Sec. 3. . . . All of *Page 723 said forty thousand bonds which shall remain unsold at the time of the adoption of this section shall be cancelled and destroyed by the state treasurer, and in lieu thereof bonds in the same amount shall be prepared and sold as hereinafter stated." The respondent treasurer contends that the bonds in question have been sold and for that reason declines to cancel the same. Respondent's contention is based upon the fact that at the time when twelve thousand of these bonds were offered for sale to the highest bidder for cash, in accordance with law, on February 26, 1920, the state board of control, acting under and by virtue of the authority vested in them by the legislature of the state (Stats. 1913, p. 563), bid for said twelve thousand bonds par, and that subsequent to that bid from time to time bonds have been issued and delivered to the state board of control in pursuance of said bid. The question here relates solely to the portion of such twelve thousand bonds as remain undelivered in the custody of the treasurer and for which no payment has been made. The question, then, resolves itself into this proposition: Did the making of the bid by the state board of control for the twelve thousand bonds and the acceptance of said bid by the state treasurer constitute a sale thereof within the meaning of the constitutional amendment?

By the statute of 1913 (Stats. 1913, p. 563), the state board of control were authorized to use any surplus moneys in the state treasury for the purchase of bonds of this state. The statute provides (section 2) the method of determining what funds shall constitute surplus funds within the meaning of the act and that "thereupon the state board of control shall proceed to invest the same in the purchase of bonds of any of the classes described in section one of this act." It is further provided in section 3 as follows: "Any bonds purchased or held under the provisions of this act may be sold or exchanged for other bonds of any of the classes described in section one of this act, and the money received from any such sale may be reinvested by the state board of control in the purchase of any such bonds; provided, that no such sale or exchange shall be made at a price which will result in a net loss to the state."

[1] The state board of control cannot buy bonds for the state at all until after it and the state treasurer have met and determined that there is "surplus money" which is available *Page 724 in payment of bonds so purchased (section 2, supra). This is a condition precedent to the power of the state board of control to make either a purchase or a contract of purchase of any bonds with public money. In the record before us there is no statement or intimation that any such meeting had been held or determination made or that there was any "surplus money" on hand at the time of the supposed purchase by the state board of control from the state treasurer, or any money available, either then or afterward, to pay for these bonds claimed to have been purchased and now remaining undelivered. Furthermore, under section 4 of the act of 1915 authorizing the sale of the highway bonds (Stats. 1915, p. 652), such sale must be made for cash and immediately thereafter the treasurer must pay the same into the state treasury. [2] These provisions show clearly that it was not contemplated that there should be an executory agreement for the sale of the bonds on the condition that payment should be made at some time in the future when "surplus money" should be available, or at such time as might be convenient for the purchaser. The so-called sale and acceptance by the treasurer were made in February, 1920. Up to the time of the passing of the constitutional amendment on November 2, 1920, there had been no payment of cash and no delivery of these bonds in controversy in pursuance of said supposed sale. From the facts stated in the record and advanced at the hearing, no other conclusion can be drawn than that the alleged sale was made on credit and that payment was to be made at a time in the future when "surplus money" should be duly declared to be available for their purchase.

[3] The officers of the state, in exercising the power of sale and purchase conferred by these statutes, are agents exercising a special power over property of the state. Such agents have no power except that which is expressly given by the statute, or is necessarily implied from the express provisions. The provisions of the statutes do not either expressly or by implication allow a sale to be made upon such terms as those which are here shown, or at a time when there is no "surplus money" with which to pay for the same, and by requiring the sale to be for cash, in effect prohibit a sale to either the state board of control or to private bidders on credit. *Page 725

[4] It necessarily follows that the contract of sale attempted to be made in this manner is utterly void as to the bonds still unpaid for and undelivered for the want of power upon the part of either party to make such contract.

A bid for bonds by the state board of control, even if accepted by the state treasurer, where there are no funds immediately available for transfer in payment therefor, and where no such transfer is then or subsequently made of such funds, is not a sale of such bonds within the meaning of the constitutional amendment of 1920, which requires the destruction of unsold bonds. (Christensen v. Cram,156 Cal. 633,635, [105 P. 950].) The purpose of the constitutional amendment was to permit an increase of interest in accordance with the market rate so that bonds would be salable at par. In the argument for the adoption of the constitutional amendment mailed to each voter it was said: "State highway bonds are now unsalable as the law will not permit their being sold at less than par. No state bond bearing but four and one-half per cent interest can hope to compete with the United States bonds now purchasable to yield 7 per cent, nor with the many excellent industrial bonds which are selling to yield eight per cent or more. . . . Like other commodities, money must be paid for when needed at the going market rate. Its value cannot be fixed by state legislation and the proposed plan appears to be well within the scope of sound business." In the argument against the proposed constitutional amendment mailed to all the voters of the state it was said: "This measure should be emphatically rejected and defeated. The foremost intent of the proposed amendment is to authorize an increase in the interest rate on about thirty-seven million dollars' worth of unsold bonds of the third highway issue, from 4 1/2 per cent to a maximum of 6 per cent." The thirty-seven million dollars includes all of the twelve thousand bonds not heretofore transferred and delivered to the state board of control. The argument in favor of the constitutional amendment would also point to the conclusion that the bonds yet undelivered by the state treasurer to the state board of control should not be so delivered, for the reason that if delivered they could not be sold as the law requires, namely, at a sum which will not net a loss to the state. (Stats. 1913, p. 563.) It is clear that the constitutional amendment contemplated the destruction of the bonds in question as "unsold" *Page 726 bonds and that when so construed the amendment does not impair the obligation of any valid outstanding contract of sale.

Let the writ issue.

Shaw, J., Sloane, J., Olney, J., Lennon, J., and Lawlor, J., concurred.

I concur in the judgment on the last ground stated in the opinion.

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