Board of County Commissioners v. Clarke & Courts

1902 OK 68, 70 P. 206, 12 Okla. 197, 1902 Okla. LEXIS 75

• Court: Supreme Court of Oklahoma
• Decided: September 2, 1902
• Status: Published

Opinion

Opinion of the court by

Hainer, J.:

Two questions are involved in the determination of this case, namely: (1) Is Greer county, Okla-ihoma, liable for the valid obligations of Greer county, 'Texas? And, (3) Are the warrants sued upon in this action barred by the statute of limitations ? We are of the opinion that the first question must be answered in the affirmative .and the second in the negative.

In Cullins v. Overton, 7 Okla. 470 this court held that Greer county, Texas, was a de facto municipal government. Mr. Chief Justice Burford, speaking for the court in this case discussing the history of the organization of Greer county, Texas, and reviewing the authorities as to its legal status, said:

“Upon the principles enunciated in the foregoing .authorities, we have no hesitancy in holding that from the* time Greer county was organized as a county by,the state of Texas up to the 16th day of March, 1896, there was a de facto government in Greer county, and that the county court of Greer county was a de facto court, and that all its -.judgments and proceedings which were had and done according to the laws of the state of Texas, are valid and binding, • and should be recognized, and given full faith and credit. During that period the state of Texas, a de 'jure government, exercised undisturbed sovereignty and jurisdiction over said territory, and it is not shown or claimed that the inhabitants made any objection thereto. And while this power was exercised without right it constituted a de facto government, executive, legislative and judicial, and all the acts of its offi«cers and courts, not in contravention of any rights under the laws and constitution of tbe United States, are valid and. binding."

In Cameron’s Executors v. State, 67 S. W. 348, the Texas court of civil appeals beld that the act creating Greer county, Texas, was unconstitutional and void; and further held that it was not a de facto or de jure government and that its officers who presumed to act for said county were not de facto officers. From this decision an appeal was taken to the supreme court of Texas, and since the filing of briefs by counsel for plaintiff in error the supreme court of Texas reversed the decision of the court of appeals, and held that Greer county, Texas, was a de facto municipal corporation and its officers were de facto officers. (Cameron’s Executors v. State, 68 S. W. 580.)

Congress by the act of May 4, 1896, recognized Greer county, Texas, as a de facto government; and that its officers were de facto officers. And it expressly provided in said act that all public buildings and property of every description heretofore belonging to Greer county, Texas, or used in the administration of public business were declared to be the property of Greer county, Oklahoma, and that all county officers shall be continued in office until the first Tuesday in November, 1896, or until their successors are elected and qualified at an election to be held on the first Tuesday in November, 1896, as provided by the laws of the Territory of Oklahoma; and that all provisions of law applicable to the organization and government of counties in Oklahoma shall forthwith be applied by the proper officers thereof to said Greer county, the intention being to provide without delay, the same organized government for said Greer county as for- other coun ties of Oklahoma. Said act further provided that all written contracts, conveyances, mortgages, liens, or other instruments which have been heretofore filed or recorded in said Greer county in conformity with the laws of the state of Texas, shall be held and considered to have been legally filed or recorded, and it shall not be necessary again to file or record them. And said' act further provided that all interest, rights, titles, and estates, conveyed, limited, encumbered, or in any wise affected by any contract, lien, conveyance, mortgage, or other instrument, or by any judgment or decree of any court of Texas of competent jurisdiction, and all judgments of said courts, civil and criminal, prior in date to March 16, 1896, shall have the same force and effect, in all respects, as if said Greer county had legally formed a part of the territory of the state of Texas up to March 16, 1896, and had upon that date been lawfully ceded by Texas to the United States with a reservation and ratification of all existing rights and liabilities according to the laws of Texas.

It will be thus seen that said act transfers the entire government of Greer county, Texas, executive, legislative and judicial, from the state of Texas to Greer county, Oklahoma; and it expressly provides that all existing rights and liabilities shall be transmitted to Greer county, Oklahoma, and remain in full force and effect.

