Kf 
 
 
 (Jorn^U ICam irljonl Slibtar^ 
 
Cornell University Library 
 KF 2289.E46 1921 
 
 V.I 
 
 A treatise on the law of railroads; conta 
 
 3 1924 019 317 944 
 
Cornell University 
 Library 
 
 The original of tiiis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924019317944 
 
A TREATISE 
 
 ON THE 
 
 LAW OP RAILROADS 
 
 CONTAINING A CONSIDERATION OF THE OKGANIZATION, STATUS 
 
 AND POWERS OF RAILROAD CORPORATIONS, AND OF THE 
 
 BIGHTS AND LIABILITIES INCIDENT TO THE LOCATION, 
 
 CONSTRUCTION AND OPERATION OF RAILROADS; 
 
 TOGETHER WITH THEIR DUTIES, RIGHTS AND 
 
 LIABILITIES AS CARRIERS 
 
 INCLUDING BOTH 
 
 STREET AND INTERURBAN RAILWAYS 
 
 By byeon k. Elliott 
 
 AND 
 
 WILLIAM F. ELLIOTT 
 
 Authors of ROADS AND STEBETS, GENERAL PRACTICE, EVIDENCB' 
 
 Volume I 
 
 INDIANAPOLIS 
 
 THE BOBBS-MERRILL COMPANY 
 
 PUBLISHERS 
 
CoPYiilGHT 1897 
 
 By the BOWEN-MEEEILL ^jOMPANY 
 
 Copyright 1907 
 By the BOBBS-MEEEILL COMPANY 
 
 COPYBIGHT 1921 
 
 By the BOBBS-MEREILL COMPANY 
 

 •^ uM 
 
 m 
 
 PREFACE TO THE THIRD EDl\l©N. \a'/2 
 
 It is an interesting fact that no other book on the law of 
 railroads in America has been published since the second edition 
 of this work appeared in 1907. Whatever that fact may be taken to 
 indicate, it places upon the author responsibilities in the prepara- 
 tion of a new edition, which he acknowledges with full appreciation 
 of the significance of the present undertaking to the bench and 
 bar of the country by reason of its being the only legal treatise in 
 its important and extensive field. 
 
 Many changes in the law relating to railroads have been 
 made since that date, both by statute and by judicial decision, 
 and many new questions have arisen. The law of master and 
 servant has been greatly altered, in dases of interstate commerce, 
 by the Federal Employers' Liability Act, Safety Appliance Act, and 
 Hours of Service Act and other federal statutes, and in cases of 
 intrastate commerce by State Workmen's Compensation Acts and 
 other state statutes. The Interstate Commerce Act has been 
 amended in many important respects and new laws, both state and 
 federal, have been adopted relative to bills of lading and other sub- 
 jects often involved in railroad litigation. New questions were 
 and are presented by conditions arising out of the late war and 
 under the Federal Contrpl Act and the Transportation Act, 1920. 
 So too, much new litigation has arisen in regard to railroad and 
 street railway regulation by public service or state railroad com- 
 missions and in regard to taxation of such companies. 
 
 The new subjects mentioned are treated and covered in this 
 edition. Several hundred new sections and many new chapters 
 have been added ; several thousand new cases have been cited ; and 
 the text has been carefully revised. 
 
 If the standing and worth of a legal text book are accurately 
 shown by the number of times the work is cited in the opinions 
 of the courts then the author acknowledges with gratitude an 
 extremely favorable verdict upon the original work and expresses 
 the hope that the present edition may prove so generally service- 
 able. 
 
 William F. Elliott. 
 iii 
 
TABLE OF CONTENTS 
 
 CHAPTER I. 
 
 DEFINITIONS. 
 
 Section 
 
 1. Railroad companies — Definition and characteristics. 
 
 2. Usually but not always corporations^Other characteristics. 
 
 3. Dual nature of railroad corporations. 
 
 4. "Railroad" or '"railway." 
 
 5. What are railroads. 
 
 6. "Railroad track" — "Right of way"— "Road-bed" and "roadway." 
 
 7. Street railways. 
 
 8. Street railways further considered. 
 
 9. Elevated railroads. 
 
 10. Electric railroads. 
 
 11. Cable railroads. 
 
 12. Interurban railroads. 
 
 CHAPTER II. 
 
 promotion and formation of the corporation. 
 Section 
 
 15. Promoters — Who are. 
 
 16. Fiduciary relation of promoters — Duties and liabilities. 
 
 17. Promoter may sell property to the corporation. 
 
 18. Personal liability of promoters — ^When partners. 
 
 19. Representations by promoters. 
 
 20. Contracts of promoters — When binding on corporation.. 
 
 21. Legislative authority essential to creation of corporation. 
 
 22. Creation by special charter., 
 
 23. ■ Acceptance of charter. 
 
 24. Incarppration under general laws. 
 
 25. Perfecting the organization. 
 
 26. Defective organization^^Waiver — Collateral attack. 
 
VI TABLE OF CONTENTS 
 
 CHAPTER III. 
 
 LEGAL STATUS. 
 
 Sbction 
 
 30. As individual, person, citizen. 
 
 31. Corporation confined to jurisdiction creating it — Business elsewhere — 
 
 Comity. 
 
 32. Citizenship — Removal of causes. 
 
 33. Residence and domicile — Jurisdiction. 
 
 34. Federal corporations. 
 
 35. Railroad in more than one state — Citizenship. 
 
 36. Control of railroads in more than one state. 
 
 37. Control of railroads incorporated in more than one state. 
 
 38. Result of consolidation or concurrent action of several states creating 
 
 new corporations. 
 
 39. Railroad only a citizen or domestic corporation of the states that charter 
 
 it — Effect of mere license. 
 
 40. Foreign corporations — Condition of admission to state. 
 
 41. Railroads as property. 
 
 42. Railroads as monopolies. 
 
 43. Railroads as public highways. 
 
 CHAPTER IV. 
 
 CHARTERS. 
 
 Section 
 
 45. Special charters and general laws. 
 
 46. Acceptance of charter. 
 
 47. Terms upon which charter is granted must be complied with — 
 
 in general laws. 
 
 48. Particular corporation must be authorized. 
 
 49. Construction of charter — General rules. 
 
 50. Grants of monopolies and powers in derogation of publi 
 
 Perpetuity. 
 
 51. Practical construction. 
 
 52. Charter to build and operate a railroad — What powers are in 
 
 53. Other powers of railroad companies — Implied powers includ 
 
 tain grants. 
 
 54. Amendment — Power must be reserved. 
 
 55. Police regulations. 
 
 56. Material amendments require unanimous consent of stocl 
 
 What are material. 
 
 57. Statutory provisions authorizing amendments. 
 
 58. Forfeiture — Statutory provisions dispensing with judicial dete 
 
TABLE OF CONTENTS Vll 
 
 Section 
 
 59. Implied condition that corporate franchise is subject to forfeiture — ^Ju- 
 
 dicial determination — Causes for forfeiture. 
 
 60. Grounds of forfeiture — Illustrative cases. 
 
 61. When duty to declare forfeiture is mandatory and when discretionary. 
 
 62. What is not cause for forfeiture. 
 
 63. Waiver of forfeiture — Collateral proceedings. 
 
 64. Proceedings to forfeit — Quo warranto — Parties. 
 
 65. Proceedings must generally be in court of law — Statutory provisions. 
 
 66. Collateral proceedings — Pleadings and judgment in forfeiture proceed- 
 
 ings. 
 
 67. Repeal of charter — Reserved power. 
 
 68. Repeal where conditional power is reserved. 
 
 69. Rule where power to repeal is not reserved. 
 
 70. Effect or repeal. 
 
 71. Repeal of by general laws. 
 
 72. Charter is subject to general laws reserving power to repeal. 
 
 73. Expiration of charter. 
 
 CHAPTER V. 
 
 FRANCHISES. 
 
 Section 
 
 75. Definition. 
 
 76. Charter and franchise distinguished. 
 n. Grant of corporate franchises. 
 
 78. Consideration for the grant of a franchise. 
 1^. Nature of a franchise further considered. 
 
 80. Franchise of being a corporation — Primary and secondary or general 
 
 and special franchises. 
 
 81. Difference between a franchise and a license. 
 
 82. Sale of corporate property essential to exercise of franchises — Limita- 
 
 tion of right to sell. 
 
 83. Effect of attempt to sell or encumber franchise. 
 
 84. Judicial sale of franchises. 
 
 85. Sequestration. 
 
 86. Seizure of corporate franchise under power of eminent domain. 
 
 87. Dissolution by authorized sale of franchises — Special franchise may 
 
 survive dissolution. 
 
Vlll TABLE OF CONTENTS 
 
 CHAPTER VI. 
 
 STOCK. 
 
 Section 
 
 90. Definition. 
 
 91. Classes of stock. 
 
 92. Shares of stock — Certificates. 
 
 93. Certificates — How far negotiable — Shares are personal property. 
 
 94. New certificates in place of lost — Fraud. 
 
 95. Preferred stock. 
 
 96. When preferred stock maj' be issued — Rights and remedies of dissent- 
 
 ing stockholders. 
 
 97. Holder of preferred stock not a creditor — His rights and remedies. 
 
 98. Rights of preferred stockholders after payment of guaranteed dividend — 
 
 Future dividend. 
 
 99. Deferred dividends — Stock reduction. 
 
 100. Rights of preferred stockholders on dissolution. 
 
 101. Guaranteed, interest-bearing, income and debenture stock. 
 
 102. Increase and reduction of capital stock. 
 
 103. Watered stock. 
 
 104. Watered stock not absolutely void. 
 
 105. Rights of creditors and liabilities of holders of watered stock. 
 
 106. Stock paid for by overvalued property — Sale of stock on market. 
 
 107. Sale and transfer of stock. 
 
 108. Who may own and transfer shares. 
 
 109. Purchase and sale by trustees and fiduciaries. 
 
 110. Right of corporation to buy and sell stock. 
 
 111. Gifts and bequests of stock. 
 
 112. Formalities of transfer. 
 
 113. Registry of transfer. 
 
 114. Lien of corporation on stock. 
 
 lis. When and to what the lien attaches. 
 
 116. Waiver of lien — ^Enforcement of lien. 
 
 117. Condemnation of stock. 
 
 CHAPTER VII. 
 
 subscriptions. 
 Section 
 
 120. Preliminary agreements to subscribe. 
 
 121. Subscriptions generally — ^Form. 
 
 122. Construction of contract of subscription. 
 
 123. Contracts of subscription are several. 
 
 124. Effect of statutes requiring cash deposit to complete subscription. 
 
table of contents ix 
 
 Section 
 
 125. Who may subscribe for stock. 
 
 126. Presumption that one whose name is subscribed is a stockholder. 
 
 127. Implied promise to pay subscription — Consideration. 
 
 128. Payment of subscription — Trust fund doctrine. 
 
 129. Conditional subscription. 
 
 130. Implied conditions. 
 
 131. Valid and invalid conditions. 
 
 132. Conditional subscription is a mere offer until accepted. 
 
 133. Subscriptions in escrow — Parol evidence. 
 
 134. Waiver of conditions. 
 
 135. When conditional subscription becomes payable. 
 
 136. Construction of conditional subscriptions — What is a sufficient compli- 
 
 ance with conditions as to time of beginning and completing road. 
 
 137. Subscriptions payable as work progresses or upon expenditure of a cer- 
 
 tain amount. 
 
 138. Failure to perform parol condition will not defeat subscription. 
 
 139. Conditions in notes. 
 
 140. Subscriptions conditioned upon location or construction of the road. 
 
 141. Effect of alteration in route fixed by charter. 
 
 142. Effect of abandonment or sale of road. 
 
 143. Condition as to terminus — Question of intention for jury. 
 
 144. What is sufficient compliance with condition as to terminus or location 
 
 of depot at a certain place. 
 
 145. General rule of construction — Performance of condition by consolidated 
 
 company. 
 
 146. Fraudulent representations in obtaining subscriptions. 
 
 147. Misrepresentations in prospectus and by agents generally. 
 
 148. Fraud may be shown by parol evidence. 
 
 149. Subscriber must be free from negligence in order to be released upon 
 
 the ground of fraud. 
 
 150. Subscription induced by fraud is merely voidable — ^When it will be 
 
 enforced. 
 
 151. Ratification and estoppel — Rescission — Rights of creditors. 
 
 CHAPTER VIII. 
 
 CALLS AND ASSESSMENTS. 
 
 Section 
 
 155. When payment of subscription must be made. 
 
 156. Calls— Nature and effect of. 
 
 157. Directors may make calls — Delegation and ratification. 
 
 158. Directors must act as a body — De facto board — Illegal calls. 
 
 159. Discretion of board in making calls. 
 
 160. Charter and statutory limitations upon discretion — Periodical instal- 
 
 ments. 
 
x table of contents 
 
 Section 
 
 161. Call should affect all alike — Motive and expediency. 
 
 162. Subscription payable upon demand — Notice. 
 
 163. Requisites of notice. 
 
 164. Constructive notice. 
 
 165. Waiver by stockholder of notice and formalities of call — Estoppel. 
 
 166. Demand and suit for assessment. 
 
 167. Assignment of right to collect subscription or assessment. 
 
 168. When courts may compel call and payment. 
 
 169. Extent of stockholder's liability for assessments — ^Agreements as affect- 
 
 ing liajbility. 
 
 170. Liability of holder where stock purports to be paid up but is not. 
 
 171. Construction of charter and statutory provisions regarding assessments. 
 
 172. Remedies where stockholder fails to pay subscription or assessment — 
 
 Forfeiture. 
 
 173. Cumulative remedies — Election. 
 
 174. Effect of forfeiture. 
 
 175. Statutory method of forfeiture must be pursued. 
 
 176. Notice of forfeiture. 
 
 177. Defeating and annulling forfeiture — Estoppel. 
 
 CHAPTER IX. 
 
 STOCKHOLDERS. 
 
 Section 
 
 180. When one becomes a stockholder. 
 
 181. Rights of stockholders — Right to vote. 
 
 182. Who has right to vote — How determined. 
 
 183. Right of trustees and receivers to vote. 
 
 184. Right of corporations and voting trusts tO' vote. 
 
 185. Number of votes to which stockholder is entitled — Cumulative voting. 
 
 186. Quorum must be present. 
 
 187. Voting by proxy. 
 
 188. Other powers of stockholders — Rights of minority. 
 
 189. Stockholders' meetings. 
 
 190. Remedies of stockholders. 
 
 191. Unregistered assignees and third person can not sue. 
 
 192. When stockholders may sue or become parties. 
 
 193. , Right to recover insurance. 
 
 194. Other rights and remedies of stockholders. 
 
 195. Stockholders as agents of the corporation. 
 
 196. Notice to stockholders. 
 
 197. Stockholders' right to inspect books. 
 
 198. Stockholder is disqualified to serve as jijdge or juror where corporation 
 
 is interested. 
 
table of contents xi 
 
 Section 
 
 199. Unlawful combinations and conspiracies to vote or prevent voting — 
 
 Injunction. 
 
 200. Liability of stockholders for unpaid subscriptions. 
 
 201. Release of stockholders — Withdrawal. 
 
 202. Compromises with stockholders. 
 
 203. Liability where stock is transferred. 
 
 204. When creditors may enforce unpaid subscriptions — Judgment and exe- 
 
 cution against corporation. 
 
 205. Effect as against stockholder, of judgment against the corporation. 
 
 206. Stockholder's defense. 
 
 207. Methods of enforcing stockholder's liability. 
 
 208. Contribution. 
 
 209. Suits by assignees and receivers. 
 
 210. Statutory liability of stockholders. 
 
 211. Defenses to actions to enforce statutory liability. 
 
 212. Who may institute action to enforce statutory liability. 
 
 213. How statutory liability is enforced — Judgment and execution against the 
 
 corporation. 
 
 214. Priority among creditors — Forum — Contribution. 
 
 215. When stockholders are liable as partners. 
 
 CHAPTER X. 
 
 by-laws, rules and regulations. 
 Sectiou 
 
 220. Power to make by-laws. 
 
 221. Who are affected by corporate by-laws. 
 
 222. Limits of power to make by-laws — Reasonableness a question for the 
 
 court 
 
 223. Power to make by-laws resides in stockholders — When directors may 
 
 make. 
 
 224. Formalities of enactment— Proof. 
 
 225. Amendment and repeal. 
 
 226. Enforcement of by-laws. 
 
 227. Rules and regulations in England. 
 
 228. Distinction between by-laws and rules and regulations — Right of rail- 
 
 road company to make rules and regulations. 
 
 229. Examples of rules and regulations which railroad companies may make 
 
 —Rules affecting passengers. 
 
 230. Rules affecting shippers and freight. 
 
 231. Rules affecting employes. 
 
 232. Enforcement of rules— Penalties. 
 
 233. Reasonableness of rules — ^When a question of fact and when a question 
 
 of law. 
 
 234. Failure to enforce rules— Waiver or abrogation. 
 
XU TA1!LE OF CONTENTS 
 
 CHAPTER XI. 
 
 corporate representatives. 
 Section 
 
 240. Railroad corporations act through oflScefs, agents or other representa- 
 
 tives. 
 
 241. Appointment of officers and agents — General doctrine. 
 
 242. Statutory privileges bestowed on agents. 
 
 243. Officers generally. 
 
 244. Qualifications of officers. 
 
 245. Election of officers — Generally. 
 
 246. Agents generally. 
 
 247. Proof of the existence of the relation of principal and agent. 
 
 248. Proof of authority. 
 
 249. Agency inferred. 
 
 250. Powers, duties and authority of officers and agents generally. 
 
 251. Authority of agent — Line of duty. ,,, 
 
 252. Scope of authority — General conclusions. 
 
 253. Contracts by agents — General doctrine. 
 
 254. Declarations and admissions of agents. 
 
 255. Declarations of agent — Res gestae. 
 
 256. Declaration must relate to matter in scope of authority and in contro- 
 
 versy. 
 
 257. Exercise of authority by agents — Illustrative cases. 
 
 258. Scope of authority — Illustrative cases. 
 
 259. Authority of agent — Emergencies and special circumstances. ,, 
 
 260. Authority of agents — Employment of surgeons. 
 
 261. Physicians and surgeons. 
 
 262. Delegation of power by directors. 
 
 263. Employment of sub-agents and servants. 
 
 264. Notice to agents or officers. 
 
 265. Ratification. 
 
 266. Acts that may be ratified. 
 
 267. Ratification — What constitutes. 
 
 268. Compensation of officers. 
 
 269. Individual liability of agents for their torts. 
 
 270. Bonds of officers and agents. , 
 
 271. Sureties — Bonds of officers and agents. 
 
 CHAPTER XII. 
 
 directors. 
 
 Section 
 
 275. Different classes of officers — Generally. 
 
 276. The governing board — Generally. 
 
table of contents xiu 
 
 Section 
 
 277. Governing board not the corporation. 
 
 278. The board of directors represents the corporation. 
 
 279. Directors — Generally. 
 
 280. Number of directors. 
 
 281. Directors — -How chosen — Generally. 
 
 282. Eligibility to the office of director. 
 
 283. Ineligibility because of connection with competing lines. 
 
 284. Election of ineligible person to officer of director. 
 
 285. Officers de facto — Generally. 
 
 286. Election of ineligible persons — Who may question right to office. 
 
 287. Directors de facto — Illustrative cases. 
 
 288. De facto directors — Two boards. 
 
 289. Holding over — -Failure to elect. 
 
 290. Powers of directors — Source of. 
 
 291. Powers of directors — Generally. 
 
 292. Powers of directors — Illustrative cases. 
 
 293. Directors — Powers of — Organic changes. 
 
 294. Directors — Extent of authority — Generally. 
 
 295. Powers of directors, general conclusion. 
 
 296. Directors — Official action — Preliminary. 
 
 297. Directors — Official action. 
 
 298. Directors — Delegation of authority. 
 
 299. Directors — Delegation of authority — Illustrative cases. 
 
 300. Directors — ^Action where the mode is prescribed. 
 
 301. Directors — Meetings. 
 
 302. Directors — Meetings — Stated and special. 
 
 303. Directors— Meetings — Notice. 
 
 304. Directors — Meetings — Proxies — Quorum. 
 
 305. Directors — Meetings outside of the state. 
 
 306. Directors — Proceedings — Record. 
 
 307. Directors — Corporate records as evidence. 
 
 308. Proof of the proceedings of the board of directors, 
 
 309. Notice to directors. 
 
 310. Directors — Admissions and declarations. 
 
 311. Ratification of the acts of directors. 
 
 312. Directors — Removal from office. 
 
 313. Compensation of directors. 
 
 314. Directors — Relation to stockholders — Preliminary. 
 
 315. Directors considered trustees. 
 
 316. Directors as trustees — Illustrative cases. 
 .317. Directors — Dealings with corporation. 
 
 318. Termination of fiduciary relations. 
 
 319. Directors — Liability of — Generally. 
 
 320. Directors — Liability in matter of contract. 
 
 321. Directors— Errors, of judgment. 
 
xiv table of contents 
 
 Sectiom 
 
 322. Directors — Liability for negligence. 
 
 323. Directors — Fraud on third persons. 
 
 CHAPTER XIII. 
 
 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS. 
 
 Section 
 
 325. President— Generally. 
 
 326. President — Incidental powers of. 
 
 327. President — Implied powers. 
 
 328. President — Powers implied from grant of authority by the board of 
 
 directors. 
 
 329. President — Influence of usage. 
 
 330. President — Apparent authority. 
 
 331. President — Ratification of unauthorized acts. 
 
 332. President — Dealings with corporation. 
 
 333. President — Relation to shareholders. 
 
 334. Treasurer — Generally. 
 
 335. Treasurer — Duties — Liabilities. 
 
 336. Treasurer — Care of corporate funds. 
 
 337. Secretary. 
 
 338. Managing agents. 
 
 339. Superintendent. 
 
 340. Superintendent — General conclusion. 
 
 341. Intermediate agents. 
 
 342. Intermediate agents — ^Agent for one purpose not for another. 
 
 343. Intermediate agents and servants distinguished. 
 
 344. Conductors. 
 
 345. Station agents. 
 
 CHAPTER XIV. 
 
 dividends. 
 Sectiom 
 
 350. Rights of stockholder — Dividends. 
 
 351. When dividend ibelongs to stockholder — Assignment. 
 
 352. To whom dividend should be paid. 
 
 353. Rights of life tenant and remainderman — Apportionment of dividends. 
 
 354. Duties of life tenant — Transfers. 
 
 355. Dividend is not property of the corporation — Rights of creditors and 
 
 stockholders. 
 
 356. Dividend is irrevocable — Actions concerning. 
 
 357. Demand — Necessity and effect of. 
 
 358. Declaration of dividend discretionary with directors. 
 
TABLE OF CONTENTS XV 
 
 Section 
 
 359. Power to borrow money or declare stock dividend. 
 
 360. Remedies for abuse of discretion. 
 
 361. Limitations upon authority to declare a dividend— Suits to reclaim. 
 
 362. Dividends should be paid out of the profits. 
 
 363. Enjoining payment of dividends. 
 
 364. Personal liability of directors. 
 
 365. Dividends payable in scrip. 
 
 366. Stock dividends. 
 
 367. Dividends payable without discrimination. 
 
 CHAPTER XV. 
 
 CONSOLIDATION. 
 Section 
 
 370. Consolidation must be authorized by legislature. 
 
 371. What is sufficient authority. 
 
 372. Statutory mode must be pursued- — Collateral attack. 
 
 373. Intention to consolidate — Difference between succession and consoli- 
 
 dation. 
 
 374. Right of majority to effect consolidation — When minority may prevent 
 
 — Release of dissenting subscribers. 
 
 375. Right to condemn shares of dissenting stockholder. 
 
 376. Statutory provisions for consolidation. 
 
 Zn. Rights of old stockholders and their relation to the new company. 
 
 378. Remedies for old stockholders. 
 
 379. Consolidated company succeeds to rights and liabilities of the old com- 
 
 panies. 
 
 380. Special privileges and immunities — When they pass to the new company. 
 
 381. When special privileges do not pass. 
 
 382. Duties and obligations of new company. 
 
 383. Liability of new company on old contracts. 
 
 384. Liability of new company for torts — Extent of liability — Generally. 
 
 385. Constituent companies are usually dissolved — When not. 
 
 386. Duration of life and franchises of consolidated company. 
 
 387. Effect of consolidation upon liens. 
 
 388. De facto consolidation — Estoppel — Liability of constituent companies 
 
 where consolidation is set aside. 
 
 389. Effect of consolidation upon pending suits. 
 
 390. Consolidation with foreign corporations. 
 
XVI TABLE OF CONTENTS 
 
 CHAPTER XVI. 
 
 CONTRACTS. 
 Section 
 
 395. Contracts— Power to make — Generally. 
 
 396. Contracts — Scope of corporate power. 
 
 397. General power to contract — Illustrative instances. 
 
 398. Power to contract — Control of by courts. 
 
 399. Effect of changes in charter. 
 
 400. Contracts — Formal requisites of. 
 
 401. Formal defects. 
 
 402.. Contracts — ^Who may make — Generally. 
 
 403. Contracts by interested persons. 
 
 404. Mode prescribed must be pursued. 
 
 405. Contracts — Parties bound to take notice of charter provisions. 
 
 406. Contracts — Unauthorized — Notice. 
 
 407. Estoppel — Generally. 
 
 408. Ratification of unauthorized acts — Rights of the public and of creditors. 
 
 409. Contracts in conjunction with other parties. 
 
 410. Pledge of corporate securities. 
 
 411. Contracts between connecting lines — Division of fares. 
 
 412. Contracts permitting use of part of road. 
 
 413. Contracts regarding terminal facilities. 
 
 414. Traffic contracts— Surrender to competing line. 
 
 415. Contracts with municipal corporations for terminal facilities. 
 
 416. Use of tracks constructed under grant from municipal corporation. 
 
 417. Contracts for location of stations. 
 
 418. Location of tracks, switches and the like. 
 
 419. Contracts that may be made by railroad companies — Particular instances. 
 
 420. Pooling contracts — Generally. 
 
 421. Pooling contracts — The authorities. 
 
 422. Pooling contracts — Presumption. 
 
 423. Contracts — Ultra vires — Definitions. 
 
 424. Contracts — Ultra vires — General doctrine. 
 
 425. Contracts — What are ultra vires — Generally. 
 
 426. Contracts — Ultra vires — Estoppel. 
 
 427. Contracts — ^Ultra vires — Executed and executory contracts. 
 
 428. Contracts— Ultra vires — Cases discriminated. 
 
 429. Contracts — Ultra vires — Illustrative instances. 
 
 430. Contracts— Ultra vires — Rule where statute prescribes consequences. 
 
 431. Contracts — Ultra vires — Injunction. 
 
 432. Contracts — Ultra vires — Denial of relief — Laches. 
 
 433. Contracts — Ultra vires — Who may contest. 
 
 434. Contracts — Ultra vires — Creditors. 
 
 435. Contracts — Ultra vires — Non-assenting stockholders. 
 
TABLE OF CONTENTS XVll 
 
 Section 
 
 436. Prohibited contracts— Effect of prescribing penalties. 
 
 437. Illegal contracts — Generally. 
 
 438. Illegal contracts and ultra vires contracts discriminated. 
 
 439. Gasses of illegal contracts. 
 
 440. Contracts void because against public policy. 
 
 441. Contracts against public policy — Location of stations and tracks. 
 
 442. Contracts void as against public policy — General conclusions. 
 
 443. Contracts void as against public policy — Illustrative cases. 
 
 444. Contracts rendered unenforcible by statute subsequently passed — Rights 
 
 and remedies. 
 
 CHAPTER XVII. 
 
 real estate. 
 Section 
 
 450. What railroad property is real estate. 
 
 451. Statutory authority requisite. 
 
 452. Power to acquire real estate — Implied power — Generally. 
 
 453. Implied power to acquire — General rule. 
 
 454. Implied power — Illustrative instances. 
 
 455. Power to acquire real estate — Instances of denial of power. 
 
 456. Title to real estate is in the company. 
 
 457. Title once vested not divested because property subsequently becomes 
 
 unnecessary. 
 
 458. Effect of conveyance to corporation of land it has no power to hold. 
 
 459. Right of foreign corporation to hold real estate. 
 
 460. The power to acquire by grant broader than the power to acquire by 
 
 condemnation. 
 
 461. Acquisition of the fee by private grant. 
 
 462. Acquisition of title by adverse possession. 
 
 463. Possession of land — To what right referred. 
 
 464. Rights of company where land is owned in fee. 
 
 465. Effect of conveyance of property the company is not authorized to 
 
 acquire. 
 
 466. Questioning the right to hold real estate. 
 
 467. Enjoining purchase of real estate where no power to receive and hold. 
 
 468. Executory contract of purchase not enforceable where there is no power 
 
 to hold the land. 
 
 469. Estoppel of parties to deeds to deny corporate existence. 
 
 470. Deed to company not in existence. 
 
 471. Formal execution of conveyances and agreements relating to real estate. 
 
 472. Contracts under corporate seal — Effect as evidence. 
 
 473. Acceptance of deed. 
 
 474. Distinction between a donation of lands and a sale. 
 
XVlll . TABLE OF CONTENTS 
 
 Section 
 
 475. Deeds of company — By whom executed, 
 
 476. Construction of deeds to railroad companies — Generally. 
 
 477. Deeds to railroad companies — Construction of conditions. 
 
 478. Grants — Beneficial — Presumption of acceptance. 
 
 479. Incidents pass with principal thing granted. 
 
 480. Effect of designating in the deed the purpose for which the land is 
 
 granted. 
 
 481. Covenants that run with the land. 
 
 482. Merger of preliminary agreement in deed. 
 
 483. Bonds for conveyance — Specific performance. 
 
 484. Presumption that there is power to hold the land. 
 
 485. Power to convey real estate. 
 
 486. Dedication of land for use as a highway. 
 
 487. Disposition of property corporation has no power to receive and hold — 
 
 Escheat. 
 
 CHAPTER XVIII. 
 
 LEASES. 
 
 Section 
 
 490. Power to lease — Generally. 
 
 491. What the legislature may prescribe. 
 
 492. Power to lease not an implied one — Legislative authority requisite. 
 
 493. The power to lease — General rule. 
 
 494. The foundation of the rule. 
 
 495. Power to accept a lease. 
 
 496. Statutes asserted to confer power to lease are not aided by construction. 
 
 497. Statutes strictly construed — Illustrative instances. 
 
 498. Statutes — Construction of. 
 
 499. What is included in the authority to execute a lease. 
 
 500. Scope of authority to lease. 
 
 501. Statutes conferring power to lease must be strictly followed. 
 
 502. Consent of stockholders — Statutory requirement must be obeyed. 
 
 503. Concurrence of stockholders necessary. 
 
 504. What number of stockholders must assent to the lease. 
 
 505. Consent of stockholders — Waiver of objections. 
 
 506. Lease where parties are corporations of different states. 
 
 507. Authority to execute lease has no extra-territorial effect. 
 
 508. Rights of foreign lessors. 
 
 509. Leases to connecting lines. 
 
 510. Lease to competing lines — Effect of statutes prohibiting. 
 
 511. Effect of executing unauthorized lease. 
 
 512. Lease — Construction. 
 
 513. Lease — Dependent and independent contracts. 
 
 514. Contract to permit use of track not necessarily a lease. 
 
tabf.e of contents xix 
 
 Section 
 
 515. Traffic contract not valid if it is in effect a lease. 
 
 516. Contracts granting right to use — Effect and construction of. . 
 
 517. Part performance — Effect of. 
 
 518. Duration of a lease. ,.\ 
 
 519. Effect of lease on taxation. 
 
 520. Public duties of lessee under an unauthorized lease — Mandamus! 
 
 521. Authorized lease — Duty of lessee to operate the road — Mandamus. 
 
 522. Lessee not liable for wrongs committed prior to the execution of the 
 
 lease. 
 
 523. Effect of a lease upon rights of creditors. 
 
 524. Authorized lease — Rights and duties to which lessee company succeeds. 
 
 525. Contract obligation of lessor — Lessee not liable thereon. 
 
 526. Recovery of rent under unauthorized lease. 
 
 527. Improvements of road by lessee operating under an unauthorized lease. 
 
 528. Receiver's power to lease. 
 
 529. Unauthorized lease — Liability of lessor^Generally. 
 
 530. Authoirized lease — Liability of lessor for injuries caused by negligence 
 
 of lessee — Cases holding lessor liable. 
 
 531. Authorized lease — Liability of lessor for negligence of lessee in operat- 
 
 ing the road — Authorities. 
 
 532. Authorized lease — Liability of lessor for negligence of lessee in operat- 
 
 ing the road — Views of the authors. 
 
 533. Control reserved by lessor. 
 
 534. Liability of lessee under authorized lease — Illustrative cases. 
 
 535. Unauthorized lease — Liability of lessor to employes of lessee — Generally. 
 
 536. Liability of lessor to employes under Federal Employers' Liability Act. 
 
 537. Unauthorized lease — Liability of lessor — General rule. 
 
 538. Liability of lessee for injuries resulting from negligence in operating 
 
 the road. 
 
 539. Contracts of the lessee. 
 
 540. Joint liability. 
 
 541. Liability of company where it permits another company to use track in 
 
 common with itself. 
 
 542. Fraudulent leases. 
 
 543. Unauthorized lease — Injunction. 
 
 CHAPTER XIX. 
 
 RAILROAD SECURITIES. 
 
 Section 
 
 545. Power of railroad companies to issue notes and bonds. 
 
 546. Power to guaranty bonds. 
 
 547. Income bonds. 
 
 548. Convertible bonds. 
 
XX TABLE OF CONTENTS 
 
 Section 
 
 549. Negotiability of bonds — Bona fide purchasers. 
 
 550. Form and manner of issuing bonds — Effect of irregularities. 
 
 551. Interest coupons. 
 
 552. Payment of bonds and interest. 
 
 553. No power to mortgage without legislative authority. 
 
 554. Legislative authority to mortgage. 
 
 555. Distinction between authority to mortgage franchises and authority to 
 
 mortgage property. 
 
 556. Who may execute the mortgage. 
 
 557. Ratification by stockholders of unauthorized or improperly executed 
 
 mortgage. 
 
 558. When ultra vires mortgage may be made effective. 
 
 559. Recording mortgages. 
 
 560. Generally as to what property is covered by the mortgage. 
 
 561. What is covered by a mortgage of the undertaking. 
 
 562. Mortgage of after-acquired property. 
 
 563. After-acquired property — When lien attaches — What it includes. 
 
 564. Fixtures — Rolling stock. 
 
 565. Reserved power to create prior lien or dispose of unnecessary property. 
 
 566. Priority of mortgages. 
 
 567. Trust deeds. 
 
 568. Equitable and defective mortgages. 
 
 569. Statutory mortgages. 
 
 570. Debentures. 
 
 CHAPTER XX. 
 
 foreclosure. 
 Section' 
 
 575. Foreclosure — Default. 
 
 576. Option to declare whole debt due — Election. 
 
 577. Foreclosure for default in payment of interest. 
 
 578. Parties to foreclosure suit — Plaintiffs. 
 
 579. Bondholders as plaintiffs. 
 
 580. Pledgees, assignees and others as plaintiffs. 
 
 581. Defendants in foreclosure suits — Generally. 
 
 582. When other lienholders should be made defendants. 
 
 583. Defenses to foreclosure suit. 
 
 584. Effect of provisions giving trustees the right to take possession and sell. 
 
 585. Rights and duties of trustees as to possession and sale. 
 
 586. Right to foreclose still exists. 
 
 587. The decree. 
 
 588. Consent decree. 
 
 589. Deficiency decree. '?[ 
 
 590. Final and appealable decrees. 
 
TABLE OF CONTENTS XXI 
 
 CHAPTER XXI. 
 
 , SALE AND REORGANIZATION. 
 
 Section 
 
 595. Railroad company cannot sell franchise and necessary property without 
 
 statutory authority. 
 
 596. Execution sales. 
 
 597. Foreclosure sales — Authority — Purchasers. 
 
 598. Sale on default in payment of interest — Sale of road as an entirety. 
 
 599. Sale of consolidated road — Sale by receiver pending foreclosure. 
 
 600. Discretion of trustees and officers as to time and manner of sale. 
 
 601. Effect of sa.le;^Purchaser's title. 
 
 602. What passes to purchaser at foreclosure sale. 
 
 603. When purchaser takes title free from liabilities and liens. 
 
 604. Disposition of proceeds of sale. 
 
 605. Disposition of proceeds — Purchaser not bound to see that they are 
 
 properly applied. 
 
 606. Preferred claims — Six months' rule. 
 
 607. Setting sale aside — Grounds — Who may sue. 
 
 608. Setting sale aside — What is not sufficient ground. 
 
 609. Redemption. 
 
 610. Reorganization by purchasers at sale — Power of legislature to provide 
 
 for. 
 
 611. Reorganization through purchasing committee. 
 
 612. Statutory reorganization — Liability of new corporation. 
 
 613. Reorganization by agreement — Rights. of minority. 
 
 614. Rights and obligations of the parties — Laches and estoppel. 
 
 615. Fraud in the sale of reorganization. 
 
 616. Reorganization by the courts. 
 
 CHAPTER XXII. 
 
 RECEIVERS. 
 Section 
 
 620. Receivers generally. 
 
 621. Jurisdiction of courts of equity — Statutory provisions. 
 
 622. Jurisdiction is sparingly exercised — Purpose of appointment. 
 
 623. General rules as to when receivers of railroads will be appointed. 
 
 624. Receivers will not be appointed merely because parties consent. 
 
 625. Extent to which jurisdiction has been exercised. 
 
 626. Insolvency as ground for appointment of receiver. 
 
 627. When insolvency is sufficient without default. 
 
 628. Default in payment of indebtedness as ground for appointment. 
 
 629. Appointment in foreclosure proceedings. 
 
xxu table of contents 
 
 Section 
 
 630. Other grounds for appointment. 
 
 631. Appointment upon application of unsecured creditors. 
 
 632. Appointment upon application of sectired creditors. 
 633.. Appointment' upon application of stockholders. 
 
 634. Appointnient upon application of corporation. 
 
 635. What court may appoint. 
 
 636. Court first obtaining jurisdiction retains it— Conflict of jurisdiction. 
 
 637. Extra-territorial jurisdiction. 
 
 638. Ancillary appointment — Coinity. 
 
 639. Procedure— Ex parte application. 
 
 640. Parties to proceedings for appointment of receiver. 
 
 641. Appointment upon motion or petition and notice — Affidavits. 
 
 642. Who may appoint — Appointment in vacation. 
 
 643. Suit must" generally be pending. 
 
 644. Who may be appointed receiver. 
 54S. ' Order appointing receiver. 
 
 646. Effect of appointment. I 
 
 647. Collateral attack on appointment. 
 
 648. Title and possession of receiver. 
 
 649. Authority, rights and duties of receiver — Control by court. 
 
 650. Contracts of receiver. 
 
 651. Suits by receivers — ^Authority to sue. 
 
 652. When receiver may maintain suit — Defenses to receiver's suit. 
 
 653. Right of receiver to use in other jurisdictions — Comity. 
 
 654. Suits against receivers — Leave to sue must be obtained. 
 
 655. Effect of failure to obtain leave to sue. 
 
 656. Effect of recent Act of Congress. 
 
 657. Rule where suit has been commenced before appointment of receiver. 
 
 658. Protection of receiver by the court. 
 
 659. Liability of receivers — Generally. 
 
 660. Liability for torts. 
 
 661. Receiver is bound to perform public duties — Mandamus. 
 
 662. Liability on contracts. 
 
 663. Liability on claims arising from operation of the road. 
 
 664. Operating expenses — Priority of claims. 
 
 665. Liability of corporation. 
 
 666. Receivers of leased lines. 
 
 667. Receiver's accounts. 
 
 668. Compensation of receiver. 
 
 669. Attorney's fees. 
 
 670. Removal and discharge. 
 
 671. Effect of removal or discharge. '■ 
 
TABLE OF CONTENTS XX1H 
 
 CHAPTER XXIII. 
 
 RECEIVER S CERTIFICATES. 
 
 Section 
 
 675. Definition and nature of receiver's certificates. 
 
 676. Power of courts to authorize. 
 
 677. Purposes for which receiver's certificates may be issued — Extent of 
 
 power. 
 
 678. Purposes and circumstances justifying issuance. 
 
 679. Purpose or circumstances not justifying issuance. 
 
 680. Order giving authority to issue. 
 
 681. Lien created by receiver's certificates. 
 
 682. Statutory provisions as to lien. 
 
 683. Negotiability of receiver's certificates. 
 
 684. Rights of holders of receiver's certificates. 
 
 685. Who may question validity of receiver's certificates. 
 
 686. Payment and redemption of certificates. 
 
 CHAPTER XXIV. 
 
 INSOLVENCY AND DISSOLUTION. 
 
 Section 
 
 690. Scope of the chapter. 
 
 691. Railroad company subject to state insolvency law. 
 
 692. Trust fund doctrine. 
 
 693. When a corporation is deemed insolvent — Effect of insolvency. 
 
 694. Assignments by corporations. 
 
 695. Preferences by corporations. 
 
 696. Preference of stockholders and officers. 
 
 697. Statutory preference of employes. 
 
 698. What constitutes a dissolution. 
 
 699. Judicial determination of dissolution. 
 
 700. Voluntary dissolution — Surrender of charter. 
 
 701. Proceedings to dissolve. 
 
 702. Dissolution in case of consolidated company. 
 
 703. Effect of dissolution. 
 
 704. Corporation may have a qualified existence after dissolution. 
 
 705. Disposition of property on dissolution. 
 
 706. Rights of creditors upon dissolution. 
 
ELLIOTT ON RAILROADS 
 
 CHAPTER I. 
 DEFINITIONS. 
 
 Sec. Sec. 
 
 1. Railroad companies — Defini- 6. "Railroad track" : — "Right 
 
 tion and characteristics. of way" — "Road-bed" and 
 
 2. Usually but not always cor- "'roadway." 
 
 porations — Other charac- 7. Street railways. 
 
 teristics. 8. Street railways further con- 
 
 3. Dual nature of railroad cor- sidered. 
 
 porations. 9. Elevated railroads. 
 
 4. "Railroad" or "railway." 10. Electric railroads. 
 
 5. What are railroads. 11. Cable railroads. 
 
 12. Interurban railroads. 
 
 § 1. Railroad Companies — Definition and characteristics. — 
 Railroad companies may be defined or described as companies or 
 associations organized for the purpose of constructing, maintain- 
 ing and operating railroads. The general railroad statutes usually 
 provide for incorporation for all of these purposes, and railroad 
 companies are usually organized for all of such purposes, but a 
 company engaged in any one of these things may be a railroad 
 company. Railroad companies are frequently engaged in oper- 
 ating railroads as lessees or the like, although they had nothing to 
 do with the construction of the roads. So, while mere construction 
 companies are not railroad companies, a construction company 
 may be as to certain matters within a statute or rule of law 
 applicable to railroad companies. Thus, a company running 
 gravel trains in the construction of a railroad has been held to be 
 "operating a railroad" within the meaning of a certain statute.^ 
 
 1 Mace V. Boedker, 127 Iowa 721, 268, 44 N. E. 218; Roe v. Winston, 
 
 104 N. W. 47S; McKnight v. Iowa, 86 Minn. 11, 90 N. W. 122; Parris 
 
 &c. R. Co., 43 Iowa 406. See also v. Tennessee Power Co., 136 Tenn. 
 
 Coughlin V. Cambridge, 166 Mass. 198, 188 S. W. 1154; Doughty v. 
 
 1 — Ell. Railkoads I 
 
§1 
 
 RAILROADS 
 
 So, a trust company, operating a railroad for the benefit of the 
 bondholders, has been held liable for killing stock under a statute 
 applying in terms to "railroad corporations. "^ And the interest 
 coupons of a corporation authorized to condemn land and to con- 
 struct and operate a railroad in addition to carrying on a mining 
 and manufacturing business have been held taxable under an act 
 of congress providing for the taxation of the interest coupons 
 of railroads.^ But it has been held, on the other hand, although 
 there is sharp conflict among the cases, that the fact that the 
 charter of a lumber company authorized it to build a railroad as 
 an incident to its business did not make it a railroad company 
 within a statute making railroad companies liable for injuries to 
 employes ;* and that contractors engaged in constructing a rail- 
 
 Firbank, 10 Q. B. Div. 358, 48 J. P. 
 55. But compare Beeson v. Busen- 
 bark, 44 Kans. 669, 25 Pac. 48, 10 
 L. R. A. 839; McKivergan v. Alex- 
 ander, &c. Co., 124 Wis. 60, 102 N. 
 W. 332; Bradford &c. Co. v. Hel- 
 fin, 88 Miss. 314, 42 So. 174, 12 L. 
 R. A. (N. S.). 1040. A railroad 
 company may construct its own 
 road, under most of the statutes, at 
 least, but as a matter of fact the 
 work is usually done in whole .or 
 in part by contractors or construc- 
 tion companies not in a strict sense 
 railroad companies. 
 
 2 Union Trust Co. v. Kendall, 20 
 Kans. 515. See also Solomon R. 
 Co. V. Jones, 30 Kans. 601, 2 Pac. 
 657. 
 
 s Kentucky Imp. Co. v. Slack, 
 100 U. S. 648, 25 L. ed. 609. See 
 also Randolph v. Post, 93 U. S. 
 502, 23 L. ed. 957; United States v. 
 Louisiana &c. R. Co., 234 U. S. 1, 
 34 Sup. Ct. 741, 58 L. ed. 1185; 
 Vicksturg &c. R. Co. v. Louisiana 
 &c. R. Co., 136 La. 691, 67 So. 553; 
 International Coal Co. v. Cape Bre- 
 ton County, 22 Canada S. C. 305; 
 
 State V. Eleventh Judicial Court, 54 
 Minn. 34, 55 N. W. 816. In the 
 last case just cited it is said that "it 
 can make no difference, as respects 
 ,the applicability of the statute, 
 whether the railroad is three miles 
 in extent or three hundred." See 
 also Idalia Realty &c. Co. v. Nor- 
 mans S. E. Ry. Co. (Mo.), 219 S. 
 W. 923. But compare North 
 Texas Transfer &c. Co. v. State, 
 108 Tex. 235, 191 S. W. 550. 
 
 4 Ellington v. Beaver Dam Lum- 
 ber Co., 93 Ga. 53, 19 S. E. 21. And 
 see Ingram-Dekle Lumber Co. v. 
 Geiger, 71 Fla. 390, 71 So,. 552, Ann. 
 Cas. 1918A, 971, where' a similar 
 ruling was made as to a company 
 engaged in operating a sawmill and 
 a short logging railroad as an in- 
 cident thereto. See also McKiv- 
 ergan V. Alexander &c. Co., 124 
 Wis. 60, 102 N. W. 332 (disap- 
 proving Roe V. Winston, 86 Minn. 
 77, 90 N. W. 122, in which the su- 
 preme court of Minnesota gave the 
 statute of Wisconsin a different 
 construction); Beeson v. Busen- 
 bark, 44 Kans. 669, 25 Pac. 48, 10 
 
DEFINITIONS 
 
 §1 
 
 road are not within the meaning of a statute requiring "railroad 
 companies" to sound a whistle.^ Again, railroad companies often 
 construct and own, or own and main-tain, railroads without oper- 
 ating them. Authority is often, although not always, given to 
 lease the road to some other company to operate or maintain 
 and operate. Originally, it seems, when railroads as commercial 
 roads first came into being they were treated largely as canals 
 or highways on which cars or vehicles were to be run by others 
 for a fixed toll or charge, and the idea was that those who so 
 
 L. R. A. 839. So, it has been held 
 that the North Carohna fellow- 
 servant act giving the servant of 
 any railroad company operating in 
 the state a right of action against 
 the company for injuries sustained 
 through the negligence of a fellow 
 servant, is not applicable where an 
 injury is sustained by a servant 
 assisting in the construction of a 
 railroad at a point five or six miles 
 from the completed track and still 
 further from the track on which 
 trains were being operated. Nich- 
 olson V. Transylvania R. Co., 138 
 N. Car. 516, 51 S. E. 40. But it has 
 been held in Texas that the word 
 ■'railroad," as used in the Texas 
 statute (Sayles' Ann Civ. St. 1897, 
 art. 4560f), making every corpora- 
 tion operating a railroad liable for 
 damages to its servants by negli- 
 gence of other servants, is used in 
 the same sense as in art. 3017, mak- 
 ing the proprietor of any railroad 
 liable for death caused by its neg- 
 ligence, and includes a logging rail- 
 road operated by a corporation 
 solely for the purpose of carrying 
 its own lumber from the woods to 
 its sawmill, and from the sawmill 
 to a railroad station near by. Lod- 
 wick Lumber Co. v. Taylor, 39 Tex. 
 Civ. App. 302, 87 S. W. 358, citing 
 
 text. See also Kibbe v. Stevenson 
 Iron Min. Co., 136 Fed. 147; Schus 
 V. Powers-Simpson Co., 85 Minn. 
 447, 89 N. W. 68, 69 U R. A. 887; 
 Roe V. Winston, 86 Minn. 77, 90 
 N. W. 122; Kline v. Minnesota Iron 
 Co., 93 Minn. 63, 100 N. W. 681; 
 Idalia Realty &c. Co. v. Nor- 
 mans S. E. Ry. Co. (Mo.), 219 
 S. W. 923 ; Hemphill v. Buck Creek 
 Lumber Co., 141 N. Car. 487, 54 
 S. E. 420; Goodman v. Tallahassee 
 Power Co., 174 N. Car. 661, 94 S. E. 
 408; Frisco Lumber v. Spivey, 40 
 Okla. 633, 140 Pac. 157; Cunning- 
 ham &c. Co. V. Neal, 101 Tex. 338, 
 107 S. W. 539, 15 L. R. A. (N. S.) 
 479n; Philip A. Ryan Lumber Co. 
 V. Ball (Tex. Civ. App.), 197 S. 
 W. 1037; Wilson v. Virginia Port- 
 land R. Co., 122 Va. 169, 94 S. E. 
 347. For further consideration of 
 this subject as to employer's liabil- 
 ity statutes see Vol. Ill, Ch. LVII. 
 5 Griggs v. Houston, 104 U. S. 
 553, 26 L. ed. 840. It has also been 
 held that a "union depot and rail- 
 road company'' is not an ordinary 
 railroad company and that it need 
 not be incorporated un'der the 
 Eitatute providing for the incorpora- 
 tion of railroad companies, but 
 might be incorporated under the 
 general law providing for the in- 
 
§1 
 
 RAILROADS 
 
 used the road would furnish and operate their own vehicles. In 
 other words, the railroad companies, as originally intended, 
 were, primarily at least, the companies that constructed and 
 owned the roads rather than the companies or persons that 
 operated and carried on the transportation business.® As already 
 intimated, however, most of the special charters, and the general 
 laws under which railroad companies are now almost universally 
 required to be incorporated, usually grant the power in express 
 terms to locate, construct and maintain the railroad, with proper 
 ■equipment, and to operate it and transport goods and passen- 
 gers.'^ Indeed, the great body of "railroad law" now has to do 
 very largely with such companies as common carriers and with 
 rights and • liabilities growing out of the operation of the road. 
 
 corporation of ordinary private 
 corporations. People v. Cheese- 
 man, 7 Colo. 376, 3 Pac. 716, 16 Am. 
 & Eng. R. Cas. 400. But see Union 
 Depot Co. v. Morton, 83 Mich. 265, 
 47 N. W. 228. See also Detroit &c. 
 Co. V. Detroit, 88 Mich. 347, SO N. 
 W. 302; State v. St. Paul &c. Co., 
 42 Minn. 142, 43 N. W. 840, 6 L. 
 R. A. 234; Union Depot &c. Co. v. 
 Chicago &c. R. Co., 113 Mo. 213, 
 20 S. W. 792. 
 
 6 Thus Simon Sterne says, in 3 
 Cyc. of Political Science, etc. (edited 
 by John Laylor) SOO: "It was sup- 
 posed that, like the canal, the rail- 
 way would be built by one class of 
 capitalists, but that also, in the 
 same manner as over canals, the 
 traffic over the railway would be 
 carried on by another class of indi- 
 viduals or corporations, of forward- 
 ers or common carriers, who, under 
 regulations and charges for toil es- 
 tablished by the railroad company, 
 would do the transportation busi- 
 ness over the line." Thus, in the 
 earliest charters in this country as 
 for instance, in that of the Ithaca, 
 
 &c. R. Co. in 1827, the following pro- 
 vision is found: "All persons pay- 
 ing the toll aforesaid may, with suit- 
 able and proper carriages, use and 
 ti-avel upon said railroad, subject to 
 such rules and regulations as the 
 said corporations are authorized to 
 make." This theory and the history 
 of railroads practically controlled 
 the majority decision of the Supreme 
 Court of the United States in the im- 
 portant case of Lake Superior &c. 
 R. Co. v. United States, 93 U. S. 442. 
 The opinion in this case contains an 
 interesting discussion of the nature, 
 history and development of rail- 
 roads. 
 
 7 It , may be a railroad company 
 and entitled to condemn land un- 
 der a statute although carries only 
 freight and not passengers. Vicks- 
 burg &c. R. Co. V. Louisiana &c. R. 
 Co., 136 La. 691, 67 So. 553; Farns- 
 worth V. Lime Rock R. Co., 83 
 Main 440, 22 Atl. 373; Brown v. 
 Chicago &c. R. Co., 137 Mo. 529, 38 
 S. W. 1099; Oswego D. &c. R. Co. 
 V Cobb, 66 Ore. 587, 135 Pac. 1°1 
 
DEFINITIONS 
 
 §2 
 
 § 2 (la). Usually but not always corporations — Other charac- 
 teristics. — An individual or a partnership may own and operate a 
 railroad,* except, perhaps, where the statute requires that all rail- 
 roads shall be owned or operated by corporations.® And it seems 
 that an individual, as well as a corporation, may, with legfislative 
 authority, exercise the right of eminent domain. i" But individ- 
 
 8 Kerr, In re, 42 Barb. (N. Y.) 
 119; Phoenix v. Gannon, 195 N. Y. 
 471, 88 N. E. 1066; Stewart's Ap- 
 peal, 56 Pa. St. 413; Parris v. 
 Tennessee Power Co., 136 Tenn. 198, 
 188 S. W. 1154; Henderson v. Og- 
 den City R. Co., 7 Utah 199, 26 
 Pac. 286, 46 Am. & Eng. R. Cas. 95 ; 
 Bank of Middlebury v. Edgerton, 30 
 Vt. 182; David v. Kingscote, 6 M. 
 & W. 174. See also Southern Pac. 
 R. Co. V. Orton, 32 Fed. 457; Par- 
 nell V. Southern R. Co. (Ala.), 74 
 So. 437; Pittsburgh &c. R. Co. v. 
 Chappell, 183 Ind. 141, 106 N. E. 
 403, Ann. Cas. 1918A, 627; Law- 
 rence V. Morgan's &c. R. Co., 39 
 La. Ann. 427, 2 So. 69, 4 Am. St. 
 265; People v. Brooklyn &c. Co., 89 
 N. Y. 75; People v. Erie R. Co., 
 198 N. Y. 369, 91 N. E. 849, 29 
 L. R. A. (N. S.)" 240, 139 Am. St. 
 82S, 19 Ann. Cas. 811; Budd v. 
 Multnomah &c. Co., 15 Ore. 404, 15 
 Pac. 654. If he holds himself out 
 to the public as a common carrier 
 he will be subject, it seems, to the 
 law governing common carriers. 
 Bank of Middlebury v. Edgerton, 30 
 Vt. 182. And it seems that even a 
 married woman may purchase on 
 execution or judicial sale under the 
 Texas statute. Texas Southern R. 
 Co. v. Harle, 101 Tex. 170, 105 S. W. 
 1107. 
 
 9 In the case of Commonwealth 
 v. Vrooman, 164 Pa. St. 306, 30 Atl. 
 217, 25 L. R. A. 250, 44 Am. St. 603, 
 
 it was held that the legislature 
 might rightfully require all persons 
 desiring to conduct the business of 
 insurance "to obtain a charter of 
 incorporation." See also Jack v. 
 Williams, 113 Fed. 823. If the doc- 
 trine of the case from which we 
 have quoted be sound, which we 
 confess we doubt, then there can be 
 no doubt that the legislature may 
 require that the business of owning 
 and opeia.ting railroads be conduct- 
 ed by corporations. The business 
 of operating a railroad is unques- 
 tionably "affected with a public in- 
 terest," and there is reason for the 
 conclusion that where an associa- 
 tion undertakes to conduct such 
 business the legislature may re- 
 quire it to be incorporated. Wilder 
 V. Aurora &c. Co., 216 111. 493, 75 
 N. E. 194, 203, and cases there cited. 
 But the mere fact that the right to 
 construct and operate railroads 
 and to condemn and obtain the 
 right of way therefor is given by 
 statute to railroad corporations does 
 not prevent an individual from con- 
 structing and operating a railroad 
 on his own land or the land of an- 
 other from whom he has purchased 
 the right of way. Moran v. Ross, 
 79 Cal. 159, 21 Pac. 457, 39 Am. & 
 Eng. R. Cas. 1. See also Wilson v. 
 Cunningham, 3 Cal. 241, 58 Am. 
 Dec. 407; Hall v. Brown, 54 N. H. 
 495. 
 10 Moran v. Ross, 79 Cal. 159, 21 
 
RAILROADS 
 
 6 
 
 uals usually have no power to acquire land for a railroad by con- 
 demnation under the eminent domain. ^^ If he does undertake 
 to maintain and operate a railroad without legislative authority 
 it will be at the risk of being held liable for maintaining a nuis- 
 ance or for injuries caused by the operation of the road,^^ and 
 he will, at least in the absence of legislative authority, have none 
 of the special powers and immunities granted only to corpora- 
 tions. Although, as we have seen, an individual may construct 
 and operate a railroad, yet, with few exceptions, railroad com- 
 panies are corporations created either by special charter or 
 organized under general laws.^^ They are now usually organized 
 under general laws. They are given certain prerogative fran- 
 chises and privileges for public purposes, in- return for which 
 the state retains a right of supervision and control in excess of 
 that exercised over purely private corporations. In the very 
 grant of the franchise there is, in effect, an implied condition 
 that it shall be held as a public or quasi public trust. ^* Although 
 
 Pac. S47, 39 Am. & Eng. R. Cas. 1; 
 Brown v. Beatty, 34 Miss.- 227, 69 
 Am. Dec. 389; Coe v. Columbus &c. 
 R. Co., 10 Ohio St. 372, 75 Am. Dec. 
 518, 529. 
 
 11 Hammond Packing Co. v. Ar- 
 kansas, 212 U. S. 322, 29 Sup. Ct 
 370, .53 L. ed. 530; People v. Erie 
 R. Co., 198 N. Y. 369, 91 N. E. 849, 
 29 L. R. A. (N. S.) 240, 246, 139 
 Am. St. 828, 19 Ann. Cas. 811. And 
 so it is lield that an individual may 
 not take by transfer from a rail- 
 road corporation the charter right 
 to build a railroad and to invade 
 the premises of others. Stewart' 
 Appeal, 56 Pa. St. 413. See also Fin- 
 ney V. Sommerville, 80 Pa. St. 59; 
 Barker v. Hartman Steele Co., 6 Pa. 
 Co. Ct. 183. 
 
 12 Wilson V. Cunningham, 3 Cal. 
 241, 58 Am. Dec. 407; Regina v. 
 Train, 3 F. & F. 22. See also Lod- 
 wick Lumber Co. v. Taylor, 39 Tex. 
 
 Civ. App. 302, 87 S. W. 358, 360, 
 citing text. But compare Austin v. 
 Augusta &c. R. Co., 108 Ga. 671, 
 34 S. E. 852, 47 L. R. A. 755, 764, 
 where the text is criticized, but 
 seems to be misunderstood. 
 
 13 As to whether the word "com- 
 pany" imports a corporation, see note 
 to State v. Hotel McCreery Co. (68 
 W. Va. 130, 69 S. E. 472), in Ann. 
 Cas. 1912A, 966, 969, and compare 
 Pittsburgh &c. R. Co. v. Chappell, 
 183 Ind. 141, 106 N. E. 403, Ann. 
 Cas. 1918A, 627 (holding a partner- 
 ship within a statute relating to rail- 
 road "companies"). 
 
 1* Messenger v. Pennsylvania R. 
 Co., 36 N. J. L. 407, 13 Am. Rep. 
 457, 463, affirmed in 37 N. J. L. 531, 
 18 Am. Rep. 754, 759. See also 
 Chesapeake &c. R. Co. v. Public 
 Service Com., 242 U. S. 603, 37 
 Sup. Ct. 235, 236, 61 L. ed. 520, 
 and authorities there cited. State v. 
 
7 DEFINITIONS § 3 
 
 the stockholders may derive a private benefit and gain therefrom, 
 yet railroads are for the use of the public, and municipal aid 
 may be authorized and granted to such corporations for the pur- 
 pose of constructing their roads as in the case of any other public 
 work. 15 This outline will serve to show in a general way the 
 peculiar nature of railroad corporations, but their legal status 
 will be more fully considered in a subsequent chapter. 
 
 § 3 (2). Dual nature of railroad corporations. — A railroad 
 company or corporation is usually regarded as a private corpora- 
 tion, and justly so, as contrasted with a strictly public 
 corporation, such as a city, county, township or the like govern- 
 mental subdivision, but it is not a private corporation in the 
 strict sense that an ordinary business corporation is, for it is 
 charged with duties of a public nature that distinguish it from 
 a purely and strictly private corporation. In many respects a 
 railroad corporation is a private corporation in all that the term 
 implies, but in other respects it differs from a corporation upon 
 which no public duties are imposed. The property of a railroad 
 
 Dodge City &c. R. Co., S3 Kans. 'Board, 73 Tnd. 543; Pittsburgh &c. 
 377, 36 Pac. 747, 42 Am. St. 295; R, Co. v. Harden, 137 Ind. 486, 37 
 Bentler v. Cincinnati &c. R. Co., N. E. 324, IS Am. & Eng. Ency. of 
 180 Ky. 407, 203 S. W. 199, L. R. A. Law 1242 ; Leavenworth County v. 
 1918E, 315, 319; National Docks R. Miller, 7 Kans. 479, 12 Am. Rep. 
 Co. V. Railroad Co., 32 N. J. Eq. 425 ; Davidson v. County Comniis- 
 755 ; Logan v. North Carolina R. sioners, 18 Minn. 482 ; Rome v. 
 Co., 116 N. Car. 940, 945, 21 S. E. Rome, 18 N. Y. 38; People v. Mit- 
 959; Moore v. Columbia &c. R. Co., chell, 35 N. Y. 551; Walker v. Cin- 
 38 S. Car. 1, 16 S. E. 781. But see cinnati, 21 Ohio St. 14, 8 Am. Rep. 
 Pierce v. Commonwealth, 104 Pa. 24; Sharpless v. Mayer, 21 Pa. St. 
 St. 155. 147, 159 Am. Dec. 759, and note; 
 15 Gelpcke v. Dubuque, 1 Wall. (U. Crawford County v. Louisville R. 
 S.) 175, 16 L. ed. 520; Pine Grove Co., 39 Ind. 192; 1 Thomp. 
 Tp. V. Talcott, 19 Wall. (U. S.) Corp. (2d ed.), §662. But see Peo- 
 666, 22 L. ed. 227; Northern Pac. pie v. Salem, 20 Mich. 542, 4 Am. 
 R. Co. V. Roberts, 42 Fed. 734, 31 Rep. 400; Morrill v. Smith Co., 89 
 Am. & Eng. Corp. Cas. 642, and Tex. 529, 36 S. W. 56; Ellis v. North- 
 authorities there cited ; Chicago &c. ern Pac. R. Co., 77 Wis. 114, 31 Am. 
 R. Co. V. Smith, 62 111. 268, 14 Am. & Eng. Corp. Cas. 661. See also 
 Rep. 99; Lafayette &c. R. Co. v. Brown v. Chicago &c. R, Co., 137 
 Geiger, 34 Ind. 185; Brocaw v. Mo. 529, 38 S. W. 1099. 
 
§3 
 
 RAILROADS 
 
 8 
 
 company used for the transportation of passengers and articles 
 of commerce is devoted to a public use. The doctrine of Chief 
 Justice Hale that, "when private property is affected with a public 
 interest it ceases to be juris privati only," applies to a railroad 
 corporation.^® It is not to be understood, however, from the 
 fact that the property of a railroad company is devoted to a public 
 use or "affected with a public interest," that it can be treated as 
 
 >■« Munn V. Illinois, 94 U. S. 113, 
 126, 24 L. ed. 77; Chicago &c. Co. v. 
 Iowa, 94 U. S. ISS, 24 L. ed. 94; 
 Peik V. Chicago &c. Co., 94 U. S. 
 164, 24 L. ed. 97; Railroad Commis- 
 sion Cases, 116 U. S. 307, 6 Sup. Ct. 
 334, 29 L. ed. 636; Georgia &c. Co. 
 V. Smith, 128 U. S. 174, 9 Sup. Ct. 
 47, 32 L. ed. 377; Chicago &c. R. 
 Co. V. Nebraska, 170 U. S. 57, 18 
 Sup. Ct. 513, 42 L. ed. 948; Olcott 
 V. Supervisors, 16 Wall. (U. S.) 678, 
 21 L. ed. 382; McCoy v. Cincinnati, 
 &c. Co., 13 Fed. 3, 6 Am. & Eng. R 
 Cas. 621 ; Mayor v. Baltimore &c 
 Co., 21 Md. 50; Newburyport &c. 
 Co. V. Eastern R. Co., 23 Pick. 
 (Mass.) 326; Ohio v. Black Diamond 
 Co. (Ohio St.), 119 N. E. 195, L. 
 R. A.'1918E, 352; Chicago &c. R. 
 Co. V. Oklahoma (Okla.), 168 Pac, 
 239, Lr R. A. 1918C, 492, 495; Hoi 
 laday v. Patterson, 5 Ore. 177 
 State V. Mclver, 2 S. Car. 25 
 State V. Boston &c. Co., 25 Vt. 433; 
 Whiting V. Sheboygan &c. Co., 25 
 Wis. 167. See also Illinois Cent. 
 R. Co. V. People, 143 111. 434, 33 
 N. E. 173, 19 L. R. A. 119; People 
 V. Boston &c. R. Co., 70 N. Y. 569. 
 The principle stated in the text ap- 
 plies, as is well known, to many 
 other kinds of corporations, Hock- 
 ett V. State, 105 Ind. 250, 5 N. E. 
 178, 55 Am. Rep. 201; Rushville 
 
 V. Rushville &c. Co., 132 Ind. 
 575, 584, 28 N. E. 853; State v. 
 Ironton, &c. Co., 37 Ohio St. 45; 
 Zanesville v. Zanesville Gas Light 
 Co., 47 Ohio St. 1, 23 N. E. 55; 1 
 Thomp. Corp. (2nd ed.), Ch. 14. 
 Some of the later decisions of the 
 Supreme Court of the United States 
 to some extent modify the doctrine 
 asserted in Munn v. Illinois, 94 U. 
 S. 113, but we do not understand 
 that they deny tlie rule that rail- 
 roads are affected with a public in- 
 terest and are subject to legisla- 
 tive regulation and control. Chica- 
 go &c. Co. v. Minnesota, 134 U. S. 
 418, 10 Sup. Ct. 462, 33 L. ed. 970; 
 Brass v. North Dakota, 153 U. S. 
 391, 14 Sup. Ct. 857, 38 L. ed. 757; 
 Reagan v. Farmers &c. Co., 154 U. 
 S. 362, 14 Sup. Ct. 1047, 38 L. ed. 
 1014; Covington &c. Co. v. Ken- 
 tucky, 154 U. S. 204, 14 Sup. Ct. 
 1087, 38 L. ed. 962. See also 
 United States v. Trans-Missouri &c. 
 Ass'n, 166 U. S. 290, 17 Sup. Ct. 
 540, 41 L. ed. 1007; Lake Shore &c. 
 R. Co. V. Ohio, 173 U. S. 285, 19 
 Sup. Ct. 465, 43 L. ed. 702 ; Missouri 
 &c. R. Co. V. May, 194 U. S. 267, 
 24 Sup. Ct. 638, 48 L. ed. 971; 
 Seaboard Air Line Ry. v. Seegers, 
 207 U. S. 73, 28 Sup. Ct. 28, 52 L. 
 ed. 108. 
 
9 
 
 DEFINITIONS 
 
 §4 
 
 a public corporation ; on the contrary, a railroad corporation is 
 ■classed as a private corporation and its strictly private rights 
 iire as much beyond legislative control as are the rights of a 
 purely private corporation.^'' While a railroad corporation- may 
 for most purposes be regarded as a private corporation there is, 
 nevertheless, as we have seen, a side to it, as one may say, that 
 is public. As will hereafter appear, the element of public in- 
 terest which enters into all railroad corporations distinguishes 
 them from purely private corporations to such an extent as to 
 lead to important results. 
 
 §4 (3). "Railroad" or "railway."— The words "railroad" and 
 "railway" are practically synonymous, and are ordinarily to be 
 treated as without distinction or meaning.^^ Thus, in one of the 
 
 IT Pierce v. Commonwealth, 104 
 Pa. St. ISO; Sweatt v. Boston &c. 
 R. Co., 3 Qiff. (U. S.) 339, Fed. 
 Cas. No. 13684; Ohio &c. R. Co. v. 
 Ridge, 5 Blackf. (Ind) 78; Sloan 
 ■V. Pacific R. Co., 61 Mo. 24, 21 
 Am. Rep. 397; Tinsman v. Belvi- 
 dere &c. R. Co., 26 N. J. L. 148, 
 69 Am. Dec. 565; Thorpe v. Rut- 
 land &c. Co,, 27 Vt. 140, 62 Am. 
 Dec. 625. See also Detroit v. De- 
 troit Citizens St. R. Co., 184 U. S. 
 368, 22 Sup. Ct. 410, 46 L. ed. 592; 
 Missouri Pac. R. Co. v. Nebraska, 
 217 U. S. 196, 30 Sup. Ct. 461, 54 
 L. ed. 727; Lake Erie &c. R. Co. v. 
 Witham, 155 111. 514, 40 N. E. 1014, 
 28 L. R A. 612, 46 Am. St. 355; 
 Candless v. Richmond &c. R. Co., 
 38 S. Car. 103, 16 S. E. 429, 18 
 L. R. A. 440. And the fact that the 
 state owns some of the shares of a 
 particular corporation does not 
 make it a public corporation. Mar- 
 shall V. Western R. Co., 92 N. Car. 
 322; Moore v. Schoppert, 22 W. Va. 
 282. 
 
 18 Massachusetts &c. Co. v. Ham- 
 ilton, 88 Fed. 588; Mobile &c. R Co. 
 V. Yeates, 67 Ala. 164; Georgia &c. 
 R. Co. V. Propst, 83 Ala. 518, 3 So. 
 764; Mobile Light &c. Co. v. 
 Mackay, 158 Ala. 51, 48 So. 509; 
 Devon v. Cincinnati &c. R. Co., 128 
 Ky. 768, 109 S. W. 361; State v. 
 Brin, 30 Minn. 522; Black v. St. 
 Louis &c. R. Co., 110 Mo. App. 198, 
 85 S. W. 96; Atchison &c.. R. Co. 
 V. Citizens Trac. &c. Co., 16 N. Mex. 
 154, 113 Pac. 810; Hestonville &C. 
 R. Co. V. Philadelphia, 89 Pa. St. 
 210; Borough of Millvaie -v. Ever- 
 green R Co., 131 Pa. St. 1, 18 Atl. 
 993, 46 Am. & Eng. R. Cas. 219; 
 Gyger v. Philadelphia &c. R. Co., 
 136 Pa. St. 96, 46 Am. & Eng. R. 
 Cas. 229n. Contra Munkers v. 
 Kansas City &c. R. Co., 60 Mo. 334, 
 in which it is held that a "railroad" 
 is the graded right of way and the 
 "railway" consists of the rails and 
 ties laid thereon. 
 
§5 
 
 RAILROADS 
 
 10 
 
 cases cited, it is said : " 'Railroad' and 'railway' are used inter- 
 changeably. They are as nearly synonymous as any two words 
 in the language. Though the latter name was, in strict accuracy, 
 the corporate name of the company intended, there can be no 
 doubt that the other name is used as designating the same com- 
 pany."i8 So, in many other cases, a variance or an alleged vari- 
 ance, caused by using the term "railroad" instead of "railway'' in 
 stating the corporate name in a pleading or writ, has been held 
 immaterial or curable by amendment. ^^ 
 
 § 5 (4). What are railroads. — A railroad has been defined as 
 "a road graded and having rails of iron or other material for the 
 wheels of carriages to run upon."^^ This definition is no longer 
 as accurate as it was when the patrons of the railroad company 
 
 19 State V. Brin, 30 Minn. 522. In 
 this case the variance was in an in- 
 dictment. 
 
 20 Where a petition is filed against 
 the "C Railroad Co.'' and the sum- 
 mons or citation is issued against 
 the "C Railzuoj) Co.," the variance 
 is nnmaterial. Galveston &c. R. Co. 
 V. Donahoe, ■ 36 Tex. 162; Central 
 &c. R. Co. V. Morris, 68 Tex. 49, 3 
 S. W. 457, 28 Am. & Eng. R. Cas. 
 50. See also Alabama &c. R. Co. 
 V. Holding, 69 Miss. 255, 13 So. 844, 
 30 Am. St. 541. But compare Vick- 
 ery v. Omaha &c. R. Co., 93 Mo. 
 App. 1. The use of the word "rail- 
 road" instead of "'railway in a writ 
 may be cured by amendment after 
 default. Chicago &c. R. Co. v. John- 
 son, 89 Ind. 88, 13 Am. & Eng. R. 
 Cas. 181. See also Houston &c. R. 
 Co. v. Weaver (Tex. Civ. App.), 41 
 S. W. 848 (action against Houston 
 & Texas Central Railway Company 
 and judgment against Houston and 
 Texas Central Railroad Company). 
 A declaration may be similarly 
 
 amended after the trial. East Ten- 
 nessee &c. R. Co. V. Mahoney, 89 
 Tenn. 311, IS S. W. 652. 
 
 21 Commonwealth v. Fitchburg R. 
 Co., 12 Gray '(Mass.) 180; Turnick 
 V. Smith, 63 Pa. St. 18. See also 
 Muskogee E. T. Co. v. Doering 
 (Okla.), 172 Pac. 793, 2 A. L. R. 94; 
 State V. .Wiggins Ferry Co., 208 Mo. 
 622, 106 S. W. 1005, 1010. The term 
 is said to embrace "any road operated 
 by steam or electricity on rails." 
 Carter v. Coharie Lumber Co., 160 
 N. Car. 8, 75 S. E. 1074; Good- 
 man V. Tallahassee Power Co., 174 
 N. Car. 661, 94 S. E. 408, 410. It 
 is also said that where a railroad is 
 spoken of as a "public highway" it 
 means "the immovable structure ex- 
 tending across the country, giaded 
 and railed for the use of the loco- 
 motive and its train of cars." Lake 
 Superior &c. R. Co. v. United States, 
 93 U. S. 442, 451, and see further 
 as to what is meant by the term rail- 
 road, the same opinion on paees 446, 
 449. 
 
11 
 
 DEFINITIONS 
 
 §5 
 
 furnished or were supposed to furnish, the vehicles, yet it is, 
 perhaps, as accurate as any brief definition that can be given. ^^ 
 It is impossible to formulate an exact or precise definition giving 
 the term "railroad" an inflexible meaning. The truth is, it has 
 no one settled and invariable meaning, and what it includes in 
 any particular case depends largely on the connection in which it 
 is used.^* In one case it is held to mean the roadbed, tracks, and 
 necessary appurtenances,^* and in its broadest sense it includes 
 far more than the track and right of way, and may include all 
 structures and appurtenances necessary to operation -^^ yet, in 
 another case, as used in a pleading, it wa6 held to mean merely 
 the track. 28 Again, it is said to include the main line over which 
 
 22 For other definitions, see Lake 
 Shore &c. R. Co. v. Kaste, 11 111. 
 App. 536; Vicksburg &c. R. Co. v. 
 Louisiana &c. R. Co., 136 La. 691, 
 67 So. 554, 555; Hall v. Brown, 54 
 N. H. 495; Seymour v. Canandaigua 
 &c, R. Co.. 25 Barb. (N. Y.) 284; 
 Tracy v. Troy &c. R. Co., 38 N. 
 Y. 433 ; Sharpless v. Mayor &c., 21 
 Pa. St. 147, 59 Am. Dec. 759. In 
 Gibbs V. Drew, 16 Fla. 147, 26 Am. 
 Rep. 700, 701, 702, it is said: "The 
 legal signification of the term 'rail- 
 road' is not only a road or way on 
 which iron rails are laid, but a road 
 as incident to the possession or own- 
 ership of which important franchises 
 and rights affecting the public are 
 attaclied. * * * Our conclusion 
 is that a railroad is a public work, 
 the possession of which is attended 
 with the right and duty to use and 
 employ the franchises granted by 
 the sovereign in connection with and 
 as appurtenant to it." For a dis- 
 cussion of the history of railways 
 see 10 Ency. Americana 478. The 
 words "'railroad" and "railwa/' are 
 synonymous, Philadelphia v. Phila- 
 delphia Trac. Co., 206 Pa. 35, 55 
 Atl. 762. 
 
 23 Neither the kind of motive 
 power used nor its location neces- 
 sarily determines the character of 
 the road. Central &c. R, Co. v. 
 Twenty-third St. R. Co., 54 How. Pr. 
 (N. Y.) 168. See also State v. Burr 
 (La.), 84 So. 60, IZ; Arends v. Grand 
 Rapids R. Co., 172 Mich. 448, 138 N. 
 W. 125 ; Newell v. Minneapolis &c. 
 R. Co., 35 Minn, 112, 27 N. W. 839, 
 59 Am. Rep. 303 ; Carli v. Stillwater 
 &c. R. Co., 28 Minn. ZIZ, 41 Am. 
 Rep.- 290. 
 
 2* State V. Hudson Terminal R. 
 Co., 46 N. J. L. 289. So in United 
 States V. Denver &c. R. Co., ISO U. 
 S. 1, 12, 14 Sup. Ct. 11, il L. ed. 
 975. 
 
 2B United States Trust Co. v. At- 
 lantic &c. R. Co., 8 N. Mex. 689, 47 
 Pac. 725, 729. See also United States 
 V. Denver &c. R. Co., 150 U. S. 12, 
 14 Sup. Ct. 11, 37 L. ed. 975. And 
 not merely the track but also the 
 operation of cars on the track. Du- 
 luth v. Duluth St. R. Co., 137 Minn. 
 286, 163 N. W. 659. Compare also 
 United States v. Brooklyn- &c. Ter- 
 minal (U. S.), 39 Sup. Ct. 283. 
 
 2C E. E. Jackson Lumber Co. v. 
 Cunningham, 141 Ala. 206, Til So. 
 445. 
 
§5 
 
 RAILROADS 
 
 12- 
 
 cars are run, together with all switches, sidings, and branchi 
 roads,^'' but not to include depot buildings offices and ware- 
 houses.2* Where the reference is to a permanent structure des- 
 ignated as a public highway, the word includes the graded and. 
 railed way ready for the train of locomotive and cars, which, 
 together with other personal property, are not included.^^ While 
 railroads are often called highways, they are not included in the 
 phrase "public roads, streets and highways," in a statute des- 
 ignating the places where telegraph companies are authorized 
 to erect their lines.*" , In a statute providing for the assessment 
 of the "entire railway," it is defined as including "all property, 
 real and personal, exclusively used in the operation of such rail- 
 way."*^ A line for the private use of the controlling stockholder 
 in conveying materials to his mill, though built by a company 
 organized under the general law providing for the formation and 
 regulation of public railroad companies, has been held not to be 
 such a railroad as may exercise the right of eminent domain,*^ for 
 one of the essential characteristics of a railroad authorized tO' 
 
 27 St. John V. Erie R. Co., 22 
 Wall. (U. S.) 136, 22 L. ed. 743; 
 Lake Superior &c. R. Co. v. United 
 States, 12 Ct. CI. 35, 93 U. S. 442, 
 23 L. ed. 965; Hartzell v. Alton &c. 
 Trac. Co., 263 111. 205, 104 N. E. 
 1080, 1081 (citing text) ; Cleveland 
 &c. R. Co. V. Speer, 56 Pa. St. 325, 
 94 Am. Dec. 84; Black v. Philadel- 
 phia &c. R. Co., 58 Pa. St. 249. See 
 also Roby v. Farmers' Grain &c. Co., 
 76 Nebr. 450, 107 N. W. l(ib\ Ore- 
 gon-Washington R. &c. Co. V. 
 Spokane &c. R. Co., 83 Ore. 528, 163 
 Pac. 600, Ann. Cas. 1918C, 991. 
 But see Terre Haute R. Co. v. 
 Peoria Co., 61 111. App. 405; Rich- 
 ter V. Penn Co., 104 Pa. St. 511. 
 
 28 South Wales R. Co. v. Local 
 Board of Health, 4 E. & B. 189, 82 
 E. C. ' L. 188. But see Esch-Cum- 
 
 mins Act, 1921 Supp. Barnes' Fed. 
 Code, §7884. Pennsylvania R. Co. 
 V. United States, 236 U. S. 351, 3S 
 Sup. Ct. 370, 373, 59 L. ed. 616. 
 
 29 Lake Superior &c. R. Co. v. 
 United States, 12 Ct. Q. 35, 93 U. S.. 
 442, 23 L. ed. 965. 
 
 30 New York City &c. R Co. v. 
 Central Union Tel. Co., 21 Hun (N. 
 Y.) 261, 1 Am. Elec. Cas. 315. 
 
 31 Atlantic &c. R. Co. v. Yavapai 
 County (Ariz.), 21 Pac. 768. 
 
 32' Weidenfeld v. Sugar Run R. 
 Co., 48 Fed. 615. See also Split 
 Rock Cable Co., In re, 128 N. Y. 
 408, 28 N. E. 506; Pittsburgh &c. 
 R. Co. V. Benwood Iron Works, 31 
 W. Va. 710, 8 S. E. 453, 2 L. R. A. 
 680n. But see Bacot, Ex parte, 36 
 S. Car. 125, 15 S. E. 204, 16 L. R. A. 
 586, 50 Am. & Eng. R. Cas. 597. 
 
13 
 
 DEFINITIONS 
 
 §5 
 
 ■exercise that right is said to be its readiness to render, without 
 discrimination, the services which all citizens alike may claim.^* 
 But, as will hereafter be seen, roads and side-tracks to mills, 
 -manufacturing establishments and the like may constitute a pub- 
 lic as well as a private use for which the exercise of the power of 
 ■eminent domain may be invoked.** The word "railroad" is some- 
 times applied, also, to the corporation owning the road and run- 
 ning trains thereon for the carriage of freight and passengers.^^ 
 Ordinarily, however, the corporation is designated as a "railroad 
 •company"** or "railroad corporation;"*'' and the fact that it is 
 authorized to do other kinds of business besides that of transport- 
 ing freight and passengers is held not to render these terms in- 
 applicable ;** nor does their applicability necessarily depend on 
 the possession of rolling stock or on the control of the road's 
 
 33 Colorado &c. R. Co. v. Union 
 &c. R. Co., 44 Am. & Eng. R Cas. 
 10, and note on page 25. 
 
 3* South Chicago R. Co. v. Dix, 
 109 111. 237; Kettle River R. Co. v. 
 Eastern R. Co., 41 Minn. 461; Har- 
 ney V. Thomas, 10 Watts (Pa.) 63; 
 Philadelphia &c. R. Co. v. Williams, 
 54 Pa. St. 103; Qetz's Appeal, 65 
 Pa. St. 1, 3 Am. & Eng. R. Cas. 
 186. But compare Cozardo v. 
 Kanawha Hardwood Co., 139 N. Car. 
 283, 51 S. E. 932, 1 L. R. A. (N. S.) 
 ■969n, 111 Am. St. 779, reviewing 
 authorities on both sides as to right 
 to condemn for such and some- 
 what similar uses ; also Riley v. 
 Louisville &c. R. Co., 142 Ky. 67, 
 133 S. W. 971, 35 L. R. A. (N. S.) 
 ■636n, Ann. Cas. 1912D, 231, 234, and 
 note. The subject is treated in 
 1§ 1206, 1207, post. 
 
 35 Calhoun v. Paducah &c. R. Co., 
 2 Flip. (U. S.) 442, 9 Cent. L. Jour. 
 '1. In the Standard Dictionary it is 
 ■said that the term "railroad" may 
 
 have any of the following mean- 
 ings : A graded road having one or 
 or more tracks, usually of metal 
 rails supported by sleepers and de- 
 signed for the passage of rolling- 
 stock. 2. The whole system of 
 tracks, stations, rolling-stock and 
 machinery used in transportation by 
 rail. 3. The corporation or persons 
 owning or operating such a system. 
 
 36 Griggs V. Houston, 104 U. S. 
 533, 26 L. ed. 840; Great Western R. 
 Co. V. Central Wales R. Co., 52 L. 
 J. Q. B. 211, L. R. 10 Q. B. Div. 
 231. 
 
 37 Union Trust Co. v. Kendall, 20 
 Kans. SIS. 
 
 38 Randolph v. Post, 93 U. S. 502, 
 23 L. ed. 957; Kentucky Imp. Co. 
 V. Slack, 100 U. S 648, 25 L ed. 609. 
 The right to construct a railroad 
 and to erect a ferry may be granted 
 to one corporation, but "a ferry is 
 not a railroad, nor is a railroad a 
 ferry." Aiken v. Western R. Co., 20 
 N. Y. 370, 376. 
 
§6 
 
 RAILROADS 
 
 14 
 
 operation, for a railroad company or corporation can exist with- 
 out either.38 
 
 § 6 (5). "Railroad track"— "Right of way"— "Roadbed" and 
 "roadway." — The term "railroad track" is often used to designate 
 the right of way with its grades and superstructure of iron 
 rails.*" But, in a narrower sense, it has been defined as "the two 
 continuous lines of rails on which the railway cars run,"*^ and it 
 does not necessarily include the whole right of way.*^ It may,^ 
 however, be so used as to include depot buildings, roundhouses, 
 machine shops, coal or wood-sheds and watertanks, if they are on 
 the right of way.*^ The latter term has been defined as meaning 
 the way over which the company has the right to pass in the 
 operation of its trains ;** and as including all of the strip of land 
 appropriated by the company for its use and upon which its road- 
 bed has been built.*^ Primarily it would seem to mean the right. 
 
 39 Pennsylvania R. Co. v. St. 
 Louis &c. R. Co., 118 U. S. 290, 6 
 Sup. Ct. 1094, 30 L. ed. 83, 24 Am. 
 & Eng. R. Cas. 58, in which one of 
 the parties was such a company. 
 See also Lake Superior &c. Co. v. 
 United States, 12 Ct. CI. 35, 93 U. 
 S. 442, 23 L. ed. 965; State v. Wig- 
 gins Ferry Co., 208 Mo. 622, 106 
 S. W. 1005, 1010 (citing text); 
 Tracy v. Troy &c. R; Co., 38 N. 
 Y. 433, 98 Am. Dec. 54; Internation- 
 al &c. Co. V. Anderson Co., 59 Tex. 
 654, 663. 
 
 40 Delaware &c. Co. v. Whitehall, 
 90 N. Y. 21, 10 Am. & Eng. R. Cas. 
 227. 
 
 41 Atchison &c. R. Co. v. Kansas 
 City &c. R. Co., 67 Kans. 569, 70 
 Pac. 939, 12, Pac. 899. But see Gates 
 V. Chicago &c. R. Co., 82 Iowa 527, 
 48 N. W. 1040, 1041. 
 
 42 Drainage Com'rs v. Illinois 
 Cent. R. Co., 158 111. 361, 41 N. E. 
 1073. 
 
 43 Pfaflf V. Terra Haute &c. R. Co., 
 
 108 Ind. 144, 9 N. E. 93; con- 
 struing § 6410, R. S. Ind. 1881 
 But not necessarily, nor perhaps or- 
 dinarily. Portland &c. R. Co. v. 
 Saco, 60 Maine 198. See also Ann. 
 Cas. 1918E, 229, 233n. 
 
 44 Postal &c. Co. V. Southern R. 
 Co., 90 Fed. 30; Pfaff v. Terre 
 Haute &c. R. Co. 108 Ind. 144, 9 
 N. E. 93; Williams v. Western &c. 
 R. Co., 50 Wis. 71, 5 N. W. 482, 5 
 Am. & Eng. R. Cas. 290. As will 
 hereafter be shown, however, it is 
 usually in the nature of an easement, 
 although a peculiar one, rather thati 
 an estate in fee. See Cincinnati &c. 
 R. Co. V. Geisel, 119 Ind. 11, 78, 
 21 N. E. 470, and authorities cited; 
 Williams v. Western &c. R. Co., SO 
 Wis. 71, 5 N. W. 482, 42 Cent. L. J. 
 156. 
 
 45 Keener v. Union Pacific R. Co., 
 31 Fed. 126. In the statute. Gen. 
 Stat. Colo. §2847, which this case 
 construes, the "entire railway" is de- 
 fined as including the right of way.. 
 
15 
 
 DEFINITIONS 
 
 §6 
 
 interest, or tenure, .but the term has a "twofold signification," 
 and may also be used as meaning the strip of land itself.*® The 
 roadbed is the foundation*'^ upon which the superstructure restS' 
 while the term "roadway" is said to include all the ground upon 
 which the company is authorized to construct and lay its bed 
 and track.** 
 
 46 New Mexico v. United States 
 Trust Co., 172 U. S. 182, 19 Sup. Ct. 
 128, 132, 43 L. ed. 407; Central 
 Trust Co. V, Wabash &c. R. Co., 29 
 Fed. 546; Atlantic &c. R. Co. v. 
 Lesueur, 2 Ariz. 428, 19 Pac. 157, 
 1 L. R. A. 244n (tenure) ; Mays- 
 ville &c. R. Co. V. Ball, 108 Ky. 241, 
 56 S. W. 188; Uhl v. Ohio River R. 
 Co., 51 W. Va. 106, 41 S. E. 340. 
 See also Western Union Tel. Co. v. 
 Pennyslvania R. Co., 195 U. S. 540, 
 25 Sup. Ct. 133, 49 L. ed. 312. In 
 Nashville &c. R. Co. v. State, 129 
 Ala. 142, 30 So. 619, it is held to 
 mean only the easement and not to 
 include structures on the land. In 
 Boyce v.. Missouri Pac. R. Co., 168 
 Mo. 583, 68 S. W. 920, 58 L. R. A. 
 442, it is said to be, in strictness, 
 neither an easement nor a fee, but 
 merely an interest in land. In 
 Northern Pac. R. Co. v. North Am. 
 Tel. Co., 230 Fed. 347, it is said to 
 be more than an easement. But 
 compare Lousiville &c. R. Co. v. 
 Postal Tel. Cable Co., 143 Ga. 331, 
 85 S. E. 110. As to whether it in- 
 cludes side tracks, switches, and the 
 like, see Chicago &c. R. Co. v. Peo- 
 ple, 98 111. 350;. Chicago &c. R. Co. 
 V. People, 99 111. 464; Chicago &c. 
 R. Co. V. Richardson County, 61 
 Nebr. 519, 85 N. W. 532; Akers v. 
 United N. J. R. &c. Co., 43 N. J. L. 
 110; Chicago &c. R. Co. v. Cass 
 
 County, 8 N. Dak. 18, 76 N. W. 
 239; Sante Fe &g. R. Co. v. Laune 
 (Okla.), 168 Pac. 1022; Missouri &c. 
 R. Co. v. Anderson, 36 Tex. Civ. 
 App. 121, 81 S. W. 781. See also 
 generally as to its meaning in vari- 
 ous connections: Wilson v. Pacific 
 Elec. R. Co., 176 Cal. 248, 168 Pac. 
 128; Northern Mass. St. R. Co. v. 
 Westminster, 227 Mass. 547, 116 N. 
 E. 896, 898. 
 
 *'' Text quoted with approval in 
 Shreveport v. Shreveport Belt R. Co., 
 107 La. Ann. 785, 32 So. 189, 190. 
 See also Dunn v. Burlington &c. R. 
 Co., 35 Minn. 73, 27 N. W. 448; Mo- 
 bile &c. R. Co. V. Alabama &c. Co., 
 87 Ala. 520, 6 So. 407, 408, holding 
 that it may include the track. 
 
 *8 North Beach &c. Co., Appeal 
 of, 32 Cal. 499; San Francisco R. 
 Co. V. State Board, 60 Cal. 12, 34; 
 San Francisco v. Central Pac. R. 
 Co., 63 Cal. 467, 49 Am. Rep. 98. 
 See also Minneapolis &c. R. Co. v. 
 Oppegard, 18 N. Dak. 1, 118 N. W. 
 830. Fences, however, are not part 
 of the roadway to be assessed as 
 such for purposes of taxation, but 
 are to be assessed as improvements 
 under the California statute. Santa 
 Clara County v. Southern Pac. R. 
 Co., 118 U. S. 394, 6 Sup. Ct. 1132, 
 1142, 30 L. ed. 118. See also San 
 Francisco &c. R. Co. v. Stockton, 149 
 Cal. 83, 84 Pac. 771. 
 
§7 
 
 RAILROADS 
 
 16 
 
 § 7 (6). Street railways. — ^A street railway has been defined as 
 "a railway laid down upon roads or streets for the purpose of 
 carrying passengers."** A distinctive feature or characteristic of 
 such a railway, considered in relation to ordinary commercial rail- 
 roads, is, or has been, that it is intended and used for the trans- 
 portation of passengers and not of freight.^" This, and the char- 
 acter of the use of the street, rather than the motive power, dis- 
 tinguish it from the ordinary commercial railroad f^ and such a 
 railway, laid in a street for the purpose of carrying passengers 
 and facilitating its use by the public, is a street railway, no mat- 
 
 49 Elliott Roads and Streets {3rd 
 ed.), §926, quoted in Montgomery 
 V. Santa Ana &c. R. Co., 104 Cal. 
 186, 37 Pac. 786, 25 L. R. A. 654, 
 43 Am. St. 89; Louisville &c. R. 
 Co. V. Louisville Clity R. Co., 2 
 Duv. (Ky.) 175. Text cited virith 
 approval in Hannah v. Metropolitan 
 St. R. Co., 81 Mo. App. 78. See defi- 
 nition in Harvey v. Aurora &c. R. 
 Co., 174 111. 295, 51 N. E. 163, 167, 
 and cases there cited. As to whether 
 this definition is not too narrow or 
 restrictive, see chapter on street 
 railways. 
 
 50 Elliott Roads and Streets (3rd 
 ed.), §926; Booth Street Railw., §1; 
 Carli V. Stillwater St. R. Co., 28 
 Minn. 373, 10 N. W. 205, 41 Am. 
 Rep. 290, 3 Am. & Eng. R. Cas. 
 226. See also Wiggins Ferry Co. v. 
 East St. Louis R. Co., 107 111. 450; 
 Attorney General v. Chicago &c. R. 
 Co., 112 111. 611; Spaulding v. Ma- 
 comb &c. R. Co., 225 111. 585, 80 N. E. 
 327; Funk v. St. Paul &c. R. Co., 
 61 Minn. 435, 63 N W. 1099, 1101, 
 29 L. R. A. 208, 52 Am. St. 608; 
 Potts v. Quaker City &c. R. Co., 12 
 Pa. Co. Ct. 593, 31 W. N. Cas. 290. 
 Text cited in Rische v. Texas 
 Transp. Co., 27 Tex. Civ. App. 33, 6(, 
 
 S. W. 324, 327. But the mere fact 
 that some kind of freight is carried 
 may not always be a conclusive test 
 under recent developments. 
 
 5 i Williams v. City Electric St. R. 
 Co., 41 Fed. 556, 43 Am. & Eng. R. 
 Cas. 215; Newell v. Minneapolis &c 
 R. Co., 35 Minn. 112, 27 N. W. 839, 
 59 Am. . Rep. 303. See also note to 
 O'Malley v. Board County Comrs., 
 (86 Kans. 752, 121 Pac. 1108), in 
 Ann. Cas. 1913C, 577, 579; annota- 
 tion in 2 Am. Law Reg. & Rev., 
 N. S. (Jan. 1895) 43; Massachusetts 
 &c. R. Co. V. Hamilton, 88 Fed. 588, 
 Wilder v. Aurora &c. Traction 
 Co., 216 111. 493, 75 N. E. 194, 
 206, 207; Linden Land Co. v. Mil- 
 waukee R. Co., 107 Wis. 511, 83 
 N. W. 851. It might be better, 
 however, to say that the character 
 of the use, that is, the fact that 
 street railways .ire to accomodate lo- 
 cal convenience and street travel, is 
 the main test. See Harvey v. 
 Aurora &c. R. Co., 174 111. 295, 307, 
 51 N. E. 163; Hartzell v. Alton &c. 
 Trac. Co., 263 111. 205, 104 N. E. 
 1080, 1081 (citing text); Sparks v. 
 Philadelphia &c. R. Co., 212 Pa. 105. 
 61 Atl. 881, 882. 
 
17 
 
 DEFINITIONS 
 
 §7 
 
 ter what motive power may be used to propel the cars.^^ So. 
 indeed, the fact that freight of some character, such as small par- 
 cels, is carried may not always be an invariable test under present 
 conditions and future developments. But street railways are not 
 always included when the term "railroads" is used in a statute. 
 The exact meaning of that term, as already stated, depends upon 
 the connection in which it is used.^* Thus, it has been heldi 
 under some statutes though not under others, to include street 
 railroads operated by horse power, in statutes giving certairu 
 powers to "railroads j"^* making the proprietors of any "railroad'* 
 
 52 Massachusets &c. Co. v. Hamil- 
 ton, 88 Fed. 588; Sinconeau v. Pa- 
 cific Elec R. Co., 159 Cal. 494, 115 
 Pac. 320; McCleary v. Babcock, 169 
 Ind. 228, 82 N. E.'4S3; Briggs v. 
 Lewiston &c. R. Co., 79 Maine 363, 
 367, 10 Atl. 47, 1 Am. St. 316, -32 
 Am. & Eng. R. Cas. 167; Nichols 
 V. Ann Arbor &c. St. R. Co., 87 
 Mich. 361, 49 N. W. 538, 16 L. R. A. 
 371. See also Newell v. Minneapolis 
 &c. R. Co., 35 Minn. 112, 27 N. W. 
 839, 59 Am. Rep. 303 ; Peoples Rapid 
 Transit Co. v. Dash, 125 N. Y. 93, 
 26 N. E. 25, 10 L. R. A. 728; 
 Clement v. Cincinnati, 16 Weekly 
 Law Bui. (Ohio) 355. But see Fast 
 End St. R. Co. V. Doyle, 88 Tenn. 
 747, 13 S. W. 936, 9 L. R. A. 100, 
 17 Am. St. 933; Stanley v. Daven- 
 port, 54 Iowa 463, 2 N. W. 164, 6 
 N. W. 706, 37 Am. Rep. 216. And 
 an underground railway may be a 
 street railway. New York District 
 R. Co., In re, 107 N. Y. 42, 14 N. E. 
 187, 32 Am. & Eng. R. Cas. 202. See 
 also Barsaloux v. Chicago, 245' 111. 
 598, 92 N. E. 525, 19 Ann. Cas. 255. 
 But see Sparks v. Phiadelphia &c. R 
 Co., 212 Pa. 105, 61 Atl. 881, and the 
 mere fact that the track is to be 
 elevated does not necessarily change 
 
 the character of the road. Freiday 
 V. Sioux City Rapid Transit Co., 
 92 Iowa 191, 60 N. W. 656, 26 
 L. R A. 246. 
 
 53 Massachusetts &c. Co. v. Hamil- 
 ton, 88 Fed. 588; Hartzell v. Alton 
 &c. Trac. Co., 263 111. 205, 104 N. E. 
 1080, 1081 (citing text). See also 
 Fidelity &c. Co. v. Douglass, 104 
 Iowa 532, 73 N. W. 1039; O'Malley 
 V. Board of Co. Comrs., 86 Kans. 
 752, 121 Pac. 1108, Ann. Cas. 1913C, 
 576, and note. State v. Burr (Fla.), 
 84 So. 61, 73. Some courts hold 
 that the word "railroad" includes 
 street railroad unless the contrary 
 is required by the context, and others 
 hold that it does not unless required 
 by the context. Omaha &c. St. R. 
 Ct). V. Interstate Commerce Com., 
 230 U. S. 324, 335, 33 Sup. Ct. 890, 
 57 L. ed. 1501, 46 L. R. A. (N. S.) 
 385. 
 
 54Chicago V. Evans, 24 111. 52.. 
 But see O'Malley v. Board, 86 Kans. 
 752, 121 Pac. 1108, Ann. Cas. 1913C, 
 576. Statutes authorizing the incor- 
 poration of railroad companies are 
 often comprehensive enough to auth- 
 orize the incorporation of street rail- 
 way companies. In Sparks v. Phil- 
 adelphia &c. R. Co., 212 Pa. St. 105, 
 
§7 
 
 RAILROADS 
 
 18 
 
 liable for injuries caused by the negligence of its servants ;^^ and 
 prohibiting the obstruction of "railroad tracks."®* So, a statute 
 authorizing the consolidation of "railroads" has been held to 
 include street railways,®'' and an act taxing the property of "any 
 railroad company" has been held to include the property of a 
 street railway.®* But a statute prohibiting the location within a 
 certain territory of railroads other than that of a designated com- 
 pany, is held not to authorize an injunction restraining a street 
 railway company from building' its road across such territory.®^ 
 A penalty denounced against railroad companies demanding fares 
 in excess of the lawful rate has been held not to apply to street 
 railroads f° nor, according to one decision, does a statute author- 
 
 61 Atl. 881, a statute for the!' incor- 
 poration of railroad companies was 
 held to authorize the construction of 
 the road underground in a tunnel 
 for a short distance, and it was also 
 held that it was not a street pas- 
 senger railroad. See also Bridwell 
 V. Gate City Terminal Co., 127 Ga. 
 520, 56 S. E. 624, 10 L. R. A. (N. 
 S.) 909n. 
 
 BB Johnson v. Louisville City R. 
 Co., 10 Bush (Ky.) 231. See also 
 Patton V. Los Angles Pac. Co., 18 
 Cal. App. 552, 123 Pac. 613; 
 Savannah &c. R. Co. v. 'Williams, 
 117 Ga. 414, 43 S. E. 751, 61 L. R. A. 
 249. But see Indianapolis &c. Tran- 
 sit Co. V. Andes, 33 Ind. App. 625, 
 72 N. E. 145; Hughes v. Indiana 
 Union Trac. Co., 57 Ind. App. 202, 
 105 N. E. 537; Funk v. St. Paul 
 &c. R. Co., 61 Minn. 435, 63 N. 'W. 
 1099, 29 L. R. A. 208, 52 Am. St. 
 608; Sams v. St. Louis &c. R. Co., 
 174 Mo. S3, 73 S. 'W. 686, 61 L. R, 
 A. 475, 17 L. R. A. (N. S.) 117, 
 and note; Lax v. Forty-second St. 
 &c. R. Co., 46 N. Y. Super. Ct. 448; 
 Norfolk &c. Trac. Co. v. Ellington, 
 
 108 Va. 245, 61 S. E. 779, 17 L. R. 
 A. (N. S.) 117, and note. 
 
 56 Price V. State, 74 Ga. 378. See 
 also Evans v. Utica &c. R. Co., 44 
 Misc. 345, 89 N. Y. S. 1089; 
 Cheatham v. McCormick, 178 Pa. St. 
 187, 35 Atl. 631. But see State v. 
 Cain, 69 Kans. 186, 76 Pac. 443. 
 
 OT 'Washington St. R. Co., In re, 
 115 N. Y. 442, 22 N. E. 356, 40 Am. 
 & Eng. R. Cas. 588; Hestonville &c. 
 R. Co. V. Philadelphia, 89 Pa. St. 
 210. But see Gyger v. Philadelphia, 
 &c. R. Co., 136 Pa. St. 96, 20 Atl. 
 399, 9 L. R. A. 369; Shipley v. Con- 
 tinental &c. R. Co., 13 Phila. (Pa.) 
 128. 
 
 5 s Citizens' R. Co. v. Pittsburg, 
 104 Pa. St. 522, 17 Am. & Eng. R. 
 Cas. 438. See ante, § 1, note 1. But 
 see San Francisco &c. R. Co. v. 
 Scott, 142 Cal. 222, 75 Pac. 575; 
 State V. Omaha &c. R. Co., 96 Nebr. 
 725, 148 N. -W. 946, and cases there 
 cited., North Texas Transfer &c. Co. 
 V. State, 108 Tex. 235, 191 S. W. 550. 
 
 B9 Louisville &c. R. Co. v. Louis- 
 ville &c. R. Co., 2 Duv. (Ky.) 175. 
 
 60 Moneypenny v. Sixth Avenue R. 
 Co., 4 Abb. Pr. (N. S.) (N. Y.) 
 
19 
 
 DElriNITIONS 
 
 §7 
 
 izing a laborer's lien on a railroad apply to a street cable rail- 
 road.*i A "dummy line," operated over the county roads be- 
 tween two cities, along whose streets its track extends to termini 
 in their centers, is a "railroad" within the meaning of a statute 
 requiring all trains to stop within one hundred feet of where two 
 railroads cross each other ; the court holding, however, that it is 
 "not a street railway" because not located within and dependent 
 on any mimicipality.®^ Such a line, engaged in the streets of a 
 city exclusively in carrying passengers, is also held to be a "rail- 
 road" within a statute requiring some person on the locomotive 
 to keep a lookout, and requiring the whistle to be sounded to 
 prevent accidents ;"* but not a "railroad" within a statute pro- 
 hibiting the occupation of streets at crossings.^* It is not easy to 
 reconcile all of the decisions and about all that can be said is that 
 the question as to whether a street railway is included in the 
 term railroad in any particular case is determined largely by the 
 context or connection in which the term is used.^^ 
 
 357, See also Funk v. St. Paul &c. 
 R. Co, 61 Minn. 435, 63 N. W. 1099, 
 52 Am. St. 608; Lincoln St. R. Co. 
 V. McClellan, 54 Nebr. 672, 74 N. 
 W. 1074, 69 Am. St. 736. 
 
 "1 Front St. Cable R. Co. v. John- 
 son, 2 Wash. 112, 25 Pac. 1084, 11 
 L. R. A. 693. See also Manhattan 
 Trust Co. V. Sioux Cable R. Co., 68 
 Fed. 82; Central Trust Co. v. War- 
 ren, 121 Fed. 323; Massillon Bridge 
 Co. V. Cambria Iron Co., 59 Ohio 
 St. 179, 52 N. E. 192. Contra St. 
 Louis &c. Co. V. Donohoe, 3 Mo. 
 App. 559; New England Engineer- 
 ing Co. V. Oakwood St. R. Co., 75 
 Fed. 162. See also Egan v. Cheshire 
 St. R. Co., 78 Conn. 291, 61 Atl. 950; 
 Koken Iron Works v. Robberson 
 Ave. R.,Co., 141 Mo. 228, 44 S. W. 
 269. In the first case, however, the 
 statutory lien extended to the land, 
 and, as the street railway company 
 did not own the fee, this was the 
 
 principal reason for holding the 
 statute inapplicable. \ 
 
 fi2 Birmingham R. Co. v. Jacobs, 
 92 Ala. 187, 9 So. 320, 12 L. R. A.. 
 830, 49 Am. & Eng. R. Cas. 263. 
 
 "S Katzenberger v. Lawo, 90 Tenn, 
 238, 16 S. W. 611, construing Tenn.- 
 code, § 1298. 
 
 64 Howard v. Union &c. Co., 156' 
 Mass. 159, 30 N. E. 479. See also- 
 Byrne v. Kansas City &c. R. Co., 61- 
 Fed. 60S, 24 L. R. A. 693. 
 
 "5 Massachusetts &c. Co. v. Ham-- 
 ilton, 88 Fed. 588 ; Hartzell v. Alton- 
 &c. Trac. Co., 263 111. 205, 104 N. E. 
 1680, 1081 (citing text); Bloxham: 
 V. Consumers &c. Co., 36 Fla. 519,, 
 18 So. 444, 29 L. R. A. S07, 51 Am.. 
 St. 44; Louisville &c. R. Co. v, 
 Louisville City R. Co., 63 Ky. 175; 
 Sams V. St. Louis &c. R. Co., 174 
 Mo. 53, 73 S. W. 686, 590, 61 L. R. 
 A. 475, 479. See also Cedar Rapids 
 &c. R. Co. V. Cedar Rapids, 106 
 
|8 
 
 RAILROADS 
 
 20 
 
 § 8 (6a). Street railways further considered.®^ — As street rail- 
 ways are usually constructed on streets and do not, ordinarily, 
 constitute an additional burden, there is seldom any necessity for 
 the exercise of power of eminent domain in order to obtain a right 
 ■of way ; but, like commercial railroads, they are of a quasi public 
 ^nature and may be authorized to condemn property for a right of 
 way as for a public use.®'^ But it has been held that a statute 
 •authorizing the condemnation of a right of way by corporations 
 ^"organized for the construction of any railway" did not apply 
 '^o street railways.®^ And it has also been held that although a 
 
 ilowa 476, 76 N. W. 728; Kansas 
 "City &c. R. Co. V. Board of Rail- 
 road Comrs., 73 Kans. 168, 84 Pac. 
 7SS. In the following cases street 
 railways were held to be included: 
 Savannah &c. R. Co. v. Williams, 117 
 Ga. 414, 43 S. E. 751, 61 L. R. A. 
 249; Bloxham v. Consumers &c. Co., 
 36 Fla. 519, 18 So. 444, 29 L. R. A. 
 307, 51 Am. St. 44; Funk v. St. 
 Paul &c. R. Co., 61 Minn. 435, 63 
 N. W. 1099, 52 Am. St. 608 ; Raflferty 
 V. Central Traction Co., 147 Pa. St. 
 579, 23 Atl. 884, 30 Am. St. 736. 
 See also Omaha &c. St. R. Co. v. 
 Interstate Commerce Com., 191 Fed. 
 40; Denver v. Mercantile Trust Co., 
 201 Fed. 790; Arends v. Grand Rap- 
 ids R Co., 172 Mich. 448, 138 N. W. 
 195. In the following cases they 
 were held not to be included: Com- 
 missioners v. Market St. R. Co., 132 
 Cal. 677, 64 Pac. 1065; State v. Du- 
 luth &c. Co., 76 Minn. 96, 78 N. W. 
 1032, 57 L. R. A. 63; Scott v. Far- 
 mers &c. Bank, 97 Tex. 31, 75 S. 
 W. 7, 16. See also Ecorse v. Jack- 
 son &c. R. Co., 153 Mich. 393, 117 N. 
 W. 89; Omaha &c. R. Co. v. Inter- 
 state Commerce Com., 230 U. S. 324, 
 33 Sup. Ct. 890, 57 L. ed. 1501, 46 L. 
 R. A. (N. S) 385n; Gould v Mer- 
 
 rill R. &c. Co., 139 Wis. 433, 121 
 N. W. 161, note in Ann. Cas. 1913C, 
 582, 584. 
 
 66 Part of this section was part of 
 § 6 in the original edition. 
 
 6T Moran v. Ross, 79 Cal. 159, 21 
 Pac. 547, 39 Am. & Eng. R Cas. 1; 
 Union Depot R. Co. v. Southern R. 
 Co., 105 Mo. 562, 16 S. W. 920; 
 St. Louis R. Co. V. Southern R. Co., 
 105 Mo. 577, 16 S. W. 960, 46 Am. 
 & Eng. R. Cas. 1; Kerr, In re, 42 
 Barb. (N. Y.) 119. 
 
 6S Thompson-Houston Electric Co. 
 V. Simon, 20 Ore. 60, 25 Pac. 147, 
 10 L. R. A. 251, 23 Am. St. 86, 47 
 Am. & Eng. R. Cas. 57. While such 
 statutes should be strictly construed, 
 yet the soundness of the decision in 
 the case just cited seems to us to 
 admit of some doubt. See Ogden 
 City R. Co. V. Ogden City, 7 Utah 
 207, 26 Pac. 288. But, there are 
 usually such material differences be- 
 tween commercial railroads and 
 street railways, both in respects al- 
 ready indicated and also in the need 
 for the exercise of the power in 
 the one case and not in the other, 
 that a statute might well be held 
 to give the power to a commercial 
 railroad and not to a street rail- 
 
21 
 
 DEFINITIONS 
 
 §9 
 
 street car company is organized under the general railroad law, 
 and has claimed to exercise the right of eminent domain, this 
 does not bring it within the terms of a statute making railroad 
 companies "owning and operating a railroad" liable for injuries 
 to a servant "injured in the work of operating such railroad" by 
 the negligence of a fellow servant, where the company is in fact 
 operating only a street railway.®* Street railway companies are 
 common carriers of passengers,''" and, while not usually common 
 carriers of freight, may become liable as common carriers of 
 goods by assuming to act as such.'^^ It has been held under the 
 Wisconsin statute, that a city cannot grant to a commercial rail- 
 road, and that the latter cannot accept, a street railway fran- 
 chiseJ^ 
 
 §9 (7). Elevated railroads. — Elevated railroads are so far 
 "railroads" that it has been held that they may be organized un- 
 der general statutes authorizing the incorporation of railroad com- 
 panies.''* But it has been held that a company incorporated and 
 
 way; Piedmont Cotton Mills v. 
 Georgia R. &c. Co., 131 Ga. 129, 
 62 S. E. 52. See also F. W. Cook 
 Inv. Co. V. Evansville Terminal R. 
 Co., 175 Ind. 3, 93 N. E. 279. 
 
 69 Sams V. St. Louis &c. R. Co., 
 174 Mo. 53, 73 S. W. 686, 61 L. R. A. 
 475. 
 
 TO Citizens' St. R. Co. v. Twiname, 
 111 Ind. 587, 13 N. E. 55; Nelson 
 V. Metropolitan St. R. Co., 113 Mo. 
 App. 703, 88 S. W. 1119, 1121; 
 Spellman v. Lincoln Rapid Transit 
 Co., 36 Nebr. 890, 55 N. W. 270, 20 
 L. R. A. 316, 38 Am. .St. 753; 
 Thompson-Houston Electric Co. v. 
 Simon, 20 Ore. 60, 25 Pac. 147, 10 
 L. R. A. 251, 23 Am. St. 86; State 
 V. Spokane St. R. Co., 19 Wash. 
 518, 53 Pac. 719, 41 L. R. A. 515, 
 67 Am. St. 739. 
 
 71 Levi V. Lynn &c. R. Co., 93 
 Mass. 300, 87 Am. Dec. 713. See 
 also Thompson-Houston Electric Co. 
 
 V. Simon, 20 Ore. 60, 25 Pac. 147, 
 10 L. R. A. 251, 23 Am. St. 86. So, 
 of course, they may be so under a 
 statute. 
 
 12 State V. Milwaukee &c. R. Co. 
 116 Wis. 142, 92 N. W. 546. 
 
 73 Lieberman v. Chicago &c. R. 
 Co., 141 111. 140, 30 N. E. 544, 51 
 Am. & Eng. R. Cas. 581. See also 
 Fulton V. Short Route R. Co., 85 
 Ky. 640, 4 S. W. 332, 7 Am. St. 
 619, 32 Am. & Eng. R. Cas. 256, 
 where it is held that a street rail-, 
 road may elevate its tracks if the 
 character of the country requires it. 
 Compare Potts v. Quaker City El. 
 R. Co., 12 Pa. Co. Ct. 593, 2 Pa. 
 Dist. 200, 161 Pa. St. 396, 29 Atl. 
 108. And in Potts v. Quaker City 
 El. R. Co., 12 Pa. Co. Ct. 593, 161 
 Pa. St. 396, 29 Atl. 108, it was held 
 that an elevated railroad through ..he 
 streets of a city for the carriage 
 of passengers exclusively cannot be 
 
§9 
 
 RAILROADS 
 
 22 
 
 organized as a street railway company has no authority or right 
 ±0 build and operate an elevated railroad J* Such roads are gen- 
 erally intended and used merely for the carriage of passengers 
 along the streets, and, where such is the case, it seems to us that, 
 upon principle, they should be regarded as street railways rather 
 than as ordinary commercial railroads,''^ or at least more in the 
 nature of the former in the respect indicated, although it would 
 be still better, perhaps, to put them in a class by themselves. But 
 whether a street railway company has authority to construct an 
 elevated road or not must depend largely upon the particular 
 charter or law under which it is organized, and the construction 
 and use of the road may be such as to constitute an additional 
 burden and entitle the abutting owners to damages, where they 
 would not be entitled to compensation if it were an ordinary 
 surface street railroadJ® Thus, it has been held that an elevated 
 railroad supported by posts, with an overhead roadbed at the 
 
 organized under the general rail- 
 road law of Pennsylvania. See al- 
 so Schaper v. Brooklyn &c. R. Co., 
 124 N. Y. 630, 26 N. E. 311 ; Peoples 
 &c. Co. V. Dash, 125 N. Y. 93, 26 N. 
 E. 25, 10 L. R. A. 728, 46 Am. & 
 Eng. R. Cas. 114. 
 
 74 Commonwealth v. Northeastern 
 El. R. Co., 161 Pa. St. 409, 29 AtL 
 112. 
 
 T-5 See New York El. R. Co. v. 
 Fifth Nat. Bank, 135 U. S. 432, 440, 
 10 Sup. Ct. 743, 34 L. ed. 231; 
 Doane v. Lake St. El. R. Co., 165 
 111. 510, 46 N. E. 520, 36 L. R. A. 
 97, 56 Am. St. 265; Barsaloux v. 
 Chicago, 245 111. 598, 92 N. E. 525, 
 19 Ann. das. 255; Hartzell v. Al- 
 ton &c. Trac. Co., 263 111. 205, 104 
 N. E. 1080, 1081 (citing text). 
 Compare however Commonwealth v. 
 Northeastern El. R. Co., 3 Pa. 104; 
 Potts V. Quaker City El. R. Co., 12 
 Pa. Co. Ct. S93, 2 Pa. Dist. 200, 
 
 161 Pa. St. 396, 29 Atl. 108. "There 
 is no doubt that a railway under, or 
 elevated above, the surface of a 
 street, is still a street railway in 
 that street." Per Peckham, J., 
 Peoples &c. Co. v. Dash, 125 N. Y. 
 93, 26 N. E. 25, 10 L. R A. 728, 
 729, 46 Am. & Eng. R. Cas. 114 
 See also Booth Street Railways, §1. 
 78 Story V. New York El. R. Co., 
 90 N. Y. 122, 43 Am. Rep. 146; 
 Lahr v. Metropolitan El. R. Co., 104 
 N. Y. 268, 10 N. E. 528; Aben- 
 droth V. Manhattan R. Co., 122 N. 
 V. 1, 25, N. E. 496, 11 L. R. A. 
 634n, 19 Am. St. 461 ; Kane v. New 
 S(^ork El. R. Co., 125 N. Y. 164, 26 
 N. E. 278, 11 L. R. A. 640, 46 
 Km. & Eng. R. Cas. 137; Ameri- 
 can Bank Note Co. v. New York 
 El. R. Co., 129 N. Y. 252, 29 N. E. 
 302; Egerer v. New York Cent. &c. 
 R. Co., 130 N. Y. 108, 29 N. E. 95, 
 14 L. R. A. 381, and note. See 
 also DeGeofroy v. Merchant's 
 
23 
 
 DEFINITIONS 
 
 §10 
 
 sides, is a "railway" and not a "street railway" within the mean- 
 ing of a statute allowing the municipal authorities to authorize 
 the construction of either in a street, but requiring compensation 
 to the abutters where a "railway" is placed in the street J'' 
 
 § 10 (8). Electric railroads. — Railroads operated by electricity 
 and engaged in carrying passengers along the streets of a city 
 are classed with street railways rather than with ordinary com- 
 mercial railroads J* Their use being in furtherance of travel 
 upon the streets may be said to be within the original purposes 
 for which the streets were dedicated and laid out, and they do 
 not, therefore, when properly constructed, constitute a new servi- 
 tude or additional burden for which abutting property-owners 
 are entitled to compensation. ''* In this respect, as in most re- 
 
 Bridge &c. Co, 179 Mo. 698, 79 S. 
 W. 386, 64 L. R. A. 959, 101 Am. 
 St. 524; State v. Superior Court, 
 30 Wash. 282, 70 Pac. 484. Compare 
 Fulton V. Short Route &c. Co., 85 
 Ky. 640, 4 S. W. 332, 7 Am.' St. 
 619; Garreti v. Lake Roland El. R. 
 Co., 79 Md. 277, 29 ' Atl. 830, 24 
 L. R. A. 396. Jt is held in Illinois 
 that they do not ordinarily at least, 
 constitute an additional servitude ; 
 Doane v. Lake St. El. R. Co., 165 
 111. 510, 46 N. E. 520, 36 L. R. A. 
 97, 56 Am. St. 265. 
 
 ■77 Freiday v. Sioux City &c. Co., 
 92 Iowa 191, 60 N. W. 656, 26 L. 
 R. A. 246. See also Koch v. North 
 Ave. R. Co., 75 Md. 222, 33 Atl. 
 463, 15 L. R. A. ill. Peoples &c. 
 Co. V. Dash, 125 N. Y. 93, 26 N. E. 
 25, 10 L. R. A. 728, 46 Am. & Eng. 
 R. Cas. 114. A subway railway with 
 frequent stations from which the sur- 
 face could be reached was held in 
 effect a street railway in New York 
 &c. R. Co., In re, 107 N. Y. 42, 
 14 N. E. 187. But see Board of 
 
 Rapid Transit R. Comrs., In re, 197 
 N. Y. 81, 90 N. E. 456, 36 L. R. A. 
 (N. S.) 647n, 18 Ann. Cas. 366 
 (holding it an additional servitude, 
 as are also ordinary railways in New 
 York). 
 
 f 8 Hill v. Rome St. R. Co., 101 
 Ga. 66, 28 S. E. 631 ; Halsey v. Rapid 
 &c. R. Co., 47 N. J. Eq. 380, 20 
 Atl. 859 ; Paterson R. Co. v. Grun- 
 dy, 51 N. J. Eq. 213, 26 Atl. 788; 
 Hudson River Tel. Co. v. Water- 
 vliet &c. Co., 135 N. Y. 393, 32 N. 
 E. 148, 17 L. R. A. 674, 31 Am. St. 
 B38 ; Thompson-Houston Electric 
 Co. V. Simon, 20 Ore. 60, 25 Pac. 
 147, 10 L. R. A. 251, 23 Am. St. 
 86, 47 Am. & Eng. R. Cas. 51; El- 
 liott Roads and Streets (3rd ed.), 
 § 887. See also North, Texas Trans- 
 fer &c. Co. V. State (Tex.), 191 
 S. W. 550. But compare Chicago, 
 &c. R. Co. V. Milwaukee &c. R. Co., 
 95 Wis. 561, 70 N. W. 678, 37 L. 
 R. A. 856, 60 Am. St. 137. 
 
 79 Williams v. City Electric St. R. 
 Co., 41 Fed. 556; Chicago &c. R. 
 
§ 10 RAILROADS 24 
 
 spects, they are governed by the same rules that apply to ordi- 
 nary street railways operated by animal power, and not by the 
 rules applicable to commercial railroads. But the more dangerous 
 nature of the motive power may require, both as to passengers 
 and to other travelers, or the public generally, a degree of care 
 not required in the case of horse railways, that is to say, the care 
 should be in proportion to the danger. A forcible illustration of 
 the rule that electric railways for carrying passengers along the 
 streets are to be regarded as street railways rather than as com- 
 mercial railroads is found in a recent case*" in which it is held 
 that an electric railway company has the right to run its cars 
 across a public toll bridge, upon the payment of adequate toll, 
 where the statute gives it the right to use "any street or high- 
 way." The court regarded it as a use which was consistent with 
 the purpose for which the bridge was erected, being in further- 
 ance of public travel and accommodation, and held that it did not 
 constitute a taking of property under the power of eminent do- 
 main.^i As electricity is now coming into use for commercial 
 railroads, and is used almost altogether as a motive power on 
 
 Co. V. Whiting &c. Co., 139 Ind. 19 Atl. 326, 7 L. R. A. 205; Cum- 
 
 297, 38 N. E. 604, 26 L. R. A. 337, berland &c. Co. v. United Electric 
 
 V7 Am. St. 264; Koch v. North R. Co., 93 Tenn. 492, 29 S. W. 104; 
 
 Avenue R. Co., 75 Md. 22, 23 Atl. San Antonio &c. S. Co. v. Lim- 
 
 463; Green v. City Suburban R. Co., burger, 88 Tex. 79, 30 S. W. 533. 
 
 78 Md. 294, 28 Atl. 626, 44 Am. St. See also Humphrey v. Ft. Smith 
 
 288; Detroit St. R. Co. v. Mills, 85 Trac. Co., 71 Ark. 152, 71 S. W. 662; 
 
 Mich. 634, 48 N. W. 1007; Paterson Birmingham Trac. Co. v. Birming- 
 
 R. Co. V. Grundy, 51 N. J. 213, 26 ham R. Co., 119 Ala. 137, 24 So. 
 
 Atl. 788; West Jersey R. Co. v. 502, 43 L. R. A. 233; note in 36 
 
 Camden &c. R. Co., 52 N. J. 452, L. R. A. (N. S.) 722; Howe v. 
 
 29 Atl. 423; Cincinnati &c. R. Co. West End St. R. Co., 167 Mass. 46, 
 
 V. City &c. Co., 48 Ohio St. 390, 27 44 N. E. 386. But compare Peck 
 
 N. E. 890, 12 L. R. A. 534, 29 Am. v. Schenectady R. Co., 170 N. Y. 
 
 St. 559, 10 R. & Corp. Law Jour. 298, 63 N. E. 357. 
 82 ; Lockhart v. Craig St. R. Co., so Pittsburgh &c. R. Co. v. Point 
 
 139 Pa. St. 419, 21 Atl. 26; Du- Bridge Co., 165 Pa. St. 37, 30 Atl. 
 
 bois Traction Co. v. Buffalo &c. R. 511, 26 L. R. A. 323. 
 Co., 149 Pa. St. 1, 24 Atl. 179, 11 si Covington &c. Co. v. South 
 
 R. & Corp. L. Jour. 6; Taggart v. Covington &c. Co., 93 Ky. 136, 19 
 
 Newport St. R. Co., 16 R. I. 668, S. W. 403, 15 L. R. A. 828. 
 
25 DEFINITIONS § 11 
 
 interurban railroads, there is likely to be confusion, unless the 
 term is confined to such roads as were formerly known as electric 
 railroads, and, as already stated, the mere fact that electricity is 
 the motive power is not conclusive as to whether the rules and 
 principles applicable to commercial railroads or those applicable 
 to street railroads apply. 
 
 § 11 (9). Cable railroads — Railroads operated by the cable 
 system are also classed with street railways. Indeed, as ordinar- 
 ily located, constructed and operated, they may be regarded as a 
 sub-class or particular kind of street railways. They do not, 
 therefore, constitute an additional burden any more than ordi- 
 nary horse railways.^^ In one case, however, it was held that a 
 cable road is, "as to one part of the street, surface, and as to 
 another part subterranean," and that a company organized 
 merely as a surface railway company had no right to excavate 
 the streets and construct a subterranean cable system ;** but the 
 same court, in a later case, held that such a company could be 
 authorized by the legislature to use the cable system without the 
 consent of the , local authorities, notwithstanding a provision of 
 the constitution prohibiting the passage of any law authorizing 
 the construction or operation of a street railroad without first 
 obtaining the consent of the local authorities.** Although cable 
 
 82 Lorie v. North Chicago R. Co., 647n, 18 Ann. Cas. 366. But the 
 
 32 Fed. 270 ; Clement v. Cincinnati contrary is held in Massachusetts : 
 
 (Ohio), 16 W. L. Bull. 355; Harri- Sears v. Crocker, 184 Mass. 586, 69 
 
 son V. Mt. Auburn Cable R. Co. N. E. 327, 100 Am. St. 577. 
 (Ohio), 17 W. L. Bull. 265; Rafferty S4 Third Avenue R. Co., Petition 
 
 V. Central Traction Co., 147 Pa. St. of, 121 N. Y. 536, 24 N. E. 951, 9 
 
 579, 23 Atl. 884, 30 Am. St. 763; L. R. A. 124. The court said that, 
 
 Booth St. Railw., § 84. Compare as the railroad had already been or- 
 
 Tuebner v. California St. R. Co., ganized, constructed and operated 
 
 66 Cal. 171, 4 Pac. 1162. as a horse street railway, the act 
 
 8s People V. Newton, 112 N. Y. of the legislature in question did not 
 396, 19 N. E. 831, 3 L. R. A. 174n. attempt to grant a franchise or au- 
 In New York a subway for rapid thorize the "construction of opera- 
 transit has also been held an addi- tion of a street railroad," but mere- 
 tional burden. Board of Rapid ly regulated the use of an existing 
 Transit R. Comrs., In re, 197 N. Y. franchise. 
 81, 90 N. E. 456, 36 L. R. A. (N. S.) 
 
§ 12 RAILROADS 26 
 
 roads in city streets engaged only in carrying passengers are 
 usually regarded as street railways, yet a company which car- 
 ries freight as well as passengers, whose road is but three miles 
 in length, over two miles of which cars are drawn by locomotives, 
 is a "railroad company," taxable as an ordinary railway, notwith- 
 standing the fact that one mile of the line, up a steep ascent, is 
 operated by cable.*® 
 
 § 12 (9a). Interurban railroads. — Interurban railroads have 
 been defined or described as "those connecting distant communi- 
 ties, which are laid mainly on highways, and as to so much of 
 them as lie within each of these communities are built upon its 
 streets and operated so as to promote local convenience and make 
 these streets more serviceable to the public."^® As a matter of 
 fact, however, interurban railroads are now constructed, so far as 
 they extend through the country between cities and towns, mainly 
 upon the land or right of way of the company rather than upon 
 the country highways.*''' It is a vexed question as to whether 
 such a railroad is an additional burden on a country highway, and 
 it is easier or cheaper, in some instances, to obtain such a right of 
 way. So, when the railroad is thus located and constructed there 
 is less danger of interfering with travel ; the cars can be run with 
 more freedom, and there is less danger of liability of accident to 
 passengers and travelers upon the highway. Such railroads are a 
 new development of a somewhat mixed character, and the law 
 applicable to them is not in all respects well settled. They usually 
 extend, from one city or town to and within the limits of another 
 city or town and partake, in some respects, of the nature of both 
 
 S5 State V. Eleventh Judicial Dis- sides of mountains not on or near 
 
 trict Ct., 54 Minn. 341, 55 N. W. any street, and we remember to 
 
 816. Compare Funk v. St. Paul have traveled on a commercial steam 
 
 City R. Co., 61 Minn. 435, 63 N. railroad in Switzerland which was 
 
 W. 1099, 29 L. R. A. 208, 52 Am. so operated for a short distance of 
 
 St. 608. And the fact that a rail- its course up the side of a mountain, 
 
 road, is operated either in whole or se Baldwin Am. Railw. Law 9. 
 
 in part by a cable system does not 87 Hartzenn v. Alton &c. Trac. 
 
 necessarily make it a street railroad. Co., 263 111. 205, 104 N. E. 1080, 
 
 There are roads so operated up the 1081. 
 
27 DEFINITIONS § 12 
 
 street railways and ordinary commercial railroads. Their na- 
 ture and characteristics, and the principles of law applicable to 
 them, will be fully considered in a separate chapter. It may be 
 well to note here, however, that an interurban electric railway 
 was held in a recent case not to be a street railway because its 
 operation was hot confined to the streets of any city and because 
 its articles , of incorporation determined its class as that of an 
 interurban road.®* 
 
 S8 Rentier v. Cincinnati &c. R. in the meaning of a statute requiring 
 
 Co., 180 Ky. 497, 203 S. W. 199, L. railroad companies to fence. Musko- 
 
 R. A. 1918E, 315. But in another re- gee Elec. Trac. Co. v. Doering 
 
 cent case an interurban electric rail- (Okla.), 172 Pac. 793, 2 A. L. R. 
 
 way was held to be a railroad with- 94. 
 
CHAPTER II. 
 
 PROMOTION AND FORMATION OF THE CORPORATION. 
 
 Sec. 
 
 15. Promoters — Who are. 
 
 16. Fiduciary relation of promoters 
 
 — Duties and liabilities. 
 
 17. Promoter may sell property to 
 
 ■ the corporation. 
 
 18. Personal liability of promoters 
 
 — When partners. 
 
 19. Representations by promoters. 
 
 20. Contracts of promoters — -When 
 
 Sec. 
 
 binding on corporation. 
 
 21. Legislative authority essential 
 
 to creation of corporation. 
 
 22. Creation by special charter. 
 
 23. Acceptance of charter. 
 
 24. Incorporation under general 
 
 laws. 
 
 25. Perfecting the organization. 
 
 26. Defective organization — ^Waiver 
 
 — Collateral attack. 
 
 § 15 (10). Promoters — Who are. — The steps preliminary to 
 the organization of a railroad corporation are frequently, if not 
 generally, taken by persons known as "promoters," who bring 
 together the persons interested in the enterprise, aid in procuring 
 subscriptions, and set in motion the machinery which leads to the 
 formation of the corporation,^ often, also, making the necessary 
 arrangements looking toward the purchase of property or the 
 entering into contracts by the new company.^ By merely sub- 
 scribing the articles, or taking stock in a company not yet in- 
 corporated, a person does not assume the character of a pro- 
 moter.* But circumstances which show that one is assuming to 
 
 1 Dickerman v. Northern Trust 
 Co., 176 U. S. 181, 203, 20 Sup. Ct. 
 311, 319, 44 L. ed. 423; See v. Hep- 
 penheimer, 69 N. J. Eq. 36, 61 Atl. 
 843 ; 1 Thomp. Corp. (2nd ed.) §§ 81, 
 82. See also note in L. R. A. 
 1918E, 833, 834. 
 
 "i Twycross v. Grant, L. R. 2 C. P. 
 Div. 469, 503; Yale Gas Stove Co. 
 v. Wilcox, quoted in note to § 16, 
 
 infra. I Thomp. Corp. (2d ed.), §82. 
 See also Ex-Mission Land &c. Co. v. 
 Flash, 97 Cal. 610, 32 Pac. 600; 
 Bosher v. Richmond &c. Co., 89 Va. 
 455, 16 S. E. 360, 37 Am. St. 879; 
 First Ave. Land Co. v. Hildebrand, 
 103 Wis. 530, 79 N. W. 753. 
 
 3 St. Louis &c. R. Co. v. Tiernan, 
 37 Kans. 606, 40 Am. & Eng. R. Cas. 
 525; Ward v. Brigham, 127 Mass. 
 
 28 
 
29 
 
 PROMOTION AND FORMATION OF THE CORPORATION 
 
 §15 
 
 act in the interest of a project, and is seeking to influence others 
 to give it pecuniary assistance, will afiford evidence that he has 
 undertaken the, responsibility of a promoter toward, persons who 
 deal with him as such.* 
 
 § 16 (11). Fiduciary relation of promoters — Duties and liabili- 
 ties. — A promoter occupies a fiduciary relation toward the com- 
 pany, and is subject, in general, to the disabilities attached to 
 trustees.^ Occupying this relation he is forbidden under any and 
 
 24. But see Lake v. Argyle, 6 Q. B. 
 477. 
 
 * Woodbury &c. Co. v. Louden- 
 slager, 55 N. J. 78, 35 Atl. 436; 
 Sidney &c. Co. v. Bird, L. R. 31, 
 Ch. Div. 328; Lake v. Argyle, 6 
 Q. B. 477. The question is largely 
 one of fact depending upon the cir- 
 cumstances of the particular case. 
 Bagnall v. Carlton, 6 Ch. D. 371, 47' 
 L. J. Ch. 30; Lydney &c. Co. v. 
 Bird, 33 Ch. D. 85, 24 Am. & Eng. 
 Corp. Cas. 24. 
 
 5 De La Motte v. Northwestern 
 Clearance Co., 126 Minn. 197, 148 N. 
 W. 47, L. R. A. 1918E, 831, 832, 
 and note, p. 941, et seq. Emma Sil- 
 ver M. Co. V. Grant, L. R. 11 Ch. 
 Div. 918; 1 Thomp. Corp. (2nd. 
 ed.), §103. In the case of Yale 
 Gas Stove Co. v. Wilcox, 64 Conn. 
 101, 29 Atl. 303, 25 L. R. A. 90, 
 42 Am. St. 159, the court said: "A 
 'promoter' has been defined to be a 
 person who organizes a corporation. 
 It is said to be, not a legal, but a 
 business term, 'usefully summing up 
 in a single word, a number of busi- 
 ness operations familiar to the com- 
 mercial world, by which a company 
 is generally brought into existence.' 
 Bowen, J., in Printing Co. v. Green, 
 28 Wkly. R. (Q. B. Div. 1880) 351, 
 352. That such persons occupy a 
 
 fiduciary relation toward the com- 
 pany or corporatiomis toward whose 
 organization they seek to promote is 
 well settled by the decisions of both 
 countries. Lord Cotton prefers to 
 call them 'trustees', Bagnall v. 
 Carlton, 6 Ch. Div. 371, 385. Sir 
 George Jessel, M. R., in Phosphate 
 Co. v. Erlanger, L. R. 5 Ch. Div. IZ, 
 said, 'A promoters stand in a fidu- 
 ciary relation to that company which 
 is their creature.' , In Erlanger v. 
 Phosphate Co., 3 App. Cas. 1218, the 
 Lord Chancellor said of promoters : 
 'They stand, in my opinion, undoubt- 
 edly in a fiduciary position. They 
 have in their hands the creation and 
 molding of the company. The3' have 
 the power of defining how, and 
 when, and in what shape, and un- 
 der what supervision, it shall start 
 into existence and begin to act as 
 a trading corporation. If they are 
 doing all this in order that the com- 
 pany may, as soon as it starts into 
 life, become through its managing 
 directors, the purchasers of the prop- 
 erty of themselves (the promoters) 
 it is, in my opinion, incumbent upon 
 the promoters to take care that in 
 forming the company they provide it 
 with an executive; that is to say, 
 with a board of directors, who shall 
 both be aware that the property 
 
§16 
 
 RAILROADS 
 
 30 
 
 all circumstances to make any secret profits at the expense of 
 
 which they are asked to buy is the 
 property of the promoters, and who 
 shall be competent and impartial 
 judges as to whether the purchase 
 ought or ought not to be made. 1 
 do not say that the owner of prop- 
 erty may npt promote and form a 
 joint stock company and then sell 
 his property to it; but I do say that 
 if he does he is bound to take care 
 that he sell it to the company 
 through the medium of a board of 
 directors who can and do exercise 
 an independent and intelligent judg- 
 ment on the transaction, and who 
 are not left under the belief that the 
 property belongs, not to the pro- 
 moter, but to some other person.' 
 Lord O'Hagan, referring to the same 
 subject, expressed a similar opinion 
 in even mora emphatic language, de- 
 claring that while- an original pur- 
 chase might be legitimate, and not 
 less so because the object of the 
 purchaser was to sell it again and 
 to sell it by forming a company 
 which might afford them a profit on 
 the transaction, yet 'the privilege 
 given them for promoting such a 
 company for stich an object involved 
 obligations of a very serious kind. 
 It required, in its exercise, the ut- 
 mo:t good faith, the completest 
 truthfulness, and a careful regard to 
 the protection of the future stock- 
 holders.' The test, therefore, of 
 the validity of such transactions is 
 that it must, in all its parts be open 
 and fair, so that the promoters shall 
 not, in_ fact, substantially, 'act both 
 as vendors and vendees, and in the 
 latter capacity approve a transaction 
 suggested by thern in the former.' 
 Foss V. Harbottle, 2 Hare 461, 488; 
 
 McElhenny's Appeal, 61 Pa. St. 188; 
 Simons v. Mining Co., 61 Pa. St. 
 202, 100 Am. Dec. 628; Oil Co. v. 
 Densmore, 64 Pa. St. 43; Pitts- 
 burgh Mining Co. v. Spooner, 74 
 Wis. 307, 42 N. W. 259, 17 Am. St. 
 149n; South &c. Co. v. Case, 104 
 Mo. 572, 16 S. W. 390; British 
 Seamless Paper-box Co., In re, 17 
 Ch. Div. 467; Sewage Co. v. Hart- 
 mont, 5 Ch. Div. 394. In Hichens 
 V. Congreve, 1 Russ. -4 M. ISO (on 
 appeal, 4 Russ. 562), three promoters 
 induced their company to buy a mine 
 for ;£2S,000, of which they received 
 from the vendor and divided among 
 themselves, ilS,0OO. This they were 
 compelled to account for to the com- 
 pany. Similar cases are Beck v. 
 Kantorowicz, 3 Kay & J. 230; 
 Printing Co. v. Green, 28 Wkly. R. 
 (Q. B. Div. 1880) 351, 352; Min- 
 ing Co. V. Grant, 11 Ch. Div. 918; 
 Bagnall v. Carlton, 6 Ch. Div. 371, 
 385; Kant v. Brickmaking Co., 17 
 Law T. (N. S.) 11; Water Co v. 
 Flash, 97 Cal. 610, 32 Pac. 600. * * * 
 A careful examination of the cases 
 will, we think, disclose two grounds- 
 of liability of the defendants to cor- 
 porations for undisclosed profits re- 
 sulting from transactions with such 
 corporations : First, where the de- 
 fendants are corporate fiduciaries. 
 The characteristic of this relation 
 is trust. Such a relation undoubted- 
 ly exists between companies and 
 their ofiicers, such as directors. Mal- 
 lory v. Mallory-Wheeler Co., 61 
 Conn. 135, 23 Atl. 707. With refer- 
 ence to promoters, since a man can 
 not receive an appointment from a 
 non-existent company, the proof may 
 be less obvious ; but it may, never- 
 
31 
 
 PROMOTION AND FORMATION OF THE CORPORATION 
 
 §16 
 
 the company,^ or to gain any advantage over other stockholders 
 arising from the profits of the company's transactions^ He must 
 generally turn over to the company any commissions received 
 for the sale of property to the company,^ and it has been held 
 that the company may sue the seller to recover such a comlmis- 
 sion if it is not yet paid,^ or it may, in a proper case, upon discov- 
 ery of the unfair character of the transaction, rescind the con- 
 tract of sale and sue the promoters to recover the moneys paid 
 them or the property.^" 
 
 theless, be shown conclusively by a 
 variety of representations, admis- 
 sions, and acts. The second ground 
 of liability is fraud. The law does 
 not prohibit a promoter from deal- 
 ing with his company, but he must 
 make full disclosure to the com- 
 pany of his relations to the prop- 
 erty that is the subject of his deal. 
 Suppression, conc^tilment, or mis- 
 representation of material facts is 
 fraud, upon proof of which rescis- 
 sion of contract, or repayment of 
 the secret profits, will be compelled." 
 6 Emery v. Parrott, 107 Mass. 95 ; 
 De La Motte v. Northwestern 
 Clearance Co., 126 Minn. 197, 148 
 N. W. 47, L. R. A. 1918E, 830. 
 Plaquemines &c. Co. v. Buck, 52 N. 
 J., Eq. 219, 27 Atl. 1094; Simons v. 
 ^'■ulcan Oil &c. Co., 61 Pa. St. 202, 
 100 Am. Dec: 628; Pittsburgh Min- 
 ing Co. V. Spooner, 74 Wis. 307, 42 
 N. W. 259, 17 Am. St. 149 and note; 
 Emma Silver M. Co. v. Grant, L. 
 R. 11 Ch. Div. 918; Lydney &c. Co. 
 V. Bird, L. R. 33 Ch. Div. 85, 55 Law 
 T. (N. S.) 558. See also Wardell 
 V. Union Pac. R. Co., 103 U. S. 651, 
 26 L. ed. 509; Dunlap v. Twin City 
 Power Co., 226 Fed. 161; Rutland 
 &c. Co. v. Bates, 68 Vt. 579, 35 Atl. 
 480, 54 Am. St. 904; 1 Thomp. Corp. 
 (2nd ed.), §§104, 105. 
 
 7 Chandler v. Bacon, 30 Fed. 538, 
 540; Emory v. Parrott, 107 Mass. 95; 
 Getty V. Devlin, 54 N. Y. 403 ; Dens- 
 more Oil Co. V. Densmore, 64- Pa. 
 St. 43; Bagnall v. Carlton, L. R. 
 6 Ch. Div. 371. See also Volney 
 V. Nilon, 68 N. J. Eq. 60S, 60 Atl. 
 189; Heckscher v. Edenborn, 203 N. 
 Y. 210, 96 N. E. 441. 
 
 8 Brewster v. Hatch, 122 N. Y. 
 349, 25 N. E. 505, 19 Am. St. 498; 
 Emma Silver M. v. Grant, L. R. 11 
 Ch. Div. 918; Lydney &c. Co. v. 
 Bird, L. R. 33 Ch. Div. 85, 55 Law 
 T. (N. S.) 558; Beck v. Kantoro- 
 wicz, 3 Kay & J. 230. See also 
 Lomita Land &c. Co. v. Robinson, 
 154 Cal. 36, 97 Pac. 10, 18 L. R. A. 
 (N. S.) 1106n. De La Motte v. 
 Northwestern Clearance Co., 126 
 Minn. 197, 148 N. W. 47, L. R. A. 
 1918E, 830. 
 
 sWhaley &c. Co. v. Green, L. R. 
 5 Q. B. Div. 109, 41 Law T. (N. S.) 
 674. 
 
 K* St. Louis &c. Mining Co. v. 
 Jackson, 5 Cent. L. J. 317; Phos- 
 phate Sewage Co. v. Hartmont, L. 
 R. 5 Ch. Div. 394, 37 Law T. (N. S.) 
 9. See also Dickerman v. Northern 
 Trust Co., 176 U. S. 181, 20 Sup. Ct. 
 311, 44 L. ed. 423. The corporation 
 is the proper plaintiff in a suit to 
 rescind the promoter's acts. 
 
§17 
 
 RAILROADS 
 
 32 
 
 § 17 (12). Promoter may sell property to the corporation. — ^A 
 
 promoter may, however, honestly and fairly sell to the company 
 property which he owned before instituting the scheme for incor- 
 poration. ^^ This is true even when the scheme relates to the 
 development of the very property which he sells to the corpora- 
 tion.12 But it seems that the corporation may rescind such a con- 
 tract, if the sale be made for an exorbitant price and without dis- 
 closing the real ownership of the property.^* And after the for- 
 mation of the company is begun a promoter cannot purchase 
 property and sell it to the corporation at an advanced price with- 
 out a full disclosure of the facts. i* 
 
 Ex-Mission Land Co. v. Flash, 
 97 Cal. 610, 32 Pac. 600. So in a 
 suit to recover the avails of a secret 
 agreement between him and one 
 from whom the corporation pur- 
 chases property. Yale Gas Stove 
 Co. V. Wilcox, 64 Conn. 101, 29 Atl. 
 303, 25 L. R. A. 90, 42 Am. St. 159. 
 See also Pittsburgh Min. Co. v. 
 Spooner, 74 Wis. 307, 42 N. W. 259, 
 17 Am. St. 149, and note. 
 
 " Burbank v. Dennis, 101 Cal. 90, 
 55 Pac. 444; Plaquemines &c. Co. v. 
 Buck, 52 N. J. 219, 27 Atl. 1094; 
 Morgan v. Skiddy, 62 N. Y. 319; 1 
 Thomp. Corp. (2nd ed.), §106. See 
 also note to Yale Gas Stove Co. v. 
 Wilcox, 64 Conn. 101, 29 Atl. 303, 
 25 L. R. A. 90, 42 Am. St. 159, and 
 note to Pittsburgh Min. Co. v. 
 Spooner, 74 Wis. 307, 42 N. W. 259, 
 17 Am. St. 149; Wills v. Nehalem 
 Coal Co., 52 Ore. 70, 96 Pac. 528; 
 Milwaukee Cold Storage Co. v. Dex- 
 ter, 99 Wis. 214, 74 N. W. 976, 40 
 L. R. A. 837; Hess Mfg. Co., In re, 
 21 Ont. App. 66. 
 
 12 Dorris v. French, 4 Hun (N. 
 Y.) 292; Seymour, v. Spring Forest, 
 &c. Assn., 144 N. Y. 333, 39 N. E. 
 365, 26 L. R. A. 859; Densmore Oil 
 
 Co. V. Densmore, 64 Pa. St. 43. 
 Cover's Case, L. R. 1 Ch. Div. 182. 
 
 13 Cape Breton Co., In re, L. R. 
 26 Ch. Div. 221, L. R. 29 Ch. Div. 
 795 ; Lindsay Petroleum &c. Co. v. 
 Kurd, L. R. 5 P. C. 221; Thomp. 
 Corp. (2nd.' ed.), 109. See al- 
 so generally Lomita Land &c. Co. 
 v. Robinson, 154 Cal. 36, 97 Pac. 10, 
 18 L. R. A. (N. S.) 1106, and note. 
 But see Densmore Oil Co. v. Dens- 
 more, 64 Pa. St. 43. 
 
 14 Ex-Mission Land, &c. Co. v. 
 Flash, 97 Cal. 610, 32 Pac. 600; Pa- 
 ducah Land &c. Co. v. Mulholland, 
 15 Ky. L. 624, 24 S. W. 624; South 
 &c. Co. V. Case, 104 Mo. 572, 16 
 S. W. 390; Plaquemines &c. Co. v. 
 Buck, 52 N. J. Eq. 219, '27 Atl. 1094 ; 
 See v. Heppenheimer, 69 N. J. Eq. 36, 
 61 Atl. 843; Pittsburg Min. Co. v. 
 Spooner, 74 Wis. 307, 42 N. W. 259, 
 17 Am. St. 149. Where a promoter 
 fraudulently represents that he has 
 bought property for a proposed cor- 
 poration at a certain price, and the 
 corporation pays him that price, it 
 may, after discovery of the fraud, 
 sue him for the profit thus made. 
 Simons v. Vulcan Oil &c. Co., 61 
 Pa. St. 202, 100 Am. Dec. 628. 
 
33 
 
 PROMOTION AND FORMATION OF THE CORPORATION 
 
 §18 
 
 § 18 (13). Personal liability of promoters — When partners. — 
 The promoters, as a general rule, are personally liable on all con- 
 tracts entered into by them before the organization is com- 
 pleted,^^ except where they have expressly stipulated against per- 
 sonal liability, or except, perhaps, where the contract is made in 
 the name of the proposed corporation alone and the credit is 
 knowingly given to it and not to the promoters.^® A promoter 
 cannot, ordinarily, in the absence of evidence that he has re- 
 ceived authority to act for his associates, render them responsi- 
 ble for his acts,^'' for the several promoters are not partners.'^ 
 
 15 Hurt V. Salisbury, 55 Mo. 310; 
 Kelner v. Baxter, L. R. 2 C. P. 174; 
 Scott V. Lord Ebury, 36 L. J. C. P. 
 161. Thomp. Corp. (2nd ed.) §84. 
 See also Manistee Lumber Co. v. 
 Union Nat. Bank, 143 111. 490, 32 
 N. E. 449; Hersey v. TuUy, 8 Colo. 
 App. 110, 44 Pac. "854; 1 Thomp. 
 Corp. (2nd ed.), §83. 
 
 16 Higgins V. Hopkins, 3 Exch. 
 163; Rennie v. Clarke, 5 Exch. 292; 
 Landman v. Entwistle, 7 Exch. 632. 
 See note to Pittsburgh Min. Co. v. 
 Spooner, 74 Wis. 307, 42 N. W. 259, 
 17 Am. St. 149, 162 ; and post, § 215. 
 They cannot be held liable to one 
 who knowingly agrees to accept and 
 does accept the notes of a corpora- 
 tion then contemplated and after- 
 ward organized in payment, and pa- 
 rol evidence is admissible to show 
 such knowledge and agreement 
 where the notes were signed by the 
 company with the names and titles 
 of the officers, especially to contra- 
 dict the contention of the plaintiff 
 that the notes of the company were 
 accepted through a misunderstand- 
 ing. Case Manufacturing Co. v. Sox- 
 man, 138 U. S. 431, 11 Sup. Ct. 360; 
 34 L. ed. 1019. See also Durgin 
 V. Smith, 133 Mich. 331, 94 N. W. 
 
 1044; IThomp. Corp. (2nd ed.), §85. 
 
 17 Johnson v. Corser, 34 Minn. 355, 
 25 N. W. T^\ Patrick v. Reynolds, 
 1 Com. B. N. S. 727; Williams v. 
 Pigott, 5 Eng. R. & C. Cas. 544. 
 See also Van Hummell v. Interna- 
 tional Gurantee Co. (Manitoba), 23 
 West L. Rep. 248, Ann. Cas. 1913E, 
 1163, and note. 
 
 18 Miller v. Baker, 161 Iowa 136, 
 140 N. W. 407; Reynell v. Lewis, 
 15 Mees. & W. 517; Bailey v. Macau- 
 lay, 13 Q. B. 815; 1 Thomp. Corp., 
 (2nd ed.), §83. See Davidson v. Hob- 
 son, 1 Mo. App. 28. And they cannot 
 be held liable as partners under a 
 complaint which does not proceed up- 
 on that theory but simply seeks to 
 hold them personally liable in the 
 event that it is ascertained that the 
 subsequent incorporation, which was 
 contemplated by all parties at the 
 time of the contract, was defective, 
 and to hold them liable as stock- 
 holders, if it should be determined 
 to be an effective incorporation. 
 Sheilds v. Clifton &c. Co., 94 Tenn. 
 123, 28 S. W. 668, 26 L. R. A. 509, 
 45 Am. St. 700. See also Buffing- 
 ton V. Bardon, 80 Wis. 635, 50 N. W. 
 776. In some cases promoters have 
 been called partners and often rules 
 
 2 — Ell. Railroads I 
 
§18 
 
 RAILROADS 
 
 34 
 
 They may, however, take on the character of partners by holding 
 themselves out as such,^® or by fraudulently acting in concert for 
 their own common personal benefit-^" If the scheme prove 
 abortive, and the proposed corporation is never chartered, the 
 expenses incurred in the attempted organization must usually be 
 borne by the promoters,^! and the subscribers, unless estopped 
 by acquiescence or some act of their own, may recover back the 
 money paid for shares of its stock.** The promoters are also li- 
 able to one who they have induced to subscribe by fraudulent 
 representations.** 
 
 applicable to partners apply. Leeds 
 V. Townsend, 228 111. 451, 81 N. E. 
 1069, 13 L. R. A. (N. S.) 191n; 
 Vaughn v. Morris (Tex. Civ. App.), 
 180 S. W. 9S4. See also Botsford 
 V. VanPiper, 33 Nev. 156, 110 Pac. 
 705. 
 
 19 CoUingwood V. Berkeley, 15 C. 
 B. N. S. 145; Lake v. Duke of Ar- 
 gyll, 6 Q. B. 447. See also McFall 
 V. McKeesport &c. Co., 123 Pa. St. 
 259, 16 Atl. 478 ;. McLennan v. Hop- 
 kins, 2 Kans. App. 260, 41 Pac. 1061. 
 
 20 Chandler v. Bacon, 30 Fed. 538; 
 Colt V. Woollaston, 2 P. Wms. 154. 
 See also Hornblower v. Crandall, 7 
 Mo. App. 220; Getty v. Delvin, 54 
 N. Y. 403. New Sombrero Phos- 
 phate Co. V. Erlanger, L. R. 5 Ch. 
 Div. IZ, 36 Law T. (N. S.) 222. 
 
 21 Sproat V. Porter, 9 Mass. 300. 
 Johnson v. Corser, 34 Minn. 355, 25 
 N. W. 799; Nockels v. Crosby, 3 
 Barn. & C. 814, 822. This may, 
 however, be regulated by contract or 
 depend upon the peculiar circum- 
 stances of each particular case. 
 That the corporation is not necessari- 
 ly liable to him, see Ritchie v. Mc- 
 Mullen, 79 Fed. 522 ; Winters v. Hub 
 
 Min. Co., 57 Fed. 287; Wilson v. 
 Trenton &c. R. Co., 56 N. J. Eq. 783, 
 40 Atl. 597; Seymour v. Spring 
 Forest &c. Assn., 144 N. Y. 333, 39 
 N. E. 365, 26 L. R. A. 859. See 
 also Van Hummell v. International 
 Guarantee Co. (Manitoba), 23 West. 
 L. Rep. 248, Ann. Cas. 1913E, 1163. 
 
 22 Williams v. Page, 24 Beav. 654; 
 Walstab v. Spotiswoode, 15 Mees. & 
 W. 501; Ashpitel v. Sercombe, 5 
 Exch. 147; Nockels v. Crosby, 3 
 Barn. & C. 814; Grand Trunk &c. R. 
 Co. V. Brodie, 9 Hare 823. But see 
 Moore v. Garwood, 4 Exch. 681. See 
 Thomp. Corp. (2nd ed.), § 112. 
 
 23 Miller v. Barber, (ii N. Y. 558; 
 Teachout v. Van Hosen, 76 Iowa 
 113, 40 N. W. 96, 1 L. R. A. 664, 14 
 Am. St. 206; Short v. Stevenson, 
 63 Pa. St. 95; Paddock v. Fletcher, 
 42 Vt. 389; Cridland v. De Mauley, 
 1 DeGex & S. 459, 12 Jur. 701; 
 Glasier v. Rolls, 60 Law T. (N. S.) 
 59 L. R. 42 Ch. Div. 436. See also 
 Brewster v. Hatch, 122 N. Y. 349, 25 
 N. E. 505, 19 Am. St. 498; Capel v. 
 Sim's &c. Co., 58 Law T. (N. S.) 
 807, 57 L. J. Ch. 713; Gerhard v. 
 Bates, 2 El. & Bl. 476. 
 
35 PROMOTION AND FORMATION OF THE CORPORATION § 19 
 
 § 19 (13a.) Representations by promoters. — Misrepresenta- 
 tions made by the promoters of a corporation at a public meeting, 
 called for the purpose of procuring subscriptions to stock, will 
 not, ordinarily, vitiate a subscription made in reliance thereon by 
 one of the class to whom the representations are made, where 
 such representations are not authorized by the corporation.^* 
 Indeed, as already stated, those who promote or undertake to 
 organize a proposed corporation are not, and cannot be in the 
 nature of things, its agents before it comes into. existence. They 
 cannot, therefore, bind it by engagements in behalf of the cor- 
 poration not ratified or adopted by it after it comes into existence, 
 nor by their declarations and representations.^* But the pro- 
 moters may render themselves personally liable by their own 
 misrepresentations and fraud in their prospectus or at a public 
 meeting to those who are injured thereby as a proximate cause.^® 
 
 § 20 (14). Contracts of promoters — When binding on corpora- 
 tion. — The promoters cannot bind the corporation by their con- 
 tracts made before the organization of the company, *'' except so 
 
 24 Smith V. Tallahassee &c. Co., 30 Scally, 66 Fla. 93, 62 So. 900; At- 
 Ala. 6S0; Mississippi &c. R. Co. v. lantic City R. Co. v. Wood, 78 N. J. 
 Cross, 20 Ark. 443, 4S4; First Nat. Eq. 298, 81 Atl. 1132 ;■ Moriarity v. 
 Bank v. Hurtford, 29 Iowa 579; Meyer, 21 N. Mex. 521, 157 Pac. 652, 
 Vicksburg &c. R. Co. v. McKean, 12 L. R. A. 1916E, 1165; Tanner v. Sina- 
 La. Ann. 638; St. Johns Mfg. Co. loa Land &c. Co., 43 Utah 14, 134 
 V. Munger, 106 Mich. 90, 64 N. W. 3, Pac. 586, Ann. Cas. 1916C, 100, and 
 58 Am. St. 468; Buflfalo &c. R. Co. note. 
 
 ■f. Dudley, 14 N. Y. 336. Compare 26 Walker v. Anglo-American &c, 
 
 Atlanta &c. R. Co. v. Hodnett, 36 Co., 72 Hun 334, 25 N. Y. S. 432 
 
 Ga. 669; Weems v. Georgia &c. R. Reese &c. Min. Co. v. Smith, L R. 
 
 Co., 88 Ga. 303, 14 S. E. 583; and see 4 H. L. 64; New Brunswick R. Co 
 
 note in 85 Am. St. 385, 386. v., Muggeridge, 1 Drew & Sm. 363; 
 
 25 United States &c. Co. v. Schleg- Clarke v. Dickson, 6 C. B. (N. S.) 
 el, 143 N. Y. 537, 38 N. E. 729; 453. See also Tuttle v. George A. 
 Weatherford &c. R. Co. v. Granger, Tuttle Co., 101 Maine 287, 64 Atl. 
 86 Tex. 350, 24 S. W. 795, 40 Am. 496. 
 
 St. 837 ; Lynde v. Anglo-Italian, &c. 27 Little Rock &c. R. Co. v. Perry, 
 
 Co. (1896), 1 Ch. 178, 73 L. T. 502; 37 Ark. 164; Perry v. Little Rock 
 
 1 Thomp. Corp. (2nd ed.), §91. &c. R. Co., 44 Ark. 383, 25 Am. & 
 
 See also Suraner-May Hdw. Co. v'. Eng. R. Cas. 44; New York &c. R. 
 
§20 
 
 RAILROADS 
 
 36 
 
 far as it adopts or ratifies their acts, either directly*® or, in some 
 cases, by accepting the benefits of contracts made for it,*^ and 
 
 Co. V. Ketchum, 27 Conn. 170; Rock- 
 ford &c. R. Co. V. Sage, 65 111. 328, 
 16 Am. Rep. S87; Sellers v. Greer, 
 172 111. 549, 50 N. E. 246, 40 L. R. A. 
 589; Tiittle v. George A. Tuttle Co., 
 101 Maine 287, 64 Atl. 496; Abbott 
 V. Hapgood, ISO Mass. 248, 22 N. E. 
 907, 5 L. R. A. 586, 15 Am. St. 
 193; Carmody v. Powers, 60 Mich. 
 26, 26 N. W. 801; Hill v. Gould, 
 129 Mo. 106, 30 S. W. 181 ; Munson 
 V. Syracuse &c. R. Co., 103 N. Y. 
 58, 8 N. E. 355, 29 Am. & Eng. R. 
 Cas. 377 ; Caledonian &c. Co. v. 
 Helensburgh, 2 Macq. 391. See also 
 Tanner v. Sinaloa Land &c. Co., 43 
 Utah ■ 14, 134 Pac. 386, Ann. Cas. 
 1916C, 100, and authorities there 
 cited in note and at close of last 
 preceding note, supra. A promoter 
 cannot bind the corporation by con- 
 tract made in obtaining a subscrip- 
 tion before the organization of the 
 corporation. Joy v. Manion, 28 Mo. 
 App. 55. 
 
 28 Cotting V. Grant &c. R. Co., 65 
 Fed 545. Stanton v. New York &c. 
 R. Co., 59 Conn. 272, 22 Atl. 300, 
 21 Am. St. 110; Wood v. Whelen. 
 93 111. 153; Low v. Connecticut &c., 
 45 N. H. 370, 46 N. H. 284; Pratt 
 V. Oshkosh Match Co., 89 Wis. 406, 
 62 N. W. 84; Payne v. New South 
 Wales &c. Co., 10 Exch. 283 ; Hutch- 
 inson V. Surrey &c. Association, 11 
 C. B. 689. See also Cushion Heel 
 Shoe Co. V. Hartt, 181 Ind. 167, 103 
 N. E. 1063. It has been held that 
 the president and general -manager 
 may adopt and ratify a contract 
 made by himself for the corporation 
 before it was legally created, for 
 
 services for the company which he 
 would have authority to engage if 
 no previous contract existed. Oakes 
 V. Cattaraugus Water Co., 143 N. Y. 
 430, 38 N. E. 461, 26 L. R. A. 544. 
 See also Arapahoe &c. Co. v. Piatt, 
 S Colo. App. 584, 39 Pac. 584. 
 
 29 In re, Ballou, 215 Fed. 810; 
 Moore &c. Co. v. Towers &c. Co., 
 87 Ala. 206, 6 So. 41, 13 Am. St. 23; 
 Stanton v. New York &c. R. Co., 
 59 Conn. 272, 22 Atl. 300, 21 Am. St. 
 110; Van Noy v. Central Union Fire 
 Ins. Co., 168 Mo. App. 287, 153 S. 
 W. 1090; Girard v. Case Bros. 
 Cutlery Co., 225 Pa. 327, 74 Atl. 
 201; Coyote Gold &c. Co. v. Ruble, 
 8 Ore. 284; Schreyer v. Turner &c. 
 Co., 29 Ore. 1, 43 Pac. 719; Bells 
 Gap. R. Co. V. Christy, 79 Pa. St. 
 59; Edwards v. Grand Junction R. 
 Co., 1 Mylne*& C. 650; Stanley v. 
 Birkenhead R. Co., 9 Simmons 264. 
 See also Whitney v. Wyman, 101 U. 
 S. 392, 25 L. ed. 1050; Continental 
 Trust Co. V. Toledo &c. Co., 86 Fed. 
 929, 948; Frankfort &c. Co. v. 
 Churchill, 6 T. B. Mon. (Ky.) 427, 
 17 Am. Dec. 159; Battelle v. North- 
 western &c. Co., 37 Minn. 89, 33 N. 
 W. 327; Bommer v. American Spiral 
 &c. Co., 81 N. Y. 468; Seymour v. 
 Spring Forest &c. Assn., 144 N. Y. 
 333, 39 N. E. 365, 26 L. R. A. 859; 
 Hall V. Vermont &c. R. Co., 28 Vt. 
 410. In some cases, however, it is 
 denied that a corporation can ratify 
 a contract so as to make it relate 
 back to its inception before the cor- 
 poration came into existence. Abbott 
 v. Hapgood, ISO Mass. 248, 22 N. E. 
 907, 5 L. R. A. 586, IS Am. St. 193, 
 
37 
 
 PROMOTION AND FORMATION OF THE CORPORATION 
 
 §20 
 
 impliedly adopting it. The corporation can only take advantage 
 joi an executory contract entered into by the promoters by fulfill- 
 ing all the engagements entered into by them on its behalf.*" It 
 cannot, as a rule, accept and retain the benefit without assuming 
 the burden.*^ But it has been held that where the promoters 
 mutually agree to perform services without compensation, the 
 company cannot be held liable for such services although it re- 
 ceived the benefit.*^ Where the contract is not made for the 
 benefit of the corporation and the parties did not rely in any way 
 
 citing Kelner v. Baxter, L. R. 2 C. 
 P. 174; Gunn v. London &c. Co., 12 
 C. B. N. S. 694; Melhado v. Porto 
 Alegre &c. R., L. R. 9 C. P. 503; 
 Empress &c. Co., In re, 16 Ch. Div. 
 125. See also Natal Land &c. Co. 
 V. Pauline &c. Syndicate (1904), 
 App. Cas. 120, 73 L. J. P. C. 22, 11 
 Manson 29; Cushion Heel Shoe Co. 
 V. Hartt, 181 Ind. 167, 103 N. E. 
 1063, SO L. R. A. (N. S.) 979n. 
 But, as we understand these deci- 
 sions, they do not decide that the 
 corporation may not be held as up- 
 on a new contract from the time of 
 its adoption. McArthur v. Times 
 Printing Co., 48 Minn. 319, 51 N. W. 
 216, 31 Am. St. 653. See also Van 
 liiimniell v. International Gurarantee 
 Co. (Manitoba), 23 West L. Rep. 
 248. Ann. Cas. 1913E, 1163; 1 Thomp. 
 Corp. (2nd ed.) §§95-102. 
 
 30 Burrows v. Smith, 10 N. Y. 550; 
 Thomp. Corp. (2nd ed.) §§101, 102; 
 Bedford &c. R. Co. v. Stanley, 32 
 L. J. Eq. 60. Unless it in some 
 way accepts the contract so as to 
 make it liable for failure to perform 
 the same it cannot successfully 
 claim the right to enforce the con- 
 tract to which it never became a 
 
 party. Penn Match Co. v. Hapgood, 
 141 Mass. 145, 7 N. E. 22. See also 
 Gent V. Manufacturers' &c. Co., 107 
 111. 652, 8 Am. & Eng. Corp. Cas. 
 306; Van Buren &c. R. Co. v. Lam- 
 phear, 54 Mich. 575, 20 N. W. 590; 
 note to Moore &c. Co. v. Towers &c. 
 Co., 87 Ala. 206, 6 So. 41, 13 Am. St. 
 23. 
 siSmith V. Parker, 148 Ind. 127, 
 
 45 N. E. 770; Paxton Cattle Co. v. 
 First Nat. Bank, 21 Nebr. 621, 33 N. 
 W. 271, 59 Am. Rep. 852; Low v. 
 Connecticut &c. R. Co., 45 N. H. 370, 
 
 46 N. H. 284; Bell's Gap R. Co. v. 
 Christy, 79 Pa. St. 59; Grand Junc- 
 tion R. Co., 1 Mylne & C. 650; 1 
 Thomp. Corp. (2d. ed.), §§96, 102. 
 But see Weatherford &c. R. Co. v. 
 Granger, 86 Tex. 350, 24 S. W. 795, 
 40 Am. St. 837; Davis &c. Co. v. 
 Hillsboro &c. Co., 10 Ind. App. 42, 
 37 N. E. 549; Taft v. Quaker &c. 
 Bank, 141 Pa. St. 550, 21 Atl. 660; 
 Rotherham &c. Co., In re, 50 Law 
 T. (N. S;) 219. See also note to 
 Pittsburgh Min. Co. v. Spooner, 74 
 Wis. 307, 42 N. W. 259, 17 Am St. 
 149, 161, 162. 
 
 32 Powell V. Georgia &c. R. Co., 
 121 Ga. 803, 49 S. E. 7.59. 
 
§21 
 
 RAILROADS 
 
 38 
 
 upon the corporation, but looked solely to the responsibility of 
 the promoters, the corporation would not, as a rule at least, be 
 liable and it is not every contract that can be so adopted by the 
 corporation as to make it liable thereon, for there may be an ab- 
 solute want of power on the part of the corporation and the con- 
 tract may be ultra vires in every sense.^* 
 
 §21 (15). LfCgislative authority essential to creation of cor- 
 poration. — A corporation has been defined as a body consisting of 
 one** or more persons, established by law for certain specific pur- 
 poses, with the capacity of succession and with special privileges 
 not possessed by individuals, yet acting in many respects as an 
 individual.*^ It is necessary to the creation of the corporation 
 that it be authorized by legislative enactment.** It was formerly 
 
 33 Marshall County v. Schneck, S 
 Wall. (U. S.) 772, 18 L. ed. SS6. 
 Stanton v. New York &c. R. Co., S9 
 Conn. 272, 22 Atl. 300, 21 Am. St. 
 110; Shrewsbury v. North Stafford- 
 shire R. Co., L. R. 1 Eq. 593, 12 Jur. 
 (.N. S.) 63; Skegness &c. Tramways 
 Co., In re, 41 Ch. Div. 215. See also 
 Marshalltown First Nat. Bank v. 
 Church Federation, 129 Iowa 268, 
 105 N. W. 578. But compare Cook 
 Mfg. Co. V. Randall, 62 Iowa 244, 
 17 N. W. 507. In some instances, 
 however, there may, perhaps, be a 
 liability because of the acceptance 
 and retention of benefits and upon 
 the ground of estoppel, although not 
 strictly upon the contract. 
 
 34 Penobscot &c. Co. v. Lamson, 16 
 Maine 224, 33 Am. Dec. 656. Under 
 the general laws in most states the 
 minimum number of incorporators 
 is usually fixed at some certain num- 
 ber more than one. Indeed, the 
 number required for the incorpora- 
 tion of railroad companies as fixed 
 by such law's is often greater than 
 the laws of the same state require 
 
 for many other corporations. The 
 corporations is a separate entity 
 from, the person or persons who 
 may own its stock, and the fact that 
 one person owns all the stock has 
 been held not to make him and the 
 corporation the same person. Mo- 
 nongahela Bridge Co. v. Pittsburgh 
 &c. Co., 196, Pa. St. 25, 46 Atl. 99, 79 
 Am. St. 685. See also Ulmer v. 
 Lime Rock R. Co., 98 Maine 579, 
 57 Atl. 1001, 66 L. R. A. 387; Chase 
 V. Michigan &c. Co., 121 Mich. 631, 
 80 N. W. 717. 
 
 351 Thomp. Corp., §§1, 2. Many 
 deifinitions are given by Judge 
 Thompson from judicial decisions. 
 
 36 Franklin Bridge Co. v. Wood, 
 14 Ga. 80; Hoadley v. County Com- 
 missioners, 105 Mass. 519; People v. 
 Assessors, 1 Hill (N. Y.) 616; At- 
 kinson V. Marietta &c R. Co., IS 
 Ohio 21. "Corporations are creatures 
 of statutes and cannot come into 
 existence in a manner other than pre- 
 scribed by statute." They cannot be 
 created by mere agreement between 
 individuals. 1 Thomp. Corp (2nd ed) 
 
39 
 
 PROMOTION AND FORMATION OF THE CORPORATION 
 
 §22 
 
 a criminal offense to assume to act as a corporation without such 
 authority,*'' and is still held to be so, in theory at least, in some 
 jurisdictions.** 
 
 §22 (16). Creation by special charter. — Such legislative au- 
 thority was formerly given by special act, in which the powers, 
 duties and liabilities of the specified corporation were enumer- 
 ated at length, and it is still granted in this way in some states,** 
 but in a number of states special laws are prohibited by the con- 
 stitution and comparatively few special charters are now granted 
 even where there is no such prohibition. It is not necessary to 
 the existence of a corporation that it be expressly declared a cor- 
 poration in so many words.*" It is sufficient if powers are 
 granted to a body of men that can only be exercised by a cor- 
 poration.*^ Where certain designated persons are declared to be 
 a corporation and given corporate powers by a special charter, 
 they have been held to become a corporation eo instanti.*^ But 
 
 § 171. Congress has power to 
 charter railroad companies in the ter- 
 ritories within its jurisdiction. 
 Thompson v. Pacific R. Co., 9 Wall. 
 (U. S.) 579, 19 L. ed. 792; Union 
 Pacific R. Co. y. Lincoln County, 1 
 Dill. (U. S.) 314, Fed. Cas. No. 
 14378; California v. Central Pac. R. 
 Co., 127 U. S. 1, 39 Sup. Ct. 1037, 32 
 L. ed. ISO. 
 
 ST Duvergier v. Fellows, 5 Bing. 
 248, 5 Moore & P. 403. 
 
 38 People V. Ridgley, 21 111. 65. 
 
 39 An act declaring that "s com- 
 pany is hereby created called the St. 
 Joseph and Iowa Railroad Com- 
 pany," and naming the first board 
 of directors, was held to be a pres- 
 ent grant of corporate powers, of 
 which the construction and opera- 
 tion of part of its road by such com- 
 pany was a sufficient acceptance. 
 Roosa V. St. Joseph &c. R. Co., 114 
 Mo. 508, 21 S. W. 1124. See also 
 Little Rock &C. R. Co. v. Little 
 
 Rock &c. R. Co., 36 Ark. 663, 684; 
 Stoops V. Greensburgh &c. Co., 10 
 End. 47. New York v. New York 
 City R. Co., 193 N. Y. 543, 86 N E. 
 565. 
 
 *" JJenton v. Jackson, 2 Johns. Ch. 
 (N. Y.) 320; Commonwealth v. 
 West Chester R. Co., 3 Grant. Cas. 
 (Pa.) 200. 
 
 41 Liverpool Ins. Co. v. Massachu- 
 setts, 10 Wall. (U. S.) 566, 19 L. ed. 
 1029; Blanchard v. Kaull, 44 Cal. 
 440; Dean v. Davis, 51 Cal. 406; 
 Inhabitants of Springfield v. Miller, 
 12 Mass. 415; Coburn v. Ellenwood, 
 4 N. H. 101; Atkinson v. Bemis, 
 11 N. H. 44; Dunn v. Oregon Uni- 
 versity, 9 Ore. 357; Delaware &c. Co. 
 V. Commonwealth, SO Pa. St. 399. 
 But see Shelton v. Banks, 10 Gray 
 (Mass.) 401; Walsh v. New York 
 and Brooklyn Bridge, 96 N. Y. 427; 
 State V. Davis, 23 Ohio St. 434; 
 Neil V. Board, 31 Ohio St. IS. 
 
 *2 Compare Dartmouth College v. 
 
§23 
 
 RAILROADS 
 
 40 
 
 a man cannot be compelled to become a member of a private 
 corporation against his will.** 
 
 § 23 (17). Acceptance of charter. — For the reason stated in the 
 last section, a special charter does not, ordinarily, create an ef- 
 fective private corporation until it is accepted.** But, as special 
 .charters are usually for the benefit of those who are named, an 
 acceptance may be presumed in many cases. *^ Thus, the fact 
 that they had applied for the charter*^ that they afterwards exer- 
 cised the powers conferred,*'^ or the like,*^ is strong, if not con- 
 
 Woodward, 4 Wheat. (U. S.) 518, 4 
 L. ed. 629; Talledega Ins. Co. v. 
 Landers, 43 Ala. 115; Little Rock &c. 
 R. Co. V. Little Rock &c. R. Co., 36 
 Ark. 663, 684; Stoops v. Greens- 
 burgh &c. Plank Road Co., 10 Ind. 
 47; State v. Dawson, 16 Ind. 40. 
 
 43 2 Kent Cora. 277; Ellis v. Mar- 
 shall, 2 Mass. 269, 3 Am. Dec. 49; 
 Lauman v. Railroad Co., 30 Pa. St. 
 46, 72 Am. Dec. 685. 
 
 44 Dartmouth College v. Wood- 
 ward, 4 Wheat. (U. S.) 518, 708, 4 
 L. ed. 629; Lexington &c. R. Co. v. 
 Chandler, 13 Mete. (Mass.) 311; 
 Haslett V. Wotherspoon, 1 Strobh. 
 Eq. (S. Car.) 209; Quinlan v. Hous- 
 ton &c. Co., 89 Tex. 356, 34 S. W. 
 738. See also Jennings v. Dark, 
 175 Ind. 332, 92 N. E. 778. 
 
 45 Bangor &c. R. Co. v. Smith, 47 
 Maine 34; Charles River Bridge v. 
 Warren Bridge, 7 Pick. (Mass.) 344; 
 1 Elliott Ev. § 106. 
 
 46 Atlanta v. Gate City &c. Co., 71 
 Ga. 106; Middlesex &c. v. Davis, 
 3 Mete. (Mass.) 137; St. Joseph &c. 
 R. Co. V. Shambaugh, 106 Mo. 557, 17 
 S. W. 581 ; Astor v. New York R. 
 Co., 48 Hun 562, 1 N. Y. S. 174. 
 But the presumption of acceptance 
 arising from the application for the 
 
 charter may, it seems, be rebutted by 
 proof that no steps were taken to 
 organize or proceed under it, al- 
 though a great many years had 
 elapsed since it was granted. New- 
 ton V. Carbery, 5 Cranch (U. S.) 
 632 Fed. Cas. No. 10190. 
 
 47 Newton v. Carhery, 5 Cranch 
 (U S.) 632, Fed. Cas. No. 10190; 
 Louisville Trust Co. v. Louisville &c. 
 R. Co., 75 Fed. 433; Talladega Ins. 
 Co. V. Landers, 43 Ala. 115; Illinois 
 River R. Co. v. Zimmer, 20 111. 654; 
 Eastern R. Co. v. Boston &c. R. Co., 
 Ill Mass. 125, IS Am. Rep. 13; 
 Quinlan v. Houston &c. R. Co., 89 
 Tex. 356, 34 S. W. 738. See also 
 Roosevelt v. Hamblin, 199 Mass. 
 127, 85 N. E. 98, 18 L. R. A. (N. S.) 
 748n; Boatmen's Bank v. Gillespie, 
 209 Mo. 217, 108 S. W. 74. 
 
 48 Snead v. Indianapolis &c. R. 
 Co., 11 Ind. 104; St. Paul Division 
 V. Brown, 11 Minn. 356; Taylor v. 
 Newberne, 55 N. Car. 141, 64 Am. 
 Dec. 566; McKay v. Beard, 20 S. 
 Car. 156; Cleaves v. Turnpike Co., 
 1 Sneed (Tenn.) 491. See also Gly- 
 mont Imp. Co. v. Toler, 80 Md. 278, 
 30 Atl. 651 ; Cincinnati &c. R. Co. v. 
 Cole, 29 Ohio St. 126, 23 Am. Dec. 
 729; 3 Elliott Ev. §§ 1932. 1936. 
 
41 PROMOTION AND FORMATION OF THE CORPORATION § 24 
 
 elusive, evidence of an acceptance. It is not, therefore, essential 
 that an express acceptance of the charter should appear in the 
 records of the corporation.*^ The acceptance must usually be 
 tinconditional, for a charter cannot be accepted in part and re- 
 jected in part, but must either be accepted or rejected as of- 
 fered.^" Although directors may sometinKes bind a corporation 
 by acts performed by them in other states than that in which the 
 corporation was created, yet the meetings of the stockholders or 
 corporators must usually be held within the jurisdiction creating 
 the corporation, and it has been held that the acceptance of a 
 charter by the corporators in their constituent capacity at a meet- 
 ing held in another state for the purpose of organization is inef-» 
 fective.®^ If a charter is granted by the legislature without any 
 application upon the part of those to whom it is granted, it is 
 regarded as a mere ofifer upon the part of the state, and may be 
 withdrawn at any time before it is accepted. ^^ When accepted, a 
 charter takes effect immediately,"^ unless otherwise provided. 
 
 § 24 (18). Incorporation under general laws. — To prevent the 
 grant of special and exclusive privileges, to secure uniformity in 
 the powers of all corporations of the same class and render them 
 
 49 Russell V. McLellan, 14 Pick, pare Missouri Lead &c. Co. v. Rein- 
 (Mass.) 63. The question of accept- hard,- 114 Mo. 218, 21 S. W. 488, 
 
 ance is usually a question of fact for 35 Am. St. 746. 
 
 the jury. Hammond v. Straus, S3 52 State v. Dawson, 16 Ind. 40. 
 
 Md. 1. See also State v. Bull, 16 Conn. 179, 
 
 50 Kenton County Court v. Bank 191 ; Illinois River R. Co. v. Zimmer, 
 Lick &c. Co., 10 Bush (Ky.) S29; 20 111. 654; Cincinnati &c. R. Co. 
 Lyons v. Orange &c. R. Co., 32 Md. v. Clifford, 113 Ind. 460, 463, 
 18; Rex. v. Westwood, 2 Dow & CI. 464, 15 N. E. 524; Chesapeake &c. 
 21, 7 Bing. 1, 90. Co. v. Baftimore &c. R. Co., 4 G. & 
 
 51 Miller v. Ewer, 27 Maine 509, J. (Md.) 1 ; Mississippi Society v. 
 46 Am. Dec. 619, and note; Smith Musgrove, 44 Miss. 820, 7 Am. Rep. 
 V. Silver Valley &c. Co., 64 Md. 85, 723. 
 
 20 Atl. 1032, 54 Am. Rep. 760. See 53 Kaiser v. Lawrence Savings 
 
 also Augusta v. Earle, 13 Pet. (U. Bank, 56 Iowa 104, 8 N. W. 772, 41 
 
 S.) 519, 10 L. ed. 274; Aspinwall Am. Rep. 85. See also Coleman v. 
 
 V. Ohio &c. R Co., 20 Ind. 4S2, 83 Coleman, 78 Ind. 344; Cincinnati, &c. 
 
 Am. Dec. 329. Freeman v. Machias R.. Co. v. Cole, 29 Ohio St. 126, 23 
 
 &c. Co., 38 Maine 343. But com- Am. Rep. 729. 
 
§24 
 
 RAILROADS 
 
 42 
 
 subject to all such general laws as may be enacted for the gov- 
 ernment of corporations of that class, and to secure to the state 
 the right to amend or repeal the charter at pleasure, provision is- 
 made for the creation of corporations by general laws in most of 
 the states,^* in several of which the constitutions forbid the pas- 
 sage of any special act chartering railroads.®^ These general 
 laws usually provide for the filing of articles of association, con- 
 forming to certain statutory requirements, by persons who have 
 subscribed stock in the projected company. The persons sub- 
 scribing to the articles of incorporation need not be residents of 
 the state issuing the charter, unless the statute requires it.^*- 
 When the requisite stock is subscribed, and the articles signed 
 and filed as provided (generally with the secretary of state) the- 
 subscribers and stockholders usually become a corporation,, 
 clothed with the powers and charged with the duties and liabil- 
 ities of corporations.^'' Proof of the act of incorporation and of" 
 
 54 1 Thomp. Corp. (2d ed.), §171, 
 et seq. This reservation may appear 
 in the Constitution, or in the general 
 laws, or in the charter itself. Thomp. 
 Corp. (2nd ed. §404. As to for- 
 mation by consolidation, see Yazoo 
 &c. R. Co. V. Adams, 180 U. S. 1, 
 21 Sup. Ct. 240, 45 L. ed. 395, and 
 chapter IS on ConsoUdation. 
 
 55 This is true of Arkansas, Colo- 
 rado, California, Illinois, Indiana, 
 Kansas, Louisiana, Mississippi, Mis- 
 souri, Nebraska New Jersey, Texas, 
 New York, Michigan, Minnesota, Ne- 
 vada, Maryland, Maine, Oregon, 
 Ohio, Wisconsin and the territories. 
 1 Thomp. Corp. (2nd ed.) §146, et 
 seq. The Kansas act in relation to 
 the Missouri, Kansas and Texas 
 Railway Company and the Union 
 Pacific Railway Company, purport- 
 ing to convey and extend all the 
 rights possessed to any part of 
 their line to their entire road, and 
 to give a right of way over all 
 
 lands as full as that enjoyed over- 
 other lands under other acts, is in 
 violation of Kans. Const, art. 12, 
 § 1, providing that the legislature 
 shall pass no special act conferring 
 corporate powers. Roberts v. Mis- 
 souri &c. R. Co., 43 Kans. 102, 22' 
 Pac. 1006, 43 Am. & Eng. R. Cas. 
 532. 
 
 56 Central R. Co. y. Pennsylvania 
 R. Co., 31 N. J. Eq! 475; National 
 Docks R. Co. V. Central R. Co., 32" 
 N. J. Eq. 755; note to State v. 
 Manufacturers &c. Assn., 50 Ohio St. 
 145, 33 N. E. 401, 24 L. R. A. 252; 
 Detwiller v. Commonwealth, 31 Pa. 
 St. 614, 18 Atl. 990, 7 L. R. A. 357; 
 Commonwealth v. Hemmingway, 131" 
 Pa. St. 614, 18 Atl. 990, 7 L. R. A. 
 360. See generally, 1 Thomp. Corp. 
 (2d ed.), §177. 
 
 •''7 Cincinnati &c. R. Co. v. Dan- 
 ville &c, R. Co., 75 111. 113; Hoag- 
 land v. Cincinnati &c. R. Co., 18: 
 Ind. 452; James v. Greensboro ftc. 
 
•43 
 
 PROMOTION AND FORMATION OF THE CORPORATION 
 
 §24 
 
 'User or corporate action under it is generally sufficient evidence 
 •of the existence of the corporation,^^ and a proper certificate of 
 incorporation, or copy of the original articles of incorporation, 
 is, in most states prima facie, and, perhaps, conclusive evidence 
 Tthereof;'® but a certificate which fails to comply, in substance, 
 with the statutory requirements is not proof of a valid corporate 
 •existence.®" The articles of incorporation are generally required 
 'to specify the objects of the corporation in at least substantial 
 -compliance with the statute,®^ the place in which its operations 
 -are to be carried on or in which its principal office is located,** 
 
 Co., 47 Ind. 379; Hunt v. Kansas 
 
 ..and Missouri Brige Co., 11 Kans. 
 
 -412. Qarkson v. Hudson River R. 
 Co., 12 N. Y. 304. The require- 
 ments of the statute must be 
 
 •substantially complied with. Peo- 
 ple V. Chambers, 42 Cal. 201; 
 
 'McCallion v. Hibernia &c. Society, 
 
 70 Cal. 163. 12 Pac. 114; Peo- 
 ■ple V. Cheeseman, 7 Colo. 376, 15 
 Am. & Eng. R. Cas. 400; Reed v. 
 Richmond &c. R. Co., 50 Ind. 342; 
 Abbott V. Omaha &c. Co., 4 Nebr. 
 
 ■416; Eaton v. Acpinwall, 19 N. Y. 
 119; Childs v. Hurd, 32 W. Va. 66, 
 
 "9 S. E. 362. But slight omissions 
 in the certificate will not vitiate it. 
 People V. Stockton &c. R. Co., 45 
 
 ■Cal. 306, 13 Am. Rep. 178; Eakright 
 v. Logansport &c. R. Co., 13 Ind. 
 404; Commonwealth v. Central Pass. 
 
 'R. Co., 52 Pa. St. 506; Buffalo &c. 
 R. Co. V. Cary, 26 N. Y. 75; Rogers 
 V. Danby Universalist Society, 19 Vt. 
 187. The fact that nearly all the 
 
 ■.officers of a railroad company are 
 also officers of other railroad com- 
 panies does not affect the corporate 
 
 •existence of the former company, 
 
 rand, under the Kansas law, its exist- 
 ence dates from the filing of its 
 
 •charter. Southern &c. R. Co. v. 
 
 Towner, 41 Kans. 72, 21 Pac. 221. 
 
 B 8 Wood y. Wiley &c. Co., 56 
 Conn. 87; 13 Atl. 137; Braintree &c. 
 Co. V. Braintree, 146 Mass. 482, 16 
 N. E. 420; Columbia &c. Co. v. 
 Meier, 39 Mo.. S3; Bank v. Interna 
 tional Bank, 21 N. Y. 542; 3 EUioti 
 Ev. §§1934-1941. See also Elliff v. 
 Oregon R. &c. Co., 53 Ore. 66, 99 
 Pac. 76; Wisconsin River Imp. Co. 
 V. Pier, 137 Wis. 325, 118 N. W. 
 857, 21 L. R. A. (N. S.) 538n. 
 
 59Thomp. Corp. (2d ed.), §284. 
 See 3 Elliott Ev. § 1941 ; also Reno 
 V. Reno &c. Ditch Co., 51 Colo. 588, 
 119 Pac. 473. 
 
 «n People v. Self ridge, 52 Cal. 331 ; 
 McCallion v. Hibernia &c. Society, 70 
 Cal. 163, 12 Pac. 114; Fifth Baptist 
 Church V. Baltimore &c. R. Co., 4' 
 Mackey (D. C.) 43. 
 
 «iWest V. BuUskin &c. Co., 32 Ind. 
 138; O'Reiley v. Kankakee &c. Co., 
 32 Ind. 169; Attorney-General v. 
 Lorman, 59 Mich. 157, 26 N. W. 311, 
 60 Am. Rep. 287; State v. Central 
 Ohio &c. Assn., 29 Ohio St. 399. 
 
 62 Harris v. McGregor, 29 Cal. 
 124; Clegg v. Hamilton &c. Co., 61 
 Iowa 121, 15 N. W. 865; People v. 
 Beach, 19 Hun (N. Y.) 259. 
 
§24 
 
 RAILROADS 
 
 44- 
 
 the amount of the capital stqck,*^ and the names and residences 
 of the incorporators,** and the like.*^ In the case of a railroad 
 company it is also usually provided that the line of the road shall 
 be more or less definitely described, but where the statute merely 
 requires that the termini should be stated and the counties namled 
 into or through which it is intended to pass, it is sufficient so to 
 describe the line by designating such place and naming each 
 county into or through which it is expected to run.*® Most of 
 the statutes require that the articles of incorporation shall be 
 signed and acknowledged by a certain number of incorporators,®'^ 
 
 63 State V. Shelbyville &c. Co., 41 
 Ind. ISl ; Heinig v. Adams. &c. Co., 
 81 Ky., 300. See also Huntington v. 
 Curry, 14 Cal. App. 468, 112 Pac. 
 583. 
 
 64 Busenback v. Attica &c. Co., 43 
 Ind. 265; Vawter v. Franklin Col- 
 lege, S3 Ind. 88. But the residence 
 need not be stated unless the statute 
 requires it. .State v. Foulkes, 94 
 Ind. 493. It is sufficient if the ini- 
 tials of the Christian name be used. 
 State V. Beck, 81 Ind. 500. 
 
 65 Piper V. Rhodes, 30 Ind. 309 ; 
 New Orleans &c. R. Co. v. Frank, 39 
 La. Ann. 707, 2 So. 310, 30 Am. & 
 Eng. R. Cas. 275; State v. Central 
 Ohio &c. Assn., 29 Ohio St. 399. 
 See also Martin v. Deetz, 102 Cal. 
 
 '55, 36 Pac. 368, 41 Am. St. 151; 
 People V. Montecito &c. Co., 97 Cal. 
 276, 32 Pac. 236, 33 Am. St. 172, 
 and note on pages 178, 179. 
 
 «6 Board v. Center Tp., 105 Ind. 
 422, 441, 2 N. E. 368, 7 N. E. 189. 
 See also Hyattsville v. Washington 
 &c. R. Co., 120 Md. 128, 87 Atl. 828; 
 New York &c. R. Co. v. O'Brien, 
 121 App. Div. 819, 106 N. Y. 909. 
 Where the line is described with 
 
 reasonably certainty and the ter- 
 mini are shown to be in the state ini 
 which the company is incorporated 
 it has been held that the fact that 
 the line as described runs partly 
 through another state does not in- 
 validate the incorporation. Pied- 
 mont &c. R. Co. V. Speelman, 67 
 Md. 260, 10 Atl. 77, 293, 30 Am. & 
 Eng. R. Cas. 316. An approximate 
 estimate of the length of the road 
 is sufficient where the length is re- 
 quired to be stated. Buffalo &c. R. 
 Co. V. Hatch, 20 N. Y. 157. And in- 
 definiteness in the description of the 
 route may be rendered immaterial 
 by legislative recognition, and the 
 construction and operation of the 
 road. Cayuga Lake Co. v. Klye, 5 
 Thomp. & C. 659, 64 N. Y. 185. 
 See post, §47. 
 
 6'? People V. Montecito &c. Co., 97 
 Cal. 276, 32 Pac. 236, 33 Am. St. 172 ; 
 Indianapolis &c. Mining Co. v. Her- 
 kimer, 46 Ind. 142 ; State v. Critchett, 
 37 Minn. 13, 32 N. W. 787; Corey 
 V. Morrill, 61 Vt. 598. In such a 
 case one who merely signs the arti- 
 cles of association without acknowl- 
 edging them does not become a 
 
45 
 
 PROMOTION AND FORMATION OF THE CORPORATION 
 
 §24 
 
 and that the certificate or copy shall be filed with the secretary of 
 state, or other officer, or published in some specified manner. In 
 some jurisdictions the failure to comply with such a requirement 
 has been held not to vitiate the organization or prevent the cor- 
 poration from coming into existence,** but much depends upon 
 the language of the particular statute, and if the requirement is 
 a condition precedent it must be complied with.*® It is, indeed, 
 the general rule that all conditions precedent must be substan- 
 tially performed.'"' Thus, where the statute provides that a cer- 
 tain amount of stock shall be subscribed before articles of incor- 
 poration can be filed, or that a certain percentage of the capital 
 stock shall be paid in before the articles are filed, the statute 
 must be complied with before a corporation can be legally or- 
 ganized.'^^ In the absence, however, of any provision upon the 
 
 stockholder and is not bound by the 
 subscription. Coppage v. Hutton, 
 124 Ind. 401, 24 N. E. 112, 7 L. R. A. 
 591. 
 
 ssshakopee &c. Co., In re, 37 
 Minn. 91, 33 N. W. 219; Granby 
 Mining Co. v. Richards, 95 Mo. 106, 
 8 S. W. 246; Holmes v. Gilliland, 
 41 Barb. (N. Y.) 568. See also 
 Vanneraan v. Young, 52 N. J. L. 403, 
 3 Lewis Am. R. & Corp. 660, and 
 note. 
 
 69 Elgin &c. Co. V. Loveland, 132 
 Fed. 41 ; Martin v. Deetz, 10^ Cal. 
 55, 36 Pac. 368, 41 Am. St. 151; 
 Bigelow V. Gregory, 73 111. 197; In- 
 dianapolis &c. Mining Co. v. Herki- 
 mer, 46 Ind. 142 ; Clegg v. Hamilton, 
 61 Iowa 121, IS N. W. 865; Field 
 V. Cooks, 16 La. Ann. 153; State v. 
 Critchett, 37 Minn. 13, 32 N. W. 787; 
 Hurt V. Salisbury, 55 Mo. 310; Capp 
 V. Hastings &c. Co., 40 Nebr. 470, 
 58 N. W. 956, 24 L. R. A. 259, 42 
 Am." St. 677; Childs v. Hurd, 32 W. 
 Va. 66, 9 S. E. 362; Bergeron v. 
 Hobbs, 96 Wis. 641, 71 N. W. 1056, 
 
 65 Am. St. 85; 1 Thomp. Corp. (2d 
 ed.), §265. Where, however, the 
 articles are properly delivered to the 
 designated officer for record, the 
 fact that he records them in the 
 wrong book will not invalidate the 
 incorporation. Walton v. Riley, 85 
 Ky. 413, 3 S. W. 605. See also 
 State V. Foulkes, 94 Ind. 493. 
 
 TOGarnett v. Richardson, 35 Ark. 
 144; Mokelumne Hill &c. Co. v. 
 Woodbury, 14 Cal. 424, 73 Am. Dec. 
 658; Danbury &c. R. Co. v. Wilson, 
 22 Conn. 43S; Attorney-General v. 
 Hanchett, 42 Mich. 436, 4 N. W. 182 ; 
 Dutchess &c. R. Co. v. Mabbett, 58 
 N. Y. 397. 
 
 71 People v. Chambers, 42 Cal. 201 ; 
 State V. Dillon, 36 Ind. 388; State 
 V. St. Paul &a Co., 92 Ind. 42; 
 Holman v. State, 105 Ind. 569, 5 N. 
 E. 702. But where this is not re- 
 quired to precede the filing of the 
 articles there may be a corporate 
 existence sufficient, at least to, with- 
 stand a collateral attack. Eastern 
 &c. Co. V. Vaughn, 14 N. Y. 546; 
 
§ 25 ■ RAILROADS 46 
 
 subject in the statute or contract of subscription, it has been held 
 not to be necessary that the entire capital stock should have been 
 subscribed for before the incorporationJ^ And where the gen- 
 eral laws for the incorporation of railroads requires the payment 
 of a certain part of the subscription in cash before the filing of the 
 articles of incorporation it should be reasonably construed,- and it 
 has been held sufficient if the payment is made by check which 
 would have been cashed.''* 
 
 §25 (19). Perfecting the organization. — Under some of the 
 statutes the names of those who are to serve as directors for the 
 first year must be stated in the article of incorporation, and 
 where such or similar provisions are found it would seem, that 
 there must be a preliminary meeting and organization, or at least 
 a selection in some manner of those who are to serve as directors. 
 But, ordinarily, the articles of incorporation are first executed 
 and filed and a meeting of the stockholders or members is then 
 held for the purpose of adopting by-laws, electing directors, and 
 perfecting the corporate organization ;''* although, as already 
 
 Palmer v. Lawrence, 3 Sandf. (N. 227; Macdougall v. Jersey &c. Co., 2 
 
 Y.) 161. See also People v. Stock- H. & M. 528.- But see Shurtz v. 
 
 ton &c. R. Co., 45 Cal. 306, 13 Am. Schoolcraft &c. R. Co., 9 Mich. 269; 
 
 Rep. 178; McClinch v. Sturgis, 72 Cahot &c. Bridge v. Chapin, 6 Cush. 
 
 Maine 288; Boston &c. Co. v. Mor- (Mass.) 50; Salem Mill Dam Co. v. 
 
 ing, IS Gray (Mass.) 211; Buiifalo Ropes, 6 Pick. (Mass.) 23; Wor- 
 
 &c. R. Co. V. Hatch, 20 N. Y. 157; cester &c. R. Co. v. Hinds, 8 Cush. 
 
 Ogdensburgh &c. R. Co. v. Frost, 21 (Mass.) 110; Livesey v. Omaha &c. 
 
 Barb. (N. Y.) 541; Cheraw &c. R. Co., 5 Nebr. SO, and compare City 
 
 Co. V. White, 14 S. Car. 51; Hotel v. Dickinson, 6 Gray (Mass.) 
 
 Spartanburg &c. R. Co. v. Ezell, 14 586; Boston &c. R. Co. v. Welling- 
 
 S. Car. 281. ton, 113 Mass. 79. See post, § 129. 
 
 72 Minor v. Mechanics' Bank, 1 '•^ People v. Chambers, 42 Cal. 201. 
 
 Pet. (U. S.) 46, 7 L. ed. 47; Boll- See also People v. Stockton &c. R. 
 
 ing V. Le Grand, 87 Ala. 482, 6 So. Co., 4S Cal. 306, 13 Am. Rep. 178. 
 
 332 ; Johnson v. Kessler, 76 Iowa ^4 See Walker v. Devereaux, 4 
 
 411, 41 N. W. 57; Massey v. Citi- Paige Ch. (N. Y.) 229; Lehman v. 
 
 zens' &c. Assn., 22 Kans. 624; Warner, 61 Ala. 455; McClinch v. 
 
 :c;ienectady &c. Plank Road Co. v. Sturgis, 72 Maine 288. See generally 
 
 Thatcher, 11 N. Y. 102; Waterford 1 Thomp. Corp. (2d ed.), Ch. 7, 
 
 &c. R. Co. V. Dalbiac, 20 L. J. Exch. and particularly, § 194. 
 
47 
 
 PROMOTION AND FORMATION OF THE CORPORATION 
 
 §26 
 
 stated, the corporation comes into existence, under many of the 
 statutes, as soon as the articles of incorporation are properly 
 filed. The directors then usually hold a directors' meeting and 
 elect the of5&cers. This ordinarily, completes the corporate or- 
 ganization, although there may be other statutory requirements 
 that should be complied with before the corporation is ready to 
 do businessJ" 
 
 § 26 (20). Defective organization — Waiver — Collateral attack. 
 — If the organization be defective, this fact cannot, as a rule, be 
 taken advantage of in any collateral action,'' ^ for mere irregulari- 
 
 75In the case of Wechselberg v. 
 Flour City Nat. Bank, 64 Fed. 90, 
 26 L. R. A. 470, it was held that, 
 under the Wisconsin statute, where 
 the requisite number of persons duly 
 signed, acknowledged and filed 
 articles of incorporation, but did 
 not subscribe for or issue any 
 stock or do anything else to per- 
 fect the organization, the corpora- 
 tion had only a qualified existence 
 without the full privileges of a com- 
 plete incorporation and organization, 
 and that one of said persons was 
 bound with the others for debts in- 
 curred by them in the name of t''e 
 corporation, although he did not ac- 
 tively participate in their acts. See 
 also Whitney v. Wyman, 101 U. S. 
 392, 25 L. ed. lOSO; Hammond v. 
 Straus, S3 Md. 1; State v. Fidelity 
 &c. Co., 49 Ohio St. 440, 31 N. E. 
 658, 16 L. R. A. 611, 6 Lewis Am. 
 R. Corp. 599; Hughesdale &c. Co, v. 
 Vanner, 12 R. I. 491; Anvil Min. 
 Co. V. Sherman, 74 Wis. 226, 42 N. 
 W. 226, 4 L. R. A. 232. As a gen- 
 eral rule, however, conditions to be 
 performed after incorporation, in 
 order to carry on business, are not 
 conditions precedent in such a sense 
 as to effect the corporate existence. 
 
 Spartanburg &c. R. Co. v. Ezell, 14 
 S. Car. 281 ; Harrod v. Hamer, 32 
 Wis. 162. And see Rutherford v. 
 Hill, 22 Ore. 218, 17 L. R. A. 549, 
 29 Am. St. S96n; People v. Rose, 
 210 111. 582, 71 N. E. 580; Cincin- 
 nati &c. R. Co. V. Clifford, 113 Ind. 
 460, 15 N. E. 524. 
 
 76 Frost V. Frostburg Coal Co., 24 
 How. (U. S.) 278, 283, 16 L. ed. 
 637; Baltimore &c. R. Co. v. Fifth 
 Baptist Church, 137 U. S. 568, 11 
 Sup. Ct. 185, 34 L. ed. 784; Lah- 
 man v. Warner, 61 Ala. 455; Illi- 
 nois &c. R. Co. V. Cook, 29 JIl. 237; 
 Brown v. Calumet R. Co., 125 111. 
 600, 18 N. E. 283 ; Aurora &c. R. Co. 
 V. Lawrenceburg, 56 Ind. 80; Com- 
 missioners V. Hall, 70 Ind. 469; 
 Qeveland &c. R. Co. v. Feight, 41 
 Ind. App. 416, 84 N. E. 15; Gill v. 
 Kentucky &c. Co., 7 Bush (Ky.) 635; 
 Taylor v. Portsmouth &c. St. R., 91 
 Maine 193, 64 Am. St. 216; Taggart 
 v. Western Md. R. Co., 24 Md. 563, 
 89 Am. Dec. 760n ; Swartout v. Mich- 
 igan A. L. Co., 24 Mich. 389, 394; 
 Eaton v. Aspinwall, 19 N. Y. 119; 
 Hanover Junction &c. R. Co. v. 
 Haldeman, 82 Pa. St. 36, 46; Monon- 
 gahela Bridge Co. v. Pittsburgh &c. 
 Co., 196 Pa. St. 25, 46 Atl. 99, 79 
 
§26 
 
 RAILROADS 
 
 48 
 
 ties may be waived by the state/'' which alone can object to the 
 unauthorized assumption of corporate powers.'^* Legislative 
 recognition of a corporation as a subsisting one is such a 
 waiver/* for the legislature has the same right to ratify and con- 
 firm an irregularly organized corporation that it has to create a 
 new one,*" but mere legislative recognition only operates to cure 
 
 Am. St. 685; Postal Tel. &c. Co. v. 
 Oregon Short Line &c. Co., 23 Utah 
 474, 90 Am. St. 70S. See also 
 Georgia Southern &c. R. Co. v. Mer- 
 cantile Trust &c. Co., 94 Ga. 306, 
 21 S. E. 701, 32 L. R. A. 208n, 47 
 Am. St. 153; Terre Haute &c. R. 
 Co. V. Robbins, 247 111. 376, 93 N. E. 
 398; note to People v. Montecito 
 Water Co., 97 Cal. 276, 32 Pac. 236, 
 33 Am. St. 172, 180 et seq.; Lusk 
 V. Riggs (Nebr.), 102 N. W. 88; 
 note to Vanneman v. Young, 3 Lewis 
 Am. R. Corp. 660, 662 et seq. 
 
 T7 If the state fail for eight years 
 to avail itself by quo warranto, of a 
 defect in articles of association con- 
 sisting in an uncertain statement 
 of a terminus of a road, it cannot 
 do it afterward. State v. Bailey, 19 
 Ind. 452. Under the statutes of 
 Tennessee which provide that a 
 railroad company's charter shall 
 first be registered in the county 
 where the company's principal of- 
 fice is ; that it shall then be trans- 
 mitted to the secretary of state, who 
 shall affix his certificate of registra- 
 tion and the great seal of state, and 
 that these shall be registered where 
 the charter was originally regis- 
 tered; and that this shall complete 
 the company's corporate character, 
 it has been held that, where a com- 
 pany was organized to run a rail- 
 road through several counties, the 
 
 county where its charter is regis- 
 tered should be deemed to have been 
 determined on as the location of the 
 principal office, and holding a di- 
 rectors' and stockholders' meeting 
 in another county will not change 
 the rule. Anderson v. Middle and 
 East Tennessee Cent. R. Co., 91 
 Tenn. 44, 17 S. W. 803, 52 Am. & 
 Eng. R. Cas. 149. 
 
 fSHay v. People, 59 111. 94; Reis- 
 ner v. Strong, 24 Kans. 410, 10 Am. 
 & Eng. R. Cas. 335. See also Shields 
 V. Clifton Hill Land Co., 94 Tenn. 
 123, 28 S. W. 668, 26 L. R. A. 509, 
 45 Am. St. 700. 
 
 T9 Cowell V. Colorado Springs Co., 
 100 U. S. 55, 25 L. ed. 547, 3 Colo. 
 82; Mead v. New York &c. R. Co., 
 45 Conn. 199; McAuley v. Colum- 
 bus &c. R. Co., 93 111. 348; McCart- 
 ney V. Chicago &c. R. Co., 112 111. 
 611, 29 Am. & Eng. R. Cas. 326; 
 Koch V. North Ave. R. Co., 75 Md. 
 222, 23 Atl. 463, 15 L. R. A. 377n; 
 Atlantic &c. R. Co. v. St. Louis, 66 
 Mo. 228; Black River &c. R. Co. 
 V. Barnard, 31 Barb. (N. Y.) 258; 
 1 Thomp. Corp. (2d ed.), §269. 
 
 80 Comanche County v. Lewis, 133 
 U. S. 198, 10 Sup. Ct. 286, 288, 33 
 L. ed. 604; Illinois &c. Co. v. Cook, 
 29 111. 237; Mitchell v. Deeds, 49 
 . 111. 416, 95 Am. Dec. 621. See also 
 Fisher v. Evansville &c. R, Co., 7 
 Ind. 407, 413. See generally Hogue 
 
49 
 
 PROMOTION . AND FORMATION OF THE CORPORATION 
 
 §26 
 
 defects in the organization, and not to create a new corporation 
 where there is not even a de facto organization upon which it can 
 act." 
 
 V. Capital &c. Bank, 47 Nebr. 929, 
 66 N. W. 1036; People v. Barker, 
 39 N. Y. S. 88; Mylrea v. Superior 
 &c. R. Co., 93 Wis. 604, 67 N. W. 
 1138; note in 33 Am. St. 179, 180; 
 Smith V. Havens &c. Soc. 90 N. Y. 
 S. 168. 
 
 81 Attorney-General v. Railroad 
 Cos., 35 Wis. 42S, 602 ; State v. Ford 
 Co., 12 Kans. 441, approved in Com- 
 anche County V. Lewis, 133 U. S. 198, 
 10 Sup. Ct. 286, 288, 33 L. ed. 604. 
 See also Oroville &c. R. Co. v. Sup- 
 ervisor, 37 Cal. -354. On this theory it 
 is held that a statute curing defects 
 in the organization of a de facto 
 
 corporation does not violate a con- 
 stitutional provision prohibiting the 
 creation of a corporation by special 
 legislation. Central Agricultural 
 Assn. v. Alabama &c. Co., 70 Ala.. 
 120. Where articles of incorpora- 
 tion filed are void, it has been beld! 
 that ■ they cannot be made good by 
 amendment. State v. Critchett, 37 
 Minn. 13, 23 N. W. 767. See gener- 
 ally Pearsall v. Great Northern &c. 
 R. Co. 73 Fed. 933; State v. Webb. 
 110 Ala. 214, 20 So. 462; Willis v. 
 Chapman, 68 Vt. 459, 35 Atl. 459; 
 1 Thorap. Corp (2d ed.), §269. 
 
CHAPTER III. 
 
 LEGAL STATUS. 
 
 Sec. 
 
 30. As individual, person, citizen. 
 
 31. Corporation confined to juris- 
 
 diction creating it — Business 
 elsewhere — Comity. 
 
 32. Citizenship — Removal of causes. 
 
 33. Residence and domicile— Juris- 
 
 diction. 
 
 34. Federal corporations. 
 
 35. Railroad in more than one state 
 
 — Citizenship. 
 .36. Control of railroads in more 
 
 than one state. 
 :37. Control of railroad incorporated 
 
 jn more than one state. 
 
 Sec. 
 
 38. Result of consolidation or con- 
 
 current action of several 
 states creating new corpora- 
 tions. 
 
 39. Railroad only a citizen or do- 
 
 mestic corporation of the 
 states that charter it — Effect 
 of mere license. 
 
 40. Foreign corporations — Condi- 
 
 tion of admission to state. 
 
 41. Railroads as property. 
 
 42. Railroads as monopolies. 
 
 43. Railroads as public highways. 
 
 § 30 (21). As individual, person, citizen. — A railroad company 
 may be regarded as an individual, in the sense that it may, unless 
 restrained by law make contracts,^ sue and be sued,* buy and sell 
 property,^ in furtherance of its business, and in general carry on 
 business much the same as if it were a natural person. It is for 
 most purposes at least, regarded and treated as a distinct entity.* 
 
 iSee 1 Elliott Cont., §§ 272, 540; 
 post chapter on Contracts. 
 
 2 See post chapters on Actions by 
 and against Railroad Companies. 
 
 3 Graham v. Railroad Co., 102 U. 
 S. 148, 161, 26 L. ed. 106; Richard- 
 son V. Mass. &c. Association, 131 
 Mass. 174; Crawford v. Longstreet, 
 43 N. J. L. 325. See also Georgia 
 Pac. R. Co. V. Wilks, 86 Ala. 478, 
 6 So. 34; McQure v. Missouri River 
 &c. R. Ca, 9 Kans. 373 (not merely 
 for speculation). As elsewhere 
 
 shown, however, it cannot, without 
 legislative authority, sell all property 
 necessary for it to keep in order to 
 perform its duties to the public. 
 
 4 Pullman Palace Car Co. v. Mis- 
 souri R. Co., lis U. S. 587, 6 Sup. Ct. 
 194, 29 L. ed. 499; Ulmer v. Lime 
 Rock R. Co., 98 Maine 579, 57 Atl. 
 1001, 66 L. R. A. 387; Monongahela 
 Bridge Co. v. Pittsburgh &c. Co., 196 
 Pa. St. 25, 48 Atl. 99, 79 Am. St. 
 685. 
 
 SO 
 
51 
 
 LEGAL STATUS 
 
 §30 
 
 It is a "person" within the meaning of the fourteenth amendmejlt 
 to the United States constitution forbidding a state to deny to 
 any person the equal protection of the laws ;^ and, generally, is 
 to be treated as a person within the meaning of statutes con- 
 ferring rights and remedies on "persons,"® unless it is evidence 
 
 5 Santa Clara Co. v. Southern &c. 
 R. Co., 118 U. S. 394, 6 Sup. Ct. 
 1132, 30 L. ed. 118, 24 Am. & Eng. 
 R. Cas. S23; Pembina &c. Co. v. 
 Pennsylvania, 125 U. S. 181, 8 Sup. 
 Ct. 830, 31 L. ed. 650; Missouri &c. 
 R. Co. V. Mackey, 127 U. S. 205, 8 
 Sup. Ct. 1161, 32 L ed. 107; Minne- 
 apolis &c. R. Co. V. Beckwith, 129 
 U. S. 26, 9 Sup. Ct. 207, 32 L. ed. 
 585; Gulf &c. R. Co. v. Ellis, 165 
 U. S. 150, 17 Sup. Ct. 255, 41 L. ed. 
 666; San Mateo Co. v. Southern &c. 
 R. Co., 7 Sawy. (U. S.) 517. See 
 also Kane v. Erie R. Co., 133 Fed. 
 681, 68 L. R. A. 788; United States 
 V. McHie, 194 Fed. 894 (within fifth 
 amendment) ; Jaquette v. Capitol 
 Trac. Co., 34 App. D. C. 41, 25 L. 
 R. A. (N. S.) 407n; State v. Atlan- 
 tic Coast Line R. Co., 56 Fla. 617, 
 47 So. 969, 32 L. R. A. (N. S.) 639n. 
 Case, In re, 20 Idaho 128, 116 Pac. 
 1037 ; Qeveland &c. R. Co. v. Backus, 
 133 Ind. 513, 32 N. E. 421, 18 L. 
 R. A. 729; Luman v. Hitchins Bros. 
 Co., 90 Md. 14, 44 Atl. 1051, 46 L. 
 R. A. 393; State v. Blake, 241 Mo. 
 100, 144 S. W. 1094, Ann. Cas. 1913C, 
 1283, note in . Ann. Cas. 1914A, 
 1308. Knoxville &c. R. Co. v. Har- 
 ris, 99 Tenn. 684, 43 S. W. 115, 53 
 L. R. A. 921; note in 14 L. R. A. 
 585; Portland R. Co. v. Railroad 
 Com., 56 Ore. 468, 105 Pac. 709, 109 
 Pac. 273. 
 
 6 Mineral Point R. Co. v. Keep, 22 
 X... ?, 74 Am. Dec. 354; Louisville 
 
 Safety &c. Co. v. Louisville &c. R. 
 Co., 92 Ky. 233, 17 S. W. 567, 14 
 L. R. A. 579, and note. Mott v. 
 Hicks, 1 Cow. (N. Y.) 513, 13 Am. 
 Dec. SSO; Indiana v. Woram, 6 Hill 
 (N. Y.) 33, 40 Am. Dec. 378; 
 Wright v. New York &c. R. Co., 28 
 Barb. (N. Y.) 80 Field v. New 
 York &c. R. Co., 29 Barb. (N. Y.)' 
 176; Boyd v. Craydon R. Co., 4 B}ng_ 
 (N. Car.) 669; Lehigh Bridge Co^ 
 V. Lehigh Coal Co., 4 Rowle (Pa.> 
 9, 26 Am. Dec. 26; State v. Nash- 
 ville University, 4 Humph. (Tenn.) 
 157. So, under statutes imposing 
 taxes. People v. Utica Ins. Co., IS 
 John (N. Y.) 358;— relating to us- 
 ury, Thornton v. Bank of Washing- 
 ton, 3 Pet. (U. S.) 36, 7 L. ed. 594; 
 Grand G. B. v. Archer, 16 Miss- 
 151 ; Commercial Bank v. Nolan, 7 
 How. (Miss.) 508 ;— relating to limi- 
 tations, Olcott V. Tioga R. Co., 20 
 N. Y. 210, 75 Am. Dec. 393;— relat- 
 ing to penal offenses. United States 
 V. Amedy, 11 Wheat. (U. S.) 3^, 
 6 L. ed. 502; Standard Oil Co. v. 
 United States, 221 U. S. 1, 31 Sup. 
 Ct. 502, 55 L. ed. 654, Ann. Cas. 
 1912D, 734n (by express provision of 
 anti-trust act). But see as to not be- 
 ing liable to indictment. Common- 
 wealth V. Illinois Cent. R. Co., 152 
 Ky. 320, 153 S. W. 459, 45 L. R. A. 
 (N. S.) 344n, Ann. Cas. 191SB, 617n; 
 People V. Rochester R. Co., 195 N. 
 Y. 102, 88 N. E. 22, 133 Am. St. 
 770, 21 L. R. A. (N. S.) 998n,' 16 
 
§31 
 
 RAILROADS 
 
 52 
 
 that the intention of the legislature was that it should not be so 
 considered^ It is not, however, a citizen entitled to the privileges 
 and immunities of citizens of the several states within the mean- 
 ing of the constitution of the United States.^ But it is, for juris- 
 dictional and other purposes, regarded as a citizen of the state 
 chartering it.* 
 
 § 31 (22). Corporation confined to jurisdiction creating it — 
 Business elsewhere^ — Comity. — In common with other corpora- 
 tions, a railroad company exists only by force of law, and cannot 
 migrate and remove beyond the jurisdiction of that law,^" nor can 
 it exercise any rights or privileges in a foreign jurisdiction unless 
 it is admitted to do so by express or implied permission of the 
 
 Ann. Cas. 837. See further as to 
 when corporation is a "person", 
 State V. Rutland R. &c. Co., 85 Vt. 
 91, 81 Atl. 252, Ann. Cas. 1914A, 
 1305, and note. See generally as to 
 what is and what is not a denial of 
 equal protection of the laws within 
 the meaning of the constitution, note 
 to Louisville Safety Vault Co. v. 
 Louisville &c. R. Co., 92 Ky. 233, 
 17 S. W. 567, 14 L. R. A. 579. 
 
 T Commonwealth v. Phenix Bank, 
 11 Mete. (Mass.) 129. 
 
 8 Paul V. Virginia, 8 Wall. (U. S.) 
 168, 19 L. ed. 357; Chicago &c. R. 
 Co. V. Whitton, 13 Wall. (U. S.) 270, 
 20 L. ed. 571; Pembina &c. Co. v. 
 Pennsylvania, 125 U. S. 181, 8 Sup. 
 Ct.' 737, 31 L. ed. 650; Norfolk &c. 
 R. Co. v. Pennsylvania, 136 U. S. 
 114, 10 Sup. Ct. 958, 34 L. ed 394; 
 State v. Delaware &c. Co., 7 Houst. 
 (Dfel.) 269, 31 Atl. 714; Woodward 
 v. Commonwealth (Ky.), 7 S. W. 
 ■613, 35 Am. & Eng. R. Cas. 496; 
 State V. Louisville &c. R. Co., 97 
 Miss. 35, 51 So. 918, 53 So. 454, 
 Ann. Cas. 1912C, 1150n; Hawley v. 
 
 Hurd, 72 Vt. 122, 47 Atl. 401, 52 
 L. R. A. 195, 82 Am. St. 922. See 
 also Attorney-General v. Electric &c. 
 Co., 188 Mass. 239, 74 N. E. 467; 
 Bacon v. Board, 126 Mich. 22, 85 
 N. W. 307, 60 L. R A. (N. S.) 
 321, and note, 86 Am. St. 524; 
 Daggs V. Orient &c. Co., 136 Mo. 
 391, 38 S. W. 85, 35 L. R. A. 226, 
 affirmed in 172 U. S. 557; note in 14 
 L. R A. 580; Union Cent. L. Ins. 
 Co. V. Channing, 86 Tex. 654, 26 
 S. W. 982, 24 L. R. A. 505. 
 
 9 See post, § 32. 
 
 10 Paul V. Virginia, 8 Wall. (U. S.) 
 168, 19 L. ed. 357; Connor v. Vicks- 
 burg &c. R. Co., 36 Fed. 263, 1 
 L. R. A. 331, and note; Aspinwall 
 v. Ohio &c. R. Co., 20 Ind. 492, 83 
 Am. Dec. 329; Eel River R. Co. v. 
 State, 143 Ind. 231,' 238, 42 N. E. 
 617; Miller v. Ewer, 27 Maine 509, 
 46 Am. Dec. 619; County of Alle- 
 gheny v. Cleveland &c. R. Co., 51 
 Pa. St. 228, 88 Am. Dec. 579; note 
 to Young V. South Tredegar &c. Co., 
 85 Tenn. 189, 2 S. W. 202, 4 Am. 
 St. 752, 760. 
 
S3 
 
 LEGAL STATUS 
 
 §32 
 
 foreign state/^ or except, perhaps, as an instrument of interstate 
 commerce. A corporation, where not restrained by the law of its 
 creation may, however, do business and perform corporate acts 
 in any state which will permit it to do so.^^ By the comitjr of 
 nations, such permission, within proper limits, is always implied 
 unless there is an affirmative refusal.^* 
 
 §32 (23). Citizenship — Removal of causes. — It is generally 
 held that a corporation may be adopted by the legislation of a 
 state, so as to become a citizen thereof, for the purposes of juris- 
 diction, where that is plainly the legislative intent. i* It has been 
 
 11 Bank of Augusta v. Earle, 13 
 Pet. (U. S.) S19, 10 L. ed. 274; Paul 
 V. Virginia, 8 Wall. (U. S.) 168, 19 
 L. ed. 357: Duke v. Taylor, 37 Fla. 
 64, 19 So. 172; Atchison &c. R. Co. 
 V. Fletcher, 35 Kaus.' 236; Balti- 
 more &C. R. Co. V. Glenn, 28 Md. 
 287, 96 Am. Dec. 533; Demarest v. 
 Flack, 128 N. Y. 205, 28 N. E. 645, 
 13 L. R. A. 845. See also California 
 V. Central &c. R. Co., 127 U. S. 1, 
 8 Sup. Ct. 1073, 32 L ed. 150. State 
 V. Illinois Cent. R. Co., 246, 111. 188, 
 92 N. E. 814. 
 
 12 Bank v Earle, 13 Pet. (U. S.) 
 519, 10 L. ed. 274; Christian Union 
 V. Yount, 101 U. S. 352, 25 L. ed. 
 888; Reichwald v. Commercial Ho- 
 tel Co., 106 111. 439; Dodge v. Coun- 
 cil Bluffs, 57 Iowa 560, 10 N. W. 
 886; Atchison &c. Co. v. Fletcher, 
 35 Kans. 236, 10 Pac. 596; Miller 
 V. Ewer, 27 Maine 509, 46 Am. Dec. 
 619; Baltimore &c. R. Co. v. Glenn, 
 28 Md. 287, 92 Am. Dec. 688; 
 Thompson v. Waters, 25 Mich. 214, 
 12 Am. Rep. 243; Williams v. Cres- 
 well, 51 Miss. 817; Blair v. Perpet- 
 ual Ins. Co., 10 Mo. 559, 47 Am. 
 Dec. 129 Merrick v. Van Sant- 
 voord, 34 N. Y. 208; Newburg &c. 
 
 Co. V. Weare, 27 Ohio St. 343; Ohio 
 Life Ins. &c. Co. v. Merchants' Ins. 
 &c. Co., 11 Humph. (Tenn.) 1, 53 
 Am. Dec. 742. 
 
 13 Cowell V. Colorado Springs Co., 
 100 U. S. 55, 3 Colo. 82, 25 L. ed. 
 547; Christian Union v. Yount, 101 
 U. S. 352, 356, 25 L. ed. 888; Man- 
 nington v. Hocking Val. R. Co., 183 
 Fed. 133; Reichwald v. Commercial 
 Hotel Co., 106 111. 439', Baltimore &c. 
 R. Co. V. Glenn, 28 Md. 287, 92 Am, 
 Dec. 688; Clark v. Memphis St. R. 
 Co., 123 Tenn. 232, 130 S. W. 751. 
 See Toledo Trac. &c. Co. v. Smith, 
 205 Fed. 643; Hammond v. Interna- 
 tional R. Co., 63 Misc. 437, 116 N. Y. 
 S. 854; note to Cone &c Co. \. 
 Poole, 41 S. Car. 70, 19 S. E. 203, 
 24 L. A. R. 289. 
 
 1* Williams v. Missouri &c. R. Co., 
 3 Dill (U. S.) 267, Fed Cas. No. 
 17728; Ohio &c. R. Co. v. Wheeler, 
 1 Black (U. S.) 286, 17 L. ed. 130; 
 Railroad Co. v. Harris, 12 Wall. (U. 
 S.) 65, 20 L. ed 354; Railway Co. v. 
 Whitton, 13 Wall. (U. S.) 270; 20 
 L. ed. 571 ; Railroad Co. v. Vance, 
 96 U. S. 450, 24 L. ed. 752; 'Bald- 
 win V. Chicago &c. R. Co., 86 Fed. 
 167. But compare Lehigh Valley 
 
?32 
 
 RAILROADS 
 
 54 
 
 field in Virginia that a corporation, by leasing and operating a 
 coad in a foreign state becomes a citizen of that state for purposes 
 of jurisdiction ; and that a suit against it for a cause of action aris- 
 ing in that state could not be removed from the state courts to the 
 federal courts. ^^ But the weight of authority is that a railroad 
 company is a citjzen of the state by which it is created, for the 
 purposes of jurisdiction of the United States courts, and may take 
 advantage of the constitutional privilege of conducting its suits 
 against the citizens of other states in those courts.^^ And a for- 
 •eign corporation can not be deprived of the right of removal to 
 the federal courts by state legislation.^'^ Any officer authorized 
 
 Coal Co. V. Yensavage, 218 Fed. 547. 
 A railroad corporation of another 
 state operating a railroad in the state 
 under a lease may be so adopted. 
 Western &c. R. Co. v. Roberson, 61 
 Fed. 592. See also Stonega Coke &c. 
 Co. V. Southern Steel Co., 123 Tenn. 
 428, 131 S. W. 988, 31 L. R, A. (N. 
 S.) 278n. 
 
 15 Baltimore &c. R. Co. v. Wight- 
 man, 29 Grat.' (Va.) 431, 26 Am. 
 Rep. 384; Baltimore &c. R. Co. v. 
 Noell, 32 Grat. (Va.) 394. Contra 
 Wilkinson v. Delaware &c. R. Co., 
 22 Fed. 353, 20 Am. & Eng. R. Cas. 
 597, and cases cited. See also Crane 
 V. Chicago &c. Co., 20 Fed. 402. 
 
 16 Louisville &c. R. Co. v. Letson, 
 2 How. (U. S.) 497, 11 L. ed. 353; 
 Marshall v. Baltimore R. Co., 16 
 How. (U. S.) 314, 14 L. ed. 953; 
 Ohio &c. R. Co. V. Wheeler, 1 Black 
 (U. S.) 286, 17 L. ed 130; Rail- 
 road Co. V. Harris, 12 Wall. (U. S.) 
 65, 20 L. ed. 354; Railroad Co. v. 
 Koontz, 104 U. S: 5, 26 L. ed. 643; 
 Southern &c. R. Co. v. Denton, 146 
 U. S. 202, 13 Sup. Ct. 44, 36 L. ed. 
 942; St. Louis &c. R. Co. v. James, 
 161 U. S. 545, 16 Sup. Ct. 621, 40 
 L. ed. 802; Barrow S. S. Co. v. 
 
 Kane, 170 U. S. 100, 18 Sup. Ct. 
 .526, 42 L. ed. 964; Williams v. Mis- 
 souri &c. R. Co., 3 Dill. (U. S.) 
 267, Fed. Cas. No. 17728; Callahan 
 V. Louisville &c. R. Co., 11 Fed. 536; 
 Wilkinson v. Delaware &c. R, Co., 22 
 Fed. 353; Baltimore &c. R. Co. v. 
 McLaughlin, 17, Fed. 519; Quigley 
 V. Cent. Pac. Co., 11 Nev. 350, 21 
 Am. Rep. 757. See also Harrison v. 
 St. Louis &c. R. Co., 232 U. S. 318, 
 34 Sup. Ct. 333, 58 L. ed. 621, L. 
 R. A 1915F, 1187, and note, to the 
 same eflfect, citing additional au- 
 thorities. 
 
 IT State legislation seeking to de- 
 prive foreign corporations of the 
 right to resort to the federal courts 
 must be held inoperative where 
 such right is conferred by the con- 
 stitution and laws of the United 
 States. Rece v. Newport News &c. 
 Co., 32 W. Va. 164, 9 S. E. 212, 
 3 L. R. A. 572, 5 Ry. & Corp. L. J. 
 515; Chicago &c R. Co. v. Whitton, 
 
 13 Wall. (U. S.) 270, 20 L. ed. 571 ; 
 Martin v. Railroad Co., 151 U. S. 673, 
 
 14 Sup. Ct. 533, 38 L. ed. 311. A 
 statute attempting to prohibit the 
 right of removal would be unconsti- 
 tutional. Home Ins. Co. v. Morse, 
 
55 
 
 LEGAL STATUS 
 
 §33 
 
 to act for it in that behalf may make the necessary affidavit and 
 procure the transfer to the federal courts of any suit begun 
 against it in the courts of a state wherein it is not domiciled.^^ 
 Where a railroad corporation is chartered by two or more states, 
 it is for most purposes a citizen of each.^^ 
 
 § 33 (24). Residence and domicile — ^Jurisdiction. — A railroad 
 corporation is a legal entity, or person, capable of ihaving a home, 
 or domicile, which is always within the state or sovereignty by 
 which it is created. 2" And it has been held by the supreme court 
 of the United States that, under the act of congress of March 3, 
 1887, as corrected by the act of August 13, 1888, a corporation 
 incorporated in one state only is not a citizen nor a resident or 
 inhabitant of another state, although it has a place of business 
 in the latter, and cannot be sued in a United States circuit court 
 of the latter state, which is in a different district from that in 
 which the company is incorporated, by a citizen of a third state.^^ 
 
 20 Wall. (U. S.) 445, 22 L. ed. 365;. 
 Barron v. Burnside, 121 U. S. 186, 
 7 Sup. Ct. 931, 30 L. ed. 915 ; South- 
 ern Pac. Co. V. Denton, 146 U. S. 
 202, 13 Sup. Ct. 44, 36 L. ed. 943; 
 Metropolitan &c. Co. v. Harper, 3 
 Hughes (U. S.) 260, Fed. Cas. No. 
 9505; Commonwealth v. East Tenn. 
 Coal Co., ^ Ky. 238, 30 S. W. 608. 
 See also Harrison v. St. Louis &c. 
 R. Co., 232 U. S. 318, 34 Sup. Ct. 
 333, 58 L. ed. 621, L. R. A. 1913F, 
 1187, and note. 
 
 isBarron v. Burnside, 121 U. S. 
 186, 7 Sup. Ct. 931, 30 L. ed. 915; 
 Mahone v. Manchester &c. R. Co., 
 Ill Mass. 72, IS Am. Rep. 9; Quig- 
 ley V. Central &c. R. Co., 11 Nev. 
 350, 21 Am. Rep. 757. 
 
 19 Railroad Co. v. Letson, 2 How. 
 (U. S.) 497, 11 L. ed., 353; Uphoff 
 V. Chicago &c. R. Co., 5 Fed. 545; 
 Mackay v. New York &c. R. Co., 
 82 Conn. IZ, 72 Atl. 583, 24 L. R. A. 
 
 (N. S.) 768n; Smith v. Cleveland 
 &c. R. Co., 170 Ind. 382, 81 N. E. 
 501; post, §35. 
 
 20 Augusta V. Earle, 13 Pet. (U. 
 S.) 519, 10 L. ed. 274; Railroad Co.. 
 V. Koontz, 104 U. S. 5, 26 L. ed. 643. 
 Cunningham v. Klamath Lake R. Co., 
 54 Ore. 13, 101 Pac. 1099. See also 
 Southern Pac. Co. v. Denton, 146 
 U. S. 202, 13 Sup. Ct. 221, 36 L. ed 
 943; United States v. Northern Pac. 
 R. Co., 134 Fed. 715; Central, &c. 
 R. Co. V. Carr, !(, Ala. 388, 52 Am. 
 Rep. 339; Eel River R. Co. v. State, 
 155 Ind. 433, 57 N. E. 701; Fowler 
 V. Des Moines &c. R Co., 91 Iowa 
 533, 60 N. W. 116; Connecticut &c. 
 R. Co. V. Cooper, 30 Vt. 476, IZ Am. 
 Dec. 319; 1 Thomp. Corp. (2d. ed), 
 §490. 
 
 21 Shaw V. Quincy Mining Co., 145 
 U. S. 444, 12 Sup. Ct. 935, 6 Lewis' 
 Am. R. & C. R. 357. This decision 
 sets at rest a vexed question iiponi 
 
§33 
 
 RAILROADS 
 
 56 
 
 Like a natural person, however, it may, for some purposes, have 
 a legal residence in a state of which it is not a citizen f^ and under 
 the statutes of most states is held to be a resident of each state 
 and municipality through which the road runs, so as to be en- 
 titled to the protection of the local laws,^^ and for purposes of 
 taxation,^* and of suing and being sued,^^ and for the service of 
 summons. 2^ And "a law which requires a foreign corporation to 
 appoint an agent upon whom process may be served, as a condi- 
 tion precedent to its right to transact business within the limits 
 of a state, is valid and binding."^'^ For most other purposes rail- 
 
 which there was much difference of 
 opinion among the circuit judges. 
 Keasbey &c. Co., In re, 160 U. S. 221, 
 16 Sup. Ct. 273, 40 L.- ed. 402 (de- 
 fendant cannot be compelled to an- 
 swer in districtt in which neither 
 defendant or plaintiff is an in- 
 habitant). Ellsworth Trust Co. 
 V. Parramore, 108 Fed. 906. See al- 
 so United States v. Northern &c. R 
 Co., 134 Fed. 715; Orr v. Baltimore 
 &c. R. Co., 242 Fed. 608; Keating 
 V. Penna. Co., 245 Fed. 155; Os- 
 trom V. Edison, 244 Fed. 228, and 
 leading articles in 35 Cent. Law Jour. 
 285, and 41 Cent. ,215. But see M. 
 Hohenberg &c. Co. v. Mobile Liners, 
 245 Fed. 169. 
 
 22Hohorst, In re, ISO U. S. 653, 
 14 Sup. Ct. 221, 37 L. ed. 1211; 
 Louisville &c. R Co. v. Letson, 2 
 How. (U. S.) 497, 11 L. ed. 353; 
 New York &c. R Co. v. Shepard, 
 5 McLean (U. S.) 455, Fed Cas. 
 No. 10198; United States v. Southern 
 Pac. R. Co., 49 Fed. 297; Andro- 
 scoggin &c. R Co. V. Stevens, 17 
 Maine 434. Thorn v. New York R. 
 Co., 26 N. J. L. 121. In Pacific R. 
 Co. V. Perkins, 36 Nebr. 456, 54 N. 
 W. 845, 57 Am. & Eng. R. Cas. 673, 
 it was held that the word "nonresi- 
 
 dent," in §100, Ch. 16 Comp. St., 
 relating to condemnation proceedings 
 for right of way for a railroad, 
 means a non-resident of the state, 
 and not of the locality of the land 
 affected, or of the county where it is 
 situated. 
 23 Richardson v. Burlington &c. 
 • R. Co., 8 Iowa 260; People v. Fred- 
 ericks, 48 Barb. (N. Y.) 173; Glaize 
 V. South Carolina R. Co., 1 Strobh. 
 L. (S. Car.) 70. 
 
 " 2* People V. Fredericks, 48 Barb. 
 (N. Y.) 173. 
 
 25 Baldwin v. Mississippi &c. R. 
 Co., 5 Iowa 518. See also State v. 
 Iowa Cent. R. Co., 91 Iowa 275, 59 
 N. W. 35; Davis v. Central &c. R. 
 Co., 17 Ga. 323. 
 
 26 Belden v. New York &c. R. Co., 
 15 How. Pr. (N. Y.) 17; Burns' 
 Ind. R. S. 1914, §5458. See also 
 New Albany &c. R. Co. v. Haskell, 
 11 Ind. 301; Schoch v. Winona &c. 
 R. Co., 55 Minn. 479, 57 N. W. 208; 
 Slavens v. Southern Pac. R. Co., 51 
 Mo. 308; Tobin v. Chester &c. R. 
 Co., 47 S. Car. 387, 25 S. E. 283, 
 58 Am. St. .890. 
 
 27 Schollenburger, Ex parte, 96 U. 
 S. 369, 374, 24 L. ed. 853; Wilson v, 
 Seligman, 144 U. S. 41, 45, 12 Sup 
 
57 
 
 LEGAL STATUS 
 
 §34 
 
 roads are treated as persons having their residence only in the 
 place where their principal office is located.^® Suits relating to 
 any matters concerning the organization, and conduct of the cor- 
 poration as such, must generally be brought in the state by which 
 it is chartered, although its principal office may be in another 
 state.29 And so, as a rule, must all corporate acts done by the 
 body of the corporation be performed in the domestic jurisdic- 
 tion, for a corporation can only act in other states by its agents 
 in matters which it may delegate to them.*** 
 
 §34 (25). Federal corporations. — Corporations formed under 
 authority of the federal government have their domicile within its 
 territorial jurisdiction, and may reside any place within the 
 United States where they have a general office established by au- 
 thority of law'.*^ Congress has power to charter railroad com- 
 
 Ct. 541, 36 L. ed. 338; Youmans v. 
 Minnesota '&c. R. Co., 67 Fed. 282, 
 284; Reyer v. Odd Fellows &c. 
 Association, 157 Mass. 367, 373, 32 
 N. E. 469, 34 Am. St. 288. See al- 
 so Katz V. Herrick, 12 Idaho 1, 86 
 Pac. 873. 
 
 28 Androscoggin Ike. R. Co. v. 
 Stevens, 28 Maine 434; Thorn v. 
 New York &c. R. Co., 26 N. J. L. 
 121. In Eel River R. Co. v. State, 
 155 Ind. 433, 57 N. E. 701, where a 
 railroad company had surrendered 
 its property land franchise under a 
 perpetual lease to another company, 
 and did no business and had no of- 
 fice or agency in the state, and quo 
 warranto proceedings were instituted 
 against it by the state, the court 
 held that its legal residence would 
 be in the county where its princi- 
 pal office was located when It >,..ased 
 to do business. See also Piatt v. 
 New York &c. R. Co., 26 Conn. 544; 
 Connecticut &c Ins. Co. v. Sprat- 
 ley, 172 U. S. 602, 19 Sup. Ct. 308, 
 43 L. ed. 569. 
 
 2» Carey v. Cincinnati &c. R. Co., 
 .1 Iowa 357; Erickson v. Nesmith, 4 
 Allen (Mass.) 233; Williston v. 
 Mich. &c. R. Co., 13 Allen (Mass.) 
 400; Oiase v. Vanderbilt, S J. & S. 
 (N. Y.) 334, 62 N. Y. 307; Howell 
 V. Chicago &c. R. Co., 51 Barb. (N. 
 Y.) 378. 
 
 30 See Aspinwall v. Ohio &c. R. 
 Co., 20 Ind. 492, 83 Am. Dec. 329, 
 where the company undertook to 
 make a call for unpaid subscriptions 
 at a meeting held outside the state. 
 Ante, § 23. But a stockholder's 
 meeting may be held in a foreign 
 jurisdiction, if all the shareholders 
 consent to such meeting, or ratify 
 its action. Stutz v. Handley, 7 R. 
 & Corp. L. J. 407, 41 Fed. 531; 
 Missouri Lead &c. Co. v. Reinhard, 
 114 Mo. 218, 21 S. W. 488, 35 Am. 
 St. 746. 
 
 31 Bank of United States v. Mc- 
 Kenzie, 2 Brock. (U. S.) 393. See 
 also S'lpreme Lod?e 4c. v. England, 
 94 Fed. 369; Commonwealth v. Tex- 
 as &c. R. Co., 98 Pa. St. 90. 
 
§35 
 
 RAILROADS 
 
 58 
 
 panics in the territories within its jurisdiction.*^ And it seems 
 that a state is powerless to prevent a corporation from doing acts 
 in the discharge of its employment by the federal government,** 
 or to exclude one engaged in interstate commerce under author- 
 ity of the acts of congress.** 
 
 § 35 (26). Railroad in more than one states — Citizenship. — The 
 
 legislature of one state may authorize a railroad corporation of an 
 other to extend its line into,*^ or hold property in,** the territory 
 of the former. Such authority granted to a foreign corporation 
 does not make of it a domestic corporation.*'' But where a rail- 
 
 32 Ante, §21, note. 
 
 33 Pembina Mining Co. v. Penn- 
 sylvania, 125 U. S. 181, 186, 8 Sup. 
 Ct. lil, 31 L. ed. 650; California v. 
 Pacific R. Co., 127 U. S. 1, 8 Sup. 
 Ct. 1073, 32 L. ed. 150; Horn Silver 
 Min. Co. V. New York, 143 U. S. 
 305, 12 Sup. Ct. 403, 36 L. ed. 164; 
 Stockton V. Baltimore &c. R. Co., 32 
 Fed. 9, 14. 
 
 34 Pensacola Tel. Co. v. Western 
 U. Tel. Co., 96 U. S. 1, 12, 24 L. 
 ed. 708. See also People v. Wemple, 
 131 N. Y. 64, 29 N. E. 1002, 24 Am. 
 St. 542. Section 5 of the Act of 
 Congress of January 28, 1915 pro- 
 vides that no courts of the United 
 States shall have jurisdiction of any 
 action or suit hi' or against a rail- 
 road company upon the ground that 
 it was incorporated under an Act of 
 Congress. Barnes' Fed. Code, § 1022. 
 And the fact that a railroad com- 
 pany is incorporated by act of con- 
 gress does not entitle it to removal 
 of an action from the state court to 
 a federal court. Texas &c. R. Co. 
 V. Hughes (Tex. Civ. App.), 192 S. 
 W. 1091. 
 
 35 Goodlett V Louisville &c. R. Co. 
 122 U. S. 391, 7 Sup. Ct. 1254, 30 
 
 L. ed. 1230; Baltimore &c. R. Co. v. 
 Harris, 12 Wall. (US.) 65, 20 L. ed. 
 354; Pomeroy v. New York &c. R. 
 Co., 4 Blatch. (U. S.) 120, Fed. Cas. 
 No. 11261. 
 
 36 Indianapolis &c. R. Co. v. Vance, 
 96 U. S. 450, 24 L. ed. 752; Balti- 
 more &c. R. Co. V. Gallahue, 12 
 Grat. (Va.) 655, 65 Am. Dec. 254; 
 Baltimore &c. R. Co. v. W"ightman, 
 
 29 Grat. (Va.) 431, 26 Am. Rep. 
 384; Baltimore &c. R. Co. v. Noell, 
 32 Grat. (Va.) 394; Goshorn v. 
 Ohio County, 1 W. Va. 308. The 
 authority granted does not confer 
 jurisdiction as to such property on 
 the incorporating state. Eaton &c. 
 Co. v. Hunt, 20 Ind. 457. 
 
 37 State V. Delaware &c. R. Co., 
 
 30 N. J. L 473, 31 N. J. L. 531, 
 86 Am. Dec. 226; Denniston v. New 
 York &c. R. Co., 1 Hilton (N. Y.) 
 62 ; Baltimore &c. R. Co. v. Gary, 28 
 Ohio St. 208; Erie R. Co. v. Stringer, 
 32 Ohio St. 468. See also Louis- 
 ville &a R. Co. v. Louisville Trust 
 Co., 174 U. S. 552, 19 Sup. Ct. 817, 
 43 L. ed. 1081; HoUingsworth v. 
 Southern R. Co., 86 Fed. 353 ; Bryan 
 V. Louisville &c. R. Co., 244 Fed. 
 650. Nor does it change the rel'a- 
 
59 
 
 LEGAL STATUS 
 
 §35 
 
 road corporation is formed by the concurrent legislation of two 
 or more states,^* or by the consolidation of corporations of two 
 or more states by authority of their laws,*® it is, for most pur- 
 poses at least, a corporation, whether the same or distinct, of 
 each, having a domicile*" therein where its corporate business 
 may be transacted.*^ Although from one point of view it may be 
 regarded as a single corporation or unit, yet from another it is not 
 the same, but a distinct corporation in each state, so far as its 
 property and business within that state are concerned,*^ and is 
 
 tionship to the incorporating state. 
 Commonwealth v. Pittsburgh &c. T\. 
 Co., S8 Pa. St. 26. But it may be, 
 in a sense, a domestic corporation 
 if the statute so provides in fixing 
 the terms upon which it is author- 
 ized to enter and carry on business 
 in the state. Young v. South Trede- 
 gar &c. Co., 85 Tenn. 189, 2 S. W. 
 202, 4 Am. St. 752. The same stat- 
 ute construed in the case just cited 
 has, however, been held by the fed- 
 eral court not to make the toreign 
 corporation authorized to do business 
 in Tennessee a domestic corporation 
 of that slate. Markwood v. South- 
 ern R. Co., 65 Fed. 817. It was 
 therefore, permitted to remove the 
 cause to the federal court. See also 
 Rece V. Newport News &c. Co., 32 
 W. Va. 164, 9 S. E. 212, 3 L. R. A. 
 572. 
 
 38 Ohio &c R. Co. V. Wheeler, 1 
 Black (U. S.) 286, 17 L. ed. 130; 
 Nashua &c. R. Co. v. Boston &c. R. 
 Co., 136 U, S. 356, 10 Sup. Ct. 1004, 
 34 L. ed. 363; Newport &c. Co. v. 
 WooUey, 78 Ky. 523. The formation 
 of a new company by interstate con- 
 solidation by joint or concurrent 
 acts of the legislatures of different 
 states is, from one point of view, 
 something of an anomaly, and has 
 
 been regarded by some courts as an 
 impossibility. See Quincy Bridge 
 Co. V. Adams County, 88 III. 615; 
 Racine &c. R. Co. v. Farmers' &c. 
 Co., 49 III. 331, 95 Am. Dec. 595. 
 But these cases are explained and 
 criticised by the same court in the 
 later case of Ohio &c. R. Co. v. 
 People, 123 111. 467, 14 N. E. 874. 
 
 39 Cohn v. Louisville &c. R. Co., 
 39 Fed. 227; Guinault v. Louisville 
 &c. R. Co., 41 La. Ann. 571, 6 So. 
 850; St. Paul &c. R. Co., In re, 36 
 Minn. 85, 30 N. W. 432; State v. 
 Chicago &c. R. Co., 25 Nebr. 165, 
 41 N. W. 128. 5 Thomp. Corp. (2nd. 
 ed.) § 6069. See also Mackay v. New 
 York &c. R. Co., 82 Conn. 73, 72 Atl. 
 583, 24 L. R. A. (N. S.) 768n. 
 
 *<) Guinault v. Louisville &c. R. Co., 
 41 La. Ann. 571, 6 S. W. 850; Cov- 
 ington &c. Bridge Co. v. Mayer, 31 
 Ohio St. 317. See also Smith v. 
 Cleveland &c. 'R. Co., 170 Ind. 382, 
 81 N. E. 501. 
 
 *i Graham v. Boston &c. R. Co., 
 118 U. S. 161, 6 Sup. Ct. 1009, 30 
 L. ed. 196; Baltimore &c. R. Co. 
 V. Harris, 12 Wall. (U. S.) 65, 20 
 L. ed. 354; Covington &c. Bridge 
 Co. V. Mayer, 31 Ohio St. 317. 
 
 42Peik V. Chicago &c. R. Co., 94 
 U. S. 164, 24 L. ed. 97: Central Trust 
 
§36 
 
 RAILROADS 
 
 60 
 
 controlled therein as to such matters by the laws of the state 
 substantially as any other domestic corporation is controlled.** 
 
 § 36 (27). Control of railroads in more than one state. — The 
 
 laws of a state can have no effect beyond the limits of its terri- 
 torial jurisdiction,** and such a corporation is not necessarily af- 
 fected, in regard to its rights, duties and liabilities, in one sover- 
 eignty, by the terms of the charter granted to it by another,*^ but 
 it has been held that its charter may be amended in either state so 
 as to control its action in that state although the amendment be 
 
 Co. V. St. Louis &c. R. Co., 41 Fed. 
 551 ; Baldwin v. Chicago &c. R. Co., 
 86 Fed. 167; Winn v. Wabash R. 
 Co., 118 Fed. 55; Pittsburgh &c. R. 
 Co. V. Rothschild (Pa.), 4 Atl. 385, 
 26, Am. & Eng. R. Cas. 50; Sprague 
 V. Hartford &c. R. Co., 5 R. I. 233 ; 
 Atwood V. Shenandoah &c. R. Co., 
 85 Va. 966, 9 S. E. 748, 38 Am. & 
 Eng. R. Cas. 534. 
 
 43 Delaware Railroad Tax Cases, 
 18 Wall. (U. S.) 206, 21 L. ed. 888; 
 Clark V. Barnard, 108 U. S. 436, 2 
 Sup. Ct. 878, 27 L. ed. 780; Ohio 
 &c. R. Co. V. Weber, 96 111. 443; 
 Chicago &c. R. Co. v Auditor-Gen- 
 eral, S3 Mich. 79, 18 N. W. 586; 
 Gage V. Lake Shore &c. R. Co., 70 
 N. Y. 220; Pollitz v. Public Utili- 
 ties Com., 96 Ohio St. 49, 117 N. 
 E. 149, L. R. A. 1918D, 166. But see 
 post, § 38, as to whether a single new 
 corporation is formed' or more than 
 one. 
 
 44 Bank of Augusta v. Earle, 13 
 Pet. (U. S.) 519, 586, 10 L: ed. 274 ; 
 Louisville &c. R. Co. v. Letson, 2 
 How. (U. S.) 497, 11 L. ed. 353; 
 Watren v. First Nat. Bank, 149 111. 
 9, 38 N. E. 122, 25 L. R. A. 746; 
 Land Grant R. Co. v. Commissioners 
 of Coffey Co., 6 Kans. 245; Newport 
 
 &c. R. Ca V. Woolley, 78 Ky. 523; 
 County of Allegheny v. Cleveland 
 &c. R. Co., 51 Pa. St. 228, 88 Am. 
 Dec. 584 ; Whaley v. Bankers' Union, 
 39 Tex. Civ. App. 385, 88 S. W. 259. 
 45 Ohio &c. R. Co. V. Wheeler, 1 
 Black (U. S.) 286, 17 L. ed. 130; 
 MuUer v. Dows, 94 U. S. 444, 24 
 L. ed. 207. One state cannot im- 
 pose any restrictions or limitations 
 upon the exercise of corporate pow- 
 ers m another state by a corporation 
 which extends into both jurisdic- 
 tions. Atwood V. Shenandoah Val- 
 ley R. Co., 85 Va. 966, 9 S. E. 
 748, 38 Am. & Eng. R. Cas. 534. 
 But is is held that a corporatioji 
 which has been adjudged insolvent 
 and placed in the hands of a receiver 
 in the state of its incorporation can- 
 not prosecute a, writ of error in an- 
 other state, over the objection of 
 the receiver. American Water- 
 works Co. v. Farmers &c. Co., 20 
 Colo. 203, 2,1 Pac. 269, 25 L. R. A. 
 338, 46 Am. St. 285. The court 
 admitted the general rule that laws 
 have no extra territorial force as 
 mere laws, but said that "thing.s done 
 in one state in pursuance of laws 
 thereof are valid and binding in 
 other state." 
 
61 LEGAL STATUS § 36 
 
 opposed to the constitution or laws of another state by which it is 
 also chartered.*^ Where it has but one set of shareholders own- 
 ing shares of a capital stock which represents the entire property, 
 and its entire business and property are under a single manage- 
 ment and operated as a unit, contracts made by the controlling 
 power are held to be miade by each of the corporations,*'' and a 
 decree rendered against the railroad in one state will bind it in 
 the other.*^ If may be restrained by the courts of one state from 
 using its corporate funds for other than corporate purposes in 
 another through which it runs.*® But it has been held that a 
 state cannot tax bonds of such a railroad corporation, secured by 
 a mortgage on its entire line, for the reason that this would be a 
 tax upon property lying without the state.^* The courts of one 
 state, having jurisdiction of the mortgagor and trustees under a 
 mortgage covering such a road may order the sale of the entire 
 road, subject to liens existing in the other state. ^^ But where a 
 corporation which is subject to a mortgage in one state, consoli- 
 dates with a corporation of another state, the courts of such 
 other state acquire no jurisdiction to enforce a foreclosure of the 
 mortgage.^2 The courts of either state may appoint a receiver 
 
 40 Covington v. Covington &c. nation as a common carrier, al- 
 
 Bridge Co., 10 Bush (Ky.) 69. though some of the acts were per- 
 
 4" Racine &c. R. Co. v. Farmers' formed in the other state. Scofield 
 
 &c. Co., 49 111. 331, 95 Am. Dec. v. Lake Shore &c. R. Co., 43 Ohio 
 
 S9S; Bissel v. Michigan &c. R. Co., St. S71, 3 N. E. 907, 54 Am. Rep. 
 
 22 N. Y. 258. 846, 23 Am. & Eng. R. Cas. 612; 
 
 48 Paine v. Lake Erie &c. R. Co., McDuffee v. Portland &c. R. Co., 
 
 31 Ind. 283, 347. 52 N. H. 430, 447, 13 Am. Rep. 72. 
 
 4S Wilmer v. Atlanta &c. R. Co., so Northern &c. R. Co. v. Jackson, 
 
 2 Woods (U. S.) 409, Fed. Cas. No. 7 Wall. (U. S.) 262, 19 L. ed. 88. 
 
 1777S ; State v. Northern R. Co., 18 See also Wood v. Goodwin, 49 Maine 
 
 Md. 193, 215; Baltimore &c R. Co. 260. 
 
 V. Glenn, 28 Md. 287, 320, 92 Am. 5i Muller v. Dows, 94 U. S. 444, 24 
 
 Dec. 698; March v. Eastern R. Co., L. ed. 207; Mead v. New York &c. 
 
 40 N. H. 548, 577, 77 Am. Dec. R. Co., 45 Conn. 199; McElrath v. 
 
 732; Fisk v. Chicago &c. R. Co., S3 Pittsburgh &c. R. Co., 55 Pa. St. 
 
 Barb. 513, 4 Abb. Pr. (N. S.) (N. 189; Hand v. Savannah &c. R. Co., 
 
 Y.) 378. And it may be enjoined 12 S. Car. 314, 366. 
 as an entirety in the courts of either 52 Eaton &c. R. Co. v. Hunt, 20 
 
 state from making unjust discrimi- Ind. 457. 
 
§ Z7 RAILROADS 62 
 
 for so much of the line as lies within its jurisdiction,^' and it has 
 been held that the corporation in one state may be wound up 
 and dissolved without affecting its charter rights in other 
 states.^* It is generally held that a United States court, for a dis- 
 trict in one state, may exercise jurisdiction to appoint a receiver 
 for an entire line extending into several states. ^^ \^ ^ay be some- 
 what difficult to reconcile all of these decisions with one another, 
 for in several of them the court evidently looked" upon the cor- 
 poration as one and the same in each state, while in most of them 
 the court treated it as practically a separate corporation in each 
 state. In some of the cases the result would have been the same 
 from either point of view. 
 
 § 37. Control of railroad incorporated in more than one state. 
 
 — Where a corporation of one state has incurred a liability under 
 the laws of that state it can not escape the jurisdiction of such 
 state merely because it is also incorporated in andther state."® 
 No shareholder who consents to a consolidation or incorporation 
 in more than one state can complain that each of such states 
 regulates the conduct of the corporation therein so far as con- 
 cerns the franchises such state has granted, and, in general, it 
 seems that each state has power over the consolidated corpora- 
 tion as to intrastate matters the same as if there were merely a 
 corporation of that state.^'^ Thus, it is held that a state which 
 has co-operated in the consolidation of several railroads incor- 
 porated in different states may enforce the agreement of the con- 
 solidated company to guarantee an undertaking of one of the 
 constituent companies, incurred and to be performed within the 
 limits of the state and valid by its laws, even though such agree- 
 
 53 Ellis V. Boston &c. R. Co., 107 Co., 19 Fed. 663; Mercantile Trust 
 Mass. 1 ; United States Rollingstock Co. v. Missouri &c. R. Co., 36 Fed. 
 Co., In re, 55 How. Pr. (N. Y.) 221, 1 L. R A. 397 
 
 286, 57 How. Pr. 16; Richardson v. 58 Patch v. Wabash R. Co., 207 
 
 Vermont &c. R. Co., 44 Vt. 613. U. S. 277, 28 Sup. Ct. 80, 52 L. 
 
 54 Hart V. Boston &c. R. Co., 40 ed. 204, 12 A. & E. Ann. Cas. 518. 
 Conn. 524. 57 See note to Mackay v. New 
 
 ^BWilmer v. Atlanta &c. R. Co., York &c. R. Co., (82 Conn. IZ, 72 
 2 Woods (U. S.) 409, Fed. Cas. No. Atl. S83) in 24 L. R. A. (N. S.) 
 17775; Brassey v. New York &c. R. 769. 
 
63 LEGAL STATUS § 38 
 
 ment might be invalid under the laws of another one of the states 
 co-operating in the consolidation.^^ 
 
 § 38 (28). Result of consolidation or concurrent action of sev- 
 eral states creating new corporations. — It is said that the fiction 
 that makes two or three corporations out of what is in fact one, is 
 established for the purpose of giving each state its legitimate 
 control over the charters which it grants ; but the acts and neg- 
 lects of the corporation are those of it as a whole.^® There is con- 
 flict among the authorities as to whether the result of a consol- 
 idation or incorporation under the laws of two or more states is 
 one corporation or several corporations with a common name, 
 stock, stockholders and property. But, as already stated, they 
 are substantially in accord upon the proposition that for certain 
 purposes, practically at least, two or more corporations are thus 
 created. In other words, the portion of a railroad in either state 
 is subject, in the main, to the laws of that state just as if it were 
 a separate corporation of such state. Upon the general subject, 
 however, it is said on the one hand, that the legislatures of two 
 different states cannot co-operate and unite in creating a single 
 corporation so as to make it one and the same legal being in 
 both.®" A corporation created by two states having the same 
 name, for the same purpose, and composed of the same corporators 
 must be regarded as distinct corporations existing under the laws of 
 the several states authorizing them.®^ On the other hand it is said 
 that there is no reason why several states cannot unite 
 in creating one and the same corporation having a common 
 
 58 Mackay v. New York &c. R. Co., so Ohio & Mississippi R. Co. v. 
 82 Conn. 73, 72 Atl. 583, 24 L. R. Wheeler, 1 Black (U. S.) 286, 17 
 A. (N. S.) 768n. Compare also At- L. ed. 130; Missouri &c. R. Co. v. 
 torney-General v. New York &c. R. Meeh, 69 Fed. 753, 30 L. R. A. 250; 
 Co., 198 Mass. 413, 84 N. E. 737; Racine &c. R. Co. v. Farmers' &c. 
 Peik V. Chicago &c. R. Co., 94 U. S. Co., 49 111. 331, 95 Am. Dec. 595; 
 164, 24 L ed. 97; Graham v. Boston Newport &c. Bridge Co. v. WooUey, 
 &c. R. Co., 118 U. S. 161, 6 sup. 78 Ky. 523; Allegheny County v. 
 Ct. 1009, 30 L. ed. 196. Cleveland &c. R. Co., 51 Pa. St. 228, 
 
 59 Home V. Boston &c. R. Co., 18 88 Am. Dec. 579. 
 
 Fed. SO. 815 Thomp. Corp. (2nd. ed.) 
 
§ 38 RAILROADS 64 
 
 name, stock, stockholders and property,*^ which will be, in real- 
 ity, a single corporation, although it may be clothed with the 
 powers of two corporations.** Thus, it has been held that such 
 a corporation may legally hold shareholders' meetings in either 
 state which will be valid as to all the property and stockholders 
 in both.** Another court has said that "a corporation may have 
 a twofold organization, and be, so far as its relation to our state is 
 concerned, both foreign and domestic. It may have a corporate 
 entity in each state, yet its genera.1 character be of a bifold organ- 
 ization."*^ It is also said that when "two corporations created 
 in dififerent states consolidate, though for most purposes they are 
 not therefore to be separately regarded, yet in each state the con- 
 solidated company is deemed to stand in the place of the corpora- 
 tion to which it there succeeded, and of its members, and conse- 
 quently to be a citizen of that state for many purposes, while in 
 the other state it would stand in the place of the other corpora- 
 tion in respect to citizenship there."** Perhaps the question is 
 to some extent to be determined by the legislative intention, for, 
 if it be conceded that two states can co-operate so as to create 
 one and the same corporation, as it certainly must be, in a sense, 
 at least, it must also be conceded that each may authorize the 
 same persons to incorporate a distinct company in that state, for 
 the same general business, to hold property and operate in that 
 
 82 Railroad Co. v. Harris, 12 Wall ties Com., 96 Ohio St. 49, 117 N. E. 
 
 (U. S.) 65, 20 L. ed. 354; Graham 149, L. R. A. 1918D, 166. Rio 
 
 V. Boston &c. R. Co., 118 U. S. 161, Grande &c. R. Go. v. Telluride &c. 
 
 6 Sup. Ct. 1009, 30 L. ed. 196; Bish- Co., 16 Utah 125, 51 Pac 146. 
 op V. Brainard, 28 Conn. 289. See »* Covington Bridge Co. v. Mayer, 
 
 also Missouri Pac. R. Co. v. Meek, 69 31 Ohio St. 317 ; Graham v. Boston 
 
 Fed. 753, 30 L. R. A. 250. 1 Thomp. &c. R. Co., 14 Fed. 753, on- appeal, 
 
 Corp. (2nd. ed.) § 505. 118 U. S. 161. See also Ohio Sec. 
 
 63 Covington Bridge Co. v. Mayer, R. Co. v. People, 123 111. 467, 14 N. 
 
 31 Ohio St. 317. See also Smith E. 874; Guinault v. Louisville &c. R. 
 
 v. Cleveland &c. R. Co., 170 Ind. Co., 41 La. Ann. 571, 6 So. 850. 
 382, 81 N. E. 501 ; • State v. Keokuk «5 McGregor v. Erie R. Co., 35 N 
 
 &c. R. Co., 99 }io. 30, 12 S. W. J. L. 115. 118. 
 290, 6 L. R. A. 222 ; Lee v. Sturges, 68 Chicago- &c. R. Co. v. Auditor 
 
 46 Ohio St. 153, 19 N. E. 560, 2 L General, per Cooley, C. J., S3 Mich. 
 
 R. A. 556; PoUitz v. Public Utili- 79, 92, 18 N. W. 586. 
 
65 ' LEGAL STATUS § 38 
 
 State in connection with the company in the other state.^^ The 
 questioH most often arises with respect to the jurisdiction of the 
 federal courts, but it seems that such jurisdiction does not neces- 
 sarily depend altogether upon the answer to the question, for, 
 whether there be one or two corporations, it is generally held, as 
 we have already shown, that there is a domestic corporation or 
 citizen of each state by which a charter is granted."^ But this 
 ruling seems to be more consistent with the theory that there 
 are two corporations. Yet, in any event, where a corporation is 
 created in one state and afterwards also made a corporation of 
 another state, it remains, for purposes of jurisdiction of the 
 United States courts, a citizen of the first state. *^ The view that 
 two corporations exist appears to have been taken by the Su- 
 preme Court of the United States in a recent decision, which, 
 however, it may be somewhat difficult to reconcile with other de- 
 cisions and dicta of that court, and which resulted in the corpora- 
 tion created in the first state being held to be a foreign rather 
 than a domestic corporation of the second state. In the case to 
 which we refer it appeared that the Nashua and Lowell Railroad 
 Corporation was first created by the legislature of New Hamp- 
 shire in 1835. In 1836 the legislature of Massachusetts constitu- 
 ted the same persons a corporation of that state, under the same 
 name, and authorized fhem to build their road from Nashua, New 
 Hampshire, to Lowell, Massachusetts. In 1838 both states 
 
 07 Clark V. Barnard, 108 U. S. 436, 156, 2 L. R. A. 564, and note. See 
 
 2 Sup. Ct. 878, 27 L. ed. 780. Ante, also Trester v. Missouri &c. R. Co., 
 
 §35. And may authorize' a consoli- 33 Nebr.' 171, 49 N. W. 1110. But 
 
 dation, socalled, at least, by keeping compare Walters v. Chicago &c. R. 
 
 one of the corporiitions alive and Co., 104 Fed 377. See generally St. 
 
 permitting it to absorb or merge the Joseph &c. R. Co. v. Steele, 167 U. 
 
 other. See post, chapter on Consoli- S. 659, 17 Sup. Ct. 925, 42 L. ed. . 
 
 dation. 315; Bradley v. Ohio &c. R. Co., 
 
 fis Railway Co. v. Whitton, 13 78 Fed. 387 , Baldwin v . Chicago &c. 
 
 Wall. (U. S.) 270, 20 L. ed. 571 ; R. Co., 86 Fed. 167. 
 
 Muller V, Dows, 94 U. S. 444, 24 «» Louisville &c. R. Co. v. Louis- 
 
 L. ed. 207; Memphis &c. R. Co. v. ville Trust Co., 174 U. S. 552, 19 
 
 Alabama, 107 U. S. 581, 2 Sup. Ct. Sup. Ct. 817, 43 L. ed. 1081. See 
 
 432, 27 L. ed. 519; Phinizy v. also Missouri Pac. R. Co. v. Castle, 
 
 Augusta &c. R. Co., 56 Fed. 273; 224 U. S. 541, 32 Sup. Ct. 606, 56 
 
 State V. Chicago &c. R. Co., 25 Nebr. L. cd. 875. 
 
 3 — Ell. Railroads I 
 
§ 38 RAILROADS 66 
 
 passed laws constituting the stockholders of each corporation 
 stockholders in the other, and uniting them into one corporation 
 under the old name, and providing that all the "tolls, franchises, 
 rights, powers, privileges and property of the two should .be held 
 and enjoyed by all the stockholders in proportion to the number 
 of their shares in either or both of said corporations." In 1857, 
 the Nashua and Lowell Railroad Corporation entered into a traf- 
 fic agreement with the Boston and Lowell Railroad Corporation, 
 which was incorporated under the laws of Massachusetts. A 
 controversy afterwards arose over this, and the former, alleging 
 that it was a New Hampshire corporation, brought suit against 
 the latter in the United States circuit court of Massachusetts. It 
 was held that the plaintiff "must be considered simply in its 
 character as a corporation created by the laws of New Hamp- 
 shire, and, as such, a citizen of that state, and so entitled to go 
 into the circuit court of the United States and bring its bill 
 against a citizen of any other state, and that its union or consoli- 
 dation with another corporation of the same name, organized un- 
 der the laws of Massachusetts, did not extinguish or modify its 
 character as a citizen of New Hampshire.'"^" The court, as an 
 
 TO Nashua & Lowell R. Corp. v. Sup. Ct 621, 40 L. ed. 802; Lauis- 
 Bostoii &c. R. Corp., 136 U. S. 356, ville &c. R. Co. v. Louisville Trust 
 10 Sup. Ct. 1004, 34 L. ed. 363. Co., 174 U. S. 552, 19 Sup. Ct. 
 Citing ' Farnura v. Blackstone Canal 817, 43 L. ed. 1081 ; Rece v. Newport 
 Corp., 1 Sura. (U. S.) 46, Fed. Cas. News &c. Co., 32 W. Va. 164, 9 
 No. 4675; Muller v. Dows, 94 U. S. S. E. 212, 3 L. R. A. 572. In Wal- 
 444, 24 L. ed. 207; St. Louis &c. ters v. Chicago &c. R. Co.,. 104 Fed. 
 R. Co. V. Indianapolis &c. R. Co., 9 377, 378, it is said: "The rule de- 
 Biss. (U. S.) 144, Fed. Cas. No. ducible froin the decisions c{ the 
 12237; on appeal sub nom., Pennsyl- Supreme Court * * * is that 
 vania R. Co. v. St. Louis &c. R. Co., a corporation, as such, has no citi- 
 118 U. S. 290, 6 Sup. Ct. 24, 30 L. zenship; that the citizenship of the 
 ed. 83 ; Racine &c. R. Co. V. Farmers' incorporators determines the jurio- 
 &c. Co., 49 111. 331, 95 . Am. Dec. diction of the federal court ; that 
 595 ; Quincy &c. Bridge Co. V. Adams the citizenship of the incorf orators 
 Co., 88 111. 615. See also Western is conclusively presumed to be that 
 &c. R. Co. V. Roberson, 61 Fed. 592; of the state in which tiie corpora- 
 Louisville T. Co. V. Louisville &c. lion was first created; that while a 
 R. Co., 75 Fed. 433; St Louis &c. corporation organized by the laws 
 R. Co. V. James, 161 U. S. 545, 16 of one state may become a domes- 
 
67 ■ LEGAL STATUS § 39 
 
 additional reason for this opinion, called attention to the injus- 
 tice that would result if the defendant, as a citizen of Massachu- 
 setts, could sue the plaintiff, as a citizen of New Hampshire, in 
 the federal court of New Hampshire, and yet prevent the plain- 
 tiff from suing it in Massachusetts on the ground that they were 
 both citizens of the latter state. Another interesting case upon 
 the same general subject was recently decided by the supreme 
 court of Massachusetts. An action was brought in Massachu- 
 setts by the administrator of a man who had lived there but had 
 been killed by the defendant in Connecticut. The defendant was 
 .incorporated in both states, and there was a statute in Massachu- 
 setts providing that a cause of action for the death of a person 
 shall survive in his personal representative, but there was no 
 such law in Connecticut. The court held that the fact that a rail- 
 road is operated as a continuous line under a charter from each 
 of two different states does not make its liabilities different or 
 greater in one of them on account of an accident occurring in the 
 other, or because the person injured was a resident of the former, 
 and that, as the statute of Connecticut gave no right of action, 
 the plaintiff could not recover in Massachusetts.''^ 
 
 § 39 (29) . Railroad only a citizen or domestic corporation of 
 states that charter it — Effect of mere license. — Many railroad cor- 
 porations operate lines in other states than those by which the 
 corporations are created, under license only, in which case they 
 remain domestic corporations and citizens only of the states by 
 which their charters are granted, and foreign corporations in the 
 states granting the license.'^* An act of the legislature recogniz- 
 
 tic corporation in another state, the Ti Davis v. New York &c. R. Co., 
 
 laws of thf two states permitting, 143 Mass. 301, 9 N. E. 815, 58 Am. 
 
 yet the citizenship of the incorpora- Rep. 138. 
 
 tors remains that of the state in ''2 Railroad Co. v. Harris, 12 Wall, 
 
 which such corporation was first (U. S.) 65, 83, 20 L. ed. 354; Penn- 
 
 created. Where, however, a new cor- sylvania Co. v. St. Louis &c. R.' Co., 
 poration is created by the joint ac- ' 118 U. S. 290, 7 Sup. Ct. 24, 30 L. 
 
 tion or operations of the lav;; of ed. 83; Goodlett v. Louisville &c. R. 
 
 two or more states, the citizenship Co., 122 U. S. 391,7 Sup. Ct. 12<5. 
 
 of such corporation will be treated 30 L. ed. 1230; Martin v. Baltimoe 
 
 as that of each state." &c. R. Co., ISl IT. S. 673, 14 Sun 
 
§39 
 
 RAILROADS 
 
 68 
 
 ing a foreign corporation, or granting it privileges, will not be 
 construed to be a charter of incorporation, unless there be a mani- 
 fest intention to create a new corporation within the state.''^ And 
 the fact that the title of an act denominates it "an act to incor- 
 porate," is not sufficient to show such intention, where the body 
 of the act is more properly construed as a license.^* A railroad 
 company operating a line in a foreign jurisdiction under a 
 lease,'' ^ or under authority given to it to condemn land for a 
 
 Ct. 533, 38 L. ed. 311. See alio 
 Southern Pac. R. Co. v. Denton, 146 
 U. S. 202, 13 Sup. Ct. 44, 36 L. ed. 
 943 ; Wilson v. Winchester &c. R. 
 Co., 99 Fed. 642; Howard v. Gold 
 &c. Co,, 102 Fed. 657; Southern Pac. 
 R. Co. V. Harrison, IZ Tex. 103, 11 
 S. W. 168; Jennings v. Idaho &c. 
 R. Co., 26 Idaho /03, 146 Pac. 101, 
 L. R A. 1915D, 115n, Ann. Cas. 
 1916E, 359 ; Fnbourg v. Pullman Co., 
 176 Fed. 981. In Baltiinore &c. R. 
 Co. V, Allen, 58 W. Va. 388, 52 S. E. 
 465, 3 L. R. A. (N. S.) 608n, 112 
 Am. St. 975, it is held that Rail- 
 road corporations chartered hy other 
 states, but owning and operating 
 raih-oads in West Virginia, have the 
 status of residents of this state, al- 
 though they are not citizens of it, 
 within the meaning of clause 1 of 
 section 2 of article 3 and clause 1 
 of section 2 of article 4 of the con- 
 stitution of the United States, nor 
 domiciled in West Virginia state in 
 the technical sense of that term ; and 
 that such corporations may be pro- 
 ceeded against as garnishees, with- 
 out reference to the jurisdiction in 
 which debts due from them were con- 
 tracted or are payable. See also on 
 the garnishment question the num- 
 erous and conflicting authorities 
 there reviewed, a'so the recent cases 
 
 of Louisville &c. R. Co. v. Deer, 200 
 U. S. 176, 26 Sup. Ct. 207, SO L. ed. 
 426; Harris v. Balk, 198 U. S. 215, 
 25 Sup. Ct. 625, 49 L. ed. 1023. 
 
 T3 Memphis &c. R. Co. v. Commis- 
 sioners, 112 U. S. 609, 5 Sup. Ct. 
 299, 28 L. ed. 837; New Orleans 
 &c. R. Co. v. Delamore, 114 U. S. 
 508, 5 Sup. Ct. 1009, 29 L. ed. 247; 
 Martin v. Baltimore &c R. Co., 151 
 U. S. 673, 14 Sup. Ct. 533, 38 L. ed. 
 311. See also Markwood v. Southern 
 R. Co., 65 Fed. 817. But compare 
 Louisville Trust Co. v. Louisville 
 &c. R. Co., 75 Fed. 433; Angier v. 
 East Tennessee &c. R. Co., 74 Ga. 
 634, 20 Am. & Eng. R. Cas. 618; 
 Indianapolis &c. R. Co. v. Vance, 
 96 U. S. 450, 24 L. ed. 752. 
 
 74 Goodlett V. Lousville &c. R. Co., 
 122 U. S. 391, 7 Sup. Ct. 1245, 30 I- 
 ed. 1230. 
 
 t^ Baltimore &c. R. Co. v. Koontz, 
 104 U. S. 5, 26 L. ed. 643; Callahan 
 v. Louisville &c. R. Co., 11 Fed. 536; 
 Baltimore &c. R. Co. v. Cary, 28 
 Ohio St. 208. See also Illinois Cent. 
 R- Co. v. Sanford, 75 Miss. 862, 23 
 So. 355. So, where it purchases the 
 local road. Morgan v. East Tennes- 
 see &c. R. Co., 48 Fed. 70S; Conn 
 V. Chicago, &c. R. Co., 48 Fed. 177. 
 Unless it is merged or consolidated 
 with it. Angier v. East Tennessee 
 
69 
 
 LEGAL STATUS 
 
 §40 
 
 right of way, and to build and operate a railroad/^ does not 
 thereby become a domestic corporation, even where the act 
 giving it authority contains a proviso that it shall be deemed a 
 domestic corporation as to all causes of action arising within the 
 state.''"' Where a corporaton is doing business under a license, 
 the license may generally be revoked at the pleasure of the state 
 granting it;''* but this rule would probably be subject, as to rail-, 
 roads, to the principal that a state cannot exclude a corporation 
 engaged in interstate commerce J® 
 
 §40 (30). Foreign corporations — Conditions of admission to 
 state. — The provision of the fourteenth amendment of the federal 
 constitution, declaring that no state shall "deny to any person 
 within its jurisdiction the equal protection of the laws," does not 
 prohibit a state from imposing conditions upon foreign corpora- 
 tions before admitting them and allowing them to do business 
 within the state.*" But the conditions must not be such as tax 
 
 &c. R. Co., 74 Ga. 634, 20 Am. & 
 Eng. R. Cas. 618; Schaefer v. East 
 Tennessee &c. R. Co., 76 Ga. 99. 
 
 ■73 Hand v. Savannah &c. R. Co., 
 12 S. Car. 314. "A corporation of 
 Illinois, authorized by its laws to 
 build a railroad across the state from 
 the Mississippi river to its eastern 
 boundary, may, by the permission 
 of the state of Indiana, extend its 
 road a few miles within the limits 
 of the latter, or, indeed, through the 
 entire state, and may use and op- 
 erate the line as one road, by the 
 permission of the state,- without 
 thereby becoming a corporation or a 
 citizen pf the state of Indiana.'' 
 Pennsylvania Co. v. St. Louis &c. 
 Co., 118 U. S. 290, 7 Sup. Ct. 24, 
 30 L. ed. 83. 
 
 T7 Chicago &c. R. Co. v. Becker, 
 32 Fed, 849. But see Western &c. 
 R. Co. V. Roberson, 61 Fed. S92. 
 
 TSDoyle v. Continental Ins Co., 
 
 94 U. S. 535, 24 L. ed. 148; Hart- 
 ford Ins. Co. V. Raymond, 70 Mich. 
 485, 38 N. W. 474. See also State 
 V. Louisville &c. R. Co., 97 Miss. 
 35, 51 So. 918, 53 So. 454, Ann. Cas. 
 1912C, llSOn. See also 5 Thomp. 
 Corp. (2nd. ed.) § 6664. 
 
 ''9 Pensacola Tel. Co. v. Western 
 Union Tel. Co., 96 U. S. 1, 24 L. 
 ed. 708 ; Norfolk &c. R. Co. v. Penn- 
 sylvania, 136 U. S. 114, 10 Sup. Ct. 
 958, 34 L. ed. 394. See also, 41 
 Cent. L. J. 152; Sault Ste. Marie v. 
 International Trans. -Co., 234 U. S. 
 333, 34 Sup. Ct. 826, 58 L. ed. 1337. 
 
 so Norfolk &c. R. Co. v. Pennsyl- 
 vania, 136 U. S. 114, 10 Sup. Ct. 
 958, 34 L. ed. .394; Mllnor v. New 
 York &c. R. Co., 53 N. Y. 363; 
 People V. Fire Assn., 92 N. Y. 311, 
 44 Am. Rep. 380. Duggerv. Mech- 
 anics' &c. Co., 95 Tenn. 245, 32 S. 
 W. 5. See also State v. Louisville 
 &c. R. Co., 97 Miss. 35, 51 So. 918, 
 
§40 
 
 RAILROADS . 
 
 70 
 
 interstate commerce,®^ or invade the province of congress. Many 
 of the states have laws prescribing the conditions upon which 
 such corporations will be permitted to do business. ^^ Several of 
 them prohibit any foreign railroad corporation from acquiring 21 
 right of way and doing business without procuring a charter and 
 becoming a domestic corporation.** Bringing an action in the 
 
 53 So. 454, Ann. Cas. 1912C, llSOn. 
 A statute imposing as a condition 
 upon foreign corporations doing 
 business in Pennsylvania that they 
 shall assess and collect the tax up- 
 on that portion of their loans in the 
 hands of individual residents within 
 the state was held valid, as such 
 statute does not impose a tax, but 
 simply defines a duty, and fixes a 
 penalty for a disregard thereof. 
 Commonwealth v. New York &c. R. 
 Co., 129 Pa. 463, 18 Atl. 412, 25 
 W. N. C. IS; New York &c. R. Co. 
 V. Comonwealth, 18 Atl. 412, 7 R. 
 & Corp. L. J. 14. But this was re- 
 versed in New York &c. R. Co. v. 
 Pennsylvania, 153 U. S. 628, 14 Sup. 
 Ct. 952, 38 L. ed. 846, for the reason 
 that the statute impaired the obli- 
 gation of the contract between the 
 company and the state. See note to 
 State V. Ackerman (Ohio), 24 L. 
 R. A. 298, and note to Cone &c. Co. 
 V. Poole (S. Car.), 24 L. R. A. 289; 
 "State Legislation .^gainst Foisign 
 Corporations," 41 Cent. L. J. 152. 
 
 81 Crutcher v. Commonwealth, 141 
 U. S. 47, 11 Sup. Ct. 851, 35 L, ed. 
 649; Norfolk &c. R. Co. v. Pennsyl- 
 vania, 136 U. S. 114, 10 Sup. Ct. 
 958, 34 L. ed. 394 ; McCall v. People, 
 136 U. S. 104, 10 Sup. Ct. 881, 34 L. 
 ed. 391. See also Blake v. McCIung, 
 172 U. S. 239, 19 Sup. Ct. 165, 43 
 L. ed. 432; Pensacola Tel. Co. v. 
 Western U. Tel. Co., 96 U. S. 1, 24 
 
 L. ed. 708; Southern R. Co. v. 
 Greene, 216 U. S. 400, 30 Sup. Ct. 
 287, 54 L. ed. 536; Stockton v. Balti- 
 more &c. R. Co., 32 Fed. 9; People 
 V. V.^eraple, 131 N. Y. 64, 29 N. E. 
 1002, 24 Am. St. 542. 
 
 82 See notes in Ann. Cas. 1913A, 
 702; Ann. Cas. 1913C, 1278; Ann. 
 Cas. 1914A, 702. 
 
 83See for instance, Barnes' West 
 Virginia Codei, pp. 748, 749. Thus in 
 Nebraska, it is held that a foreign 
 railroad corporation, being prohib- 
 ited by the constitution from acquir- 
 ing a right of way in Nebraska, can- 
 not do so indirectly through a 
 Nebraska corporation. Koenig v. 
 Chicago &c. R. Co., 27 Nebr. 699, 43 
 N. W. 423. In Pennsylvania, where 
 the statutes allow the stock of 
 domestic corporations to he held by 
 other corporations, it is held that 
 a foreign corporation does not, by 
 owning all the stock of a domestic 
 corporation, "acquire or hold" the 
 real estate of the domestic corpora- 
 tion so as' to violate the act 
 of April 26, 1855, against acquir- 
 ing or holding real estate "directly in 
 the corporate name, or by, or 
 through any trustee or other device 
 whatsoever, unless specially author- 
 ized," under penalty of escheat. 
 Commonwealth v. New York &c. R. 
 Co., 132 Pa. St. 591, 19 Atl. 291, 7 
 L. R. A. 634, 25 W. N. C. 404, 47 
 Leg. Int. 222. A constitutional pro- 
 
71 
 
 LEGAL STATUS 
 
 §41 
 
 state or federal courts of a foreign state does not constitute "do- 
 ing business" in such state, and such an action may be main- 
 tained, although the laws of that state relating to foreign cor- 
 porations within its limits have not been complied with.^* Where 
 a foreign corporation doing business in the state fails to desig- 
 nate a resident agent, upon whom service of process may be 
 made as required by law, it has been held that a court possessing 
 equity powers has jurisdiction to appoint a receiver for the busi- 
 ness of such corporation, without personal service, upon a show- 
 ing of an immediate necessity for such action.®^ 
 
 § 41 (31). Railroads as property. — All property essential to the 
 operation of a railroad, including the right of way, roadbed, ties, 
 rails, side-tracks, switches, depots, station-houses, water-tanks, 
 and other fixtures, together with the rolling stock and other 
 necessary movable appliances, has been held by the federal 
 courts to be real estate.*® The same ruling is made by the courts 
 
 vision that no foreign corporation 
 shall "have power to condemn or 
 appropriate property" does not pre- 
 vent a foreign railroad corporation 
 from acquiring a right of way by 
 agreement with the landowner. St. 
 Louis &c. R. Co. V. Foltz, 52 Fed. 
 627. 
 
 84 American Loan &c. Co. v. East 
 &c. R. Co., 37 Fed. 242; Christian 
 v. American &c. Co.. 89 Ala. 198, 7 
 So. 427; Ayres v. Siebel, 82 Iowa .347, 
 47 N. W. 989; C. B. Rogers & Co. 
 v. Simmons, ISS Mass. 259, 29 N, E. 
 580; Powder River &c. Co-, v. Custer 
 County, 9 Mont. 145, 22 Pac. o8.<; 
 Texas Land &c. Co. v. Worsh-nm, 
 Id Tex. 556, 13 S. W. 384 See al- 
 so Toledo Trac. &c. Co. v. Smith, 
 205 Fed. 643. But operating a line 
 of railroad in the state is "doing 
 business'' therein. Cafasso v. Phila- 
 delphia &c. R. Co., 169 Fed. 887; 
 State V. Chicago •<v:c. R. Co., 95 Ark. 
 
 114 128 S. W. 555; Missouri &:. R. 
 Co. V. Demere (Tex. Civ. App.), 
 145 S. W. 623. See also Mauser 
 V. Union Pac. R. Co., 243 Fed. 274; 
 Reynolds v. Missouri &c. R. Co.. 
 228 Mass. 584, 117 N. E. 913. 
 
 S5 Glines v. Supreme S. O. of I. H., 
 20 N. Y. S. 275. See generally as 
 to compelling appointment of such 
 agent as condition of right to do 
 business in the state. State v. St. 
 Mary's Francos-American Petroleum 
 Co., 58 W. Va. 108, 51 S. E. 865, 
 
 1 L. R. A. (N. S.) 558, and note,. 
 112 Am. St. 951, 6 .Ann. Ca=. 38. 
 
 86 Minnesota Co. v. St Paul Co., 
 
 2 Wall. (U. S.) 609, 17 L. ed. 886; 
 Pennock v. Coe, 23 How. (U. S.) 
 117, 16 L. ed. 436; Farmers' &c. Co. 
 V. St. Jo. &c. R. Co., 3 Dill. (U. S.) 
 412, Fed. Cas. No. 4669. But see 
 post, § 450. This ruling is made 
 the more readily when necessary to 
 the protection of the rights of lien 
 
!41 
 
 RAILROADS 
 
 72 
 
 of many states,*^ in some of which, however, the character of 
 rolling stock as property is fixed by statute.^* In those states in 
 which the subject is uncontrolled by statute, the preponderance 
 of authority is to the effect that only the land owned by the rail- 
 road company, together with the ties, rails and other structures 
 permanently affixed thereto, is realty ; and that engines, cars, and 
 other moveable appliances are to be regarded for most purposes 
 as personalty.^^ The question of what is permanently affixed to 
 
 holders, in whose hands the perman- 
 ent structure without the movable 
 appliances would have little value. 
 An analogy is drawn between roll- 
 ing stoclc and other movable rail- 
 road appliances, and Venetian blinds, 
 lightening rods, i-ittie, and slaves, 
 and implements used in working a 
 plantation, a steel-yard in a machine 
 house, fish in a pond, doves in a 
 cote, all cf which ha 'e been held to 
 be realty. Farrar v. Stackpole, 6 
 Greenl. (Maine) 155; Lushington v. 
 Sewell, 1 Sim. 435, 480; Washburn 
 Real Prop. (3d ed.), p. 10. But see 
 as to taxation, the more recent de- 
 cisions of the Supreme Court of the 
 United States in Green v. Van Bus- 
 kirk, 7 Wall. (U. S.) 139, 150, 19 L. 
 ed. 109; Gloucester Ferry Co. v. 
 Pennsylvania, 114 U. S. 196, 5 Sup. 
 Ct. 826, 29 L. ed. 158, 13 Am. & Eng. 
 Corp. Cas. .365 ; Baltimore &c. R. Co. 
 V. Allen, 22 Fed. Zn, 17 Am. & Eng. 
 R. Cas. 461; Union Loan & T. Co. 
 'v. Southern &c. Co., 51 Fed. 840. 
 Much, however, depenfls tiprm the 
 statute. See generally Webster 
 Lumber Co. v. Keystone &c. Co., 
 51 W. Va. 545, 42 S. E. 632, 66 
 L. R. A. iTi, and note. 
 
 87 Farmers' &c. Co. v. Hendrick- 
 son, 25 Barb. (N. Y.) 484, 493; 
 Palmer vi Forbes, 23 111. 237 ; Louis- 
 ville &c. R. Co. V. State, 25 Ind. 
 177, 87 Am, Dec. 358; Youngman 
 
 V. Elniira &c. R. Co., 65 Pa. St. 
 278. State Treasurer v. Somerville 
 &c. R. Co,, 28 N. J. L. 21 ; Sangamon 
 & M. R. Co. V. Morgan County, 14 
 111, 163, 56 Am. Dec. 497; Chicago & 
 N. W. R. Co. V. Ft, Howard, 21 Wis. 
 45, 91 Am, Dec. 458 ; Neilson v. Iowa 
 Eastern R. Co., 51 Iowa 184, 33 Am. 
 Rep. 124, 1 N. W. 434. Railroad ties, 
 rails and, other materials brought to. 
 but not actually fixed upon, the right 
 of way, designed to be used in con- 
 structing a projected line of railroad, 
 are taxable by the local authorities 
 as personalty. Chicago, B. & Q. R. Co. 
 V. Hitchcock County, 40 Nebr, 781, 
 59 N. W, 358. 
 
 58 PhilHps V. Winslow, 18 B. Mon. 
 (Ky,) 431, 68 Am. Dec. 729; Miller 
 V. Rutland &c. k. Co., Id Vt. 452, 
 490. 
 
 59 Neilson v. Iowa Eastern R. Co., 
 51 Iowa 184, 1 N. W. 434, Zi Am. 
 Rep, 124; Boston &c. Co. v. Gilmore, 
 i1 N. H. 410, 72 Am. Dec. 336; 
 Williamson Trustee v. New Jer.sey 
 R. Co,, 29 N. J. Ea. 311, 15 /m. 
 Rep. 572, and authorities there ciJed ; 
 Randall v. Elwell, 52 N. Y. 521, 11 
 Am. Rep. 747; Hoyle v. Plattsburgh 
 &c, R. Co,, 54 N. Y, 314, 13 Am. 
 Rep. 595; Coe v Culumbns &c. R. 
 Co., 10 Ohio St. 372, 75 Am. Dec. 
 518; Chicago &c. R. Co. v. Ft. 
 Howard, 21 Wis. 44, 91 Am. Dec. 
 458 ; post, § 450. Interest of railway 
 
73 
 
 LEGAL STATUS 
 
 §42 
 
 a railroad right of way is one partly of law and partly of fact, 
 mainly dependent on the purpose of the builders, whether, for 
 example, it be to construct a main line or side branches for tem- 
 porary use.*** A railroad corporation's property, so far as the 
 ownership and the profit are concerned, is in ordinary respects 
 private, though applied to a use in which the public has aij in- 
 terest.9i / 
 
 §42 (32). Railroads as monopolies. — ^A railroad is not neces- 
 sarily nor usually a monopoly in a legal sense, nor is the company 
 entitled to prevent the location of a rival railroad upon or across 
 the territory through which its road runs, when such rival road 
 is duly authorized by the state ;®2 for the grant of a franchise to 
 one corporation will not be construed as a pledge that the "state 
 will not grant similar franchises to another, although by so doing 
 it may impair or even destroy the value of the first franchise.®^ 
 The legislature may, however, unless prohibited by the constitu- 
 
 company in street is held real estate 
 in Newark &c. Co. v. North .A.rling- 
 ton, 65 N. J. L. ISO, 46 Atl. 568. 
 See also Thompson v. Schenectady 
 R. Co., 124 Fed. 274; Palmer v. 
 Forbes, 2.3 111. 301 ; Western &c. R. 
 Co. V. Deal, 90 N. Car. 110. But 
 compare People v. Tax Comrs., 104 
 N. Y. 240, 10 N. E. 437; Front St. 
 &c. R. Co. V. Johnson, 2 Wash. V2, 
 25 Pac. 1084, 11 L. R. .A.. 69.;, and 
 ante, § 6. 
 
 90Van Keuren v. Central R. Co., 
 38 N. J. L. 165, 13 Am. Rep. 43.' 
 
 91 Lake Shore &c. R. Co. v. Chi- 
 cago &c. R. Co., 97 III. 506; Pitts- 
 burgh &c. R. Co. V. Benwood Iron 
 Works, 31 W. Va. 710, 8 S. E.. 453, 
 36 Am. & Eng. R. Cas. 531. 
 
 92 Newcastle &c, R. Co. v. Peru 
 &c. R. Co., 3 Ind. 464; Baltimore 
 &c. R. Co. V. State, 45 Md. 596; 
 Metropolitan R. Co. v. Highland St. 
 R. Co., 118 Mass. 290; 1 Thomp. 
 Corp, (2nd. ed.) § 338. But see 
 
 Raritan &c. R. Co. v. Delaware .^c. 
 Canal Co., 18 N. J. Eq. 546. 
 
 93 Charles River Bridge v. Warreii 
 Bridge, 6 Pick. (Mass.) 376, 7 Pick. 
 (Mass.) 344, 11 Peters (U. S.) 420. 
 See also as to turnpike. Turnpike 
 Co. V. State, 3 Wall. (U. S.) 2lO, 18 
 L. ed. 180; Indiana C. R. Co. v. 
 Robinson, 13 Cal. 519; Bartram v. 
 Central T. Co., 25 Cal. 283; Lafay- 
 ette P. R. Co. V. New Albany & S. 
 R. Co., 13 Ind. 90, 74 Am. Dec. 246; 
 Washington &c. R. Co. v. Baltimore 
 &c. R. Co., 10 Gill & J. (Md.) 392; 
 Collins V. Sherman, 31 Miss. 679; 
 White R. T. Co. v. Vermont C. R. 
 Co., 21 Vt..590. As to bridges, see Fall 
 V. Sutter C, 21 Cal. 237; Hartford B. 
 Co. V. Union Ferry Co., 29 Conn. 
 210; Oswego Falls B. Co. v. Fish, 
 1 Barb. Ch.- (N. Y.) 547; Hamilton 
 Ave., In re, 14 . Barb. (N. Y.) 405 
 Thompson v. New York &c. R Co., 
 3, Sandf. Ch. 625. As Vo fciries, 
 see Wright v. Nagle, 101 U. S. 791, 
 
§42 
 
 RAILROADS 
 
 74 
 
 tion, grant an exclusive franchise to build and maintain a rail- 
 road within, certain limits,®* such franchise being always subject 
 to the right of eminent domain.*^ But a monopoly is not to be 
 implied.*^ 
 
 2S L. ed. 921; Fitch v. New Haven 
 &c. R. Co., 30 Conn. 38; McLeod v. 
 Burroughs, 9 Ga. 213; Harrison v. 
 Young, 9 Ga. 359; Shorter v. Smith, 
 9 Ga. S17; Richmond &c. R. Co. v. 
 Rogers, 1 Duvall (Ky.) 13.5. Collins 
 V. Sherman, 31 Miss. 679. As to 
 canals, see Tuckahoe C. Co. v. Tucka- 
 hoe &c. R. Co., 11 Leigh (Va.) 42, 
 36 Am. Dec. 374; Illinois & M. C. 
 Co. V. Chicago &c. R. Co., 14 111. 
 314. 
 
 S4 Richmond &c. R. Co. v. Louisa 
 R. Co., 13 How. (U. S.) 71, 14 L. ed. 
 SS ; Bridge Proprietors v. Hoboken 
 Co., 1 Wall. (U. S.) 116, 17 L. ed. 
 S71 ; Binghamton B. Co., In re, 3 
 Wall. (U. S.) 51, 18 L. ed. 137: 
 Boston &c. R. Co. v. Salem &c. R. 
 Co., 2 Gray (Mass.) 1 ; Pierce Rail., 
 citing Micou v. Tallassee C. Co., 47 
 Ala. 652 ; California State Tel. Co. v. 
 Alta T. Co., 22 Cal. 398; Pontchar- 
 train R. Co. v. Orleans Nav. Co., 15 
 La. 404; State v. Noyes, 47 Maine 
 189, 208; Pennsylvania R. Co. v. 
 Baltimore &c. R. Co., 60 Md. 263; 
 Michigan C. R. Co. v. Michigan S. 
 R. Co., 4 Mich. 361; Martin v. 
 O'Brien, 34 Miss. 21; Delaware & 
 R. Co. V. Camden & A. R. Co., 16 
 N. J. Eq. 321, 18 N. J. Eq. 546; 
 Pennsj'lvania R. Co. v. National &c. 
 R. Co., 23 N. J. Eq. 441 ; Chenango 
 B. Co. v. Binghamton B: Co., 27 N. 
 Y. 87; Chenango B. Co. v. Lewis, 63 
 Barb. (N. Y.) Ill ; Camblos v. Phila. 
 &c. R. Co., 4 Brewster (Pa.) 563, 
 595; 1 Thomp. Corp. (2nd. ed.) §338. 
 
 In Fidelity &c. Co. v. Mobile St. 
 R. Co., S3 Fed. 687, it is held that 
 one public corporation cannot take 
 the franchise of another even 
 under legislative authority, if such 
 taking will materially affect its use. 
 where there is no reserved right 
 of amendent, it has been held that 
 ilie grant of an exclusive franchise 
 'o operate a railroad within certain 
 limits amounts to a contract ju the 
 part of the state, which it cannot 
 violate by the conferring upon an- 
 other company power to build and 
 operate a parallel road. Pennsylvania 
 R. Co. v. Baltimore &c. R. Co., 6* 
 Md. 263; Boston &c. R. Co. v. Salem 
 &c. R. Co., 68 Mass. 1. See also Rari- 
 tan &c. R. Co. v. Canal Co., 18 N. 
 J. Eq. 546; Pontchartrain R. Co. v. 
 New Orleans &c. R. Co., 11 La. Ann. 
 253. But compare Boston &c. R. Co. 
 V. Boston &c. R. Co., 5 Cush. 
 (Mass.) 375; Richmond &c. R. Co. 
 V. Louisa &c. R. Co., 13 How. (U. 
 S.) 71, 14 L. ed. 55; Louisville &c- 
 R. Co. V. Louisville City TL Co., 2 
 Duv. (Ky.) 175. 
 
 95 New Orleans &c. R. Co. v. 
 Southern & A. T. Co., S3 Ala. 211 
 Enfield T. B. Co. v. Hartford & N, 
 H. Co., 17 Conn. 40, 454, 42 Ann. 
 Dec. 716; Metropolitan C. R. Co. v, 
 Chicago &c. R. Co., 87 111. 317 
 Piscataqua B. v. New Hampshire 
 Bridge, 7 N. H. 35; New Jersey S. 
 R. Co. V. Long Branch Com., 39 
 N. J. L. 28. 
 
 9" Charles River Bridge v. War- 
 
75 
 
 LEGAL STATUS 
 
 §43 
 
 § 43 (33). Railroads as public highways. — Railroads, by 
 whomsoever constructed or owned or operated, are quasi public 
 works and are often likened by the courts and writers to public 
 highways.*'' The constitutions and laws of some states declare 
 them to be public highways; those of others declare the com- 
 panies to be common carriers, whose roads are available to all 
 
 ren Bridge, 11 Peters (U. S.) 420, 
 ■9 L. ed. nZ, 938; Citizens' St. R. 
 Co. V. Jones, 34 Fed. 579; Lafay- 
 •ette Plank Road Co. v. New Albany 
 &c. R. Co., 13 Ind. 90, 34 Am. Dec. 
 .246; Indianapolis Cable St. R. Co. 
 V. Citizens' St. R. Co., 127 Ind. 369, 
 24 N. E. 1054 26 N. E. 893 ; Hudson 
 River Tel. Co. v. Watervliet Turnp. 
 & R. Co., 56 Hun. 67, 9 N. Y. S. 
 177, 29 N. Y. St. 694; Syracuse 
 Water Co. v. Syracuse, 116 N. Y. 
 167, 22 N. E. 381, 26 N. Y. S. 364 
 
 5 L. R. A. 546, 29 Am. & Eng. Corp. 
 Cas. 307; State v. Hamilton, 47 
 •Ohio St. 52, 23 N. E. 935, 29 Am. 
 
 6 Eng. Corp. Cas. 208, 23 W. L. 
 Bull. 190. Post, §50. 
 
 9T White River T. Co. v. Ver- 
 mont C. R. Co., 21 Vt. 590. "We 
 regard it as a misnomer to attach 
 even the name 'quasi public corpora- 
 tion' to a railroad company. * * * 
 Its road may be called a quasi pub- 
 lic highway." Gordan, J., in Peirce 
 v. Commonwealth, 104 Pa. St. 150, 13 
 Am, & Eng. R. Cas. 74, 79. Lake 
 Superior &c. R. Co. v. United States, 
 93 U. S. 442, 458, dissenting opinion. 
 "That railroads, though constructed 
 by private corporations and owned 
 by them, are public highways, has 
 been the doctrine of nearly all the 
 courts ever since such conveniences 
 for passage and transportation have 
 had any existence. * * * Building 
 a railroad, though it be bulit by a 
 
 private corporation, is an act done for 
 public use. And the reason why 
 the use has always been held a pub- 
 lic one, is that such a road is a high- 
 way, whether made by the govern- 
 ment itself, or by the agency of cor- 
 porate bodies, or even by individuals 
 when they obtain their power to con- 
 struct it from legislative grant." 01- 
 cott V. Supervisors, 16 Wall. (U. 
 S.) 678, 694, 21 L. ed. 382. See also 
 Cherokee Nation v. Southern Kans. 
 R. Co., 135 U. S. 641, 10 Sup. Ct. 
 965, 971, 34 L. ed. 295. But the old 
 theory that a railroad is a public 
 highway in the same sense as a turn- 
 pike, over which any person may run 
 his vehicles upon payment of suit- 
 able tolls, has been abandoned. Beek- 
 man v. Saratoga, &c. R. Co., 3 Paige 
 (N. Y.) 45, 74 22 Am. Dec. 679; 
 Samblos v. Philadelphia &c. R. Co., 
 4 Brewester (Pa.) 563, 597. See also 
 Estes Park Toll Road Co. v. Ed- 
 wards, 3 Colo. App. 74 32 Pac. 549; 
 Chicago &c. R. Co. v. Chicago, 140 
 111. 309, 29 N. E. 1109; Cox v. Louis- 
 ville &c. R. Co., 48 Ind. 178; Clark 
 v. Chicago &c. R. Co., 127 Mo. 197, 
 29 S. W. 1013; Murch v. Concord 
 R. Corp., 29 N. H. 9, 61 Am. Dec. 
 631. They are not highways in such 
 a sense as to render an obstruction 
 thereon a public nuisance. Stone- 
 back V. Thomas Iron Co. (Pa.), 4 
 Atl. 721. See also Comer v. State, 
 62 Ala. 320. 
 
§43 
 
 RAILROADS 
 
 76 
 
 persons for the transpprtation of themselves and their prop- 
 erty.®* This latter definition expresses most nearly the relation of 
 a completed railroad to the public. Except in discharging its 
 duties as a carrier, the company is entitled to the exclusive use 
 and possession of its property.'^ There may also be said to be a 
 resemblance to public highways in that the power of eminent 
 domain can be invoked to aid in the construction and extension 
 of railroads,^ whenever, in the judgment of the legislature, they 
 will be of value as thoroughfares over w'hich the services of com- 
 
 as The Pennsylvania railroad is de- 
 clared by its charter (Pamphlet 
 Laws, 1846, 323) to be a public 
 highway, over which the company 
 must haul the cars of all persons 
 who require such service subject to 
 restrictions. Trunick v. Smith, 63 
 Pa. St. 18. In lake Superior &c. R. 
 Co. V. United States, 93 U. S. 4t2, 
 the doctrine of railroads as high- 
 ways is carried very far, and it is 
 held that the act of Congress grant- 
 ing lands, in aid of a railroad and 
 providing that it should be a public 
 highway for the free use of the gov- 
 ernment in transporting troops and 
 property gave the government its 
 use as a highway only and not free 
 transportation in the cars of the 
 company. 
 
 1 Central of Georgia v. Brinson, 
 10 Ga. 207, 19 Am. & Eng. R. Cas. 
 42; Toledo &c R. Co. v. Pence, 68 
 111. 524; Hoyt v. Chicago &c. R. Co., 
 93 111. 601; Baltimore &c. R. Co. v. 
 Schwindling, 101 Pa. St. 2.S8, 47 Am. 
 Rep. 706, 8 Am. & Eng. R. Cas. 544 ; 
 Chicago &c. R. Co. v. Chicago City 
 Railway Co., 10 Nat. Corp. Rep. 651. 
 See also Western Uri. Tel. Co. v. 
 Pennsylvania R. Co., 195 U. S. 540, 
 25 Sup. Ct. 133, 49 L. ed. 312; 
 
 Donovan v. Pennsylvania R. Co., 199 
 U. S. 279, 26 Sup. Ct. 91, 94, 50 
 L. ed. 192; Hyde v. Missouri Pac. 
 R. Co., 110 Mo. 272, 19 S. W. 483. 
 Pittsburgh &c. R. Co. v. Bingham, 
 29 Ohio St. 364, 370, 371, 23 Am. 
 Rep. 751. 
 
 2 Olcott V. The Supervisors, 16 
 Wall. (U. S.) 678, 21 L. ed. 382; 
 Hodgerson v. St. Louis &c. R. Co., 
 160.111. 430, 43 N. E. 614;' Wor- 
 cester v. Western R. Co., 4 Mete. 
 (Mass.) 564, 1 Am. R. Cas. 350, 
 352; Stewart v. Erie &c. Trans. Co., 
 17 Minn. 372; Niagara Falls &c. R. 
 Co., In re, 108 N. Y. 375, 15 N. E. 
 429; Gibson v. Mason, 5 Nev. 2S3: 
 CooWs Const. Lim. (7th ed.) 753. 
 Thus, in Cherokee Nation v. South- 
 ern Kans. R. Co., 135 U. S. 641, 657, 
 10 Sup. Ct. 965, 971, 34 L. ed. 302, 
 it is said : "It is because it is a 
 public highway and subject to such 
 (governmental) control that the cor- 
 poration by which it is constructed, 
 and by which it is to be maintained, 
 may be permitted, under legislative 
 sanction, to appropriate private prop- 
 erty for the purposes of a right of 
 way, upon making just compensation 
 to the owner in t'le mode prescribed 
 by law." 
 
77 
 
 LEGAL STATUS 
 
 §43 
 
 nion carriers can be rendered.* Again, they are so far public im- 
 provements that the state may levy and collect a tax to aid in 
 their construction.* 
 
 3 Newburyport T. Co. v. Eastern 
 R. Co., 23 Pick. (Mass.) 326, 1 Am. 
 R. Cas. 294; Weir v. St. Paul &c. 
 R. Co., 18 Minn. ISS. Contra Costa 
 R. Co. V. Moss, 23 Cal. 323. 
 
 * Olcott V. Supervisors, 16 Wall. 
 (U. S.) 678, 21 L. ed. 382; Ravens- 
 
 wood R. Co. V. Ravenswood, 41 W. 
 Va. 732, 24 S. E. 597, 56 Am. St. 
 906; ante § 1. See also Lehigh Val- 
 ley R. Co. V. Canal Board, 204 N. Y. 
 471, 97 N. E. 964, Ann. Cas. 1913C, 
 1228 ; post chapter on Municipal Aid. 
 
CHAPTER IV. 
 CHARTERS. 
 
 Sec. 
 
 45. Special charters and general 
 
 laws. 
 
 46. Acceptancfe of charter. 
 
 47. Terms upon which charter is 
 
 granted must be complied 
 with — Provisions in general 
 laws. 
 
 48. Particular corporation must be 
 
 authorized. 
 
 49. Construction of charter — Gen- 
 
 eral rules. 
 
 50. Grants of monopolies and pow- 
 
 ers in derogation of public 
 rights — Perpetuity. 
 
 51. Practical construction. 
 
 52. Charter to build and operate a 
 
 railroad — ^What powers are in- 
 cluded. 
 
 53. Other powers of railroad com- 
 
 panies — Implied powers in- 
 cluded in certain grants. 
 
 54. Amendment — Power must be 
 
 reserved. 
 
 55. Police regulations. 
 
 56. Material amendments require 
 
 unanimous consent of stock- 
 holders — ^What are material. 
 
 57. Statutory provisions authorizing 
 
 amendments. 
 
 58. Forfeiture — Statutory provi- 
 
 sions dispensing with judi- 
 cial determination. 
 
 Sec. 
 
 59. Implied condition that corpo- 
 
 rate franchise is subject to 
 forfeiture — Judicial determi- 
 nation — Causes for forfei- 
 ture. 
 
 60. Grounds of forfeiture — Illus- 
 
 trative cases. 
 
 61. When duty to declare forfei- 
 
 ture is mandatory and when 
 discretionary. 
 
 62. What is not cause for forfei- 
 
 ture. 
 
 63. Waiver of forfeiture — Collater- 
 
 al proceedings. 
 
 64. Proceedings to forfeit — Quo 
 
 warranto — Parties. 
 
 65. Proceedings must generally be 
 
 in court of law — Statutory 
 provisions. 
 
 66. Collateral proceedings — Plead- 
 
 ings and jiidgment in forfei- 
 ture proceedings. 
 
 67. Repeal of charter — Reserved 
 
 power. 
 
 68. Repeal where conditional power 
 
 is reserved. 
 
 69. Rule where power to repeal is 
 
 not reserved. 
 
 70. Effect or repeal. 
 
 71. Repeal of by general laws. 
 
 72. Charter is subject to general 
 
 laws reserving power to re- 
 peal. 
 7i. Expiration of charter. 
 
 78 
 
79 
 
 CHARTERS 
 
 §45 
 
 § 45 (34). Special charters and general laws. — The power to 
 grant railroad charters in common with charters of other corpora- 
 tions is a legislative function, usually exercised in this cotintry by 
 the legislatures of the various states/ although congress may, in 
 the exercise of its power to regulate interstate commerce, con- 
 struct, or authorize individuals or corporations to construct, rail- 
 roads across the states and territories of the United States.^ These 
 charters are either special, in which case corporate powers are 
 conferred upon certain designated persons by an act of the legis- 
 lature, in which the powers, duties and liabilities of the specified 
 corporation are enumerated at length; or they are derived from 
 a general authorization to any man or men to be and act as a 
 body corporate upon complying with certain terms.* In order to 
 prevent the granting of special and exclusive privileges, and to 
 render all corporations amenable to the will of the legislature at 
 all times, charters are usually conferred only by general laws,* 
 special charters being prohibited by the constitutions of most of 
 the states.^ 
 
 11 Thomp. Corp. (2d ed.), §§35, 
 145, 170 et seq. 
 
 2 California v. Central Pac. R. Co., 
 2 Interstate Com. 153, 127 U. S. 1, 
 8 Sup Ct. 1073, 32 L. ed. ISO; 
 Thompson v. Pacific R. Co., 9 Wall. 
 (U.. S.) 579, 19 L. ed. 792. 
 
 3 The general law and the articles 
 of incorporation or association exe 
 cuted and filed in compliance there- 
 with, in such case, constitute the 
 charter. Westport Stone Co. v. 
 Thomas, 175 Ind. 319, 94 N. E. 406, 
 35 L. R. A. (N. S.) 646n. See also 
 Attorney General v. Great Eastern R. 
 Co., L. R., 5 App. Cas. 473 ; 1 Thomp. 
 Corp. (2d ed.) 172. 
 
 ■41 Thomp. Corp. (2d. ed.), § 147. 
 
 5 1 Thomp. Corp. (2d ed.), § 146. 
 Even when the Constitution prohib- 
 its the creation of corporations by 
 special laws, it has been held that a 
 special charter granted before the 
 
 adoption of the Constitution may be 
 amended by special act. State v. Cape 
 Girardeau R. Co., 48 Mo. 468; Roosa 
 V. St. Joseph &c. R. Co., 114 Mo. 
 508, 21 S. W. 1124. See also United 
 States V. Stanford, 161 U. S. 412, 
 16 Sup. Ct. 576, 40 L. ed. 751 ; State 
 V. Webb, 110 Ala. 214, 20 So. 462; 
 Smith V. Indianapolis &c. R. Co., 158 
 Ind. 425, 63 N. E. 849; Bohmer v. 
 Hoffen, 161 N. Y. 390, 55 N. E. 1047. 
 In support of the text, see Wallace 
 V. Loomis, 97 U. S. 146, 24 L. ed. 
 895; San Francisco v. Spring Val- 
 ley, 48 Cal. 493; Roberts v. Missouri 
 &c. R. Co., 43 Kans. 102, 22 Pac. 
 1006, 43 Am. & Eng. R. Cas. 532; 
 St. Paul Fire Ins. Co. v. Allis, 24 
 Minn. 75. In England general power 
 to organize railroads is given by 
 the Railways Construction Facilities 
 Act, 27 and 28 Vict. Ch. 121. 
 
§ 46 RAILROADS 8Q 
 
 § 46 (35). Acceptance of charter. — In either case the charter is 
 generally of no effect until the terms upon w'hich it is granted are 
 complied with, and it is accepted by the incorporators.^ The con- 
 struction and operation by a railroad company of a part of its 
 road is sufficient evidence of an acceptance of its charter, where 
 no particular mode of acceptance is designated,'' and it is held 
 that a railroad charter may be considered as presumptively ac- 
 cepted at its date without record evidence of the fact, when it ap- 
 pears that the grantees afterwards asked for and obtained amend- 
 ments and have fully constructed the road,^ although it has been 
 said that the certificate of incorporation constitutes the only evi- 
 dence of the acceptance of the terms and conditions contained 
 in the statute.^ This, however, is not the rule with regard to spe- 
 cial charters, and it may be doubted if it is of universal applica- 
 tion even in other cases. ^^ 
 
 § 47 (36). Terms upon which charter is granted must be com- 
 plied with— Provisions in general laws. — It is generally essential 
 to the existence of a de jure corporation that the terms upon 
 which a grant of corporate rights is made should be substantially 
 complied with, though slight irregularities will not necessarily 
 defeat the incorporation,!^ particularly where the statute pro- 
 
 6 Bates V. Wilson, 14 Colo. 140, 557, 17 S. W. 581; Roosa v. St. 
 24 Pac. 99, 8 R. & Corp. L. J. 144; Joseph &c. R. Co., 114 Mo. 508, 21 
 ante, Ch. II. But filing the neces- S. W. 1124. See also City R. Co. 
 sary article of incorporation and or- v. Citizens' St. R. Co., 166 U. S. 
 ganizing under the general law op- 557, 17 Sup. Ct. 653, 41 L. ed. 1114 
 erates of course as an acceptance, in- (so holding in care of franchise), 
 eluding the provisions of such gen- s Farnsworth v. Lime Rock R. Co., 
 eral law as part of the corporate 83 Maine 440, 22 Atl. 373. See also 
 charter or constitution. 1 Thomp. Benbow v. Cook, 115 N. Car. 524, 
 Corp. (2d ed.) §172; Chicago Union 20 S. E. 453, 44 Am. St. 454. 
 Trac. Co. v. Chicago, 199 111. 484, 65 9 Bates v. Wilson, 14 Colo. 140, 24 
 N. E. 451, 59 L. R. A. 631. Proof Pac. 99, 8 R. & Corp. L. J. 144. 
 
 of acceptance, see Thomp. Corp. (2d. lo See ante §§ 23, 24, where the 
 
 ed.), § 289. subject is more fully treated. And 
 
 7 Russell V. Sebastian, 233 U. S. see also 3 Elliott Ev., §§ 1934-1938 
 195, 34 Sup. Ct. 517, 58 L. ed. 912, ii People v. Montecito &c Co 97 
 Ann. Cas. 1914C, 1282 ; St. Joseph & Cal. 276, 32 Pac 236, 33 Am. St. 172, 
 I. R. Co. V. Shambaugh, 106 Mo. and note; People v. Cheeseman, 7 
 
81 
 
 CHARTERS 
 
 §47 
 
 vides for their amendment.^^ The general laws for the incor- 
 poration of railway companies in the various states of this coun- 
 try are substantially the same in most respects. ^^ They usually 
 require that the articles shall state the name of the company,^* 
 the amount of the capital stock, and the number of shares into 
 which it is divided, the termini of the road, the names of the 
 counties through which it will pass, its length as near as may be, 
 and the number . of directors chosen to manage the affairs of 
 the corporation, together with their names. i** To these are added 
 various requirements by different states, as that the capital stock 
 shall be not less than a certain sum per mile, or that the places 
 
 Colo. 376, 3 Pac. 716; Eakright v. 
 Loganspon &c. K. Co., 13 Ind. 404; 
 Busenback v. Attica &c. R. Co., 43 
 Ind.. 265; Busey v. Hooper, 35 Md. 
 15, 6 Am. Rep. 350; State v. Wood, 
 84 Mo. i7ii; Buffalo &c. R. Co. v. 
 Cary, 26 N. Y. 75; Cayuga Lake R. 
 Co. V. Kyle, 64 N. Y. 185, 5 Thorap. 
 & C. 659; 1 Thomp. Corp. (2d ed.) 
 §§ 178-186. A statement in the 
 articles of association of a railroad 
 company that it shall be operated 
 as a transfer road, and no discrimi- 
 nation shall be made against any 
 road, and that uniform rates for the 
 same services shall be charged to 
 either persons or railroad companies, 
 does not show that the carriage of 
 passengers was excluded from the 
 purposes of its orgatiization, espec- 
 ially where the articles state that the 
 organization is for the purpose of 
 constructing, operating and maintain- 
 ing a railroad of slandard gauge. 
 Bay City Belt Line R. Co. v. Hitch- 
 cock, 90 Mich. 533, 51 N. W. 808. 
 
