Breckenridge v. Johnston , 62 Idaho 121 ( 1940 )

The effect of the majority opinion is recognition of the right of a municipal corporation to repudiate a legally contracted obligation. I cannot agree to such a doctrine.

When these bonds were issued by the district and purchased by appellant, it was contracted, and the purchaser had a right to believe the contract would be kept, that interest coupons would be paid as they fell due and that the bonds would be paid at orbefore maturity. (Straus v. Ketchen, 54 Idaho 56,28 P.2d 824.) That much stands conceded. But it has been argued that the bondholder had his remedy by mandamus, to compel the levy of annual assessments to raise money to meet interest and provide a sinking fund to pay the bonds at maturity, and that, not having availed himself of such remedy, he is now without a remedy. This contention is a non sequitur and unsound. Because a creditor refrains from suing his debtor does not exonerate the debtor from his obligation. The most such forbearance can do is to let the statute of limitations start running.

Here we have a case, however, where the debtor actually hadthe money in the treasury with which to pay ($8,863.62 ininterest fund and $11,490.78 in sinking fund) and no necessity existed for mandatory process to enforce the collection of funds for payment. The treasurer testified:

"Q. Will you state how much money you have now in the interest fund?

"A. $8,863.62.

"Q. Will you state how much money you now have in the sinking fund?

"A. $11,490.78.

"Q. How much money do you have in the fund for maintenance, repair and so on?

"A. $3,113.83.

"Q. And what is the total?

"A. $23,468.23."

It is no more onerous to pay interest on past due bonds than to pay accruing interest coupons on unmatured principal. There is as much reason and justice in declining the one as the other. It would be impugning the honesty and integrity of the borrower to say that he did not expect to pay the principal at maturity and that he might cease paying interest and thereby and thereafter have the benefit of indefinite free use of the lender's money. I rather prefer to believe that appellant and respondent dealt in good faith and that they should be held to observe the integrity of their contract.

It is not enough to say that, since no coupons were attached for interest after maturity on the principal debt, therefore no interest was contracted to be paid on past due bonds. Such circumstance should rather be taken as an evidence of the expectation of both lender and borrower, that the principal would be paid at maturity and therefore no further coupons were necessary or could ever mature after maturity of the principal debt.

Section 41-2557, I. C. A., corresponding with section 29 of the original drainage law enacted in 1913 (1913 Sess. Laws, pp. 58, 75), to which reference is above made, provides as follows:

"It shall be the duty of the treasurer of any county in which there may be a district issuing bonds under the provisions of this chapter, whenever he has upon hand $5000 of the special fund for the payment of said bonds, and when said bonds shall have run for a period of three years, to advertise in the newspaper doing the county printing, for the presentation to him for payment of as many of the bonds issued under the provisions of this chapter as he is able to pay with the funds in his hands, to be paid in numerical order of said bonds, beginning with the bond number one, until all of said bonds are paid: provided, that thirty days after the first publication of said notice of the treasurer calling in any of said bonds, said bonds shall cease to bear interest."

The proviso to the foregoing section of the code implies that interest shall be paid on all bonds, whether due or not, for 30days after they are called, if not sooner paid. If past due bonds were not meant to draw interest, then this limitation to a 30-day period, after call, would be meaningless. (Miners' Merchants' Bank v. Herron, 46 Ariz. 71, 47 P.2d 430; see secs. 41-2554 and 41-2557, I. C. A.)

The statute, authorizing the issuance of refunding bonds to take up an original issue, carries all the implications of interest payments on both due and past due outstanding bonds (secs. 41-2601 and 41-2602, I. C. A.) and may extend the maturity date of principal far beyond the original maturity and carry coupons.

It seems to me that the sound and just rule, which ought to prevail in such cases, is stated in 44 C. J., page 1236, section 4221, as follows:

"Unless a contrary intent is indicated by statute, interest-bearing or coupon bonds of a municipality, which are not paid upon demand at maturity, continue to bear interest, and the same is true of coupons which are not paid."

The statute, section 41-2558 (prior to its amendment, 1935 Sess. Laws, chap. 55, sec. 2), provides in express terms that when coupons are presented and there are no funds in the treasury to pay them, it shall be the duty of the treasurer to indorse them as presented and not paid for want of funds and "that thereafter said coupons shall bear interest at the same rate as other warrants so presented and unpaid."

There is another potent reason for holding that these bonds continue to draw interest after maturity, and that is, the uniform construction that has been placed upon the law by the administrative officers of the various counties and districts of the state ever since it was enacted. It was alleged in the answer and stipulated as true upon the trial as follows:

"IX. That by a contemporaneous construction that was placed upon the provisions of Chapter 179, Title 32 of the Compiled Statutes of the State of Idaho (now, as amended, Title 41, Chapter 25, I. C. A.), by all of the county treasurers of Idaho charged with the payment of interest and principal of said bonds, and by all other officers in the State of Idaho charged by law with the duty of carrying out the provisions of the law relative to the payment of said bonds, principal and interest, it was held to be the law that if said bonds shall not be paid at maturity they shall continue to draw interest at the rate provided for in the bonds until they are paid or until 30 days after the first notice of call made as provided by law."

