(60 Colo. 382)

Ronald P. McDonald and the City of Golden,

CITY OF GOLDEN v. WESTERN LUMBER the latter being plaintiff in error here, to re& POLE CO. (No. 8243.) (Supreme Court of Colorado. 1. MUNICIPAL CORPORATIONS

-STATUTE.

Jan. 3, 1916.)
373-CLAIMS

cover the sum of $3,477.11, with interest at eight per cent. a year from November 5th, 1903, alleged to be due for fir pipe staves, sold and delivered to McDonald as principal

Under Rev. St. 1908, § 5408, providing that contractor, for use in the construction of a any person to whom a contractor for work with water works system for the city. The cause a city may be indebted may file his claim with

the clerk of the city, and if the claim tally was tried to the court in April, 1908, upon the with the statement of the contractor, the amount issues formed by the amended complaint, the shall be paid directly to claimant and deducted answer of the city and replication thereto. out of the sum to be paid the contractor, where Upon these issues, after a full hearing on

a contractor to build waterworks for defendant

city made a written order for the payment of the merits, the court found that the city was money in favor of a materialman, which was not liable for the claim, and as to it enterserved on the city, there being no fraud, the ed a judgment of dismissal. Subsequently city was bound by such order as to the amount such proceedings were had that this judg [Ed. Note.-For other cases, see Municipal ment was reversed by the Court of Appeals Corporations, Cent. Dig. § 913; Dec. Dig. and the cause remanded. See Western Lum373.] ber & Pole Co. v. City of Golden, 23 Colo. App. 461, 130 Pac. 1027.

of the claim.

2. MUNICIPAL CORPORATIONS

-INTEREST-STATUTE-"CITY."

373-CLAIMS

At a second hearing, on November 29th, Rev. St. 1908, § 3162, provides that creditors may receive interest, in the absence of agree 1913, upon motion, on the authority of the ment as to rate, at 8 per cent. for all moneys decision of the Court of Appeals, judgment after they become due on any bond, bill, prom- was entered in favor of the company for issory note, or other instrument of writing, or the sum of $6,277.00, the aggregate of the on money due on mutual settlement of accounts

There are but two questions for consideration. First. Should the case have been retried on its merits upon the theory that it was remanded for that purpose? and, Second. Is the company entitled in any event to interest on its claim?

from the date of such settlement, on money original claim, $3,477.11, and interest, $2,due on account from the due date, etc. Sec- 799.89, to date of judgment. The case is now tion 3163 provides that county orders and war- here for review on writ of error sued out by rants and other like evidences or certificates the city to that judgment. of municipal indebtedness shall bear interest at 6 per cent. from the date of presentation for payment, etc. A city, by statute, upon presentation to it by a materialman on a waterworks job of the contractor's order for the payment of money, became liable in the amount thereof directly to the materialman, but neglected to pay, and the materialman sued, claiming interest. Held, that the "city," a voluntary organization created for local convenience, advantage, and inThe amount of the original claim is eviterest, and acting in a private as well as a denced by an order in writing duly served public capacity, was liable for interest under upon the clerk of the city on November 5th, section 3162, since its building of a waterworks 1903, which reads as follows: was a purely private activity, while towns and cities in business transactions are liable for interest in the absence of statute or decisions putting them on a different footing, the only purpose of section 3164 being to make it impossible for a municipality to agree to pay, a higher rate of interest on certain securities than 6 per cent.

[Ed. Note.-For other cases, see Municipal Corporations, Cent. Dig. § 913; Dec. Dig.

373.

For other definitions, see Words and Phrases, First and Second Series, City.]

Gabbert, C. J., and Garrigues, J., dissenting. En Banc. Error to District Court, Jefferson County; H. S. Class, Judge.

Action by the Western Lumber & Pole Company against the City of Golden. Judgment for plaintiff, and defendant brings error. Affirmed.

John W. Barnes and William A. Dier, both of Golden, for plaintiff in error. Van Cise, Grant & Van Cise, of Denver; for defendant in error.

"Golden, Colo., Nov. 5th, 1903. "To the City of Golden, W. H. Carter, Esq., City Clerk, Golden, Colo.

"Dear Sir-You will please retain out of any estimate due me, on contract between the City of Golden and myself, the sum of thirty-four hundred seventy-seven dollars and eleven cents ($3,477.11), and pay the same to the Western Lumber & Pole Company of Denver, Colorado. Interest to be added at rate of 8 per cent. per annum from date until paid.