 121 Thomp. Corp. (2d. ed.), § 183 
 et seq. 
 
 13 The general acts of the various 
 states are built upon the railroad 
 act of New York, enacted in 1850, 
 
 Laws 1850, ch. 140. 
 
 i4Rhodes v. Piper, 40 Ind. 369; 
 Goodyear Rubber Co. v. Goodyear 
 Rubber Mfg. Co., 8 Am. & Eng. 
 Corp. Cas. 317. A corporation is en- 
 titled to the exclusive use of the 
 name it chooses. Holmes v. 
 Holmes &c. Man. Co., 37 Conn. 278, 
 9 Am. Rep. 324; note to Cincinnati 
 Cooperage Co. v. Bate, 10 Lewis' Am. 
 R. & Corp. 653, 672. 
 
 15 See ante, § 24; Burns' R. S. 
 Ind. 1914, § 5176. The fact that 
 the articles are required to name the 
 termini of the road affords no ar- 
 gument that such road shall be longi- 
 tudinal. \ circular railroad may be 
 incorporated and may exercise the 
 power of eminent domain. State v. 
 Martin, 51 Kans. 462, 33 Pac. 9. The 
 names of the directors are essential. 
 Dutchess &c R. Co. v. Mabbett, 58 
 N. Y. 397. The contrary is held in 
 Eakright v. Logansport &c. R. Co., 
 13 Ind. 404. But the force of that 
 case as an authority is destroyed by 
 the cases of Busenback v. Attica &c. 
 R. Co., 43 Ind. 265, and Reed v. 
 Richmond Street P.. Co.. 50 Ind. .342, 
 19 Am. Rep. 718; 1 Thomp. Corp. 
 (2ded.), § 178. 
 
§ 47 RAILROADS 82 
 
 of residence of the directors shall be given, or that the number 
 ■of years the corporation is to continue shall be stated. The 
 ■articles must usually be signed by a certain number^'' of sub- 
 scribers to the capital stock, each of whom, under most statutes, 
 must state his place of residence and the number of shares taken 
 by him.i* The filing of such articles, properly verified or ac- 
 knowledged, in some public repository, as the office of the secre- 
 tary of state or of some local recording officer, with the addition, 
 perhaps, of the certificate of some public officer, that the stat- 
 utes have been complied with, usually creates the corporation.^* 
 After such articles have been filed they are usually evidence of 
 the existence of a corporation de jure. 2" It is held in Colorado 
 that the omission of any of the requisites of a certificate of incor- 
 poration required by the general act for the formation of cor- 
 porations is a fatal defect, and no de jure right is conferred by 
 such certificate to exercise corporate franchises ; and, therefore, a 
 certificate of incorporation containing no provision for directors, 
 trustees, or any governing body, as required by the statute, but 
 vesting the control and management of the corporation in a 
 president, vice-president, and attorney, is insufficient to confer 
 a right to exercise such franchises.^^ And in Tennessee it has 
 
 IT The number required is twenty- 67 Am. St 607. In Illinois it is 
 
 five in New York, while five are said that a corporation cannot do 
 
 sufficient in many states. " Three business until the certificate of 
 
 only are required in Florida and complete organization and a copy 
 
 one may incorporate in Iowa. Sub- of all papers filed with the secre- 
 
 scriptions of stock upon conditions tary of state have been duly re- 
 
 that can only be fulfilled after incor- corded, and that fraudulently and 
 
 poration are not to be counted as a surreptitiously recording papers of 
 
 part of the necessary preliminary a new corporation, contrary to the 
 
 subscription. Fairview R. Co. v. agreement of the incorporators, is 
 
 Spillman, 23 Ore. 587, 32 Pac. 688. of no effect. Ricker v. Larkin, 27 
 
 isSee 1 Thorap. Corp. (2d. ed.), m. App. 625. 
 
 § 187; a:lso ante, § 24. aofiates v. Wilson, 14 Colo. 140, 
 
 19 Ante, § 24; 8 Thomp. Corp. § 200. 24 Pac. 99, 8 R. & Corp. L. J. 144. 
 
 See also Chicago &c. R. Co. v. Lake, 22 Bates v. Wilson, 14 Colo. 140, 
 
 130 111. 42, 22 N. E. 616; North Point 24 Pac. 99, 8 R. & Corp. L. J. 144. 
 
 &c. Co. V. Utah &c. Co., 16 Utah See also Reed v. Richmond St. R. 
 
 246, 52 Pac. 168, 40 L. R. A. 851, Co., 50 Ind. 342, 19 Am. Rep. 718. 
 
83 CHARTERS § 48 
 
 been held that where the statute states what must be done to 
 complete the corporate organization and prescribes the form of 
 the charter the statute must be followed no matter how incon- 
 venient or unnecessary some of the requirements may seem.2» 
 But it has been held that a statute which requires the certificate 
 of organization of a railroad company to state the termini of the 
 road, and the county or counties throug'h which the road shall 
 pass, applies only to the main line of the company, and, hence, 
 it is unnecessary for the certificate to specify the termini of 
 branch lines or the counties through which they will pass.^* And 
 it has also been held that the description of a terminus as "at or 
 near" a certain place is not so indefinite and defective as to vitiate 
 the articles of incorporation.^^ So, where an estimate of the 
 length of the road is required, it, may be approximately given.^a 
 
 §48 (37). Particular corporation must be authorized. — The 
 
 charter confers corporate rights and privileges only upon those 
 named as incorporators or upon those to whom their rights are 
 transferred by authority of law. Parties cannot take a corporate 
 character with which they have no concern and which belongs to 
 others, and effect a valid corporate organization by a pretense 
 of user thereunder.2'^ The mere purchase of all the corporate 
 
 23 Collier v. Union R. Co., 113 190. See also New York &c. R. Cd. 
 Tenn. 96, 83 S. W. ISS. See gen- v. O'Brien, 121 App. Div. 819, 106 
 erally as to what is a fatal defect, N. Y. S. 909. But see De Long v. 
 New York Cable Co. v. Mayor, 104 Schimmel, 58 Ind. 64; Indianapolis, 
 N. Y. 1, 10 N. E. 332; Heinige v. &c. R. Co. v. Newsom, 54 Ind. 121. 
 Adams, &c. Co., 81 Ky. 300. 1 Thomp. As to the right to construct a cir- 
 Corp. (2d. ed.), § 178. cular road, notwithstanding the 
 
 24 Trester v. Missouri, &c. R. statute requires the termini to be 
 Co., 33 Nebr. 171, 49 N. W. 1110. stated. See State v. Martin, 51 
 See ante, § 24; and Pacific R. &c. Kans. 462, 33 Pac. 9; Collier v. 
 Co. V, Astoria R. &c. Co., 53 Ore. Union R. Co., 113 Tenn. 96, 83 S. 
 247, 99 Pac. 1044. As to what is W. 155. 
 
 within charter power tO' build lat- 26 Buffalo, &c. R. Co. v. Hatch 
 
 eral railroads, see note in 12 L. R. 20 N. Y. 157. 
 
 A. (N. S.) 326. 27 Welch v. Old Dominion Min. 
 
 26 Central R. Co. v. Pennsyl- & R. Co., 31 N. Y. St. 916, 10 N. Y. 
 
 vania R. Co., 31 N. J. Eq. 475; S. 174, 8 R. & Corp. L. J. 254. See 
 Warner v. Callender, 20 Ohio St. 
 
§49 
 
 RAILROADS 
 
 84 
 
 property will not give any right to the use of the corporate fran- 
 chise,28 when unauthorized. Nor can a corporation, it seems, be 
 formed for the purchase and operation of a railroad under a 
 charter merely authorizing a corporation for the purpose of con- 
 struing and operating such a road.^^ 
 
 § 49 (38). Construction of charter — General rules. — The char- 
 ter of a railway company in common with those of other private 
 corporations,*" is to be strictly but reasonably construed in favor 
 of the public and against the company,*^ wherever their interests 
 conflict. This rule is, however, subject to the qualification that 
 inasmuch as railway corporations are created to further great 
 public interests, their charters will receive a liberal interpretation 
 in furtherance of those interests, when they are apparent to the 
 courts, instead of the strict construction usually given to the 
 charters of private corporations organized exclusively for pecu- 
 
 also Rogers v. Nashville, &c. R. 
 Co., 91 Fed. 299; Memphis, &c. R. 
 Co. V. Railroad Comrs., 112 U. S. 
 609, 5 Sup. Ct. 299, 28 L. ed. 837; 
 1 Thomp. Corp. (2nd ed.), §§ 229, 
 230. The pretended purchase of 
 the right of way of a railroad com- 
 pany at a sale on execution will 
 give the purchaser no rights under 
 the franchises of the execution- 
 defendant. East Alabama R. Co. 
 V. Doe, 114 U. S. 340, 5 Sup. Ct. 
 869, 29 L. ed. 136. The roadbed 
 and superstructure of a railroad 
 built under charter from the state 
 is charged not only in the hands 
 of the original corporation, but of 
 purchasers^ with the burden of the 
 charter obligations. Such burden 
 can only be removed by consent 
 of the state. State v. Dodge City 
 R. Co., S3 Kans. 377, 36 Pac. 747, 
 42 Am. St. 29S. 
 
 28BrufIett V. Great Western R. 
 Co., 2S 111. 310; Coe v. Columbus, 
 
 &c. R. Co., 10 Ohio St. 372, 75 Am. 
 Dec. 518, and note; Atkinson v. 
 Marietta, &c. R. Co., IS Ohio St. 
 21, 35. See also People v. Union 
 Gas &c. Co., 254 111. 395, 98 N. E. 
 768, Ann. Cas. 1916 B, 201. 
 
 29 Gulf &c. Co. V. Morris, 67 Tex. 
 692, 4 S. W. 156, 35 Am. & Eng. 
 R. Cas. 94; State v. Beck, 81 Ind. 
 500. See also State v. Interna- 
 tional Invest. Co., 88 Wis. 512, 60 
 N. W. 796, 43 Am. St. 920. 
 
 so Perrine v. Chesapeake, &c. 
 Canal Co., 9 How. (U. S.) 172, 13 
 L. ed. 92. 1 Thomp. Corp. (2d. ed.), 
 § 299, et seq. See also Washington- 
 Oreg. Corp. v. Chehalis, 202 Fed. 591 ; 
 State V. Des Moines City R. Co., 159 
 Iowa 259, 140 N. W. 437. 
 
 31 1 Thomp. Corp. (2d ed.) § 297. 
 
 The charter of a corporation is to 
 be strictly construed; nothing is to 
 be taken as conceded but what is 
 given in unmistakable terrris or by 
 
85 
 
 CHARTERS 
 
 §49 
 
 niary profit.*^ The powers of a corporation under its charter 
 are such, and such only, as are expressly conferred by the stat- 
 
 an implication equally clear. Rock- 
 land Water Co. v. Camden & R. 
 Water Co., 80 Maine 544, 15 Atl. 
 785, 1 L. R. A. 388; Oregon R. &c. 
 Co. V. Oregonian R. Co., 130 U. S. 
 1, 9 Sup. Ct. 409, 32 L. ed. 837, 5 
 R. & Corp. L. J. 364; Richmond 
 &c. R. Co. V. Louisa &c. R. Co., 13 
 How. (U. S.) 71, 14 L. ed. 55; 
 Coosaw Mining Co. v. State, 144 
 U. S. 550, 12 Sup. Ct. 689, 36 L. 
 ed. 537 ; Bradley v. New York &c. 
 R. Co., 21 Conn. 294; Florida &c. 
 R. Co. V. Pensacola &c. R. Co., 10 
 Fla. 145; Macon v. Macon &c. R. 
 Co., 7 Ga. 221; Davis v. Old Colony 
 R. Co., 131 Mass. 258, 41 Am. St. 
 221; People v. Broadway R. Co., 
 126 N. Y. 29, 26 N. E. 961 ; Penn- 
 sylvania R. Co. V. Canal Comrs., 21 
 Pa. St. 9; Monongahela &c. Co. v. 
 Kirk, 46 Pa. St. 112, 84 Am. Dec. 
 527; East Line &c. R. Co. v. Rush- 
 ing, 69 Tex. 306, 6 S. W. 834; 
 Parker v. Great Western R. Co.. 7 
 M. & G. 253, 49 E. C. L. 253. "A 
 doubtful charter does not exist, be- 
 cause whatever is doubtful is de- 
 cisively certain against the cor- 
 poration." Black, J., in Common- 
 wealth V. Erie &c. R. Co., 27 Pa. 
 St. 339, 67 Am. Dec. 471 n; Jack- 
 son County Horse Car Co. v. In- 
 terstate &c. Co., 24 Fed. 306, 308; 
 Pennsylvania R. Co. v. Philadel- 
 phia &c. R. Co., 10 Pa. Co. Ct. 625, 
 49 Leg. Intel. 5. See also Oppen- 
 heimer v. Philadelphia &c. R. Co., 
 39 App. D. C. 253. 
 
 32 Jacksonville &c. Co. v. Hoop- 
 er, 160 U. S. 514, 523, 16 Sup. Ct. 
 
 379, 40 L. ed. SIS; Mayor v. Balti- 
 more &c. R. Co., 6 Gill (Md.) 288, 
 48 Am. Dec. 531; Fall River Iron 
 Works Co. v. Old Colony &c. R. 
 Co., 5 Allen (Mass.) 221, 226; West 
 Branch &c. Co. v. Lumber &c. Co., 
 121 Pa. St. 143, 6 Am. St. 766. See 
 State V. Stoll, 17 Wall. (U. S.) 42S, 
 21 L. ed. 650; Bradley v. New 
 York &c. R. Co., 21 Conn. 294-, 
 North London R. Co. v. Metropoli- 
 tan Board, 1 JohnS'. Eng. Ch. 405, 
 5 Jur. (N. S.) 1121; Mayor v. Bal- 
 timore &c. R. Co., 21 Md. 50, 93. 
 In this last case it was held that 
 power given to a railroad company 
 to subscribe in aid of the construc- 
 tion of lateral roads authorizes it 
 to loan money or bonds to such 
 road, and take a mortgage to se- 
 cure such loan. A grant of power 
 for the performance of a public 
 act is not to be so construed as to 
 make the act impossible, and such 
 a construction is not justified by 
 the rule that private charters 
 are to be strictly interpreted; pro- 
 visos in a grant will not be 
 allowed to defeat the grant it- 
 self. West Branch Boom Co. v. 
 Pennsylvania Joint Lumber and 
 Land Co., 121 Pa. St. 143, 15 Atl. 
 509, 6 Am. St. l(i(>, 22 W. N. C. 303. 
 The interpretation of a railroad 
 charter, like the interpretation of 
 any other grant, is the ascertain- 
 ment of intention. The means rea- 
 sonably necessary for the enjoy- 
 ment of a granted property or 
 rights, to the exercise of the 
 granted power, and for the carry- 
 
§49 
 
 RAILROADS 
 
 86 
 
 utes granting it, together with such additional powers as are 
 fairly implied,^* as being necessary to the enjoyment of the pow- 
 ers enumerated.** The enumeration of certain powers implies 
 the exclusion of all others not reasonably necessary to their en- 
 joyment.*^ The phrase "necessary powers," however, generally 
 means such as are convenient, useful and appropriate to the spe- 
 
 ing out of the purpose of the 
 grant, are given by implication. 
 Burke v. Concord R. Co., 61 N. H. 
 160. But see Oregon R. & Nav. 
 Co. V. Oregonian R. Co., 130 U. S. 
 1, 9 Sup. Ct. 409, 32 L. ed. 837, 5 
 R. & Corp. L. J. 364; Baltimore &c. 
 R. Co. V. Dist. of Columbia, 3 Mc- 
 Arthur (D. C.) 122; East Line &c. 
 R. Co. V. Rushing, 69 Tex. 306, 6 
 S. W. 834, and authorities cited in 
 last preceding note. 
 
 33 Thomas v. Railroad Co., 101 U. 
 S. 71, 82, 25 L. ed. 950; Mobile v. 
 Railroad Co., 84 Ala. 115, 5 Am. 
 St. 342 n; Central R. Co. v. Col- 
 lins, 40 Ga. 582; Lower v. Chicago 
 &c. R. Co., 59 Iowa 563, 13 N. W. 
 718, 10 Am. & Eng. R. Cas. 17; 
 Mobile &c. R. Co. v. Franks, 41 
 Miss. 494, 511; Pacific R. Co. v. 
 Seely, 45 Mo. 212, 220, 100 Am. 
 Dec. 369; State v. Atchison &c. R. 
 Co., 24 Nebr. 143, 38 N. W. 43, 8 
 Am. St. 164 n; Delaware &c. Canal 
 Co. V. Camden &c. R. Co., 16 N. 
 J. Eq. 321, 372; Morris &c. R. Co. 
 V. Sussex R. Co., 20 N. J. Eq. 542, 
 562; Commonwealth v. Erie &c. R. 
 Co., 27 Pa. St. 339, 67 Am. Dec. 
 471 n; Pittsiburg &c. R. Co. v. Al- 
 legheny County, 63 Pa. St. 126, 135; 
 National Car Advertising Co. v. 
 Louisville &c. R. Co., 110 Va. 413, 
 66 S. E. 88, 24 L. R. A. (N. S.) 
 
 1010 n. This does not mean that 
 express powers themselves can be 
 enlarged by implication. People 
 v. Chicago &c. R. Co., 233 111. 378, 
 84 N. E. 368, 16 L. R. A. (N. S.) 
 604, 122 Am. St. 181, 13 Ann. Cas. 
 285; Pitlsburg R. Co. v. Pittsburg, 
 226 Pa. St. 498, 75 Atl. 681. 
 
 34 Thomas v. Railroad Co., 101 
 U. S. 71, 25 L. ed. 950; Ross &c. 
 Co. V. Southern Co., 72 Fed. 957; 
 Enfield Toll Bridge Co. v. Hart- 
 ford R. Co., 17 Conn. 454, 44 Am. 
 Dec. 556 n; Housatonic R. Co. v. 
 Lee &c. R. Co., 118 Mass. 391; 
 Davis, v. Old Colony R. Co., 131 
 Mass. 258, 41 Am. Rep. 221; Mor- 
 ris &c. R. Co. v. Newark, 10 N. J. 
 Eq. 352; Shawmut Bank v. Platts- 
 burgh &c. R. Co., 31 Vt. 491. 
 
 35 Thomas v. Railroad Co., 101 
 U. S. 71, 82, 25 L. ed. 950; Case v. 
 Kelly, 133 U. S. 21, 10 Sup. Ct. 
 216, 33 L. ed. 513; Lewis &c. Co. 
 V. Thomas, 8 Ky. L. 872, 3 S. W. 
 907; Tennessee &c. R. Co. v. 
 Adams, 3 Head. (Tenn.) 596; Pitts- 
 burgh &c. R. Co. V. Jones, 111 Pa. 
 St. 204, 2 Atl. 410, 56 Am. Rep. 
 260; 1 Thomp. Corp (2d ed.) § 306; 
 1 Elliott Cont, § 540. See also Na- 
 tional Car Advertising Co. v. 
 Louisville &c. R. Co., 110 Va. 413, 
 66 S. E. 88, 24 L. R. A. (N. S.) 
 1010, and note. 
 
87 
 
 CHARTERS 
 
 §50 
 
 cific power granted.*® Ambiguity in the terms used may be so 
 great as to vitiate the charter*^ as all doubtful expressions will 
 generally be construed against the corporation.^^ ^ charter, 
 however, like a contract between individuals,*^ is to be construed 
 fairly and reasonably,*" according to the natural import of the 
 language Used, with reference to the purposes and objects of the 
 corporation,* 1 and with a view to carrying out the intention of the 
 legislature in granting it.*^ Where similar franchises are granted 
 to two corporations, the charters must, if possible, receive such 
 a construction that effect may be given to both, and neither be 
 held to be in derogation of the other.** 
 
 § 50 (39). Grants of monopolies and powers in derogation of 
 public rights — Perpetuity. — The rule of strict construction against 
 corporations is peculiarly applicable to grants of exclusive privi- 
 
 ssMcCulloch V. Maryland, 4 
 Wheat (U. S.) 316, 413, 4 L. ed. 579, 
 Marshall, C. J.; Green Bay &c. R. 
 V. Union Steamboat Co., 107 U. 
 s! 98, 2 Sup. Ct. 221, 27 L. ed. 
 413; Hood v. New York &c. 
 R. Co., 22 Conn. 1, 16; Buffett v. 
 Troy &c. R. Co., 40 N. Y. 168, 176; 
 Buffit V. Troy &c. R. Co., 36 Barb. 
 (N. Y.) 420. See also Choctaw &r. 
 R. Co. V. Bond, 160 Fed. 403 ; State v. 
 Illinois Cent. R. Co., 246 111. 188, 
 9> N. E. 814; Logansport v. Smith, 
 47 Ind, App. 64, 93 N. E. 883; Mc- 
 Adow V. Kansas City Western R. 
 Co., 96 Kans. 423, 151 Pac. 1113, L. 
 R. A. 1917B, llS8n; 8 Elliott Cont., 
 §§ 541, 542. But not such as are un- 
 usual and too remote and indirect. 
 Northside R. Co. v. Worthington, 
 88 Tex. 562, 53 Am. St. 778; People 
 V. Chicago &c. Co., 130, 111. 268, 17 
 Am. St. 319; Burrill L. Diet, title 
 "Necessary." 
 
 37 1 Thomp. Corp. (2d ed.), § 303 
 
 38 Richmond &c. R. Co. v. Louisa 
 
 &c. R. Co., 13 How. (U. S.) 71, 
 14 L. ed. 55; Rice v. Railroad Co., 
 1 Black (U. S.) 358, 17 L. ed. 147; 
 Singleton v. Southwestern R. Co., 70 
 Ga. 464, 48 Am. Rep. 574n; Penn- 
 sylvania R. Co. V. Canal Comrs., 21 
 Pa. St. 22; Commonwealth v. Central 
 Pass. R. Co., 52 Pa. St. 506; Scales 
 V. Pickering, 4 Bing. 448. 
 
 39 Except that it is usually more 
 strictly construed. 
 
 *<' Green Bay &c. R. Co. v. Union 
 Steamboat Co., 107 U. S. 98, 2 Sup. 
 Ct. 221, 27 L. ed. 413 ; Brown v. Win- 
 nisimmet Co., 11 Allen (Mass.) 326, 
 336; Commonwealth v. Erie &c. R. 
 Co., 27 Pa. St. 339, 67 Am. Dec. 471n. 
 
 *il Thomp. Corp. (2d ed.), §297, 
 
 *21 Thomp. Corp. (2d. ed.), §§ 298, 
 301, 309. See Wells v. Northern Pac. 
 R. Co., 23 Fed. 969. 
 
 *3 Pennsylvania R. Co.'s Appeal, 
 93 Pa. St. 150, 3 Am. & Eng. R. 
 Cas. 507; Hudson Riv. Tel. Co. v. 
 Watervliet Turnp. Co., 56 Hun 67, 
 9 N. Y. S. 177. 
 
§50 
 
 RAILROADS 
 
 88 
 
 leges, monopolies, and powers in derogation of public rights, or 
 the like. In such cases it is generally held that nothing passes 
 by implication, and it is said that "this rule applies with peculiar 
 force to articles of association, which are framed under general 
 laws, and which are a substitute for a legislative charter, and as- 
 sume and define the powers of the corporation by the mere act of 
 the associates, without any supervision of the legislature or of 
 any public authority."** Thus, exclusive privileges and monopo- 
 lies are not to be presumed, and if not unequivocally granted 
 must be deemed to be withheld.*^ So, grants in derogation of 
 public rights,*® or of the rights and franchises of other corpora- 
 tions,*'^ are to be strictly construed. And, "as between a con- 
 struction which will place a limitation on the grant and one which 
 
 ** Central Transp. Co. v. Pullman's 
 Car Co., 139 U. S. 24, 49, 11 Sup. 
 Ct. 478, 35 L. ed. 55, Per Gray, T. ; 
 Oregon R. &c. Co. v. Oregonian R. 
 Co., 130 U. S. 1, 27, 9 Sup. Ct. 409, 
 32 L. ed. 837. 
 
 45 Charles River Bridge v. Warren 
 Bridge, 11 Pet. (U. S.) 420, 9 L. ed. 
 773 ; Richmond &c. R. Co: v. Louisa 
 R. Co., 13 How. (U. S.) 71, 14 L. 
 ed. 55 ; Lehigh &c. Co. v. Easton, 
 121 U. S. 388, 7 Sup. Ct. 916, 30 L. 
 ed. 1059; Jackson &c. R. Co. v. Inter- 
 state R. Transit Co., 24 Fed. 306; 
 Omaha Horse R. Co. v. Cable Tram- 
 way Co., 30 Fed. 324; Georgia R. 
 Co. V. Smith, 70 Ga. 694; East St. 
 Louis &c. R. Co. V. East St. Louis 
 Union R. Co., 108 111. 265; Indian- 
 apolis Cable R. Co. v. Citizens' R. 
 Co., 127 Ind. 369, 24 N. E. 1054, 26 
 N. E. 893, 8 L. R. A. 539n; Gaines 
 V. Coates, 51 Miss. 335; De Lancey 
 V. Insurance Co., 52 N. H. 581 ; Peo- 
 ple V. Broadway R. Co., 126 N. Y. 29, 
 26 N. E. 961. See also Detroit Citi- 
 zens' St. R. Co. V. Detroit R. Co., 
 
 171 U. S. 48, 18 Sup. Ct. 732. 43 
 L. ed. 67; Augusta &c. R. Co. v. Au- 
 gusta &c. R. Co., 96 Ga. 562, 23 S. E. 
 501 ; Chica.go &c. R. Co. v. Louisville 
 &c. R. Co., (Ky), 58 S. W. 799. 
 
 46 Fertilizing Co. v. Hyde Park, 97 
 U. S. 659, 24 L. ed. 1036; Turnpike 
 Co. V. Illinois, 96 U. S. 63, 24 L. 
 ed. 651. See also State v. Des 
 Moines City R. Co., 159 Iowa 259, 
 140 N. W. 4.37. Thus, property al- 
 ready devoted to a public use can- 
 not be taken and used by a corpora- 
 tion unless the right is clearly 
 granted. People v. Thompson, 98 N. 
 Y. 6'; Stamford v. Stamford R. Co., 
 56 Conn. 381, 15 Atl. 749, 1 L. R. A. 
 375; People v. Newton, 112 N. Y. 
 396, 19 N. E. 831, 3 L. R. A. 174n ; 
 Elliott Roads and Streets, §§ 185- 
 188. 
 
 *'< Bridgeport v. New York R. Co., 
 36 Conn. 255, 4 Am. Rep. 63; Wor- 
 cester &c. R. Co. v. Railroad Comrs., 
 118 Mass. 561; Packer v. Sunbury 
 &c. R. Co., 19 Pa. St. 211 ; Pennsyl- 
 vania R. Co.'s Appeal, 93 Pa. St. 
 150. 
 
89 CHARTERS § 51 
 
 will give rise to a perpetuity, it is clear that it is the duty of the 
 court, in favor of the public, to impose the limitation."** 
 
 §51 (40). Practical construction. — It is a familiar rule that, 
 in cases of doubt, the practical exposition or construction of a con- 
 tract by the parties is entitled to great, if not controlling influ- 
 ence, and will usually be foUovired by the courts.** This rule has 
 been applied to statutes which have received a contemporaneous 
 construction,"" and even to constitutional provisions.^^ It. fol- 
 lows, therefore, that the practical construction of a grant to a 
 railroad company established by years of uniform usage, ac- 
 quiesced in by the public and all parties interested, will be of 
 great weight in determining the construction of the grant and will 
 usually be followed by the courts if the meaning or extent of the 
 grant would otherwise be doubtful.^^ But this rule should not 
 perhaps, be carried to the extent to which it is carried by some 
 of the courts in the construction of ordinary contracts, that is, 
 it should not be so applied as to enable corporations to acquire 
 rights, as against the public, which are clearly not given to 
 them, either expressly or impliedly, by their charters or grants 
 
 *8 Detroit V. Detroit City R. Co., SS9; People v. Board, 100 111. 495; 
 
 56 Fed. 867, 886. See also Choctaw Hovey y. State, 119 Ind. 386, 395, 
 
 Min. Co. V. South Carolina, 144 U. 21 N. E. 890; Rogers v. Goodwin, 
 
 S. 550, 12 Sup. Ct. 689, 36 L. ea. 2 Mass. 475; Pike v. Megoun, 44 
 
 537. Mo. 491; State v. Parkinson, 5 Nev. 
 
 49 Chicago V. Sheldon, 9 Wall. ^^- ^" ^™" ^- Schuyler, 4 Gilm. 
 (U. S.) 50, 19 L. ed. 594; District ^"''^ ^21, it is said: "It has al- 
 of Columbia v. Gallaher, 124 U. S. ^^^^ *'"" regarded by the courts 
 SOS, 8 Sup. Ct. 585, 31 L. ed. 526; ^^ equivalent to a positive law." 
 Central Trust Co. v. Wabash &c. Approved m Board of Comrs. v. 
 R. Co., 34 Fed. 254; Union Pac. R. B""*f f' ^^^ I"^. 143, 12 N. E. 151. 
 Co. V. Anderson, 11 Colo. 293, 18 , "Johnson v. Joliet, 23 111. 202; 
 Pac. 24; Reissner v. Oxley, 80. Ind. l'^^""- ^^yhew, 2 Gill (Md.) 487; 
 580, and authorities there cited; Bingham v. Miller, 17 Ohio 445. 49 
 Vinton v. Baldwin, 9S Ind. 433; ™\,^^" 
 
 Frazier v. Myers, 132 Ind. 71, 31 /^°^'\^ v. Louisville &c. R. 
 N. E. 536. 2 Elliott Cont. § 1537. ^°' "^ ^^^- ^\^' ^ ^o. 106, 5 Ani. 
 
 St. 342. See also McGilvra v. Se- 
 
 50 United States v. Philbrick, 120 attle Elec. Co., 61 Wash. 38, 111 
 U. S. 52, 7 Sup. Ct. 413, 30 L. ed. Pac. 896, Ann. Cas. 1912 B, 1020 n. 
 
§52 
 
 KAILEOADS 
 
 90 
 
 from the public. In other words, the mere assumption of a 
 right on their part and inaction on the part of the public will 
 not necessarily be conclusive that such a right exists, espe- 
 cially as against the plain letter of the law.^^ 
 
 § 52 (41). Charter to build and operate a railroad — What 
 powers are included. — The grant of authority to build and oper- 
 ate a railroad carries with it, when necessary to the enjoyment of 
 the franchise, the implied authority to condemn lands for a right 
 of way;^* to appropriate land of the state over which the char- 
 tered route runs, although no provision is made for compensation 
 for it when taken ;S5 to erect bridges over navigable streams f^ to 
 repair bridges where it is authorized to build;®'' to construct its 
 road across a highway^^ or railroad®' between its authorized ter- 
 mini; but not, ordinarily, along and upon a highway*" or prop- 
 erty already devoted to railroad use;^^ to take gravel and mate- 
 
 53 Powers that can only be ob- 
 tained by charter or grant cannot 
 be acquired by assuming, without 
 authority, to exercise them; nor is 
 the public, although it may be rep- 
 resented by its officers, in a situa- 
 tion to protect its rights or take 
 action to the same extent as are 
 individuals. 
 
 B* Tennessee &c. R. Co. v. 
 Adams, 3 Head (Tenn.) S96. 
 
 55 Indiana Cent. R. Co. v. State, 
 3 Ind. 421. But this doctrine is of 
 doubtful soundness. 
 
 56 Hamilton v. Vicksburg &c. R. 
 Co., 34 La. Ann. 970, 44 Am. Rep. 
 451; Fall River Iron Works Co. v. 
 Old Colony &c. R. Co., 5 Allen 
 (Mass.) 221; Tennessee R. Co. v. 
 Adams, 3 Head (Tenn.) 596; Miller 
 v. Prairie du Chien &c. R. Co., 34 
 Wis. 533. In Schofield v. Pennsyl- 
 vania &c. R. . Co., 12 Pa. Co. Ct. 
 122, it was held that the railroad 
 had power to build a branch road 
 extending a thousand feet along 
 
 the bed of a navigable stream. But 
 see Stevens v. Erie R. Co., 21 N. 
 J. Eq. 259. 
 
 57 Central Trust Co. v. Wabash 
 Sz:c. R. Co., 32 Fed. 566. 
 
 58 State V. Montclair R. Co., 35 
 N. J. L. 328; Lewis v. German- 
 town R. Co., 16 Phila. (Pa.) 608; 
 White River Turnp. Co. v. Ver- 
 mont Cent. R. Co., 21 Vt. 590. 
 
 5i' St. Louis &c. R. Co. V. Spring- 
 field &c. R. Co., 96 111. 274; Ft. 
 Wayne v. Lake Shore &c. R. Co., 
 132 Ind. 558, 32 N. E. 215, 18 L. R. 
 A. 367n, 32 Am. St. 277; Baltimore 
 &c. R. Co. V. Union R. Co., 35 Md. 
 225. 
 
 60 St. Louis &c. R. Co. v. Haller, 
 82 111. 208; Kenton County Court 
 V. Bank Lick Turnp. Co., 10 Bush 
 (Ky.) 529; Springfield v. Connecti- 
 cut River R. Co., 4 Cush. (Mass.) 
 63. 
 
 61 Housatonic &c. R. Co. v. Lee 
 &c. R. Co., 118 Mass. 391. Contra 
 Costa &c. R. Co. V. Moss, 23 Cal. 
 
91 
 
 CHARTERS 
 
 §52 
 
 rial for use in construction of the roadbed, and water for the use 
 of the engines ;^2 to run trains of cars over the road by the use 
 of steam as a motive power, even though it be so near to a pub- 
 lic highway as to frighten horses driven thereon;** and to take 
 tolls for the carriage of goods and passengers.** The grant of a 
 right to construct a railroad between two towns has been held 
 
 323; Seymour v. Jeflfersonville &c. 
 R. Co., 126 Ind.- 466, 26 N. E. 188; 
 Alexandria &c. R. Co. v. Alexan- 
 dria &c. Co., 75 Va. 780; 40 Am. 
 Rep. 143 n; 1 Thomp. Corp. (2d. 
 ed.), § 363. Express, or at least 
 clearly implied, authority is gen- 
 erally necessary in such cases. Cen- 
 tral City &c. R. Co. V. Fort Clark 
 &c. R. Co., 81 111. 523; Baltimore 
 &c. R. Co. V. North, 103 Ind. 486, 
 3 N. E. 144; Eastern R, Co. v. 
 Boston &c. R. Co., Ill Mass. 125, 
 15 Am. Rep. 13; Elliott Roads and 
 Streets, §§ 185, 186. See also Denver 
 &c. R. Co. V. Denver &c. Co., 5 
 McCrary (U. S). 443, 17 Fed. 867; 
 Railway Co. v. Ailing, 99 U. S. 463, 
 25 L. ed. 438, aa to respective 
 rights of two railroad companies in 
 a narrow canon or defile. Other 
 authorities, and a full treatment of 
 this subject will be found in the 
 chapter on Eminent Domain. 
 
 62 See Morgan v. Louisiana, 93 
 U. S. 217, 23 L. ed. 860; also Stro- , 
 hecker v. Alabama &c. R. Co., 42 
 Ga. 509; Henry v. Dubuque &c. R. 
 Co., 2 Iowa 288; Early wine v. To- 
 peka &c. R. Co., 43 Kans. 746, 23 
 Pac. 940; Taylor v. New York &c. 
 R. Co., 38 N. J. L. 28; Pennsyl- 
 vania R. Co. V. Miller, 112 Pa. St. 
 34, 3 Atl. 780; Aldrich v. Drury, 8 
 R. I. 554. But see Preston v. Du- 
 
 buque &c. R. Co., 11 Iowa 15. 
 
 esBordentown &c. T. Co. v. 
 Camden &c. R. Co., 17 N. J. L. 
 314, 319. 
 
 64 See Morgan v. Louisiana, 93 
 U. S. 217, 23 L. ed. 860. Courts 
 have construed the charter of a 
 canal or railroad company, in re- 
 lation to the right to take freight 
 or toll, in favor of the public and 
 against the company. 1 Thomp. 
 Corp. (2d. ed.), § 303. Stourbridge 
 Canal Co. v. Wheeley, 2 B. & Ad. 
 793; Barrett v. Stockton &c. R. 
 Co., 2 Man. & Gr. 134, 7 Man. & 
 Gr. 870; Gildart v. Gladstone, 11 
 East 675; Leeds &c. Canal v. Hust- 
 ler, 1 B. & C. 424; Camden &c. R. 
 Co. V. Briggs, 22 N. J. L. 623. 
 Where the charter of a canal im- 
 posed a toll on goods carried on 
 vessels passing through the canal, 
 and on such vessels as had not suf- 
 ficient goods aboard to yield a toll 
 of four dollars, it was held that 
 the company had no right to 
 charge toll for passengers, and a 
 vessel laden exclusively with pas- 
 sengers was entitled to navigate 
 the canal upon payment of the toll 
 imposed upon an empty vessel. 
 Perrine v. Chesapeake &c. Canal 
 Co., 9 How. (U. S.) 172, 13 L. cd. 
 92. 
 
§ 52 RAILROADS 92 
 
 to carry implied authority to run a branch line along a street of 
 one of the towns to reach a depot and turn-table which lay off 
 from the direct line.^^ Power to build a road "to" or "from" a 
 certain town, or to construct works "at" such a town, includes 
 power to build to such point within the corporate limits suitable 
 for the transaction of its business and the accommodation of the 
 public as may be fixed upon by the company and the municipal 
 authorities.*® "A railroad company whose charter gives it the 
 right to build its road from a certain city is not barred from mak- 
 ing the union depot in such city its terminus by the fact that it 
 began to construct its road from a point in the outskirts of the 
 city, and for some time ran trains from such point, when it ap- 
 pears the company never made any permanent improvements at 
 such point, and that from the first it made efforts to extend its 
 line to the union depot. "*'^ But no authority is given to build the 
 road into such a town in a direction different from that of the 
 general direction of the road.^^ A company chartered to build a 
 railroad for the purpose of transporting lumber for shipment by 
 water, with authority to construct the road "to the place of ship- 
 
 85 Flanagan v. Great Western R. named. Chicago &c. R. Co. v. Chi- 
 
 Co., L. R. 7, Eq. Cas. 116. See cago &c. R. Co., 112 111. 589, 25 Am. 
 
 also Clarke v. Cuckfield Union, 21 & Eng. R. Cas. 158; Mason v. 
 
 L. J. Q. B. 349; New Orleajis &c. Brooklyn &c R. Co., 35 Barb. (N. 
 
 R. Co. V Second Municipality &c., Y.) 373; Rio Grande &c. R. Co. v. 
 
 1 La Ann. 128; Knight v. Carroll- Brownsville, 45 Tex. 88. See also 
 
 ton R. Co., 9 La. Ann. 284. But Waycross &c. R. Co. v. Offcrman 
 
 see Northeastern R. Co. v. Payne, &c. R. Co., 109 Ga. 82/, 35 S. E. 
 
 8 Rich. L. (S. Car.) 177, to the 275; Colorado &c. R. Co. v. Union 
 
 effect that authority to build Pac. R. Co., 41 Fed. 293. Contra, 
 
 "from" a city does not give a right Northeastern R. Co. v. Payne, 8 
 
 to build within the city limits. ' Rich. L. (S. Car.) 177. The term 
 
 68 Moses V. Pittsburgh &c. R. "between" has also been construed 
 
 Co., 21 111. SIS, 522; Mohawk as inclusive. Morris &c. R. Co. v. 
 
 Bridge Co. v. Utica &c. R. Co., 6 Central &c. R. Co., 31 N. J. L. 205. 
 
 Paige Ch. (N. Y.) SS4; Common- 67 Colorado E. R. Co. v. Union 
 
 wealth V. Erie &c. R. Co., 27 Pa. Pac. R. Co., 41 Fed. 293. See also 
 
 St. 339, 344, 67 Am. Dec. 471 n. Collier v. Union R. Co., 113 Tenn. 
 
 These terms are generally regard- 96, 83 S. W. ISS. 
 
 ed as inclusive and authorize a lo- 6S Savannah &-c. R. Co. v. Shiels, 
 
 cation within the city or place 33 Ga. 601. 
 
93 
 
 CHARTERS 
 
 §52 
 
 ping lumber" on a river, may lawfully appropriate lands for a 
 right of way across the flats or overflowed lands within the ordi- 
 nary banks of the river and extend its tracks across such lands 
 to a convenient navigable part of the river from which lumber 
 may be shipped.** A railroad corporation has implied authority 
 to build and maintain restaurants for its passengers'^** or em/- 
 ployesf ^ to erect or secure the erection of a telegraph line along 
 its route;''* and to erect and maintain depots, car houses, water 
 tanks, repair shops, and the like.''^ It also has power to make 
 reasonable rules and regulations for the safety and convenience 
 of its passengers'^* and the management of its road and 
 
 «9Peavey v. Calais R. Co., 30 
 Maine 498, 1 Am. R. Cas. 147. 
 
 fi) Jacksonville &c. R. &c. Co. v. 
 Hooper, 160 U. S. 514, 16 Sup. Ct. 
 379, 40 L. ed. 515; State v. Illinois 
 Cent. R. Co., 246 111. 188, 92 N. E. 
 814; Louisville Property Co. v. 
 Commonwealth, 146 Ky. 827, 143 
 S. W. 412, 38 L. R. A. (N. S.) 
 830 n; Flanagan v. Great Western 
 R. Co., L. R. 7 Eq. Cas. 116. But 
 compare Western Md. R. Co. v. 
 Blue Ridge Hotel Co., 102 Md. 307, 
 62 Atl. 351, 2 L. R. A. (N. S.) 887n, 
 111 Am. St. 362. 
 
 "1 Jacksonville &c. R. Co. v. 
 Hooper, 160 U. S. 514, 16 Sup. Ct. 
 379, 40 L. ed. SIS; Abraham v. Ore- 
 gon &c. R. Co., yi Ore. 495, 60 Pac. 
 899, 64 L. R. A. 391, 82 Am. St. 779. 
 So, in some instances, it may buy 
 or hire steamboats or run stages in 
 connection with its line. Green 
 Bay &c. R. Co. v. Union Steam- 
 boat Co., 107 U. S. 98, 2 Sup. Ct. 
 221. 21 L. ed. 413; Buffett v. Troy 
 &c. R. Co., 40 N. Y. 168, 172; Shaw- 
 mut Bank v. Plattsburg &c. R. Co., 
 31 Vt. 491. See also Norfolk &c. 
 R. Co. V. Shippers' Compress Co., 
 83 Va. 272, 2 S. E. 139. 
 
 ■^sPrather v. Western U. Tel. 
 Co., 89 Ind. 501; Marietta &c. R. 
 Co. v. Western U. Tel. Co., 38 
 Ohio St. 24, 10 Am. & Eng. R. Cas. 
 387; Pittsburg &c. R. Co. v. Shaw 
 (Pa.), 36 Am. & Eng. R. Cas. 4S3. 
 Or scales at its stations for weigh- 
 ing freight. London &c. R. Co. v. 
 Price, L. R. 11 Q. B. Div. 485, 13 
 Am. & Eng. R. Cas. 128; Western 
 U. Tel. Co. V. Rich, 19 Kans. 517, 
 27 Am. Rep. 159. 
 
 73 State V. Mansfield, 23 N. J. L. 
 510, 57 Am. Dec. 409n; Wright v. 
 Carter 27 N. J. L. 76; State v. New- 
 ark, 1 Dutch. (N. J.) 315 But it has 
 been held that a railroad has no 
 implied power to erect houses for 
 its employes nor to establish • fac- 
 tories for making its own rails and 
 rolling stock, nor to do any other' 
 acts not necessary to the Success-" 
 ful operation of the road.' State 
 V. Mansfield, 23 N. J. L." Slt^^iS^q 
 Am. Dec 409 n. See also 1 Thomp. 
 Corp. (2d. ed.), § 309.- ,■ r .,., , 
 
 '7* Chicago &c. R. Co. v. Wil- 
 liams, 55 III. 185, 8 Am. Rep. 641; 
 Gray v. Cincinnati &c. R. Co., 11 ; 
 Fed. 083, 6 Am. & Eng. R. Cas. 
 588. See also Martjn v. , Rhode 
 
§53 
 
 RAILROADS 
 
 94 
 
 business.''^ It is not confined to making rules merely for the 
 convenience of passengers. 
 
 § 53 (42). Other powers of railroad companies — Implied 
 powers included in certain grants. — A railroad company may olfer 
 a reward for the detection of persons obstructing its tracks. '^^ Un- 
 der an authority to erect a bridge, the corporation may condemn 
 land for abutments'^'^ and may build necessary approaches.''^ So, 
 under a general authority to condemn land for a right of way, a 
 corporation may take land for depots, water-tanks, roundhouses, 
 shops, and coal and wood yards, and such other works as are 
 necessary to the operation of the road,''* and it may build side 
 tracks to the establishments of large shippers as a power inciden- 
 tal to its expressly granted powers,*" and, under express power 
 to build a branch road, it may buy one already built. ^^ It is said 
 
 Island Co., 32 R. I. 162, 78 Atl. 
 548, 32 L. R. A. (N. S.) 695, Ann. 
 Cas. 1912C, 1283n. 
 
 T5 Chicago &c. R. Co. v. People, 
 56 111. 365, 8 Am. Rep. 690; Reagan 
 V. St. Louis &c. R. Co., 93 Mo. 348, 
 6 S. W. 371, 3 Am. St. 542; Cleve- 
 land &c. R. Co. V. Bartram, 11 
 Ohio St. 457. See. By-laws, Rules 
 and Regulations, . Chapter X, and 
 see Martin v: Rhode Island Co., 32 
 R. I. 162, 78 Atl. 548, 32 L. R. A. 
 (N. S.) 695, Ann. Cas. 1912C, 1283n, 
 where many cases are cited and 
 examples or illustrations are given 
 of rules held valid though adopted 
 for the protection of the company, 
 and not for the convenience of 
 passengers. 
 
 ''B Central R. &c. Co. v. Cheat- 
 ham, 85 Ala. 292, 4 So. 828, 7 Am. 
 St. 48, 37 Am. & Eng. R. Cas. 282. 
 
 7" I.inton V. Sharpsburg &c. Co., 
 1 Grant's Cas. (Pa.) 414. 
 
 ''s Slatten v. Des Moines &c. R. 
 Co., 29 Iowa 148, 4 Am. Rep. 205. 
 
 79 State V. Mansfield, 23 N. J. L. 
 510, 57 Am. Dec. 409 n; Nashville 
 &c. R. Co. V. Cowardin, 11 Humph. 
 (Tenn.) 348; Vermont Cent. R. Co. 
 V. Burlington, 28 Vt. 193. 
 
 so Chicago &c. R. Co. v. Porter, 
 43 Mmn. 527, 46 N. W. 75, 43 Am. 
 & Eng. R. Cas. 170; Getz's Appeal, 
 65 Pa. St. 1, 3 Am. & Eng. R. Cas. 
 186; Wilson v. Furness R. Co., L. 
 R. 9 Eq. Cas. 28. But see Pitts- 
 burg &c. R. Co. V. Benwood Iron 
 Works, 31 W. Va. 710, 8 S. E. 453, 
 2 L. R. A. 680 n, 36 Am. & Eng. 
 R. Cas. 531, where it is held that 
 a railroad company cannot exercise 
 the power of eminent domain to 
 secure a right of way for a side 
 track to a steel mill, even where, 
 there is evidence that all who wish 
 to avail themselves of the proposed 
 switch for shipping purposes may 
 do so. 
 
 81 Branch v. Jessup, 106 U. S. 
 468, 484, 1 Sup. Ct. 175, 27 L. ed. 
 279; Central Trust Co. v. Washing- 
 ton County R. Co., 124 Fed. 813. 
 
95 
 
 CHARTERS 
 
 §53 
 
 that the burden is upon those asserting the fact to show that the 
 charter of a corporation authorizes it to take or convey lands,*^ 
 and those claiming such authority by implication must show that 
 it is necessary to the enjoyment of the franchises expressly 
 granted.*' The power to make contracts includes power to dis- 
 pose of securities received in the prosecution of the objects for 
 which the company is chartered.^* A railroad corporation has 
 implied authority to contract generally in the course of its legiti- 
 mate business, where not prohibited or restricted by some ex- 
 press provision of law.*^ Thus, it may make proper traffic 
 arrangements with other companies*® and permit them to use its 
 terminals.*'^ It may borrow money, and give negotiable notes,** 
 or issue or guarantee bonds, to carry into effect the object of the 
 organization, but not, ordinarily, to aid independent enterprises.*® 
 
 82 Lumbard v. Aldrich, 8 N. H. 
 31, 28 Am. Dec. 381. 
 
 83 Renesselaer &c. R. Co. v. Davis, 
 43 N. Y. 137; New York Cent. R. 
 Co., In re, 66 N. Y. 407. 
 
 84Chicago &c. R. Co. v. Howard, 
 7 Wall. (U S) 392, 412. 
 
 85 Chicago &c. R. Co. v. Howard, 
 7 Wall. (U. S.) 392, 19 L. ed. 117; 
 Mobile &c. R. Co. v. Talman & 
 Ralston, IS Ala. 472; Arrington v. 
 Savannah &c. R. Co., 95 Ala. 434, 
 11 So. 7; Pixley v. Western Pac. 
 R. Co., 33 Cal. 183, 91 Am. Dec. 
 623; Chattanooga &c. R. Co. v. 
 Davis, 89 Ga. 708, IS S. E. 626; 
 Racine &c. R. Co. v. Farmers' &c. 
 R. Co., 49 111. 331, 9S Am. Dec. S9S; 
 Philadelphia &c. R. Co. v. Hick- 
 man, 28 Pa. St. 318. 
 
 86 Sussex &c. R. Co. v. Morris 
 &c. R. Co., 19 N. J. Eq. 13; Wheel- 
 er v. San Francisco &c. R. Co., 31 
 Cal. 46, 89 Am. Dec. 147; Perkins 
 V. Portland &c. R. Co., 47 Maine 
 573, 74 Am. Dec. 507; Manchester 
 &c. R. Co. V. Concord &c. R. Co., 
 66 N. H. 100, 20 Atl. 383, 49 Am. 
 
 St. 582; Stewart v. Erie &c. Co., 17 
 Mich. 372; Georgia &c. Co. v. Mad- 
 dox, 116 Ga. 64, 42 S. E. 315, 321, 
 citing text. 
 
 8T Miller v. Green Bay &c. R. 
 Co., 59 Minn. 169, 60 N. W. 1006, 
 26 L. R. A. 443. See also Union 
 Pac. R. Co. V. Chicago &c. R. Co., 
 163 U. S. 564, 16 Sup. Ct. 1173, 41 
 L. ed, 265, and Georgia &c. Co. v. 
 Maddox, 116 Ga. 64, 42 S. E. 315, 
 321, citing text. 
 
 83 Chicago &c. R. Co. v. Howard, 
 7 Wall. (U. S.) 392, 19 L. ed. 117; 
 White Water Canal Co. v. Vallette, 
 21 How. (U. S.) 414, 16 L. ed. 154; 
 Branch v. Atlantic &c. R. Co., 3 
 Woods (U. S.) 481, Fed. Cas. No. 
 1807; Wood v. Whelen, 93 111. 153. 
 
 89 Cases cited in last preceding 
 note; also Vanderveer v. Asbury 
 Park &c. R Co., 82 Fed. 355. Con- 
 tra, in England, Bateman v. Mid- 
 Wales R. Co., L. R. 1 C. P. 499. 
 It cannot, of course, guarantee 
 bonds merely to help others or the 
 like. Elevator Co. v. Memphis &c. 
 
§53 
 
 RAILROADS 
 
 96 
 
 It has been held to have no implied authority to grant an exclu- 
 sive right to use its cars for advertising purposes.^" Authority to 
 build a branch or lateral road implies power to condemn lands 
 for a right of way for such road,^^ and to construct a branch line 
 running in the same general direction as the main line, even 
 though it be built to connect with the main line of another 
 road,*2 and even, it has been held, to build a short elevated road 
 
 R. Co., 85 Tenn. 703, S S. W. 52, 
 4 Am. St. 798; Northside R. Co. v. 
 Worthington, 88 Tex. 562, 30 S. W. 
 1055, 53 Am. St. 778. See also 
 Western Md. R. Co. v. Blue Ridge 
 Hotel Co., 102 Md. 307, 62 Atl. 351, 
 2 L. R. A. (U. S.) 887 ii. 111 Am. 
 St. 362; Smead v. Indianapolis &c. 
 R. Co., 11 Ind. 104. But it can 
 guarantee bonds which it lawfully 
 owns in order to make them sal- 
 able and enhance their value to it. 
 
 :iO National Car Advertising Co. 
 V. Louisville &c. R. Co., 110 Va. 
 413, 66 S. E. 88, 24 L: R. A. (N. S.) 
 1010 n. But compare Burns v. St. 
 Paul City R. Co., 101 Minn. 363, 112 
 N. W. 412, 12 L. R. A. (N. S.) 7S7n 
 (not, however, deciding the exact 
 question); New York v. Interbor- 
 ough Rapid Transit Co., S3 Misc. 
 126, 104 N, Y. S. 157 (right to 
 have advertising signs and weigh- 
 ing machines in subway stations); 
 Fifth Ave. Coach Co. v. New York, 
 58 Misc. 401, 111 N. Y. 759; Pitts- 
 burgh &c. Trac. Co. v. Seidell, 6 
 Pa. Dist. R. 414. 
 
 9i Newhall v. Galena &c. R. Co., 
 14 111. 273. The right to "construct 
 such branches aa the directors may 
 deem necessary,'' conferred upon 
 a railroad corporation by its char- 
 ter gives it a continuing power of 
 branch building which is not taken 
 
 away by a subsequent act requiring 
 the company within a certain time 
 to complete its road "with one or 
 more tracks, sidings, depots and 
 appurtenances." Pittsburg &c. R. 
 Co. V. Pittsburg &c. R. Co., 159 
 Pa. St. .«1, 28 Atl. 155. 
 
 92 Blanton v. Richmond &c. R. 
 Co., 86 Va. 618, 10 S. E. 925, 43 
 Am. & Eng. R. Cas. 617; Howard 
 County V. Central Nat. Bank, 108 
 U. S. 314, 2 Sup. Ct. 689, 27 L. ed. 
 739. See also Baltimore &c. R. Co. 
 V. Waters, 105 Md. 396, 66 Atl. 685, 
 12 L. R. A. (N. S.) 326 n; Wheel- 
 ing Bridge &c. R. Co. v. Camden 
 &c. Co., 35 W. Va. 205, 13 S. E. 
 369. Where the charter of a rail- 
 road corporation empowers it to 
 build only one specified branch 
 road, another road, incorporated 
 under the laws of a diflferenl state, 
 though constructed and operated 
 by the first road, is not a "branch" 
 of such road within the meaning of 
 a deed reserving a right of way 
 over such premises in favor of such 
 road or any of its branches. Biles 
 v. Tacoma &c. R. Co., 5 Wash. St. 
 509, 32 Pac. 211. Where a railroad 
 company's charter expresslj' au- 
 thorizes it to build branch roads, 
 contracts entered into l)y it with a 
 construction company for the coii- 
 stniction of a projected branch 
 
97 
 
 CHARTERS 
 
 §54 
 
 from the original terminus of its route along a public landing.^* 
 A limitation as to the time within which the "works hereby re- 
 quired" shall be finished, will usually be held to apply only to 
 the building and equipping of the main line, and the building of 
 lateral roads will be understood to be optional with the com- 
 pany.®* 
 
 §54 (43). Amendment — Power must be reserved. — The char- 
 ter of a corporation constitutes a contract between the corporation 
 and the state, and is not subject to amendment or repeal,®^ unless 
 the right to alter or revoke is reserved.®® And it has been held 
 
 road are valid and may be en- 
 forced. Arrington v. Savannah &c. 
 R. Co, 95 Ala. 434, 11 So. 7. 
 
 83 McAboy's Appeal, 107 Pa. St. 
 548. And along and across streets. 
 Pittsburgh v. Pennsj'lvania R. Co., 
 48 Pa. St. 355. 
 
 'Ji Blanton v. Richmond &c. R. 
 Co., 86 Va. 618, 10 S. E. 925. But 
 see Newhall v. Galena &c. R. Co., 
 14 111. 273, where it is held that a 
 limitation or extension of time in 
 which to construct should, by in- 
 tendment, be applied to the lateral 
 or branch lines equally with the 
 main line of the road. Tn Com- 
 monwealth V. New York &c. R. 
 Co., 10 Pa. Co. Ct. 129, a railroad 
 and mining company was author- 
 ized by its charter to build a rail- 
 road or railroads from anj- lands 
 held by them to a certain railroad, 
 or to connect any two or more rail- 
 roads which might be constructed 
 bj" them in either or both of two 
 counties named. The court held 
 that the building of one road did 
 not exhaust the powers of the com- 
 pany, and that having built one 
 railroad and finding it unprofitable, 
 
 the building of another did not 
 operate to forfeit the company's 
 charter. 
 
 05 Dartmouth College v. Wood- 
 ward, 4 Wheat. (U. S.) 518, 4 L. 
 ed. 629; Piqua Branch Bk. v. 
 Kiioop, 16 How. (U. S.) 369, 14 L. 
 ed. 977; State v. Noyes, 47 Maine 
 189; Pennsylvania R. Co. v. Balti- 
 more &c. R. Co., 60 Md. 263;, 
 Thornton v. Marginal Freight R. 
 Co., 123 M.ass. 32; Ashuelot R. Co. 
 V. Elliott, 58 N. H. 451; Common- 
 wealth v. Erie &c. Co., 107 Pa. St. 
 112; Houston &c. R. Co. v. Texas 
 •tc. R. Co., 70 Tex. 649. See also 
 Pennsylvania R. Co. v. Miller, 132 
 U. S. 75, 10 Sup. Ct. 34, 33 L. ed. 
 267; Northern Pac. R. Co. v. Min- 
 nesota, 208 U. S. 583, 28 Sup. Ct. 
 341, 52 L. ed 630; Russell v. Sebas- 
 tian, 233 U. S. 195, 34 Sup. Ct. 517, 
 58 L. ed. 912, Ann. Cas. 1914 C, 
 1282; 1 Thomp Corp (2d ed.) §§ 
 313, 314, 370; Laird v. Baltimore 
 &c. R. Co., 121 Md. 179, 88 Atl. 
 348, 47 L. R. A. (N. S.) 1167 n. 
 
 ®6 The several states now pro- 
 vide by general laws or by consti- 
 tutional provisions that all charters 
 
 4 — Ell. Railroads I 
 
§54 
 
 RAILROADS 
 
 98 
 
 that an express reservation by the legislature of power to repeal 
 a charter can give no authority to take away or destroy property 
 
 granted shall be subject to altera- 
 tion, amendment and repeal, at the 
 discretion of the legislature. 1 
 Thomp. Corp. (2d ed.) § 402; 
 Greenwood v. Union Freight R. 
 Co., lOS U. S. 13, 26 L. ed. 961; 
 Mowrey v. Indianapolis &c. R. Co., 
 4 Biss. (U. S.) 78, Fed. Cas. No. 
 9891. See St. Louis &c. R. Co. v. 
 Ryan, 56 Ark. 245, 19 S. VV. 839; 
 Delaware R. Co. v. Tharp, 5 Harr. 
 (Del.) 454; New Orleans &c. Co. v. 
 Harris, 27 Miss. 517; New York El. 
 R. Co. In re, 70 N. Y. 327; Com- 
 monwealth V. Fayette &c. R. Co., 
 55 Pa. St. 452 ; New Jersey v. Lard, 
 95 U. S. 104; 8 Thomp. Corp., § 401, 
 et seq. Exemption from legislative 
 interference, given by charter, 
 "must appear by such clear and un- 
 mistakable language that it can not 
 be reasonably construed consist- 
 ently with the reservat'!on of the 
 power by the state." Georgia R. 
 &c. Co. V. Smith, 128 U. S. 174, 9 
 Sup. Ct. 47, 32 L. ed. Zll, 16 Wash. 
 L. 749. "The condition is implied 
 in every grant of corporate exist- 
 ence, that the corporation shall be 
 subject to such reasonable regula- 
 tions, in respect to the general con- 
 duct of its affairs, as the legislature 
 may from time to time prescribe, 
 which do not materially interfere 
 with or obstruct the substantial 
 enjoyment of the privileges the 
 state has granted, and serve only 
 to secure the ends for which the 
 corporation was created." Hill v. 
 Merchants' Mut. Ins. Co., 134 U. 
 S. 515, 10 Sup. Ct. 589, 33 L. ed. 
 
 994, 7 Rail. & Corp. L. J. 442; 
 Montclair Tp. v. New York &c. R 
 Co., 45 N. J. Eq. 436, 18 Atl. 242, 
 40 Am. & Eng. R. Cas. 342, 6 R. & 
 Corp. L. J. 385; Reed v. Gettysburg 
 &c. Assn., 129 Pa. St. 329, 18 Atl. 
 130, 24 W. N. C. 292. Exemption 
 from future general legislation, 
 either by a constitutional provision 
 or by an act of the legislature, 
 does not exist unless it is given ex- 
 pressly, or unless it follows by an 
 implication equally clear with ex- 
 press words. In the absence of 
 any prior contract exempting it 
 from liability to future general 
 legislation, a railroad corporation 
 takes its charter subject to the 
 general law of the state and to 
 such changes as may be made in 
 such general law, and subject to 
 future constitutional provisions 
 and future general legislation. Chi- 
 cago &c. R. Co. V. Minnesota, 134 
 U. S. 418, 10 Sup. Ct. 462, 702, 33 
 L. ed. 970, 41 Alb. L. J. 325, 2 
 Advo. 182, 42 Am. & Eng. R. Cas. 
 285. See also Citizens' St. R. Co. 
 V. Memphis, 53 Fed. 715; Pearsall 
 V. Great Northern R. Co., 161 U. S. 
 ,646, 16 Sup. Ct. 705, 40 L. ed. 838. 
 This rule applies to future general 
 legislation as to compensation for 
 property taken in the exercise of 
 eminent domain. Pennsylvania R. 
 Co. v. Miller, 132 U. S. 75, 10 Sup. 
 Ct. 34, 33 L. ed. 267; Pennsylvania 
 &c. R. Co. V. Duncan, 111 Pa. St. 
 353, 5 Atl. 742, 25 W. N. C. 1, 46 
 Phila. Leg. Int. 487. 
 
99 
 
 CHARTERS 
 
 §54 
 
 lawfully acquired or created under authority conferred by the 
 charter f nor to disturb, affect or impair vested rights either of 
 the corporation or of its shareholders.®® It has no power to make 
 any material or essential alteration in the contract between the 
 members themselves and the corporation; and therefore a new 
 charter obtained by the directors of a railroad company, without 
 the consent of the stockholders, changing the capital stock and 
 route, is not binding upon the stockholders.®® But the right of 
 
 ST People V. O'Brien, 111 N. Y. 
 1, IS N. E. 692, 19 N. Y. St. 173, 2 
 L. R. A. 255, 7 Am. St. 684. See 
 also 1 Thomp. Corp. (2cl ed.) § 341. 
 But see Greenwood v. Union 
 Freight R. Co., 105 U. S. 13, 26 L. 
 ed. 961; Close v. Glenwood Cem- 
 etery, 107 U. S. 466, 2 Sup. Ct. 267, 
 27 L. ed. 408. And compare Orr v. 
 Bracken County, 81 Ky. 593; San 
 Mateo V. Southern &c. R. Co., 8 
 Sawy. (U. S.) 238, 279; New Or- 
 leans &c. Co. V. Harris, 27 Miss. 
 517; Black v. Delaware &c. Co., 24 
 N. J. Eq. 456. 
 
 98 Hill V. Glasgow R. Co., 41 
 Fed. 610; Knoxville v. Knoxville 
 &c. R. Co., 22 Fed. 758; Bryan v. 
 Board, 90 Ky. 322, 13 S. W. 276, 7 
 R. & Corp. L. J. 389 ; Detroit v. De- 
 troit Sic Co., 43 Mich. 140, 5 N. W. 
 275; Troy &c. R. Co. v. Kerr, 17 
 Barb. (N. Y.) 581; Kenosha &c. R. 
 Co. V. Marsh, 17 Wis. 13. See gen- 
 erally Cleveland v. Cleveland City 
 R. Co., 194 U. S. 517, 24 Sup. Ct. 
 756, 48 L. ed. 1102; Union Pac. R. 
 Co. V United States, 99 U. S. 700, 
 25 L. ed. 496; Lewis v. Northern 
 Pac. R. Co , 36 Mont. 207, 92 Pac. 
 469: Lawrence v. Rutland R. Co., 
 80 Vt. 370, 67 Atl. 1091, IS L. R. 
 A. (N. S.) 350 n, 13 Ann. Cas. 475. 
 
 "After vested rights have been ac- 
 quired, the charter of a corpora- 
 tion can not be so amended as to 
 impair them, unless the power to 
 amend or repeal is expressly re- 
 served; but where the original and 
 amendatory acts are passed at the 
 same session of the legislature, 
 with only a brief interval between, 
 during which there is no accept- 
 ance of the provisions of the orig- 
 inal act and no rights are acquired 
 thereunder, the amendatory act is 
 valid." Cincinnati &c. R. Co. v. 
 Clifford, 113 Ind. 460, IS N. E. 524; 
 Nashville Co. v. State, 96 Tenn. 
 249, .34 S; W. 4. 
 
 99 Snook V. Georgia Imp. Co., 83 
 Ga. 61, 9 S. E. 1104, 38 Am. & Eng. 
 R. Cas. 492. See also Looker v. 
 Maynard, 179 U. S. 46, 21 .Sup. Ct. 
 21, 45 L. ed. 79; Laird v. Baltimore 
 &c. R. Co., 121 Md. 179, 88 Atl. 348, 
 47 L. R. A. (N. S.) 1167 n, Ann. 
 Cas. 1915 B, 728 n; New Orleans 
 &c. R. Co. V. Harris., 27 Miss. 517; 
 Zabriskie v. Hackensack &c. R, 
 Co., 18 N. J. Eq. 178, 90 Am. Dec. 
 617; Mills v. Central R. Co., 41 N. 
 J. Eq. 1. 2 Atl. 453; State v. North- 
 ern Pac. R. Co., 157 Wis. 73, 147 
 N. W. 219. 
 
§ 54 RAILROADS 100 
 
 the state to amend the charter of a railroad company is not 
 abridged or affected by executory contracts between the company 
 and a construction company, and between the latter and subcon- 
 tractors, touching the construction and equipment of the road; 
 for all parties contracting with a corporation must take notice of 
 the conditions on which it holds its franchises, and of its sub- 
 jection to the legislative will.^ Where a special charter contain- 
 ing no provision for its amendment is granted to a railroad com- 
 pany while an act is in force declaring that the charter of every 
 corporation created under a general law, and every charter 
 granted by act of the general assembly, unless sUch act declares 
 the contrary, is subject to amendment^ it has been held that the 
 general assembly may impose upon such railroad, in common 
 with others, the burden of paying the salary and expenses of a 
 state officer to whom is given the supervision of the railroads of 
 the state. 2 It may also impose upon the railway company the 
 duty of constructing and maintaining bridges on the line of high- 
 ways across rights of way which it has merely graded without 
 laying the rails.* Such amendments may be made by the enact- 
 ment of a general railroad act which applies to the specially char- 
 tered corporation.* A charter granting to a railway company the 
 privilege of choosing its own route between two places may be 
 amended by requiring it to pass through an intermediate point, 
 even after its route has been located and contracts have been let 
 for its construction.^ And it is held that a change of a charter 
 within a month after it was granted, so as to make the corpora- 
 tion lialDle to pay a certain percentage of its gross receipts from 
 the operation of a street railroad, instead of fifty dollars per car, 
 
 I Macon &c. R Co. v. Gibson, 8.S * Montclair v. New York &c. R. 
 
 Ga. 1, 11 S. E..442, 21 Am. St. 135, Co., 45 N. J. Eq. 436, 18 Atl. 242, 
 
 43 Am. & Eng. R. Cas. 318. 6 R. & Corp. L. J. 385, 40 Am. & 
 
 -' Charlotte &c. R. Co. v. Gibbes Eng. R. Cas. 342; Pearsall v. Great 
 
 27 S. Car. 385, 4 S. E. 49, 31 Am. & Northern R Co., 161 U. S. 646, 16 
 
 Eng. R. Cas. 464. Sup. Ct. 70S, 40 L. ed. 838. 
 
 3 Montclair v. New York &c. R. 5 See Macon &c. R. Co. v. Gib- 
 Co., 45 N. J. Eq. 436, 18 Atl. 242, son (Stamps), 85 Ga. 1, 11 S. E. 
 40 Am. & Eng. R. Cas. 342. 442, 43 Am. & Eng. R. Cas. 318. 
 
101 
 
 CHARTERS 
 
 §55 
 
 is within the general authority to alter a charter^ under the New 
 York statute." 
 
 § 55 (44). , Police regulations. — Even where no power to amend 
 the charter is reserved, the railroad company is still governed by 
 the principle that every owner of property, however absolute 
 and unqualified his title, holds it subject to the implied condition 
 that the use shall not be injurious to the public, and is amenable 
 to regulations prescribed under the police power of the state.'' 
 Thus, it has been held that railroad companies may be compelled 
 by statutes passed after their incorporation to fence their tracks,^ 
 to provide accommodations for their passengers, and the like.* 
 So, they may have imposed upon them a liability for setting fire 
 
 6 New York v. Twentj'-third 
 Street R. Co., 113 N. Y. 311, 21 N. 
 E. 60, 22 N. Y. St. 958, 5 R. & 
 Corp. L. J. 583. See also Chicago 
 &c. R. Co. V. Minnesota, 134 U. S. 
 418, 10 Sup. Ct. 462, 33 L. ed. 972, 
 and see and compare generally. Note 
 in L. R. A. 1915c, 277. Also 8 Thomp. 
 Corp. §§ 401, 412. 
 
 '' Power of state over railroads 
 as restricted by legislative char- 
 ters, 32 Cent. L. J. 181. See also 
 Franbarger v. Chicago &c. R. Co., 
 250 Mo. 46, 156 S. W. 694; People 
 V. Boston &c. R. Co., 70 N. Y. 569; 
 Nelson v. Vermont &c. R. Co., 26 
 Vt. 717, 62 Am. Dec. 614; Bacon v. 
 Boston &c. R. Co., 83 Vt: 421, 76 
 Atl. 128; Fair Haven &c. R. Co. 
 v. New Haven, 203 U. S. 379, 27 
 Sup. Ct. 74, 51 L. ed. 237, and cases 
 cited in following notes. 
 
 8 Wilder v. Maine Central R. Co., 
 65 Maine 332, 20 Am. Rep. 698; 
 Illinois Cent. R. Co. v. Willen- 
 borg, 117 111. 203, 7 N. E. 698^ 57 
 Am. Rep. 862; New Albany &c. R. 
 Co. V. Tilton, 12 Ind. 3, 74 Am. 
 Dec. 195; Thorpe v. Rutland &c. 
 
 R. Co., 27 Vt. 140, 148, 62 Am. Dec. 
 625. 
 
 9 State v. New Haven &c. R. Co., 
 43 Conn. 351; State v. Indiana &c. 
 R. Co., 133 lud. 69, 32 N. E. 817, 
 18 L. R. A. 502. To provide for 
 safety of employes, State v. Nel- 
 son, 52 Ohio St. 88, 39 N. E. 22, 
 26 L. R. A. 317; State v. Hoskins, 
 58 Minn. 35, 59 N. W. 545, 25 L. 
 R. A. 759, and note. To fence 
 tracks, stop trains at crossings, 
 slacken speed, post tariffs, charge 
 no more than a certain fixed rate, 
 etc.. Stone v. Farmers' &c. Co., 116 
 U. S. 307, 6 Sup. Ct. 334, 29 L. ed. 
 636; Smith v, Alabama, 124 U. S. 
 465, 8 Sup. Ct. 564, 31 L. ed. 508. 
 For other illustrations of the right 
 to exercise the police power see New 
 York &c. R. Co. v. Bristol, 151 U. 
 S. 556, 14 Sup. Ct. 437, 38 L. ed. 
 269; Wabash R. Co. v. Defiance, 
 167 U. S. 88, 17 Sup. Ct. 748, 42 
 L. ed. 87; New York &c. R. 
 Co. v. Bridgeport Traction Co., 
 65 Conn. 410, 32 Atl. 953, 29 L. R. 
 A. 367. 
 
§56 
 
 RAILROADS 
 
 102 
 
 to property along their right of way.^" Other illustrations and a 
 fuller treatment of this subject will be found elsewhere.^^ 
 
 §56 (45). Material amendments require unanimous consent of 
 stockholders — What are material. — It is a general rule that fun- 
 damental and material amendments cannot be made by the direc- 
 tors or majority stockholders so as to bind the minority stock- 
 holders without their consent. Such amendments require the 
 unanimous consent of the stockholders, and cannot be made by 
 the majority stockholders under general laws authorizing -the 
 filing of amended articles of association unless the minority 
 stockholders consent.i^ But immaterial amendments, or those 
 for the benefit of the corporation and in furtherance of its orig- 
 inal purposes, may usually be made or accepted by a majority of 
 the stockholders.^* It is difficult to formulate any general rule 
 
 10 Rodemacker v. Milwaukee &c. 
 R. Co., 41 Iowa 297, 20 Am. Rep. 
 592; Grisisell v. Housatonic &c. R. 
 Co., 54 Conn. 447, 9 Atl. 137, 1 Am. 
 St. 138, 32 Am. & Eng. R. Cas. 
 349; Lyman v. Boston &c. R. Co., 
 4 Cush. (Mass.) 288. 
 
 11 See chapter on State Control." 
 
 12 Printing House v. Trustees, 
 104 U. S. 711, 26 L. ed. 902; Mow- 
 rey v. Indianapolis &c. R. Co., 4 
 Biss. (U. S.) 78, Fed. Cas. No. 
 9891; Sparrow v. Evansville &c. R. 
 Co., 7 Ind. 369; New Orleans &c. 
 R. Co. V. Harris, 27 Miss. 517; 
 Union Locks &c. Canals v. Towne, 
 1 N. H. 44, 8 Am. Dec. 32; Hart- 
 ford &c. R. Co. V. Croswell, 5 Hill 
 (N. Y.) 383; Marietta &c. R. Co. v. 
 Elliott, 10 Ohio St. 57. The au- 
 thorities are collected in the elabo- 
 rate note to Commonwealth v. Cul- 
 len, 13 Pa. 133, S3 Am. Dec. 450, 
 462, and in Perkins v. Coffin, 84 
 Conn. 275, 79 Atl. 1070, Ann. Cas. 
 1912C, 1188 n. See also Sage v. Dil- 
 
 lard, 15 B. Mon. (Ky). 340. 1 Thomp. 
 Corp. (2d ed.) §§ 346, 378, 382 
 (where it is also shown that even 
 the legislature can not force a ma- 
 terial amendment upon the stock- 
 holders). 
 
 IS Chicago Life Ins. Co. v. 
 Needles, 113 U. S. 574, 5 Sup. Ct. 
 681, 28 L. ed. 1084; Winter v. Mus- 
 cogee R., 11 Ga. 438; Board v. Mis- 
 sissippi &c. R. Co., 21 111. 338; Fry 
 V. Lexington &c. R. Co., 2 Mete. 
 (Ky.) 314, 322; Agricultural &c. R. 
 Co. V. Winchester, 13 Allen 
 (Mass.)- 29; Gifford v. New Jersey 
 R. Co., 10 N. J. Eq. 171; Troy &c. 
 R. Co. V. Kerr, 17 Barb. (N. Y.) 
 581; Buffalo &c. R. Co. v. Dudley, 
 14 N. Y. 336; Poughkeepsie &c. Co. 
 V. Griffin, 24 N. Y. ISO; Cross v. 
 Peach Bottom R. Co., 90 Pa. St. 
 .392; Rutland &c. R. Co. v. Thrall, 
 35 Vt. 536; Stevens v. Rutland &c. 
 R. Co., 29 Vt. 545; 1 Thomp. Corp. 
 (2d. ed.), §§ 379, 384. Contra, Cen- 
 tral R. Co. V. Collins, 40 Ga. 582, 
 
103 
 
 CHARTERS 
 
 §56 
 
 for determining What are material amendments and what are im- 
 material. But it may be said, with a reasonable degree of accu- 
 racy, that an amendment that changes the rights of the stock- 
 holders inter se, alters the original object of the corporation, or 
 adds to or restricts its franchises, rights and powers in such a 
 manner as to increase the liabilities of the stockholders or de- 
 prive them of vested rights, is material and requires the consent 
 of all the stockholders,!* while an amendment which merely 
 clothes the corporation with such additional immunities and priv- 
 ileges as are strictly in furtherance of the original design, without 
 substantially adding to or restricting the same and without ma- 
 terially affecting the rights of the stockholders inter se, may be 
 regarded as immaterial and accepted by a majority of the stock- 
 holders. ^^ It is held in some cases that extensive changes may 
 
 617; Zabriskie v. Hackensack &c. R. 
 Co., 18 N. J. Eq. 178, 90 Am. Dec. 
 617. See also 8 Thomp. Corp. §§ 379, 
 386. 
 
 14 Witter V. Mississippi &c. R. 
 Co., 20 Ark. 463; Middlesex Turnp. 
 Co. V. Locke, 8 Mass. 268; Hester 
 V. Memphis &c. R. Co., 32 Miss. 
 378. Changing course and termini 
 of railroad, Marietta &c. R. Co. v. 
 Elliott, 10 Ohio .St. 57; Manhcim 
 &c. Co. V. Arndt, 31 Pa. St. 317; 
 Stevens v. Rutland &c. R. Co., 29 
 Vt. S4S. Consolidation, Botts v. 
 Simpsonville &c. Co., 88 Ky. 54, 10 
 S. W. 134, 2 L. R. A. 594; Pearce 
 V. Madison &c. R. Co., 21 How. (U. 
 S.) 441, 16 L. ed. 184. Division 
 into two corporations, Board v 
 Mississippi &c. R. Co., 21 111. 338 
 McCray v. Junction R. Co., 9 Ind, 
 358: Indiana &c. Turnp. Co. v. 
 Phillips, 2 Pen. & W. (Pa.) 184, 
 Changing purpose, Hartford &c. R. 
 Co. V Croawell, 5 Hill (N. Y.) 383; 
 Ashton V Burbank, 2 Dill. (U. S.) 
 435, F«d. Cas. No. 582. See also 
 
 Thomas v. Railroad Co., 101 U. S. 
 71, 25 L. ed. 950; Mahan v. Wood, 
 44 Cal. 462; Oldtown &c. R. Co. v. 
 Veazie, 39 Maine 571; Black v. 
 Delaware &c. Co., 24 N. J. Eq. 455. 
 15 Perkins v. Coffin, 84 Conn. 275, 
 79 Atl. 1070, Ann. Cas. 1912 C, 1188, 
 and note. Extending time for com- 
 pletion of road, Agricultural 
 Branch R. Co. v. Winchester, 13 
 Allen (Mass.) 29; Taggart v. West- 
 ern R. Co. 24 Md. 563, 89 Am. Dec. 
 760 n; San Antonio v. Jones, 28 
 Tex. 19. Changing name of cor- 
 poration, Buffalo &c. R. Co. v. 
 Dudley, 14 N. Y. 336; Bucksport 
 &c. R. Co. V. Buck, 68 Maine 81; 
 Milwaukee &c. R. Co. v. Field, 12 
 Wis. 340. Slight changes in the 
 route or branch in some direction • 
 where the general interests of the 
 corporation and the rights of the 
 stockholders are not affected there- 
 by, Peoria &c. R. Co. v. Preston, 
 35 Iowa 115; Fry v. Lexington &c. 
 R. Co., 2 Mete. (Ky.) 314, 323; 
 Irwin v. Turnpike Co., 2 Pen. & 
 
§56 
 
 RAILROADS 
 
 104 
 
 be made or accepted by the majority in the organization and 
 objects of the corporation, provided they do not destroy its dis- 
 tinctive features or substitute an entirely different purpose ;i® 
 but some of these cases, as is clearly demonstrated by Judge 
 Thompson^'' and Mr. Morawetz,!^ are unsound in principle and 
 contrary to the weight of authority. It is also said that the 
 question of the materiality of an amendment must depend upon 
 the peculiar facts and circumstances of the particular case;^^ 
 but, while this is doubtless true to some extent, and in a limited 
 
 W. (Pa.) 466, 23 Am. Dec. S3. See 
 also Willson v. Wills Valley R. 
 Co., 33 Ga. 466; Hazelett v. Butler 
 University, 84 Ind. 230; Midland 
 &c. R. Co. V. Gordon, 16 Mees. & 
 W. 804; leading article in 16 Am. 
 Law Rev. 101, by W. H. Whitaker: 
 and note in S3 Am; Dec. 465. 
 
 1" Changes in the governing body 
 and organization. Commonwealth 
 V. Cullen, 13 Pa. St. 133, S3 Am. 
 Dec, 450: Mower v. Staples, 32 
 Minn. 284, 20 N. W. 225. Changes 
 in the purpose, and the like. Pacific 
 R. Co. V. Hughes, 22 Mo. 291, 64 
 Am. Dec. 265 n; Delaware R. Co. 
 V. Tharp, 1 Houst. (Del.) 149, 174; 
 Martin v. Pensacola &c. R. Co., 8 
 Fla. 370, 73 Am. Dec. 713; Pacific 
 R. Co. V. Renshaw, 18 Mo. 210. 
 Changes in route and termini of 
 railroad, Banet v. Alton &c. R. Co., 
 13 111. 504; Looker v. Maynard, 179 
 U. S. 46, 21 Sup Ct. 21, 45 L. ed. 
 79; Polk V. Mutual Reserve &c. 
 Assn., 207 i;. S. 310, 326, 28 Sup. Ct. 
 65, 52 L. ed. 229; Peoria &c. R. Co. 
 V Elting, 17 111. 429; Ross v. Chi- 
 cago vSjc. R. Co., 77 111. 127. Con- 
 solidation, Sprague v. Illinois &c. 
 R. Co., 19 111. 174. Purchase of 
 other roads, Venner v. Atchison 
 
 &c. R. Co., 28 Fed. 581. See also 
 Willson V. Wills Valley R. Co., 33 
 Ga. 466; Rice v. Rock Island &c. 
 R. Co., 21 111. 93; Hanna v. Cincin- 
 nati &c. R. Co., 20 Ind. 30; Wor- 
 cester V. Norwich &c. R. Co., 109 
 Mass. 103; Troy &c. R. Co. v. Kerr, 
 17 Barb. (N Y.) 581; Lord v. 
 Equitable L. Assur. Soc, 194 N. Y. 
 212, 87 N. E. 443, 22 L. R. A. (N. 
 S.) 420 n; Greenville &c. R. Co. v. 
 Coleman, 5 Rich. L. (S. Car.) 118. 
 Alterations or amendments which do 
 not change the nature, purpose or 
 character of the corporation or its 
 enterprise, and do not impair the 
 obligation of a contract, but which 
 are designed to enable the corpora- 
 tion to conduct its authorized busi- 
 ness with greater facility, more ben- 
 eficially, or more wisely, are regarded 
 as auxiliary to the original object. 1 
 Thomp. Corp. (2d. ed.), § 379. 
 
 17 1 Thomp. Corp. (1st ed.) §§ 
 72, 73. 
 
 18 1 Morawetz Priv. Corp. § 402. 
 
 19 Whitter v, Mississippi &c. R. 
 Cc, 20 Ark. 463. See also Wright 
 v. Minnesota &c. Ins. Co., 193 U. 
 S. 6S7, 24 Sup. Ct. 549, 48 L. ed. 832. 
 
 2'i Memphis Branch R. Co. v. 
 Sullivan, 57 Ga. 240; Witter v. Mis- 
 
105 
 
 CHARTERS 
 
 §57 
 
 sense, there must be some general rule by which the courts shall 
 be guided, for the question is one of law for the court to deter- 
 
 mine.^** 
 
 § 57 (46). Statutory provisions authorizing amendments. — 
 
 Provision is made in the various states for the amendments of the 
 charters granted under the various general railroad acts, by the 
 voluntary act of the corporation, when it is desirable to increase 
 the amount of its capital stock, or the number of its directors, or 
 to change its route, or termini. ^^ But not every change in the fun- 
 damental law of a corporation is an amendment. Where the 
 alteration by the legislature is very material, the act may be con- 
 strued as the grant of a new charter, if such an intention appears 
 on the part of the legislature, and by accepting it the company 
 will be held to have surrendered its rights and contracts under 
 the original charter.^^ The legislature has, in every state, a cer- 
 
 sissippi &c. R. Co., 20 Ark. 463. But 
 see Southern &c. Co. v. Stevens, 87 
 Pa. St. 190 
 
 21 Where a charter is amended, un- 
 der the' Tennessee act, so ast to 
 change the starting point of a rail- 
 road, the change will not be effected 
 unless such amendment is registered 
 where the charter was originally 
 required to be registered. Ander- 
 son V. Middle &c. R. Co., 91 Tenn. 
 44, 17 S. W. 803, 52 Am. & Eng. R. 
 Gas. 149. 
 
 22 Shook V. Improvement Co., 83 
 Ga. 61, 9 S. E. 1104, 38 Am. & 
 Eng. R. Cas. 492. This was a case 
 in which, after the incorporation 
 of the A. & H. Co., under the gen- 
 eral railroad law, the legislature 
 passed an act entitled "An act to 
 incorporate the A. & H. R. Co., 
 to confer certain powers and privi- 
 leges on s^id company, and for 
 other purposes." The corporators 
 named in the act were not alto- 
 
 gether the same as those to whom 
 the original charter was granted, 
 and the act stated that "they are 
 hereby created a body politic and 
 corporate," and gave them all 
 powers necessary to any railroad 
 company. Afterwards an amend- 
 ment to this act was passed, en- 
 titled "An. act to amend the char- 
 ter of the A. & H. R. Co., to 
 change the name thereof, * * * 
 to authorize the extension thereof, 
 * * * and for other purposes." 
 The last amendment gave the com- 
 pany a new name and, in the con- 
 struction of the extension, all the 
 powers granted by the act as first 
 amended. The court held that 
 these acts constituted a separate 
 and distinct charter, creating a new 
 corporation, and were not merely 
 amendments to the original char- 
 ter. Youngblood v. Improvement 
 Co., 83 Ga. 797, 10 S. E. 124. 
 
§58 
 
 RAILROADS 
 
 106 
 
 tain control over all corporations in the way of modifying the 
 charters under which they operate, but where an attempted en- 
 largement of corporate powers becomes indistinguishable from a 
 granting of new substantive rights, a statute attempting to give 
 such powers is within the purview of a constitutional amendment,, 
 prohibiting any private or local statute granting any exclusive 
 privileges or franchises to a corporation.^* 
 
 § 58 (47). Forfeiture — Statutory provisions dispensing with 
 judicial determination. — Provision is made in many charters for 
 their forfeiture upon failure of the corporation to comply with cer- 
 tain conditions imposed, as that it shall begin the construction of 
 its road within a certain time, and complete the road and put it in 
 operation before the expiration of a time limit or the like.^* 
 Such provisions appear in all the general acts for the incorpora- 
 tion of railroads.' Under some of the statutes the forfeiture will 
 take effect upon failure to comply with the conditions imposed.^^ 
 
 2^ Astor V. New York Arcade R. 
 Co., 113 N. Y. 93, 22 N. Y. St. 1, 
 20 N. E. S94, 2 L. R. A. 789 n,; 
 Braceville Coal Co. v. People, 147 
 111. 66, 35 N. E. 62, 22 L. R. A. 
 340, 37 Am. St. 206. 
 
 2* People V. New York Central 
 Underground R. Co., 137 N. Y. 606, 
 33 N. E. 744; Cluthe v. Evansville 
 &c. R. Co., 176 Ind. 162, 95 N. E. 
 543, Ann. Cas. 1914 A, 935 n. But 
 such a provision does not apply to 
 every sidetrack and switch which 
 the company may find necessary or 
 convenient to construct after the 
 road is put in operation. It is suf- 
 ficient if the main line is con- 
 structed and the road put in opera- 
 tion within the time limited. Ar- 
 eata V. Areata &c. R. Co., 92 Cal. 
 639, 28 Pac. 676. 
 
 2" See Brooklyn &c. R. Co., In 
 re, 72 N. Y. 245, 55 How. Prac. 14; 
 
 Brooklyn Steam Transit Co. v. 
 Brooklyn, 78 N. Y. 524. But com- 
 pare Day v. Ogdensburgh &c. R.. 
 Co., 107 N. Y. 129, 13 N. E. 765; 
 New York &c. Bridge Co. v. Smith,. 
 148 N. Y. 540, 42 N. E. 1088. A 
 railroad company buying, at fore- 
 closure sale, the franchise andi 
 property of another company 
 whose road-bed is not completed, 
 reorganizing under Laws N. Y., 
 1874, ch. 430, which provide that 
 such reorganization shall become 
 and be vested with all the rights, 
 privileges and franchises belonging 
 to the corporation owning the 
 property so sold, "and shall be 
 subject to all the provisions, duties 
 and liabilities imposed by the gen- 
 eral railroad act and its amend- 
 ments, except so far as * * * 
 inconsistent herewith, and with the 
 last named rights, privileges and 
 
107 
 
 CHARTERS 
 
 §58 
 
 -without judicial determination,^''' and the franchises may be re- 
 granted by the legislature to another corporation.^* But this, as 
 we shall hereafter show, is not the general rule, in the absence 
 ■of such a statute, for, unless otherwise provided, a mere cause 
 -of forfeiture is not ipso facto a forfeiture, but is simply ground 
 for a judicial determination and declaration of forfeiture.*® A 
 
 franchises;" but failing to complete 
 the railroad within the time lim- 
 ited by the general railroad act 
 and amendments under which the 
 -company owning the property re- 
 ceived its charter, may lose its 
 charter at suit of the attorney-gen- 
 eral, under code Civil Proc. N. Y., 
 § 1798 et seq. Attorney-General, 
 In re, SO Hun 511, 2 N. Y. S. 684. 
 
 27 Oakland R. Co. v. Oakland &c. 
 ■R. Co.. 45 Cal. 365, 13 Am. Rep. 
 181; State v. St. Paul &c. R. Co., 
 35 Minn. 222, 224, 28 N. W. 245; 
 Brooklyn Steam Tr. Co. v. Brook- 
 lyn,' 78 N. Y. 524; Bywaters v. 
 Paris &c. R. Co., 73 Tex. 624, 11 S. 
 "W. 8.'i6. And this is so, even 
 though the construction of the 
 ■projected road is actually begun 
 within the time, by a lessee. Brook- 
 lyn &c. R. Co., In re, 72 N. Y. 
 245, 75 N. Y. 335, 19 Hun 314, 55 
 How. Prac. 14; Sulphur Springs 
 &c. R. Co. V. St. Louis &c. R. Co., 
 2 Tex. Civ. App. 650, 23 S. W. 
 1012. Contra Citizens' &c. R. Co. 
 v. Belleville, 47 111. App. 388. See 
 ■generally Atchison St. R. Co. v. 
 TSTave, 38 Kans. 744, 17 Pac. 587, 5 
 Am. St. 800, and note thereto. 
 
 28 United States v. Grundy, 3 
 Cranch (U. S.) 337, 351, 2 L. ed. 
 459; Oakland R. Co. v. Oakland &c. 
 R. Co., 45 Cal. 365, 13 Am. Rep. 
 181; State v. Clinton, &c. R. Co. 
 
 4 Rob. (La.) 445; Sturges v. Van- 
 derbilt, 73 N. Y. 384; Brooklyn &c. 
 Co. V. Brooklyn, 78 N. Y. 524; 
 Brooklyn &c. R. Co., In re, 72 N. 
 Y. 245, 75 N. Y. 335, 19 Hun 314, 
 55 How. Prac. 14; Kennedy v. 
 Strong, 14 Johns. (N. Y.) 128; La- 
 Grange &c. R. Co. V. Rainey, 7 
 Coldw. (Tenn.) 420. 
 
 23 Thus, in Brooklyn &c. Co. v. 
 Brooklyn, 78 N. Y. 524, 529, it is 
 said: "The general principle is not 
 disputed that a corporation, by 
 omitting to perform a duty im- 
 posed by its charter, or to com- 
 ply with its provisions, does not 
 ipso facto lose its corporate char- 
 acter or cease to be a corporation, 
 but simply exposes itself to the 
 hazard of being deprived of its cor- 
 porate character and franchises by 
 the judgment of the court m an 
 action instituted for. that purpose 
 by the attorney-general in behalf 
 of the people; but it can not be 
 denied that the legislature has the 
 power to provide that a corpora- 
 tion may lose its corporate exist- 
 ence without the intervention of 
 the courts by any omission of duty 
 or violation of its charter, or de- 
 fault as to limitations imposed, and 
 whether the legislature has intend- 
 ed so to provide in any case de- 
 pends upon the construction of the 
 language used." Many authorities 
 
59 
 
 RAILROADS 
 
 108 
 
 condition to insure the speedy construction of the road is for 
 the benefit of the public, and the general rule is that a forfeiture 
 for non-compliance with such condition can be enforced only by 
 the public authorities. A stockholder cannot take advantage of 
 it,*° nor can any advantage be taken of it in any collateral ac- 
 tion. ^i Thus, it is held that such non-compliance cahnot be made 
 available to defeat condemnation proceedings instituted by the 
 company,^^ nor can a landowner take advantage of it in support 
 of a suit to eject the company from land over which the road has 
 been built.^* 
 
 § 59 (48). Implied condition that corporate franchise is subject 
 to forfeiture — ^Judicial determination — Causes for forfeiture. — 
 
 Where no condition is expressed in the charter, there is, neverthe- 
 less, an implied condition annexed to every grant of corporate 
 powers, that they shall be subject to forfeiture for willful misuser 
 or non-user in regard to matters which go to the essence of the 
 contract between the corporation and the state. ^* Such a for- 
 
 are collected, cited and reviewed in 
 the note to State v. Atchison &c. 
 R. Co. (24 Nebr. 143), 8 Am. St. 
 164, 193 et seq, and in Cluthe v. 
 Evansville &c. R. Co., 176 Ind. 162, 
 95 N. E. 543, Ann. Cas. 1914 A, 
 935 11, and see post, §§ 59, 63. 
 
 30 Antonio v. Jones, 28 Tex. 19. 
 See also People v. Ulster &c. R. 
 Co., 128 N. Y. 240, 28 N. E. 635, 
 60 Am. & Eng. R. Cas. 558, and 
 note; People v. North River &c. 
 Co., 121 N. Y. 582, 24 N. E. 834, 9 
 L. R. A. 33 n, 18 Am. St. 843, 32 
 Am. & Eng. Corp. Cas. 149; Hinch- 
 man v. Philadelphia &c. Co., 160 
 Pa. St. 150, 28 Atl. 652. 
 
 31 Hodges v. Baltimore &c. R. 
 Co., 58 Md. 603; Brooklyn El. R. 
 Co., In re, 125 N. Y. 434, 26 N. E. 
 479, 57 Hun 590, 11 N. Y. S. 161. 
 See also Central &c. R. Co. v. Peo- 
 ple, 5 Colo. 39. 
 
 32 Brooklyn El. R. Co., In re, 125 
 N. Y. 434, 24 N. .E. 834, 57 Hun 
 590, il N. Y. S. 161. See aLso Dis- 
 mal Swamp R. Co. v. John L. 
 Rofer Lumber Co., 114 Va. 537, 11 
 S. E. 598, Ann. Cas. 1914 C, 641 n. 
 
 3^ Cincinnati &c. R. Co. v. Clif- 
 ford, 113 Ind. 460,' 15 N. E. 524; 
 Bravard v. Cincinnati &c. R. Co., 
 lis Ind. 1, 17 N. E. 183. 
 
 31 Edgar Collegiate Ingt. v. 
 Hai-dy, 142 111. 363, 32 N. E. 494; 
 State V. Minnesota Cent. R. Co., 
 36 Minn. 246, 30 N. W. 816, 29 Am. 
 & Eng. R. Cas. 440, and note; State 
 V. .Atchison &c. R. Co., 24 Nebr. 
 143, 38 N. W. 43, 8 Am. St. 164, 
 and note on page 180; People v. 
 Broadway R. Co., 126 N. Y. 29. 26 
 N. E. 961, 48 Am. & Eng. R. Cas. 
 692, and authorities there cited; 
 People V. Milk Exchange, 133 N. 
 Y. 565, 30 N. E. 850; New York 
 
109 
 
 CHARTERS 
 
 §59 
 
 feiture can, ordinarily, be declared only by decree of some com- 
 petent judicial tribunal in proceedings instituted by the sovereign 
 or its representative for that purpose.*^ To cause a forfeiture 
 under the implied condition that the franchise shall be used for 
 the purposes for which it was granted, there must be either an 
 assumption of privileges not conferred by the charter,^^ a willful 
 abuse of corjjorate powers, or an improper neglect to perform 
 duties imposed.*^ Each duty assigned by the act of incorporation 
 has been held to be a condition annexed to the grant of the fran- 
 
 Elec. Lines Co. v. Empire' City 
 Subway Co., 235 U. S. 179, 35 Sup. 
 Ct. 72, Ann. Cas. 1915A, 906 n; 1 
 Thomp. Corp. (2cl ed.) § 6528. 
 
 35 Chicago Life Ins. Co. v. Nee- 
 dles, 113 U. S. 574, 5 Sup. Ct. 681, 
 28 L. ed. 1084; State v. Mississippi 
 &c. R. Co., 20 Ark. 495; Darnell v. 
 State, 48 Ark. 321, 3 S. W. 365; 
 Board &c. v. Hall, 70 Ind. 469, 472; 
 Hasselman v. United States Mort- 
 gage Co., 97 Ind. 365, 368; Dyer v. 
 Walker, 40 Pa. St. 157; Vermont 
 &c. R. Co. V. Vermont Cent. R. Co., 
 34 Vt. 1, 57; 1 Thomp. Corp. (2d 
 ed.) § 6520. Neither a stockholder, 
 a corporate creditor nor one hav- 
 ing a private controversy with the 
 company can institute the suit. 
 North V. State, 107 Ind. 356, 8 N. 
 E. 159; Gaylord v. Fort Wayne &c. 
 R. Co., 6 Biss. (U. S.) 286, Fed. 
 Cas. No. 5284: Folger v. Colum- 
 bian &c. Ins. Co., 99 Mass. 267, 96 
 Am. Dec. 747 n; W«st Jersey &c. 
 Co. V. Camden &c. R. Co., 52 N. J. 
 Eq. 452, 29 Atl. 333; Moore v. 
 Brooklyn &c. R. Co., 108 N. Y. 98, 
 IS N. E. 191 ; Pickett v. Abney, 84 
 Tex. 645,. 19 S. W. 859. See also 
 Commonwealth v. Germantown R. 
 Co., 20 Pa. St. 518; Western Penna. 
 
 R. Co.'s Appeal, 104 Pa. St. 399; 
 note in 8 Am. St. 198, 199. 
 
 se People v. Utica Ins. Co., 15 
 Johns. (N. Y.) 358, 8 Am. Dec. 243. 
 
 3T People v. Kingston &c. R. Co., 
 23 Wend. (N. Y.) 193, 35 Am. Dec. 
 551; Central &c. R. Co. v. People, 
 5 Colo. 39, 46; Attorney-General v. 
 Erie &c. R. Co., 55 Mich. 15, 22, 
 20 N. W. 696; S Thomp. Corp. (2d. 
 ed.), § 6528; note to State v. 
 Atchison &c. R. Co., 24 Nebr. 143, 
 38 N. W. 43, 8 Am. St. 164, 183. 
 Under Rev. Stat. Ohio, § 6789, a 
 suit to oust a corporation from its 
 franchise for misuser must be 
 brought within five years from the 
 date of commission of the offense. 
 State V. Pittsburgh &c. R. Co., SO 
 Ohio St. 239, 33 N. E. 1051. An 
 allegation that the company in- 
 tends at some time in the future 
 to neglect the performance of its 
 duties to the public, and does not 
 in good faith intend to carry out 
 the objects of the incorporation, is 
 insufficient. State v. Martin, 51 
 Kans. 462, 33 Pac. 9, 60 Am. & 
 Eng. R. Cas. 567; Commonwealth 
 V. Pittsburgh &c. R. Co., 58 Pa. 
 St. 26. 
 
§60 
 
 RAILROADS 
 
 110 
 
 chise conferred.*^ One such act or neglect may be sufficient to 
 justify a forfeiture if tending to mischievous consequences;^^ but 
 the ordinary rule is that acts, to have that effect, must be willful 
 and repeated.*^ Slight deviations from the provisions of a charter, 
 especially when arising from accident or mistake,*^ or from the 
 unauthorized acts of the company's servants,*^ will not neces- 
 sarily cause a forfeiture, unless the franchises are made to depend 
 upon a strict and literal performance,*^ for a substantial perform- 
 ance of conditions imposed is all that is ordinarily required.** 
 An abuse of one department of a franchise may, however, cause a 
 forfeiture of the entire franchise.*^ 
 
 § 60 (49) . Grounds of forfeiture — Illustrative cases. — Failure 
 to run regular trains sufficient for the accommodation of the pub- 
 lic,** even where the company possesses and continues to exercise 
 
 38 People V. Kingston Turnpike 
 R Co., 23 Wend. (N. Y.) 193, 35 
 Am. St. 551. 
 
 38 Attorney-General v. Peters- 
 burg R. Co., 6 Ired. (N. Car.) 456; 
 People V. Brisitol &c. Co., 23 Wend. 
 (N. Y.) 222, 245; Commercial Bank 
 of Nachez v. State, 6 S. & M. 
 (Tenii.) 599, 623. 
 
 *o Harris v. Mississippi Valley R. 
 Co., 51 Miss. 602; State v. Pipher, 
 28 Kans. 127, 131; State v. Council 
 Bluffs &c. Co., U Nebr. 354, 356, 9 
 N. W. 563; State v. Royalton &c. 
 Co., 11 Vt. 431. The mere failure 
 to run trains for five days, not 
 shown to have been willful or neg- 
 ligent, has been held insufficient 
 cause for declaring a forfeiture. 
 People V. Atlantic &c. R. Co., 125 
 N. Y. 513, 26 N. E. 622, 48 Am. & 
 Eng. R. Cas. 688; 1 Thomp. Corp. 
 (2d ed.) §§ 6533, 6534. 
 
 *1S Thomp. Corp. (2d. ed.), §6534. 
 
 *- State V. Commercial Bank, 14 
 Miss. 218. 237. 
 
 *3 Eastern Archipelago Co. v. 
 Regina, 2 Ellis & B. 856, 22 Eng. 
 L. & Eq. 338. See generally 5 Thomp. 
 Corp. (2d. ed.), § 6523. 
 
 ** Chicago City R. Co. v. People, 
 73 111. 541; State v. Wood, 84 Mo. 
 378; People v. Thompson, 21 
 Wend. (N. Y.) 235; Thompson v. 
 People, 23 Wend. (N. Y.) 537; 
 Commonwealth v. Allegheny &c. 
 Co., 20 Pa. St. 185; 1 Thomp. Corp. 
 (2d ed.) § 6529. See also Harris 
 V. Mississippi &c. R. Co., 51 Miss. 
 602. 
 
 *5 People V Kankakee &c. Co., 
 103 111. 491; People v. Bristol &c. 
 T. Co., 23 Wend. (N. Y.) 222. 
 
 *(> State V. Minnesota Central R. 
 Co., 36 Minn. 246, 30 N. W. 816, 
 29 Am. & Eng. R. Cas. 440; People 
 V. Albany &c. R. Co., 24 N. Y. 261, 
 82 Am. Dec. 295; Silliman v. Fred- 
 ericksburg &c. R. Co., 27 Grat. 
 (Va.) 119. See State v; Railway 
 Co., 40 Ohio St. 504. 
 
Ill 
 
 CHARTERS 
 
 §60 
 
 other and secondary franchises,*'^ refusal of a railroad company 
 to run pa:ssenger cars where it was incorporated to run both 
 freight and passenger cars,*^ and failure to keep its principal 
 place of business within the state as required by statute,*® have 
 been held each to be a sufficient ground for enforcing a forfeiture. 
 The state need only prove that the act complained of is such as 
 in the nature of things is calculated to cause injury. No actual 
 injury need be shown.^" Where a railroad corporation became 
 insolvent thirteen years before, surrendered its property, sus- 
 pended business, and permitted another corporation to carry on 
 the business for which it was organized, its charter was properly 
 declared forfeited.' ^ So, where a corporation permitted its road 
 
 *f State V. Minnesota Centra! R. 
 Co., 36 Minn, 246, 30 N. W. 816. 
 But see Waclesboro &c. Co. v. 
 Burns, 114 N. Car. 353, 19 S. E. 
 238. 
 
 48 People V. Pittsburg R. Co., S3 
 Cal. 694. 
 
 4» State V. Park &c. Co., 58 Minn. 
 330, 59 N. W. 1048, 49 Am. St. 516, 
 10 Lewis Am. R. & Corp. R. 585; 
 Simmons v. Norfolk &c. Co., 113 
 N. Car. 147, 18 S. E. 117, 22 L. R. 
 A. (ilT, 37 Am. St. 614; State v. 
 Milwaukee &c. R. Co., 45 Wis. 579. 
 And it is suggested that such fail- 
 ure IS a breach of the duty of a 
 corporation at common law, and 
 would authorize a forfeiture in the 
 absence of any statute on the sub- 
 ject. State V. Milwaukee &c. R. 
 Co., supra; People v. Kingston &c. 
 Co., 23 Wend. (N. Y.) 193, 35 Am. 
 Dec. SSI. In this case it was shown 
 that such action on the part of the 
 corporation prevented the enforce- 
 ment of an attachment against the 
 shares of stockholders in an action 
 brought in the courts of Wiscon- 
 
 sin as provided by state laws. But 
 it is held that a failure on the part 
 of the principal officers to reside in 
 the state and to keep the principal 
 offices therein iS' not per se a for- 
 feiture, and the franchises will 
 only be forfeited for this cause 
 upon quo warranto where it is 
 shown that such action works an 
 injury to the legal rights of the 
 public or of individuals. See State 
 V. Southern Pacific R. Co., 24 Tex. 
 80; North and South &c. Co. v. 
 People, 147 111. 234, 35 N. E. 608, 
 24 L. R. A. 462 n, 9 Lewis Am. R. 
 & Corp. 1. 
 
 50 Commercial Bank v. State, 6 
 S. & M. (Miss.) 599. 
 
 51 People v. Northern R. Co., S3 
 Barb. (N. Y.) 98. See also Hart 
 V. Boston &c. R. Co., 40 Conn. 524, 
 where it is held that the fact that 
 it is an enforced suspension 
 brought on by legal proceedings is 
 no defense. But insolvency does 
 not ipso facto work a forfeiture. 
 Moran v. Lydecker, 27 Hun (N. 
 Y.) S82; State v. Bailey, 16 Ind. 
 
§60 
 
 RAILROADS 
 
 112 
 
 to be sold on execution and broken up into two or more parts.''^ 
 A m'ere colorable exercise of the corporate powers, as by the 
 election of directors and the holding of occasional meetings, 
 where the ordinary business of the corporation is relinquished, 
 will bring the case within the meaning of a statute imposing a 
 forfeiture for suspension of business.®* So, where a railroad 
 company takes up part of its track'^* or abandons and ceases to 
 operate a part of its road,®^ or neglects to keep its road in such 
 repair that it can be used,®® or neglects to build part of its road 
 and uses the rest only in getting out coal from mines owned by 
 those who control it,®^ or leases its road to another corporation 
 for a long period without statutory authority,®^ or builds a line 
 with other termini than those named in its charter and connects 
 with a foreign railroad without authority of law,®® it has bfeen 
 held that the state may enforce a forfeiture of the charter. And 
 the sale of part of its road by a turnpike company to avoid the 
 
 46, 79 Am. Dec. 405; Bradt v. 
 Benedict, 17 N. Y. 93. See also 1 
 Thomp. Corp. (2d ed.) § 6539. 
 
 »2 Slate V. Rives, S Ired. (N. 
 Cai.) 297, 309. 
 
 53 Jackson &c. Ins. Co., In re, 4 
 Sanf. Ch. (N. Y.) 559. 
 
 54 State V. West &c. R. Co., 34 
 Wis. 197. 
 
 55 People V. Albany &c. R. Co., 
 24 N. Y. 261, 82 Am. Dec. 295. But 
 see post, § 62. As to what is suf- 
 ficient evidence of abandonment 
 see 3 Elliott Ev. §§ 1577, 1578, 1579. 
 
 5B State V. Madison &c. R. Co., 
 72 Wis. 612, 40 N. W. 487, 1 L. R. 
 A. 771, 36 Am. & Eng. R. Cas. 135; 
 People V. Plymouth &c. Co., 32 
 Mich. 248; People v. Hillsdale &c, 
 Co., 23 Wend. (N. Y.) 254. See 
 also Davis v. Vernon Shell Road 
 Co., 103 Ga. 491, 29 S. E. 475; Peo- 
 ple V. Plainfield Ave. G. R. Co., 105 
 Mich. 9, 62 N. W. 998. 
 
 5T State v. Hazelton &c. R. Co., 
 40 Ohio St. 504. See also State v. 
 
 Pasumpsic Tp. Co., 3 Vt. 178. 
 Where the charter does not limit 
 ihe time within which the road is 
 to be constructed, a railroad maj' 
 build Its line long after the date of 
 its charter, no forfeiture having 
 been enforced against it. Western 
 &c. R. Co.'s Appeal, 104 Pa. St. 399. 
 
 58 State V. Atchison &c. R. Co., 
 24 Nebr. 143, 38 N. W. 43, 8 Am. 
 St. 164. In Louisiana &c. R. Co. 
 V. State, 75 Ark. 435, 88 S. W. 559, 
 it is held that the statute provid- 
 ing for a forfeiture of all charter 
 rights of any railroad company ac- 
 quired by lease not made in con- 
 formity with the statute is applica- 
 ble to a foreign railroad company 
 operating in the state under such 
 a lease, and quo warranto may be 
 maintained against it. See also 
 State V. Seneca Co. Bank, S Ohio 
 St. 171; State v. Pawtuxet Tp. Co., 
 8 R. I. 182, 521, 94 Am. Dec. 123. 
 
 50 Commonwealth v. Franklin 
 Canal Co., 21 Pa. St. 117. 
 
113 
 
 CHARTERS 
 
 §60 
 
 obligation to repair, has been held to be evidence of such willful 
 non-user as authorized a decree of forfeiture.®" Entering into an 
 agreement with other corporations to destroy competition has 
 been held a cause of forfeiture ;®^ and such agreements on the part 
 of competing lines of railroad are expressly forbidden in many of 
 the states. Where the statute requires a certain amount of capi- 
 tal stock to be subscribed before the organization of a railroad 
 corporation, this must be done, and it is held that the sub- 
 scription must be made in good faith by those having a reasonable 
 expectation of being able to pay for the stock subscribed, or the 
 state may enforce a forfeiture.^^ And generally a failure to pro- 
 ceed in good faith to carry out the purposes of the organization, 
 and complete the enterprise, will authorize a suit by the state for 
 this purpose.®^ In Louisiana the issue of fictitious or "watered" 
 stock is, by statute, made a cause for the forfeiture of the char- 
 ter of a corporation ; and in Nebraska, where such issues are 
 prohibited by the constitution,®^ a railroad corporation may be 
 
 60 State V. Pawtuxet Tp. Co., 8 
 R. I. 182, 94 Am. Dec. 123. 
 
 6J People V. North Kiver Sugar 
 Ref., 19 N. Y. St. 853, 3 N. Y. S. 
 401; People v. Milk Exchange, 133 
 N. Y. S6S, 30 N. E. 850. See also 
 Chicago &c. R. Co. v. Wabash &c. 
 R. Co., 61 Fed. 993, 10 Lewis' Am. 
 R. & Corp. 173, and nole: Cleve- 
 land &c. R. Co. V. Closser, 126 Tnd. 
 348, 26 N. E. 159, 9 L. R. A. 754 n, 
 22 Am? St, 593, 3 Lewis' Am. R. & 
 Corp. 686. But see United States 
 V. Knight & Co., 156 U. S. 1, IS 
 Sup. Ct. 249, 39 L. ed. 325, 10 
 Lewis' Am. R. & Corp. 737; Oak- 
 dale &c. Co. V. Garst, 18 R. L 484, 
 28 Atl. 973, 23 L. R. A. 639, 49 Am. 
 St. 784, 10 Lewis' Am. R. & Corp. 
 184. 
 
 •52 The state is not concluded by 
 the. fact that the articles of asso- 
 ciation were filed after the requis- 
 
 ite subscription was made, if it be 
 shown that the subscribers were 
 insolvent. Holman v. State, 105 
 Ind. 569, 5 N. E. 702. See also 
 State v. Debenture &c. Co., 51 La. 
 Ann. 1874, 26 So. 600. 
 
 ®3Cook Corporations (7th. ed,), 
 § 638; People v. Ulster &c. R. Co., 
 128 N. Y. 240, 28 N. E. 635; People 
 V. New York &c. R. Co., 137 N. Y. 
 606, 33 N. E. 744; State v. Noncon- 
 nah &c. Co. (Tenn ), 17 S. W. 128. 
 But it has been held that a failure 
 to organize within the time limited 
 will not prevent a valid organiza- 
 tion thereafter if no forfeiture has. 
 been adjudged at the suit of the 
 state. Seaboard &c. R. Co. v. Olive, 
 142 N. Car. 257, 55 S. E. 263. See 
 also Holman v. State, 105 Ind. 569, 
 5 N. E. 702. 
 
 «'"'Con.st. Nebr., art. 11, § 5. 
 
§61 
 
 RAILROADS 
 
 114 
 
 held to have forfeited its charter for this cause f^ but this is not, 
 ordinarily, a cause of forfeiture.*^ 
 
 !§ 61 (50). When duty to declare forfeiture is mandatory and 
 "when discretionary. — Where, in a proceeding by quo warranto on 
 behalf of the state, a cause of forfeiture prescribed by statute is 
 clearly shown to exist, it is mandatory upon the court to declare 
 the forfeiture,*® and it has no discretion to refuse judgment upon 
 the ground that it would be against public interest.*^ But in all 
 cases where the information is based only upon the implied con- 
 dition that the corporation shall serve the purposes of its creation 
 it is within the sound discretion of the court whether or not it 
 will pronounce judgment of ouster against a corporation which 
 has misused or abused its franchises, and it will generally refuse 
 ito do so if, in its judgment, the interests of the public do not re- 
 >quire a forfeiture.^" 
 
 § 62 (51). What is not cause for forfeiture. — A mere intention 
 -.to violate its duty,''^ or to fail to build its road'''^ will not author- 
 
 ^6 State V. Atchison &c. R. Co., 
 24 Nebr. 143, 38 N. E. 43, 8 Am. 
 St. 164. 
 
 6T State V. Minnesota &c. R. Co., 
 40 Minn. 213, 41 N. W. 1020, 3 L. 
 R. A. SIO; Commonwealth v. Cen- 
 tral Pass. R. Co.. 52 Pa. St. 506. 
 Post. § 62. 
 
 88 State V. Real Estate Bank, 5 
 Ark. 595, 41 Am. Dec. 109; State 
 V. Minnesota Cent. R. Co., 36 Minn. 
 246, 30 N. W. 816, 29 Am. & Eng. 
 R. Cast 440; People v. Fishkill, &c. 
 Co., 27 Barb. (N. Y.) 445; People 
 V. Northern R. Co., 53 Barb. (N. 
 Y.) 98; People v. Ulster &c. R. 
 Co., 128 N. Y. 240, 28 N. E. 635; 
 State V. Oberlin, &c. Assn., 35 Ohio 
 St. 258; 1 Thomp. Corp. {2nd ed.) 
 § 6524. 
 
 68 State V. Pennsylvania, &c. Co., 
 23 Ohio St. 121. See also State v. 
 Cumberland Tel., &c. Co., 114 
 
 Tenn. 194, 86 S. W. 390; State v. 
 Southern Pac. R. Co., 24 Tex. 80; 
 1 Thomp. Corp. (2nd ed.) § 6254. 
 
 70 State V. People's Mut. Benefit 
 Assn., 42 Ohio St. 579; State v. 
 Crawfordsville, &c. Co., 102 Ind. 
 283, 289, 1 N. E. 395. See also 
 State V. United States, &c. Co., 140 
 Ala. 610, 37 So. 442, 103 Am. St. 
 60; People v. North Chicago R. Co. 
 88 111. 537; State v. Portland Nat. 
 Gas Co., 153 End. 483, 53 N. E. 1089, 
 74 Am. St. 314, 53 L. R. A. 413; 
 State V. Omaha, &c. R. &c. Co., 91 
 Iowa 517, 60 N. W. 121. 
 
 Ti Commonwealth v. Pittsburgh, 
 ,&c. R. Co., 58 Pa. St. 26, 45; State 
 V. Martin, 51 Kans. 462, 33 Pac. 9, 
 60 Am. & Eng. R. Cas. 567; Attor- 
 ney General v. Superior, &c. Co., 
 93 Wis. 604, 67 N. W. 1138, 44 L. 
 R. A. 565 n. 
 
 72 State V. Kingan, Si Ind. 142; 
 State V. Beck, 81 Ind. 500. 
 
lis CHARTERS § 62 
 
 ize a forfeiture, even though it might authorize an injunction^' 
 And it is said that there must be a violation of the spirit as well 
 as the letter of the law before such a decree is justifiable J* The 
 intent is sometimes considered in deciding whether the charter 
 has been violated. Where the charter was made liable to for- 
 feiture for non-user for two years, the court decided that a for- 
 feiture was not incurred by the failure of a railroad corporation 
 to begin building its line until three years from the date of its 
 charter, where that time had been devoted to efforts to raise the 
 necessary funds J ^ And the holding of a meeting of the corpo- 
 rators of a company to which all the stock had been subscribed, 
 at which the charter was accepted, ofificers elected, and contracts 
 for building the road were authorized, was held to put the char- 
 ter in operation within the meaning of the provision of the Illi- 
 nois constitution'^* abrogating all charters not in operationJ'^ 
 Acceptance of a charter, paying- an enrollment tax and bonus to» 
 the state, the election of officers, appointment of committees, and! 
 the expenditure of large sums of money in the purchase of min- 
 eral rights, and in surveying, grading, and constructing a rail- 
 road, were held sufficient in a recent case to exempt a railroad 
 and mining company from the operation of the section of the 
 Pennsylvania constitution,''* which provides that the charters of 
 all such corporations as have not commenced business in good 
 faith, prior to a certain date, shall be forfeited,''^ and the court 
 also said that: "A mere temporary suspension of the business 
 
 73 Sec note to Ottaquechee for maintaining such action that a 
 Wookn Co. V. Newton, 57 Vt. 451, raih-oad company has omitted for 
 by H. C. Black, 21 Cent. L. J. 432, five days to run its trains. People 
 435. V. Atlantic Ave. R. Co., 125 N. Y. 
 
 74 Thompson v. People, 23 513, 26 N. E. 622, affirming 57 Hun 
 Wend. (N. Y.) 537, 58s. 378, 10 N. Y. S. 907. See also State 
 
 75 Young V. Webster City, &c. v. Consolidation Coal Co., 46 Md. 
 R. Co., 75 Iowa 140, 39 N. W. 234. 1, 14. 
 
 Under the New York code, which 76 HUnoisi Const. 1870, Art. XI. 
 
 allows an action in equity for the 77 McCartney v. Chicago, &c. R. 
 
 forfeiture of the charter of a cor- Co., 112 III. 611. 
 poration, "where it has suspended 78 Const. Pa. Art. XVI, § 1. 
 
 its ordinary and lawful business for 79 Commonwealth v. New York, 
 
 at least one year," it is no ground &c. R. Co., 10 Pa. Co. Ct. 129. 
 
§62 RAILROADS ll6 
 
 of a railroad company for a year, the business being afterwards 
 resumed and continued without interruption, is not such non- 
 user of its franchise as will operate as a forfeiture of its char- 
 ter."*" The omission of a railroad company for five days to run 
 its trains has been held not to be an "abuse of its powers," with- 
 in the meaning of a statute, ^^ which authorizes an action for dis- 
 solution for abuse of corporate powers, ^^ a,nd, in other instances, 
 where the suspension was merely temporary, as for lack of pat- 
 ronage at the time, and did not injuriously affect the public, it 
 has been held not to be sufficient cause for forfeiture in the ab- 
 sence of a statute requiring a forfeiture for such cause.** So, it 
 has been held that the mere failure to observe some of the pre- 
 liminary requirements, as a failure to file a map of the proposed 
 route with the secretary of state within a certain time,** or the 
 payment of one-half of the capital stock in property whose value 
 exceeds one-half of the par value of the stock where the statute 
 requires such half to be paid in lawful money of the United 
 States,*^ will not work a forfeiture; nor, it is said, will any spe- 
 cific act of nonfeasance, unintentionally but negligently com- 
 mitted, where it does not have a mischievous tendency.*® Build- 
 ing the road across lands over which the company has not ob- 
 
 80 Commonwealth v. New York, ern Archipelago Co. v. Regina, 22 
 &c. R. Co., 10 Pa. Co. Ct. 129. Eng. L. & Eq. 228, to the general 
 
 81 Code Civil Proc. N. Y. § 1798. eflfect that slight deviations from 
 
 82 People v. Atlantic Ave. R. Co., *^« provisions of the charter 
 125 N. Y. 513, 26 N. E. 622, affirm- '"'^ "°^ necessarily either an abuse 
 
 g 57 Hun 378, 10 N. Y. S. 907. or a misuse of it. But see People 
 
 V. Montecito Water Co., 97 Cal. 
 
 in 
 
 83 State V. Real Estate Bank, 5 276, 32 Pac. 236, 33 Am. St. 172 n. 
 
 Ark. 595, 41 Am. Dec. 109; Com- (Articles not sufficiently signed), 
 
 monwealth v. Fitchburg R. Co., 12 gs State v. Wood, 84 Mo. 378. 
 
 Gray (Mass.) 180; State v. ^he soundness of this decision, 
 
 Commercial Bank, 13 Sm. & M. however, is questionable. 
 
 (Miss.) 569 53 Am^ Dec. 106; Peo- ,,^ rj,^^^ ^^^p (2d. ed.), § 6534. 
 
 pie V. Bank of Hudson, 6 Cow. gee also People v. Jackson R. Co., 9 
 
 (N. Y.) 217. ]^ich. 285 ; People v. Hillsdale T. Co., 
 
 8* Harris v. Mississippi Valley 23 Wend (N. Y.) 2; State v. Royal- 
 Ac. R. Co., 51 Miss. 602. See East- ton, &c. T. Co., 11 Vt. 431. 
 
117 CHARTERS §62 
 
 tained the right of way has been held not a sufficient misuser to 
 cause a forfeitures'^ Neither an unauthorized attempt to change 
 the corporate name,^* nor the use of an abbreviation instead of 
 proper name,^" is sufficient ground for quo warranto proceedings. 
 Failure to run regular passenger trains, where, by reason of the 
 construction and operation of a horse railroad, the income from 
 such trains would not pay for the expense of operating them is 
 not a cause of forfeiture, it appearing that the company is regu- 
 larly engaged in the transportation of freight traffic over its road, 
 and has carried all passengers who have sought passage;^" nor 
 is the obtaining of a charter from another state for a similar 
 purpose*^ and bringing a suit in the federal court to test the con- 
 stitutionality of a statute of its own state incorporating another 
 company a cause of forfeiture ;^- nor forming an unauthorized 
 agreement of consolidation with another corporation ;®* nor issu- 
 ing stock below par where no interests are injuriously afiEected 
 thereby. 9* And it has been held that quo warranto will not lie to 
 prevent the use of a portion of a railroad which has been com- 
 pleted, merely because the project for building other portions 
 
 87 See State v. Kill Buck, &c. the suit were brought in the courts 
 Co., 38 Ind. 71; People v. Hillsdale, of a foreign .sovereignty, but holds 
 &c. Co., 2 Johns. (N. Y.) 190. that the federal courts form a part 
 
 88 O'Donnell v. Johns & Co., 76 of the courts of each state, admin- 
 Tex. 362, 13 S. W. 376. As to istering the law as construed by its 
 eflfect of unauthorized change of own tribunals. 
 
 name, see Cincinnati Cooperage 93 State v. Crawfordsville, &c. 
 
 Co. V. Bate, 96 Ky. 356, 26 S. W. Co., 102 Ind. 283, 1 N. E. 39S; 
 
 538, 49 Am. St. 300, 10 Lewis' Am. Crawfordsville, &c. Co. v. State, 
 
 R. & Corp. 653, and note. 102 Ind. 435, 1 N. E. 864. It is 
 
 80 People V Bogart, 45 Cal. 73. held otherwise, however, where 
 
 90 Commonwealth v. Fitchburg the consolidation is expressly pro- 
 
 R. Co., 12 Gray (Mass.) 180. But hibited. State v. Atchison, &c. R. 
 
 compare ante § 60. Co., 24 Nebr. 143, 38 N. W. 43, 8 
 
 S"! Commonwealth v. Pittsburgh, Am. St. 164. 
 
 &c. R. Co., 58 Pa. St 26. vi Howe v. Deuel, 43 Barb. (N. 
 
 92 Commonwealth v. Pittsburg, Y.) 504; Hastings v. Amherst, &c. 
 
 &c. R. Co., 58 Pa. St. 26. The R. Co., 9 Cush. (Mass.) 596; State 
 
 Court, per Sharswood, J., intimates v. Minnesota, &c. Co., 40 Minn, 
 
 that the case might be different if 213, 41 N. W. 1020, 3 L. R. A. SlOn. 
 
§63 
 
 RAILROADS 
 
 118 
 
 authorized by the charter has been abandoned ;^^ nor merely to 
 vindicate private rights or redress private grievances.^* 
 
 § 63 (52). Waiver of forfeiture — Collateral proceedings. — No 
 advantage can be taken in any collateral proceeding, of a forfeit- 
 ure which has not been judicially established ;*'' and the state may 
 waive any breach involving a forfeiture of charter rights,®* by 
 implication as well*® as by legislative enactment.^ A waiver will 
 not, however, revive a corporation after it has ceased to exist. 
 
 95 Attorney- General v. Birming- 
 ham Junction R. Co., 8 Eng. L. & 
 Eq. 243; But see ante, § 60. A sale 
 of all the corporate property does 
 not necessarily work a forfeiture 
 ■of the corporate franchises, and 
 where it is necessary for the pro- 
 tection of the interests of stock- 
 holders or third persons, a cor- 
 poration which has disposed of all 
 its property will be held to be still 
 in existence. Langhorne v. Rich- 
 • mond City R. Co., (Va.) 19 S. E. 
 122; Price v. Holcomb, 80 Iowa 
 123, 56 N. W. 407. 
 
 98 State V. Atchison, &c. R. Co., 
 176 Mo. 687, 75 S. W. 776, 63 L. R. 
 A. 761 n. This case also holds that 
 quo warranto will not lie to pre- 
 vent tlic company from making an 
 unlawful rate or charge where an- 
 other ample and adequate remedy 
 is provided, and the subject is fur- 
 ther considered, with citation of 
 authorities, in the note thereto. 
 
 OTDanbury, &c. R. Co. v. Wil- 
 son, 22 Conn. 435, 449; New York, 
 &c. R. Co. V. New York, &c. R. 
 Co., 52 Conn. 274; Cincinnati, &c. 
 R. Co. V, Clifford, 113 Ind. 460, 15 N. 
 E. 524; Hodges v. Baltimore, &c. 
 R. Co.. 58 Md. 603; Cleveland, &c. 
 R. Co. V. Erie, 27 Pa. St. 380. See 
 
 also Southern Pac. R. Co. v. Orton, 
 32 Fed. 457; Greenville v. Green- 
 ville, &c. Co., 125 Ala. 625, 27 So. 
 764; New Jersey So. R. Co. v. 
 Long Branch Comrs., 39 N. J. L. 
 28; Asheville Division v. Aston, 92 
 N. Car. 578; Greenbrier Lumber 
 Co. v. Ward, 30 W. Va. 43, 3 S. E. 
 227; 1 Thomp. Corp. (2nd ed.) §§ 
 6520, 6527. 
 
 98 People V. Los Angeles, &c. R. 
 Co., 91 Cal. 338, 27 Pac. 673; State 
 V. Portland, &c. Co., 153 Ind. 483, 
 S3 N. E. 1089, 53 L. R. A. 413, 74 
 Am. St. 314; Farnsworth v. Lime, 
 &c. R. Co., 83 Maine 440, 22 Atl. 
 i7A; Slate v. Bergen, &c. R. Co., 
 S3 N. J. L. 108, 20 Atl. 762; Peo- 
 ple v. Ulster, &c. R. Co., 128 N. Y. 
 240, 28 N. E. 635; Hinchman v. 
 Philadelphia, &c. R. Co., 160 Pa. 
 St. 150, 28 Atl. 652 ; State v. Lincoln 
 St. R. Co., 80 Nebr. 333, 114 N. W. 
 422, 14 L. R. A. (N. S.) 336; 5 
 Thomp. Corp. (2nd ed.) § 6445. 
 
 99 People V. Mississippi, &c. R. 
 Co., 14 111. 440; Foster v. Pitch, 36 
 Conn. 236; New York, &c. R. Co., 
 Petition of, 70 N. Y. 327; 5 Thomp. 
 Corp. (2nd ed.) § 6545. 
 
 iSuch a statute may revive and 
 keep in force the original act of 
 incorporation, and continue the ex- 
 
119 
 
 CHARTERS 
 
 1 63 
 
 where the constitution prohibits the granting of special charters,^ 
 though, possibly, a general act for the remission of all forfeit- 
 ures incurred under the terms of the incorporating act would be 
 valid.^ It has been held that the passage of an act providing 
 for the issue of bonds to be paid long after a forfeiture would, by 
 the terms of the charter, have accrued, is a waiver of such for- 
 feiture, and a repeal by implication of the clause in the charter 
 providing for it.* So a legislative recognition of a de facto cor- 
 poration after an accrued forfeiture has become known may con- 
 stitute a waiver,^ as well as a long-continued neglect on the part 
 of the judicial department to enforce the forfeiture.** But where 
 there has been no attempt legally to organize a corporation, no 
 
 istence of the corporation as it was 
 before the forfeiture. Phillips v. 
 Albany, 28 Wis. 340. 
 
 2 Oroville, &c. R. Co v. Super- 
 visors of Plumas Co., 37 Cal. 3S4; 
 Brooklyn, &c. R. Co., In re, 72 N. 
 Y. 245, 75 N. Y. 335, 19 Hun 314, 
 55 How. Prac. 14. 
 
 3 See Maryland v. Baltimore, &c. 
 R. Co., 3 How. (U. S.) 534, 11 L. 
 ed. 714; Chicago, &c. R. Co. v. Ad- 
 ler, 56 111. 344; Wilson v. Ohio, &c. 
 R. Co., 64 111. 542, 16 Am. Rep. 
 565. 
 
 4 Foster v. Pitch, 36 Conn. 236. 
 See also State v. Webb, 110 Ala. 
 214, 20 So. 462. 
 
 5 Central & Georgetown R. Co. 
 V. People, 5 Colo. 39; Enfield 
 Bridge Co. v. Connecticut River 
 Co., 7 Conn. 28; People v. Ottawa 
 Hydraulic Co., 115 111. 281, 3 N. E. 
 413; Chesapeake, &c. Canal Co. v. 
 Baltimore, &c. R. Co., 4 Gill & J. 
 (Md.) 1; Briggs v. Cape Cod Ship 
 Canal Co., 137 Mass. 71; New 
 York, &c. R. Co., Petition of, 70 
 N. Y. 327; Baltimore, &c. R. Co. v. 
 Marshall Co., 3 W. Va. 319. La 
 
 Grange, &c. R. Co. v. Rainey, 7 
 Coldw. (Tenn.) 420, empowering 
 another company to buy the fran- 
 chises of a railroad company is a 
 waiver of accrued forfeiture for 
 non-user of such franchises, and 
 the new company takes by its pur- 
 chase a right to complete and op- 
 erate the purchased road under its 
 original franchise. Hinchman v. 
 Philadelphia, &c. R. Co., 160 Pa. St. 
 150, 28 Atl. 652. See also Co- 
 manche Co. V. Lewis, 133 U. S. 
 198, iO Sup. Ct. 286, 33 L. Ed. 604; 
 State V. Godwinsville, &c. Co., 44 
 N. J. L. 496, SOI; Central Cross-: 
 town R. Co. V. Twenty-third St. 
 R. Co., 54 How. Prac. (N. Y.) 168; 
 Attorney-General v. Superior, &c., 
 Co., 93 Wis. 604, 67 N. W. 1138. 
 6 State V. Crawfordsville, &c. Tp. 
 Co., 102 Ind. 283, 1 N. E. 395; Peo- 
 ple V. Oakland County Bank, 1 
 Dougl. (Mich.) 282; People v. Wil- 
 liamsburg, &c. Co., 47 N. Y. 586; 
 State V. Janesville Water Co., 92 
 Wis. 496, 66 N. W. 512, 32 L. R. A. 
 391. 
 
§ 63 RAILROADS 120 
 
 lapse of time confers any rights/ and where, according to the 
 terms of the charter, the franchise has been absolutely forfeited 
 by failure to perform certain conditions, mere subsequent recog- 
 nition by the legislature will not waive the forfeiture.** Providing 
 penalties for the acts which, by the terms of the charter would 
 constitute a forfeiture, has been held to be a waiver,^ but it is said 
 that where there is a statute^" which makes it the duty of the 
 attorney-general, unless otherwise expressly directed by law, to 
 seek the forfeiture of the charter of the corporation which has, 
 by any act or omission, misuser or non-user, forfeited the same, 
 the right of the state to demand a forfeiture of the charter of a 
 railroad company which has sold its road and franchises to a for- 
 eign company in violation of the constitution, failed to keep up 
 its organization, and allowed its road to become unsafe, is not 
 waived by the provisions of a subsequent statute,^^ providing for 
 quo warranto against a corporation carrying on business in vio- 
 lation of a constitutional provision^^ forbidding sale to or con- 
 solidation with a competing or foreign company, to enforce the 
 penalties therefor, together with an injunction against future 
 violation, and the appointment of a receiver.^^ 
 
 " People V. Stanford, 11 Cal. 360, s State v. Real Estate Bank, ' 5 
 
 18 Pac. 85, 19 Pac. 693, 2 L. R. A. Ark. S9S, 41 Am. Dec. 109; Baker 
 
 92. See also State v. Bailey, 19 v. Backus, 32 111. 79; Washington, 
 
 Ind. 452; People v. Pullman Palace &c. R. Co. v. State, 19 Md. 239; 
 
 Car Co., 175 111. 125, 51 N. E. 664, Commonwealth v. Breed, 4 Pick. 
 
 64 L. R. A. 366. Where the iucor- (Mass.) 460; State v. Morris, 73 
 
 poration is merely irregular, a leg- Tex. 435, 11 S. W. 392. But see 
 
 isilative recognition is equivalent to Commercial Bank of Natchez v. 
 
 a charter. McAuley v. Columbus, State, 6 S. & M. (Mass.) 599; State 
 
 &c. R. Co., 83 111. 348; Kanawha, Bank v. Stat«, 1 Blackf. (Ind.) 267, 
 
 &c. Co. V. Kanawha, &c. Co., Fed. 12 Am. Dec. 234 n. 
 
 Cas. No. 7606, 7 Blatch. (U. S.) lo Rev. Stat. Tex. Art. 2805 
 
 391; Cowellv Colorado, &c. Co. 3 ,,5^^,^^ ^^^.^^ S^^^ ^^^ 
 
 Colo. 82; Kellogg v. Union l^o., 12 » 2 
 Conn. 7; Mead v. New York, &c. 
 
 R. Co., 45 Conn. 199; Atlantic, &c. '^ ^onst. Tex. Art. X, §§ 5, 6. 
 
 R. Co. V. St Louis, 66 Mo. 228. is East Line, &c. R. Co. v. State, 
 
 8 State V. Fourth, &c. Tp. Co., IS 75 Te.x. 434, 12 S. W. 690. 
 N. H. 162, 14 Am. Dec. 690. 
 
121 
 
 CHARTERS 
 
 §64 
 
 § 64 (53) . F*roceedings to forfeit — Quo warranto — Parties. — 
 
 At conxmon law it was held that a forfeiture of charter franchises 
 should be enforced by scire facias, i* while quo warranto was the 
 proper means of inquiring into an unauthorized assumption of 
 corporate powers. ^^ But the latter writ, or, in modern practice, 
 an information in the nature of a quo warranto, may be used for 
 the trial of abuse of powers as well as for inquiring into the 
 usurpation of franchises. ^^ When quo warranto is employed 
 for the purpose of ousting individuals who have unlawfully 
 usurped the franchise to be a corporation and have no corporate 
 existence, it is generally held that it should be directed against 
 the individuals assuming to act as a corporation, ^'^ for "a corpo- 
 ration," it is said, "cannot be brought into court to answer the 
 allegation that it is not and never was a corporation" ;i* and bring- 
 ing a suit against the company by its assumed corporate name 
 is held in many jurisdictions to be an admission of its existence 
 as a corporation.!® Moreover, it is said that the incorporators 
 
 1* Ames V. Kansas, 111 U. S. 449, 
 4 Sup. Ct. 437; 28 L. ed. 482;. Re- 
 gents of University v. Williams, 9 
 Gill & J. (Md.) 365, 31 Am. Dec. 
 72, lil; State v. St. Paul, &c. R. 
 Co., 3S Minn. 222, 28 N. W. 245; 
 Rex V. Pasmore, 3 Term Rep. 199, 
 244. 
 
 15 Authorities cited in last note, 
 supra. 
 
 18 Bruffett V. Great Western R. 
 Co., 25 III. 353; Chesapeake, &c. 
 Co. V. Baltimore, &c. R. Co., 4 
 Gill & J. (Md.) 1, 121; People v. 
 Jackson, &c. R. Co., 9 Mich. 285; 
 National Docks R. Co. v. Central 
 R. Co., 5 Stew. (N. J.) 755; People 
 V. Utica Ins. Co., 15 Johns. (N. Y.) 
 358, 386, .395; People v. Trustees af 
 Geneva College, 5 Wend. (N. Y.) 
 211; State v. Boston, &c. R. Co., 25 
 Vt. 433; State v. Milwaukee, &c. R. 
 Co., 45 Wis. 579; note to State v. 
 
 Atchison, &c. R. Co., 24 Nebr. 143; 
 38 N W. 43, 8 Am. St. 164, 198; 
 High Extr. Rem. § 647, 5 Thomp 
 Corp. (2nd ed.) § 5798. 
 
 IT Wolfe V. Underwood, 97 Ala. 
 375, 12 So. 234; People v. Stan- 
 ford, 71 Cal. 360, 18 Pac. 85, 19 
 Pac. 693; Chesshire v. People, 116 
 111. 493, 6 N. E. 487; Mud Creek, 
 &c. Co. V. Stale, 43 Ind. 236; Peo- 
 ple v. Rensselaer, &c. R. Co., 15 
 Wend. (N. Y.) 113, 30 Am_. Dec. 
 33; State v. Cincinnati, &c. Co., 18 
 Ohio St. 262; Commonwealth v. 
 Central Pass. R. Co., 52 Pa. St. 
 506; State v. South Park, 34 Wash. 
 162, 75 Pac. 636, 101 Am. St. 998. 
 
 18 Mud Creek, &c. Co. v. State, 
 43 Ind. 236; Chesshire v. People, 
 116 111. 493, 6 N. E. 487. 
 
 10 People V. Stanford, 11 Cal. 
 360, 18 Pac. 85, 19 Pac. 693, 2 L. R. 
 A. 92; Commercial Bank of Nat- 
 
§64 
 
 RAILROADS 
 
 122 
 
 should have their day in court, in the event that they do not con- 
 stitute a legal person capable of appearing and answering.^" But 
 the proceedings should be against the corporation itself, where 
 the purpose is to enforce a forfeiture of its charter, incurred by 
 misuse or abuse of its powers, or to oust it from the exercise of 
 unwarranted rights and privileges under its charter,^! and it is 
 said that the doctrine that the institution of the proceeding 
 
 chez V. State, 6 S. & M. (Miss.) 
 599; 614; People v. Rensselaer, &c. 
 R. Co., IS Wend. (N. Y.) 113, 30 
 Am. Dec. 33, 38. Contra People v. 
 Bank of Hudson, 6 Cow. (N. Y.) 
 217; State v. Cincinnati Gas Light 
 &c. Co., 18 Ohio St. 262. And see 
 State V. Inner Belt R. Co., 74 Kans. 
 413, 87 Pac. 696. In the note to 
 State V. Atchison, &c. R. Co., 24 
 Nebr. 143, 38 N. W. 43, 8 Ara. St. 
 164, 199, it is said that "this rul6 
 rests upon no sound reason,'' and 
 it does seem like sacrificing the 
 spirit to the letter, for, where it 
 clearly appears from the informa- 
 tion that its purpose is to challenge 
 the legal existence of the corpora- 
 tion, or, in other words, the right 
 of the incorporators to be a cor- 
 poration, it is verj'- technical to 
 hold that the use of the corporate 
 name is an admission of the cor- 
 porate existence. It is more in con- 
 sonance with the spirit of such pro- 
 ceedings, although it may not be 
 entirely logical, to treat the name 
 as descriptive and the information 
 as calling upon the individuals to 
 answer by what authority they use 
 that name and exercise the rights 
 of a corporation. 
 
 20 State V. Independent School 
 District, 44 Iowa 227; King v. Cily 
 of London, Skin. 293, 310. 
 
 21 Smith V. State, 21 Ark. 294; 
 
 State v. Atchison, &c. R. Co. 24 
 
 Nebr. 143, 38 N. W. 43, 8 Am. St. 
 
 164 n, 32 Am. & Eng. R. Cas. 388; 
 
 People v. Bank of Niagara, 6 Cow. 
 
 (N. Y.) 196; People v. New York. 
 &c. R. Co., 137 N. Y. 606, 33 N. 
 
 E. 744, 66 Hun 633, 21 N. Y. S. 
 373; State v. Taylor, 25 Ohio St. 
 279. , Judge Thompson states the rule 
 as follows : "Where the charge is 
 that the corporation encercises powers 
 not given by its charter, or misuses 
 or abuses its franchises, the action 
 is against the corporation to oust it 
 from the use of the usurped power, 
 and the corporation is the proper 
 party respondent and not the mem- 
 bers. * *. * But where the charge 
 is that corporate powers are usurped 
 by a body having no corporate exist- 
 ence, then the action is against the 
 individuals composing the illegal cor- 
 poration and they are the proper and 
 sole parties respondent." S Thomp. 
 Corp. 2d. ed.), § 5811. See also State 
 V. Barron, 57 N. H. 498; People v. 
 Rensselaer, &c. R. Co., 15 Wend. (N. 
 Y.), 113, 30 Am. Dec. 33, and note; 
 also article in 40 Alb. L. J. 10. 
 
123 
 
 CHARTERS 
 
 §65 
 
 against the corporation eo nomine admits its legal existence rests 
 upon no sound reason.22 
 
 § 65 (54). Proceedings must generally be in court of law — 
 Statutory provisions. — A proceeding to enforce a forfeiture or to 
 deprive a de facto corporation of its usurped privileges must be 
 brought in a court of law ,2^ a court of equity having no jurisdic- 
 tion in such cases unless it is conferred by statute.^* In many of 
 the states special provisions are made by statute for the prosecu- 
 tion of suits of this nature in certain specified courts. ^^ The state 
 
 22 See note in 8 Am. St. 199, and 
 State V. Inner Belt R. Co., 74 Ivans. 
 413, 87 Pac. 696. 
 
 23 Attorney-General v. Luder 
 Ice Co., 104 Mas.s. 239, 6 Am. Rep. 
 227; Attorney-General v. Stevens, 
 1 N. J. Eq. 369, 22 Am. Dec. 526; 
 President, &c. v. Trenton Bridge 
 Co., 13 N. J. Eq. 46; Attorney-Gen- 
 eral V. Ulica Ins. Co., 2 Johns. Ch 
 (N. Y.) 371: People v. Equity, &c., 
 141 N. Y. 232, 36 N. E. 194; King 
 V. Clarke, 1 East. 38, 43. Wheth- 
 er a corporation has been guilty of 
 acts or omissions sufficient to con- 
 stitute cause for forfeiture is gen- 
 erally a judicial and not a legisla- 
 tive question. Cooley's Const. 
 Lim. *106; Mayor v. Pittsburgh, 
 &c. R. Co., 2 Abb. U. S. 9; Regents 
 V. Williams, 9 (}. & J. (Md.; 365, 
 31 Am. Dec. 72; Vermont, &c. R. 
 Co. V. Vermont Cent. R. Co., .34 
 Vt. 2. 
 
 24 Folger V. Columbian Ins. Co., 
 99 Mass. 267, 96 Am. Dec. 747; 
 Bayless v. Orne, 1 Freom. Ch. 
 (Miss.) 161; Belmont v. Erie R. 
 Co., 52 Barb (N. Y.) 637; Western, 
 
 &c. R. Co.'s Appeal, 104 Pa. St. 
 399; State v. Merchants' Ins., &c. 
 Co., 8 Humph. (Tenn.) 234. See 
 Heap V. Heap Manufacturing Co., 
 97 Mich. 147, '56 N. W. 349, note 
 to State V. Atchinson, &c. R. Co., 8 
 Am. St. 164, 200; Cobe v. Guyer, 237 
 111. 516, 86 N. E. 1071; 5 Thomp. 
 Corp. (2d ed.), § 6542. 
 
 25 In our own country writs or 
 informations in the nature of writs 
 of quo warranto are filed in the 
 highest courts of ordinary jurisdic- 
 tion in several of the states, either 
 by the attorney-general or the 
 prosecutor. People v. Richardson, 6 
 Cow. (N. Y.) 102; Commonwealth 
 V. Fowler, 10 Mass. 290; State v. 
 Merry, 3 Mo. 278; State v. Foster, 2 
 Halst (N. J.) 101 ; People v. Rich- 
 ardson, 4 Cow. (N. Y). 97, 102; Res- 
 publica V. Griffiths, 2 Dall. (Pa.) 112; 
 State V. Charleston, 1 Const. R. 
 (Treadway, S. Car.) 36. See Den- 
 ike V. New York, &c. Co., 80 N. Y. 
 i599. In California, this jurisdiction 
 lies in the district courts. In In- 
 diana 'an information may be filed 
 in the circuit court by the prose- 
 
§66 
 
 RAILROADS 
 
 124 
 
 may delegate the right to bring the action in its name,^^ but it 
 may not authorize any person to declare a forfeiture without 
 first obtaining the judgment of a court.^'' 
 
 § 66 (55). Collateral proceedings — Pleadings and judgment in 
 forfeiture proceedings. — No private individual can maintain a suit 
 to enforce the forfeiture of a charter, unless specially authorized 
 by the state to do so, nor can a mere ground or cause for for- 
 feiture be successfully used by him as part of his cause of action 
 in a collateral proceeding,^^ nor can acts amounting to a forfeit- 
 ure be set up by plea or answer in any collateral action. ^^ Pro- 
 
 cuting attorney, or by any person 
 claiming an interest in the corpora- 
 tion which has abused its powers. 
 Burns' R. S. 1914, ' §§ 1188, 1189; 
 Danville, &c. Co. v. State, 16 Ind. 
 456; Board v. Hall, 70 Ind. 469. 
 In New York, Tennessee, and 
 Colorado, the remedy is by civil 
 action under the several codes; 
 People V. Cook, 8 N. Y. (4 Seld.) 
 67, 59 Am Dec. 451; State v. Turk, 
 Ma.rt. & Yerg. (Tenn.) 287; Attor- 
 ney-General V. Leaf, 9 Humph. 
 (Tenn.) 753; Central, &c. R. Co. v. 
 People, 5 Colo. 39; Atchison, &c. R. 
 Co. V. People, 5 Colo. 60. A 
 forfeiture of corporate franchises 
 granted by a city can be enforced 
 only by a direct proceeding by 
 quo warranto under the statutes. 
 Citizens', &c. R. Co. v. Belleville, 
 47 111. App. 388. The information 
 must clearly set forth a substantial 
 cause of forfeiture. 5 Thomp. Corp. 
 (2d. €id.), § 6542. 
 
 26 State v. Smith, 32 Ind. 213; 
 State v. Ireland, 130 Ind. ^11, 29 
 N. E. 396; Western, &c. R. Co.'s 
 Appeal, 104 Pa. St. 399. Where the 
 common law rule has not been 
 changed by the statute, suit must 
 
 be brought by the attorney gen- 
 eral on behalf of the state. Heap 
 V. Heap Co., 97 Mich. 147, 56 N. W. 
 349; Bass v. Roanoke, &c. Co., Ill 
 N. Carr. 439, 16 S. E. 402; State v. 
 International Co., 89 Tex. 562, 35 
 S. W. 1067. 
 
 2T A statute authorizing the sec- 
 retary of state to declare the char- 
 ter of a corporation forfeited if its 
 taxes are not paid is invalid. For- 
 feiture can be made only after suit 
 brought by the state for that pur- 
 pose. Greenbrier, &c. Co. v. Ward, 
 36 W. Va. 573, 15 S. E. 89. 
 
 2S North v. State, 107 Ind. 356, 
 8 N. E. 159; State v. Rio Grande 
 R. Co., 41 Tex. 217; 5 Thomp. Corp. 
 (2nd ed.) § 6520. Injunction will 
 not lie at the suit of a private per- 
 son to enforce the forfeiture of a 
 charter granted to a corporation 
 for public purposes. Hinchman v. 
 Philadelphia, &c. R. Co., 160 Pa. 
 St. 150, 28 Atl. 652; Twelfth St. 
 Market Co. v. Philadelphia, &c. R. 
 Co., 142 Pa. St. 580, 21 Atl. 902. 
 
 20 Hammett v. Little Rock, &c. 
 Co., 20 Ark. 204; Union Branch R. 
 Co. v. East Tenn., &c. Co., 14 Ga. 
 
125 
 
 CHARTERS 
 
 §66 
 
 ceedings to declare a forfeiture must be instituted in the state 
 or country in which the corporation is created.^" The informa- 
 tion should, in moat states, set forth specifically the facts upon 
 which the claim of forfeiture of corporate rights is founded.*^ 
 It has been held that a judgment recovered against a corpora- 
 tion pending an appeal from a judgment forfeiting its franchises 
 will, where an appeal suspends the judgment of the trial court, 
 bind the property of the corporation, although the judgment ap- 
 pealed from is afterward affirmed.^^ But, after dissolution, the 
 general rule is that no judgment can be entered against the cor- 
 poration even in a suit which was pending at the time of the 
 dissolution.** 
 
 327; Logan v. Vernon, &c. R. Co., 
 90 Ind. 552; Thompson v. New 
 York. &c. R. Co., 3 Sand. Ch. (N. 
 Y.) 625; New York, &c. R. Co., 
 Petition of, 70 N. Y. 327; La 
 Grange, &c. R. Co. v. Rainey, 7 
 Coldw. (Tenn.) 420; Connecticut, 
 &c. R. Co. V. Bailey, 24 Vt. 465, 58 
 Am. Dec. 181. See Bass v. Roan- 
 oke Nav., &c. Co., Ill N. Car. 439, 
 16 S. E. 402, 19 L. R. A. 247 n. 
 
 30 Society v. New Haven, 8 
 Wheat. (U. S.) 464, S L. ed. 662; 
 Importing, &c. Co. v. Locke, 50 
 Ala. 332; State v. Mobile, &c. R. 
 Co., 108 Ala. 29, 18 So. 801; Carey 
 V. Cincinnati, &c. R. Co., S Iowa 
 357, 367; Richardson v. Clinton 
 Wall Trunk Mfg. Co., 181 Mass. 
 580, 64 N. E. 400; Howell v. Chi- 
 cago, &c. R. Co., 51 Barb. (N. Y.) 
 378. 
 
 81 State V. Southern Pac. R. Co., 
 24 Tex. 80. The state must charge 
 and prove the abuse or misuse of 
 its franchises relied on as ground 
 of forfeiture. State v. Talbot (Mo. 
 Sup.), 27 S. W. 366. But need not, 
 it has been held, expressly charge 
 
 that the acts complained of were 
 prohibited by statute or that pub- 
 lic injury resulted therefrom. Eel 
 River R. Co. v. State, 155 Ind. 433, 
 57 N. E. 388. See however People 
 V. Colorado Eastern R. Co., 8 Colo. 
 App. 301, 46 Pac. 219. A full treat- 
 ment of the pleadings and practice 
 in such proceedings will be found 
 in the note to People v. Rensselaer, 
 &c. R. Co., IS Wend. (N. Y.) 113, 
 30 Am. Dec. 33, 49-53. 
 
 32 Texas Trunk R. Co. v. Jack- 
 son, 85 Tex. 60S, 22 S. W. 1030; 
 Giles v. Stanton, 86 Tex. 620, 26 
 S. W. 615; Giles v. East Line, &c. 
 R. Co. (Tex. Civ. App.), 26 S. W. 
 1111. 
 
 33 First Nat. Bank v. Colby, 21 
 Wall. (U. S.) 609; 22 L. ed. 687; 
 Saltmarsh v. Planters', &c. Bank, 
 17 Ala. 761; Terry v. Merchants', 
 &c. Bank, 66 Ga. 177; Thornton v. 
 Marginal, &c. R. Co., 123 Mass. 
 32. As to .form of judgment of 
 forfeiture, see Slee v. Bloom, 5 
 Johns. Ch. (N. Y.) 366; People v. 
 Rensselaer, &c. R. Co., 15 Wend. 
 (N. Y.) 113, 30 Am. Dec. 33, and 
 
§67 
 
 RAILROADS 
 
 126 
 
 § 67 (56). Repeal of charter — Reserved power. — Where the 
 state, either by constitutional provision,** by general statute,'^ 
 or by special reservation introduced into the creative act, reserves 
 the power to alter, amend or repeal the charter of a corporation, 
 such charter is held not to constitute a contract between the state 
 and the incorporators within the meaning of the federal con- 
 stitution ;'* though in the absence of such reservation, the charter 
 cannot be taken away excepting for acts of the corporation 
 amounting to a forfeiture. *'' Where an unconditional reservation 
 is made, the power to repeal may be exercised at the pleasure 
 of the legislature,** and its exercise cannot be reviewed by the 
 
 note. In Eel River R. Co. v. State, 
 155 Ind. 433, 57 N. E. 388, it is 
 held that the court may not only 
 render a judgment of forfeiture, 
 but may also appoint a receiver 
 when asked for in the information. 
 
 34 See ante, § 54; Chesapeake, 
 &c. R. Co. V. Miller, 114 U. S. 176, 
 5 Sup. Ct. 313, 29 L. ed. 121. When 
 the constitution of a state forbids 
 the granting of irrevocable char- 
 ters, this provision becomes a part 
 of all charters granted, and under 
 them subject to repeal, whether 
 so expressed in the act of the leg- 
 islature or not. Delaware, &c. R. 
 Co. V. Tharp, 5 Harr. (Del.) 454. 
 
 35 The right to alter and repeal 
 may be reserved in a general stat- 
 ute so as to apply to charters sub- 
 sequently granted. Thornton v. 
 Marginal, &c. R. Co., 123 Mass. 32; 
 State V. Brown, &c. Co. 18 R. I. 
 16, 25 Atl. 246, 17 L. R. A. 856. 
 And an act reserving power to re- 
 peal or amend remains -in force un 
 til expressly repealed. 1 Thomp. 
 Corp. (2d. ed.), § 414. But the legis- 
 lature may enter into an irrepeal- 
 able contract with a corporation. 
 
 notwithstanding a previous legisla- 
 ture has reserved the power to 
 alter or repeal the charter. New 
 Jersey v. Yard, 95 U. S. 104, 24 L. 
 ed. 352. 
 
 3« Mowrey v. Indianapolis, &c. 
 R. Co., 4 Biss. (U. S.) 78, Fed. Cas. 
 No. 9891; Pacific R. Co. v. Ren- 
 shaw, 18 Mo. 210; Zabriskic v. 
 Hackensack, &c. R. Co., 18 N. J. 
 Eq. 178, 185, 90 Am. Dec. 617; 
 Commonwealth v. Fayette Co. R. 
 Co., 55 Pa. St. 452; Cross v. Peach 
 Bottom R. Co., 90 Pa. St. 392; 
 Wagner Free Inst., v. Philadelphia, 
 132 Pa. St. 612, 19 Atl. 297, 19 Am. 
 St. 613; West Wisconsin R. Co. v. 
 Trempealeau County, '35 Wis. 257. 
 See also State v. Louisville, &c. 
 Rt Co., 97 Miss. 35, 51 So. 918, 53 
 So. 454, Ann. Cas. 1912 C, 1150 n. 
 
 37 Miller v. State, 15 Wall. (U. 
 S.) 478, 21 L. ed. 98; State v. 
 Northern Cent. R. Co., 44 Md. 131,. 
 164; Campbell v. Mississippi Union 
 Bank, 6 How. (Miss.) 625, 653. 
 
 38 Spring Valley Water- works v> 
 Schottler, llO U. S. 347, 4 Sup. Ct. 
 48, 28 L. ed. 173; Mayor v. Pitts- 
 burgh, &c. R. Co., 2 Abb. (U. S.) 
 
127 
 
 CHARTERS 
 
 §68 
 
 courts, unless, possibly, where some principle of natural justice 
 is violated.*^ 
 
 § 68 (57). Repeal where conditional power is reserved. — But 
 where only a conditional power to repeal the charter upon a 
 failure of the corporation to comply with certain conditions is 
 reserved, although the power may be exercised at once upon such 
 failure,*" and although the presumption will be in favor of the 
 existence of the facts on which the validity of a repealing statute 
 depends ;*^ yet it has been held that, the legislature is not the 
 final judge as to whether such a failure has given it authority to 
 repeal, and that its action may be set aside by the courts.*^ It 
 
 9; Mobile, &c. R. Co. v. State, 29 
 Ala. 573; Bruffett v. Great Western 
 R. Co., 25 111. 353; Thornton v. 
 Marginal, &c. R. Co., 123 Massi. 
 32; New York, &c. R. Co., Peti- 
 tion of, 70 N. Y. 327, 351; Western, 
 &c. R, Co. V. Rollins, 82 N. Car. 
 523; 1 Thomp. Corp. (2d. ed.), §414. 
 See also Musgrove v. Vicksburg, &c. 
 R. Co., 50 Miss. 670. 
 
 . so Lothrop V. Stedman; 13 
 Blatch. (U. S.) 134, 42 Conn. 583, 
 Fed. Cas. No. 8519; Sala v. New 
 Orleans, 2 Woods (U. S.) 188, Fed. 
 Cas. No. 12246. See also Shields 
 V. Ohio, 95 U. S. 319, 24 L. ed. 
 357; Sinking Fund Cases, 99 U. S. 
 700, 720, 25 L. ed. 496. 
 
 40 Oakland R. Co. v. Oakland, 
 &c. R. Co., 45 Cal. 365, 13 Am. Rep. 
 181; New York, &c. R. Co. v. Bos- 
 ton, &c. R. Co., 36 Conn. 196; Min- 
 ers^ Bank v. United States, 1 
 Greene (Iowa) 553; Myrick v. 
 Brawley, 33 Minn. 377, 23 N. W. 
 549; Kennedy v. Strong, 14 Johns. 
 • (N. Y.) 128. But see Flint, &c. Co. 
 -V. Woodhull, 25 Mich. 99, 12 Am 
 
 Rep. 233; Chesapeake, &c. Canal 
 Co. V. Baltimore, &c. R. Co., 4 
 G. & J. (Md.) 1. 
 
 41 Erie, &c. R. Co. v. Casey, 26 
 Pa. St. 287; State v. Curran, 7 Eng. 
 (Ark.) 321. See also Williamsport 
 Pass. R. Co. V. Williamsport, 120 
 Pa. St. 1, 13 Atl. 496. 
 
 *2 Commonwealth v. Pittsburgh, 
 &c. R. Co., 58 Pa. St. 26; Erie, &c. 
 R. Co. V. Casey, 26 Pa. St. 287. See 
 also Myrick v. Brawley, 33 Minn. 
 377, 23 N. E. W. 549. Some cases • 
 hold Ihat by accepting a charter 
 containing a reservation by the 
 legislature of power to repeal, upon 
 the happening of a contingency, 
 the corporation is estopped to 
 question the authority of the legis- 
 lature to determine whether the 
 contingency has happened, though 
 the question would otherwise be 
 one for judicial determination. 
 Crease v. Babcock, 23 Pick. 
 (Mass.) 334, 34 Am. Dec. 61 ; Loth- 
 rop V. Stedman, 42 Conn. 583; 
 Carey v. Giles, 9 Ga. 253; Miners' 
 Bank v. United States, 1 Greene 
 (Iowa) 553; DeCamp v. Eveland, 
 
§ 68 RAILROADS 128 
 
 seems to us, however, that the legislature, having the right to 
 reserve the power to repeal unconditionally, may reserve the 
 right to repeal conditionally with power to determine whether or 
 not the condition exists, for it is a general rule that where the 
 legislature is authorized to determine whether a state of facts 
 exists authorizing the exercise of power, its judgment that such 
 a state of facts does exist is conclusive.** As such repeal may be 
 regarded as only a ready substitute for a forfeiture for abuse of 
 corporate powers upon quo warranto proceedings,** it has been 
 suggested that the corporation should have an opportunity to be 
 heard in its own defense before some judicial tribunal,*" and not 
 subjected to an ex parte judgment pronounced by one of the par- 
 ties to the contract, which it is claimed has been violated.*^ But, 
 since a judicial finding establishing the misuser or abuse of cor- 
 porate powers would have the effect to dissolve the corporation, 
 such a proceeding would rtnder idle the reservation of the power 
 of repeal.*'^ This power is of value because it may be exercised 
 when proceedings by quo warranto might not only prove inef- 
 fectual, but would involve risks, embarrassment and delay.** A 
 legislative inquiry to ascertain if there has been a violation of its 
 charter or any other default by a corporation chartered under a 
 general statute reserving to the legislature the right to repeal 
 charters of corporations of its class upon any such violation or' 
 
 19 Barb. (N. Y.). 81. This we re- repealing power. State v. South- 
 
 gard as the better rule. See 1 ern, &c. R. Co., 24 Tex. 80. 
 Thomp. Corp. (2d. ed.), § 415. 45 Mayor v. Pittsburgh, &c. R. 
 
 43 Elliott Gen. Prac, § 148, and Co., 2 Abb. (U. S.) 9. See Ver- 
 authorities last above cited. See mont, &c. R. Co. v. Vermont, &c. 
 also the more recent Pennsylvania R. Co., 34 Vt. 2. 
 
 case of Wagner Free Inst. v. Phila- 46 Commonwealth v. New Bed- 
 
 delphia, 132 Pa. St. 612, 19 Am. ford Bridge, 2 Gray (Mass.) 339. 
 St. 613, and cases last cited in pre- 47 Erie, &c. R. Co. v. Casey, 26- 
 
 ceding note. Pa. 287; Miners' Bank v. United 
 
 44 Legislative power to declare a States, 1 Greene (Iowa) SS3; 
 forfeiture is cumulative to. and not Crease v. Babcock, 23 Pick. 
 a substitute for a judicial proceed- (Mass.) 334, 34 Am. Dec. 61. 
 
 ing by quo warranto, and such pro- 4S Erie, &c. R. Co. v. Casey, 26' 
 
 ceedings may be brought when the Pa. St. 287. 
 legislature has failed to exercise its 
 
129 CHARTERS § 69 
 
 default, has been held not to be a "judicial act," such as the 
 legislature is prohibited from performing by the constitutions 
 of many of the states.** 
 
 § 69. (58). Rule where power to repeal is not reserved. — 
 
 Where the power to repeal has not been reserved a different rule 
 applies. In such a case the charter can only be revoked for cause 
 as established by the decree of a competent tribunal upon judicial 
 inquiry, 50 and is not subject to legislative repeal for any alleged 
 abuse of corporate franchises,^* at least where the legislature is 
 prohibited by the state constitution from exercising judicial 
 powers. 5^ 
 
 § 70 (59). Effect of repeal. — The legislature may not, under 
 the guise of authority to repeal the charter, invalidate contracts 
 and vested rights of third parties f^ nor, in general, will any ac- 
 tion on its part affect the ownership of personal and real prop- 
 erty acquired by the corporation during its lawful existence, or 
 of rights or contract of choses in action, so acquired, which do , 
 not in their nature depend upon the general powers conferred 
 by the charter.^* The rights of the shareholders of such a cor- 
 
 49 Crease v. Babcock, 23 Pick. 111. 413, 24 N. E. 532, 8 L. R. A. 
 (Mass.) 334, 34 Am. Dec. 61. See 858 n. See also Suburban, &c. Co. 
 post, § 69. V. Inhabitants, &c. (N. J.), 41 Atl. 
 
 50 Ante, §§ 65, 67. 86S; National, &c. Co. v. Kansas 
 
 51 State V. Noyes, 47 Maine 189; City, 65 Fed. 691. 
 
 Sturges V. Vanderbilt, 73 N. Y. s3 Miller v. State, 15 Wall. (U. 
 
 384; Brooklyn Cent. R. Co. v. S.) 478, 21 L. Ed. 98; Railroad Co. 
 
 Brooklyn City R. Co., 32 Barb. (N. v. Maine, 96 U. S. 499, 24 L. ed. 
 
 Y.) 358; Commonwealth v. Pitts- 836; Rice v. Minnesota, &c. R. Co., 
 
 burgh, &c. R. Co., 58 Pac. St. 26. 1 Black (U. S.) 3S8, 17 L. ed. 147; 
 
 52 Bruffett V. Great Western R. Commonwealth v. Essex Co., 13 
 to., 25 III. 353; University of Gray (Mass.) 239, 253; Detroit v. 
 Maryland v. Williams, 9 Gill & J. Detroit, &c. Plank Road Co., 43 
 (Md.) 365, 31 Am. Dec. 72. But Mich. 140, 5 N. W. 275; Albany, &c. 
 see Crease v. Babcock, 23 Pick. R. Co. v. Brownell, 24 N. Y. 345. 
 (Mass.) 334, 34 Am. Dec. 61. It But see Macon, &c. R. Co. v. Gib- 
 has been held that a charter ia son, 85 Ga. 1, 21 Am. St. 135. 
 perpetual and irrevocable if there 54 Greenwood v. Marginal, &c. 
 is no law limiting it or providing R. Co., 105 U. S. 14, 26 L. ed. 961 ,"• 
 for repeal. Snell v. Chicago, 133 per Miller, J.; New Orleans, &c. 
 
 5 — Ell. Railroads I 
 
§70 
 
 RAILROADS 
 
 130 
 
 poration to their interests in such property are not, as a rule, 
 annihilated by such a repeal,^^ and where the legislature does not 
 provide a special remedy, the courts may enforce those rights by 
 the means within their power.^^ The repeal by the legislature of 
 the charter of a corporation, however, destroys its ability to orig- 
 inate new transactions dependent on the power conferred by the 
 charter, and leaves the incorporators with only such powers as 
 may be exercised by unincorporated private persons under the 
 general laws of the state. ^'^ But the legislature may charter a 
 new corporation with authority to take so much of the property 
 and franchises of the corporation whose charter is revoked as may 
 be necessary to the public use, upon making compensation there- 
 for,5* and it has been held that the repeal of a corporation's char- 
 ter vests in the state the right to all public works built by it for 
 public use on lands taken in the name of the state (subject to the 
 proprietary right of the shareholders to the assets), together with 
 the right to manage them or regrant them at its election.^^ 
 
 R. Co. V. Delamore, 114 U. S. SOI, 
 S Sup. Ct. 1009, 29 L. ed. 244. See 
 also Mason v. Mining Co., 133 U. 
 S. SO, 10 Sup. Ct. 224, 33 L. ed. 
 S24; San Mateo v. Southern, &c. R. 
 Co., 8 Sawy. (U. S.) 238, 279, 13 
 Fed. 722; Orr v. Bracken County, 
 81 Ky. S93; State v. Noyes, 47 
 Maine 189; Detroit v. Detroit, &c. 
 Plank Rd. Co., 43 Mich. 140, S N. 
 W. 275; People v. O'Brien, 111 
 N. Y. 1, 18 N. E. 692, 2 L. R. A. 
 2SS n, 7 Am. St. 684, 45 Hun 519, 
 and note, Opinion of Justices, 66 
 N. H. 630, 33 Atl. 1076. Some of 
 these cases, notably the New York 
 and Maine cases, go still further 
 and apply this rule to franchises. 
 56 Greenwood v. Marginal, &c. R. 
 Co., 105 U. S. 14, 26 L. ed. 961; 
 Thornton v. Marginal Freight, &c. 
 Co., 123 Mass. 32; Opinion of Jus- 
 tices, 66 N. H. 630, 33 Atl. 1076. 
 
 And see Citizensi* St. R. Co. v. City 
 R. Co., 64 Fed. 651; Africa v. 
 Knoxville, 70 Fed. 734; Dow v. 
 Northern R. Co., 67 N. H. 1, 3d 
 Atl. 510; New York v. Twenty- 
 third St. R. Co. 113 N. Y. 311, 21 
 N. E. 60; IngersoU v. Nassau, &c. 
 Co., 1S7 N. Y. 453, 52 N. E. 545, 
 43 L. R. A. 236. An intent to in- 
 terfere with vested rights, which 
 would render the statute unconsti- 
 tutional, will not be inferred unless 
 plainly declared. West Jersey 
 Traction ' Co. v. Camden, &c. Co., 
 52 N. J. Eq. 452, 29 Atl. 333. 
 
 56 Greenwood v. Marginal, &c. R. 
 Co., 105 U. S. 14, 26 L. ed. 961. 
 
 57 Greenwood v. Marginal, &c. R. 
 Co., 105 U. S. 14, 26 L. ed. 961. 
 
 58 Greenwood v. Marginal, &c. 
 R. Co., 105 U. S. 14, 26 L. ed. 961. 
 
 59 Erie &c. R. Co. v. Casey, 26 Pa. 
 St. 287. 
 
131 
 
 CHARTERS 
 
 §71 
 
 § 71 (60). Repeal of by general laws. — Where power to repeal 
 is reserved, a special charter may be repealed by a general law,®" 
 even it has been held, where no reference is made to the charter 
 repealedj^i but a general law can have such an effect only where 
 it is so opposed to the provisions of the charter that both acts 
 may not stand together.*^ The repeal of a general incorporating 
 act does not, however, affect the charter rights of a corporation 
 previously, organized under its provisions,®^ unless such is the 
 intention of the legislature.®* 
 
 § 72 (61). Charter is subject to general laws reserving power 
 to repeal. — A charter, unless otherwise provided, is subject to the 
 general laws in force when it was granted,®^ and, therefore, a gen- 
 eral law reserving the power to alter, amend or repeal corporate 
 charters generally is taken as forming part of all charters after- 
 wards granted.®® For this reason, as already stated,®'^ the amend- 
 
 so State V. Commissioners &c., Ji] 
 N. J. L. 288; Mechanics &c. Bank 
 V. Bridges, 30 N. J. L. 112. That 
 the charter may be revoked by a 
 change in the constitution of the 
 state, as well as by statute, where 
 power to repeal has been reserved, 
 see Lee & Co.'s Bank, Matter of, 
 21 N. Y. 9. 
 
 61 State V. Commissioners &c., 37 
 N. J. L. 228. But see City of Grand 
 Rapids V. Grand Rapids Hydraulic 
 Co., 66 Mich. 606, 33 N. W. 749; 
 New Jersey v. Yard, 95 U. S. 104, 24 
 L. ed. 352, same case as above. 
 
 62 State v. Commissioners &c., 37 
 N. T. L. 228. See also Bangor R. 
 Co. V. Smith, 47 Maine 34; Union 
 Imp. Co. V. Commonwealth, 69 Pa. 
 St. 140. 
 
 63 Bibb V. Hall, 101 Ala. 79, 14 
 So. 98, 59 Am. & Eng. R. Cas. 62; 
 Donworth v. Coolbaugh, 5 Iowa 300; 
 Union Hebrew Assn.. v. Benshimol, 
 130 Mass. 325; Bewick v. Alpena 
 
 Harbor Co, Vi Mich. 700; Freehold 
 &c. Assn. V. Brown, 29 N. J. Eq. 
 121. 
 
 6* See Wilson v. Tesson, 12 Ind. 
 285 ; Bibb v. Hall, 101 Ala. 79, 14 So. 
 98, 59 Am. & Eng. R. Cas. 62. 
 
 65 Pratt V. Atlantic &c. R. Co., 42 
 Maine 579. 
 
 66 Tomlinson v. Branch, IS Wall. 
 (U. S.) 460, 21 L. ed. 189. Citi- 
 zens' Sav. Bank v. Owensboro, .173 
 U. S. 636, 19 Sup. Ct. 530, 43 L. 
 ed. 840; Citizens' St. R. Co. v. Mem- 
 phis, S3 Fed. 715; Griffin v. Ken- 
 tucky Ins. Co., 3 Bush (Ky.) 592, 
 96 Am. Dec. 259; Commissioners v. 
 Holyoke &c. Co., 104 Mass. 446, 6 
 Am. Rep. 247; Massachusetts Gen- 
 eral Hospital v. State Mut. L. A. 
 Co., 4 Gray (Mass.) 227; State v. 
 Person, 32 N. J. L. 134; Lee's Bank, 
 In re, 29 N. Y. 9 ; . Suydam v. Moore, 
 8 Barb. (N. Y.) 358. 
 
 67 Ante, §67. 
 
'7Z 
 
 RAILROADS 
 
 132 
 
 ment or repeal of the charter where such a general law existed 
 at the time it was granted is not, ordinarily, a violation of the 
 provision of the constitution of the United States forbidding the 
 impairment of the obligation of contracts. And the fact that part 
 of such a general statute is incorporated into a charter, does not, 
 by implication, repeal the rest of the statute.®* 
 
 § 73 (62). Expiration of charter. — The existence of railroad 
 companies incorporated by special charters,®* as that of other 
 business corporations,'''' is frequently limited to a term of years ; 
 and some of the states having general laws for the formation of 
 such corporations limit the time for which a corporation may 
 be formed under them. Where there are no provisions for re- 
 newal of the corporation'^! or where no advantage is taken of 
 such provisions, the corporation is ipso facto dissolved upon the 
 expiration of the time for which it was chartered. ''^- It is not 
 necessary in such a case that a dissolution should be judicially 
 decreed, ^^ and the plea of nul tiel corporation may be interposed 
 to any suits which it may bring,'* and any member may, in a 
 
 espratt v. Atlantic &c. R. Co., 42 
 Maine 579. See also 1 Thomp. Corp. 
 (2d. ed.), § 413. 
 
 69 For instances of such charters 
 of limited duration, see Charter of 
 the Union Railroad Co. Local Laws 
 Ind. 1839, p. 131 ; of Newbaugh and 
 Vanderburgh Railroad Co. Local 
 Laws Ind. 1850, p. 308. 
 
 701 Thomp. Corp. (2d. ed.), §190. 
 
 71 An extension of the life of a 
 corporation by renewal is held not to 
 be the creation of a new corporation. 
 Chicago &c. R. Co. v. Doyle, 258 
 111. 624, 102 N. E. 260, Ann. Cas. 
 1914B, 385, and other cases cited in 
 opinion and note. 
 
 720akland R. Co. v. Oakland &c. 
 R. Co., 45 Cal. 365, 13 Am. Rep. 181. 
 See also Marion &c. Co. v. Perry, 74 
 
 Fed. 425, 3i L. R. A. 252; Ashe- 
 ville Division v. Aston, 92 N. Car. 
 578; note in 33 L. R. A. 576; Com- 
 monwealth V. Lykens Water Co., 110 
 Pa. St. 391, 2 Atl. 63; La Grange 
 &c. R. Co. V. Rainey, 7 Coldw. 
 (Tenn.) 432; Combes v. Keyes &c. 
 R. Co., 89 Wis. 297, 62 N. W. 89, 27 
 L. R. A. 369, 46 Am. St. 839. 
 
 73 Merrill v. Suflfolk Bank, 31 
 Maine 57, SO Am. Dec. 649; Bank 
 of Gallipolis V. Trimble, 6 B. Mon. 
 (Ky.) 599; Sturges v. Vanderbilt, 
 7i N. Y: 384, 390; LaGrange &c. 
 R. Co. V. Rainey, 7 Coldw. (Tenn.) 
 420. See also Bird v. Gay, 162 Mich. 
 612, 127 N. W. 814.- 
 
 74 Brooklyn &c. R. Co., In re, 72 
 N. Y. 245; Krutz v. Paola Town 
 Co., 20 Kans. 397. But see St. Louis 
 
133 CHARTERS § 73 
 
 proper case, insist upon a distribution of its assets. '^^ If the 
 charter is to continue until a certain day, the corporation expires 
 at the close of the preceding day.''* But it has been held that a 
 general statute limiting the life of corporations will not affect a 
 corporation organized under a special charter, to which no par- 
 ticular reference is made in the general act.'''' If the charter of a 
 company be suffered to expire it would seem that the legislature 
 cannot then renew its charter so as to continue its existence as a 
 corporate body, except by the consent of all the corporators.'"' 
 This is intimated, rather than decided, in the case to which we 
 have referred ; but where one becomes a stockholder under a 
 charter expressly limiting the duration of the corporation, and 
 there is no reserved power of amendment or repeal, there is rea- 
 son for saying that he cannot be compelled to remain or become 
 a stockholder in what is virtually a new corporation by a renewal 
 of the charter after the corpoi'ation had ceased to exist by reason 
 of the expiration of the original charter. Yet it is generally held, 
 as it should be, that a renewal even after the expiration of the 
 
 Gas Light Co. v. St. Louis, 11 Mo. R. Co., 51 Fed. 309; Union Pa.-i'ic 
 
 App. SS, 84 Mo. 202. R. Co. v. Chicago &c. R. Co., 163 
 
 75 Greeley v. Smith, 3 Story (U. U. S. 564, 16 Sup. Ct. 1173, 41 L. 
 S.) 657, Fed Cas. No. 5748; Burns ed. 265; Board v. Deposit Bank &c. 
 V. Metropolitan Bldg. Assn., 2 124 Fed. 18; Kansas &c. Co. v. 
 Mackey (D. C.) 7; Eagle Chair Co. Smith, 40 Kans. 192, 19 Pac. 636; 
 V. Kelsey, 23 Kans. 632; Bank of Council Grove &c. R. Co. v. Law- 
 Mississippi V. Wrenn, 11 Miss. 791 ; rence, 3 Kans. App. 274, 45 Pac. 125 ; 
 Mann v. Butler, 2 Barb. Ch. (N. Y.) Detroit &c. Co. v. Macomb Circuit 
 362; Sturges v. Vanderbuilt, 73 N. Judge, 109 Mich. 371, 67 N. W. 531. 
 Y. 384. See also Home Bldg. Assn. v. Bru- 
 
 78 People V. Walker, 17 N. Y. 502. ner, 134 Ky. 361, 120 S. W. 306. 
 
 77 Steadman v. Merchants' &c. As to the effect of laws passed af- 
 Bank, 69 Tex. SO, 6 S. W. 675; ter the enactment of the charter but 
 State V. Ladies of the Sacred Heart, prior to acceptance, see Planters &c. 
 99 Mo. 533, 12 S. W. 293. See also Co. v. Tennessee, 161 U. S. 193, 16 
 State V. Stormont, 24 Kans. 6S6. Sup. Ct. 466, 40 L. ed. 667 ; Stone 
 
 78 Bailey v. HoUister, 26 N. Y. v. Wisconsin, 94 U. S. 674, 24 L. ed. 
 112. See generally upon the sub- 102; Attorney-General v. Wisconsin 
 ject of rights after charters expire, &c. R. Co., 35 Wis. 599. 
 
 Union Pacific R. Co. v. Chicago &c. 
 
§73 
 
 RAILROADS 
 
 134 
 
 original term is a continuation of the old charter or corporation 
 and not the creation of a new one.''® There are many decisions 
 to this effect where the corporate term of existence was merely- 
 extended, no matter whether such extension was made before or 
 after the expiration of the original term.®" 
 
 79 Chicago &c. R. Co. v. Doyle, 
 258 111. 624, 102 N. E. 260, Ann. 
 Cas. 1914B, 38Sn. See also Augusta 
 &c. R. Co. V. Augusta, 100 Ga. 701, 
 28 S. E. 126; Ohio Valley &c. Co. v. 
 Bruner, 148 Ky. 358, 146 S. W. 749. 
 
 soprostburg Min. Co. v. Cumber- 
 land R. Co., 81 Md. 28, 31 Atl. 698, 
 and other cases cited in note in Ann. 
 Cas. 1914B, 390. But it may be 
 otherwise where the statute shows 
 a different intention. Commonwealth 
 V. Cain, 14 Bush (Ky.) S2S. 
 
CHAPTER V. 
 
 FRANCHISES. 
 
 Sec. 
 
 75. Definition. 
 
 76. Charter and franchise distin- 
 
 guished. 
 n. Grant of corporate franchi-ses. 
 
 78. Consideration for the grant of 
 
 a franchise. 
 
 79. Nature of a franchise farthe/ 
 
 considered. 
 
 80. Franchise of being a corpora- 
 
 tion — Primary and secondary 
 or general and special fran- 
 chises. 
 
 81. Difference between a franchise . 
 
 and a license. 
 
 Sec. 
 
 82. Sale of corporate property es- 
 
 sential to exercise of fran- 
 chises — Limitation of right to 
 sell. 
 
 83. Effect of attempt to sell or en- 
 
 cumber franchise. 
 
 84. Judicial sale of franchises. 
 
 85. Sequestration. 
 
 86. Seizure of corporate franchise 
 
 under power of eminent do- 
 main. 
 
 87. Dissolution by authorized sale 
 
 of franchises — Special fran- 
 chise may survive dissolution. 
 
 § 75 (63). Definition. — In its broad signification the term 
 "franchises" means "a special privilege conferred by government 
 upon individuals, and which does not belong to the citizens of the 
 country generally of common right,"^ but the meaning of the 
 term "corporate franchises" is not so comprehensive. We suppose 
 that the term "corporate franchises" means such special rights 
 and privileges as are conferred upon corporations by the legisla- 
 tive power.* We do not include in our definition corporate im- 
 
 13 Thomp. Corp. (2d. ed.), § 2860; 
 Blackstone Comm.. 37; Joyce Fran- 
 chises, §§ 1, 2. "A franchise is a 
 grant or special privilege conferred 
 by the sovereign power of the State." 
 People V. Union Gas &c. Co., 254 
 111. 395, 98 N. E. 768, Ann Cas. 1916B, 
 201, 204. 
 
 2 In Fietsam v. Hay, 122 111. 293, 
 1.3 N, E. 501, 3 Am. St. 492, it is 
 said that the term, ini its appro- 
 priate sense, 'is confined to such 
 rights and privileges as are con- 
 ferred upon corporate bodies by leg- 
 islative grant, and that a franchise 
 is the right or privilege of being a 
 
 135 
 
§75 
 
 RAILROADS 
 
 136 
 
 munities because immunities are not always franchises,* although 
 they may sometimes be properly considered as such under the 
 statute applicable to the particular instance. The franchises of 
 a railroad corporation are such rights and privileges as are essen- 
 tial to the proper operation of a railroad and nec'&ssary to the 
 
 corporation and of doing such 
 things, and such things, only, as 
 are authorized by the charter. See 
 also State v. Austin &c. R. Co., 94 
 Tex. S30, 62 S. W. 1050; People's 
 Passenger R. Co. v. Memphis City R. 
 Co.,- 10 Wall. (U. S.) 38, 19 L. ed. 
 844. In Detroit &c. R. Co. v. Com- 
 mon Council, 125 Mich. 673, 85 N. 
 W. 96, 86 N. W. 809, 84 Am. St. 
 589, it is said that franchises are 
 of three classes : 1. The right to 
 organize and exist as a corporation. 
 2. The right to act generally. 3. The 
 special privileges which are not pos- 
 sessed by individuals under general 
 laws. Compare Crawford Elec. 
 Co. V. Knox County Power Co., 110 
 Maine 285, 86 Atl. 119, Ann. Cas. 
 1914C, 933n. In State v. Business 
 Men's Athletic Club, 178 Mo. App. 
 548, 163 S. W. 901, it is said that a 
 corporate franchise is the right to 
 exist as an entity for the purpose 
 of doing things permitted by law 
 while the things which it is author- 
 ized to do are its powers as dis- 
 tinguished from its franchises. 
 
 3 In the case of Keokuk &c. Co. 
 V. Missouri, 152 U. S. 301, 14 Sup. 
 Ct. 592, 38 L. ed. 450. attention is 
 directed to an apparent conflict in 
 the decisions. We quote the follow- 
 ing from the opinion in that case : 
 "In Chesapeake &c. R. Co. v. Mil- 
 ler, 114 U. S. 176, 5 Sup. Ct. 813, it 
 
 was held that an immunity from 
 taxation enjoyed by the Covington 
 & Ohio Railway Company did 
 not pass to a purchaser of such 
 road under foreclosure of a mort- 
 gage, although the act provided 
 that "said purchaser shall forth- 
 with be a corporation,' and 'shall 
 succeed to all such franchises, 
 rights and privileges * * * 
 as would have been had * * * by 
 the first company but for such sale 
 and conveyance.' It was held, fol- 
 lowing in this particular, Morgan v. 
 Louisiana, 93 U. S. 217, that the 
 words 'franchises, rights and privi- 
 leges' did not necessarily embrace a 
 grant of an exemption or immunity 
 See also, Picard v. East Tenn. &c. 
 R. Co., 130 U. S. 637, 9 Sup. Ct. 640. 
 Upon the other hand, it was held 
 in Tennessee v. Whitworth, 117 U. 
 S. 139, 6 Sup. Ct. 649, that the right 
 to have shares in its capital stock 
 exempted from taxation within the 
 state is conferred upon a railroad 
 corporation by state statutes grant- 
 ing to it 'all the rights, powers and 
 privileges,' conferred upon another 
 corporation named, if the latter 
 corporation possesses by law such 
 right of exemption, citing in sup- 
 port of this principle a number of 
 prior cases. See also Wilmington 
 &c. R. Co. V. Ashbrook, 146 U. S. 
 279, 297, 13 Sup. Ct. 72." 
 
137 
 
 FRANCHISES 
 
 U6 
 
 conduct of the business of a railroad company.* Merely transient 
 or personal immunities do not, as we believe, fall within the legal 
 meaning of the term. The distinction between transient immuni- 
 ties and permanent rights and privileges which constitute fran- 
 chises is one of importance since some franchises may be trans- 
 ferable while mere immunities are not. 
 
 § 76 (64). Charter and franchise distinguished. — A charter 
 contains the grant of a franchise, but is not the franchise itself. 
 The charter is the evidence that a franchise has been granted 
 rather than the franchise, for that is the thing the charter grants. 
 The constitutional inhibition against impairing the obligation of 
 contract is not operative upon the charter but upon the contract 
 which the charter contains, and protects franchises because they 
 are valuable property or contract rights.^ 
 
 4 In the case of Morgan v. Louisi- 
 ana, 93 U. S. 217, 233, 23 L. ed. 
 860, it was said : "Much confusion 
 of thought has arisen in this case 
 and in similar cases, from attach- 
 ing a vague and undefined meaning 
 to the term 'franchises.' It is often 
 used as synonymous with rights, 
 privileges and immunities, though of 
 a personal and temporary character ; 
 so that, if any one of these exists, 
 it is loosely termed a 'franchise,' and 
 is supposed to pass upon a trans- 
 fer of the franchises of the com- 
 pany. But the term must always 
 be considered in connection with 
 the corporation or property to 
 which it is alleged to appertain. 
 The franchises of a railroad cor- 
 poration are rights or privileges 
 which are essential to the opera- 
 tions of the corporation,, and with- 
 out which its road and works 
 would be of little value; such 
 as the franchise to run cars, to take 
 tolls, to appropriate earth and 
 
 gravel for the bed of its road, or 
 water for its engines, and the like. 
 They are positive rights or privi- 
 leges without the possession of 
 which the road of the company 
 could not be successfully worked." 
 See also Rochester R. Co. v. Roch- 
 ester, 205 U. S. 236, 27 Sup. Ct. 
 469, 51 L. ed. 784; People v. State 
 Tax Comrs., 174 N. Y. 417, 67 N. 
 E. 69, 63 L. R. A. 884, 105 Am. St. 
 674; Lord v. Equitable Life Assur. 
 Soc, 194 N. Y. 212, 87 N. E. 443, 
 22 L. R. A. (N. S.) 420n, 427 (dis- 
 tinguishing the "general" franchise 
 to be a corporation from "special" 
 franchises). 
 
 5 Oakland R. Co. v. Oakland &c. 
 Co., 45 Cal. 365, 13 Am. Rep. 181. 
 See also Joyce on Franchises, 
 §§ 4, 41, 46; 3 Thomp. Corp. (2nd 
 ed.), § 2861. In Lord v. Equitable 
 Life Assur. Soc, 194 N. Y. 212, 87 
 N. E. 443, 22 L. R. A. (N. S.) 420n, 
 427, it is said that the charter of 
 a corporation is the law which 
 
V7 
 
 RAILROADS 
 
 138 
 
 §^77 (65). Grant of corporate franchises. — A corporate fran- 
 chise using the term "franchise" as meaning a property right 
 that are often called franchises may be granted by municipal 
 corporations to railroad companies, but that which is a corporate 
 franchise in the true sense of the term can only be granted by the 
 state. A license to place a railroad track in a certain street is 
 sometimes called a franchise, but this is, it seems to us, an erro- 
 neous use of the term. The right to use the street is a priyilege 
 or license, until acted upon, rather than a corporate franchise, 
 except where it is conferred as a franchise by the charter or 
 statute,® or if a franchise, it is a secondary or derivative one,'' 
 
 gives it existence as such and can 
 be repealed at the will of the legis- 
 lature, while a "special franchise" 
 is the right to use public property 
 for a public use, but with private 
 profit. Repeal of an ordinance 
 granting right to lay double tracks 
 in a street is held an unlawful im- 
 pairment of the obligation of the 
 contract, in Grand Trunk &c. R. 
 Co. V. South Bend, 227 U. S. 544, 
 35 Sup. Ct. 303, 57 L. ed. 638, 44 
 L. R. A. (N. S.) 405. See also Rus- 
 sell V. Sebastian, 233 U. S. 195, 34 
 Sup. Ct. 517, 58 L. ed. 912, Ann. 
 Cas. 1914C, 1282; Louisville v. 
 Cumberland Tel. &c. Co., 224 U. S. 
 649, 659, 32 Sup. Ct. 572, 56 L. ed. 
 934; New York Elec. Lines Co. v. 
 Empire City Subway Co., 235 U. 
 S. 179, 35 Sup. Ct. 72, Ann. Cas. 
 191 5 A, 906. 
 
 6 McPhee, &c. Co. v. Union Pac. 
 R. Co., 158 Fed. 5; Chicago, &c. 
 Co. V. People, 73 111. 541; Metro- 
 politan, &c. Co. V. Chicago, &c. Co., 
 87 111. 317; Belleville v. Citizens' 
 R. Co., 152 111. 171, 38 N. E. 584, 
 26 L. R. A. 681; Eichels v. Evans- 
 
 ville, &c. Co., 78 Ind. 261, 41 Am. 
 Rep. 561; People v. Ft. Wayne, &c. 
 R. Co., 92 Mich. 522, 525, 52 N. W. 
 1010, 16 L. R. A. 752; Lincoln St. 
 R. Co. v. Lincoln, 61 Nebr. 109, 84 
 N. W. 802; State v. Citizens' St. 
 R. Co., 80 Nebr. 357, 114 N. W. 
 429. See also Metropolitan Home 
 Tel. Co. v. Emerson, 202 Mass. 
 402, 88 N. E. 670. The right of 
 way is called an easement in May- 
 or, &c. of Knoxville v. Africa, 77 
 Fed. 503, 507. See also New York 
 Elec. Lines Co. v. Empire City 
 Subway Co., 235 U. S. 179, 35 
 Sup. Ct. 72, Ann.' Cas. 1915 A, 906. 
 See generally Saginaw, &c. Co. v. 
 Saginaw, 28 Fed. 529; Jersey City 
 v. Jersey City, &c. R Co., 20 N. 
 J. Eq. 360; State v. Hilbert, 72 
 Wis. 184, 39 N. W. 326; Eichels v. 
 Evansville &c. R. Co., 78 Ind. 261, 
 41 Am. Rep. 561; Elliott Roads and 
 Streets (3d. ed.), §§ 933, 938. In 
 one sense;, however, such grant of 
 such a right or privilege, when 
 not a mere naked license may be 
 called a secondary franchise. 
 T Saginaw v. Saginaw, &c. Co., 
 
139 FRANCHISES § 78 
 
 and, at all events, the right to use city streets for a railroad must 
 be granted either directly by the legislature or through the action 
 of the municipality authorized by the legislature.* 
 
 § 78 (66). Consideration for the grant of a franchise. — A fran- 
 chise using the term "franchise" as meaning a property right 
 vested in a corporation, is always supported by a consideration. 
 This consideration may be the implied undertaking to perform 
 •corporate duties beneficial to the public, or it' may be an express 
 agreement to do or not to do a designated act. In this respect a 
 franchise differs essentially from a bare license, for a bare li- 
 cense is not supported by any consideration. It is, therefore, 
 ■entirely consistent with principle to hold that a bare or naked 
 license is revocable and is not protected as a franchise, The 
 license does not become a contract until it is accepted and acts 
 are performed under it which vest the rights of the parties, while 
 a franchise becomes effective upon the acceptance of the charter 
 or the performance of such acts as are required to be performed 
 as conditions precedent to the vesting of the rights granted.^ 
 
 .28 Fed. 529; Shreveport Trac. Co. Wall. (U. S.) 38, 19 L. ed. 344; 
 
 V. Kansas City, &c. R. Co., 119 La. Henderson v. Central, &c. Co., 21 
 
 759, 44 So. 457; State v. Hilbert, 72 Fed. 358; Indianapolis, &c. Co. v. 
 
 Wis. 184, 39 N. W. 326. Citizens' Co., 127 Ind. 369, 24 N. 
 
 8 People's R. Co. v. Memphis R. E. 1054, 26 N. E. 893, 8 L. R. A. 
 Co., 10 Wall. (U. S.) 38, 51, 19 L. 539 n; Western, &c. Co. v. Citi- 
 «d. 844; Pittsburgh, &c. R. Co. v. zens', &c. Co., 128 Ind. 525, 26 N. 
 Hood, 94 Fed. 618; Farmer v. E. 188, 28 N. E. 88, 10 L. R. A. 
 Myles, 106 La. Ann. 333, 30 So. 770 n, 25 Am. St. 462; Atchinson St. 
 858; Adee v. Nassau Elec. R. Co., R Co. v. Nave, 38 Kans. 744, 17 
 •65 App. Div. 529, 72 N. Y. S. 992; Pac. 587, S Am. St. 800; Detroit v. 
 Potts V. Quaker City R. Co., 161 Detroit, &c. Co., 37 Mich. 558; Peo- 
 Pa. St. 396, 29 Atl. 108; Elliott Ple v. Mutual, &c. Co., 38 Micli. 154; 
 Roads and Streets (3d. ed.), §§ 933, Galveston City, &c. Co. v. Galves- 
 934. See and compare Covin v. ton City St. R. Co., 63 Tex. 529; 
 Chicago, 132 Fed. 848. Gulf City, &c. Co. v. Galveston, 65 
 
 9 Philadelphia, &c. Co.'s Appeal, Tex. 502; Great Central R. Co. v. 
 102 Pa. St. 123. See generally Peo- Gulf, &c. R. Co., 26 Am. & Eng. 
 pie's R. Co. V. Memphis R. Co., 10 R. Cas. 114. 
 
§ 79 RAILROADS 140 
 
 § 79 (67). Nature of a franchise further considered. — The 
 right to exist as a corporation, that is, as a legal entity composed 
 of individuals united under a common name, with the capacity 
 both of self-perpetuation and of exercising certain of the powers 
 and privileges of a natural person, such as the power to sue and 
 be sued, to hold and convey property, to make by-laws for the 
 control of its business and to enter into contracts in the corpo- 
 rate name, is often spoken of as the company's franchise, i" On 
 the other hand, the word "franchises" is frequently used to desig- 
 nate those special privileges and powers conferred upon a corpo- 
 ration for the furtherance of some public work, such as the right 
 to construct a railroad upon lands taken by the right of eminent 
 domain, and "those rights or privileges which are essential to the 
 operations of the corporation, and without which its roads and 
 works would be of little value, such as the franchise to run cars, 
 to take tolls, to appropriate earth and gravel for the bed of its 
 road, or water for its engines, and the like."ii In so far as the 
 word is used to designate powers which an individual may not 
 exercise without a special grant of authority from the legis- 
 lature^^ (for example, eminent domain), a franchise has, ordi- 
 
 10 Blackstone Comm. 37; Iron Prerogative franchises, sucli as the 
 
 Silver Mine Co. v. Cowie, 31 Colo. exercise of the right of eminent 
 
 450, 72 Pac. . 1067; Cedar Rapids domain, arise from a special grant, 
 
 Water Co. v. Cedar Rapids, 118 and can only be exercised by cither 
 
 Iowa 234, 91 N. W. 1081. The an individual or a corporation by 
 
 right to carry on business in the authority of such a grant and with- 
 
 corporate name, to make contracts, in the jurisdiction of the state by 
 
 to sue and be sued, and to acquire which the grant is made. See 3 
 
 and hold property as a corporate Thomp. Corp. (2d. ed.), § 2862. 
 
 body, and to be exempt from lia- n Morgan v. Louisiana, 93 U. S. 
 
 bility for the debts of its stock- 217, 23 L. ed. 860; Lawrence v. 
 
 holders, and solely liable for the Morgan Louisiana, &c. Co., 39 La. 
 
 debts and liabilities contracted by Ann. 427, 2 So. 69, 4 Am. St. 265; 
 
 it, with such other rights as enable Vermont v. Boston, &c. R. Co., 25 
 
 the corporation to act as a person Vt. 433. The right to take tolls is 
 
 or legal entity, are called ordinary a special franchise. Beekman v. 
 
 franchises, and may be exercised in Saratoga, &c. R. Co., 3 Paige (N. 
 
 any jurisdiction where such exer- Y.) 45. 
 
 cise is not expressly prohibited. i- To the effect that franchises' 
 
141 
 
 FRANCHISES 
 
 79 
 
 narily, no transferable value/^ and, though it may be valued for 
 taxation separately from the capital stock and property,^* it can- 
 not, as a rule, be transferred by sale,^® mortgage,^^ or assign- 
 
 to build, own and manage a rail- 
 road are not necessarily corporate 
 nor unassignable, see Ragan v. 
 Aiken, 77 Tenn. 609, 42 Am. Rep. 
 684; Bank of Middlebury v. Edger- 
 ton, .30 Vt. 182. 
 
 133 Thomp. Corp. (2d. ed.), §2872. 
 
 14 Wilmington, &c. R. Co. v. 
 Board, &c., 72 N. Car. 10; Franchise 
 taxation, 3 Thomp. Corp. (2d. ed.), 
 § 2920 at seq. See also Bank of Cali- 
 fornia V. San Francisco, ,142 Cal. 
 276, 75 Pac. 832, 64 L. R. A. 918, 
 100 Am. St. 130; Horn, &c. Co. v. 
 New York, 143 U. S. 305, 12 Sup. 
 Ct. 403, 36 L. ed. 164. 
 
 i^Thus it has been held that no 
 transfer of the property and frani- 
 chises of a corporation will invest 
 the purchasers with corporate ex- 
 istence. New Orleans, &c R. 
 Co. V. Delamore, 114 U. S. 501, 
 5 Sup. Ct. 1009, 29 L. ed. 
 244; Memphis, &c. Co. v. Rail- 
 road Commissioners, 112 U. S. 609, 
 5 Sup. Ct. 299, 28 L. ed. 837; Ore- 
 gon R. Co. V. Oregonian R. 
 Co., 130 U. S. 1, 9 Sup. Ct. 
 409, 32 L. ed. 837; Fietsam v. 
 Hay, 122 111. 293, 13 N. E. 
 501, 8 Am. St. 492; Rollins v. Clay, 
 33 Maine 132; Commonwealth v. 
 Smith, 92 Mass. 448, 87 Am. Dec. 
 672; Middlesex R. Co. v. Boston, 
 &c. R. Co., 115 Mass. 347; Chaflfee v. 
 Ludeling, 27 La. Ann. 607; Black 
 V. Delaware, &c. Co., 24 N. J. Eq. 
 
 455; Coe v. Columbus, &c. Co., 10 
 Ohio St. 372, 75 Am. Dec. 518 n; 
 Atkinson v. Marietta &c. R. Co., 15 
 Ohio St. 21, 35; Gulf, &c. R. Co. v. 
 Morris, 67 Tex. 692, 4 S. W. 156. 
 16 Richardson v. Sibley, 93 Mass. 
 65, 87 Am. Dec. 700; Daniels v. 
 Hart, 118 Mass. 543; Black v. Dela- 
 ware, &c. Co., 22 N. J. Eq. 130, 
 396; Woodruff v. Erie R. Co., 25 
 Hun (N. Y.) 246; Lauman v. Leba- 
 non Val. R. Co., 30 Pa. St. 42, 72 
 Am. Dec. 685; Frazier v. East 
 Tennessee, &c. R. Co., 88 Tenn. 
 138, 12 S. W. 537. Contra, Shepley 
 V. Atlantic, &c. R. Co., 55 Maine 
 395; Meyer v. Johnston, 53 Atl. 
 237. The franchise of being a cor- 
 poration is not included in a mort- 
 gage of all the property and fran- 
 chises of a railroad, unless by posi- 
 tive provision of law. Memphis, 
 &c. R. Co. V. Railroad Commis- 
 sioners, 112 U. S. 609, 5 Sup. Ct. 
 299, 28 L. ed. 837; New Orleans, 
 &c. R. Co. V. Delamore, 114 U. S. 
 501, 5 Sup. Ct. 1009, 29 L. ed. 244. 
 3 Thomp. Corp. (2d. ed.), §§ 2901, 
 2910. See Snell v. Chicago, 133 111. 
 413, 24 N. E. 532, 8 L. R. A. 8S8n; 
 Threadgill v. Pumphrey, 87 Tex. 573, 
 30 S. W. 356. But see as to fran- 
 chiseis that pass to purchaser at fore- 
 closure sale where there is authority 
 to mortgage, Vicksburg v. Vicksburg, 
 &c. Co., 202 U. S. 453, 26 Sup. Ct. 
 660, 663, 50 L. ed. 1102. 
 
§80 
 
 RAILROADS 
 
 142 
 
 ment,^'' nor be sold on execution/* unless the legislature has pro- 
 vided for such a transfer in the charter or in some general stat- 
 ute.^8 Where such provision is made, the grantee receives the 
 franchise indirectly from the legislature by virtue of the power 
 given to the corporation.^" 
 
 § 80 (68). Franchise of being a corporation — Primary and 
 secondary or general and special franchises. — Confusion often re- 
 sults from the failure to discriminate between the franchise of 
 being a corporation and the franchise of acquiring rights and ex- 
 ercising corporate functions as a corporation. The difference 
 between the franchise of being a corporation and the franchise 
 
 IT Memphis, &c. R. Co. v. Rail- 
 road Commissioners, 112 U. .S- 
 609, 619, SO Sup. Ct. 299, 28 L. ed. 
 837; Richardson v. Sibley, 93 Mass. 
 65; Bo wen v. Leace, S Hill (N. Y.) 
 221 ; Hurlbut v. Carter, 21 Barb. (N. 
 Y.) 221 ; Frazier v. East Tennessee 
 &c. R. Co., 88 Tenn. 138, 12 S. W. 
 537, 40 Am. & Eng. R. Cas. 358; 
 Commonwealth v. Smith, 10 Allen 
 (Mass) 448, 87 Am. Dec. 672. "As 
 the franchise and corporation cannot 
 exist independently, it is uniformly 
 held that the franchise is not assign- 
 able." People V. Union Gas, &c. 
 Co., 254 111. 395, 98 N. E. 768, Ann. 
 Cas. 1916 B, 201, 204. 
 
 18 Randolph v. Lamed, 27 N. J. 
 Eq. 557. But see State v. Rives, 
 5 Ired. L. (N. Car.) 297; Lawrence 
 V. Morgan's, &c. Co., 39 La. Ann. 
 427, 2 So. 69, 4 Am. St. 265. Prop- 
 erty essential to the exercise of fran- 
 chise may not be separated from 
 it and sold on execution. East 
 Alabama R. Co. v. Doe, 114 
 U. S. 340, 5 Sup. Ct. 869, 29 L. ed. 
 136; Indianapolis, &c. Co. v. State, 
 
 105 Ind. 37, 4 N. E. 316; Louisville, 
 &c. R. Co. V. Boney, 117 Ind. 501, 
 
 20 N. E. 432, 3 L. R. A. 435 n; 
 Youngman v. Elmira, &c. R. Co., 
 65 Pa. St. 278; Baxter v. Nashville, 
 &c. Turnpike Co., 10 Lea (Tenn.) 
 488. 
 
 19 Mahaska, &c. R. Co. v. Des 
 Moines Valley R. Co., 28 Iowa 437; 
 East Boston Freight R. Co. v. 
 Eastern R. Co., 13 Allen (Mass.) 
 422; State v. Richmond &c. R. Co., 72 
 N. Car. 634; State v. Sherman, 22 
 Ohio St. 411, 428. Where such acts 
 •are done without authority, the legis- 
 lature may, by ratifying and confirm- 
 ing them, render them valid. Shaw 
 V. Norfolk, &c. R. Co., 5 Gray 
 (Mass.) 162, 179; Branch v. Jesup 
 
 106 U. S. 468, 1 Sup. Ct. 495; 27 
 L. ed. 279; Pollard v. Maddox, 28 
 Ala. 321; Shaw v. Norfolk, &c. R. 
 Co., 5 Gray (Mass.) 162; Richards 
 V. Merrimack, &c. Co., 44 N. H. 
 127, 136; Hall v. Sullivan R. Co., 
 
 21 Law. Rep. 138; Waterman Corp., 
 §159. 
 
 203 Thomp. Corp. (2d. ed.), §2866. 
 
143 
 
 FRANCHISES 
 
 §80 
 
 of exercising rights as a corporation is important. A corporation, 
 or, more accurately, perhaps, the corporators may be invested 
 with the franchise of existing as a corporation and yet not en- 
 dowed with the right to do acts it claims power to do. Thus, 
 a water company may be invested with the franchise of being 
 a corporation and yet not possess the franchise of furnishing a 
 city with water.^i In another case the question was as to the 
 right to acquii-e and hold property, and the distinction between 
 the capacity to acquire property and the franchise to be a corpo- 
 ration was clearly drawn.^^ The question received very full con- 
 
 21 Andrews v. National Foundry, 
 &c. Works, 61 Fed. 782. In the 
 opinion in that case it was said: 
 "By its act of incorporation, the 
 Oconto Water 'Company came into 
 being, endowed not with the right 
 to establish and maintain water- 
 works in Oconto, but with capa- 
 city to receive and exercise that 
 right." This illustrates the doc- 
 trine we are endeavoring to make 
 clear, namely, that the franchise of 
 being a corporation is essentially 
 different from a right to receive 
 property or the capacity to per- 
 form duties. Doubtless: the power 
 and capacity may often be implied 
 from the charter or statute creat- 
 ing the corporation, but they are 
 not to be implied from the bare 
 franchise of being a corporation. 
 See also Crawford Elec. Co. v. 
 Knox County Power Co., 110 
 Maine 285; 86 Atl. 119, Ann. Cas. 
 1914 C, 933 n, 937. 
 
 22 Southern, &c. Co. v. Orton, 32 
 Fed. 457, 473. Judge Sawyer, in 
 the course of his very able opinion, 
 said: "The creative act necessarily 
 extends only to the bringing into 
 being of an artificial person, with 
 
 the capacities stated, among which 
 is, 'a capacity to receive and enjoy 
 in common grants and privileges 
 and immunities;' that is to say, a 
 capacity to receive and enjoy such 
 grants, privileges and immunities 
 as may be made either at the time 
 of the creation or any other time. 
 The creation of the being, with the 
 capacity to receive grants, is one 
 thing; the granting of other privi- 
 leges and immunities, which it has 
 the capacity to receive when cre- 
 ated, is another. When such a be- 
 ing is brought into existence, a cor- 
 poration has been created. A legal 
 entity, a person, has been created, 
 with a capacity to do, by itS' corpo- 
 rate name, such things as the legis- 
 lative power may permit, and re- 
 ceive such grants of such rights 
 and privileges, and of such proper- 
 ty, as the legislature itself, or pri- 
 vate persons with the legislative 
 permissaon may give. But I do not 
 understand that every right, privi- 
 lege or grant that can be conferred 
 upon a corporation must be given 
 simultaneously with the creative 
 act of incorporation. On the con- 
 trary, I suppose the artificial be- 
 
;80 
 
 RAILROADS 
 
 144 
 
 sideration in still another case, and the rule was well stated by the 
 court and its position enforced with great strength. ^^ Indeed, 
 there is good authority for saying that the franchise to become 
 and exist as an artificial being or corporation vests in the cor- 
 porators, while the franchise to act in a certain way and exercise 
 the privileges granted for that purpose vests in the corporation.^* 
 
 ing must be created with a capa- 
 city to receive before anything can 
 be received. The right to be a cor- 
 poration is itself a separate, dis- 
 tinct and independent franchise, 
 complete within itself, and a cor- 
 poration having been created, en- 
 joying this franchise, may receive 
 a grant and enjoy other distinct 
 and independent franchises, such 
 as may be granted to and enjoyed 
 by natural persons. But because 
 it enjoys the latter franchises, they 
 do not, therefore, constitute a part 
 of the distinct and independent es- 
 sential franchise — the right to be a 
 corporation. They are additional 
 franchises given to the corporation, 
 and not parts of the corporation it- 
 self — not of the essence of the cor- 
 poration." See also Central Trust 
 Co. v. Western N. C. R. Co., 89 
 Fed. 24. 
 
 "3 In the case of Coe v. Colum- 
 bus, &c. Co., 10 Ohio St. 372, 75 
 Am. Dec. 518, speaking of the dis- 
 tinction referred to in the text, the 
 court said: "This distinction has 
 been clearly pointed out in a re- 
 cent case, in which it is said: 
 'Among the franchises of the com- 
 pany is that of being a body poli- 
 tic, with rights of succession of 
 members, and of acquiring, hold- 
 ing and conveying property, and 
 suing and being sued, by a certain 
 
 name. Such an artificial being only 
 the law can create; and when cre- 
 ated it cannot transfer its own 
 existence into another body, nor 
 can it enable natural persons to act 
 in its name, save as its agents or 
 as members of the corporation, 
 acting in conformity with the 
 modes required or allowed by its 
 charter. The franchise to be a 
 corporation, is, therefore, not a 
 subject of sale and transfer, unless 
 the law, by some positive provi- 
 sion, has made it so, and pointed 
 out the modes in which such sale 
 and transfer may be effected. But 
 the franchises to build, own and 
 manage a railroad, and to take 
 tolls thereon, are not necessarily 
 corporate rights; they are capable 
 of existing in and being enjoyed 
 by natural persons; and there is 
 nothing in their nature inconsistent 
 with their being assignable.' Hall 
 V. Sullivan R. Co., 21 Law Rep, 138, 
 140, 1 Brun. Col. Cas. 613, Curtis, 
 J. Very similar language is used 
 in a recent case in Vermont. Bank 
 of Middlebury v. Edgerton, 30 Vt.- 
 182, 190." The same general doc- 
 trine is asserted in Grand Rapids, 
 &c. Co. V. Prange, 35 Mich. 400, 24 
 Am. Rep. 585; Fort Worth, &c. 
 Co. V. Rosedale, &c. Co., 68 Tex. 
 169, 176, 4 S. W. 534. 
 2* Rogers v. Nashville &c. R. Co.,^ 
 
145 
 
 FRANCHISES 
 
 §80 
 
 The right to be or exist as a corporation is often called its pri- 
 mary franchise as distinguished from the right to do or exercise 
 a certain right or privilege, which, under this classification, is 
 called a secondary franchise. ^^ So, the general right to live and 
 do business by the exercise of the corporate powers granted by 
 the state has been called a "general franchise" as distinguished 
 from the grant of a right such as the right of way over a city 
 street with privilege to operate a railroad thereon or any similar 
 right to use public property for a public use, but with private 
 profit, which has been called a "special franchise. "^'^ 
 
 91 Fed. 299; Fietsam v. Hay, 122 
 111. 293, 13 N. E. 501, 3 Am. St. 492 ; 
 State V. Topeka Water Co., 61 Kans. 
 547, 558, 60 Pac. 337, 341. So, in 
 Memphis &c. R. Co. v. Railroad 
 Comrs., 112 U. S. 619, 5 Sup. Ct. 299, 
 303, 28 L. ed. 837, it is said; "The 
 franchise of being a corporation be- 
 longs to the corporators, while the 
 powers and privileges, vested in and 
 to be exercised by the corporate 
 body as such, are the franchises of 
 the corporation." But see Knoup v. 
 Piqua Branch, 1 Ohio St. 614; 
 Young V. Webster City R. Co., 75 
 Iowa 140, 39 N. W. 234. 
 
 25 San Joaquin &c. Irr. Co. v. 
 Merced Co., 2 Cal. App. 593, 84 Pac. 
 285; State v. Topeka Water Co., 61 
 Kans. 547, 60 Pac. 337, 341; 3 
 Thomp. Corp. (2d ed.), §§2862, 
 2863, Joyce Franchises, §8. There 
 are very material differences be- 
 tween the two and the distinction, 
 no matter what nomenclature is 
 used, is important. For instance the 
 one may be granted without the 
 other or one may be taken away 
 when the other can not be, one may 
 be given or permitted in a for- 
 eign jurisdiction and the other 
 not, and one may be the subject of 
 
 taxation and the other not. So, as 
 already shown, one may belong to 
 the corporators and the other to the 
 corporation. See generally Adams 
 Exp. Co. V. Ohio State Auditor, 166 
 U. S. 185, 17 Sup. Ct. 604, 41 L. ed. 
 965 ; Thompson v. Schenectady R. 
 Co., 124 Fed. 274, and other cases 
 cited in the text books above re- 
 ferred to; Bank of California v. 
 San Francisco, 142 Cal. 276, 75 Pac. 
 832. 64 L. R. A. 918, 100 Am. St. 
 130; Virginia &c. Toll Road Co. v. 
 People, 22 Colo. 429, 432, 45 Pac. 
 398, il L. R. A. 711n; Crawford 
 Elec. Co. v. Knox County Power 
 Co., 110 Maine 285, 86 Atl. 119, Ann. 
 Cas. 1914C, 933, 935, 936. 
 
 26 People V. State Tax Comrs., 174 
 N. y. 417, 435, 67 N. E. 69, 63 L.- 
 R. A. 884, 105 Am. St. 674; Lord 
 V. Equitable Life &c. Soc, 194 N. Y.. 
 212, 87 N. E. 443, 22 L. R. A. (N.. 
 S.) 420n. "The term 'franchise' 
 has a dual meaning. Its scope and 
 meaning must be determined by its 
 application. There is a wide differ- 
 ence between a franchise which in- 
 heres in the right to exist as a cor- 
 poration and a franchise to exer7 
 cise certain special privileges as 
 such ; for instance, the right to oc- 
 
^ 81 RAILROADS 146 
 
 §81 (69). Difference between a franchise and a license. — A 
 distinction must be kept in mind between a charter franchise con- 
 stituting a contract on the part of the state in consideration of 
 ■certain duties which, by accepting the charter, the corporation 
 ^undertakes to perform, and a mere legislative permission or li- 
 'cense, which is revocable at the pleasure of the grantor. A sup- 
 plemient to a charter,^'' or a general statute or ordinance,^* which 
 ■confers new rights or privileges for an indefinite time without 
 the imposition of any new burdens, generally amounts to a mere 
 license. A mere naked license is revocable at the pleasure of the 
 legislature, but where there is money expended upon the faith 
 that a permanent right is granted, it seems to us that the license 
 is not revocable. This opinion is, we know, opposed by eminent 
 judges and authors, but it seems to us to rest on sound and solid 
 principle.^^ Of course, the doctrine we favor cannot prevail 
 where there is no grant of a permanent right and the parties 
 (Understand, or are bound to know, that a mere temporary privi- 
 lege is granted, but where the privilege is in its nature perma- 
 aient and is acted upon as such by the parties in good faith, and 
 anoney is expended in the just belief that the right is of a per- 
 
 cupy or cross public highways and Cal. 639, 28 Pac. 676; Belleville v. 
 
 to construct in or across them and Citizens' R. Co., 152 111. 171, 38 N. E. 
 
 operate thereon a public utility." 584, 26 L. R. A. 681 ; Williams v. 
 
 State V. Black Diamond Co., 97 Citizens' R. Co., 130 Ind. 71, 73, 29 
 
 Ohio St. 24, 119 N. E. 195, L. R. A. N. E. 408, 409, 15 L. R. A. 64, 3 Am. 
 
 1918E, 353, 357. St. 201; Elliott Roads and Streets 
 
 27 Philadelphia &c. R. Co.'s Ap- (3d. ed.), § 938. Professor Hare, re- 
 peal, 102 Pa. St. 123. See Johnson ferring to the Pennsylvania cases 
 V. Crow, 87 Pa. St. 184; Christ cited in the following note, says: 
 Church V. County of Philadelphia, "These decisions are obviously 
 24 How. (U. S.) 300, 16 L. ed. 602. sound. An individual who gives a 
 
 28 Southwark R. Co. v. Philadel- license which cannot be enjoyed 
 phia, 47 Pa. St. 314; Branson v. without the expenditure of money 
 Philadelphia, 47 Pa. St. 329. may fairly be presumed to intend 
 
 29 That an ordinance granting a that it shall be irrevocable, but no 
 right to use a city street is an irrev- such inference can be drawn where 
 ocable contract when accepted and the state or city is dealing with a 
 acted on, see Asheville St. R. Co. v. highway, and ought to retain the 
 Asheville, 109 N. Car. 688, 14 S. E. power of supervision and control." 
 316; Areata v. Areata &c. Co., 92 1 Hare Am. Const. Law, 666. 
 
147 
 
 FRANCHISES 
 
 §82 
 
 manent nature, the party making the expenditure is entitled to 
 protection.^" 
 
 § 82 (70). Sale of corporate property essential to exercise of 
 franchises — Limitation of right to sell. — ^According to the greater 
 weight of authority, a railroad corporation may not transfer any 
 of its property or privileges which are essential to a fulfillment 
 of the purposes for which it was chartered, except by legislative 
 authority. Property not held for strictly corporate purposes, that 
 is property not necessary to enable the corporation to exercise 
 its corporate functions and perform its corporate duties may be 
 sold; but property necessary for corporate use cannot be sold or 
 transferred where its sale would render the corporation unable to 
 perform its corporate duties. In other words, a corporation can- 
 not sell or transfer its property in cases where such a sale or 
 transfer would disable it from performing its public and corporate: 
 duties and exercising its corporate functions except in cases, 
 where there is legislative authority to make such sales or 
 transfers.^^ 
 
 so Some of the cases hold that 
 such a license is revocable, although 
 the grantee has made valuable im- 
 provements in the belief that the 
 privilege vrill not be recalled. Bran- 
 son V. Philadelphia, 47 Pa. St. 329; 
 Monongahela &c. Co. v. Coons, 6 
 Watts & S. (Pa.) 101; Southwark 
 R. Co. V. Philadelphia, 47 Pa. St. 
 314; Johnson v. Crow, 87 Pa. St. 184. 
 But there is conflict on this point. 
 Campbell v. Indianapolis &c. R. Co., 
 110 Ind. 490, 11 N. E. 482; People 
 V. Chicago &c. Co., 18 111. App. 125; 
 State V. Noyes, 47 Maine 189; Com- 
 monwealth V. Proprietors &c., 2 Gray 
 (Mass.) 339; People v. O'Brien, 111 
 N. Y. 1, 7 Am. St. 684; Elliott Roads 
 and Streets, §§ 1050, 1051. See also 
 Twin Village Water Co. v. Demar- 
 iscotta Gas &c. Co., 98 Maine 325, 
 
 56 Atl. 1112, note in Ann. Cas. 1916B,. 
 211, 212, 213. 
 
 31 York &c. R. Co. V. Williams;. 
 17 How. (U. S.) 30, IS L. ed. 27;: 
 Pearce v. Madison &c. Co., 21 
 How. (U. S.) 441, 16 L. ed. 80; 
 Pullan V. Cincinnati &c. Co., 4 Biss. 
 (U. S.) 35, Fed. Cas. No. 11461; 
 Thomas v. West Jersey R. Co., 101 
 U. S. 71, 25 L. ed. 950; Pennsyl- 
 vania Co. v. St. Louis &c. Co., 118 
 U. S. 290, 6 Sup. Ct. 1094, 30 L. ed. 
 83; Oregon v. Oregonian &c. Co., 
 130 U. S. 1, 9 Sup. Ct. 409, 32 L. 
 ed. 837; Central Transportation Co. 
 v. Pullman &c. Co., 139 U. S. 24, 
 11 Sup. Ct. 478, 35 L. ed. 55; At- 
 lantic &c. Co. v. Union Pacific &c. 
 Co., 1 Fed. 745; Cumberland Tel. 
 Co. v. Evansville, 127 Fed. 187; 
 Singleton v. Southwestern R. Co., 
 
§83 
 
 RAILROADS 
 
 148 
 
 § 83 (71). Effect of attempt to sell or encumber franchise. — It 
 
 is well settled that a corporation cannot alienate or mortgage its 
 primary franchise or right to be a corporation without constitu- 
 tional or statutory authority to do so.^^ Though all of the prop- 
 erty of the corporation should pass into the hands of a purchaser, 
 he would not by such purchase, necessarily, become entitled to 
 the franchises,^* in the absence of any law giving authority to 
 dispose of the corporate rights and privileges ; for an authority 
 to mortgage or otherwise transfer the property will not neces- 
 sarily confer power to dispose of the franchises.** It is, of course, 
 
 70 Ga. 464, 48 Am. Rep. 574 n; 
 Hays V. Ottawa &c. Co., 61 111. 422; 
 State V. Dodge City &c. R. Co., S3 
 Kans. 377, 36 Pac. 747, 42 Am. St. 
 295; Richardson v. Sibley, 93 Mass. 
 65, 87 Am. Dec. 700; Common- 
 wealth V. Smith, 10 Allen (Mass.) 
 448, 455, 87 Am. Dec. 672; Richards 
 V. Merrimack R. Co., 44 N. H. 136; 
 Black V. Delaware &c. Co., 22 N. J. 
 Eq. 130; Logan v. North Carolina 
 R. Co., 116 N. Car. 940, 21 S. E. 
 959; Stewart's Appeal, 56 Pa. St. 
 413; Pittsburgh &c. Co. v. Alle- 
 gheny County, 63 Pa. St. 126; 
 Johnson Co. v. Miller, 174 Pa. St. 
 605, 34 Atl. 316, 52 Am. St. 833; 
 Philadelphia v. Philadelphia &c. R. 
 Co., 177 Pa. St. 292, 35 Atl. 610. 34 
 L. R. A. 564; Vermont &c. Co. v. 
 Vermont &c. Co., 34 Vt. 1; Roper 
 V. McWhorter, 11 Va. 214. See also 
 Attorney-General v. Haverhill Gas 
 &c. Co., 215 Mass. 394, 101 N. E. 
 1061, Ann. Cas. 1914C, 1266, and 
 note on p. 1271; note in L. R. A. 
 1917 D, 707; 3 Thomp. Corp. (2d 
 ed.), §2425. The general doctrine 
 was thus stated in Black v. Dela- 
 ware &c. Co., 22 N. J.. Eq. 130: 
 "It may be considered as settled 
 
 that a corporation can not lease or 
 alienate any franchise, or any prop- 
 erty necessary to perform its ob- 
 ligations and duties to the state, 
 without legislative authority." But 
 some courts have held that special 
 franchise or rights on property ob- 
 tained from a municipality may be 
 sold or assigned. See Knoxville v. 
 Africa, 11 Fed. 501; American 
 Loan &c. Co. v. General Elec. Co., 
 71 N. H. 192, 51 Atl. 660; Com- 
 mercial Elec. &c. Co. V. Tacoma, 
 17 Wash. 661, 50 Pac. 592. 
 
 32 Memphis &c. R. Co. v. Rail- 
 road Comrs., 112 U. S. 609, 5 Sup. 
 Ct. 299, 28 L. ed. 837: Southern R. 
 Co. V. Mitchell, 139 Ala. 629, 37 So. 
 85; Organ v. Memphis &c. R. Co., 
 51 Ark. 235, 11 S. W. 96; Archer 
 V. Terre Haute &c. R. Co., 102 III. 
 493; 3 Thomp. Corp. (2d ed.), 
 §§ 2900, 2901, and numerous cases 
 there cited. 
 
 33 Bruffett V. Great Western R. 
 Co., 25 111. 353, 357; Clarke v. Oma- 
 ha &c. R. Co., 4 Nebr. 458; Pierce 
 V. Emery, 32 N. H. 484; Atkinson 
 V. Marietta &c. R. Co., IS Ohio St. 
 21. 
 
 34 People V. Commercial Tel. &c. 
 
149 
 
 FRANCHISES 
 
 §84 
 
 competent for the legislature to confer power to sell and convey 
 corporate franchises, but the power is not an incidental one and 
 cannot exist in the absence of a statute conferring it. The attempt 
 to sell a corporate franchise without statutory authority would be 
 ineffective, and would pass no title, but the question as to who 
 may take advantage of the attempt to sell where the power does 
 not exist is one upon which there is some diversity of opinion. 
 But, in most of the states, railroad corporations are given power 
 by statute to mortgage, or sell, their franchises as well as their 
 tangible property, subject to certain restrictions. ^° 
 
 §84 (72). Judicial sale of franchises. — As a general rule, cor- 
 porate franchises cannot be sold on a judgment or decree unless 
 the statute authorizes a sale.^® But where power is conferred 
 
 Co., 277 111. 265, US N. E. 379, L. 
 R. A. 1917 D, 704 n; McAllister v. 
 Plant, 54 Miss. 106; Pullan v. Cin- 
 cinnati &c. R. Co., 4 Biss. (U. S.) 
 35, Fed. Cas. No. 11461. See Phila- 
 delphia V. Western U. Tel. Co., 11 
 Phila. 327; Cumberland Tel. Co. v. 
 Evansville, 127 Fed. 187, and note 
 in 35 Am. St. 390. But compare 
 Threadgill v. Pumphrey, 87 Tex. 
 573, 30 S. W. 356. And see as to 
 alienability of street privileges or 
 franchises, Lawrence v. Hennessy, 
 165 Mo. 659, 65 S. W. 717; Ruther- 
 ford V. Hudson River Trac. Co., 
 IZ N. J. L. 227, 63 Atl. 84; Boise 
 Artesian &c. Water Co. v. Boise 
 City, 230 U. S. 84, 33 Sup. Ct. 987, 
 57 L. ed. 1400. 
 
 35 See note in L. R. A. 1917D, 709. 
 In the United Statfes it would be 
 difficult to find a railroad that has 
 not mortgaged its road and fran- 
 chise, and in most instances under 
 express legislative authority. 
 
 ^6 Cue V. Tidewater &c. Co., 24 
 How. (U. S.) 257, 16 L. ed. 635; 
 Meyer v. Johnston, 53 Ala. 237; 
 Wood V. Truckee &c. Co., 24 Cal. 
 474; James v. Pontiac Road Co., 8 
 Mich. 91 ; Plymouth &c. Co. v. Col- 
 well, 39 Pa. St. 337, 80 Am. Dec. 
 526; Wellsborough v. Griffin, 57 Pa. 
 St. 417; Youngman v. Railroad Co., 
 65 Pa. St. 278; Ammant v. Pres- 
 ident &c., 13 Serg. & R. (Pa.) 212; 
 Leedom v. Plymouth &c. Co., 5 
 Watts & S. (Pa.) 265; Miller v. 
 Rutland &c. R. Co., Z(> Vt. 452. 
 See Railroad v. James, 6 Wall. (U. 
 S.) 750, 18 L. ed. 854; Richardson 
 v. Sibley, 93 Mass. 65, 87 Am. Dec. 
 700; Stewart v. Jones, 40 Mo. 140; 
 State V. Rives, 5 Ired. (N. Car.) 
 297; Coe v. Cincinnati &c. Co., 10 
 Ohio St. 372, 75 Am. Dec. 518; 
 Coe V. Peacock, 14 Ohio St. 187; 
 Foster v. Fowler, 60 Pa. St. 27; 
 State V. Black Diamond Co., 91 
 Ohio St. 24, 119 N. E. 195, L. R. 
 A. 1918 E, 352. 
 
§84 
 
 RAILROADS 
 
 150 
 
 upon a corporation to mortgage all its property and franchises a. 
 sale upon a decree foreclosing such a mortgage will convey to the 
 purchaser all such franchises as are necessary to the use and 
 enjoyment of the property bought by him at such sale.^'' The 
 franchise to be a corporation does not pass to the purchaser unless 
 a clear provision of positive law makes it transferable. The fran- 
 chise of being a corporation is a peculiar one, and, as we have 
 seen, is essentially different from other corporate franchises; 
 so peculiar is it that ordinarily it is not assignable and, indeed, 
 is never assignable except when made so by statute.** The right 
 to sell corporate franchises being statutory the general rule is 
 that the sale must be conducted in substantial conformity to the 
 requirements of the statute, and where a mode is provided for 
 
 37 In New Orleans &c. Co. v. 
 Delamore, 114 U. S. 501, 5 Sup. Ct. 
 1009, 29 L. ed. 244, the court said: 
 "When there has been a judicial 
 sale of railroad property under 
 mortgage authorized by law, cover- 
 ing its franchise, it is now well 
 settled that the franchises neces- 
 sary to the use and enjoyment of 
 the railroad passes to the pur- 
 chaser." Memphis &c. Co. v. Rail- 
 road Commissioners, 112 U. S. 609, 
 5 Sup. Ct. 299, 28 L. ed. 837; Vicks- 
 burg V. Vicksburg Water Works 
 Co., 202 U. S. 453, 26 Sup. Ct. 660, 
 50 L. ed. 1102 (but not the pri- 
 mary franchise or right to exist as 
 a corporation) ; Chaffee v. Lude- 
 ling, 27 La. Ann. 607; Detroit v. 
 Mutual &c. Co., 43 Mich. 594, 5 
 N. W. 1039; Metz v. Buffalo &c. 
 Co., 58 N. Y. 61, 17 Am. Rep. 201; 
 People V. Brooklyn &c. Co., 89 N. 
 Y. 75; Atkinson &c. Co. v. Mari- 
 etta &c. Co., IS Ohio St. 21. See 
 also Julian v. Central Trust Co., 
 193 U. S. 93, 24 Sup. Ct. 399, 404, 
 405, 48 L. ed. 629. 
 
 38 Memphis &c. Co. v. Railroad 
 Commissioners, 112 U. S. 609, 5 
 Sup. Ct. 299, 28 L. ed. 837; Wil- 
 lamette &c. Co. V. Bank, 119 U. S. 
 191, 7 Sup. Ct. 187, 30 L. ed. 384; 
 Vicksburg v. Vicksburg Water 
 Works Co., 202 U. S. 453, 26 Sup. 
 Ct. 660, 50 L. ed. 1102; Snell v. 
 Chicago, 133 111. 413, 24 N. E. 532, 
 8 L. R. A. 858; Commonwealth v. 
 Smith, 92 Mass. 448, 87 Am. Dec. 
 672; Grand Rapids &c. Co. v. 
 Prange, 35 Mich. 400, 24 Am. Rep. 
 585; Metz v. Buffalo &c. R. Co., 
 58 N. Y. 61, 17 Am. Rep. 201 ; Peo- 
 ple V. Cook, 110 N. Y. 443, 18 N. E. 
 113; Eldridge v. Smith, 34 Vt. 484; 
 Adams v. Boston &c. Co., 4 Nat. 
 Bank Reg. (314) 99; Sweatt v. Bos- 
 ton &c. Co., 5 Nat. Bank Reg. 234; 
 notes in 35 Am. St. 399, and 103 
 Am. St. 555; Hall v. Sullivan &c. 
 Co., 1 Brun (C. C.) 613. But 
 compare Denison &c. R. Co. v. St. 
 Louis &c. R. Co., 30 Tex. Civ. App. 
 474, 72 S. W. 201. 
 
151 FRANCHISES §85 
 
 making the sale it is exclusive and must be pursued.^® The pur- 
 chaser at a valid judicial sale ordinarily takes all the property 
 and franchises of the corporation in cases where the sale of such 
 property and franchises is authorized by statute, but is not bound 
 for the debts of the corporation.*" The franchises which pass by 
 the sale are, however, such only as by law can be sold and trans- 
 ferred. Purchasers at such a sale may organize a new corpora- 
 tion, and generally the new corporation will succeed to the fran- 
 chises of the old (provided, of course, there was authority to 
 sell the franchises) except the franchise to be a corporation. 
 That franchise does not come from the sale but from the sover- 
 eign. 
 
 § 85 (73). Sequestration. — ^The process of sequestration is a 
 writ or commission issued to some officer or person empowering 
 him to enter into possession of property and receive the rents, 
 revenues or profits thereof, and to apply them as the court may 
 order or adjudge.*^ The statutes in most of the states have 
 supplanted the old chancery doctrine ; in others its existence has 
 been denied upon the ground that the courts did not possess in- 
 herent equity powers, in others the doctrine has been modified, 
 and in some others prevails without substantial change.** In 
 
 39 James v. Pontiac &c. Co., 8 687; Cook v. Detroit &c. R. Co., 45 
 Mich. 91. See generally Stamford Mich. 453; McKusick v. Seymour, 
 Bank v. Ferris, 17 Conn. 259; Tit- 48 Minn. 172, 50 N. W. 1114; Hos- 
 comb V. Union Marine &c. Co., 8 pesi v. Northwestern &c. Co., 48 
 Mass. 326; Howe v. Starkweather, Minn. 174. 50 N. W. 1117, IS L. R. 
 17 Mass. .240. A. 470, 31 Am. St. 637; Mann v. 
 
 40 Stewart &c. Co.'s Appeal, 72 Pentz, 3 N. Y. 415; Bangs v. Mcln- 
 Pa. St. 291; Vilas v. Milwaukee &c. tosh, 23 Barb. (N. Y.) 591; Clark- 
 Co., 17 Wis. 497; Smith v. Chicago son v. DePeyster, 3 Paige (N. Y.) 
 &c. Co., 18 Wis. 17. 320; Devoe v. Ithaca &c. Co., 5 
 
 4iHinde's Ch. Pr. 127; Ballentine's Paige (N. Y.) 521; Judson v. Ros- 
 
 Law Die. sie Galena R. Co., 9 Paige (N. Y.) 
 
 *2 Cypress Shingle Co. v. Lorio, 598, 38 Am. Dec. 569; Steiner's Ap- 
 
 46 La. Ann. 441, 15 So. 95; McKim peal, 27 Pa. St. 313; Reid v. North- 
 
 V. Odom, 3 Bland Ch. (Md.) 407; western &c. Co., 32 Pa. St. 257; 
 
 Jones V. Boston &c. Co., 21 Mass. Penrose v. Erie &c. Co., 56 Pa. St. 
 
 507, 16 Am. Dec. 358; Grew v. 46, 93 Am. Dec. 778; Foster v. 
 
 Breed, 53 Mass. 363, 46 Am. Dec. Fowler, 60 Pa. 'St. 27; Germahtown 
 
§86 
 
 RAILKOADS 
 
 152 
 
 many respects decrees appointing receivers for railroad corpora- 
 tions accomplish essentially the same results as those acconi- 
 j)lished by sequestration, and the process of sequestration is sel- 
 dom employed in jurisdictions where the authority to appoint 
 receivers is broad and comprehensive. ^^ As is the case where 
 receivers are appointed the appointment of a sequestrator does 
 not, as a general rule, end the corporate existence, but the seques- 
 trator takes possession of the corporate property and employs 
 the corporate franchises in conducting business. If the debts 
 are discharged in full the property and franchises, as a rule, 
 revert to the corporation.** The money received by the seques- 
 trator of a corporation is to be distributed among the creditors 
 in substantially the same manner as in the case of the insol- 
 vency of a natural person.*^ 
 
 § 86 (74). Seizure of corporate franchise under power of emi- 
 nent domain. — Although a corporation may have a property inter- 
 est in its franchises, such that they may not be taken from it by 
 
 &c. Co. V. Filler, 60 Pa. St. 124, 100 
 Am. Dec. 546; Muncy Creek &c. 
 Co. V. Hill, 84 Pa. St. 459; Ammant 
 V. New Alexandria &c. Co., 13 
 Serg. & R. (Pa.) 210, 15 Am. Dec. 
 593 n; Earl of Kildare v. Eustace, 
 
 1 Vern. 419; Lowten v. MayOFj 2 
 Mer. 393; Johnson v. Chippendall, 
 
 2 Sim. 55; Francklyn v. Colhoun, 3 
 Swanst. 276. 
 
 43 In addition to those cases 
 cited in preceding note relative to 
 process of sequestration we cite 
 Ford V. Plankinton Bank, 87 Wis. 
 363, 58 N. W. 766; Neall v. Hill, 
 16 Cal. 145, 150, 76 Am. Dec. 508 n; 
 Loder v. New York &c. Co., 4 
 Hun (N. Y.) 22; Mott v. Union 
 Bank, 38 N. Y. 18; Donnelly v. 
 West, 17 Hun (N. Y.) 564; Rod- 
 bourn V. Utica &c. R. Co., 28 Hun 
 (N. Y.) 369; Rankine v. Elliott, 16 
 N. Y. 377-, Foster v. Townshend, 
 
 68 N. Y. 203; Bloom v. Burdick, 1 
 Hill (N. Y.) 130, 37 Am. Dec. 
 299n ; Morgan v. Turner, 4 Tex. Civ. 
 App. 192, 23 S. W. 284, 23 S. W. 
 284; Craddocks v. Ins. Co., 5 Phila. 
 249; London &c. Co. v. Morphy, 10 
 Ont. 86, 12 Am. & Eng. Corp. Cas. 
 53. 
 
 44 Mann v. Pentz, 3 N. Y. 415; 
 Kincaid v. Dwinelle, 59 N. Y. 548; 
 HoUingshead v. Woodward, 35 
 Hun (N. Y.) 410; Parry v. Amer- 
 ican Opera Co., 12 Civ. Pro. (N. 
 Y.) 194; Angell v. Silsbury, 19 
 How. Prac. (N. Y.) 48. 
 
 •4S Steiner's Appeal, 27 Pa. St. 
 313. The sequestrator may be em- 
 powered to sell the corporate prop- 
 erty, or he may be authorized to 
 use the property and franchises 
 until enough money is earned to 
 satisfy the claims of creditors. 
 
15J 
 
 FRANCHISES 
 
 §87 
 
 the legislature and conferred upon another company without 
 compensation,*® yet they are subject to the power of eminent 
 domain and may be taken under that power whenever the inter- 
 ests of the public require it.*'^ Property of this kind, however, 
 is so far favored in law that authority to take the franchise of 
 a corporation will not be implied from a grant of power to 
 take property, conferred in general terms,** unless the taking 
 be necessary to carry out the purposes of the charter containing 
 such grant.*® The intention to grant such power must appear 
 by express words,®" or by necessary implication.®^ 
 
 §87 (75). Dissolution by authorized sale of franchises. — Spe- 
 cial franchise may survive dissolution. — The power of the legisla- 
 ture to authorize the sale of all corporate franchises is, as we 
 have seen, undoubted, and when a sale is made pursuant to a 
 valid statute of all franchises it has been held that the corporate 
 existence necessarily terminates. ^^ We suppose that the author- 
 
 *6 Boston Water Power Co. v. 
 Boston. &c. R. Co., 23 Pick. (Mass.) 
 360. 
 
 4T Richmond R. Co. v. Louisa R. 
 Co., 13 How. (U. S.) 71, 14 L. ed. 
 55; New York &c. R. Co. v. Boston 
 &c. R. Co., 36 Conn. 196; New- 
 castle R. Co. V. Peru R. Co., 3 Ind. 
 464; Northern R. Co. v. Concord 
 &c. R. Co., 27 N. H. 183; Jersey 
 City &c. R. Co. V. Jersey City &c. 
 R. Co., 20 N. J. Eq. 61; Beekman 
 V. Saratoga R. Co., 3 Paige Ch. 
 (N. Y.) 45, 22 Am. Dec. 679 n; 
 post, § 1216, 
 
 48 Buffalo, Matter of, 68 N. Y. 
 167. 
 
 « Mobile &c. R. Co. v. Alabama 
 Midland R. Co., 87 Ala. 501, 6 So. 
 404; Milwaukee &c. R. Co. v. Fari- 
 bault, 23 Minn. 167; Boston &c. R. 
 Co., In re, S3 N. Y. 574; Little 
 Miami &c. R. Co. v. Dayton, 23 
 Ohio St. 510. 
 
 50 Clarence R. Co. v. Great 
 North &c. R. Co., 4 Q. B. 46. 
 
 51 Hickok V. Hine, 23 Ohio St. 
 523, 13 Am. Rep. 255 n. To justify 
 such a taking there must be a 
 necessity so absolute that, without 
 it, the grant itself will be defeated. 
 It must also be a necessity that 
 arises from the very nature of 
 things over which the corporation 
 has no control; it must not be cre- 
 ated by the company itself for its 
 own convenience or for economy. 
 Sharon R. Co., Appeal of, 122 Pa. 
 St. 533, 17 Atl. 234, 9 Am. St. 133 n; 
 Pennsylvania R. Co.'s Appeal, 93 
 Pa. St. ISO. See generally post, 
 i 1216. 
 
 52 Turnpike Co. v. Illinois, 96 U. 
 S. 63, 24 L. ed. 651; Memphis &c. 
 R. Co. V. Railroad Commissioners:, 
 112 U. S. 609, 5 Sup, Ct. 299, 28 L. 
 ed. 8'31; Snell v. Chicago, 133 111. 
 413, 24 N. E. 532, 8 L. R. A. 8S8n; 
 
§87 
 
 RAILROADS 
 
 154 
 
 ized sale of part of the corporate franchises would not necessarily 
 and of itself work a dissolution of the corporation, but each 
 case must, as we believe, be determined upon the statute author- 
 izing the sale. If the franchise of being a corporation is author- 
 ized to be sold, then a sale pursuant to the statute would termi- 
 nate the corporate existence, but an authorized sale of the fran- 
 chise to do certain acts not constituting the whole of the cor- 
 porate franchises would not have that effect. It has also been 
 held that some so-called franchises, such, for instance, as the 
 right of a street railway company to use the streets of a city, 
 may be granted for a longer period than the charter life of the 
 company and may survive its dissolution.^* But where no time 
 is fixed the prevailing rule is that a special franchise does not 
 outlive the life of the municipality granting it,^* nor the life of 
 the corporation to which it is granted.^^ 
 
 citing State v. Sherman, 22 Ohio 
 St. 411; Pierce v. Emery, 32 N. H. 
 484; Thomas v. Dakin, 22 Wend. 
 (N. Y.) 9, 71. But see People v. 
 Union Gas &c. Co., 254 111. 395, 98 
 N. E. 768, Ann. Cas. 1916B, 201. 
 
 5S See Greenwood v. Union 
 Freight Co., 105 U. S. 13, 26 L. ed. 
 961; New Orleans &c. R. Co. v. 
 Delamore, 114 U. S. 501, S Sup. Ct. 
 1009, 29 L. ed. 244; Detroit v. De- 
 troit Citizens' St. R. Co., 184 U. S. 
 395, 22 Sup. Ct. 410, 46 L. ed. 610; 
 Detroit Citizens' St. R. Co. -v. De- 
 troit, 64 Fed. 628, 26 L. R. A. 673; 
 Citizens' St. R. Co. v. City R. Co., 
 64 Fed. 647; Milhau v. Sharp, 27 
 N. Y. 611; People v. National 
 Trust Co., 82 N. Y. 283; People v. 
 O'Brien, 111 N. Y. 1, 18 N. E. 
 692, 2 L. R. A. 225, 7 Am. St. 717; 
 Hall V. Sullivan R. Co., 1 Brun- 
 ner's (C. C.) 613. And compare 
 also Davis v. Memphis &c. R. Co., 
 87 Ala. 633, 6 So. 140; Cedar Rap- 
 ids Water Co. v. Cedar Rapids, 118 
 
 Iowa 234, 91 N. W. 1081 (a quasi- 
 public corporation is generally al- 
 lowed to operate a reasonable time 
 after the expiration of its fran- 
 chise where no provision is made 
 for continuance of the service and 
 the public would suffer from its 
 discontinuance) . Ordinarily, how- 
 ever, it is said, "in the absence of 
 controlling language to the con- 
 trary, the life of the grant is the 
 period fixed for the life of the cor- 
 poration." Govin V. Chicago, 132 
 Fed. 848, 855. But this case was 
 reversed in Blair v. Chicago, 201 
 U. S. 400, 26 Sup. Ct. 427, 50 L. ed. 
 801. Compare, however, Cleveland 
 v. Cleveland Elec. R. Co., 201 U. 
 S. 529, 26 Sup. Ct. 513, SO L. ed. 
 854; People v. Chicago Tel. Co., 
 220 111. 238, n N. E. 245. 
 
 54 People V. Chicago Tel. Co., 220 
 111. 238, n N. E. 245. 
 
 55 Blair v. Chicago, 201 U. S. 400, 
 26 Sup. Ct. 427, SO L. ed. 801 ; Peo- 
 ple V. Central Union Tel. Co., 232 
 
155 
 
 FRANCHISES 
 
 §87 
 
 111. 260, 83 N. E. 829; Sullivan v. 
 Bailey, 125 Mich. 104, 83 N. W. 
 996. See also St. Clair County 
 Turnpike Co. v. People, 96 U. S. 63, 
 24 L. ed. 651. It seems that the 
 state may grant a perpetual fran- 
 chise, but a municipality, ordinarily 
 at least, has no such power. Louis- 
 ville V. Cumberland Tel. &c. Co., 
 224 U. S. 649, 56 L. ed. 934; Detroit 
 V. Detroit City Ry. Co., 56 Fed. 
 867; Logansport R. Co. v. Logans- 
 port, 114 Fed. 688, 192 U. S. 604, 
 48 L. ed. 584; Boise City &c. Water 
 Co. V. Boise City, 123 Fed. 232; 
 Omaha Elec. &c. Co. v. Omaha, 
 
 179 Fed. 455. See also Boston Elec. 
 Light Co. V. Boston Terminal Co., 
 184 Mass. 566, 69 N. E. 346; East 
 Ohio Gas Co. v. Akron, 81 Ohio 
 St. 33, 90 N. E. 40, 26 L. R. A. 
 (N. S.) 92 n, 18 Ann. Cas. 332. But 
 compare Seattle v. Columbia &c. R. 
 Co., 6 Wash. 379, 33 Pac. 1048. It 
 has been held that,- although the 
 grant is in terms perpetual, it may 
 be upheld with this provision elim- 
 inated. Levis V. Newton, 75 Fed. 
 884. But this seems erroneous, or 
 at least not beyond question. 
 Wellston V. Morgan, 59 Ohio St. 
 147, 52 N. E. 127. 
 
CHAPTER VI. 
 
 STOCK. 
 
 ec. 
 
 
 Sec. 
 
 90. 
 
 Definition. 
 
 102. 
 
 91. 
 
 Classes of stock. 
 
 
 92. 
 
 Shares of stock — Certificates. 
 
 103. 
 
 93. 
 
 Certificates — How far nego- 
 tiable—Shares are personal 
 
 104. 
 
 
 property. 
 
 IDS. 
 
 94. 
 
 New certificates in place of 
 lost — Fraud. 
 
 
 95. 
 
 Preferred stock. 
 
 106. 
 
 96. 
 
 When preferred stock may 
 be issued — Rights and rem- 
 
 
 
 edies of dissenting stock- 
 
 107. 
 
 
 holders. 
 
 108. 
 
 97. 
 
 Holder of preferred stock not 
 
 
 
 a creditor — His rights and 
 
 109. 
 
 
 remedies. 
 
 
 98. 
 
 Rights of preferred stock- 
 holders after payment of 
 
 110. 
 
 
 guaranteed dividend — Fu- 
 
 111. 
 
 
 ture dividend. 
 
 112. 
 
 99. 
 
 Deferred dividends — Stock re- 
 
 113. 
 
 
 duction. 
 
 114. 
 
 100. 
 
 Rights of preferred stock- 
 holders on dissolution. 
 
 115 
 
 101. 
 
 Guaranteed, interest-bearing, 
 income and debenture 
 
 116. 
 
 
 stock. 
 
 117. 
 
 Increase and reduction of 
 capital stock. 
 
 Watered stock. 
 
 Watered stock not absolutely 
 void. 
 
 Rights of creditors and lia- 
 bilities of holders of wat- 
 ered stock. 
 
 Stock paid for by overvalued 
 property — Sale of stock on 
 market. 
 
 Sale and transfer of stock. 
 
 Who may own and transfer 
 shares. 
 
 Purchase and sale by trustees 
 and fiduciaries. 
 
 Right of corporation to buy 
 and sell stock. 
 
 Gifts and bequests of stock. 
 
 Formalities of transfer. 
 
 Registry of transfer. 
 
 Lien of corporation on stock. 
 
 When and to what the lien 
 attaches. 
 
 Waiver of lien — Enforcement 
 of lien. 
 
 Condemnation of stock. 
 
 § 90 (76). Definition. — Capital stock has been defined as "the 
 sum fixed by the corporate charter as the amount paid in or to be 
 paid in by the stockholders for the prosecution of the business of 
 
 156 
 
157 
 
 STOCK 
 
 §90 
 
 the corporation and for the benefit of corporate creditors."^ The 
 term is often used to denote the capital or property of the cor- 
 poration,2 but, strictly speaking, the capital stock is not identical 
 with the corporate property or capital.* It represents, rather, 
 the capital or property of the corporation to the extent required 
 by its charter,* and may be said, in one sense at least, to describe 
 or evidence the interest of the stockholders in the corporation 
 and to consist of the sum of all the shares.^ It remains fixed 
 and cannot exceed the amount authorized by the charter or stat- 
 
 iCook Corporations (7th. ed.), 
 § 9. See also Sanger v. Upton, 91 
 U. S. 60, 23 L. ed. 220; Farrington 
 V. Tennessee, 95 U. S. 686, 24 L. 
 ed. S60. See also St. Louis &c. R. 
 Co. V. Loftin, 30 Ark. 695; State v. 
 Norwich &c. R. Co., 30 Conn. 290; 
 4 Thomp. Corp. (2d ed.), §3404. 
 Other definitions are given in the 
 following recent case§: Stamford 
 Trust Co V. Yale &c. Co., 83 Conn. 
 43, 75 Atl. 90; Continental Securi- 
 ties Co. V. Interborough Rapid 
 Transit Co., 165 Fed. 945; State v. 
 Clement Nat. Bank, 84 Vt. 167, 78 
 Atl. 944, Ann. Cas. 1912 D, 22 n. 
 
 2 So used in State v. Norwich &c. 
 R. Co., 30 Conn. 290; New Haven 
 V. City Bank, 31 Conn. 106; People 
 V. Commissioners, 23 N. Y. 192, 
 220, 222, opinion of Comstock, C. 
 J.; People v. Coleman, 126 N. Y. 
 433, 27 N. E. 818, 12 L. R. A. 762n. 
 
 3 Stock dividends and their re- 
 straint, 7 Am. Bar. Assn. 257; Ten^ 
 nessee v. Whitworth, 117 U. S. 129, 
 6 Sup. Ct. 645, 648, 29 L. ed. 830; 
 Commercial Fire Ins. Co. v. Board 
 
 "of Revenue, 99 Ala. 4, 14 So. 490; 
 State V. Morristown Fire Assn., 23 
 N. J. L. 195; Burrell v. Bushwick 
 R. Co., 75 N. Y. 216; State Bank 
 
 V. Milwaukee, 18 Wis. 281, 295. See 
 also Bank of Commerce v. Tennes- 
 see, 104 U. S. 495, 26 L. ed. 811; 
 Ohio &c. R. Co. V. Weber, 96 111. 
 443; Markle v. Burgess, 176 Ind. 
 25, 95 N. E. 308; American Life 
 Ins. Co V. Ferguson, 66 Ore. 417, 
 134 Pac. 1029; State v. Cheraw &c. 
 R. Co., 16 S. Car. 528. 
 
 * See Hannibal &c. R. Co. v. 
 Shacklett, 30 Mo. 550; Williams v. 
 Western Union Tel. Co., 93 N. Y. 
 162, 188; Tradesman &c. Co. v. 
 Wheel Co., 95 Tenn. 634, 32 S. W. 
 1097, 49 Am. St. 943. 
 
 5 See Tennessee v. Whitworth, 
 117 U. S. 129, 6 Sup. Ct. 645, 29 L. 
 ed. 830; People v. Chicago &c. Co., 
 130 111. 268, 22 N. E. 798; Greenleaf 
 v.. Board, 184 111. 226, 56 N. E. 
 295, 75 Am. St. 168; Henderson 
 Bridge Co. v. Commonwealth, 99 
 Ky. 623, 31 S. W. 486; Tradesman 
 &c. Co. V. Knoxville &c. Co., 95 
 Tenn, 634, 32 S. W. 1097, 31 L. 
 R. A. 593, 49 Am. St. 943; ("Capital 
 stock paid" in means amount sub- 
 scribed by stockholders). "Stock di- 
 vidends and their restraint," 7 Am. 
 Bai- Assn. 263. But see Wilkes- 
 Barre &c. Bank v. Wilkes-Barre, 
 148 Pa. St. 601, 24 Atl. 111. 
 
190 
 
 RAILROADS 
 
 158 
 
 ute and articles of incorporation, while the capital or property 
 may vary greatly in value from time to time and may exceed the 
 amount of capital stock authorized by the charter.^ This excess 
 over and above the amount of the required and authorized cap- 
 ital stock, arising generally out of the transaction of the corpor- 
 ate business and consisting of profits, may be divided among the 
 stockholders by way of dividends in the discretion of the direc- 
 tors, and does not constitute part of the capital stock,'' although, 
 until a division is made, or, at least, until a dividend is declared, 
 it remaifts the property of the corporation.* For these reasons it 
 seems clear that the terms "capital" and "capital stock" are not 
 synonymous, yet they are frequently so used, and the term "cap- 
 ital stock" has often been held to embrace all the property or cap- 
 
 6 Commercial Fire Ins. Co. v. 
 Board of Revenue, 99 Ala. 4, 14 So. 
 490; Barry v. Merchants' &c. Co., 
 1 Sandf. Ch. (N. Y.) 280; Cook v. 
 Marshall, 191 Pa. St. 315, 34 Atl. 
 314; Tradesman &c. Co. v. Knox- 
 ville &c. Co., 95 Tenn. 634, 32 S. 
 W. 1097, 49 Am. St. 943; Wells v. 
 Green Bay &c. Canal Co., 90 Wis. 
 442, 64 N. W. 69. 
 
 '^ Farrington v. Tennessee, 95 U. 
 S. 679, 24 L. ed. 558; Hightower 
 V. Thornton, 8 Ga. 486, 52 Am. Dec. 
 412; Williams v. Wesitern Union 
 Tel. Co., 93 N. Y. 162; People v. 
 Coleman, 126 N. Y. 433, 27 N. E. 
 818; State Bank v. Milwaukee, 18 
 Wis. 281. But see Phelps v. Farm- 
 ers' &c. Bank, 26 Conn. 269. 
 
 8 The interest of a stockholder 
 riiay, however, exceed in value the 
 nominal or par value of his shares. 
 In a sense, therefore, his actual in- 
 terest may not depend entirely 
 upon the amount of stock or cap- 
 ital stock authorized. The real 
 value of his shares^, which meas- 
 
 ures his interest, is more often de- 
 termined by the actual value of all 
 the property of the corporation. 
 Jones V. Terre Haute &c. R. Co.^ 
 57 N. Y. 196, and in the recent 
 case of People v. Coleman, it is 
 said that the capital stock of the 
 company and the capital stock (or,, 
 more properly, the share stock) of 
 the shareholders are two different 
 things; that the property of the 
 corporation may consist of cap- 
 ital stock, which is the fund re- 
 quired to be paid in and kept in- 
 tact as the basis of the business 
 enterprise, its surplus, and its 
 franchise, neither of which is part 
 of its capital stock; and that the 
 capital stock, or share stock, of the 
 stockholders "'covers, embraces, 
 represents, all three in their total- 
 ity." People v. Coleman, 126 N. Y. 
 433, 438, 27 N. E. 818, 12 L. R. A. 
 762 n. See also Coit v. North 
 Carolina &c. Co., 14 Fed. 12; Hen- 
 derson Bridge Co. v. Common- 
 wealth, 99 Ky. 623, 31 S. W. 486, 
 
159 STOCK § 91 
 
 ital of the corporation, particularly when found in a statute 
 clearly evincing an intention upon the part of the legislature to 
 include all corporate property within the meaning of the term.* 
 
 § 91 (77). Classes of stock. — Corporate stock — using that term 
 in the sense in which it is generally used in this connection — 
 may be divided into two principal classes, common and preferred, 
 the common stock being subject to a priority as to the payment 
 of dividends in favor of the preferred stock. Other kinds of 
 stock, mostly in the nature of preferred stock, are also frequently 
 issued, such as guaranteed, interest-bearing, income, or deben- 
 ture stock. And "special stock," having certain peculiarities dis- 
 tinguishing it from ordinary stock, is also authorized in some 
 cases. The different kinds of stock and the distinctions between 
 them will, however, be considered in subsequent sections. 
 
 §92 (78). Shares of stock — Certificates. — The common stock 
 is divided into shares, each of which gives to the owner a propor- 
 tional part of certain rights in the management and profits of the 
 corporation during its existence, and in the assets upon dissolu- 
 tion.^" The ownership of these shares is usually evidenced by 
 certificates which set forth the number owned and the amount 
 actually paid thereon, or^ that they are paid up, if such is the 
 case.^^ The possession of such a certificate, however, does not 
 
 29 L. R. A. 73; Raleigh &c. R. Co. Jones v. Concord &c. R. Co., 67 
 
 V. Wake County, 87 N. Car. 414, 17 N. H. 234, 30 Atl. 614, 68 Am. St. 
 
 Am. & Eng. R. Cas. 466. 650; Plimpton v. Bigelow, 93 N. Y. 
 
 9 Security Co. v. Hartford, 61 592, 599; Bradley v. Bauder, 36 
 
 Conn. 89, 23 Atl. 699; Ohio &c. R. Ohio St. 28, 35, 38 Am. Rep. 547; 
 
 Co. V. Weber, 96 111. 443; Phila- Monongahela &c. Co. v. Pittsburgh 
 
 delphia v. Ridge Ave. R. Co., 102 &c. , Co., 196 Pa. St. 25, 46 Atl. 99, 
 
 Pa. St. 190. 79 Am. St. 685; Brightwell v. Mal- 
 
 lOOakbank Oil Co. v. Crum, L. ' lory, 10 Yerg. (Tenn.) 196; Harri- 
 
 R. 8 App. Cas. 65; Fisher v. Essex son v. Vines, 46 Tex. IS, 21. 
 
 Bank, 5 Gray (Mass.) 373. See n 4 Thomp. Corp. (2nd ed.), 
 
 also Gibbons v. Mahon, 136 U. S. §3480; Cook Corporations (7th. 
 
 549, 10 Sup. Ct. 1057, 34 L. ed. 525; ed.), § 14. The certificate is the 
 
 Field V. Pierce, 102 Massi 253, 261; evidence of the ownership of 
 
 Bent V. Hart, 10 Mo. App. 143; the .stock and not the stock it- 
 
§92 
 
 RAILROADS 
 
 160 
 
 necessarily constitute the holder an owner of the shares it repre- 
 sents,^^ and a person whose name appears in the list of stock-, 
 holders in the company's feooks^* will usually be entitled to trans- 
 fer his stock/* to receive dividends, ^^ and to vote in corporation 
 meetings,!® and may be held liable as a stockholder, i' even 
 though a certificate has not been issued to him,^* or he has 
 pledged^' or assigned it. But the possession of a certificate, 
 made out in the holder's name, or indorsed with a power of at- 
 torney to transfer the stock on the company's books, 2" is prima 
 
 self. Higgins v. Lawringle, 154 
 111. 301, 40 N. E. 362; Hawley v. 
 Brumagin, 33 Cal. 394; Winslow v. 
 Fletcher, 53 Conn. 390, 4 Atl. 250, 
 52 Am. Rep. 122; Lipscomb v. Con- 
 don, 56 W. Va. 416, 49 S. E. 392, 
 67 L. R. A. 670, 107 Am. St. 832. 
 
 12 Baker v. Woolston, 27 Kans. 
 185. 
 
 13 Vail V. Hamilton, 85 N. Y. 
 453, 20 Hun 355. See Hawley v. 
 Upton, 102 U. S. 314, 26 L. ed. 179; 
 New Hampshire &c. R. Co. v.. 
 Johnson, 30 N. H. 390, 64 Am. Dec. 
 300. 
 
 1* National Bank v. Watsontown 
 Bank, 105 U. S. 217, 26 L. ed. 1039; 
 Cincinnati &c. R. Co. v. Pearce, 28 
 Ind. 502; First Nat. Bank v. Gif- 
 ford, 47 Iowa 575; Butterfield v. 
 Spencer, 1 Bosw. (N. Y.) 1. 
 
 15 McNeil V. Tenth National 
 Bank, 46 N. Y. 325, 7 Am. Rep. 
 341; Ellis v. Proprietors, 2 Pick. 
 (Mass.) 243. 
 
 16 Evans v. Bailey, 66 Cal. 112, 4 
 Pac. 1089; State v. Ferris, 42 Conn. 
 560; Beckett v. Houston, 32 Ind. 
 393. 
 
 i-T Mitchell V. Beckman, 64 Cal. 
 117, 28 Pac. 110; Agricultural Bank 
 
 V. Wilson, 24 Maine 273. See Hen- 
 kle V. Salem Mfg. Co., 39 Ohio St. 
 547. 
 
 18 Mitchell V. Beckman, 64 Cal. 
 117, 28 Pac. 110; Fulgam v. Macon 
 &c. R. Co., 44 Ga. 597; Mathis v. 
 Pridham, 1 Tex. Civ. App. 58, 20 
 S. W. 1015; Crumlish v. Shenan.- 
 doah- Valley R. Co., 40 W. Va. 627, 
 22 S. E. 90. See also Yeaman v. 
 Galveston City Co., 106 Tex. 389,. 
 167 S. W. 710, Ann. Cas. 1917 E„ 
 191. 
 
 isVa'il V. Upton, 85 N. Y. 453, 
 20 Hun 355. 
 
 20 As to the effect of such a 
 blank indorsement, see Eraser v. 
 Charleston, US. Car. 486; Leavitt 
 V. Fisher, 4 Duer (N. Y.) 1. As to 
 the other modes of transfer, see 
 Cook Corporations (7th. ed.), 
 § 375. Under the law of Massachu- 
 setts, shares of stock may be ef- 
 fectually transferred by delivery of 
 the certificate with a power of at- 
 torney to transfer the same on the 
 books of the company, signed in 
 blank. Andrews v. Worcester &c. 
 R. Co., 159 Mass. 64, 33 N. E. 
 1109. 
 
161 
 
 STOCK 
 
 §93 
 
 facie evidence of the holder's title to the shares it represents.^^ 
 And the owner of stock has a right to receive a certificate as a 
 voucher for his title, if he asks for it.^* But the books of the 
 company are generally the final evidence as to who are stock- 
 holders,^* and a certificate, apart from the ownership of the 
 shares it represents, may be said to be worthless. 2* 
 
 § 93 (79). Certificates — How far negotiable — Shares are per- 
 sonal property. — It follows, from what has been stated; that such 
 certificates are not strictly negotiable, ^^ but the shares which they 
 
 21 Walker v. Detroit Transit &c. 
 Co., 47 Mich. 338, 11 N. W. 187. 
 That it is only a convenient evi- 
 dence of the holder's title, see 
 Johnson v. Albany &c. R. Co., 40 
 How. Prac. (N. Y.) 193; In re Put- 
 man, 193 Fed. 464; Cincinnati &c. 
 R. Co. V. Pearce, 28 Ind. 502; Sli- 
 pher V. Earhart, 83 Ind. 173; Mar- 
 kle V. Burgess, 176 Ind. 25, 95 N. E. 
 308; United States Radiator Co. v. 
 State, 208 N. Y. 144, 101 N. E. 
 783, 46 L. R. A. (N. S.) 585 n. 
 
 22 National Bank v. Watsontown 
 Bank, 105 U. S. 217, 26 L. ed. 1039; 
 Chester Glass Co. v. Dewey, 16 
 Mass. 94, 8 Am. Dec. 128; Buffalo 
 &c. R. Co. V. Dudley, 14 N. Y. 336, 
 347; Johnson v. Albany &c. R. Co., 
 40 How. Prac. (N. Y.) 193; Rio 
 Grande &c. Co. v. Burns, 82 Tex. 
 SO, 17 S. W. 1043; 4 Thomp. Corp. 
 (2d. ed.), § 3455 et seq. 
 
 23 Dows V. Naper, 91 111. 44, 71 
 Am. Dec. 337; New Albany &c. R. 
 Co. v. McCormick, 10 Ind. 499; 
 Morrill V. Little Falls &c. Co., S3 
 Minn. 371, 55 N. W. 547, 21 L. R. 
 A. 174; New Hampshire &c. R. Co. 
 V. Johnson, 30 N. H. 390, 64 Am. 
 
 6 — Ell. Railroads I 
 
 Dec. 300. See generally as to when 
 and how far this rule is applicable, 
 3 Elliott Ev., § 1946. See also 
 Chesapeake &c. R. Co. v. Deep- 
 water R. Co., 57 W. Va. 641, SO 
 S. E. 890. While between the 
 parties a provision requiring the 
 transfer of stock on the corpora- 
 tion books is inoperative, yet as ■ 
 against the corporation and others 
 the assignment is imperfect and 
 executory until perfected on the 
 books of the corporation. Noble 
 v. Turner, 69 Md. 519, 16 Atl. 124; 
 Topeka Mfg. Co. v, Hale, 39 Kans. 
 23, 17 Pac. 601. 
 
 24 Payne v. Elliot, 54 Cal. 339, 35 
 Am. Rep. 80. 
 
 25 Hammond v. Hastings, 134 U. 
 S. 401, 10 Sup. Ct. 727, 33 L. ed. 
 960; East Birmingham &c. Co. v. 
 Dennis, 85 Ala. 565, 5 So. 679, 2 L. 
 R. A. 836, 7 Am. St. 73; Clark v. 
 American Coal Co., 86 Iowa 436, 
 53 N. W. 291, 17 L. R. A. 557;' 
 Scwall v. Boston Water-power Co., 
 86 Mass, 277, 81 Am. Dec. 701; 
 Shaw V. Spencer, 100 Mass. 382, 97 
 Am. Dec. 107; Mechanics' Bank v. 
 New York &c. R. Co., 13 N. Y. 
 
§93 
 
 RAILROADS 
 
 162 
 
 represent may be sold^® as any other personal property .^^ and 
 the certificates will pass as incident to the shares. But holders 
 of stock who transfer their corporate certificates to others by in- 
 dorsement in blank or by delivery when so indorsed, and cor- 
 porations who issue certificates^* which state on their face that 
 the shares are fully paid up and which contain no notice of the 
 
 599, 627; Knox v. Eden &c. Co., 148 
 N. Y. 441, 42 N. E. 988, 31 L. R. 
 A. 779, 51 Am. St. 700. See also 
 Perkins v. Cowles, 157 Cal. 625, 
 108 Pac. 711, 30 L. R. A. (N. S.) 
 283, 137 Am. St. 158, and notes. 
 
 26 Stock may be sold on execu- 
 tion in nearly all the states. 
 
 27 Nearly all of the states pro- 
 vide by statute that shares of stock 
 shall be personal property. Such 
 a provision is merely declaratory 
 of the common law. Mohawk &c. 
 R. Co. V. Clute, 4 Paige Ch. (N. 
 Y.) 384, 393; 2 Cook Corporations 
 (7th. ed.), § 331; 8 Thompson 
 Corp., § 3465. The rule is the same 
 where all the corporate property is 
 real estate. Baldwin v. Canfield, 
 26 Minn. 43, 1 N. W. 585. See 
 generally to the effect that shares 
 are personal property, Seward v. 
 Rising Sun, 79 Ind. 351, 13 Am. & 
 Eng. R. Cas. 315; Jellenik v. Hu- 
 ron &c. Co., 82 Fed. 778; Berney 
 Nat. Bank v. Pinckard, 87 Ala. 577, 
 6 So. 364, 30 Am. & Eng. Corp. 
 Cas. 52; Tregear v. Etiwanda 
 Water Co., 76 Cal. 537, 18 Pac. 
 658, 9 Am. St. 245; Southwestern 
 R. Co. V. Thomason, 40 Ga. 408; 
 Watson v. Molden, 10 Idaho 570, 
 79 Pac. 503; Cooper v. Corbin, 105 
 111. 224, 13 Am. & Eng. R. Cas. 
 394; Fahrig v. Milwaukee &c. Co., 
 
 113 111. App. 525; Allen v. Pegram, 
 16 Iowa 163; Weaver v. Barden, 49 
 N. Y. 286; Bradley v. Bander, 36 
 Ohio St. 35, 38 Am. Rep. 547; Budd 
 V. Multnomah St. R. Co., 12 Ore. 
 272, 7 Pac. 99, 53 Am. Rep. 355; 
 Lipscomb's Admr. v. Condon, 56 
 W. Va. 392, 49 S. E. 92, (,1 L. R. 
 A. 670. 
 
 28 Where spurious and fraudu- 
 lent certificates of stock are issued 
 by the officers of a corporation 
 under its seal and their genuine- 
 ness affirmed by such officers in 
 answer to inquiries from an in- 
 tending purchaser, the corporation 
 is liable on such certificates to a 
 bona fide purchaser for value. Fifth 
 Ave. Bank v. Forty-second St. &c. 
 R. Co., 137 N. Y. 231, 33 N. E. 378, 
 19 L. R. A. 331 n, 33 Am. St. 712; 
 Mutual Life Ins. Co. v. Forty- 
 second St. &c. R. Co., 74 Hun 505, 
 26 N. Y. S. 545; Citizens' Nat. 
 Bank v. Cincinnati &c. R. Co., 29 
 Wkly. Law Bui. 15. See Ryder v. 
 Bushwick R. Co., 134 N. Y. 83, 31 
 N. E. 251. But where the certif- 
 icates were issued in pursuance of 
 a fraudulent scheme to which the 
 assignor was a party, the assignee 
 acquires no rights superior to those 
 of his assignor. Brown v. Duluth 
 &c. R. Co., S3 Fed. 889. 
 
163 
 
 STOCK 
 
 §93 
 
 claims of the corporation^^ are held so far estopped^" by the ap- 
 parent ability to convey a good title to the shares which their 
 
 29 Where no lien upon shares is 
 given to the company by the char- 
 ter or by a general law for debts 
 or unpaid calls due the company, 
 the ecertificate should set out the 
 claim of lein so as to notify all 
 purchasers. 4 Thomp. Corp. (2d. 
 ed.), § 4004. Where the certi- 
 ficate states that it represents 
 paid-up stock, the corporation can 
 not deny that fact after it has 
 passed into the hands of a bona 
 fide purchaser. Steacy v. Little 
 Rock &c. R. Co., 5 Dill. (U. S.) 
 348, Fed. Cas. No. 13329; Young 
 V. Erie Iron Co., 65 Mich. Ill, 31 
 N. W. 814; 1 Cook Corporations 
 (7th ed.), §50. And it seems 
 that the purchaser may assume 
 that stock is paid up, when he pur- 
 chases in the open market, in the 
 absence of anything to give him 
 notice to the contrary, and he will 
 be protected. Foreman v. Bige- 
 low, 4 Cliff. (U. S.) 508, Fed. Cas. 
 No. 4934; Cleveland &c. Co. v. 
 Texas &c. R. Co., 27 Fed. 250; 
 Dupont V. Tilden, 42 Fed. 87; Key- 
 stone Bridge Co. v. McCluney, 8 
 Mo. App. 496; West Nashville &c. 
 Co. V Nashville Sav. Bank, 86 
 Tenn. 252, 6 S. W. 340, 6 Am. St. 
 835; Cook Stock and Stockholders, 
 §§ SO, 257. Contra Meyers v. Seeley, 
 10 Nat. Bank Reg. 411. Certificates 
 of stock ordinarily contain no rep- 
 resentations as to whether any 
 equities attach to the shares which 
 they represent, and it is said that 
 a certificate of stock is not nego^ 
 tiable paper and whoever takes it 
 
 takes it subject to its equities and 
 burdens, and it is not necessary 
 that the certificate contain a state- 
 ment of the limitations and bur- 
 dens which the law casts upon all 
 such paper. The omission of such 
 a statement is not a waiver by the 
 corporation of the benefits thereof; 
 and, though the purchaser be igno^ 
 rant of such equities and burdens, 
 his ignorance does not enable him 
 to hold the paper discharged there- 
 from. Wherever such paper is is- 
 sued, under authority granted by 
 general statute, whoever deals with 
 that paper is charged with notice 
 of all limitations and burdens at- 
 tached to it by such statute, 
 whether the party lives in or out 
 of the state. Hammond % Hast- 
 ings, 134 U. S. 401, 10 Sup. Ct. 727, 
 33 L. ed. 960; Craig v. Hesperia 
 &c. Co., 113 Cal. 7, 45 Pac. 10, 35 
 L. R. A. 306, 54 Am. St. 316; Rol- 
 lins V. St. Paul &c. R. Co., 29 N. Y. 
 St. 208, 9 N. Y. S. 909. 
 
 soEven though certificates are al- 
 together spurious, the company is- 
 suing them can be compelled to in- 
 demnify one who purchases them in 
 good faith from the person to whom 
 it issued them. Kisterbock's Appeal, 
 127 Pa. 601, 18 Atl. 381, 14 Am. St. 
 868. See also Thomp. Corp. (2d. 
 ed.), § 4145 et seq. The corpor- 
 ation will be estopped to deny that 
 stock is fully paid after certificates 
 which were paid in property that the 
 corporation was authorized to take in 
 payment for stock have passed into 
 the hands of bona fide purchasers, al- 
 
§93 
 
 RAILROADS 
 
 164 
 
 acts have conferred upon the holder of the certificates,^^ that 
 such certificates are said to possess quasi negotiability.^^ Where, 
 however, a corporation is organized under a public law which 
 provides that the corporation shall have a lien upon all the stock 
 or property of its members invested therein for any indebtedness 
 of such members to the corporation, such law is notice to the 
 world ; and, in the absence of any representations as to such lien 
 on the part of the corporation, a purchaser of such stock will 
 
 though the property was overvalued. 
 Dupont V. Tilden, 42 Fed. 87. In Far- 
 rington v. South Boston R. Co., 150 
 Mass. 406, 23 N. E. 109, S L. R. A. 
 849, IS Am. St. 222, 7 R. & Corp. 
 L. J. 196, the court says: "We 
 think it is a safer and more rea- 
 sonable rule to hold that a person 
 taking on pledge a certificate of 
 .-took newly issued in his name by 
 an officer of a corporation as se- 
 curity for the private debt of the 
 officer should be required to inves- 
 tigate the title to the stock if the 
 ofiiccr is one who has the power, 
 either alone or with others, to issue 
 stock certificates, than to hold that 
 such a person can rely upon a cer- 
 tificate so issued to him in the 
 absence of actual notice or knowl- 
 edge that it has been fraudulently 
 issued." 
 
 31 Walker v. Detroit Transit R. 
 Co., 47 Mich .338, .347, 11 N. W. 
 187; McNeil v. Tenth Nat. Bank, 
 46 N. Y. 325, 7 Am. Rep. 341 ; Tay- 
 ler V. Greait Indian &c. R. Co., 4 
 DeG. & J. 559; Cook Corporations 
 (7th. ed.), § 416; 4 Thomp. Corp. 
 (2d. ed.), § 3481. The English courts, 
 however, refuse to follow the Ameri- 
 can rule as to the quasi negotiability 
 of certificates even where they are 
 issued by an American corporation. 
 
 Colonial Bank v. Cady, 63 Law T. 
 27. 
 
 32 Daniel Nego. Instru., § 1708. 
 .'^n owner of stock who permitted 
 a certificate to be issued to an- 
 other for stock which he had trans- 
 ferred to such other person with- 
 out consideration, and wrho takes 
 a blank assignment of such cer- 
 tificate, can hold the stock as 
 against an attaching creditor of 
 that other person. Andrews v. 
 Worcester &c. R. Co., 159 Mass. 
 64, 33 N. E. 1109. They have, how- 
 ever, been held to be so far non- 
 negotiable instruments that a bona 
 fide purchaser of such certificates 
 standing on the company's books 
 in the name of the former owner, 
 regularly indorsed by him in blank, 
 and stolen from the present owner 
 without his fault, gets no title. East 
 Birmingham Land Co. v. Dennis 
 85 Ala. 565, 5 R. & Corp. L. J 
 296, 2. L. R. A. 836. See also 
 Masury v. Arkansas Nat. Bank, 93 
 Fed. 603; Sherwood v. Meadow 
 Valley &c. Co., SO Cal. 412; Bar- 
 stow V. Savage &c. Co., 64 Cal. 
 388, 1 Pac. 349, 49 Am. Rep. 705; 
 Knot V. Eden &c. Co., 148 N. Y. 
 441, 42 N. E. 988, 31 L. R. A. 779, 
 51 Am. St. 700. 
 
165 
 
 STOCK 
 
 §94 
 
 take it subject to such lien.** Agreements between the corpora- 
 tion and its stockholders that the stock shall be non-assessable 
 have been upheld, as between them, in numerous cases, but credi- 
 tors may attack such agreements in a proper case.** 
 
 § 94 (80). New certificates in place of lost— Fraud. — "A bond 
 of indemnity may be required by a corporation as a condition of 
 issuing new certificates of stock for those that have been lost, 
 where the owner is an assignee and has never had possession of 
 the old certificates, and the lapse of time is not so great as to 
 preclude danger of their reappearance."*^ A purchaser of cor- 
 porate stock receiving new certificates therefor, signed by the 
 proper officers, although issued through their fraud, is, if he acts 
 in good faith, and without notice, entitled to be protected as a 
 bona fide purchaser. He owes no duty, ordinarily, to the cor- 
 poration to see to it that the seller surrenders any old certificates 
 and transfers them on the books of the corporation,*^ and the 
 
 33 Hammond v. Hastings, 134 U. 
 S. 401, 10 Sup. Ct. 727, 33 L. ed. 
 960. 
 
 3* Both of these propositions are 
 either expressly decided or con- 
 ceded in the following cases: Sco- 
 vill V. Thayer, 105 U. S. 143. 26 
 L. ed. 968; Dickerman v. Northern 
 Trust Co., 176 U. S. 181, 44 L. ed. 
 423, 20 Sup. Ct. 319; Lum v. Amer- 
 ican Wheel &c. Co., 165 Cal. 657, 
 133 Pac. 303, Ann. Cas. 191SA, 816, 
 and note; Wall v. Basin Min. Co., 
 16 Idaho 317, 101 Pac. 733, 22 L. R. 
 A. (N. S.) 1013 and note. Addi- 
 tional authorities will be found in 
 the notes referred to. See also 
 post §§ 105, 106. 
 
 *5Guilford v. Western Union Tel. 
 Co., 43 Minn. 434, 46 N. W. 70. 
 See also State v. New Orleans &c. 
 Exch., 114 La. 324, 38 So. 204; But- 
 ler V. Glen Cove Starch Co., 18 
 
 Hun CN. Y.) A1\ Travers v. North 
 Carolina R. Co., 133 N. Car. 322, 45 
 S. E. 651; Galveston City Co. v. 
 Sibley, 56 Tex. 269. Where, on 
 application to a company to regis- 
 ter a transfer of stock, the com- 
 pany sent a letter giving notice of 
 it to the holder of stock on the 
 register, and stating that, unless 
 she advised them to the contrary, 
 the stock would be transferred in 
 their books; and she failed to an- 
 swer the letter; and the company 
 subsequently registered the trans- 
 fer, — she was held not estopped 
 from showing that her signature to 
 the transfer was a forgery, and de- 
 manding to have her name re- 
 placed on the register as holder of 
 the stock. Barton v. London &c. 
 R. Co!, L. R. 24 Q. B. D. 11. 
 
 3B Allen v. South Boston R. Co., 
 150 Mass. 200, 22 N. E. 917, 5 l! 
 
§94 
 
 RAILROADS 
 
 166 
 
 corporation may be held liable to damages for the fraud of its 
 ofificers in issuing such stock, where it cannot be compelled to 
 issue valid shares in place of those fraudulently issued for the 
 reason that this would cause an overissue of its capital stock.*'' 
 On the other hand, it has been held that if a purchaser exhibits 
 to the corporation a forged assignment of stock, and thus ob- 
 tains a new certificate,, which he sells, he may become liable to 
 the corporation which he has deceived by impliedly representing 
 that the signature is genuine,^^ and it has also been held that 
 one who receives stock from- an agent to secure the agent's own 
 private debt, knowing that the surrender of the old certificate 
 is a prerequisite to the issue of the new, without making any 
 inquiry as to whether it has been surrendered, is not a bona fide 
 purchaser and cannot hold the corporation liable in damages.*^ 
 The issue of new certificates of stock in place of other certificates, 
 properly issued, which have been lost, does not, however, con- 
 stitute an overissue of stock.*" 
 
 R. A. 716, IS Am. St. 185. See 
 also American Wire Nail Co. v. 
 Bayless, 91 Ky. 94, IS S. W. 10; 
 Salisbury Mills v. .Townsend, 109 
 Mass. 115; New York &c. R. Co. 
 V. Schuyler, 34 N. Y. 30. But see 
 Moores v. Citizens' Nat. Bank, 111 
 U. S. 156, 4 Sup. Ct. 345, 28 L. ed. 
 385. This case is severely criti- 
 cised in 29 Alb. Law. jour. 364, 
 and in Lowell Transfer of Stock, 
 § 112, n. 2. See further upon the 
 general subject, 4 Thomp. Corp. 
 (2d ed.), §3566, et seq. 
 
 .37Weslern Un. Tel. Co. v. Dav- 
 enport, 97 U. S. 369, 24 L. ed. 1047; 
 Supply Ditch Co. v. Elliott, 10 
 Colo. 327, 15 Pac. 691, 3 Am. St. 
 586; Bridgeport Bank v. New York 
 &c. R. Co., 30 Conn. 231; Tome v. 
 Parkersburg R. Co., 39 Md. 36, 17 
 Am. Rep. 540; Western &c. R. Co. 
 \. Franklin Bank, 60 Md. 36; New 
 
 York .tc. R. Co. v. Schuyler, 34 N. 
 Y. 30; Titus v. Great Western &c. 
 Co., 61 N. Y. 237; Cleveland &c. 
 R. Co. V. Robbins, 35 Ohio St. 483; 
 Kisterbochs' Appeal, 127 Pa. St. 
 601, 18 Atl. 381, 14 Am. St. 868. 
 
 38 Boston &c. R. Co. v. Richard- 
 son, 135 Mass. 473. 
 
 39 Farrington v. South Boston R. 
 Co., 150 Mass. 406, 23 N. E. 109, 5 
 L. R. A. 849, 15 Am. St. 222. See 
 also Moores v. Citizens' Nat. Bank, 
 111 U. S. 156, 4 Sup. Ct. 345, 28 L. 
 ed. 385; Hall v. Rose Hill &c. Co., 
 70 111. 673; Seligson v. Brown, 61 
 Tex. 114, 10 Am. & Eng. Corp. Cas. 
 143. 
 
 40 Allen V. South B. R. Co., ISO 
 Mass. 200, 22 N. E. 917, 5 L. R. A. 
 716, 15 Am. St. 185; Kinnan v. 
 Forty-second St. R. Co., 1 Misc. 
 457, 21 N. Y. S. 789, affirmed in 
 140 N. Y. 183, 35 N. E. 498. 
 
167 STOCK § 95 
 
 § 95 (81). Preferred stock. — Preferred stock is usually issued 
 in exchange for common stock as an inducement for the share- 
 holders to advance money to meet certain exigencies which arise 
 in prosecuting the corporate enterprises; or as security to the 
 holders of stock in the more prosperous of two consolidating 
 companies; or in exchange for mortgage bonds of the corpora- 
 tion.*^ But authority to issue such stock and sell it upon the 
 market is frequently given by statute, and it seems that, as it is 
 not against public policy and amounts virtually to a mere con- 
 tract on the part of the stockholders as to how they shall divide 
 the profits, they may agree in the beginning and provide in the 
 by-laws for the classification of the stock into common and pre- 
 ferred, when where the statute is silent upon the subject,*^ or 
 issue it thereafter with unanimous consent of the stockholders.*^ 
 It has been held that it cannot be issued to raise money to pay a 
 dividend on the common stock.** To induce investors to take 
 the stock it is usually provided that the holder shall be entitled 
 to payment of a certain dividend out of the accrued profits not 
 necessary for the operation of the road or for repairs,*^ or reason- 
 
 41 A mortgagee who exchanges 261; Lindley Companies, § 396; 1 
 his bonds for preferred stock is: no Cook Corp. (7th. ed.), § 268; 4 
 longer a creditor, but becomes a Thomp. Corp. (2d. ed.), § 3586. 
 stockholder, with a stockholder's But see Guinness v. Land Corp., 
 rights and liabilities. St. John v. L. R. 22, Ch. Div. 349; Ash- 
 Erie R. Co., 22 Wall. (U. S.) 136, bury v. Watson, L. R. 30, Ch. Div. 
 22 L. ed. 743. His claims are sub- 376, 16 Am. & Eng. Corp. Cas. 383. 
 ject lo all mortgages executed be- *' Toledo &c. R. Co. v. Continen- 
 fore or after his stock was issued. tal Trust Co., 95 Fed. 497; Higgins 
 King V. Ohio &c. R. Co., 12 Chi. v. Sansingh, 154 111. 301, 40 N. E. 
 Leg. News 219, 2 Fed. 36; Warren 362; Knoxville &c. R. Co. v. Knox- 
 y. King, 108 U. S. 389, 2 Sup. Ct. ville, 98 Tenn. 1, 37 S. W. 883, Ann. 
 789, 27 L. ed. 769. Cas. 1916 D, 476; Gordon v. Rich- 
 
 42 Hamlin v. Toledo &c. R. Co., mond &c. R. Co., 78 Va. 501, and 
 
 78 Fed. 664, 670, 36 L. R. A. 826; post, § 102. 
 
 Cratty v. Peoria &c. Assn., 219 111. ** Hoole v. Great Western R. 
 
 516, 76 N. E. 707; Lockhart v. Co., L. R. 3, ch. 262. 
 
 Van Alstyne, 31 Mich. 76, 18 Am. 4-' It has been held that earnings 
 
 Rep. 156; Kent v. Quicksilver Min- should go toward the payment of 
 
 ing Co., 78 N. Y. 159; South &c. a floating debt in preference t.-i the 
 
 Brewery Co., R. L. R. 31, Ch. Div. payment of dividends on the pre- 
 
§96 
 
 RAILROADS 
 
 168 
 
 able improvements,** before dividends are paid to the holders of 
 common stock,*'' and this is the reason it is called preferred 
 stock. It usually gives priority of dividends but not priority of 
 assets or capital.** 
 
 § 96 (82) . When preferred stock may be issued — Rights and 
 remedies of dissenting stockholders. — Such stock, at least when 
 not provided for when the company is organized, can only be 
 issued where the power to issue it is conferred by charter or by 
 statute,*^ unless it is issued by agreement of all the stock- 
 holders.^' It is held in a recent case, however, that it may be 
 
 ferrcd stock. Chaffee v. Rutland 
 R. Co., SS Vt. 110. See Belfast &c. 
 R. Co. V. Belfast, 11 Maine 445, 1 
 Atl. 362. But as to the payment 
 of a debt not yet due, see Hazel- 
 tine V. Belfast &c. R. Co., 79 Maine 
 411, 10 Atl. 328, 1 Am. St. 330. 
 
 *6 New York &c. R. Co. v. 
 Nickals, 119 U. S. 296, 7 Sup. Ct. 
 209, 30 L. ed. 363, reversing IS 
 Fed. 575, where it was held that 
 payment of dividends could be en- 
 forced before the improvements 
 contemplated were made. 
 
 *7Totten V. Tison, 54 Ga. 139; 
 Bates V. Androscoggin &c. R. Co., 
 49 Maine 491 ; Boardman v. Lake 
 Shore &c. R. Co., 84 N. Y. 157; 
 Prouty V. Michigan &c. R. Co., 1 
 Hun (N. Y.) 655; Chaffee v. Rut- 
 land R. Co., 55 Vt. 110; Henry v. 
 Great Northern &c. R. Co., 4 Kay 
 & J. (Eng. Ch.) 1; Cook Corp. (7th. 
 ed.), § 270, 
 
 4S Jones V. Concord &c. R. Co., 
 67 N. H. 234, 30 Atl. 614, 68 Am. 
 St. 650. But it may also give 
 priority as against holders of the 
 common stock. 
 
 *fl Sturge V. Eastern &c. R. Co., 
 
 7 De G., M. & G. 158; Bard v. Bani- 
 gan, 39 Fed. 13; Williston v. Mich- 
 i,gan &c. R. Co., 95 Mass. 400; Kent 
 V. Quicksilver Mining Co., 78 N. 
 Y. 159; Campbell v. American &c. 
 Co., 122 N. Y. 455, 25 N. E. 853, 11 
 L. R. A. 596. The power will not 
 be extended by implication. Cov- 
 ington &c. Co. v. Sargent, 1 Cin. 
 Super. Ct 354; Melhado v. "Hamil- 
 ton, 28 L. T. (N. S.) 578, 29 L. T. 
 (N. S.) 364; Harrison v. Mexican 
 R. Co., L. R. 19 Eq. Cas. 358. 
 Power granted to a railroad com- 
 pany to do all the lawful acts in- 
 cident to its corporate existence, 
 with ''such additional powers as 
 may be convenient for the due and 
 successful execution of the powers 
 granted," does not authorize it to 
 guarantee a specific dividend on 
 its stock, as a premium to induce 
 a subscription, even though the 
 guaranty be partly in consideration 
 of services rendered the company. 
 Elevator Co. v. Memphis &c. R. 
 Co., 85 Tcnn. 703, 4 Am. St. 798, 
 5 S. W. 52. 
 
 50 Harrison v. Mexican R. Co., 
 44 L. J. (Ch.) 403; Higgins v. Lan- 
 
169 
 
 STOCK 
 
 §96 
 
 issued unless prohibited.^! A stockholder may waive objections 
 to such an issue, and long acquiescence will be construed to be 
 such a waiver.^2 "A privilege given by a railroad company to its 
 stockholders to exchange common stock for preferred stock must 
 be exercised within a reasonable time, and a tender of common 
 stock and the additional sum required for an exchange, maae 
 thirty-three years after the privilege was conferred, is not made 
 within a reasonable time."^^ It has been held that the directors 
 cannot issue such stock under an authorization to the corporation 
 to do so,"* but this decision seems of doubtful soundness, and, 
 in any event, such an issue is susceptible of ratification by a sub- 
 
 singh, 154 111. 301, 40 N. E. 362; 
 Kent V. Quicksilver Mining Co., 
 78 N. Y. 159, 178. See also PoUitz 
 V. Wabash R. Co., ISO App. Div. 
 709, 135 N. Y. S. 785. Some cases 
 have held that under a power to 
 increase the capital stock and to 
 borrow money such stock could be 
 issr.cd by a majority vote. Hazle- 
 hurst v. .Savannah &c. R. Co., 43 
 Ga. 13 (1875); West Chester &c. 
 R. Co. V. Jackson, 11 Pa. St. 321; 
 Gordon v. Richmond &c. R. Co., 
 19. Va, 501, 22 Am. & Eng. R. Cas. 
 7>Z: Rutland &c. R. Co. v. Thrall, 
 35 Vt. 536. But this has been 
 denied. Kent v. Quicksilver Min- 
 ing Co., 78 N. Y. 159. It has 
 been held that the power to issue 
 preferred stock is given by the 
 grant of a right to raise funds by 
 a sale of stock. Chaffee v. Rut- 
 land &c. R. Co., 55 Vt. 110, 16 Am. 
 & Eng. R. Cas. 408. See also State 
 V. Cheraw &c. R. Co., 16 S. Car. 
 524. 
 
 51 Continental Trust Co. v. To- 
 ledo &c. R. Co., 86 Fed. 929, citing 
 and relying on Hamlin v. Toledo 
 
 &c. R. Co., 78 Fed. 664, 36 L. R. 
 A. 826. See last preceding section 
 on this subject. But see Mercan- 
 tile Trust Co. V. Baltimore .&c. R. 
 Co., 82 Fed. 360. 
 
 f'2 Branch v. Atlantic &c. R. Co., 
 3 Woods (U. S.) 481, Fed. Cas. 
 No. 1807; Taylor v. South &c. R. 
 Co., 13 Fed. 152; Hoyt v. Quick- 
 silver Mining Co., 17 Hun (N. Y.) 
 169; Kent v. Quicksilver Min. Co., 
 78 N. Y. 159. See Banigan v. Bard, 
 134 U. S. 291, 10 Sup. Ct. 565, 33 
 L. ed. 932; Hazlehurst v. Savan- 
 nah &c. R. Co., 43 Ga. 13; Lock- 
 hart V. Van Alstyne, 31 Mich. 76, 
 18 Am. Rep. 156, 163, and compare 
 American Tube Works v. Boston 
 ^c. Co., 139 Mass. 5, 29 N. E. 63; 
 National Bank v. Drake, 29 Kans. 
 311, 44 Am. Rep. 646. 
 
 53 Holland v. Cheshire R. Co., 
 151 Mass. 231, 24 N. E. 206, 8 R. 
 & Corp. L. J. 49. See also Pear- 
 son v. London &c. R. Co., 14 Sim 
 541. 
 
 »^ McLaughlin v. Detroit &c. R. 
 Co., 8 Mich. 99. 
 
§97 
 
 RAILROADS 
 
 170 
 
 sequent vote of the stockholders.^® A dissenting stockholder 
 may enjoin an unauthorized issue of preferred stock,^*.or may 
 have it set aside by suit brought within a reasonable time.^'^ 
 
 § 97 (83). Holder of preferred stock not a creditor — His rights 
 and remedies. — The holder of preferred stock is not a creditor of 
 the corporation,®^ but simply a shareholder with a superior right 
 to receive dividends when the profits are insufficient to pay them 
 to all the holders of stock,®^ and he can claim the payment of 
 
 85 McLaughlin v. Detroit &c. R. 
 Co., 8 Mich. 99. 
 
 56 Sturge V. Eastern R. Co., 7 
 DcG., M. & G. 1S8; Moss v. Syers, 
 32 L. J. Ch. 711; Hutton v. Scar- 
 borough &c. Co., 4 DeG., J. & S. 
 672; Kent v. Quicksilver &c. Co., 
 78 N. Y. 159. 
 
 B7 A long delay in bringing suit 
 or other acquiescence may confirm 
 the isisue. Taylor v. South &c. R. 
 Co., 4 Woods (U. S.) 57S, 13 Fed. 
 152 (10 years) ; Banigan v. Bard, 
 134 U. S. 291, 10 Sup. Ct. 565, 33 
 L. ed. 932; Hazlehurst v. Savannah 
 &c. R. Co., 43 Ga. 13; Kent v. 
 Quicksilver Mining Co., 78 N. Y. 
 159 (4 years). One accepting such 
 stock can not question its validity 
 in a suit for the purchase price, if 
 the other stockholders do not com- 
 plain. Evansville &c. R. Co. v. 
 Evansville, 15 Ind. 395, 415. See 
 also Branch v. Jesup, 106 U. S. 468, 
 
 1 Sup. Ct. 495, 27 L. ed. 279. But 
 compare Reed v. Boston &c. Co., 
 141 Masis. 454, 5 N. E. 852; An- 
 thony V. Household &c. Co., 16 R. 
 I. 571, 18 Atl. 176, 5 L. R. A. 57S. 
 
 38 Warren v. King, 108 U. S. 389, 
 
 2 Sup. Ct. 789, 27 L. ed. 769; Bailey 
 V. Railroad Co., 1 Dill. (U. S.) 174, 
 
 Fed. Cas. No. 736; National Elec. 
 Signaling Co. v. Fessenden, 207 
 Fed. 915; Grover v. Cavanaugh, 40 
 Ind. App. 340, 82 N. E. 104; Bel- 
 fast &c. R. Co. V. Belfast, 77 Maine 
 445, 1 Atl. 362; Field v. Lamson 
 &c. Co., 162 Mass. 388, 38 N. E. 
 1126, 27 L. R. A. 136, and note; 
 McLaughlin v. Detroit &c. R. Co., 
 8 Mich. 100; Taft v. Hartford &c. 
 R. Co., 8 R. I. 310, 5 Am. Rep. 575; 
 Chafiee v. Rutland &c. R. Co., 55 
 Vt. 110; Birch v. Cropper, 61 Law 
 T. 621. See also Smith v. Alabama 
 &c. Assn., 123 Ala. 538, 26 So. 232; 
 Guaranty Trust Go. v. Galveston 
 City R. Co., 107 Fed. 311; People 
 V. St. Louis &c. R. Co., 176 111. 
 512, 52 N. E. 292; note in 73 Am. 
 St. 228; 4 Thomp. Corp. (2d. ed.), 
 § 3607. But see Emerson v. New- 
 York &c. R. Co., 14 R. I. 555, 16 Am. 
 & Eng. R. Cas. 404; Burt v. Rattle, 
 31 Ohio St. 116. See generally Heller 
 V. National Marine Bank, 89 Md. 
 602, 43 Atl. 800, 45 L. R A. 438, 73 
 Am St. 212, and note. 
 
 S9 St. John V. Erie R. Co., 22 
 Wall. (U. S.) 136, 22 L. ed. 743; 
 Warren v. King, 108 U. S. 389, 2 
 Sup. Ct. 789, 27 L. ed. 769; Bates 
 V. Androscoggin &c. R. Co., 49 
 
171 
 
 STOCK 
 
 §97 
 
 'dividends only out of the net earnings;*" The ownership of such 
 stock usually confers upon the holder a right to vote it at meet- 
 ings of the shareholders; but it has been held competent for a 
 railroad company, in issuing certificates of preferred stock, to 
 stipulate therein that the holders shall not have or exercise the 
 right to vote as stockholders at such meetings.®^ The directors 
 may be compelled by suit to pay dividends on preferred stock 
 before otherwise disposing of net earnings,*^ subject to a reason- 
 
 Maine 491; Taft v. Hartford &c. 
 R. Co., 8 R. 1. 310, S Am. Rep. 575; 
 Chafifee v. Rutland &c. R. Co., 55 
 Vt. 110; State v. Cheraw &c. R. 
 Co., 16 S. Car. 524, and other au- 
 thorities cited in last preceding 
 note. Held subject to the statu- 
 tory liability of a stockholder in 
 Railroad Co. v. Smith, 48 Ohio St. 
 219, 31 N. E. 743. It has also 
 been held that preferred stock can 
 not be charged as a liability in de- 
 termining whether the indebted- 
 ness of a railroad company is so 
 great as to justify it in refusing to 
 run separate passenger trains. Peo- 
 ple V. St. Louis &c. R. Co., 176 111. 
 512, 52 N. E. 292, 35 L. R. A. 656. 
 
 60 Belfast &c. R. Co. v. Belfast, 
 77 Maine 445, 1 Atl. 362; Lock- 
 hart V. VanAIstyne, 31 Mich. 76; 
 Elkins V. Camden &c. R. Co., 36 N. 
 J. Eq. 233; Miller v. Ratterman, 
 47 Ohio St. 141, 24 N. E. 496; 
 Henry v. Great Northern &c. R. 
 Co., 1 De Gex & J. 606. But see 
 Cotting V. New York &c. R. Co., 
 54 Conn. 156, 5 Atl. 851; Totten v. 
 Tilson, 54 Ga. 139. And some- 
 times the statute otherwise pro- 
 vides. Williams v. Parker, 136 
 Mass. 204. See also Rogers v. 
 Citizens' Nat. Bank, 93 Md. 613, 49 
 
 Atl. 843. As to what are net earn- 
 ings, see .St. John v. Erie R. Co., 
 10 Blatchf. (U. S.) 271, Fed. Cas. 
 No. 12226, affirmed in 22 Wall. 136; 
 Union Pac. R. Co. v. United States, 
 99 U. S. 402, 25 L. ed. 274; Warren 
 V. King, 108 U. S. 389, 398, 27 L. 
 ed. 769; Phillips v. Eastern R. Co., 
 138 Mass. 122; Van Dyck v. Mc- 
 Quade, 86 N. Y. 38. 
 
 fii Miller v. Ratterman, 47 Ohio 
 St. 141, 24 N. E. 496. To same ef- 
 fect is State v. Swanger, 190 Mo. 
 561, 89 S. W. 872, 2 L. R. A. (N. 
 S.) 121 n, 4 Ann. Cas. 563. See 
 also note in 73 Am. St. 239. 
 
 63 Bailey v. Hannibal &c. R. Co., 
 1 Dill (U. S.) 174, Fed. Cas. No. 
 736; Mackintosh v. Flint &c. R. 
 Co., 32 Fed, 350; Bates v. Andro- 
 scoggin &c. R. Co., 49 Maine 491; 
 Hazeltine v. Belfast &c. R. Co., 30 
 Am. & Eng. R. Cas. 528, 79 Maine 
 411, 1 Am. St. 330; Barnard v. Ver- 
 mont &c. R. Co., 89 Mass. 512; 
 Boardman v. Lake Shore &c. R. 
 Co., 84 N. Y. 157, 180; Dickinson 
 V. Chesapeake &c. R. Co., 7 W. Va. 
 390. See also Storrow' v. Texas 
 &c. Assn., 87 Fed. 612; Cotting v. 
 New York &c. R. Co., 54 Conn. 
 156, 5 Atl. 851. 
 
§97 
 
 RAILROADS 
 
 172 
 
 able discretion on their part as to making improvements,''^ and, 
 possibly, as to the liquidation of a floating debt,®* yet no suit can 
 be maintained, as a rule, against the corporation for a preferred 
 dividend until profits with which to pay it have accrued and ,it 
 has been declared.®^ But if such accrued profits be appropriated 
 to the payment of dividends on common stock while the guar- 
 anteed dividends on preferred stock remain unpaid, payment of 
 such common dividends may be enjoined.®® Or, if the payment 
 is actually made, the holder of preferred stock is entitled to in- 
 terest on his accrued dividends from the date of this misappro- 
 priation.®^ If from a lack of net profits with which to pay the 
 guaranteed dividends upon preferred stock they should remain 
 unpaid for a time, the holders are entitled to payment of arrears 
 before any dividends are declared on common stock,®* unless dif- 
 
 i!3 New York &c. R. Co. v. Nick- 
 als, 119 U. S. 296, 7 Sup. Ct. 209, 
 30 L. ed. 36.3. It is suggested that 
 where arrears are not collectible 
 the corporation should riot be al- 
 lowed to retain profits for the 
 making of improvements before 
 paying dividends on preferred 
 stock, as such power would give 
 the corporation an opportunity to 
 defeat the preterence by waiting to 
 declare a dividend until the profits 
 sufficed for dividends on all the 
 capital stock. 1 Cook Corp. (7th. 
 ed.), i 272. 
 
 84 Chafifee v. Rutland &c. R. Co., 
 55 Vt. 110; Belfast &c. R. Co. v. 
 Belfast, n Maine 445, 1 Arl. 362. 
 .See Hazeltine v. Belfast &c. R. Co., 
 79 Maine 411, 10 Atl. 328, 1 Am. St. 
 330, 30 Am. & Eng. R. Cas. 528. 
 
 65 Taft v. Hartford &c. R. Co., 
 8 R. I. 310, 5 Am. Rep. 575; Lock- 
 hart V. VanAlstyne, 31 Mich. 76, 
 18 Am. Rep. 156; Webb v. Earle, 
 L. R. 20 Eq. 556. The declara- 
 tion of such a dividend is very 
 
 largely within the discretion of the 
 directors as long as they act in 
 good faith. Field v. Lamson, 162 
 Mass. 388, 38 N. E. 1126, 27 I.. R. 
 A. 136, and note. 
 
 «e Union Pac. R. Co. v. United 
 States, 99 U. S. 402, 25 L. ed. 274; 
 Prouty V. Michigan Southern &c. 
 R. Co., 1 Hun (N. Y.) 655; Taft 
 V. Hartford &c. R. Co., 8 R. I. 310, 
 5 Am. Rep. 575. 
 
 ''■f Prouty V. Michigan &c. R. Co., 
 1 Hun (N. Y.) 655; Henry v. Great 
 Northern R. Co., 4 K. & J. 1. See 
 also Boardman v. Lake Shore &c. 
 R. Co., 84 N. Y. 157, 4 Am. & Eng. 
 R. Cas. 265. 
 
 68 Bailey v. Hannibal &c. R. Co., 
 1 Dill. (U. S.) 174, Fed Cas. No. 
 736, 17 Wall. (U. S.) 96, 21 L. ed. 
 611; Elkins v. Camden &c. R. Co., 
 36 N. J. Eq. 233; Boardman v. 
 Lake Shore &c. R. Co., 84 N. Y. 
 157; H«nry v. Great Northern R. 
 Co., 1 DeG. & J. 606 (1857) ; Mat- 
 thews V. Great Northern &c. R. 
 Co., 28 L. J. Ch. 375 (1859). But 
 
173 
 
 STOCK 
 
 §98 
 
 ferent provision is made by statute or otherwise.^* It should be 
 observed, however, that nearly all the matters stated in this sec- 
 tion may be determined by some statute, or, in some instances, 
 by the contract ; and, even though stock is designated as preferred 
 stock, the mere name does not make it such if it does not possess 
 the characteristics and qualities of preferred stock. ■"• 
 
 § 98 (84). Rights of preferred stockholders after payment of 
 guaranteed dividend — Future dividendsi. — ^After the holders of 
 preferred stock have received the dividend guaranteed to them, 
 the net profits remaining on hand may be devoted to the pay- 
 ment of dividends on the common stock alone, until the holders 
 of such stock have received a dividend equal to that paid on the 
 preferred stock, after which all stock shares equally in any addi- 
 tional dividends which the net earnings on hand may suffice to 
 payJ^ Such is the general rule in the absence of anything to the 
 contrary, . but the matter is frequently determined by statute or 
 
 see contra. Belfast &c. R. Co. v. 
 Belfast, n Maine 44S, 1 Atl. 362; 
 Gordon v. Richmond &c. R. Co., 78 
 Va. 501. See where there was a 
 reduction of stock because of 
 losses, Roberts v. Roberts-Wicks 
 Co., 184 N. Y 257, n N. E. 13, 3 
 L. R. A. (N. S.) 1034. 
 
 69 See Dent v. London &c. Co., 
 L. R. 16, Ch. Div. 344; Belfast &c. 
 R. Co. V. Belfast, 11 Maine 445, 1 
 Atl. 362, where a by-law was held 
 to have controlling influence. See 
 Companies Clauses, Act of 1863, 26 
 and 27 Vict., ch. 16, § 14, for statute 
 provision limiting- the fund for the 
 payment of preferred dividends to 
 the profits of the current year. 
 
 ''O Heller v. National Marine 
 Bank. 89 Md. 602, 43 Atl. 800, 45 
 L. R. A. 438, n Am. St. 212 n. 
 See also for cases in which the 
 stock was held not to be preferred 
 
 and the holder was held to be a 
 creditor rather than a stockholder, 
 or the like; Totten v. Tison, 54 
 Ga. .139; Savannah Real Estate &c. 
 Co. V. Silverberg, 108 Ga. 281, 33 
 S. E. 908; Cratty v. Peoria &c. 
 Assn:, 219 111. 516, 76 N. E. 707; 
 Burt V. Rattle, 31 Ohio St. 116. 
 
 71 Sternbergh v. Brock, 225 Pa. 
 279, 74 Atl. 166, 24 L. R. A. (N. S.) 
 1078, 1081, 133 Am. St. 877 (citing 
 text); Bailey v. Hannibal &c. R. 
 Co., 1 Dillon (U. S.) 174, Fed. Cas. 
 No. 736, 17 Wall. (U. S.) 96, 21 L. 
 ed. 611; Fidelity Trust Co. v. Le- 
 high Valley R. Co., 215 Pa. 610, 64 
 Atl. 829, 7 A. & E. Ann. Cas. 613; 
 Allen V. Londonderry &c. R. Co., 
 25 W. R. 524. See also Coggeshall 
 v. Georgia Land &c. Co., 14 Ga. 
 App. 637, 82 S. E. 156. ' But com- 
 pare Scott v. Baltimore &c. R. Co 
 93 Md. 475, 49 Atl. 327. 
 
§ 99 RAILROADS 174 
 
 provision in the by-laws and certificates. The preferred share- 
 holders are not entitled to have the profits reserved to pay their 
 dividends which may accrue in the future. An assignment of the 
 stock carries with it all arrears of dividends,''^ not expressly sep- 
 arated and reserved to the grantor/* unless the dividend has 
 been declared before the transfer.''* 
 
 § 99. Deferred dividends — Stock reduction. — The reduction, 
 on account of business losses, of preferred stock, distributed 
 ratably among its holders, does not affect their right, when 
 profits are subsequently earned, to the arrears or deferred divi- 
 dends where the stock is cumulative, but the surplus of capital 
 remaining after such reduction cannot be used for that purpose 
 so as to give the preferred stockholders a preference'"' out of the 
 capital. 
 
 § 100 (85). Rights of preferred stockholders on dissolution. — 
 Unless a preference in repayment of capital invested has been 
 specially contracted for''^ or is given by statute,'^'' the holder of 
 preferred stock shares equally with common shareholders m a 
 distribution of assets upon dissolution. '^^ His claims are subject 
 
 T2 Manning v. Quicksilver Min. 107 Fed. 311; Continental Trust Ca. 
 
 Co., 24 Hun (N. Y.) 360; Hyatt v. v. Toledo &c. R. Co., 86 Fed. 929 
 
 Allen, 56 N. Y. 553, 15 Am. Rep. (as where it is made a lien on the 
 
 449. property and earnings) ; Wilson v. 
 
 73 Jermain v. Lake Shore &c. R. Parvin. 119 Fed. 652 ; Kent v. Hon- 
 Co., 91 N. Y. 483. singer, 167 Fed. 619 (same). 
 
 74 Ohio, City of, v. Cleveland &c. '''' McGregor v. Home Ins. Co., 
 R. Co., 6 Ohio St. 490. 33 N. J. Eq. 181. 
 
 75 Roberts v. Roberts-Wicks Co., 78 McGregor v. Home Ins. Co., 
 184 N. Y. 257, 77 N. E. 13, 3 L. R. 33 N. J. Eq. 181; Bridgewater Nav. 
 A. (N. S.) 1034 n, 112 Am. St. 607, Co., Re, 58 Law T. 476; Birch v. 
 6 Ann. Cas. 213. Cropper, 61 Law T. 621; Griffith v. 
 
 76 Bangor &c. Co., Re, L. R. Paget, L. R. 6, Ch. Div. 511. See 
 20 Eq. 59; Bridgewater Nav. Co., also Lloyd v. Penna Electric &c. 
 Re, L. R. 39 Ch. Div. 1, 58 Law T. Co., 75 N. J. Eq. 263, 72 Atl. 16, 21 
 476, 26 Am. & Eng. Corp. Cas. 386. L. R. A. (N. S.) 228 n, 20 Ann. 
 That it may be so contracted for CaE. 119. But see Gordon v. Rich- 
 unless prohibited, see Gmaranty mond &c. R. Co., 78 Va. 501, 22 
 Trust Co. V. Galveston &c. R. Co., Am. & Eng. R. Cas. 33. So, when 
 
175 
 
 STOCK 
 
 §101 
 
 to those of creditors for debts contracted subsequently to the 
 issue of his stockj^ and, in general, unless otherwise provided 
 by statute, he has no greater rights as against creditors than com- 
 mon stockholders in the way of priority over other creditors in 
 the distribution of its assets.^" This results from the rule that 
 he is a stockholder and not a creditor.*^ 
 
 § 101 (86). GuarcUiteed, interest-bearing, income and deben- 
 ture stock. — An agreement on the part of the corporation to pay 
 a specified dividend or interest on its stock absolutely and at all 
 events, whether any profits are earned or not, would be contrary 
 to public policy and void,®^ and it has been held that a railroad 
 company cannot, without legislative authority, contract to pay 
 interest on its stock before the road is completed or any income 
 
 the capital stock is reduced the 
 preferred stock may be reduced 
 equally with the common. Bar- 
 row &c. Co., R«, S9 Law T. SOO; 
 Great Western &c. Co., Re, 56 L. 
 J. Ch. 3 ; Bannatyne v. Direct &c. 
 Co., 55 Law T. 716. Unless it is 
 preferred as to assets as well as 
 dividends. Quebrada R., Re. 60 
 Law T. 482. But see American 
 Pastoral Co., Re, 62 Law T. 625. 
 See generally note in 73 Am. St. 
 243. 
 
 79 Warren v. King, 108 U. S. 389, 
 2 Sup. Ct. 789, 27 L. ed. 769; St. 
 John V. Erie R. Co., 22 Wall. (U. 
 S.) 136, 22 L. ed. 743; King v. Ohio, 
 &c. R. Co., 2 Fed. 36; Birch v. 
 Cropper, 61 Law T. 621. See also 
 Ellsworth V. Lyons, 181 Fed. 55. 
 
 80 Rider V. John D. Delker, &c. 
 Co., 145 Ky. 634, 140 S. W. 1011, 
 39 L. R. A. (N. S.) 1007 n; Fryer 
 V. Wiedemann, 148 Ky. 379, 146 
 S. W. 752, 39 L. R. A. (N. S.) 1011 ; 
 Weaver Power Co. v. Elk Moun- 
 tain Mill Co., 154 N. Car. 77, 69 S. 
 
 E. 747 (so holding even where the 
 stock certificate gave him "a pre- 
 ferred lien on the assets of the 
 company." This was held to give 
 him a preference over the com- 
 mon stockholders on liquidation, 
 but not over creditors). 
 
 81 See ante, § 97. This section is 
 quoted in Heller v. Nat. Marine 
 Bank, 89 Md. 602, 43 Atl. 800, 44 
 L. R. A. 438, 443, 73 Am. St. 212 n. 
 See also Higgins v. Lansingh, 154 
 111. 301, 40 N. E. 362. 
 
 82Lockhart v. Van Alstyne, 31 
 Mich. 76, 18 Am. Rep. 156; Chase 
 V. Vanderbilt, 62 N. Y. 307; Ohio 
 College v. ■ Rosenthal, 45 Ohio St. 
 183, 12 N. E. 665; State v. Cheraw, 
 &c. R. Co., 16 S. Car. 524; Elevator 
 Co. v. Memphis, &c. R. Co., 85 
 Tenn. 703, 5 S. W. 52, 4 Am. St. 
 798; Crawford v. Northeastern, &c. 
 R. Co., 3 Jur. (N. S.) 1093. See 
 also Jorguson v. Apex Gold Mines 
 Co., 74 Wash. 243, 133 Pac. 465, 46 
 L. R. A. (N. S.) 637 n. 
 
