See Acts 91-2 b. 233. fendant who entered into contract with him, whereby, as an inducement for plaintiff to purchase, he promised to refund his money should the stock become worthless. This was an original contract. Moorehouse v. Crangle, 36 Ohio St. 130, is in point. There C, who was a large stockholder of a business corporation, and president thereof, verbally promised M that, if he would subscribe and pay $500 to the capital stock of the company, he should, within one year, receive 15 per cent. on the amount invested. M, in consideration of this promise, subscribed and paid for the stock. No dividends were made or earned within the year. Held that this was not a contract to answer for the debt, default or miscarriage of another, but an original contract, upon the proof of which plaintiff was entitled to recover. Johnson, J., in discussing the case, said: "The terms of the statute make it clear that a collateral promise or one to answer for the liability of another, is one where there is a debt or obligation of another than the promisor for whose default he undertakes to be liable. An original liability of another is the foundation of the collateral liability of the promisor. If this contract is not within the statute of frauds, the plaintiff is entitled to recover, as it is not doubted but that the consideration stated is sufficient. Was there any debt, obligation or legal duty, expressed or implied, owing by the stock corporation to the plaintiff as a stockholder, for which the defendant undertook to answer upon default of the corporation?" The learned judge, after defining the duties of the corporation to its stockholders, adds: "The defendant did not undertake to answer for any debt, default or miscar riage by the corporation growing out of a failure to perform any of these duties. Defendant's contract was, in legal effect, essentially different from the obligations of the corporation in favor of plaintiff as a stockholder, and the liability created was wholly independent of any default by the corporation. It was not an undertaking to answer for the default of the corporation." In Hill v. Smith, 21 How. 283, plaintiff had sold land to a railroad company, receiving in payment therefor the stock of the company, which the defendant guarantied should be at par within three years. This was held an original, and not a collateral, contract. Stress was laid by counsel upon the use of the word "guaranty" in the contract as importing a collateral agreement, but the court held that the term, when taken in connection with the other provisions of the agreement, showed it to be an original contract. Green v. Brookins, 23 Mich. 48, is to like effect. See, also, notes to Forth v. Stanton, 1 Saund. 211. Applying the reasoning of these cases to the case in hand, and the question involved is solved in favor of plaintiff. INTERESTED DEED ACKNOWLEDGMENT OFFICER VALIDITY.-In Cooper v. Hamilton Perpetual Building & Loan Assoc., 37 S. W. 2 Rep. 12, it was held that an acknowledgment before a person relating to the grantor or interested in the conveyance is not ipso facto void, but voidable; and while it will not per se be declared void, it is open to attack, and the court will lend a ready ear to evidence of undue advantage, fraud, or oppression arising out of the fact of such relationship or interest. The court says: The defendant building and loan association in this case claims title to certain premises under the foreclosure of a deed of trust executed by Cooper and wife to secure a debt due the association. The complainants claim homestead in the premises, and the bill is filed to secure the same, and enjoin the association from taking possession under their foreclosure proceeding. The theory of the bill is that the deed of trust which has been foreclosed was acknowledged before one E. Y. Chapin, a notary public, and that the acknowledgment is illegal and void, because the notary, when he took the acknowledgment of the husband and wife, was a stockholder and director in the association, and its attorney, and, being thus interested, he was incompetent to take the acknowledgment of any instrument made to or for the benefit of the association. The only question involved is whether an officer so interested is competent to take an acknowledgment, and whether this conveyance so acknowledged is valid, and passes the homestead of complainants. The chancellor was of opinion the acknowledgment was invalid, and the conveyance void as to the homestead, and so decreed, and defendant appealed, and assigned error. The cause was heard by the court of chancery appeals, and the decree of the chancellor was reversed, and complainants have appealed to this court, and assigned error raising the question before stated. There is quite a conflict of authority and diversity of holding in the different States upon the question of whether the act of taking an acknowledgment to a deed or other instrument is a ministerial or judicial act. It has been held to be a ministerial act in the United