Nuveen Co. v. City of Quincy , 115 Fla. 510 ( 1934 )

A petition for rehearing filed for the plaintiff in error states that the Court apparently overlooked questions presented as to whether the statute of limitations is applicable to this action at law, in view of previous decisions (Munroe v. Reeves,71 Fla. 612, 71 So. 922; State, ex rel. Nuveen v. Greer,88 Fla. 249, 102 So. 739) and of the allegations of a replication designed to show a trust relation which would make the statute of limitations inapplicable to the action; and that the Court should interpret Chapter 9057, Acts of 1921, as being mandatory.

In the holding that "the right of action having accrued when assumpsit could have been maintained, the statute of limitations had barred this action before it was brought," and in other statements in the opinion, there was necessarily involved a determination that the statute of limitations was applicable as pleaded.

The replication referred to is as follows:

"Seventh: And for further replication to the second plea of the defendant, filed herein, the plaintiff says:

"That on or about the 30th day of October, 1909, this plaintiff bought of and from the defendant, the City of Quincy, $10,000.00 Dollars of par value of bonds of the said City of Quincy dated the first day of July, A.D. 1909, issued for the purpose of erecting school buildings and maintaining a system of public education in said municipality, and due on July 1st, A.D. 1949; that said bonds were purchased by the plaintiff in full and complete reliance upon the recital therein, that same were duly authorized by law and were the binding obligations of the City of Quincy, Florida; that this defendant paid the City of Quincy, the sum of $9,891.66 Dollars in cash for said bonds, which said money was actually received by the said City of Quincy, the defendants herein; that the said bonds so purchased by the plaintiff from the defendant were and are null and void because issued by the City of Quincy in violation of an implied provision of the Constitution of the State of Florida, developed by judicial interpretation after the said issuance and sale of said bonds by the defendant to the plaintiff, and because for the reasons aforesaid, the statute enacted by the Legislature of the State of Florida, expressly authorizing the issuance of said bonds and the statute enacted by the Legislature of the State of Florida expressly validating said bonds were likewise null, void and unconstitutional; that both parties to the said sale of said bonds, to-wit: the plaintiff and defendant, acted in good faith and relied upon the validity of said bonds and believed that said bonds were the valid and binding obligations of the City of Quincy; that the facts aforesaid in law constituted the defendant, the City of Quincy, the trustee of said funds for the defendant and said funds were held in trust by the defendant for the uses of the plaintiff; that the defendant used and spent said moneys paid by the plaintiff to the defendant for the purchase of said bonds for its own benefit and thereby as trustee became liable to the plaintiff for interest upon said moneys according to law; that the defendant, by reason of the facts aforesaid, is a bare or naked trustee of said moneys for the use of the plaintiff and the plaintiff is entitled to recover the same in this action; that by reason of the defendant being a trustee of said moneys and funds no statute of limitation can or does run against the plaintiff and in favor of the defendant on the plaintiff's cause of action to recover said money from the defendant under the laws of the State of Florida.

"WHEREFORE the plaintiff says that he is entitled to recover in this cause notwithstanding the lapse of time and that the second plea of the defendant filed herein to the declaration of the plaintiff constitutes no defense or bar to the plaintiff's right of recovery by reason of the facts aforesaid."

Municipal bonds payable by taxation are issued only upon delegated authority and are binding contracts of the municipality representing its taxpayers only when the bonds are duly authorized by and are issued in accordance with controlling law. If municipal bonds are not authorized and issued in accordance with paramount law, they are illegal and void, and money paid for them does not raise a trust in favor of the purchaser, even if the money is used for an authorized municipal purpose.

A purchaser of municipal bonds which have not been duly adjudged to be in accord with the controlling law, takes them subject to a future adjudication as to the validity of the statute authorizing the issue, and as to the legal sufficiency of the record of the proceedings in issuing the bonds as well as to the legal effect of the contents of the bonds. Statements or recitals contained in municipal bonds to the effect that they are issued in full compliance with law, cannot affect the invalidity of such bonds when issued in violation of the Constitution of the State.

In this case there was no authorized purchase of property or sale of bonds by the city and no misapplication of the funds of the plaintiff. There was an intentional purchase of city bonds, the possible inherent or latent constitutional or fundamental infirmities of which bonds were in law conclusively presumed to be known to all parties, the bonds not having been adjudged to be valid under the Constitution; and the subsequent adjudication of their illegality does not operate to raise a trust out of the transaction in favor of the party who has paid for the bonds he intended to buy, when the city cannot pay the bonds because forbidden to do so by the paramount law.

In Chapman v. County of Douglas, 107 U.S. 348, 2 Sup. Ct. 62,27 L.Ed. 378, cited for plaintiff in error, there was a duly authorized purchase of land by the county, only the method of payment being unauthorized; and it was adjudged that the county should hold the title in trust until the land is paid for as authorized by law, or else the title to be reconveyed. Here municipal bonds were issued contrary to the Constitution, and consequently without any legally delegated authority, so theentire transaction was legally unauthorized and void, the parties being in law bound by the consequences thereof, so there was no predicate whatever upon which to base a trust relation. The purchaser received the bonds he intended to buy and paid what he intended to pay for the bonds, which could be legally issued only by duly delegated authority, the validity of which delegated authority being, as the purchaser was bound to show, contingent upon possible future adjudication. The city cannot legally be authorized to pay the bonds.

In Browder v. Da Costa, 91 Fla. 1, 109 So. 448, also cited for plaintiff in error, there was a trust relation of attorney and client between competent parties to the purchase of land, with no question of delegated authority legally conferred or of the legality of the transaction.

The consideration that should the bonds be adjudged to be illegal and void, the city may legally return the money it received for the bonds and used for a city purpose, does not create a trust against the city and in favor of those who bought city bonds which were issued and bought in good faith, but which in law are legally unauthorized and void because issued in violation of the Constitution, though the illegality was not known until the validity of the bonds was duly put in issue and adjudicated, all parties being in law held to know that an adjudication of an issue of validity or invalidity is a legal condition on which all municipal bonds are issued.

A trust cannot be enforced by an action in common counts on an implied promise; though in such an action if duly instituted a judgment may be recovered for money which in conscience the defendant should not be allowed to retain. In this case no trust is shown and the action is at law on an alleged implied promise to return money paid for the purchase of municipal bonds which both parties supposed were valid. But both parties are in law held to know that the supposed validity of the bonds was subject to future judicial adjudication.

There was no intent to raise a trust and the law implies no trust in the purchase of municipal bonds afterwards held to be illegal and void, though the money paid may be returned if no provision of law is thereby violated.

The Act of 1921 intended merely to authorize a return of the money paid for the void bonds, and the intent of the enactment is the law.

This action of assumpsit in common counts was not begun within the time prescribed by the applicable statute of limitations, and there is no showing of a trust or other matter to exclude the operation of the statute of limitations to this case.

Rehearing denied.

WHITFIELD, TERRELL, BROWN and BUFORD, J. J., concur.

DAVIS, C. J., concurs in the result.