A MUNICIPAL CORPORATION IS ESTOPPED FROM DENYING THE VALIDITY OF DEBENTURES, IN THE HANDS OF AN INNOCENT ASSIGNEE, IF THEY ARE ISSUED IN THE FORM PRESCRIBED.

TWENTY-SEVENTH SELECTED CASE.

WEBB AND OTHERS V. THE COMMISSIONERS OF KEENE BAY.*

ESTOPPEL--DEBENTURE--ASSIGNEE OF--ILLEGALITY OF CONTRACT--MANDAMUS.-A body corporate, having issued debentures, which are assignable, and purport to have been executed pursuant to powers conferred by statute, is estopped from alleging against an innocent assignee for value that the debentures have been issued illegally and in contravention of the statutory powers; and the assignee may by action of mandamus compel the body corporate to apply its funds to liquidate the interest due on the debentures, as required by their act of incorporation. Commissioners were incorporated by statute for the purpose of improving the town of H., and were empowered to levy rates and to borrow money. For securing payment of the loans made to them they were authorized to issue in a prescribed form debentures, bearing interest and capable of assignment. A person being a commissioner was forbidden, under a penalty, to accept any contract for carrying out the objects of the statute. The commissioners bought bricks for the purposes of the act from P. H., a commissioner, and in order to provide for the payment of the bricks they executed and delivered to him debentures in the prescribed form, which were duly registered as required by the act. P. H. assigned them to the plaintiffs for value without notice of the circumstances under which they were issued. The commissioners having made default in payment of the interest due upon the debentures: Held, assuming the transaction to have been illegal, that, as the commissioners had issued the debentures knowing that they might be assigned, they were estopped from alleging that the debentures had been illegally issued; and that the plaintiffs were entititled to: maintain an action of mandamus to compel the commissioners to apply their funds in payment of the interest.

AN action commenced by writ, with an endorsement that the plaintiffs intended to claim a writ of mandamus to command the defendants to apply money raised, or to be raised under or by virtue of 3 & 4 Wm. 4, c. cv., in the manner prescribed by section 123 of that act.

*Reported in 5 L. R. Q. B., 641;` 39 L. J. Q. B., 221; 29 L. T., 745; 19 W. R., 241 (1870).

At the trial a verdict was taken for the plaintiffs subject to

a case.

1. The defendants are a body corporate incorporated by 3 & 4 Wm. 4, c. cv., an act for paving, cleansing, lighting, watching, repairing, and improving a certain portion of the parish of Herne in the county of Kent.

2. By section 109, the commissioners were empowered to raise and levy from time to time such sums of money as they might think requisite by a rate assessment to be made and levied under the name and description of the "Repairing, Lighting, and Watching Rate."

3. By section 119 the commissioners were empowered from time to time to borrow at interest any sum of money upon the credit of the rate or assessment authorized to be made; and in the event of the same sum of money or any part thereof being repaid by said commissioners to borrow at interest in like manner any other sum of money, and so on toties quoties; but so, nevertheless, that there should not be owing upon the security at any time more than the aggregate sum of 5,000l. And it was enacted that every such mortgage security should or might be in the words or to the effect provided by the act. 4. By section 120, it was declared lawful for the holder of a security to transfer it in the form provided by the act.

5. By section 121, the holder of the security was entitled to his quota of the rate in proportion to the annual amount of the interest due on the mortgage without priority.

6. By section 123, it was enacted that the money to be raised by the rate, or on the credit thereof, should, in the first place, be applied in defraying the costs of obtaining the act, then in paying the interest of the several sums of money borrowed on the credit of the rate, then in executing the several works by the act directed to be done, and then in reducing, paying off, and discharging the several principal sums of money that might be from time to time borrowed on the credit of such rate.

7. The plaintiffs are assignees and transferees for value of six mortgages or securities upon the credit of the rate of 100%. each, bearing interest at 57. per cent per annum. These mortgages were granted to David Halket under the circumstances

hereafter appearing, of which circumstances the plaintiffs' testator and the plaintiffs had no notice. These mortgages were, with other securities, deposited with the testator from whom the plaintiffs derived their title in 1836, to secure the sum of 4,000l. and interest. Upon Halket's bankruptcy, in 1859, these bonds were valued at 757., and were transferred by a deed which states the sum of 757. to be the consideration of the transfer; but, after realizing all the securities a considerable balance of 4,0007., exceeding the sum of 6007., remained due. Such mortgages and the transfers of them to the plaintiff are all in the form prescribed by the act, and were duly registered after they were respectively executed, and the mortgages had the common seal of the commissioners affixed in the presence of five commissioners, who signed the mortgages. In no case was the said David Halket one of the said five commissioners.

