Summary
In Molineux v. State, 109 Cal. 378, [50 Am. St. Rep. 49, 42 P. 34], the effect of this act was considered as to its bearing upon the liability of the state to pay additional interest upon its war bonds.
Summary of this case from County of Alameda v. ChambersOpinion
Department One
Hearing In Bank Denied.
Appeal from a judgment of the Superior Court of Sacramento County. A. P. Catlin, Judge.
COUNSEL:
The state was not liable for interest upon interest. (Carr v. State , 127 Ind. 204; 22 Am. St. Rep. 624; State v. Board of Public Works, 36 Ohio St. 409-15; United States v. North Carolina , 136 U.S. 211; Sawyer v. Colgan , 102 Cal. 283.) The act of 1893 could not constitutionally confer interest by retrospective action, since such action would be a gift in violation of the constitution. (Const., art. IV, sec. 31; Bourn v. Hart , 93 Cal. 321; 27 Am. St. Rep. 203; Conlin v. Board of Supervisors , 99 Cal. 17, 22; 37 Am. St. Rep. 17.)
W. F. Fitzgerald, Attorney General, for Appellant.
Mastick, Belcher & Mastick, and Freeman & Bates, for Respondent.
The coupons drew interest from the date of their maturity. (Clark v. Iowa City, 20 Wall. 583; Aurora City v. West, 7 Wall. 82; Amy v. Dubuque , 98 U.S. 473; Koshkonong v. Burton , 104 U.S. 740.) The act allowing interest does not violate the constitution, which provides for suits against the state in such manner as directed by law. (Const., art. XX, sec. 6.) The state can make a moral obligation legal. (Beals v. Amador County , 35 Cal. 631; Edwards v. Kearzey , 96 U.S. 595; Ede v. Knight , 93 Cal. 159; Koshkonong v. Burton, supra ; Sinton v. Ashbury , 41 Cal. 530; Carr v. State , 127 Ind. 214; 22 Am. St. Rep. 624.)
JUDGES: Harrison, J. Garoutte, J., and Van Fleet, J., concurred.
OPINION
HARRISON, Judge
In 1851 certain Indian war bonds were issued on behalf of the state, by virtue of an act of the legislature, passed for that purpose. (Stats. 1851, p. 520.) The bonds themselves, and the coupons for the semi-annual interest thereon, which matured prior to 1854, were paid by the United States in September, 1856. Plaintiff is the holder of certain coupons that had been detached from these bonds, representing the semi-annual interest thereon that accrued prior to September 1, 1856, amounting in the aggregate to the sum of four thousand five hundred dollars. On the 3d of March, 1894, he presented his claim against the state upon these coupons to the board of examiners, and demanded that they allow the claim, with legal interest on the coupons from their respective dates of maturity. The board refused to allow his demand, and thereupon the present action was commenced under the provisions of the act of February 28, 1893. (Stats. 1893, p. 57.) Judgment was rendered in favor of the plaintiff for the amount of the coupons and interest as claimed by him, from which the defendant has appealed, and the error chiefly relied upon in the appeal is the allowance of interest.
The liability of the state to pay interest upon the matured coupons of its bonds was presented in Sawyer v. Colgan , 102 Cal. 283, and we there said:
" Section 1917 of the Civil Code does not apply to an indebtedness of the state, and the state is not liable to pay interest on its debts, unless its consent to do so has been manifested by an act of its legislature, or some lawful contract of its executive officers. (United States v. North Carolina , 136 U.S. 211; Carr v. State , 127 Ind. 204; 22 Am. St. Rep. 624.)" The respondent, however, contends that, under the provisions of section 5 of the act of 1893, under which this action is brought, he is entitled to legal interest upon the coupons from their maturity. That section is as follows:
" Sec 5. In case judgment be rendered for the plaintiff in any such suit, it shall be for the amount actually due from the state to the plaintiff, with legal interest thereon from the time the obligation accrued, and without costs."
The "legal interest" for which judgment is by this section authorized to be entered in favor of the plaintiff is only such interest as is authorized by law. If the plaintiff is not legally entitled to interest upon his claim, either by reason of the nature of the claim or the immunity of the state from an obligation to pay interest, this statute does not authorize its recovery; and as we have seen that there was at that time no liability on the part of the state for interest upon the coupons, there was no "legal" interest for which a recovery could be had, irrespective of the provisions of the statute itself.
The claim by the respondent that the act is retrospective, and by its terms includes the right to recover legal interest from the maturity of the coupons, is met by article IV, section 31, of the constitution, which declares: "The legislature shall have no power. .. . to make any gift, or authorize the making of any gift of any public money or thing of value to any individual, municipal, or other corporation whatever."
Inasmuch as prior to the passage of the act there was no liability for interest on the part of the state, it was not competent for the legislature to create such liability by the passage of the act. To increase the existing obligation for the coupons, by adding thereto the right to recover interest thereon, would be to make a donation to the holder of the coupons of the amount of the interest. If it be conceded that the state was under a moral obligation to pay the same interest upon its [42 P. 35] indebtedness that is recognized as recoverable by law between individuals, such moral obligation does not render the statute constitutional, or make the interest so authorized other than a gift. (Bourn v. Hart , 93 Cal. 321; 27 Am. St. Rep. 203; Conlin v. Board of Supervisors , 99 Cal. 17; 37 Am. St. Rep. 17.)
The superior court is directed to modify the judgment appealed from by striking therefrom the words "nineteen thousand six hundred and seventy-two dollars," and insert in lieu thereof the words "forty-five hundred dollars," and as so modified the judgment will stand affirmed.