, the defendants and the interveners appeal.

Judgment affirmed.

M. L Parcells and Blenkner & MacFarlane, all of Columbus, for appellants.

A. G McNaught, of Roundup, for respondent.

ANGSTMAN Justice.

This is an appeal from the judgment of the district court directing the county treasurer of Golden Valley county to make certain payments on the bonds and coupons of the Franklin Irrigation District.

The case was tried on an agreed statement of facts showing: That on the first day of March, 1923, the district executed and delivered seventy-nine bonds, in the principal amount of $500 each, with the exception of one which was for $685.13; that each and all bonds were payable to bearer and identical in form and substance and all bearing interest at six per cent and becoming due on the first day of March, 1933; that the bonds bore interest coupons maturing semiannually; that some of the bonds had been redeemed before their maturity; that the unredeemed bonds are held by relator, the Central Auxiliary Company, and by the interveners, the Phillips Investment Company, and the Securities Service, Inc., that all of the coupons have been paid except on bonds numbered 10 to 15, inclusive, the interest on those amounting to $1,800, which are held by the relator; that the coupons representing this interest were more than eight years past due at the time of demand for payment which was made in 1938; that the district has never been in possession of a dependable, or any, water supply system and has never furnished water in any substantial amount to bona fide users; that of the original 35,275.67 acres in the district approximately 15,541 acres have passed to the county for delinquent taxes; and that the only funds on hand for the purpose of paying the interest and principal of the bonds are $7,491.71 in the bond and interest fund, and $690.23 in the general fund, of the district making a total of $8,181.94, which is inadequate to meet all the obligations.

The district court in deciding the issues directed the coupons to be paid first from the general fund until it was exhausted and then from the bond interest and sinking fund, the balance to be prorated among all of the bondholders. The interveners contend that the decision is erroneous in that the coupons were barred by the statute of limitations and that the payments on the principal should not be made on a pro rata basis but by giving preference to the bonds of lower numerical order.

The statute of limitations that was pleaded was the 8-year statute, section 9029 Revised Codes. After the agreed statement of facts was filed defendants as well as the interveners asked leave of court to amend their pleadings so as to rely upon the 2-year statute, section 9033, as well as the 5-year statute, section 9041. The court denied the right of interveners to amend but made no ruling on defendants' motion. The court found that the coupons were not barred by section 9029 and declined to consider whether they were barred by sections 9033 or 9041.

In determining whether the court reached the correct result we shall consider the question whether the coupons were barred by the statute pleaded, as well as whether barred by those attempted to be pleaded. If they were not barred by any of these statutes then it was immaterial whether the court erred in denying the motion to amend the pleadings.

It is well settled that, generally, the same statute of limitations applicable to the principal of bonds is applicable also to the coupons, except that the statute begins to run from the date of the maturity of the coupons respectively, and not from the date of the maturity of the bonds and this irrespective of whether the coupons have been detached from the bonds or remain attached thereto. Smythe v. Inhabitants of New Providence, D.C., 253 F. 824; Clark v. Iowa City, 20 Wall. 583, 22 L.Ed. 427; Amy v. City of Dubuque, 98 U.S. 470, 25 L.Ed. 228; Koshkonong v. Burton, 104 U.S. 668, 26 L.Ed. 886; California Safe Dep. & T. Co. v. Sierra Val. Ry. Co., 158 Cal. 690, 112 P. 274, Ann.Cas.1912A, 729; Curtis v. Rialto Irr. Dist., 44 Cal.App. 738, 187 P. 117; People v. Honey Lake Irr. Dist., 77 Cal.App. 367, 246 P. 819; Wood on Limitations, 4th Ed., Vol. 1, section 127; 37 C.J. 848. But when the bonds and coupons are payable out of a particular fund only, other questions must be considered in determining when the statute starts to run.

Interveners contend that when the interest coupons matured, the holder had a cause of action in mandamus to compel the levy of an assessment for the purpose of creating a fund sufficient to pay them and hence that the cause of action accrued at that time. This contention cannot stand in the face of the agreed statement of facts showing "that from time to time special assessments were duly made and levied upon the property within" the district for the purpose of paying the bonds and interest.

Interveners contend in any event that relator's cause of action accrued when there was money in the hands of the county treasurer applicable to the payment of the interest coupons sufficient to pay them. Relator on the other hand contends that no cause of action accrued even then until demand for payment was made and refused or the trust otherwise repudiated. Relator's contention in this respect must be sustained. The statute of limitations does not begin to run when the bonds are payable out of a particular fund unless it appears that the fund has been provided for. 37 C.J. 849. While relator had a cause of action in mandamus to compel the payment of the interest coupons as soon as money was in the hands of the proper officer and held for their payment (38 C.J. 761; State ex rel. Shapley v. Board of Com'rs of Yellowstone County, 12 Mont. 503, 31 P. 78; Greeley v. Cascade County, 22 Mont. 580, 57 P. 274; State ex rel. McHose v. District Court, 95 Mont. 230, 26 P.2d 345; State ex rel. DeKalb v. Ferrell, 105 Mont. 218, 70 P.2d 290), yet there are circumstances here which save the coupons from the bar of any statute of limitations.

The principal and interest on the bonds were payable out of a particular fund exclusively, of which the county treasurer was custodian (sec. 7213, 7232, Revised Codes 1921). The officers of the irrigation district who must provide for the levy and collection of a tax sufficient to meet the interest and principal, and the county treasurer who is made the custodian of the funds of the district, stand in the relation of trustees for the bondholders of the district. Thompson v. Emmett Irr. Dist., 9 Cir., 227 F. 560; Norfolk & W. Ry. Co. v. Board of Education, D.C., 14 F.Supp. 475; Jewell v. City of Superior, 7 Cir., 135 F. 19; Rothschild v. Village of Calumet Park, 350 Ill. 330, 183 N.E. 337; Taylor v. Benham, 5 How. 233, 12 L.Ed. 130; Blackford v. City of Libby, 103 Mont. 272, 62 P.2d 216, 107 A.L.R. 1348.

It is generally held that as between the trustee and the beneficiary of a trust, the statute of limitations does not run until the trust has been repudiated and notice of repudiation received by the beneficiary. Blackford v. City of Libby, supra; City of New Orleans v. Warner, 175 U.S. 120, 20 S.Ct. 44, 44 L.Ed. 96. The rule is succinctly stated in 4 Bogert on Trusts and Trustees, § 951, as follows "The true rule with respect to the statute of limitations and express trusts is more clearly stated as follows: During performance of the express trust there is no cause of action for breach and so the statute of limitations has no bearing on the rights of the cestui; but, if the trustee violates the trust and the cestui knows of such conduct, or could have learned of it by the use of reasonable diligence, the...