State v. Peterson

• Decision Date: 21 December 1939
• Docket Number: 6681
• Citation: 61 Idaho 50,97 P.2d 603
• Parties: STATE, Appellant, v. OTTO F. PETERSON and MARIE M. PETERSON, His Wife, Respondents
• Court: Idaho Supreme Court

97 P.2d 603

61 Idaho 50

STATE, Appellant, v. OTTO F. PETERSON and MARIE M. PETERSON, His Wife, Respondents

No. 6681

Supreme Court of Idaho

December 21, 1939

PUBLIC SCHOOL ENDOWMENT FUND-LOANS-MORTGAGE FORECLOSURE-STATUTE OF LIMITATIONS-CONSTITUTIONAL LAW-STATUTES, CONSTRUCTION OF.

1. Public school endowment funds are "trust funds" of the highest order. (Act Cong., Feb. 18, 1881, 21 Stat. 326; Const., art. 9.)

2. A state is not barred by a statute of limitations unless expressly named.

3. As respects public rights or property held for public use upon trusts, states as well as municipalities are not within the operation of a statute of limitations.

4. An action by the state to foreclose a mortgage executed to secure a loan of money out of public school endowment fund was not barred by five-year statute of limitations, even though that statute is made applicable by another statute to actions brought by the state, and even if those statutes be considered as though passed after the adoption of the Constitution which declares that the public school fund shall forever remain inviolate and intact, since the state in handling that fund acts as a "trustee" performing a high constitutional public duty. (I. C. A., secs. 5-216, 5-225; Act Cong., Feb. 18, 1881, 21 Stat. 326; Act Cong. July 3, 1890, sec. 21, 26 Stat. 219; Const., art, 9, secs. 3 11, art. 21, sec. 2.)

5. Where there are two possible constructions of a statute, one resulting in its being held unconstitutional or of doubtful constitutionality and the other not, a court should adopt the construction holding it constitutional.

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Charles E. Winstead, Judge.

Appellant sued to foreclose a mortgage executed by respondents in favor of appellants to secure a loan of $ 4,700 out of the public school endowment fund. The court sustained a demurrer to appellant's amended complaint and on failure of the state to plead further judgment of dismissal was entered, from which this appeal is taken. Reversed and remanded.

Reversed and remanded with directions. Costs to appellant.

J. W Taylor, Attorney General, Lawrence B. Quinn, R. W. Beckwith, E. G. Elliott and D. W. Thomas, Assistant Attorneys General, for Appellant.

The legislature of the State of Idaho cannot, by statutory enactment, divert or authorize diversion of any part of the principal or interest of the permanent education funds of the State of Idaho, or by statute cause a loss to said fund, and hence the statutes of limitation applicable against the state generally are not operative to estop the state acting as trustee of those funds for the common schools of the State of Idaho from bringing an action for recovery of money loaned therefrom. (Art. 9, secs. 3, 4, 11, Const., Idaho; sec. 5, Idaho Admission Bill; sec. 55-701, I. C. A.; State v. Fitzpatrick, 5 Idaho 499, 51 P. 112.)

The permanent education funds of the State of Idaho are protected when loans are made on farm lands as provided by the Constitution of the State of Idaho, if the necessity arises therefor, by foreclosure of the mortgage and reduction of the property to the state's possession. (Sec. 55-715, I. C. A., as amended, 1937 Session Laws, chap. 170, p. 278; Kieldsen v. Barrett, 50 Idaho 466, 297 P. 405; State v. Reed, 47 Idaho 131, 272 P. 1008.)

Karl Paine, for Respondents.

Section 5-225, I. C. A. The limitations prescribed in this chapter apply to actions brought in the name of the state, or for the benefit of the state, in the same manner as to actions by private parties.

"The legislature, at the time of the enactment of C. S., sec. 6618, making the statute of limitations applicable to the state, evidently had in mind and recognized the common-law rule exempting the government from such limitations, and meant and intended to provide a limitation for every kind of an action that could be brought in the courts of the state, and passed the same for the express purpose of making the statutory limitation apply with equal force to actions brought by the state in its sovereign and proprietary capacity as well as to those brought by private parties." (Blaine County v. Butte County, 45 Idaho 193, 196, 261 P. 338; Small v. State, 10 Idaho 1, 76 P. 765; Lemhi County v. Boise Livestock Loan Co., 47 Idaho 712, 717, 278 P. 214; State v. Naylor, 50 Idaho 113, 294 P. 333.)

GIVENS, J. Ailshie, C. J., and Budge, Morgan and Holden, JJ., concur.

OPINION

GIVENS, J.

April 24, 1924, respondents gave their note and mortgage for a loan of $ 4,700 made them by appellant from the permanent educational public school fund of the State. By agreement date of maturity was extended from April 24, 1929, to July 1, 1932. Interest to July 16, 1932, was paid December 16, 1932, thus starting the statute to run as at least of the latter date and the note and mortgage thereafter remained due and unpaid. Foreclosure was commenced December 10, 1938.