In Comanche County v. Lewis, 183 U. S. 198 the supreme court of the United States has held that when a legislature has full power to create corporations, its act, recognizing as valid a de facto corporation, whether private or municipal, operates to cure all defects in steps leading up to tbe organization, and making a de jure out of wbat was before only a de facto corporation.

It follows, therefore, that Greer county, Texas, at the time the obligations sued on in this action were issued, was a de facto municipal corporation, and that its officers were de facto officers invested with full power and authority to create said indebtedness. Being a de facto municipal corporation, its officers had the power to create indebtedness for lawful corporate purposes; and it had the power and authority to levy and collect taxes to pay such indebtedness. The power to levy and collect taxes and pay such indebtedness is not a grant of power to the munieipitality as a corporate body,, but it is a necessary and indispensible power that is vested in the inhabitants of the incorporated territory. Hence the valid ohligations created by the municipality must survive the dissolution of the corporation, and must pass with whatever public property it may possess to the inhabitants who continue to reside under the new corporation within the boundaries of the municipal area, and in behalf of the inhabitants of which the debt was originally created.

The decisions of the supreme court of the United States sustain this general doctrine.

In Broughton v. Pensacola, 98 U. S. 266, it was held that a change in the charter of a municipal corporation,, in whole or part, by an amendment of its provisions, or the substitution of a new charter in place of the old one, embracing substantially the same corporators and the same territory, will not be deemed,' in the absence of express legislative declaration otherwise, to affect the identity of the corporation, or to relieve it from its previous liabili ties, although different powers are possessed under the amended or new charter, and different officers administer its affairs. The opinion of the supreme court of the United States in this ease was delivered by Mr. Justice Field, who, in the course of the opinion, said:

“The ancient doctrine that, upon the repeal of a private corporation, its debts were extinguished, and its real property reverted to its grantors and its personal property vested in the state, has been so far modified by modem adjudications, that a court of equity will now lay hold of the property of a dissolved corporation, and administer it for the benefit of its creditors and stockholders. The obligation of contracts, made whilst the corporation was in existence, survives its dissolution; and the contracts may be enforced by a court of equity, so far as to subject, for their satisfaction, any property possessed by the corporation at the time. In the view of equity, its property constitutes a trust fund, pledged to the' payment of debts of creditors and stockholders; and, if-a municipal corporation, upon the surrender, or extinction in other ways, of its charter, is possessed of any property, a court of equity will equally take possession of it for the benefit of the creditors of the corporation."

And in conclusion the learned justice said:

“When, therefore, a new form is given to an old municipal corporation, or such a corporation is recognized under a new charter, taking in its new organization the place of the old one, embracing substantially the same corporators and the same territory, it will be presumed that the legislature intended a continued existence of the same corporation, although different powers are possessed under, the new charter, and different officers administer- its affairs; and, in the absence of express provision for their payment otherwise, it will also be presumed, in such case. that the legislature intended that the liabilities as well as the rights of property of the corporation in its old form should accompany the corporation in its reorganization. That such was the intention of the state of Florida in the present case, we have no doubt; to suppose otherwise would be to impute to her an insensibility to the claims of morality and justice, which nothing in her history warrants.

“The principle which applies to the state would seem to be applicable to cases of this kind. Obligations contracted by its agents continue against the state, whatever changes may take place in its constitution or government. ‘The new government/ says Wheaton, ‘succeeds to the fiscal rights, and is bound to fulfill the fiscal obligations, of the former government. It has become entitled to the public domain and other property of the state, and is bound to pay its debts previously contracted/ (Inter. L. 30.) So a change in the charter of a municipal corporation, in whole or in part, by amendment of its provisions, of the substitution of a new charter in place of the old one, should not be deemed, in the absence of express legislative declaration otherwise, to affect the identity of the corporation or to relieve it from its previous liabilities.”

