Alabama City, G. & A. Ry. Co. v. City of Gadsden

64 So. 91, 185 Ala. 263, 1913 Ala. LEXIS 687

• Court: Supreme Court of Alabama
• Decided: December 4, 1913
• Status: Published

Opinion

SAYRE, J.

Appellant company had been furnish-» ing light to the city of Gadsden under a contract calling for monthly settlements, and appellee had fallen far behind in making payment. Appellant demanding its money, and appellee being unable to pay, negotiation between them resulted in the adoption of a resolution by the board of mayor and aldermen on October 1, 1906, as follows: “Resolved by the mayor and board of aldermen of the city of Gadsden that warrants be issued covering the amounts due, bearing interest at the rate of eight per cent, per annum, and the clerk be instructed to issue said Avarrants.” The resolution was shown by the minutes of the board, and was carried into effect, so far as concerned the issue of Avarrants, by the clerk’s interlineation of words into then outstanding warrants which imported that they Avere to bear interest. Viewed in connection with the evidence as to the previous contention between the parties, Ave think this resolution cannot be fairly construed otherAvise than as. an agreement on the part of the city, on the consideration that appellant Avould continue to carry the warrants then due and continue to furnish light under its contract, to pay interest on Avarrants then due and outstanding We find no sufficient justification in the language employed for an interpretation which would bring future indebtedness within the scope and influence of the resolution. Por a time the clerk issued warrants for subsequently accruing claims on account of light furnished which purported to bear interest. But this feature of the later Avarrants created no obligation on the city for the reason that in wording them as interest bearing the clerk acted without authority. True, there was testimony going to show an informal agreement by the members of the board of aldermen of later date that interest should be paid; but this agreement found no place upon the record of the proceedings of the board of aldermen. In fact, the understanding of the parties and the direction of the board was that the so-called agreement should not be spread upon the minutes, this because it was supposed that publicity in the matter would stimulate other creditors of the city to demand interest on their deferred claims and because there was an appreciation of the consideration that all creditors in like case were entitled to like treatment. This manner of dealing with the so-called agreement rendered it null and of no effect. “The law requires a record to the end that those who may be called to act under it may have no occasion to look beyond it; to avoid the mischief of leaving municipal corporate action to be proved by parol evidence; to make it certain that rights which have accrued under such actions shall not be destroyed or affected by the always fallible and often wholly unreliable recollection of witnesses, however truthful and intelligent they may be.” — 2 McQuillan, Munn. Corp. p. 1358. This is the doctrine of our cases.— Perryman v. Greenville, 51 Ala. 507; Greenville v. Water Works Co., 125 Ala. 625, 27 South. 764.

On January 1, 1909, a number of warrants in favor of appellant, including those covered by the resolution of October 1, 1906, and as well others of later issue, were presented to the city treasurer for payment; but payment was denied for lack of funds. On December 31, 1909, appellant received payment of the principal of all these warrants with interest from the date of presentation to the treasurer, such interest being paid under authority of section 1205 of the Code of 1907 (Act of Aug. 13, 1907, p. 820, § 54), which provides that, “if no interest is stipulated to be paid on warrants drawn upon the treasurer and not paid for want of funds, then the legal rate shall be allowed from the time of presentation,” etc., the denial of interest for the antecedent time being based, as the brief for appellee would seem to indicate, upon the theory that the municipality was without authority to contract for the payment of interest.

This action was brought to recover a balance due of interest claimed. The evidence shows very clearly that appellant (plaintiff below) has received the principal of the debt in controversy and received the same as a payment of the principal with the understanding and purpose that the contention as to whether appellee was further liable on account of interest should be settled by a resort to the courts, thus eliminating all question as to whether the amount so received should be applied first to the payment of interest.

Our judgment is that appellant was also entitled to interest upon the indebtedness covered by the resolution-contract of October 1, 1906, to the date of the payment made, less of course, any interest then paid. In view of the city’s inability to meet its obligation to appellant at the time, the meaning of the contract was that appellant should receive interest during the time payment should be further deferred.