States courts and in the courts of Arkansas, Georgia, Illinois, Kentucky, Maine, Massachusetts, Minnesota, New Hampshire, New York, Maryland, and Ohio, and in these States it is held that an officer may take acknowledgment though related or interested or a party. But it is held to be a judicial act in other States, to-wit, Alabama, California, Iowa, Missouri, North Carolina, Pennsylvania, Virginia, West Virginia, Mississippi. The authorities are collated in 1 Am. & Eng. Enc. Law (2d Ed.), p. 489. In Tennessee the courts have held that the act is judicial or quasi judicial, and especially is this so as to the act when it involves the privy examination of a married woman. Rhea v. Isely, 1 Leg. Rep. 292; Shields v. Netherland, 5 Lea, 197. This holding is doubtless largely due to the fact that under our statutes originally acknowledgments were taken in open court, and with the formalities attending other judicial proceedings. This rule has, however, been relaxed until clerks and deputies and notaries may take ac knowledgment out of open court, and even in foreign States, where this State has no judicial jurisdiction. Aside from the question whether the act is ministerial or judicial or both in its character, it is held, and properly so, that it is unwise and contrary to public policy for any officer to take an acknowledgment to any instrument to which he is a party, or in which he is interested, directly or indirectly. In either event the officer should be disinterested, and entirely impartial as between the parties. Devl. Deeds, § 426; Tied. Real Prop. § 810; Hammers v. Dole, 61 Ill. 310; Groesbeck v. Seeley, 13 Mich. 344. And it is held in a large number of cases that such acknowledgments, affected by interest or relationship, are invalid and void, at least so far as third persons are concerned. 1 Am. & Eng. Enc. Law (2d Ed.), 493, 494. We have been cited to quite a number of cases in our own State which appear to sanction the holding that such an acknowledgment is not valid, and among them the NESS The question, what is the aggregate indebtedness, within the meaning of constitutional provisions and municipal charters, which may be incurred by municipalities and other public corporations, as well as the question, what is indebtedness in this connection, are points upon which the courts are not agreed, though it is believed by the writer that, with few exceptions, the decisions may be substantially harmonized upon principles which seem to be generally well established in jurisprudence. It will be the aim of this article to array and explain the adjudications upon two lines: First, as to the question of aggregate indebtedness, and, second, as to the character and legal effect of the obligations which, under the head of indebtedness or of liability, have been discussed and passed upon by the courts, in determining whether a given transaction was or not ultra vires, or illegal. The Minnesota court has held that a county board has no power to incur liability against the county which, with ordinary current expenses and other liabilities payable within a year, will exceed both the amount of funds on hand and the maximum amount assessable as one year's taxes for county purposes, nor anticipate uncollected taxes, nor issue bonds involving such indebtedness. The statute provided that it should be unlawful for the board, unless expressly authorized by law, "to contract any debt, or incur any pecuniary liability, for the payment of either the principal or interest for which, during the current year or any subsequent year, it will be necessary to levy on the taxable property of such county cases of Beaumont v. Yeatman, S Humph. 542, and LIMIT OF MUNICIPAL INDEBTED. Tipton v. Jones, 10 Heisk, 564. These cases simply AGGREGATE INDEBTEDinvolved the question whether a deputy clerk could take an acknowledgment to an instrument to which NESS INDEBTEDNESS" AND "LIAhis principal was a party, or in which he was bene. BILITY." ficially interested; and it was held proper for him to do so, because the deputy is a sworn officer, and disinterested. Several unreported cases are also relied on, in which it is claimed this court upheld such acknowledgments when the officers taking them were interested in or parties to the instrument, and such has been the holding of this court. We think the true rule is that, while acknowledgments taken before officers who are related to either party or interested in the instruments are contrary to public policy, and by no means to be encouraged, and while the practice which has become so prevalent should be discountenanced and discontinued, still such acknowledgments are not absolutely invalid and void because of such interest or relationship, without more. Where there is no imputation or charge of improper conduct or bad faith or undue advantage arising out of such interest or relationship, the mere fact that the acknowledg ment was taken before such officer would not vitiate the instrument, or render it void, when it was otherwise free from