life-interest by the deed of Tunis D. Melick. Pidcock's proper course was to appeal from that order. The expensive and oppressive course of filing a bill to quiet title ought not to be encouraged. For like reasons, I think Mrs. Melick's answer in the nature of a cross-bill ought to be dismissed. The relief prayed by her, as against Pidcock's mortgage, would be ineffectual and valueless, if the deed to Sarah Ann Studdiford passed all the title of Tunis D. Melick; for in that case her judgments were not liens upon the mortgaged premises. Before attacking the priority of that mortgage she must set aside the conveyance to Mrs. Studdiford.

(44 N. J. E. 232)

FARRINGTON v. HARRISON.

(Court of Errors and Appeals of New Jersey. July 28, 1888.)

1. EQUITY-ACCOUNTING-Pleading-BurDEN OF PROOF.

To a bill for an accounting by the administrator of a deceased partner against the survivor, alleging that a previous sale of the decedent's interest to the survivor was obtained by fraudulent representations and statements of the partnership accounts, a plea of the sale in bar, and a denial of the fraud, does not shift the burden of proving fraud from the plaintiff; and defendant having supported his plea by proof of the sale without any evidence of fraud or bad faith, and the plaintiff having offered no evidence, the bill should be dismissed.1

2. SAME.

Facts alleged by defendant in his plea amounting to a circumstantial denial of the statements alleged to be fraudulent by the bill need not be proved by defendant, in the absence of proof of fraud by plaintiff.

MAGIE, CLEMENT, and COLE, JJ., dissent.

Appeal from court of chancery.

Decree by BIRD, V. C. 10 Atl. Rep. 105.

Bill for an accounting by Ira M. Harrison, as administrator of John C. Johnson, deceased, against Joseph F. Farrington, surviving partner of the firm of John C. Johnson & Co. For a full statement of facts, see the reports of this case in 10 Atl. Rep. 105, and 3 Atl. Rep. 80. Defendant appeals from a decree directing an account.

Samuel C. Mount, for appellant. John W. Taylor, for respondent.

KNAPP, J. The complainant below and respondent here is administrator of John C. Johnson, deceased, who, in his life-time, was a partner in business with the defendant. The complainant, as such administrator, filed his bill against the defendant as surviving partner, and prayed a decree that the defendant account to him of the affairs of the partnership. The bill so filed set up the fact that the defendant had made a statement of the accounts exhibiting the affairs of the partnership, and showing a balance due to the decedent, and that complainant afterwards, relying upon that as a true statement of the partnership concerns, had sold and conveyed to the defendant, for a price then agreed upon between them, the entire interest of the decedent in the partnership property and effects. The bill set up further that the statement was deceptive and untrue, and that, through the fraud and misrepresentation of the defendant, he was deceived and misled into making this settlement and sale to the defendant; and prayed that, notwithstanding the transaction of sale, because of such fraud, a new accounting should be had. The defendant pleaded the sale and purchase by him from the administrator in bar of the relief sought; and in his plea, as well as in an answer filed in support of the plea, denied the fraud alleged in the bill.

The cause came to a hearing before Vice-Chancellor BIRD. The defendant,

'The burden of proving fraud is on him who alleges it. See Moses v. Katzenberger, (Ala.) 4 South. Rep. 237; Hodges v. Lassiter, (N. Č.) 2 S. E. Rep. 923, and cases cited in note; Dirkson v. Knox, (Iowa,) 30 N. W. Rep. 50, and cases cited in note; Schroder v. Walsh, (Ill.) 11 N. E. Rep. 70, and cases cited in note.

to support his plea, made proof by his own oath of negotiations between the complainant and himself for the purchase of the partnership interest of his deceased partner, resulting in an agreement for its sale and purchase, at a price agreed upon between them. A statement of this agreement was shown to have been reduced to writing, but not signed by the parties. By its terms promissory notes were to be given by the purchaser for the payment of the amount, and, while these were never given, still it was testified to that the agreed price had been paid to or for the complainant; and the receipt of the complainant, acknowledging the payment, was also produced in evidence. Nothing was elicited from the defendant in his examination in any wise to impugn or throw doubt upon the good faith of this transaction of sale, or of any of the steps which led up to it. On this testimony the defendant's counsel rested his case. The complainant offered no testimony, and upon consideration the vice-chancellor advised a decree that the defendant should account, ruling that the plea had not been sustained.