§101 
 
 RAILROADS 
 
 176 
 
 received.^* But in Massachusetts, the statute provides for "spe- 
 cial stock," upon which a semi-annual dividend or interest is pay- 
 able absolutely and as a debt, without regard to the corporate 
 earnings,** and, even in the absence of express legislative au- 
 thority, a corporation has the same power to guaranty dividends 
 and provide for interest out of the profits that it has to issue pre- 
 ferred stock, for such guaranteed or interest-bearing stock is vir- 
 
 sa Painesville, &c. R. Co. v. King, 
 17 Ohio St. SOO, 534, 49 Am. Dec. 
 478. See also Troy, &c. R. Co. v. 
 Tibbits, 18 Barb. (N. Y.) 297; 
 Pittsburgh, &c. R. Co. v. Allegheny 
 Co.' 63 Pa. St. 126. But we believe 
 that a railroad company ordinarily 
 has power, for the purpose of get- 
 ting subscriptions and money to 
 build the road, to issue interest- 
 bearing stock or to agree to pay 
 interest until the road is built or 
 until some other designated time, 
 at least where the interest, al- 
 though accruied, is not to be paid 
 until the road is in operation and 
 sufficient profits are made. Thus, 
 in the case of Evansville, &c. R. 
 Co. V. Evansville, IS Ind. 395, 415, 
 the court said: "The work of con- 
 structing a railroad sometimes re- 
 quires years for its completion, and 
 dividends to stockholders seldom, 
 if ever, accrue before the road is 
 fully completed. If interest were 
 not allowed upon the stock, those 
 who invest their funds at the be- 
 ginning would receive nothing 
 more than those who take their 
 stock when the work may be near- 
 ly completed. We see nothing 
 against the law or public policy in 
 this arrangement. The coftstruc- 
 tion of a railroad requires a large 
 
 outlay of capital, much of which 
 must be furnished before the work 
 can progress to any considerable 
 extent. If interest is allowed on 
 the stock from the time it is paid 
 for, there is an inducement for 
 capitalists to invest early and fur- 
 nish the means to successfully car- 
 ry on the enterprise." To the same 
 effect are the decisions in Richard- 
 son V. Vermont, &c. Co., 44 Vt. 
 613, 618; Wright v. Vermont, &c. 
 R. Corp., 12 Cush. (Mass.) 68; 
 Barnard v. Vermont, &c. R. Co., 7 
 Allen (Mass.) 512; Ohio v. Cleve- 
 land, &c. R. Co., 6 Ohio St. 489; 
 Rutland, &c. Co. v. Thrall, 35 Vt. 
 536; Milwaukee, &c. R. Co. v. 
 Field, 12 Wis. 340. See also Water- 
 man V. Troy &c. R. Co., 8 Gray 
 (Mass.) 433. See also People 
 V. Preston, 140 N. Y. 549, 35 N. E. 
 979, 24 L. R. A. 57; Miller v. Pitts- 
 burgh &c. R. Co., 40 Pa. St. 237, 80 
 Am. Dec. 570. 
 
 8* American Tube Works v. 
 Boston, &c. Co., 139 Mass. S, 29 N. 
 E. 63; Reed v. Boston, &c. Co., 141 
 Mass. 4S4, S N. E. 852, 12 Am. & 
 Eng. Corp; Gas. 153; Williams v. 
 Parker, 136 Mass. 204, 6 Am. & 
 Eng. Corp. Gas. 566. See also- 
 Gordon v. Richmond, &c. R. Co., 
 78 Va. 501. 
 
177 
 
 STOCK 
 
 §101 
 
 tually preferred stock and nothing more.*^ It will generally be 
 construed to mean that the interest or dividend is payable only 
 out of the profits and upheld on that ground,*" but much, of 
 course, will necessarily depend upon the language used, and 
 where the interest is guaranteed absolutely and the corporation 
 also agrees to liquidate the principal at a specified time, or the 
 like, so that the so-called stock is in reality an interest-bearing 
 debenture the relation created thereby will be that of debtor and 
 creditor and the holder will not be merely a shareholder as he 
 would be if it were preferred or interest-bearing stock payable 
 only out of the profits.'^" Its validity, therefore, would depend 
 upon some other power than the power to issue preferred stock.** 
 Sometimes an agreement is made between two corporations 
 whereby one guarantees to the other a certain specified annual 
 dividend on its capital stock. Such an agreement is held to be 
 a guarantee to the corporation and not to the stockholders sev- 
 
 85 Taft V. Hartford, &c. R. Co., 8 
 R. I. 310, S Am. Rep. 575; Miller 
 V. Ratterman, 47 Ohio St. 141, 24 
 N. E. 496; Henry v. Great North- 
 ern &c. R. Co., 4 K. & J. 1. See also 
 note in 73 Am. St. 227, 228, 235, 
 and In re Fechheimer Fisbel Co., 
 212 Fed. 357. Except that the divi- 
 dends are more clearly cumulative 
 and more clearly show that the 
 holder is entitled to arrears as 
 soon as the profits are earned and 
 the dividend declared. Boardman 
 v. Lake Shore, &c. R. Co., 84 N. Y. 
 157; Field v. Lamson, &c. Co., 162 
 Mass. 388, 38 N. E. 1126, 27 L. R. 
 A. 136; Henry v. Great Northern, 
 &c. R. Co., .4 K. & J. 1. 
 
 86LoGkhart v. Van Alstyne, 31 
 Mich. 76, 18 Am. Rep, 156; Water- 
 man V. Troy, &c. R. Co., 8 Gray 
 (Mass.) 433; Scott v. Central R. 
 Co., 52 Barb. (N. Y.) 45; Taft v 
 Hartford, &c. R. Co., 8 R. I. 310, 
 
 5 Am. Rep. 575; Field v. Lamson, 
 &c. Co., 162 Mass. 388, 38 N. E. 
 1126, 27 L. R. A. 136, and note. See 
 also Barnard v. Vermont; &c. R. 
 Co., 7 Allen (Mass.) 512; Richard- 
 son V. Vermont, &c. R, Co., 44 Vt. 
 613. 
 
 87 Burt V. Rattle, 31 Ohio St. 
 116; Totten v. Tison, 54 Ga. 139; 
 West Chester, &c. R. Co. v. Jack- 
 son, 77 Pa. St. 321. 
 
 88 Quoted in Heller v. National 
 Marine Bank, 89 Md. 602, 43 Atl. 
 800, 45 L. R. A. 438, 443, 73 Am. 
 St. 212 n, where it is said that or- 
 dinarily preferred stock does not 
 constitute a lien upon the fran- 
 chise and property, but that merely 
 calling it preferred stock does 
 not necessarily have the effect of 
 making it ordinary preferred stock, 
 and that the statute may make it a 
 lien, although the term "'preferred 
 stock" is used. 
 
§ 102 
 
 RAILROADS 
 
 178 
 
 erally, and the directors have power to modify the terms of such 
 guaranty, and their action in so doing will not be disturbed by 
 the courts where they have acted fairly and in good faith.*^ 
 
 § ID2 (87). Increase and reduction of capital stock. — ^A cor- 
 poration can neither increase nor reduce its fixed capital stock 
 without legislative authority.*" The power to increase it can not, 
 ordinarily, be implied from the power to reduce it,»i nor can the 
 power to reduce it be implied from the mere power to increase 
 it.92 And when the statute confers the power to increase or de- 
 crease' the capital stock the statutory method of procedure should 
 be substantially followed.93 Unless otherwise provided, the 
 
 ^9 Plagg V. Manhattan R. Co., 10 
 Fed. 413, 20 Blatch. (U. S.) 142; 
 Beveridge v. New York, &c. R. 
 Co., 112 N. Y. 1, 19 N. E. 489, 2 
 L. R. A. 648. A guarantee of a 
 specified dividend upon the stock of 
 another company absolutely and 
 ^vithout regard to profits was held 
 unauthorized and not enforceable 
 in Elevator Co. v. Memphis, &c. R. 
 Co., 85 Tenn. 703, S S. W. 52, 4. 
 Am. St. 798. It has also been held 
 that a railroad company has no im- 
 ■ plied power to guarantee the inter- 
 est and dividends on stocks and 
 bonds of a summer hotel, although 
 the business of the railroad might 
 thus be increased. "Western, &c. 
 R. Co. V. Blu« Ridge Hotel Co., 
 102 Md. 307, 62 Atl. 351, 3 L. R. A. 
 (N. S.) 887, and note. 
 
 90 Spring Co. v. Knowlton, 103 
 U. S. 49, 26 L. ed. 347; Scovill v. 
 Thayer, 105 U. S. 143, 26 L. ed. 
 968; Railway Co. v. AUerton, 18 
 Wall. (U. S.) 233, 21 L. ed. 902; 
 Winters v. Armstrong, 37 Fed. 
 508; Peck v. Elliott, 79 Fed. 10; 
 Tschumi v. Hills, 6 Kans. App. 549, 
 
 51 Pac. 619; Oldtown R. Co. v. 
 Veazie, 39 Maine 571; Mechanic's 
 Bank v. New York, &c. R. Co., 13 
 N. Y. 599, 617; New York &c. R. 
 Co. V. Schuyler, 34 N. Y. 30; Coolfe 
 V. Marshall, 191 Pa. St. 315, 43 Atl. 
 314, 64 L. R. A. 413. Sec also Leu- 
 rey v. Bank of Baton Rouge, 131 
 La. 30, 58 So. 1022, Ann. Cas. 
 1913E, il68, and note. But the 
 authorized issue of bonds con- 
 vertible into stock may, in effect, 
 amount to authority to increase the 
 capital stock to that extent. Bel- 
 mont V. Erie R. Co., 52 Barb. (N. 
 Y.) 637; Ramsey v. Erie R. Co., 
 38 How. Prac. (N. Y.) 193, 216. 
 See also Van Allen v. Illinois Cent. 
 R. Co., 7 Bosw. (N. Y.) SIS. 
 
 91 Lexington, &c. R. Co. v. 
 Chandler, 13 Met. (Mass.) 311; 
 Sutherland v. Olcott, 95 N. Y. 93. 
 
 92Seignouret v. Home Ins. Co., 
 24 Fed. 332, 10 Am. & Eng. Corp 
 Cas. 131, 25 Am. L. R. 29; Suther- 
 land V. Olcott, 95 N. Y. 93. See 
 also Smith v. Goldsworthy, 4 Q. B. 
 (4 Ad. & E. N. S.) 430. 
 
 93 Spring Co. V. Knowlton," 103 
 
179 
 
 STOCK 
 
 §102 
 
 power so given can only be exercised by the stockholders, and not 
 by the directors.®* But the stockholders may be estopped by 
 their acquiescence, in such a case, from questioning the legality 
 of an increase or decrease made by the directors.®^ When the 
 capital stock is increased new shares of stock are generally is- 
 sued and sold, but the existing shareholders ordinarily have the 
 first right to take their proportionate part of the new stock,^® al- 
 
 U. S. 49, 26 L. ed. 347; Aspinwall 
 V. Butler, 133 U. S. 59S, 10 Sup. Ct! 
 417, 32 L. ed. 779; Fishback v. 
 Fond du Lac, &c. R. Co., 158 Fed. 
 88; Grangers', &c. Co. v. Kamper, 
 li Ala. 325, 6 Am. & Eng. Corp. 
 Cas. 497; Smith v. Franklin Park 
 Land, &c. Co., 168 Mass. 345, 47 
 N. E. 409; State v. McGrath, 86 
 Mo. 239; Knowlton v. Congress 
 Spring Co., 57 N. Y. 518; Wheeler, 
 In re, 2 Abb. Pr. N. S. (N. Y.) 
 361. But compare Handley v. 
 Stutz, 139 U. S. 417, 11 Sup. Ct. 
 530, 35 L. ed. 227, 34 Am. & Eng. 
 Corp. Cas. 624. The general rule 
 is that if the stock is an over-issue 
 so that there is an entire want of 
 power the holder does not become 
 a stockholder, and is not liable as 
 such, but if there is power to issue 
 it, mere informalities or irregulari- 
 ties will not vitiate it and one who 
 receives it may become liable as a 
 stockholder. This distinction is 
 drawn in Scovill v. Thayer, 105 U. 
 S. 143, 26 L. ed. 968, where the 
 authorities are reviewed and dis- 
 tinguished. 
 
 94 Chicago City R. Co. v. Aller- 
 ton, 18 Wall. (U. S.) 233, 21 L. ed. 
 902; Pollitz V. Wabash R. Co., 167 
 Fed. 145; Eidman v. Bowman, 58 
 111. 444, 11 Am. Rep. 90; Wolf v. 
 Chicago, &c. Co., 233 111. 501, 84 
 
 N. E. 614, 13 Ann. Cas. 369; Mc- 
 Nulta v. Corn Belt Bank, 164 111. 
 427, 45 N. E. 954, 56 Am. St. 203; 
 Percy v. Millaudon, 9 La. 326 (6 
 Mart. N. S. 616), 7 Am. Dec. 196; 
 Gill V. Balis, 72 Mo. 424. But see 
 Sutherland v. Olcott, 95 N. Y. 93. 
 
 95 Chicago City R. Co. v. Aller- 
 ton, 18 Wall. (U. S.) 233, 21 L. ed 
 902; Payson v. Stoever, 2 Dill. (U.. 
 S.) 428, Fed. Cas. No. 10863; Se^ 
 well's Case, L. R. 3 Ch. 131. See- 
 also Columbia Nat. Bank v. Mat-- 
 thews, 85 Fed. 934; Barrows v. 
 Natchang, &c. Co., 72 Conn. 658,. 
 45 Atl. 951; Veeder v. Mudgett^ 
 95 N. Y. 309, 
 
 96 Crosby v. Stratton, 17 Cold. 
 App. 212, 68 Pac. 130; Gray v. 
 Portland Bank, 3 Mass. 364, 3 Am. 
 Dec. 156; Jones v. Morrison, 31 
 Minn. 140, 6 N. W. 854; Humboldt, 
 &c. Assn. V. Stevens, 34 Nebr. 528, 
 52 N. W. 568, 2,i Am. St. 654; Jones 
 V. Concord, &c. R. Co., 67 N. H. 
 119, 38 Atl. 120, 68 Am. St. 650; 
 Way V. American, &c. Co., 60 N. J. 
 Eq. 263, 47 Atl. 44; Cunningham's 
 Appeal, 108 Pa. St. 546; Stokes v. 
 Continental Trust Co., 186 N. Y. 
 285, 78 N. E. 1090, 12 L. R. A. (N. 
 S.) 969 n, 9 Ann. Cas. 738, and note. 
 The authorities are elaborately re- 
 viewed in the opinion in the case 
 last above cited. See also Glenn 
 
102 
 
 RAILROADS 
 
 180 
 
 though they have no right to demand a gratuitous distribution of 
 it to them^'' and may lose their right to take precedence of other 
 purchasers by failing to act within the time specified, or within 
 a reasonable time.^® The capital stock may also be increased, 
 when authorized, by means of stock dividends.^^ The ordinary 
 method of reducing the. capital stock is by refunding to each 
 stockholder a proportionate part of the surplus over and above 
 the amount of the capital stock as reduced. ^ So, a corporation 
 
 V. Kittanning Brewing Co., 259 Pa. 
 St. 510, 103 Atl. 340, L. R. A. 1918D, 
 738, and note Ann. Cas. 1918D, 
 769: It has, however, been ques- 
 tioned whether this rule applies to 
 a railroad company existing inde- 
 pendently of the stockholders with 
 its economy and modes of action 
 defined by statute. And it does not 
 apply to old shares purchased by the 
 corporation and reissued. State v. 
 Smith, 48 Vt. 266; nor it seems, to 
 original shares of authorized stock 
 remaining undisposed of. Curry v. 
 Scott, 54 Pa. St. 270, 275, or stock is- 
 sued to purchase property which will 
 become part of the common prop- 
 erty. Meredith v. New Jersey, &c. 
 Co., 55 N. J. Eq. 211, 37 Atl. 539, 
 (affirmed 56 N. J. Eq. 454, 41 Atl. 
 1116); Bonnet v. First Nat. Bank, 
 24 Tex. Civ. App. 613, 60 S. W. 
 325. 
 
 97 Miller v. Illinois, &c. R. Co., 
 24 Barb. (N. Y.) 312, 330; Brown 
 V. Florida, &c. R. Co., 19 Fla. 472. 
 
 98 Hart v. St. Charles St. R. Co., 
 30 La. Ann. 1, 758; Baltimore City 
 Pass. R. Co. V. Hamblcton, 17 Md. 
 341, 26 Atl. 279. See also Crosby v. 
 Stratton, 17 Colo. 212, 68 Pac. 130; 
 Terry v. Eagle Lock' Co., 47 Conn. 
 141; Brown v. Florida, &c. R. Co., 
 19 Fla. 472; Sewall v. Eastern R. 
 
 Co., 9 Cush. (Mass.) 5; Hammond 
 v. Edison, &c. Co., 131 Mich. 79, 
 90 N. W. 1040, 100 Am. St. 582. 
 
 99 4 Thomp. Corp. (2d ed.), §3629; 
 See also Lantz v. Moeller, 76 Wash. 
 429, 136 Pac. 687, 50 L. R. A. (N. S.) 
 68, and note, where many additional 
 authorities are cited and reviewed. In 
 one sense, perhaps, a stock dividend 
 does not increase the capital stock as 
 the theory is that, while it may in- 
 crease the number of shares, the ag- 
 gregate interest of the stockholders is 
 the same as before ; in other words, it 
 simply dilutes the existing share to 
 the extent that new shares are is- 
 sued. Williams v. Western Union 
 Tel. Co., 93 N. Y. 162. Therefore it 
 is not taxable under the Federal In- 
 come Tax Law as income of a stock- 
 holder. Eisner v . Mecomber (U. 
 S.), 40 Sup. Ct. 189. 
 
 1 Seeley v. New York Exchange 
 Bank, 8 Daly (N. Y.) 400, affirmed 
 in 78 N. Y. 608; Strong v. Brook- 
 lyn &c. R. Co., 93 N. Y. 426; Cur- 
 rier V. Lebanon &c. Co., 56 N. H. 
 262. See also 4 Thomp. Corp. (2d. 
 ed.), §3864. But a stockholder in 
 a bank which reduces its capital 
 stock to the extent that its capital 
 has become impaired on account of 
 bad debts, to prevent an assessment 
 upon the stockholders, cannot com- 
 
181 
 
 STOCK 
 
 §103 
 
 may effect a reduction by purchasing and cancelling its own 
 shares, where it has authority to do so.* This, however, will not 
 necessarily operate as a reduction, unless so intended, for they 
 may be resold and reissued.* And the mere power to reduce the 
 capital stock does not authorize the corporation to purchase the 
 shares of particular shareholders, over the objection of others, on 
 such terms or in such a way as to benefit the former at the ex- 
 pense of the latter.* Nor is the "writing off" of a loss, which the 
 corporation has suffered, such a reduction as is generally au- 
 thorized.^ 
 
 § 103 (88). Watered stock. — What is known as "watered 
 stock" is fictitiously paid-up stock or stock which does not repre- 
 
 pel a distribution of money after- 
 ward realized on tlie "bad debts," 
 as in case of a reduction where the 
 capital is unimpaired. McCann v. 
 First Nat. Bank, 112 Ind. 354, .14 
 N. E. 251. 
 
 ^ Chicago &c. R. Co. v. Marseilles, 
 84 111. 145; Williams v. Savage &c. 
 Co., 3 Md. Ch. 418 ; Berger v. United 
 States Steel Corp., 63 N. J. Eq. 809, 
 S3 Atl. 68; Taylor v. Miami &c. Co., 
 6 Ohio 176; State v. Smith, 48 Vt. 
 266; Catling Gun &c.. Re, 62 L. T. 
 R. 312; British &c. Trustee &c. v. 
 Couper (1894), A. C. 399. See arti- 
 cle in 8 So. Law Rev. U. S. 369; 
 Tulare &c. Dist. v. Waweah &c. Co., 
 112 Cal. xvii, 44 Pac. 662. 
 
 3 State Bank v. Fox, 3 Blatchf. (U. 
 S.) 431; Bank v. Wickersham, 99 
 Cal. 655, 34 Pac. 444 ; Clapp v. Peter- 
 son, 104 111. 26; Jefferson v. Bur- 
 ford (Ky.), 17 S. W. 855; Common- 
 wealth v. Boston 8zc. R. Co., 142 
 Mass. 146, 7 N. E. 716; City Bank 
 V. Bruce, 17 N. Y. 507; Vail v. 
 Hamilton, 85 N. Y. 453. See also 
 Western Imp." Co. v. Des Moines 
 
 Nat. Bank, 103 Iowa 4S5, 72 N. W. 
 657; Leonard v. Draper, 187 Mass. 
 536, 73 N. E. 644; Porter v. Ply- 
 mouth Gold Min. Co., 29 Mont. 347, 
 74 Pac. 938, 101 Am. St. 569; Ber- 
 ger v. United States Steel Corp., 63 
 N. J. Eq. 809, 53 Atl. 68; San An- 
 tonio Hdw. Co. V. Sanger (Tex. Civ. 
 App.), 151 S. W. 1104. 
 
 4 Chetlain v. Republic Life Ins. 
 Co., 86 111. 220; Gill v. Balis, 72 Mo. 
 424; Currier v. Lebanon &c. Co., 56 
 N. H. 262. See also Pacific Fruit 
 Co. V. Coon, 107 Cal. 447, 40 Pac. 
 542 ; Coquard v. St. Louis Cotton 
 Compress Co. (Mo.), 7 S. W. 176. 
 In d. somewhat similar case where 
 the majority attempted a fraudulent 
 reduction of stock at the expense of 
 the minority, although the author- 
 ized form was followed, the court 
 annulled the entire transaction. 
 Theis V. Durr, 125 Wis. 651, 104 
 N. W. 985, 1 L. R. A. <N. S.) S71n, 
 110 Am. St. 880. 
 
 5 Ebbow Vale &c. Co., In re, L. R. 
 4 Ch. Div. 832; Seignouret v. Home 
 Ins. Co., 24 Fed. 332. 
 
§ 103 
 
 RAILROADS 
 
 182 
 
 sent its face or par value in money or money's worth added to 
 the assets of the corporation,® but which is issued as a bonus or 
 exchanged for money, property, services,'' or demands upon the 
 company* of a less value than the par value of the stock.® Such 
 issues of stock are frequently said to be contrary to public 
 policy,!" and a fraud upon those who take it as full paid stock, ^^ 
 
 ■6 Handley v. Stutz, 139 U. S. 417, 
 418, 11 Sup. Ct. 530, 35 L. ed. 227; 
 Cook Corporations (7th. ed.), § 28. 
 See also State v. Citizens' Light &c. 
 Co., 172 Ala. 232, 55 So. 193; Lantz 
 V. Moeller, 76 Wash. 429, 136 Pac. 
 687, SO L. R. A. (N. S.) 68, and 
 note. 
 
 ■^ Capital stock to an amount far 
 beyond the actual cost of the road 
 is frequently issued to the construc- 
 tion company in payment for build- 
 ing it and this method is not subject 
 to condemnation. Cook Corp. (7th. 
 ed.), § 29. 
 
 8 Such stock is frequently issued 
 in the shape of a stock dividend 
 when no corresponding amount has 
 been added to the value of the com- 
 pany's property. 
 
 " Sturges V. Stetson, 1 Biss. (U. 
 S.) 246, Fed. Cas. No. 13568; Tobey 
 V. Robinson, 99 111. 222, 228; Oh- 
 phant V. Woodburn &c. Co., 63 Iowa 
 332, 19 N. W. 212 ; Barnes v. Brown, 
 80 N. Y. 527, 534. But see Scovill 
 V. Thayer, 105 U. S. 143, 26 L. ed. 
 968; Lorillard v. Clyde, 86 N. Y. 
 384. Mere inflation, or gratuitous 
 distribution of stock upon no in- 
 crease of value in the corporate 
 property, is condemned by law. Wil- 
 liams V. Western Union Tel. Co., 
 93 N. Y. 162. 
 
 !0 Sturges v. Stetson, 1 Biss. (U. 
 S.) 246, Fed. Cas. No. 13S68; Oli- 
 
 phant V. Woodburn Coal &c. Co., 
 63 Iowa 332, 19 N. W. 212; State 
 V. Atchinson &c. R. Co., 24 Nebr. 
 143, 38 N. W. 43; Morrow v. Iron 
 &c Co., 87 Tenn. 262, 10 S. W. 495, 
 5 R. & Corp. L. J. 206. Quo war- 
 ranto does not lie against a corpo- 
 ration in Minnesota merely because 
 it issues its stock below par. State 
 V. Minnesota &c. Co., 40 Minn. 213, 
 41 N. W. 1020, 3 L. R. A. 610n. 
 But such act is said to be clearly 
 ultra vires. Fisk v. Chicago &c. R. 
 Co., S3 Barb. (N. Y.) 513. And it 
 is held that a forfeiture may be de- 
 creed for ultra vires acts which are 
 detrimental to the interests of the 
 public. People v. Utica Ins. Co., 15 
 Johns. (N. Y.) 358, 8 Am. Dec. 243 ; 
 People V. Improvement Co., 103 111. 
 491; State v. People's &c. Assn., 42 
 Ohio St. 579; Commonwealth v. 
 Delaware &c. Canal Co., 43 Pa. St. 
 295. See also Holman v. State, 105 
 Ind. 569, S N. E. 702. And the con- 
 stitutions and laws of many of the 
 states provide that railroad corpora- 
 tions shall not issue stock except- 
 ing for money or its equivalent ac- 
 tually received. And the modern 
 railroad commission and public util- 
 ities laws usually regulate the mat- 
 ter. See also Fitzpatrick. v. Dis- 
 patch &c. Co., 83 Ala. 604, 2 So. 727, 
 19 Am. & Eng. Corp. Cas. 423. 
 11 Barnes v. Brown, 80 N. Y. 527. 
 
183 
 
 STOCK 
 
 §104 
 
 and are sometimes said to be cause for the forfeiture of the com- 
 pany's charter. In Louisiana the constitution provides that this 
 penalty shall follow such action.^^ 
 
 § 104 (89). Watered stock not absolutely void. — The stock so 
 issued is not, however, absolutely void, where it is not an over- 
 issue, even though there is a constitutional provision declaring 
 fictitious issues void, if there is a consideration to support it, as 
 where it is sold below par, or issued in payment for work or 
 property of less than its face value.^* The general rule, however, 
 is that if it is an overissue in excess of the amount limited by 
 charter, it is ultra vires and void even in the hands of a bona fide 
 purchaser.^* And the stock, if issued gratuitously,^" or such a 
 proportion of it as will reduce the face value of the shares held 
 
 i2Const La., § 266. 
 
 13 Scovill V. Thayer, lOS U. S. 143, 
 26 L. ed. 968; Coit v. Gold Amal- 
 gamated Co., 119 U. S. 343, 7 Sup. 
 Ct. 231, 30 L. ed. 420; Memphis &c. 
 R. Co. V. Dow, 120 U. S. 28/, 7 
 Sup. Ct. 482, 30 L. ed. 59S; Gas- 
 quet V. Credent City &c. Co., 49 Fed. 
 496; Northern Trust Co. v. Columbia 
 &c. Co., 75 Fed. 936; Dickerman v. 
 Northern Trust Co., 80 Fed. 450; 
 Lindsey v. Pasco Power &c. Co., 203 
 Fed. 251; Stein v. Howard, 65 Cal. 
 616, 4 Pac. 662; California Trona 
 Co. V. Wilkinson, 20 Cal. App. 694, 
 130 Pac. 190; Peoria R. Co. v. 
 Thompson, 103 III. 187; Knapp v. 
 Publishers, 127 Mo. 53, 29 S. W. 
 885; LoriUard v. Clyde, 86 N. Y. 
 384; Barr v. New York &c. R. Co., 
 125 N. Y. 263, 26 N. E. 145; Am- 
 brose &c. Co., In re, L. R. A. 14 Ch. 
 Div. 390, 394. But see New Castle 
 &c. R. Co. V. Simpson, 21 Fed. 533, 
 23 Fed. 214; Sturges v. Stetson, 1 
 Biss. (U. S.) 246, Fed. Cas. No. 
 13568; Fisk v. Chicago &c. R. Co., 
 S3 Barb. (N. Y.) 513. 
 
 14 Scovill V. Thayer, 105 U. S. 143, 
 26 L. ed. 968; Granger &c. Ins. Co. 
 V. Kamper, 1Z Ala. 325; McChord 
 V. Ohio &c. R. Co., 13 Ind. 220; 
 Ryder v. Bushwick R. Co., 134 N. 
 Y. 83, 31 N. E. 251 ; Pruitt v. Okla- 
 homa &c. Baking Co., 39 Okla. 509, 
 135 Pac. 730; Kampman v. Tarver, 
 87 Tex. 491, 29 S. W. 768; First 
 Ave. Land Co. v. Parker, 111 Wis. 
 1, 86 N. W. 604, 87 Am. St. 841, 
 and note. See, however, where it is 
 merely spurious and not an over- 
 issue, American Wire Nail Co. v. 
 Bayless, 91 Ky. 94 IS S. W. 10; 
 Manhattan Beach Co. v. Harned, 27 
 Fed. 484 23 Blatchf. (U. S.) 494; 
 note in. 87 Am. St. 849, 850, 856; 
 New York &c. R. Co. v. Schuyler, 
 38 Barb. (N. Y.) 534 
 . 15 Gilman &c. R. Co. v. Kelly, 17 
 III. 426. See also Richardson v. 
 Green, 133 U. S. 30, 10 Sup. Ct. 
 280, 33 L. ed. 516; Donald v. Ameri- 
 can &c. Co., 62 N. J. Eq. 729, 48 Atl. 
 771, 1116. 
 
§104 
 
 RAILROADS 
 
 184 
 
 to the sum paid for the stock/" may, it has been held, where it is 
 sold below par, be at the suit of a dissenting stockholder,^' re- 
 called for cancellation from the person to whom it is issued,^® or 
 from his grantee with notice,^^ though not, it would seem, from a 
 bona fide purchaser for value.^" Participating stockholders^^ and 
 their transferrees with notice^'* are estopped to complain of the 
 transaction,-^ at least when not absolutely void as an overissue, 
 as is the corporation itself, in the absence of fraud. ^^ 
 
 16 Sturges V. Stetson, 1 Biss. (U. 
 S.) 246, Fed. Cas. No. 13568; Fos- 
 dick V. Sturges, 1 Biss. (U. S.) 
 255, Fed. Cas. No. 4956. 
 
 IT Since each shareholder may in- 
 sist that every other shareholder 
 shall contribute his ratable part of 
 the company's capital for the com- 
 mon benefit, he may maintain a suit 
 to cancel an unauthorized issue of 
 shares purporting to be paid-up, 
 when they, in reality, are not. 
 See S Fletcher Cyc. Corp., § 3517 et 
 seq. See also Stetbins v. Perry 
 County, 167 HI. 567, 47 N. E. 
 1048; Kimball v. New England &c. 
 R. Co., 69 N. H. 485, 45 Atl. 253; 
 note in 87 Am. St. 855, also show- 
 ing when corporation may maintain 
 such a suit. 
 
 18 Gilman &c. R. Co. v. Kelly, 11 
 111. 426. 
 
 19 Upton V. Tribilcock, 91 U. S. 
 45, 23 L. ed. 203; Boulton Carbon 
 Co. V. Mills, 78 Iowa 460, 43 N. W. 
 290, 5 L. R. A. 649. 
 
 201 Cook Corporations, (7th. ed)., 
 §31. 
 
 21 Scovill V. Thayer, 105 U. S. 143, 
 26 L. ed. 968; Wood v. Corry &c. 
 Co., 44 Fed. 146; Richardson v. Chi- 
 cago &c. Co., 131 Cal. xviii, 63 Pac. 
 74; Callahan v. Windsor, 78 Iowa 
 193, 42 N. W. 652; World &c. Co. 
 
 V. Hamilton &c. Co., 123 Mich. 620, 
 82 N. E. 528; Gold Co., In re, L. R. 
 11, Ch. Div. 701, 712. Dissenting 
 Stockholders may have relief. Tay- 
 lor V. Philadelphia &c. R. Co., 7 
 Fed. 381 ; Parsons v. Joseph, 92 Ala. 
 403, 8 So. 788; Perry v. Tuscaloosa 
 &c. Co., 93 Ala. 364, 9 So. 217. If 
 they act promptly. Taylor v. South 
 &c. R. Co., 13 Fed. 152. 
 
 22 Syracuse &c. R. Co., In re,' 91 
 N. Y. 1 ; Foster v. Seymour, 23 Fed. 
 65; Ffooks v. Southwestern R. Co., 
 1 Sm. & G. 142. 
 
 23 Scovill v. Thayer, 105 U. S. 143, 
 26 L. ed. 968; St. Louis &c. R. Co. 
 v. Tiernan, 37 Kans. 606, 15 Pac. 
 544, where the giving of $3,600,000 
 of stock and payment of $200,000 to 
 directors of the company for an 
 old road-bed which cost them $15,- 
 000, when all the stockholders and 
 directors knew all the facts, was 
 held to give the corporation no 
 cause to complain, 40 Am. & Eng. 
 R. Cas. 525, 544. See also Arkan- 
 sas &c. Co. v. Farmers' &c. Co., 13 
 Colo. 587, 22 Pac. 954; First Nat. 
 Bank V. Gustin &c. Co., 42 Minn. 
 327, 44 N. W. 198, 6 L., R. A. 676n, 
 18 Am. St. 510. 
 
 24 See Dickerman v. Northern 
 Trust Co., 176 U. S. 181, 20 Sup. 
 Ct. 311, 44 L. ed. 423. See also 
 
185 
 
 STOCK 
 
 §105 
 
 § 105 (90). Rights of creditors and liabilities of holders of 
 watered stock. — But the creditors of the corporation may gen- 
 erally compel the persons receiving stock to pay the par value in 
 full,28 or such part thereof as may be necessary to pay their 
 claims.28 It is he^d, however, by the Supreme Court of the 
 United States, in a comparatively recent case, which has met 
 with some criticism, that "'an active corporation may, for the 
 purpose of paying its debts and obtaining money for the success- 
 ful prosecution of its business, issue its stock and dispose of it for 
 the best price that can be obtained," and that it may give the pur- 
 chaser paid-up stock as a bonus without making him liable on 
 such stock.-' 
 
 generally as to where there is or is 
 not an estoppel. First Ave. Land 
 Co. V. Parker, 111 Wis. 1, 86 N. W. 
 604, 87 Am. St. 841, 856-860. 
 
 2S Upton V. Tribicock, 91 U. S. 45, 
 23 L. ed. 203; Scovillv. Thayer, 105 
 U. S. 143, 26 L. ed. 968; Camden 
 V. Stuart, 144 U. S. 104, 12 Sup. Ct. 
 585, 36 L. ed. 363; Flinn v. Bagley, 
 7 Fed. 785; Stutz v. Handley, 41 
 Fed. 531 ; Mann v. Cooke, 20 Conn. 
 178; Hickling v. Wilson, 104 111. 54; 
 Great Western Tel. Co. v. Gray, 122 
 111. 630, 14 N. E. 214; Bates v. 
 Great Western Tel. Co., 134 111. 5.36, 
 25 N. E. 521; Skrainka v. Allen, 76 
 Mo. 384; Fisher v. Seligman, 7 Mo. 
 App. 383; Sagory v. Dubois, 3 Sandf. 
 Ch. (N. Y.) 466, 499. But in 
 Clark V. Bever, 139 U. S. 96, 11 Sup. 
 Ct. 468, 35 L. ed. 88, it was held 
 that a railroad company in financial 
 straits could settle with a creditor 
 by giving him stock at twenty cents 
 on the dollar, and that other corpo- 
 rate creditors could not afterwards 
 hold him liable for the additional 
 eighty cents. 
 
 28 Scovill V. Thayer, 105 U. S. 143, 
 155, 26 L. ed. 968. Where a director 
 
 takes shares of the capital stock as a 
 bonus for his influence, he becomes 
 subject to the liabilities of a share- 
 holder who has taken stock but has 
 not paid for the same, and a con- 
 tract between him and the company 
 that the stock shall not be assessable 
 cannot relieve him of the liability. 
 Richardson v. Green. 133 U. S. 30, 
 
 10 Sup. Ct. 280, 33 L. ed. 516; Allen 
 V. Fairbanks, 45 Fed. 445; Halde- 
 man v. Ainslie. 82 Ky. 395; McAvity 
 v. Lincoln &c. Co., 82 Maine 504, 20 
 Atl. 82. But see Christensen v. 
 Quintard, 29 N. Y. S. 61, where it 
 is held that a reduction of forty 
 per cent, in the price of stock and 
 bonds was a donation by the corpa- 
 ration to induce him to take the 
 stock, and a judgment creditor can- 
 not claim it in payment of his debt. 
 See also Christensen v. Eno, 106 N. 
 Y. 97, 12 N. E. 648. 
 
 27 Handley v. Stutz, 139 U. S. 417, 
 
 11 Sup. Ct. 530, 35 L. ed. 227. See 
 also Hospes v. Northwestern &c. Co., 
 48 Minn. 174, SO N. W. 1117, 15 L. 
 R. A. 470, 31 Am. St. 637; Coe v. 
 East & W. R. Co., 52 Fed. 531. See 
 criticism in 2 Thomp. Corp. (1st ed.). 
 
106 
 
 RAILROADS 
 
 186 
 
 § 106 (91). Stock paid for by overvalued property — Sale of 
 stock on market. — Where the stock is paid for in property at a 
 fraudulent overvaluation, the corporate creditor may usually 
 compel a rescission of the sale in toto,** and the restoration of the 
 stock or its actual value,^® unless he knew of the manner in 
 which payment was made for the stock before he became a cred- 
 itor.^" It has also been stated broadly that the creditor must 
 affirm in toto or rescind in toto and that he cannot hold the 
 owner of such stock liable as for an unpaid subscription.*^ But 
 most of the cases relied upon in support of this doctrine are cases 
 in which the stock was not issued upon an ordinary subscription, 
 but in payment for the construction of the road, or the like,'* 
 and, whatever may be the rule in such cases, it seems unjust and 
 in violation of true principle, to extend it to ordinary subscrip- 
 tions.** It is a questionable doctrine at the best, and, upon prin- 
 
 § 2092. And see also Jackson v. 
 Traer, 64 Iowa 469, 20 N. W. 764, 
 S2 Am. Rep. 449. 
 
 28Currie's Case, 3 DeG., J. & S. 
 367; Phelan v. Hazard, S Dill. (U. 
 S.) 45, Fed. Cas. No. 11068; Coffin 
 V. Ransdell, 110 Ind. 417, 11 N. E. 
 20; Van Cott v. Van Brunt, 82 N. Y. 
 535. See also Las Ovar Co. v. Davis, 
 35 App. D. C. 372. 
 
 29 In Iowa (Osgood v. King, 42 
 Iowa 478), and in Missouri (Schickle 
 V. Watts, 94 Mo. 410, 7 S. W. 274) 
 it is held that the court will decree 
 the payment of the difference be- 
 tween the value of the property or 
 labor given in exchange for stock 
 and its par value, even where no 
 fraud is proven, but this is against 
 the weight of authority. See also 
 Libby v. Tobey, 82 Maine 397, 19 
 Atl. 904. 
 
 30 Bank of Fort Madison v. Al- 
 den, 129 U. S. 372, 9 Sup. Ct. 332, 
 32 L. ed. 725 ; Nicrosi v. Calera Land 
 Co., 115 Ala. 429, 22 So. 147; Ten- 
 
 Eyck V. Pontiac &c. R. Co., 114 
 Mich. 494, 72 N. W. 362; 4 Thomp. 
 Corp. (2d ed.), §3913. 
 
 311 Cook Corp. (7th. ed.), § 46; 
 See 7 A. L. R. 972n, for cases on 
 both sides. Coffin v. Ransdell, 110 
 Ind. 417, H N. E. 20. In Fogg v. 
 Blair, 139 U. S. 118, 11 Sup. Ct. 476, 
 35 L. ed. 104, the stock was not shown 
 to be of any value and the court said 
 that the creditors were not, there- 
 fore, wronged. In Anderson's Case, 
 L. R. 7 Ch. Div. 75, the court said 
 that the contract was for paid-up 
 stock and to hold the owner liable 
 as a "contributory" would be to 
 make a new contract. 
 
 32 Fogg V. Blair, 139 U. S. 118, 11 
 Sup. Ct. 476, 35 L. ed. 104; Van 
 Cott V. Van Brunt, 82 N. Y. 535; 
 Barr v. New York &c. R. Co., 125 
 N. Y. 263, 26 N. E. 145. 
 
 33 See Lloyd v. Preston,- 146 XJ. S. 
 630, 13 Sup. Ct. 131, 36 L. ed. 1111; 
 Camden v. Stuart, 144 U. S. 104, 12 
 Sup. Ct. 585, 36 L. ed. 363; Elyton 
 
187 
 
 STOCK 
 
 §106 
 
 ciple, a subscriber who fraudulently pays his subscription in 
 grossly overvalued property, or property which is practically 
 worthless or of so little value that the transaction should be pre- 
 sumed to be fraudulent, and receives paid-up stock therefor, ought 
 not to be allowed to take advantage of his own fraud and thus 
 occupy a better position than one who has paid cash and acted 
 in good faith, but should, on the contrary, be held liable to cred- 
 itors whom he has misled for the entire subscription, where the 
 property is worthless, and, it would seem, for the difference be- 
 tween the value of the property and the par value of the stock, in 
 other cases, if the corporation is insolvent.^* But, in the absence 
 
 &c. Co. V. Birmingham &c. Co., 92 
 Ala. 407, 9 So. 129, 12 L. R. A. 307, 
 25 Am. St. 65; Gari;ett v. Kansas 
 &c. Co., 113 Mo. 330, 20 S. W. 965, 
 35 Am. St. 713; Macbeth v. Ban- 
 field, 45 Ore. 553, 78 Pac. 693, 106 
 Am. St. 670; Gogebic &c. Co. v. Iron 
 Chief &c. Co., 78 Wis. 427, 47 N. W. 
 726, 23 Am. St. 417. These cases 
 would also seem to deny the univer- 
 sal application of the alleged rule 
 stated in Coffin v. Ransdell, 110 Ind. 
 417, 11 N. E. 20; Scovill v. Thayer, 
 IDS U. S. 143, 26 L. ed. 968, and 
 other cases cited in a previous note, 
 that the transaction must first be 
 set aside as fraudulent in a pro- 
 ceeding for that purpose before the 
 subscriber can be held liable in any 
 event, and we see no reason for such 
 rule in the code states where the 
 same court has both law and equity 
 jurisdiction and can give full re- 
 lief in one proceeding. 
 
 34 Camden v. Stuart, 144 U. S. 
 104, 12 Sup. Ct. 585; 36 L. ed. 363; 
 Coleman v. Howe, 154 III. 458, 39 
 N. E. 725, 45 Am. St. 133; Osgood 
 V. King, 42 Iowa 478; Jackson v. 
 Traer, 64 Iowa 469, 20 N. W. 764, 
 52 Am. Rep. 449 ; Chisholm v. Forny, 
 
 65 Iowa 333, 21 N. W. 644? Boulton 
 &c. Co. V. Mills, 78 Iowa 460, 43 N. 
 W. 290, 5 L. R. A. 649; Peninsular 
 &c. Bank v. Black &c. Co., 105 Mich. 
 535, 63 N. W. 514; First Nat. Bank 
 V. Gustin &c. Co., 42 Minn. 327, 44 
 N. W. 198, 6 L. R. A. 676, 18 Am. 
 St. 510; Clayton v. Oregon &c. Co., 
 109 N. Car. 385, 14 S. E. 36. See 
 also Bates v. Great Western Tel. 
 Co., 134 111. 536, 25 N. E. 521; Mc- 
 Avity V. Lincoln Pulp &c. Co., 82 
 Maine 504, 20 Atl. 82; Douglass v. 
 Ireland, 73 N. Y. 100; Gamble v. 
 Queens &c. Co., 123 N. Y. 91, 25 N. 
 E. 201, 9 L. R. A. 527. The whole 
 subject is well considered in the re- 
 cent case of McBeth v. Banfield, 45 
 Ore. 553, 78 Pac. 693, 106 Am. St. 
 670, and note, and it is there hell 
 that the creditor or one standing in 
 his stead may maintain a suit in 
 equity as for an unpaid subscription 
 and compel the stockholder to re- 
 spond for the difference between the 
 actual value of the property and the 
 par value of the stock. See also Ely- 
 ton Land Co. v. Birmingham &c. 
 Co., 92 Ala. 407, 9 So. ^29, 25 Am. 
 St. 65; Sprague v. Nat. Bank, 172 
 111. 149, 50 N. E. 19, 64 Am. St. 
 
§107 
 
 RAILROADS 
 
 188 
 
 of fraud, paid-up stock may be paid for in property such as the 
 corporation may use, and it will make no difference that the prop- 
 erty afterwards turns out to be of less value than was supposed.'^ 
 The court, in such a case, "will treat that as payment which the 
 parties have agreed should be payment."*^ And it has been held 
 that the fact that one to whom such stock is issued returns a por- 
 tion of it as a gift to the corporation to sell below par and place 
 the proceeds in the corporate treasury does not necessarily prove 
 that the property was overvalued.*''^ A corporation may also dis- 
 tribute to its shareholders, or sell on the market, shares of stock 
 which it has purchased under legislative authority,** or which 
 have been forfeited to it for non-payment of calls.*^ 
 
 § 107 (92). Sale and transfer of stock. — Shares of stock (un- 
 less declared by statute to be real estate) are personal property,*" 
 
 17; Chisholm v. Forny, 65 Iowa 333, 
 21 N. W. 664; Wishard v. Hansen, 
 99 Iowa 307, 68 N. W. 691, 61 Am. 
 St. 238; Barron v. Burrill, 86 
 Maine 66, 29 Atl 939, and note to 
 Buck V. Ross, 68 Conn. 29, 35 Atl. 
 763, 57 Am. St. 67, 68. But com- 
 pare Colonial Trust Co. v. McMil- 
 lan, 188 Mo. 547, 87 S. W. 933, 107 
 Am. St. 335. 
 
 35 Coit V. North Carolina Gold 
 &c. Co., 14 Fed. 12, affirmed in 119 
 U. S. 343; Clow v. Brown, 134 
 Ind. 287, 31 N. E. 361; Young v. 
 Erie &c. Co., 65 Mich. Ill, 31 N. 
 W. 814; Bickley v. Schlag, 46 N. 
 J. Eq. 533, 20 Atl. 250; Schenck 
 V. Andrews, 57 N. Y. 133 ; Common- 
 wealth V. Central Pass. R. Co., 52 
 Pa. St. 506; Whitehill v. Jacobs, 
 75 Wis. 474, 44 N. W. 630; Drum- 
 raond's Case, L. R. 4 Ch. Ap. 772 
 
 38 Phelan v. Hazard, 5 Dill. (U. 
 S.) 45, Fed. Cas. No. 11068, 6 Cent. 
 L. J. 109; Peck v. Coalfield Coal 
 Co., 11 111. App. 88; Coffin v. Rans- 
 
 dell, 110 Ind. 417, 11 N. E. 20; 
 Brant v. Ehlen, 59 Md. 1. 
 
 3T Lake Superior Iron Co. v. 
 Drexel, 90 N. Y. 87; Williams v. 
 Taylor, 120 N. Y. 244, 24 N. E. 288. 
 See also Davis v. Montgomery &c. 
 Co., 101 Ala. 121, 127, 8 So. 496. 
 48 Am. St. 17. But compare Ai- 
 ling V. Wenzel, 133 111. 264, 24 V. 
 E. 551; Ailing v. Ward, 30 Am. & 
 Eng. Corp. Cas. 133. 
 
 38 Commonwealth v. Boston &c. 
 R. Co., 142 Mass. 146, 7 N. E. 716. 
 
 39 Otter V. Brevoort &c. Co., 50 
 Barb. (N. Y.) 247; People v. Al- 
 bany &c. R. Co., 55 Barb. (N. Y.) 
 344, 371; Ramwells Case, SO L. J. 
 (Ch.) 827. 
 
 40 Ante, §93; note to Klaus, In 
 re, 26 Am. L. Reg. (N. S.) 98, 
 104. And as such they are gener- 
 ally held in America to be included 
 in the phrase "goods, wares and 
 merchandise" in the statute of 
 frauds. .Baltzen v. Nicolay, 53 N. 
 Y. 467; Hinchman v. Lincoln, 124 
 
STOCK 
 
 §107 
 
 and are subject to purchase and sale by natural persons as other 
 personal property, and the right of the shareholder to sell and 
 transfer his stock cannot be taken away or unduly restrained 
 by a by-law of the corporation.*^ But reasonable regulations 
 may be made regarding the formalities of transfer and registra- 
 tion/- and such matters are frequently provided for in the char- 
 ter or by statute.*^ The transfer, in order to relieve the trans- 
 
 U. S. 38, 8 Sup. Ct. 369, 31 L. ed. 
 337; North v. Forest, IS Com. 400 
 Pray v. Mitchell, 60 Maine 430 
 Boardman v Cutter, 128 Mass. 388 
 Tisdale v. Harris, 20 Pick. (Mass.) 
 9; Mason v. Decker, 72 N. Y. 59S, 
 28 Am. Rep. 190. But see Vawter 
 V. Griffin, 40 Ind. 593, 602; Green v. 
 Brookins, 23 Mich. 48, 9 Am. Rep. 74 ; 
 Gadsden v. Lance, 1 McMuU. Eq. 
 (S. Car.) 87, Z7 Am. Dec. 548. 
 Statute does not apply to agreement 
 to take back or repurchase. Fitz- 
 patrick v. Woodruff, 96 N. Y. 561 ; 
 Richter v. Frank, 41 Fed. 859 
 Thorndike v. Locke, 98 Mass. 340 
 Meyer v. Blair, 109 N. Y. 600, 17 
 N. E. 228, 4 Am. St. SCO; Fay v. 
 Wheeler, 44 Vt. 292. 
 
 41 Morgan v. Struthers, 131 U. S. 
 246, 252, 9 Sup. Ct. 726, 33 L. ed. 
 132; Gould v. Head, 41 Fed. 240, 
 247; Sargent v. Franklin Ins. Co., 
 8 Pick. (Mass.) 90, 19 Am. Dec. 
 306; Moore v. Bank, 52 Mo. 377; 
 Feckheimer v. Nat. Bank, 79 Va. 
 80; Klaus, In re, 67 Wis. 401, 29 
 N. W. 582. See also Victor G. 
 Bloede Co. v. Bloede, 84 Md. 129, 
 57 Am. St. 373, and note. Such a 
 by-law would be in restraint of 
 trade and contrary to public policy 
 But an agreement between mem- 
 bers not to sell except on cer- 
 tain conditions may be valid if not 
 in unreasonable restraint of trade. 
 
 1 Cook Corporations (7th. ed.), 
 § 332. See also Dane v. Young, 
 61 Maine 160; Metropolitan &c. 
 Bank v. St. Louis &c. Co., 36 
 Fed. 722; New England Trust 
 Co. . V. Abbott, 162 Mass, 148, 
 38 N. E. 432, 27 L. R. A. 271, and 
 note. The right to sell and trans- 
 fer stock of a railroad company 
 cannot be exercised to the prejudice 
 of the public in a manner prohibited 
 by law, and illegal agreements for 
 ■'corners" in stotk and the like will 
 not be enforced. Pennsylvania R. 
 Co. V. Commonwealth (Pa.), 7 Atl. 
 368; Town Council v. Elliott, 5 
 Ohio St. 113; Sampson v. Shaw, 
 101 Mass. 145; Leonard v. Poole. 
 114, N. Y. 371, 21 N. E. 707. But 
 see Havemeyer v. Havemeyer, 11 J. 
 & S. (N. Y.) 506, 13 J. & S. (N. 
 Y.) 464, 86 N. Y. 618. As to such 
 contracts and wager or gambling 
 contracts generally, see 1 Cook 
 Corp. (7th ed.), §§ 333, 341, 348. 
 
 *2 Planters' &c. Co. v. Selma Sav. 
 Bank, 63 Ala. 585; Dane v. Young, 
 61 Maine 160; Bishop v. Globe &c.. 
 Co., 135 Mass. 132, 5 Am. & Eng. 
 Cas. 161. See also note in 57 Am. 
 St. 379. 
 
 4SFractor's &c. Co. v. Marine &c. 
 Co., 31 La. Ann. 149; Merrill v. Call, 
 15 Main 428; Shepherd's Case, L 
 R. 2 Eq. S64; Smith v. Canada Car 
 Co., 6 Upper Can. Pr. 107. 
 
107 
 
 RAILROADS 
 
 190 
 
 feror from further liability, must usually be absolute,** and to a 
 person capable of succeeding to his liabilities.*^ Where the 
 shares are not fully paid-up a transfer to an insolvent person, or 
 "man of straw," for the purpose of avoiding liability, cannot be 
 made so as to relieve the transferor from liability to creditors 
 upon his stock.** But, as a general rule, a regular transfer of 
 shares of corporate stock will not be disturbed by the courts un- 
 less it is satisfactorily shown that it was conditional, designed to 
 serve as collateral or pledge to secure a payment, or was simu- 
 lated and not intended to transfer the ownership.*^ Stock can 
 generally be completely transferred only on the books of the cor- 
 poration, and the company is entitled to require proof of the 
 right of the holder of certificates to demand such a transfer. *8 If 
 
 a National Bank v. Case, 99 U. S. 
 628, 25 L. ed. 448; Billings v. Rob- 
 inson, 94 N. Y. 415; Veiller v. 
 Brown, 18 Hun (N. Y.) 571. 
 
 *5See notes in 51 L. R. A..(N. S.) 
 1051, 1052 and in 30 L. R. A. (N. S.) 
 283, and see observation and cases 
 cited in Pauly v. State Loan & Trust 
 Co., 165 U. S. 606, 17 Sup. Ct. 465, 
 467, 41 L. ed. 844. 
 
 ■46 Bowden v. Johnson. 107 U. S. 
 251, 2 Sup. Ct. 246, 27 L. ed. 386; 
 McDonald v. Dewey, 202 Vi. S. 
 510, 26 Sup. Ct. 731, 50 L. ed. 1128, 
 6 Ann. Cas. 419; Rider v. Morri- 
 son, 54 Md. 429; Marcy v. Ckrk, 
 17 Mass. 330; McClaren v. Fran- 
 ciscus, 43 Mo. 452 ; Gafif v. Flesher, 
 33 Ohio St. 107; Aultman's Appeal, 
 98 Pa. St. 505; Dauchy v. Brown, 
 24 Vt. 197; Mandion v. Firemen's 
 Ins. Co., 11 Rob. (La). 177; Nathan 
 V. Whitlock, 9 Paige (N. Y.) 339. 
 
 47 Small V. Saloy, 42 La. Ann. 
 183, 7 So, 450. See also Farmers', 
 &c Co. v.. Chicago, &c. R. Co., 
 163 U. S. 31, 16 Sup. Ct. 917, 41 
 L. ed. 60. 
 
 *8 Telegraph Co. v. Davenport,. 
 97 U. S. 369, 24 L. ed. 1047; But^ 
 trick V. Nashua, &c. R. Co., 62 N. 
 H. 413, 13 Am. St. 578; Bayard v. 
 Farmers', &c. Bank, 52 Pa. St. 232; 
 Davis V. Bank of England, 2 Bing.. 
 393. Transfers of stock in corpora- 
 tions organized under Ky. Gen.. 
 Stat., ch. 56, are valid against cred- 
 itors as well as between the par- 
 ties, although not recorded in the 
 books of the company. Thurber 
 V. Crump, 86 Ky. 408, 6 S. W. 145> 
 One acting as the agent of a trust 
 company, to enable it to perpetrate 
 a fraud or wrong on the rights of 
 a stockholder, and who has thus- 
 acquired possession of certificates 
 of stock, cannot compel a transfer 
 of the stock to him on the books 
 of the corporation. Gould v. Head 
 (C. C. D. Colo.), 7 R. & Corp. L. 
 J. 402, 41 Fed. 240. If the corpora- 
 tion refuses to make the transfer,, 
 upon proper request, the party en- 
 titled to have it made has his 
 remedy, although there is consid- 
 
191 
 
 STOCK 
 
 §107 
 
 it negligently or wrongfully permits stock to be transferred to 
 one having no right to the same, it will be liable to the rightful 
 owner.49 "The act of a corporation in transferring shares of 
 
 erable conflict among the authori- 
 ties as to whether it is by man- 
 damus, by suit in equity, or by an 
 action at law for damages. See 2 
 Cook Corporations (7th. ed.), §§389- 
 392 ; Green Mount &c Co. v. Bul- 
 la, 45 Ind. 1 ; St. Lawrence, &c. 
 Co., Re, 44 N. J. L. 529; Cushman 
 V. Thayer, &c. Co., 76 N. Y. 365, 
 32 Am. Rep. 315; Doty v. First 
 Nat. Bank, 3 N. Dak. 9, 53 N. W. 
 n, 17 L. R. A. 259; Iron R. Co. v. 
 Fink, 41 Ohio St. 321, 52 Am. Rep. 
 84; Hoppin v. Buffum, 9 R. I. 513, 
 11 Am. Rep. 291; State v. Cheraw, 
 R. Co., 16 S. Car. 524; Rio Grande, 
 &c. Co. V. Burns, 82 Tex. SO, 17 S. 
 W. 1043. 
 
 *9 Woodhouse v. Crescent Mut. 
 Ins. Co., 35 La. Ann. 238; Pratt v. 
 Boston, &c. R. Co., 126 Mass. 443; 
 Crocker v. Old Colony R. Co., 137 
 Mass. 417; Livezey v. Northern 
 Pac. R. Co., 157 Pa. St. 75, 27 Atl. 
 762; Midland R. Co. v. Taylor, 8 
 H. L. Cases 751, affirming Taylor 
 V. Midland R. Co., 29 L. J. Ch. 731, 
 ante, § 94. Where an executor sur- 
 renders stock to a reorganization 
 committee of a corporation, taking 
 therefor negotiable certificates re- 
 deemable after a reorganization by 
 a new issue of stock and, after his 
 removal from the executorship, 
 transfers the certificates, which, 
 after several transfers, are taken 
 up by the corporation and new 
 stock issued to the holders in lieu 
 thereof, the corporation is liable to 
 
 the legatees for the value of the 
 stock at the time of the transfer 
 on the books of the company. Mo- 
 bile & O. R. Co. V. Humphries, dl 
 Miss. 35, 7 So. 522, 19 Am. St. 262. 
 If a corporation negligently can- 
 cels a person's stock and issues 
 certificates therefor to a third par- 
 ty, the true owner may bring ac- 
 tion against the corporation to 
 compel replacement of his stock or 
 its value. St. Romes v. Levee 
 Steam Cotton-Press Co., 127 U. S. 
 614, 8 Sup. Ct. 1335, 32 L. ed. 289. 
 An agent with power of attorney 
 authorizing him to sell and trans- 
 fer stock and other securities and 
 property, caused stock belonging 
 to the principal to be transferred 
 to himself on the books of the 
 company, without the knowledge 
 of the principal. The court held 
 that the corporation was liable to 
 the original stockholder. Tafft v. 
 Presidio, &c. R. Co., 84 Cal.lSl; 
 reversing 22 Pac. 485, 24 Pac. 436, 
 11 L. R. A. 125, 18 Am. St. 166, 
 where it was held that the power 
 was sufficient to authorize a trans- 
 fer to the agent, and the fact that 
 such agent was a director of the 
 corporation would not charge it 
 with notice. A corporation may 
 also be liable to the transferee 
 where it represents that a forged 
 certificate is genuine. Mutual Life 
 Ins. Co. V. Forty-second St., &c. 
 Co., 74 Hun 505, 26 N. Y. S. 545, 
 explaining Fifth Ave. Bank v. 
 
§108 
 
 RAILROADS 
 
 192 
 
 stock without the authority of the owner is not ratified by the 
 latter's having told another agent than the one on whose applica- 
 tion the transfer was made that he would not hold him respon- 
 sible for delivering the certificates to the agent who applied for 
 the transfer."5o 
 
 § 108 (93). Who may own and transfer shares. — Married 
 women are generally enabled to become the owners of shares of 
 stock, by the statutes of the various states, ^^ and also to a lim- 
 ited degree in England.®^ Purchases and sales of stock by an 
 infant are voidable at any time during infancy,"* or within a rea- 
 sonable time after becoming of age,^* as are his other contracts. 
 The corporation, it has been held, is bound to know of the in- 
 ability of a person who is non compos mentis to make a valid 
 transfer, and may become liable if it permits a registry. ^^ A sale 
 of stock by a drunken person will be set aside, unless fairly made 
 and for a sufficient consideration. ^'^ An unrecorded transfer, made 
 in good faith before assignment by an insolvent, will be protect- 
 ed.^''' But if the transferee delay unreasonably to claim his stock, 
 
 Forty-second St., &c. Co., 137 N. 
 Y. 231, 33 N. E. 378, 19 L. R. A. 
 331, 33 Am St. 712. 
 
 50 Quay v. Presidio, &c. R. Co., 
 82 Cal. 1, 22 Pac. 925. 
 
 "Whitters v. Sowles, 38 Fed. 
 700, construing law of Vermont. A 
 married woman has the legal ca- 
 pacity to receive a transfer of stock 
 in moneyed corporations though 
 the consideration may have been 
 paid entirely by the husband. Key- 
 ser V. Hitz, 133 U. S. 138, 10 Sup. 
 Ct. 290, 33 L. ed. 531. The wife's 
 capacity to hold and transfer stock 
 is generally determined by the law 
 of her domicile, but that of the 
 domicile of the corporation should 
 also be consulted. Hill v. Pine 
 River Bank, 45 N. H. 300; Cook 
 Corporations (7th. ed.), § 319. 
 
 52Cook Corporations (7th. ed.), 
 § 319. 
 
 53 Birkenhead, &c. R. Co. v. 
 Pilcher, 5 Exch. 24. Voidable and 
 not void. Smith v. Nashville, &c. 
 R. Co., 91 Tenn. 221, 18 S. W. 546; 
 Lumsden's Case, L. R. 4 Ch. App. 
 C. 31. 
 
 54 Dublin &c. R. Co. v. Black, 8 
 Exch. 181. But if he does not so 
 disaffirm within a reasonable time 
 (in this case ten months) he will 
 be. bound. Ebbett's Case, L. R. 5 
 Chan. App. C. 302. Even a sale by 
 transfer of the certificate is not 
 binding on an infant. Smith v. 
 Baker, 42 Hun 504. 
 
 55 Chew V. Bank of Baltimore, 
 14 Md. 299. 
 
 5«Thacrah v. Haas, 119 U. S. 
 499, 7 Sup. Ct. 311, 30 L. ed. 486. 
 
 57 Dickinson v. Central Nat. 
 Bank, 129 Mass. 279, 37 Am. Rep. 
 351. 
 
193 
 
 STOCK 
 
 §108 
 
 it may be awarded to the assignee. ^^ An officer or director of 
 the compan)' may buy and sell its stock like any other person, if 
 he acts in good faith and does not mislead the person with whom 
 he deals,59 ^nd he is not bound to disclose information received 
 by him as such officer.®" A partner may also sell and transfer 
 partnership stock,®! but- a joint owner cannot transfer the inter- 
 est of the other joint owner of stock registered in the name of 
 both.®^ Stock may be bought or sold by means of an agent,®* 
 and the principal will be bound by the acts of the agent done iti 
 excess of his authority, if the agent was clothed with apparent 
 authority and the limitations imposed were unknown to the per- 
 son dealing, with him in good faith.®* 
 
 58 Shipman v. Aetna Ins. Co., 29 
 Conn. 245. 
 
 59 Trisconi v. Winship, 43 La. 
 Ann. 45, 33 Am. & Eng. Corp. Cas. 
 271; Board v. Reynolds, 44 Ind. 509, 
 15 Am. Rep. 245; Crowell v. Jack- 
 son, 53 N. J. L. 656, 23 Atl. 426; 
 Carpenter v. Danforth, 52 Barb. 
 (N. Y.)'581; Cawley, In re, L. R. 
 42 Ch. Div. 209; But see Grant v. 
 Atrill, 11 Fed. 469; Prewett v. 
 Trimble, 92 Ky. 176, 17 S. W. 356, 
 36 Am. St. 586; Fisher v. Budlong, 
 10 R. I. 525; Gilbert's Case, L. R. 
 S Ch. App. C. 559; South London 
 &c. Co., In re, L. R. 39 Ch. Div. 
 324, 60 L. T, R. N. S. 68. See also 
 Steinfeld v. Nielsen, 15 Ariz. 424, 
 139 Pac. 879. 
 
 60 Board &c. v. Reynolds, 44 
 Ind. 509. 
 
 81 Quiner v. Marblehead Social 
 Ins. Co., 10 Mass. 476. 
 
 62 Comstock V. Buchanan, 57 
 Barb. (N. Y.) 127; Standing v. 
 Bowring, L. R. 27 Ch. Div. 341. In 
 most of the states, a joint-tenancy 
 
 can only be created by an express 
 statement or a manifest intention 
 to create an estate limited to the 
 survivor. 
 
 1)31 Cook Corporations (7th. ed.), 
 ch. 19. An agent has no further 
 real interest in stock standing in 
 his name than he has in any other 
 property of his principal in his 
 hands. Cook Corporations (7tli. 
 ed.), ch. 19, § 321. 
 
 64 McNeil V. Tenth National 
 Bank, 46 N. Y. 325, 7 Am. Rep. 
 341; Strange v. Houston &c. R. 
 Co., 53 Tex. 162, where the owner 
 of a certificate of stock in an in- 
 corporated company, placed his 
 certificate, with a blank transfer 
 indorsed thereon, in the hands of 
 an agent for sale, the agent filled 
 the blank with his own name, and 
 afterward indorsed thereon a trans- 
 fer from himself to a. bona fide 
 purchaser, and it was held that 
 such purchaser took a good title 
 to the stock. 
 
 7— Ell. Railroads I 
 
§ 109 RAILROADS 194 
 
 § 109 (94). Purchase and sale by trustees and fiduciaries. — 
 
 The common-law rule is that guardians, executors and trustees 
 may not use trust funds for the purchase of shares of stock,^' nor 
 sell shares which form a part of the trust estate,®^ except as em- 
 powered to do so by the statute,®'^ or by the instrument creating 
 the trust, or directed to do so by a court of chancery.''* It is held 
 under the English Companies Act of 1845, paragraph 18, that 
 when the names of the executors of a deceased shareholder in a 
 company are placed on the register of shareholders in respect of 
 shares, which belonged to their testator, they become joint- 
 shareholders in their individual capacity, although they may be 
 described as executors in the register; and, consequently, the 
 shares can only be transferred by means of a transfer executed by 
 all of them.^' If a sale of shares held in trust be made by the 
 trustee without authority he may be compelled to restore the 
 stock with dividends, or to pay over the amount received there- 
 for with interest, at the election of the cestui que trust.'^" And 
 the same rule is enforced where the stock is sold in breach of the 
 trust and converted to the use of the trustee, even though he was 
 
 65 Trafiford v. Boehm, 3 Atk. 440 that trustees may invest the trust 
 (1746). See also In re Decker, 37 funds in stocks without special auth- 
 Misc. 527, 76 N. Y. S. 315. ority. Lamar v. Micou, 112 U. S. 452, 
 
 66 Bohlen's Estate, 75 Penn. St. 5 Sup. Ct. 221, 28 L. ed. 751, and 114 
 304. U. S. 218, 5 Sup. Ct. 857, 29 L. ed. 
 
 67 See 22 and 23 Victoria, ch. 35, 94 (Ga. and Ala.) ; Gray v. Lynch, 
 sec. 32, 23 and 24 Victoria, ch. 38. 8 Gill (Md.) 403; Smyth v. Burns, 
 
 68 This is the rule of law in many 25 Miss. 422; Washington v. Em- 
 of the states at the present time. ery, 4 Jones Eq. (N. Car.) 32. See 
 Tucker v. State, Hart, 72 Ind. 242; also Boggs v. Adger, 4 Rich. Eq. 
 Kimball v. Reding, 31 N. H. 352, (S. Car.) 408, and dictum in Hunt, 
 64 Am. Dec. 333; Ward v. Kitchen, Appellant, 141 Mass. 515, 6 N. E. 
 30 N. J. Eq. 31 ; King v. Talbot, 40 554 
 
 N. Y. 76; Ihmsen's Appeal, 43 Pa. "» Barton v. London &c. R. Co., 
 
 St. 431; Allen v. Gaillard, 1 S. Car. L. R. 24 Q. B. D. 11. 
 
 (Rich. N. S.) 279. This rule stated '"' Harrison v. Harrison, 2 Atk. 
 
 in the text obtains generally in the 121; McKim v. Hibbard, 142 Mass. 
 
 United States and England. 1 Cook 422, 8 N. E. 152; Hart v. Ten Eyck, 
 
 Corporations (7th. ed.), § 222. Some 2 Johns. Ch. (N. Y.) 62, 117; Pink- 
 
 of the states have upheld the rule ett v. Wright, 2 Hare 120. 
 
195 
 
 STOCK 
 
 §109 
 
 empowered to sellJ^ A bona fide purchaser from a trustee with- 
 out notice takes a good title to the stock transferred.''^ But any- 
 thing which is sufficient to put the purchaser upon inquiry that 
 would, if reasonably pursued, disclose the real facts, will amount 
 to constructive noticeJ^ If the trustee has authority to transfer 
 the stock for any purpose, the purchaser may assume that the 
 proceeds of the sale will be properly disposed of,''* and he will 
 be protected unless he knows that the sale or pledge is to procure 
 means for the private debts or purposes of the trustee.''^ The cor- 
 poration is liable to the cestui que trust, if, with notice that stock 
 is held in trust, it permits such stock to be transferred on the 
 books of the company by the trustee without authority.''® The 
 
 Ti McKim V. Hibbard, 142 Mass. 
 422, 8 N. E. 152. 
 
 T2 Smith V. Nashville &c. R. Co., 
 91 Tenn. 221, 18 S. W. S46; Salis- 
 bury Mills V. Townsend, 109 Mass. 
 115; Cook Corporations (7th. ed.), 
 § 325. The rule is otherwise in 
 England until the purchaser has 
 obtained registry. Shropshire 
 Union R., &c. Co. v. Queen, L. R. 
 7 H. L. 496; Roots v. Williamson, 
 58 L. T. R. 802. 
 
 73 Where th« stockholder is 
 termed in the certificate a "trustee" 
 or stated therein to hold the shares 
 "in trust," this is notice of every- 
 thing, which, upon inquiry, the pur- 
 chaser could ascertain from the 
 cestui que trust. Duncan v. Jau- 
 don, 15 Wall. (U. S.) 165, 176, 21 
 L. ed. 142; Jaudon v. National City 
 Bank, 8 Blatch. (U. S.) 430, Fed. 
 Cas. No. 7230; Shaw v. Spencer, 
 100 Mass. 382, 97 Am. Dec. 107; 
 Gerard v. McCormick, 130 N. Y. 
 261, 29 N. E. 115, 14 L. R. A. 234. 
 ''^Perry Trusts (6th. ed.), § 225; 
 Ashton v. Atlantic Bank, 85 Mass. 
 217. 
 
 ''s Simons v. Southwestern R 
 Bank, 5 Rich. Eq. (S. Car.) 270 
 Duncan v. Jaudon, 15 Wall. (U. 
 S.) 165, 21 L. ed. 142; Jaudon v 
 National City Bank, 8 Blatch. (U. 
 S.) 450, Fed. Cas. No. 7230. 
 
 ■Je Bohlen's Estate, 75 Pa. St. 304 
 Maywood v. Railroad Bank, S S, 
 Car. 379; Chapman v. City Council 
 30 S. Car. 549, 6 S. E. 158, 3 L. R. 
 A. 311; Barton v. North &c. R. Co., 
 L. R. 38 Ch. D. 458, 58 L. T. R. 
 549. See Weyer v: Second Nat 
 Bank, 57 Ind. 198; Stewart v. Fire- 
 man's Ins. Co., 53 Md. 564; Mar- 
 bury V. Ehlen, 72 Md. 206, 19 Atl. 
 648; Bird v. Chicago &c. R. Co., 
 137 Mass. 428; Wooten v. Wilming- 
 ton &c. R. Co., 128 N. Car. 119, 38 
 S. E. 298, 56 L. R. A. 615. A cor- 
 poration having issued stock cer- 
 tificates showing on their face that 
 they were to be taken by the hold- 
 er as devisee under and subject to 
 the provisions of a certain will, is 
 chargeable with notice of the con- 
 tents of such will and of the trusts 
 imposed thereby, in all subsequent 
 dealings with such shares of stock. 
 
§110 
 
 RAILROADS 
 
 196 
 
 word "trustee" following the holder's name is sufficient notice," 
 and formal notice to a board of directors is notice to the cor- 
 poration under all future boardsJ^ 
 
 § 110 (95). Right of corporation to buy and sell stock. — In 
 England it is held that a corporation cannot buy shares of its own 
 stock,'^* unless expressly empowered to do so. In case of a trans- 
 fer of stock to the corporation"" or to a trustee in trust for it, 
 where this rule prevails, the transferor is liable on the subscrip- 
 tion, and on the statutory liability in case of insolvency to the 
 same extent as if he still held the stock,*i unless the corpora- 
 tion has authority by charter or otherwise to make the pur- 
 
 and is liable for a conversion by a 
 trustee to the prejudice of the 
 rights of the cestui que trust, of 
 which it has notice, where it aids 
 such conversion by transfer of the 
 stock and reissuance of certificates. 
 Caulkins v. Gaslight Co., 85 Tenn. 
 683, 4 S. W. 287, 4 Am. St. 786. 
 Generally the corporation is not 
 chargeable with liability for trans- 
 ferring stock in violation of trusts, 
 of which it had no actual notice. 
 Peck V. Providence Gas Co., 17 R. 
 I. 275, 23 Atl. 967, 15 L. R. A. 
 643. Where the administrator of 
 an estate transferred certain shares,' 
 of stock to the "heirs and distribu- ' 
 tees" of his decedent's estate, it 
 was held that the corporation was 
 not bound to hold the stock sub- 
 ject to a trust imposed by the will 
 of the decedent, of which it had no 
 actual knowledge, but was justified 
 in transferring her proportion of 
 the stock to the grantee of the de- 
 cedent's daughter. Smith v. Nash- 
 ville &c. R. Co., 91 Tenn. 221, 18 
 S. W. 546. 
 
 fT Loring v. Salisbury Mills, 125 
 Mass. 138. See also Marbury v. 
 Ehlen, 72 Md. 206, 19 Atl. 648, 20 
 Am. St. 467; Geyser &c. Co. v. 
 Stark, S3 L. R. A. 684. The fact 
 that the transfer is made some 
 years after the execution of the 
 trust should have been completed, 
 is notice. Lowry v. Commercial 
 &c. Bank &c., Taney's Dec. (U. 
 S.) 310. 
 
 '^'^ Mechanic's Bank &c. v. Seton, 
 1 Pet. (U. S.) 299, 7 L. ed. 152. 
 
 79 Trevor v. Whitworth, L. R. 
 12 App. C. 409, 57 L. T. R. 457; 
 Zulueta's Claim, L. R. 5 Ch. 444. 
 See also Coppin v. Greenlees &c. 
 Co., 38 Ohio St. 275, 43 Am. St. 
 425; German Sav. Bank v. Wulfe- 
 kuhler, 19 Kans. 60; Barton v. Port 
 Jackson &c. Co., 17 Barb. (N. Y.) 
 397. 
 
 80 Dillon, J., in Johnson v. Laflin, 
 
 5 Dill. (U. S.) 65, Fed. Cas. No. 
 7393; Great Eastern R. Co. v. Tur- 
 ner, L. R. 8 Ch. App. 149. 
 
 81 Walters' Second Case, 3 DeG. 
 
 6 Sm. 244; Munt's Case, 22 Beav. 
 55; Daniell's Case, 22 Beav. 43. 
 
197 
 
 STOCK 
 
 §110 
 
 chase.82 Where, however, he does not know that the trustee 
 takes the stock in trust for the corporation, but believes him to 
 be a bona fide purchaser, the seller is not so liable.®* The trus- 
 tee accepting such a conveyance^* and the directors procuring 
 it®^ are also personally liable to the corporation and its credi- 
 tors on all shares so conveyed. A person who has been employed 
 by a railroad company to buy stock of a certain person for the 
 purpose of consummating a sale of the corporate property, who 
 buys such stock in his own name, must be regarded as holding it 
 subject to the equitable considerations growing out of an ar- 
 rangement previously made by his vendor with parties acting in 
 the interest of the corporation, and the most that he can have 
 after a transfer of the corporate property is the fair value of the 
 stock at the time of such transfer .^^ But the better American 
 authority®'^ is to the efifect that a railroad company may, for 
 
 82 Grady's Case, 1 DeG., J. & S. 
 488. 
 
 83 Johnson v. Laflin, 103 U. S. 
 800, 26 L. ed. 532; Nicol's Case, 3 
 DeG. & J. 387. 
 
 84 Crandall v. Lincoln, 52 Conn. 
 73, 52 Am. Rep. 560; Empire City 
 Bank, Matter of, 18 N. Y. 199, 226; 
 Allibone v. Hager, 46 Pa. St. 48. 
 One who has exercised ownership 
 of stock by accepting a dividend 
 cannot deny his liability as owner. 
 Sanger v. Upton, 91 U. S. 56, 60, 
 23 L. ed. 220. 
 
 SB Evans v. Coventry, 25 L. J. 
 (Ch.) 489, 501. So the corporate 
 agent may be made personally lia- 
 ble for moneys expended by him 
 for such stock. Crandall v. Lin- 
 coln, 52 Conn. 73, 52 Am. Rep. 560. 
 
 86 Young V. Toledo &c. R. Co., 
 !(, Mich. 485, 40 Am. & Eng. R. 
 Cas. 514. 
 
 87 Johnson County v. Thayer, 94 
 U. S. 631, 24 L. ed. 133; First Nat. 
 Bank v. Salem &c. Co., 39 Fed. 89; 
 
 Fleitmann v. John M. Stone Cotton 
 Mills, 186 Fed. 466; Allen v. Fran- 
 cisco Sugar Co., 193 Fed. 825; Sny- 
 der V. Tunitas &c. Co., 72 Cal. 194, 
 
 13 Pac. 479; Hartridge v. Rockwell, 
 R. M. Charlton (Ga.) 260; Clapp 
 V. Peterson, 104 111. 26; Iowa Lum- 
 ber Co. v. Foster, 49 Iowa 25, 31 
 Am. Rep. 140; Dupee v. Boston 
 Water-power Co., 114 Mass. 37; 
 Cole V. Cole Realty Co., 169 Mich. 
 347, 135 N. W. 329; City Bank v. 
 Bruce, 17 N. Y. 507; Eby v. Guest, 
 94 Pa. St. 160; Farmers', &c. Bank 
 ir. Champlain Trans. Co., 18 Vt. 
 131, 139; Marvin v. Anderson, 111 
 Wis. 387, 87 N. W. 226; Blalock v. 
 Kenersville &c. Co., 110 N. Car. 99, 
 
 14 S. E. 501, 36 Am. & Eng. Corp. 
 Cas. 84, 90, and note, where the 
 authorities on both sides of the 
 question are collected. Contra: 
 Schaun v. Brandt, 116 Md. 560, 82 
 Atl. 551. The authorities dn both 
 sides are also reviewed in the note 
 to Hall V. Henderson, 126 Ala. 449 
 
110 
 
 RAILROADS 
 
 198 
 
 legitimate purposes, and when not in violation of the rights of 
 creditors, purchase shares of its own stock which have been 
 issued to individuals,** unless prohibited by statute. And the 
 courts of all the states apparently hold or concede that a corpora- 
 tion may take shares of its own stock in payment of, or as secur- 
 ity for, antecedent debts due to it from the stockholders."" But it 
 has been held that such purchase is voidable at the instance of 
 corporate creditors who are injured thereby.®^ Where shares of 
 its own stock are transferred to the corporation"^ or to a trustee 
 for its benefit, the stock is not thereby merged, unless such is the 
 intention, but may, it has been held, be resold by authority of the 
 ■ board of directors."* or of the stockholders at the market price,"* 
 
 28 So. S31, 61 L. R. A. 621, 8S Am. 
 St. S3, and in the note to Schulte 
 V. Boulevard &c. Land Co., (164 
 Cal. 464, 129 Pac. 582) in Ann. Cas. 
 1914B, 1013, 1016, where attention 
 is also called to statutory provision 
 in different states. See also 8 
 Thomp. Corp., §§4075, 4076. 
 
 ssChicago &c. R. Co. v. Presi- 
 dent &c. Town of Marseilles, 84 
 111. 145. But see Hall v. Alabama 
 &c. Co., 173 Ala. 398, 39 So. 285, 
 2 L. R. A. (N. S.) 130. 
 
 9*Cook Corporations (7th. ed.), 
 § 311. See also Schulte v. Boulevard 
 &c. Land Co., 164 Cal. 464, 129 l>x. 
 582, Ann. Cas. 1914B, 1013, and 
 note. A promise of a stockholder 
 to surrender to the corporition 
 stock on which there is an unpaid 
 assessment, which stock is not at 
 the time under his control, havin-; 
 been pledged by him, does not con- 
 stitute a surrender of such stock, 
 as against a subsequent purchaser 
 from such stockholder. Hill v. 
 Atoka &c. Co., 124 Mo. 153, 21 S. 
 W. 508, 25 S. W. 926. - 
 
 "iClapp V. Peterson, 104 111. 26; 
 Commercial Nat. Bank v. Burch, 141 
 111. 519, 31 N. E. 420. See al^o 
 
 Crandall v. Lincoln, 52 Conn. ITi, 52 
 Am. Rep. 560; Tichenor-Grand Co., 
 In re, 203 Fed. 720; Fraser v. Rit- 
 chie, 8 IH. App. 554; Heggie v. 
 People's &c. Assn. 107 N. Car. 581, 
 12 S. E. 275, 33 Am. St. 331n, 32 
 Am. & Eng. Corp. Cas. 60S. So, 
 if the corporation is insolvent at 
 the time. Currier v. Lebanon &c. 
 Co., 56 N. H. 262; Alexander v. 
 Relfe, 74 Mo. 495; Columbian Bank, 
 In re, 147 Pa. St. 422, 23 Atl. 626. 
 
 »2 State Bank of Ohio v. Fox, 3 
 Blatch. (U. S.) 431; Am. Railway 
 Frog Co. v. Haven, 101 Mass. 398, 3 
 Am. Rep. 377; Vail v. Hamilton, 85 
 N. Y. 453 ; State v. Smith, 48 Vt. 266. 
 
 63 State Bank of Ohio v. Fox, 3 
 Blatch. (U. S.) 431; Jefferson v. 
 Burford (Ky.), 17 S. W. 855; Wil- 
 liams V. Savage Mfg. Co., 3 Md. 
 Ch. 418; State v. Smith, 48 Vt. 
 266. See also Commonwealth v. 
 Boston &c. R. Co., 142 Mass. 146, 
 7 N. E. 716; City Bank v. Bruce, 
 17 N. Y. 507; Vail v. Haniiltcn, 
 85 N. Y. 453. 
 
 94 Ramwell's Case, SO L. J. (Ch.) 
 827; Otter v. Brevort. &c. Co.. SO 
 Barb. (N. Y.) 247. 
 
199 
 
 STOCK 
 
 §110 
 
 without regard to its par value. But such stock, until resold, is 
 said to be lifeless and cannot be voted, nor can it draw divi- 
 dends.®5 A railroad company may not purchase stock of another 
 railroad corporation,®® without legislative authority contained in 
 the charter or in the general statute of the state.®'' One corpora- 
 
 95Brewster v. Hartley, il Cal. IS, 
 99 Am. Dec. 437; Monsseaux v. 
 Urquhart, 19 La. Ann. 482; Ameri- 
 can &c. Co. V. Haven, 101 Mas3. 
 398; New England &c. Ins. Co. v. 
 Phillips, 141 Ma«s. S3S, 6 N. E. 534; 
 McNeely v. Woodruff, 13 N. J. Law 
 352; Vail v. Hamilton, 85 N. Y. 
 453; State v. Smith, 48 Vt. 266. 
 
 96 Dunbar v. American Tel. &c. 
 Co., 238 111. 456, 87 N. E. 521 ; State 
 V. Atlantic City &c. R. Co., 11 N J. 
 L. 465, 72 Atl. Ill; Clark v. Mem- 
 phis St. R. Co., 123 Tenn. 232, 130 
 S. W. 751. Such a purchase may 
 be enjoined. Central R. Co. v. Col- 
 lins, 40 Ga. 582 ; Mackintosh v. 
 Flint &c. R. Co., 34 Fed. 582; 
 Memphis &c. R. Co. v. Woods, 88 
 Ala. 630, 7 So. 108, 7 L. R. A. 60Sp^ 
 1 Lewis' Am. R. & Corp. 55, and 
 note; Hazlehurst v. Savannah &c. 
 R. Co., 43 Ga. 13, 57; Pearson v. 
 Concord &c. R. Co., 62 N. H. 537, 
 13 Am. St. 590; Elkins v. Camden 
 &c. R. Co., 36 N. J. Eq. 5; Great 
 North. R. Co. v. iiastern Counties 
 R. Co., 21 L. J. (Ch) 837. On the 
 general subject of power to purchase 
 and hold stock in another corpora- 
 tion, see 4 Thomp. Corp. (2d. ed.), 
 § 4055. 
 
 9T Matthews v. Murchison, 17 
 Fed. 760; Zabriskie v. Cleveland &c. 
 R. Co., 23 How. (U. S.) 381, 16 
 L. ed. 488 (Ohio Act) ; Atchison 
 &c. R. Co. v. Fletcher, 35 Kans. 
 236, 10 Pac. 596, and Atchison &c. 
 R. Co. v. Cochran, 43 Kans. 225, 23 
 
 Pac. 151, 7 L. R. A. 414, 19 Am. 
 St. 129, 1 Lewis' Am. R. & Corp. 
 640, construing Kansas statute ; 
 Mayor v. Baltimore &c. R. Co., 21 
 Md. SO; White v. Syracuse &c. R. 
 Co., 14 Barb. (N. Y.) 559. Authori- 
 ty to consolidate with a road gives 
 power to purchase its stock with a 
 view to securing that end. Hill v. 
 Nisbet, 100 Ind. 341. For a con- 
 struction of the provision in the 
 constitution of Pennsylvania that a 
 railroad company may not control a 
 competing line, see The Common- 
 wealth V. South Pa. R. Co., 1 Co. 
 Ct. (Pa.) 214, 223, affirmed in Sup. 
 Ct., see 29 Am. & E. R. Cas. US, 
 154, where it is held to prohibit a 
 purchase of the stock of a compet- 
 ing line by a railroad company in 
 its own name or in the name of an- 
 other road which it contro's. To 
 the same point under the constitu- 
 tion of Georgia, see Clarke v. Cen- 
 tral R. &c. Co., SO Fed. 338 (1892). 
 A railroad company is aufhorized 
 to purchase the stock of another 
 company for the purpose of acquir- 
 ing its roadbed and right of way, by 
 a statute (How. Mich. 3403) v^hich 
 provides that "it shall be lawiul I'.-r 
 any railroad company in this state, 
 which shall have entered in good 
 faith upon the work of constructing 
 its road, and shall become unable 
 to complete the construction of the 
 same, cr any part thereof, to sell 
 and Convey the whole or ;iii part 
 of it,"; road so partially con>plpted. 
 
§111 
 
 RAILROADS 
 
 200 
 
 tion has, generally, no implied power to invest money in the 
 stocks of another.®^ But a corporation may have the right to 
 acquire shares in another company in the usual course of its legi- 
 timate business,^^ or to protect itself by way of compromise or 
 security or payment of a doubtful debt owing to it by the cor- 
 poration whose shares it receives. * A contract by the stockhold- 
 ers of a corporation to transfer their stock to a person or cor- 
 poration not allowed by law to hold the same has been held 
 illegal and void.^ 
 
 § 111 (96). Gifts and bequests of stock.^Shares of stock in a 
 corporation may be the subject of a gift.^ A clear intent to give 
 it must be proven, although no formal method of transfer is nec- 
 
 together with the rights ai:d {r:in- 
 ■chisc\s connected iherewith, to any 
 other railroad company or corpora- 
 tion of this state not having the 
 same t-^rminal pomts and not being 
 a competing line." Dewey v. Toledo, 
 &c. R. Co., 91 Mich. 351, SI N. W. 
 1063, SO Am. & Eng. R. Ca-: 607. 
 See also in Mifsotiri State v Mis- 
 souri Pac. R. Co., 237 Mo. 338, 141 
 S. W. 643, 241 Mo. 1, 144 S. W. 
 863. A railroad company may pur- 
 chase end vote the stock of anoilier 
 company in like manner as an indi- 
 vidual under the New York Stat- 
 ute. Oelbermann v. New Yarh &c. 
 R. Co., 77 Hun 332, 27 N. Y. S. 
 S4S. See also Continental Securi- 
 ties Co. V. Interborough Rapid 
 Trans. Co., 165 Fed. 945. 
 
 98 Hamilton v. Savannah &c R. 
 Co., 49 Fed. 412; PeopU: v. Chi- 
 cago Gas Trust Co., 130 Til. 268. 
 22 N. E. 798, 6 L. R. A. 497n, 17 
 Am. St. 319, 1 Lewis' Am. R. & 
 Corp. 562; Franklin Co. v. Lewis- 
 ton Institution, 68 Maine 43, 28 Am. 
 Rep, 9; Franklin Bank v. Commer- 
 cial Bank, 36 Ohio St. 350, 38 Am. 
 
 Rep. 594; Great Northern R. Co. 
 v. Eastern &c. R. Co., 21 L. J. Ch. 
 837; Cook Corporations (7th. ed.), 
 § 315; 4 Thomp. Corp (2d. ed.), 
 § 4055 et seq. But see Booth v. Rob- 
 inson, 55 Md. 419; Ryan v. Leaven- 
 worth &c. R. Co., 21 Kans. 365. 
 
 9-' Royal Bank of India's Case, 
 L. R. 4 Ch. App. Cas. 252. 
 
 1 First Nat. Bank v. Nat. &c. 
 Bank, 92 U. S. 122, 128, 23 L. ed. 
 %9; Fleckner v. Bank, 8 Wheat. (U. 
 
 S.) 351, 5 L. ed. 634. See .tlso 
 Converse v. Gordon Governor Co., 
 174 Fed. 30. But compare Ir- 
 vine V. Chicago &c. Coal Co., 200 
 Fed. 953. 
 
 2 State V. Ohio &c. R. Co., 6 Ohic 
 Cir. Ct. 415. 
 
 3 4 Thomp. Corp. (2d ed.), 
 §4305. See Reed v. Copeland, 50 
 Conn. 472, 47 Am. Rep. 663; Wal- 
 ker V. Joseph &c. Co., 47 N. J. Eq. 
 342, 20 Atl. 885; Decaumont v. Bo- 
 gert, 36 Hun (N. Y.) 382; Grymes 
 V. Hone, 49 N. Y. 17, 10 Am. Rep. 
 313; Jackson v. Twenty-third St. R. 
 Co., 88 N. Y. 520; Roberts App-^al 
 85 Pa. St. 84. 
 
201 
 
 STOCK 
 
 §112 
 
 essary.* But in England, under the statutes, the stock miust be 
 registered in the name of the donee, in order to vest the title in 
 him.5 Sfock may also be bequeathed by will like other property.* 
 
 §112 (97). Formalities of transfer. — In making a complete 
 and formal transfer of shares of stock three separate and distinct 
 steps are usually taken. The certificate is assigned by the trans- 
 feror to the transferee, the certificate is then surrendered or de- 
 livered to the corporation, and finally the transfer is duly regis- 
 tered in the books of the corporation. A new certificate is then, 
 ordinarily, issued to the transferee.''^ But where no certificate has 
 ever been issued, the registry of the transfer upon the books of 
 the company will be sufficient,^ and a transfer may be good, even 
 where a certificate has been issued, without surrendering it.® So, 
 in the absence of any valid provision to the contrary, a transfer 
 may be made, at least as between the parties, by mere delivery 
 of the certificate without any written assignment or registra- 
 tion.i" Ordinarily, however, the assignment is made in writ- 
 
 4Cook Corporations (7th. ed.), 
 §308. But see Matthews v. Hoag- 
 land, 48 N. J. Eq. 4SS, 21 Atl. 10S4. 
 
 5 Nanney v. Morgan, 57 L. T. R. 
 48. 
 
 6 4 Thomp. Corp. (2d ed.), §4290. 
 For the effect of different forms of 
 devise and of gifts causa' mortis, 
 see Cook Stock and Stockholders, 
 Ch. XVIII. 
 
 TBut this is not absolutely essen- 
 tial. Chouteau Spring Co. v. Har- 
 ris, 20 Mo. 382; First Nat. Bank 
 V. Gifford, 47 Iowa S7S. 
 
 s First Nat Bank v. Gifford, 47 
 Iowa 575; Brigham v. Mead, 10 Al- 
 len (Mass.) 245. 
 
 9 Finn V. Brown, 142 U. S. 56, 12 
 Sup. Ct. 136, 35 L. ed. 936; Citi- 
 zens' St. R. V. Robbins, 128 Ind. 
 449, 26 N. E. 116, 12 L. R. A. 498, 
 25 Am. St. 445; Hastings v. Blue 
 Hills &c. Co., 9 Pick. (Mass.) 80; 
 
 New York &c. R. Co. v. Schuyler, 
 34 N. Y. 30; DeCaumont v. Bogert, 
 36 Hun (N. Y.) 382; Roberts' Ap- 
 peal, 85 Pa. St. 84; Seeligson v. 
 Brown, 61 Tex. 114, 10 Am. & Eng. 
 Corp. Cas. 143. But see Moores v. 
 Citizens' Nat. Bank, 111 U. S. 156, 
 4 Sup. Ct. 345, 28 L. ed. 385. 
 
 10 National Bank v. Western Pac. 
 R. Co.,' 157 Cal. 573, 108 Pac. 676, 
 27 L. R. A. (N. S.) 987, 21 Ann. 
 Cas. 1391; Reed v. Copeland, 50 
 Conn. 472, 47 Am. Rep. 663; Walsh 
 V. Sexton, 55 Barb. (N. Y.) 251; 
 Allerton v. Lang, 10 Bosw. (N. Y.) 
 362; Commonwealth v. Crompton, 
 137 Pa. St. 138, 20 Atl. 417; Parker 
 V. Bethel &c. Co., 96 Tenn. 252, 34 
 S. W. 209. See also Harvey v. 
 Stowe, 219 Fed. 17; Brewster v. 
 Hartley, 37 Cal. 15, 99 Am. Dec. 
 237; Jarvis v. Rogers, 13 Mass. 105. 
 But compare Matthews v. Hoag- 
 
§113 
 
 RAILROADS 
 
 202 
 
 ing upon the certificate, and it is held in accordance with the well 
 established custom, that the assignment may be made in blank, 
 that is, it may be signed by the transferor without inserting the 
 name of the transferee, who, upon its delivery to him, may insert 
 his own name.i^ Such an assignment is usually accompanied by 
 a power of attorney also signed in blank, authorizing such attor- 
 ney to sign the transfer or registry upon the books of the com- 
 pany, thus obviating any necessity for the presence of the trans- 
 feror at the office of the company, and this blank may likewise be 
 filled out by the transferee, ^^ or by the registry clerk.^^ 
 
 § 113 (98). Registry of transfer. — It is generally provided that 
 stock shall be transferred only upon the books of the company. 
 Even where such a provision exists, however, a valid assignment 
 of the certificate will estop the transferor from impeaching his 
 transferee's title or that of any subsequent bona fide transferee, 
 notwithstanding the fact that such assignment or transfer is not 
 registered.^* As to the corporation, however, where such a pro- 
 
 land, 48 N. J. Eq. 4SS, 21 Atl. 10S4; 
 Burrall v. Bushwick R. Co., 7S N. 
 Y. 211 ; Sitgreaves v. Farmers' &c. 
 Bank, 49 Pa. St. 359. 
 
 "McNeil V. Tenth Nat. Bank, 
 46 N. Y. 325, 7 Am. Rep. 341 ; Bank 
 of America v. McNeil, 10 Bush 
 (Ky.) 54; Walker v. Detroit &c. 
 R. Co., 47 Mich. 338; Cutting v. 
 Damerel, 88 N. Y. 410; Pennsyl- 
 vania R. Co.'s Appeal, 86 Pa. St. 
 80; Sargent, Ex parte, L. R. 17 Eq. 
 Cas. 273; Ortigosa v. Brown, 47 L. 
 J. Ch. 168, 4 Thomp. Corp. (2d 
 ed.), §4317. We are not consider- 
 ing, however, the question as to 
 whether creditors can attach any of 
 such assignments. 
 
 12 Holbrook v. New Jersey Zinc 
 Co., 57 N. Y. 616, 623; Bridgeport 
 Bank V. New York &c. R. Co., JO 
 Conn. 231; Otis v. Gardner, 105 111. 
 
 436; McCarthy v. Crawford, 238 111. 
 38, 86 N. E. 750, 29 L. R. A. (N. 
 S.) 252n, 128 Am. St. 9Sn; Broad- 
 way Bank v. McElrath, 13 N. J. Eq. 
 24; Colonial Bank v. Hepworth, 36 
 Ch. Div. 36. 
 
 132 Gook Corporations (7th. ed.), 
 § 375 ; Allen v. South Boston R. Co., 
 150 Mass. 200, 22 N. E. 917, 5 L. 
 R. A. 716, 15 Am. St. 185. Such 
 a power of attorney has been held 
 irrevocable. Skinner v. Ft. Way;- 
 &c. R. Co., 58 Fed. 55. 
 
 14 Black V. Zacharie, 3 How. (U. 
 S.) 483, 513, 11 L. ed. 690; John- 
 son V. Laflin, 103 U. S. 800, 804, 26 
 L. ed. 532; Continental Nat. Bank 
 v. Elliot &c. Bank, 7 Fed. 369; 
 Duke v. Cahawba Nav. Co., 10 Ala. 
 82, 44 Am. Dec. 472; Ross v. South- 
 western R. Co., 53 Ga. 514; Bruce 
 v. Smith, 44 Ind. 1; People's Bank 
 
203 
 
 STOCK 
 
 §113 
 
 vision exists it is not ordinarily bound to recognize as a stock- 
 holder a purchaser who does not have the transfer registered or 
 properly apply for its registration.^® But the corporation may 
 waive a formal registry so far as its own rights are concerned.^** 
 And in most jurisdictions the rule is that a bona fide purchaser of 
 
 V. Gridl'ey, 91 111. 457; Noble v. 
 Turner, 69 Md. 519, 16 Atl. 124; 
 Brown v. Smith, 122 Mass. 589; 
 Baldwin v. Canfield, 26 Minn. 43, 
 1 N. W. 261; Lund v. Wheaton &c. 
 ■Co., 50 Minn. 36, 52 N. W. 268; 
 Merchants' &c. Bank v. Richards, 
 •6 Mo. App. 454; Cushman v. Thay- 
 er Mfg. Co., 76 N. Y. 365, 32 Am. 
 Rep. 315; Smith v. Nasliville, &c. 
 R. Co., 91 Tenn. 221, 18 S. W. 546. 
 Noyes V. Spaulding, 27 Vt. 420. See 
 also National Bank v. Western 
 Pac. R. Co., 157 Cal. 573, 108 Pac. 
 676, 27 L. R. A. (N. S.) 987, 21 
 Ann. Cas. 1391; Shires v. Allen, 
 47 Colo. 440, 107 Pac. 1072. The 
 same rule has been held to apply 
 to the transferer's assignee in 
 bankruptcy. Dickinson v. Central 
 Nat. Bank, 129 Mass. 279; Sibley v. 
 ■Quinsigamond Nat. Bank, 133 
 Mass. 515; Dobson, Ex parte, 2 
 Mont. & D. (Eng. B. R.) 685. As 
 to whether it transfers both legal 
 and equitable title or only the lat- 
 ter, see 4 Thomp. Corp. (2nd ed.) 
 §§ 4318, 4319. 
 
 152 Cook Corporations (7th. ed.), 
 § 381. See also Evansville Union 
 Stockyards Co. v. State, 179 Ind. 
 505, 101 N. E. 822; Star Mut. 
 Tel. Co. V. Longfellow, 85 Kans. 
 353, 116 Pac. 506. As to the or- 
 dinary manner of registering the 
 transfer, see Burrall v. Bushwick 
 R. Co., 75 N. Y. 211; Green Mount 
 
 &c. Co. V. Bulla, 45 Ind. 1; Na- 
 tional Bank v. Watsontown Bank, 
 105 U. S. 217, 26 L. ed. 1039. As to 
 what is a sufficient registry or ap- 
 plication in particular cases, see 
 Case V. Bank, 100 U. S. 446, 25 L. 
 ed. 695; Fisher v. Jones, 82 Ala. 
 117, 3 So. 13; Plumb v. Bank, 48 
 Kans. 484, 29 Pac. 699; Newell v. 
 Williston 138 Mass. 240; Pinkerton 
 V. Manchester &c. R. Co., 42 N. H. 
 424; Chemical Nat. Bank v. Cod- 
 well, 132 N. Y. 250, 30 N. E. 644; 
 American Nat. Bank v. Oriental 
 Mills, 17 R. L 551, 23 Atl. 795. 
 Either party to the transfer is usu- 
 ally entitled to demand a registry. 
 Johnson v. Laflin, 103 U. S. 800, 
 26 L. ed. 532; Webster v. Upton, 
 91 U. S. 65, 23 L. ed. 385. 
 
 16 Upton V. Burnham, 3 Biss. (U. 
 S.) 431, 520, Fed. Cas. No. 16798; 
 Richmondville Mfg. Co. v. Prall, 9 
 Conn. 487; Wilson v. St. Louis &c. 
 Co.', 108 Mo. 588, 18 S. W. 286, 32 
 Am. St. 624, 36 Am. & Eng. Corp. 
 Cas. 290; Isham v. Buckingham, 49 
 N. Y. 216; Cutting v. Damerel, 88 
 N. Y. 410; Robinson v. Natl. Bank, 
 95 N. Y. 637; Chambersburg Ins. 
 Co. V. Smith, 11 Pa. St. 120; Ameri- 
 can Nat. Bank v. Oriental Mills, 17 
 R. I. 551, 23 Atl. 795. See also Na- 
 tional Safe &c. Trust Co. v. Hibbs, 
 32 App. D. C. 459; Gray v. Fank- 
 hauser, 58 Ore. 423, 115 Pac. 146. 
 
§113 
 
 RAILROADS 
 
 204 
 
 a share of stock for a valuable consideration is not affected by a 
 subsequent attachment or levy upon stock for the debts of the 
 transferor, nor, in general, by any subsequent equities, although 
 the transfer has never been registered.^'' But this rule has not 
 passed unchallenged,^® and it does not, of course, apply to a 
 purchaser of stock upon which a levy has been made before the 
 purchase.!" The corporation may, and should, generally, we 
 
 i'^ Continental Nat. Bank v. 
 Eliot Nat. Bank, 7 Fed. 369; Scott 
 V. Pequonnbck Nat. Bank, IS Fed. 
 494; Nat. Bank v. Western Pac. 
 R. Co., 157 Cal. 573, 108 Pac. 676, 
 27 L. R. A. (N. S.) 978; Thurber v. 
 Crump, 86 Ky. 408, 6 S. W. 145; 
 Smith V. Crescent City &c. Co., 
 30 La. Ann. 1378; Kern v. Day, 45 
 La. Ann. 71, 12 So. 6; Lund v. 
 Wheaton '&c. Co., SO Minn. 36, 36 
 Am. St. 623; Clark v. German &c. 
 Bank, 61 Miss. 611; Broadway 
 Bank v. McElrath, 13 N. J. Eq. 24;' 
 Comeau v. Guild Farm Oil Co., 3 
 Daly (N. Y.) 218; Doty v. First 
 Nat. Bank, 3 N. Dak. 9, S3 N. W. 
 77, 17 L. R. A. 259; Seeligson v. 
 Brown, 61 Tex. 114. See also Ev- 
 eritt V. Farmers' &c. Bank, 82 
 Nebr. 191, 117 N. W. 401, 20 L. 
 R. A. (N. S.) 996n; Reilly v. Alse- 
 con Land Co., 75 N. J. Eq. 71, 71 
 Atl. 248; Smith v. American Coal 
 Co., 7 Lans. (N. Y.) 317; Lipscomb 
 V. Condon, 56 W. Va. 416, 49 S. E. 
 392, 67 L. R. A. 670, 107 Am. St. 
 938. At least where there is no- 
 tice of the transftr. Bridgewater 
 Iron Co. V. Lissberger, 116 U. S. 
 8, 6 Sup. Ct. 241, 29 L. ed. 557; 
 Mowry v. Hawkins, 57 Conn. 453, 
 18 Atl. 784; Wilson v. St. Louis 
 &c. R. Co., 108 Mo. 588, 18 S. W. 
 286, 32 Am. St. 624; Scripture v. 
 
 Francestown &c. Co., SO N. H. 571; 
 Telford &c. Co. v. Gerhab (Pa.), 
 13 Atl. 90, 21 Am. & Eng. Corp. 
 Cas. 471; Commonwealth v. Wat- 
 mough, 6 Whart. (Pa.) 117. See 
 generally as to liability of trans- 
 ferees, note in 30 L. R. A. (N. S.) 
 283, et seq. 
 
 18 Berney Nat. Bank v. Pinchard, 
 87 Ala. 577, 6 So. 364; Weston v. 
 Bear River &c. Co., 5 Cal. 186, 63- 
 Am. Dec. 117; Conway v. John, 14 
 Colo. 30, 23 Pac. 170; Oxford &c. 
 Co. V. Bunnel, 6 Conn. 552; State 
 V. First Nat. Bank, 89 Ind. 302; 
 Colman v. Spencer, 5 Blackf. (Ind.) 
 197; Fort Madison &c. Co. v. Ba- 
 tavian Bank, 71 Iowa 270, 32 N. 
 W. 336, 60 Am. Rep. 789; Skow- 
 hegan Bank v. Cutler, 49 Maine 
 315; Noble v. Turner, 69 Md. S19, 
 16 Atl. 124; Dean v. Rapid Tel. Co., 
 162 Mo. App. 100, 144 S. W. 135; 
 Buttrick v. Nashua &c. R. Co., 62 
 N. H. 413, 13 Am. St. S78; Murphy, 
 Re, 51 Wis. 519, 8 N. W. 419. But 
 in several of these cases the stat- 
 ute explicitly altered the rule. The 
 transferer is generally held liable 
 to creditors where the transfer is 
 not registered as required, espe- 
 cially if the requirement is stat- 
 utory. 4 Thomp. Corp. (2nd ed.) 
 
 § 4364. 
 
 19 Young V. South Tredegar &c. 
 
205 
 
 STOCK 
 
 §113 
 
 think, insist upon the surrender of the old certificate as a condi- 
 tion to registration.^*" But when this is done and proper appli- 
 cation made it is the duty of the company to register the transfer 
 in the absence of some legal excuse. ^^ When a corporation 
 wrongfully refuses to make or permit the registry of a ti'ansfer 
 the party entitled thereto usually has his remedy by suit in 
 equity,^^ but he may, if he so elects, bring an action at law for 
 damages,^^ and, in some jurisdictions, it is also held that man- 
 
 Co., 85 Tenn. 189, 2 S'. W. 202, 4 
 Am. St. 752; Chesapeake & Ohio 
 R. Co. V. Paine, 29 Grat. (Va.) 502; 
 Shenandoah Valley R. Co. v. Grif- 
 fith, 76 Va. 913. 
 
 20 Bank v. Lanier, 11 Wall. (U. 
 S.) 369, 20 L. ed. 172; Tafft v. 
 Presidio R. Co., 84 Cal. 131, 22 Pac. 
 485, 18 Am. St. 166; Supply Ditch 
 Co. V. Elliott, 10 Colo. 327, 3 Am. 
 St. 586; Ironstone Ditch Co. v. 
 Equitable Securities Co., 52 Colo. 
 268, 121 Pac. 174; Bridgeport Bank 
 V. New York &c. R. Co., 30 Conn. 
 231 ; State v. New Orleans &c. E. 
 Co., 30 La. Ann. 308; Factors' &c. 
 Co. V. Marine &c. Co., 31 La. Ann. 
 149; New York &c. R. Co. v. 
 Schuyler, 34 N. Y. 30; Brisbane v. 
 Delaware &c. R. Co., 94 N. Y. 204; 
 National Bank v. Lake Shore &c. 
 R. Co., 21 Ohio St. 221; Cleveland 
 &c. R. Co. V. Robbins, 35 Ohio St. 
 483. 
 
 21 As to what will justify refusal,' 
 see Telegraph Co. v. Davenport, 97 
 U. S. 369, 24 L. ed. 1047; Gould v. 
 Head, 41 Fed. 240; People v. Sterl- 
 ing Mfg. Co., 82 111. 457; Mer- 
 chants' Nat. Bank v. Richards, 6 
 Mo. App. 454. As to what will not 
 justify refusal, see Helm v. Swig- 
 gett, 12 Ind. 194; American &c. Co. 
 V. Bayless, 91 Ky. 94, IS S. W. 10; 
 
 Kahn v. St. Joseph Bank, 70 Mo. 
 262; People v. Paton, 5 N. Y. St. 
 316; State v. Mclver, 2 S. Car. 25; 
 Moffatt V. Farquhar, L. R. 7 Ch. 
 Div. 591. 
 
 22 Mechanic's Bank v. Setoa, 1 
 Pet. (U. S.) 299, 7 L. ed. 152; 
 Wilson v. Atlantic &c. R Co., 2 
 Fed. 459; Shinner v. Ft. Wayne &c. 
 R. Co., 58 Fed. 55; Jessup v. Chi- 
 cago &c. R. Co., 188 Fed. 931; lasi- 
 gi v. Chicago &c. R. Co., 129 Mass. 
 46; Cushman v. Thayer Mfg. Co., 
 76 N. Y. 365, 32 Am. Rep. 315; Iron 
 R. Co. v. Fink, 41 Ohio St. 321, 
 52 Am. Rep. 84; 2 Cook Corpora- 
 tions (7th. ed.), § 391; 4 Thomp. 
 Corp. (2d ed.) §§ 4405, 4407. See 
 also Vernon &c. R. Co. v. Wash- 
 ington Twp., 48 Ind. App. 309, 95 
 N. E. 599. In Gould v. Head, 41 
 Fed. 240, the suit was against the 
 secretary and. it was held that the 
 corporation was not a necessary 
 party. 
 
 23 Kimball v. Union Water Co., 
 44 Cal. 173, 13 Am. R. 157; Helm v. 
 Swiggett, 12 Ind. 194; Vernon &c. 
 R. Co. v. Washington Twp., 48 Ind. 
 App. 309, 95 N. E. 599; Sargent v. 
 Franklin Ins. Co., 8 Pick. (Mass.) 
 90, 19 Am. Dec. 306; Kortwright v. 
 Buffalo &c. Bank, 20 Wend. (N. 
 Y.) 90; Doty v. First Nat. Bank, 
 
§114 
 
 RAILROADS 
 
 206 
 
 damus will lie tu compel the corporation to make or permit a 
 registration.^* 
 
 § 114 (99). Lien of corporation on stock. — A corporation has, 
 at common law, no lien upon a shareholder's stock for debts due 
 from him to it.^^ Such a lien is given by general statutes iii many 
 
 3 N. Dak. 9, S3 N. W. 71, 17 L. R. 
 A. 259; Rio Grande &c. Co. v. 
 Burns, 82 Tex. SO, 17 S. W. 1043; 
 
 4 Thomp. Corp. (2d ed.) § 4406, 
 et seq. 
 
 24 People V. Goss &c. Co., 99 III. 
 3SS; Green Mount &c. Co. v. Bul- 
 la, 45 Ind. 1; State v. First Nat. 
 Bank, 89 Ind. 302; Slemmons v. 
 Thompson, 23 Ore. 215, 31 Pac. 
 514; State v. Cheraw &c. R. Co., 
 16 S. Car. 524; Goodwin v. Ottawa 
 &c. R. Co., 13 Upper Can. (C. P.) 
 254; Norris v. Irish Land Co., 8 
 El. & Bl. 512. See also Scherck v. 
 Montgomery, 81 Miss. 426, 2>i So. 
 507; Sheppard v. Rockingham 
 Power Co., ISO N. Car. lid, 64 S. E. 
 894. It has been said that this 
 remedy is peculiarly appropriate 
 in the case of railroads on account 
 of their quasi public nature. State 
 V. Mclver, 2 S. Car. 25. But al- 
 though we believe that, in many 
 cases, where the shares have com- 
 paratively little value or an emer- 
 gency exists, mandamus ought to 
 lie, yet we do not believe that the 
 distinction referred to in the case 
 last cited exists, as the rights of 
 the members are substantially the 
 same as in ordinary private cor- 
 porations. See Stackpole v. Sey- 
 mour, 127 Mass. 104. The follow- 
 ing cases hold that mandamus will 
 not lie: Tobey v. Hakes, 54 Conn. 
 
 274, 7 Atl. SSI Am. St. 114; TowneS 
 v. Nichols, 17> Maine 515; Baker v. 
 Marshall, 15 Minn. 177; State v. 
 Rombauer, 46 Mo. 155; State v. 
 Guerrero, 12 Nev. 105; State v. 
 People's &c. Assn. 43 N. J. L. 389; 
 Freon v. Carriage Co., 42 Ohio St. 
 30, 51 Am. Rep. 794; Shipley v. 
 Mechanics Bank, 10 Johns (N. Y.) 
 484; Birmingham &c. Co. v. Com- 
 monwealth, 92 Pa. St. 72; Rex v. 
 Bank, 2 Doug. 524; Rex v. Lon- 
 don &c. Co., 1 Dowl. & R. 510. See 
 generally, on the subject of this 
 section, note in 57 Am. St. 379, et 
 seq., and 3 L. R. A. (N. S.) 551. 
 25 Case v. Bank, 100 U. S. 446, 
 25 L. ed. 695; Farmers' &c. Bank 
 V. Wasson, 48 Iowa 336, 30 Am. 
 Rep. 398; Dempter &c. Co. v. 
 Downs, 126 Iowa 80, 101 N. W. 
 735, 106 Am. St. 340; Jewell v. 
 Nuhn (Iowa), 138 N. W. 457; Ha- 
 gar V. Union Nat. Bank, 63 Maine 
 509; Gemmell v. Davis, 75 Md. 546, 
 23 Atl. 1032, 32 Am. St. 412; Sar- 
 gent V. Franklin Ins. Co., 8 Pick. 
 (Mass.) 90, 19 Am. Dec. 306; 
 Massachusetts Iron Co. v. Hooper, 
 7 Cush. (Mass.) 183; Bank v. Pin- 
 son, 58 Miss. 421, 38 Am. Rep. 330; 
 Carroll v. Mullanphy &c. Bank, 8 
 Mo. App. 249; Williams v. Lowe, 4 
 Nebr. 382; Driscoll v. West Brad- 
 ley &c. Co., 59 N. Y. 96; Merchants' 
 Bank v. Shouse, 102 Pa. St. 488. 
 
207 
 
 STOCK 
 
 §114 
 
 of the states,^® and is frequently given by charter.^'^ It may be 
 created also, wheii authorized, by a by-law of the corporation,^* 
 but many of the courts hold that, if created in this way, it will 
 not bind a bona fide purchaser, without notice that such a by-law 
 
 26 Pittsburgh &c. R. Co. v. Clarke, 
 29 Pa. St. 146, construing the 
 Pennsylvania statute requiring 
 payment -of the shareholder's 
 indebtedness to the corporation 
 before transfer of shares in a 
 railway corporation , unless the 
 lien is waived. Lien upon shares 
 are forbidden by statute in 
 New , Hampshire. Hill v. Pine 
 River' Bank, 45 N. H. 300, 309. A 
 corporation has no special vendor's 
 lien, in the absence of a contract 
 to that effect, on shares or. its 
 capital stock, for unpaid purchase- 
 money. Lankershim Ranch Land 
 & W. Co. V. Herberger, 82 Cal. 
 600,, A statute may create a lien 
 in favor of the corporation for 
 debts due from shareholders prior 
 to its enactment. Birmingham 
 Trust &c. Co. V. East Lake Land 
 Co., 99 Ala. 379, 13 So. 72, 20 L. R. 
 A. .600. See also Hammond v. 
 Hastings, 134 U. S. 401, 10 Sup. 
 Ct. 727, 33 L. ed. 990; OHphint v. 
 Bank, 60 Ark. 198, 29 S. W. 460; 
 note in 57 Am. St. 394. 
 
 27 Kenton Ins. Co. v. Bowman, 
 84 Ky. 430, 1 S. W. 717; German 
 &c. Bank v. Jefferson, 10 Bush 
 (Ky.) 326; Reese v. Bank, 14 Md. 
 271, 74 Am. Dec. 536; Leggett v. 
 Bank, 24 N. Y. 283; Cross v. Phe- 
 nix Bank, 1 R. I. 39; Bohmer v. 
 City Bank, 17 Va. 445; Sabin v. 
 Bank, 21 Vt. 353; Bradford &c. Co. 
 
 V. Briggs, L. R. 12 App. Cas. 29. 
 28 Cunningham v. Alabama &c. 
 Co., 4 Ala. 652; Tuttle v. Walton, 
 1 Ga. 43; Farmers' &c. Bank v. 
 Haney, 87 Iowa 101, 54 N. W. 61; 
 Dempster &c. Co. v. Downs, 126 
 Iowa 80, 101 N. W. 735, 106 Am. 
 St. 340; Bank of Holly Springs, v. 
 Pinson, 58 Miss. 421, 38 Am. Rep. 
 330; St. Louis Perpetual Ins. Co. v. 
 Goodfellow, 9 Mo. 149; Mechanics' 
 Bank v. Merchants' Bank, 45 Mo. 
 513, 100 Am. Dec. 388;, Young v. 
 Vough, 23 N. .J. Eq. 325; Reading 
 Trust Co, V. Reading Iron Works, 
 137 Pa. St. 282, 21 Atl. 169; Lock- 
 wood V. Mechanics' Nat. Bank, 9 
 R. I. 308, II Am. Rep. 258; 2 Cook 
 Corps. (7th ed.), § 522; 4 Thomp. 
 Corp. (2d. ed.), §4007. See also Bank-' 
 ers Trust Co. v. McCloy, 109 Ark. 
 160, 159 S. W. 205. It has also 
 been held that such a lien may be 
 created by contract. Jennings v. 
 Bank, 19 Cal. 323, 21 Pac. 852, 5 
 L. R. A. 233, 12 Am. St. 145; Van. 
 sands v. Middlesex Co. Bank, 26 
 Conn. 144; Farmers' &c. Bank v. 
 Haney, 87 Iowa 101, 54 N. W. 61. 
 Or by usage. Morgan v. Bank, 8 
 Yerg. & R. (Pa.) n, 11 Am. Dec. 
 57S,-and note. But this would not 
 bind a bona fide purchaser without 
 notice. Driscoll v. West Bradley 
 &c. Co., 59 N. Y. 96; Bryon v. Car- 
 ter, 22 La. Ann. 98. 
 
§115 
 
 RAILROADS 
 
 208 
 
 existed,^® and it is held that such a by-law, unless recited in the 
 certificate, will not amount to constructive notice.^" Authority 
 to make "regulations" as to transfers has been held sufficient to 
 empower the directors of a corporation to make a by-law reserv- 
 ing such a lien.^i "Where, by general law, a lien is given to a 
 corporation upon its stock for the indebtedness of the stock- 
 holder, it is valid and enforceable against all the world."*^ 
 
 § 115 (100). When and to what the lien attaches. — It may at- 
 tach to the stock for the owner's debts, although registered in an- 
 other's name;** and it will take priority over antecedent debts 
 which the stock has been pledged to secure, if the pledgee has 
 failed to notify the corporation of his interest.** No action of the 
 
 29 Bankers' Trust Co. v. McCloy, 
 109 Ark. 160, 1S9 S. W. 205; Hardy 
 V. Boyer, 7 Ga. App. 472, 67 S. E. 
 205 (should be on face of cer- 
 tificate) ; This is true not only in 
 Arkansas and Georgia, but also of 
 New York, Louisiana, Massachu- 
 setts, Alabama, Pennsylvania, Cali- 
 fornia, Mississippi and Ohio, and 
 probably some others. 2 Cook Cor- 
 porations (7th. ed.), § 532. See 
 also Bank v. Lanier, 11 Wall. (U. 
 S.) 369, 20 L. ed. 172; Bank v. Pin- 
 son, 58 Miss. 421, 38 Am. Rep. 330; 
 Brinkerhoflf-Farris Trust &c. Co. v. 
 Home &c. Co., 118 Mo. 447, 24 S. 
 W. 129;Kisterbock's Appeal, 127 Pa. 
 St. 601, 18 Atl. 381, 14 Am. St. 868; 1 
 Thomp. Corp. (2d. ed.), § 1034 et 
 seq; 2 Thomp. Corp. (2d. ed.), § 
 4007. 
 
 so Brinkerhoff-Ferris Trust, &c. 
 Co. V. Home &c. Co., 118 Mo. 447, 
 24 S. W. 129; 2 Cook Corporations 
 (7th. ed.), § 532. But it is oth- 
 erwise where the articles of incor- 
 poration duly filed in the proper 
 public office so provide. Demp- 
 
 ster Mfg. Co. V. Downs, 126 Iowa 
 80, 101 N. W. 735, 106 Am. St. 340. 
 
 31 Pendergast v. Bank, 2 Sawy. 
 (U. S.) 108, Fed. Cas. No. 10918; 
 Cunningham v. Alabama &c. Co., 4 
 Ala. 652; Spurlock v. Pacific R. Co., 
 61 Uo. j19; Bank v. Durfee. 118 
 Mo. 431, 24 S. W. 133; McCready 
 V. Rumsey, 6 Duer (N. Y.) 574. 
 But see Bank v. Manufacturers' 
 &c. Bank, 20 N. Y. 501. 
 
 ^-Hammond v. Hastings, 134 U. 
 S. 401, 10 Sup. Ct. 727, 33 L. ed. 
 960, 2 Lewis' Am. R. & Corp. 698, 
 and authorities there cited. To the 
 same effect, see Bishop v. Globe 
 Co., 135 Mass. 132; Bohmer v. City 
 Bank, 77 Va. 445. 
 
 33 Stebbins v. Phoenix F. Ins. 
 Co., 3 Paige (N. Y.) 350. See also 
 Mount HoUey Paper Co.'s Appeal, 
 99 Pa. St. S13; Planters' &c. Co. 
 V. Selma Sav. Bank, 63 Ala. 585. 
 But compare Helm v. Swiggett, 12^ 
 Ind. 194. 
 
 3* Piatt V. Birmingham Axle Co., 
 41 Conn. 255, 264; Union Bank v. 
 Laird, 2 Wheat. (U. S.) 390, 4 L. 
 
209 
 
 STOCK 
 
 §116 
 
 directors is necessary to fix the lien upon stock owned by its 
 debtor.^'s It will attach to trust stock for debts of a trustee hold- 
 ing the stock in his own name, there being nothing in the way of 
 notice to the corporation of the nature of his title.*® The lien 
 attaches to dividends as well as to stock, and they may be re- 
 tained by the corporation to discharge a debt due it from the 
 shareholder,*'^ and the lien may be enforced, whether the debts are 
 due, or are to become due at some future time.** But it has been 
 held that no Hen attaches for debts of a holder of certificates who 
 has re-transferred them without obtaining registry.*^ 
 
 §116 (101). Waiver of lien — Enforcement of lien. — The right 
 to a lien is usually given exclusively for the benefit of the corpora- 
 tion,*" and cannot be enforced by any one else. It cannot even 
 be enforced indirectly by assignment of another's claim to the 
 corporation that it may enforce payment for his benefit.*^ But 
 
 ed. 269. See, however, where 
 notice is given, or the corporation 
 has knowledge of the prior pledge, 
 Bradford &c. Co. v. Briggs, 56 L. 
 T. R. 62; Gemmell v. Davis, 75 
 Md. 546, 23 Atl. 1032, 32 Am. St. 
 412; Ardmore State Bank v. Ma- 
 son, 30 Okla. 568, 120 Pac. 1080, 39 
 L. R. A. (N. S.) 292. 
 
 35 Elliott V. Sibley, 101 Ala. 344, 
 13 So. 500. 
 
 36 Young V. Vough, 23 N. J. Eq. 
 325; New London &c. Bank v. 
 Brocklebank, L. R. 21 Ch. Div. 30Z. 
 Compare Bradford &c. Co. v. 
 Briggs, L. R. 12 App. Cas. 29. 
 
 375 Fletcher Cyc. Corp., § 3606. 
 Hagar v. Union Nat. Bank, 63 Maine 
 509; Sargent v, Franklin Ins. Co., 8 
 Pick. (Mass.) 90, 19 Am. Dec. 306; 
 Bates V. N. Y. &c. Co., 3 Johns. Cas. 
 (N. Y.) 238. See Gemmell v. Davis, 
 75 Md. S46, 23 Atl. 1032, 32 Am. St. 
 
 412, and compare Brent v. Bank, 2 
 Cranch C. C. (U. S.) 517, Fed. Cas. 
 No. 1834. 
 
 38 Pittsburgh &c. R. Co. v. 
 Qarke, 29 Pa. St. 146; Cunning- 
 ham v. Alabama &c. Co., 4 Ala. 
 652; St. Louis &c. Ins. Co. v. Good- 
 fellow, 9 Mo. 149. The lien is not 
 lost, even though the statute of 
 limitations should interpose as a 
 bar to an action on the debt. Geyer 
 V. Western Ins. Co., 3 Pittsb. (Pa.) 
 41; Farmers' Bank v. Iglehart, 6 
 Gill (Md.) 50. 
 
 "» Helm v. Swiggett, 12 Ind. 194. 
 But see first note to this section, 
 supra. 
 
 *02 Cook Corporations (7th. ed), 
 § 529; Bank of Utica v. Smal- 
 ley, 2 Cowen (N. Y.) 770, 14 Am. 
 Dec. 526. 
 
 •ti White's Bank v. Toledo &c. 
 Ins. Co., 12 Ohio St. 601. 
 
§116 
 
 RAILROADS 
 
 210 
 
 a surety of the stockholder, who. has been compelled to discharge 
 such a lien, is subrogated to the rights of the corporation.^^ The 
 corporation may waive its lien and proceed by other means to 
 collect the debt,** or at its election it may enforce it against 
 shares in the hands of the debtor as liens are enforced against 
 other property.** It has been held that the waiver of the lien will 
 not Release a surety unless he has given the corporation express 
 notice not to waive it.*^ The ordinary method of enforcing its 
 lien against shares which have been sold by the debtor is by a 
 refusal to transfer the stock.*" But it is generally held that the 
 lien may be foreclosed in equity.*''' The corporation cannot hold 
 
 *2 Young V. Vough, 23 N. J. Eq. 
 325; Petersburg Sav. &c. Co. v. 
 Lumsden, 75 Va. 327. ' See also 
 Gray v. Stone, 69 L. T. R. 282. But 
 compare Cross v. Phenix Bank, 1 
 R. I. 39. . 
 
 43 Hoy lake R. Co., In re, L. R. 
 9 Ch. App. C. 257, 259; 5 Fletcher 
 Cyc Corp., § 3fi20. A corporation 
 may; sj^aive a lien on its stock, but 
 ignorance of the existence pf the lien, 
 on the part of the purchaser, does not 
 destroy the lien and does not consti- 
 tute waiver on part of the corpora- 
 tion. Hammond v. Hasting's. 134 U. S. 
 401, 10 Sup. Ct. 727, 33 L. ed! 960. See 
 generally as to waiver, Cecil Nat. 
 Bank V. Watsontown Bank, 105 U. 
 S. 217, 26 L. ed. 1039; First iWat. 
 Bank v. Hartford &c. Co., 4S Conn. 
 22; Des Moines &c. Co. v. Des 
 Moines &c. Bank, 97 Iowa 668, 66 
 N. W. 914; Kenton Ins. Co. v. 
 Bowman, 84 Ky. 430; Bishop v. 
 Globe Co., 135 Mass. 132; Citizens' 
 State Bank v. Kalamazoo &c. 
 Bank, 111 Mich. 313, 69 N. W. 663 
 (by-law held no waiver); Hill v. 
 Pine River Bank, 45 N. H. 300; 
 Nat. Bank v. Rochester Tumbler 
 
 Co., 172 Pa. St. 614, 33 Atl. 748. 
 
 **' Brent v. Bank of Washington, 
 10 Peters (U. S.) 596, 9 L. ed. 547. 
 Fdreclosure and sale or attach- 
 ment, Sabin v. Bank, 21 Vt. 353; 
 Farmers' Bank of Maryland'^, Case, 
 2 Bland's Ch. (Md.) 394; Morrison, 
 In re, 10 Nat. Bank Reg. 105. 
 
 4B Perrine v. Fireman's Ins. Co., 
 22 Ala. 575. 
 
 48 First Nat. Bank of Hartford 
 v. Hartford &c' Co., 45 Conn. 22; 
 Reese v. Bank,. 14 Md. 27l, '74 Am. 
 Dec. 536; Mechanics' Bank v. Mer- 
 chants' Bank, 45 Mo. 513, 100 Am. 
 Dec. 388; Bohmer v. City Bank, 77 
 Va. 445. See also Moore v. Royal 
 Oak Lumber Co., 171 Mich. 400, 
 137 N. W. 270. 
 
 *7 Kenton Ins. Co. v. Bowman, 
 84 Ky. 430, 1 S. W. 717; United 
 States &c. Land Co. v. Sullivan, 
 113 Minn. 27, 128 N. W. 1112, Ann. 
 Cas. 1912A, 51, and note; National 
 Bank &c. v. Rochester Lumbei 
 Co., 172 Pa. St. 614, 33 Atl. 748; 
 White River Sav. Bank v. Capital 
 Sav. Bank &c. Co., .77 Vt. 123, 59 
 Atl. 197, 107 Am. St. 754. See also 
 Wynn v. Lallafoosa County Bank, 
 
211 STOCK § 117 
 
 the purchaser personally liable.*^ And it cannot hold a lien on 
 stock for the debts of a registered stockholder contracted after it 
 has been regularly notified that he has sold such stock and trans- 
 ferred the certificates.*^ 
 
 § 117 (101a). Condemnation of stock. — An important ques- 
 tion, to which reference will also be made in another connection, 
 has recently been decided by the Supreme Court of the United 
 States. A state statute authorized the condemnation, under cer- 
 tain circumstances and by proper proceedings, by a railroad com- 
 pany of minority shares of stock in another company, and it was 
 held that one company, which was the lessee of another and the 
 owner of three-fourths of the stock of the latter, could lawfully 
 condemn the outstanding shares owned by a person who refused 
 to sell, where the improvement of the lessor's road was neces- 
 sary in order to serve the public and the lessor did not have, 
 while the condemning company did have, means to make the im- 
 provement.^"- This is in accordance with the prevailing view, 
 and affirmed the decision of the state court,^^ but the general 
 question as to when stock of minority holders can be thus taken 
 has been regarded as not entirely free from doubt, and there are. 
 comparatively few decisions upon the subject.^^ 
 
 168 Ala. 469, .S3 So. 228; Wright 298. See Gemmell v. Davis, 75 Mcf. 
 
 Lumber Co. v. Hixon, 105 Wis. 153, 546, 23 Atl. 1032. 
 
 80 N. W. 1110. Contra, Aldine Mfg. so Qffield v. New York &c. R. 
 
 Co. v. Phillips, 118 Mich. 162, 76 Co., 203 U. S. 372, 27 Sup. Ct 72 
 
 N. W. 371, 42 L. R. A. 531, 74 Am. 51 L. ed. 231. 
 
 St. 380. 51 In New York &c. R. Co. v. 
 
 48Cook Corporations (7th ed.), Offield, 17 Conn. 417, 59 Atl. 510, 
 
 i 530. and 78 Conn. 1, 60 Atl. 740. 
 
 « Bank of America v. McNeil, 52 See Spencer v. Seaboard Air 
 
 10 Bush (Ky.) 54; Nesmith v. Line R. Co., 137 N. Car. 107, 1 L. 
 
 Washington Bank, 6 Pick. (Mass.) R. A. (N. S.) 604, and note. 
 324; Conant v. Reed, 1 Ohio St. 
 
CHAPTER VII. 
 
 SUBSCRIPTIONS. 
 
 Sec. 
 
 
 Sec. 
 
 120. 
 
 Preliminary agreements to 
 subscribe. 
 
 
 l'21. 
 
 Subscriptions g e n e r a 1 1 y — 
 
 
 
 ■ Form. 
 
 137. 
 
 122. 
 
 Construction of contract of 
 subscription. 
 
 
 123. 
 
 Contracts of subscription are 
 
 
 
 several. 
 
 138; 
 
 124. 
 
 Effect of statutes requiring 
 cash deposit to com.plele 
 
 
 
 subscription. 
 
 139. 
 
 125. 
 
 Who may subscribe for 
 stock. 
 
 140. 
 
 126. 
 
 Presumption that one whose 
 
 
 
 name is subscribed is a 
 
 141. 
 
 
 stockholder. 
 
 
 127. 
 
 Implied promise to pay sub- 
 scription—Consideration. 
 
 142. 
 
 128. 
 
 Payment of .subscription- 
 Trust fund doctrine. 
 
 143. 
 
 129. 
 
 Conditional subscription. 
 
 
 130. 
 
 Implied conditions. 
 
 144. 
 
 131, 
 
 Valid and invalid conditions. 
 
 
 132. 
 
 Conditional subscription is a 
 mere offer until accepted. 
 
 
 133. 
 
 Subscriptions in escrow— Pa- 
 rol evidence. 
 
 145. 
 
 134. 
 
 Waiver of conditions. 
 
 
 13S. 
 
 When conditional subscrip- 
 tion becomes payable. 
 
 146. 
 
 136. 
 
 Construction of conditional 
 subscriptions — What is a 
 sufficient conipliance with 
 
 147. 
 
 conditions as to time of 
 beginning and completing 
 road. 
 
 Subscriptions payable as 
 work progresses or upon 
 expenditure of a certain 
 amount. 
 
 Failure to perform parol con- 
 dition will not defeat sub- 
 scription. 
 
 Conditions in notes. 
 
 Subscriptions conditioned 
 upon location or construc- 
 tion of the road. 
 
 Effect of alteration in route 
 fixed by charter. 
 
 Effect of abandonment or 
 sale of road. 
 
 Condition as to terminus — 
 Question of intention for 
 jury. 
 
 What is sufficient compliance 
 with condition as to termi- 
 nus or location of depot at 
 a certain place. 
 
 General rule of construction 
 — Performance of condition 
 by consolidated company. 
 
 Fraudulent representations in 
 obtaining subscriptions. 
 
 Misrepresentations in pros- 
 pectus and by agents gen- 
 erally. 
 
 212 
 
213 
 
 SUBSCRIPTIONS 
 
 §120 
 
 Sec. 
 
 Sec. 
 
 148. Fraud may be shown by pa- 150. Subscription induced by 
 
 fraud is merely voidable — 
 When it will be enforced. 
 151. Ratification and estoppel — 
 Rescission — Rights of cred- 
 itors. 
 
 rol evidence. 
 149. Subscriber must be free from 
 negligence in order to be 
 released upon the ground 
 of fraud. 
 
 § 120 (102). Preliminary agreements to subscribe. — It fre- 
 quently happens, especially where corporations are formed under 
 general laws, that, prior to their incorporation, a preliminary 
 agreement is made by those who are interested, to take a certain 
 amount of stock. ^ There is a sharp conflict among the authori- 
 ties as to the effect of such agreements and the liability of those 
 who execute them. A distinction is sometimes drawn between 
 an agreement to subscribe, and a present subscription or agree- 
 ment stating that each subscriber "hereby subscribes" a certain 
 sum, or the like ;- but while this may be good law where the facts 
 
 1 This is often contemplated by 
 the statutory scheme of incorpora- 
 tion, even where there is no ex- 
 press provision upon the subject. 
 Thus, in Anderson v. New Castle 
 &c. R. Co., 12 Ind. 376, 74 Am. 
 Dec. 218, it is said: "Under the 
 general railroad law, subscriptions 
 of a certain amount of stock are 
 necessary for the organization of 
 the contemplated corporation, and 
 for that reason and purpose are 
 valid before the corporation is or- 
 ganized, and may be collected by 
 it after organization." See also 
 Cross V. Pickneyville &c. Co., 17 
 111. 54; Hughes v. Antietam &c. 
 Co., 34 Md. 316; Hamilton &c. Co. 
 V. Rice, 7 Barb. (N. Y.) 157. 
 
 2 See Mt. Sterling &c. Co. v. Lit- 
 tle, 14 Bush (Ky.) 429; Lake On- 
 tario &c. R. Co. V. Curtiss, 80 N. 
 Y. 219; Strasburg R. Co. v. Echter- 
 
 nacht. 21 Pa. St, 220, 60 Am. Dec. 
 49. In such a case it is held that 
 while the agreement does not 
 amount to a subscription which 
 can be enforced,, yet the corpora- 
 tion may recover from the signer 
 the damages caused by his failure 
 to accept and pay for the stock, 
 which should be measured, how- 
 ever, not by the par value of the 
 stock, but by the difference be- 
 tween its par value and its mar- 
 ket value. Thrasher v. Pike County 
 R. Co., 25 111. 340 (393 orig. ed.). 
 See also Stowe v. Flagg, 72 111. 397, 
 402; Quick v. Lernon, 105 111. 578; 
 Peninsular R. Co. v. Duncan, 28 
 Mich. 130; Rhey v. Ebensburg &c. 
 Co., 27 Pa. St. 261 ; Irwin Creek &c. 
 Co. V. Taylor, 51 N. Y. 969; Cart- 
 wright V. Dickinson, 88 Tenn. 476, 
 12 S. W. 1030, 7 L. R. A. 7Q6, 17 
 Am. St. 910; Lake Ontario &c. R. 
 
§120 
 
 RAILROADS 
 
 214 
 
 justify such a distinction, it would seem that although the com- 
 pany is not yet incorporated and the agreement is made in con- 
 templation of its future incorporation, yet if each one who signs 
 the agreement relies and must rely upon each and every other 
 party thereto in order to obtain the means to incorporate and 
 carry out the purposes of the agreement, the effect is practically 
 the same, no matter whether the agreement is in terms that they 
 agree to subscribe a certain amount or that they do subscribe a 
 certain amount.* In either case, if a signer of the agreement re- 
 ceives shares after the company is incorporated, pays calls, takes 
 part in the corporate proceedings, or otherwise ratifies the sub- 
 scription, the corporation, after also ratifying it, may hold him lia- 
 ble the same as any other subscriber.* Upon this proposition there 
 
 Co. V. Curtiss, 80 N. Y. 219 (in- 
 timating that one of the parties to 
 the agreement, if made for his 
 benefit, could bring such an action 
 and that the measure of damages 
 would be as above stated). The 
 preliminary agreement may, of 
 course, be so worded as to be bind- 
 ing only in case a de jure corpora- 
 tion is formed. Capps v. Hastings 
 &c. Co., 40 Nebr. 470, 58 N. W. 
 956, 24 L. R. A. 259, 42 Am. St. 677. 
 
 3 See 1 Thomp. Corp. (2d ed.) 
 §§ 543, 547; Cook Corporations, 7th. 
 ed.), § 75; Auburn &c. Assn. v. 
 Hill, 113 Cal. 382, 45 Pac. 695; 
 Nickum v. Burckhardt, 30 Ore. 464, 
 47 Pac. 788, 48 Pac. 474, 60 Am. 
 St. 822. Compare also Planters &c. 
 Packet Co. v. Webb, 144 Ala. 666, 
 39 So. 562; Webb v. Baltimore &c. 
 R. Co., 11 Md. 92, 39 Am. St. 396, 
 26 Atl. 113; Gettysburg Nat. Bank 
 V. Brown, 95 Md. 367, 52 Atl. 975, 
 93 Am. St. 339, and note. 
 
 * Rockville &c. Co. v. Van Ness, 
 2 Cranch C. C. (U. S.) 449, Fed. 
 Cas. 11986; Cross v. Pickneyville 
 
 &c. R. Co., 17 111. 54; Tonica &c. 
 R. Co. V. McNeely, 21 111. 71; Mc- 
 Cormick v. Gas Co., 48 Kans. 614, 
 29 Pac. 1147; Twin Creek &c. Co. 
 V. Lancaster, 79 Ky. 552; Kennebec 
 &c. R. Co. V. Palmer, 34 Maine 
 366; Penobscot R. Co. v. Dummer, 
 40 Maine 172, 6Z Am. Dec. 654; 
 Maltby v. Northwestern &c. R. 
 Co., 16 Md. 422; Red Wing Hotel 
 Co. V. Freidrich, 26 Minn. 112, 1 
 N. W. 827; Minneapolis &c. Co. v. 
 Davi,«, 40 Minn. 110, 41 N. W. 1026, 
 3 L. R. A. 796n, 12 Am. St. 701; 
 Kansas City Hotel Co. v. Hunt, 57 
 Mo. 126; Inter Mountain Pub. Co. 
 V. Jack, 5 Mont. 568, 6 Pac. 20; 
 Bufifalo &c. R. Co. v. Dudley, 14 
 N. Y. 336; Buffalo &c. R. Co. v. 
 Gifford, 87 N. Y. 294; Bell's Ap- 
 peal, lis Pa. St. 88, 8 Atl. 177, 2 
 Am. St. 532; International &c. 
 Assn. V. Walker, 83 Mich. 386, 47 
 N. W. 338, 3 Lewis Am. R. & 
 Corp. 731, and note, where the au- 
 thorities are collected and re- 
 viewed. 
 
215 
 
 SUBSCRIPTIONS 
 
 §120 
 
 is substantial unanimity among the authorities, although it is 
 sometimes said that a corporation not in existence at the time a 
 contract is made cannot become a party to it so far as to enforce 
 it after the incorporation,^ and, in a recent Massachusetts case 
 the rule is broadly stated that although a contract is made in the 
 name and for the benefit of a projected corporation, it cannot, 
 after its organization, become a party to the contract even by 
 adoption or ratification of it.^ But the better rule is that such an 
 agreement, if not a completed contract, is at least a continuing 
 offer made for the benefit of the corporation, which is practically 
 the aggregate of the individuals who entered into the agreement 
 upon the faith of each other's subscription, and that the corpora- 
 tion may adopt and enforce itJ The statute may, however, pro- 
 vide that subscriptions shall be made by signing the articles of 
 incorporation, with certain other fornialities, and it has been 
 held that in such a case one who has merely signed a preliminary 
 
 5 Mt. Sterling &c. Co. v. Little, 
 14 Bush (Ky.) 429; Lake Ontario 
 &c. Co. V. Curtiss, 80 N. Y. 219; 
 Pittsburgh &c. R. Co. v. Gazzam, 
 32 Pa. St. 340; Charlotte &c. R. 
 Co. V. Blakely (S. Car.), 3 Strob. 
 245, and note to Winston v. Dor- 
 sett &c. Co., 129 111. 64, 21 N. E. 
 514, 4 L. R. A. 507, 508. See also 
 Rikhoff V. Machine Co., 68 Ind. 388. 
 
 6 Abbott V. Hapgood, ISO Mass. 
 248, 22 N. E. 907, 5 L. R. A. 586, 15 
 Am. St. 193. 
 
 T Mary,sville &c. Co. v. Johnson, 
 93 Cal. 538, 29 Pac. 126, 27 Am. 
 St. 21.5, 6 Lewis Am. R. & Corp. 9; 
 Auburn &c. Assn. v. Hill, 32 Cal. 
 xvii, 32 Pac. 587; note to Winston 
 V. Dorsett &c. Co., 129 111. 64, 21 
 N. E. 514, 4 L. R. A. 507; Heaston 
 V. Cincinnati &c. R. Co., 16 Ind. 
 275, 79 Am. Dec. 430 n; Miller v. 
 Wild Cat &c. Co., 52 Ind. 51; Nul- 
 ton V. Clayton, 54 Iowa 425, 6 N. 
 
 W. 685, 37 Am. Rep. 213; Camp- 
 bell V. Raven, 176 Mich. 208, 142 
 N. W.'355; Shelby County R. Co. 
 V. Crow, 137 Mo. App. 461, 119 S. 
 W. 435; Ashuelot Shoe Co. v. Hoit, 
 56 N. H. 548; Lake Ontario &c. R. 
 Co. V. Mason, 16 N. Y. 451; Buf- 
 falo &c. R. Co. V. Clark, 22 Hun 
 (N. Y.) 359; Lowville &c. R. Co. 
 V. Elliott. 196 N. Y. 545, 89 N. E. 
 1104; and authorities cited in notes 
 to § 20, ante. In no case, perhaps, 
 is this more clearly stated than it 
 is by the Supreme Court of Massa- 
 chusetts in the case of Athol Music 
 Hall Co. V. Carey, 116 Mass. 471, 
 and yet this is difficult to reconcile 
 with the extreme rule that a cor- 
 poration can not ratify a contract 
 made for its benefit, announced in 
 Abbott V. Hapgood, 150 Mass. 248, 
 22 N. E. 907, 5 L. R. A. 586, 15 
 Am. St. 193, heretofore cited. 
 
§120 
 
 RAILROADS 
 
 216 
 
 agreement, and has not signed or joined in the execution of the 
 articles of incorporation in the manner provided by statute, can- 
 not be held liable upon the incomplete subscription or agree- 
 ment.^ It is also, urged, in support of this doctrine, and, indeed, 
 in support of the broader doctrine announced in some of the 
 cases, which requires a ratification by the corporation and the 
 alleged stockholder, before he can be held liable as a subscriber, 
 that, as every contract must be mutually binding upon both par- 
 ties, the corporation cannot enforce such an agreement because- 
 it is not itself bound thereby.^ In line with these decisions, it 
 has also been held that one who signs such an agreement may 
 withdraw before acceptance by the corporation, i" but this would, 
 in some cases, be very unfair to the other subscribers, and one 
 
 s Monterey &c. R. Co. v. Hild- 
 reth, S3 Cal. 123; Reed v. Rich- 
 mond St. R. Co., 50 Ind. 342; Cop- 
 page V. Hntton, 124. Ind. 401, 24 N. 
 E. 112, 7 L. R. A. 591; Carlisle v. 
 Saginaw Sic. R. Co., 27 Mich. 315; 
 Parker v. Northern Cent. &c. R. 
 Co., 33 Mich. 23; Sedalia &c. R. 
 Co. V. Wilkerson, 83 Mo. 235; 
 Poughkeepsie &c. R. Co. v. Griffin, 
 24 N. Y. 150; Dutchess &c. R. Co. 
 V. Mabbett, 58 N. Y. 397; Buffalo 
 &c. R. Co. V. Gifford, 87 N. Y. 294; 
 Troy &c. R. Co. v. Tibbits, 18 Barb. 
 (N. Y.) 297; Erie &c. R. Co. v. 
 Owen, 32 Barb. (N. Y.) 616; 
 Butcher v. Dillsburg &c. R. Co., 76 
 Pa. St. 306. But see McClure v. 
 People's Freight R. Co., 90 Pa. St. 
 269. 
 
 9 Monterey &c. R. Co. v. Hild- 
 reth, 53 Cal. 123; Goff v. Winches- 
 ter College, 6 Bush (Ky.) 443; 
 Fanning v. Insurance Co., 37 Ohio 
 St. 339, 41 Am. Rep. 517; Stras- 
 burg R. Co. V. Echternacht, 21 Pa. 
 St 220, 60 Am. Dec. 4y; Cleaves 
 
 v. Brick Church Co., 1 Sneed 
 (Tenn.) 491. But compare Sho- 
 ber V. Lancaster &c. Assn., 68 Pa. 
 St. 429, and Edinboro Academy 
 V. Robinson, 37 Pa. St. 210, 78 Am. 
 Dec. 421, with the Pennsylvania 
 case above cited. While some of 
 the cases in which this rule is 
 stated were, perhaps, correctly de- 
 cided, yet we think the broad doc- 
 trine they announce is unsound in 
 principle and upon authority. 
 
 10 Hudson Real Estate Co. v. 
 Tower, 156 Mass. 82, 30 N. E. 465, 
 .32 Am. St. 434; Garrett v. Dills- 
 burg &c. R. Co., 78 Pa. St. 465;' 
 Auburn Bolt & Nut Works v. 
 Shultz, 143 Pa. St. 256, 22 Atl. 904; 
 Patty V. Hillsboro &c. Co., 4 Tex. 
 Civ. App. 224, 23 S. W. 336. See ' 
 also Holt v. Winfield Bank, 25 Fed. 
 812; Planters &c. Packet Co. v. 
 AVebb, 156 Ala. 551, 46 So. 977, 16 
 Ann. Cas. 529; Plank's Tavern Co. 
 V. Burkhard, 87 Mich. 182, 49 N. 
 W. 562; 1 Thomp Corp. (2d ed.) 
 § 518. 
 
217 
 
 SUBSCRIPTIONS 
 
 §121 
 
 court, at least, has denied the existence of such a right.^^ Where 
 a company has been incorporated before the subscription is made, 
 the objection made in some of the cases to the enforcement of 
 preliminary subscriptions upon the ground that a corporation 
 not in existence could not be a party, does not, of course, obtain 
 even though it may not have completed its organization before 
 the subscription is made.^^ gu^- the conditions of the agree- 
 ment must be substantially complied with, at least so far as they 
 are conditions precedent, and if the contemplated scheme becomes 
 impossible of performance or a different corporation from that 
 contemplated is organized, the subscriber to the preliminary 
 agreement cannot be held liable as a shareholder.^' 
 
 §121 (103). Subscriptions generally — Form. — No particular 
 formality is required by any principle of law in making a sub- 
 scription to the capital stock of a corporation, and a binding sub- 
 scription may, in general, be made in any way in which other con- 
 tracts are entered into.^* The courts will look to the intention of 
 
 11 Kidwelly Canal Co. v. Raby, 2 
 Price 93. See also Lake Ontario 
 &c. R. Co. V. Mason, 16 N. Y. 451; 
 Peninsular &c. R. Co. v. Duncan, 
 28 Mich. 130; Bullock v. Falmouth 
 &c. Co., 85 Ky. 184, 3 S. W. 129, 1 
 Thomp. Corp. (2d ed.) § 524. And 
 compare Rutenbeck v. Hohn, 143 
 Iowa 13, 121 N. W. 698, 136 Am. 
 St. 731; Utah Hotel Co. v. Madsen, 
 43 Utah 285, 134 Pac. 577. 
 
 12 The right 1o enforce the sub- 
 scription is merely suspended until 
 organization. Danbury &c. R. Co. 
 V. Wilson, 22 Conn. 435; Marlbor- 
 ough Branch R. Co. v. Arnold, 9 
 Gray (Mass.) 1.59, 69 Am. Dec. 279; 
 Low V. Connecticut &c. R. Co., 45 
 N. H. 370; Oregon Cent. R. Go. v. 
 Scoggin, 3 Ore. 161; Diman v. 
 Providence &c. R. Co., 5 R. I. 130; 
 Vermont &c. Co. v. Windham 
 
 Bank, 44 Vt. 489. But see Starrett 
 V. Rockland Ins. Co., 65 ^ilaine 
 374; Wilmington &c. R. Co. v. 
 Wright, 5 Jones (N. Car.) 304. 
 
 IS Knox V. Childersburgh &c. 
 Co., 86 Ala. 180, 5 So. 578; Hanford 
 Mercantile Store v. Sowlveere, 
 11 Cal. App. 261, 104 Pac. 708; 
 Wright Bros. v. Merchants &c. 
 Packet Co., 104 Miss. 507, 61 So. 
 550; Dorris v. Sweeney, 60 N. Y. 
 463. See also Indianapolis &c. Co. 
 V. Herkimer, 46 Ind. 142; Marshall 
 Foundry Co. v. Killian, 99 N. Car. 
 501, 6 S. E. 680, 6 Am. St. 539; 
 note in .33 Am. St. 185; 1 Thomp. 
 Corp. (2d ed.) § 528, et seq. 
 
 1* Blunt V. Walker, 11 Wis. 334, 
 349, 78 Am. Dec. 709. See also 
 Dupee V. Chicago &c. Co., 117 Fed. 
 40; Hays v. Ottawa &c. R. Co., 61 
 111. 422. 
 
§121 
 
 RAILROADS 
 
 218 
 
 the parties rather than to the manner in which it is manifested, 
 and if it appear that a writing was intended as a subscription, it 
 will usually be sufficient in the absence of some provision to the 
 contrary, no matter how informal it may be.^s Indeed, it would 
 seem that a parol subscription may be valid,^^ and merely accept- 
 ing and holding a certificate of stock may be sufficient to make 
 one liable as a stockholder,^'' or if he assumes the duties and 
 claims the rights of a stockholder, and acts as such with the 
 acquiescence and consent of the corporation,^* it is generally suf- 
 
 15 Woodruff V. McDonald, 33 
 . Ark. 97; Melvin v. Lamar Ins. Co., 
 
 80 111. 446, 22 Am. Rep. 199; Ot- 
 tawa &c. R. Co. V. Black, 79 111. 262 ; 
 Brownlee v. Ohio &c. R. Co., 18 
 Ind. 68; State v. Beck, 81 Ind. 500; 
 NuUon V. Clayton, 54 Iowa 425, 6 
 N. W. 685, yi Am. Rep. 21.3; Fry 
 V. Lexington &c. R. Co., 2 Met. 
 (Ky.) 314; Oler v. Baltimore &c. 
 R. Co., 41 Md. 583; Hagerstown 
 &c. Co. V. Creeger, 5 Harr. & J. 
 (Md.) 122, 9 Am. Dec. 495; Cay- 
 uga &c. R. Co. V. Kyle, 64 N. Y. 
 185; Phoenix &c. R. Co. v. Badger, 
 67 N. Y. 294; Ogdensburgh &c. R. 
 Co. V. Frost, 21 Barb. (N. Y.) 541; 
 Ashtabula &c. R. Co. v. Smith, 15 
 Ohio St. 328; Stuart v. Valley R. 
 Co., 32 Grat. (Va.) 146, and note 
 to Parker v. Thomas, 19 Ind. 213, 
 
 81 Am. Dec. 385, 395. But see Mc- 
 Clelland V. Whiteley, 11 Biss. (U. 
 S.) 444, 15 Fed. 322. 
 
 10 1 Thomp. Corp. (2d ed.) § 573; 
 Colfax &c. Co. V. Lyon, 69 Iowa 
 683, 29 N. W. 780; Rutenbeck v. 
 Hohn, 143 Iowa 13, 121 N. W. 698, 
 136 Am. St. 730, 731, and note on 
 p. 743, where additional authorities 
 are cited; Manchester St. R. Co. 
 V. Williams, 71 N. H. 312, 52 Atl. 
 461. See also Walter v. Merced 
 
 Academy, 126 Cal. 582, 59 Pac. 136; 
 Electric Tel. Co., In re, 3 De G. & 
 J. 170. If it may be performed 
 within a year, it is not within the 
 statute of frauds. BuUock v. Fal- 
 mouth &c. Co., 85 Ky. 184, 3 S. W. 
 129; Straughan v. Indianapolis &c. 
 R. Co., 38 Ind. 185. But see Pitts- 
 burgh &c. Co. V. Gazzam, 32 Pa. 
 St. 340; Vreeland v. New Jersey 
 &.C. Co., 29 N. J. Eq. 188; Fanning 
 V. Insurance Co., 37 Ohio St. 339, 
 41 Am. Rep. 517. And in a num- 
 ber of other cases a mere informal 
 offer or promise to subscribe has 
 been held insufficient. Notes in 93 
 Am. St. 339; 136 Am. St. 746. 
 
 "Upton V. Tribilcock, 91 U. S. 
 45, 23 L. ed. 203; Stutz v. Handley, 
 41 Fed. 531; McLaughlin v. Detroit 
 &c. R. Co., 8 Mich. 99. See also 
 Lane v. Brainerd, 30 Conn. S6S; 
 Clark V. Continental &c. Co., 57 
 Ind. 135; Nulton v. Clayton, 54 
 Iowa 425, 37 Am. Rep. 213, 6 N. 
 W. 635; Shickle v. Watts, 94 Mo. 
 410, 7 S. W. 274; Hamilton &c. 
 Co. V. Rice, 7 Barb. (N. Y.) 157; 
 Rensselaer &c. R. Co. v. Barton, 
 16 N. Y. 457. 
 
 IS Such acts operate as an estop- 
 pel to deny his membership in the 
 company. Sanger v. Upton, 91 U. 
 
219 SUBSCRIPTIONS , § 122 
 
 ficient to bind both him, and the corporation. But the charter 
 or statute may require subscriptions to be made in a specified 
 manner ; and, unless there is a subsequent ratification, express or 
 implied, by the parties, the statute must be substantially com- 
 plied with in order to hold the subscriber .^^ It has also been held 
 that an agreement by one to accept so many shares as should be 
 allotted to him, and sending to the company's banker a sufficient 
 deposit to cover the advancement required upon a subscription to 
 such shares, although it is acted upon by the corporation and a 
 certain number of shares are allotted, and the rest of his deposit 
 returned, is not sufficient to constitute him a stockholder until he 
 has accepted the shares, although his name is placed upon the 
 register as a stockholder, and he has notice that his certificates 
 of stock are ready for him, and he requests that they be for- 
 warded to him.2" 
 
 § 122 (104). Construction of contract of subscription. — Where 
 the place of performance is not specified in a contract made in one 
 state to subscribe for shares of stock of a railroad company in- 
 corporated under the laws of another state where it has its road 
 and treasury, it has been held that the contract is to be per- 
 formed in the latter starte and is to be construed by its laws.^^ It 
 
 S. S6, 2.1 L. ed. 220; Jewell v. Rock 235; Troy &c. R. Co. v. Tibbetts, 
 
 River &c. Co., 101 111. 57; Boston 18 Barb. (N. Y.) 297; Dutchess &c. 
 
 &c. R. Co, V. Wellington, 113 Mass. R. Co. v. Mabbett, 58 N. Y. 397; 
 
 T); Griswold v. Seligman, 72 Mo. Asbtabula &c. R. Co. v. Smith, 15 
 
 110; Wheeler v. Millar, 90 N. Y. Ohio St. .328; Bucher v. Dillsburg 
 
 353; Philadelphia &c. R. Co. v. &c. R. Co., Id Pa. St. 306; Union 
 
 Cowell, 28 Pa. St. 329, 70 Am. Dec. R. Co v. Sneed, 99 Tenn. 1, 41 S. 
 
 128; Cheltenham &c. R. Co. v. W. 364, 47 S. W. 89. But see Jewell 
 
 Daniel, 2 Q. B. 281. But see Shields v. Rock River &c. Co., 101 111. 57; 
 
 V. Casey, 155 Pa. St. 253, 25 Atl. Phoenix &c. Co. v. Badger, 67 N. 
 
 619. Y. 294; Buflfalo &c. R. Co. v. Gif- 
 
 19 Eppes V. Mississippi &c. R, ford, 87 N. Y. 294; and compare 
 
 Co., 35 Ala. 33; Reed v. Richmond Grangers' &c. Co. v. Vinson, 6 
 
 St. R. Co., 50 Ind. 342; Coppage v. Ore. 172. 
 
 Hutton, 124 Ind. 401, 24 N. E. 112, 20 New Brunswick &c. R. Co. v. 
 7 L. R. A, 591; Carlisle v. Saginaw Muggerid.a^e, 4 H. & N. 160. 
 Val. R. Co., n Mich. 315; Sedalia 21 Penobscot &c. R. Co. v. Bart- 
 Ac. R. Co. V. Wilkerson, 83 Mo. lett, 12 Gray (Mass.) 244, 71 Am. 
 
§123 
 
 RAILROADS 
 
 220 
 
 is a well-established rule that the construction of a written con- 
 tract is for the court, and this is true of a contract of subscrip- 
 tion.^^ But, on the other hand, questions of ratification and in- 
 tention are usually questions of fact for the jury, and it has been 
 held that the intention of an alleged subscriber to take stock as a 
 subscriber, or to ratify an insufficient subscription, or an act of 
 the corporation treating him as a subscriber, is a question of fact 
 for the jury.2* 
 
 § 123 (105). Contracts of subscription are several. — Contracts 
 of subscription, as usually made, are several and not joint.^* 
 This is true, ordinarily, even where they are joint in form, be- 
 cause it is clear from the nature of the contract that each sub- 
 scriber intends to bind himself alone for his own subscription, 
 and this intention must prevail notwithstanding the joint form 
 of the promise.^-' In accordance with this rule it has even been 
 
 Dec. 753. See generally as to con- 
 flict of laws and the law of the 
 state where the corporation is cre- 
 ated governing, note in 93 Am. St. 
 393, 394. 
 
 ^2 Monadnock R. Co. v. Felt, 52 
 N. H. 379; 1 Elliott Gen. Prac. § 431. 
 The object, as in other cases, 
 is to get at the intention of the 
 parties, and while parol evidence 
 is not admissible to vary the writ- 
 ten contract, the court in a proper 
 case may hear and receive evi- 
 dence of matters that enable it to 
 view "^he contract from the stand- 
 point of the parties at the time and 
 construe it "in the light of exist- 
 ing circumstances," or of practical 
 construction given it by the parties. 
 1 Thomp. Corp. (2d ed.) §§ 568, 
 569, and cases cited, especially 
 Cravens v. Eagle Cotton Mills Co., 
 120 Ind. 6, 21 N. E. 981, 16 Am. St. 
 298. 
 
 23 Philadelphia &c. R. Co. v. Co- 
 
 well, 28 Pa. St. 329, 70 Am. Dec. 
 128; Macomb v. Barcelona &c. 
 .A.ssn., 134 N. Y. 598, 31 N. E. 613: 
 Galveston &c. Co. v. Bolton, 46 
 Tex. 634. 
 
 24 Robertson v. March, 4 111. 198; 
 Herron v. Vance, 17 Ind. 595; 
 Hastings Lumber Co. v. Edwards, 
 188 Mass. 587, 75 N. E. 57; Miller 
 v. Preston, 4 N. Mex. 396, 17 Pac. 
 565; Whittlesey v. Frantz, 74 N. 
 Y. 456; Wayne &c. Inst. v. Smith, 
 36 Barb. (N. Y.) 576: Orynski v. 
 Lonstaunan (Tex.), 15 S. W. 674; 
 Connecticut &c. R. Co. v. Bailey, 
 24 Vt. 465, 58 Am. Dec. 181; Gib- 
 bons V. Grinsel, 79 Wis. 365, 48 N. 
 W. 255; 2 Elliott Cont. §§ 1480, 
 1481. 
 
 252 Elliott Contracts § 1480; Davis 
 &c. Co. v. Barber, 51 Fed. 148; Price 
 V. Grand Rapids &c. R. Co., 18 Ind. 
 137; Landwerlen v. Wheeler, 106 
 Ind. 523, 5 N. E. 888; Hall v. 
 Thayer, 12 Met. fMass.) 130; Davis 
 
221 
 
 SUBSCRIPTIONS 
 
 §124 
 
 held that where one person makes two subscriptions in two differ- 
 ent capacities, that is, as an individual and as a trustee, a separate 
 action must be brought to enforce each subscription.^^ 
 
 § 124 (106). Effect of statutes requiring cash deposit to com- 
 plete subscription. — Several of the states by general statute re- 
 quire that a certain sum shall be paid upon each share of stock 
 at the time of subscribing, at least where the subscription is made 
 before organization, and such a provision is frequently found in 
 special charters and in by-laws. It is generally held that an en- 
 tire omission to make such a payment at the time of subscribing 
 will not render the subscription absolutely void so that the sub- 
 scriber can defend against payment of it for this cause,^^ since 
 this would be permiitting him to take advantage of his own wrong 
 in failing to pay.^^ The theory of these cases is that the require- 
 ment is made for the benefit of the corporation and that it may 
 waive the right to avoid the subscription for this cause,*" and 
 
 V. Belford, 70 Mich. 120, 37 N. W. 
 919; Gibbons v. Bente, SI Minn. 
 499, So N. W. 756, 22 L. R. A. 80, 
 and note. But see Davis v. Shafer, 
 50 Fed. 764; Davis v. Bronson, 2 
 N. Dak. 300, 50 N. W. 836, 16 L. R. 
 A. 655, 33 Am. St. 783; Darnell v. 
 Lyon, 85 Tex. 4SS, 22 S. W. 304, 
 960; Gait v. .Swain, 9 Grat. (Va.) 
 633, 60 Am. Dec. 311. 
 
 2« Erie &c. R. Co. v. Patrick, 2 
 Abb. .\pp. Cas. 72, 2 Keyes (N. Y.) 
 2S6. 
 
 2S Selma &c. R. Co. v. Round- 
 tree, 7 Ala. 670; Mitchell v. Rome 
 R. Co., 17 Ga. 574; Illinois River 
 R. Co. V. Zimmer, 20 111. 6S4; 
 Wight V. Shelby R. Co., 55 Ky. 4, 
 63 Am. Dec. S22; Vicksburg &c. 
 R. Co. V. McKean, 12 La. Ann. 638 ; 
 Oler V. Baltimore &c. R. Co., 41 
 Md. 583; Webb v. Baltimore &c. 
 R. Co., 77 Md. 92, 26 Atl. 113, 39 Am. 
 
 St. 396; Minneapolis. &c. R. Co. 
 v. Bassett, 20 Minn. 535, 18 Am. 
 Rep. 376; Barrington v. Mississippi 
 Cent. R. Co., 32 Miss. 370; Henry 
 v. Vermillion &c. R. Co., 17 Ohio 
 187; Spartanburg &c. R. Co. v. 
 Ezell, 14 S Car. 281; Pittsburgh 
 &c. R. Co. v. Applegate, 21 W. 
 Va. 172; East Gloucestershire R. 
 Co. V. Bartholomew, L. R. 3 Exch. 
 IS. See also 1 Thomp. Corp. (2d 
 ed.), §564 
 
 29 Haywood &c. R. Co. v. Bryan, 
 6 Jones L. (N. Car.) 82. 
 
 3" Piscataqua Ferry Co. v. Jones, 
 39 N. H. 491; Lake Ontario &c. 
 R. Co. v. Mason, 16 N. Y. 451; 
 Garrett v. Dillsburg &c. R. Co., 78 
 Pa. St. 465. Cases cited in two 
 preceding notes. But see McRea 
 v. Russell, 12 Ired. (N. Car.) 224, 
 where it is said that the provision 
 "was, moreover, meant to protect 
 
§124 
 
 RAILROADS 
 
 222 
 
 enforce payment thereof, notwithstanding the fact that the 
 statute, if literally construed, would seem to make a cash deposit 
 essential to the validity of the subscription. In some of the 
 states, however, this defense is allowed, because of the stringent 
 language of the statute,^^ but even in such states it is strongly 
 disapproved,^^ and is usually restricted to the narrowest possible 
 limits.^* Thus a few subscribers have been permitted to pay 
 the percentage for all f* payment by check,^^ or by promissory 
 note,^® or in services rendered to the company under a contract,^'^ 
 has been held a sufficient compliance with the statute ; and it has 
 
 men from the consequences of 
 making such subscriptions under 
 the influence of momentary excite- 
 ment, which they could not fulfill." 
 31 People V. Chambers, 42 Cal. 
 201; Wood V. Coosa &c. R. Co., 
 32 Ga. 273; Taggart v. Western 
 Md. R. Co., 24 Md. 563, 89 Am. 
 Dec. 760 n; New York &c. R. Co. 
 V. Van Horn,- 57 N. Y. 473: Hi- 
 bernia T. Cor. v. Henderson, 8 
 Serg. & R. (Pa.) 219, 11 Am. Dec. 
 593; Fiser v. Mississippi &c. R. Co., 
 32 Miss. 359; Charlotte &c. R. Co. 
 V. Blakely, 3 Strobh. Eq. (S. Car.) 
 245. See also 1 Thomp. Corp. (2d 
 ed.), § 564. If the requirement is 
 merely in the by-laws, and not in 
 the charter or statute, failure to 
 comply with it will not vitiate the 
 subscription so as to prevent its 
 enforcement by the company. 
 Water Valley &c. Co. v. Seaman, 
 53 Miss. 655; Piscataqua &c. Co. 
 V. Jones, 39 N. H. 491. 
 
 32 Rensselaer &c. R. Co. v. Bar- 
 ton, 16 N. Y. 457, note; Erie &c. 
 R. Co. v. Brown, 25 Pa. St. 156. In 
 Wood v. Coosa &c. R. Co.. 32 Ga. 
 273, the court based its decision 
 upon the positive language of the 
 statute that a subscription without 
 
 a preliminary payment should be 
 void. 
 
 33 See note to Parker v. Thomas, 
 81 Am. Dec. 385, 397, 398; Lee v. 
 Cutrer, 96 Miss. 355, 51 So. 808, 27 
 L. R. A. (N. S.) 315. 
 
 34 Ogdensburgh &c. R. Co. v. 
 Wooley, 3 Abb. Ct. of App. 398. 
 See also Mississippi &c. R. Co. v. 
 Harris, 36 Miss. 17. 
 
 3 Si Syracuse &c. R. Co. v. Gere, 
 4 Him (N. Y.) 392; Staten Island 
 &c. R. Co., Re, 57 Hun (N. Y.) 422, 
 where the check was certified; 
 People V. Stockton &c. R. Co., 45 
 Cal. 306, 13 Am. Rep. 178, when it 
 was shown that the check would 
 have been paid if presented. 
 
 36 Ogdensburgh &c. R. Co. v. 
 Wooley, 3 Abb. Ct. of App. 398; 
 Greenville &c. R. Co. v. Wood- 
 sides, 5 Rich. L. (N. Car.) 145, 55 
 Am. Dec. 708; Vermont Cent. R. 
 Co. V. Clayes, 21 Vt. 30, 35. Con- 
 tra, Boyd v. Peach Bottohi R. Co., 
 90 Pa. St. 169; Leighty v. Susque- 
 hanna &c. Co., 14 Serg. & R. (Pa.) 
 434 
 
 37 Beach v. Smith, 30 N. Y. 116, 
 affirming same case, 28 Barb. (N. 
 Y.) 254. But see New York &c. 
 R. Co. V. Hunt, 39 Conn. 75. 
 
223 SUBSCRIPTIONS § 125 
 
 been held that actual payment at any period after subscription 
 with intent to effectuate and complete the subscription is suf- 
 ficient.*^ Indeed, acts indicating ' that the subscriber holds him- 
 self to be a shareholder may amount to a waiver of this de- 
 fense.** And the statute is held to apply only to subscriptions 
 expressly mentioned in it, and not to embrace conditional sub- 
 scriptions,*" nor subscriptions taken before incorporation,*^ 
 where the language of the statute is general as to subscriptions 
 given to the corporation. So, where the statute expressly re- 
 ferred only to subscriptions taken by the commissioners, the pro- 
 vision was held to apply to no others.*^ 
 
 § 125 (107). Who may subscribe for stock. — In general any 
 one may subscribe for stock who is competent to enter into an or- 
 dinary contract.** Married women are enabled by statute iii 
 England** arid generally in the United States,*^ to become sub- 
 scribers for stock. An infant's subscription is subject to the 
 same rules which apply to his other contracts.*^ And the gen- 
 eral rules applicable to agency govern contracts made by the 
 
 3B Barrhigton v. Mississippi Cent. Pennsylvania act of 1868. See also 
 
 R. Co., 32 Miss. 370; Black River Minneapolis &c. R. Co. v. Bassett, 
 
 &c. R. Co. V. Clarke, 25 N. Y. 208. 20 Minn. S3S, 18 Am. Rep. 376; 
 
 See also Hall v. Selma &c. R. Co., .6 Lake Ontario &c. R. Co. v. Mason, 
 
 Ala. 741. 16 N. Y. 457. 
 
 S9Erie &c. R. Co. v. Brown, 25 *2 Philadelphia &c. R. Co. v. 
 
 Pa. St. 156; Everhart v. West Hickman, 28 Pa. St. 318. 
 
 Chester &c. R. Co., 28 Pa. St. 339. *31 Thomp. Corp. (2d. ed.), § 640. 
 
 See also Cole v. Satsop R. Co., 9 ** Mrs. Matthewman's Case, L. 
 
 Wash. 487, Z7 Pac. 700, 43 Am. St. R. 3 Eq. 781; Pugh & Sharman's 
 
 858, and note to the effect that it Case, L. R. 13 Eq. 566. 
 
 is no defense to subscribers as 45 1 Thomp. Corp. (2d ed.), §643; 
 
 against creditors, that part of the Witters v. Sowles, 32 Fed. 767. 
 
 necessary amount is illegally sub- ^^ See Mitchell's Case, L. R. 9 
 
 scribed by others, if they knew the Eq. 363; Ebbett's Case, L. R. 5 
 
 facts at the time they subscribed. Chan. 302; Baker's Case, L. R. 7 
 
 40 Hanover &c. R. Co. v. Halde- Chan. 115; Dublin &c. R. Co. v. 
 man, 82 Pa. St. 36. Black, 8 Exch. 181; 1 Thomp. Corp. 
 
 41 Garrett v. Dillsburg &c. R. (2d ed.), §642. 
 Co., 78 Pa. St. 465, construing 
 
§125 
 
 RAILROADS 
 
 224 
 
 agents of the subscriber*' or of the corporation,** or by persons 
 assuming to act as such in case their acts are subsequently rati- 
 fied.*® The corporation itself cannot make a valid subscription 
 to its own stock.^" and one corporation cannot, as a general rule, 
 subscribe for stock in another corporation'^ unless making such 
 a subscription is within the powers, express or implied, con- 
 ferred by its charter or by statute.^^ j^ has been held, however, 
 that a construction company has implied power to take stock in 
 a railroad which it is building.^* Commissioners to take sub- 
 scriptions^* and corporate officers may take stock where the sub- 
 
 *^ Musgrave v. Morrison, 54 Md. 
 161; New York &c. Co., In re, 35 
 Hun (N. Y.) 220; New York &c. 
 R. Co., In re, 99 N. Y. 12; Rhey 
 V. Evensburgh &c. Co., 27 Pa. St. 
 261 • Merrick &c. Co. v. Philadel- 
 phia &c. Co., 115 Pa. 314, 8 Atl. 
 794; 1 Thomp. Corp. (2d ed.) § 644. 
 It has been held that a subscrip- 
 tion by a trustee of an undisclosed 
 principal is binding on the trus- 
 tee. State V. Superior Court, 45 
 Wash. 321, 88 Pac. 332. 
 
 *8 Walker v. Mobile &c. R. Co., 
 34 Miss. 245. 
 
 *>) Judah V. American &c. Co., 4 
 Ind. 333; Musgrave v. Morrison, 
 54 Md. 161; Mississippi &c. R. Co. 
 V. Harris, 36 Miss. 17; Philadelphia 
 &c. R. Co. V. Cowell, 28 Pa. St. 
 .329, 70 Am. Dec. 128; Mobile &c. 
 R, Co. V. Yandal, 5 Sneed (Tenn.) 
 294; 1 Thomp. Corp. (2d ed.) § 
 645. 
 
 5'J Holladay v. Elliott, 8 Ore. 84; 
 Allibone v. Hager, 46 Pa. St. 48; 
 Preston v. Grand Colliery &c. Co., 
 11 Sim. 327. See also Johnston v. 
 Allis, 71 Conn. 207, 41 Atl. 816; 
 Martin v. Ohio Stove Co., 78 111. 
 App. 105; Oliver v. Rahway &c. 
 Co., 64 N. J. Eq. 596, 54 Atl. 460. 
 
 51 Maunsell v. Midland &c. R. 
 Co., 1 Hem. & M. 130; Zabriskie 
 v. Railroad Co., 23 How. (U. S.) 
 381, 16 L. ed. 488; Merz Capsule 
 Co. v. United States &c. Co., 67 
 Fed. 414; Peo^ple v. .Chicago Gas 
 Trust Co., 130 111. 268, 22 N. E. 798, 
 17 Am. St. Rep. 319; Nebraska 
 Shirt Co. v. Horton, 3 Nebr. 888, 93 
 N. W. 225; Berry v. Yates, 24 
 Barb. (N. Y.) 199, 410; Franklin 
 Bank v. Commercial Bank, ,36 Ohio 
 St. 350, 38 Am. Rep. 594; Valley R. 
 Co. V. Lake Erie Iron Co., 46 Ohio 
 St. 44, 18 N. E. 486, 1 L. R. A. 412. 
 :<■! vVhite v. Syracuse &c. R. Co., 
 14 Barb. N. Y. 559. See Zabriskie 
 v. Cleveland &c. R. Co., 23 How. 
 (U. S.) 381, 16 L. ed. 488; Mat- 
 thews V. Murchison, 17 Fed. 760; 
 Ryan v. Leavenworth &c. R. Co., 
 21 Kans. 365; Mayor &c. v. Balti- 
 more &c. R. Co., 2l' Md. 50; Pear- 
 son V. Concord &c. R. Co., 62 N. 
 H. 537, 13 Am. St. 590, 13 Am. & 
 Eng. R. Cas. 102. 
 
 53 Rochester &c. R. Co., In re, 
 45 Hun (N. Y.) 126. 
 
 51 Walker v. Devereaux, 4 Paige 
 (N. Y.) 229. See also Cheraw &c. 
 R. Co. V. White, 14 S. Car. 51. 
 
225 
 
 SUBSCRIPTIONS 
 
 §126 
 
 scriptions are fairly made and no advantage is taken of the public 
 or of other subscribers.^^ So municipal corporations are fre- 
 quently given authority by the legislature to aid railroads by 
 subscribing to their stock. ^^ 
 
 § 126 (108). Presumption that one whose name is subscribed 
 is a stockholder. — The appearance of a person's name on the 
 books of a company as a subscriber or stockholder,^'^ or its ap- 
 pearance on the original subscription paper,"^ or books,®* or its 
 entry in the books kept by commissioners*" to take subscriptions 
 is said to be prima facie evidence that he is a stockholder."^ But 
 it is not conclusive unless shown to have been placed there by 
 himself or by his authority. "^ Where the books are lost or de- 
 stroyed, a certified copy of the list of stockholders from the files 
 or records of a public office is held to be evidence in like manner 
 as the books themselves, if such list is required by law to be so 
 
 5» Sims V. Street R. Co., 37 Qhio 
 St. .'556. .See Brower v. Passenger 
 R. Co., 3 Phila. (Pa.) 161. 
 
 ■'« Selma &c. R. Co., Ex parte, 
 45 Ala. 696, 6 Am. Rep. 722; Sharp- 
 less V. Mayor, 21 Pa. St. 147; Com- 
 missioners V. Miller, 7 Kans. 479, 
 12 Am. Rep. 425, where the au- 
 thorities are collected and re- 
 viewed; 1 Thomp. Corp. (2d ed.) 
 §§ 662, 671, et seq. Post, § 1070, et 
 seq. So, a state may subscribe. 
 Curran v. Arkansas, 15 How. (U. 
 S.) 304, 14 L. ed. 705; Brady v. 
 State, 26 Md. 290; Baltimore &c. 
 R. Co. V. State, 36 Md. 519. 
 
 STTurnbiill v. Payson, 95 U. S. 
 418, 24 L. ed. 437; Iowa &c. R. 
 Co. V. Perkins, 28 Iowa 281; Hoag- 
 land V. Bell, 36 Barb. (N. Y.) S7; 
 Pittsburgh &c, R. Co. v. Apple- 
 gate, 21 W. Va. 172. 
 
 SI* Partridge v. Badger, 25 Barb. 
 (N. Y.) 146: 
 
 ■"'» Marlborough &c. R. Co. v. 
 Arnold, 75 Mass. 159, 69 Am. Dec. 
 279; Rockville &c. Co. v. Van Ness, 
 2 Cranch. C. C. (U. S.) 449, fed. 
 Cas. No. 11986. 
 
 «o Wood V. Coosa &c. R. Co., 32 
 Ga. 21 i. 
 
 81 But see, on this general sub- 
 ject, 3 Elliott Ev. § 1946; Harrison 
 V. Remington &c. Co., 140 Fed. 
 385, 402; Chesapeake &c. R. Co. v. 
 Deepwater, 57 W. Va. 641, SO S. 
 E. 890, 906. The presumption aris- 
 ing: from his name being entered in 
 the books may be overcome by 
 proof. Mudgett v. Horrell, 33 Cal. 
 25 
 
 «"! New Brunswick &c. R. Co. v. 
 MUggeridsje, 4 H. & N. 160; Water- 
 fofd &c. R. Co. V. Pidcock, 8 Exch. 
 21^. 
 
 S — Ell. Railroads I 
 
§127 
 
 RAILROADS 
 
 226 
 
 filed or recorded,®^ but not otherwise.** The erasure of a name 
 from a subscription list by the subscriber will not necessarily end 
 his liability,®^ and the fact that he became bound may be proved 
 by parol, where the written evidences of that fact have been lost 
 or destroyed.*^ 
 
 § 127 (109). Implied promise to pay subscription — Considera- 
 tion. — An action by the corporation to recover the amount sub- 
 scribed may be maintained upon the implied promise to pay con- 
 tained in a subscription to its capital stock,®'' and the right to 
 membership in the corporation, with the probable advantages to 
 be derived from such membership, is a sufficient consideration to 
 support the action.^^ Indeed, a consideration arising from the 
 
 63 Cleveland v. Burnham, SS Wis. 
 598, 13 N. W. 677, 680. 
 
 64 Troy &c. R. Co. v. Kerr, 17 
 Barb. (N. Y.) 581, 600. 
 
 65 Johnson v. Wabash &c. Co., 
 16 Ind. 389; Bordentown v. Imlay, 
 4 N. J. L. 285; Greer v. Chartiers 
 &c. R, Co., 96 Pa. St. 391, 42 Am. 
 Rep. 548. Bui see Burt v. Farrar, 
 24 Barb. (N. Y.) 518, to the effect 
 that a subscriber having access to 
 the certificate before it is filed may 
 erase or modify his subscription 
 even though he has previously in- 
 duced others to subscribe. 
 
 66 Galveston Hotel Co. v. Bolton, 
 46 Tex. 633; Haynes v. Brown, 36 
 N. H. 545. 
 
 67 Upton v. Tribilcock, 91 U. S. 
 45, 23 L. ed. 203; Hawley v. Upton, 
 102 U. S. 314, 26 L. ed. 179; Selma 
 &c. R. Co. V. Tipton, 5 Ala. 787, 
 39 Am. Dec. 344; Ventura &c. R. 
 Co. V. Collins (Cai.), 46 Pac. 287; 
 Branch v. Augusta &c. Works, 95 
 Ga. 573, 23 S. E. 128; note to 
 Parker v. Thomas, 19 Ind. 213, 81 
 Am. Dec. 385, 393, 394; Miller v. 
 Wild Cat &c. Co., 52 Ind. 51; Cop- 
 
 page V. Hutton, 124 Ind. 401, 24 
 N. E. 112, 7 L. R. A. 591; Atlantic 
 &c. Co. V. Andrews, 97 Mich. 466, 
 56 N. W. 858; Lake Ontario &c. 
 R. Co. V. Mason, 16 N. Y. 451; 
 Greenville &c. R. Co. v. Cathcart, 
 4 Rich. (S. Car.) 89; Chase v. Ten- 
 nessee &c, R. Co., 5 Lea (Tenn.) 
 415; Windsor Electric Light Co. v. 
 Tandy, 66 Vt. 248, 29 Atl. 248, 44 
 Am. St. 838; 1 Thomp. Corp. (2d 
 ed.) § 576; note in 93 Am. St. 357, 
 358, 359, where this is stated to be 
 the rule supported by the weight 
 of .authority. A few courts, how- 
 ever, seem to require an express, 
 promise. See note last above re- 
 ferred to in 93 Am. St. 356, 357, for 
 citation of such cases. 
 
 6« Bullock V. Falmouth &c. Co., 
 85 Ky. 184, 3 S. W. 129; Selma &c. 
 R. Co. V. Tipton, S Ala. 787, 39 Am. 
 Dec. 344; New Albany &c. R. Co. 
 V. Fields, 10 Ind. 187; St. Paul &c. 
 R. Co. V. Robbins, 23 Minn. 439; 
 ^yalter A. Woods Harvester Co. v. 
 Robbins, 56 Minn. 48, 57 N. W. 317; 
 Osborn v. Crosby, 63 N. H. 583; 
 Lake Ontario &c. R. Co. v. Mason, 
 
227 
 
 SUBSCRIPTIONS 
 
 §128 
 
 mutual obligations entered into by the subscribers,®^ will, it 
 seems, be conclusively implied by law from the fact of the sub- 
 scription.'"' A subscription to the capital stock of a corporation 
 amounts to an agreement to take the stock at its par value, and 
 where a land-owner agrees to take the stock of a railroad com- 
 pany in payment of damages to his land caused by the construc- 
 tion of the road, it has been held that he cannot demand the 
 stock at its market value J ^ 
 
 §128 (110). Payment of subscription — Trust fund doctrine. — 
 As already stated, a subscription to corporate stock is, in effect, 
 a contract to pay for it in the mode prescribed,' although it con- 
 tains no express promise to pay.'^^ The fund contributed and 
 agreed to be contributed by the stockholders constitutes, in 
 equity, a trust fund for the benefit or security of the corporate 
 creditors,'^* and the general rule, therefore, is that subscriptions 
 
 16 N. Y. 451. In most of the New 
 England States, however, it is held 
 that the only remedy available to 
 the corporation is to declare the 
 shares forfeited, unless the sub- 
 scriber expressly promises to pay, 
 or the charter expressly provides 
 that a subscription on his part 
 shall bind him to pay for the shares 
 subscribed. Russell v. Bristol, 49 
 Conn. 251; Belfast &c. R. Co. v. 
 Moore, 60 Maine 561; Boston &c. 
 R. Co; V. Wellington, 113 Mass. 79; 
 White &c. R. Co. v. Eastman, 34 
 N. H. 124; Connecticut &c. R. Co. 
 V. Bailey, 24 Vt. 465, 58 Am. Dec. 
 181. 
 
 69 West V. Crawford, 80 Cal. 19. 
 21 Pac. 1123; Twin Creek &c. Co. 
 V. Lancaster, 79 Ky. 552; Northern 
 &c. R. Co. V. Miller, 10 Barb. (N. 
 Y.) 260; Belton Compress Co. v. 
 Saunders, 70 Tex. 699, 6 S. W. 134. 
 But free' Cottage' &c. Church v. 
 
 Kendall, 121 Mass. 528, 23 Am. 
 Rep. 286. 
 
 '^o East Tennessee &c. R. Co. v. 
 Gammon, 5 Sneed (Tenn.) 567. 
 
 ■^1 Hoffman v. Bloomsburg &c 
 R. Co., 157 Pa. St. 174, 27 Atl. 564. 
 
 '7 2 Ante, § 127; 1 Cook Corp. (7th. 
 ed.), § 52, et seq; Shattuck v. Robbins, 
 68 N. H. 565 ; Howley v. Upton, 102 
 U; S. 314 ; note to Winston v. Brooks, 
 129 Til. 64, 21 N. E. 514, 4 L. R. A. 
 507. 
 
 73 Sawyer v. Hoag, 17 Wall. (U. 
 S.) 610, 21 L. ed. 731; Upton v. Tri- 
 bilcock, 91 U. S. 45, 23 L. ed. 203; 
 Graham v. Railroad Co., 102 U. S. 
 148, 161, 26 L. ed. 106; Camden v. 
 Stewart, 144 U. S. 104, 12 Sup. Ct. 
 585, 36 L. ed. 363 ; Wood v. Dummer, 
 3 Mason (U. S.) 308, Fed. Cas. No. 
 17944 ; John W. Cooney Co. v. Arling- 
 ton Hotel Co., (Del. Ch.) 101 Atl. 
 879; Goodman v. White, 174 N. Car. 
 399, 93 S. E 906; Germantown 
 
§128 
 
 RAILROADS 
 
 228 
 
 must be paid in money or "money's worth.'"'* But this does not 
 mean that stock must necessarily be paid for in cash at the time 
 it is issued.""' Unless oithervvise provided, payment may be 
 
 Pass. R. V. Filler, 60 Pa. St. 124, 
 100 Am. Dec. 546, and note; Adler 
 V. Milwaukee &c. Co., 13 Wis. S7; 
 2 Thomp. Corp. § 1569. This 
 doctrine, which is not found in the 
 old English cases, is now too well 
 settled in this country to need the 
 citation of all the authorities. They 
 are collected and reviewed in the 
 note to Thompson v. Reno Sav. 
 Bank, 19 Nev. 103, 7 Pac. ,68, 3 
 Am. St. 797, 808. Sawyer v. Hoag, 
 17 Wall (U. S.) 610; Upton v. Tre- 
 bilcock, 91 U. S. 45. See also 
 Perkins v. Cowles, 157 Cal. 625, 
 108 Pac. 711, 30 L. R. A. (N. S.) 
 283 n, 137 Am. St. 158, and notes; 
 Niles V. Olszak, 87 Ohio St. 229, 
 100 N. E. 820, L. R. A. 1918E, 238, 
 and note; note in 5 L. R. A. 649, 
 46 L. R. A. (N. S.) 440, 448, and 
 Easton Nat. Bank v. American 
 Brick &c. Co., 70' N. J. 732, 64 Atl. 
 917, 8 L. R. A. (N. S.) 271. For 
 explanations of the general doc- 
 trine and limitations upon another 
 phase of it see Hollins v. Brier- 
 field &c. Co, 150 U. S. 371, 14 Sup. 
 Ct. 127, 37 L. ed. 1113; Chatta- 
 nooga &c. R. Co. V. Evans. 66 Fed. 
 809; O'Bear &c, Co. v. Volfer, 106 
 Ala. 205, 17 So. 525, 28 L. R. A. 
 707, 54 Am. St. 31; Worthen v. 
 Griffith, 59 Ark. 562, 28 S. W. 286, 
 43 Am. St. 50, and note; First Nat. 
 Bank v. Dovetail &c. Co., 143 Ind. 
 550, 40 N. E. 810; Henderson v. 
 Indiana Trust Co., 143 Ind. 561, 40 
 N. E. 516. The doctrine has been 
 criticised in some respects, but the 
 
 same result has been reached on 
 other principles. See Macbeth v. 
 Banfield, 45 Ore. 553, 78 Pac. 693, 
 106 Am. St. 670, 677; Hospes v. 
 Northwestern &c. Co., 48 Minn. 
 174, 50 N. W. 1117, 15 L. R. A. 
 470, 31 Am. St. 637; Holcombe v. 
 Trenton White City Co., 80 N. J. 
 Eq. 122, 82 Atl. 618. 
 
 ■''• Drummond's case, L. R. 4 Ch. 
 772; note to Winston v. Brooks, 
 129 111. 64, 21 N. E. 514, 4 L. R. 
 A. 507; Wetherbee v. Baker, 35 N. 
 J. Eq. 501; Marshall Foundry Co. 
 V. Killian, 99 N. Car. 501, 6 S. E. 
 680, 6 Am. St. 539. See also John 
 W. Cooney Co. v. Arlington Hotel 
 Co., (Del. Ch.) 101 Atl. 879; and 
 likewise notes in 51 L. R. A. (N. 
 S.) 56, 52 L. R. A. (N. S.) 454, 
 and L. R. A. 1916E, 570. 
 
 '5 "Where a share is issued, if 
 the price be paid in cash, so much 
 is added to the working capital, 
 thereby enhancing the creditor's 
 security. If the price be not paid, 
 the purchaser's indebtedness may 
 be looked to for a like effect." 
 Chouteau v. Dean, 7 Mo. App; 210, 
 214. 'Unpaid stock is as much a 
 part of this pledge (that the cap- 
 ital stock shall constitute a trust 
 fund for the creditor), and as much 
 a part o1 the assets of the com- 
 pany, as the cash which has been 
 paid in upon it, creditors have the 
 same right to look to it as to any- 
 thing else, and tlie same right to 
 insist upon its payment as upon 
 the payment of any other debt due 
 
229 
 
 SUBSCRIPTIONS 
 
 §128 
 
 made in notes/" checks,''^ or municipal bonds,^* where the mu- 
 nicipality is authorized to issue them for that purpose. So, it 
 may be made in labor or services^® And property which is nec- 
 essary to the corporation in carrying out its legitimate business, 
 or which it is authorized to purchase, may liliewise be received 
 in payment.*" It has also been held that stock may be is'sucd in 
 
 the company." Sanger v. Upton, 
 91 U. S. 56, 60, 61, 23. L. ed. 220, 
 and authorities there cited. 
 
 T6 Goodrich v. Reynolds, 31 111. 
 490, 83 Am. Dec. 240; Pacific Trust 
 Co. V. Dorsey, 72 Cal. SS, 12 Pac. 
 49; Stoddard v. Shetucket &c. Co., 
 34 Conn. S42; Hardy v. Merri- 
 weather, 14 Ind. 203; Ogdensburg 
 &c. R. Co. V. Wooley, 3 Abb. App. 
 Dec. (N. Y.) 398; Vermont Cen- 
 tral R. Co. V. Clayes, 21 Vt. 30; 
 Blunt V, Walker, 11 Wis. 334, 78 
 Am. Dec. 709. And see Mitchell 
 V. Beckman, 64 Cal. 117, 28 Pac. 
 110; McDowell v. Chicago Steel 
 Works, 124 III. 491, 16 N. E. 854, 7 
 Am. St. 381; Union Cent. &c. Co. 
 V. Curtis, 35 Ohio St. 343; Doak v. 
 Stahlman (Tcnn.), 58 S. W. 741. 
 
 'J'< People V. Stockton &c. R. Co., 
 45 Cal. 306, 13 Am. Rep. 178; Syra- 
 cuse &c. R. Co. V Gere, 4 Hun (N. 
 Y.) 392; Staten Island &c. R. Co., 
 In re, 37 Hun (N. Y.) 422. 
 
 TsPost, chapter on Municipal Se- 
 curities. See also Southern &c. Co. 
 V. Lanier, 5 Fla. 110, 58 Am. Dec. 
 448; Valk v. Crandall, 1 Sandf. Ch. 
 (N. Y.) 179; Leavitt v. Pell, 27 Barb. 
 (N. Y.) 322. 5 Thomp. Corp. (2d. 
 ed.), § 6689. 
 
 '9 Lake .St. El. R. Co. v. Ziegler, 
 99 Fed. 114; Cincinnati &c. R. Co. 
 V. Clarkson, 7 Ind. 595; Liebke v. 
 
 Knapp, 79 Mo. 22, 49 Am. Rep. 212; 
 Rich V. State Nat. Bank, 7 Nebr. 
 201, 29 Am. Rep. 382; State v. Tim- 
 ken, 48 N. J. L. 87, 2 Atl. 783; 
 Beach v. Smith, 30 N. Y. 116; La- 
 Crosse &c. Harvester Co. v. God- 
 dard, 114 Wis. 610, 91 N. W. 225, 
 and note in 19 Am. and Eng. Corp. 
 Cas. 258. Upon principle, where 
 the corporation has authority to 
 pay Its orificers salaries or compen- 
 sation for special services, there 
 seems to be no valid reason why 
 the indebtedness of the corpora- 
 tion to them may not be used to 
 pay for stock issued to him it good 
 faith. 4 Thomp. Corp. (2nd ed.) 
 § 3952. But see Daniell, Ex parte, 
 1 De G. & J. 372. 
 
 80 Branch v. Jesup, 106 U. S. 468, 
 1 Sup. Ct. 49S, 27 L. ed. 279; 
 Frenkel v. Hudson, 82 Ala. 158, 60 
 Am. Rep. 736; Ohio &c. R. Co. v. 
 Cramer, 23 Ind. 490; Coffin v. 
 Ransdall, 110 Ind. 417, 11 N. E. 20; 
 New Haven Nail Co. v. Linden 
 Spring Co., 142 Mass. 349, 7 N. E. 
 773; Liebke v. Knapp, 79 Mo. 22, 
 49 Am. Rep. 212; Donald v. Amer- 
 ican &c. Co., 62 N. J. Eq. 729, 48 
 Atl. 771, 1116; Beach v. Smith, 30 
 N. Y. 116; Philadelphia &c. R. Co. 
 V. Hickman, 28 Pa. St. 318; Bed- 
 ford County V. Nashville &c. R. 
 Co., 14 Lea (Tenn.) 525; Clark v. 
 Farrirgton, 11 Wis. 306. Contra, 
 
§128 
 
 RAILROADS 
 
 230 
 
 satisfaction of a debt due from the corporation.^^ But the trans- 
 action must be bona fide, and the overvaluation of services or 
 property received in payment may be so grossly excessive as to 
 raise a presumption of fraud. ^^ Yet the courts will usually treat 
 that as a payment which the parties have agreed shall be pay- 
 ment,** and it will make no difference, in the absence of fraud, 
 that the property afterwards turns out to be of less value" than 
 was supposed.** The doctrine which we have been considering 
 would seem to prevent a corporation, at least as against credi- 
 tors, from issuing paid-up stock and releasing the subscriber 
 upon payment in money of less than its par value f^ but where all 
 
 Henry v. Vermilion &c. R. Co., 17 
 Ohio 187; Neuse &c. Co. v. Com- 
 missioners, 6 Jones (N. Car.) 204. 
 
 81 Lehman v. New York &c. R. 
 Co., 2 Sandf. (N. Y.) 39; Reed v. 
 Hayt, 51 N. Y. 121; Carr v. Le- 
 Fevre, 27 Pa. St. 413; Appleyard's 
 Case, 49 L. J. Ch. 290; Woodfall's 
 Case,. 3 DeG. & Sm. 63. So, it 
 has been held that it may be is- 
 sued in payment of damages. Phila- 
 delphia &c. R. Co. V. Hickman, 28 
 Pa.' St. 318. 
 
 82 Elyton Land Co. v. Birming- 
 ham &c. Co., 92 Ala. 407, 9 So. 129, 
 12 L. R. A. 507, 25 Am. St. 65; 
 Boulton &c. Co. V. Mills, 78 Iowa 
 460, 43 N. W. 290, 5 L. R. A. 64yn, 
 6 R. & Corp. L. J. 417; Boynton 
 V. .\ndrews, 63 N. Y. 93; Douglass 
 V. Ireland, 73 N. Y. 100; Carr v. 
 LeFevre, 27 Pa. St. 413. See also 
 Osgood V, King, 42 Iowa 478; 
 Chishclm v. Forny, 65 Iowa 333, 21 
 N. W. 664; National Tube Works 
 Co. V. Gilfillan, 124 N. Y. 302, 26 
 N. E. 538. And in a few states the 
 property must be taken at its true 
 value in order to amount to a com- 
 plete payment as against a creditor. 
 
 Libby v. Tobey, 82 Maine 397, 19 
 Atl. 904; Shickle v. Watts, 94 Mo. 
 410, 7 S. W. 274, 2 Thomp. Corp. 
 § 1616. 
 
 s^iPhelan v. Hazard, 5 Dill. (U. 
 S.) 45, 6 Cent. L. J. 109, Fed. Cas'. 
 No. 11068; Peck v. Coalfield Coal 
 Co., 11 111. App. 88; Coffin v. Rans- 
 d«ll, 110 Ind. 417, 11 N. E. 20; 
 Brant v. Ehlen. 59 Md. 1. 
 
 8* Coit V. North Carolina &c. 
 Co., 14 Fed. 12, affirmed in 119 U. 
 S. 343, 7 Sup. Ct. 231, 30 L. ed. 
 420; Dupont v. Tilden, 42 Fed. 87; 
 Coe V. East & West R. Co., 52 Fed. 
 531; Grant v. East & West R. Co., 
 54 Fed. 569; Arapahoe &c. Co. v. 
 Stevens, 13 Colo. 534, 22 Pac. 823; 
 Young V. Erie &c. R. Co., 65 Mich. 
 Ill, 31 N. W. 814; Brickley v. 
 Schlag, 46 N. J. Eq. 533, 20 Atl. 
 250; Schenck v. Andrews, 57 N. Y. 
 133. 
 
 85 Upton V. Tribilcock, 91 U. S. 
 45, 23 L. ed. 203; Sawyer v. Hoag, 
 17 Wall. (U. S.) 610, 21 L. ed. 
 731; Remington &c. Co., In re, 139 
 Fed. 766 (distinguishing Handley 
 V. Stutz, 139 U. S. 417, 11 Sup. Ct. 
 530, 35 L. ed. 227); Williams v. 
 
231 
 
 SUBSCRIPTIONS 
 
 §128 
 
 the other stockholders consent, and it is not forbidden by the 
 charter or statute, such a transaction is binding upon the com- 
 pany, and it cannot collect the difference between the amount 
 paid and the face value of the stock for its own benefit.®® And 
 in a recent case, the supreme court of the United States went 
 still further and held that an active corporation might issue stock 
 and sell it upon the market for far less than its par value, in 
 order to obtain money to prosecute its business and pay its debts, 
 and that creditors could not compel the purchaser to pay its face 
 value.®'' This case, however, has met with much criticism,*® and 
 the rule therein announced should not be extended in its applica- 
 tion to a different state of facts. In some jurisdictions the ac- 
 tion of the directors and stockholders in good faith determining 
 the value of the property, services, or the like taken in payment of 
 a stock subscription is conclusive, in the absence of actual fraud, 
 but in others the rule is not so strict, and a gross overvaluation 
 of property, whose value is easily ascertained is presumptive if 
 
 Evans, 87 Ala. 725, 6 So. 702, 6 L. 
 R. A. 218 n; Bates v. Great West- 
 ern Tel. Co., 134 111. 536, 25 N. E. 
 521. See Chouteau v. Dean, 7 Mo. 
 .A.pp. 210; Macbeth v. Banfield, 45 
 Ore. 553, 78 Pac. 693, 106 Am. St. 
 670; Gogebic &c. Co. v. Iron Chief 
 &c. Co., 78 Wis. 427, 47 N. W. 726, 
 23 Am, St. 417 ; 8 Fletcher Cyc. Corp. 
 § 5038. 
 
 seScovill V. Thayer, 105 U. S. 
 143, 26 L. ed. 968; Harrison v. Ar- 
 kansas Valley R. Co., 13 Fed. 522, 
 4 McCrary (U. S.) 264. See also 
 Memphis &c. R. Co. v. Dow, 120 
 U. S. 287, 7 Sup. Ct. 482, 30 L. ed. 
 595; Foster v. Seymour, 23 Fed. 
 65; Stewart v. Railroad Co., 41 
 Fed. 736; Dickerman v. Northern 
 Trust Co., 80 Fed. 450; Higgins v. 
 Lansingh. 154 III. 301, 40 N. E. 
 
 362; St Louis &c. R. Co. v. Tier- 
 nan, 37 Kans. 606, 15 Pac. 544; 
 Coler V. Tacoma &c. R. Co., 53 N. 
 J. Eq. 680, 53 Atl. 680. 
 
 STHandley v. Stutz, 139 U. S. 
 417, 11 Sup. Ct. 530, 35 L. ed. 227. 
 See also cases cited in Grant v. 
 .East & West R. Co., 54 Fed. 569, 
 575, and Van Cott v. Van Brunt, 
 82 N. Y. 535 
 
 88 See article by R. C. McMur- 
 trie in 25 Am. L. Rev. 749; 2 
 Thomp. Corp. (1st ed.), §1665. See 
 also Kimbell v. Chicago &c. Co., 
 119 Fed. 102; Smith v. Ferries &c. 
 R. Co., 119 Cal. xvii, 51 Pac. 723; 
 Martin v. South Salem Land Co., 
 94 Va. 28 26 S. E. 591; Adamant 
 Mfg. Co. V. Wallace, 16 Wash. 614, 
 48 Pac. 415. 
 
§129 
 
 RAILROADS 
 
 232 
 
 not conclusive evidence of fraud, in the absence of anything to 
 the contrary,89 
 
 §129 (111). Conditional subscriptjons.-^A subscription may 
 be made upon a condition precedent, in which case it can only be 
 enforced after the performance of the condition.^" The courts, 
 however, lean toward a construction of the subscription which 
 wiU hold any conditions expressed therein to be conditions sub- 
 sequent,^^ in which case the subscription is generally held to be 
 
 s" Coit V. North Carolina &c. 
 Co., 119 U. S. 343, 7 Sup..Ct. 231, 
 30 L. ed. 420; Lloyd v. Preston, 
 146 U. S. 630, 13 Sup. Ct. 131, 36 
 L. ed. 1111; Coleman v. Howe, 154 
 111. 458, 39 N. E. 725, 727, 45 Am. 
 St. 133; National Tube Works v. 
 Gilfillan, 124 N. Y. 302, 307, 26 N. 
 E. 538. In Macbeth v. Banfield, 
 45 Ore. 553. 78 Pac. 693, 106 Am. 
 St. 670, 680, it is said: "It is com- 
 petent for the determination of the 
 question to take into consideration 
 the nature of the property, the 
 purposes for which it is accepted, 
 and all the conditions and circum- 
 stances attending and surrounding 
 the transaction; and if, from thp 
 whole, it appears that the board 
 has acted in good faith, in the 
 honest exercise of its best judg- 
 ment, no adverse presumption 
 pending, then are its acts conclu- 
 sive, otherwise not. Clark Cor- 
 porations, 380, 381 ; Van Cleve v. 
 Berkey, 143 Mo. 109, 44 .S. W. 743, 
 42 L. R. A. 593, 598; Boynton v. 
 Andrews, 63 N. Y. 93: Douglass v. 
 Ireland, 7i N. Y. lOO; Lake Su- 
 perior Iron Co. V. Drexel, 90 N. 
 Y. 87; Elyton Land Co. v. Birm- 
 ingham &c. Co., 92 Ala. 407, 4231 9 
 So. 129, 12 L. R. A. 307, 25 Am. 
 
 St. 65; Osgood v. King, 42 Iowa 
 478; Jackson v. Traer, 64 Iowa 469, 
 20 N. W. 764, 52 Am. Rep. 449." 
 See also note in 42 L. R. A. 593, 
 and notes in 52 L. R. A. (N. S.) 
 454, and L. R. A. 1916E, 570. 
 
 9" North &c. R. Co. v. Winfree, 
 51 Ga. 318; Alhiian v. Havana &c. 
 R. Co., 88 111. 521; note to Parker 
 V. Thomas, 19 Ind. 213, 81 Am. 
 Dec. 385, 398; Peoria &c. R. Co. v. 
 Preston, 35 Iowa 115; Bucksport 
 &c. R. Co. V. Buck, 68 Maine 81; 
 Taggart v. Western Md. R. Co., 24 
 Md. 563, 89 Am. Dec. 760 n; Mon- 
 roe V. Fort Wayne &c. R. Co., 28 
 Mich. 272; Porter v. Raymond, S3 
 N. H. 519; Ashtabula &c. R. Co. v. 
 Smith, 15 Ohio St. 328; Chartiers 
 &c. R. Co. V. Hodgens, 85 Pa. St. 501 ; 
 Lowe V. Edgefield &c. R. Co., 1 
 Head (Tenn.) 659; Montpelier &c. 
 R. Co. V. Langdon, 46 Vt. 284; Mil-' 
 waukee &c. R. Co. v. Field, 12 Wis. 
 340. See also Stone v. Monlicello 
 Const. Co., 135 Ky. 659, 117 S. W. 
 .369, 40 L. R. A. (N. S.) 978; Foote 
 V. Greilick, 166 Mich. 636, 132 N. 
 W. 473; Missouri Pac. R. Co. v. 
 Tygard, 84 Mo. 263. 54 Am. Rep. 
 97. 
 
 »i Swartout v. Michigan Air Line 
 R. Co.. 24 Mich. 389; Chamberlain 
 
232 
 
 SUBSCRIPTIONS 
 
 §129 
 
 absolute,'-'- and the condition subsequent a separate contract of 
 the corporation to be enforced- like other contracts.*^ Subscrip- 
 tions made before incorporation and taken for the purpose of 
 raising the capital required to secure incorporation under a gen- 
 eral statute, must be absolute.^* Advance subscriptions made 
 upon condition are held void in New York,^^ -while the condition 
 only is held void in Pennsylvania,"^ and the subscription is up- 
 held as an absolute one. But the cases generally agree that a 
 conditional subscription is not to be counted in estimating the 
 stock subscribed,"'' and the better reason and -weight of authority 
 
 V. Paiuesville &c. R. Co., IS Ohio 
 St. 225. The electors of a county 
 voted to .subscribe for stock in the 
 plaintiflE's railroad and issue the 
 bonds of the county for the same, 
 on condition that the railroad 
 should be completed and in opera- 
 tion in the county, by leas« or 
 otherwise, from a connection -with 
 existing roads in the state, and, 
 also, conditioned that the accept' 
 ance of the bonds issued in pay- 
 ment of the stock should consti- 
 tute a covenant binding upon the 
 railroad company, its lessees or as- 
 signs, to maintain and operate said 
 line of road, by lease or other- 
 -wise, over its route for a term of 
 ninety-nine years. The court held 
 that an agreement by the railroad 
 company, executed after such sub- 
 scription, to sell and transfer its 
 road after it wis completed, in 
 order to obtain money for its con- 
 struction, did not discharge or re- 
 lease the county from the payment 
 of its subscription. Southern &c. 
 R. Co. V. To-wer, 41 Kans. 72. 
 
 ^'■^ Johnson v. Georgia &c. R. Co., 
 81 Ga. 725, 8 S. E. 531; Henderson 
 &c. R. Co. V. Leavell, 16 B. Mon. 
 
 (Ky.) 358; Belfast &c. R. Co. v. 
 Moore, 60 Maine 561, 576; Miller 
 V. Pittsburgh &c. R. Co., 40 Pa, 
 St. 237, 80 Am. Dec. 570; Paducah 
 &c. R. Co. v. Parks, 86 Tenn. 554, 
 8 S. W. 842. See also Sarbach v. 
 Kansas &c. Co., 86 Kans. 734, 122 
 Pac. 113, Ann. Cas. 1913C, 415. 
 
 931 Cook Corporations (7th. ed.), 
 § 78. See also Bobzin v. Gould 
 Balance Valve Co., 140 Iowa 744, 
 118 N. E. 40. 
 
 9* New York &c. R. Co. v. Hunt, 
 39 Conn. 75; Brand v. Lawrence- 
 ville &c. R. Co., 77 Ga. 506, 1 S. E. 
 255; Troy &c. R. Co. v. Newton, 8 
 Gray. (Mass.) 596; Ellison v. Mo- 
 bile &c. R. Co. V. Tibbits, 18 Barb. 
 (N. Y.) 297; Chamberlain v. Paiues- 
 ville &c. R. Co., 15 Ohio St. 225; 
 Boyd V. Peach Bottom R. Co., 90 
 Pa. St. 169, 1 Am. & Eng. R. Cas. 
 631. 
 
 s"' Troy &c R. Co. v. Tibbits, 18 
 Barb. (N. Y.) 297. 
 
 96Caley v. Philadelphia &c, R. 
 Co., 80 Pa. St. 363; Boyd v. Peach 
 Bottom R. Co., 90 Pa. St. 169. See 
 also Burke v. Smith, 16 Wall. (TJ. 
 S.) 390, 396, 21 L. ed. 361. 
 
 9'^ California &c. Co. v. Russell, 
 
§129 
 
 RAILROADS 
 
 234 
 
 would seem to be that, when made for this purpose, only abso- 
 lute subscriptions are valid and enforceable by either the sub- 
 scriber or the corporation.''* Yet, a condition in a preliminary 
 subscription that the organization shall not be completed until 
 a certain amount of stock has been subscribed, is valid.*^ And 
 such a provision in the charter constitutes a condition precedent 
 annexed to every subscription.^ 
 
 88 Cal. 277, 26 Pac. 105; New York 
 &r R Co. V. Hunt, 39 Conn. 75; 
 Brand v. Lawrenceville &c. R. Co., 
 77 Ga. 506; Ticonic &c. Co. v. 
 Lang, 63 Maine 480; Boston &c. R. 
 Co. V. Wellington, 113 Mass. 79; 
 Caley v. Philadelphia &c. R. Co., 
 80 Pa. St. 363. Nor colorable or 
 fictitious subscriptions. Memphis 
 Branch R. Co. v. Sullivan, 57 Ga. 
 , 240. Nor subscriptions by persons 
 having no reasonable expectation 
 of being able to pay. Holman v. 
 State, 105 Ind. 569, 5 N. E. 702; 
 Belfast &c. R. Co. v. Inhabitants 
 of Brooks, 60 Maine 568. See also 
 Branch v. Augusta &c. Works, 95 
 Ga. 573, 23 S. E. 128; Denny Hotel 
 Co. V. Schram, 6 Wash. 134, 32 Pac. 
 1002, 36 Am. St. 137. But if there 
 is good faith, insolvency of some 
 may not be a defense for others. 
 Penobscot R. Co. v. Dummer, 40 
 Maine 172, 63 Am. Dec. 654; Salem 
 &c. Corp. v. Ropes, 9 Pick. (Mass.) 
 187, 19 Am. Dec. 363. 
 
 981 Cook Corporations (7th. ed.), 
 § 79, note. 
 
 99 Penobscot &c. R. Co. v. Dunn, 
 39 Maine 587; Philadelphia &c. R. 
 Co V. Hickman, 28 Pa. St. 318. 
 And,' according to the weight of 
 authority, there is even at common 
 law an implied condition that all 
 the required • stock shall be sub- 
 
 scribed before a subscription shall 
 become due. Peoria &c. R. Co. v. 
 Preston, 35 Iowa 115; Salem Mill 
 Dam Corp. v. Ropes, 6 Pick. 
 (Mass.) 23; Livesey v. Omaha Ho- 
 tel Co., 5 Nebr. 50, and authorities 
 there cited; New Hampshire Cent. 
 R. Co. V. Johnson, 30 N. H. 390, 
 64 Am. Dec. 300; 1 Thomp. Corp. 
 (2d. ed.), § 528, and authorities- 
 cited in note; Anderson v. Middle 
 &c. R. Co., 91 Tenn. 44, 17 S. W. 
 803, 52 Am. & Eng. R. Cas. 149, 
 151; Denny Hotel Co. v. Schram,. 
 6 Wash. 134, 32 Pac. 1002, 36 Am. 
 St. 130. But see Chubb v. Upton, 
 95 U. S. 665, 24 L. ed. 523; New- 
 castle &c. R. Co. v. Bell, 8 Blackf. 
 (Ind.) 584; Stewart v. Minnesota 
 &c. R. Co., 36 Minn. 355, 31 N. W. 
 351 (as to rights of creditors);. 
 Astoria &c. R. Co. v. Hill, 20 Ore. 
 177, 25 Pac. 379; Cheraw &c. R. 
 Co. V. White, 14 S. Car. 51. See 
 also ante, § 24. 
 
 1 Memphis Branch R. Co. v. 
 Sullivan, 57 Ga. 240; Peoria &c. R. 
 Co. V. Preston, 35 Iowa 115; New 
 Ham.pshire &c. R. Co. v. Johnson, 
 30 N. H. 390, 64 Am. Dec. 300; 
 Somerset R. Co. v. Clarke, 61 
 Maine 379; 1 Thomp. Corp. §§ 612, 
 613. Subscribers for stock of an 
 incorporated company, whose cap- 
 ital is fixed at a certain sum, whose 
 
235 
 
 SUBSCRIPTIONS 
 
 §130 
 
 §130 (11 la). Implied conditions. — It is not only true that a 
 provision in a chartei to the effect that no subscription shall be 
 enforceable until a certain amount of stock, has been subscribed 
 for is a condition precedent, but 't is ai.-o held in many jurisdic- 
 tions that where the capital stock is fixed, it is an implied condi- 
 tion, in the absence of anything to the contrary, that it shall all 
 be subscribed for before a subscriber is liable upon his subscrip- 
 tion. Thus it is said : "It is a general and well-settled rule, sub- 
 ject to a few qualifications only, that where the capital stock of a 
 corporation is fixed, it is implied in every contract of subscrip- 
 tion, as a condition precedent to liability thereunder, that all the 
 capital stock must be subscribed. Until all the capital stock is 
 subscribed, payment of his subscription or any part thereof can- 
 not be required of any subscriber."^ But if the subscription con- 
 
 shares are limited to a certain 
 number, and whose charter pro- 
 vides that payment shall be made 
 as may be determined by the board 
 of directors, can not be compelled 
 to pay until the whole capital has 
 been subscribed for and the board 
 lias called for payment, unless it is 
 shown that by their acts they have 
 waived their rights in those re- 
 gards. Exposition R. &c. Co. v. 
 Canal St. E. R. Co., 42 La. Ann. 
 370, 7 So. 627. This is the com- 
 mon law rule where the charter 
 ■does not otherwise provide, but 
 such defense may be waived by the 
 subscriber. Masonic Temple Assn. 
 V. Channell, 43 Minn. 353, 45 N. 
 W. 716; International &c. Assn. v. 
 Walker, 83 Mich. 386, 47 N. W. 
 338, 3 Lewis' Am. R. & Corp. 731. 
 See also McConnaghy v. Monti- 
 cello Const. Co., 135 Ky. 667, 117 
 ■S. W. 372. 
 
 2 Note to Gettysburg Nat. Bank 
 V. Brown (95 Md. 367, 52 Atl. 975), 
 in 93 Am. St. 339, 368; Stoneham 
 
 Branch R. Co. v. Gould, 68 Mass. 
 277; Contuocook Valley R. Co. v. 
 Barker, 32 N. H. 363. See also 
 Santa Cruz R. Co. v. Schwartz, 53 
 Cal. 106; Stearns v. Sopris, 4 Colo. 
 App. 191, 35 Pac. 281; Allman v. 
 Havana &c. R. Co., 88 111. 521; 
 McCoy V. World's Columbian Ex- 
 position, 186 111. 356, 57 N. E. 1043, 
 78 Am. St. 288; Hoagland v. Cin- 
 cinnati &c. R. Co., 18 Ind. 452; 
 Peoria &c. R. Co. v. Preston, 35 
 Iowa 115; Exposition R. &c. Co. 
 V. Canal St. &c. R. Co., 42 La. 
 Ann. 370, 7 So. 627; Somerset &c. 
 R. Co. V. Gushing, 45 Maine 524; 
 Somerset &c R. Co. v. Clarke, 61 
 Maine 379; Rockland &c. Co. v. 
 Sewall, 78 Me. 167, 3 Atl. 181, 80 
 Maine 400, 14 Atl. 939; Hughes v. 
 Antietam Mfg. Co., 34 Md. 316; 
 Musgrove v. Morrison, 54 Md. 161; 
 Worcester &c. R. Co. v. Hinds, 62 
 Mass. 110; Shurtz v. Schoolcraft 
 &c. R, Co., 9 Mich. 270; Interna- 
 tional &c. Assn. V. Walker, 88 
 Mich. 62, 49 N. W. 1086; Curry 
 
§130 
 
 RAILROADS 
 
 236 
 
 tract or agreement shows a contrary intention there is no room 
 for such an implication,^ and an express unconditional provision 
 to pay has been held in some cases to evince such an intention.* 
 So, the matter is frequently regulated and determined by stat- 
 ute.^ And a subscriber may be responsible for preliminary ex- 
 
 Hotel Co. V. Mullins, 93 Mich. 318, 
 S3 N. W. 360; Masonic Temple 
 Assn. V. Chanwell, 43 Minn. 333, 45 
 N. W. 716; Duluth Inv. Co. v. 
 Witt, 63 Minn. 538, 65 N. W. 956; 
 Haskell V. Worthington, 94 Mo. 
 560, 7 S. W. 481; Sedalia &c. R. 
 Co. V. Abell, 17 Mo. App. 645; Mc- 
 Cann v. American Cent. Ins. Co., 
 4 Nebr. 256; Macfarland v. West 
 Side Ike. Assn, 53 Nebr. 417, 73 N. 
 W. 736; Tewett v. Valley R. Co.. 34 
 Ohio St. 601; Astoria &c. R. Co. 
 V. Hill, 20 Ore. 177, 25 Pac. 379; 
 Read v. Memphis &c. Gas. Co., 56 
 Tenn. 545; Anderson v. Middle &c. 
 R. Co., 91 Tenn. 44, 17 S. W. 803; 
 Galveston Hotel Co. v. Bolton, 46 
 Tex. 633; Norwich Lock Mfg. Co. 
 V. Hockaday, 89 Va. 557, 16 S. E. 
 877; Denny Hotel Co. v. Schram, 
 6 Wash. 134, 32 Pac. 1002, 36 Am. 
 .St. 130; Birge v. Browning, 11 
 Wash. 249, 39 Pac. 643; Greenbrier 
 Industrial Exp. v. Ocheltree, 44 W. 
 Va. 626, 30 S. E. 78; Milwaukee 
 Brick &c. Co. v. Schoknecht, 108 
 Wis. 457, 84 N. W. 838;.Wontner 
 V. Shairp, 4 Com. B. 404. But see 
 South. Ga. &c. R. Co. v. Ayres, 56 
 Ga. 230; Rensselaer &c. Plank 
 Road Co. V. Wetsel, 21 Barb. (N. 
 Y.) 56; Schenectady Plank Roal 
 Co. V. Thacher, 11 N. Y. 102 ; Lynch 
 V. Eastern &c. R. Co., 57 Wis. 430, 
 15 N. W. 743, 825. As to the rule 
 where the capital stock is not fixed. 
 
 see note in 93 Am. St. 375, citing 
 apparently conflicting authorities 
 from the same states, most of 
 which, however, may probably be 
 reconciled in view of the fact that 
 in all or nearly all of those hold- 
 ing that there was no such implied 
 condition there was an express 
 promise to pay, and that both the 
 fact of the express promise and of 
 the capital not being fixed were 
 influential factors in the decision. 
 As to when, if at all, a subscriber 
 can question the validity of the 
 corporate organization in case it 
 exists as a de facto corporation, 
 see Jones v. Dodge, 97 Ark. 248, 
 133 S. W.. 828, L. R. A. 1915A, 
 472, and elaborate note. 
 
 3 Arkadelphia Cotton Mills v. 
 Trimble, 54 Ark. 316, 15 S. W. 776; 
 Troy &c. R. Co. v. Newton, 74 
 Mass. 596; Sedalia &c. R. Co. v. 
 Abell, 17 Mo. App. 645; Anderson 
 V. Middle &c. R. Co., 91 Tenn. 44, 
 17 S. W. 803. 
 
 * See West v. Crawford, 80 Cal. 
 19, 21 Pac. 1123; Lail v. Mt. Ster- 
 ling Coal Road Co., 76 Ky. 32; 
 .Skowhegan &c. R. Co. v. Kinsman, 
 77 Maine 370; Rockland &c. Co. v. 
 Sewell, 80 Maine 400, 14 Atl. 939. 
 
 5 See San Bernardino &c. Co. v. 
 Merrill, 108 Cal. 490, 41 Pac. 487; 
 Mandel v. Swan &c. Co., 154 111. 
 177, 40 N. E. 462, 45 Am. St. 124; 
 Anglo-American &c. Co. v. Dyer, 
 
237 
 
 SUBSCRIPTIONS 
 
 ij \M 
 
 penses, even though not subject to calls and assessments for the 
 general purpose of the corporation." 
 
 § 131 (112). Valid and invalid conditions.— Where the condi- 
 tion is that the capit:al stock shall be limited to .a certain amount, 
 after that amount is reached a subscription in excess thereof can- 
 not be ehforced by the corporation.'^ Parol and secret conditions 
 annexed to an absolute subscription are held void as a fraud upon 
 the corporate creditors and other subscribers who are injured 
 ■ thereby,* and the subscription is enforceable according to its 
 
 181 Mass. 593, 64 N. E. 416; Fair- 
 view R. Co. V. Spillman, 23 Ore. 
 587, 32 Pac. 688. This the statutes 
 frequently provide for organizing 
 and doing business when a certain 
 amount less than all the stock is 
 subscribed, and a siibscriber is gen- 
 erally liable in such a case, haying 
 subscribed with reference to such 
 provision. See Jewett v. Valley R. 
 Co., 34 Ohio St. 601; Hanover 
 Junction R. Co. v. Haldeman, 82 
 Pa. St. 36; Milwaukee &c. Co. v. 
 Schoknecht, 108 Wis. 457, 84 N. W. 
 838, and other authorities cited in 
 note in 93 Am. St. 373. 
 
 6 Covington &c. R. Co. v. Moore, 
 3 Ind. 5.10; .Salem Mill &c. Corp. 
 V. Ropes, 23 Mass. 23; Littleton 
 Mfg. Co. v. Parker, 14 N. H. 543; 
 Anvil Min. Co. v. Sherman, 74 Wis. 
 226, 42 N. W. 226, 4 L. R. A. 232 n. 
 Such a condition is waived if the 
 subscriber, -with knowledge that 
 the required proportion of the 
 stock has not been subscribed at- 
 tends the meetinigs .pf the com- 
 pany and p^riticipates in its or- 
 ganizatioti, rbut not if he acted in 
 ignorance of the fact that the re- 
 quired stock had not been sub- 
 
 scribed. Fairview &c. R. Co. v. 
 SpHlman, 23 Ore. 587, 32 Pac. 688; 
 Auburn Opera House &e. v. Hill, 
 97 Cal. xvii, 32 Pac. 587; Interna- 
 tional &c. Assn. v. Walker, 97 
 Mich. 159, 56 N. W. 344. 
 
 1 Clark V. Turner, 73 Ga. 1 ; Mer- 
 rill V. Gamble, 46 Iowa 615; Oler 
 V. Baltimore &c. R. Co., 41 Md. 
 583,; Burrows v. Smith, 10 N. Y. 
 550. See also Laredo Imp. Co. v. 
 .Stevenson, 66 Fed. 633; 1 Thomp. 
 Corp. (2d ed.) § 578. 
 
 8 Mississippi &c. R. Co. v. Cross, 
 20 Ark. 443; Mann v. Cooke, 20 
 Conn. 178; Ridgefield &c. R. Co. v. 
 Brush, 43 'Conn. 86; Johnson v. 
 Pensficpla &c. R. Co., 9 Fla. 299; 
 New Albany &c. R. Co. v. Fields, 
 10 Ind. 187; Chouteau Co. v. Floyd, 
 74 Mc. 286; Kishacoquillas &c. R. 
 Co. v. MicConaby, 16 Serg. & R. 
 (Pa.) 340; Robinson v. Pittsburg 
 8pc. R. Co., 32 Pa. St. 334; Phila- 
 delphia .&c. R. Co. V. Conway, 177 
 Pa. St. 364, 35 Atl. 7i6; Connecticut 
 &;c. R. Co. V. Bailey, 24 Vt. 465, 58 
 Aci. Dec. 181; Preston v. Gra.nd 
 CplUer Dock Cq,, 2 Eng. Rail. & 
 Canal C^s. 3.35; Davidson's -Case, 3 
 DeG. & S. 21. But see Pjckler v. 
 
§132 
 
 RAILROADS 
 
 238 
 
 terms. It cannot even be varied by a separate written contract 
 executed at the time the subscription was made, if such separate 
 contract was unknown to other subscribers and creditors.® But 
 as a general rule any condition which can be legally^" performed 
 or complied. with by the corporation,^^ may be annexed to a sub- 
 scription given for stock in a corporation which is already or- 
 ganized, if such condition be expressed therein. ^^ It has also 
 been held that a condition will be presumed to have been made 
 when the subscription was given, in the absence of proof to the 
 contrary,!* and will be held valid when annexed to the subscrip- 
 tion after it was given, if done with the consent of all the par- 
 ties, and for a consideration.^* 
 
 § 132 (113). Conditional subscription is a mere offer until 
 accepted. — A conditional subscription usually constitutes only 
 an offer on the part of the subscriber until it is accepted by the 
 
 Arkansas Packing Co., 112 Ark. 33, 
 164 S.W. 764 (parol evidence ad- 
 missible to show application for 
 stock not to be delivered or to be- 
 come operative until subscriber so 
 directed). 
 
 9 Brownlee v. Ohio &c. R. Co., 
 18 Ind. 68; White Mountains R. 
 Co. V. Eastman, 34 N. H. 124; 
 Meyer v. Blair, 109 N. Y. 600, 17 
 N. E. 228, 4 Am. St. SOO. 
 
 10 As to the effect of an ultra 
 vires condition in a subscription, 
 see Pellatt's Case, L. R. 2 Ch. 527; 
 Thigpen v. Mississippi &c. R. Co., 
 32 Miss. 347. See also Morrow v. 
 Nashville &c. Co., 87 Tenn. 262, 10 
 S. W. 495, 3 L. R. A. 37, 10 Am. 
 St. 658; Laredo Imp. Co. v. Steven- 
 son, 66 Fed. 633. 
 
 11 Penobscot &c. R. Co. v. Dunn, 
 39 Maine 587; Louisville &c. R. Co. 
 V. Sumner, 106 Ind. 55, 60, 55 Am. 
 Rep. 719, 5 N. E. 404; Bobzin v. 
 Gould Balance Valve Co., 140 Iowa 
 744, 118 N. W. 40; McMillan v. 
 
 Maysville &c. R. Co., 54 Ky. 218, 
 61 Am. Dec. 181; Ashtabula &c. 
 R. Co. V. Smith, 15 Ohio St. 328; 
 Dayton &c. R. Co. v. Hatch, 1 Dis- 
 fiey (Ohio) 84; Lake Ontario 
 Shore R. Co. v. Curtiss, 80 N. Y. 
 219. See Chicago &c. R. Co. v. 
 Aurora, 99 III. 205, where it is held 
 that a town may issue railroad aid 
 bonds, payable upon a condition 
 which can not legally be fulfilled. 
 
 12 For conditions which have 
 been held valid see 1 Cook Corpor- 
 ations (7th. ed.), § 83; 8 Thomp. 
 Corp. §§ 591, 612, 619, 628; 
 Cox v. Hardee, 135 Ga. 80, 68 S. E. 
 932. 
 
 13 Robinson v. Pittsburgh &c. R. 
 Co., 32 Pa. St. 334, 72 Am. Dec. 
 792. 
 
 14 Pittsburgh &c. R. Co. v. Stew- 
 art, 41 Pa. St. 54; Tonica &c. R. 
 Co. V. Stein, 21 111. 96; New Hamp- 
 shire Cent. R. Co. v. Johnson, 30 
 N. H. 390, 64 Am. Dec. 300. 
 
239 
 
 SUBSCRIPTIONS 
 
 §133 
 
 corporation/^ after which, upon performance of the condition, it 
 has the binding force of any other subscription,^^ but it has been 
 held that such a subscription may be recalled if there is an un- 
 reasonable delay in accepting it.^'^ So, a gratuitous subscription 
 with only one signer is said to be an offer, which, until accepted 
 by the promisee in express terms, or by a .performance of the 
 conditions stipulated therein, is but a nudum pactum, and can- 
 not be enforced, against the will of the subscriber, by an action at 
 law.^^ 
 
 § 133 (114). Subscriptions in escrow — Parol evidence. — A 
 contract of subscription to capital stock, absolute on its face, may. 
 
 15 Junction R. Co. v. Reeve, IS 
 Ind. 236. See also Cass v. Pitts- 
 burgh &c. R. Co., 80 Pa. St. 31 ; Tag- 
 gart V. Western Md. R. Co., 24 Md. 
 S63, 89 Am. Dec. 760. But see 
 Mansfield &c. R. Co. v. Stout, 26 
 Ohio St. 241, to the effect that the 
 question of acceptance is imma- 
 terial where the corporation has 
 fully performed the condition im- 
 posed. The death of the subscrib- 
 er before acceptance of a condi- 
 tional subscription amounts to a 
 revocation. Sedalia &c. R. Co. v. 
 Wilkinson, 83 Mo. 235; Wallace v. 
 Townsend, 43 Ohio St. 537, 3 N. E. 
 601, 54 Am. Rep. 829. Where the 
 acceptance must be formal, as in 
 an offer to give land in payment 
 for stock,- it must be by the board 
 of directors, or a specially author- 
 ized agent, so as to bind the com- 
 pany to issue stock in exchange 
 for it before the subscriber will be 
 bound. An acceptance by less than 
 a quorum of the directors will not 
 bind him. Junction R. Co. v. Reeve, 
 IS Ind. 236. 
 
 16 New Albany &c. R. Co. y. Mc- 
 
 Cormick, 10 Ind. 499, 71 Am. Dec. 
 7>7,1; Webb v. Baltimore &c. R. Co., 
 n Md. 92, 39 Am. St. 396, 54 Am. 
 & Eng. R. Cas. 202; Ashtabula &c. 
 R. Co V. Smith, 15 Ohio St. 328; 
 Armstrong v. Karshner, 47 Ohio 
 St. 276, 24 N. E. 897. Immediately 
 upon performance of the condition, 
 a promise on the part of the sub- 
 scriber to pay, and of the company 
 to issue its stock upon such pay- 
 ment, is implied. Mansfield &c. 
 R. Co. V. Brown, 26 Ohio St. 223. 
 See also Webb v. Baltimore, &c. R. 
 Co., V Md. 92, 26 Atl. 113, 39 Am. 
 St. 396; St. Paul &c. R. Co. v. Rob- 
 bins, 23 Minn. 439. 
 
 ifTaggart v. Western Md. R. 
 Co., 24 Md. 563, 89 Am. Dec. 760n. 
 See also Wood's Case, L. R. IS Eq. 
 236, holding that notice of such re- 
 call may be given to the secretary. 
 That a conditional subscription 
 may be revoked while still in the 
 hands of the corporate agent, see 
 Lowe V. Edgefield &c. R. Co., 1 
 Head (Tenn.) 659. 
 
 IS Broadbent v. Johnson, 2 Idaho 
 300, 13 Pac. 83. 
 
§133 
 
 RAILROADS 
 
 240 
 
 like any other contract, be delivered to a third person to be held 
 in escrow until the performance of certain conditions. But if 
 delivered to the railroad company it becomes valid and binding, 
 and the delivery is effectual to convey title to the company.^* 
 Where a subscription is delivered in escrow, parol evidence is 
 admissible to show the conditions upon which it is held.*" But 
 such evidence is not, as a rule, admissible to establish an escrow 
 in the hands of the company,*^ although it has been held admis- 
 sible to show that a subscription left with a soliciting agent was 
 not to be delivered until the subscriber should have made an in- 
 vestigation and directed its delivery, and that, upon the inves- 
 tigation proving unsatisfactory, he had at once notified the agent 
 to withhold and cancel it.^^ If a subscription, delivered to a com- 
 mittee of citizens to be held as an escrow to await the perform- 
 ance of certain parol conditions annexed thereto, be delivered to 
 the company before the condition is fulfilled, such delivery is 
 ineffective, and the subscription cannot be enforced.*^ When a 
 
 19 Cass V. Pittsburgh &c. R. Co., 
 80 Pa. St. 31; Madison &c. Co. v. 
 Stevens, 10 Ind. 1; Wight v. Shel- 
 by R. Co., 16 B. Mon. (Ky.) 4, 63 
 Am. Dec. 522, where delivery was 
 made to a commissioner to take 
 subscriptions. But a director not 
 authorized to take subscriptions di- 
 rectly may hold one in escrow. Ot- 
 tawa &c. . R. Co. V. Hall, 1 Bfadw. 
 (111.) 612. And it has been held 
 that where the subscription was 
 left in the hands of an agent to 
 solicit subscription with direc- 
 tions, to which he assented, to hold 
 it until the subscriber made inves- 
 tigations and not to deliver it to 
 the company until the subscriber 
 directed him to do so, and the 
 subscriber, on the investigation 
 proving unsatisfactory, iitimedi- 
 ately notified the agent to with- 
 hold and cancel it, the subscriber 
 
 did not become a stockholder and 
 was not liable thereon. Great 
 Western Tel. Co. v. Loewenthal, 
 1S4 111. 261, 40 N. E. 318. 
 
 20 Ottawa &c. R. Co. v. Hall, 1 
 Bradw. (111.) 612; Great Western 
 Tel. Co. V. Loewenthal, 154 111. 261, 
 40 N. E. 318. See also Pickler v. 
 Arkansas Packing Co., 112 Ark. 
 33, 164 S. W. 764. 
 
 21 Wight V. Shelby R. Co., 55 Ky. 
 4 63 Art. Dec. 522. 
 
 22 Great Western Tel. Co. v. 
 Loewenthal, 154 111. 261, 40 N. E. 
 318. See also Pickler v. Arkansas 
 Packing Co., 112 Ark. 33, 164 S. 
 W. 764; Cass v. Pittsburgh &c. R. 
 Co., 80 Pa. St. .11 ; Oilman v. Gross, 
 97 Wis. 224, 72 N. W. 885. 
 
 23 Beloit &c. R. Co. v. Palmer, 19 
 Wis. 574. The same is true if it be 
 put into the hands of a special 
 agent of the company to be deliv- 
 
241 
 
 SUBSCRIPTIONS 
 
 §134 
 
 subscription is given on a separate paper, parol evidence is ad- 
 missible to show that it was to be annexed to the books only on 
 the performance of certain conditions.^* So, on the other hand, it 
 has been held that where a subscription is in the name of a party 
 as "trustee" it may be shown by parol evidence that he acted 
 as agent for others, and creditors, or a receiver appointed at 
 their instance, may maintain an action to recover the subscrip- 
 tion from the real parties in interest.*® 
 
 § 134 (115). Waiver of conditions. — ^The condition may be 
 waived by the subscriber, by express agreement,*® by acting as 
 an officer of the corporation,*'^ by paying the whole subscrip- 
 tion,** or giving an absolute, promissory note therefor,*® or by 
 
 ered only upon the performance of 
 conditions annexed. Saginaw &c. 
 R. Co. V. Chappell, 56 Mich. 190, 
 22 N. W. 278. 
 
 24 Bucher v. Dillburgh &c. R. Co., 
 76 Pa. St. 306; Tonica &c. R. Co. v. 
 Stein, 21 111. 95. 
 
 25 Cole V. Satsop R. Co., 9 Wash. 
 487, 37 Pac. 700, 43 Ann. St. 858. 
 But see as to the inadmissibility of 
 parol evidence generally. Smith v. 
 Tallahassee &c. Co., 30 Ala. 650; 
 Martin v. Pensacola &c. R. Co., 8 
 Fla. 370, 73 Am. Dec. 713; New 
 Albany &c. R. Co. v. Fields, 10 Ind. 
 187; Wight v. Shelby R. Co., 16 B. 
 Mon. (Ky.) 4, 63 Am. Dec. 522; 
 Kennebec &c. R. Co. v. Waters, 34 
 Maine 369; Miller v. Hanover &e. 
 R. Co., 87 Pa. St. 95, 30 Am. Rep. 
 349. 
 
 *8 Hanover Junction &c. R. Co. 
 V. Haldeman, 82 Pa. St. 36. The 
 conditions implied by law in sub- 
 scriptiohis to stock, that payment 
 shall not be enforced until all the 
 stock is subscribed is waived by 
 the subscribers to the stock of a 
 
 railroad company expressly agree- 
 ing, for the purpiose of enabling 
 the company to build a certain part 
 of its road, to pay their subscrip- 
 tions; and if the company acts up- 
 on this agreement and constructs 
 the road, the subscribers making 
 such an agreement must pay, 
 though others do not. Anderson 
 V. Middle &c. Tenn. Cent. R. Co., 
 91 Tenn. 44, 17 S. W. 803; 52 Am. 
 & Eng. R. Cas. 149. As to waiver 
 of ?uch condition by express agree- 
 ment, see, also, Skowhegan &c. R. 
 Co. v. Kinsman, 11 Maine 370. 
 
 2T Dayton &c. R. Co. v. Hatch, 
 1 Disney (Ohio) 84; Lane v. Brain- 
 erd; 30 Conn. 565. See also Mac- 
 farland v. West Side Imp. Assn., 
 53 Nebr. 417, IZ N. W. lib, 1 
 Thomt). Corp. (2d ed.) § 616. 
 
 28 Parks V. Evatisville &c. R. Co., 
 23 Ind. 567. See also Stone v. 
 MonticeMo Const. Co., 135 Ky. 659, 
 117 S. W. 369, 40 L. R. A. (N. S.) 
 978. 
 
 29 Evansville &c. R. Co. v. Dunn, 
 17 Ind. 603; Slipher v Earhart, 83 
 
§134 
 
 RAILROADS 
 
 242 
 
 •any act, with knowledge of the facts, which shows an intention 
 to hold himself to be an absolute shareholder in the enterprise.*" 
 So, as a general rule, any acts on the part of the subscriber which 
 liave induced others to act in reliance upon the fact that he was 
 ■a stockholder will be sufficient to establish such a waiver or es- 
 itoppel without any necessity for showing that either the corpo- 
 ration or any other subscriber has in fact been influenced by such 
 acts.^i The rule as to waiver of the implied condition that no 
 subscription shall be payable until all of the capital stock has 
 been subscribed is well stated in a recent case, as follow? : "The 
 courts, in stating what will estop the subscriber, or prevent his 
 being heard to make the objection (that the full capital ftock 
 of the corporation has not been subscribed) refer only to his acts, 
 and do not include the fact that they did influence others. If a 
 technical estoppel were required to prevent a subscriber With- 
 drawing his subscription on this ground much fraud might be' 
 
 Jnd. 173; Chamberlain v. Paines- 
 -vilte &c. R. Co., IS Ohio St. 225. 
 "But when the company's agent in- 
 •duces the subscriber to execute the 
 ttiot*^ by means of falsely repre- 
 senting that the condition has been 
 complied with, their execution is 
 not a waiver. Taylor v. Fletcher, 
 IS Ind. 80. See also Parker v. 
 Thomas, 19 Ind. 213, 81 Am. Dec. 
 38Sn. And where payments are 
 made under a mistaken belief in- 
 duced by false and fraudulent rep- 
 resentations that the condition has 
 previously been performed, such 
 payment is not a waiver. Ridge- 
 field &c. R! Co. v. Brush, 43 Conn. 
 86; Somerset &c. R. Co. v. Cush- 
 ing, 45 Maine 524; Morris &c. Co. 
 V. Nathan, 2 Hall (N. Y.) 239. The 
 note given subsequent to the con- 
 tract of subscription can not be re- 
 garded as forming a part of such 
 contract and so is not subject to 
 -the conditions annexed to it. 
 
 O'Donald v. Evansville &c. R. Co., 
 14 Ind. 259. 
 
 30 Parker v. Thomas, 19 Ind. 213, 
 81 Am. Dec. 38Sn; Parks v. Ev- 
 ansville, &c. R. Co., 23 Ind. 567; 
 Willamette Freighting Co. v. 
 Stannus, 4 Ore: 261. See also 
 California &c. Co. v. Callander, 94 
 Cal. 120, 29 Pac. 859, 28 Am. St. 99; 
 Hendrix v. Academy of Music, 73 
 Ga. 437; McConnaghy v. Monti- 
 cello, 135 Ky. 667, 117 S. W. 372; 
 Hards v. Platte Val. &c. Co., 35 
 Nebr. 263, 53 N. W. 73; Fa'irview 
 &c. R. Co. V. Spillman, 23 Ore. 587, 
 32 Pac. 688; note in 93 Am. St. 380- 
 383; 1 Thomp. Corp. (2d ed.) §§616- 
 618. Delay in canceling a sub-' 
 scription may bind one where 
 it shows an intention to become an 
 absolute stockholder. Wheat- 
 croft's Case, 29 L. T. R. 324. 
 
 31 Railway Co. v. Lacey, 3 
 Younge & J. 80. 
 
243 SUBSCRIPTIONS § 134 
 
 committed ; for, if it must be shown that the corporation or some 
 subscriber, of whom there may be many hundreds or even thou- 
 sands, was in fact influenced by the acts of the subscriber who 
 seeks to withdraw it, might be impossible to prove the fact, even 
 though it exist. The safer rule in such a case is that, if his acts 
 are of such a character that either the corporation or subscribers 
 may have been induced by them to act, and will be prejudiced 
 if he be permitted to withdraw, he shall be held to have waived, 
 or to be estopped to assert the defense. It is immaterial which 
 word is used, except, perhaps, for the sale of strict verbal ac- 
 curacy.*^ A waiver will generally be implied if the subscriber 
 consents to the letting of contracts, the creation of debt, or the 
 doing of any corporate act involving the necessity of calling in 
 the subscribed stock, unless the charter expressly forbid the doing 
 of any corporate act until the requisite capital is subscribed,'* 
 An express condition may also be waived or qualified by another: 
 clause of the agreement which is inconsistent with it.** But ai 
 subscriber's mere silence,^^ or a part payment,*® or soliciting; 
 subscriptions and permitting himself to be chosen to a corporate 
 office, without acting as such,*'' is not necessarily such a waiver.. 
 Nor, in general, is participation in any acts done for perfecting; 
 the organization and setting it on its feet for business, such as; 
 preparing and procuring the execution of the articles, procuiring^ 
 subscriptions to its stock, preparing by-laws for its government, 
 and the like, to be considered a waiver of the condition that the 
 
 32 Masonic Temple Assn. v. R. Co. v. Stewart, 41 Pa. St. 54. 
 Channell, 43 Minn. 353, 45 N. W. But see Klein v. Alton, &c. R. Co., 
 716. 13 111. 514. The distinction is made 
 
 33 Anderson v. Middle &c. Tenn. as to whether the payments are 
 Cent. R. Co., 91 Tenn. 44, 17 S. W. such as to entitle the subscriber to 
 803, 52 Am. & Eng. R. Cas. 149. demand his stock and preclude the 
 
 34 Woonsocket Union R. Co. v. company from denying that he is 
 Sherman, 8 R. I. 564. a stockholder. Appeal of Mack 
 
 35 Burlington &c. R. Co. v. (Pa.) 7 Atl. 481. See also Parks 
 Boestler, 15 Iowa 555; Bucksport, v. Evansville &c. R. Co., 23 Ind. 
 &c. R. Co. V. Inhabitants &c., 67 567. 
 
 Maine 295. 37- Rjdgefield &c. R. Co. v. Rey- 
 
 36 Jewett V. Lawrenceburgh &c. nolds, 46 Conn. 375. 
 R. Co., 10 Ind. 539; Pittsburgh &c. 
 
§135 
 
 RAILROADS 
 
 244 
 
 corporation sh«ill not begin business until the capital stock is all 
 subscribed, for these things are proper, and to some exteiit neces- 
 sary to be done, although the subscriptions are incomplete.** If 
 the annexed condition be a reserved right to withdraw the sub- 
 scription, this right must be exercised within a reasonable time 
 or it will ordinarily be held to be waived.^" 
 
 § 135 (116). When conditional subscription becomes pay- 
 able. — Where certain acts are to be done within a Sipecified time, 
 the expiration of the time without performance will generally 
 operate to discharge the subscriber from liability,*" at least where 
 they are conditions precedent and time is of the essence. A 
 subscription made on condition that the road shall be "perma- 
 nently" located on a certain route has been held payable when 
 the route is adopted by the directors,*^ but a chauge in the route 
 so that it does not fulfill the conditions, after part of the money 
 is paid, may enable the subscriber to recover his money .^^ 
 Whether the conditions have been performed is a question of fact 
 
 38 Gillfillan, C. J., in Masonic 
 Tertiple Assn. v. Channell, 43 Minn. 
 353; Memphis &c. R. Co. v. Sulli- 
 van, 57 Ga. 240; Old town &c. R. 
 Co. V. Veazie, 39 Maine 571. See 
 also Livesey v. Omaha &c. Co., S 
 Nebr. SO; International &c. Assn. 
 V. Walker, 88 Mich. 62, 49 N. W. 
 1086. 
 
 39 Wilmington &c. R. Co. v.. 
 Robeson, 5 Ired. (N. Car.) 391. 
 
 40 Freeman v. Matlock, 67 Ind. 
 99; Moore v. Campbell, 111 Ind. 
 328, 12 N. E. 495; Meanphis &c. R. 
 Co. V. Thompson, 24 Kans. 170; 
 Portland &c. R. Co., v. Inhabitants 
 &c., 58 Maine 23. See also Cincin- 
 nati &c. R. Co. V. Bensley, 51 Fed. 
 738, 19 L. R. A. 796. Where per- 
 formance of the condition was 
 completed soon after the expira- 
 tion of the time, and the subscriber 
 
 neglected to take his name oft the 
 books, he was held bound. Lee v. 
 Imbrie, 13 Ore. 510, 11 Pac. 270. 
 And see Missouri Pac. R. Co. v. 
 Tygard, 84 Mo. 263, 54 Am. Rep. 
 97. See however Freeman v. Mat- 
 lock, 68 Ind. 99. 
 
 41 Smith V. Allison, 23 Ind. 366; 
 Cliambenlain v. Painesville &c. R. 
 Co., IS Ohio St. 225. Contra Nash- 
 ville &c. R. Co. v. Jones, 2 Coldw. 
 (Tenn.) 574. As to meaning of 
 "locate" generally, see note in Am. 
 Cas. 1912C, 1309. 
 
 *- Jewett V. Lawrenceburgh &c. 
 R. Co., 10 Ind. 539. But if the 
 change is unauthorized by law it 
 is said that the alteration is inop- 
 erative and the svbscription not 
 made voidable. Danbury &c. R. 
 Co. V. Wilson, 22 Con. 435, 4S6. 
 
245 
 
 SUBSCRIPTIONS 
 
 §136 
 
 which may be proved by parol,** as may fraud or bad faith on 
 the part of the corporation or its officers in this connection.** 
 Where the agreement leaves the question as to when the condi- 
 tion has lieen performed to the judgment of the directors, their 
 decision, if made in good faith, is final.*^ Notice of such per- 
 formance must usually be given to the subscriber, and payment 
 demanded before the subscription will become payable.*^ But a 
 formal notice of performance is not usually necessary before suit, 
 where the subscriber has actual knowledge that the condition has 
 been fulfilled. *'' Property subscribed in payment for stock taken 
 should be specially demanded by the corporation, if no time is 
 fixed for delivery.*^ And upon the failure of the subscriber to 
 furnish the property, the subscription becomes payable in cash.*® 
 
 §136 (117). Construction of conditional subscriptions — ^What 
 is a sufficient compliance with condition as to time of beginning 
 and completing road. — The conditions most commonly annexed 
 
 43 St. Louis &c. R. Co. V. Eakins, 
 30 Iowa 279; Jewett v. Lawrence- 
 burgh &c. R. Co., 10 Ind. 539. See 
 also Toledo &c. R. Co. v. Johnson, 
 49 Mich. 148, 13 N. W. 492; Brand 
 V. Lawrenceville Branch R. Co., 77 
 Ga. 506, 1 S. E. 2SS. In some cases 
 proof is made by the corporate rec- 
 ords. Penobscot &c. R. Co. v. 
 Dunn, 39 Maine 587. And the bur- 
 den is usually upon the company. 
 Santa Cruz R. Co. v. Schwartz, 53 
 Cal. 106; Chase v. Sycamore &c. R. 
 Co., 38 111. 215; Bucksport &c.. R. 
 Co. V. Buck, 65 Maine 536. 
 
 *4 New York Exchange Co. v. 
 DeWolf, 31 N. Y. 273. But see 
 Ellison V. Mobile &c. R. Co., 36 
 Miss. 572. 
 
 45CaSs V. Pittsburgh &c. R. Co., 
 80 Pa. St. 31. 
 
 *6 Chase v. Sycamore &c. R. Co.; 
 38 111. 215; Trott v. Sarchett, 10 
 
 Ohio St. 241 ; 1 Cook Corporations, 
 (7th. ed.), § 89. Contra, Cox 
 V. Hardee, 135 Ga. 80, 68 S. E. 
 932 (where condition is that there 
 shall be no liability until a certain 
 amount is subscribed) ; Spartan- 
 burg &c. R. Co^ V. De Graffenreid, 
 12 Rich. L. (S. Car.) 675. See gen- 
 erally 1 Thomp. Corp. (2d ed.), 
 § 606. 
 
 47 New Albany &c. R. Co. v. Mc- 
 Cormick, 10 Ind. 499, 71 Am. Dec. 
 337. See also Nichols v. Burling- 
 ton &c. Co., 4 Greene (Iowa) 42; 
 Spartanburg &c. R. Co. v. De Graf- 
 fenreid, 12 Rich. L. (S. Car.) 675; 
 1 Thomp. Corp. (2d ed.) § 607. 
 
 4 8 Ohio &c. R. Co. V. Cramer, 23 
 Ind. 490. See McClure v. People's 
 R. Co., 90 Pa. St. 269. 
 
 49Haywood &c. R. Co. v. Bryan 
 6 Jones L. (N. Car.) 82; Sperry v. 
 Johnson, 11 Ohio 452. 
 
§136 
 
 RAILROADS 
 
 246 
 
 to subscriptions to the stock of a railroad company relate to the 
 time of beginning and completing the road, or to the route over 
 which the road shall run. Where the condition requires the rail- 
 road to be begun or finished before a certain date, it is held that 
 time is of the essence of the contract,^" and the subscriber may 
 be discharged from liability by a failure to comply with the con- 
 dition. But a substantial compliance is generally held suffi- 
 cient,^^ at least where this appears to have been the intention of 
 the parties, while a mere colorable compliance with a condition 
 that the road should be completed and a train run over the road 
 by laying a temporary track, over which an engine and a few 
 cars are run, but which must be replaced by another before regu- 
 
 50 Freeman v. Matlock, 67 Ind. 
 99; Burlington &c. R. Co. v. Boest- 
 ler, IS Iowa SSS; Memphis &c. R. 
 Co. V. Thompson, 24 Kan.s. 170; 
 Ticonic &c. Co. v. Lang, 63 Maine 
 480; Jackson v. Shortridge, 29 Tex. 
 394, 94 Am. Dec. 290. The text is 
 quoted in McCrackin v. Greens- 
 boro &c. R. Co., 168 N. Car. 62, 84 
 S. E. 30; and in West Va. R. Co. 
 V. Harrison Co., 47 W. Va. 273, 34 
 S. E. 786. But see Johnson v. 
 Kessler, 16 Iowa 411, 41 N. W. 57. 
 
 61 Hall V. Sims, 106 Ala. 56, 17 
 So. 534; Freeman v. Matlock, 67 
 Ind. 99; Brocaw v. Board &c., Ti 
 Ind. 543; Southern Kansas &c. R. 
 Co. V. Towner, 41 Kans. 22, 21 
 Pac. 221; Missouri Pac. R. R. v. 
 Tygard, 84 Mo. 263, 54 Am. Rep. 
 97; Fort Worth &c. R. Co. v. Will- 
 iams, 82 Tex. 553, 18 S. W. 206; 
 Williams v. Ft. Worth &c. R. Co., 
 82 Tex. 553, 18 S. W. 206. See also 
 Hunt V. Upton, 44 Wash. 124, 87 
 Pac. 56. But compare Toledo &c. 
 R. Co. V. Hinsdale, 45 Ohio St. 
 556, 15 N. E. 665; Martin v. Pen- 
 sacola R. Co., 8 Fla. 390, 73 Am, 
 
 Dec. 713. The road may be sub- 
 stantially built to a certain point, 
 although a depot has not been 
 erected nor a station agent em- 
 ployed. Ogden V. Kirby, 79 111. 
 SSS. The court held it a substan- 
 tial compliance where the road was 
 not finally completed for two and 
 a half months after the stipulated 
 time. Des Moines Valley R. Co. v. 
 Graff, 27 Iowa 99, 1 Am. Rep. 256. 
 See also Missouri Pac. R. Co. v. 
 Tygard, 84 Mo. 264, 54 Am. Rep. 
 97. A condition in the vote of 
 bonds by a county in aid of a 
 railroad company, that it shall es- 
 tablish and maintain a division ter- 
 minus at a point situated between 
 two named cities in the county, is 
 substantially complied with if the 
 terminus is established at a point 
 on the line of the road between the 
 two cities a few rods off from a 
 direct line between them. Chi- 
 cago &c. R. Co. V. Harris, 49 Kans. 
 399, 30 Pac. 456. See also Wullen- 
 waber v. Dunigan, 30 Nebr. 877, 
 47 N. W. 420, 13 L. R. A. 811. 
 
247 
 
 SUBSCRIPTIONS 
 
 §136 
 
 lar trains can be run, would not be sufficient to bind the sub- 
 scriber.^2 A condition that "cars shall run to B, upon a com- 
 pleted railroad from B," is, however, sufficiently complied with 
 by running leased cars over the road.^^ Where payment is to be 
 made upon completion of a portion of the road, it is not necessary 
 that it be made a first-class road before payment can be en- 
 forced, but the specified portion must be substantially finished 
 and capable of being operated for the transaction of railroad 
 business.®* Upon such a completion of the specified part of the 
 
 52 Freeman v. Matlock, 67 Ind. 
 99; Brocaw v. Board &c., 73 Ind. 
 S43; Paris &c. R. Co. v. Henderson, 
 89 111. 86. The condition is not 
 fulfilled by making a temporary ar- 
 rangement by which cars are run 
 to the required terminus over a 
 portion of another company's 
 track. Lawrence v. Smith, 57 
 Iowa 701, 11 N. W. 674; Indian- 
 apolis &c. R. Co. V. Holmes, 101 
 Ind. 348. A person subscribed 
 $5,000 in aid of a railroad company, 
 "one-half of said sum to be due 
 and payable when said company 
 shall construct or secure a contin- 
 uous line of railway from T. to 
 M." Trains ran from T. into M. 
 over the road in the specified time, 
 but the road belonging to the com- 
 pany only extended to t)., and from 
 D. to T.; trains were run over the 
 t-oad of another company under an 
 arrangement by. which the track 
 was to be used by the new com- 
 pany, but in subordination to the 
 use of the company owning. The 
 court held that there was no per- 
 formance under which the sub- 
 scriber could be held upon his 
 subscription. Brown v. Dibble, 65 
 Mich, 520, 32 N. W. 656. See also 
 Tabor &c. R. Co. v. McCormick, 
 
 90 Iowa 446, 57 N. W. 949. But 
 see People v. Holden, 82 111. 93, 
 where the company used one mile 
 of track and terminals belonging 
 to another railroad company in or- 
 der to reach one of the towns 
 named in the condition, and it was 
 held to be a sufficient compliance 
 to render the subscriber liable. A 
 notice of election stated that the 
 question to be submitted was 
 whether aid should be voted for 
 the construction of a railroad be- 
 tween W. and a point on the W. R. 
 Co. in W. county, the petition stat- 
 ed that the road should be com- 
 pleted so that trains could be run 
 from W. to L. on the line of the 
 W. R. Co. by a stated time. It 
 was held that the company was noj: 
 required to build an independent, 
 continuous line to L., but a junc- 
 tion with the W. R. Co. was suffi- 
 cient. Young V. Webster City &c. 
 R. Co., 75 Iowa 140, 39 N. W. 234. 
 
 53 Courtright v. Deeds, 2,7 Iowa 
 503. But see St. Louis &c. R. Co. 
 V. Hoiick, 120 Mo. App. 634, 97 S. 
 W. 963. 
 
 54 Armstrong v. Karshner, 47 
 Ohio St. 276, 24 N. E. 897. When 
 the company has constructed a 
 road which is reasonably safe, fit 
 
§137 
 
 RAILROADS 
 
 248 
 
 road the subscription becomes final and absolute and is en- 
 forceable.^^ 
 
 § 137 (118). Subscriptions payable as work progresses, or 
 upon expenditure of a certain amount. — Subscriptions are some- 
 times made payable as the work progresses, or upon the construc- 
 tion of a certain portion of the work, or the expenditure of a cer- 
 tain sum or percentage. Such a stipulation in the contract of 
 subscription may operate as a waiver of the implied condition 
 that all the stock shall be subscribed before any subscription can 
 be collected, and an agreement by subscribers to pay their sub- 
 scription as the work progresses, in order to enable the company 
 to build a certain portion of the road, will operate as such a 
 waiver and render such subscribers liable to pay their subscrip- 
 tion as the specified portion of the work is done under the agree- 
 ment.^* Where a subscription when made was unauthorized and 
 
 and convenient for the public use 
 and accommodation, as new rail- 
 roatis are grdinarijy used in simi- 
 lar localities, it has complied with 
 a condition in a vote of a munici- 
 pal corporation granting aid in the 
 construction of the railroad, that 
 it shall be paid when the road is 
 completed for use. Where an act 
 providing for the issuance of bonds 
 for the purpose of aiding a rail- 
 road authorizes preferred stock to 
 be issued to the county extending 
 the aid when the road is completed, 
 the county will be estopped to 
 deny that the road is completed if 
 it receives and retains stock. Lan-' 
 caster County v. Cheraw &c. R. 
 Co., 28 S. Car. 134, S S. E. 338. 
 
 55 Webb V. Baltimore &c. R. Co., 
 n Md. 92, 26 Atl. 113, 39 Am. St. 
 396, 54 Am. & Eng. R. Cas. 202. 
 The entire road need not be com- 
 pleted in such a case before the 
 
 subscription can be collected. 
 Gardner v. Walsh, 95 Mich. SOS, 55 
 N. W. 355, 59 Am. & Eng. R. Cas. 1. 
 58 Anderson v. Middle & East 
 Tenn. Cent. R. Co., 91 Tenn. 44, 17 
 S. W. 803, 52 Am. & Eng. R. C. 
 149. In this case subscribers to the 
 capital stock of a railroad char- 
 tered to run from Gallatin to Knox- 
 ville, a distance of one hundred 
 and fifty miles, signed an agree- 
 ment to pay their subscriptions "as 
 fast as the work progressed," upon 
 a- section of the road eleven and 
 one-half miles long, extending 
 from Hartsville to a point on the 
 Chesapeake and Nashville railroad, 
 eight and one-half miles from Gal- 
 latin, which they agreed should be 
 constructed before the company 
 had procured sufficient finances to 
 build the whole road. They were 
 held liable to pay their subscrip- 
 tions upon suit brought to enforce 
 
249 SUBSCRIPTIONS § 138 
 
 invalid because the company had not, at that time, expended ten 
 per centum of its authorized capital in the construction of its 
 road, nor obtained actual bona fide subscriptions to its capital 
 stock, to the amount of twenty per cent thereof, as required by 
 statujte,^'' it was held that such subscription could be enforced 
 against the subscriber, after the company had fully complied with 
 its conditions.^* Although originally invalid, il constituted a 
 continuing offer by the subscriber to pay the company the 
 amount subscribed, upon the performance by it of the prescribed 
 conditions, which, when not withdrawn before, the conditions 
 were fully complied with, became an absolute subscription, and 
 was no longer open to the objection that the company was with- 
 out corporate capacity to receive it. But a requirement in the 
 subscription that certain things be done must clearly appear to 
 be intended as a condition precedent, or it will not be construed 
 to have that effect. ^^ 
 
 § 138 (119). Failure to perform parol condition will not defeat 
 subscription. — A condition will not be permitted to defeat a sub- 
 payment when seventy per cent. car works in said city, has fulfilled 
 of the work had been done upon its obligation when the tertninus, 
 such section of the road, although office, shops and car works have 
 the company was insolvent, and been established therein without 
 wholly unable to complete the road any intention of removing them, 
 as originally contemplated, and and the company can not be com- 
 although the subscribers were busi- pelkd to keep them, there when 
 ness men of Gallatin, whose ob- the interests of the road and of 
 jcct in taking stock was to secure the public require a removal. The 
 an outlet from their city to Knox- city is relegated to its remedy 
 ville. The court said that they for a breach by action for dam- 
 were estopped by their express ages. Texas &c. R. Co. v. Marshall, 
 agreement to deny their liability as 136 U. S. 393, 10 Sup. Ct. 846, 
 subscribers, for by such an agree- 34 L. ed. 385, 8 R. & Corp. L. J. 
 ment they waived the conditions, 162, 42 Am. & Eng. R. Cas. 637. 
 express and implied, annexed to 57 Rev. Stat. Ohio, § 3298. 
 their original contract of subscrip- f'S Armstrong v. Karshner, 47 
 tion. A company, having accepted Ohio 276, 24 N. E. 897. 
 a donation from a city, in consider- ^^ Armstrong v. Karshner, 47 
 ation that it permanently establish Ohio 276, 24 N. E. 897; Johnson v. 
 its terminus, main office, shops and Kessler, 76 Iowa 411, 41 N. W. 57. 
 
§ 139 RAILROADS 250 
 
 scription unless clearly required by what is set forth in the 
 writing,^" for, in the absence of fraud, or mistake, the written 
 subscription cannot, as a rule, be varied or controlled by parol 
 evidence.®^ Thus, it was held in a recent case, that "it is no 
 defense in an action on a railroad aid subscription, conditioned 
 on the completion of the road to Iowa Falls, by September 1, 
 1884 that the company had broken an oral promise, which was 
 part of the consideration, to complete the line from Iowa Falls 
 to Forest City within one year from the date fixed in the contract 
 for the completion of the road to Iowa Falls, and that the com- 
 pany had abandoned the project of building the line between 
 those points. The rights of the parties are governed by the writ- 
 ten contract, and parol evidence is not admissible to show a con- 
 dition not embodied in the written agreement."*^ 
 
 § 139 (120). Conditions in notes. — A note payable two years 
 after the road is completed and trains are running to a certain 
 point and expressed to be in consideration of the completion of 
 the line within sixty days, is not defeated by a failure to complete 
 it within such time,®* and a note payable when the track is laid 
 and cars run thereon cannot be defeated by showing that the 
 consideration for such note was that the track should be so laid 
 within three years of its date.®* But a long delay in constructing 
 the road may defeat a note given upon this condition.®^ The 
 words "the road to be finished by September 1, 1872," in such a 
 
 soCairo &c. R. Co. v. Delap, 7 62 Blair v. Buttolph, 72 Iowa 31, 
 
 Brad. (111.) 60; Johnson v. Geor- 33 N. W. 349. 
 
 gia Midland &c. R. Co., 81 Ga. 725, 63 Traer v. Stuart, 46 Iowa IS. 
 
 8 S. E. 531. See also Meyer v. 64 Cairo &c. R. Co. v. Delap, 7 
 
 Blair, 109 N. Y. 600, 17 N. E. 228, Brad. (111. App.) 60. 
 
 4 Am. St. 500; Paducah &c. Co. v. 6B A period of fourteen years is 
 
 Parks, 86 Tenn. 554, 8 S. W. 842. not "a reasonable time" within 
 
 61 Low V. Studabaker, 110 Ind. which to build a railroad, where it 
 
 57, 10 N. E. 301; Johnson v. Geor- is the evident intent of the parties 
 
 gia Midland &c. R. Co., 81 Ga. 725, that the road should be completed 
 
 8 S. E. 531; Tabor &c. R. Co. v. within "a reasonable time," so as 
 
 McCormick, 90 Iowa 446, 57 N. W. to render subscribers to capital 
 
 949. But compare Lake Manawa stock liable on notes payable when 
 
 R. Co. V. Squire, 89 Iowa 576, 57 cars shall be running. Blake v. 
 
 N. W. 307. Brown, 80 Iowa 277, 45 N. W. 751. 
 
251 SUBSCRIPTIONS § 140 
 
 note will not imply a condition precedent.^® Notes made payable 
 when the railroad between two points "with the privilege of 
 entering Atlanta, Ga., on the track of any railroad having termi- 
 nal facilities there," is graded and ready for the cross-ties, tres- 
 tles and bridges, were held payable when the grading was done, 
 although the road had not yet acquired such privilege.*'^ And 
 when the notes were payable at specified times "as the work 
 progressed through the county, provided the company establish 
 a depot" at a certain place, the condition to erect a depot was held 
 not a condition precedent.*® 
 
 § 140 (121). Subscriptions conditioned upon location or con- 
 struction of the road. — A subscription conditioned upon the loca- 
 tion of the railroad through a certain town becomes absolute 
 when such location is permanently made, although the road has 
 not been constructed.** So, where the subscription was payable 
 at such times and in such instalments as the directors should pre- 
 scribe, provided the road should be "permanently located" on a 
 certain route, and a "freight house and depot be built" at a cer- 
 tain point, the provision that the buildings be erected was held to 
 be a stipulation merely, and not a condition precedent, to be per- 
 
 66 Davis V. Cobban, 39 Iowa 392. iher as to what are conditions sub- 
 
 67 Johnson v. Georgia Midland sequent rather than precedent. 1 
 &c. R. Co., 81 Ga. 72S, 8 S. E. 531. Thomp. Corp. (2d ed.) §§ 625-632. 
 The court, by Bleckly, C. J., says. 69Wemple v. St. Louis &c. R. 
 "There was no stipulation that the Co., 120 111. 196, 11 N. E. 906; 
 privilege of entering Atlanta was Smith v. Allison, 23 Ind. 366; Mc- 
 to be secured before the notes be- Millan v. Maysville &c. R. Co., 15 
 came payable. The clause relat- B. Mon. (Ky.) 218, 61 Am. Dec. 
 ing to that privilege was intro- 181; Swartout v. Michigan Air 
 duced to describe the railroad as Line R. Co., 24 Mich. 389; North 
 it was to be ultimately, not as it Missouri &c. R. Co. v. Winkler, 29 
 was to be at the maturity and pay- Mo. 318; Miller v. Pittsburgh &c. 
 ment of the subscriptions to the R. Co., 40 Pa. St. 237, 80 Am. Dec. 
 capita] stock." 570 (where subscription said "lo- 
 ss Paducah &c. R. Co. v. Parks, cated and constructed") ; Berry- 
 
 86 Tenn. 554, 8 S. W. 842; Will- man v. Cincinnati Southern R. Co;, 
 iams v. Fort Worth &c. R. Co., 82 14 Bush (Ky.) 755 (same as last 
 Tex. 553, 18 S. W. 206. See fur- case). 
 
§ 140 RAILROADS 252 
 
 formed before the subscription could be collected^" And so a 
 • stipulation that the road should be operated independently of an 
 existing railroad was held to relate to what should be done after 
 payment was made and the road was completed.''^ Where the 
 subscribers promised to pay the sums set opposite their names, 
 in equal instalments at six, twelve and eighteen months from a 
 certain date, to be used only toward paying the damages and 
 costs in acquiring the right of way, if the plaintiff's railroad 
 should be permanently located and constructed through Lexing- 
 ton, it was held that the construction of the road was not a con- 
 dition precedentJ^ It is generally held, in accordance with the 
 authorities already cited, that a subscription, made upon the ex- 
 press condition that the company shall locate and construct its 
 railroad to a certain point, becomes payable at the time or times 
 mentioned in the contract of subscription, if the railroad shall 
 have been located at that point, and that the construction of the 
 road, unless expressly made so, is not a condition precedent to 
 the payment of the subscription.''* Where the subscription is 
 made upon condition that the road be "built" to a certain point, 
 the money is payable upon call when the road is permanently lo- 
 cated, in good faith, upon the designated route.''* And the same 
 rule applies where the condition is that the railway shall "pass" 
 through a certain country.''* Payment of such a subscription may 
 
 TO Chamberlain v. PainesvMle &c. 74 Warner v. Callender, 20 Ohio 
 
 R. Co., IS Ohio St. 22S; Ashtabula St. 190; Swartout v. Michigan Air 
 
 &c. R. Co. V. Smith, IS Ohio St. Line R. Co., 24 Mich. 389; Woon- 
 
 .328. See also Pittsburgh &c. R. socket Union R. Co. v. Sherman, 8 
 
 Co. V. Biggar, 34 Pa. St. 455. R. I. 564. . In this latter case the 
 
 71 Johnson v. Georgia Midland subscription was payable 'if the 
 &c. R. Co., 81 Ga. 72S, 8 S. E. 531. road is built" through a certain 
 
 72 Berryman v. Cincinnati &c. R. village. See also Hunt v. Upton, 
 Co., 14 Bush (Ky.) 7SS. But see 44 Wash. 124, 87 Pac. 56. 
 Burlington &c. R. Co v. Boestler, 75 Ashtabula &c. R. Co. v. Smith, 
 IS Iowa SSS. 15 Ohio St. 328; North Missouri R. 
 
 73 Miller v. Pittsburgh &c. R. Co. v. Winkler, 29 Mo. 318; Cham- 
 Co., 40 Pa. 237, 80 Am. Dec. 570; berlain v. Painesville &c. R. Co., IS 
 McMillan v. Maysville &c. R. Co., Ohio St. 225. 
 
 15 B. Mon. (Ky.) 218, 61 Am. Dec. 
 181. 
 
253 
 
 SUBSCRIPTIONS 
 
 §140 
 
 be enforced, it seems although work upon the road has been sus- 
 pended from lack of means to prosecute it. To permit the sub- 
 scriber to set up such a suspension as a defense in a suit to col- 
 lect the subscriptioji woijld be to permit Jiim to take advantage 
 of his own wrong and bad faith in refusing to pay what he agreed 
 to pay at a time fixed in order that the company might have 
 means with which to build the road.'''® It is now established by 
 the decided weight of authority that stock may be subscribed 
 or money donated to a railroad company upon condition that it 
 will locate or build its road upon a specified route not inconsist- 
 ent with its charter, and which does not plainly, conflict with the 
 interests of the public ; and that any such agreement to take stock 
 or to pay money will become binding when the road is so located.' '^ 
 But where a citizen and business man of a town made a subscrip- 
 tion on condition that the company would construct and operate 
 its road through or into the town, it was held that this had refer- 
 ence to the limits, of the town as they existed at the time, and that 
 
 "6 Miller v. Pittsburgh &c. R. 
 Co., 40 Ps. St. 237, 80 Am. Dec. 
 570. 
 
 7T Martin v. Pensacola &c. R. 
 Co., 8 Fla. 370, 78 Am. Dec. 713; 
 Paris &c. R. Co. v. Henderson, 
 89 111. 89; Jewett v. Lawrence- 
 burgh &c. R. Co., 10 Ind. 539; Bur- 
 lington &c. R. Co. V. Boestler, IS 
 Iowa SSS; Des Moines &c. R. Co. 
 V. Graff, 27 Iowa 99, 1 Am. Rep. 
 256; Cedar Rapids &c. R. Co. v. 
 Spafford, 41 Iowa 292; McMillan 
 V. Maysville &c. R. Co., IS B. Mon. 
 (Ky.) 218, 61 Am. Dec. 181; Bucks- 
 port &c. R. Co. V. Brewer, 67 
 Maine 295; Tygard v. Western Md. 
 R. Co., 24 Md. 563, 89 Am. Dec. 
 760; Agricultural &c. R. Co. v. 
 Winchester, 13 AJlen (Mass.) 29; 
 Swartout v. Michigan &c. R. Co., 
 24 Mich. 389; Missouri Pacific R. 
 
 Co. V. Taggard, 84 Mo. 263, 54 
 Am. Rep. 97; Cayuga Lake &c. R. 
 Co. V. Kyle, S T. & C. (N. Y.) 659. 
 Buffalo &c. R. Co. v. Pottle, 23 
 Barb. (N. Y.) 21; Mansfield &c. R. 
 Co. V. Brown, 26 Ohio St. 223; 
 Cumberland Valley R. Co. v. Baab, 
 9 Watts (Pa,.) 458; Moore v. Han- 
 over Junction R. Co., 94 Pa. St. 
 324; Woonsocket &c. R. Co. v. 
 Sherman, 8 R. I. 564; Charlotte &c. 
 R. Co. V. Blakeley, 3 Strobh. (S. 
 Car.) 245; Nashville &c. R. Co. v. 
 Jones, 2 Cold. (Tenn.) 574; Rose v. 
 San Antonio &g. R. Co., 31 Tex. 49; 
 Connecticut &c. R. Co. v. Baxter, 
 32 Vt 805; Racine Co. Bank v. 
 Ayres, 12 Wis. 512; Post, §§ 417, 
 418. But see Woodstock Iron Co. 
 V. Richmond &c. Extension Co., 129 
 U. S. 643, 32 L. ed. 819; 9 Sup. Ct. 
 402; Florida &c. R. Co. v. State, 
 
141 
 
 RAILROADS 
 
 254 
 
 the construction of the road into territory afterwards annexed to 
 the town was not a compliance therewith.'* 
 
 § 141 (122). Effect of alteration in route fixed by charter. — ■ 
 Generally, if a subscription be made to a railroad, whose route 
 is fixed by its charter, any material alterations in such route, 
 made without his consent, will release the subscriber from lia- 
 bility.''* In a Georgia case where the southern terminus was 
 
 31 Fla. 482, 13 So. 103, 34 Am. St. 
 30; St. Louis &c. R. Co. v. Mathers, 
 104 111. 2S7; St. Joseph &c. R. Co. 
 V. Rj-an, 11 Kans. 602, IS Am. Rep. 
 3S7; Pacific R. Co. v. Seely, 45 Mo. 
 212, 100 Am. Dec. 369. An agree- 
 ment to pay a staled sum to se- 
 cure the location of a railroad upon 
 a specified route was upheld and 
 enforced on the ground that the 
 public interest was not opposed to 
 the location required by the condi- 
 tion, in First National Bank v. 
 Hendre, 49 Iowa 402, 31 Am. Rep. 
 153. A condition involving the lo- 
 cation of the proposed route of a 
 turnpike company's roaa has been 
 held void in New York as an at- 
 tempt to influence by improper 
 nieans the decision of a question in 
 which public interests are involved, 
 and therefore against public policy. 
 Butternuts &c. T. Co. v. North, 1 
 Hill (N. Y.) 518; Fort Edwards &c. 
 Co. v. Payne, IS N. Y. 583; Mace- 
 don S'c. Plank R. Co. v. Snediker, 
 18 Barb. (N. Y.) 317. See to the 
 same effect as to railroads, Utica 
 &c. "'R. ' Co. v'.' Brinckerhoff, 21 
 Wend. (N. Y.) 139, 34 Am. Dec. 
 220. But see later New York cases 
 cited, supra. 
 
 'SSt. Loius &c. R. Co. V. Houck, 
 120 Mo. App. 634 97 S. W. 963. The 
 court also held that the construction 
 
 of a new line from the point named 
 to a point where it connected with 
 an old line extending into the town 
 would be sufficient, but that where 
 it was also a condition to the pay- 
 ment of the subscription that the rail- 
 road company "shall have construc- 
 ted and begun the operation" of a 
 road through or into a certain town, 
 and "shall have caused" a certain 
 trust company "to execute in favor of 
 the undersigned a bond" in a cer- 
 tain sum, conditioned that the line 
 would be maintained and operated 
 for the period of five years, it was 
 understood that the operation of 
 the road should be begun in good 
 faith and with the intention of con- 
 tinuing to run trains for five years, 
 and an operation designed to be 
 temporary, either in order to con- 
 form to the words of the subscrip- 
 tion, or as a makeshift until a de- 
 pot was built outside of the town 
 named, to be stopped as soon as 
 the new depot was finished and the 
 mere running of a local train to 
 and from the depot for convenience 
 of the train crew, was not suffi- 
 cient. 
 
 T9 Caley v. Philadelphia &c. R. 
 Co., 80 Pa. St. 363;. Danbury &c. R. 
 Co. V. Wilson, 22 Conn, 435;. Buck- 
 field &c. R. Co. V. Irish, 39 Maine 
 44. But see where it was not def- 
 
255 SUBSCRIPTIONS § 141 
 
 changed by act of the legislature, passed upon application of the 
 corporation, from HawkinsviHe to Thomasville, and the author- 
 ized capital was greatly increased, the court held that a dissent- 
 ing subscriber was released by such alterations, although, when 
 he subscribed, the general law under which the first charter was 
 obtained authorized amendments to be made to the charter, the 
 route to be changed, and the capital stock to be increased.®" The 
 same is true if the subscription paper specifies the route and 
 termini, and material alterations are made in them after it is 
 signed ; and passing a resolution to make such a change will be 
 evidence of an abandonment of the route as originally contem- 
 plated.^^ Where a subscription is made upon a condition as to 
 location, the subscriber may show that the alterations made, 
 though very slight, are material alterations as to him. Thus, 
 where the road is constructed 1,200 feet from the subscriber's 
 mill, instead of 500 feet, as required by the condition annexed to 
 the subscription, it has been held that the subscriber may show 
 that his interests are so injuriously affected by the change that 
 he would have no inducement to subscribe stock in a road on 
 the new location.*^ And building a railroad twenty-four hundred 
 feet from a certain point, with a branch passing over the route 
 mentioned in the condition, will not fulfill a requirement that the 
 road shall be built within twelve hundred feet of the designated 
 point.*^ But a condition that the road should be constructed 
 froin! Stockton up the valley of the San Joaquin river, in the 
 direction of another town lying to the south, was held to be sub- 
 stantially complied with by the construction of the road toward 
 the east across the valley for the first few miles, and then up the 
 valley toward the town named.** Where the charter empowers 
 the corporation to change its route or termini, a subscription 
 
 initely located. Eppes v. Missis- N. Y. SSO: Plattville v. Galena &c. 
 
 sippi &c. R. Co., 35 Ala. 33. R. Co., 43 Wis. 493. 
 
 80 Snock V. Georgia Imp. Co., 83 82 Caley v. Philadelphia &c. R. 
 Ga. 61, 9 S. E. 1104. Co., 80 Pa. St. 363. 
 
 81 Caley v. Philadelphia &c. R. ssVirginia & Truckee R. Co. v. 
 Co., 80 Pa. St. 363. See also Bur- Commissioners, 6 Nev. 68. 
 lington &c. R. Co. v. Whitney, 43 84 Stockton &c. R. Co. v. Stock- 
 Iowa 113; Burrows v. Smith, 10 ton, SI Cal. 328. 
 
§ 142 RAILROADS 256 
 
 must, however, as a general rule, expressly make the construction 
 of the road to a given point operate as a condition precedent or 
 the subscription will be construed to be absolute and such 
 changes as are deemed necessary may be made without affecting 
 the subscriber's liability.^^ The same rule applies to a note given 
 for donated aid, evep where an improper motive prompted the 
 change, if it was legally made.*® 
 
 § 142 (123). Effect of abandonment or sale of road;— The fact 
 that the corporation has abandoned a part of its road,*'' or has 
 not completed, and apparently has no intention of completing 
 it,** is no defense to an action for the payment of a subscription, 
 unless the completion of the road is clearly made a condition 
 precedent. Neither, it has been held, is the sale of a portion of 
 the road under authority of a statute,*^ which provides that any 
 dissenting stockholder may exchange his shares for shares in the 
 purchasing company.*" In Indiana it is provided by statute.*! 
 that in case of a sale of any railroad by virtue of any mortgage 
 foreclosure, and the formation by the purchasers of a new corpo- 
 ration to operate the road, all subscribers to the original stock of 
 said railroad company shall be released and discharged from all 
 their unpaid subscriptions. "Recognizing the fact that stock in 
 an insolvent railwiay company, the property of which has been 
 sold in a foreclosure or other judicial proceeding, is worthless, 
 
 ssjewett' V. Valley R. Co., 34 sonville &c. Co., 7 Fla. 26S. But 
 
 Ohio St. 601. total abandonment causing a loss 
 
 86 Greenville &c. R. Co. v. John- of the charter or the like may be. 
 son. 8 Baxter (Tenn.) 332. Sodus Bay &c. R. Co. v. Lapham, 
 
 87 Armstrong v. Karshner. 47 43 Hun (N. Y.) 314; Fountain 
 Ohio St. 276, 24 N. E. 897; Dor- Ferry &c. Co. v. Jewell, 8 B. Mon. 
 man v. Jacksonville &c. R. Co., 7 (Ky.) 147; Pittsburgh &c. R. Co. v. 
 Fla. 265; Ogden v. Kirby, 79 111. Byers, 32 Pa. St. 22, 72 Am. Dec. 
 SSS. See also McMillan v. Mays- 770; McCully v. Pittsburgh &c. R. 
 ville &c. R. Co., 15 B. Mon. (Ky.) Co., 32 Pa. St. 25. 
 
 218, 61 Am. Dec. 181. _ 89 Rev. Stat. Ohio, § 3409. 
 
 88 Buffalo &c. R. Co. v. Gifford, 90 Armstrong v. Karshner, 47 
 87 N. Y. 294, 22 Hun 359. See also Ohio St. 276, 24 N. E. 897. 
 
 Four Mile Valley R. Co. v. Bailey, »i Rev. Stat. Ind. (1914), § 5335. 
 
 18 Ohio St. 208; Dorman v. Jack- 
 
257 SUBSCRIPTIONS § 143 
 
 this statute was intended to protect subscribers by cancelling all 
 obligations to pay unpaid subscriptions to such stock in all cases 
 where there shall not have been an adjustment by agreement 
 or compromise. In other words, the statute was intended to en- 
 act into a law the rule of fair dealing, that no one should be re- 
 quired to pay something for nothing."^'' 
 
 § 143 (124). Condition as to terminus — Question of intention 
 for jury. — Where a condition requires the road to run to a certain 
 named place, and there are both a township and a t^illage of that 
 name, it is a question of intention as to which is meant. And 
 this is true though the village is not incorporated, if it is com- 
 monly designated by that name.** The question as to which is 
 meant in such a case, it is Said, is to be determined by the jury 
 upon evidence offered, like any other question of fact.** 
 
 § 144 (l25). What is sufficient cOiripliance -with condition as to 
 terminus or location of depot at a certain place — Illustrative 
 cases. — Where subscriptions to the capital stock of a railroad 
 company were to be paid when the road "is completed and cars 
 running from T. to M.," it was held that payment could not be 
 enforced when the road had been built to a point nine hundred 
 and fifty feet from the limits of T. and in another county, at 
 which place its terminal facilities were located. The fact that the 
 company had built a track leading from its main line into the 
 town of T., where it had built a platform and transacted some 
 business, did not, it was held, constitute a compliance with the 
 condition of the subscription, where it was shown that such track 
 was built upon ground leased for one year, and the plaintiff's 
 president had stated that it was not intended to be permanent. 
 Such a condition in a subscription to the capital stock of a rail- 
 road company chartered to build a railfoad from one town to 
 another requires that the principal business at the latter should 
 be transacted at a point within its Corporate limits.*^ Where the 
 
 »2 Kallars, J., in Board &c. v. 9* Connecticut, &c. R. Q>. v. 
 
 State, US Ind. 64, 88, 4 N. E. 589, Baxt-ef, .32 Vt. 805. 
 
 17 N. E. 855. 9r' Tabor &c. R. Co. v. McCor- 
 
 93 0|?d«en V. Kirby, 79 111. 555. mick, 90 Iowa 446, 57 N. W. 949. 
 
 9 — Ell. Railroads I 
 
§ 145 RAILROADS 258 
 
 subscription is made upon condition that a depot be established 
 within a certain distance of a town, the distance may be meas- 
 ured in a straight line from the corporate limits without regard 
 to buildings or improvements,®® or from the recorded plat, as it 
 was at the time the subscription was made, and is not affected 
 by a subsequent annexation of adjoining territory.®'^ The meas- 
 urement of distance is not controlled by the traveled route be- 
 tween the two points.®^ The location of the depot at the desig- 
 nated point, fulfills the condition, although the side-tracks and 
 switches are placed at a greater distance away from the town.®* 
 A subscription made on condition that the depot shall be located 
 at the nearest practicable point within one mile of the courthouse, 
 is not violated by a failure to locate it at the nearest possible 
 point; but the company has fulfilled the condition when it has 
 built a depot at the nearest point within one mile of the court 
 house at which it could be located at a reasonable cost, with 
 reference to all the circumstances under which it was to be done.^ 
 An agreement to subscribe a certain amount of stock upon con- 
 dition that the railroad company shall locate a depot at a certain 
 point is held to become an absolute subscription, of which pay- 
 ment may be enforced according to its terms upon the location 
 of the depot.2 Where the condition is that the road shall be "per- 
 manently located to and within the town of W., with a station at 
 the same," the condition is not fulfilled by the construction of 
 the road through the town with a depot just outside its limits.^ 
 
 § 145 (125). General rule of construction — Performance of 
 condition by consolidated company. — Generally, where it can be 
 done without doing violence to the language used, any condi- 
 
 See also St. Louis &c. R. Co. v. 99 Courtright v. Strickler, 37 
 
 Houck, 120 Mo. App. 634, 97 S. W. Iowa 382. 
 
 963. 1 Wooters v. International R. 
 
 96 Courtright v. Strickler, 37 Co., 54 Tex. 294. 
 
 Iowa .382. 2 North Missouri R. Co. v. Mil- 
 
 8T Davenport &c. R. Co. v. Rog- ler, 31 Mo. 19. 
 
 ers, 39 Iowa 298. 3 Davenport &c. R. Co. v. O'Con- 
 
 98 Cedar Falls &c. R. Co. v. ner, 40 Iowa 477. See also St. 
 
 Rich, 33 Iowa 113. Louis &c. R. Co. v. Houck, 120 
 
 Mo. App. 634, 97 S. W. 963. 
 
259 
 
 SUBSCRIPTIONS 
 
 §^145 
 
 tions imposed will be given such a construction as will further 
 the enterprise. And a condition relating to the construction of 
 the road may be so far complied with by another company which 
 builds it, as to hold the subscriber;* for it is usually of no im- 
 portance to the subscriber who builds the road, if it is built in 
 pursuance of the plan existing when the subscription was made. 
 But the_ subscriber can, of course, limit his subscription to a sin- 
 gle company, by express stipulation. And the consolidation of 
 the railroad company with another made after the subscription, 
 but before the stock was issued under a power existing when the 
 subscription was made, has been held not to release a town from 
 liability upon bonds issued in payment of such a subscription. ^ 
 The liability upon such a subscription cannot be denied where the 
 municipality took an active part in bringing about the consoli- 
 dation.® But where the consolidated company has a longer route 
 
 4 Michigan &c. R. Co. v. Bacon, 
 33 Mich. 466. See also Muscatine 
 &c. R. Co. V. Horton, 38 Iowa 33; 
 Merrill v. Gamble, 46 Iowa 615; 
 Munroe v. Fort Wayne &c. E. Co., 
 28 Mich. 272. The purchaser of a 
 railroad, under a decree of fore- 
 closure, after one installment on a 
 township subscription to the rail- 
 road has been paid, acquires no in- 
 terest in the money subscribed to 
 the original company. Board of 
 Commissioners v. State, 115 Ind. 
 64, 4 N. E. 589, 17 N. E. 855. A 
 promise to pay money upon the 
 completion of a railroad described 
 in the contract as the Delphos, 
 Bluflfton and Frankfort Railroad 
 can only be enforced by the promi- 
 see upon proof that the railroad 
 named has been completed, and it 
 will not be sufficient to entitle the 
 promisee to a recovery to prove 
 that a railroad has been built, for 
 it must be shown that the railroad 
 
 described has been built. Low v. 
 Studabaker, 110 Ind. 57, 10 N. E. 
 301. 
 
 BMenasha v. Hazard, 102 U. S. 
 81, 26 L. ed. 85; Mt. Vernon v.- 
 Hovey, 52 Ind. 563. The subscrip- 
 tion of a county to bonds in aid of 
 a railroad is not annulled by con- 
 solidation of such railroad company 
 with another, under a law providing 
 that the railroad company might 
 consolidate with other campanies 
 with the aproval of two-thirds of 
 the stock held in each company. 
 Chicago &c. R. Co. v. Board &c., 36 
 Kans. 121, 12 Pac. 593. 
 
 6 County of Tipton v. Locomotive 
 Works, 103 U. S. 523, 26 L. ed. 340. 
 A township ir^ Missouri voted bonds 
 in aid of the C. & O. R. Co., whose 
 road was not then built, and who-:e 
 articles of association declared that 
 its object was to construct and op- 
 erate a , railroad from C. to such 
 point on the line between Missouri 
 and Iowa as should be deemed tl;e 
 
§146 
 
 RAILROADS 
 
 260 
 
 and different termini than the company to which the subscription 
 was made, and the consolidation is entered into without the con- 
 sent of the subscriber, it has been held that the subscription can- 
 not be enforced^ Such contracts are interpreted by the same 
 rules as other contracts, with reference to the true intent and 
 meaning of the parties ; and in order to ascertain such intent and 
 meaning, the circumstances under which the agreement was made 
 may be shown.* The condition, to be valid, must be expressed 
 in the subscription. Secret agreements between the subscriber 
 and the oflficers of the company afford no protection to the sub- 
 scriber, but the subscription will usually be enforced as an ab- 
 solute one.® 
 
 § 146 (127). Fraudulent representations in obtaining sub- 
 scription. — A subscription to capital stock is understood to be 
 niade upon the implied condition that the representations of the 
 company or its ofiScers and authorized agents and promoters as 
 to the financial condition of the enterprise, the amount and kind 
 
 best route for operating a road be- 
 tween C. and Omaha, Nebr. Be- 
 fore the bonds were issued, the C. 
 
 6 O. consolidated with an Iowa 
 company, and the consolidated com- 
 pany proceeded to construct and 
 operate a road from St. Louis, by 
 way of C, to Council Bluffs, Iowa, 
 and Omaha, and the bonds were is- 
 sued to the consolidated company. 
 The court held that as consolidation 
 was necessary, in order to carry out 
 the purpose for which the C. & O. 
 Co. was organized, the existing 
 statutory provision therefor became 
 part of the contract with the town- 
 ship, and the issuance of bonds to 
 the consolidated company was valid. 
 Livingston County v. First Nat. 
 Bank, 128 U. S. 102, 9 Sup. Ct. 18, 32 
 L. ed. 359. 
 
 T Rochester &c. R. Co. v. Cuyler, 
 
 7 Lans. (N. Y.) 431. See also 
 
 Marsh v. Fulton County, 10 Wall. 
 (U. S.) 676, 19 L. ed. 1040. 
 
 8 Detroit &c. R. Co. v. Starnes, 
 38 Mich. 698. See also Sta'-e v. 
 Old Town Bridge Co., 85 Maine 
 17, 26 Atl. 947; Rogers v. Gallo- 
 way &c. College, 64 Ark. 627, 44 
 S. W. 454, 39 L. R. A. 636. 
 
 9 Great Western Tel. Co. v. 
 Haight, 49 111. App. 633; Madison 
 &c. R. Co. V. Stevens, 6 Ind. 379; 
 Minneapolis &c. Co. v. Davis, 40 
 Minn. 110, 12 Am. St. 701; York 
 Park &c. Assn. v. Barnes, 39 Nebr. 
 834, 58 N. W. 440; Robinson v. 
 Pittsburgh &c. R. Co., 32 Pa. St. 
 334, 72 Am. Dec. 792; Cunningham 
 V. Edgefield &c. R. Co., 2 Head 
 (Tenn.) 23; Downie v. White, 12 
 Wis. 176, 78 Am. Dec. 731. See ar- 
 ticle in 28 Am. Law Reg. (N. S.) 
 306; also Oswald v. Minneapolis S,t. 
 Co., 65 Minn. 249, 68 N. W. 15. 
 
261 
 
 SUBSCRIPTIONS 
 
 §146 
 
 of property which it owns, or any other existing facts that would 
 influence subscriptions, upon the faith of which such subscrip- 
 tion is made, shall be true and made in good faith." And not 
 only is this true, but where statements are made to induce sub- 
 scriptions there must be a full and fair statement of all material 
 facts, which it is the duty of the corporation or its agents to dis- 
 close. A suppression of part of the truth will often amount to 
 a misrepresentation.^^ But representations, in order to be so far 
 binding upon the corporation as to avoid the subscription in case 
 they prove to be false, must generally relate to some fact exist- 
 ing either in the past or present time which has an influence upon 
 the status of the corporation.^^ And it must appear that the rep- 
 
 lOCook Corporations (7th ed.), 
 Ch. 9. See also Southern In-; Co. 
 V. Milligan, 154 Ky. 216, IS; S. \V. 
 37; Davis v. Louisville Trusi Co., 
 181 Fed. 10, 30 L. R. A. (N. S.) 
 1011 (subscriber may rely on report 
 made to Bfadstreet or Davis) ; 8 
 Thomp. Corp. §§708, 726, 727, 728. 
 
 11 New Brunswick &c. R. Co. v. 
 Muggeridge, 1 Dr. & Sm. 363, 381; 
 Directors &c. R. Co. v. Kisch, J^. R. 
 2 H. L. Gas. 99;- Oakes v. Tur- 
 quand, L. H. 2 H. L. Cas. 323, 2 
 Pom. Eq. Jur. §§901, 902. Where 
 the prospectus set forth the own- 
 ership by the corporation of a piece 
 of property claimed to be of great 
 value, the omission to stale that a 
 very large sum of money was paid 
 for it was held to be a fraudulent 
 suppression of facts. Directors <ii. 
 V. KiSch, L. R. 2 H. L. Cas. 99. An 
 omission to state in a prospectus 
 how many shares have been taken 
 by the directors is not. Directors 
 ■&c. V. Kisch, L. R. 2 H. L. Cas. 
 99; Atlanta &c. R. Co: v. Hodnett, 
 36 Ga. 669; Pulsford v. Richards, 
 17 Beav. 87, 17 Jur. 865; Heymann 
 
 V. European &c. R. Co., L. R. 7 Eq. 
 154. 
 
 12 Edington v. Fitzmaurice, L. R. 
 29 Ch. Div. 459; Southern Ins. Co. 
 V. Milligan, 154 Ky. 216, 157 S. 
 W. 37. See generally Alabama &c. 
 Works V. Dallas, 127 Ala. 513, 29 
 So. 459; Tyler v. Savage, 143 U. 
 S. 79, 12 Sup. Ct. 340, 36 L. ed. 
 82, 8 Thomp. Corp. §§714, 721. A 
 person induced to give a n)*; for 
 subscription to the capital stock of 
 a railroad by representations that 
 only a certain amount of stock 
 would be issued when there had al- 
 ready been issued a larger amoimt, 
 is relieved from his subscription. 
 Weems v. Georgia &c. R. Co., 84 
 Ga. 356, 11 S. E. 503. So is one 
 who is induced to subscribe by 
 means of a false statement that cer- 
 tain stock has been subscribed. 
 Arnison v. Smith, 59 L. T. R. 627; 
 Spellier &c. Co. v. Leedom, 149 Pa. 
 St. 185, 24 Atl. 197. Or that a 
 government guaranty has been ob- 
 tained. Kisch V. Central R. &c., 34 
 L. J. (Ch.) 545. So, a false state- 
 ment by an officer that none of the 
 
§146 
 
 RAILROADS 
 
 262 
 
 resentations were relied upon as true by the subscriber, and 
 formed an inducement to make the subscription.^* Any repre- 
 sentations as to the future policy or intentions of the corpora- 
 tion^* or any parol promises or agreements as to what the cor- 
 
 itock had been sold fof less than 
 par has been held suflicient to au- 
 thorize a rescission. 'Hubbard v. 
 International Mercantile Agsncv 
 (N. J. Ch.), 59 Atl. 24. So, a repre- 
 sentation that a certain prominent 
 businc!? nj.in has subscribed ior a 
 large amount, when it was given 
 to him without the payment of any 
 purchase price therefor, is sufficient 
 to render voidable any subscription 
 induced by such representations. 
 Coles V. Kennedy, 81 Iowa 360, 46 
 N. W. 1088, 25 Am. St. 50^; and 
 ■other cases cited in note in 29 L. R. 
 A. (N. S.) 477. And so is a false 
 representation that certain i)i-operty 
 has been purchased and is owned by 
 the company, and that the company 
 is in good condition and is earning 
 on the completed portion of the 
 road four and one-half per cent, on 
 the entire cost of the road, when 
 the agent knew that the comjiany 
 •was almost bankrupt, having neitlier 
 money nor credit and that its stock 
 was almost worthless. Waltlo v. 
 Chicago &c. !•'.. Co., 14 Wis. 57 S. 
 
 13 Authorities cited in prece'iig 
 note. Jennings v. Broughton, 22 L. 
 J. (N. S.) Ch. 585; Grone v. Eco- 
 nomic L. Ins. Co. (Del. Ch.), 80 Atl. 
 809 ; Mitchell v. Deeds, 49 111. 416, 95 
 Am. Dec. 621 ; Melendy v. Keen, 89 
 111. 395; Sinnett v. Moles, 38 Iowa 
 25; Oregon Central R. Co. v. Scog- 
 gin, 3 Ore. 161; 2 Pom. Erj. liir. 
 § 890. See Crump v. U. S. Mining 
 Co., 7 Grat. (Va.) 352, 56 Am. Dec. 
 
 116. It is said that the misrepre- 
 sentations must not only be made 
 without an ''.unest belief in their 
 truth. bu» niust h^ve been intended 
 for the jub icriber to act upon, and 
 he must have acted in reliance up- 
 on them. But the authorities on the 
 question cannot be said to bear out 
 this rule any further than that the 
 subscriber must have been so far in- 
 fluenced by the misrepresentations 
 as to material facts concerning the 
 enterprise that it would operate as a 
 fraud upon him to hold him to a con- 
 tract into which he would not know- 
 ingly have entered, although there are 
 many dicta which go much further. 
 In an action on a note given for sub- 
 scription to the stock of a railroad, 
 defendant claimed that plaintiff when 
 soliciting the subscription repre- 
 sented that the road would be 
 stocked and bonded only to a cer- 
 tain amount per mile, whereas it 
 was stocked and bonded to a much 
 larger amount per mile but he did 
 not testify that he wo'.dd noi have 
 subscribed and given his note if he 
 had known how nrnc^ stock and 
 bonds had been or woi'.I.I be issued, 
 and it appeared thnt other true rep- 
 resentations were the chief induce- 
 •:ient .to his subscifjtioii. r[e vjus 
 held bound by his "subscription. 
 Weems v. Georgia Midland &c. K. 
 Co., 88 Ga. 303, 14 S. E. 583. 
 
 14 Jeflferson v. Hewitt, 95 Cal. 535, 
 30 Pac. 772; Weston v. Columbus 
 &c. R. Co., 90 Ga. 289, IS S. E. 
 
263 
 
 SUBSCRIPTIONS 
 
 §146 
 
 poration will or will not do cannot be interposed as a defense to 
 an absolute subscription,^^ even though made with a fraudulent 
 
 773 ; McCallister v. Indianapolis &c. 
 R. Co., 15 Ind. 11; Topeka &c. Co. 
 V. Hale, 39 Kans. 23, 17 Pac. 601; 
 Anderson v. Middle &c. R. Co., 91 
 Tenn. 44, 17 S. W. 803, 52 Am. & 
 Eng. R. Cas. 149. 
 
 15 Ogilvie V. Knox Ins. Co., 22 
 How. (U. S.) 380, 16 L. ed. 349; 
 Smith V. Tallahassee Branch &c. R. 
 Co., 30 Ala. 650; Dill v. Wabash 
 Valley R. Co., 21 111. .91 ; Qem 
 V. Newcastle &c. R. Co., 9 Ind. 
 488, 68 Am. Dec. 653; Wight v. 
 Shelby R. Co., 16 B. Mon. (Ky.) 
 4, 63 Am. Dec. 522; German 
 National Banks' Receiver v. Na- 
 gel, 26 Ky. 748, 82 S. W. 433; 
 Vicksburgh &c. R. Co. v. McKean, 
 12 La. Ann. 638; Swatara R. Co. 
 V. Brune, 6 Gill. (Md.) 41; Walk- 
 er V. Mobile &c. R. Co., 34 Miss. 
 245; LaGrange &c. Co. v. Mays, 29 
 Mo. 64; White Mountains R. Co. v. 
 Eastman, 34 N. H. 124; Syracuse 
 &c. R. Co. V. Gere, 4 Hun (N. Y.) 
 392; North Eastern R. Co. v. Rordi- 
 gues, 10 Rich. (S. Car.) 278; Jewett 
 V. Valley R. Co., 34 Ohio St. 601; 
 Oregon Central R. Co. v. Scoggin, 
 3 Ore. 161 ; Grossman v Penrose 
 Ferry Bridge Co., 26 Pa. St. 69; 
 East Tennessee &c. R. Co. v. Gam- 
 mon, S Sneed (Tenn.) 567; Mil- 
 waukee &c. R. Co. V. Field, 12 Wis. 
 340. Proof that the execution of 
 the contract was procured by false 
 and fraudulent representations by 
 the company that the means were 
 already provided for t''.i" construc- 
 tion of the road betw.-cr two 
 points within the time Sj-ecified, 
 
 where the subscription was made 
 upon the condition that another por- 
 tion of the road should be con- 
 structed within that time was lield 
 insufficient to constitute a defense to 
 an action on the subscription. 
 Blair v. Buttolph, 72 Iowa 31, 33 
 N. W. 349. A representation that 
 payment will not be demanded mitil 
 certain work is completed does not 
 bind till' i.ompany. LaGrange &c. 
 R. Co. V. Mays, 29 Mo. 64; Clem 
 V. Newcastle &c. R. Co., 9 Ind. 488, 
 68 Am. Dec. 653. Nor does a rep- 
 resentation that the road n -.11 be ex- 
 tended to a certain point. Low v. 
 Studabaker, 110 Ind. 57, 10 N. E. 
 301. Or that a branch road v,ill be 
 built. McAlister v. Indianapolis &c. 
 R. Co., 15 Ind. 11 ; Guarantee &c. 
 Co. V. Weil, 141- Pa. St. 511, 21 Atl. 
 665. But it is said that if a person 
 is induced to subscribe for stock by 
 means of an agreement made by an 
 officer of the corporation within 
 the scope of his authority, the sub- 
 scriber may, upon failure of the 
 corporation to perform the agree- 
 ment, cancel his subscription md re- 
 cover back the sums paid on the 
 stock. Weeden v. Lake Erie &c. R. 
 Co., 14 Ohio 563; Grossman v. Pen- 
 rose Ferry Bridge Co., 26 Pa. St. 
 69. The fact that the sub.^cription 
 was made in rel'ance upon the 
 statement of the company's agent 
 who procured the subscription that 
 the road would be economically 
 built, and that the stock would 
 prove a good investment, is no de- 
 fense to an action to enforce pay- 
 
§146 
 
 RAILROADS 
 
 264 
 
 intent by the company's agents in order to procure the subscrip- 
 tion. Nor will any statement as to the legal eifect of the contract 
 of subscription, or as to the legal rights and liabilities assumed, 
 prove a defense, for every one is bound to know the law.^® State- 
 ments of facts, however, need not, ordinarily, be made with 
 knowledge of their falsity; for, if the corporation or its agents 
 mislead a subscriber by statements recklessly made in ignorance 
 of the truth it may not take advantage of the acts induced by its 
 own misstatements. ^'^ Statements which amount only to an ex- 
 pression of opinion, if honestly made without intent to deceive, 
 or if made in relation to matters equally open to the knowledge 
 of both parties, will not amount to fraudulent representations.^* 
 Thus, a representation that a sufficient amount of solvent stock 
 was subscribed to complete the road within two years, and that 
 the company was able, and would complete it within that time, 
 does not amount to a fraudulent representation even though 
 untrue." Nor would a statement that the construction company, 
 
 ment. Weston v. Columbus South- 
 ern R. Co., 90 Ga. 289, 15 S. E. 
 773. 
 
 16 Upton V. Tribilcock, 91 U. S. 
 45, 23 L. ed. 203; Clem v. New- 
 castle &c. R. Co., 9 Ind. 488, 6", 
 Am. Dec. 653; Parker v. Thomas, 
 19 Ind. 213, 81 Am. Dec. 38Sn; 
 North Eastern R. Co. v. Rodrigues, 
 10 Rich. (S. Car.) 278. But see Upton 
 V. Englehart, 3 Dill. (U. S.) 496, Fed. 
 Cas. No. 16800, where a misrepresent- 
 ation as to the legal liability of the 
 stockholders in a corporation organ- 
 ized in another state was held to be 
 a defense. 
 
 I'f Henderson v. Railroad Co., 17 
 Tex. 560, 67 Am. Dec. 675; Reese 
 River &c. Co. v. Smith, L. R. 4 H. 
 L. 64; Edington v. Fitzmaurice, L. 
 R. 29 Ch. Div. 4S9; 2 Pom. Eq. 
 Jur. § 887. The courts incline very 
 strongly to uphold subscriptions to 
 
 capital stock, and many cases inti- 
 mate that the person making the 
 statement must have had a fraudu- 
 lent purpose, or such knowledge as 
 would impute such fraudulent pur- 
 pose to him. Nugent v. Cincinnati 
 &c. R. Co., 2 Disney (Ohio) 302; 
 Selma &c. R. Co. v. Anderson, 51 
 Miss. 829; Cunningham v. Edgefield, 
 &c. R. Co., 2 Hed. (Tenn.) 23. 
 
 18 Montgomery &c. R. Co. v. 
 Matthews, 77 Ala. 357, 54 Am. Rep. 
 60; Walker v. Mobile R. Co., 34 
 Miss. 245; 2 Pom. Eq. Jur. §878. 
 See also German Nat. Bank's Re- 
 ceiver v. Nagel, 26 Ky. 748, 82 S. 
 W. 433; West End &c. Co. v. Clai- 
 borne, 97 Va. 734, 34 _S. E. 900. 
 In re. National Pressed Brick Co., 
 212 Fed. 878. 
 
 19 Brownlee v. Ohio &c. R. Co., 
 18 Ind. 68; Weston v. Columbus &c. 
 R. Co., 90 Ga. 289, IS S. E. 773. 
 
265 SUBSCRIPTIONS § 146 
 
 which had undertaken to build and equip the road, was able to 
 complete it by the use of its own resources, without any advance 
 from the company. ^o Representations made by an agent of a 
 railroad company in reference to the value of a donation of land 
 made by congress to the company, and in relation to the amount 
 of assets of the company, and its ability to complete the road 
 within a certain time, and the probable cost and profits of the 
 road, though false and exaggerated, and made to induce persons 
 to subscribe for the stock, were held to be but expressions of 
 opinion, and not to amount to fraudulent representations.^^ And 
 representations that the road would be constructed over a certain 
 route within a certain time, although offered as an inducement 
 to subscribe for stock,, and operating as such, have been held to 
 be no defense to an action for payment of the subscription.^^ 
 Where the directors, in good faith and by honest mistake of 
 judgment, added to the assets certain debts which proved not to 
 be collectible, and thereby showed the company to be solvent, 
 when the loss of the money represented by such debts threw it 
 into insolvency, it was held not fraudulent misrepresentation. ^^ 
 The same holding was made where it was stated in good faith 
 that the corporation had a valid government contract, but, upon 
 litigation, this was found to be untrue.^* And it has even been 
 held that a representation that title to land was good when in 
 fact it was bad, if made in good faith with an honest belief that 
 it is true is not a fraudulent misrepresentation.^^ The mere intent 
 on the part of the company to deceive and defraud by misrepre- 
 
 See also Johnson v. National &c. pleas are fatally bad, because they 
 
 Assn., 125 Ala. 465, 28 So. 2. do not aver that Kirkpatrick did 
 
 20 Andrews v. Ohio &c. R. Co., not honestly entertain the opinions 
 14 Ind. 169. he expressed." See also Blair v. 
 
 21 Walker v. Mobile &c. R. Co., Buttolph, 72 Iowa 31, 33 N. W. 349; 
 34 Miss. 245. See also Union Nat. Ellison v. Mobile &c. R. Co., 36 
 Bank v. Hunt, 76 Mo. 439., Miss. 572. 
 
 22 Montgomery &c. R. Co. v. Mat- 23 Jackson v. Turquand, L. R. 4 
 thews, n Ala. 357, 54 Am. Rep. 60. H. L. 305. 
 
 The court, by Stone, C. J., says : 2* Kennedy v. Panama &c. Co., 
 
 "The representations set forth in L. R. 2 Q. B. 580. 
 
 each of the special pleas * * * 26New Brunswick &c. R. Co. v. 
 
 could be nothing but opinion. These Conybeare, 9 H. L. Cas. 711. 
 
§147 
 
 RAILROADS 
 
 266 
 
 sentations is immaterial if it does not cause any damage to the 
 subscriber. 2" Representations, false when made, but which be- 
 come true by the force of intervening events before the subscrip- 
 tion is completed, cannot afterward, it seems, be complained of 
 by the subscribers.^^ 
 
 § 147 (128). Misrepresentations in prospectus and by agents- 
 
 generally. — The fraudulent representations which will avoid a 
 subscription may be made by statements contained in a prospec- 
 tus issued by the authority of the directors or the stockholders' 
 of a corporation if they induced the subscription to be made.**^ 
 Or they may be contained in a report made by the corporate ofii^ 
 cers to the stockholders ; for a person may rely upon such a report 
 when subscribing for stock.^* And the corporation is chargeable 
 with the frauds and misrepresentations of its authorized agents 
 to procure subscriptions.^" It was formerly held in England that 
 
 26 Keller v. Johnson, 11 Ind. 337, 
 71 Am. Dec. 355 ; Cunningham v. 
 Edgefield &c. R. Co., 2 Head 
 (Tenn.) 23; 2 Pom. Eq. Jur. §898. 
 
 27 Ship V. Crosskill, L. R. 10 Eq. 
 Cas. 73. 
 
 28 Oakes v. Turquand, L. R. 2 H. 
 L. Cas. 325. See also Bosher v. 
 Richmond &c. Co., 89 Va. 455, 16 
 S. E. 360, 37 Am. St. 879; 2 Pom. 
 Eq. Jur. § 881; 8 Thomp. Corp. 
 § 728. But due allowance must be 
 made for high coloring and some ex- 
 aggeration due to the sanguine ex- 
 pectations of the promoters. Directors 
 &c. Central R. Co. v. Kisch, L. R. 2 
 H. L. Cas. 99. The language of the 
 prospectus will be construed in favor 
 of the validity of the subscription. 1 
 Cook Corp. (7th. ed.), § 143. See 
 as to liability of promoter for fraud 
 in prospectus. Downey v. Finu- 
 cane, 205 N. Y. 251, 98 N. E. 391, 
 40 L. R. A. (N. S.) 307. 
 
 29 New Brunswick &c. R. Co. v. 
 
 Conybeare, 9 H. L. Cas. 711 ; Na- 
 tional &c. Co. V. Drew, 32 Eng. 
 Law & Eq. 1. See also Peterson. 
 V. People's &c. Assn., 124 Mich. 573, 
 83 N. W. 606. 
 
 30 Montgomery &c. R. Co. v. Mat- 
 thews, n Ala. 357, 54 Am. Rep. 60; 
 Ranger v. Great Western R. Co., S 
 H. L. Cas. 72. If the president had 
 no authority to take subscriptions 
 and did not in fact take the sub- 
 scription, the subscriber can not 
 charge the company with fraud be- 
 cause of any representations he may- 
 have made. Rives v. Montgomery 
 South Plank R. Co., 30 Ala. 92. And 
 the subscriber is bound to know that 
 commissioners with statutory powers 
 to take subscriptions cannot bind 
 the corporation by any representa- 
 tions which they may make. Bav- 
 ington V. Pittsburgh &c. R. Co., 34 
 Pa. St. 358; Wight v. Shelby R. 
 Co., 16 B. Mon. (Ky.) 4, 63 Am. 
 
267 
 
 SUBSCRIPTIONS 
 
 §147 
 
 the corporation was only bound by such representations as the 
 agent was authorized to make.^^ But the rule is said to be now 
 well established both in that country and in this that a corpora- 
 tion cannot claim or retain the benefit of a subscription obtained 
 through the fraud of its agents.*^ And the fact that the person 
 making the fraudulent representations had no express authority 
 irom the corporation, or exceeded such authority, will not affect, 
 this rule, provided he was legally connected with the taking of 
 the subscription.** If the corporation adopts a subscription taken 
 ■without authority, it must also adopt the representations by 
 which that subscription was procured.^* But false representa- 
 tions by persons who have no authority from' the company and 
 who do not take the subscription for its benefit cannot affect the 
 binding force and validity of the subscriptions.*' Parol declara- 
 tions and representations made by an officer of the corporation 
 at a public meeting, though false and made with intent to de- 
 ceive, will not ordinarily so far bind the corporation as to release 
 a subscription made in reliance upon them.*^ The subscriber 
 
 Dec. 522; Syracuse &c. R. Co. v. 
 ■Gere, 4 Hun (N. Y.) 392; North 
 •Carolina R. Co. v. Leach, 4 Jones 
 L. (N. Car.) 340. 
 
 3iCook Corporations (7th. ed.), 
 ? 139. In Pennsylvania the corpora- 
 tion is held bound only when it has 
 clothed the agent with actual or ap- 
 parent authority to make repre- 
 sentations. Custar V. Titusville &c. 
 Co., 63 Pa.. St. 381. 
 
 328 Thomp. Corp. § 708; Wm. B. 
 Joyce &c. V. Eifert, 56 Ind. App. 190, 
 105 N. E. 59. 
 
 33 Crump V. United States Min. 
 Co., 7 Grat. (Va.) 352, 56 Am. Dec. 
 116; Waldo v. Chicago &c. R. Co., 
 14 Wis. 575. 
 
 34 Crump V. United States Min. 
 Co., 7 Grat. (Va.) 352, 56 Am. Dec. 
 116. . See also Walker v. Mobile &c. 
 R Co., 34 Miss. 245; Garrison v. 
 
 Technic &c. Works, 55 N. J. Eq. 
 708, 37 Atl. 741. See also Virginia 
 Land Co. v. Haupt, 90 Va. 553, 20 
 S. E. 824 44 Am. St. 939. 
 
 35 Cunningham v. Edgefield &c. 
 R. Co., 2 Head. (Tenn.) 23. See 
 also Miller v. Wild Cat &c. Co., 57 
 Ind. 541, holding that an agent 
 taking subscriptions before the in- 
 corporation of the company can- 
 not bind it by his misrepresenta- 
 tions. An agent must at least have 
 implied or apparent authority before 
 he can bind his principal. 2 Pom. 
 Eq. Jur., § 909. 
 
 36Buflfalo &c. R. Co. v. Dudley, 
 14 N. Y. 336; First Nat. Bank v. 
 Hurford, 29 Iowa 579. A different 
 rule is anounced in Wisconsin and 
 Georgia, but the rule in the text is 
 most consonant with the current of 
 authority. See Atlanta &c. R. Co. 
 
§ 148 RAILROADS 268 
 
 must be presumed to know that an officer has received no au- 
 thority from the corporation to bind it in this manner;*^ and 
 there could be but little security for the creditors of a corporation 
 if it were held answerable for all the declarations of its officers 
 made outside the scope of their authority.** The question as to 
 whether the person making the false representations had author- 
 ■ ity from the corporation to act as its agent is usually a question 
 of fact for the jury.** 
 
 § 148 (129). Fraud may be shown by parol evidence.— ^The 
 fraud may be established by parol evidence/" since this only 
 goes to show that no contract was formed, and not to vary it as 
 made.*! This rule does not, therefore, conflict with the general 
 rule that parol evidence is not admissible to alter or vary the 
 terms of a written contract. On the contrary, it is in accord with 
 the rule that parol evidence is admissible, especially in case of 
 fraud, to show that there never was, in reality, a valid agree- 
 ment.'*^ 
 
 § 149 (130). Subscriber must be free from negligence, in or- 
 der to be released upon the groimd of fraud. — In order to secure 
 a release from his subscription upon the ground that his subscrip- 
 tion was induced by fraud, the subscriber may have to show that 
 
 V. Hodnett, 36 Ga. 669; McClellan New Orleans &c. R. Co. v. Will- 
 
 V. Scott, 24 Wis. 81. See also lams, 16 La. Ann. 315; N. Y. Ex- 
 
 Weems v. Georgia &c. R. Co., 88 change Co. v. DeWolf, 31 N. Y. 
 
 Ga. 303, 14 S. E. 583, where the 273; Jewett v. Valley R. Co., 34 
 
 question was submitted to the jury. Ohio St. 601 ; Henderson v. Rail- 
 
 37 Smith V. Tallahassee Branch &c. way Co., 17 Tex. 560, 67 Am. Dec. 
 
 R. Co., 30 Ala. 650. 675: Connecticut &c. R. Co. v. 
 
 38Vicksburg &c. R. Co. v. Mc- Bailey, 24 Vt. 465, 58 Am. Dec. 
 