objection or criticism. It is certainly improper and bad policy for a judge to preside or act in any case in which he is a party, or interested, or in which he is related to the parties who are interested; but the fact that a judicial officer does so act in such case does not render the proceedings or judgments void, or make either a nullity. In Holmes v. Eason, 8 Lea, 754, this question was maturely considered, and an elaborate opinion was rendered by the court, speaking through Judge Cooper, holding that a judg ment rendered by a justice of the peace related to one of the parties within the prohibited degree is not void, but voidable only, and an execution issued on such judgment should not be quashed for that reason alone. The learned judge reviewed the cases thoroughly, and, overruling those in conflict, announced the opinion of the court as above indicated as the best and most approved holding. This ruling has been followed in Posey v. Eaton, 9 Lea, 500, and in Grundy Co. v. Tennessee Coal Co., 94 Tenn. 326, 29 S. W. Rep. 116. These cases go upon the idea that the incompetency of the officer is waived, and that the judgments are voidable, and not void. In accord with these principles involved in these cases, we think the better rule is that acknowledgment before parties related or interested are voidable, but not ipso facto void; and, while such acknowledgments will not per se be declared void, still they are open to attack, and the court will lend a ready ear to evidence of undue advantage, fraud, or oppression arising out of the fact of such relationship or interest in the officer taking the acknowledgment. In the case at bar it is not shown that the complainants were prejudiced in any way by the facts that the acknowledg ment was taken before Chapin, or that he practiced any fraud or deception upon them, or that he ob tained any undue advantage by reason of his relation to the defendant company, or that he failed, in taking the acknowledgment, to do anything the law required him to do; but the case is vested solely and entirely upon the ground that an acknowledgment thus taken is ipso facto a nullity, and void. a higher rate of tax than the maximum rate prescribed by this act;" and the court held, that it mattered not that the indebtedness incurred was not payable that year or before another year's tax levy. The same court held, under a statute providing that the municipal authorities shall not, without special authority of law, "have authority to issue any bonds, or create any debt or any liabilities against said city in excess of the 1 Rogers v. Board of Com'rs, 59 N. W. Rep. 488; Johnston v. County of Becker, 6 N. W. Rep. 411, 27 Minn. 64. 11 ing indebtedness, to exceed five per cent. in the aggregate on the value of taxable property, nor without at the time providing for collecting by annual tax sufficient to pay interest on such debt and the principal within 34 years, and that a vote be taken favoring such indebtedness; that a contract between the city and an electric company for erection of a light plant upon a site furnished by the city, and for a lease by the city from the company for five years, paying therefor quarterly, made without sanction of a vote, was ultra vires and void; that the debt may be payable in future as well as presently, or upon a contingency, and still be within the inhibition, and that current expenses are contemplated in the aggregate indebtedness under the constitution. In Texas, that under a constitutional provision limiting indebtedness to a certain rate per cent. of taxable property and requiring an assessment to be provided for sufficient to pay the interest and create a sinking fund to pay the debt, the city had no authority to pledge or appro amount of revenue actually levied and applicable to the payment of such liabilities;" that a contract by the city council for street lighting for a term of five years is void under the charter, unless the funds on hand and the taxes actually levied when the contract was made were sufficient to cover all the liability incurred by the contract, and payable during the five years, and also current expenses and other existing liabilities of the fiscal year for which such taxes were levied.2 The Missouri court has decided that, under a constitutional provision that cities of a certain size shall be limited to a certain rate of taxation, unless increased by approval of voters, for certain purposes, which restrictions shall apply to all taxes, in connection with other provisions that no city shall become indebted "in any manner or for any purpose to an amount exceeding in any year the income and revenue provided for such year, without the assent of two-thirds of the voters. Nor in any case requiring such assent shall any indebtedness be allowed to be increased to an amount, includ-priate in payment of either principal or intering existing indebtedness, in the aggregate exceeding five per centum on the value of the taxable property therein," and with a proviso that, before or