Municipal corporations, in the absence of constitutional or statutory inhibition, may contract for the payment of interest on their warrants drawn to cover ordinary debts. — 2 Am. & Eng. Encyc. (2d Ed.) 26; State v. Stoud, 43 Wash. 501, 86 Pac. 848, 10 Ann. Cas. 208, note. Section 1205 of the Code, to which we have referred, recognizes this law. This section did not, however, operate to require further presentation of the claim upon the indebtedness affected by the resolution-contract of October 1, 1906. Ordinarily, city warrants draw interest, if at all, after they have been presented to the disbursing officer and payment denied for want of funds, this because a municipal corporation, unlike a private person, is not bound to seek its creditors. — 10 Ann. Cas., supra. The negotiation and agreement between the parties to this case, had in view of the city’s confessed inability to pay, and with the intent and effect of postponing the date of payment, was the equivalent of a presentation within the rule of the authorities. It established between the parties that status which exists between private persons standing in the relation of debtor and creditor plus an express agreement to pay interest.

Appellee insists that appellant’s suit should not be entertained for the reason that it seeks to recover interest only; that the right to recover interest, which is a mere incident to and increment of the principal debt, was lost when payment of the principal was accepted. The general rule is that when the principal subject of a claim is extinguished by the act of the plaintiff, or of the parties acting in unison, all its incidents go with it. Such is the rule where by statute or the practice of the courts interest is awarded in the way of damages. In such case it does not constitute a distinct claim and can only be recovered in an action for the principal; but, where the payment of interest is provided for by contract, it constitutes an integral part of the debt, as much so as the principal debt itself, and an independent action for its recovery may be sustained notwithstanding payment of the principal as such has been made and accepted. — 22 Cyc. 1571 et seq. • Our cases hold nothing to the contrary. In Westcott v. Waller, 47 Ala. 492, payment of the principal by a debtor of doubtful solvency was made and received in full satisfaction. That was held to be a good accord and satisfaction. In Crowder v. Red Mountain Mining Co., 127 Ala. 254, 29 South. 847, the pertinent ruling was that a contract void as to the principal debt was void also as to any interest accruing on such principal. Other cases cited by appellee to this point may be discriminated from the case at hand by the fact that in them there was no express contract to pay interest.

Appellee contends that there was an accord and satisfaction when appellant accepted the principal of its debt and such increment of interest as the appellee was willing to pay. This contention presents an issue of fact, depending upon the intent with which the payment was made and received, and must upon the testimony be resolved in favor of appellant. The board of mayor and aldermen had determined to pay the amount which was subsequently paid upon condition that appellant would receive same in full of its claim. Appellant did not agree. The matter was then referred to a committee consisting of the mayor and some members of the aldermanic board, which committee was raised to disburse the funds secured by an issue of bonds to pay the city’s floating debt, and had power to act in the premises. This committee authorized the mayor to settle appellant’s claim as the board of may- or and aldermen had proposed. But in fact appellant settled with the distinct understanding on its part that it would not yield its claim to the interest here sued for and would seek to determine its right thereto in an action at law. Appellee seems to base its contention for its plea of accord and satisfaction on the idea that the mayor, acting for the committee, which in turn was acting for the board of the mayor and aldermen,' had no authority to make payment except upon the condition that it should be accepted in full of appellant’s claim. But the question of the mayor’s authority is not involved. The question is upon what understanding appellant, assuming of course that it acted in good faith and without misleading appellee’s agent or agents, received the payment, and the proof is as we have stated it. On these facts there was no accord and satisfaction. To constitute an accord and satisfaction the sum less than the amount actually due must have been accepted by appellant in full settlement of its disputed claim.— Hodges v. Tennessee Implement Co., 123 Ala. 572, 26 South. 490.

We have decided that section 1191 of the Code of 1907 is a statute of nonclaim, and that presentation within its provision is not prerequisite to the bringing of a suit. — Anderson v. Birmingham, 177 Ala. 302, 58 South. 256. It hardly seems necessary to say that the municipality could not by ordinance impose the duty of prior presentation upon creditors of the city. In sustaining the demurrer to the complaint on the ground that it failed to aver a presentation of the claim to the city council or the clerk before suit brought, if that was the ground upon which the ruling proceeded, the court erred.

Interest on the interest due, in the circumstances of this case, no date for the payment of the deferred warrants having been stipulated, should be allowed, it seems, from the date of the bringing of the suit. That event fixed the time when interest under the cofitract became due and payable. — Ragland v. Wood, 71 Ala. 145, 46 Am. Rep. 305; Stickney v. Moore, 108 Ala. 590, 19 South. 76.

In order that a judgment may be rendered in accordance with our views, the evidence remaining the same, the judgment will be reversed, the cause remanded.

Reversed and remanded.

McClellan, Mayfield and Somerville, JJ., concur.