Respondent's demurrer was sustained by the trial court on the ground the cause of action was barred by section 5-216. I. C. A. ^[1] made applicable by section 5-225, 1. C. A. ^[2]

Upon appellant's failure to amend or plead further judgment was entered for respondent, dismissing the action, hence this appeal. The sole question is whether section 5-216. I. C. A., thus bars the action.

Sections 5-216 and 5-225, I. C. A., were first enacted as sections 156 and 165, chapter X, pages 30 and 31, Territorial Session Laws 1881, which adjourned February 10, 1881, and without change have been carried through subsequent compilations and codifications into the 1932 codes.

The first cession of lands foreshadowing statehood and to constitute a trust fund as further provided for and prospectively accepted by the State in article 9 of the Constitution. was by act of Congress, chapter 61, volume 21, U.S. Stats. at Large, Feb. 18, 1881, page 326. ^[3]

Further grants were made in the admission bill, 26 U.S. Stat. at Large, chapter 656, page 215, section 4, 5, 6, 7, 8, 10, 12; Volume 1, I. C. A., page 164-166.

Section 3, article 9, Idaho Constitution, declares the public school fund "shall forever remain inviolate and intact . . . . ," the state to supply all losses that may in any manner occur. Section 11, article 9, authorizes the loaning of said funds upon restricted securities.

Thus these public school endowment funds are trust funds of the highest and most sacred order, made so by Act of Congress and the Constitution, so considered by the members of the Constitutional Convention (vol. I. pp. 647, 773, 861; vol. II, p. 1287) and so recognized and declared by this court (Roach v. Gooding, 11 Idaho 244, 81 P. 642; Parsons v. Diefendorf, 53 Idaho 219, 23 P.2d 236; Evans v. Van Deusen, 31 Idaho 614, 174 P. 122; State v. County of Minidoka, 50 Idaho 419, 298 P. 366) and other land grant states. (Rowlands v. State Loan Board of Arizona, 24 Ariz. 116, 207 P. 359; Special School Dist. No. 5 v. State, 139 Ark. 263, 213 S.W. 961; Robertson v. Monroe County, 118 Miss. 520, 79 So. 184; State v. Llewellyn, 23 N.M. 43, 167 P. 414, 421; State v. Donald, 160 Wis. 21, 151 N.W. 331; State v. McMillan, 12 N.D. 280, 96 N.W. 310; Wyman v. Banvard, 22 Cal. 524, 525; Greenbaum v. Rhodes, 4 Nev. 312.)

With regard to the applicability of the statute of limitations this court at an early day (1894) declared:

"It is also well settled that a state is not barred by a statute of limitations, unless expressly named. . . . As respects public rights or property held for public use upon trusts, municipal corporations are not within the operation of the statute of limitations; . . . ." (emphasis ours). (In re Counties, etc., v. County of Alturas, 4 Idaho 145, 37 P. 349, 95 Am. St. 53.)

While the court therein had before it a controversy between counties, if the statute of limitations therein mentioned, being the provisions considered herein, did not apply to a county when acting as trustee, they would not apply to the State, because the county is only a political branch or subdivision of the State. (Strickfaden v. Greencreek Highway Dist., 42 Idaho 738, 248 P. 456, 49 A. L. R. 1057; Reinhart v. Canyon County, 22 Idaho 348, 125 P. 791; United States v. Nez Perce County, 95 F.2d 238; Edwards v. Logan County, 244 Ky. 296, 50 S.W.2d 83; Carlton v. Mathews, 103 Fla. 301, 137 So. 815; Crowley v. Clark County, 219 Wis. 76, 261 N.W. 221; Town of Saluda v. Polk County, 207 N.C. 180, 176 S.E. 298: City of Pendleton v. Umatilla County, 117 Ore. 140, 241 P. 979.) The higher the sovereignty and the more sacred (not used in a religious sense) and public the function involved the greater the reason for immunity. (37 C. J. 710-715.)

It is true Bannock County v. Bell, 8 Idaho 1, 65 P. 710, 101 Am. St. 140, overruled Fremont County v. Brandon, 6 Idaho 482, 56 P. 264, which followed In re Counties v. County of Alturas, supra, but expressly did not overrule In re Counties v. Alturas, supra, stating it was not applicable to Bannock v. Bell, supra, 101 Am. St. 140, 179, note.

Thus the doctrine announced in In re Counties v. Alturas, supra, remains. There is as much justification because of the supporting reasons therein to hold the statute of limitations not applicable herein, as there was for the holding in State v. Fitzpatrick, 5 Idaho 499, at 506, 51 P. 112, that the usury statute did not apply to loans of school funds, and the argument of that decision is pertinent and controlling here:

"It is contended that, as said promissory notes and mortgage called for compound interest, the provisions of said section 1266 of the Revised Statutes (above quoted) are applicable to this case, and must be followed in entering judgment therein. That section prescribes the penalty for making usurious contracts or...