at the time of incurring the indebtedness, provision for collection of "an annual tax sufficient to pay the interest of such indebtedness as it falls due, and also to constitute a sinking fund, and for payment of the principal thereof, within twenty years of contracting the same;" that the city authorities could not levy a tax exceeding the rate in question, to pay rent for water-works, though approved by two-thirds of the qualified voters, that the levy of the tax and setting it apart for that and no other purpose is essentially a part of the contract, and that the contract was void for the entire period. The Nebraska court has held substantially the same. In an exhaustive opinion, the West Virginia court has held, under a constitutional provision that no municipal corporation est of the debt any part of the current revenues; the attempt in that case being to pay for a water-works system by long time bonds, and to appropriate net revenues derived from the water-works to an interest fund. In Oregon, that an ordinance providing for payment of money by the town without providing the means for payment, creates an indebtedness against the corporation in excess of the constitutional limit; the court construing the ordinance in question, which provided for a ten-year contract and payments thereunder of $200 per month for the use of a water-works, as incurring an aggregate indebtedness of $24,000. In Illinois,* that under a constitutional provision limiting indebtedness, a contract by a city whose indebtedness exceeds such limit to pay, in monthly installments, for water for fire purposes, is void, the contract running for thirty years. The constitution provided that the including existing indebtedness, in the aggregate exceeding five per centum," etc. The Illinois court held, in construing the term "to become indebted," that the indebtedness was not payable out of special funds, but absolutely, and without regard to the ability to pay with funds on hand, and that the contract incurred the risk of its unavoidable extension as to payment beyond the fiscal year; but that it would have been no less a debt under the contract had it been made payable out of a sufficient current revenue, or any specific fund. In New York, 10 that under a statute authorizing the common council to improve the water-works of the city, a municipal contract for lease of premises for such purpose reserving a rental aggregating for the term more than $10,000, and not authorized by a special election, is void, though each semi annual payment under the lease was much less than the statutory limitation in amount; that the contention that without a vote such improvement might be provided for where the annual expense of maintaining it will not exceed the statutory limitation of indebtedness, is unsound. In Michigan," that a thirty-year contract for the use of water hydrants, creates a liability against the city to the full extent of the aggregate rental. The city charter provided that the council shall have no power to contract debts, incur liabilities, or make expenditures in any one year which shall exceed the revenue for the same year.' In Iowa, that under a constitutional provision employing the term "become indebted," not only a present indebtedness but one payable on a contingency, or one payable at a future day, is contemplated, involving a series of annual payments. 12 In Indiana, 13 that under In Indiana, 13 that under an organic law forbidding a municipal corporation to become indebted beyond a certain amount, "in any manner or for any purpose,' such amount may not be exceeded even for necessary current expenses; that the indebt 9 To substantially the same effect see Springfield v. edness contemplated in the constitution comprises all indebtedness created by the city, whether due or not; the court relying upon Illinois and Iowa cases, though holding the same proposition independently of other authorities. In Montana, in a comprehensive consideration of the whole subject, and an exhaustive analysis of the authorities, it was held, under a statute limiting the power of a municipal council "to incur any indebtedness on behalf of said city for any purpose whatever to exceed the sum of $20,000," a water contract involving an annual rental of $15,000, was ultra vires and void; the contract being for twenty years.15 In New Jersey, 16 that under a city ordinance providing for appropriations and limiting expenditures for city purposes for a stated period, obligations incurred during that period, though to be paid out of a fund to be raised in the future, are in excess of the prescribed limit. In another case, that a five-year contract by a city for electric. lights, was void under a similar ordinance, and that the aggregate indebtedness incurred under the contract was the sum of the annual payments. That's a twenty-year contract for supply of water for a city, under a charter empowering the making of a contract for such purposes, but limiting the period to ten years, was without authority