 Kean, 12 La. Ann. 638. 181. See also Anderson v. Scott, 
 
 39Kelsey v. Northern &c. Co., 45 70 N. H. 350, 47 Atl. 607. 
 
 N. Y. 505; Crump v. United States HI Elliott Cont. § 1650; Henkley 
 
 Min. Co., 7 Grat. (Va.), 352, 56 Am. v. Sac Oil &c. Co., 132 Iowa 396, 107 
 
 Dec. 116. N. W. 629, 119 Am. St. 564. 
 
 40 Wert V. Crawfordsville &c. Co., 421 Elliott Ev. §§ 592, 593; 3 El- 
 
 19 Ind. 242; St. Louis &c. R. Co. v. liott Ev. § 1947; 1 Elliott Cont. § 
 
 Tierman, 37 Kans. 606, 15 Pac. 544; 1629. 
 
269 SUBSCRIPTIONS § 150 
 
 he was not misled by his own negligence in not making prudent 
 inquiries.*^ For where both parties have equal access to the 
 means of information, the subscriber has no right to rely entirely 
 upon the representations of the agent, unless some means or 
 artifices are used to prevent investigation.** A subscriber who 
 reads contradictory statements in different documents cannot 
 rely upon a part only of such representations without investiga- 
 tion.*^ But where the facts are such as are within the knowl- 
 edge of the corporation and its agents, the subscriber is only 
 bound to exercise reasonable caution in accepting as true the 
 representations made.** He is not bound to pursue independent 
 inquiries, even though they would have shown him the falsity 
 of the statements made by the agent or contained in the pros- 
 pectus.*^ 
 
 § 150 (131). Subscription induced by fraud is merely voidable 
 — When it will be enforced. — A subscription induced by fraudu- 
 lent representations is voidable only, and not void ;** and is bind- 
 ing on both parties unless disaffirmed or rescinded.** If fraud 
 
 *3 Upton V. Englehart, 3 Dill. S.) 496 Fed. Cas. No. 16800; New 
 (U. S.) 496; Fed Cas. No. 16800; Brunswick &c. R. Co. v. Mugger- 
 Davis V. Dumont, 37 Iowa 47; idge, 1 Dr. & Sm. 363; Directors &c. 
 Hughes V. Antietam Mfg. Co., 34 Central R. Co. v. Kisch, L. R. 2 H. 
 Md. 316; Custar v. Titusville &c. L. Cas. 99. 
 
 Co., 63 Pa. St. 381 ; (Connecticut,^ 47 Documents referred to in the 
 
 &c. R. Co. V. Bailey, 24 Vt. 46S, 58 prospectus need not be examined. 
 
 Am. Dec. 181. See also In re,' even though they would show the 
 
 American Nat, Beverage Co., 193 Fed. falsity of statements made therein. 
 
 772; Chicago Bldg. &c. Co. v. Kisch v. Central R. Co., 34 L. J. 
 
 Peterson, 133 Ky. 596, 118 S. W. (Ch.) 545; Directors &c. CentnaJ 
 
 384. But it is held that the burden R. Co. v. Kisch, L. R. 2 H. L. Cas. 
 
 is upon the corporation to show 99. • 
 
 that the subscriber had knowledge. *« Upton v. Englehart, 3 Dill. (U. 
 
 Bowen v. Aetna Indemnity Co., 151 S.) 496, Fed. Cas. No. 16800; Cun- 
 
 lowa 663, 131 N. W. 1086. ningham v. Edgefield &c. R. Co., 2 
 
 ** Walker v. Mobile &c. R. Co., Head (Tenn.) 23; Burleson v. 
 
 34 Miss. 245; Jennings v. Braugh- Davis (Tex. Civ. App.), 141 S. W. 
 
 ton, 22 L. J. (Ch.) 585. 559; Reese River Min. Co. v. 
 
 *5Scholey v. Central R. Co., L. Smith, L. R. 4 H. L. 64. 
 
 R. 9 Eq. Cas. 267n. *9 Tennent v. City of Glasglow 
 
 *e Upton V. Englehart, 3 Dill. (U. Bank, L. R. 4 App. Cas. 615. 
 
§ 151 RAILROADS 270 
 
 is established, however, it has been held that no action can be 
 maintained by the corporation to recover, either upon the orig- 
 inal subscription or upon a note given therefor,™ unless the sub- 
 scriber has ratified it or in some way become estopped, and the 
 subscriber may recover back whatever money he has paid before 
 discovery of the Traud.^^ Where, however, his subscription was 
 made in pursuance of a fraudulent purpose he may not complain 
 that his strict legal liabilities are enforced. ''^ A subscription, ab- 
 solute on its face, made under a secret agreement with the direc- 
 tors of the company, by which the subscriber was to be per- 
 mitted to reduce the number of shares taken after it had operated 
 as an inducement to others to subscribe, should be enforced ac- 
 cording to its terms.^* -And, in general, a secret agreement be- 
 tween the company and subscriber, lessening his liability and 
 changing the ostensible terms of the subscription, can neither 
 be enforced nor successfully used as a defense to defeat his sub- 
 scription. To release the subscriber would operate as a fraud 
 upon the other subscribers and the corporate creditors.^* 
 
 § 151 (132). Ratification and estoppel — Rescission — Rights of 
 creditors. — The subscriber should take steps to have his subscrip- 
 
 50 I Occidental Ins. Co. v. Zanz- Pa. St. 141 ; Downie v. White, 12 
 horn, 2 Mo. App. 205. But an inno- Wis. 176, 78 Am. Dec. 731. 
 
 cent third person may enforce such 53 White Mountain R. Co. v. East- 
 
 a note where it is negotiable and is man, 34 N. "H.. 124. 
 
 taken by him upon a valuable con- B4 Lamar Ins. Co. v. Moore, 80 111. 
 
 sideration in the usual course of 446, 22 Am. Rep. 199 ; Meyer v. Blair,, 
 
 business. Andrews v. Hart, 17 Wis. 109 N. Y. 600, 17 N. E. 228, 4 Am. St. 
 
 297. 500; York Park &c. Assn. v. Barnes, 
 
 51 Grangers' Ins. Co. v. Turner, 39 Nebr. 834, 58 N. W. 440, 9 
 61 Ga. 561 ; Atkinson v. Pocock, 1 Lewis Am. R. and Corp. 240, 244 - 
 Exch. 796, 12 Jur. 60; Jarrett v. Graff v. Pittsburgh &c. R. Co., 31 
 Kennedy, 6 C. B. 319. Pa. St. 489; Miller v. Hanover &c. 
 
 52 Litchfield Bank v. Peck. 29 R. Co., 87 Pa. St. 95, 30 Am. Rep. 
 Conn. 384. The subscribers "could 349. See also Chubb v. Upton, 95. 
 not be permitted to set up any fraud U. S. 665, 24 L. ed. 523 ; Howard 
 to which they were a party, as a v. Glenn, 85 Ga. 238, 11 S. E. 610;- 
 ground for their own discharge." Schaeffer v. Missouri Home &c. Co., 
 Southern P. R. Co. v. Hixon, 5 46 Mo. 248; 1 Thomp. Corp. (2(l!. 
 Ind. 165, 169. See County of Craw- ed.), ! 633. 
 
 ford V. Pittsburgh &c. R. Co., 32 
 
271 SUBSCRIPTIONS § 151 
 
 tion canceled within a reasonable time after he discovers the 
 fraud; for if he permits the interests of other subscribers and 
 corporate creditors to attach by reason of his delay, his own 
 laches will be a bar to his relief in equity.^^ And any acts on his 
 part after he has knowledge of the fraud, which are inconsistent 
 with an intention to disaffirm the subscription contract will be 
 held to amount to a ratification, and render it absolutely bind- 
 ing.^* Thus, it has even been held that one who subscribes in 
 'Consideration of the extension of a railroad to a certain point is 
 ■estopped to deny his obligation after the road has been built on 
 the faith thereof, although such point is outside of the state which 
 granted the charter and such charter does not purport to author- 
 ize a line beyond the limits of the state.^'^ He may also be guilty 
 of laches in failing to inform himself as to facts which would give 
 him notice of the fraud that has been practiced upon him. It is 
 held that it is the duty of a person taking shares in a company 
 to inform himself as to the provisions of the articles of associa- 
 tion, they being registered, and he must take the consequences 
 of his neglect to do so,^* and if they show that the representa- 
 
 55 Chubb V. Upton, 95 U. S. 655, 24 his stock is a waiver. Ayre's Case, 25 
 
 L. ed. 523; Schaeffer v. Missouri Beav. 513. So also is instructing 
 
 Home Ins. Co., 46 Mo. 248; Graff his broker to sell Briggs, Ex 
 
 V. Pittsburgh &c. -R. Co., 31 Pa. St. parte, L. R. 1 Eq. 483. And so 
 
 489;. London &c. Ins. Co., Re, L. is participation in Stockholders' 
 
 R. 24 Ch. Div. 149; Heymann v. meetings. ChafSn v. Cummings, 37 
 
 European Central R. Co., L. R. 7 Maine 76. But attendance on a 
 
 Eq. Cas. 154; Cook Corporations meeting has been held not to be a 
 
 (7th. ed.), i 161; 1 Thomp. Corp. waiver. Stewart's Case, L. R. 1 Ch. 
 
 (2d ed.), § 734, et seq. See also App. 574. And the same has been 
 
 Wallace v. Bacon, 86 Fed. 553; held as to voting shares by proxy. 
 
 Barcus v. Gates, 89 Fed. 783; Bar- Greenville &c. R. Co. v. Coleman, 
 
 tol V. Walton &c. Co., 92 Fed. 13. S Rich. L. (S. Car.) 118; McCully 
 
 58 Upton V. Jackson, 1 Flipp. (U. v. Pittsburgh &c. R. Co., 32 Pa. St. 
 
 S.) 413, Fed. Cas. No. 16802; 25. Paying a call after knowledge 
 
 Chubb V. Upton, 95 U. S. 667, 24 of the fraud is held to be a waiver. 
 
 L. ed. 523; Martin v. Paul O'Burne Scholey y. Central R. Co., L. R. 
 
 &c. Co., 99 Cal. 355, 33 Pac. 1107; 9 Eq. 267n. 
 
 City Bank v. Bartlett, 71 Ga. 797; 57 Doherty v. Arkansas &c. R. Co., 
 
 Wilson V. Hundley, 96 Va. 96, 30 5 Ind. Ter. 537, 82 S. W. 899. 
 
 S. E. 492, 70 Am. St. 837; 2 Thomp. 58 Oakes v. Turquand, L. R. 2 H. 
 
 Corp. (2d. ed.), § 749. Selling part of L. 325. 
 
§151 
 
 RAILROADS 
 
 272 
 
 tions by which he was induced to subscribe were untrue, he must 
 rescind within a reasonable time after he has an opportunity to 
 know the truth by consulting them. But it has been held that 
 he is not guilty of laches until after he has knowledge of the 
 fraud, or of facts which should reasonably put him on inquiry, 
 and that he is not chargeable with knowledge of facts disclosed 
 at a stockholders' meeting at which he was not present but was 
 represented by the perpetrator of the fraud, to whom he had 
 given his proxy.^® If he elects to rescind the contract, he must 
 do so in toto, and must generally tender back his stock cer- 
 tificates.®" In England,*! ^nd by a number of authorities in this 
 country,*^ it is held that a subscription cannot be rescinded on 
 the ground that it was induced by fraudulent representations un- 
 less proceedings are begun before the corporation becomes in- 
 solvent, or, at least, while it is a "going concern. "^^ Other courts 
 
 59 Virginia Land Co. v. Haupt, 
 90 Va. 533, 19 S. E. 168, 44 Am. 
 St. 939n, 9 Lewis' Am. R. & Corp. 
 235. 
 
 60 Parks v. Evansville &c. R. Co., 
 23 Ind. 567; Marion Trust Co. v. 
 Blish (Ind. App.), 79 N. E. 415. A 
 subscriber to stock cannot rescind 
 for fraud, when he has had the 
 stock transferred to his infant 
 children, unless their right thereto 
 is also tendered back. Francis v. 
 New York &c. R. Co., 108 N. Y. 
 93, 15 N. E. 192. But compare 
 West, Ex Parte, 56 Law Times (N. 
 S.) 622. 
 
 «i Tennent v. City of Glasgow 
 Bank, L. R. 4 App. Cas. 615; Reese 
 River Co. v. Smith, L. R. 4 H. L. 
 64; Oakes v. Turquand, L. R. 2 H. 
 L. Cas. 325; Kent v. Freehold &c. 
 Co., L. R. 3 Ch. App. 493. 
 
 62 Ogilvie V. Knox Ins. Co., 22 
 How. (U. S.) 380, 16 L. ed. 349; 
 Chubb V. Upton, 95 U. S. 665, 24 
 
 L. ed. 523; Duffield v. Barnum &c. 
 Works, 64 Mich. 293, 31 N. W. 310; 
 Olson V. State Bank, 67 Minn. 267, 
 69 N. W. 904; Saffold v. Barnes, 
 39 Miss. 399; Ruggles v. Brock, 6 
 Hun (N. Y.) 164; Clarke v. 
 Thomas &c. Co., 34 Ohio St. 46; 1 
 Thomp. Corp. (2d ed.) §737. 
 
 63 This was the rule in our bank- 
 ruptcy courts under the bankrupt 
 act of 1867. Farrar v. Walker, 13 
 Nat. Bankr. Reg, 82. See also Up- 
 ton V. Tribilcock, 91 U. S. 45; 23 
 L. ed. 203; Turner v. Grangers &c. 
 Co., 65 Ga. 649, 38 Am. Rep. 801; 
 Cunningham v. Edgefield &c. R. Co., 
 2 Head (Tenn.) 23. Certainly this 
 is true where there is unreasonable 
 delay and the rights of creditors are 
 involved. Newton Nat. Bank v. 
 Newbegin, 74 Fed. 135, 33 L. R. A. 
 727; Howard v. Turner, ISS Pa. St 
 349, 26 Atl. 753, 35 Am. St 883. In 
 Bosher v. Richmond &c. Co., 89 Va. 
 455, 16 S. E. 360, 37 Am. St. 879, 
 
273 
 
 SUBSCRIPTIONS 
 
 §151 
 
 hold that if the subscriber acts with due diligence and there is 
 nothing to create an estoppel, he may obtain a rescission for 
 fraud even after such a condition exists ;** but, in any event, if he 
 has been guilty of laches to the injury of creditors he cannot have 
 rescission as against them after the corporation has become 
 insolvent and is no longer a "going concern."®^ 
 
 where several subscriptions had 
 been obtained by means of fraudu- 
 lent representations in a prospectus, 
 it was held that such subscribers 
 had a common interest, and several 
 might join in a bill for the benefit 
 of themselves and others similarly 
 situated, to set aside their subscrip- 
 tions. 
 
 6* Kentucky Mut. &c. Co. v. 
 Schaefer, 120 Ky. 227, 85 S. W. 
 1098; Newton Nat. Bank v. New- 
 begin, 74 Fed. 135, 33 L. R. A. 727; 
 Fear v. Bartlett, 81 Md. 435, 32 Atl. 
 322, 33 L. R, A. 721 ; Pafk v. Kribs, 
 24 Tex. Civ. App. 650, 60 S. W. 
 905. And see Hinkley v. Sac Oil 
 &c. Co., 132 Iowa 396, 107 N. W. 
 629, 119 Am. St. 564; Gress v. 
 Knight (Ga.), 68 S. E. 834, 31 L. 
 R. A. (N. S.) 900. The cases on 
 
 both sides are reviewed in the note 
 to the above case as last reported. 
 See also Morrisey v. Williams, (W. 
 Va.), 82 S. E. 509, L. R. A. 191SD, 
 792. 
 
 *5 Meholin v, Carlson, 17 Idaho 
 742, 107 Pac. 755, 134 Am. St. 286; 
 E^rle v. Humphrey, 121 Mich, 518, 
 80 N. W. 370; Chamberlain v. 
 Trogden, 148 N. Car. 139, 61 S. E. 
 628, 16 A. & E. Ann. Cas. 177; 
 Martin v. South Salem Land Co., 
 94 Va. 28, 26 S. E. 591. This is 
 conceded in the cases cited, in the 
 last preceding note and is, of course, 
 included in those which follow the 
 English rule, as they go even fur- 
 ther. See generally Grees v. Knight 
 (Ga.), 68 S. E. 834, and note to 
 that case as also reported in 31 L- 
 R. A. (N. S.) 900. 
 
CHAPTER VIII. 
 CALLS AND ASSESSMENTS. 
 
 Sec. 
 
 155. When payment of subscrip- 
 
 tion must be made. 
 
 156. Calls — Nature and effect of. 
 
 157. Directors may. make calls — 
 
 Delegation and ratification. 
 
 158. Directors must act as a body 
 
 — De facto board — Illegal 
 calls. 
 
 159. Discretion of board in making 
 
 calls. 
 .160. Charter and statutory limita- 
 ^ , tions upon discretion — Peri- 
 
 \-' 'odical instalments. 
 
 161. Call should affect all alike- 
 
 Motive and expediency. 
 
 162. Subscription payable upon de- 
 
 mand — ^Notice. 
 
 163. Requisites of notice. 
 
 164. Constructive notice. 
 
 165. Waiver by stockholder of no- 
 
 tice and formalities of call 
 — Estoppel. 
 
 166. Demand and suit for assess- 
 
 ment. 
 
 Sec. 
 
 167. Assignment of right to collect 
 
 subscription or assessment. 
 
 168. When courts may compel call 
 
 and payment. 
 
 169. Extent of stockholder's liabil- 
 
 ity for assessments — Agree- 
 ments as affecting liability. 
 
 170. Liability of holder where 
 
 stock purports to be paid 
 up but is not. 
 
 171. Construction of charter and 
 
 statutory provisions regard- 
 ing assessments. 
 
 172. Remedies where stockholder 
 
 fails to pay subscription or 
 assessment — Forfeiture. 
 
 173. Cumulative remedies — Elec- 
 
 tion. 
 
 174. Effect of forfeiture. 
 
 175. Statutory method of forfeiture 
 
 must be pursued. 
 
 176. Notice of forfeiture. 
 
 177. Defeating and annulling for- 
 
 feiture — Estoppel. 
 
 § 155 (133). When payment of subscription must be made. — 
 Where a subscription contains a promise to pay upon a certain 
 day, the subscriber is bound to pay at that time without further 
 notice or he is liable to suit immediately upon his default,^ and 
 
 1 Estell V. Knightstown &c. Tpk. 
 Co., 41 Ind. 174; Beckner v. River- 
 .side &c. Tpk. Co., 65 Ind. 468; 
 
 Waukon &c. R. Co. v. Dwyer, 49 
 Iowa 121 ; Northwood Union Shoe 
 Co. V. Pray, 67 N. H. 435, .32 Atl. 
 
 274 
 
275 
 
 CALLS AND ASSESSMENTS 
 
 §155 
 
 he is also bound, in the absence of any provision in the subscrip- 
 tion, if the charter or a general statute specifies the time of pay- 
 ment, to pay at the designated time.^ The same is true where the 
 subscription is made payable upon the happening of a certain 
 event and at stated periods thereafter. The subscriber must 
 know when his subscription becomes payable.^ The stockholder 
 may pay his subscription as soon after the corporation is organ- 
 ized as he may choose, without awaiting the formality of a call,* 
 if he act in good faith.^ But where the capital stock is to be paid 
 at such times and in such instalments as may be required by the 
 president and directors, such a requirement, being an uncertain 
 event, forms a condition which, as between the corporation and 
 the stockholder, suspends the obligation to pay until it is made."* 
 And an ordinary subscription made without any designated time 
 for payment is generally held to become payable only after a for- 
 mal declaration to that effect by the corporate authorities,' ; 
 
 770. A subscription may regulate 
 the time of payment. New Jersey 
 Midland R. Co. v. Strait, 35 N. J. 
 L. 322; Roberts v. Mobile &c. R. 
 Co., 32 Miss. 373. Even though the 
 statute fixes the time of payment. 
 loWa &c. R. Co. V. Perkins, 28 Iowa 
 281. See also West v. Crawford, 
 80 Cal. 19, 21 Pac. 1123. 
 
 2 Phoenix Warehousing Co. v. 
 Badger, 67 N. Y. 294. 
 
 3 Breedlove v. Martinsville &c. R. 
 Co./ 12 Ind. 114, where the subscrip- 
 tion was payable in instalments of 
 ten per cent, every sixty days after 
 the work was put under contract. 
 
 * Marsh v. Burroughs, 1 Wood 
 (U. S.) 463, Fed. Cas. No. 9112; 
 Poole, Jackson & Whyte's Case, L. 
 R. 9 Ch. D. 322. Where the cor- 
 poration owes money to the sub- 
 scriber, it is frequently applied to 
 discharge his indebtedness without 
 awaiting a call. Adamson's Case, 
 L. R. 18, Eq; Cas. 670. 
 
 s If it be merely a colorable pay- 
 ment to escape liability in case of.' 
 insolvency he will not be permitted 
 to claim a release from indebted- 
 ness on his subscription. Syke's- 
 Case, L. R. 13 Eq. Cas. 2SS; Barge's. 
 Case, L. R. S Eq. Cas. 420. 
 
 6 Purton V. New Orleans &c. K, 
 Co., 3 La. Ann. 19. See also Wil- 
 liams V. Taylor, 120 N. Y. 244, 24 
 N. E. 288. 
 
 ' Ventura &c. R. Co. v. Hart- 
 man, 116 Cal. 260, 48 Pac 65; Ala- 
 bama &c. R. Co. v. Rowley, 9 Fla. 
 508; North &c. St. R. Co. v. Spul- 
 lock, 88 Ga. 283, 14 S. E. 478; Span- 
 gler V. Indiana &c. R. Co., 21 111. 
 276; Braddock v. Philadelphia &c. 
 R. Co., 45 N. J. L. 363. See also 
 Brookshire Canning &c. Co. v. 
 Evan, 163 Mo. App. 564, 146 S. W. 
 828. A call is not applicable to 
 stock which was subscribed for after 
 the call was made. Pike v. Bangor 
 &c. R. Co., 68 Maine 445. Some 
 
§156 
 
 RAILROADS 
 
 276 
 
 § 156 (134). Calls — Nature and effect of. — Such a declaration 
 as that referred to in the preceding section is termed a "call,"* 
 and the sum of money so rendered payable may be payable in one 
 or more instalments, where the directors are invested with entire 
 discretion and there is no contract to the contrary, according to 
 the terms of the resolution.^ Any declaration or resolution to the 
 eflfect that the whole,i* or a certain part,^^ of the unpaid sub- 
 scriptions shall be paid in, though informal and irregular, ^^ will 
 
 cases in New York have asserted the 
 rule that unless the contract pro- 
 vides for calls, the subscription is 
 payable absolutely and at once. 
 Lake Ontario &c. R. Co. v. Mason, 
 16 N. Y. 4S1; Phoenix &c. R. Co. 
 V. Badger, 67 N. Y. 294. But the 
 point was not decided in either of 
 these cases and other cases in that 
 state recognize the doctrine of the 
 text. Mann v. Pentz, 3 N. Y. 415; 
 Seymour v. Sturgess, 26 N. Y. 134; 
 Williams v. Meyers, 41 Hun (N. Y.) 
 S4S. See also South Georgia &c. 
 R. Co. V, Ayres, 56 Ga. 230; Wil- 
 liams V. Taylor, 120 N. Y. 244, 24 
 N. E. 288. In a suit on a subscrip- 
 tion to the capital stock of a com- 
 pany which provided that the sub- 
 scriptions should be paid "in such 
 instalments and at such times as 
 may be decided by a majority of the 
 stockholders or board of directors, 
 or a trustee empowered for the pur- 
 pose by a majority of the stock- 
 holders," no proof was offered to 
 show that any provisions as to the 
 amount of the installments or the 
 time of payment of such had ever 
 been so made, nor that any call for 
 payment had ever been made in said 
 manner, and it was held that there 
 should be a judgment of non-suit 
 against the plaintiflF. North &c. R. 
 
 Co. V. Spullock, 88 Ga. 283, 14 S. 
 E. 478. 
 
 ** Spangler v. Indiana &c. R. Co., 
 21 111. 276; Braddock v. Philadel- 
 phia &c. R. Co., 45 N. J. L. 363; 
 Pittsburgh &c. R. Co. v. Clarke, 29 
 Pa. St. 146; Newry & Enniskillen 
 R. Co. V. Edmunds, 2 Ex. R. 118. 
 See also Wall v. Basin Min. Co., 16 
 Idaho 313, 101 Pac. 733. The term 
 may also refer to a notice given of 
 such resolution, or to the time 
 which it names as the time of pay- 
 ment. Ambergate &c. R. Co. v. Mit- 
 chell, 4 Exch. 540. 
 
 sHaun v. Mulberry &c. Road, 33 
 Ind. 103; Hays v. Pittsburgh &c. R. 
 Co., 38 Pa. St 81; Rutland &c. R. 
 Co. V. Thrall, 35 Vt. 536; North- 
 western &c. R. Co. V. McMichael, 
 6 Exch. 273; Birkenhead &c. R. Co. 
 V. Webster, 6 Exch. 277. But it is 
 said that debt wilt not lie for one 
 of such instalments until all are due 
 and payable. Birkenhead &c. R. Co. 
 V. Webster, 6 Exch. 277. 
 
 lOHaun v. Mulberry &c. R. Co., 
 33 Ind. 103; Fox v. AUensville &c. 
 R. Co., 46 Ind. 31. 
 
 11 Spangler v. Indiana &c. R. Co., 
 21 111. 276; Ross v. Lafayette &c. 
 R. Co., 6 Ind. 297. 
 
 12 Philadelphia &c. R. Co. v. Hick- 
 man, 28 Pa. St. 318; Southhamp- 
 
277 
 
 CALLS AND ASSESSMENTS 
 
 §157 
 
 be a valid call if it be sufficient to show a clear official intent to 
 render payable so much of the subscription as is embraced by 
 the terms, 1^ and is susceptible of legal proof.** The resolution 
 need not state the time or place of payment/^ but these may be 
 left to be fixed by the administrative officers of the corporation. ** 
 It is perfectly competent for the directors to determine these 
 matters at the same or a subsequent meeting. And it has been 
 held that they may order that at a certain future time a call pay- 
 able at a later date shall be made.*^ Where no place is desig- 
 nated, the resolution requiring payment wrill itnport a require- 
 ment that the payments should be made to the treasurer of the 
 corporation at his office.^* 
 
 § 157 (135). Directors may make calls — Delegation and rati- 
 fication. — In general, the directors are the proper authorities to 
 make calls, i'' in the absence of any other provision in the char- 
 ter, or in any statute or by-law. Where this power is not given 
 to the directors, it is usually lodged with the stockholders at 
 
 ton Dock Co. v. Richards, 2 E.ng. 
 Railw. & Canal Cas. 215, 234. Ir- 
 regularities may be waived. Hays 
 V. Pittsburgh &c. R. Co., 38 Pa. St. 
 81; Macon &c. R. Co. v. Vason, 
 57 Ga. 314. But see Grosse Isle 
 Hotel Co. V. I'Anson, 43 N. J. L. 
 442. 
 
 13 Budd V. Multnomah St. R. Co., 
 15 Ore. 413, 15 Pac. 659, 3 Am. St. 
 169. 
 
 1* An entry in the minutes of the 
 corporation is sufficient proof. Fox 
 V. AUensville &c. Tpk. Co., 46 Ind. 
 31. The passage of the resolution 
 may be proven, though no entry was 
 made in the minutes. Hays v. Pitts- 
 burgh &c. R. Co., 38 Pa. St. 81. 
 See Bavington v. Pittsburgh &c. R. 
 Co., 34 Pa. St. 358. 
 
 15 Marsh v. Burroughs, 1 Wood 
 (U. S.) 463, Fed. Cas. No. 9112; 
 
 Andrew v. Ohio &c. R. Co., 14 Ind. 
 169; Rutland &c. R. Co. v. Thrall, 
 35 Vt. 536; Great North &c. R. Co. 
 V. Biddulph, 7 M. & W. 243. 
 
 16 They should be fixed by the no- 
 tice. Andrew v. Ohio &c. R. Co., 
 
 14 Ind. 169; In re Cawley &c. Co., 
 42 Ch. Div. 209. And should be rea- 
 sonable. Fairfield &c. Co. v. Thorp, 
 13 Conn. 173. 
 
 17 Sheffield &c. R. Co. v. Wood- 
 cock, 7 Mees. & W. 574. See also 
 Penobscot R. Co. v. Dummer, 40 
 Maine 172, 63 Am. Dec. 654; Heas- 
 ton V. Cincinnati &c. R. Co., 16 Ind. 
 275, 79 Am. Dec. 430. 
 
 iSDanbury &c. R. Co. v. Wilson, 
 22 Conn. 435. 
 
 19 Budd V. Multnomah St. R. Co., 
 
 15 Ore. 413, 15 Pac. 659, 3 Am. St. 
 169, 172; Ambergate &c. R. Co. v. 
 Mitchell, 4 Exch. 540. 
 
§ 158 RAILROADS 278 
 
 large,^° in which case it has been held they may delegate the 
 power to the directors ;^^ and it has been held in such a case that 
 even without Such a delegation of power, the directors may still 
 make calls, if not expressly prohibited. ^^ But the directors can- 
 not delegate such a special authority entrusted to them,^^ though 
 they may ratify a call made by one to whom they have attempted 
 to delegate it, and so render such call valid. 2* And they may, it 
 seems, authorize another to determine the amount of some of the 
 instalments and to designate the times of payment.^^ Thus it is 
 said that they may make a general declaration that the stock is 
 payable, and give a general authority to the treasurer to require 
 the payment of the stock, and calls made by him will be valid, 
 even though the resolutions do not specify the amount of each 
 instalment to be called for. 20 
 
 § 158 (136). Directors must act as a body — De facto board — 
 Illegal calls. — ^A valid call cannot be made by a portion of the 
 board of directors in the absence of a quorum for the transaction 
 of business. 2'^ But that a de facto board was illegally elected 
 cannot be set up as a defense to a call regularly made by them.^* 
 
 20Estell V. Knightstown Tp. Co., 26 Hays v. Pittsburgh &c. R. Co., 
 
 41 Ind. 174; Ex parte Winsor, 3 38 Pa. St. 81. But see Silver Hook 
 
 Story (U. S.) 411. . Road v. Green, 12 R. I. 164. 
 
 21 Rives V. Montgomery &c. R. 27 Price v. Grand Rapids &c. R. 
 Co., 30 Ala. 92. Contra, Winsor, Ex Co., 13 Ind. SB; Bottomle/s Case, 
 parte, 3 Story C. C. 411, Fed. Cas. L. R. 16 Ch. Div. 681. Possibly 
 No. 17884. such an act could be confirmed by 
 
 22 Budd V. Multnomah St. R. Co., the majority. Phosphate of Lime 
 IS Ore. 413, IS Pac. 659, 3 Am. St. Co., Re, 24 L. T. 932. 
 
 169. But see Marlborough &c. Co. 28 Fairfield &c. Tpk. Co. v. Thorp, 
 
 V. Smith, 2 Conn. S79. 13 Conn. 173; Macon &c. R. Co. v. 
 
 23Banet v. Alton &c. R. Co., 13 Vason, 57 Ga. 314; Eakright v. 
 
 111. 504; Pike v. Bangor &c. R. Co., Logansport &c. R. Co., 13 Ind. 404; 
 
 68 Maine 445; Silver Hook Road Steinmetz v. Versailles &c. R. Co.', 
 
 V. Greene, 12 R. I. 164; Rutland &c. 57 Ind. 457; Ohio &c. R. Co. y. Mc- 
 
 R. Co. V. Thrall, 35 Vt. 536. Pherson, 35 Mo. 13, 86 Am. Dec. 
 
 24 Rutland &c. R. Co. v. Thrall, 128. Contra, Howbeach, &c. Co. v. 
 
 35 Vt. 536; Read v. Memphis &c. Teague, 5 H. & N. 151. And see 
 
 Co., 9 Heisk. (Tenn.) 545. People's Mut. Ins. Co. v. Westcott, 
 
 25Banet v. Alton &c. R. Co., 13 14 Gray (Mass.) 440, where a call 
 111. 404. 
 
279 CALLS AND ASSESSMENTS § 159 
 
 If the corporation is unauthorized and illegal, calls made by it 
 cannot, it seems, be enforced.29 But it is generally held that the 
 implied promise to pay upon call contained in a subscription to 
 the capital stock of a legally incorporated company is sufficient 
 to support an action, and of course an action may be maintained 
 on an express promise to pay for such stock. 
 
 § 159 (137). Discretion of board in making calls. — The corpo- 
 rate authorities who are empowered to make calls are the sole 
 judges as to the advisability of making them,*o subject, perhaps, 
 to the condition that the power must be exercised in good faith 
 for the purpose of raising money for the use of the corporation.^' 
 And where no limitations are placed upon their discretion, they 
 may require the whole subscription to be paid, either at one time 
 or in instalments.^^ 
 
 §160 (138). Charter and statutory limitations upon discretion 
 — Periodical instalments. — The assessments are frequently re- 
 quired by charter or by statute to be limited to not more than a 
 certain per centum of the subscription within a given time. And 
 where the charter provides that after the payment of a certain 
 
 by directors elected at a meeting 92 Am. St. 437; Chouteau Ins. Co. 
 without notice was held invalid, v. Floyd, 74 Mo. 286; Budd v. Mult- 
 Moses V. Tompkins, 84 Ala. 613, 4 nomah St. R. Co., 15 Ore. 413, IS 
 So. 763. The rule in England seems Pac. 659, 3 Am. St. ' 169. See also 
 to be opposed to the doctrine stated Stone v. Penn Yan &c. R. Co., 125 
 in the text. Swansea 'Dock Co. v. App. Div. 94, 109 N. Y. S. 374. 
 Levien, 20 L. J. (Ex.) 447. See 3i Harbershon's Case, L. R. 5 Eq. 
 also Moses v. Tompkins, 84 Ala. 286. But where the money is raised 
 613, 4 So. 763. for the use of the company, equity 
 
 29 Gillespie v. Ft. Wayne &c. R. will not inquire whether such use 
 Co., 17 Ind. 243. • is essential to its best interests. 
 
 30 Oglesby v. Attrill, 105 U. S. Bailey v. Birkenhead &c. R. Co., 12 
 605, 26 L.I ed.' 1186 ; American Alka- Beav. 433 ; Yetts v. Norfolk &c. R. 
 li Co. V. Campbell, 113 Fed. 398; Co., 3 DeG. & Sm. 293. See also 
 Visalia &c. R. Co. v. Hyde, 110 Cal. Oglesby v. Attrill, 105 U. S. 605, 26 
 632, 43 Pac. 10, 52 Am. St. 136; L. ed. 1186. 
 
 Judah V. American &c. Co., 4 Ind. 32 Haun v. Mulberry &c. Grav. R. 
 
 333; Anglo-American Land Co. v. Co., 32 Ind. 103. 
 Dyer, 181 Mass. 593, 64 N. E. 416, 
 
§ 160 RAILROADS 280 
 
 per cent., no further assessment shall be made "unless with the 
 assent of three-fourths of the stockholders," a shareholder cannot 
 oe made to pay the balance by the directors, without a three- 
 fourths vote of the stockholders.^* It has also been held that sub- 
 scriptions to stock which is to be called for in proportions can 
 only be recovered where the instalments were called for periodi- 
 cally, and that an attempt to make all the assessments at one 
 time, without having given any notice to the subscriber that pre- 
 vious assessments were payable is invalid. ^^ But where the sub- 
 scription was made upon condition that not more than five per 
 cent, should be assessed at any one time, it was held that an as- 
 sessment of more than that sum, payable in instalments of not 
 more than five per cent, each, must be levied by a single vote of 
 the directors.*® It seems, however, that the corporation cannot 
 by contract, agree to postpone a call for an indefinite time.*' 
 
 § 161 (139). Call should affect all alike — Motive and expedi- 
 ency. — A call in order to be valid must ordinarily affect all simi- 
 lar stock of the corporation alike. *^ But the fact that wrong 
 nuotives induced the directors to make the call does not constitute 
 a valid objecion to it,*^ where the assessment is equal and the 
 money is raised ostensibly for corporate uses. Thus, in the case 
 cited, it was held that although the declaration alleged that the 
 assessment was unnecessary and was made in pursuance of a 
 scheme to embarrass the plaintiff and get possession of his stock 
 at a nominal price, as it did not appear to be in excess of the 
 power of the directors nor for an object foreign to the purposes 
 
 34 Louisiana Paper Co. v. Waples, 37 McComb v. Credit Mobilier &c., 
 
 3 Woods (U. S.) 34, Fed. Cas. No. 13 Phila. 468; Van Allen v. 111. Cen- 
 
 8540. tral R. Co., 7 Bosw. (N. Y.) SIS. 
 
 85 Spangler v. Indiana &c. R. Co., 88 pike v. Bangor &c. R. Co., 68 
 
 21 111. 276. But see Heaston v. Cin- Maine 445; Great Western &c. Co. 
 
 cinnati &c. R. Co., 16 Ind. 275, 79 v. Burnham, 79 Wis. 47, 47 N. W. 
 
 Am. Dec. 430. m. See also North Milwaukee 
 
 38 Penobscot R. Co. v. Dummer, Townsite v. Bishop, 103 Wis. 492, 
 
 40 Maine 172, 63 Am. Dec. 654; 79 N. W. 785, 45 L. R. A. 174, 24 
 
 Penobscot R. Co. v. Dunn, 39 Maine Am. St. 698. 
 
 587. 39 0glesby v. Attrill, 105 U. S. 
 
 60S, 26 L. ed. 1186. 
 
281 
 
 CALLS AND ASSESSMENTS 
 
 §162 
 
 of the corporation, the court would not inquire into the motives 
 which prompted it or the expediency of making it. 
 
 § 162 (140). Subscription payable upon demand — Notice. — 
 
 It is held in a number of jurisdictions that a subscription pay- 
 able at such times and places as shall be directed by the direc- 
 tors of the company is payable upon demand,*" that a suit to 
 collect the installment called for is a sufficient demand,*^ and 
 that no notice of such a call need be given before suit,*^ unless it 
 is required by the charter or by-laws, or by statute.*^ In ac- 
 cordance with this doctrine, where no such requirement is found 
 in the charter or general laws, a judgment for an instalment 
 
 *o Ross V. Lafayette &c. R. Co., 
 6 Ind. 297; New Albany &c. R. Co. 
 V. McCormick, 10 Ind. 499, 71 Am. 
 Dec. 337, and note; Gray v. Monon- 
 gahela &c. Co., 2 Watts & S. (Pa.) 
 156, 37 Am. Dec. SOO, and note. 
 On the question of payment of sub- 
 scriptions on call, see 4 Thomp. Corp. 
 (2d. ed.), § 3685 et seq. The statutes 
 of nearly all the states make the cap- 
 ital stock payable in such instal- 
 ments, and at such times ^nd places 
 as the directors prescribe. A call for 
 the payment of a subscription is a 
 suflficient acceptance of the subscriber 
 as a stockholder. Dainbury &c. R. Co. 
 V. Wilson, 22 Conn. 435; Wight v. 
 Shelby R. Co., 16 B. Mon. (Ky.) 
 4, 63 Am. Dec. 522; Buffalo &c. R. 
 Co. V. Dudley, 14 N. Y. 336. 
 
 41 Smith V. Indiana &c. R. Co., 12 
 Ind. 61. 
 
 *2 Eppes V. Mississippi &c. R. Co., 
 35 Ala. 33; Grubbs v. Vieksburg 
 &c. R. Co., SO Ala. 398; Wilson v. 
 Mills Valley R. Co., 33 Ga. 466; 
 Peake v. Wabash R. Co., 18 111. 88; 
 Hill V. Nisbet, 100 Ind. 341; Lake 
 Ontario &c. R. Co. v. Mason, 16 N. 
 
 Y. 451, 464; Grubb v. Mahoning 
 Nav. Co., 14 Pa. St. 302. 
 
 *3 Notice is required by statute in 
 several states. Such a statute is 
 generally held to be mandatory. 
 Mississippi &c. R. Co. v. Gaster, 20 
 Ark. 455; Macon &c. R. Co. v. Va- 
 son, 57 Ga. 314; note in 93 Am. St. 
 384, 385. The Pennsylvania R. R. 
 act requires notice of calls to be 
 given. McCarty v. Selinsgrove &c. 
 R. Co., 35 Led. Intel. 410. See also 
 Scarlett v. Academy, 43 Md. 203; 
 Muskingum Valley &c. Co. v. Ward, 
 13 Ohio 120, 42 Am. Dec. 191, 3 
 Thomp. Corp. (2d. ed.), § 3722 (no- 
 tice by publication). When the trus- 
 tees of a corporation, suing on a sub- 
 scription to its capital stock, show that 
 they have taken steps, which the law 
 authorized them to take, the pre- 
 sumption is that they have taken 
 them regularly; and, if there is any 
 by-law which renders their action 
 irregular, it is matter of defense 
 and should be so pleaded. Puget 
 Sound &c. R. Co. v. Ouillette, 7 
 Wash. 265, 34 Pac. 929. 
 
163 
 
 RAILROADS 
 
 282 
 
 on a subscription will be sustained even though it does not 
 appear that the defendant had any notice whatever of a call for 
 such instalment.** But respectable authority holds that notice 
 of calls must be given before suit is brought to collect them,*^ 
 since all stockholders cannot reasonably be presumed to know 
 what the directors do without notice of that fact,*® which is 
 peculiarly within the knowledge of the corporate authorities 
 seeking to enforce the subscription liability.*'' 
 
 § 163 (141). Requisites of notice. — Where notice is required, 
 it must be such a notice as will give the shareholder to under- 
 stand that a call has been made, and that he is required to pay 
 the amount on a named day,** and some authorities hold that it 
 must designate the place of payment.*^ It must be given the 
 full number of days prescribed before the call is made payable 
 or before suit is brought,^" but where actual personal notice is 
 given this has been held effectual, although the charter, statute 
 or by-laws provide for some other form of notice.^^ Actual 
 
 ** Wilson V. Mills Valley R. Co., 
 
 33 Ga. 466. 
 
 45 Wear v. Jacksonville &c. R. 
 Co., 24 111. S94; Rutland &c. R. Co. 
 V. Thrall, 3S Vt. 536; Edinburgh &c. 
 R. Co. V. Hebblewhite, 6 M. & W. 
 707; Miles v. Bough, 3 Ad. & El. 
 (N. S.) 84S; Lindley Comp. L. (Sth 
 ed.) 417, 4 Thomp. Corp. (2d ed.), 
 § 3720. 
 
 46 Hughes V. Antietam Mfg. Co., 
 
 34 Md. 316. 
 
 47This rule is commended in 4 
 Thomp. Corp. (2d. ed.), § 3720. bee 
 also note in li Am. St. 385, 386, wliere 
 it is stated that the weight of author- 
 ity is that notice is unnecessary, but 
 authorities on both sides are cited. 
 
 ■ks Shackelford v. Dangerfield, L. 
 R. 3 C. P. 407. 
 
 *8 Dexter &c. R. Co. v. Millerd, 
 3 Mich. 91, holding that a notice to 
 pay to the treasurer does not suffi- 
 
 ciently indicate the place of pay- 
 ment. But see Muskingum Valley 
 Tpk Co. V. Ward, 13 Ohio 120, 
 42 Am. Dec. 191, holding that it 
 does. And see Danbury &c. R. Co. 
 V. Wilson, 22 Conn. 435, where it 
 is held that a call is impliedly pay- 
 able to the treasurer at his office 
 unless otherwise provided in the 
 resolution, 
 
 30 Mississippi &c. R. Co. v. Cas- 
 ter, 20 Ark. 455. Fifty-nine days is 
 insufficient where the statute pre- 
 scribes sixty days. Macon &c. R. 
 Co. V. Vason, 57 Ga. 314. See al- 
 so Cole V. Joliet Opera House Co., 
 79 111. 96. 
 
 51 Mississippi &c. R. Co. v. Gas- 
 ter, 20 Ark. 455, where the statute 
 provided for sixty days' notice by 
 publication. Schenectady &c. R. 
 Co. v. Thatcher, 11 N. Y. 102, 
 where the defendant aided in send- 
 
283 
 
 CALLS AND ASSESSMENTS 
 
 §164 
 
 notice will be presumed where the subscriber expressly prom- 
 ises to pay a call which has already been made.^^ Notice by 
 mail has been held to be effective only if actually received, in 
 the absence of special provision for notice of this kind,^^ and it 
 is for the jury to decide whether it was so received."* 
 
 § 154 (142). Constructive notice. — Where constructive no- 
 tice is relied upon proof must usually be made of a strict com- 
 pliance with the provisions of the statute, charter, or by-law 
 conferring authority to give notice by publication or other- 
 wise. ^^ Publication must be made the full number of days 
 required before the call is payable,^* but one publication has 
 been held sufficient unless more are expressly required.''^ It 
 has been held that this mode of giving notice of matters m 
 which many persons are interested, such as a call by the direc- 
 tors of a corporation, has so long been an universal usage, and 
 
 ing out by mail notices required by 
 charter. See also Grand Valley 
 Irr. Co. V. Fruita Imp. Co., 2tl Colo. 
 483, 86 Pac. 324; Lexington &c. R. 
 Co. V. Chandler, 13 Mete. (Mass.) 
 311; McCarty v. Sellingsgrove R. 
 Co., 87 Pa. St. 332. Contra, Tomlin 
 V. Tonica &c. R. Co., 23 111. 429 
 (374). 
 
 52 Miles V. Bough, 3 Ad. & El. 
 (N. S.) 845; Fairfield Co. Tpk. Co. 
 V. Thorp, 13 Conn. 173. 
 
 53 Hughes V. Antietam &c. Co., 34 
 Md. 316; Lake Ontario &c. R. Co. 
 V. Mason, 16 N. Y. 451. But see 
 Braddock v. Philadelphia &c. R. Co., 
 45 N. J. L. 363. See generally 4 
 Thomp. Corp. (2d ed.), §3722. 
 
 5* Braddock v. Philadelphia &c. 
 R. Co., 45 N. J. L. 363. Only the 
 person actually mailing the notice 
 can testify that it was sent. Jones 
 V. Sison, 6 Gray (Mass.) 288. 
 
 55 Macon &c. R. Co. v. Vason, 57 
 
 Ga. 314; Cole v. Juliet &c. Co., 79 
 III. 96; Louisville &c. Turnpike Co. 
 V. Meriwether, S B. Mon. (Ky.) 
 13. See 4 Thomp. Corp. (2d. ed.), 
 §§3722, 3724, 3726. 
 
 56 Macon &c. R. Co. v. Vason, 57 
 Ga. 314. The certificate of the sec- 
 retary is not admissible to prove 
 such publication. Tomlin v. Tonica 
 &c. R. Co., 23 111. 429. The printed 
 notice must be put in evidence. 
 Rutland &c. R. Co. v. Thrall, 35 Vt. 
 536. But may be supplemented by 
 the testimony of the publisher as to 
 subsequent insertions. Unthank v. 
 Henry Co. Tpk. Co., 6 Ind. 125; An- 
 drews V. Ohio &c. R. Co., 14 Ind. 
 169. 
 
 57 Marsh v. Burroughs, 1 Woods 
 (U. S.) 463, Fed. Cas. No. 9112; 
 Fox V. Allensville &c. Tpk. Co., 46 
 Ind. 31; Muskingum Val. Tpk. Co. 
 V. Ward, 13 Ohio 120, 42 Am. Dec. 
 191. 
 
§ 165 RAILROADS 284 
 
 of a notoriety equal to that of the publication of newspapers 
 themselves, that the custom of doing so has become a part of 
 the law of the land,^* and that such a notice is sufHcient where 
 the mode of notice is left undetermined by express provision 
 of law.^® But the better authority seems to hold that such a 
 notice would bind only those who could be proven to have actu- 
 ally read it ;**" and that, in general, showing that notice was 
 given to others even of the immediate neighborhood will not 
 be sufficient to charge a subscriber,*^ where constructive notice 
 is not expressly provided for and such provisions carefully and 
 exactly complied with. 
 
 § 165 (143). Waiver by stockholder of notice and formalities 
 of call — Estoppel. — The subscriber may waive notice, -or he may 
 waive the formalities which give validity to the call,''- and may 
 even waive the call itself.** Such a waiver may be by acts as 
 well as by express agreement.** It is held that a director par- 
 ticipating in a call cannot question its validity.*^ And a sub- 
 scriber who, on receiving notice of a call, refuses to pay it and 
 denies his liability as a stockholder, waives an}- further notice 
 
 58 Hall V. United States Ins. Co., waiver of its invalidity. Pike v. 
 S Gill (Md.) 484. Bangor &c. R. Co., 68 Maine 445. 
 
 59 Louisville &c. Co. v. Meri- A waiver must be clearly proved, 
 wether, S B. Mon. (Ky.) 13; Grubbs Rutland &c. R. Co. v. Thrall, 35 Vt. 
 V. Vicksburg &c. R. Co., 50 Ala. 536. 
 
 398; Danbury &c. R. Co. v. Wilson, 63 Such a waiver is frequently 
 
 22 Conn. 435. See also Fisher v. made by an agreement to pay the 
 
 Evansville &c. R. Co., 7 Ind. 407. subscription on a day certain. New 
 
 60 Alabama &c. R Co. v. Rowley, Albany &c. R. Co. v. Pickens, 5 Ind. 
 9 Fla. 508; Lake Ontario &c. R. Co. 247; Waukon &c. R. Co. v. Dwyer, 
 V. Mason, 16 N. Y. 451. And see 49 Iowa 121. 
 
 Lincoln v. Wright, 23 Pa. St. 76; 64 Macon &c. R. Co. v. Vason, 57 
 
 Tomlin v. Tonica &c. R. Co., 23 111. Ga. 314. 
 
 429, 62 Am. Dec. 316n. 65 York Tramways Co. v. Wil- 
 
 61 New Jersey Midland R. Co. v. lows, L. R, 8 Q. B. D. 685. But the 
 Strait, 35 N. J. L. 322. fact that a director voted for a call 
 
 62 Campbell v. Santa Maria Oil and made a part payment of it, will 
 &c. Co. 153 Cal. 282, 95 Pac. 39, 4 not estop him to question his lia- 
 Thomp. Corp. (2d ed.) § 2798. The bility as a stockholder. 
 
 vote of a city to pay a call is no 
 
285 CALLS AND ASSESSMENTS § 166 
 
 of future calls.®* But voluntary payment of part of a subscrip- 
 tion is not necessarily a waiver of the right to have calls made 
 for the balance before payment.®'^ And the payment of one ille- 
 gal assessment does hot estop the subscriber from setting up 
 illegality as a defense to a second.*^ 
 
 § 166 (144). Demand and suit for assessment. — After a call 
 is rendered payable by resolution and due notice, suit may be 
 brought to collect it without further demand.®^ Where several 
 instalments are in default, it has been held that one suit may be 
 brought for all.'''' The complaint in such a case must aver that 
 all the several instalments are due and payable.''^ Interest may 
 be collected from the time the instalments become due, in cas,. 
 they are not promptly paid.^^ 
 
 § 167 (145). Assignment of right to collect subscription on 
 assessment. — The claim arising from an unpaid call may be as- 
 signed like any other debt,''* as may subscription contracts pay- 
 ee Cass V. Pittsburgh &c. R. Co., Vogt Mach. Co., 182 Ky. 473, 206 
 80 Pa. St. 31. S. W. 806. 
 
 67 Grosse Isle Hotel Co. v. I'An- 70 Spangler v. Indiana &c. R. Co., 
 son, 43 N. J. L. 442. 21 III. 276. 
 
 68 Somerset &c. R. Co. v. Cush- ti Bethel &c. Tpk. Co. v. Bean, 
 ing, 45 Maine 524. Nor, on the 58 Maine 89. 
 
 other hand, does the illegality of 72 Casey v. Galli, 94 U. S. 673, 24 
 
 one assessment vitiate a subsequent L. ed. 168; Rikhoff v. Brown's &c. 
 
 legal assessment. European &c. R. Co., 68 Ind. 388; Gould v. Oneonta, 
 
 Co. V. McLeod, 3 Pugsley (16 N. 71 N. Y. 298. See also McCoy v. 
 
 B.) 3, 39. World's Columbian Exposition, 186 
 
 «» Winter y. Muscogee &c. R. Co., 111. 356, 57 N. E. 1043, 78 Am. St. 
 
 11 Ga. 438; Penobscot R. Co: v. 288; May v. Ullrich, 132 Mich. 6, 
 
 Dummer, 40 Maine 172, 63 Am. 92 N. W. 493, 4 Thomp. Corp. (2d 
 
 Dec. 654. See genei-ally as to plead- ed.), §3712. This, however, is a 
 
 ings and defences in such actions, matter frequently regulated by stat- 
 
 8 Thomp. Corp. §§ 3802-3880. The ute. Thus, under the Virginia stat- 
 
 liability of a stockholder for un- ute, it has been held interest may 
 
 paid subscription is controlled by be collected from the date of the 
 
 law of state where corporation is call. Hawkins v. Glenn, 131 U. S. 
 
 created and exists. United States 319, 9 Sup. Ct. 739,. 33 L. ed. 184. 
 
 Cast Iron Pipe &c. Co. v. Henry 73 Miller v. Malony, 3 B. Mon. 
 
§168 
 
 RAILROADS. 
 
 286 
 
 able upon a day certain^* But subscriptions made subject to 
 call cannot be mortgaged or sold before payment has been called 
 forjs since the discretion to make calls vested in the directors 
 is not the subject of transfer/'^ and, generally, the power to 
 enforce calls can only be exercised by the company to whose 
 stock the subscription was made, unless there has been a con- 
 solidation or transfer of the franchises to another company in 
 pursuance of full statutory authority.''^ 
 
 § 168 (146). When courts may compel call and payment. — 
 
 In case of corporate insolvency, a court of equity may compel 
 the directors to make a call for the purpose of raising funds with 
 which to pay the debts of the corporation.^* Or it may dispense 
 with a call and order that the unpaid subscriptions, or such a 
 part of them as may be necessary to pay the corporate debts,''® 
 
 (Ky.) 105; Morris v. Cheney, 51 111. 
 4S1; Wells v. Rodgers, SO Mich. 
 294, 15 N. W. 462; Downie .v. 
 Hoover, 12 Wis. 174, 78 Am. Dec. 
 7^0. 
 
 7-iSee Smith v. Hollett, 34 Ind. 
 519; Hays v. Branham, 36 Ind. 219. 
 
 T5 Rodgers v. Wells, 44 Mich. 411, 
 6 N. W. 860; Wells v. Rodgers, 50 
 Mich. 294, 15 N. W. 462; New Jer- 
 sey Midland R. Co. v. Strait, 35 N. 
 J. L. 322 ; Stanley, Ex parte, 33 L. 
 J. (Ch.) 535. 
 
 ■^8 A mortgage on all the land, 
 property and eflfects of the corpo- 
 ration does not cover unpaid sub- 
 scriptions. Pickering v. Ilfracombe 
 R. Co., 37 L. J. (C. P.) 118. 
 
 7T Thrasher v. Pike County R. 
 Co., 25 111. 393. 
 
 TS Sanger v. Upton, 91 U. S. 56, 
 23 L. ed. 220; Chandler v. Siddle, 3 
 Dill. (U. S.) 477, Fed. Cas. No. 
 2594; Germantown Pass. R. Co. v. 
 Fitler, 60 Pa. St. 124, 100 Am. Dec. 
 546n, 4 Thomp. Corp. (2d ed.), 
 
 § 3714. See also Glenn v. Saxton, 
 68 Cal. 353, 9 Pac. 420; Calloway 
 V. Glenn, 105 Ky. 648, 49 S. W. 
 440; Clevenger v. Moore, 71 N. J. L. 
 148, 58 Atl. 88; Efird v. Piedmont 
 Land &c. Co., 55 S. Car. 78, 32 S; 
 E. 758, 896. But this remedy has 
 been disapproved. Dalton &ic. R. 
 Co. V. McDaniel, 56 Ga. 191; Hatch 
 V. Dana, 101 U. S. 205, 25 L. ed. 
 885; Ward v. Griswoldville &c. Co., 
 16 Conn. 593. Compare Glenn v. 
 Howard, 81 Ga. 383, 8 S. E. 636, 
 12 Am. St. 318. See also Great 
 Western Tel. Co. v. Purdy, 162 U. 
 S. 329, 16 Sup. Ct. 810, 40 L. ed. 
 986. 
 
 ''■9 Citizens' &c. Co. v. Gillespie, 
 lis Pa. St. 564, 9 Atl. 73. See al- 
 so Washington Sav. Bank v. But- 
 chers' &c. Bank, 107 Mo. 133, 17 S. 
 W. 644, 28 Am. St. 405; Henry v. 
 Vermillion &c. R. Co., 17 Ohio 187; 
 McKay v. Elwood, 12 Wash. 579, 
 41 Pac. 919. 
 
287 
 
 CALLS AND ASSESSMENTS 
 
 §169 
 
 be paid to a receiver for the benefit of th,e corporate creditors.®" 
 The right of the court to do this is upheld even where the stat- 
 ute provides that calls shall be made only by the directors.®^ 
 
 § 169 (147). Extent of stockholder's liability for assessments 
 — Agreements as affecting liability. — The principle of law is 
 now well settled that a stockholder is not liable for assessments 
 beyond the par value of his stock,^^ unless made so liable by 
 provisions of the corporate charter or by a constitutional stat- 
 ute. ^^ Liability to such an assessment cannot be created by a 
 by-law adopted by a majority vote of the directors or of the 
 stockholders.^* It has been held, however, that an agreement 
 
 80 Scovill V. Thayer, 105 U. S. 143, 
 26 L. ed. 968; Hatch v. Dana, 101 
 U. S. 205, 25 L. ed. 885; Marsh v. 
 Burroughs, 1 Woods (U. S.) 463, 
 Fed. Cas. No. 9112; Glenn v. Sam- 
 ple, 80 Ala. 159, 60 Am. Rep. 92; 
 Glenn v. Saxton, 68 Gal. 353, 9 Pac. 
 420; Chandler v. Keith, 42 Iowa 99; 
 Shockley v. Fisher, 75 Mo. 498; Sa- 
 gory V. Dubois, 3 Sandf. Ch. (N. 
 Y.) 466; Henry v. Vermillion &c. 
 R. Co.,. 17 Ohio 187; Elderkin v. 
 Peterson, 8 Wash. 674, 36 Pac. 1089; 
 Adler v. Milwaukee &c. Co., 13 Wis. 
 57. But see as to necessity for no- 
 tice. Farwell v. Great Westeirn &c. 
 Tel. Co., 161 111. 522, 44 N. E. 891, 
 with which compare, however. 
 Brown v. AUebach, 156 Fed. 697. 
 
 81 Glenn v. Saxton, 68 Cal. 353, 9 
 Pac. 420; Crawford v. Rohrer, 59 
 Md. 599. But see Trustees &c. v. 
 Waples, 3 Woods (U. S.) 34, hold- 
 ing that the court cannot make a 
 call where the charter provides for 
 a call only upon a three-fourths 
 vote of the stockholders. As to 
 right of receiver or assignee to 
 make calls, in a proper case, see 
 4 Thomp. Corp. (2d ed.), §3715. 
 
 82 Smith v. Huckabee, 53 Ala. 
 191; Redkey Citizens' &c. Gas Co. 
 v. Orr, 27 Ind. App. 1, 60 N. E. 
 716; Lewey's Island R. Co. v. Bol- 
 ton, 48 Maine 451, 77 Am. Dec. 236; 
 Coffin v. Rich, 45 Maine 507, 71 Am. 
 Dec. 559; Inhabitants of Norton v. 
 Hodges, 100 Mass. 241; Enterprise 
 Ditch Co. V. Moffitt, 58 Nebr. 642, 
 79 N. W. 560, 45 L. R. A. 647n, 
 76 Am. St. 122; Great Falls &c. R. 
 Co. V. Copp, 38 N. H. 124; Chase 
 V. Lord, n N. Y. 1; Carr v. Igle- 
 hart, 3 Ohio St. 457. 
 
 83 Santa Cruz R. Co. v. Spreckles, 
 65 Cal. 193, 3 Pac. 661, 802. See 
 post Chapter IX, Stockholders. 
 
 8* Kennebec &c. R. Co. v. Ken- 
 dall, 31 Maine 470; Trustees of 
 Free Schools v. Flint, 13 Mete. 
 (Mass.) 539; Flint v. Pierce, 99 
 Mass. 68; Enterprise Ditch Co. v. 
 Moffitt, 58 Nebr. 642, 79 N. W. 560, 
 n Am. St. 122, 45 L. R. A. 647n, 
 96 Am. Dec. 691. But see Hume v. 
 Winyah Canal Co., 1 Carolina L. J. 
 217. See upon the general subject 
 note in 22 L. R. A. (N. S.), 1013; 
 and as to question of 'liability of hold- 
 er of stock as collateral seciurity, 
 see note in Ann. Cas. 1916C, 567. 
 
§ 170 RAILROADS 288 
 
 entered into by all the stockholders and printed upon the certifi- 
 cates, may make not only the stockholders but their assignees 
 liable to further assessments.*'"' And if the stockholders, by 
 agreement among themselves, voluntarily contribute to the cor- 
 porate treasury in proportion to the value of their shares to 
 meet the needs of the corporation, such advances do not create 
 corporate debts and cannot be recovered back.®" 
 
 ■ § 170. Liability of holder where stock purpcwts to be paid 
 up but is not. — The general rule is that the corporation, in the 
 absence of statutory authority or special power conferred upon 
 it, has no authority to make calls and assessments upon paid 
 up stock, and this has often been held, in the absence of fraud, 
 as between the corporation or stockholder, even where the stock 
 has not in fact been fully paid up.®'^ But under a phase of the 
 trust fund doctrine it is generally held that where the stock is 
 not paid up the fact that it is designated or issued as paid up 
 stock will not prevent creditors from attacking the transaction 
 or having payment of the unpaid portion enforced in a proper 
 
 SB Weeks V. Silver &c. Co., 23 J. 728, 46 So. 285; Gillett v. Chicago 
 
 & S. (N. Y. Sup. Ct.) 1. &c. Trust Co., 230 lU. 373, 82 N. E. 
 
 86Bidwell V. Pittsburgh &g. R. 891; Utica Fire &c. Co. v. Waggon- 
 Co., 114 Pa. St. 535, 6 Atl. 729. er &c. Clock Co., 166 Mich. 168, 
 
 8T Scovill V. Thayer, 105 U. S. 132 N. W. 502 ; Holcombe v. Tren- 
 
 143, 26 L. ed. 968; Dickermatt v. ton &c. Co., 80 N. J. Eq. 122, 82 
 
 Northern Trust Co., 176 U. S. 181, Atl. 618; Security Trust Co. v. Ford, 
 
 20 Sup. Ct. 311, 44 L. ed. 423; Wall 75 Ohio St. 322, 79 N. E. 474, 8 
 
 V. Basin Min. Co., 16 Idaho 313, L. R. A. (N. S.) 263, and other 
 
 101 Pac. 733, 22 L. R. A. (N. S.) cases there cited in note; Gordon 
 
 1013, and cases cited in note; Bent v. Cumrtiings, 78 Wash. SIS, 139 Pac. 
 
 V. Underdown, 156 Ind. 516, 60 N. 489. See also First Nat. Bank v. 
 
 E. 307; Gary v. St. Joe Min. Co., Northrup, 82 Kans. 638, 109 Pac. 
 
 32 Utah 497, 91 Pac. 369, 12 L. R. 672, 136 Am. St. 119. But see 
 
 A. (N. S.) 554. See also note in 45 Southworth v. Morgan, 205 N. Y. 
 
 L. R. A. 647. 293, 98 N. E. 490, 51 L. R. A. (N. 
 
 88 Upton V. Tribikock, 91 U. S. S.) 56. As to whien transferees 
 
 45, 23 L. ed. 203; Merchants &c. of the stock are liable in such a 
 
 Agatcy V. Davidson, 23 Cal. App. case, see note to Perkins v, Cowles 
 
 274, 137 File. 1091; Knight &c. Co. (157 Cal. 625, 108 Pac. 711), in 30 
 
 V. Tampa &c. Buck Co., 55 Fla. L. R. A. (N. S.) 283. 
 
289 Calls and assessments § 171 
 
 § 171 (148). Construction of charter and statutory provisions 
 regarding assessments. — Statutes and charter provisions author- 
 izing such assessments will be strictly construed. ^'^ Where the 
 charter provided "that the shares in said capital stock shall not 
 be liable to assessment after the capital stock so fixed in amount 
 has been paid in, except in equal proportions, and by the con- 
 sent of. the stockholders owning at least three-fourths of the 
 shares of the capital stock of the corporation," it was held that 
 paid-up stock was not liable to assessment in any event until 
 the full amount of the capital stock as fixed by the charter had 
 been subscribed for and actually paid in."" So, where the char- 
 ter provided that "if at any time the stock paid into said corpo- 
 ration shall be impaired by loss or otherwise, the directors shall 
 forthwith repair the same by assessment," this authority was 
 held to be conferred only for the purpose of providing capital ' 
 with which to continue business, and a receiver was not allowed, 
 to make an assessment with which to pay debts-^^ 
 
 § 172 (149). Remedies where stockholder fails to pay sub- 
 scription or assessment — Forfeiture. — A subscriber may ordi- 
 narily be sued for any unpaid instalment due on his stock, as for 
 the breach of any other contract to pay money,^^ his subscrip- 
 
 89Lewey's Island R. Co. v. Bol- 92 The corporation may levy ex- 
 ton, 48 Maine 451, 11 Am. Dec 236; ecution on the stock and sell it to 
 Libby v. Tobey, 82 Maine 2B1, 19 satisfy a judgment obtained in such 
 Atl. 904; O'Reilly v. Bard, 105 Pa. suit. Chase v. East Tenn. &c. R. 
 St. 569; Henderson v. Turngrew, 9 Co., 5 Lea (Tenn.) 415. In sev- 
 Utah 432, 35 Pac. 495. eral of the New England States, 
 
 90 Atlantic De Laine Co. v. Ma- however, the rule seems to be that 
 son, 5 R. I. 463. the only remedy open to a corp'ora- 
 
 91 Dewey v. St. Albans Trust Co., tion in case of the non-payment of 
 57 Vt. 332. But a similar statute in stock subscribed is by forfeiture of 
 California (Civ. Code, §§331, 332) the shares, unless the subscriber ex- 
 is construed to permit assessments pressly promised to pay, or the 
 to any extent "for the purpose of charter expressly bound him to do 
 paying expenses, conducting busi- so. Katama Land Co. v. Jernegan, 
 ness or paying debts." Santa Cruz 126 Mass. 155; Belfast &c. R. Co. 
 R. Co. V. Spreckles, 65 Cal. 193, 3 v. Cottrell, 66 Maine 185; New 
 Pac. 661, 802. See generally notes Hampshire &c. R. Co. v. Johnson, 
 in 45 L. R. A. 647, and in 22 L. R. 30 N. H. 390, 64 Am. Dec. 300; 
 A. (N. S.) 1013. Piscataqua Ferry Co. v. Jones, 39 
 
 10 — Ell. Railroads I 
 
§172 
 
 RAILROADS 
 
 290 
 
 tion to the capital stock being construed as a promise to pay the 
 face value of the shares subscribed for.^^ But the corporatio 
 
 N. H. 491 ; Connecticut &c. R. Co. v. 
 Bailey, 24 Vt. 465, 58 Am. Dec. 181. 
 Contra, Windsor Electric Light Co. 
 V. Tandy, 66 Vt. 248, 29 Atl. 248, 
 44 Am. St. 838. See also Dotson v. 
 Hoggan (Utah), 140 Pac. 128. But in 
 Connecticut it is held that the sign- 
 ing of a subscription paper and agree- 
 ing to "take" certain shares amounts 
 to a promise to pay their face value. 
 Hartford &c. R. Co. v. Kennedy, 12 
 Conn. 499. And this is the general 
 rule throughout the United States 
 and is the rule enforced in the fed- 
 eral court. Upton v. Tribilcock, 91 
 U. S. 45, 23 L. ed. 203; Sanger v. 
 Upton, 91 U. S. 56, 23 L. ed 220, 
 and cases cited in next note infra. 
 In other words, the prevailing rule 
 is that even wfhere there may be a 
 forfeiture that remedy is merely 
 cumulative and there may be an 
 election. Nashua Sav. Bank v. 
 Anglo-Am. Land &c. Co., 189 U. 
 S. 221, 23 Sup. Ct. 517, 47 L. ed. 
 782 ; Campbell v. American &c. Co., 
 125 Fed. 207; 4 Thomp. Corp. 
 (2d ed.), §3739. A provision in the 
 charter that the subscription may 
 be enforced by suit or by forfeiture 
 will fix a personal liability upon the 
 subscriber without an express prom- 
 ise to pay. Kennebec &c. R. Co. v. 
 Kendall, 31 Maine 470; Connecti- 
 cut &c. R. Co. V. Bailey, 24 Vt. 465, 
 58 Am. Dec. 181. See Fry v. Lex- 
 ington &c. R. Co., 2 Mete. (Ky.) 
 314. Pennsylvania, Nebraska; Mary- 
 land, Michigan, Wisconsin, Alaba- 
 ma, New Mexico and Arizona have 
 general statutes providing that a 
 
 railroad corporation may sue for un- 
 paid instalments. Similar pro- 
 vision is made by statute in the 
 following states : Page & Adams 
 Ann. Code (1910), §8674; Min. 
 Gen. Stat. (1913), §6642; Ark. Dig. 
 (1916), §954; W. Va. Code, 1916, 
 Ch. 53, § 34; Courtright's Colo. Stat., 
 1913, §850. An agreement to take 
 and fill certain shares has been con- 
 strued to be an agreement to pay 
 for them. Buckfield Branch R. Co. 
 v. Irish, 39 Maine 44. See also 
 Penobscot &c. R. Co. v. Bartlett, 12 
 Gray (Mass.) 244. 
 
 ssSelma R. Co. v. Tipton, 5 Ala. 
 787, 39 Am. Dec. 344; Hartford &c. 
 R. Co. v. Kennedy, 12 Conn. 499; 
 Kirksey v. Florida &c. Plank R. Co., 
 7 Fla. 23, 68 Am. Dec. 426; Klein v. 
 Alton &c. R. Co., 13 111. 514; In- 
 stone v. Frankfort Bridge Co., 2 
 Bibb. (Ky.) 576, 5 Am. Dec. 638; 
 Hughes V. Antietam M. Co., 34 Md. 
 316; Freeman v. Winchester, 10 S. 
 & M. (Miss.) 577; Northern R. Co. 
 V. Miller, 10 Barb. (N. Y.) 260; 
 Western R. Co. v. Avery, 64 N. 
 Car. 491 ; Delaware &c. Canal Nav. 
 V. Sansom, 1 Binn. (Pa.) 70; North 
 Eastern R. Co. v. Rodriguez, 10 
 Rich. L. (S. Car.) 278; Stokes v. 
 Lebanon &c. Tpk. Co., 6 Humph. 
 (Tenn.) 241 ; Windsor El. Light Co. 
 V. Tandy, 66 Vt. 248, 29 Atl. 248, 
 44 Am. St. 838. But an action on 
 a stock assessment against one 
 party on stock which is in the 
 name of another party on the books 
 of the corporation cannot ordinarily 
 be maintained by the corporation. 
 
291 
 
 CALLS AND ASSESSMENTS 
 
 173 
 
 is also, in many of the states, authorized by statute to declare a 
 forfeiture of its stock for non-payment of calls, while others 
 authorize a sale of the stock and an application of the proceeds 
 to the payment of the instalment, for which a call has been 
 issued and to which the owner does not respond, after due 
 notice.^^ This remedy cannot be pursued except when it is 
 given by charter or by statute,^'' or is created by consent of all 
 the stockholders which is usually indorsed on the certificates."'' 
 
 § 173 (150). Cumulative remedies — Election. — Statutory per- 
 mission to declare a forfeiture does not destroy the corporate 
 right to collect the money due upon' the subscription by other 
 means, where such right is given by law or -by contract,"® and 
 
 Vale Mills v. Spalding, 62 N. H. 
 60S. 
 
 95 See where sale .was held void 
 and issue of new stocks in its 
 place compelled, when stockholder 
 duly tendered amount due, Wils'on 
 V. Duplin &c. Co., 139 N. Car. 39S, 
 52 S. E. 62. 
 
 96 Westscott V. Minnesota &c. Co., 
 23 Mich. 14S ; Minnehaha &c. Assn. 
 V. Legg, SO Minn. 333, S2 N. W. 
 898; Budd v. Multnomah St. R. Co., 
 IS Ore. 413, IS Pac. 6S9, 3 Am. St. 
 169; Budd v. Multnomah, IS Ore. 
 404, IS Pac. 6S4, 40 Am. & Eng. R. 
 Cas. SSI ; Perrin v. Granger, 30 Vt. 
 S9S; Barton's Case, 4 DeG. & J. 46. 
 
 97 Weeks v. Silver &c. Co., 23 J. 
 & S. (N. Y.) 1; Lesseps v. Archi- 
 tects Co., 4 La. Ann. 316. It can- 
 not be created by a by-law, except 
 where authority to make such by-law 
 is conferred by statute, and a sale 
 under an attempted forfeiture with- 
 out such authority conveys no title. 
 Long Island R. Co., Matter of, 19 
 Wend. (N. Y.) Zl, 32 Am. Dec. 429. 
 See Kirk v. Nowill, 1 Term R. 118; 
 
 Kennebec &c. R. Co. v. Kendall, 31 
 Maine 470. And compare Detwei- 
 ler v. Breckenkamp, 83 Mo. 4S; 
 Lesseps v. Architects Co., 4 La. 
 Ann. 316. 
 
 98 Selma &c. R. Co. v. Tipton, S 
 Ala. 787, 39 Am. Dec. 344; Hartford 
 &c. R. Co. V. Kennedy, 12 Conn. 
 499; Kirksey v. Florida &c. Co., 7 
 Fla. 23, 68 Am. Dec. 426; High- 
 tower V. Thornton, 8 Ga. 486, S02, 
 52 Am. Dec. 412; Peoria &c. R. Co. 
 V. Elting, 17 111. 429; Gratz v. Redd, 
 4 B. Mon. (Ky.) 178; New Orleans 
 &c. Co. V. Briggs, 27 La. Ann. 318; 
 South Bay &c. Co. v. Gray, 30 
 Maine 547; Boston &c. R. Co. v. 
 Wellington, 113 Mass. 79; Atlantic 
 Dynamite Co. v. Andrews, 97 Mich. 
 466, 56 N. W. 858; White Moun- 
 tain R. Co. V. Eastman, 34 N. H. 
 124; Rensselaer &c. R. Co. v. Wet- 
 sel, 21 Barb. (N. Y.) 56; Ogdens- 
 burg &c. R. Co. V. Frost, 21 Barb. 
 (N. Y.) 541; Tar River &c. Co. v. 
 Neal, 3 Hawks. (N. Car.) 520; Del- 
 aware &c. Co. V. Sansom, 1 Binn. 
 (Pa.) 70; Greenville &c. R. Co. v. 
 
§173 
 
 RAILROADS 
 
 292 
 
 the corporation may, in a proper case, elect which remedy it 
 will pursue.ss It has been held that the remedy for forfeiture 
 and fjale could be pursued, and that the shareholder could then 
 be sued for any unpaid balance not discharged- by the pro- 
 ceeds arising from a sale of the stock, as in a foreclosure of a 
 mortgage, where the mortgaged property does not sell for 
 enough to pay the debt.^ It is argued that where provision is 
 made for the payment to the subscriber of any surplus arising 
 from a sale, after paying the delinquent assessment,^ the con- 
 tention that the forfeiture destrpys the contract relation between 
 him and the corporation cannot be upheld, but he will be impli- 
 edly liable for any deficiency in the sum necessary to discharge 
 
 Cathcart, 4 Rich L. (S. Car.) 89; 
 Stokes V. Lebanon &c. Co., 6 
 Humph. (Tenn.) 241; Rutland &c. 
 R. Co. V. Thrall, 35 Vt. 536; Puget 
 Sound &c. R. Co. v. Ouellette, 7 
 Wash. 265, 34 Pac. 929. The lia- 
 bility of a stockholder in a for- 
 eign corporation is generally de- 
 termined by the law of the state 
 which created it, but it may be 
 enforced by the courts of other 
 jurisdictions, and "the general rule 
 in the states of this county is, 
 where a c^orporation has a right un- 
 der the statute creating it, to de- 
 clare a forfeiture of shares for non- 
 payment of calls, it may exercise its 
 option to forfeit the stock or bring 
 its action to collect the amount of 
 the calls, but cannot forfeit the 
 stock and afterwards sue at law, as 
 the exercise of the first option would 
 end the relation of the parties and 
 exclude a resort to the other." 
 Mandel v. Swan Land &c. Co., 154 
 111. 177, 40 N. E. 462, 27 L. R. A. 
 313, 45 Am. St. 124, citing Small v. 
 Herkimer &c. Co., 2 N. Y. 330; 
 Buffalo &c. R. Co. v. Dudley, 14 
 
 N. Y. 336; Rutland &c. R. Co. v. 
 Thrall, 35 Vt. 536. 
 
 99 4 Thomp. Corp. (2d ed.), 
 § 3739; 1 Cook Corporations (7th. 
 ed.), § 124; White v. McCuUagh, 
 74 W. Va. 160, 81 S. E. 720; 8 
 Thomp. Corp. §3735^ 
 
 1 Carson v. Arctic Min. Co., 
 5 Mich. 228. But see Mandel v. 
 Swan &c. Co., 154 111. 177, 40 N. 
 E. 462, 27 L. R. A. 313, 45 Am. St. 
 124. For other cases in which legis- 
 lative provision is made by charter 
 or otherwise, for such procedure see 
 Brockenbrough v. James River &c. 
 Co., 1 Patton & H. (Va.) 94; Mann 
 V. Cooke, 20 Conn. 178; Danbury 
 &c. R. Co. v. Wilson, 22 Conn. 435. 
 One who acquired his shares by 
 transfer is held liable under this 
 rule equally with an original sub- 
 scriber. Merrimac Min. Co. v. 
 Bagley, 14 Mich. SOI, and cases 
 cited supra. 
 
 2 Provisions that the shareholder 
 shall have the surplus or be liable 
 for any deficiency is found in the 
 general statutes of Massachusetts, 
 Vermont, Maryland and Wisconsin. 
 
293 
 
 CALLS AND ASSESSMENTS 
 
 §173 
 
 such assessment.^ And it has been held that the company may 
 declare a forfeiture after suit brought to recover unpaid calls, 
 and that such a forfeiture cannot be pleaded in bar of the fur- 
 ther maintenance of the suit where the value of the stock for- 
 feited is not equal to the money due the company,* although the 
 stockholder may insist, in diminution of damages, that such 
 value shall be subtracted from the sum for which the corpora- 
 tion would otherwise have judgment.-' But it is generally held 
 that while the corporation may proceed either by suit or by for- 
 feiture, the adoption of the statutory remedy by forfeiture or 
 sale excludes the other,'' except where the statute gives an ac- 
 tion for the balance of the subscription not canceled by the 
 proceeds of the sale.^ Where such an action was given by stat- 
 ute in Massachusetts it was held that a personal action could 
 not be maintained until there had been a formal declaration of 
 forfeiture and a sale based upon such forfeiture.^ But a mere 
 threat to enforce a forfeiture, or an unsuccessful attempt to sell 
 
 3 Cars'on v. Arctic Min. Co., S 
 Mich. 288. See also Hartford &c. 
 R. Co. V. Kennedy, 12 Conn. 499; 
 Instone v. Frankfort Bridge Co., 2 
 Bibb. (Ky.) 576, 5 Am. Dec. 638; 
 Great Northern R. Co. v. Kennedy, 
 4 Exch. 417. 
 
 •* Herkimer Mfg. Co. v. Small, 21 
 Wend. (N. Y.) 273, reversed, how- 
 ever, in 2 N. Y. 330. 
 
 5 Herkimer Mfg. Co. v. Small, 21 
 Wend. (N. Y.) 273, reversed, how- 
 ever, in 2 N. Y. 330. 
 
 6Ashton v. Burbank, 2 Dill. (U. 
 S.") 43S, Fed. Cas. No. 582; Allen 
 V. Montgomery &c. Co., 11 Ala. 437; 
 Macon &c. R. Co. v. Vason, 57 Ga. 
 314; Mandel v. Swan &c. Co., 154 
 111. 177, 40 N. E. 462, 27 L. R. A. 
 313, and note, 45 Am. St. 124; 
 Macauly v. Robinson, 18 La. Ann. 
 619; Athol &c. R. Co. v. Inhabi- 
 tants of Prescott, 110 Mass. 213; 
 Mechanics' &c. Co. v. Hall, 121 
 
 Mass. 272; Mills v. Stewart, 41 N. 
 Y. 384; Ogdensburg &c. R. Co. v. 
 Frost, 21 Barb. (N. Y.) 541; Rut- 
 land &c. R. Co. V. Thrall, 35 Vt. 
 536; King's Case, L. R. 2 Ch. 714. 
 
 ■? Such a pfovision is frequently 
 found in special charters granted to 
 corporations. See New Hampshire 
 Cent. R. Co. V. Johnson, 30 N. H. 
 390, 64 Am. Dec. 300; Danbury &c. 
 R. Co. V. Wilson, 22 Conn. 435; 
 Great Northern R. Co. v. Kennedy, 
 4 Exch. 417, 425. It is also given 
 by general statute i« Massachusetts, 
 Vermont, Maryland and Wisconsin. 
 And in West Virginia and Arkan- 
 sas,. Barnes' W. Va. Code, 1916, Ch. 
 53, §33; Ark. Dig. (1916), §954. 
 
 8 Athol &c. R. Co. V. Prescott, 110 
 Mass. 213. But the holding would 
 probably be different in those states 
 where a personal action is given in 
 the first instance by the common 
 law, as construed by their courts 
 
§ 174 RAILROADS 294 
 
 the shares, will not bar a suit to enforce the stibscription con- 
 tract.» Notice that a forfeiture will be enforced in the future 
 unless payment is made is not a forfeiture,!" nor is a threat of 
 forfeiture for non-payment.^^ And a stockholder's obligation 
 to pay continues so long as his right to the shares, with the 
 privileges and emoluments attached to them, remains. ^^ It has 
 also been held that an action to collect a subscription, when 
 prosecuted to judgment, will preclude the enforcement of a for- 
 feiture. '■^ The remedy is such a case would seem to be by exe- 
 cution levied upon the stock. i* 
 
 § 174 (151). Effect of forfeiture. — Except where the statute 
 makes provision for the payment to the shareholder of the sur- 
 plus arising from a sale of the forfeited shares after payment of 
 the instalments due,!^ it is held that such surplus belongs to the 
 corporation. 1® After proper forfeiture, the stockholder can claim 
 none of the rights of an owner of stock, ^'^ nor can he be charged 
 as a stockholder, with the corporate liabilities at the suit of the 
 corporate creditors, "^^ even, it is held, for debts contracted before 
 
 9 Macon &c. R. Co. v. Vason, 57 i* For an instance of the sale of 
 Ga. 314; Instone v. Frankfort stock on such an execution, see 
 Bridge Co., 2 Bibb. (Ky.) 576, 5 Chase v. East Tenn. &c. R. Co., S 
 Am. Dec. 638. See Walter Valley Lea (Tenn.) 415. 
 
 M. Co. V. Seaman, 53 Miss. 655 ; is Statutes of Massachusetts, 
 
 Cockerell v. Van Diemen's Land Co., Vermont, Maryland and Wisconsin 
 
 26 L. J. (C. P.) 203. have made such provision. 
 
 10 Macon &c. R. Co. v. Vason, 1 6 Small v. Herkimer &c. Co., 2 
 57 Ga. 314; Bigg's Case, L. R. 1 N. Y. 330. See Freeman v. Har- 
 Eq. 309; Hays v. Franklin County wood, 49 Maine 195; Cook Corpor- 
 Lumber Co., 35 Nebr. 511, S3 N, W. ations (7th. ed.), § 133. But com- 
 381. See also Johnson v. Albany pare Henkel v. Pioneer Sav. &c. Co., 
 &c. R. Co., 40 How. Prac. (N. Y.) 61 Minn. 35, 63 N. W. 243. 
 
 193. " St. Louis &c. Co. V. Sandoval 
 
 "Water Valley M. Co. v. Sea- &c. Co., 116 111. 170, 5 N. E. 370. 
 
 man, 53 Miss. 655. is Allen v. Montgomery R. Co., 
 
 12 Instone v. Frankfort Bridge 11 Ala. 437, 450; Macauley v. Rob- 
 Co., 2 Bibb. (Ky.) 576, 581, 5 Am. inson, 18 La. Ann. 619; Snell's Case, 
 Dec. 638 ; Buffalo &c. R. Co. v. Dud- L. R. 5 Chan. 22. See also Crissey 
 ley, 14 N. Y. 336, 347. v. Cook, 67 Kans. 20, 72 Pac. 541; 
 
 13 Giles V. Hutt, 3 Exch. 18. Ford v. Chase, 118 App. Div. 605, 
 
295 
 
 CALLS AND ASSESSMENTS 
 
 175 
 
 the forfeiture.!^ But to have this effect, the forfeiture must be 
 enforced in good faith. A forfeiture of shares by collusion of 
 the shareholder and the directors will be set aside for fraud by a 
 court of equity at the suit of the creditors of an insolvent cor- 
 ■porationj^o ^^d the shareholder will be held liable to the same 
 extent as if no forfeiture had been attempted.^! 
 
 §175 (152). Statutory method of forfeiture must be pursued. 
 — The method of forfeiture prescribed by the statute authorizing 
 this remedy must be strictly pursued, and all the prescribed for- 
 malities complied with,^^ in order to divest the stockholder's 
 title. Where, as is true in many of the states, ^^ the statute 
 
 103 N. Y. S. 30, affd. 189 N/ Y. 504, 
 and cases cited in note in Ann. Cas. 
 1912B, 494. 
 
 "Mills V. Stewart, 41 N. Y. 384 
 (unless it is collusive and fraudu- 
 lent). 
 
 20 Gerraantown &c. R. Co. v. Fit- 
 ter, 60 Pa. St. 124, 100 Am. Dec. 
 S46n. 
 
 21 Burke V. Smith, 16 Wall. (U. 
 S.) 390, 21 L. ed. 361; Slee v. 
 Bloom, 19 Johns. (N. Y.) 456, 10 
 Am. Dec. 273 ; Gower's Case, L. R. 
 6 Eq. 11; Stanhope's Case, L. R. 1 
 Ch. 161. Abandonment of the 
 
 'shares by the stockholder, without 
 a declaration of forfeiture by the 
 corporation will not release the sub- 
 scriber from liability on his sub- 
 scription. R'ockville &c. Tpk. Co. 
 V. Maxwell, 2 Cranch C. C. (U. S.) 
 451, Fed. Cas. No. 11984. 
 
 22 Moses V. Tompkins, 84 Ala. 
 613, 4 So. 763; Occidental &c. Assn. 
 V. Sullivan, 62 Cal. 394; Alabama 
 &c. R. Co. V. Rowley, 9 Fla. 508; 
 York &c. R. Co. v. Ritchie, 40 
 Maine 425; Lewey's Island R. Co. 
 V. Bolton, 48 Maine 451, 11 Am. 
 Dec. 236; Portland &c. R. Co. v. 
 
 Graham, 11 Mete. (Mass.) 1; 
 Downing v. Potts, 23 N. J. L. 66; 
 Eastern &c. P. R. Co. v. Vaughan, 
 20 Barb. (N. Y.) 155; Johnson v. 
 Albany &c. R. Co., 40 How. Prac. 
 (N. Y.) 193; Germantown &c. R. 
 Co. V. Fitler, 60 Pa. St. 124, 100 
 Am. Dec. S46n; Morris v. Metal- 
 line Land Co., 164 Pa. St. 326, 30 
 Atl. 240, 27 L. R. A. 305, and note, 
 44 Am. St. 614; London &c. R. Co. 
 V. Fairclough, 2 Mann. & G. 674; 
 Garden Gulley &c. Co. v. McLister, 
 L. R. 1 App. Cas. 39. See Rutland 
 &c. R. Co. V. Thrall, 35 Vt. 536. 
 Some of the old cases that a sub- 
 stantial compliance with the require- 
 ments is sufficient, but the modern 
 rule is as stated in the text. Cook 
 .Corporations (7th. ed.), § 129. 8 
 Thomp. Corp. §3727. But neglect 
 to comply strictly with a matter of 
 mere form will not necessarily in- 
 validate a forfeiture. In re. North 
 HoUenbeagle Min. Co., Knight''? 
 Case, L. R. 2 Chan. 321, 15 L. 1 
 (N. S.) 546. 
 
 23 Several of these states per 
 mit other modes of sale to be p'-e 
 scribed by by-laws. 
 
§175 
 
 RAILROADS 
 
 296 
 
 authorizes a sale of the forfeited shares at public auction, they 
 cannot legally be sold at private sale.^* And a sale for the pay- 
 ment of several assessments, including one which was illegal or 
 unauthorized, may be avoided.^s It has been held that only a 
 properly constituted board of directors has authority to declare 
 a forfeiture,^'^ and the stockholder may enjoin an attempted for- 
 feiture of his shares by a board that has not been legally 
 chosen. 2^^ The company may defer the exercise of its power 
 of forfeiture until all the instalments become due,^^ but if it 
 elects to sell stock that is only partially paid for by payment 
 of the delinquent assessment, it has been held that the purchaser 
 at the forfeiture sale must assume the payment of the instal- 
 ments to become due in the future; and if he fails to pay them 
 the stock must be sold again. ^^ And where the statute is silent 
 as to details, the procedure must be just and reasonable.^" 
 
 2* Lewey's Island R. Co. v. Bol- 
 ton, 48 Maine 451, 11 Am. Dec. 236. 
 See Birmingham &c. R. Co. v. 
 Locke, 1 Q. B. 256; Catchpole v. 
 Ambergate &c. R. Co., 1 Ellis & 
 B. Ill, as to what is a sufficient 
 compliance with prescribed formali- 
 ties. 
 
 25 Stoneham &c. R. Co. v. Gould, 
 2 Gray (Mass.) 277; Lewey's Island 
 R. Co. V. Bolton, 48 Maine 451, 11 
 Am. Dec. 236. 
 
 26 Garden Gully Sc. Co. v. McLis- 
 ter, L. R. 1 App. Cas. 39, 55. See 
 also Ormbsy v. Vermont &c. Co., 56 
 N. Y. 623; Bottomley's Case, L. R. 
 16 Ch. Div. 681. 
 
 2T Moses V. Tompkins, 84 Ala. 
 613, 4 So. 763. 
 
 28 Brockenbrough v. James River, 
 &c. Co., 1 Patton & H. (Va.) 94. 
 
 29 Sturgess V. Stetson, 1 Biss. (U. 
 S.) 246, 251, Fed. Cas. No. 13568. 
 
 30 Rutland &c. R. Co. v. Thrall, 
 35 Vt. 536, holding that a resolution 
 of the board of directors that all 
 
 stock remaining unpaid at a day 
 named in the future shall be sold 
 to satisfy the assessment levied is 
 reasonable. But see Johnson v. Al- 
 bany &c. R. Co., 40 How. Prac. (N. 
 Y.) 193, to the effect that a gerieral 
 resolution to forfeit all stock re- 
 maining unpaid at a certain day in 
 the future is insufficient to effect a 
 forfeiture without further action by 
 the corporation. But where the 
 stockliolder is shown to have re- 
 ceived notice of such determination, 
 it is held that the court will pre- 
 sume that the necessary steps were 
 taken to perfect the forfeiture. 
 Knight's Case, L. R. 2 Chan. 321, 15 
 L. T. (N. S.) 546. A thirty days' 
 notice is reasonable and sufficient. 
 Rutland &c. R. Co. v. Thrall, 35 
 Vt. 536. But a three days' notice 
 is not; at least, where the owner 
 lives at a distance in another state. 
 Lexington &c. R. Co. v. Staples, 
 5 Gray (Mass.) 520. 
 
297 
 
 CALLS AND ASSESSMENTS 
 
 §176 
 
 § 175 (153). Notice of forfeiture.— Notice to the delinquent 
 subscriber that his shares will be forfeited unless calls are paid 
 within a certain time is generally required to precede the en- 
 forcement of the forfeiture,*^ a.nd this requirement must be 
 strictly complied with.*^ While the manner of giving notice is 
 usually prescribed by the statute authorizing a forfeiture, per- 
 sonal notice is said to be sufficient.** And it is intimated that 
 one having actual notice cannot object to the mode by which 
 it is given.** But a notice which did not purport to be given 
 by the proper officer of the company has been held insufficient, 
 and the sale based thereon was held voidable. *5 The notice 
 
 31 Under an Indiana statute, a«fter 
 notice of the call is given, one who 
 fails to pay cannot insist that an ad- 
 ditional notice of forfeiture should be 
 given. Hill v. Nisbet, 100 Ind. 341. 
 
 32 Heaston v. Cincinnati &c. R. 
 Co., 16 Ind. 275, 79 Am. Dec. 430n; 
 Lewey's Island R. Co. v. Bolton, 48 
 Maine 451, 11 Am. Dec. 236; 
 Hughes V. Antietam &c. R. Co., 34 
 Md. 316; Lake Ontario &c. R. Co. 
 V. Mason, 16 N. Y. 451 ; Morris v. 
 Metalline &c. Co., 164 Pa. St. 326, 
 31 Atl. 114, 27 L. R. A. 30Sn, 44 
 Am. St. 614; Rutland &c. R. Co. v. 
 Thrall, 35 Vt. 536, 546. See also 
 Eppes V. Mississippi &c. R. Co., 35 
 Ala. 33 ; Cockrell v. Van Dieman's 
 Land Co., 26 L. J. (C. P.) 203; 
 Lexington &c. R. Co. v. Chandler, 13 
 Mete. (Mass.) 311, where a notice 
 required by a by-law was held mere- 
 ly directory. See also Mississippi 
 &c. R. Co. V. Caster, 20 Ark. 455; 
 Knight's Case, L. R. 2 Ch. 321, IS 
 L. T. (N. S.) 546. But a notice 
 after forfeiture was presumed to 
 have been given, when the substan- 
 tial requirements were complied 
 with. Where notice of an assess- 
 
 ment must be given thirty days be- 
 fore the order of the directors to 
 sell the shares, it is not sufficient 
 to give the notice thirty days be- 
 fore the sale. Lewey's Island R. Co. 
 V. Bolton, 48 Maine 451, 11 Am. 
 Dec. 236. See Louisville &c. Tpk. 
 Co. V. Meriwether, 5 B. Mon. (Ky.) 
 13. 
 
 33 Mississippi &c. R. Co. v. Cas- 
 ter, 20 Ark. 455; Lexington &c. R. 
 Co. V. Chandler, 13 Mete. (Mass.) 
 311. See Knight's Case, L. R. 2. 
 Chan. 321, IS L. T. R. 546; Birming- 
 ham &c. R. Co. V. Locke, 1 Q. B. 
 256; South Stafforashire R. Co. v. 
 Burnside, 5 Exch. 129. But see 
 Lewey's Isalnd R. Co. v. Bolton, 48 
 Maine 451, 11 Am. Dec. 236. 
 
 3* Mississippi &c. R. Co. v. Caster, 
 20 Ark. 455; Lexington &c. R. Co. 
 V. Chandler, 13 Mete. (Mass.) SIL 
 
 35 Portland &c. R. Co. v. Graham, 
 11 Mete. (Mass.) 1. See also 
 Lewey's Island R. Co. v. Bolton, 48 
 Maine 441, 11 Am. Dec. 236. It 
 should usually be served upon the 
 person who is registered as owner. 
 Graham v. Van Diemen's Land Co., 
 1 H. & N. 541, 26 L. J. Exch, IZ. 
 
§177 
 
 RAILROADS 
 
 298 
 
 should be certain and unequivocal as to the time of the for- 
 feiture,^^ and time and place of sale.^'' 
 
 § 177. (154). Defeating and annulling forfeiture — Estoppel. 
 
 — The forfeiture can generally be defeated by a tender of the 
 full amount diie on the subscription to the proper officer of the 
 corporation at any time before a sale actually takes place. ^^ An 
 irregular or defective forfeiture may be voidable only, and not 
 void, and long acquiescence^^ may estop both the shareholder 
 and the company from denying its validity.'"' But the share- 
 owner''^ may, in a proper case, by calling upon a court of chan- 
 
 30 Watson v. Eales, 23 Beav. 294. 
 
 37 Lexington &c. R. Co. v. Staples, 
 5 Gray (Mass.) 520. See also 
 Shannan v. Tooker, 167 Cal. 484, 
 140 Pac. 10. 
 
 38 Mitchell V. Vermont &c. Co., 67 
 N. Y. 280. This is true though the 
 tender be accompanied by a protest. 
 Sweny v. Smith, L. R. 7 Eq. 324. 
 And, it would seem, even though a 
 declaration of strict forfeiture had 
 been entered on the books of the 
 company. Walker v. Ogden, 1 Biss. 
 (U. S. C. C.) 287, Fed. Cas. No. 
 17081. See also Iron R. Co. v. Fink, 
 41 Ohio St 321, S2 Am. Rep. 84. The 
 owner has been allowed to redeem 
 in several cases involving peculiar 
 circumstances. See Stubbs v. Lis- 
 ter, 1 Younge & C. Ch. Cas. 81 ; 
 Walker v. Ogden, 1 Biss. (U. S.) 
 287, Fed. Cas. No. 17081. 
 
 30 Phosphate &c. Co. v. Green, L. 
 R. 7 C. P. 43. By statute in Cali- 
 fornia application for relief from an 
 irregular forfeiture must be made 
 within six months. ,Civ. Code Cal., 
 § 347. 
 
 40 Sayre v. Citizens' Gas &c. Co. 
 69 Cal. 207, 7 Pac. 437, 10 Pac. 408 ; 
 Lesseps v. Architects Co., 4 La. Ann. 
 
 316; Knight's Case, L. R. 2 Ch. 321; 
 Austin's Case, 24 L. T. (N. S.) 932; 
 Woollaston's Case, 4 DeG. & J. 437; 
 Evans v. Smallcombe, L. R. 3 H. of 
 L. 249; Prendergast v. Turton, 1 
 Younge & C. Ch. Cas. 98, S Jur. 
 1102. But see Garden GuUey &c. 
 Co. v. McLister, L. R. 1 App. Cas. 
 39, 55, holding that mere laches will 
 not bar the shareholder from equit- 
 able relief against an invalid declar- 
 ation of forfeiture. See also Orms- 
 by V. Vermont &c. Co., 56 N. Y. 
 623. 
 
 41 Mitchell V. Vermont &c. Co., 61 
 N. Y. 280; Sweny v. Smith, L. 
 R. 7 Eq. 324. An unauthorized for- 
 feiture may be enjoined. Moore v. 
 New Jersey &c. Co., 5 N. Y. S. 192 ; 
 Green v. Abietine &c. Co., 96 Cal. 
 322, 31 Pac. 100. But an injunction 
 to restrain the sale of shares for 
 assessments will not be granted 
 where the plaintiff does not offer to 
 pay the cfiUs. Burnham v. San 
 Francisco &c. Co., lis Cal. 24, 17 Pac. 
 939. Where the forfeiture is legal 
 equity will seldom interfere because 
 of hardship or the like. Clark v. 
 Barnard, 108 U. S. 436, 456, 2 Sup. 
 Ct. 878, 27 L. ed. 780; Taylor v. 
 
299 
 
 CALLS AND ASSESSMENTS 
 
 §177 
 
 eery, obtain a decree annulling such a forfeiture ; and so, too, 
 may corporate creditors whose interests are injured thereby.*^ 
 It was held, however, in one of the cases to which we have 
 referred in support of our last proposition, that where a corpo- 
 ration had made an assignment for the benefit of creditors, and 
 the directors afterwards made a call and forfeited the plaintiff's 
 stock for non-payment, without any express objection or assent 
 on the part of the assignee, the plaintiff could not, without ten- 
 dering the amount due or taking any steps, to prevent the for- 
 feiture, maintain a suit to annul the forfeiture and restore to 
 him his right as a stockholder.*^ 
 
 North Star &c. Co., 79 Cal. 285, 21 
 Pac. 753; Marshall v. Golden Fleece 
 &c. Co., 16 Nev. 156; Vatable v. 
 New York &c. R. Co., 96 N, Y. 49; 
 Sparks v. Liverpool Water-Works, 
 13 Ves. 428. But see Glass v. Hope, 
 16 Grant (Upper Can.) Ch. 420; 
 Iron R. Co. v. Fink, 41 Ohio St. 
 321, 22 Am. & Eng. R. Cas. 20, 52 
 Am. Rep. 84. Mandamus will not lie 
 to compel a foreign corporation to 
 annul a forfeiture. North State &c. 
 Co. V. Field, 64 Md. 151, 20 Atl. 
 1039. Damages may also be re- 
 covered where stock is wrongfully 
 forfeited and sold. Allen v. Ameri- 
 can &c. Assn., 49 Minn. 544, 52 N. 
 W. 144, 32 Am. St. 581 ; Ormsby v. 
 Vermont &c. Co., 56 N. Y. 623; 
 Budd V. Multnomah St. R. Co., IS 
 Ore. 413, 15 Pac. 659, 3 Am. St. 169; 
 New Chile &c. Co., Re, 63 L. T. R. 
 
 344; Catchpole v. Ambergate &c. R. 
 Co., 1 El. & Bl. Ill, 22 L. J. Q. B. 
 35. 
 
 42 Germantown &c. R. Co. v. Fit- 
 ler, 60 Pa. St. 124, 100 Am. Dec. 
 546; Grand Rapids Savings Bank v. 
 Warren, 52 Mich. 557, 18 N. W. 356. 
 It seems that the corporation itself 
 cannot, after forfeiting shares, set 
 the forfeiture aside or irregularity in 
 the notice, and hold the subscriber 
 liable as a stockholder. Austin's 
 Case, 24 L. T. (N. S.) 932. See as 
 to rights and remedy of creditors 
 where stock is forfeited and bought 
 in by the corporation. Tiger v. 
 Rogers Cotton Cleaner &c. Co., 96 
 Ark 1, 130 S. W. 585, Ann. Cas. 
 1912B, 488, and note. 
 
 *3 Germantown &c. R. Co. v. Fit- 
 ter, 60 Pa. St. 124, 100 Am. Dec. 
 546. 
 
CHAPTER IX. 
 
 STOCKHOLDERS. 
 
 Sec. 
 
 180. When one becomes a stock- 
 
 holder. 
 
 181. Rights of stockholders— Right 
 
 to vote. 
 
 182. Who has right to vote— How 
 
 determined. 
 
 183. Right of trustees and receivers 
 
 to vote. 
 
 184. Right of corporations and vot- 
 
 ing trusts to vote. 
 
 185. Number of votes to which 
 
 stockholder is entitled — 
 Cumulative voting. 
 
 186. Quorum must be present. 
 
 187. Voting by proxy. 
 
 188. Other powers of stockholders 
 
 —Rights of minority. 
 
 189. Stockholders' meetings. 
 
 190. Remedies of stockholders. 
 
 191. Unregistered assignees and 
 
 third person can not sue. 
 
 192. When stockholders may sue 
 
 or become parties. 
 
 193. Right to recover insurance. 
 
 194. Other rights and remedies of 
 
 stockholders. 
 
 195. Stockholders as agents of the 
 
 corporation. 
 
 196. Notice to stockholders. 
 
 197. Stockholders' right to inspect 
 
 books. 
 
 198. Stockholder is disqualified to 
 
 serve as judge or juror 
 where corporation is in- 
 terested. 
 
 199. Unlawful combinations and 
 
 conspiracies to vote or pre- 
 vent voting — Injunction. 
 
 Sec. 
 200. 
 
 201. 
 202. 
 
 203. 
 
 204. 
 
 205. 
 
 206. 
 
 207. 
 
 208. 
 209. 
 
 210. 
 
 211. 
 
 212. 
 
 213. 
 
 214. 
 
 215. 
 
 Liability of stockholders for 
 unpaid subscriptions. 
 
 Release of stockholders — 
 Withdrawal. 
 
 Compromises with stock- 
 holders. 
 
 Liability where stock is 
 transferred. 
 
 When creditors may enforce 
 unpaid subscriptions — -Judg- 
 ment and execution against 
 corporation. 
 
 Effect as against stockholder, 
 of judgment against the cor- 
 poration. 
 
 Stockholder's defense. 
 
 Methods of enforcing stock- 
 holder's liability. 
 
 Contribution. 
 
 Suits by assignees and re- 
 ceivers. 
 
 Statutory liability of stock- 
 holders. 
 
 Defenses to actions to enforce 
 
 statutory liability. 
 Who may institute action to 
 
 enforce statutory liability. 
 
 How statutory liability is en- 
 forced — Judgment and exe- 
 cution against the corpora- 
 tion. 
 
 Priority among creditors — 
 Forum — Contribution. 
 
 When stockholders are liable 
 as partners. 
 
 300 
 
301 
 
 STOCKHOLDERS 
 
 §180 
 
 § 180 (155). When one becomes a stockholder. — It is some- 
 times said that one who has subscribed for stock in an incorpo- 
 rated company does not become a stockholder until he has paid 
 for such stock,! ^nd, on the other hand, it is said that he does 
 become a stockholder as soon as he subscribes to an uncondi- 
 tional agreement to take a certain number of shares. ^ It seems 
 to us that it will not do to affirm as a general rule that payment 
 of a subscription is essential to constitute the subscriber a stock- 
 holder, although this may doubtless be made essential by char- 
 ter, statute, or authorized by-law ;S nor will it do to say that a 
 mere subscription, without anything more, will always be suffi- 
 cient, but a complete and valid subscription is undoubtedly 
 sufficient, as a general rule, where the subscriber is accepted by 
 the corporation as a stockholder.* So, even where the subscrip- 
 
 1 Bates V. Great Western Tel. Co., 
 134 111. 546, 25 N. E. 521 ; Busey v. 
 Hooper, 35 Md. 15; Baltimore &c. 
 R. Co. V. Hambleton, 11 Md. 341, 26 
 Atl. 279; St. Paul &c. R. Co. v. Rob- 
 bins, 23 Minn. 439; Minneapolis 
 Harvester Works v. Libby, 24 Minn. 
 327. 
 
 SHartford &c. R. Co. v. Keonnedy, 
 12 Conn. 499; Upton v. Tribilcock, 91 
 U. S. 45, 23 L. ed. 203; Kennebec 
 &c. R. Co. V. Palmer, 34 Maine 
 366; Brigham v. Mead, 10 Alien 
 (Mass.) 245; Sagory v. Dubois, 3 
 Sandf. Ch. (N. Y.) 466; Hartford 
 &c. R. Co. v. Croswell, S Hill (N. 
 Y.) 383; Union Turnpike Co. v. 
 Jenkins, 1 Caines ' (N. Y.) 381; 
 Spear v. Crawford, 14 Wend. (N. 
 Y.) 20, 28 Am. Dec. 513; Burr v. 
 Wilcox, 22 N. Y. 551. See also 
 Waukon &c. R. Co. v. Dwyer, 49 
 Iowa 121 ; Harrison v. Remington 
 &c. Co., 140 Fed. 385. But compare 
 1 Thomp. Corp. (2d ed.), §§550, 
 560. 
 
 3 And where the contract is not a 
 subscription, but a purchase of new 
 shares, payment may be required, as 
 the delivery of a certificate and pay- 
 ment may be intended to be concur- 
 rent acts. Clark v. Continental 
 Imp. Co., 57 Ind. 135; Quick v 
 Lemon, 105 III. 578; Weiss v. Mauch 
 Chunk Co., 58 Pa. St. 295. A mere 
 pledgee is not, ordinarily, a stock- 
 holder. Beecher v. Wells &c. Co., 
 1 McCarty (U. S.) 62, 1 Fed. 276; 
 Baker v. Woolston, 27 Kans. 185, 
 although he may become such to 
 most intents and purposes by being 
 registered as owner upon the books 
 of the company; note to Argus 
 Printing Co., In re, 12 L. R. A. 781. 
 See also notes in 19 L. R. A. (N. S.) 
 252; 20 L. R. A. (N. S.) 996; and L. 
 R. A. 1916F, 491. 
 
 4 Authorities cited in next to last 
 note, supra. See also 1 Cook Cor- 
 porations (7th. ed.), § 10; note in 
 Ann. Cas. 1913C, 418; State v. Har- 
 ris, 3 Ark. 570, 36 Am. Dec. 460; 
 
§ 180 RAILROADS 302 
 
 tion is irregular, or incomplete, or conditional, the subscriber 
 may become a stockholder by acting as such and being treated 
 as such by the corporation. And one may also befcome a stock- 
 holder by purchasing stock and having it transferred to him 
 upon the books of the company. But where stock is issued in 
 excess of the amount authorized by the charter or governing 
 law, a purchaser of certificates for shares so issued cannot com- 
 pel the corporation to accept him as a stockholder, even though 
 he may have an action for damages, and, as he does not obtain 
 the rights of a stockholder he cannot be held liable as a stock- 
 holder.^ On the other hand, however, "if a corporation is au- 
 thorized by law to increase its capital stock upon complying 
 with certain prescribed forms or conditions, and the corpora- 
 tion or its agents appear to have endeavored to comply with 
 the prescribed forms or conditions, and have in fact increased 
 the company's capital stock by issuing new shares, on the as- 
 sumption that the legal right to increase the capital stock had 
 been acquired, and if the holder of such new shares has acted 
 as a shareholder and enjoyed the rights of a shareholder, then 
 the creation of such new shares will be recognized by the courts 
 and given effect according to the intention of the parties, al- 
 though the statutory forms or conditions were not complied 
 with, and no legal right to create the new shares was in fact 
 obtained."^ 
 
 Wheeler v. Millar, 90 N. Y. 355; Imp. Co. v. Stevenson, 66 Fed. 633; 
 
 Henderson v. Hogan, 7 Ohio Dec. Rood v. Whorton, 67 Fed. 434; 
 
 (Reprint) 173. In Dunn v. Howe, Green v. Signa Iron Co., 76 Fed. 
 
 107 Fed. 849, 850, it is said that 947; McCord v. Ohio &c. R. Co., 13 
 
 notwithstanding expressions in Ind. 220; Wheeler v. Thayer, 121 
 
 many cases and books to the effect Ind. 64, 22 N. E. 972; Oler v. Bal- 
 
 that the record is conclusive evi- timore &c. R. Co., 41 Md. 583 ; 
 
 dence, one who never accepts but First Ave. Land Co. v. Parker, 111 
 
 refuses to accept stock is not a Wis. 1, 86 N. W. 604, 87 Am. St. 
 
 stockholder even though the secre- 84. Union R. Co. v. Sneed, 99 Tenn. 
 
 tary enters his name on the books 1, 41 S. W. 364. But compare Du- 
 
 as such. See generally 3 Elliott Ev. pont v. Ball (Del.), 106 Atl. 39, 7A, 
 
 §1946. L. R. 9SS. 
 
 B 1 Thomp. Corp. (2d ed.) § 3S45 ; « See Chubb v. Upton, 95 U. S. 665, 
 
 Scovill V. Thayer, 105 U. S. 24 L. ed. 523 ; Grangers' Life fia:. Ins. 
 
 . 143, 26 L. ed. 968. See also Laredo Co. v. Kamper, 73 Ala. 325 ; Kansas 
 
303 
 
 STOCKHOLDERS 
 
 §181 
 
 § 181 (156). Rights of stockholders— Right to vote. — A stock- 
 holder cannot, ordinarily, ■ be deprived of the property rights 
 which attach to his membership, including his right to partici- 
 pate in the management of the company's business,'^ except by 
 a regularly enforced forfeiture of his stock under charter or 
 statutory authority.^ The most important of these rights are 
 those of sharing in the profits earned by the corporation,'' and 
 in the property remaining for distribution upon a dissolution 
 of the corporation ;io of helping to select the persons to manage 
 the affairs of the corporation; and of aiding to shape its policy 
 and control its action, or, in other words, of voting at stock- 
 holders' meetings. The right to vote usually belongs to the 
 person in whose name the stock is registered,^^ or in case of his 
 decease to his legally qualified administrator or executor,^^ ai. 
 though it has been held competent for a railroad company, in 
 issuing certificates of preferred stock, to stipulate that the hold- 
 ers shall not have or exercise the right to vote at stockholders' 
 
 City Hotel Co. v. Hunt, 57 Mo. 126; 
 Veeder v. Mudgett, 95 N. Y. 295, 310. 
 See generally as to estoppel to deny 
 that one is a stockholder, Clark v. 
 Hamilton, 217 Fed. 229, L. R. A. 
 1918E, 750, and note. 
 
 7 Hill V. Nisbet, 100 Ind. 341; 
 Kennebec &c. R. Co. v. Kendall, 31 
 Maine 470; Long Island R. Co., In 
 re, 19 Wend. (N. Y.) Z7 ; Perrin v. 
 Granger, 30 Vt. 595. 
 
 8 If one has title to corporate 
 stock, it can not be defeated by a 
 subsequent resolution of the direct- 
 ors of the corporation. Gurney v. 
 Union Transfer &c. Co., 25 Jones 
 & S. 444, 29 N. Y. St. 274, 8 N. Y 
 549. 
 
 9 See generally Dividends, Ch. 
 XIV. 
 
 10 See generally Insolvency and 
 Dissolution, Ch. XXIV. 
 
 11 Vowell V. Thompson, 3 Cranch 
 (U. S.) 428, Fed. Cas. No. 17023; 
 Northrop v. Newton &c. Turnpike 
 Co., 3 Conn. 544; Beckett v. Hous- 
 ton, 32 Ind. 393; Monsseaux v. 
 Urquhart, 19 La. Ann. 482; Long 
 Island R. Co., In re, 19 Wend. (N. 
 Y.) 37; See also Lucas v. Milliken, 
 139 Fed. 816. 
 
 12 North Shore &c. Ferry Co., 
 Matter of, 63 Barb. (N. Y.) 556; 
 Cape May &c. Co., Matter of, 51 
 N. J. L. 78, 16 Atl. 191. Stock 
 sold by three executors of the de-' 
 ceased owner can not be voted unless 
 they agree upon the vote to be cast. 
 Tunis V. Hestonville &c. R. Co., 149 
 Pa. St. 70, 24 Atl. 88, IS L. R. A. 
 665. See also Pioneer Paper Co., 
 Re, 36 How. Prac. (N. Y.) 111. As 
 to right of partner to vote, see Al- 
 len v. Hill, 16 Cal. 113; Kenton 
 Furnace &c. Co. v. McAlpin, 5 Fed. 
 737. 
 
§182 
 
 RAILROADS 
 
 304 
 
 meetings and persons accepting such shares will be bound 
 thereby.13 But, ordinarily, the right to vote is an incident to 
 the ownership of shares of stock,^* and the corporation cannot 
 by by-laws restrict^^ nor enlarge^® the right to vote as fixed 
 by the charter or by general statute. ^^^ 
 
 § 182 (157). Who has right to vote— How determined.— The 
 books and records of a corporation determine who are its stock- 
 holders for the time being, and who have a right to vote, al- 
 though the stock may have been sold or pledged as collateral 
 security, 1^ and the inspectors and tellers cannot, as a rule, as- 
 
 13 Miller v. Ratterman, 47 Ohio 
 St. 141, 26 N. E. 496, 43 Am. & 
 ling. R. Cas. 339. 
 
 i4Kreiger v. Shelby R. Co., 84 Ky. 
 66; Lord v. Equitable &c. Soc, 194 
 N. Y. 2i2, 87 N. E. 443, 22 L. R. A. 
 (N. S.) 420. 
 
 13 Beckett v. Houston, 32 Ind. 
 393; Rex v. Spencer, 3 Burr. 1827. 
 
 -6 Taylor v. Griswold, 14 N. J. L. 
 ^22, holding that a by-law of the 
 liackensack Bridge Co. could not 
 confer .upon stockholders the right 
 to one vote for each share they 
 owned, where the number of votes 
 was limited by the charter. 
 
 17 But some of the states have 
 statutes authorizing the corporations 
 to make by-laws regulating the 
 number of shares that shall entitle 
 the members to one or more 
 votes. And as between the parties 
 the agreement of pledge may deter- 
 mine who has the right to vote. 
 Commonwealth v. Dalzell, 152 Pa. 
 St. 217, 25 Atl. 535, 34 Am. St. 640; 
 Pennsylvania R. Co. v. Pennysl- 
 vania L. Ins. Co., 205 Pa. St. 219, 
 54 Atl. 783; Goetzniger v. Donahue, 
 138 Wis. 103, 119 N. W. 823. 
 
 18 Parker, C. J., in State v. Fer- 
 
 ris, 42 Conn. 560; Scholfield v. 
 Union Bank, 2 Cranch (U. S.) 115, 
 Fed. Cas. No. 12475; Vowell v. 
 Thompson, 3 Cranch (U. S.) 428, 
 Fed. Cas. No. 17023, where it was 
 mortgaged. Brewster v. Hartley, 37 
 Cal. IS, 99 Am. Dec. 237; Wil- 
 cocks, Ex parte, 7 Cow. (N. Y.) 
 402, 17 Am. Dec. 525, where the 
 stock was pledged; Cohen v. Big 
 Stone &c. Iron Co., Ill Va. 468, 69 
 S. E. 359, Ann. Cas. 1912A and 
 authorities there cited in note. If 
 mortgaged stock is transferred to 
 the mortgagee, upon the books of 
 the corporation, he and not the 
 mortgagor will be entitled to vote 
 it. So, generally, where the stock 
 has been duly transferred upon the 
 books of the company, and regis- 
 ter-ed in the name of the pledgee, 
 he is entitled to vote. 4 Thomp. 
 Corp. (2d. ed.), § 4237; In re Barker, 
 6 Wend. (N. Y.) 509; Argus Printing 
 Co., In re, 1 N. Dak. 434, 48 N. W. 
 347, 12 L. R. A. 781, 26 Am. St. 639; 
 Hoppin v. Buffum, 9 R. I. 513, 11 
 Am. Rep. 291. Compare State v. 
 Smith, 15 Ore 98, 14 Pac. 814, IS 
 Pac . 137, 386. These cases state, 
 however, that a court of equity may 
 
305 
 
 STOCKHOLDERS 
 
 §182 
 
 sume to go into a hearing and decision of the question as to 
 who is in fact the owner of the stock sought to be voted.^^ The 
 registry on the transfer books of the corporation is, as a general 
 rule, prima facie, if not conclusive, evidence of the holder's right 
 to vote the shares so registered in his name.^'' It is generally 
 
 compel the pledgee to give the pled- 
 gor a proxy in a proper case. Ex 
 parte Wilcocks, 7 Cow. (N. Y.) 402, 
 17 Am. Dec. 525. In order that a 
 stockholder may vote at a corpora- 
 tion election, it is not necessary that 
 he be the sole or only owner. A credi- 
 tor holding stock as collateral se- 
 curity may agree with the debtor 
 owning the stock as to which shall 
 vote at a corporate election, and 
 they may appoint a third person to 
 hold the stock and vote for them. 
 Ervin v. Philadelphia &c. R. Co. 
 (C. P. Phila. Pa.) 7 R. & Corp. 
 L. J. 87. 
 
 i9See 1 Thomp. Corp. §§ 856, 857. 
 Held contra, under New York stat- 
 ute, in Strong v. Smith, 15 Hun (N. 
 Y.) 222. 
 
 20Turnbull v. Payson, 95 U. S. 
 418, 24 L. ed. 437; Semple v. Glenn, 
 91 Ala. 245, 6 So. 46, 9 So. 265, 24 
 Am. St. 894; State v. Ferris, 42 
 Conn. 560, 568 (Where a bankrupt 
 was permitted to vote) ; Morrill v. 
 Little Falls &c. Co., S3 Minn. 371, 
 55 N. W. 547, 21 L. R. A. 174; 
 Long Island R. Co., In Matter of, 
 19 Wend. (N. Y.) il, 44; and au- 
 thorities cited in 8 Thompson Cor- 
 porations § 857. See also note in 
 Ann. Cas. 1912A, 206. But one rail- 
 road corporation, having acquired a 
 majority of the stock of another rail- 
 road corporation, unless expressly au- 
 thorized by statute, will not be allow- 
 ed to vote such stock in the corpora- 
 
 tion elections or in matters concern- 
 ing the management or control of the 
 latter company; at least where the 
 two roads are rivals in the same field 
 ■of operation, and a conflict of inter- 
 est may arise in the matter of expen- 
 diture, or in division of patronage or 
 of earnings or where the profits of 
 one company may be increased by a 
 diminution of those of the other. 
 Memphis &c. R. Co. v. Woods, 88 
 Ala. 630, 7 So. 108, 7 L. R. A. 605. See 
 also O'Connor v. International &c. 
 Co., 68 N. J. Eq. 680, 62 Atl. 408. 
 Where the contract for the pres- 
 ent sale of shares of stock has 
 been entered into and the stock de- 
 livered to a third person in escrow, 
 to be delivered to the purchaser only 
 on fulfillment of the terms of the 
 sale, and by the terms of the con- 
 tract the purchaser was to have the 
 right to vote the stock, while the 
 sale remained executory, it was held 
 that the seller had no right to vote, 
 although the statute made the certi- 
 ficates of stock and the transfer 
 books of the corporation prima facie 
 evidence of the right to vote the 
 stock. Commonwealth v. Patterson, 
 158 Pa. St. 476, 27 Atl. 998. Held 
 not to be conclusive in Mudgett v. 
 Horrell, 33 Cal. 25; Stephens v. Fol- 
 lett, 43 Fed. 842, 31 Am. & Eng. 
 Corp. Cas. 466; Smith v. San Fran- 
 cisco &c. Co., 115 Cal. 584, 47 Pac. 
 582, 35 L. R. A. 309, 56 Am. St. 
 119; Chaffin v. Cummings 2.1 Maine 
 
§182 
 
 RAILROADS 
 
 306 
 
 immaterial that he has no certificates of stock, ^^ or has sold and 
 transferred his certificates, ^^ or that he owes the subscription 
 price,^^ or that he is a mere nominal holder of stock belonging 
 to another,^* which has been registered newly for the purpose 
 of voting.25 But where the owner of the stock is not entitled to 
 vote, as in a case where stock is owned by a non-resident under 
 a charter which provides that only resident stockholders may 
 vote, it has been held that a resident of the state who receives 
 a colorable transfer of the stock, for the purpose of voting it, 
 does not thereby become a legal voter. ^^ Although the corpo- 
 rate books are the proper evidence of the right of an owner of 
 shares to exercise a stockholder's rights and privileges, he is en- 
 titled to have a certificate issued to him as a voucher for his 
 title, and to enable him the more readily to put his shares upon 
 the market,^^ and where the books do not show who is the 
 owner, the certificate is prima facie evidence of ownership.^^ 
 
 76; Waterford &c. R. Co. v. Pid- 
 cock, 8 Exch. 279. In Archer v. 
 American &c. Co., SO N. J. Eq. 33, 24 
 Atl. 508, the books are held conclu- 
 sive evidence so far as the election 
 officers are concerned, but only prima 
 facie evidence when the right to vote 
 is the subject of judicial investiga- 
 tion. 
 
 2iHawley v. Upton, 102 U. S. 
 314, 26 L. ed. 179; Mitchell v. Beck- 
 man, 64 Cal. 117, 28 Pac. 110, 1 Am. 
 & Eng. Corp. Cas. 40;' Beckett v. 
 Houston, 32 Ind. 393; New Hamp- 
 shire Cent. R. Co. v. Johnson, 30 
 N. H. 390,, 64 Am. Dec. 300; Crum- 
 lish V. Shenandoah Valley R. Co., 
 40 W. Va. 627, 22 S. E. 90. See also 
 4 Thomp. Corp. (2d. ed.), § 3455 and 
 authorities cited. 
 
 22 Bailey v. Railroad Co., 22 Wall. 
 (U. S.) 604, 637, 22 L. ed. 840. 
 People V. • Robinson, 64 Cal. 373, 1 
 Pac. 156; State v. Ferris, 42 Conn. 
 560. 
 
 23 Birmingham &c. R. Co. v. 
 Locke, 1 Q. B. 256; Downing v. 
 Potts, 23 N. J. L. 66, Where nothing 
 had been paid; Savage v. Ball, 17 
 N. J. Eq. 142, where the stock was 
 issued in payment for work which 
 had not been performed. 
 
 24 State of Nevada v. Leete, 16 
 Nev. 242. 
 
 25 The corporation cannot require 
 him to take oath as to the real 
 ownership of the stock. People v. 
 Kip, 4 Cow. (N. Y.) 382, note. 
 And it may be compelled to register 
 a transfer made for the purpose of 
 qualifying the transferee to vote. 
 Moffatt V. Farquhar, L. R. 7 Ch. D. 
 591. But see post, § 199. 
 
 26 State V. Hunton, 28 Vt. 594. 
 See also Barker, Re, 6 Wend. (N. 
 Y.) 509. 
 
 2T Johnson v. Albany &c. R. Co., 
 40 How. Prac. (N. Y.) 193. 
 
 28 Broadway Bank v. McElrath, 
 13 N. J. Eq. 24; ante, §92. 
 
307 STOCKHOLDERS § 183 
 
 Where his subscription is made upon a condition not yet per- 
 formed, if the stockholder has been registered, he may vote upon 
 the question whether such condition shall or shall not be per- 
 formed.29 The holder of shares issued as a stock dividend may 
 vote upon such stock after registry, the same as upon any 
 other,^" and a transferee usually receives this right with the 
 stock transferred.^! It is frequently provided, however, that no 
 stockholder can vote on stock, unless it has been standing in his 
 name on the books of the corporation at least a certain number 
 of days prior to the election or meeting. 
 
 § 183 (158). Right of trustees and receivers to vote. — If the 
 
 stock be registered in the name of the holder as trustee, he may 
 vote it,^* unless he be a trustee for the corporation itself, in 
 which case the officers are chargeable with notice of the title 
 which he holds, and his holding is subject to the rule that stock 
 owned b))- the corporation cannot be voted.^* The fact that the 
 holder of shares is designated as "cashier" or "president" on the 
 company's books will not influence his right to vote, as such 
 words are merely descriptive. And it has been held that a per- 
 son who succeeds him in that position has no right to vote the 
 shares so held unless they are regularly transferred to him by 
 
 29 Greenville &c. R. Co. v. Cole- Schmidt v. Mitchell, 101 Ky. 570, 41 
 man, S Rich. Law (S. Car.) 118. S. W. 929, 72 Am. St. 427. 
 
 30 Bailey v. Railroad Co., 22 Wall. 3i Brewster v. Hartley, 37 Cal. 15, 
 (U. S.) 604, 637, 22 L. ed. 840. 99 Am. Dec. 237. Holmes, Ex 
 But the rule is different as to scrip parte, 5 Cow. (N. Y.) 426; Ameri- 
 dividends, convertible into stock, can Railway-Frog Co. v. Haven, 
 Bailey v. Railroad Co., 22 Wall. 101 Mass. 398, 3 Am. Rep. 377. See 
 (U. S.) 604, 637, 22 L. ed. 840. also Union &c. Assn. v. Seligman, 
 
 31 See Commonwealth v. Stevens, 92 Mo. 635, 15 S. W.' 630, 1 Am. St. 
 168 Pa. 582, 32 Atl. 111. 776n; McNeely v. Woodruff, 13 N. 
 
 33 Barker, Matter of, 6 Wend. (N. J. L. 352; Warren v. Pim, 66 N. J. 
 
 Y.) 509; Hoppin v. Buffum, 9 R. I. Eq. 353, 59 Atl. 773, 775; O'Connor 
 
 513. See also Clowes v. Miller, 60 v. International &c. Co., 68 N. J. 
 
 N. J. Eq. 179, 47 Atl. 345; Com- Eq. 67, 680, 59 Atl. 321; Parsons 
 
 monwealth v. Dalzell, 152 Pk. St. v. Tacoma Co., 25 Wash. 492, 65 
 
 217, 25 Atl. 535, 34 Am. St. 640. Pac. 765. 1 Thomp. Corp. (2d ed.). 
 
 Executor allowed to vote in § 869. 
 
§184 
 
 RAILROADS 
 
 308 
 
 name.®^ The right of a receiver of stock to vote seems generally 
 to have been conceded without question,*^ and it has been held 
 that the court appointing him may direct him how to vote."'' 
 
 § 184 (159). Right of corporations and voting trusts to vote. 
 — Corporations authorized to hold stock in another corporation 
 are usually entitled to vote it.^* And this they may do by an 
 agent.^^ But one corporation cannot, ordinarily, acquire and 
 vote stock in another without statutory authority,*'' and a rival 
 company which has acquired a majority of the stock in a cor- 
 poration, without statutory authority, may be enjoined from 
 voting it.*! And so may a trust company which is a stockholder 
 of a corporate stock pledged as collateral for bonds of another 
 corporation and which is also a trustee of the indebtedness of 
 the corporation and an agent for its creditors, or a voting trust 
 which holds a majority of the stock of a railroad company to be 
 voted in the interest of another corporation.*^ The subject of 
 
 35 Mohawk &c. R. Co., Ex parte, 
 19 Wend. (N. Y.) 135. A contrary 
 rule is upheld as more reasonable 
 and just in Farmers' &c. Co. v. Chi- 
 cago &c. R. Co., 27 Fed. 146, 156. 
 See also Mousseaux v. Urquhart, 19 
 La. Ann. 482. But it would seem 
 that a transfer on the corporate 
 book is a reasonable means o^ prov- 
 ing that such successor has been 
 selected to fill the former officer's 
 place. 
 
 3 6 As to preferred stockholders, see 
 8 Thomp. Corp. § 859. 
 
 37 American Inv. Co. v. Yost, 25 
 Abb. N. C. (N. Y.) 274, note. 
 
 38 Hancock v. Louisville &c. R. 
 Co., 145 U. S. 409, 12 Sup. Ct. 969, 
 36 L. ed. 755; Rogers v. Nashville 
 &c. Co., 91 Fed. 299; Davis v. 
 United States &c. Co., 11 Md. 35, 
 25 Atl. 982. 
 
 39 State v. Rohlfifs (N. J.), 19 Atl. 
 1099. ■ \ « 
 
 40 Central R. Co. v. Collins, 40 Ga. 
 582 ; McGinness &c. Co. v. Boston &c. 
 Co., 29 Mont. 428, 75 Pac. 89; State 
 V. MaDaniel, 22 Ohio St. 354; Valley 
 R. Co. V. Lake Erie &c. Co., 46 Ohio 
 St. 44, 18 N. E. 486, 1 L. R. A. 412; 
 Parsons v. Tacoma Co., 25 Wash. 
 495, 65 Pac. 765 ; Woods v. Memphis 
 &c. R. Co., 5 R. & Corp. L. J. 372. 
 
 41 Memphis &c. R. Co. v. Woods, 
 88 Ala. 630, 7 So. 108, 7 L. R. A. 
 605, and note; Mack v. DeBardele- 
 ben &c. Co., 90 Ala. 396, 8 So. ISO, 
 9 L. R. A. 650n; Milbank v. New 
 York &c. R. Co., 64 How. Prac. 
 (N. Y.) 20. See also Buckeye &c. 
 Co. V. Harvey, 92,Tenn. 115, 20 S. 
 W. 427. Contra, Camden &c. R. 
 Co. V. Elkins, 37 N. J. Eq. 273. 
 
 42 Clarke v. Central R. &c. Co., 50 
 Fed. 338, IS L. R. A. 683, and note. 
 See also In re Argus Printing Co., 
 1 N. Dak. 435, 48 N. W. 347, 26 Am. 
 St. 639. The federal courts have 
 
309 
 
 STOCKHOLDERS 
 
 §184 
 
 voting trusts as illegal combinations or monopolies under the 
 act of congress will be hereafter considered, but it may be said 
 in this connectio;i that while fair agreements among stockhold- 
 ers to vote as a unit as the majority may determine have been 
 upheld,*^ yet an unfair agreement among the officers for their 
 own benefit or between two corporations having common di- 
 rectors,^* or an irrevocable voting trust or holding company 
 creating a monopoly has recently been held illegal as against 
 public policy or the statute.*^ 
 
 held that the purchase of stock in 
 sugar refineries for the purpose of 
 acquiring control of the business of 
 refining and selling sugar in the 
 United States is not in violation of 
 the act of congress of July 2, 1890, 
 and does not involve a monopoly or 
 restraint of interstate commerce 
 within the meaning of that act. United 
 States V. E. C. Knight Co., 60 Fed. 
 934, affirmed in 156 U. S. 1, 15 Sup. 
 Ct. 249; Greene, In re, 52 Fed. 104. 
 The authorities are reviewed in the 
 opinion of the court and in the dis- 
 senting opinion in the case in the 
 United States Supreme Court cited 
 supra. See also Harvey v. Linville 
 &c. Co., 118 N. Car. 693, 24 S. E. 
 489. But see Northern Securities 
 Co. V. United States, 193 U. S. 197, 
 24 Sup. Ct. 436, 48 L. ed. 679. 
 
 43Ziegler v. Lake &c. R. Co., 69 
 Fed. 176; Mobile &c. R. Co. v. Nich- 
 olas, 98 Ala. 98, 12 So. 723; Smith 
 V. San Francisco &c. R. Co., 115 
 Cal. 584, 47 Pac. 582, 35 L. R. A. 
 309, 56 Am. St. 119; Brightman v. 
 Bates, 175 Mass. 105, 55 N. E. 809; 
 Chapman v. Bates, 61 N. J. Eq. 658, 
 47 Atl. 638, 88 Am. St. 459. See 
 also Memphis &c. R. Co. v. Woods, 
 88 Ala. 630, 7 So. 108, 16 Am. St. 
 81, 7 L. R. A. 605, and note ; Weber 
 
 v. Delia Mountains Min. Co., 14 
 Idaho 404, 94 Pac. 441. Proper 
 pooling or voting trusts are not ille- 
 gal and have often been upheld. 
 Bowditch v. Jackson Co., 76 N. H. 
 351, 82 Atl. 1014, L. R. A. 1917A, 
 1174; Carnegie Trust Co. v. Securi- 
 ty L. Ins. Co., Ill Va. 1, 68 S. E. 
 412, 31 L. R. A. (N. S.) 1186; Win- 
 sor V. Commonwealth Coal Co., 63 
 Wash. 62, 114 Pac. 908, 33 L. R. A. 
 (N. S.) 63. But see Bridges v. 
 Staton, 150 N. Car. 216, 63 S. E. 
 892; Shepard v. Rockingham Pow- 
 er Co., ISO N. Car. 776, 64 S. E. 
 894. 
 
 4* Withers v. Edmonds, 26 Tex. 
 Civ. App. 189, 62 S. W. 795; Good- 
 ell V. Verdugo &c. Co., 138 Cal. 308, 
 71 Pac. 354. 
 
 45 Northern Securities Co . v. 
 United States, 193 U. S. 197, 24 
 Sup. Ct. 436, 48 L. ed. 679; Warren 
 V. Pim, 66 N. J. Eq. 353, 59 Atl. 773 
 See also Shepang Voting Trust 
 Cases, 60 Conn. 576, 24 Atl. 34 
 Fisher v. Bush, 35 Hun (N. Y.) 641 
 Harvey v. Linville &c. Co., 118 N, 
 Car. 693, 24 S. E. 489, 54 Am. St, 
 749; article in 35 Am. Law Reg. 
 (N. S.) 50; 1 Thomp. Corp. (2d 
 ed), §§898-900. 
 
§ 185 RAILROADS 310 
 
 § 185 (160). Number of votes to which stockholder is enti- 
 tled — Cumulative voting. — It seems under the common law, in 
 the absence of any statute on the subject, that 'each stockholder 
 is entitled to but one vote.*^ But this is not the natural and rea- 
 sonable rule in corporations whose capital represents a money 
 investment, and it is generally provided in the laws for the crea- 
 tion of railroad corporations, that the stockholders shall have 
 one vote for each share of stock which they own,*'' although the 
 total number of votes that may be cast by one stockholder is 
 sometimes limited. It is also provided by constitution or stat- 
 ute in several of the states that, in voting for directors, each 
 shareholder shall be entitled to as many votes as will equal the 
 number of his shares, multiplied by the number of directors to 
 be elected.*^ This system of cumulative voting is intended to 
 enable the minority to obtain a representation upon the board. 
 Such a provision, however, is generally held not to apply to cor- 
 porations previously existing and would be unconstitutional so 
 far as it applied to corporations previously chartered,** unless, 
 perhaps, where the power to amend or repeal remains in the 
 legislature. 5" 
 
 *6Corporation cannot acquire and Am. & Eng. Corp. Cas. 328; Hays 
 
 vote its own stock. Clark v. National v. Commonwealth, 82 Pa. St. 518; 
 
 Steel &c. Co., 82 Conn. 178, 72 Atl. Baker's Appeal, 109 Pa. St. 461; 
 
 930. Commonwealth v. Butterworth, 160 
 
 47 Hays V. Commonwealth, 82 Pa. ^^- ^t. SS, 28 Atl. 507. Such a stat- 
 
 St. 518. Such provision is made by "^^ '= "°' retroactive. Loewenthal 
 
 general statute in most of the ^- ^"'^^^^ *=• ^o- 52 N. J. Eq. 440, 
 
 gt^tgg 28 Atl. 454; Looker v. Maynard, 179 
 
 U. S. 46, 21 Sup. Ct. 21, 45 L. ed. 
 
 t'J ^°f. Corporations (7th ed.) 79 gmith v. Atchinson &c. R. Co., 
 
 § 609a ; Wright v. Central &c Co., 67 g^ -p^^ 272 
 
 Cal. 532, 8 Pac. 70, 13 Am. & Eng. _ ^ ' ' „, 
 
 Corp. Cas. 89, in which the system J"^'°f ^,- ^f* ^^- ^^- ^- ^°- 
 
 is fully explained. See also 3 Cyclo- ^ W. Va. 174, 12 S. E. 1071. See 
 
 pedia of Political Science, 526; 1 ^'=° ^^"^ ^- United States Cement 
 
 Thomp. Corp. (2d ed.), § 886. ^o., 36 Ind. App. 149, 73 N. E. 269; 
 
 Gregg V. Granby Min. Co., 164 Mo. 
 
 49 State v. Greer, 78 Mo. 188, 8 616, 65 S. W. 312. 
 
311 
 
 STOCKHOLDERS 
 
 §186 
 
 § 186 (161). Quorum must be present. — Before votes may be 
 cast at a meeting, it is necessary that a certain number of stock- 
 holders or the holders of a certain number of shares^^ (called 
 a quorum) shall be present. This number is frequently fixed 
 by the by-laws, and is generally a majority of the stock enti- 
 tled to vote.^^ But if the body consists of an indefinite number 
 and no provision is made upon the subject, those who actually 
 assemble at a regularly called meeting may constitute a quo- 
 rum.^* And if the required number, or a quorum, be present, a 
 majority of the votes actually cast at the meeting will generally 
 control in the absence of any special provisions as to 'the num- 
 ber of votes necessary to bind the corporation, ^^ although it is 
 frequently said or intimated that it requires a majority of those 
 
 SI Tennessee &c. R. Co. v. East 
 Alabama R. Co., 73 Ala. 426. 
 
 531 Thomp. Corp. (2d. ed.), § «iO; 
 Hill V. Town, 172 Mich. 508, 138 N. 
 W. 334, 42 L. R. A. (U. S.) 799. 
 
 54 Brown v. Pac. Mail &c. Co., 5 
 Blatchf. (U. S.) 525, Fed. Cas. No. 
 2025; Morrill v. Little Falls &c. Co., 
 53 Minn. 371, 55 N. W. 547, 21 L. 
 R. A. 174; Columbia &c. Co. v. 
 Meier, 39 Mo. 53; Field v. Field, 9 
 Wend. (N. Y.) 394; Craig v. First 
 Presbyterian Church, 88 Pa. St. 42 
 Rex V. Bellringer, 4 Term Rep. 810 
 1 Thomp. Corp. (2d ed.), §846, 
 See also Green v. Felton, 42 Ind 
 App. 675, 84 N. E. 166. 
 
 55 State V. Green, 37 Ohio St. 227 
 Gowen's Appeal, 10 Week. N. Cas 
 85. See also Durfee v. Old Colony 
 &c. R. Co., 5 Allen (Mass.) 230, 
 242 ; New Orleans &c. R. Co. v. Har- 
 ris, 27 Miss. 517, 537; Gifford v. 
 New Jersey R. Co., 10 N. J. Eq. 171 ; 
 Stevens v. Rutland &c. R. Co., 29 
 Vt. 545. "li a quorum is present 
 and a majority of the quorum vote 
 
 in favor of a measure, it will pre- 
 vail, although an equal number 
 should refrain from voting. A 
 majority of the number of members 
 required to constitute a quorum is 
 sufficient." Rushville Gas Co. v. 
 Rushville, 121 Ind. 206, 23 N. E. 
 72, 6 L. R. A. 315; followed in 
 State V. Dillon, 125 Ind. 65, 25 
 N. E. 136. In such a case, "silence 
 is acquiescence rather than opposi- 
 tion." Cases just cited. See also 
 County of Cass v. Johnston, 95 U. 
 S. 360, 369, 24 L. ed. 416; Launtz v. 
 People, 113 111. 137; State v. Chute, 
 34 Minn. 135, 24 N. W. 353 ; Attorney 
 General v. Shepard, 62 N. H. 383, 
 13 Am. St. 576; Oldknow v. Wain- 
 right, 2 Burr. 1017; 1 Thotnp. Corp. 
 (2d. ed.), § 848; How & Bemis Mu- 
 nic. Police Ord. 42. Contra, Common- 
 wealth V. Wickersham, 66 Pa. St. 
 134; Lawrence v. IngersoU, 88 Tenn. 
 52, 12 S. W. 422, 6 L. R. A. 308, 
 17 Am. St. 870. Withdrawal to break 
 a quorum is not favored, 8 Thomp. 
 Corp. § 850. 
 
§187 
 
 RAILROADS 
 
 312 
 
 present."^ It is held that a single shareholder, even though he 
 owns a majority of the stock, cannot hold a corporate meeting 
 alone. There must generally be at least two to constitute a 
 meeting.^'^ But the holding would probably be different where 
 a single individual is allowed to form a corporation,^* as under 
 a statute in lowa,^^ if the meeting was regular in other respects. 
 
 § 187 (162). Voting by proxy. — At common law the stock- 
 holder must cast his vote in person."" But authority to vote by 
 proxy upon certain conditions and under certain restrictions is 
 given by general statute in many of the states, '^^ and it may be 
 and very often is conferred by a by-law. "^ And the suggestion 
 has been made that the modern custom of voting by proxy in 
 moneyed corporations, without any regard to any express au- 
 thority, which prevails in the United States, may have modi- 
 fied the common law so far as to permit evidence of such a 
 usage to establish the right where it is not expressly conferred 
 by charter or by statute.®^ A proxy should be in writing, and 
 
 561 Thomp. Corp. (2d. ed.), 
 §848; Lawrence v. IngersoU, 88 
 Tenn. 512, 12 S. W. 422, 6 L. R. 
 A. 308, 17 Am. St. 870. See also 
 State, V. Fagan, 42 Conn. 32 (Under 
 a statute), with which compare 
 State V. Chapman, 44 Conn. S9S. 
 
 S'! £.ngland v. Dearborn, 141 Mass. 
 590, 6 N. E. 837; Hopkins v. Rose- 
 clare Lead Co., 72 111. 373 ; Sharpe 
 V. Dawes, 46 L. J. Q. B. 104. 
 
 BS See Swift v. Smith, 65 Md. 428, 
 S Atl. 534, 57 Am. Rep. 336; where 
 one stockholder owned all the stock 
 and was held to be, in effect, the 
 corporation itself. 
 
 ,59 Code of Iowa (1913), §1608; 
 McClain's Ann. Code Iowa, § 1638. 
 
 eoMcKee v. Home &c. Co., 122 
 Iowa 731, 98 N. W. 609; Philips v. 
 Wickmlan, 1 Paige (N. Y.) 590; 
 Commonwealth v. Bringhurst, 103 
 Pa. St. 134, 49 Am. Rep. 119; 1 
 Thomp. Corp. (2d. ed.), § 875. See 
 
 also In re Schwartz (N. J. L.), 72 
 Atl. 70. 
 
 61 People's Home Sav. Bank v. Su- 
 perior Court, 104 Cal. 649, 38 Pac. 
 533, 43 Am. St. 147; Lighthall Mfg. 
 Co., Matter of, 47 Hun (N. Y.) 258. 
 
 62 State V. Tudor, 5 Day (Conn.) 
 329, 5 Am. Dec. 162; People v. 
 Crossley, 69 111. 195 ; Commonwealth 
 V. Detwiller, 131 Pa. St. 614, 18 Atl. 
 990, 7 L. R. A. 357. Many of the 
 states give statutory authority for 
 the making of by-laws to regulate 
 this matter. People v. Crossley, 
 69 111. 195; 1 Thomp. Corp. (2d 
 ed.), § 877. But the existence 
 of such authority at common law is 
 doubted in Philips v. Wickham, 1 
 Paige (N. Y.) 590, and is denied in 
 Taylor v. Griswold, 14 N. J. Law 
 222, 27 Am. Dec. 33. 
 
 63See generally 1 Thomp. Corp. 
 (2d. ed.), § 875. 
 
313 
 
 STOCKHOLDERS 
 
 §187 
 
 should be in such form and so executed as to bear reasonable 
 evidence of being genuine and valid.''* And the corporate of- 
 ficers may insist upon reasonable evidence of that fact before 
 allowing it to be voted,''^ but it has been held that they cannot 
 require sworn proof that the person executing the proxy is the 
 owner of the stock it represents.^® A proxy only confers the 
 right to vote upon the measures contemplated by the person 
 giving it,"^ and frequently only gives authority to vote for of- 
 ficers.^* One who holds stock of a railroad company in trust 
 for corporations owning competing lines, and is forbidden by 
 law to hold such stock, and who is largely interested in such 
 competing lines, does not, by a relinquishment of such stock 
 
 64 But the mere omission of a 
 date will not justify its rejection. 
 St. Lawrence Steamboat Co., Matter 
 of Election of, 44 N. J. L. 529. The 
 by-laws may require proxies to be 
 witnessed. Harben v. Phillips, L. R. 
 23 Ch. D. 14, 22. One to whom a 
 testator has by will directed his 
 executors to give a proxy to cast the 
 vote for stock held by the testator 
 cannot vote when the executors re- 
 fuse the proxy, because of inability 
 to agree as to how the vote shall be 
 cast. Tunis v. Hestonville &c. R. 
 Co., 149 Pa. St. 70, 24 Atl. 88, IS L. 
 R. A. 665. 
 
 65 St. Lawrence Steamboat Co., 
 Matter of Election of, 44 N. J. L. 
 529. But it has every appearance of 
 genuineness and is regular in form, 
 the officers cannot refuse it. Cecil, 
 Matter of, 36 How. Prac. (N. Y.) 
 477. 
 
 66 People v. Tibbets, 4 Cow. (N. 
 Y.) 358. 
 
 o^Or fairly within its scope, Parish 
 V. Cieneguita &c. Co., 12 Ariz. 235, 
 100 Pac. 781. A proxy to vote is not 
 a proxy to demand a poll. Haven &c. 
 Co., In re L. R. 20 Ch. D. 151 ; Reg. v. 
 Gov. Stock Co., L..R. 3 Q. B. D. 
 442. The appointment of a proxy 
 without limitation, gives him author- 
 ity to bind his principal by a vote 
 against his interest as well as for 
 it, to the same extent as if the vote 
 were cast in person. Mobile &c. R. 
 Co. V. Nicholas, 98 Ala. 92, 12 So. 
 723. 
 
 68 But it may, of course, give 
 greater powers to the holder either 
 generally or specifically. See 1 
 Thomp. Corp. (2d ed.), §§879, 880. 
 He cannot vote to dissolve the 
 corporation or to sell the entire cor- 
 porate property and business. Id. § 
 880. A proxy at a stockholders' meet- 
 ing to elect directors may vote on mo- 
 tions to take ballot and to adjourn 
 the same as a stockholder. For- 
 syth V, Brown, 13 Pa.. Co. Ct. 576. 
 
§188 
 
 EAiLROADS 
 
 314 
 
 made by such competing corporations in his favor, acquire any 
 right to vote the same.s" A naked proxy is revocable.™ 
 
 § 188 (163). Other powers of stockholders — Rights of mi- 
 nority. — Besides electing officers, the corporate shareholders in 
 meeting assembled usually have power to make the by-laws of 
 the corporation,''! to increase or decrease the capital stock un- 
 der authority of the legislature,''^ to accept or authorize amend- 
 ments of a certain kind to the charter,''^ to dissolve the corpo- 
 
 69 Clarke v. Central R. &c. Co., SO 
 Fed. 338. A railroad which owns 
 stock of a competing line may be 
 enjoined from voting the same at 
 the suit of stockholders of the com- 
 petitor, who have acquiesced in its 
 ownership of such stock and control 
 of such line for more than six years. 
 George v. Central R. &c. Co., 101 
 Ala. 607, 14 So. 7S2. 
 
 TO Woodruff V. Dubuque &c. R. 
 Co., 30 Fed. 91; Vanderbilt v. Ben- 
 nett, 2 R. and Corp. L. J. 409; Reed 
 v. Bank, 6 Paige (N. Y.) 337. See 
 also Cone v. Russell, 48 N. J. Eq. 
 208, 21 Atl. 847. And this is the 
 general rule in regard to proxies. 
 2 Cook Corp. (7th ed.), § 610; 1 
 Thomp. Corp. (2d ed.), § 884. 
 
 Til Cook Corporations (7th. ed.), 
 § 4a; 1 Thomp. Corp. (2d. ed.), 
 §§ 965, 968; Morton &c. Co. v. Wy- 
 song, SI Ind. 4. But it is frequently 
 provided by charter or otherwise that 
 the by-laws shall be made by the di- 
 rectors. 1 Thomp. Corp. (2d. ed.), 
 § 970. 
 
 T2 Railway Co. v. Allerton, 18 
 Wall. (U. S.) 233, 21 L. ed. 902; 
 Crandall v. Lincoln, 52 .Conn. IZ, 
 99, 52 Am. Rep. 560; Eidman v. 
 Bowman, 58 111. 444, 11 Am. Rep. 
 90; Percy v. Millaudon, 3 La. 568, 
 585; Finley &c. Co. v. Kurtz, 34 
 Mich. 89. 
 
 T3 Marlborough Mfg. Co. v. Smith 
 2 Conn. 579; Peoria &c. R. Co. v. 
 Preston, 35 Iowa 115; Taggarc v. 
 Western R. Co., 24 Md. 563, 89 Am. 
 Dec. 760n ; --■ Brown v. Fairmount 
 Mine Co., 10 Phila. (Pa.) 32. A 
 material of fundamental amendment 
 must be accepted by a unanimous 
 vote of the stockholders. Marietta, 
 &c. R. Co. V. Elliott, 10 Ohio St. 
 57; New Orleans &c. R. Co. v. Har- 
 ris, 27 Miss. 517. A dissenting 
 stockholder will not be bound there- 
 by. Snook v. Georgia Improvement 
 Co., 83 Ga. 61, 9 S. E. 1104. Where 
 the amendment does not work any 
 material change in the corporation, 
 the will of the majority should gov- 
 ern. Sprague v. Illinois River R. 
 Co., 19 111. 174. But the right to 
 amend without any acceptance by 
 the stockholders is generally re- 
 served by the legislature. 
 
 T4 Mobile &c. R. Co. v. State, 29 
 Ala. 573, S86; Chesapeake &c. Co. 
 V. Baltimore &c. Co., 4 Gill & J. 
 (Md.) 1, 121; Denike v. New York 
 &c. Co., 80 N. Y. 599, 606; Mcln- 
 tyre Poor School v. Zanesville 
 Canal &c. Co., 9 Ohio 203, 34 Am. 
 Dec. 436; Houston v. Jefferson Col- 
 lege, 63 Pa. St. 428; LaGrange &c. 
 R. Co. V. Rainey, 7 Coldw. (Tenn.) 
 420. 
 
315 
 
 STOCKHOLDERS 
 
 §189 
 
 ration in a proper case for an authorized cause,''* and the likeJ'^ 
 The right to vote includes the right to a voice in the settlement 
 of these various questions. But the rights of the minority must 
 be respected, and a single stockholder has been held to be able, 
 by refusing his assent, to prevent a material amendment to the 
 charter,''^ as he may a dissolution,'^'' where it is not authorized 
 or not made with a bona fide intention to pay the corporate 
 debts and discontinue the business. 
 
 § 189 (164). Stockholders' meetings. — In matters which must 
 be settled by the body of the stockholders, the assent of a ma- 
 jority of them, expressed elsewhere than at a meeting — as, 
 where the assent of each is given separately and at different 
 times to a person who goes to them privately — is not binding 
 upon the company.''^ But provision is sometimes made by stat- 
 ute for the stockholders to perform certain acts, such as the 
 adoption of by-laws, by giving a written consent thereto, with- 
 out the formality of a meeting.''^ Stockholders' meetings should 
 be held within the state by which the corporation is created.*'' 
 
 ''5 Eidman v. Bowman, 58 111. 444, 
 11 Am. Rep. 90; Metropolitan &c. 
 R. Co. V. Manhattan &c. R. Co., 11 
 Daly (N. Y.) 367. 
 
 ■fs Pearce v. Madison &c. R. Co., 
 21 How. (U. S.) 441, 16 L. ed. 184; 
 Fry V. Lexington &c. R. Co., 2 Mete. 
 (Ky.) 314; Tuttle v. Mich. Air Line 
 Co., 35 Mich. 247; New Orleans &c. 
 R. Co. V. Harris, 27 Miss. 517. 
 Delaware &c. R. Co. v. Irick, 23 N. 
 J. L. 321; Marietta &c. R. Co. v. 
 Elliott, 10 Ohio St. 57; ante, §56. 
 
 ''TErvin v. Oregon R. &c. Co., 27 
 Fed. 625; Von Schmidt v. Hunting- 
 ton, 1 Cal. 55 ; Barton v. Enter- 
 prise &c. Assn., 114 Ind. 226, 16 
 N. E. 486, 5 Am. St. 608, where the 
 corporation charter had not ex- 
 pired; Kean v. Johnson, 9 N. J. Eq. 
 401 ; Black v. Delaware &c. Canal 
 Co., 22 N. J. Eq. 130, where the 
 object was to continue business un- 
 
 der a new organization. 
 
 ''SDuke V. Markham, 105 N. 
 Car. 131, 10 S. E. 1017, 18 Am. St. 
 889 ; Commonwealth v. Cullen, 13 Pa. 
 St. 133, 53 Am. Dec. 450; Dennis v. 
 Joslin &c. Co., 19 R. I. 666, 36 Atl. 
 129, 61 Am. St. 805. But it is held 
 that a certificate signed by the presi- 
 dent of a corporation, who holds 
 nearly all of its stock, stating that a 
 majority of the stockholders has as- 
 sented thereto, implies that he has 
 assented, and such certificate is suffi- 
 cient assent of the majority of the 
 stockholders unless the statute pro- 
 vides some particular form or place 
 for such assent. Humphreys v. St. 
 Louis &c. R. Co., 37 Fed. 307. 
 
 ■"O The written assent of two- 
 thirds of the stock is sometimes 
 made sufficient to adopt by-laws 
 without a meeting. 
 
 80 Bank of Augusta v. Earle, 13 
 
§189 
 
 RAILROADS 
 
 316 
 
 It is sometimes said that acts performed at a meeting in a for- 
 eign jurisdiction are void,^^ but the better rule would seem to 
 be that, in the absence of any provision to the contrary, the acts 
 of the stockholders at such a meeting are voidable rather than 
 void, and may be valid where all the stockholders give their 
 consent. ^2 In other words, the corporation and the stockhold- 
 ers in such a case are estopped from questioning upon this 
 ground the validity of the meeting and proceedings, to which 
 they consented and in which they participated. If the corpora- 
 tion is consolidated or incorporated in two or more states, so as 
 to be a citizen of each, it seems that the stockholders may law- 
 fully meet in either state. ^^ Where the officers of a corporation 
 neglect and refuse to call a meeting which it is their duty to 
 call, they may be compelled to do so, in a proper case, by man- 
 damus at the suit of a stockholder.®* In order to bind absent 
 
 Pet. (U. S.) 519, 10 L. ed. 274. 
 Jones V. Pearl Min. Co., 20 Colo. 
 417, 38 Pac. 700; Harding v. Ameri- 
 can &c. Co., 182 111. SSI, SS N. E. 
 577, 74 Am. St. 189; Hodgson v. 
 Duluth &c. R. Co., 46 Minn. 454, 49 
 N. W. 197; 1 Thomp. Corp. (2d ed.), 
 § 814. 
 
 51 Miller v. Ewer, 27 Maine 509, 
 46 Am. Dec. 619; Aspinwall v. Ohio 
 &c. R. Co., 20 Ind. 492, 83 Am. Dec. 
 329. See also Mack v. De Bardele- 
 ben &c. Co., 90 Ala. 396, 8 So. 150; 
 Duke V. Taylor, 37 Fla. 64, 19 So. 
 172, 31 L. R. A. 484, 53 Am. St. 
 332; Craig Silver Co. v. Smith, 163 
 Mass. 262, 39 N. E. 1116; Hodgson 
 V. Duluth &c. R. Co., 46 Minn. 454, 
 49 N. W. 197; Hilles v. Parrish, 14 
 N. J. Eq. 380; Ormsby v. Vermont 
 &c. Co., 56 N. Y. 623; Franco-Tex- 
 an Land Co. v. Leigle, 59 Tex. 339. 
 
 52 Missouri Lead &c. Co. v. Rein- 
 hard, 114 Mo. 218, 21 S. W. 488, 35 
 Am. St. 746; Handley v. Stutz, 139 
 U. S. 417, 11 Sup. Ct. 530, 35 L. ed. 
 227, appeal from Stutz v. Handley, 
 
 41 Fed. 531; Heath v. Silverthorn 
 &c. Co., 39 Wis. 146; 2 Cook Cor- 
 porations (7th. ed.), § 589; I Thomp. 
 Corp. (2d. ed.), § 814. See also 
 Wright V. Lee, 2 S. Dak. 596, 51 N. 
 W. 706; Graham v. Boston &c. R. 
 Co., 118 U. S. 161, 6 Sup. Ct. 1009, 30 
 L. ed. 196. Council of Jewish Wom- 
 en V. Council, 212 Mass. 219, 98 N. 
 E. 862. There is more reason, per- 
 haps, for holding that meetings for 
 the purpose of accepting the charter 
 and organizing should be held within 
 the state. Smith v. Silver Valley, 
 &c. Co., 64 Maine 85, 54 Am. Rep. 
 760; Freeman v. Machias &c. Co., 
 38 Maine 343 ; see also Camp v. 
 Byrne, 41 Mo. 525; ante, § 23. 
 
 83 Covington &c. Bridge Co. v. 
 Mayer, 31 Ohio St. 317 ; Graham v. 
 Boston &c. R. Co., 118 U. S. 161, 
 6 Sup. Ct. 1009, 30 L. ed. 196; ante, 
 § 37. But see Aspinwall v. Ohio 
 &c. R. Co., 20 Ind. 492, 83 Am. jJec. 
 329. 
 
 84 People V. Cummings, 72 N. Y. 
 433; State v. Wright, 10 Nev. 167; 
 
317 
 
 STOCKHOLDERS 
 
 §189 
 
 and dissenting stockholders, the meeting must be duly assem- 
 bled.8^ Members are bound to take notice of regular stated 
 meetings fixed by the charter or by-laws;*** but they should be 
 duly notified of special or called meetings,^'^ and the statute or 
 by-laws may, of course, provide for notice of all meetings. The 
 provisions of the charter or by-laws in regard to the time and 
 manner of calling meetings and the nature of the notice should 
 be followed;** but a by-law providing that notice may be given 
 in a certain way is not necessarily exclusive.*" In the absence 
 of any express provision, personal notice, if not absolutely es- 
 sential, is certainly the safest.®" The essential elements of the 
 notice are the time of the meeting,®^ the place of the meeting,®^ 
 
 McNeely v. Woodruff, 13 N. J. L. 
 352. See also American Railway- 
 Frog. Co. V. Haven., 101 Mass. 398, 
 
 3 Am. Rep. 377. 
 
 85 It should be called by the au- 
 thorized officers or persons. See 
 Reilly v. Oglebay, 25 W. Va. 36; 
 Cassell V. Lexington &c. Co. (Ky.), 
 9 S. W. 502; Evans v. Osgood, 18 
 Maine 213; Johnston v. Jones, 23 N. 
 J. E<^. 216. 
 
 86 Warner v. Mower, 11 Vt. 385; 
 People V. Batchelor, 22 N. Y. 128; 
 State V. Bonnell, 35 Ohio St. 10; 8 
 Thomp. Corp. §817. 
 
 ST Farwell v. Houghton Copper 
 Works, 8 Fed. 66; Stow v. Wyse, 7 
 Conn. 214, 13 Am. Dec. 99, and note ; 
 Commonwealth v. CuUen, 13 Pa. St. 
 133, 53 Am. Dec. 450; Kynaston v. 
 Mayor, 2 Strange 1051 ; Rex v. Hill, 
 
 4 Bam. & Cress. 426; 1 Thomp. Corp. 
 (2d. ed.), §§ 832, 834. 
 
 ** Stockholders of Shelby R. Co. 
 v. Louisville &c. R. Co., 12 Bush 
 (Ky.) 62; Tuttle v. Michigan Air 
 Line R. Co., 35 Mich. 247; Hunt v. 
 School Dist., 14 Vt. 300, 39 Am. 
 Dec. 225. 
 
 89 Citizens' Mut. Ins. Co. v. Sort- 
 weil, 8 Allen (Mass.) 217. 
 
 80 Stow v. Wyse, 7 Conn. 214, 18 
 Am. Dec. 99. See also Wiggin v. 
 Freewill Baptist Church, 8 Mete. 
 (Mass.) 301; Harding v. Vande- 
 water, 40 Cal. 77. 
 
 91 It has been held that the hour, 
 as well as the day, must be stated. 
 San Buenaventura &c. Co. v. Vas- 
 sault, 50 Cal. 534, 537. The fact 
 that there is some delay in calling 
 the meeting to order will not, as a 
 rule, invalidate it, but holding it 
 before the time designated may op- 
 erate as a surprise upon some of the 
 stockholders and give those who do 
 not participate just cause for at- 
 tacking its validity as to them. Peo- 
 ple V. Albany &c. R. Co., 55 Barb. 
 (N. Y.) 344. The notice should al- 
 so be served, a reasonable time be- 
 fore the meeting, although this is 
 usually fixed by the statute or by- 
 laws. Long Island R. Co., In re, 19 
 Wend. (N. Y.) 37, 32 Am. Dec. 
 429; Brown v. Republican &c. Mines, 
 55 Fed. 7; Covert v. Rogers, 38 
 Mich. 363, 31 Am. Rep. 319. 
 
 921 Thomp. Corp. (2d. ed.), § 828; 
 Jones v. Milton Tpk. Co., 7 
 
§189 
 
 RAILROADS 
 
 318 
 
 and the business to be transacted,^* unless the stockholders, by 
 reason of some provision in the charter or by-laws, are already 
 chargeable with knowledge of one or more of these things. An 
 appearance at the meeting without objection will usually oper- 
 ate as a waiver of objections to the notice.^* And where a 
 meeting is duly called and held, the corporation may adjourn 
 and transact any business at the adjourned meeting which they 
 could have transacted at the original meeting, without giving 
 any additional notice other than that implied in the adjourn- 
 ment. ''° It will be presumed, in the absence of anything to the 
 contrary, that a meeting attended by a quorum was duly called.®® 
 
 Ind. 547; United States v. McKel- 
 den, 8 Reporter 778, 11 D. C. 162. 
 
 93 Notice of the ordinary busi- 
 ness to be transacted at a general 
 stated meeting is usually unneces- 
 
 ,sary. Chicago &c. R. Co. v. Union 
 Pac. R. Co., 47 Fed. IS; Merritt v. 
 Ferris, 22 111. 303 ; Sampson v. Bow- 
 doinham &c. R. Co., 36 Maine 78; 
 Warner v. Mower, 11 Vt. 385; But 
 notice of the business to be trans- 
 acted at a special meeting is gen- 
 erally essential and no other busi- 
 ness can be regularly transacted 
 than that specified in the notice. 
 Atlantic Delaine Co. v. Mason, 5 R. 
 I. 463; People's Mut. Ins. Co. v. 
 Westcott, 14 Gray (Mass.) 440; 
 Rex V. Mayor &c. of Doncaster, 2 
 Burr. 738. See also Bridport Old 
 Brewery Co., In re, L. R. 2 Ch. 191 ; 
 London &c. Co., In re, L. R. 31 Ch. 
 D. 223; Tuttle v. Michigan Air Line 
 R. Co., 35 Mich. 247; 1 Thomp. Corp. 
 (2d. ed.), § 835. 
 
 94 Handley v. Stutz, on appeal, 
 139 U. S. 417, 11 Sup. Ct. 530, 35 
 L. ed. 227; Kenton Furnace Co. v. 
 McAlpin, 5 Fed. 737; Stutz v. Hand- 
 ley, 41 Fed. 531 ; Wood v. Corry &c. 
 Co., 44 Fed. 146; Campbell v. Ar- 
 
 genta &c. Co., 51 Fed. 1 ; Union Pac. 
 R. Co. V. Chicago &c. R. Co., 51 
 Fed. 309; Nelson v. Hubbard, 96 
 Ala. 238, 11 So. 428, 17 L. R. A. 
 375 ; Jones v. Milton Tpk. Co., 7 Ind. 
 547; Bucksport &c. R. Co. v. Buck, 
 68 Maine 81; People v. Peck, 11 
 Wend. (N. Y.) 604, 27 Am. Dec. 
 104. 
 
 95 Smith V. Law, 21 N. Y. 296; 
 Granger v. Grubb, 7 Phila. (Pa.) 
 350; Warner v. Mower, 11 Vt. 385; 
 Rex V. Carmarthen, 1 Maule & S. 
 697; Scadding v. Lorant, 3 H. L. 
 Cas. 418. But see, where there is 
 bad faith' and stockholders are taken 
 advantage of. State v. Bonnell, 35 
 Ohio St. 10; New York &c. Co. v. 
 Parrott, 36 Fed. 462; also State v. 
 Phillips, 79 Maine 506, 10 Atl. 447; 
 Reg. V. Grimshaw, L. R. 10 Q. B. 
 747 (new and different business can 
 not be transacted). 
 
 96 Lane v. Brainerd, 30 Conn. 565 ; 
 Sargent v. Webster, 13 Mete. 
 (Mass.) 497, 46 Am. Dec. 743; 
 Wells V. Rodgers, 60 Mich. 525, 27 
 N. W. 671; Beardsley v. Johnson, 
 121 N. Y. 224; McDaniels v. Flow- 
 er Brook &c. Co., 22 Vt. 274. 
 
319 
 
 STOCKHOLDERS 
 
 190 
 
 § 190 (165). Remedies of stockholders. — A stockholder has 
 the further right to bring an action to obtain redress for wrongs 
 done to the corporate rights or to restrain ultra vires acts done 
 in the name of the corporation in cases where the corporation, 
 upon request, refuses to bring the suit,^^ and where the persons 
 who are despoiling the corporation or who have caused it to 
 exceed its powers, are in control of it.®® Thus a suit brought by 
 
 sTHawes v. Oakland, 104 U. S. 
 4S0, 26 L. ed. 827; Taylor v. 
 Holmes, 127 U. S. 489, 8 Sup. Ct. 
 1192, 32, L. ed. 179; Foster v. Mans- 
 field &c. R. Co., 36 Fed. 627; Put- 
 nam V. Ruch, 56 Fed. 416; Mem- 
 phis &c. R. Co. V. Woods, 88 Ala. 
 630, 7 So. 108, 7 L. R. A. 60Sn, 16 
 Am. St. 81; Mack v. DeBardeleben 
 &c. Co., 90 Ala. 396, 8 So. ISO, 9 
 L. R. A. 6S0, and note; Teachout 
 V. Des Moines &c. St. R. Co., 75 
 Iowa 722, 38 N. W. 145; Wilkie v. 
 Rochester &c. R. Co., 12 Hun (N. 
 Y.) 242; Stevens v. Rutland &c. R. 
 Co., 29 Vt. 545; Atwood v. Merry- 
 weather, L. R. S Eq. 464, note; 4 
 Thomp, Corp. (2d ed.), §4552. A 
 request and refusal of the corpora- 
 tion to sue must generally be shown 
 or a sufficient excuse for failure to 
 make the request. Weidinfelder v. 
 Allegheny &c. R. Co., 47 Fed. 11; 
 Whitney v. Fairbanks, 54 Fed. 985; 
 Macon &c. R. Co. v. Shailer, 141 
 Fed. 585; Johns v. McLester, 137 
 Ala. 283, 34 So. 174, 97 Am. St. 27, 
 and note; Beshoar v. Chappell, 6 
 Colo. App. 323, 40 Pac. 244 ; Atchison 
 &c. R. Co. V. Board, 51 Kans. 617, 33 
 Pac. 312; Latimer v. Richmond &c. 
 R. Co., 39 S. Car. 44, 17 S. E. 258. 
 Where a corporation expired by 
 limitation in its charter, but its ex- 
 istence was continued thereafter by 
 
 statute for the purpose of winding 
 up its business, such limitation in 
 its charter is not sufficient ground 
 for bringing suit in the name of 
 some of the stockholders in behalf 
 of the corporation, to recover its 
 property, where no application has 
 been made to the directors. Tay- 
 lor V. Holmes, 127 U. S. 489, 8 Sup. 
 Ct. 1192, 32 L. ed. 179. 
 
 98 Heath v. Erie R. Co., 8 Blatchf. 
 (U. S.) 347, Fed. Cas. No. 6306; 
 Parrott v. Byers, 40 Cal. 614; 
 Board &c. v. Lafayette &c. R. Co., 
 50 Ind. 85; Miner v. Belle Isle Ice 
 Co., 93 Mich. 97, 53 N. W. 218, 17 
 L. R. A. 412; Currier v. New York 
 &c. R. Co., 35 Hun (N. Y.) 355; 
 Doud v. Wisconsin &c. R. Co, 65 
 Wis. 108, 25 N. W. 533, 56 Am. Rep. 
 620; Oshkosh &c. Co., Re, 11 Wis. 
 366, 46 N. W. 441, 9 L. R. A. 273, 
 and note. See also Jones v. Mis- 
 souri &c. Co., 144 Fed. 765. The 
 minority stockholders can not en- 
 join acts of the majority stockhold- 
 ers or directors of a corporation in 
 relation to its internal management, 
 such as executing a perpetual lease 
 of its railroad and franchises, where 
 the acts complained of are neither 
 fraudulent nor illegal. And ' the 
 mere fact that defendants are also 
 the majority stockholders and of- 
 ficers of the corporation to which 
 
§190 
 
 RAILROADS 
 
 320 
 
 a stockholder on behalf of his corporation against the directors 
 and others, has been sustained, where he sought redress for 
 frauds, wrongs, and breaches of trust, and to recover from them 
 money of which the corporation had been defrauded.^'' In such 
 a suit, the corporation should be joined as a defendant, ^ as the 
 court cannot pass upon its rights unless it is brought into court. 
 It has also been held that a stockholder may enjoin the perform- 
 
 the proposed lease is to be made is 
 not sufficient to establish ^ fraud. 
 Shaw V. Davis, 78 Md. 308, 28 Atl 
 619, 23 L. R. A. 294. Where the 
 suit is against those in control of 
 the corporation, no request that they 
 shall bring the suit is necessary. 
 George v. Central R. Co., 101 Ala. 
 607, 14 So. 752; Smith v. Dorn, 96 
 Cal. Ti, 30 Pac. 1024; Landis v. Sea 
 Isle &c. Co., S3 N. J. 654, 31 Atl. 
 755; Sage v. Culver, 71 Hun 42, 24 
 N. Y. S. 514. See also Higgins 
 V. Lansingh, 154 111. 301, 40 N. E. 
 362, and note in 97 Am. St. 34. 
 Where a majority stockholder of a 
 railroad company elects and controls 
 its board of directors, and obtains 
 a lease of its railroad at a nom- 
 inal rental, any minority stockhold- 
 er may sue in his own name for the 
 fraud committed on the company. 
 Pondir v. New York &c. R. Co., 
 72 Hun 384, 25 N. Y. S. 560; Earle 
 V. Seattle &c. R. Co., 56 Fed. 909. 
 Where it is merely a question of 
 corporate policy, and no question of 
 fraud or illegality of the proposed 
 action of the corporation is raised, 
 equity will not interpose to control 
 the action of directors to whom the 
 charter confides the management of 
 corporate aflfairs. EUerman v. Chi- 
 cago Junct. R. &c. Co., 49 N. J. Eq. 
 217, 23 Atl. 287; Wheeler v. Pull- 
 
 man &c. Co., 143 III. 197, 32 N. E. 
 420, 17 L. R. A. 818; Manufacturers 
 &c. Co. V. Cleary, 121 Ky. 403, 89 
 S. W. 248. 
 
 89 Beach v. Cooper, 72 Cal. 99, 13 
 Pac. 161; Putnam v. Ruch, 54 Fed. 
 216. A stockholder may bring an 
 action to enjoin the directors from 
 unlawfully transferring the stock to 
 a consolidated corporation, and he 
 need not consult with the directors 
 with reference thereto. Botts v. 
 Simpsonville &c. Tpk. Co., 88 Ky. 
 54, 10 S. W. 134, 2 L. R. A. 594. 
 
 1 Curran v. Arkanasas, 15 How. 
 (U. S.) 304, 14 L. ed. 705; Heath 
 V. Erie &c. Co., 8 Blatchf. (U. S.) 
 347, 394, Fed. Cas. No. 6306; Ken- 
 nebec &c. R. Co. V. Portland &c. 
 R. Co., 54 Maine 173, 181; Brewer 
 V. Boston Theater, 104 Mass. 378; 
 Bagshaw v. Eastern R. Co., 7 Hare 
 114; 3 Cook Corporations (7th ed.), 
 § 738, and numerous authorities 
 cited. The general rule is that the 
 corporation is a necessary party, 
 either as a plaintiiif or defendant. 
 Davenport v. Dows, 18 Wall. (U. 
 S.) 626, 21 L. ed 938; Beach v. 
 Cooper, 72 Cal. 99, 13 Pac. 161; 
 Hersey v. Veazie, 24 Maine 9, 41 
 Am. Dec. 364; Wilson v. American 
 Palace Car Co., 64 N. J. 534, 54 
 Atl. 415, note in 97 Am. St. 45, 46; 
 Greaves v. Gouge, 69 N. Y. 154, 52 
 
321 
 
 STOCKHOLDERS 
 
 §191 
 
 ance of an ultra vires contract to which all the other stockhold- 
 ers have consented although he is not specially injured thereby.^ 
 
 § 191 (166). Suits by unregistered assignees and third per- 
 sons. — It has been held that an assignee of railroad stock, who 
 has not registered his stock, nor obtained recognition as a stock- 
 holder, cannot bring suit in behalf of himself and other stock- 
 holders to restrain the officers of the corporation from ultra 
 vires and illegal acts.^ Parties who never paid, or agreed to 
 pay, anything for corporate stock issued to them, are not, ordi- 
 narily, shareholders, and cannot, as a rule, maintain an action 
 as such.* The merely expectant owner of stock in a corpora- 
 
 How. Prac. (N. Y.) 58; Western 
 R. Co. V. Nolan, 48 N. Y. 513; Zinn 
 V. Mendel, 9 W. Va. 580. 
 
 2Byrne v. Schuyler &c. Co., 65 
 Conn. 336, 31 All. 833, 28 L. R. A. 
 304, and cases cited. See also Cen- 
 tral R. Co. V. Collins, 40 Ga. 582; 
 Davis V. Congregation, 40 App. Div. 
 424, 57 N. Y. S. 1015. 
 
 3 Brown v. Duluth &c. R. Co., S3 
 Fed. 889. See also Heath v. Erie 
 R. Co., 8 Blatchf. (U. S.) 347, Fed. 
 Cas. 6306 ; Hersey v. Veasie, 24 Maine 
 9, 41 Am. Dec. 364n; Ramsey v. 
 Erie R. Co., 7 Abb. Pr. N. S. (N. 
 Y.) 156. But compare Ervin v. 
 Oregon &c. Co., 28 Hun (N. Y.) 
 269; Parrott v. Byers, 40 Cal. 614; 
 Moore v. Silver &c. Co., 104 N. Car. 
 534, 10 S. E. 679; Bagshaw v. East- 
 ern &c. R. Co., 7 Hare 114. It is 
 not absolutely essential in most ju- 
 risdictions, it seems, that the trans- 
 fer should be registered and there 
 are many cases in which actual 
 stockholders have been allowed to 
 sue even though their right was eqit- 
 able rather than a strict legal one. 
 Arkansas &c. Canal Co. v. Farmers' 
 ■&c. Trust Co., 13 Colo. 587, 22 Pac. 
 
 954; Fisher v. Patton, 134 Mo. 32, 
 33 S. W. 451, 34 S. W. 1096; O'Con- 
 nor v. International Silver Co., 68 
 N. J. Eq. dJ, 59 Atl. 321; 4 Thomp. 
 Corp. (2d ed.), §4630. A bill to 
 enjoin corporate acts which does 
 not allege fraud on the part of the 
 directors, or that they are threaten- 
 ing to do some act ultra vires or 
 for their own interests, in a manner 
 injurious to, or destructive of, the 
 rights of other shareholders, but 
 that the plaintiffs have made an 
 earnest effort to obtain redress with- 
 in the corporation itself, is insuffi- 
 cient on demurrer. Latimer v. 
 Richmond &c. R. Co., 39 S. Car. 
 44, 17 S. E. 258; Roman v. Wool- 
 folk, 98 Ala. 219, 13 So. 212 ; Atchi- 
 son &c. R. Co. V. Board &c., 51 
 Kans. 617, 33 Pac. 312. But where 
 the complaint shows that a rival 
 corporation has secured control of 
 the company, and acts of itself and 
 its officers amounting to fraud up- 
 on the rights of plaintiff are stated, 
 the complaint is sufficient. Earle v. 
 Seattle &c. R. Co., 56 Fed. 909. 
 
 * Arkansas River &c. Co. v. Far- 
 mers' &c. Trust Co., 13 Colo. 587. 22 
 
 11 — Ell. Railroads I 
 
§192 
 
 RAILROADS 
 
 322 
 
 tion, before becoming a stockholder, can neither be heard to 
 complain of acts of the corporation which may be ultra vires, 
 nor be permitted to interfere in any way in the affairs of the 
 company.^ To enable one or more stockholders to maintain in 
 a federal court of equity, a suit which should properly be 
 brought by the corporation itself, it has been held that they must 
 show that they were shareholders at the time of the transaction 
 complained of, or that the shares have devolved on them since 
 by operation of law.^ 
 
 § 192 (167). When stockholders may sue or become parties. 
 
 — -Stockholders have been permitted to sue on behalf of the cor- 
 poration to remove a cloud from the corporate title to real es- 
 tate,'^ and to compel payment of subscriptions.* But, on the 
 
 Pac. 954; Hinchley v. Pfister, 83 
 Wis. 64, 53 N. W. 21. See also 
 Busey v. Hooper, 35 Md. 15. If he 
 is the actual owner it may not be 
 necessary -that he should have paid 
 for the stock. Landes v. Globe &c. 
 Co., 73 Ga. 176. Purchasers of stock 
 have the right to demand that a con- 
 tract of the corporation be canceled 
 on the ground that it is ultra vires, 
 and a wrongful refusal to transfer 
 stock on the books of the com- 
 pany can not defeat that right. 
 Carson v. Iowa City Gaslight Co., 
 80 Iowa 638, 45 N. W. 1068. 
 
 5 Mayer v. Denver &c. R. Co., 38 
 Fed. 197, 6 R. & Corp. L. J. 49. 
 
 6 Dimpfell v. Ohio &c. R. Co., 110 
 U. S. 209, 3 Sup. Ct. 573, 28 L. ed. 
 121; Hawes v. Oakland, 104 U. S. 
 450, 26 L. ed. 827. Rule 94, U. S. 
 Rules of Practice in Equity Cases, 
 104 U. S. ix. But new equity rules 
 may change • this, and while some 
 states follow that rule as a general 
 principle others refuse to follow the 
 rule. See 4 Tbomp. Corp. §4631; 
 Polliz v. Gould, 202 N. Y. 11, 94 
 
 N. E. 1088, Ann. Cas. 1912D, 1098, 
 and cases on both sides reviewed in 
 opinion and note. A suit removed 
 to the federal court from a state 
 court will not be dismissed for fail- 
 ure to comply with this rule since 
 it applies only to suits originally 
 begun in the federal court. Earle 
 V. Seattle &c. R. Co., 56 Fed. 909. 
 Where stock was transferred merely 
 by indorsement and not by issuing 
 certificates, the stockholder must 
 show that he purchased the stock 
 in good faith and not for mere pur- 
 pose of vexation, before he can sue 
 for redress for fraudulent transac- 
 tion committed by officers or others 
 before he became a stockholder. 
 Moore v. Silver Valley Min. Co., 104 
 N. Car. 534, 10 S. E. 679. 
 
 7 Baldwin v. Canfield, 26 Minn. 
 43, 56, 1 N. W. 261. 
 
 sWallworth v. Holt, 4 Mylne & 
 Cr. 619. Other illustrative cases are 
 referred to in Hiscock v. Yacy, 9 
 Misc. 578, 30 N. Y. S. 860, quoted 
 in note in 97 Am. St. 41. Stock- 
 holders, as shown in a subsequent 
 
323 
 
 STOCKHOLDERS 
 
 §192 
 
 other hand, a stockholder has been denied the right to sue for 
 a trespass upon the company's property,' and he cannot take 
 an appeal in a suit which it has lost." In cases involving fraud 
 and collusion he must move promptly to assert his rights upon 
 gaining knowledge of the wrongful acts complained of, for if he 
 participates or acquiesces in unwarrantable acts of the officers 
 or of a majority of the stockholders, he will usually be bound 
 by them.^i He will not be permitted to wait until he can see 
 whether the unauthorized act is for the advantage of the cor- 
 poration, and in case it proves disastrous, sue to set it aside. ^^ 
 
 section have often been allowed to 
 sue in behalf of the corporation to 
 set aside a fraudulent transaction. 
 See PoUitz v. Gould, 202 N. Y. 11, 
 94 N. E. 1088, Ann. Cas. 1912D, 
 1100 and cases cited in notes. 
 
 9 Dale V. Grant, 34 L. J. 142. 
 
 10 Silk Mfg. Co. V. Campbell, 27 
 N. J. L. 539. For other illustra- 
 tive cases see Van Kirk v. Adler, 111 
 Ala. 104, 20 So. 336; Hendrickson 
 V. Bradley, 8S Fed. 508; Flynn v. 
 Brooklyn City R. Co., 158 N. Y. 
 493, 53 N. E. 520; note in 97 Am. 
 St. 42, 43. 
 
 "Taylor v. Holmes, 127 U. S. 
 489, 8 Sup. Ct. 1192, 32 L. ed. 179; 
 Memphis &c. R. Co. v. Grayson, 
 88 Ala. 572, 7 So. 122, 16 Am. 
 St. 69; Alexander v. Searcy, 81 Ga. 
 536, 8 S. E. 630, 12 Am. St. 337; 
 Burgess v. St." Louis County R. 
 Co., 99 Mo. 496, 12 S. W. 1050. But 
 see Appleton v. American Malt. Co., 
 65 N. J. Eq. 375, 54 Atl. 454. See 
 as to when there must be a refusal 
 by the corporation or dictators to 
 sue before a stockholder can do so. 
 Continental Securities Co. v. Bel- 
 mont, 206 N. Y. 7, 99 N. E. 138, 
 Ann. Cas. 1914A, m, and cases 
 cited in opinion and note; Fitz- 
 gerald V. Fitzgerald, 41 Nebr. 374, 
 
 59 N. W. 838. An act not expressly 
 prohibited by law, but unauthorized 
 in the charter of the corporation, 
 which affects only the interests of 
 the stockholders, may be made good 
 by the assent of the stockholders, 
 so as to protect strangers dealing 
 with them' in good faith. Hollins v. 
 St. Paul &c. R. Co., 29 N. Y. St. 
 208, 9 N. Y. S. 909, 8 R. & Corp. 
 L. J. 117. So, a purchaser of stock 
 with notice that it was voted in fa- 
 vor of the illegal act cannot com- 
 plain of such act. Brown v. Du- 
 luth &c. R. Co., 53 Fed. 889; Wood 
 V. Corry &c. Co., 44 Fed. 146; Barr 
 V. New York &c. R. Co., 125 N. Y. 
 263, 26 N. E. 145; Syracuse &c. R. 
 Co.,' In re, 91 N. Y. 1. Several 
 of these cases apply this doctrine 
 even to transferees without notice 
 of fraud, but in Parsons v. Joseph, 
 92 Ala. 403, 8 So. 788, its applica- 
 tion to bona fide purchasers is de- 
 nied. 
 
 i2Atchison &c. R. Co. v. Fletcher, 
 35 Kans. 236, 10 Pac. 596; Burgess 
 V. St. Louis County R. Co., 99 Mo. 
 496, 12 S. W. 1050. For an instance 
 in which it was held that the stock- 
 holder acted with sufficient promt- 
 . ness, see Byrne v. Schuyler &c. Co., 
 65 Conn. 336, 31 Atl. 833. 
 
§192 
 
 RAILROADS 
 
 324 
 
 The fact that the plaintifit bought his stock expressly to enable 
 him to bring the suit is not necessarily a ground for refusing 
 relief.^* If it appears that the plaintiff is prosecuting the suit 
 at the instance and for the benefit of others who are not stock- 
 holders, and who indemnify him against the costs of the suit, 
 the court will not interfere by interlocutory injunction. i* Nor 
 will it readily grant this extraordinary relief before hearing, 
 where the measures are of evident expediency, and have the 
 approbation of all the other stockholders, although proper relief 
 will not be denied upon final hearing if the acts complained of 
 are shown to be ultra vires. ^^ The fact that a rival company 
 merely instigated the suit is not a reason for denying relief of 
 which the stockholders are shown to be entitled, i" although the 
 
 13 Ramsay v. Erie R. Co., 8 Abb. 
 Pr. N. S. (N. Y. )174; Young v. 
 Drake, 8 Hun (N. Y.) 61; Chicago 
 V. Cameron, 22 111. App. 91, aff'd 
 120 111. 447; Winsor v. Bailey, SS 
 N. H. 218; Elkins v. Camden &c. 
 R. Co., 36 N. J. Eq. S; Cook Cor- 
 porations (7th ed.), § 736. But see 
 ante, note 3, page 240, and Alexan- 
 der V. Searcy, 81 Ga. S36, 8 S. E. 
 630, 12 Am. St. 337. The fact that 
 the certificates of stock were not is- 
 sued to him until after a corpora- 
 tion had accepted an unconstitu- 
 tional amendment to its charter will 
 not preclude one having a vested 
 right to stock of the corporation by 
 virtue of stock receipts from enforc- 
 ing his rights against an attempt to 
 misappropriate funds under such 
 amendment : Hill v. Glasgow R. Co., 
 41 Fed. 610. The fact that plaintiff 
 became a stockholder after commis- 
 sion of the acts complained of does 
 not defeat his right to begin the 
 action, which is brought directly 
 for the benefit of the corporation. 
 Chicago V. Cameron, 22 111. App. 
 91 aff'd in 9 West. R. 507, 120 111.. 
 
 447, 11 N. E. 899. But it' has been 
 held that where the transfer is 
 merely nominal the transferee can- 
 not maintain the suit. McDonnell v. 
 Grand Canal Co., 3 Ir. Ch. R. 578; 
 Robson V. Dodd, L. R. 8 Eq. 301. 
 
 1* Beshoar v. Chappell, 6 Colo. 
 App. 323, 40 Pac. 244; Belmont v. 
 Erie R. Co., 52 Barb. (N. Y.) 637; 
 Filder v. London &c. R. Co., 1 H. 
 & Miller 489; Forrest v. Manches- 
 ter &c. R. Co., 4 DeG., F. & J. 126. 
 But see Dinsmore v. Central R. Co., 
 19 Fed. 153 ; Central R. Co. v. Collins, 
 40 Ga. 582; Sandford v. Railroad, 
 24 Pa. St. 378. 'He must not act in 
 bad faith or the court will usually 
 refuse to aid him. Beshoar v. Chap- 
 pell, 6 Colo. App. 323, 40 Pac. 244; 
 Tevis V. Hammersmith, 161 Ind. 74, 
 66 N. E, 79, 67 N. E. 672. 
 
 iBDuPont V. Northern Pacific R. 
 Co., 18 Fed. 467. But not where he 
 has knowingly accepted and retained 
 the benefit. Wormser v. Metropoli- 
 tan St. R. Co., 184 N. Y. 83, 76 N. 
 E. 1036. 
 
 16 Colraan v. Eastern Counties R. 
 Co., 10 Beav. 1. 
 
325 STOCKHOLDERS § 193 
 
 court may decline to entertain a suit by shareholders in such a 
 company who have purchased shares in the rival company for 
 purpose of litigation. ^'^ And in cases where the corporation 
 neglects or refuses to defend a suit because of fraud and collu- 
 sion on the part of the corporate officers, a stockholder may, 
 according to some authorities, be admitted as a defendant, and 
 allowed to set up any defenses which the corporation might 
 have offered to the suit.^^ But other authorities hold that the 
 proper means by which the stockholders should protect their 
 rights is to file an original bill in equity to have the judgment in 
 such suit set aside for fraud.^* 
 
 § 193 (168). Rigiht to recover insurance. — Where the corpor- 
 ation neglects properly to insure its property, it is held that a 
 stockholder may insure it in his own name, and may, in case of 
 loss, recover upon such a policy for a sum which will make up any 
 deficiency in the amount of the company's insurance necessary 
 to cover his interest-^** But the corporation is generally held 
 to be a legal entity separate and apart from the owners of its 
 stock, even though all the stock belong to one person. ^^ It 
 
 IT Ffooks V. London &c. R. Co., &c. R. Co., 78 Hun 213, 28 N. Y. S. 
 
 17 Jur. 365. 933; Oelbermann v. New York &c. 
 
 18 Koehler v. Black River &c. Co., R. Co., 7 Misc. 352, 27 N. Y. S. 945. 
 
 2 Black (U. S.) 715, 17 L. ed. 339; is Blackman v. Central R. Co., 58 
 
 Graham v. Boston &c. R. Co., 118 Ga. 189; Forbes v. Memphis &c. R. 
 
 U. S. 161, 6 Sup. Ct. 1009, 30 L. Co., 2 Woods (U. S.) 323, Fed. Cas. 
 
 ed. 196; Bayliss v. Lafayette &c. R. No. 4926; Kelley v. Mississippi &c. 
 
 Co., 8 Biss. (U. S.) 193, Fed. Cas. R. Co., 1 Fed. 564, holding that at 
 
 1140; Farmers &c. T. Co. v. Toledo common law a stockholder cannot 
 
 &c. R. Co., 67 Fed. 49; Mussina v. defend, even though the corporation 
 
 Goldthwaite, 34 Tex. 125. A stock- is in no position to do so. 
 
 holder cannot defend against a suit 20 Warren v. Davenport Fire Ins. 
 
 to foreclose a mortgage upon its Co., 31 Iowa 464; Riggs v. Com- 
 
 property for default in the payment mercial Mut. Ins. Co., 125 N. Y. 7, 
 
 of interest upon the ground that the 25 N. E. 1058, 10 L. R. A. 684, 21 
 
 railroad company has misapplied its Am. St. 716. See also Seaman v. 
 
 earnings in ord,er to bring about the Enterprise Fire Ins. Co., 18 Fed. 
 
 default, even where the majority 250. 
 
 stockholder is a heavy bondholder 21 Button v. Hoffman, 61 Wis. 20, 
 
 and desires the mortgage foreclosed. 20 N. W. 667, SO Am. St. 131. See 
 
 Farmers &c. T. Co. v. New York Hopkins v. Roseclare &c. Co., 72 
 
§194 
 
 RAILROADS 
 
 326 
 
 would seem, therefore, that he cannot insure as absolute owner 
 of the property,^^ whatever may be the rule as to his qualified 
 interest therein. 
 
 § 194 (169). Other rights £ind remedies of stockholders. — A 
 
 stockholder may, in general, contract with the corporation upon 
 the same terms, in the same manner, and to the same extent that 
 another person may.^s And it is held that he may be interested 
 in the construction company to which a corporate contract is 
 given, even though he owns a majority of the stock and there- 
 by may have control.^* But this right would seem to be, held 
 subject to the principle which is now firmly established, that 
 where a majority of the stockholders assume control of the 
 corporation, they take upon themselves the trust relation occu- 
 pied by the corporation toward its stockholders,^'' and are 
 
 111. 373 ;" Newton &c. Co. v. White, 
 42 Ga. 148. But see Swift v. Smith, 
 65 Md. 428, 5 Atl. 534, 57 Am. Rep. 
 336, where it is held that a person 
 owning all the stock may bind the 
 corporation by his individual acts. 
 
 22 See Philips y. Knox &c. Ins. 
 Co., 20 Ohio 174; Riggs v. Commer- 
 cial &c. Ins. Co., 19 J. & S. (N. Y. 
 Super. Ct.) 466. 
 
 23 Hartford &c. R. Co. v. Ken- 
 nedy, 12 Conn. 499, 509; Central &c. 
 R. Co. V. Claghorn, 1 Speers (S. 
 Car.) 545, 562. It is held that 
 stockholders of a corporation have 
 the same right to purchase its prop- 
 erty and take possession thereof 
 that strangers would have during 
 the pendency of a suit to forfeit the 
 charter. Havemeyer v. Superior Ct., 
 84 Cal. 327, 24 Pac. 121, 10 L. R. A. 
 627, 18 Am. St. 192. See also 
 Crymble v. Mulvaney, 21 Colo. 203, 
 40 Pac. 499; Merrick v. Peru Coal 
 Co., 61 111. 472; Mickles v. Roches- 
 
 ter City Bank, 11 Paige (N. Y.) 
 118, 42 Am. Dec. 103. Stockholders 
 in a corporation may purchase its 
 mortgage bonds and enforce pay- 
 ment in the usual manner, though 
 the object in purchasing the bonds 
 was to cause a foreclosure and to 
 purchase the property at the sale. 
 Farmers &c. Co. v. New York &c. 
 R. Co., 78 Hun 213, 28 N. Y. S. 
 933. See also Oelbermann v. New 
 York &c. R. Co., 7 Misc. 352, 27 N. 
 Y. S. 945. 
 
 24 Porter v. Pittsburgh &c. Co., 
 120 U. S. 649, 670, 7 Sup. Ct. 741, 30 
 L. ed. 830, holding that the mere 
 fact of such ownership does not 
 raise a legal inference that he dom- 
 inates the board of directors. 
 
 25 Ervin v. Oregon R. &c. Co., 27 
 Fed. 625, 20 Fed. 577 (Irvin v.), 28 
 Fed. 833. See also Miner v. Belle 
 Isle Ice Co., 93 Mich. 97, 53 N. W. 
 218, 17 L. R. A. 412. 
 
327 
 
 STOCKHOLDERS 
 
 §194 
 
 bound to equity and fair dealing. 2« Upon this principle depends 
 the well-established right of .a minority stockholder to have 
 set aside a fraudulent sale of the corporate property, by the 
 majority of the stockholders,^''' or by the directors,^^ to them- 
 selves, or a fraudulent sale of property to the corporation by 
 them. 29 He may, in good faith, obtain security for his debt,^** 
 and may sue or be sued by the corporation both at law and in 
 
 26 And a court of equity will re- 
 view their action at the instance of 
 the minority. Menier v. Hooper's 
 Tel. Works, L. R. 9 Ch. 350; 
 Meeker v. Winthrop &c. Co., 17 
 Fed. 48. See Barr v. New York &c. 
 R. Co., 96 N. Y. 444. 
 
 27ReiUy V. Oglebay, 25 W. Va. 
 36; Mason v. Pewabic Min. Co., 25 
 Fed. 882. A creditor of the old cor- 
 poration who is injured thereby may 
 have the sale set aside for fraud. 
 San Francisco &c. R. Co. v. Bee, 48 
 Cal. 398. 
 
 28 Jones V. Arkansas &c. Co., 38 
 Ark. 17; Buell v. Buckingham, 16 
 Iowa 284, 85 Am. St. 516; Hoyle 
 v. Plattsburgh &c. R. Co., 54 N. Y. 
 314, 13 Am. Rep. 595, setting aside 
 a purchase by a director at a sale on 
 execution. The director can hold 
 property of the corporation which 
 he may purchase only as a trustee 
 for the corporation, and, on being 
 repaid the purchase money he must 
 make it over to his cestui que trust. 
 Harts V. Brown, 77 111. 226; Mun- 
 son V. Syracuse &c. R. Co., 103 N. 
 Y. 58, 29 Hun 76; Covington &c. 
 R. Co. V. Bowler's Exrs., 9 Bush 
 (Ky.) 468, holding a purchaser from 
 the director with notice subject to 
 the same liability as his vendor. 
 
 But a sale to a syndicate of whi> . 
 a director is a member, if made in 
 good faith and for an adequate 
 price, will not be set aside. Du- 
 Pont V. Northern Pac. R. Co., 18 
 Fed. 467; Hill v. Nisbet, 100 Ind. 
 341. See Ashhurst's Appeal, 60 Pa. 
 St. 209, where a sale to a director 
 was upheld. But where the sale 
 was made to the directors through 
 "dummies" the corporate creditors 
 cannot have 'it set aside after the 
 lapse of a long time, even though 
 made for an inadequate price. 
 Graham v. Railroad Co., 102 U. S. 
 148, 26 L. ed. 106. 
 
 29 Where a director fraudulently 
 conveys land to the corporation, the 
 stockholder should not sue in equity 
 to dissolve the corporation on ac- 
 count of such sale, but his remedy 
 is in an action by the corporation 
 through its proper agents, or, in 
 case they refuse to sue, then by the 
 stockholder himself, to set aside the 
 fraudulent sale. Tutwiler v. Tus- 
 caloosa Coal &c. Co., 89 Ala. 391, 7 
 So. 398. 
 
 30 Reichwald v. Commercial Hotel 
 Co., 106 111. 439; Foster v. Belcher's 
 Sugar Refining Co., 118 Mo. 238. 24 
 S. W. 63. 
 
§195 
 
 RAILROADS 
 
 328 
 
 equity. ^'^ And in case of its insolvency he may be competent 
 and qualified to act as its receiver or assignee.*^ 
 
 § 195 (170). Stockholders as agents of the corporation. — A 
 
 stockholder cannot, as such, bind the corporation by a contract 
 made in its name,^* although, of course, he may act as its agent 
 by appointment.^* And it is held that all the stockholders in 
 meetings assembled cannot, ordinarily, make a valid contract,^" 
 but that this power belongs to the directors or to agents acting 
 under their authority.*^ Since he is not the corporation nor 
 necessarily its agent, a stockholder's admissions will not bind 
 
 31 Booker, Ex parte, 18 Ark. 338; 
 Sanborn v. Lefferts, 58 N. Y. 179; 
 Leonard v. Spencer, 108 N. Y. 338, 
 IS N. E. 397; Waring v. Catawba 
 Co., 2 Bay (S. Car.) 109; Wausau 
 &c. Co. V. Plumber, 35 Wis. 274. 
 A stockholder may recover damages 
 for an injury caused by the negli- 
 gence or misconduct of the corpo- 
 ration. Morbach v. Home Min. Co., 
 53 Kans. 731, 37 Pac. 122. 
 
 32 Covert V. Rogers, 38 Mich. 363, 
 31 Am. Rep. 319n; Bowery Bank, 
 Matter of, 16 How. Prac. (N. Y.) 
 56. But a stockholder should be ap- 
 pointed only with the consent of 
 the parties having opposing in- 
 terests. Atkins V. Wabash &c. R. 
 Co., 29 Fed. 161. A corporate offi- 
 cer cannot be a receiver in New 
 Jersey. Freeholders v. State Bank, 
 28 N. J. Eq. 166. 
 
 33 Morelock v. Westminister 
 Water Co. (Md.), 4 Atl. 404; Cen- 
 tral Trust Co. V. Bridges, 57 Fed. 
 753 ; Allemong v. Simmons, 124 Ind. 
 
 199, 23 N. E. 768 (Where a stock- 
 holder and director owning most of 
 the stock in a railroad company 
 made a contract in its name which 
 was held invalid) ; England v. Dear- 
 born, 141 Mass. 590, 6 N. E. 837; 
 Mays V. Foster, 13 Ore. 214, 10 Pac. 
 17. 
 
 34 Spear v. Ladd, 11 Mass. 94. 
 The rule has been held to be the 
 same where he owns all the stock. 
 Button v. Hoffman, 61 Wis. 20, 20 
 N. W. 667, 50 Am. Rep. 131. But 
 the contrary is held in Swift v. 
 Smith, 65 Md. 428, 5 Atl. 534, 57 
 Am. Rep. 336. 
 
 35 Humphreys v. McKissock, 140 
 U. S. 304, 11 Sup. Ct. 779, 35 L. ed. 
 473; Gashwiler v. Willis, 33 Cal 11, 
 91 Am. Dec. 607; Conro v. Port 
 Henry &c. Co., 12 Barb. (N. Y.) 
 27; McCuUough v. Moss, 5 Denio 
 (N. Y.) 567; Gulf &c. R. Co. v. 
 Morris, 67 Tex. 692, 4 S. W. 156. 
 See post, §§277, 290, 293. 
 
 361 Thomp. Corp. (2d ed.), §1070. 
 
329 
 
 STOCKHOLDERS 
 
 §196 
 
 it,^'' and service of process upon him is not service upon the 
 •corporation. ^8 
 
 § 196 (171). Notice to stockholder. — Notice to an individual 
 stockholder is not, as a rule, notice to the corporation.^® A 
 stockholder is not, ordinarily, chargeable with knowledge of cor- 
 porate contracts,*" or entries in the books of the corporation,** 
 unless his relations are such as to render it reasonably prob- 
 able that he had actual knowledge thereof. In the latter case, 
 of course, actual knowledge may be inferred.*^ It has also been 
 held that a stockholder is not chargeable with constructive 
 notice of the corporate by-laws ;** but this is certainly not the 
 ■general rule. 
 
 37 Fairfield &c. Co. v. Thorp, 13 
 •Conn. 173; Mitchell v. Rome R. Co., 
 17 Ga. 574, 586; Morrell v. Dixfield, 
 30 Maine 157; Soper v. Buffalo &c. 
 R. Co., 19 Barb. (N. Y.) 310; Ma- 
 rgin V. Kauffman, 4 Serg. & Rawle 
 (Pa.) 317, 321, 8 Am. Dec. 713n. 
 Excepting, of course, where he is 
 acting as agent for the corporation 
 by its authority in a matter which 
 it has entrusted to him. Norwich 
 •&c. R. Co., v. Cahill, 18 Conn. 484; 
 American Fur Co. v. United States, 
 2 Pet. (U. S.) 358, 7 L. ed. 450. 
 
 38Lillard v. Porter, 2 Head 
 (Tenn.) 177; DeWolf v. Mallett, 3 
 Dana (Ky.) 214. 
 
 39 Union Canal Co. v. Loyd, 4 
 Watts & S. (Pa.) 393; Racine &c. 
 Co. V. Joliett &c. Co., 27 Fed. 367. 
 See alsQ dissenting opinion in City 
 
 of Logansport v. Justice, 74 Ind. 
 .378, 39 Am. Rep. 79n, and authori- 
 ties there cited. 
 
 40 Tarbox v. Gorman, 31 Minn. 
 •62; Baker v. Woolston, 27 Kans. 
 185, 4 Thomp. Corp. (2d ed.) 
 § 4470. 
 
 41 Hill V. Manchester &c. Co., S 
 B. & Ad. 866; Rudd v. Robinson, 
 
 126 N. Y. 113, 26 N. E. 1046, 12 
 L. R. A. 273n, 22 Am. St. 816. But 
 see Hamilton &c. Co. v. Iowa &c. 
 Co., 88 Iowa 364, 55 N. W. 496. 
 
 42 See Bedford R. Co. v. Bowser, 
 48 Pa. St. 29. In Graff v. Pitts- 
 burgh &c. R. Co., 31 Pa. St. 489, 
 495, the court holds a stockholder 
 bound by an entry made while he 
 was present and assenting to it. If 
 he is also a director he is as fully 
 chargeable with notice of entries in 
 the books as a partner would be 
 with entries in the partnership 
 books. Montgomery v. Exchange 
 Bank (Pa.), 6 Atl. 133; First Nat. 
 Bank v. Tisdale, 18 Hun (N. Y.) 
 151; aff'd 84 N. Y. 655. Between 
 stockholders the books of the cor- 
 poration control as to what it has 
 done. Hubbell v. Meigs, 50 N. Y. 
 480. A stockholder is an- integral 
 part of the corporation to the ex- 
 tent that, in view of the law, he is 
 privy to the proceedings touching 
 the body of which he is a member. 
 Hawkins v. Glenn, 131 U. S. 319, 9 
 Sup. Ct. 739, 38 L. ed. 184; Lewis 
 V. Glenn, 84 Va. 947, 6 S. E. 866. 
 
 43 Pearsall v. Western U. Tel. 
 
§197 
 
 RAILROADS 
 
 330 
 
 § 197 (172). Stockholders' right to inspect books. — A stock- 
 holder is entitled to inspect the corporate books at reasonable in- 
 tervals, either in person,** or by an expert or an agent, when he 
 is too ignorant to do it himself intelligently .*5 The directors 
 cannot exclude a member from this right because his motives in 
 making the inspection are hostile to the interests of the corpora- 
 tion,*^ and he may enforce the right by mandamus if it is 
 
 Co., 44 Hun (N. Y.) 532, on appeal, 
 124 N. Y, 256, 26 N. E. 534, 21 Am. 
 St. 662. See also Rice v. Peninsu- 
 lar Club, 52 Mich. 87, 17 N. W. 708. 
 But see post, §221, contra. 
 
 *4 Stone V. Kellogg, 165 111. 192, 
 46 N. E. 222, 56 Am. St. 240; Stein- 
 way, Matter of, 159 N. Y. 250, S3 
 N. E. 1103; Commonwealth v. 
 Philadelphia &c. R. Co., 3 Pa. Dist. 
 R. 115; Deaderick v. Wilson, 8 
 Baxt. (Tenn.) 108; Kimball v. 
 Dem, 39 Utah 181, 116 Pac. 28. The 
 corporation can not refuse stock- 
 holders the right to inspect the trans- 
 fer books simply because it would be 
 inconvenient to grant it, nor because 
 a by-law required the transfer 
 books to be closed thirty days be- 
 fore election. State v. St. Louis &c. 
 R. Co., 29 Mo. App. 301. S.tate v. 
 Laughlin, S3 Mo. App. 542. 
 
 45Foster v. White, 86 Ala. 467, 6 
 So. 88; Ellsworth v. Dorwart, 95 
 Iowa 108, 63 N. W. 588, 58 Am. St. 
 247; State v. Bienville &c. Co., 28 
 La. Ann. 204; People v. Nassau 
 Ferry Co., 83 Hun (N. Y.) 128, 33 
 N. Y. S. 244; Cincinnati &c. Co. 
 V. Hoffmeister, 62 Ohio St. 189, 56 
 N. E. 1033, 78 Am. St. 707; Phoenix 
 Iron Co. V. Commonwealth, 113 Pa. 
 St. 563, 6 Atl. 75. See also Thomp. 
 Corp. (2d ed.), §4515, et seq. Such 
 a provision is contained in the stat- 
 
 utes of nearly all the states. Under 
 Wis. Rev. Stat. § 1757, which is sim- 
 ilar to the statutes of most of the 
 other states, it is held that a stock- 
 holder has the right to examine not 
 only the books containing the stock 
 accounts, but those containing the 
 general accounts. State v. Bergen- 
 thal, 72 Wis. 314, 39 N. W. 566. 
 
 *6 Chable v. Nicaragua &c. Co., 59' 
 Fed. 846; Cobb v. Lagarde, 129 Ala.. 
 488, 30 So. 326; Weihenmayer v. 
 Bitner, 88 Md. 325, 42 Atl. 245, 45 
 L. R. A. 446n; State v. Sportsman's 
 &c. Assn., 29 Mo. App. 326; People 
 V. Throop, 12 Wend. (N. Y.) 183; 
 Commonwealth v. Phoenix Iron Co., 
 105 Pa. St. Ill, 51 Am. Rep. 184; 
 Regina v. Wilts &c. Canal Naviga- 
 tion Co., 29 L. T. R. (N. S.) 922,. 
 where the shareholder was an at- 
 torney, who sought to make an in- 
 spection in the interest of his cli- 
 ents, who were in litigation with the 
 company. But see Peeple v. North- 
 ern Pac. Co., 18 Fed. 471; People 
 V. Walker, 9 Mich. 328; State v. 
 Einstein, 46 N. J. L. 479; Lyon v. 
 American Screw Co., 16 R. I. 472. 
 17 Atl 61. Nor does the fact thrt 
 he requests to see some of the books 
 which he is not entitled to see, jus- 
 tify a refusal to permit him to in 
 spect those which he is entitled to 
 see. Ellsworth v. Dorwart, 95 Iowa 
 
331 
 
 STOCKHOLDERS 
 
 §198 
 
 wrongfully denied.*'' The writ should be directed to the officer 
 or person having the custody of the books.** 
 
 § 198 (173). Stockholder is disqualified to serve as judge or 
 juror v^rhere corporation is interested. — A stockholder is incom- 
 petent to serve as a judge,*® or juror,^" in a case to which the 
 corporation is a party, and, at common law, is incompetent to 
 testify as a witness in such a case.^^ But many of the states have 
 statutes rendering interested parties competent as witnesses, and 
 in other states this last rule may usually be evaded by a trans- 
 fer of the shareholder's stock. ^^ ^ bona fide transfer of the stock 
 
 108, 63 N. W. 588, 58 Am. St. 427. 
 But where the right is not stat- 
 utory there may be cases where in- 
 spection can be refused because not 
 -for a legitimate purpose and a cor- 
 poration may usually make reason- 
 able by-laws as to the time, place 
 or manner. 4 Thomp. Corp. §§4517, 
 4524. 
 
 ■iT Cockburn v. Union Bank, 13 
 La. Ann. 289; People v. Lake Shore 
 &c. R. Co., 11 Hun (N. Y.) 1; 
 People V. Pacific &c. Co., 50 Barb. 
 <N. Y.) 280; Commonwealth v. 
 Phoenix Iron Co., 105 Pa. St. Ill, 
 51 Am. Rep. 184; 8 Thomp. Corp. 
 § 4539. A stockholder of a pri- 
 -vate corporation, or his attorney in 
 fact, has a right to inspect the books 
 and records of a corporation at any 
 reasonable time, without giving a 
 reason therefor. His remedy is man- 
 damus. Foster v. White, 86 Ala. 
 467, 6 So. 88, 6 R. & Corp. L. J. 
 S8. Contra, Investment Co. v. El- 
 dridge, 2 Pa. Dist. 394. But the re- 
 fusal of such right by the secretary 
 is not of itself ground for damages 
 against the corporation. Legendre 
 V. New Orleans &c. Assn., 45 La. 
 
 Ann. 669, 12 So. 837, 40 Am. St. 
 243. 
 
 *8 People V. Throop, 12 Wend. 
 (N. Y.) 183; People v. Mott, 1 
 How. Prac. (N. Y.) 247; State v. 
 Bergenthal, 72 Wis. 314, 39 N. W. 
 566. 
 
 *9 Dimes v. Prop, of Grand Junc- 
 tion Canal, 3 H. of L. Cas. 759; 
 Peninsular R. Co. v. Howard, 20 
 Mich. 18; Cregin v. Brooklyn &c. 
 R. Co., 19 Hun (N. Y.) 349. But 
 relationship to a stockholder does 
 not disqualify. Searsburgh Tpk. 
 Co. V. Cutler, 6 Vt. 315; Butler v. 
 Glens &c. R. Co., 121 N. Y. 112, 24 
 N. E. 187. 
 
 50 Page V. Contoocook Valley R. 
 Co., 21 N. H. 438; Peninsular R. Co. 
 V. Howard, 20 Mich. 18; Georgia 
 Railroad v. Hart, 60 Ga. 550, where 
 a stockholder's son was also held 
 incompetent. See 2 Elliott's Gen. 
 Prac. §518. 
 
 51 Porter v. Bank of Rutland, 19 
 Vt. 410; Delaware &c. R. Co. v. 
 Irick 23 N. J. L. 321; 2 Elliott on 
 Ev. §739. 
 
 521 Cook Corporations (7th ed.), 
 §11. 
 
§199 
 
 RAILROADS 
 
 332- 
 
 before the commencement of the suit has been held sufficient^ 
 although "the debt sued for existed at the time of the transfer^ 
 and continued to exist until the suit was brought."^* 
 
 § 199 (174). Unlawful combination and conspiracies to vote 
 or prevent voting — Injunction. — Where a fraudulent purpose to^ 
 vote stock in a particular way, and thereby to control the election 
 to the irreparable and permanent injury of the corporation or of 
 other stockholders is shown,®* or where a conspiracy to control 
 the election by qualifying others to vote stock which the owner 
 is not authorized to vote ;®® or by excluding the votes of certain 
 stockholders^^ is shown ; or where a rival corporation has ob- 
 tained control of stock by ultra vires act, and seeks to vote it to- 
 the injury of the company's interests,^'' an injunction may issue 
 to restrain the holding of an election until further order of the 
 
 ssSmith V. Tallahassee &c. Co., 30 
 Ala. 650; Illinois Mutual Fire Ins. 
 Co. V. Marseilles &c. Co., 6 111. 236; 
 Utica Ins. Co. v. Cadwell, 3 Wend. 
 (N. Y.) 296; Union Bank v. Owen, 
 4 Humph. (Tenn.) 338. 
 
 54 Reed v. Jones, 6 Wis. 680. Or- 
 dinarily , however, the purpose or 
 motive of the shareholder is imma- 
 terial if he does no illegal act. 
 
 55 Webb V. Ridgely, 38 Md. 364, 
 where the charter permitted a sin- 
 gle stockholder to vote only twenty 
 shares. But though a court of 
 equity may do so, the corporation 
 cannot question the holder's right to 
 vote because the shares were trans- 
 ferred to him by one who owned a 
 greater number of shares than any 
 one person is permitted to vote. 
 Stranton &c. Co., In re, L. R. 16 
 Eq. SS9 ; State v. Smith, 48 Vt. 266 ; 
 People V. Kip, 4 Cow. (N. Y.) 382, 
 note. See ante, § 182. 
 
 56 Camden &c. R. Co. v. Elkins, i7 
 N. J. Eq. 2:^3 ; People v. Albany &c. 
 
 R. Co., SS Barb. (N. Y.) 344, where 
 it is held that the inspectors may 
 be enjoined from receiving the 
 votes of certain stockholders until 
 the votes of others have been de- 
 posited. Hafer v. New York &c. R. 
 Co., 14 Wkly. Law Bui. 68. 
 
 67 Memphis &c. R. Co. v. Woods, 
 88 Ala. 630, 7 So. 108, 7 L. R. A. 
 60S, 16 Am. St. 81, where the rival 
 company owned a majority of the 
 stock and had elected its own direc- 
 tors to serve as directors of the 
 company in which plaintiffs were in- 
 terested, who used their power 
 against the interests of that road, 
 the defendant company and all per- 
 sons representing it where enjoined 
 from voting the shares of stock 
 which it held ; ante, § 184. See al- 
 so 1 Thomp. Corp. (2d ed.), §§873,. 
 874. See also' Milbank v. New York 
 &c. R. Co., 64 How. Prac. (N. Y.> 
 20; George v. Central R. &c. Co., 
 101 Ala. 607, 14 So. 752. 
 
333 STOCKHOLDERS § 199 
 
 courtjSs or to restrain the offending stockholder or his agents 
 from voting his stock,^^ or a particular portion of it,®" either 
 altogether, or until the petitioner's rights have been protected.^i 
 But an injunction will not issue to prevent stockholders holding 
 large interests from gaining control of the corporation, by legal 
 means, because they will probably misuse their power.*^ Nor 
 can the right to vote be denied because of the alleged wrongful 
 motives of the holder in buying his stock.^* And it is perfectly 
 competent for stockholders owning a majority of the stock to 
 combine and elect a board of directors,®* if the combination is 
 formed without fraud. ®^ Where the application for an injunction 
 is not made a sufficient number of days before the election to 
 afford the defendants an opportunity to be heard, it may, as a 
 rule, be summarily dismissed.®® But where the persons sought 
 to be enjoined can have no legal right to vote any stock they 
 own, or in the case of a railroad owning stock in a rival corpora- 
 tion, there may be reason for issuing an injunction restraining 
 them.®'' And, in a proper case, the court may order that an elec- 
 tion shall be temporarily postponed,®* though an order that it 
 
 58 People V. Albany &c. R. Co., 63 PeHder v. Lushington, L. R. 6 
 55 Barb. (N. Y.) 344. But an in- Ch. D. 70. Parties who are inter- 
 junction forbidding the holding of ested in opposition to a corporation 
 an election at all is void. have the right to purchase its stock 
 
 59 Memphis &c. R. Co. v. Woods, in order to defeat a contract which 
 88 Ala. 630, 7 So. 108, 7 L. R. A. it is about to make. Carson v. Iowa 
 60S, 16 Am. St. 81. City Gaslight Co., 80 Iowa 638, 45 
 
 60 Reed V Jones, 6 Wis. 680; N. W. 1068. 
 
 Webb V. Ridgely, 38 Md. 364. 64Havemeyer v. Havemeyer, 86 
 
 61 Brown v. Pacific Mail &c. Co., N. Y. 618 aff'g 43 N. Y. Super. Ct. 
 5 Blatchf. (U. S.) 525, Fed. Cas. 506; Faulds v. Yates, 57 111. 416, 11 
 No. 2025, where the defendants were Am. Rep. 24. 
 
 enjoined from participating in any 65 People v. Albany &c. R. Co., 55 
 
 election unless plaintiff's votes were Barb. (N. Y.) 344. 
 
 received at the election. 66Hilles v. Parrish, 14 N. J. Eq. 
 
 62 Camden &c. R. Co. v. Elkins, 380. See also Lucas v. Milliken, 
 Zl N. J. Eq. 273. One stockholder 139 Fed. 816. 
 
 can do nothing to control or direct 67 Memphis &c. R. Co. v. Woods, 
 
 the vote of another stockholder. 88 Ala. 630, 7 So. 108, 7 L. R. A. 
 
 Ryder v. Alton &c. R. Co., 13 111. 60S, 16 Am. St. 81. 
 
 S16. . 68 People v. Albany &c. R. Co., 55 
 
§200 
 
 RAILROADS 
 
 334 
 
 should never be held would be erroneous.^^ An injunction di- 
 rected against the voting of particular stock may cause what 
 would otherwise be the minority to become the majority, and so 
 change the result, but it will not prevent the holding of the elec- 
 tionjo A stockholder may also enjoin the directors from inter- 
 fering with and postponing an annual election and thereby ex- 
 tending their term J i Further than the right to vote in the man- 
 agement of corporate affairs, the stockholder has not, during thfr 
 continuance of the corporation, any direct legal interest m it& 
 property.'^^ 
 
 §200 (175). Liability of stockholders for unpaid subscription. 
 
 — A stockholder is, of course, liable to the corporation for any 
 unpaid balance due on the shares for which he has subscribed, 
 and this liability may be enforced in a proper case by suit in the 
 name of the corporation, or in equity at the suit of any corporate 
 creditor who is injured by its non-paymient, upon the insolvency 
 and winding up of the corporation^* And one who subscribes or 
 
 Barb. (N. Y.) 344; Scholfield v. 
 Union Bank, 2 Cr. C. C. (U. S.) 
 lis, Fed. Cas. No. 1247S. 
 
 69 People V. Albany &c. R. Co., SS 
 Barb. (N. Y.) 344. 
 
 TO Brown v. Pacific Mail &c. Co., 
 S Blatchf. (U. S.) S25, Fed. Cas. 
 No. 202S. 
 
 Ti Elkins V. Camden &c. R. Co., 
 36 N. J. Eq. 467. 
 
 72 Humphreys v. McKissock, 140 
 U. S. 304, 11 Sup. Ct. 779, 3S L. 
 ed. 473; Curry v. Woodward, 44 
 Ala. 305; Phelps v. Farmers &c. 
 Bank, 26 Conn. 269; Goodwin v. 
 Hardy, S7 Maine 143, 99 Am. Dec. 
 7S8n; Granger v. Bassett, 98 Mass: 
 462; Lockhart v. Van Alstyne, 31 
 Mich. 76, 78, 18 Am. Rep. 156; 
 Jones V. Terre Haute &c. R. Co., 
 57 N. Y. 196; Burroughs v. North 
 Carolina R. Co., 67 N. Car. 376, 12 
 Am. Rep. 611. 
 
 TS The courts of America gener- 
 ally hold that the capital stock of 
 a corporation, upon insolvency, and 
 especially the unpaid subscriptions, 
 constitute a trust fund for the bene- 
 fit of the creditors of the corpora- 
 tion. Note to Thompson v. Reno 
 Sav. Bank, 19 Nev. 103, 7 Pac. 68; 
 3 Am. St. 797, 808, et. seq.; 1 Cook 
 Corporations (7th ed.), § 199, note 
 in 8 L. R. A. (N. S.) 263, 45 L. 
 R. A. (N. S,) 1013, and 51 L. R. A. 
 (N. S.) 56. Ante, §§105, 128. 
 Where a consolidation between two 
 corporations is effected under a law 
 providing that all property, rights 
 of. action and other interests of the 
 consolidating companies shall rest in 
 and become the property of the con- 
 solidated corporation, and provides 
 that stock of the new corporation 
 shall be issued in exchange for the 
 stock of the corporations merged, a 
 
335 
 
 STOCKHOLDERS 
 
 §200 
 
 takes part as a stockholder after the corporation is formed is 
 estopped to deny that it is legally incorporated, although some 
 of the statutory formalities may not have been complied with.^* 
 But one who merely subscribes to a preliminary agreement to 
 take stock after the corporation is formed is usually entitled to 
 insist upon the regular organization of a legal corporation, and 
 if he does not by subsequent acts acquiesce in the mode of in- 
 corporation, recognize it as a legal corporation or in any way act 
 as a stockholder, he is not estopped to deny his liability as such, 
 where the incorporation is defective and invalid J^ Ordinarily, 
 subscriptions are required to be paid in money ; but where the 
 statg law allows subscriptions to be paid in property, the trans- 
 fer of property in payment of shares made in good faith at an 
 honest valuation entitles the owner to hold his shares as fully 
 paid up even against creditors of the corporation in the event 
 of its solvency^® So, it is held that a bona fide purchaser of 
 
 subscription to the stock of one of 
 the old corporations becomes assets 
 for the payment of the debts of the 
 new -corporation. Hamilton v. Clar- 
 ion &c. R. Co., 144 Pa. St. 34, 23 
 Atl. S3, 13 L. R. A. 779n. 
 
 T4 Casey v. Galli, 94 U. S. 673; 24 
 L. ed. 168; Chubb v. Upton, 95 U. 
 S. 665, 24 L. ed. 523 ; Upton v. Hans- 
 brough, 3 Biss. (U. S.) 417, Fed. 
 Cas. No. 16801; Hickling v. Wil- 
 son, 104 111. 54; Anderson v. New- 
 castle &c. R. Co., 12 Ind. 376, 74 
 Am. Dec. 218; Cravens v. Eagle 
 Cotton Mills, 120 Ind. 6, 21 N. E. 
 981, 16 Am. St. 298; Thompson v. 
 Reno Sav. Bank, 19 Nev. 103, 7 Pac. 
 68, 3 Am. St. 191, and note; 
 Dutchess &c. Co. v. Davis, 14 
 Johns. (N. Y.) 238, 7 Am. Dec. 
 459; Clarke v. Thomas, 34 Ohio St. 
 46; Hamilton v. Clarion &c. Co., 
 144 Pa. St. 34, 23 Atl. S3, 13 L. R. 
 A. 779n; Slocum v. Warren, 10 R. 
 I. 112 and 116; 1 Cook Corporations 
 
 (7th ed.), §§ 184, 185; 8 Thoimp. 
 Corp., §§ 1951, 1953, 1981. 
 
 75 Indianapolis &c. Co. v, Herki- 
 mer, 46 Ind. 142; Reed v. Richmond 
 St. R. Co., SO Ind. 342; Richmond 
 Factory Assn. v. Clarke, 61 Maine 
 351; Taggart v. Western Md. R. 
 Co., 24 Md. S63, 89 Am. Dec. 760n; 
 Capps & McCapps v. Hastings &c. 
 Co., 40 Nebr. 470, 58 N. W. 956, 24 
 L. R. A. 259, 42 Am. St. 677; Dorris 
 V. Sweeney, 60 N. Y. 463; Fair- 
 view &c. Co. v. Spillman, 23 Ore. 
 587, 32 Pac. 688; note to Parker v 
 Thomas, 81 Am. Dec. 392. 
 
 76 Grant V. East & West R. Co., 
 54 Fed. 569. Ante, §106. Where 
 the property was transferred to the 
 corporation at an overvaluation and 
 accepted by a Ijoard of directors 
 chosen by the votes of the subscrib- 
 ers, it was held that the pretended 
 payment for the stock subscribed 
 was fraudulent, and that the sub- 
 scriber could be compelled to pay 
 
§201 
 
 RAILROADS 
 
 336 
 
 stock ill open market, where the certificate, on its face, purports 
 to be fully paid up and non-assessable, is not liable for assess- 
 ments, although, in fact, it was not fully paid." An unpaid sub- 
 scription may be collected in payment of damages for a tort the 
 same as for a contract debt.''® 
 
 §201 (176). Release of stockholder— Withdrawal.— This lia- 
 bility is one from which the stockholder cannot ordinarily claim 
 release after the corporation has become insolvent, in cases 
 where such release was not legally ascertained and established 
 before such insolvency.''® And he can only be released from lia- 
 
 ■' e difference between the actual 
 value of the property and the par 
 value of the stock. Lloyd v. Pres- 
 ton, 146 U. S. 630, 13 Sup. Ct. 131, 
 36 L. ed. 1111. See also Boulton 
 Carbon Co. v. Mills, 78 Iowa 460, 43 
 N. W. 290, 5 L. R. A. 649. 
 
 '?'? Rood V. Whorton; 67 Fed. 434, 
 and authorities there cited; Hand- 
 ley V. Stutz, 139 U. S. 417, 11 Sup. 
 Ct. 530, 35 L. ed. 227; Young v. 
 Erie Iron Co., 65 Mich. Ill, 31 N. 
 W. 814; Davies v. Ball, 64 Wash. 
 292, 116 Pac. 833, Ann. Cas. 1914B, 
 750. See also Hess v. Trumbo, 27 
 Ky. L. 320, 84 S. W. 1153; First 
 Nat. Bank v. Gustin &c. Co., 42 
 Minn. 327, 44 N. W. 198, 6 L. R. A. 
 676, 18 Am. St. 510; Hospes v. 
 Northwestern &c. Co., 48 Minn. 174, 
 50 N. W. 1117, 15 L. R. A. 470, 31 
 Am. St. 637; Easton Nat. Bank v. 
 American &c. Co., 69 N. J. Eq. 839, 
 60 Atl. 54. But compare Howe v. 
 Illinois &c. Works, 46 111. App. 85. 
 As elsewhere shown this is not a 
 universal rule although where prop- 
 erly limited and applied it is sus- 
 tained by nearly all of the recent 
 cases. See also note in 30 L. R. A. 
 (N. S.) 283; and notes in Ann. Cas. 
 
 1914B, 748 and 754. 
 
 ''8 Powell V. Oregonian Railway,, 
 36 Fed. 726, 38 Fed. 187; Grindle v. 
 Stone, 78 Maine 176, 3 Atl. 183. 
 
 T9 He cannot then rescind his con- 
 tract of subscription for fraud of 
 the company's agents in obtaining 
 it. Chubb V. Upton, 95 U. S. 665, 
 24 L. ed. 523; Turner v. Grangers' 
 &c. Ins. Co., 65 Ga. 649, 38 Am: Rep. 
 801; Duffield v. Barnum &c. Works, 
 64 Mich. 293, 31 N. W. 310; Saf- 
 fold v. .Barnes, 39 Miss. 399; Rug- 
 gles v. Brock, 6 Hun (N. Y.) 164; 
 Farrar v. Walker, 13 Nat. Bankr. 
 Reg. 82; Kent. v. Freehold &c. Co., 
 L. R. 3 Ch. App. 493. And the com- 
 pany cannot agree to a rescission to 
 the detriment of the creditors' in- 
 terests. Burke v. Smith, 16 Wall. 
 (U.S.)' 390, 21 L. ed. 361; Zirkel v. 
 Joliet &c. Co., 79 111. 334; Vick v. 
 La. Rochelle, 57 Miss. 602; Gill v. 
 Balis, 72 Mo. 424. See also Anglo- 
 American &c. Co. v. Lombard, 132 
 Fed. 721 ; Knickerbocker &c. Co. v. 
 Myers, 133 Fed. 764; Tiger v. 
 Rogers Cotton Cleaner Co., 96 Ark. 
 1, 130 S. W. 585, Ann. Cas. 1912B, 
 488, and cases cited in note. 
 
537 
 
 STOCKHOLDERS 
 
 §201 
 
 bility not induced by fraud on the part of the corporation by the 
 unanimous consent, express or implied,^** of all the other stock- 
 holders.81 Even a majority of the stockholders, it has been held, 
 cannot withdraw and refuse to proceed.*^ A cancellation of the 
 subscription, even where made with the unanimous consent of the 
 other stockholders, may be impeached and set aside, in a proper 
 case, by any corporate creditor injured thereby.^* Any attempt 
 on the part of the corporation to release a subscriber from liabil- 
 ity will be subjected to rigid scrutiny by a court of equity, at the 
 instance of corporate creditors,^* and will only be upheld where 
 the release is fairly and honestly made for a valuable considera- 
 
 80 Knowledge and acquiescence 
 for years will bind a stockholder 
 who did not know of the release be- 
 for it was affectea. Evans v. 
 Smallcombe, L. R. 3 H. L. 249; 
 Stuart V. Valley R. Co., 32 Grat. 
 (Va.) 146. Retaining and using 
 benefits arising from a cancellation 
 of the subscription will prevent the 
 corporation and the stockholders 
 from objecting to the release. Miller 
 V. Second &c. Assn., SO Pa. St. 32. 
 
 81 Selma &c. R. Co. v. Tipton, 5 
 Ala. 787, 39 Am. Dec. 344; Pacific 
 Fruit Co. V. Coon, 107 Cal. 447, 40 
 Pac. 542; Johnson v. Wabash &c. R. 
 Co., 16 Ind. 389; Lake Ontario &c. 
 R. Co. V. Mason, 16 N. Y. 451, 463 ; 
 Garrett v. Dillsburg &c. R. Co., 78 
 Pa. St. 465; Miller v. Hanover &c. 
 R. Co., 87 Pa. St. 95, 30 Am. Rep. 
 349 ; Gulf Coast &c. R. Co. v. Neely, 
 64 Tex. 344. 
 
 82 Busey v Hooper, 35 Md. 15, 6 
 Am. Rep. 350. A tender of payment 
 for stock and refusal on the part 
 of the corporate ofifiGers to accept 
 the same is no defense in an action 
 by corporate creditors for the un- 
 paid balance due on such stock, 
 after the corporation has become in- 
 
 solvent,, where the subscriber con- 
 tinued an active member of the cor- 
 poration after such tender and re- 
 fusal. Potts V. Wallace, 146 U. S. 
 689, 13 Sup. Ct. 196, 36 L. ed. 1135.. 
 
 83Vick V. La Rochelle, 57 Miss.. 
 602; FarnsWorth v. Robbins, 36« 
 Minn. 369, 31 N. W. 349; Appeal' 
 of Miller, 1 Penny. (Pa.) 120; 2: 
 Thomp. Corp (2d ed.), § 763. But 
 in England it is held the credi- 
 tor can obtain nothing but what the 
 company is entitled to get from the 
 shareholders. Dronfield &c. Co., 
 In re, L. R. 17 Ch. Div. 76. 
 
 84 Sawyer v. Hoag, 17 Wall. (U. 
 S.) 610, 21 L. ed. 731; Morgan v. 
 Allen, 103 U. S. 498, 26 L. ed. 498; 
 Putnam v. New Albany, 4 Biss. (U. 
 S.) 365, Fed Cas. No. 11481; Up- 
 ton v. Hansbrough, 3 Biss. (U. S.) 
 417, 425, Fed. Cas. No. 16801;' 
 South Mountain &c. Mining Co., In 
 re, 7 Sawyer (U. S.) 30, 5 Fed. 403; 
 Goodwin v. McGehee, 15 Ala. 232'; 
 Union Ins. Co. v. Fear &c. Co., 97 
 111. 537, 37 Am. Rep. 129; Thomp- 
 son V. Meisser, 108 111. 359; 
 Chisholm v. Forny, 65 Iowa 333, 21 
 N. W.' 664; Gill V. Balis, 72 Mo. 
 424. 
 
§201 
 
 RAILROADS 
 
 338 
 
 tion.85 Neither the board of directors of the corporation/* nor 
 ■any officer,^'' has power to agree with a subscriber that his sub- 
 ■scription shall be canceled; unless such power is given by char- 
 ter or statute, or by the by-laws of the company; and entries 
 caused by them to be made in the books of the company show- 
 ing a release will be disregarded.^^ The money refunded for calls 
 paid before such an attempted release may be recovered in a 
 proper case at the suit of any stockholder, by a bill in equity, and 
 the subscriber's liability upon his canceled subscription may be 
 established.^^ If loss accrues to the corporation by reason of the 
 
 85 This is the rule in the federal 
 courts. New Albany v. Burke, 11 
 Wall.. (U. S.) 96, 20 L. ed. ISS; 
 Burke V. Smith, 16 Wall. (U. S.) 
 390, 21 L. ed. 361; Potts v. Wal- 
 lace, 146 U. S. 689, 13 Sup. Ct. 196, 
 -36 L. ed. 1135. And is followed in 
 Illinois courts. Zirkel v. Joliet &c. 
 Co., 79 111. 334. 
 
 -&6 Ryder V, Alton &c. Co., 13 111. 
 "516; Rider v. Morrison, 54. Md. 429; 
 White Mts. R. Co. v. Eastman, 34 
 N. H. 124; Tuckerman v. Brown, 33 
 N. Y. 297, 88 Am. Dec. 386; 
 Jewett V. Valley R. Co., 34 Ohio St. 
 601; Bedford R. Co. v. Bowser, 48 
 Pa. St. 29; Lafayette &c. Corp. v. 
 Ryland, 80 Wis. 29, 49 N. W. 157; 
 London &c. Co., In re, L. R. S Ch. 
 Div. 525; Thomas' Case, L. R. 13 
 Eq. 437. 
 
 87Cartmell's Case, L. R. 9 Ch. 
 691. 
 
 88 The general manager of a cor- 
 poration, who is also its largest 
 stockholder, secretary and treasurer, 
 cannot release a stockholder from 
 his contract by charging off balance 
 due on the books for unpaid calls 
 and crediting sums already paid. 
 
 where no attempt is made to trans- 
 fer the shares, although the man- 
 ager secures new subscriptions as 
 substitutes therefor, and both par- 
 ties at the time believe that he has 
 authority to release old contracts 
 and substitutes new ones; and the 
 fact that an over-issue of stock will 
 result on account of the new sub- 
 scriptions unless there is a cancel- 
 lation of earlier subscriptions, will 
 not justify such invalid cancellation. 
 Cartwright v. Dickinson, 88 Tenn. 
 476, 12 S. W. 1030, 7 L. R. A. 706, 
 17 Am. St 910. 
 
 89 Melvin v. Lamar Ins. Co., 80 
 111. 446, 22 Am. Rep. 199; South 
 Bend Toy &c. Co. v. Pierre &c. Ins. 
 Co., 4 S. Dak. 173, 56 N. W. 98. 
 A secret agreement by which the 
 officers of' the corporation agree that 
 the subscribers shall not be com- 
 pelled to pay for his subscription, 
 but shall be permitted to withdraw 
 when he chooses, is invalid and does 
 not affect the subscription nor the 
 subscriber's liability. Great West- 
 ern Tel. Co. V. Haight, 49 111. App. 
 633. 
 
339 STOCKHOLDERS § 202 
 
 improper cancellation of a subscription by the directors, they 
 may be held personally liable for such loss.^" 
 
 §202 (177). Compromise with stockholders.— But the corpo- 
 rate authorities may compromise a subscription debt, as they may 
 other debts, if there be a reasonable doubt as to the liability of 
 the subscriber,"! or if he be insolvent,»2 where it is done in good 
 faith. If there be no rea! controversy, the compromise will not 
 be binding.93 It has been held, however, that where a subscrib- 
 er fails to pay his subscription or to act as a stockholder, the 
 corporation may treat his subscription as abandoned and permit 
 others to fill it."* It has also been held that one subscription 
 may be substituted for another upon request of the parties where 
 a regular transfer of shares is not yet possible.^^ 
 
 § 203 (178). Liability where stock is transferred. — An original 
 subscriber cannot, however, by a transfer of his stock, discharge; 
 himself from liability for unpaid installments without the con- 
 sent of the corporation ; and where he does transfer on the books: 
 of the company as required by its by-laws, a receiver of the com~- 
 
 90 Bank of St. Mary's v. St. John, 93 Phosphate ,&c. Co. v. Green, L. 
 25 Ala. 566; Hodgkinson v. National R. 7 C. P. 43; Spackman v. Evans^ 
 &c. Co., 26 Beav. 473. It seems that L. R. 3 H. L. 171, 188, 231; Living- 
 the subscriber may set up this fact stone v. Temperance &c. Society, 17 
 as a defense. Southern Hotel Co. Ont. App. 379, 31 Am. & Eng. Corp. 
 V. Newman, 30 Mo. 118. Cas. 541. 
 
 91 Bath's Case L. R. 8 Ch. Div. 94 Perkins v. Union &c. Co., 12 Al- 
 334; Lord Belhaven's Case, 3 DeG., len (Mass.) 273. See also 1 Thomp. 
 J. & S. 41. See Whitaker v. Grum- Corp. (2d ed.), § IQ. 
 
 mond, 68 Mich. 249, 36 N. W. 62 ; 95 Xo make a valid substitution. 
 
 New Albany v. Burke, 11 Wall. (U. the signature of the first subscriber 
 
 S.) %, 20 L. ed. ISS. must be erased and that of his sub- 
 
 92 Philadelphia &c. R. Co. v. Hich- stitute inserted. Ryder v. Alton &c. 
 man, 28 Pa. St. 318. A receiver can- R. Co., 13 111. 516. See also 1 Cook 
 not be empowered by a court of Corporations (7th ed.), § 62, and 
 equity to compromise a subscrip- compare Cartwright v. Dickinson, 88 
 tion, unless all the subscribers are Tenn. 476, 12 S. W. 1030, 17 Am. St. 
 parties to the suit in connection 910; Hawkins v. Mansfield &c. Co., 
 with which he is appointed. Chan- 52 Cal. 513; Coleman v. Spencer, 5 
 dler V. Brown, 17 111. iii. Blackf. (Ind.) 197. 
 
§204 
 
 RAILROADS 
 
 340 
 
 pany, or assignee in bankruptcy, on its becoming insolvent, may 
 recover from him the unpaid instalments already due.*® But, as 
 -a general rule, in most jurisdictions, upon a valid transfer, duly 
 registered, the transferee succeeds to all the rights and liabilities 
 <ol the transferor, and becomes liable in his place for future calls 
 and indebtedness.*^ If the transfer is not registered, the trans- 
 feror will usually continue liable, both to the corporation and to 
 its creditoTS.*^ 
 
 § 204 (179). When creditors may enforce unpaid subscriptions 
 — ^Judgment and execution against corporation. — Subscriptions to 
 the capital stock of railroad corporations are most commonly dis- 
 puted when an attempt is made to call them in to liquidate 
 claims after corporate insolvency has occurred."* Under such 
 
 96 Hood V. McNaughton, 54 N. J. 
 JL. 425, 24 Atl. 497; Upton v. Tribil- 
 -cock, 91 U. S. 45, 23 L. ed. 203; 
 American Alkali Co. v. Campbell, 
 *113 Fed. 398. Some cases hold that 
 >a stockholder cannot by transfer- 
 ring his stock relieve himself from 
 liability for debts already accrued. 
 Voight V. Dregge, 97 Mich. 322, 56 
 N. W. 557; Glenn v. Hunt, 120 Mo. 
 330, 25 S. W. 181; Commercial Nat. 
 Bk. V. Gibson, 37 Nebr. 750, 56 N. 
 W. 616; Nenney v. Waddill, 6 Tex. 
 Civ. App. 244, 25 S. W. 308. Others 
 hold that he is relieved of such lia- 
 bility unless the transfer was fraud- 
 ulently made to an insolvent pur- 
 chaser for the purpose of escaping 
 liability. Van Demark v. Barons, 
 52 Kans. 119, 35 Pac. 798; Close v. 
 Brady, 4 Misc. 474, 24 N. Y. S. 567. 
 9T Webster v. Upton, 91 U. S. 65, 
 70, 23 L. ed. 384; Hartford &c. R. 
 Co. V. Boorman, " 12 Conn. 530 ; 
 Tucker v. Gilman, 121, N. Y. 189, 24 
 N. E. 302 ; Roosevelt v. Brown, UN. 
 Y. 148; 4 Thomp. Corp. (2d ed.), 
 § 4371. See generally notes in 6 Am. 
 
 St. 838, ■ 3 Am. St. 806, 93Am. St. 
 388; 30 L. R. A. (N. S.) 283; and 
 L. R. A. 1918D, 1050. 
 
 98 Richmond v. Irons, 121 U. S. 
 27, 7 Sup. Ct. 788, 30 L. ed. 864; 
 Kellogg V. Stockwell, . 75 111. 68; 
 Plumb V. Bank, 48 Kans. 484, 29 Pac. 
 699; Dane v. Young, 61 Maine 160; 
 Shellington v. Howland, 53 N. Y. 
 371; Bell's Appeal, 115 Pa. St. 88, 
 8 Atl. 177, 2 Am. St. 532. See also 
 Knickerbocker &c. Co. v. Meyers, 
 133 Fed. 764; Way v. Mortenson 
 242 Fed. 903; Russell v. Easter- 
 brook, 71 Conn. 50, 40 Atl. 905; 
 Way V. Mooers, 135 Minn. 339, 
 160 N. W. 1014; Chilson v. Kava- 
 nagh (Okla.), 160 Pac. 601, L. R. 
 A. 1918D, 1044 and note as to con- 
 tinued liability where constitution 
 or statutes so provides; and see 
 American Alkali Co. v. Kurtz, 134 
 Fed. 663, 665, as to liability where 
 stock is in the name of a dummy. 
 
 99 As to effect of creditor's knowl- 
 edge that stock is not fully paid, see 
 note in 7 A. L. R. 972. 
 
341 
 
 STOCKHOLDERS 
 
 §204 
 
 circumstances, it is the practice of the courts to rigidly enforce 
 the payment of the unpaid subscriptions for the accumulation of 
 a fund with which to pay corporate debts. But these unpaid 
 subscriptions balances are not the primary fund for the payment 
 of corporate liabilities.^ The corporate property must first be 
 exhausted, or it must be made to appear that such property is so 
 inadequate for the payment of corporate debts as to establish in- 
 solvency,^ before a creditor is permitted to resort to them. The 
 general rule in most jurisdictions is that a creditor's suit to en- 
 force payment of unpaid subscriptions can be maintained only 
 after a judgment at law has been obtained against the corpora- 
 tion and an execution issued thereon has been returned unsatis- 
 fied.* This remedy, however, need not be pursued where the 
 
 11 Cook Corporations (7th ed.), 
 §200. A stockholder cannot set off 
 his claim as a creditor against his 
 liability as a stockholder, but must 
 share with the other creditors, as he 
 is not ordinarily liable in excess of 
 his obligation to pay in full for his 
 stock. Boulton Carbon Co. v. Mills, 
 78 Iowa 460, 43 N. W. 290, 6 R. & 
 Corp. L. J. 417; Tama Water Power 
 Co. V. Hopkins, 79 Iowa 6S3, 44 N. 
 W. 797. The liability of a stock- 
 holder should not be enforced on a 
 judgment against a corporation, 
 where there are other judgment 
 debtors whose property subject to 
 execution could satisfy the judg- 
 ment. Burch V. Taylor, 1 Wash. 
 245, 24 Pac. 438. An attachment 
 against a corporation cannot be 
 levied on the individual property 
 of natural persons composing it. 
 State V. Marshall, 69 Miss. 486, 13 
 So. 668. 
 
 2 Terry v. Tubman, 92 U. S. 156, 
 23 L. ed. 537; Stiles v. Samainego, 
 3 Ariz. 48, 20 Pac. 607; First Nat. 
 
 Bank v. Greene, 64 Iowa 445, 17 N. 
 W. 86, 20 N. W. 754; Hedges v. 
 Silver Hill &c. Co., 9 Ore. 200; 
 Cleveland v. Marine Bank, 17 Wis. 
 545. Corporate bankruptcy has been 
 held sufficient evidence of the ina- 
 bility of the corporation to pay a 
 corporate debt to justify an action 
 by creditors to enforce subscriptions. 
 State Savings Assn. v. Kellogg, 52 
 Mo. 583; Terry v. Anderson, 95 U. 
 S. 628, 636, 24 L. ed. 365; Shelling- 
 ton V. Howland, 53 N. Y. 371. 
 
 3 Xerry v. Anderson, 95 U; S.. 628, 
 636, 24 L. ed. 365; Swan Land &c. 
 Co. V. Frank, 148 U. S. 603, 13 Sup. 
 Ct. 691, 37 L. ed. 577; Walser v. 
 Seligman, 21 Blatch. (U. S.) 130, 
 13 Fed. 415; Cutright v. Stanford, 
 81 111. 240; Bank &c. v. Dallam, 4 
 Dana (Ky.) 574; Baxter v. Moses, 
 n Maine 465, 1 Atl. 350, 52 Am. 
 Rep. 783; Wetherbee v. Baker, 35 
 N. J. Eq. 501 ; Freeland v. McCul- 
 lough, 1 Denio (N. Y.) 414, 43 Am. 
 Dec. 685n; Cleveland v. Burnham, 
 55 Wis. 598, 13 N. W 677; nn< 
 
§205 
 
 RAILROADS 
 
 342 
 
 corporation has formally dissolved,* and has no funds with which 
 to pay the corporate debts.^ And the unpaid subscription in 
 such a case may be reached by the general creditors, although 
 the corporate property, rights, privileges and franchises are cov- 
 ered by mortgage to secure another creditor." 
 
 § 205 (180). Effect as against stockholder of judgment against 
 the corporation. — Such a judgment, where the court has jurisdic- 
 tion, is generally held conclusive against the stockholders as to 
 the validity and amount of the creditor's claim, unless impeached 
 for fraud or collusion.'' And it was held in a recent case, where 
 
 to Thompson v. Reno Sav. Bank, 3 
 Am. St. 797, 814; and in note 
 in 46 L. R. A. (N. S.) 446. 
 But see Williams v. Chamberlain, 
 123 Ky. ISO, 94 S. W. 29. This 
 should he a personal, judgment pro- 
 nounced by the courts of state in 
 which the corporation exists. Pat- 
 terson V. Lynde, 112 111. 196; Bay- 
 liss V. Swift, 40 Iowa 648; Rocky 
 Mt. &c. Bank v. Bliss, 89 N. Y. 338; 
 Murray v. Vanderbilt, 39 Barb. 
 (N. Y.) 140, 147; Barclay v. Tal- 
 man, 4 Edw. Chan. (N. Y.) 123; 
 Bank &c. v. Adams, 1 Pars. Eq. 
 (Pa.) 534. Some states by statute 
 require the remedy against the cor- 
 poration to be exhausted before re- 
 sort is had to the property of the 
 stockholders. Only a judgment 
 and an unsatisfied execution ex- 
 hausts the legal remedy. Rocky 
 Mountain Nat. Bank v. Bliss, 89 N. 
 Y. 338; Brice v. Munro, 5 Can. L. 
 T. (Ont.) 130. See also Thornton 
 V. Lane, 11 Ga. 459; Priest v. Es- 
 sex &c. Co., 115 Mass. 380; Shelling- 
 ton V. Rowland, 53 N. Y. 371; 
 Wehrman v. Reakirt, 13 Ohio Dec. 
 Sl7, 1 Cin. Super. Ct 230; New 
 England &c. Bank v. Newport 
 
 Steam Factory, 6 R. I. 154, 75 Am. 
 Dec. 688; Dauchy v. Brown, 24 Vt. 
 197. Contra, in Marion &c. Co. v. 
 Norris, il Ind. 424; Shafer v. Mor- 
 iarity, 46 Ind. 9; Bird v. Calvert, 22 
 S. Car. 292; Sleeper v. Goodwin, 67 
 Wis. 577, 31 N. W. 335. See also 4 
 Thomp. Corp. (2d ed.), § 5075 et seq. 
 
 4 Kincaid v. Dwindle, 59 ' N. Y. 
 548. See Remington v. Samana Bay 
 Co., 140 Mass. 494, 5 N. E. 292, to 
 the effect that a judgment against a 
 corporation, recovered after the cor- 
 poration has been dissplved, is void. 
 See generally as to jurisdiction of 
 equity to enforce, note in 46 L. R. A, 
 (N. S.) 440. 
 
 5 Creditors will not be required to 
 await the collection of doubtful 
 claims or claims in litigation. The 
 stockholders must pay promptly, and 
 take upon themselves the onus of 
 delay and risk as to all such cases. 
 Moses v. Ocoee Bank, 1 Lea 
 (Tenn.) 398, 413; Stark v. Burke, 
 9 La. Ann. 341, 343, But see Young- 
 love V. Kelly &c. Co., 49 Ohio St. 
 663, 33 N. E. 234. 
 
 6 Dean v. Biggs, 25 Hun (N. Y.) 
 122. 
 
 T Marsh v. Burroughs, 1 Woods 
 
343 
 
 STOCKHOLDERS 
 
 §205 
 
 the plaintiff had recovered a judgment against the corporation in 
 an action for damages for waste, that a judgment against a cor- 
 poration for the recovery of money is conclusive evidence, in a 
 suit against a stockholder for the collection of said judgment, of 
 the existence of the corporation and its liability to plaintiff 
 therein as thereby determined; and such judgment, whether 
 given in an action ex contractu or ex delicto, is an indebtedness 
 of the corporation, for which a stockholder is liable to the amount 
 due on his stock.® But in some jurisdictions the stockholder is 
 permitted to disprove the claim where a judgment is sought to 
 be enforced against him,® and the judgment amounts only to 
 
 (U. S.) 463, Fed. Cas. No. 9112; 
 Bissit V. Kentucky River Nav. Co., 
 15 Fed. 3S3, and note 360; Powell v. 
 Oregonian R. Co., 36 Fed. 726 ; Amer- 
 ican Nat. Bank v. Suple, 11 S Fed. 
 657; Hampson v. Weare, 4 Iowa 13, 
 66 Am. Dec. 116n; Grund v. Tucker, 
 5 Kans. 70; Milliken v. Whitehouse, 
 49 Maine 527; Hawes v. Anglo-Sax- 
 on Petroleum Co., 101 Mass. 385; 
 Hinckley v. Kettle River R. Co., 80 
 Minn. 32, 82 N. W. 1088; Henry v. 
 Vermillion &c. R. Co., 17 Ohio 187; 
 Wilson V. Pittsburgh &c. Coal Co., 
 43 Pa. St. 424. See also Hawkins v. 
 Glenn, 131 U. S. 319, 9 Sup. Ct. 739, 
 33 L. ed. 184; Glenn v. Liggett, 
 135 U. S. 533, 10 Sup. Ct. 867, 34 
 L. ed. 262; Scofield v. Excelsior &c. 
 Co., 27 Ohio Cir. Ct. 347; Childs 
 V. Blethen, 40 Wash. 340, 82 Pac. 
 405; Conklin v. Furman, 8 Abb. Pr. 
 N. S. (N. Y.) 161; Slee v. Bloom, 
 20 Johns. (N. Y.) 669; Stephens v. 
 Fox, 83 N. Y. 313. The last of 
 the cases hold that it is sufficient 
 evidence of these facts where not 
 disproved. This doctrine has been 
 denied in New York. Slee v. 
 Bloom, 5 Johns. Ch. (N. Y.) 366, 
 
 reversed in Slee v. Bloom, 20 Johns. 
 669; Moss v. McCuUough, 5 Hill 
 (N. Y.) 131, reversed 7 Barb. 
 (N. Y.) 279; Strong v. Wheaton, 
 38 Barb. (N. Y.) 616; Miller v. 
 White, SO N. Y. 137; McMahon v. 
 Macy, 51 N. Y. 155. But this point 
 did not properly arise in the last two 
 cases, and Strong v. Wheaton pro- 
 fesses to be based on the authori- 
 ty of Moss v. McCuUough, 5 Hill 
 (N. Y.5 131. 
 
 8 Powell V. Oregonian R. Co., 6 R. 
 & Corp. L. J. 28, 38 Fed. 187. A 
 judgment on a claim for damages 
 for waste becomes an indebtedness 
 of the corporation, whether the 
 claim for damages was an "indebt- 
 edness" under the Oregon constitu- 
 tion or not; and the stockholder is 
 liable for such debt to the extent of 
 the amount unpaid on his stock. 
 Powell V. Oregonian R. Co., 36 Fed. 
 726, 3 L. R. A. 201. 
 
 9Neilson v. Crawford, 52 Cal. 
 248; Quick v. Lemon, 105 111. 578; 
 Grund v. Tucker, 5 Kans. 70; 
 Hawes v. Anglo-Saxon &c. Co., 101 
 Mass. 385; Grand Rapids Sav. Bank 
 v. Warren, 52 Mich. 557, 18 N. W 
 
§206 
 
 RAILROADS 
 
 344 
 
 prima facie evidence, i" of the creditor's right to money due the 
 ■corporation for subscriptions. It has also been held that a judg- 
 Tnent against a corporation is merely a step to fix the liability of 
 stockholders, and does not merge it or stand in the way of any 
 discovery or relief which would otherwise be proper to enforce 
 that liability." 
 
 §206 (181). Stockholder's defense.— It has been held that 
 stockholders may be admitted to defend a suit brought against the 
 corporation for the purpose of charging them on their individual 
 liability, and the court will, in a proper case, relieve the corpora- 
 tion from a default and permit them to carry on the litigation. ^^ 
 The judgment does not even tend to prove that the person sued 
 as a subscriber or stockholder is liable as such, and he may offer, 
 with some exceptions, the same defenses that he could offer to 
 suit by the corporation itself.^^ But it is generally held that any 
 
 356; Merchants' Bank v. Chandler, 
 19 Wis. 434. See also Rood v. 
 Whorton, 67 Fed. 434. And see, 
 where judgment is on an ultra vires 
 contract, Ward v. Joslin, 186 U. S. 
 142, 22 Sup.- Ct. 807, 46 L. ed. 1093. 
 10 It has been held that the stock- 
 holder may set up any defense that 
 was open to the corporation and put 
 the creditor to strict proof of his 
 claim a second time. Moss v. Mc- 
 CuUough, 5 Hill (N. Y.) 131, and 
 cases following; Chase v. Curtis, 113 
 U. S. 452, 5 Sup. Ct. 554, 28 L. ed. 
 1038; Chestnut v. Pennell, 92 111. 55. 
 Cases of this kind may be found de- 
 pending upon the peculiar language 
 of statutes holding the corporation 
 liable for debts in the first instance, 
 if not promptly paid. Trippe v. 
 Hancheon, 82 Ind. 307; Southmayd 
 V. Russ, 3 Conn. 52; Bailey v. Ban- 
 cker, 3 Hill (N. Y.) 188, 38 Am. 
 Dec. 625. 
 
 11 Newberry v. Robinson, 41 Fed. 
 458, 7 R. & Corp. L. J. 396. 
 
 12 Peck V. New York &c. S. S. Co., 
 3 Bosw. (N. Y.) 622. 
 
 131 Cook Corporations (7th ed.), 
 §210. But while the judgment 
 against the corporation does not 
 prove that a particular person was a 
 stockholder, such a judgment even 
 on default is generally conclusive 
 against stockholders as to other 
 matters, .such as the debt and the 
 liability of the corporation and the 
 like. 4 Thomp. Corp. (2d ed.) 
 §§ 4970-4978. In a suit by the assig- 
 nee of a judgment against a corpo- 
 ration brought against the stock- 
 holders, the assignee must show that 
 he paid a valuable consideration for 
 the judgment assigned. Wilson v. 
 St. Louis &c. R. Co., 120 Mo. 45, 
 25 S. W. 527, 759. 
 
345 
 
 STOCKHOLDERS 
 
 §207 
 
 fraud on the part of the corporation^* or its officers^^ is not avail- 
 able as a defense to the claims of a corporate creditor who gave 
 credit on the faith of the subscription and who was not a party 
 to such fraud and had no knowledge of it. And secret agree- 
 ments by which the corporation contracted that the defendant 
 should not be liable for the unpaid balance of his subscription 
 cannot be pleaded as such defense.!^ The statute of limitations 
 may, however, be a good defense in a proper case.^'^ 
 
 § 207 (182). Methods of enforcing stockholder's liability.— 
 
 The subscriber is liable to garnishment, in a proper case, in com- 
 mon with any other corporate debtor, for unpaid calls that have 
 been made by the company.^* And it has been held that he may 
 
 14 Chubb V. Upton, 95 U. S. 6S5, 
 667, 24 L. ed. S23; Turner v. 
 Grangers' &c. Ins. Co., 65 Ga. 649, 
 38 Am. Rep. 801 ; Howard v. Glenn, 
 85 Ga. 238,. 11 S. E. 610, 21 Am. 
 St. 156; Safifold v. Barnes, 39 Miss. 
 399; Ruggles v. Brock, 6 Hun (N. 
 Y.) 164; Tennent v. Glasglow Bank, 
 L. R. 4 App. Cas. 615; Stone v. 
 City &c. Bank, L. R. 3 C. P. Div. 
 282; Oakes v. Turquand, L. R. 2 
 H. L. 325. See also note in 93 Am. 
 St. 393. But see Savage v. Bartlett, 
 78 Md. 561, 28 Atl. 414. 
 
 15 Republic Ins. Co., In re, 3 Biss. 
 (U. S.) 452, Fed. Cas. No. 11704. 
 
 16 Such an agreement is held to be 
 fraud at law upon the corporate 
 creditors. Upton v. Tribilcock, 91 
 U. S. 45, 23 L. ed. 203; Chubb v. 
 Upton, 95 U. S. 665, 24 L. ed. 523; 
 Scoville V. Thayer, 105 U. S. 143, 26 
 L. ed. 968; Flinn v. Bagley, 7 Fed. 
 785; Northrop v. Bushnell, 38 Conn. 
 498 ; Hickling v. Wilson, 104 111. 54 ; 
 Eyerman v. Krieckhaus, 7 Mo. App. 
 455; Sagory v. Dubois, 3 Sandf. Ch. 
 R. (N. Y.) 466, 499. See also Wil- 
 
 son V. Hundley, 96 Va. 96, 30 S. E. 
 492, 70 Am. St. 837. An agreement 
 operating among and against stock- 
 holders only for an apportionment of 
 their several stock liabilities is good 
 and is contrary neither to law or 
 public policy. Winston v. Dorsett 
 Pipe & P. Co., 27 111. App. 546. 
 
 17 As to the statute of limitations 
 as a defense and when it begins to 
 run, see note in 93 Am. St. 390 et 
 seq. ; and Boyd, v. Mutual L. Assn., 
 116 Wis. 155, 90 N. W. 1086, 94 N. 
 W. 171, 61 L. R. A. 918, 96 Am. St. 
 948, and extended note. 
 
 ■ IS Faull V. Alaska &c. Min. Co., 
 8 Sawyer (U. S.) 420, 14 Fed. 657; 
 Curry v. Woodward, 53 Ala. 371; 
 Brown v. Union Ins. Co., 3 La. Ann. 
 177; Simpson v. Reynolds, 71 Mo. 
 594; Rand v. White Mts. R. Co., 40 
 N. H. 79; Hays v. Lycoming &c. 
 Co., 99 Pa. St. 621 ; note to Thomp- 
 son V. Reno Sav. Bank, 3 Am. St. 
 797, 806. But unpaid subscriptions 
 for which no calls have been issued 
 cannot be reached in this way. 
 Bingham v. Rushing, 5 Ala. 403 ; 
 
§207 
 
 RAILROADS 
 
 346 
 
 be sued at law by a corporate creditor for unpaid calls, and that 
 he is liable to a judgment for the full amount due on such calls. ^* 
 But the remedy most commonly resorted to and the one most 
 favored by the courts, is by bill in equity.^" And it has been said 
 that no one creditor can assume that he alone is entitled to what 
 any stockholder owes, and sue at law so as to appropriate it 
 exclusively to himself. ^^ Such a bill should be filed by so many 
 
 Meints v. East St. Louis &c. Co., 89 
 111. 48; Brown v. Union Ins. Co., 3 
 La. Ann. 177; McKelvey v. Crockett, 
 18 Nev. 238, 2 Pac. 386; Hughes 
 V. Oregonian R. Co., 11 Ore. 1S8, 
 2 Pac. 94; Bunn's Appeal, 105 Pa. 
 St: 49, 51 Am. Rep. 116. 
 
 ispauU V. Alaska &c. Min. Co., 
 8 Sawyer (U. S.) 420, 14 Fed. 657; 
 Allen V. Montgomery R. Co., 11 Ala. 
 437; McCarthy v. Lavasche, 89 111. 
 270, 31 Am. Rep. 83n; Bank &c. v. 
 Dallam, 4 Dana (Ky.) 574; Free- 
 man V. Winchester, 18 Miss, 'in . 
 
 20 Ogilvie V. Knox Ins. Co., 22 
 How. (U. S.) 380, 16 L. ed. 349; 
 Hatch V. Dana, 101 U. S. 205, 25 
 L. ed. 885; Louisiana Paper Co. v. 
 Waples, 3 Woods (U. S.) 34, Fed. 
 Cas. Np. 8540; FauU v. Alaska &c. 
 Min. Co., 8 Sawyer (U. S.) 420, 16 
 Fed. 657; Holmes v. Sherwood, 16 
 Fed. 725 ; Allen v. Montgomery &c. 
 R. Co., 11 Ala. 437; Harmon v. Page, 
 62 Cal. 448; Ward v. Griswoldville 
 &c. Co., 16 Conn. 593; Dalton &c. R. 
 Co. V. McDaniel, 56 Ga. 191; Hick- 
 ling V. Wilson, 104 111. 54; Craw- 
 ford V. Rohrer, 59 Md. 599; Shickle 
 V. Watts, 94 Mo. 410, 7 S. W. 274; 
 Christensen v. Eno, 106 N. Y. 9il, 
 100, 12 N. E. 648; Henry v. Vermil- 
 lion &c. Tpk. Co., 17 Ohio 187; 
 Germantown &c. R. Co. v. Fitler, 60 
 Pa. St. 124, 100 Am. Dec. 546n ; 
 
 Adler v. Milwaukee &c. Co., 13 Wis. 
 57. A creditor's bill is a proper 
 remedy for enforcing personal lia- 
 bility of stockholders. Stutz v. 
 Handley, 7 Ry. & Corp. L. J. 407, 
 41 Fed. 531. Such a bill cannot be 
 maintained to enforce a stale claim. 
 Wilson V. St. Louis &c. R. Co., 120 
 Mo. 45, 894, 25 S. W. 527, 759. 
 
 21 Patterson v. Lynde, 106 U. S. 
 519, 1 Sup. Ct. 432, 27 L. ed. 265. 
 It seems to be a settled rule in the 
 United States Courjts that unpaid 
 subscriptions can be reached by a 
 corporate creditor in a court of 
 equity only. Brown v. Fisk, 23 Fed. 
 228. See also Potts v. Wallace, 146 
 U. S. 689, 13 Sup. Ct. 196, 36 L. 
 ed. 1135. But compare note in 40 
 L. R. A. (N. S.) 450. Some states 
 provide by statute that the only 
 remedy to enforce the payment of a 
 debt of a corporation against the 
 individual stockholders thereof shall 
 be by bill in chancery. Many of the 
 courts hold a bill in equity to be the 
 creditor's only means of reaching 
 unpaid subscriptions. Smith v. 
 Huckabee, 53 Ala. 191 ; Jones v. 
 Jarman, 34 Ark. 323; Erickson v. 
 Nesmith, 15 Gray (Mass.) 221; 
 Umsted v. Buskirk, 17 Ohio St. 
 113; Hodges v. Silver Hill Min. Co., 
 9 Ore. 200. Even where the general 
 equitable remedy by creditor's bill 
 
347 
 
 STOCKHOLDERS 
 
 §207 
 
 creditors as may wish to bring suit,^^ in favor of any or all 
 creditors that may choose to come in and establish their claims,^* 
 and should be directed against the corporation itself,^* and all 
 solvent subscribers within the jurisdiction of the court whose 
 subscriptions are not fully 'paid, excepting such as are un- 
 known.^^ 
 
 has been abolished by statute, the 
 right to proceed herein by suit in 
 equity has been held to exist. Ad- 
 ler V. Milwaukee &c. Co., 13 Wis. 
 57. An action at law cannot be 
 maintained by a creditor of a cor- 
 poration, under Wash. Code, §2434, 
 against a stock subscriber, for the 
 unpaid portion of his subscription. 
 Burch V. Taylor, 1 Wash. 24S, 24 
 Pac. 438. 
 
 22 Crease v. Babcock, 10 Mete. 
 (Mass.) 525; Patterson v. Lynde, 
 106 U. S. 519, 1 Sup. Ct. 432, 27 L. 
 ed. 265. Several creditors cannot 
 bring separate suits but the first 
 properly framed bill takes preced- 
 ence, and another creditor's suit may 
 be enjoined. Pierce v. Milwaukee 
 Construction Co., 38 Wis. 253. 
 
 23 Terry v. Little, 101 U. S. 216, 
 25 L. ed. 864; Crease v. Babcook, 
 10 Mete. (Mass.) 525; Wetherbee v. 
 Baker, 35 N. J. Eq. 501; Morgan 
 V. New York &c. R. Co., 10 Paige 
 (N. Y.) 290, 40 Am. Dec. 244n; 
 Umsted V. Buskirk, 17 Ohio St. 
 113; Coleman v. White, 14 Wis. 700, 
 80 Am. Dec. 797. Even if the bill 
 was not filed for the benefit of all 
 creditors choosing to come in and 
 share the expense, any creditor has 
 a right to establish his claim un- 
 der it and share pro rata in the dis- 
 tribution of the assets. TurnbuU v. 
 Prentiss Lumber Co., 55 Mich. 387; 
 Walker v. Crain, 17 Barb. (N. Y.) 
 
 119. See also Wright v. McCor- 
 mack, 17 Ohio St. 86; Adler v. Mil- 
 waukee &c. Co., 13 Wis. 57; note in 
 40 L. R. A. (N. S.) 448. 
 
 24WaIser v. Memphis &c. R. Co., 
 19 Fed. 152; Wetherbee v. Baker, 
 35 N. J. Eq. 501; Mann v. Pentz, 
 3 N. Y. 415. Where the corpora- 
 tion is beyond the jurisdiction or is 
 defunct it need not be made a party. 
 Walser v. Seligman, 21 Blatch. (U. 
 S.) 130 Fed. 415; Wellman v. How- 
 land &c. Works, 19 Fed. 51. 
 
 25 Walser v. Memphis &c.- R. Co., 
 19 Fed. 152; Vick v. Lane, 56 Miss. 
 681; Erickson v. Nesmith, 46 N. 
 H. 371; Ulmsted v. Buskirk, 17 
 Ohio St. 113; Pierce v. Milwaukee 
 &c. Co., 38 Wis. 253. All need not 
 be originally made parties, according 
 to the authority of some cases, but 
 the stockholders against whom the 
 suit is directed may bring in those 
 not made parties by cross-bill and 
 thus enforce contribution. Hatch v. 
 Dana, 101 U. S. 205, 25 L. ed. 885. 
 See also Ogilvie v. Knox Ins. Co., 
 22 How. (U. S.) 380, 16 L. ed. 349; 
 Von Schmidt v. Huntington, 1 Cal. 
 55 ; Lamar Ins. ' Co. v. Gulick, 102 
 111. 41; Glenn v. Williams, 60 Md. 
 93; Griffith v. Mangam, 75 N. Y. 
 611 ; Brundage v. Monumental &c. 
 Co., 12 Ore. 322. Some cases hold 
 that judgment cannot be rendered 
 against part, of the delinquent sub- 
 scribers unless it affirmatively ao- 
 
§208 
 
 RAILROADS 
 
 348 
 
 § 208 (183). Contribution. — The creditors are under no obliga- 
 tion to see that the payments made by the subscribers are propor- 
 tionally equal, and a court of chancery will compel payment of 
 so much of the unpaid subscriptions of the stockholders that 
 are before it as may be necessary to pay the corporate debts. ^'* 
 The stockholder may, however, in general, have the other stock- 
 holders within the jurisdiction joined as defendants, ^'^ in which 
 case contribution may be enforced in the original suit.^^ Or, if 
 he is compelled to pay more than his proportion of. the debts of 
 the company, he may maintain a suit against his co-stockholders 
 for contribution. 28 The fact that the creditor is himself a stock- 
 
 pear that the others are insolvent or 
 beyond the jurisdiction of the court. 
 Wood V. Dummer, 3 Mason (U. 
 S.) 308, Fed. Cas. No. 17944; Marsh 
 V. Burroughs, 1 Woods (U. S.) 463, 
 Fed. Cas. No. 9112; Bonewitz v. 
 Van Wert Co. Bank, 41 Ohio St. 
 78. See Erickson v. Nesmith, 46 N. 
 H. 371. But this rule may be doubted. 
 See Hatch v. Dana, 101 U. S. 205. 25 
 L. ed. 88S; Cook Corporations (7th 
 ed.), § 206. See also 4 Thomp. Corp. 
 (2d ed.), § 510. 
 
 26 Pentz V. Hawley, 1 Barb. Ch. 
 (N. Y.) 122; Marsh v. Burroughs, 
 1 Woods (U. S.) 463, Fed. Cas. No. 
 9112; Evans v. Coventry, 25 L. J. 
 Chan. 489. But actual subscribers 
 are not liable for that part of the 
 capital stock which was never sub- 
 scribed. Evans v. Coventry, 25 L. 
 J. Chan. 489. 
 
 27 Hatch V. Dana, 101 U. S. 205, 
 25 L. ed. 885. The fact that credi- 
 tors of a corporation have released 
 one stockholder from his liability is 
 of no concern to another stock 
 holder unless his liability has been 
 thereby increased, and he is still lia- 
 ble on his subscription to the capital 
 stock. Howard v. Glenn, 85 Ga. 238, 
 
 11 S. E. 610. A creditor of a cor- 
 poration may bring individual action 
 at law against one of the stock- 
 holders to recover to the amount of 
 his entire pro rata liability notwith- 
 standing that he has compromised 
 with other stockholdlers, especially 
 where the offer to compromise was 
 made to all with notice that if not 
 accepted the creditor would claim 
 his full legal rights. Hall v. Klinck, 
 25 S. Car. 348, 60 Am. Rep. 505. A 
 compromise decree making an offer 
 of the terms of settlement to all 
 alike who are liable on stock of an 
 insolvent corporation does not re- 
 lease those who do not accept it 
 from their liability on the stock. 
 Hambleton v. Glenn, 72 Md. 351, 20 
 Atl. 115. 
 
 28 Holmes v. Sherwood, 3 Mc- 
 Crary (U. S.) 405, 16 Fed. 725; 
 Umsted v. Buskirk, 17 Ohio St. 
 113; Hodges v. Silver Hill Min. Co., 
 9 Ore. 200; Masters v. Rossie &c. 
 Co., 2 Sandf. Ch. 301; N. Y. Code 
 of Civil Procedure, §§1791-1794. 
 
 29 Holmes v. Sherwood, 3 Mc- 
 Crary (U. S.) 405, 16 Fed. 725; 
 Marsh v. Burroughs, 1 Woods (U. 
 S.) 463, Fed Cas. No. 9112; Win- 
 
349 
 
 STOCKHOLDERS 
 
 §209 
 
 holder and delinquent in making payments on his stock does not 
 necessarily prevent him from recovering against other delinquent 
 subscribers in a suit to enforce payment of a judgment obtained 
 by him against the corporation. But he must contribute ratably 
 with the other stockholders to the payment of the amount due 
 him.^o It has also been held that a part of the stockholders may, 
 in a proper case, file a bill in equity upon their own account, mak- 
 ing the corporation a party, to enforce the payment of unpaid 
 balances of subscriptions, for the payment of corporate indebted- 
 ness, and for contribution, even before a creditor's bill has been 
 iiled.31 
 
 § 209 (184). Suits by assignees and receivers. — In case the cor- 
 poration has passed into the hands of a receiver or an assignee 
 it is the duty of such receiver^^ or assignee^^ to collect the un- 
 
 cock V. Turpin, 96 111. 135; Stewart 
 V. Lay, 45 Iowa 604; Millaudon v. 
 New Orleans &c. R. Co., 3 Rob. 
 (La.) 488; Matthews v. Albert, 24 
 Md. 527; Gray v. Coffin, 9 Cush. 
 (Mass.) 192; Hadley v. Russell, 40 
 N. H. 109; Stover v. Flack, 30 N. Y. 
 64; Umsted v. Buskirk, 17 Ohio St. 
 113; Farrow v. Bivings, 13 Rich. Eq. 
 (S. Car.) 25; Suttons' Case, 3 DeG. 
 & Sm. 262.. See also Putnam v. 
 Misochi, 189 Mass. 421, 75 N. E. 956; 
 See V. Heppenheim'er, 69 N. J. Eq. 
 36, 61 Atl. 843. As to when the 
 suit by the stockholder to enforce 
 contribution in case of statutory lia- 
 bility must be in equity, and when 
 the action may be at law, see Shur- 
 low V. Lewis, 170 Mich. 493, 136 
 N. W. 484, 41 L. R. A. (N. S.) 
 ■975n, and cases cited in note. Brin- 
 ham V. Wellersburg Coal Co., 47 
 Pa. St. 43, where it is said that the 
 right to contribution in Pennsyl- 
 vania is purely statutory. 
 
 30 Wilson V. Kiesel, 9 Utah 397, 35 
 Pac. 488. See also Thompson v. Reno 
 
 Sav. Bank, 19 Nev. 103, 7 Pac. 68, 
 3 Am. St. 797. 
 
 31 Fiery v. Eramert, 36 Md. 464. 
 
 32 Andrews v. Bacon, 38 Fed. 777; 
 Chandler v. Brown, 77 111. 333; 
 State V. Union Stock Yards State 
 Bank, 103 Iowa 549, 70 N. W. 752, 
 72 N. W. 1076; Frank v. Morrison, 
 SB Md. 423; Dayton v. Borst, 31 N. 
 Y. 435; note to Germantown &c. R. 
 Co. V. Fitler, 60 Pa. 124, 100 Am. 
 Dec. 551; Mean's Appeal, 85 Pa. St. 
 75. And see Dill v. Ebby, 27 Okla. 
 584, 112 Pac. 973, 46 L. R. A. (N. 
 S.) 440 and note. Under the Eng- 
 lish Railway Companies Act of 1867, 
 a receiver has no such power. Bir- 
 mingham &c. R. Co., In re, L. R. 18 
 Ch. Div. 155. See ' also Hancock, 
 Nat. Bank v. Ellis, 172 Mass. 39, 51 
 N. E. 207, 42 L. R. A. 396, 70 Am. 
 St. 232. 
 
 33 Chamberlain v. Bromberg, 83 
 Ala. 576, 3 So. 434; Stewart v. Lay, 
 45 Iowa 604; Shockley v. Fisher, 75 
 Mo. 498 ; Phoenix &c. Co. v. Badger, 
 67 N. Y. 294; Clarke v. Thomas, 34 
 
,§210 
 
 RAILROADS 
 
 350 
 
 paid subscriptions necessary for the payment of the debts of the 
 corporation, and the creditor's right to proceed directly against 
 the delinquent shareholders is usually suspended during the time 
 it remains in his hands. ^* A receiver represents the creditors as 
 well as the shareholders and corporation, and may, as such repre- 
 sentative and as an officer of the court, disaffirm illegal and 
 fraudulent transfers of corporate property and .recover its mis- 
 applied funds and securities, ^^ although he cannot, ordinarily, 
 enforce a subscription which the corporation could not have en- 
 forced at the time of his appointment.^® 
 
 §210 (185). Statutory liability of stockholders. — In several of 
 the states a corporation creditor may, upon the dissolution of a 
 railroad corporation without payment of his debt, sue the stock- 
 holders individually and recover the whole debt, leaving the 
 stockholder paying it to his action against the other stockholders 
 for contribution.^'' Other states provide by statute that each 
 
 Ohio St. 46; Tobey v. Russell, 9 R. 
 I. 58; Vanderwerken v. Glenn, 85 
 Va. 9, 6 S. E. 806; note to German- 
 town &c. R. V. Fitler, 100 Am. Dec. 
 551, 556. An assignee in bankruptcy 
 may sue by bill in equity to recover 
 unpaid subscriptions. Sawyer v. 
 Hoag, 17 Wall. (U. S.) 610, 621, 21 
 L. ed. 731; Chubb v. Upton, 95 U. 
 S. 665, 24 L. ed. 523; Payson v. 
 Stoever, 2 Dill (U. S.) 427, Fed Cas. 
 No. 10863. See also Potts v. Wal- 
 lace, 146 U. S. 689, 13 Sup. Ct. 196, 
 36 L. ed. 1135. 
 
 3* See Franklin v. Menown, 10 
 Mo. App. 570. But the creditors 
 may compel the receiver to act for 
 them in collecting unpaid subscrip- 
 tions. Stark V. Burke, 9 La. Ann. 
 341; Rankine v. Elliott, 16 N. Y. 
 ill; Atwood V. Rhode Island &c. 
 Bank, 1 R. I. 376. A creditor who 
 had knowledge that stock had been 
 taken at an overvaluation may, 
 however, be. estopped from partici- 
 
 pating in the fund, or seeking en- 
 forcement of the liability. Davies v. 
 Ball, 64 Wash. 292, 116 Pac. 833, 
 Ann. Cas. 1914B, 750; Dupont v. 
 Ball, (Del). 106 Atl. 39, 7 A. L. R. 
 955 and notes. But see Sherman v. 
 Harley, 178 Cal. 584, 174 Pac. 901, 
 7 A. L. R. 950, and note on § 983. 
 
 35 Davis V. Gray, 16 Wall. (U. S.) 
 203, 218, 21 L. ed. 477; Voorhees 
 V. Indianapolis &c. Co., 140 Ind. 220, 
 39 N. E. 738; Graham Button Co. 
 V. Spielmann, 50 N. J. Eq. 120, 24 
 Atl. 571 ; Attorney-General v. Guar- 
 dian &c. Co., n N. Y. 272; 1 El- 
 liott's Gen. Pr. § 393. 
 
 36 Cutting V. Damerel, 88 N. Y. 
 410. See also note in 46 L. R. A. 
 (N. S.) 452. 
 
 3T Under the Kansas Law gov- 
 erning private corporations stock- 
 holders are severally and not jointly 
 liable to the corporation creditors, 
 and each must be sued separately. 
 Abbey v. W. B. Grimes Dry Goods 
 
351 
 
 STOCKHOLDERS 
 
 §210 
 
 stockholder shall be liable for the debts of the corporation to the 
 amount unpaid of the stock held or subscribed for by him until 
 all the stock is paid in,^^ while some of the states add a personal 
 liability on the part of the stockholders for the wages of certain 
 of their employes, regardless of the fact that their stock may or 
 may not be paid in full.*'' And similar provisions are frequently 
 found in special charters.*" The individual liability of members 
 for the debt of a corporation is a departure from the established 
 rules of law, and is founded solely upon grounds of public policy, 
 depending entirely upon express provisions of the statute law.; 
 and such liability is to be construed reasonably but strictly, 
 rather than liberally, and not extended beyond the limits to 
 which it is plainly carried by such provisions of the statute.*^ 
 
 Co., 44 Kans. 415, 24 Pac. 426, 8 
 R. & Corp. L. J. 207. Where the 
 ■directors of a corporation, acting in 
 good faith, have borrowed money 
 for the purposes of the corporation, 
 the indebtedness against the corpo- 
 ration is created, the stockholders 
 become personally liable to the len- 
 der of the money or the sureties who 
 pay it, and it is not necessary to 
 show that all the money was ac- 
 tually appropriated to the legitimate 
 -uses of the corporation. Borland v. 
 Haven, 37 Fed. 394. 
 
 38 The liability created by a statute 
 ■similar to the present one in South 
 ■Carolina, was held to be enforceable 
 by an action at law against one 
 stockholder individually. Hall v. 
 Klinck, 25 S. Car. 348, 60 Am. Rep. 
 50S. 
 
 39Holders of preferred stock in an 
 insolvent corporation are subject to 
 the statutory liability for its debts, 
 equally with the common stockhold- 
 ers. Railroad Co. v. Smith, 48 Ohio 
 St. 219, 31 N. E. 743. 
 
 40 A provision in an act of incor- 
 poration, that stockholders shall be 
 
 individually liable "to the extent of 
 double the amount of the stock sub- 
 scribed for or held by them," ren- 
 ders them liable to double the 
 amount of their stock, whether paid 
 up or not. Dreisbach v. Price, 133 
 Pa. 560, 19 Atl. 569,, 26 Wkly. Notes 
 Cas. 61. And is is held that the 
 individual liability of a stockholder 
 under the terms of a charter is not 
 extinguished by the expiration of 
 the charter. Wheatley v. Glover, 
 125 Ga. 710, 54 S. E. 626. 
 
 4iLibby v. Toby, 82 Maine 397, 
 19 Atl. 904, where the plaintiff 
 sought to enforce against a stock- 
 holder, a judgment recovered against 
 the corporation under the Maine 
 statute; Chamberlin v. Huguenot 
 &c. Co., 118 Mass. 532; Salt Lake 
 City Nat. Bank v. Hendrickson, 40 
 N. J. L. 52; Chase v. Lord, 11 N. 
 Y. 1; O'Reilly v. Bard, 105 Pa. St. 
 569; Windham &c. Inst. v. Sprague, 
 43 Vt. 502; note to Thompson v. 
 Reno Sav. Bank, 3 Am. St. W, 834. 
 "The individual liability of stock- 
 holders in a corporation for the pay- 
 ment of its debts is always a crea- 
 
§211 
 
 RAILROADS 
 
 352 
 
 Accordingly it is held that such liability for debts cannot be en- 
 forced to pay damages recovered against the corporation in an 
 action in tort.'*^ 
 
 § 211 (186). Defenses to actions to enforce statutory liability. 
 
 — In suits to enforce such liability, certain defenses are open to 
 the stockholder that would not be allowed him in an equitable 
 suit to enforce payment of his subscription to the corporation. 
 Thus he may show that the debt for which the suit is brought 
 does not belong to the particular class for which the stockjiolders 
 are made liable,*^ and it is held, in general, that statutes fixing 
 a personal liability upon the stockholders for debts due to ser- 
 vants or laborers are enacted for the benefit of that "class whose 
 members usually look to the reward of a day's labor or service 
 
 tion of statute. At common law it 
 does not exist. The statute which 
 creates it may also declare the pur- 
 pose of its creation and provide for 
 the manner of its enforcement." 
 Pollard v. Bailey,' 20 Wallace (U. 
 S.) S20, 22 L. ed. 376; Terry v. 
 Little, 101 U. S. 216, 25 L. ed. 864; 
 Russell V. Pacific Co., 113 Cal. 258, 
 45 Pac, 323, 34 L. R. A. 747n. It is 
 held : that a statute attempting to 
 repeal and take away this statutory 
 liability and right is unconstitution- 
 al if retroactive and applied as 
 against creditors who made their 
 contracts and acquired their rights, 
 while the defendant was a stock- 
 holder, before the passage of the re- 
 pealing statute. Harrison v. Rem- 
 ington &c. Co., 140 Fed. 385. And 
 a statute has been held unconstitu- 
 tional where it atempts to create a 
 double liability as against those who 
 became stockholders before its pas- 
 sage. Yoncalla State Bank v. Gem- 
 mill, 134 Minn. 344, 159 N. W. 
 798, L. R. A. 1917A, 1223. 
 
 *2 Chase v. Curtis, 113 U. S. 452, 
 5 Sup. Ct. 554, 28 L. ed. 1038; Stan- 
 ton v. Wilkeson, 8 Ben. (U. S.) 357, 
 Fed. Cas. No. 13299; Zimmer v. 
 Schleehauf, 115 Mass. 52; Bohn v. 
 Brown, 33 Mich. 257, 263; Cable v. 
 McCune, 26 Mo. 371, 72 Am. Dec. 
 214; Heacock v. Sherman, 14 Wend. 
 (N. Y.) 58; note to Prince v. Lynch, 
 99 Am. Dec. 427, 435. A stockholder 
 of a railroad company is not person- 
 ally liable for the negligence of the 
 officers, agents, or employes of the 
 company in the operation of its 
 road. Atchison fee. R. Co. v. Coch- 
 ran, 43 Kans. 225, 23 Pac. 151, 7 L. 
 R. A. 414, 19 Am. St 129, 41 Am. & 
 Eng. R. Cas. 48. 
 
 43 Wilson v. Stockholders, 43 Pa. 
 St. 424; Larrabee v. Baldwin, 35 
 Cal. 155; Conant v. Van Schaick, 
 24 Barb. (N. Y.) 87. One who be- 
 came a stockholder after the debt 
 was incurred by the corporation is 
 liable under the statute like any 
 other stockholder. Railroad Co. v. 
 Smith, 48 Ohio St. 219, 31 N. E. 
 743. 
 
353 STOCKHOLDERS § 21 1 
 
 for immediate or present support, from whom the company does 
 not expect credit, and to whom its future ability to pay is of no 
 consequence.** Consequently, a civil engineer,*^ or his assist- 
 ant,*" or a superintendent,*'' or a general manager,*^ will not be 
 entitled to enforce such liability for his own benefit, where it is 
 confined to debts due "laborers and servants." But a master 
 mechanic and superintendent of works has been held to be a "ser- 
 vant and laborer" under a similar statute applying to manufac- 
 turing companies.*^ And a superintendent of construction, who 
 acted as foreman of a gang of one hundred and fifty men engaged 
 in digging trenches and laying gaspipes, and whose duties re- 
 quired him to be with the men while at work and occasionally to 
 do some physical labor because of a scarcity of hands, was held 
 a "laborer" within the meaning of a mechanic's lien law.''" The 
 stockholder may also show in defense to such a suit that the cor- 
 porate creditor by express contract made at the time the debt 
 was incurred waived his right to resort to the stockholders for 
 payment in whole or in part, and it is settled in England that he 
 may show that the contract contained a stipulation by the cor- 
 poration for the exemption of its members from the liability im- 
 posed upon them by statute in the event of corporate insol- 
 vency.^^ So he may show that he has been separately released 
 
 44 Wakefield v. Fargo, 90 N. Y. Jennings, L. R. 9 Q. B. Div. 45. 
 213, 217, overruling several earlier But compare Sleeper v Goodwin, 67 
 cases; Adams v. Goodrich, 55 Ga. Wis. 577, 31 N. W. 335. 
 
 233. And see Harrod v. Hamer, 32 48 Wakefield v. Fargo, 90 N. Y. 
 
 Wis. 162 ; note to Thompson v. Reno 213 ; Hill v. Spencer, 61 N. Y. 274. 
 
 Sav. Bank, 3 Am. St. 797, 842. 49 Sleeper v. Goodwin, 67 WSs. 
 
 45 Pennsylvania &c. R Co. v. 577, 31 N. W. 335. 
 
 Lueffer, 84 Pa. St. 168, 24 Am. Rep. so Pendergast v. Yandes, 124 Ind. 
 
 189; Ericsson v. Brown, 38 Barb. 159, 24 N. E. 724, 8 L. R. A. 849. 
 
 (N. Y.) 390. Contra, Conant v. Van 5i Such a contract is valid. Rob- 
 
 Schaick, 24 Barb. (N. Y.) 87; Wil- inson v. Bidwell, 22 Cal. 379; Bas- 
 
 liamson v. Wadsworth, 49 Barb. (N. shor v. Forbes, 36 Md. 154; Brown 
 
 Y.) 294. V. Eastern State Co., 134 Mass. 590, 
 
 46 Brockway v. Innes, 39 Mich. 47, where the waiver was oral ; Hess v. 
 33 Am. Rep. 348. Werts, 4 Serg. & R. (Pa.) 356; 
 
 47Kincaid v. Dwinelle, 59 N. Y. State Fire Ins. Co., In re, 1 Hem. 
 548. And see Gurney v. Atlantic, & M. 457, 1 DeG., F. & J. 634. But 
 &c. R. Co., 58 N. Y. 358 ; Gordon v. the ' exemption must be clearly 
 
 12 — Ell, Railkoads I 
 
§211 
 
 RAILROADS 
 
 354 
 
 from the statutory liability, ^^ or that he has voluntarily paid cor- 
 porate debts to the full amount of such liability.''* He may also, 
 in some jurisdictions, set off a debt or judgment due him from 
 the corporation against a personal action brought by an indi- 
 vidual creditor, where the statute provides for such suits, ^^ al- 
 
 proved. Skinner v. Dayton, 19 John. 
 (N. Y.) 513, 537, 10 Am. Dec. 286; 
 Athenaeum &c. Society, Re, 3 DeG. 
 & J. 660. A stipulation against hold- 
 ing stockholders liable has been held 
 to refer to the statutory liability 
 and not to the subscription liability. 
 Preston v. Cincinnati &c. R. Co., 36 
 Fed. 54. 
 
 52 Where the stockholders are 
 held to be severally and not jointly 
 liable under the statute, one may be 
 released without releasing the oth- 
 ers. Bank &c. v. Ibbotson, 5 Hill 
 (N. Y.) 461. See also Herries v. 
 Piatt, 21 Hun (N. Y.) 132; Borland 
 V. Haven, 37 Fed. 394; Prince v. 
 Lynch, 38 Cal. 528, 99 Am. Dec. 
 427n. 
 
 ssMathez v. Neidig, 72 N. Y. 100; 
 San Jose Sav. Bank v. Pharis, 58 
 Cal. 380; Boyd v. Hall, 56 Ga. 563. 
 The payments must be bona fide. 
 Thebus v. Smiley, 110 111. 316; Man- 
 ville V. Karst, 16 Fed. 173. And 
 must be made before the suit in 
 which they are relied upon as a de- 
 fense was commenced. Jones v. 
 Wiltberger, .42 Ga. 575. But see 
 Richards v. Brice, 15 Daly' 144, 3 
 N. Y. S. 41. And his exemption 
 from liability will be measured by 
 the sum actually paid on corporate 
 debts and judgments, and not by 
 the face of the claims paid off or 
 purchased by him. Kunkelman v. 
 Rentchler, 15 Brad. (111.) 271; 
 Holland v. Heyman, 60 Ga. 174; 
 
 Bulkley v. Whitcomb, 49 Hun Z90, 1 
 N. Y. S. 748. The fact that suits 
 brought by other stockholders are 
 pending is no defense, so long as 
 they have not been brought to judg- 
 ment. Ingalls V. Cole, 47 Maine 
 530, 541; Grose v. Hilt, 36 Maine 
 22, denies the doctrine of the text. 
 54 Boyd V. Hall, 56 Ga. 563; Jer- 
 man v. Benton, 79 Mo. 148; Wheel- 
 er V. Millar, 90 N. Y. 353, 362; 
 Christensen v. Colby, 43 Hun (N. 
 Y.) 362. See also note in 41 L. R. 
 A. (N. S.) 981. The rule in most 
 jurisdictions is different when the 
 suit is on behalf of the corporation 
 to reach unpaid subscriptions. 
 Everett v. Foster, 223 Mass. 553, 
 112 N. E. 239; Utica Fire Alarm 
 Tel. Co. v. Waggoner &c. Co., 166 
 Mich. 618, 132 N. W. 502; Thomp- 
 son V. Reno Sav. Bank, 19 Nev. 103. 
 7 Pac. 68, 3 Am. St. 797, and note 
 826; note in L. R. A. 1918E, 243, 
 et seq. But see Niler v. Olszak, 87 
 Ohio St. 229, 100 N. E. 820, L. R. 
 A. 1918E, 238. Judgments purchased 
 by him can only be set off to the 
 extent of the amount that was ac- 
 tually paid for them. Bulkley v. 
 Whitcomb, 49 Hun 290, 1 N. Y. S. 
 748. In action by corporate credi- 
 tors to enforce the statutory lia- 
 bility of a stockholder, the stock- 
 holder must have held his claim 
 against the corporation at the time 
 the execution against the corpora- 
 tion was returned nulla bona, in or- 
 
355 
 
 STOCKHOLDERS 
 
 §212 
 
 though, as we have seen, a different rule applies in case of an 
 ordinary suit to reach unpaid subscriptions for the creditors. Of 
 course he may set up in defense any proper matters tending to 
 show that he is not a stockholder and that a stockholder's liabil- 
 ities do not attach to him.B^ But it is no defense that the credi- 
 tor purchased his claim against the corporation at a discount 
 after its insolvency.^" 
 
 §212 (187). Who may institute action to enforce statutory 
 liability. — An action to enforce the statutory liability can only be 
 maintained, as a rule at least, by the creditors themselves for 
 their own benefit.^'^ Thus, it has been held that neither the cor- 
 poration itself,^* nor its assignee, ^^ nor a receiver can enforce 
 it.^" Herein lies another distinction between the statutory lia- 
 bility of a stockholder and his ordinary liability for unpaid sub- 
 scriptions. 
 
 §213 (188). How statutory liability is enforced — Judgment 
 and execution against the corporation. — In most of the states. 
 
 der to use it as a defense. Co- 
 quard v. Prendergast, 35 Mo. App. 
 237. 
 
 558 Thomp. Corp. §§ 5146, 5176 
 (what is a stockholder). 
 
 56 Coquard v. Prendergast, 35 Mo. 
 App. 237. An assignee of a judg- 
 ment against a corporation, in or- 
 der to maintain an action upon it 
 against the individual stockholders, 
 must show that he paid a valuable 
 consideration for it. Wilson v. St 
 Louis &c. R. Co., 120 Mo. 45, 25 S, 
 W. 527, 759. 
 
 87 Hicks V. Burns, 38 N. H. 141 
 Farnsworth v. Wood, 91 N. Y. 308 
 note to Thompson v. Reno Sav 
 Bank, 3 Am. St. 191, 847. 
 
 ssUmsted v. Buskirk, 17 Ohio 
 St. 113; Liberty &c. Assn. v. Wat- 
 kins, 70 Mo. 13. 
 
 59 Wright V. McCormack, 17 Ohio 
 St. 86, 95; Dutcher v. Marine Nat. 
 Bank, 12 Blatch. (U. S.) 435, Fed. 
 Cas. No. 4203; Runner v. Dwiggins, 
 147 Ind. 238, 46 N. E. 580, 36 L. R. 
 A. 645. 
 
 60 Billings v. Robinson, 94 N. Y. 
 415; Jacobson v. Allen, 20 Blatch. 
 (U. S.) 525, 12 Fed. 454; Arenz 
 V. Weir, 89 111. 25. See also Steinke 
 V. Loofbourow, 17 Utah 252, 54 Pac. 
 120; 4 Thomp. Corp. (2d ed.), 
 §5090. Unless of course, the re- 
 ceiver is vested with that right by- 
 statute. Walker v. Crain, 17 Barb. 
 (N. Y.) 119; Richmond v. Irons, 121 
 U. S. 27, 7 Sup. Ct. 788; 30 L. ed. 
 864; Kirtley v. Holmes, 107 Fed. 1, 
 52 L. R. A. 738, holding that a re- 
 ceiver might enforce the statutory 
 liability. 
 
§213 
 
 RAILROADS 
 
 356 
 
 Special provision is made for enforcing this liability,®^ but it is the 
 rule in many jurisdictions that, even where not expressly re- 
 quired by statute, an action for this cause must be preceded by a 
 judgment and an execution returned unsatisfied.*^ In some other 
 jurisdictions, however, it is held, usually because the particular 
 statute so provides or is so construed, that the statutory liability 
 of stockholders is primary and may be enforced, without first 
 obtaining a judgment against the corporation.®^ Such a judg- 
 ment is generally held conclusive as to the amount and validity 
 
 61 Note to Thompson v. Reno 
 Sav. Bank, 3 Am. St. 797, 8S4. 
 The statutory remedy must be fol- 
 lowed and is generally held ex- 
 clusive. 4 Thomp. Corp. (2d ed.), 
 §§5092, S093. If no remedy is pro- 
 vided and the statute simply affirms 
 the liability of stockholders for un- 
 paid subscriptions, the usual remedy 
 in equity is the proper one. But if 
 a new liability is imposed upon the 
 stockholders severally, the creditor's 
 remedy may either be at law or in 
 equity, according to the circum- 
 stances of the case, and the nature 
 of the relief that should be granted. 
 For authorities upon these propo- 
 sitions, and upon the subject of par- 
 ties in such cases, see the exhaustive 
 note to Thompson v. Reno Sav. 
 Bank, 3 Am. St. 797, 8SS, 858; also 
 4 Thomp. Corp. (2d ed.), § 5091 ; and 
 8 Thomp. Corp. § S076. 
 
 62 Lane v. Harris, 16 Ga. 217; 
 Bayliss v. Swift, 40 Iowa 648; 
 Drinkwater v. Portland &c. R. Co., 
 18 Maine 35; Wright v. McCor- 
 raack, 17 Ohio St. 86; Mean's Ap- 
 peal, 85 Pa. St. 75; note to Prince 
 v. Lynch, 99 Am. Dec. 427, 434; 4 
 Thomp. Corp. (2d ed.), §§4952, 
 
 5123, 5124. See also Globe Pub. Co. v. 
 State Bank, 41 Nebr. 175, 59 N. W. 
 683, 27 L. R. A. 854, 10 Lewis Am. R. 
 
 6 Corp. 589; Swan Land &c. Co. 
 V. Frank, 148 U. S. 603, 13 Sup. Ct. 
 691, 37 L. ed. 577. 
 
 63 Spence v. Shapard, 57 Ala. 598; 
 Davidson v. Rankin, 34 Cal. 503; 
 Queenan v. Palmer, 117 111. 619,, 629, 
 
 7 N. E. 613; Todhunter v. Randall, 
 29 Ind. 275; McMahon v. Macy, 51 
 N. Y. 155, 160; Sleeper v. Goodwin, 
 67 Wis. 577, 586, 31 'N. W. 335. 
 Compare Marshall v. Harris, 55 
 Iowa 182, 7 N. W. 509, with the 
 Iowa case cited in last note, and Har- 
 per v. Union &c. Co., 100 111. 225, 
 with Illinois case herein cited. See 
 also 4 Thomp. Corp. (2d ed.), 
 §§ 4957, 4959, and 8 Thomp. Corp. 
 §§ 4957, 4958. See also as to when 
 prior proceedings against the 
 corporation are excused as useless. 
 Fourth Nat. Bank v. Francklyn, 120 
 U. S. 747, 7 Sup. Ct. 757, 30 L. ed. 
 825 ; Paine v. Stewart, 33 Conn. 516 ; 
 State Sav. Assn. v. Kellogg, 52 Mo. 
 583; Shellington v. Howland, 53 N. 
 Y. 371; Hodges v. Silver &c. Co., 
 9 Ore. 200. 
 
357 
 
 STOCKHOLDERS 
 
 §214 
 
 of the creditor's claim in the same manner as when the suit is to 
 enforce payment of balances due on subscriptions.*'* 
 
 §214 (189). Priority among creditors! — Forum — Contribution. 
 
 — A judgment creditor of an insolvent corporation who $rst 
 moves to charge a stockholder on his liability under the statute, 
 ordinarily acquires the priority of right to recover against such 
 stockholder, with which a creditor subsequently moving cannot 
 rightfully interfere.®^ The courts of another state in which a 
 part of the stockholders may reside, will generally enforce a lia- 
 bility imposed by statute or charter, for contract debts of the 
 company ,8® though they will not enforce penalties prescribed for 
 failures to obey state regulations.^'' This liability may be en- 
 forced against the estate of a deceased shareholder,®* and it has 
 
 64 See also 4 Thomp. Corp. (2d 
 ed.), §4970, et seq., note to Thomp- 
 son V. Reno Sav. Bank, 3 Am. St. 
 797, 858. In Ohio, suits against the 
 stockholder directly are permitted, 
 and it is held that he can interpose 
 only such defenses to them as are 
 available to the corporation. Rail- 
 road Co. V. Smith, 48 Ohio St. 219, 
 31 N. E. 743. 
 
 65 Lowry v. Parsons, 52 Ga. 356; 
 Thebus v. Smiley, 110 111 316; 
 Wells V. Robb, 43 Kans. 201, 23 Pac. 
 148; Cole v. Butler, 43 Maine 401. 
 But see Chicago v. Hall, 103 111. 
 342; State Sav. Assn. v. Kellogg, 
 63 Mo. 540. 
 
 66 Flash v. Conn, 16 Fla. 428, 26 
 Am. Rep. 721, 109 U. S. 371, 3 Sup. 
 Ct. 263, 27 L. ed. 966; Queenan v. 
 Palmer, 117 111. 619, 7 N. E. 613; 
 Howell v. Manglesdorf, 33 Kans. 
 194, 199, 5 Pac. 759; Manville v. 
 Edgar, 8 Mo. App. 324; Corning 
 v. McCullough, 1 N. Y. 47; Lowry 
 V. Inman, 46 N. Y. 119, 127; Aldrich 
 v. Anchor Coal &c. Co., 24 Ore. 32, 
 
 32 Pac. 756, 41 Am. St. 831; Ault- 
 man's Appeal, 98 Pa. St. 505; 
 Sackett's Harbor Bank v. Blake, 3 
 Rich. Eq. (S. Car.) 225; Woods v. 
 Wicks, 7 Lea (Tenn.) 40. But see 
 where special remedy is provided. 
 Fowler v. Lamson, 146 111. 472, 34 
 N. E. 932, il Am. St. 163, and note. 
 
 6T Derrickson v. Smith, 27 N. J. 
 L./ 166 ; Sayles v. Brown, 40 Fed. 8 ; 
 Lowry v. Inman, 46 N. Y. 119. See 
 generally as to enforcement of stat- 
 utory liability, conflict of laws and 
 what law governs in such cases, note 
 in Zl Am. St. 168-174; and note in 
 'i7> Am. St. 393, 394; also Blair v. 
 Newbegin, 65 Ohio St. 425, 62 N. E. 
 1040, 58 L. R. A. 644, and note. 
 
 68 Richmond v. Irons, 121 U. S. 
 27, 7 Sup. Ct. 788, 30 L. ed. 864; 
 Manville v. Edgar, 8 Mo. App. 324; 
 Chase v. Lord, 11 N. Y. 1. See for 
 additional cases to this eflfect and 
 also as to when it may be enforced 
 against heirs, and procedure for en- 
 forcement, note in Ann. Cas. 1913A 
 384. 
 
§215 
 
 RAILROADS 
 
 358 
 
 been held that this may be done without a reviver of the judg- 
 ment against the corporation.'^'' Stockholders are usually en- 
 titled, in equity, to contribution from other shareholders, as in 
 the case of suits for unpaid subscriptions.'"' 
 
 § 215 (190). When stockholders are liable as partners. — 
 
 Stockholders may generally be held liable as partners for 
 the payment of debts incurred by the company, if it has 
 •proceeded to do business without taking the requisite steps 
 to become legally incorporated. '^^ And where no such 
 business undertaken is authorized by the act under which 
 incorporated is attempted, a partnership liability will 
 be incurred by all who become members,''^ as it also 
 is, according to some authorities, where a corporation is formed 
 
 09 Douglass V. Loftus, 85 Kans. 
 720, 119 Pac. 74, Ann. Cas. 1913A, 
 378. See also Atlantic Trust Co. v. 
 Dana, 128 Fed. 209. 
 
 ■701 Thomp. Corp. (2d ed.), § 5231, 
 et seq; note to Thompson v. Reno 
 Sav. Bank, 3 Am. St. 797, 870. But 
 see 8 Thomp. Corp. §§ 5232-5328. 
 
 ■^1 Western &c. T. Co. v. Union 
 Pacific R. Co., 3 Fed. 721; Smith 
 V. Colorado &c. Co., 14 Fed. 399; 
 Weohselberg v. Flour City Nat. 
 Bank, 64 Fed. 90; Garnett v. Rich- 
 ardson, 35 Ark. 144; Harris v. Mc- 
 Gregor, 29 Cal. 124; Meinhard v. 
 Bedingfield Mercantile Co., 4 Ga. 
 App. 176, 61 S. E. 34; Pettis v. At- 
 kins, 60 111. 454; Bigelow v. Greg- 
 ory, IZ 111. 197; Coleman v. Cole- 
 man, 78 Ind. 344; Kaiser v. Law- 
 rence Sav. Bank, 56 Iowa 104, 8 N. 
 W. 772, 41 Am. Rep. 85; Walton v. 
 Oliver, 49 Kans. 107, 30 Pac. 172. 
 33 Am. St. 355; Field v. Cooks, 16 
 La. Ann. 153 ; Hurt v. Salisbury, 
 55 Mo. 310; Martin v. Fewell, 79 
 Mo. 401 ; Unity Ins. Co. v. Cram, 
 
 43 N. H. 636; Fuller v. Rowe, 57 
 N. Y. 23; Midill v. Collier, 16 Ohio 
 St. 599, 613, 47 Am. Dec. 387; note 
 in L. R. A. 1916C, 197, 198. But 
 see 'Whitney v. Wyman, 101 U. S. 
 392, 25 L. ed. 1050; Humphrey v. 
 Mooney, 5 Colo. 282; Planters' &c 
 Bank V. Padgett, 69 Ga. 159; Mer- 
 chants' &c. Bank v. Stone, 38 Mich. 
 779; Merriman v. Magiveny, 12 
 Heisk. (Tenn.) 494. 
 
 ■72 4 Thomp. Corp. (2d ed.), §4747 
 et seq; 'Vredenburg v. Behan, 
 33 La. Ann. 627. But see Mande- 
 ville v. Courtwright, 126 Fed. 1007. 
 So where the law under which in- 
 corporation is attempted is uncon- 
 stitutional. Eaton V. Walker, 76 
 Mich. 579, 43 N. W. 638, 6 L. R. 
 A. 102. See also Heaston v. Cin- 
 cinnati &c. R. Co., 16 Ind. 275, 278, 
 79 Am. Dec. 430; Kennedy v. Mc- 
 Lellan, 76 Mich. 598, 43 N. W. 638; 
 Williams y. Pank, 7 Wend. (N. Y.) 
 541 ; Chenango Bridge Co. v. Paige, 
 83 N. Y. 178, 190, 38 Am. Rep. i.<:7. 
 
359 
 
 STOCKHOLDERS 
 
 §215 
 
 to do business only outside of the state creating it, the forma- 
 tion of such a corporation being held to be a fraud upon the 
 lawJ* But the weight of authority seems to be opposed to this 
 latter ruleJ* What omissions, in the articles will render the in- 
 corporation so incomplete as to fix a partnership liability upon 
 the members may depend largely upon the language of the 
 statute under which incorporation is attempted ; for where there 
 is a valid law authorizing the incorporation a failure to observe 
 immaterial provisions/^ or to perform acts required after the in- 
 
 73 Land Grant R. &c. Co. v. Cof- 
 fey Co., 6 Kans. 245, and opinion of 
 Attorney-General of Texas (1887), 
 2 R. & Corp. L. J. 433, where the 
 companies were only authorized to 
 transact business outside the sov- 
 ereignty creating them. Hill v. 
 Beach, 12 N. J. Eq. 31; Kruse v. 
 Dusenbury, 19 Wkly. Dig. (N. Y. C. 
 P.) 201; Montgomery v. Forbes, 148 
 Mass. 249, 19 N. E. 342, where regu- 
 larly organized corporations had 
 places of business only outside of 
 the states by which they were 
 created. See also Duke v. Taylor, 
 37 Fla. 64, 19 So. 172, 31 L. R. \. 
 484, S3 Am. St. 232; Montgomery 
 V. Forbes, 148 Mass. 249, 19 N. E. 
 342 ; State v. Park &c. Co., 58 Minn. 
 330, 59 N. W. 1048, 49 Am. St. 516; 
 Coler V. Tacoma, 64 N. J. 117, S3 
 Atl. 680. See also Wonderly v. 
 Booth, 36 N. J. L. 2S0; note in L. 
 R. A. 1916C, 217. 
 
 T4 Canada Southern R. Co., v. 
 Gebhard, 109 U. S. 527, 3 Sup. Ct. 
 363, 27 L. ed. 1020; Oregonian R. 
 Co. V. Oregon R. &c. Co., 23 Fed. 
 232; New York &c. R. Co., In re, 
 35 Hun (N. Y.) 220; Demarest v. 
 Flack, 128 N. Y. 205, 28 N. E. 645, 
 13 L. R. A. 854; Pennsylvania Co. 
 V. Sloan, 1 Bradw. (111.) 364; 4 
 
 Thorap. Corp. (2d ed.), §4749. But 
 see Northern Securities Co. v. 
 United States, 193 U. S. 197, 24 Sup. 
 Ct. 436, 48 L. ed. 679; Empire Mills 
 V. Alston Grocery Co., 4 Willson 
 Civ. Cas. Ct. App. (Tex.) 221, 15 
 S. W. 200, 12 L. R. A. 366, and 
 note; Second Nat. Bank v. Hall, 35 
 Ohio St. 158, where the stockhold- 
 ers escaped a personal liability by 
 organizing under the laws of an ad- 
 joining state. Bateman v. Service, L. 
 R. 6 App. Cases 386. As to tramp 
 corporations, generally, see note in 
 L. R. A. 1917E, 893. 
 
 T5 McClinch v. Sturgis, 72 Maine 
 288, where notice of the meeting to 
 organize was not sent to all the 
 members. Judah v. American &c. 
 Co., 4 Ind. 333, where the subscrip- 
 tions were taken and notice of the 
 stockholders' meeting given in a 
 different manner from that provided 
 in the act. Stout v. Zulick, 46 N. 
 J. L. 599, 7 Atl. 362, where an im- 
 material part 'of the certificate of 
 acknowledgment was omitted. Rus- 
 sell v. McLellan, 14 Pick. (Mass.) 
 63; Holmes v. Gilliland, 41 Barb. 
 (N. Y.) 568, where no notice was 
 given to the community by publi- 
 cation. Granby &c. L-o. v. Richards. 
 95 Mo. 106, 8 S. W. 246, where the 
 
§215 
 
 RAILROADS 
 
 360 
 
 corporation is effected will not, as a rlile, vitiate the organiza- 
 tion,''® and different preliminary acts are made essential in dif- 
 ferent statutes. Nor is it true in every case that the failure to 
 fully comply with the statute will, make the stockholders liable as 
 partners. The doctrine of estoppel should not be overlooked. In 
 accordance with that doctrine it is fairly well settled that where 
 there is a valid law providing for incorporation and an attempt 
 has been made in good faith to incorporate under such law for the 
 purposes therein specified, and to carry on the authorized busi- 
 ness as a corporation, one who deals with it as such is estopped 
 from questioning the corporate existence and cannot hold the 
 incorporators liable as partners, notwithstanding the fact that 
 the statutory formalities may not have been fully complied 
 with.''® A stockholder, if held to the liability of a partner, will, 
 
 articles were not filed with the 
 county clerk as required by law. For 
 omissions held material, see note 71 
 supra. 
 
 ■^8 Trowbridge v. Scudder, 11 
 Cush. (Mass.) 83, where the prin- 
 cipal business for which the corpo- 
 ration was organized was never be- 
 gun. Lagan v. Iowa &c. Construc- 
 tion Co., 49 Iowa 317, where the 
 company had been guilty of ultra 
 vires and fraudulent acts. First 
 Nat. Bank v. Davies, 43 Iowa 424, 
 where the articles were to be filed 
 within ninety days. But in the re- 
 cent case of Cincinnati Cooperage 
 Co. V. Bate, 96 Ky. 356, 26 S. W. 538, 
 49 Am. St. 300, 10 Lewis' Am. R. 
 & Corp.' 653, it is held that changing 
 the name of a corporation without 
 complying with the statute is to de- 
 stroy the identity of the corporation 
 and amounts to a virtual abandon- 
 ment of it, so as to render the stock- 
 holder liable as partner. The sound- 
 ness of this decision, however, seems 
 to us to be doubtful, and such, we 
 
 understand, is the opinion of Mr. 
 Lewis as indicated in the note in 10 
 Lewis' Am. R. & Corp. § 665 et seq. 
 T8 Whitney v. Wyman, 101 U. S. 
 392, 25 L. ed. 1050; Gartside Coal 
 Co. V. Maxwell, 22 Fed. 197; Sni- 
 der's Sons Co. v. Troy, 91 Ala. 224, 
 8 So. 754, 11 L. R. A. 515, 24 Am. 
 St. 887; Humphreys v. Mooney, 5 
 Colo. 282; Duke v. Taylor, 37 Fla. 
 64, 19 Sio. 172, 175, 31 L. R. A. 484, 
 53 Am. St. 232, 10 Lewis' Am. R. 
 & Corp. 589; Bushnell v. Consoli- 
 dated &c. Co., 138 111. 67, 27 N. E. 
 596; Snyder v. Studeb^ker, 19 Ind. 
 462, 81 Am. Dec. 415; Baker v. Neff, 
 7i Ind. 68; Williamson v. Kokomo 
 &c. Co., 89 Ind. 389; Crowder 
 V. Sullivan, 128 Ind. 486, 28 IN. E. 
 94; Walton v. Riley, 85 Ky. 413, 3 
 S. W. 60S; Laflin &c. Co. v. Sin- 
 sheimer, 46 Md. 315, 24 Am. Rep. 
 522; First Nat. Bank v. Almy, 117 
 Mass. 476; Finnegan v. Noeren- 
 berg, 52 Minn. 239, 53 N. W. 1150, 
 18 L. R. A. 778, 38 Am. St. 552; 
 Globe Pub. Co. v. State Bank, 41 
 
361 
 
 STOCKHOLDERS 
 
 §215 
 
 ordinarily, be bound only as a partner for the debts contracted 
 while he was a member of the company^'* A stockholder does 
 not become liable as a partner merely because he falsely repre- 
 -sents that the corporation is solvent,*" and his promise to pay the 
 •corporate debts is a promise to answer for the debts of another 
 within the statute of frauds. ^^ Where persons purchase a rail- 
 road at execution sale, it has been held that they acquire none 
 •of the special privileges of individual stockholders in the old cor- 
 poration, and, in such a case, if they continue to operate it with- 
 out forming a new corporation, they will incur partnership lia- 
 bilities on account thereof.*^ 
 
 Nebr. 175, 59 N. W. 683, 27 L. R. 
 A. 854; Larned v. Beal, 65 N. H. 
 184, 23 Atl. 149; Vanneman v. 
 Young, 52 N. J. L. 403, 20 Atl. S3, 
 .3 Lewis' Am. R. & Corp. 660, and 
 note; Second Nat. Bank v. Hall, 
 35 Ohio St. 158; Swofford Bros. Dry 
 Goods Co. V. Owen, 37 Okla. 616, 
 133 Pac. 193; Rutherford v. Hill, 
 22 Ore. 218, 29 Pac. 546, 17 L. R. 
 A. S49n, 29 Am. St. 596n; AUe- 
 .^heny Nat. Bank v. Bailey, 147 Pa. 
 St. Ill, 23 Atl. 439; American Salt 
 Co. V. Heidenheimer, 80 Tex. 344, 
 15 S. W. 1038, 26 Am. St. 743. 
 
 T9 Fuller V. Rowe, 57 N. Y. 23. 
 But where he becomes a member by 
 transfer of another's interest, he 
 may be held to have assumed his 
 :grantor's liability for precedent 
 debts. Taylor v. Ifill, 1 N. R. 566, 
 8 L. T. R. (N. S.) 148. It has 
 been held, however, that one who 
 becomes a member after the at- 
 
 tempted organization, and takes no 
 part in the management of the com- 
 pany is not liable for its debts be- 
 cause of imperfect incorporation. 
 Stafford Nat. Bank v. Palmer, 47 
 Conn. 443. 
 
 80 Searight v. Payne, 2 Tenn. Ch. 
 175. But he may render himself 
 liable in damages for false repre- 
 sentations. 
 
 81 Trustees &c. v. Flint, 13 Mete. 
 (Mass.) 539. 
 
 82 Chaffe v. Ludeling, 27 La. Ann. 
 607. As to when a railroad com- 
 pany becomes liable as a partner 
 or the like for contracts or torts 
 of another company in which it owns 
 a majority of stock or otherwise 
 controls, see Stone v. Cleveland &c. 
 R. Co., 202 N. Y. 352, 95 N. E. 816, 
 35 L. R. A. (N. S.) 770 (holding 
 it not liable in the particular case), 
 and note. 
 
CHAPTER X. 
 
 BY-LAWS, RULES AND REGULATIONS. 
 
 Sec. 
 
 220. Power to make by-laws. 
 
 221. Who are affected by corporate 
 
 by-laws. 
 
 222. Limits of power to make by- 
 
 laws — Reasonableness a 
 question for the court. 
 
 223. Power to make by-laws resides 
 
 in stockholders — When di- 
 rectors may make. 
 
 224. Formalities of enactment — 
 
 Proof. 
 
 225. Amendment and repeal. 
 
 226. Enforcement of by-laws. 
 
 227. Rules and regulations in Eng- 
 
 land. 
 
