Opinion
No. 33066.
February 28, 1938.
1. MUNICIPAL CORPORATIONS.
The obligation to pay interest from date on municipal bonds includes obligation to pay interest from maturity if interest-bearing obligation is not redeemed on or before maturity.
2. MUNICIPAL CORPORATIONS.
The statute providing for interest on notes, accounts, and contracts, does not apply to municipal corporations or other political subdivisions of state (Code 1930, section 1946).
3. MUNICIPAL CORPORATIONS.
Where municipal bonds were issued under statutes authorizing municipality to issue interest-bearing bonds, municipality was liable for interest on unpaid bonds and interest coupons after maturity thereof, notwithstanding absence of specific provision for payment of interest after maturity.
APPEAL from the circuit court of Sunflower county. HON. S.F. DAVIS, Judge.
Moody Davis, of Indianola, for appellant.
It will be noted from the record that bonds and interest coupons sued on in this case were issued by the City of Indianola, a municipal corporation, a political subdivision of the State of Mississippi. It will also be noted that the bonds and interest coupons do not provide for interest from or after maturity. Such being true it is inevitable that the contract sued on does not provide for interest from and after maturity and hence the allowance of such interest cannot be based on a contract of the appellant municipal corporation. If interest from and after maturity cannot be based on a contract with the appellant then it cannot be allowed unless authorized by statute. The applicable statute law, beginning with the Code of 1871, is as follows: "The legal rate of interest on all bonds, notes, accounts, judgments, and contracts shall be six per cent per annum; etc." Section 2379, Code 1871. "The legal rate of interest on all notes, accounts, judgments and contracts, shall be six per cent per annum; etc." Section 1141, Code of 1880. "The legal rate of interest on all notes, accounts, and contracts shall be six per centum per annum; etc." Sec. 2348, Code 1892; Sec. 7678, Code 1906; and Sec. 946, Code 1930.
It will be noted that the Code of 1871 included "bonds and judgments." In the Code of 1880 "bonds" were omitted, and in the Codes of 1892, 1906 and 1930 "bonds and judgments" were omitted.
In the cases of Swan v. Turner, 23 Miss. 565, State v. Mayes, 28 Miss. 706, and Whitney v. State, 52 Miss. 732, interest was allowed against the State without citation of authority. But these cases were overruled by this court in 1926 in Moore v. Tunica County, 108 So. 900.
In the case at bar the appellee, on the argument of his demurrer to appellant's plea of partial defense and in requesting his instruction, did not point out the statute under which he claims to be entitled to interest against the municipality, and being unable to find any such statute we presume that the claim is based on the general statute, which this court has repeatedly held does not apply to the state and its political subdivisions.
City of Natchez v. McGehee, 127 So. 902; U.S. v. State of North Carolina, 34 L.Ed. 336.
We take it that it is not necessary after a careful study of the case of Moore v. Tunica County, supra, to cite the numerous Mississippi cases supporting our view. From the authorities cited it is undoubtedly true that the rule in this state is that neither the state nor any of its political subdivisions is liable for interest on past due obligations unless such interest is contracted for or specifically authorized by statute. In reviewing the various cases on this subject we find that there are some exceptions to the rule, but undoubtedly in such cases there was some express statutory authority for the payment of interest or the court rendering the opinion did not have in mind the distinction between the liability of a sovereign to pay interest and that of a private individual to pay interest under some general statute of law or some general rule of law recognized by the courts of that particular jurisdiction. Brewer Hewitt, of Jackson, for appellee.
It is elementary that municipal corporations, in accordance with statutory authorization, may issue interest bearing obligations and are bound by said contracts. The instruments sued on were issued pursuant to statutory authority as interest bearing obligations, and under the terms thereof bear interest until paid at the rates specified therein. The appellant is unquestionably liable for interest in this case on the matured bonds, coupons, and judgment under its express contract.
We should like to point out a distinction between the case at bar and the cases cited by appellant. The bonds and coupons sued upon were issued by the municipality in the exercise of its contractual powers. It had incurred an indebtedness, and, needing money to pay the same, proceeded to borrow it. In the exercise of powers of this character, as distinguished from governmental powers, the municipality is not entitled to invoke for its protection any immunity pertaining to it as a sovereign or governing body.
The only Mississippi case which we have been able to find bearing on the question and one which is directly in point is that of Town of Lexington v. Union National Bank, 75 Miss. 1, 22 So. 291. This was a case where a town was sued on some bonds issued by it, and among other things this court said: "We repudiate as unsound the position that the unpaid coupons bore no interest after their maturity. The town being authorized to issue interest bearing obligations maturing for payment at fixed dates, cannot avoid the continuance of interest without paying."
In this instance the City of Indianola received money and solemnly promised to repay same with interest specified in the instruments. With full authority they voluntarily assumed this obligation, and it is now their duty to perform under the terms of their contract, and if unwilling should be compelled so to do.
The appellee, John P. Gates, being the holder and owner for value of certain matured interest-bearing bonds aggregating the principal sum of $2,500, together with past-due interest coupons thereto attached, and which had been issued by the appellant, the city of Indianola, a municipal corporation, brought this action in the circuit court of Sunflower county and recovered judgment against the appellant for the full amount sued for, including interest thereon. On this appeal the appellant challenges the correctness of the judgment on the sole ground that interest was allowed by the court below on both the bonds and interest coupons after the maturity thereof, and contends that such interest is not recoverable since the bonds and coupons do not specifically provide for the payment of interest after maturity, and that there is no statute imposing liability upon a municipal corporation for interest in such cases.
However, the bonds in question were issued under statutes authorizing municipalities to issue interest-bearing bonds at not exceeding 6 per cent. per annum, which stipulation of course means that interest should run from the date of their issuance. The obligation to pay interest from date includes an obligation to pay interest from maturity if the interest-bearing obligation is not redeemed on or before maturity. The cases of Moore v. Tunica County, 143 Miss. 821, 107 So. 659; Id., 143 Miss. 839, 108 So. 900, and City of Natchez v. McGehee, 157 Miss. 225, 127 So. 902, relied on by the appellant, involved claims for salaries due for official services, and are not at all applicable on the issue presented in the case at bar, since the amount claimed as salary in those cases was not an interest-bearing obligation. Board of Supervisors of Warren County v. Klein, 51 Miss. 807.
It is true that section 1946, Code of 1930, which is our general statute providing for interest on notes, accounts, and contracts, does not apply to municipal corporations or other political subdivisions of the state, since they are not specifically mentioned therein. Nevertheless, this rule does not prevent a municipal corporation or other political subdivision of the state from being liable for interest on their interest-bearing obligations issued under other statutes providing therefor.
The decision of the present case is controlled by the case of Town of Lexington v. Union National Bank, 75 Miss. 1, 22 So. 291, 294, where the court said: "We repudiate as unsound the position that the unpaid coupons bore no interest after their maturity. The town, being authorized to issue interest-bearing obligations maturing for payment at fixed dates, cannot avoid the continuance of interest without paying."
Affirmed.