Smith v. Town of Greenwich

The coupons described in the complaint were detached from bonds issued by the town of Greenwich, Washington county, N. Y., between April 1 and May 12, IS71, pursuant to the provisions of chapter 907 of the Laws of 1869, and prior to the amendment thereof contained in chapter 925 of the Laws of 1S71. The bonds from which said coupons were taken were made payable in twenty years from their date, instead of thirty years, as provided in the statute.

Under the decision of the Court of Appeals in Hoag v. The Town of Greenwich ( 133 N. Y. 152 ), the said bonds, as such, were void as “ bonds, as vouchers or securities,” but the agents of the town who issued them had the power to borrow the money, which, in good faith, was advanced thereon, and although they issued unauthorized securities, yet, the town, in the transaction, became liable on account of the money advanced on the faith of the bonds on an implied contract to repay the loan at the time when by the statute the bond should have been made payable. In the case cited

It follows, therefore, that the bonds from which plaintiffs’ coupons were taken are not valid securities, but the town being liable for the money advanced thereon on an implied contract to repay the same, plaintiffs, under the doctrine established in the case above cited, were entitled to recover on said coupons unless their claim was barred by the Statute of Limitations.

If the town bonds in question had been valid securities the coupons detached therefrom probably would have been deemed specialties, like the securities from which they were taken, and in an action thereon a twenty-year limitation would have applied. It is said by Judge Eaui, in Bailey v. County of Buchanan ( 115 N. Y. 291 -301): “ It is true that past-due coupons, payable to bearer when detached from the bonds, are for many purposes independent, separate instruments. They may be negotiated and may be sued upon by the holder without the production of the bonds. 'x' * * But the coupons, nevertheless, always have some relation to the bonds. Their force and effect and character may be determined by reference to the bonds. They are secured by the same mortgage, and, although unsealed, are specialties like the bonds and are governed by the same Statute of Limitations which is applicable to the bonds.” (See, also, City of Lexington v. Butler, 14 Wall. 282 -292; Williamsburgh Savings Bank v. Town of Solon, 136 N. Y. 481 ; McClelland v. Norfolk Southern R. R. Co., 110 id. 469.)

But in the case under consideration there were in fact no bonds. The instruments, so called, were void. The indebtedness was not secured by any writing, but was merely an implied obligation arising on account of money paid and advanced.

While the bonds, however, were void, plaintiffs brought this action upon the assumption that the coupons for semi-annual interest payable to bearer attached thereto were valid, and that the transfer of those mentioned in the complaint to their testator gave

Thereafter said plaintiffs or their testator could at any time have maintained an action on' said coupons. A satisfaction or payment of the principal debt would not have extinguished such right. A claim existed on account of said loan to the town of Greenwich in favor of the holders of the bonds for the principal sum loaned, and a separate demand for the accrued semi-annual interest to the holders of the coupons. (The City v. Lamson, 9 Wall. 477 ; Bailey v. County of Buchanan, 115 N. Y. 297 -301.)

It is alleged in the answers, to which demurrers were interposed, that plaintiffs’ cause of action did not accrue within six or ten years prior to the commencement of the suit. The allegations contained in said answers may be deemed an averment that the coupons were transferred to plaintiffs’ testator over six or ten years prior to the commencement of the action. When so transferred a cause of action at once accrued on the coupons in favor of the deceased. It was a cause of action on a demand separate from that, of the persons to whom the town was indebted for the principal sum loaned. The cause of action so transferred by the sale of the coupons was not one on a sealed instrument, because the loan wras not secured by a valid or legal bond. Plaintiffs’ claim on the coupons was like one on an unsealed note. The action thereon, we think, was barred after the expiration of six years.

The learned counsel for the appellants apparently assumes that the bonds in question, which have been held by the Court of Appeals void as securities, should be deemed sealed instruments in this action, with the coupons attached thereto, as far as necessary to give such coupons the character of specialties. As we understand the decision of the Court of Appeals in Hoag v. Town of Greenwich (supra), the bonds issued prior to May 12, 1871, by the town of Greenwich were absolutely void. They are not to be regarded

The judgment should be affirmed, with costs.

MayiiaM, P. J., and Heebicis:, J., concurred.

Judgment affirmed, with costs.