 Sec. 
 
 228. Distinction between by-laws 
 
 and rules and regulations — 
 Right of railroad company 
 to make rules and regula- 
 tions. 
 
 229. Examples of rules and regula- 
 
 tions which railroad com- 
 panies may make — Rules af- 
 fecting passengers. 
 
 230. Rules affecting shippers and 
 
 freight. 
 23L Rules affecting employes. 
 
 232. Enforcement of rules — Penal- 
 
 ties. 
 
 233. Reasonableness of rules — 
 
 When a question of fact and' 
 when a question of law. 
 
 234. Failure to enforce rules — 
 
 Waiver or abrogation. 
 
 § 220 (191). Power to make by-laws. — The law implies from 
 the act of creating a corporation a grant of power to make all 
 necessary by-laws, or private statutes for the government of itself 
 and its members, officers and agents. ^ This power is, however, 
 in most cases, specially granted to railroad companies and other 
 corporations either by a provision of the company's charter or by 
 general statute. ^ In many cases the power is granted to make 
 
 1 Drake v. Hudson River R. Co., 
 7 Barb. (N. Y.) 508; State v. Over- 
 ton, 24 N. J. L. 435, 61 Am. Dec. 
 671 ; Martin v. Nashville &c. Assn., 
 2 Cold. (Tenn.) 418; 1 Thomp. 
 Corp.. (2d ed.), § 965. 
 
 2 They may make all by-laws and 
 regulations for their own govern- 
 ment necessary and consistent with 
 the constitution and laws of the 
 state and with their own charters. 
 1 Thomp. Corp. (2d ed.), §965. 
 
 362 
 
.363 
 
 BY-r.AWS, RULES AND REGULATIONS 
 
 §220 
 
 b}-laws for certain specified purposes, and where this is so, leg- 
 islation upon other subjects is usually considered as prohibited ' 
 by implication.* The corporation cannot pass any by-law incon- 
 sistent with its charter,* nor, as a rule, any relating to matters 
 ■outside the objects for which it was incorporated, unless power 
 to do so is expressly conferred.^ The usual subjects with refer- 
 ence to which corporations ordinarily have power to make by- 
 laws are such as relate to the time and manner of calling and 
 conducting meetings of the stockholders, or of the directors, the 
 number of each .•equired to form a quorum, the method of vot- 
 ing proxies, the number of shares entitling a member to one or 
 
 3 Child V. Hudson Bay Co., 2 
 Peere Wms. 207; State v. Ferguson, 
 .33 N. H. 424, 430. See alsa 
 McCuUough V. Annapolis R. Co., 4 
 ■Gill (Md.) 58; Taylor v. Griswold, 
 14 N. J. L. 222, 27 Am. Dec. 33n; 
 State V. Mayor &c., 33 N. J. L. 57; 
 Ireland v. Globe Milling &c. Co., 
 19 R. I. 180, 61 Am. St. 756; Rex 
 V. Spencer, 3 Burr. 1827. But this, 
 •of course, depends upon the charter 
 or particular statute and its proper 
 •construction, and the mere fact that 
 power is expressly given to make 
 rules or by-laws on one subject does 
 not necessarily imply a prohibition 
 as to all other subjects, especially 
 In the case of such a corporation 
 as a railroad company with its 
 -varied and complex relations, in- 
 terests and duties. For instance, a 
 statute might expressly authorize it 
 to make rules as a carrier governing 
 its relation with shippers and thus 
 "would not prevent its making rules 
 as to its employes or the like not 
 affecting shippers or its duties as a 
 ■carrier. 
 
 4 Kennebec &c. R. Co. v. Kendall, 
 31 Maine 470, where it was under- 
 taken to impose a personal liability 
 for calls not imposed by the char- 
 ter. Carr v. St. Louis,, 9 Mo. 191, 
 where the corporation undertook to 
 increase the salaries of the officers 
 beyond what the charter allowed. 
 McCullough V. Annapolis R. Co., 4 
 Gill (Md.) 58 where the right of an 
 officer to vote, was restricted to a 
 casting vote in case of a tie. Clark 
 V. Wild, 85 Vt. 212, 81 Atl. 536, Ann. 
 Cas. 1914C, 661, where many addi- 
 tional authorities are cited both in 
 the opinion and in the note. See 
 also 1 Thomp. Corp. (1st ed.), 
 § 1011 ; Steiner v. Steiner &c. Co., 
 120 Ala. 128, 26 So. 494; Durkee v. 
 People, 155 111. 354, 46 Am. St. 340, 
 40 N. E. 626; People v. Chicago &c. 
 Exchange, 170 III. 556, 39 L. k. A. 
 373, 62 Am. St. 404, 48 N. E. 1062; 
 Presbyterian &c. Fund v. Allen, 106 
 Ind. 593, 7 N. E. 317; American Le- 
 gion of Honor v. Perry, 140 Mass. 
 580, 5 N. E. 634; Kearney v. An- 
 drews, 10 N. J. Eq. 70. 
 
 5 1 Thomp. Corp. (2nd ed.) §§997, 
 998. 
 
§221 
 
 RAILROADS 
 
 364- 
 
 more votes, the mode of enforcing forfeitures of stock (where no- 
 ■ mode is prescribed by statute), the number of directors and other 
 officers, and the mode of choosing and compensating them, the 
 transfer of stock, and the management and disposition of the corr 
 porate property.* 
 
 § 221 (192). Who are affected by corporate by-laws. — Such 
 by-laws are obligatory only upon the corporate body, its mem- 
 bers and agents, and do not, as a rule, affect the general public.'^ 
 Herein, as we shall hereafter show, they differ from rules and 
 regulations such as those promulgated by common carriers to- 
 govern their dealings with the public. They are not evidence for 
 the corporation against strangers who deal with it unless such 
 by-laws are brought home to their knowledge and assented to by 
 them.^ But the members of the company are affected by all 
 binding statutes of the corporation from the timi.; of their enact- 
 ment, without any formal notice of their existence.® 
 
 6 Reasonable rules and regula- 
 tions may, of course, be made in 
 case of a railroad company within 
 proper limits in regard to the con- 
 duct of the business, and relations 
 between the company and its em- 
 ployes and shippers and travelers. 
 
 7 Samuel v. Holladay, 1 Woolw. 
 (U. S.) 400, Fed. Cas. No. 12288; 
 Bank of Holly Springs v. Pinson, 
 S8 Miss. 421, 38 Am. Rep. 330; Wait 
 V. Smith, 92 111. 385; Walker v. Wil- 
 mington &c. R. Co., 26 S. Car. 80, 
 1 S. E. 366. They bind only mem- 
 bers and officers or agents. Bank of 
 Wilmington v. WoUaston, 3 Harr. 
 (Del.) 90; Worcester v. Essex 
 Bridges Co., 7 Gray (Mass.) 457; 
 Palmyra v. Morton,' 25 Mo. 593; 
 Rathburn v. Snow, 123 N. Y. 343, 
 25 N. E. 379, 10 L. R. A. 355; Me- 
 chanics' Bank v. Smith, 19 Johns. 
 (N. Y.) 115; Susquehanna Ins. Co. 
 V. Perrine, 7 Watts & S. (Pa.) 348. 
 
 But see Bocock v. Alleghany &c. 
 Co., 82 Va. 913, 1 S. E. 325, 3 Am. 
 Rep. 128. See also Moyer v. East 
 Shore &c. Co., 41 S. Car. 300, 19 S. 
 E. 651, 25 L. R. A. 48, 44 Am. St. 
 709, and note. 
 
 8 Smith V. North Carolina R. Co.,. 
 68 N. Car. 107; Moyer v. East 
 Shore &c. Co., 41 S. Car. 300, 19 S. 
 E. 651, 44 Am. St. 709, L. R. A. 
 48, and note. See also 1 Thomp. 
 Corp. (2d ed.), §1056. 
 
 9 Arapahoe &c., Co. v. Stevens, 13 
 Colo. 534, 22 Pac. 823; Bauer v. 
 Samson Lodge, 102 Ind. 262, 1 N. 
 E. 571; Hunter v. Sun Mutual &c 
 Co., 26 La. Ann. 13 ; Frank v. Mor- 
 rison, 58 Md. 423; Buffalo v. Web- 
 ster, 10 Wend. (N. Y.) 99; Wood- 
 fin v. Asheville &c. Ins Co., 6 Jones 
 Law (N. Car.) 558; Susquehanna 
 &c. Co. V. Perrine, 7 Watts & S. 
 (Pa.) 348. 
 
365 
 
 BY-LAWS, RULES AND REGULATIONS 
 
 §222 
 
 § 222 (193). Limits of power to make by-la ws-^Reasonable- 
 ness a question for the court. — The power of the corporation to 
 make by-laws is always limited by the requirement that they 
 must not be inconsistent with the constitution and valid statutes 
 of the United States or of the state in which it is established 
 not- with the general policy and fundamental principles of com- 
 mon law as it is therein accepted.^" Thus, it was held in a re- 
 cent case that a by-law permitting bondholders to vote for direc- 
 tors was in conflict with the constitution of Illinois and the gen- 
 eral policy of the state and therefore void.^^ The rule is often 
 stated to be that by-laws must be reasonable. ^^ and not opposed 
 to common right. ^^ The question as to the reasonableness of a 
 by-law is for the court, in most jurisdictions, and it is held that 
 the jury cannot hear evidence as to its effects offered in proof of 
 the claim that it is unreasonable.^* A by-law can never be valid 
 
 loBuUard v. Bank, 18 Wall. (U. 
 S.) 589, 21 L. ed. 923; Illinois Cent. 
 R. Co. V. Bloomington, 1(> 111. 447; 
 People V. Chicago &c. Exchange, 
 170 111. SS6, 48 N, E. 950, 62 Am. 
 St. 404; Sayre v. Louisville &c. 
 Assn., 1 Duv. (Ky.) 143, 85 Am. 
 Dec. 613n; Kennebec &c. R. Co. v. 
 Kendall, 31 Maine 470; State v. 
 Curtis, 9 Nev. 325; State v. Cin- 
 cinnati, 23 Ohio St. 445; Price v. 
 Supreme Lodge, 68 Tex. 361, 4 S. 
 W. 633; 1 Thomp. Corp. (2d ed.), 
 § 995. 
 
 iiDurkee v. People, 155 111. 354, 
 40 N. E. 626, 46 Am. St. 340. See 
 also Brewster v. Hartley, 37 Cal. IS, 
 99 Am. Dec. 237. 
 
 12 Chandler v. Northern Cross R. 
 Co., 18 111. 190; American Livestock 
 Co. V. Chicago &c. Exchange, 143 
 111. 210, 32 N. E. 274, 36 Am. St. 
 385; Kennebec &c. R. Co. v. Ken- 
 dall, 31 Maine 370; Kent v. Quick- 
 silver Min. Co., 78 N. Y. 159; Wil- 
 liams V. Great Western R. Co., 10 
 Exch. 15. 
 
 13 Hayden v. Noyes, 5 Conn. 391. 
 But see Goddard v. Merchants' Ex- 
 change, 9 Mo. App. 290. By-laws 
 which are vexatious, unequal, op- 
 pressive and manifestly detrimental 
 to the interests of the corporation 
 are void. Gosling v. Veley, 12 Q. 
 B. 328; Chicago v. Rumpflf, 45 111. 
 90, 92 Am. Dec. 196; People v. Med- 
 ical Society, 24 Barb. (N. Y.) 570. 
 
 1* Illinois Cent. R. Co. v. Whitte- 
 more, 43 111. 420; Commonwealth v. 
 Worcester, 3 Pick. (Mass.) 462; 
 Merz V. Missouri Pac. R. Co., 14 
 Mo. App. 459; Morris &c. R. Co. v. 
 Ayres, 29 N. J. L. 393, 80 Am. Dec. 
 215; People v. Throop, 12 Wend. 
 (N. Y.) 182; 1 Elliott's Gen. Pr. 
 §436; 1 Thomp. Corp. (2d ed.), 
 §§ 999, 1001. Its unreasonableness 
 must be demonstrated. Hibernia &c. 
 Co. V. Harrison, 93 Pa. St. 264; 
 Faxon v. Sweet, 13 N. J. L. (1 
 Green) 196. But see Day v. Owen, 
 5 Mich. 520, holding that the rea- 
 sonableness of a by-law should be 
 left to the jury under proper instruc- 
 
§222 
 
 RAILROADS 
 
 366 
 
 where it impairs the obligation of a contract/^ nor where it 
 amounts to a retrospective or ex post facto rule/® nor where it 
 deprives the holder of< any of his vested property rights. ^''^ The 
 right given by statute to vote by proxy is a substantial right and 
 cannot be taken away, or even materially abridged, by any cor- 
 porate by-laws. 1® Neither will a by-law be sustained if, under the 
 guise of regulating the mode of transfer, it unreasonably restricts 
 the power to transfer shares;^® or if it forbids the member ta 
 
 tions from the court. See also as 
 to railroad regulations for jury 
 Chicago &c. R. Co. v. McLellan, 84 
 111. 109; Morris &c. R. Co. v. Ayres, 
 29 N. J. L. 393, 80 Am. Dec. 215; 
 Pittsburgh &c. R. Co. v. Lyon, 123 
 Pa. St. 140, 16 Atl. 607, 10 Am. St. 
 517. Post, §233. See generally 
 Wuerfler v. Trustees &c., 116 Wis. 
 19, 92 N. W. 433, 96 Am. St. 94; 
 note in 43 Am. St. 147, 153; Car- 
 ney V. New York &c. Ins. Co., 162 
 N. Y. 453, 57 N. E. 78, 49 L. R. A. 
 471, 76 Am. St. 347. 
 
 15 Such a by-law would be con- 
 trary to the constitution of the 
 United States. U. S. Const, art. 1, 
 §10; Kennebec &c. R. Co. v. Ken- 
 dall, 31 Maine 470; Northford &c. 
 Assn. V. Perkins, 93 Maine 235, 44 
 Atl. 893, 74 Am. St. 342. See also 
 Flint V. Pierce, 99 Mass. 68, 96 Am. 
 Dec. 685, 691; Bergman v. St. Paul 
 &c. Assn., 29 Minn. 275, 13 N. W. 
 120; Stuyesant v. New York, 7 
 Cow. (N. Y.) 588; note to Freeland 
 V. McCuUough, 43 Am. Dec. 694. 
 
 16 U. S. Const, art. 1, § 10; How- 
 ard V. Savannah, T. Charlt. (Ga.) 
 173 (holding a municipal by-law 
 void at common law for this rea- 
 son) ; People v. Fire Department, 31 
 Mich. 458; Great Falls Ins. Co. v. 
 Harvey, 45 N. H. 292. 
 
 1'? Kent v. Quicksilver Min. Co., 
 78 N. Y. 159, where preferred stock 
 had been issued. Taylor v. Gris- 
 wold, 14 N. J. L. 222, where an at- 
 tempt was made to give a vote for 
 each share of stock, and so deprive 
 the small stockholders of an equal 
 voice in the management of its af- 
 fairs. See People v. Crockett, 9 
 Cal. 112; Gray v. Portland Bank, 
 3 Mass. 364, 3 Am. Dec. 156; 
 Budd v. Multnomah St. R. Co., 15 
 Ore. 413, 3 Am. St. 169, 15 Pac. 
 659. Long Island R. Co., In re, 19 
 Wend. (N. Y.) 37, 32 Am. Dec. 429. 
 The last two cases hold a by-law 
 forfeiting shares invalid. See Ire- 
 land V. Globe Mining Co., 21 R. I. 
 9, 41 Atl. 258, 79 Am. St. 769; Peo- 
 ple's Home Sav. Bank v. Superior 
 Court, 104 Cal. 649, 38 Pac. 452, 29 
 L. R. A. 844n, 43 Am. St. 147, 153, 
 and note. 
 
 18 People's Home Sav. Bank v. 
 Superior Court, 104 Cal, 649, 38 Pac. 
 452, 29 L. R. A. 844n, 43 Am. St. 
 147; Matter of Lighthall Mfg. Co., 
 47 Hun. (N. Y.)258. 
 
 19 Sargent v. Franklin Ins. Co., 8 
 Pick. (Mass.) 90; Farmers' &c. 
 Bank v. Wasson, 48 Iowa 336, 30 
 Am. Rep. 398; Moore v. Bank of 
 Commerce, 52 Mo. 377. 
 
367 BY-LAWS, RULES AND REGULATIONS § 223 
 
 seek legal redress in the courts ;2'' for such by-laws would at- 
 tack rights with which the states themselves are prohibited from 
 interfering,^! and a corporation cannot, under a grant of power 
 from a state, do what the state itself has no power to do. And 
 so the repeal of a by-law cannot divest rights acquired under it 
 while it continued in force.^^ If the by-law be separable in its 
 character, valid provisions contained in it may stand, although it 
 contains others which are void.^^ 
 
 § 223 (194). Power to make by-laws resides in stockholders — 
 When directors may make. — The power to make by-laws resides 
 in the members of the corporation at large, where there is no law 
 or valid usage to the contrary.^* But it is frequently provided 
 by charter^s or by general statute that this power shall be exer- 
 cised by the directors ; and where there is no provision on the 
 subject the stockholders may delegate to the directors authority 
 to make all necessary by-laws. 2* 
 
 §224 (195). Formalities of enactment — Proof. — By-laws are 
 not generally required in this country to be enacted or promul- 
 gated in any particular form, but only to be enacted at a legal 
 
 20 Amesbury v. Bowditch &c. Co., vitiates the whole. State v. Curtis, 
 6 Gray (Mass.) 596; Bauer v. Samp- 9 Nev. 325. 
 
 son Lodge, 102 Ind. 262, 1 N. E. 24 Morton G. R. Co. v. Wysong, 
 
 571, and authorities there cited. 51 Ind. 4, 12; Bank of Holly 
 
 21 U. S. Const., art. 1, § 10. Springs v. Pinson, 58 Miss. 421, 38 
 
 22 Kent V. Quicksilver Min. Co., Am. Rep. 330; Martin v. Nashville 
 78 N. Y. 159, 182. See also Wist &c. Assn., 2 Coldw. (Tenn.) 418; 
 V. Grand Lodge, 22 Ore. 271, 29 1 Thomp. Corp. (2d ed.), §968. 
 Pac. 610, 29 Am, St. 603; Supreme 25 See Union Bank of Maryland 
 Lodge K. P. v. Knight, 117 Ind. v. Ridgely, 1 Harris & G. (Md.) 
 489, 20 N. E. 479, 3 L. R. A. 409n; 324; and Fairfield Tpk. Co. v. 
 note in 43 Am. St. 157, 158. Thorp, 13 Conn. 173. 
 
 23 Amesbury v. Bowditch &c. Ins. 26 Cahill v. Kalamazoo Mut. Ins. 
 Co., 6 Gray (Mass.) 596; Shelton Co., 2 Doug. (Mich.) 124, 43 Am. 
 v. Mayor, 30 Ala. 540, 68 Am. Dec. Dec. 457; State v. Overton, 24 N. 
 143; Rogers v. Jones, 1 Wend. (N. J. L. 435; Willcocks, Ex parte, 7 
 Y.) 237, 19 Am. Dec. 493. But not Cow. (N. Y.) 402, 17 Am. Dec. 525; 
 if the by-law must be taken as an 1 Thomp. Corp. (2d ed.) § 970. 
 entirety . so that the invalid part 
 
§ 224 RAILROADS 36S 
 
 meeting of the corporation, and even that much is not always re- 
 quired to be shown in many jurisdictions where they have been 
 acted upon.2''' And it has been held that the jury may find a by- 
 law, its terms and adoption, from the usage of the corporation, in 
 the absence of other evidence, no particular form of adoption be- 
 ing prescribed,^* and it being shown that no record evidence of 
 the adoption of such by-laws is in existence. But, in general, it 
 is necessary, in order to prove what they are, that the by-laws 
 themselves shall be produced, and where such is the case parol 
 proof of their contents by an officer of the corporation is insuf- 
 ficient.2" Where the charter or a general statute prescribes, the 
 mode in which by-laws shall be made and adopted in order that 
 they may be valid, that mode must be pursued.*" Thus, in Eng- 
 land, by-laws, are generally required to be made under corporate 
 seal,^i and in California and other states which follow its code, 
 all by-laws adopted must be certified by a majority of the direc- 
 tors and by the secretary of the corporation, and copied in a 
 legible hand in the "book of by-laws" to be kept. in the corporate 
 office for public inspection; and no by-law shall take effect until 
 so copied. ^2 When the books of the corporation, in which it is 
 proved that the by-laws of the corporation are registered, are 
 produced, they are held to be evidence of the existence and terms 
 of such by-laws in all courts of justice.^^ 
 
 27 1 Thomp. Corp. (2d ed.), §987, performance shall be preserved, 
 et seq. But the written assent of Langsdale v. Bonton, 12 Ind. 467; 
 the holders of two-thirds of tue McCabe v. Board &c., 46 Ind. 380. 
 capital stock is effectual to adopt a See Fairfield T. Co. v. Thorp, 13 
 code of by-laws without a meeting Conn. 173. 
 
 for that purpose in several of the 29 Lumbard v. Aldrich, 8 N. H. 
 
 states. 31. See also 3 Elliott Evidence, 
 
 28 Union Bank v. Ridgely, 1 Har- § 1941, and cases cited in note 93. 
 ris & G. (Md.) 324. See also Smith sol Thomp. Corp. (2d ed.), § 986; 
 V. Sherman, 113 Iowa 601, 85 N. Dunston v. Imperial Gas Light Co., 
 W. 747; Graebner v. Post, 119 Wis. 3 Barn. & Adol. 12S. 
 
 392, 96 N. W. 783, 100 Am., St. 890. si Dunston v. Imperial Gas &c. 
 
 So ,they may find any act of the Co., 3 B. & Ad. 125, 23 E. C. L. 63. 
 
 directors to have been, duly per- 32 See Vercoutere v. Golden State 
 
 formed if the statute does not pre- Land Co., 116 Cal. 410, 48 Pac. 375. 
 
 scribe the manner of its performance S3 Case of Thetford, 1 Salk 192„ 
 
 and that record evidence of such 12 Vin. Abr. 90. 
 
369 BY-LAWS, RULES AND REGULATIONS § 225 
 
 § 225 (196). Amendment and repeal. — Of course, the same 
 body (whether stockholders or directors) that may enact by-laws 
 may repeal them or enact others in their stead .3* And it seems 
 that the repeal of a by-law may be proved by showing a course 
 of conduct inconsistent therewith in a manner similar to that by 
 which its adoption is shown by usage. ^^ So, of course, amend- 
 ments may be made in the by-laws.** But by-laws upon the 
 faith of which and under which vested rights have been acquired 
 by a member cannot be so amended or repealed as to impair such 
 rights.*'' 
 
 § 226 (197). Enforcement of by-laws. — The power to make 
 by-laws necessarily implies the power to enforce them by pecun- 
 iary penalties, competent and proportionable to the offense.*® 
 But such power is often specially conferred by charter or by stat- 
 ute. The penalty must, however, be reasonable and certain,*' 
 and cannot be enforced by a forfeiture of shares*" without statu-- 
 tory authority. i 
 
 § 227 (198). Rules and regulations in England. — In England 
 rules for the government of the railroad employes, in their deal- 
 ings with the public, and of the passengers and others transact- 
 
 34 The power to make by-laws stockholders have no right, vested 
 
 generally implies the power to re- or otherwise, which is infringed by 
 
 peal them. King v. Ashwell, 12 East the majority amending the by-laws 
 
 22; Kent v. Quicksilver &c. Co., 78 in the manner provided. Renn v. 
 
 N. Y. 159. But see Stevens v. United States Cement Co., 36 Ind. 
 
 Davidson, 18 Grat. (Va.) 819, 98 App. 149, li N. E. 269. 
 Am. Dec. 692. 38 1 Thomp. Corp. (2nd ed.), 
 
 35 Attorney-General v. Middle- §1040, et seq. 
 
 ton, 2 Ves. Sen. 327. See also 39 Cahill v. Kalamazoo &c. Co., 2 
 
 Henry v. Jackson, Zl Vt. 431. Doug. (Mich.) 124, 43 Am. Dec. 457; 
 
 36 Schrick v. St. Louis &c. Co., 34 Mobile v. Yuille 3 Ala. 137, 36 Am. 
 Mo. 423. See generally as to Dec. 441; Grant Corp. 84; 1 Thomp. 
 amendment and repeal, note in 43 Corp. (2d ed.), §1040. 
 
 Am. St. 157, 158. « Long Island R. Co., Re, 19 
 
 37 Kent v. Quicksilver &c. Co., 78 Wend. (N. Y.) 37, 32 Am. Dec. 429; 
 N. Y. 159. Compare East Tenn. &c. Budd v. Multnomah St. R. Co., 15 
 R. Co. V. Gammon, 5 Sneed (Tenn.) Ore. 413, 15 Pac. 659, 3 Am. St. 169; 
 567. Ordinarily, however, minority Kirk v. Nowell, 1 Term R. 118. 
 
§ 227 RAILROADS 370 
 
 ing business with the company, are called by-laws,*^ and under 
 ajiany of the special charters granted in that country, as well as 
 under the Companies' Clauses Consolidation Act of 1845, the rail- 
 road companies are authorized to enact regulations which resem- 
 l)le the by-laws or ordinances of municipal corporations, Their 
 'control over persons coming under their property and their right 
 to regulate such matters extend to the imposition of penalties for 
 failure to observe such regulations, which may even be enforced 
 by imprisonment. *2 Such rules or by-laws must be made under 
 the common seal of the corporation, and so far as they affect 
 those who are not officers or servants of the company, should be 
 approved by the board of trade or railway commissioners.*^ A 
 copy of these by-laws must be furnished to every officer and , 
 servant of the company liable to be affected thereby. And in 
 many instances, power to bind parties dealing with the company 
 is granted on condition that the by-laws or regulations adopted 
 shall be written or printed, and copies of them prominently dis- 
 played at all stations.** While the rules are required to be so 
 -adopted and promulgated there is a tendency to hold the corpora- 
 Ttion not liable for acts of its servants done in contravention of 
 saiCih rules. Thus it was held that the company was not liable 
 in a case where the station clerk informed the plaintiff that he 
 could use his excursion ticket for return passage by a certain 
 train, which, however, did not run clear through, and the plain- 
 
 41 Chilton V. The London &c. R. comfort of other passengers, or ob^ 
 Go., 16 M. & W. 212, 5 Eng. Ry. & structing the company's servants in 
 Can. Cas. 4. the discharge of their duty, shall 
 
 42 Chilton V. London &c R. Co., be liable to a penalty of forty ■ shill- 
 16 M. & W. 212. See Hodges- Law ings, and (in all but the first in- 
 of Rail. 453, for the by-laws most stance) forfeiture of the fare paid 
 generally adopted in England. and eviction from the company's 
 
 43 Hodges Law of Rail. SS2, SS3. premises. And any person wilfully 
 In the code of by-laws framed by injuring the company's carriages 
 the board of trade and generally shall be liable to a penalty of not 
 adopted in England, it is provided more than £5, in addition to the 
 that every person attempting to damage done. Hodges Law of Rail, 
 evade the payment of all or a part 453. 
 
 of his fare, and every person smok- a Great Western R. Co. v. Good^ 
 
 ing, being intoxicated, committing man, 11 Eng. L. & Eq. 546. 
 a nuisance, or interfering with the 
 
371 BY-LAWS, RULES AND REGULATIONS § 228 
 
 tiff was arrested by the superintendent for refusing to pay the 
 extra fare demanded for his passage on such train.'*'' And the 
 company was also held not liable for the arrest by its inspector of 
 an innocent man upon a charge of having no ticket, refusing to 
 pay fare, being intoxicated, and assaulting the inspector, in vio- 
 lation of the company's regulations, even though the solicitor 
 of the company attended to conduct the proceedings at the hear- 
 ing before the magistrate, but without knowledge of the facts.*^ 
 But these cases would seem to be opposed to the rule which ob- 
 tains generally throughout this country, that it makes no dif- 
 ference, as to binding the company, that the agent disobeyed his 
 superior, even though it was wilfuU}-^ done,^^ so long as he was 
 acting within the scope of his employment.*^ 
 
 § 228 (199). Distinction between by-laws and rules and regu- 
 lations — ^Right of railroad company to make rules and regula- 
 tions. — In this country there is a clearly recognized distinctiorf 
 between, on the one hand, by-laws for the government of the. 
 members and officers in their dealings with the corporation, which 
 must be adopted by the body of stockholders, or by the directors ;.. 
 and, on the other hand, regulations for the government of the 
 company's employes and servants engaged in operating the road*" 
 and of passengers and others of the public transacting business'- 
 with the company or dealing in any manner with the company's 
 property,*^ which may usually be made by any officer or agent of 
 the corporation duly authorized to control the business or prop- 
 erty to which they relate.^" A railroad company has an implied 
 
 *5 Roe V. Birkenheard &c. R. Co., 293. Whether the agent was acting 
 
 7 Eng. L. & Eq. 546, 6 Eng. Ry. & within the scope of his authority is 
 
 Can. Cas. 795. generally for the jury to determine 
 
 *6 Eastern Counties R. v. Broom, from the evidence. McKernan 
 
 v: 
 
 2 Eng. L. & Eq. 406; Roe v. Birken- Manhattan R. Co., 22 Jones & S. Sp. 
 
 head R. Co., 7 Exch. 36. (N. Y. Super. Ct.) 354. 
 
 47 Weed V. Panama R. Co., 5 Duer 49 State v. Overton, 24 M. J. L. 
 (N. Y.) 193. Post, §286. 435, 61 Am. Dec. 671; Morris &c. R. 
 
 48 Philadelphia &c. R. Co. v. Der- Co. v. Ayres, 29 N. J. L. 393; Com- 
 by, 14 How. (U. S.) 468, 483, 14 monwealth v. Power, 7 Mete. 
 L. ed. 502; Higgins v. Watervliet (Mass.) 596, 601, 41 Am. Dec. 465. 
 &c. 1. Co., 46 N. Y. 23, 7 Am. Rep. so Smith v. Chamberlain, 38 S. 
 
§229 
 
 RAILROADS 
 
 372 
 
 authprity (which is necessarily almost absolute) ^^ to make and 
 •enforce all reasonable rules and regulations for the control of its 
 trains and the persons thereon, of persons using its stations and 
 grounds, and of those transacting business with it, in order to 
 provide for the safety of its passengers and employes, and to 
 protect itself from imposition and wrong.^^ 
 
 § 229 (200). Examples of rules and regulations which railroad 
 companies may make — Rules affecting passengers. — To this end 
 they may regulate the purchase of tickets, the time and manner 
 of procuring and paying for the same, and the time and manner 
 of surrendering them ; the manner and time of entering and leav- 
 ing the cars ; and the conduct of the passengers while upon the 
 cars or at stations waiting for trains, as that they shall not be 
 boisterous or disorderly, shall do nothing to obstruct the con- 
 jluctors or other employes in the discharge of their duties, and 
 
 Car. i29, V7 S. E. 371, 19 L. R. A. 
 -710, 32 Am. L. Reg. (N. S.) 747; 
 'Commonwealth v. Power, 7 Mete. 
 KMass.) 596, 41 Am. Dec. 465, hold- 
 ing that a superintendent of a rail- 
 way station may make reasonable 
 rules for the control of the build- 
 ings and grounds, and for the regu- 
 lation of conduct of persons coming 
 upon such grounds. Markham v. 
 Brown, 8 N. H. 523, 31 Am. Dec. 
 209, to the same effect. Veeders 
 V. Fellows, 20 N. Y. 126, per Strong, 
 J.: "The; conductors, in the absence 
 of any directions from their superior 
 officers, have a right, and, indeed, 
 it is obligatory upon them to adopt 
 some rule relative to the surrender 
 of the tickets of the passenger." 
 
 siHibbard v. New York &c. R. 
 Co., 15 N. Y. 455. 
 
 52 Crocker v. New London &c. R. 
 Co., 24 Conn. 249; Dickerman v. St. 
 Paul Union Depot Co., 44 Minn. 
 
 433, 46 N. W. 907, 3 Lewis' Am. R. 
 & Corp. Cas. 374, and note, 46 N. 
 W. 907; Southern R. Co. v. Ken- 
 drick, 40 Miss. 374, 90 Am. Dec. 
 332; Cleveland &c. R. Co. v. Bart- 
 ram, 11 Ohio St. 457; Pittsburgh &c. 
 R. Co. V. McClurg, 56 Pa. St. 294; 
 Reese v. Pennsylvania R. Co., 131 
 Pa. St. 422, 19 Atl. 72, 6 L. R. A. 
 529, 1 Lewis Am. R. & Corp. Cas. 
 147; Taylor v. Spartanburg &c. R. 
 Co., 98 S. Car. 206, 82 S. E. 404, 
 52 L. R. A. (N. S.) 908, 909 (cit- 
 ing text and next two following 
 sections) ; Stephen v. Smith, 29 Vt. 
 160. See also Donovan v. Pennsyl- 
 vania Co., 199 U. S. 279, 26 Sup. 
 Ct. 91, 50 L. ed. 192; Garricott v. 
 New York State Rys., 223 N. Y. 9, 
 119 N. E. 94, L. R. A. 1918D, 929. 
 931; Chicago &c. R. Co. v. Arm- 
 strong, 30 Okla. 134, 120 Pac. 952, 
 Ann. Cas. 1913B, 1343. 
 
i72, 
 
 BY-LAWS, RITLES AND EEGULATIONS 
 
 §229 
 
 shall be seated in the cars while the train is in motion. ^^ Thus, 
 where a reasonable opportunity is afforded for the purchase of 
 tickets, they may enact and enforce a rule requiring the payment 
 of an additional sum by those who do not purchase tickets before 
 entering the car, and a regulation providing that ten cents extra 
 shall be paid in such a case over and above the regular ticket fare, 
 is reasonable and valid. 5* It has also been held that a street rail- 
 way company may adopt a rule that no bank bill or government 
 note larger than two dollars need be accepted and changed on 
 the car.85 So, a railroad company may require the production 
 of a ticket and its exhibition to the conductor at proper times as 
 evidence of the right to passage.^® And a rule requiring pas- 
 
 53 Hibbard v. New York &c. R. 
 Co., IS N. Y. 4SS, and cases in last 
 note supra; Coombs v. Southern 
 Wis. Ry. Co., 162 Wis. Ill, ISS N. 
 W. 922, L. R. A. 1916D, 539, and 
 note. 
 
 5* Crocker v. New London. &c. R. 
 Co., 24 Conn. 249; Pullman Co. v. 
 Reed, 75 111. 125; Sage v. Evans- 
 ville &c. R. Co., 134 Ind. 100, 33 
 N. E. 771 ; Snellbaker v. Paducah 
 &c. R. Co., 94 Ky. 597, 23 S. W. 509; 
 State V. Goold, S3 Maine 279; Swan 
 V. Manchester &c. R. Co., 132 Mass. 
 116, 42 Am. Rep. 432; State v. Hun- 
 gerford, 39 Minn. 6, 38 N. W. 628; 
 Forsee v. Alabama &c. R. Co., 63 
 Miss. 67; Hilliard v. Goold, 34 N. 
 H. 230, 66 Am. Dec. 765; Reese v. 
 Pennsylvania R. Co., 131 Pa. St. 422, 
 19 Atl. 72, 17 Am. St. 818, 1 Lewis 
 Am. R. & Corp. R. 147; Stephen 
 V. Smith, 29 Vt. 160. See also Man- 
 ning V. Louisville &c. R. Co., 95 
 Ala. 92, 11 So. 8, 36 Am. St. 225; 
 Ammons v. Southern R. Co., 138 N. 
 Car. 555, 51 S. E. 127. 
 
 35 Barker v. Central Park &c. R. 
 Co., 151 N. Y. 237, 45 N. E. 550, 35 
 L. R. A. 489, 56 Am. St. 626. 
 
 56 Nye V. Marysville &c. St. R. 
 Co., 97 Cal. 461, 32 Pac. 530; Downs 
 V. New York &c. R. Co., 36 Conn. 
 287, 4 Am. Rep. 77; Chicago &c. R. 
 Co. V. Roger, 1 Bradw. (111.) 472; 
 Baltimore &c. R. Co. v. Blocher, 27 
 Md. 277; Northern Cent. R. Co. v. 
 O'Conner, 76 Md. 207, 24 Atl. 449, 
 35 Am. St. 422; Standish v. Narra- 
 gansett &c. Co., Ill Mass. 512, 15 
 Am. Rep. 66; Frederick v. Mar- 
 quette &c. R. Co., 37 Mich. 342, 26 
 Am. Rep. 531; Van Dusan v. Grand 
 Trunk R. Co., 97 Mich. 439, 56 N. 
 W. 848; Ripley v. New Jersey &c. 
 Co., 31 N. J. L. 388; Townsend v. 
 New York &c. R. Co., 56 N. Y. 29$, 
 15 Am. Rep. 419; Crawford v. Cin- 
 cinnati &c. R. Co., 26 Ohio St. 580; 
 Poole V. Northern Pac. R. Co., 16 
 Ore. 261, 19 Pac. 107, 8 Am. St. 289; 
 Cresson v. Philadelphia &c. R. Co., 
 11 Phila. (Pa.) 597; Jerome v. 
 Smith, 48 Vt. 230, 21 Am. Rep. 125; 
 Duke v. Great Western R. Co., 14 
 Upper Can. Q. B. 369, 377. See 
 Watkins v. Pennsylvania R. Co., 21 
 Dist. of C. 1, 52 Am. & Eng. R. 
 Cas. 159, and note. 
 
§229 
 
 RAILROADS 
 
 374 
 
 sengers to make a continuous trip, unless they procure a "stop- 
 over" ticket or check, is reasonable and valid. ^^ A railroad com- 
 pany may also make and enforce a rule forbidding passengers to 
 be carried on freight trains,^^ where it sufficiently provides for 
 their accommodation on passenger trains, and, if it permits pas- 
 sengers on freight trains, it may, after due notice of the rule, re- 
 quire such passengers to provide themselves with a particular 
 kind of ticket which it has given them a reasonable opportunity 
 to obtain. 58 It is likewise held, in the absence of any statutory 
 provision to the contrary, that the railroad company may adopt 
 rules providing that particular trains shall stop only at certain 
 stations, where it furnishes reasonable means of reaching all sta- 
 tions on its road by other trains, and that passengers are bound 
 to take notice of such a rule as shown in the time-card published 
 by the company.^" Rules and regulations in regard to separate 
 
 57 Cheney v. Boston &c. R. Co., 11 
 Mete. (Mass.) 121, 45 Am. Dec. 190, 
 and note; Johnson v. Concord R. 
 Co., 46 N. H. 213, 88 Am. Dec. 199; 
 Beebe v. Ayres, 28 Barb. (N. Y.) 
 275; Yorton v. Milwaukee &c. R. 
 Co., 54 Wis. 234, 11 N. W. 482, 41 
 Am. Rep. 23. And street railway 
 companies may make and enforce 
 reasonable rules as to transfer at 
 specified places and within a certain 
 time. Shortsleeves v. Capital Tract. 
 Co., 28 App. (D. C.) 365, 8 L. R. 
 A. (N. S.) 287, and other cases cited 
 in note; Taylor v. Spartanburg Ry. 
 &c. Co., 98 S. Car. 206, 82 S. E. 404, 
 
 52 L. R. A. (N. S.) 908, and other 
 recent cases cited in note. 
 
 58 Chicago &c. R. Co. v. Randolph, 
 
 53 111. 510, 5 Am. Rep. 60; Eaton v. 
 Delaware &c. R. Co., 57 N. Y. 382, 
 15 Am. Rep. 513; Houston &c. R. 
 Co. V. Moore, 49 Tex. 31, 30 Arn. 
 Rep. 98. 
 
 59 Evans v. Memphis &c. R. Co., 
 56 Ala. 246, 28 Am. Rep. 771; Ar- 
 
 nold V. Illinois &c. R. Co., 83 III. 
 273, 25 Am. Rep. 383; St. Louis &c. 
 R. Co. V. Myrtle, 51 Ind. 566; Law 
 V. Illinois &c. R. Co., 32 Iowa 534; 
 Kansas &c. R. Co. v. Kessler, 18 
 Kans. 523; Burlington &c. R. Co. v. 
 Rose, 11 Nebr. 177, 1 Am. & Eng. 
 R. Cas. 253, 8 N. W. 433. 
 
 «o Texas &c. R. Co. v. Ludlam 
 (Tex. Civ. App.), 26 S. W. 430; 
 Dietrich v. Pennsylvania &c. R. Co., 
 71 Pa. St. 432, 10 Am. Rep. 711. 
 "It is the duty of a party going up- 
 on a railroad train to inform him- 
 self when, where and how he can 
 go or stop according to the regu- 
 lations of the railroad company." 
 Ohio &C. Co. v. Applewhite, 52 Ind. 
 540, 546; Chicago &c. R. Co. v. 
 Randolph, S3 111. 510, 5 Am. Rep. 
 60; Pittsburgh &c. Co. v. Lightcap, 
 7 Ind. App. 249, 253, 34 N. E. 243; 
 Jackson v. Grand Ave. R. Co., 1"] 
 Mo. 199, 2' S. W. 192; Beauchamp 
 v. International &c. R. Co., 56 Tex. 
 239; Gulf &c. R. Co. v. Henry, 84 
 
375 
 
 BY-LAWS, RULES AND REGULATIONS 
 
 §229 
 
 cars for ladies and their escorts,*^ or providing for the separation 
 of white from colored passengers,®^ have also been upheld as rea- 
 sonable where equal accommodations were offered to all. So has 
 a rule that none but holders of first-class tickets shall ride on 
 sleeping cars.^^ Railroad companies may also adopt and enforce 
 rules prohibiting passengers from riding in the baggage or ex- 
 press cars or on the engines, platforms, or other improper places 
 of danger,®* and prohibiting disorderly conduct on the cars.®^ 
 And they may exclude from their carriages and premises such 
 persons as refuse to comply with, their reasonable regulations.®® 
 
 Tex. 678, 19 S. W. 870, 16 L. R. 
 A. 318, 52 Am. & Eng. R. Cas. 233. 
 See also Southern Ry. Co. v. Bailey 
 (Ga.), 85 So. 847, L. R. A. 191 5E, 
 1043, 1045 (citing text). 
 
 61 Marquette v. Chicago &c. R. 
 Co., 33 Iowa 562 ; Peck v. New York 
 &c. R. Co., 70 N. Y. 587; Memphis 
 &c. R. Co. V. Benson, 85 Tenn. 627, 
 4 S. W. S, 4 Am. St. 776; Bass v. 
 Chicago &c, R. Co., 36 Wis. 450, 17 
 Am. Rep. 495. And a rule of an 
 electric railway company that women 
 shall be allowed to go first where 
 a crowd is waiting to board a car 
 has been held authorized by common 
 law and reasonable. Ga'rricott v. 
 New York State Rys., 223 N. Y. 
 9, 119 N. E. 94, L. R. A. 1918D, 
 929. So has a rule prohibiting turn- 
 ing of seats. Chesapeake &c. R. Co. 
 V. Speller, 157 Ky. 222, 162 S. W. 
 815, 50 L. R. A. (N. S.) 394. 
 
 62 West Chester &c. R. Co. v. 
 Miles, 55 Pa. St 209, 93 Am. Dec. 
 744; Green v. Bridgeton, 9 Cent. L. 
 J. 206; Plessey, Ex parte, 45 La. 
 Ann. 80, 11 So. 948, 18 L. R. A. 639, 
 and note. See also post, § 2540. 
 But a statute permitting sleeping 
 and dining cars exclusively for 
 white persons without providing 
 
 any similar accommodation for ne- 
 groes is invalid under the fouir- 
 teenth amendment. McCabe v. At- 
 chison &c. R. Co., 235 U. S. 151, 
 35 Sup. Ct. 69. 
 
 63 Pullman Palace Car Co. v. Lee, 
 49 111. App. 75, and the company 
 may charge extra compensation for 
 a seat in a chair car, even to the 
 holder of a first class ticket. St. 
 Louis &c. R. Co. V. Hardy, 55 Ark 
 134, 17 S. W. 711, 52 Am. & Eng. 
 R. Cas. 224. 
 
 64 Florida Southern R. Co. v. 
 Hirst, 30 Fla. 1, 52 Am. & Eng. R. 
 Cas. 409, 11 So. 506, 16 L. R. A. 
 631, and note, 32 Am. St. 17n; Au- 
 gusta R. &c. Co. V. Smith, 121 Ga. 
 29, 48 S. E. 681 ; O'Neill v. Lynn &c. 
 R. Co., 155 Mass. 371, 29 N. E. 630; 
 Robertson v. New York &c. R. Co., 
 22 Barb. (N. Y.) 91; Pennsylvania 
 R. Co. v. Langdon, 92 Pa. St. 21, 
 37 Am. Rep. 651. 
 
 65 See Pittsburgh &c. R. Co. v. 
 Pillow, 76 Pa. St. 510, 18 Am. Rep. 
 424; Jencks v. Coleman, 2 Sumn. 
 (U. S.) 221, Fed. Cas. No. 7258; 
 New Orleans &c. Co. v. Burke, 53 
 Miss. 200, 24 Am. Rep. 689. 
 
 66 Louisville &c. R. Co. v. John- 
 son, 92 Ala. 204, 9 So. 269; Louis- 
 
§230 
 
 RAILROADS 
 
 376 
 
 §230 (200a). Rules affecting shippers and freight. — Like rea- 
 sonable rules inay be made to govern the receipt, carriage, and 
 delivery of freight and baggage, and the shipper may be com- 
 pelled to conform to them in transacting business with the com- 
 pany.6^ Thus, it has been held that a railroad company may re- 
 quire persons hauling freight from its depot to take it from the 
 platform, where it is delivered to them by the company's agents, 
 and to transact business over the counter, without entering the 
 warehouse to check off the freight.®^ So, it is now established in 
 most jurisdictions by the weight of authority, in accordance with 
 
 ville &c. R. Co. V. Logan, 88 Ky. 
 232, 10 S. W. 65S, 3 L. R. A. 80, 
 21 Am. St. 332; Commonwealth v. 
 Power, 7 Mete. (Mass.) 596; Mur- 
 phy V. Union R. Co., 118 Mass. 228; 
 Putnam v. Broadway -&c. R. Co., SS 
 N. Y. 108, 14 Am. Rep. 190; Town- 
 send V. New York &c. R. Co., 56 
 N. Y. 295, 15 Am. Rep. 419; Mon- 
 nier v. New York &c. R. Co., 175 N. 
 Y. 281, Q N. E. 569, 62 L. R. A. 
 357, 96 Am. St. 619; McKernan v. 
 Manhattan R. Co., 54 N. Y. Super. 
 Ct. 354; Pittsburgh &c. R. Co. v. 
 Pillow, 76 Pa. St. 510, 18 Am Rep. 
 424. A railroad company may, at its 
 option, exclude all persons coming 
 upon its premises for purposes 
 other than transacting business with 
 the company. Hotel runners. Com- 
 monwealth V. Power, 7 Mete. 
 (Mass.) 596, 41 Am. Dec. 465, and 
 note; D. R. Martin, The, 11 Blatch. 
 (U. S.) 233, Fed. Cas. No. 1030; 
 Landrigan v. State, 31 Ark. SO, 25 
 Am. Rep. 547; porters, Barney v. 
 Oyster Bay &c. Co., 67 N. Y. 301, 
 23 Am. Rep. 115; Summitt v. State, 
 8 Lea (Tenn.) 413; Harris v. Ste- 
 vens, 31 Vt. 79; omnibus driver. 
 Barker v. Midland R. Co., 18 C. B. 
 46. See post, §2560. But passen- 
 
 gers are not always bound to know 
 rules for employes and the like. 
 New York &e. R. Co. v. Winter, 
 143 U. S. 60, 70, 12 Sup. Ct. 356, 
 36 L. ed. 71. Posting a rule in 
 the car is evidence of notice. Bal- 
 timore &c. Road V. Cason, 72 Md. 
 377, 20 Atl. 113. But see Coupland 
 V. Housatonic R. Co., 61 Conn. 334, 
 541, 23 Atl. 870, 15 L. R. A. 534. 
 
 67 Southern R. Co. v. Kendriek, 40 
 Miss. 374, 90 Am. Dec. 332; Chi- 
 cago &c. R. Co. V. Colby, 69 Nebr. 
 572, 96 N. W. 145; Morris &c. R. 
 Co. V. Ayres, 29 N. J. L. 393; Ran- 
 dall V. Richmond &c. R. Co., 108 N. 
 Car. 612, 13 S. E. 137; Pittsburgh 
 &c. R. Co. V. Lyon, 123 Pa. St. 140, 
 16 Atl. 607, 2 L. R. A. 489, 10 Am. 
 St. 517. As to when the customer 
 is not bound to take notice of rules 
 see Central R. &c. Co. v. Skellie, 90 
 Ga. 694, 16 S. E. 657; Southern Exp. 
 Co. V. Crook, 44 Ala. 468, 4 Am. 
 Rep. 140; Atchinson &c. R. Co. v. 
 Miller, 16 Nebr. 661, 21 N. W. 451. 
 And may exclude intoxicated and 
 turbulent persons from its depots 
 and warehouses. Qiicago &c. R. 
 Co. V. Armstrong, 30 Okla. 134, 120 
 Pac. 952, Ann. Cas. 1913B, 1343. 
 
 68 Such a regulation is reasonable. 
 
Z77 
 
 BY-LAWS, RULES AND REGULATIONS 
 
 §231 
 
 the better reason, that it is competent for a railroad company to 
 adopt and enforce a reasonable regulation, fixing the time within 
 which a consignee shall unload his freight after notice of its 
 arrival and providing a reasonable charge per day thereafter for 
 car service or by way of demurrage. ^^ As will hereafter appear, 
 however, a common carrier Can make no unreasonable and unjust 
 discrimination between its customers,'^" and some regulations 
 that it might otherwise make are prohibited by the interstate 
 commerce law, or determined by the state law relating to rail- 
 road or public utilities commissions. 
 
 § 231 (200b). Rules affecting employes. — Rules affecting pas- 
 sengers and shippers are not the only rules which a railroad com- 
 pany has the power to make. It is not only the right, but it is 
 also the duty of railroad companies to promulgate and enforce 
 reasonable and necessary rules for the safety of its employes, in 
 the management and operation of its road.'^^ It has also been 
 
 Donovan v. Texas &c. R. Co., 64 
 Tex. 519, 29 Am. & Eng. R. Cas. 
 320. 
 
 69 Norfolk & Western R. Co. v. 
 Adams, 90 Va. 393, 18 S. E. 673, 56 
 Am. & Eng. R. Cas. 330; Miller v. 
 Georgia &c. R. Co., 88 Ga. 563, 15 
 S. E. 316, 18 L. R. A. 323, 30 Am. 
 St. 170; Miller v. Mansfield, 112 
 Mass. 260; Pennsylvania R. Co. v. 
 Midvale Steel Co., 201 Pa. St. 624, 
 51 Atl. 313, 88 Am. St. 836; Ken- 
 tucky Wagon &c. Co. v. Louisville 
 &c. Co., 11 Ry. & Corp. L. J. 49; 
 post, §2369. One dollar per day for 
 each car was held reasonable in the 
 first two cases above cited. But 
 see Chicago &c. R. Co. v. Jenkins, 
 103 111. 588; Burlington &c. R. Co. 
 V. Chicago Lumber Co., 15 Nebr. 
 390, 19 N. W. 451. 
 
 70 Hays v. Pennsylvania &c. Co., 
 12 Fed. 309; Logan v. Central R. 
 Co., 74 Ga. 684. See Chicago &c. R. 
 
 Co. V. People, 56 111. 365, 8 Am. Rep. 
 690; Cleveland R. Co. v. Closser, 
 126 Ind. 348, 26 N. E. 159, 9 L. R. 
 A. 754n, 22 Am. St. 593, and au- 
 thorities there cited; Root v. Long 
 Island R. Co., 114 N. Y. 300, 21 N. 
 E. 403, 4 L. R. A. 331n, 11 Am. St. 
 643, and exhaustive note; Rice v. 
 Railroad Co., 3 Inters. Com. Com. 
 Rep. 186. Article in 16 Am. L. 
 Rev. 818; note to Commonwealth 
 V. Power, 41 Am. Dec. 465, 484. 
 
 71 Hough V. Railway Co., 100 U. 
 S. 213, 25 L. ed. 612; Chicago &c. 
 R. Co. V. Moranda, 93 111. 302, 34 
 Am. Rep. 168; Ohio &c. R. Co. v. 
 CoUarn, li Ind. 261, 38 Am. Rep. 
 134; Ford v. Fitchburg R. Co., 110 
 Mass. 240, 14 Am. Rep. 598; Corco- 
 ran V. Delaware &c. R. Co., 126 N. 
 Y. 673, 27 N. E. 1022; Morgan v. 
 Hudson River &c. Co., 133 N. Y. 
 666, 31 N. E. 234; Pittsburgh &c. R. 
 Co. V. Henderson, 37 Ohio St. 549; 
 
§232 
 
 RAILROADS 
 
 378 
 
 held that the adoption of mere general rules may not relieve a 
 company where emergencies demanded special rulesJ- This 
 subject, however, will be fully considered hereafter. 
 
 § 232 (201). Enforcement of rules — Penalties. — Beyond exclu- 
 sion from their premises and from "the privileges of transacting 
 business with them, railroad corporations have in this country 
 very little authority to, inflict penalties for disobedience of their 
 rules, except so far as such penalties are prescribed by the statutes 
 of the various states. But they are generally permitted, as we 
 have seen, to exact a higher fare from passengers failing to pro- 
 cure tickets and seeking to pay their fare after getting upon the 
 train,''^ provided such increased fare be reasonable. And the 
 English courts have adjudged a by-law valid which required a 
 passenger, not procuring or delivering up his ticket, to pay fare 
 from the place where the train originally started. ''* Such rules 
 must be in accordance with the charter and not, it seems, in con- 
 
 Lewis V. Seifert, 116 Pa. St. 628, 11 
 Atl. 514, 2 Am. St. 631; post §1840. 
 
 72 Sprague v. New York &c. R. 
 Co., 68 Conn. 345, 36 Atl. 791, 2>1 
 L. R. A. 638. But see where an 
 employe acquiesces in the rules and 
 their sufficiency. Berrigan v. New 
 York &c. R. Co., 131 N. Y. 582, 30 
 N. E. 57; and see post, §2891. See 
 also Wolsey v. Lake Shore &c. R. 
 Co., 33 Ohio St. 227. As to notice 
 to the employe and evidence there- 
 of, see Sprong v. Boston &c. R. Co., 
 58 N. Y. 56, and compare Shenan- 
 doah Valley R. Co. v. Lucado, 86 
 Va. 390, 10 S. E. 422; Galveston 
 &c. R. Co. V. Gormley, 91 Tex. 393, 
 43 S. W. 877, 66 Am. St. 894. 
 
 '''3 McGowen v. Morgan's Louisi- 
 ana &c. R. Co., 41 La. Ann. 732, 
 6 So, 606, 5 L. R. A. 817, 17 Am. 
 St. 415; State v. Hungerford, 39 
 Minn. 6, 38 N. W. 561; Reese v. 
 Pennsylvania R. Co., 131 Pa. St. 422, 
 19 Atl. 72, 6 L. R. A. 529, 17 Am. 
 
 St. 818; 1 Lewis Am. R. & Corp. 
 Cas. 147, citing numerous authori- 
 ties and holding that an additional 
 charge of ten cents is not a "'charge 
 for transportation" within the mean- 
 ing of a statute limiting the rate 
 three and one-half cents per mile. 
 Ante, §229. Expulsion or ejection - 
 in a proper manner and in a proper 
 place is an ordinary and proper 
 method of enforcing reasonable 
 rules or regulations as to the 
 conduct of passengers. Chesapeake 
 &c. R. Co. v. Spiller, 157 Ky. 222, 
 162 S. W. 815, 50 L. R. A. (N. S.) 
 394; Coombs v. Southern Wis. R. 
 Co., 162 Wis. Ill, 155 N. W. 922, 
 L. R. A. 1916D, 539, and note. 
 
 74 Chilton V. London &c. R. Co., 
 16 M. & W. 212, 5 Eng. Ry. & Can. 
 Cas. 4. See also Manning v. Louis- 
 ville &c. R. Co., 95 Ala. 392, 11 So. 
 8, 16 L. R. A. 5Sn, 36 Am. St. 225, 
 52 Am. & Eng. R. Cas. 213. 
 
379 
 
 BY-LA WSj RULES AND REGULATIONS 
 
 §233 
 
 flict with any of the numerous regulations prescribed by statute 
 in the states through which the road runs or in which it does 
 business,'''' and must, moreover, be reasonable.''* 
 
 § 233 (202). Reasonableness of rules — When a question of fact 
 and when a question of law. — The reasonableness- of such regu- 
 lations and of the manner of their enforcement in a given case 
 has been held by some of the courts to be a question of fact for 
 the jury.'^^ But it would seem that this must be a question of 
 law for the court to decide, if any fixed and permanent regula- 
 tions are to be established, and the better authority holds it to be 
 such; since one jury in a given case might pronounce the rule 
 reasonable, while another jury in another case might decide the 
 same rule to be unreasonable. ''^ Yet, as any given case is apt to 
 depend in part upon the facts and circumstances which are them- 
 selves in dispute, some authorities hold that the question of the 
 reasonableness of a rule as applied to the case in hand should be 
 
 T5 See ante, § 220. We do not 
 mean, however, that a state law will 
 control the authority of the United 
 States over the road as an instru- 
 ment of interstate commerce. 
 
 76 Chicago &c. R. Co. v. Williams, 
 5S 111. 185, 8 Am. Rep. 641. Ante, 
 §222. 
 
 77 Prather v. Railway Co., 80 Ga. 
 427, 9 S. E. 530, 12 Am. St. 263; 
 State V. Chovin, 7 Iowa 204; State 
 V. Overton, 24 N. J. L. 435, 61 Am. 
 Dec. 671; Morris &c. R. Co. v. 
 Ayres, 29 N. J. L. 393; Texas &c. 
 R. Co. V. Adams, 78 Tex. 372, 14 
 S. W. 666, 22 Am. St. 56. 
 
 78 Illinois Central R. Co. v. Whit- 
 temore, 43 111. 420, 92 Am. Dec. 138; 
 Chicago &c. R. Co. v. McLallen, 84 
 111. 109 (holding, however, that its 
 adequacy or sufficiency is for the 
 jury) ; Nolan v. New York &c. R. 
 Co., 7 Conn. 159, 180, 39 Atl. 115, 
 43 L. R. A. 305; South Florida R. 
 
 Co. v. Rhoads, 25 Fla. 40, 6 So. 60, 
 3 L. R. A. 733n, 23 Am. St. 506; 
 Pittsburgh &c. R. Co. v. Nuzum, 50 
 Ind. 141, 19 Am. Rep. 703; Fertich 
 V. Michener, 111 Ind. 472, 481, 11 N, 
 E. 60S; 60 Am. Rep. 709; Hoffbauer 
 V. Delhi &c. R. Co., 52 Iowa 342, 3 
 N. W. 121, 35 Am. Rep. 278; Ma- 
 roney v. Old Colony &c. R. Co., 106 
 Mass. 153, 8 Am. Rep. 305; Vedder 
 V. Fellows, 20 N. Y. 126; Louisville 
 &c. R. Co. V. Fleming, 14 Lea 
 (Tenn.) 128; Pierce v. Randolph, 
 12 Tex. 290; Yorton v. Milwaukee 
 &c. R. Co., 54 Wis. 234, 11 N. W. ' 
 482, 41 Am. Rep. 23; 1 Elliott's 
 Gen. Pr., § 436. See also Little Rock 
 &c. R. Co. -V. Barry, 84 Fed. 944, 
 43 L. R. A. 349; Cincinnati &c. R. 
 Co. V. Lowell, 141 Ky. 249, 132 S. 
 W. 569 (citing text) ; Garricott v. 
 New York State Rys., 223 N. Y. 9, 
 119 N. E. 94, L. R. A. 1918D, 929, 
 931. 
 
§234 
 
 RAILROADS 
 
 380 
 
 submitted to the jury, under proper instructions from the, court, 
 as a mixed question of law and fact,''® and that it is for the court 
 only where the facts are undisputed.®" There are, doubtless, 
 many cases in which the reasonableness of the rule depends, iii 
 the particular instance, upon disputed facts or circumstances, 
 and, where this is true, it may, perhaps, be called a mixed ques- 
 tion of law and fact ; but, when the facts are undisputed we think 
 it is clear, both upon principle and according to the weight of 
 authority, that the question is one of law for the court. ®^ 
 
 § 234 (202a). Failure to enforce rules — ^Waiver or abrogation. 
 
 — By-laws may often be waived, and so, too, in some instances, at 
 least, may a rule of a railroad company. By failing to enforce a 
 rule the company may allow it to become a dead letter and, in 
 effect, waive, abandon, or abrogate it.®^ As will hereafter be 
 shown, it is not every failure to enforce or carry out a rule by 
 every employe, or in a few exceptional instances, that will ordin- 
 arily have this effect, but' there are instances in which both em- 
 ployes and others have been relieved from the operation of a rule 
 
 T» Brown v. Memphis &c. R. Co., 
 4 Fed. 2,1; Day v. Owen, S Mich. 
 520, 72 Am. Dec. 62; Bass v. Chi- 
 cago &c. R. Co., 36 Wis. 450. See 
 also Christian v. First Div. St. Paul 
 &c. R. Co., 20 Minn. 21; Clason v. 
 Milwaukee, 30 Wis. 316. It is for the 
 jury to ascertain the facts in such a 
 case, but it is a question of law 
 whether upon such facts the rule is 
 reasonable. But see Devoe v. New 
 York &c. R. Co., 174 N. Y. 1, 66 N. 
 E. 568. 
 
 80 Commonwealth v. Power, 7 
 Mete. (Mass.) 596; Pittsburgh &c. 
 R. Co. V. Lyon, 123 Pa. St. 140, 16 
 Atl. 607, 2 L. R. A. 489, 10 Am. 
 St. 517. 
 
 81 St. Louis &c. R. Co. V. Hardy, 
 55 Ark. 134 17 S. W. 711, 52 Am. 
 & Eng. R. Cas. 224; Hofifbauer v. 
 Railway Co., 52 Iowa 342, 3 N. W. 
 121, 35 Am. Rep. 278; Old Colony 
 
 R. Co. V. Tripp, 147 Mass. 35, 17 N. 
 E. 89, 9 Am. St. 661; Garricott v. 
 New York State Rys., 223 N. Y. 9, 
 119 N.E. 94 L. R. A. 1918D, 929; 
 Wosley V. Railroad Co., 33 Ohio St. 
 227; Louisville &c. R. Co. v. Flem- 
 ing, 14 Lea (Tenn.) 128; and au- 
 thorities cited in note 82, supra. See 
 also Missouri &c. Ry. Co. v. Collier, 
 157 Fed. 347, 354 The construction 
 of a written rule is for the court. 
 Lake Shore &c. R. Co. v. Peterson, 
 144 Ind. 214 42 N. E. 480, 43 N. 
 E. 1. 
 
 82 This section is quoted in Flori- 
 da East Coast R. Co. v. Carter, 67 
 Fla. 335, 65 So. 254, Ann. Cas. 
 1916E, 1299, 1302, where it is said; 
 "We think this is a sound principle 
 of law.'' See also Merkouras v. 
 Chicago &a R. Co., 101 Nebr. 717, 164 
 N. W. 719, 720 (citing text). 
 
381 
 
 BY-LAWS^ RULES AND REGULATIONS 
 
 §234 
 
 at one time promulgated by the company because it was no 
 longer considered in force, and such, in general, is the effect or 
 result where the company itself does not enforce it but knowingly 
 permits it to become a dead letter.^^ 
 
 83 Chicago &c. R. Co. v. Lowell, 
 151 U. S. 209, 219, 14 Sup. Ct. 281, 
 38 L. ed. 131 ; Montgomery &c. Ry. 
 Co. V. Kolb, 73 Ala. 396, 49 Am. 
 Rep. 54. See Sweetland v. Lynn &c. 
 R. Co., 177 Mass. 574, 59 N. E. 443, 
 51 L. R. A. 783; Greenfield v. De- 
 troit &c. R. Co., 133 Mich. 557, 95 
 
 N. W. 546. This subject, especially 
 with reference to employes, is here- 
 after considered. See also Northern 
 Pac. R. Co. V. Nickels, 50 Fed. 718. 
 And see generally as to waiver of 
 by-laws proper and estoppel in such 
 cases. 1 Thomp. Corp. (2d ed.), 
 §§1058, 1059. 
 
CHAPTER XI. 
 
 CORPORATE REPRESENTATIVES. 
 
 Sec. 
 
 240. Railroad corporations act 
 through officers, agents or 
 other representatives. 
 
 241. Appointment of officers and 
 
 agents — General doctrine. 
 
 242. Statutory privileges bestowed 
 
 on agents. 
 
 243. Officers generally. 
 
 244. Qualifications of officers. 
 
 245. Election of officers — Generally. 
 
 246. Agents generally. 
 
 247. Proof of the existence of the 
 
 relation of principal and 
 ' agent. 
 
 248. Proof of authority. 
 
 249. Agency inferred. 
 
 250. Powers, duties and authority 
 
 of officers and agents gener- 
 ally. 
 
 251. Authority of ag«nt — Line of 
 
 duty. 
 • 252. Scope of authority — General 
 conclusions. 
 
 253. Contracts by agents — General 
 
 doctrine. 
 
 254. Declarations and admissions 
 
 of agents. 
 
 255. Declarations of agent — Res 
 
 gestae. 
 
 Sec. 
 
 256. Declaration must relate to 
 
 matter in scope of authority 
 and in controversy. 
 
 257. Exercise of authority by agents 
 
 — Illustrative cases. 
 
 258. Scope of authority — Illustra- 
 
 tive cases. 
 
 259. Authority of agent — Emergen- 
 
 cies and special circum- 
 stances. 
 
 260. Authority of agents-^Employ- 
 
 ment of surgeons. 
 
 261. Physicians and surgeons. 
 
 262. jjelegation of power by di- 
 
 rectors. 
 
 263. Employment of sub-agents and 
 
 Servants. 
 
 264. Notice to agents or officers. 
 
 265. Ratification. 
 
 266. Acts that may be ratified. 
 
 267. Ratification — What constitutes. 
 
 268. Compensation of officers. 
 
 269. Individual liability of agents for 
 their torts. 
 
 270. Bonds of officers and agents. 
 
 271. Sureties — Bonds of officers^ 
 
 and agents. 
 
 § 240 (203). Railroad corporations act through officers, agents^ 
 or other representatives. — It is elementary learning that corpora- 
 tions act through agents, officers, attorneys or servants. The na- 
 ture of a corporation aggregate, as is well known, is such that it 
 can only perform its corporate functions, duties and acts through 
 
 382 
 
383 
 
 CORPORATE REPRESENTATIVES 
 
 §240 
 
 the mediurti of natural persons.^ The creation of a railroad cor- 
 poration invests it with povi^er, without express words, to choose 
 officers, agents, attorneys and servants.^ In other words, the cre- 
 ation of a railroad company invests it, as an incidental power, 
 with the authority to appoint officers and agents. 
 
 § 241 (204). Appointment of officers and agents — General doc- 
 trine. — As a general rule agents or servants may be appointed by 
 railroad corporations in the same manner as agents and servants 
 may be appointed by natural persons.* .It is however, to be un- 
 derstood that where the charter or act of incorporation provides 
 the mode in which officers or agents shall be appointed that mode 
 must be pursued. There may be cases where a departure from 
 the mode prescribed by the charter or act of incorporation would 
 not prejudice the rights of third persons, but the general rule is 
 that where the mode is expressly prescribed by the charter or the 
 act of incorporation the appointment will not be valid if there is 
 a substantial or material departure from the prescribed mode.* 
 
 1 New York &c. Co. v. Schuyler, 
 34 N. Y. 30; Lyman River &c. Co., 
 2 Aik. (Vt.) 255, 16 Am. Dec. 70S; 
 2 Thomp. Corp. (2d ed.), §1386. 
 
 2 Alabama &c. Co. v. Kidd, 29 
 Ala. 221 ; Protection Life Ins. Co. v. 
 Foote, 79 111. 361, 368; Kitchen v. 
 Cape Girardeau &c. Co., 59 Mo. 514; 
 Hurlbut V. Marshall, 62 Wis. 590, 
 22 N. W. 852 ; Wood v. Ontario &c. 
 Co., 24 U. C. C. P. 334. 
 
 3 Bank of Columbia v. Patterson, 
 7 Cranch (U. S.) 299, 3 L. ed. 351 ; 
 Alabama &c. Co. v. Kidd, 29 Ala. 
 221 ; Reynolds v. Collins, 78 Ala. 94 ; 
 Crowley v. Genessee &c. Co., 55 
 Cal. 273; Bancroft v. Wilmington 
 &c. Academy, 5 Houst. (Del.) 577; 
 Hamilton v. Newcastle &c. Co., 9 
 Ind. 359; White v. State, 69 Ind. 
 273; Fitch v. Lewiston Steam Mill 
 Co., 80 Maine 34, 12 Atl. 732; Santa 
 Clara &c. Co. v. Meredith, 49 Md. 
 
 389, 33 Am. Rep. 264; Cook v. Kuhn, 
 
 1 Nebr. 472; Despatch Line &c. v. 
 Bellamy &c. Co., 12 N. H. 205, 11 
 Am. Dec. 203 ; Randall v. Van Vech- 
 ten, 19 Johns. (N. Y.) 60, 10 Am. 
 Dec. 193 ; Giles v. Taff Vale. R. Co., 
 
 2 El. & Bl. 822 ; Gofl v. Great North- 
 ern &c. Co., 3 El. & El. 672, 30 L. 
 J. Q. B. 148. 
 
 * Salem Bank v. Gloucester Bank, 
 17 Mass. 1, 9 Am. Dec. Ill ; Badger 
 V. American &c. Co., 103 Mass. 244, 
 4 Am. Rep. 547; Henning v. United 
 States Ins. Co., 47 Mo.. 425, 4 Am. 
 Rep. 332. Beatty v. Marine Ins. Co., 
 2 Johns. (N. Y.) 109, -3 Am. Dec. 
 401; Gordon v. Preston, 1 Watts 
 (Pa.) 385; Chicago &c. Co. v. 
 James, 22 Wis. 194; Card v. Carr, 1 
 C. B. N. S. 197; Kirk v. Bell, 16 
 Q. B. 290. See Bridgeport Bank 
 V. New York &c. Co., 30 Conn. 231. 
 
§ 242 RAILROADS 384 
 
 I 
 
 To prevent misunderstanding we say that we are here outlining 
 general doctrines and are not stating specific rules. 
 
 §242 (205). Statutory privileges bestowed on agents. — Be- 
 cause of the entire reliance of a railroad corporation upon its ser- 
 vants for the discharge of its duties to the public, some of the 
 older charters granted to them special privileges and exemptions. 
 Privileges and exemptions granted corporate agents are generally- 
 regarded as bestowed upon the corporation and not upon per- 
 sons who chance to be the corporate agents. Thus, it is held that 
 an exemption of the servants of a corporation from military 
 duty, serving on juries, and working on public roads, is not a 
 mere personal privilege to the officers, agents and servants of the 
 company, but is a right or privilege of the corporation, on which 
 it may insist in favor of any servant whom it may employ.^ 
 
 §243 (205). Officers generedly.— The most important of cor- 
 porate agents are, of course, the officers,® without whom no busi- 
 ness can be transacted by the corporation.''' Indeed, in most acts 
 for the incorporation of railroad companies, a choice of directors 
 is one of the essential steps toward incorporation.® The power to 
 
 5 Johnson v. State, 88 Ala. 176, 7 corporation', for that legal entity 
 So. 2S3, 41 Am. & Eng. R. Cas. 27S ; is the principal, and its officers are 
 Zimmer v. State, 30 Ark. 677. The its agents or representatives, 
 grant of such a privilege was held '? Gashwiler v. Willis, 33 Cal. 11,. 
 unconstitutional in Tennessee. Nee- 91 Am. Dec. 607; Willey v. Crocker- 
 ly V. State, 4 Lea (Tenn.) 316. 'Woolworth Nat. Bank, 141 Cal. 508,. 
 
 6 Officers are but ministerial 75 Pac. 106 ; Atlantic Coast Line 
 agents of the corporation. Dis- R. Co. v. Waycross Electric Light 
 patch Line &c. v. Bellamy Mfg. Co., &c. Co., 123 Ga. 613, 51 S. E. 621; 
 12 N. H. 205, 37 Am. Dec. 203; Conro v. Port Henry &c. Co., 12 
 Burr V. McDonald, 3 Grat. (Va.) Barb. (N. Y.) 27; Gulf &c. R. Co. 
 215. Officers may be invested with v. Morris, 67 Tex. 692, 4 S. W. 156. 
 very comprehensive powers, but they See also Home Fire Ins. Co. v. Bar- 
 are not the corporation. A corpora- ber, 67 Nebr. 664, 93 N. W. 1024,. 
 tion may entrust the conduct of its 60 L. R. A. 927, 108 Am. St. 716. 
 business to its officers, and may be » See 2 Parks' Ann. Code of Ga.,. 
 bound by their acts, but no matter 1914, § 2581, et seq. ; Hurd's Rev. Stat, 
 how extensive the powers conferred of 111. 1917, pp. 2335, 2336, §§ 2, 8- 
 upon corporate officers, they are 2 Burns' Rev. Stat. Ind. 1914, § 5176 
 merely the representatives lof the et seq. ; 1 Mo. Ann. Stat. 1906, § 1034 • 
 
385 CORPORATE REPRESENTATIVES § 244 
 
 choose officers is inherent in a corporation and implied from the 
 fact of incorporation without being specially granted.® This im- 
 plied power is limited by the rule that the officers must be such 
 as are reasonably necessary to the discharge of corporate func- 
 tions and to enable the corporation to accomplish the object for 
 which it was created. 
 
 §244 (207). Qualifications of officers. — It is, of course, com- 
 petent for the legislature to prescribe by charter the qualifications 
 of corporate officers and to provide what persons shall or shall 
 not be eligible to hold a corporate office. The legislative decision 
 as to who shall be eligible is necessarily conclusive and not sub- 
 ject to review by the courts. The laws of several of the states 
 prohibit any officer of a railroad corporation from becoming an 
 officer of a parallel or competing line,^" and some of the states 
 make stockholders and owners of express and transportation 
 companies ineligible to hold office or act as agents in any railroad 
 company. 11 Ordinarily, any one may be an officer of a corpora- 
 tion who is competent to transact busiriess for another, unless 
 special qualifications are required by the charter or by-laws. ^^ 
 
 § 245 (208) . Election of officers — Generally. — Where the mode 
 of choosing officers is not prescribed by the charter, they must, as 
 a general rule, be chosen by the body of the corporators, or in 
 such a mode as the corporators acting in accordance with the 
 charter may prescribe. i* Officers can exercise only the powers 
 granted to them either expressly by the charter or by the by- 
 laws, enacted pursuant to the charter, or implied by a declara- 
 
 Wisconsin Stat. 1915, § 1820; Char- n Pennsylvania and Missouri make 
 
 ter of St. Ladislaus &c. Assn., 19 Pa. it a misdemeanor for an officer or 
 
 Co. Ct. Rep. 25. employe of a railroad to be interested 
 
 9 Terwilliger v. Great Western in the business of transportation as a 
 
 Tel. Co., 59 111. 249; Hughes v. Par- common carried over such road, 
 ker, 19 N. H. 181; Wheeler, Ex 12 People v. Webster, 10 Wend, 
 
 parte, 2 Abb. Pr. N. S. (N. Y.) 361. (N. Y.) 554. See also Mobile &c. 
 
 Hurlbut v. Marshall, 62 Wis. 590, R. Co. v. Owen, 121 Ala. 505, 25 
 
 22 N. W. 852. So. 612. 
 
 16 See 1 Mo. Ann. Stat. 1906, i3 State v. Ancker, 2 Rich. L. (S. 
 
 § 1063; Wisconsin Stat. 1915, § 1804. Car.) 245, 
 
 13 — Ell. Railroads I 
 
§ 244 RAILROADS 386 
 
 tion of the purposes of their appointment, or such as by neces- 
 sary implication are conferred upon them. It was held at com- 
 mon law that the power to appoint agents rests with the stock- 
 holders at large, but this doctrine is almost entirely swept away 
 as to mere agents. It was also held that the courts cannot judici- 
 ally know that a particular board or body of a corporation not 
 created by a public statute is authorized by the charter and by- 
 laws to appoint agents, where no proof of the fact is introduced,^* 
 but this doctrine requires limitation and qualification. Princi- 
 pal governing officers, such as the members of the board of di- 
 rectors, must be chosen by the members of the corporation unless 
 otherwise provided by the charter. All of the states make pro- 
 vision by their statutes for the incorporation of railroads for the 
 choice of a board of directors, who are charged with the imme- 
 diate government and direction of the affairs of the corporation,^^ 
 and of a president usually chosen by them.^* Many of the states 
 provide that the directors shall also choose certain other officers, 
 as vice-president,^'^ secretary ,^^ and treasurer ;^^ while other 
 states leave all officers and agents, as these states leave all but 
 
 1* It has been held that, the of the powers and duties of many 
 
 court cannot judicially know the au- classes of officers and agents of rail- 
 
 thority and duties of officers of a road companies. It may be true that 
 
 railroad corporation where they are courts will not take judicial notice 
 
 not defined by law. Brown v. Mis- of the particular powers and duties 
 
 souri &c. R. Co., 67 Mo. 122. Nor of officers, but that they will take 
 
 of agents. Wood v. Chicago &c. R. notice of the general scope and na- 
 
 Co., 59 Iowa 196, 13 N. W. 99; ture of the powers and duties of 
 
 Southern R. Co. v. Hogan, 103 Ga. many classes of officers and agents 
 
 564, 29 S. E. 760; McGowan v. St. is also true. See 1 Elliott Ev. § 72. 
 Louis &c. R. Co., 61 Mo. 528. But 15 See statutes referred to in note 
 
 see Louisville &c. R. Co. v. McVay, 8, supra. 
 
 98 Ind. 391, 49 Am. Rep. 770, where le See Kurd's Rev. Stat. 111. 1917, 
 
 the court noticed the duties and ch. 114, p. 2337, § 12; 1 Mo. Ann. 
 
 powers of a "general manager" Stat. 1906, § 1038; and other statutes 
 
 without proof. And Sacalaris v. cited in note 8. 
 
 Eureka &c. R. Co., 18 Nev. 155, 1 it See statutes referred to in note 
 
 Pac. 835, 51 Am. Rep 737, where 16. 
 the court did the same as to a is See note 16. 
 "superintendent." We think that 19 See note 16. 
 
 the courts may take judicial notice 
 
387 CORPORATE REPRESENTATIVES §246 
 
 those enumerated, to be selected by the directors in accoi dunce 
 with the by-laws that may be adopted, or in response to the ap- 
 parent needs of the corporation. 2" 
 
 §246 (209). Agents generally. — Agents are sometimes ap- 
 pointed for a term certain, though they are more often appointed 
 to serve at the pleasure of the directors or principal officers. Ex- 
 cept where some other provision is. contained in the charter or 
 by-laws, the directors have implied power to remove at any time 
 agents appointed by them, subject to the rules which govern 
 similar contracts between agents of individuals and their princi- 
 pals. ^^ But the authority of a duly appointed agent does not, 
 necessarily, cease with the termination of the ofHce of the board 
 of directors by which he was appointed 5^^ such authority, as a 
 general rule, continues until revoked,' unless a limit was placed 
 upon its duration when granted. 
 
 § 247 (210). Proof of the existence of the relation of principal 
 and agent. — The general rule is that the existence of the relation 
 of principal and agent may be established by direct evidence or 
 by facts and circumstances. Whether the relation exists is ordi- 
 narily, but not always, a question of fact. 2* As is well known, the 
 relation of principal and agent cannot be established by evidence 
 of the declarations of the person claiming to act as agent,^* nor 
 
 20 Without express power granted 48 Ark. 177, 2 S. W. 783, 3 Am. St. 
 to them, it is the right of the direc- 220; Missouri &c. Co. v. Carpenter, 
 tors to appoint necessary officers and 44 Kans. 257, 24 Pac. 462; Barrett 
 agents of the company, ^nd to pro- v. Indianapolis &c. Co., 9 Mo. App. 
 vide for the payment of compensa- 226; McDougall v. Covert, 18 U. C. 
 tion. Falkiner v. Grand Junction R. C. P. 119. See 1 Elliott Gen. Pr. 
 Co., 4 Ont. Rep. 350. § 426. Where the facts are in con- 
 
 21 In re Griffing Iron Co., 63 N. J. troversy the question is for the jury. 
 L. 357, 46 Atl. 1097. Franklin &c. Co. v. Mackey, 83 Hun 
 
 22 Anderson v. Longden, 1 Wheat. 511, 31 N. Y. S. 1057; Baker v. Tib- 
 (U. S.) 85, 4 L. ed. 42; Northhamp- betts, 162 Mass. 468, 49 N. E. 350 
 ton Bank v. Pepoon, 11 Mass. 288; See generally on this subject, 3 El- 
 Exeter Bank v. Rogers, 7 N. H. 21. liott Ev. §§ 1626-1635. 
 
 23 Waterbury v. New York &c. 24 Lindsay v. Central &c. Co., 46 
 Co., 21 Blatchf. (U. S.) 314, 17 Fed. Ga. 477; Columbus &c. Co. v. Pow- 
 671 ; St. Lotiis &c. Co. v. Hendricks, ell, 40 Ind. 37 ; Hirsohmann v. Iron 
 
§248 
 
 RAILROADS 
 
 388 
 
 can it be established by evidence of merely a general understand- 
 ing among business men.^s The agents of the corporation not 
 expressly named in the charter are usually appointed by the di- 
 rectors under their general authority to direct the affairs of the 
 corporation.28 Such an appointment should, when practicable, 
 be proved by the records of the corporation, and can not be estab- 
 lished by the mere acts of the assumed agent as to the particular 
 matter in question without proof that they were adopted or rati- 
 fied by' the corporation. ^'^ But, as a general rule, no formal reso- 
 lution of the board ol directors is required to appoint an agent 
 or define his powers. ^^ It is not, ordinarily, necessary that the 
 agent's authority be conferred by writing.^^ The fact of his 
 agency may also be proved by showing what he has been accus- 
 tomed to do for his principal with the latter's acquiescence.*" 
 
 §248 (211). Proof of authority. — It is not enough, as a gen- 
 eral rule, to prove the existence of the relation of principal and 
 
 Range &c. R. Co., 91 Mich. 384, 56 
 N. W. 842; Burke v. Frye, 44 Nebr. 
 223, 62 N. W. 476; Taylor v. Second 
 Ave. &c. Co., 17 J. & S. (N. Y.) 
 513; Marvin v. Wilber, 52 N. Y. 
 270; New England he. Co. v. Bax- 
 ley, 44 S. Car. 81, 21 S. E. 444, 885; 
 Brady v. Nagle (Tex. App.), 29 S. 
 W. 943; 3 Elliott Ev. §1636. 
 
 25 McGregor v. Hudson (Tex. 
 App.), 30 S. W. 489. See also 3 
 Elliott Ev. §1638. 
 
 26 But subordinate agents and em- 
 ployes are usually appointed by other 
 officers or higher agents given au- 
 thority to make such appointments. 
 
 27Huntsville &c. R. Co. v. Cor- 
 penning, 97 Ala. 681, 12 So. 295; 
 City i:,lectric St. R. Co. v. First Nat. 
 &c. Bank, 62 Ark. 33, 34 S. W. 89, 
 31 L. R. A. 535, 54 Am. St. 282; 
 International &c. R. Co. v. Prince, 11 
 Tex. 560, 14 S. W 171, 19 Am. St. 
 795; Waterman Corp^ 323. 
 
 28 Bank of Lyons v. Demmon, 
 Hill & D. Supp. (N. Y.) 398; Good- 
 win V. Union Screw Co., 34 N. H. 
 378; 2 Thomp. Corp. (2d ed.) § 1596. 
 It may be made "by the usual 
 course of business." Bank of Mid- 
 dlebury v. Rutland &c. R. Co., 30 
 Vt. 159. 
 
 29 Bank of Middlebury v. Rutland, 
 &c. R. Co., 30 Vt. 159; Nicholas v. 
 Oliver, 36 N. H. 218; 3 Elliott Ev. 
 §1628;. 2 Thomp. Corp. (2d ed.) 
 § 1596. 
 
 30 Hamilton v. Newcastle &c. R. 
 Co., 9 Ind. 359; Whitney v. South 
 Paris Mfg. Co., 39 Maine 316. His 
 authority may be implied from his 
 course of action and its ratification 
 by the corporation. Perkins v. 
 Washington Ins. Co., 4 Cow. (N. Y.) 
 645; Elysville Mfg. Co. v. Okisko 
 Co., 1 Md. Ch. 392. See also 3 El- 
 liott Ev. §§1633, 1634; York v. 
 Mathis, 103 Maine 67, 68 Atl. 746. 
 
389 CORPORATE REPRESENTATIVES § 249 
 
 agent, but, ordinarily, there must be some evidence of the author- 
 ity and its scope. In the case of general superior officers, as 
 president, general manager, and the like, the court may infer, in a 
 general way, the existence of authority. In the case of mere 
 agents, where nothing has been done toward executing a contract 
 made by one who assumes to act for the corporation and damages 
 for non-performance are sought to be recovered, the plaintiiif must 
 affirmatively show that the agent had authority to bind the cor- 
 poration. ^i Evidence that a person is an agent of the company 
 is, ordinarily, not sufficient to establish his authority to bind the 
 company by his particular acts, but, as a general rule, evidence 
 that the relation of principal and agent exists must be supple- 
 mented by evidence showing the nature and extent of the agent's 
 authority. ^2 
 
 §249 (212). Agency inferred. — The law will often infer an 
 agency from the general character of the acts which one assuming 
 to act for the corporation has been permitted to do,^* although 
 they do not come strictly within the terms of his employment, 
 and the agent will be held to possess the power to bind his prin- 
 cipal within the limits of the aiithority with which he, has appar- 
 ently been clothed by the principal in respect to the subject-mat- 
 ter. ^^ The corporation will, as a general rule, be bound by the 
 
 3ij.^ister V. LaRue, 15 Barb. (N. 118; Perkins v. Portland &c. R. Co., 
 
 Y.) 323; Atlantic Co. v. Vigilancia, 47 Maine 573, 74 Am. Dec. 507; 
 
 73 Fed. 452. See also Elliott Ev. Hotchin v. Kent, 8 Mich. 526; 
 
 §§1625, 1632. Washburn v. Nashville &c, R. Co., 
 
 32 Highland Av. &c. Co. v. Wai- 40 Tenn. 638, 75 Am. Dec. 784 ; Tan- 
 ters, 91 Ala. 435, 8 So. 57; Chatta- ner v. Oil Creek R. Co., 53 Pa. St. 
 nooga &c. Co. v. Liddell, 85 Ga. 482, 411. See also 2 Thomp. Corp. (2d 
 11 S. E. 853, 21 Am. St. 169; Bon- ed.), §§ 1597, 1598; Murphy v. Cane, 
 nell V. State, 64 Ind. 498; Nail v. 82 N. J. L. 557, 82 Atl. 854, Ann. 
 Louisville &c. Co., 129 Ind. 260, 264, Cas. 1913D, 642, and other cases 
 28 N. E. 183, 611; McGowan v. cite^ in note. 
 
 St. Louis &c. Co., 61 Mo. 528; 34 Alabama &c. R. Co. v. Kidd, 
 
 Brown v. Missouri &c. Co., 67 Mo. 29 Ala. 221; Columbus &c. R. Co., 
 
 122. V. Powell, 40 Ind. 37; Louisville &c. 
 
 33 Alabama &c. R. Co. v. Kidd, 29 R. Co. v. McVay, 98 Ind. 391, 49 
 Ala. 221 ; Isbell v. Brinkman, 70 Ind. Am. Rep. 770 ; Covington v. Coving- 
 
§ 250 RAILROADS 390 
 
 acts of an agent whom it has permitted to pursue a particular 
 line of conduct for a considerable period without objection.*' 
 Thus, where the board of managers of a railroad company per- 
 mitted the president to assume entire control of the business of 
 the company for three years, and to make such purchases for the 
 company as he deemed necessary, giving notes and corporate 
 securities in payment, and at the end of the three years assumed 
 control of the road, together with all the property so acquired, 
 and continued to use it without questioning the manner in which 
 it was obtained, the company was held bound by all the acts of 
 the president during the time he held control of its road.^* But, 
 unless his authority is shown to have been enlarged by the course 
 of business which the corporation has permitted him to pursue, 
 or by ratifying acts not embraced in his original authority,^'' an 
 agent under a general appointment to do specified things has 
 only limited special powers.^® 
 
 § 250 (213). Powers, duties and authority of officers and agents 
 generally. — An attempt is made in some of the states to out- 
 line the duties of certain officers of railroad companies, but most 
 of the states leave this matter to be controlled by the by-laws. 
 As between themselves and the corporation, the officers and 
 agents have only s.uch powers as are directly or impliedly con- 
 ton Bridge Co., 10 Bush. (Ky.) 69; tion of a single act of an assumed 
 Mechanics' Bank v. New York &c. agent, if sufficiently unequivocal. 
 R. Co., 13 N. Y. 599; Pickering v. positive and compreliensive in its 
 Busk, 15 E^st 38. And authority character, may be sufficient, to estab- 
 to act in a certain matter will carry lish an agency to do other similar 
 with it authority to bind the corpo- acts. Wilcox v. i^aicago &c. R. Co., 
 ration in all things incident thereto. 24 Minn. 269. 
 
 Bodine v. Exchange Fire Ins. Co., 36 Olcott v. Tioga R. Co., 27 N. 
 
 51 N. Y. 117, 10 Am. Rep. 566; Y. 546, 84 Am. Dec. 298. And see 
 Newell V. Smith, 49 Vt. 255. See Kelley v. Newburyport &c. Horse R. 
 also Dore v. Southern Pac. Co., 163 Co., 141 Mass. 496, 6 N. E. 745. 
 Cal. 182, 124 Pac. 817. 37 Commonwealth v. Ohio &c. R. 
 
 35 Caldwell v. National Mohawk Co., 1 Grants' Cas. (Pa.) 329, and 
 Valley Bank, 64 Barb. (N. Y.) 333. cases cited in preceding notes. 
 See generally 3 Elliott Ev. §§1631, 38 Wilson v. Genesee Mut. Tns. 
 
 1633, 1634, 1635; 2 Thomp. Corp. Co., 14 N. Y. 418. 
 (2d ed.) §1603. A single recogni- 
 
391 
 
 CORPORATE REPRESENTATIVES 
 
 §250 
 
 ferred upon them by the charter, or by the terms of their ap- 
 pointment.^^ Where the charter provides that certain povirers 
 of the corporation shall be exercised by particular officers or 
 agents, only such officers or agents may exercise them, and any 
 attempt by other persons to bind the corporation by the exercise 
 of such powers will ordinarily be voidable,*" but there may be 
 circumstances which will prevent the corporation from avoiding 
 the acts of such officers or agents. The general rule is that where 
 the duties of an officer or agent are defined by law, or prescribed 
 in the charter or articles of association, or established by usage, 
 a person dealing with the corporation is bound to know the lim- 
 itations upon his authority thus determined.*^ It has been held 
 by some of the courts that he must, in doubtful cases, acquaint 
 himself with the extent of such authority, or submit to the con- 
 sequences of an omission to do so.*^ As between the corporation 
 and third persons, where the agent's power is not limited by the 
 charter or by positive law, the corporation will generally be held 
 
 39 See 2 Thomp. Corp. (2d ed.), 
 §1408. 
 
 40 Union Mut. Fire Ins. Co. v. 
 Keyser, 32 N. H. 313, 64 Am. Dec. 
 375. 
 
 41 Adriance v. Roorae, 52 Barb. 
 <N. Y.) 399; State v. Commercial 
 Bank, 14 Miss. 218, 45 Am. Dec. 280; 
 Ernest v. Nicholls, 6 H. L. Cas. 401. 
 Persons dealing with the officers of 
 a corporation, or with persons as- 
 suming to represent it, are charge- 
 able with notice of the purpose of 
 its creation and its powers and with 
 the authority, actual or apparent, of 
 its officers or agents with whom 
 tthey deal. Wilson v. Kings County 
 Elev. R. Co., 114 N. Y. 487, 21 N. E. 
 1015, 24 N. Y. S. 81; Memphis &c. 
 Elevator Co; v. Memphis &c. R. Co., 
 85 Tenn. 703, 5 S. W. 52, 4 Am St. 
 798; Bocock v. Alleghany Coal & 
 Iron Co., 82 Va. 913, 1 S. E. 325, 3 
 
 Am. St. 128; Whitehurst v. White- 
 hurst, 83 Va. 153, 1 S. E. 801. 
 
 42 Risley v. Indianapolis &c. R. 
 Co., 1 Hun (N. Y.) 202, in which 
 there is a dictum to the effect that 
 one contracting with an officer of the 
 corporation must be informed as to 
 his powers set forth in the by-laws. 
 But the principal upon which the 
 case is based is that one dealing 
 with a corporation must ascertain 
 with certainty the authority of a 
 person professing to act for the cor- 
 portion, unless he has been held 
 out by the corporation as possess- 
 ing the powers in question or has 
 before acted for it in the same ca- 
 pacity; and failing to do this he 
 must abide the consequences of his 
 neglect. Salem Bank v. Gloucester 
 Bank, 17 Mass. 1, 9 Am. Dec. Ill J 
 Adriance v. Roome, 52 Barb 'M. 
 Y.) 399. 
 
§250 
 
 RAILROADS 
 
 392 
 
 bound by his acts performed within the scope of his apparent 
 authority; and this is true not only of his contracts, but of all his 
 other acts and oniissions.*^ Thus it is held liable for the frauds, 
 the misrepresentations,** and even the torts,*^ of its authorized 
 
 43 Cedar Rapids &c. Co. v. Stew- 
 art, 25 Iowa 115; New York &c. Co. 
 V. Bates, 68 Md. 184, 11 Atl. 705; 
 Reed v. Home Savings Bank, 130 
 Mass. 443, 39 Am. Rep. 468 ; Hirsdh- 
 mann v. Iron Range &c. Co., 97 
 Mich. 384,. 56 N. W. 842; Ecker v. 
 Chicago &c. R. Co., 8 Mo. App. 
 223 ; Olcott v. -Tioga &c. Co., 27 N. 
 Y. 546, 84 Am. Dec. 298; Chestnut 
 Hill &c. Co. V. Rutter, 4 Serg. & 
 R. (Pa.) 6, 8 Am. Dec. 675; Wash- 
 burn V. Nashville &c. Co., 3 Head. 
 (Tenn.) 638; Nashville &c. Co. v. 
 Carroll, 6 Heisk. (Tenn.) 347; 
 Clouse V. Canada Southern &c. Co., 
 4 Ont. 28, 14 Am. & Eng. R. Cases 
 456; Langan v. Great Western &c. 
 Co., 30 L. T. (N. S.) 173; Ranger 
 V. Great Western R. Co., 5 H. L. 
 Cas. 72. See also 2 Thomp Corp. 
 (2d ed.), §1597, 1609. If an agent 
 is invested with the indicia of au- 
 thority, the company will be liable to 
 innocent third persons for the acts 
 of the agent within the scope of the 
 authority with which he appears to 
 be clothed, although he may trans- 
 cend his actual authority or violate 
 instructions, but this rule does not 
 prevail where the authority of the 
 agent is prescribed by the corpo- 
 rate charter. Illinois &c. Co. v. 
 Jonte, 13 111. App. 424; Goflf v. To- 
 ledo &c. Co., 28 111. App. 529; Madi- 
 son &c. R. Co. V. Norwich &c. Soc, 
 24 Ind. 457, Lake Shore &c. Co. v. 
 Foster, 104 Ind. 293, 4 N. E. 20, 54 
 Am. Rep. 319; American &c. Co. v. 
 
 Minneapolis, St. Paul &c. Co., 44 
 Minn. 93, 46 N. W. 143; Harrison 
 V. Kansas City &c. Co., SQ Mo. App. 
 332; Meyer v. Harnden &c. Co., 24 
 How. Prac. (N. Y.) 290; Brooke v. 
 New York &c. Co., 108 Pa. St. 529, 
 
 1 Atl. 206, 56 Am. Rep. 235; Hull 
 V. East Line &c. Co., 66 Texas 619, 
 
 2 S. W. 831;' Winchell v. National 
 &c. Co., 64 Vt. 15, 23 Atl. 728. 
 
 44 Bank of U. S. v. Davis, 2 Hill 
 (N. Y.) 451; New York &c. R. Co. 
 V. Schuyler, 34 N. Y. 30. 
 
 45 Drake v. Kiely, 93 Pa. St. 492 ; 
 Whiteman v. Wilmington &c. R. Co., 
 2 Harr. (Del.) 514, 33 Am. Dec. 
 411; Moore v. Fitchburg R. Corp., 
 70 Mass. 465, 64 Am. Dec. 83; 
 Evansville &c. R. Co. v. McKee, 99 
 Ind. 519, 50 Am. Rep. 102; where 
 the company's detective caused the 
 arrest of an innocent person, and 
 the company was held liable in dam- 
 ages. See' also Northwestern &c. 
 Co. V. Hack, 66 111. 238; Gillemater 
 V. Madison &c. Co., 5 Ind. 339 ; Pitts- 
 burgh &c. Co. V. Kirk, 102 Ind. 399, 
 52 Am. Rep. 675 ; Ramsden v. Bos- 
 ton &c. Co., 104 Mass. 117, 6 Am. 
 Rep. 200; Miller v. Burlington, 8 
 Nebr. 219; State. v. Morris &c. Co., 
 23 N. J. L. 360; Brokaw v. New 
 Jersey &c. Co., 32 N. J. L. 328; 
 Nolton v. Western R. Co., 15 N. Y. 
 444, 69 Am. Dec. 623 ; Cohen v. Dry 
 Dock &c. Co., 69 N. Y. 170; Stewart 
 V. Brooklyn &c. Co., 90 N. Y. 
 588, 43 Am. Rep. 185; Smith v. 
 Manhattan &c. Co., 45 N. Y. S. 865 ; 
 
393 CORPORATE REPRESENTATIVES § 250 
 
 agents, committed in the course of their employment.*" In an 
 action of trespass against a railroad company and its president, 
 who was also the manager of a construction company, which 
 had contracted with the railroad company to construct its road, 
 it appeared that as such manager of the construction company, 
 he made a contract with contractors to build a certain portion on 
 a line, "as shown by a map designating the surveys, both on file 
 in the office of the chief engineer" of the railroad, with such vari- 
 ations as should be determined on by the construction company ; 
 that as such he notified the contractors to commence the work 
 "as per contract," and that they underlet four sections to a con- 
 tractor, who committed the trespass ; the president also wrote 
 the body of a letter purporting to be signed by the construction 
 company to the contractors, stating that it vvas deemed advisable 
 by the executive committee of the railroad (of which committee 
 he was a member) to change the line of survey at that place, and 
 requesting them to await instructions, and suspend operations ; 
 the contractors stopped work, but were paid for the work on 
 plaintiff's land, on estimates approved by the chief engineer in 
 drafts approved by the executive committee, and it was held 
 that the testimony of a director of the railroad company that 
 there was a contract with the construction company, together 
 with the fact that the latter company was working under the 
 
 Hussey v. Norfolk &c. Co., 98 N. Pullman &c. Co., 20 Fed. 100; Rit- 
 
 Car. 34, 3 S. E. 923, 2 Am. St. 312; chie v. Waller, 63 Conn. ISS, 28 
 
 Sawyer v. Norfolk &c. R. Co., 142 Atl. 29, 27 L. R. A. 161, and notes, 
 
 N. Car. 1, 54 S. E. 793; Quinn v. 38 Am. St. 361; Toledo &c. R. Co. 
 
 South Carolina &c. Co., 29 S. Car. v. Harmon, 47 III. 298, 95 Am. Dec. 
 
 381, 7 S. E. 614, 1 L. R. A. 682; 489; Indianapolis ■&c. Co. v. An- 
 
 Payne v. Western &c. Co., 13 Lea thony, 43 Ind. 183 ; Terre Haute &c. 
 
 (Tenn.) 507, 49 Am. Rep. 666; Co. v. Jackson, 81 Ind. 19, 6 Am. 
 
 Craker v. Chicago &c. Co., 36 Wis. & Eng. R. Cases 178; Pennsylvania 
 
 657, 17 Am. Rep. 504; Ranger v. Co. v. Weddle, 100 Ind. 138, and 
 
 Gfeat vVestern &c. Co., S H. L. Cas. cases cited; De Camp v. Mississippi 
 
 72. &c. R. Co., 12 Iowa 348; Perkins v. 
 
 48 The old common law doctrine Missouri &c. Co., 55 Mo. 201 ; 
 
 that a master is not liable for the Quigley v. Central &c. Co., 11 Nev. 
 
 wilful act of the servant, although 350, 21 Am. Rep. 757, Craker v. 
 
 performed within the line of duty, Chicago &c. R. Co., 36 Wis. 657, 17 
 
 has been overthrown. Heenrich v. Am. Rep. 504. 
 
§250 
 
 RAILROADS 
 
 394 
 
 railroad company's franchise, and with its consent, was enough 
 to show a liability on the part of the railroad company for what- 
 ever the sub-contractors did bona fide and in the line of their 
 employment.*'' The corporation is also liable for the negligence! 
 of its agents or servants resulting in the failure to perform duties 
 imposed upon it for consequent injury to one to whom such 
 duties are owing,** even though the servants were carefully se- 
 lected with reference to their competency.*^ The employer's 
 duty is not fully discharged in such a case when he exercises care 
 in the selection of employes, although it is his duty to exercise 
 such care,^° but he is liable for not seeing to it that his employes 
 
 47 St. Louis &c. R. Co. V. Dren- 
 nan, 26 111. App. 263. A corporation 
 cannot, by its by-laws, or any con- 
 stating instrument, avoid liability for 
 the wrongful act of its officers or 
 servants performed within the scope 
 of their authority. Sherman v. 
 Commercial Printing Co., 29 Mo. 
 App. 31. 
 
 48 Brown v. Chicago &c. R. Co., 
 54 Wis. 342, 11 N. W. 356, 911, 41 
 Am. Rep. 41 ; Pennsylvania Co. v. 
 Hoagland, 78 Ind. 203; Byrne v. 
 Wilson, 15 Irish C. L. 332. This 
 has been held, although the passen- 
 ger traveled free, under a contract 
 wherehy he assumed all risks of ac- 
 cidents. Ohio &c. R. Co. v. Selby, 
 47 Ind. 471, 17 Am. Rep. 719; 
 Johnson v. Missouri Pacific &c. Co., 
 96 Mo. 340, 9 S. W. 790, 9 Am. St. 
 351. 
 
 ■49 Gillenwater v. Madison &c. R. 
 Co., 5 Ind. 339, 61 Am. Dec. 101. 
 "See generally Georgia &c. R. Co. v. 
 Dougherty, 86 Ga. 744, 12 S. E. 747, 
 22 Am. St, 499; Baird v. Shipman, 
 132 111. 16, 23 N. E. 384, 7 L. R. A. 
 128, 22 Am. St. 514 ; Golden v. New- 
 brand, 52 Iowa 59, 2 N. W. 537, 35 
 Am. Rep. 257; New Orleans &c. Co. 
 V. Harrison, 48 Miss. 112, 12 Am. 
 
 Rep. 356; Blake v. Ferris, 5 N. Y. 
 (1 Selden) 48, 55 Am. Dec. 304; 
 McClung V. Dearborne, 134 Pa. St. 
 396, 19 Atl. 698, 8 L. R. A. 204, 19 
 Am. St. 708. 
 
 50 Wabash &c. Co. v. McDaniels, 
 107 U. S. 454, 2 Sup. Ct. 932, 27 
 L. ed. 605; Chicago &c. Co. v. Shan- 
 non, 43 111. 338; Toledo &c. Co. v. 
 Bailey, 145 111. 159, 33 N. E. 1089; 
 Western Stone Co. v. Whalen, 151 
 111. 472, 38 N. E. 241, 42 Am. St. 
 244; Lake Shore &c. Co. v. Stupak, 
 123 Ind. 210, 23 N. E. 246; Union 
 &c. Co. V. Young, 19 Kans. 488; 
 Oilman v. Eastern &c. Co., 92 Mass. 
 233, 87 Am. Dec. 635; Gilman v. 
 Eastern &c. Co., 95 Mass. 433, 90 
 Am. Dec. 210; Hatt v. Nay, 144 
 Mass. 186, 10 N. E. 807; Monahan 
 V. Worcester, ISO Mass. 439, 23 N. 
 E. 228, 15 Am. St. 226; Davis v. 
 Detroit &c. Co., 20 Mich. 105, 4 Am. 
 Rep. 364; Hilts v. Chicago &c. Co., 
 55 Mich. 437, 21 N. W. 878; Lee v. 
 Michigan Central &c. Co., 87 Mich. 
 574, 49 N. W. 909; Grube v. Mis- 
 souri &c. Co., 98 Mo. 330, 11 S. W. 
 736, 4 L. R. A. 776, 14 Am. St. 
 645 ;. Wright v. New York &c. Co 
 25 N. Y. 562. 
 
395 
 
 CORPORATE REPRESENTATIVES 
 
 §251 
 
 perforin their duties with reasonable care, skill and diligence. 
 As already suggested, the employer is not exonerated, although 
 the negligence consisted in disobeying orders. ^^ 
 
 § 251 (214). Authority of agent — Line of duty. — The principal 
 is liable only for acts done within the scope of the agent's au- 
 thority, express or implied."^ Beyond the scope of authority and 
 
 61 Philadelphia &c. R. Co. v, Der- 
 by, 14 How. (U. S.) 468, 14 L. ed. 
 S02. See also Louisville &c. R. Co. 
 V. Steele, 179 Ky. 605, 201 S., W. 43, 
 L. R. A. 1918D, 317. A person seek- 
 ing to charge a corporation with 
 the act of its officers or authorized 
 agents is not affected by secret in- 
 structions limiting the apparent 
 powers of such officers or agents. 
 Benesch v. John Hancock Mut. L. 
 Ins. Co., 32 N. Y. St. IZ, 11 N. Y. 
 S. 348. 
 
 52 The general subject was well 
 considered in the case of Chicago 
 &c. Co. V. Bryant, 65 Fed. 969, 974. 
 The reporter in his head notes 
 makes this statement of the case : 
 "A yardmaster, after 6 p. m., on be- 
 ing relieved from duty, took a pas- 
 senger car and engine to give him- 
 self and fellow servants a free ride 
 to and from a meeting of theirs, 
 without notice or permission from 
 any officer who had authority to 
 permit the passage of such a train. 
 Held that such act, not having been 
 done in the course of his employ- 
 ment, but for his own ends exclus- 
 ively, and without authority to 
 carry passengers for the company, 
 and having no apparent authority, 
 except possession of the train, the 
 company was not liable as to a pas- 
 senger for injury to one on the 
 train." In the course of the opinion 
 
 the court used this language : 
 "Moreover it is a, fatal objection to 
 the liability of this company for the 
 acts of this yardmaster in operating 
 this train that they were not in the 
 course of his employment for the 
 company, but for his own ends ex- 
 clusively, while he was at liberty 
 from his master's service. The mas- 
 ter is not liable for an act done by 
 a servant when he is free from his 
 service and is not attempting to 
 discharge any duty to his master im- 
 posed upbn him by his employment, 
 but is pursuing his own ends ex- 
 clusively, even though the act could 
 not have been done without the 
 facilities afforded by his relation to 
 his master." In Mitchell v. Crass- 
 weller, 13 C. B. 237, a carman, whose 
 duty it was to put the horse and 
 cart of his master in his stable after 
 the day's work was completed, ob- 
 tained the keys of the stable for 
 that purpose, and then drove in an- 
 other directions on his own business 
 without the consent of his master. 
 On his return he drove his master's 
 horse and cart against and injured a 
 third person, but the master was- 
 held to be exempt from liability for 
 this injury. In Cousins v. Hannibal, 
 &c. R. Co., 66 Mo. 572, the su- 
 perintendent of the company took 
 an idle locomotive from its round- 
 house in the night, and ran it two 
 
§251 
 
 RAILROADS 
 
 396 
 
 duty he is a stranger to his principal and cannot bind him. Very- 
 many cases hold that the master is not liable for a servant's will- 
 ful and malicious trespass which he has neither commanded nor 
 ratified and which was evidently perpetrated to gratify the pri- 
 vate hate or malignity of the servant, although done under color 
 of a discharge of the duty which he has undertaken for his em- 
 ployer. ^^ Thus it is held that where a person who applies to 
 
 and one-half miles for a doctor for 
 a sick neighbor. On the way he 
 carelessly drove the engine upon and 
 killed the plaintiff's mule. But the 
 Supreme Court of Missouri held that 
 the company was not liable for the 
 death of the mule. In Morier v. 
 St. Paul &c. R. Co., 31 Minn. 351- 
 353, 17 N. W. 952, 47 Am. Rep. 793, 
 a case in which an action was 
 brought against the company for 
 damages that resulted from a fire 
 kindled by its sectionmen on its 
 right of way to pook their dinners 
 on a day when they were working 
 for the company, before and after 
 their dinner, Judge Mitchel, of the 
 Supreme Court of the state of Min- 
 nesota, states this rule in these 
 words : "If the act be done while 
 the servant is at liberty from the 
 service, and pursuing his own ends 
 exclusively, the master is not re- 
 sponsible. If the servant was, at the 
 time when the injury was inflicted, 
 acting for himself, and as his own 
 master, pro tempore, the master 
 is not liable. If the servant step 
 aside from his master's business, for 
 however short a time, to do an act 
 not connected with such business, 
 the relation of master and servant 
 is for the time suspended. Such, 
 variously expressed, is the uniform 
 doctrine laid down by all authori- 
 ties. 1 Thomp. Neg. (2d ed.), §522, 
 
 et seq., 885, 886; White Supplement, 
 to Thomp. Neg., §§518-614; Little 
 Miami R. Co. v. Wetmore, 19 Ohio 
 St. 110, 2 Am. Rep. 373; Storey v. 
 Ashton, L. R. 4 Q. B. 476; Mit- 
 chenn v. Crassweller, 13 C. B. 237; 
 McClenaghan v. Brock, 5 Rich. L. 
 (S. Car.) 17." To the same effect 
 are Campbell v. Providence, 9 R. I. 
 262, and Garretzen v. Duenckel, 50 
 Mo. 104, 107, 111, 11 Am. Rep. 405. 
 See also Southern R. Co. v. Cham- 
 bers, 126 Ga. 404, 55 S. E. Z1 ; Cen- 
 tral of Georgia R. Co. v. Morris, 121 
 Ga. 484, 49 S. E. 606, 104 Am.' St. 
 164; Obertoni v. Boston &c. R. Co., 
 186 Mass. 481, 71 N. E. 980, 67 L. 
 R. A. 422. 
 
 53 McManus v. Crickett, 1 East 
 106 ; Evansville &c. R. Co. v. Baum, 
 26 Ind. 70; Hibbard v. New York 
 &c. R. Co., IS N. Y. 455; Illinois 
 Central R. Co. v. Downey, 18 111. 
 259, and authorities cited in last 
 preceding note. See also as to this 
 being the rule where the act is out- 
 side the scope of the employment, 
 St. Louis Southwestern R. Co. v. 
 Harvey, 144 Fed. 806; Dougherty v. 
 Chicago &c. R. Co., 137 Iowa 257, 
 114 N. W. 902, 14 L. R. A. (N. S.) 
 590, and notes, 126 Am. St. 282. 
 Everingham v. Chicago &c. R. Co., 
 148 Iowa 662, 127 N. W, 1009, Ann'. 
 Cas. 1912C, 848. Compare Bowens 
 V. Illinois Cent. R. Co., 136 Fed. 
 
397 
 
 CORPORATE REPRESENTATIVES 
 
 §251 
 
 have his baggage checked, and by his abusive language provokes 
 a quarrel with the baggageman, in the course of which the bag- 
 gageman injures him with a hatchet, he cannot hold the railroad 
 company liable for his injuries. s* The principle is one of wide 
 sweep and is illustrated by many cases presenting divers 
 phases.^" It is held that an agent employed to control and super- 
 
 306, 70 L. R. A. 915 (holding com- 
 pany not liable) with Southern R. 
 Co. V. Chambers, 126 Ga. 404, 55 S. 
 E. 37, 7 L. R. A. (N. S.) 927 
 (holding company liable under some- 
 what similar' circumstances) . Where 
 one agrees to supply a railroad com- 
 pany with timber for construction 
 of its road, and employes of sub- 
 contractors under him committed 
 trespasses in getting timbers for 
 such construction, the railroad com- 
 pany is not liable under the statute 
 providing that an employer is not 
 liable for torts of his employes, en- 
 gaged in an independent business, 
 when there is no evidence of a rati- 
 fication by the company. Parker v. 
 Waycross & F. R. Co., 81 Ga. 387, 
 8 S. E. 871. 
 
 84 Little Miami R. Co. v. Wet- 
 more, 19 Ohio St. 110, 2 Am. Rep. 
 373. The weight of authority holds 
 the employer liable for willful in- 
 juries in a proper case. See post, 
 §§ 1793, 2489. 
 
 5B Stephenson v. Southern &c. Co., 
 93 Cal. 558, 29 Pac. 234, IS L. R. A. 
 475, 27 Am. St. 226; Walton v. New 
 York &c. Co., 139 Mass. 556, 2 N. 
 E. 101 ; McKeon v. Citizen's &c. Co., 
 42 Mo. 79; Garretzen v. Duenckel, 
 SO Mo. 104, 11 Am. Rep. 405; Cou- 
 sins V. Hannibal &c. Co., 66 Mo. 
 572; Farber v. Missouri &c. Co., 116 
 Mo. 81, 22 S. W. 631; Walker v. 
 Hannibal &c. Co., 121 Mo. 575, 26 
 
 S. W. 360, 24 L. R. A. 363, 42 Am. 
 St. 547; Farber v. Missouri Pacific 
 Co., 32 Mo. App. 378; Pittsburgh 
 &c. Co. V. Shields, 47 Ohio St. 387, 
 24 N. E. 658, 8 L. R. A. 464, 21 
 Am. St. 840; Towanda &c. Co. v. 
 Heeman, 86 Pa. St. 418; Cunning- 
 ham V. Grand Trunk Railroad, 31 
 U. C. Q. B. 350; McKenzie v. Mc- 
 leod, 10 Bing. 385 ; Mitchell v. Crass- 
 weller, 13 C. B. 237. In many cases 
 the question whether the act was 
 performed within the scope of the 
 agent's authority is one of fact. 
 Kimball v. Cushmann, 103 Mass. 
 194, 4 Am. Rep. 528; Ritchie v. Wal- 
 ler, 63 Conn. 155, 28 Atl. 29, 27 L. 
 R. A. 161, 38 Am. St. 361; Redding 
 V. South Carolina &c. Co., 3 S. Car. 
 1, 16 Am. Rep. 681. But the ques- 
 tion is often one of law. Stone v. 
 Hill, 45 Conn. 44, 29 Am. Rep. 635; 
 Storey V. Ashton, L. R. 4. Q. B. 
 476. See generally Rounds v. Del- 
 aware &c. Co., 64 N. Y. 129, 21 Am. 
 Rep. 597; Cormack v. Digby, 9 I. R. 
 C. L. 557; Burns v. Poulson, L. 
 R., 8 C. P. 563; Sleath v. Wilson, 
 9 Carr. & P. 607;. Whatman v. Pear- 
 son, L. R. 3 C. P. 422. Pollock says, 
 "whether the servant is really bent 
 on his master's affairs or not is a 
 question of fact, but a question 
 which may! be troublesome." Pol- 
 lock Torts, marginal page 71. This 
 statement of the law is not entirely 
 correct, for there are cases in which 
 
1251 
 
 RAILROADS 
 
 398 
 
 vise the lands of a railway corporation cannot render the com- 
 pany liable in damages for malicious prosecution by instituting a 
 criminal prosecution for larceny of the company's property, even 
 though the prosecution is shown to be malicious and without 
 probable cause. ^® So where a railroad inspector imprisoned the 
 plaintiff on a charge of drunkenness and refusal to pay his fare, 
 and preferred a charge against him before a magistrate by whom 
 he was dismissed, the court held that the company was not liable 
 in the absence of anything going to show that the inspector was 
 authorized to make the arrest or that the fact of the plaintiff 
 being in custody was known to the company.^^ If, however, the 
 
 the court must determine, as mat- 
 ter of law, whether the agent was 
 acting within the scope of his au- 
 thority. 
 
 56 Pressley v. Mobile &c. R. Co., 
 IS Fed. 199. The same ruling was 
 made in a somewhat similar case 
 where a' foreman and crew assaulted 
 a party. Waller v. Great Northern 
 R. Co., 18 S. Dak. 420, 100 N. W. 
 1097, 70 L. R. A. 731. But if it was 
 part of the duty of a ticket agent 
 of a corporation tq post in his ofi&ce 
 notices pertaining to the business 
 carried on there, the corporation is 
 liable for a libel contained in a no- 
 tice posted by him, though in ex- 
 cess of his authority Fogg v. Boston 
 &c. R. Co., 148 Mass. 513, 20 N. 
 E. 109, 12 Am. St. 583. And the rail- 
 road company is liable for a mali- 
 cious prosecution instituted by the 
 general manager, although its char- 
 ter did not authorize ,his act. Gulf 
 &c. R. Co. V. James, 73 Tex. 12, 10 
 S. W. 744, IS Am. St. 743. 
 
 57 Eastern Counties R. Co. v. 
 Broom, IS Jur. 297, 2 Eng. L. & 
 Eq. 406. See also Daniel v. Atlantic 
 Coast Line R. Co., 136 N. Car. 517, 
 48 S. E. 816, 67 L. R. A. 455; Allen 
 
 V. London &c. R. Co., L. R. 6 Q. 
 B. 65, 23 L. T. 612. But where the 
 agent is employed to detect and ar- 
 rest persons who unlawfully inter- 
 fere with its business, and while 
 acting within the scope of his em- 
 ployment he arrests an innocent per- 
 son, the corporation is liable. Louis- 
 ville &c. Co. V. McKee, 92 Ind. 371, 
 47 Am. Rep. 193; Evansville &c. R. 
 Co. V. McKee, 99 Ind. S19, S Am. 
 Rep. 102; Pennsylvania Co. v. Wed- 
 dle, 100 Ind. 138; Higgins v. Water- 
 vliet &c. R. Co., 46 N. Y. 23, 7 
 Am. Rep. 293; Lynch v. Metropol- 
 itan &c. R. Co., 90 N. Y. n, 43 Am. 
 Rep. 141 ; Galveston &c. R. Co. v. 
 Donahoe, S6 Tex. 162. See 
 Goff V. Great Northern R. Co., 
 30 L. J. Q. B. 148, holding a rail- 
 road company liable for an arrest 
 made by one of its servants under 
 an authority to make arrests in cer- 
 tain cases, conferred upon railway 
 employes by statute. There is, how- 
 ever, a conflict of authority. The 
 Supreme Court of Maryland in the 
 case of Central R. Co. v. Brewer, 
 78 Md. 63, 28 Atl. 615, held that a 
 street railway company is not liable 
 for a malicious prosecution and false 
 
399 CORPORATE REPRESENTATIVES § 252 
 
 act is within the scope of the agent's duty, and is perfoimtd in 
 the line of service, the great weight of authority is that the mas- 
 ter is Hable, although the act is wilful. 
 
 §252 (215). Scope of authority — General conclusion. — The 
 
 conflict among the authorities to which we have referred makes it, 
 we know, hazardous to venture to state a general conclusion, but 
 we think that it is safe to affirm that, where cars or other equip- 
 ments or appliances are owned and used for particular purposes 
 and this is matter of general knowledge, no agent or servant of a 
 railway company has authority to impose a duty upon the com- 
 pany by inviting a third person to use such equipments or ap- 
 pliances for his own pleasure or convenience, such person not 
 being in the service of the company, having no business rela- 
 tions with it, and there being no emergency warranting a depar- 
 ture from the ordinary course of conduct or business. We have, ' 
 indeed, stated our general conclusion in narrower terms than the 
 best reasoned cases warrant, and are inclined to think the con- 
 clusion should be stated in broader terms. In our opinion, no 
 agent or servant of a railroad company has general authority to 
 devote any of the property of the company to uses entirely for- 
 eign and different from that to which the property was devoted 
 by the corporation. The most liberal view that can be justly 
 taken in favor of one who acts upon an invitation given by an 
 agent or servant of the company to use its property for a purpose 
 
 arrest of an individual by its presi- (N. S.) 88, and note; Mansfield v. 
 
 dent and superintendent on a charge Burns &c. Detective Agency, 102 
 
 of having passed counterfeit money, Kans. 687, 171 Pac. 625, L. R. A. 
 
 unless such officers have express 1918D, 571, and note; Pearson v. 
 
 authority for such action or it is Great Southern Lumber Co., 134 La. 
 
 ratified by the company, citing Carter 117, 63 So. 759, L. R. A. 1916F, 1247, 
 
 v. Machine Co., 51 Md. 290, 34 Am. and note; Mose v. Campbells Creek 
 
 Rep. 311; Tolchester Co. v. Steim- R. Co., 75 W. Va. 62, 83 S. E. 721, 
 
 raier, 72 Md. 313, 20 Atl. 188, 8 L. L. R. A. 1915C, 1183, and note (com- 
 
 R. A. 846. The conflicting cases are pany liable for act of special police 
 
 collected in a note to Ritchie v. Wal- officer appointed by public authori- 
 
 ler, 63 Conn. 155, 28 Atl. 29, 27 L. ties at instance of company though 
 
 R. A. 161, 38 Am. St. 361. See' also act is prompted by personal motives 
 
 Conchin v. El Paso &c. R. Co., of the officer.) 
 13 Ariz. 259, 108 Pac. 260, 28 L. R. A. 
 
§253 
 
 RAILROADS 
 
 400 
 
 essentially different from that to which the property is devoted 
 by the company is that he is a bare licensee to whom the com- 
 pany, ordinarily at least, owes no duty except that of doing him 
 no wilful injury. There is, in truth, strong reason for regarding 
 such a person as a mere trespasser. The cases which hold that 
 one who undertakes to render service for a railroad company 
 upon the request of an agent or employe who has no authority to 
 bind the company by such a request is a mere volunteer to whom 
 the company is responsible for wilful wrongs, but not for in- 
 juries resulting from negligence, support the conclusion stated.''^ 
 
 §253 (216). Contracts by agents — General doctrine. — The 
 
 general rules applicable to contracts by agents of corporations 
 apply to contracts by agents of railroad companies, varied only 
 .by the peculiar facts or by the nature of the business to which the 
 contracts relate. It is not our purpose to consider the subject of 
 agency generally, but to treat it only so far as is necessary to the 
 
 58 We cite a few of the many 
 cases which by their direct judg- 
 ments or by their reasoning sustain 
 our conclusion. Chicago &c. R. Co. 
 V. Bryant, 6S Fed. 969; Arasmith 
 V. Temple, 11 III. App. 39; Ream v. 
 Pittsburgh &c. R. Co., 49 Ind. 93; 
 Everhart v. Terre Haute &c. R. Co., 
 78 Ind. 292, 41 Am. Rep. 567; Pitts- 
 burgh &c. V. Adams, 105 Ind. 151, 5 
 N. E. 187; Wright v. Rawson, 52 
 Iowa 329, 3 N. W. 106, 35 Am. Rep. 
 275; Osborne v. Knox &c. R. Co., 
 
 68 Maine 49, 28 Am. Rep. 16; Gil- 
 shannon V. Storybook &c. Co., 10 
 Cush. (Mass.) 228; Walton v. New 
 York &c. Co., 139 Mass. 556, 2 N. E. 
 101 ; Mellor v. Merchants' &c. Co., 
 150 Mass. 362, 23 N. E. 100, 5 L. 
 R. A. 792; Keating v. Michigan &c. 
 Co., <)! Mich. 154, 56 N W. 346; 
 Morier v. Railway Co., 31 Minn. 351, 
 353, 17 N. W. 952, 47 Am. Rep. 
 793 ; Louisville &c. Co. v. Douglass, 
 
 69 Miss. 723, 11 So. 933. 30 Am. St. 
 
 583; Cousins v. Railroad Co., 66 
 Mo. 572; Wyllie v. Palmer, 137 N. 
 Y. 248, ZZ N. E. 381, 19 L. R. A. 
 285; Flower v. Pennsylvania Co., 69 
 Pa. St. 210, 8 Am Rep. 251; Baird 
 V. Petit, 70 Pa. St. 477; Campbell v. 
 Providence, 9 R. I. 262; McClen- 
 aghan v. Brock, 5 Rich. L. (S. Car.) 
 17; Washburn v. Nashville &c. R. 
 Co., 40 Tenn. 638, 75 Am. Dec. 784; 
 Mayton v. Texas &c. Co., 63 Tex. 11, 
 51 Am. Rep. 637; Gulf &c. Co. v. 
 Dawkins, 11 Tex. 228, 13 S. W. 932 ; 
 Texas &c. R. Co. v. Skinner, 4 Tex. 
 Civ. App. 661, 23 S. W. 1101; Mit- 
 chell V. Crassweller, 13 C. B. 237; 
 Murray V. Currie, L. R. 6 C. P. 24. 
 See alsq White v. Levi, 137 Ga. 269, 
 IZ S. E. 376; Southern R. Co., v. 
 Pope, 133 Ky. 835, 119 S. W. 237; 
 Lynch v. Boston &c. R. Co., 226 
 Mass. 522, 116 N. E. 248, L. R. A. 
 1917E, 819, and note. Post, §§1305, 
 1580, 1581, 1582. 
 
401 
 
 CORPORATE REPRESENTATIVES 
 
 §253 
 
 unity and completeness of the plan of our work. It may be said 
 at the outset that an agent may bind the corporation by any con- 
 tract which he may make within the scope of his apparent au- 
 thority, although he exceeds his real authority, unless the party 
 with whom he is dealing knows or ought to know the contract 
 to be one which he is not authorized to make, but he cannot bind 
 the company by an act outside of the real or apparent scope of 
 his authority.59 It has been held that a railroad company can 
 neither be bound by a contract made by a person who is not its 
 agent, nor can it ordinarily enforce a contract made by a person 
 who is not its agent.**' We suppose, however, that the doctrine 
 
 50 Harrison v. Missouri Pacific R. 
 Co., 74 Mo. 364, 41 Am. Rep. 318. 
 Where the brakeraan took up the 
 tickets for the conductor and re- 
 turned the wrong part of a return 
 ticket to a passenger, thinking, as he 
 testified, that "one-half of the ticket 
 was good for a ride either way," 
 the railroad was bound to accept 
 such part of the ticket in payment 
 for the return passage, and was held 
 liable in damages for a refusal so 
 to do. Lake Erie &c. R. Co. v. Fix, 
 88 Ind. 381, 4S Am. Rep. 464. See 
 as to whether conductor can waive 
 conditions in stockdrovers' pass, note 
 in 27 L. R. A. (N. S.) 646. Persons 
 held out as the general agent and 
 the state agent of a foreign cor- 
 poration, who employ a general man- 
 ager to assist them in its work 
 bind the corporation by their con- 
 tract, if the other party is ignor- 
 ant of the limitation on their au- 
 thority. Equitable Endowment Assn. 
 V. Fisher, 71 Md. 430, 18 Atl. 803. 
 See also as to implied authority 
 of superintendent of department to 
 contract with reference to matters 
 relating thereto, note in 38 L. R. 
 A. (N. S.) 1135. But an offi- 
 
 cer of a corporation not authori- 
 zed to transact the general busi- 
 ness of the company with third 
 persons cannot bind the company by 
 certifying that the company has no 
 lien on certain shares of stock. 
 Foster v. Cleveland &c. Co., 56 Fed. 
 434; Montgomery &c. Co. v. Hurst, 
 9 Ala. 513; Montgomery &c. Co. v. 
 Hardaway, 104 Ala. 100, 16 So. 29; 
 St. Louis &c. Co. v. Hendricks, 48 
 Ark. 177, 2 S. W; 783, 3 Am. St. 
 220; Dye v. Virginia &c. Co., 9 
 Mackey (D. C.) 63; Chicagio &c. 
 Co., v. Volk, 45 111, 175; Kenton 
 Ins. Co. v. Bowman, 84 Ky. 430, 1 
 S. W. 717; Niebles v. Minneapolis 
 &c. Co., 37 Minn. 151, 33 N. W. 332 ; 
 Fowlds V. Evans, 52 Minn. 551, 54 
 N. W. 743; Deming v. Grand 
 Trunk &c. Co., 48 N. H. 455; Beat- 
 tie v. Delaware &c. Co., 90 N. Y. 
 643; Katzenstein v. Raleigh &c. R. 
 Co., 84 N. Car. 688, 6 Am. & Eng. 
 R. Cas. 464; International &c. Co. 
 v. Ragsdale, 67 Tex. 24, 2 S. W. 
 515; Wood v. Ontario &c. Co., 24 
 U. C. C. P. 334; London & North- 
 western R. Co. V. Bartlett, 7 H & 
 N. 400. 
 «o Chicago &c. Co. v. Estes, 71 
 
§254 
 
 RAILROADS 
 
 402 
 
 of the cases cited in the note must be qualified by the rule that 
 an effective ratification is equivalent to precedent authority. 
 Strictly speaking, the relation of principal and agent cannot exist 
 in the absence of a contract, express or implied.®^ This doctrine 
 sustains the decisions which adjudge that a volunteer cannot be 
 regarded as the agent or employe of a railroad company, although 
 he may, in fact, assume to perform acts in its service. 
 
 §254 (217). Declarations and admissions of agents. — ^The 
 familiar rule is that a principal is not bound, as a general rule, by 
 the declarations or admissions of an agent unless made in the 
 course of business or line of duty of the agent and while "the 
 transaction is depending." This rule is one of extensive applica- 
 tion. An agent may bind the corporation by his declarations and 
 admissions made in and about the execution of the duties of his 
 employment in the same manner that an agent of a private indivi- 
 dual may bind his principal.*^ It is, however, essential to the 
 
 Iowa 603, 33 N. W. 124, 30 Am. & 
 Eng. R. Cas. 276; Estes v. Chicago 
 &c. Co., 72 Iowa 235, 33 N. W. 647. 
 See also note in L. R. A. 1918F, 
 8-137. 
 
 ®i Central Trust Co. v. Bridges, 
 57 Fed. 753, 57 Am. & Eng. R. Cas. 
 452; Fischer v. Merchants' Des- 
 patch &c. Co., 13 Mo. App. 133; 
 Kelly V. Lehigh &c. Co., 8 Daly (N. 
 Y.) 291. In the case first cited the 
 court said: "An agency is created — 
 authority is actually conferred — ^very 
 much as a contract is made, i. e., by 
 an agreement between the principal 
 and agent that such a relation shall 
 exist. The minds of the parties 
 must meet in establishing the agen- 
 cy." This rule does not apply where 
 the principal holds out another as 
 his agent, for in such a case the lia- 
 bility rests upon the ground of es- 
 toppel. 
 
 62 Montgomery R. Co. v. Hurst, 
 9 Ala. 513 ; Union &c. Co. v. Hepner, 
 3 Colo. App. 313, 33 Pac. 72; Louis- 
 ville §ic. Co. V. Buck, 116 Ind. 566, 
 19 N. E. 453, 2 L. R. A. 520, 9 Am. 
 St. 883; Ohio &c. Co. v. Stein, 133 
 Ind. 243, 31 N. E. 180, 32 N. E. 831, 
 19 L. R. A. 773; Covington R. Co. 
 V. Ingles, IS B. Mon. (Ky.) 637; 
 Whitworth v. Detroit &c. R. Co., 
 81 Mich. 98, 45 N. W. 500; Malecek 
 V. Tower Grove R. Co., 57 Mo. 17; 
 Henderson v. Railroad Co., 17 Tex. 
 560, 67 Am. Dec. 675 ; International 
 &c. Co. V. Lewis (Tex. Civ. App.), 
 23 S. W. 323. See generally note 
 in Ann. Cas. 1912C, 109; also Hill 
 V. Pullman Co., 188 Fed. 497; 
 Touchberry v. Northwestern R. Co., 
 88 S, Car. 47, 70 S. E. 424; Deaver- 
 Jeter Co. v. Southern R. Co., 91 S. 
 Car. 503, 74 S. E. 1071, Ann Cas. 
 1914A, 230. 
 
403 
 
 CORPORATE REPRESENTATIVES 
 
 §255 
 
 competency of such declarations, as a general rule, that they be 
 not narratives of past occurrences, but, in a sense at least, part of 
 the res gestae.*^ 
 
 §255 (218). Declarations of agent — Res gestae. — The settled 
 rule is that the declarations of an agent made after the transac- 
 tion is closed or usually long after an event has happened, are not 
 admissible against the principal.®* The authorities are substan- 
 tially agreed that the declarations are not competent unless made 
 under such circumstances and at such a time and place as to be 
 regarded as part of the res gestae;®^ but there is much diversity 
 
 63 To be admissible the declara- 
 tions must be made by the agent act- 
 ing within the scope of his author- 
 ity, dum fervet opus. Bensley v. 
 Brockway, 27 111. App. 410; Deere 
 V. Bagley, 80 Iowa 197, 45 N. W. 
 557; Corrister v. Kansas City &c 
 Co., 25 Mo. App. 619; Bevis v. 
 Baltimore &c. R. Co., 26 Mo. App 
 19; Southerland v. Wilmington &c. 
 Co., 106 N. Car. 100, 11 S. E. 189, 
 See also Axtell v. Northern Pac. R, 
 Co., 9 Idaho 392, 74 Pac. 1075 
 Pennsylvania R. Co. v. Orem Fruit 
 &c. Co., Ill Md. 356, n Atl. 571 
 Hogan V. Kelly, 29 Mont. 485, 75 
 Pac. 81; St. Louis &c. R. Co. v. 
 Carlisle, 34 Tex. Civ. App. 268, 78 
 S. W. 553; St. Louis Southwestern 
 R. Co. V. Gilbert (Tex. Civ. App.), 
 136 S. W. 836; 1 Elliott Ev. §§252, 
 564, 565. 
 
 64 Atchison &c. Co. v. Parker, 55 
 Fed. 595; St. Louis &c. Co. v. Mc- 
 Lelland, 62 Fed. 116; Huntsville &c. 
 Co. V. Corpening, 97 Ala. 681, 12 So. 
 295; Chewning v. Ensly &c. R. Co., 
 100 Ala. 493, 14 So. 204; Ft. Smith 
 Oil Co. V. Slover, 58 Ark. 168, 24 
 S. W. 106; St. Louis &c. R. Co. v. 
 Kelley, 61 Ark. 52, 31 S. W. 884; 
 
 Borland v. Nevada Bank, 99 Cal. 89, 
 33 Pac. 737, i1 Am. St. 32; John- 
 son V. East Tennessee &c. Co., 90 
 Ga. 810, 17 S. E. 121; Holt v. Spo- 
 kane &c. Co., 3 Idaho 703, 35 Pac. 
 39; Chicago &c. Go. v. Johnson, 36 
 111. App. 564; McCarthy v. Muir, 
 50 111. App. 510; Belief ontaine &c. 
 Co. V. Hunter, 33 Ind. 335, 5 Am. 
 Rep. 201; Ohio &c. Co. v. Levy, 134 
 Ind. 343, 32 N. E. 815; Petrie v. 
 Columbia &c. Co., 27 S. Car. 63, 2 
 S. E. 837; Waldrop v. Greenwood 
 &c. Co., 28 S. Car. 157, S S. E. 471 ; 
 La Rue v. St. Anthony &c. Co., 3 
 S. Dak. 637, 54 N.' W. 806; Wendt 
 v. Chicago &c. Co., 4 S. Dak. 476, 
 57 N. W. 226; Weideman v. ta- 
 coma &c. Co., 7 Wash. 517, 35 Pac. 
 414; Grisim v. Milwaukee &c. Co., 
 84 Wis. 19, 54 N. W. 104. 
 
 ssVicksburg &c. Co. v. O'Brien, 
 119 U. S. 99, 7 Sup. Ct. 118, 30 L. 
 ed. 299; Chicago &c. Co. v. Becker, 
 32 Fed. 849; Memphis &c. Co. v. 
 Womack, 84 Ala. 149, 4 So. 618; 
 Durkee v. Central Pacific &c. Co., 
 69 Cal. 533, 11 Pac. 30, 58 Am. Rep. 
 562; Pittsburgh &c. Co. v. Theo- 
 bald, 51 Ind. 246; Ohio &c. Co. v. 
 Stein, 133 Ind. 243, 31 N. E. 180, 32 
 
§256 
 
 RAILROADS 
 
 404 
 
 of opinion as to what declarations can be considered as part of 
 the res gestae. Some of the cases have unduly extended the rule 
 and allowed prejudicial declarations to go to the jury^^ unmind- 
 ful of the sound principle that declarations of a third person are 
 generally incompetent and that the declarations of an agent are 
 held competent as exceptions to the general rule. Other cases 
 have erred, as we think, in allowing expressions of opinion to go 
 in evidence as part of the res gestse.^' It seems to us that an 
 opinion of a witness cannot be regarded as part of an occurrence 
 or transaction, and that only the facts connected with the occur- 
 rence can be strictly said to form, part of the res gestae. 
 
 § 256 (219). Declarations must relate to matter in scope of 
 authority and in controversy. — As a general rule, declarations of 
 an agent not relating to the transaction or occurrence are not ad- 
 missible against the principal, nor are declarations not connected 
 with matters over which the agent has authority.^^ It has been 
 
 N. E. 831; Blanchard &c. Co. v. 
 Garritson, 43 Ind. App. 303, 87 N. 
 E. ISl ; State v. Pomeroy, 25 Kans. 
 349; Michigan &c. Co. v. Coleman, 
 28 Mich. 440, 446; Adams v. Hanni- 
 bal &c. Co., 74 Mo. SS3, 41 Am. Rep. 
 333; State v. Tilley, 3 Ired. L. (N; 
 Car.) 424; Southerland v. Wilming- 
 ton &c. Co., 106" N. Car. 100, 11 S. 
 E. 189; Luby v. Hudson River &c. 
 Co., 17 N. Y. 131; Waldele v. New 
 York &c. R. Co., 95 N. Y. 274, 47 
 Am. Rep. 41; Martin v. New York 
 &c. Co., 103 N. Y. 626, 9 N E. 505 ; 
 Cincinnati &c. Co. v. Mara, 26 Ohio 
 St. 185. See generally note in Ann. 
 Cas. 1912C, 109. 
 
 66 Gorman v. Minneapolis &c. Co., 
 78 Iowa 509, 43 N. W. 303; Omaha 
 &c. Co. V. ChoUette, 41 Nebr. 578 
 59 N. W. 921 ; Texas &c. Co. v. Les- 
 ter, 75 Tex. 56, 12 S. W. 955; Gulf 
 &c. Co. V. Compton, 75 Tex. 667, 13 
 S. W. 667;. International &c. R. Co. 
 
 v.' Smith (Tex.), 14 S. W. 642, 44 
 Am. & Eng. R. Cas. 324; Linder- 
 berg V. Cresent Co., 9 Utah 163, 33 
 Pac. 692; Hooker v. Chicago &c. 
 Co., 76 Wis. 542, 44 N. W. 1085, 41 
 Am. & Eng. R. Cas. 498. For in- 
 stances of declarations held admis- 
 sible, see 1 Elliott Ev. §§564, 565, 
 and Elliott Ev. § 2510. 
 
 67 Elledge v. National &c. Co., 100 
 Cal. 282, 34 Pac. 720, 38 Am. St. 
 290. See Metropolitan &c. Co. v. 
 Collins, 1 App. D. C. 383; St. Louis 
 &c. Co. V. Paup (Ark.), 22 S. W. 
 213; Alabama &c. Co. v. Hill, 90 
 Ala. 71, 8 So. 90, 9 L. R. A. 442, 24 
 Am. St. 764. 
 
 68 Missouri &c. Co. v. Stults, 
 31 Kans. 752, 3 Pac. 522, 15 Am. & 
 Eng. R. Cas. 97; Wells v. Alabama 
 &c. Co., 67 Miss. 24, 6 So. 737; 
 Chillioothe v. Raynard, 80 Mo. 185; 
 Younce v. Broad River &c. Co., 155 
 N. Car. 239, 71 S. E. 329, Ann. Cas. 
 
405 
 
 CORPORATE REPRESENTATIVES 
 
 §256 
 
 held that declarations of an agent, although made at the time of 
 the occurrence, are not competent against the principal because 
 not connected with it.''^ It is important that the rule admitting 
 declarations of agents be confined within its legitimate limits, as 
 its extension is likely to result in unjust injury. 
 
 1912C, 107, and other cases cited in 
 note; Baltimore &c. Co. v. Christie, 
 S W. Va. 325 ; Kirby v. Great West- 
 ern &c. Co., 18 L. T. N. S. 6S8. 
 See generally Seaboard Air Line R. 
 Co. V, Sikes, 4 Ga. App. 7, 60 S. E. 
 868; Hilbert v. Spokane &c. R. Co., 
 20 Idaho 54, 116 Pac. 1116; Dum- 
 mington v. Louisville &c. R. Co., 153 
 Ky. 388, 155 S. W. 750;' Warner v. 
 Maine Cent. R. Co., Ill Maine 149, 
 88 Atl. 403; Crowley v. Boston 
 Elev. R. Co., 204 Mass. 241, 90 N. 
 E. 532; 1 Elliott Ev. §252. 
 
 69 Butler V. Manhattan R. Co., 143 
 N. Y. 417, 38 N. E. 454, 26 L.' R.' A. 
 46, 42 Am. St. 738. We quote from 
 the opinion the following. "We 
 think there was error also in one of 
 . the rulings upon the admission of 
 evidence. The plaintiff's wife testi- 
 fied to the closing of the gate and 
 the blow received, and stated that at 
 the time the guard was looking in 
 the opposite direction ; that im- 
 mediately after the blow she made 
 an exclamation of pain. Then 
 plaintiff's counsel then asked the 
 witness 'What the guard said in re- 
 ply to her exclamation of pain.' The 
 question was objected to by the 
 counsel for defendant as incom- 
 petent and hearsay, whereupon the 
 plaintiff's counsel said: "I intend to 
 prove that the brakeman in charge 
 of the brakes at the moment of the 
 blow did not treat her (the plain- 
 tiff's wife) with respect, but, on the 
 
 contrary, insulted her.' The trial 
 judge, after warning the plaintiff's 
 counsel, finally allowed the question 
 to be put, and the witness answered. 
 He said : 'I can go to hell ; shut up.' 
 The defendant's counsel excepted to 
 the evidence. The only claim made 
 in support of the ruling of the court 
 is that the remark of the brakeman 
 was part of the res gestae. We 
 think the ruling cannot be supported 
 upon this ground. The only cir- 
 .cumstance upon which it can be 
 claimed to have been part of the 
 res gestae was its connection in 
 point ot time with the transaction 
 under investigation, viz. : The al- 
 leged injury from the closing of 
 the gate. While proximity in point 
 of time with the act causing the 
 injury is, in every case of this 
 kind essential to make what was 
 said by a third person competent 
 evidence against another as part of 
 the res gestae, that alone is insuffi- 
 cient, unless what was said may be 
 considered part of the principal fact, 
 and so a part of the act itself. But, 
 as in this case, the act was complete 
 before the remark of the brakeman- 
 was made, although closely con- 
 nected with it in point of time, and 
 was not one naturally accompany- 
 ing the act, or calculated to unfold 
 its character or quality, it was not 
 admissible as res gestae. It was as 
 independent of the principal fact, 
 and as incompetent as. evidence, as 
 
§257 
 
 RAILROADS 
 
 406 
 
 §257 (220). Exercise of authority by agents — Illustrative 
 cases. — As a general rule the authority of an agent extends to the 
 doing of all subordinate acts which properly accompany the 
 principal act which he is to do. Thus, a power given by a cor- 
 poration to an agent to purchase property for the corporation 
 necessarily carries with it the power to obligate the company to 
 pay, notwithstanding the fact that a by-law forbids the con- 
 tracting of any debt for a company except by order of the direc- 
 tors.''" If, however, he has never been clothed with any real or 
 apparent authority by the corporation, the person who deals with 
 him relying upon his representations as to his authority has no 
 recourse on any one but the person who assumes to be the agent 
 of the corporation.'^! And where the acts done are outside of the 
 ordinary duties of similar agents in corporations generally, the 
 presumption, in the absence of anything to the contrary, will be 
 that they were done without authority.'' ^ Accordingly, it is held 
 
 though the act and the remark had 
 been much further separated in 
 point of time. Res gestae in a case 
 like this implies substantial coinci- 
 dence in time, but if declarations, of 
 third persons are not in their na- 
 ture a part of the fact, they are not 
 admissible in evidence, however 
 closely related in point of time. See 
 Waldele v. New York &c. R. Co., 95 
 N. Y. 274, 47 Am. Rep. 41, and cases 
 cited. The remark of the brakeman 
 was brutal, and for that reason was 
 calculated to prejudice the jury, but 
 it had nothing to do with the ques- 
 tion at issue, viz., whether the 
 plaintiff's wife sustained an injury 
 hrough the defendant's negligence, 
 and, having been admitted against 
 the protests of the defendant's coun- 
 sel, its admission was reversible 
 error." 
 
 ■^o Arapahoe Cattle & Land Co. v. 
 Stevens, 13 Colo. 534, 22 Pac. 823, 28 
 Am. & Eng. Corp. Cas. 12. 
 
 71 Talladega Ins. Co. v. Peacock, 
 
 67 Ala. 253; Risley v. Indianapolis 
 &c. R. Co., 1 Hun (N. Y.) 202. 
 Even in cases of negotiable instru- 
 ments, those dealing with an agent 
 must inquire .into his authority. 
 Silliman v. Fredricksburg &c. R. 
 Co., 27 Grat. (Va.) 119. An agency 
 cannot be proved by proof of the 
 oral declarations of the supposed 
 agent himself. Missouri Pacific R. 
 Co. V. Stults, 31 Kans. 752, 3 Pac. 
 522. 
 
 ''SLouisville &c. R. Co. v. McVay, 
 98 Ind. 391, 49 Am. Rep. 770; Mar- 
 quette &c. R. Co. V. Taft, 28 Mich. 
 289. But see where the act is within 
 the scope of the ordinary and appro- 
 priate duties of such officers or 
 agents. National State Bank v. Vigo 
 County Nat. Bank, 141 Ind. 352, 40 
 N. E. 799, 50 Am. St. 330; Eureka 
 Iron &c. Works v. Bresnehan, 60 
 Mich. 332, 23 N. W. 524; Lucky 
 Queen Min. Co. v. Abraham, 26 Ore. 
 282, 38 Pac. 65. 
 
407 CORPORATE REPRESENTATIVES § 257 
 
 that without a special authority conferred upon him. in the par- 
 ticular instance, neither an assistant roadmaster nor a master of 
 transportation can be presumed to have authority to represent 
 a railroad company in claiming disputed titlesJ^ And it has also 
 been held that the trackmaster of a railroad company, having 
 charge of a section of its roadbed, which includes an ash-pit, has 
 no authority to make a contract allowing one to have all the coals 
 and ashes dumped by locomotives at the pit as compensation for 
 keeping it clearJ-* The fact that a civil engineer of a railroad, 
 who had no special authority to employ men, told a man to see 
 to delivering some freight which was on the steps of the freight 
 house, and to look to things there, and remain until the company 
 discharged him, creates no right of action against the company ; 
 and such an employment does not become binding upon the com- 
 pany by being ratified by the station agent who is not shown to 
 have had authority in the matterJ^ It is also apparently held in 
 a recent case that a division superintendent had no authority to 
 direct a section foreman to assist in unloading cattle-guard tim- 
 ber, that not being part of the foreman's duty, and that the fore- 
 man while so engaged was not an employe of the company J** So 
 it has been held that a station agent has no authority to employ 
 third persons to watch the station for burglars, and that no impli- 
 cation of authority to do so arises from the fact that the sta- 
 tion agent himself had authority to do the actsJ' 
 
 TS Drew v. Comstock, 57 Mich, arate department, and that the rela- 
 
 176, 23 N. W. 721. tion of master and servant did not 
 
 T4 Little V. Kerr, 44 N. J. Eq. 263, exist with respect to such work and 
 
 14 Atl. 613. the servant could not recover as a 
 
 T5 Willis v. Toledo &c. R. Co., 72 servant while injured in such sep- 
 
 Mich. 160, 40 N. W. 205. But see arate department. 
 Wilson V. Kings Co. El. R. Co., 114 77 Lipscomb v. Houston &c. R. 
 
 N. Y. 487, 21 N. E. 1015. Co., 95 Tex. 5, 64 S. W. 923, 55 L. 
 
 76 Bryan v. International &c. R. R. A. 869, 93 Am. St. 804. But see 
 Co. (Tex. Civ. App.), 90 S. W. 693, for instances in which the company 
 citing Freeman v. San Antonio has been held liable where the agent 
 Brew. Co., 38 Tex Civ. App. 396, 85 apparently had authority as so held 
 S. W. 1165, where it is held that a out or from a long course of deal- 
 foreman of one department had no ing. Florida &c. R. Co. v. Vernidoe, 
 authority to order a workman in his 81 Ga. 175, 7 S. E. 129; Batavian 
 department to work in another sep- Bank v. Minneapolis &c. R. Co., 123 
 
§ 258 RAILROADS 408 
 
 § 258 (221). Scope of authority — Illustrative cases.— A person 
 climbed upon a railroad train on which he was forbidden by the 
 rules of the company to ride, and was compelled by an employe 
 of the company, who had no authority over the train, to alight 
 while it was in motion, and was thereby injured. The company 
 was held not liable.'^^ It has been held that a locomotive engineer, 
 being subordinate to the conductor in charge of the train, has no 
 authority to impose a duty upon a railroad company to persons 
 whom he permits to ride on the train in violation of the rules of 
 the company. '^^ A similar doctrine is held with reference to the 
 authority of the baggagemaster to permit persons to ride on a 
 train,^'' and a like doctrine was applied in a case where a person 
 was riding on the train by invitation of a brakeman.*^ A some- 
 what different doctrine was held in a case where a person was 
 invited to get on an engine, ^^ but the doctrine of the case re- 
 ferred to seems to us to be unsound. An employe has no author- 
 ity to invite persons to ride on the hand-car for their own pleasure 
 or convenience.^^ It has, however, been held that a trainmaster 
 has authority to invite persons to ride on a hand-car,** but in our 
 
 Wis. 389, 101 N. W. 687 ; 2 Thotnp. 79 Chicago &c. Co. v. Casey, 9 111. 
 
 Corp. (2d ed.), §§1468, 1S90, 1603. App. 632, citing Chicago &c. Co. v. 
 
 And where he was superintendent or Mitchie, 83 111. 427. 
 
 manager of a department, or the like. so Reary v. Louisville &c. Co., 40 
 
 Brace v. Northern Pac. R. Co., 63 La. Ann. 32, 3 So. 390, 8 Am. St. 
 
 Wash. 417, lis Pac. 841, 38 L. 497^ 34 Am. & Eng. R. Cas. 277. 
 
 R. A. (N. S.) 1135, and other cases si Candiff v. Louisville &c. Co., 42 
 
 there cited in note. La. Ann. 477, 7 So. 601. 
 
 78 Towanda Coal Co. v. Heeman, 82 Nashville &c. Co. v. Erwin, 
 
 86 Pa. St. 418; Marion v. Chicago (Tenn.) 3 Am. & Eng. R. Cas. 465. 
 
 &c. R. Co., 59 Iowa 428, 13 N. W. But see Ohio &c. Co. v. Allender, 
 
 415, 44 Am. Rep. 687. But if one 47 111. App. 484. Clarke v. Colo- 
 
 with authority to put him off the rado &c. R. Co., 165 Fed. 408, 19 
 
 train should do so in an improper L. R. A. (N. S.) 988, and cases 
 
 manner and thereby cause him to be cited in note 
 
 injured, the company would be lia- 83 International &.c. Co. v. Cock, 
 
 ble. Carter v. Louisville &c. R. Co., 68 Tex. 713, 5 S. W. 635, 2 Am. St! 
 
 98 Ind. 552, 49 Am. Rep. 780; Ben- 521. See Poole v. Chicago &c. Co., 
 
 ton V. Chicago &c. R. Co., 55 Iowa 56 Wis. 227, 14 N. W. 46. 
 
 496, 8 N. W. 330; Rounds v. Dela- s* International &=. Co. v. Prince, 
 
 ware &c. R. Co., 64 N. Y. 129. 77 Tex. 560, 14 S. W. 171, 19 Am! 
 
409 
 
 CORPORATE REPRESENTATIVES 
 
 fi -3'> 
 
 opuiion this decision is erroneous, for a hand-car, as L'vcry one 
 is bound to know, is not kept or used by a railroad company fcjr 
 carrying persons not in its service or having business with it. In 
 a well considered case it was held that a section foreman had no 
 authority to invite persons to ride on a hand-car, ^^ and the doc- 
 trine asserted in that case we regard as the true one.*^ 
 
 § 259 (221a). Authority of agents — Emergencies and special 
 circumstances. — Special circumstances may sometimes give au- 
 thority to an agent over a particular matter or to do an act in 
 regard to which he would ordinarily have no authority either 
 express or implied. That is to say, facts may exist which may 
 greatly broaden an agent's ordmary authority, and the special 
 circumstances may be such that an act of an oiificer, or even of 
 an agent who is not an officer, may bind the company, when, 
 
 St. 795, 44 Am. & Eng. R. Cas. 294. 
 See Prince v. International &c. Co., 
 64 Tex. 144. 
 
 85 Hoar V. Maine Central Co., 70 
 Maine 65, 35 Am. Rep. 299. The 
 court cited the cases of Graham v. 
 Toronto &c. Co., 23 U. C. C. P. 541 ; 
 Sheerman v. Toronto &c. Co., 34 U. 
 C. Q. B. 451, and in the course of 
 the opinion said: "A master is 
 bound by the acts of his servant in 
 the course of his employment, but 
 not by those obviously and utterly 
 'Outside of the scope of such em- 
 ployment. If not common carriers, 
 a section foreman with his handcar 
 has no right to impose upon the de- 
 fendant the onerous responsibilities 
 arising from that relation. He has 
 no right to accept passengers for 
 transportation and bind the defen- 
 dants for their safe carriage, and 
 every man may safely be presumed 
 to know this much. If the risk is 
 much greater by this mode of con- 
 veyance, the plaintiff's intestate, by 
 
 adopting it, assumed the extra risk 
 arising therefrom, and must be held 
 to abide the unfortunate conse- 
 quences. No one becomes a passen- 
 ger except by the consent, express 
 or implied, of the carrier. There 
 is no allegation of express consent 
 by the defendants, nor of anything 
 from which consent can be iinplied 
 that the plaintiff's intestate should 
 be carried at their risk by this un- 
 usual mode of conveyance.'' 
 
 86 See Clarke v. Colorado &c. R. 
 Co., 165 Fed. 408. See St. Louis 
 &c. R. Co. V. Jones, 96 Ark. 558, 
 132 S. W. 636, 37 L. R. A. (N. S.) 
 418n, and other cases cited in note ; 
 Pittsburgh &c. R. Co. v. Hall, 46 
 Ind. App. 219, 90 N. E. 498, 91 N. 
 E. 743 ; Willis v. Atlantic &c. R. Co., 
 120 N. Car. 508, 26 S. E. 784; Rath- 
 bone v. Oregon R. Co., 40 Ore. 225, 
 66 Pac. 909; International &c. R. 
 Co. V. Cock 68 Tex. 713, 5 S. W. 
 635, 2 Am. Sf 521. 
 
§ 259 RAILROADS 410 
 
 under ordinary circumstances such officer or employe would 
 have no authority in the premises. Thus, an emergency may 
 arise in which there is an absolute duty resting on the company 
 to act at once, and in which, either because its own interests re- 
 quire it or because of such duty to others to be present by some 
 representative and to act at once, or both, the highest agent 
 on the ground, or some other agent, depending somewhat upon 
 the circumstances of the particular case, may act for and bind 
 the company to the extent, at least,- that the emergency re- 
 quires. Such cases are of course, exceptional, but it is easy to 
 suppose cases where a conductor, or an engineer, or even a 
 brakeman or switchman, in the absence of any one else, would 
 be authorized to do some act to save life, or the like, not ordi- 
 narily within the scope of his employment or duty, and even 
 to bind or make the company responsible. We suppose, for in- 
 stance, that if the wires were down, and all communication were 
 cut off because of a storm, and the engine should break down 
 and human life would be endangered by delay and failure to re- 
 pair, or even perishable freight ruined, the conductor, or, per- 
 haps, the engineer, under some circumstances, would have au- 
 thority to purchase a small piece of material necessary to make 
 temporary repairs, or that the conductor, under such circum- 
 stances, might employ necessary assistance to save perishable 
 freight in case of a wreck. Certainly if there were a wreck and 
 passengers were caught under a car and injured, and in immi- 
 nent danger of being crushed to deathj .a conductor, being the 
 highest representative present, would have authority to employ 
 assistance, if necessary, to raise the car and rescue such pas- 
 sengers. Other illustrations might be given, ^'^ but the question 
 
 87 See post, § 344. See also Cros- Facts may exist which will greatly 
 
 san V. New England R. Co., 149 broaden or greatly lessen an agent's 
 
 Mass. 196, 21 N. E. Zdl, 3 L. R. A. authority. A conductor's authority 
 
 766, 14 Am. St. 408; Baldwin Rail- in the presence of a superior agent 
 
 roads, 2S3. In the course of the may dwindle into insignificance, 
 
 opinion in Terre Haute &c. R. Co. v. while in the absence of a superior 
 
 McMurray, 98 Ind. 358, 49 Am. Rep. it may become broad and compre- 
 
 752, it is said : "The authority of hensive. An emergency may arise 
 
 an agent is to be determined from which will require the corporation 
 
 the facts of the particular case, to act instantly, and if the conductor 
 
411 
 
 CORPORATE REPRESENTATIVES 
 
 §260 
 
 has usually arisen in regard to the employment of physicians 
 and surgeons, and that branch of the subject merits more than 
 a general reference. It will be considered in the following 
 section. 
 
 §260 (222). Authority of agents — Employment of surgeons. 
 
 — It may be affirmed that the employment of a physician or sur- 
 geon is not ordinarily within "the scope of the authority of a 
 subordinate agent or employe, but that there may be extraordi- 
 nary cases giving, authority to employ a surgeon or physician.** 
 Neither a roadmaster,*^ section agentj^" yardmaster,^! nor sta- 
 tionmaster,^^ will be presumed to have authority to employ a 
 
 is the only agent present, he must 
 act for the corporation, and if he 
 acts at all, all his acts are of just 
 as much force as that of the highest 
 officer of the corporation. There 
 are cases, where the train is distant 
 from the supervision of superior of- 
 ficers, where the conductor must 
 act, and act for the company, and 
 where, for the time, and under the 
 exigencies of the' occasion, he is its 
 sole representative, and if he be its 
 only representative, he must, for. the 
 time and the exigency, be its highest 
 representative. Simple examples 
 will prove this to be true. Suppose, 
 for illustration, that a train is 
 brought to a halt by the breaking 
 of a bolt, and that near by is a me- 
 chanic who can repair the broken 
 bolt and enable the train to proceed 
 on its way, may not the conductor 
 employ the mechanic? Again sup- 
 pose a bridge is discovered to be un- 
 safe, and that there are timbers at 
 a neighboring mill which will make 
 it safe, may not the conductor, in 
 behalf of his principal, employ men 
 to haul the timber to the bridge? 
 Once more, suppose- the, engineer of 
 
 a locomotive to be disabled, and 
 that it is necessary to at once move 
 the train to avoid danger, and 
 there is near by a competent en- 
 gineer, may not the conductor em- 
 ploy him to take the train out of 
 danger?" In St. Louis &c. R. Co. v. 
 Hunt, 6 Ala. App. 434, 60 So. 530, 
 it is held- that a conductor has au- 
 thority to discharge all subordinate 
 brakemen. 
 
 88 See Hunick v. Meramec Quarry 
 Co., 262 Mo. S60, 172 S. W. 43, and 
 authorities there reviewed. 
 
 89 Louisville &c. R. Co. v. McVay, 
 98 Id. 391, 49 Am. Rep. 770. See 
 also Peninsular R. Co. v. Gary, 22 
 Fla. 356, 1 Am. St. 194. 
 
 90 Tucker v. St. Louis &c. R. Co., 
 54 Mo. 177. 
 
 91 Marquette &c. R. Co. v. Taft, 
 28 Mich. 289. 
 
 92 Cox V. Midland &c. R. Co., 3 
 Exch. 268. See also Godshaw v. J. 
 N. Struck & Bros., 109 Ky. 285, 58 
 S. W. 781, 51 L. R. A. 668. A rail- 
 road company will be held to be le- 
 gally liable to furnish necessary 
 medical attendance and care to pas- 
 sengers injured by its fault, since it 
 
§260 
 
 EAILROADS 
 
 412 
 
 physician to attend a servant of the company injured in the line 
 of his duties. So, also, it is held that there is nothing in the 
 duties of the company's solicitor,^^ or surgeon,^* or engineer,^'' 
 
 has contracted to carry them safely, 
 and is liable for any failure to do 
 so. But no such liability attaches 
 when they are hurt; by an inevitable 
 accident, such as the derailment of 
 a train by a cyclone. Union Pacific 
 R. (^o. V. Beatty, 35 Kans. 265, 10 
 Pac. 845, 57 Am. Rep. 160. And a 
 railroad company will be held liable 
 ■for any necessary care bestowed 
 upon an injured employe at the in- 
 stance and request of the principal 
 agent, which it may have upon the 
 ground and in a position to engage 
 such care, in an emergency calling 
 for immediate action. Since an em- 
 ployer does not stand to his serv- 
 ants as a stranger, but owes them 
 the duty imposed by the dictates of 
 humanity. Terre Haute &c. R. Co. 
 V. McMurray, 98 Ind. 358, 49 Am. 
 Rep. 752; Terre Haute &c. R. Co. v. 
 Brown, 107 Ind. 336, 8 N. E. 218. 
 But such authority by implication 
 from necessity will not be extended 
 any further than the necessities of 
 the case require. Louisville &c. R. 
 Co. V. Smith, 121 Ind. 353, 22 N. E. 
 775, 6 L. R. A. 320. 
 
 93 Neither a conductor nor a solic- 
 itor of a railroad company can ordi- 
 narily contract for surgical attend- 
 ance upon an injured passenger or 
 employe, so as to bind the company. 
 St. Louis &C. R. Co. V. Hoover, S3 
 Ark. 377, 13 S. W. 1092. 
 
 84 Mayberry v. Chicago &c. R. 
 Co., 75 Mo. 492; Terre Haute &c. 
 R. Co. v. Brown, 107 Ind. 336, 8 
 N. E. 218. See also Smith v. Chi- 
 
 cago &c. R. Co., 104 Iowa 147, 73 
 N. W. 581 ; Burke v. Chicago &c. R. 
 Co., 114 Mich. 685, 72 N. W. 997. 
 • 95 In an action by a physician 
 against a railroad company for pro- 
 fessional services rendered to an 
 employe of the company who had 
 sustained an injury on its car», it 
 was held that evidence that the en- 
 gineer of the train, on which the in- 
 jury happened, telegraphed to a sta- 
 tion agent to have a doctor at the 
 station when the train arrived, does 
 not show an employment of the 
 plaintiff by the company, in the ab- 
 sence of evidence of the authority 
 of the engineer to bind the com- 
 pany. Cooper v. New York Central 
 &c. R. Co., 6 Hun (N. Y.) 276. 
 But it would seem that evidence that 
 he was in sole charge of the train, 
 and the employes' injury required 
 immediate attention would be suf- 
 ficient to show his authority. Terre 
 Haute , &c. R. Co. v. McMurray, 98 
 Ind. 358, 49 Am. Rep. 752; Mar- 
 quette &c. R. Co, v. Taft, 28 Mich. 
 289, per Cooley, J. The doctrine of 
 these cases last cited is to be care- 
 fully limited and rigidly confined to 
 cases where there is pressing and 
 urgent emergency requiring imme- 
 diate action. There is, of course, 
 no general duty resting on the em- 
 ployer to care for sick or wounded 
 employes, and the duty to obtain the 
 services of a surgeon is not a gen- 
 eral lone, but a transient one arising 
 out of and only existing during an 
 emergency. An agent can not do 
 
413 
 
 CORPORATE REPRESENTATIVES 
 
 §260 
 
 or conductor"*' from which such authority can be presumed. 
 But an emergency calling for immediate action in order to save 
 life or prevent suffering may be sufficient to confer authority 
 upon the subordinate to employ necessary surgical aid, if he is 
 the highest representative of the company on the ground."'' 
 There may be cases of immediate urgency when it will be within 
 the scope of the agent's employment to render those imperative 
 services which the dictates of justice and humanity hold to be 
 due from an employer to a servant injured while engaged in his 
 
 more than the immediate urgency 
 requires without exceeding his au- 
 thority. 
 
 96 St. Louis &c. R. Co. V. Hoover, 
 53 Ark. 377, 13 S. W. 1092; Terre 
 Haute &c. R. Co. v. McMurray, 98 
 Ind. 3S8, 49 Am. Rep. 7S2; Tucker 
 V. St. Louis &c. R. Co., 54 Mo. 177. 
 See also Northern Central R. Co. 
 V. State, 29 Md. 420, 96 Am. Dec. 
 545; Wills V. International &c. R. Co., 
 41- Tex. Civ. App. SB, 92 S. W. 273. 
 In Hays v. Wabash R. Co., 119 Mo. 
 App. 439, 95 S. W. 299, the defend- 
 ant railroad company had a book of 
 rules, one of which had been de- 
 livered to the plaintiff, a local sur- 
 geon retained' by the defendant, and 
 one of such rules provided that in 
 cases of wrecks or accidents, where 
 either passengers or employes are 
 injured, the nearest competent sur- 
 geon should be summoned and the 
 nearest hospital and the chief offi- 
 cers of the road should be notified 
 by wire, giving the name and 
 whereabouts of the injured persons, 
 the name of the surgeon in attend- 
 ance, and the like. Plaintiff was 
 wired by the conductor of the train 
 to meet the same at a certain sta- 
 tion and take care of a passenger 
 who had been injured, and on the 
 
 arrival of the train met and con- 
 ducted the passenger to a hospital, 
 where he performed an operation 
 and subsequently cared for liim. 
 The court held that the plaintiff was 
 at least entitled to recover the rea- 
 sonable value of his services in 
 treating such passenger for a rea- 
 sonable time until the defendant's 
 claim agent could have been notified 
 and his answer returned. 
 
 9'' Arkansas Southern R. Co. v. 
 Loughridge, 65 Ark. 300, 45 S. W. 
 907; Bonnette v. St. Louis &c. R. 
 Co., 87 Ark. 197, 112 S. W. 220, 
 16 L. R. A. (N. S.) 1081; Terre 
 Haute &c R. Co. v. McMurray, 98 
 Ind. 358, 49 Am. Rep. 752; Salter 
 V. Nebraska &c. Co., 79 Nebr. 373, 
 112 N. W. 600, 13 L. R. A. (N. S.) 
 545. But see Cox v. Midland Coun- 
 ties R. Co., 3 Exch. 268 ; Houghton 
 V. Pilkington, (1912) 3 K. B. 308, 
 Ann. Cas. 1913C, 790. And in some 
 jurisdictions the authority has been 
 denied where the injured person 
 was a trespasser. Adams v. South- 
 ern R. Co., 125 N. Car. 565, 34 S. 
 E. 642; Wills v. International &c. R. 
 Co.,- 41 Tex. Civ. App. 58, ,92 S. W. 
 273. But coftipare Dych' v. Vicks- 
 bjirgh &c. R. Co., 79 Miss. ,361, 30 
 So, 7n. :.. >.; 
 
§260 
 
 RAILROADS 
 
 414 
 
 service ;98 and not only this, but in cases of urgent emergency 
 it may become his duty to take such measures as will prevent 
 needless suffering and loss of life.^^ And even though the agent 
 had no authority to engage a physician, such an employment 
 may be ratified, and it is held that a physician employed by the 
 conductor of a train to care for a man injured by the train can 
 
 ssTerre Haute &c.. R. Co. v. Mc- 
 Murray, 98 Ind. 358, 49 Am. Rep. 
 7S2. In Marquette &c. R. Co. v. 
 Taft, 28 Mich. 289, Judge Cooley 
 says : "We shall not stop to prove 
 that there is a strong moral obliga- 
 tion resting upon any one engaged 
 in a dangerous business, to do what 
 may be immediately necessary to 
 save life or prevent an injury be- 
 coming irreparable, when an acci- 
 dent happens to a person in his em- 
 ploy. We shall assume this to be 
 too obvious to require argument 
 * * *. There can be no doubt 
 that it is within the scope of some- 
 body's employment for a railway 
 to cause a beast wliich is injured in 
 carriage or run over at a crossing 
 to be picked up and have the at- 
 tention proper and suitable to its 
 case ; and if no one is authorized to 
 do as much for the faithful servant 
 of the company who is in like man- 
 ner injured, but all persons in its 
 employ are impliedly forbidden to 
 incur any expense beyond what may 
 be necessary to remove him out of 
 the way of their trains and machin- 
 ery — even to convey him to his 
 house, or to save his life by binding 
 up a threatening wound — then, if 
 such is the law, the court must not 
 hesitate to apply it, even though it 
 be impossible to avoid feeling that 
 it ought not to be the law, and that 
 no business of this extensive and 
 
 hazardous nature ought to be suf- 
 fered to be carried on with no one 
 for the major part of the time em- 
 powered to recognize and perform 
 a duty which, at least on moral 
 grounds, is so obvious and impera- 
 tive. But we do not think such is 
 the law." 
 
 99 In the case of Northern Central 
 R. Co. V. State, 29 Md. 420, 96 Am. 
 Dec. S4S, a man was so injured by 
 a collision with the defendant's 
 train as to become unconscious. 
 The company's agents believing 
 him to be dead, but without care- 
 ful examination, laid him upon a 
 box in the tool house and left him 
 without care over night. The man 
 recovered consciousness in the 
 night, but because of the lack of 
 attention to his wounds, bled to 
 death. The court held that it is' the 
 duty of agents in charge of a rail- 
 road train to take care of one in- 
 jured by the train which they are 
 operating, and to do it with a proper 
 regard to his safety and the laws 
 of humanity. And that the above 
 facts were evidence that he came 
 to his death by the negligence of 
 the compan/s servants, although 
 he may have been negligent in get- 
 ting upon the track in the first 
 place. See also Humick v. Mera- 
 niac Quarry Co., 262 Mo. 560, 172 S. 
 W. 43, and authorities there reviewed. 
 
415 
 
 CORPORATE REPRESENTATIVES 
 
 1260 
 
 recover against the railroad company for his services if, after 
 knowledge of his employment by the conductor, the company 
 failed to notify him that it would not be responsible.^ The 
 authority of such a subordinate agent, however, arises only with 
 the emergency which makes it necessary for him to possess it, 
 and ends with such emergency .^ And neither a conductor,^ 
 a roadmaster,* a section agent,^ a station agent,® nor the com- 
 pany's physician possessing authority to purchase medicines on 
 the company's credit,''' can bind it by a contract for nursing and 
 
 1 Terre Haute &c. R. Co. v. 
 Stockwell, 118 Ind. 98, 20 N. E. 650. 
 To the same effect see Toledo &c. 
 R. Co. V. Rodrigues, 47 Ifl. 188, 95 
 Am. Dec. 484, where a letter was 
 written to the general superintend- 
 ent by the station agent, by whom 
 a nurse and physician were employed 
 stating the facts, and he did not dis- 
 claim liability for the company. 
 Toledo &c. R. Co. v. Prince, SO 111. 
 26, holding that the superintendent, 
 t'O escape liability, should repudiate 
 the station agent's act in such a 
 case and direct him to apprise the 
 surgeon of such dissent. Louis- 
 ville &c. R. Co. V. McVay, 98 Ind. 
 391, 49 Am. Rep. 770, holding the 
 company bound by a ratification by 
 the general manager of a contract 
 for nursing made by the road- 
 master. See also Indianapolis &c. 
 R. Co. V. Morris, 67 111. 295. 
 
 2 St. Louis &c. R. Co. V. Hoover, 
 S3 Ark. 377, 13 S. W. 1092; Louis- 
 ville &c. R. Co. V. Smith, 121 Ind. 
 353, 22 N. E. 775, 6 L. R. A 320; 
 Ohio &c. R. Co. V. Eriy, 141 Ind. 
 73, 40 N. E. 257, 28 L. R. A. 546, 
 and note; Cushman v. Cloverland 
 Coal Co., 170 Ind. 402, 406, 84 N. E. 
 759, 760 (citing text). 
 
 3 Sevier v. Birmingham &c. R. 
 
 Co., 92 Ala. 258, 9 So. 405; St. 
 Louis &c. R. Co. V. Hoover, 53 Ark. 
 377, 13 S. W. 1092; Indianapolis &c. 
 R. Co. v. Morris, 67 111. 295. A 
 conductor having procured or con- 
 sented to the attendance of a com- 
 petent surgeon upon an injured 
 brakeman cannot bind the company 
 by engaging additional surgeons. 
 Louisville &c. R. Co. v. Smith, 121 
 Ind. 353, 22 N. E. 775, 6 L. R. A. 
 320. 
 
 * Louisville &c. R. Co. v. McVay, 
 98 Ind. 391, 49 Am. Rep. 770. 
 
 5 Tucker v. St. Louis &c. R. Co., 
 54 Mo. 177. But see Bigham v. Chi- 
 cago &c. R. Co., 79 Iowa 534, 44 N. 
 W. 80S. 
 
 6 Atlantic &c. R. Co. v. Reisner, 
 18 Kans. 458, where the court says : 
 "The authorities cited sustain the 
 proposition that a station agent of 
 a railroad company is not author- 
 ized, by virtue of his position as 
 such agent, to employ a hotel- 
 keeper, at the expense of the com- 
 pany, to attend to one of its brake- 
 men, injured while working for the 
 company, nor to furnish such em- 
 ployes with board and lq4ging while 
 disabled." See also Tucker v. St. 
 Louis &c. R. Co., 54 Mo. 177. 
 
 7 Mayberry v. Chicagoi &g. R. Co., 
 
§260 
 
 RAILROADS 
 
 416 
 
 care bestowed on an employe during a protracted illness, though 
 such contracts may be ratified by the company^ and made bind- 
 ing upon it if it owes either a legal or moral obligation to the 
 injured party.* In the case of officers and superior agents hav- 
 ing general authority to enter into contracts for the compiny, 
 however, the courts hold that authority to procure care and 
 medical attendance of an injured employe is incident to such 
 general authority. Accordingly it is held that the general man- 
 agerji" or the general superintendent, ^^ or an assistant super- 
 
 75 Mo. 492, 11 Am. & Eng. R. Cas. 
 29. See also Southern R. Co. v. 
 Grant, 136 Ga. 303, 71 S. E. 422, 
 Ann. Cas. 1912C, 472 (citing text). 
 To much the same effect are Ben- 
 nett V. St. Louis &c. R. Co., 87 
 Ark. 197, 112 S. W. 220, 128 Am. 
 St. 30, 16 L. R. A (N. S.) 1081 
 (holding a physician so employed 
 by a conductor in an emergency has 
 no ■ authority to employ an assis- 
 tant) ; .Bond v. Hurd, 31 Mont. 314, 
 78 Pac. 579, 3 Ann. Cas. 566. 
 
 8 Indianapolis &c. R. Co. v. Mor- 
 ris, 67 111. 295; Louisville &c. R. 
 Co. V. McVay, 9|8 Ind. 391, 49 Am. 
 Rep. 770. See also Reynolds v. 
 Chicago &c. R. Co., 114 Mo. App. 
 670, 90 S. W. 100 (by claim agent). 
 
 ■s In Louisville &c. R. Co. v. Mc- 
 Vay, 98 Ind. 391, 49 Am. Rep. 770, 
 the court says : "There is no evi- 
 dence as to how Barnett was in- 
 jured ; but inasmuch as the general 
 manager ratified contracts for taking 
 care" of him, and the company paid 
 for such service (except the claim 
 of aiipellee), it should be presumed 
 — there ' being no evidence to the 
 contrary — that the injury was so in- 
 flicted as that the contract for his 
 care was not ultra vires." 
 
 10 Atlantic &c. R. Co. v. Reisner, 
 
 18 Kans. 458; Walker v. Great West- 
 ern R. Co., L. R. 2 Exch. 228. In 
 this case. Chief Baron Kelley, in 
 the course of the argument, in- 
 quired, "Must a board be convened 
 before a man who has bqth legs 
 broken can have medical assist- 
 ance?" Louisville &c. R. Co. v. Mc- 
 Vay, 98 Ind. 391, 49 Am. Rep. 770, 
 where it is held that the courts will 
 presume a general authority on the 
 part of one holding the position of 
 "general manager.'' But it has been 
 held otherwise as to the general 
 manager of an ordinary private cor- 
 poration. J. F. Spelman v. Gold 
 Mine &c. Co., 26 Mont. 76, 66 Pac. 
 597, 55 L. R. A. 640, 91 Am. St. 402. 
 Cushman v. Qoverland Coal Co., 
 170 Ind. 402, 84 N. E. 759, 16 L. 
 R. A. (N. S.) 1078; and cases and 
 notes in 34 L. R. A. (N S.) 350; 
 and Ann. Cas. 1912C, 474, where 
 other cases on both sides of the 
 question as to corporations other 
 than railroads are cited and re- 
 viewed. See also Holmes v. Mc- 
 Allister, 123 Mich. 493, 82 N. W. 
 220, 48 L. R. A. 396. 
 
 11 Toledo &c. R. Co. v. Rodrigues, 
 47 111. 188, 95 Am. Dec. 484. Cairo 
 &c. R. Co. V. Mahoney, 82 111. 73, 
 25 Am. Rep. 299; Terra Haute &c. 
 
417 
 
 CORPORATE REPRESENTATIVES 
 
 §260 
 
 intcndcnt,'^ having general supervising authority over the in- 
 terests of a railroad company possesses authority to make such 
 contracts on behalf of the company.^* And in England it is held 
 that the sub-inspector of railway police has implied power to 
 employ surgical aid for an injured employe.^* If the railroad 
 company assumes to furnish a physician or surgeon to treat an 
 injured passenger^^ or employe,^® it takes upon itself only the 
 
 R. Co. V. Stockwell, 118 Ind. 98, 20 
 N. E. 650; Cincinnati &c. R. Co. v. 
 Davis, 126 Ind. 99, 25 N. E. 878, 
 9 L. R. A. 503; Atchison &c. R. 
 Co. V. Reecher, 24 Kans. 228; Com- 
 tra, Stephenson v. New York &c. R. 
 Co., 2 Duer (N. Y.) 341. See 
 Marquette &c. R. Co. v. Taft, 28 
 Mich. 289, where a divided court, 
 in an opinion written by Judge 
 Cooley, Christiancy, C. J., concur- 
 ring, held that he has sucli power, 
 Graves and Campbell, J. J., dissent- 
 ing. 
 
 12 Bigham v. Chicago, M. & St. P. 
 R. Co., 79 Iowa 534, 44 N. W. 805; 
 Pacific R. Co. V. Thomas, 19 Kans. 
 256. See also Bedford Belt R. Co. 
 V. McDonald, 17 Ind. App. 492, 46 
 N. E. 1022, 60 Am. St. 172. But 
 compare Brown v. Missouri &c. R. 
 Co., 67 Mo. 122, holding that a di- 
 vision superintendent would not be 
 presumed to have power to bind the 
 company for a "small bill of drugs 
 furnished a woman who had been 
 hurt by a locomotive or cars of the 
 company." The court says : "No 
 proof was offered as to the duties 
 of such officer, and the courts can- 
 not take judicial notice of them." 
 
 13 See Trenor v. Central Pacific 
 R. Co., 50 Cal. 222 ; Indianapolis &c. 
 R. Co. v. Morris, 67 111. 295; Tuck- 
 er V. St. Louis &c. R. Co., 54 Mo. 
 
 177; Cox V. Midland Counties R. 
 Co., 3 Exch. 268. 
 
 1* Langan v. Great Western R. 
 Co., 30 L. T. N. S. 173. 
 
 15 In Secord v. St. Paul &c. R. 
 Co., 18 Fed. 221, 224, Shiras, J., 
 says : "If it assumes the responsi- 
 bility of engaging a surgeon, and 
 placing him in charge of parties, 
 that may be injured,, then it is re- 
 sponsible thus far; that the person 
 it selects must be a competent man ; 
 he must be reasonably fitted for the 
 duties which he is called upon to 
 perform. In other words, it will 
 not do for the company to take up 
 some incompetent man, who is not 
 fit by education or experience to un- 
 dertake the responsibilities of any 
 case that may be placed in his hand. 
 If it does engage a physician and 
 surgeon who is sufficiently experi- 
 enced, that is all that can be ex- 
 pected of the railroad company, and 
 is all of its liability." 
 
 16 In the case of South Florida 
 R. Co. V. Price, 32 Fla. 46, 13 So. 
 638, the Supreme Court of Florida 
 says : "The plaintiff, however, in 
 this case undertakes in his declara- 
 tion to fasten liability upon the de- 
 fendant company upon a further 
 charge that a surgeon, who was em- 
 ployed by said company to render 
 medical and surgical aid to injured 
 
 14 — Ell. Railroads I 
 
§260 
 
 RAILROADS 
 
 418 
 
 obligation to furnish a competent man, skilled in his profession, 
 and having done so is not responsible if he proves negligent in 
 caring for this particular patient. In the absence of an express 
 contract entered into on behalf of the company by some one 
 authorized to represent it, a physician can have no claim against 
 the company for services rendered to an injured employe or 
 passenger. He can not render the services gratuitously and 
 then sue the railway company upon an implied assumpsit.!'^ 
 And even though the company's representative may have prom- 
 ised on behalf of the company that his bill should be paid, a 
 physician cannot hold it liable where it does not appear that the 
 services were rendered in reliance upon such promise or upon 
 the credit of the company.^® 
 
 employes, did, in the exercise of his 
 duty as such physician and surgeon, 
 set the injured arm of plaintiff in 
 such an unskilled and negligent 
 manner as to render it ill-shaped 
 and forever useless to him in the 
 performance of any manual labor. 
 There is no allegation or proof that 
 the physician and surgeon so al- 
 leged to have, been employed by the 
 defendant company was not compe- 
 tent and skilled in the line ot his 
 profession; and, in the absence of 
 such allegation and the proof to sus- 
 tain it, the defendant is not liable 
 for any negligent exercise by such 
 surgeon of his profession in the 
 treatment of the plaintiff. Even 
 though we should admit it to be 
 within the corporate powers of such 
 a company to obligate itself to the 
 rendition of medical or surgical aid 
 to its sick or injured employes, by 
 assuming it as a duty or otherwise, 
 or to become liable under any cir- 
 cumstances for any negligence of 
 any such surgeon acting in the line 
 of his profession, still it seems to 
 be well settled that it will have per- 
 
 formed its entire duty in that re- 
 spect when it employs a person of 
 ordinary competence and skill in 
 that profession; and that, having 
 done so, it cannot be held liable for 
 the carelessness or negligence of 
 such surgeon in the performance of 
 his duties as such. Secord v. Rail- 
 way Co., 18 Fed. 221; McDonald v. 
 Mass. &c. Hospital, 120 Mass. 432, 
 21 Am. Rep. 529 ; O'Brien v. Cunard 
 Steamship Co., 154 Mass. 272, 28 N. 
 E. 266, 13 L. R. A. 329; Laubheim 
 v. De Koninglyke N. S. Co., 107 N. 
 Y. 228, 13 N. E. 781, 1 Am. St. 815. 
 See also Ohio &c. R. Co. v. Early, 
 141 Ind. 73, 40 N. E. 257, 28 L. R. 
 A. 546, and note; Atchison &c. R. 
 Co.' V. Zeiller, 54 Kans. 340, 38 Pac. 
 282; Chicago &c. R. Co. v. How- 
 ard, 45 Nebr. 570, 63 N. W. 872. 
 
 17 Toledo &c. R. Co. v. Rodrigues, 
 47 111. 188, 95 Am. Dec. 484; Ellis 
 V. Central Pacific R. Co., 5 Nev. 
 255. 
 
 18 Northern Central R. Co. v. 
 Prentiss, 11 Md. 119; Caney v. 
 South Pacific Coast R. Co., 63 Cal. 
 501, where the court says : "The 
 
419 
 
 CORPORATE REPRESENTATIVES 
 
 §261 
 
 § 261 (223). Physicians and surgeons. — If a railroad exer- 
 cises reasonable care in selecting a physician or surgeon to treat 
 an injured employe it is not liable for the acts of such surgeon 
 or physician.^8 The physician or surgeon so employed does 
 not become the agent of the company. As we have elsewhere 
 said, there is no general duty to care for sick or injured employes 
 or to employ surgeons to attend them.^^ There are exceptional 
 cases where an urgent emergency imposes upon the company a 
 special duty to secure surgical attention, but, as elsewhere said,. 
 such a duty is transient and special, coming into existence with 
 the emergency and with the emergenc}- expiring.^i 
 
 § 262 (224) . Delegation of power by directors. — The direc- 
 tors are held to be superior officers and as such possessors of 
 
 plaintiff, in his testimony and on the 
 trial, admitted, and his witnesses 
 proved, that the services were ren- 
 • dered in pursuance of his original 
 employment by those who were 
 wounded, and not otherwise. There 
 was, therefore, no contract, express 
 or implied, between the plaintiff and 
 the defendant in relation to the 
 services which are the subject of 
 the suit, and as there is no prejudi- 
 cial error in the record the judg- 
 ment and order are affirmed. 
 
 isSecord v. St. Paul &c. R. Co., 
 18 Fed. 221; Union Pac. Railway 
 Co. v. Artist, 60 Fed. 365; South 
 Fla. Railroad Co. v. Price, 32 Fla. 
 46, .13 So. 638; Pittsburgh &c. Co. 
 V. Sullivan, 141 Ind. 83, 40 N. E. 
 138, 27 L. R. A. 840, 50 Am. St. 
 313; Eighmy v. Union Pac. R. Co., 
 93 Iowa 538, 61 N. W. 1056; Mc- 
 Donald V. Mass. &c. Hospital, 120 
 Mass. 432, 21 Am. Rep. 529; O'Brien 
 V. Cunard Steamship Co., 154 Mass. 
 272, 28 N. E. 266, 13 L. R. A. 329; 
 Allan V. State Steamship Co., 132 
 N. Y. 91, 30 N. E. 482, 15 L. R. A. 
 
 166, 28 Am. St. 556; Van Tassell 
 V. Manhattan &c. Hospital, 60 Hun 
 585, 15 N. Y. S. 620; Laubheim v. 
 De Koninglyke &c. Co., 107 N. Y. 
 228, 13 N. E. 781, 1 Am. St. 815;, 
 Haas V. Missionary Society &c., 6 
 Misc. 281, 26 N. Y. S. 868; Fire 
 Insurance Patrol v. Boyd, 120 Pa. 
 St. 624, 15 Atl. 553, 1 L. R. A. 417, 
 6 Am. St. 745 ; Quinn v. Kansas City 
 &c. R. Co., 94 Tenn. 713, 30 S. W. 
 1036, 28 L. R. A. 552, 45 Am. St. 
 767. 
 
 20 Sevier v. Birmingham &c. Co., 
 92 Ala. 258, 9 So. 405; Toledo &c. 
 Co. V. Rodrigues, 47 111. 188, 95 Am. 
 Dec. 484; Toledo &c. Co. v. Prince, 
 50 111. 26; Cairo &c. Co. v. Mahoney, 
 82 III. 73, 25 Am. Rep. 299; Union 
 &c. Co. V. Beatty, 35 Kans. 265, 10 
 Pac. 845, 57 Am. Rep. 160. Wennell 
 V. Adney, 3 B. & P. 252; Cooper v.. 
 Phillips, 4 C. & P. 581; Sellen v. 
 Norman, 4 C. & P. 80; Newby v. 
 Wiltshire, 2 Esp. 739. 
 
 21 Pittsburgh &c. Co. v. Sullivan, 
 141 Ind. 83, 40 N. E. 138, 27 L. R, 
 A. 840, SO Am. St. 313. 
 
§ 262 RAILROADS 
 
 420 
 
 very extensive powers, and they may delegate to agents or em- 
 ployes authority of wide scope,^^ but they cannot delegate pow- 
 ers which they are specially required to exercise by the provi- 
 sions of the charter,^^ or by necessary implication. The powers 
 which they are held by implication to be unable to delegate are 
 generally said to be such as require the exercise of judicial or 
 personal discretion as a board,^* such as declaring dividends, 
 making calls, leasing the franchises and property of the com- 
 pany or executing a mortgage upon them, or entering into a con- 
 solidation agreement with another company, where such pow- 
 ers are lodged in the directors. ^•'' What powers are and what 
 are not specially enjoined upon the directors personally and re- 
 quired to be executed by them in person must generally be as- 
 certained from the charter or act of incorporation. Powers of 
 a legislative or judicial nature necessarily exercised in govern- 
 ing the corporation cannot be delegated unless the statute by 
 express words or fair implication confers a right to delegate 
 them. 
 
 §253 (225). Employment of sub-agents and servants. — The 
 
 general rule is that the authority of an agent cannot be dele- 
 gated unless power to delegate is expressly or impliedly con- 
 ferred upon him. Authority to employ sub-agents may often 
 be implied from the rank and position of the agent, but, as a 
 rule, agents of inferior rank and limited authority cannot right- 
 
 •22Burrill v Nahant Bank, 43 40 Maine 425; Farmers' Mut. In=. 
 
 Mass. 163, 35 Am. Dec. 395; Salt- Co. v. Chase, 56 N. H. 341; Silver 
 
 marsh v. Spaulding, 147 Mass. 224, Hook Road v. Greene, 12 R. I. 164; 
 
 17 N. E. 316; Manchester &c. R. Read v. Memphis &c. Co., 9 Meisk. 
 
 Co. V. Fisk, 33 N. H. 297. Hoyt v. (Tenn.) 545; County of Palatine 
 
 Thompson, 19 N. Y. 207; See also Loan &c. Co., Re, 43 L. J. Eq. 588. 
 
 Lewis V. Albemarle &c. R. Co., 95 24 Percy v. Millaudon, 3 La. 568 ; 
 
 N. Car. 179; Davis v. Memphis Farmers' Mut. Iris. Co. v. Chase, 
 
 City R. Co., 22 Fed. 883 ; New York 56 N. H. 341 ; Patterson v. Port- 
 
 &c. R. Co. v. Smith, 20 R. I. 134, land Smelting Works, 35 Ore. 96, 
 
 37 Atl. 636. The directors may ap- 56 Pac. 407; Silver Hook Road v! 
 
 point all necessary subordinate offi- Greene, 12 R. I. 164. 
 
 cers. Kitchen v. Cape Girardeau 25 See ante under the various ti- 
 
 &c. R. Co., 59 Mo. 514. ties of dividends, calls, etc. 
 23 York &c. R. Co. v. Ritchie, 
 
421 
 
 CORPORATE REPRESENTATIVES 
 
 §264 
 
 fully employ other agents or servants. Ordinarily a mere agent 
 cannot, without the authority or consent, express or implied, 
 of the corporation, employ another to perform the duties re- 
 quired of him so as to bind the corporation, especially in any- 
 thing which requires the exercise of judgment and discretion,^^ 
 or of skill, 2'^ in its performance. But in the case of superin- 
 tendents, managers and agents invested with general powers, an 
 authority to employ subordinate agents is implied from neces- 
 sity and custom, even if not expressly given.^* 
 
 § 264 (226). Notice to agents or officers. — Notice given to, 
 or knowledge acquired by an ofificer^^ or an agent of a corpora- 
 tion, when acting for the corporation within the scope of his 
 authority, 3" concerning matters about which he is acting or has 
 
 26 York &c. R. Co. v. Ritchie, 40 
 Maine 425; Brewster v. Hobart, IS 
 Pick. (Mass.) 302; Gillis v. Bailey, 
 21 N. H. 149; Silver Hook Road 
 V. Greene, 12 R. I. 164. 
 
 27 Everhart v. Terre Haute &c. 
 R. Co., 78 Ind. 292, 41 Am. Rep. 
 567, where a brakeman employed 
 plaintiff to perform some of his 
 duties, and the plaintiff being in- 
 jured by the company's negligence, 
 the company was held not liable. 
 Kent Com. (9th ed.), 854, 856. 
 
 28 See Brace v. Northern Pac. 
 R. Co., 63 Wash. 417, 115 Pac. 
 841, 38 L. R. A. (N. S.) 1135, and 
 other cases cited in note. But com- 
 pare Stephens v. John L. Roper 
 Lumber Co., 160 N. Car. 107, 75 
 S. E. 933, 41 L. R. A. (N. S.) 1141. 
 When the regular brakeman is ab- 
 sent, and the proper and safe man- 
 agement of the train so requires, 
 the conductor has authority to sup- 
 ply the place of the absent brake- 
 man, and, for the time being, such 
 person is an employe of the railroad, 
 with all of an employe's rights. 
 
 Sloan V. Central R. Co., 62 Iowa 
 728, 16 N. W. 331. 
 
 29 Notice to the president when 
 acting for the corporation is notice 
 to the corporation. Hoffman &c. Co. 
 V. Cumberland &c. Co., 16 Md. 456, 
 n Am. Dec. 311; First Nat. Bank 
 V. Gifford, 47 Iowa 575; Barnes v. 
 Trenton Gas. Co., 27 N. J. Eq. 33. 
 But the notice or information must 
 be given or acquired while he was 
 acting as president. Winchester v. 
 Baltimore &c. R. Co., 4 Md. 231; 
 Miller v. Illinois Central R. Co., -24 
 Barb. (N. Y.) 312. So notice to the 
 secretary was held sufficient. Tren- 
 ton Banking Co. v. Woodruff, 2 N. 
 J. Eq. 117. 
 
 30 Schenck v. Mercer County 
 Mut. Ins. Co., 24 N. J. L. 447; 
 Marine Mfg. Co. v. Harding, 155 
 Ind. 648, 58 N. E. 194; Goodall v. 
 New Eng. Mut. Fire Ins. Co., 25 
 N. H. 169. But such knowledge 
 should be imputed to the corpora- 
 tion only so long as the agency re- 
 mains; and where an agent posses- 
 sing knowledge not acquired by any 
 
§264 
 
 RAILROADS 
 
 422 
 
 authority to act, will be imputed to the "corporation. ^^ But the 
 knowledge must be shown to relate to the business of his 
 agency, . and must not be merely casual knowledge, but must 
 usually be knowledge acquired while acting as agent. ^^ And 
 the corporation will be chargeable with notice of all facts within 
 the knowledge of a person assuming to act for it, relative to the 
 business in hand, in case it ratifies and adopts his acts.^* No- 
 tice to or notice acquired by an individual stockholder alone 
 will not bind the corporation,** and it is held that the fact that 
 lie afterwards becomes an officer will not render it binding.*''' 
 There are many decisions to the effect that notice to an agent 
 at some previous time and when he was engaged in a different 
 business will not bind his principal unless it is shown to have 
 been actually disclosed to him,*^ and the better reason, we are 
 
 usage, custom or course of business 
 of the company, such as knowledge 
 of the arbitrary mark of a consig- 
 nee of goods shipped by railroad, 
 ceases to serve as agent, the com-, 
 pany cannot be charged with such 
 knowledge. Great Western Rail- 
 way V. Wheeler, 20 Mich. 419. See 
 generally Pittsburgh &c. Co. v. 
 Ruby, 38 Ind. 294, 10 Am. Rep. Ill; 
 Ohio &c. Co. V. Collarn, 73 Ind. 261, 
 38 Am. Rep. 134. 
 
 312 Thomp. Corp. (2d ed.), 
 S 1645. It is essential that no- 
 tice should relate to matters over 
 which the authority of the agent ex- 
 tends and should be more than mere 
 casual information gathered as an 
 individual. Day v. Wamsley, 33 
 Ind. 145. 
 
 32 Brown v. Bankers' &c. Co., 30 
 Md. 39; Goodloe v. Godley, 13 S. & 
 M. (Miss.) 233, 51 Am. Dec. 159, 
 Willard v. Deni'se, 50 N. J. Eq. 482, 
 26 Atl. 29, 35 Am. St. 788; notes in 
 24 Am. St. 228-233, and 38 Am. St. 
 770; 2 Thomp. Corp. (2d ed.), 
 
 §§1647, 1649; note in Ann. Cas. 
 1912C, 295. 
 
 33Hovey v. Blanchard, 13 N. H. 
 145. See also Singleton v. Bank of 
 Monticello, 113 Ga. 527, 38 S. E. 
 947; 2 Thomp. Corp. (2d ed.), 
 § 1659. 
 
 34Danville Bridge Co. v. Pomeroy, 
 15 Pa. St. 151 ; Black v. Camden &c. 
 R. Co., 45 Barb. (N. Y.) 40; Nash- 
 ville &c. R. Co. V. Elliott, 1 Coldw. 
 (Tenn.) 611, 78 Am. Dec. 506. 
 
 35 Housatonic Bank v. Martin, 42 
 Mass. 294; Union Canal Co. v. 
 Lloyd, 4 W. & S. (Pa.) 393. See 
 also Brennan v. Emery &c. Co., 99 
 Fed. 971 ; Kearny Bank v. Froman, 
 129 Mo. 427, 31 S. W. 769, SO Am. 
 St. 456; Casco Nat. Bank v. Clark, 
 139 N. Y. 307, 34 N. E. 908, 36 
 Am. St. 705. 
 
 36 Miller v. Illinois Central R. Co., 
 24 Barb. (N. Y.) 312; Astor v. 
 Wells, 4 Wheat. (U. S.) 466, 4 L. 
 ed. 616; Pepper v. George, 51 Ala. 
 190; Keenan v. Missouri Ins. Co., 
 12 Iowa 126; Plympton v. Preston, 
 
423 
 
 CORPORATE REPRESENTATIVES 
 
 §264 
 
 inclined to think, supports this rule. Very respectable author- 
 ity, however, holds that notice or knowledge received by an. 
 agent before he was appointed as such is imputable to the prin- 
 cipal in regard to matters in which he is afterward employed, 
 if it can be shown that the facts were then present in the agent's 
 mind, or that knowledge of them was so recently acquired that 
 it should be presumed that he still had it in mind;*'' but this 
 doctrine we are inclined to regard as unsound. The rule in 
 England^^ is that which we have said we believe to be supported 
 by the better reason.^^ So, if the agent is acting adversely to 
 the corporation, and his interests are adverse, there is no pre- 
 sumption that he will inform the corporation in regard to such 
 
 4 La. Ann. 356; United States Ins. 
 Co. V. Shriver, 3 Md. Ch. 381 ; 
 Winchester v. Baltimore &c. R. Co., 
 4 Md. 231 ; Washington Bank v. 
 Lewis, 22 Pick. (Mass.) 24; Tren- 
 ton V. Pothen, 46 Minn. 298, 49 N. 
 W. 129, 24 Am. St. 250; Reed's Ap- 
 peal, 34 Pa. St. 207. In McComb 
 V. Chicago &c. R. Co., 7 Fed. 426, 
 it was held that an officer could 
 not be made a party to a bill of dis- 
 covery when he did not derive his 
 information in his official capacity, 
 but derived it from a participation 
 in tlie creation of the corporation. 
 
 37 The Distilled Spirits, 11 Wall. 
 (U. S.) 356, 20 L. ed. 167; Fair- 
 field Savings Bank v. Chase, 72 
 Maine 226, 39 Am. Rep. 319; Leb- 
 anon Savings Bank v. Hollenbeck, 
 29 Minn. 322, 13 N. W. 145; Hovey 
 v. Blanchard, 13 N. H. 145; Ingall? 
 V. Morgan, 10 N. Y. 178. See al- 
 so note in 24 Am. St. 229, 230, where 
 this view is taken and additional 
 authorities are cited upon both 
 sides, and see generally 2 Thomp. 
 Corp. (2d ed.), §1651. 
 
 38 Dresser v. Norwood, 17 C. B. 
 N. S. 466. But the older cases 
 hold to the other rule. Preston v. 
 Tubbin, 1 Vern. 286; Lowther v. 
 Carlton, 2 Atk. 242 ; Hiern v. Mill, 
 13 Ves. 114 
 
 39 For cases forming exceptions to 
 the general rule that notice to the 
 agent is notice to the principal, see 
 Thompson &c. Co. v. Capitol &c. 
 Co., 65 Fed. 341 ; Innerarity v. 
 Bank, 139 Mass. 322, 1 N. E. 282, 52 
 Am. Rep. 710; Allen v. South R. 
 Co., ISO Mass. 200, 22 N. E. 917, 
 5 L. R. A. 716, 15 Am. St. 185; De 
 Kay V. Hackensack Water Co., 38 
 N. J. Eq. 158; Kennedy v. Green, 
 3 Mylne & K. 699; Espin v. Pem- 
 berton, 3 De Gex & J. 547; RoUand 
 v. Hart, L. R. 6 Ch. App. 678; Cave 
 V. Cave, L. R. 15 Ch. Div. 639; Ket- 
 tlewell V. Watson, L. R. 21 Ch. Div. 
 685, 707; Frankel v. Hudson, 82 Ala. 
 158, 2 So. 758, 60 Am. Rep. 736. 
 The doctrine of the cases cited is 
 that when the agent is attempting 
 to defraud his principal notice to 
 him is not notice to the principal. 
 
§265 
 
 RAILROADS 
 
 424 
 
 matter, and his notice or knowledge in that regard is not, there- 
 fore, imputed to the corporation in such a case.*" 
 
 §265 (227). Ratification. — Even though the agent is not 
 shown to have received any authority from the corporation, and 
 it does not appear that he has been held out to the world as 
 possessing any such authority, and no former acts of his are 
 shown from which his authority as an agent could be presumed, 
 yet the corporation will be bound if it is shown to have ki^ow- 
 ingly ratified the particular act in question*^ by express adoption 
 of the contract,*^ either iii whole or in part,** by availing itself 
 of the proceeds or benefits arising from an execution of the con- 
 tract by the other party,** or by neglecting to disavow and ac- 
 tively condemn the unauthorized act for a long time and until 
 
 40Lamson v. Beard, 94 Fed. 30; 
 Arlington &c. Co. v. Bluethenthal, 
 36 App. Cas. (D. C.) 209, Anp. Cas. 
 1912C, 294, and note citing other 
 cases ; Booker v. Booker, 208 111. 
 529, 70 N. E. 709, 100 Am. St. 250; 
 Corcoran v. Snow Cattle Co., 151 
 Mass. 74, 23 N. E. 727; Merchants' 
 Nat. Bank v. Lovitt, 114 Mo. 519, 
 21 S. W. 825, 35 Am. St. 770, and 
 note; Camden Safe &c. Co. v. Lord, 
 67 N. J. Eq. 489, 58 Atl. 607; Grin- 
 ster V. Scranton &c. Co., 181 Pa. 
 St. 327, n Atl 550, 59 Am. St. 650; 
 2 Thorap. Corp (2d ed.), §1655. 
 
 41 Stuart V. London &c. R. Co., 16 
 Jur. 209, 10 Eng. L. & Eq. 57. Evi- 
 dence that representatives of a cor- 
 poration agreed that certain laind 
 should be used as a highway and 
 that such agreement was afterward 
 ratified is not rendered inadmissible 
 by the fact that no such authority 
 was given the representatives in the 
 resolution authorizing the purchase 
 of the land. People v. Eel River, 
 &c. R. Co., 98 Cal. 665, 33 Pac. 728. 
 
 42 McLaughlin v. Detroit &c. R. 
 Co., 8 Mich. 99. 
 
 43 United States Rolling Stock Co. 
 v. Atlantic &c. R. Co., 34 Ohio St. 
 450, 32 Am. Rep. 380. 
 
 4* Davidson v. Bridgeport, 8 
 Conn. 472; Oilman &c. R. Co. v. 
 Kelly, n 111. 426; Bangor &c. R. 
 Co. V. Smith, 47 Maine 34; Hilliard 
 v. Goold, 34 N. H. 230, 66 Am. Dec. 
 765; Scott v. Middletown &c. R. 
 Co., 86 N. Y. 200; Kickland v. 
 Menasha &c. Co., 68 Wis. 34, 31 N. 
 W. 471, 60 Am. Rep. 831. When a 
 corporation receives without objec- 
 tion, the benefit of a contract made 
 by any agent in its behalf, for a 
 purpose authorized in its charter, it 
 may be presumed to have authorized 
 or ratified the contract. Pittsburgh 
 &c. R. Co. .v. Keokuk &c. Co., 131 
 U. S. 371, 9 Sup. Ct. 770, 33 L. ed. 
 157. See also Tylee v. Illinois 
 Cent. R. Co., 97 Nebr. 646, 150 N. 
 W. 1015 (claim agent's contract). 
 
425 CORPORATE REPRESENTATIVES § 265 
 
 innocent third persons have been thereby induced to put them- 
 selves in a position from which they cannot be taken without 
 loss if the act should be held invalid.*^ What is a reasonable 
 time in which to disavow an act of the agent after being in- 
 formed of what he has done will depend upon the particular cir- 
 cumstances of the case. If the corporation and its officers have 
 knowledge that the other contracting party is making large 
 expenditures on the faith of the contract, they must act promptly 
 if they would disaffirm it.**' Ratification from long silence has 
 been held a question for the jury.*'^ But ratification should not 
 be lightly presumed, especially where the act is wholly beyond 
 the ordinary duties of the officer or agent performing it ;** for 
 no individual member can represent the corporation in its aggre- 
 gate capacity, except by consent. Thus, proof that the plain- 
 tifFs men were seen at work upon a turnpike road by different 
 members of the corporation owning it, and by its agent who was 
 authorized to bind the corporation only by written contracts, 
 was held insufficient to establish a claim for pay for such work, 
 where it was not shown that any authorized agent of the cor- 
 poration, or any one who had previously acted for the corpora- 
 tion in such matters, had requested that the work should be 
 done or promised to pay for it.*" 
 
 *5 Indianapolis Rolling Mill Co. S. W. 802; Hall v. New York &c, 
 V. St. Louis &c. R. Co., 120 U. S. R. Co., 27 R. I. . S2S, 65 Atl. 278 ; 
 256, 7 Sup. Ct 542, 30 L. ed 639; 1 Elliott Gen. Pr. §426. 
 Hazelhurst v. Savannah &c. R. Co., 48 Kersey Oil Co. v. Oil Creek &c. 
 43 Ga. 13 ; Sheldon &c. Co. v. Eicke- R. Co., 12 Phila. (Pa.) 374. 
 meyer &c. Co., 90 N. Y. 607 ; United 49 Hayden v. Middlesex. Tpk. Co., 
 States &c. Stock Co. v Atlantic &c. 10 Mass. 397, 6 Am. Dec. 143. See 
 R. Co., 34 Ohio St. 450, 32 Am. St. Cox v. Midland R. Co., 18 Law J. 
 380. See also Kelly y. Newbury- N. S. Exch. 65. But where an en- 
 port &c. R. Co., 141 Mass. 496, 6 N. gineer who had previously made 
 E. 745 : such contracts which had been rati- 
 
 46 United States &c. Stock Co. v. fied by the corporation, promised 
 Atlantic &c. R. Co., 34 Ohio St. '450, that parties furnishing materials to 
 32 Am. St. 380. build a bridge for the company 
 
 47 First Nat. Bank v. Reed, 36 should be paid, it was held bound 
 Mich. 263. See Arkansas &c. R. by such promise. Beattie v. Dela- 
 Co. V. Dickinson, 78 Ark. 483, 95 ware &c. R. Co., 90 N. Y. 643. 
 
§266 
 
 RAILROADS 
 
 426 
 
 § 266 (228). Acts that may be ratified.— It is competent for 
 a railroad company to ratify any act of an agent performed 
 within the scope of the corporate power. The general rule is 
 that a corporation can only ratify contracts which it has power 
 to enter into,^" and it is powerless to ratify one which it is pro- 
 hibited from making by its charter, by public policy or by 
 general statute. ^^ It is, in general, true that a void act cannot 
 be ratified. A recovery, however, may be had on the quantum 
 meruit in many cases for the value of the property actually re- 
 ceived by the company. Such a recovery does not, as a general 
 rule, rest upon the void contract, but there are cases which hold 
 that a recovery can be had on the contract.^^ 
 
 §267 (229). Ratification — What constitutes. — A ratification 
 will be presumed only in case the corporation was aware of all 
 the material facts and circumstances which would influence it 
 in adopting or rejecting the contract,^* or had such means of 
 
 50 Board &c. v. Lafayette &c. R. 
 Co, SO Ind. 85; Pacific R. Co. v. 
 Thomas, 19 Kans. 256; Scott v. 
 Middletown &c. R. Co., 86 N. Y. 
 200; United States &c. Stock Co. 
 V. Atlantic &c. R. Co., 34 Ohio St. 
 450, 32 Am. St. 380; Boston &c. R. 
 Co. V. New York &c R. Co., 13 R. 
 I. 260; Miller v Rutland &c. Co., 36 
 Vt. 452. 
 
 51 Such a contract is as if no con- 
 tract had ever been made, and, oi 
 course, incapable of ratification. 
 Martin v. Zellerbach, 38 Cal. 300, 
 99 Am. Dec. 365; Davis v. Old 
 Colony R. Co., 131 Mass. 258, 41 
 Am. Rep. 221 ; Taymouth Tp. v. 
 Koehler, 35 Mich. 22; Alexander v. 
 Cauldwell, 83 N. Y. 480. 
 
 52 Hitchcock V. Galveston, 96 U. 
 S. 341, 24 L. ed. 659; Bank v. Pat- 
 terson, 7 Cranch (U. S.) 299,- 3 L. 
 ed. 351 ; Railway Co. v. McCarthy, 
 96 U. S. 258, 24 L. ed. 693; Louisi- 
 
 ana v. Wood, 102 U. S. 294, 26 L. 
 ed. 153; Parkersburg v. Brown, 106' 
 U. S. 487, 1 Sup. Ct. 442, 27 L. ed. 
 238; Pennsylvania &c. Co. v. St. 
 Louis &c. Co., 118 U. S. 290, 6 Sup. 
 Ct. 1094, 30 L. ed. 83; Pennsylvania 
 R. Co. V. Keokuk &c. Co., 131 U. 
 S. 371, 9 Sup. Ct 770, 33 L. ed. 157 ; 
 Missouri Pacific Co. v. Sidell, 67 
 Fed. 464; State Board &c. Co. v. 
 Citizens' &c. Co., 47 Ind. 407, 17 
 Am. Rep. 702; Schipper v. Aurora, 
 121 Ind. 154, 158, 22 N. E. 878, 6 
 L. R. A. 318; Dill v. Wareham, 7 
 Mete. (Ky.) 438; Davis v. Old Col- 
 ony R. Co., 131 Mass. 258, 41 Am. 
 Rep. 221 ; DeGroff v. American &c. 
 Co., 21 N. Y. 124; Bissell v Michi- 
 gan &c. Co., 22 N. Y. 258; Whitney 
 Arms Co. v. Barlow, 63 N. Y. 62, 
 20 Am. Rep. 504. 
 
 53Gilman &c R. Co. v. Kelley, 77 
 111. 426, 
 
427 
 
 CORPORATE REPRESENTATIVES 
 
 §268 
 
 knowing that it was chargeable with negligence in not being 
 informed of them.^* The rule stated is a familiar one, and lit- 
 tle else than its bare statement is required. We refer in the 
 note to a few of the great number of cases which assert and ap- 
 ply the rule.®^ 
 
 §268 (230). Compensation of officers. — As a general rule 
 there is no implied promise to pay corporate officers anything 
 for their services, but they are presumed, to serve without com- 
 pensation unless some provision for payment is made by stat- 
 ute, by contract, or by resolution of the board of directors.^* 
 Where a certain compensation is agreed upon before the serv- 
 ices are rendered, payment of it will be enforced. Accordingly, 
 it is held that a by-law of a corporation, providing that "no 
 ■debts shall be contracted by the company unless there are funds 
 in the treasury to meet the same," does not apply to the salary 
 
 54Hotchin v. Kent, 8 Mich. 526; 
 Exchange Bank v. Monteath, 17 
 Barb. (N. Y. )171. 
 
 55 Western &c. Bank v. Arm- 
 strong, 152 U. S. 346, 14 Sup. Ct. 
 572, 38 L. ed. 470; Russ v. Telfen- 
 er, 57 Fed. 973; W. O. Johnson & 
 Sons V. Des Moines &c. R. Co., 129 
 Iowa 281, 105 N. W. 509; First 
 Nat. Bank v. Badger &c. Co., 54 Mo. 
 App. 327; Sherrill v. Weisiger &c. 
 Co., 114 N. Car. 436, 19 S. E. 365; 
 Battaglia v. Thomas, 5 Tex. Civ. 
 App. 563, 23 S. W. 1118. It is fam- 
 iliar and established law that the act 
 of an agent inust be ratified in toto 
 or entirely repudiated. Rader v. 
 Maddox, 150 U. S. 128, 14 Sup. Ct. 
 46, 37 L. ed. 1025; Nicklase v. Grif- 
 fith, 59 Ark. 641, 26 S. W. 381; 
 Stanard Milling Co. v. Flower, 46 
 La. Ann. 315, IS So. 16; Tallman 
 V. Kimball, 74 Hun 279, 26 N. Y. S. 
 811; Graff v. Callahan, 158 Pa. St. 
 389, 27 Atl. 1009; Brown v. Par- 
 
 sons, 10 Utah 233, 37 Pac. 346. A 
 principal who seeks to escape liabil- 
 ity for the unauthorized act of the 
 agent must repudiate it within a rea- 
 sonable time after it comes to his 
 knowledge. Swartz v. Duncan, 38 
 Nebr. 782, 57 N. W. 543. 
 ■ 56 Officers of corporations are 
 presumed to perform the duties of 
 their trust gratuitously, unless other- 
 wise provided by a statute or a con- 
 tract. Smith V. Putnam, 61 N. H. 
 632; Barril v. Calendar Insulating 
 &c. Co., 50 Hun 257, 19 N. Y. S. 
 877; Toponce v. Corinne Mill, C. 
 & S. Co., 6 Utah 439, 24 Pac. 534. 
 There is no implied promise to pay 
 the president of a private corpora- 
 tion for his services. McAvity v. 
 Lincoln Pulp &c. Co., 82 Maine 504, 
 20 Atl. 82. See McMuUen v. Rit- 
 chie, 64 Fed. 253 ; Starbuck v. Hous- 
 atonic R. Co., 83 Hun 534, 32 N. 
 Y. S. 87; Potts v. Rose Valley Mills, 
 167 Pa. St. 310, 31 Atl. 655. 
 
§ 269 . RAILROADS 428 
 
 of the secretary of such corporation, especially when it has- 
 received the consideration for the indebtedness contracted.^'' 
 And a by-law or resolution adopted by the directors of a corpo- 
 ration that the salary of the president shall be paid monthly out 
 of the money that may come into the hands of the treasurer 
 from the first sale of bonds is held not to exempt the corporation 
 from liability therefor in case the bonds are not sold.^® Officers 
 and agents, of whom active duties are required, not chosen from 
 among the directors are, ordinarily, entitled to a reasonable 
 compensation for services rendered at the request of the corpo- 
 ration or of its authorized representatives/'^ Payment for labor 
 as well as for materials useftil in carrying on the business of the 
 corporation may usually be made in money or its equivalent; 
 and, if in the latter, the transaction cannot be impeached for 
 error of judgment on the part of the officers as to the value of 
 the services or property. ^^ 
 
 §269 (231). Individual liability of agents for their torts. — 
 
 Although the corporation becomes bound to answer for any 
 wrongs committed by an agent in the course of his employment, 
 the agent is not thereby discharged from liability. He must an- 
 
 57 McCracken v. Halsey Fire En- number of shares of its capital 
 gine Co., 57 Mich. 361, 24 N. W. stock, and gave active and valuable 
 104. service to the company, expecting^ 
 
 58 Indianapolis &c. R. Co. v. Hyde, that when it became prosperous he 
 122 Ind. 188, 23 N. E. 706. But a would have a large salary for the 
 resolution fixing the salary of a future, with some compensation for 
 charter officer elected for one year the past, but with no agreement as 
 at a sura certain per month does not to salary — the fact that he stated 
 necessarily fix that rate for the several times to other stockholders- 
 year. Bennett v. St. Louis Car that he was serving without com- 
 Roofing Co., 23 Mo. App. 587. pensation will not defeat his right 
 
 59 Rogers v. Hastings &c. R. Co., to reasonable pay for his services 
 22 Minn. 25; Missouri River R. Co. when the corporation has become in- 
 V. Richards, 8 Kans. 101 ; St. Louis solvent. Bard v. Banigan, 39 Fed. 
 &c. R. Co. V. Grove, 39 Kans. 731, 13. 
 
 18 Pac. 958. Where, at the request «9 Arapahoe Cattle & Land Co. v. 
 of a corporation, a man became its Stevens, 13 Colo. 534, 22 Pac. 823, 
 general agent and purchased a large 28 Am.' & Eng. Corp. Cas. 12. 
 
429 CORPORATE REPRESENTATIVES § 270 
 
 swer for his frauds,^i misrepresentations,®^ and other wrongful 
 acts,"* even though he does them by the express direction of a 
 superintendent or other superior officer of the corporation.^* 
 
 § 270 (232)'. Bonds of officers and agents. — The officers and 
 agents of a corporation are liable to it for any loss occasioned 
 by their misconduct or neglect,''^ and it is competent for the 
 corporation to take a bond from an officer or agent to secure 
 the faithful performance of his duty. The right to require such 
 a bond is given by statute in many states,''® but such statutes 
 are but an affirmance of the common law,®''^ and any corporation 
 may pass a valid by-law requiring security to be given by its 
 agents.®* Even though the charter prescribes the security to be 
 taken, such provision will be held merely directory and a differ- 
 ent bond may be enforced against the sureties in case of the 
 agent's default.®^ If the bond is executed and delivered to the 
 corporation, and the officer enters upon the discharge of his 
 duties, it may be enforced against the sureties upon a breach of 
 its conditions without showing any formal acceptance of it by 
 
 61 Dodgson Case, 3 De Gex & S. peared that he acted only in obedi- 
 85; Attorney-General v. Leicester, 7 ence to orders. 
 
 Beav. 176. es Briggs v. Spaulding, 141 U. S. 
 
 62 Salmon v. Richardson, 30_ 132, 11 Sup. Ct. 924, 35 L. ed. 662 ; 
 Conn. 360, 79 Am. Dec. 255; Fusz' Lexington R. Co. v. Bridges, 7 B. 
 V. Spaunhorst, 67 Mo. 256; Meyer Men. (Ky.) 556; Pontchartrain R. 
 V. Amidon, 45 N. Y. 169; Hender- Co. v. Paulding, 11 La. 41; March v. 
 son V. Lacon, L. R. 5 Eq. 249. See Eastern R. Co., 43 N. H. 529. 
 
 also Tyler v. Savage, 143 U. S. 79, 6® See Rev. Stat. Arizona 1913, 
 
 12 Sup. Ct. 340, 36 L. ed. 82. §§ 2137, 2191-2194. 
 
 esBerghoff v. McDonald, 87 Ind. 67 2 Tliomp. Corp. (2d ed.); § 1390. 
 549 ; Richardson v. Kimball, 28 68 Bank of United States v. Dand- 
 Maine 463; Harriman v. Stowe, 57 ridge, 12 Wheat (U. S.) 64, 6 L. 
 Mo. 93;. Cameron v. Kenyon &c. ed. 552. See Bank of North Lib- 
 Co., 22 Mont. 312, 56 Pac. 358, 74 erties v. Cresson, 12 Serg. & R. 
 Am. St. 602; Horner v. Lawrence, (Pa.) 306; Peppin v. Cooper, 2 B. 
 37 N. J. L. 46; Crane v. Onder- & Aid. 431. 
 
 donk, 67 Barb. (N. Y.) 47; Elmore 69 As where the charter prescribed 
 
 V. Brooks, 6 Heisk. (Tenn.) 45. a bond with two sureties, and a 
 
 64 Duluth V. Mallett, 43 Minn. 204, bond with only one surety was 
 
 45 n! W. 154, where the conviction taken. Bank of Northern Liberties 
 
 of an engineer for obstructing a v. Cresson, 12 Serg. & R. (Pa.) 306. 
 crossing was upheld, though it ap- 
 
§ 270 RAILROADS 430 
 
 the directors.^" A total failure to execute any bond whatever 
 will not prevent the person appointed to an office from being 
 a legal agent of the corporation, even where the charter pro- 
 vides that he shall "give bond before he enters upon the duties 
 of his office,'"^^ although a failure to require a bond may render 
 the officers, whose duty it was to require the bond liable for any 
 loss resulting from their failure to do soJ^ A bond is not void 
 as to the obligors because it is signed by the officers who should 
 examine and approve it/* nor because the officer neglected to 
 be swornJ* But, if the principal knows of some fact which will 
 materially affect the liability of the sureties,''^ as that he is 
 being cheated by an agent,''® and applies for security for the 
 good conduct of the agent, but conceals this fact from the one 
 who, in ignorance of it, becomes a surety for the agent, the 
 obligation so obtained may be avoided by the surety. The cor- 
 porate representative must, if fit opportunity offers, inform the 
 surety of any material facts within his knowledge relative to the 
 trustworthiness of the officer, such as prior defaults and the like, 
 or the surety will not be bound.'''' And the corporation cannot,- 
 upon misconduct of the agent amounting to a substantial breach 
 of the bond after it is executed, retain him in its employ and yet 
 
 ''0 Amherst Bank v. Root, 2 Mete. 74 State Bank v. Chetwood, 8 N. 
 
 (Mass.) 522. -J. L. 1. 
 
 Ti Bank of United States v. ''5 Franklin Bank v. Stevens, 39 
 
 Dandridge, 12 Wheat. (U. S.) 64, Maine 532. 
 
 6 L. ed. 552. But if the charter 76 Maltby's Case, cited in 1 Dow. 
 
 especially provided that he should 294. Wliere a station agent at the 
 
 not be deemed for any purpose in time of signing the official bond is 
 
 his office until an approval of his in default, and the sureties are not 
 
 bond by the proper board, any acts informed of that fact, they will not 
 
 which he did before such approval be bound. Wilmington &c. R. Co. 
 
 would be utterly void. Bank of v. Ling, 18 S. Car. 116. 
 
 United States v. Dandridge, 12 77 Graves v. Lebanon Nat. Bank, 
 
 Wheat. (U. S.) 64, 6 L. ed. 552, per 10 Bush (Ky.) 23, 19 Am. Rep. 50; 
 
 Story, J. Franklin Bank v. Cooper, 36 Maine 
 
 72 Pontchartrain R. Co. v. Pauld- 179; State v. Atherton, 40 Mo. 209; 
 ing, 11 La. 41. Western &c. Ins. Co. v. Clinton, 66 
 
 73 Amherst Bank v. Root, 2 Mete. N. Y. 326; Dinsmore v. Tidball, 34 
 (Mass.) 522. Ohio St. 411; Aetna Life Ins. Co. v. 
 
 Mabbett, 18 Wis. 667. 
 
431 CORPORATE REPRESENTATIVES § 270 
 
 hold the sureties liable for his future defaults, unless notice is 
 given to the sureties and they expressly or impliedly consent to 
 the agent's retentionJ^ The fact that the agent is retained will 
 not relieve the surety from a liability already accrued^® As a 
 general rule the corporation is not bound upon discovering that 
 an officer is in default to dismiss the officer and notify the sure- 
 ties in order that they may take measures to protect them- 
 selves.** And where the officer or employe was a defaulter at 
 the time of giving the bond, but this fact was unknown to the 
 company, or where the corporation retains him in its employ 
 after his default, but in ignorance of his misconduct, the surety 
 i.^ not thereby discharged, even though such ignorance arises 
 from the negligence of officers of the corporation in failing to 
 ■examine into the accounts of the person under bond.®^ The 
 mere fact that a balance was due from the agent to the principal 
 on account of money received by him, where it did not carry an 
 imputation of misconduct on the part of the agent, was held 
 not a material fact, the concealment of which would release the 
 surety. *2 And the fact that a balance is found to be due from 
 the agent to the corporation, and he is afterward allowed to 
 continue in its employ will not necessarily release the sureties, 
 for it is only where the default is evidently a dishonest one, 
 amounting to a breach of the bond, that the corporation is bound 
 to discharge the delinquent.*^ A bond will be presumed to be 
 
 T8 Taylor v. Bank of Kentucky, 2 Co. v. Simmons, 131 Mass. 85, 41 
 J. J. Marsh (Ky.) 564; Wilmington Am. Rep., 196; Atlas Bank v. Brow- 
 Ac. R. Co. V. Ling, 18 S. Car. 116. nell, 9 R. I. 168, 11 Am. Rep. 231;' 
 Phillips V. Foxall, L. R. 7 Q. B. Black v. Ottoman Bank, IS Moore 
 666. P. C. 472. 
 
 T9 State Bank v. Chetwood, 8 N. 82 Guardians &c. v. Strother, 24 
 
 J. L. 1; Union Bank v. Forstall, 11 Eng. Law & Eq. 183, 22 L. T. 84; 
 
 La. 211. Watertown &c. Ins. Co. v. Simmons, 
 
 80 Grocers' Bank v. Kingman, 16 131 Mass. 85, 41 Am. Rep. 196 ; Wil- 
 Gray (Mass.) 473; Morris Canal mington &c. R. Co. v. Ling, 18 S. 
 &c. Co. V. Van Vorst, 21 N. J. L. Car. 116. See Vilwig v. Baltimore 
 100; Pittsburgh &c. R. Co. v. &c. R. Co., 79 Va. 449. 
 
 Shaeflfer, 59 Pa. St. 350; Peel v. 83 Atlantic &c. Tel. Co. v. Barnes, 
 
 Tatlock, 1 Bros. & Pull. 419. 64 N. Y. 385, 21 Am. Rep. 621; 
 
 81 Bowne v. Mt. Holly Nat., Bank, Richmond &c. R. Co. v. Kasey, 30 
 45 N. J. L. 360; Watertown &c. Ins. Grat. (Va.) 218. 
 
§ 271 RAILROADS ^^^ 
 
 executed with reference to the time for which the officer or 
 agent is appointed, if for a term certain,, and the sureties cannot 
 be. held liable for his misconduct in any subsequent terms for 
 which he may be chosen.^* But they may, by the use of apt 
 words in the bond, bind themselves for an indefinite number of 
 successive terms during which he may hold his position.** 
 Where one gives a bond as an officer of a corporation whose 
 charter will soon expire, his bondsmen cannot be held liable for 
 his defalcations while acting as an officer under an extension of 
 the charter.** But the adoption of a by-law changing the time 
 for holding the annual meeting, or changing the mode of con- 
 ducting the business of the corporation after the termination of 
 a lease of its property will not discharge the sureties.*'^ It has 
 also been held that the obligation of a bond is not avoided by the 
 amalgamation of the company to which it was given with an- 
 other under an act of parliament providing that all the securi- 
 ties of the old companies should be vested in the new, and the 
 duties of the officer were unchanged.** 
 
 §271 (233). Sureties— Bonds of officers and agents. — The 
 
 rules which govern as .to the eflfect of changes in obligations of 
 sureties apply to sureties on the bonds of corporate officers and 
 agents. We shall not discuss the subject at length, but will re- 
 fer to some general rules. A change in the contract in any ma- 
 terial part, without the consent of the surety, will discharge 
 him from his obligation*^ as where one who is working for a 
 •salary goes to work on a commission,"" or where one who gives 
 
 8* Chelmsford Co. v. Demarest, 7 so Thompson v. Young, 2 Ohio- 
 Gray (Mass.) 7; Exeter Bank v. 334. 
 
 Rogers, 7 N. H. 21 ; Manufacturers' 87 Lexington &c. R. Co. v. Elwell, 
 
 &c. Loan Co. v. Qdd Fellows' Hall 8 Allen (Mass.) 371. 
 
 Assn., 18 Pa. St. 446. 88 Eastern Union R. Co. v. Coch- 
 
 85 Middlesex Mfg. Co. v. Law- rane, 24 Eng. L. & Eq. 495 ; London 
 
 rence, 1 Allen (Mass.) 339. See &c. R. Co. v. Goodwin, 3 Exch. 320. 
 
 Lexington &c. R. Co. v. Elwell, 8 89 Miller v. Stewart, 9 Wheat. (U. 
 
 Allen (Mass.) 371; Consolidated S.) 680, 6 L. ed. 189. 
 
 Nat. Bank v. Fidelity &c. Co., 67 "o Northwestern R. Co. v. W hin- 
 
 Fed 874; Eastern R. Co. v. Loring, ray, 26 Eng. L. & Eq. 488. 
 138 Mass. 381. 
 
433 CORPORATE REPRESENTATIVES § 271 
 
 bond as agent for an insurance cornpany which has no author- 
 ity to engage in banking is intrusted by it with the business of 
 banking for the corporation, and embezzles funds intrusted to 
 him for that purpose.'*^ But a surety on the bond of a ticket 
 seller, conditioned for his faithful performance of "all the duties 
 of the said office which are or may be imposed upon him under 
 this or any future appointment," is not released by the fact 
 that the capital stock of the corporation is increased, that the 
 travel becomes much greater and that the ticket agent's salary 
 is nearly doubled after the bond is given.^^ The sureties on the 
 official bond of an officer or agent of a private corporation con- 
 ditioned for the faithful performance of his duties will not be 
 held to any greater liability than would attach to the agent if 
 no bond were given, unless the language of the bond clearly 
 requires it.®^ Such a bond has reference to the agent's hou- 
 esty,®* and binds him only to the reasonable skill and ordinary- 
 diligence in performing the duties of his office*^ to which he is-, 
 bound by the terms of an ordinary employment. And where 
 a sum of money belonging to the corporation is stolen from the: 
 agent without his fault, his sureties cannot be held liable upon a: 
 bond which provides that he shall "well, truly and faithfully 
 perform the duties required of him * * * ^j^^ promptly pay 
 over and promptly account for all moneys belonging to said 
 company which shall be received by him as such agent. "^* The 
 
 91 Blair v. Perpetual Ins. Co., 10 »* Union Bank v. Clossey, 10 
 Mo. SS9, 47 Am. Dec. 129. Johns. (N. Y.) 271, 11 Johns. (N. 
 
 92 Eastern R. Co. v. Loring, 138 Y.) 182. 
 
 Mass. 381; Strawbridge v. Baltimore 95 American Bank v. Adams, 12 
 
 &c. R. Co., 14 Md. 360, 74 Am. Dec. Pick. (Mass.) 303. An officer of a 
 
 541. See also Bank of Wilmington private corporation is liable only for 
 
 V. WoUaston, 3 Harr. (Del.) 90; the care required of an ordinary 
 
 Morris Canal & Banking Co. v. trustee or bailee for hire, and is not 
 
 Van Vorst, 21 N. J. L. 100. an insurer of property coming into 
 
 93 Planters' &c. Bank v. Hill, 1 his hands. Mowbray v. Antrim, 123 
 Stew. (Ala.) 201, 18 Am. Dec. 39; Ind. 24, 23 N. E. 858.; Wayne Pike 
 Chicago &c. R. Co. v. Bartlett, 120 Co. v. Hammons, 129 Ind. 368, 27 
 111. 603, 11 N. E. 867; Baltimore &c. N. E, 487. 
 
 R. Co. V. Jackson, 33 Alb. J. (N. 96 Chicago &c. R. Co. v. Bart- 
 
 Y.) 239. lett, 120 111. 603, 11 N. E. 867; Bal- 
 
§ 271 RAILROADS 434 
 
 corporation cannot, without the unanimous consent of the stock- 
 Jiolders, condone gratuitously the fraud of its officers.^'' 
 
 timore &c. R. Co. v. Jackson, 33 97 Hazard v. Durant, 11 R. I. 19S. 
 
 Alb. L. J. (N. y.) 239. So where See as to right of stockholders to 
 
 property is lost without his fault. sue, notes in 97 Am. St. 30, et seq. 
 
 Mowbray v. Antrim, 123 Ind. 24, 23 See also Greathouse v. Martin, 100 
 
 N. E. 858. Tex 99, 94 S. W. 322. 
 
CHAPTER XII. 
 
 DIRECTORS. 
 
 Sec. 
 
 275. Different classes of oflScers — 
 Generally. 
 
 276. The governing board — Gener- 
 
 ally. 
 
 277. Governing board not the cor- 
 
 poration. 
 
 278. The board of directors repre- 
 
 sents the corporation. 
 
 279. Directors — 'Generally. 
 
 280. Number of directors. 
 
 281. Directors — How chosen — Gen- 
 
 erally. 
 
 282. Eligibility to the office of di- 
 
 rector. 
 
 283. Ineligibility because of con- 
 
 nection with competing 
 lines. 
 
 284. Election of ineligible person 
 
 to officer of director. 
 
 285. Officers de facto — Generally. 
 
 286. Election of ineligible person — 
 
 Who may question right to 
 office. 
 
 287. Directors de facto — Illustra- 
 
 tive cases. 
 
 288. De facto d i r ect o r s— Two 
 
 boards. 
 
 289. Holding over— Failure to elect. 
 
 290. Powers of directors — Source 
 
 of. 
 
 291. Powers of directors— Gener- 
 
 ally. 
 
 292. Powers of directors — Illustra- 
 
 tive cases. 
 293. Directors— Powers of- 
 changes. 
 
 -Organic 
 
 Sec. 
 
 294. Directors — Extent of author- 
 
 ity — Generally. 
 
 295. Powers of directors, general 
 
 conclusion. 
 
 296. Directors — ^Official action — 
 
 Preliminary. 
 
 297. Directors — ^Official action. 
 
 298. Directors — Delegation of au- 
 
 thority. 
 
 299. iJirectors — Delegation of au- 
 
 thority—Illustrative cases. 
 
 300. Directors — ^Action where the, 
 
 mode is prescribed. i 
 
 301. Directors — Meetings. 
 
 302. Directors — Meetings — Stated' 
 
 and special. 
 
 303. Directors — Meetings — Notice. 
 
 304. Directors— Meetings — Proxies 
 
 — Quorum. 
 
 305. Dirjectors —< Meetings outside 
 
 of the state. 
 
 306. Directors — Proceedings — Rec- 
 
 ord. 
 
 307. Directors — Corporate -records 
 
 as evidence. 
 
 308. Pr^or~bdr\|he proceedings of 
 ^'^ the board of directors. 
 
 309. Notice to directors. 
 
 310. Directors — Admissions and 
 
 declarations. 
 
 311. Ratification of the acts of di- 
 
 rectors. 
 
 312. Directors — Removal from of- 
 
 fice. 
 
 313. Compensation of directors. 
 
 314. Directors — Relation to stock- 
 
 holders — Preliminary. 
 
 435 
 
§ 275 ■ RAILROADS 436 
 
 Sec. Sec. 
 
 315. Directors considered trustees. 320. Directors — Liability in matter 
 
 316. Directors as trustees— Illustra- of contract. 
 
 tive cases. 321. Directors — Errors of judg- 
 
 317. Directors— Dealings with cor- ment. 
 
 poration. 322. iJirectors— Liability for negli- 
 
 318. Termination of fiduciary rela- gence. 
 
 tions. 323. Directors — Fraud on third per- 
 
 319. Directors — Liability of^Gen- sons.. 
 
 ■erally. 
 
 I 275 (234). Different classes of officers — Generally. — In the 
 preceding chapter we have in a general way treated of the offi- 
 cers and agents of railway companies and shall now consider 
 that class of corporate officers that may be said to be the gov- 
 erning officers of the corporation. Some of these officers are 
 invested with powers that resemble governmental, legislative 
 and judicial powers, while others are executive or ministerial 
 ■officers. The common-law rule was quite strict, and under it 
 •only the members of the board of directors, or the governing 
 ^oard by whatever name designated, were regarded as officers 
 "Of such superior rank and authority as to constitute them very 
 much more than agents and servants,^ but this doctrine has been 
 greatly limited. 
 
 § 276 (235). The governing board — Generally. — The power of 
 corporate government is vested in a board of officers generally 
 denominated "board of directors" or "board of trustees." The 
 governing board is the highest representative of the corporation. 
 The members of the board are the officers in whom are lodged 
 the primary and highest corporate powers. They actively exer- 
 cise the powers of the corporation, and, while it is true that the 
 powers they exercise are in a sense delegated to them, yet their 
 powers are not delegated powers in the same gtnse as are the 
 
 1 Farwell v. Boston &c. Co., 45 chinson v. York &c. Co., 5 Exch. 
 
 Mass. 49, 38 Am. Dec. 339; Mur- 343; Bartonshill &c. Co. v. Reid, 3 
 
 ray v. South Carolina R. Co., Macq. 266; McFarlane v. Caledon- 
 
 1 McMul. (S. Car.) 385; Priestley ian, &c. Co., 6 Macph. (Sc. Ct. of 
 
 V. Fowler, 3 M. & W. 1 ; Hut- Sessions, 3d. Ser.) 102. 
 
437 DIRECTORS § 277 
 
 powers conferred upon agents, attorneys or employes. ^ The 
 governing board must, under many statutes, exercise all cor- 
 porate powers, for, while the shareholders select the members 
 of the board, the board exercises powers which those who put 
 them in office cannot rightfully exercise. As a rule corporate 
 powers must be exercised by the governing board, or througl^ 
 agents and servants appointed directly or indirectly by it. Where 
 the act of incorporation requires corporate powers to be exer- 
 cised by the governing board itself they cannot be exercised 
 by any other corporate department officers or agents, for where 
 the mode of corporate action is prescribed it must be pursued.' 
 The members of the governing board are usually designated as 
 the directors, and we shall employ that term as a generic one 
 denoting the officers invested with the principal powers. 
 
 § 277 (236). Governing board not the corporation. — ^The board 
 of directors is not in strictness the corporation unless made so by 
 the act of incorporation.* Statements are found in some of the 
 books and cases which seem to indicate that "the board of di- 
 rectors constitute the corporation.^ These statements, as we 
 
 2 Bliss V. Kaweah &c. Co., 6S Cal. (N. Y.) 358, 383, 8 Am Dec. 243; 
 
 502, 4 Pac. 507. See generally Ma- New York &c. Co. v. Ely, 2 Cow. 
 
 honey Min. Co. v. Anglo-Califor- (N. Y.) 678; Willcocks, Ex parte, 
 
 nia Bank, 104 U. S. 192, 26 L. ed. 7 Cow. (N. Y.) 402, 17 Am. Dec. 
 
 707; Nashua &c. R. Co. v. Boston 525; Hosack v. College &c., 5 Wend. 
 
 &c. R. Co., 27 Fed. 821; Conro v. (N. Y.) 547. See also Flagg v. 
 
 Port Henry &c. Co., 12 Barb. (N. Manhattan R. Co., 20 Blatchf. (U 
 
 Y.) 27; Union &c. Co. v Rocky S.) 142. 
 
 Mountain &c. Co., 2 Colo.. 565; 4 Tiffets v. Walker, 4 Mass. 597; 
 
 United Soc. v. Underwood, 9 Bush. Reg. v. Paramore, 10 Ad. & El. 286; 
 
 (Ky.) 609, IS Am. Rep. 731; Mc- Regina v. New York, 2 Q. B. 847; 
 
 Cullough V. Moss, 5 Den. (N. Y.) Mayor &c. v. Simpson, 8 Q. B. 65; 
 
 567, 575; Beveridge v. New York Grant Corp. 365. 
 
 El. R. Co., 112 N. Y. 1, 19 N. E. 5 Maynard v. Fireman's Ins. Fund, 
 
 416; Dana v. Bank of United States, 34 Cal. 48, 91 Am. Dec. 672. See 
 
 5 Watts & S. (Pa.) 223; 2 Thomp. generally Hoyt v. Thompson, 19 N- 
 
 Corp. §§1065, 1066. Y. 207; Beveridge v. New York El. 
 
 sBeatty v. Manne Ins. Co., 2 R. Co., 112 N. Y. 1, 19 N. E. 416; 
 
 Johns. (N. Y.) 109, 3 Am. Dec. 401; Cleveland &c. R. Co. v. Himrod &c. 
 
 People V. Utica &c. Co., 15 Johns. Co., 37 Ohio St. 321, 41 Am. Rep. 
 
§ 278 RAILROADS 438 
 
 believe, assert an erroneous doctrine, for broad and compre- 
 hensive as are the powers of the board of directors, the body 
 politic and corporate is distinct from the board, and there are 
 corporate powers which the board cannot exercise. The board 
 cannot, unless expressly authorized by the act of incorporation, 
 prescribe the qualifications of its own members, enact by-laws, 
 amend articles of association, increase capital stock or effect a 
 consolidation with another company, for power to do these 
 things, and others, dwells elsewhere/' 
 
 § 278 (237). The board of directors represents the corporation. 
 
 — When duly organized and officially acting within the scope of 
 the authority conferred upon it by the charter or the valid by- 
 laws of the corporate body, the board of directors represents and 
 acts for the corporation to the exclusion of the individual stock- 
 holders. As we have elsewhere said, action by the stockholders 
 where the charter, or act of incorporation, requires action by the 
 board of directors, is ineffective. In such cases the stockholders 
 are substantially- strangers to the corporation so far as corpo- 
 rate action is concerned. They elect the directors, but they 
 cannot perform the dut'ies or exercise the functions enjoined 
 upon the board of directors by law. The stockholders are not 
 co-owners of the corporate property, and hence cannot act in 
 regard to it as joint-owners of property can do where the title 
 is in natural persons^ Shareholders cannot convey the corpo- 
 
 509; Leavitt v. Oxford &c. Co., 3 acts refers to ordinary transactions 
 Utah 265, 1 Pac. 356, 4 Am. & Eng. and not to fundamental and organic 
 Corp. Cas. 234; Miller v. Rutland changes, like increasing its capital 
 &c. R. Co., 36 Vt. 452. stock or leasing its plant," citing 
 6 Chicago &c. Co. v. AUerton. 18 Cass v. Manchester &c. Co., 9 Fed. 
 Wall. (U. .S.) 233, 21 L. ed. 902: 640; Thomas v. Railroad Co., 101 U. 
 State V. Adams, 44 Mo. 570; Day- S. 71, 25 L. ed. 950. See also Bed- 
 ton &c. R. Co. V. Hatch, 1 Disney ford R. Co. v. Bowser, 48 Pa. St. 
 (Ohio) 84; Commonwealth v. Cul- 29. 
 
 len, 13 Pa. St. 133, S3 Am. Dec. ^ Williamson v. Smoot, 7 Mart. 
 
 450; 2 Thomp. Corp. (2d ed.), (La.) (O. S.) 31, 12 Am. Dec. 494; 
 
 §§ 1182, 1187-1189. In Nashua &c. Spurlock v. Missouri Pacific R. Co.', 
 
 Co. V. Boston &c. Co., 27 Fed. 821: 90 Mo. 199, 12 S. W. 219; Mickles 
 
 "The general power of the board of v. Rochester &c. Bank, 11 Paige (N. 
 
 directors to perform all corporate Y.) 118, 42 Am. Dec. 103; Burrall 
 
439 
 
 DIRECTORS 
 
 §278 
 
 rate real estate for the reason that the title is in the corporation,* 
 and conveyances must be made by the authorized representa- 
 tives of the corporation. A conveyance made by all the stock- 
 holders may be upheld in equity where facts are alleged and 
 proved sufficient to invoke the assistance of the court of con- 
 science, but the conveyance in and of itself is not effective to 
 carry the title.® In various modes the question as to the author- 
 ity of the stockholders to act for the corporation has been pre- 
 sented and the conclusion generally declared is that it is only 
 in exceptional cases that their acts can be regarded as those of 
 the corporation. 1* A stockholder may, of course, be appointed 
 an agent of the corporation and his acts, within the scope of his 
 
 V. Bush wick R. Co., 75 N. Y. 211. 
 See also Lawson v. Black Diamond 
 &c. Co., 44 Wash. 26, 86 Pac. 1120. 
 In the case of American &c. Co. 
 V. Norris, 43 Fed. 711, the court 
 said: "It is the familiar law that a 
 corporation has a personality of its 
 own distinct from that of its stock- 
 holders, that it is not affected in the 
 remotest degree by contracts made 
 by its stockholders with third par- 
 ties, whether they own much or lit- 
 tle of its capital stock, and is not 
 bound to discharge any personal ob- 
 ligations assumed by its stock- 
 holders." The court cited Pullman 
 &c. Co. V. Missouri Pacific Co., 115 
 U. S. 587, 6 Sup. Ct. 194, 29 L. ed. 
 499; Davis &c. Co. v. Davis &c. 
 Wagon Co., 20 Fed. 699; Moore &c. 
 Co. V. Towers &c. Co., 87 Ala. 206, 
 € So. 41, 13 Am. St. 23. The court 
 also distinguished the case from 
 that of Beal v. Chase, 31 Mich. 490. 
 The case of American &c. Co. v. 
 Taylor Mfg. Co., 46 Fed. 152, is the 
 same case as that from which we 
 have quoted and was heard upon an 
 amended bill See generally Han- 
 
 cock V. Holbrook, 9 Fed, 353; Rail- 
 road Co. V. Howard, 7 Wall. (U. 
 S.) 392, 19 L. ed. 117; PoUitz v. 
 Wabash R. Co., 207 N. Y. 113, 100 
 N. E. 721. 
 
 8 Baldwin v. Canfield, 26 Minn. 
 43, 1 N. W. 261 ; Wheelock v. Moul- 
 ton, 15 Vt. 519; Myers v. Perigal, 
 2 DeGex, M. & G. 599; Edwards v. 
 Hall, 6 DeGex', M. & G. 74, 92. See 
 generally Gillett v. Bowen, 23 Fed. 
 625; Langdon v. Hillside &c. Co., 41 
 Fed. 609; Shay v. Terolumie &c. 
 Co., 6 Cal. 73; Harris v. Muskingum 
 &c. Co., 4 Blackf. (Ind.) 267, 29 
 Am. Dec. 372; Tomlinson v. Brick- 
 layer's Union, 87 Ind. 308; Whit- 
 manri v. Cox, 26 Maine 355; Smith 
 V. Hurd, 12 Mete. (Mass.) 371, 46 
 Am. Dec. 690; Moffat v. Winslow, 
 7 Paige (N. Y.) 124; Carothers v. 
 Alexander, 74 Tex. 309, 12 S. W. 4. 
 
 9 American &c. Co. v. Taylor &c. 
 Co., 46 Fed. 152 ; Society &c. v. Ab- 
 bott, 2 Beav. 559. 
 
 10 Gordon v. Swan, 43 Cal. 564. 
 See also- 2 Thomp. Corp. (2d ed.), 
 §§1175, 1178. 
 
44l> 
 
 § 279 RAILROADS 
 
 authority,' will be binding on the corporation, but his authority 
 will be attributable to his appointment and not to his position 
 as a shareholder. '^i 
 
 § 279 (238). Directors — Generally. — The principal officers of a 
 private corporation are, as already indicated, the directors. A 
 choice of directors is an essential step in its organization, and 
 in many of the states it is specified that the corporate powers 
 are to be exercised by them.^^ It is competent for the legisla- 
 ture to constitute the board of directors the corporation, and 
 where there is a statute making the directors the corporation, 
 they are necessarily the possessors of the whole corporate power 
 not elsewhere lodged. But, as a rule, directors are elective offi- 
 cers, chosen as the chief representatives of the corporation. 
 
 § 280 (239). Number of directors. — The number of directors is 
 fixed by charter or by the law providing for the incorporation of 
 railroads, or is left to be determined by the stockholders within 
 certain limits. Where the number is not fixed by the charter, or 
 the statute under which the company is organized, it may be fixed 
 by the stockholders by appropriate action. Where the number 
 is fixed definitely by the constating articles or articles of asso- 
 ciation it cannot be changed except in the manner provided by 
 law, or by an authorized change or amendrnent of such articles.^' 
 
 §281 (240). Directors — How chosen — Generally. — Directors 
 are usually chosen by the stockholders.^* In the absence of statu- 
 tory provisions vesting the power elsewhere it properly resides 
 in the stockholders of the company. The members compose the 
 corporation and it is for them to choose their representatives in 
 some authorized or appropriate mode, unless the statute pre- 
 scribes the mode ; but in the event that a mode is prescribed 
 the stockholders cannot rightfully pursue any other. As we 
 
 11 See 2 Thomp. Corp., § 1610. See also Greenville &c. R. Co. v. 
 
 12 2 Thomp. Corp. (2d ed.), Johnson, 8 Baxt. (Tenn.) 332. 
 
 §§ 1066, 1067. 14 2 Thomp. Corp. (2d ed.), § 1066. 
 
 13 Mower v. Staples, 32 Minn. 284. 
 
441 DIRECTORS § 282 
 
 shall see presently, an immaterial or unsubstantial deviation 
 from the mode prescribed will not vitiate the election. 
 
 §282 (241). Eligibility to the office of director.— Where the 
 
 act of incorporation requires that, to render a person eligible to 
 the office of director, he shall possess certain prescribed qualifi- 
 cations, he cannot be rightfully chosen to the office unless he 
 possesses the required qualifications. In this, as in all other 
 matters, the act under which the company is incorporated con- 
 stitutes the paramount law.^^ At common law, any person 
 capable of acting as the business agent for another may be a 
 director.!® Persons under the disability of coverture or infancy 
 are eligible to the office of dii^ector unless the statutory law in- 
 terdicts the selection of such persons. Non-residents may, in 
 the absence of statutory prohibition, be eligible to the office of 
 director,!^ but if residence is required by the statute a non-resi- 
 dent is ineligible. Where the statute does not make the owner- 
 ship of stock essential to eligiibility to the office of director a per- 
 son who is not a stockholder may be elected.^* If the charter 
 or by-laws enacted in accordance with it require that directors 
 shall be stockholders, then the persons chosen must be the own- 
 ers of stock. 1^ It has been held, however, that where one is ap- 
 is Horton v. Wilder, 48 Kans. 222, Am. Rep. 684 ; St. Lawrence Steam- 
 29 Pac. 566; State v. Manufacturers boat Co., In re, 44 N. J. L. 529; 
 &c. Co., SO Ohio St. 45, 33 N. E. Kerchner v. Gettys, 18 S. Car. 521 ; 
 401, 24 L. R., A. 252, 29 W. L. Bull. Stock, Ex parte, 33 L. J. Ch. 731 ; 
 160, 29 Ohio L, J. 160. British &c. Assn., Re, L. R. 5 Ch. 
 
 16 People V. Webster, 10 Wend. Div. 306. See Fey v. Peoria &c. 
 (N. Y.) 554. Co., 32 111. App. 618; Penobscot, 
 
 IT Commonwealth v. Hemming- &c. Co. v. Dumtner, 40 Maine 172, 
 way, 131 Pa. St. 614, 18 Atl. 992, 7 63 Am. Dec. 654; Despatch Line v, 
 L. R. A. 357; Commonwealth v. Det- Bellamy &c. Co., 12 N. H. 265, 37 
 wiler, 131 Pa. St. 614, 18 Atl. 990, 7 Am. Dec. 203; Corporate Directors, 
 L. R.' A. 357; McCall v. Bryam Mfg. Re, 7 Pa. Co. Ct. 178. See general- 
 Co., 6 Conn. 428. See State v. ly Trisconi v. Winship, 43 La. Ann. 
 Smith, 15 Ore. 98, 14 Pac. -814; and 45, 9 So. 29, 26 Am. St. 175; 
 note in 24 L. R. A. 252. Beardsley v. Johnson, 121 N. Y. 224, 
 
 18 Wight V. Springfield &c. Co., . 24 N. E. 380. 
 117 Mass. 226, 19 Am. Rep. 412; !» Bartholomew v. Bently, 1 Ohio 
 
 Spering's Appeal, 71 Pa. St.- 11, 10 St. 37. It is held that actual bene- 
 
§ 283 RAILROADS 442 
 
 pointed director by the articles of association he is a de jure 
 officer, although he did not at the time of his appointment own 
 the number of shares required by the articles of association.*" 
 The conclusion reached in the case cited in the note is placed 
 upon the ground that the articles of association only relate to 
 officers appointed in the future. 
 
 §283 (242). Ineligibility because of connection with compet- 
 ing lines. — It is held that a director of one company is incompe- 
 tent to serve as director of a company having adverse interests, 
 and, if chosen, the court will remove him and replace him by trus- 
 tees of its own appointing.21 The decisions to which we refer 
 seem to be supported by sound reason. Directors occupy fidu- 
 ciary relations to the corporation and they ought not to be in- 
 terested adversely to the corporation. It has, however, been 
 held that the fact that a stockholder intends, if elected a director, 
 to vote for an arrangement by which another corporation will 
 control the company cannot, though such an arrangement be 
 illegal, affect the validity of his election. ^^ 
 
 ficial ownership is requisite. Bain- 506; Portal v. Emraens, 1 Com. PI. 
 
 bridge v. Smith, L. R. 41 Ch. Div. Div. 664. 
 
 462, 33 Am. & Eng. Corp. Cases 2i Pearson v. Concord R. Co., 62 
 
 172 ; Stock, Ex parte, 33 L. J. Ch. N. H. 537, 13 Am. St. 590. In West 
 
 731 ; Newcomb, Matter of, 63 Hun Virginia a corporation may provide 
 
 633, 18 N. Y. S. 549. See Nathan by by-law that no person who is at- 
 
 V. Tompkins, 82 Ala. 437, 2 So. torney against it in a suit shall be 
 
 747; Hazelhurst v. Savannah &c. R. eligible to serve as director. Cross 
 
 Co., 43 Ga. 13; Richards v. Attle- v. West Virginia Central &c. R. Co., 
 
 borough &c. Bank, 148 Mass. 187, 37 W. Va. 342, 16 S. E. 587, 18 L. 
 
 19 N. E. 353, 1 L. R. A. 781 ; Chem- R. A. 582. But the mere fact that 
 
 ical &c. Bank v. Colwell, 132 N. Y. one is a director in two companies 
 
 250, 30 N. E. 644; Argus Printing is not necessarily a disqualification 
 
 Co., In re, 1 N. Dak. 434, 48 N. W. where the duties or interests do not 
 
 347, 26 Am. St. 639 ; Commonwealth conflict. Mobile &c. R. Co. V. Owen, 
 
 V. Detwiler, 131 Pa. St. 614, 18 Atl. 121 Ala. 505, 25 So. 612. 
 990, 7 L. R. A. 357; Cumming v. 22 Ohio & M. R. Co. v. State, 49 
 
 Prescott, 2 Younge & C. Exch. 488; Ohio St. 668, 32 N. E. 933. See al- 
 
 Pulbrook V. Richmond &c. Co., L. so Stanley v. Luse, 36 Ore. 25, 58 
 
 R. 9 Ch. Div. 610. Pac. 75. 
 20Karuth's Case, L. R. 20 Eq. 
 
443 DIRECTORS § 284 
 
 § 284 (243). Election of ineligible person to office of director. — 
 
 It is generally held that the election of an ineligible person to 
 the office of director is voidable only and not absolutely void.^^ 
 If the election is not void, but merely voidable, it would seem to 
 follow that the person chosen is invested with color of office 
 and, ordinarily, is not to be regarded as a mere usurper. He is 
 not; to be sure, an officer de jure, but it seems to us that he is 
 to some extent and for some purposes a corporate representa- 
 tive; but there are authorities holding that an ineligible person 
 cannot be a de facto officer. 2* It is also held that votes cast for 
 an ineligible candidate are "thrown away."^^ For the reasons 
 given and upon the authorities referred to in the next paragraph, 
 we are inclined to the opinion that an ineligible candidate for- 
 mally elected and inducted into office may be an officer de facto. 2® 
 
 §285 (244). Officers de facto — Generally. — Where the rights 
 of third persons are involved an officer may be such de facto, al- 
 though in strict right he is not eligible to the office and has not 
 been legally elected. It would be a hardship upon third persons 
 who deal with corporations to require them at their peril to 
 determine whether persons acting as corporate officers under 
 color of right are in fact the officers of the corporation. The 
 question is essentially different in cases where third persons are 
 concerned from what it is in cases where the person claiming 
 to be an officer asserts some right by virtue of the office. Where 
 there is color of right under a corporate election and corporate 
 recognition of the acts of the person claiming to be a director, 
 third persons who in good faith act upon the belief that he is 
 
 23 The doctrine goes back to the Am. St. 427 ; Tramways Co., In re, 
 case of Crawford v. Powell, 2 Burr. S Ch. Div. 963. 
 
 1013. See also note in IS L. R. A. 26 Horton v. Wilder, 48 Kans. 222, 
 
 418. 29 Pac. 566. See also Burr v. Mc- 
 
 24 People V. Albany &c. R. Co., SS Donald, 3 Grat. (Va.) 215; note in 
 Barb. (N. Y.) 344; Craw v. Easter- 15 L. R. A. 418, 2 Thomp. Corp. 
 ly, 54 N. Y. 679; Easterly v. Barber, (2d ed.), §§1111, 1113. As to when 
 65 N. Y. 252. they are not de facto officers, see 
 
 2B See Schmidt v. Mitchell, Waterman v. Chicago &c. R. Co., 
 101 Ky. 570, 41 S. W. 929, 72 139 111. 658, 29 N. E. 689, 15 L. R. 
 
 A. 418, and note. 
 
§286 
 
 RAILROADS 
 
 444 
 
 an officer are entitled to protection. The same principle which' 
 protects persons who deal with persons having color of right 
 to a public office should protect those who deal with representa- 
 tives of corporations, for it would be unjust to require persons 
 dealing with corporate representatives acting as officers under 
 color of right to investigate and decide whether the claim to 
 office is well founded. The same principle which upholds acts 
 of corporations de facto ought to be sufficient to uphold the acts 
 of persons who with color of right assume the functions of cor- 
 porate officers. We believe the conclusion we have stated to be 
 supported by principle and authority.^'' 
 
 § 286 (245). Election of ineligible person — Who may question 
 right to office. — A private person who has no interest whatever in 
 the affairs of a railroad corporation cannot successfully challenge 
 the right of an ineligible person to hold the office to which he 
 
 27 Mahoney Min. Co. v. Anglo- 
 California Bank, 104 U. S. 192, 26 
 L. ed. 707; Atlas Nat. Bank v. 
 Gardner &c. Co., Fed. Cas. No. 635, 
 8 Hiss. 537; Rockville &c. v. V-an 
 Ness, 2 Cranch (U. S.) 449, Fed. 
 Cas. No. 11986; Selma &c. Co. v. 
 Tipton, 5 Ala. 787, 39 Am. Dec. 344 ; 
 Moses V. Tompkins, 84 Ala. 613, 
 4 So. 763; Cahill v. Kalamazoo &c. 
 Co., 2 Dougl. (Mich.) 124, 43 Am. 
 Dec. 457; Tucker v. Aiken, 7 N. H. 
 113, 135; Despatch Line &c. v. Bel- 
 lamy, 12 N. H. 205, 2,1 Am. Dec. 
 203; Wallace v. Walsh, 125 N. Y. 
 26, 25 N. E. 1076, 11 L. R. A. 166; 
 Demarest v. Flack, 128 N. Y. 205, 28 
 N. E. 645, 13 L. R. A. 854; Atlan- 
 tic &c. Co. V. Johnston, 70 N. Car. 
 348; Burr v. McDonald 3 Grat. 
 (Va.) 215; 2 Thomp. Corp. (2d 
 ed.), §§1111-1114 Contra, New- 
 comb,' In re, 42 N. Y. St. 442, 18 
 N. Y. S. 16. In Beardsley v. John- 
 son, 121 N. Y. 224, 24 N. E. 380, it 
 
 was held if a person elected to the 
 office of director becomes ineligible 
 and his place is filled by election, 
 he is not even a director de facto, 
 and service of process on him is 
 void. There is, as every one knows, 
 an essential difference between cases 
 where the rights of innocent third 
 persons are involved and cases 
 where the rights of the claimant are 
 asserted by him, and so there is be- 
 tween cases involving rights of 
 third persons and cases where the 
 state assails the right of the claim- 
 ant to the office. Ebaugh v. German, 
 &c. Church, 3 E. D. Smith (N. Y.), 
 60; People v. Albany &c. Co., 55 
 Barb. (N. Y.) 344; County &c. Co., 
 In re, L. R. 5 Ch. App. 288. Se 
 generally Cooper v. Curtis, 30 
 Maine 488 ; Charitable Assn. v. Bald- 
 win, 1 Mete. (Mass.) 359; Mech- 
 anich's &c. Bank v. Burnet &c. Co., 
 32 N. J. Eq. 236; Atlantic &c. Co. 
 V. Johnston, 70 N. Car. 348. 
 
445 DIRECTORS § 287 
 
 was chosen, except in cases where it is otherwise provided by 
 statute. One who actively and knowingly participates in secur- 
 ing an illegal election and the choice of persons not qualified, 
 cannot be heard to complain of the result of the election. If 
 the complainant has been guilty of an intentional wrong he is 
 -not in a situation to invoke the assistance of the courts.^** 
 
 § 287 (246). Directors de facto — Illustrative cases. — Persons 
 acting as officers although their term of office had expired and 
 they were holding over have been held to be officers de facto, but 
 it seems to us that they should be regarded as officers de jure.^® 
 Officers chosen at a day other than that specified are at least 
 officers de facto, and there is authority as well as reason for 
 holding them to be officers de jure in the just sense of the term.^^ 
 It has been held that a director elected by a minority of the 
 ■stockholders is a de facto director.^i So an officer elected under 
 an unconstitutional statute has been held to be an officer de 
 facto. *^ Officers elected at a meeting held outside of the state 
 have been held to be de facto officers.®^ ' Directors discharging 
 
 28 Wiltz V. Peters, 4 La. Ann. 339. Ct 1121, 30 L. ed., 178; Plymouth v. 
 
 Application of Syracuse &c. Co., Painter, 17 Conn. S8S, 44 Am. Dec. 
 
 Matter of, 91 N. Y. 1. 574; Mallett v. Uncle Sam &c. Co., 
 
 29Thorington v. Gould, 59 Ala. 1 Nev. 188, 90 Am. Dec. 484; State 
 
 461, 2 Thomp. Corp. (2d. ed.) §1081. v. Curtis, 9 Nev. 325; Hamlin v. 
 
 80 In Beardsley v. Johnston, 121 Kassafer, IS Ore. 456, 15 Pac. 778, 
 N. Y. 224, 24 N. E. 380, the pro- 3 Am. St. 176. Compare also Brad- 
 visions of a statute requiring the ford v. Frankfort &c. R. Co., 142 
 ■corporate election to be held on a Ind. 383, 40 N. E. 741, 41 N. E. 
 designated day were directory and 819. • 
 ■directors chosen on a day different 33 Mining Co. v. Anglo-iCalifor- 
 from that specified were held ofiScers nian Bank, 104 U. S. 192, 26 L. ed. 
 •de jure. 707; Anglo-Californian Bank v. Ma- 
 
 31 Delaware &c. Co. v. Pennsyl- honey &c. Co., 5 Sawy. (U. S.) 255, 
 vania &c. Co., 21 Pa. St. 131. See 258, Fed. Cas. No. 392; John v. 
 also Bair v. Bank of Washington, Farmers &c. Bank, 2 Blackf. (Ind.) 
 11 S. & R. (Pa.) 411; 2 Thomp. 367, 20 Am. Dec. 119; Ohio &c. R. 
 Corp. (2d ed.) §1112. . Co. v. McPherson, 35 Mo. 13, 86 
 
 32 Leach v. People, 122 111; 420, 12 Am. Dec. 128, citing Trustees &c. v. 
 N. E. 726. See generally Norton v. Hill, 6 Cow. (N. Y.) 23, 16 Am. 
 Shelby County, 118 U.' S. 425, 6 Sup. Dec. 429. All Saint's Church v. 
 
§ 288 RAILROADS 446 
 
 the functions of office and holding under color of appointment 
 by the legislature are de facto directors.^* It has been adjudged 
 that directors may be such de facto although the corporation 
 was illegally or irregularly organized. ^° We suppose, however, 
 that there can be no officers de facto, and, of course, no officers 
 de jure, where there is no statute authorizing the organization 
 of the corporation, for in such a case there could be no color 
 of right, and color of right is essential to create an officer de 
 facto. Mere irregularities in the mode of conducting an election 
 will not, unless very material and substantial, impair the title 
 of the persons chosen as directors, and as to third persons, of- 
 ficers chosen will be de facto officers, although there may be 
 many irregularities and errors in conducting the election. 
 
 § 288 (247). De facto directors — Two boards. — If there arc 
 two boards of directors the question as to whether there can be 
 de facto directors is perplexing. If those claiming to be directors 
 have color of title, are not mere usurpers, and have acted as 
 directors for a considerable length of time, we think that as to 
 third persons, acting in good faith and without notice, in the 
 ordinary course of business, they should be regarded as direc- 
 tors de facto.** The question is, of course, radically different 
 where it arises in a suit or action by innocent third persons 
 from what it is when it arises in a suit or action by one claiming 
 rights as an officer, or in a suit or action by one who actively 
 participates in giving the claimants color of office and seeks to 
 obtain personal benefit through the acts of such persons, for in 
 
 Lovett, 1 Hall (N. Y. S. Ct.) 191. Bank, 18 Ind. 327; Smith v. Erb, 4 
 See also Commonwealth v. Milton, Gill. (Md.) 437; Savage v. Ball, 17 
 12 B. Mon. (Ky.) 222, S4 Am. Dec. N. J. Eq. 142; People v. Staton, 73 
 522; Aspinwall v. Ohio &c. Co., 20 N. Car. S46, 21 Am. Rep. 479. 
 Ind. 329, 83 Am. Dec. 329; Brad- 35 Hackensack &c. Co. v. DeKay, 
 ford V. Frankfort &c. R Co., 143 36 N. J. Eq. S48. 
 Ind. 383, 40 N. E. 741, 41 N. E. se Lebanon &c. Co. v. Adair, 85 
 819; Wright v. Lee, 2 S. Dak. 596; Ind. 244; Waterman v. Chicago' &c. 
 51 N. W. 706. Co., 139 111. 658, 29 N. E. 689, 15 
 34 Ellis V. North Carolina, 68 N. L. R. A. 418, 32 Am. St. 228 ; Gene- 
 Car. 423. See generally Humphreys see Tp. v. McDonald, 98 Pa. St. 
 V. Mooney, 5 Colo. 282; Smith v. 444. 
 
447 DIRECTORS § 289 
 
 such cases there is reason for holding that the corporation is not 
 bound by the acts of the claimants of the office.^'' 
 
 § 289 (248). Holding over — Failure to elect. — Where officers 
 are elected for a designated term and the stockholders fail to elect 
 at the time fixed for the election, the officers will hold over, 
 unless the statute otherwise provides, and their official acts will 
 bind the corporation. ^^ A failure to elect officers at the time 
 prescribed does not work a dissolution, unless the statute ex- 
 pressly or impliedly makes such failure operate as a dissolution.*" 
 Where the stockholders refuse or neglect to elect officers and 
 corporate affairs are put in jeopardy by such failure, or the 
 rights of property are thereby prejudiced the court may, upon 
 the suit of a party who shows equity, and makes it appear that 
 his rights are in danger of being impaired or destroyed, appoint 
 a receiver to take charge of the affairs of the corporation.*" 
 
 § 290 (249) . Powers of directors — Source of. — The statute un- 
 der which a railroad company is organized is the source of power 
 and the stockholders cannot invest the persons chosen as di- 
 rectors with powers not conferred upon the corporation by the 
 
 STHildreth v. Mclntire, 1 J. J. not &c. Bank v. Studwell, 6 Daly 
 
 Marsh. (Ky.) 206, 19 Am. Dec. 61; (N. Y.) 13; Olcott v. Tioga &c. Co., 
 
 Conway v. St. Louis, 9 Mo. App. 27 N. Y. 546, 84 Am. Dec. 298; 
 
 488. See also Moses v. Tompkins, Currie v. Mutual &c. Co., 4 Hen. 
 
 84 Ala. 613, 4 So. 763. See also & M. (Va.) 315, 4 Am. Dec. 517. 
 
 Waterman v. Chicago &c. R. Co., 139 See also New York &c. R. Co. v. 
 
 111. 6S8, 29 N. E. 689, IS L. R. A. Motil, 81 Conn. 466, 71 Atl. 563; 
 
 418, 32 Am. St. 228; Genesee School Schmidt v. Pritchard, 135 Iowa 240, 
 
 Dist. V. McDonald, 98 Pa. St. 444. 112 N. W. 801; Penobscot &c. R. 
 
 See generally concerning effect of Co. v. Dunn, 39 Maine 587. 
 acts of de facto directors as to 39 Cahill v. Kalamazoo &c. Co., 2 
 
 stockholders and corporation and Dougl. (Mich.) 124, 43 Am. Dec. 
 
 concerning rights as between such 457; Kjiowlton v.- Ackley, 8 Cush. 
 
 directors and stockholders. 2 Thomp. (Mass.) 93; Philips v. Wickam, 1 
 
 Corp. (2d ed.), §§ 1117-1119. Paige (N. Y.) 590. 
 
 38 Thorington v. Gould, 59 Ala. *o Lawrence v. Greenwich &c. Co., 
 
 461; Cassell v. Lexington &c. Co., 1 Paige (N. Y.) 587; Ward v. Sea 
 
 (Ky.) 9 S. W. 701; South Bay &c. &c. Co., 7 Paige (N. Y.) 294, 
 Co. V. Gray, 30 Maine 547; Hugue- 
 
§291 
 
 RAILROADS 
 
 448 
 
 charter.'! -phe stockholders have authority to select the per- 
 sons to whom such powers are to be intrusted, but individual 
 stockholders do not stand in the relation of principals.*^ The 
 corporation, however, does occupy the position of a principal, for 
 the directors are its agents or representatives. 
 
 §.291 (250). Powers of directors — Generally. — ^As a general 
 
 rule, except so far as their action is controlled bv special provi- 
 sions of the charter, or of by-laws adopted under its authority, the 
 directors may do any act within the general range of the ordinary- 
 business of the company which the company itself ma^^ do.** As 
 elsewhere said, the board of directors is the governing depart- 
 ment of the corporation and it is through the board or those 
 acting under it, that ordinary corporate affairs are managed and 
 the usual corporate business transacted. The implied powers 
 of the directors generally have merely as wide a range as the 
 implied powers of the corporation itself. Comparatively few 
 powers are reserved to the stockholders of railroads in this coun- 
 try. The right to elect the directors, and to pass upon ques- 
 
 41 It is not necessary, however, 
 that all powers be expressly con- 
 ferred upon the corporation by the 
 charter, for many powers exist by 
 necessary implication. 
 
 42 Bank of Middlebury v. Rutland 
 &c. R. Co., 30 Vt. 159; Dayton &c. 
 R. Co. V. Hatch, 1 Disn. (Cin. Sup. 
 Ct.) 84; Wood Hydraulic &c. Co. v. 
 King, 45 Ga. 34; Chetlain v. Re- 
 public &c. Ins. Co., 86 111. 220; 
 Shaw V. Norfolk County R. Co., 16 
 Gray (Mass.) 407. 
 
 43 Bank of Middlebury v. Rutland 
 &c. R. Co., 30 Vt. 159; Wright v. 
 Oroville &c. Co., 40 Cal. 20. See 
 also Reichwald v. Commercial Ho- 
 tel Co., 106 111. 439; Phillip v. 
 Aurora Lodge, 87 Ind. 505 ; Eastern 
 R. Co. V. Boston &c. Co., Ill Mass. 
 125, 15 Am. Rep. 13; Beveridge v. 
 New York El. R. Co., 112 N. Y. 1, 
 
 19 N. E. 489; Heidrick v. Pitts- 
 burgh &c. R. Co., 239 Pa. 29, 86 
 Atl. 527. Where two railroads in 
 adjoining states are operated to- 
 gether, and additional land and de- 
 pot buildings are necessary in one 
 of the states to enable them to re- 
 tain their increased business, the di- 
 rectors of the railroad in the other 
 state have power to contract to pay 
 a proper portion of the cost of 
 these extended business facilities, 
 though, as a general rule, they have 
 no authority to expend money up- 
 on buildings outside the states in 
 which their road is located, without 
 the consent of the stockholders- 
 Nashua & L. R. Corp. V. Boston & - 
 L. R. Corp., 136 U. S. 356, 10 Sup. 
 Ct. 1004, 34 L. ed. 363, 42 Am. & 
 Eng. Cas. 688. 
 
449 DIRECTORS § 291 
 
 tions of leasing or selling the franchises and property, of increas- 
 ing or decreasing the capital stock, of consolidating with other 
 corporations,** and other matters of a fundamental or organic 
 nature do not, however, properly belong to the directors, for 
 those powers properly belong to the stockholders.*" The board 
 of directors is the proper agency to make ordinary corporate 
 contracts. Its power in this respect is very broad and compre- 
 hensive. The board, unless so required by statute, is not bound 
 to make all contracts itself, but may in most instances empower 
 officers or agents to make ordinary business contracts. Con- 
 tracts entered into by the board of directors will always be bind- 
 ing upon the company, where the contracts are within the scope 
 of the corporate powers, and are made in pursuance of some ob- 
 ject embraced by the charter.** The rule stated is a general 
 one of wide sweep, but, wide as the rule is, it is always to be 
 understood that the power to contract, its extent and limitations, 
 must be ascertained from the act of incorporation. The action 
 of the board of directors in making contracts cannot be con- 
 trolled even by a majority of the stockholders, where the power 
 to contract is conferred upon the board by the act of incorpo- 
 ration*'' and where they act in good faith ; that is, the action 
 
 4* See Dayton &c. R. Co. v. fairs and making changes of the na- 
 
 Hatch, 1 Disn. (Cin. Super. Ct.) ture of those mentioned. See 2 
 
 84. The stockholders and not Thomp. Corp. (2d ed.), §§1182, 
 
 the directors are the . proper 1187-1189. 
 
 parties to increase the capital stock 46 Hodder v. Kentucky &c. R. 
 
 where no provision is made as to Co., 7 Fed. 793; Dayton &c. R. Co., 
 
 how it is to be done. Wheeler, In v. Hatch, 1 Disn. (Cin. Sup. Ct.) 
 
 re, 2 Abb. Pr. N. S. (N. Y.) 361. 84; Protection L. Ins. Co. v. Foote, 
 
 Or to agree to an amendment of the 79 111. 361 ; Cicotte v. Anciaux, S3 
 
 charter. Witter v. Mississippi &c. Mich. 227; Union Mut. Ins. Co. v. 
 
 R. Co., 20 Ark. 463. Keyser, 32 N. H. 313, 64 Am. Dec. 
 
 *5 Organic or fundamental changes 375 ; Record v. Central Pac. Co., IS 
 
 in the corporate body, its organiza- Nev. 167; Bank of Middlebury v. 
 
 tion or object cannot be made by Rutland &c. R. Co., 30 Vt. 159 ; Facki- 
 
 the directors except where the char- ner v. Grand Junction R. Co., 4 
 
 ter authorizes the directors to make Ont. R. Ch. Div. 350. 
 such changes. There is an impor- 47 Wardell v. Union Pac. R. Co., 
 
 tant distinction between conducting 103 U. S. 651, 26 L. ed. 509; Flagg 
 
 and managing general corporate af- v. Manhattan R. Co., 20 Blatchf. 
 
 15 — Eix. Railroads I 
 
§ 292 RAILROADS 450 
 
 cannot be controlled directly. It may, however, often be con- 
 trolled indirectly by voting the directors out of office, in a legal 
 mode. Where the rights of third persons have intervened the 
 stockholders cannot annul the action of the directors, unless 
 they have violated the provisions of the charter or transcended 
 their authority ; and not always, even in such cases, for there 
 may be conduct or acts constituting an estoppel which will 
 preclude the stockholders from successfully assailing the ac- 
 tion of their representatives. The authority and discretion of 
 the directors, being intrusted to them by the effective agreement 
 of all the stockholders expressed in the charter or articles of 
 association, can be controlled by the majority or by any other 
 agent in comparatively very few cases.*® 
 
 §292 (251). Powers of directors — Illustrative cases. — Where 
 two railway corporations of different states whose lines connected 
 entered into an agreement to operate and manage their road as 
 one system, it was held that the directors of one company were 
 authorized without the previous approval of the stockholders 
 to pay for the construction of a passenger station in the state 
 foreign to that in which it was created, and into which its line 
 did not extend, where it appeared that the construction of the 
 passenger station was for the purpose of enabling the joint man- 
 
 (U. S.) 142, 10 FeQ. 413. Direc- Elkins v. Camden &c. R. Co., 36 N. 
 tors do not exceed their powers by J. Eq. 241 ; Karnes v. Rochester &c. 
 making an agreement, with appar- R. Co., 4 Abb. Pr. N. S. (N. Y.) 
 ently good reasons and in good 107; Sims v. Street R. Co., 37 Ohio 
 faith, to reduce the amount of St. SS6. But if they act in mat- 
 money payable under a lease of ters where their private interests are 
 their corporation, especially if near- concerned any stockholders may have 
 ly nine-tenths of the stockholders their action set aside. Hedges v. 
 have acquiesced. Beveridge v. New Paquett, 3 Ore. IT. A tripartite 
 York El. R. Co., 112 N. Y. 1, 19 N. agreement between three corpora- 
 E. 489, 2 L. R. A. 648. tions having been adjudged void as 
 48 Oglesby v. Attrill, lOS U. S. to one, the directors of the other 
 60S, 26 L. ed. 1186; Banet v. Alton companies may, in their honest dis- 
 &c. R. Co., 13 111. 504; Bardstown cretion, bring action to sever the 
 &c. Tpk. Co. v. Rodman (Ky.), 13 contractual relations. Beveridge v. 
 S. W. 917; Belfast &c. R. Co. v. New York Elevated R. Co., 112 N. 
 Belfast, n Maine 445, 1 Atl. 350; Y. 1, 19 N. E. 489, 2 L. R. A. 648. 
 
451 
 
 DIRECTORS 
 
 §292 
 
 agement to retain and extend its increasing business.*^ Direc- 
 tors usually have power to fix and provide for the payment of 
 the salaries of the officers of the company.^" So, it has been held 
 that they have power to pay part of the corporate indebtedness 
 in stock of the company,^! and authority to compensate one of 
 their number for services rendered the company not within the 
 line of his duties as director,^^ and to issue bonds to pay debts 
 contracted for constructing and completing the road and to 
 mortgage the corporate property to secure the payment of the 
 same.'''^ The directors of a railroad company have no author- 
 ity, implied or general, to appropriate its bonds to aid in the 
 construction of the line of another corporation. s* Nor have they 
 power to postpone the time of an annual election of officers, so 
 as to continue themselves in office. ^^ Directors have power to 
 borrow money to conduct the business of the corporation, and 
 ordinarily, they may pledge its personal property or mortgage 
 its real estate to secure money borrowed for corporate pur- 
 poses.^® They have power, except where the law otherwise 
 
 49 Nashua &c. Co. v. Boston &c. 
 Co., 136 U. S. 356, 10 Sup. Ct. 1004, 
 34 L. ed. 363. 
 
 50 St. Louis &c. Co. V. Tierman, 
 37 Kans. 606, IS Pac. 544, 40 Am. 
 & Eng. R. Cas. 525; Falkiner v. 
 Grand Junction &c. Co., 4 Ont. R. 
 Ch. Div. 350, 16 Am. & Eng. R. Cas. 
 591. See also 8 Thomp. Corp. 
 § 1182. 
 
 51 County Court v. Baltimore &c. 
 Co., 35 Fed. 161. 
 
 52 Ten Eyck v. Pontiac &c. Co., 
 74 Mich. 226, 41 N. W. 905, 3 L. R. 
 A. 378, 16 Am. St. 633, 37 Am. & 
 Eng. R. Cas. 273. 
 
 53 McLane v. Placerville &c. Co., 
 66 Cal. 606, 6 Pac. 748, 26 Am. & 
 Eng. R. Cas. 404. See also 2 
 Thomp. Corp. (2d ed.), §1189. But 
 as elsewhere shown, there are limita- 
 tions upon the right of a railroad 
 company to mortgage or contract so 
 
 as to prevent it from performing 
 its public duties. 
 
 54 Starbuck v Mercantile Trust 
 Co., 9 Ry. & Corp. L. J. 203. See 
 also Western Md. R. Co. v. Blue 
 Ridge Hotel Co., 102 Md. 307, 62 
 Atl. 351, 3 L. R. A. (N. S.) 887. 
 
 55 Elkins V. Camden &c. R. Co., 36 
 N. J. Eq. 467. 
 
 56 Ridgeway v. Farmers Bank, 12 
 Serg. & R. (Pa.) 256, 14 Am. Dec 
 681 ; Taylor v. Agricultural &c. Co., 
 68 Ala. 229; Hopson v. Aetna &c. 
 Co., 50 Conn. 597; Wood v. Wheel- 
 an, 93 111. 153; Hendee v. Pinkerton, 
 14 Allen (Mass.) 381; Tupp v. 
 Swanzey &c. Co., 20 Mass. 291, 15 
 Am. Dec. 209; Burrell v. Nahant 
 Bank, 43 Mass. 163, 35 Am. Dec. 
 395; Saltmarsh v. Spaulding, 147 
 Mass. 224, 17 N. E. 316; Davis v. 
 Flagstaflf &c. Co., 2 Utah 74. See 
 generally Flagg v. Manhattan &c. 
 
§292 
 
 RAILROADS 
 
 452 
 
 provides, to make contracts for the transportation of property,^'' 
 and, as it has been held, to make a contract with another com- 
 pany to divide the earnings of the two companies. ^^ It has been 
 held that directors have no authority to organize a second com- 
 pany in another state and impose the expense upon the home 
 company.^® It has been adjudged that where the directors and 
 shareholders are not identical, the directors have no authority 
 to bind the corporation by an agreement with a designated per- 
 son that he shall be a director.^^ Unless authority is granted by 
 the act of incorporation a board of directors has no power to in- 
 vest corporate funds in the stock of other corporations.^^ There 
 are exceptions to this general rule, but they are very rare. 
 Stock of other corporations may be acquired as a security for. 
 
 Co., 10 Fed. 413; Chamberlain v. 
 Bromberg, 83 Ala. 576, 3 So. 434; 
 Union Bank v. Ellicott, 6 G. & J. 
 (Md.) 363; Descombes v. Wood, 
 91 Mo. 196, 60 Am. Rep. 239; Mc- 
 Cullough V. Moss, S Denio (N. Y.) 
 567, 575; Hoyt v. Thompson, 19 N. 
 Y. 207, 216; Duncomb v. New York 
 &c. Co., 88 N. Y. 1; Sheldon &c. 
 Co., V. Eickemeyer &c. Co., 90 N. 
 Y. 607; West of England Bank, In 
 re, L. R. 14 Ch. Div. 317; Bank of 
 South Australia v. Abrahams, L. 
 R. 6 P. C. 265; Sheffield, &c. Co. v. 
 Unwin, L. ,R. 2 Q. B. Div. 214. 
 
 57 Railroad Co. v. Furnace Co., il 
 Ohio St. 434. 
 
 58 Elkins V. Camden &c. R. Co., 36 
 N. J. Eq. 241. 
 
 59 Eakins v. American White 
 Bronze Co., 75 Mich. 568, 42 N. W. 
 982. 
 
 60 Seymour v. Detroit tolling 
 Mills, 56 Mich. 117, 22 N. W. 317, 23 
 N. W. 186. 
 
 61 Joint Stock &c. Co. v. Brown, 
 Law 8 Eq. Cases 381 ; Sumner v. 
 Marcy, 3 Woodb. & M. (U. S.) 105, 
 
 Fed. Cas. No. 13609; Mackintosh v. 
 Flint &c. R. Co., 34 Fed. 582; 
 Easun v.' Buckeye &c. Co., 51 Fed. 
 156; Memphis &c. R. Co. v. Woods, 
 88 Ala. 630, 7 So. 122, 16 Am. St. 
 81 ; Commercial &c. Co. v. Board 
 &c., 99 Ala. 1, 14 So. 490, 42 Am. 
 St. 1 ; Mechanics &c. Assn. v. Meri- 
 den &c. Co., 24 Conn. 159; Central R. 
 Co. V. Collins, 40 Ga. 582; Hazle- 
 hurst V. Savannah &c. R. Co., 43 
 Ga. 13, 58; People v. Chicago &c. 
 Co., 130 111. 268, 22 N. E. 798, 17 
 Am. St. 319; Franklin &c. Co. v. 
 Lewiston &c., 68 Maine 43, 28 Am. 
 Rep. 9 ; Bank v. Hart, 37 Nebr. 197, 
 55 N. W. 631, 40 Am. St. 479; Pear- 
 son V. Concord R. Co., 62 N. H. 537, 
 13 Am. St. 590; Central R. Co. v. 
 Pennsylvania R. Co., 31 N. J Eq. 
 475; Valley &c. Co. v. Lake Erie &c. 
 Co., 46 Ohio St. 44, 18 N. E. 486; 
 Denny &c. Co. v. Schram, 6 Wash. 
 134, 32 Pac. 1002, 36 Am. St. 130. 
 See also Williams v. Johnson, 208 
 Mass. 544, 95 ^f. E. 90; State v. 
 Atlantic City &c. R. Co., 11 N. J. L. 
 465, 72 Atl. 111. 
 
453 
 
 DIRECTORS 
 
 §293 
 
 or in payment of, a debt; for a railway company, unless its 
 charter otherwise provides, is entitled to secure payment of 
 claims owing to it, in the same manner as may be done by other 
 business corporations, or by natural persons.^^ The directors 
 of a corporation invested with authority to dispose of corporate 
 funds may, as it has been held, accept stock of other corporations 
 in payment,^* but we regard the doctrine asserted by the cases 
 referred to as one to be very cautiously received and very care- 
 fully applied. Where the statute authorizes the consolidation 
 of railway corporations, and the purchase of the stock of the one 
 company by the other, and a consolidation is rightfully effected, 
 the purchase of stock may be made by the board.^* 
 
 §293 (252). Directors — Powers of — Organic changes. — Di- 
 rectors have no general authority to make any fundamental 
 changes in the purposes and objects of the corporation,^^ nor to 
 accept an amendment to the charter making such changes,^^ un- 
 
 62 Memphis &c. R. Co. v. Woods, 
 88 Ala. 630, 7 So. 122, 16 Am. St. 81. 
 See generally National Bank v. 
 Case, 99 U. S. 628, 25 L. ed. 448; 
 County Court &c. v. Baltimore &c. 
 R. Co., 35 Fed. 161; Holmes &c. 
 Co. V. Holmes &c. Co., 127 N. Y. 
 252, 27 N. E. 831, 24 Am. St. 448, 8 
 Thomp. Corp. §§4063, 4064. 
 
 63 Tread well v. Salisbury &c. Co., 
 7 Gray (Mass.) 393, 66 Am. Dec. 
 490; Hodges v. New England &c. 
 Co., 1 R. I. 312, 53 Am. Dec. 624. 
 
 64 Atchison &c. R. Co. v. Fletcher, 
 35 Kans. 236, 10 Pac. 596; Ryan v. 
 Leavenworth &c. Co., 21 Kans. 365; 
 Atchison &c. R. Co. v. Cockran, 43 
 Kans. 225, 23 Pac. 151, 7 L. R. A. 414, 
 19 Am. St. 129; Hill v. Nisbet, 100 
 Ind. 341; State v. Atchison &c. R. 
 Co., 24 Nebr. 143, 38 N. W. 43, 8 
 Am. St. 164. 
 
 65 Witter V. Mississippi &c. R. 
 Co., 20 Ark. 463 ; Railway Co. v. Al- 
 lerton, 18 Wall. (U. S.) 233, 21 L. 
 
 ed. 902; Venner v. Atchison '&c. 
 Co., 28 Fed. 581; Mississippi &c. R. 
 Co. V. Caster, 24 Ark. 96; Marl- 
 borough &c. Co. V. Smith, 2 Conn. 
 579; Fry v. Lexington &c. R. Co., 2 
 Mete. (Ky.) 314; Durfee v. Old Col- 
 ony R. Co., 4 Allen (Mass.) 230; 
 Joy V. Jackson .&c. Plank Road Co., 
 11 Mich. 155; Hope &c. Co. v. Beck- 
 mann, 47 Mo. 93; Atlantic &c. R. 
 Co. V. St. Louis, 66 Mo. 228; Black 
 V. Delaware & R. Canal Co., 22 N. 
 J. Eq. 130; Elkins v. Camden &c. R. 
 Co., 36 N. J. Eq. 233; Blatchford v. 
 Ross, 5 Abb. Pr. R. N. S. (N. Y.) 
 434; Goodin v Evans, 18 Ohio St. 
 ISO; Commonwealth v. CuUen, 13 
 Pa. St. 133,. 53 Am. Dec. 450; Ba- 
 ker's Appeal, 109 Pa. St 461; Era 
 &c. Co., In re, 30 L. J. Eq. 137; 
 Starbuck v. Mercantile Trust Co., 9 
 Corp. & Ry. L. J. 203; 2 Thomp. 
 Corp. (2d ed.), §1187. 
 
 66 Mobile &c. Co. v. Steiner, 61 
 Ala. 559; Mississippi &c. R. Co. v. 
 
§293 
 
 RAILROADS 
 
 454 
 
 less, perhaps, where such power is clearly lodged in them by the 
 charter."*^ It has, however, been held that the power to accept 
 amendments is lodged with the directors when it is given in 
 general terms to the corporation, and the directors are intrusted 
 with all of the corporate powers.^^ But we suppose that the 
 doctrine of the case referred to can only apply where the stat- 
 ute impliedly or expressly vests the board with power to accept 
 amendments, for that power properly resides in the stockhold- 
 ers. When the amendment is immaterial and does not work a 
 fundamental change impairing the rights of the stockholders, 
 or, possibly, where the legislature has reserved the right to 
 amend, the directors may act upon the amendment.^* If the 
 legislature has reserved the power to amend, then an immate- 
 
 Gaster, 24 Ark. 96; Marlborough 
 &c. Co. V. Smith, 2 Conn. 579 ; State 
 V. Oftedal, 72 Minn. 498, 75 N W. 
 692 ; Hope &c. Co. v. Beckmann, 47 
 Mo. 93 ; Commonwealth v. CuUen, 
 13 Pa. St. 1333, 53 Am. Dec. 450; 
 Baker's Appeal, 109 Pa. St. 461; 
 Brown v. Fairmount &c. Co., 10 
 Phila. (Pa.) 32. 
 
 6T In Dayton &c. R. Co. v. Hatch, 
 1 Disn. (Cin. Super. Ct.) 84 the 
 court said : "That both the special 
 charter of the plaintiff and the gen- 
 eral railroad law contemplated that 
 all corporate acts, including an as- 
 sent to such an amendment as the 
 one authorized, should be done by 
 the board of directors, appears to 
 be clear." In the note which fol- 
 lows we have ventured to question 
 the soundness of the decision in the 
 case here cited. Our judgment is 
 that amendments which are funda- 
 mental in their nature must be ac- 
 cepted by all the stockholders ex- 
 cept in cases where the statute ex- 
 pressly vests the whole corporate 
 power in the directors or provides 
 
 that amendments may be accepted 
 by them. Venner v. Atchison &c. 
 Co., 28 Fed. 581; Sprigg v. West- 
 ern Tel. Co., 46 Md. 67; Buffalo &c. 
 R. Co. V. Dudley, 14 N. Y. 336; 
 Kenosha &c. R. Co. v. Marsh, 17 
 Wis. 13. 
 
 68 Dayton &c. R. Co. v. Hatch, 1 
 Disn. (Cin Super. Ct.) 84 We 
 think that the doctrine of the case 
 cited is broader than principle or 
 authority will justify; at all events, 
 some of the expressions in the opin- 
 ion require qualification and limita- 
 tion. The doctrine laid down in 
 Railway Co. v. Allerton, 18 Wall. 
 (U. S.) 233, 21 L. ed. 902, is the 
 true one in our judgment. 
 
 69 New Haven &c. R. Co. v. Chap- 
 man, 38 Conn. 56; Pacific R. Co. v. 
 Hughes, 22 Mo. 291; Delaware &c 
 R. Co. V. Irick, 23 N. J. L. 321 
 Bailey v. Holister, 26 N. Y. 112 
 Bedford R. Co. v. Bowser, 48 Pa. 
 St. 29. See also Eastern R. Co. v 
 Boston &c. R. Co., Ill Mass. 125, 15 
 Am. Rep. 13. 
 
455 DIRECTORS § 293 
 
 rial amendment cannot be justly said to impair the rights of 
 stockholders, but it would be otherwise if the amendment were 
 a material one and power to amend were not reserved.'''*' Di- 
 rectors, although intrusted with extensive powers in the man- 
 agement of the corporation business, have, ordinarily, no au- 
 thority to apply to the legislature for an enlargement of the cor- 
 porate powers nor to accept a grant of such powers made upon 
 their application. ''i Directors cannot, in the absence of any 
 provisions of the charter giving them power, increase the capi- 
 tal stock/^ since this is a change of a fundamental character, 
 which, by introducing additional votes into the corporate body, 
 would change the relative influence, control and profit of each 
 member, and have the effect of making the stockholders mem- 
 bers of a company in which they never consented to become 
 members. Nor can they dispose of the company's property 
 which is necessary to the transaction of its business, and wind 
 up its affairs without special authority from the stockholders.''^ 
 The rule just stated as to the disposition of property is a gen- 
 eral one, but is not without exceptions. There may be cases, 
 as for instance, where it is necessary to preserve corporate prop- 
 erty and interests by an assignment, in which the directors may _ 
 dispose of corporate property. The general rule is that the 
 authority conferred upon the directors is granted them in order 
 that they may carry forward the purposes for which the cor- 
 
 ■?o See ante, § 56. 72 Eidman v. Bowman, 58 111. 444, 
 
 71 Marlborough Mfg. Co. v. 11 Am. Rep. 90; Wheeler, In re, 
 
 Smith, 2 Conn. 579. Any such ac- 2 Abb. Pr. N; S. (N. Y.) 361. See 
 
 tion on their part would not bind Durfee v. Old Colony R. Co., 5 
 
 the stockholders. Snook v. Georgia Allen (Mass.) 230; Atlantic &c. R. 
 
 Imp. Co., 83 Ga. 61, 9 S. E. 1104. Co. v. St. Louis, 66 Mo. 228. 
 
 See to the effect that the directors 73 RoUins v. Clay, 33 Maine 132; 
 
 cannot bind the stockholders by Abbot v. American &c. Co., 33 Barb, 
 
 their acceptance of an amendment (N. Y.) 578. See also Elyton Land 
 
 to the charter, where the legisla- Co. v. Dowdell, 113 Ala. 177, 20 So. 
 
 ture had not reserved the power to 981, 59 Am. St. 105; People v. Bal- 
 
 amend. Witter v. Mississippi &c lard, 134 N. Y. 269, 32 N.. E. 54, 17 
 
 R. Co., 20 Ark. 463; Commonwealth L. R. A. 737; 2 Thomp. Corp. 
 
 V. Cullen, 13 Pa. St. 133, 53 Am. (2d ed.) § 1189. 
 Dec. 450 See ante, §56. 
 
§294 
 
 RAILROADS 
 
 456 
 
 poration was organized, and not that they may terminate its 
 existence.^* Where no special authority''^ to do so is contained 
 in the charter, the directors of a railroad company cannot exe- 
 cute a lease of the company's property without being directed 
 by a regularly called meeting of the stockholders to do so.'"' 
 
 § 294 (253). Directors — Extent of authority — Genexally. — The 
 authority of the board of directors extends to contracting debts 
 in pursuance of the business and purposes of the corporation and 
 pledging or conveying real or personal property in payment 
 or as security J'^ It is held that the board may make an assign- 
 ment of the property of the corporation for the benefit of its 
 creditors, in a proper case, without the express authority or 
 consent of the stockholder,''^ if jt .^cts in good faith. The direc- 
 tors can, of course, only bind the corporation, as a rule as to cor- 
 porate matters and by acts within the scope of the powers con- 
 ferred upon the company .''* 
 
 ■74 Bank Corars. v. Bank of Brest, 
 1 Harr. Ch. (Mich.) 106. 
 
 ''s Under this general doctrine it 
 . is held that authority to manage 
 the business does not include power 
 to lease the road. Metropolitan El. 
 R. Co. V. Manhattan El. R. Co., 11 
 Daly (N. Y.) 373, where it is held 
 that the directors could not lease the 
 road, although the corporation was 
 specially empowered to do so. 
 
 T6 Martin v. Continental Pass. R. 
 Co., 14 Phila. (Pa.) 10, holding this 
 to be true where the directors hold 
 a. majority of the stock. But where 
 the directors owned all the stock, 
 it was said that there was no one 
 in a situation to complain. Barr v. 
 New York &c. R. Co., 96 N. Y. 444. 
 As elsewhere shown, a railroad 
 company itself does not always 
 have this power even if stockholders 
 attempt to authorize it. See post, 
 § 429, et seq. 
 
 77 Miller v. Rutland &c. R. Co., 36 
 Vt. 4S2; Despatch Line v. Bellamy 
 Mfg. Co., 12 N. H. 205, 37 Am. Dec. 
 203. Unless specially prohibited 
 the directors may mortgage the cor- 
 porate property to secure a debt 
 which they may create. County 
 Court of Taylor Co. v. Baltimore, 
 &c. R. Co., 35 Fed. 161; Reichwald 
 V. Commercial Hotel Co., 106 111. 439; 
 Ellis V. Boston &c. R. Co., 107 Mass. 
 1; 2 Thomp. Corp. (2d ed.), §1190. 
 
 TSDeCarap v. Alward, 52 Ind. 
 468 ; Dana v. Bank of U. S., 5 Watts 
 & S. (Pa.) 223; 2 Thomp. Corp. 
 (2d ed.), §1191. Of course it 
 could only do so where the corpora- 
 tion itself is not prohibited from 
 making such an assignment. Dana 
 V. Bank of U. S., 5 Watts & S. 
 (Pa.) 223. 
 
 79 Ricord v. Central Pac. R, Co., 
 15 Nev. 167. 
 
457 DIRECTORS § 295 
 
 § 295 (254). Powers of directors — General conclusion. — It may 
 
 be safely affirmed that the general rule is that all the ordinary 
 affairs and business of a railroad company are under the con- 
 trol and management of the board of directors and that in con- 
 ducting that business and managing those affairs the board of 
 directors is in effect the corporation, but is not the corporation 
 so far as concerns matters beyond the ordinary corporate busi- 
 ness and affairs. The difficulty is in determining what shall be 
 considered as the ordinary affairs and business of the corpora- 
 tion, or of the nature of the corporate business or objects, is 
 referred, that a change of the scheme of the corporate organiza- 
 tion, or of the nature of the corporate business or objects, is 
 not within the meaning of the cases which hold that the ordi- 
 nary affairs and business of the corporation are to be managed 
 and controlled by the board of directors. The shareholders can- 
 not manage or control the ordinary corporate affairs, for the 
 power over those affairs being vested in the board of directors 
 necessarily excludes the shareholders. But the shareholders, 
 although excluded from the management and control of ordi- 
 nary corporate matters, do control all matters of a fundamental 
 or organic nature. 
 
 §296 (255). Directors — Official action — Preliminary. — In dis- 
 charging the duties and exercising the functions imposed by law 
 upon the directors as the governing officers of the corporation 
 they should act as a body, duly convened in session as an official 
 board. What may be called governmental powers cannot be 
 delegated, and powers that cannot be delegated must be exer- 
 cised by the board of directors acting as a body. Individual 
 and separate action is not official action. These governmental 
 powers are in their nature legislative or judicial and require 
 for their proper and rightful exercise deliberation and discus- 
 sion. It is necessary, therefore, that such powers should be 
 exercised by the board of directors so that there may be a com- 
 
 80 Hoyt V. Thompson, 19 N. Y. 651. The first of these cases goes 
 207, 217; Bathe v. Decatur &c. Co., too far. 
 12, Iowa 11, 34 N. W. 484, S Am. St. 
 
§ 297 RAILROADS 4581 
 
 parison of views and an exercise of judgment and discretion 
 by all the members of the board. 
 
 § 297 (256). Directors — Of&cial action. — Directors should act 
 together as a board, and, upon principle, action by them sepa- 
 rately is not valid or effective. A corporate act required to be 
 performed by the directors is not effectively performed unless 
 the directors convene as a body in obedience to the requirements 
 of the charter or in accordance with the provisions of a by-law 
 enacted under authority conferred by the charter or act of in- 
 corporation. Separate action of a majority of the directors is 
 not the action of the board of directors. The members of the 
 board, when acting together, are the authorized governing of- 
 ficers of the company, but the members acting separately are 
 not. 81 The rule just stated applies, although a majority of the 
 directors may separately assent to a given measure or control.*^ 
 
 §298 (257). Directors — Delegation of authority. — The direct- 
 ors cannot rightfully delegate to other corporate officers or agents 
 powers which the law requires thern to exercise themselves as a 
 board. 8^ But the strictness of this rule has been greatly re- 
 
 siFilon V. Millei- &c. Co., IS N. Co., 26 Mo. 102; Readrich v. Wil- 
 
 Y. S. 57; Kansas City &c. Co. v. son, 8 Baxt. (Tenn.) 108; Rob- 
 
 Devol, 72 Fed. 917; Tennessee &c. arts v. Button, 14 Vt. 195. 
 
 R. Co. V. East Alabama R. Co., 75 82 Butler v. Cornwall &c Co., 2Z 
 
 Ala. 426; Gashwiler v. Willis, 33 Conn. 335; Cannon River &c. Co. 
 
 Cal. 11, 91 Am. Dec. 607; Bank of v. Rogers, 51 Minn. 388, 53 N. W. 
 
 Healdsburg v. Bailhache, 65 Cal. 759; D'Arcy v. Tamar &c. Co., 4 
 
 327, 4 Pac. 106; Harris v. Mus- Hurls. & Colt. 463; Bosanquet v. 
 
 kingum &c. Co., 4 Blackf. (Ind.) Shortridge, 4 Exch. 699. See also. 
 
 267, 29 Am. Dec. 372; AUemong v. (to the effect that this is the rule,, 
 
 Simmons, 124 Ind. 199, 23 N. E. but that stockholders may waive it), 
 
 768 ; Kupf er v. South Parish, 12 Merchants' &c. Bank v. Harris Lum- 
 
 Mass. 185; Tileston v. Newell, 13 ber Co., 103 Ark. 283, 146 S. W. 
 
 Mass. 406; New Haven &c. Co. v. 508, Ann. Cas. 1914B, 715, and 
 
 Hayden, 107 Mass. 525 ; Lockwood other cases cited in note, 
 
 v. Thunder &c. Co., 42 Mich. 536, S3 There is conflict in the ad- 
 
 4 N. W. 292; Browning v. Hinkle, judged cases as to what powers are 
 
 48 Minn. 544, 51 N. W. 60S, 31 Am. incapable of delegation, and some 
 
 St. 691; Barcus v. Hannibal &c. of the cases go very far in restrict- 
 
459 DIRECTORS § 298 
 
 laxed in modern limes and, where the charter or statute is not 
 clearly prohibitive, it is generally held that they may delegate 
 to a committee, or, perhaps, to other subordinate agents mat- 
 ters that may involve the exercise of judgments and discretion 
 as well as ordinary routine duties. ^^°' The directors may ap- 
 point agents to perform duties of a ministerial and executive 
 ■character, but it does not follow from this that they can en- 
 trust to others the duties imposed upon them as such by law. 
 There is an essential diflference between appointing agents to 
 perform duties not required of the board of directors, and as- 
 suming to delegate to others, authority vested in the directors 
 as the governing board of the corporation. In many instances 
 •duties may be delegated to other agents or officers, but duties 
 of a judicial or legislative nature which the law requires the 
 ■directors to perform as a body, cannot be delegated. There are, 
 no doubt, duties that may be performed through the medium 
 ■of committees. The board may appoint a committee of its num- 
 ber to discharge certain duties, such as auditing the accounts 
 of the financial officers, or arranging the terms of a lease or 
 mortgage, but it has been held that the acts of the committee 
 must be passed upon, or in some method adopted or ratified, by 
 the board to make them binding on the corporation.^* In other 
 words, it is held in a number of the cases that the action of the 
 committee must in some appropriate mode be made that of the 
 Iboard of directors, either by preqedent authority or subsequent 
 ratification.^^ Some cases hold that ministerial or executive 
 
 ing the right to delegate, while also Jones v. Williams, 139 Mo. 1, 
 
 others go to the extreme in the 39 S. W. 486, 40 S. W. 353, 37 L. 
 
 other direction. Against authority R. A. 682, 61 Am. St. 436; 2 Thomp. 
 
 ±0 delegate, see Weidenfeld v. Sugar Corp. (2d ed.), §1200. 
 
 R. Co., 48 Fed. 615; Pike v. Ban- 83a g Thomp. Corp. §§1202, 1207, 
 
 gor &c. R. Co., 68 Maine 44S. Up- 1211. 
 
 holding delegation to executive 84 Waite v. Winham Co. Mining 
 
 committee, see Union Pac. R. Co. v. Co., 36 Vt. 18. 
 
 Chicago &c. R. Co., 163 U. S. 564, 85 Berks &c. Road v. Myers, 6 
 
 .597, 16 Sup. Ct. 1173, 41 L. ed. 265; Sergt. & R. (Pa.) 12, 9 Am. Dec. 
 
 Hoyt V. Thompson, 19 N. Y. 207; 402; Union &c. Co. v. Chicago &c. 
 
 Black River Imp. Co. v. Holway, Co., 51 Fed. 309; Tippets v. Wal- 
 
 SS Wis. 344, 55 N. W. 418. See ker, 4 Mass. 595; Sheridan Electric 
 
§298 
 
 KAir.RCMDS 
 
 460 
 
 acts, the performance of which may be delegated, may be au- 
 thorized or ratified by the assent of a majority of the board 
 given separately, especially, if that has been the usage. ^* And 
 it is also held that the concurrent action of a majority of the 
 directors is sufficient in such a case,^'' without the formality of 
 a meeting, but it is held that the action should, in such case, be 
 taken by them as directors, and not in some other capacity, and 
 that it should clearly appear that a majority of the board con- 
 
 Light Co. V. Chatham &c. Bank, 127 
 N. Y. 517, 28 N. E. 467. Power to 
 appoint a committee and to invest 
 them with authority to contract 
 may be conferred upon the board of 
 directors by the act of incorpora- 
 tion. In Chicago v. Union &c. Co., 
 47 Fed. 15, 17, the court said : "Sum- 
 ming up this question, the instru- 
 ment was signed and attested by the 
 proper officers. It was aproved by 
 the executive committee, which excu- 
 tive committee was granted ad 
 interim by the board of directors 
 all the power of that board ; au- 
 thority to make such delegation of 
 power was given to the board by the 
 by-laws. Power to make such by- 
 laws was bestowed by the act of in- 
 corporation upon the stockholders. 
 At the regular meeting the contract 
 was approved by all the stockhold- 
 ers present. Under these circum- 
 stances if the contract was one 
 which the corporation could make 
 it was fully authorized and duly 
 executed and binding." 
 
 86 Bee V. San Francisco &c. R. 
 Co., 46 Cal. 248; Estes v. German 
 Nat. Bank, 62 Ark. 7, 34 S. W. 85; 
 Foot V. Rutland &c. R. Co., 32 Vt. 
 633. See Rogers v. Hastings, 22 
 Minn. 25, where the corporation was 
 held liable to compensate an agent 
 employed by the directors without 
 
 formal action by the board. See 
 also Tenney v. East Warren Lum- 
 ber Co., 43 N. H. 343, where it was 
 held sufficient proof of the concur- 
 rence of. the board to show that they 
 assented separately. 
 
 87 Despatch Line &c. v. Bellamy 
 Mfg. Co., 12 N. H. 205, 37 Am. Dec. 
 203; Edgerly v. Emerson, 23 N. H. 
 SSS, SS Am. Dec. 207; Ross v. Croc- 
 kett, 14 La. Ann. 811 ; Yellow Jacket 
 Min. Co. V. Stevenson, 5 Nev. 224; 
 Dey V. Jersey City, 19 N. J. Eq. 412 ; 
 Stoystown &c. Tpk. Co. v. Craver, 
 45 Pa. St. 386. See Lyndeborough 
 Glass Co. V. Massachusetts Qass 
 Co., Ill Mass. 315, where the sup- 
 erintendent acted with the knowl- 
 edge of all the directors except one 
 in making a purchase, and that one 
 learned of the superintendent's act 
 soon afterward, but no action re- 
 pudiating the purchase was ever tak- 
 en. In a suit to recover the pur- 
 chase price the court held that the 
 purchase was authorized by the com- 
 pany. Directors holding a majority 
 of the stock have power to agree 
 that an individual may have the full 
 amount that he can collect of a 
 claim against a third person. Del- 
 aware City &c. Nav. Co. v. Rey- 
 bold, 8 Houst. (Del.) 203, 14 Atl. 
 847; 
 
461 DIRECTORS § 299 
 
 sented.*® It is to be said that some of the cases trench upon 
 the rule forbidding the delegation of authority as well as upon 
 the- rule requiring the directors to act as a board, and so far as 
 they do run counter to these rules they are of doubtful sound- 
 ness. 
 
 §299 (258). Directors — Delegation of authority— Illustrative 
 cases. — It is generally held that the directors cannot delegate the 
 authority to make assessments, but it is also held that they may 
 ratify an assessment made without adequate authority by an 
 agent. ^^ Some of the cases hold that the power to execute 
 mortgages and leases of corporate property cannot be delegated, 
 but on this point the authorities are in conflict.®" Our opinion 
 is that as to property not required to enable the corporation to 
 exercise its corporate functions and discharge its duties to the 
 public, the board of directors has power to delegate the author- 
 ity to sell or lease. The board of directors may effectively au- 
 thorize corporate officers or agents to sell and assign notes, 
 bonds or other securities, belonging to the corporation.®^ 
 
 § 300 (259). Directors — Action where the mode is prescribed. 
 
 — If the statute prescribes the formalities to be observed by the 
 directors in doing a given act, they must comply therewith, or 
 their act may be voidable. ^^ This rule applies to cases where ob- 
 
 88 Junction R. Co. v. Reeve, IS States, 5 Watts & S. (Pa.) 233; 
 Ind. 236. Leeds &c. Co., Re, 1 L. R. Ch. App. 
 
 89 Ante, § 200. Winsor, Ex parte, S61. 
 
 3 Stoiry (U. S.) 411, Fed. Cas. No. siPleckner v. Bank of United 
 
 17884; Silver Hook Road v. Greene, States, 8 Wheat. (U. S.) 383, 5 L. 
 
 12 R. I. 164. - ed. 631 ; Stevens v. Hill, 29 Maine 
 
 90 Female &c. Asylum v. Johnson, 133 ; Northampton Bank v. Pepoon, 
 43 Maine 180; Emerson v. Provi- 11 Mass. 288; Ridgway v. Farmers' 
 dence &c. Co., 12 Mass. 237, 7 Am. Bank, 12 Serg. & R. (Pa.) 256, 14 
 Dec. 66 ; Burrill v. Nahant Bank, 2 Am. Dec. 681 ; 2 Thomp. Corp. (2nd. 
 Mete. (Mass.) 163, 3S Am. Dec. ed.), §1201. 
 
 395; Gillis v. Bailey, 21 N. H. 149; 92 Leominster Canal Co. v. 
 
 Manchester &c. R. Co. v. Fisk, 33 Shrewsbury &c. R. Co., 3 K. & J. 
 
 N. H. 297; Lyon v. Jerome, 26 654; Leavenworth R. Co. v. County 
 
 Wend. (N. Y.) 485, 37 Am. Dec. Court, 42 Mo. 171; Pittsburgh &c. 
 
 271; Whitney v. Union &c. Co., 65 R. Co. v. Clarke, 29 Pa. St. 146. 
 N. Y. 576; Dana v. Bank of United 
 
§ 30O RAILROADS 462 
 
 servance of the formalities is expressly declared by statute to 
 be a necessary condition precedent,^^ and to all cases in which 
 the effect of the act will be to destroy pre-existing rights,** or 
 to impose burdens upon persons whose willingness to assume 
 them depends on their assent to such formalities.*^ In such 
 cases, all persons are bound at their peril to know whether the 
 formalities have been observed or not. But with regard to for- 
 malities which are merely directory, a different rule is estab- 
 lished. A substantial compliance in such a case is sufficient, 
 and where the material formalities have been observed, a fail- 
 ure to comply with those which are not material will not invali- 
 date the acts, at least as to innocent parties."' The failure to 
 observe a formality cannot be set up by one who is bound to see 
 to its observance, against those who have no knowledge of such 
 failure,*'' unless they bore such a relation to the company that 
 they knew or were bound to know that such formality was nec- 
 essary and had the means of ascertaining whether it had been 
 observed.** If the directors have general authority to do an 
 act, all persons dealing with them in reference to such act may 
 assume that it was regularly done, and that all necessary for- 
 malities were observed,** unless something appears on the face 
 
 93 Leominster Canal Co. v. ed. 628 ; Leavenworth R. Co. v. 
 Shrewsbury &c. R. Co., 3 K. & J. County Court, 42 Mo. 171. 
 
 ^S4 ; Homersham v. Wolverhampton 96 Town of Venice v. Murdock, 92 
 
 Water Works, 6 Exch. 137. U. S. 494, 23 L. ed. 583; Lane v. 
 
 94 As where shares are forfeited Schomp, 20 N. J. Eq. 82; Mott v. 
 for non-payment. Portland &c. R. United States Ins. Co., 19 Barb. 
 Co. v. Graham, S2 Mass. (11 Mete.) (N. Y.) 568; Bissell v. Michigan 
 1; Lewe/s Island R. Co. v. Bolton, &c. R. Co., 22 N. Y. 258. 
 
 48 Maine 451, 77 Am. Dec. 236 ; Gar- 97 New Castle &c. Marine Ins. 
 
 den Gully &c. Co. v. McLister, L. Co., In re, 19 Beav. 97; Galveston 
 
 R. 1 App. Cases .39. R. Co. v. Cowdrey, 11 Wall. (U. 
 
 95 As where the corporation is au- S.) 459, 20 L. ed. 199. 
 
 thorized to incumber or transfer its 98 Jackson Ins. Co. v. Cross, 9 
 
 property, if the stockholders vote to Heisk. (Tenn.) 283; Mott v. United 
 
 do so, or where aid may be levied States Trust Co., 19 Barb. (N. Y.) 
 
 by municipal corporations if the 568; European R. Co., In re, L. R. 
 
 taxpayers so vote. Eagle v. Kohn, 8 Eq. 444. 
 
 84 111. 292; Concord v. Portsmouth 99 Conn. Mut. Life Ins. Co. v. 
 
 Savings Bank, 92 U. S. 625, 23 L. Cleveland &c. R. Co., 41 Barb. (N. 
 
463 DIRECTORS § 300 
 
 of the transaction to suggest inquiry. ^ Thus it has been held 
 that a railroad corporation cannot dispute the validity of a mort- 
 gage given to secure its bonds that are owned by bona fide hold- 
 ers upon the ground that its directors authorized its execution 
 at a meeting held outside of the state. ^ Nor can a corporation 
 dispute the validity of acts authorized by its directors at a spe- 
 cial meeting, upon the ground that proper notice of such special 
 meeting was not given, where no objection to their validity was 
 made by any director or stockholder until after the rights of in- 
 nocent third parties had intervened.^ When the mode of action 
 and formalities to be observed are prescribed by the by-laws, 
 even more liberal rules obtain in determining the rights of per- 
 sons claiming by virtue of the acts of the directors. Such rule 
 may be varied by usage,* at least where the by-laws are made 
 hy the directors.^ And persons dealing with the corporation 
 will not be held to so strict a knowledge of limitations and re- 
 strictions upon the general authority of the directors contained 
 in the by-laws as of those contained in public statutes.® The ob- 
 servance of required formalities may be waived, and the corpo- 
 ration may become bound by acquiescence in informal acts,'' ex- 
 
 Y.) 9. See also Bissell v. Michigan note where authorities on both 
 
 &c. R. Co., 22 N. Y. 258 (And see sides of the general question are re- 
 
 as to ratification or waiver of infor- viewed. 
 
 malities. Merchants &c. Bank v. 4 Pittsburgh &c. R. Co. v. Clarke, 
 
 Harris Lumber Co., 103 Ark. 283, 29 Pa. 146. 
 
 146 S. W. 508, Ann. Cas. 1914B. 5 Samuel v. Holladay, 1 Woolw. 
 
 713 and 717n) ; Zabriskie v. Cleve- (U. S.) 400, Fed. Cas. No. 12288. 
 
 land &c. R. Co., 23 How. (U. S.) And a formality declared to be im- 
 
 ^81, 16 L. ed. 488; Royal British perative may be so long and so uni- 
 
 Bank v. Turquand, 6 E. & B. 327. versally disregarded as to cease to 
 
 1 Eagle Ins. Co., Ex parte, 4 K. be operative. Walton, Ex parte, 26 
 & J. 549. L. J. Ch. 545. 
 
 2 Galveston &c. R. Co. v. Cow- « Bissell v. Michigan Southern R. 
 drey, 11 Wall. (U. S.) 459, 20 L. Co., 22 N. Y. 258. 
 
 ed. 199. T Zabriskie v. Cleveland &c. R. 
 
 3 Samuel v. Holladay, 1 Woolw. Co., 23 How. (U. S.) 381, 16 L. ed. 
 (U. S.) 400, Fed. Cas. No. 12288. 488; Bragate v. Shortridge, 5 H. L. 
 See also Merchants &c. Bank v. Cas. 297; Walton, Ex parte, 26 L. 
 Harris Lumber Co., 103 Ark. 283, J. Ch. 545. 
 