In Mt. Pleasant v. Beckwith, 100 U. S. 514, a municipal corporation had been dissolved, and its territory divided and annexed to three adjacent corporations. Upon this state of facts the court held that unless the legislature otherwise provided, the corporations to which the territory and inhabitants of the divided corporation had been transferred, were severally liable for a proportionate share of its debts, and were vested with its power to raise revenue wherewith to pay them, by levying taxes upon the property transferred to the persons residing therein. Mr. Justice Clifford, in discussing this subject said:

“Municipal debts cannot be paid by an act of the legisla ture annulling tbe charter of the municipality, and, if not, then the creditors of each political division must have some remedy after the annulment takes place. Without officers, or the power of electing such agents, a municipal corporation, if it can be so called, would be an entity very difficult to be subjected to legal process of to legal responsibility; but when the entity itself is extinguished, and the inhabitants within its territory and other property are transferred to other municipalities, the suggestion that creditors may pursue their remedy against the original contracting party is little less than mockery. Public property, with the inhabitants and their estates, and the power of taxation having been transferred by the authority of the legislature to the appellants, the principles of equity and good conscience require that, inasmuch as they are and have been for nearly twenty years in the enjoyment of the benefits resulting from the annexation, they shall in due proportiohs also bear the burdens. (New Orleans v. Clark, 95 U. S. 644.”)

And in concluding the opinion he declared that:

“Pecuniary burdens may be increased or diminished by the change; but, in the absence of express provisions regulating the subject, it will be presumed in every case that where both municipalities are continued, that the outstanding liabilities of the same remain unaffected by such legislation. Unlike that in this case, the charter of the old town was vacated and annulled; from which it follows that the same principles of justice require that the appellant towns; to which the territory, property and inhabitants of the annulled municipality were annexed, should become liable for its outstanding indebtedness.”

In Port of Mobile v. Watson, 116 U. S. 289, the supreme court of the United States held that where a municipal corporation is dissolved and a new corporation is created composed of substantially the same community, including sub stantially the same taxable property, within reduced territorial limits organized for the same general purposes, and holding by transfer without consideration, the public property of the former, it is the successor of the old corporation, and is liable for its debts.

In Comanche County v. Lewis it was held that the debts of a county, contracted during a valid organization remain the obligations of the county, although for a time the organization be abandoned, and there be no officers to be reached by the process of the courts. The opinion of the court was delivered by Mr. Justice Brewer, and in the course of the opinion he uses the following clear and forcible language:

“No one would for a moment suppose that when the county has contracted a valid obligation, the fact, if it.could be made to appear, that all its inhabitants had been removed and their places supplied by others, would affect that obligation. There has been no subdivision of the original territory; no addition to or subtraction from it. The only change has been in the continuity of political organization, and that, neither by municipal law nor the law of nations, destroys the territorial responsibility for legal obligations. Even a change in form does not destroy responsibility. The republic of France recognizes as valid the debts of the empire.”

Applying the principles announced in these well considered cases by the supreme court of the United States, which this court must regard as final and authoritative, to the ease under consideration, it follows that Greer county, Oklahoma, is liable for the valid obligations of Greer county, Texas.

This brings us to the second proposition, and that is, were the warrants, which are the subject of controversy, valid obligations of Greer county, Texas, at the date of the approval of the act of congress of May 4, 1896, when the property was transferred from the do facto government of Greer county, Texas, to the 'de jure corporation of Greer county, Oklahoma? And were the warrants at that time barred by the statute of limitations under the laws of Texas? The warrants having been issued during the ye^rs 1889 to 1892 inclusive, more than five years elapsed from the date of their issuance until they became subject to the laws of Oklahoma.

These warrants were issued on a particular fund. They were drawn on what was known as the “third class fund,” under the laws of the state of Texas; and immediately after their issuance they were registered. It appears that .under the laws of the state of Texas when a warrant is issued and there are no funds in the treasury to pay it, it is then registered, and after such warrant is registered it must be paid in the order of registration. No provision was ever made by Greer county, Texas, by the exercise of its taxing powers or otherwise, to pay the warrants which are the subject of this controversy. In our opinion where a warrant is issued by the officers of a municipal or quasi municipal corporation, and the creditor accepts the same relying on the ordinary modes of taxation to pay said obligation, the corporation cannot be heard to say, upon an action to enforce the payment thereof, that it is barred by the statute of limitations without first pleading and proving that it has provided a fund for the payment of such indebtedness. And while the authorities are not entirely harmonious upon this question, we think that the trend of modern decisions sustains this doctrine.

