Smith v. Town of Greenwich , 80 Hun 118 ( 1894 )

PUTNAM, J.

The coupons described in the complaint were detached from bonds issued by the town of Greenwich, Washington county, N. Y., between April 1 and May 12, 1871, pursuant to the provisions of chapter 907 of the Laws of 1869, and prior to the amendment thereof contained in chapter 925 of the Laws of 1871. The bonds from which said coupons were taken were made payable in 20 years from their date, instead of 30 years, as provided in the statute. Under the decision of the court of appeals in Hoag v. Town of Greenwich, 133 N. Y. 152, 30 N. E. 842, the said bonds, as such, were void as “bonds, as vouchers or securities." But the agents of the town, who issued them, had the power to borrow the money which in good faith was advanced thereon; and, although they issued unauthorized securities, yet the town, in the transaction, became liable on account of the money advanced on the faith of the bonds, on an implied contract to repay the loan at the time when by the statute the bond should have been made payable. In the case cited, Judge Finch uses the following language:

“I think, therefore, that we should hold that the town of Greenwich is indebted to the plaintiff in the sum * * * for which the void bonds were executed, payable at the end of thirty years from the date of the loan, with interest thereon, payable semi-annualiy, and should recover judgment for so much of the interest unpaid and in arrears as was due and payable at the commencement of the actkn.”

It follows, therefore, that the bonds from which plaintiffs’ coupons were taken are not valid securities, but the town being liable for the money advanced thereon, on an implied contract to repay the same, plaintiffs, under the doctrine established in the case above cited, were entitled to recover on said coupons unless their claim was barred by the statute of limitations. If the town bonds in question had been valid securities, the coupons detached therefrom probably would have been deemed specialties, like the securities from which they were taken, and in an action thereon a 20-year limitation would have applied. It is said by Judge Earl in Bailey v. Buchanan Co., 115 N. Y. 297-301, 22 N E. 155:

“The past-due coupons, payable to bearer, when detached from the bonds, are for many purposes independent, separate instruments. They may be negotiated, and may be sued upon by the holder without the production of the bonds. * * * But the coupons, nevertheless, always have some relation to the bonds. Their force and effect and character may be determined by reference to the bonds. They are secured by the same mortgage, and, although unsealed, are specialties, like the bonds, and are governed by the same statute of limitations which is applicable to the bonds.”

See, also, City of Lexington v. Butler, 14 Wall. 282-292; Williamsburgh Sav. Bank v. Town of Solon, 136 N. Y. 481, 32 N. E. 1058; McClelland v. Railroad Co., 110 N. Y. 469, 18 N. E. 237. But in the case under consideration there were in fact no bonds. The instruments so called were void. The indebtedness was not secured by any writing, but was merely an implied obligation arising on account of money paid and advanced. While the bonds, however, were void, plaintiffs brought this action, upon the assumption that the coupons for semiannual interest, payable to bearer, attached thereto, were valid, and the transfer of those mentioned in the complaint to their testator gave them a right of action thereon. Assuming that this assumption is correct, it then appears that the defendant was indebted to the holders of the void bonds for the amount thereof, payable at the end of 30 years from their date, with semiannual interest, and also to the plaintiffs for interest on said indebtedness accruing in 1874, which accrued interest had been transferred to the plaintiffs’ testator by a sale to him of the coupons described in the complaint. After said plaintiffs or their testator could at any time have maintained an action on said coupons, a satisfaction or payment of the principal debt would not have extinguished such right. A claim existed, on account of said loan to the town of Greenwich, in favor of the holders of the bonds, for the principal sum loaned, and a separate demand for the accrued semiannual interest to the holders of the coupons. City v. Lamson, 9 Wall. 477; Bailey v. Buchanan Co., 115 N. Y. 297-301, 22 N. E. 155.

It is alleged in the answers, to which demurrers were interposed, that plaintiffs’ cause of action did not accrue within six or ten years prior to the commencement of the suit. The allegations contained in said answers may be deemed an averment that the coupons were transferred to plaintiffs’ testator over six or ten years prior to the commencement of the action. When so transferred, a cause of action at- once accrued on the coupons, in favor of the deceased. It was a cause of action on a demand separate from that of the persons to whom the town was indebted . for the principal sum loaned. The cause of action so transferred by the sale of the coupons was not one on a sealed instrument, because the loan was not secured by a valid or legal bond. Plaintiffs’ claim on the coupons was like one on an unsealed note. The action thereon, we think, was barred after the expiration of' six years.

The learned counsel for the appellants apparently assumes that the bonds in question, which have been held by the court of appeals void as securities, should be deemed sealed instruments in this action, with the coupons attached thereto, as far as necessary to give such coupons the character of specialties. As we understand the decision of the court of appeals in Hoag v. Town of Greenwich, supra, the bonds issued prior to May 12, 1871, by the town of Greenwich, were absolutely void. They are not to be regarded as sealed instruments or securities for any purpose. Hence, the coupons transferred to plaintiffs’ testator were not specialties. They were simply written instruments providing for the payment of semiannual interest upon a loan to the town for which no valid evidence of debt had ever been executed. If the sum loaned had been payable, by the terms of the statute, in one year, instead of thirty, an action to recover the principal sum would have been barred by the statute of limitations after the lapse of seven years. We conclude that, the principal sum loaned to the town of Greenwich not being secured by any legal bonds, the coupons for the semiannual interest thereon, transferred to deceased, cannot be deemed sealed instruments, and hence the six-year limitation applies. The judgment should be affirmed, with costs. All concur.