It is true that such a practice of continuous construction by the administrative officers is not conclusive on the courts. On the other hand, however, in doubtful cases, it is uniformly adverted to as of great weight in construing statutes. (United Pacific Ins. Co. v. Bakes, 57 Idaho 537, 545,67 P.2d 1024; Bashore v. Adolf, 41 Idaho 84, 91, 238 P. 534, 41 A.L.R. 932; 25 Rawle C. L., p. 1043, sec. 274; 59 C. J., sec. 609, pp. 1025, 1030, sec, 626, p. 1064; Cooley's Const. Lim., 4th ed., p. 76; State ex rel. Anderson v. Rayner, 60 Idaho 706,712, 96 P.2d 244; Eldridge v. Black Canyon Irr. Dist.,55 Idaho 443, 447, 43 P.2d 1052.)

The majority opinion seems to be predicated on the assumption that the law does not contemplate, and the commissioners need not provide for, the payment of the principal debt (bonds)at maturity and that, therefore, it must have been anticipated that some at least of the bonds would be outstanding and unpaid after maturity. This is a false assumption and, as I view it, such contingency is specifically provided against by the statute. The statute says that annual levies or assessments shall be made during at least the last five years of the period during which the bonds are to run, "sufficient to liquidate said bonds at maturity." (Sec. 41-2556, I. C. A.) The lawmakers evidently foresaw that some property owners would not pay their assessments as they fell due and so they provided that:

"The commissioners may also levy assessments for any expense necessarily incurred by them . . . . and also may add to said assessment sufficient to pay any deficiency occurring the preceding year or any other unpaid warrant indebtedness, if any, or to pay any outstanding warrants: provided, that any assessments to be hereafter made by any drainage commissioners to pay warrants shall not exceed twenty per cent of the original cost of organization and construction in addition to the assessments which may be levied under section 41-2536, and such assessments, when made, shall be apportioned and collected as hereinbefore provided for." (Sec. 41-2562.)

The statute (sec. 41-2556) further provides that the commissioners "are hereby authorized and required, annually, to levy an assessment sufficient to liquidate said bonds atmaturity." Now it seems clear to me, that the legislature contemplated that where sufficient money is not raised from assessment made in any one year, on account of the failure of property owners to pay their assessments, it would be the duty of the commissioners the following year to levy a larger assessment sufficient to make up the deficiency carried over from the preceding year, and so on until final maturity of the bonds. The power of the commissioners to make such levy is circumscribed only by the limit of benefits that have beenassessed against the several tracts of land subject toassessment. But, pursuing this plain statutory provision, there need never be any accumulation of past due bonds.

The facts of this case illustrate the point I am here attempting to make, in this, that the total assessment of benefits against the lands within this drainage district was $291,337.29, whereas, the bond issue was only $68,000. So that assessments might properly be made within the terms of the statute against this property for more than four times the amount of the bond issue and still be within the limits of the assessment of benefits. That, however, was never necessary in this case. There is no complaint that the annual assessments all together exceeded or approached the maximum of benefits assessed against these lands, as is well illustrated by the foregoing excerpt from the testimony of the treasurer.

The lawmakers never contemplated the enactment of a statute that would leave a loophole for public or municipal dishonesty or that would allow a municipal corporation (Nampa M. I.Dist. v. Barclay, 56 Idaho 13, 47 P.2d 916, 100 A.L.R. 557; Straus v. Ketchen, 54 Idaho 56, 28 P.2d 824; City ofNampa v. Nampa M. I. Dist., 19 Idaho 779, 115 P. 979), to float its bonds for a corporate community improvement and later on repudiate them.

All annual assessments must be uniform for the same year on all the assessable property in the district, without regard to whether any previous assessments are delinquent or have been paid. If not paid within the delinquency periods allowed, the land must be conveyed under the delinquency statute.

The majority opinion ignores our holding in Smith v. City ofNampa, 57 Idaho 736, 68 P.2d 344, wherein we specifically recognized the difference between "annual instalment assessments as spread on the tax rolls for a specific year," and "aggregate apportionment of benefits." Under these statutes and our repeated decisions thereon, it seems to me that a district always has the opportunity and power to protect itself against delinquent assessments by increase of subsequent annual levies within the limits of the aggregate benefit assessment. Clearly, the payment by the district of county and state taxes on land, the title to which has passed to the district for delinquent assessments, would be comprised within the provisions of section 41-2562, authorizing assessments for any expense necessarily incurred by them for . . . . maintenance . . . . or any extraordinary reasons, and . . . . may add to said assessment sufficient to pay any deficiency occurring the preceding year or any other unpaid warrant indebtedness. . . . ."

That part of the judgment, decreeing "that the bonds of Drainage District No. 3 ceased to draw interest on the dates of the maturities of said bonds" should be reversed; and that part of the judgment, decreeing "that the defendant is not legally liable for repayment of interest on matured bonds of Drainage District No. 3" should be affirmed.