In Lincoln County v. Luning 133 U. S. 529, Mr. Justice Brewer, in discussing this question said:

“By the general limitations law of the state some of the coupons were barred; but there has been this special legislation in reference to these coupons. The bonds were issued under the funding act of 1873. In 1877 the county was delinquent in its interest, and the legislature passed an act amendatory to the act of 1873. This amendatory act provided for the registering, of overdue coupons, and iihposed upon the treasurer the duty of thereafter paying the coupons as money came into his possession applicable thereto, in the order of their registration. (Statutes of Nevada, 1877, 46.)

“The coupons which by the general limitation law would have been barred were presented, as they fell due, to the treasurer for payment, and payment demanded and refused, because the interest fund was exhausted. Thereupon the treasurer registered them as presented, in accordance with the act of 1877, and from the time of their registration to the commencement of this suit there was no money in the treasury applicable to their payment. This act, providing for registration and for payment in a particular order, was a new provision for the payment of these bonds, which was accepted by the creditors, and created a new right upon which he might rely. It provided, as it were, a special trust fund, to which the coupon holder might, in the order of registration, look for payment, and for payment through which he might safely wait. It amounted to a promise on the part of the county to pay such coupons as were registered, in the order of their registration, as fast as money came into the interest fund; and such promise was by the creditor accepted; and when payment is provided for out of a particular fund to be created by the act of the debtor, he cannot plead the statute of limitations until he shows that that fund had been provided.”

We think this is a clear and forcible statement of the law.

In King Iron Bridge and Manufacturing Co. v. Otoe County, 124 U. S. 459, a ease arose in the supreme court of the United States from the state of Nebraska, in which this subject was under consideration by the court. It appeared that suit was brought to recover the amount due upon certain warrants of a county. The petition alleged, among other things, that the warrants had been presented to the county treasurer, and payment thereon demanded. The county treasurer endorsed upon the warrant “not paid for want of funds.” Afterwards the warrants were duly registered for payment. The answer set up as a defense that the cause of action did not accrue within five years next before the commencement of the suit. To this a demurrer was filed upon the ground that the answer did not state facts sufficient to constitute a defense, and “that by the statutes of Nebraska and the construction given thereunder by the court of Nebraska, the statute does not run against a county warrant.” This demurrer was overruled, and judgment rendered in favor of the county. The case was appealed to the supreme court of tne United States, and the judgment of the lower court was reversed on the ground that in Nebraska the statute for five years does not run against a county warrant. And that the cause of action upon such warrant did not accrue when the payment was refused. The court further held that in an action to recover the amount due upon warrants an answer that the cause of action did not accrue within five years next before the commencement of the suit, did not state facts sufficient to constitute a defense.

'Chief Justice Waite said:

“According to the rule established in Brewer v. Otoe County, the cause of action did not accrue when the payment was refused, Tut only when the money for its payment is •collected, or time sufficient for the collection of the money has elapsed. We cannot say, as a matter of law, "that this was more than five years before the commencement of the action.”

In Robertson v. Blaine County, 90 Fed. 63, it was held that a county cannot plead limitation to an action against it •to enforce an obligation payable from a particular fund, without first showing that it has provided such fund. In this case the rule announced by Mr. Justice Brewer in Lincoln County v. Luning was approved and followed.

The same rule has been adopted by the supreme court of Kansas in Hubbell et al v. City of South Hutchinson, 68 Pac. 62, where it was held that the statute of limitations will .not start to run in favor of a city on its outstanding warrants until it has money in its treasury to satisfy such obligations. In the course.of the opinion the court said:

“This action was based upon certain written obligations, and, in the absence of the intervening circumstances would become barred within five years from'the date of their ’issuance. It is the settled law of this state, however, that "the statute of limitations does not run in favor of a munici~pal or quasi municipal corporation upon its outstanding obli■gations until the corporation has provided a fund with which payment thereof may be made.”

We concur in the views announced in these decisions. It follows, therefore, that the warrants sued upon in this action were not barred by the statute of limitations under the laws of the state of Texas, and that they were valid and subsisting obligations at the time Greer county, Texas, was transferred to Greer county, Oklahoma.

