Union Sav. Bank & Trust Co. v. Gelbach

• Decision Date: 27 March 1894
• Citation: 8 Wash. 497,36 P. 467
• Court: Washington Supreme Court
• Parties: UNION SAV. BANK & TRUST CO. v. GELBACH, COUNTY TREASURER.

36 P. 467

8 Wash. 497

UNION SAV. BANK & TRUST CO. v. GELBACH, COUNTY TREASURER.

Supreme Court of Washington

March 27, 1894

Appeal from superior court, Thurston county; M. J. Gordon, Judge.

Petition by the Union Savings Bank & Trust Company for a writ of mandate to compel George Gelbach, as treasurer of Thurston county, Wash., to pay certain county warrants held by plaintiff. From an order denying the writ and dismissing the petition, plaintiff appeals. Reversed.

A E Buell and Crowley, Sullivan & Grosscup, for appellant.

Milo A Root, Pros. Atty., for respondent.

STILES J.

Appellant being possessed of warrants issued by Thurston county in 1891-92, upon the call of respondent, who is treasurer of the county, presented them to him for payment. The treasurer offered payment of the principal, with interest at 10 per cent. per annum until June 7, 1893, and at 8 per cent. since that date. The reason for the difference in the rate of interest offered was that whereas, prior to June 7, 1893, the legal rate of interest in this state was 10 per cent., the act of February 21, 1893, which took effect June 7th, reduced that rate to 8 per cent. The statute (Gen. St. § 216) requires the treasurer, when he has not funds to pay a county order or warrant presented, to indorse it, "Not paid for want of funds," with the date of the indorsement over his signature; and from this time it is declared the order shall draw legal interest. The contention of the appellant is (1) that the language and intention of the act of 1893 are wholly prospective; (2) whatever may have been the intention, it was not within the power of the legislature to change the rate which prevailed at the time when the orders were presented and indorsed.

In Saunders v. Carroll, 12 La. Ann. 793, the first of the above points was well covered, and it was held that a new interest law would not be considered as applicable to cases which arose previous to its passage unless the legislature in express terms, declared such to be its intention. We have no idea that our legislature of 1893 contemplated for one moment that public obligations of this class would be repudiated, to the extent of one-fifth of the interest thereon, by the passage of the act of February 21st. The act itself bears no evidence of any such intention. But a disposition of the case upon this point would be far from satisfactory, and we shall consider it upon the other as well. It is agreed that, if the provision in regard to interest at the rate of 10 per cent. entered into and became a part of the contract, the legislature could not impair it by making the reduced rate applicable to the warrant either before or after the passage of the law; but, if the exaction of interest is mere penalty for the unlawful act of detaining money due, then it is conceded that it is changeable with the change in the law. A county order or warrant is lacking in one of the qualities which make notes, bills, checks, etc., commercial paper, viz. "negotiability." This lack, however, is due entirely to the fact that it is open to all defenses which might have been made to the claim on which it was founded. In Allison v. Juniata Co., 50 Pa. St. 351, it was held, following Dryer v. Covington Tp., 19 Pa. St. 200, that such warrants were not even contracts upon which a suit could be maintained, but that the original indebtedness was the sole ground of action. There are some other cases of like tenor, perhaps, but they do not express the current law of such matters. Dill. Mun. Corp. §§ 485-487, and Daniel, Neg. Inst. §§ 427-430, treat these warrants as only something less in negotiability than notes or bonds, and therefore not commercial paper. This court, in Seymour v. City of Spokane, 6 Wash. 362, 33 P. 832, maintained a doctrine exactly the contrary of that put forth in Pennsylvania and a few other states concerning the payment of interest on warrants where no statute required it. But however the case may be elsewhere, or in other cases, we are satisfied that it cannot be held here that a county warrant is not a contract to pay money. Our statutes governing the presentation and allowance of claims against counties, and the issuance of warrants for the sums allowed, plainly contemplate that the transaction between the claimant and the county is to be merged in the warrant, and settled by it, just as fully as is a store account between a merchant and his customer when the latter gives his note for the balance found due upon the former's books. One of the principal reasons we find given in the cases alluded to for not allowing interest on warrants, where there has been no custom and no statute, is that people who have dealt with a county have, by advancing the price of their goods, discounted the face of their claims before their warrants are issued. But here we have the law making the payment of interest mandatory, so that one who deals with a county knows that he is expected to sell to it on a cash basis, the same as he does to a private individual, making himself whole for delay in payment out of the interest required to be paid him. When the dealer delivers goods to the county, it is just as much implied that he shall have interest at the legal rate from the time his warrant is presented as that he shall have his claim passed upon and a warrant issued for the amount found due. But it is said that the right to interest exists only because it is given by statute as a penalty for the county's nonpayment on demand, to which the sufficient answer is that every right which a creditor has against a county is to precisely the same extent statutory. The right to sue, the right to have a claim allowed, the right to have a warrant, and to have it paid, all depend on statutes which are none the less necessary to the existence of any of these rights because they are universal accompaniments of county organization. The obligation to pay interest is no less one of contract when the claim for interest is based upon a transaction growing out of contract, because the burden of paying interest is imposed upon the county by a statute. Its obligation to pay the principal has the same foundation.

The only question which remains, then, is whether, since the warrant has read into it a contract to pay "legal interest," it can be held that the rate is to vary as the legal rate is changed by statute from higher to lower and vice versa. It is claimed that there is notice in the statute itself that the rate which is legal at one time may be changed later, and that the warrant holder takes the risk of the change. To support this proposition a number of cases are cited which hold the rule to be that, where a note provides for "interest" from date...