Bardsley v. Sternberg

52 P. 251, 18 Wash. 612, 1898 Wash. LEXIS 601

• Court: Washington Supreme Court
• Decided: February 18, 1898
• Docket: No. 2622
• Status: Published

Opinions

The opinion of the court was delivered by

Anders, J.

This was an application by the appellant (plaintiff below) to the superior court of Pierce county for a peremptory writ of mandate commanding the respondent (defendant below) as treasurer of the' city of Tacoma to pay five certain warrants of said city. The affidavit in support of the motion for the writ specifically described each of the warrants in suit, and averred that the plaintiff below was the owner and holder thereof, and that they were regularly issued and were outstanding and unpaid; that they had been indorsed by the city treasurer “ not paid for want of funds;” that they were drawn on the general fund during the months of July, August, September and October, 1892; that they were presented to the defendant as treasurer for payment, and payment ivas refused, and that said treasurer had in his hands money sufficient to pay the same, and applicable to the payment thereof. Due notice of the application having been given, the defendant below appeared and answered, setting up among other things as defenses, (1) That two of the warrants were issued to councilmen of the city, and were therefore illegal and void, and (2) that four of said warrants, including one of the salary warrants, had been presented to the treasurer of the city and paid by him with money of the city to the credit of the general fund, hut that the then treasurer failed and neglected to cancel the same and that they thereafter, and without consideration, wrongfully came into the possession of the plaintiff. To this answer the plaintiff replied, denying the invalidity of the two salary warrants, as well as the allegations of payment, and upon the issue thus presented a trial was had and judgment was rendered in favor of the defendant for costs, and dismissing the action. Upon appeal to this court the judgment was affirmed. See Bardsley v. Sternberg, 17 Wash. 243 (49 Pac. 499). The cause was originally submitted to this court upon the printed briefs of the respective counsel, and, upon petition of appellant, a rehearing was granted, and the case was subsequently fully and ably argued by counsel upon both sides. And the writer hereof feels constrained to say that the argument of counsel and a re-examination of the entire record have convinced him that his conclusions on the former presentation of the case, respecting some material questions, and especially as to the effect of certain documentary evidence contained in the record, were erroneous. When the cause came on for trial in the court below, the respondent, conceiving that the burden of proof rested upon him, requested, and was permitted by the court, to open and close the case; and the trial proceeded accordingly. It is conceded that the warrants in question, other than the two drawn for salary of eouncilmen, were properly issued in the first instance and evidenced just obligations of the city; and there is therefore no question as to their original validity. . It is also conceded that the hooks of the city comptroller show that all of them are still unpaid and outstanding. The evidence shows that from November, 1890, to April, 1891, one George W. Boggs was the treasurer of the city of Tacoma, and that, during that time, it was his general custom, when current warrants on the general fund were presented to him, to give the payee or holder thereof the amount called for by the warrants and to require the payee to indorse his name on the back thereof, such warrants being payable to the person therein named, or order; that the treasurer then placed the warrants in the cash box in his safe, where they were kept and treated by him as so much money, until disposed of to third parties. When several of such warrants had accumulated, they were taken out of the cash drawer by the treasurer, or by his deputy or bookkeeper, and classified and listed. This listing consisted in placing the number, date and amount of each warrant on a memorandum sheet, and, after this was done, the list was copied in a letter press copy book and the original list was attached to the warrants therein listed.. These warrants, with the list attached, were then delivered to some third party, or parties, at which time they were indorsed by the treasurer “ not paid for want of funds.” When these warrants were delivered to a purchaser they were paid for at par, and the amount received was placed in the drawer from which the warrant was taken. But not all of these warrants were thus disposed of. Some of them were deposited in the bank where the treasurer kept part of the funds of the city, and, in such cases, they were ordinarily credited to the city as a deposit of so much actual cash, and the bank afterwards sold them to its customers. That all of the warrants in suit, except that issued to councilman Boardman, passed through the hands of the city treasurer in the manner above indicated, is not disputed. And whether or not the evidence proves an absolute payment of the warrants is a question upon which, the learned counsel for the respective parties entertain radically different opinions, and which we are again called upon to determine. It is insisted, with much earnestness on behalf of respondent, that when the original holders of these warrants received the amount of money mentioned therein from the treasurer, from the fund upon which they were drawn, the warrants were thereby absolutely paid and extinguished, and no act or intention of the treasurer could give them any force or vitality thereafter. But we are of the opinion that the mere fact that the holder of a city warrant receives the money of the city and delivers up the warrant to the regular disbursing officer does not necessarily constitute payment, so far, at least, as such officer is concerned. It was in effect so held by the supreme court of Missouri in Morrow v. Surber, 97 Mo. 155 (11 S. W. 48). There a warrant not yet due and payable, because there were prior warrants outstanding and unpaid, was presented to the deputy county treasurer and by him paid, under the belief that it was in fact payable. The treasurer brought an action against the payee to recover the money paid thereon, and tendered to him the canceled warrant, and the court sustained the action, notwithstanding the claim of the defendant that the warrant had been fully and properly paid. In Flser v. City of Ft. Worth, 27 S. W. 739, it was proposed to purchase a certain series of city bonds with money in the hands of the treasurer which had been collected for the purpose of redeeming another series of bonds, and it was contended that the investment of the money as proposed by the city council would work a cancellation and extinguishment of the bonds so purchased. But the court ruled otherwise. And in support of its conclusion the court quoted from Jones, Corporate Bonds and Mortgages, § 325, where it is said:

“ A company may purchase its own bonds as an investment, and re-issue them. If the facts show that there was no intention of paying the bonds, hut they were regarded and reported by the company as still outstanding, they are valid in the hands of a subsequent purchaser and are secured by the lien of the mortgage.”

From the above cases, it appears that something more may he necessary to constitute payment on the part of municipal, or other public corporations, than the delivery to the holder of its warrants or other obligations of the amount of money evidenced thereby, and that the intention of the obligor is important in determining the question Avhether the obligations have or have not been extinguished. Other authorities expressly announce the doctrine that upon the question of payment the intent or purpose of the parties to the transaction is not to he disregarded. In 18 Am. & Eng. Ene. Law, p. 150, it is said:

“ Payment is a mode of extinguishing obligations. It is an act calling for the exercise of will, of consent. To constitute a payment, money or some other valuable thing must he delivered by the debtor to the creditor for the purpose of extinguishing the debt, and the creditor must receiA’o it for the same purpose.”

In Cushing v. Wyman, 44 Me. 121, it was held that

To enable a party to set up the defense of payment, there must he the concurring intention of the party making and the party receiving the payment. The payment must he received as Avell as made in satisfaction of the debt.”

And in Bloodworth v. Jacobs, 2 La. An. 24, the court said:

“ By the term payment is meant not only the delivery of a sum of money, but the performance of an obligation. . It is an act requiring the exercise of the will— of consent, without Avhich it has not the characteristics of that mode of extinguishing obligations.”

And Daniel’s definition of the term is as follows:

“ By payment is meant the discharge of a contract to pay money by giving to the party entitled to receive it, the amount agreed to be paid by one of the parties who entered into the agreement. Payment is not a contract. It is the discharge of a contract in which the party of the first part has a right to demand payment, and the party of the second part has a right to make payment.” 2 Daniel, Negotiable Instruments (4th ed.), § 1221.

