CERTIFICATE OF JUST CLAIM ‑- AMENDMENT OF RCW 42.24.030 TO ALLOW AS PART OF ENDORSEMENT ON WARRANTS

CERTIFICATE OF JUST CLAIM ‑- AMENDMENT OF RCW 42.24.030 TO ALLOW AS PART OF ENDORSEMENT ON WARRANTS

(1) Warrants are not negotiable instruments within the law of merchants.

(2) Certificate of service and transfer of ownership may be combined so as to require one endorsement only.

(3) Assignment of payees interest in warrant cannot affect statutory requirement of certificate.

(4) Amendment to RCW 42.24.030 is permissive, not mandatory.

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                                                                   April 20, 1955

Honorable Cliff Yelle
State Auditor
Olympia, Washington                                                                                                                Cite as:  AGO 55-57 No. 60

Attention  !ttF. D. Keister

            Assistant State Auditor

Dear Sir:

            In your letter of April 4, 1955, previously acknowledged, you have requested our opinion on the following questions based on an interpretation of RCW 42.24.030 as amended by chapter 339, Laws of 1955, as follows:

            "All persons furnishing materials, rendering service or performing labor, or receiving certificates of indebtedness from any disbursing officer of the state, or any county, city, district, or precinct, shall furnish a certificate, certifying on honor that he has furnished materials, rendered services, or performed labor, as described and that the claim is just, due and unpaid, which certificate shall be a part of the voucher.

             [[Orig. Op. Page 2]]

            "The certificate as to service of legislators, officers or employees of the state, or any county, city, district or precinct, drawing annual or monthly salaries may be set forth in form prescribed by the department of municipal corporations, as part of the endorsement on the warrant or check issued in payment of such services.

            "The certificate need not be sworn to but any person certifying a claim that is false or untrue shall be guilty of perjury in the second degree."

            (1) Would the amendment to RCW 42.24.030 as provided in chapter 339, Laws of 1955, if put into effect, impose a restrictive endorsement on state warrants which might affect their negotiability?

            (2) Would the provisions of the act require two endorsements on the warrant, viz., (a) the certificate of service and (b) the transfer of ownership?

            (3) If two signatures are required, should the state treasurer refuse payment if the warrant or warrants bear but one endorsement of the payee, which apparently is a necessary requirement under the provisions of RCW 43.08.010 (10)?

            (4) Since many salary warrants are assigned, particularly to banks, does the assignment for transfer of ownership eliminate in any way the requirement for a certificate of service as a condition of payment of the claim, either on the warrant itself or the corresponding payroll or voucher?

            (5) With respect to the duties and responsibilities of the state auditor, are the provisions of this amendment to RCW 42.24.030 mandatory or optional?

            Our answer to questions 1 and 2 is in the negative.  Question 3 becomes moot.  Our answer to question 4 is in the negative.  Our answer to question 5 is that the amendment is optional.

             [[Orig. Op. Page 3]]

                                                                     ANALYSIS

            State, county, city and other municipal corporation warrants are not now nor have they been, prior to the amendment in question, negotiable instruments in the sense of the law of merchants.  Anyone taking these warrants takes them subject to defenses that might be interposed were they held by the original payee.

            Our supreme court in the case of  State ex rel. Ackerman v. Meath, 87 Wash. 659, at p. 661, cites with approvalState ex rel. Olympia National Bank v. Lewis, 62 Wash. 266, as follows:

            " 'It needs no argument to demonstrate that if Hamilton was the relator in this proceeding and still the holder of the warrant, he could not successfully maintain this proceeding and thereby enforce the payment of the warrant by the treasurer.  This being the law, the relator, of course, is in no better position, unless it be held that the warrant is negotiable paper acquired by the relator as an innocent holder for value before maturity.  That such warrants are "not negotiable in the sense of excluding inquiry into the legality of their issue or to exclude defenses thereto," has been determined by the previous decisions of this court, in harmony with the general rule upon that subject.  Bardsley v. Sternberg, 17 Wash. 243, 49 Pac. 499; West Philadelphia Title & Trust Co. v. Olympia, 19 Wash. 150, 52 Pac. 1015; 28 Cyc. 1570'"

            See also 36 A.L.R. 949 for a collection of authorities.

            The printing of the certificate on the warrant gives the state no new defense or one not already available to it under existing law.  It is also true that this would not amount to a "restrictive endorsement."

            The generally accepted definition of a "restrictive endorsement" is set forth in 10 C.J.S. at page 704 as follows:

             [[Orig. Op. Page 4]]

            "A restrictive indorsement [[endorsement]]is one which restrains the negotiability of the instrument to a particular person or for a particular purpose."

            The legal effect of such an endorsement is to retain the title to the instrument in the endorser and to make the endorsee his agent for the purpose set forth in the endorsement.  10 C.J.S. 704.

            In addition to the fact that a state or a municipal corporation cannot be estopped to deny the legality of a warrant, your attention is invited to RCW 62.01.003 which defines the term "unconditional" in the phrase "unconditional promise or order to pay a sum certain in money."  (One of the requirements to establish the negotiability of an instrument.)  This section specifically points out that "an order or promise to pay only out of a particular fund isnot unconditional" (Emphasis supplied) Since most state and municipal warrants carry this requirement, they are also non-negotiable on these grounds.

            With regard to your second question, in our opinion the provision in question would not require two signatures.  The certificate could be so worded that it would be evident that the single signature was affixed to certify as to the justice of the claim and as an endorsement for the purpose of passing title.

            Since our answer to question 2 is in the negative, it is not necessary to consider further the problem presented in question 3.

            The amendment in question does not change the law requiring a certificate, either on the warrant itself or on the corresponding payroll or voucher.  The effect of the amendment is to provide an additional method of obtaining the certificate in the case of certain listed employees.  In the event no certificate was signed as a part of the payroll or voucher, it would be necessary for the employee to sign the one on the warrant before the treasurer could cash the instrument.  (RCW 43.08.010 (10)).  The assignment cannot in any way affect the statutory requirement.

            With regard to question 5, we find our supreme court, in the case ofFaunce v. Carter, 26 Wn. (2d) 211, at page 215, quotes with approval the rule set forth in 59 C.J. 1079, § 635, to the effect that:

             [[Orig. Op. Page 5]]

            "'the word "shall" when used in a statute is imperative and operates to impose a duty which may be enforced, while the word "may" is permissive only and operated to confer discretion.  These words, however, are frequently used interchangeably in statutes, and without regard to their literal meaning.  In each case, the word is to be given that effect which is necessary to carry out the intention of the legislature as determined by the ordinary rules of construction * * *.'"

            In the case ofSpokane County ex rel. Sullivan v. Glover, 2 Wn. (2d) 162 at page 169, our supreme court says:

            "A mandatory provision in a statute is one which, if not followed, renders the proceeding to which it relates illegal and void; a directory provision is one the observance of which is not necessary to the validity of the proceeding.  59 C.J. 1072, § 630; 25 R.C.L. 766, § 14.  It is upon this distinction that our conclusion herein will rest."

            It appears that the instant problem falls within that rule.  Failure to print the certificate on the warrant would not render the issuance of the warrant void if the certificate has been made as a part of the voucher.  In our opinion, the legislature has provided an alternative method which the auditor may use at his discretion.  If it had been the legislature's intention to eliminate the use of the certificate on the voucher in the classifications within the amendment, they could and undoubtedly would have said so.

Very truly yours,

DON EASTVOLD
Attorney General

B. F. RENO, JR.
Assistant Attorney General