"[Signed] R. P. McDonald."

The pleadings of the city admit that it failed to comply with and observe the provisions of the law, upon which the company relied for recovery, and under which the city's liability was declared.

[1] Section 5408, Revised Statutes 1908, provides:

BAILEY, J. This action was commenced The facts essential to recovery under the May 27th, 1904, in the District Court of Jef-law on the merits were conclusively shown ferson County, by the Western Lumber and by testimony at the original trial, and no tesPole Company, defendant in error, against timony was introduced to overcome, disprove

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

or challenge the same. But the trial court plainly determines that the plaintiff was enmisapplied the law and determined, regard-titled to recover under the statute, upon the less of the proofs, that under the statute merits of the case. Nothing therefore was and as matter of law there was no liability left to be done but to remand the cause to against the city under the circumstances the trial court for entry of the judgment shown. On the contrary, however, the Court which it should have entered originally, and of Appeals in its opinion determined that as we construe the remanding order, conthe right of the company to recover from sidered in connection with the context of its the city had been fully established, and re-opinion, the Court of Appeals intended that manded the case, in this language: the trial court should do precisely what it did do.

"Entertaining no doubt as to the validity of the statute and the right of the Lumber Company to invoke its provisions, the judgment of the trial court must be reversed and the case remanded for further proceedings in harmony with the views herein expressed."

[2] Having determined that the city is liable, shall it pay interest on the claim from the time of the presentation of the order and demand for payment, November 5th, 1903, or at all? The sections of the statute involved in this consideration are 3162, 3163 and 3164, Revised Statutes 1908, which read as fol

Just what the Court of Appeals did determine as to plaintiff's right of recovery is shown in the following extracts from the opinion rendered. At page 463 of 23 Colo. lows: App., at page 1027 of 130 Pac., this was said: 3162. "Creditors shall be allowed to receive "The contractor became indebted to the Lum-interest when there is no agreement as to the ber Company for material which it had furnish-rate thereof, at the rate of eight per centum per ed him, and which he and another firm of con- annum, for all moneys after they become due, tractors, who completed the waterworks after on any bond, bill, promissory note or other inthe termination of the McDonald contract, used strument of writing, or on any judgment recovin the construction of the plant. For this in- ered before any court or magistrate authorized debtedness, amounting to over $3,000, after all to enter up the same within this state, from the proper credits were allowed, the contractor day of entering up said judgment until the satgave an order to the plaintiff in error on the isfaction thereof be made; also, on money due on mutual settlement of accounts from the city. In fact he gave two such orders, one signed by himself, and one signed by himself and date of such settlement, on money due on ac his manager. These orders appear to have been count from the date when the same became due, delivered to the city clerk. * and on money received to the use of another and other evidence, such as correspondence, clearly retained without the owner's knowledge.' indicating knowledge on the part of the city officials that the contractor was not making satisfactory settlements with the Lumber Company for material which the latter was furnishing the former."

There was

3163. "The parties to any bond, bill, promissory note, or other instrument of writing, may stipulate therein for the payment of a greater or higher rate of interest than eight per centum per annum, and any such stipulation may be enforced in any court of competent jurisdiction in

On pages 469, 470 of 23 Colo. App., on page the state." 1029 of 130 Pac., it is further said:

3164. "County orders and warrants, town and "It is conceded that the city made no at-like evidences or certificates of municipal indebtcity and school orders and warrants, and other tempt whatever to comply with the provisions edness, shall bear interest at the rate of six per of this statute or any thereof. * Section centum per annum from the date of the presen5408 of the act, in unequivocal terms, com- tation thereof for payment at the treasury where mands the city to pay the money due the claim- the same may be payable, until there is money ant directly to him, when by agreement or judg; in the treasury for the payment thereof, except ment that amount shall have been ascertained." when otherwise specially provided by law, and After saying that equity considers that as every county treasurer, town treasurer and city done which ought to have been done, the opin- treasurer to whom any such county, town, city or school order or warrant is presented for ion proceeds as follows, at page 475 of 23 payment, and who shall not have on hand the Colo. App., at page 1031 of 130 Pac.: funds to pay the same, shall indorse thereon the rate of interest said order or warrant will draw, and the date of such presentation, and subscribe such endorsement with his official signature; provided, that, all such orders and warrants may be made to bear a lower rate of interest than above specified, by special agreement between such counties, towns and cities issuing the same, and the person to whom such orders or warrants are issued."