It would seem, therefore, according to these authorities, that the real intention of treasurer Boggs in cashing these warrants should be taken into consideration in determining the validity of the respondent’s defense of payment, unless, as claimed by respondent, the acts of the treasurer operated to extinguish them, as mere matter of law; and we do not think they did. The official books of the city clearly show that at the time these warrants were taken up by the treasurer there were other warrants of the city outstanding and unpaid in amounts largely in excess of the money in the hands of the treasurer belonging to the general fund, and this, notwithstanding it appeared that, within the period of time during which these warrants were issued and disposed of, large sums of money were received from taxes and licenses and credited to the city. It is contended by the appellant that, at the time the transactions in question occurred, all warrants of the city were payable in the order of their issuance. On the other hand, it is the contention of the respondent that no time was fixed either by ordinance or the city charter as to the order of payment of warrants, for the alleged reason that ordinance 29 of the city was repealed by section 58 of the charter of 1886 (Laws 1885-6, p. 205), which latter charter was repealed by that of 1890, which contains no provision on this subject. But whichever of these positions is the correct one, is immaterial, so far as this case is concerned, for, under the law of this state as established by the decision of this court in La France Fire Engine Co. v. Davis, 9 Wash. 600 (38 Pac. 154), and other cases, warrants like these are payable, in the absence of legislative direction, either in the order of their issuance, or of their presentation, and not at the discretion of the particular officer whose duty it is to pay them. And that being true, it follows that the city treasurer had no authority to pay these warrants when they were originally presented to him, nor did the holder at that time have a right to demand payment. We think it fair to presume that treasurer Boggs was aware of that fact, and for that reason carried the warrants which he received in lieu of cash, and refrained from crediting himself with the money so paid out. This practice of the treasurer of taking in warrants and then considering them as money until disposed of for cash prevailed for nearly four years—one witness says even longer than that—and yet neither the treasurer nor any other city official charged with the duty of looking after its financial affairs ever considered the warrants as paid. A careful examination of the whole evidence discloses that the city council must have known of the treasurer’s custom of dealing with warrants, for its financial committee knew it, according to the testimony of its chairman, and so did the comptroller, as the testimony of the deputy, shows. The knowledge of these officials was knowledge of the city. And with this knowledge on their part all of these officials acquiesced in the acts of the treasurer here complained of. But it is, in effect, argued on behalf of the respondent that this acquiescence on the part of the city officials was in furtherance of a scheme or conspiracy between them and the treasurer and certain banks and warrant-brokers to swindle and defraud the city. If the evidence disclosed such a state of facts it would be difficult for us to find language sufficient to express our utter abhorrence and condemnation of such, conduct. But we fail to discover proof of any such thing. Whatever may have been the motive actuating the treasurer and other officials, of the city, it does not appear that it was to defraud the city, for the proof shows that, for every one of the warrants disposed of by the treasurer, cash equal to its face value was received to the credit of the fund on which it was drawn. That the acts of the treasurer respecting these warrants were irregular and reprehensible is not disputed, but that they amounted to a payment and extinguishment of the warrants is quite a different proposition. Whatever may be the true definition of the woi'd “ payment,” one thing, we think, is absolutely certain, and "that is, that it cannot be said that an obligation has been paid and discharged unless the obligor has jiarted with money or some other thing of value for the jiurpose of discharging it. It follows, therefore, that, if the city’s funds were left in the same condition after these transactions, in which they were before, the warrants were not paid; and such, according to the evidence, is the fact in this case. It is true that it is not shown that when any particular warrant that had been taken up and carried as cash by the treasurer was disxiosed of, the amount received therefor was either credited to the city or charged to himself by the treasurer, but the same result was accomplished by letting the cash account stand as if no such transaction had taken place. A debit and a credit of the same amount would evidently have left the account as it was before. It is admitted, or rather stated, by the learned counsel for the respondent, in their brief on rehearing, that the evidence shows exactly what money went into the hands of the city treasurer and with what he was charged with having, and from whence it came, and that the money in his hands was received for taxes and licenses and from the sale of bonds, and was checked every morning by the deputy comptroller from the treasurer’s books. And this statement is amply-corroborated by the evidence in the case. ISTow this “ checking up ” of the treasurer’s accounts by the comptroller was done in pursuance of a provision of the city charter, so that his books, as well as the books of the treasurer, would show the “ exact financial condition of the city.” It being true, then, that all the moneys received by the treasurer were duly credited to the city hi his books, and “ checked ” by the comptroller, and entered in his books, it is clear that if the money paid out for warrants was not replaced by the treasurer there would have been a wide discrepancy between the books which were required by the city charter to be kept, and which were kept, by these respective officers. But there was no substantial discrepancy, for the evidence discloses that when Boggs went out of office, on or about April 17, 1894, there was a difference of but six cents between his books and those of the comptroller. And, moreover, the report of the finance committee made to, and adopted by, the city council, on January 14, 1893, which was offered in evidence by appellant, and, as we believe, wrongfully excluded by the court, shows that they had examined the books and accounts of the city treasurer and those of the comptroller, from April 19, to December 31, 1892, and found the difference between the two to be four cents, and that in other respects the accounts' agreed. That report also shows that the committee had examined the checks and bank accounts, and counted the cash with the city treasurer up to said December 31, 1892. It appears by the city charter that this finance committee was not an ordinary committee appointed at the pleasure, and simply for the convenience of, the council, but that it was a distinct organization, or body, provided for, and having its duties prescribed, by the charter. This examination of the treasurer’s books by the finance committee was made in discharge of its duty, under the law hy which it was created and governed, and its report, especially after its adoption by the council, was competent evidence to show that all the funds of the city were then—and that was some time after these warrants had been disposed of-—-in the hands of its treasurer, and, by consequence, that the city had parted with no money on account of these warrants. And our view respecting the force and relevancy, as evidence, of this report is not, in our judgment, inconsistent with the ruling of the court in the cases of Dudley v. Inhabitants of Weston, 1 Metc, 477, and Collins v. Inhabitants of Dorchester, 6 Cush. 398, cited by counsel for the respondent. It is generally understood that official books and records, when relevant, are admissible in evidence, and, if not impeached, constitute proof of a very satisfactory character, as to the facts recited therein; and accordingly both parties here rely, to a greater or less extent, on the official books of the comptroller and treasurer as supporting their respective positions. It is suggested, however, on the part of respondent that the proof only shows at most that the city treasurer, and not the city itself, received the proceeds of warrants which were sold, and that such proof is not sufficient to bind the city. But it must be conceded that a municipal corporation, as a distinct and separate entity, apart from its officers, is incapable either of receiving or disbursing money. It can only act by and through its legally constituted officers and agents. The charter of the city of Tacoma makes it the duty of the city treasurer to receive and safely keep all the funds of the city, and to disburse the same only on orders signed by the president of the council, attested by the city clerk, and countersigned by the comptroller. When, therefore, the treasurer in his official .capacity receives money belonging to, and for the credit of, the city, the city receives it, and it is thenceforth the money of the city. But it is claimed by the respondent that his predecessor Boggs had no right to receive money for the particular warrants which he paid for with the public funds, and that neither he, the respondent, nor the city are bound by his acts in that regard. If that be true, then why should the city retain the money so received by its agent for its use without authority, as it is claimed, and at the same time claim that the warrants have been paid? As already indicated, the irregular and unauthorized, and, we might say, illegal, part of the warrant transactions, and which, it is claimed, the city could and did ratify, consisted in buying these undue warrants with city money. But can it be justly said that a city may ratify and confirm that part of a transaction which was wrong and repudiate that which was right, simply because it may be to its own pecuniary interest to do so? We think not. We say that the replacing of the money obtained for these warrants in the city treasury was right because we are aware of no rule of law or good morals which prevents one from returning to the rightful owner property which he has wrongfully taken from such owner. Oases are cited by respondent which hold that a city or county warrant, check, or certificate which has been once paid is thereafter functus officio as an evidence of indebtedness, and cannot be re-issued without competent and express authority, and, if so issued, is subject to the defense of payment, or any other legal defense, even in the hands of a bona fide holder. But that proposition is not disputed by the appellant. The question here is, not the effect of actual payment, but whether in fact payment has ever been made at all. And that four of the warrants were paid before they came into the hands of the appellant was just what the respondent .undertook, but, in our judgment, failed, to prove at the trial, because the facts proved did not constitute a payment. Aside from the record evidence above mentioned showing that the city received the proceeds of all the warrants which were sold, it is shown by positive oral evidence that the city, by its treasurer, received the full face value of two of these warrants when they were delivered to the assignor of the appellant. One of them was delivered to the Union Savings Bank, and the face value thereof credited to the city and the amount was subsequently paid out on the official order of the city treasurer. The other was delivered to the same bank and was paid for by a check drawn to the order of Boggs, as city treasurer, which check was paid in the usual course of business.