8. David Halket was, and acted as a commissioner at the time of the execution and granting to him of the six mortgages, and he was a brick and tile manufacturer.

9. It appears by the minute-book of the proceedings of the commissioners, which was to be taken as correctly representing what took place at the meetings of the commissioners, that on the 11th of April, 1835, at a meeting of the commissioners, at which David Halket, with five others, was present, it was resolved that the offer of Halket to sell to the commissioners 125,000 bricks, at 17. 128. per 1,000, to be secured by debentures, be accepted, and that the clerk do prepare such debentures accordingly; and that on the 5th of August following, at a meeting of the commissioners, at which Halket was present, with five others, it was resolved that the meeting do seal and approve by the signature of five commissioners present, certain debentures, and amongst them two to Halket; viz., Nos. 19 and 20, each for 1007., and the same having been done, the clerk was directed to register the same and hand them over to their respective owners.

10. It further appears by said minute-book that on the 17th of August, 1835, at a meeting of the commissioners, at which Halket was present, with five others, it was resolved that the clerk do prepare by the next meeting a debenture of 100%. to Halket, on account of work done by Ambrose Hickins,

and three additional debentures be prepared for David Halket in further discharge of his account for bricks, amounting to 4277. 48., and David Halket engaged to furnish bricks at 17. 128. per 1,000, to increase the amount of his claim to 5007., and that on the 14th of September, 1835, at a meeting of the commissioners, at which David Halket was present, with five others, it was resolved that this meeting do seal and approve by the signatures of five commissioners present, four debentures to David Halket, and the same being done, that the clerk be directed to register the same and hand the same over to the

owners.

11. Halket did, before the 14th of September, 1835, supply bricks to the said commissioners to the value of 5007., and Ambrose Hickins was a contractor to execute a culvert and other works for the commissioners to the amount of 1,2377., and he was also a debtor to Halket in the amount of 1007., for bricks supplied to him, Ambrose Hickins by Halket, and he agreed to receive payment of said sum of 1,2377., in 9377. in cash and in three of the mortgages of 100., each, and Ambrose Hickins by writing, dated the 8th of August, 1835, directed the commissioners to grant one of the said mortgages of 100%., to David Halket, Halket having arranged with said Ambrose Hickins to take one of the mortgages of 100l., in satisfaction of the debt of 1007., due to him from the said Ambrose Hickins.

12. The two bonds granted to Halket on the 3d of August, 1835, together with the four bonds granted to him on the 14th of September, 1835, as mentioned in the 9th and 10th paragraphs, are the six bonds transferred to the plaintiffs as aforesaid, and the subject of the present action. No money actually was paid by Halket or Hickins to the commissioners. 14. The six mortgages so granted to Halket were duly transferred to the plaintiffs on the 5th of May, 1859.

15. Before the 5th of May, 1859, the costs, charges and expenses of applying for and incident to the obtaining and passing of the act, and of all interest upon money advanced for that purpose had been paid partly in cash, and as to 6007. residue thereof, by six debentures similar to those granted to Halket but neither before the 3d of August, 1835, nor since

has any money been raised or received by said commissioners applicable for reducing, paying off or discharging the principal sum of money borrowed on the credit of the rate or any part thereof, and such principal sums and the mortgage granted for the same have never been released or discharged.

16. Since the 5th of May, 1859, the commissioners have in every year raised and received by virtue of the act, under and by virtue of the reparing, lighting and watching rate money, sufficient to pay the interest of the several sums of money borrowed on the credit of the rate, and of the mortgages granted in respect thereof, including the mortgages herein before mentioned and referred to, but the commissioners had not paid any interest on any of the mortgages but had ap plied the money so raised and received in executing the several works by the act directed to be done. The moneys received have never been more than sufficient to defray the costs of executing the several works.

19. At the time of the service of a demand for payment the commissioners had in their hands 27. 118. Od., money arising from the rates and applicable under the act to the purposes thereby prescribed and since that date, and before the commencement of this action had received further money so applicable, and they refused to pay any interest to the plaintiffs on the mortgages.

The court was to be at liberty to draw inferences of fact. The questions for the opinion of the court were:

1. Whether the plaintiffs are entitled to recover in this action any and, if so what, sum of damages in respect to arrears of interest on the six mortgages or any of them.

2. Whether the plaintiffs are entitled to writ of mandamus in the form indorsed on the writ.

COCKBURN, C. J.-By 3 & 4 Wm., c. cv., a local act, which provided for the paving, cleansing, lighting and improving the town of Herne Bay, certain commissioners are appointed; and by section 119 the commissioners have power to mortgage the rates which they are empowered to levy under the act for the purposes which they as such commissioners are to execute; and the present plaintiffs sue upon certain debentures which