"This wholesome rule of equity requires us to hold that neither the city's duty nor the Lumber Company's right have been in any manner altered by the unauthorized payment by the city of McDonald's claim, and that the Lumber Company may yet look to the city for its pay for the material furnished the contractor, precisely as it might have done had no such payment been made by the city to him."

It has long been recognized that a distincIt is clearly evident that when the contractor, McDonald, gave the order to the com- tively municipal corporation acts in a twopany, that was an admission by him of the fold manner, namely, in a governmental or amount due the latter. In other words, the political capacity, and in a ministerial or priwritten order by the contractor, when served vate or business capacity. In this case the on the city on November 5th, 1903, was in city was acting in a purely ministerial or every way equivalent to a compliance by the business capacity. This court has repeatedly creditor with the requirements of Section recognized this doctrine. In Denver v. Maur5408. The city had notice of the claim ander, 47 Colo. 209, at page 212, 106 Pac. 875, at the amount thereof, and in the absence of page 876, it is said: fraud, and there is no suggestion of that, was bound thereby, as to the amount of the

general duties are imposed upon a municipal corporation. One is governmental, and the mu

"The authorities agree that two classes of

ployés occurring in the performance thereof. in the case of Montezuma County v. Wheeler, The other is private and corporate, and the 39 Colo. 207, 89 Pac. 50, has laid down a municipality is liable for negligence of employés occurring in the performance thereof. City of rule based upon the construction of our statDenver v. Davis, 37 Colo. 370 [86 Pac. 1027, 6 utes, which puts towns and cities in a differL. R. A. (N. S.) 1013, 119 Am. St. Rep. 293, ent position respecting interest than obtains 10 Ann. Cas. 187]." generally.

In City of Denver v. Rhodes, 9 Colo. 554, 13 Pac. 729, it was declared that a municipality undertaking a public improvement, such as the construction of a sewer, is liable like an individual for damages resulting from negligence or omission of duty.

Explaining fully the distinction, based upon authorities quoted therein, in Esberg Cigar Co. v. City of Portland, 34 Or. 282, 55 Pac. 961, 43 L. R. A. 435, 75 Am. St. Rep. 651, it was held, in substance, that water works belong to a city in its private, rather than its public capacity, so as to make it liable for injury for the negligent construction or maintenance thereof, even though the legislature determines upon the necessity for such works and selects certain persons as agents of the city by whom the work shall be undertaken. In Shipley v. Hacheney, 34 Or. 303, at page 307, 55 Pac. 971, at page 972, this is said:

The opinion in question ought not to be given such construction. There it was attempted to collect interest from a county upon a bill of a water commissioner, which the county refused to pay. It was sought to recover interest on the amount from the date the bill was presented and payment demanded. The liability of the county for interest, under such circumstances, was denied, upon the theory that counties are involuntary organizations, civil divisions of the state, created by general law to aid in the administration of state government, and therefore not liable for interest, except by agreement, or unless specifically made so by statute.

A city is a voluntary organization created for local convenience, advantage and interests, and acts in a private as well as a public capacity, and an entirely different rule applies to it with respect to liability to pay interest in business transactions. This dis"So it is said, in manifest harmony with this tinction is clearly recognized and pointed distinction, that the rule in respect to the corporate indebtedness of the municipality does not out in the decision under consideration. Beordinarily differ from that which applies to in- sides, that portion of the opinion which it is dividuals. Dillon, Mun. Corp. § 506. The doc- sought to apply in this case, was in no sense trine is also sustained and promulgated by judicial utterances. In Murphy v. City of Omaha, necessary for a decision of that case, the 33 Neb. 402, 408, 50 N. W. 267, it is said: matter in question being purely argumentaIn the absence of any contract that payment tive and expressly used, as stated in the shall be delayed, the city will be liable for in- opinion itself, to strengthen the conclusion, terest like any other debtor. * In its business transactions a city should be required based on an entirely different line of arguto conform to the ordinary rules, and all ex- ment, which had been reached. After the emptions claimed which would work injustice court had determined the case upon the should be denied.' Upon the same principle, theory that the county was an involuntary interest was allowed against the town in Langdon v. Town of Castleton, 30 Vt. 285. See, corporate body, a division of the state, creatalso, Pruyn v. City of Milwaukee, 18 Wis. 367; ed purely as an agency or instrumentalit City of Grand Rapids v. Blakely, 40 Mich. 367, 29 Am. Rep. 539; State ex rel. v. Trustees of Town of Pacific, 61 Mo. 155; City of Scranton v. Hyde Park Gas Co., 102 Pa. 382."

