Hinds County v. National Life Insurance

| Miss. | Mar 15, 1913

Cook, J.,

delivered the opinion of the court.

On October 6> 1902, the county of Hinds issued twenty-five-year bonds of the county, payable at the option of the county any time after five years by authority of and in conformity to section 311 of the Code of 1892, as amended by Acts Leg. 1900', p. 165, and by section 312 of said Code. The bonds so issued were made payable to John Nuveen & Co., or bearer, at the office of the county treasurer in the city of Jackson. At a regular meeting of the board of supervisors of said county in the month of January, 1910, it was found that the county had on hand, arising from the special tax levied for that purpose, a sufficient amount to pay off a portion of said bonds, and the county having a right so to do, and this right having been reserved upon the face of the bonds, the board entered an order upon its minutes exercising its option to pay off the bonds numbered 21 to 57, inclusive. The order gave notice to the holders of these bonds, and directed them to present same for payment to the county treasurer at his office on the 7th day of February, 1910, and provided, further, that interest would cease from the date fixed for their presentation for payment. It appears, further, that the county had set apart and placed in its treasury a sufficient amount to pay the bonds and accrued interest to said date, and that the money has been so kept ever since. This order was published in a newspaper in said county, the official organ of the county, for a period of three weeks next before the date fixed as aforesaid.

Appellee was the holder of the bonds in question, and never had any actual notice of said order or advertisement thereof, and on the 1st day of February, 1911, sought to collect the interest coupons for 1910'. The county refused to pay the interest, but, by agreement, it paid the face of the bonds, and held the interest pending a judicial determination of its liability. This suit was then instituted to enforce the payment of the interest accruing- before actual notice of the option to pay was. brought home to the holders of the bonds. After hearing-the facts as above stated, the trial court peremptorily instructed the jury to find for appellees, which was accordingly done, and the county appeals to this court.

No case has been called to our attention deciding the-exact question involved in this appeal. The case most: nearly in point was decided by District Judge Phillips,, and is reported in 66. Fed. 127, styled Stewart v. Henry County. The learned judge in his opinion reaches his-conclusions in a forceful and lucid manner, but, at last,, when the opinion is boiled down, it can only be said that: a strong argument is made to support hisi conclusions,, which were based upon expediency and the practical impossibility of giving actual notice to holders of bonds-payable to bearer. It will be borne in mind that the statute, by the authority of which these bonds were issued and sold, provides no method by which the option to call and pay the bonds may be exercised. It merely conferred the power to pay the bonds after five years from the date of their issuance — that is all. It would have been competent for the lawmaldng department to have provided for constructive notice of the option, and, had such procedure been prescribed and followed by the county, there would have been no lawsuit. This was not done. "Whose fault was it? The representatives in the legislature were the-representatives of the seller of the bonds, and not of the-buyer. The buyer had no control of, or influence over, the legislature, and, while they took the bonds with notice that the county had the power to call the bonds after five-years, yet did they not have the right to be notified when the county had decided to exercise the privilege of paying-its bonds? The bption to pay the bonds after five years must necessarily be signified by some affirmative act of the county, and it would seem that, so long as the holders of the bonds were unaware of the desire and purpose of' the obligor to pay before payment could be enforced, they were under no legal or moral obligation to inquire concerning the county’s purpose in reference thereto. If A. executes his note payable to B., or bearer, on or before a date named, A. must, of course, notify the holder of the note by tendering payment, should he desire to pay before the maturity of the note. The bonds are in all essentials the notes of the county, and it is believed that, in the absence of a performance of some statutory method of constructive notice, the holders of the bonds must have had actual notice before interest could be stopped.

As said before, Judge Phillips makes a strong argument in support of the contrary view, upon the ground of the practical difficulty of giving actual notice to holders of unregistered bonds, payable to bearer. The credit of the state or county should be maintained, and the holders of public securities are entitled to the same fair treatment accorded to holders of ordinary commercial paper. It was the fault of the legislature that no constructive notice was created, and it is but just to visit the consequences of this omission upon the county rather than upon creditors of the county.

It is admitted that the judgment entered by the trial court was erroneous. The judgment here will be for the accrued interest of 1910, with six per cent, interest thereon from February 1, 1911.

Affirmed.