This brings us to the last proposition, and that is: Is the action barred by the statute of limitations under the laws of Oklahoma? It is strenuously contended by learned counsel, for plaintiff in error that if the obligations of Greer county, Texas, are valid and binding upon Greer county, Oklahoma,, that such liability would not arise unless the law implies a contract that the new corporation shall pay the debts of the' old, or unless such obligation was imposed by the statute. In other words, that the obligation imposed arises either by dear-implication of law or is imposed by legislative enactment. And in support of this contention by counsel for plaintiff in error, the ease of Robertson v. Blaine County, 90 Fed. 63, is relied upon. Upon examination it would seem that the reasons announced by the learned judge in this case sustains the contention of plaintiff in error. We have carefully examined this-decision and concur in the conclusions and judgment of the court but not with the reasons therein stated. In that case-the legislature of Idaho abolished Alturus and Logan counties- and created from the same territory Blaine county; and provided that all valid and legal indebtedness of Alturus and Logan counties shall be assumed and- paid by the county of Blaine, and that all rights of action now existing in favor-of or against said Alturus and Logan counties may be maintained in favor of, or against, Blaine county. Blaine county was sued upon bonds issued by Alturus county. The court; held that no action could be maintained against Blaine county upon the bonds issued by Alturus county, except by virtue-of the statute creating the new county, and, therefore, that the liability was one created by the statute within the meaning of the statute of limitations. This, in our opinion, is not a correct statement of the law and is in direct conflict with the? decisions of the supreme court of the United States. Manifestly the act creating Blaine county out of the same territory which formerly composed Alturus and Logan counties did. not create a new obligation, but only recognized the validity of the indebtedness of the old corporations, and expressly provided that Blaine county shall assume and pay said indebtedness. It simply placed the new corporation in the shoes of' the old. Blaine county took the place of Alturus and Logan counties. It received all the property and all the benefits resulting therefrom, and, was, therefore, legally and morally bound to. assume and pay all of its just and valid obligations. The new corporation of Blaine county was included within, the same territory, inhabited by the same people, and possessed all the property of the old corporation, and the only difference between the old corporations and the new is that the boundaries of the two old corporations were included in. the new, and the names of the old counties changed to Blaine. Certainly the change in the name of a payor cannot change- or affect the liability of a corporation, any more than the-change of the name of an individual by legislative enactment' could affect his valid obligations.

The supreme court of the United States had this same-question under consideration in Shapleigh v. San Angelo, 167 U. S. 647, and it was there declared that:

“When we hold that the new corporation, under the-facts disclosed by this record is subject to the obligations-of the preceding, corporation, we mean subject to them as existing legal obligations, in manner and form as they would have been enforceable had there been no change of organization.”

Applying this rule to the case at bar, it follows that G-reer •county, Oklahoma, is liable for the valid obligations of Greer county, Texas, in manner and form as they would have been enforceable had there been no change of organization. The fact that a corporation is dissolved or becomes defunct, and a new corporation is created composed of exactly the same territory and the same people, and the same taxable property, .and organized for the same general purposes, and holds by transfer, without consideration, the public property of the former, it is to all intents and purposes the legal successor of the old corporation and is liable for its just debts and obligations. This court will presume that when congress established Greer county, Oklahoma, and transferred to it all the public property of Greer county, Texas, without any consideration whatever, and provided for the ratification of all existing rights and liabilities, that it intended that the liabilities as well as the rights of property of Greer county, Texas, which thereby ceased to exist, shall accompany the territory and , property into the new jurisdiction which was thereby created; and we have no doubt that such was the manifest intention of congress. Certainly congress did not intend that Greer county, Oklahoma, should receive all the benefits that accrued to it from the transfer of the property from Greer •county, Texas, and not bear the burdens that were incident to such transfer.

It follows that this action was rightfully brought upon the warrants in manner and form as issued by Greer county, Texas, and that they were not barred either by the statute of limitations of the state of Texas, or of Oklahoma.

The judgment of the district court of Oklahoma county, Oklahoma, was right, and it is therefore affirmed.

Burwell, J., who presided in the court below, not sitting; Beauchamp, J., absent; all the other Justices concurring.