* *

Even in Illinois, where the decisions in this particular seem to be favorable to the city, they do not go so far as to hold that cities are not chargeable with interest. In Conway v. City of Chicago, 237 Ill. 128, at page 137, 86 N. E. 619, at page 623, the court said:

"The general rule as to the liability of municipalities is, that they are not liable on their contracts for interest in the absence of an express agreement to pay it, yet where money is wrongfully obtained, or where it is lawfully obtained and unlawfully and wrongfully withheld, the municipality is liable for interest to the same extent as a private person." City of Shawnee v. Freauff, 36 Okl. 280, 128 Pac. 255; 28 Cyc. page 1754.

We have no hesitancy, therefore, in holding, upon the weight of authority, that towns and cities in business transactions are liable for interest, in the absence of statute or decisions of our courts putting them on a different basis, the same as private corporations or individuals. In this connection it is contended by counsel for the city that this court, 154 P.-7

of the state for general governmental purposes, and subject to like rules and restrictions governing its liability for interest as the state, and therefore not bound by statute to pay interest unless expressly designated therein, the court made use of this language:

"The foregoing we believe to be the correct doctrine as to the allowance of interest upon claims against a county. We are strengthened in the belief that it was not the intention of the legislature to allow interest upon claims Ann. Stats. (sec. 3162, R. S. 1908), because sec. against counties by virtue of sec. 2252 Mills' 2254 provides that: 'County orders and warrants and other like evidences or certificates of indebtedness shall bear interest at the rate of eight per cent.' If it was intended that obligations of the county other than those mentioned in sec. 2254 should draw interest, as provided in sec. have been idle, because the earlier section pro2252, the enactment of the latter section would vides for the allowance of interest 'on any bond, bill, promissory note or other instrument of writing,' which expressions are broad enough to include county orders and warrants and other like evidences of municipal indebtedness. The rule being that counties may not have liabilities imposed upon them in the absence of a statute, and the fact that the legislature provided that county orders, warrants and other like evidences of municipal indebtedness shall bear interest, it must have intended to exclude all ob

ligations other than those mentioned. Expres- that in no event could it be liable under this sio unius est exclusio alterius."

There appearing to be no error in the judg- in the construction of the pipe line, and that ment, it is affirmed.

there was a balance due from McDonald to the lumber company were all denied and put

GABBERT, C. J., and GARRIGUES, J., in issue by the answer. dissent.

2. The Court of Appeals gave no direction to the lower court to enter any specific judgGARRIGUES, J. (dissenting). 1. It ap- ment. It simply ordered that it proceed in pears from the complaint that the defendant harmony with the views expressed in the in error, a lumber company, in 1903 furnish- opinion of the court. The question which it ed the contractor, McDonald, with a quanti- had under consideration and decided was the ty of fir pipe staves used by him in construct- liability of the city, as an abstract proposiing a pipe line for a system of waterworks tion under the statute, not the amount of the built by the city, for which, without interest, liability. The lower court held it could not it is alleged an unpaid balance remains of be made liable under the statute in any $3,451.92, not $3,477.11, as stated in the ma- event. The Court of Appeals held this was jority opinion. The city paid the contractor, erroneous; that a municipality letting a conwho, it is alleged, neglected to pay the 'lum- tract for public works may be made liable ber company such balance, and in 1904 it under the statute to one supplying material brought suit against the city based upon to the contractor; that merely because the chapter 124, Session Laws of 1899. At the statute contained no provision for its enfirst trial in 1908, the lower court dismissed forcement was no defense, where the city