The plea in this case is not that known in equity pleading as a pure plea. It seeks to bar the relief sought by the complainant by setting up an arrangement or completed bargain which the complainant, in his bill, in anticipation of its use as a defense, had set forth and sought to impeach on the ground of fraud. Such a plea, pleaded under these circumstances, must, according to settled rules, deny the grounds upon which the complainant in his bill seeks to overturn that which the defendant raises as a bar, so that the complainant may have an issue which will let in his proof of fraud or other ground of relief. In this case, the complainant admits the sale, but avers that it was obtained by fraud practiced upon him by the defendant. The defendant sets up the sale as a completed transaction in bar of the relief sought, and denies the fraud. Now, the contention is, and must be to support this decree, that, under the issue formed on such a plea, the defendant must, in support of it, not only prove the contract which he pleads in bar, but he must assume also in the first instance the negative of showing that it was not in bad faith or in fraud that it arose. I do not think that any authority is to be found for this position. Complainant, by setting out the contract of sale to attack it for alleged fraud, did not deprive the defendant of the right of pleading such sale in bar. But the defendant could not so plead it as to preclude the complainant from introducing proof of the fraud charged in the bill.

The burden of proof was not shifted by this mode of pleading. When the defendant proved a complete sale, the law implied, in the absence of further proof, good faith and honesty in the contract. In every transaction lawful in itself, the law supports a presumption of honesty and good faith. He who asserts the existence of fraud or bad faith asserts the existence of that which is out of the common course of things, and the onus is cast upon him to make proof of his averments, and, as I understand it, the burden of proof on such an issue never changes. Under the issue made by these pleadings the complainant doubtless might have attacked and defeated this plea by proving the fraud which he averred, and which the defendant, by his denial, which he was obliged to make, had put in issue. But when the defendant made proof of the contract substantially as pleaded by him, and rested his case, under this issue, his plea was supported in the absence of evidence showing fraud. It seems to me that the condition in which the court below found the proof in this case called for a decree in favor of the defendant, and not one requiring him to account.

But it is said the defendant should be held to a failure in proof of his plea in giving no evidence of the truth of his averments respecting the Wilson note, which he had charged against the interest of the deceased partner. The plea stated in substance that the note was given by Wilson as an accommodation to the decedent, who, as payee, indorsed it to the firm, and then, under the firm indorsement, had the note discounted for himself, leaving the

firm to pay it at maturity. These facts, it is said, he should have been required to prove. It is to be remembered, however, that this averment in the plea was only a circumstantial denial of a charge of fraud made against the defendant in the bill claiming credit for the firm in the account rendered to the administrator of the firm affairs. This is one of the items of the account alleged by the complainant to be fraudulent, and he, to support his bill, must have proved it. The plea, in effect, denies the fraud by averring facts which show that the charge was just and fair. The burden of proving fraud on this note transaction, if it existed, was not shifted from the complainant to the defendant by anything in his plea. Indeed, it is doubtful whether the complainant shows any wrong done to him in respect to this note. The ground of complaint is not that the decedent did not have the money on the note for his own use, but that the surviving partner did not, instead of charging the note up to decedent, proceed to collect the same of the maker. But the decedent was liable to the firm as first indorser of the note, and on the firm paying it could justly claim it of him. If he paid it, he, or his representative, had legal recourse to the maker as the one primarily liable by the terms of the contract. I think the decree of the court below ordering an accounting was wrong, and should be reversed, and the bill dismissed, with costs.

MAGIE, CLEMENT, and COLE, JJ., dissent.

(50 N. J. L. 665)

ATLANTIC CITY WATER-WORKS Co. v. REED.

(Court of Errors and Appeals of New Jersey. August 8, 1888.)