 146 S. W. 508, Ann. Cas. 713, and 
 
§ 301 RAILROADS 464 
 
 cept where the charter or public statutes make the observance 
 of the formalities a condition precedent to the directors' author- 
 ity to act.8 
 
 §301 (260). Directors — Meetings. — The official action of di- 
 rectors is taken in regular or special meetings convened in accord- 
 ance with the provisions of the charter or by-laws. Strictly speak- 
 ing, the functions of directors can only be exercised at such meet- 
 ings. The rule is that the directors can exercise the powers 
 specially intrusted to them only as a board convened in regular 
 session as a board.® Thus, where the directors took part in a 
 stockholders' meeting, at which the body of the stockholders 
 executed a lease, the action was held void as beyond the powers 
 of the stockholders, and the court said : "It is no answer, that 
 individual stockholders who were present at the meeting when 
 the lease was ordered, were also directors. They did not meet 
 or act as directors, but as stockholders. "i" A majority of those 
 present at a regularly convened meeting may act for the corpo- 
 ration,^! but in order to constitute a regular meeting it is neces- 
 
 8 Walton, Ex parte, 26 L. J. Ch. Brinkerhoff Zinc. Co. v. Boyd, 182 
 545 ; Pittsburgh &c. R. Co. v. Clarke, Mo. 597, 91 S. W. 523. But see 
 29 Pa. St. 146. Bank of Middlebury v. Rutland &c. 
 
 9 Johnston v. Jones, 23 N. J. Eq. R. Co., 30 Vt. 159, holding that the 
 216; Junction R. Co. v. Reeve, 15 directors may give their assent sep- 
 Ind. 236; Morrison v. Wilder Gas arately if that is their usual practice. 
 Co., 91 'Maine 492, 40 Atl. 542, 64 lo Conro v. Port Henry Iron Co., 
 Am. St. 257; Schackelford v. New 12 Barb. (N. Y.) 27. 
 
 Orleans &c. R. Co., 37 Miss. 202; u Hax v. R. T. Davis Mill Co., 
 Calumet Paper Co. v. Haskell &c. 39 Mo. App. 453; Smith v. Los 
 Co., 144 Mo. 331, 45 S. E. 1115, 66 Angeles Im. &c. Assn., 78 Cal. 289, 
 Am. St. 425; Yellow Jacket Min. 20 Pac. 677, 12 Am. St. S3; Des- 
 Co. V. Stevenson, 5 Nev. 224; But- patch Line v. Bellamy Mfg. Co., 12 
 trick v. Nashua &c. R. Co., 62 N. N. H. 205, 37 Am. Dec. 203. Pro- 
 H. 413, 13 Am. St. 578 ; Green v. vided, of course, that they are a ma- 
 Miller, 6 Johns., (N. Y.) 38; Stoys- jority of those present and voting, 
 town &c. Tpk. R. Co. v. Craver, 45 And even though an equal number 
 Pa. St. 386; King v. Great Marlow, be present who refrain from voting, 
 2 East. 244; Marseilles Extension still the votes of a majority of the 
 R. Co., In re, L. R. 7 Ch. App. 161. number necessary to form a quorum 
 See also Ney v. Eastern Iowa Tel. will carry a measure where there 
 Co., 162 Iowa 525, 144 N. W. 383; are no dissenting votes. Rushville 
 
465 DIRECTORS § 302 
 
 sary that a quorum be present. In the absence of any special 
 regulations,^^ ^ majority of the board is necessary to constitute 
 a quorum.^* 
 
 § 302 (261). Directors — Meetings — Stated and special. — The 
 
 charter sometimes provides for stated or general meetings of the 
 board of directors, and also for the calling and holding of spe- 
 cial meetings. It is barely necessary to suggest that where pro- 
 visions are made by the charter for the time and place of hold- 
 ing stated meetings and for the mode of holding special meet- 
 ings, those provisions must be substantially complied with in 
 all material respects. Notice of special meetings must be given 
 in the mode prescribed by the charter or corporate by-laws ;i* 
 but of stated or regular meetings provided for by the charter 
 or by-laws need not be given, as it is the duty of the directors 
 to take notice of the provisions of the charter and by-laws ot 
 the company. „ 
 
 §303 (262). Directors — Meetings — Notice.— Where statedl 
 meetings are held, by the board at prescribed times fixed by the 
 charter, or by-laws, or by resolution, all the directors are bound' 
 to take notice of the time and place of holding them.^^ The pre- 
 
 Gas Co. V. Rushville, 121 Ind. 206, Great Falls &c. R. Co. v. Ganong, 
 
 23 N. E. 72, 6 L. R. A. 31S, 16 Am. 48 Mont. 54, 136 Pac. 390. 
 
 St. 388. Contra, Lawrence v. Inger- a Hunt v. School District, 14 Vt. 
 
 soil, 88 Tenn. 52, 12 S. W. 422, 6 300, 39 Am. Dec. 225; Hatch v. 
 
 L. R. A. 308, 17 Am. St. 870. Johnson &c. Co., 79 Fed. 828; Stow 
 
 12 This rule is prescribed by stat- v. Wyse, 7 Conn. 214, 18 Am. Dec. 
 ute in most of the states. 99; Long Island &c. R. Co., Matter 
 
 13 Price V. Grand Rapids &c. R. of, 19 Wend. (N. Y.) 37, 32 Am. 
 Co., 13 Ind. 58; Cram v. Bangor Dec. 429; Doernbecher v. Columbia 
 House Proprietary, 12 Maine 354; &c, Co., 21 Ore. 573, 28 Pac. 899, 28 
 Foster v. MuUanphy Planing Mill Am. St. 766; 2 Thomp. Corp. (2nd 
 Co., 92 Mo. 79, 4 S. W. 260; Edger- ed,), §§1138, 1140, 1146. See also 
 ly V. Emerson, 23 N. H. 555, 55 Am. Hayes v. Canada &c. S. S. Co., 181 
 Dec. 207. But it is held that the Fed. 289; Great Falls &c. R. Co. v. 
 failure to fill two vacancies in a Ganong, 48 Mont. 54, 136 Pac. 390. 
 board consisting of five members 16 Warner v. Mower, 11 Vt. 385 • 
 does not destroy the right of the Sampson v. Bowdoinham &c. Co. 
 remaining three to make a quorum. 35 Maine 78; Atlantic &c. Co. v. 
 
§303 
 
 RAILROADS 
 
 466 
 
 sumption is in favor of the regularity of the meetings of cor- 
 porate directors and the burden is on the party who assails their 
 regularity to show that there were irregularities in calling, hold- 
 ing or conducting the meeting/" and where a quorum is present 
 the presumption is that all were notified." In order that special 
 meetings held at other times or places may be such meetings as 
 will empower the directors present to act for the corporation, 
 all the directors must have proper notice of the time of meet- 
 ing; but, if all the directors are present and participate in the 
 proceedings the fact that notice has not been formally given is 
 unimportant. If notice has hot been given and the directors 
 are not all in attendance at the meeting a very different ques- 
 tion is presented. If some of the directors are not notified the 
 proceedings will not, as a rule, be effective, although a quorum 
 be present at the meeting and concur in the proceedings. ^^ No- 
 
 Sanders, 36 N. H. 2S2; People v. 
 Peck, 11 Wend. (N. Y.) 604, 27 Am. 
 Dec. 104; People v. Batchelor, 22 
 JSr. Y. 128; Rex v. Hill, 4 Barn. & 
 Cress. 436. See also Guraaer v. 
 Cripple Creek Tunnel &c. Co., 40 
 Colo. 1, 90 Pac. 81; Western Imp. 
 Co. V. Des Moines Nat. Bank, 103 
 Iowa 4SS, 72 N. W. 657. 
 
 16 Wells V. Rodgers, 60 Mich. S2S, 
 27 N. W. 671; Stockton Combined 
 Harvester Works v. Houser, 109 
 Cal. 1, 41 Pac. 809; Lane v. Brain- 
 erd, 30 Conn. S6S; Hardin v. Iowa 
 &c. Co., 78 Iowa 726, 43 N. W. 543, 
 6 L. R. A. 52; Sargent v. Webster, 
 12 Mete. (Mass.) 497; Chouteau' &c. 
 Co. V. Holmes, 68 Mo. 601, 30 Am. 
 Rep. 807 ; Leavitt v. Oxford &c. Co., 
 3 Utah 265, 1 Pac. 356; Budd v. 
 Walla Walla &c. Co., 2 Wash. Ter. 
 347, 7 Pac. 896. 
 
 17 McCall V. Bryam &c. Co., 6 
 Conn. 428; Wells v. Rahway &c. 
 Co., 19 N. J. Eq. 402 ; Leavitt v. 
 Oxford &c. Co., 3 Utah 265, 1 Pac. 
 
 356. See for an extreme case 
 Arms V. Conant, 36 Vt. 744. See 
 generally Wood &c. Co. v. King, 45 
 Ga. 34; Wood v. Boney (N. J.), 21 
 Atl. 574; Chase v. Tuttle, 55 Conn.. 
 455, 12 Atl. 874, 3 Am. St. 64; 2 
 Thomp. Corp. (2nd. ed.), § 1148. 
 
 18 Bank of Little Rock v. McCar- 
 thy, 55 Ark. 473, 18 S. W. 759, 29 
 Am. St. 60; Farwell v. Houghton 
 &c. Works, 8 Fed. 66; School Dist. 
 v. Bennett, 52 Ark. 511, 13 S. W. 
 132; Simon v. Sevier &c. Co., 54 
 Ark. 58, 14 S: W. 1101 ; Harding v. 
 Vandewater, 40 Cal. 11; Paola &c. 
 R. Co. V. Commissioners, 16 Kans. 
 302; Jackson v. Hampden, 16 Maine 
 184; Covert v. Rogers, 38 Mich. 363, 
 31 Am. Rep. 319; Baldwin v. Can- 
 field, 26 Minn. 43, 1 N. W. 261; 
 Chouteau &c. Co. v. Holmes, 68 Mo. 
 601, 30 Am. Rep. 807; State v. Fer- 
 guson, 31 N. J. L. 107; Gordon v. 
 Preston, 1 Watts (Pa.) 385, 26 Am. 
 Dec. 75; Pike County v. Rowland, 
 94 Pa. St. 238; Stevens v. Eden, 12 
 
467 
 
 DIRECTORS 
 
 §303 
 
 tice of special meetings should be given to all the members of 
 the board as the charter or by-laws provide, or, if no provision 
 is made, the directors should be notified personally.'-^ As we 
 have already indicated, the rule is that if all the directors attend 
 at the meeting any irregularities in the manner of giving notice 
 will be held to have been waived ;2<' and this, it has been held, 
 will be true if those who were not present duly acquiesce in the 
 action of those who attended the meeting, provided there was a 
 quorum present at the meeting.^i Ratification of the proceed- 
 ings of a meeting previously held will give them validity, al- 
 though notice of the previous meeting may have been insufift- 
 cient.22 It has been held that if no objection is made to the 
 regularity of a meeting until an act ordered thereat has been 
 fully performed, the legality of such act cannot afterward be 
 questioned in a court of equity on the ground of failure to give 
 
 Vt. 688. See also note in Ann. Cas. 
 1914B, 717, 718. Compare Edgerly 
 V. Emerson, 23 N. H. 569, 55 Am. 
 Dec. 207; Chase v. Tuttle, 55 Conn. 
 455, 12 Atl. 874, 3 Am. St. 64. Bank 
 V. Flour Co., 41 Ohio St. 552; Hali- 
 fax &c. R. Co. V. Francklyn, 8 Ry. 
 & Corp. L. J. 91 ; Mr. Taylor says 
 that the decision in Edgerly v. Em- 
 erson, supra, is erroneous. Taylor 
 Corp., 260 n. We concur in his 
 view. Stow V. Wyse, 7 Conn. 214, 
 18 Am. Dec. 99. 
 
 19 See 2 Thomp. Corp. (2nd. 
 ed.), § 1146, and see § 1147 as 
 to when notice by mail is sufficient. 
 Those present cannot bind the prop- 
 erty of the corporation against the 
 wishes of others not notified. Doyle 
 V. Mizner, 42 Mich. 332, 3 N. W. 
 968; Kersey Oil Co. v. Oil Creek 
 &c. R. Co., 5 W. N. C. (Pa.) 144. But 
 see Edgerly v. Emerson, 23 N. H. 
 555; Bank v. Flour Co., 41 Ohio 
 
 St. 552, 55 Am. Dec. 207. If the 
 notice be sent in the prescribed man- 
 ner, but directors who are out of the- 
 state fail to receive it, the action of 
 the other directors is not thereby 
 nullified. Chase v. Tuttle, 55 Conn. 
 455, 12 Atl. 874, 3 Am. St. 64. 
 
 20Judah v. American &c. Co., 4^ 
 Ind. 333; Jones v. Milton &c. Co., 
 7 Ind. 547; Stobo v. Davis Provision 
 Co., 54 111. App. 440; People v. 
 Peck, 11 Wend. (N. Y.) 604, 27 Am. 
 Dec. 104. 
 
 21 Reed v. Hayt, 109 N. Y. 659, 17 
 N. E. 418. 
 
 22 In absence of fraud or con- 
 spiracy, defect in notice to directors, 
 of a special meeting, is cured by 
 subsequent ratification of the action 
 there taken. County Court &c. v. 
 Baltimore & O. R. Co., 35 Fed. 161. 
 See also Portugese &c. Mines, In re, 
 45 Ch. Div. 16, 63 L. T. 423; 2 
 Thomp. Neg. (2nd. ed.), § 1143. 
 
§304 
 
 RAILROADS 
 
 468 
 
 notice ;2^ but this doctrine cannot prevail except in cases where 
 injustice would result to innocent parties if it were not applied. 
 
 §304 (263). Directors — Meetings — Proxies — Quorum. — The 
 
 rule prohibiting the delegation of authority requires the personal 
 presence of directors at all meetings of the board and forbids 
 voting by proxy. Where a definite number^* constitutes a body 
 intrusted with corporate duties or functions, it is necessary to 
 effective action that a quorum of members be present, and a 
 quorum consists of a majority of the members, unless the stat- 
 ute provides otherwise.^^ Proceedings at a meeting where there 
 is not a quorum of the directors present are voidable but not ab- 
 solutely void, and as they are not void they may be ratified. ^^ 
 Where a quorum is present a majority may effectively act.-'^ It 
 has been held that where the act of incorporation does not des- 
 ignate the number that shall constitute a quorum and confers 
 j)ower upon the board to, enact by-laws the by-laws may fix the 
 
 T2S Samuel v. HoUaday, 1 Woolw. 
 '(U. S.) 400, Fed. Cas. No. 12288. 
 See also Reed. v. Hayt, 51 N. Y. 
 Sup. Ct. 121. 
 
 24 Where the body is composed of 
 an indefinite number the rule is dif- 
 ferent. Ante, § 186. 
 
 25 Tennessee &c. Co. v. East Ala- 
 bama &c. R. Co., 73 Ala. 426; 
 Wickersham v. Crittenden, 93 Cal. 
 17, 28 Pac. 788; Price v.. Grand 
 Rapids &c. Co., 13 Ind. 58; Cram 
 V. Bangor House, 12 Maine 354; St. 
 Louis &c. Association v. Hennessy, 
 11 Mo. App. 555; Hax v. Davis &c. 
 Co., 39 Mo. App. 453; Willcocks, 
 Ex parte, 7 Cow. (N. Y.) 402, 17 
 Am. Dec. 525; Stringham v. Osh- 
 kosh &c. Co., 33 Wis. 471. 
 
 28 Samuel v. HoUaday, 1 Woolw. 
 (U. S.) 400, Fed. Cas. No. 12288; 
 Hanson v. Dexter, 36 Maine 516; 
 Atlantic &c. Co. v. Sanders, 36 N. 
 H. 252. A different doctrine is as- 
 
 serted in Price v. Grand Rapids R. 
 Co., 13 Ind. 58, but that case was 
 wrongly decided. If the act was be- 
 yond the power of the directors it 
 would be void, and if void, not 
 capable of ratification. 
 
 2T Cotton v. Davis, 1 Stra. S3; 
 People v. Auditor, 33 III. 9; Buell 
 V. Buckingham, 16 Iowa 284, 85 Am. 
 Dec. 516, citing 2 Kent's Com. 293, 
 5 Dane's Abr. 150; Sargent v. Web- 
 ster, 13 Mete. (Mass.) 497, 46 Am. 
 Dec. 743; Cahill v. Kalamazoo &c. 
 Co., 2 Dougl. (Mich.) 124, 43 Am. 
 Dec. 457. In the opinion of Judge 
 Dillon in Buell v. Buckingham are 
 cited Rex. v. Monday, Cowp. 530; 
 Southwofth v. Palmyra R. Co., 2 
 Mich. 287; State v. McBride, 4 Mo. 
 303, 29 Am. Dec. 636; Green v. Wel- 
 ler, 32 Miss. 650; Union &c. Co., In 
 re, 22 Wend. (N. Y.) 591; Rogers, 
 Ex parte, 7 Cow. (N. Y.) 526; 2 
 Thomp. Corp. (2nd ed.), §1152. 
 
469 DIRECTORS § 305 
 
 number at less than a majority.'*® There is reason, we venture 
 to suggest, for doubting the soundness of the doctrine declared 
 in the case referred to. We think that as the rule requiring a 
 majority in order to constitute a quorum is well established, the 
 conclusion must be that the statute is to be considered in con- 
 nection with that rule and not as a detached or fragmentary part 
 of the law, and that silence upon the subject means that the 
 usual and established rule of law shall prevail. A director whose' 
 presence is necessary to make a quorum cannot effectively vote 
 upon a question in which he is individually, materially and di- 
 rectly interested, as, for instance, upon a contract with himself 
 and the corporation, so that as to such a question there is no 
 quorum present since the interested person is not as to the par- 
 ticular matter competent to act as a director.^® When the presi- 
 dent is a member of the board of directors it is proper to count 
 him. in ascertaining whether a quorum is present, but if he is not 
 a director then he cannot be counted unless the act of incor- 
 poration so provides.^" 
 
 § 305 (264). Directors — Meetings outside of the state. — It is 
 generally held that where there is no express provision to the con- 
 trary in the charter or in some general statute, the directors may 
 meet outside of the state by which the corporation is created, 
 and there transact ordinary corporate business.'^ It seems, in- 
 
 28 Hoyt V. Thompson, 5 N. Y. also Federal L. Ins. Co. v. Griffin, 
 
 320; 2 Thomp. Corp. (2nd. ed.), 173 "111. App. 5. But see where 
 
 § 1154. But this is certainly not there were enough competent direc- 
 
 true where the charter requires a tors voting. Foster v. Mullanphy, 
 
 majority. State v. Curtis, 9 Nev. 92 Mo. 79, 4 S. W. 260; Leavitt v. 
 
 325. Oxford &c. Co., 3 Utah 265, 1 Pac. 
 
 29Bassett v. Fairchild, 132 Cal. 356; 2 Thomp. Corp. (2nd. ed.), 
 
 637, 64 Pac. 1082; Buell v. Bucking- §1158. 
 
 ham, 16 Iowa 284, 85 Am. Dec. 576; 30 Glens Falls &c. Co. v. White, 
 
 Miner v. Belle Isle &c. Co., 93 18 Hun. (N. Y.) 214; Bank of 
 
 Mich. 97, S3 N. W. 218; St. Louis Maryland v. Ruff, 7 Gill & J. (Md.) 
 
 V. Alexander, 23 Mo. 483; Foster 448. 
 
 V. Mullanphy &c. Mill, 92 Mo. Ti, si Ohio &c. R. Co. v. McPherson, 
 
 4 S. W. 260; Van Hook v. Somer- 35 Mo. 13, 86 Am. Dec. 128; Gal- 
 
 ville fee. Co., 5 N. J. Eq. 137; 2 veston &c. R. Co. v. Cowdrey, 11 
 
 Thomp. Corp. (2nd. ed.), § 1157. See Wall. (U. S.) 459, 20 L. ed. 199; 
 
§306 
 
 RAILROADS 
 
 470 
 
 deed, that they may even meet in a foreign country.*^ We have 
 ■qualified our statement that meetings may be held outside of the 
 state which created the corporation by saying that such meet- 
 ings may be held for the transaction of ordinary corporate busi- 
 ness. This we have done because it is intimated by high author- 
 ity that there are acts which cannot be rightfully done outside 
 of the state.^^ It is, however, not easy to conceive what acts 
 within the power of the board of directors may not be as well 
 performed in one state as in another.** Some of the authorities 
 make a distinction between the acts of the corporation itself and 
 the acts of its officers and agents, holding that corporate acts 
 which the corporation itself must do should be performed with- 
 in the limits of the state by which it was created. 
 
 § 306 (265). Directors — Proceedings — Record. — The statutes 
 of many of the states require the directors to cause a record of 
 
 McCall V. Byrara &c. Co., 6 Conn. 
 428; Wood &c. Company v. King, 
 45 Ga. 34; Reichwald v. Commer- 
 cial &c. Co., 106 111. 439, 450; Bel- 
 lows V. Todd, 39 Iowa 209; Smith 
 V. Silver Valley &c. Co., 64 Md. 85, 
 20 Atl. 1032, 54 Am. Rep. 760; 
 Thompson v. Natchez &c. Co., 68 
 Miss. 423, 9 So. 821 ; Missouri &c. Co. 
 V. Reinhard, 114 Mo. 218, 21 S. W. 
 488, 35 Am. St. 746; Bassett v. Monte 
 Christo &c. Co., IS Nev. 293; Smith 
 V. Alvord, 63 Barb. (N. Y.) 415; 
 Arms V. Conant, 36 Vt. 744. 
 
 32 Bank of . Augusta v. Earle, 13 
 Pet. (U. S.) 519, 10 L. ed. 274. 
 
 33 In Galveston Railroad v. Cow- 
 drey, 11 "Wall. (N. Y.) 459, 476, the 
 court said: "No doubt it may be 
 true, in many cases, that the extra- 
 territorial acts of directors would 
 be held void, as in. the case cited 
 from the Fourteenth New Jersey 
 Chancery Reports, 383, where a set 
 of directors of a New Jersey cor- 
 
 poration met in Philadelphia, 
 against a positive prohibitory stat- 
 ute of New Jersey, and improperly 
 voted themselves certain shares of 
 stock. And other cases may be put 
 where their acts would be held void 
 without a prohibitory statute, and it 
 is generally true that a corporation 
 exists only within the jurisdiction 
 of the territory that created it." 
 See Hilles v. Parrish, 14 N. J. Eq. 
 380; Warren &c. Co. v. Aetna &c. 
 Co., Fed. Cas. No. 17206, 2 Paine 
 (U. S.) 501; Freeman v. Machias 
 &c. Co., 38 Maine 343 ; Bank of Vir- 
 ginia v. Adams, 1 Parson Eq. Cas. 
 (Pa.) 534. 
 
 34 In Wright v. Bundy, 11 Ind. 
 398, 404, the court said: "The mere 
 place where the active agents of a 
 corporation enter into contract must, 
 in general, be immaterial. The ma- 
 terial question must be one of pow- 
 er, not of place." 
 
471 
 
 DIRECTORS 
 
 §307 
 
 their proceedings to be kept, and where such statutes exist it is 
 the duty of the directors to cause a record of their proceedings 
 to be made. Where there is no such statute, sound business policy- 
 requires a record of all the proceedings to be kept. But the 
 failure or neglect of corporate officers to keep a record of their 
 proceedings cannot, as a rule, prejudice the rights of third per- 
 sons. Where a record is made and third persons have in good 
 faith acquired rights upon the faith thereof the company will be 
 estopped, provided the acts evidenced by the record were not 
 ultra vires.^^ As a rule entries of record duly made in regular 
 course are prima facie evidence of the facts recited.^® The fa- 
 miliar general rule is that stockholders have a right to inspect 
 the corporate records,*'^ and it is held that it is no excuse for 
 refusing to permit an inspection that the shareholder proposes 
 to be assisted in the examination by his attorney. ^^ Record 
 entries, duly made and signed, may be sufficient evidence of a 
 contract so as to take a case out of the statute of frauds. ^^ 
 
 § 307 (266). Directors — Corporate records as evidence. — The 
 
 primary evidence of the proceedings of the board of. directors is 
 the record ;*° but, as elsewhere shown, the rights of third persons 
 
 35 Stratton v. Lyons, S3 Vt. 130. 
 A corporation is not bound where 
 fraudulent interpolations have been 
 made in its records without any 
 fault on its part or that of its agents 
 or ofScers. Holden v. Hoyt, 134 
 Mass. 181. It would be otherwise 
 if the corporation were in fault. 
 
 36 Hawkshaw v. Supreme Lodge 
 &c., 29 Fed. 770; Isbell v. New York 
 &c. Railroad Co., 25 Conn. SS6 
 Rollins V. Shaver &c. Co., 80 Iowa 
 380, 45 N. W. 1037, 20 Am. St. 427 
 Hathaway v. Addison, 48 Maine 440 
 Sanborn v. School District, 12 Minn 
 17; Heintzelman v. Druids' &c 
 Assn., 38 Minn. 138, 36 N. W. 100 
 Beardsley v. Johnson, 49 Hun 607 
 1 N. Y. S. 608; Mcllhenny v. Beriz, 
 
 80 Tex. 1, 13 S. W., 655, 26 Am. St. 
 705; McDaniels v. Flower Brook 
 &c. Co., 22 Vt. 274. As to being the 
 best evidence, see 3 Elliott Ev. 
 §1941, and see, generally, §1943. 
 
 37 Commonwealth v. Phoenix &c. 
 Co., 105 Pa. St. Ill, SI Am. Rep. 
 184, 23 Am. L. Reg. (N. S.) 388, 
 23 Cent. L. J. 584, and notes. 
 
 38 People V. Nassau &c. Co., 86 
 Hun 128, 33 N. Y. S. 244. Ante, 
 § 197. 
 
 39 Jones V. Victoria &c. Co., L. R. 
 2 Q. B. D. 314; Argus Co. v. Mayor, 
 55 N. Y. 495, 14 Am. Rep. 296. 
 
 40 O wings V. Speed, 5 Wheat. (U. 
 S.) 420, 424, 5 L. ed. 124; Thayer 
 V. Middlesex &c. Co., 10 Pick. 
 (Mass.)< 326; Haven v. New Hamp- 
 
§308 
 
 RAILROADS 
 
 472 
 
 are not prejudiced by the failure to keep a record, nor will the 
 failure to keep a record preclude resort to parol testimony in the 
 proper case.*^ Entries duly made are held competent evidence 
 to prove payments to an employe of the company ,*2 but it is held 
 that .corporate records are not competent to prove a claim against 
 strangers to the company.** We suppose, however, that for 
 some purposes corporate records are admissible even as against 
 third persons, as, for instance, to show that a meeting of the 
 directors was held on a certain day, or the like. Record entries 
 are generally competent evidence against officers of the com- 
 pany,** but are not, of course, always conclusive upon them. A 
 fraudulent entry may be attacked,*^ or the good faith of the di- 
 rectors' acts may be inquired into by giving parol proof as to 
 what they really did.*® 
 
 § 308 (267). Proof of the proceedings of the board of directors. 
 
 — Where the act of incorporation prescribes the mode in which 
 the proceedings of the board of directors shall be proved, the 
 
 shire Asylum, 13 N. H. 532, 38 Am. 
 Dec. 512; Wells v. Rahway &c. Co., 
 19 N. J. Eq. 402; Clark v. Far*- 
 mers' &c. Co., 15 Wend. (N. Y.) 
 256; Buncombe &c. Co. v. McCar- 
 son, 1 Dev. & B. (N. Car.) 306; 
 Bowick V. Miller, 21 Ore. 25, 26 
 Pac. 861. Dial v. Valley &c. Assn., 
 29 S. Car. 560, 8 S. E. 27. See 
 3 Elliott Ev. §§ 1941, 1943. 
 
 *iPost, §308; Whiting v. Wel- 
 lington, 10 Fed. 810; Nashua &c. 
 R. Co. V. Boston &c. R. Co., 27 
 Fed. 821; AUis v. Jones, 45 Fed. 
 148; Bay View &c. Co. v. Williams, 
 SO Cal. 353; Melledge v. Boston &c. 
 Co., 5 Cush. (Mass.) 158; Morrill 
 V. C. T. &c. Co., 32 Hun (N. Y.) 
 543; Pickett v. Abney, 84 Tex. 645, 
 19 S. W. 859. 
 
 42 Ganther v. Jenks & Co., 76 
 Mich. 510, 43 N. W. 600. See Hum- 
 phrey V. People, 18 Hun (N. Y.) 
 
 393; Huntington v. Attrill, 118 N. 
 Y. 365, 23 N. E. 544. 
 
 *3 Graville v. New York &c. Co., 
 34 Hun (N. Y.) 224; Blair v. St. 
 Louis &c. R. Co., 25 Fed. 684. See 
 also Chesapeake &c. R. Co. v. Deep- 
 water R. Co., 57 W. Va. 641, SO 
 S. E. 890; 3 Elliott Ev. §1945. 
 
 *4 First Nat. Bank v. Tisdale, 84 
 N. Y. 655; Allison v. Coal Co., 87 
 Tenn. 60, 9 S. W. 226. See Wallace 
 V. Lincoln &c. Bank, 89 Tenn. 630, 
 15 S. W. 448; Rudd v. Robinson, 54 
 Hun 339, 7 N. Y. S. 535; Rudd v. 
 Robinson, 126 N. Y. 113, 26 N. E. 
 1046, 12 L. R. A. 473, 22 Am. St 
 816; Spellier &c. Co. v. Geiger, 147 
 Pa. St. 399, 23 Atl. 547; Olney v. 
 Chadsey, 7 R. I. 224. 
 
 *5 Thorne v. Travelers' Ins. Co., 
 80 Pa. St. IS, 21 Am. Rep. 89. 
 
 *6Waite V. Windham Co. Mining 
 Co., 36 Vt. 18. 
 
473- 
 
 DIRECTORS 
 
 §309 
 
 mode prescribed is generally exclusive. Where there is a record, 
 of course that is the best evidence, and must be produced or some 
 excuse shown justifying a resort to secondary evidence. But 
 where it is not in conflict with some provision of the charter, the 
 acts of the directors of a corporation, if not recorded, may be 
 proved by parol.*'' Where records are lost, parol evidence of 
 their contents is competent.*^ It has also been held that omis- 
 sions in the records may be supplied by parol proof.** 
 
 § 309 (268). Notice to directors. — Notice to the directors, 
 when acting in their official capacity, is notice to the company. 5" 
 Notice to individual directors when not acting for the corpora- 
 tion is not, ordinarily, effective as notice to the corporation. ^"^ 
 
 4T Langsdale v. Bonton, 12 Ind. 
 467; Junction R. Co. v. Reeve, IS 
 Ind. 236; Weber v. Fickey, 52 Md. 
 500. In the case of Ten Eyck v. 
 Pontiac &c. R. Co., 74 Mich. 226, 
 41 N. W. 90S, 3 L. R. A. 378, 16 
 Am. St. 633, Zl Am. & Eng. R. 
 Cases, 273, the court said: "What 
 is resolved upon at a meeting of a 
 board of directors of a private cor- 
 poration may be proven by the rec- 
 ord of the proceedings of the board, 
 if one is kept, and the proceedings 
 entered, but if a record is not kept 
 or the proceedings not recorded, pa- 
 rol evidence is admissible to show 
 what was resolved upon, and by 
 what vote it was carried." See 
 Bank of Yolo v. Weaver, 96 Cal. 
 xvii, 31 Pac. 160; McCall v. By- 
 ram &c. Co., 6 Conn. 428; Iowa 
 Drug Co. V. Souers, 139 Iowa 72, 
 117 N. W. 300, 19 L. R. A. (N. S.) 
 115. See Cram v. Bangor, 12 
 Maine 354; Zihlman v. Cumberland 
 &c. Co., 74 Md. 303, 22 Atl. 271; 
 Edgerly v. Emerson, 23 N. H. 555, 
 55 Am. Dec. 207 ; Great • Northern 
 
 &c. Co., In re, 62 L. T. R. 231; 
 3 Elliott Ev. §1947. 
 
 48 Dix V. Akers, 30 Ind. 431, 3 El- 
 liott Ev. §§1941, 1947. 
 
 49Taymouth v. Koehler, 35 Mich. 
 22; Ratcliff v. Teters, 27 Ohio St. 
 66. 
 
 50 Fulton Bank v. New York &c. 
 Canal Co., 4 Paige (N. Y.) 127; 
 Cragie v. Hadley, 99 N. Y. 131, 1 N. 
 E. 537, 52 Am. R. 9; National 
 Second Bank v. Cushman, 121' Mass. 
 490; Smith v. South &c. Bank, 32 
 Vt. 341, 76 Am. Dec. 179; 8 Thomp. 
 Corp. §1668. 
 
 siFarrel Foundry v. Dart, 26 
 Conn. 376; Gridley v. Lafayette &c. 
 Co., 71 111. 200; Goodloe v. Godley, 
 13 Sm. & M. (Miss.) 233, 51 Am. 
 Dec. 159; Thompson v. Central 
 Passenger R. Co., 83 N. J. L. W, 
 85 Atl. 201 ; Westfield Bank v. Cor- 
 nen, 37 N. Y. 320, 93 Am. Dec. 573; 
 German Mining Co., In re, 4 DeG. 
 M. & G. 19. But see Fairfield &c. 
 Bank v. Chase, 72 Maine 226, 39 Am. 
 Rep. 319. 
 
§309 
 
 RAILROADS 
 
 ■474 
 
 If the notice is effective upon directors in office it is effective 
 upon their successors in office. ^^ 
 
 52 United &c. Co. v. Shriver, 3 
 Md. Ch. 381; Farmers' &c. Bank 
 V. Payne, 25 Conn. 444, 68 Am. Dec. 
 367; Louisiana &c. Bank v. Senecal, 
 13 La. 525; Lancey v. Bryant, 30 
 Maine 466; Washington Bank v. 
 Lewis, 22 Pick. (Mass.) 24; Pemi- 
 gewassett Bank v. Rogers, 18 N. H. 
 255; Fulton Bank v. New York &c. 
 Co., 4 Paiga (N. Y.) 127; Edwards 
 V. Grand Junction R. Co., 1 Myl. & 
 Cr. (13 Eng. Ch. 559) 650. The 
 settled rule is that directors acting 
 as individuals merely cannot bind 
 the company in any way, and the 
 fact that one or two directors, con- 
 stituting a minority of the board, 
 have knowledge as individuals of 
 certain facts is insufficient to prove 
 notice to the corporation. Winches- 
 ter V. Baltimore &c. R. Co., 4 Md. 
 231 ; Mercier v. Canonge, 8 La. Ann. 
 37; Fulton Bank v. New York &c. 
 Canal Co., 4 Paige (N. Y.) 127; 
 Peruvian R. Co. v. Thames &c. Ins. 
 Co., L. R. 2 Ch. App. Cas. 617. No- 
 tice given to a director as an official 
 to be communicated to the board 
 has been held to bind the corpoia- 
 tion. Boyd v. Chesapeake &c. Canal 
 Co., 17 Md. 195, 79 Am. Dec. 646; 
 National Bank v. Norton, 1 Hill (N. 
 Y.) 572. It would seem that any 
 knowledge of facts which comes to 
 a director or directors privately, or 
 by public rumor, but which is not 
 communicated by them to the board 
 will not bind the' corporation. U. S. 
 Ins. Co. v. Shriver, 3 Md. Ch. 381; 
 CommercSal Bank v. Cunningham, 
 41 Mass. 270, 35 Am. Dec. 322. 
 Though if such knowledge is actu- 
 
 ally imparted by such director to 
 the board at a regular meeting, the 
 corporation is bound. Bank of 
 Pittsburgh v. Whitehead, 10 Watts 
 (Pa.) 397, 36 Am. Dec. 186. It is 
 held in a few cases that the knowl- 
 edge of a director who acts upon 
 the matter as to which he has such 
 knowledge, is the knowledge of the 
 board, without regard to the man- 
 ner in which he acquired it, and 
 even though he did not communicate 
 it to his fellows. Bank of U. S. 
 V. Davis, 2 Hill (N. Y.) 451; 
 North River Bank v. Aymar, 3 Hill 
 (N. Y.) 262. But this principle is 
 opposed by the weight of authority, 
 and it has been held repeatedly, that 
 where the interests of a director 
 are opposed to those of the corpora- 
 tion no knowledge possessed by him 
 will be imputed to it. Hatch v. 
 Ferguson, 66 Fed. 668, 676; Fren- 
 kel V. Hudson, 82 Ala. 158, 2 So. 
 758, 60 Am. Rep. 736; First Nat. 
 Bank v. Gifford, 47 Iowa 575; 
 Wickersham v. Chicago Zinc Co., 
 18 Kans. 481, 26 Am. Rep. 784; 
 Winchester v. Baltimore &c. R. Co., 
 4 Md. 231; Innerarity v. Bank, 139 
 Mass. 322, 1 N. E. 282, 52 Am. Rep. 
 710; Commercial Bank v. Cunning- 
 ham, 24 Pick. (Mass.) 270, 35 Am. 
 Dec. 322 ; Barnes v. Trenton Gas. 
 L. Co., 27 N. J. Eq. 33. See also 
 First Nat. Bank v. Lowther Oil &c. 
 Co., 66 W. Va. 505, 66 S. E. 713, 28 
 L. R. A. (N. S.) 511. And knowl- 
 edge by the directors of their own 
 mismanagement will not be imputed 
 to the corporation to raise the bar 
 of the statute of limitations in a suit 
 
475 DIRECTORS § 310 
 
 § 310 (269). Directors — Admissions and declarations. — Sub- 
 stantially the same rules that prevail in regard to officers and 
 agents generally govern the subject of admissions and declara- 
 tions by directors, but there is this important exception, namely, 
 the directors, in order to bind the company, should act as a board 
 duly convened. Admissions and representations must, as a rule, 
 be made by at least a quorum of the directors acting as a body, 
 in order to bind the corporation, unless special authority is 
 shown. ^* When made at a time the board is not in session, 
 they are the statements of individuals, and not of corporate 
 representatives, except in cases where they are authorized to 
 act as agents. It follows from the general rule we have stated 
 that neither one director, nor any number of directors, except 
 in cases where there is special authority from the company, can 
 bind it by admissions or declarations.^* Where, however, a di- 
 rector has special authority to act as an agent for the company, 
 he can, of course, bind it by his acts and admissions like any 
 other agent, ^^ but his acts bind the company because of the spe- 
 cial authority, and not simply because of his position as a direc- 
 tor. In a case where a director is invested with special author- 
 ity, then as to such matters as his authority covers notice to or 
 
 against them by the corporation or Tpk. Co. v. Thorp, 13 Conn. 173; 
 
 its stockholders. Ryan v. Leaven- Low v. Connecticut &c. R. Co., 45 
 
 worth &c. R. Co., 21 Kans. 365, 404. N. H. 370; Matteson v. New York 
 
 53 Huntington &c. R. Co. v. Deck- Cent R. Co., 62 Barb. (N. Y.) 364; 
 er, 82 Pa. St 119; Michigan &c. R. Smith v. North Carolina R. Co., 68 
 Co. V. Cougar, 55 III 503; Vicks- N. Car 107; Pennslyvania R. Co.'s 
 burg &c R. Co. V. Ragsdale, 54 Appeal, 80 Pa. St. 265; Charleston 
 Miss. 200; Low v. Connecticut &c. &c. R. Co. v. Blake, 12 Rich. L. 
 R. Co., 45 N. H. 370; Soper v. Buf- (S. Car.) 634. See also Guillaume 
 falo &c. R. Co., 19 Barb. (N. Y.) v. Fruit Land Co., 48 Ore. 400, 86 
 310; Thew v. Porcelain Mfg. Co., 5 Pac. 883. Although a director of 
 S. Car. 415. See Titus v. Cairo &c. a railroad company owns a majori- 
 Bank, Zl N. J. L. 98; St. Louis &c. ty of the stock he cannot bind the 
 R. C. V. Drennan, 26 111. App. 263; company by a contract. AUemong v. 
 Meux's Case, 2 DeGex, M. & G. Simmons, 124 Ind. 199, 23 N. E. 768, 
 522; Tottendell v. Fareham &c. Co., 7 R. & Corp. L. J. 416. 
 
 L. R. 1 C. P. 674. 55 Burnes v. Pennell, 2 H. L. 
 
 54 Michigan Cent. R. Co. v. Gou- Cases 497 ; Meux's Case, 2 DeG., M 
 gar, 55 111. 503; Fairfield County & G. 522. 
 
§311 RAILROADS 
 
 476 
 
 knowledge acquired by him, is notice to the board of directors 
 and the corporation.^* 
 
 §311 (270). Ratification of the acts of directors.— The ordi- 
 nary rules respecting the ratification of the acts of agents apply 
 to the acts of directors. Some of the authorities indicate that aa 
 directors are officers of superior rank, ratification will be pre- 
 sumed upon less evidence than" is required in cases where the 
 acts are those of subordinate agents. Any acts which the cor- 
 poration can authorize the directors to perform may be made 
 valid by subsequent ratification, although they were outside of 
 the directors' powers when performed.^'' The state may, by a 
 subsequent legislative enactment, give validity to their unau- 
 thorized acts.^^ But we suppose that where the acts of the di- 
 rectors are entirely outside of the scope of their authority the 
 state could not impose new and additional burdens upon the 
 stockholders, thereby essentially changing the charter, without 
 the consent, express or implied, of the stockholders of the com- 
 pany. 
 
 §312 (271). Directors — Removal from office. — The general 
 rule is that a board of directors has no implied power to remove 
 one of the. directors and declare his office vacant. The power of 
 removal may, of course, be given by the act of incorporation or 
 by corporate by-laws enacted in accordance therewith, but the 
 power is not inherent or implied. A director cannot, as a rule, 
 be deprived of his office nor excluded by the board from taking 
 
 66 Hoover v. Wise, 91 U. S. 308, 40 N. E. 362. See also Kessler v. 
 23 L. ed. 392; Fairfield Savings Ensley, 123 Fed. 546; Greenleaf v. 
 Bank v. Chase, 72 Maine 226, 39 Norfolk &c. R. Co., 91 N. Car. 33; 
 Am. Rep. 319; Gen. Ins. Co. v. U. 2 Thomp. Corp. (2d ed.), §1257. 
 S. Ins. Co., 10 Md. 517, 69 Am. Dea We do not mean, of course, to say 
 174; Fulton Bank v. Canal Co., 4 that acts which as to the corpora- 
 Paige Ch. (N. Y.) 127. tion itself are ultra vires can be rat- 
 
 57 McLaughlin v. Detroit &c. R. ified. 
 
 Co., 8 Mich. 99; Farmers' &c. Co. b8 Coe v. New Jersey Midland R. 
 
 v. Toledo &c. R. Co., 67 Fed. 49; Co., 31 N. J. Eq. 105. 
 Hicrgins v. Lansingh, 154 111. 301, 
 
477 
 
 DIRECTORS 
 
 §312 
 
 part in its proceedings f^ but we are inclined to believe that there 
 may be extraordinary cases where there is a clear and undoubted 
 betrayal of trust in which the board would be justified in exclud- 
 ing one of its members from taking part in its proceedings.^" A 
 director cannot, according to many of the decided cases, be re- 
 moved by a majority of the stockholders themselves,«i unless the 
 power to remove is given by the charter or by-laws.^^ It is said 
 that to allow a majority of the stockholders to remove the direc- 
 tors at will would, to a very considerable extent, nullify the well- 
 settled rule that the discretion of the directors cannot be con- 
 trolled by the stockholders ; but this line of reasoning is not very 
 satisfactory. We can see no sufficient reason why the power of 
 removal may not be vested in those who actually own the cor- 
 poration and are primarily and principally interested, nor can we 
 
 59 If they attempt to wrongfully 
 exclude a director, he is entitled to 
 an order restraining them from so 
 doing. Pulbrook v. Richmond &c. 
 Co., L. R. 9 Ch. Div. 610. See 
 generally Mobile &c. R. Co. v. Owen, 
 121 Ala. SOS, 25 So. 612; Deposit 
 Bank v. Hearne, 104 Ky. 819, 46 
 S. W. 160; Commonwealth v. Det- 
 willer, 131 Pa. St. 614, 18 Atl. 990, 
 7 L. R. A. 357. 
 
 60 Some of the courts hold that a 
 director cannot be prevented from 
 examining corporate records and 
 books, but may secure an examina- 
 tion by mandamus, although the op- 
 posing directors regard him as act- 
 ing in opposition to the corporate 
 rights and interests. People v. 
 Mott, 1 How. Prac. (N. Y.) 247; 
 People V. Throop, 12 Wend. (N. Y.) 
 183. But we believe that there may 
 te extreme cases where a director 
 can be denied the right of inspec- 
 tion. State V. Einstein, 46 N. J. L. 
 479. 
 
 61 Powers V. Blue &c. Assn., 86 
 Fed. 70S; Johnston v. Jones, 23 N. 
 
 J. Eq. 216; State v. Bryce, 7 Ohio 
 (2d pt.) 82; Imperial &c. Co. v. 
 Hampson, L. R. 23 Ch. Div. I, 7. 
 But see Bayless v. Orne, Freem. Ch. 
 (Miss.) 161, 176; Adamantine 
 Brick Co. v. Woodruff, 4 McArthur 
 (D. C.) 318; Burr v. McDonald, 3 
 Grat. (Va.) 215, 224, holding that 
 the director's right to his office be- 
 ing forfeited by his misconduct, he 
 may be removed by the stockholders. 
 62 Hunter v. Sun Mut. Ins. 
 Co., 26 La. Ann. 13. The gen- 
 eral laws of a number of the 
 states provide for the removal 
 of directors from office. By-laws 
 of a corporation providing that 
 when any director shall die, resign, 
 neglect to serve, or remove out of 
 the county, the board may proceed 
 to supply the vacancy, do not au- 
 thorize a director to be ousted by a 
 vote of the board of directors on 
 the ground of ineligibility. Com- 
 monwealth v. Detwiller, 131 Pa. St. 
 614, 18 Atl. 990, 7 L. R. A. 357, 28 
 Am. & Eng. Corp. Cas. 669. 
 
§ 313 RAILROADS 
 
 478 
 
 avoid the conclusion that some of the courts have been misled by 
 the early decisions regarding charitable corporations. The rules 
 which apply to charitable corporations cannot apply in all their 
 vigor to business corporations such as railway companies. It is 
 reasoned in other cases that the interests of shareholders may be 
 protected without the exercise of this power, since the directors, 
 being trustees for the stockholders, may be removed by the 
 court for an abuse of their powers, upon application to it by the 
 parties in interest, and hence the stockholders should not be in- 
 vested with power of removal.''^ Where power is given to the 
 stockholders by the charter or by-laws to remove directors for a 
 reasonable cause, the court will not, ordinarily, inquire into the 
 sufficiency of a cause upon which they have acted,®* nor will it 
 interfere to control the actions of the directors under such con- 
 ditions, but will leave the stockholders to depose them in case 
 they do not perform their duties properly. ^^ 
 
 § 313 (272). Compensation of directors. — We have elsewhere 
 treated in a general way of the compensation of corporate offi- 
 cers,^^ and we shall not again discuss the general subject. It 
 may be said by way of preface that, ordinarily, directors are not 
 entitled to compensation for services rendered in the capacity of 
 directors unless provision is made for the payment of compensa- 
 tion by the charter or by-laws, nor will a contract to pay for 
 such services be implied. Where, however, a director performs 
 services under a contract that are clearly beyond the range of his 
 official duties he is entitled to such compensation, in the absence 
 
 63 Ward V. Davidson, 89 Mo. 445, «* Inderwick v. Snell, 2 Macn. & 
 
 1 S. W. 846. See generally 2 G. 216. 
 
 Thomp. Corp. (2d ed.), §§1084, «5 Moses v. Tompkins, 84 Ala. 
 
 108S. The power is generally re- 613, 622, 4 So. 763; Hattersley v. 
 
 served or given by statute or by- Earl of Shelburne, 10 Week. R. 
 
 law. Making use of his position to 881, 31 L. J. Ch. 873. See also Hed- 
 
 further his private gains, or ceasing ges v. Paquett, 3 Ore. 11; Neal v. 
 
 to hold the requisite number of Hill, 16 Cal. 145, 16 Am. .Dec. 508. 
 
 shares, will cause a director to See generally as to removal by 
 
 cease to hold his office in England. courts. 2 Thomp. Corp. (2d ed.), 
 
 Companies Clauses, Act of 1845, 8 §§ 1100-1106. 
 
 Vict. Ch. 16, §86. ee Ante, §268. 
 
479 
 
 DIRECTORS 
 
 §313 
 
 of anything to the contrary, as a stranger performing similar 
 services would be entitled to receive.^'^ Unless the compensation 
 is fixed by resolution or by-law before the services are rendered, 
 a director is, as a rule, not entitled to pay for his services.''* The 
 
 ST Jackson v. New York Central 
 R. Co., 2 Thorap. & C. (N. Y.) 653; 
 New York &c. R. Co. v. Ketch- 
 um, 27 Conn. 170; Lafayette &c. R. 
 Co. V. Cheeney, 87 111. 446; Shack- 
 elford . V. New Orleans &c. R. Co., 
 37 Miss. 202 ; Hodges v. Rutland &c. 
 R. Co., 29 Vt. 220. A director who 
 performs services for the corpora- 
 tion at the request of the board of 
 directors is entitled to recover, on 
 an implied contract, what the ser- 
 vices are reasonably worth, so far 
 as the amount has not been fixed by 
 resolution of the board. Ten 
 Eyck V. Pontiac &c. R. Co., 74 Mich. 
 226, 41 N. W. 905, 3 L. R. A. 378, 
 16 Am. St. 633. A director who, 
 independently of his duties as di- 
 rector, performs services for, and 
 furnishes material to, the corpora- 
 tion, which are necessary and prop- 
 er, has the same right as other per- 
 sons to recover upon an implied 
 contract for such services and ma- 
 terials. Greensboro &c. Tump. Co. 
 v. Stratton, 120 Ind. 294, 22 N. E. 
 247. To entitle him to pay there 
 must have been an expectation at 
 the time, on the part of the corpo- 
 ration, to pay therefor. Gill v. New 
 York Cab Co., 48 Hun 524, 16 N. 
 Y. S. 236. In Shackleford v. New 
 Orleans &c. R. Co., 37 Miss. 202, it 
 was held that attendance on the 
 board meetings is the only service 
 which a director will be presumed 
 to render gratuitously. In Rogers 
 V. Hastings &c. R. Co., 22 Minn. 
 
 25, it was held that a director who 
 rendered special services as attor- 
 ney and land commissioner at the 
 request of the other directors might 
 recover therefor. The question 
 whether or not the services rendered 
 were special, so that he is entitled 
 to pay therefor, depends upon 
 whether they were such as could be 
 rendered by a person other than a 
 director. Henry v. Rutland &c. R. 
 Co., 27 Vt. 435. And a director may 
 recover for services rendered by 
 him as agent of the company at its 
 request, but not in his character as 
 director. Chandler v. Monmouth 
 Bank, 13 N. J. L. 255. But it has 
 been held that a director cannot, in 
 the absence of contract , claim a 
 commission for the sale of the cor- 
 poration bonds. Hodges v. Rutland 
 &c. R. Co., 29 Vt. 220. And that 
 he cannot claim pay for services 
 as managing director. Bolt & Iron 
 Co., Re, 14 Ont. R. 211, 19 Am. & 
 Eng. Corp. Cas. 165. And that 
 even a director who serves with- 
 out compensation cannot recover a 
 reward offered by the corporation 
 for the recovery of stolen property 
 and the detection of the thief, since 
 he only did his duty if he accomp- 
 lished both. Stacy v. State; Bank, 5 
 III. (4 Scam.) 91; Collins v. Gode- 
 froy, 1 Barn. & Adol. 950. 
 
 68 Kilpatrick v. Penrose Ferry' 
 Bridge Co., 49 Pa. St. 118, 88 Am. 
 Dec. 497; New York &c. R. Co. v. 
 Ketchum, 27 Conn. 170; Coleman v. 
 
§313 
 
 RAILROADS 
 
 480 
 
 fact that a director expected to be paid for his services will not 
 alter the rule,"'' and it has been held that a subsequent promise to 
 pay for them is ineffective for lack of consideration.'"' The com- 
 pensation which has been fixed by the board, where they have a 
 right to determine the compensation, may be increased by a vote 
 of the board during his term, and will entitle him to such in- 
 creased compensation for all services thereafter renderedJ^ But 
 while it is competen1,for the board to fix the compensation to be 
 given to directors as well as that of other officers and agents,''^ 
 unless the by-laws or statute expressly provide otherwise, a di- 
 rector-may also fill another office of the corporation;''^ yet where 
 a director fills such other office, he will be entitled only to such 
 compensation therefor as is fixed or agreed upon before the ser- 
 vices are rendered^* 
 
 Second Ave. R. Co., 38 N. Y. 201; 
 Hodges V. Rutland &c. R. Co., 29 
 Vt. 220. It is presumed that a stock- 
 holder, not a director of the corpo- 
 ration, who assumes the duties of 
 the office and performs them with- 
 out any agreement or provision for 
 compensation, performs the official 
 services gratuitously. Mather v. 
 Eureka Mower Co., 118 N. Y. 629, 
 23 N. E. 993.. An officer of a cor- 
 poration, in order to recover com- 
 pensation for his services, must show 
 that he is an officer de jure. Wat- 
 erman v. Chicago & I. R. Co., 34 111. 
 App. 268, affirmed in 139 111. 6S8, 29 
 N. E. 689, IS L. R. A. 418, 32 Am. 
 St. 228. 
 
 «9 New York &c. R. Co. v. Ketch- 
 am, 27 Conn. 170. 
 
 ■?'(> Maux Ferry G. R. Co. v. Brane- 
 gan, 40 Ind. 361 ; Loan Assn. v. 
 Stonemetz, 29 Pa. St. 534; Dunston 
 v. Imp. Gas Co., 3 B. & Ad. 125. 
 He may receive pay for services 
 rendered before he became director, 
 under a resolution passed by the 
 
 other members of the board. 
 Branch Bank v. Collins, 7 Ala. 95; 
 New York R. Co. v. Ketchum, 27 
 Conn. 170. 
 
 ■^iTt having been understood by 
 the board of directors of a corpora- 
 tion that its officers were to be paid 
 for their services, the board may 
 afterwards fix and pay a reasonable 
 sum. Stewart v. St. Louis &c. R. 
 Co., 41 Fed. 736. 
 
 ''■2 Hodges V. Rutland &c. R. Co., 
 29 Vt. 220. 
 
 T3 A director may also be treas- 
 urer. Sargent v. Webster, 54 Mass. 
 497, 46 Am. Dec. 743. 
 
 T*. Holder v. Lafayette &c. R. Co., 
 71 111. 106, 22 Am. Rep. 89, where 
 the director served as treasurer. 
 Rogers v. Hastings &c. R. Co., 22 
 Minn. 25, where he served as secre- 
 tary. It has been held that the ac- 
 tion of the board of directors of a 
 corporation in providing that the 
 salary of the president should be 
 fixed by him and another director, 
 who together owned nearly all the 
 
481 DIRECTORS § 314 
 
 § 314, (273). Directors— Relation of to stockholders— Prelimi- 
 nary. — The directors of a railroad company occupy fiduciary rela- 
 tion to the stockholders. The relation is essentially one of trust 
 and confidence ; but directors are not trustees in the strict or tech- 
 nical sense, since they do not hold the legal title to the corporate 
 property and may in some cases deal with the corporation where 
 their own individual interests are concerned. They are, however, 
 trustees in the sense in which the term "trustees" is often used. 
 The courts and text writers generally speaft of them as trustees, 
 and correctly so; but the use of the term trustees seems to have 
 misled some judges and writers, for they have applied stricter 
 rules to directors than authority sanctions or principle war- 
 rants. In the sense in which the term "trustees'' is used in ref- 
 erence to the functions and duties of persons occupying fiduciary 
 relations directors are trustees in all that term implies and are 
 subject to the rules which govern that class of persons, but they 
 are not trustees in the same sense as persons are who hold the 
 legal title to property for the benefit of other persons, nor are 
 they trustees for third persons who deal with the company. ''' 
 
 §315 (274). Directors considered trustees. — It is held in a 
 very great number of cases that a director occupies the position 
 
 stock, and that the contract was rat- 662, the court said : "Bank directors 
 ified by the board of directors, is are often styled 'trustees,' but not 
 such an exercise of the board's au- in any technical sense. The rela- 
 thority to fix his salary as to con- tion between the corporation and 
 stitute a contract on which he can them is rather that; of principal and 
 recover. Bagaley v. Pittsburgh & L. agent; certainly so far as creditors 
 S. Iron Co., 146 Pa. St. 478, 23 Atl. are concerned the relation is that of 
 837. We think that the case referred contract and not of trust. But, un- 
 to is well decided, for the reason doubtedly, under circumstances they 
 that there was an effective ratifica- may be treated as occupying the po- 
 tion of the acts of the president and sition of trustees to cestui que 
 the director authorized to act in con- trust." Spering Appeal, 71 Pa. St. 
 junction with him, but if it were not 11, 10 Am. Rpp. 684. See also 
 for the element of ratification we Beach v. Miller, 130 111, 162, 22 N. 
 should think there could be no re- E. 464, 17 Am. St. 291, and note; 
 covery in such a case. McCourt v. Singers, 145 Fed. 103. 
 "i^ In Briggs v. Spaulding, 141 U. But they do owe a duty to credi- 
 S. 132, 11 Sup. Ct. 924, 35 L. ed. tors especially in case of insolvency. 
 
 16 — Ei,L. Railroads I 
 
315 
 
 RAILROADS 
 
 482 
 
 of a trustee for the stockholders,''® and as such: is prohibited from 
 making use of his position or of the knowledge acquired by rea- 
 son of holding the same to promote, either directly or indirectly, 
 his private advantage at the expense of the corporation. The 
 rule governing trustees generally, which prohibits them from 
 using trust property for their own profit, applies to directors. 
 Directors are bound to exercise the utmost good faith, '''^ but are 
 not absolutely prohibited from dealing with the corporation. 
 Directors are bound to exercise their powers to promote the cor- 
 porate interests and it is a breach of duty for them to make use 
 of their powers to injure the corporate interests or impair cor- 
 porate rights. Thev are guilty of a breach of trust if they make 
 use of corporate property or funds for their individual gain.'^^ A 
 director cannot, without an inexcusable breach of trust, place 
 
 2 Thomp. Corp. (2d ed.), §1219. 
 
 ■76 Robinson v. Smith, 3 Paige (N. 
 Y.) 222, 24 Am. Dec. 212; Koehler 
 V. Black River Falls Co., 2 Blackf. 
 (U. S.) 715, 17 L. ed. 339; Memphis 
 &c. R. Co. V. Woods, 88 Ala. 630, 
 7 So. 108, 16 Am. St. 81; Bradbury 
 V. Barnes, 19 Cal. 120; San Fran- 
 cisco &c. R. Co. V. Bee, 48 Cal. 398; 
 Paine v. Lake Erie R. Co., 31 Ind. 
 283; Hale v. Republican &c. Co., 8 
 Kans. 466; Covington &c. R. Co. v. 
 Bowler, 9 Bush. (Ky.) 468; Euro- 
 pean &c. R. Co. V. Poor, 59 Maine 
 277; Ward v. Salem St. R. Co., 108 
 Mass. 332; Michigan Air Line R. 
 Co. V. Mellen, 44 Mich. 321, 6 N. W. 
 845; Stewart v. Lehigh Valley R. 
 Co., 38 N. J. L. 505; Blake v. Buf- 
 falo Creek R. Co., 56 N. Y. 485; 
 Simons v. Vulcan &c. Co., 61 Pa. 
 St. 202, 100 Am. Dec. 628; Great 
 Luxembourg R. Co. v. Magnay, 25 
 Beav. 586; Aberdeen R. Co. v. 
 Blakie, 1 Macq. 461; Verplanck v. 
 Mercantile &c. Co., 1 Edw. Ch. 84; 
 York &c. Co. V. Hudson, 16 Beav. 
 
 485; Imperial &c. Assn. v. Coleman, 
 L. R. 6 H. L. 189; Albion &c. Co 
 v. Martin, 1 Ch. Div. 580; Ben- 
 nett's Case, 5 DeGex, M. & G. 284 
 Williams v. Page, 24 Beav. 654; 2 
 Thomp. Corp. (2d ed.), §§ 1215-1218 
 8 Thomp. Corp. §§1176, 1215. 
 
 '''' The fact that a person has rela- 
 tives on the board of directors of 
 a corporation will not defeat his 
 valid claim against the corporation. 
 Rollins v. Shaver Wagon & C. Co., 
 80 Iowa 380, 45 N. W. 1037, 20 Am. 
 St. 427. See cases in preceding 
 note; 2 Thomp. Corp. (2d ed.) 
 §§1220, 1221. 
 
 78 Ward V. Davidson, 89 Mo. 445, 
 1 S. W. 846; Warden v. Railroad 
 Co., 103 U. S. 651, 26 L. ed. 509; 
 Cook V. Sherman, 20 Fed. 167, and 
 note; Pollitz v. Wabash R. Co., 207 
 N. Y. 113, 100 N. E. 721; Goodin 
 v. Cincinnati &c. Co., 18 Ohio St. 
 169; Smith v. Smith, 3 Des. Eq. (S. 
 Car.) 557; Southern Kans. R. Co. 
 v. Logul (Tex. Civ. App.), 139 S. 
 W. 11. 
 
483 DIRECTORS § 316 
 
 him.:cli' in a position which will i-cnder him unable to exercise 
 his powers for the promotion of the corporate welfare.''* Di- 
 rectors are under a strict obligation to exercise care and dili- 
 gence to preserve the property and money of the company. They 
 have no right to make gifts of corporate property,^" nor to allow 
 unjust or illegal claims to be enforced against the company. ^^ 
 
 § 316 (275). Directors as trustees — Illustrative cases. — As we 
 
 have said in another place, directors are considered as trustees of 
 the corporation and its shareholders, but not usually of third per- 
 sons. ^^ The scope and application of the general doctrine is bet- 
 ter shown by reference to the adjudged cases than by general 
 statements, and we shall refer to some of the many decisions of 
 the court upon the subject. Directors may, in good faith, and for 
 a fair, valuable consideration, sell corporate property to one of 
 their number, but such a transaction will be closely scrutinized 
 and if not entirely fair and free from fraud will be set aside. ^^ 
 A director cannot purchase property for the corporation, treat it 
 as a purchase by himself and charge the corporation a profit.** 
 
 79Attaway v. Third Nat. Bank, L. J. Ch. 418. See also Young v. 
 93 Mo. 485, S S. W. 16. Primarily Naval &c. Soc, 74 L. J. K. B. 302 
 the breach of duty by a director is a (190S), 1 K. B. 687. 
 wrong inflicted upon the corpora- 82 Briggs v. Spaulding, 141 U. S. 
 tion, but a breach of duty may also 132, 11 Sup. Ct. 924, 35 L. ed. 662; 
 be injurious to third persons; thus Landis v. Sea Isle &c. Co. (N. J. 
 where a director sells his influence Eq.), 31 Atl. 755. 
 in such a way as to give one cred- S3 Mish v. Main, 81 Md. 36, 31 
 itor of the corporation an advantage Atl. T^. See also Millsap v. Chap- 
 over its other creditors, his action man, 76 Miss. 942, 26 So. 369, 71 
 is unlawful. Berryman v. Cincin- Am. St. 547, and note, 
 nati &c. R. Co., 14 Bush. (Ky.) 755 ; 8* Blair &c. Co. v. Walker, SO 
 Bliss V. Matteson, 45 N. Y. 22. Iowa 376; Averill v. Barber, 53 
 
 80 St. Louis &c. Co. V. Partridge, Hun 636, 6 N. Y. S. 255 ; Getty v. 
 8 Mo. App. 580. See Williams v. Devlin, 54 N. Y. 403; McElhenny's 
 Page, 24 Beav. 654; Minor v. Me- Appeal, 61 Pa. St. 188; Simons v. 
 chanics' Bank, 1 Pet. (U. S.) 46, Vulcan Oil Co., 61 Pa. St. 202, 98 
 7 L. ed. 47; Brown v. De Yoiing, Am. Dec. 215; Rice's Appeal, 79 
 167 111. 549, 47 N. E. 863; McCul- Pa. St. 168; Benson v. Heathorn, 1 
 lough V. Ford &c. Co., 213 Pa. St. Y. & C. 326; Great Luxembourg 
 110, 62 Atl. 521. R. Co. V. Magnay, ,25 Beav. 586. See 
 
 81 Lowndes v. Garnett &c. Co., 33 generally European &c. R. Co. v. 
 
§316 RAILROADS 484 
 
 The decisions authorize the conclusion that directors may engage 
 in good faith in a competing business on their individual ac- 
 count,^^ and this doctrine^ if kept within reasonable limits, we 
 regard as sound, but, as we believe, a director cannot engage in a 
 competing business if the necessary and natural effect of his en- 
 gaging in that business is to impair his pow.er to discharge his 
 duty to the company of which he is a director, or to detract from 
 his fidelity to that company. The doctrine of the cases referred 
 tp is one to be limited, not extended, and if it appears in such a 
 case that the director is in any w;ay using his official position ^o 
 the injury of the company or its business, for the advancement 
 of his own business or that of a rival of his company of which he 
 is a director, a stockholder should be awarded relief, for it is cer- 
 tainly the duty of the director to do all that he reasonably can 
 to promote the interests of the company of which he is such 
 officer.^® It has been adjudged that an order of a board of di- 
 rectors awarding compensation to one of their number is void- 
 able where it required the vote of the director to make the or- 
 der, s'' but we suppose it is competent to provide compensation 
 where the services are rendered outside of the duties of the di- 
 rector and the order is adopted by a sufficient vote, exclusive of 
 
 Poor, 59 Maine 277; Dodge v. Huffman &c. R. Co. v. Cumberland 
 
 Woolsey, 18 How. (U. S.) 331, IS &c. Co., 16 Md. 456; Cumberland 
 
 L. ed. 401; Gifford v. New Jersey &c. Co. v. Parish, 42 Md. 598; Keo- 
 
 R. Co., 10 N. J. Eq. 171; Stevens kuk &c. Co. v. Davidson, 95 Mo. 
 
 V. Rutland &c. R. Co., 29 Vt. 545; 467, 8 S. W. 545; Gallery v. Na- 
 
 Ware v. Grand Junction &c. Co., tional &c. Bank, 41 Mich. 169, 2 N. 
 
 2 Russ. & M. 470. W. 193, 32 Am. Rep. 149; Fitz- 
 
 85 Barr v. Pittsburgh &c. Co., 51 gerald v. Fitzgerald &c. Co., 44 Nebr. 
 Fed. 33. See also Barr v. Pitts- 463, 62 N. W. 899; Blake v. Buffalo 
 burgh &c. Co., 40 Fed. 412 ; Lagarde &c. Co., 56 N. Y. 485 ; Cumberland 
 V. Anniston &c. Co., 126 Ala. 496, &c. Co. v. Sherman, 30 Barb. (N. Y.) 
 28 So. 199; Keokuk &c. Packet Co. 533. See also Ritchie v. McMullen, 
 V. Davidson, 95 Mo. 467, 8 S. W. 79 Fed. 522. 
 
 545; New York Automobile Co. v. 87 wichersham v. Crittenden, 106 
 
 Franklin, 49 Misc. 8, 97 N. Y. S. 781., Cal. 327, 39 Pac. 602. See also 
 
 86 Perry v. Tuscaloosa &c. Co., 93 Thomas v. Brownville &c. R. Co., 
 Ala. 364, 9 So. 217; Paine v. Lake 109 U. S. 522, 3 Sup. Ct. 315, 37 L. 
 Erie &c. Co., 31 Ind. 283; Union ed. 1018. 
 
 Bank V. Jones, 4 La. Ann. 236; 
 
485 DIRl-XTOKS § 316 
 
 that of the interested director. Contracts between directors that 
 they should have a percentage upon all money secured by means 
 of a bond of indemnity executed by them, providing against the 
 future indebtedness of the company are voidable.*** A director 
 cannot rightfully enter into any engagement or contract which 
 he knows is prejudicial to the corporation or its shareholders, 
 since his duty requires of him that he shall exercise his powers 
 for the promotion of the corporate interests,®® but this general 
 rule does not go to the extent of interdicting him for making an 
 open, fair and honest contract with the corporation, although 
 such a contract may yield him a personal benefit. A well con- 
 sidered case holds that the purchase of a railroad by one of the 
 directors without the consent of the company will be set aside 
 upon re-payment to the director of the money expended by him 
 in making the purchase.®" Directors cannot rightfully make 
 unjust or unfair discrimination in favor of particular stock- 
 holders. ®i The cases generally assert that directors cannot buy 
 claims against the corporation at less than their face, and recover 
 the full value of the corpora tion,*^ but we think this rule is sub- 
 
 88 Butler V. Cornwal Iron Co., 22 public policy is violated, but the po- 
 Cpnn. 335. sition of director sometimes creates 
 
 89 Woodstock Iron Co. v. Rich- the public policy, for it is public 
 mond &c. Co., 1251 U. S. 643, 9 Sup. policy not to permit corporate offi- 
 Ct. 402, 32 L. ed. 819; citing Lin- cers to make contracts which may 
 der V. Carpenter, 62 111. 309; St. tempt or influence them to betray 
 Louis &c. Railroad Co. v. Mathers, their trusts. 
 
 71 111. 592, 22 Am. Rep. 122; Pad- so Covington &c. R. Co. v. Bow- 
 
 fic Railroad Co. v. Seely, 45 Mo. ler, 9 Bush (Ky.) 468. See Bill v. 
 
 212, 100 Am. Dec. 369; Fort Edward Western Union Tel Co., 16 Fed; 14; 
 
 &c. Plank Road Co. v. Payne, 15 Jones v. Arkansas &c. Co., 38 Ark. 
 
 N. Y. 583; HoUaday v. Patterson, 17; Bent v. Priest, 10 Mo. App. 543; 
 
 5 Ore. 177; Racine &c. Bank v. Dorris v. French, 4 Hun (N. Y.) 
 
 Ayres, 12 Wis. 570. It may not be 292. 
 
 improper to observe that a contract si Chase v. Vanderbilt, 62 N. Y. 
 
 by which any person undertakes to 307. 
 
 do an act forbidden by public policy B2 McDonald v. Haughton,, 70 N. 
 
 is voidable, and that the fact that Car. 393; Brewster v. Stratman, 4 
 
 persons , who enter into such con- Mo. App. 41 ; Duncomb y. New 
 
 tracts , are directors- of a railroad York &c. R. Co., 84 N. Y. 190; 
 
 company is not important where HoUaday v. Davis, 5 Ore. 40; Holla- 
 
§316 
 
 RAILROADS 
 
 486 
 
 ject to exceptions, for if the purchase is openly, honestly and 
 fairly made with the full knowledge of the corporation, we can 
 see no reason why it may not be enforced, but if there be any 
 concealment, fraud or deception, the director should not at the 
 utmost be allowed to recover anything more than the amount 
 actually paid for the claims. ^^ Directors have no general right 
 to loan the credit of the company, or to issue mere accommoda-- 
 tion paper in the name of the company, where no consideration 
 is yielded the company,®' except in cases where the act of incor- 
 poration empowers them to do so, or, perhaps, where from long 
 usage the power may be inferred. Contracts entered into by di- 
 rectors prejudicial to corporate interests, or for the sole purpose 
 of enabling them to retain control of the corporate affairs, are 
 voidable.®^ Directors cannot, of course, enter into combinations 
 with other persons for the purpose of securing to such persons or 
 themselves a gain, profit or advantage at the expense of the cor- 
 poration.®^ It is a familiar rule, illustrated by cases much too 
 
 day v.. Patterson, 5 Ore. 177. See 
 also Kroegher v. Calivada &c. Co., 
 119 Fed. 641; Bonney v. Tilley, 109 
 Cal. 346, 42 Pac. 439; Ryan v. Leav- 
 enworth &c. R. Co., 21 Kans. 365. 
 
 93 Analogous cases sustain the 
 statement of the text. Smith v. 
 Lansing, 22 N. Y. 520; Chester v. 
 Dickerson, 54 N. Y. 1, 13 Am. Rep. 
 550; Getty v. Devlin, 54 N. Y. 403; 
 Ashust's Appeal, 60 Pa. St. 290; 
 Seymour v. Spring Forest &c. Assn., 
 144 N. Y. 333, 39 N. E. 365, holds, 
 and, as we think, correctly, that 
 there are cases in which evidences 
 of corporate indebtedness may be 
 bought by directors. See also St. 
 Louis &c. R. Co. V. Chenault, 36 
 Kans. 51, 12 Pac. 303; Coombs 
 V. Barker. 31 Mont. 526, 79 Pac. 1 ; 2 
 Thomp. Corp. (2nd. ed.), § 1239. 
 
 94 Hutchinson v. Sutton &c. Co., 
 57 Fed. '998. 
 
 95 Northern &c. Co. v. Concord R. 
 
 Co., 50 N. H. 166; Bliss v. Matteson, 
 45 N Y. 22. 
 
 96 Jackson v. Ludeling, 21 Wall. 
 (U. S.) 616, 22 L. ed. 492; Nelson 
 V. Luling, 62 N. Y. 645. See gener- 
 ally Drury v. Cross, 7 Wall. (U. 
 S.) 299, 19 L. ed. 40; Twin Lick 
 &c. Co. V. Marbary, 91 U. S. 587, 
 23 L. ed. 328; Richardson v. Green, 
 133 U. S. 30, 10 Sup. Ct. 280, 33 
 L. ed. 516; San Diego v. San 
 Diego &c. R. Co., 44 Cal. 106; 
 Andrews v. Pratt, 44 Cal. 309; 
 Harts V. Brown, 11 111. 226; Mc- 
 Murtry v. Montgomery &c. Co., 86 
 Ky. 206, 5 S. W. 570; Fuller v. 
 Dame, 18 Pick. (Mass.) 472; Boer- 
 um V. Schneck, 41 N. Y. 182; Hoyle 
 V. Pittsburgh &c. Co., 54 N. Y. 314, 
 13 Am. Rep. S9S; Duncomb v. New 
 York &c. Co., 88 N. Y. 1; Stark 
 Bank v. United States &c. Co., 34 
 Vt. 144; Cook v. Berlin &c. Mill 
 Co., 43 Wis. 433. 
 
487 
 
 DIRECTORS 
 
 §317 
 
 numerous for citation, that all dealings between directors and the 
 corporations are scrutinized with great care and avoided, if there 
 be any undue advantage taken by the directors, or any conceal- 
 ment or deception, and this general rule applies to dealings be- 
 tween two corporations in cases where the directors of one are 
 also directors of the other.*'^ 
 
 § 317 (276). Directors — Dealings with corporation. — Directors 
 are not, under all circumstances, prohibited from dealing with the 
 company of which they are the representatives. If there is en- 
 tire good faith and no taint of fraud, a transaction with the com- 
 pany will generally be sustained.®* Contracts made by a direc- 
 tor with the company, which upon close scrutiny appear to be 
 entirely fair, open and honest, will be upheld by the courts.®" 
 The weight of authority is that such contracts are not void, nor 
 always even voidable,^ although there is conflict of authority. It 
 
 9T Paine v. Lake Erie &c. Co., 31 
 Ind. 283; Polar Star Lodge v. Pol- 
 ar Star Lodge, 16 La. Ann. 76; Ab- 
 bot V. American &c. Co., 33 Barb. 
 (N. Y.) 578. See also Wardell v. 
 Union Pac. R. Co., 103 U. S. 651, 26 
 L. ed. 509; Bill v. Western Union 
 Tel. Co., 16 Fed. 14; Memphis &c, 
 R. Co. V. Woods, 88 Ala. 630, 7 So, 
 108, 7 L. R. A. 605, 16 Am St. 81 
 Parker v. Nickerson, 112 Mass., 195 
 Pearson v. Concord R. Corp., 62 N 
 H. 537, 13 Am. St. 590; 2 Thomp. 
 Corp. (2nd. ed.), § 1241. 
 
 98 Warden v. Railroad Co., 103 
 U. S. 651, 26 L. ed. 509; Michoud 
 V. Girod, 4 How. (U. S.) 503, 11 
 L. ed. 1076; Koehler v. Black River 
 Falls Iron' Co., 2 Black (U. S.) 715, 
 17 L. ed. 339; Hotel Co. v. Wade, 97 
 U. S. 13, 24 L. ed. 917; Ryan v. Rail- 
 road Co., 21 Kans. 365 ; Van Cott v. 
 Van Brunt, 82 N. Y. 535; Densmore 
 Oil Co. V. Densmore, 64 Pa. St. 43. 
 See Bristol &c. Co. v. Probasco, 64 
 
 Ind. 406; Greensboro &c. Co. v. 
 Stratton, 120 Ind. 294, 22 N. E. 247; 
 Ward V. Polk, 70 Ind. 309; Cheeny 
 V. Lafayette &c. R. Co., 68 111. 570, 
 18 Am. Rep. 584; New Orleans &c. 
 Co. V. Brown, 36 La. Ann. 138, 51 
 Am. Rep. 5; Santa Clara &c. Co. v. 
 Meredith, 49 Md. 389, 33 Am. Rep. 
 264; Rogers v. Hastings R. Co., 22 
 Minn. 25; Shackelford v. New Or- 
 leans &c. R. Co., 'SJ Miss. 202; 
 Chandler v. Monmouth Bank, 1 
 Green (N. J.) 255; Henry v. Rut- 
 land &c. R. Co., 27 Vt. 435. But 
 contracts- with a director must be 
 entirely free from fraud. Parker 
 V. Nickerson, 137 Mass. 487; Hotel 
 Co. V. Wade, 97 U. S. 13, 24 L. ed. 
 917. 
 
 99 European &c. R. Co. v. Poor, 
 59 Maine 277; Ashurst's Appeal, 60 
 Pa. St. 290; Stark Bank v. United 
 States Pottery Co., 34 Vt. 144. 
 
 1 Claflin V. South Carolina R. Co., 
 8 Fed. .118; Stewart v. St. Louis &c. 
 
§317 
 
 RAILROADS 
 
 488 
 
 is held by some of the courts that, while executory, such con- 
 tracts are voidable at the instance of the corporation,^ or of a dis- 
 senting stockholder.^ Contracts with directors may, as a rule, be 
 set aside upon very slight grounds, at the suit of any one in- 
 jured thereby.* Some of the cases hold that voidable contracts 
 with a director may be ratified by acquiescence. ^ It is also held 
 that if the director has done anything toward executing the con- 
 tract, it cannot be avoided by the corporation without restora- 
 
 Co., 41 Fed. 736; Hallam v. Indi- 
 anolo Hotel Co., 56 Iowa 178, 9 
 N. W. Ill; Stratton v. Allen, 16 
 N. J. Eq. 229; Sims v. Street R. 
 Co., 37 Ohio St. SS6; Central &c. 
 Railroad Co. v. Claghorn, 1 Spcers' 
 Eq. (S. Car.) 546; 2 Thomp. Corp. 
 (2nd. ed.), §§ 1224, 1225, 8 Thomp. 
 Corp. §§1224, 1227. 
 
 2 Munson v. Syracuse &c. R. Co., 
 103 N. Y. 58, 18 N. E. 355; Aber- 
 deen R.- Co. V. Blakie, 1 Macq. 461. 
 
 3 Warden v. Railroad Co., 103 U. 
 S. 651, 26 L. ed. 509; Little Rock 
 &c. R. Co. V. Page, 35 Ark. 304; 
 Ward V. Salem St. Railway, 108 
 Mass. 332; Flint &c. R. Co. v. Dew- 
 ey, 14 Mich. 477; Duncomb v. New 
 York &c. R. Co., 84 N. Y. 190; 
 Houston &c. R. Co. v. Van Alstyne, 
 56 Tex. 439; York &c. R. Co. v. 
 Hudson, 16 Beav. 485; 2 Thomp. 
 Corp. (2nd. ed.), §§ 1226, 1227. 
 Where there was no fraud a sale 
 by a director of property to a cor- 
 poration, which is approved by the 
 board of directors and ratified by 
 the stockholders, will not be held 
 invalid simply because the sale was 
 made for a sum greatly in excess of 
 the cost of property to the direc- 
 tor. Stewart v. St. Louis &c. R. 
 Co., 41 Fed. 736. In the case cited 
 the court said, speaking of the di- 
 
 rectors, that "When the sale to the 
 company was made they did hold 
 a position of trust, and were bound 
 in their official action to faith- 
 fully and honestly execute their 
 duties, and not to make a deal where 
 there personal interest should be 
 served at the expense of the com- 
 pany they represented." 
 
 4 Twin Lick Oil Co. v. Marbury, 
 91 U. S. 587, 23 L. ed. 329, and 
 numerous cases cited ; 2 Thomp. 
 Corp. (2nd. ed.), §§ 1225-1228. It is 
 held that a purchase by a corpora- 
 tion will not be set aside because of 
 the interest of one of the directors, 
 where the complaining stockholder 
 has suffered no damage. Hill v. 
 Nisbet, 100 Ind. 341. A Contract 
 made by the directors with two of 
 their number, when only four were 
 present, is invalid. Ailing v. Wen- 
 zel, 27 111. App. 511. 
 
 5 Kelley v. Newburyport &c. R. 
 Co., 141 Mass. 496, 6 N. E. 745; 
 Union Pac. R. Co. v. Credit Mobi- 
 lier, 135 Mass. 367; Ashurst'b Ap- 
 peal, 60 Pa. St. 290. Generally a 
 party who seeks to avoid a void- 
 able contract must act with prompt- 
 ness. Seymour v. Spring Forest 
 Cemetery Assn., 144 N. Y. 333, 39 
 N. E. 365, 26 L. R. A. 859. 
 
489 
 
 DIRECTORS 
 
 §317 
 
 tion to him of what the corporation received. under it." Where 
 they act in. entire good faith, and the transaction is open and fair, 
 directors may purchase corporate property^ It has been ad- 
 judged that they may even purchase the corporate indebtedness, 
 and enforce a judicial sale of the property to themselves, if they 
 have acted in good faith and given the stockholders a full oppor- 
 tunity to make advances to relieve the corporation from embar- 
 rassment, and they have refused to do so.^ Where a director has 
 necessarily expended money in good faith for the corporation, he 
 is usually entitled to be reimbursed.^ So a director may loan 
 
 6 Duncomb v. New York &c. R. 
 Co., 84 N. Y. 190, 88 N. Y. 1. If 
 the officers, directors and stock- 
 holders consent to a contract be- 
 tween the corporation and a director 
 and keep the property thus acquired, 
 the contract will not be voidable 
 merely because made with a direc- 
 tor. Battelle v. Northwestern Ce- 
 ment & Concrete Pavement Co., 
 37 Minn. 89, 33 N. W. 327. 
 
 7 Little Rock &c. R. Co. v. Page, 
 35 Ark. 304; Buell v. Buckingham,. 
 16 Iowa 284, 85 Am. Dec. 516; El- 
 lis V. Boston &c. R. Co., 107 Mass. 
 1 ; Kitchen v. St. Louis &c. R. Co., 
 69 Mo. 224. See Hoyle v Platts- 
 burgh &c. R. Co., 54 N. Y. 314, 13 
 Am. Rep. 595. A purchase by a 
 director of a corporation without an 
 order of the board of directors, of 
 property of the corporation in satis- 
 faction of his own debt is ratified 
 if the corporation takes up cancels 
 and retains the notes held by him. 
 Beach v. Miller, 130 111. 162, 22 N. E. 
 464, 17 Am. St. 291, 28 Am. & Eng. 
 Corp. Cas. 468. But in order that 
 such a transaction niay repel an as- 
 sault by a stockholder or creditor 
 prejudiced thereby it must be en- 
 tirely free from fraud. Courts are 
 
 reluctant to permit the purchase of 
 corporate property by any of 
 the corporate officers and scrutinize 
 such transactions very carefully. 
 Slade v. Van Vechten 11 Paige (N. 
 Y.) 21 ; Munson v. Syracuse &c. Co., 
 103 N. Y. 50, 8 N. E. 355. 
 
 8 Harts V. Brown, 17 111. 226. See 
 also Patterson v. Portland Smelt- 
 ing Works, 35 Ore. 96, 56 Pac. 407. 
 But he can neither buy nor sell 
 against the wish of the corporation 
 or the stockholders, excepting by 
 judicial process in pursuance of a 
 fair contract made with their ap- 
 probation, since ne is a trustee, and 
 no trustee can purchase of himself 
 nor sell to himself over the objec- 
 tions of his cestui que trust. Pear- 
 son v. Concord R. Co., 62 N. H. 
 537, 13 Am. St. 590, and numerous 
 cases cited. 
 
 9 Rogers v. Hastings, 22 Minn. 
 25; Missouri R. Co. v. Richards, 8 
 Kans. 101. Delivery of corporate 
 stock and execution of a mortgage 
 on corporate property by a board of 
 directors, in paymerit of corporate 
 indebtedness, is not rendered void 
 by the fact that several directors 
 became guarantors for further ad- 
 vances to the corporation after its 
 
§317 
 
 RAILROADS 
 
 490 
 
 money to the corporation, where it is needed for its benefit, if he 
 act fairly and openly, and may purchase the corporate property 
 at a public sale, under a trust deed given to secure it." Direc- 
 tors acting in good faith are in many cases entitled to the same 
 rights as other creditors.^ ^ But in making purchases or sales for 
 the corporation, they cannot directly or indirectly speculate, to 
 the injury of the company, for their own advantage.'-^ It is held 
 that contracts with railroad directors, whereby they undertake, 
 for a compensation given to themselves, to alter or establish their 
 road, depots or works so as to promote private interests, are 
 ^■oid, as contravening public policy. ^^ Such cases belong to the 
 class which equity writers characterize as cases of constructive 
 fraud. 
 
 credit had been exhausted, and 
 which were to be paid by the deliv- 
 ery of the stock. Taylor County v. 
 Baltimore &c. R. Co., 35 Fed. 161. 
 
 10 Saltmarsh v. Spaulding, 147 
 Mass. 224, 17 N. E. 316; Twin Lick 
 Oil Co. V. Marbury, 91 U. S. S87, 
 23 L. ed. 328. See also Richardson 
 V. Green, 133 U. S. 30, 10 Sup. Ct. 
 280, 33 L. ed. S16; Taylor County 
 Court V. Baltimore &c. R. Co., 35 
 Fed. 161. But if he attempts to take 
 an undue advantage, his mortgage 
 cannot be enforced. Sutter St. R. 
 Co. V. Baum, 66 Cat. 44, 4 Pac. 916. 
 A director of a railroad may prop- 
 erly own its bonds and may enforce 
 payment in case of default by fore- 
 closure. Duncomb v. New York &c. 
 R. Co., 84 N. Y. 190, 88 N. Y. 1 ; 
 Harpending v. Munson, 91 N. Y. 
 650. An officer or agent of the cor- 
 poration, capable of becoming its 
 creditors, may enforce the liability 
 of creditors notwithstanding his re- 
 lation to the corporation. Hall v. 
 Klinck, 25 S. Car. 348, 60 Am. Rep. 
 505. 
 
 11 Claflin V. South Carolina R. 
 Co., 8 Fed. (4 Hughes 12) 118. A 
 stockholder, and even a director, 
 may become a creditor of a corpo- 
 ration in absence of fraud. Bor- 
 land v. Haven, 37 Fed. 394. 
 
 12 Manufacturers' Sav. Bank v. 
 Big Muddy Iron Co., 91 Mo. 38, 10 
 S. W. 865; Port v. Russell, 3() Ind. 
 60, 10 Am. Rep. 5; Wayne Pike Co. 
 V. Hammons, 129 Ihd. 368, 27 N. E. 
 487; 2 Thomp. Corp. (2nd. ed.), 
 §§1233, 1234. 
 
 13 Union Pac. R. Co. v. Durant, 1 
 Cent. L. J. 581; Bestor v. Wathen, 
 60 111. 138; Pacific R. Co. v. Seely, 
 45 Mo. 212, 100 Am. Dec. 369. It is 
 the duty of a director to manage 
 the corporate business for the profit 
 of the stockholders, and he cannot 
 so deal with its property as to make 
 profit for himself. Schetter v. 
 Southern Oregon Co., 19 Ore. 192, 
 24 Pac. 25; Hart v. Brockway, 57 
 Mich. 189, 23 N. W. 725; Pearson 
 v. Concord R. Corp., 62 N. H. 537, 
 13 Am. St. 590. 
 
491 DIRECTORS § 318 
 
 § 318 (277). Directors — Termination of fiduciary relations. — 
 
 The fiduciary relation may, of course, be terniinated by resigna- 
 tion, removal from office, or the like. It may also be terminated 
 by operation of law. So, too, conditions may so change as to 
 sever the relation and leave the director as free to act as if the 
 relation had never existed.^* 
 
 § 319 (278). Directors — Liability of — Generally. — In consider- 
 ing the personal liability of directors, it is important to keep in 
 mind the distinction, heretofore mentioned, between the duties of 
 the directors to the corporation and its share holders, and their 
 duties to third persons. ^° As to the corporation they are, as we 
 have said, trustees, but as to third persons they are not trustees, 
 simply because of their official relation to the corporation and its 
 stock holders, although they may doubtless become such in parti- 
 cular instances. 1* Where there is a breach of duty in the dis- 
 charge of duties owing to the corporation there is a breach of 
 trust, but as to third persons a breach of duty is not always a 
 breach of trust. From the doctrine that there is an essential dif- 
 ference- bet-^een the duty to the corporation and the duty to third 
 persons, consequences of importance result. It is obvious that 
 there may be a liability to the corporation or stockholders, where 
 there would be none to third persons and that the evidence re- 
 quired in the one class of cases is very different from that required 
 m the other class. So, too, the duty in the one class of cases is 
 
 1* The entire plant and assets of 15 Ante, § 314. Briggs v. Spauld- 
 
 a corporation, having been sold un- ing, 141 U. S. 132, 11 Sup. Ct. 924, 
 
 der an assignment for the benefit of 35 L. ed. 662. See, as to preferring 
 
 creditors, a stockholder, who was a themselves as Creditors, Napanee 
 
 director and the treasurer of the Canning Co. v. Raid Murdock & Co., 
 
 corporation, is no longer a trustee 1S9 Ind. 614, 64 N. E. 870, 59 L. R. 
 
 or in any fiduciary relation to the A. 199, wherie the authorities on 
 
 corporation, which will prevent him both sides are cited in the prevail- 
 
 from taking an assignment to him- ing and in the dissenting opinions, 
 
 self of corporate debts, which he has i6 Wilkinson v. Bauerle, 41 N. J. 
 
 paid personally, and participating Eq. 635, 7 Atl. 514. See Loverin 
 
 with the other creditors in the dis- v. McLaughlin, 161 111. 417, 44 N. E. 
 
 tribution of the fund. Hammond's 99. 
 Appeal, 123 Pa. St. 503, 16 Atl. 419. 
 
§ 319 RAILROADS 492 
 
 stricter than in the other, and the obligation to exercise good 
 faith milch 'higher. Some of the cases discrittiinate between offi- 
 cers to whom compensation is paid, and those who receive no pay 
 for their services,^ ^ but where persons undertake to serve a busi- 
 ness corporation, such as a railway company, it seems to us they 
 are under an obligation to the corporation and stockholders, to 
 exercise at least ordinary care and diligence, whether their ser- 
 vices are or are not paid for by the corporation. It is no doubt 
 true that in determining whether ordinary care and diligence has 
 been exercised, it is proper to consider the time and attention 
 that directors are, under the circumstances of the particular case, 
 bound to give the corporate affairs, but this does not lead to the 
 conclusion that the directors may be guilty of negligence, and, 
 nevertheless, be exonerated from liability, for the failure to exer- 
 cise ordinary care and diligence is negligence. Whether ordinary 
 care and diligence has been exercised must usually, but not 
 always, be a question of fa:ct to be determined by the jury, under 
 the instructions of the court. ^^ It may be said, by the Way, that 
 it is only just and natural that officers who are paid for devoting 
 
 17 First National Bank v. Reed, and cases where they' assume the du- 
 36 Mich. 263; Pangborn v. Citizens; ties of directors of a business cor- 
 &c. Assn., 35 N. J. Eq. 341 ; Austin poration. In accepting the position 
 V. Daniels, 4 Denio (N. Y.) 299; of director of a business corpora- 
 Commercial Bank v. Ten Eyck, 48 tion men do so knowing that corpo- 
 N. Y. 305; East New York &c. Co. rate affairs require time and atten- 
 V. Elmore, 5 Hun (N. Y.) 214. tion as well as the exercise of reas- 
 
 18 Spering's Appeal, 71 Pa. St. 11, onable business care and diligence, 
 10 Am. Rep. 684; Hun v. Cary, 82 and they, therefore, impliedly, at 
 N. Y. 65, n Am. Rep. 546, citing least undertake to exercise that dili- 
 Scott V. De Payster, 1 Edw. Ch. 513, gence and care. In regard to cor- 
 543;; Hodges v. New England &c. porate affairs as well as in all other 
 Co., 1 R. I. 312, 53 Am. Dec. 624; matters the question of negligence 
 Liquidators &c. v. Douglas, 22 Sess. or no negligence must, in a very 
 Cases (2nd. series) (Scotch) 447, 32 great measure, depend upon the 
 Scotch Jur. 212; Charitable Cprpo- facts of the particular case. First 
 ration v. Sutton, 2 Atk. 405 ; Litch- National Bank v. Ocean National 
 field V. White, 7 N. Y. 438, 57 Am. Bank, 60 N.- Y. 278, 19 Am. Rep. 
 Dec. 534. It seems to us that there 181, and authorities cited. See also 
 is an essential difference between Coddington v, Canaday, 157 Ind. 
 cases where persons serve as di- 243, 61 N. E. 567; 2 Thpmp. Corp. 
 rectors of a charitable corporation (2nd. ed.), § 1277. 
 
493 DIRECTORS § '520 
 
 their time and attention- to the corporate affairs, should be held 
 to a higher degree of care and diligence, than those who serve 
 without compensation, or those who undertake to give only a 
 part of their time and services to the corporation, but this does 
 not authorize the conclusion that any corporate officer, whether 
 paid or not paid for his services, may neglect the duties he has 
 assumed, and yet not be held liable for the consequences of his 
 negligence. The effect to be ascribed to the fact that no com- 
 pensation is paid is that it is in all cases an important factor in 
 determinipg whether ordinary diligence was exercised, and in 
 many cases a controlling one. 
 
 § 320 (279). Directors — Liability in matter of contract. — Sub- 
 stantially the same rules that apply to corporate officers and 
 agents generally, respecting personal liability in matters of con 
 tract, govern cases where a personal liability is sought to be im- 
 posed upon the directors of a railroad company. The familiar 
 general rule is that where an officer or agent enters into a contract 
 for the corporation, in its name and by its authority, his principal 
 alone is bound and he incurs no personal liability. If the agent 
 exceeds his authority he may incur a personal liability. So, if an 
 agent executes the contract in his own name he may be bound to 
 the person with whom he contracts. i*" The general doctrine is 
 that directors, so long as they act within the scope of their 
 powers, bind the corporation and it alone ; yet their acts done in 
 excess of such powers may in some cases bind them, personally. 2" 
 As we have elsewhere said, directors are not liable for the con- 
 sequences of mistakes which they may make, so long as they act 
 in good faith and with reasonable care,^! and keep within the 
 
 19 Vincent v. Chapman, 10 Gill & count Co., In re, L. R. 9 Ch. App. 
 J. (Md.) 279; Johnson v. Gibson, 691. 
 
 78 Ind. 282 ; Mott v. Hicks, 1 Cow- 21 As where they are misled by 
 
 en (N. Y.) 513. counsel whom they have employed. 
 
 20 Smith V. Poor, 3 Ware (U. S.) Spering's Appeal, 71 Pa. St U, 10 
 148, Fed. Cas. No. 13093; Land Am. Rep. 684; Van Dyck v. Mc- 
 Credit Co. v. Lord Ferraoy, L. R. Quade, 86 N. Y. 38. The measure of 
 8 Eq. 7. See also International Con- care and diligence required of the 
 tract Co., In re, L. R. 6 Ch. App. directors of a corporation is gener- 
 S2S; County Palatine Loan and Dis- ally such as a prudent man exer- 
 
i321 
 
 RAILROADS 
 
 494 
 
 scope of their powers. ^^ It is often said that the directors are 
 liable for any loss resulting from their acts if they exceed or 
 abuse their powers ; but this is, perhaps, rather a broad statement 
 of the rule and is not to be taken without some qualification. ^^ 
 
 § 321 (280). Directors — Errors of judgment. — Where directors 
 act in good faith and with reasonable care and diligence, not go- 
 ing beyond the scope of their authority, they are not personally 
 liable for losses that may occur although they may not have 
 wisely exercised their discretion or may have erred in judgment. 
 They are required to act in good faith and to exercise reasonable 
 care and diligence, but their duty imposes upon them no higher 
 or greater obligations. Mistake of judgment or bad business 
 management is not of itself sufficient to create a personal lia- 
 bility.2* 
 
 cises in his own affairs, but must 
 be determined in each case in view 
 of all the circumstances. Horn Sil- 
 ver Min. Co. V. Ryan,, 42 Minn. 196, 
 44 N. W. 56, 28 A. & E. Corp. Cas. 
 657. See' also 2 Thorap. Corp. (2nd. 
 ed.), §§1271-1273. 
 
 22 Percy v. Millaudon, 8 Mart. N. 
 S. (La.) 68; Dunn v. Kyle, 14 Bush. 
 .(Ky.) 134; Hodges v. New Eng- 
 land Co., 3 R. I. 9; Vance v. Pnoe- 
 nix Ins. Co., 4 Lea (Tenn.) 385. 
 
 23 National Exchange Bank v. 
 Sibley, 71 Ga. 726; Cole v. Cassidy, 
 138 Mass. 437, 52 Am. Rep. 284; 
 Morgan v. Skiddy, 62 N. Y. 319; 
 Paddock' v. Fletcher, 42 Vt. 389. 
 Directors who vote for a resolution 
 to illegally issue and negotiate notes 
 of the corporation, incur a person- 
 al liability to the corporation where 
 such notes come into the hands of 
 bona fide purchasers. Metropolitan 
 Elv. R. Co. V. Kneeland, 120 N. Y. 
 134, 24 N. E. 381, 8 L. R. A. 253,' 17 
 Am. St. 619. Directors of a com- 
 
 pany which has received the assets 
 of another company and has as- 
 sumed its debts, who misapply the 
 assets of the old company, thereby 
 render themselves individually liable 
 to its creditors. Nat. Bank of Jeffer- 
 son V. Texas Invest. Co., 74 Tex. 
 421, 12 S. W. 101. 
 
 24Godbold V. Branch Bank, 11 
 Ala. 191, 46 Am. Dec. 211; Percy 
 V. Millaudon, 8 Mart. (N. S.) (La.) 
 68; Citizens' &c. Assn. v. Coriell, 
 34 N. J. Eq. 383; Hun v. Cary, 82 
 N. Y. 65, 37 Am. Rep. 546; Ex- 
 celsior &c. Co. V. Lacey, 63 N. Y. 
 422; Spering's Appeal, 71 Pa. St. 
 11, 10 Am. Rep. 684; Vance v. 
 Phoenix &c. Co., 4 Lea (Tenn.) 385 ; 
 Overend v. Gurney, L. R. 4 Ch. 
 701; Overend v. Gibb, L. R. 5 H. 
 L. 480; Turquand v. Marshall, L. R. 
 4 Ch. 376; Charitable Corparation' v. 
 Sutton, 2 Atk. 400; 2 Thomp. Corp. 
 (2nd. ed.), §§ 1271, 1272; 8 Thomp. 
 Corp. §1271. 
 
495 
 
 DIRECTORS 
 
 §322 
 
 §322 (281). Directors — Liability for negligence. — We have 
 elsewhere said that directors are bound to exercise ordinary or 
 reasonable care and diligence in the discharge of their duties; 
 that the failure to do so is negligence, but that what shall be 
 deemed negligence depends, as a rule, upon the facts of the parti- 
 cular case. At this place our purpose is to direct attention to some 
 of the cases enforcing and applying the doctrines stated. A direc- 
 tor is personally liable, in general, for any acts of the board of 
 which he is a member constituting culpable negligence,^" or 
 amounting to a fraudulent breach of trust,^® unless he can show 
 that he sought to prevent such action, if present when the action 
 was taken,^'' or that he labored to avert its injurious consequences 
 after it came to his knowledge.^* But this rule should have a 
 reasonable application, and where a director is absent from a 
 single meeting, for instance on account of illness, or the like he 
 should not be held liable for such acts of the other directors 
 unknown to him and which he could not have prevented even if 
 present.*® 
 
 25Beal V. Osborne, 72 Cal. 305, 13 
 Pac. 871 ; Myer v. Caperton, 87 Ky. 
 306, 8 S. W. 885, 12 Am. St. 488; 
 Spering's Appeal, 71 Pa. St. 11, 10 
 Am. Rep. 684; Cady v. Sanford, S3 
 Vt. 632; Marshall v. Farmers' &c. 
 Bank, 85 Va. 676, 8 S. E. 586, L L. 
 R. A. 534, 17 Am. St. 84, and note 
 reviewing authorities 8 Thomp. 
 Corp. §§1273, 1282. Directors of 
 a corporation are personally liable 
 for permitting the corporate funds 
 or property to be wasted or lost by 
 inexcusable negligence or inatten- 
 tion to the duties they assume in 
 accepting the office of director. 
 Horn Silver Min. Co. v. Ryan, 42 
 Minn. 196, 44 N. W. 56, 28 Am. & 
 Eng. Corp. Cas. 657. 
 
 26 Sims v. Street R. Co., Zl Ohio 
 St. 556; Colquitt v. Howard, 11 Ga. 
 556; Smith v. Poor, 40 Maine 415, 
 
 63 Am. Dec. 672; Hazard v. Durant, 
 11 R. I. 195. 
 
 27 Unless, being present through 
 only part of the session, he had no 
 knowledge of the facts. Land Cred- 
 it Co. V. Fermoy, L. R. 5 Ch. 7o3. 
 
 28 Metropolitan R. Co. v. Knee- 
 land, 120 N. Y. 134, 24 N. E. 381, 
 8 L. R. A. 253, 17 . Am. St. 619; 
 Percy v. Millaudon, 3 La. 568; 
 Black V. Delaware &c. Canal Co. 
 22 N. J. Eq. 130, 420; Shea v. 
 Mabry, 1 Lea (Tenn.) 319. 
 
 29Briggs V. Spaulding, 141 U. S. 
 132, 11 Sup. Ct. 924, 35 L. ed. 662; 
 Movius V. Lee, 30 Fed. 298; Mur- 
 phy V. Penniman, 105 Md. 452, 66 
 Atl. 282, 121 Am. St. 583; In re 
 Spering's Appeal, 71 Pa. St. 11, 10 
 Am. Rep. 684; Cargill v. Bower, 10 
 Ch. Div. S02, 47 L. J. Ch. 649; 2 
 Thomp. Corp. (2nd. ed.), §§ 1282- 
 1284. 
 
323 
 
 RAILROADS 
 
 496 
 
 §323 (282). Directors — Fraud on third persons.-^Directors 
 
 who' make false and fraudulent representations of fact, thereby 
 causing loss to innocent third persons who act upon the faith of 
 the truth of the representations, are personally liable to such per- 
 sons.^** It is essential to a recovery in such cases that it be 
 proved by the plaintiff that the representations were false. But 
 it is held, with good reason and upon authority, that it is not 
 necessary that the plaintiff should show that the representations 
 were made with actual intent to defraud.*^ . The rep- 
 resentations may be made in various forms. The form in 
 which they are made is not regarded as material, for if they were 
 made and did result in defrauding a right-doing third person he 
 is entitled to recover. The question has arisen in many forms; 
 thus, where the directors knowingly issued fraudulent stock or 
 bonds, they were held to be individually liable to any purchaser 
 or subsequent transferee in good faith and without notice of the 
 fraudulent character of the stock or bonds. ^^ So, the making of 
 
 30 Tyler v. Savage, 143 U. S. 79, 
 12 Sup. Ct. 340, 36 L. ed. 82; Sal- 
 mon V. Richardson, 30 Conn. 360, 
 79 Am. Dec. 255; Tate v. Bates, 
 118 N. Car. 287, 24 S. E. 482, 54 
 Am. St. 719; Prescott v. Haughey, 
 65 Fed. 653. In the last case cited, 
 Baker, J., delivered a strong and 
 well-reasoned opinion, in the course 
 of which it was said : "The fraud- 
 ulent representations charged in the 
 complaint, if made under color of 
 their office, were entirely outside of 
 the official duties of the directors. 
 Neither the law, nor the obligations 
 of their office made it any part of 
 their duty to utter and publish false 
 and fraudulent statements and re- 
 ports in regard to the condition of 
 the bank. The tort for which they 
 are sued was committed in their pri- 
 vate and personal capacit)', because 
 the 'law does not confer upon such 
 officers any authority to coihmit 
 
 frauds of the character complained 
 of. These; directors have used their 
 official position to enable them to 
 perpetrate a fraud on the plaintifif 
 entirely outside of the legitimate 
 scope of their duties." The court 
 discriminated between the case be- 
 fore it for judgment and that of 
 Bailey v. Mosher, 63 Fed. 488. See 
 also 8 Thomp. Corp. §§ 1301, 1303. 
 
 31 Scale v. Baker, 70 Tex. 283, 7 
 S. W. 742, 8 Am. St. 592. 
 
 32 Hornblower v. Crandall, 78 Mo. 
 581; National Exch. Bank v. Sibley, 
 71 Ga. 726; Bruff v; Mali, 36 N. Y. 
 200; Acts 16th Gen. Assem. Iowa, 
 ch. 123, § 6, provides that if the 
 directors of any railroad of three- 
 feet gauge receiving taxes voted in 
 aid thereof under the act shall vote 
 to mortgage or incumber the road 
 for more than $16,000 per mile, they, 
 or those voting in the affirmative, 
 shall be liable to each stockholder 
 
•497 
 
 DIRECTORS 
 
 §323 
 
 false and fraudulent statements as to the value of the stock or 
 condition of the business of the corporation, or other matters 
 peculiarly within their knowledge,^* will render the directors 
 liable to the parties to whom they were made and who acted 
 upon them for all damages which they sustain thereby. Action- 
 able false and fraudulent representations may be made in a pros- 
 pectus^* or report*^ officially issued, and, as a general rule, all 
 persons into whose hands such prospectus or statement may 
 come, have a right to rely upon them and to hold the directors 
 personally responsible for losses sustained by reason of acting 
 upon a belief in their truth.** As a general rule only those di- 
 rectors who participated in the fraud are personally liable,*'^ and 
 to entitle a plaintiff to recover, such participation or at least 
 knowledge and acquiescence therein must be proved,*'^ since the 
 court will not, in the absence of evidence, indulge the presump- 
 tion that a director knows of the frauds of his associates. The 
 authorities are numerous upon the general question and support 
 the general statement of the opening sentence of this section.*" 
 
 in an amount double the par value 
 of his stock, if the stock is rendered 
 less valuable thereby. Under this 
 statute it was held that persons re- 
 ceiving shares for taxes voted and 
 paid after a mortgage for more than 
 $16,000 per mile had been executed 
 and recorded could not recover 
 against directors who voted the 
 same. Walker v. Birchard, 82 Iowa 
 388, 48 N. W. 71. 
 
 33 Scale V. Baker, 70 Tex. 283, '7 
 S. W. 742, 8 Am. St. 592, and note; 
 Vreeland v. New Jersey &c. Co., 29 
 N. J. Eq. 188; Morgan v. Skiddy, 
 62 N. Y. 319. If the statements be 
 as to matters of law and mere opin- 
 ion, the directors are not bound. 
 New' Brunswick &c. R. Co. v. Cony- 
 bear, 9 H. L. Cas. 711 ; Rashdall v. 
 Ford, L. R. 2 Eq. 750; Morgan v. 
 Skiddy, 62 N. Y. 319. 
 
 3* Morgan v. Skiddy, 62 N. Y. 
 
 319; United Society v. Underwood, 
 9 Bush (Ky.) 609, 15 Am. Rep. 731. 
 
 35 Salmon v. Richardson, 30 Conn. 
 360, 19 Am. Dec. 255; Warren v. 
 Para &c. Co., 166 Mass. 97, 44 N. 
 E. 112. 
 
 36 Peek V. Gurney, L. R. 6 H. L. 
 in ; Vreeland v. N. J. Stone Co., 29 
 N. J. Eq. 188 The rule stated 
 would not apply if the persons into 
 whose hands such instruments came 
 knew that the statements were not 
 true, or if they were guilty of such 
 negligence as would, under the ordi- 
 nary rules of law, prevent a recovery 
 for a loss caused by fraudulent 
 representations. 
 
 37 Cargill V. Bower, L R. 10 Ch. 
 Div. 502. 
 
 38 Arthur v., Griswold, 55 N. Y 
 400. 
 
 39Neall V. Hill, 16 Cal. 145, 76 
 Am. Dec. 508; Salmon v. Richard- 
 
§323 
 
 RAILROADS 
 
 498 
 
 In many of the states the directors are by statute made person- 
 ally liable for corporate debts created beyond their subscribed 
 capital stock,*" and are also made liable for debts in case they 
 declare and pay dividends unlawfully. *i The making of a report 
 as to the business and financial condition of a railroad corpora- 
 tion which is false in any material representation renders the 
 officers signing it liable for all debts of the corporation contracted 
 while they are such officers thereof in Arkansas, Texas and 
 Nevada; and renders them liable to a penalty in Michigan; and 
 making such a report is a misdemeanor in Nevada and Minne- 
 sota." 
 
 son, 30 Conn. 360, 79 Am. Dec. 2SS; 
 Delano v. Case, 121 111. 247, 12 N. E. 
 676, 2 Am. St. 81; United Society 
 V. Underwood, 72 Ky. 609, 15 Am. 
 Rep. 731 ; Graves v. Bank, 73 Ky. 
 23, 19 Am. Rep. SO; Cross v. Sack- 
 ett, 6 Abb. Pr. (N. Y.) 247; Caz- 
 eaux V. Mali, 25 Barb. (N. Y.) 578; 
 Morgan v. Skiddy, 62 N. Y. 319; 
 Bartholomew v. Eentley, 15 Ohio 
 659, 45 Am. Dec. 596; Wallace v. 
 Bank, 89 Tenn. 630, 15 S. W. 448, 
 24 Am. St. 625; Marshall v. Bank, 
 85 Va. 676, 8 S. E. 586, 2 L. R. A. 
 534, 17 Am. St. 84; Clarke v. Dick- 
 son, 6 C. B. (N. S.) 452; Johnson 
 V. Gorlett, 3 C. B. (N. S.) 569; 
 Peek V. Deery, L. R. 37 Ch.. Div. 
 541, 585. See generally Clark v. 
 Edgar, 84 Mo. 106, 54 Am. Rep. 84; 
 Nat. Exchange Bank v. Sibley, 71 
 Ga. 726; Peck v. Cooper, 112 111. 
 192, 54 Am. Rep. 231; Wyandotte 
 V. Corrigan, 35 Kans. 21, 10 Pac. 
 99; Peek v. Gurney, Law R. 6 H. 
 L. 377. 
 
 40 8 Thomp. Corp. § 1342. Cal. 
 Civ. Code, §309, making directors 
 of corporations individually liable 
 for debts created beyond their sub- 
 
 scribed capital stock, was held ap- 
 plicable to all the subscribed capital 
 stocks, irrespective of the mode of 
 disposition, and whether paid in or 
 not. But the debts referred to did 
 not include capital stock paid for 
 corporate property. Moore v. Lent, 
 81 Cal. 502, 22 Pac. 875. 
 
 "8 Thomp. Corp. § 1347. 
 
 *2 8 Thomp. Corp. §§ 1325. See 
 Niles v. Dodge, 70 Ind. 147; State 
 V. Cox, 88 Ind. 254; Fairbanks &c. 
 Co. V. Macleod, 8 Colo. App. 190, 
 45 Pac. 282; Lehman v. Knapp, 48 
 La. 1148, 20 So. 674. See generally 
 Stone v. Kellogg, 62 111. App. 444; 
 Rose V. Eclipse &c. Co., 60 Mo. App. 
 28; Solomon v. Bates, 118 N. Car. 
 311, 24 S. E. 478, 54 Am. St. 725. 
 Greenville &c. Co. v. Reis, 54 Ohio 
 549, 44 N. E. 271. Rights of direc- 
 tors under statutes preferring claims 
 of laborers. Consolidated &c. Co. 
 v. Keystone &c. Co., 54 N. J. Eq. 
 309, 35 Atl. 157. As to who are 
 proper parties where the right to 
 the office of director is involved, see 
 Dusenbury v. Looker, 110 Mich. 58, 
 67 N. W. 986. 
 
CHAPTER XIII. 
 
 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS. 
 
 Sec. 
 
 325. President — Generally. 
 
 326. President — Incidental powers 
 
 of. 
 
 327. President — Implied p&wers. 
 
 328. President — Powers implied 
 
 from grant of authority by 
 the board of directors. 
 
 329. President — Influence of usage. 
 
 330. President — -Apparent author- 
 
 ity. 
 
 331. President — Ratification of un- 
 
 authorized acts. 
 
 332. President — Dealings with cor- 
 
 poration. 
 
 333. President — Relation to share- 
 
 holders. 
 
 334. Treasurer — Generally. 
 
 Sec. 
 
 335. Treasurer — Duties — Liabili- 
 
 ties. 
 
 336. Treasurer— Care of corporate. 
 
 funds. 
 
 337. Secretary. 
 
 338. Managing agents. 
 
 339. Superintendent. 
 
 340. Superintendent — 'General con- 
 
 clusion. 
 
 341. Intermediate agents. 
 
 342. Intermediate agents — Agent 
 
 for one purpose not for an- 
 other. 
 
 343. Intermediate agents and serv- 
 
 ants distinguished. 
 
 344. Conductors. 
 
 345. Station agents. 
 
 §325 (283). President — Generally. — Railroad companies are 
 generally required to elect a president^ who is, ordinarily, the 
 chief executive officer of the company.^ It can hardly be said that 
 the powers and duties of a president of a railway company are 
 prescribed and defined by the general principles of law, for, as ?, 
 rule, recourse must be had to the act of incorporation or to the 
 
 1 The president must be chosen 
 by the body to which the act of 
 incorporation grants the right to 
 elect. An election by the stockhold- 
 ers, where the charter requires the 
 board of directors to elect, has been 
 held a nullity. Walsenburg &c. Co. 
 V. Moore, 5 Colo. App. 144, 38 Pac. 
 60. 
 
 2 Provision is often made for the 
 election of a vice president, but, as 
 
 a rule he only acts in the absence 
 of the president, althotigh active, 
 independent duties may be required 
 of him, if the company so desires, 
 and no provision of the charter for- 
 bids. Colman v. West Virginia &c. 
 Co., 25 W. Va. 148; Richards v. 
 Osceola, 79 Iowa 707, 45 N. W. 294; 
 Chicago &c. Co. v. James, 22 Wis. 
 194; Chicago &c. Co. v. James, 24 
 Wis. 388. 
 
 499 
 
§ 325 RAILROADS 500 
 
 corporate by-laws to ascertain what these powers and duties are. 
 Some of the cases hold that he has no greater powers by virtue 
 of his office than any other director except that he is the presid- 
 ing officer at the meetings of the board of directors.* It seems to 
 us, however, that the powers of the president are greater and 
 more comprehensive than those of an individual director, for he 
 may act for the company in ordinary business affairs, and this 
 an individual director cannot do; but the president cannot, of 
 course, effectively exercise powers which belong to the board of 
 directors. We think it may be safely said that in ordinary rou- 
 tine business matters the president may act for the company 
 unless his powers are so circumscribed and limited by the act of 
 incorporation or the corporate by-laws as to exclude the opera- 
 tion of the general rules of law. We know that the authorities 
 are in conflict upon this question, but we believe that the trend of 
 modern authority is strongly in favor of the conclusion we have 
 stated. Some of the decisions contain loose general statements 
 that cannot justly be regarded as authoritative, but must be 
 taken to be mere dicta. There is, however, a sharp conflict in 
 the authorities which it is not possible to reconcile.* While the 
 
 sDabney v. Stevens, 10 Abb. Pr. 330; Wainwright v. P. H. &c. Roots 
 
 (N. S.) 39; Titus v. Carlo &c. R. Co., 176 Ind. 682, 97 N. E. 8. 
 Co., 27 N. J. L. 98 ; Adriance v * Sustaining the doctrine of the 
 
 Roome, 52 Barb. (N. Y.) 399; Ris- text. Sherman &c. Co. v. Swigart, 
 
 ley V. Indianapolis &c. R. Co., 1 43 Kans. 292, 23 Pac. 569, 19 Am. St. 
 
 Hun (N. Y.) 202. See generally 137; Blen v. Bear River &c. Co., 20 
 
 Bacon v. Mississippi &c. Co., 31 Cal. 602, 81 Am. Dec. 132; Los 
 
 Miss. 116; Hodges v. Rutland &c. Angeles &c. Co. v. Los Angeles, 
 
 R. Co., 29 Vt. 220; Templen V. Chi- 106 Cal. 156, 39 Pac. 535; 
 
 cago &c. Co., 75 Iowa 548, 35 N. Hawley v. Gray Bros. &c.- Co., 106 
 
 W. 634, 34 Am. & Eng. R. Cas. Cal. 337, 39 Pac. 609; Chicago &c. 
 
 107; Chicago &c. R. Co. v. James, Co. v. Coleman, 18 111. 297, 68 Am. 
 
 22 Wis. 194. See also 2 Thomp. Dec. 544; Mitchell v. Deeds, 49 111. 
 
 Corp. (2nd. ed.), §§ 1450-1456. And 416, 95 Am. Dec. 621; Ceeder v. 
 
 further to the effect that his power Loud &c. Co., 86 Mich. 541, 49 N. 
 
 by mere virtue of the office and not W. 575, 24 Am. St. 134; Gray v. 
 
 as general manager is, at all events, Waldron, 101 Mich. 612, 60 N. W. 
 
 very limited, see National State 288; Thomas v. City &c. Bank, 40 
 
 Bank v. Vigo Co. Nat. Bank, 151 Nebr. 501, 58 N. W. 943, 24 L. R. A. 
 
 Ind. 352, 40 N. E. 799, SO Am. St. 263; Oakes v. Cattarugus &c. Co., 
 
501 
 
 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 326 
 
 president of a railroad may, as we believe, act for the corpora- 
 tion in ordinary matters of routine business, he is merely an offi- 
 cer and not the corporation.^ He cannot perform the duties of 
 the board of directors, nor can he perform those conferred upon 
 other corporate officers by the act of incorporation or the by- 
 laws, neither can he effectively perform acts outside of the ordi- 
 nary business affairs or transactions of the company." 
 
 §326 (284). President — Incidental powers of. — As indicated 
 in the preceding section our opinion is that the president of a rail- 
 road company possesses incidental powers of considerable scope 
 in all cases, except, perhaps, in those where the act of incorpora- 
 tion or the by-laws so clearly and fully prescribe and define his 
 powers as to exclude all implied power. The rule applied to char- 
 itable corporations cannot, it seems to us, be applied to railway 
 
 143 N. Y. 430, 38 N. E. 461, i'o L. 
 R. A. 544; Washburn v. Nashville 
 &c. Co., 3 Head (Tenn.) 638, 75 
 Am. Dec. 784; Richmond &c. R. 
 Co. V. Snead, 19 Grat. (Va.) 354, 
 100 Am. Dec. 670. See also Jones 
 &c. Co. V. Crary, 234 111. 28, 84 N. E. 
 651 ; Dexter Sav. Bank v. Friend, 
 90 Fed. 703. Contra, Lyndon &c. 
 Co. V. Lyndon &c. Inst., 63 Vt. 581, 
 22 Atl. 575, 25 Am. St. 783; Brook- 
 lyn &c. Co. V. Slaughter, 33 Ind. 
 185; Mount Sterling &c. Co. v. 
 Looney, 1 Mete. (Ky.) 550, 71 Am. 
 Dec. 491 ; Wait v. Nashua &c. Assn., 
 66 N. H. 581, 23 Atl. 17, 14 L. R. 
 A. 356, 49 Am. St. 630; 34 Cent. 
 L. J; 119. A valuable article, rich 
 in . authority, by Judge Seymour D 
 Thompson, in 39 Cent. L. J. 200, pre- 
 sents both sides of the question 
 very fully, and so does 2 Tnomp. 
 Neg. (2nd. ed.), §§ 1450-1462. Cop- 
 ious notes will be found in Wait 
 V.' Nishtia &,c. Assn., 66 N. H. 581, 
 14 "L. R. a. Zie, 49 Am. St. 630, 
 
 and in Teraplin v. Chicago &c. R. 
 Co., n Iowa 548, 35 N. W. 634, 34 
 Am. & Eng. R. Cas. 107. 
 
 5 Bi- Spool &c. Co. V. Acme , &c. 
 Co., 153 Mass. 404, 26 N. E. 991. 
 
 sBlen V. Bear River &c. Co., 20 
 Cal. 602, 81 Am. Dec. 132; Bliss 
 V. Kaweah &c. Co., 65 Cal. 502, 4 
 Pac. 507; Siebe v. Joshua &c. Co., 
 86 Cal. 390, 25 Pac. 14; Castle v. 
 Belfast &c. Co., 72 Maine 167; Leg- 
 gett V. New Jersey &c. Co:, 1 N. 
 J. Eq. 541, 23 Am. Dec. 728; Risley 
 V. Indianapolis &c. R. Co., 1 Hun 
 (N. Y.) 202; Crump v. United 
 States &c. Co., 7 Grat. (Va.) '352, 
 56 Am. Dec. 116; Walworth Coun- 
 ty Bank v. Farmers' &c. Co., 14 
 Wis. 325. See also Yellow Jacket 
 &c. Min. Co. V. Stevenson, 5 Nev. 
 224; AUentown First Nat. Bank v. 
 Hoch, 89 Pa. St. 324, Zl Am. Rep. 
 769. The doctrine is carried ' very 
 far in the case of Asher v. Sutton, 
 31 Kans. 286, 1 Pac. 53S. 
 
§ 327 RAILROADS 502 
 
 companies, so that the cases laying down the law as to the powers 
 of the president of educational, literary, benevolent corporations, 
 or the like, ought not to be unqualifiedly accepted as authorita- 
 tively declaring the law applicable to the presidents of railroad 
 companies. Judges know ex officio that in the conduct and man- 
 agement of railway companies there are matters requiring daily 
 attention and that of those matters disposition must be made 
 promptly and effectively without calling together the board of 
 directors for formal action. So, too, it is a matter of judicial 
 knowledge that railroad companies are often consolidated, that 
 interests of great magnitude are combined, that many miles of 
 railroad are placed under one management, and that directors 
 often reside far apart and far distant from the principal office. In 
 view of these considerations, and others which might be sug- 
 gested, it is but reasonable and natural to hold that in many 
 respects the powers of the chief executive or ministerial officers 
 of a railroad company are more comprehensive than those of a 
 corporation of a different nature, such as a manufacturing, min- 
 ing or banking company, although in other respects, as the bor- 
 rowing of money, or the like, they may not be so comprehen- 
 sive as those of a president of a corporation of that class. It is 
 safe, at all events, to affirm that the president of a railroad com- 
 pany does possess implied or incidental powers, either as such or 
 by virtue of usage, and that his powers extend beyond those ex- 
 pressly conferred upon him by the board of directors. He may 
 do many acts without direct o*" express authority from the board 
 of directors of the company. 
 
 §327 (285). President — Implied powers. — It is difficult in 
 some cases to determine what powers the president possesses as 
 incident to the office bestowed upon him, or as iniplied from the 
 general nature of the authority conferred upon him by the com- 
 pany. A contract of an unusual character, as, for instance, a con- 
 tract for the construction of the road, he has no implied power to 
 make, since that is a contract of an extraordinary character, at 
 least it is one beyond the range of ordinary corporate business.'^ 
 
 1 Central &c. Co. v. Condon, 67 Co., 73 Iowa 548, 35 N. W. 634 ; 
 Fed. 84; Templin v. Chicago &c. R. Griffith v. Chicago &c. R. Co. 74 
 
503 EXECUTIVE AND MINISTERIAL OFFICEKS AND AGENTS § 327 
 
 He cannot rightfully sell all the personal property of the cor- 
 poration, nor, perhaps, any very considerable part of it, unless 
 authorized by the board of directors f but we venture to affirm, 
 notwithstanding some decisions to the contrary, that he may sell 
 particular articles of personal property without express author- 
 ity from the board, as, for example, a car or a locomotive. The 
 president does not merely by virtue of his office, possess author- 
 ity to dispose of all of the assets of the company, for such an act 
 is one beyond the scope of his authority.^ Some of the cases 
 assert that the president cannot purchase property for the cor- 
 poration,!" but we think that he may within reasonable limits 
 purchase property required for use in the ordinary course of the 
 corporate business, but that the authority to purchase is a limited 
 one. The president, under ordinary circumstances, has no im- 
 plied power to release parties from liability to the corporation. ^i' 
 Authority to mortgage the corporate property cannot be im- 
 plied, but must be conferred by the board of directors or by that 
 branch of the corporate government in which power to authorize 
 the execution of mortgages is lodged. ^'-^ Unless otherwise pro- 
 Iowa 85, 36 N. W. 901 ; Risley v. W Bliss v. Kaweah &c. Co., 65 Cal. 
 Indianapolis &c. R. Co., 1 Hun (N. 502, 4 Pac. 507; Blen v. Bear River 
 Y.) 202. See Fitzgerald v. Fitz- &c. Co., 20 Cal. 602, 81 Am. Dec. 
 gerald &c. Co., 41 Nebr. 374, 62 N. 132. But it has been held that the 
 W. 899. president of a railroad company 
 
 8 Walworth County Bank v. may borrow money for use in its 
 Farmers' &c. Co., 14 Wis. 325; business and execute a note there- 
 Bliss V. Kaweah &c. Co., 6S Cal. for. Cotton States &c., Co. v. Flori- 
 502, 4 Pac. 507; Fulton Bank v. da R. Co., 69 Fla. 52, 67 So. 568. 
 New York &c, Co., 4 Paige (N. See also 8 Thomp. Corp. §1477. 
 Y.) 127. See also Titus v. Cairo n Risley v. Indianapolis &c. R. 
 &c. R. Co., 37 N. J. L. 98; Asher Co.,.l Hun (N. Y.) 202; Soper v. 
 V. Sutton, 31 Kans. 286, 1 Pac. 535. Buffalo &c. Co., 19 Barb. (N. Y.) 
 As suggested in the preceding sec- 310; Miller v. Rutland &c. R. Co., 
 tion, we are inclined to think that 36 Vt. 452. 
 
 cases such as those cited in this note 12 Luse v. Isthmus &c. R. Co., 6 
 
 cannot apply with full force to rail- Ore. 125, 25 Am. Rep. 506; Eng- 
 
 road companies. land v. Dearborn,. 141 Mass. 590, 6 
 
 9 Titus V. Cairo &c. Co., 37 N. J. N. E. 837. See generally Davis v. 
 L. 98, 102. See McCuUough v. Rock Creek &c. Co., 55 Cal. 359, 36 
 Moss, 5 Denio (N. Y.) 567. Am. Rep. 40; Alta &c. Co. v. Alta 
 
§327 
 
 RAILROADS 
 
 504 
 
 vided in the act of incorporation or by-laws, the president of a 
 railroad company has a general supervision and authority over 
 the stibject of employing and discharging corporate agents and 
 servants.i^* There is a conflict of authority upon the question as 
 to whether he has the power to commence an action on behalf of 
 the company ;!* but, for our part, we can see no sufficient reason 
 why he may not do so in ordinary cases. He may employ coun- 
 sel to defend an action or suit against the company.^" He has 
 no implied power to bind the company by consenting to the ap- 
 pointment of a receiver,^ 8 nor has he power to make an assign- 
 ment of the corporate assets for the benefit of creditors. i'' 
 
 Mining Co., 78 Cal. 629, 21 Pac. 
 373; Jesup v. City Bank, 14 Wis. 
 331. 
 
 13 Arapahoe &c. Co. v. Stevens, 
 13 Colo. 534, 22 Pac. 823. 
 
 14 Recamier &c. Co. v. Seymour, 
 24 N. Y. St. 54, S N. Y. S. 648; 
 Davis V. Memphis &c. R. Co., 22 
 Fed. 883; Wetherbee v. Fitch, 117 
 111. 67, 7 N. E. 513; Bailey v. Sny- 
 der, 61 111. App. 472; Bright v. Met- 
 airie &c. Assn., 33 La. Ann. 58; 
 White v. Westport &c. Co., 1 Pick. 
 (Mass.) 215, 11 Am. Dec. 168; 
 Globe Works v. Wright, 106 Mass. 
 207; Ashuelot &c. Co. v. Marsh, 1 
 Cush. (Mass.) 507; Reno &c. Co. v. 
 Leete, 17 Nev. 203, 30 Pac. 702 ; 
 Potter v. New York &c. Co., 44 
 Hun (N. Y.) 367; Oakley v. Work- 
 ingmen's &c. Soc, 2 Hilt. (N. Y.) 
 487; American &c. Co. v. Oakley, 
 9 P?ige (N. Y.) 496, 38 Am. Dec. 
 561; Colman v. West Virginia &c. 
 Co., 25 W. Va. 148. 
 
 isSarmiento v. Davis Boat &c. 
 Co.,', 105 Mich. 300, 63 N. W. 205, 
 55 Am. St. 446; Wetherbee v. Fitch, 
 117 III. 67, 7 N. -E. 513. 
 
 18 Walters v. Anglo-Saxon &c. 
 Co., 50 Fed. 316. 
 
 iTAsher v. Sutton, 31 Kans. 286, 
 1 Pac. 535; Gibson v. Goldthwaite, 
 7 Ala. 281, 42 Am. Dec. 592; Hal- 
 lowell &c. Bank v. Hamlin, 14 Mass. 
 178; Luse v. Isthmus &c. R. Co., 6 
 Ore. 125, 25 Am. Rep. 506. The 
 president of an ordinary private cor- 
 poration may be authorized by the 
 governing board to make an assign- 
 ment. Vanderpoel v. Gorman, 140 
 N. Y. 563, 35 N. E. 932, 24 L. R. A. 
 548, 37 Am. St: 601. For cases de- 
 claring and enforcing the general 
 doctrine as to the implied powers 
 of a president of a corporation, see 
 Smith V. Smith, 62 111. 493; Indian- 
 apolis &c. Co. V. St Louis &c. R. 
 Oa, 26 Fed. 140; Crowly v. Gene- 
 see &c. Co., 55 Cal. 273; Bank of 
 Healdsburg v. Bailhace, 65 Cal. 
 327, 4 Pac. 106; Greig v. Riordan, 
 99 Cal. 316, 33 Pac. 913; Stow v. 
 Wyse, 7 Conn. 214, 18 Am. Dec. 
 99; Sherman &c. Co. v. Swigart, 43 
 Kans. 292, 23 Pac. 569, 19 Am. St. 
 137, 2 Lewis Am. R. & Corp. 158; 
 Northern Central &c. R. Co. v. Bas- 
 tian, 15 Md. 494; Rhodes v. Webb, 
 24 Minn. 292; Duncorab v. New 
 York &c. Co., 88 N. Y. 1, 13 Am. 
 & Eng. R. Cas. 84; Jourdan v. Long 
 
505 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS §328 
 
 § 328 (286). President— Powers implied from grant of author- 
 ity by the board of directors. — It seems proper, in order' to pre- 
 vent a possibie njisunderstanding, that we should say, by way of 
 explanation, that in discussing the incidental and implied powers 
 ■of the president we have had reference only to the powers inci- 
 dent to the office bestowed upon him, and to those implied from 
 the nature of the office itself. The board of directors may ma- 
 terially extend the powers of the president and invest him with 
 authority much beyond that inherent in the office of president.^* 
 Where the directors rightfully invest the president with a princi- 
 pal power, he takes it with all the incidental powers essential 
 to a proper exercise of the principal power conferred upon him.^® 
 
 § 329 (287). President — Influence of usage. — The usage of a 
 railway company is an important factor in determining the power 
 of its president. The president may often be invested with au- 
 thority by corporate usage. It is not possible to lay down any 
 definite rules upon this subject, but it may be safely said that long 
 continued usage may confer authority upon the president much 
 greater than that inherent in his office and essentially greater 
 than th^t expressly conferred upon him by the board of direc- 
 tors or the stockholders of the corporation. ^•' 
 
 Island R. Co., 115 N*. Y. 380, 22 N. is Baker v. Cotter, 45 Maine 236; 
 
 E. 153; Nichols v. Scranton &c. Hatch v. Coddington, 95 U. S. 48, 
 
 Co., 137 N. Y. 471, 33 N. E. 561; 24 L. ed. 339; Irwin v. Bailey, 8 
 
 Oakes v. Cataraugus &c. Co., 143 Biss. (U. S.) 523, Fed. Cas. No. 
 
 N. Y 430, 38 N. E. 461; Chicago 7079; Rowland v. Myer, 3 N. Y.' 
 
 &c. R. Co. V. James, 24 Wis. 388. 290. But the implied power is only 
 
 18 Seely v. San Jose &c. Co., 59 such as is necessary to effectuate 
 
 Cal. 22; Hawley v. Gray Bros. &c. the principal power. Second &c. R. 
 
 Co., 103 Cal. 337, 39 Pac. 609; Mit- Co. v. Mehrbach, 17 Jones & S. (N. 
 
 chell V. Deeds, 49 111. 416, 95 Am. Y.) 267. 
 
 Dec. 621; Smith v. Smith, 62 111. 20 Minor v. Mechanics' Bank, 1 
 
 493, 496; Castle v. Belfast &c. Co., Pet. (U. S.) 46, 7 L. ed. 47; Mount 
 
 72 Maine 1,67; State v. Heckart, 62 Sterling &c. R. Co. v. Looney, 58 
 
 Mo. App. 427 ; Lee v. Pittsburgh &c. Ky. 550, 71 Am. Dec. 491 ; Northern 
 
 Co., 56 How. Prac. (N. Y.) 373; Cent. R. Co. v. Bastian, 15. Md. 494; 
 
 Lucky &c. Co. v. Abraham, 26 Ore. Merchants &c. Bank v. Citizens &c. 
 
 282, 38 Pac. 65. See also McCor- Co., 159 Mass. SOS, 34 >T. E. 1083, 
 
 raick V. Stockton ^c. R. Co., 130 38 Am. St. 453; Walker v. Detroit 
 
 Cal. 100, 62 Paq 267. &c. Co., 47 Mich. 337, 11 N. W. 187. 
 
§ 330 RAILROADS 506 
 
 §330 (288). President— Apparent authority.— The authority 
 with which the corporation ostensibly invests its president is as 
 to persons dealing in good faith and without notice of his actual 
 authority, the authority which he possesses ; but it is not his au- 
 thority in cases where the person dealing with him has notice 
 of his actual authority.^i The question in such cases is |as to the 
 ostensible authority with which the president has been invested, 
 not as to the authority actually conferred upon him. In most 
 cases the question as to whether the president has been clothed 
 with authority to perform the act upon which the claims or cor- 
 porate liability is based is one of fact. Where the person deal- 
 ing with the president has notice that the president is acting for 
 himself, or knows that the business he is engaged in is not cor- 
 porate business, the corporation is not bound.^* 
 
 § 331 (289). President — Ratification of unauthorized acts. — 
 
 The acts of the president, like those of any other agent, although 
 beyond the scope of his authority, may, of course, be ratified by 
 the corporation. 2^ There is, it is barely necessary to suggest, no 
 
 See generally Mining Co. v. Anglo- 22 Stone v. Hayes, 3 Denio (N. 
 Californian Bank, 104 U. S. 194, 26 Y.) 575; Moores v. Citizens' Nat. 
 L. ed. 707; Martin v. Webb, UO U. Bank, 111 U. S.- 156, 4 Sup. Ct. 345, 
 S. 7, 3 Sup. Ct. 428, 28 L. ed. 49; 28 L. ed. 385; Farrington v. South 
 Bell V. Hanover &c. Bank, 57 Fed. Boston R. Co., 150 Mass. 406, 23 
 821; Western &c. Co. v. Bayne, 11 N. E. 109, 5 L. R. A. 849, 15 Am 
 Hun (N. Y.) 166; Moyer v. East St. 222; Bentley v. Columbia &c. 
 Shore &c. Co., 41 S. Car. 300, 19 Co., 17 N. Y. 421 ; Claflin v. Farm- 
 S. E. 651, 25 L. R. A. 48, 44 Am. ers' &c. Bank, 25 N. Y. 293; Wilson 
 St. 709; 8 Thomp. Corp. §1460. v. Metropolitan &c. R. Co., 120 N. 
 21 The rule upon this subject is Y. 145,- 24 N. E. 384, 17 Am. St. 
 substantially the same whether the 625; Manhattan &c. Co. v. Forty- 
 agent of the corporation be the pres- second &c. R. Co., 139 N. Y. 146, 
 ident or some other agent. Manhat- 151, 34 N. E. 776. 
 ton &c. Co. V. Forty- Second &c. R. 23 Qlcott v. Tioga R. Co., 27 N. 
 Co., 139 N. Y. 146, 34 N. E. 776; Y. 546, 84 Am. Dec. 298; Pixley 
 Bank of Batavia v. New York &c. v. Western Pac. R. Co., 33 Cal. 183, 
 R. Co., 106 N. Y. 195, 12 N. E. 433, 91 Am. Dec. 623; Pittsburgh &c. 
 60 Am. Rep. 440; Fifth Ave. Bank R. Co. v. WooUey, 12 Bush. (Ky.) 
 V. Forty-second &c. R. Co., 137 N. 451; Southgate v. Atlantic &c. R. 
 Y. 231, 33 N. E. 378, 19 L. R. A. Co., 61 Mo. 89. When the president 
 331,- 33 Am. St. 712. of a corporation executes, in its 
 
507 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 332 
 
 doubt as to the general rule that unauthorized acts may be rati- 
 fied, but it is not always easy to say what will be deemed a rati- 
 fication.2* Acts clearly and entirely beyond the corporate power 
 cannot be ratified. 
 
 §332 (290). President — Dealings with corporation. — Essen- 
 tially the same rules apply to transactions by the president with 
 the corporation as those which govern transactions between the 
 corporation and the directors. The president acts in a fiduciary 
 capacity, and is bound to exercise the utmost good faith in deal- 
 ing with the corporation. He may deal with it, but his course 
 must be open, honest and fair or else the courts will set the trans- 
 action aside or hold him responsible in damages at the suit of 
 one having a right to invoke judicial assistance.^^ 
 
 §333 (291). President— Relation to shareholders.— In our 
 
 judgment the president is a trustee for the shareholders, although 
 he may not be a trustee in the full sense of the term. 2® He un- 
 
 behalf and within the scope of its 
 charter, a contract which requires 
 the concurrence of the board of 
 directors, and the board, having full 
 knowledge of his act, does not dis- 
 sent within a reasonable time, it 
 will be presumed to have ratified 
 the contract. Pittsburgh &c. Co. v. 
 Keokuk ^&c. Co., 131 U. S. 371, 9 
 Sup. Ct.' 770, 33 L. ed. 157. See 
 also as to presumption that presi- 
 dent had authority to do act done 
 by him within scope of corporate 
 powers; Lloyd &c. Co, v. Matthews, 
 223 111. 477, 79 N. E. 172, 7 L. R. A. 
 (N. S.) 376, and authorities on 
 both sides reviewed in note. 
 
 24 Jourdan v. Long Island &c. R. 
 Co., 115 N. Y. 380, 22 N. E. 153; 
 Alabama &c. Co. v. South &c. R. 
 Co., 84 Ala. 570, 3 So. 286, 5 Am. 
 St. 401; Chateau v. Allen, 70 Mo. 
 290; Gutta Percha &c. Co. v. Vil- 
 lage of Ogalla, 40 Nebr. 775, 59 N. 
 
 W. 513, 42 Am. St. 696; Doren- 
 becker v. Columbia C. L. Co., 21 
 Ore. 573, 28 Pac. 899, 28 Am. St. 
 766; Currie v. Bowman, 25 Ore. 364, 
 35 Pac. 848; Taylor v. Albermarle 
 &c. Co., 105 N. Car. 484, 10 S. E. 
 897. For cases of such ratification 
 without formal act see Leroy &c. R. 
 Co. v. Sidell, 66 Fed. 27; Michigan 
 &c. R. Co. V. Chicago &c. R. Co., 
 132 Mich. 324, 93 N. W 882; Texas 
 &c. R. Co. V. Davis, 93 Tex. 378, 
 54 S. W. 381, 55 S. W. 562. 
 
 25 Ante, §317; Bristol v. Scran- 
 ton, 57 Fed. 70, and cases cited 
 Krohn v. Williamson, 62 Fed. 869 
 Bristol V. Scranton, 63 Fed. 218 
 Bensiek v. Thomas, 66 Fed. 104 
 Hook V. Ayres, 80 Fed. 978; Baker 
 v. Harpster, 42 Kans. 511, 22 Pac. 
 415. See also Lewis v. Hammer- 
 smith (Ind. App.), 81 N. E. 614. 
 
 26 Board v. Reynolds, 44 Ind. 509, 
 IS Am. Rep. 245. 
 
§ 334 RAILROADS "508 
 
 questionably occupies fiduciary relations to the stockholders of 
 the corporation. While the cases generally concede that a fidu- 
 ciary relation exists between him and the shareholders, yet they 
 discriminate between the relationship and that of one who is in 
 the strict sense a trustee.^''^ It has been held that as the powers of 
 the president are so limited the same person may fill the office 
 of president of two distinct corporations, and such identity does 
 not of itself invalidate dealings between the two corporations,^^ 
 but we suppose that this doctrine is to be taken with some quali- 
 fication, for no officer can rightfully accept a position that re- 
 quires of him acts adverse to the corporation he represents. 
 
 §334 (292). Treasurer — Generally. — The treasurer of a rail- 
 way company is, as a rule, the officer who has custody of its 
 funds, upon whom warrants are drawn, and by whom corporate 
 funds are disbursed. The authority of the treasurer is generally 
 prescribed by the charter or defined by the corporate by-laws. He 
 necessarily possesses some incidental authority, but it is narrow 
 in its scope. He has no general implied power to purchase prop- 
 erty for the company, nor has he implied power to sell corporate 
 property, neither has he implied power to borrow money on the 
 credit of the corporation.^' The corporation may enlarge the 
 
 27 Allen V. Curtis, 26 Conn. 4S6 ; If, however, there is a positive mis- 
 Smith V. Hurd, S3 Mass. 371, 46 representation the transaction will 
 Am. Dec. 690; Carpenter v. Dan- be voidable. Fish v. Budlong, 10 
 forth, 52 Barb. (N. Y.) 581. See R. I. 525; Prewett v. Trimble, 92 
 generally Johnson v. Laflin, 5 Dill. Ky. 176, 17 S. W. 356, 36 Am. St. 
 (U. S.) 65, Fed. Cas. No. 7393; 586. 
 
 Perry v. Pearson, 135 111. 218, 25 N. 28 Leathers v. Janney, 41 La. Ann. 
 
 ,E. 636; Heman y. Britton, 14 Mo. 1120, 6 So. 884, 6 L. R. A. 661. See 
 
 . App. 121; Crowell v. Jackson, 53 N. also Salem Iron Co. v. Lake Su- 
 
 J. L. 656, 23 Atl. 426; Deaderick v. perior &c. Co., 112 Fed. 239. But 
 
 Wilson,, 8 Baxt. (Tenn.) 108; Gil- compare McCourt v. Singers &c., 
 
 bert's Case, L. R. 5 Ch. App. 5S9; 145 Fed. 103. 
 
 Scott V. De Pyster, 1 Edw. Ch. 513. 29 Craft v. South Boston &c. Co., 
 
 Several of the cases cited hold that ISO Mass. 207, 22 N. E. 920, 5 L. 
 
 the president may buy stock of the R. A. 641; Chemical N'ational Bank 
 
 , .^hat.eholder, and if >he does not ac- v. Wagner, 93 Ky. S2S, 20 S. W. 
 
 tually mislead the person with 535, 40 Am.. St. 206. ..Sep also Tay- 
 
 whom he deals the sale wilrbe valid. lor v. Taylor," 74 Maine 582; Ste- 
 
509 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 334 
 
 authority of the treasurer, and usage may so extend the scope of 
 his authority as to carry it beyond that which is inherent in the 
 office itself. By continued usage the powers of the treasurer may 
 be enlai-ged, and he many bind the corporation by acts per- 
 formed within the scope of the agency created or sanctioned by 
 usage.30 It has been held that drafts accepted by the treasurer 
 are presumed to be properly accepted.*^ The treasurer, unless 
 specially authorized* or unless authorized by usage, cannot bind 
 a railway' corporation by the acceptance of accommodation 
 drafts. As we have said, the treasurer has no general authority 
 to borrow money for the company, and it is held that even 
 though he borrows money, which is used for the purposes of the 
 corporation, the lender cannot recover it from the corporation, 
 where it appears that it was used instead of other money which 
 the treasurer had embezzled, and that the primary object in bor- 
 rowing it was to conceal his default.^^ There is, it is obvious, an 
 essential difference between the authority of the treasurer of a 
 trading corporation in the habit of borrowing money for cor- 
 porate use and the treasurer of a railroad company, and the au- 
 thority of the treasurer of a trading corporation in this respect 
 is broader and less limited than that of a railroad company.^* 
 The treasurer of a corporation has no power as such to confess 
 judgment for it,^* nor, as a rule, can he conduct litigation for the 
 corporation. It is held, however, that he has authority to com- 
 promise a disputed claim which he is authorized to collect. ^^ 
 
 vens V. Carp River &c. Co., 57 Mich. But we suppose that this presump- 
 
 427, 24 N. W. 160; Pelton v. Spider tion is at most a rebuttable one. 
 
 Lake &c. Co., 132 Wis. 219, 112 N. 32 Craft v. South Boston R. Co., 
 
 W. 29, 122 Am. St. 963; 2 Thorap. ISO Mass. 207, 22 N. E. 920, S L. 
 
 Corp. (2nd. ed.), §§ 1S62-1S6S. R. A. 641. 
 
 30 Lester v. Webb, 1 Allen 33 Craft v. South Boston R. Co., 
 (Mass.) 34; Page v. Fall River &c. ISO Mass. 207, 22 N. E. 920, S L. 
 R. Co., 31 Fed. 2S7; Merchants' R. A. 641. See Merchants' &c. 
 Bank v. State Bank, 19 L. ed. 1008, Bank v. Citizens' &c. Co., 1S9 Mass. 
 10 Wall. (U. S.) 604. See also SOS, 34 N. E. 1083, 38 Am. St. 453. 
 Sun Printing &c. Assn. v. Moore, 34 Stevens v. Carp River &c. Co., 
 183 U. S. 642, 22 Sup. Ct. 240, 46 57 Mich. 427, 24 N. W. 160. 
 
 L. ed. 366. ^' Gafford v. American &c Co., 
 
 31 Credit Co. v. Howe &c. Co., 54 11 Iowa 736, 42 N. W. 550. 
 Conn. 357, 8 Atl. 472, 1 Am. St. 123. 
 
§ 335 RAILROADS 
 
 510 
 
 While the general rule is that the treasurer, by virtue of his 
 office, has no authority to conduct litigation for the corporation, 
 yet such authority may be implied in particular instances; thus, 
 if a promissory note is placed in his hands for collection; he may 
 cause suit to be brought upon it.*^ Unless the authority to 
 execute accommodation paper is specially conferred upon the 
 treasurer or is vested in him by usage, he cannot bind the cor- 
 poration by the execution of such paper. *'^ General authority to 
 act for the corporation may, if not forbidden by the charter, be 
 conferred on the treasurer, and where such authority is conferred 
 his acts within its scope will bind the corporation.** 
 
 §335 (293). Treasurer — Duties — Liabilities. — The treasurer, 
 it is obvious, occupies a fiduciary relation toward the corporation, 
 and is prohibited from making use of his position to further his 
 own interests. He cannot rightfully do any act adverse to the 
 interests of the company. The rule stated is applied with much 
 strictness by some of the courts. Thus, it is held that he has 
 no authority to pay himself a claim he holds against it, unless the 
 claim has been approved and its payment authorized by the cor- 
 poration.*® The authorities recognize his right to deal with the 
 corporation, but they require that in all his dealings with the cor- 
 poration he shall exercise the utmost good faith. 
 
 § 336 (294). Treasurer— Care of corporate funds.— The treas- 
 urer is bound to exercise ordinary care, prudence and diligence in 
 protecting and preserving the corporate funds placed in his 
 charge. He is not absolutely responsible for the loss of corporate 
 funds, but will be exonerated if it appears that he exercised rea- 
 
 36 North Brookfield &c. Bank v. in transacting business for the cor- 
 
 Flanders, 161 Mass. 335, 2,1 N. E. poration, is notice to the principal. 
 307. 39 Wayne Pike Co. v. Hammons, 
 
 3T Usher V. Raymond Skate Co., 129 Ind. 368, 27 N. E. 487; Peter- 
 
 163 Mass. 1, 39 N. E. 416. borough R. Co. v. Wood, 61 N. H. 
 
 38Parmelee v. Associated &c., 11 418; Aberdeen R. Co. v. Blakie, 1 
 
 Misc. 363, 32 N. Y. S. 149. In Macq. 461. But compare St. Louis 
 
 Hotchkiss &c. Co. v. Union &c. Bank, &c. R. Co. v. Chenault, 36 Kans. SI, 
 
 68 Fed. 76, it is held that notice to 12 Pac. 303. 
 the treasurer, given while engaged 
 
511 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS §337 
 
 sonable care, prudence and diligence/" and if, without his fault or 
 negligence, they are lost, stolen or destroyed, he cannot be held 
 accountable,*^ but the loss falls upon his principal. This general 
 rule applies to cases where the money is deposited for the com- 
 pany in a bank which the treasurer has reason to believe is sound, 
 but which siibsequently fails. It has been held that where a rail- 
 road company was notified by its treasurer of his expected ab- 
 sence, with a request that remittances be made to the firm of 
 which he was a member, and remittances were made accordingly 
 to the firm, and reports to stockholders made that funds were in 
 the hands of such firm as "financial agents," the act of the treas- 
 urer in selecting the place of deposit was ratified, and he was 
 absolved from liability in that regard;*^ but we suppose that in 
 such a case it devolves upon the treasurer to show that he acted 
 with reasonable prudence and in good faith. 
 
 § 337 (295). Secretary. — The secretary of a railroad company 
 has by virtue of his office very limited, powers indeed, so far as 
 concerns the conduct of the active business of the corporation. In 
 the matter of making contracts he has, perhaps, some implied or 
 incidental authority, but it is very narrowly circumscribed. He 
 certainly has no general authority to make contracts for the. 
 company,*^ but contracts made by him may be so ratified as to 
 bind the company-** He has no authority to bind the corpora- 
 tion by executing evidences of indebtedness ;*^ nor, indeed, by 
 
 40 New York &c. R. Co. v. Dixon, 294; Ross Oil &c. Co. v. Estham, 
 114 N. Y. 80, 21 N. E. 110; Mow- 1Z Kans. 464, 85 Pac. 531, 4 Elliott 
 bray v. Antrim, 123 Ind. 24, 23 N. Cont. §2891. See also Telegraph 
 E. 858. V. Lee, 125 Iowa 17, 98 N. W. 364; 
 
 41 Mowbray v. Antrim, 123 Ind. Blanding v. Davenport &c. Co., 88 
 24, 28, 23 N. E. 858; Wayne Pike Iowa 225, 55 N. W. 81. 
 
 Co. V. Hammons, 129 Ind. 368, 379, 44 Nebraska &c. Co. v. Bell, 58 
 
 27 N. E. 487. See generally as to Fed. 326. See also Hess v. Sloane, 
 
 liability of treasurer, 2 Thomp. 66 App. Div. 522, 73 N. Y. S. 313. 
 
 Corp. (2nd. ed.), §§1570, 1571. 45 Holden v. Phelps, 141 Mass. 
 
 42 New York &c. R. Co. v. Dixon, 456, 5 N. E. 815. See also Jewett 
 114 N. Y. 80, 21 N. E. 110. v. West Somerville &c. Bank, 173 
 
 43 Chicago V. Stein, 252 III. 409, Mass. 54, 52 N. E. 1085, 73 Am. St. 
 96 N. E. 886. Ann. Cas. 1912D, 259; Gregory v. Lamb, 16 Nefbr. 
 
§ 338 RAILROADS ■ 512 
 
 any ordinary business contracts. He may, of coursfe, be invested 
 by the board of directors with power to contract,*" but in such a 
 case the source of his power is the action of the board and not the 
 office oi secretary. Where the secretary has power to bind 
 the company and he acts within the scope of his power, ]the same 
 general rules as to the effect of admissioris and declarations ap- 
 ply that prevail in other cases of agency.*''^ 
 
 § 338 (296) . Managing agents. — There is a class of agents 
 called "general managers," "superintendertis," or the like, whose 
 powers and authority are very broad and 'comprehensive. They 
 are not in strictness corporate officers except where made so by 
 the charter or by-laws ; but their powers are really more extensive 
 in many respects than those of some of the chief officers of the 
 corporation. A general manager or superintendent cannot, of 
 course, exercise the powers or functions devolved upon the di- 
 rectors or other officers of the corporation,*^ but in conducting 
 the actual business of the corporation he exercises very broad and 
 c'dmprehensive authority. The name or designation bestowed 
 upon a managing agent does not necessarily determine the scope 
 of his authority, but, within limits, indicates in a general way the 
 nature of his authority. As we have elsewhere said the scope 
 of his authority is ordinarily a question of fact to be determined 
 
 205, 20 N. W. 248; 8 Thomp. Corp. 47 Kraniger v. People's &c. Assn. 
 
 § 1513. It was held in Moshannon 60 Minn. 94, 61 N. W. 904. See also 
 
 &c. Co. V. Sloan, 109 Pa. St. 532, note to Younce v. Broad River 
 
 7 Atl. 102, that the secretary has Lumber Co., in Ann. Cas. 19r2C, 
 
 no authority to release a debtor, 107. 
 
 and see other cases on the general 48 In the case of Evansville &c. 
 
 subject reviewed in note in Ann. Cas. Co, v. Barnes, 137 Ind. 306, 36 N. 
 
 1912D, 296. E. 1092, the court held that a su- 
 
 48 Jefferson v. Hewitt, 103 Cal. perintendent of construction had no 
 
 624, 37 Pac. 638. See generally Mer- authority to open the road for the 
 
 chants' &c. Bank v. Hervey &c. Co., carriage of passengers, saying, "The 
 
 45 La. Ann. 1214, 14 So. 139; Ne- board of directors and the cstab- 
 
 braska &c. Co. v. Bell, 58 Fed. 326; lished rules of the company alone 
 
 Moore v. H. Gaus &c. Co., 113 Mo. could make the appellant a common 
 
 98, 20 S. W. 975; Famous Shoe &c. carrier for hire and the appellee a 
 
 Co; v. Eagle &c. Works, 51 Mo. App. passenger." 
 66. 
 
513 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 339 
 
 from the evidence in the particular case.*^ We think, however, 
 that where a railroad company holds out an agent as general 
 manager or superintendent, the courts may take judicial notice 
 of the general scope of his authority, but that the precise nature 
 of his authority must, as a general rule, be determined from the 
 facts and circumstances of the case in which the question 
 
 arises 
 
 50 
 
 § 339 (297). Superintendent. — The actual authority of a super- 
 intendent or general manager of a railroad or one of its divisions 
 depends in a great degree upon the provisions of the charter and 
 by-laws and the resolutions passed by the board of directors rela- 
 tive to such employment. As between the"company and persons 
 having knowledge of the terms of his employment, he will, as a 
 general rule, be held to have only such powers as have been 
 thereby expressly or impliedly conferred upon him.^^ But as to 
 persons having no notice of his actual authority the rule is other- 
 wise, for as to such persons he will be deemed to have the au- 
 thority evidenced by the indicia of authority with which the cor- 
 
 49 Ante, § 248. Gamacho v. Ham- sary or incident to the business of 
 ilton Co., IZ N. Y. St. 4S7, il N. Y. which he has such management 
 S. 725. without other evidence of his ac- 
 
 50 See generally Trephagen v. tual authority in the particular in- 
 South Omaha, 69 Nebr. 577, 96 N. stance. See 8 Thomp. Corp. §§ 1575, 
 W. 248; Green Co. v. Blodgett, 55 1576, 1579. 
 
 111. App. 556, 159 111. 169, 42 N. E. si a director of a corporation, 
 176, 50 Am. St. 146; St. Louis &c. contracting with another director of 
 R. Co. V. Grove, 39 Kans. 731, 18 the corporation concerning the cor- 
 Pac. 958 ; Ceeder v. Loud &c. Co., porate property, who is also busi- 
 86 Mich. 541, 49 N. W. 575, 24 Am. ness manager with enumerated and 
 St. 134; Langan v. Great Western limited powers, is chargeable with 
 R. Co., 30 L. T. (N. S.) 173. The notice of any defect in the mana- 
 title itself seems to imply agency ger's authority to make said con- 
 and control. American Inv. Co. v. tract. Schetter v. Southern Ore- 
 Cable Zo., 4 Ga. App. 106, 60 S. gon Co., 19 Ore. 192, 24 Pac. 25. 
 E. 1037. And where such manager See generally Walrath v. Champion 
 is invested by the corporation with &c. Co., 63 Fed. 552; Smith v. Co- 
 the actual management the corpora- operative &c. Assn., 12 Daly (N. 
 tion will usually be bound by his Y.) 304. 
 acts and contracts which are neces- 
 
 17 — Ell. Railroads I 
 
§339 
 
 RAILROADS 
 
 514 
 
 poration has invested him.^s Where the duties of the office have 
 not been defined, but the superintendent is simply given general 
 authority to manage the business of the corporation, he will or- 
 dinarily be held to have such powers as appertain to the office by 
 usage of the company by which he is employed,^* and other com- 
 panies of a similar character.^* But it is essential in order to 
 make the corporation liable for the acts of a general superin- 
 tendent or general manager that the acts be performed in trans- 
 acting the business of the corporation. ^5 The superintendent of 
 a railroad company, clothed with general power and authority 
 in regard to the management of trains, is held to be the immedi- 
 ate representative and executive officer of the corporation, and 
 his negligent and improper order, which causes an injury, ren- 
 ders the company liable as much as if it had emanated directly 
 from the directors themselves in their official capacity.^^ In his 
 
 52 2 Thomp, Corp. (2nd. ed.), 
 §§ 1576, 1S79. We have considered 
 in another connection the authority 
 of managing agents, such as superin- 
 tendents and the like. Ante, §260. 
 See generally Railway &c. Co. v. 
 Lincoln &c. Bank, 82 Hun 8, 31 N. 
 Y. S. 44; Merrill v. Hurley, 6 S. 
 Dak. 592, 62 N. W. 958, 55 Am. St. 
 859; Brace v. Northern Pac. R. Co., 
 63 Wash. 417, 115 Pac. 841, 38 L. 
 R. A. (N. S.) 1135, and cases cited 
 in note. 
 
 53 Olcott V. Tioga &c R. Co., 27 
 N. Y. 546, 84 Am. Dec. 298. See 
 last note supra; also Raleigh &c. 
 R. Co. V. Pullman, 122 Ga. 700, 50 
 S. E. 1008; Matson v. Alley, 141 
 111. 284, 31 N. E. 419; Madison &c. 
 Co. V. Norwich &c. Society, 24 Ind. 
 457; American Tel. &c. Co. v. Green, 
 164 Ind. 349, 73 N. E. 707; Par- 
 rott V. Mexican C. R. Co., 207 Mass. 
 184, 93 N. E. 590, 34 L. R. A. (N. 
 S.) 261 ; Sarmiento v. Davis &c. Co., 
 105 Mich. 300, 63 N. W. 205, 55 
 
 Am. St. 446; Ecker v. Chicago &c. 
 Co., 8 Mo. App. 223, 1 Am. & Eng. 
 R. Cas. 357; Barber v. Stromberg 
 &c. Co., 81 Nebr. 517, 116 N. W. 
 157; Goodwin v. Union Screw Co., 
 34 N. H. 378; Mayall v. Boston &c. 
 Co., 19 N. H. 122, 49 Am. Dec. 
 149; Wisconsin Oak Lumber Co. v. 
 Laursen, 126 Wis. 484 105 N. W. 
 906; 2 Thomp. Corp. (2nd. ed.), 
 § 1576. 
 
 54 Louisville &c. R. Co. v. Mc- 
 Vay, 98 Ind. 391, 398, 49 Am. Rep. 
 770. See also 2 Thomp. Corp. (2nd. 
 ed.), §1576. 
 
 55 Cosh Murray Co. v. Adair, 9 
 Wash. 686. 38 Pac. 749. And of his 
 department or branch where he is 
 limited to one. Dale v. Donaldson 
 Lumber Co., 48 Ark. 188, 2 S. W. 
 703, 3 Am. St. 224; Union Pac. &c. 
 R. Co. V. McCarty, 3 Colo. App. 530, 
 34 Pac. 767; 2 Thomp. Corp. (2nd. 
 ed.), §1577. 
 
 56 Washburn v. Nashville &c. R. 
 Co., 40 Tenn. 638, 75 Am. Dec. 784. 
 
?15 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS §339 
 
 dealings with third persons a superintendent, like any other 
 agent, will be held to have power to bind the corporation within 
 the limits of his apparent authority. And it is held that a gen- 
 eral manager should be presumed to have the general control and 
 direction of all matters connected with the operation of the rail- 
 road which the term indicates until the contrary is shown.^'? Ac- 
 cordingly, a railroad company is, it has been held, liable for the 
 service of an attorney retained by its general manager to attend 
 to its legal business, unless the attorney knew or might have 
 known by using ordinary diligence that the manager had no au- 
 thority to employ him.^'' It was held in another case that a rail- 
 road superintendent may bind the company by issuing a circu- 
 lar ofifering a general, standing reward for the arrest of train 
 wreckers, although no special authority to do so has been granted 
 him by the directors;,^^ A railroad company has power, for the 
 protection of its property,®" to offer a general, standing reward 
 for the arrest of train wreckers, and it may well be held that a 
 superintendent invested with the general authority pertaining 
 to that position may bind the company by offering a reward for 
 the detection of persons who injure or destroy the property of 
 the company.®^ In one case the court presumed that the gen- 
 eral superintendent had authority to contract for fencing the 
 company's road f^ in another, that he acted by the company's 
 
 57 Sacalaris v. Eureka &c. R. Co., Ceeder v. Loud &c. Co., 86 Mich. 
 18 Nev. ISS, 1 Pac. 835, 51 Am. 541, 49 N. W. 575, 24 Am. St. 134. 
 Rep. 737 ; Louisville &c. R. Co. v. 59 Central R. & Bkg. Co. v. Cheat- 
 McVay, 98 Ind. 391, 399, 49 Am. ham, 85 Ala. 292, 4 So. 828, 7 Am. 
 Rep. 770; Sax v. Detroit &c. R. Co., St. 48. 
 
 125 Mich. 252, 84 N. W. 314, 315, 84 eo Ricord v. Central Pacific R. 
 
 Am. St. 572, citing text. A promis- Co., 15 Nev. 167; American Ex- 
 
 sory note, indorsed by a manager, press Co. v. Patterson, 73 Ind. 430. 
 
 must have been previously author- 6i Toledo &c. Co. v. Rodrigues, 
 
 ized or subsequently ratified as 47 111. 188, 95 Am. Dec. 484. 
 
 evinced by general course of busi- 62 New Albany &c. R. Co. v. Has- 
 
 ness or resolution in order to ren- kell, 11 Ind. 301. See also West 
 
 der. a business corporation liable up- v. Washington &c. R. Co., 49 Ore. 
 
 on it. Huntington v. Attrill, 118 N. 436, 90 Pac. 666 (power to sell land 
 
 Y. 365, 23 N. E. 544. where railroad company had appar- 
 
 58 St. Louis &c. R. Co. V. Grove, ently put it under his control to dis- 
 39 Kans. 731, 18 Pac. 958. See also pose of). 
 
§ 340 RAILROADS 516 
 
 authority in denying an owner the right to remove his property 
 from the company's premises;^* in another it was held that he 
 has authority to withdraw a notice to terminate a lease of the 
 company's property;®* and in another case it was held that he 
 may bind the company by his declarations relative to the pur- 
 chase of fuel for the use of its locomotives.*^ We think the rul- 
 ing in the case last cited is correct, because such a contract is one 
 made in the course of the ordinary business of the company ; but 
 the authority to make such contracts may be specially conferred 
 upon some other officer or agent, and in that event it could not 
 be rightfully exercised by the superintendent. The decisions 
 generally go upon the principle that the corporation cannot deny 
 the general authority of one whom it holds out as a general 
 agent. But a superintendent's or manager's authority usually 
 extends only to the management of the ordinary business of the 
 corporation, and it is accordingly held that a sale of the property 
 of a railroad corporation by the superintendent, unauthorized by 
 the directors, passes no titles'* Necessarily the question as to 
 whether the superintendent is held out as possessing the author- 
 ity asserted must be a question of fact in most instances, so that 
 no general rule can be laid down as to the extent of his authority ; 
 but it may be safely said that he has no implied authority to 
 make unusual or extraordinary contracts. 
 
 §340 (298). Superintendent — General conclusion. — Decisions 
 as to the authority of such officers, as managers and supei-inten- 
 dents depend so much upon the circumstances of the particular 
 cases and there is such a wide range in the duties which the su- 
 es Giles V. Taff Vale R. Co., 2 E. S. W. 79, 26 Am. St. 824. But com- 
 & B. 822. pare West v. Washington &c. R. 
 
 64 Patrick v. Richmond &c. R. Co., Co., 49 Ore. 436, 90 Pac. 666. Other 
 93 N. Car. 422. cases showing when general tnana- 
 
 95 Sacalaris v. Eureka &c. R. Co., ger or superintendent has power to 
 18 Nev. ISS, 1 Pac. 835, 51 Am. Rep. bind the corporation in particular 
 IZl. instances and when not are cited in 
 
 66Bowen v. Mt. Washington R. 2 Thomp. Corp. (2nd. ed.), §§ 1581- 
 Co., 62 N. H. 502. See also Stow 1590, and in 8 Thomp. Corp. §§ 1580, 
 V. Wyse, 7 Conn. 214, 18 Am. Dec. 1581, 1583, et seq. 
 99;- Green v. Hugo, 81 Tex. 452, 17 
 
517 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 341 
 
 perintendents of different roads are required to perform, and in 
 the powers which they are permitted to exercise, that no definite 
 rule as to the precise extent of their authority can be safely stated. 
 It is safe to say, however, that the authority of such an officer 
 will be extended by implication to cover a very broad field where 
 it is necessary to protect the interests of innocent parties dealing 
 with him, but not in favor of persons having knowledge of the 
 real extent of his powers and duties. The courts cannot, of 
 course, invest him with authority, but they can adjudge what, 
 under the facts of the particular case, is the authority conferred 
 upon him by the company. The nature of the business of con- 
 ducting and managing a railroad is a matter of which the courts 
 take judicial notice in a general way, and if they do take judicial 
 notice of such a matter they must of necessity take notice that 
 some general ministerial agent is required who can actively 
 supervise and manage the ordinary details of the operation of the 
 road.^^ We do not, however, mean to be understood as saying 
 that courts will take judicial notice of the scope of the superin- 
 tendent's authority in a particular case or where it is asserted 
 to embrace a subject not clearly within the general scope of the 
 authority of that class of agents. 
 
 § 341 (299). Intermediate agents. — In order to perform its 
 duty to the public and properly conduct its corporate afifairs it is 
 necessary that a railroad company should have general implied 
 power to appoint intermediate agents, and the courts recognize 
 the existence of this power and hold railroad companies respon- 
 
 6T Courts take judicial notice of 256; Railroad Co. v. Beecher, 24 
 
 the hazardous nature of the busi- Kans. 228; Cincinnati &c. Railroad 
 
 ness Oif operating railway trains, Co. v. Davis, 126 Ind. 99, 2S N. E. 
 
 and of the authprity of a superin- 878, 9 L. R. A. 503, 44 Am. & Eng. 
 
 tendent in relation to such matters. R. Cas. 459. See also Louisville &c. 
 
 Union Pac. R. Co. v. Winterboth- R. Co. v. McVay, 98 Ind. 391, 49 
 
 am, 52 Kans. 433, 34 Pac. 1052, 59 Am. Rep. 770; Sacalaris v. Eureka 
 
 Am. & Eiig. R. Cas. 75, citing Union &c. R. Co., 18 Nev. 155, 1 Pac. 835, 
 
 Pac. Co. V. Beatty, 35 Kans. 265, 51 Am. Rep. 737; Sax v. Detroit 
 
 10 Pac. 845, 57 Am. Rep. 160, 26 &c. R. Co., 125 Mich. 252, 84 N. W. 
 
 Am. & Eng. R. Cas 84; Pacific 314, 84 Am. St. 572; 1 Elliott Ev. 
 
 Railroad Co. v. Thomas, 19 Kans. § 72. 
 
§ 342 RAILROADS 518 
 
 sible for the acts of such agents when performed within the scope 
 of their authority or within the line of their duty. It is only, 
 however, to a very limited extent that the courts can judicially 
 know the nature of the authority of such subordinate agents. In 
 most cases the nature and extent of their authority is to be deter- 
 mined as a question of fact from the evidence in the particular 
 case, but, as we believe, the courts may in some cases take judi- 
 cial notice of the general and ordinary authority of subordinate 
 agents. We have elsewhere referred to cases showing the nature 
 of the authority of subordinate agents. *** 
 
 § 342 (300). Intermediate agents — Agents for one purpose not 
 for another. — It may happen that a person may be a corporate 
 agent for one purpose and yet not for another. Thus a foreman 
 may be an agent for the purpose of hiring and discharging sec- 
 tion men, but as to work on the track be a mere servant.®^ It is 
 obvious that the person assuming to act as an agent is only an 
 agent when performing the duties of an agent, and in perform- 
 ing other duties is a servant or employe, although he may be act- 
 ing in all he does under a contract of employment. The acts of a 
 servant or employe are in many respects essentially different 
 from those of an agent, and this difference, as we shall hereafter 
 show, leads to important results. 
 
 § 343 (301). Intermediate agents and servants distinguished. 
 
 — The adjudged cases distinguish between subordinate agents 
 
 68 Ante, §§ 258-261. It has been Mo. 445, 110 S. W. 1086. 
 held that a claim agent has no gen- 69 Justice v. Pennsylvania Co., 
 eral authority to make a valid con- 130 Ind. 321, 30 N. E. 303. We do 
 tract of employment with an in- not, at this place, enter upon a con- 
 jured employe as part of the set- sideration of the vexed question of 
 tlement of a claim. Hornick v. whether the authority to hire and 
 Union Pac. R. Co., 85 Kans. 568, discharge, constitutes the person 
 118 Pac. 60. But the company may clothed with that authority an 
 be bound by ratification. Klinch v. agent for all purposes conected 
 Chicago City R. Co., 262 111. 282, 104 with his line of service under his 
 N. E. 669. And circumstantial evi- contract of employment, but else- 
 dence may be sufficient to show au- where consider that question. See 
 thority of an agent to enter into a Mealman v. Union Pac. R. Co., 37 
 contract of such a character. Fed. 189, 2 L. R. A. 192, and notes. 
 Tinkle v. St. Louis &c. R. Co., 212 
 
519 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 344 
 
 knd servants, and the distinction often becomes one of import- 
 ance. It is very difficult, indeed it is impossible, in the present 
 state of the authorities, to accurately discriminate between 
 agents and servants. It is, perhaps, safe to say that when a duty 
 personal to the master is intrusted to an employe, the employe 
 is as to that duty an agent, although as to other duties he may be 
 a servant; if, however, the duty is not one personal to the em- 
 ployer the relationship between employer and employe is or- 
 dinarily not that of principal and agent, but is that of master 
 and servant. The employer may, of course, by custom and us- 
 age, confer authority upon a servant beyond that appertaining 
 to such relation, but ordinarily a servant has no authority to 
 make contracts for the master. 
 
 §344 (302). Conductors. — The authority of the conductor or- 
 dinarily extends to the control of the movements of his train, and 
 to the immediate direction of the movements of the employes en- 
 gaged in operating the train, and he is, to a great extent, the rep- 
 resentative of the company in such dealings as it may be neces- 
 sary for the passengers to have with it while en route. Conse- 
 quently the company is liable to passengers, and, in some cases, 
 to third persons if he fails to take proper precautions to guard 
 against injury from any defects in cars, engines, or equipments, 
 which are discoverable,'''' or permits employes to move the cars 
 in such a manner as to cause an injury,'^i or is guilty of any 
 improper or unfair conduct toward the passengers in his 
 charge.''^ It is responsible for his acts done in the line of his 
 employment, although they were done wilfully'^* and in direct 
 
 TO Mad River &c. R. Co. v. Bar- 34 Barb. (N. Y.) 353. Or assaults 
 
 ber, S Ohio St. 541, 67 Am. Dec. 312. a passenger, Ramsden v. Boston 
 
 Ordinarily the conductor is, accord- &c. R. Co., 104 Mass. 117, 6 Am. 
 
 ing to the weight of authority, a fel- Rep. 200; Jeffersonville &c. R. Co. 
 
 low servant of other employes en- v. Rogers, 38 Ind. 116, 10 Am. Rep. 
 
 gaged in the management and op- 103; Craker v. Chicago &c. R. Co., 
 
 eration of trains. 36 Wis. 657, 17 Am. Rep. 504. 
 
 71 Rauch V. Lloyd, 31 Pa. St. 358, T3 Jeffersonville R. Co. v. Rogers, 
 72 Am. Dec. 747. 38 Ind. 116, 10 Am. Rep. 103; Cra- 
 
 72 As where he exacts illegal fare. ker v. Chicago &c. R. Co., 36 Wis. 
 Porter v. New York Central R. Co., 657, 17 Am. Rep. 504. 
 
§ 344 RAILROADS 520 
 
 opposition to the instructions and orders of his employers.'* His 
 authority does not, ordinarily, extend to making contracts on be- 
 half of the company, but there may be cases of urgent emergencv 
 where he may make a contract for the company. He is to ad- 
 minister the rules of the company rather than make contracts for 
 it. It has been held that, acting under a general authority, he 
 may, in his discretion, relax or apply these rules within reason- 
 able hounds, according to circumstances,''^ but this doctrine, as 
 it seems to us, is one to be cautiously applied and kept within 
 strict limits, for there is certainly no general authority to alter or 
 suspend the established rules and regulations of the company. 
 The establishment or alteration of rules and regulations is not, 
 ordinarily, within the authority of a conductor, since it is his 
 duty to obey and carry into effect the rules and regulations of the 
 company. As we have said, the conductor has no general author- 
 ity to make contracts on behalf of the company, but he may in 
 rare cases of necessity, when circumstances demand it, bind the 
 company by such contracts as are clearly necessary to enable 
 him to carry out his prescribed duties.'"' In order that contracts 
 made by him shall be obligatory upon the company they must 
 be made to enable him to perform the duties required of him and 
 must not relate to collateral matters nor be outside of the line 
 of the duty assigned to him. Thus, he may, where other pro- 
 vision has not been made, employ mechanics to repair a break 
 of the cars or machinery which must be repaired before the train 
 can proceed to its destination, and may engage men and teams 
 
 T4 Porter v. New York Central Murray, 98 Ind. 358, 49 Am. Rep. 
 
 R. Co., 34 Barb. (N. Y.) 3S3. 7S2; Goff v. Toledo &c. Co., 28 111. 
 
 75 O'Donnell v. Allegheny Valley App. S29. In Wright v. Glenns 
 R. Co., 59 Pa. St. 239, 98 Am. Dec. Falls &c. R. Co., 24 App. Div. 617, 
 336. See also on the general subject, 48 N. Y. S. 1026, it is held that a 
 Carroll v. New York &c. R. Co., 1 street car conductor may bind the 
 Duer (N. Y.) 571 ; New York &c. company by his statement of the rate 
 R. Co. V. Winter, 143 U. S. 60, 70, of fare made by a prospective pas- 
 12 Sup. Ct. 356, 36 L. ed. 71 ; senger before taking passage so as 
 Thompson v. Truesdale, 61 Minn. to entitle the passenger to recover 
 129, 63 N. W. 259, 52 Am. St. 579; when ejected for not paying a higher 
 Vedder v. Fellows, 20 N. Y. 126. rate. See post, §§ 2417, 2486. 
 
 76 Terre Haute &g. R. Co. v. Mc- 
 
521 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS §344 
 
 to render the roadway or bridges secure for the passage of his 
 train, when weakened or partially swept away by unforeseen 
 ■causes ; but in such cases the authority to contract does not exist 
 tinless there is an urgent necessity for immediate action. It is 
 the necessity which confers authority, not simply the position of 
 conductor.'^'' Doubtless he may, in case of the sudden death or 
 •disability of the engineer, engage a competent engineer to take 
 the train to a point where another engineer in the employ of the 
 company can be obtained, if such employment be an urgent 
 ■necessity and required to avoid disaster or serious injury to the 
 company. It has been held that the conductor has authority, 
 when the regular brakeman is sick or absent, and the proper and 
 safe management of the train so requires, to supply the place of 
 the sick or absent brakeman, and render the substitute so em- 
 ployed an employe of the company for the time being,'''® but we 
 suppose this doctrine can only apply in very rare cases, for, as a 
 ■general rule, a conductor has no authority to employ agents or 
 ■servants for the company. The authority of the conductor to en- 
 ter into contracts for the company is created by the necessity 
 for the exercise of such authority, and as soon as the emergency 
 
 T7 St. Louis &c. R. Co. V. Jones, conductor asked plaintiff to make 
 
 96 Ark. SS8, 132 S. W. 636, 37 L. coupling for him, did not show 
 
 R. A. (N. S.) 418, 423, 424 (quot- such a necessity as conferred upon 
 
 ing text) ; Terre Haute &c. R. Co. the conductor an authority to em- 
 
 V. McMurray, 98 Ind. 358, 49 Am. ploy the brakeman, nor did it show 
 
 Rep. 752. See ante, §259. As a any employment at all, either with 
 
 ■general rule he has no authority to or without authority. We suppose 
 
 ■employ agents or servants. Yazoo that the right to employ a bfake- 
 
 &c. R. Co. V. Stansberry, 97 Miss. man exists only in cases of urgent 
 
 831, 53 So. 389, 390 (citing text). necessity, for the authority to em- 
 
 78 Sloan V. Central Iowa R. Co., ploy agents or servants is no part 
 •62 Iowa 728, 16 N. W. 331 ; Georgia of a conductor's general authority. 
 Pacific R. Co. v. Propst, 83 Ala. If there is no emergency there is 
 518, 3 So. 764, 85 Ala. 203, 4 So. no authority to employ servants, 
 711, 90 Ala. 1, 7 So. 635. On the and it is only in very rare and ex- 
 second appeal of this case it was ceedingly clear cases that such au- 
 lield that evidence that the plaintiff, thority can exist. Church v. Chi- 
 a night watchman, was riding to cago &c. Co., SO Minn. 218, 52 N. 
 his home on the train, when, one W. 647; Jewell v. Grand Trunk 
 of the brakemen being sick, the Railway, 55 N. H. 84. 
 
§ 345 RAILROADS 522 
 
 is past the authority usually terminates.'"' In one of the decided 
 cases it seems to be held that a conductor may bind the com- 
 pany by a contract to carry a passenger to a particular place on 
 the line of the road,^" and if the case is to be understood as so- 
 deciding we think it must be regarded as unsound ; if, however,, 
 it is to be regarded as deciding that the place was one at which, 
 the conductor was authorized to stop the train if he so elected^ 
 then we think that the decision correctly declares the law. In. 
 our judgment a conductor has no authority to stop trains at 
 places not provided for by the rules or time schedules of the com- 
 pany, unless a discretion as to stopping is vested in him. The 
 safety of the public, as well as the interests of the railroad com- 
 pany, requires that stops should be made only at places author- 
 ized by the company. The conductor has no general authority 
 to designate the places where the trains shall stop, and he cannot 
 bind the company by a contract to stop at a certain place unless 
 he is authorized to stop at that place by the rules, regulations or 
 custom of the company. We have at this place merely outlined 
 the authority and duties of a conductor as we have .treated of his 
 duties and powers with reg<ird to passengers in the discussion of 
 the subject of the duties and liabilities of a railroad company as 
 a carrier of passengers. ^^ 
 
 § 345 (303). Station agents. — It is held that the courts cannot 
 take judicial notice of the powers of a station agent,^^ but we 
 suppose they may in a very general way take notice of the au- 
 thority of such an agent. They certainly do take notice that he 
 has no authority to change the rules of the company as to the 
 
 79 Louisville &c. R. Co. v. Smith, 8 1 judicial notice has been taken 
 121 Ind. 353, 22 N. E. 775, 6 L. in a general way as to the ordinary 
 R. A. 320, and authorities cited. authority of a conductor. Condran 
 Ante, §260, note 2. v. Chicago &c. R. Co., 67 Fed. 522, 
 
 80 Hull V. East Line &c. R. Co., 523; 1 Elliott Ev. §72. 
 
 66 Tex. 619, 28 Am. & Eng. r! 82 Wood v. Chicago &c. R. Co., 59 
 
 Cas. 221. But see St. Louis &c. R. Iowa 196, 13 N. W. 99. But see 
 
 Co. V. Jones, 96 Ark. 558, 132 S. Brown v. Minneapolis &c. R. Co., 31 
 
 W. 636, 37 L. R. A. (N. S.) 418; Minn. 553, IS N. W. 834 
 Ohio &c. R. Co. V. Hatton, 60 Ind. 
 12. 
 
523 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 345 
 
 places where trains shall stop to discharge passengers.*^ Proot 
 of his general authority to make contracts for the shipment of 
 freight over the line of a railroad is sufficient evidence from 
 which to infer his authority to contract with reference to all the 
 necessary and ordinary details of the business.** His admissions 
 and declarations, made within the scope of his authority, are, of 
 course, binding upon the company, like those of any other agent ; 
 but it is held to be error in an action for a penalty for delay in 
 shipping local freight to admit the declarations of a station agent 
 whose agency is unconnected with the through freight business, 
 to the effect that the company during a certain season used most 
 of its cars in transporting through freight.*® His general author- 
 ity being established, it has been held that he will be held to 
 possess authority to bind the company by a contract to furnish 
 cars by a certain day,*® or to carry the freight to its destination 
 
 83 White V. Evansville &c. R. Co., 
 133 Ind. 480, 33 N. E. 273. 
 
 84 Blodgett V. Abbot, 72 Wis. 516, 
 40 N. W. 491, 7 Am. St. 873; Wood 
 V. Chicago &c. R. Co., 68 Iowa 491, 
 27 N. W. 473, 56 Am. Rep. 861. 
 See generally Illinois &c. Co. v. 
 Jonte, 13 111. App. 424; Merchants 
 .&c. Co. V. Joesting, 89 111. 152; 
 Brown v. Louisville &c. Co., 36 111. 
 App. 140;' Squire v. New York &c. 
 Co., 98 Mass. 239; Mayall v. Boston 
 &c. Railroad, 19 N. H. 122, 49 Am. 
 Dec. 149; Congar v. Galena &c. R. 
 Co., 17 Wis. 477; London &c. R. 
 Co. V. Bartlett, 7 H. & N. 400; 
 Lewis V. Great Western &c. Co., 5 
 H. & N. 867. And where he has 
 authority to sell tickets he may be 
 held to have implied authority to 
 furnish reasonable information and 
 make representations within the 
 line and scope of his duty. Louis- 
 ville &c. R. Co. V. Scott, 141 Ky. 
 538, 133 S. W. 800, 34 L. R. A. 
 (N. S.) 206; Louisville &c. R. Co., 
 
 V. Spurling, 160 Ky. 819, 170 S. W. 
 192. It is held in the province of 
 Ontario that a station agent is an 
 "officer'' within the meaning of a 
 statute providing that "any of the 
 officers" of a body corporate may be 
 examined touching the matters in 
 question in an action, at least where 
 the action is based upon a contract 
 executed by such station agent on 
 behalf of the company. Ramsay v. 
 Midland R. Co. (Ont), 16 Am. & 
 Eng. R. Cas. 594 It is held in 
 Marsh v. Chicago &c. Co., 79 Iowa 
 332, 44 N. W. 562, that an agent 
 having authority to make special 
 rates may agree to give a rebate. 
 
 85 Branch v. Wilmington &c. R. 
 Co., 88 N. Car. 573. 
 
 86 Wood V. Chicago &c. R. Co., 
 68 Iowa 491, 27 N. W. 473, 56 Am. 
 Rep. 861 ; Easton v. Dudley, 78 Tex. 
 236, 14 S. W. 583. See also Stoner 
 V. Chicago &c. R. Co., 109 Iowa 
 SSI, 80 N. W. 569; Gulf &c. R. Co. 
 V. Irvine (Tex. Civ. App.), 73 S. 
 
§ 345 RAILROADS 524 
 
 and deliver it within any reasonable time agreed upon^^ or to de- 
 liver goods at an unusual place upon its own line.''* But in the 
 absence of a custom authorizing it, an undertaking by a station 
 agent at the request of the consignee .after a car has reached its 
 destination to deliver it at another place or to another person has- 
 been held to be nothing more than a personal accommodation on 
 the part of the agent, not rendering the company liable. ^^ Where 
 he is given charge of the depot building and station grounds it 
 has been held that he may make reasonable rules for the regula- 
 tion of persons having business to transact with the company,, 
 and may exclude persons who lefuse to conform to such regula- 
 tions, and others who come to the station for purposes of their 
 own not connected with the company's business.^* And station 
 agents will, in general, be held to have such additional powers as 
 may be conferred upon them, either expressly or by implication 
 from the usual course of business. A station, agent may bind his 
 principal within the limits of his apparent authority, even though 
 that authority is restricted by secret instructions, which are un- 
 known to the other contracting party.^^ The court will not, how- 
 
 W. 540. But not to furnish cars at Vt. 326, 94 Am. Dec. 398; Webber 
 
 another station. Gulf &c. R. Co. v. v. Great Western R. Co., 3 H. & C. 
 
 Hodge, 10 Tex. Civ. App. 543, 30 S. 771. 
 
 W. 829; Voorhees v. Chicago &c. 89 Melbourne v. Louisville &c. R, 
 
 R. Co., 71 Iowa 735, 30 N. W. 29, Co., 88 Ala. 443, 6 So. 762. 
 
 60 Am. Rep. 823. Provided the 90 Commonwealth v. Power, 7 
 
 shipper has no actual knowledge of Mete. (Mass.) 596, 41 Am. Dec. 465. 
 
 a defect in the' agent's authority si Wood v. Chicago &c. R. Co., 
 
 which prevents him from making 68 Iowa 491, 27 N. W. 473, 56 Am. 
 
 such a contract that shall bind the Rep. 861; Pruitt v. Hannibal &c. 
 
 company. Harrison v. Missouri R. Co., 62 Mo. 527, where it is held 
 
 Pac. R. Co., 74 Mo. 364, 41 Am. that notice of restrictions upon the 
 
 Rep. 318. agent's authority must be conveyed 
 
 87 Deming v. Grand Trunk - R. to the public in such a manner as 
 Co., 48 N. H. 455, 2 Am. Rep. 267. to authorize the inference that ship- 
 See also Harrell v. Wilmington &c. pers are apprised of them. See al- 
 R. Co., 106 N. Car. 258, 11 S. E. so Lake Shore &c. Co. v. Foster, 
 286. 104 Ind. 293, 4 N. E. 20, 54 Am! 
 
 88 Southern Express Co. v. Mc- Rep. 319; Newport News &c. R. Co 
 Veigh, 20 Grat (Va.) 264; Phil- v. Mercer, 96 Ky. 475, 29 S. W. 301 ; 
 lips v. North Carolina R. Co., 78 Harrison v. Kansas City &c. R. Co' 
 N. Car. 294; Mann v. Birchard, 40 SO Mo. App. 332; Brooke v. New 
 
525 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 345 
 
 ever, presume that the agent had authority to bind the company 
 by contract for carriage beyond its own line, *^ since a common 
 carrier is not required to deliver goods at a point beyond its 
 line.*^ Where a station agent signed receipts furnished in blank 
 by a shipper, by the terms of which the corporation undertook 
 to forward and deliver the goods to the order of the consignee 
 at points on a connecting line, but it appeared that he acted with- 
 out special authority and without the knowledge of the corpora- 
 
 York &c. Co., 108 Pa. St. 529, 1 
 Atl. 206, 56 Am. Rep. 235; South- 
 ern Express Co. v. Woraack, 1 
 Heisk. (Tenn.) 256; International 
 &c. R. Co. V. True, 23 Tex. Civ. 
 App. 523, 57 S. W. 977; Johnson v. 
 Central Vt. R. Co., 56 Vt. 707, 19 
 Am. & Eng. R. Cas. 169. In Illinois 
 Cent. R. Co. v. Bryant, 70 Miss. 
 665, 12 So. 592, it is held that where 
 it has been the custom for a sta- 
 tion agent to receive notice of the 
 assignment of the wages of em- 
 ployes, liotice to such agent is no- 
 tice to the company. See Memphis 
 &c. Co. V. Koch, 28 Kans. 565, 9 
 Am. & Eng. R. Cas. 429. As to 
 when notice to station agent is no- 
 tice to the company, see Merrill v. 
 American &c. Co., 62 N. H. 514.; 
 Great Western &c. Co. v. Wheeler, 
 20 Mich. 419; Wells v. American 
 &c. Co., 44 Wis. 342. 
 
 82 Hoffman v. Cumberland &c. R. 
 Co., 85 Md. 391, 37 Atl. 214; Grover 
 & Baker &c. Co. v. Missouri Paci- 
 fic R. Co., 70 Mo. 672, 35 Am. Rep. 
 444; Marmonstein v. Pennsylvania 
 R. Co., 68 N. Y. St. 172, 34 N. Y. 
 S. 97; Coates v. Chicago &c. R. Co., 
 8 S. Dak. 173, 65 N. W. 1067; Cum- 
 mins V. Dayton &c. R. Co., (Ind. 
 Super. Ct., Marion Co.) 9 Am. & 
 Eng. R. Cas. 36. 
 
 93 Burroughs v. Norwich &c. Co., 
 100 Mass. 26; People v. Chicago &c. 
 R. Co., 55 111. 95, 8 Am. Rep. 631; 
 Erie R. Co. v. Wilcox, 84 111. 239, 
 25 Am. Rep. 451; Pittsburgh &c. R. 
 Co. v. Morton, 61 Ind. 539, 574, 28 
 Am. Rep. 682; Cobb v. Iowa Cen- 
 tral R. Co., 38 Iowa 601 ; Grover & 
 Baker &c. Co. v. Missouri Pac. R. 
 Co., 70 Mo. 672, 35 Am. Rep. 444; 
 Wait V. Albany &c. Co., 5 Lans. (N. 
 Y.) 475, Piedmont Mfg. Co. v. Col- 
 umbia &c. R. Co., 19 S. Car. 353; 
 Oxlade V. North Eastern R. Co., IS 
 C. B. (N. S.) 680. See generally 
 as to authority of agents authorized 
 to make contracts respecting trans- 
 portation of passengers and goods, 
 Houston &c. R. Co. v. Hill, 63 Tex. 
 381, 51 Am. Rep. 642; Mulligan v. 
 Northern &c. R. Co., 4 Dak. 315, 29 
 N. W. 659; Michigan &c. R. Co. v. 
 Day, 20 111. 375, 71 Am. Dec. 278; 
 Angle V. Mississippi &c. R. Co., 18 
 Iowa 555; Missouri Pac. Co. v. Fin- 
 ley, 38 Kans. 550, 16 Pac. 951 ; Med- 
 bury v. New York &c. Co., 26 Barb. 
 (N. Y.) 564; Riley v. New York 
 &c. R. Co., 34 Hun (N. Y.) 97; 
 Borden v. Richmond &c. Co., 113 N. 
 Car. 570, 18 S. E. 392, 37 Am. St. 
 632. 
 
§345 
 
 RAILROADS 
 
 526 
 
 tion in so doing, and that the agent had been furnished with 
 blank forms of receipts by the companyi by which it was pro- 
 vided that in case of loss or damage of the goods the corporation 
 only should be responsible in whose actual custody the goods 
 should be at the time, the company was held not liable for a loss 
 occurring on a connecting line.^* But the authority of a station 
 agent to make contracts for the carriage of goods over connect- 
 ing lines may be shown by evidence that such was the usual 
 course of business,*^ since the company is bound by the acts of 
 its agents which it has permitted for a length of time without 
 objection. There is no doubt of the authority of a railroad com- 
 pany to enter into a valid contract of this character.^* A local 
 
 9* Burroughs v. Norwich &c. R. 
 Co., 100 Mass. 26, 1 Am. Rep. 78. 
 See also Chicago &c. R. Co. v. 
 Ingrahma, 114 Ark. 506, 170 S. W. 
 232. 
 
 95 Grover & Baker &c. Co. v. Mis- 
 souri Pac. R. Co., 70 Mo. 672. See 
 also Faulkner v. Chicago &c. R. Co., 
 99 Mo. App. 421, 73 S. W. 927; 
 Gulf &c. R. Co. V. Cole, 8 Tex. 
 Civ. App. 635, 28 S. W. 391; Bige- 
 low V. Chicago &c. R. Co., 104 Wis. 
 109, 88 N. W. 95. Where a local 
 agent of a railroad company was 
 authorized to make a special con- 
 tract for transporting a lot of corn 
 from Illinois to Boston, but had no 
 authority to contract for the return 
 of a part of the freight charged, it 
 was held that the company should 
 not be allowed, after having availed 
 itself of the benefits of the con- 
 tract, to repudiate an agreement for 
 the return of freight charges which 
 he had introduced into the contract. 
 Toledo &c. R. Co. v. Elliott, 76 111. 
 67. Where it is shown that a sta- 
 tion agent was in the habit of receiv- 
 ing goods for carriage over con- 
 necting lines, and was in possession 
 
 of the company's stamp to be used 
 upon receipts, which he issued for 
 such goods, and that the company 
 took possession of the goods and 
 caused them to be shipped, with, at 
 least, a presumptive knowledge of 
 the terms of the receipt given, the 
 agent will be presumed to have au- 
 thority to contract for the shipment 
 of goods over a connecting line. 
 Hansen v. Flint &c. R. Co., 73 Wis. 
 346, 41 N. W. 529, 9 Am. St. 791. 
 
 96 Ohio &c. R. Co. V. McCarthy, 
 96 U. S. 258, 24 L. ed. 693 ; Wheeler 
 V. San Francisco &c. R. Co., 31 Cal. 
 46, 89 Am. Dec. 147; Perkins v. 
 Portland &c. R. Co., 47 Maine 573, 
 74 Am. Dec. 507; Feital v. Middle- 
 sex R. Co., 109 Mass. 398, 12 Am. 
 Rep. 720; Stewart v. Erie &c. Trans. 
 Co., 17 Minn. 372; Nashua Lock Co. 
 V. Worcester &c. R. Co., 48 N. H. 
 339; Milnor v. New York &c. R. 
 Co., 53 N. Y. 363 ; Cincinnati R. Co. 
 V. Pontius, 19 Ohio St. 221; Balti- 
 more &c. R. Co. V. Brown, 54 Pa. 
 St. IT; Morse v. Brainerd, 41 Vt. 
 550; Candee v. Pennsylvania R. Co., 
 21 Wis. 582, 94 Am. Dec. 566; Wil- 
 by v. West Cornwall R. Co., 2 
 
527 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 345 
 
 station agent has no authority, generally, to contract to furnish 
 cars to shippers at stations other than that at which he is sta- 
 tioned,'''' since his authority, real or apparent, extends only to 
 the control of the company's business at his own station.^'* He 
 has no such authority over the company's trains as will enable 
 him to make a binding contract for the carriage of freight on a 
 passenger train.®* It is no part of his duties to assign seats to 
 passengers upon a train, hence it has been held that the companj- 
 is not bound by directions given by a station agent to a passen- 
 ger to ride in a dangerous place outside the car.^ He cannot 
 make a binding contract with the company on his own behalf 
 without giving the company an opportunity to ratify or dis- 
 affirm it after being put in possession of the fact of his interest.^ 
 So, he cannot bind the company by a contract for the services of 
 an assistant to perform a part of the duties of his office without 
 express authority, since such a contract, by lessening the duties 
 
 Hurl. & N. 703. See also Berger 
 &c. Co. V. Chicago &c. R. Co., 159 
 Wis. 2S6, ISO N. W. 496, 499 (citing 
 text). And general freight agents 
 have been held presumed to have 
 this power. Burtis v. Buffalo &c. 
 Co., 24 N. Y. 274; Farmers &c. Co. 
 v. Northern Pac. R. Co., 120 Fed. 
 873. And see generally as to pow- 
 ers such agents may be presumed 
 to have, Fremont &c. R. Co. v. New 
 York &c. R. Co., 66 Nebr. 159, 92 N. 
 W. 131; St. Louis &c. R. Co. v. El- 
 gin &c. Co., 175 111. 557, 51 N. E. 
 911, 67 Am. St. 238; Baker v. Chi- 
 cago &c. R. Co., 91 Minn. 118, 97 
 N. W. 650; Missouri &c. R. Co. v. 
 Wells, 24 Tex. Civ. App. 304, 58 
 S. W. 842. But see Converse v. 
 Norwich &c. Trans. Co., 33 Conn. 
 166. 
 
 97 Missouri Pac. R. Co. v. Stults, 
 61 Kans. 752, 3 Pac. 522; Gulf &c. 
 R. Co. V. Hodge, 10 Tex. Civ. App. 
 543, 30 S. W. 829. 
 
 98 Voorhees v. Chicago &c. R. 
 Co., 71 Iowa 735, 30 N. W. 29, 60 
 Am. Rep. 823. 
 
 99Elkins V. Boston &c. R. Co., 3 
 Fost (N. H.) 275. 
 
 1 Little Rock &c. R. Co. v. Miles, 
 40 Ark. 298, 48 Am. Rep. 10. 
 
 2 Pegram v. Charlotte &c. R. Co., 
 84 N. Car. 696, 37 Am. Rep. 639, 
 where the station agent negotiated 
 for an excursion train to be run for 
 his benefit to a Fourth of July sele- 
 bration, and the court held that, his 
 interests in the matter being adverse 
 to those of the company, he was 
 bound, by reason of his fiduciary 
 relationi toward the company, to dis- 
 close all material facts which would 
 influence it in making the contract, 
 including the fact that it was made 
 for his own benefit, and his failure 
 to do so would prevent him from 
 enforcing the contract. 
 
§ 345 RAILROADS 
 
 52S 
 
 devolving upon him, would indirectly benefit the agent him- 
 self.3 Upon the same principle, the railroad company cannot be 
 held liable for the failure of its station agent to perform duties 
 which he undertakes in pursuance of his employment by a third 
 person as an agent for the purchase and shipment of goods. The 
 law does not favor double agencies.* If he ships his own goods 
 at a higher rate than is allowed by law, he cannot maintain an 
 action to recover the overcharges paid, since he himself acted 
 as the instrument by which the wrong was done and was, there- 
 fore, a party to the wrong of which he complains.^ Where the 
 station agent performs an act that is beyond the power of the 
 railroad corporation itself, the corporation is not necessarily 
 bound thereby. It has even been held (erroneously, as we think) 
 where a station agent caused the arrest of a shipper for refusing" 
 to pay the return charges for a horse that the company was not 
 liable to an action for false imprisonment, since the company had 
 no authority to arrest for non-payment of charges for carriage,, 
 and could not be held to have conferred such authority upon the 
 agent.® While the railroad company is, ordinarily, liable to third 
 persons for the fraudulent conduct of the station agent within 
 the line of his employment, it is not, ordinarily, so liable to per- 
 sons having knowledge of the fraud. Accordingly, if a station 
 agent issues a bill of lading for goods not placed in his posses- 
 sion and delivers it to a person acting in collusion with him, the 
 railroad is not bound. It is held by many of the courts that as- 
 a bill of lading is not a negotiable instrument a fraudulent bill 
 is void even in the hands of an innocent third person who has; 
 
 3 Willis V. Toledo &c. R. Co., 72 R. Co. v. James, li Tex. 12, 10 S. 
 Mich. 160, 40 N. W. 205. W. 744, IS Am. St. 743, where the- 
 
 4 Summer v. Charlotte &c. R. Co., general manager made an arrest not 
 78 N. Car. 289. See also Mulligan authorized by the charter, and the 
 V. Northern Pac. R. Co., 4 Dak. 31S, company was held liable. And if 
 29 N. W. 659 ; Coleman v. Richer, the agent had authority to make ar- 
 2 El. & Bl. 750, 75 E. C. L. 750. rests under any circumstances, the 
 
 BSteever v. Illinois Central R. company may be held liable where 
 
 Co., 62 Iowa 371, 17 N. W. 595, he used his power without justifi- 
 
 construing Acts 1874, ch. 68. cation. Goff v. Great Northern R.. 
 
 6 Poulton V. London &c. R. Co., Co., 30 L. Jour. Q. B: 148. 
 L. R. 2 Q. B. 534. But see Gulf 
 
529 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 345 
 
 been induced to advance money upon the faith of it J But a num- 
 ber of courts hold the railroad company liable in such a case, 
 upon the ground that it is the natural and necessary expectation 
 of a carrier issuing bills of lading that they will pass freely from 
 one to another and advances be made upon their faith, that the 
 carrier has no right to believe, and never does believe, that their 
 effect is limited to the person to whom they are first and directly 
 issued,* and that it is estopped to deny the facts set out in a bill 
 
 7 Freidlander v. Texas &c. R. Co., 
 130 U. S. 416, 9 Sup. Ct 570, 32 
 L. ed. 991, in which Fuller, C. J., 
 speaking for the court, says : "The 
 law can punish roguery, biit cannot 
 always protect the purchaser from 
 loss, and so fraud perpetrated 
 through the device of a false bill of 
 lading may work injury to an inno- 
 cent party, which cannot be re- 
 dressed by a change of victims." 
 Stone V. Wabash &c. R. Co., 9 Brad. 
 (111.) 48; Baltimore &c. R. Co. v. 
 Wilkins, 44 Md. 11, 22 Am. Rep. 
 26. See Grant v. Norway, 2 Eng. L. 
 
 6 Eq. 337; Lake Shore &c. Co. v. 
 Foster, 104 Ind. 293, 4 N. E. 20, 54 
 Am. Rep. 319; Fellows v. Steamer 
 R. W. Powell, 16 La. Ann. 316, 79 
 Am. Dec. 581 ; National Bank v. 
 Chicago &c. R. Co., 44 Minn. 224, 
 46 N. W. 342, 560, 20 Am. St. 566; 
 Louisiana Nat. Bank v. Laveille, 52 
 Ma 380; Sioux City &c. R. Co. v. 
 First Nat. Bank, 10 Nebr. 556, 
 
 7 N. W. 311, 35 Am. Rep. 488; 
 Dean v. King, 22 Ohio St. 118. In 
 Bank of N. Y. &c. v. American &c. 
 Co., 153 N. Y. 559, 38 N. E. 713, 
 it is held that a by-law of a cor- 
 poration authorizing an officer to 
 sign warehouse receipts does not 
 confer upon him authority to sign 
 a receipt for his own property. 
 
 8 Bank of Batavia v. New York 
 &c. R. Co., 106 N. Y. 19S, 12 N. 
 E. 433, 60 Am. Rep. 440; Armour 
 v. Michigan Cent. R. Co., 65 N. Y. 
 Ill, 22 Am. Rep. 603; Wichita 
 Savings Bank v. Atchison Sac. R. 
 Co., 20 Kans. 519. In this latter 
 case the court says: "The custom 
 of grain dealers is to buy of the pro-^ 
 ducer his wheat, corn, barley, etc., 
 then deliver the same to the rail- 
 road company for shipment to mar- 
 ket. The railroad company issues^ 
 to the shipper its bill of ladings 
 The shipper takes his bill of lading: 
 to a bank, draws a draft upon his; 
 commission merchant or consignee 
 against the shipment, and attaches 
 his bill of lading to the draft. Up- 
 on the faith of the bill of lading 
 and without further inquiry the 
 bank cashes the draft, and the 
 money is thus obtained to pay for 
 the grain purchased, or to purchase 
 other shipments. In this way the 
 dealer realizes at once the greater 
 value of his consignments, and need 
 not wait for the returns of the sale 
 of his grain to obtain money to 
 make other purchases. In this way 
 the dealer with a small capital may 
 buy and ship extensively; and while 
 having a capital of a few hundred 
 dollars oilly, may buy for cash and 
 
1345 
 
 RAILROADS 
 
 530 
 
 of lading issued by its accredited agent to the injury of one who 
 has been misled thereby.^ There is some reason for the doctrine 
 
 ship grain valued at many thous- 
 -ands. This mode of transacting 
 business is greatly advantageous 
 hath to the shipper and the pro- 
 ducer. It gives the shipper who is 
 prudent and posted as to the mar- 
 kets almost unlimited opportunities 
 for the purchase and shipment of 
 grain, and furnishes a cash market 
 for the producer at his own door. 
 It enables the capitalist and banker 
 to obtain fair rates of interest for 
 the money he has to loan, and in- 
 sures him, in the way of bills of 
 Jading, excellent security. It also 
 'furnishes additional business to rail- 
 -road companies, as it facilitates and 
 increases shipments to the markets. 
 .A m.ode of doing business so bene- 
 ifidal to so many classes ought to 
 receive the favoring recognition of 
 the courts to aid its continuance." 
 See also Brooke v. New York &c. 
 Co., 108 Pa. St. 529, 1 Atl. 206, 56 
 Am. Rep. 235; Dean v. Driggs, 137 
 N. Y. 274, 33 N. E. 326, 19 L. R. A. 
 302, 33 Am. St. 721. 
 
 9 Brooke v. New York &c. R. Co., 
 108 Pa. St. 529, 1 Atl. 206, 56 Am. 
 Rep. 235; St. Louis &c. R. Co. v. 
 Larned, 103 111. 293; Coventry v. 
 Great Eastern R. Co., L. R. 11 Q. 
 B. Div. 776. Sioux City &c. R. Co. 
 V. First Nat. Bank, 10 Nebr. 556, 7 
 N. W. 311, 35 Am. Rep. 488, where 
 the leading cases holding the con- 
 trary are very fully reviewed. In 
 this case, Maxwell, C. J., speaking 
 for the court, says: "All the testi- 
 mony shows that the bills of lading 
 in controversy were issued by an 
 
 authorized agent of the railroad 
 company, and that he not only had 
 authority to issue such bills, but it 
 was one of the duties imposed upon 
 him. As against an innocent pur- 
 chaser of the bills, it will not do to 
 say that the agent had authority to 
 issue bills of lading duly signed, 
 only in cases where shipments were 
 made, and no authority where ship- 
 ments were not made. The com- 
 pany itself has invested its own 
 agent with the authority to issue 
 bills of lading, and when duly is- 
 sued they are not the bills of the 
 agent, but of the railroad company. 
 The representation, therefore, thus 
 made in the bills that the company 
 has received a certain quantity of 
 grain for shipment, is a representa- 
 tion to any one who, in good faith 
 relying thereon, sees fit to make ad - 
 vances on the same. If these rep- 
 resentations are false, who should 
 bear the loss? The party who ap- 
 pointed, placed confidence in, and 
 gave authority to make the bills, or 
 the one that in good faith, relying 
 thereon, purchased or advanced 
 money on the same ■ * + * The 
 case presents every element neces- 
 sary to constitute an estoppel in 
 pais, a representation made with 
 full knowledge that it might be act- 
 ed upon, and subsequent action in 
 reliance thereon, by which the de- 
 fendants in error would lose the 
 amount advanced if the representa- 
 tion is not made good. This princi- 
 ple was entirely overlooked in Grant 
 v. Norway, and the cases following 
 
531 EXECUTIVE AND MINISTERIAL OFFICERS AND AGENTS § 345 
 
 declared in the cases last referred to, for the act of the station 
 agent in such cases in issuing the bill- of lading must cause loss 
 either to his employer or to some third person, and as the em- 
 ployer "trusted most it must suffer most." The maxim that, 
 "where one of two innocent persons must suffer loss by the fraud 
 of a third person, he who put it in the power of the third to com- 
 mit the fraud must bear the loss" seems applicable to such cases. 
 Analogous cases — those where warehouse receipts were issued 
 — give some support to the decisions under immediate mention.^" 
 But the weight of authority is to the effect that the company is 
 not bound where no goods were received.^^ 
 
 it." See also Thomas v. Atlantic Merchants' &c. Bank, 78 Ga. 574, 3 
 
 Coast Line R. Co., 85 S. Car. 537, S. E. 327; Preston v. Witherspoon, 
 
 64 S. E. 220, 67 S. E. 908, 34 L. 109 Ind. 457, 9 N. E. 585, 58 Am. 
 
 R. A. (N. S.) 1177, and cases there Rep. 417; Babcock v. People's Bank, 
 
 cited in note. 118 Ind. 212, 20 N. E. 732; Whitlock 
 
 loCowdrey v. Vanderburgh, 101 v. Hay, 58 N. Y. 484; Stewart v. 
 
 U. S. 572, 25 L. ed. 923; McNeil v. Phoenix Ins. Co., 9 Lea (Tenn.) 104. 
 Hill, 1 Wool. (U. S. C. C.) 96 Fed. " See post, §§ 2136, 2139. See al- 
 
 Cas. No. 8914; Planters' &c. Co. v. so 4 Elliott Cont. §3157. 
 
CHAPTER XIV. 
 
 DIVIDENDS. 
 
 Sec. 
 
 350. Rights of .stockholder — Divi- 
 
 dends. 
 
 351. When dividend belongs to 
 
 stockholder — Assignment. 
 
 352. To whom dividend should be 
 
 paid. 
 
 353. Rights of life tenant and re- 
 
 mainderman — Apportion- 
 ment of dividends. 
 
 354. Duties of life tenant — ^Trans- 
 
 fers. 
 .355. Dividend is not property of 
 fr , the corporation — Rights of 
 
 ' ' creditors and stockholders. 
 
 356. Dividend is irrevocable — ^Ac- 
 
 tions concerning. 
 
 357. Demand — Necessity and effect 
 
 of. 
 
 Sec. 
 
 358. Declaration of dividend dis- 
 
 cretionary with directors. 
 
 359. Power to borrow money or de- 
 
 clare stock dividend. 
 
 360. Remedies for abuse of discre- 
 
 tion. 
 .361. Limitations upon authority to 
 declare a dividend — Suits to 
 reclaim. 
 
 362. Dividends should be paid out 
 
 •of the profits. 
 
 363. Enjoining payment of divi- 
 
 dends. 
 
 364. Personal liability of directors. 
 
 365. Dividends payable in scrip. 
 
 366. Stock dividends. 
 
 367. Dividends payable without dis- 
 
 crimination. 
 
 §350 (304). Rights of stockholders — Dividends. — A stock- 
 holder has no strictly legal right to the property or undistributed 
 profits of the corporation ;^ he has merely a right to participate, to 
 a certain extent, in the management of the company and to share 
 in the distribution of whatever property may remain after pay- 
 ment of its debts upon dissolution,^ together with the further 
 right, which constitutes the principal inducement to become a 
 shareholder, of sharing in the distribution, which is made at longer 
 or shorter intervals of time in all prosperous companies, of the 
 
 1 Commercial Fire Ins. Co. v. Jones v. Terre Haute R. Co., 57 
 Board, 99 Ala. 1, 14 So. 490, 42 Am. 
 St. 17; Goodwin v. Hardy, 57 Maine 
 143; Granger v. Bassett, 98 Mass. 
 462; Lockhart v. Van Alstyne, 31 
 Mich. 76, 78, 18 Am. Rep. 156; 
 
 N. Y. 196; Burroughs v. North 
 Carolina R. Co., 67 N. Car. 376, 12 
 Am. Rep. 611. 
 
 2Burrall v. Bushwick R. Co., 75 
 N. Y. 211, 216. 
 
 532 
 
533 
 
 DIVIDENDS 
 
 §351 
 
 profits arising from the business which the corporation is or- 
 ganized to transact.* When a corporate profit has been ascer- 
 tained, declared, ordered and set aside by the proper corporate 
 authorities to be paid to the stockholders on demand or at a fixed 
 time, it is termed a dividend.* A resolution ascertaining the 
 amount of the corporate profits, and declaring them payable to 
 the stockholders, is a declaration of a dividend, even though it 
 leaves the time of payment to be fixed afterward by the 
 directors. 5 
 
 § 351 (305). When dividend belongs to stockholder — Assign- 
 ment. — The dividend belongs to the holder of the shares at the 
 time it is declared,® and so soon as it is due it becomes his abso- 
 
 3 Forbes v. Memphis &c. R. Co., 2 
 Woods (U. S.) 323, 331, Fed. Cas. 
 No. 4926; Plimpton v. Bigelow, 93 
 N. Y. 592, 599. 
 
 4 Mobile &c. R. Co. v. Tennessee, 
 153 U. S. 486, 14 Sup. Ct. 968, 38 
 L. ed. 793; Alsop v. De Eoven, 107 
 111. App. 190; Lockhart v. Van Als- 
 tyne, 31 Mich. 76, 18 Am. Rep. 156; 
 Hyatt V. Allen, 56 N. Y. 553, IS Am. 
 Rep. 449; Chaflfee v. Rutland R. 
 Co., 55 Vt. 110; Webb v. Earle, L. 
 R. 20 Eq. 556; "A dividend is that 
 portion of the profits and surplus 
 funds of the corporation which has 
 been actually set apart by a valid 
 resolution of the board of directors, 
 or by the shareholders at a corpo- 
 rate meeting, for distribution among 
 the shareholders according to their 
 respective interests, in such a sense 
 as to become segregated from the 
 property of the corporation and to 
 become the property of the share- 
 holders distributively." 2 Thomp. 
 Corp. §2126, citing King v. Patter- 
 son &c. R. Co., 29 N. J. L. 82. See 
 also 5 Thomp. Corp. (2nd. ed.), 
 § 5271. 
 
 6 March v. Eastern R. Co., 43 N. 
 H. 515; Foote, Appellant, 22 Pick. 
 (Mass.) 299; King v. Paterson &c. 
 R Co., 29 N. J. L. 82, 504; Simp- 
 son v. Moore, 30 Barb. (N. Y.) 
 637; Earp's Appeal, 28 Pa. St. 368; 
 De Gendre v. Kent, L. R. 4 Eq. 
 Cas. 283. See also Northwestern 
 Marble Co. v. Carlson, 116 Minn. 
 438, 133 N. W. 1014, Ann. Cas. 
 1913B, 552. But where the time of 
 payment is not fixed, it has been 
 held that a bill in equity is the ap- 
 propriate and only remedy. Scott v. 
 Eagle &c. Co., 7 Paige (N. Y.) 198; 
 Pratt V. Pratt, Read & Co., 33 Conn. 
 446. 
 
 6 Wright" V. Tuckett, 1 Johns. & H. 
 (Eng. Ch.) 266; Central R. &c. Co. 
 V. Papot, 59 Ga. 342; Bright v. 
 Lord, 51 Ind. 272, 19 Am. Rep. 732; 
 Baltimore City Pass. R. Co. v. 
 Sewell, 35 Md. 238, 6 Am. Rep. 402 ; 
 note in 45 L. R. A. 392; Boardman 
 V. Lake Shore &c. R. Co.; 84 N. 
 Y. 157, 178; Hopper v. Sage, 112 
 N. Y. 530, 20 N. E. 350, 8 Am. St. 
 771. All dividends declared pre- 
 vious to the death of the stock- 
 
§351 
 
 RAILROADS 
 
 534 
 
 lute property^ If the dividend be made payable on a day subse- 
 quent to that on which it is declared, the stockholder may, be- 
 tween the time it is declared and the time it becomes payable, as- 
 sign and transfer either the stock^ or the dividend* without affect- 
 ing his title to the other, although a devise of the dividends with- 
 out qualification has been held to carry with it the stocks them- 
 selves.^" The fact that a dividend was earned before a transferee 
 purchased his stock will not affect his title to dividends declared 
 after such purchase. ^^ He is entitled to all dividends declared 
 
 holder, and remaining unpaid, go to 
 his administrator, even though not 
 yet payable. Kernochan, In re, 104 
 N. Y. 618, 11 N. E. 149; De Gendre 
 V. Kent, L. R. 4 Eq. 283; 5 Thomp. 
 Corp. (2nd. ed.), § 5330. 
 
 T Germain v. Lake Shore &c. R. 
 Co., 91 N. Y. 483 ; Keppel v. Peters- 
 burg R. Co., Chase's Dec. (U. S.) 
 167, Fed. Cas. No. 7222; King v. 
 Paterson &c. R. Co., 29 N. J. L. 82 
 and 504; Scott v. Central R. Co., 52 
 Barb. (N. Y.) 45. Where, however, the 
 fact that a dividend has been voted 
 by directors is not made public or 
 communicated to the stockholders, 
 and no fund is set apart for pay- 
 ment, the vote may be rescinded. 
 Ford V. East Hampton Rubber- 
 Thread Co., 158 Mass. 84, 32 N. E. 
 1036, 20 L. R. A. 65, 35 Am. St. 
 462. A potential right to a divi- 
 dend is not a debt until the dividend 
 is declared. Lockhart v. Van Al- 
 styne, 31 Mich. 76, 18 Am. Rep. 
 156; London &c. Co., Re, L. R. 5 
 Eq. 519; Stevens v. South Devon 
 &c. R. Co., 9 Hare 313. It then be- 
 comes a debt due from the corpora- 
 tion. Wheller v. Northwestern &c. 
 Co., 39 Fed. 347. See also North- 
 western Marble &c. Co. v. Carlson, 
 116 Minn. 438, 133 N. W. 1014, Ann. 
 Cas. 1913B, 552. 
 
 8 Wright V. Tuckett, 1 Johns. & 
 H. (Eng. Ch.) 266; Wheeler v. 
 Northwestern &c. Co., 39 Fed. 347; 
 Hill v. Newichawanick Co., 71 N. 
 Y. 593. Contra Burroughs v. North 
 Carolina R. Co., 67 N. Car. 376, 12 
 Am. Rep. 611. Ohio City v. Qeve- 
 land &c. R. Co., 6 Ohio St. 489. In 
 Kennedy v. First Nat. Bank, 115 N. 
 Car. 223, 20 S. E. 375, it was held 
 that where a widow, to whom divi- 
 dends were bequeathed during her 
 life or widowhood, with remainder 
 over to her daughter, consented to 
 the transfer of the certificate of 
 stock to the daughter, she waived 
 all claim to the dividend. 
 
 9 Brundage v. Brundage, 60 N. Y. 
 544; Curry v. Woodward, 44 Ala. 
 305; Black v. Homersham, L. R. 4, 
 Exch. Div. 24. See also Cook v. 
 Monroe, 45 Nebr. 349, 63 N. W. 800, 
 11 Nat. Corp. R. 5. 
 
 10 Collier v. CoUier, 3 Ohio St. 
 369. 
 
 11 Central R. &c. Cj. v. Papot, 59 
 Ga. 342; Ryan v. Leavanworth &c. 
 Co., 21 Kans. 365, 403; March v. 
 Eastern R. Co., 43 N. H. 515; Jer- 
 main v. Lake Shore &c. R. Co., 91 
 N. Y. 483. See also Nickals v. New 
 York &c. R. Co., 15 Fed. 575. 
 
535 DIVIDENDS § 352 
 
 while he owns it.^^ ^ gale of shares of stock, including all divi- 
 dends due or to become due thereafter, has also been held to 
 include a stock dividend. i* 
 
 § 352 (306). To whom dividends should be paid. — The general 
 rule is that in cases of periodical payments due at intervals, and 
 not falling due from day to day, there can be no apportionment.^* 
 Owning an option to purchase stock does not entitle the vendee 
 to dividends declared before he has closed the bargain and while 
 he still has the right to either purchase or refuse the stock.^^ 
 although an absolute purchase of stock to be delivered at the 
 seller's option will entitle the purchaser to all dividends declared 
 after entering into the original contract of purchase.^' And 
 where an offer to sell shares is accep'ted before revocation, it has 
 been held that the acceptor may claim all dividends declared 
 after the date of the offer.^'^ for the bargain is presumed to have 
 been made with reference to the value of the shares at the time 
 the offer was made. The corporation may generally pay the 
 dividend to the person in whose name the stock is registered upon 
 the books of the company^^ without injury,^^ and it will be pro- 
 
 12 Bailey v. Railroad Co., 22 Wall. le Currie v. White, 45 N. Y. 822; 
 (U. S.) 604, 637, 22 L. ed. 840; Black v. Homersham, L. R. 4 Exch. 
 Goodwin v. Hardy, 57 Maine 143; Div. 24. See also Phinizy v. Mur- 
 March v. Eastern R. Co., 43 N. H. ray, 83 Ga. 747, 10 S. E. 358, 6 L. 
 515 ; Jones v. Terre Haute &c. R. R. A. 426, 20 Am. St. 342. 
 
 Co., 57 N. Y. 196. If he acquires it Harris v. Stevens, 7 N. H. 454. 
 
 it by devise he takes all dividends But see Hopper v. Sage, 112 N. Y. 
 
 declared after the death of his tes- 530, 20 N. E. 350, 8 Am. St. 771. 
 
 tator. Phelps v. Farmers' &c. Bank, is Brisbane v. Delaware &c. R. 
 
 26 Conn. 269. See note in 45 L. Co., 94 N. Y. 204; Gemmell v. Davis, 
 
 R. A. 393. 75 Md. 546, 23 Atl. 1032, 32 Am. St. 
 
 13 Rose V. Barclay, 191 Pa. St. 412 ; Cook v. Monroe, 45 Nebr. 349, 
 594, 43 Atl. 385, 45 L. R. A. 392, 63 N. W. 800, 11 Nat. Corp. R. 5; 
 and note. Cleveland &c. R. Co. v. Robbins, 35 
 
 14 Clapp v. Aster, 2 Edw. Ch. (N. Ohio St. 483. 
 
 Y.) 379. See note in 45 L. R. A.' 19 Jones v. Terre Haute &c. R. 
 396. Co., 29 Barb. (N. Y.) 353; North- 
 is Bright V. Lord, 51 Ind. 272, 19 rop v. Newton &c. Tpk. Co., 3 Conn. 
 Am. Rep. 732. 544. 
 
§352 
 
 RAILROADS 
 
 536 
 
 tected even though he has transferred the shares. 2" But where 
 the corporation has due notice of a transfer, it should pay the 
 money only to the transferee,^^ and it seems that it may properly 
 do so, even though he has not yet been registered as a stock- 
 holder.22 If a stockholder dies, his administrator is the proper 
 party to receive dividends on his stock,^^ for dividends declared 
 before, though payable after the owner's death, belong to the 
 estate, even as against the devisees of the stock. 2* His heirs, it 
 is said, can only claim the dividends after they have procured 
 the shares to be transferred to themselves. ^s Where the corpora- 
 tion closed its transfer books some days before the declaration 
 of a dividend, parties who applied for and where refused registry 
 while the books remained closed were held entitled to the divi- 
 dend when declared. 2® If fhe corporation should pay a dividend 
 
 20 Oeveland &c. R. Co. v. Rob- 
 bins, 35 Ohio St. 483; Bell v. Laf- 
 ferty, 1 Penny. (Pa.) 4S4. 
 
 21 Jones V. Terre Haute &c. R. 
 Co., 57 N. Y. 196, 205; Timberlake 
 V. Shipper &c. Co., 72 Miss. 323, 16 
 So. 530; note in 45 L. R. A. 397; 
 Robinson v. National Bank, 95 N. 
 Y. 637, wnere the corporation had 
 improperly refused to register a 
 transfer. 
 
 22 See Gemmell v. Davis, 75 Md. 
 546, 23 Atl. 1032, 32 Am. St. 
 412. It has also been held that a 
 pledgee has a right to dividends de- 
 clared iduring the pendency of the 
 pledge, although not transferred on 
 the corporate books. Brady v. Irby, 
 101 Ark. 573, 142 S. W. 1124, Ann. 
 Cas. 1913E, 1054. In the note to this 
 case as last reported other authori- 
 ties are also cited to the effect that, 
 in the absence of contract to the 
 contrary the pledgee is entitled to 
 dividends declared during such 
 time. 
 
 23 Brisbane v. Delaware &c. R. 
 Co., 94 N. Y: 204. 
 
 24 De Gendre v. Kent, L. R. 4 Eq. 
 283; Kernochen, Re, 104 N. Y. 618, 
 11 N. E. 149. 
 
 25 State V. New Orleans &c. R. 
 Co., 30 La. Ann. 308. 
 
 26 Jones V. Terre Haute &c. R. 
 Co., 57 N. Y. 196, 205; Robinson v. 
 National Bank, 95 N. Y. 637. 
 Where the corporation is author- 
 ized by statute or by charter to 
 close its books under such circum- 
 stances, the holding would, perhaps, 
 be different. If the corporation re- 
 fuses to transfer stock to a pur- 
 chaser upon application regularly 
 made, it has been held that he may 
 maintain a suit against it for a divi- 
 dend due on his stock, without first 
 coinpelling a transfer of stock to 
 him by proceeding in equity. 
 Hill V. Atoka &c. Co. (Mo. 
 Sup.), 21 S. W. 508. This case 
 was afterward reversed, however, 
 by the court in banc, upon other 
 grounds. The decision reversing 
 it is found in 124 Mo. 153, 25 S. 
 W. 926. 
 
537 DIVIDENDS § 353 
 
 to a person as a stockholder, although he may have wrongfully- 
 held the stock, one claiming to be the real owner of the stock, 
 but not an admitted stockholder, cannot establish his right 
 thereto in the first instance, it seems, by an action against the 
 stockholder to recover such dividend, as for money had and re- 
 ceived. His action to recover the dividend could only be main- 
 tained against the corporation, if it could be' maintained at all, 
 and he cannot follow the assets into the hands of others without 
 first establishing his rights as a creditor of the corporation.^'^ 
 
 § 353 (307). Rights of life tenant and remainderman — Appor- 
 tionment of dividends. — An ordinary cash dividend declared dur- 
 ing the existence of the life tenancy goes, presumptively at least, 
 to the life tenant,^^ but where stock is heM in trust for a life ten- 
 ant with remainder over, the rule has been laid down that all divi- 
 dends declared from profits earned during the tenancy belong to 
 the life tenant,^® while extraordinary dividends amounting only 
 to a distribution of a portion of the invested capital,*" or a dis- 
 tribution of profits earned or accumulated before the tenancy 
 
 27 Peckham v. Van Wagenen, 83 Atl. 527, 9 L. R. A. 421, 20 Am. St. 
 N. Y. 40, 38 Am. Rep. 392, dis- 894. If the last preceding dividend 
 tinguishing LeRoy v. Globe Ins. Co., was made at a regular and reason- 
 2 Edw. Ch. (N. Y.) 657, and Le able time, before a cash dividend de- 
 Blanc, In re, 75 N. Y. .598. See clared after the life estate arose, it 
 however Cook v. Monroe, 45 Neb. wjU be given to the life tenant, re- 
 349, 63 N. W. 800, 11 Nat. Corp. gardless of the- time when it was 
 Rep. 5. earned. Richardson v. Richardson, 
 
 28 Richardson v. Richardson, 75 75 Maine 570, 46 Am. Rep. 428; 
 Maine 570, 46 Am. Rep. 428; Mil- Jermain v. Lake Shore &c. R. Co., 
 len V. Guerrard, (P Ga. 284, 44 Am. 91 N. Y. 483; Barclay v. Wain- 
 Rep. 720; Bates v. MacKinley, 31 wright, 14 Ves. 66. See also note 
 Beav. 280; 2 Thomp. Corp. §§2193, in 35 L. R. A. (N. S.) 563, and 
 2201. See also "The rule in Minot's 50 L. R. A. (N. S.) 510; 
 
 Case," by Judge Corliss, in ZZ Alb. 30 Vinton's Appeal, 99 Pa. St. 
 
 L. Jour. 106; De Koven v. Alsop, 434, 44 Am. Rep. 116; Heard v. 
 
 205 111. 309, 63 L. R. A. 587, 68 N. Eldredge, 109 Mass. 258, 12 Am. 
 
 E. 930. Rep. 687; Gifford v. Thompson, 115 
 
 29Earp's Appeal, 28 Pa. St. 368; Mass. 478; Wheeler v. Perry, 18 N. 
 
 Biddle's Appeal, 99 Pa. St. 278; H. 307. 
 Oliver's Estate, 136 Pa. St. 43, 20 
 
§353 
 
 RAILROADS 
 
 538 
 
 arose,^^ belong to the remainderman. This rule is followed, either 
 in whole or in part, in the greater number of the states, of the 
 American union,*^ and can be objected to, it is said, only because 
 of the difficulty in applying it in particular cases.^^ In Massa- 
 
 31 Pennsylvania Co. v. Dovey, 64 
 Pa. St. 260; Moss's Appeal, 83 Pa. 
 St. 264, 24 Am. Rep. 164; Smith's 
 Estate, 140 Pa. St. 344, 21 Atl. 438, 
 23 Am. St. 237. 
 
 32 Spooner v. Phillips, 62 Conn. 
 62, 24 Atl. 524, 16 L. R. A. 461; 
 De Koven v. Alsop, 205 111. 309, 68 
 N. E. 930, 63 L. R. A. 587; Hite 
 V. Hite, 93 Ky. 257, 20 g. W. 778, 
 19 L. R. A. 173, 40 Am. St. 189; 
 Hite V. Hite, 2 Ry. & Corp. L. J. 
 (Ky.) 568; Gilkey v. Paine, 80 
 Maine 319, 14 Atl. 205; Peirce v. 
 Burrough, 58 N. H. 302; Van Dor- 
 en V. Olden, 19 N. J. Eq. 176, 97 
 Am. Dec. 650; Kernochan, In re, 
 104 N. Y. 618, 11 N. E. 149; 
 Smith's Estate, 140 Pa. St. 344, 21 
 Atl. 438, 23 Am. St. 237; Cobb v. 
 Fant, 36 S. Car. 1, 14 S. E. 959. 
 The rule seems to be somewhat un- 
 settled in New York. Compare 
 Goldsmith v. Swift, 25 Hun (N. Y.) 
 201; Warren, In re, 33 N. Y. St. 
 584, 11 N. Y. S. 787; Clarkson v. 
 Clarkson, 18 Barb. (N. Y.) 646; 
 Simpson v. Moore, 30 Barb. (N. Y.) 
 637; Riggs v. Cragg, 89 N. Y. 479; 
 Kernochan, In re, 104 N. Y. 618, 11 
 N. E. 149. See also McLouth v. 
 Hunt, 154 N. Y. 179, 48 N. E. 548, 
 39 L. R. A. 230; Lowry v. Farmers' 
 &c. Co., 172 N. Y. 137, 64 N. E. 
 796. Compare Osborne, In re, 209 
 N. Y. 450, 103 N. E. 723, SO L. R. 
 A. (N. S.) 510, and cases cited,. 
 Ann. Cas. 1915A, 298n. And see 
 for other authorities supporting this 
 
 rule and making some distinctions, 
 Poole V. Union Trust Co., 191 Mich. 
 162, 157 N. W. 430, Ann. Cas. 1918E, 
 622, and cases cited in opinion and 
 note. Authorities on both sides are 
 also reviewed in notes in Ann. Cas. 
 1912B, 1216, and 191SA, 298. 
 
 ssEarp's Appeal, 28 Pa. St. 368. 
 In 33 Alb. L. Jour. 427, Judge Cor- 
 liss lays down the following rules 
 upon this subject: "1. If the 
 dividend" is made up of profits, the 
 dividend goes to the life tenant, ir- 
 respective of the form in which it 
 is declared. 2. The life tenant is 
 entitled to all dividends, whether in 
 cash or in stock, declared during the 
 existence of his interest, whether 
 they consist of profits which have 
 accrued subsequently to the vesting 
 of the life estate, or in part of earn- 
 ings of the corporation which had 
 accumulated at the time of the devo- 
 lution upon the life tenant of his 
 interest in the property. 3. That in 
 so far as any dividend consists of 
 money, derived from an increase in 
 the value of the corporation prop- 
 erty, or is derived from any source 
 other than the net earnings of the 
 company, the life tenant can claim 
 no interest therein. 4. That not 
 only is it beyond the power of the 
 corporation to bind the life tenant 
 by dividing net earnings in the form 
 of capital stock, but the life tenant 
 can always show the true nature 
 and source of the dividend, in spite 
 of any act of declaration to the con- 
 
539 
 
 DIVIDENDS 
 
 §353 
 
 chusetts,** Georgia, ^^ Rhode Island,^® and the District of Colum- 
 bia,*'^ the courts look only to the declaring the dividend, to 
 ascertain who is entitled to it, but hold, in general, that a divi- 
 dend payable in money shall be regarded as income, and given to 
 the life tenant, while a dividend payable in stock shall be re- 
 garded as capital and given to the remainderman,^^ since it is 
 thought unwise to attempt to ascertain how the corporation came 
 by the funds out of which either cash or stock dividends are de- 
 clared,** and since a stock dividend does not, as a rule, increase 
 the interest of the shareholders in the property of a corporation, 
 but merely dilutes their shares and is only a new evidence of 
 their interests.*" For this reason it is held that such a dividend 
 generally constitutes capital rather than income, and goes to the 
 remainderman.*^ It has also been held that new shares of pre- 
 ferred stock issued in double the amount of the old shares, but at 
 
 trary; and that, on the other hand, 
 the remainderman may prove that 
 a dividend which apparently be- 
 longs to the life tenant is in fact the 
 property of the remainderman." 
 
 34 Minot V. Paine, 99 Mass. 101, 
 96 Am. Dec. 70S; Daland v. Wil- 
 liams, 101 Mass. 571 ; New England 
 Trust Co. V. Eaton, .140 Mass. 532, 
 4 N. E. 69, 54 Am. Rep. 493. But 
 see Davis v. Jackson, 152 Mass. 58 
 25 N. E. 21, 23 Am. St. 801. 
 
 ssMillen v. Guerrard, 67 Ga. 284, 
 44 Am. Rep. 720, construing Code 
 Ga. §2256. 
 
 36 Parker v. Mason, 8 R. I. 427; 
 Petition of Brown, 14 R. I. 371, 51 
 Am. Rep. 397; Newport Trust Co. 
 V. Van Rensselaer, 32 R. I. 231, 78 
 Atl. 1009, 35 L. R. A. (N. S.) 563. 
 The state of the law in the different 
 jurisdictions is shown with citation 
 of recent cases in the note to the 
 above case as last reported. See 
 also notes in 12 L. R. A. (N. S.) 
 
 768, 50 L. R. A. (N. S.) 510. 
 
 37 Gibbons v. Mahon, 4 Mackey 
 (D. C.) 130, 54 Am. Rep. 262. 
 
 38 Minot V. Paine, 99 Mass. 101, 
 96 Am. Dec. 705. See also De 
 Koven v. Alsop, 205 111. 309, 63 L. 
 R. A. 587, 68 N. E. 930. 
 
 39 Boston &c. R. Co. v. Common- 
 wealth, 100 Mass. 399. 
 
 40 Gibbons v. Mahon, 136 U. S. 
 549, 10 Sup. Ct. 1057, 34 L. ed. 525. 
 
 41 Terry v. Eagle Lock Co., 47 
 Conn. 141 ; Spooner v. Phillips, 62 
 Conn. 62, 24 Atl. 524, 16 L. R. A. 
 461, and note; Millen v. Guerrard, 
 
 67 Ga. 292; Greene v. Smith, 17 R. 
 I. 28, 19 Atl. 1081; De Koven v. 
 Alsop, 205 111. 309, 63 L. R. A. 587. 
 
 68 N. E. 930. See also notes in 12 
 L. R. A. (N. S.) 768; 35 L. R. A. 
 (N. S.) 563, and 50 L. R. A. (N. 
 S.) 510, for a review of the con- 
 flicting cases and statement of th«> 
 rule in each jurisdiction. 
 
§ 353 RAILROADS 540 
 
 one-half the rate of interest, in compromise of claims of the' 
 holders for back and unpaid dividends, constitute capital and not 
 income as between the life tenant and remainderman.*^ A strict 
 adherence to this rule would so clearly be productive of hard- 
 ship and injustice that some modifications have been engrafted 
 upon it in Massachusetts, where it was first announced, and it 
 is held that the court will take into consideration the whole char- 
 acter of the property and the transaction, vs/ith due regard to all 
 the facts preceding, attending, and resulting from the declaration 
 of the dividend, in order to determine whether the dividend 
 rightfully belongs to the owner of the stock or to the owner of 
 the income.** Accordingly, it is held that a dividend payable 
 in stock purchased with the surplus earnings of the corporation 
 belongs absolutely to the life tenant,** and that a cash dividend 
 of forty per cent., for the payment of which no fund is provided, 
 but which is declared to be receivable in payment for shares of 
 stock issued under a power to increase the capital stock, is vir- 
 tually a stock dividend, and must go to the remainderman,*^ as 
 must also the compensation paid to the corporation for a part of 
 its real estate taken by right of eminent domain, and distributed 
 to the stockholders as a cash dividend.*® In England, the courts 
 originally followed the rule that regular cash dividends belong 
 to the life tenant as income, while extraordinary dividends, or 
 bonuses, belong to the remainderman,*'' but th'e tendency at the 
 present time seems to be to hold the action of the corporation 
 conclusive, so that, if it declares even an extraordinary dividend 
 during the existence of the life tenancy, it goes to the life tenant, 
 and if it treats the earnings as capital they will not go to the life 
 tenant.*^ A bonus, however, which is paid from profits that 
 
 M Mills V. Britton, 64 Conn. 4 47 Brander v. Brander, 4 Ves 
 
 29 Atl. 231, 24 L. R. A. 536. 800; Paris v. Paris, 10 Ves. Jr. 185- 
 
 *3 Daland v. Williams, 101 Mass. Irving v. Houston, 4 Paton Scotch' 
 
 S71; Rand v. Hubbell, 115 Mass. H. L. 521; Murray v. Glasse 17 
 
 461, 15 Am. Rep. 121. jur. 816. 
 
 **Leland v. Hayden, 102 Mass. 48 Boiich v. Sproule, L. R. 12 
 
 ^^'^- App. Cas. 385, 397; Barton's Trust 
 
 *5 Daland v. Williams, 101 Mass. In re, L. R. 5 Eq. 238; Price v.' 
 
 57^- Anderson, 15 Sim. 473 ; Ellis v. Bar- 
 
 46 Heard v. Eldredge, 109 Mass. field, 64 L. T. R. 625. But see Sug- 
 
 258, 12 Am. Rep. 687. den v. Alsbury, 63 L. T. R. 576. 
 
541 
 
 DIVIDENDS 
 
 §353 
 
 have been fraudulently retained to the prejudice of the rights of 
 the life tenant, will be given to him as income deferred.*^ The 
 rules to which we have referred are those announced by the 
 courts in their endeavor to accompHsh justice in the absence of 
 any statute authorizing an apportionment, and in the absence of 
 any clearly expressed intention on the part of- the grantor or tes- 
 tator. Where the intent of the grantor or testator is clearly ap- 
 parent, it will control, and the courts will be guided by it.^° In 
 case the life tenant dies before a dividend is declared, the general 
 rule is that it cannot be apportioned, but belongs wholly to the 
 remainderman.^! But in England^^ and in several states in this 
 country,^^ dividends are made apportionable by statute, while 
 in one or two states there is a tendency to hold dividends ap- 
 portionable at common law.^* The worth or value of a privilege 
 accorded to shareholders of taking new shares upon an increase 
 •of the capital stock, belongs to the remainderman, ^^ ]-,m ^j^g [^. 
 
 49Maclaren v. Stainton, L. R. 11 
 Eq. 382 ; Dale v. Hayes, 40 L. J. Ch. 
 244; Edmondson v. Crosthwaite, 34 
 Beav. 30. 
 
 50 Gibbons v. Mahon, 136 U. S. 
 549, 10 Sup. Ct. 10S7 34 L. ed. 525; 
 Millen V. Guerrard, 67 Ga. 284, 44 
 Am. Rep. 720; Reed v. Head, 6 Al- 
 len (Mass.) 174; Clarkson v. Qark- 
 son, 18 Barb. (N. Y.) 646; Thom- 
 son's Appeal, 89 Pa. St. 36; Bushee 
 V. Freeborn, 11 R. I. 149; Bouch, 
 In re, L. R. 29 Ch. Div. 635. See 
 also Soehnlein v. Soehnlein, 146 
 Wis. 330, 131 N. W. 739. 
 
 ^1 Granger v. Bassett, 98 Mass. 
 462; Quinn v. Madigan, 65 N. H. 8, 
 17 Atl. 976; Brundage v. Brundage, 
 ■60 N. Y. 544, 551; King v. FoUett, 
 3 Vt. 385; Pearly ,v. Smith, 3 Atk. 
 260 (174S); Scholefield v. Redfern, 
 2 Drew. & Sm. 173. But compare 
 Johnson v. Bridgewater &c. Co., 14 
 Cray (Mass.) 274. 
 
 52 33, 34 Vict. Ch. 35, §2; Beavan 
 V. Beavan, S3 L. T. R. 245. 
 
 53 See S Thomp. Corp. (2nd. ed.), 
 § 5414, et seq.; 6 Fletcher's Ency. 
 Corp., § 3711, et seq. ; note in 12 L. R. 
 A. (N. S.) 768, et seq. 
 
 Si Rutledge, Ex parte, 1 Harper's 
 Eq. (S. Car.) 65, 14 Am. Dec. 696; 
 Wilson's Appeal, 108 Pa. St. 344. 
 See also Smith's Estate, 140 Pa. St 
 344, 21 Atl. 438, 23 Am. St. 237. 
 
 55 Brinley v. Grou, 50 Conn. 66, 
 47 Am, Rep. 618; Hite v. Hite, 93 
 Ky. 257, 20 S. W. 878, 19 L. R. A. 
 173, 40 Am. St. 189; Atkins v. Al- 
 bree, 94 Mass. 359; Goldsmith v. 
 Swift, 25 Hun (N. Y.) 201 ; Kerno- 
 chan, In re, 104 N. Y. 618, 11 N. 
 E. 149; Biddle's Appeal, 99 Pa. St. 
 278; Sanders v. Bromley, 55 L. T. 
 R. (N. S.) 145. But see Wilt- 
 bank's Appeal, 64 Pa. St. 256, 3 Am. 
 Rep. 585. 
 
§ 354 RAILROADS 542 
 
 come from the money received tipon the sale of such a privilege, 
 or from the stock which is taken by the trustee under such a 
 privilege for the benefit of the trust, belongs, it seems, to the life 
 tenant.®^ 
 
 § 354 (308). Duties of life tenant — Transfers. — The calls which 
 are made during the continuance of his estate must, generally, be 
 paid by the life tenant,^'' who must also keep down taxes on the 
 stock.58 He is not entitled to have the stock transferred to him 
 on the corporate books,^® and the corporation may be held liable 
 to the remainderman for enabling the life tenant to dispose of the 
 shares to his injury.*" But the life tenant may hold the admin- 
 istrator permitting a transfer^^ or the corporation making it®^ 
 (where it has notice of the trust) liable for his interests in shares 
 transferred in fraud of his rights. 
 
 §355 (309). Dividend is not property of the corporation — 
 Rights of creditors and stockholders. — From the time a dividend 
 becomes due it ceases to be a part of the property of the corpora- 
 tion.®^ The creditors of the corporation cannot claim it in prefer- 
 
 56 Moss's Appeal, 83 Pa. St. 264, 45 Ala. 185; Webb v. Burlington, 
 24 Am. Rep. 164. There is more 28 Vt. 188. 
 
 or less difference of opinion in dif- ''9 Collier v. Collier, 3 Ohio St. 
 
 ferent jurisdictions as to nearly 369; State v. Robinson, 57 Md. 486; 
 
 every proposition stated in this sec- Hyatt v. Allen, 56 N. Y. 553, 15 Am. 
 
 tion, but we have cited the leading Rep. 449. 
 
 cases and referred to notes in which so Caulkins v. Memphis ■ &c. Co., 
 
 those in each jurisdiction are re- 85 Tenn. 683, 4 S. W. 287, 4 Ani. St. 
 
 viewed to such an extent that the 786. 
 
 law in each jurisdiction may be ^i Keeney v. Globe Mill Co., 39 
 
 found. The subject is also elabor- Conn. 145. 
 
 ately treated in 5 Thomp. Corp. (2nd. ^2 Stewart v. Firemen's Ins. Co., 
 
 ed.), §5389, et seq. 53 Md. 564. 
 
 57 Box's Trusts, In re, 9 L. T. 83 But until the dividend is de- 
 (N. S.) 372. But the testator's es- clared, corporate profits belong to 
 tate is liable for a call which be- the corporation and may be seized 
 comes due the day after his death. by its creditors. Curry v. Wood- 
 Emery V. Wason, 107 Mass. 507. ward, 44 Ala. 305 ; Rand v. Hubbell, 
 
 58 Citizens' Mut. Ins. Co. v. Lott, 115 Mass. 461, 474, 15 Am. Rep. 
 k • 221. 
 
543 DIVIDENDS § 356 
 
 ence to the stockholder,^* even though the corporation may have 
 become insolvent after the money was in good faith set apart with 
 which to pay it, biit before it was actually paid.** Where, how- 
 ever, a sufficient surplus is on hand with which to pay the divi- 
 dend at the time it is declared, but before it is due this surplus is 
 swept away by fraud of one of the officers, or by other unforeseen 
 circumstances, it has been held that the corporation may be re- 
 strained from paying dividends out of its other funds.^* And 
 where" no specific fund is set apart for the payment of dividends, 
 a. shareholder who has not claimed or received his money before 
 the corporation becomes insolvent, has, it seems, but a claim 
 against the corporation, to be enforced like those of other credi- 
 tors.®'^ A specific fund deposited in bank for the payment of 
 dividends which have been lawfully declared, cannot be re- 
 claimed by the corporation, or by a receiver,*^ but can be used 
 only for that purpose, though it will be and remain at the risk of 
 the corporation until a reasonable time after notice is given to 
 the stockholder.®^ If the bank fails after such a reasonable time 
 has elapsed, the loss will fall upon the stockholder.'^" 
 
 § 356 (310). Dividend is irrevocable — Actions concerning. — A 
 
 ■dividend once legally declared cannot be revoked,''^ unless, per- 
 
 64 Van Dycke v. McQuade, 86 N. to King v. Paterson &c. R. Co., 29 
 Y. 38; New Hampshire Sav. Bank N. J. L. 82, 504. 
 
 V. Richey, 121 Fed. 956. '^i Beers v. Bridgeport Spring Co., 
 
 65 As where a great fire rendered 42 Conn. 17. See also Armant v. 
 an insurance company insolvent. Le New Orleans &c. R. Co., 41 La. Ann. 
 Roy V. Globe Ins. Co., 2 Edw. Ch. 1020, 7 So. 35. But it has been held 
 i(N. Y.) 657. that where dividends have been im- 
 
 66 Fawcett v. Laurie, 1 Drew. & properly and unlawfully paid they 
 Sm. 192. may be reclaimed. Lexington &c. 
 
 67Lowne v. American Fire Ins. Co. v. Page, 17 B. Mon. (Ky.) 412, 
 
 Co., 6 Paige (N. Y.) 482; Curry v. 66 Am. Dec. 165; Slayden v. Seip, 
 
 Woodward, 44 Ala. 305. 25 Mo. App. 439, 446. See also Mc- 
 
 68 Le Blanc, Matter of, 14 Hun Kusick v. Seymour &c. Co., 48 Minn. 
 (N. Y.) 8; Beers v. Bridgeport 172, 50 N. W. 1116. The right to 
 Spring Co., 42 Conn. 17. The stock- reclaim a dividend paid by an in- 
 holder may follow the fund. solvent corporation passes to its 
 
 69 King V. Paterson &c. R. Co., 29 assignee if the terms of the assign- 
 N. J. L. 82, 504. ment are siifFc'ev.tly comprehensive. 
 
§356 
 
 RAILROADS 
 
 544 
 
 haps, where no fund has been set apart, and the declaration is re- 
 scinded before it is made public, and before the time fixed for the 
 payment of the dividendJ^ It becomes a debt due from the cor- 
 poration which may be enforced by action at law,''* like any other 
 debt. But only the owner of the stock can maintain an action for 
 this cause. Mere possession of the certificate, or even a special 
 property therein, is not always enough.'''* Such an action should, 
 ordinarily, be brought against the corporation as such, and not 
 against the corporate ofificers,''^^ and should be preceded by A de- 
 mand for payment.''® But a stockholder cannot, as a rule at least, 
 sue for profits until a dividend has been declared,'''' even though 
 the dividends have been guarp'^teed to the corporation by an- 
 
 Main v. Mills, 6 Biss. (U. S.) 98, 
 Fed. Cas. No. 8974; Lexington &c. 
 Co. V. Page, 17 B. Mon. (Ky.) 412, 
 66 Am. Dec. 165. 
 
 "2 Ford V. Easthampton &c. Co., 
 158 Mass. 84, 32 N. E. 1036, 20 L. 
 R. A. 65, 35 Am. St. 462. 
 
 ''SCoey V. Belfast &c. R. Co., Ir. 
 Rep. 2 C. L. 112; Keppel v. Peters- 
 burg R. Co., Chase's Dec. (U. S.) 
 167, Fed. Cas. 7722; Southwestern 
 &c. R. Co. V. Martin, 57 Ark. 355, 
 21 S. W. 465; State v. Baltimore 
 &c. R. Co., 6 Gill (Md.) 363; King 
 V. Paterson &c. R. Co., 29 N. J. L. 
 504; Jones v. Terre Haute &c. R. 
 Co., 57 N. Y. 196; Ohio City v. 
 Cleveland &c. R. Co., 6 Ohio St. 
 489; West Chester &c. R. Co. v. 
 Jackson, 77 Pa. St. 321; Dalton v. 
 Midland Counties R. Co., 13 C. B. 
 474. See also Northwestern Marble 
 &c. Co. V. Carlson, 116 Minn 438, 
 133 N. W. 1014, Ann. Cas. 1913B, 
 5S2n. But see Fawcett v. Laurie, 
 1 Drew. & Sm. 192, as to the case 
 of a loss of all the profits after 
 the dividend is declared and before 
 it is paid. 
 
 T4 Dow V. Gould &c. Minn. Co., 
 
 31 Cal. 629. See also Berford v. 
 New York Iron Mine, 56 N. Y. 
 Super! Ct. 236, 4 N. Y. S. 836. 
 
 T8 French v. Fuller, 23 Pick. 
 (Mass.) 108; Smith v.- Poor, 40 
 Maine 415, 63 Am. Dec. 672. But 
 where the treasurer retained divi- 
 dends under claim that he was 
 owner of the shares, an action 
 against him individually was sus- 
 tained. Williams v. Fullerton, 20 Vt. 
 346. But see Peckham v.' Van Wag- 
 enen, 83 N. Y. 40, 38 Am. Rep. 392. 
 
 76 State V. Baltimore &c. R. Co., 
 6 Gill (Md.) 363; Bank of Louis- 
 ville V. Gray, 84 Ky. 565 ; King v. 
 Paterson &c. R. Co., 29 N. J. L. 
 504; Scott V. Central R. &c. Co., 
 52 Barb. (N. Y.) 45, where a letter 
 of inquiry was held insufficient de- 
 mand. The suit has been held a 
 sufficient demand of itself. Keppell 
 V. Petersburg R. Ox, Chase's Dec. 
 (U. S.) 167, Fed Cas. No. 7722; 
 Robinson v. National Bank, 95 N. 
 Y. 637. 
 
 ''T Beveridge v. New York &c. R. 
 Co., 112 N. Y. 1, 19 N. E. 489, 2 
 L. R. A. 648. See also note in 
 Ann. Cas. 1913B, 553. 
 
545 
 
 DIVIDENDS 
 
 §356 
 
 other corporation which has leased the road."* The mere fact 
 that profits may have arisen from the transaction of the cor- 
 porate business gives him no absolute right to an immediate dis- 
 tribution thereof in the way of dividends. ^^ If suits be brought 
 by different parties to recover the same dividend, the corporation 
 may require them to interplead.**" The corporation, it has been 
 held, cannot defend against a suit for such a dividend, on the 
 ground that it had no legal authority to declare a dividend, where 
 dividends have been paid to a majority of the stockholders and 
 are retained by thcm.^i But where the corporation has a lien on 
 the shares for a debt due it from the stockholder, it may set up 
 the debt by way of set-off or counter-claim. '''^ 
 
 TSFlagg V. Manhattan R. Co., 10 
 Fed. 413, 21 Am. Law Reg. (U. S.) 
 77S, 10 Blatchf. 142; Beveridge v. 
 New York &c. R. Co., 112 N. Y. 1, 
 19 N. E. 489, 2 L. R. A. 648 ; Hark- 
 ness V. Manhattan R. Co., 54 N. Y. 
 Super. Ct. 174. And it has been 
 held that an agreement to pay a 
 shareholder a certain specified divi- 
 dend each year is ultra vires and 
 cannot be enforced. Elevator Co. 
 V. Memphis &c. R. Co., 8S Tenn. 
 703, 4 Am. St. 798. But see Taft v. 
 Hartford &c. R. Co., 8 R. I. 310, S 
 Am. Rep. 575, and ante, §§95, 96. 
 
 79 Beveridge v. New York El. R. 
 Co., 112 N. Y. 1, 19 N. E. 489, 2 
 L. R. A. 648; Phelps v. Farmers' 
 &c. Bank, 26 Conn. 369; Minot v. 
 Paine, 99 Mass. 101, 96 Am. Dec. 
 705. See also Gordon v. Richmond 
 &c. R. Co., 78 Va. 501. 
 
 80 Salisbury Mills v. Townsend, 
 109 Mass. 115. 
 
 81 Stoddard v. Shetucket Found- 
 ry Co., 34 Conn. 542. And where 
 the minutes of the meeting at which 
 the dividend was alleged to have 
 been declared showed that a resolu- 
 tion declaring the dividend was of- 
 fered and seconded, but failed _ to 
 
 18 — Ell. Railroads I 
 
 show its adoption, it was held com- 
 petent to prove that the dividend 
 was really declared by proof that 
 each officer of the company had 
 acted on the assumption that the 
 resolution had been adopted, and 
 that, in accordance therewith, every 
 stockholder, with the exception of 
 plaintiff, had received his pro rata 
 share of the dividend. Southwest- 
 ern &c. R. Co. V. Martin, 57 Ark. 
 355, 21 S. W. 465. 
 
 82 King V. Paterson &c. R. Co., 29 
 N. J. L. 504. It is held that a lien 
 upon dividends may still exist af- 
 ter the lien upon shares is taken 
 away by statute. Hagar v. Union 
 Nat. Bank, 63 Maine 509. It is held 
 that no such lien can be claimed 
 upon dividends due the estate of a 
 deceased shareholder. Merchants 
 Bank v. Shouse, 102 Pa. St. 488; 
 Brent v. Bank &c., 2 Cranch C. C. 
 (U. S.) 517, Fed. Cas. No. 1834. 
 Nor can a set-off be claimed where 
 the shares have been assigned, with 
 the knowledge of the corporation, be- 
 fore the declaration of the dividend. 
 Gemmell v. Davis, 75 Md. 546, 23 
 Atl. 1032, 32 Am. St. 412. 
 
§357 
 
 RAILROADS 
 
 546 
 
 §3.57 (311). Demand— Necessity and effect of.— Interest can 
 only be recovered from the time of a demand and refusal to pay 
 the dividend after it has been declared and becomes due,^^ and 
 the statute of limitation may only run from that time.^* So, it 
 has been held in Louisiana that prescription will not run against 
 a person who is ignorant of his right to dividends, except from 
 the date when he learns of his supposed claim and makes a 
 demand, since dividends are payable only on demand, and can- 
 not be said to be due until demanded. ^^ A demand is sufficient 
 if made upon the bank or person through whom the dividend 
 is payable.^® 
 
 § 358 (312). Declaration of dividend discretionary with direct- 
 ors. — In general, the determination of the question whether a 
 dividend shall be declared rests in the discretion of the directors,*'^ 
 
 83 Keppels V. Petersburg R. Co., 
 Chases' Dec. (U. S.) 167, Fed. Cas. 
 No. 7722; State v. Baltimore &c. R. 
 Co., 6 Gill (Md.) 363, 387; Board- 
 man V. Lake Shore &c. R. Co., 84 
 N. Y. 157, 187; Philadelphia &c. R. 
 Co. V. Cowell, 28 Pa. St. 329, 70 
 Am. Dec. 128. A different rule is 
 applied to dividends on preferred 
 stock not paid when due. See 
 Boardman v. Lake Shore &c. R. Co., 
 84 N. Y. 157. And it has been said 
 that in New York interest is not 
 dependent on demand. Prouty v. 
 Michigan Southern &c. R. Co., 1 
 Hun (N. Y.) 6SS, 657; Adams v. 
 Port Plain Bank, 36 N. Y. 255. 
 
 84 State V. Baltimore &c. R. Co., 
 6 Gill (Md.) 363; Philadelphia &c. 
 R. Co. V. Cowell, 28 Pa. St. 329, 70 
 Am. Dec. 128. See also Terre 
 Haute &c. R. Co. v. Indiana, 194 
 U. S. 579; 24 Sup. Ct." 767, 48 L. ed. 
 1124; 5 Thomp. Corp. (2nd. ed.), 
 §§5374, 5375. 
 
 85 Armant v. New Orleans &c. R. 
 
 Co., 41 La. Ann. 1020, 7 So. 35. 
 This was a case in which a company, 
 on reorganization was granted a 
 new charter providing that divi- 
 dends not claimed within three years 
 should be forfeited, and an old 
 stockholder who did not know of 
 his rights nor of the reorganization 
 was held not to be affected by this 
 provision, until, being apprised of 
 his rights and liabilities, he asserted 
 his claim to dividends by making a 
 demand. 
 
 86 King V. Paterson &c. R. Co., 29 
 N. J. L. 504. 
 
 87 Howell v. Chicago &c. Co., 51 
 Barb. (N. Y.) 378; Ely v. Sprague, 
 Clarke Ch. (N. Y.) 351; State v. 
 Baltimore &c. R. Co., 6 Gill (Md.) 
 363 ; Barnard v. Vermont &c. R. 
 Co., 7 Allen (Mass.) 512; Field v. 
 Lamson &c. Co., 162 Mass. 388, 38 
 N. E. 1126, 27 L. R. A. 136; Hunt- 
 er V. Roberts, 83 Mich. 63, 47 N. 
 W. 131, 9 R. & Corp. L. J. 90, 31 
 Am. & Eng. Corp. Cas. 349; Mc- 
 
547 
 
 DIVIDENDS 
 
 §358 
 
 and they may invest the profits to properly extend or develop 
 the business,** or to provide for the payment of future indebted- 
 ness, subject only to the rule that they must act in good faith 
 and within the limits of the corporate powers.®^ Under an 
 English statute, however, directors are required to report the 
 condition of the company to the stockholders and to be guided 
 by their determination as to when a dividend shall be de- 
 clared."'^ Some authorities hold that the company should in- 
 crease its capital before extending its business, and that the 
 directors, by taking its earnings for the latter purpose, commit 
 a gross violation of duty; and that in case the earnings have 
 been so used by them they should increase the capital stock 
 
 Lean v. Pittsburgh &c. Co., 159 Pa. 
 St. 112, 28 Atl. 211 ; Chafifee v. Rut- 
 land R. Co., 55 Vt. 110; Browne v. 
 Monmouthshire R. &c. Co., 13 Beav. 
 32; 5 Thomp. Corp. (2nd. ed.), § 5290, 
 et seq. The discretion of the di- 
 rectors in controlling the policy of 
 the corporation as to payment of 
 cash dividends, if honestly exer- 
 cised, will not be interfered with 
 by the courts. Zellerbach v. Allen- 
 berg, 99 Cal. 57, 33 Pac. 786; Excel- 
 sior &c. Co. V. Pierce, 90 Cal. 131, 
 27 Pac. 44. But this discretion may 
 be limited by law or contract. Park 
 V. Grant Locomotive Works, 40 N. 
 J. Eq. 114, 3 Atl. 162. Compare Am- 
 erican Wire Nail Co. v. Gedge, 96 
 Ky. 513, 29 S. W. 353. 
 
 88 Pratt v. Pratt, 33 Conn. 446; 
 Durfee v. Old Colony &c. R. Co., 
 5 Allen (Mass.) 230. Where a divi- 
 dend has been declared and partly 
 paid, the corporation cannot defeat 
 the payment of the rest by invest- 
 ■ ing the remainder of the profits in 
 permanent improvements. Beers v. 
 Bridgeport Spring Co., 42 Conn. 17; 
 Miller v. Illinois Central R. Co., 24 
 Barb. (N. Y.) 312. But it has been 
 
 held that a dividend may be de- 
 clared for a fiscal year subsequent 
 to that in which the profits were 
 earned. Mills v. Northern R. Co., L. 
 R. 5 Ch. App..Cas. 621. 
 
 89 Karnes v. Rochester &c. R. Co., 
 4 Abb. Pr. (N. Y.) N. S. 107, the 
 court saying: "The court cannot 
 undertake to say judicially that the 
 future business of the corporation 
 will be prosperous ; nor has it any 
 right to postpone the rights and 
 claims of creditors to future earn- 
 ings and "accumulations, even if it 
 could be certain they would accrue." 
 Belfast &c. R. Co. v. Belfast, 11 
 Maine 445 ; Lord v. Brooks, 52 N. 
 H. 72; March v. Eastern R. Co.. 43 
 N. H. 515. This rule is adhered to 
 very strictly where holders of com- 
 mon stock seek to have a dividend 
 declared, but where holders of pre- 
 ferred stock seek to enforce their 
 rights, the courts sometimes depart 
 very far from this rule in their ef- 
 forts to assist them. 
 
 90 Vic. Ch. 16, § 120. See however 
 Bond v. Barrow &c. Co., (1902) 1 
 Ch. 353, 9 Manson 69, 71 L. J. Ch. 
 246. 
 
§359 
 
 RAILROADS 
 
 548 
 
 and issue a stock dividend,^ ^ or borrow as much money as has 
 been used in improvements to replace the profits which have 
 been improperly diverted. 
 
 § 359 (313). Power to borrow money or declare stock dividend. 
 
 — It has been held that the company, where it has used profits for 
 improvements, may lawfully borrow an equivalent sum of money 
 with which to pay a dividend,^^ or it may, when it has authority 
 to increase its capital stock, declare a stock dividend. ^^ The cor- 
 poration may, in general, it is said, borrow money to pay a divi- 
 dend when a fair estimate of its assets and liabilities shows an 
 excess of assets equal to the amount of the proposed dividend,^* 
 since the profits of the corporation for the purpose of declaring 
 a dividend may fairly be estimated to consist in the excess of 
 its cash and other property on hand over its liabilities.®^ 
 
 §360 (314). Remedies for abuse of discretion. — The usual 
 remedy for an abuse of discretion in using the profits and failing 
 
 91 Hoole V. Great Western R. Co., 
 L. R. 3 Ch. App. Cas. 262. 
 
 92 Mills V. Northern R. &c. Co., L. 
 R. S Ch. App. 621. See also Great 
 Western Min. &c. Co. v. Harris, 
 128 Fed. 321; Excelsior Water &c. 
 Co. V. Pierce, 90 Cal. 131, 277 Pac. 
 44. 
 
 93 Ohio City v. Cleveland &c. R. 
 Co., 6 Ohio St. 489; State v. Balti- 
 more &c. R. Co., 6 Gill (Md.) 363; 
 Boston &c. R. Co. v. Common- 
 wealth, 100 Mass. 399; Williams v. 
 Western Union Tel. Co., 93 N. Y. 
 162; Howell v. Chicago &c. R. Co., 
 51 Barb. (N. Y.) 378; Common- 
 wealth V. Pittsburgh &c. R. Co., 74 
 Pa. St. 83; Rose v. Barclay, 191 Pa. 
 St. 594, 43 Atl. 385, 45 L. R. A. 392 ; 
 Gordon v. Richmond &c. R. Co., 78 
 Va. 501; 5 Thomp. Corp. (2nd. ed.), 
 §§ 5273-5276. Such a diyidend, it is 
 said, may be revoked at any time be- 
 
 fore certificates are issued. Terry v. 
 Eagle Lock Co., 47 Conn. 141. '' 
 England such a dividend is said to 
 be ultra vires, and in some of the 
 states it is prohibited by constitu- 
 tional provision. Hoole v. Great 
 Western R. Co., L. R. 3 Ch. App. 
 262. 
 
 9* Stringer's Case, L. R. 4 Cli. 
 475, 20 L. T. ,N. S.) 591. But as a 
 general rule it seems that a corpora- 
 tion cannot borrow money with 
 which to pay dividends. Davis v. 
 Flagstaff &c. Min. Co., 2 Utah 74. 
 
 95 Hubbard v. Weare, 79 Iowa 
 678, 44 N. W. 915; Miller v. Brad- 
 ish, 69 Iowa 278. See also Good- 
 now V. American &c. Paper Co., 73 
 N. J. Eq. 692, 69 Atl. 1014; Roberts' 
 V. Roberts-Wicks Co., 184 N. Y. 
 257, 77 N. E. 13, 112 Am. St. 607, 
 3 L. R. A. (N. S.) 1034, and note. 
 
549 
 
 DIVIDENDS 
 
 §360 
 
 to declare dividends is by electing other directors,*'® and it is said 
 that a court will take into account the fact that not only this 
 course, but also that of disposing of his shares, is open to an 
 aggrieved shareholder.*'^ But still a court of equity will exercise 
 a supervisory power in this matter, and may, at the instance 
 of any shareholder, compel the proper authorities to declare 
 and pay the dividend, in cases where there is a clear abuse of 
 power in refusing to do so.** This power is most often invoked 
 by the holders of preferred shares, when the action of the direc- 
 tors threatens to rob them of their preference. Thus, in a 
 comparatively recent case,** it appeared that by the terms of the 
 subscription contract the holders of preferred stock in the de- 
 fendant company were entitled to a dividend from net profits 
 each year during which they were earned, but not to cumulative 
 dividends, and that the arrearages of one year were not payable 
 out of the earnings of subsequent years. It was held that an 
 attempt on the part of the directors to accumulate money for 
 the payment of the funded indebtedness, by refusing to pay any 
 
 96 Jermain v. Lake Shore &c. R. 
 Co., 91 N. Y. 483; Barnard v. Ver- 
 mont &c. R. Co., 7 Allen (Mass.) 
 512 ; Karnes v. Rochester &c. R. 
 Co., 4 Abb. Pr. N. S. (N. Y.) 107; 
 Chaffee v. Rutland &c. R. Co., SS 
 Vt. 110; Brown v. Monmouthshire 
 &c. R. Co., 13 Beav. 32, IS Jur. 475. 
 
 97 Barry v. Merchants' Exchange 
 Co., 1 Sandf. Ch. (N. Y.) 280. 
 
 98 Crichton v. Webb Press Co., 
 113 La. Ann. 167, 36 So. 926, 67 
 L. R. A. 76; Brown v. Buffalo &c. 
 R. Co., 27 Hun (N. Y.) 342; 
 Boardman v. Lake Shore &c. R. Co., 
 84 N. Y. 157; Hiscock v. Lacy, 9 
 Misc. 578, 30 N. Y. S. 860; Stevens 
 V. South Devon R. Co., 9 Hare" 313; 
 S Thomp. Corp. (2nd. ed.), § 5295. 
 But not where the stockholder waits 
 until after the corporation has be- 
 come insolvent before bringing his 
 
 suit. Scott v. Eagle Fire Iris. Co., 
 7 Paige (N. Y.) 198. And it is 
 held in Massachusetts that no equit- 
 able relief can be granted against 
 a foreign corporation having neither 
 offices nor place of business in that 
 state for a failure to declare and 
 pay dividends according to the stip- 
 ulations of their certificates of 
 stock. Williston v. Michigan 
 Southern &c. R. Co., 13 Allen 
 (Mass.) 400. In determining the 
 question the object of the corpora- 
 tion and the condition of its affairs 
 will be considered. Fougeray v. 
 Cord, 50 N. J. Eq. 185, 24 Atl. 499. 
 Ordinarily, however, the directors 
 cannot be compelled, by mandamus 
 to pay a dividend. People v. Cen- 
 tral &c. Co., 41 Mich. 166. 
 
 99 Hazeltine v. Belfast &c. R. Co., 
 79 Maine 411, 1 Am. St. 330. 
 
§ 361 RAILROADS 550 
 
 dividends on preferred stock through a long term of j^ears, after 
 which the income from the road might be expected to be great 
 enough to pay to the holders of common stock the same divi- 
 dends that holders of preferred stock would be entitled to re- 
 ceive, was unjustifiable and a violation by the directors of their 
 legal duty, and the court ordered the payment of a dividend to 
 the preferred shareholders out of the income for the current 
 year, after the corporate expenses and interest on the funded 
 debt had been paid.^ But it is held that one who is not a stock- 
 holder cannot obtain a decree compelling the corporation to 
 declare and pay such dividends as shall appear upon an account- 
 ing to have been earned.* 
 
 § 361 (315). Limitations uppn authority to declare a dividend 
 — Suits to reclaim. — There are also many limitations upon the le- 
 gal authority of the directors to declare a dividend. In Vir- 
 ginia, it is held that directors who have failed to declare divi- 
 dends at the time fixed by the charter cannot declare one for 
 each of a number of years and so reduce the size of the divi- 
 dends.^ A valid dividend can in no case be declared and paid 
 as against creditors when the corporation is insolvent,* but can 
 only be lawfully declared when sufficient net profits have been 
 earned to pay it. And if payment of the dividend will consume 
 any portion of the capital stock of the company, such dividend 
 
 1 Nickals v. New York &c. R. Co.. men shareholders claimed the right 
 IS Fed. S7S; Richardson v. Ver- to have such dvidends paid to them 
 mont &c. R. Co., 44 Vt. 613 ; West as would equal the dividends re- 
 Chester &c. R. Co. V. Jackson, 11 ceived by the preferred sharehold- 
 Pa. St. 321 ; and compare Willis- ers for a series of twelve years past, 
 ton v. Michigan Southern R. Co., 13 before any further payments were 
 Allen (Mass.) 400; Belfast &c. R. made to the preferred shareholders. 
 Co. V. Belfast, 11 Maine 445. 4 Dividends paid when the com- 
 
 2 Berford v. New York Iron Mine, pany is insolvent may be recovered 
 56 N. Y. Super. Ct. 236, 4 N. Y. S. back from the stockholders. Os- 
 836. And a stockholder must usual- good v. Laytin, 3 Keyes (N. Y.) 
 ly first make proper application to 521 ; Slayden v. Seip &c. Co., 25 Mo. 
 the directors. Meeder v. Buffalo App. 439. See also Taylor v. Corn- 
 Bill's Wild West Co., 132 Fed. 280. monwealth, 119 Ky. 731, 25 Ky. L. 
 
 3 Gordon v. Richmond &c. R. Co., 374, 75 S. W. 244; 5 Thomp. Corp. 
 78 Va. 501. In this case the com- (2nd. ed.), § 5383. 
 
551 
 
 DIVIDENDS 
 
 §361 
 
 may be held fraudulent and void,^ and, if paid, so much of the 
 capital as was consumed in the payment may be recovered back® 
 usually by suit in equity'' brought by any corporate creditor 
 who holds a judgment against the corporation upon which an 
 execution has been returned unsatisfied.* So, a receiver may 
 recover money paid as a dividend while the company was in- 
 solvent.^ And it has been held that the directors themselves 
 may reclaim dividends which have been illegally declared under 
 a misapprehension of the right to declare them, and which have 
 been paid to the shareholders.^" The stockholder is bound to 
 take notice of the condition of the corporation, ^i and it has been 
 held that his private property may be reached in such an action 
 
 5 Lockhart v. Van Alstyne, 31 
 Mich. 76, 18 Am. Rep. 156; Elkins 
 V. Camden &c. R. Co., 36 N. J. Eq. 
 233; Carpenter v. New York &c. R. 
 Co., 5 Abb. Pr. (N. Y.) 277; Pitts- 
 burgh &c. R. Co. V. .County of Al- 
 legheny, 63 Pa. St. 126; Chaffee v. 
 Rutland &c. R. Co., SS Vt. 110. But 
 see Verner v. General &c. Trust, 
 (L. R. 1894), 2 Ch. 239. 
 
 6 Railroad Company v. Howard, 7 
 Wall. (U. S.) 392, 19 L. ed. 'll7; 
 Finn v. Brown, 142 U. S. b6, 12 
 Sup. Ct. 136, 35 L. ed. 936; Johnson 
 V. Laflin, 5 Dill (U. S.) 65, 85, note. 
 Fed. Cas. No. 7393; McKusick v. 
 Seymour &c. Co., 48 Minn. 172, 50 
 N. W. 1116; Heman v. Britton, 88 
 Mo. 549; Hasthigs v. Drew, 76 N. 
 Y. 9; Story's Eq. Juris. (13th ed.), 
 § 1252. The corporation should be 
 made a party to the bill. First Nat. 
 Bank v. Smith, 6 Fed. 215. 
 
 7 The creditor should file a bill in 
 the nature of a creditor's bill in fa- 
 vor of himself and all other cred- 
 itors that may choose to come in 
 and share the expense of the suit. 
 Hastings v. Drew, Id N. Y. 9; Bank 
 
 of St. Mary's v. St. John, 25 Ala. 
 566. First Nat Bank v. Smith, 6 
 Fed. 215; 
 
 8 See 4 Thomp. Corp. (2nd. 
 ed.), §4951, and 5 Thomp. Corp. 
 (2nd. ed.), § 5361. But cred- 
 itors of an insolvent corporation 
 cannot, ordinarily, require the stock- 
 holders to surrender dividends paid 
 by it when it was solvent. Reid v. 
 Eatontbn Co., 40 Ga. 98, 2 Am. Rep. 
 563; Main v. Mills, 6 Biss. (U. S.) 
 98, Fed. Cas. No. 8974; Mercantile 
 &c. Co., In re, L. R. 4 Ch. 475. But a 
 corporate creditor may be estopped. 
 Lawrence v. Greenup, 97 Fed. 906. 
 
 9 Osgood V. Lajrton, 3 Keyes (N. 
 Y.) 521; 5 Thomp. Corp. (2nd. ed.), 
 § 5360. Compare Van Duyck v. Mc- 
 Quade, 86 N. Y. 45. 
 
 10 Lexington &c. Co. v. Page, 56 
 Ky. 412, 66 Am. Dec. 165. This de- 
 cision, however, seems questionable. 
 
 11 Peterson v. Illinois &c. Co., 6 
 Bradw. (111.) 257; Bank of St. 
 Mary's v. St. John, 25 Ala. 566; 
 Clapp V. Peterson, 104 111. 26; Os- 
 good V. Laytin, 48 Barb. (N. Y.) 
 463. 
 
§ 362 RAILROADS 552 
 
 by the creditors/^ even though he was in reality ignorant of the 
 fact that payment of his dividend would impair the capital stock. 
 The statute of limitations will run from the time the dividend 
 is declared in favor of a shareholder who receives such a divi- 
 dend in good faith and without actual notice.^^ If compelled 
 to pay more than his equitable proportion of such a debt, the 
 stockholder may enforce contribution by his associates ;i* and 
 a stockholder who became possessed of his shares after such a 
 dividend was paid cannot ordinarily be held liable in such a 
 suit." It has also been held that he is not liable to corporate 
 creditors for a dividend received by him in good faith while 
 the corporation was solvent.^® 
 
 § 362 (316). Dividends should be paid .out of the profits — 
 
 The rule is often stated as requiring all dividends to be paid out 
 of the net profits of the company, and this rule is generally 
 correct when net profits are interpreted to mean that portion 
 of the income which remains after the deduction of all proper 
 charges and outlays, ^'^ which would include interest, and the 
 
 12 Bartholomew v. Bently, 15 Miller v. Bradish, 69 Iowa 278, 28 
 Ohio 659, 45 Am. Dec. 596. As to N. W. 594. See also New York &c. 
 the stockholder's liability in a pro- Co. ^v. Nickals, 119 U. S. 296, 7 Sup. 
 ceeding by creditor's bills to reach Ct. 209, 30 L. ed. 363. But there is 
 dividends paid after the corpora- much confusion in the authorities 
 tion was insolvent or in contempla- upon the general subject and some 
 tion of insolvency, see Railroad Co. conflict among the decisions as to 
 V. Howard, 7 Wall. (U. S.) 392, 19 what are profits within the rule and 
 L. ed. 117; Pacific R. Co. v. Cut- how they are ten be determined. For 
 ting, 27 Fed. 638; Lexington &c. a full consideration and review of 
 Ins. Co. v. Page, 56 Ky. 412, 66 Am. authorities, see 5 Thomp. Corp. 
 Dec. 165; Heman v. Britton, 88 Mo. (2nd. ed.), §§5305-5311. The net 
 549; Hastings v. Drew, 76 N. Y. 9. profits have been held to be the in- 
 
 13 Lexington &c. Ins. Co. v. Page, come remaining after the payment 
 56 Ky. 412, 66 Am. Dec. 165. of operating expenses, and before 
 
 14 Bartlett v. Drew, 57 N. Y. 587. the payment of interest. Corry v. 
 
 15 Hurlbut v. Taylor, 62 Wis. 607. Londonderry &c. R. Co., 29 Beav. 
 
 16 Great Western &c. Co. v. Har- 263. But it is doubted if interest 
 ris, 128 Fed. 321. on debentures can be charged to 
 
 IT St. John v. Erie R. Co., 22 capital, and the fund for the pay- 
 Wall. (U. S.) 136, 22 L. ed. 743; ment of dividends thereby in- 
 
553 DIVIDENDS § 362 
 
 like.i* But the corporation need not be absolutely free from debt 
 before paying dividends ;i^ indeed, a contrary rule would pre- 
 vent almost eveiry railroad in the country from paying divi- 
 dends.^" The debts which the company is authorized to carry 
 while paying dividends are funded debtSj and others of that 
 class. Debts owing to contractors, and money due to bankers 
 and others for advances made to aid in building the road, must 
 usually be defrayed before dividends are declared,^^ though 
 these debts may, in the discretion of the directors, be converted 
 into funded indebtedness where this is practicable.^- But it has 
 been held that dividends must ordinarily be paid only out of 
 earnings,^^ and, unless the contrary is provided by charier or 
 by statute, so, as a general rule, must interest upon stock when 
 it is allowed.^* Consequently, it has been held unlawful for a 
 company which has not yet earned any income to declare a 
 dividend upon its ordinary stock out of a sum of money paid to 
 it as penalty and interest by the contractors, upon a failure to 
 complete the company's lines according to agreement. ^^ An 
 absolute agreement to pay interest upon stock, where it is not 
 expressly authorized by statute, has been held void,^® although 
 
 Creased. Bloxam v. Metropolitan 21 See Bond v. Barrow &c. Co., 
 
 R. Co., L R. 3 Ch. App. Cas. 337, (1902) 1 Ch. 353, 9 Manson 69, 71 
 
 344, 350. L. J. Ch. 246. 
 
 18 See Mobile &c. R. Co. v. Ten- 22 Belfast &c. R. Co. v. Belfast, 11 
 nessee, 153 U. S. 486, 14 Sup. Ct. Maine 445, 23 Am. &.E. R. Cas. lie, 
 968, 38 L. ed. 793 Except in cases 740. 
 
 where a portion of the capital is dis- 23 Bloxham v. Metropolitan R. 
 
 tributed upon a reduction of capital Co., L. R. 3 Ch. App. Cas. 337. 
 
 stock. See Strong v. Brooklyn &c. 24 Macdougall v. Jersey &c. Co., 2 
 
 R. Co., 93 N. Y. 426. Where capi- Hem. & M. 528; Salisbury v. Met- 
 
 tal stock is impaired and reduced, a ropolitan R. Co., 38 L. J. Ch. 249. 
 
 dividend cannot ordinarily be de- 25 Bloxham v. Metropolitan R. 
 
 clared even out of net earnings ; 5 Co., L. R. 3 Ch. App. Cas. 337. 
 
 Thomp. Corp. (2nd. ed.) , § 5312. But see Alcoy &c. R. Co. v. Green- 
 
 19 Mills v. Northern &c. R. Co., L. hill, 79 L. T. 257. 
 
 R. 5 Ch. App. Cas. 621. 26 McLaughlin v. Detroit &c. R. 
 
 , 20 Belfast &c. R. Co. v. Belfast, 11 Co., 8 Mich. 100; Troy &c. R. Co. 
 
 Maine 445; Hazeltine v. Belfast &c. v. Tibbitts, 18 Barb. . (N. Y.) 297; 
 
 R. Co., 79 Maine 411, 1 Am. St. Painsville &c. R. Co. v. King, 17 
 
 330; Miller v. Bradish, 69 Iowa 278, Ohio St. 534; Pittsburgh &c. R. Co. 
 
 28 N. W. 594. V. Allegheny County, 63 Pa. St. 126. 
 
§ 363 RAILROADS 554 
 
 it is perfectly competent in this country for a railroad com- 
 pany to contract that it will, whenever the surplus earnings shall 
 enable it to do so out of such earnings, pay interest on the stock 
 subscriptions for the time the road is building and until it is 
 ready for operation. ^'^ 
 
 §363 (317). Enjoying payment of dividends. — An injunction 
 will not ordinarily issue at the instance of corporate creditors to 
 restrain acts tending to decrease the corporate assets where it 
 is not shown that the remaining assets will be insufficient to meet 
 the corporate liabilities.^^ And another company claiming the 
 right of distress for non-payment of toll charges cannot obtain 
 an injunction to restrain the payment of dividends.^^ The fact 
 that there is not cash actually on hand or at the banker's to pay 
 the proposed dividend in full,*'^ or that certain immaterial er- 
 rors in calculations are contained in an account honestly made 
 out and published in good faith, ^^ is not sufficient to justify 
 the granting of an injunction. And it has been held that a court 
 of equity will not restrain the payment of a dividend merely 
 upon the ground that the directors have acted in violation of 
 their duties to the public. ^^ An injuncion will not be granted, 
 it seems, to restrain payment of a dividend already declared 
 without a stronger showing than is required to restrain the 
 declaration of the dividend,** though the fact that dividends 
 
 See also National Salt Co. v. In- a creditor may enjoin directors from 
 
 graham, 122 Fed. 40. But see ante, paying a dividend. Mobile &c. R. 
 
 § 101. Co. V. Tennessee, 153 U. S. 486, 14 
 
 27 Evansville &c. R. Co. v. Evans- Sup. Ct. 968, 38 L. ed. 793 ; Reid 
 ville, 15 Ind. 395; Cunningham v. v. Eatonton Mfg. Co., 40 Ga. 98, 
 Vermont &c. R. Co., 12 Gray 2 Am. Rep. 563. 
 
 (Mass.) 411 ; McLaughlin v. De- 29 South Yorkshire R. Co. v. 
 
 troit &c. R. Co., 8 Mich. 100; Ohio Great Northern R. Co., 9 Ex. 55. 
 
 City v. Cleveland &c. R. Co., 6 Ohio 30 Stringer's Case, L. R. 4 Ch. 475. 
 
 St. 489; Richardson v. Vermont &c. 3i Yool v. Great Western R. Co., 
 
 R. Co., 44 Vt. 613. 20 L. T. R. (N. S.) 74. 
 
 28 Mills v. Northern &c. R. Co., L 32 Browne v. Monmouthshire R. 
 R. 5 Ch. 621; Lee v. Neuchatel &c. &c. Co., 13 Beav. 32; Stevens v. 
 Co., 58 L. T. ,R. 553. But see Wil- South Devon R. Co., 9 Hare 313. 
 liams v. Boice, 38 N. J. Eq. 364. S3 Carpenter v. New York &c. R. 
 There are cases, however, in which Co., 5 Abb. Pr. (N. Y.) 277; Car- 
 
555 
 
 DIVIDENDS 
 
 §363 
 
 have been declared is by no means conclusive of the fact that 
 they must be paid. It is generally held that the court will not, 
 in a suit brought by a single shareholder, to which the other 
 shareholders are not made parties, restrain the payment of divi- 
 dends which have been regularly declared, since it cannot, in 
 their absence, interfere with the legal right which the stock- 
 holders have acquired to such dividends.** But a stockholder 
 may file a bill on behalf of himself and others to enjoin the 
 threatened declaration of a dividend out of the capital stock.^" 
 It must be shown that a fraud is being perpetrated upon citi- 
 zens of the state in which the suit is brought, before its courts 
 will enjoin the declaration of a dividend by a corporation of 
 another state. *^ But it has been held that the court will not 
 refuse to restrain the corporation from paying a dividend to the 
 common share holders to the injury of resident holders of pre- 
 ferred shares upon which dividends have not been paid, even 
 though the defendant corporation has its domicile in another 
 state.^'' 
 
 lisle V. Southeastern R. Co., 1 Macn. 
 & G. 689. 
 
 34 Fawcet v. Laurie, 1 Drew. & 
 Sm. 192 ; Carlisle v. Southeastern R. 
 Co., 1 Macn. & G. 689; Carpenter 
 V. New York &c. R. Co., 5 Abb. 
 Pr. 277. But see Marquand v. Fed- 
 eral Steel Co., 95 Fed. 725. 
 
 35 Carpenter v. New York &c. 
 R. Co., S Abb. Pr. (N. Y.) 277; 
 Painsville &c. ,R. Co. v. King, 17 
 Ohio St. 534; Carlisle v. Southeast- 
 ern R. Co., 1 Macn. & G. 689, 14 
 Jur. 515; Fawcet v. Laurie, 1 Drew. 
 & Sm. 192; McDougall v. Jersey &c. 
 Co., 2 Hem. & M. 528; Bloxam v. 
 Metropolitan R. Co., L. R. 3 Ch. 
 337; Salisbury v. Metropolitan R. 
 Co., 38 L. J. Ch. 249. See also 
 March v. Eastern R. Co., 40 N. H. 
 548, n Am. Dec. 732. But the bill 
 must show that injury will result 
 from the illegal act. Chaflfee v. Rut- 
 
 land R. Co., SS Vt. 110; Carlisle v. 
 Southeastern R. Co., 1 Macn. & G. 
 689, 14 Jur. 515; 5 Thomp. Corp. 
 (2nd. ed.), § 5364. An injunction has 
 also been granted to restrain the 
 payment of a dividend out of earn- 
 ings necessary to repair the road. 
 Davidson v. Gillies, 1 Am. & Eng. 
 R. Cas. 595, note. See also Dent 
 v. London &c. Co., L. R. 16 Ch. 
 Div. 344, 1 Am. & Eng. R. Cas. 
 592. 
 
 36 Howell V. Chicago &c. R. Co., 
 51 Barb. (N. Y.) 378. See also 
 Williston V. Michigan Southern &c. 
 R. Co., 13 Allen (Mass.) 400; Ber- 
 ford V. New York ^c. Co., 56 N. 
 Y. Super. Ct. 236, 4 N. Y. S. 836. 
 
 Sf Prouty V. Michigan Southtern 
 &c. R. Co., 1 Hun (N. Y.) 655. But 
 see Williston v. Michigan Southern 
 &c. R. Co., 13 Allen (Mass.) 400. 
 
§ 364 RAILROADS 556 
 
 §364 (318). Personal liability of directors. — In addition to 
 their liability as stockholders, the directors have been held per- 
 sonally liable to refund dividends paid out of the capital stock,** 
 at least where they have acted wilfully and knowingly,^^ and they 
 have been denied recourse upon the stockholders who took the 
 dividends in good faith.^o It^ has been said that, "Where direct- 
 ors order dividends to be paid where no profits have been made; 
 without expressly saying so, a gross fraud is practiced, and the 
 directors are not only civilly liable to those whom they have 
 deceived and injured, but a:re guilty of conspiracy, for which 
 they are liable to be prosecuted and punished."*^ But the better 
 rule would seem to be that they are not liable beyond their lia- 
 bility as stockholders, where they have acted in good faith,*- or, 
 if they are held liable, they may, perhaps, recover what they 
 have paid in an action against the stockholders.** A suit to en- 
 force this liability has been held to be properly brought by a 
 non-participating stockholder.** But a stockholder seeking to 
 hold the directors personally liable for damages which he has 
 sustained by reason of their fraud and mismanagement, should 
 bring his suit in a court of equity.*^ At law, in the absence of 
 special statute, the directors are usually responsible only to the 
 
 38 Gratz V. Redd, 4 B. Mon. (Ky.) Ky. 556, 559, 46 Am. Dec. 528, it is 
 178, 194; Hill v. Frazier, 22 Pa. St. suggested that such a suit would be 
 320. See also Evans v. Coventry, more properly brought by the stock- 
 25 L. J. Ch. 489, 8 DeGex, M. & G. holders, or by the corporation, and 
 835; National Funds &c. Co., In re, the court doubts if the directors can 
 L. R. 10 Ch. Div. 118. he held liable to the corporate cred- 
 
 39 Burnes v. Pennell, 2 H. L. Cas. itors, but it may well be doubted 
 497, 513. if the stockholders retaining their 
 
 40 Exchange Banking Co., In re, dividends could have any standing 
 L. R. 21 Ch. Div. 519. in a court of equity to prosecute 
 
 *i Lord Campbell in Burnes v. such a suit, and the creditors would 
 
 Pennell, 2 H. L. Cas. 497, 513. seem to have the strongest claim 
 
 *2 Excelsior Pet. Co. v. Lacey, 63 in equity to some remedy for an im- 
 
 N. Y. 422. ' pairment of the fund upon the faith 
 
 43 Salisbury v. Metropolitan R. of which the debts are created. 
 Co., 22 L. T. R. (N. S.) 839. 46 Smith v. Kurd, 12 Mete. 
 
 44 Salisbury v. Metropolitan R. (Mass.) 371; Sears v. Hotchkiss, 25 
 Co., 22 L. T. R. (N. S.) 839. In Lex- Conn. 171 ; Bishop v. Houghton, 1 
 ington &c. R. Co. v. Bridges, 46 E. D. Smith (N. Y.) 566. 
 
557 DIVIDENDS § 365 
 
 corporation.*^ It is, however, provided by statute in many of 
 the states that the directors declaring and paying any dividend 
 vvrhich impairs the capital stock shall be individually liable for 
 the corporate debts,*'' or for some other stated penalty, such as 
 double damages, fine or imprisonment. It has been held that 
 where recovery is had from a director as a wrong-doer under 
 such a statute,*^ he can have no right of subrogation as against 
 the corporation.*^ And a claim based on such a statute^** against 
 a director who has acted in good faith, may, it seems, be barred 
 by laches.®^ 
 
 § 365 (319). Dividends payable in scrip. — Dividends are fre- 
 quently made payable in "scrip" or certificates which confer upon 
 the holder certain rights, which are set out in the certificates 
 themselves. This plan is adopted when the profits of the company 
 are in the shape of property which has yet to be sold, or when 
 the profits are being used in making improvements to be repre- 
 sented by a stock dividend, which is to be declared at some time 
 in the future. The certificates are made redeemable in money, 
 stock, bonds, or property, either at a fixed time or at the option 
 of the corporation^^ or of the holder,^* and, being negotiable, 
 enable the stockholders who wish to do so, to realize at once 
 upon the dividend. Sometimes these certificates so far partake 
 of the nature of certificates of stock as to entitle the holder to 
 
 46 Smith V. Poor, 40 Maine 415; *9 Hill v. Frazier, 22 Pa. St. 320. 
 
 Allen V. Curtis, 26 Conn. 456, 65 Am. so Companies' Act, of 1862 (Eng.), 
 
 Dec. 557 ; Evans v. Brandon, 53 § 165. 
 Tex. 56. And, of course, a stock- 
 holder who has received a dividend 
 wrongfully and illegally declared 
 
 will not be allowed to maintain an ^^ Brown v. Lehigh &c. Co., 49 Pa. 
 
 action for his own benefit, from the St. 270; 4 Thomp. Corp. (2nd. ed.), 
 
 directors who illegally declared it, §3439; S Thomp. Corp. (2nd. ed.), 
 
 on the theory of a breach of trust. §5277. 
 
 Wallace v. Lincoln Savings Bank, 53 Chaffee v. Rutland R. Co., 55 
 
 89 Tenn. 630, 24 Am. St. 625. Vt. 110; State v. Baltimore &c. R. 
 
 47 See Companies' Act of 1862 Co., 6 Gill (Md.) 363; Brundc.rt v. 
 (Eng.), § 165. Brundage, 1 Th. & C. (N. Y.) 82, 
 
 48 Pennsylvania Act of 7th of affirmed, 60 N. Y. 544. 
 April, 1849, §9. i V , ;,<r 
 
 51 Mammouth Copperopolis &c., In 
 re, SO L. J. Ch. 11. 
 
§ 366 RAILROADS 558 
 
 dividends.''* But the issue of such certificates is not a distribu- 
 tion of the surplus from which the corporation expects to pay 
 them, and does not transfer the title to that surplus to the holders 
 of certificates.^^ The company may, however, distribute the 
 property of which its surplus income consists among its stock- 
 holders in the form of a dividend, where it is susceptible of a 
 ratable distribution f^ or it may declare a dividend payable in 
 bonds which represent earnings used for the improvement of 
 the road.^'^ 
 
 §366 (320). Stock dividends. — If the earnings of the company 
 have been devoted to the purchase of shares of stock made under 
 legislative authority, the shares so purchased may be distributed 
 ■to the stockholders in the form of a stock dividend,''* unless such 
 dividends are prohibited by statute. A stock dividend has been 
 defined as "the issue by a corporation, as a dividend, of new 
 shares which have been paid up by the transfer from the surplus 
 or profit and loss account to the account representing, capital 
 stock of a sum equal to their par value."69 The effect of such 
 
 34 Bailey v. Railroad Co., 22 Wall. SSO ; State v. Baltimore &c. R. Co., 
 (U. S.) 604, 22 L. ed. 840; Robin- 6 Gill (Md.) 363. 
 son's Trust, In re, 218 Pa. St. 481, "8 Commonwealth v. Boston &c. 
 67 Atl. 775. They usually carry no R. Co., 142 Mass. 146, 7 N. E. 716. 
 voting power. Commonwealth v. See generally on the right to pur- 
 Union &c. Co., 192 Pa. St. 507, 43 chase its own shares, note to Hall 
 Atl. 1010. V. Henderson, 126 Ala. 449, 28 So. 
 
 55 People V. Board of Assessors, 531, 61 L. R. A. 621 ; Porter v. 
 76 N. Y. 202, 16 Hun (N. Y.) 196; Plymouth Gold Min. Co., 29 Mont. 
 Bailey v. Railroad Co., 22 Wall. (U. 347, 74 Pac. 938, 101 Am. St. 569, 
 S.) 604, 22 L. ed. 840; Common- and note. But the stockholders 
 wealth V. Pittsburgh &c. R. Co., 74 have no right to claim a pro rata 
 Pa. St. 83. share of such stock until it is or- 
 
 56 Scott V. Central R. &c. Co.. 52 dered to be divided among them. 
 Barb. (N. Y.) 45, where the divi- Wiltbank's Appeal, 64 Pa. St. 256, 
 dends were paid in Confederate 3 Am. Rep. 585; St. John v. Erie 
 money. See also Merchant v. West- R. Co., 10 Blatch. (U. S.) 271, Fed. 
 em &c. Assn., 56 Minn. 327, 56 N. Cas. No. 12226; Bradley v. Holds- 
 W. 327; Williams v. Western Union worth, 3 M. & W. 422. 
 
 Tel. Co., 93 N. Y. 162. 59 "Stock Dividends and Their 
 
 57 Wood V. Lary, 47 Hun (N. Y.) Restraint," 7 Am. Bar Assn. 263; 
 
559 DIVIDENDS § 366 
 
 a dividend is, it seems, simply to change the form of the invest- 
 ment of the stockholders by increasing the number of shares 
 and thereby diminishing the value of each without affecting the 
 solvency of .the corporation or altering the aggregate value of 
 the shares or interests of the stockholders.®" It may, therefore, 
 be made not only where old shares have been purchased by the 
 corporation, but also where the corporation is authorized to 
 increase its stock and issue new shares and a surplus has been 
 earned, so that the new stock represents and has back of it so 
 much additional capital or property which the directors might 
 have distributed among the stockholders or retained for future 
 use.^i Insomuch as the stock dividend consisting of new shares 
 virtually takes the place of a cash dividend, each shareholder is, 
 ordinarily, entitled to share therein to the same extent as if it 
 were paid in cash, and all should, therefore, be given an equal 
 opportunity to take their proportionate shares of the new stock 
 in the first instance. ^^ But it is said that stockholders in rail- 
 roads and other corporations, whose powers and duties are de- 
 fined by statute, have no right to claim shares of new stock, 
 upon anj' terms in preference to others desiring to become own- 
 
 nole to Gordon v. Richmond &c. 82 De Koven v. Alsop, 205 111. 
 
 R. Co., 78 Va. SOI, 22 Am. & Eng. 309, 63 L. R. A. 587 ; Jones v. Mor- 
 
 R. Cas. 33, 48. rison, 31 Minn. 140, 16 N. W. 854 ; 
 
 60 Williams v. Western Union Tel- Jones v. Terre Haute &c. R, Co., 
 Co., 93 N. Y. 162; Gibbons v. Ma- 57 N. Y. 196; Dousman v. Wiscon- 
 han, 136 U. S. 549, 10 Sup. Ct. 1057, sin &c. R. Co., 40 Wis. 418. See 
 34 L. ed. 525; Towne v. Eisner, 245 also note, 12 L. R. A. (N. S.) 969. 
 U. S. 418, 62, L. ed. 372, 38 Sup. Ct. It has been held that the corpora- 
 158, L. R. A. 1918 D, 254; Terry v. tion may give the stockholders the 
 Eagle Lock Co., 47 Conn. 141 ; De- privilege of taking new stock, when 
 Koven v. Alsop, 205 111. 309, 63 L. the capital stock is increased, at par, 
 R. A. 587; Howell v. Chicago &c. or less than par, although it may be 
 R. Co., 51 Barb. (N. Y.) 378. worth more. Moss's Appeal, 83 Pa. 
 
 61 Kenton Furnace &c. Co. v. Mc- St. 264, 24 Am. Rep. 164 ; Wiltbank's 
 Alpin, 5 Fed. 12,1; Rand v. Hub- Appeal, 64 Pa. St. 256, 3 Am. Rep. 
 bell, 115 Mass. 461, 15 Am. Rep. 585. As to the rights of holder.s 
 121 ; Commonwealth v. Pittsburgh of preferred stock, see Gordon v. 
 &c. R. Co., 74 Pa. St. 83. See also Richmond &g. R. Co., 78 Va. 501, 22 
 Farwell v. Great Western Tel. Co., Am. & Eng. R. Cas. 33; Phillips v. 
 161 III. 522, 44 N. E. 891 ; 5 Thomp. Eastern R. Co., 138 Mass. 122. 
 Corp. (2nd ed.), §§5273, 5274. 
 
§ 367 RAILROADS 560 
 
 ers of such stock, unless this privilege is expressly conferred 
 upon them in some manner equivalent to a declaration of a 
 dividend/*'* In our opinion, however, there is no good reason 
 for distinguishing between railroad companies and. other corpo- 
 rations whose stockholders have been held to have the first right 
 to take the new shares, unless there is something requiring it in 
 the charter, statute, or_ by-laws of the particular corporation.** 
 And when the capital stock of a company has been lawfully 
 reduced, the property thus deducted from the capital may be 
 distributed as a dividend.**'' Where no special provision is made 
 to the contrary, a dividend i.s presumed to be payable in cash, 
 and in lawful or current money.*"* And a company cannot show 
 that a dividend was payable only in bank bills passing at a dis- 
 count, if it has not distinctly said so in the resolution de- 
 claring it.*'' 
 
 §367 (321). Dividends payable without discrimination.; — A 
 
 dividend must be payable equally to all stockholders of the same 
 class, and the directors cannot discriminate either as to the pro- 
 
 ' !. . . . . . . 
 
 portional size of the dividends*^ or as to the manner or time of 
 
 i-J Miller v. Illinois Cent. R. Co,, N. Y. 548; Scott v. Central R. &c. 
 
 24 Barb. (N. Y.) 312; Curry v. Co., 52 Barb. (N. Y.) 45, where the 
 
 Scott, 54 Pa. St. 270; Ohio Ins. Co. income of the corporation was con- 
 
 V. Nunemacher, IS Ind. 294. But federate money only, but the legal 
 
 see note, 12 L. R. A. (N. S.) 969. effect of the resolution was held to 
 
 B4 Eidman v. Bowman, 58 111. 444, be that the dividends were payable 
 
 11 Am. Rep. 90; Gray v. Portland in lawful money of' the United 
 
 Bank, 3 Mass. 364, 3 Am. Dec. 156; States. A stockholder cannot ordi- 
 
 Reese v. Bank of Montgomery Co., narily be compelled to accept a 
 
 31 Pa. St. 78, 72 Am. Dec. 726 ; Cun- stock dividend instead of cash ; 
 
 ninghara's Appeal, 108 Pa. St. 546; Hoole v. Great Western R. Co., 
 
 State. Page v. Smith, 48 Vt. 266; L. R. .3 Ch. 262, 17 L. J. (N. S.) 
 
 note in 12 L. R. A. (N. S.) 969; 1 453; Williams v. Western Union 
 
 Rorer Rail. 208. Tel. Co., 9 Abb. N. Cas. (N. Y.) 
 
 05 Strong v. Brooklyn &c. R. Co., 419. 
 93 N, Y. 426, 435 ; Parker v. Mason, 67 Ehle v. Chittenangd Bank, 24 N. 
 8 R. I. 427. But as elsewhere Y. 548, where the dividend was 'de- 
 shown, this cannot ordinarily be dared to be payable in "New York 
 done lawfully as against creditors. staite currency." 
 See ante, § 102. «« Ryder v. Alton &c. R. Co.,' 13 
 
 «6Ehle V. Chittenango Bank, 24 111. 516; Hale v. ReipuMican River 
 
561 
 
 piViDENOS 
 
 §367 
 
 payment,'"' or as to the medium of payment, as by paying a part 
 of the stockholders in gold and forcing the others to accept de- 
 preciated paper at its face value,'^" because a portioji of the stock 
 is unpaid, '^1 or because certain stockholders own a greater num- 
 ber of shares than others,"^ or because the stock held by part 
 of the stockholders was issued after that held by others, even 
 though it was not issued until after the dividend was, earned, 
 provided it was issued before the dividend was declared.''i?,;i;The 
 stockholders may prevent or restrain an unequal or tinfa'i'r diSr 
 tribution of the profits of the company by bill in equity,^* or 
 they may,, perhaps, sue at law as for a breach of the implied 
 contract to distribute the profits ratably^" In the case of. law- 
 
 Bridge Co., 8 Kans. 466; State v. 
 Baltimore &c. R. Co., 6 Gill (Md.) 
 363 ; March v. Eastern R. Co., 43 
 N. H. 515 ; Jackson v. Newark 
 Plank Road Co., 31 N. J. L. 277; 
 Howell V. Chicago &c. R. Co., 51 
 Barb, (N. Y.) 378; Painesville &c. 
 R. Co. V. King, 17 Ohio St. 534; 
 Atlantic &c. Tel. Co. v. Common- 
 wealth, 3 Brewst. <Pa.) 366; Har- 
 rison V. Mexican R. Co., L. R. 19 
 Eq. 358; Coey v. Belfast &c. R. Co. 
 (I. R.), 2 C. L. 112; 5 Thomp. Corp. 
 (2nd ed.); §5289. But see, as to pre- 
 ferred stockholders entitled to a 
 fixed sum per annum, Fidelity 
 Trust Co. V. Lehigh &c. R. Co., 215 
 Pa. St. 610, 64 Atl. 829; Gardner 
 &c. Bank v. Taber-Prang &c. Co., 
 189 Mass. 363, 75 N. E. 705. 
 
 "'J State V. Baltimore &c. R. Co., 
 6 Gill (Md.) 363; Jones v. Terre 
 Haute &c. R. Co., 57 N. Y. 196. 
 
 ''O State V. Baltimore &c. R. Co., 
 6 Gill (Md.) 363; Keppel v. Peters- 
 burgh &c. R. Co., Chase's Dec. (U. 
 S.) 167, Fed. Cas. No. 7722. 
 
 ■^1 Oakbank &c. Co. v. Crum, L. 
 R. 8 App. Cas. 65 ; Reese v. Bank 
 &c., 31 Pa. St. 78, 72 Am. Dec. 726. 
 
 But the dividend so declared may 
 generally be applied by the corpora- 
 tion toward extinguishing the share- 
 holder's indebtedness for his stock. 
 King V. Paterson &c. R. Co., 29 N. 
 J. L. 504. This it may be so ap- 
 plied by agreement, see Kenton &c. 
 Co. \ . McAlpin, 5 Fed. 737. 
 
 T2 State V. Baltimore &c. R. Co., 
 6 Gill (Md.) 363; Jones v. Terre 
 Haute &c. R. C, 57 N. Y. 196. 
 
 ''S Jones V. Terre Haute R. Co., 
 57 N. Y. 196; Phelps v. Farmers' 
 &c. Bank, 26 Conn. 269; Jermain v. 
 Lake Shore &c. R. Co., 91 N. Y. 
 483. 
 
 ''* Luling V. Atlantic &c. Ins. Co., 
 45 Barb. (N. Y.) 510; Cratty v. 
 Peoria &c. Assn., 219 111. 516, 76 N. 
 E. 707. In case of a fraudulent 
 overissue of stock, payment of divi- 
 dends may be enjoined until it is 
 ascertained who are the true holders 
 of genuine stock. Underwood v. 
 New York &c. R. Co., 17 How. Prac. 
 (N. Y.) 537. See also Burnes v. 
 Pennell, 2 H. L. Cas. 497; Paines- 
 ville &c. R. R. Co. V. King, 17 Ohio 
 St. 534. 
 
 'i'> Such an action was sustained 
 
§367 
 
 RAILROADS 
 
 562 
 
 fill preferred stock, however, the matter depends upon contract 
 which may give the holders a preference over common stock- 
 holders and the holders of one issue may even be given a prefer- 
 ence over the holders of anotherJ^ 
 
 in New Jersey. Jackson v. Newark 
 Plank-Road Co., 31 N. J. L. 277. 
 See also Hill v. Mining Co. (Mo.), 
 21 S. W. 508. 
 
 'i'6 See generally as to this and as 
 to when preferred stockholders are 
 entitled to cumulative dividends 
 and to preference as to capital as 
 well as dividends, the notes in 27 
 L. R. A. 143, 3 L. R. A. (N. S.) 
 1034, 21 L. R. A. (N. S.) 228. 
 
 24 L. R. A. (N. S.) 1078, 39 L. 
 R. A. (N. S.) 1007, 6 A. L. R. 
 802-835; also 5 Thomp. Corp. (2nd. 
 ed.), §5345, et seq. And the 
 directors may have no such dis- 
 cretion to refuse to declare a divi- 
 dend as in the case of common 
 stockholders. Burk v. Ottawa Gas 
 &c. Co., 87 Kans. 6, 123 Pac. 857, 
 Ann. Cas. 1913D, 773, and other 
 cases cited in note. 
 
CHAPTER XV. 
 
 CONSOLIDATION. 
 
 Sec. 
 
 370. Consolidation must be author- 
 
 ized by legislature. 
 
 371. What is sufficient authority. 
 
 372. Statutory mode must be pur- 
 
 sued — Collateral attack. 
 
 373. Intention to consolidate — Dif- 
 
 ference between ■ succession 
 and consolidation. 
 
 374. Right of majority to effect 
 
 consiolidation — When min- 
 ority may prevent — Release 
 of dissenting subscribers. 
 
 375. Right to condemn shares of 
 
 dissenting stockholder. 
 
 2>1(>. Statutory provisions for con- 
 solidation. 
 
 Sn. Rights of old stockholders and 
 their relation to the new 
 company. 
 
 378. Remedies for old stockholders. 
 
 379. Consolidated company suc- 
 
 ceeds to rights and liabili- 
 ties of the old companies. 
 
 380. Special privileges and immuni- 
 
 ties — When they pass to the 
 new company. 
 
 Sec. 
 
 381. When special privileges do 
 
 not pass. 
 
 382. Duties and obligations of new 
 
 company. 
 
 383. Liability of new company on 
 
 old contracts. 
 
 384. Liability of new company for 
 
 torts — Extent of liability — ■ 
 Generally. 
 
 385. Constituent companies are: 
 
 usually dissolved — Wheni 
 not. 
 
 386. Duration of life and fran- 
 
 chises of consolidated com- 
 pany. 
 
 387. Effect of consolidation upon 
 
 liens. 
 
 388. De facto consolidation — Estop- 
 
 pel — Liability of constituent 
 companies where consolida- 
 tion is set aside. 
 
 389. Effect of consolidation upon 
 
 pending suits. 
 
 390. Consolidation with foreign 
 
 corporations. 
 
 § 370 (322). Consolidation must be authorized by legislature. 
 
 — In the absence of legislative authority a railroad company can-, 
 not consolidate with another company so as to form a single 
 corporation,! although the legislature may, by a subsequent act. 
 
 1 Clearwater v. Meredith, 1 Wall. 1066 ; Pearce v. Madison &c. R. Co., 
 (U. S.) 25, 17 L. ed. 604; Chicago 21 How. (U. S.) 441, 16 L. ed. 184; 
 Title &c. Co. V. Doyle, 259 111. 489, Aspinwall v. Ohio &c. R. Co., 20 
 102 N. E. 790, 47 L. R. A. (N. S.) Ind. 492, 83 Am. Dec, 329; Green- 
 
 563 
 
§370 
 
 RAILROADS 
 
 564 
 
 render valid an unauthorized consolidation.^ Most of the states, 
 however, now make provision for the consolidation of railroad 
 companies owning roads which form a continuous or connect- 
 ing line,^ while some of the states permit consolidation wherever 
 the two consolidating roads connect to form a continuous line 
 by means of an intervening railroad, and others do hot require 
 arty connection at all between existing roads as a prerequisite 
 
 ville &c. Co. V. Planters' &c. Co., 70 
 Miss. 669, 13 So. 879, 35 Am. St. 
 •681 ; Black v. Delaware &c. Canal 
 Co., 24 N. J. Eq. 4SS ; Riker &c. Co. 
 V. United Drug Co., 79 N. J. Eq. 
 S80, 82 Atl. 930, Ann. Cas. 1913A, 
 1190 (where many other cases are 
 cited in note) ; Blatchford v. Ross, 
 5 Abb. Pr. (N. S.) 434, 54 Barb. 
 (N. Y.) 42; New York &c.' Canal 
 Co. V. Fulton Bank, 7 Wend. (N. 
 TT.) 412; Knapp v. Supreme Com- 
 :inandery &c., 121 Tenn. 212, 118 S. 
 W. 390; Slate v. Rutland R. &c. 
 ■Co., 85 Vt. 91, 81 Atl. 252 (not 
 •even a de facto consolidated corpo- 
 iration can result unless consolida- 
 tion is authorized by statute) ; note 
 to Wood V. City of Seattle (Wash.), 
 52 L. R. A. 369, 370; Charlton v. 
 Newcastle &c. R. Co., S Jur. (N. S.) 
 1096. See also Ashley v. Ryan, 153 
 U. S; 436, 14 Sup. Ct. 865, 38 L. ed. 
 773; Kavanagh v. Omaha L. Assn., 
 84 Fed. 295; American Loan &c. Co. 
 V. Minnesota &c. R. Co., 157 111. 641, 
 42 N. E. 153 ; Pingree v. Mich. Cent. 
 R. Co., 118 Mich. 314, 76 N. W. 635, 
 •643, 53 L. R. A. 274 (citing text) ; 
 Gulf &c. R. Co. V. Newell, 73 Tex. 
 334, 11 S. W. 342, 15 Am. St. 788. 
 But if one company is given power 
 to consolidate with any other it may 
 choose, the company it selects is 
 -thereby authorized to unite with it 
 
 in the consolidation. Prospect Park, 
 &c. R. Co., In re, 67 N. Y. 371. 
 
 2 Louisville Trust Co. v. Louis- 
 ville &c. R. Co., 75 Fed. 433 ; Bishop 
 V. Brainerd, 28 Conn. 289; Mead 
 V. New York &c. R. Co., 45 Conn. 
 199; Mitchell v. Deeds, 49 111. 416, 
 95 Am. Dec. 621; McCauley v. Col- 
 umbus &c. R. Co., 83 111. 348; Am- 
 erican L. &c. T. Co. V. Minnesota 
 &c. R. Co., 157 111. 641, 42 N. E. 153 ; 
 Fisher v. Evansville &c. R. Co., 7 
 Ind. 407, 413. But a general law 
 authorizing railroad corporations to 
 consolidate their roads, which is 
 prospective in its language and 
 terms, will not be construed to 
 have a retrospective operation. 
 Hatcher v. Toledo &c. R. Co., 62 111. 
 477. Informal consolidation has 
 been held validated by subsequent 
 legislation. Mead v. New York &c. 
 R. Co., 45 Conn. 199; McCauley v. 
 Columbus &c. R. Co., 83 111. 348, 352. 
 
 3 Two or more railroad corpora- 
 tions, whose roads form a contin- 
 uous line, may enter into an arrange- 
 ment for operating both roads as 
 one and thus become jointly liable 
 for debts incurred in borrowing 
 money to be used in furtherance of 
 the business of such line. Chicago 
 &c. R. Co. V. Ayres, 140 111. 644, 
 30 N. E. 687. 
 
565 
 
 CONSOUDATION 
 
 §370 
 
 to a valid consolidation of their lines.* This general authority, 
 however, is subject to the provisions of the constitutions^ and 
 laws® of many of the states, which forbid the consolidation of 
 companies owning or operating parallel and competing lines. '' 
 In addition to the powers conferred by such general statute, au- 
 thority to consolidate is sometimes given in the company's char- 
 ter,* or is contained in a special act of the legislature in states 
 
 * The statutes of many of the 
 states also authorize consolidation 
 when the roads cross or intersect 
 each other. 
 
 s See note, 52 L. R. A. 373, 374, for 
 a reference to constitutional provi- 
 sions and decisions. 
 
 6 See note, 52 L. R. A. 376. A 
 railroad need not necessarily be 
 parallel to or connected with an- 
 other road in order to be a "com- 
 peting road" within the statute for- 
 bidding the consolidation of com- 
 peting roads. East Line &c. R. Co. 
 V. State, 75 Tex. 434, 12 S. W. 690. 
 See also Commonwealth v. Louis- 
 ville &c. R. Co., 144 Ky. 324, 138 
 S. W. 291, Ann. Cas. 1913A, 633, 
 and cases there cited in note. The 
 Missouri statute, which prohibits 
 any railroad company within the 
 state from owning, operating, or 
 managing any other parallel or com- 
 peting railroad within the state, ap- 
 plies only where both the roads are 
 situated within the state, and where 
 the competition is of some practical 
 importance, such as is liable to af- 
 fect rates. Kimball v. Atchison &c. 
 R. Co., 46 Fed. 888. 
 
 7 In West Virginia and Maryland 
 the consolidation of such companies 
 is forbidden without the consent of 
 the legislature, and in Florida the 
 consent of the railroad commission 
 is required. Many other states 
 
 also forbid the consolidation 
 of parallel and competing lines. 
 References to the constitution and 
 statutes will be found in the notes, 
 45 L. R. A. 271-275, and 52 L. R. A. 
 373, 376. As to what are and what 
 are not competing lines, see Kimball 
 V. Atchison &c. R. Co., 46 Fed. 888; 
 Leavenworth v. Chicago &c. R. Co., 
 25 Fed. 219; Illinois &c. Trust Co., 
 V. St. Louis &c. R. Co., 217 111. 504, 
 75 N. E. 562, and authorities cited 
 in preceding note; Currier v. Con- 
 cord &c. R. Co., 48 N. H. 321 ; Peo- 
 ple V O'Brien, 111 N. Y. 1, 18 N 
 E. 692, 2 L. R. A. 255, 7 Am. ft, 
 684. See also Fields v. Holland, 
 158 Ky. 544, 165 S. W. 699; Com- 
 monwealth v. Louisville &c. R. Co., 
 144 Ky. 324, 138 S. W. 291, Ann. 
 Cas. 1913A, 633 and cases there 
 reviewed. Provision against con- 
 solidation of parallel or competing 
 lines of railroad have been held not 
 to apply to local street railways. 
 Vermer v. Chicago City R. Co., 258 
 111. 523, 101 N. E. 949; State v. 
 Lincoln Trac. Co., 90 Nebr. 535, 134 
 N. W. 278. 
 
 8 Nugent V. Supervisors, 19 Wall. 
 (U. S.) 241, 22 L. ed. 83; Archer 
 V. Terre Haute &c. R. Co., IQZ 111. 
 493. See also Bonnet v. First Nat. 
 Bank, 24 Tex. Civ. App. 613, 60 S. 
 W. 325. 
 
§371 
 
 RAJLROADS 
 
 565 
 
 where special acts are not forbidden by the constitution." A 
 state has a right to prescribe the conditions upon which a con- 
 solidation may be had under its laws, and a statute requiring 
 the payment of a fee upon filing an agreement of consolidation 
 is not unconstitutional or invalid as imposing a tax on interstate 
 commerce.^" 
 
 § 371 (322a). What is sufficient authority. — The power of a 
 state to authorize the consolidation of corporations of its own 
 creation in a proper case is unquestioned, in the absence of 
 some constitutional limitation.^! And it has been held that a 
 consolidation of street railway lines, apparently demanded by 
 the public interests, when authorized by law, is not in violation 
 of a provision of the constitution prohibiting monopolies, trusts 
 and combinations for the purpose of fixing prices or limiting 
 production or regulating transportation of any product or com- 
 modity. ^^ But the authority to consolidate must be clearly 
 
 9 Rev. Stat. III. 1917 ch. 114, 
 §§196, 197; Fisher v. Evansville &c. 
 R. Co., 7 Ind. 407; Black v. Dela- 
 ware &c. Canal Co., 24 N. J. Ekj. 
 455. Power given by statute to one 
 railroad to consolidate with an- 
 other has been held to authorize 
 any other to join with it. Pros- 
 pect Park &c. R. Co., In the Mat- 
 ter ■o-i, 67 N. Y. 371; Mitchell v. 
 Deeds, 49 111. 416, 95 Am. Dec. 621. 
 A law prohibiting a. particular rail- 
 road company from consolidating 
 with any parallel or competing line 
 does not violate any contract or 
 other right invested in another rail- 
 road company, authorized general- 
 ly by a former statute to consolidate 
 with any connecting company, the 
 company prohibited not yet being in 
 existence at the time of passage of 
 the prohibitory statute and there be- 
 ing at that time no contract au- 
 thorizing such consolidation of the 
 
 two roads. East Line &c. R. Co. 
 V. Rushing, 69 Tex. 306. 
 