thereof and made no attempt to comply with interest on the McDonald order. Every lawits terms. It is evident to me, and I think yer knows that, in the absence of an express very clear from reading the opinion of the agreement, interest is purely a creature of Court of Appeals, that it only intended to statute, and one claiming interest must place place a construction upon the statute for the his finger on some specific law authorizing guidance of the lower court in another trial it. There is no provision for interest in the de novo, and reversed and remanded the case statute creating the liability of the city in generally. If it had intended the lower this case, and its liability to pay interest, in court should, upon receipt of the remittitur, the absence of an express agreement, on enter a final judgment for a definite amount any balance due from the contractor to the based simply upon the opinion, judgment, materialman is based upon chapter 71, R. S. and remittitur of the Court of Appeals, it 1908. Section 3162 thereof, upon the allowseems inexcusable that it did not give such ance of interest generally to creditors, prospecific directions to the lower court. gave no such directions. I think the majori- ment as to the rate, in certain specific inIt vides that creditors, where there is no agreety opinion arbitrarily reads such intent into stances shall be allowed 8 per cent. per anthe opinion of the Court of Appeals. The city has a right, on a trial de novo, to con- ders and warrants, town and city orders and num. Section 3164 provides that county ortest the matters at issue in the pleadings, warrants, and school orders and warrants governed by the law of the case announced shall bear interest at 6 per cent. per annum by the decision of the Court of Appeals. The from the date of presentation until there is contractor could not forestall this right and money in the treasury to pay them. In the obligate the city to pay a liquidated amount Montezuma Case, 39 Colo. 207, 89 Pac. 50, we with interest thereon by giving an order on held that section 3162, regarding the general the city. I think it erroneous to measure the liability of creditors to pay interest, did not city's liability by an order given by McDonald to the lumber company against the city counties to pay interest is governed excluapply at all to counties; that the liability of drawing 8 per cent. interest, in the face of a denial by the city of the allegations of the this section 3164 concerning towns and cities, sively by section 3164. The provisions of complaint. According to the decision of the counties and school districts, are identical. Court of Appeals, the lumber company's right It makes no distinction. It says that city orof action against the city, if any, is based ders and warrants, like county orders and purely upon a statutory liability, and not up- warrants, shall draw 6 per cent. interest from on an order given by the contractor. When date of presentation until there is money in the case was reversed and remanded without the treasury for their payment. further directions except to proceed in harmony with the opinion, I think it stood for trial the reason given in the Montezuma Case for de novo upon the issues presented by the holding that it was not intended by the statpleadings, as originally. Where it is intendedute that obligations of the county other than the trial court should enter a final judgment those mentioned in section 3164 should draw disposing of the case upon the record as it stands, the practice in all well-regulated courts of review is for the appellate court to direct specifically the kind of judgment to be entered. Johnson v. Bailey, 17 Colo. 59, 28 Pac. 81; Dickson v. Bank, 11 Colo. App. 154, 52 Pac. 745; Talcott v. Delta Co., 19 Colo. App. 11, 73 Pac. 256; Cahn v. Tootle, 58 Kan. 260, 48 Pac. 919.

Therefore

interest under section 3162 applies with equal force to towns and cities and school districts. The statutory liability of the city for the balance due the materialman from the contractor is an obligation of the city other than that mentioned in section 3164, and if section 3162, regarding interest generally, is not applicable to counties, then from the reasoning in the Montezuma case, it does not 3. According to the law of the case as an- apply to cities. The McDonald order, calling nounced by the Court of Appeals, the suit is for 8 per cent. interest, was not a contract based upon a specific statute, and the measor agreement made by the city. The city had ure of the city's liability is the unpaid bal- nothing to do with it. It in no way bound ance, if any, which the contractor owes the the city to pay either the principal or interlumber company for material, not the order est mentioned therein. Its liability is not given by McDonald. The complaint alleges upon the order, but for the unpaid balance, that the balance is $3,451.92, which, plus $25,- if any, for material, and whether it was lia19 interest that was added, amounted on No- ble or not for interest on such balance devember 5, 1903, to $3,477.11, for which amount pends upon the provisions of section 3164. McDonald on that date gave an order, draw- under the authority of the Montezuma Case. ing 8 per cent. interest. The lower court and not upon section 3162. It surely cannot allowed the face of this order and interest be successfully contended that section 3164 from date at 8 per cent., making an aggregate does not place counties, cities, towns, and judgment of $6,277; and the question is pre-school districts upon exactly the same basis sented: In the event there is a balance due and apply to them alike with regard to the the lumber company from McDonald for payment of interest; and, if counties are not which the city is liable, must it pay interest liable for interest under section 3162, then thereon under the statute? not must it pay towns, cities, and school districts are not I