1. CERTIORARI-LACHES-APPEAL-REVIEW.

The determination of the supreme court on the question of the laches of the prosecutor in applying for a writ of certiorari is final, not subject to review or error. 2. MUNICIPAL CORPORATIONS-LIABILITY-OBLIGATIONS BEYOND LIMIT OF EXPENDITURE. Where there is only a city ordinance prescribing appropriations and the limit of expenditure for city purposes for a stated period, it is criminal for the city council to incur obligations during that period in excess of such appropriations and limit of expenditure, and the obligations so incurred are invalid, pursuant to the crimes act, approved February 7, 1876, (Revision, 1294.)

3. SAME.

Water companies act April 21, 1876, (Supp. Revision, 650,) does not modify the operation of the above-mentioned crimes act.

4. SAME.

Act March 15, 1881, (P. L. 1881, p. 118,) authorizing municipal corporations to contract for a supply of water for public uses, did not validate prior criminal arrangements entered into by municipal authorities for a water supply.

5. SAME

RIGHTS OF PERSONS DEALING WITH MUNICIPALITY.

In view of the public policy embodied in the crimes act above mentioned, persons dealing with municipal authorities are required to exercise reasonable diligence to ascertain, before attempting to bind the public by obligations outrunning the official life of those boards who are willing to assume them, whether there be legally provided the funds from which the obligations may be met, and in the absence of such diligence the public will not be estopped from setting up the illegality of the obligations by the fact that the other party has acted in reliance upon their validity. Affirmed by divided court.

(Syllabus by the Court.)

Error to supreme court.

S. H. Grey and Theo. Runyon, for plaintiff in error. W. H. Potter, for defendant in error.

DIXON, J. The facts of this case appear in the opinion delivered in the supreme court. 9 Atl. Rep. 759. The judgment of that court setting aside and annulling two ordinances for providing a supply of water for Atlantic City, approved October 21, 1880, and November 19, 1880, and the contract between the city and the Atlantic City Water-Works Company, dated November 23, 1880, and

embodying said ordinances, has been removed to this court by writ of error at the instance of the water company, and is here assailed for the following reasons: First. Because the writ of certiorari, by which the municipal proceedings were brought before the supreme court, was improvidently allowed, and should have been dismissed. Second. Because the prosecutor in certiorari, now the defendant in error, was by his laches estopped, at the time of the allowance of the writ of certiorari, from lawfully obtaining the same. Third. Because Atlantic City had, at the time of the passage of the ordinances and the making of the contract, full power and authority in the premises. So far as the laches of the prosecutor in applying for the writ of certiorari is concerned, it must now be regarded as settled that the determination of the supreme court is final, not subject to review here on error. It was so held by this court in State v. French, 24 N. J. Law, 736, where the supreme court had allowed and sustained the writ, notwithstanding the allegation of laches, and in Weart v. Jersey City, 43 N. J Law, 662, where that court had dismissed the writ for laches. The other points of controversy may be resolved into these three inquiries: First. Were the ordinances and contract originally legal? Second If not, have they since been legalized? Third. If not, are the tax-payers and residents of the city (of whom the prosecutor in certiorari is one) estopped from setting up the illegality? The original illegality of these proceedings is manifested by the following considerations When the ordinances were passed, and the contract was signed, there existed a city ordinance which prescribed the appropriations and limit of expenditure for city purposes for the term beginning on the first Monday in September, 1880, and ending on the first Monday in September, 1881, and which provided funds to meet the various expenditures. This ordinance made no appropriation for the objects sought by the proceedings now under review, and fixed a limit of expenditure within which the obligation incurred by those proceedings cannot possibly be confined. A statute of this state, approved February 7, 1876, (Revision, 1294,) renders it criminal for city councils to incur any obligation in excess of the appropriation and limit of expenditure provided by law In speaking of this statute, the chief justice, delivering the opinion of this court, in Halsted v. State, 41 N. J, Law, 552, said: "The system clearly defined here is that a certain fund is provided for all the expenses and disbursements and obligations to be incurred during the current year, and that every obligation or debt incurred during such year is to be paid out of the fund so provided, and that all debts incurred, which are to be paid out of a fund to be raised in the future, are in excess, or, what is the same thing, in transgression, of the limit of expenditure established by law." The ordinance above referred to was the law of the corporation, and the appropriation and limit of expenditure fixed by it became those provided by law. There existed no others. The incurring of any obligation beyond the provisions of that ordinance was therefore plainly prohibited. Consequently, those councilmen who voted to incur the obligation assumed by the present ordinances and contract committed a misdemeanor. State v. Halsted, 39 N. J. Law, 402; Halsted v. State, 41 N J. Law, 552. The ordinances were unlawful, (Siedler v. Freeholders, 39 N. J. Law, 632;) and the contract or obligation itself was invalid, (Crampton v. Zabriskie, 101 U. S. 601.) Counsel for the plaintiff in error seem to contend that the statute under which the water company was organized, approved April 21, 1876. (Supp. Revision, 650,) modified the operation of the crimes act, above mentioned, in such a way as to prevent its application to the proceedings in question. But there is no ground for the contention. That statute confers on the city the right and power of consenting to the association of persons for supplying it with water, and to their laying pipes in its streets, (Davis v. Town of Harrison, 46 N. J. Law, 79;) but all that may be done in entire harmony with the purposes of the crimes act. Unless, therefore, some act of the legislature be found legalizing these unlawful proceedings, they must be adjudged invalid.