 10 Ashley v. Ryan, 153 U. S. 436, 
 14 Sup. Ct. 865, 38 L. ed. 773, affirm- 
 ing 49 Ohio St. 504, 31 N. E. 721. As 
 to whether the power is exhausted 
 by one consolidation, see Taylor v. 
 Atlantic &c. R. Co., 57 How. Prac. 
 (N. Y.) 26; Continental Trust Co. 
 v. Toledo &c. R. Co., 82 Fed. 642, 
 to the effect that it is not, and Mor- 
 ril v. Smith County, 89 Tex. 529, 
 36 S. W. 56, to the contrary. 
 
 11 Ohio &c. R. Co. v. People, 123 
 111. 467, 14 N. E. 874. 
 
 12 Wood V. Seattle, 23 Wash. 1, 
 62 Pac. 135, 52 L. R. A. 369. As 
 to whether street railroads are in- 
 cluded in the general acts for the 
 consolidation or railroads, see Wash- 
 ington Street &c. R. Co., In re, 115 
 N. Y. 442, 22 N. E. 356; Heston- 
 ville &c. R. Co. V. Philadelphia, 89 
 Pa. St. 210; Millvale v. Evergreen 
 
567 
 
 CONSOLIDATION 
 
 §371 
 
 given and cannot, ordinarily, be implied.^' Thus a prohibition of 
 the consolidation of parallel and competing lines does not im- 
 pliedly authorize the consolidation of lines which are neither 
 parallel nor competing.^* So, authority to consolidate with an- 
 other line cannot be inferred from the power to merely "unite 
 or connect" therewith,, as this is held to mean only a physical 
 union or mechanical connection of the tracks.^® It is also the 
 rule that both of the consolidating companies must be competent, 
 or, in other words, that mere general authority granted to one 
 of them to consolidate is not sufificient unless the particular con- 
 solidation is authorized or both companies have authority to 
 make such a consolidation.^* 
 
 &c. R. Co., 131 Pa. St. 1, 18 Atl. 
 993, 7 L. R. A. 369, holding that 
 they are. 
 
 isEarle v. Seattle &c. R. Co., 56 
 Fed. 909; Central R. Co. v. Collins, 
 40 Ga. 582; American Loan &c. Co. 
 V. Minnesota &c. R. Co., 157 111. 
 641, 42 N. E. 153. See Greenville 
 &c. Co. V. Planters' &c. Co., 70 Miss. 
 669, 13 So. 879; Colgate v. United 
 States Leather Co., 75 N. J. Eq. 229, 
 72 Atl. 126, 19 Ann. Cas. 1262 ; Erste 
 Sokolower &c. v. First United &c. 
 Verein, 32 Misc. 269, 66 N. Y. S. 
 356; Commonwealth v. Pennsylvania 
 &c. R. Co., 17 Phila. (Pa.) 609; 
 Lauman v. Lebanon Valley &c. R. 
 Co., 30 Pa. St. 42, 72 Am. Dec. 685. 
 
 14 East Line &c. R. Co. v. State, 
 75 Tex. 434, 12 S. W. 690. 
 
 15 Louisville &c. R. Co. v. Ken- 
 tucky, 161 U. S. 677, 16 Sup. Ct. 
 714, 40 L. ed. 849. It is also held 
 in this case that the constitution 
 may forbid the consolidation of 
 parallel or competing roads ; that a 
 
 ■grant of authority to purchase and 
 hold any branch road constructed by 
 another company or to receive the 
 
 cars of other roads and agree on 
 terms does not authorize either a 
 consolidation or purchase of paral- 
 lel and competing roads and that ac- 
 quiescence by the state in several 
 purchases of branch' roads parallel 
 to some of the companies own 
 branches cannot be treated as a 
 binding contemporaneous construc- 
 tion of the charter so as to au- 
 thorize consolidation with a parallel 
 and competing road connecting the 
 principal termini of the company. 
 
 16 St. Louis &c. R. Co. V. Terre 
 Haute &c. R. Co., 145 U. S. 393, 12 
 Sup. Ct. 953, 36 L. ed. 748; Louis- 
 ville &c. R. Co. V. Kentucky, 161 U. 
 S. 677, 16 Sup. Ct. 714, 40 L. ed. 
 849; East Line &c. R. Co. v. Rush- 
 ing, 69 Tex. 306, 6 S. W. 834. See 
 also Pennsylvania R. Co. v. St. 
 Louis &c. R. Co., 118 U. S. 290, 6 
 Sup. Ct 1094, 30 L. ed. 83; Central 
 Transp. Co. v. Pullman's Palace 
 Car Co., 139 U. S. 24, 11 Sup. Ct. 
 478, 35 L. ed. 55; Camden &c. R. 
 Co. v. May's Landing &c. Co., 48 
 N. J. L. 530, 7 Atl. 523. But com- 
 pare New York &c. R. Co. v. New 
 
§372 
 
 RAILROADS 
 
 568 
 
 § 372 (323). Statutory mode must be pursued — Collateral at- 
 tack. — Enabling statutes and laws providing for consolidation 
 are construed to authorize a consolidation only in cases where 
 the companies seeking to combine come fairly within the terms 
 of th€ statute. And a statute which provides for the consolida- 
 tion of companies owning lines that have been so constructed 
 as to admit the passage of cars over such lines of road continu- 
 ously without break of gauge or interruption, does not author- 
 ize the consolidation of companies whose roads cannot be so 
 combined as to form substantially a single line of road.^'' But 
 statutes authorizing the consolidation of connecting or continu- 
 ous lines do not always require that one should connect with 
 the other at its terminus. ^^ It has been held that the organiza- 
 tion of a railroad company with the view of ultimately consoli- 
 dating upon equitable terms and in accordance with the provi- 
 sions of an existing statute with another already in existence; 
 is not contrary to public policy, and a railroad corporation or- 
 ganized for guch purpose may, with a view to accomplishing 
 
 York &c. R. Co., 52 Conn. 274 ; 
 Prospect Park &c. R. Co., In re, 67 
 N. Y. 377. 
 
 17 State V. Atchison &c. R. Co., 
 24 Nebr. 143, 38 N. W. 43, 8 Am. St. 
 164; Central R. &c. Co. v. Macon, 
 43- Ga. 646; East Line &c. R. Co. 
 V. State, 74 Tex. 434, 12 S. W. o90; 
 State V. Vanderbilt, 37 Ohio St. 590. 
 In the latter case the court says : 
 "That the mere physical ability to 
 pass cars from one road to the 
 other satisfies the statute is a con- 
 struction of it which is wholly in- 
 admissible, for the provision re- 
 quiring such connection would be 
 without meaning. In imposing that 
 restriction upon consolidation, the 
 legislature intended, not merely that 
 the physical fact should exist, but 
 that such consolidation should only 
 be made for the very purpose of 
 
 passing freight and passengers over 
 both lines, or some material parts 
 thereof — not necessarily in a direct 
 or straight line, but continuously." 
 The court cannot know judicially 
 that roads sought to be consolidated 
 would, if completed, form a con- 
 tinuous line. Georgia Pacific R. Co. 
 V. Gaines, 88 Ala. 377, 7 So. 382. 
 
 18 Hancock v. Louisville &c. R. 
 Co., 145 U. S. 409, 12 Sup. Ct. 969, 
 36 L. ed. 755; Wallace v. Long 
 Island R. Co., 12 Hun (N. Y.) 460. 
 See also Union Trust Co. v. Illi- 
 nois Mid. R. Co., 117 U. S. 434, 6 
 Sup. Ct. 809, 29 L. ed. 963; Hum- 
 phreys v. St. Louis &c. R. Co., 37 
 Fed. 730; Buck v. Seymour, 46 
 Conn. 156; Atchison &c. R. Co. v. 
 Fletcher, 35 Kans. 236, 10 Pac. 596:' 
 Mayor &c. v. Baltimore &c. R. Co 
 21 Md. SO. 
 
569 
 
 CONSOLIDATION 
 
 ^37: 
 
 such consolidation and carrying out the object for which it was 
 created, purchase the stock of such other road.i® Where the 
 statute provides for the mode of consolidation, that mode must 
 be substantially, if not strictly, pursued,^" although the courts 
 will usually presume in favor of the validity of a consolidation 
 in the absence of evidence to the contrary ,21 and will not permit 
 
 I'J Hill V. Nisbet, 100 Ind. 341. It 
 was held by the supreme court of 
 Michigan that a certain statute of 
 that state authorized a railroad com- 
 pany to purchase the stock of an- 
 other company for the purpose of 
 acquiring its road-bed and right of 
 way. Dewey v. Toledo &c. R. Co., 
 91 Mich. 351, 51 N. W. 1063. See 
 ante, § 110, note 97, where the pro- 
 visions of the statute are quoted. 
 See also Market St. R. Co. v. Hell- 
 man, 109 Cal. 571, 42 Pac. 225. As 
 to consolidation of uncompleted 
 roads, see Livingston County v. 
 First Nat. Bank, 128 U. S. 102, 9 
 Sup. Ct. 18, 32 L. ed. 359; Bohmer 
 V. Haflen, 161 N. Y. 390,, 55 N. E. 
 1047. But compare Clarke v. 
 Omaha &c. R. Co., 4 Nebr. 459. 
 
 20 Pingree v. Michigan Cent. R. 
 Co., 118 Mich. 314, 76 N. W. 635, 
 643, 53 L. R. A. 274 (quoting text) ; 
 Peninsular R. Co. v. Tharp, 28 
 Mich. 506; Mansfield &c. R. Co. v. 
 Drinker, 30 Mich. 124; Rodgers. v. 
 Wells, 44 Mich. 411 ; Common- 
 wealth v. Atlantic &c. R. Co., 53 Pa. 
 St. 9. See also State v. Chicago 
 &c. R. Co., 145 Ind. 229, 43 N. E. 
 226; State v. Vanderbilt, 37 Ohio St, 
 590. An agreement for consolida- 
 tion of two railroad companies, duly 
 executed after , the meetings of the 
 stockholders of both companies had 
 been held, in which the consolida- 
 
 tion was ordered, is not rendered in- 
 valid by the fact that it bears date 
 prior to the meetings. Wells v. 
 Rodgers, 60 Mich. 525, 27 N. W. 
 671. Substantial compliance with an 
 act authorizing consolidation is 
 sufficient. County of Leavenworth 
 V. Chicago &c. R. Co., 25 Fed. 219. 
 21 Sparrow v. Evansville &c. R. 
 Co., 7 Ind. 369; Farmers &c. Co. v. 
 Toledo &c. R. Co., 67 Fed. 49, 55 ; 
 Swartout v. Michigan &c. Railroad 
 Co., 24 Mich. 389. See Wells v. 
 Rodgers, 60 Mich. 525, 27 N. W. 
 671. But in Georgia Pacific R. Co. 
 V. Gaines, 88 Ala. 377, 7 So. 382, the 
 supreme court of Alabama held that 
 it must affirmatively appear that 
 several companies consolidated un- 
 der the laws of that state are so 
 joined as to form a continuous line, 
 or the consolidated company can- 
 not claim to succeed to the rights 
 of the constituent companies. See 
 also Georgia Pac. R. Co. v. Wilks, 
 86 Ala. 478, 6 So.' 34 ; Brown v. Dib- 
 ble, 65 Mich. 520,- 32 N. W. 656, 30 
 Am. & Eng. R. Cas. 241. In Cam- 
 eron V. New York &c. Co., 133 N. 
 Y. 336, 31 N. E. 104, it is held that 
 where proceedings are duly begun 
 under a statute repealed while they 
 are in progress they may be con- 
 cluded under a saving clause in the 
 repealing act. 
 
§372 
 
 RAILROADS 
 
 570 
 
 it to be questioned collaterally ,22 at least by the corporation and 
 its stockholders, where it assumes to act as a consolidated com- 
 pany under the law and issues bonds and mortgages as such 
 without any objection on the part of the state or the stock- 
 holders.23 But where the constitution of a state provided that 
 no railroad corporation should consolidate its stock, property, 
 franchises or earnings, in whole or in part, with any other rail- 
 road company owning a parallel or competing line, it was held 
 that the word "consolidate" was used "in the sense to join or 
 unite," and that the constitution could not be evaded by sub- 
 stituting a lease instead of a conveyance.^* The case just re- 
 ferred to was a quo warranto proceeding by the attorney-gen- 
 eral to oust the lessor company from its franchises, and the court 
 held that they were subject to forfeiture, but refused to decree 
 a forfeiture in the first instance and merely declared the lease 
 void. 
 
 22 Pittsburgh &c. R. Co. v. Roths- 
 child, 26 Am. & Eng. R. Cas. SO. 
 See also Wallace v. Loomis, 97 U. 
 S. 146, 24 L. ed. 895 ; Casey v. Galli, 
 94 U. S. 673, 24 L. ed. 168; Dallas 
 County V. Huidekoper, 154 U. S. 
 654, 14 Sup. Ct. 1190, 25 L. ed. 974; 
 Oregon-Washington R. &c. Co. v. 
 Wilkinson, 188 Fed. , 363. Private 
 litigants cannot ordinarily raise the 
 question of the validity of the con- 
 solidation. Day V. Tacoma R. &c. 
 Co., 80 Wash. 161, 141 Pac. 347. A . 
 de facto consolidated corporation 
 cannot set up the illegality of the 
 consolidation to defeat a recovery 
 against it upon the contracts of one 
 of its constituent companies. Chi- 
 cago &c. R. Co. V. Putnam, 36 Kans. 
 121, 12 Pac. 593. Only the state 
 can attack the validity of a consoli- 
 dation, apparently regular, which has 
 existed and been acted upon by the 
 companies for five years. Atchison 
 
 &c. R. Co., v. Board Comrs. Sum- 
 ner Co., 51 Kans. 617, 33 Pac. 
 312. See also Bell v. Pennsylvania 
 &c. R. Co. (N. J.), 10 Atl. 741. But 
 see, as to right of stockholder in the 
 original corporation to question the 
 existence of the consolidated corpo- 
 ration when sued on his subscrip- 
 tion, post, § 378 ; 1 Thomp. Corp. 
 §§357, 358. 
 
 23 Phinizy v. Augusta &c. R. Co., 
 62 Fed. 678; Farmers &c. Co. v. 
 Toledo &c. R. Co., 67 Fed. 49. See 
 also Ashley v. Supervisors, 60 Fed. 
 55 ; Close v. Glenwood Cemetery, 
 107 U. S. 466, 2 Sup. Ct. 267, 27 L. 
 ed. 408; Douglas County v. Bolles, 
 94 U. S. 104, 24 L. ed. 71 ; Bradford 
 v. Frankfort &c. R. Co., 142 Ind. 
 383, 40 N. E. 741. 
 
 24 State v Atchison &c. R. Co., 24 
 Nebr. 143, 38 N. W. 43, 8 Am. St. 
 164, 32 Am. & Eng. R. Cas. 388. 
 
 .... . . 1 
 
571 
 
 CONSOLIDATION 
 
 §373 
 
 § 373 (324). Intention to consolidate — Difference between 
 succession and consolidation. — Where a general power to con- 
 solidate is given without any specific provision as to the terms 
 or mode, it is held that the companies may unite upon such terms 
 and in such mode as they choose,^^ so long as they do not ex- 
 ceed the statutory authority. But a clear intention to consoli- 
 date together with the performance of acts reasonably appro- 
 priate to that end, must be shown in order to establish a con- 
 solidation, ^^ and the mere purchase by one railroad corporation 
 of the franchise and property of another. at a sale on execution 
 does not operate to make the purchaser the successor by con- 
 solidation of the purchased road.^''^ A consolidated corporation 
 
 2-> Dimpfel v. Ohio &c. R. Co., 9 
 Biss. (U. S.) 127, Fed. Cas. No. 
 3918. 
 
 26 5 Thomp. Corp. (2nd ed.), 
 § 6035, et seq. ; Shrewsbury &c. R. 
 Go. V. Stour Valley R. Co., 21 Eng. 
 L. & Eq. 628. See also Hart v. 
 Rensselaer &c. R. Co., 8 N. Y. 37, 
 59 Am. Dec. 447; Ericson v. Fra- 
 ternal Mystic Circle, 105 Tex. 170, 
 146 S. W. 160. The union of iiame, 
 officers, business and property of 
 corporations does not, it has been 
 held, change their distinctive charac- 
 ter as separate corporations. Na- 
 shua &c. R. Corp. V. Boston &c. R. 
 Corp., 136 U. S. 356, 10 Sup. Ct. 
 1004, 34 L. ed. 363, 42 Am. & Eng. 
 R. Cas. 688. Nor is a temporary co- 
 operation under one management a 
 consolidation. Archer v. Terre 
 Haute &c. R. Co., 102 III. 493, 7 Am. 
 & Eng. R. Cas. 249. And the identi- 
 ty of the stockholders, or the fact 
 that one of the corporations, by 
 means thereof, or by means of the 
 ownership of the stock of the other, 
 exercised a controlling influence 
 over it, does not make either the 
 
 agent of the other, nor merge them 
 into one, so as to make the contract 
 of one binding upon the other, where 
 they are separately organized under 
 distinct charters. Richmond &c. 
 Const. Co. V. Richmond &c. R. Co., 
 68 Fed. lOS; Central Trust Co. v. 
 Bridges, 57 Fed. 753. A railroad 
 company is not liable for the or- 
 dinary operation of another com- 
 pany merely because the former 
 owns a majority of the stock and 
 controls the organization of the lat- 
 ter. Stone V. Cleveland &c. R. Co., 
 202 N. Y. 352, 95 N. E. 816, 35 L. 
 R. A. (N. S.) 770. 
 
 27 Gulf &c. R. Co. V. Newell, 73 
 Tex. 334, 11 S. W. 342, 15 Am. St. 
 788; Crane &c. Co. v. Fry, 126 Fed. 
 278; Houston &c. R. Co. v. Shirley, 
 54 Tex. 125; Gulf &c. R. Co. v. 
 Morris, 67 Tex. 692, 4 S. W. 156. 
 But consolidation by purchase may 
 be expressly authorized. William- 
 son V. New Jersey &c. R. Co., 26 
 N. J. Eq. 398; Eaton &c. R. Co. v. 
 Hunt, 20 Ind. 457. See also Chica- 
 go &c. R. Co. V. Ashling, 160 111. 
 373, 43 N.' E. 373; Chicago &c. R. 
 
§373 
 
 RAILROADS 
 
 572 
 
 may usually be said to be the successor of the original or con- 
 stituent companies, 2* but succession is not necessarily con- 
 solidation, and a corporation may have authority to become the 
 successor of another without having any authority to con- 
 solidate. Succession by purchase, or in any other manner than 
 by consolidation, is usually a very different thing from the lat- 
 ter and gives rise to different rights and liabilities. ^^ So, a con- 
 
 Co. V. State, 153 Ind. 134, SI N. E. 
 924, where all stock of one com- 
 pany is purchased and stock of an- 
 other company is issued in ex- 
 change. , But compare Exchange 
 Bank v. Macon &c. Co., 97 Ga. 1, 
 25 S. E. 326, 33 L. R. A. 800. The 
 new corporation gets its rights ' by 
 grant from the state rather than by 
 transfer from the former corpora- 
 tions. Diggs V. Fidelity &c. Co., 112 
 Md. SO, 75 Atl. 517. ' 
 
 28 United States v. Southern Pac. 
 R. Co., 45 Fed. 596. 
 
 29 The distinction is well stated in 
 Compton V. Wabash &c. R. Co., 45 
 Ohio St. 592 16 N. E. 110, 18 N. E. 
 380. See also Capital Traction Co. v. 
 Offutt, 17 App. (D. C.) 292; Conn 
 V. Chicago &c. R. Co., 48 Fed. 177 ; 
 Memphis &c. R. Co. v. Woods, 88 
 Ala. 630, 7 So. 108, 7 L. R. A. 605, 
 16 Am. St. 81 ; Pingree v. Michi- 
 gan Cent. R. Co., 118 Mich. 314, 
 76 N. W. 635, 53 L. R. A. 274 
 (citing text).; State v. Montana R. 
 Co., 21 Mont. 221, 53 Pac. 623, 45 
 L. R. A. 271 ; Pennison v. Chicago 
 &c. R. Co., 93 Wis. 344, 67 N. W. 
 702; note in 89 Am. St. 607-612; 
 note in 52 L, R. A. 369. Thus, the 
 successor by purchase rriay acquire 
 
 the property free from debts and 
 liabilities already created. Hoar'd v. 
 Chesapeake &c. R. Co., 123 U. S. 
 222, 8 Sup. Ct. 74, 31 L. ed. 130; 
 Cook V. Detroit &c. R. Co., 43 Mich. 
 349, 5 N. W. 390; Pennsylvania 
 Transp. Co.'s Appeal, 101 Pa. St. 
 576; Hammond v. Port Royal &c. 
 R. Co.; 15 S. Car. 10, 16 S. Car. 
 567. And while it is usually bound 
 by restrictions on the old company, 
 it does not always acquire the spe- 
 cial privileges and franchises of the 
 old company. Thus, if an individ- 
 ual purchaser becomes the succes- 
 sor, the franchise to be a corpora- 
 tion may not pass to him. See 
 Chaflfe V. Ludeling, 27 La. Ann. 607 ; 
 Daniels v. St. Louis &c. R. Co., 62 
 Mo. 43; Campbell v. Marietta &c. 
 R. Co., 23 Ohio St. 168; Pittsburgh 
 Cin. &c. R. Co. V. Moore, 33 Ohio 
 St. 384, 31 Am. Rep. 543; Pennsyl- 
 vania R. Co. V. Sly, 65 Pa. St. 205; 
 Ragan v. Aiken, 9 Lea (Tenn.) 609, 
 42 Am. Rep. 684. The purchase by 
 a foreign company of stock in do- 
 mestic companies in different lo- 
 calities does not amount to a con- 
 solidation. Clarke v. Memphis St. 
 R. Co., 123 Tenn. 232, 130 S. W. 
 751. 
 
573 
 
 CONSOLIDATION 
 
 374 
 
 solidation in the strict sense is to be distinguished from a 
 merger,^** reorganization,^! amalgamation^^ or lease. ^^ 
 
 § 374 (325). Right of majority to effect consolidation — When 
 minority may prevent — Release of dissenting subscribers. — 
 
 Where the law under which a corporation is formed provides 
 generally for its consolidation with other companies, such con- 
 solidation may be effected at the pleasure of the majority of the 
 corporation.^* But where the power to consolidate was not con- 
 tained in the charter or governing law, a consolidation cannot 
 be effected without the consent of all the stockholders,^^ even 
 
 30 Vicksburg &c. Tel. Co. v. Citi- 
 zens' Tei. Co., 79 Miss. 341, 30 So. 
 725, 89 Am. St. 6S6; Atlantic &c. 
 R. Co. V. Georgia, 98 U. S. 3S9, 25 
 L. ed. 185. See also Central &c. R. 
 Co. V. State, 54 Ga. 401; Ramsey 
 V. Hicks, 44 Ind. App. 490, 87 N. E. 
 1091 ; Pingree v. Michigan Cent. R. 
 Co., 118 Mich.^314, 76 N. W. 635, 
 53 L. R. A. 274 (citing text) ; Keo- 
 kuk &c. R. Co. V. Missouri, 152 U. 
 S. 301, 14 Sup. Ct. 592, 38 L. ed. 
 450; 5 Thomp. Corp. (2nd. ed.), 
 § 6037. As to meaning of "'merger" 
 and "consolidation" as used in Ala- 
 bama statute, see Alabama &c. Ry. 
 V. Tolman (Ala.), 76 So. 381. 
 
 31 See note in 89 Am. St. 609. 
 
 32 See note in 89 Am. St. 612. 
 The terms are sometimes used as 
 synonymous, but amalgamation is 
 an indefinite term and may include 
 what is not strictly a consolidation. 
 See also 5 Thomp. Corp. (2nd. ed.), 
 §6036. 
 
 33 Mills V. Central R. Co., 41 N. 
 J. Eq. 1, 2 Atl. 453; State v. Mon- 
 tana R. Co., 21 Mont. 221, 53 Pac. 
 623, 45 L. R. A. 271 ; S Thomp. Corp. 
 (2nd. ed.), § 6039. See also State v. 
 Vanderbilt, 37 Ohio St. 590; Mis- 
 
 souri Pac. R. Co. V. Owens, 1 Tex. 
 App. Civ. Cas. 384. But a consoli- 
 dation sometimes takes the form, 
 in some respects, of a lease, pur- 
 chase of shares or the like. 
 
 3-1 Sparrow v. Evansville &c. R. 
 Co., 7 Ind. 369; Nugent v. Super- 
 visors, 19 Wall. (U. S.) 241, 22 L. 
 ed. 83; Bonner v. Terre Haute &c. 
 R. Co., 151 Fed. 985; Bish v. John 
 son, 21 Ind. 299; Atchison &c. R. 
 Co. v. Phillips Co., 25 Kans. 261; 
 Hale V. Cheshire R. Co., 161 Mass. 
 443, Zl N. E. 306; Mansfield &c. 
 R Co. V. Stout, 26 Ohio St. 241; 
 Cork &c. R. Co. v. Patterson, 37 
 Eng. L. & Eq. Rep. 398. Under the 
 Louisiana statute requiring a vote 
 of "three-fourths of all the stock- 
 holders" of each corporation to ef- 
 fect a consolidation, three-fourths of 
 the number of shares must be voted 
 for it where each share is entitled 
 by charter to one vote. Simon 
 Borg &c. Co. v. New Orleans City 
 R. Co., 244 Fed. 617. 
 
 35'S Thomp. Corp. (2nd. ed.), 
 §§6056, 6057 See also Clearwater 
 V. Meredith, 1 Wall. (U. S.) 25, 17 
 L. ed. 604; Illinois &c. R. Co. v. 
 Cook, 29 111. 237; Botts v. Simp- 
 
§374 
 
 RAILROADS 
 
 574 
 
 though the legislature may have passed a subsequent statute 
 authorizing the consolida-tion of all railroad companies,*^ except, 
 perhaps, where the power to amend was reserved.*'^ In other 
 words, there must usually be the unanimous consent of all the 
 stockholders, unless the right to consolidate was given by the 
 
 sonville &c. Co., 88 Ky. 54, 10 S. 
 W. 134, 2 L. R. A. 594; Chapman 
 V. Mad River &c. R. Co., 6 Ohio 
 St. 119; Indianola R. Co. v. Fryer, 
 56 Tex. 609; Gulf &c. R. Co. v. 
 Newell, IZ Tex. 334, 11 S. W. 342. 
 Compare Lauman v. Lebanon Valley 
 R. Co., 30 Pa. St. 42, 72 Am. Dec. 
 685. The stockholder may be es- 
 topped by his acquiescence for a 
 term of years to deny the validity 
 of a consolidation effected without 
 his express consent. Boston &c. R. 
 Co. V. New York &c. R. Co., 13 R. 
 I. 260; Bell v. Pennsylvania &c. R. 
 Co. (N. J.), 10 Atl. 741. See also 
 Atchison &c. R. Co. v. Sumner 
 County Comrs., 51 Kans. 617, 33 
 Pac. 312; International &c. R. Co. 
 V. Bremond, 53 Tex. 96. The con- 
 sent of the bondholders and other 
 creditors is not necessary to a con- 
 solidation. 
 
 36Earle v. Seattle &c. R. Co., 56 
 Fed. 909; Alexander v. Atlanta &c. 
 R. Co., 108 Ga. 151, 33 S. E. 866; 
 Sparrow v. Evansville &c. R. Co., 7 
 Ind. 369; McCray v. Junction R. 
 Co., 9 Ind. 358; Kean v. Johnson, 
 9 N. J. Eq. 401. And it has been 
 held that the fact that the legisla- 
 ture has reserved the right to an. end 
 or repeal the original charter does 
 not ordinarily, give it a "right to au- 
 thorize a consolidation against the 
 will of the minority. Mayor &c. 
 Knoxville v. Knoxville &c. R. Co., 
 22 Fed. 758; Cross v. Peach Bottom 
 
 R. Co.; 90 Pa. St 392. See also 
 Rabe v. Dunlap, 51 N. J. Eq. 40, 
 25 Atl. 959; Black v. Delaware &c. 
 Co., 24 N. J. Eq. 455; Kenosha &c. 
 R. Co. V. Marsh, 17 Wis. 13. But 
 see Pennsylvania College Cases, 13 
 Wall. (U. S.) 190, 20 L. ed. 550; 
 Bishop V. Brainerd, 28 Conn. 289, 
 and authorities cited in next follow- 
 ing note. "Whether or not the legis- 
 lature can authorize the consolida- 
 tion of a corporation, under the 
 general power reserved to alter or 
 annul the charter, is not necessary- 
 to be decided. It is certain that it 
 cannot be done whep it affects the 
 right of stockholders, by increasing 
 their liability as such, or diminish- 
 ing the value of their stock. * * * 
 The act in this case is void unless, 
 made by the unanimous consent of 
 the stockholders." Botts v. Simp- 
 sonville &c. Co., 88 Ky. 54, 10 S. W. 
 134, 2 L. R. A. 594; Blatchford v. 
 Ross, 54 Barb. 42, 37 How. Prac. 
 (N. Y.) 110. But see Beal v. New 
 York &c. R. Co., 41 Hun 172, 4- 
 N. Y. S. 174. 
 
 ST See Market St. R. v. Hellman,. 
 109 Cal. 571, 42 Pac. 225; Hanna v. 
 Cincinnati &c. R. Co., 20 Ind. 30; 
 Hale V. Cheshire R. Co., 161 Mass 
 443, Z1 N. E. 307; Pacific R. Co. v. 
 Renshaw, 18 Mo. 210. But compare- 
 last preceding note, and see, for re- 
 view of cases on both sides of the 
 question, the note in 52 L. R. A.. 
 384-387. 
 
575 CONSOLIDATIO'N § 375 
 
 law or the "constating instruments" at the time the corporation 
 was created.^^ If the consoHdation be effected under legislative 
 authority given after subscriptions are rnade but without the 
 consent of subscribers who have not yet paid for stock in the 
 original companies, the consolidated company cannot enforce 
 such subscriptions.*^ It has also been held that a municipal cor- 
 poration has no power to give its consent to or acquiesce in a 
 consolidation by which the enterprise is so far changed that the 
 vote authorizing a subscription does not apply to the road of the 
 new company.*" But the case referred to has been distinguished, 
 and the general rule is that if a municipal corporation, author- 
 ized to make the subscription, has subscribed for stock of a cor- 
 poration which at 'the time was empowered to consolidate with 
 another the municipalitj' will not be released by such authorized 
 ■consolidation thereafter, and its bonds issued in payment are not 
 rendered invalid.* ^ 
 
 § 375 (325a). Right to condemn shares of dissenting stock- 
 liolder. — An interesting question has arisen as to the power of 
 the legislature to authorize the condemnation of shares of a dis- 
 senting stockholder. It is evident that, if this power does not 
 exist a single dissenting stockholder might, in some instances, 
 seriously interfere not only with the interests of the majority 
 stockholders but also with the public interests. If there is due 
 process of law and just compensation it would seem that there 
 
 ssEarle v. Seattle &c. R. Co., 56 *! New Buflfalo v. Iron Co., 105 
 
 Fed. 909, 912. U. S. 11, 26 L. ed. 1024; Bates' 
 
 39 Booe V. Junction R. Co., 10 Ind. County v. Winters, 112 U. S. 325, 5 
 •93; Harshman v. Bates Co., 92 U. Sup. Ct. 157, 28 L. ed. 744; Living- 
 S. 569, 23 L. ed. 747; Clearwater ston County v. First Nat. Bank, 128 
 V. Meredith, 1 Wall. (U. S.) 25, U. S. 102, 9 Sup. Ct. 18, 32 L. ed. 
 17 L. ed. 604; McCray v. Junction 359; Mayor v. Dennison, 69 Fed. 58; 
 R. Co., 9 Ind. 358; 5 Thomp. Corp. Chicago &c. R. Co. v. Stafford Coun- 
 (2nd. ed.), §6061. See ante, §§54, 56. ty, 36 Kans. 121, 12 Pac. 593. See 
 
 40 State V. Nemaha, 10 Kans. 569. other authorities in note to Can- 
 See also Harshman v. Bates Co., 92 tillon v. Dubuque &c. R. Co., S L. 
 U. S. 569, 23 L. ed. 747; Hamil- R. A. 278, and in note to Morrison 
 
 ton Co. V. State, 115 Ind. 64, 4 N. E. v. American Snuff Co., 89 Am. St. 
 
 589, 17 N. E. 855; Morrill v. Smith 629. 
 
 County, 89 Texas 529, 36 S. W. 56. ,^.-' 
 
§ 376 RAILROADS 
 
 576 
 
 is no valid objection to the enactment of such a law and the 
 exercise of the power of eminent domain in such a case, and so 
 it has been held. In one case it is said : "In the exercise of the 
 right of eminent domain the legislature may authorize shares in 
 corporations and corporate franchises to be taken for public use 
 upon just compensation. The title to this species of property is 
 no more secure against invasion, where the public use requires 
 it, than is the ownership of real estate under this paramount right 
 in the public, subject to which all private property is held."'*^ 
 And in a very recent case it is held that such a statute is valid 
 and that it neither grants exclusive privileges to a particular set 
 of men nor impaiis the obligation of a contract within the mean- 
 ing of the prohibition in the constitution.*^ 
 
 §376 (326). Statutory provisions for consolidation. — The 
 
 laws of the various states for' the consolidation of railroad com- 
 panies generally provide that an agreement for a consolidation 
 must be entered into by the directors of the several companies**^ 
 and ratified by a vote of stockholders.*^ In Indiana the statute 
 
 42 Black V. Delaware &c. Canal Co., 30 Pa. St. 42, 49, 72 Am. Dec. 
 Co., 24 N. J. Eq. 4SS. 685; short note on the subject in 3 
 
 43 New York &c. R. Co. v. Offield, Mich. Law Rev. 309. 
 
 n Conn. 417, 59 Atl. 51.0. To the 44 5 Thomp. Corp. (2nd. ed.), 
 
 same effect is the recent case of § 6053. 
 
 Spencer v. Seaboard Air Line R. 45 5 Thomp. Corp. (2nd. ed.), 
 Co., 137 N. Car. 107, 49 S. E. 96, 1 §6053. The agreement for a con- 
 L. R. A. (N. S.) 604. See also solidation must be ratified by a 
 Gregg V. Northern R. Co., 67 N. state board before it is of any 
 H. 452, 41 Atl. 271; Dickinson v. force in Michigan. Howell Stat. 
 Consolidated Traction Co., 114 Fed. § 3344. In New Hampshire ap- 
 232. But such a statute is not to plication must be made to the su- 
 be unduly extended or applied so preme court, which may, after no- 
 as to deprive the stockholder of his tice and hearing, authorize, the con- 
 rights without proper proceedings, solidation, "if the public g«od will 
 due process of law and just com- be promoted by such union.'' Pub. 
 pensation. See Mowrey v. Indiana Stat. 1892, ch. 156, §22. Recent rail- 
 &c. R. Co., 4 Biss. (U. S.) 78, Fed. road commission statute also require 
 Cas. No. 9891; Mills v. Central R. the consent of the commission in 
 Co., 41 N. J. Eq. 1, 2 Atl. 453; Rabe many jurisdictions. Judge Thomp- 
 v. Dunlap, 51 N. J. Eq. 40, 25 Atl. son says: "The statutes generally 
 959; Lauman v. Lebanon Valley R. prescribe: 1. An agreement be- 
 
577 
 
 CONSOLIDATION 
 
 §376 
 
 provides that any railroad corporation in that state may con- 
 soUdate with a railroad corporation in an adjoining state "upon 
 such terms as may be by them mutually agreed upon, in accord- 
 ance with the laws of the adjoining state," and it is held that 
 this does not require that the meeting of the stockholders to act 
 upon the proposition to consolidate shall be called and con- 
 ducted in accordance with the laws of such adjoining; state.*® 
 The agreement of consolidation as entered into by the directors 
 and ratified by the stockholders is usually required to be filed 
 with the secretary of state,*^ and it is held in Ohio that until 
 this is done the consolidation is not actually completed so as to 
 effect a dissolution of the old companies, but that they still 
 remain competent to accept subscriptions to their capital stock 
 until the agreement is actually filed. *^ The supreme court of 
 
 tween the corporations intending to 
 consolidate. 2. Ratified by a certain 
 majority, generally two-thirds of 
 the stockholders of each corpo- 
 ration, at a duly notified meeting 
 for tha.t purpose. 3. The articles of 
 consolidation thus ratified, properly 
 authenticated, are filed with the sec- 
 retary of state, which are there- 
 after evidence of the consolidation 
 in all courts." CansoHdation of Cor- 
 poration, 31 Cent. L. J. 4, 5. 
 
 *6 Bradford v. Frankfort &c. Co., 
 142 Ind. 383, 40 N. E. 741. 
 
 *7 Trester v. Missouri Pac. R. 
 Co., 33 Nebr. 171, 49 N. W. 1110. 
 See article by Judge Thompson in 
 31 Cent. L. J. S. Notice is. also re- 
 quired in some states. The certifi- 
 cate so filed is made evidence of a 
 lawful consolidation by a statute in 
 some states. A copy of the articles 
 of consolidation between two rail- 
 roads, duly certified under the seal 
 of the secretary of state, is prima 
 facie evidence of the existence of 
 the consolidated corporation. East 
 St Louis C. R. Co. V. Wabash &c. 
 
 R. Co., 24 III. App. 279. A certi- 
 fied copy from the secretary of 
 state's office of an agreement for 
 consolidation was held by the Su- 
 preme Court of the United States 
 to be conclusive evidence of the con- 
 summation of the consolidation of 
 corporations in Missouri, under a 
 similar statute, in suits between the 
 consolidated company and individ- 
 uals or other corporations. Leaven- 
 worth County v. Chicago &c. R. Co., 
 134 U. S. 688, 10 Sup. Ct. 708, 33 
 L. ed. 1064. The filing of the cer- 
 tificate of consolidation may be 
 made a condition precedent. Com- 
 monwealth V. Atlantic &c. R. Co., 53 
 Pa. St. 9; Peninsular R. Co. v. 
 Tharp, 28 Mich. 506. But see Leav- 
 enworth County v. Chicago &c. R. 
 Co., 134 V. S. 688, 10 Sup. Ct. 708, 
 33 L. ed. 1064. Other steps may 
 also be required as condition pre- 
 cedent. Mansfield &c. R. Co. v. 
 Drinker, 30 Mich. 124. 
 
 *8 Mansfield &c. R, Co. v. Brown, 
 26 Ohio St. 223. See also State v. 
 Vanderbilt, 37 Ohio St. 590. 
 
 19 — Ell. Railroads I 
 
§ 376 RAILROADS 578 
 
 Pennsylvania, however, holds that the consolidated corporation 
 is so far created by the execution of an agreement of consolida- 
 tion by the constituent corporations that a valid subscription to 
 its stock may be made before the agreement is recorded.*® And 
 in a case in one of the federal courts it was held that where the 
 agreement was recorded in the office of the secretary of state 
 and it appeared from the minutes of three of the companies that 
 it had been ratified and accepted by the stockholders, and the 
 new company assumed and exercised for several years entire 
 charge and control of all the roads without objection, this was 
 sufficient to show an acceptance by all of them, although the 
 minutes of the fourth company were lost and although the 
 agreement did not have upon it the certificates of the several 
 secretaries of the different companies, which the statute' made 
 conclusive evidence of such acceptance.^" Statutes granting per- 
 missive authority to consolidate often prescribe conditions. ^^ 
 A statute granting railroad companies power to consolidate, 
 but coupling the grant with a condition or proviso that the con- 
 solidated company shall not have power to create any lien which 
 shall be valid as against a specified class of creditors is not in 
 violation of a constitutional provision that statutes shall embrace 
 hut one subject, which must be expressed in the title. ^^ 
 
 *9 McClure v. People's Freight R. solidation, see Columbus &c. R. Co. 
 
 Co., 90 Pa. St. 269. The provision v. Skidmore, 69 111. 566; Cotninon- 
 
 requiring each company to file with wealth v. Carroll, 145 Mass. 403, 14 
 
 the secretary of state a resolution N. E. 618; Kinion v. Kansas City, 
 
 accepting the provision of the act &c. R. Co., 39 Mo. App. 382. 
 
 under which the two companies 5i See Illinois G. T. R. Co. v. 
 
 have consolidated is merely direc- Cook, 29 111. 237; Adams v. Yazoo 
 
 tory, and a disregard of it will not &c. R. Co., 17 Miss. 194, 24 So. 200, 
 
 invalidate the agreement of cosoli- 317, 28 So. 956, 60 L. R. A. 33; 
 
 dation, if all other provisions of the Charlotte &c. R. Co. v. Gibbes, 27 
 
 act have been complied with. Leav- S. Car. 385, 4 S. E. 49; Houston 
 
 enworth' County v. Chicago &c. R. &c. R. Co. v. Shirley, 54 Tex. 125. 
 
 Co., 25 Fed. 219, 134 U. S. 688, 10 S2 Frazier v. East Tenn. &c. R. 
 
 Sup. Ct. 708, 33 L. ed. 1064. Co., 88 Tenn. 138, 12 S. W. 537, 
 
 so Phinizy v. Augusta &c. R. Co., 40 Am. & Eng. R. Cas. 358. 
 62 Fed. > 678. As to proof of con- 
 
579 
 
 CONSOLJDATION 
 
 §377 
 
 §377 (327). Rights of old stockholders and their relation to 
 the new company. — The stockholders of the constituent corpora- 
 tions cannot be compelled to become stockholders of the new cor- 
 poration without their consent, unless otherwise provided, and 
 do not become such, as a rule, until the surrender of their old 
 stock in exchange for new.°^ And, although the old corporation 
 may be dissolved by the act of consolidation the property inter- 
 ests of its stockholders usually remain unchanged until divested 
 by their own act or in some manner provided by law.^* Several 
 of the states, however, provide for the purchase by the company 
 of the shares of stockholders who decline to become members 
 of the consolidated company,"-' And, as a general rule, unless 
 otherwise provided by contract or the governing statute, when 
 the consolidation is duly perfected stockholders in the old com- 
 panies become stockholders in the new,^^ which may usually en- 
 force the unpaid subscriptions to the stock of the. old corpora- 
 
 53 State V. Bailey, 16 Ind. 46, 79 
 Am. Dec. 405 ; Gardner v. Hamil- 
 ton &c. Ins. Co., 33 N. Y. 421; S 
 Thomp. Corp. (2nd. ed.), §6061. See 
 also Kohl V. Lilenthal, 81 Cal. 378, 20 
 Pac. 401, 22 Pac. 689, 6 L. R. A. 
 520; Clearwater v. Meredith, 1 Wall. 
 (U. S.) 25, 17 L. ed. 604; Lauman 
 V. Lebanon &c. R. Co., 30 Pa. St. 
 42, 72 Am. Dec. 685. 
 
 3 4 Philadelphia &c R. Co. v. Cata- 
 wissa R. Co., S3 Pa. St. 20. It has 
 been held in Massachusetts that the 
 holder of bonds convertible into the 
 stock of a road which had consoli- 
 dated with another to form a new 
 corporation, expressly charged with 
 the performance of its obligations 
 and liabilities, was entitled to de- 
 mand stock in the new corporation, 
 as for the purposes of this contract 
 the old corporation continued under 
 
 the new name. Day v. Worcester 
 &c. R. Co., 151 Mass. 302, 23 N. E. 
 824. 
 
 55 See 5 Thomp. Corp. (2nd. ed), 
 § 6060. But this does not prevent 
 a resort to the courts in a proper 
 case. Langan v. Frankyln, 20 N. Y. 
 S. 404. See also as to right to arbi- 
 trate. Pittsburgh &c. R. Co. v. Gar- 
 rett, 50 Ohio St. 405, 34 N. E. 493. 
 
 56 Ridgway Township v. Gris- 
 wold, 1 McCrary (U. S.) 151, Fed. 
 Cas. No. 11819; 1 Thomp. Corp. 
 (2nd. ed.), § 355. In Fee v. New Or- 
 leans &C. Co., 35 La. Ann. 413, it 
 was held that a stockholder in one 
 of the old companies could sue the 
 consolidated company for stock 
 which he was entitled to in ex- 
 change. So, under the agreement 
 in Anthony v. American Glucose 
 Co., 146 N. Y. 407, 41 N. E. 23. 
 
§378 
 
 RAILROADS 
 
 580 
 
 tions.s' But, if the subscription was made upon a valid condi- 
 tion, it passes to the new company subject to such condition. s* 
 
 § 378 (328). Remedies of old stockholders. — As elsewhere 
 stated,^" a dissenting stockholder cannot always be compelled 
 to become a shareholder in the new consolidated company, nor 
 held liable upon his original subscription, and he may, in some 
 instances, entirely defeat or prevent the consolidation. Thus, 
 he may enjoin aia ultra vires consolidation,^" inimical to him, at 
 least until his interest is purchased or secured.*^ He may, how- 
 ever, lose the right to enjoin a consolidation which could not be 
 made without his consent by acquiescence or laches. ^^ It is also 
 
 5^ Nugent V. Supervisors, 19 Wall. 
 (U. S.) 241, 22 L. ed. 83; Pope v. 
 Board of Comrs., 51 Fed. 769; 
 Hanna v. Cincinnati &c. R. Co., 20 
 Ind. 30 ; Swartout v. Michigan &c. 
 R. Co., .24 Mich. 389; Wells v. Rod- 
 gers, 60 Mich. S2S, 27 N. W. 671; 
 Cooper v. Shropshire &c. R. Co., 
 13 Jur. 443, 6 Eng. R. & Canal Cas. 
 136. See also Hayworth v. Junc- 
 tion R. Co., 13 Ind. 348; Mansfield 
 &c. R. Co. V. Drinker, 30 Mich. 124. 
 But compare Sprague v. Illinois &c. 
 R. Co., 19 111. 174; Ottawa &c. R. 
 Co. V. Black, 79 111. 262. As to 
 when this cannot be done, see ante, 
 § 374. Here, of course, we refer to 
 a consolidation authorized by char- 
 ter or statute at the time the sub- 
 scription was made. See also. 
 Sparrow v. EvansviUe &c. R. Co., 7 
 Ind. 369; Hanna v. Cincinnati &c. R. 
 Co., 20 Ind. 30; Mansfield &c. R. 
 Co. v. Brown, 26 Ohio St. 223. 
 
 58 2 Thomp. Corp. (2d ed.), § 6061 ; 
 Mansfield &c. R. Co. v. Pettis, 26 
 Ohio St. 2S9. 
 
 59 Ante, §374. 
 
 «o Charlton v. New Castle &c. R. 
 R. Co., 5 Jur. (N. S.) 1096; Nathan 
 
 V. Tompkins, 82 Ala. 437, 2 So. 747 ; 
 Watson V. Harlem &c. Co., 52 How. 
 Prac. (N. Y.) 348. See also Mowrey 
 V. Indianapolis &c. R. Co., 4 Biss. (U. 
 S.) 78, Fed. Cas. No. 9891 ; Market 
 St. R. Co. V. Hellman, 109 Cal. 571, 
 42 Pac. 225; Botts v. Sirapsonville 
 &G. Co., 88 Ky. 54, 10 S. W. 134, 2 
 L. R. A. 594; Mills v. Central R. 
 Co., 41 N. J. Eq. 1, 2 Atl. 453 ; Rabe 
 V. Dunlap, 51 N. J. Eq. 40, 25 Atl. 
 959; Stevens v. Rutland &c. R. Co., 
 
 29 Vt. 545. But not, it is held, on the 
 ground that one of the constituent 
 companies was illegally organized. 
 Bell V. Pennsylvania &c. R. Co. (N. 
 J.), 10 Atl. 741. 
 
 8iLauman v. Lebanon &c. R. Co., 
 
 30 Pa. St. 42, 72 Am. Dec. 685; 
 State V. Bailey, 16 Ind. 46, 79 Am. 
 Dec. 405. 
 
 B2 Bell V. Pennsylvania &c. R. Co. 
 (N. J.), 10 Atl. 741; Zabriskie v. 
 Hackensack &C. R. Co., 18 N. J. Eq. 
 178, 90 Am. Dec. 617; Deaderick v. 
 Wilson, 8 Baxt. (Tenn.) 108; 5 
 Thomp. Corp. (2nd ed.), §§ 6058, 
 6059. See also Cole v. Birmingham 
 Un. R. Co., 143 Ala. 427, 39 So. 403 ; 
 Alton R. &c. Co. V. Mayfield, 95 111. 
 
581 
 
 CONSOLIDATION 
 
 §379 
 
 said that where a consolidation is wrongfully effected by the 
 shareholders, over the objection of a dissenting shareholder, who 
 has partly paid for his stock ; the consolidated company is liable 
 to him therefor, but he cannot sue the directors personally for 
 damages.®' We have already referred to the general rqle pro- 
 hibiting collateral attacks upon consolidated corporations as 
 well as other corporations, but this rule ought not, it seems to 
 us, to be applied so as to prevent a subscriber to stock in one of 
 the original corporations from questioning, under certain circum- 
 stances, the corporate existence or title of the new consolidated 
 corporation by way of defense to an action by the new company 
 to enforce such subscription.** 
 
 § 379 (329). Consolidated company succeeds to rights and 
 liabilities of the old conjpanies. — As a general rule the consoli- 
 dated company is vested with all the rights, property, privileges 
 and franchises of the several companies of which it is formed,"^ 
 
 App. 146; Hale v. Cheshire R. Co., 
 161 Mass. 443, n N. E. 307; Rabe 
 V. Dunlap, SI N.' J. Eq. 40, 25 Atl. 
 959; Drake v. New York &c. Co., 
 26 App. Div. 499, 50 N. Y. S. 826; 
 Spencer v. Seaboard Air Line R. 
 Co., 137 N. Car. 107, 49 S. E. 96, 1 
 L. R. A. (N. S.) 604, and note; 
 Boston &c. R. Co. v. New York &c. 
 R. Co., 13 R. I. 260. 
 
 03 International &c. R. Co. v. Bre- 
 mond, 53 Tex. 96. See also Tanner 
 V. Lindell R. Co., 180 Mo. 1, 79 S. 
 W. 155, 103 Am. St. 534. And see 
 and compare generally as to rights 
 and remedies of dissenting stock- 
 holder. Mayfield v. Alton R. &c. 
 Co., 198 111. 528, 65 N. E. 100; Bar- 
 nett V. Philadelphia &c. Co., 218 Pa. 
 649, 67 .\tl. 912. 
 
 64 See Mansfield &c. R. Co. v. 
 Stout, 26 Ohio St. 241; Mansfield 
 &c. R. Co. V. Brown, 26 Ohio St.' 
 223; Tuttle v. Michigan Air Line 
 
 R. Co., 35 Mich. 247. But see Otta- 
 wa &c. R. Co. V. Black, 79 111. 262; 
 Kenosha R. &c. R. Co. v. Marsh, 17 
 Wis. 13. 
 
 B5 Mt. Pleasant v. Beckwith, 100 
 U. S. 514, 25 L. ed. 699 ; Chicago &c. 
 R. Co. V. Moffit, 75 111. 524; Craw- 
 fordsville &c. Co. v. Fletcher, 104 
 Ind. 97, 2 N. E. 243; note to Louis- 
 ville &c. R. Co. V. Boney, 117 Ind. 
 501, 20 N. E. 432, 3 L. R. A. 435; 
 Louisville &c. R. Co. v. Blythe, 69 
 Miss. 939, 11 So. Ill, 16 L. R. A. 
 251, 30 Am. St. 599. See also Bir- 
 mingham &c. Co. V. Cunningham, 
 141 Ala. 470, 37 So. 689; 5 Thomp. 
 Corp. (2nd. ed.), §6080, et seq. State 
 V. Maine Central R. Co., 66 Maine 
 488, it is held that where a new cor- 
 poration is formed by the consolida- 
 tion of two or more previously exist- 
 ing corporations, and by the act is to 
 "have the powers, privileges and im- 
 munities possessed by each of the cor- 
 
§379 
 
 RAILROADS 
 
 582 
 
 and is subject to the debts and liabilities of such companies.®® 
 The statutes generally so provide,"^ and such liability usually 
 exists, even though neither the statute nor the agreement of 
 consolidation expressly so provides."* But it is not liable for a 
 
 porations," the new corporation will 
 have; only the privileges, powers and 
 immunities poissessed by the one of 
 such corporations having the fewest 
 privileges, powers and immunities, 
 and which were common to all. But 
 see Natchez &c. R. Co.. v. Lambert, 
 70 Miss. 779, 13 So. 33. 
 
 66 Atlantic &c. R. Co. v. John- 
 son, 127 Ga. 392, 56 S. E. 482, 11 
 L. R. A. (N. S.) 1119, and other 
 cases there cited in note, especially 
 as to liabilitiy; note to McMahan v. 
 Morrison, 79 Am. Dec. 424, 426; 
 Louisville &c. R. Co. v. Boney, 117 
 Ind. SOI, 20 N. E. 432, 3 L. R. A. 
 435, and note. See Harrison 
 V. Arkansas &c. Co., 4 Mc- 
 Crary (U. S.) 264, 13 Fed. 
 522 ; Pullman Car Co. v. Missouri 
 Pac. Co., lis U. S. 587, 6 Sup. Ct 
 194, 29 L. ed. 499; Atlantic &c. R. 
 Co. V. Johnson, 127 Ga. 392, 56 S. 
 E. 483, 11 L. R. A. (N. S.) 1119; 
 Berry v. Kansas City &c. R. Co., 
 52 Kans: 759, 39 Am. St. 371; 
 Thompson v. Abbott, 61 Mo. 176. 
 The new company cannot aver ig- 
 norance of an unrecorded mort- 
 gage given by one of its consti- 
 tuent companies. Mississippi &c. Co. 
 V. Chicago &c. R. Co., 58 Miss. 846. 
 See also Bloxam v. Florida &c. R. 
 Co., 35 Fla. 625, 17 So. 902. The 
 New York statute authorizing the 
 consolidation of railroad companies, 
 and providing that all debts and lia- 
 bilities of either company, except 
 mortgages, shall attach to the new 
 
 corporation, and be enforced against 
 it and its property to the same ex- 
 tent as if created by it, allows an 
 action against the new company on 
 bonds and coupons of one of the 
 former companies, though secured 
 by a mortgage on the property of 
 the original debtor corporation. 
 Polhemus v. Fitchburg R. Co., 123 
 N. Y, 502, 26 N. E. 31. See Plain- 
 view V. Winona &c. R. Co., 36 Minn. 
 505, 32 N. W. 745. Such liability 
 attaches unless there is a special 
 agreement to the contrary. Berry 
 V. Kansas City &c. R. Co., 52 Kans. 
 759, 774, 39 Am. St. 371. 
 
 STSee note in . 89 Am. St. 636; 
 Kansas City &c. R. Co. v. Langley, 
 70 Kans. 453, 78 Pac. 858. 
 
 68 "The foundation of the liability 
 of a consolidated corporation may 
 rest on a statute or an agreement, 
 either express or implied. If the 
 statute does not provide that the 
 new company shall assume the 
 debts and liabilities of the consti- 
 tuent companies, and there is no 
 express agreement respecting the 
 same, the debts of the original com- 
 panies follow as an incident of the 
 consolidation, and become by im- 
 plication the obligations of the new 
 corporation." Berry v. Kansas City 
 &c. R. Co., 52 Kans. 774, 36 Pac. 
 724, 39 Am. St. 381. See also Peo- 
 ple V. Louisville &c. R. Co., 120 
 111. 48, 10 N. E. 657; State v. Bal- 
 timore &c. R. Co., n Md. 489, 26 
 Atl. 865; Chase v. Michigan Tel. 
 
583 
 
 CONSOIJDATIO'N 
 
 §379 
 
 penalty incurred by the lessee of one of the constituent com- 
 panies.®" Even in the absence of express statutory provisions 
 on the subject the property and franchises of the old companies 
 will usually vest in the new corporation,™ and it will succeed 
 to all the rights of each of such companies, and may compromise 
 and settle a claim against one of them and enforce the settle- 
 ment by suitJi Where the law under which the corporation 
 
 Co., 121 Mich. 631, 80 N. W. 717; 
 Shadford v. Detroit &c. R. Co., 130 
 Mich. 300, 89 N. W. 960; Thomp- 
 son V. Abbott, 61 Mo. 176; Houston 
 &c. R. Co. V. Shirley, S4 Tex. 125; 
 Missouri Pac. R. Co. v. Owens, 1 
 Tex. App. Civ. 384; Langborne 
 V. Richmond R. Co., 91 Va. 369. 22 
 S. E. 1S9; National &c. Works v. 
 Oconto City &c. Co., 105 Wis. 48, 
 81 N. W. 125; Tennessee v. Whit- 
 worth,. 117 U. S. 139, 6 Sup. Ct. 649, 
 
 29 L. ed. 833; notes in 11 L. R. A. 
 (N. S.) 1119; 32 L. R. A. (N. S.) 
 616. 
 
 69 State V. Pittsburgh &c. R. Co., 
 135 Ind. 578, 35 N. E. 700. 
 
 ■^0 Green County v. Conness, 109 
 U. S. 104, 3 Sup. Ct. 69, 27 L. ed. 
 872; Southern Pac. R. Co. v. Poole, 
 32 Fed. 451; State v. Seaboard &c. 
 R. Co., 52 Fed. 450; Meyer v. John- 
 ston, 53 Ala. 237; Zimnier v. State, 
 
 30 Ark. 677; Baltimore v. Baltimore 
 &c. R. Co., 6 Gill (Md.) 288, 438 
 Am. Dec. 531 ; Consolidated Gas Co. 
 V. Baltimore &c., 98 Md. 689, 57 Atl. 
 29; Daniels v. St. Louis &c. R. Co., 
 62 Mo. 43; Trester v. Missouri Pac. 
 R. Co., 33 Nebr. 171, 49 N. W. 1110; 
 Trenton St. R. Co., In re, (N. J. 
 Eq.), 47 Atl. 819; South Carolina 
 R. Co. V. Blake, 9 Rich. L. (S. Car.) 
 228; Langhorne v. Richmond R. Co., 
 91 Va. 369, 22 S. E. 159. Cashman 
 V. Brownlee, 128 Ind. 266, 27 N. E. 
 
 560. In this latter case it is held 
 that where land is conveyed in fee 
 simple to a railroad company and 
 afterward the company is consoli- 
 dated with another, and further 
 consolidations take place from . time 
 to time, the new companies formed 
 by the successive consolidations suc- 
 ceed to the said real estate, and 
 may recover it from grantor or those 
 to whom he afterward transfers 
 it, although he has remained in 
 possession .of the premises for more 
 than twenty years after the convey- 
 ance was made, since the possession 
 of a grantor cannot be adverse to 
 the title of his grantee. See also 
 Union Trac. Co. v. Barey, 164 Ind. 
 249, IZ N. E. 263 (right to appeal 
 eminent domain proceedings) ; Ball 
 V. Rutland R. Co., 93 Fed. 513 
 (right to fix rates). 
 
 Ti Pain V. Lake Erie &c. R. Co., 
 31 Ind. 283. See also St. Paul &c. 
 R. Co. V. Western Union Tel. Co., 
 118 Fed. 497. The consolidated 
 company may collect municipal aid 
 voted to one of the companies of 
 which it is formed, where the con- 
 solidation was authorized at the time 
 it was voted. Scott' v. Hansheer, 
 94 Ind. 1 ; East Lincoln v. Daven- 
 port, 94 U. S. 801, 24 L. ed. 322; 
 Atchison &c. R. Co. v. Phillips Co., 
 25 Kans. 261. See also Pope v. 
 Board of Comrs., 51 Fed. 769 (hold- 
 
§379 
 
 RAILROADS 
 
 584 
 
 was organized authorizes a consolidation, the consolidated com- 
 pany may recover on the contracts of subscription given to the 
 original companies, since the subscriptions will be held to have 
 been made with reference to the law as it then existed.''^ The 
 consolidated company may accept a continuing offer to sub- 
 scribe made to one of the original companies, and may, when 
 authorized to do so, perform any conditions annexed to a sub- 
 scription given to such company. ''^ A valid consolidation or a 
 right as successor may, however, be required to be shown to en- 
 able the consolidated company or its assignee to maintain an 
 action upon the contracts of one of the roads out of which it 
 was formed^* But it is sufficient, in pleading such a consoli- 
 dation, to show the organization of the original companies into 
 
 ing in accordance with the Indiana 
 decision that the tax must be levied 
 and collected or there is no legal 
 right to it). The Pennsylvania stat- 
 ute governing the consolidation of 
 connecting railroad compjinies pro- 
 vides that the new company shall 
 possess all the rights theretofore 
 vested in either of them ; and all the 
 property and rights of actions shall 
 be deemed to be transferred to the 
 new company. It was held that the 
 consolidated company could recover 
 on an indemnity bond given by a 
 passenger agent to one of the old 
 companies, its attorney, successors, 
 or assigns ; prior to the act of con- 
 solidation, where such agent con- 
 tinues in his position and discharges 
 substantially the same duties as be- 
 fore. Pennsylvania &c. R. Co. v. 
 Harkins, 149 Pa. St. 121, 24 Atl. 
 17S, 50 Am. & Eng. R. Cas. 587. 
 The new company may lawfully use 
 a patent axle box which the old com- 
 panies were licensed to use. Light- 
 ner v. Boston &c. R. Co., 1 Lowell 
 (U. S.) 338, Fed. Cas. No. 8343. 
 72 Nugent v. Supervisors, 19 Wall. 
 
 (U. S.) 241, 22 L. ed. 83; Scotland 
 County v. Thomas, 94 U. S. 682, 24 
 L. ed. 219; Bates County v. Win- 
 ters, 112 U. S. 325, 5 Sup. Ct. 157, 
 28 L. ed. 744; Bish v. Johnspn, 21 
 Ind. 299; Atchison &c. R. Co. v. 
 Phillips Co., 25 Kans. 261; Mans- 
 field &c. R. Co. v. ■ Stout, 26 Ohio 
 St. 241 ; ante, § 355. 
 
 ■^3 Mansfield &c. R. Co. v. Brown, 
 26 Ohio St. 223. 
 
 74 Brown v. Dibble, 65 Mich. 520, 
 32 N. W. 656, 30 Am. & Eng. R. 
 Cas. 241. After a railroad company 
 has been merged, by consolidation 
 with another railroad company, and 
 such new corporation is carrying on 
 a railway business, and is a de facto 
 corporation, the existence and valid- 
 ity of the corptjration can only be 
 attacked in a direct proceeding 
 brought for that purpose ; .such a 
 matter will not be the subject of a 
 collateral attack by way of defeat- 
 ing the right to recover on bonds 
 of the merged railroad subscribed 
 to by a county in aid of railroad 
 construction. Chicago &c. R. Co. v. 
 Putnam, 36 Kans. 121, 12 Pac. 593. 
 
585 
 
 CONSOLIDATION 
 
 §380 
 
 the consolidated company by a given name and as a corporate 
 body by authority of law, without setting out the steps taken 
 to effect the sameJ^ 
 
 § 380 (330). Special privileges and immunities^- When they 
 pass to the new company. — Special privileges possessed by all of 
 the consolidating companies will pass to the new company, 
 where the statute provides that it shall have all the "franchises, 
 privileges and immunities of the constituent companies.'"^® Thus, 
 it has been held that an exemption from taxation will pass to 
 the new company so far as the property originally covered by 
 the exemption is concerned.'^'' But, in the absence of such a 
 provision, it seems that a special immunity of exemption from 
 
 T5 Collins V. Chicago &c. R. Co., 
 14 Wis. 492. See also Jackson Con- 
 solidated Trac. Co. v. Jackson Circ. 
 Judge, ISS Mich. 522, 119 N. W. 
 915. In the pleading the consolida- 
 tion of two railway corporations un- 
 der the statutes of another state it 
 is sufficient to set out a copy of the 
 statutes, and to allege that their 
 provisions have been complied with, 
 and the consolidation effected ; it is 
 not necessary to set out the steps 
 taken under the statutes, such steps 
 being evidence of the consolidation. 
 Rothschild v. Rio Grande W. R. Co., 
 63 Hun 632, 18 N. Y. S. 548. 
 
 T6 In State v. Maine &c. R. Co., 66 
 Maine 488, it was held that the con- 
 solidated company took only such 
 privileges and immunities as were 
 common to all the constituent com- 
 panies. It could, however, doubtless 
 be given all that any one of them 
 possessed. See 5 Thomp. Corp. 
 (2nd. ed.), §6111. 
 
 TT International &c R. Co. v. An- 
 derson Co., 59 Tex. 654; Natchez 
 &c. R. Co. v. Lambert, 70 Miss. 779, 
 13 So. 33. Where two companies. 
 
 whose charters exempt their capital 
 stock from taxation, consolidate to 
 form a single corporation, it has 
 been held that the shares of stock 
 of such consolidated company are 
 not subject to taxation. Tennessee 
 V. Whitworth, 117 U. S. 139, 6 Sup. 
 Ct. 649, 29 L. ed. 833, affirming State 
 V. Whitworth, 22 Fed. 75, 81. See 
 Philadelphia &c. R. Co. v. Mary- 
 land, 10 How. (U. S.) 376, 13 L. ed. 
 461; Tomlinson v. Branch, 15 Wall. 
 (U. S.) 460, 21 L. ed. 189; Central 
 R. Co. v. Georgia, 92 U. S. 665, 23 
 L. ed. 757; Chesapeake &c. R. Co. 
 V. Virginia, 94 U. S. 718, 24 L. ed. 
 310; Atlantic &c. R. Co. v. Georgia, 
 98 U. S. 359, 25 L. ed. 185; State 
 Treasurer v. Auditor-General, 46 
 Mich. 224, 9 N. W. 258. But com- 
 pare State V. Maine Central R. Co., 
 66 Maine 488; Morgan v. Louisi- 
 ana, 93 U. S. 217, 23. L. ed. 860; 
 Railroad Co. v. Gaines, 97 U. S. 
 697, 24 L. ed. 1091 ; and see authori- 
 ties cited in next following note ; 
 State V. Keokuk &c. R. Co., 99 Mo. 
 30, 12 S. W. 290, 6 L. R. A. 222. 
 
§380 
 
 RAILROADS 
 
 586 
 
 taxation enjoyed by one of the original companies will not pass 
 to the consolidated company^* It has been held that a right 
 to take land for a right of way,"^ or to borrow money or mort- 
 gage the road as security.s" or to charge a certain rate for 
 transportation,*' will pass to the consolidated company. So 
 it has been held that the right conferred by special charter 
 upon a street railway company to operate a street railway upon 
 all or any of the streets of a city, survives to the company in 
 
 78 Rochester R. Co. v. Rochester, 
 205 U. S. 236, 27 Sup. Ct. 469, 51 
 L. ed. 784. See also ante, § 75, note 
 2; Keokuk &c. R. Co. v. Missouri, 
 152 U. S. 301, 14 Sup. Ct. 592, 38 
 L. ed. 450, in which attention is 
 called to the apparent conflict in the 
 decisions of the Supreme Court of 
 the United States. In Phoenix, &c. 
 Co. V. Tennessee, 161 U. S. 174, 16 
 Sup. Ct. 471, 40 L. ed. 660, the con- 
 flicting authorities are reviewed and 
 the conclusion reached that the 
 weight of authority and the better 
 reason is to effect that the word 
 "immunity" or "exemption"' must 
 be used unless the legislative inten- 
 tion to pass the exemption is other- 
 wise clearly shown, and that a mere 
 transfer of the "privileges" of the 
 constituent companies is insufficient 
 to pass the exemption from taxation. 
 And this is followed in Rochester 
 R. Co. V. Rochester, supra. But the 
 question as to whether an exemption 
 survives may also depend some- 
 what upon the nature and effect 
 of the so-called consolidation 
 as to whether it does or does 
 not work a dissolution, and there 
 are some cases in which the exemp- 
 tion from taxation was held to 
 pass, although no such language was 
 used as that which seems to be re- 
 
 quired according to the decision 
 above referred to. See authorities 
 cited in last preceding note; also St. 
 Louis &c. R. Co. v. Berry, 41 Arl(. 
 509; St. Louis &c R. Co. v. Berry, 
 113 U. S. 465, 5 Sup. Ct. 529, 28 
 L. ed. 1055 ; Rochester R. Co. v. 
 Rochester, 205 U. S. 236, 27 Sup. 
 Ct. 469, 51 L. ed. 784; Atlantic &c. 
 R. Co. V. Allen, 15 Fla. 637; Nat- 
 chez &c. R. Co. V. Lambert, 70 Miss. 
 119, 13 So. 33; State v. Woodruff, 
 36 N. J. L. 94; note in 89 Am, St. 
 626; 5 Thomp. Corp. (2nd. ed.), 
 §6112. 
 
 79 South Carolina R. Co. v. Blake, 
 9 Rich. (S. Car.) 228. See also 
 Lawrence v. Morgan &c. Co., 39 La. 
 Ann. 427, 2 So. 69, 4 Am. St. 265; 
 Adee v. Nassau Elec. R. Co., 65 App. 
 Div. 529, 72 N. Y. S. 992. 
 
 sn Mead v. New York &c. R. Co., 
 54 Conn. 199. See also Dupont v. 
 Northern Pac. R. Co., 18 Fed. 467; 
 Wabash &c. R. Co. v. Ham, 114 U. 
 S. 587, 5 Sup. Ct. 1081, 29 L, ed. 
 235. 
 
 81 Ball V. Rutland R. Co.,' 93 Fed. 
 513; Fisher v. New York Central 
 &c. R. Co., 46 N. Y. 644. But see 
 Covington &c. Co. v. Sanford, 
 14 Ky. Law Rep. 689, 20 S. W. 
 1031; Pittsburgh &c. Co. v. Moore, 
 33 Ohio St. 384, 31 Am. Rep. 543. 
 
587 
 
 CONSOLIDATION 
 
 §381 
 
 which it is merged by consolidations.^^ And where the officers 
 and servants of a company are exempt from jury duty, it has 
 likewise been held that the officers and servants of the com- 
 pany into which it is merged by consolidation will possess the 
 same privilege.** 
 
 §381 (331). When speciar privileges do not pass.— A sur- 
 render by the companies of all special privileges is sometimes 
 made the condition of a grant by the state of authority to con- 
 solidate, in which case the new company will have only the 
 special privileges conferred by its charter.** And, when the 
 consolidation under the law giving the power to consolidate 
 operates in effect as a charter, and the company formed by 
 the consolidation is a new corporation organized under that 
 charter,*^ no special privileges or exemptions will be trans- 
 mitted to the new company which the legislature could not 
 confer at the time the consolidation was effected.*" This is in 
 
 82 Citizens' Street R. Co. v. Mem- 
 phis, S3 Fed. 715. 
 
 sszimm r v. State, 30 Arlc. 677. 
 See also Hawkins v. Small, 7 Baxt. 
 (Tenn.) 193 ; Tennessee v. Whit- 
 wortli, 22 Fed. 81. 
 
 S4 State V. Keokuk &c. R. Co., 99 
 Mo. 30. 
 
 83 The consolidation of a railroad 
 corporation with companies organ- 
 ized under the laws of other states 
 is not an incorporation within the 
 meaning of laws requiring the pay- 
 ment of an organization tax. Peo- 
 ple V. New York &c. R. Co., 129 N. 
 Y. 474, 6S4, 29 N. ^. 959. See opin- 
 ion of the justices, 65 N. H. 673, to 
 the same eflfect as to the union of 
 two domestic corporations. 
 
 86 St. Louis &c. R. Co. V. Berry, 
 113 U. S. 465, 5 Sup. Ct. 529, 28 
 L. ed. 1025; Keokuk &c. R. Co. v. 
 Missouri, 152 U. S. 301, 14 Sup. Ct. 
 592, 38 L. ed. 450; State v. Keo- 
 
 kuk &c. R. Co., 99 Mo. 30, 6 L. R. 
 A. 222; Keokuk &C..R. Co. v. Scot- 
 land Co., 41 Fed. 305. In these 
 cases it is held that the corporation 
 formed by a consolidation effected 
 after the state has adopted a con- 
 stitution prohibiting the legislature 
 from granting any exemption from 
 taxation cannot claim benefit of an 
 exemption previously granted to the 
 companies of which it is composed. 
 But in Citizens' Street R. Co. v. 
 Memphis, 53 Fed. 715, Judge Ham- 
 mond held that a consolidation did 
 not have any effect to destroy the 
 special privileges and immunities 
 held by the consolidating companies 
 where the consolidation was effected 
 under a law passed after the adop- 
 tion of a constitution providing 
 "that the legislature shall have no 
 power * * * to pass any law 
 granting to any individual or indi- 
 viduals rights, pt'ivilegies, immuni- 
 
§ 382 RAILROADS 588 
 
 accordance with the rule announced in a previous section.*^ 
 It has also been held by the Supreme Court of the United 
 States, in a recent case, that a grant to the new corporation of 
 the exemptions and immunities of each of the constituent 
 companies did not pass the exemption of the stockholders of 
 the constituent companies from individual liability, as the ex- 
 emption of stockholders was not an exemption of the corpora- 
 tion.*8 And in a still more recent case it is held by the same 
 court that an immunity of a street railway company from 
 paving between its tracks did not pass under a statutory pro- 
 vision that the "estate, property, rights, privileges, and fran- 
 chises" of the old company should vest in and be held and 
 enjoyed by the consolidated or purchasing company.** 
 
 § 382 (332) . Duties and obligations of new company. — Not 
 
 only does the new company usually possess all of the rights 
 and privileges of the original companies not expressly taken 
 from it, but it is subject in general to all the duties imposed 
 upon them by the law or laws of their creation, except so far 
 as the law under which the consolidation is effected relieves 
 it from the performance of such duties.®" It is bound to per- 
 
 ties or exemptions other than such those cited in note (at close of 
 
 as may be, by the same law extend- §380), ante, yet technically and 
 
 ed to any member of the community logically it seems to be correct, at 
 
 who may be able to bring himself least if the letter rather than the 
 
 within the provisions of such law. spirit of the law is to be followed 
 
 No corporation shall be created, or and the rule that exemptions must 
 
 its powers increased or diminished be clearly granted, and that the cor- 
 
 by special laws, but the general as- poration is a distinct entity separate 
 
 sembly shall provide by general from its stockholders, is to be ap- 
 
 laws for the organization of all cor- plied as against the stockholders in 
 
 porations hereafter created, which such a case. 
 
 laws may at any time be altered or so Rochester R. Co. v. Rochester, 
 
 repealed." 205 U. S. 236, 27 Sup. Ct. 469, 51 
 
 87 See ante, § 373. L. ed. 784. 
 
 88 Minneapolis &c. R. Co. v. Gard- 90 Chicago &c. R. Co. v. Moffitt, 75 
 ner, 177 U. S. 332, 20 Sup. Ct. 656, 111. 524; Tomlinson v. Branch,' IS 
 44 L. ed. 793. This seems to be Wall. (U. S.) 460, 21 L. ed. 189; 
 a dangerous doctrine and in conflict State v. Northern Pac. R. Co., 36 
 
 w 
 
 ith the reasoning in such cases as Minn. 207; Charity Hospital 
 
589 
 
 CONSOLlDATfON 
 
 § m 
 
 form the duties resting upon the original companies as com- 
 mon carriers, and any agreement to avoid such duties is con- 
 trary to public policy and void.^^ So, it has been held liable 
 for a failure to restore a stream crossed by one of the con- 
 stituent companies to its former condition,^^ and for the con- 
 tinuance of a nuisance erected by such company.®^ 
 
 §383 (333). Liability of new company on old contracts. — 
 
 The contracts entered into by the constituent railroad com- 
 panies may usually be enforced against the new company to 
 the extent that it is capable of performing their conditions.** 
 Thus, it has been held that the consolidated company is bound 
 to perform the contract of transportation called for by a mile- 
 age ticket' issued by a constituent company,^-'' to convey land 
 
 New Orleans &c Co., 40 La. Ann. 
 382, 4 So. 433 ; 5 Thomp. Corp. (2nd. 
 ed.), §§6083, 6095, et seq. 
 
 91 Peoria &c. R. Co. v. Coal Val- 
 ley Min. Co., 68 111. 489; People v. 
 Louisville &c. R. Co., 120 111. 48, 10 
 N. E. 657. 
 
 92 Chicago &c. R. Co. v. Moffitt, 75 
 111. 524; Cott V. Lewiston R. Co., 
 36 N. Y. 214. 
 
 83 Eyler v. County Comrs., 49 Md. 
 257, 33 Am. Rep. 249; Wellcome v. 
 Leeds, 51 Maine 313 ; Central R. Co. 
 V. State, 32 N. J. L. 220. 
 
 9* Pullman Palace Car • Co. v. 
 Missouri Pac. R. Co., 115 U. S. 
 587, 6 Sup. Ct. 194, 29 L. ed. 499. 
 Union Pac. R. Co. v. McAlpine, 129 
 U. S. 305, 9 Sup. Ct. 286, 32 L. ed. 
 673; Smith v. Los Angeles &c. R. 
 Co., 98 Cal. 210, 33 Pac. S3 (liable 
 for' breach of contract). See al- 
 so Columbus &c. R. Co. v. Skidmo-re, 
 69 111. 566; Hancock &c. Ins. Co. v. 
 Worcester &c. R. Co., 149 Mass. 214, 
 21 N. E. 364; Day v. Worcester &c. 
 R. Co., 151 Mass. 302, 23 N. E. 824; 
 Thompson v. Abbott, 61 Mo. 176. 
 
 Under a statute authorizing the con- 
 solidation of a railroad company, 
 which is the grantee of a right of 
 way, with another company, a sec- 
 tion of the statute providing that 
 the consolidation shall not affect the 
 rights of creditors of the companies, 
 the new company is not protected, 
 as an innocent purchaser, against 
 the enforcement of covenants en- 
 tered into by the grantee of the 
 right of way, and which run with 
 the land, jeven though the breach 
 occurred after the consolidation was 
 eflfected. Mobile &c. R. Co. v. Gil- 
 mer, 85 Ala. 422, 5 So. 138. But the 
 mere fact that the stockholders of 
 two separate companies are the 
 same, or the like, does not neces- 
 sarily operate as a merger or con- 
 solidation and make one liable for 
 the contracts of the other. Rich- 
 mond &c. Co. V. Richmond &c. Co., 
 68 Fed. 105; Chase v. Michigan Tel. 
 Co., 121 Mich. 631, 80 N. W. 717. 
 
 95 Tompkins v. Augusta Southern 
 R. Co., 102 Ga. 436, 30 S. E. 992. 
 In Cox V. Baltimore &c. R. Co., 180 
 
§383 
 
 RAILROADS 
 
 590 
 
 agreed to be conveyed by a constituent company,^" to mam- 
 tain a depot at a certain place as so agreed,®'^ and the like.^®. 
 But, while the contracts of the original companies may be 
 binding upon the corporation formed by their consolidation 
 to the same extent and in the same manner that they were 
 binding upon the original companies respectively, the new com- 
 pany, ordinarily, assumes no greater obligations than rested 
 upon those companies at the time of the consolidation. Thus, 
 in a suit to compel a railroad company formed by consolida- 
 tion to perform a contract made by one of the original com- 
 panies to use the complainant's cars on its entire line of rail- 
 way, and on all roads which it might thereafter control by 
 ownership, lease, or otherwise, the court held that the new 
 company must use the plaintiff's cars upon all roads owned 
 or controlled at the time of the consolidation by the company 
 which had made the contract, but that the contract did not 
 apply to roads acquired after the consolidation."* 
 
 Ind. 495, 103 N. E. 337, 50 L. R. A. 
 (N. S.) 4S3n, it is expressly stated 
 that the act of consolidation involves 
 an implied assumption by the new 
 company of the obligation and lia- 
 bilities of the old companies, but it 
 is held that this rule does not apply 
 where the company is merely a pur- 
 chaser at judicial sale so as to make 
 it liable in a parol contract of em- 
 ployment made by the old company. 
 
 96 Union Pac. R. Co. v. McAlpine, 
 129 U. S. 305, 9 Sup. Ct. 286, 32 
 L. ed. 673. 
 
 97 People v. Louisville &c. R. Co., 
 120 111. 48, 10 N. E. 657. 
 
 98 Boardman v. Lake Shore &c. R. 
 Co., 84 N. Y. 157 ; Sappington v. Lit- 
 tle Rock &c. R. Co., 57 Ark. 23. For 
 many illustrations of liability as to 
 indebtedness and contracts of con- 
 stituent companies, see generally At- 
 lantic &c. R. Co. V. Johnson, 127 Ga. 
 392, 56 S. E. 482, 11 L. R. A. (N. 
 
 S.) 1119 and other cases' cited in 
 note; also Shadford v. Detroit &c. 
 R. Co., 130 Mich. 300, 89 N. W. 960. 
 99 Pullman's Palace Car Co. v. 
 Missouri Pac. R. Co., 115 U. S. 587, 
 6 Sup. Ct. 194, 29 L. ed. 499. 
 The liability of a succeeding 
 corporation for the debts of the old 
 may depend upon the nature of the 
 transaction and be limited by the 
 value or extent of the property re- 
 ceived from the old and many of 
 the courts hold that there is gen- 
 erally a liability for such debts to 
 that extent but no further unless 
 assumed or imposed by statute. In 
 re, Halstead, 204 Fed. 115; Central 
 Imp. Co. V. Cambria Steel Co., 210 
 Fed. 696; Ferguson Wheeler Land, 
 Lumber & Handle Co. v. Good, 112 
 Ark. 260, 165 S. W. 628; Wesco 
 Supply Coke v. El Dorado 
 Light &C. Co., 107 Ark. 424, 155 S. 
 W. 518; Ft. Wayne &c. Trac. Go 
 
591 
 
 CONSOLIDATION 
 
 §384 
 
 § 384 (334). Liability of new company for torts — Extent of 
 liability— Generally. — The consolidat;ed company is generally 
 held liable for the torts of the original companies as well as upon 
 their contracts. ^ Where suit is brought directly against the 
 consolidated company upon a demand against one of its con- 
 stituent corporations^ the fact of the consolidation should be 
 averred in the complaint, declaration, or bill, in order to avoid 
 a variance in the proof. ^ The debts and liabilities may be en- 
 
 V. Kendlesparker, 46 Ind. App. 299, 
 92 N. E. 228; United Zinc Co. v. 
 Harwood, 216 Mass. 474, 103 N. E. 
 1037; Irvine v. New York Edison 
 Co., 207 N. Y. 425, 101 N. E. 3S8, 
 Ann. Cas. 1914C, 441. 
 
 1 Indianapolis &c. R. Co. v. Jones, 
 29 Ind. 465, 95 Am. Dec. 654 (stock 
 killing case) ; Warren v. Mobile &c. 
 R. Co., 49 Ala. 582 (personal in- 
 juries; Zealy v. Birmingham R. 
 Co., 99 Ala. 579, 13 So. 118; Coggin 
 V. Central R. Co., 62 Ga. 685, 35 Am. 
 Rep. 132; Chicago &c. R. Co. v. 
 Moffitt, 75 111. 524; Columbus &c. 
 R. Co. V. Powell, 40 Ind. 2,7 (per- 
 sonal injuries) ; Jeffersonville &c. 
 R. Co. V. Hendricks, 41 Ind. 48 
 (personal injuries) ; Qeveland &c. 
 R. Co. V. Prewitt, 134 Ind. 557, 33 
 N; E. 367, 54 Am. & Eng. R. Cas. 
 198; State v. Baltimore &c. R. Co., 
 77 Md. 489, 26 Atl. 865; New Bed- 
 ford R. Co. V. Old Colony R. Co., 
 120 Mass. 397; Batterson v. Chi- 
 cago &c. R. Co., 53 Mich. 125, 18 
 N. W. 584; Railroad Co. v. Hut- 
 chins, Z7 Ohio St. 282 (conversion) ; 
 Texas &c. R. Co. v. Murphy, 46 
 Tex. 356, 26 Am. Rep. 272; Lang-- 
 horne v. Richmond R. Co., 91 Va. 
 369, 22 S. E. 159. But see Louis- 
 vill &c. R. Co. V. Hughes, 134 
 Ga. 75, 67 S. E. 542; Cotzhau- 
 sen V. H. W. Johns Mfg. Co., 
 
 100 Wis. 473, 76 N. W. 622; Jo- 
 seph V. Southern R. Co., 127 Fed. 
 606. It is the identity of the cor- 
 poration, and not of the name, that 
 determines the liability of a rail- 
 road company for a trespass. De 
 . Lissa V. Missouri R. Co., 36 Mo. 
 App. 706. As to whether liability for 
 torts is included in express assump- 
 tion of indebtedness or liabilities of 
 one company by another in the 
 agreement and just what such an 
 agreement covers, see Luedecke v. 
 Des Moines Cabinet Co., 140 Iowa 
 223, 118 N. W. 456, 32 L. R. A. 
 (N. S.) 616, and cases there cited 
 in note; Billmyer Lumber Co. v. 
 Merchants' Coal &c. Co., 66 W. Va. 
 696, 66 S. E. 1073, 26 L. R. A. (N. 
 S.) 1101, and note reviewing cases. 
 It is held in Cooper v. Utah Light 
 &c. R. Co., 35 Utah 570, 102 Pac. 
 202, that a corporation is not gen-, 
 erally liable for the torts of the cor- 
 poration to which it has succeeded, 
 but is liable under the Utah con- 
 stitution for judgments for personal 
 injuries to employes in its opera- 
 tion where the new company paid 
 for the property and franchise of 
 the old company by issuance of 
 stock. 
 
 2 Indianapolis &c. R. Co. v. Jones, 
 29 Ind. 465, 95 Am. Dec. 654 See 
 also Langhorne v. Richmond City 
 
§384 
 
 RAILROADS 
 
 592 
 
 forced against the consolidated company into which it is merged, 
 without any statute imposing such liability,^ at least to the 
 extent of the property received by it from the old corpora- 
 tion.* Equity will consider the effects of a merged or dis- 
 solved corporation as a trust fund for the payment of cred- 
 itors, into whosesoever hands they may come.^ But it has 
 
 R. Co., 91 Va. 364, 22 S. E. 357 ; Sel- 
 ma &c. R. Co. v. Harbin, 40 Ga. 707; 
 Marquette Ssc. R. Co. v. Lan^ton, 32 
 Mich. 251; note in 89 Am. St. 647, 
 648, as to suing the consolidated 
 company directly and as to abate- 
 ment and substitution. A variance 
 arising from such omission cannot 
 be taken advantage of for the first 
 time in an appellate court. Indian- 
 apolis &c. R. Co. V. Jones, 29 Ind. 
 46S, 95 Am. Dec. 654. 
 
 3 The consolidated company, it is 
 said, should be deemed to be merely 
 the same as each of its constituents, 
 their existence continued in it, un- 
 der the new form and name, their 
 liabilities still existing as before, 
 and capable of enforcement against 
 the new company in the same way 
 as if no change had occurred in its 
 organization or name. Indianapolis 
 &G, R. Co. V. Jones, 29 Ind. 465, 29 
 Am. Dec. 654; Columbus &c. R. Co. 
 V. Powell, 40 Ind. 37; Louisville &c. 
 R. Co. V. Boney, 117 Ind. SOI, 20 
 N. E. 432, 3 L. R. A. 435; Thomp- 
 son V. Abbott, 61 Mo. 176; Miller 
 V. Lancaster, 5 Coldw. (Tenn.) 514. 
 There can be no loss of identity of 
 the original companies in the con- 
 solidation to the prejudice of the 
 rights of prior creditors, or the de- 
 struction of prior liens. Hamlin v. 
 Jerrard, 72 Maine 62 ; Central R. 
 &c. Co. V. Georgia, 92 U, S. 665, 23 
 L. ed. 757. Where one railroad com- 
 
 pany terminates its existence by be- 
 ing consolidated with another, and 
 no arrangements are made respect- 
 ing the property and liabilities of 
 the first company, the consolidated 
 company will succeed to all the prop- 
 erty and be answerable for all the 
 liabilities of the consolidating com- 
 panies. Louisville &c. R. Co. v. 
 Baney, 117 Ind. 501, 20 N. E. 432, 
 3 L. R. A. 435; Atlantic &c. R. Go. 
 V. Johnson, 127 Ga. 392, 56 S. E. 
 482. 
 
 * Tompkins v. Augusta Southern 
 R. Co., 102 Ga. 436, 30 S. E. 992; 
 Brum v. Merchants' Mut. Ins. Co. 
 16 Fed. 140; Harrison v. Arkansas 
 Valley R. Co., 4 McCrary (U. S.) 
 264, 13 Fed. 522; United States Cap- 
 sule Co. V. Isaacs, 23 Ind. App. 
 533, 55 N. E. 832; Morrison v. Am- 
 erican Snuff Co., 79 Miss. 330, 30 
 So. 723, 89 Am. St. 598. And prob- 
 ably even this limitation does not 
 ordinarily apply where there is a 
 strict consolidation. Atlantic &c. R. 
 Co. V. Johnson, 127 Ga 392, 56 S. 
 E. 482, 11 L, R. A. (N. S.) 1119. 
 See ante, § 379. 
 
 B Powell V. North Missouri R. Co., 
 42 Mo. 63. The creditors have not 
 ■only a remedy at law against the 
 new company, but also may enforce 
 their claims in equity against the 
 assets of the original company; for 
 it is not Qompetent for the legis- 
 lature by law to compel the credit- 
 
593 
 
 CONSOLIDATION 
 
 §385' 
 
 been held that where the act of consolidation merely raerg'es 
 the identity of one railroad company into that of another 
 which has already become the owner of its property and fran- 
 chises freed from liens, this rule does not apply ; for the foun- 
 dation of the liability of a consolidated corporation for the 
 debts and liabilities of the constituent corporations must rest, 
 it is said, upon an agreement either express or implied from 
 its further act in taking possession of all means of meetj-ng 
 those liabilities ; and no assumption of liability can be im- 
 plied from a consolidation by which no assets pass to the cor- 
 poration sought to be charged.® 
 
 § 385. Constituent companies are usually dissolved — When 
 not. — There is, it seems, a clear distinction between a con- 
 solidation whereby the several corporations are merged into 
 a new one and the union or combination of two or more cor- 
 porations by dissolving all but one into which the others are 
 mergedJ And the fact that the company absorbing the others 
 
 ors of a company to accept the lia- 
 bility of a new company formed of 
 the stockholders of their debtor 
 company and others, in substitution 
 for their original rights. Har- 
 rison V. Arkansas Valley R. Co., 
 4 McCrary (U. S.) 264, 13 Fed. 522 ; 
 Montgom.ery &c. R. Co. v. Branch, 
 59 Ala. 139; Barksdale v. Finney, 14 
 Grat. (Va.) 338. See also where one 
 company takes over as^ owner all 
 the property and assets of another 
 without compensation except issu- 
 ance of stock in new company. Chi- 
 cago &c. R. Co. V. Taylor, 183 Ind. 
 240, 108 N. E. 1. In some juris- 
 dictions it is held that the new com- 
 pany, in the absence of a statute 
 or contract to the contrary, does not 
 assume the debts and liabilities of 
 the old, and is liable only to the 
 extent of the property which it has 
 received from the debtor company. 
 
 Prouty V. Lake Shore R. Co., 52' N. 
 Y. 363; Boardraan v. Lake Shore 
 &c. R. Co., 84 N. Y. 157; Shaw v. 
 Norfolk County R. Co., 16 Gray 
 (Mass.) 407; Shackelford v. Missis- 
 sippi Cent. R. Co., 52 Miss. 159. 
 
 Houston &c. R. Coi v. Shirley, 
 54 Tex. 125. See also Hatcher v. 
 Toledo &c. R. Co., 62 111. 477, where, 
 the debts of the old company, having 
 been wiped out by foreclosure and 
 sale, were held not to be fastened 
 upon the new by a subsequent stat- 
 ute making consolidated companies 
 liable for the debts of the constitu- 
 ent companies. And compare ante, 
 §379. 
 
 T See United States v. Southerni 
 Pac. R. Co., 46 Fed. 683; Tomlinson 
 V. Branch, 15 Wall. (U. S.) 4tjO, 21 
 L. ed. 189; Central R. Co. v. Geor- 
 gia, 92 U. S. 665, 23 L. ed. 757; 
 Philadelphia &c. R. Co. v. Mary- 
 
I 385 
 
 RAILROADS 
 
 594 
 
 is given a new name and enlarged powers will not, necessa- 
 rily, affect its identity, but a mortgage upon its property, to- 
 gether with all future acquisitions executed before such other 
 ■companies were absorbed or merged into it will, it has been 
 held, attach to the entire line of road as it exists after the 
 merger.* Ordinarily, the effect of a consolidation is to dis- 
 solve the old companies and form a new one;^ but this result 
 does not always follow from a so-called consolidation, for it 
 depends largely upon the terms of the consolidation and the 
 legislative intent as manifested in the statute under which the 
 consolidation takes place, i" and the constituent companies usu- 
 ally have at least a qualified existence for the purpose of wind- 
 
 land, 10 How. (U. S.) 376, 13 L.. 
 ed. 461 ; Citizens' Street R. Co. v. 
 Memphis, S3 Fed. 715; Vicksburg 
 &c. Tel. Co. V. Citizens Tel. Co., 79 
 Miss. 341, 30 So. 72S, 89 Am. St. 656; 
 ;n<rte in 89 Am. St. 607-609; Lee v, 
 Atlantic &c. R. Co., ISO Fed. 775, 
 :787 (citing text) ; note in 11 L. R. 
 A. (N. S.) 1119. 
 
 -s Meyer v. Johnston, 64 Ala. 603, 
 8 Am. & Eng. R. Cas. 584. But 
 compare Metropolitan Trust Co. v. 
 Chicago &c. R. Co., 253 Fed. 868. 
 
 9 Railroad Co. v. Georgia, 98 U. S. 
 359, 363, 25 L. ed. 185; Yazoo &c. 
 R. Co. V. Adams, 180 U. S. 1, 21 
 Sup. Ct. 240, 45 L. ed. 395 (re- 
 viewing the earlier cases in. the Su- 
 preme Court of the United States) ; 
 Keokuk &c. R. Co. v. Missouri, 152 
 U. S. 301, 14 Sup. Ct. 592, 28 L. 
 ed. 450; Clearwater v. Meredith, 1 
 Wall. (U. S.) 25, 17 L. ed. 604. 
 Shields v. Ohio, 95 U. S. 319, 325, 
 24 L. ed. 357; St. Louis &c. R. Co. 
 V. Berry, 41 Ark. 509; McMahan v. 
 Morrison, 16 Ind. 172, 79 Am. Dec 
 418, and note; Fee v. New Orleans 
 &c. Co., 35 La. Ann. 413; Miner v. 
 New York &c. R. Co., 123 N. Y. 
 
 242; Cheraw &c. R. Co. v. Commis- 
 sioners, 88 N. Car. 519; Ashley v. 
 Ryan, 49 Ohio 504, 31 N. E. 721, 
 725, 726; note to State v. Chicago 
 &c. R. Co., 2 L. R. A. 564; note to 
 Louisville &c. R. Co. v. Boney, 3 
 L. R. A. 435 See also Lester v. 
 Georgia &c. R. Co., 90 Ga. 802, 17 
 S. E. 113; Chicago &c. R. Co. v. 
 Ashling, 160 111. 373, 43 N. E. 373; 
 Scheidel Coil Co. v. Rose, 242 111. 
 484, 90 N. E. 221 ; Louisville &c. R. 
 Co. v. Utz, 133 Ind. 265, 32 N. E. 
 881; State v. Leueur, 145 Mo. 322, 
 4Q S. W. 1075; Charlotte &c. R. Co. 
 V. Gibbes, 27 S. Car. 385, 4 S. E. 
 49. 
 
 10 Wabash &c. R. Co. v. Ham, 114 
 U. S. 587, 595, 5 Sup. Ct. 1081, 29 
 L. ed. 235; Central R. Co. v. Geor- 
 gia, 92 U. S. 665, 670, 23 L. ed. 757. 
 See also People v. New York &c 
 R. Co., 129 N. Y. 474, 29 N. E. 959, 
 15 L. R. A. 82; Evans v. Inter- 
 state Rapid Transit R. Co., 106 Mo. 
 594, 17 S. W. 489; Boston &c. R. 
 Go. V. New York &c. R. Co., 13 
 R. I. 260. See also ante, § 373, note 
 26. 
 
595 CONSOLIDATION § 385 
 
 ing up their affairs and preserving the, rights of their creditors.i^ 
 "The term "consolidation" is an elastic one and may include a, 
 union of two or more corporations into a new one with a dif- 
 ferent name, with or without extinguishing the constituent cor- 
 porations, or the merger of two or more corporations into an- 
 other existing corporation under the name of the latter.^^ There 
 is, as we have already said, a distinction between these modes 
 of consolidation. In the latter case, if the merger is complete,, 
 it is evident that the one corporation is extinguished, unless 
 kept alive for certain purposes, while it is equally clear that the 
 other, in which it is merged, is not dissolved. ^^ In other words, 
 the legislative intention in such a case would seem to be to unite 
 the two companies under the old charter of one of them, while 
 statutes authorizing the consolidation of two or more corpora.- 
 tions in the ordinary way are generally construed as authQrfe^- 
 ing the formation of a new and distinct corporation, thus ex- 
 tinguishing all the constituent companies unless a contrary in- 
 tention is manifest. It all depends ordinarily, however, upon the ■ 
 opinion of the legislature, as shown in the statute authorizing 
 the consolidation, and the agreement of consolidation in pur- 
 suance of the statute.!* "There is nothing in the nature of tte 
 
 11 Edison Electric Light Co. v. Mo. R. Co., 42 Mo. 63, however, it 
 New Haven &c. Co., 35 Fed. 233 ; is said that a union by which several 
 Eaton &c. R. Co. v. Hunt, 20 Ind. companies are merged into and con- 
 457; Compton v. Wabash &c. R. Co., stituted one body, corporate under 
 45 Ohio St. 592, 16 N. E. 110, 117; 5 the name of one of them, and all 
 Thomp. Corp. (2nd. ed.), §6041. And are continued in existence, is a con- 
 see Mansfield &c. R. Co. v. Brown, 26 solidation proper, while it is not a 
 Ohio St. 223; Day v. Worcester &c. mere consolidation where one is ex- 
 R. Co., 151 Mass. 302, 23 N. E. .824; tinguished and the other continued 
 Spence v. Mobile &c. R. Co., 79 Ala. in existence. 
 
 576; Selma &c. R. Co. v. Harbin, is Central R. &c. Oo. v. Georgia, 
 
 40 Ga. 706. See ante, §384, note 92 U. S. 665, 23 L. ed. 757; Meyer 
 
 2, also Atlantic &c. R. Co. v. Cone, v. Johnston, 64 Ala. 603, 8 Am. & 
 
 S3 Fla. 400, 43 So. 514, 521 (citing Eng. R. Cas. 584. 
 
 text). 1* See Crawfordsville &c. Co. v. 
 
 12 Text quoted with approval in Fletcher, 104 Ind. 97, 2 N. E. 243; 
 
 Pingree v. Michigan Cent. R. Co., Central R. &c. Co. v. Georgia, 92 
 
 118 Mich. 314, 76 N. W. 635, 643, U. S. 665, 23 L. ed. 757; Meyer v. 
 
 S3 L. R. A. 274. In Powell v. North Johnston, 64 Ala. 603 ; note in 52 
 
§ 3SC RAILROADS 596 
 
 subject-matter, nor of the process of consolidation, that requires 
 the extinction of the old corporations to make the new. It may 
 be done, or it may not.''^'* So far at least as domestic corpora- 
 tions are concerned, it is for the state to say upon what terms 
 they may consolidate and it may thus determine the effect of 
 the consolidation. As said in a recent case, "It is perfectly com- 
 petent for the legislature, in consolidation acts, to declare what 
 shall be the status of the domestic corporations which shall avail 
 themselves of their provisions, and also of the consolidated com- 
 pany. Whether the new consolidation shall create a mere busi- 
 ness union between the constituent companies, leaving them 
 in existence as corporations, or whether it shall operate as a stir- 
 render of the corporate franchises and an extinguishment of their 
 corporate existence, and as creating a new corporation combin- 
 ing to the extent permitted by the act, the powers of the cor- 
 porations out of which it is formed, and vesting in it the proper- 
 ty of the constituent companies, depends upon the legislative in- 
 tention."io 
 
 § 386 (33Sa). Duration of life and franchises of consolidated 
 company. — The statute and agreement of consolidation gener- 
 ally fix the duration of the life of the consolidated company, but 
 a question of some difficulty arises when the law is silent and 
 does not speak upon the subject. In one case it was said that 
 where the law is silent the life of the new consolidated com- 
 
 Am. St. 369; Chicago &c. R. Co. v. properly used as applying to cases in 
 
 Ashling, 160 111. 373, 43 N. E. 373, which the constituent companies are 
 
 375, 376. But consolidation iu the dissolved or extinguished as sepa- 
 
 strict and narfowest sense usually rate corporations, 
 operates to create a new corporation 16 People v. New York &c. R. Co., 
 
 and extinguish the old ones except 129 N. Y. 474, 482, 29 N. E. 9S9, 
 
 as they may be kept alive in a IS L. R.-A. 82. To the same effect 
 
 limited sense or the purpose of is Day v. Worcester &c. R. Co., 151 
 
 winding up or under statutory pro- Mass. 302, 23 N. E. 824. See also 
 
 vision for the benefit of creditors or Shrewsbury &c. R. Co. v. Stour 
 
 the like. Valley R. Co., 2 DeG., M. & G. 866; 
 
 15 Citizens' St. R. Co. v. Memphis, Parkinson v. West End St. R. Co., 
 
 53 Fed. 715, 718. But in strict- 173 Mass. 446, S3 N. E. 891. 
 ness, we think the term is more 
 
597 CONSOLIDATION § 387 
 
 pany cannot exceed that of the shorter-liyed of the constituent 
 companies, and it was held that where the charter of one expired 
 by limitation on the same day that the other began there could 
 be no consolidation under a statute providing for consolidations 
 between existing corporations. ^^ But this decision, as to the 
 latter point, was reversed by the Supreme Court of the United 
 States, 1® which did not, however, consider the other question. 
 The fallacy of the reasoning in the first case cited lies, it is said, 
 "in the assumption that the old corporations have anything to 
 do with granting a life to the new corporation."!" At all events, 
 if, as is generally the case and is generally held, a new and dis- 
 tinct corporation is created, which owes its life to the existing 
 law and act of consolidation thereunder, and that existing law, 
 while not expressly stating in particular what shall be the dura- 
 tion of the life of consolidated companies, authorizes new com- 
 panies to be created for a certain term, the better view would 
 seem to be that the new consolidated company may be created 
 and organized for that term, notwithstanding the life or lives 
 one or both of the constituent companies would have terminated 
 before that time.^" 
 
 § 387 (336). Effect of consolidation upon liens. — A mortgage 
 placed upon the propert}^ by the original corporation remains a 
 lien upon it in the hands of the consolidated company, *i and 
 
 I'New Orleans Gas Light Co. v. Cleveland .&c. Co., 201 U. S. S29, 
 
 Louisiana &c. Co., 11 Fed. 277. 26 Sup. Ct. 513, 50 L. ed. 854. 
 
 18 New Orleans Gas Light Co. v. 21 Hazard v. Vermont &c. R. Co., 
 Louisiana &c. Co., 115 U. S. 650, 17 Fed. 753; Mississippi Valley Co. 
 6 Sup. Ct. 252, 29 L. ed. 516. v. Chicago &c. R. Co., 58 Miss. 846; 
 
 19 See note in 89 Am. St. 615. Morrison v. American Snuff Co., 79 
 
 20 See Market St. R. Co. v. Hell- Miss. 330, 30 So. 723, 89 Am. St. 
 man, 109 Cal. 571, 42 Pac. 225; 598; Rutten v. Union Pac. R. Co., 
 Charity Hospital v. New Orleans 17 Fed. 480; Compton v. Wabash 
 &c. Co., 40 La. Ann. 382, 4 So. 433 ; &c. Co., 45 Ohio St. S92, 16 N. E. 
 Rio Grande &c. R. Co. v.. Telluride 110. But see Wabash &c. R. Co. v. 
 &c. Co., 16 Utah 125, 51 Pac. 146. Ham, 114 U. S. 587, 5 Sup. Ct. 
 And see generally Blair v. Chicago 1081, 29 L. Ed. 235. And the con- 
 &c. R. Co., 201 U. S. 400, 26 Sup. solidated company will not be per- 
 Ct. 427, 50 L. ed. 801 ; Cleveland v. mitted to aver ignorance of such 
 
§387 
 
 RAILROADS 
 
 598 
 
 where the mortgage so provides, it will cover all acquisitions of 
 the consolidated company which become a part of the property 
 to which it originally attached. ^^ ii has been held, however, 
 that a mortgage executed by a consolidated corporation will take 
 priority over unsecured debts of one of the consolidating com- 
 panies, contracted while the company possessed the power to 
 enter into an agreemet of consolidation, and transfer all of its 
 assets and liabilities to the new company thereby formed.^* 
 Where a person purchases unsecured bonds of a railroad corn- 
 
 mortgage though unrecorded. Mis- 
 sissippi &c. R. Co. V. Chicago &c. 
 R. Co., 58 Miss. 846; The Key City, 
 14 Wall. (U. S.) 653, 20 L. ed. 
 896; Cordova Coal Co. v. Long, 91 
 Ala. 538, 8 So. 865; Eaton &c. R. Co. 
 V. Hunt, 20 Ind. 457. See also 
 North Carolina R. Co. v. Dreur, 3 
 Woods (U. S.) 691. A railroad 
 company with notice of plaintiff's 
 lien on the road entered into a 
 consolidation with another company. 
 The property 'oi the consolidated 
 company was leased to a canal com- 
 pany. Held, that neither the consoli- 
 dated company nor its lessee, the 
 canal company, was, in respect to 
 plaintiff's lien, a purchaser for value 
 without notice. Vilas v. Page, 106 
 N. Y. 439, 13 N. E. 743. 
 
 32 Central R. &c. Co. v. Georgia, 
 92 U. S. 665, 23 L. ed. 757, 98 U. 
 S. 359, 25 L. ed. 185; Compton v. 
 Jesup, 68 Fed. 263 ; Hamlin v. Jer- 
 rard, 72 Maine 62; Hamlin v. Euro- 
 pean &c. R. Co., 72 Maine 83. The 
 lien of a mortgage having the usual 
 provisions as to after-acquired prop- 
 erty does not, ordinarily, ion the con- 
 solidation of the mortgager com- 
 pany with another, attach to 
 ■property contributed by such latter 
 company or afterwards acquired by 
 
 the consolidated company. Metro- 
 politan Trust Co. v. Chicago &c. R. 
 Co., 253 Fed. 868. 
 
 23 Wabash &c. R. Co. v. Ham, 114 
 U. S. 587, 5 Sup. Ct. 1081, 29 L. ed. 
 235; Tysen v Wabash &c. R. Co., 
 15 Fed. 763; Indianapolis &c. R. Co. 
 V. Jones, 29 Ind. 465, 95 Am. Dec. 
 654. In the first case just cited the 
 old bondholders were given an oppor- 
 tunity to exchange their bonds for 
 bonds secured by a mortgage of the 
 consolidated company, but failed to 
 do so for six years, after which 
 the mortgage in question was exe- 
 cuted. See Blair v. St. Louis &c. R. 
 Co., 24 Fed. 148. But where a con- 
 solidated company stipulated that 
 certain bonds of the old company 
 should be protected by the new com- 
 pany, it was held that the holders 
 of these bonds acquired the right 
 to require the 'property of the com- 
 pany issuing them to be applied to 
 their payment in preference to mort- 
 gagees of the consolidated company. 
 Compton V. Wabash &c. R. Co., 45 
 Ohio St. 592. This case grew out 
 of the same transaction as the first 
 case above cited and the supreme 
 court of Ohio refused to follow the 
 Supreme Court of the United States. 
 
599 CONSOLIDATION § 388 
 
 pany which is authorized by law to consolidate with other com- 
 panies he may be held to have made the purchase in contemplar 
 tion of a possible consolidation ;** but liens created by the con- 
 stituent companies and existing at the time of the consolidation 
 are superior to those of the same class created by the consoli- 
 dated company. 25 So, where the act of consolidation provides 
 that the old companies shall remain in existence to preserve the 
 rights of creditors, they are not relieved from liability on pre- 
 viously issued bonds by reason of the fact that their property 
 has passed into the hands of the consolidated company. ^^ It 
 has been held, however, that where several railroad companies 
 are consolidated the bonded indebtedness of each, although 
 secured by mortgage on its property and franchises, ri^ay be 
 enforced against the new corporation, under a statute providing 
 that "all debts and liabilities incurred by either of said corpo- 
 rations, except mortgages, shall thenceforth attach to such new 
 corporation. "^''^ 
 
 § 388 (337). De facto consolidation — Estoppel — Liability of 
 constituent companies where consolidation is set aside. — Rail- 
 
 24 Tysen v. Wabash &c. R. Oo., 15 consolidated company that the old! 
 Fed. 763; Montgomery &c. Railroad shall be liable has been held not to 
 Co. V. Branch, 59 Ala. 139. But see be binding upon creditors of the 
 Wabash &c. R. Co. v. Ham, 114 U. old without their consent. Smith v. 
 S. 587, S Sup. Ct. 1081, 29 L. ed. Los Angeles &c. R. Co., 98 Cal. 210-,. 
 235; Polhemus v. Fitchburg R. Co., 33 Pac. 53. 
 
 123 N. Y. 502, 26 N. E. 31. 2f Polhemus v. Fitchburg R. Co., 
 
 25 Hazard v. Vermont &c. R. Co., 123 N. Y. 502, 26 N. E. 31. The 
 17 Fed. 753; Spence v. Mobile &c. court held that the words "except 
 R. Co., 79 Ala. 576; Mobile &c. mortgages," confined the mortgage 
 R. Co. V. Gilmer, 85 Ala. 422, S So. lien to the property owned by the 
 138 ; Shackelford v. Mississippi company which had executed the 
 &c. R. Co., 52 Miss. 159; Pittsburgh mortgage prior to the c^msolidation 
 &c. R. Ca V. Lynde, 55 Ohio St. 23, without affecting the other property 
 44 N. E. 596, 5 Thomp. Corp. (2nd. of the consolidated company, but 
 ed.), §6087. did not prevent the latter from be- 
 
 26 Gale V. Troy &c. R. Co., 51 Hun coming liable for the debt tof the old 
 (N. Y.) 470, 4 N. Y. 295; Indiana- company secured by such mortgage, 
 polis &Cr R. Co. V. Jones, 29 Ind. See also Utica Nat. Brewing Co.,, 
 465, 95 Am. Dec. 654; Jones Corp. Matter of, 154 N. Y. 268, 48 N. E: 
 Bonds & Mtg. §362. An agreement 521. 
 
 between the old companies and the 
 
§ 388 RAILROADS 600 
 
 road companies which, being authorized by law to consolidate 
 their lives, enter into a de facto consolidation, and transact busi- 
 ness in the name of the consolidated company, will be estopped 
 to deny the validity of the consolidation in a suit to enforce 
 liabilities incurred in the transaction of such business and upon 
 the faith of their legal existence as a consolidated company.^* 
 This rule has been said to be applicable where business within 
 the ordinary powers of the constituent companies was trans- 
 acted by a company into which they had formed themselves 
 without legislative authority. ^^ This decision rests upon the 
 theory that the companies, having power to do the acts, could 
 not deny a liability mcurred thereby upon the ground that they 
 exceeded their charter powers in selecting the means by which 
 the acts should be done. Possibly it may be upheld on this 
 ground, but, in any event, it is an extreme application of the 
 doctrine. And, where there is no authority to consolidate, a 
 direct attack may be made by quo warranto proceedings by 
 the state,^" but it has been held that a suit to enjoin an ultra 
 vires consolidation will also lie.^^ Where an ineffectual attempt 
 is made to eflect a consolidation, and the attempted consolida- 
 
 28 Racine &c. R. Co. v. Farmers' ply with the statutes. Ckvetand &c. 
 
 &c. Co., 49 III. 331, 347, 95 Am. R. Co. v. Feight, 41 Ind. App. 416, 
 
 Dec. S9S ; Southern Kans. &c. R. Co. 84 N. E. IS. 
 
 V. Towner, 41 Kans. 12, 21 Pac. 221 ; 29 Bissell v. Michigan Southern 
 
 Callender v. Painsville &c. R. Co., &c. R. Co., 22 N. Y. 2S8. 
 
 11 Ohio St. Slt6; Tagart v. Northern so Distilling &c. Co. v. People, 156 
 
 Central R. Co., 29 Md. 557; Rey- 111. 448, 41 N. E. 188; State v. Beck, 
 
 nolds V. Myers, 51 Vt. 444; Farmers' 81 Ind. 500; People v. North River 
 
 &c. Co. V. Toledo &c. R. Co., 67 &c. Co., 121 N; Y. 582, 24 N. E. 
 
 Fed. 49, 55. Ante, § 372 ; S Thon^. 834, 9 L. R. A. 33, 18 Am. St. 843 ; 
 
 Corp. (2nd. ed.), §6064. See also East Line &c. R. Co. v. State, 75 
 
 Greene v. Michigan United States Tex. 434, 12 S. W. 690. 
 
 R. Co., 159 Mich, 58, 123 N. W. si Trust Company of Georgia v. 
 
 607. A de facto consolidated cor- State, 109 Ga. 736, 35 S. E. 323, 
 
 poration results from a bona fide 48 L. R. A. 520; Louisville &c. R. 
 
 attempt to consolidate under a Co. v. Commonwealth, 97 Ky. 675, 
 
 statute authorizing it and actual 31 S. W. 476. See also Bohmer 
 
 exercise of corporate functions v. Haffen, 161 N. Y. 390, 55 N. E. 
 
 thereunder, notwithstanding some 1047 (suit by taxpayer), 
 irregularities in the attempt to com- 
 
601 
 
 CONSOLIDATION 
 
 §389 
 
 tion is afterward tet aside by the court as being null and void, it 
 has been held that the several companies are individually liable 
 for liabilities contracted by the consolidated company ; and exe- 
 cution may be had against them upon a judgment recovered 
 against the consolidated company before it was judicially dis- 
 solved.^^ ' 
 
 §389 (338). Effect of consolidation upon pending suits. — It 
 
 is sometimes provided by statttte that pending suits against a cor- 
 poration shall not be affected by its consolidation with other 
 companies.^* And, even in the absence of such a provision, the 
 action of the state in granting authority to consolidate and the 
 action of the corporation in effecting a consolidation tinder that 
 authority cannot affect the rights of the plaintiff in a suit pend- 
 ing against it. The corporation cannot, by its own act, defeat 
 the right of persons to maintain suits actually begun. ^* The 
 
 82 Ketcham v. Madison &c. R. Co., 
 20 Ijid. 260. Where two competing 
 railway lines executed an illegal 
 consolidation, and defendant has de- 
 rived all the benefits arising from 
 the contract of consolidation, its el- 
 legality is no defense to a bill in 
 equity for an accounting and a re- 
 turn of the consideration to plaintiff 
 whose property passed to defendant 
 under the contract. Manchester &c. 
 R. V. Concord R. Co., 66 N. H. 100, 
 20 Atl. 383, 9 L. R. A. 689, 49 Am. 
 St. 582, 47 Am. & Eng. R. Cas. 
 359. 
 
 33 Baltimore &c. R. Co. v. Mussel- 
 man, 2 Grant's Cas. (Pa.) 348; 
 Shackelford v. Mississippi &c. R. 
 Co., 52 Miss. 159; East Tennessee 
 &c. R. Co. V. Evans, 6 Heisk. 
 (Tenn.) 607. Under a New York 
 statute, which provided that actions 
 pending against either of the con- 
 solidating companies should not 
 abate, but might be conducted to 
 
 final judgment in the name of the 
 existing company, and the rights of 
 creditors preserved unimpaired, and 
 the corporations continued in exist- 
 ence to preserve the name, it was 
 held that an action could be brought 
 after the consolidation against one 
 of the consolidating companies on 
 its bonds previously executed. Gale 
 V. Troy &c. Co., 51 Hun 470, 4 
 N. Y. S. 295. 
 
 3* Shackelford v. Mississippi &c. 
 R. Co., 52 Miss. 159. See also Kin- 
 ion V. Kansas City &c. R. Co., 39 
 Mo. App. 574; Atlantic &c. R. Co. 
 V. Cone, 53 Fla. 1017, 43 So. 514, 
 521 (citing text) ; Evans v. Inter- 
 state &c. R. Co., 106 Mo. 594, 17 
 S. W: 489. It- is no defense that de- 
 fendant has no property, but that 
 the property it formerly possessed 
 had vested in the new company. 
 Gale V. Troy &c. R. Co., 51 Hun 470, 
 4 N. Y. S. 295. 
 
§389 
 
 RAILROADS 
 
 602 
 
 identity of the old corporation may be considered, in some juris- 
 dictions, at least, as continued for the purposes of the suit.^^ But 
 it has been held in other jurisdictions that the new company 
 should be made a party to the suit by substitution, and that all 
 proceedings against the original company after consolidation 
 without bringing the consolidated company into court are void.^** 
 Where such a substitution is made it has been held that the 
 substituted defendant may treat the pleadings filed by the orig- 
 inal defendant as its own and avail itself of the exceptions re- 
 served by the original defendant before the substitution.^^ There 
 is conflict among the authorities as to whether an action at law 
 can be instituted against the consolidated company after the 
 consolidation. Some of the courts hold that it is only liable to 
 
 35 Shackelford v, Mississippi &c. 
 R. Co., 52 Miss. 159; Baltimore &c. 
 R. Co. V. Musselman, 2 Grant Cas. 
 (Pa.) 348; East Tennessee &c. R. 
 Co. V. Evans, 6 Heisk. (Tenn.) 607. 
 But see Kansas &c. R. Co. v. Smith, 
 40 Kans. 192, 19 Pac. 636. See also 
 Birmingham R. Co. v. Enslen, 144 
 Ala. 343, 39 So. 74; Solomonocich 
 V. Denver &c. Tramway Co., 39 Colo. 
 282, 89 Pac. 57; Calvert &c. R. Co. 
 V. Driskill, 31 Tex. Civ. App. 200, 
 71 S. W. 997. 
 
 36 Selma &c. R. Co. v. Harbin, 40 
 Ga. 706; Kansas City &c. R. Co. v. 
 Way, 60 Kans. 856, 56 Pac. 78; 
 Prouty v. Lake Shore &c. R. Co., 
 52 N. Y. 363. See also note in 89 
 Am. St; 648; Cunkel v. Interstate 
 R. Co., 54 Kans. 194, 40 Pac. 184. 
 But compare Kinion v. Kansas City 
 &c. R. Co., 39 Mo. App. 382; India- 
 napolis &c. R. Go. v. Jones, 29 Ind. 
 465, 95 Am. Dec. 654; Indianola 
 R. Co. V. Fryer, 56 Tex. 609. A rail- 
 road company which has consoli- 
 dated with other railroad companies 
 under a new name ceases to exist 
 as a corporation, and a suit by 
 
 or against such railroad company 
 before consolidation, cannot after- 
 wards be prosecuted by or against 
 it or in its original name. Kansas 
 &c. R. Co.. V. Smith, 40 Kans. 192, 
 19 Pac. 636. ' Under the Missouri 
 statute, which provides that the 
 consolidated company succeeds to 
 the liabilities of the consolidating 
 corporations where such a' consoli- 
 dation takes place pending a suit 
 against one of the consolidating 
 companies, the complaint may be 
 amended by substituting the consol- 
 idated company as defendant, and 
 judgment may be entered ' against it 
 without further notice to it. Kinion 
 V. Kansas City &c. R. Co., 39 Mo; 
 App. 574. It has been held that 
 judgment against the Consolidated 
 company on a claim against a con- 
 stituent company, afterwards dis- 
 solved, may be enforced against the 
 property which the latter received 
 and held from both of the constitu- 
 ent companies. Ketchara v. Madison 
 &c. R. Co., 20 Ind. 260. ■ 
 
 37 Louisville &c. R. Co. v. Utz, 
 133 Ind. 265, 32 N. E. 881. 
 
603 
 
 CONSOLIDATION 
 
 §390 
 
 the extent of the property received from the constituent com- 
 pany, against which the liability existed, and that it can only 
 be reached by suit in equity,^* but the better rule seems to be 
 that ain action at law can be maintained against the consoli- 
 dated company for the prior torts or debts of the constituent 
 companies, for which it is made liable under the statute or agree- 
 ment of consolidation.** It has been held, however, that even 
 where an action might have been maintained against either the 
 constituent company committing a tort or against the consoli- 
 dated company, at the election of the plaintiff, he cannot sue 
 both in one action.*" 
 
 §390 (339). Consolidation with foreign corporations. — The 
 
 legislature of a state may authorize corporations of that state to 
 consolidate with those of other states.''^ Railroads of other states 
 
 38 See ante, §384. 
 
 39 Langhorne v; Richmond R. Co., 
 91 Va. 369, 22 S. E. 159, citing 1 
 Thomp. Corp., §§372, 39S; S 
 Thomp. Corp. (2nd. ed.), §6104; 
 Warren v. Mobile &c. R. Co., 
 49 Ala. 582; Montgomery &c. R. 
 Co. V. Boring, 51 Ga. 582; Colum- 
 bus &c. R. Co. V. Skidmore, 69 111. 
 566; Arbuckle v. Illinois' &c, R. Co., 
 81 111. 429; Berry v. Kansas City 
 &c. R. Co., 52 Kans. 774, 36 Pac. 
 724, 39 Am. St. 381; State v. Balti- 
 more &c. R. Co., 11 Md. 189, 26 
 Atl. 865 ; New Bedford R. Co. v. 
 Old Colony R. Co., 120 Mass. 397; 
 Thompson v. Abbott, 61 Mo. 176; 
 Houston &c. R. Co. v. Shirley, 54 
 Tex. 125. See also ante, §384, and 
 note to Austin v. Tecumseh Nat. 
 Bank, 59 Am. St. 551. The right 
 to bring an action at law against the 
 consolidated company is placed up- 
 on various grounds. It avoids cir- 
 cuity of action, and the necessary 
 privity is created, according to some 
 
 of the decisions, by the statiite and 
 consolidation thereunder, or, accord- 
 ing to others, the right to maintain 
 such an action may be supported 
 upon the theory that the old cbrpo- 
 rations are continued in existence 
 in the new for the purpose of en- 
 forcing such liability. 
 
 40 Langhorne v. Richmond R. Co., 
 91 Va. 369, 22 S. E. 159. 
 
 41 Chicago &c. R. Co. v. Lake 
 Shore &c. R. Co., 5 Fed. 19; Peik 
 v. Chicago &c. R. Co., 94 U. S. 164, 
 24 L. ed. 97; Maine Central R. Co. 
 v. Maine, 96 U. S. 499, 24 L. ed. 836; 
 Lousiville &c. R. Co. v. Kentucky, 
 161 U. S. 677, 16 Sup. Ct. 714, 40 
 L. ed. 849; Bishop v. Brainerd, 28 
 Conn. 289; Ohio &c. R. Co. v. Web- 
 er, 96 111. 443; Ellis v. Boston &c. 
 R. Co., 107 Mass. 1; Boardman v. 
 Lake Shore &c. R. Co., 84 N. Y. 
 157; Richardson v. Vermont &c. R. 
 Oo., 44 Vt. 613. But a state may of 
 course, permit a railroad of another 
 state to acquire the property and 
 
§390 
 
 RAILROADS 
 
 604 
 
 are generally permitted to consolidate with roads within the 
 state upon the same terms as domestic corporations, if the 
 laws of such states also authorize the consolidation.** But the 
 new company so formed is a domestic corporation, in each state 
 within which its property lies, so far as the ownership and use 
 of such property is concerned,** and it is subject to the juris- 
 diction of the courts of the several states, so far as its property 
 and the operation of its road in them respectively is concerned.*' 
 
 franchises of domestic corporations 
 and to operate their roads by other 
 means than consolidation. Copeland 
 V. Memphis &c. R. Co., 3 Woods 
 (U. S.) 651, Fed. Cas. No. 3209. A 
 statute may be so drawn as to au- 
 thorize the consolidation of only do- 
 mestic and foreign corporations and 
 not two purely domestic corpora- 
 tions. Greene v. Michigan &c. R. 
 Co., 159 Mich. 58, 123 N. W. 607; 
 or, on the other hand to authorize 
 consolidation of domestic corp'jra- 
 tions only. William B. Riker &c. 
 Co. V. United Drug Co., 79 N. J. Eq. 
 580, 82 Atl. 930, Ann. Cas. 1913A, 
 1190; Gordon v. American Patriots 
 (Tex. Civ. App.), 141 S. W. 331. 
 
 *3 The laws of Indiana require the 
 consolidation to be made in accord- 
 ance with the laws of the adjoining 
 state. Burns' R. S. (1914), §5375. 
 
 44 Eaton &c. R. Co. v. Hunt, 20 
 Ind. 457; Delaware &c. Tax Cases, 
 18 Wall. (U. S.) 206, 21 L. ed. 
 888; Graham v. Boston &c. R. Co., 
 14 Fed. 753; Peters v. Boston &c. 
 R. Co., 114 Mass. 127; State v. Chi- 
 cago &c. R. Co., 25 Nebr. 156, 41 
 N. W. 125, 2 L. R A. 564 and note ; 
 Trester v. Missouri Pac. R. Co., 33 
 Nebr. 171, 49 N. W. 1110. See 
 also Williamson v. Illinois Cent. R. 
 Co. (Ind. App.), 121 N. E. 324; 
 
 PoUetz V. Public Utilities Com., 96 
 Ohio St. 49, 117 N. E. 149. It has 
 been held that the corporation can- 
 not be sued in the Federal courts 
 of one state by a citizen of that state 
 for injuries received in another state, 
 into which the consolidated line ex- 
 tends. See Nashville &c. Railway 
 Co. v; Edwards, 91 Ga. 24, 16 S. E. 
 347; Memphis &c. R. Co. v. Ala- 
 bama, 107 U. S. 581, 2 Sup. Ct. 432, 
 27 L. ed. 518; Western &c. R. Co. 
 v. Roberson, 61 Fed. 592. As to 
 whether the result of the consolida- 
 tion is one or two companies, see 
 ante, §§35, 37. See also Central 
 Trust Co. v. Chattanooga &c. R. Co., 
 68 Fed. 685, 693; Burger v. Grand 
 Rapids &c. R. Co., 22 Fed. 561, 20 
 Am. & Eng. R. Cas. 607; Ohio &c. 
 R. Co. V. People, 123 111. 467, 14 N. 
 E. 874. 
 
 45 See Mackay v. New York &c. 
 R. Co., 82 Conn. 75, 72 Atl. 583, 24 L. 
 R. A. (N. S.) 768; Angier v. East 
 Tenn. &c, R. Co., 74 Ga. 634; St. 
 Paul &c. R. Co., In re, 36 Minn. 85, 
 30 N. W. 432; Sage v. Lake Shore 
 &c. R. Co., 70 N. Y. 220; Ashley v. 
 Ryan, 49 Ohio St. 504, 31 N. E. 721. 
 The courts of a state will still retain 
 jurisdiction of a corporation after 
 its consolidation with a foreign cor- 
 poration unless an express surren- 
 
605 CONSOLIDATION § 390 
 
 One state, while it may fix the status of domestic companies 
 which consolidate under its laws, has no power to authorize the 
 consolidation of domestic corporations with those of another 
 state, without the consent of the latter state, in such a manner 
 as to vest the franchises, rights and property of the foreign cor- 
 porations in the consolidated company, ox to authorise the con- 
 version of the stock of all the constituent corporations into that 
 of the consolidated company.*^ Where a corpioration is formed 
 by the consolidation of corporations of several states it gen- 
 erally acts as a unit in the transaction of its business, and, in 
 the absence of a statutory provision to the contrary, it has been 
 held that it may transact its corporate business in bne state for 
 all, and the contracts it enters into, and the liabilities it incurs 
 in one state are binding upon it in all the states, and may be 
 enforced against it in any one of them when the action is 
 transitory.*'^ Yet, as the laws of a state have no effect outside of 
 its limits, it is held that the consolidated corporation in one 
 state acts under the authority of the charter of that state, and is 
 not affected by the legislation of another state in which a part 
 of its line lies,*^ and that it may be dissolved and its business 
 
 der of jurisdictional power is shown. states. Ohio &c. R. Co. v. People, 
 
 Eaton &c. R. Co. v. Hunt, 20 Ind. 123 111. 467, 14 N. E. 874. A railroad 
 
 457. corporation, chartered and operated 
 
 46 People V. New York &c. R. Co., in two states, consolidated and made 
 
 129 N. Y. 474, 29 N. E. 959, 15 L. subject to all the duties and liabili- 
 
 R. A. 82. ties, under one charter and the laws 
 
 4'7 Fitzgerald v. Missouri Pac. R. of one state, as if wholly located 
 
 Co., 45 Fed: 812 ; Graham v. Bos- therein, is an entity, and it is respon- 
 
 ton &c. R. Co., 118 U. S. 161,' 6 sible as a whole for its acts and its 
 
 Sup. Ct. 1009, 30 L. ed. 196; Home negligence. Providence Coal Co. v. 
 
 V. Boston &c. R. Co., 62 N. H. 454, Providence & W. R. Co., 15 R. I. 
 
 ante, §36. The provision in the con- 303, 4 Atl. 394; Southern R. Co. v. 
 
 stitution of Illiniois requiring a ma- Bouknight, 70 Fed. 442. 
 
 jority of the directors of any com- 48 Pittsburgh &c. R. Co. v. Roths- 
 
 pany incorporated under tne laws of child (Pa.), 26 Am. & Eng. R. Cas. 
 
 that state to be residents thereof, 50; Mead v. New York &c. R. Co., 
 
 does not apply to a corporation 4S Conn. 199; Quincy R. Bridge Co. 
 
 formed by the consolidation of an v. Adams Co., 88 111. 615; Eaton 
 
 existing corporation of that state &c. R. Co. v. Hunt, 20 Ind. 457; 
 
 with similar corporations of other State v. Northern Central R. Co., 
 
§390 
 
 RAILROADS 
 
 606 
 
 wound up in one state l^y the courts of that state without af- 
 fecting its franchise in another.^" It is not safe, however, to 
 lay down any unqualified general rules upon these subjects. In 
 order to determine, with any degree of certainty, the effect of a 
 consolidation, and the rights, powers, duties and liabilities of 
 the consolidated company, in any particular case, resort must 
 be had to the legislation of the states in which the company is 
 consolidated and the agreement of consolidation in pursuance 
 thereof. 
 
 18 Md. 193; Pittsburgh &c. Co.'s 
 Appeal (Pa.), 4 Atl. 38S; Gardner 
 V. James, 5 R. I. 235 ; ante, § 36. 
 In Ohio &c. R. Co. v. People, 123 
 111. 467, 14 N. E. 874, it is said ex- 
 plicity that the consolidated cor- 
 poration has in each state all the 
 rights, powers and franchises that 
 the constituent company of that state 
 had therein, but will not have there- 
 in the rights, powers and franchises 
 of the constituent company of the 
 other state, or, in other words, that 
 the new corporation will stand in 
 each state as the original company 
 had stood in the same state. This, 
 
 however, cannot be affirmed as an 
 invariable rule, for much depends 
 upon the statute and consolidation 
 agreement. The legislature of each 
 state could give, and often does 
 give, the new company the right to 
 exercise in its own jurisdiction all 
 the powers and franchises that any 
 or all of the constituent Companies 
 may have possessed. 
 
 49 Hart V. Boston &c. R. Co., 40 
 Conn. 524. For a further and fuller 
 treatment of the subject-matter of 
 this section, see ante, §§ 35,' 36, 37. 
 See also notes in 47 L. R. A. (N. S.) 
 1058, and L. R. A, 191 SC, 279. 
 
CHAPTER XVI. 
 
 CONTRACTS. 
 
 Sec. Sec. 
 
 395. Contracts — Power to make — 41S. 
 
 Generally. 
 
 396. Contracts — Scope of corporate 
 
 power. 
 
 397. General power to contract — 
 
 Illustrative instances. 
 
 398. Power to contract — Contr^>l of 
 
 by courts. 
 399.- Effect of changes in charter. 
 
 400. Contracts — Formal requisites 
 
 of. 
 
 401. Formal defects. 
 
 402. Contracts ^ Who may make — 
 
 Generally. 
 
 403. Contracts by interested per- 
 
 sons. 
 
 404. Mtode prescribed must be pur- 
 
 sued. 
 
 405. Contracts — Parties bound to 
 
 take notice of charter pro- 
 visions. 
 
 406. Contracts — Unauthorized — 
 
 Notice. 
 
 407. Estoppel — Generally. 
 
 408. Ratification of unauthorized 
 
 acts— Rights of the public 
 and of creditors. 
 
 409. Contracts in conjunction with 
 
 other parties. 
 
 410. Pledge of corporate securities. 
 
 411. Contracts between connecting 
 
 lines — Division of fares. 
 
 412. Contracts permitting use of 
 
 part of road. 
 
 413. Contracts regarding terminal 
 
 facilities. 
 
 414. Traffic contracts — Surrender 
 
 to competing line. 
 
 607 
 
 416. 
 
 417. 
 
 418. 
 
 419. 
 
 420. 
 421. 
 
 422. 
 
 423. 
 
 424. 
 
 425. 
 
 426. 
 
 427. 
 
 428. 
 
 429. 
 
 430. 
 
 431. 
 
 Contracts with municipal cor- 
 porations for terminal facil- 
 ities. 
 
 Use of tracks constructea un- 
 der grant from municipal 
 corporation. 
 
 Contracts for location of sta- 
 tions. 
 
 Location of tracks, switches 
 and the like. 
 
 Contracts that may be made 
 by railr<oad companies — Par- 
 ticular instances. 
 
 Pooling contracts — Generally. 
 
 Pooling contracts — The au- 
 thorities. 
 
 Pooling contracts — Presump- 
 tion. 
 
 Contracts — Ultra vires — -Defi- 
 nitions. 
 
 Contracts — Ultra vires — Gen- 
 eral doctrine. 
 
 Contracts -r- What are ultra 
 vires — Generally. 
 
 Contracts — Ultra vires — Es- 
 toppel. 
 
 Contracts — Ultra vires — Exe- 
 cuted and executory con- 
 tracts. 
 
 Contracts— Ultra vires — Cases 
 discriminated. 
 
 Contracts — ^Ultra vires — Illus- 
 trative instances. 
 
 Contracts — Ultra vires — Rule 
 where statute prescribes 
 consequences. 
 
 Contracts — Ultra vires — In- 
 junction. 
 
§395 
 
 RAILROADS 
 
 608 
 
 Sec. 
 
 432. Contracts — Ultra vires — De- 
 
 nial of relief — Laches. 
 
 433. Cbntracts — Ultra vines — Who 
 
 may contest. 
 
 434. Contracts — Ultra vires — Cred- 
 
 itors,. 
 
 435. Contracts— Ultra vires — Non- 
 
 assenting stockholders. 
 
 436. Prohibited contracts — Effect of 
 
 prescribing penalties. 
 
 437. Illegal contracts — Generally. 
 
 438. Illegal contracts and ultra 
 
 vires contracts discrimi- 
 nated. 
 
 Sec. 
 
 439. Classes of illegal contracts. 
 
 440. Contracts void because against 
 
 public policy. 
 
 441. Contracts against public policy 
 
 — ^Location of stations and 
 tracks. 
 
 442. Contracts void as against pub- 
 
 lic policy — General conclu- 
 sions. 
 
 443. Contracts void as against pub- 
 
 lic policy — Illustrative cases. 
 
 444. Contracts rendered unenforc- 
 
 ible by statute subsequently 
 passed — Rights and Reme- 
 dies. 
 
 § 395 (340). Ccmtracts — Power to make — Geq^rally.-r-A rail- 
 road company has the implied or incidental power to enter into 
 any and all contracts necessary to enable it to carry out the 
 purposes of its organization, except so far as it is restrained by 
 its charter or the general law. The presumption is in favor ot 
 the power of the corporation to make any contract, which is 
 regular on its face and is not in conflict with any prohibition of 
 law, and is within the scope of the general powers conferred 
 upon the corporation. ^ Within the scope of the corporate pow- 
 
 1 Baltimore v. Baltimore &c. R. 
 Co., 21 Md. SO; Mitchell v. Rome 
 &c. R. Co., 17 Ga. 574; Davis v. Old 
 Colony R. Co., 131 Mass. 258, 41 
 Am. Rep. 221 ; Stewart v. Erie 
 Trans. Co., 17 Minn. 372 ; Morris &c. 
 R. Co. V. Sussex R. Co., 20 N. J. Eq. 
 (5 Green) 542; Rider Life Raft Co. 
 V. Roach, 97 N. Y. 378; Shipper v. 
 Pennsylvania R. Co., 47 Pa. St. 338; 
 South Wales R. Co. v. Redmond, 
 10 C. B. N. S. 675. See also Choc- 
 taw &c. R. Co. v. Bond, 160 Fed. 
 403. The burden of proof is gen- 
 erally upon the person asserting the 
 illegality or ultra vires character of 
 
 a contract made by a corporation. 
 Morris &c. R. Co. v. Sussex R. Co., 
 20 N. J. Eq. (5 Green) 542; Ohio 
 &c. R. Co. V. McCarthy, 96 U. S. 
 258, 24 L. ed. 693; Alabama Gold 
 Life Ins. Co. v. Central &c. Assn., 
 54 Ala. 73; Oakland Elec. Co. v. 
 Union Gas &c. Co., 107 Maine 279, 
 78 Atl. 288. Prima facie, it has 
 been said, all its contracts are valid, 
 and it lies on those who would im- 
 peach any contract to make ouv that 
 it is invalid. Scottish North East- 
 ern R. Co. V. Stewart, 3 Macq. 382 
 415. 
 
609 CONTRACTS § 396 
 
 ers the right to contract is much the same i as that .gf natural 
 persons.^ but as corporate powers are derivative, and not, inher- 
 ent, the authority of a corporation to contract is limited, by, the 
 charter or act of incorporation. It is, of course, competent for 
 the legislature to limit the power to contract, and to, designate 
 the mode in which corporations may contract and, where a limi- 
 tation is imposed or a mode prescribed the corporation cannot 
 rightfully make a contract beyond the limits fixed by the stat- 
 ute, nor can it regularly contract in any other mode than that 
 prescribed by law in cases where a specific mode is prescribed.^ 
 
 § 396 (341). Contracts — Scope of corporate power. — The 
 
 power of a railroad company to make contracts is limited by the 
 act of incorporation, but is, nevertheless, very broad and com- 
 prehensive. Every charter granted a railroad corporation invests 
 it with implied as well as with express powers. The doctrine 
 seems to have been asserted in England, and receives some sup- 
 port in this country, that the legislature, when it creates a cor- 
 poration, gives to that body an absolute right of contract, except 
 so far as it may be restrained by positive law.* It cannot, how- 
 
 a Fitzgerald &c. Co. v. Fitzgerald, ed. 279; Green Bay &c. R. Co. v. 
 
 137 U. S. 98, 11 Sup. Ct. 36; Hall Union &c. Co., 107 U. S. 98, 2 Sup. 
 
 V. Tanner &c. Co., 91 Ala. 363, 8 Ct. 221, 27 L. ed. 413; Pennsylvania 
 
 So. 348; Tennessee &c. Co. v. Kava- R. Co. v. St. Louis &c. Co., 118 U. 
 
 naugh, 93 Ala. 324, 9 So. 395; S. 290, 6 Sup. Ct. 1094, 30 L. ed. 
 
 Gloninger v. Pittsburgh R. Co., 83; Sa:lt Lake City v. Holister, 118 
 
 139 Pa. St. 13, 21 Atl. 211; Hand v. U. S. 256, 6 Sup. Ct. 1055, 30 L. 
 
 Clearfield &c. Co., 143 Pa. St. 408, ed. 176; Oregon &c. Co. v. Ore- 
 
 22 Atl. 709. See also St. Joseph &c. gonian R. Co., 130 U. S. 1, 4 Sup. 
 
 R. Co. V. St. Louis &c. R. Co., 135 Ct. 409, 33 L. ed. 90; Pittsburgh 
 
 Mo. 173, 36 S. W. 602, 33 L. R. A. &c. R. Co. v. Ketokuk &c. Co., 131 
 
 607, 615. U. S. 371, 9 Sup. Ct. 770, 33 L. ed. 
 
 sPerrine v. Chesapeake &c. Co., 157; Central &c. Co. v. Pullman 
 
 9 How. (U. S.) 172, 13 L. ed. 92; Car Co., 139 U. S. 24, 11 Sup. Ct. 
 
 Pearce v. Madison &c. Co.; 21 How. 478, 35 L. ed. 55, 45 Am. & Eng. 
 
 (U. S.) 441, 16 L. ed. 184; Zabriskie R. Cases 607; New London v. Brain- 
 
 V. Oeveland &c. Co., 23 How. (U. ard, 23 Conn. 522; Commonwealth 
 
 S.) 381, 398, 16 L. ed. 488; Tliomas v. Erie &c. Co., 27 Pa. St. 339, 67 
 
 V. West Jersey &c. Co., 101 U. S. Am. Dec. 471. 
 
 71, 25 L. ed. 950 ; Branch v. Jesup, * Shrewsbury &c. R. Co. v. North- 
 
 106 U. S. 468, 1 Sup. Ct. 495, 27 L. western R. Co., 6 H. L. Cas. 113; 
 
 20 — Ell. Railroads I 
 
§396 
 
 RAILROADS 
 
 610 
 
 ever, be true that a corporation has an absolute right to con- 
 tract, for it cannot make a contract entirely foreign to the object 
 for which it was created.^ It is generally held in the United 
 States, and it is the only defensible doctrine, that the power ot 
 a corporation to make contracts is limited to the making of 
 contracts which it is expressly authorized to enter into and such 
 as are reasonably necessary or incident to the enjoyment of the 
 express powers granted by its charter, and, in general, its offi- 
 cers and agents can only bind it to this extent.*^ It is not neces- 
 sary, however, that the powers of a corporation should be enu- 
 merated, nor is it necessary that the power to contract should 
 be expressly conferred, for the power to make such contracts as 
 will promote the corporate welfare and enable the corporation to 
 conduct its corporate affairs is implied.'' 
 
 Riche V. Ashbury R. Car Co., L. R. 
 9 Exch. 224, citing case of Sutton's 
 Hospital, 10 Coke 1 ; Norwich v. 
 Norfolk &c. R. Co., 4 El. & Bl. 397. 
 5 This is an old familiar doc- 
 trine, for it has long been settled 
 that a dorporation cannot make a 
 contract beyond the sphere of cor- 
 porate power, as defined by the act 
 of incorporation. Utica Ins. Co. v. 
 Scott, 19 Johns. (N. Y.) 1; Pierce" 
 V. New Orleans &c. Co., 9 La:. 397; 
 Lawler v. Walker, 18 Ohio 151; 
 Dublin Corp. v. Attorney General, 9 
 Bligh N. S. 39S; Webb v. Manches- 
 ter &c., 4 Mylne & Craig 116. See 
 also Western Md. R. Co. v. Blue 
 Ridge Hotel Co., 102 Md. 307, 62 
 Atl. 351, 2 L. R. A. (N. S.) 887, 
 111 Am. St. 362; Williams v. John- 
 son, 208 Mass. 544, 95 N. E. 90; 
 Nor, in general, that would disable 
 it from performing its public func- 
 tions, 'or be against public policy. 
 See Sammons v. Kearney Power &c. 
 Co., n Nebr. 580, 110 N. W. 312, 
 8 L. R. A. (N. S.) 404n; 1 Elliott 
 
 Cont. § 575, et seq, and post, §§ 414, 
 423, et seq. 
 
 " Vandall v. South San Francisco 
 Dock Co., 40 Cal. 83; Winter v. 
 Muscogee R. Co., 11 Ga. 438; Bowl- 
 ing Green R. Co. v. Warren County, 
 
 10 Bush (Ky.) 711; Mobile &c. R. 
 Co. V. Franks, 41 Miss. 494; 
 Downing v. Mt. Washington, R. Co., 
 40 N. H. 231. See also Pittsburgh 
 &c. R. Co. V. Lyon, 123 Pa. St. 140, 
 16 Atl. 607, 2 L. R. A. 489, 10 Am. 
 St. 517; Davis v. Old Coltony R. Co., 
 131 Mass. 258, 41 Am. Rep. 221; 1 
 Elliott Cont. §§540, 541. 
 
 T Jacksonville &c. R. Co. v. 
 Hooper, 160 U. S. 514, 16 Sup. Ct. 
 379, 40 L. ed. Sl5; Toledo &c. R. 
 Co. V. Rodriguez, 47 111. 188, 95 Am. 
 Dec. 484; People v. Illinois Cent. R. 
 Co., 233 111. 378, 84 N. E. 368, 122 
 Am. St. 181, 16 L. R. A. (N. S.) 
 604, and other cases there cited in 
 notes; Brown v. Winnisimmet Co., 
 
 11 Allen (Mass.) 326; Smith v. 
 Nashua &c. R. Co., 27 N. H. 86, 
 59 Am. Dec. 364; Buffit v. Troy &c. 
 
611 
 
 CONTRACTS 
 
 §397 
 
 § 397 (342). General power to contract — Illustrative instances. 
 
 '• — Railroad companies, unless forbidden by statute, may borrow 
 money for corporate purposes and issue negotiable instruments.* 
 It is held, however, that under a power to borrow money and 
 issue negotiable bonds a railroad company cannot issue perpet- 
 ual or irredeemable bonds.^ A railroad company has power to 
 compromise all controversies relating to corporate affairs. i** A 
 
 Co., 36 Barb. (N. Y.) 420. See al- 
 so Choctaw &c. R. Co. v. Bond, 160 
 Fed. 403; State v. Illinois Cent. R. 
 Co., 246 111. 188, 92 N. E. 814; 
 Logansport v. Smith, 47 Ind. App. 
 64, 93 N. E. 883; 1 Elliott Cont. 
 §§ 540, 542. Some of the cases 
 affirm that the inquiry which the 
 courts are to make is whethei the 
 power to make the contract is tor- 
 bidden, not whether it is granted. 
 Taylor v. Chichester &c. R. Co., L. 
 R. 2 Exch. 356, 384; Scottish &c. 
 R. Co. V. Stewart, 3 Macq. 382, 415; 
 Eastern &c. R. Co. v. Hawkes, 5 H. 
 L. Cas. 331. See Mississippi &c. 
 R. Co. V. Howard, 7 Wall. (U. S.) 
 392, 19 L. ed. 117; Ohio &c. R. 
 Co. V. McCarthy, 96 U. S. 258, 24 
 L. ed. 693; Kitchen v. Cape Girar- 
 deau &c. Co., 59 Mo. 514; Cary v. 
 >..leveland &c. R. Co., 29 Barb. (N. 
 Y.) 35, 52; Madison &c. Co. v. 
 Watertown &c. Oo., 5 Wis. 173; 
 Bateman v. Mayor &c. Ashton &c., 
 3 Hurl. & N. 323; South Yorkshire 
 R. Co. V. Great Northern R. Co., 9 
 Exch. 55, 88; South Wales R. Co. 
 V. Redmond, 10 C. B. (N. S.) 675; 
 Norwich v. Norfolk R. Co., 4 El. 
 & Bl. 397, 432. 
 
 8 White Water Valley R. Co. v. 
 Vallette, 21 How. (U. S.) 414, 16 
 L. ed. 154; Mississippi &c. R. Co. 
 V. Howard, 7 Wall. (U. S.) 392, 19 
 L. ed. 117; Galveston &c. Co. v. 
 
 Cowdrey, 11 Wall. (U. S.) 459, 20 
 L. ed. 199; Frye v. Tucker, 24 111. 
 180; Goodrich v. Reynolds, 31 111. 
 490, 83 Am. Dec. -240; Marion &c. 
 Go. V. Hodge, 9 Ind. 163; Butler v. 
 Rahm, 46 Md. 541 ; Dupee v. Bos- 
 ton &c. Co., 114 Mass. 37; Pierce 
 V. Emery, 32 N. H. 484; Richards 
 V. Merrimack &c. R. Co., 44 N. H. 
 127, 135; Olcott v. Tioga R. Co., 
 27 N. Y. 546, 84 Am. Dec. 298; 
 Philadelphia &c. Co. v. Hickman, 28 
 Pa. St. 318; Golinger v. Pittsburgh 
 &c. R. Co., 139 Pa. St. 13, 21 Atl. 
 211, 46 Am. & Eng. R. Cas. 276. See 
 also Alabama &c. Ins. Co. v. Cen- 
 tral &c. Co., 54 Ala. 73 ; Philadelphia 
 &c. R. Co. V. Stichter, 21 Am. R. 
 Reg. (N. S.) 713, and note; Com- 
 monwealth V. Smith, 10 Allen 
 (Mass.) 448, 455, 87 Am. Dec. 672. 
 
 9 Taylor v. Philadelphia &c. R. 
 Co., 7 Fed. 386, 1 Am. & Eng. R. 
 Cases 616, citing Thomas v. West 
 Jersey &c. R. Co., 101 U. S. 71, 25 
 L. ed. 950. Contra Philadelphia &c. 
 R. Co.'s Appeal,. 11 W. N. C. (Pa.) 
 325, 4 Am. & Eng. R. Cas. 118, 21 
 Am. L. Reg. 713. 
 
 10 Philadelphia &c. Co. v. Hick- 
 man, 28 Pa. St. 318; Macon &c. R. 
 Oo. V. Vason, 57 Ga. 314. See gen- 
 erally Bath's Case, L. R. 8 Ch. Div. 
 334; Kipling v. Todd, L. R. 3 C. 
 P. Div. 350. 
 
§ 397 RAILROADS 612 
 
 contract to haul a designated quantity of goods each month is 
 one th^t may be lawfully made, provided no discrimination is 
 made against other shippers.^' So, it has recently been held that 
 a railroad company may contract with a person to build up, de- 
 velop, and conduct the business of transporting milk over its 
 lines of road.^^ There can, of course, be no doubt as to the 
 power to employ and contract to pay a compensation to such 
 agents and officers as may be required to conduct the corporate 
 business, and it has been held that two companies may employ 
 one general manager.!^ A contract between two railroad com- 
 panies, wherein they agreed to establish and maintain a dispatch 
 line for the transportation of freight, was recognized as valid, 
 but there seems to have been no discussion of the question 
 whether the contract was or was not against public policy.^* An 
 arrangement by which the receiver of existing companies was 
 to receive all the stock and bonds of a proposed railroad, to be 
 used in constructing the roadbed, leaving no funds for building 
 side-tracks or purchasing equipment, was held to be invalid and 
 the organization of the proposed company a fraud upon the stat- 
 ute. ^^ A railroad company may contract with a municipal cor- 
 poration to erect a depot at a designated place, but in the ab- 
 sence of clear words constituting a covenant to perpetually 
 maintain the depot at the designated place the company is not 
 bound to do so.^^ It seems to us doubtful whether an agree- 
 
 11 Harrison v. New Orleans &c. i* Chicago &c. R. Co. v. New York 
 Co., 28 La. Ann. W ; Chicago &c. &c. R. Co., 24 Fed. 516, 22 Am. 
 R. Co. V. Chicago &c. R. Co., 79 & Eng. R. Cas. 265. See also Pra- 
 111. 121. See also Cleveland &c. R. ther v. Western Un. Tel. Co., 89 Ind. 
 Co. V. Himrod Furnace Co., 37 Ohio SOI ; Western Un. Tel. Co. v. Rich. 
 St. 321, 41 Am. Rep. 509. 19 Kans. 517, 27 Am. Rep. 159, ante, 
 
 12 Delaware &c. R. Co. v. Kutler, §§52, 53. 
 
 147 Fed. 51. See, however, as to is Chicago &c. R. Co. v. Miller, 
 
 contracting for the use of space in 91 Mich. 166, 51 N. W. 981. 
 
 its cars for ■ advertising. National 16 Texas &c. R. Co. v. Marshall, 
 
 Car Advertising Co. v. Louisville &c. 136 U. S. 393, 10 Sup. Ct. 846, 34 
 
 R. Co., 110 Va. 413, 66 S. E. 88, 24 L. ed. 385, 42 Am. & Eng. R. Cas. 
 
 L. R. A. (N. S.) 1010. (>y]\ citing Mead v. Ballard, 7 Wall. 
 
 13 State v. Concord R. Co., 62 N. (U. S.) 290, 19 L. ed. 190. 
 H. 375, 13 Am. & Eng. R. Cas. 94. • 
 
613 CONTRACTS § 398 
 
 mcnt to perpetually maintain a depot at a designated place 
 would be valid, since the changes wrought by time and progress 
 may make it necessary for the public interest and the promo- 
 tion of the public welfare to locate the station elsewhere. We 
 suppose that when parties enter into a contract they must be 
 held to contract with reference to such matters. This subject, 
 however, is considered in another section. i'' It has also been 
 held that one railroad company may grant to another the right 
 to use the track without pecuniary compensation and that where 
 stich a contract is made by the general superintendent with the 
 knowledge of the board of directors, it will be enforced. ^^ 
 
 § 398 (343). Power to contract — Control of by courts. — The 
 
 business policy of a corporation is a matter for the management 
 and control of the corporation, and the courts will not dictate the 
 policy to be pursued in such a matter, nor exercise surveillance 
 over the corporation in regard to mere matters of business pol- 
 icy or expediency. 1^ Where the action is lawful and not beyond 
 the power of the corporation, the courts will not examine "into 
 the affairs of the corporation to determine the expediency of its 
 action, or the motives for it."^" Courts will not control corpo- 
 rate action where the matter is one of pure discretion, but may 
 
 17 See post, §417. Ala. 292, 4 So. 824, 7 Am. St. 48; 
 
 18 Alabama &c. R. Co. v. South Hutton v. West Cork R. Co., 23 
 &c. R. Co., 84 Ala. 570, 3 So. 286, Ch. Div. 654. Other illustrati'ons of 
 5 Am. St. 401. Some of the ex- the power of railroad eompanies to 
 pressions used in the opinion de- contract were given in considering 
 livered in the case cited indicate charter powers, and will be found 
 that the directors may make a dona- in § 52, ante. 
 
 tion lof the property rights of the is Evans v. Union Pacific R. Co., 
 
 company, but we think that the 58 Fed. 497. See generally Willough- 
 
 agreement before the court dis- by v. Chicago &c. Co., SO N. J. 
 
 closed a consideration, so that it Eq. 656, 25 Atl. 277, 39 Am. & Eng. 
 
 cannot be said that there was an Corp. Cas. 153; Sewell v; East Cape 
 
 entire absence of consideration. . We May Co., 50 N. J. Eq. 717, 25 Atl. 
 
 do not believe that the officers of a 929. 
 
 railroad company have power to so Oglesby v. Attrill, 105 U. S. 
 
 make a gift of any material part 605, 26 L. ed. 1186; Bailey v. Bir- 
 
 of the corporate property. But see kenhead &c. R. Co., 12 Beav. 433. 
 Central R. &c. Co. v. Cheatham, 85 
 
§ 399 RAILROADS 614 
 
 interfere where there is a palpable abuse of discretion which 
 causes a legal injury to the person who seeks judicial assist- 
 ance.^^ To justify interference upon the ground of an abuse of 
 discretion, a very strong and clear case must be made by the 
 complainant, for it is only where there is palpable abuse and 
 manifest injury that courts will give relief. ^^ 
 
 § 399 (344). Effect of changes in charter. — A party who con- 
 tracts with a railroad company deals, as he is bound to know, 
 with a creature of the law invested with limited powers. He 
 cannot successfully insist that it possesses unlimited power to 
 enter into contracts, and he must take notice of the general 
 power of the legislature over the corporation. In accordance 
 with this principle it has been held that all parties contracting 
 with a corporation must take notice of the conditions on which 
 it holds its franchises, and of its subjection to the legislative 
 will, and that executory contracts for the construction of the 
 road may be annulled or rendered less profitable by the act of 
 the legislature in amending the charter under a reserved power 
 so as to change the route and render the performance of such 
 contracts impossible or more expensive. ^^ 
 
 21 Davis V. Mayor &c. 1 Duer (N. Bleckly, J., said: "Nor is the right 
 Y.) 451; Baldwin v. Bangor, 36 of a state so to amend or modify the 
 Maine 518; Methodist &c. Church v. charter abridged or in any manner 
 Baltimore, 6 Gill (Md.) 391. See affected by executory contracts, en- 
 Western Union &c. Co. v. Mayor &c., tered into by the company with 
 38 Fed. 552, 3 L. R, A. 449; Mont- third persons, before the amending 
 gomery &c. Co. v. Montgomery, 87 act was passed. The Macon Con- 
 Ala. 245, 6 So. 113, 4 L. R. A. 616; struction Company, in dealing with 
 Chicago V. Evans, 24 111. 52; Rich- the railroad company, was bound to 
 mond v. Davis, 103 Ind. 449, 3 N. E. take notice of the generallaw of the 
 130; Des Moines &c. Co. v. Des state, under which the right and 
 Moines, 44 Iowa SOS, 24 Am. Rep. power were reserved which have 
 756; Williams v. New York &c. R. been exercised. A tenant at will 
 Co., 16 N. Y. 91, 69 Am. Dec. 615; cannot make contracts with refer- 
 Smith v. McCarthy, 56 Pa. St. 359. ence to the estate, which will limit 
 
 22 Wildes V. Rural &c. Co., 53 N. the power of the landlord to ter- 
 J. Eq. 452, 32 Atl. 676. minate the estate by means com- 
 
 28 Maoon &c. R. Co. v. Gibson, 85 patible with its nature. So a cor- 
 Ga. 1, 21 Am. St. 135, 11 S. E. 442, poration in the possession of fran- 
 
615 
 
 CONTRACTS 
 
 §400 
 
 § 400 (345). Contracts — Formal requisites of. — The old doc- 
 trine that a corporation could only contract under its common 
 seal does not, as every one knows, any longer prevail. Some 
 contracts must be evidenced by the corporate seal, but the in- 
 stances in which a seal is essential to the validity of a corpo- 
 rate contract are comparatively few, for in the vast majority 
 of cases no seal is required. It is not required where the con- 
 tract relates to ordinary corporate business. The legislature 
 may, of course, require that all contracts shall be attested by 
 the corporate seal, but a provision in the charter requiring the 
 corporation to have a common seal does not require all con- 
 
 chises held at the will of the state 
 cannot hinder the resumptiion or 
 modification of those franchises by 
 entering into executory contracts 
 with third persons. Nor can that 
 effect be wrought by like contracts 
 between the parties immediately 
 contracting with the corporation, 
 and subcontractors under them. On 
 no contract whatsoever does the 
 amendment now in question have 
 any direct ' effect. Its only effect 
 upon contracts is incidental and, 
 if they cannot be performed con- 
 sistently with the alteration in the 
 charter made by the amending stat- 
 ute, their performance, in so far as 
 thus hindered or obstructed, will be 
 excused; the rule of law being that 
 performance of contracts, when ren- 
 dered impossible by act of law, 
 stands excused. (Citing Bish. Cont. 
 §594, and other authorities.) Un- 
 der these authorities, if the Macon 
 Construction Company, or a sub- 
 contractor under it, was under a 
 stipulation to complete the railway 
 by a given time, and if time was of 
 the essence of the contract, a valid 
 excuse for failing so to do would 
 be furnished by this subsequent 
 
 legislation, in that legislation has 
 rendered, or should render, it im- 
 possible to complete the work by 
 the stipulated time. In so far as 
 this or any other executory contract 
 has been rendered less valuable or 
 profitable to the parties concerned 
 by the legislation, in question, that 
 is a consequence which should have 
 been forseen as possible, and which 
 must be accepted by the parties as 
 an incident of the exercise by the 
 legislature of its rightful legislative 
 power. Surely it cannot rationally 
 be contended that because the al- 
 teration of charters with respect to 
 the latitude of the franchises grant- 
 ed may or does operate unfavorably 
 upon executory contracts made by 
 or under the, corporations, the char- 
 ters must remain unaltered in this 
 respect, and the reserved power in 
 the legislature be reduced to a 
 power in name only." See also 
 Mumma v. Potomac Co., 8 Pet. (U. 
 S.) 281, 8 L. ed. 945; Thornton v. 
 Railway Co., 123 Mass. 32; and com- 
 pare Cincinnati &c. R. Co. v. Clif- 
 foru, 113 Ind. 460, 15 N. E. 524, and 
 post, §405. 
 
i400 
 
 RAILROADS 
 
 616 
 
 tracts to be under ' seal.^* In a monographic note written or 
 edited by Mr. Freeman it is said that in this countr)- "the rule 
 is well nigh, if not absolutely, universal" that a corporate seal 
 is uniiecessary in most cases, and in every case iri which a seal 
 would be unnecessary if the act or contract in question were 
 that of an individual.^'' In considering the authority of corpo- 
 rate representatives, we referred to the familiar rule that where 
 the charter prescribed the mode of contracting, that mode must 
 be pursued, and also said that the general rule is that corpora- 
 tions are not bound by contracts executed by persons having no 
 authority from the corporation, or by agents who transcended 
 the authority conferred upon them. It is not necessary to add 
 anything to what has been said upon those subjects, for they 
 are familiar ones and our consideration of them has been a.=i 
 full as is consistent with the scope of our work.-" 
 
 2* Sarmiento v. Davis &c. Co., 105 
 Mich. 300, 63 N. W. 205, 55 Am. 
 St. 446. See Gary &c. Co. v. Cain, 
 70 Miss. 628, 13 So. 239. The seal, 
 where one is required, may be at- 
 tached by a person whom the gov- 
 erning board recognizes as secre- 
 ■ tary, although such a person is not 
 secretary de jure. Augusta &c. R. 
 Co. V. Kittel, 52 Fed. 63. A con- 
 tract not required to be under seal, 
 which professes to be executed by 
 the president in behalf of the cor- 
 poration, is presumptively a corpo- 
 rate contract. National &c. Assn. v. 
 Prentice &c. Co., 49 Minn. 220, 51 
 N. W. 916. See Muscatine &c. Co. 
 V. Muscatine Lumber Co., 85 Iowa 
 112, 52 N. W. 108, 39 Am. St. 284. 
 Of course a corporate contract must 
 possess the essential elements of a 
 contract between natural persons, 
 such as a consideration and the like. 
 It is barely necessary to suggest 
 that where the statute requires a 
 contract to be in writing or requires 
 
 it to be under seal, the statutory 
 requirement must be 'obeyed. Paul- 
 ing V. London &c. R. Co., 8 Exch. 
 867. See Chase v. Second Ave. R. 
 Co., 97 N. Y. 384, 49 Am. Rep. 531. 
 Real estate conveyances are still 
 usually required to be under seal. 
 1 Elliott Cont. § 544, and aun. ori- 
 ties there cited' in note 49. 
 
 25 Note to Green Co. v. Blodgett, 
 50 Am. St. 146, 152, citing and re- 
 viewing many atuhorities. 
 
 26 In addition to the authorities 
 heretofore cited, see Missouri Pac. 
 R. Go. V. Sidell, 67 Fed. 464; Leroy 
 &c. R. Co. V. Sidell, 66 Fed. 27; 
 National &c. Bank v. Vigo County 
 &c. Bank, 141 Ind. 352, 40 N. E. 
 799, 50 Am. St. 330; Bradford v. 
 Frankfort &c. R. Co., 142 Ind. 383, 
 40 N. E. 741; TuIIeys v. Keller, 
 45 Nebr. 220, 63 N. W. 388; Canada 
 &c. Co. V. Woodbridge &c. Co., 58 
 N. J. L. 134, 32 Atl. 66; First Na- 
 tional Bank v. Asheville &c. Co., 116 
 K. Car. 827, 21 S. E. 948; Eaton 
 
^17 CONTRACTS § 401 
 
 § 401' (345). Formal defects. — Merely formal defects in a cor- 
 porate contract not affecting the substantial rights of the par- 
 ties will be disregarded by the courts. If there is no defect af- 
 fecting substantial rights the courts will ascertain and carry 
 into effect the intention of the contracting parties. ^^ But, of 
 ■course, if the defects are of such a character as to render the 
 -alleged contract nugatory, or so vague and uncertain that the 
 intention of the parties cannot be discovered, it will not be 
 enforced. 
 
 §402 (347). Contracts — Who may make — Generally.— The 
 
 general power of a railroad company to enter into contracts may 
 be exercised by the board of directors. ^^ The general rule is 
 that in the board is vested the paramount power of making cor- 
 porate contracts, but other officers may often contract on be- 
 half of the corporation. 2*" As was said at another place, there 
 are some contracts which the board of directors must make, but 
 ordinary corporate contracts relating to the usual business of 
 the corporation may be made by other officers, or by duly ap- 
 
 V. Robinson, 19 R. I. 146, 31 Atl. 2t Underbill v. Santa Barbara &c. 
 
 1058, 32 Atl. 339, 29 L. R. A. 100. Co., 93 Cal. 300, 28 Pac. 1049. See 
 
 Effect of notice by one who takes Seymour v. Spring Forest &c. Assn., 
 
 promissory note executed by treas- 64 Hun 632, 19 N. Y. 94; Hassel- 
 
 urer of corporation in fraud of its man v. Japanese &c. Co., 2 Ind. App. 
 
 -rights. Millward &c. Co., In re, 161 180, 27 N. E. 718, 28 N. E. 207; 
 
 Pa. St. 157, 28 Atl. 1072, 1077. Au- Dexer v. Long, 2 Wash. 435, 27 
 
 thority to an agent to execute a Pac. 271, 26 Am. St. 867. 
 
 mortgage empowers him to insert 28 Bank of Middlebury v. Rutland 
 
 usual conditions therein. Gribble v. &c. R. Co., 30 Vt. 159; Wright v. 
 
 Columbus &c. Co., 100 Cal. 67, 34 Oroville &c. Co., 40 Cal. 20; Clark 
 
 Pac. 527; Vincent v. Snoqualmie &a Corp. 485. 
 
 Co., 7 Wash. 566, 35 Pac. 396. Acts 29 A president who has general 
 
 in excess of authority may be rati- managing authority may assent to 
 
 fied where they are within scope the reformation of a contract, in 
 
 of corporate power. People v. Eel case of a mistake therein, executed 
 
 River &c. R. Co., 98 Cal. 665, 33 Pac. by him in behalf of the corporation. 
 
 728; Nebraska &c. Co. v. Bell, 58 Nichols v. Scranton &c. Co., 137 N. 
 
 Fed. 326; Thomas v. City &c. Bank, Y. 471, 33 N. E. 561. See abo 
 
 40 Nebr. 501, 58 N. W. 943, 24 L. Taussig v. St. Louis &c. R. Co., 186' 
 
 R. A. 263. Mo. 269, 85 S. W. 378. 
 
§403 
 
 RAILROADS 
 
 618 
 
 pointed agents acting within the scope of their employment;"* 
 and the powers of the board of directors are often permitted to 
 be delegated to its executive committee. ^^ 
 
 § 403 (348). Contracts by interested persons. — The general 
 rule is that a corporate agent cannot at the same time act for 
 himself and for the corporation in a matter where his interests 
 are antagonistic to those of the corporation. This rule is one 
 of wide sweep. It has even been held that corporations having 
 common officers and trustees cannot enter into valid contracts 
 with each other. 3- Nor cian an officer or agent of the company 
 
 30 Where the purchasing agent of 
 a railway has apparent authority to 
 make contracts for supplying the 
 company with stationery, a third 
 person, who has dealt with him a 
 number of years on the faith of his 
 having such authority, can enforce 
 a contract with said purchasing 
 agent as against the company, and 
 the defense that the agent had no 
 authority is not a good one. Levy 
 V. New York &c. R. Co., 4 Misc. 415, 
 24 N. Y. S. 124. 
 
 SI Union Pac. R. Co. v. Chicago 
 &c. R. Co., 163 U. S. 564, 16 Sup. Ct. 
 1173, 41 L. ed. 265. See also Kelsey 
 V. New England &c. R. Co., 60 N. 
 J. Eq. 230, 46 Atl. 1059; Salem &c. 
 Co. V. Lake Superior &c. Co., 112 
 Fed. 239; Burrill v. Nahant Bank, 
 2 Mete. (Mass.) 163, 35 Am. Dec. 
 395 ; Sheridan Electric Light Co. v. 
 Chatham Nat. Bank, 52 Hun 575, 
 5 N. Y. S. 529; Black River &c. 
 Co. V. Holway, 85 Wis. 344, 55 N. 
 W. 418. 
 
 32 Stokes V. Phelps Mission, 47 
 Hun 570, 14 N. Y. S. 901; Barr v. 
 New York &c. R. Co., 52 Hun 555, 
 24 N. Y. S. 188. See also Mont- 
 gomery Traction Co. v. Harmon, 
 
 140 Ala. 505, 37 So: 371. A con- 
 tract leasing cars from one railroad 
 company to another, whose officers 
 are substantially the same, will not 
 be recognized on a claim for com- 
 pensation against a receiver of the 
 lessee railroad company, though a 
 reasonable compensation for the use 
 of the cars will be allowed. Thomas 
 V. Peoria &c. R. Co., 36 Fed. 808. 
 Four persons, common directors of 
 two different railroads, became 
 assignees of a construction contract 
 made by one of the companies, by 
 which they received its stocks and 
 bonds, thereby making a large profit. 
 Afterwards acting for the two com- 
 panies, they executed a lease of the 
 road and franchis'es of the com- 
 pany whose bonds and stocks they 
 held to the other company, binding 
 it to pay as rental certain sums to 
 meet interest on the bonds and divi- 
 dends, on the stocks. The lease was 
 held invalid as an attempt by the 
 directors to impose obligations on 
 the lessee company for their own 
 private benefit and no formal re- 
 scission of the lease was necessary: 
 Barr v. New York &c. R. Co., 52 
 Hun 555, 5 N. Y. S. 623. Certain 
 
619 
 
 CONTRACTS 
 
 §403 
 
 bind it, as a general rule, by a contract in which he is person- 
 ally interested,** at least where the interests are conflicting. It 
 
 persons, being stockholders and di- 
 rectors of both a railroad company 
 and an iron company negotiated in 
 good faith a contract between the 
 railroad company and the iron com- 
 pany, which took the form of a reso- 
 lution by the railroad company to 
 lease a railroad owned by the iron 
 company and pay in stocks and 
 bonds, and of a subscription by the 
 iron company to be paid in property, 
 viz., a lease of their railroad, 
 the contract was unanimously rati- 
 fied by a vote of all the stock- 
 holders of the railroad company. 
 The contract was held to be at worst, 
 only voidable, and as no fraud or in- 
 tentional over valuation appeared, 
 and the consideration was nearly 
 adequate, the bonds issued were held 
 valid. Coe v. East &c. R. Co. of 
 Alabama, 52 Fed. S31. In Chicago 
 &c. Co. V. Yerkes, 141 111. 320, 30 
 N. E. 667, 33 Am. St. 315, it is 
 held that where authority to sell cor- 
 porate property was conferred up- 
 on the president and secretary a 
 sale to the secretary was ineffective. 
 But the prevailing rule is that a con- 
 tract between two corporations is 
 not necessarily void merely because 
 some of the directors or other offi- 
 cers of each are the same. Such 
 contracts are voidable rather than 
 void and are usually upheld where 
 there is good faith and the absence 
 of fraud. Leavenworth Co. v. Chi- 
 cago &c. R. Co., 134 U. S. 688, 10 
 Sup. Ct. 708, 33 L. ed. 1064; Mem- 
 phis &c. R. Co. V. Woods, 88 Ala. 
 630, 7 So. 108, 16 Am. St. 81, 7 
 
 L. R. A. (N. S.) 60S, and note 
 where other authorities are cited; 
 San Diego &c. R. Co. v. Pacific 
 Beach Co., 112 Cal. S3, 44 Pac. 
 333, 33 L. R. A. 788, and cases cited 
 in note; United States Rolling 
 Stock Co. V. Atlantic &c. R. Co., 34 
 Ohio St. 450, 32 Am. Rep. 380; 2 
 Thomp. Corp. (2nd. ed.), §§1241, 
 1242. 
 
 33 Sargent v. Kansas Midland R. 
 Co., 48 Kans. 672, 29 Pac. 1063. See 
 2 Thomp. Corp. (2nd. ed.), i 1411, 
 ante, §§317, 332. But such a con-, 
 tract may by the weight of authori- 
 ty, be binding if it is shown to be 
 fair and free from fraud and the 
 corporation is represented by an- 
 other proper agent, or if the con- 
 tract is ratified and adopted by the 
 corporation, and it may, in any event, 
 be liable for the benefits actually 
 received and retained by it. See 
 also 2 Thomp. Corp. (2nd. ed.), 
 §§1243, 1244, 1411. The fact that 
 the president of a railroad com- 
 pany, without the knowledge of 
 the other directors, is interested in 
 a construction contract let by the 
 company, does not in itself make 
 the contract void, but simply void- 
 able. Augusta &c. R. Co. v. Kittel, 
 2 U, S. App. 409, 52 Fed. 63; 
 Langan v. Krancklyn, 29 Abb. N. 
 Cas. 102, 20 N. Y. S. 404. See also 
 Schnittger v. Old Home &c. Co., 144 
 Cal. 603, 78 Pac. 9. A corporation 
 which sells certain of its bonds to 
 its directors for less than par, but 
 for their actual value, is estopped 
 from attacking the validity of the 
 
§404 
 
 RAILROADS 
 
 620 
 
 is, therefore, to be understood that when it is said that a cor- 
 poration may be bound by the act of its agent performed within 
 the scope of his authority the meaning is that he must be acting 
 for the corporation and not in a matter in which his interests 
 and those of the corporation are in conflict. 
 
 § 404 (349). Mode prescribed must be pursued. — The manda- 
 tory requirements of the charter must be observed, when it pre- 
 scribes a mode of contracting, since it is from the charter, alone 
 that the corporation derives power to enter into contracts.** 
 This elementary rule applies to provisions respecting the desig- 
 nation of the officers by whom the contract shall be made, as 
 well as to other matters. The stockholders of a corporatiort 
 cannot, by a majority vote, bind the corporation to a contract, 
 when the charter lodges the power of contracting wholly with 
 •the board of directors.*^ But if a contract were adopted by a 
 unanimous vote of the stockholders, they would, no doubt, be 
 estopped to deny the binding force of the contract.*® Although 
 
 sale. Union Loan &c.- Co. v. South- 
 ern California &c. Co., 51 Fed. 840. 
 See Skinner v. Smith, 134 N. Y. 240, 
 31 N. E. 911. The rule prohibiting 
 persons in a fiduciary relation from 
 contracting for their own advantage 
 in the name of the beneficiaries 
 does not apply to directors who own 
 all the stock of the corporation, and 
 such contracts are not void as 
 against public policy. McCracken 
 V. Robinson, 57 Fed. 375. 
 
 3* Head v. Providence Ins. Co., 2 
 Cranch (U. S.) 127, 2 L. ed. 229; 
 Bissell V. Spring Valley Twp., 110 
 U. S. 162, 3 Sup. Ct. 555, 28 L. ed. 
 105. 
 
 35 Gulf &c. R. Co. V. Morris, 67 
 Tex. 692, 4 S. W. 156; Gashwiler 
 V. Willis, 33 Cal. 11, 91 Am. Dec. 
 607; McCuUough v. Moss. 5 Denio 
 (N. Y.) 567. ■ See also Jenkins Gas- 
 tonia &c. Co., 115 N. Car. 535, 20 
 
 S. E. 724. But at common law a. 
 corporation may contract by a vote 
 accepting a proposal made in a 
 meeting. Maxwell v. Dulwich Col- 
 lege, 1 Fonbl. 306, 7 Sim. 222n; Es- 
 sex Tpk. Corp. V. Collins, 8 Mass. 
 292. 
 
 ss The act of incorporation fur- 
 nishes no security to persons assent- 
 ing to unauthorized acts. Kearny 
 V. Buttles, 1 Ohio St. 362. But the 
 creditors or a receiver acting for- 
 their interests may dispute the cor- 
 porate liability on such a contract 
 so far as it tends to impair the 
 ability of the corporation to pay its 
 valid obligations. Bank of Chatta- 
 nooga v. Bank of Memphis, 9 Heisk. 
 (Tenn.) 408; National Trust Co. v. 
 Miller, 33 N. J. Eq. 155. A share- 
 holder ratifying, participating in or 
 acquiescing in the acts of a corpora- 
 tion will be bound by such acts anda 
 
621 CONTRACTS § 405 
 
 the acts, doings and declarations of individual members of a cor- 
 poration, unsanctioned by the body, are not binding upon it, yet, 
 in the absence of any vote, a contract may be shown by infer- 
 ences drawn from corporate acts, much the same as in the case 
 of an individual.^'^ 
 
 § 405 (350). Contracts — Parties bound to take notice of char- 
 ter provisions. — The constitution of a corporation, and the pow- 
 ers which it possesses under its constitution, are presumed to 
 be known as matters of law to its menibers and to all persons 
 dealing with the corporation. ^^ It is a logical conclusion from 
 this general rule that parties contracting with a railroad com- 
 pany cannot successfully aver that they were ignorant of the 
 nature of the powers conferred upon it by the legislature, but, 
 nevertheless, the courts do in some measure at least depart from 
 this general doctrine, since they do protect persons who con- 
 tract with the company. The doctrine, however, exerts an im- 
 portant influence on almost all cases. The general principle 
 stated leads to the conclusion that the corporation is not bound 
 by any act of the board of directors, or any other corporate 
 agent, done in excess of the charter powers, since a person deal- 
 
 his trustee cannot bring action ad- St. 160; Leonard v. American In- 
 
 versary to said acts in his favor. surance Co., 97 Ind. 299; Davis •-. 
 
 Memphis &c. R. Co. v. Grayson, 88 Old Colony R. Co., 131 Mass. 2ZX 
 
 Ala. 572, 7 So. 122, 16 Am. St. 69. 41 Am. Rep. 221 ; Kraniger v. Peo- 
 
 37 New York &c. R. Co. v. New pie's &c. Society, 60 Minn. 94, 61 
 York, 1 Hilton (N. Y.) 562; Gowen N. W. 904; Hoyt v. Thompson, 19 
 Marble Co. v. Tarrant, 73 111. 608; N. Y. 207; Alexander v. Cauldwell, 
 Canal Bridge v. Gordon, 1 Pick. 83 N. Y. 480; Jemison v. Citizens' 
 (Mass.) 297; Goodwin v. Union Savings Bank, 122 N. Y. 135, 9 L. R. 
 Screw Co., 34 N. H. 378. A. 708, 19 Am. St. 482, 3 Am. R. 
 
 38 Spence v. Mobile &c. R. Co., 79 & Corp. Cas. 285. In Jenkins v. 
 Ala. 576; Pearce v. Madison &c. R. Gastonia &c. Co., 115 N. Car. 535, 20 
 Co., 21 How. (U. S.) 441, 16 L. S. E. 724, it is held that where the 
 ed. 184; Relfe v. Rundle, 103 U. statute requires the corporate con- 
 S. 222, 26 L. ed. ZZ7 ; Western tract to be in writing it cannot be 
 Nat. Bank v. Armstrong, 152 U. S. ratified by silence. See also Spence 
 346, 14 Sup. Ct. 572, 38 L. ed. 470; v. Wilmington &c. Mills, 115 N. Car. 
 Steele v. Fraternal Tribunes &c. 210, 20 S. E. 372. These cases seem 
 215 111. 190, 74 N. E. 121, 106 Am. to us to go very far. 
 
§ 406 RAILROADS 622 
 
 ing with the corporation is bound to know that no agent can 
 exceed the powers of the corporation itself.** And, of course, 
 nobody can hold a principal bound by a contract made with his 
 agent in excess of that agent's known powers, much less can the 
 corporation be held on the contract where the contract is one 
 which the corporation had no power to make. The same gen- 
 eral rule holds as to ultra vires act of the majority of the stock- 
 holders, for the majorit}"^ can bind absent or dissenting stock- 
 holders only by acts done under sanction of the charter.*** While 
 a person dealing with the corporation is held to be affected with 
 notice of the corporate powers as indicated by the law of its 
 incorporation, he is not, as a rule, bound to take notice of ex- 
 traneous circumstances upon which the right to exercise those 
 powers may depend.*'^ 
 
 § 406 (351). Contracts — Unauthorized — Notice. — A party who 
 deals with a corporation is bound to take notice of the powers 
 conferred upon it by the act of incorporation, but is not bound 
 to take notice of the purpose of the corporation in making the 
 contract unless that purpose is made apparent by the nature of 
 the, transaction. There is, it is obvious, a clearly marked dis- 
 tinction between cases where a party asserts that he was igno- 
 rant of extrinsic facts or circumstances, and cases where he 
 avers ignorance of the provisions of a charter or statute.''- Al- 
 though the purpose of the corporation be to do an illegal act, 
 the person will be unaffected by that fact unless he had notice 
 of it. Thus, if a contract in the form of a negotiable corporate 
 
 39 Elevatoi' Co. v. Memphis 6ic. R. Madison &c. R. Co. v. Norwich Sav 
 Co., 85 Tenn. 703, 5 S. W. 52, 4 Soc, 24 Ind. 457; Thompson v. Lam- 
 Am. St. 798; Davis v. Old Colony bert, 44 Iowa 239; Gano v. Chicago 
 R. Co., 131 Mass. 258, 41 Am. Rep. &c. R. Co., 60 Wis. 12. 17 N 
 221. W. 15; Eastern Counties R. v 
 
 40 Bird V. Bird's Patent &c. Co., Hawkes, 5 H. L. C. 331. 
 
 L. R. 9 Ch. 358. , 42 Tt was held in Kuser.y. Wright 
 
 41 Galveston Railroad v. Cowdrey, 52 N. J. Eq. 825, 31 At! 397 that a 
 11 Wall. (U. S.) 459, 20 L. ed. 199; person receiving a mortgage is not 
 Express Co. v. Railroad Co., 99 U, bound to know that sufficient notice 
 S. 191, 199, 25 L. ed. 319; Oxford was given corporate directors. 
 
 Iron Co. V. Spradley, 51 Ala. 171 ; 
 
623 
 
 CONTRACTS 
 
 §406 
 
 security, issued by a corporation having authority to issue such 
 paper, gives no suggestion that it was issued as accommoda- 
 tion paper, an innocent holder will not be affected by the fact 
 that it was issued for accommodation and without considera- 
 tion,^' but it would be otherwise if the person who took the 
 paper had actual knowledge of its character.** If it is within 
 the scope of the power of the corporate agents to issue such se- 
 curities, the purchaser may assume that they were properly 
 issued.** A person who sells to a corporation property which 
 it has power to purchase, will not be affected by the circum- 
 stances that it was purchased for an unauthorized purpose, if he 
 has no knowledge of such fact.** The general doctrine applies 
 to a loan of money which is afterward misapplied. If the cor- 
 poration had general authority to borrow money the lender is 
 not bound to supervise its application.*'' It is held that if a 
 corporation, with authority to borrow not more than a certain 
 sum, borrows in excess of that sum, the lender may recover 
 
 *3 Estabrook, Ex parte, 2 Low. 
 (U. S.) 547, Fed. Cas. No. 4534; 
 Farmers' &c. Bank v. Sutton &c. Co., 
 52 Fed. 191; Madison &c. R. Co. v. 
 Norwich Sav. See, 24 Ind. 457; 
 Bird V. Daggett, 97 Mass. 494; 
 Monument &c. Bank v. Globe 
 Works, 101 Mass. 57. But see Mc- 
 Lellan v. Detroit &c. Works, 56 
 Mich. 579, 23 N. W. 321 ; Lafayette 
 &c. Bank V. St. Louis &c. Co., 2 Mo. 
 App. 299; National Bank v. Young, 
 41 N. J. Eq. 531, 3 Atl. 94; Farmers' 
 &c. Bank V. Empire Stone Dress- 
 ing Co., S Bosw. (N. Y.) 275; Bank 
 of Genesee v. Patchin Bank, 19 N. 
 Y. 312. 
 
 44 National Bank v. Wells, 79 N. 
 Y. 498; West St. Louis &c. Bank v. 
 Shawnee &c. Bank, 95 U. S. 557, 24 
 L. ed. 490. 
 
 46 Hackensack Water Co. v. De- 
 Kay, 36 N. J. Eq. 548; Ellsworth v. 
 St. Louis &c. R. Co., 98 N. Y. 553; 
 
 Eastern Counties R. Co. v. Hawkes, 
 5 H. L. C. 331; London &c. R. Co. 
 V. McMichael, 5 Exch. 855. A cor- 
 poration having power to execute 
 negotiable paper may bind itself by 
 becoming an indorser or guarantor 
 of bonds received by it in the course 
 of business, with a view to increas- 
 ing the value of such bonds. Rail- 
 road Co. v. Howard, 7 Wall. (U. 
 S.) 392, 19 L. ed. 117; Tod v. Ken- 
 tucky Union Land Co., 57 Fed. 47. 
 
 46 And in case the property is such 
 as the corporation is authorized to 
 purchase, the vendor is under no' 
 obligation to inform himself as to 
 whether this particular purchase 
 was a proper one for it to make. 
 Eastern Counties R. Co. v. Hawkes 
 
 5 H. L. C. 331. 
 
 47 Thompson v. Lambert, 44 Iowa 
 239; Tracy v. Talmadge, 14 N. Y. 
 162, 67 Am. Dec. 132. 
 
§407 
 
 RAILROADS 
 
 624 
 
 provided he made the loan in ignorance that the exces^ was 
 already reached.-*" It may be well enough to suggest, in pass- 
 ing, that the rules respecting rights depending upon the ignoi^- 
 ance of the party dealing with the corporation, are subject to 
 the further rule that he must have acted in good faith and as 
 a prudent man, and his ignorance must not be due to his own 
 fault or negligence.*^ 
 
 §407 (352). Estoppel — Generally. — A corporation maj- estop 
 itself to deny the existence and binding force of a contract, the 
 same as an individual, provided that the contract is not entirely 
 beyond the scope of its corporate powers. Where a corpora- 
 tion voluntarily accepts the benefit arising from the perform- 
 ance of a contract which it had power to make, but which was 
 made on its behalf by one who was not authorized to represent 
 it, it cannot afterward deny its liability on the contract.^" A 
 railroad company may, of course, be estopped by acts or con- 
 
 48 New Providence' V. Halsey, 117 
 U. S. 336, 6 Sup. Ct. 764, 29 L. ed. 
 904; Auerbach v. LeSueur Mill Co., 
 28 Minn. 291, 9 N. W. 799, 41 Am. 
 Rep. 285; Ossipee &c. Mfg. Co. v. 
 Canney, 54 N. H. 295; Mutual Bene- 
 fit &c. Co. V. Elizabeth, 42 N. J. L. 
 235; Cotton v. New Providence, 47 
 N. J. L. 401, 2 Atl. 253. See Coffin 
 V. Indianapolis, 59 Fed. 221. 
 
 *9 Express Co. v. Railroad Co., 99 
 U. S. 191, 199, 25 L. ed. 319. 
 
 60 Bonner v. Spiral Hinge Mfg. 
 Co., 81 N. Y. 468; Little Rock &c. 
 R. Co. V. Perry, 37 Ark. 164; Jour- 
 dan V. Long Island R. Co., 115 N. 
 Y. 380, 22 N. E. 1126; Windsor v. 
 St. Paul &c. R. Co., 37 Wash. 156, 
 79 Pac. 613. See Weatherford &c. 
 R. Co. V. Granger, 85 Tex. 574, 86 
 Tex. 350, 22 S. W. 70, 959, 23 S. 
 W. 425. When a natural principal 
 would be estopped under similar 
 circumstances, to deny his liability 
 
 on a contract made in his name by 
 his agent, a corporation will be estop- 
 ped in like manner, provided the 
 contract is not in the proper sense 
 ultra vires. Foulkes v. San Diego 
 &c. R. Co., 51 Cal. 365; Kellogg 
 Bridge Co. v. Hamilton, 110 U. S. 
 108, 3 Sup. Ct. 537, 28 L. ed. 86; 
 Hayden v. Middlesex Tpk. Co., 10 
 Mass. 397, 6 Am. Dec. 143; Tyler v. 
 Trustees, 14 Ore. 485, 13 Pac. 329. 
 Where the president and general man- 
 ager of a company borrowed money 
 and executed notes in the corporate 
 name it was held that the corpora- 
 tion is not estopped from attacking 
 the validity of the notes, even 
 though one member of the board of 
 trustees knew of the transaction and 
 though the money was used for the 
 company's benefit. Dunbar, C. J., 
 dissenting. Elwell v. Puget Sound 
 &c. R. Co., 7 Wash. 487, 35 Pac. 
 376. 
 
CONTRACTS 
 
 §408 
 
 duct, as well as by matter of record. It may he estopped to 
 deny that it has ratified the unauthorized act of a person who 
 has assumed to represent it. It is not necessary to show a for- 
 mal ratification of a contract by a board of directors of a cor- 
 poration, but it is sufficient to render it binding upon the cor- 
 poration if it accepted and acted under it and performed its 
 terms with full knowledge of its import.^^ 
 
 §408 (353). Ratification of unauthorized acts— Rights of the 
 public and of creditors. — So far as concerns the corporation and 
 its stockholders, there can be no doubt that the unauthorized 
 acts of the company's officers and agents may be ratified by the 
 stockholders, so as to render them valid and binding upon thie- 
 corporation and its stockholders. This is elementary doctrine. ^2; 
 But, as we have elsewhere said, we do not believe that an act;: 
 entirely outside of and beyond the scope of the powers con^ 
 ferred upon the corporation can be ratified so as to give vitality 
 to the contract, for what could not be done directly by enter- 
 ing into contract cannot be accomplished by ratification,^* We 
 
 51 Taylor v. Albermarle Steam Y. S. 719; Taylor v. Chichester &c. 
 Nav. Co., 105 N. Car. 434, 10 R. Co., L. R. 2 Exch. 356, 380. If 
 S. E. 897; Jacksonville &c. R. stockholders of a corporation stand 
 Oo. V. Hooper, 160 U. S. 514, 16 by and sanction, or seem by their 
 Sup. Ct 379, 40 L. ed. 515; Ander- silence to sanction, unauthorized 
 son V. Connor, 43 Misc. 384, 87 N. acts of the officers of the company, 
 Y. S. 449; Gulf &c. R. Co. v. Pitt- they must abide by such acts. Bur- 
 man, 4 Tex. Civ. App. 167, 23 S. W. gess v. St. Louis County R. Co., 99 
 318. The acceptance of a bonus by Mo. 496, 12 S. W. 1050. But in 
 a railroad company ratifies the rep- Weatherford &c. R. Co. v. Granger, 
 resentations made by a director 86 Tex. 350, 24 S. W. 795, it was 
 while soliciting the bonus from the held, reversing 23 S. W. 425, tliat a 
 citizens of a town. corporation accepting a bonus on its 
 
 52 Branch v. Jesup, 106 U. S. 468, organization is not liable on the con- 
 1 Sup. Ct. 495, 27 L. ed. 279; Tay- tract of the promoter for services 
 lor v. S. & N. Alabama R. Co., 13 in procuring the bonus, in the ab- 
 Fed. 152; Augusta &c. R. Co. v. sence of a statutory provision or an 
 Kittel, 52 Fed. 63; Kelley v. New- express agreement to that effect, 
 buryport &c. R. Co., 141 Mass. 496, 53 Post, §426; Kelner v. Baxter, 
 6 N. E. 745; Hitchings v. St. Louis L. R. 2 C. P. 174; Scott v. Lord 
 &c. Trans. Co., 68 Hun 33, 22 N. Ebury, 36 L. J. C. P. 161 ; Melhado 
 
§ 409 RAILROADS 626 
 
 make a distinction between acts performed by agents outside 
 of the scope of their authority, and acts entirely beyond the scope 
 of the powers conferred upon the corporation by the legislature. 
 The question of the right to ratify and of the effect of a ratifi- 
 cation is radically different in cases where the interests of cred- 
 itors are involved, and in cases where the state assails the con- 
 tract, from what it is where the corporation or its stockholders 
 seek to avoid the contract. The state, and in some instances the 
 creditors of the company, may object to the enforcement of 
 such a contract, although the corporation and its stockholders 
 may have assumed to ratify if* 
 
 §409 (354). Contracts in conjunction with other parties. — 
 
 The power to unite with other corporations or with natural per- 
 sons in making contracts required by legitimate corporate busi- 
 ness is one of the implied powers of a railroad company. The 
 general power to contract authorizes the execution of all such 
 contracts as are necessary to enable the corporation to success- 
 fully and properly conduct its corporate business. Thus a rail- 
 road company may unite with natural persons in a contract for 
 the maintenance of crossings,^" or, in many instances, with in- 
 dividuals or corporations for various other legitimate purposes. ^^ 
 
 V. Porto Alegre &c. R. Co., L. R. 189. As to the rights of creditors, 
 
 9 C. P. 503; Spiller v. Paris Rink see Bank of Chattanooga v. Bank of 
 
 Co., L. R. 7 Ch. Div. 368; Empress Memphis, 9 Heisk. (Tenn.) 408; 
 
 Eng. Co., In re, L. R. 16 Ch. Div. Abbott v. Baltimore &c. Co., 1 Md. 
 
 125; North'd Ave. Hotel Co., In re, Ch. 542; National Trust Co. v. Mil- 
 
 L. R. 33 Ch. Div. 16. See Gooday ler, 33 N. J. Eq. 155; Talmage v. 
 
 V. Colchester & S. W. Co., 15 Eng. Pell, 7 N. Y. 328. 
 
 L. & Eq. 596; Preston v. Liverpool 55 Chattanooga &c. R. Co. v. Da- 
 
 M. &c. R. Co., 7 Eng. L. & Eq. 124 ; vis, 89 Ga. 708, IS S. E. 626. 
 
 Webb V. Direct &c. R. Co., 9 Hare 56 See Chicago &c. R. Co. v. 
 
 129. See also Steele v. Fraternal Ayres, 140 111. 644, 30 N. E. 687; 
 
 Tribunes, 215 111. 190, 74 N. E. 121, Nashua &c. R. Co. v. Boston &c. R. 
 
 106 Am. St. 160; 1 Elliott Cont. Co., 27 Fed. 821 ; Chicago &c. R. Co' 
 
 §§560-562. V. Mulford, 162 111. 522, 44 N. E. 
 
 54 Oil Creek &c. R. Co. v. Pennsyl- 861, 39 L. R. A. 599 ; State v. Con- 
 
 vania Trans. Co., 83 Pa. St. 160; cord R. Co., 59 N. H. 85; Elkins v. 
 
 Shewalter v. Pirner, 55 Mo. 218; Camden &c. R. Co., 36 N. J. Eq. 
 
 Kelly v. Peoples' Trans. Co., 3 Ore. 241; Sussex R. Co. v. Morris &c. 
 
627 CONTRACTS § 410 
 
 § 410 (355). Pledge of corporate securities. — ^A party who, in 
 good faith, receives from the board of directors of a corporation 
 bonds in pledge, will be protected provided the directors had 
 authority to issue such bonds.°' The general doctrine is that 
 the power to sell carries with it the power to pledge.^* But an 
 officer or agent who has no power to sell or negotiate the bonds 
 cannot, of course, pledge them, and the decisions in analogous 
 cases clearly establish the doctrine that neither the president 
 nor any other executive or ministerial officer has authorityr 
 merely by virtue of his office, to pledge the bonds of the com- 
 pany.s^ The board of directors, if it has the power to issue and 
 sell bonds, may authorize the president or other representative 
 of the company to pledge them. If the course of business has 
 been such as to warrant the inference that the president or other 
 representative has authority to pledge the bonds, and such an 
 act is n'ot ultra vires in the proper sense, then a pledge by the 
 president would be upheld for the protection of a bona fide 
 pledgee. 
 
 §411 (356). Contracts between connecting lines — Division of 
 fares. — In the absence of a statute interdicting it, one railroad 
 
 company may rightfully enter into a contract with another for 
 
 19 N. J. Eq. 13; Rocky Mt. Mills v. Smith, 16 Wall. (U. S.) 390, 21 
 
 V. Wilmington &c. R. Co., 119 N. L. ed. 361; Bank of U. S. v. Dunn, 
 
 Car. 693, 25 S. E. 854, 56 Am. St. 6 Pet. (U. S.) 51, 8 L. ed. 316; 
 
 682. Blanding v. Davenport &c. R. Co., 
 
 57 Farmers' Loan &c. Co. v. To- 88 Iowa 225, 55 N. W. 81 ; Chemical 
 
 ledo &c. R. Co., 54 Fed. 759; &c. Bank v. Wagner, 93 Ky. 525, 20 
 
 Beecher v. Marquette &c. Mill Co., S. W. 535, 40 Am. St. 206; Famous 
 
 45 Mich. 103, 7 N. W. 695; Dun- &c. Co. v. Eagle Iron Works, 51 
 
 comb V. New York &c. Railroad Co.. Mo. App. 66; Davis v. Rockingham 
 
 84 N. Y. 190. &c. Co., 89 Va. 290, IS S. E. 547. 
 
 = 8 Piatt V. Union Pac. R. Co., 99 See also Second Ave. R. Co. v. 
 
 U. S. 48, 25 L. ed. 424; Leo v. Mehrbach, 49 N. Y. Super. Ct. 267; 
 
 Union Pac. Railway Co., 17 Fed. Titus v. Cairo &c. R. Co., 37 N. J. 
 
 273; Farmers' Loan &c. Co. v. To- L. 98. Nor, it is held, to let a con- 
 
 ledo &c. R. Co., 54 Fed. 759. struction contract. Griffith v. Chi- 
 
 59 Potts v. Wallace, 146 U. S. 689, cago R. Co., 74 Iowa 85, 36 N. W. 
 
 13 Sup. Ct. 196, 36 L. ed. 1135, 40 901; Templin v. Chicago &c. R. Co., 
 
 Am. & Eng. Corp. Cas. 286 ; Burke 1Z Iowa 548, 35 N. W. 634. 
 
1 412 
 
 RAILROADS 
 
 528 
 
 the purpose of making a through line, and agree upon a division 
 of the fares according to local rates."" Where the object of such 
 ■^ contract is to secure through connections and not to stifle com- 
 petition, there is, it is obvious, no violation of the principles of 
 ipublic policy. If, however, under the guise of securing a through 
 ■connection, one railroad company should contract with another 
 for the purpose of shutting off all competition- and enabling one 
 ■of the companies to charge unreasonable fares, the contract 
 'would be illegal. Where there is a statute forbidding combina- 
 tions and the division of fares an essentially dififerent question 
 is presented, and that question is not here considered. 
 
 I 412 (357). Contracts permitting use of part of road. — A dis- 
 tinction is made between the lease of the entire road and a con- 
 tract granting pei^mission to one railroad company to use part 
 of the road of another, and contracts of the latter class may be, 
 and usually are, upheld*^ even though a lease of the entire road 
 
 «o Hartford &c. R. Co. v. New 
 York &c. R. Co., 3 Robt. (N. Y.) 
 411; Columbus &c. R. Co. v. India- 
 napolis &c. R. Co., 5 McLean (U. 
 S.) 4S0, Fed. Cas. No. 3047; An- 
 droscoggin &c. Co. V. Androscoggin 
 R. Co., 52 Maine 417; Stewart v. 
 Erie &c. Co., 17 Minn. 372; Sussex 
 &c. Co. V. Morris &c. Co., 19 N. J. 
 Eq. 13; Great Northern R. Co. v. 
 Manchester R. Co., 10 Eng. L. & 
 Eq. 11. See Missouri Pac. R. Co. 
 V. Texas &c. R. Co., 30 Fed. 2; note 
 in 72 Am. Dec. 230, 231 ; Continent- 
 al Securities Co. v. Interborough &c. 
 Transit Co., 207 Fed. 467; State v. 
 Chicago &c. R. Co., 95 Ark. 114, 128 
 S. W. 555; Bartlette v. Norwich &c. 
 R. Co., 33 Conn. 560; Geforgia R. 
 &c. Co. V. Maddox, 116 Ga. 64, 42 
 S. E. 315, 321, citing text; Graham 
 V. Macon &c. R. Co., 120 Ga. 757, 
 49 S. E. 75; Perkins v. Portland 
 &c. R. Co., 47 Maine 573, 74 Am. 
 
 Dec. 507; Pennsylvania &c. Co. v. 
 Delaware &c. Co., 1 Keyes (N. Y.) 
 72; Munhall v. Pennsylvania R. Co., 
 92 Pa. St. 150. Compare also Chi- 
 cago &c. R. Co. V. Ayres, 140 111. 
 644, 30 N. E. 687; 1 Elliott Cont. 
 § 585. But compare Union Trust 
 &c. Bank v. Kinlock &c. Tel. Co., 
 258 111. 202, 101 N. E. 535, Ann. Cas. 
 1914B, 258, and cases there cited 
 in note, as to rule where the con- 
 tract creates a monopoly or is 
 restraint of trade. .A.s to power of 
 state to compel joint traflSc arrange- 
 ments between conecting carriers, 
 see State v. Minneapolis &c. R. Co., 
 80 Minn. 191, 83 N. W. 60, 89 Am. 
 St. 514, and note, including opinion 
 of Supreme Court of the United 
 States affirming the decision of the 
 state court. 
 
 61 Chicago &c. R. Co. v. Ayres, 140 
 111 644, 30 N. E. 687; Chicago &c. 
 R. Co. V. Denver &c. R. Co., 143 
 
629 
 
 CONTRACTS 
 
 §413 
 
 and property would be unauthorized, in the. absence of any stat- 
 ute to the contrary. Where the company granting the permis- 
 sion does not disable itself from performing its duty to the pub- 
 lic, there is no reason for holding invalid a contract which sim- 
 ply grants the use of part of the road. It would be otherwise if 
 one of the companies by such a contract should disable itself 
 from performing the duties enjoined upon it by law. If the 
 governing statute authorizes the execution of a lease, then, of 
 course, there can be no question as to the power of one company 
 to lease all of its road to another. 
 
 § 413 (358). Contracts regarding terminal facilities. — A con- 
 tract by one railroad company to permit the use of its terminal 
 facilities by another company is valid, in the absence of any 
 statute to the contrary, provided the company owning the ter- 
 minal facilities does not by the terms or the effect of the con- 
 tract disable itself from performing its corporate functions.*^ 
 
 U. S. 596,, 12 Sup. Ct. 479, 36 t ed. 
 277; Union Pacific R. Co. v. Chica- 
 go &c. R. Co., 51 Fed. 309. See 
 also Bacon v. Boston &c. R. Co., 83 
 Vt. 421, 76 Atl. 128; Evansville &c. 
 Ry. Co. V. Evansville &c. Ry. Co., SO 
 Ind. App. 502, 514, 98 N. E. 649 (cit- 
 ing text). 
 
 62 Union Pac. R. Co. v. Chicago 
 &c. R. Co., 51 Fed. 309, 51 Am. & 
 Eng. R. Cas. 162; Chicago &c. R. 
 Co. V. Union Pacific R. Co., 47 Fed. 
 IS. See also Miller v. Green Bay 
 &c. R. Co., 59 Minn. 169, 60 N. W. 
 1006, 26 L. R. A. 443. In the case 
 first cited the court referred to Ore- 
 gan &c. Co. V. Oregonian R. Co.. 
 130 U. S. 1, 9 Sup. Ct. 409, 32 L. 
 ed. 837; Central Trans. &c. Co. v. 
 Pullman &c. Co., 139 U. S. 24, 11 
 Sup. Ct. 478, 35 L. ed. SS, and other 
 cases of like character, and dis- 
 criminated them from the case 
 where there was a grant of a right 
 
 to iise terminal facilities. The 
 court cited, in support of its con- 
 clusion, the following cases: Joy v.. 
 St. Louis, 138 U. S. 1, 43, 11 Sup. 
 Ct. 243, 34 L. ed. 843; Hendee v. 
 Pinkerton, 96 Mas;s. 381, 386; Brown 
 V. Bellows, 4 Pick. (Mass.) 179;. 
 Brown v. Winnisimmet Co., 11 Allen. 
 (Mass.) 326; Providence v. St.. 
 John's Lodge, 2 R. L 46; Dike v. 
 Greene, 4 R. I. 285; Gregory v- 
 Mighell, 18 Ves. 328; Midland tL 
 Co. v. Great Western R. Co., 8 Ch. 
 App. 841, 851 ; Simpson v. Westmin- 
 ster Hotel Co., 8 H. L. Cas. 712. On. 
 appeal to the Supreme Court the 
 judgment was aifirmed and the dis- 
 tinction clearly drawn between such 
 a contract and one disabling a rail- 
 road company from performing 
 its duties to the public, two 
 justices, however, dissenting. 163 
 U. S. 564, 16 Sup. Ct. 1173, 41 L. 
 ed. 26S. See generally Harper ■«. 
 
§414 
 
 RAILROADS 
 
 630 
 
 But under guise of such a contract, a railroad company cannot 
 so divest itself of its property and franchises as to incapacitate 
 itself from discharging the duties resting upon it, nor unlaw- 
 fully discriminate and give excliisive rights contrary to the law. 
 The paramount rule that railroad corporations cannot abdicate 
 their functions, nor surrender their powers without the consent 
 of the legislature is not impinged by a reasonable contract grant- 
 ing to another company use of its tracks and stations. 
 
 §414 (359). Traffic contract — Surrender to competing line. — 
 A traffic contract which destroys the independence of a railroad 
 company and disables it from performing its duties cannot be 
 enforced, except where such a contract is authorized by stat- 
 ute.** The policy of the law is to prevent the creation of monop- 
 olies and to foster fair competition,^* and hence one railroad com- 
 pany has no implied power to absorb another, but such power 
 may be granted by the legislature. The rule that a railroad com- 
 pany cannot "absolve itself from the performance of its func- 
 tions without the consent of the legislature,"*^ is a general 
 
 Cincinnati &c. Co., IS Ky. L. 223,- 
 22 S. W. 849. The text is cited with 
 approval in Georgia R. &c. Co. v. 
 Maddox, 116 Ga. 64, 42 S. E. 315, 
 321, where it is said that such an 
 arrangement, instead of disabling 
 either company from transacting its 
 own business^ increases the facilities 
 of each and correspondingly benefits 
 the general public. 
 
 63Earle v. Seattle &c. R. Co., 56 
 Fed. 909; Evansville &c. Ry. Co. v. 
 Evansville &c. Ry. Co., 50 Ind. App. 
 502, 513, 98 N. E. 649 (citing text). 
 
 8* Chicago &c. R. Co. v. Southern 
 Ind. R. Co., 38 Ind. App. 234, 70 
 N. E. 843, 845, quoting text. See 
 also as to invalidity of contracts be- 
 tween competing lines creating a 
 monopoly. J. H. Field & Son v. E. 
 G. Holland & Son, 158 Ky. 544 165 
 S. W. 699; Louisville &c. R. Co. v. 
 Commonwealth, 161 U. S. 677, 16 
 
 Sup. Ct. 714 40 L. ed. 849. And 
 for additional agreements and com- 
 binations held invalid, see United 
 States v. Pacific &c. R. Co., 228 U. 
 S. 87, 33 Sup. Ct. 443, 57 L. ed. 
 742; United States v. Terminal R. 
 R. Assn., 224 U. S. 383, 32 Sup. 
 Ct. 507, 56 L. ed. 810; United States 
 Tel. Co. V. Central Union Tel. Co., 
 202 Fed. 66; Fields v. Holland, 158 
 Ky. 544, 165 S. W. 699, L. R. A. 
 1915C, 865, and note. 
 
 65 Fisher v. West Virginia &c. Co., 
 39 W. Va. 366, 19 S. E. 578, 23 L. 
 R. A. 758; Ricketts v. Chesapeake 
 &c. R. Co., 33 W. Va. 433, 10 S. 
 E. 801, 7 L. R. A. 354 25 Am. St. 
 901; New York &c. R. Co. v. 
 Winans, 17 How. (U. S.) 30, IS 
 L. ed. 27; Washington &c. R. Co. 
 v. Brown, 17 Wall. (U. S.) 445, 
 21 L. ed. 675; Pennsylvania &c. Co. 
 v. St. Louis &c. Co., 118 U. S. 290, 
 
631 
 
 COKTRACTS 
 
 §415 
 
 one applicable to all classes of contracts made by railroad cor- 
 porations. An arrangement by which one company grants to an- 
 other a right to use its track, the purpose of the two companies 
 being to secure an interchange of traffic, is not a mere naked 
 license but is an enforceable contract.®" Trackage contracts, un- 
 less forbidden by statute, may be made between railroad com- 
 panies."'^ Railroad companies have general power to make con- 
 tracts to build, repair and restore public or private crossings.®* 
 
 §415 (360). Contracts with municipal corporations for ter- 
 minal facilities. — A contract may be made between a railroad 
 company and a municipal corporation, by which the company 
 is granted terminal facilities.®® The grant is taken with the bur- 
 
 6 Sup. Ct. 1094, 30 L. ed. 83; Central 
 Trans. Co. v. Pullman's Palace Car 
 Co., 139 U. S. 24, 11 Sup. Ct. 478, 
 35 L. ed. 55; United States v. Union 
 Pac. R. Co., 160 U. S. 1, 16 Sup. Ct. 
 190, 40 L. ed. 319; Grand Tower &c. 
 Co. V. Ullman, 89 111. 244. See 
 George v. Central &c. R. Co., 101 
 Ala. 607, 14 So. 752; Attorney Gen- 
 eral V. Haverhill Gaslight Co., 215 
 Mass. 394, 101 N. E. 1061, Ann. Cas. 
 1914C, 1266, and note; Quigley v. 
 Toledo R. &c. Co., 89 Ohio St. 68, 
 105 N. E. 185, Ann. Cas. 1915D, 
 992, and note ; Biles v. Tacoma &c. 
 Co., 5 Wash. 507, 32 Pac. 211. In 
 Galveston &c. Co. v. Davis, 4 Tex. 
 Civ. App. 468, 23 S. W. 301, and 
 in Galveston &c. Co. v. Arispe, 5 
 Tex. Civ. App. 611, 23 S. W. 928, 24 
 S. W. 33, it was held that an 
 arrangement by which several com- 
 panies lease their roads to one com- 
 pany for ninety-nine years, is an 
 agreement of partnership and not a 
 lease. We very much doubt the 
 soundness of those decisions, for, as 
 we believe, the contract, whether 
 technically a lease or not, was in- 
 effective. 
 
 66 Louisville &c R. Co. v. ' Ken- 
 tucky &c. R. Co. 95 Ky. 55, 26 S. W. 
 532. 
 
 6'' Union Pac. R. Co. v. Chicago 
 &c. R. Co., 163 U. S. 564, 16 Sup. 
 Ct. 1173, 41 L. ed. 265; Boston &c. 
 R. Corp. V. Nashua &c. R. Corp., 
 157 Mass. 258, 31 N. E. 1067, cit- 
 ing Nashua &c. R. Co. v. Boston 
 &c. R., 136 U. S. 356, 10 Sup. Ct. 
 1004, 34 L. ed. 363. Contract 'grant- 
 ing right to use railroad and appur- 
 tenances is governed by ordinary 
 rules of construction. Chicago &c. 
 Co. V. Denver &c R. Co., 143 U. S. 
 596, 12 Sup. Ct. 479, 36 L. ed. 277, 
 50 Am. & Eng. R. Cas. 60. See 
 St. Paul &c. R. Co. V. St. Paul &c. 
 Co., 44 Minn. 325, 46 N. W. 566.. 
 
 «8 Post V. West Shore &c. R. Co., 
 123 N. Y. 580, 26 N. E. 7. See 
 Atchison &c. R. Co. v. Lenz, 35 111. 
 App. 330; Elgin v. Baltimore &c. 
 R. Co., 74 Md. 61, 21 Atl. 688. 
 
 69 Louisville &c. Co. v. Mississippi 
 &c. Co., 92 Tenn. 681, 22 S. W. 920, 
 59 Am. & Eng. R. Cas. 99; Balti- 
 more &c. R. Co. V. Pittsburgh &c. 
 R. Co., 55 Fed. 701; St. Paul &c. 
 
§416 
 
 RAILROADS 
 
 632 
 
 dens imposed upon it by the town or city/" and all companies 
 claiming through the company to which the grant is made take 
 subject to the burdens so imposed J^ It is true of all grants of 
 rights to use public parks, streets or roads, that the grantee 
 takes with the burdens imposed by the municipal authorities, 
 and all parties whose claims are founded upon the grant are 
 bound by its terms and conditions. 
 
 §416 (361). Use of tracks constructed under grant from 
 municipal corpK>ration. — It is common for municipal corpora- 
 tions to grant the right to use its streets to one railroad com- 
 pany upon a condition that other companies may be permitted 
 to use the trackJ^ xhe power to make such a contract is un- 
 questionable, and the disputes that the courts have been called 
 upon to adjudicate generally are as to the construction to be 
 given such contracts^* Ordinarily, the municipal corporation 
 
 V. Minnesota &c. R. Co., 47 Minn. 
 154, 49 N. W. 646, 13 L. R. A. 415, 
 50 Am. & Eng. R. Cas. 55; Chi- 
 cago &c. Co. V. St. Paul &c. R. 
 Co., 54 Minn. 411, 56 N. W. 129. 
 See also Admiral Realty Co. v. New 
 York, 206 N. Y. 110, 99 N. E. 241, 
 Ann. Cas. 1914A, 1054. 
 
 '^0 Hays v. Michigan Cent. R. Co., 
 Ill U. S. 228, 4 Sup. Ct. 369, 28 
 L. ed. 410, 15 Am. & Eng. R. Cas. 
 394. 
 
 71 Joy V. St. Liouis, 138 U. S. 1, 11 
 Sup. Ct. 243, 34 L. ed. 843, 45 Am, 
 & Eng. R. Cas. 655 ; Cincinnati v. 
 White, 6 Pet. (U. S.) 431, 8 L. ed, 
 452; Randall v. Latham, 36 Conn 
 48 ; Stockett v. Howard, 34 Md. 121 
 Van Doren v. Robinson, 16 N. J 
 Eq. 256; Winfield v. Henning, 21 
 N. J. Eq. 188; Kirkpatrick v. Pesh- 
 ine, 24 N. J. Eq. 206; Parker v. 
 Nightingale, 88 Mass. 341, 83 Am. 
 Dec. 632 ; Bronson v. Coffin, 108 
 Mass. 175 ; Trustees of Watertown 
 
 V. Cowen, 4 Paige (N. Y.) 510, 27 
 Am. Dec. 80; Verplanck v. Wright, 
 23 Wend. (N. Y.) 506; Drew v. 
 Van Deman, 6 Heisk. (Tenn.) 433; 
 citing Tulk v. Moxhay, 2 Phil. Ch. 
 774; Luker v. Dennis, 7 Ch. Div. 
 227; Western v. Macdermott, L. R. 
 2 Ch. 72. 
 
 72 We merely touch upon the gen- 
 eral question here, as we have con- 
 sidered the subject more at length 
 in discussing the subject of rail- 
 roads in streets. 
 
 73 Chicago &c. R. Co. v. Kansas 
 City &c. R. Co., 52 Fed. 178, 38 Fed. 
 58; Central &c. Co. v. Wabash &c. 
 R. Co., 29 Fed. 546. The. power of 
 determining where tracks shall be 
 located, unless an express provision 
 to the contrary is made by the legis- 
 lature, resides in the municipal cor- 
 poration. Citizens &c. Co. v. Jones, 
 34 Fed. 579; West End &c. R. Co. 
 v. Atlanta &c. Co., 49 Ga. 151; Chi- 
 cago &c. R. Co. V. People, 73 111. 541 ; 
 
633 CONTRACTS § 417 
 
 may impose such conditions as in its discretion it deems ex- 
 pedient, and the company accepting such a grant, as well as 
 such companies as avail themselves of the benefit of it, must 
 accept the benefit with its conditions and burdensJ* It has also 
 been held that a municipal corporation may contract with a 
 railroad company to pay part of the expense of changing a 
 grade crossing, and in making such a contract the municipality 
 does not loan its creditJ^ 
 
 § 417 (362). Contracts for location of stations. — Elsewhere 
 we have directed attention to the cases which hold that a rail- 
 JToad company cannot enter into a valid contract to locate a sta- 
 tion at a designated place, and have said that in our opinion 
 such a contract may be made if no public interest is prejudiced. 
 If the contract is made solely to promote private interests at 
 the expense of the public welfare, the contract should, as we 
 think, be held to be illegal. But if public interests are not 
 prejudiced, or the power of the company to do what the public 
 welfare requires is not abridged, we believe the contract should 
 be regarded as valid. Many cases hold that a railroad corpora- 
 tion may contract for the erection and maintenance of a station 
 at a certain point,'''' where its right to maintain stations at other 
 
 State V. Henderson, 38 Ohio St. 644; where the city has excessive power. 
 
 Elliott Roads & Streets (3rd ed.), Parson v. Fogg, 205 111. 326, 68 N. 
 
 §966. E, 7SS. 
 
 74 Louisville &c. Co. v. Mississippi '^6 Atlantic &c. R. Co. v. Camp, 
 
 &c. Co., 92 Tenn. 681, 22 S. W. 130 Ga. 1, 60 S. E. 177, IS L. R. A. 
 
 920; Joy v. St. Louis, 138 U. S. 1, (N. S.) 594, 597, 598 (quoting 
 
 11 Sup. Ct. 243, 34 L. ed. 843, 45 text) ; Gray v. Chicago &c. R. Co., 
 
 Am. & Eng. R. Cas. 655. 189 111. 400, 59 N. E. 950; Louis- 
 
 TSBrooke v. Philadelphia, 162 Pa. ville &c. R. Co. v. Sumner, 106 Ind. 
 
 St. 123, 29 Atl. 387, 24 L. R. A. 781. 55, 5 N. E. 404, 55 Am. Rep. 719; 
 
 See also Detroit v. Detroit United Cedar Rapids &c. R. Co. v. Spafford, 
 
 R. Co., 133 Mich. 608, 95 N. W. 736; 41 Iowa 292; First Nat. Bank v. 
 
 Detroit v. Detroit R. Co., 134 Mich. Hendrie, 49 Iowa 402, 31 Am. Rep. 
 
 11, 95 N. W. 992, 99 N. W. 411, 153; Owensboro &c." R. Co. v. Grif- 
 
 104 Am. St. 600. But compare as to fith, 92 Ky. 137, 17 S. W. 277 ; Mc- 
 
 lack of power of street railway coni- dure v. Missouri River &c. R. Co., 
 
 pany to make agreement with prop- 9 Kans. 373; Kansas Pac. R. Co. v. 
 
 erty owners in regard to paving Hopkins, 18 Kans. 494; Port Huron 
 
§418 
 
 RAILROADS 
 
 634 
 
 points is not thereby impairedJ^ This we believe to be the 
 sound doctrine. But an agreement not to locate a station or 
 depot within prescribed limits, where it is needed for the busi- 
 ness of the company and for the use of the public would be 
 illegal^* 
 
 §418 (363). Location of tracks, switches and the like. — The 
 
 first duty of a railroad company in the location of tracks and 
 
 &c. R. Co. V. Richards, 90 Mich. 
 577, 51 N. W. 680; Grimes v. Minne- 
 apolis &c. Trac. Co., 133 Minn. 442, 
 158 N. W. 719, L. R. A. 1916F, 687, 
 and authorities there cited in note; 
 Vicksburg &c. R. Co. v. Ragsdale, 
 46 Miss. 458; Martindale v. Kansas 
 City &c. R. Co., 60 Mo. 508; Kinealy 
 V. St. Louis &c. R. Co., 69 Mo. 658; 
 Missouri Pac. R. Co. v. Tygard, 84 
 Mo. 263, 54 Am. Rep. 97; Currier 
 V. Concord R. Co., 48 N. H. 321; 
 Cumberland Valley R. Oo. v. Baab, 9 
 Watts (Pa.) 458, 36 Am. Dec. 132; 
 Caldwill V. East Broad Top &c. R. 
 Co., 169 Pa. St. 99, 32 Atl. 85; 
 Texas &c. R. Co. v. Robards, 60 
 Tex. 545, 48 Am. Rep. 268; Mosel 
 V. San Antonio &c. R. Co. (Tex. 
 Civ. App.), 177 S. W. 1048; Jessup 
 V. Grand Trunk R. Co., 28 Grant's 
 Ch. (U. C.) 583; Wallace v. Great 
 Western R. Co., 3 Ont. App. 44. 
 Contra Pacific R. Co. v. Seely, 45 
 Mo. 212, 100 Am. Dec. 369; Burney 
 V. Ludeling, 47 La. Ann. 73, 16 So. 
 507. As to specific performance of 
 such contracts, see 16 L. R. A. (N. 
 S.) 307, and note. 
 
 77 Williamson" v. Chicago &c. R. 
 Co., S3 Iowa 126, 4 N. W. 870, 36 
 Am. Rep. 206; St Louis &c. R. Co. 
 V. Mathers, 72 111. 592. Where a 
 right of way and ground for the 
 
 erection of station were granted to 
 a railroad at a nominal quit rent in 
 consideration that "all passenger 
 trains should stop regularly" at such 
 station, it was held on appeal to 
 the House of Lords that the com- 
 pany was bound to stop all trains 
 passing through said station for the 
 conveyance of passengers, excepting 
 trains chartered by individuals for 
 their own use, and special excursion 
 trains. Burnett v. Great North of 
 Scotland R. Co., L. R. 10 App. Gas. 
 147, 24 Am. & Eng. R. Cas. 647. 
 
 78 Florida Cent. R. Co. v. State, 
 31 Fla. 482, 13 So. 103, 20 L. R. A. 
 419, 34 Am. St. 30; Marsh v. Fair- 
 bury &c. R. Co., 64 111. 414, 16 Am. 
 Rep. 564; Louisville &c. R. Co. v. 
 Sumner, 106 Ind. 55, S N. E. 404, 
 55 Am. Rep. 719; Chicago &c. R. 
 Co. v. Southern Ind. R. Co., 38 Ind. 
 App. 234, 70 N. E. 843; St. Joseph 
 &c. R. Co. V. Ryan, 11 Kans. 602, 
 IS Am. Rep. 357; Baird v. Salina 
 &c. R. Co., 103 Kans. 452, 173 Pac. 
 1069, L. R. A. 1918F, 1201; Currie 
 V. Natchez &c. R. Co., 61 Miss. 725; 
 Mobile &c. R. Co. v. People, 132 
 111. 559, 24 N. E. 643, 22 Am. St. 
 556. See also notes in 6 L. R. A. 
 (N. S.) 524; 25 L. R. A. (N. S.) 
 967. 
 
635 
 
 CONTRACTS 
 
 §418 
 
 switches is to the public, and it cannot rightfully make any con- 
 tract which will prevent it from performing this duty. Where, 
 however, no public interest is affected, and there is no statute 
 to the contrary, a railroad company may bind itself to locate a 
 switch at a designated place.'^* If, however, it appears that the 
 company is governed by a consideration of self-interest, and 
 that the interest of the public will be prejudiced by such a con- 
 tract, it should be regarded as illegal.^" It has been held that a 
 railroad company may make a valid agreement to stop i'ts 
 trains at a certain point at specified times for the receipt of 
 freight.^-*- But in our opinion such contracts cannot be upheld 
 if it is shown that they are materially injurious to the interests 
 of the public, for the public welfare cannot be sacrificed for 
 mere private benefit.*^* It has also been adjudged that a rail- 
 road company may agree with the lessee of refreshment rooms 
 at a point upon its line for the stoppage of its trains at such 
 point for a reasonable time to enable the passengers to obtain 
 refreshments there,*^ and that a recovery may be had for a 
 breach of such agreement. ■''■^ 
 
 79 Whalen v. Baltimore &c, R. Co., 
 108 Md. 11, 69 Atl. 390, 17 L. R. A. 
 (N. S.) 130n, 129 Am. St. 423; Ly- 
 dick V. Baltimore &c. R. Co., 17 W. 
 Va. 427. 
 
 80 See Chicago &c. R. Co. v. 
 Southern Ind. R. Co., 38 Ind. App. 
 234, 70 N. E. 843. 
 
 81 Lydick v. Baltimore &c. Co., 17 
 W. Va. 427; Lindsay v. Great 
 Northern R. Co., 17 Jur. S22. In 
 these cases it was held that such an 
 agreement could be specifically en- 
 forced, and a court of equity will 
 restrain a breach thereof. 
 
 8ia See Ford v. Oregon Elec. R. 
 Co., 60 Ore. 278, 117 Pac. 809, 36 
 L. R. A. (N. S.) 358, Ann. Cas. 
 1914A. 280. 
 
 82 Phillips V. Great Western R. 
 Co., L. R. 7 Ch. 409. 
 
 83 Flanagan v. Great Western R. 
 Co., L. R. 7 Eq. 116; Rigby v. Great 
 Western R. Co., 4 Eng. R. & Canal 
 Cas. 190. But we think that such 
 contracts are to be carefully scrut- 
 inized and not upheld where they 
 materially infringe the rights of 
 the public. The public interest is 
 always, as it seems to us, the para- 
 mount consideration. Contracts to 
 stop trains at designated places, or 
 to do like acts, may in many in- 
 stances be detrimental to the public 
 welfare, and in such instances they 
 should not be enforced. See Wha- 
 len V. Baltimore &c. R. Co., 108 Md. 
 11, 69 Atl. 390, 17 L. R. A. (N. S.) 
 130n, 129 Am. St. 423; Conger v. 
 New York &c. R. Co., 120 N. Y. 
 29, 23 N. E. 983. 
 
§419 
 
 K.MLROADS 
 
 636 
 
 § 419 (364). Contracts that may be made by railroad com- 
 panies — Particular instances. — We have called attention to the 
 general and familiar rule that all railroad companies possess 
 implied and incidental contract powers, and we do not attempt 
 to give many cases illustrating the general rule, but shall refer 
 to some cases possessing peculiar features. Unless some statute 
 forbids, a railroad company may contract to carry a person and 
 his family upon its trains free during his life,®* or for any period 
 of time,®^ subject to any prescribed legal conditions.^'' It may 
 make special contracts for the carriage of passengers,®'^ pro- 
 vided that it makes no unjust discrimination and violates no 
 
 84 Grimes v. Minneapolis &c. R. 
 Co., 37 Minn. 66, 33 N. W. 33. See 
 Pennsylvania Co. v. Erie &c. R. 
 Oo,. 108 Pa. St. 621; Rice v. Illi- 
 nois Cent. R. Co., 22 111. 643. The 
 interstate commerce act may not only 
 forbid such a contract but may al- 
 so prevent its • enforcement even 
 though entered into before the pas- 
 sage of the act. Louisiville &c. R. 
 Co. v. Mottley, 219 U. S. 467, 31 
 Sup. Ct. 265, SS L. ed. 297, 34 L. 
 R. A. (N. S.) 671. See also note 
 in 23 L. R. A. (N. S.) 217. Where 
 right of way is granted to a railroad 
 company in consideration of a free 
 pass for the grantor during his life, 
 the purchaser of the road at a fore- 
 closure sale cannot be held liable 
 for failure to grant such pass. Hel- 
 ton v. St Louis &c. R. Co., 2b Mo. 
 App. 322. 
 
 S5 Knopf v. Richmond &c. R. Co., 
 85 Va. 769, 8 S. E. 787. 
 
 86 In Knopf V. Richmond &c. R. 
 Co., 85 Va. 769, 8 S. E. 787, it was 
 decided that, under the circum- 
 stances, the company was not at 
 fault for failing to issue a pass 
 which had not been applied for, 
 and that the company's ageiils 
 
 rightfully ejected, the plaintiff on 
 his failure to produce and show a 
 pass. In Grimes v. Minneapolis &c. 
 R. Co., 37 Minn. 66, 33 N. W. 33, 
 it was held that the defendant, hav- 
 ing contracted to carry the mem- 
 bers of the family of plaintiff's 
 father, in consideration of a con- 
 veyance of land for a right of way, 
 and making it a rule to issue no 
 passes, was under an obligation to 
 inform the conductors of plaintiff's 
 rights, and instruct them to allow 
 them. 
 
 sTGulf &c. R. Co. V. McGown, 
 65 Tex. 640; Mosher v. St. Louis 
 &c. R. Co., 127 U. S. 390, 8 Sup. 
 Ct. 1324, 32 L. ed. 249; Penning- 
 ton V. Philadelphia &c. R. Co., 62 
 Md. 95; Johnson v. Philadelphia 
 &t. R. Co., 63 Md. 106; Bates v. 
 Old Colony R. Co., 147 Mass. 255, 
 17 N. E. 633. See also Quimby v. 
 Boston &c. R. Co., ISO Mass. 365, 
 23 N. E. 205, 5 L. R. A. 846; Gris- 
 wold v. New York &c. R. Co., 53 
 Conn. 371, 4 Atl. 261, 55 Am. Rep. 
 115; Ulrich v. New York &c. R. 
 Co., 108 N. Y. 80, 15 N. F. 60, 2 
 Am. St. 369. 
 
637 CONTRACTS § 420 
 
 statute or rules of law. This is true also respecting the car- 
 riage of goods. ^* It may, by contract, extend its duties and 
 liabilities to the carriage of goods beyond its own line.^* Many 
 cases also hold that where no statutory provisions control, a 
 railway company may contract to carry for less than a reason- 
 able compensation, though it may not charge more.^° 
 
 §420 (365). Pooling contracts — Generally. — There is much 
 ■diversity of opinion as to the wisdom or expediency of permit- 
 ting railroad companies to enter into pooling contracts, and 
 there is some diversity of opinion among authors and judges 
 as to the validity of such contracts. It seems to us that some 
 confusion has been caused by the failure to clearly discriminate 
 a pooling contract from a contract for the maintenance of fair 
 rates and the prevention of ruinous competition. If a contract 
 is simply one wherein provision is made for preventiiig ruinous 
 •competition and is neither intended to nor does limit or sup- 
 press fair competition and is neither intended to nor does fix or 
 maintain unreasonable rates of fare, then it cannot be regarded 
 
 88 Ball V. Wabash &c. R. Co., 83 111. 293 ; Cummins v. Dayton Lz. R. 
 Mo. S74; Louisville &c. R. Co. v. Co. (Marion Co., Ind., Super. Ct), 
 Sherrod, 84 Ala. 178, 4 So. 29, 35 9 Am. & Eng. R. Cas. 36; Beard 
 Am. Rep. 628; Bartlett v. Pitts- v. St. Louis &c. R. Co., 79 Iowa 
 Wabash &c. R. Co., Ill 111. 351, 53 527, 44 N. W. 803; Swift v. Pa- 
 Am. Rep. 628; Bar-ljlett v. P'iJJts- cific Mail &c. Co., 106 N. Y. 206, 
 burgh &c. R. Co., 94 Ind. 281; 12 N. E. 583; Hanson v. Flint &c. 
 Sprague-v. Missouri Pac. R. Co., 34 R. Co., 73 Wis. 346, 41 N. W. 529, 
 Kans. 347, 8 Pac. 465; Chicago &c. 9 Am. St. 791. 
 R. Co. V. Abels, 60 Miss. 1017; so Toledo &c. R. Co. v. Elliott, 76 
 Brown v. Manchester &c. R. Co., L. 111. 67; Christie v. Missouri Pac. 
 R. 9 Q. B. Div. 230, 10 Q. B. Div. R. Co., 94 Mo. 453, 7 S. W. 567; 
 250, affirmed, L. R. 8 App. Cas. 703. Carton v. Railway Co., 1 Best & S. 
 
 88 Houston &c. R. Co. v. Hill, 63 112, 154. But it may not unjustly 
 
 Tex. 381, 51 Am. Rep. 642; Dar- discriminate in favor of certain ship- 
 
 denelle &C; R. Co. v. Shinn, 52 Ark. pers so as to foster monopoly. Sco- 
 
 93, 12 S. W. 183; Pereira v. Cen- field v. Lake Shore &c. R. Co., 43 
 
 tral Pac. R. Co., 66 Cal. 92, 4 Pac. Ohio St. 571, 3 N. E. 907, 54 Am. 
 
 ■988 ; Atlanta &c. R. Co. v. Texas Rep. 846. See Houston &c. R. Co. v. 
 
 G. Co., 81 Ga. 602, 9 S. E. 600; Rust, 58 Tex. 98, 9 Am. & Eng; R. 
 
 .St. Louis &c. R. Co. V. Lamed, 103 Cas. 123. 
 
§ 420 RAILROADS 
 
 638 
 
 as an illegal pooling contract, but must be regarded as a valid 
 traffic contract. If there is no restraint placed upon any one of 
 the contracting companies, if all- are left free to perform their 
 duties, and if tliere is no incentive or inducement to any one of 
 them to neglect or refuse to perform its duty there is not, as it 
 seems to us, any illegal element in the contract. But if the con- 
 tract either in terms or in effect disables any one of the con- 
 tracting companies from performing its duty or makes it to its 
 interest not to perform its duty the contract should, as we be- 
 lieve, be held void as against public policy. Whether the con- 
 tract does or does not disable some one of the contracting com- 
 panies, or whether it makes it to its interest not to perform its 
 duty, or limits fair competition, or tends to enable the com- 
 panies, or some one of them, to obtain unreasonable fares, are 
 questions to be determined from the facts of the particular 
 case. Where the constitution or statute prohibits contracts be- 
 tween competing or rival lines then, of course, no such contract 
 can be valid. ^* If the policy of the state as indicated by its laws 
 is against such contracts they are not, if is obvious, of any 
 validity.^* We do not at this place enter upon a consideration 
 of the effect of the federal interstate commerce law, or of the 
 federal statute directed against trusts, or the effect of state stat- 
 utes directed against trusts and combinations, but confine our 
 discussion to the subject of what are commonly called pooling" 
 contracts without regard to constitutional or statutory pro- 
 visions.®® 
 
 93 In some of the states railroad terstate commerce act and the re- 
 companies are forbidden to enter in- cent decisions of the Supreme 
 to any contract for pooling their Court of the United States in such 
 earnings. cases as United States v. Trans- 
 
 94 Morrill v. Boston &c. R. Co., Missouri Freight Assn., 166 U. S. 
 55 N. H. 531. But see Manchester 290, 17 Sup. Ct. 540, 41 L. ed. 1007; 
 &c. R. Co. V. Concord R. Co., 66 Northern Securities Co. v United 
 N. H. 100, 20 Atl. 383, 9 L. R. A. States, 193 U. S. 197, 24 Sup Ct 
 689, 49 Am. St. 582, 47 Am. & Eng. 436, 48 L. ed. 679, and Southern 
 R. Cas. 359, 3 Am. R. & Corp. R. Pac. R. Co. v. Interstate Com., 200- 
 22; Currier v. Concord R. Co., 48 U. S. 536, 26 Sup. Ct. 330, SO L. 
 N. H. 321. ed. 585, will be considered in an- 
 
 95 The effect of the so-called other volume. And see "Transporta- 
 Sherman anti-trust act and the in- tion Act, 1920". 
 
639 
 
 CONTRACTS 
 
 §421 
 
 § 421 (366). Pooling contracts — ^The authorities. — The rule 
 which seems to be sanctioned by the weight of authority is that 
 contracts between railroad companies providing for the regula- 
 tion of charges and preventing ruinous competition are not in 
 themselves illegal, but they are illegal if they are intended to 
 suppress fair competition or have that effect, and so they are if 
 they disable any of the contracting companies from performing 
 their duty or make it to the interest of any one of them not to 
 perform the duty enjoined upon them by law.^" We have stated 
 
 96 Pittsburgh &c. R. Co. v. Keo- 
 kuk &c. Co., 131 U. S. 371, 9 Sup. 
 Ct. 770, 33 L. ed. 157; Central Trust 
 Co. V. Ohio Central R. Co., 23 Fed. 
 306; Koehler, Ex parte, 23 Fed. 529; 
 United States v. Trans-Missouri &c. 
 Assn., 58 Fed. 58; Eclipse &c. Co. 
 V. Pontchartrain R. Co., 24 La. Ann. 
 1 ; Stewart v. Erie &c. Co., 17 Minn. 
 372; Burke v. Concord R. Co., 61 
 N. H. 160; Manchester &c. R. Co. 
 V. Concord R. Co., 66 N. H. 100, 20 
 Atl. 383, 49 Am. St. 582, 47 Am. 
 & Eng. R. Cas. 359, 3 Am. R. & 
 Corp. Cas. 22; Sussex &c. R. Co. v. 
 Morris R. Co., 19 N. J. Eq. 13; 
 Shrewsbury &c. R. Co. v. London 
 &c. R. Co., 17 Q. B. 652, 21 L. J. 
 Q. B. 89; Hare v. London &c. R. 
 Co., 2 J. & H. 80, 30 L. J. Ch. 817; 
 Lancaster &c. Co. v. Northwestern 
 &c. Co., 2 K. & J. 293, 25 L. J. Ch. 
 223. In Ives v. Smith, 3 N. Y. 
 645, 19 N. Y. St 645, a violation 
 of such a contract by a company 
 was enjoined at the suit of a stock- 
 holder. A contract between rail- 
 road companies, members of a 
 freight association, binding them to 
 establish and maintain such rates, 
 rules and regulations on freight 
 traffic between competitive points, 
 as a committee of their choosing 
 
 shall recommend, providing for 
 monthly meetings of the association, 
 and that each company shall give 
 five days' notice before a monthly 
 meeting of every reduction of rates 
 or deviation from the rules it pro- 
 poses to make; that it will advise 
 with the representatives of the other 
 members at the meeting relative to 
 proposed changes, and if the propo- 
 sition is voted down, that it will 
 then give ten days' notice that it 
 will make the changes, notwith- 
 standing the vote, if it will not 
 abide by the vote; that no member 
 will bill any freight falsely, or at a 
 wrong classification ; and, providing 
 that any member may withdraw 
 from the asociation on a notice of 
 thirty days, does not substantially 
 disable the parties to the contract 
 from the performance of their pub- 
 lic duties. United States v. Trans- 
 Missouri Freight Assn., 58 Fed. 58, 
 In this case there is a strong dis- 
 senting opinion by Shiras, J. See 
 Texas &c. R. Co. v. Southern Pa- 
 cific R. Co., 41 La. Ann. 970, 6 So. 
 888, 17 Am. St. 445, 10 Am. & Eng. 
 R. Cas. 475; Kettle River R. Co. v. 
 Eastern R. Co., 41 Minn. 461, 43 
 N. W. 469, 40 Am. & Eng. R. Cas. 
 449. 
 
§421 
 
 RAILROADS 
 
 640 
 
 the doctrine in somewhat narrower terms than some of the ioases 
 declare it, but we believe our statement to be a fair expression 
 of the prevailing, opinion. If the purpose of the contract between 
 the companies is to stifle competition so as to obtain unreason- 
 able fares, or if its effect be to disable one of the contracting ,com- 
 panies from performing the duty enjoined upon it, the i contract 
 should be condemned as illegal.®'' 
 
 OT In the case of Chicago &c. R. 
 Co. V. Wabash &c. Co., 61 Fed. 993, 
 10 Lewis' Am. R. & Corp. 173, 
 the court said: "A railroad com- 
 pany is quasi public corporation 
 and owes certain duties to the pub- 
 lic, among which are the duties to 
 afford reasonable facilities for the 
 transportation of persons and to 
 charge only reasonable rates for 
 such service. Any contract by which 
 it disables itsfelf from these duties, 
 or which makes it to its interest 
 not to perform them, or removes all 
 incentive to their performance, is 
 contrary to public policy and void, 
 and the obvious purpose of this con- 
 tract being to suppress or limit com- 
 petition between the contracting 
 companies, in respect to the traffic 
 covered by the contract, and to es- 
 tablish rates without regard to the 
 question of their reasonableness, it 
 is contrary to public policy and 
 void." The court cited Cleveland 
 &c. Co. V. Closser, 126 Ind. 348, 26 
 N. E. 159, 9 L. R. A. 754, 22 Am. St. 
 593 ; Gibbs v. Consolidated Gas 
 Co., 130 U. S. 396, 9 Sup. Ct. 553, 
 32 L. ed. 919; United States v. 
 Trans-Missouri &c. Assn., 58 Fed. 
 58; Western Union Tel. Co. v. 
 American &c. Co., 65 Ga. 160, 38 Am. 
 Rep. 781 ; Chicago &c. Co. v. Peo- 
 
 ple's &c. Co., 121 111, 530, 13,,N. E. 
 169, 2 Am. St. 124; Sayre v. Louis- 
 ville &c. Assn., 62 Ky. 143, 85 Am. 
 Dec. 613; Texas &;c. Co. v. South- 
 ern Pac. R. Co., 41' La. A!nn. 970, 
 6 So. 888, 17 Am. St. 445; Hook- 
 er v. Vande water, 4 Denio (N. Y.) 
 349, 47 Am. Dec. 258; Stanton v 
 Allen, 5 Denio (N. Y.) 434, 49 Am. 
 Dec. 282 ; Central &c. Co. v. Guthrie,. 
 35 Ohio St. 666; State v. Standard 
 Oil Co., 49 Ohio St. 137, 30 N. E. 
 279, 15 L. R. A. 145, 34 Am. St. 
 541 ; Morris Run Co. v. Barclay &c. 
 Co., 68 Pa. St. 173, 8 Am. Rep.. 
 159; Gulf &c.- R. Co. v. State, 72 
 Tex. 404, 10 S. W. 81, 1 L. R. A. 
 849, 13 Am. St. 815; West Va. 
 &c. Co. V. Ohio River &c. Co., 22 
 W. Va. 600, 46 Am. Rep. 527. The 
 court denied the doctrine of Cen- 
 tral &c. Co. V. Ohio Central R. Co., 
 23 Fed. 306. Mr. Lewis, in this 
 note to the case from which we 
 have quoted, cites and comments 
 upon many cases. 10 Lewis' Am. R. 
 & Corp. R. 181-184 See also as to 
 contracts for division of territory 
 or the like. Chicago &c. R. Co. v. 
 S'outhern Ind. R. Co., 38 Ind. App. 
 234, 70 N. E. 843; Home Telephone 
 Co. v. North Manchester Tel. Co., 
 47 Irid. App. 411, 92 N. E. 558, 93 
 N. E. 234. 
 
641 CONTRACTS § 422 
 
 § 422 (357). Pooling contracts — Presumption. — It seems to us 
 that when it appears that several railroad companies have en- 
 tered into an agreement to establish and maintain rates the pre- 
 sumption should be against its validity, and that the contracting 
 companies should be required to show that it was not intended to 
 unjustly stifle fair competition or disable any one of the com- 
 panies from performing its duty. Prima facie such a contract 
 should be regarded as against public policv."* The presumption 
 against such a contract may doubtless be removed, but the con- 
 tract should be jealously scrutinized and not upheld if it be not 
 made to appear that it was not entered into in order to prevent 
 ruinous or, as some of the cases say, unhealthy competition. The 
 burden of making this appear should be placed on the party who 
 asserts the validity of the contract.^® But a contract between 
 companies whose roads connect and are not competing is not 
 such a pooling contract as we mean, and, unless prohibited by 
 charter or statute, such a contract between connecting companies 
 is usually valid. ^ 
 
 §423 (368). Contracts — Ultra vires— Definitions.— In dis- 
 cussing many of the subjects which have been considered in the 
 preceding pages we have referred to the doctrine of ultra vires, 
 and so we shall do in other parts of our work, but it seems ap- 
 
 98 Cleveland &c. R. Co. v. Closser, Boston &c. R. Co., SS N. H. 531. 
 
 126 Ind. 348, 26 N. E. 159, 9 L. R. But a court will not help a quilty 
 
 A. 754, 22 Am. St. 593 ; Chicago &c. party where such a contract has 
 
 R. Co. V. Southern Ind. R. Co., 38 been performed. Harriman v. 
 
 Ind. App. 234, 70 N. E. 843. Northern Securities Co., 197 U. S. 
 
 90 In a subsequent part of our 244, 25 Sup. Ct. 493, 49 L. ed. 739; 
 
 work,' we have discussed the effect Central Trust Co. v. Ohio Cent. R. 
 
 of the interstate commerce law and Co., 23 Fed. 306. 
 
 other statutes upon the question of i Atchison &c. R. Co. v. Denver 
 
 the validity of pooling arrange- &e. R. Co., 110 U. S. 667, 4 Sup. Ct. 
 
 ments between railroad companies. 185, 28 L. R. A. 291 ; Sussex R. Co. 
 
 It has been held that the pertorm- v. Morris &c. R. Co., 19 N. J. Eq. 
 
 ance of an unlawful pooling contract 13 ; Elkins v. Camden &c. R. Co., 
 
 may be enjoined. Gulf &c. R. Co. v. 36 N. J. Eq. 241 ;' Cumberland Val- 
 
 State, 72 Tex. 404, 10 S. W. 81, 13 ley R. Co. v. Gettysburg &c. R. Co., 
 
 Am. St. 815; Currier v. Concoro R. 177 Pa. St. 519, 35 Atl. 952. See 
 
 Corp., 48 N. H. 321; Morrill v. also ante, §411.' • " ' 
 
 21 — Ell. Railroads I 
 
§423 
 
 RAILROADS 
 
 642 
 
 propriate to treat brieflj' of the general doctrine of ultra vires at 
 this place. The term "ultra vires" is one very frequently em- 
 ployed and not always wfith strict accuracy. Roughly defined 
 the term, when applied to a corporation, means beyond the 
 powers of the corporation.^ It may be here noted that the doc- 
 trine of ultra vires is applicable as a defense on the part of the 
 corporation only to actions arising out of the contract.* Con- 
 tracts and other acts of the corporation which are outside or in 
 excess of the corporate powers are ultra vires. The term is some- 
 times applied to acts which corporations, as well as natural per- 
 sons, are forbidden by law to do,"* and when so used it means 
 illegal contracts, but this is not, in strictness, an accurate use 
 of the term. Acts may be ultra vires and yet not be illegal in 
 the strict sense, for acts in excess of the corporate powers, al- 
 though entirely honest and moral, may be ultra yires.^ If the 
 
 2 In the case of National &c. Bank 
 V. Porter, 125 Mass. 333, 28 Am. 
 Rep. 235, the court said : "There 
 is nothing of mystery or sanctity in 
 the use of the words of a dead lan- 
 guage, ultra vires ; and although it 
 is a concise and convenient form by 
 which to indicate the unauthorized 
 action of artificial persons with 
 limited powers, still it is as appli- 
 cable to individual as to corporate 
 action. An illegal act of an indi- 
 vidual is as really ultra vires as the 
 unauthorized act of a corporation." 
 See generally as to the meaning of 
 the term, 8 Elliott Cont. §556, n..24; 
 and note in L. R. A. 1917A, 754. 
 
 3 National Bank v. Graham, 100 
 U. S. 699, 25 L. ed. 750; Central 
 &c. R. Co. V. Smith, 76 Ala. 572, 52 
 Am. Rep. 353; Gruber v. Washing- 
 ton &c. R. Co., 92 N. Car. 1; Hus- 
 sey v. Norfolk &c. R. Co., 98 N. 
 Car. 34, 3 S. E. 923, 2 Am. St. 312; 
 Hutchinson v. Western &c. R. Co., 
 6 Heisk. (Tenn.) 634. 
 
 * East Anglian R. Co. v. Eastern 
 Counties R. Co., 11 C. B. 775; South 
 Yorkshire R. Co. v. Great Northern 
 R. Co., 9 Exch. 55, 84. It is held 
 that the word "unlawful," as applied 
 to the purposes for which corpora- 
 tions are formed, is not used exclu- 
 sively in the sense of malum in se 
 or malum prohibitum, but it is 
 also used to designate such acts, 
 powers, and contracts as are ultra 
 vires. People v. Chicago Gas Trust 
 Co., 130 111. 268, 22 N. E. 798, 8 
 L. R. A. 497, 17 Am. St. 319. 
 
 3 In Whitney Arms Co. v. Bar- 
 low, 63 N. Y. 62, 20 Am. Rep. 504, 
 it was said : "When acts of corpo- 
 rations are spoken of as ultra vires 
 it is not intended that they are un- 
 lawful or even such as the corpiora- 
 tion cannot perform, but merely 
 those which are not within the 
 powers conferred upon the corpo- 
 ration by the act of its creation, and 
 are in violation of the trust reposed 
 in the managing board by the share- 
 
643 
 
 CONTRACTS 
 
 §424 
 
 corporation is not invested with power to make the contract or 
 perform the act which is the subject of controversy, the contract 
 or act is ultra vires, although it may be free from any taint of 
 fraud. The term ultra vires is often used in denoting contracts 
 voidable because of their violation of public policy, but, as said 
 by an eminent English judge, the term "illegality" is the better 
 one.® The term ultra vires is sometimes used to characterize a 
 contract made by a corporate officer who has no authority to act 
 for the corporation in the transaction out of which the contract 
 arises, but this is not an accurate use of the term. A president of 
 a railroad company, for example, may have no authority to con- 
 tract for the construction of the road, because such authority is 
 vested in the board of directors, but such a contract could not be 
 justly said to be ultra vires of the corporation.'^ 
 
 § 424 (369). Contracts — Ultra vires — General doctrine. — Con- 
 tracts which are beyond the scope of the powers granted by the 
 
 holders, that the affairs shall be 
 managed and the funds applied sole- 
 ly for carrying out the objects for 
 which the corporation was created." 
 The court cited Earl of Shrewsbury 
 V. North Staffordshire &c. R. Co., 
 L. R. 1 F.q. 593; Tyler v. Chichester 
 &c. Co., L. R. 2 Exch. 3S6; Bissell 
 V. Michigan &c. R. Co., 22 N. Y. 
 258. In. Bissell v. Mich. &c. R. Co. 
 supra, the court said: "The words 
 ultra vires and illegality represent 
 totally different and distinct ideas. 
 It is true that a contract may have 
 both these defects, but it may also 
 have one without the other." See 
 generally Ashbury &c. Co. v. Riche, 
 L. R. 7 H. L. 653; Kadish v. Gar- 
 den City &c. Assn., 151 111. 531, 38 
 N. E. 236, 42 Am. St. 256; Neils- 
 ville Bank v. Tuthill, 4 Dak. 295, 30 
 N. VV. 154; Kent v. Quicksilver &c. 
 Co., 78 N. Y. 159; Bath Gas Light 
 Co. V. Claffy, 151 N. Y. 24, 45 N. E. 
 
 390, 36 L. R. A. 664; note in 70 
 Am. St. 157, 158; 3 Thomp. Corp. 
 (2nd. ed.), §2767. 
 
 6 Cairns, L. C, in Ashbury &c. R. 
 Go. V. Riche, L. R. 7 H. L. 653. 
 
 T An agent may exceed his au- 
 thority, but the contract entered 
 into by him not be ultra vires as to 
 the corporation. The distinction 
 between cases where an agent ex- 
 ceeds the authority conferred upon 
 him and cases where the act is 
 beyond the corporate power or ca- 
 pacity is often of importance. It 
 is especially so in cases where the 
 question is whether the agent's act 
 has* been ratified; if the agents sim- 
 ply transcended his authority his 
 act may be validated by ratification, 
 but if the act was beyond the cor- 
 porate power, ratification will not 
 always validate it. See note in 70 
 .\m. St. 160. 
 
§424 
 
 RAILROADS 
 
 644 
 
 act of incorporation or outside of the objects for which it was 
 created, are, in the just sense, ultra vires, but they are not neces- 
 sarily illegal in the strict sense.* An illegal contract, that is, a 
 contract condemned or prohibited by law, differs from a contract 
 made by a corporation in excess of its corporate powers, but in- 
 volving no moral turpitude or wrong, and this difference leads to 
 important practical results. If a party engages with a corpora- 
 tion in an illegal contract, that is, a contract involving moral tur- 
 pitude, the courts will not aid him to enforce the contract nor to 
 recover money or property yielded the corporation under it. 
 Where, however, a corporation obtains money or property under 
 a contract that is not illegal, the party from whom such money or 
 property is obtained may be aided by the courts, although the 
 contract was ultra vires.^ It is held upon the same general prin- 
 
 8 Lord Chancellor Selborne in 
 Great Eastern &c. R. Co. v. Turner, 
 L. R. 8 Ch. 149, said: "The com- 
 pany is a mere abstraction of law. 
 All that it does, all that the law im- 
 putes to it as its act, must be that 
 which can be legally done within 
 the powers vested in it by law. 
 Consequently, an act which is ultra 
 vires and unauthorized is not an 
 act of the company in such a sense 
 as that the consent of the company 
 to that act can be pleaded." See 
 also note in 70 Am. St. 1S7, 158; 
 and compare Oakland Elec. Co. v. 
 Union Gas. &c. Co., 107 Maine 279, 
 78 Atl. 288; Scham v. Brandt, 116 
 Md. 560, 82 Atl. 551. 
 
 8 Union Trust Co. v. Illinois Mid- 
 land &c. Co., 117 U. S. 434, 6 Sup 
 Ct. 809; 29 L. ed. 963; Pennsylvania 
 &c. Co. v. St. Louis &c. Co., 118 
 U. S. 290, 6 Sup. Ct. 1094; 30 L. 
 ed, 83 ;• Central Transportation Co. 
 V. Pullman Car Co., 139 U. S. 24, 
 11 Sup. Ct. 478, 35 L. ed. 55; At: 
 lantic &c. Co. v. Union Pacific R. 
 
 Co., 1 Fed. 745; Memphis &c. R. 
 Co. V. Dow, 19 Fed. 388; New Cas- 
 tle &c. R. Co. V. Simpson, 23 Fed. 
 214; Pullman &c. Co. v. Central &c. 
 Co., 65 Fed. 158; Argenti v. San 
 Francisco, 16 Cal. 255; Miners' &c. 
 Co. V. Zellerbach, 37 Cal. 543, 99 Am. 
 Dec. 300; Hazelhurst v. Savannah 
 &c. R. Co., 43 Ga. 13; Bradley v. 
 Ballard, 55 111. 413, 8 Am. Rep. 
 656; State Board &c. v.. Citizens 
 &c. Co., 47 Ind. 407, 17 Am. Rep. 
 702 ; Wapello v. Burlington &c. Co., 
 44 Iowa 585; Franklin Co. v. Lewis- 
 ton &c. Bank, 68 Maine 43, 49, 28 
 Am. Rep. 9; Dill v. Wareham, 7 
 Mete. (Mass.) 438; Morville v. 
 American &c. Co., 123 Mass. 129, 25 
 Am. Rep. 40; Attleborough Bank 
 V. Rogers, 125 Mass. 339; Manches- 
 ter &c. Co. V. Concord &c. Co., 66 
 N. H. 100, 20 Atl. 383, 9 L. R. A 
 689, 49 Am. St. 582; Degrofi v 
 American &c. Co., 21 N. Y. 124; Bis- 
 sell V. Michigan &c. Co., 22 N. Y, 258 
 Parrish v. Wheeler, 22 N. Y. 494 
 Hays V. Gallon &c. Co., 29 Ohio St. 
 
645 
 
 CONTRACTS 
 
 §424 
 
 ciple that if the party contracting with a corporation retains the 
 property obtained from the corporation, thus securing a benefit 
 under the contract, he cannot escape payment of the value of the 
 property so obtained on the ground that the contract was ultra 
 vires. ^° A contract expressly forbidden by statute or one malum 
 in se is not enforceable, but is to be regarded as void, for in such 
 cases the corporation does more than perform an act in excess of 
 its corporate powers. ^^ Some of the cases hold that contracts 
 executed in a mode different from that prescribed by the act of 
 incorporation are ultra vires, i- but this doctrine we regard as 
 untenable. It is, no doubt, true that the contract should be made 
 in the mode prescribed by the charter,^^ but the fact that the con- 
 tract was not made in the prescribed mode does not authorize 
 
 330, 340; Oil Creek &c. Co. v. Penn- 
 sylvania Trans. Co., 83 Pa. St. 160; 
 Wright V. Pipe Line Co., 101 Pa. 
 St. 204, 47 Am. Rep. 701; Rutland 
 &c. R. Co. V. Proctor, 29 Vt. 93; 
 Northwestern &c. Co. v. Shaw, 37 
 Wis. 655, 19 Am. Rep. 781; Miller 
 V. American &c. Co., 92 Tenn. 167, 
 21 S. W. 39, 20 L. R. A. 765. In 
 many jurisdictions, however, as 
 shown in some of the decisions 
 above cited, there can be no recov- 
 ery upon the contract itself. 
 
 10 Bath Gaslight Co. v. Claffy, 56 
 N. Y. St. 426, 26 N. Y. S. 287; 
 Ashenbroedel Club v. Finlay, 53 Mo. 
 A pp. 256; Whitney Arms Co. v. 
 Barlow, 63 N. Y. 70. See Belcher 
 &c. Co. V. St. Louis &c. Elevator 
 Co., 101 Mo. 192, 13 S. W. 822, 8 
 L. R. A. 801; Salmon &c. Co. v. 
 Dunn, 2 Idaho 26, 3 Pac. 911; 
 Baker v. Northwestern &c. Co., -36 
 Minn. 185, 30 N. W.- 464. See elab- 
 orate note in L. R. A. 1917A, Til, 
 1026, et seq., on the general subject. 
 
 13 Root V. Godard, 3 McLean (U. 
 S.) 102, Fed. Cas. No. 12037; Root 
 
 V. Wallace,. 4 McLean (U. S.) 8, 
 Fed. Cas. No. 12039; Davis v. Bank, 
 4 McLean (U. S.) 387, Fed. Cas. 
 No. 3626; Hayden v. Davis, 3 Mc- 
 Lean (U. S.) 276, Fed. Cas. No. 
 6259; Jaycox, In re, 12 Blatch. (U. 
 S.) 209, Fed. Cas. No. 7237; Phila- 
 delphia &c. Co. v. Towner, 13 Conn. 
 249; Talmage v. Pell, 7 N. Y. 328; 
 New York State &c. Co. v. Helmer, 
 n N. Y. 64. See also McNulta v. 
 Corn Belt Bank, 164 111. 427, 56 
 Am. St. 203; Cincinnati- &c. Co. v. 
 Rosenthal, 55 III. 85, 8 Am. Rep. 
 626; Visalia Gas &c. Co. v. Sims, 
 104 Cal. 326, 43 Am. St. 105. 
 
 12 Farmers &c. Bank v. Harrison, 
 57 Mo. 503; Matthews v. Skinker, 
 62 Mo. 329, 21 Am. Rep. 425; Mc- 
 Spedon v. New York, 7 Bosw. (N. 
 Y. Super. Ct.) 601. 
 
 13 Bank of United States v. Dan- 
 dridge, 12 Wheat. (U. S.) 64, 6 L. 
 ed. 552; Head v. Providence &c. 
 Co., 2 Cranch (U. S.) 127; 2 L. ed 
 229; Hannibal &c. Co. v. Marion 
 County, 36 Mo. 294. 
 
§425 
 
 RAILROADS 
 
 646 
 
 the conclusion that the corporation had no power to enter into 
 the contract. It is probably true that an executory contract, 
 made in a mode different from that prescribed, will not be obliga- 
 tory upon the corporation, but, nevertheless, such a contract is 
 not void and may therefore be ratified. 
 
 §425 (370). Contracts — What are ultra vires — Generally. — 
 
 The familiar elementary rule is that the corporate powers are 
 such only as are expressed in the charter, or in the act of incor- 
 poration and the articles of association, together with such im- 
 plied powers as are proper and necessary to the enjoyment of 
 those which are expressly conferred,^* and acts of the corpora- 
 tion or its agents in excess of such powers will not impose an 
 obligation upon the corporation by express contract.^^ It is, of 
 
 "Thomas v. Railroad Co., 101 U. 
 S. 71, 25 L. ed. 950; Jacksonville R. 
 &c. Co. V. Hooper, 160 U. S. 514, 
 16 Sup. Ct. 379, 40 L. ed. 515; 
 Lower v. Chicago &c. R. Co., 59 
 Iowa 563, 13 N. W. 718; Mobile 
 &c. R. Co. V. Franks, 41 Miss. 494 
 511; State v. Atchison &c. R. Co., 
 24 Nebr. 143, 38 N. W. 43, 8 Am. 
 St. 164. As elsewhere shown, how- 
 ever, the word "necessity" as used 
 in this conection does not mean ab- 
 solutely necessary, but rather rea- 
 sonably necessary, or convenient, us- 
 ual and appropriate. See also Cen- 
 tral Ohio &c. Co. V. Capital City 
 Dairy Co., 60 Ohio St. 96, S3 N. 
 E. 711, 64 L. R. A. 395; Fort 
 Worth City Co. v. Smith Bridge 
 Co., 151 U. S. 294, 14 Sup. Ct. 339, 
 38 L. ed. 167; Bedford Belt R. Co. 
 v. McDonald, 17 Ind. App. 492, 46 
 N. E. 1022, 60 Am. St. 172; Tona- 
 wanda R. Co. v. New York &c. R. 
 Co., 42 Hun (N. Y.) 496. 
 
 15 Lucas V. White Line Transfer 
 Co., 70 Iowa 541, 3 N. W. 771, 59 
 
 Am. Rep. 449; Knoxville v. Knox- 
 ville &c. R. Co., 22 Fed. 758. The 
 true basis of the doctrine of ultra 
 vires and the reason the corporation 
 is not liable upon such a contract 
 is said to be: 1. The interest of 
 the public that the corporation shall 
 not transcend the powers granted. 
 
 2. The interest of the stockholders. 
 
 3. The obligation of every one en- 
 tering into a contract with a corpo- 
 ration to take notice of the legal 
 limits 'of its power. Pittsburgh &c. ' 
 R. Co. V. Keokuk Bridge Co., 131 
 U. S. 371, 9 Sup. Ct. 770, 33 L. ed. 
 157; McCormick v. Market Nat. 
 Bank, 165 U. S. 538, 17 Sup. Ct. 433, 
 41 L. ed. 817; California Bank v. 
 Kennedy, 167 U. S. 362, 17 Sup. Ct. 
 381, 42 L. ed. 198. No corporation, 
 either public or private, can exer- 
 cise any power not expressly con- 
 ferred or necessarily implied to en- 
 able it to carry into effect the pur- 
 poses for which it was created. 
 First M. E. Church v. Atlanta, ^(^ 
 Ga. 181; Oregon R. &c. Co. v. Ore- 
 
647 coxTRACTs § 425 
 
 course, not difficult to state, as a general rule, that contracts be- 
 yond or outside of the scope of the powers bestowed on the cor- 
 poration are ultra vires, but it is not alway? easy to say ]ust 
 what contracts are beyond the scope of the powers expressly or 
 impliedly conferred upon the corporation. It is, to be sure, not 
 difficult in all cases to conclude that a contract is ultra vires since 
 there are many cases in which the contract is so plainly beyond 
 the corporate power that it may, without doubt or hesitation, be 
 adjudged to be ultra vires. In many instances a careful study 
 of the charter or act of incorporation is necessary in order to de- 
 termine whether the contract is one the corporation had power 
 to make, in others a bare knowledge of the nature and character 
 of the corporation is all that is required in order to determine 
 whether the contract is beyond the scope of the powers con- 
 ferred upon the corporation by the legislature. A study of the 
 decided cases will give a clearer conception of the law upon the 
 subject than the statement of general rules can do. 
 
 §426 (371). Contracts — Ultra vires— Estoppel.— It is held in 
 many of the cases that a corporation may be estopped to make 
 the defense in an action on the contract that the contract was 
 ultra vires, 1® but this doctrine is, as we believe, technically if not 
 radically unsound, although it may be, as generally held, that the 
 doctrine of ultra vires will not be so applied as to work a legal 
 wrong or defeat the ends of justice. We do not doubt that a cor- 
 poration receiving and retaining a benefit under an ultra vires 
 
 gonian R. Co., 130 U. S. 1, 9 Sup. but property or money received by 
 
 Ct. 409; 32 L. ed. 837; Cumberland the corporation, under color of the 
 
 &c. Co. V. ■ Evansville, 127 Fed. 187, contract, may be recovered back. 
 
 190, 191, and numerous authorities See generally note in 70 Am. St. 
 
 cited; Chewacla Lime Works v. 165-176. 
 
 Dismukes, 87 Ala. 344, 6 So. 122, S 16 State Board v. Citizens' &c. Co , 
 
 L. R. A. 100; State v. Atchison & 47 Ind. 407, 17 Am. Rep. 702; Whit- 
 
 N. R. Co., 24 Nebr. 143, 38 N. W. ney Arms Co. v. Barlow, 63 N. Y. 
 
 43, 8 Am. St. 164; Beers v. Dalles 62, 20 Am. Rep. 504. See authori- 
 
 City, 16 Ore. 334, 18 Pac. 835. An ties cited in the notes to the next 
 
 ultra vires contract cannot, as we section which follows. See also 
 
 have seen, impose an obligation by post, §429; and notes in L. R. A. 
 
 express contract on the corporation, 740, 825, and L. R. A. 1917B, 821. 
 
§426 
 
 RAILROADS 
 
 648 
 
 contract may be compelled to do equity, but we do. not see how it 
 is legally possible to hold that a corporation can be estopped to 
 deny that it had no power to make the contract. If a contract is 
 ultra vires in the true sense, that is, a contract entirely beyond 
 and outside of the corporate powers, it cannot be made effective 
 by an estoppel although the party contracting with the corpora- 
 tion may be protected from loss or injury upon equitable prin- 
 ciples. Where the contract is not beyond the scope of the cor- 
 porate powers, but is executed in a mode different from that 
 prescribed by law, or is executed by officers or agents without 
 authority from the corporation, then it may be ratified or the 
 corporation may be bound by an estoppel. Where, however, the 
 contract is in the true sense ultra vires it is void and relief is 
 granted a party against the corporation not upon the ground of 
 estoppel or of ratification of the contract, but upon equitable prin- 
 cipleSj and in granting relief the courts in effect treat tlie con- 
 tract as disaffirmed. 1'^ 
 
 IT The doctrine, which rests on 
 solid principle, is that declared in 
 Central Transportation Co. v. Pull- 
 man &c. Co., 139 U. S. 24, 11 Sup. 
 Ct. 478, 35 L. ed. 55, where it was 
 said: "A contract of a corporation 
 which is ultra vires in the proper 
 sense, that is to say, outside oi the 
 object of its creation, as defined in 
 the law of its organization, and, 
 therefore, beyond the powers con- 
 ferred upon it by the legislature, is 
 not voidable only, but wholly void, 
 and of no legal effect. The objec- 
 tion to the contract is not merely 
 that the corporation 'ought not to 
 have made it, but that it could not 
 make it. The contract cannot be 
 ratified by either party, because it 
 could not have been authorized by 
 either. No performance on either 
 side can give it validity, or be the 
 foundation of any right of action 
 upon it. When a corporation is act- 
 
 ing within the general scope of the 
 powers conferred upon it by- the 
 legislature, the corporation, as well 
 as persons contracting with it, may 
 be estopped to deny that it has com- 
 plied with the legal formalities, 
 which are prerequisite to its exist- 
 ence or to its action, because such 
 prerequisites might in fact have been 
 complied with. But when the con- 
 tract is beyond the powers con- 
 ferred upon it by the legislature, 
 neither the corporation nor the 
 other party to the contract can be 
 estopped by assenting to it, or by 
 acting upon it, to show that it was 
 prohibited by those laws." It was 
 also said: '"A contract ultra vires 
 being unlawful and void, not because 
 it is in itself immoral, but because 
 the corporation, by the law of its 
 creation, is incapable of making it, 
 the courts, while refusing to main- 
 tain any action upon the unlawful 
 
649 
 
 CONTRACTS 
 
 §427 
 
 § 427 (372), Contracts — Ultra vires— Executed and execu- 
 tory contracts. — The authorities discriminate between executed 
 and executory contracts. There is substantial agreement upon 
 the proposition that ultra vires contracts which are wholly 
 executory cannot be enforced against the corporation/^ but as in- 
 
 contract, have always striven to do 
 justice between the parties, so far 
 as could be done, consistently with 
 adherence to the law, by permitting 
 money or property, parted with on 
 the faith of the unlawful contract, 
 to be recovered back or compensa- 
 tion to be made for it. In such a 
 case, however, the action is not 
 maintained upon the unlawful con- 
 tract, nor according to its terms." 
 The court cited many cases, among 
 them Parkersburg v. Brown, 106 U. 
 S. 487, 1 Sup. Ct. 442, 27 L. ed. 238 ; 
 Chapman v. Douglas, 107 U. S. 348, 
 2 Sup. Ct. 62, 27 L. ed. 378; Hitch- 
 cock V. Galveston, 96 U. S. 341, 24 
 L. ed. 659; Union Trust Co. v. Illi- 
 nois Midland &c. Co., 117 U. S. 
 434, 6 Sup. Ct. 809, 29 L. ed. 963; 
 Pittsburgh &c. R. Co. v. Keokuk 
 &c. Co., 131 U. S. 371, 9 Sup. Ct. 
 770, 33 L. ed. 157. This doctrine 
 is sustained by well-reasoned cases. 
 Brunswick &c. Co. v. United Gas 
 &c. Co., 85 Maine 532, 35 Am. St. 
 385; Long v. Georgia &c. Co., 91 
 Ala. 519, 8 So. 706, 24 Am. St. 931 ; 
 Chicago &c. Co. v. People's &c. Co., 
 121 111. 530, 13 N. E. 169, 2 Am. 
 St. 124; Davis v. Old Colony R. 
 •Co., 131 Mass. 258, 41 Am. Rep. 
 221; Greenville Compress &c. Co. v. 
 Planters' &c. Co., 70 Miss. 669, 13 
 So. 879, 35 Am. St. 681; Morris 
 &c. R. Co. V. Sussex R. Co., 20 
 N. J. Eq. 542, 562; Bank of Chilli- 
 cothe V. Swayne, 8 Ohio 257, 32 
 
 Am. Dec. 207; Steele v. Fraternal 
 Tribunes, 215 111. 190, 74 N. E. 121, 
 106 Am. St. 160; Marble Co. v. 
 Harvey, 92 Tenn. 115, 20 S. W. 
 427, 36 Am. St. 71; Franco &c. Co. 
 V. McCormick, 85 Tex. 416, 23 S. 
 W. 123, 34 Am. St. 815; Eastern 
 Counties R. Co. v. Hawkes, 5 H. L. 
 C. 331, per Lord Cranworth; Bag- 
 shaw V. Eastern Union R. Co., 7 
 Hare 114, per Wigram, V. C; Ash- 
 bury R. &c. Co. V. Riche, L. R. 7 
 H. L. C. 653; and other authorities 
 cited in 29 Am. & Eng. Ency.- of 
 Law (2d ed.) 54, 55, 56, but some 
 of these cases hold the several c(.>n- 
 tracts to be opposed to public policy, 
 and it is said that the opinions ex- 
 pressed as to the effect of contracts 
 to which this objection cannot be 
 made may therefore be considered 
 as mere dicta. Rorer Rail. 941, 942. 
 See also Muncie Nat. Gas Co. v. 
 Muncie, 160 Ind. 97, 104, 105, 66 
 N. E. 436, 60 L. R. A. 822; and 
 elaborate note in L. R. A. 1917A, 
 825, et seq. 
 
 18 3 Thomp. Corp. (2d ed.), 
 §2786; Wilkes v. Georgia Pacific R. 
 Co., 79 Ala. 180; Hazelhurst v. Sa- 
 vannah R. Co., 43 Ga. 13. See State 
 Board of Agriculture v. Citizens' 
 St. R. Co., 47 Ind. 407, 17 Am. Rep. 
 702; Chicago &c. R. Co. v. Southern 
 Ind. R. Co., 38 Ind. App. 234, 70 
 N. E. 843; Day v. Spiral Springs 
 Co., 57 Mich. 146, 23 N. W. 628, 
 58 Am. Rep. 352; Parish v. Wheel- 
 
§427 
 
 RAILROADS 
 
 650 
 
 timated in the preceding paragraph there is conflict as to the 
 effect of such a contract after it has been executed and the party 
 contracting with the corporation has parted with money or 
 property. The performance of an executory ultra vires contract 
 may be enjoined by a dissenting stockholder or other interested 
 party who would be injured if it were carried into effect.^^ Many 
 cases hold that after a contract has been executed, in whole or 
 in part, a new element is introduced into the transaction. It 
 would, they assert, be clearly unjust to permit the members of a 
 corporation to take the benefits of a performance of the con- 
 tract by the other party and then refuse performance on its 
 part.^" The fallacy in this reasoning, as it seems to us, is in as- 
 suming that a contract may be valid although there was no 
 power whatever to make it, and that unless the contract is up- 
 held, the party will be remediless. The party is hot without rem- 
 
 er, 22 N. Y. 494; Nassau Bank v. 
 Jones, 95 N. Y. 115, 47 Am. Rep. 
 14; Simpson v. Building Assn., 38 
 Ohio St. 349; note in 70 Am. St. 
 165 ; 1 Elliott Cont., § 557 ; and note 
 in L. R. A. 1917A, 752. Such execu- 
 tory contracts .as are entirely for- 
 eign to the objects and purposes for 
 which the corporation was formed, 
 or which are outside its express or 
 implied powers, are void and cannot 
 be enforced against it. Rock River 
 Bank v. Sherwood, 10 Wis. 230, 78 
 Am. Dec. 669. 
 
 18 It has been held that a con- 
 tract for the purchase of steamboats 
 to run in connection with the line 
 may be set aside at the suit of a 
 stockholder. Hoagland v. Hannibal 
 &c. R. Co., 39 Mo. 451; Colman v. 
 Eastern Counties R. Co., 10 Beav. 
 1. So of a contract to improve a 
 harbor. Munt v. Shrewsbury &c. 
 R. Co., 13 Beav. 1. Or to build the 
 main line by the use of money 
 raised for the construction of a 
 
 branch line. Bagshaw v. Eastern 
 Union R. Co., 7 Hare 114. So of 
 an ultra vires lease. Board &c. Tip- 
 . pecanoe Co. v. Lafayette &c. R. Co., 
 50 Ind. 85. See also Central R. Co. 
 V. Collins, 40 Ga. 582; Stewart v. 
 Erie &c. Trans. Co., 17 Minn. 372, 
 398 ; March v. Eastern R. Co., 40 N. 
 H. 548, 43 N. H. 515, 11 Am. Dec. 
 732; Mills v. Central R. Co., 41 N. 
 J. Eq. 1, 2 Atl. 453; Cumberland 
 Valley R. Co.'s Appeal, 62 Pa. St. 
 218; Stevens v. Rutland &c. R. Co., 
 29 Vt. 545. 
 
 20 State Board of Agriculture v. 
 Citizens' St. R. Co., 47 Ind. 407, 17 
 Am. Rep. 702; Peoria &c. R. Co. 
 v. Thompson, 103 111. 187; Camden 
 &c. R. Co. V. Mays Landing &c. R. 
 Co., 48 N. J. L. 530, 7 Atl. 523^ 
 Oil Creek &c. R. Co. v. Pennsyl- 
 vania Trans. Co., 83 Pa. St. 160; 
 Denver Fire Ins. Co. v. McClelland, 
 9 Colo. 11, 9 Pac. 771, 59 Am. Rep. 
 134. See also 3 Thomp. Corp. (2d 
 ed.), §§2787, 2788, and cases cited. 
 
651 
 
 CONTRACTS 
 
 427 
 
 edy because the courts decline to hold the contract valid, for it is 
 clearly within the power of the court to do complete justice by 
 compelling the restoration of the property or by awarding dam- 
 ages. We fully agree that in all cases where the corporation has 
 received money or property or the fruits of labor, as a result of 
 a performance of the contract by the other party, it should not 
 be permitted to retain the benefits received without making 
 reparation, but we cannot agree that a contract made where there 
 is an entire absence of power can be enforced. The members of 
 the corporation are held by many of the courts to be estopped, ^^ 
 
 21 Argenti v. San Francisco, 16 
 Cal. 255; Bradley v. Ballard, 55 111 
 413, 8 Am. Rep. 656; State Board 
 of Agriculture v. Citizens' Street R. 
 Co., 47 Ind. 407, 17 Am. Rep. 702; 
 Louisville &c. R. Co. v. Flanagan, 
 113 Ind. 488, ,14 N. E. 370, 3 Am. 
 St. 674; McQuer V. Manchester &c. 
 R. Co., 13 Gray (Mass.) 124, 74 
 Am. Dec. 624; Hale v. Mutual Fire 
 Ins. Co., 32 N. H. 295, 64 Am. Dec. 
 370; Cary v. Cleveland &c. R. Co., 
 29 Barb. (N. Y.) 35; Vought v. 
 Eastern Building &c. Assn., 172 N. 
 Y. 517, 92 Am. St. 761; Texas 
 Western R. Co. v. Gentry, 69 Tex. 
 625, 8 S. W. 98; Rutland &c. R. Co. 
 V. Proctor, 29 Vt. 93. See also Oil 
 Creek &c. R. Co. v. Pennsylvania 
 &c. Co., 83 Pa. St. 160; Bigbee 
 Packet Go. v. Moore, 121 Ala. 379, 
 25 So. 602; Pittsburgh &c. R. Co. 
 V. Allegheily Co., 79 Pa. St. 210, 
 215; 3 Thomp. Corp. (2d ed.), 
 §§2787, 2788, 2789; Articles in 
 6 Cent. L. J. 5, 12 Cent. L. 
 J. 389; note in L. R. A. 1917A, 825, 
 et seq ; Kennedy v. California &c. 
 Bank, 101 Cal. 495, 35 Pac. 1039, 40 
 Am. St. 69; Peoria &c. R. Co. v. 
 Thompson, 103 111. 187; Perkins v. 
 Portland &c. R. Co., 47 Maine 573, 
 
 74 Am. Dec. 507; Derwey v. Toledo 
 &c. R. Co., 91 Mich. 351, 51 N. W. 
 1063; Camden &c. R. Co. v. May's 
 Landing &c. R. Co., 48 N. J. L. 530, 
 7 Atl. 523; Security Nat. Bank v. 
 St. Croix Power Co., 117 Wis. 211, 
 94 N. W. 74, and other authorities 
 cited in 29 Am. & Eng. Ency. of 
 Law (2d ed.) 57, and in note in 70 
 Am. St. 170; also White v. Com- 
 mercial &c. Bank, 66 S. Car. 491, 
 45 S. E. 94, 97 Am. St. 803, and 
 note. In one case it was held that 
 where two street car companies or- 
 ganized under the general laws of 
 the state, enter into a contract by 
 which the first is to pay the second 
 a certain rental for the use of the 
 latter's track, the lessor cannot, 
 while exercising and enjoying the 
 right, refuse to pay the sum agreed 
 upon on the ground that the con- 
 tract .was ultra vires of its officers. 
 Canal &c. R. Co. v. St. Charles 
 St. R. Co., 44 La. Ann. 1069, 11 So. 
 702. So it has been held that a 
 corporation which accepts and uses 
 money loaned in good faith on a 
 mortgage upon its property, and 
 pays interest on such money after 
 notice of the mortgage, cannot es- 
 cape liability on such mortgage by 
 
§428 
 
 RAILROADS 
 
 652 
 
 not only individually, but collectively, to set up the defense to an 
 action on the contract, but as we have said in the preceding sec- 
 tion we cannot yield assent to this as a general proposition. 
 
 §428 (373). Contracts — Ultra vires — Cases discriminated. — 
 
 We think that it vmU be found upon an analysis of many of the 
 cases often cited as holding that a corporation may be estopped 
 to aver that it had no power to enter into the contract which is 
 beyond its corporate capacity, that they are not, in fact, cases in 
 which the contract was in the proper sense ultra vires. They, are 
 cases of the defective exercise of power, not cases where there is 
 an entire want of power. ^^ Some of the cases are really cases 
 
 the passage of a resolution disap- 
 proving and annulling the presi- 
 dent's authority, especially where the 
 mortgage was executed by the presi- 
 dent by the authority of the board 
 of directors and no steps were tak- 
 en to disaffirm the mortgage until 
 long after its execution. Augusta 
 &C. R. Co. V. Kittel, 52 Fed. 63. 
 The cases which follow also oppose 
 the doctrine we favor. In one case 
 it was held that after a corporation 
 has received the fruits which grow 
 out of the performance of an act 
 ultra vires, and the mischief has all 
 been accomplished, it comes with an 
 ill grace then to assert its want of 
 power to do the act or make the 
 contract in order to escape the per- 
 formance of an obligation it has 
 assumed. Wright v. Hughes, 119 
 Ind. 324, 21 N. E. 907, 12 Am. St. 
 412. The same general doctrine is 
 held in other cases. Owen Sound 
 S. S. Co. V. Canadian Pac. R. Co., 
 17 Ont. R. 691, 40 Am. & Eng. R. 
 Cas. S93. A corporation, having 
 enjoyed the benefits of a contract, 
 cannot plead that it was ultra vires 
 in the absence of fraud. Sherman 
 
 Center Town Co. v. Morris, 43 
 Kans. 282, 23 Pac. 569, 19 Am. St. 
 134; People's Gaslight & C. Co. v. 
 Chicago Gaslight & C. Co., 20 111. 
 App. 473; First Nat. Bank of Mon- 
 mouth v. Brooks, 22 111, App. 238; 
 Sheridan Electric Light Co. v. 
 Chatham Nat. Bank, 52 Hun 575, 
 24 N. Y. St. 622, 5 N. Y. S. 529; 
 Hubbard v. Camperdown Mills, 26 
 S. Car. 581, 2 S. E. 576. This rule 
 applies where a corporation attempts 
 to deny the authority of an agent 
 or officer. Peck v. Doran & W, Co., 
 57 Hun 343, 32 N. Y. St. 405, 10 
 N. Y. S. 401; Lancaster County v. 
 Cheraw & C. R. Co., 28 S. Car. 134, 
 5 S. E. ,338. A railroad company 
 cannot ■ plead that its contract to 
 build and operate a telegraph line 
 was ultra vires as a defense to an 
 action by the builder of the line for 
 his c6mpensation. Pittsburgh &c. 
 R. Co. V. Shaw (Pa.), 14 Atl. 323. 
 
 22 This is true of the case of Ben- 
 siek V. Thomas, 66 Fed. 104, and 
 of the cases of Aurora &c. Horti- 
 cultural Society v. Paddock, 80 111. 
 263; Kent v. Quicksilver Mining 
 Co., 78 N. Y.. 159. The reasoning 
 
653 
 
 CONTRACTS 
 
 §428 
 
 where the act was performed in violation of the corporate by- 
 laws,^* or by an agent in excess of his authority, and not cases 
 where the act was wholly and entirely beyond the scope of the 
 powers conferred upon the corporation by the legislature.^* It 
 may, perhaps, be true in a limited or qualified sense that where 
 the contract is made by an agent who exceeds his authority, or 
 is made in violation of corporate by-laws, that there is a contract 
 ultra vires, but it is not true in the proper or just sense, for it is 
 not a contract made where the corporation itself had no capacity 
 whatever to contract, and it is only to cases where there is an 
 entire absence of power to contract that the doctrine of ultra vires 
 justly applies. Some of the decisions treat cases where the con- 
 tract in question was made in some mode other than that pre- 
 scribed by the charter as ultra vires ; but this certainly is errone- 
 
 of the decision in Sheldon &c. Co. 
 V. Eickemeyer &c. Co., 90 N. Y. 
 608, is, we venture to say, founded 
 on the erroneous assumption that 
 an ultra vires contract is "but the 
 case of an agent making a contract ■ 
 in excess of his authority," for, as 
 it seems to us, where the corpora- 
 tion itself acts and the contract is 
 entirely outside of the scope of the 
 powers conferred upon the corpora- 
 tion, the case is that of a corpora- 
 tion attempting to make a contract 
 it had no power to make. We be- 
 lieve the conclusion reached in the 
 ease upon which we are commenting 
 is right, but think the reasoning 
 fallacious. 
 
 23 Roy &c. Co. V. Scott, 11 Wash. 
 399, 39 Pac. 679. 
 
 24 In the case of Missouri Pac. R. 
 Co. V. Sidell, 67 Fed. 464, the court 
 pointed out the difference between 
 cases where there is an entire ab- 
 sence of power and cases where the 
 power is abused or not properly ex- 
 ercised. The court cited the cases 
 of Davis v. Old Colony Railroad 
 
 Co., 131 Mass. 258, 41 Am. Rep. 
 221 ; Pennsylvania &c. Co. v. Keo- 
 kuk &c. Co., 131 U. S. 371, 9 Sup. 
 Ct. 770, 33 L. ed. 157; Louisiana v. 
 Wood, 102 U. S. 294, 26 L. ed. 153 ; 
 Parkersburg v. Brown, 106 U. S. 
 487, 1 Sup. Ct. 442, 27 L. ed. 238; 
 Pennsylvania R. Co. v. St. Louis &c. 
 R. Co., 118 U. S. 290, 6 Sup. Ct. 
 1094, 30 L. ed. 83; Zabriskie v. 
 Cleveland &c. R. Co., 23 How. (U. 
 S.) 381, 16 L. ed. 488. The court 
 quoted with aproval from Davis v. 
 Railroad Co., supra, the following: 
 "There is a clear distinction be- 
 tween the exercise of a power not 
 conferred upon, varying from the 
 objects of its creation as declared 
 in the law of its organization, of 
 which all persons dealing with it 
 are bound to take notice, and the 
 abuse of a general power, or the 
 failure to comply with prescribed 
 formalities or regulations in the 
 particular instance, when such abuse 
 or failure is nqt known to the other 
 contracting parties." 
 
§ 428 RAILROADS 654 
 
 ous, for the defect in such cases is in the execution of a power 
 granted; the power itself is not absent. Other cases cited as 
 affirming that a corporation may be estopped to deny the validity 
 of an ultra vires contract really decide nothing more than that 
 the corporation must restore the property it received or make 
 compensation, and in such cases there is no question of estoppel 
 involved. Still other cases are placed under the doctrine of ultra 
 vires where there was in fact nothing more than a failure to hold 
 a directors' meeting, or give a notice, or do some such act in the 
 mode prescribed by law,^^ but such cases are not justly cases 
 within the doctrine of ultra vires. Whether a contract beyond 
 the power of the corporation is absolutely void or not, however, 
 the practical effect of the difference of opinion is confined, in the 
 main, to the remedy, for in all jurisdictions the courts will seek 
 to do justice, arid if the contract is regarded as absolutely void, 
 still if one party has performed it and the other retains the bene- 
 fit there may be an action upon the implied contract, or, in any 
 event proper relief will be granted by proceeding according to 
 the view taken in the particular jurisdiction. ^^ 
 
 26 Farmers &c. Co. v. Toledo &c., Co. v. Farmers' L. & T. Co., 116 
 
 67 Fed. 49. The case cited holds, Fed. 700; Big^bee &c. Packet Co. v. 
 
 inter alia, that parties, by unreason- Moore, 121 Ala, 379, 25 So. 602; 
 
 able delay, may lose the right to Atkins v. Shreveport &c. R. Co., 
 
 successfuliy complain of an irregu- 106 La. Ann. S68, 31 So. 166; Har- 
 
 lar or unauthorized act citing AUis rison v. Annapolis &c. R. Co., 50 
 
 V. Jones, 45 Fed. 148; Wood v. Md. 490; L'Herbette v. Pittsfield 
 
 Corry Water-Works Co., 44 Fed. Nat. Bank, 162 Mass. 137, 38 N. E. 
 
 146; Hackensack Water Co. v. De- 368, 44 Am. St. 354; Mobile &c. 
 
 Kay, 36 N. J. Eq. 548; Reed's Ap- R. Co. v. Wisdom, 5 Heisk." 
 
 peal, 122 Pa. St. 565, 16 Atl. 100; (Tenn.) 125; Tennessee Ice Co. v. 
 
 Fidelity &c. Co. v. West Pennsyl- Raine, 107 Tenn. 151, 64 S. W. 29; 
 
 vania &c. R. Co., 138 Pa. St. 494, note in L. R. A. 1917B, 1026, et stq. 
 
 21 Atl. 21, 21 Am. St. 911. The See also Grand River Bridge Co. v. 
 
 distinction referred to is noted in Rollins, 13 Colo. 4, 21 Pac. 897; 
 
 the principal opinion in Calumet Eckman v. Chicago &c. R. Co., 169 
 
 &c. Canal &c. Co. v. Conkling, 273 111. 312, 48 N. E. 496, 38 L. R. A. 
 
 111. 318, 112 N. E. 982, L. R. A. 750; Schrimplin v. Farmers' Assn., 
 
 1917B, 814, 818. 123 Iowa 102, 98 N. W. 613; Hunt 
 
 20 Eastern Bldg. &c. Assn. v. Wil- v. Hauser Malting Co., 90 Minn, 
 
 liamson, 189 U. S. 122, 23 Sup. Ct. 282, 96 N. W. 85; Interstate Hotel 
 
 527, 47 L. cd. 735; Central R. &c. Co. v. Woodward &c. Co., 103 Mo. 
 
655 
 
 CONTRACTS 
 
 §42^ 
 
 § 429 (374). Contracts — Ultra vires — Illustrative instances. — 
 
 A charter incorporating a company to build and operate a rail- 
 road, does not by implication confer power to purchase and run a 
 line of steamboats,^'' but, of course, such a company may be in- 
 vested with power to own and operate a line of steamboats in 
 connection with its railroad, and the power to do so, or at least to 
 make traffic arrangements, may be implied from provisions ordi- 
 narily found in railroad charters where the boats are run in con- 
 nection with the railroad at its termini, or across a river, or the 
 like, for the benefit of the public who travel upon the railroad, at 
 least where there seems to be a reasonable necessity therefor. ^^ 
 Such a charter does not by implication confer power to engage in 
 the business of trading in coal^s nor to purchase and hold for 
 
 App. 198, n S. W. 114; Pittsburgh 
 &c. R. Co. V. Altoona &c. R. Co., 
 196 Pa. St. 4S2, 46 Atl. 431 ; note in 
 70 Am. St. 173-175. If fully exe- 
 cuted and performed on both sides 
 such ultra vires contracts are usual- 
 ly unassailable and permitted to 
 stand. 3 Thomp. Corp. (2d ed.), 
 §2785; 8 Elliott Cont. §557. 
 
 2T Central R. &c. Co. v. Smith, Id 
 Ala. 572, 52 Am. Rep. 353; Pearce 
 V. Madison &c. R. Co., 21. How. (U. 
 S.).441, 16 L. ed. 184; Gunn v. Cen- 
 tral R. &c. Co., 74 Ga. 509; Hoag- 
 land V. Hannibal, St. Joseph R. Co., 
 39 Mo. 451 ; Colman v. Eastern 
 Counties R. Co., 10 Beav. 1. But 
 authority to contract for the trans- 
 portation of its passenarers beyond 
 its own line will enable it to make 
 a valid contract guaranteeing the 
 profits of a steamboat line connect- 
 ing with it at its terminus. Green 
 Bay &c. R. Co. v. Union Steamboat 
 Co., 107 U. S. 98, 27 L. ed. 413. But 
 see Colman v. Eastern Counties R. 
 Co., 10 Beav. 1. And a railroad 
 company can purchase and operate 
 such boats as are necessary to carry 
 
 its traffic from the end of its line 
 across the intervening navigable 
 water to the "ostensible and sub- 
 stantial termini of their route." 
 Wheeler v. San Francisco &c. R. 
 Co., 31 Cal. 46, 89 Am. Dec. 147. 
 Where the road has authority to 
 contract for transportation and de- 
 livery of persons and property be- 
 yond its own termini, it may run 
 boats from its termini to other 
 points. Shawmut Bank v. Platts- 
 burgh &c. R. Co., 31 Vt. 491; South 
 Wales R. Co. v. Redmond, 10 Conn. 
 B. N. S. 675. 
 
 28 See authorities cited .in last 
 note, supra; also Graham v. Macon 
 &c. R. Co., 120 Ga. 757, 49 S. E. 75 ; 
 Wiggins Ferry Co. v. Ohio &c. R. 
 Co., 142 U. S. 396, 12 Sup. Ct. 188, 
 35 L. ed. 1055; Wiggins Ferry Co, 
 v. Chicago &c. R. Co., 73 Mo. 389, 
 39 Am. Rep. 519; Hackett v. Mult- 
 nomah R. Co., 12 Ore. 124, 6 Pac. 
 659, 53 Am. Rep. 327; McAboy's 
 Appeal, 107 Pa. St. 548. 
 
 29 Att'y-General v. Great North- 
 ern R. Co., 1 Drew. & Sm. 154. Or 
 Northwestern Union Packet Co. v. 
 
§429 
 
 RAILROADS 
 
 656 
 
 speculative purposes lands not needed for the purposes of the 
 corporation.^** A railroad cannot contract to extend its line be- 
 yond the limits defined in the charter.^i nor construct branch 
 roads not authorized by its charter,^^ nor make any material 
 change in its route where the charter prescribes what the route 
 shall be,^^ nor expend its funds in the construction of the line 
 essentially different from that for which they were raised;'* so 
 it has been held that it cannot use corporate funds to improve 
 the navigation of a stream upon which it had erected wharves 
 and warehouses. '5 A railway company has no implied power to 
 build a canal basin,^'^ nor to aid improvement, gas, water, or 
 land companies, or the like.^'^ Corporate funds cannot be used 
 for lobbying purposes,*^ nor, as a rule, used to purchase stock in 
 
 Shaw, 37 Wis. 655, 19 Am. Rep. 781. 
 See also People v. Illinois Cent. R. 
 Co., 233 111. 378, 84 N. E. 368, 16 
 L. R. A. (N. S.) 604, 122 Am. St. 
 181. 
 
 30 Pacific R. Co. v. Seely, 45 Mo. 
 212, 100 Am. Dec. 369. Rensselaer 
 &c. R. Co. V. Davis, 43 N. Y. 137; 
 Waldo V. Chicago &c. R. Co., 14 
 Wis. 575. A contract whereby one 
 railroad company agrees not to op- 
 pose the passage of a law giving 
 land to another company, on condi- 
 tion that the land shall be subse- 
 quently divided, is not enforceable. 
 Chippewa &c. R. Co. v. Chicago 
 &c. R. Co., 75 Wis. 224, 44 N.' W. 
 17. A railroad corporation has no 
 power to take by gift lands lying 
 along its route for other than rail- 
 road purposes. Case v. Kelley, 133 
 U. S. 21, 10 Sup. Ct. 216, i3 L. 
 ed. 513. 
 
 31 Bagshaw v. Eastern Union R. 
 Co., 7 Hare 114. See Stevens v. 
 Rutland &c. R. Co., 29 Vt. 545. 
 
 32 Knight V. Carrolton R. Co., 9 
 La. Ann. 284; Morris &c. R. Co. v. 
 Central R. Co., 31 N. J. L. 205, But 
 
 see McAboy's Appeal, 107 Pa. St. 
 548. 
 
 33 Charities R. Co. v. Hodgens, 77 
 Pa. St. 187; Rives v. Montgomery 
 &c. R. Co., 30 Ala. 92; Mississippi 
 &c. R. Co, V. Cross, 20 Ark. 443. 
 See Central Plank R. Co. v. Clem- 
 ens, 16 Mo. 359; Erie R. Co. v. 
 Steward, 170 N. Y. 172, 63 N. E. 
 118. 
 
 34 See Bagshaw v. Eastern Union 
 Ry., 7 Hare 114, where at the suit 
 of a stockholder, the railway cain- 
 pany was enjoined from using, for 
 the completion of its main line, 
 funds raised under authority of an 
 act of parliament to construct a 
 branch line. 
 
 35 Munt v. Shrewsbury &c. R. Co., 
 13 Beav. 1. 
 
 38 Plymouth R. Co. V. Colwell, 39 
 Pa. St. 337, 80 Am. Dec. 526. 
 
 ST Chicago v. Cameron, 120 111. 
 447, 11 N. E. 899. 
 
 38 Shea V. Mabry, 1 Lea (Tenn.) 
 319, where the directors were held 
 liable for using the corporate funds 
 for this purpose. 
 
657 
 
 CONTRACTS 
 
 §429 
 
 another company.*^ Corporate funds, it is, held, may. not be do- 
 nated to an exhibition,*" nor to a musical , concert,; even though it 
 is expected that the receipts of the corporation from its business 
 of carrying will be thereby materially increased.*^ ;The directors 
 
 39 Central R. Co. v, Collins, 40 
 Ga. 582; Military &c. Assn. v. Sa- 
 vannah &c. R. Co., 105 Ga. 420, 31 
 S. E. 200; Salomons v. Laing, 12 
 Beav. 339; Mannsell v. Midland &c. 
 R. Co., 1 Hem. & M. 130. See also 
 Holmes &c. Co. v. Holmes &c. Co., 
 127 N. Y. 252, 27 N. E. 831, 24 
 Am. St. 448; 3 Thomp. Corp. (2d 
 ed.), §2811. Though the purchase 
 by a corporation of stock in another 
 corporation is ultra vires, the objec- 
 tion cannot be raised by the stock- 
 holders of the company whose stock 
 is so purchased. Oelbermann v. 
 New York &c. R. Co., 7 Misc. 352, 
 27 N. Y. S. 945. In some states 
 railway corporations are given a 
 limited power to purchase stock in 
 other railway companies. While 
 other states expressly forbid such a 
 purchase. See also Oelbermann v. 
 New York & N. R. Co., 11 Hun 332, 
 29 N. Y. S. 545. 
 
 40 See Tompkinson v. South &c. 
 R. Co., 56 L. T. R. 812, where such 
 a donation was enjoined at the suit 
 of a stockholder. But see as to 
 permanent location of state fair, 
 State Board of Agriculture v. Citi- 
 zens' St. R. Co., 47 Ind. 407, 17 Am. 
 Rep. 702. 
 
 41 Davis V. Old Colony R. Co., 131 
 Mass. 258, 41 Am. Rep. 221, where 
 a subscription in aid of the "World's 
 Peace Jubilee and International Mu- 
 sical Festival" at Boston was held 
 not binding upon the corporation 
 although the concert had been held 
 on the faith of the subscription 
 
 guarantees. In this case, Gray, J., 
 after an exhaustive review of the 
 cases both of this country and Eng- 
 land, says: "But when the corpora- 
 tion has actually received nothing 
 in money or property, it cannot be 
 held liable upon an agreement to 
 share in or to guarantee the profits 
 of an enterprise which is , wholly 
 without the scope of its corporate 
 powers, upon the mere ground that 
 conjectural or speculative benefits 
 were believed by its officers to be 
 likely to . result from the making 
 of the agreement, and that the other 
 party has incurred expenses upon 
 the faith of it. Thomas v. Railroad 
 Co., 101 U. S. 71, 25 L. ed. 950; 
 Downing v. Mount Washington 
 Road Co., 40 N. H. 230; East Ang- 
 lian R. Co. V. Eastern Counties R. 
 Co., 11 C. B. 775; MacGregor v. 
 Dover & Deal R. Co., 18 Q. B. 618; 
 Ashbury R. &c. Co. v. Riche, L. 
 R. 7 H. L. 653; Franklin Co. v. 
 Lewiston Inst, for Sav., 68 Maine 
 43, 28 Am. Rep. 9. See also 3 
 Thomp. Corp. (2d ed.), §2116. 
 See, however, State Board of Agri- 
 culture V. Citizens' St. R. Co., 47 
 Ind. 407, 17 Am. Rep. 702, where 
 the court, in construing a subscrip- 
 tion contract, contitioned upon the 
 location of the state fair upon its 
 line, says: "It is not claimed in 
 the case under consideration that 
 there was any statute by which the 
 Street Railway Company was pro- 
 hibited from entering into the con- 
 tract in question, or, in other words. 
 
§430 
 
 RAILROADS 
 
 658 
 
 cannot legally use the corporate funds to induce promoters to 
 abandon a proposed rival company ,*2 nor to buy land at an ex- 
 orbitant price of one who, as part consideration, withdraws op- 
 position to the charter,** or lends his influence to the scheme.** 
 
 § 430 (375). Contracts — Ultra vires — Rule where statute pre- 
 scribes consequences. — It is generally held that where the legis- 
 lature specifically prescribes the consequences that shall follow 
 from an act of ultra vires, without making it void, the act is not 
 to be regarded as void.*" Where the statutory prohibition is 
 
 that in making the contract that 
 company violated any statute by 
 which the act was prohibitedT All 
 that is claimed is that there was a 
 want of power on the part of the 
 corporation to bind itself by the 
 contract. It is fully shown on the 
 part of the plaintiff that the State 
 Board of Agriculture performed the 
 contract on its part. The Street 
 Railway Company has thus received 
 the benefits and advantages of the 
 contract, but seeks to avoid paying 
 the consideration promised, because 
 it had not the legal power to con- 
 tract for the benefits which it has 
 actually received. In our opinion 
 the Street Railway Company is not 
 at liberty to assume this- position. 
 It has received the profits resulting 
 from the compliance of the plain- 
 tifif with the contract. These profits, 
 we are at liberty to presume, have 
 gone to swell the dividends of the 
 stockholders in that corporation. It 
 would be unjust for their company 
 now to escape performance of the 
 contract by which these profits have 
 been realized." 
 
 *2 Russell V. Wakefield W. W. 
 Co., L. R. 20 Eq. 474. Nor agree 
 with a competing road that it will 
 not complete its own road. Hart- 
 
 ford &c. R. Co. V. New York &c. 
 R. Co., 3 Rob. (N. Y.) 411. 
 
 *3 Gage V. New Market R. Co., 18 
 Q. B. 457. Cases such as the above 
 are usually treated as coming un- 
 der the doctrine of ultra vires, and 
 many of them with reason, since 
 such contracts as they involve are 
 tainted with the vice of illegality 
 and are also beyond the corporate 
 power. A contract may, it is evi- 
 dent, have more than one defect ot 
 vice. 
 
 ** Earl of Shrewsbury v. North 
 Staffordshire R. Co., L. R. 1 Eq. 
 S93. 
 
 *5 Pratt V. Short, 79 N. Y. 437, 
 445, 35 Am. Rep. 531; Lester v. 
 Howard Bank, 33 Md. 558, 3 Am. 
 Rep. 211; Washburn Mill Co. v. 
 Bartlett, 3 N. Dak. 138, 54 N. W. 
 544; National Bank v. Whitney, 103 
 U. S. 99; 3 Thomp. Corp. (2d ed.), 
 §2794. In Chattanooga &c. R. Co. 
 V. Evans, 66 Fed. 809, it is held 
 that non-compliance with a statute 
 requiring certain acts to be done by 
 a railroad company and prescribing 
 a penalty to be imposed upon per- 
 sons for a violation of the statute 
 does not invalidate a purchase of 
 land by the company. 
 
659 
 
 CONTRACTS 
 
 §431 
 
 clearly for the benefit of a designated class of persons and no 
 others, only members of that class can take advantage of a vio- 
 lation of the statute. Where the manifest intention of the stat- 
 ute would be defeated by adjudging an ultra vires contract void 
 it will not be so adjudged.** 
 
 §431 (376). Contracts — Ultra vires — Injunction. — A contract 
 which a corporation has no power to make cannot be enforced 
 by injunction.'" The doctrine that an ultra vires contract can- 
 not be enforced directly or indirectly by injunction is so clearly 
 sound that there is no room for fair debate, but as to the power 
 to prevent a corporation from entering into such a contract there 
 is perhaps room for debate, since such a contract'if entered into is 
 not, as a contract, effective. In our opinion, however, both prin- 
 ciple and authority require the conclusion that injunction will lie 
 to restrain a corporation from making such a contract.*^ The 
 modern cases, with good reason, are inclined to extend the rem- 
 edy by injunction,*^ and it seems to us that sound reason au- 
 
 *6 Gold Mining Co. v. National 
 Bank, 96 U. S. 640, 24 L. ed. 648; 
 National Bank v. Matthews, 98 U. 
 S. 621, 235 L. ed. 188; Farmington 
 &c. Bank v. Fall, 71 Maine 49 ; Dun- 
 comb V. New York &c. Co., 84 N. 
 Y. 190. See also Mutual &c. Ins. 
 Co., In re, 107 Iowa 143, 11 N. W. 
 868, 70 Am. St. 149. 
 
 47 Greenville &c. Co. v. Planters' 
 &c. Co., 70 Miss. 669, 13 So. 879, 35 
 Am. St. 681 ; Pearce v. Madison &c. 
 Railroad Co., 21 How. (U. S.) 441, 
 16 L. ed. 184, citing Pennsylvania 
 Co. y. St. Louis &c. Co., 118 U. S. 
 290, 6 Sup. Ct. 1094, 30 L. ed. 83 ; 
 Davis V. Old Colony R. Co., 131 
 Mass. 258, 41 Am. Rep. 221; Cork 
 &c. R. Co., In re, 4 Ch. App. 748; 
 Ashbury &c. Co. v. Riche, L. R. 7 
 H. L. 653, 672. 
 
 48 Attorney-General v. Chicago 
 &c. R. Co., 35 Wis. 425; Thomas 
 
 V. Railroad Company, 101 U. S. 71, 
 25 L. ed. 950; Board v. Lafayette 
 &c. R. Co., 50 Ind. 85; Attorney- 
 General V. Delaware &c. R. Co., 27 
 N. J. Eq. 631; Stockton v. Central 
 R. Co., SO N. J. Eq. 489, 25 Atl. 
 942, 17 L. R. A. 97; Latimer v. 
 Richmond R. Co., 39 S. Car. 44, 17 
 S. E. 258; Fishmongers Co. v. F.ast 
 India Co., 1 Dick. 163 ; Agar v. 
 Regents' Canal Coop. Ch. 11; Be- 
 man v. Rufford, 6 Eng. L. & Eq. 
 106; Colman y. Eastern &c. R. Co.,. 
 10 Beav. 1 ; Coats v. Clarence R. 
 Co., 1 Russ. & M. 181 ; 3 Elliott Con- 
 tracts, §§2547, 2548. See, however, 
 Graham v. Birkenhead &c. R. Co., 6- 
 Eng. L. & Eq. 132 ; F.fooks v. London 
 &c. Co., 19 Eng. L. &■ Eq. 7. 
 
 49 Champ V. Kendrick, 130 Ind.. 
 549, 30 N. E. 787; Pomeroy Eq. 
 Juris. § 1357. 
 
§432 
 
 RAILROADS 
 
 660 
 
 thorizes interference to prevent a corporation from entering into 
 a contract that it has no power to make rather than to permit the 
 contract to be made and after it is made contest its validity. The 
 state may, in the proper case, secure relief in equity against a 
 corporation that attempts to exercise a power that it does not 
 possess.^" Stockholders may maintain injunction to prevent cor- 
 porate officers from materially deviating from the objects for 
 which the corporation was formed.^^ 
 
 §432 (377). Contracts — Ultra vires— Denial of relief — 
 Laches. — It is held that if there 'is inexcusable delay in seeking 
 relief the courts will refuse to interpose, although the contract 
 may be ultra vires. ^^ The decisions proceed upon the general 
 
 50 Stockton V. Central R. Co., 50 
 N, J. Eq. 489, 2S Atl. 942, 17 L. R. 
 A. 97; Columbian Athletic Club v. 
 State, 143 Ind. 98, 40 N. E. 914, 28 
 L. R. A. 216, 52 Am. St. 407; At- 
 torney-General V. Chicago &c. R. 
 Co., 35 Wis. 425. See Attorney- 
 General V. Great Northern R. Co., 
 4 DeG. & Sm. 75; Taylor v. Salmon, 
 4 Myle. & Cr. 134; Ware v. Regents' 
 &c. Co., 3 DeG. & J. 212; River 
 Dun &c. Co. V. North Midland R. 
 Co., 1 Eng. R. & C. Cas. 135; At- 
 torney-General V. ohnson, Wils. Ch. 
 pt. 2, 87; Attorney-General v. Bir- 
 mingham &c. Co., 4 DeG. & Sm. 490 ; 
 Attorney-General v. Forbes, 2 Myl. 
 & C. 123; Attorney-General v. East- 
 ern Counties R. Co., 3 Eng. R. & 
 C. Cas. 337; Attorney-General v. 
 Sheffield &c. Co., 3 DeG. M. & G. 
 304; Attorney-General v. Mid-Kent 
 R. Co., 3 Ch. App. Cas. 100. See 
 People V. North River &c. Co., 121 
 N. Y. 582, 24 N.' E. 834, 9 L. R. A. 
 33, 18 Am. St. 843; People v. North 
 River &c. Co., 22 Abb. N. Cas. 164, 
 3 N. Y. S. 401, 2 L. R. A. 33. But 
 compare Attorney-General v. Great 
 
 Eastern R. Co., 11 Ch. Div. 449; 
 Attorney-General v. Utica Ins. Co., 
 2 Johns. Ch. (N. Y.) 371. 
 
 51 Kean v. Johnson, 9 N. J. Eq. 
 401 ; Livingston v. Lynch, 4 Johns. 
 Ch. (N. Y.) 573; Ware v. Grand 
 Junction R. Co., 2 Russ. & M. ^70. 
 See Sparhawk v. Union &c. R. Co., 
 54 Pa. St. 401. See also Zabriskie 
 V. Cleveland &c. R. Co., 23 How. 
 (U. S.) 381, 16 L. ed. 1188; Pol- 
 lock V. Farmers' &c. Co., 157 U. S. 
 429, 15 Sup. Ct. 673, 39 L. ed. 759; 
 Gunnison &c. Co. v. Whitaker, 91 
 Fed. 191 ; Tippecanoe County v. La- 
 fayette &c. R. Co., 50 Lid. 85 ; Cen- 
 tral R. Co. v. ColHns, 40 Ga. 582; 
 Willoughby v. Chicago Junction R. 
 Co., SO N. J. Eq. 656, 25 Atl. 277, 
 39 Am. & Eng. Corp. Cas. 153; In- 
 ternational &c. R. Co. V. Bremond, 
 53 Tex. 96. As far back as Dodge 
 V. Woolsey, 18 How. (U. S.) 331, 
 15 L. ed. 401, it was said that this 
 "is no longer doubted." 
 
 52 St. Louis &c. Co. V. Terre 
 Haute &c. Co., 145 U. S. 393, 12 
 Sup. Ct. 953, 36 L. ed. 738; St. 
 Louis &c. Co. V. Terre Haute &c. 
 
661 CONTRACTS § 433 
 
 doctrine that a party guilty of laches cannot successfully invoke 
 the assistance of the courts. The courts in refusing to grant 
 relief do not affirm the validity of the contract, but leave the par- 
 ties where it found them because of the laches of the 
 complaint.^* 
 
 §433 (378). Contracts— Ultra vires— Who may contest.— A 
 
 person not a corporate stockholder, or one not having a right to 
 or interest in corporate property, cannot dispute the right of a 
 corporation to make contracts of a certain kind upon the ground 
 that they are ultra vires. Thus, a wharfinger will not be per- 
 mitted, to dispute the right of a railroad company to rent its 
 wharf in competition with his own, by showing that its charter 
 does not authorize it to keep a wharf for rent.^* A person who is 
 sued for damage done to real estate held by a corporation cannot 
 successfully defend by showing that the charter of the corpora- 
 tion does not permit it to hold such real estate, or that it is not 
 authorized to take and hold land for the purposes for which the 
 real estate in question is acquired. ^^ Even with regard to stock- 
 holders and officers of the corporation the rule obtains that a per- 
 son whose rights are in no way infringed by th€ doing of an ultra 
 vires act cannot found an action or defense upon the doing of 
 that act. Upon this principle, it is held that the title acquired 
 by the vendee of land from a railroad company is good, although 
 it was ultra vires the company's charter to purchase the land in 
 the first instance.^^ And the officers of a corporation who have 
 
 Co., 33 Fed. 440; Alexander v. Robinson, 81 Mo. 18; Gifford v. 
 
 Searcy, 81 Ga. S36, 12 Am. St. 337. New Jersey R. Co., 10 N. J. Eq. 
 
 53 In the first case cited the court 171 ; 0«lbermann v. New York &c. 
 placed stress, upon the principle that R. Co., 7 Misc. 352, 27 N. Y. S. 
 where both parties are in fault the 94S; Farmers &c. Bank v. Dietroit 
 courts will not give aid to either &c. R. Co., 17 Wis. 372. 
 
 of them. 55 Farmers Loan &c. Co. v. Green 
 
 54 N«w Orleans &c. R. Co. v. El- Bay &c. R. Co., 11 Biss.- (U. S.) 334, 
 lerman, lOS U. S. 166, 26 L. ed. 12 Fed. 773. 
 
 1015. See New Haven Wire Co. 57 Walsh v. . Barton, 24 Ohio St. 
 
 Cases, 57 Conn. 352, 18 Atl. 266; .28. See also Mallett v. Simpson, 94 
 
 Tomlinsbn v. Bricklayers' Union, 87 N. Car. 37, 55 Am. Rep. 594. 
 Ind. 308; St. Louis Drug Co. v. 
 
§ 434 RAILROADS 662 
 
 bought stock for the company cannot plead as a defense to an 
 action for conversion of the stock to their own use, that the orig- 
 inal purchase made by them on behalf of the corporation was 
 ultra ,vire,s.s8 The rule as asserted by many of the adjudged 
 cases is that, after the corporation has performed its part of the 
 contract, the other party will not be permitted to interpose the 
 plea that it had no power to make such a contract.^* The rule 
 has been thus stated : "Without deciding whether or not it was 
 within the corporate power of the railway company to become a 
 party to such bond or contract, we are clearly of the opinion that, 
 after full performance by the company of the stipulations of such 
 bond of contract on its part to be done and performed, and after 
 the appellees have received in full the benefits they bargained 
 for, they cannot be permitted to escape or avoid the obligation 
 of their contract upon the ground that the company had possibly 
 exceeded its corporate power, or that such contract, as to it, was 
 possibly ultra vires."*" We have elsewhere said that we believe 
 that the contract is not enforceable and the right of the party 
 to protection from loss or injury does not rest upon the contract, 
 but upon general equitable principles. 
 
 §434 (379). Contracts— Ultra vires— Creditors.— Corporate 
 
 creditors occupy an essentially diflferent position from that oc- 
 
 58 St. Louis Stoneware Co. v. privileges . and franchises for ninety- 
 Partridge, 8 Mo. App. 217. six years to defendant does not ren- 
 
 39 Whitney Arms Co. v. Barlow, der it so far an executed contract 
 
 63 N. Y. 62, 20 Am. Rep. 504; that a party thereto is estopped to 
 
 Parish v. Wheeler, 22 N. Y. 494; deny its validity and to repudiate 
 
 Hamilton &c. Hydraulic Co. v. Cin- it. Oregon R. &c. Co. v. Orego- 
 
 cinnati &c. R. Co., 29 Ohio St. 341. nian R. Co., 130 U. S. 1, 9 Sup. Ct. 
 
 In this case the defendant was per- 409, 32 L. ed. 837; Pennsylvania 
 
 mitted to fill up a watercourse in R. Co. v. St. Louis &c. R. Co., 118 
 
 consideration that it would reopen U. S. 290, 630, 7 Sup. Ct. 24, 30 L. 
 
 and restore the watercourse when ed. 83. See also 8 Elliott Cont. 
 
 requested. The defendant was held § 558. 
 
 estopped to 'set up that the owner- 60 Chicago &c. R. Co. v. Derkes, 
 
 ship and maintenance of the water- 103 Ind. S20, 525, 3 N. E. 239. See 
 
 course by the plaintiff was ultra also Louisville &c. Co. v. Flanagan, 
 
 vires. Three years of perform- 113 Ind. 488, 493, 14 N. E. 370, 3 
 
 ance of a contract by which the Am. St. 674; Steam Nav. Co. v. 
 
 railway company demised its roads, Weed, 17 Barb. (N. Y.) 378. 
 
663 CONTRACTS - § 434 
 
 cupied by the corporation or its stockholders. They have no part 
 in the management of the affairs of the corporation, and receive 
 no direct benefit from a successful prosecution of its enterprises. 
 Their contracts are made in reliance upon the fact that the cor- 
 porate fund is a primary fund for the payment of the corporate 
 debts. Accordingly the assent of all the shareholders can not 
 render valid, as against the creditors, a contract not within the 
 corporate powers ; and a partial performance by the other con- 
 tracting party cannot ordinarily make the corporation liable to 
 an action that will jeopardize their interests. *i The position of 
 the creditors is so essentially different from that of the corpora- 
 tion and its shareholders that the rules which apply to one class 
 cannot unqualifiedly apply to the other. The rule asserted in 
 well considered decisions is that in cases where the corporation 
 is insolvent, the claims of parties founded upon an ultra vires 
 contract will be set aside in favor of creditors claiming under 
 valid contracts.®^ The corporate creditors,, of course, have no 
 rights to be protected in cases where the corporation is clearly 
 solvent, for in such a case payment of the debt due under an ultra 
 vires contract will not menace its ability to pay its other debts, 
 and they cannot complain of such payment. But where the pay- 
 ment of the claims of creditors founded upon contracts valid in 
 all respects will be endangered by the enforcement of what are 
 called ultra vires contracts the latter class of contracts will not be 
 enforced. Where the contract is ultra vires in the proper sense 
 of the term, then, as we have elsewhere shown, there can be no 
 
 ni National Trust Co. v. Miller, 33 a transfer of mortgages by the cor- 
 
 N. J. Eq. 155. See also Washing- poration made to secure such 
 
 ton Mill Co. V. Sprague Lumber Co.,. claims. Talmage v. Pell, 7 N. Y. 
 
 19 Wash. 165, 52 Pac. 1067; 3 328. The corporation is not es- 
 
 Tbomp. Corp. (2cl ed.), §2850. But topped to set up the defense of ultra 
 
 it has been held otherwise where no vires in favor of its creditors whose 
 
 fraud is charged. Force v. Age- debts were created under lawful 
 
 Herald Co., 136 Ala. 271, 33 So. 866. power, where it is insolvent, and the 
 
 ii2 The receiver of such a corpora- object is to prefer such creditors to 
 
 tion may repudiate claims arising others claiming under unauthorized 
 
 out of ultra Vires contracts. Abbott contracts. Bank of Chattanooga v. 
 
 \'. Baltimore &c. Steam Packet Co., Bank of Memphis, 9 Heisk. (Tenn.) 
 
