1. The statute of limitations of Iowa, which bars actions upon
all written contracts within ten years after the cause of action
thereon has accrued, commences to run against actions upon coupons
for interest annexed to municipal bonds in that state, when they
have been detached from the bonds and transferred to parties other
than the holders of the bonds, from the maturity of the coupons
respectively.
2. The cases of
City of Kenosha v.
Lamson, 9 Wall. 477, and of
City of
Lexington v. Butler, 14 Wall. 282, commented upon
and explained.
3. Coupons for interest when severed from the bonds to which
they were annexed originally are negotiable and pass by delivery.
They then cease to be incidents of the bonds, and become
independent claims, and do not lose their validity if for any cause
the bonds are cancelled or paid before maturity.
Page 87 U. S. 584
On the 1st of March, 1856, Iowa City issued a number of bonds,
dated on the day just named, promising in each to pay to the
bearer, on the 1st of January, 1876, the sum of $500, with interest
at 10 percent, payable on the 1st of January in each year. For this
interest, ten coupons, or interest warrants in negotiable form, for
$50 each, were annexed to the bonds. From ten of these bonds the
coupons were subsequently cut off, and long before the commencement
of this suit -- which was on the 31st of January, 1874 -- were
negotiated and by purchase and delivery became the property of a
certain Clark. The ten bonds themselves, from which the coupons
were thus severed, were paid off and satisfied by the company prior
to the said date Clark not being at the time owner or holder of any
of them.
In this state of things, Clark, on the said 31st of January,
1874, sued the city on ten coupons representing the installments
due on the 1st of January, 1860. More than fourteen years
had thus elapsed since the coupons had become due, and since suit
might have been brought on them.
The statute of limitations in Iowa, making no distinction
between simple contracts and specialties, enacts that all actions
"founded on
written contracts" must be brought within ten
years after the cause of action accrued.
In bringing his suit so long after the coupons became due, the
plaintiff's idea, founded on his interpretation of the decisions in
The City of Kenosha v. Lamson [
Footnote 1] and
City of Lexington v. Butler,
[
Footnote 2] in this Court, was
that the statute began to run against the coupons only from the
maturity of the bond, and as the bond would not be barred until
January 1, 1886, that his suit on the coupons, though brought more
than fourteen years after they became due, was still in time.
The defendant's position was that the cases just mentioned and
relied on by the plaintiff were misinterpreted by him; that suits
on the coupons were barred in ten years after
their
Page 87 U. S. 585
own maturity, or barred January 1, 1870, more than four
years before this suit was brought.
The defendant accordingly pleaded the statute of limitations,
alleging that more than ten years had elapsed since the cause of
action arose and before the bringing of the suit.
He pleaded further the facts above-mentioned about the coupons
and bonds, to-wit, that the plaintiff got them by purchase in the
market after they had been severed from the bonds; that long before
the suit brought the bonds had been satisfied, and that the
plaintiff was not owner of them when they were so paid.
To this plea the defendant demurred, assigning for cause
"that the statute had not run for ten years against the covenant
in the bonds to pay the interest, and that the payment of the bonds
to another person than the holder of the coupons did not bar his
remedy on the coupon, his right of action running on the coupons
until the remedy thereon was barred by running of the statute
against the bond itself."
A point thus made was:
"Does the statute of limitation commence to run upon the coupons
in suit from their own maturity respectively, or does it commence
to run upon the coupons only from the maturity of the bonds to
which said coupons belonged?"
The judges being opposed in opinion on the question, they
certified it to this Court for answer.
Page 87 U. S. 586
MR. JUSTICE FIELD delivered the opinion of the Court.
The bonds of Iowa City were taken up and cancelled before the
commencement of this action, but previous to such cancellation the
coupons for interest due on the 1st of January, 1860, upon which
the action is brought, were detached and negotiated to other
parties until by purchase they came to the possession of the
plaintiff. The statute of Iowa prescribes the limitation of ten
years to actions on all written contracts, whether under seal or
otherwise.
The simple question, therefore, presented for our determination
is whether the statute is a bar to an action upon the coupons
detached from the bonds and transferred to parties other than the
holders of the bonds, when it would
Page 87 U. S. 587
not be a bar to an action on the bonds themselves had they not
been cancelled.
The counsel for the plaintiff cites the case of
City of
Kenosha v. Lamson, reported in the 9th of Wall. and the case
of
City of Lexington v. Butler, reported in the 14th of
Wall. as conclusive against the bar of the statute. There are
expressions in the opinions of the Court in those cases which,
detached from the context, would seem to justify this conclusion.