and void for the entire period. The Supreme Court of the United States bas held,19 that a board of county freeholders cannot incur against the county obligations beyond its income previously provided by taxation; this under a law providing that the expenditures in any year "shall not exceed the amount raised by tax for said year," and another act providing against disbursing, ordering or voting for disbursement of moneys in excess of the appropriation to such board, and against incur 17 14 City of Springfield v. Edwards, 84 Ill. 626; Law v. People, 87 Ill. 385; Fuller v. Chicago, 89 Ill. 282; Prince v. City of Quincy, 105 Ill. 138; Grant v. Davenport, 36 Iowa, 396; French v. City of Burlington, 42 Iowa, 614. ring "obligations in excess of the appropriation and limit of expenditures provided by law." The suit in question went up from New Jersey, and the court say: "The object of the statute of New Jersey defining and limiting its (the board's) powers would be defeated if a debt could be contracted without present provision for its payment in advance of a tax levy, upon a simple declaration that out of the amount to be raised in a future fiscal year it should be paid. The law in terms limits the expenditures of the board * to the amount to be raised by taxation actually levied, not by promised taxation in the future." In California,20 that a city council has no power to enter into a contract for a debt to arise in future, unless there is at the time money in the treasury to pay the same after all other expenses of government; the charter providing that the council shall have no power "to create any debt upon the credit of the city, nor to make any expenditure for improvements except as provided for in this act, nor shall any warrant be drawn on the city treasury, unless there shall be sufficient moneys to meet the same after paying the expenses of the government and all other demands legally due." In Michigan, that a contract of purchase of a water company, subject to a mortgage which is treated as part of the municipal debt, increases the debt by the amount of the mortgage. On the other hand, the Massachusetts court has held,22 that a town in authorizing its selectmen to contract for a supply of water for fire and other purposes for ten years, at a certain sum per annum, payments to be made out of moneys annually granted by the town and raised by taxation, is not the incurring of a debt, within the meaning of a statute empowering towns to "incur debts for temporary loans in anticipation of the taxes of the year in which such debts are incurred, and of the year next ensuing, and expressly made payable therefrom by a vote of the town," and another providing for purchasing rights to supply water to the inhabitants, for which the town may issue bonds; 20 Wallace v. Mayor of San Jose, 29 Cal. 180. the court holding that the statute did not apply to contracts for current expenses and payable out of current revenues during the term of the contract. Again, it was held in New York,28 that a contract to grade and pave a street, to be performed within a year, but the completion of which extended beyond a political year, did not violate a charter prohibiting expenditure "for any purpose in such year exceeding the amount which they are authorized to raise for such purposes;" that the contract did not incur a debt until the service was performed and the contractor entitled to pay.24 In Louisiana, 25 that a time contract for supply of gas or light for sev eral years does not evidence a debt under the statute there in question, which provides that municipal authorities shall have no power "to contract any debt or pecuniary liability without fully providing in the ordinance creating the debt the means of paying" the debt and interest; the contract providing for monthly payments, aggregating several hundred thousand dollars, and a special appropriation each year sufficient to meet the provisions of the contract, being provided for. In Georgia, 26 that a contract for electric lights for the city, running ten years with annual payments, is permissible, and does not constitute the incurring of an indebtedness in the aggregate amount of the annual payments, for the purposes of an injunction suit to enjoin the carrying out of the contract, where it appeared that no payments were yet due; the court expressly refraining from deciding the point whether, in case a pay. ment were due under the contract, the contract would be valid in regard to the limit of indebtedness. In Alabama," that a fifteen-year contract with a water company involving monthly payments, was validone section of the charter providing that the city council "shall not contract any debt, or incur any liability except such as 23 Weston v. City of Syracuse, 17 N. Y. 110 (Law Ed. B. 4, 212). 24 It did not appear in that case that the aggregate amount under the contract equalled the whole annual revenue of the city. 25 New Orleans Gas Light Co. v. City of New Orleans, 7 South. Rep. 559, 42 La. Ann. 188. See also |