Of course, statutes prior to the crimes act cannot have such an effect, for anything in them inconsistent with its provisions was abrogated upon its passage. Hence we need not examine the city charter. The only other law referred to in this connection is an act approved March 15, 1881, (P. L. 1881, p. 118,) to authorize municipal corporations to contract for a supply of water for public uses, a supplement to which was passed April 7, 1884, (P L. 1884, p. 194.) This act authorizes cities to make contracts for a water supply during a term not exceeding 10 years, with a proviso that it shall not apply to any city which at the time of its passage was supplied with water for public use, pursuant to a contract or arrangement with some board or corporation. On this proviso counsel argues that existing arrangements for water supply, between cities and corporations, which did not amount to contracts, were recognized and rendered obligatory. We think the argument is fallacious, for several reasons. In the first place, it should not be assumed that the legislature contemplated arrangements which, like this before us, were criminal. In the next place, the legislature, so far from indicating a purpose to validate any existing arrangements, has expressly declared that the act shall not apply to any city having a water supply pursuant to such arrangement. And, lastly, the title of the act does not express or include the design of validating prior illegal arrangements. Our conclusion is that the ordinances and contract were and remained unlawful. It is yet to be considered whether the tax-payers of the city are estopped from setting up the illegality. The water company insists that such an estoppel arises from the fact that its incorporators became organized, and the corporation constructed its works, in reliance on the validity of these municipal proceedings. But we think that the reliance here assumed was not justified, but, on the contrary, that the incorporators and the corporation are chargeable with notice that the proceedings were invalid. The illegality sprung out of a general, public, criminal statute, of the provisions of which all persons in the state are presumed to be cognizant. The evidence in the cause does not indicate, nor do counsel claim, that the city authorities ever asserted, or the water company, its incorporators, or agents, ever supposed that such facts existed as, under this law, would warrant the city council in assuming an obligation to pay at least $7,500 annually for 99 years. In view of the public policy which this statute embodies, persons dealing with municipal authorities must be required to exercise some reasonable diligence to ascertain, before attempting to bind the public by obligations far outrunning the official life of those boards who are willing to assume them, whether there be legally provided the funds from which the obligations may be met. In the absence of such diligence, contracting parties deal with these official bodies at their peril. The beneficent aims of the law cannot be otherwise attained. Inasmuch, then, as the water company had no reason for supposing this extraordinary contract to be within the lawful authority of the city council, it must be held to have had notice of its illegality, and the subsequent conduct of the company cannot, in law, be regarded as having been influenced by any reliance upon its validity. A claim is also made that an estoppel arises from the fact that, after the company had constructed the hydrants called for by the contract, the fire companies of the city drew water therefrom for the suppression of fires. But, assuming that these companies were the agents of the city in what they did, it is not perceived how their acts could bind the city beyond the payment of a fair compensation to the water company for the services thus rendered. Their acts were certainly not referable to the contract now under consideration, for when they were performed the city council had itself formally repudiated the ordinances on which the contract rested. And it was no more within the power of the fire companies than it was within the power of the city council to incur obligations of the extent here claimed against the municipality. We find in the record no error, and the judgment of the supreme court should be affirmed. In reaching this conclusion, we have not