It is further contended by the respondent that the depositing of the city funds in the banks of the city was an illegal act and violative of section 7 of article 8, and sections 14 and 15, of article 11, of the state constitution. The first section referred to prohibits a municipal, or other public corporation, from giving any money or property, or loaning its money or credit, to, or in aid of, any individual, association, company or corporation, except for the necessary support of the. poor and infirm, etc., and the second malíes it a felony for any officer having the possession or control of any public money to make a profit out of the same or to use it for any purpose not authorized by law. The third section cited has no appreciable bearing upon the questions involved herein. It is not contended here that the city of Tacoma ever loaned either its money or credit to any bank, and therefore the first section of the constitution above cited has no application to this case. While under the constitution and statutes of this state it would be illegal and criminal for a city treasurer to make a profit by loaning or otherwise using contrary to law the public funds intrusted to his keeping, we do not think that depositing such funds in a bank, simply for safe-keeping, subject to re-payment on demand, is in any respect illegal. It is neither a loan nor an investment of the funds, in the ordinary meaning of these words, as used in constitutions and statutes like ours. See Comstock v. Gage, 91 Ill. 328; Moulton v. McLean, 5 Colo. App. 454 (39 Pac. 78); Estate of Law, 14 L. R. A. 103 (22 Atl. 831); In re House Resolution, 12 Colo. 395 (21 Pac. 486). See, also, State v. McFetridge, 84 Wis. 473 (54 N. W. 1).

In Baily v. Commonwealth, (Pa.), 10 Atl. 764, and Nason v. Directors, 126 Pa. St. 445 (17 Atl. 616), the right of official custodians of public funds to deposit such funds in bank does not seem to have been questioned, although the constitution of Pennsylvania as to making a profit, etc., out of public money is identical with our own. See Brightly’s Purdon’s Digest, p. 42.

Of course the liability of the treasurer for all money of the city coming into his hands cannot be affected by his having deposited it in a bank. If it is lost in consequence of the insolvency of the bank he and his bondsmen must make good such loss. But it is scarcely necessary to say that no mere loss by a city of its funds, however it may have occurred, will operate to discharge its just liabilities.

As to the two salary warrants, we are of the opinion that, under the ruling of this court in Taylor v. Tacoma, 8 Wash. 174 (35 Pac. 584), they are illegal and void and constitute no ground for a mandamus against the respondent. But as to the other three warrants, the judgment is reversed and the cause remanded with directions to issue a peremptory writ of mandate commanding the respondent as treasurer of the city of Tacoma to pay the warrants described in appellant’s affidavit and drawn and issued to Arkley, Bunn and Dautrick, respectively.

Dunbab and Gobdon, JJ., concur.