But the whole purport of the decisions in those cases was to the
effect that the coupons being given for interest on the bonds,
partook of their nature and were equally high as security, and
therefore the statute could only run against them when it would run
against instruments of the dignity of the bonds. In other words,
the decisions only established the doctrine that the coupons so far
partook of the nature of the bonds that as the latter were
specialties so were they specialties also, and not mere simple
contracts. [
Footnote 3]
The first case, that of
City of Kenosha v. Lamson,
arose in Wisconsin, where actions upon sealed instruments are not
barred until the lapse of twenty years, whilst actions upon simply
contracts are barred in six years. The action was brought upon the
coupons when more than six years but less than twenty years had
elapsed after their maturity. And the court held that the coupons
were substantially copies of the bond in respect to the interest,
and were given to the holder of the bond for the purpose of
enabling him to collect the interest at the time and place
mentioned, without the trouble of presenting the bond every time
the interest became due, and to enable him to realize the interest
by negotiating the coupons in business transactions; and that the
coupons partaking of the nature of the bonds, which were of higher
security than the coupons, were not barred by lapse of time short
of twenty years. The court concluded its opinion by observing that
it would be a departure from the purpose for which the coupons were
issued, and from
Page 87 U. S. 588
the intent of the parties, to hold that when they are cut off
from the bonds the nature and character of the security changes and
becomes a simple contract debt and adds: "Our conclusion is that
the cause of action is not barred by lapse of time short of twenty
years."
The case of
City of Lexington v. Butler arose in
Kentucky, where the statute prescribes fifteen years as the
limitation for actions on bonds and only five years for actions on
simple contracts. The action was upon coupons of certain bonds
issued by the city, and the city pleaded the statute of limitations
of five years, but the court answered that bonds were specialties
not falling within the period prescribed; that suits on bonds might
be maintained if commenced within fifteen years after the cause of
action accrued, and that a suit upon a coupon was not barred by the
statute unless the lapse of time was sufficient to bar also a suit
upon the bond, as the coupon, if in the usual form, was but a
repetition of the bond in respect to the interest for the period of
time therein mentioned, and partook of its nature.
It is evident from this examination of the cases cited that it
was not the intention of the court to decide that an action upon a
coupon detached from the bond, and negotiated to other parties, was
not subject to the same limitations as an action upon the bond
itself; much less to hold that the coupons remained a valid and
existing cause of action not only for the period prescribed for
actions on the bond after its maturity, but for the additional
period intervening between the maturity of the coupon and the
maturity of the bond, however, great that might be. The question
before the court in those cases was only whether the time the
statute ran against the coupons was the longest or shortest period
-- was it six or twenty years in the Wisconsin case, or was it five
or fifteen years in the Kentucky case -- and the court held that
the statute ran for the longest period, because the coupons partook
of the nature of the bonds and the statute ran for that period as
to them.
Most of the bonds of municipal bodies and private corporations
in this country are issued in order to raise funds for
Page 87 U. S. 589
works of large extent and cost, and their payment is therefore
made at distant periods, not unfrequently beyond a quarter of a
century. Coupons for the different installments of interest are
usually attached to these bonds, in the expectation that they will
be paid as they mature, however, distant the period fixed for the
payment of the principal. These coupons, when severed from the
bonds, are negotiable and pass by delivery. They then cease to be
incidents of the bonds, and become in fact independent claims; they
do not lose their validity, if for any cause the bonds are
cancelled or paid before maturity; nor their negotiable character;
nor their ability to support separate actions; and the amount for
which they are issued draws interest from its maturity. They then
possess the essential attributes of commercial paper, as has been
held by this Court in repeated instances. [
Footnote 4] Every consideration, therefore, which gives
efficacy to the statute of limitations when applied to actions on
the bonds after their maturity, equally requires that similar
limitations should be applied to actions upon the coupons after
their maturity.
Coupons, when severed from the bonds to which they were
originally attached, are in legal effect equivalent to separate
bonds for the different installments of interest. The like action
may be brought upon each of them, when they respectively become
due, as upon the bond itself when the principal matures; and to
each action -- to that upon the bond and to each of those upon the
coupons -- the same limitation must upon principle apply. All
statutes of limitation begin to run when the right of action is
complete, and it would be exceptional and illogical to hold that
the statute sleeps with respect to claims upon detached coupons,
whilst a complete right of action upon such claims exists in the
holder.
We answer, therefore, the question certified to us, that the
statute of Iowa which extends the same limitation to
Page 87 U. S. 590
actions on all written contracts, sealed or unsealed, began to
run against the coupons in suit from their respective maturities,
and accordingly
Affirm the judgment.
[
Footnote 1]
76 U. S. 9 Wall.
477.
[
Footnote 2]
81 U. S. 14 Wall.
282.
[
Footnote 3]
See also Commissioners of Knox County
v. Aspinwall, 21 How. 539,
62 U. S. 546.
[
Footnote 4]
Thompson v. Lee
County, 3 Wall. 327;
Aurora
City v. West, 7 Wall. 105.
See also County of
Beaver v. Armstrong, 44 Pa.St. 63, and
National Exchange
Bank v. Hartford, Providence& Fishkill Railroad Co., 8
R.I. 375.
CLIFFORD, J.:
I dissent from the opinion of the Court upon the ground that the
case is governed by our prior decisions.