 1 Md. Ch. 542. He may repudiate 408. 
 
§ 435 RAILROADS 664 
 
 recovery upon it. The contract itself is void, but tliere may be in 
 many cases a recovery upon the quantum valebat or quantum 
 meruit. If there is a right to recover on the quantum meruit, for 
 the reasonable value of the property received and appropriated 
 by the corporation, there is reason for doubting whether credi- 
 tors can defeat the. claims of parties having such a right of re- 
 covery, for, in such a case, the property received and appro- 
 priated becomes part of the corporate assets and increases the 
 security of' the creditors. Where there is an executory contract 
 merely there is no difficulty, for it is clear, that such a contract 
 cannot be enforced nor damages recovered for its breach. It 
 is held that creditors may be estopped by the fact that they have 
 received the benefits of the unauthorized act and their dealings 
 have been with reference thereto.®^ 
 
 §435 (380). Contracts — Ultra vires — Non-assenting stock- 
 holders. — It is reasoned that as corporations act only by their 
 officers and agents, and are controlled by majorities, and as the 
 interests of the minority stockholders and the creditors are not 
 always respected by the managers, the rule that the corporation 
 is bound by contracts of its agents, is not of universal applica- 
 tion. It would seem to be clear upon principle that a stockholder 
 would not be bound by any ultra vires contract entered into by 
 the directors, of which he had no knowledge, even though a bene- 
 fit accrued to the corporation by reason of the performance of 
 such a contract.*" There is, however, difficulty in practically ap- 
 plying this general doctrine. If the corporation does actually re- 
 ceive and retain property of value it should be compelled to make 
 just and equitable compensation, although some of the stock- 
 holders may assail the transaction. It is, however, quite clear 
 on principle that where the contract is executory a non-assentint,'- 
 stockholder, who promptly assails it, is entitled to relief. But 
 since the books of the company are at all times open for their 
 inspection, it may be presumed that the members of the corpora- 
 
 63 Tone V. Columbus, 39 Ohio St 64 See Bi-Spool &c. Co. v. Acme 
 
 281, 48 Am. Rep. 438. See also Mfg. Co., 153 Mass. 404, 26 N F 
 
 Fogg V. Blair, 133 U. S. 534, 10 Sup 991 ; 3 Thomp. Corp. (2d ed ') 
 
 Ct. 338, 33 L. ed.-721. §2846, et seq. 
 
665 CO.NTKACTS § 435 
 
 tion are cognizanl; of its acts, and a ratification of such acts will 
 be presumed from acquiescence on their part."^ It is so difficult 
 to permit a contract to be set aside by a dissenting stockholder 
 without at the same time relieving those by whom it was made, 
 that the courts refuse to entertain his objections on the ground 
 that a contract is ultra vires, unless he moves promptly to pre- 
 vent its execution. He will not, as a general rule, be heard to ex- 
 press, after the contract is executed, a dissent which he has not 
 made known until it was apparent that the contract would oper- 
 ate against his interests,^'' unless he has done equity or caused 
 equity to be done by the corporation. 
 
 § 436 (381). Prohibited contracts — Effect of prescribing pen- 
 alties. — Where a contract is illegal because prohibited by legis- 
 lative enactment, it is not necessarily void if the legislature has 
 specifically provided what the consequences of a violation of the 
 statute shall be. The general rule upon this subject seerns to be 
 that where the statute which prohibits the contract expressly 
 prescribes the consequences of its violation the contract is' not 
 void, since the consequences expressly prescribed are exclusive."'^ 
 
 00 Thompson v. Lambert, 44 Iowa ment of any money loaned or dis- 
 239. counted by any incorporated com- 
 es Thompson v. Lambert, 44 Iowa pany contrary to the provisions of 
 239; Bradley v;. Ballard, SS 111. 413, the [statute] shall be void," it was 
 8 Am, l\ep. 656. See also Union held that the notes or seduritie's so 
 Pac. R. Co. V. Chicago &c. R. Co., taken were void, but the money 
 163 U. S. 564, 16 Sup. Ct. 1173, 41 loaned on them could be recovered. 
 L. ed. 265 ; article in 13 Am. L. The court said : "A prohibitory 
 Rev. 661 ; 3 Thomp. Corp. (2d statute may itself point out the con- 
 ed.), §2832; Rabe v. Dunlap, 51 N. sequences of its violation, and if, on 
 J. Eq. 40, 25 Atl. 959. a consideration of the whole stat- 
 6^ See ante, § 430.; 2 Elliott Cont. ute, it appears that the legislature 
 §§667-669 (not void where statute intended to define such cdnse- 
 is merely a revenue measure). quences, and to exclude any other 
 Where a corporation was forbidden penalty or forfeiture than such as is 
 by law to issue notes or other evi- declared in the statute itself; no 
 dences of debt, to be loaned or put other will be enforced, and if an ac- 
 in circulation as money, the stat- tion can be maintained on the trans- 
 ute declaring that all notes or other action of which the prohibited 
 securities for the payment of money transaction was a part without 
 "maae or given to secure the pay- sanctioning the' illegality, such 
 
§436 
 
 RAILROADS 
 
 666 
 
 But this rule cannot govern where there is simply a general pen- 
 alty prescribed. Where a penalty is declared, the general rule 
 
 action will be entertained." Pratt 
 V. Short, 79 N. Y. 437, 445, 35 Am. 
 Rep. 531. In Edison General 
 Electric Co. v. Canadian Pac. Nav. 
 Co., 8 Wash. 370, 36 Pac. 260, 24 
 L. R. A. 315, 40 Am. St. 910, the 
 Supreme Court of Washington held 
 that although a statute provides a 
 penalty for a foreign corporation 
 doing business without first having 
 registered contracts by such corpora- 
 tion are not thereby rendered void. 
 The court said : "There is some 
 diversity among the cases in the 
 construction of laws of this kind, 
 but the weight of authority seems 
 to establish the doctrine that it is 
 the duty of the courts to look at 
 the whole statute, and therefrom de- 
 termine as to what was the intent 
 of the legislature. If, by the terms 
 thereof, the act is made unlawful, 
 it will usually be construed to 
 amount to a prohibition of said act, 
 and the imposition of a penalty will 
 also amount to a prohibition if, 
 from the language used, such seems 
 to have been the intent of the legis- 
 lature. But in the case at bar, while 
 the company is liable to the penalty 
 provided in the statute, there is 
 nothing in the act which in terms 
 prohibits the transaction of business 
 or declares it to be unlawful, and 
 the particular language of the clause 
 which imposes the penalty has no 
 tendency to establish either of said 
 propositions. On the contrary, its 
 language, fairly construed, would 
 seem to contemplate that the com- 
 pany might do business without 
 such registration, but that, if it did 
 
 it should pay the penalty therein 
 prescribed for the privilege of so 
 doing. The cases cited by appel- 
 lant, when applied to the facts of 
 this case, have little tendency to 
 sustain its contention. The investi- 
 gation which we have been able to 
 give the adjudged cases tends to 
 support the statement made by re- 
 spondent, in its brief, that a pro- 
 vision like the one under considera- 
 tion has never been held to render 
 contracts void, though entered into 
 without the authority of the statute, 
 Some of the cases cited by appel- 
 lant contain expressions to the ef- 
 fect that the imposition of a penalty 
 for the performance of an act is 
 equivalent to declaring it unlaw- 
 ful; but an examination of the facts 
 will show that the provisions which 
 they were construing were clothed 
 in far different language than the 
 one under consideration." Where a 
 corporation loans money in excess 
 of the prescribed limit to be loaned 
 to an individual, the corjjoration 
 can recover the money. "We do 
 not think that public policy re- 
 quires, or that- congress intended 
 that an excess of loans beyond the 
 proportion specified should enable 
 the borrower to avoid the payment 
 of the money actually received by 
 him. This would be to injure the 
 interests of creditors, stockholders 
 and all who have an interest in the 
 safety and prosperity of the bank." 
 Gold Min. Co. v. National Bank, 96 
 U. S. 640, 24 L. ed. 648; Duncomb 
 V. New York &c. R. Co., 84 N. Y. 
 190. And a provision in the char- 
 
667 
 
 CONTRACTS 
 
 §437 
 
 is that a contract to do the forbidden act is void. As is well 
 known the accepted doctrine is that the imposition of a penalty 
 for doing the act operates as such an implied prohibition as to 
 bring the case within this rule.^* It is sometimes provided that 
 only specified persons shall be entitled to the protection of a 
 special prohibition of the statute, and when this is so only such 
 persons can take advantage of it.®* 
 
 §437 (382). Illegal contracts — Generally. — It is hardly neces- 
 sary to say that a railroad company has no more right to enter 
 into an illegal contract than a natural person or a corporation 
 of anv kind. If an act be malum in se or malum prohibitum a 
 railroad company cannot perform it.''" Where a contract is li- 
 
 ter of a corporation prohibiting 
 any director or other officer, under 
 penalty of fine or imprisonment, 
 from borrowing money from the 
 bank, does not exempt a director 
 from liability for money loaned to 
 him in violation of the prohibition. 
 Farmington Sav. Bank v. Fall, 71 
 Maine 49. Ante, §430. 
 
 csO'Donnell v. Sweeney, S Ala, 
 467, 39 Am. Dec. 336; Woods v. 
 Armstrong, 54 Ala. ISO, 25 Am. Rep. . 
 671 ; Sharp v. Teese, 9 N. J. L. 352, 
 17 Am. Dec. 479; Mitchell v. Smith, 
 1 Binney (Pa.) 110, 2 Am. Dec. 
 417; Seidenbender v. Charles, 4 
 Serg. & Raw. (Pa.) 151, 8 Am. 
 Dec. 682; Ohio L. Ins. &c. Co. v. 
 Merchants' Ins. Co., 30 Tenn. 1, S3 
 Am. Dec. 742; Wilson v. Spencer, 
 1 Rand. (Va.) 76, 10 Am. Dec. 491 ; 
 8 Elliott Cont. §665. 
 
 68 Courts often speak of acts and 
 contracts as void, when they mean 
 no more than that some party con- 
 cerned has a right to avoid them. 
 Legislators sometimes use language 
 with equal want of exact accuracy; 
 and when they say that some act or 
 contract shall not be of any force 
 
 or effect, mean perhaps no more 
 than this : that at the option of 
 those for whose benefit the provi- 
 sion was made it shall be voidable, 
 and have no force or effect as 
 against his interests. * * * If it is 
 apparent that an act is prohibited 
 and declared void on grounds of 
 general policy, we must suppose the 
 legislative intent to be that it shall 
 be void to all intents, while if the 
 manifest intention is to give protec- 
 tion to determinate individuals who 
 are sui juris, the purpose is suffi- 
 ciently accomplished, if they are 
 given the liberty of avoiding it." 
 Beecher v. Marquette &c. Co., 45 
 Mich. 103, 108, 7 N. W. 695, per 
 Cooley, J. ; Earle v. Earle, 91 Ind. 
 27. See also Union Nat. Bank v. 
 Matthews, 98 U. S. 629, 2S L. ed. 
 188; Roberts v. Lane, 64 Maine 108, 
 18 Am. Rep. 242; Prescott Nat. 
 Bank v. Butler, 157 Mass. 548, 32 
 N. E. 909. 
 
 70 Marshall v. Baltimore &c. R. 
 Co., 16 How. (U. S.) 314, 14 L. ed. 
 953; Pueblo &c. R. Co. v. Rudd, 5 
 Colo. 270; Pueblo &c. R. Co. v. Tay- 
 lor, 6 Colo. 1, 45 Am. Dec. 512; 
 
§ 438 RAILROADS 668 
 
 legal and for that reason void, no action can be maintained upon 
 it, for the courts will decline to assist either party in enforcing 
 it.'^i But it is unnecessary to do more than suggest these gen- 
 eral rules and add that all of the fundamental rules regarding 
 illegal contracts apply to contracts by railroad companies. 
 
 §438 (383). Illegal contracts and ultra vires contracts dis- 
 criminated.^At another place we have directed attention to the 
 difference between contracts that are ultra vires and contracts 
 that are illegal. ''- It is obvious that a contract may be beyond 
 the scope of the corporate powers and yet not be illegal in the 
 proper sense of the term. The term "illegal contract," as we 
 employ it, means a contract forbidden by legislative enactment or 
 condemned by some general rule of law. It is true, of course, 
 that a contract which is against public policy is illegal, but we 
 can see no valid reason for making an independent and distinct 
 class of contracts against public policy, for public policy is set- 
 tled and determined by general rules of law, so that such a con- 
 tract is really an illegal one and is, therefore, properly a member 
 of the general class designated by the term illegal contracts. 
 What the term "public policy" means has not been precisely de- 
 termined by the' iudicial decisions.'* Illegal contracts are, in a 
 
 Morris &c. R. Co. v. Sussex &c. R. t 2 Ante, §428; Woodruff v. Erie 
 Co., 20 N. J. Eq. 542 ; Chippewa &c, R. Co., 93 N. Y. 609, 618. The mod- 
 Co. V. Chicago &c. R. Co., 75 Wis. ern cases deny that there is any es- 
 224 44 N. W. 17, 6 L. R. A. 601; sential difference between contracts 
 Ashbury R. &c. Co. v. Riche, L. R. to perform acts malum in se and 
 7 H. L, C. 653; 3 Thomp. Corp. contracts to do that which is malum 
 (2d ed.), §§ 2791, et seq. prohibitum. Evans v. Trenton, 24 
 
 ■?i Ohio &c. Co. V. Merchants &c. N. J. L. 764. 
 Co., 30 Term. 1, 53 Am. Dec. 742 ; ' T3 In Richardson v. Mellish, 2 
 O'Donnell v. Sweeney, 5 Ala. 467, 39 Bing. 229, 9 E. C. L. 557, Burroughs, 
 Am. Dec. 336; Woods v. Arm- J., said: "Public policy is a very 
 strong, 54 Ala. 150, 25 "Am. Rep. unruly horse, and when once you 
 671 ; Wilson v. Spencer, 1 Rand. get astride of it you never know 
 (Va.) 76, 10 Am. Dec. 491. See where it will carry you. Public pol- 
 also Minnesota &c. R. Co. v. Way, icy does not admit of definition and 
 34 S. Dak. 435, 148 N. W. 858; is not easily explained." See gen- 
 Webb V. Tulchire, 3 Ired. (N. Car.) erally Bank of United States v. 
 Law 485, 40 Am. Dec. 419; 3 Owens, 2 Pet. (U. S.) 527, 7 L. ed. 
 Thomp. Corp. (2d ed.), §2791. 508; Providence &c. Co. v. Norris, 2 
 
669 
 
 CONTRACTS 
 
 §439 
 
 sense, ultra vires, but they are something more, they_ are con- 
 tracts of "an evil tendency." It is hardly necessary to say that a 
 railroad corporation has no more right to enter into an illegal 
 contract than an individual. It is to be remarked, however, that 
 a positive legislative enactment may confer authority to make a 
 contract which, but for the statute, would be regarded as illegal 
 because against public policy.''* 
 
 § 439 (384). Classes of illegal contracts. — We have said that 
 in our judgment a contract void because against public policy iS 
 an illegal contract. Some of the cases, however, do hot class such 
 contracts as illegal, but make of them a separate and distirtct 
 class. We think that illegal contracts, as distinguished from or- 
 dinary ultra vires contracts, may be divided into (1) those which 
 are immoral in themselves, and forbidden by law to person's as 
 well as corporations; (2) those which the corporations in ques- 
 tion are forbidden to make by statute, and (3) those which public 
 policy forbids them to makeJ^ The latter class of contracts, that 
 
 Wall. (U. S.) 45, S6, 17 L. ed. 868; 
 Farmers' &c. R. Co. v. White, 5 Colo. 
 App. 1, 31 Pac. 34S; Florida &c. R. 
 Co. V. State, 31 Fla. 482, 13 So. 103, 
 20 L. R.A. 419; Pennsylvania Co. v. 
 Dolan, 6 Ind. App. 109, 32 N. E. 
 802, 51 Am. St. 289; Griswold v. 
 Illinois &c. R. Co. (Iowa), 53 N. 
 W. 295 (reversed on rehearing, in 
 90 Iowa 265, 57 N., W. 843, 24 
 L. R. A. 647) ; Durgin v. Dyer, 68 
 Maine 143; Smith v. Arnold, 106 
 Mass. 269; Bishop v. Palmer, 146 
 Mass. 469, 474, 16 N. E. 299, 4 Am, 
 St. 339; Brown v. New York &c. 
 Co., 75 Hun 355, 27 N. Y. S. 69 
 Pierce v. Evans, 61 Pa. St. 415 
 Burkholder v. Beetem, 65 Pa. St 
 496; Edgerton v. Earl Brownlow, 4 
 H. L. Cas. 1. 
 
 T4 Donaldson v. Jude, 2 Bibb 
 (Ky.) 57; Brown v. Anderson, 1 T. 
 B. Mon. (Ky.) 198; Vermont &t. 
 R. Co. V. Vermont &c. R. Co., 34 
 
 Vt. 1. See also American &c. 
 Union v. Yount, 101 U. S. 352, 25 
 L. ed. 888. Where there is no legis- 
 lation it is for the courts to decide 
 whether a contract is or is not "at 
 war with any established interest of 
 society," and, therefore, illegal. 
 Kellogg V. Larkin, 3 Pin. (Wis.) 
 123, 3 Chand. 133, 56 Am. Dec. 164; 
 B'oardman v. Thompson, 25 Iowa 
 487, 501. Legislation, however, set- 
 tles questions of policy. Speaking 
 of the power of the legislature in 
 this regard the Supreme Court of 
 the United States said: "Questions 
 of this sort determined there are 
 conclusive here." License Tax Cases, 
 S Wall. (U. S.) 462, 469, 18 L. ed. 
 675. See also Hadden v. Collector 
 S Wall. (U. S.) 107, 18 L. ed. S18; 
 Magee v. O'Neill, 19 S. Car. 170, 
 45 Am. Rep. 765. 
 
 TSSee 3 Thomp. Corp. (2d ed.), 
 § 2136, et seq. 
 
§440 
 
 KAILROADS 
 
 670 
 
 is, contracts against public policy, have been discussed princi- 
 pally in cases where corporations charged with the performance 
 of certain public duties have entered into contracts whereby they 
 are disabled to perform such duties, or the rights of the public 
 are infringed,^* but the principle has a somewhat wider range. 
 
 §440 (385). Contracts void because aji^ainst public policy. — 
 
 The settled doctrine is that railroads and other corporations 
 which are created with special powers and privileges, and 
 charged with certain duties to the public, are held bound by con- 
 siderations of public policy to refrain from doing any acts which 
 may disable them from performing their duties to the public. ''■'" 
 This familiar principle is applied to various classes of cases, but 
 while there is no diversity of opinion as to the principle itself 
 there is some conflict among the cases as to its application. It 
 is held, in accordance with the general principle stated,'^'* that a 
 
 T6 New York &c. R. Co. v. Win- 
 aiis, 17 How. (U. S.) 30, 39, IS 
 L. ed. 27; Pearce v. Madison &c. R. 
 Co., 21 How. (U. S.) 441, 16 L. ed. 
 184; Thomas v. West Jersey Co., 
 101 U. S. 71, 25 L. ed. 950; Branch 
 V. Jesup, 106 U. S. 468, 478; 1 Sup. 
 Ct. 15, 27 L. ed. 279; Pennsylvania 
 R. Co. V. St. Louis &c. R. Co., 118 
 U. S. 290, 6 Sup. Ct. 1094, 30 L. ed. 
 83; Pittsburgh &c. R. Co. v. Keo- 
 kuk &c. Bridge Co., 131 U. S. 371, 
 384 9 Sup. Ct. 770, 33 L. ed. 157; 
 Central Trans. Co. v. Pullman P. 
 Car Co., 139 U. S. 24 11 Sup. Ct. 
 478, 35 L. ed. 55; Hazelhurst v. Sta- 
 vannah &c. R. Co., 24 Ga. 13; El- 
 kins V. Camden &c. R. Co., 36 N. 
 J. Eq. 5; New England Express Co. 
 V. Maine Central R. Co., 57 Maine 
 188. See also 3 Thomp. Corp. (2d 
 ed.), §2792. 
 
 TT Thomas v. West Jersey R. Co., 
 101 U. S. 71, 25 L. ed. 950; Gibbs 
 V. Consolidated Gas Co., 130 U. S. 
 396, 9 Sup. Ct. 553, 32 L. ed. 979; 
 
 Central Trans. Co. v. Pullman Car 
 Co., 139 U. S. 24, 11 Sup. Ct. 478, 
 35 L. ed. 55; Daniels v. Hart, 118 
 Mass. 543; Abbott v. Johnstown &c. 
 R. Co., 80 N. Y. 27, 36 Am. Rep. 
 572; West Virginia &c. Co. v. Ohio 
 &c. Co., 22 W. Va. 600, 46 Am. Rep. 
 527, and see Indiana authorities 
 collected and cited in Muncie Gas 
 Co. V. Muncie, 160 Ind. 97, 104, 66 
 N. E. 436, 60 L. R. A. 822. 
 A corporation can not disable 
 itself by contract from performing 
 its public duties, or, by agreement,, 
 compel itself to make public accom- 
 modation subordinate to its private 
 interests. Gibbs v. Consolidated 
 Gas Co., 130 U. S. 396, 9 Sup. Ct. 
 553, 32 L. ed. 979; Davis v. South- 
 ern Pac. Co., 235 Fed. 731; Chreste 
 y. Loui,sville &c. R. Co., 167 Kv. 75, 
 180 S. W. 49, L. R. A. 1917B, 1123^ 
 and note. 
 
 7« Oregon R. Co. v. Oregonian R. 
 Co., 130 U. S. 1, 9 Sup. Ct. 409, 32 
 L.-ed. 837; Winchester &c. Tpk. Co. 
 
671 
 
 CONTRACTS 
 
 §440 
 
 railroad cannot mortgage, lease or sell its railroad, nor any prop- 
 erty essential to the operation of its railroad,'^ in the absence of 
 authority from the state. »" So contracts by which it is under- 
 
 V. Vimont, 5 B. Mon. (Ky.) 1 ; State 
 V. Morgan, 28 L*. Ann. 482; Daniels 
 V. Hart, 118 Mass. 543; Southern 
 Pac. R. Co. V. Esquibel, 4 N. Mex. 
 337, 20 Pac. 109; Black v. Delaware 
 &c. Canal Co., 22 N. J. Eq. 130, 
 399. But see Memphis &c. R. Co. 
 V. Dow, 19 Fed. 388 ; Kelly v. Trus- 
 tees &c., 58 Ala. 489; Miller v. Rut- 
 land &c. R. C6., 36 Vt. 452, ASH, 
 holding that it may mortgage its 
 property to purchase necessary rails, 
 without which it could perform none 
 of its public duties. 
 
 79 Peters v. Lincoln &c. R. Co., 2 
 McCrary, (U. S.) 275, 12 Fed. 513; 
 Thomas v. Railroad Co., 101 U. S. 
 71, 25 L. ed. 950; Pennsylvania R. 
 Co. V. St. Louis &c. R. Co., 118 U. 
 S. 290, 6 Sup. Ct. 1094, 30 L. ed. 
 83; Oregon R. &c. Co. v. Oregoni- 
 an R. Co., 130 U. S. 1, 9 Sup. Ct. 
 409, 32 L. ed. 837; Singleton v. 
 Southwestern R. Co., 70 Ga. 464, 48 
 Am. Rep. 574 ; Board &c. v. Lafay- 
 ette &c. R. Co., SO Ind. 85, 110; 
 Middlesex R. Co. v. Boston &c. R. 
 Co., lis Mass. 347; Freeman v. Min- 
 nesota &c. R. Co., 28 Minn. 443, 10 
 N. W. 594; Pierce v. Emery, 32 N. 
 H. 484; Abbott v. Johnstown &c. R. 
 Co., 80 N. Y. 27, 36 Am. Rep. 572. 
 See opinion of Chief Justice Ruger, in 
 WoodrufI V. Eriie R. Co., 93 N. Y. 
 609, 618; Brooker v. Maysville &c. 
 R. Co., 119 Ky. 137, 83 S. W. 117; 
 Quigley v. Toledo R. &c. Co., 89 
 Ohio St. 68, lO'S N. E. 185, Ann. 
 Cas. 1915D, 992, and note. But it 
 
 has been held that it may, under 
 certain circumstances, sell a terminal 
 switch to the owner of the land on 
 which it is laid. Oman v. Bedford 
 &c. Stone Co., 134 Fed. 64, citing 
 Jones V. Newport News &c. R. Co., 
 55 Fed. 736, and South Dakota v. 
 North Carolina, 192 U. S. 286, 24 
 Sup. Ct. 269, 48 L. ed. 448. See al- 
 so Bacon v. Boston &c. R. Co., 83 
 Vt. 421, 76 Atl. 128. 
 
 80 In Maine it is held to be the 
 policy of the state to permit rail- 
 roads to mortgage their property at 
 will. Kennebec &c. R. Co. v. Port- 
 land &c. R. Co., 59 Maine 9. See 
 also Woodruff v. Erie R. Co., 93 N. 
 Y. 609, 618. Mr. Charles Francis 
 Adams, president of the Union 
 Pacific Railroad, in an address 
 at Boston, on December 15, 1888, 
 said : "I am very sure now, as 
 I have been for the last twenty 
 years, and as I long ago expressed 
 myself, that a great consolidated 
 corporation, or even a trust, can, be 
 held to a far stricter responsibility 
 to the law than numerous smaller 
 and conflicting corporations." Mr. 
 Justice Brewer, in United States v. 
 Western Union Tel. Co., 50 Fed. 28, 
 42, said: "It may be true, as con- 
 tended, and, not disturbed by the 
 common hue and cry about monop- 
 oly I am disposed to believe that it 
 is true — that the real interests of 
 the public are subserved by the con- 
 solidation of the various transpor- 
 tation systems." 
 
§440 
 
 RAILROADS 
 
 672 
 
 taken 'tb stifle competition between parallel roads, which would, 
 in the natural order of things, be competing lines, are illegal and 
 void."^ One road will not be permitted to contract for the pur- 
 chase of 'stock of a competing road, with a view to gainmg con- 
 trol of it, and so preventing competition between the two roads.*^ 
 
 81 Cleveland &c. R. Co. v. Closser, 
 126 Ind. 348, '26 N. E. 159, 9 L. R. 
 A. 754, 22 Am. St. 593; Chicago 
 &c. R. Co. V. Wabash &c. R. Co., 
 61 ]Fe(i.'993; Craft v. McConoughy, 
 79 111. 346, 22 Am. Rep. 171; Mor- 
 rill V. Boston &c. R. Co., 55 N. H. 
 531; Stockton v. Cent.&c. R. Co., SO 
 N. J. Eq. 52, 24 Atl. 964, 17 L. R. 
 A. 97 ; Hooker v. Vandewater, 4 
 Denio (N. Y.) 349, 47 Am. Dec. 
 258; Central Ohio Salt Co. v. Guth- 
 rie, 35 Ohio St. 666; Morris Run 
 Coal Co., V. Barday Coal Co., 68 
 Pa. St. 173, 8 Am. Rep. 159; Gibbs v. 
 Consolidated Gas Co., 130 U. S. 396, 
 9 Sup. Ct. 553, 32 L. ed. 9.79. In an- 
 nouncing the opinion .of the court in 
 this case Chief Justice Fuller said: 
 "In the instance of business of such 
 a character that it presumably can- 
 not be restrained to any extent what- 
 ever without prejudice to the public 
 interests, courts decline to enforce or 
 sustain contracts imposing such re- 
 straint, however partial, because in 
 contravention of public policy." 
 Texas &c. R. Co. v. Southern Pa- 
 ciiic R. Co., 41 La. Ann. 970, 6 So. 
 888, 17 Am. St. 445; Gulf &c. R. 
 Co. V. State, 72 Tex. 404, 1 L. R. 
 A. 849. See United States v. Trans- 
 Missouri Freight Assn., 58 Fed. 58; 
 and note to Harding v. American 
 Glucose Co., 182 111. 551, 55 N. E. 
 577, 64 L. R. A. 738, 74 Am. St. 
 189, 235, 249-255. 
 
 82 Central R. Co. v. Collins, 40 
 
 Ga. 582; De La Vergne &c. Co. v. 
 German &c. Inst., 175 U. S. 40, 20 
 Sup. Ct. 20, 44 L. ed. 65; Louisville 
 &c. R. V. Kentucky, 161 V. S. 677, 
 
 16 Sup. Ct. 714, 40 L. ed. 849; Peo- 
 ple V. Chicago &c. Co., 130 111. 268, 
 22 N. E. 798, 8 L. R. A. 497, 
 
 17 Am St. 319; CentralR. Co. v. 
 Pennsylvania R. Co., 31 N. J. Eq. 
 475, 494; Elkins v. Camden &c. R. 
 Co., 36 N. J. Eq. S. See also Mil- 
 bank v. New York &c. R. Co., 64 
 How. Prac. (N. Y.) 20; Pennsyl- 
 vania R. Co. V. Commonwealth 
 (Pa.), 29 Am. & Eng. R. Cas. 145, 
 154; Great Northern R. Co. v. 
 Eastern Counties R. Co., 21 L. J. 
 Ch. 837. An insolvent construc- 
 tion company contracted to build 
 a railway for a corporation, and 
 received nearly all of the latter's 
 stocks, bonds, and assets as se- 
 curity for its outlay. Without be- 
 ginning the work the construction 
 company transferred all the stock 
 to the persons managing another 
 railway already in operation, among 
 whom were the president and many 
 of its directors, the funds of the lat- 
 ter corporation being used in pur- 
 chasing the stock of the construc- 
 tion company. So that the stock of 
 both the construction company and 
 the projected road was controlled 
 by the same management as the 
 road then in operation, and ran for 
 nearly the same distance, and in the 
 same general direction, as the pro- 
 
673 
 
 CONTRACTS 
 
 §441 
 
 § 441 (386). Contracts against public policy — Location ot sta- 
 tions and tracks — True principle requires, as it seems to us, that 
 contracts for the location of depots and stations should be held 
 illegal where they are made for the advancement of mere pri- 
 vate interest, and are prejudicial to the public interest. Where, 
 however, there is contravention of the public interest, we can 
 see no valid reason for condemning such a contract. We believe 
 that whether public interests are or are not sacrificed to purely 
 private interests is a question to be determined upon the facts of 
 the particular case. The cases which hold that subscriptions 
 upon condition that the road shall be built upon a designated line 
 are valid, ^^ as well as cases which uphold municipal aid to rail- 
 road companies, cannot be supported if it be conceded that all 
 contracts to locate a road on a designated line, or build stations 
 at a particular place are void. It has been held that contracts 
 requiring a railroad company to establish its depot at a certain 
 point are against public policy, and not enforceable.** There is, 
 however, conflict of authority upon this question.®^ Contracts 
 
 jected line, which would he a com- 
 petitor. The court held that the 
 evident purpose and effect of the 
 transaction was to violate by indi- 
 rection the section of the Georgia 
 constitution prohibiting the pur- 
 chase of the stock of one corpora- 
 tion by another, and any contract 
 between them tending to lessen 
 competition in their respective busi- 
 nesses or to encourage monopoly, 
 and that equity would interfere and 
 seize the assets of the insolvent 
 construction conipany, which stood 
 in the position of derelict trustees. 
 Langdon v. Branch, 37 Fed. 449. 
 
 S3 Martin v. Pensacola &c. R. 
 Co., 8 Fla. 370; Evansville &c. Co. 
 V. Shearer, 10 Ind. 244; Burling- 
 ton &c. R. Co. V. Boestler, IS Iowa 
 SSS; McMillan v. Maysville &c. R. 
 Co., 54 Ky. 218, 61 Am. Dec. 179; 
 Buckspoflt &c. Co. v. Brewer, 67 
 
 22 — Ell. Railroads 1 
 
 Maine 295 ;■ Taggart v. Western Md. 
 R. Co., 24 Md. 563, 89 Am. Dec. 
 760; Detroit &c. Co. v. Starnes, 38 
 Mich. 698; North Mo. R. Co. v. 
 Winkler, 29 Mo. 318; O'Neal v. 
 King, 3 Jones (N. Car.) 517; Ash- 
 tabula &c. R. Co. v. Smith, IS 
 Ohio St. 328; Spartanburg &c. R. 
 Co. V. De Graffenreid, 12 Rich. L. 
 (S. Car.) 675; Rhey v. Edensburg 
 &c. Co., 27 Pa. St. 261. 
 
 84 Pacific R. Co. V. Seely, 45 Mo. 
 212, 100 Am. Dec. 369; Florida 
 Cent. R. Co. v. State, 31 Fla. 482, 
 13 So. 103, 20 L. R. A. 419, 34 Am. 
 St. 30. But see Atlantic &c. R. Co. 
 V. Thomas, 60 Fla. 412, S3 So. 510; 
 Scholten v. St. Louis &c. R. Co., 
 101 Mo. App. 516, 12, S. W. 915. 
 
 ssBestor v. Wathen, 60 111. 138; 
 Marsh v. Fairbury &c. Co., 64 111. 
 414, 16 Am. Rep. 564 ; Louisville 
 &c. R. Co. V. Sumner, 106 Ind. 55, 
 
441 
 
 RAILROADS 
 
 674 
 
 made to influence the location of the route of a projected road 
 are held to be illegal by some of the courts.^*? In our opinion, 
 
 5. N. E. 404, 55 Am. Rep. 719; 
 Cedar Rapids &c. R. Co. v. Spaf- 
 ford, 41 Iowa 292; Williamson v. 
 Chicago &c. R. Co., 53 Iowa 126, 
 4 N. W. 870, 36 Am. Rep. 206; 
 Kansas Pac. R. Co. v. Hopkins, 18 
 Kans. 494; Vicksburgh &c. R. Co. 
 V. Ragsdale, 54 Miss. 200; Mis- 
 souri Pac. R. Co. V. Tygard, 84 Mo. 
 263, 54 Am. Rep. 97; Currier v. 
 Concord R. Co., 48 N. H. 321; 
 Parrott v. Atlantic &c. R. Co., 165 
 N. Car. 295, 81 S. E. 348, Ann. Cas. 
 1915D, 265; Texas &c. R. Co. v. 
 Robards, 60 Tex. 545, 48 Am. Rep. 
 268 ; International &c. Co. v. Daw- 
 son, 62 Tex. 260; Chapman v. Mad 
 River &c. R. Co:, 6 Ohio St. 119. 
 And as already stated in a preced- 
 ing section we think the better rule 
 sustained by the weight of authori- 
 ty is that such a contract is not 
 necessarily invalid if it does not 
 conflict with public interests. Ante, 
 § 417. But a provision in such a 
 contract that another depot should 
 not be established within certain 
 limits is illegal and void. St Jo- 
 seph &c. R. Co. V. Ryan, 11 Kans. 
 602, 15 Am. Rep. 357; St. Louis 
 &c. R. Co. V. Mathers, 71 111. 592, 
 22 Am. Rep. 122; St. Louis &c. R. 
 Co. V. Mathers, 104 111. 257; Wil- 
 liamson V. Chicago &c.. R. Co., 53 
 Iowa 126, 4 N. W. 870, 36 Am. Rep. 
 206. See also Mobile &c. R. Co. v. 
 People,- 132 111. 559, 24 N. E. 643, 
 22 Am. St. 556; Enid Right of Way 
 &c. Co. V. Lile, IS Okla. 328, 82 
 Pac. 810. 
 
 86 Woodstock Iron Co. v. Rich- 
 mond &c. Co., 129 U. S. 643, 9 Sup. 
 
 Ct. 402, 32 L. ed. 819. In announc- 
 ing, the opinion of the court lu the 
 case cited, Mr. Justice Field said : 
 "The business of the extension 
 company was one in which the pub- 
 lid was interested. Railroads are 
 for many purposes public highways. 
 They are constructed for the con- 
 venience of the public and property. 
 In their construction, without neces- 
 sary length between designated 
 points, in their having proper ac- 
 commodations, and in their charges 
 for transportation, the public is di- 
 rectly interested. * * * AH arrange- 
 ments, therefore, by which directors 
 or stockholders or other persons 
 may acquire gain by inducing cor- 
 porations to disregard their duties 
 to the public, are illegal and lead to 
 unfair dealing, and, this being 
 against public policy, will not be en- 
 forced by the courts. In this case, 
 the extension company, to which 
 the duty of locating and construc- 
 ing the railroad between its termini 
 was intrusted, in agreeing, for a 
 consideration offered by a third 
 party, to disregard that duty, and 
 locate and construct the road by a 
 longer route than was required, not 
 only committed a wrong upon the 
 railroad company by imposing un- 
 necessary burdens upon it, to meet 
 which- larger charges for transporta- 
 tion might be called for, but also a 
 wrong upon the public." Bestor 
 V. Wathen, 60 111. 138; St. Louis 
 &c. R. Co. V. Mathers, 71 111. 592, 
 22 Am. Rep. 122; Fuller v. Dame, 
 18 Pick. (Mass.) 472; Holladay v. 
 Patterson, 5 Ore. 177. But see 
 
675 
 
 CONTRACTS 
 
 §441 
 
 however, a contract to locate a railroad upon a designated line 
 cannot be adjudged void as a matter of law without regard to 
 extrinsic facts. Such a contract may or may not be void, depend- 
 ing upon the facts of the particular case. If the public interests 
 are not prejudiced, and there is no corrupt conduct, such con- 
 tracts are not illegal, but if the public interests are sacrificed, the 
 charter violated, or corrupt influences exerted, the contract 
 should be adjudged illegal. A stipulation in a contract that no 
 side track shall be built by the railroad company in a certain 
 town may be sufficient to render the entire contract illegal and 
 void.^^ 
 
 Farrington v. Stuckey, 7 Ind. Ter. 
 364, 104 S. W. 647, 165 Fed. 325; 
 McKell V. Chesapeake &c. R. Co., 
 186 Fed. 39; Davis v. Williams, 121 
 Ala. 542, 25 So. 704; McCowen v. 
 Pew, 153 Cal. 735, 96 Pac. g93, 21 
 L. R. A. (N. S.) 80O; Riley v. 
 Louisville &c. R. Co., 142 Ky. 67, 
 133 S. W. 971, 35 L. R. A. (N. S.) 
 636, and other cases cited in note ; 
 Ann. Cas. 1912D, 230n. 
 
 87 Pueblo &c. R. Co. V. Rudd, 5 
 Colo. 270; Pueblo &c. R. Co. v. Tay- 
 lor, 6 Colo. 2. In this case the court 
 said: "Railroad companies are held 
 to be quasi public corporations and 
 agencies, their directors, acting in 
 the double capacity as agents for 
 the company and trustees for the 
 public, clothed with an important 
 public trust. These roads subserve 
 public purposes to such an extent 
 that the public may impose upon it- 
 self the burden of taxation to aid 
 in their construction (St. Joseph & 
 Denver City R. Co. v. Ryan, 11 
 Kans. 602, 15 Am. Rep. 357), and 
 the lawful exercise of the rights of 
 eminent domain in the taking of 
 private property for the purpose of 
 their construction is put solely upon 
 
 the ground of public use. When, 
 therefore, the public interests are 
 brought in conflict with the private 
 interests of the company, or of pri- 
 vate individuals with whom such 
 companies deal, such private inter- 
 ests must yield to those of the pub- 
 lic. It logically follows that the 
 public has a right to say that such 
 companies shall not be permitted 
 *o make any contract which would 
 prevent them from accommodating 
 the public, where entitled to it in 
 the matter of transportation 'and 
 travel. In the case of the St. Jo- 
 seph &c. R. Co. V. Ryan, 11 Kans. 
 602, 15 Am. Rep. 357, which arose . 
 upon a contract containing a stipu- 
 lation that the railroad company 
 would not have or use any other 
 depot within three miles of the de- 
 pot agreed to be established by the 
 contract the court says : 'Railroads 
 are public agencies and perform a 
 public duty. They are agencies, 
 created by the public with certain 
 privileges, and subject to certain 
 obligations. A contract that they 
 will not discharge, or by which they 
 cannot discharge those obligations, 
 is a breach of that public duty, and 
 
§442 
 
 RAILROADS 
 
 676 
 
 § 442 (387). Contracts void as against public policy — General 
 conclusions. — It may be laid down as a general rule that any 
 contract by which the rights of the public are infringed is void as 
 against public policy; but the decisions as to what are public 
 rights and what is the public policy upon which those rights are 
 founded, depend so much upon the peculiar circumstances of 
 each case that it is not an easy matter to state a general rule 
 that will justly govern any given contract.^^ A contract which 
 
 cannot be enforced. They are un- 
 der obligations to employ 'skillful 
 and competent engineers and other 
 competent employes to superintend 
 and take care of the running of 
 their trains. A contract that they 
 will not employ such agents and 
 servants is certainly void. They 
 are bound to furnish reasonable fa- 
 cilities for the transportation of 
 freight and passengers, both as to 
 number and quality of cars and 
 coaches, and the number of trains, 
 and a contract not to furnish such 
 facilities will not be tolerated. * * * 
 Upon the same principle it is the 
 duty of a railroad company to fur- 
 nish reasonable depot facilities. The 
 number and location of the depots, 
 so as to constitute reasonable depot 
 facilities vary with the changes and 
 amount of population and business. 
 A contract to leave a certain dis- 
 tance along the line of the road des- 
 titute of depots is a contravention 
 of this duty.' In addition to the 
 foregoing, the same doctrine is laid 
 down in the following, among other 
 cases : Marsh v. Fairbury and 
 Northwestern R. Co., 64 111. 414, 16 
 Am. Rep. 564; St. Louis, Jackson- 
 ville & Chicago R. Co. v. Mathers, 71 
 111. 592, 22 Am. Rep. 122; Pacific R. 
 Co. V. Seely 45 Mo. 212, 100 Am. 
 Dec. 369; Fuller v. Dame, 18 Pick. 
 (Mass.) 472; HoUaday v. Patterson, 
 
 5 Ore. 177. Upon both principle 
 and authority, we think it beyond 
 serious question that the condition 
 in this contract, whereby it was 
 sought to prevent a neighboring 
 town through which the railroad 
 passed from having the facilities of 
 even a side track, and to prevent 
 the railroad company from the ex- 
 ercise of discretion in providing 
 such facilities for the public, is ille- 
 gal and void, by reason of its clear 
 contravention of the public inter- 
 ests, and the duty of such company 
 in their relations to the public." 
 See also Chicago &c. R. Co. v. 
 Southern Ind. R. Co., 38 Ind. App. 
 234, 70 N. E. 843, and see generally 
 as to the doctrine of this section ante 
 §417; 1 Elliott Cont, §581. 
 
 88In proof of this statement of 
 the text we refer to the conflict of 
 authority as to whether a railroad 
 company may make a valid contract 
 with a telegraph company to allow 
 no other telegraph company to con- 
 struct a line along its road. The 
 following authorities hold that, un- 
 der the circumstances of those cases, 
 it may. Western Union Tel Co. v. 
 Atlantic, &c. Tel. Co., 7 Biss. (U. 
 S.) 367; Fed. Cas. Co. 17445; West- 
 ern Union Tel. Co. v. Chicago, &c. 
 R. Co., 86 111. 246, 29 Am. Rep. 28. 
 The case of Western Union Tel 
 Co. v. Burlington, &c. R. Co., 3 
 
677 CONTRACTS § 442 
 
 on its face assumes to bind the parties to an act hostile to the 
 pubUc interest may, doubtless, be adjudged void as a matter 
 of law. But it cannot be justly said that every contract provid- 
 ing for the construction of a railroad upon a given line, or for 
 the building of a station at a particular place is opposed to the 
 interests of the public. It may well be that such a contract will 
 promote and not prejudice the public welfare. So, too, it may be 
 true that such a contract in no manner violates the provisions of 
 the corporate charter, but on the contrary, justly aids in carrying 
 those provisions into efifect. In such cases, or in cases of a simi- 
 lar character, there is no valid reason for adjudging the contract 
 void. We believe that a contract providing for the location of 
 a station at a given place should be regarded with something 
 akin to suspicion and that it should be carefully scrutinized, but 
 we do not think that it should be regarded as illegal per se with- 
 out looking to attendant circumstances or regarding extrinsic 
 evidence. ^'^ As we have substantially said, such a contract may 
 be regarded as per se illegal where a corrupt purpose is disclosed 
 by its terms, or where it appears from its provisions that public 
 interests will be unduly prejudiced, but we do not believe that 
 such a contract is under all circumstances to be regarded as 
 illegal. We know that the general rule is that the ^■alidity of a 
 contract is to be determined not by considering whether it does 
 injury in the particular case, but whether it is such as might be 
 injurious.^" But we do not believe that the rule applies to all 
 contracts belonging to the class of which we are speaking, for 
 such contracts are not always opposed, to the public interests. 
 The cases which hold that officers cannot contract for their own 
 benefit to secure a particular location are not in point, for they 
 rest upon a different principle ; nor are the cases which hold that 
 a contract to pay a person a sum of money to secure the location 
 at a particular place, since such cases are different from those 
 
 McCrary (U. S.) 130, 11 Fed. 1, holds Ore. 177, 180; Oscanyan v. 
 
 that it may not. See Atlantic, &c. Arms Co., 103 U. S. 261, 274, 26 
 
 Tel. Co. V. Union Pac. R. Co., 1 L. ed. S39; Providence Tool Co. v. 
 
 McCrary (U. S.) 541, 1 Fed. 745. Norris, 2 Wall. (U. S.) 48, 56, 17 L. 
 
 89 Ante, §417. ed. 868; Elkhart County Lodge v. 
 
 on Holladay v. Patterson, 5 Crary, 98 Ind. 238, 49 Am. Rep. 746. 
 
§443 
 
 RAILROADS 
 
 678 
 
 in which there is a direct and open agreement with the railroad 
 company.91 Where a party under a contract to build a railroad 
 enters into an agreement to deviate from the line fixed, it is en- 
 tirely just to adjudge such an agreement void, but such an agree- 
 ment is essentially different from, one openly and directly made 
 with the railroad company. ^^ The doctrine we have ventured 
 to advocate is contrary to a number of the decisions, but there 
 are well-reasoned cases which give our views full support.''^ 
 
 § 443 (388). Contracts void as against public policy — Illus- 
 trative cases. — A contract by which a railway corporation under- 
 takes to convey to a telegraph company such exclusive rights in 
 that portion of its right of way not occupied by its tracks as to 
 prevent the erection of a competing line thereon is invalid.^* An 
 
 91 The case of Fuller v Dame, 18 
 Pick. (Mass.) 472, was that of a 
 person agreeing for a designated 
 sum to secure the location at a par- 
 ticular place, and is not, when just- 
 ly interpreted, against the doctrine 
 of the text. It seems to us that 
 some of the courts have given an 
 effect to the case cited far beyond 
 that which can be fairly assigned 
 it.. A doctrine has been deduced 
 from it which it does not declare. 
 
 92 The agreement held void in 
 Woodstock, &c. Iron Co. v. Rich- 
 mond, &c. Co. 129 U. S. 643, 9 Sup.- 
 Ct. 402, 32 L. ed. 819, was between 
 a construction company and a land- 
 owner, so • that ■ the decision can- 
 not be regarded as opposing the 
 statements of the text. 
 
 83 Louisville R. Co. v. Sumner, 
 106 Ind. 55, 5 N. E. 404, 55 Am. 
 Rep. 719; Taylor v. Cedar Rapids, 
 &c. R. Co., 25 Iowa 371 ; First Na- 
 tional Bank v. Hendrie, 49 Iowa 402, 
 31 Am. Rep. 153; Williamson v. 
 Chicago, &c. R. Co. 53 Iowa 126, 4 
 N. W 870, 36 Am. Rep. 206; Mc- 
 
 Clure V. Mo. River R. Co., 9 Kans. 
 373; Swartout v. Michigan, &c. R. 
 Co., 24 Mich. 389; Harris v. Rob- 
 erts, 12 Nebr. 631, 12 N. W. 89, 41 
 Am. Rep. 779. 
 
 9*Pacific Posta.l Tel. Co. v. West- 
 ern Union Tel. Co., 50 Fed. 493, SO 
 Am. & Eng. R. Cas.. 665 ; Western 
 Union Tel. Co. v. Burlington, &c. 
 R. Co., 3 McCrary (U. S.) 130, 11 
 ;Eed. 1; Western Union Tel Co. v. 
 American Union Tel. Co., 65 Ga. 
 160, 38 Am. Rep. 781 ; Union Trust 
 Co. V. Atchison, &c. R. Co., 8 N. 
 Mex. 327, 43 Pac. 701. The first 
 case cited was a proceeding by a 
 bill in equity for an injunction to 
 prevent the Western Union Tele- 
 graph Company from constructing 
 and operating a telegraph line on 
 the right of way of the Seattle, 
 Lake Shore and Eastern Railway 
 Company between certain stations. 
 The plaintiff based its claims upon 
 a contract entered into by the de- 
 fendant's grantor, which provided 
 as follows : "The railway company 
 hereby grants right of way for said 
 
679 
 
 CONTRACTS 
 
 1443 
 
 agreement, which, by its terms, gives the exclusive right to a 
 railway corporation in or through a certain tract of land, in so 
 
 line of telegraph along the route 
 of its road, and upon its grounds, 
 * * * and the railway company 
 hereby agrees that it will not 
 grant right of way along its road 
 for the construction of the line 
 of any other telegraph company." 
 Judge Hanford said : "The argu- 
 ment is that the contract is a con- 
 veyance, and that it vests in the 
 complainant the exclusive right to 
 the entire strip of land for tele- 
 graph purposes during the term 
 specified, which right amounts to 
 an interest in the land, and is a 
 legal estate. * * * If the con- 
 tract, in explicit terms, granted 
 such an interest in the premises as 
 the plaintiff claims, I should have 
 to hold it to be ultra vires and 
 void, for the reason that the laws 
 of the territory of Washington, in 
 force when it was made, did not 
 authorize a railway corporation to 
 transfer land acquired for railroad 
 purposes, by lease, so as to divest 
 itself of its duties and obligations 
 to the public as to the use of such 
 property. * * * Telegraph lines 
 are to serve the public, and wher- 
 ever they are connected with a 
 railroad as incidental to the rail- 
 way business, the right.s of the 
 public respecting the same must 
 be governed by the principles ap- 
 plicable to other branches of the 
 service; and the public policy 
 which underlies the numerous de- 
 cisions of the courts of this coun- 
 try denying the right of a railway 
 corporation to divest itself of re- 
 sponsibility and invest another 
 
 with its powers and functions, 
 touches directly the question in 
 this case as to the right of one 
 corporation to transfer to anothei' 
 an exclusive right for telegraph 
 purposes to the occupancy and con- 
 trol of property acquired as a 
 necessary means of serving the 
 public. A contract made by a rail- 
 way company, whereby it attempts 
 to create a monopoly in theuse of 
 its property for the transmission 
 of news and intelligence, is just 
 as invalid as a contract would be 
 whereby a railway corporation 
 should attempt to confer upon one 
 individual or corporation an ex- 
 clusive right to have any particu- 
 lar commodity transported as 
 freight over its railway. Whether 
 this contract be regarded as an 
 intended conveyance of an interest 
 in the property or as a covenant 
 affecting the title to the right of 
 way, or as a contract creating 
 simply a personal liability, it is 
 not such a contract as a court of 
 equity can uphold or decree to be 
 specifically performed; and at 
 least as against the defendant the 
 Western Union Telegraph Com- 
 pany, it is void, except in so far 
 as it confers upon the plaintiff the 
 right to maintain unmolested its 
 telegraph line and conduct its busi- 
 ness without interruption." It has 
 been laid down as a general rule 
 that contracts, the object of which 
 is to secure to the obligee a mo- 
 nopoly or. an exclusive use for 
 public purposes of land held by 
 other corporations or by a priv- 
 
§443 
 
 RAILROADS 
 
 680 
 
 far as it attempts to exclude other railway corporations from ac- 
 quiring a right of way over the same tract, upon land not appro- 
 priated or required for its use by the company, is against public 
 policy and void.'^ A contract by which a corporation, chartered 
 to perform certain duties to the public, agrees that it will not 
 perform those duties at all for a term of years, is void."'' A stipu- 
 
 ate owner if subject to the right 
 of eminent domain, are void. See 
 American Rapid Tel. Co. v. Con- 
 necticut Tel. Co., 49 Conn. 352, 44 
 Am. Rep. 237; Western Union Tel. 
 Co. V. American Tel. Co., 19 Am. L. 
 Reg. (N. S.) 173; Pensacola Tel. 
 Co. V. Western Union Tel. Co., 96 
 U. S. 1, 24 L. ed. 708; Western 
 Union Tel. Co. v. St. Joseph, &c. R. 
 Co., 1 McCrary (U. S.) 565, 3 Fed. 
 430; Western Union Tel. Co. v. 
 Burlington, &c. R. Co., 3 McCrary 
 (U. S.) 130, 11 Fed. 1; Western 
 Union Tel. Co. v. Baltimore, &c. 
 Tel. Co., 22 Fed. 133 ; Western Union 
 Tel. Co. V. Baltimore, &c. Tel. Co., 
 23 Fed. 12; Western Union Tel. 
 Co. V. American U. Tel. Co., 9 Hiss. 
 (U. S.) 72, Fed. Cas. No. 17444; 
 Western Union Tel. Co. v. Ameri- 
 can Tel. &c. Co., 65 Ga. 160, 38 
 Am. Rep. 781 ; Skrainka v. Schar- 
 ringhausen, 8 Mo App. 522; West- 
 ern Union Tel. Co. v. Atlantic, &c. 
 Tel. Co., 5 Nev. 102. In Fort 
 Worth St. R. Co v. Queen City R. 
 Co., 71 Tex. 165, 9 S. W. 94, the 
 court in construing a contract by 
 which a railroad company owning 
 a tract of land upon which its 
 depot is located undertakes to 
 give to a horse railway company 
 an exclusive right to build its road 
 to the depot over the land, held 
 that such a contract is not a mo- 
 nopoly, but an easement granted 
 
 by the owner of the fee, and can 
 be taken for public use only by 
 due process of law, but that the 
 rights of .the company cannot be 
 divested by any act of the original 
 grantors. 
 
 »5 Kettle River R. Co. v. East- 
 ern R. Co., 41 Minn. 461, 4 N. 
 W. 469, 6 L. R. A. 111. See al- 
 so Western Union Tel. Co. v. 
 Postal Tel. Co., 217 Fed. 533 (ex- 
 clusive right given by railroad 
 company to telephone company.) 
 But compare Cumberland Tel. &c. 
 Co. V. State, 100 Miss. 102, 54 So. 
 670, 39 L. R. A. (N. S.) 277; Home 
 Tel. Co. V. Sarcovie Light &c. Co., 
 236 Mo. 114, 139 S. W. 108, 36 L. R. 
 A. (N. S.) 124. 
 
 96 Central Trans. Co. v. Pull- 
 man's Palace Car Co., 139 U. 
 S. 24, 11 Sup. Ct. 478, 35 L. ed. 
 55; Gibbs v. Consolidated Gas. Co., 
 130 U. S. 396, 408, 8 Sup. Ct. 553, 32 
 L. ed. 979; Oregon Steam Nav. Co. 
 V. Winsor, 20 Wall. (U. S.) 64, 22 
 L. ed. 315. This principle applies 
 to all cases where the corporation 
 assumes to contract that it will 
 not perform the duties imposed 
 upon it, no matter what the form 
 of the contract may be, but it 
 finds, perhaps, its most frequent 
 illustration and application in cases 
 where corporations assume to 
 transfer their property by way of 
 lease. See Leases, Ch. XVIIL 
 
681 
 
 CONTRACTS 
 
 §444 
 
 lation in a contract by which a railroad common carrier seeks to 
 protect itself from liability for the negligence of itself or its ser- 
 vants will not be enforced by the courts.^'' And a contract by 
 which a common carrier undertakes to carry for one person or 
 corporation to the exclusion of all others,*^ or to carry for them 
 on more favorable terms than are accorded others, thereby fos- 
 tering a monopoly and destroying the business of those less 
 favored®^ is contrary to public policy and void.''- 
 
 § 444. Contract rendered unenforceable by statute subse- 
 quently passed — Rights and remedies. — It sometimes happens 
 
 97 Railroad Company v. Lockwood, 
 17 Wall. (U. S.) 357, 21 L. ed. 627. 
 This topic is. considered in treat- 
 ing of liability of employer to em- 
 ploye. See also 8 Elliott Cont. S§ 
 765. 766, m, 3214, 3219. 
 
 98 New England' Express Co. v. 
 Maine Central R. Co., 57 Maine 
 188; Sandford v. Railroad Co., 24 
 Pa. St. 378, 64 Am. Dec. 667; Dins- 
 more V. Louisville, &c. R. Co., 2 
 Flip. (U. S.) 672, 2 Fed. 465 ; South- 
 ern Express Co. v. Memphis, &c. R. 
 Co., 2 McCrary (U. S.) 570, 8 Fed. 
 799, holding tha': a discrimination 
 against an express company is un- 
 lawful. 
 
 99Scofield V. Railway Co., 43 
 Ohio St. 571, 3 N. E. 907, 54 Am. 
 Rep. 846; Messenger v. Penn- 
 sylvania R. Co., 36 N, J. L. 407, 
 37 N. J. L. 531 18 Am. Rep. 754; 
 13 Am. Rep. 457; Stewart v. 
 Lehigh Valley R. Co., 38 N. J. L. 
 505. See klsb note in 74 Am. St. 
 250; Hays v. Pennsylvania Co., 12 
 Fed. 309; State v. Cincinnati, &c. 
 R. Co., 47 Ohio St. 130, 23 N. E. 
 928, 7 L. R. A. 319, and compare 
 Scofield v. Lake Shore, &c. R. Co., 
 43 Ohio St. 571, 3 N. E. 907, 54 Am 
 Rep. 846; Kansas Pac. R. Co. v. 
 
 Bayles, 19 Colo. 348, 35 Pac. 744. 
 Every common carrier must carry 
 for all to the extent of his capac- 
 ity, without undue or unreasonable 
 discrimination either in charges or 
 facilities. Atchison, &c. R. Co. v. 
 Denver, &c. R. Co., 110 U. S. 667, 
 674, 4 Sup. Ct. 185, 28 L. ed. 291. 
 1 But it is held that a common 
 carrier which charges no more 
 than a reasonable sum for carrying 
 may charge one person more than 
 it does another. Munhall v. Penn- 
 sylvania R. Co., 92 Pa. St. ISO; 
 Johnson v. Pensacola, &c. R. Co., 
 16 Fla. 623, 667; Fitchburg R. Co. v. 
 Gage, 12 Gray (Mass.) 393; Hous- 
 ton, &c.' R. Co. V. Rust, 58 Tex. 98. 
 See also Manchester, &c. R. Co. v. 
 Concord R. Co., 66 N. H. 100, 20 
 Atl. 383, 9 L. R. A. 689, 49 Am. St. 
 582. The granting of a rebate con- 
 trary to the provisions of the in- 
 terstate commerce law does not 
 render the bill of lading void, so 
 that no action can be maintained 
 against the carrier for loss of the 
 goods by negligence. Merchants' 
 Cotton Press, &c. Co. v. Insur- 
 ance Co. of North America, 151 U. 
 S. 368. 14 Sup Ct. 367, 38 L. ed. 195. 
 
§ 444 RAILROADS '682 
 
 that a contract, such as that of a carrier to give an annual pass for 
 life, or the like, is rendered impossible of performance by reason 
 of a statute passed after the contract was made. It has been 
 expressly held that such a contract is rendered unenforceable by 
 the interstate commerce act.^ In such a case it seems that the 
 party benefited by such a contract when he has given a valuable 
 consideration therefor and" the consideration to be rendered him 
 has thus failed, or partially failed, ought to have some remedy ; 
 but, on the other hand, the railroad company ought not to be 
 mulcted in. damages for obeying the law rendering its further 
 performance impossible. The only decisions we have found di- 
 rectly in point upon this phase of the subject seem to be diame- 
 trically opposed to each other. In one of them the latter view 
 was taken and it was held that a landowner who had conveyed 
 land to the company in consideration of an annual pass for life 
 could neither have the conveyance rescinded, where the land had 
 materially increased in value, nor hold the railroad company 
 liable in damages.* But in the other case the court took the view 
 that this was unjust to the landowner and held that he was en- 
 titled to damages in cash for the value of the property less the 
 value of what he had already received under the contract.* 
 
 2 Louisville &c. R. Co. v. Mott- and other cases cited in note; also 
 ley, 219 U. S. 467, 31 Sup. St. 26S, note in 41 L. R. A. (N. S.) 559, 3 
 55 L. ed. 297, 34 L. R. A. (N. S.) Elliott Cont. § 1901. 
 
 671. See also as to state statutes, * Louisville, &c. R. Co. v. Crowe, 
 
 State v. Martyn, 82 Nebr. 225, 117 156 Ky. 27, 160 S. W. 759, 49 L. R. A. 
 
 N. W. 719, 23 L. R. A. (N. S.) 217; (N. S.) 848, The statement in the 
 
 State V. Union Pac. R. Co., 87 other case that the railroad company 
 
 Nebr. 29, 126 N. W. 859, 31 L. R. A. ought not to be "mulcted in dam- 
 
 (N. S.) 657 (but in these cases the ages" seems to beg the question or 
 
 statute was already in force), to be an undue assumption be- 
 
 3 Lowley v. Northern Pac. R. cause holding it liable for the bal- 
 Co., 68 Wash. 558, 123 Pac. 998, 41 ance of the consideration which 
 L. R. A. (N. S.) 559. See Ameri- it agreed to pay for what it has 
 can Mercantile Exchange v. Blunt, already received and holds can 
 102 Maine 128, 66 Atl. 212, 10 L. R. hardly be called mulcting it in 
 A. (N. S.) 414, 120 Am. St. 463n, damages. 
 
CHAPTER XVII. 
 
 REAL ESTATE. 
 
 Sec. Sec. 
 
 450. What railroad property is real 466. 
 
 estate. 
 
 451. Statutory authority requisite. 467. 
 
 452. Power to acquire real estate 
 
 — -Implied power — -Gener- 
 ally. 468. 
 
 453. Implied power to acquire — 
 
 General rule. 
 
 454. Implied power — Illustrative 
 
 instances. 469. 
 
 455. Power to acquire real estate 
 
 — Instances of denial of 
 power. 470. 
 
 456. Title to real estate is in the 
 
 company. 471. 
 
 457. Title once vested not divest- 
 
 ed because property sub- 
 sequently becomes unnec- 472.- 
 essary. 
 
 458. Effect of conveyance to cor- 473. 
 
 poration of land it has no 474. 
 power to hold. 
 
 459. Right of foreign corporation 475. 
 
 to hold real estate. 
 
 460. The power to acquire by 476. 
 
 grant broader than the 
 power to acquire by con- 
 demnation. 477. 
 
 461. Acquisition of the fee by pri- 
 
 vate grant. 
 
 462. Acquisition of title by ad- 478. 
 
 verse possession. 
 
 463. Possession of land — To what 479. 
 
 right referred. 
 
 464. Rights of company where 480. 
 
 land is owned in fee. 
 
 465. Effect of conveyance of prop- 
 
 erty the company is not 481. 
 authorized to acquire. 
 
 683 
 
 Questioning the right to hold 
 real estate. 
 
 Enjoining purchase of real 
 estate where no power to 
 receive and hold. 
 
 Executory contract of pur- 
 chase not enforceable 
 where there is no power to 
 hold the land. 
 
 Estoppel of parties to deeds 
 to deny corporate exist- 
 ence. 
 
 Deed to company not in exist- 
 ence. 
 
 Formal execution of convey-' 
 ances and agreements re- 
 lating to real estate. 
 
 Contracts under corporate 
 seal — Effect- as evidence. 
 
 Acceptance of deed. 
 
 Distinction between a dona- 
 tion of lands and a sale. 
 
 Deeds of company — ^By whom 
 executed. 
 
 Construction of deeds to rail- 
 road companies — Gener- 
 ally. 
 
 Deeds t& railroad companies 
 — Construction of condi- 
 tions. 
 
 Grants — Beneficial — Presump- 
 tion of acceptance. 
 
 Incidents pass with principal 
 thing granted. 
 
 Effect of designating in the 
 deed the purpose for which 
 the, land is granted. 
 
 Covenants that run with the) 
 land. 
 
§450 
 
 RAILROADS 
 
 684 
 
 Sec. 
 482. 
 
 483. 
 
 484. 
 
 Merger of preliminary agree- 
 ment in deed. 
 
 Bonds for conveyance — Spe- 
 cific performance. 
 
 Presumption that there is 
 power to hold the land. 
 
 Sec. 
 48S. 
 486. 
 
 487. 
 
 Power to convey real estate. 
 
 Dedication of land for use as 
 a highway. 
 
 Disposition of property cor- 
 poration has no power to 
 receive and hold — Escheat. 
 
 § 450 (389). What railroad property is real, estate.. — There is 
 no contrariety of opinion as to the nature of land and "annexed 
 permanent immovable structures," for that kind of property is so 
 clearly real estate that there is no room for doubt as to its char- 
 acter.^ The question of difficulty most often encountered is as to 
 the nature of what is commonly called "rolling stock," that is, 
 locomotives, cars and the like. These things are essential to the 
 operation of a railroad and it is difficult to conceive the existence 
 of a railroad without incorporating in the conception locomotives 
 and cars. Locomotives and cars are not, to borrow a term from 
 logic, accidents, but inseparable incidents. There is reason sup- 
 porting the cases which adjudge that the rolling stock is personal 
 
 1 Palmer v. Forbes, 23 111. 301; 
 Hunt v. Bullock, 23 111. 320. See 
 Front &c. Co. v. Johnson, 2 Wash. 
 112, 25 Pac. 1084, 11 L. R. A. 693; 
 Neilson v. Iowa &c. R. Co., 51 Iowa 
 184, 1 N. W. 434, 33 Am. Rep. 124; 
 St. Louis &c. Co. V. Donahue, 3 Mo. 
 App. 559, Appendix; Northern Pac. 
 R. Co. v. Carland, 5 Mont. 146, 3 
 Pac. 134; Mcllvain v. Hestonville, 
 &c. R. Co., 5 Phila. (Pa.) 13; Joy v. 
 St. Louis, 138 U. S. 1, 11 Sup. Ct. 
 243, 34 L. ed. 843; note in 66 L. R. 
 A. 33 et seq. Iron rails laid on 
 roadbed are held to be real estate 
 unless made personal property by 
 agreement. Hunt v. Bay State, &c. 
 Co., 97 Mass. 279. Statutes fre- 
 quently provide that such things 
 shall be deemed real estate. Union 
 Trust Co. V. Weber, 96 111. 346; 
 Quincy R. Bridge Co. v, Adams 
 
 County, 88 111. 615; Neary v. Phila- 
 delphia, &c. R. Co., 7 Houst. (Del.) 
 419, 9 Atl. 405. Or, on the other 
 hand, personal property for the pur- 
 pose of taxation or the like. Mis- 
 souri, &c. R. Co. v. Labette County, 
 9 Kans. App. 545, 59 Pac. 383; Rich- 
 mond V. Richmond, &c. R. Co., 21 
 Grat. (Va.) 604; note in 66 L. R. A. 
 35. And it is held that property 
 which may be regarded either as a 
 fixture ordinarily constituting part of 
 the real estate or as personalty may 
 be considered as the one or the 
 other according to the agreement of 
 the parties. Webster Lumber Co. v. 
 Keystone, &c. Co., 51 W. Va. 545, 42 
 S. E. 632, 66 L. R. A. 33. See also 
 upon the general subject. Bishop v. 
 McKiUian, 124 Cal. 321, 57 Pac. 76, 
 71 Am. St. 68; Western, &c. R. Co. 
 V. Deal, 90 N. Car. 110. 
 
685 
 
 REAL ESTATE 
 
 §450 
 
 property, but, on the other hand, there is reason supporting the 
 cases which adjudge it to be real estate. The weight of authority 
 is that where the statute does not otherwise provide, rolling 
 stock is personal property and not real estate,^ but upon this 
 question there is a direct conflict. Whether rolling stock is or is 
 not real estate often depends in a great measure upon the statute. 
 Where the question is not influenced by statute the weight of 
 authority is that it is personal property,' but there has been 
 much diversity of opinion.* The right of way of a railroad com- 
 
 2 Judge Minor is very decided in 
 his, opinion that rolling stock is per- 
 sonal property. He says : "As the 
 rolling stock is not attached to the 
 realty, it seems to be an extraordi- 
 nary anomaly to treat it as consti- 
 tuting a part thereof, merely be- 
 cause the road can not be operated 
 without it. With equal reason a 
 cart, a plough, a mule, a wheelbar- 
 row or a spade might be deemed 
 part of a farm, inasmuch as a farm 
 can not be operated without such 
 appliances." Minor's Inst, (top) 609. 
 The conclusion of the justly re- 
 spected and able author is sustained 
 by the weight of authority, but, with 
 sincere deference, we venture to say 
 that the fact that the things he men- 
 tions are, not attached to the land is 
 not sufficient to characterize them 
 as personal property. The character 
 of property is by no means always 
 determined by the answer to the 
 question whether it is or is not at- 
 tached to the land. As shown in the 
 argument of Mr. Carpenter, else- 
 where quoted from, many things are 
 regarded as real estate although not 
 permanently annexed to the land. 
 Farrar v. Stackpole, 6 Greenl. 
 (Maine) 154, 19 Am. Dec. 201; 
 Rogers v. Cox, 96 Ind. 157, 49 Am. 
 
 Dec. 152, and cases cited; Gile v. 
 Stevens, 13 Gray (Mass.) 146, 7 Am. 
 Dec. 132; Rogers v. Gilinger, 30 Pa. 
 St. 185, 72 Am. Dec. 694; Colegrave 
 V. Dias Santos, 2 B. & C. 76; Siford's 
 Case, 11 Coke 46; House v. House, 
 10 Paige Ch. 158. 
 
 3 Ante, §41; Williamson v. 
 New Jersey, &c. R. Co., 29 N. J, 
 Eq. 311 ; Randall v. Elwell, 52 N. Y. 
 521, 11 Am. Rep. 747; Hoyle v. 
 Plattsburg, &c. R. Co., 54 N. Y. 314, 
 13 Am. Rep. 595; Stevens v. Buf- 
 falo, &c. R. Co., 31 Barb. (N. Y.) 
 590; Chicago, &c. Co. v. Ft. Howard, 
 21 Wis. 44, 91 Am. Dec. 458. See 
 generally Beardsley v. Ontario 
 Bank, 31 Barb. (N. Y.) 619; Meyer 
 v. Johnston, 53 Ala. 237, 353 ;■ Louis- 
 ville, &c. R. Co. V. State, 25 Ind. 
 177, 87 Am. Dec. 358; Neilson v. 
 Iowa, &c. R. Co., 51 Iowa 184, 1 N. 
 W. 434, 33 Am. Rep. 124; Boston 
 &c. R, Co. V. Gilmore, 37 N. H. 410, 
 72 Am. Dec. 336; State Treas. v. 
 Somerville, &c. R. Co., 28 N. J. L. 
 21 ; Coe ■ V. Columbus, &c. R. Co., 
 10 Ohio St. 372, 75 Am. Dec. 518; 
 Grand Trunk, &c. R. Co. v. Eastern 
 Township Bank, 10 Lower Canada 
 Jur. 11. 
 
 * Pennock v. Coe, 23 How. (U. S.) 
 117, 16 L. ed. 436; Minnesota Co. v. 
 
§ 451 RAILROADS 686 
 
 pany is real estate,^ or at least an easement or interest in land 
 rather than personal property. 
 
 § 451 (390). Statutory authority requisite. — The rule is well 
 established that a railroad corporation cannot acquire and hold 
 lands for any purposes except such as are authorized by statute.* 
 It is, however, not necessary that the authority to acquire or hold 
 real estate should be expressly conferred. It may be implied. 
 
 §452 (391). Power to acquire real estate — Implied power — 
 Generally. — The rule as generally expressed is that a railroad 
 company has the implied power to acquire and hold such real 
 estate as is reasonably necessary to enable it to perform its cor- 
 porate duties and exercise its corporate functions. Where there 
 is no statute specifically defining the power of the company to 
 hold real estate, the question is to be solved by ascertaining what 
 is reasonably necessary to enable it to accomplish the purpose 
 for which it was organized. The object for which the corpora- 
 tion was created is, of course, to be determined from the statute 
 authorizing its existence. This object being ascertained, then 
 
 St. Paul Co., 2 Wall. (U. S.) 609, Timmons v. Switzer, 11 Ind. 363; 
 
 17 L. ed. 886 ; Railroad Co. v. James, Vaughn v. Dayton, 12 Ind. 561 ; New 
 
 6 Wall. (U. S.) 750, 18 L. ed. 854; Albany, &c. R. Co. v. Huff, 19 Ind. 
 
 Farmers' &c. Co. v. St. Joseph, &c. 444; Louisville, &c. R. Co. v. Boney, 
 
 R. Co., 3 Dill. (U. S.) 412, Fed. 117 Ind. 501, 20 N. E. 432, 3 L. R. A. 
 
 Cas. No. 4669; Scott v. Clinton, &c. 435; Northern Pac. R. Co. v. Car- 
 
 R. Co., 6 Biss. (U. S.) 529, Fed. land, 5 Mont. 146, 3 Pac. 134; Ante, 
 
 Cas. No. 12527 ; Palmer v. Forbes, 23 § 6. 
 
 111. 301; Titus V. Mabee, 25 111. 257; 6 qa.,e v. Kelly, 133 U. S. 21, 10 
 
 Phillips V. Winslow, 18 B. Mon. Sup. Ct. 216, 33 L. ed. S13-; Coleman 
 
 (Ky;) 431; Morrill v. Noyes, 56 v. San Rafael Turnpike Co., 49 Cal. 
 
 Maine 458, 96 Am. Dec. 486; State 517; Taber v. Cincinnati, &c. R. Co., 
 
 V. Northern, &f. R. Co., 18 Md. 193; IS Ind. 459; Pacific R. Co. v. Seelyi 
 
 Farmers', &c. Co. v. Hendrickson, 45 Mo. 212, 100 Am. Dec. 369; New 
 
 25 Barb. (N. Y.) 484; Farmers', &c. York, &c. R. Co. v. Kip, 46 N. Y. 
 
 Co. V. Commercial Bank, 11 Wis. 546, 7 Am. Rep. 385; Overmyer v. 
 
 207. See also Hammock v. Loan &. Williams, 15 Ohio 26; Eldridge v 
 
 T. Co., 105 U. S. 77, 26 L. ed. 1111; Smith, 34 Vt. 484; Waldo v. Chi- 
 
 Booth V. Central Sav. Bank, 58 Colo. cago, &c. R. Co., 14 Wis. 575- East- 
 
 519, 146 Pac. 240. ern Counties R. Co. v. Hawke's, 5 H. 
 
 S Atlantic, &c. R. Co. v. Leseur, 2 L. Cas. 331 ; Wallace v Moore 178 
 
 Ariz. 428, 19 Pac. 157, 1 L. R. A. 244; N. Car. 114, 100 S. E. 237, 238 '(cit- 
 
 President, &c. v. Sipe, 11 Ind. 67; ing text). 
 
687 REAL ESTATE § 453 
 
 it follows that such incidental powers as are reasonably neces- 
 sary to enable the corporation to accomplish the object for which 
 it was created vest in. it by necessary implication. Analogous 
 cases adjudge that the power of a corporation is not confined to 
 authority to do that which is absolutely or indispensably essen- 
 tial to the performance of the acts and duties specified in the 
 statute from' which it derives its power,'' but extends to such 
 things as are reasonably and fairly necessary. The law, how- 
 ever, has always jealously regarded the power of corporations to 
 hold real estate and the courts are reluctant to enlarge the power 
 by implication. It has been again and again affirmed that there 
 is serious danger to be apprehended from corporate acquisition 
 of land, and that the power should be carefully limited.® It is, 
 therefore, true that the cases relating to implied powers where 
 ordinary business contracts or acts performed in conducting or- 
 dinary corporate affairs are involved can hardly be taken as safe 
 guides for the government of cases where the question is as to 
 the power of a railroad company to acquire and hold real estate.^ 
 
 §453 (392). Implied power to acquire— r-General rule. — The 
 
 general rule that a corporation has the right to take and hold real 
 estate reasonably necessary to the purpose of its creation is as- 
 serted by many of the courts. There is no substantial diversity 
 of opinion.!" This is implied as an incident of the principal 
 
 T Brown v. Winnisimmet Co., 11 companies is a departure from the 
 
 Allen (Mass.) 326; Smith v. Nashua, ancient policy of the law. 
 
 &c. R. Co., 27 N. H. 86, 94, 59 Am. » In Case v. Kelly, 133 U. S. 21, 
 
 Dec. 364; Buffett v. Troy, &c. R. 10 Sup. Ct. 216, 33 L. ed. 513, it 
 
 Co., 40 N. Y. 168, 36 Barb. (N. Y.) ^^.s held that a railroad company 
 
 420; 3 Thomp. Corp (2nd ed.), § =°"'^ °"'y "^^^^^ve and hold lands 
 
 23gi for the defined purposes of the road. 
 
 See also Pacific R. Co. v. Seely, 45' 
 
 8 The statutes enacted by the Brit- Mo. 212, 100 Am. Dec. 369. 
 ish parliament and by the legisla- lo Old Colony, &c. R. Co. v. 
 tures of some of the American. Evans, 12 Mass. 25, 66 Am. Dec. 
 states evidence the opposition to the 394; Callaway, &c. Co. v. Clark, 32 
 policy of allowing corporations to Mo. 305; Ossipee, &c. Co. v. Can- 
 become owners of real estate. The ney, 54 N. H. 295; Asheville Divi- 
 public grant of land by the United sion, &c. v. Astbn, 92 N. Car. 578; 
 States and by the states to railroad Page v. Hejineberg, 40 Vt. 81, 94 Am. 
 
§454 
 
 RAILROADS 
 
 688 
 
 power granted.^ 1 But as corporate grants are always strictly- 
 construed, the right to acquire and hold real estate cannot be ex- 
 tended by liberal construction.^^ jf Jt appears from the express 
 provisions of the statute that to deny the power to hold real 
 estate would defeat the object for which the corporation was 
 created, then, in the absence of countervailing provisions, the 
 power to hold real estate will be implied. In the case of a rail- 
 road corporation the implied power is broad enough to authorize 
 the acquisition of land for any structures that are reasonably 
 necessary for the proper construction and operation of the road.^^ 
 
 §454 (393). Implied power — Illustrative instances. — A rail- 
 road company may acquire land for the erection of engine, houses 
 and shops for the repair of cars and engines used on the road.^* 
 It may buy and hold property for docks and warehouses rea- 
 sonably necessary for the storage of property entrusted to it for 
 carriage.^" It may buy land for freight and passenger depots and 
 
 Dec. 378; State v. Madison, 7 Wis. 
 688; 2 Kent's Comm. 227; 1 Bl. 
 Comm. 475, 478; 8 Thomp. Corp. 
 § 2365. 
 
 11 The question as to the right to 
 hold real estate is, as is well known, 
 a question between the sovereign 
 and the corporation. The title which 
 the corporation obtains even where 
 it has no authority to own the land 
 is a peculiar one. It does, it seems, 
 acquire a title, but, of course, not a 
 complete one. It is held that "a 
 corporation might purchase and take 
 title to the real estate, its title, how- 
 eVer, like that of an alien, being de- 
 feasible at the pleasure of the com- 
 monwealth." Leazure v. Hillegas, 7 
 Sergt. & R. (Pa.) 313; Runyan v. 
 Coster, 14 Pet. (U. S.) 122, 10 L. 
 ed. 382; Hickory Farm, &c. Co. v. 
 Buffalo, &c. R. Co., 32 Fed. 22; 
 Hamsher v. Hamsher, 132 111. 273, 23 
 N. E. 1123i 8 L. R. A. 556; Goundie 
 
 v. Northampton Water Co., 7 Pa. St. 
 233. 
 
 12 Eversfield v. Mid-Sussex, &c. R. 
 Co., 1 Giff. 153, 3 DeG. & J. 286; 
 Dodd v. Salisbury, &c. R. Co., 1 Giff. 
 158, 5 Juris. (N. S.) 782; Bostock 
 v. North Staffordshire, &c. R. Co., 5 
 DeG. & S. 584, 4 El. & B. 798. 
 
 13 Chicago, &c. R. Co. v. Wilson, 
 17 111. 123; Low v. Galena, &c. R. 
 Co., 18 111. 324; Bangor, &c. R. Co. 
 V. Smith, 47 Maine 34; New York, 
 &c. R. Co., In re, 46 N. Y. 546, 7 
 Am. Rep. 385. See also Knowles v. 
 Texas, &c. Trac. Co. (Tex. Civ. 
 App.), 121 S. W. 232. 
 
 1* Southern Pac. R. Co. v. Ray- 
 mond, 53 Cal. 223; Hannibal, &c. R. 
 Co. v. Muder, 49 Mo. 165; Virginia, 
 &c. R. Co. V. Elliott, 5 Nev. 358; 
 State v. Mansfield, 23 N. J. L. 510, 
 57 Am. Dec. 409. 
 
 15 Lawrence v. Morgan's &c. R. 
 Co., 39 La. Ann. 427, 2 So. 69, 4 
 Am. St. 265. 
 
689 
 
 REAL ESTATE 
 
 §454 
 
 the necessary approaches thereto,^® for the building of turnouts 
 and side tracks to accommodate the business of the company.^' 
 It may acquire land in order to procure materials for the eco- 
 nomical construction of the road.^^ It has been held that it may 
 buy land in order to furnish gravel to persons who are to trans- 
 port it over the company's road, thereby adding to its revenues.^* 
 It may acquire land for the purpose of erecting thereon a dinner 
 house for its employes. ^^ It may provide offices for the transac-. 
 
 16 Protzman v. Indianapolis, &c. 
 R. Co., 9 Ind. 467, 68 Am. Dec. 650; 
 Graham v. Connersville, &c. R. Co., 
 36 Ind. 463, 10 Am. Rep. 56; Reed 
 V. Louisville Bridge Co., 8 Bush 
 (Ky.) 69; Hamilton v. Annapolis, 
 &c. R. Co., 1 Md. SS3; Mansfield, 
 &c. R. Co. V. Clark, 23 Mich. 519; 
 Weir V. St. Paul, &c. R. Co., 18 
 Minn. 155; Hannibal, &c. R. Co. v. 
 Muder, 49 Mo. 165 ; New York Cent. 
 &c. R. Co., In re, 11 N. Y. 248; Giesy 
 V. Cincinnati, &c. R. Co., 4 Ohio St. 
 308; Cumberland Valley R. Co. v. 
 McLanahan, 59 Pa. St. 23; South 
 Carolina, &c. R. Co. v. Blake, 9 
 Rich. L. (S. Car.) 228; Nashville, 
 &c. R. Co. V. Cowardin, 11 Humph. 
 (Tenn.) 348. A railroad company 
 may use the land acquired by it for 
 a right of way in any manner which 
 contributes to the safe and efficient 
 operation of the road, and does not 
 interfere with the rights of adjacent 
 property, and the erection of a 
 freight depot and other structures 
 thereon is not a misuser. Elyton 
 Land Co. v. South & North Ala. R. 
 Co., "95 Ala. 631, 10 So. 270.* We 
 cite some cases where the land was 
 acquired by condemnation, since they 
 serve to show the general scope of 
 the term corporate purposes. 
 
 I'l Protzman v. Indianapolis, &c. 
 
 R. Co., 9 Ind. 467; Toledo, &c. R. 
 Co. V. Daniels, 16 Ohio St. 390; 
 Cleveland, &c. R. Co. v. Speer, 56 
 Pa. St. 325, 94 Am. Dec. 84. 
 
 18 Overmeyer v. Williams, IS Ohio 
 26. See also Georgia Pac. R. Co. v. 
 Wilks, 86 Ala. 478; 6 So. 34; Mallett 
 V. Simpson, 94 N..Car. 37, 55 Am. 
 Rep. 594. But see New York, &c. 
 R. Co. V. Gunnison, 1 Hun (N. Y.) 
 496. See in general New York, &c. 
 R. Co.. V. Kip, 46 N. Y. 546, 7 Am. 
 Rep. 385 ; McClure v. Missouri River 
 R. Co., 9 Kans. ZTi; Land v. Coffi- 
 man, SO Mo. 243; Lake Shore, &c. 
 .R. Co. v. Cincinnati, &c. R. Co., 30 
 
 Ohio St. 604; Blunt v. Walker, 11 
 Wis. 334, 78 Am. Dec. 709. 
 
 19 Old Colony, &c. R, Co. v. 
 Evans, 72 Mass. 25, 66 Am. Dec. 394. 
 It has been suggested that a railway 
 company may supply a chapel or 
 theater for the benefit of its work- 
 men. East Anglian R. Co. v. East- 
 ern Counties R. Co., 11 C. B. 775. 
 There is reason, in our judgment, 
 for holding that railway companies 
 may, within reasonable limits, pro- 
 vide for the comfort and welfare of 
 their employes. 
 
 20 United States, &c. Co. v. Wa- 
 bash, &G. R. Co., 32 Fed. 480; Gudger 
 V. Richmond, &c. R. Co., 106 N. Car. 
 481, 11 S. E. SIS; Texas, &c. R. Co. 
 
§455 
 
 RAILROADS 
 
 690' 
 
 tion of its business, although such offices are located in a foreign 
 state, and it has been held that it may buy mines under some cir- 
 cumstances.^^ 
 
 § 455 (394). Power to acquire real estate — Instances of denial 
 of power. — We have called attention to the fact that the power to 
 acquire property by purchase is broader than the power to ac- 
 quire it by the virtue of the right of eminent domain,^^ and it is 
 obvious that cases bearing on the power to acquire by condemna- 
 tion cannot be accepted as safe guides where the question is as to 
 the power to obtain land by purchase. But those cases do serve 
 to mark the general nature of the power, so that it is proper to 
 cite them in this connection, as we are here discussing the gen- 
 eral power to acquire land. It is held that a railroad company 
 cannot acquire land by condemnation for the construction of a 
 temporary track while the main track is building,^' but it seems 
 
 V. Robards, 60 Tex. S45, 48 Am. Rep. 
 268. See also Abraham v. Oregon, 
 &c. R. Co., 37 Ore. 495, 60 Pac. 899, 
 64 L. R. A. 391, 82 Am. St. 779; 
 Jacksonville, &c. R. Co. v. Hooker, 
 160 U. S. 514, 40 L. ed. 515; State 
 V. Illinois Cent. R. Co., 246 111. 188, 
 92 N. E. 814; Chicago, &c. R. Co. v. 
 Board, 48 Wis. 666, 5 N. W. 3 ; Mil- 
 waukee, &c. R. Co. V. Board, 29 Wis. 
 116. 
 
 aiLyde v. Eastern, &c. R. Co., 36 
 Beav. 10, 17. See Attorney-General v. 
 Great Northern, &c. R. Co., 6 Jurist 
 N. S. 1006. But compare Wilks v. 
 Georgia Pac. R. Co., 79 Ala. 180. It 
 probably can not do so in ordinary 
 cases under the present law. See 
 generally Attorney-General v. Great 
 Eastern, &c. R. Co., L. R. 11 Ch. D. 
 449, 505; Western Union, &c. Co. v. 
 Rich, 19 Kans. 517, 27 Am. Rep. 
 159; Moses v. Boston, &c. R. Co., 
 24 N. H. 71, 55 Am. Dec. 222; Smith 
 V. Nashua, &c. R. Co., 27 N. H. 86, 
 
 95, 59 Am. Dec. 364; New York, &c. 
 R. Co. V. Kip, 46 N. Y. 546, 7 Am. 
 Rep. 385; Holmes v. Eastern Coun- 
 ties, &c. R. Co., 3 K. & J. 675; Flana- 
 gan V. Great Western, &c. R. Co., 7 
 Eq. 116; Shrewsbury, &c. R. Co. v. 
 Stour Valley, &c. R. Co., 2 De G. M. 
 & G. 866; East, &c. Docks R. Co. v. 
 Dawes, 11 Hare 363; Cother v. Mid- 
 land R. Co., 2 Phill. 469. 
 
 22 The rights acquired by pur- 
 chase are regarded as more com- 
 plete than those acquired by con- 
 demnation. Thus where a railroad 
 company acquires land upon which to 
 build its road by purchase of the 
 fee, it is not bound, in its dealings 
 with such land, by restrictions upon 
 its authority to use its "right- of 
 way." Calcasieu Lumber Co. v. Har- 
 ris, 77 Tex. 18, 13 S. W. 453. 
 
 23 Currier v. Marietta, &c. R. Co., 
 11 Ohio St. 228; Gray v. Liverpool. 
 &c. R. Co., 9 Beav. 391. 
 
691 REAL ESTATE § 456 ' 
 
 to US that the doctrine of the cases cited goes too far. We think 
 that where a temporary track is essential to the proper construc- 
 tion of the main line or to its operation, it is competent for the 
 company to acquire land for that purpose. It has been held not 
 competent for a railroad company to condemn land for the erec- 
 tion of dwellings for the workmen employed by it.^* It is clear 
 that a railroad company has no implied power to acquire lands 
 by eminent domain or otherwise for speculative purposes, or to 
 prevent competition, or to aid in collateral enterprises remotely 
 connected with the road.^^ . 
 
 §456 (395). Title to real estate is in the company. — Title to 
 real estate acquired by a railroad company vests in the company 
 and not in its stockholders. The stockholders have an interest 
 in corporate property, which interest is represented by their 
 shares of capital stock, but they are not the owners of the real 
 estate of the company. The corporation while composed of its 
 shareholders is a distinct legal entity having an individuality of 
 its own.^** It is of itself a person although it is the creature of 
 statute. We do not mean to say that the term "corporations'' 
 always includes natural persons, but so far as the ownership of 
 property is concerned a corporation such as a railroad company 
 is a person. Conveyances of corporate real estate must be execu- 
 ted by the company .^'^ and, ordinarily, actions tor injuries to its 
 
 24 State V. Mansfield, 23 N. J. L. Cent. R. Co., 34 Vt. 1. See also 
 510, 57 Am, Dec. 409; Nashville, &c. Case v. Kelley, 133 U. S. 21, 10 Sup. 
 R. Co. V. Cowardin, 11 Humph. Ct. 216, 33 L. ed. 513; Boston, &c. 
 (Tenn.) 348; Eldridge v. Smith, 34 R. Co. v. Coffin, 50 Conn. 150; Beas- 
 Vt. 484. But see Ante, §354, note ley v. Aberdeen, &c. R. Co., 145 N. 
 20. Car. 272, 59 S. E. 60; Delaware, &c. 
 
 25 McClure v. Missouri, &c. R. Co., R. Co. v. Tobyhanna Co., 232 Pa. 
 9 Kans. 373 ; Baltimore, &c. R. Co. v. St. 76, 81 Atl. 132 ; Chicago, &c. R. 
 Union R. Co., 35 Md. 224, 6 Am. Co. v. Mason, 23 S. Dak. 564, 122- 
 Rep. 397; Pacific R. Co. v. Seeley, N. W. 601. 
 
 45 Mo. 212, 100 Am. Dec. 369; Rens- 26 Rand v. Hubbell, 115 Mass. 461, 
 selaer &c. R. Co. v. Davis, 43 N. Y. 15 Am. Rep. 121 ; Regina v. Arnaud, 
 137; New York, &c. R. Co. v. Kip, 16 L. J. Q. B. SO. 
 
 46 N. Y. 546, 7 Am. Rep. 385; Iron 27 Ante, §339. There are cases of 
 R. Co. V. Ironton, 19 Ohio St. 299; a very peculiar nature in which 
 Vermont, &c. R. Co. v. Vermont equity will enforce a conveyance 
 
§ 457 RAILROADS 
 
 692 
 
 property must be prosecuted by the corporate entity. There are 
 cases where, upon the wrongful refusal of the corporation to act, 
 equity will interfere for the protection of the stockholders, but 
 these cases form exceptions to the general rule. 
 
 § 457 (396). Title once vested not divested because property 
 subsequently becomes unnecessary. — Where property at the time 
 of its acquisition is reasonably necessary for the legitimate cor- 
 porate purposes the fact that the necessity subsequently ceases 
 does not always make the holding wrongful nor divest the title. 
 The question of the right to hold property acquired by a railroad 
 company must, as a rule, be determined by the situation and con- 
 dition at the time of its acquisition, and complete title once ac- 
 quired is not taken away by future events. There is no wrong in 
 holding real estate where a complete title is rightfully obtained, 
 although changes wrought by subsequent action, taken under 
 authority of law, may have the effect to render the property not 
 necessary to the attainment of corporate objects or the exercise 
 of corporate functions. But the general doctrine stated does not 
 ordinarily apply where the property is acquired by virtue of the 
 right of eminent domain and the fee is not taken. If, however, 
 the law authorizes the taking of the fee and a fee is taken, it is 
 not divested by the fact that it has ceased to be necessary to the 
 accomplishment of corporate objects. ^^ If an absolute title vests, 
 no matter how acquired, the company, it is obvious, secures an 
 indefeasible estate. 
 
 § 458 (397). Effect of conveyance to corporation of land it has 
 no power to hold. — A conveyance to a corporation of land it has 
 no power to hold is voidable at the suit of the state, but it is not 
 void. 29 Such a conveyance is so far effective that it vests in the 
 
 made by individual stockholders, but where right of way is only an ease- 
 
 they are exceedingly rare. American, ment. McLemore v. Memphis, &c. 
 
 &c. Co. V. Taylor, &c. Co., 46 Fed. R. Co. (Tenn.), 69 S. W. 338;'Mis- 
 
 152; Society, &c. v. Abbott, 2 Beav. souri Pac. R. Co. v. Bradbury, 106 
 
 559. Mo. App. 450, 79 S. W. 966. 'And 
 
 28 Page V. Heineberg, 40 Vt. 81, 94 compare Williams v. Johnson, 208 
 
 Am. Dec. 378. See also Humbert v. Mass. 544, 95 N. E. 90. 
 
 Trinity Church, 24 Wend. (N, Y.) 29 i„ National Bank v. Matthews, 
 
 587. See however as to reversion 98 U. S. 621, 627, 25 L. ed. 188, it 
 
693 
 
 REAL ESTATE 
 
 §459 
 
 corporation a title which will empower it to convey the land, pro- 
 vided the conveyance is made prior to a judgment against it in 
 a proceeding by the state. The authorities declare the title ac- 
 quired by the corporation to be similar to that obtained by an 
 alien in a jurisdiction where aliens are forbidden to hold land.^" 
 
 § 459 (398). Right of foreign corporation to hold real estate. — 
 
 It was adjudged in an early case by the Supreme Court of the 
 United States that a corporation of one state cannot be the owner 
 of land in another state without the assent of the state in which 
 the land lies.^^ But the corporation may hold such lands, if it 
 
 was said : "Where a corporation is 
 incompetent by its charter to take 
 a title to real estate a conveyance 
 to it is not void, but voidable, and 
 the sovereign alone can object. It 
 is valid until assailed by a direct 
 proceeding instituted for that pur- 
 pose.'' See, to the same effect Na- 
 tional Bank v. Whitney, 103 U. S. 
 99, 26 L. ed. 443; Swope v. Leffing- 
 well, lOS U. S. 3, 26 L. ed. 939; 
 Fortier v. New Orleans, &c. Bank, 
 112 U. S. 439, 5 Sup. Ct. 234, 28 L. 
 ed. 764; Reynolds v. Crawfordsville, 
 &c. Bank, 112 U. S. 40S, S Sup. Ct. 
 213, 28 L. ed. 733; Smith v. Sheeley, 
 12 Wall. (U. S.) 3S8, 361, 20 L. ed. 
 430; Myers v. Croft, 13 Wall. (U. 
 S.) 291, 20 L. ed. 562; Long v. Geor- 
 gia Pac. R. Co., 91 Ala. 519, 8 So. 
 706, 24 Am. St. 931; Plummer v. 
 Chesapeake, &c. R. Co., 143 Ky. 102, 
 136 S. W. 162, 33 L. R. A. (N. S.) 
 362; 3 Thomp. Corp. §2390, et seq. 
 But the rule that no one but the 
 state can question it is not entirely 
 without exceptions in unusual cases, 
 and it has been held that an execu- 
 tory contract may be rescinded 
 where the corporation has no power 
 to take the property. Coleman v. 
 
 San Rafael, &c. Co., 49 Cal. 517. 
 See however where contract is exe- 
 cuted. 3 Thomp. Corp. (2nd ed.) 
 §2400. 
 
 ao Fritts v. Palmer, 132 U. S. 282, 
 10 Sup. Ct. 93, 33 L. ed. 317, citing 
 Cross V. DeVaUe, 1 Wall. (U. S.) 
 1, 13, 17 L. ed. 515; Governeur v. 
 Robertson, 11 Wheat. (U. S.) 332, 
 8 L. ed. 614; National Bank v. Mat- 
 thews, 96 U. S. 621, 628, 25 L. ed. 
 188; Phillips v. Moore, 100 U. S. 
 208, 25 L. ed. 603. See also Leazure 
 V. Hillegas, 7 Sergt. & R. (Pa.) 313; 
 Goundie v. Northampton Water Co., 
 7 Pa. St. 233; Hickory Farm, &c. 
 Co. V. BuflEalo, &c. R. Co., 32 Fed. 
 22; Hamsher v. Hamsher, 132 111. 
 273, 23 N. E. 1123, 8 L. R. A. 556; 
 Russell V. Texas, &c. R. Co., 68 Tex. 
 646, 5 S. W. 686; Hubbard v. Wor- 
 cester Art Museum, 194 Mass. 280, 80 
 N. E. 490, 9 L. R. A. (N. S.) 689, 
 693, and see note to this case as last 
 reported referring to cases on both 
 sides as to whether others may 
 question the power of a corporation 
 to take by bequest or devise. 
 
 siRunyan v. Coster, 14 Pet. (U. 
 S.) 122, 10 L. ed. 382; Cowell v. 
 Colorado, &c. Co., 100 U. S. 55, 25 
 
§459 
 
 RAILROADS 
 
 694 
 
 has power from the state that created it,*^ unless the right is 
 denied by the state in which the land is situated.^* In one of the 
 cases it is held that in favor of a grantee a foreign corporation 
 will be presumed to have power to hold real estate under the laws 
 of the state by which it was incorporated.^* The state in which 
 the land lies may impose such limitations and restrictions upon 
 the right of a foreign corporation to acquire and hold land situ- 
 ated within its borders as it deems proper.*^ The doctrine of 
 most of the cases is that an individual cannot successfully assail 
 the right of a foreign corporation to hold land.^® 
 
 L. ed. 547; Carroll v. East St. Louis, 
 67 111. 568, 16 Am. Rep. 632; United 
 States, &c. Co. v. Lee, 73 111. 142, 24 
 Am. Rep. 236; Barnes v. Suddard, 
 117 111. 237, 7 N. E. 477; Pennsyl- 
 vania Co., &c. V. Bauerle, 143 111. 459, 
 33 N. E. 166. 
 
 *2 Metropolitan Bank v. Godfrey, 
 23 111. 579; Diamond, &c. Co. v. 
 Powers, 51 Mich. 145, 16 N. W. 314. 
 See Blair v. Perpetual Ins. Co., 10 
 Mo. 559, 47 Am. Dec. 129; Ohio, &c. 
 Co. V. Merchants', &c. Co., 30 Tenn-. 
 1, 53 Am. Dec. 742, 8 Thomp. Corp. 
 §§ 6685-6688. 
 
 33 New York, &c. Dock v. Hicks, 
 5 McLean (U. S.) Ill, Fed. Cas. 
 No. 10204; Northern Transportation, 
 &c. Co. V. Chicago, 7 Biss. (U. S.) 
 45, Fed. Cas. No. 10324; New Hamp- 
 shire, &c. Co. V. Tilton, 19 Fed. 73; 
 Lathrop v. Commercial Bank, 38 Ky. 
 114, 33 Am. Dec. 481; Thompson v. 
 Waters, 25 Mich. 214, 12 Am. Rep. 
 243; Lumbard v. Aldrich, 8 N. H. 
 31,. 28 Am. Dec. 381 ; White v. How- 
 ard, 46 N. Y. 144; Lancaster v. Am- 
 sterdam, &c. Co., 140 N. Y. 576, 35 
 N. E. 964, 24 L. R. A. 322; Alward 
 V. Holmes, 10 Abbott (N. Car.) 96; 
 Baltimore, &c. S. Co. v. McCutchen, 
 13 Pa. St. 13; State v. Boston, &c. 
 
 R. Co., 25 Vt. 433; Claremont Bridge 
 Co. V. Royce, 42 Vt. 730, 
 
 3* Tarpey v. Deseret, &c. Co., 5 
 Utah 494, 17 Pac. 631. See New 
 Hampshire, &c. Co. v. Tilton, 19 
 Fed. 73 ; Realty Co. v. Appolonio, 5 
 Wash. 437, 32 Pac. 219. 
 
 35 Diamond, &c. Co. v. Powers, 51 
 Mich. 145, 16 N. W. 314. Even if 
 absolute prohibition would be an in- 
 terference with interstate comtrierce, 
 requiring a railroad company to be- 
 come incorporated in the state in 
 which the land lies is not such an 
 unlawful interference or regulation. 
 Plummer v. , Chesapeake, &c. R. Co., 
 143 Ky. 102, 136 S. W. 162, 33 L. R. 
 A. (N. S.) 362. 
 
 36 Lancaster v. Amsterdam, &c. 
 Co., 140 N. Y. 576, 24 L. R. A. 322; 
 Bank of Toledo v. International 
 Bank, 21 N. Y. 542; Methodist, &c. 
 Church V. Pickett, 19 N. Y. 482. See 
 also Hickory Farm Oil Co. v. Buf- 
 falo, &c. R. Co., 32 Fed. 22; note to 
 Hanna v. Kelsey Realty Co. (145 
 Wis. 276), in 2,2, L. R. A. (N. S.) 
 355, with which compare Plummer 
 v. Chesapeake, &c. Ry. Co., 143 Ky. 
 102, 136 S. W. 162, 33 L. R. A. (N! 
 S.) 362. 
 
:695 REAL ESTATE § 460 
 
 § 460 (399). The power to acquire property by grant broader 
 than the power to acquire by condemnation. — The authorities 
 with good reason discriminate between the power to acquire 
 property by grant and the power to obtain by the exercise of the 
 right of domain. Statutes conferring the authority to condemn 
 property are, as is well known, strictly construed, and their oper- 
 ation is seldom enlarged by implication. Where property is 
 seized by virtue of the eminent donjain, it is taken against the 
 owner's will, while in the case of a grant he voluntarily conveys 
 to the company. Property legitimately connected with the pur- 
 pose of the corporation may be rightfully acquired, although the 
 connection be remote. It is not essential, in case of purchase,' 
 that the property be immediately connected with the corporate 
 purpose ; it is sufficient if it be reasonably necessary to the con- 
 venience of the company and those dealing with it. They may 
 acquire land by purchase for many purposes that would not be 
 sufficient to warrant the seizure under the right of eminent do- 
 main, especially where that right is limited to the extent that it 
 is in some of the statutes. Refreshment stands, dining places, 
 bookstalls, and like conveniences, may be provided by railroad 
 companies for the use of travelers and, as we believe, employes, 
 and as there is power to provide such things there is also power 
 to acquire land for such purposes. But the power to acquire 
 by purchase does not necessarily imply the power to seize under 
 the right of eminent domain. 
 
 § 461 (400). Acquisition of the fee by private grant. — A rail- 
 road company may acquire a fee in lands by grant, unless forbid- 
 den by statute or by some rule of law.*'^ Where there is author- 
 ity to receive and hold real estate by private grant, and there is 
 neither an express nor an implied limitation upon the authority, 
 a fee may be taken. But where there is an implied restriction, 
 as is often the case in regard to the right of way, or the like, of a 
 railroad company, the grant does not ordinarily vest a fee in the 
 
 37 Holt V. Somerville, 127 Mass. York &c., R. Co., 12 N. Y. 121 ; 
 
 408; State v. Brown, 27 N, J. L. Cross v. Seaboard Air Line R. Co., 
 
 13; Hill V. Western, &c. R. Co., 172 N. Car. 119, 90 S. E. 14; 3 
 
 32 Vt. 68. See also Nicoll v. New Thomp. Corp. (2nd ed.) § 2368. 
 
§461 
 
 RAILROADS 
 
 696 
 
 company, but vests such an estate, usually an easement, as is 
 requisite to effect the purpose for which the property is re- 
 quired. Where the grant is of "surplus real estate,"** as it is 
 often called, that is of real estate not forming part of the rail- 
 road or its appendages, a deed effective to vest a fee in a natural 
 person will vest that estate in a railroad company. The acquisi- 
 tion of land for a corporate purpose, such as the use in construct- 
 ing and operating a railroa^d, conveys the property for the time 
 the company has a right to operate the road, but unless the fee 
 is clearly granted we suppose that the title does not extend be- 
 yond that period.^9 It is held that even though the corporation 
 is chartered for a limited period, it may take a conveyance of 
 lands in fee in so far that it can convey the fee to another, al- 
 though for the purpose of enjoyment, its estate must necessarily 
 be limited to the term of its corporate existence.*" It has been 
 
 38 MulHner v. Midland, &c. R. 
 Co., 11 Ch. Div. 611. See, as to the 
 authority to hire out property not 
 needed by the company, Forrest v. 
 Manchester, &c. R. Co., 30 Beav. 
 40; Hartford F. Ins. Co. v. Chi- 
 cago, &c. R. Cq., 175 U. S. 91, 44 
 L. ed 84; Brown v. Winnisimmet 
 Co., 11 Allen (Mass.) 326. 
 
 39 Norton v. Duluth Transfer R. 
 Co., 129 Minn. 126, 151 N. W. 907, 
 Ann. Cas. 1916E, 760 and cases 
 cited in note. 
 
 40 Nicoll V New York, &c. R. 
 Co., 12 N. Y. 121 ; Rives v. Dudley, 
 3 Jones Eq. (N. Car.) 126. See also 
 Morrill v. Wabash, &c. R. Co., 96 
 Mo. 174, 9 S. W. 657. The charter 
 of the Tonawanda R. Co. (Laws N. 
 y. 1832, 241) limited its existence 
 to fifty years, and authorized the 
 company to acquire lands by emi- 
 nent domain "for the use or ac- 
 commodation of such railroad or 
 its appendages;" and "to appropri- 
 ate so much of such lands as may 
 
 be necessary to its own use for 
 the purposes contemplated by this 
 act." It also conferred the "right 
 to construct and during its exist- 
 ence to maintain and continue a 
 railroad." It was held that the 
 use of the land taken was not lim- 
 ited to the fifty years of corporate 
 existence, but was to continue as 
 long as it should be devoted to 
 sucH public purposes; and that, as 
 this company was afterwards con- 
 solidated by legislative act with 
 another company, the owners of 
 the fee cannot recover the land 
 at the expii-ation of the fifty years. 
 Davis V. Memphis, &c. R. Co., 87 
 Ala. 633, 6 So. 140; Miner v. New 
 York, &c. R. Co., 46 Hun (N. Y.) 
 612, Since a corporation organized 
 under the general railroad act (2 
 Rev. St. N. Y. 7th ed. 1569) ceases 
 to exist within five years after its 
 articles of association are filed, 
 unless it begins the construction 
 of its road, a grant to such a cor- 
 
697 REAL ESTATE § 461 
 
 doubted, however^ whether the doctrine of the cases referred to 
 can be sustained. It may well be held that where the statute 
 gives a right to renew or extend the term of the corporate exis- 
 tence the grant extends to that time, for the law in force at the 
 time of the execution of the contract enters into it as a silent but 
 important factor ; but where there is an express limit to the term 
 of the corporate existence, there is some reason for questioning 
 whether it can be justly held that the grant extends beyond that 
 period when an absolute fee is not expressly granted. A grant 
 to a corporation is a grant for the purpose specified in the char- 
 ter, and when the right of the corporation to use the property 
 ceases there is at least some reason for saying that the estate ter- 
 minates. ^^ We are not speaking of "surplus real estate," nor of 
 deeds where there is an express conveyance of an absolute fee, 
 but of cases where from the situation and agreement of the par- 
 ties it satisfactorily appears that the land was granted for use in 
 constructing and operating the road, and not absolutely and un- 
 conditionally. Where the fee is acquired it may, of course, be 
 transferred, and so, in general, may any other estate.*^ But it 
 is to be understood that, as to the conveyance of property es- 
 sential to enable the company to perform the duties imposed 
 upon it by law, the right to transfer does not exist unless con- 
 ferred by statute, for, as we have elsewhere shown, a railroad 
 company cannot disable itself from discharging its duty by trans- 
 ferring its property, except in cases where the transfer is author- 
 ized by statute.** 
 
 poration ten years after its or- 118 Fed. 984. That a fee may be 
 
 ganization, and before it had con- conveyed in such a case seems to 
 
 structed any road conveys no title, be well settled, but the question is 
 
 Greenwood Lake, &c. R. Co. v. New one of construction as to whether 
 
 York &c. R. Co., SS Hun 606, 8 N. j^ joes in the particular case. ' 
 Y. S. 26. 
 
 42 See however People V. O'Brien, "« Pollard v. Maddox, 28 Ala. 
 
 Ill N. Y. 1, 18 N. E. 692, 2 L. R. A. ^^1; Harrison v. Lexmgton, &c. R. 
 
 255, 7 Am. St. 684; Detroit v. De- ^o., 9 B. Men. (Ky.) 470; New Jer- 
 
 troit Citizens' St. R. Co., 184 U. S. ^^y> &=• R- Co. v. Van Syckle, 37 
 
 368, 46 L. ed. 592; Detroit Citizens' N. J. L. 496. 
 
 St. R. Co. V. Detroit, 64 Fed. 634, ** The subject of acquisition of 
 
 26 L. R. A. 673; Brown v. Schleier, the right of way by purchase is 
 
§462 
 
 RAILROADS 
 
 698 
 
 § 462 (401). Acquisition of title by adverse possession. — 
 There can be no doubt that title to surplus real estate may be 
 acquired in a proper case by limitation. The company may upon 
 the same principle acquire an easement by adverse possession.*^ 
 We suppose that where the possession consists in the use of the 
 lands as a right of way an easement and not the fee would be 
 acquired.*^ The general rule is that where an easement is 
 claimed by user the easement can be no broader than the use.' 
 The extent of the easement in such a case is to be determined by 
 the actual use and possession. Upon the general principle stated 
 it is held that adverse use of railroad tracks for more than 
 twenty years is not shown if it appears that the particular tracks, 
 
 discussed in the chapter entitled 
 "Purchase of right of way." 
 
 45 Sherlock v. Louisville, &c. R. 
 Co., lis Ind. 22, 17 N. E. 171. Where 
 a railroad company, with the con- 
 sent of a land-owner, staked off a 
 strip of ground as a right of way, 
 and entered thereon and occupied 
 so much thereof as was needed for 
 the construction of its road, and 
 remained in possession thereof un- 
 der claim of title to the entire 
 strip, exercising over it such acts 
 of ownership as the nature of the 
 property permitted for twenty 
 years, the railroad company ac- 
 quired a title to the entire strip 
 laid off. Hargis v. Kansas City, 
 &c. R. Co., lOG Mo. 210, 13 S. W. 
 680, See also Florida Southern R. 
 Co. V. Loring, 51 Fed. 932; Texas, 
 &c. R. Co. V. Scott, 71 Fed. 726; 
 Illinois Cent. R Co. v. Noyes, 252 
 111. 178, 96 N. E. '830; Waggoner v. 
 Wabash R. Co., 185 111. 154, 56 N. 
 E. 1050; Newcastle v. Lake Erie, 
 &c. R. Co., 155 Ind. 18, 'si N, E. 
 516; Fortune v. Chesapeake, &c. 
 R. Co. (Ky.), 58 S. W. 711. 
 
 *<> Organ v. Memphis, &c. R. Co., 
 51 Ark. 235, 11 S W. 96, 39 Am. & 
 Eng. R. Cas. 75. Texas quoted in 
 La Crosse v. Cameron, 80 Fed. 264, 
 275. See also Consumers' Gas T. 
 Co. v. American Plate Glass Co., 
 162 Ind. 393, 68 N. E. 1020; Peoria, 
 &c. R. Co. V. Attica, &c. R. Co., 
 154 Ind. 218, 56 N.-E. 210. In, Texas, 
 &c. R. Co. V. Wilson, 83 Texas 153, 
 18 S. W. 325, 51 Am. & Eng. R. Cas. 
 364, it was held that if the company 
 was a mere trespasser it could not 
 acquire title. The court cited 
 Hays V. Texas, &c. R. Co., 62 Texas 
 397. But see Texas, &c. R. Co. v. 
 Gaines (Tex. Civ. App.), 27 S. W. 
 266. As to what acts are sufficient 
 to constitute possession, see Em- 
 ery v. Raleigh, &c. R. Co., 102 
 N. Car. 209, 9 S. E. 139, 11 Am. St. 
 727, i1 Am. & Eng. R. Cas. 253. 
 See generally American Bank Note 
 Co. v. New York, &c. R. Co., 50 
 Am. & Eng. R. Cas. 292; Chicago, 
 &c. R. Co. V. Gait, 133 111. 657, 23 
 N. E. 425, 44 Am. & Eng. R. Cas. 43 ; 
 Erie, &c. R. Co. v. Rousseau, 17 
 Ont. App. 483, 46 Am. & Eng. R. 
 Cas. 539. 
 
699 
 
 REAL ESTATE 
 
 §462 
 
 the use of which constituted a nuisance, had been laid a much 
 shorter time than that, although other tracks had been used a 
 longer time.*''^ The quantity of land taken under a grant is de- 
 termined from the terms of the deed or from the attendant cir- 
 cumstances and not simply from actual user. Thus it is held in 
 Pennsylvania that a railroad company authorized to take for its 
 right of way a strip not exceeding sixty feet in width is, in the 
 absence of any designation of its boundaries, presumed to have 
 taken the full sixty feet, though the road be located in a street 
 less than sixty feet wide, and the company in the construction of 
 its road does not take actual possession of the land outside of 
 the street.*^ But where the railroad claims under a grant or re- 
 lease of the right of way by a private landowner, in which the 
 width is not specified, the width of the strip conveyed may be 
 shown by proof of the contemporaneous acts arid declarations of 
 the parties.*® 
 
 4T Thompson v. Pennsylvania R. 
 Co., 45 N. J. Eq. 870, 14 Atl. 897, 
 19 Atl. 622, on appeal, Pennsylvania 
 R. Co. V. Thompson, 45 N. J. Eq. 
 870, 19 Atl. 622. 
 
 48 Jones V. Erie, &c. R. Co., 144 
 Pa. St. 629. In Indiana it has been 
 held that the court will presume,; 
 from the fact that a railroad ap- 
 propriated a rig^ht of way under 
 the general railroad law, that it 
 took the full width (100 feet) which 
 that law authorized it to' take. 
 Campbell v. Indianapolis, &c. R. 
 Co., 110 Ind. 490, 11 N. E. 482. And 
 the same is true where the land 
 was taken possession of under a 
 special charter. Indianapolis, &c. 
 R. Co. v. Rayl, 69 Ind. 424; Prather 
 V. Western Union Tel. Co., 89 Ind. 
 501. To the same effect see Duck 
 River Valley, &c. R. Co. v. Coch- 
 rane, 3 Lea (Tenn.) 478; Day v. 
 Railroad Co., 41 Ohio St, 392. But 
 compare Peoria, &c. R. Co. v. 
 
 Attica &c. R. Co., 154 Ind. 218, 56 
 N. E. 210; Jones v. Erie, &c. R. Co., 
 169 Pa. St. 333, 32 Atl. S3S, 47 Am. 
 St. 916. 
 
 49 Indianapolis, &c. R. Co. v. 
 Reynolds, 116 Ind. 356, 19 N. E. 141 ; 
 Indianapolis, &c. R. Co. v. Lewis, 
 119 Ind. 218, 21 N. E. 660. If the 
 grant of a right of way by a priv- 
 ate land-owner does not specify 
 the width of the strip granted, the 
 railroad company will only acquire 
 a right to such land as is actually 
 taken and used. Fort Wayne, &c. 
 R. Co., V. Sherry, 126 Ind. 334, 25 
 N. E. 898, 10 L. R. A. 48; Vicks- 
 burg, &c. R. Co. V. Barrett, 67 
 Miss. 579, 7 So. 549. Where a right 
 of way is granted, "with right to 
 use such additional land as may be 
 necessary for the construction and 
 maintenance'' of the road, the com- 
 pany is bound only to use ordinary 
 care in constructing its road ; and 
 the necessity for taking additional 
 
§463 
 
 RAILROADS 
 
 700 
 
 §463 (402). Possession of land— To what right referred. — 
 
 Where there is a right to take land for a designated purpose and 
 the land is used for that purpose, the possession will be referred 
 to that right.^o From tliis doctrine, which we regard as well- 
 founded, it follows that a railroad company, in taking possession 
 of' land, will ordinarily take an easement and not the fee, for the 
 reason that the right to take an easement is the right to which 
 possession must be referred. The fee is not acquired by posses- 
 sion unless the right to which the possession is referable author- 
 izes the acquisition of a fee.^i A corporation cannot, by exceed- 
 ing its power, enlarge its rights. 
 
 land is to be determined by ordi- 
 nary care. Gulf, &c. R. Co. v. Rich- 
 ards, 83 Tex. 203, 18 S. W. 611. 
 Staking off the full width permitted 
 by law, with the land-owner's per- 
 mission, and the subsequent occu- 
 pation of so much as the needs of 
 the road required, under claim of 
 title to the whole, gives a rail- 
 road company a right of way of 
 the width originally staked off. 
 Hargis v. Kansas City, &c. R. Co., 
 lOO Mo. 210. 
 
 BO Proprietors, &c. v. Nashua, &c. 
 R. Co., 104 Mass. 1, 6 Am. Rep. 181. 
 
 SI Peirce v. Boston, &c. R. Co., 
 141 Mass. 481, 6 N. E. 96 In speak- 
 ■ing of the use and occupancy of 
 property, the court said : "The 
 manner in which it shall be used 
 for the designated purposes is in 
 the discretion of .the corporation 
 and is no concern of the land-own- 
 er. Even if the corporation ex- 
 ceeds its franchise in the manner 
 of such occupancy, it does not 
 thereby disseize the owner of the 
 fee. If a railroad corporation fits 
 its station-house with conveniences 
 for furnishing lodging and food 
 
 necessary for the comforts of its 
 passengers, it does not claim the 
 fee of the land, allowing others 
 than passengers to use them. It is 
 not a claim in the fee of the land 
 that it does not distinguish be- 
 tween the public and its passen- 
 gers in the use of the refreshment 
 tables, news stand or telegraph 
 office kept there. The building is 
 none the less a stationhouse, and 
 the fitting it for use and providing 
 conveniences for passengers and 
 the public alike, is an incident of 
 its use for the business of the 
 corporation, and, in doing it, the 
 corporation asserts no right except 
 to maintain a station-house and 
 what it deems incidental to that. 
 It may exceed its corporate rights 
 in the use of the station-house, but 
 it does not thereby claim the fee 
 in the land on which it stands." 
 In Consumers' Gas. T. Co. v. Amer- 
 ican Plate Glass Co., 162 Ind. 393, 
 68 N. E. 1020, 1021, the text is cited 
 with approval arid it is held that a 
 railroad company which enters and 
 holds possession without color of 
 title acquires only an easement. 
 
701 KEAL ESTATE § 464 
 
 § 464 (403). Right of company where land is owned in fee. — 
 
 Where a railroad company becomes the owner of land in fee 
 simple it generally has all the ordinary rights of a natural per- 
 son, except in so far as those rights are abridged by statutory 
 provisions. The difficulty is to determine when the title of the 
 company is in fee, for, as we have seen, a conveyance which 
 would convey an absolute fee to a natural person does not always 
 convey such an estate to a railroad company, since the situation 
 of the parties and attendant circumstances may exert an im- 
 portant influence, as, for instance, where a deed is made of land 
 for a right of way and the company is not authorized to. take a 
 fee, or perhaps where the term of the corporate existence is lim- 
 ited to a specified term of years. In all such cases the law is to 
 be considered as an element of the contract, for the law is always 
 a part of the contract unless excluded by valid stipulations, ^^ so 
 that a conveyance, although apt words for the creation of a fee, 
 and such as would create a fee if the transaction were between 
 natural persons, are used, will not invariably vest a fee in the 
 corporation. Some of the courts make a distinction between 
 cases where there is a grant of the, fee for a right of way and 
 cases where the right of way is acquired under the eminent do- 
 main. Thus in one case it was held that a statute prohibiting a 
 railroad company from erecting buildings on its right of way did 
 not apply where the right of way was acquired by grant. ^^ 
 
 § 465 (404). Effect of conveyance of property the company is 
 not authorized to acquire. — ^As we have seen, a railroad company 
 does acquire a title to land conveyed to it, even when it may not 
 be authorized to hold such property, although the title is a pecu- 
 liar one. As it acquires a title it possesses something which 
 it may convey in a proper case, so that, in cases where it does 
 convey, the question is as to the title its grantee takes under 
 the deed. The adjudged cases hold, and with reason, that the 
 conveyance carries to the grantee a full and valid title.^* The 
 
 52 Foulks V. Falls, 91 Ind. 315, 11 Texas 18, 13 S. W. 453, 43 Am. & 
 321; Long v. Straus, 107 Ind. 94, Eng. R. Cases 570. 
 
 6 N. E. 123, 7 N. E. 763, 57 Am. Rep. S4 Walsh v. Barton, 24 Ohio St. 
 87. 28; Ragan v. McElroy, 98 Mo. 349, 
 
 53 Calcasieu, &c. Co. v. Harris, 11 S. W. 735. 
 
§466 
 
 RAILROADS 
 
 702 
 
 conveyance cannot, it is obvious, have such an eflfect, however, 
 unless made before the state has assailed the right of the com- 
 pany to hold the land. 
 
 § 465 (405). Questioning the right to hold real estate. — The 
 
 lule that the right to hold land can only be questioned by the 
 state is a familiar one.^' The legislature may, of course, author- 
 ize an individual having an interest or suffering an injury to 
 assail the right of a railroad company to hold land. But where 
 there is no legislation modifying the rule the right to hold land 
 can be successfully challenged only by a proceeding in the name 
 of the state in the nature of a quo warranto. The attack must be 
 direct and not collateral. Upon this principle it is held that a 
 party against whom a railroad company seeks an injunction to 
 restrain interference with land of which it is in possession by 
 grant cannot successfully defend upon the ground that the rail- 
 road company had no power to acquire the land.^® 
 
 55 Cowell V. Colorado Spring.* 
 Co., 100 U. S. 55; 25 L. ed. 547; 
 Jones V. Habersham, 107 U. S. 174, 
 27 L. ed 401 ; Fritts v. Palmer, 132 
 U. S. 282, 33 L. ed. 317; Mackall v. 
 Chesapeake, &c. Co., 94 U. S. 308, 
 24 L. ed. 161; Van Wyck v. Kne- 
 vals, 106 U. S. 360, 21 L. ed. 201; 
 Plummer v. Chesapeake, &c. R. 
 Co., 143 Ky. 102, 136 S. W. 162, 33 
 L. R. A. (N. S.) 362; Toledo, &c. R. 
 Co. V. Johnson, 49 Mich. 148, 13 N. 
 W. 492; Fayette Land Co. v. Louis- 
 ville, &c. R. Co., 93 Va. 274, 24 S. E. 
 1016. See generally Hackensack 
 Water Co. v. De Kay, 36 N. J. Eq. 
 548; Truckee, &c. Co. v. Campbell, 
 44 Cal. 89; Denver, &c. R. Co. v. 
 Denver, &c. Co., 2 Colo. 673; Cin-. 
 cinnati, &c. R. Co. v. Danville, &c. 
 R. Co., 75 111. 113; Osborn v. Peo- 
 ple, 103. 111. 224; North v. State, 
 
 107 Ind. 356, 8 N. E. 159; Keene v. 
 Van Reuth, 48 Md. 184; Northeast- 
 ern Tel. &c. Co. v. Hepburn, 72 N. 
 J. Eq. 7, 65 Atl. 747 ; Freeland v. Penn- 
 sylvania, &c. Co., 94 Pa. St. 504; 
 Pixley V. Roanoke, &c. Co., 75 Va. 
 320. But see for exceptional cases 
 such as those where the corpora- 
 tion seeks the aid of the court to 
 perfect its title. South &c. R. Co. 
 V. Highland Ave., &c R. Co., 119 
 Ala. 105, 24 So. 114; Seattle Gas, &c. 
 Co. v. Citizens, &c.. Co., 123 Fed. 
 588; Scott v. Farmers, &c. Bank 
 (Tex. Civ. App.), 66 S. W. 485. 
 
 56 Kansas City, &c. R. Co. v. 
 Kansas City, &c. Co., 118 Mo. 599, 
 34 S. W. 478. See also Russell v. 
 Texas, &c. R. Co., 68 Tex. 646, 5 
 S. W. 686; Southern Pac. R. Co. 
 V. Orton, 6 Sawy. (U. S.) 157, 32 
 Fed. 457. 
 
703 REAL ESTATE § 467 
 
 § 467 (406). Enjoining purchase of real estate where no power 
 to receive and hold. — The familiar and long-settled rule stated in 
 the preceding section does not preclude a stockholder from en- 
 joining the purchase of property which the company has no 
 power to receive and hold. It is one thing to prevent the expen- 
 diture of corporate funds for an unauthorized purpose and quite 
 another to question the right to hold property already acquired 
 by the corporation. There is, therefore, sound reason for dis- 
 criminating between the two classes of cases.*'' 
 
 §468 (407). Executory contract of purchase not enforceable 
 where there is no power to hold the land. — The general principle 
 that an individual cannot question the power of a corporation to 
 hold real estate, except in cases where the statute authorizes the 
 question to be so raised,*^ does not apply to a case where a cor- 
 poration seeks to enforce a contract for real estate which it has 
 no power to hold.*® A corporation cannot invoke judicial aid 
 where the purpose of the suit or action is to secure property of 
 which the law does not permit it to become the owner. It would 
 be strange, indeed, if a corporation could obtain a judgment or 
 decree investing it with land which the law commands it not to 
 take, since such a judgment or decree would make the court the 
 agent of a party in violating the law. "Better is the condition of 
 the defendant" in such a case. 
 
 §469 (408). Estoppel of parties to deeds to deny corporate 
 existence. — The well-known general rule is that a person who 
 contracts with a corporation is estopped to deny that it is a cor- 
 poration, and this rule applies to a grantor who conveys land to 
 a corporation.^" It may be true that where there is no statute 
 
 5'^ See Hough v. Cook Land Co., v. Highland Ave., &c. R. Co., 119 Ala. 
 
 73 111. 23, 24 Am. Rep. 230; Pollock IDS, 24 So. 114; Pacific R. Co. v. 
 
 V. Farmers' Loan & T. Co., 157 U. Seeley, 45 Mo. 212, 100 Am. Dec. 369. 
 
 S. 429, 39 L. ed. 759. But see as to selling and re- 
 
 58 Martindale v. Kansas City &c. covering price, Natoma Water, &c. 
 R. Co., 60 Mo. 508. Co. v. Clarkin, 14 Cal. 544; Jones 
 
 59 Case V. Kelly, 133 U. S. 21, 13 v. Habersham, 107 U. S. 174, 21 L. 
 Am. & Eng. R. Cas. 70, 33 L. ed. .ed. 401. 
 
 513. See also South, &c. R. Co. so Close v. Glenwood Cemetery;' 
 
§470 
 
 RAILROADS 
 
 704 
 
 authorizing the organization of a corporation of such a general 
 class or nature as that named as grantee there cannot be an 
 estoppel, but if there can be a corporation of the general class 
 or nature then the grantor will be estopped. In other words, if 
 there can be a de facto corporation the doctrine of estoppel will 
 efifectively operate. An estoppel cannot arise, however, where 
 there is a clear and explicit statute governing the subject and its 
 provisions are such as to preclude the operation of an estoppel.*"- 
 
 § 470 (409). Deed to company not in existence. — The doctrine 
 of many of the cases is that as a deed is a contract there must be 
 two parties, and hence there must be a grantee.*^ This doctrine 
 has been applied to deeds to corporations not having a legal exis- 
 tence.*^ There is reason for holding that where it appears that 
 there is no statute authorizing the creation of any such corpora- 
 
 107 U. S. 466, 27 L. ed. 408; Swart- 
 out V. Michigan, &c. R. Co., 24 
 Mich. 389. In Winget v. Quincy 
 Building Assn., 128 111. 67, 21 N. E. 
 12, it is held that there is an estop- 
 pel, even if the statute be uncon- 
 stitutional. 
 
 91 Workingmen's Bank v. Con- 
 verse, 29 La. Ann. 369. 
 
 82 Harriman v. Southam, 16 Ind. 
 190; Lyles v. Lescher, 108 Ind. 382, 
 
 9 N. E. 365; Hall v. Leonard, 1 
 Pick. (Mass.) 27; Huss v. Stephens, 
 51 Pa. St. 282; Stephens v. Huss, 54 
 Pa. St. 20. See Hogan v. Page, 2 
 Wall. (U. S.) 605,-17 L. ed 854; Rus- 
 sell V. Topping, 5 McLean (U. S.) 
 194, Fed. Cas. No. 12163; Hunter 
 V. Watson, 12 Cal. 363, 73 Am. Dec. 
 543; German, &c. Assn. v Scholler, 
 
 10 Minn. 331; Douthitt v. Stinson, 
 63 Mo. 268; Morris v. Stephens, 46 
 Pa. St. 200; Gage v. Newmarket, 
 &c. R. Co., 18 Q. B. 457; 4 Elliott 
 Cont, §3846. 
 
 93 In Harriman v. Southam, 16 
 
 Ind. 190, the court held that a deed 
 to a corporation which had 
 no existence was a nullity and did 
 not estop the grantor, but in 
 Snyder v. Studebaker, 19 Ind. 462, 
 81 Am. Dec. 415, the earlier case 
 was overruled and it was held that 
 the grantor was estopped to deny 
 the existence of the corporation 
 to which the deed was made. See 
 Russell V. Topping, 5 McLean (U. 
 S.) 194, Fed. Cas. No. 12163; Ger- 
 Man, &c. Assn. v. Scholler, 10 Minn. 
 331; Douthitt v Stinson, 63 Mo. 
 268; Jackson v. Cory, 8 Johns (N. 
 Y.) 385; 3 Elliott Ev. § 1940. The 
 court, in the case of Provost v. 
 Morgati, &c. R. Co., 42 La. Ann. 809, 
 8 So. 584, 46 Am. & Eng. R. Cas. 
 535, reaches a correct conclusion 
 upon the facts, but we doubt the 
 soundness of some of the broad 
 statements contained in the opin- 
 ion. See 2 Am. Law Reg. & Rev 
 296. 
 
705 
 
 REAL ESTATE 
 
 §470 
 
 tibn as the one named in the deed the grant is ineffective, but 
 where there is a statute authorizing the organization of such 
 corporation, with power to make such a contract, it seems to us 
 that the deed cannot be regarded as void or even voidable in all 
 cases. If there is a statute under which such a corporation may 
 exist, the doctrine of estoppel may well be applied in many in- 
 stances. A deed may be valid if the corporation be one de 
 facto.®* There is some diversity of opinion as to whether a deed 
 executed before the formation of a corporation which is subse- 
 quently organized is valid.®^ Our opinion is that such a deed 
 may be valid where the parties all know that a corporation 
 is to be organized, intend that the deed shall be effective when 
 the corporation comes into existence, and the corporation is or- 
 ganized, as all the parties intended it should be.*® If a deed is 
 delivered in escrow to be held until the formation of the pro- 
 posed corporation, it will be valid if the corporation is formed as 
 contemplated and a delivery made to it after its organization.®'^ 
 
 64 Myers v._ Croft, 13 Wall. (U. 
 S.) 291, 20 L. ed. 562; Smith v. 
 Sheeley, 12 Wall. (U. S.) 358 
 20 L. ed. 430. As we have else- 
 where shown such a deed does not 
 pass title, and as no one but the 
 state can question the right to ex- 
 ercise corporate powers or hold 
 property a deed to a de facto cor- 
 poration cannot be treated as a 
 nullity. 
 
 65 Clifton Heights &c. Co. v. 
 Randell, 82 Iowa 89, 47 N. W. 90S; 
 Philadelphia, &c. Assn. v. Hart, 4 
 Wheat. (U. S.) 1, 4 L. ed. 499; 
 
 ■Rotch's Wharf Co. v. Judd, 108 
 Mass. 224. See also 'post, § 1151. 
 
 06 Rathbone v. Tipga, &c. Co., 2 
 Watts & S. (Pa.) 74. But see 
 Douthit V. Stimson, 63 Mo. 268. 
 We do not believe, however, that 
 where there is no statute authoriz- 
 ing the organization of such a cor- 
 poration as .that contemplated a 
 
 deed would be valid. Subscrip- 
 tions to a contemplated corpora- 
 tion may be valid and upon the 
 same principle a deed may be 
 valid. 
 
 67 In the case of Spring Garden 
 Bank v. Hulings Lumber Co., 32 W. 
 Va. 357, G S. E. 243, 3 L. R. A. 583, 
 the court conceded the rule to be 
 that if there is no grantee in esse 
 the deed would be inoperative, cit- 
 ing Hulick v. Scovil, 4 Gilm. (111.) 
 159; Harriman y. Southam, 16 Ind. 
 190, and Russell v. Topping, 5 Mc- 
 Lean (U. S.) 194, Fed. Cas. No. 
 12163, but held that a delivery in 
 escrow made the deed operative. 
 In the course of the opinion the 
 court quoted from the opinion in 
 Rotch's Wharf Co. v. Judd, 108 
 Mass. 224, 228, the following: 
 "The acceptance of the deed will 
 be presumed as soon as the plain- 
 tiffs (the corporation) were com- 
 
 23 — Ell. K.\ilroads I 
 
§ 471 RAILROADS 706 
 
 § 471 (410). Formal execution of conveyances and agree- 
 ments relating to real estate. — The ancient and well-known rule 
 is that where the statute prescribes a specific mode for the execu- 
 tion of corporate contracts that mode must be substantially pur- 
 sued,*^ but it does not follow that in all cases the failure to pur- 
 sue the prescribed rule will render the contract voidable. Where 
 no specific mode is prescribed the company may contract in the 
 usual mode. Where the law requires a seal then the contract, in 
 order to be effective, should be attested by the seal of the cor- 
 poration, but even in cases where a seal is required the convey- 
 ance may be upheld, although no seal is attached. If its enforce- 
 ment be required by the general principles of equity the absence 
 of a seal will not defeat the title of the grantee. The requirement 
 of the statute of frauds that conveyances of land shall be under 
 seal applies to corporations, and deeds conveying real estate 
 should be under Lhe corporate seal, but while such an unsealed 
 deed does not satisfy the statute there may often be such circum- 
 stances connected with the execution as will operate to estop the 
 corporation from alleging its invalidity. A deed defectively 
 executed is voidable, not void, for as the general power to exe- 
 
 petent to take it." Concord Bank Dec. 742. The courts are gener- 
 V. Bellis, 10 Cush. (Mass.) 276; ally reluctant to adjudge a con- 
 Bank of U. S. V. Dandridge, 12 tract ineffective because of a de- 
 Wheat. (U. S.) 64, 70, 6 L. ed. SS2. feet in the mode of executing it. 
 The case of Drury v. Foster, 2 Some of the courts hold that the 
 Wall. (U. S.) 24, 17 L. ed. 780, was rule that contracts must be exe- 
 also cited. In support of the rule cuted in the mode prescribed ap- 
 that it is the duty of the court to plies only to executory contracts. 
 uphold rather than destroy deeds Pixley v. Western Pacific, &c. R. 
 the court cited Sherwood v. Whit- Co., 33 Cal. 183, 91 Am. Dec. 623; 
 ing, 54 Conn. 330, 8 Atl. 80, 1 Am. Foulke v. San Diego, &c R. Co., 51 
 St. 116; Shed v. Shed, 3 N. H. 432; Cal. 365; Cincinnati v. Cameron, 33 
 African, &c. Church v. Conover, 27 Ohio St. 336. See Rumbough v. 
 N. J. Eq. 157; Flagg v. Fames, 40 Southern, &c.-R. Co., 106 N. Car. 461, 
 Vt. 16, 94 Am. Dec. 363. 11 S. E. 528; Curtis v. Piedmont, 
 68 Beatty v. Marine, &c. Co., '2 &c. Co., 109 N. Car. 401, 13 S. e'. 
 Johns. (N. Y.) 109, 3 Am. Dec. 944. In the absence of statutory 
 401; Salem Bank v. Gloucester restrictions a corporation may 
 Bank, 17 Mass. 1, 9 Am. Dec HI; make every kind of a deed. See 
 note to Leggett v. New Jersey also note in 23 Am. Dec. 742 at seq. 
 Mfg. Co., 1 N. J. Eq. 541, 23 Am. 
 
707 REAL ESTATE § 472 
 
 cute deeds exists the act of the corporation in executing it is not 
 ultra vires. A defectively executed deed may be made good by 
 ratification. Where the statute requires conveyances of land 
 to be under seal, corporate' deeds must be under the seal 
 of the corporation.*^ Where there is an agreement and part 
 performance, although the agreement may not be such as to 
 satisfy the statute of frauds, the grantee may enforce the con- 
 tract substantially under the same rules as those which govern 
 similar contracts between individuals. An agreement to convey 
 land, although not under the corporate seal, may usually be en- 
 forced where the rules which apply to contracts between natural 
 persons entitle the party to enforce a contract of a similar na- 
 ture.™ A distinction is made between an agreement to convey 
 or lease land and the deed or lease, and it is held that although 
 the deed in the one case must be executed under seal an unsealed 
 agreement is effective. ''^ 
 
 §472 (411). Contracts under corporate seal — Effect as evi- 
 dence. — An agreement evidenced by the corporate seal is prima 
 facie evidence that the instrument was executed by the corpora- 
 tion.''- Where the seal is affixed to an instrument which is with- 
 in the power of the corporation to execute, that is, where there 
 is not an entire absence of power to execute it, the presumption is 
 that it was duly executed "by the corporation. But, of course, a 
 
 69 Crawford v. Longstreet, 43 N. (U. S.) 475, Fed. Cas. No. 9530; 
 J. L. 325. A valuable .collection of Crescent City, &c. R. Co. v. Simp- 
 authorities upon the subject of the son, 17 Cal. 286, 19 Pac. 426; Union, 
 effect of the statute upon the ex- &c. Co. v. Bank, 2 Colo. 226; Reed v. 
 ecution of leases will be found Bradley, 17 111. 321 ; Indianapolis, 
 in Mr. Freeman's note to Wallace &c. R. Co. v. Morganstern, 103 111. 
 V. Scog-gins, 17 Am. St. 752. See 149; Morse v. Beale, 68 Iowa 463, 
 also 3 Thomp. Corp. (2nd. ed.) § 27 N. W. 461; Burrill v. Nahant 
 2437. Bank, 2 Mete. (Mass.) 163, 35 Am. 
 
 70 Banks V. Poitiaux, 3 Rand. (Va.) Dec. 395; Missouri, &c. Works v. 
 136, 15 Am. Dec. 706; Legrand v. Ellison, 30 Mo. App. 67; Leggett v. 
 Hampden, &c. College, 5 Munf. New Jersey, &c. Co., 1 N. J. Eq. 
 (Va.) 324. 541, 23 Am. Dec. 728; Boyce v. 
 
 Ti Conant v. Bellow's Falls, &c. Montauk, &c. Co., 37 W. Va. 73, 16 
 Co., 29 Vt. 263. S. E. 501. 
 
 T2 Mickey v. Stratton, S Sawyer 
 
§ 473 RAILROADS 708 
 
 seal will not give even prima facie validity to the instrument 
 where it appears from an inspection of the instrument itself that 
 the contract in question is ultra vires in the proper sense of the 
 term. If the person who affixes the seal has no authority to do 
 so the seal will not make the contract efifectiveJ^ Where the 
 signatures of the officers are shown to be genuine the authen- 
 ticity of the seal will be presumed^* 
 
 § 473 (412). Acceptance of deed. — A deed may be accepted 
 by parol.'^s A parol acceptance of a deed binds the grantee ac- 
 cepting it to a performance of the covenants and conditions 
 written in the deed.''* The statute of frauds cannot be made 
 available to defeat the performance of the agreements which 
 the deed contains. The authorities in most jurisdictions estab- 
 lish the doctrine that the person for whose benefit the promise 
 is made may enforce it.'''' 
 
 § 474 (413). Distinction between a donation of lands and a 
 sale. — The courts make a distinction between a donation of land 
 
 73 In Luse v. Isthmus, &c. R. Co., Barned's Banking . Co., Re, L. R. 3 
 
 6 Ore. 125, 2S Am. Rep. 506, the Ch. 105. 
 
 president affixed the seal to a mort- ''5 Smith's Appeal, 69 Pa. St. 474; 
 gage of one of the company's loco- Tripp v. Bishop, 56 Pa. St. 424; 
 motives, and it was held that he had Swisshelm v. Swissvale, &c. Co., 95 
 no authority to use the seal. The Pa. St. 367. So, as elsewhere shown, 
 court cited Fink v. Canyon, &c. Co., acceptance may often be presumed. 
 5 Ore. 301 ; Hoyt v. Thompson, 5 N. See also 1 Elliott Ev. § 108. See 
 Y. 320. See also Norris v. post, § 478. See generally as to de- 
 Dains, 52 Ohio St. 215, 39 N. E. 660, livery and . acceptance, 3 Thomp. 
 49 Am. St. 716. A somewhat similar Corp. (2nd ed.) §§ 2440, 2441 ; 4 El- 
 ruling was made in Gibson v. Gold- liott Cont. §§ 3910, 3915, 3916, 3917. 
 thwaite, 7 Ala. 281, 42 Am. Dec. 592. te Harlan v. Logansport, &c. R. 
 
 1'^ Solomon's Lodge v. MontmoUin, Co., 133 Ind. 323, 32 N. E. 930; Lake 
 
 58 Ga. 547; Phillips v. Coffee, 17 III. Erie, &c. R. Co. v. Priest, 131 Ind. 
 
 154 63 Am. Dec. 357; Susquehanna, 413, 31 N. E. 77. 
 
 &c. Co. v. Gen. Ins. Co., 3 Md. 305, 7''' Lawrence v. Fox, 20 N. Y. 268; 
 
 56 Am. Dec. 740; Evans v. Lee, 11 Moore v. Ryder, 65 N. Y. 438; Doug- 
 
 Nev. 194; Josey v. Wilmington, &c. lass v. Wells, 57 How. Prac. (N. Y.) 
 
 R. Co., 12 Rich. L. (S. Car.) 134; 378; Stevens v. Flannagan, 131 Ind 
 
 122, 30 N. E. 898. 
 
709 REAL ESTATE § 475 
 
 to a railroad company and a sale of land to itJ^ The distinc- 
 tion exerts an imjDortant influence in many cases. Where prop- 
 erty is purchased the estate of the purchasing compafiy is, or- 
 dinarily, greater than it is in cases where the land is acquired 
 by condemnation, so the use ' to which property acquired by 
 purchase may be devoted is often less limited than it is in 
 cases where the acquisition is by virtue of the power of emi- 
 nent domain, and so, too, the power to purchase property for 
 a corporate purpose is much less fettered than the power to 
 acquire it by proceedings to condemnJ^ 
 
 §475 (414). Deeds of company — By whom executed. — 
 
 Where the statute expressly designates the officers or agents 
 by whom deeds shall be executed its provisions should be fol- 
 lowed. We do not mean to say that a deed executed by other 
 officers or agents would be void, for deeds executed within the 
 corporate power are not void, although executed by other offi- 
 cers or agents than those designated by statute. Such deeds 
 may be ratified and so, too, they may become practically ef- 
 fective where there are present the requisite elements of an 
 estoppel. A deed executed by officers other than those desig- 
 nated by the statute is not an ultra vires act. Where the power 
 to perform the acts exists, the fact that it is not performed by 
 the proper officers is a defective or improper execution of a 
 power, but it is nothing more. There is a clear distinction be- 
 tween the defective execution of a power and an act beyond the 
 scope of the powers of the corporation. A railroad company 
 having power to convey property may, in the absence of statu- 
 tory provisions, convey it by such officers or agents as it may 
 select.^" There is no conflict upon the general question, and 
 the doctrine is so well settled that we deem it unnecessary to 
 cite many authorities. 
 
 IS Roberts v. Northern Pacific, &c. T9 Ante, § 460. 
 
 R. Co., 1S8 U. S, 1, 39 L. ed. 873; so Morris v. Keil, 20 Minn. 531; 
 
 Northern Pacific R. Co. v. Roberts, Bason v. King's, &c. Co., 90 N. Car. 
 
 42 Fed. 734. See, as to donation, 417. See also 3 Thomp. Corp. (2nd 
 
 Bravard v. Cincinnati, &c. R. Co., 115 ed.) § 2437. 
 Ind. 1, 17 N. E. 183. 
 
§ 476 RAILROADS ^10 
 
 § 476 (415). Construction of deeds to railroad companies— 
 Generally. — Deeds, conveying to a railroad company what is 
 called "surplus real estate," that is, real estate not essential to 
 the construction or operation of the road are to be construed 
 by substantially the same rules as those which govern the con- 
 struction of ordinary private grants, but conveyances granting 
 to the company property essential to the construction and 
 operation of the road are, in many respects, so peculiar that 
 the ordinary rules for the construction of deeds do not always 
 supply the means of solving questions which arise in cases in- 
 volving the construction and effect of such conveyances. Many 
 deeds convey land for "a right of way," and the extent of the 
 estate conveyed by such a deed is to be determined by ascertain- 
 ing what constitutes a right of way. In an Iowa case the land- 
 owner conveyed, by deed of quitclaim, "a right of way for all 
 purposes connected with the construction, use or occupation of 
 said railroad," and it was adjudged that the grantee could not 
 take sand from the land for use in the erection of a round- 
 house, and that the grantor might take sand for any purpose, 
 provided he did not interfere with the legitimate use of the land 
 by the company. ^^ The decision in the case cited may be sup- 
 ported upon the theory that the words "right of way" are con- 
 trolling, and are . not modified or limited by the words with 
 which they are associated. It cannot be supported upon the 
 theory that the construction of a roundhouse is not a purpose 
 connected with the construction, use and operation of a rail- 
 road. Providing a place for sheltering the locomotives used 
 in operating the road is executing a purpose reasonably con- 
 nected with the construction and use of the road.^^ The rul- 
 ings in similar cases authorize and support this conclusion.^* 
 
 81 Vermilya v. Chicago, &c. R. Co., time to time when necessary, not to 
 
 66 Iowa 606, 24 N. W. 234, 5S Am. exceed the width of the right of 
 
 Rep. 279, 23 Am. & Eng. R. Cas. 108. way authorized by charter. Hendrix 
 
 It has been held that a right of way v. Southern R. Co., 162 N. Car. 9 
 
 deed to so much land as might be 11 S. E. 1001. 
 
 occupied by the railroad, its banks, 88 New York, &c. R. Co. v. Kip, 46 
 
 ditches and works includes only the N. Y. S46, 7 Am. Rep. 385 ; Hannibal, 
 
 land occupied for such purposes, but &c. R. Co. v. Muder, 49 Mo. 165. 
 
 that the way might be widened from 83 Grand Trunk R. Co. v. Richard- 
 
711 
 
 REAL ESTATE 
 
 §476 
 
 The necessity which will authorize a railroad company to re- 
 ceive and hold land need not be an absolute one, nor need it 
 appear that the land is indispensable to the construction or 
 operation of the road, but it is sufficient if there is a reasonable 
 necessity for taking and holding the land,^* so that where a 
 conveyance is made granting such property as is necessary for 
 the construction and operation of the road, it conveys such 
 property and estate as is reasonably necessary for the construc- 
 tion or operation of the road. The term "right of way," it has 
 been held, describes the tenure and not the land granted.^' We 
 suppose, however, that the term "right of way" may sometimes 
 mean the land occupied by the company,*^ but ordinarily, per- 
 haps, it cannot be regarded as descriptive of the real estate 
 conveyed. The meaning of the term may be controlled by 
 associated words and sometimes by the circumstances under 
 which the deed is executed.^''' 
 
 son, 91 U. S. 454, 23 L. ed. 356; Stro- 
 liecker v. Alabama, &c. R. Co., 42 
 Ga. 509; Chicago, &c. R. Co. v. Wil- 
 son, 17 111. 123; Spofiord v. Bucks- 
 port, &c. R. Co., 66 Maine 26; Old 
 Colony, &c. R. Co. v. Evans, 6 Gray 
 (Mass.) 25, 66 Am. Dec. 394; Mallett 
 V. Simpson, 94 N. Car. i7, 55 Am. 
 Rep. 594; Cumberland, &c. R. Co. v. 
 McLanahan, 59 Pa. St. 23; Lyde v. 
 Eastern, &c. R. Co., 36 Beav. 10. 
 
 S4 Worcester v. Western R. Co., 4 
 Mete. (Mass.) 564; State v. Han- 
 cock, 35 N. J. L. 537 ; State v. Com- 
 missioners, &c., 23 N. J. Law 510, 57 
 Am. Dec. 409; Curtis v. Leavitt, IS 
 N, Y. 9. 
 
 85 Atlantic, &c. R. Co. v. Lesueur, 
 2 Ariz. 428, 19 Pac. 157, 37 Am. & 
 Eng. R. Cas. 368. In the case cited, 
 in speaking of the argument of coun- 
 sel, the court used this language: 
 "It IS said that the term right of 
 way is used to describe the land 
 granted; that is, that these are 
 
 words of description rather than of 
 tenure. We can not concur with 
 this view, and no authority can be 
 found which so holds." See Louis- 
 ville, &c. R. Co. v. Maxey, 139 Ga. 
 541, 17 S. E. 801. 
 
 86 See ante, § 6. 
 
 87 Reidinger v. Marquette, &c. R. 
 Co., 62 Mich. 29, 28 N. W. 775, 14 
 Am. & Eng. Corp. Cas. 394; Hall v. 
 Ionia, 38 Mich. 493. A deed of right 
 of way for "so long as the same is 
 used for railway purposes" usually 
 conveys only an easement which may 
 be lost by abandonment. Louisville, 
 &c. R. Co. V. Maxey, 139 Ga. 541, 77 
 S. E. 801; Vandalia R. Co. v. Top- 
 ping, 62 Ind. App. 657, 113 N. E. 
 421; Norton v. Duluth Transfer R. 
 Co., 129 Minn. 126, 151 N. W. 907, 
 Ann. Cas. 1916E, 760, and other cases 
 there cited in note; Illinois Cent. R. 
 Co. V. Centerville Tel. Co., 135 Tenn. 
 198, 186 S. W. 90. But a deed for 
 a right of way may convey a fee 
 
§ 477 • RAILROADS 712 
 
 §477 (416). Deeds to railroad companies — Construction of 
 ^Conditions. — The acceptance of a deed containing conditions 
 imposes updn the company accepting it the duty of performing 
 such covenants and conditions.^* Thus a condition in a deed 
 granting land to a railroad company for a right of way, "pro- 
 viding the same does not interfere with buildings," and provid- 
 ing also that in the event that the right of way shall interfere 
 with buildings the grantee shall pay damages, is binding upon 
 the grantee.^9 In one case it Was held that where the convey- 
 ance contained a condition requiring the company to construct 
 cattle guards at crossings the grantor might enforce specific 
 performance of the contract or enforce a lien for the expense 
 of constructing proper cattle guards.^* A condition, that the 
 grantee shall fence is operative upon the grantee although there 
 is nothing more than a parol acceptance of the deed.^^ The 
 result to which the authorities lead is this: a railroad company 
 cannot be permitted to enjoy the easement and yet refuse to 
 perform the conditions of the contract which created the ease- 
 ment or vested the estate conveyed in the grantee. '•^ The con- 
 where the language shows such an 9i Midland, &c. R. Co. v. Fisher, 
 intention. Note in Ann. Cas. 1916E, 125 Ind. 19, 24 N. E. 756, 8 L. R. A. 
 764. 604, 21 Am. St. 189, 43 Am. & Eng. 
 
 8S Cambridge v. Charlestown, &c. R. Cas. 578. See generally Louis- 
 R. Co., 7 Mete. (Mass.) 70. See ville, &c. R. Co. v. Power, 119 Ind. 
 also Harlan v. Logansport, &c. R. 269, 21 N. E. 751. 
 Co., 133 Ind. 323, 32 N. E. 930; 92 Donald v. St. Louis, &c. R. Co., 
 
 Louisville, &c. R. Co. v. Power, 119 52 Iowa 411, 3 N. W. 462; Midland, 
 Ind. 269, 21 N. E. 751 ; Chattanooga, &c. R. Co. v. Fisher, 125 Ind. 19, 24 
 &c. R. Co. V. Davis, 89 Ga. 708, 15 N. E. 756, 21 Am. St. 189, 43 Am. & 
 S. E. 626; Gray v. Chicago, &c. R. Eng. R. Cas. 578; Duffy v New 
 Co., 189 111. 400, 59 N. E. 950. York, &c. R. Co., 2 Hilton (N. Y.) 
 
 89Rathbone v. Tioga, &c. Co., 2 496; Atlantic Dock Co. v. Leavitt, 
 Watts & S. (Pa.) 74. SO Barb. (N. Y.) 135; Huston v. 
 
 90 Dayton, &c. R. Co. v. Lewton, Cincinnati, &c. R. Co., 21 Ohio St. 
 20 Ohio St. 401. In Davies v. St. 235; Pittsburgh, &c. R. Co. v. Bos- 
 Louis, &c. R. Co., 56 Iowa 192, 9 N. worth, 46 Ohio St. 81, 38 Am. & 
 W. 117, it was held that the grantor Eng. R. Cas. 290. See also Semple 
 has a vendor's lien if the grantee v. Cleveland, &c. R. Co., 172 Pa. St. 
 fails to pay the purchase money. See, 369, 33 Atl. 564; Gratz v. Highland 
 on the general subject, Kansas Pa- Scenic R. Co., 165 Mo. 211, 65 S. W. 
 cific R. Co. V. Hopkins, 18 Kans. 494. 223; Knox ville, &c. R. Co.'v Beeler 
 
713 REAL ESTATE ' § 478 
 
 dition must, of course, be a valid one, for an illegal condition 
 has no effect.** 
 
 §478 (417). Grants — Beneficial — Presumption of accept- 
 ance. — The general rule is that where a grant to a railroad corn- 
 pany is beneficial no formal acceptance is required, and that in 
 the absence of countervailing facts an acceptance of a bene- 
 ficial grant will be presumed.®* If the statute requires an ac- 
 ceptance to be evidenced in a prescribed mode there must, as a 
 rule, be an acceptance in the mode prescribed; in other words, 
 there must be a substantial compliance with the provisions of 
 the statute. The rule is that deeds will be upheld where it can 
 be justly and reasonably done, and presumptions in favor of 
 their effectiveness are generally made. 
 
 § 479 (418). Incidents pass with principal thing granted. — 
 
 Where there is a grant of a principal thing all the necessary 
 incidents essential to the enjoyment of the principal thing usu- 
 ally pass to the grantee.®^ Where there is a grant of land for use 
 by a railroad company in operating its road the grant conveys the 
 right to use the land for that purpose and the grantee cannot 
 recover damages for injuries caused by a reasonably careful 
 operation of the road.'® The principle asserted in the cases to 
 
 90 Tenn. 548, 18 S. W. 391; Post, Maine 34; Charles River Bridge v. 
 
 § 1161, et seq. For illustrative cases Warren Bridge, 7 Pick. (Mass.) 344; 
 
 of conditions subsequent see Latham Rathbone v. Tioga, &c. R. Co., 2 
 
 V. Illinois Cent. R. Co., 2S3 111. 93, Watts & S. (Pa.) 74. See also 4 
 
 97 N. E. 254; Lexington, &c. R. Co. Elliott Cont. § 3916. 
 
 V. Moore, 140 Ky. 514, 131 S. W. 257; ssReidinger v. Marquette, &c. R. 
 
 Bridgers v. Beaman, 159 N. Car. 521, Co., 62 Mich. 29, 28 N. W. 775, 29 
 
 75 S. E. 798. ' Am. & Eng. R. Cas. 611 ; Babcock v. 
 
 »3 St. Louis, &c. R. Co. v. Mathers, Western, &c. Corp., 9 Metcf. (Mass.) 
 
 71 111. 592, 22 Am. Rep. 122 ; Lynn V. 553, 43 Am. Dec. 411. See also 
 
 Mount Savage, &c. R. Co., 34 Md. Louisville, &c. R. Co. v. French, 100 
 
 603 ; Kettle River, &c. R. Co. v. Tenn. 209, 43 S. W. 771, 66 Am. St. 
 
 Eastern, &c. R. Co., 41 Minn. 461, 43 752. 
 
 N. W. 469, 40 Am. & Eng. R. Cas. 96 Chicago, &c. R. Co. v. Smith, 
 
 449; Hammond v. Port Royal, &c. Ill 111. 363, 29 Am. & Eng. R. Cas. 
 
 R. Co., 15 S. Car. 10. 558, citing Chicago, &c. R. Co. v. 
 
 9^ Bangor, &c. R. Co. v. Smith, 47 Springfield, &c. R. Co., 67 111. 142 ; 
 
§ 480 RAILROADS 714 
 
 which we have referred is one of practical importance and 
 leads to material results. It prevents a grantor from success- 
 fully asserting a claim for damages for injuries from noise, 
 smoke and the like, resulting from the proper operation of the 
 roadj and it precludes him from successfully prosecuting an 
 action for a nuisance, although annoyance from smoke, noise 
 and similar things necessarily incident to the operation of the 
 road is suffered by him.*'' But the grant does not exonerate 
 the company from liability for injury caused by its negligence", 
 nor, it may be said in passing, do the damages assessed in con- 
 demnation proceedings cover loss caused by the negligence of 
 the company. 
 
 § 480 (419). Effect of designating in the deed the purpose for 
 which land is granted. — The designation of the purpose for 
 which the land is granted is often regarded as creating a con- 
 dition subsequent and as defining and limiting the title of the 
 grantee.®^ But a mere statement of the purpose for which the 
 conveyance is made does not necessarily, nor, perhaps, ordi- 
 narily, have this effect unless there is something else in the 
 deed, or something in the nature of the purpose, or other cir- 
 cumstances so indicating.®* The effect of a deed is not, as a 
 
 Keithsburg, &c. R. Co. v. Henry, 79 Co., 65 Mo. 325; Struthers v. Dun- 
 
 111. 290; Norris v. Vermont, &c. R. kirk, &c. R. Co., 87 Pa. St. 282. 
 
 Co., 28 Vt. 99. See also Chicago, &c. 98 Ottumwa, &c. R. Co. v. McWil- 
 
 Co. V. Loeb, 118 111. 203, 8 N. E. Hams, 71 Iowa 164, 32 N. W. 315, 29 
 
 460, 59 Am. Rep. 341 ; Lafayette, &c. Am. & Eng. R. Cas. 544 ; Norton v. 
 
 V. New Albany, &c. Co., 13 Ind. 90, Duluth Transfer R. Co., 129 Minn. 
 
 74 Am. Dec. 246;' Swinney v. Fort 126, 151 N. W. 907, Ann. Cas. 1916E, 
 
 Wayne, &c. R. Co., 59 Ind. 205; 760, and cases cited; Robinson v. 
 
 Lafayette, &c. Co. v. Murdock, 68 Missisquoi R. Co., 59 Vt. 426, 10 
 
 Ind. 137; Indiana, &c. R. Co. v. Al- Atl. 522, 30 Am. & Eng. R. Cas. 299. 
 
 len, 113 Ind. 308, IS N. E. 451, 3 Am. See generally Gadberry v. Sheppard, 
 
 St. 650; White v. Chicago, &c. R. 27 Miss. 203; Adams v. Logan Co.', 
 
 Co., 122 Ind. 317, 23 N. E. 782. Post, 11 III. 336; Harris v. Shaw, 13 111! 
 
 vol. 2, §§1170, 1281. 456; Wiggins Ferry Co. v. Ohio, &c. 
 
 97 Dunsmore v. Central R. Co., 72 R. Co., 94 111. 83 ; Morrill v. Wabash, 
 
 Iowa 182, 33 N. W. 456; Cosby v. &c. R. Co., 96 Mo. 174, 9 S. W. 657; 
 
 Owensboro, &c. R. Co., 10 Bush State v. Brown, 27 N. J. L. 13. 
 
 (Ky.) 288; Randle v. Pacific, &c. R. 99 See Scovill v. McMahon, 62 
 
715 
 
 REAL ESTATE 
 
 §481 
 
 rule, to be determined from a single clause, but the whole in- 
 strument must be considered. It is to be read by the light of 
 surrounding circumstances, '^ and give such effect as the parties 
 intended it should have.^ 
 
 § 481 (420). Covenants that run with the land. — Many cove- 
 nants peculiar to conveyances to railroad companies run with 
 the land. If the covenant is a direct and not a collateral one it 
 runs with the land and binds remote grantees.* The weight of 
 
 Conn. 378, 26 Atl. 479, 21 L. R. A. 
 58, 36 Am. St. 350; Noyes v. St. 
 Louis, &c. R. Co. (111.), 21 N. E. 
 487; Brady v. Gregory, 49 Ind. App. 
 355, 97 N. E. 452 ; Lake Erie, &c. R. 
 C'i. V. Ziebarth, 61 Ind. 228, 33 N. E. 
 256; Kilpatrick v. Baltimore, 8rMd. 
 179, 31 Atl. 805, 27 L. R. A. 643, 48 
 Am'. St. 509; 4 Elliott Cont. §3875. 
 
 1 It has been held that a deed for 
 a nominal consideration, to railroad 
 companies, which recites that the 
 conveyance is "for the erection and 
 maintenance thereon of the freight- 
 houses \rtiich said companies or 
 either of them * * * and for 
 such other general railroad purposes 
 as may be necessary"- — conveys abso- 
 lute title, and is not conditioned upon 
 the erection of said freighthouses, so 
 as to enable the grantor to have it 
 canceled upon failure to erect them. 
 Noyes v. St. Louis, &c. R. Co. (111.), 
 21 N. E. 487. See also 4 Elliott 
 Cont. §3875. 
 
 2 Louisville, &c. R. Co. v. Koelle, 
 104 111. 455, 11 Am. & Eng. R. Cas. 
 301; Hadden v. Shoutz, 15 111. 582; 
 Koelle v. Knecht, 99 111. 396; Ne- 
 waygo, &c. Co. v. Chicago, &c. R. 
 Co., 64 Mich. 114, 30 N. W. 910, 29 
 Am. & Eng. R. Cas. 505. In Lock- 
 wood v. Ohio River R. Co., 103 Fed. 
 
 243, it is said that an agreement 
 prepared by the company should be 
 construed most strongly against it 
 in case of ambiguity and doubt. 
 
 3 Fresno, &c. Co. v. Rowell, 80 Cal 
 114, 22 Pac. 53, 13 Am. St. 112; 
 Hazlett V. Sinclair, 76 Ind. 488, 40 
 Am. Rep. 254, and authorities cited; 
 Midland, &c. R. Co. v. Fisher, 125 
 Ind. 19, 24 N. E. 756, 8 L. R. A. 604, 
 21 Am. St. 180, 43 Am. & Eng. R. 
 Cas. 578; Scott v. Stetler, 128 Ind. 
 385, 27 N. E. 721; Bronson v. Cof- 
 fin, 108 Mass. 175, 11 Am. Rep. 335; 
 Burbank v. Pillsbury, 48 N. H. 475 ; 
 Blain v. Taylor, 19 Abb. Prac. (N. 
 Y.) 228; Countryman v. Deck, 13 
 Abb. N. Cas. (N. Y.) 110; Easter 
 V. Little Miami, &c. R. Co., 14 Ohio 
 St. 48; Pittsburgh, &c. Co. v. Bos- 
 worth, 46 Ohio St. 81, 38 Am. & 
 Eng. R. Cas. 290; Kellogg v. Robin- 
 son, 6 Vt. 276, 27 Am. Dec. 550; 
 Hartung v. Witte, 59 Wis. 285, 18 
 N. W. 175. See generally as to what 
 covenants do and what do not run 
 with the land, Mobile, &c. R. Co. v. 
 Gilmer, 85 Ala. 422, 5 So. 138; Ly- 
 ford V. North Pac, &c. R. Co., 92 
 Cal. 93, 28 Pac. 103; Chappell v. 
 New York, &c. R. Co., 62 Conn. 195, 
 24 Atl. 997;- Elizabethtown, &c. R. 
 Co. V. Wright, 21 Ky. L. 128, "SO S. 
 
§482 
 
 RAILROADS 
 
 716 
 
 authority is that a covenant to fence runs with the land.* A 
 parol agreement to maintain a fence, however, does nbt run 
 with the land.^ 
 
 §482 (421). Merger of preliminary agreement in deed. — The 
 
 general rule is that a preliminary agreement providing for the 
 conveyance of land is merged in the deed.® This rule applies to 
 a contract made with a railroad company for the conveyance • of 
 land.'' The rule is a familiar one and is one of great practical 
 importance in cases where the question relates to the grant of 
 a right of way. 
 
 § 483 (422). Bonds for conveyance^ — Specific performance. — 
 
 A railroad company acting within the scope of its authority 
 may take a bond, often called "a title bond," for the conveyance 
 
 W. 1105; Baird v. Erie R. Co., 210 
 N. Y. 225, 104 N. E. 614; Hammond 
 V. Port Royal, &c. R. Co., 16 S. Car. 
 573; Post, §1167. 
 
 4 Pittsburgh, &c. R. Co. v. Bos- 
 worth, 46 Ohio St. 81, 38 Am. & Eng. 
 R. Cas. 290; Midland, &c. R. Co. v. 
 Fisher, 125 Ind. 19, 24 N. E. 756, 8 
 L. R. A. 604, 21 Am. St. 189, 43 Am. 
 & Eng. R. Cas. 578; Countryman v. 
 Deck, 13 Abb. N. Cas. (N. Y.) 105; 
 Post, §§ 1167, 1635, 1703. 
 
 5 Vandegrift v. Delaware, &c. R. 
 Co., 2 Houst. (Del.) 287; Kentucky 
 Central, &c. R. Co. v. Kenney, 10 
 Ky. L. 251, 8 S. W. 201, 20 Am. & 
 Eng. R. Cas. 458; Wilder v. Maine 
 Central R. Co., 65 Maine 332, 20 Am. 
 Rep. 698; Morss v. Boston, &c. R. 
 Co., 2 Cush. (Mass.) 536; Pitkin v. 
 Long Island, &c. R. Co., 2 Barb. Ch. 
 (N. Y.) 221, 47 Am. Dec. 32o'; Day 
 V. New York Central R. Co., 31 
 Barb. (N. Y.) 548. See also St. 
 Louig, &c. R. Co. V. Todd, 36 111. 
 
 409; Thomas v. Hannibal, &c. R. Co., 
 82 Mo. 538. 
 
 6 Phillbrook v. Emswiler, 92 Ind. 
 590; Houghtaling v. Lewis, 10 Johns. 
 (N. Y.) 297; Bailey v. Snyder, 13 
 Sergt. & R. (Pa.) 160; Frederick v. 
 Campbell, 13 Sergt. & R. (Pa.) 136; 
 Smith V. Evans, 6 Binney (Pa.) 102, 
 6 Am. Dec. 436; Haggerty v. Fagan, 
 2 Penrose & W. (Pa.) 533; Twyford 
 V. Wareup, Cases temp. Finch. 310; 
 Williams v. Morgan, 15 Q. B. 782. 
 
 'Waldron v. Toledo, &c. R. Co., 
 55 Mich. 420, 21 N. W. 870, 20 Am. 
 & Eng. R. Cas. 348; Druse v. Wheel- 
 er, 22 Mich. 439. But there are some 
 limitations, qualifications, or excep- 
 tions to the general rule, such, for 
 instance, as showing the true con- 
 sideration of a deed, or the purpose 
 or object of the parties in regard to 
 it, in a proper case. 8 Elliott Cont. 
 §§ 1629, 1633-1641, et seq ; note in L. 
 R. A. 1916E, 221. See also Doan v. 
 Cleveland, &c. R. Co., 54 Ind. App. 
 620, 98 N. E. 321, 100 N. E. .95. 
 
T17 REAL ESTATE §482 
 
 of land. If the bond is sufficiently specific and certain, presents 
 the necessary equitable elements and the conditions on the part 
 of the company are performed, specific performance will be 
 decreed.^ The rule which requires contracts to be specific and 
 certain will defeat a specific performance where the price is not 
 agreed upon but is left to be fixed by an umpire.^ If, however, 
 the price has been definitely and finally fixed by the umpire, 
 specific performance may be decreed." There must be such a 
 consideration as the court can justly regard as equitable; but 
 where the contract recites that the agreement to build the road 
 forms part of the consideration, the fact that the land agreed 
 to be conveyed is much more valuable than the price named 
 will riot defeat the suit.^^ It has been held that the fact that 
 the road has not been completed within the time limited by the 
 statute will not avail the obligor as a defense for the reason 
 that only the state can make that question, ^^ but the failure 
 may, as it seems to us, be of such a character as to render it 
 inequitable to enforce the contract, and if that be so, then, upon 
 well-established principles, specific performance will not be 
 decreed.** 
 
 8 Byers v. Denver, &c. R. Co., 13 15 Am. Rep. 110. See also Post, 
 
 Colo. 552, 22 Pac. 951; Chicago, &c. §§1155, 1156. 
 
 R. Co. V. Swinney, 38 Iowa 182 ; Bos- » Milnes v. Gery, 14 Vesey 400. 
 
 ton, &c. R. Co. V. Babcock, 3 Cush. See Tillett v. Charing Cross Co., 26 
 
 (Mass.) 228; Walker v. Eastern, &c. Beav. 419. 
 
 R. Co., 6 Hare 594 ; Sanderson v. lo Brown v. Bellows, 4 Pick. 
 
 Cockermouth, &c. R. Co., 11 Beav. (Mass.) 179. 
 
 497. As to what is a' sufficient de^ i* Ottumwa, &c. R. Co. v. McWil- 
 
 scription of the land, see Ottumwa, Hams, 71 Iowa 164, 32 N. W. 315, 29 
 
 &c. R. Co. V. McWiUiams, 71 Iowa Am. & Eng. R. Cas. 544. But fraud 
 
 164, 32 N. W. 315, 29 Am. & Eng. will justify the court in refusing spe- 
 
 R. Cas. 544, citing Pursley v. Hayes, cific performance. Grand Tower, &c. 
 
 22 Iowa 11, 92 Am. Dec. 350; Bar- R. Co. v. Walton, 150 111. 428, 37 N. 
 
 low V. Chicago, &c. R. Co., 29 Iowa E. 920. 
 
 276; Beal v. Blair, 33 Iowa 318; 12 Ross v. Chicago, &c. R. Co., 77 
 
 Spangler v. Danforth, 65 111. 152; 111. 127. See Atlantic, &c. R. Co. v. 
 
 Telford V. Chicago,. &c. R. Co., 172 St. Louis, 66 Mo. 228. 
 
 111. 559, SO N. E. 105; Hurley v. 13 Coe v. New Jersey Midland R. 
 
 Brown, 98 Mass. 545, 96 Am. Dec. Co., 31 N. J. Eq. 105; Clarke v. 
 
 671 ; Mead v. Parker, 115 Mass. 413, Rochester, &c. R. Co., 18 Barb. (N. 
 
§ 484 RAILROADS 718 
 
 §484 (423). Presumption that there is power to hold the 
 land. — Where a corporation is authorized to hold land for cer- 
 tain purposes, a conveyance of land to it will ordinarily be pre- 
 sumed to be for some purpose within the corporate powers, 
 unless the contrary is clearly shown.^* The presumption can- 
 not obtain where it appears upon the face of the deed and from 
 a reference to the statute that the company had no power to 
 acquire and hold the property, but there are very few cases in 
 which the presumption will not be made. 
 
 §485 (424). Power to convey real estate. — A railroad com- 
 pany has power to convey lands of which it is the owner, except 
 where some rule of law or some statute prohibits it from con- 
 veying its property. It is to be remembered, however, that the 
 rule to which we have often referred, prohibiting a railroad com- 
 pany from disabling itself from performing its duties, operates 
 as a limitation upon the power or disposition. The power of a 
 railroad company is, therefore, not so unfettered as that of a 
 purely private corporation. The right to convey its surplus 
 land, that is, land not essential to enable -it to perform its cor- 
 porate duties, is substantially the same as that of a strictly pri- 
 vate business corporation. A private business corporation has 
 general power to convey,^^ and it follows from what we have 
 said that as to surplus property the power of railroad companies 
 is one of a general nature. 
 
 Y.) 3S0; Webb v. Direct London, W. 616; Yates v. VanDeBogert, 56 
 
 &c. R. Co., 9 Hare 129; Gooday v. N. Y. 526. 
 
 Colchester, &c. R. Co., 17 Beav. 132 ; 15 White Water, &c. Co. v. Val- 
 
 Edwards v. Grand Junction, &c. R. lette, 21 How. (U. S.) 414, 16 L. ed. 
 
 Co., 1 Myl. & C. 650 (13 Eng. Ch. 154; Miners', &c. Co. v. Zellerbach] 
 
 559) ; Hawkes V. Eastern, &c. R. Co., n Cal. 543, 99 Am. Dec. 300; 
 
 1 DeG., M. & G. 1Z1; Wycombe, &c. Aurora, &c. Co. v. Paddock, 80 111' 
 
 R. .Co. V. Donnington Hospital, L. 263; Buell v. Buckingham, 16 Iowa 
 
 R. 1 Ch. 268. 284, 85 Am. Dec. 516; Dupee v. Bos- 
 
 14 Gilmer v. Stone, 120 U. S. 586, ton, &c. Co., 114 Mass. Zl ; Barry v. 
 
 30 L. ed. 734; Ohio, &c. R. Co. v. Merchants', &c. Co., 1 Sandf Ch 
 
 McCarthy, 96 U. S. 258, 24 L. ed. (N. Y.) 280; Newark v. Elliott, 5 
 
 693; Brewer, &c. Co. v. Boddie, 181 Ohio St. 113; 8 Thomp. Corp. § 2415 ■ 
 
 111. 622, 55 N. E. 49; McCarty v. St. Patent, &c. Co., In re, L. R 6 Ch' 
 
 Paul, &c. R. Co., 31 Minn. 278, 17 N. 83. 
 
719 REAL ESTATE § 486 
 
 §486 (425). Dedication of land for use as a highway. — A 
 railroad corporation may dedicate to public use a highway 
 across lands owned by it and used for its railroad tracks.^" In- 
 deed, it is a general rule that either public or private corpora- 
 tions may make dedications unless they are forbidden by their 
 charter or the governing statute.^'' Thus, where the Northern 
 Pacific Railroad Company made an addition to a town on a sec- 
 tion of land granted to it by congress, and sold lots with refer- 
 ence to a recorded plat thereof, it was held that a street which 
 was shown on the plat as extending across the railroad track 
 must be regarded as dedicated to the public use, that this 
 was not ultra vires as an alienation of its right of way so as to in- 
 terfere with the purpose of the grant made by congress, and that 
 it had no right to block the street by the erection of a depot 
 at that point. ^^ So, where a railroad company for eighteen 
 years permitted the public to use a crossing as a street, parted 
 its trains to let vehicles through, allowed it to be improved as 
 a street, and made a map showing the existence of such a street, 
 it was held that a valid dedication was shown and that the 
 
 16 Southern Pac. Co. v. Pomona, § 160, citing, as to private corpora- 
 144 Cal. 339;. 11 Pac. 929 (citing tions, Williams v. New York, &c. 
 text); Central R. Co. v. Bayonne, S2 Co., 39 Conn. S09; Grand Surrey 
 N. J. L. 503, 20 Atl. 69; Hast v. Canal v. Hall, 1 M. & Gr. 392. The 
 Piedmont, &c. R. Co., 52 W. Va. rule stated in the text-book above 
 396, 44 S. E. 155, 156 (citing text). referred to was approved in Lake 
 See also Matthews v. Seaboard Air Erie, &c. R. Co. v. Boswell, 137 Ind. 
 Line R., 67 S. Car. 499, 46 S. E. 335, 336, 36 N. E. 1103. 
 
 336, 65 L. R. A. 286 (citing text). is Northern Pac. R. Co. v. Spo- 
 
 In the West Virginia case above kane, 56 Fed. 915. But compare 
 
 cited, however, it is further held Northern Pac. R. Co. v. Townsend, 
 
 that to bind the corporation beyond 190 U. S. 267, 47 L. ed. 1044, as to 
 
 revocation it must be made by the the Northern Pacific Railroad Com- 
 
 directors or be ratified by them or pany's right of way not being subject 
 
 by such public use for such time to adverse possession or alienation 
 
 and under such circumstances as to prior to the act of June 24, 1912, 
 
 justify the inference of such ratifica- the effect of which act is considered 
 
 tion. See also Williams v. New in Union Pac. Ry. Co. v. Laramie 
 
 York, &C. R. Co., 39 Conn. 509. Stockyards Co., 23 U. S. 90, 58 L. 
 
 17 Green v. Canaan, 29 Conn. 157; ed. 179. 
 Elliott Roads and Streets (3rd ed.). 
 
§ 487 RAILROADS 720 
 
 company was estopped from denying the existence of the street, 
 especially as persons had bought lots and built houses 'on both 
 sides of the street upon the faith that it extended across the 
 company's right of way.^^ In another case it was held that the 
 dedication of a portion of its land by a railroad company to the 
 public as a highway was not ultra vires, and that its uninter- 
 rupted use as a highway for four years by the public was suffi- 
 cient to show a complete dedication and acceptance.^" 
 
 § 487 (426). Disposition of property corporation has no 
 power to receive and hold — Escheat. — The question a:s to what 
 disposition shall be made of property purchased by a company 
 which it has no power to receive and hold is an interesting one. 
 Whether the property shall escheat to the state upon judg- 
 ment in a proceeding by the state assailing the right of the 
 company to hold it, may, of course, be controlled by statute, 
 but if there be no statute then the question is to be determined 
 upon general principles. We suppose that if there is a statute 
 providing that it shall escheat to the state, creditors dealing 
 with the corporation, as well as stockholders, must take notice 
 of the statute and must know, as matter of law, that they can- 
 not successfully assert a right to the property. In considering 
 the effect of a. dissolution we have discussed the cases bearing 
 upon the question and stated the general doctrine relating to 
 the disposition of property upon the dissolution of the corpo- 
 ration. ^^ In Pennsylvania the question came before the court, 
 and it was held that the property did not escheat to the state 
 but went to the stockholders.^^ And in a recent Kentucky case 
 
 19 Lake Erie, &c. R. Co. v. Bos- 291, 7L. R. A. 634; Commonwealth 
 well, 137 Ind. 336, 36 N. E. 1103. v. New York, &c. R. Co., 114 Pa. 
 
 20 People V. Eel River, &c. R. Co., St. 340, 7 Atl. 756. See also Sioux, 
 98 Cal. 665, 33 Pac. 728. &c. Co. v. Trust Co., 82 Fed. 124; 
 
 21 Greenwood v. Freight Co., 105 Detroit Citizens' St. R. v. Detroit, 
 U. S. 13, 26 L. ed. 961; McCoy v. 64 Fed. 628; Brown v. Schleier, 118 
 Farmer, 65 Mo. 244 ; Owen v. Smith, Fed. 981 ; Keith v. Johnson, 109 Ky. 
 31 Barb. (N. Y.) 641; Heath v. 421, 59 S. W. 487; Miner v. New 
 Barmore, SO N. Y. 302. York, &c. R. Co., 123 N. Y. 242, 25 
 
 22 Commonwealth v. New York, N. E. 339. See generally Heman v. 
 &c. R. Co., 132 Pa. St. 591, 19 Atl. Britton, 88 Mo. 549; Hightower v. 
 
721 
 
 REAL ESTATE 
 
 §487 
 
 it is held that one who, in good faith and for a valuable con- 
 sideration, buys land from a corporation before any action is 
 brought by the state to establish an escheat to which it is sub- 
 ject because the corporation has held it when unnecessary to its 
 purposes, in violation of the constitution, acquires an indefeas- 
 ible title to such land. 2* 
 
 Thornton, 8 Ga. 486, 52 Am. Dec. 
 412; St. Louis, &c. Coal Co. v. San- 
 dival, &c. Co., 116 111. 170, 5 N. E. 
 370; Wheeler v. Pullman, &c. Co., 
 143 111. 197, 32 N. E. 420, 17 L. R. A. 
 818; Burrall v. Bushwick R. Co., 75 
 
 N. Y. 211 ; Asheville, &c. Co. v. As- 
 ton, 92 N. Car. 578. 
 
 23 Louisville School Board v. King, 
 32 Ky. L. 687, 107 S. W. 247, IS L. 
 R. A. (N. S.) 379, distinguishing 
 Commonwealth v. Chicago, &c. Ry. 
 Co., 30 Ky. L. 673, 99 S, W. 596. 
 
CHAPTER XVIII. 
 
 LEASES. 
 
 Sec. 
 
 
 Sec. 
 
 490. 
 
 Power to lease — Generally. 
 
 510. 
 
 491. 
 
 What the legislature may pre- 
 
 
 
 scribe. 
 
 511. 
 
 492. 
 
 Power to lease not an implied 
 
 
 
 one — Legislative authority 
 
 512. 
 
 
 requisite. 
 
 513. 
 
 493. 
 
 The power to lease — General 
 
 
 
 rule. 
 
 514. 
 
 494. 
 
 The foundation of the rule. 
 
 
 49S. 
 
 Power to accept a lease. 
 
 515. 
 
 496. 
 
 Statutes asserted to confer 
 
 
 
 power to lease are not aided 
 
 516. 
 
 
 by construction. 
 
 
 497. 
 
 Statutes strictly construed — 
 
 517. 
 
 
 • Illustrative instances. 
 
 518. 
 
 498. 
 
 Statutes— Construction of. 
 
 519. 
 
 499. 
 
 What is included in the au- 
 thority to execute a lease. 
 
 520. 
 
 500. 
 
 Scope of authority to lease. 
 
 
 SOI. 
 
 Statutes conferring power to 
 lease must be strictly fol- 
 lowed. 
 
 521. 
 
 502. 
 
 Consent of stockholders — Stat- 
 utory requirement must be 
 obeyed. 
 
 522. 
 
 503. 
 
 Concurrence of stockholders 
 necessary. 
 
 523. 
 
 504. 
 
 What number of stockholders 
 must assent to the lease. 
 
 524. 
 
 505. 
 
 Consent of stockholders — 
 
 
 
 Waiver of objections. 
 
 525. 
 
 506. 
 
 Lease where parties are cor- 
 
 
 
 porations of different states. 
 
 526. 
 
 507. 
 
 Authority to execute lease has 
 
 
 
 no extra-territorial effect. 
 
 527. 
 
 508. 
 509. 
 
 Rights of foreign lessors. 
 Leases to connecting lines. 
 
 
 Lease to competing lines — ^Ef- 
 fect of statutes prohibiting. 
 
 Effect of executing unauthor- 
 ized lease. 
 
 Lease — Construction. 
 
 Lease — ^Dependent and inde- 
 pendent contracts. 
 
 Contract to permit use of track 
 not necessarily a lease. 
 
 Traific contract not valid if it 
 is in effect a lease. 
 
 Contracts granting right to use 
 — Effect and construction of. 
 
 Part performance — Effect of. 
 
 Duration of a lease. 
 
 Effect of lease on taxation. 
 
 Public duties of lessee under 
 an unauthorized lease — Man- 
 damus. 
 
 Authorized lease — Duty of les- 
 see to operate the road- 
 Mandamus. 
 
 Lessee not liable for wrongs 
 committed prior to the exe- 
 cution of the lease. 
 
 Effect of a lease upon rights 
 of creditors. 
 
 Authorized lease— Rights and 
 duties to which lessee com- 
 pany succeeds. 
 
 Contract obligation of lessor — 
 Lessee not liable thereon. 
 
 Recovery of rent under un- 
 authorized lease. 
 
 Improvements of road by les- 
 see operating under an un- 
 authorized lease. 
 
 722 
 
723 LEASES § 490 
 
 Sec. Sec. 
 
 528. Receiver's power to lease. 535. Unauthorized lease — Liability 
 
 529. Unauthorized lease — Liability of lessor to employes of les- 
 
 of lessor — Generally. see — Generally. 
 
 530. Authorized lease — Liability of 536. Liability of lessor to employes 
 
 lessor for injuries caused by under Federal Employers' 
 
 negligence of lessee— Cases Liability Act. 
 
 holding lessor liable. 537. Unauthorized lease — Liability 
 
 531. Authorized lease— Liability of of lessor — General rule. 
 
 lessor for negligence of les- 538. Liability of lessee for injuries 
 see in operating the road — resulting from negligence in 
 
 Authorities. operating the road. 
 
 532. Authorized lease — Liability of 539. Contracts of the lessee. 
 
 lessor for negligence of les- 540. Joint liability. 
 
 see in .operating the road — ■ 541. Liability of company where it 
 
 Views of the authors. permits another company to 
 
 533. Control reserved by lessor. use track in common with 
 534 Liability of lessee under au- itself. 
 
 thorized lease — Illustrative 542. Fraudulent leases, 
 cases. 543. Unauthorized lease — Injunction. 
 
 §490 (427). Power to lease — Generally. — The legislative 
 power respecting the creation of railroad corporations is of such 
 a plenary nature that statutes may be enacted authorizing one 
 company to lease its road, equipments and appurtenances to 
 another company. The whole subject is in the main a legisla- 
 tive one. Where there is no constitutional provision inter- 
 dicting it the authority to lease may be conferred by a special 
 act, but where the constitution of the state requires that all 
 laws for the organization and government of corporations shall 
 be general and not special or local, the authority to execute a 
 lease of a railroad and its equipments must be conferred by a 
 general law. The authority, to lease the road is to be discrimi- 
 nated from the authority to lease property not forming part of 
 tlie railroad or essential to its operation for a railroad company 
 i.uthorized to own and hold property not forming part of its 
 line of railroad or essential to the operation thereof, is, as to 
 such property, invested with the rights of an ordinary owner 
 of land, and as such owner may lease or sell it.^ Property form- 
 
 1 Hartford F. Ins.- Co. v. Chicago, Pac. R. Co., 47 Fed. IS, 51 Fed. 309; 
 &c. R. Co., 175 U. S. 91, 99, 44 L. ed. Pierce v. Emery, 32 N. H. 484. See 
 84; Chicago, &c. R. Co. v. Union also Louisiana, &c. R. Co. v. State, 
 
§ 491 RAILROADS 724 
 
 ing part of the railroad, or essential to its operation, is not held 
 as property is held by ordinary owners, but is held under the 
 grant to the corporation for the purpose of enabling it to per- 
 form its corporate duties and functions, and, as the law forbids a 
 railroad corporation from conveying or transferring such of its 
 property as would disable it from performing such duties and 
 functions it has no power to transfer by way of lease prop- 
 erty essential to enable it to perform such functions or duties. 
 
 § 491 (428). What the legislature may prescribe. — Within 
 the limitations imposed by the constitution the legislature may 
 prescribe by whom and to whom leases may be executed. The 
 legislative determination, where no constitutional provision is 
 violated, is conclusive. The legislative judgment (when ex- 
 pressed in a valid enactment), as to the parties to whom leases 
 may be made,^ as to the terms and conditions of leases, and as 
 to the duties and obligations of parties thereto cannot be re- 
 viewed by the courts. If the power, which the legislature as- 
 sumes to exercise, is vested in it by the organic law, it is mas- 
 
 75 Ark. 435, 88 S. W. 559; St. Louis, operated the road under the lease, 
 
 &c. R. Co. V. Hale, 82 Ark. 175, 100 he could not defend against an action 
 
 S. W. 1148; State v. New Orleans, to recover the stipulated rent. Wobd- 
 
 &c. Co., 109 La. Ann. 64, 33 So. 81; ruff v, Erie R. Co., 93 N. Y. 609. 
 
 Michigan Cent. R. Co. v. BuUard, But the decision referred to is of 
 
 120 Mich. 416, 79 N. W. 635. But doubtful soundness. See Abbott v. 
 
 see Hobart-Lee Tie Co. v. Stone, 135 Johnstown, &c. R. Co., 80 N. Y. 27, 
 
 Mo. App. 438, 117 S. W. 604, where 36 Am. Rep. 572; Cox v. Terre 
 
 the lease operated to discriminate in Haute, &c. R. Co., 133 Fed. 371. 
 
 favor of one shipper. We are not, Where the legislature amended , a 
 
 however, considering this phase of domestic railroad charter and au- 
 
 the subject in the text, but are re- thorized the company to lease its 
 
 ferring to contracts having no such property to another railroad free 
 
 objectionable features. from responsibility for the lessee's 
 
 2 Where the statute authorized a torts, it was held that such amend- 
 
 lease to another company, but gave ment did not relieve the lessor from 
 
 no express authority to lease to an the application of a subsequent law 
 
 individual, it was held that such a imposing such liability, based on 
 
 lease was neither malum in se nor legislative authority to alter, suspend 
 
 malum prohibitum, that it was not or repeal corporate charters. Brown 
 
 void as contrary to public policy, and v. Louisiana, &c. R. Co., 256 Mo. 522, 
 
 that, after the individual lessee had 165 S. W. 1060. 
 
725 LEASES § 492 
 
 ter of its own discretion and is the exclusive judge of all ques- 
 tions of expediency or policy. 
 
 §492 (429). Power to lease not an implied one — Legislative 
 authority requisite. — As the power to lease property essential 
 to the operation of a railroad is- not an implied or incidental 
 power, it would seem to necessarily follow that it does not ex- 
 ist except by virtue of an effective statute. The rule that a 
 railroad company cannot execute a lease is generally placed 
 upon the ground of public policy, but it is frequently said that 
 in the absence of a statute there is no power to execute a lease. 
 One who asserts that a railroad corporation has power to lease 
 its railroad or property essential to the operation thereof must 
 show an effective legislative enactment granting the power to 
 lease, otherwise his assertion will be unavailing.^ 
 
 §493 (430). The power to leas© — General rule. — Whatever 
 difference of opinion there may be as to the grounds upon which 
 the rule rests, the rule itself is firmly established. That rule, 
 as asserted in very numerous cases, is that a railroad corpora- 
 
 3 It seems that there are really to time by the latter to the former 
 
 ,two grounds upon which the pre- of a portion of the gross receipts, 
 
 vailing doctrine may be supported, This was, in substance and effect, 
 
 namely, the rule of public policy, a lease of the railroad and franchise 
 
 and the rule that corporate charters for a term of almost a thousand 
 
 are to be strictly construed and cor- years, and was a contract which 
 
 porations possess only such powers neither of the companies had power 
 
 as their charters confer. In St. to enter into unless expressly au- 
 
 Louis, &c. Co. V. Terre Haute, &c. thorized by the state which created 
 
 Co., 145 U. S. 393, 12 Sup. Ct. 953, it, and which, if beyond the scope of 
 
 36 L. ed. 738, the court, speaking the lawful powers of either corpora- 
 
 of the contract between the two cor- tion, was wholly void, could not be 
 
 porations, said: "In short, by this ratified or validated by either or 
 
 contract one railroad company un- both, and would support no action or 
 
 dertook to transfer its whole rail- suit by either against the other." See 
 
 road and equipments and its privi- also Chicago, &c. R. Co. v. Hart, 209 
 
 leges and franchises to maintain and 111. 414, 70 N. E. 654, 66 L. R. A. 
 
 operate the road to another com- .75, 79, citing text; 3 Thomp. Corp. 
 
 pany for a term of 999 years in con- {2nd ed.) § 2480. 
 sideration of the payment from time 
 
494 
 
 RAILROADS 
 
 726 
 
 tion cannot, without express legislative permission, lease its 
 road, franchises and equipments to another corporation and 
 transfer to its lessee the privilege of operating the road.* It 
 cannot, by way of lease, transfer a corporate franchise or privi- 
 lege to another company nor impose upon another its own cor- 
 porate duties except in cases where the statute so provides.^ 
 
 § 494 (431). The foundation of the rule.— ^It seems to us, as 
 we have said, that the rule forbidding a railroad company from 
 
 * Thomas v. West Jersey R. Co., 
 101 U. S. 71, 25 L. ed. 950; Pennsyl- 
 vania R. Co. V. St. Louis, &c. R. Co., 
 118 U. S. 290, 30 L. ed. 83; Oregon 
 R, &c. Co. V. Oregonian, &c. R. Co. 
 130 U. S. 1, 32 L. ed. 837; Oregon R., 
 &c. Co. V. Oregonian R. Co., 145 U. 
 S. 52, 36 L. ed. 620 ; Briscoe v. South- 
 ern Kansas, &c. R. Co., 40 Fed. 273; 
 Hamilton v. Savannah, &c. Co., 49 
 Fed. 412; Earle v. Seattle, &c. R. 
 Co., 56 Fed. 909; Pittsburgh, &c. R. 
 Co. v. Columbus, &c. R. Co., 8 Biss. 
 (U. S.) 456, Fed. Cas. No. 11197; 
 Memphis, &c. R. Co. v. Grayson, 88 
 Ala. 572, 7 So. 122, 16 Am. St. 69; 
 Memphis, &c. R. Co. v. Grayson, 88 
 Ala. 572, 7 So. 122, 16 Am. St. 69; 
 Hays V. Ottawa, &c. R. Co., 61 111. 
 422; Wabash, &c. R. Co. v. Payton, 
 106 111. 534, 46 Am. Rep, 705 ; Grand 
 Tower, &c. Co. v. UUman, 89 111. 244; 
 Board Comrs. Tippecanoe Co. v. 
 Lafayette, &c. R. Co., SO Ind. 85; 
 Middlesex R. Co. v. Boston, &c. R. 
 Co., 115 Mass. 347; Norwich, .&c. R. 
 Co. V. Worcester, 147 Mass. 518, 18 
 N. E. 409; State v. Atchison, &c. R. 
 Co., 24 Nebr. 143, 38 N. W. 43, 8 
 Am. St. 164; Mills v. Central R. Co., 
 41 N. J. Eq. 1; People v. Albany, 
 &c. R. Co., n N. Y. 232; Abbott v. 
 Johnstown, &c. R. Co., 80 N. Y. 27, 
 
 36 Am. Rep. 572; Troy, &c. R. Co. 
 V. Boston, &c. R. Co., 86 N. Y. 107; 
 Stewart & Foltz's Appeal, 56 Pa. St. 
 413; Pittsburgh, &c. R. Co. v. Alle- 
 gheny Co., 63 Pa. St. 126; Harmon 
 V. Columbia, &c. R. Co., 28 S. Car. 
 401, 5 S. E. 835, 13 Am. St. 686; 
 Frazier v. East Tenn., &c R. Co., 88 
 Tenn. 138, 12 S. W. 537; Interna- 
 tional, &c. R. Co. V. Underwood, 67 
 Tex. 589, 4 S. W. 216; International, 
 &c. R. Co. V. Eckford, 71 Tex. 274, 
 8 S. W. 679; Ricketts v. Chesapeake, 
 &c. R. Co., Zl W. Va. 433, 10 S. E. 
 801, 7 L. R. A. 354, 25 Am. St. 901, 
 1 Lewis' Am. R. & Corp. 455, 25 
 Am. St. 901; Fisher v. West Vir- 
 ginia, &c. R. Co., 39 W. Va. 366, 19 
 S. E. 578, 23 L. R. A. 758; Nelson v. 
 Vermont, &c. R. Co., 26 Vt. 717, 62 
 Am. Dec. 614; Great Northern R. 
 Co. V. Eastern Counties R. Co., 12 
 Eng. L. & Eq. 224; East Anglian, 
 &c. R. Co. V. Eastern, &c. R. Co., 11 
 Com. B. 775; 3 Thomp. Corp. (2nd 
 ed.) §2480. 
 
 5 Text cited in Chicago, &c. R. 
 Co. V. Hart, 209 111. 414, 70 N. E. 
 654, 66 L. R. A. 75, 79; also cited in 
 Georgia R. &c. Co. v. Maddox, 116 
 Ga. 64, 42 S. E. 315, 317; Georgia 
 R. &c. Co. V. Haas, 127 Ga. 187, 56 
 S. E. 313, 119 Am. St. 327. 
 
727 
 
 LEASES 
 
 §495 
 
 leasing its railroad may be rested on two grounds. The rule, 
 however, is usually put upon the ground that public policy 
 forbids one company from transferring its railroad to another. 
 It is unquestionably true that a railroad corporation has no 
 power to relieve itself of the duties and obligations which it 
 owes to the public by a voluntary surrender of its property 
 and franchises.* A railroad company cannot escape its charter 
 obligations by an abandonment of its road, or the like, for that 
 public policy forbids,'^ and there is no reason why the same 
 general principle should not apply to transfers by way of lease. 
 
 §495 (432). Power to accept a lease. — The principle which 
 underlies the doctrine that a railroad company cannot lease its 
 railroad without direct legislative authority supports the rule 
 that a railroad company cannot, without legislative auhority, 
 take a grant or lease of the property and franchises of another 
 company. 8 The power to accept franchises granted to another 
 
 e Palmer v. Utah, &c. R. Co., 2 
 Idaho 290, 16 Pac. 5S3, 36 Am. & 
 Eng. R. Cas. 443; Balsley v. St. 
 Louis, &c. R. Co., 119 111. 68, 8 
 N. E. 8S9, 59 Am. Rep. 784; Harmon 
 V. Columbia, &c. R. Co., 28 S. Car. 
 401, 5 S. E. 83S, 13 Am. St. 686; Gulf, 
 &c. R. Co. V. Morris, 67 Tex. 692, 4 
 S. W. 156; International, &c. R. Co. 
 V. Moody, 71 Tex. 614, 9 S. W. 
 456 ; Ricketts v. Chesapeake, &c. R. 
 Co., 33 W. Va. 433, 10 S. E. 801, 7 
 L. R. A. 354 25 Am. St. 901. See 
 also Evansville, &c. R. Co. v. 
 Evansville, &c. R. Co., 50 Ind. App. 
 502, 513, 98 N. E. 649; Quigley v. 
 Toledo, &c. R. Co., 89 Ohio St. '68, 
 105 N. E. 185. The obligation of 
 one of two contracting railroads 
 to fulfill the duties of its charter 
 by completing the unbuilt part of 
 its road is inconsistent with a con- 
 tract for a long time— such as 
 twenty years — ^by which it con- 
 tracts to deliver all its traffic over 
 
 that part of its road to another 
 company. Des Moines, &c. R. Co., 
 V. Wabash &c. R. Co., 135 U. S. 576, 
 10 Sup. Ct. 736, 34 L. ed. 243, 43 
 Am. & Eng. R. Cas. 694 
 
 T The principle to which we refer 
 is illustrated by such cases as State 
 V. Dodge City, &c. R. Co., S3 Kans. 
 377, 36 Pac. 755, 42 Am. St. 295, 61 
 Am. & Eng. R. Cas. 631; People v. 
 Louisville, &c. R. Co., 120 111. 48, 
 10 N. E. 657; Evansville, &c. R. 
 Co. V. Evansville, &c. R. Co., 50 Ind. 
 App. 502, 98 N. E. 649; State v. 
 Sioux City &c. R. Co., 7 Nebr. 357; 
 Erie, &c. Railroad Co. v. Casey, 26 
 Pa. St. 287. See generally Railroad 
 Commissioners v. Portland, &c. R. 
 Co., 63 Maine 269, 18 Am. Rep. 208; 
 Gates V. Railroad, 53 Conn. 333, 5 
 Atl. 695 ; Pierce v. Emery, 32 N. H. 
 484; People v. New York, &c. R. Co., 
 28 Hun (N. Y.) S43. 
 
 8 Oregon R., &c. Co. v. Oregon- 
 ian R. Co., 130 U. S. 1, 9 Sup. Ct. 
 
§496 
 
 RAILROADS 
 
 728 
 
 company is not an implied or incidental power. Public policy 
 forbids that one company should, without legislative sanction, 
 assume the duties imposed by law upon another corporation.® 
 
 §496 (433). Statutes asserted to confer power to lease are 
 not aided by construction. — The power to lease is not, as a rule, 
 favored by the courts, at least they are not inclined to adjudge 
 that it exists unless the statue in clear terms confers it. The 
 power to lease does not exist unless it clearly appears that the 
 legislature intended to confer it upon the corporation. Con- 
 struction will be strict, not liberal, as against a party who as- 
 serts that the corporation has power to lease its railroad and 
 equipments. 1" The power to transfer property essential to the 
 
 409, 32 L. ed. 837; St. Louis, &c. R. 
 Co. V. Ter.re Haute, &c. R. Co., 
 14S U. S. 393, 12 Sup. Ct. 9S3, 36 
 L. ed. 738; Pennsylvania, &c. R. 
 Co. V. St. Louis, &c. R. Co'., 118 
 U. S. 290, 6 Sup. Ct. 1094, 30 L. ed. 
 83; State v. Montana R. Co., 21 
 Mont. 221, S3 Pac. 623, 45 L. R. A. 
 271. See also Central Transporta- 
 tion Co. V. Pullman's, &c. Co., 139 
 U.. S. 24, 35 L. ed. 55. We mean 
 by the statement in the text that 
 one corporation cannot take, by 
 lease, property of another corpo- 
 ration in cases where the property 
 assumed to be leased is essential 
 to the performance of corporate 
 duties by the company which un- 
 dertakes to execute the lease, but 
 we do not mean that corporate 
 property other than that of the 
 character indicated may not be 
 leased. 
 
 9 In Georgia R., &c. Co. v. Mad- 
 dox, 116 Ga. 64, 42 S. E. 315, 317, 
 the text is cited with approval and 
 the court says : "To make this 
 lease valid the lessor must have 
 had the power to make the lease. 
 
 and the lessee the power to accept 
 it, for if the lease was beyond the 
 power of either it was as invalid 
 as if beyond the power of both." 
 10 Oregon R., &c. Co, v. Oregon- 
 ian R. Co., 130 U. S. 1, 9 Sup. Ct. 
 409, 32 L. ed. 837; Thomas v. West 
 Jersey, &c. R. Co., 101 U. S. 71, 
 25 L. ed. 950. In the first case 
 cited the court commented upon 
 the doctrine that corporate char- 
 ters are to be strictly construed, 
 referred to the cases Charles Riv- 
 er Bridge v. Warren River Bridge, 
 11 Pet. 420, 9 L ed. 773; Dubuque, 
 &c. R. Co. V. Litchfield, 23 How. 
 (U. S.) 66, 16 L. ed. 500, and Turn- 
 pike Co. V. Illinois, 96 U. S. 63, 24 
 L. ed. 651, and, iii the course of the 
 opinion, said : "One of the most 
 important powers with which a 
 corporation can be invested is the 
 right to sell ojit its whole prop- 
 erty, together with the franchises 
 under which it operated, or the 
 authority to lease its property for 
 a long term of years. In the case 
 of a railroad company these priv- 
 ileges, next to the privilege to 
 
729 
 
 LEASES 
 
 §497 
 
 operation of a railroad is one of great importance and the pol- 
 icy of the law has always been against such transfers, so that 
 there is strpn^g reason for the conclusion that the power must b'e 
 clearly and expressly conferred. 
 
 § 497 (434). Statutes strictly construed— Illustrative in- 
 stances. — A power conferred upoii a corporation to consolidate 
 with other roads,ii or to sell its road,^* or to acquire other liiies 
 of railroad by purchase,^? or to make contracts with aiiother 
 railroad company for the use of its road/* does not necessarily 
 
 build and operate its railroad, 
 would be the most important which 
 could be given it, and this idea 
 would irripress itself upon the 
 legislatur£. Naturally, we should 
 look for the authority to do these 
 things in some express provision 
 of the law. We would suppose 
 that if the legislature saw fit to 
 confer such rights it would do so 
 in terms which could not be mis- 
 understood," See also Quigley v. 
 Toledo R., &c. Co., 89 Ohio St. 68, 
 105 N. E. 185, Ann. Cas. 191SD, 
 992. But' compare Northern Pac. 
 R. Co. V. Wisconsin, &c. R. Co.. 
 117 Minn. 217, 135 N. W. 984. 
 
 11 St. Louis, &c. R. Co. V. Terre 
 Haute, &c. R. Co., 145 U. S. 393, 12 
 Sup. Ct. 953, 36 L. ed. 738; Archer 
 V. Terre Haute, &c. R. Co., 102 111. 
 493; Board, &c. v. Lafayette, &c. 
 R. Co., 50 Ind. 85; Mills v. Central 
 R. Co., 41 N. J. Eq. 1; State v. 
 Vanderbilt, il Ohio St. 590, 
 
 18 Oregon, &c. R. Co. v. Oregon- 
 ian R. Co., 130 U, S. 1, 9 Sup. Ct. 
 409, 35 L. ed. 837; Pennsylvania Co. 
 V. St. Louis, &c. R. Co., 118 U. S. 
 290, 6 Sup. Ct. 1094 30 L. ed. 83; 
 Thomas v. West Jersey, &c. R. Co., 
 101 U. S. 71. 25 L. ed. 950. 
 
 IS Mills V. Central R. -Co., &c., 
 41 N. J. Eq. 1. 
 
 14 St. Louis, &c. R. Co. V. Terre 
 Haute, &c. R. Co., 145 U. S. 393, 12 
 Sup. Ct. 953, 36 L. ed. 738, See 
 also Troy, &c. R. Co. v. Boston, 
 &c. R. Co., 86 N. y 107. The power 
 conferred by the New York act of 
 1839 upon a railroad corporation 
 to contract with another for the 
 use of their respective roads in 
 sjich manner as the contract may 
 prescribe has been held to involve 
 the power to make a lease for a 
 term of years. Beveridge v. New 
 York Elev. R. Co., 112 N. Y. 1, 19 
 N. E. 489, 2 L. R, A. 648 ; Woodruff 
 V. Erie R. Co., 93 N. Y. 609. By 
 the laws of New York, 1839, c. 218, 
 providing that "it shall be lawful 
 hereafter for any railroad corpo- 
 ration to contract with any other 
 railroad for the use of their re- 
 spective roads, and thereafter to 
 use the same in such manner as 
 may be prescribed in such con- 
 tract," a railroad company is au- 
 thorized to lease its road and fran- 
 chise to another railroad company, 
 though the roads of the lessor and 
 and lessee are parallel and compet- 
 ing lines, and their merger or con- 
 
§498 
 
 RAILROADS 
 
 730 
 
 include authority to lease its road. A general statute authoriz- 
 ing the formation of a corporation for any lawful purpose does 
 not authorize a railroad company to insert in its articles of asso- 
 ciation authority to make such a lease.^^ 
 
 § 498 (435). Statutes — Construction of. — While the construc- 
 tion of statutes conferring the power to execute leases is, as 
 against the power, always strict, still the legislative intention is 
 not to be defeated by an unreasonably strict construction.^* 
 The grant of a principal power will carry with it such neces- 
 sary incidental powers as are requisite to effectuate it; In ac- 
 
 solidation is prohibited by the 
 laws. New York Consol. Laws 
 (1917), e. 59, § 52; Gere v. New 
 York, &c. R. Co., 19 Abb. N. Cas. 
 193. 
 
 15 Oregon R., &c. Co. v. Ore- 
 gonian R Co., 130 U. S. 1, 9 Sup. 
 Ct. 409, 32 L. ed. 837. In announc- 
 ing the opinion of the court in this 
 case Mr. Justice Miller said: "An- 
 other important consideration to 
 be observed, peculiarly applicable 
 to the acts of corporations formed 
 by the corporations themselves, de- 
 claring what business they are 
 about to pursue, and the powers 
 which they purpose to exercise in 
 carrying it on, is that while the 
 thing to be done may be lawful, 
 in a general way, there are and 
 must be limitations upon the 
 means by which it is to be done or 
 the purpose carried out, which the 
 articles cannot remove or violate. 
 A company might be authorized by 
 its articles to establish a large 
 manufactory in a particular local- 
 ity, and might be held to be a 
 valid incorporation with sufficient 
 powers to prosecute the business 
 described; but such articles al- 
 
 though mentioning the particular 
 place, would not empower the 
 company in the exercise of the 
 power thus conferred to carry on a 
 business injurious to the health or 
 comfort of those living in that 
 vicinity. Instances might be mul- 
 tiplied in which powers described 
 in general terms as belonging to 
 the objects of the parties who 
 thus become incorporated would 
 be valid; but the corporation, in 
 carrying out this general purpose, 
 would not be authorized to exer- 
 cise the powers necessary for so 
 doing in any mode which -the law 
 of the state would not justify in 
 any private persons or any unin- 
 corporated body. The manner in 
 which these powers shall be exer- 
 cised, and their subjection to the 
 restraint of the general laws of the 
 state and its general principles 
 of public policy, are not in any 
 sense enlarged by inserting in the 
 articles of association the author- 
 ity to depart therefrom. 
 
 i« See State v. Richmond, &c. R. 
 Co., 72 N. Car. 634; Hampe v. Pitts- 
 burg, &c. Co., 165 Pa. St. 468, 30 
 Atl. 931. 
 
731 LKASES §499 
 
 cordance with this principle a grant of power wherein is mani- 
 fested the intention of the legislature to enable a railroad com- 
 pany to secure a continuous line of transportation and to make 
 contracts with other railroad companies or with steamboat lines 
 to effect that object authorizes the railroad corporation to con- 
 tract with a steamboat line and confers authority to execute and 
 accept a lease.^'' The express grant of a right to lease a railroad 
 authorizes the traiisfer by way of lease of all such incidents and 
 appurtenances as are reasonably necessary to the operation of 
 the demised road.^* Thii must, on principle, be the correct 
 rule. If the legislature authorizes the execution of a lease it is 
 necessarily implied that the lease shall be an effective one, and 
 in order to make it effective it is essential that all incidents 
 necessary to a proper operation of the road shall pass to the 
 lessee. The legislative sanction implies the authority to prop- 
 erly operate the leased road, and so, too, the public welfare 
 demands that it shall be properly operated. It must be true 
 that necessary incidents pass to the lessee, since the lessor, by 
 executing a lease under legislative sanction, parts with all con- 
 trol and the lessee must operate the road or else it must cease 
 to do business. That it must cease to do business cannot be- 
 afifirmed, since the cessation of business would be the defeat 
 of the legislative purpose in creating the corporation and au- 
 thorizing it to lease its road. 
 
 § 499 (436). What is included in the authority to execute a 
 lease. — In a preceding paragraph of this chapter we said that 
 authority to execute a lease carried such incidental powers as 
 
 " Green Bay, &c. R. Co. v. 46 Atl. 824; Day v. Ogdensburgh, 
 
 Union, &c. Co., 107 U. S. 98, 2 Sup. &c. R. Co., 107 N. Y. 129, 13 N. E. 
 
 Ct. 221, 27 L. ed. 413, 13 Am. & Eng. 765; Beveridge v. New York El. 
 
 R. Cas. 6S8; Branch v. Jesup, R. Co., 112 N. Y. 1, 19 N. E. 489, 
 
 106 U. S. 468, 1 Sup. Ct. 495, 27 L. 2 L. R. A. 648 ; Hill v. Atlantic, &c. 
 
 ed. 279, 9 Am. & Eng. R. Cas. 558; R. Co., 143 N. Car. 539, 55 S. F. 
 
 Pittsburg, &c. R. Co. v. Keokuk, 854, 9 L. k. A. (N. S.) 606 (author 
 
 &c. R. Co., 131 U. S. 371, 9 Sup. Ct. ity to "farm out" right of trans- 
 
 770, 38 L. ed. 157, 39 Am. & Eng. portation). 
 
 R. Cas. 213. See also Huntting v. is Simpson v. Denison, 10, Hare 
 
 Hartford, &c. R. Co., 73 Conn. 179, 51, 16 Jurist 828. 
 
§ 500 RAILROADS 732 
 
 were necessary to make the lease effective, and this principle au- 
 thorizes the conclusion that authority to lease, given in general 
 and unrestricted terms, confers authority to assign a lease or 
 accept an assignment. The matter of form is of comparatively 
 little importance, for the courts will look through the form to 
 the substance. Upon this principle it is held "that a railroad 
 company which is authorized to take a lease of another line may 
 take an assignment of such a lease from the lessees of such 
 other line,^3 and that giving authority to one company to lease 
 the property of another certain company authorizes the latter 
 to make the lease. 2" 
 
 § 500 (437). Scope of authority to lease. — Some of the cases 
 give a very wide and liberal construction to the express grant 
 of authority to execute a lease. In some of the ca.ses very broad 
 language is used, broader than true principle warrants. While 
 it is true that incidents pass by the grant of a principal power, 
 purely collateral powers do not. The courts hold that under a 
 statute giving a railroad company power to lease, maintain and 
 operate another railroad upon such terms and conditions as may 
 be agreed upon between the companies respectively, the lessee 
 
 19 Stewart v Long Island R. Co., Jacksonville, &c. R. Co. v. Louis- 
 102 N. Y. 601, 8 N. E. 200, 55 Am. ville, &c. R. Co., 47 111. App. 414, 
 Rep. 844. Where a railroad is sold 150 111. 480, 37 N. E. 924. A rail- 
 under foreclosure a new corpora- road company having issued to 
 tion acquiring all of the property plaintiff a perpetual pass over its 
 of the old except the leased line, road in consideration of a right of 
 not included in ihe transfer, but of way given it through plaintiff's 
 which, nevertheless, the new com- land, subsequently sold its road, 
 pany actually takes possession and the purchaser assuming none of its 
 operates, the new company must be debts or obligations, and not using 
 regarded as the assignee of the the right of way. Held, that the 
 lefise, and, by virtue of its posses- purchaser was not bound to honor 
 sion, is liable for the rent which plaintiff's pass. Dickey v. Kansas 
 in this case was the interest on City, &c. R. Co., 122 Mo. 223, 26 
 first mortgage bonds, which the S. W. 685. 
 
 original lessee had agreed to pay; 20 Huntting v. Hartford St. R. 
 
 and the succeeding company is Co., li Conn, 179, 181, 46 Atl. 824; 
 
 liable as long as it occupies the Pinkerton v Pennsylvania Trac- 
 
 road.' Frank v. New York, &c. R. tion Co. 193 Pa. St. 229, 44 Atl. 284. 
 Co., 122 N. Y. 197, 23 N. E. 332; 
 
733 
 
 LEASES 
 
 -§,5.01 
 
 company may guarantee the payment of interest coupons of 
 bonds issued by the lessor company, which are equal in amount 
 and times of payment to the reserved rent.^^ The general au- 
 thority to lease implies the incidental authority to agree upon 
 the consideration, terms and conditions of the lease, and hence 
 the contracting companies may agree that part or all of the 
 consideration agreed upon may be yielded by guarantying pay- 
 ments of bonds. 
 
 § 501 (438). Statutes conferring power to lease must be 
 strictly followed. — It is held that statutes conferring power upon 
 a railroad company to lease its road must be strictly followed,^* 
 but we suppose that if all the material requirements of the stat- 
 ute are substantially complied with the lease would not be vOid. 
 The power to lease is, however, not favored, and a material de- 
 parture from the provisions of the statute would make the lease 
 ineffective. Where conditions are imposed by the statute they 
 must be complied with or the lease may be avoided.^* 
 
 21 Eastern Townships Bank v. 
 St. Johnsbury, &c. R. Co., 40 Fed. 
 423, 40 Am. & R. Cas. 566; Day v. 
 Ogdensburg, &c. R. Co., 107 N. Y. 
 129, 13 N. E. 765. An agreement, 
 by the lessor company, guarantee- 
 ing to the lessee a sum of money 
 equal to ten per cent, of the lat- 
 ter's capital stock, to be paid in 
 equal quarterly instalments, and 
 an unsigned clause printed on the 
 margin of such stock, in pursuance 
 of the agreement, that lessor "has 
 agreed to pay to (the lessee) an 
 amount equal to ten per cent, per 
 annum on the capital stock," do not 
 constitute any contract to which a 
 holder of such stock is a party or 
 privy. Beveridge v. New York El. 
 R. Co., 112 N. Y. 1, 19 N. E. 489, 2 
 L. R. A. 648. An agreement by a 
 railroad company, in leasing prop- 
 erty and franchises from another 
 company, to pay as rent the inter- 
 
 est on certain liabilities of the 
 lessor during term of the lease, 
 and to pay the principal of such 
 liabilities at the expiration of the 
 lease is not ultra vires. Gere v. 
 New York, &. R. Co., 19 Abb. N. 
 Cas. (N. Y.) 193,,. 
 
 22 In Humphreys y St. Louis, 
 &c. R. Co., 37 Fed. 307, the presi- 
 dent of the company signed a cer- 
 tificate that a majority of the 
 shareholders had assented to the 
 lease, and it was evidence of , the 
 assent of all shareholders and was 
 a compliance with ;)the statutory 
 requirement that the assent of a 
 majority of the shareholders to the 
 execution of the lease should be 
 given in writing. 
 
 23 Peters v. Lincoln, &c. R. Co., 
 14 Fed. 319; Peters v. Lincoln, &c. 
 R. Co., 12 Fed. 513; Kent, &c. R. 
 Co. V. London, &c. Co., L R. 3 Ch. 
 R. 6S6. 
 
§ 502 RAILROADS 
 
 734 
 
 § 502 (439). Consent of stockholders — Statutory requirement 
 must be obeyed. — Many of the states make the consent of a des- 
 ignated number of the stockholders requisite to the effective 
 execution of a lease.^* Where the mode of assenting is pre- 
 scribed by statute there must be a substantial compliance with 
 its requirements. It has been decided that where the statute 
 requires that "no lease shall be perfected until a meeting of the 
 stockholders shall have been called by the directors," and the 
 "holders of at least two-thirds of the stock," voting "at such 
 meeting, shall have assented thereto," the requirement that the 
 assent shall be given by voting at a stockholders' meeting is 
 of the essence, and the assent of the individual stockholders 
 given otherwise than in such meeting is of no effect. ^^ 
 
 § 503 (440). Concurrence of stockholders necessary. — We re- 
 gard the concurrence of the stockholders as essential, ordinarily 
 at least, to the validity of the lease of a railroad and its equip- 
 ment. There is, however, conflict of authority upon this ques- 
 tion which cannot be reconciled. It is held in a New York case 
 that where a general power to lease its road is given by the 
 law of its incorporation to a railroad company whose directors 
 are charged with the government and direction of its affairs, a 
 contract for such leasing is within the original power of the 
 board of directors, and may be exercised without the concur- 
 rence of the stockholders. 2« We cannot assent to the doctrine 
 
 24 A certificate signed by the Ct. 779, 35 L. ed. 473. See ge?erally 
 president, who owns nearly all the as to such assent and waiver or 
 stock, to the effect that a majority estoppel, Rogers v. Nashville, &c. 
 of the stockholders have assented R. Co., 91 Fed. 299; St. Louis, &c.. 
 to the lease is sufficient evidence R. Co. v. Terre Haute, &c. R. Co., 
 of a compliance with the statute 145 U. S. 393, 12 Sup. Ct. 953, 36 L. 
 of Missouri, which requires the ed. 738; Boston, &c. R. Co. v.. 
 majority of the stockholders to Graham, 179 Mass. 62, 60 N. E. 405; 
 give their assent in writing. Hum- Continental Ins. Co. v. New York, 
 phreys v. St. Louis, &c. R. Co., 37 &c. R. Co., 103 App. Div. 282, 93. 
 Fed. 307. See Peters v. Lincoln," N. Y. S. 27; Latimer v. Richmond, 
 &c. R. Co.. 12 Fed. 513. &c. R. Co., 39 S. Car. 44, 17 S. E. 
 
 25 Peters v. Lincoln, &c'. R. Co., 258. 
 
 12 Fed. 513. See Smith v. Hurd, 12 26 Beveridge v. New York El. 
 Mete. (Mass.) 371; Humphreys v. R. Co., 112 N. Y. 1, 19 N. E. 489, 2 
 McKissock, 140 U. S. 304, 11 Sup. L. R. A. 648 It was held in the 
 
735 
 
 LEASES 
 
 §503 
 
 of the case referred to. The execution of a lease of the entire 
 road is a matter in its nature fundamental and organic, and 
 where there is a mere grant of authority to execute a lease, we 
 think that the consent of the stockholders is necessary, but if 
 the power is by statute lodged in the governing board then, of 
 course, the concurrence of the stockholders is not required. The 
 New York case to which reference has just been made,*'' does 
 not, we venture to say with due respect for the able court by 
 which the case was decided, correctly express the general rule 
 of law. We do not believe that the board of directors is, in 
 name or in power, the corporation, for as we have elsewhere 
 shown,*^ the board is the representative of the corporation. 
 The courts do certainly apply to corporate directors the rule 
 respondeat superior, and this is a recognition of the fact that 
 they are the mere agents of the corporation. ^^ Their powers to 
 
 case cited that an agreement on 
 the part of the lessor company, 
 made in good faith and on account 
 of the financial embarrassment of 
 the lessee, to reduce the amount of 
 rental under the lease, is within 
 the powers of the directors. We 
 think that some of the statements 
 in the case above cited, and in the 
 cases of Leslie v. Lorillard, 110 N. 
 Y. 536, 18 N, E. 363, and Hoyt v. 
 Thomson, 19 N. Y. 216, go much 
 too far. We do not believe that 
 merely conferring upon the board 
 of directors the power to manage 
 corporate affairs constitutes the 
 board the corporation or invests it 
 with power to rhake fundamental or 
 organic changes in the constitu- 
 tion of the corporation. If it can 
 be said that the statute vests the 
 whole and entire power of con- 
 ducting the corporate business in 
 the board of directors, including 
 that of radically changing the cor- 
 porate objects, then it may prop- 
 
 erly be held that a lease of the 
 whole road may be made without 
 the concurrence or assent of the 
 stockholders, but if the power is 
 to manage ordinary corporate af- 
 fairs, we think the assent of the 
 stockholders is necessary. 
 
 27 Beveridge v. New York, &c. 
 R. Co., 112 N. Y. 1, 19 N. E. 489, 2 
 L.' R. A. 648. See also Dickinson 
 V. Consolidated Trac. Co., 114 Fed. 
 232. 
 
 28 Ante, §§277, 278, 290, 293, 295. 
 
 29 The New York cases assert 
 the doctrine stated in the text. 
 Abbott V. American Hard Rubber 
 Co., 33 Barb. (N. Y.) 578; Cumber- 
 land, &c. Co. y Sherman, 30 Barb. 
 (N. Y.) 553; Metropolitan, &c. Co. 
 V. Manhattan, &c. Co., 11 Daly (N. 
 Y.) 377, 15 Am. & Eng. R. Cas. 1; 
 Twin-Lick &c. Co. v. Marbury, 
 91 U. S. 587, 23 L. ed. 328; 
 Branch Bank v. Collins, 7 
 Ala. 95; Rollins v. Clay, 33 
 Maine 132; Brokaw v. New Jersey, 
 
503 
 
 RAILRCAHG 
 
 736 
 
 a great extent are delegated and not original powers. Doubtless 
 the directors do acquire power' from the corporate charter, but 
 not ■ such power as is required to make an organic and funda- 
 mental change in the objects, and 'purposes of a corporation.^'' 
 The object of the formation of a railroad company is to itself 
 operate tht- road and not to lease to another company and 
 thereby cease to conduct the business for which the corporation 
 was organized and assume the position of a landlord. The ef- 
 fect of a railroad lease is an organic change. The law forbids 
 the leasing of a railroad, except where the power is given by 
 express legislative enactment, and oiie of the grounds upon 
 which this rule of law rests is that the execution of a lease is 
 • an act fundamental and organic in its nature. ^^ In granting 
 authority to le.ase, the legislature grants authority to radically 
 change the character of corporate business, rights and liabili- 
 
 &c. Co., 32 N. J. L. 328, 90 Am. 
 Dec. 659; Simons v. Vulcan Oil, 
 &c. Co., 61 Pa. St. 202, 100 Am. 
 -Dec. 628; Bank of Middlebury v. 
 Rutland, &c. Co., 30 Vt. 159; Stark 
 Bank v. United States, &c. Co., 34 
 Vt. 144; State v Smith, 48 Vt. 266; 
 Lindley Company Law (Sth ed.) 
 155; Burmester v, Norris, 6 Exch. 
 796; Cplman v. Eastern, &c. R. Co., 
 10 Beav. 1; Clay v. Rufford, 19 
 ^Eng. L. & E. 350. 
 
 30 Railroad Co. v. AUerton, 18 
 Wall. (U. S.) 233, 21 L. ed. 902; 
 Burke V. Smith, 16 Wall. (U. S.) 
 390, 21 L. ed. 361 ; Cass v. Manches- 
 ter, &c. R. Co., 9 Fed. 640; Bank 
 V. St. John, 25 Ala. 566; Marlbor- 
 ough, &c. Co., v.. Smith, 2 Conn. 
 579; Alford v. Miller, 32 Conn. 
 543; Penobscot, &c. R. Co. v. Dunn, 
 39 Maine 587; Gill v. Balis, 72 Mo. 
 424; White Mountain, &c. Co. v. 
 Eastman, -34 N. H. 124; Bedford, 
 &c. Co. V. Bowser. 48 Pa. St. 29; 
 State V. Chamber of Commerce, 20 
 Wis. 68. In Stevens v. Davison, 18 
 
 Grat. (Va.) 819, 98 Am. Dec. 692, 
 the court held that a lease does in- 
 volve a franchise, and that it 
 could not be executed by the board 
 of directors under a statute pro- 
 viding that no contract shall be 
 made "involving the franchise of 
 said road," without the consent of 
 the stockholders. See Kersey, &c. 
 Co. V. Oil Creek, &c. R., 12 Phila. 
 (Pa.) 374; Bedford, &c. R. Co. v. 
 Bowser, 48 Pa. St. 29, 37; Penob- 
 scot, &c. R. Co. V. Dunn, 39 Maine 
 587, 601. See also Rogers v. Nash- 
 ville, &c. R. Co., 91 Fed. 299, 322; 
 Waldoborough v. Knox &c. R. Co., 
 84 Maine 469, 24 Atl. 942. 
 
 31 If the power to lease were an 
 ordinary corporate power it woul'' 
 not be necessary to enact a statut 
 conferring the power, but a stat- 
 ute is necessary because the pow- 
 er is in its nature fundamental and 
 organic. Thomas v. West Jersey, 
 &c. R. Co., 101 U. S. 71, 25. L. ed. 
 950, and cases cited. 
 
737 LEASES § 504 
 
 ties, and it seems to us that the directors must have the concur- 
 rence of the stockholders. We do not mean to say that the 
 stockholders can directly execute a lease, but what we mean is 
 that the directors cannot execute a lease without the concur- 
 rence of the stockholders. The directors must, as we believe, 
 formally execute the contract, and must directly represent and 
 act for the corporation in making it,*^ but they must also have 
 the assent of the stockholders. Where, as we have elsewhere 
 remarked, the board of trustees, or the board of directors is 
 incorporated there is reason for a different rule from that which 
 we have here stated to be the sound one. Incidental or ordi- 
 nary corporate powers may, as a rule, be exercised by the board 
 of directors without any interference on the part of the stock- 
 holders, and a contract for the right to use part of a railroad 
 may, perhaps, be regarded as an ordinary corporate contract,*^ 
 but a lease for a long period of years vesting entire and exclu- 
 sive possession and control in another corporation is essentially 
 different from trackage, traffic, or other contracts of a similar 
 nature. , 
 
 § 504 (441). What number of stockholders must assent to 
 the lease. — Where the statute designates the number of stock- 
 holders that must assent to a lease in order to render it effective 
 there is no difficulty, for it is clear that the assent of the pre- 
 scribed number will make the lease effective, although the 
 number may be less than the whole number of stockholders. 
 But where no number is designated by the statute, and a gen- 
 eral authority to lease is granted there is difficulty. Some qi 
 the courts hold that where a general authority is granted to 
 execute a lease, the lease is not effective unless the stockhold- 
 
 32 Ante, § 19S. Co., 131 Mass. 258, 41 Am. Rep. 221. 
 
 33 Green Bay, &c. R. Co. v. Union, See generally Eastern, &c. R. Co. v. 
 &c. Co., 107 U. S. 98, 2 Sup. Ct. 221, Hawkes, 5 H. L. Cas. 331, 371-381 ; 
 27 L. ed. 413. See York, &c. R. Co. Ashbury, &c. Co. v. Riche, L. R. 7 H. 
 V. Winans, 17 How. (U. S.) 30, 15 L. 653; MacGregor v. Dover, &c. R. 
 L. ed. 27; Pearce v. Madison, &c. Co., 18 Q. B. 618; East Anglian, &c. 
 R. Co., 21 How. (U. S.) 441, 16 L. R. Co. v. Eastern Counties R. Co., 
 ed. 184; Davis v. Old Colony, &c. R. 11 C. B. 775. 
 
 24 — Ell. Railroads I > i I 
 
§ 505 RAILROADS 738 
 
 ers unanimously assent to its execution.^* Other courts hold 
 that where there is general authority to execute the lease and 
 no provision is made as to the number that must assent, a ma- 
 jority may authorize the execution of the lease.^^ It seems to 
 us that where the lease transfers the entire road for a long 
 term of years the consent of all the stockholders is required 
 unless the statute otherwise provides. The general rule is that 
 after the shareholders have entered into a contract among them- 
 selves, under legislative sanction, and have made investments 
 and expended their money in execution of the plan agreed upon, 
 the plan cannot, even by virtue of legislative enactment, be 
 radically changed by the act of a bare majority. A lease does 
 work a radical change in many respects, notably in the respect 
 that the character of the stockholders' investment is radically 
 altered, for the lease places them substantially in the position of 
 a landlord whose income is derived from rents, whereas the in- 
 come of a stockholder is derived from the profits of the road. 
 There is, however, reason for a different conclusion from that 
 which we favor. A lease for a limited period is not the same 
 thing as a sale, but in cases where the term is a long one it is 
 not very different in its practical consequences from a sale; 
 for it. yields possession and control to the lessee, and takes the 
 entire operation and control from the lessor, although it does 
 not terminate the lessor's ownership. But while the ownership 
 remains, its rights and incidents for the term fixed by the lease 
 are entirely different from those which attach to the ownership 
 of a railroad where there is no lease. 
 
 § 505 (442). Consent of stockholders — Waiver of objections, 
 formal execution of lease. — The provisions of a statute requir- 
 ing the consent of the stockholders confer a personal privilege 
 
 34 Mills V. Central R. Co., 41 N. also Dickinson v. Consolidated Trac- 
 J. Eq. 1; Zabriskie v. Hackensack, tion Co., 114 Fed. 232, and compare 
 &c. R. Co., 18 N. J. Eq. 178, 90 Am. Mahen v. Gulf, &c. Co., 173 Ala. 
 Dec. 617. See Boston, &c. R. Co. 257, 55 So. 607, 35 L. R. A. (N. S.) 
 V. New York, &c. R. Co., 13 R. I. 396, and note; Cohen v. Bigstone, 
 260. &c. Iron Co., Ill Va. 468, 69 S. e! 
 
 35 Waldoborough v. Knox, &c. R. 359, Ann. Cas. 1912A, 203, and note 
 Co., 84 Maine 469, 24 Atl. 942. See 
 
739 LEASES § 506 
 
 which it seems they may waive by acquiescence in a lease exe- 
 cuted without their consent.*® The fact that the board of direc- 
 tors agree upon the terms of the lease before submitting it to the 
 stockholders does not invalidate the lease where the stock- 
 holders assent to its execution. *'' Where no special mode for 
 executing a lease is provided by statute, an authorized lease 
 executed in the usual form, or in such a form as to express the 
 contract of the parties will be sufficient. 
 
 § 506 (443). Lease where parties are corporations of differ- 
 ent states. — As appears from what has been said in a preceding 
 section, and as is indeed clear upon general principles, in order 
 to make an effective lease, it is necessary that there should be 
 power in the one company to execute a lease and in the other 
 to accept it. If the company to which the lease is made has no 
 power to accept a lease, the lease is ineffective. This principle 
 governs cases where leases are executed by corporations of 
 different states. In a very ably reasoned opinion it was affirmed 
 by the supreme court of the United States that a lease executed 
 by an Illinois railroad company to an Indiana company was not 
 valid for the reason that the Indiana company was not author- 
 ized by statute to accept a lease from the Illinois corporation. ** 
 
 § 507 (444). Authority to execute lease has no extraterrito- 
 rial effect. — State laws, as well known, have no force or effect 
 outside of the limits of the state. Laws conferring authority 
 upon a corporation to do prescribed acts, operate only upon 
 state corporations. We do not mean, of course, that a state has 
 no control over foreign corporations doing business within its 
 borders ; our meaning is that its laws conferring authority upon 
 
 36 St. Louis, &c. R. Co. V. Terre Boston, &c. R. Co., 65 N. H. 393, 23 
 
 Haute, &c. R. Co., 33 Fed. 440. The Atl. 529. 
 
 lease had been suflfered to stand ' f of 3T Jones v. Concord, &c. R. Co., 67 
 
 seventeen years, and the court held N. H. 234, 30 Atl. 614, 68 Am. St. 
 
 the stockholders barred by laches. 650. 
 
 See also Latimer v. Richmond, &c. 38 St. Louis, &c. R. Co. v. Terre 
 
 R. Co., 39 S. Car. 44, 17 S. E. 258; Haute, &c. R. Co., 145 U. S. 393, 12 
 
 Archer v. Terre Haute, &c. R. Co., Sup. Ct. 953, 36 L. ed. 738, 6 Lewis' 
 
 102 III. 493; Boston, &c. R. Co. v. Am. R. & Corp. 439. 
 
§ 507 RAILROADS 740 
 
 a corporation do not carry that atithority into other states. The 
 principle stated requires the conclusion that a state cannot, by 
 chartering a corporation, confer upon it a legal right to act 
 within the jurisdiction of another state,*^ and that authority 
 granted to a corporation to lease its road cannot have any ef- 
 fect outside of the state giving such authority.*" The author- 
 ity does not extend beyond the state limits. Upon the princi- 
 ple stated, it was held that the charter granted by the state of 
 Kansas to a railroad corporation formed under its laws, con- 
 ferred upon such corporation no power to lease that part of its 
 road lying in the Indian territory; and that, in the absence of a 
 grant of power to lease contained in the act of congress author- 
 izing the building of that part of the road, a lease of its whole 
 road would be invalid as to the part lying in the territory.*^ 
 And, ordinarily, a statute which provides that railroad com- 
 panies may lease the property of other railroad companies refer 
 only to domestic corporations, and does not authorize a lease to 
 a foreign corporation. *2 But it has been held that a statute 
 providing for a forfeiture of the franchise and all charter rights 
 of any company acquired under a lease not made in conformity 
 with the statute is applicable to a foreign company operating in 
 the state under a lease,*^ and that a domestic company, author- 
 ized to lease, may take a lease from a foreign company if the 
 foreign company had authority to make the lease.** 
 
 39 3 Thomp. Corp. (2nd ed.) § 42 McCabe v. Maysville, &c. R. Co., 
 2485. The law of New Jersey 112 Ky. 861, 66 S. W. 1054; Archer 
 prohibits the lease of a railroad v. Terre Haute, &c. R. Co., 102 111. 
 within the state to a foreign corpora- 493 ; Van Steuben v. Central R. Co., 
 tion, and it is held that under this 178 Pa. St. 367, 35 Atl. 922 ; Howard 
 statute a lease to a domestic corpora- v. Chesapeake, &c. R. Co., 11 App. 
 tion whose stock is owned by a for- Cas. (D. C.) 300. 
 
 eign corporation is invalid. Stockton 43Louisiana &c. R. Co. v. State, 75 
 
 V. Central R. Co., 50 N. J. Eq. 52, 24 Ark. 435, 88 S. W. 559. 
 
 Atl. 964. 44 Day v. Ogdensburgh &c. R. Co., 
 
 40 Oregon R. &c. Co. v. Oregonian 107 N. Y. 129, 13 N. E. 765. See also 
 R. Co., 130 U. S. 1, 9 Sup. Ct. 409, Ackerman v. Cincinnati &c. R. Co., 
 32 L. ed. 837. 143 Mich. 58, 106 N. W. 558. And a 
 
 41 Briscoe v. Southern Kansas R. consolidated company formed by con- 
 Co., 40 Fed. 273, 40 Am. & Eng. R. solidation of a foreign company with 
 Cas. 599. a domestic company has been held a 
 
.741 LEASES § 508 
 
 § 508 (445). Rights of foreign lessors. — The rights of a cor- 
 poration of one state that becomes the lessee of a railroad of an- 
 other state are such as are conferred by the laws of the state from 
 which the lessor received its charter.*^ This must necessarily be 
 true, for the lessor derives all its powers from the state in which 
 it was incorporated, and, of course, can grant no other rights than 
 such as were conferred upon it by the statute to which it owes its 
 existence and powers. What the lessor was required to do by the 
 state which created it must be done by its lessee. 
 
 § 509 (446). Leases to connecting lines. — In some of the states 
 the statutes grant a right to lease to connecting lines. Where 
 there is such a grant, then, upon the principle that statutes grant- 
 ing authority to execute a lease are to be strictly construed, it is 
 implied that there is no authority to lease to other lines. It is 
 held that under such a statute it is not essential to the validity of 
 a lease that the leased road shall be an extension from either ter- 
 minus of the main line, but it may be merely a collateral branch, 
 forming a continuous road, by way of the junction, to either ter- 
 minus of such main line, in as direct a route as the average rail- 
 road.*^ The pivotal question under such statutes is whether the 
 
 domestic company authorized ' to take the place of junction to Shelbyville, 
 
 a lease from another company, a distance of about eighteen miles, 
 
 Peters v. Boston &c. R. Co., 114 the general course being a trifle 
 
 Mass. 127. south of east. There was a physical 
 
 45 McCandless v. Richmond &c. R. connection between the two roads 
 
 Co., 38 S. Car. 103, 16 S. E. 429, 18 at Anchorage, the latter being the 
 
 L. R. A. 440, 61 Am. & Eng. R. Cas. western terminus of the Shelbyville 
 
 S24. road. From this point the main line 
 
 *8 Hancock v. Louisville &c. R. Co., of the lessee road extends north- 
 
 145 U. S. 409, 12 Sup. Ct. 960, easterly, and the Shelbyville road 
 
 36 L. ed. 755, construing the southeasterly, making two forks of 
 
 Kentucky Act of January 22, the letter 'V. Shelbyville is nearly 
 
 1858. The court says : "The due east from Louisville, and the 
 
 main line of the lessee's road ex- Shelbyville road, together with 
 
 tends in a northeasterly direction twelve miles of the lessee's road, 
 
 from Louisville to Cincinnati. At makes a continuous line between 
 
 Anchorage, about twelve miles east Shelbsrville and Louisville in a route 
 
 of Louisville, the Shelbyville road about as straight as the average 
 
 touches it. At the time of the lease railroad. But Anchorage is not a ter- 
 
 the latter road was completed from minus of the lessee road, and the 
 
§510 
 
 RAILROADS 
 
 742 
 
 line to which the lease is executed is or is not a connecting 
 line.*7 
 
 § 510 (447). Lease to competing lines — Effect of statutes pro- 
 hibiting. — Many of the states now provide by general laws for 
 the transfer by lease, of a railroad to another corporation which 
 does not own a parallel or competing line.** The effect of these 
 statutes is, generally speaking, to confer power to lease to any 
 other than competing or rival lines, so that the validity of the 
 lease depends upon whether the lines are rival or competing lines 
 within the meaning of the statute. Such statutes are to be 
 strictly construed ; as some of the courts say, a railroad company 
 is required to "be able to point to the exact provisions granting 
 authority" to make any given lease. *^ It is clear from the trend 
 
 contention is that, under the statute, 
 the leased line must touch one of 
 the termini of the lessee's road so 
 as to make an extension of it. 
 * * * vVe think it is enough that 
 by the lease the connected roads 
 form a continuous line, and it is not 
 essential that the leased line be an 
 extension from either terminus of 
 the lessee's road. The evil which 
 was intended to be guarded against 
 by this limitation was the placing 
 of parallel and competing roads un- 
 der one management and the control 
 by one company of the general rail- 
 road affairs of the state through the 
 leasing of roads remote from its 
 own and with which it has no physi- 
 cal or direct business connection. It 
 was not intended to prevent a com- 
 pany with a long road, like the les- 
 see company, from leasing branches 
 by means of which it establishes con- 
 tinuous lines from their several ter- 
 mini to each of its own." 
 
 4T Text quoted in Georgia R. &c. 
 Co. V. Maddox, 116 Ga. 64, 42 S. E. 
 315, 320. See also Chesapeake &c. R. 
 Co. V. Howard, 178 U. S. 153, 20 
 
 Sup. Ct. 880, 44 L. ed. 1015; Hampe v. 
 Pittsburgh &c. Traction Co., 165 Pa. 
 St. 468, 30 Atl. 931; Kaufman v. 
 Pittsburgh &c. R. Co., 217 Pa. 599, 
 66 Atl. 1108. There is some differ- 
 ence of opinion as to what is a con- 
 tinuous or connecting line, and the 
 following cases seem to require more 
 than several of those cited in the last 
 preceding note. State v. Atchison &c. 
 R. Co., 24 Nebr. 143, 38 N. W. 43, 
 8 Am. St. 164; State v. Vanderbilt, 
 37 Ohio St. 590: 
 
 *8 A line of railroad may be com- 
 peting within the meaning of a stat- 
 ute which forbids railroads com- 
 panies from purchasing or leasing a 
 competing line, though the competing 
 points are reached by trackage ar- 
 rangements with other lines. Hafer 
 V. Cincinnati, H. & D. R. Co., (Ohio 
 Com. PI.) 29 Wkly. Law Bui. 68. 
 
 49 Pennsylvania &c. R. Co. v. St. 
 Louis &c. R. Co., 118 U. S. 290, 6 
 Sup. Ct. 1094, 30 L. ed. 83; State v. 
 Atchison &c. R. Co., 24 Nebr. 143, 38 
 N. W. 43, 8 Am. St. 164. A railroad 
 corporation whose power of eminent 
 domain necessary to the construction 
 
743 
 
 LEASES 
 
 §510 
 
 of the judicial decisions that as in favor of the power to lease, 
 there is no elasticity in such statutes. A statute authorizing a 
 railroad to lease its track to another company, when the respec- 
 tive lines "are continuous or connected," has been held to author- 
 ize a lease only when the two roads form one continuous line, be- 
 tween points not otherwise connected by either separately,^" over 
 which, according- to some authorities, freight and passengers may 
 be carried without transfer,^! and it will usually be construed as 
 not permitting a lease of parallel and competing lines. ^^ The 
 principle asserted by the courts in the cases referred to, as in 
 many others, forbids transfers to rival lines except where the 
 statute clearly and unequivocally confers the right to malce such 
 transfers, but where there is a valid statutory power the transfer 
 to rival lines is valid.^^ It is held that a statute which forbids 
 
 of a branch road conferred by char- 
 ter is extinct by reason of non-user 
 during the term prescribed for its 
 exercise cannot purchase or lease 
 the branch road subsequently built, 
 on the foundation of the right of 
 eminent domain which is extinct. 
 Such lease is therefore ultra vires. 
 Camden &c. R. Co. v. May's Land- 
 ing &c. R. Co., 48 N. J. L. 530, 7 Atl. 
 523. It was held that neither Rev. 
 St. Ohio, § 3300, providing that any 
 railroad may lease or purchase the 
 road of another company, not com- 
 peting, nor § 3409, providing that a 
 company, not able to complete the 
 construction of its line, may trans- 
 fer its property to another, which 
 transfer "shall include all work 
 done, together with all rights, privi- 
 leges and easements," confers au- 
 thority to sell and transfer a com- 
 pany's contracts of subscription pay- 
 able on completion of the road. To- 
 ledo &c. R. Co. V. Hinsdale, 45 Ohio 
 556, IS N. E. 665. 
 
 so State v. Atchison &c. R. Co., 24 
 Nebr. 143, 38 N. W. 43, 8 Am. St. 
 
 164; Smith v. Reading City &c. R. 
 Co., 13 Pa. Co. Ct. 49. It was held in 
 Pennsylvania that two lines which 
 cannot be operated together without 
 a transfer of passengers and freight 
 do not form a continuous line." 
 Hampe v. Mt. Oliver I. R. Co., (Pa. 
 Cora. PL) 24 Pittsb. Leg. J. (N. S.) 
 330. But this case has been reversed. 
 Hampe v. Pittsburgh &c. Co., 165 Pa. 
 St. 468, 30 Atl. 931. 
 
 51 State v. Vanderbilt, Zl Ohio St. 
 590. 
 
 52 See Eel River R. Co. v. State, 
 155 Ind. 433, 57 N. E. 388. See also 
 Pearsall v. Great Northern R. Co.. 
 161 U. S. 646, 16 Sup. Ct. 709, 40 L. 
 ed. 838. 
 
 53 In the case of the Catawissa &c. 
 R. Co. V. Philadelphia &c. R. Co., 14 
 Pa. Co. 280, it was held that where 
 one railroad company acquired, by 
 virtue of a valid lease, the right to 
 the railroad of another company, 
 the former, in building a line paral- 
 lel with the road acquired, did not 
 violate the constitutional provision, 
 prohibiting one company from ac- 
 
§511 
 
 RAILROADS 
 
 744 
 
 railroad companies to purchase or lease competing lines renders 
 void a lease of a railroad by another, which reaches competing 
 points by means of trackage arrangements with other lines. ^* 
 
 § 511 (448). Effect of executing unauthorized lease. — The 
 highest authorities generally affirm that an unauthorized lease 
 which the company has no power to make is void,^^ but some of 
 the cases seem to hold that rent provided for by such a lease may 
 be recovered where the road is operated under the lease and bene- 
 fit is actually received by the company which has possession and 
 use of the road. Our opinion, elsewhere expressed and elabor- 
 ated, is that such a lease is void^® and no recovery can be had 
 
 quiring the rights of a parallel and 
 competing road. In the course of 
 the opinion, it was said : "Was it 
 in any sense a competing road the 
 acquisition of which is prohibited by 
 Article XVII, of the constitution? 
 The object of the prohibition was 
 clearly to prevent one independent 
 corporation from acquiring the pos- 
 session of the road of another com- 
 pany which is operating a compet- 
 ing line. It was to prevent the 
 buying up of one railroad corpora- 
 tion of a competing line and the 
 establishment thereby of a monop- 
 oly. The building of one road by 
 another for the purpose of facilitat- 
 ing and enlarging its own business, 
 can by no fair process of reasoning 
 be contended to be within the con- 
 stitutional prohibition, unless, in- 
 deed, a man be said to compete with 
 himself, when he enlarges his own 
 business or enters into a new one." 
 B4 Hafer v. Cincinnati &c. R. Co., 
 (Ohio Com.: Pis. 1893) 29 Weekly 
 Law Bui. 68. But see Hancock v. 
 Louisville &c. R. Co., 145 U. S. 409, 
 12 Sup. Ct. 969, 36 L. ed. 755 ; Black 
 v. Delaware &c. Canal Co., 22 N. J. 
 
 Eq. 402. In the case of Louisville 
 &c. R, Co. V. Commonwealth, 97 Ky. 
 672, 31 S. W. 476, it was held that a 
 statute authorizing a railroad com- 
 pany to purchase and own a road 
 constructed by another company did 
 not confer authority to purchase a 
 competing line in violation of a con- 
 stitutional provision adopted subse- 
 quent to the enactment of the statute 
 prohibiting railroad companies from 
 purchasing competing lines. See Mis- 
 souri Pacific &c. Co. V. Sidell, 67 Fed. 
 464; State v. Montana R. Co., 21 
 Mont. 221, 53 Pac. 623, 45 L. R. A. 
 271 ; Chesapeake &c. R. Co. v. How- 
 ard, 14 App. Cas. (D. C.) 262. See 
 generally as to what are parallel or 
 competing lines, note in Ann. Cas. 
 1913A, 638. 
 
 35 We think that principle and au- 
 thority require the conclusion that 
 the unauthorized lease by which a 
 railroad seeks to turn over its en- 
 tire road to another is ultra vires 
 and void, and may be set aside at 
 the suit of a dissenting stockholder. 
 Ante, §§423,428. 
 
 58 State V. Atchison &c. R. Co., 24 
 Nebr. 143, 38 N. W. 43, 8 Am. St. 
 
745 
 
 LEASES 
 
 §512 
 
 upon it, but that in the proper case there may perhaps be a re- 
 covery upon an implied contract. Some of the courts hold that 
 the abandonment of its road to the lessee is sufficient ground for 
 the institution of quo warranto proceedings on the part of the 
 state.sT 
 
 § 512 (449). Lease — Construction. — The approved doctrine 
 seems to be that the terms of a lease made under legislative au- 
 thority will be strictly construed, and. their meaning will not be 
 extended by implication. ^^ We can see no reason, however, for 
 applying to railroad leases any other rules of construction than 
 those which govern in the construction of similar contracts exe- 
 
 164. An Illinois railroad corpora- 
 tion is bound to take notice that its 
 lease to an Indiana corporation is 
 ultra vires of the latter, so that where 
 the lease becomes an executed con- 
 tract by the delivery of the leased 
 property the lessor is in pari delicto 
 with the lessee, and cannot maintain 
 a suit to recover possession. So far 
 as the lessor corporation can be re- 
 garded as representing its non-con- 
 senting stockholders in their efforts 
 to set aside the lease, it and they are 
 barred by laches in failing to bring 
 an action to set it aside for seventeen 
 years, and by accepting the rentals 
 during that time. St. Louis &c. R. 
 Co. V. Terre Haute &c. Co., 145 U. S. 
 393, 12 Sup. Ct. 953, 36 L. ed. 738. 
 In Cox V. Terre Haute &c. R. Co., 
 133 Fed. 371, it is held that a lease 
 void as against public policy can not 
 be the foundation for recovery of 
 rental. But see Camden &c. R. Co. 
 V. May's Landing &c. R. Co., 48 N. 
 J. L. 530, 7 Atl. 523; Woodruff v. 
 Erie R. Co., 93 N. Y. 609, 3 Thomp. 
 Corp. (2nd ed.), § 2494, and see post, 
 § 526, as to recovery of rent. 
 ST Board Comrs. v. Lafayette &c. 
 
 R. Co., SO Ind. 85. But, it is held 
 that a contract whereby another rail- 
 road is permitted to use a track 
 jointly with a lessor, in such man- 
 ner as not to interfere with the les- 
 sor's use thereof, is valid unless ex- 
 pressly forbidden. Union Pac. R. Co. 
 v. Chicago &c. R. Co., 51 Fed. 309. 
 Such a contract is not within the rule 
 forbidding a railroad company from 
 transferring property essential to the 
 performance of its corporate duties, 
 since the company does not by per- 
 mitting another company to make a 
 limited and qualified use of its tracks, 
 disable itself from performing the 
 duties imposed upon it by law. 
 
 5S Chicago &c. R. Co. v. Denver 
 &c. R. Co., 143 U. S. 596, 12 Sup. Ct. 
 479, 36 L. ed. 277. For contract held 
 to be a lease, and construction there- 
 of, see Moorshead v. United R. Co., 
 119 Mo. App. 541, 96 S. W. 261, dis- 
 tinguishing St. Joseph &c. R. Co. v. 
 St. Louis &c. R. Co., 135 Mo. 173. 
 36 S. W. 602, 33 L. R. A. 607. See 
 also Terre Haute &c. R. Co. v. Cox, 
 102 Fed. 825; Continental Ins. Co. v. 
 New York &c. R. Co., 187 N. Y. 225, 
 79 N. E. 1026. 
 
§ 513 RAILROADS 746 
 
 cuted under statutory authority. The terms must, of course, b,e 
 such as the statute authorizes, but, within the limits of the power 
 conferred, the contracting parties may agree upon such terms and 
 conditions as they deem proper, provided, of course, no rule of 
 law is violated. 
 
 § 513 (450) Lease — Dependent and independent contracts. — 
 
 The question whether a contract relating to a lease and in a 
 measure connected with it is dependent or independent, is some- 
 times an important one, for a lease may be void and the contract 
 relating to the same subject, executed by the same parties, may 
 be valid. ^^ If the contract is independent of the lease it may be 
 valid, although the lease is void. Reference in the independent 
 contract to the lease does not necessarily make the lease part of 
 it, but, of course, the reference may be such as to incorporate the 
 lease in the contract, and whether it does or not is to be deter- 
 mined in each particular case from the language employed in the 
 instrument.^" Whether the contract is or is not a dependent one 
 depends, of course, upon the language employed by the parties, 
 and the ordinary doctrines of law, applicable to the subject of 
 dependent and independent contract provisions govern cases in 
 which the construction of such leases are involved and supply the 
 rules of decision. In an Illinois case, the agreement in the form 
 of a lease was that the railroad company should deliver to the 
 
 59 Pittsburgh &c. R. Co. v. Keokuk in the clause referring to them." In 
 &c. Co., ISS U. S. 156, IS Sup. Ct. 42, app-lying this ancient and well-settled 
 39 L. ed. 106; Pittsburgh &c. R. Co. rule in the case of Fitzmaurice v. 
 V. Keokuk &c. Co, 131 U. S. 371, 7 Bayley, 9 H. L. Cases 78, Compton, 
 Sup. Ct. 770, 33 L. ed. 157, 39 Am. J., said: "By referring in a document 
 & Eng. R. Cas. 213. See 1 Elliott signed by the party to another docu- 
 Cont., § 1576. ment, the person so signing in eflfect 
 
 60 Pittsburgh &c. R. Co. v. Keokuk signs a document containing the 
 &c. Co., 131 U. S. 371, 9 Sup. Ct. 770, terms of the one referred to." The 
 39 Am. & Eng. R. Cas. 213, 33 L. ed. rule applies to referertces made by 
 157. Ordinarily the reference would acts of parliament. North British &c. 
 make the lease part of the contract. Co. v. Tod, 12 CI. & Fin. 722; Ware 
 The maximum is, "Instruments to v. Regent's Canal Co., 28 L. J. Ch. 
 which reference is made in another 153; Galwey v. Baker, 5 CI. & Fin. 
 instrument have the same eflfect and 157; Brain v. Harris, 10 Exch. 908- 
 operation as if they were inserted Reg. v. Caledonia R. C. 16 Q. B. 19. 
 
747 
 
 LEASES 
 
 §513 
 
 other party a designated quantity of grain, wiiich the other 
 should accept and store, and it was held that the promises to 
 deliver and to accept and store were dependent promises.*^ Cove- 
 nants in leases executed by railroad companies are construed and 
 enforced as are covenants in leases executed by natural persons, 
 that is, the same general principles of law govern in such cases,"^ 
 but the nature of the business of such companies and the limited 
 powers with which they are invested, necessarily render their 
 leases different in some respects from those of natural persons. A 
 reasonable construction is to be given covenants in railroad leases, 
 and such covenants are held to require that to be done which "is 
 reasonable and. which would be so accounted by reasonable 
 men."®3 In a New Hampshire case, the subject of covenants in 
 leases executed by one railroad company to another is very fully 
 discussed, and the effect of ■ such covenants clearly stated.** 
 Where the contracting parties have, by a settled course of deal- 
 ing, given a construction to the lease, that construction will be 
 
 «i Dunlap V. Chicago &c. R. Co., 
 151 111. 409, 33 N. E. 89; citing Hough 
 V. Rawson, 17 111. 588 ; Porter v. Rose, 
 12 Johns. (N. Y.) 209, 7 Am. Dec. 
 306. 
 
 62 Boston &c. R. Co. v. Boston &c. 
 R. Co., 65 N H. 393, 23 Atl. 529, 51 
 Am. & Eng. R. Cas. 106. See Grand 
 Trunk &c. R. Co. v. Chicago &c. R. 
 Co., 141 Fed. 785. 
 
 63 In the case of Catawissa &c. R. 
 Co. V. Philadelphia &c. R. Co., 14 
 Pa. Co. Ct. 280, the lease contained 
 a covenant that the lessee should 
 maintain the leased road in good con- 
 dition, operate it with reasonable care, 
 and "use all proper and reasonable 
 means to maintain and increase the 
 business thereof." It was held that 
 this covenant was not broken by the 
 construction of a parallel road. The 
 court said, inter alia : "The defend- 
 ants are required to use all reason 
 able means to maintain and increase 
 
 the business of the road. This ineans 
 that they will do what is usually ac- 
 counted reasonable, and- what ought 
 to be so accounted by reasonable men. 
 It is difficult, perhaps impossible, to 
 bring within the limits of a precise 
 definition exactly what is required by 
 an undertaking in such general terms. 
 It can only be determined when ques- 
 tions arise in regard to the particu- 
 lar actions and conduct of the party, 
 and their result." We agree with 
 the court that the solution of the 
 question generally depends upon the 
 facts of the particular case, but it 
 seems to us that a covenant such as 
 that contained in the lease before 
 the court prohibits the lessee from 
 building a road parallel with that 
 leased to it. 
 
 6* Boston &c. R. Co. v. Boston &c. 
 R. Co., 65 N. H. 393, 23 Atl, 529, 51 
 Am. & Eng. R. Cas 106 
 
§ 514 RAILROADS 748 
 
 upheld by the courts, unless it is in violation of the law or the 
 clear words of the contract or infringes the rights of others. 
 Thus, where a railroad company which has granted to another 
 company the right to the joint use of its track and depots, allows 
 the grantee and assignee of the latter to enter upon and continue 
 in such possession and use, it is practically a construction of the 
 power of the company to assign its rights under the contract.*^ 
 
 § 514 (451). Contract to permit use of track not necessarily a 
 lease. — A contract between two railroad companies wherein one 
 company agrees to permit another company to use its tracks, sta- 
 tion, buildings or the like, is not necessarily a lease within the 
 meaning of the rule prohibiting a railroad company from trans- 
 ferring its property by way of lease. There is a distinction be- 
 tween a lease and a traffic, or trackage contract.**^ A lease trans- 
 fers control from the lessor to the lessee, and the former is there- 
 by disabled from performing the duties imposed upon it by law, 
 whereas a contract granting the privilege of using tracks, station 
 buildings and the like does not divest the company granting such 
 use or control, nor disable it from discharging its corporate duties 
 or exercising its' corporate functions.^'' There is solid foundation 
 
 65 Chicago &c. R. Co. v. Denver rado &c. R. Co., 89 Fed. 560. A con- 
 &c. R. Co., 46 Fed. 145. See also tract wherein one company agrees to 
 Columbus &c. R. Co. v. Pennsylvania permit another company at the ex- 
 Co., 143 Fed. 757. But compare Pere pense of the latter to connect with the 
 Marquette R. Co. v. Wabash R. Co., main track of the former, the object 
 141 Mich. 215, 104 N. W. 650. being to facilitate an interchange of 
 
 66 Ante, §§411, 412, 413, 414; Chi- business is more than a mere re- 
 cago &c. Co. v. Union Pac. Co., 47 vocable license. It is an enforceable 
 Fed. IS; Union Pac. R. Co. v. Chi- contract founded on a valuable con- 
 cago &c. R. Co., 51 Fed. 309, 51 Am. sideration. Louisville &c. R. Co. v. 
 & Eng. R. Cas. 162. See Langly v. Kentucky &c. Co., 95 Ky. 550, 26 S. 
 Railroad Co., 10 Gray (Mass.) 103 ; W. 532. See generally Kanawha &c. 
 Humphreys v. St. Louis &c. R. Co., R. Co. v. Public Utilities Com., 96 
 11 Fed. 307. See also Coney Island Ohio St. 414, 117 N. E. 353; Philip 
 &c. R. Co. V. Brooklyn Cable Co., 53 A. Ryan Lumber Co. v. Ball (Tex. 
 Hun 169, 6 N. Y. S. 108; South Caro- Civ. App.), 197 S. W. 1037. 
 
 lina &c. R. Co. v. Carolina &c. R. 67 The reasoning upon which a de- 
 Co., 93 Fed. 543; Archer v. Terre nial of the right of a railroad com- 
 Haute &c. R. Co., 102 111. 493. But pany to transfer its property and 
 compare Central Trust Co. v. Colo- franchises so as to disable itself to 
 
749 LEASES § 515 
 
 for the distinction between a contract whereby one company sim- 
 ply permits use to be made of its railroad, and a contract whereby 
 the one company transfers to the other its railroad through the 
 instrumentality of a lease. The right to do such things as are 
 reasonably necessary to the successful operation of a railroad is 
 implied in the grant of a franchise to build and operate a rail- 
 road, and it may well be held in cases where the object to be 
 attained advances the interests of the contracting companies and 
 the contract which they enter into does not disable either from 
 performing its corporate duties, that in making such a contract 
 the companies have not exceeded the power conferred upon 
 them. There is, it is obvious, no rule of public policy which for- 
 bids one company from granting to another a mere right to use 
 tracks, depots or the like, so long as there is no unlawful dis- 
 crimination or violation of the interstate commerce law or other 
 governing statute. If, however, under the guise of a contract per- 
 mitting one company to use the property of another, there 
 should, in fact, be a transfer from one to the other, the contract 
 would be ultra vires, and against public policy. 
 
 § 515 (452). Traffic contract— Not valid if it is in effect a 
 lease. — A traffic contract may be rightfully entered into, but, 
 under the guise of a traffic contract, a railway company cannot, 
 except where the statute authorizes it, turn over its road to an- 
 other company. In other words, a railroad company cannot, 
 under the form of a traffic contract, make a lease of its road, ex- 
 cept where there is statutory authority to execute the lease.^^ If 
 
 perform its public duties is based a railroad company is granted "the 
 
 does not, it is obvious apply to a perpetual and free use" of the right 
 
 contract whereby a railroad company of way of another railroad company, 
 
 lets another company into joint pos- within a specified distance, means that 
 
 session of part of its line for a term the grantee of such privilege is to 
 
 of years at an agreed rental; and have, not merely the uninterrupted 
 
 such a contract is not, as between the use of such right of way, but is to 
 
 parties, ultra vires, where such joint have it free of compensation. Alaba- 
 
 possession does not interfere with the ma &c. R. Co. v. South &c. R. Co., 
 
 present use of such line by the com- 84 Ala. S70, 3 So. 286, 5 Am. St. 401. 
 
 pany that owns it. Chicago &c. R. Co. 68 in the case of Nashua &c. R. 
 
 v. Union Pac. R. Co., 47 Fed. 15. It Co. v. Boston &c., 164 Mass. 222, 41 
 
 has been held that a contract whereby N. E. 268, 49 Am. St. 454, the ques- 
 
§ 516 RAILROADS 750 
 
 the professed traffic contract is, in fact, a lease, it is ultra vires, 
 but where the contract is in the proper sense a traffic contract, 
 then, as we believe, it may be effective. 
 
 § 516 (453). Contracts granting right to use^Effect and con- 
 struction of. — It is held that an agreement between two railroad 
 companies, conferring on each the right to run its cars over the 
 tracks of the other, each retaining absolute control over its road 
 for all other purposes, confers no interest which can be assigned 
 or leased.^8 It is obvious that such a contract cannot be regarded 
 as a lease since there is nothing more than an agreement per- 
 mitting one company to use the tracks of another, but it is diffi- 
 cult to determine just what the specific nature of the contract is 
 and what are the rights of the parties. It is a contract for joint 
 use, and the company owning the road does not fully part with 
 possession or control, so that the rights and obligations of the 
 parties are not the same as those of a lessor and lessee in an au- 
 thorized lease. Some of the courts hold that an agreement by 
 one railroad company that another, "and its assigns," may use 
 one of its tracks on certain conditions, is a mere license and not 
 a lease.'''' We incline to the opinion that where there is a valid 
 
 tion was stated but not decided. The Mass. 177, 35 N. E. 776, 22 L. R. A. 
 court, however, referred to the cases 364, 39 Am. St. 467; L'Herbette v. 
 of Burke v. Concord &c. R. Co., 61 Pittsfield &c. Bank, 162 Mass. 137, 
 N. H. 160, and Boston &c. R. Co. v. 38 N. E. 368, 44 Am. St. 354; Man- 
 Boston &c. R. Co., 65 N. H. 393, 23 Chester &c. R. Co. v. Concord &c. R. 
 Atl. 529. In the. first of the cases Co., 66 N. H. 100, 20 Atl. 383, 9 L. 
 cited the court held that the joint R. A. 689, 49 Am. St. 582. See also 
 manager of two roads both operated Central Trust Co. v. Colorado &c. R. 
 by one company under a contract had Co., 89 Fed. 560. 
 no right to use the joint funds in 69 Brooklyn Crosstown R. Co. v. 
 improving the road of the operating Brooklyn City R. Co., 51 Hun 600, 
 company and that the other company 3 N. Y. S. 901. 
 
 might recover it in a proper action. 70 Coney Island &c. R. Co. v. 
 In support of this ruling the court Brooklyn Cable Co., 53 Hun 169, 6 
 cited Slater Woolen Co. v. Lamb, 143 N. Y. S. 108. In a reported case the 
 Mass. 420, 9 N. E. 823; Central &c. president of the plaintiff railroad 
 Co. V. Pullman's &c. Co., 139 U. S. 24, company testified that the vice-presi- 
 11 Sup. Ct. 478, 35 L. ed. 55; Central dent of the defendant railroad corn- 
 Trust Co. v. Ohio &c. R. Co., 23 Fed. pany promised that plaintiff should 
 306 ; Nims v. Mount Hermon &c., 160 have, free of charge, full terminal 
 
751 
 
 LEASES 
 
 §516 
 
 consideration for such an agreement it is not a mere revocable 
 license but is an enforceable contractJ^ If there is a sufficient 
 consideration for the agreement, we can see no reason why it 
 should not be regarded as a contract in all that the term implies. 
 If, however, there is no consideration the agreement may well be 
 treated as a mere license. If there is nothing more than a license 
 then there is reason for holding that the licensee cannot enjoy the 
 privileges conferred by such agreement and at the same time 
 confer the right to do so on other companies, since this would be 
 to impose greater burdens on the licensor than the agreement 
 contemplated. ''2 We do not believe that there can be an assign- 
 ment, even if there be a contract, where the original company 
 also retains the right to make use of the right or privilege granted 
 it, for the grant implies that the right to exercise the privilege is 
 only conferred upon the company to which it is granted. The 
 
 facilities at the junction of the two 
 roads. A director of plaintiff testi- 
 fied that it was assumed, rather than 
 expressly agreed, that plaintiff should 
 have such terminal facilities. Sever- 
 al officers of plaintiff testified that 
 they had heard of no claim that said 
 agreement had been made until about 
 twenty years after the organization 
 of plaintiff, when it was deprived of 
 such terminal facilities. It appeared 
 that the plaintiff company had been 
 operated by defendant for five years, 
 and that on being reorganized, it con- 
 sented that a charge should be made 
 for the use of the terminal facili- 
 ties ; that at a subsequent reorganiza- 
 tion a higher charge was paid for 
 eighteen months ; and that two years 
 later the charge was increased, and 
 one payment made under protest. No 
 action was ever taken by the direct- 
 ors of either company upon the sub- 
 ject. It was held, in an action for 
 damages for severing the connection 
 
 between the two companies, and de- 
 priving the plaintiff of such facili- 
 ties, that the evidence justified a 
 finding that the agreement was tem- 
 porary and permissive only. Port 
 Jervis &c. R. Co. v. New York &c. 
 R. Co., 132 N. Y. 439, 30 N. E. 85S. 
 Where one railroad company has 
 permission by parol to extend its 
 track upon the right of way of an- 
 other company for the purpose of 
 making a connection, such permis- 
 sion is a mere license, and, although 
 valuable improvements have been 
 made, may be revoked at the will of 
 the licensing company. Richmond 
 &c. R. Co. v. Durham &c. R. Co., 104 
 N. Car. 658, 10 S. E. 6S9, 40 Am. & 
 Eng. R. Cas. 488. 
 
 Ti Louisville &c. R. Co. v. Ken- 
 tucky &c. R. Co., 95 Ky. 550, 26 S. 
 W. 532. 
 
 72 Coney Island &c. R. Co. v. 
 Brooklyn Cable Co., 53 Hun 169, 6 
 N. Y. S. 108. 
 
§ 517 RAILROADS 752 
 
 parties may, of course, provide for an assignment by the stipula- 
 tions of their contract.''^ 
 
 § 517 (454). Part performance — Effect of. — Under the rule ap- 
 proved by the Supreme Court of the United States, the partial 
 performance of a contract of lease, executed without legislative 
 authority, confers no rights under the lease. Thus, where a void 
 lease is made by a railroad company for a term of ninety-six 
 years, at a certain yearly rental, the use of the road by the lessee 
 and payment of the rental for three years does not make the con- 
 tract so far an executed one as to estop the lessee to deny its 
 validity.'^* This doctrine results from the principle elsewhere 
 considered that where the contract is, in a proper sense, ultra 
 vires, no right can be founded on the contract itself. If the con- 
 tract be absolutely void and not merely voidable, it cannot be 
 made effective by the acts of the contracting parties.''^ 
 
 § 518 (455). Duration of a lease. — Where there is no authority 
 to sell, there is, as it seems to us, no right to execute a lease the 
 practical effect of which is equivalent to a sale.'''* This principle 
 would prohibit a railroad company from leasing its road for such 
 a length of time as would clearly deprive it of possession and use 
 
 73 As to assignments of leases, see, 92 Fed. 735 ; Ogdensburgh &c. R. 
 
 generally, Terre Haute &c. R. Co. Co. v. Vermont &c. R. Co., 63 N. Y. 
 
 V. Peoria &c. R. Co., 61 111. App. 405, 176. But see where authority was 
 
 167' 111. 296, 47 N. E. 573 ; Indiana- afterwards conferred and the lease 
 
 polls Mfg. &c. Union v. Cleveland &c. recognized. Terre Haute &c. R. Co. 
 
 R. Co., 45 Ind. 281 ; St. Joseph &c. v. Cox, 102 Fed. 825. 
 
 R. Co. V. St. Louis &c. R. Co., 135 75 Ante, §§427, 438 and §§411-414. 
 
 Mo. 173, 36 S. W.602,33 L. R. A. 76 St. Louis &c. R. Co. v. Terre 
 
 607; Boston &c. R. Co. v. Boston &c. Haute &c. R. Co., 145 U. S. 393, 12 
 
 R. Co., 65 N. H. 393, 23 Atl. 529; Sup. Ct. 953, 36 L. ed. 738, and cases 
 
 Frank v. New York &c. R. Co., 122 cited. But it has been held that a 
 
 N. Y. 197, 25 N. E.' 332. lease may be made for 999 years 
 
 7* Oregon R. & Nav. Co. v. Ore- where there is authority to lease, 
 
 gonian R. Co., 130 IJ. S. 1, 9 Sup. Ct. Dickinson v. Consolidated Trac. Co., 
 
 409, 32 L. ed. 837; Oregon R. &c. Co. 119 Fed. 871 ; 'Wormser v. Metropoli- 
 
 V. Oregonian R. Co., 145 U. S. 52, 12 tan St. R. Co., 98 App. Div. 29, 90 
 
 Sup. Ct. 814, 36 L. ed. 620. See also N. Y. S. 714. 
 East St. Louis &c. R. Co. v. Jarvis, 
 
753 LEASES § 519 
 
 for a palpably unreasonable period. We do not believe that a 
 transfer can be made which is in substance a sale, although in 
 form a lease. Of course, where there is authority to sell, a sale 
 may be made. It has been held in New York that a lease of its 
 road by a railroad company for a longer term than the period of 
 its corporate existence is not void, since the laws of that state 
 provide for an extension of the charter.''''^ There is, as it seems 
 to us, reason for the conclusion that a railroad corporation cannot 
 make a lease extending beyond its corporate life. One would 
 think that in authorizing a lease the legislature had in mind the 
 statute fixing the duration of corporate existence, and that it did 
 not mean that any corporate act should be effective after corpor- 
 ate death. But there is also some reason for the other view, and 
 as already shown, the courts seem inclined to adopt the view that 
 such a lease is not void.''^ 
 
 § 519 (456). Effect of lease on taxation. — Where the statute 
 authorizes the execution of a lease and also provides that the 
 leased road shall become the property of the lessee company, the 
 road is assessable as the property of the lessee and not as the 
 property of the lessor.''''' It may well be doubted whether this 
 
 77 Gere v. New York &c. R. Co., 19 41 L. ed. 265 ; Sioux City &c Co. v. 
 Abb. N. Cas. (N. Y.) 193. The fact Trust Co., 82 Fed. 124; Chicago &c. 
 that a lease by a railroad company R. Co. v. People, 1S3 111. 409, 38 ,N. 
 was for 999 years, while the charter- E. 1075, 29 L. R. A. 69; Morrison 
 of the lessee would expire in about v. St. Paul &c. R. Co., 63 Minn. 75, 
 forty years, did not render it void, 65 N. W. 141, 30 L. R. A. 546; State 
 especially as the charter contained v. Montana R. Co., 21 Mont. 221, 53 
 a provision that it might be renewed Pac. 623, 45 L. R. A. 271, and see 
 from time to time, and as the lease generally Ackerman v. Cincinnati &c- 
 was expressly made binding upon R. Co., 143 Mich. 58, 106 N. W. 558;: 
 the assigns and successors of the Lancaster County v. Lincoln Audi- 
 parties. Union Pac. R. Co. v. Chica- torium Assn., 87 Nebr. 87, 127 N. W.. 
 go Ac. R. Co., 51 Fed. 309, 10 U. S. 226. 
 
 App. 98, 163 U. S. 564, 599, 16 Sup. 79 Huck y. Chicago &c. R. Co., 86. 
 
 Ct. 1173, 41 L. ed. 265. 111. 352; Hagan v. Hardie, 8 Heisk.. 
 
 78 See also as to such leases and (Tenn.) 812. See generally Philadel- 
 leases for a long term distinguished phia &c. R. Co. v. Appeal Tax Court, 
 from a sale or consolidation. Union 50 Md. 397; Appeal Tax Court v. 
 Pac. R. Co. V. Chicago &c. R. Co., Western &c. R. Co., 50 Md. 274. 
 163 U. S. 564, 569, 16 Sup. Ct. 1173, Such a contract is practically a con- 
 
§ 519 RAILROADS 754 
 
 result' would follow where the lessor remains the owner and only 
 transfers the road for a limited time. If the lessor remains the 
 owner the principle which ordinarily prevails would I'equire that 
 taxes be assessed against it and not against its lessee.*" We sup- 
 pose that where there is simply an authority to lease and no pro- 
 vision vesting the lessee with the ownership the property must be 
 treated for the purpose of taxation as that of the lessor. Au- 
 thority to execute a lease implies that the lessor retains the own- 
 ership of the demised property, but grants to the lessee use, pos- 
 session and control for a designated term. A person, natural or 
 artificial, who executes a lease, does not sell or convey the prop- 
 erty, but simply transfers use, possession and control for the 
 term designated in the lease. It is competent for the legislature 
 in conferring authority to lease to prescribe the terms and condi- 
 tions upon which the authority shall be exercised, and hence it 
 may provide that the lessee company shall be treated as the 
 owner or that it shall pay all taxes. In every authorized lease 
 there are two estates, that of the lessor and that of the lessee, and 
 where both are of value both may be assessed, but each estate 
 must be assessed against its owner unless the statute otherwise 
 provides. It is probably true that if under the form of a lease a 
 sale is made, the company acquiring the property is liable to 
 taxation as owner,*^ but to have this effect the contract, although 
 in form a lease, must be, in legal contemplation, a sale. Where 
 the statute provides for a tax upon the earnings of the road the 
 lessee company is, ordinarily, the party against which the assess- 
 ment should be rnade.*^ The earnings are part of the estate of 
 
 tract of sale, or rather, in its prac- so See to the effect that the lessor 
 tical effect is equivalent to a sale in must pay the franchise tax. Central 
 cases where the term is one of great of Georgia R. Co. v. Wright, 206 Fed. 
 length; while nominally a lease it 107; Chesapeake &c. R. Co. v. Louis- 
 is practically a sale in its effects ville &c. R. Co., 1S4 Ky. 637, 157 S. 
 and consequences. Where the con- W. 1107. 
 
 tract is for a short term it is a si Commonwealth v. Nashville &c. 
 
 lease rather than a sale, but if for R. Co., 93 Ky. 430, 20 S. W. 383, 54 
 
 a great number of years it would be Am. & Eng. R, Cas. 254. 
 
 substantially a sale of the property. 82 Vermont &c. R. Co. v. Vermont 
 
 Pennsylvania R. Co. v. St. Louis &c. &c. R. Co., 63 Vt. 1, 21 Atl. 262, 731, 
 
 R. Co., 118 U. S. 290, 6 Sup. Ct. 46 Am. & Eng. R. Cas. 646. 
 1094, 30 L. ed. 83. 
 
755 LEASES § 520 
 
 the lessee company and not of the estate of the lessor. The earn- 
 ings are derived from the possession and use of the road, and 
 hence are the property of the lessee. The question, however, is 
 one depending almost entirely upon the statute governing the 
 particular case, for, as we have said, the legislature may lay the 
 tax upon either company as it deems proper, since it has full 
 power to prescribe the terms and conditions upon which the 
 authority to lease shall be exercised. 
 
 § 520 (457). Public duties of lessee under an unauthorized 
 lease — Mandamus.^s — j^ ^y ^o means follows from the rule that 
 the lessee operating a road under an unauthorized lease is liable 
 for torts in the management of the leased road, that it can be 
 compelled to perform the duties imposed upon the lessor com- 
 pany. It is evident that it may be liable for its torts in operating 
 the road and yeit not bound to perform the obligations which the 
 law requires the lessor to perform. If the lease is void it neither 
 confers a right not creates a duty. In a well-reasoned opinion it 
 was adjudged that where a lease was executed without authority 
 the lessee could not be compelled to operate the leased road and 
 that mandamus would not lie. 8* 
 
 §521 (458). Authorized lease — Duty of lessee to operate the 
 road — Mandamus. — Where the lease is authorized a very differ- 
 ent question is presented from that which arises in cases where 
 the lease is unauthorized. If it is the imperative duty of the 
 lessor company to operate the road and it has no discretionary 
 power in the matter and that duty was transferred to the lessee 
 
 83 This entire section, including the lease is void it imposes no obliga- 
 note, is quoted with approval in Ala- tion on the Union Pacific Railroad 
 bama Cent. R. Co. v. Alabama Pub. Company to operate the road." The 
 Serv. Com. (Ala.), 76 So. 862, L. decision was placid on the ground 
 R. A. 1918C, 293, 296. that the lease was void, for it was 
 
 84 People v. Colorado &c. R. Co., affirmed that mandamus lies where 
 42 Fed. 638. In the course of the there is a duty to operate a railroad, 
 opinion Caldwell, J., said : "As the The court cited State v. Sioux City 
 relator and the respondents are &c. R. Co., 7 Nebr. 357; Common- 
 agreed that the lease was void that wealth v. Fitchburgh &c. R. Co., 12 
 ends the case as to the Union Pa< Gray (Mass.) 180. 
 
 dfic Railroad Company, for if the "Vi--'^t|" 
 
§522 
 
 RAILROADS 
 
 756 
 
 by the lease, it would seem clear that the lessee could be com- 
 pelled by mandamus to perform the duty. This conclusion is 
 supported by decisions in analogous cases. ^^ It is settled that a 
 railroad company in possession of its road may be compelled by 
 mandamus to operate its road in accordance with the positive re- 
 quirements of its charter, and we can see no reason why this 
 principle should not apply to a company in full possession of a 
 road under an authorized lease. In authorizing the lease the 
 legislature empowered the transfer of the duty of operating the 
 road to the lessee, and, with the duty, authorized the transfer 
 of im.portant rights and privileges, so that the duty of the lessee 
 accepting the lease with its benefits becomes imperative. The 
 lessor having rightfully transferred possession to the lessee com- 
 pany cannot operate the road, and hence the duty necessarily de- 
 volves on the lessee." ' "*'"* 
 
 § 522 (459). Lessee not liable for wrongs committed prior to 
 the execution of the lease. — ^The lessee does not become liable for 
 
 SB Union Pacific R. Co. v. Hall, 
 91 U. S. 343, 23 L. ed. 428; Chicago 
 &c. R. Co. V. Crane, 113 U. S. 424, 
 5 Sup. Ct. 578, 28 L ed. 1064; Tal- 
 cott V. Pine Grove, 1 Flip. (U. S.) 
 120, Fed. Cas. No. 13735; State v. 
 Hartford &c. R. Co., 29 Conn. 538; 
 State V. New Haven &c. R. Co., 41 
 Conn. 134; New Haven &c. R. Co. 
 V. State, 44 Conn. 2)1 (>; Chicago &c. 
 R. Co. V. People, 56 111. 365, 8 Am. 
 Rep. 690 ; Railroad Commissioners v. 
 Portland &c. R. Co., 63 Maine 269, 
 18 Am. Rep. 208; Commonwealth v. 
 Fitchburg &c. R. Co., 12 Gray 
 (Mass.) 180; State v. Nebraska Tel. 
 Co., 17 Nebr. 126, 52 Am. Rep. 404; 
 State v. Sioux City &c. R. Co., 7 
 Nebr. 357; People v. New York &c. 
 R. Co., 28 Hun (N. Y.) 543; Peo- 
 ple V. Albany &c. Co., 24 N. Y. 261,_ 
 82 Am. Dec. 295 ; People v. Rome &c.' 
 R. Co., 103 N. Y. 95, 8 N. E. 369; 
 
 Mobile &c. R. Co. v. Wisdom, 5 
 Heisk. (Tenn.) 125; Farmers' &c. 
 Co. v. Henning, 17 Am. Law Reg. 
 (N. S.) 266; King v. Severn &c. R. 
 Co., 2 Barn. & Aid. 646. See also 
 Southern R. Co. v. Franklin &c. R. 
 Co., 96 Va. 693, 32 S. E. 485, 44 L. 
 R. A. 297; Litchfield &c. R. Co. v. 
 People, 222 111. 242, 78 N. E. 589;, 
 State v. Mobile &c. R. Co., 86 Miss. 
 172, 38 So. 732. 
 
 86 There may, possibly, be excep- 
 tional cases, as where the operation 
 of a line would exhaust the corpo- 
 rate capital, in which a mandamus 
 would not lie. Commonwealth v. 
 Fitchburg &c. R. Co., 12 Gray 
 (Mass.) 180. But where there is 
 not a clear, valid and sufficient rea- 
 son shown excusing the company 
 there can, as we believe, be no doubt 
 of the power to coerce a perform- 
 ance of duty by mandamus. 
 
757 LEASES § 523 
 
 injuries inflicted by the lessor before the execution of the lease, 
 unless it expressly assumes such liability.*^ Where there is an 
 assumption of liability the extent and nature of the liability of 
 the lessee company depends upon the provisions of the contract. 
 In saying that the lessee is not liable for wrongs committed prior 
 to the execution of the lease we do not mean to convey the im- 
 pression that for a continuing wrong the lessee is not liable, for 
 our opinion is that where the lessor company is the original 
 wrongdoer and the lessee continues the wrong after the execu- 
 tion of the lease it is liable.^* But this rule can not apply where 
 there was a single transient wrong and the injury was complete 
 prior to the execution of the lease. 
 
 § 523 (460). Effect of a lease upon rights of creditors.^The 
 question whether a railroad company which acquires by an au- 
 thorized lease all the property of another company, can hold the 
 property free from the claims of the general or unsecured credi- 
 tors of the lessor company, is not entirely free from difficulty. 
 If the lessee acts in good faith, and the lease is such as the law 
 authorizes it to take and its lessor to execute, it certainly does 
 acquire valuable ;iroperty rights. Where there is good faith, no 
 liens, no notice, actual or constructive, and the lease is one the 
 lessor has authority to execute and the lessee to accept, it is dif- 
 ficult to perceive any solid ground upon which the rights of the 
 lessee can be subordinated to the claims of general and unsecured 
 creditors. If the lessee company acts in bad faith, or if it secures 
 property under such circumstances as to make it equitably 
 chargeable as a trustee, then equity will so charge it, and will 
 decree that the avails of property received under such ciircum- 
 
 87 Pittsburgh &c. R. Co. v. Kain, &c. R. Co. v. Peyton, 106 111. 534, 
 35 Ind. 291 ; Little Miami &c. R. Co. 46 Am. St. 70S ; Chicago, Rock Island 
 V. Hambleton, 40 Ohio St. 496. See & Pacific Railway Company v. Wil- 
 also DeLaney v. Georgia &c. R. Co., Ham Martin, 81 Kans. 344, 105 Pac. 
 58 S. Car. 357, 36 S. E. 699, 79 Am. 451, 27 L. R. A. (N. S.) 164; Stickley 
 St. 843. V. Chesapeake &c. R. Co., 93 Ky. 323, 
 
 88 Little Miami &c. R. Co. v. Ham- 20 S. W. 261 ; Silver v Missouri Pac. 
 bleton, 40 Ohio St. 496. See also R. Co., 101 Mo. 79, 13 S. W. 410; 
 Canon City &c. R. Co. v. Oxtoby, Wasmer v. Delaware &c. R. Co., 80 
 45 Colo. 214, 100 Pac. 1127; Wabash N. Y. 212, 36 Am. Rep 608. 
 
§524 
 
 RAILROADS 
 
 75« 
 
 Stances may be applied to the payment of the claims of the credi- 
 tors of the lessor company. 8'-' TBut we very much doubt whether 
 it can be deprived of the leased property in a case where it is en- 
 tirely free from fault or wrong, and takes the property under an 
 authorized lease. Doubtless a court of equity would make such 
 a decree in the particular case as the principles of equity require, 
 but it seems to us that it would not decree that the claims of un- 
 secured creditors are in all cases paramount to the rights of the 
 lessee. The rights of creditors should be protected, as far as it 
 can be done, without depriving the lessee of its rights, but the 
 rights of the lessee when it is entirely free from fault are entitled 
 to protection.*^ 
 
 § 524 (461). Authorized lease, rights and duties to which les- 
 see company succeeds. — What are known as "prerogative fran- 
 chises" do not pass to the lessee under an authorized lease, but 
 such rights as are necessary to the operation of the road and the 
 conduct of its affairs do pass to the lessee.** In other words, the 
 
 90 Chicago &c. R. Co. v. Third Na- 
 tional Bank. 134 U. S. 276, 10 Sup. 
 Ct. 550, 33 L. ed. 900, citing Central 
 R. &c. Co. V. Pettus, 113 U. S. 116, 
 124, 5 Sup. Ct. 387, 28 L. ed. 915; 
 Mellen v. Moline &c. Iron Works, 131 
 U. S. 352, 366, 9 Sup. Ct. 981, 33 L. 
 ed. 178. See also Ward v. McPher- 
 son, 87 Ark. 521, 113 S. W. 42 ; Chi- 
 cago &c. R. Co. V. Third National 
 Bank, 26 Fed. 820. In the case first 
 cited the question we are here deal- 
 ing with was stated, but not decided. 
 We quote from the opinion the fol- 
 lowing: "Can a corporation in debt 
 transfer its entire property by lease, 
 so as to prevent the application of 
 the property at its full value, to the 
 satisfaction of its debts? We do 
 not care to pursue an inquiry into this 
 question at length, or consider what 
 limitations would surround this doc- 
 trine as applied generally, preferring 
 
 to notice a single matter which is 
 significant and decisive." 
 
 91 See Harle-Haas Drug Co. v. 
 Rogers Drug Co., 19 Wyo. 35, 113 
 Pac. 791, Ann. Cas. 1913E, 181. 
 
 92 The execution of a lease does 
 not, ordinarily, confer upon the les- 
 see the franchise to be a corpora- 
 tion nor a franchise to take property 
 under the power of eminent domain; 
 but the legislature may, perhaps, by 
 express and apt words confer such 
 franchises. Such franchises do not 
 pass under authority conferred in 
 general terms to execute a lease. The 
 general authority does not imply that 
 the lessee shall take such high pre- 
 rogative franchises, although it does 
 imply that the lessee shall have 
 power to do such things as are rea- 
 sonably necessary to enable it to 
 properly operate the road. 
 
759 
 
 LEASES 
 
 §524 
 
 lessee conlpany, under such a lease, generally succeeds to the 
 charter rights of the lessor company, so far as such rights are 
 necessary to the operation of the road under the lease.^ In 
 granting the principal, that is, the right to lease, the incidental 
 rights essential to the exercise of the principal right is also 
 granted. As a general rule it is safe to say that the lessee is 
 bound to perform all of the public duties imposed by law upon the 
 lessor company. The lessee company takes the burdens with, the 
 benefits.®* In a recent case a lease by a domestic company to a 
 
 03 Fisher v. New York Central R. 
 Co., 46 N. Y. 644, where the lessee 
 was held entitled to charge such 
 rates as were legal for the company 
 owning the leased line. But the 
 right to appropriate property under 
 the right of eminent domain does 
 not pass to the lessee. Mayor v. 
 Norwich, &c. R. Co., 109 Mass. 103; 
 Chicago, &c. R. Co. v. Illinois Cen- 
 tral R. Co., 113 111. 156. In Nebraska 
 it is permitted to institute proceed- 
 ings in the name of the lessor. Diet- 
 richs V. Lincoln, &c. R. Co., 13 Nebr. 
 361 ; Gottschalk v. Lincoln, &c. R. 
 Co., 14 Nebr. 389, 13 N. W. 624. See 
 Chattanooga R. Co. v. Felton, 69 
 Fed. 273: Kip v. New York, &c. R. 
 Co., 67 N. Y. 227; Pittsburgh, &c. 
 R. Co: V. Moore, 33 Ohio St. 384, 31 
 Am. Rep. S43. It has been held that 
 the lessee succeeds to the right of 
 the lessor to lay a double track on 
 land acquired as a right of way. 
 Earnhardt v. Southern R. Co., 1S7 
 N. Car. 358, 72 S. E. 1062. 
 
 94 Dryden v. Grand Trunk R. Co., 
 60 Maine 512; McMillan v. Michigan 
 Southern, &c. R. Co., 16 Mich. 79, 
 93 Am. Dec. 208; State v. Mobile, 
 &c. R. Co., 86 Miss. 172, 38 So. 732 ; 
 New York, &c. Co., In re, 49 N. Y. 
 414; New York v. Twenty-third St. 
 
 R. Co., 113 N. Y. 311, 21 N. E. 60; 
 Pennsylvania R. Co. v. Sly, 65 Pa. 
 St. 205; Commonwealth v. Pennsyl- 
 vania R. Co., 117 Pa. St. 637, 12 Atl. 
 38; South Carolina R. Co. v. Wil- 
 mington, &c. R. Co., 7 S. Car. 410. 
 The lessee may be compelled to oper- 
 ate the road along such places as had 
 extended aid to the lessor company. 
 State V. Central Iowa R. Co., 71 
 Iowa 410, 32 N. W. 409, 60 Am. Rep. 
 806. See Chicago, &c. R. Co. v. 
 Crane, 113 U. S. 424, 5 Sup. Ct. 578, 
 28 L. ed. 1064. It must maintain 
 all fences, cattle-guards, etc., which 
 the lessor company was required by 
 law to maintain. Curry v. Chicago, 
 &c. R. Co., 43 Wis. 665. It must 
 give all statutory signals, etc., re- 
 quired of the lessor company. Lin- 
 field v. Old Colony, &c. R. Co., 64 
 Mass. 562, 57 Am. Dec. 124. And it 
 is bound to make alterations in a 
 highway crossing required by stat- 
 ute. Westbrook's Appeal, 51 Conn. 
 95, 17 Atl. 368. See also State v. 
 Southern Kans. R. Co., 44 Tex. Civ. 
 App. 218, 99 S. W. 167 (bound to 
 maintain closets under statute requir- 
 ing this of all railroad companies). 
 The corporation tax law of Vermont, 
 1882, imposes a tax upon the entire 
 gross earnings of all railways oper- 
 
§ 525 RAILROADS 760 
 
 foreign company, authorized by the legislature, giving the lessee 
 the right to have, hold and exercise all the rights, powers, privi- 
 leges and franchises which could be lawfully held, exercised and 
 enjoyed in connection with such railroad as fully as the same 
 could be held, exercised or enjoyed by the lessor, was held to give 
 the lessee the right to lay water mains along the right of way 
 where the lessor had that right.®^ 
 
 § 525 (462). Contract obligations of lessor — Lessee not liable 
 thereon. — It is obvious that it would be a violation of principle to 
 hold that the lessee under an authorized lease is liable on the con- 
 tracts of the lessor company in the absence of any provision to 
 that effect. 88 'pij^ legislative sanction protects the lessee from 
 any imputation of wrong, and in taking possession of the road 
 under the lease it does what it has a lawful right to do. It can- 
 not be held that by simply accepting a lease it binds itself by 
 contracts made by the lessor before the execution of the lease. 
 The legislature may make it a condition of the exercise of the 
 power to take a lease that the lessee company shall perform the 
 contracts of the lessor, but where the power is granted in general 
 terms the duty to perform prior contracts entered into by the 
 lessor does not necessarily devolve upon the lessee company. 
 
 § 526. (463). Recovery of rent under unauthorized lease. — 
 
 The question of the right of the lessor to recover rent under an 
 unauthorized lease, is one upon which there is a diversity of 
 opinion, Some of the courts hold that rent may be recovered.^^ 
 
 ated in the state, and provides that 95 Canton v. Canton, &c. Co., 84 
 when a railway is operated under a Miss. 268, 36 So. 266, 65 L. R. A. 
 lease the tax shall be paid by the 561, lOS Am. St. 428. 
 lessee. Where the lessee had paid 96 An agreement by the lessor 
 the tax and deducted it from the company to give an annual pass to 
 rent, while such legislation was up- plaintiff in consideration of ~a re- 
 held by the decisions of the United lease of the right of way through 
 States Supreme Court, the lessor was his land is not binding upon another 
 not permitted to recover from the company to which that company 
 lessee because of a later decision by leases the road. Pennsylvania Co. v. 
 that court that such tax was uncon- Erie, &c. R. Co., 108 Pa. St. 621. 
 stitutional. Vermont, &c. R. Co. v. 9r Woodruff v. Erie, &c. R. Co., 93 
 Vermont Cent. R. Co., 63 Vt. 1, 21 N. Y. 609, holding that although 
 Atl. 262, 731, 10 L. R. A. 562. there is no power to execute a lease 
 
761 LEASES § 527 
 
 While others deny that there is a right of recovery on the lease, 
 and in a recent case it is held that a lease which is ultra vires 
 and void cannot be the foundation of any recovery of rentals.®^ 
 We think that there can be no recovery upon, the lease for the 
 reason that it is void^ but it does not necessarily follow from the 
 fact the lease is void that there can be no recovery of compensa- 
 tion for the reasonable rental value of the leased property. If it 
 could be justly said that the lessee was estopped then there would 
 be little difficulty in solving the question. But it is not easy to 
 find any principle upon which a conclusion that the lessee is 
 estopped can be rested.®® Both parties do what they have no 
 right to do, both parties have equal means of knowledge, and the 
 question whether there was or was not power to execute the 
 lease is one of law and not of fact. We are here speaking of 
 cases where there is an entire absence of power, not simply a 
 defective or improper exercise of power. Where there is power 
 to lease, then, although the lease may be defectively executed, 
 there may be an estoppel, but we do not think there can be an 
 estoppel where there is an entire absence of power. There is an 
 important distinction between a lease not properly executed and 
 a lease executed where there is an utter and entire absence of 
 power to execute a lease, but this distinction is often lost sight 
 of and the result is confusion and error. 
 
 § 527 (464). Improvements of road by lessee operating under 
 an unauthorized lease. — It has been held that a lessee operating a 
 railroad under an unauthorized lease cannot recover for improve- 
 ments made while in possession of the road under the lease. ^ If 
 
 to an individual, yet if a lease is SO Ind. 85; Ogdensburg, &c. Co. v. 
 
 executed to an individual, he will Vermont, &c. R. Co., 4 Hun (N. Y.) 
 
 be liable for the stipulated rent. The 268; Union Bridge Co. v. Troy, &c. 
 
 case of Abbott v. Johnstown, &c. R. Co., 7 Lans. (N. Y.) 240. 
 
 Co., 80 N. Y. 27, 36 Am. Rep. '572, 98 Cox v. Terre Haute, &c. R. Co., 
 
 is distinguished, and the cases of 133 Fed. 371. See also ante, § Sll. 
 
 Bissell V. Michigan, &c. R. Co., 22 99 Ante, §§ 426, 427, 428. 
 
 N. Y. 258, and Whitney, &c. Co. v. i State v. McMinnville, &c. R. Co., 
 
 Barlow, 63 N. Y. 62, 20 Am. Rep. 6 Lea (Tenn.) 369, 4 Am. & Eng. R. 
 
 504, are followed. See Farmers' Cas. 95. See also Middlesex R. Co. 
 
 Grain, &c. R. Co. v. St. Joseph, &c. v. Boston, &c. R. Co., 115 Mass. 347. 
 Co., 2 Fed. 117; Board v. Reynolds, 
 
§ 528 RAILROADS 
 
 762 
 
 such a lease is absolutely void then it cannot confer any rights 
 upon the lessee, and, unless there is some controlling element of 
 estoppel or some protecting statute, the lessee cannot recover 
 money expended in improving the road. Whether the lessee 
 company can be regarded as an occupying claimant under the 
 statutes protecting such claimants must depend upon whether 
 the void lease confers color of title upon a company that was 
 itself a wrongdoer in accepting the lease. The lease, being void, 
 will not, of itself, give a right of action nor be sufficient founda- 
 tion for an enforceable claim or demand. In the first case above 
 referred to the court virtually held that the lessee was not "hold- 
 ing possession in good faith and under color of title. "^ 
 
 § 528 (465). Receiver's power to lease. — The receiver of a 
 railroad company cannot execute a lease unless the statute grants 
 permission.^ If the railroad company has no power to execute 
 a lease it seems clear that a receiver appointed by the court can- 
 not make a valid lease. It seems to us, too, that in the absence 
 of a statute granting permission to execute a lease of a railroad 
 the courts could not confer such a power upon a receiver of the 
 corporation owning the road, for the power to lease is statutory. 
 
 § 529 (466). Unauthorized lease — Liability of lessor — Gener- 
 ally. — The question whether a lease is or is not authorized is an 
 important one in cases where claims for injury are sought to be 
 enforced against the company which assumes to lease its rail- 
 road. If the lease is unauthorized, that is, made without legis- 
 lative authority, it is, in our judgment, absolutely void, and if 
 void, the lessor has not transferred' any of its public duties or 
 obligations.* A transfer of a duty or obligation cannot be made 
 
 2 As to the right of the company bert v. Washington City R. Co., 33 
 as against the landowner where it Grat. (Va.) 586, to the effect that 
 enters and makes improvements un- the court may authorize him to do so. 
 der a license or as a trespasser, see As to rights and liabilities of re- 
 note in 66 L. R. A. 33 et seq. ceiver where there is an existing 
 
 3 State V. McMinnville, &c. R. Co., lease, see 3 Thomp. Corp. (2nd ed.) 
 6 Lea (Tenn.) 369; McMinnville, &c. §2517, and post, chapter on Re- 
 R. Co. V. Huggins, 3 Baxt. (Tenn.) ceivers. 
 
 177. But see Mercantile T. Co. v. * See post, § 537. See also Quigley 
 Missouri, &c. R. Co., 41 Fed. 8; Gil- v. Toledo R. &c. Co., 89 Ohio St. 
 
763 
 
 LliASES 
 
 §529 
 
 by a void act. If there is no transfer of duty it remains where 
 the law cast it, and if there is a culpable breach of duty resulting 
 in injury the fact that there was an attempt to transfer the duty 
 will not relieve the party upon whom the law imposed the duty 
 from liability. If the duty remains unaffected by a transfer, as 
 it does where the transfer is void, the breach of duty is the wrong 
 of the party upon whom the duty was imposed by law. It clearly 
 and necessarily results from the principles stated that where the 
 lease is unauthorized a wrongful breach resulting in injury im- 
 poses a liability upon the company that assumes, without power, 
 to execute a lease. But while it is clear that there is a liability 
 on the part of the lessor where the lease is unauthorized, that is, 
 where there is no power to execute it, there is doubt whether this 
 liability extends to the servants employed by the lessee in oper- 
 ating the road.^ The weight of authority at present perhaps is 
 that the lessor is liable to the servants of the lessee, but it is not 
 
 68, 105 N. E. 185, Ann. Cas. 1915D, 
 992, L. R. A. 1918E, 249, and notes 
 to said cases as reported in both of 
 these last reports. 
 
 5 Baltimore, &c. R. Co. v. Paul, 143 
 Ind. 23, 40 N. E. 519, 28 L. R. A. 216, 
 applying the doctrine of East Line, 
 &c. Railroad Co. v. Culberson, 72 
 Tex. 375, 10 S. W. 706, 13 Am, St. 
 805, and distinguishing Macon, &c. 
 R. Co. V. Mayes, 49 Ga. 355, IS Am. 
 Rep. 678. Judge Cooley illustrates 
 the general doctrine and says: "The 
 general duty of a railroad company 
 to run its trains with care becomes 
 a particular duty to no one until he 
 is in a position to have a right to 
 complain of the neglect." Cooley 
 Torts, 660. In the case of Kahl v. 
 Love, il N. J. Law 5, the rule was 
 thus stated: "Actionable negligence 
 exists only when the party whose 
 negligence occasions the loss owes a 
 duty, arising from contract or other- 
 wise, to the person sustaining such 
 
 loss." The court in Lary v. The 
 Cleveland, &c. Co., 78 Ind. 323, 329, 
 41 Am. Rep. 572, quoted a very 
 similar statement of the rule with 
 approval. The statement quoted is 
 this : "Actionable negligence exists 
 only where the one whose act causes 
 or occasions the injury owed the in- 
 jured person a duty created either 
 by contract or by operation of law, 
 which he has failed to discharge." 
 •Many cases are cited in the case 
 from which we have quoted. Gibson 
 V. Chesapeake, &c. R. Co., 215 Fed. 
 24; The State Travelers' Ins. Co. v. 
 Harris, 89 Ind. 363, 366, 46 Am. Rep. 
 169; Nave v. Flack, 90 Ind. 205, 207, 
 46 Am. Rep. 205 ; Evansville, &c. R. 
 Co. V; Griffin, 100 Ind. 221, SO Am. 
 Rep. 783; Indianapolis, &c. R. Co. v. 
 Pitzer, 109 Ind. 179, 182, 6 N. E. 
 310, 10 N. E. 70, 58 Am. Rep. 387. 
 This subject is further considered 
 post, § 535. 
 
§ 530 RAILROADS 764 
 
 clear that this doctrine is sound. It is elementary learning that 
 there is no negligence where there is no duty, and that a party 
 who bases an asserted right of action upon the negligence of the 
 defendant must show the breach of a specific duty owing him,^ 
 and where the relation of master and servant exists the only 
 duty, so far as such relation is concerned, is that created by the 
 contract of employment, so that it would seem that the em- 
 ployer is the only person liable, at least unless it can justly be 
 said' that there is a breach of duty which could not be transferred 
 or escaped, owing to the injured party as one of the public. In 
 the latter case, wh.jre the negligence is not merely that of the 
 lessee but consists of that of the lessor in having defective tracks, 
 switches, engines and cars, or the like, there is much reason for 
 holding the lessor liable even to the employes of the lessee. 
 
 § 530 (467). Authorized lease — Liability of lessor for injuries 
 caused by negligence of lessee — Cases holding lessor liable. — 
 
 There is a wide diversity of opinion upon the question whether a 
 company that leases its railroad to another company under au- 
 thority of law is liable for the negligence, of the lessee in operat- 
 ing the road under the lease. Many- of the courts and some of the 
 text-writers afifirm that the lessor is liable although the lease is 
 executed under authority of law, unless the statute which grants 
 the right to lease exempts the lessor froni liability.'' The theory 
 
 6 See post, § S3S. approved the case of Braslin v. 
 
 7' In Logan v. North Carolina R. Somerville, &c. R. Co., 145 Mass. 64, 
 
 Co., 116 N. Car. 940, 21 S. E. 959, 13 N. E. 65. As sustaining the doc- 
 
 the court referred to the cases of trine that the lessor was liable for 
 
 State V. Richmond, 72 N. Car. 634; an injury to a person employed by 
 
 Gooch V. McGee, 83 N. Car. 59, 35 the lessee, the court cited National 
 
 Am. Rep. 558; Hughes v. Commis- Bank, &c. v. Atlanta, &c. R. Co., 25 
 
 sioners, 107 N. Car. 598, 12 S. E. 465, S. Car. 216; Harmon v. Columbia, 
 
 and other cases holding that express &c. R. Co., 28 S. Car. 401, 5 S. E. 
 
 legislative authority is requisite to 835, 13 Am. St. 686; Singleton v. 
 
 the validity of a lease and adjudged Southwestern R. Co., 70 Ga. 464, 48 
 
 that even though there was legisla- Am. Rep. 574, 21 Am. & Eng. R. 
 
 tive authority for the execution of Cas. 226; Balsley v. St. Louis, &c. 
 
 the lease, the lessor company was R. Co., 119 111. 68, 8 N. E. 859, 
 
 liable for injuries caused by the 59 Am. Rep. 784; Naglee v. Alexan- 
 
 negligence of the lessee. The court dria, &c. R. Co.. 83 Va. 707, 3 S. E. 
 
765 
 
 LEASES 
 
 §530 
 
 of some of the cases which hold the lessor liable for, the negli- 
 gence of the lessee in operating the road is that a railroad com- 
 pany is never exonerated excep.t where there is an express statu- 
 tory provision relieving it from liability. The cases to which we 
 refer deny that there can be exoneration by implication, and 
 assert that the authority to lease does not protect the lessor.^ 
 Other courts hold that the lessor is exonerated from liability for 
 the negligence of the lessee in operating the road, but is liable for 
 
 the South Carolina law the lessor 
 remains liable with the lessee for 
 damages to individuals caused in the 
 operation of the road. Price v. 
 Southern Power Co., 206 Fed. 496. 
 So under a Missouri statute even 
 though the charter originally pro- 
 vided otherwise. Brown v. Louisi- 
 ana &c. R. Co., 256 Mo. 522, 165 S. 
 W. 1060. 
 
 8 Balsley v. St. Louis, &c. R. Co., 
 119 111. 68, 8 N. E. 859, 59 Am. Rep. 
 784; Wabash, &c. R. Co. v. Peyton, 
 106 111. 534, 46 Am. Rep. 705, 18 Am. 
 & Eng. R. Cas. 1 ; ChoUette v. Oma- 
 ha, &c. R. Co., 26' Nebr. 159, 41 N. 
 W. 1106, 37 Am. & Eng. R. Cas. 16. 
 It is so held even as to an employe 
 of the lessee company in the recent 
 case of Chicago, &c. R. Co. v. Hart, 
 209 111. 414, 70 N. E. 654, 66 L. R. A. 
 75, where authorities on both sides 
 are collected and reviewed in the 
 prevailing and dissenting opinions. 
 And in Parr v. Spartanburg, &c. R. 
 Co., 43 S. Car. 197, 49 Am. St. 826, 
 the lessor company was held liable 
 for a tort in the negligent operation 
 of the road by a receiver of its les- 
 see, appointed in an action to which 
 it was not a party. South Carolina 
 has a statute making a consolidated 
 company liable for injury to an em- 
 ploye of its lessee. Reed v. South- 
 ern R., 75 S. Car. 162, 55 S. E. 218. 
 
 369, 5 Am. St. 308; Acker v. Alex- 
 andria, &c. Railroad Co., 84 Va. 648, 
 5 S. E. 688. See also Georgia R. &c. 
 Co. V. Haas, 127 Ga. 187, 56 S. E. 
 313 ; DriscoU v. Norwich &c. R. Co., 65 
 Conn. 230, 32 Atl. 354; Green v. 
 Coast Line R. Co., 91 Ga. IS, 24 S. 
 E. 814, 2>Z L. R. A. 806, 54 Am. St. 
 379; Chicago &c. R. Co. v. Schmitz, 
 211 111. 446, 71 N. E. 1050; Stephens 
 V. Railroad Co., 36 Iowa 327; Sor- 
 enson v. Chicago &c. R. Co., 183 
 Iowa 1123, 168 N. W. 313; Bower v. 
 Burlington, &c. R. Co., 42 Iowa 546; 
 McCabe v. Maysville &c. R. Co., 112 
 Ky. 861, 66 S. W. 1054; dinger v. 
 Chesapeake &c. R. Co. 128 Ky. 736, 
 109 S. W. 315, 15 L. R. A. (N. S.) 
 998 ; Markey v. Louisiana &c. R. Co., 
 185 Mo. 348, 84 S. W. 61; Chollette 
 v. Omaha &c. R. Co., 26 Nebr. 169, 
 41 N. W. 1106, 4 L. R. A. 135; Hard- 
 en V. North Carolina R. Co., 129 N. 
 Car. 354, 40 S. E. 184, 55 L. R. A. 
 784, 85 Am. St. 747 ; Parker v. North 
 Carolina R. Co., 150 N. Car. 433, 64 
 S. E. 186; Quigley v. Toledo &c. R. 
 Co., 89 Ohio St. 68, 105 N. E. 185, 
 Ann. Cas. .1915D, 992, L. R. A. 1918E, 
 249; Midland Valley R. Co. v. 
 Toomer, 62 Okla. 162, 162 Pac. 1127, 
 1129; Davis v. Atlanta, &c. R. Co.,, 63 
 S. Car. 370, 41 S. E. 468; Chicago &c. 
 R. Co. V. Willard, 220 U. S. 413, 
 31 Sup. Ct. 460, 55 L. ed. 521. Under 
 
§531 
 
 RAILROADS 
 
 766 
 
 injuries resulting fi-om a breach of duty owing to the public, 
 as, for instance, negligence in the construction of tracks, sta- 
 tion buildings and the like.® 
 
 § 531 (468). Authorized lease — Liability of lessor for neg- 
 ligence of lessee in operating the road — Authorities denying 
 liability. — As said in the preceding section some of the cases 
 make a distinction between negligence in the operation of the 
 road and negUgence in its construction or in the performance 
 of a duty to the public, and adjudge that the lessor company is 
 not liable for the negligence of the lessee in operating the 
 road.^0 
 
 9 Central, &c. R. Co. v. Phinazee, 
 93 Ga. 488, 21 S. E. 66; Kansas, &c. 
 Railroad Co. v. Wood, 24 Kans. 619 ; 
 St. Louis &c. R. Co. V. Curl, 28 
 Kans. 622, 11 Am. & Eng. R. Cas. 
 4S8; Nugent v. Boston, &c. R. Co., 
 80 Maine 62, 12 Atl. 797, 6 Am. St. 
 151, 38 Am. & Eng. R. Cas. 52; Bay 
 City R. Co. V. Austin, 21 Mich. 390; 
 Kearney v. Central, &c. R. Co., 167 
 Pa. St. 362, 31 Atl., 637 ; Texas, &c. 
 R. Co. V. Moore, 8 Texas Civ. App. 
 289, 27 S. W. 962. See also Lee v. 
 Southern Pac. R. Co., 116 Cal. 97, 
 58 Am. St. 140, and note; Louis- 
 ville, &c. R. Co. V. Linton, 43 Ind. 
 App. 709, 88 N. E. 532 (lessor not 
 liable to passenger of lessee unless 
 injury caused by defective track or 
 the like) ; De Lashmutt v. Chicago, 
 &c. R. Co., 148 Iowa 556, 126 N. W. 
 359; Hamilton v. Louisiana, &c. R. 
 Co., 117 La. 243, 41 So. 560, 6 L. 
 R. A. (N. S.) 787; McCpUoch v. 
 Southern R. Co., 149 N. Car. 305, 
 62 S. E. 1096; Lakin v. Railroad Co., 
 13 Ore. 436, 11 Pac. 68, 57 Am. St. 
 25. Not for acts of the lessee in 
 the maintenance and repair of the 
 road. Ackerman v. Cincinnati, &c. 
 
 R. Co., 143 Mich. 58, 106 N. W. 558, 
 114 Am. St. 640; Shores v. South- 
 ern R. Co., 72 S. Car. 244, 51 S. E. 
 699. 
 
 10 Arrowsmith v. Nashville, &c. 
 R. Co., 57 Fed. 165. In the case 
 cited the court, after a very full re- 
 view of the authorities, adopted the 
 doctrine of the cases of Mahoney v. 
 Atlantic, &c. R. Co., 63 Maine 68, 
 and Nugent v. Boston, &c. R. Co., 
 80 Maine 62, 12 Atl. 797, 6 Am. St. 
 151, 38 Am. & Eng. R. Cas. 52, and 
 quoted from the latter case as ex- 
 pressive of the true rule the follow- 
 ing: "And herein, as we think, lies 
 the true distinction which marks the 
 dividing line of the lessor's respon- 
 sibility. In other words an author- 
 ized lease, without any exemption 
 clause, absolves the lessor from the 
 torts of the lessee resulting from 
 the negligent operation and handling 
 of trains and the general manage- 
 ment of the leased road over which 
 the lessor could have no control. But 
 for an injury resulting from the 
 negligent omission of some duty 
 owed to the public, such as the 
 proper construction of the road, sta- 
 
767 
 
 LEASES 
 
 §532 
 
 § 532 (469). Authorized lease^Liability of lessor for neg- 
 ligence of lessee in operating the road — Views of the authors. 
 
 I — Our opinion is that where the lease is executed under the 
 provisions of a statute, in accordance with its requirements, 
 and is made to a company having authority to accept it, and 
 is made in good faith and not for the purpose of transferring 
 duties or obligations to an irresponsible party, the lessor com- 
 pany is not liable for injuries caused by the negligence of the 
 lessee and not attributable to a breach of any public duty of 
 the company that executed the lease. It must be assumed that 
 in granting the authority to execute a lease the legislature had 
 in mind former statutes as well as the established rules of the 
 common law.'^^ When power to execute a lease is conferred 
 upon a corporation the legislature must, in the absence of coun- 
 tervailing language, be deemed to intend to authorize the exe- 
 cution of such an instrument as the established law regards 
 as a lease. The law enters as a silent factor into every con- 
 tract, and hence of every lease it is an important element. The 
 
 tion houses, etc., the charter com- 
 pany cannot, in the absence of stat- 
 utory authority, discharge itself of 
 legal responsibility.'' The court in 
 the case first named cited as support- 
 ing its conclusion the following au- 
 thorities : Briscoe v. Southern &c. R. 
 Co., 40 Fed. 273 ; St. Louis &c. R. Co. v. 
 Curl, 28 Kans. 622, 11 Am. & Eng. 
 R. Cas. 458; Ditchett v. Spuyten, &c. 
 R. Co., 67 N. Y. 425; Miller v. New 
 York, &c. R. Co., 125 N. Y. 118, 47 
 Am. & Eng. R. Cas. 369; Virginia, 
 &c. R. Co. V. Washington, 86 Va. 
 629, 10 S. E. 927, 7 L. R. A. 344, 43 
 Am. & Eng. R. Cas. 688. See also 
 Heron v. St. Paul, &c. R. Co., 68 
 Minn. 542, 71 N. W. 706 (citing 
 text) ; Hayes v. Northern Pac. R. 
 Co., 74 Fed. 279; Litte Rock, &c. R. 
 Co. V. Daniels, 68 Ark. 171, 56 S. W. 
 874; Caruthers v. Kansas City, &c. 
 R. Co., 59 Kans. 629, 54 Pac. 673, 44 
 
 L. R. A. TSl; Harper v. Newport 
 News, &c. R. Co., 90 Ky. 359, 14 S. 
 W. 346; New York v. Twenty-third 
 St. R. Co., 113 N. Y. 311, 21 N. E. 
 60; Miller v. Railroad Company; 125 
 N. Y. 118, 26 N. E. 35. The same 
 view is taken in Yeates v. Illinois 
 Cent. R. Co., 137 Fed. 943, 945 (cit- 
 ing text) where it is also held that 
 the question is one of general law 
 in regard to which a federal court 
 is not controlled by state decisions. 
 See also Williams v. Spartanburg R. 
 Co., 124 Fed. 796; Curtis v. Cleve- 
 land, &c. R. Co., 140 Fed. W ; Gib- 
 son V. Chesapeake, &c. R. Co., 215 
 Fed. 24; Vadas v. Pittsburg, &c. R. 
 Co., 230 Pac. St. 41, 79 Atl. 166. 
 
 12 "The legislature are presumed 
 to know existing statutes and the 
 state, of the law relating to the sub- 
 jects with which they deal." Suth- 
 erland Stat. Const. § 287. 
 
§ 532 RAILROADS 768 
 
 legal effect of a lease is to transfer for a prescribed period of 
 time the possession and control of the property to the lessee. 
 In authorizing the execution of a lease the legislature grants 
 the right to execute and carry into effect such an instrument 
 as divests the lessor of possession and control and places it in 
 the lessee to the exclusion of the lessor. The possession of the 
 one party is excluded and that of the other is made complete 
 by the legislative sanction. If a sale is made under valid legis- 
 lative authority the company that acquires the property ac- 
 quires an exclusive right and interest, and the lessee by virtue 
 of the lease acquires a similar right so far as possession, con- 
 trol and management are concerned, for the term for which 
 the property was leased. It cannot be doubted that a statute 
 conferring general authority to sell means a complete and 
 effective sale, and upon the same principle it must be concluded 
 that the power to lease, unless qualified and limited by stat- 
 ute, is a power to make a complete and effective lease. A 
 complete and eft'ective lease certainly vests the right of pos- 
 session, control and management in the lessee, since no other 
 effect can be assigned such a lease without a direct and pal- 
 pable violation of long and well established principles of law. 
 The lessor company does no v/rong in executing a lease which 
 the law of the land gives it full power to execute, so that in 
 executing the lease there is no improper motive, no illegal act, 
 nor any wrongful attempt to escape a duty. In granting au- 
 thority to lease, the legislature empowers the lessor company to 
 transfer the duty of operating the road to the lessee, and in 
 doing what the legislature authorizes no rule of public policy 
 is violated. It is, indeed, inconceivable that there can be a 
 violation of a rule of public policy where the act done by a 
 party is done under a legislative enactment and in accordance 
 with its provisions The cases which hold the lessor liable, 
 although the lease is an authorized one, upon the ground that 
 there must be an express exemption from liability in order to 
 exonerate the lessor, concede, what could not be denied with- 
 out leaving the dom.ain of reason, that the legislature may by 
 express enactment exonerate t^e lessor, so that, even upon that 
 theory ("which we believe to be unsound) the question, at bot- 
 
769 LEASES § 532 
 
 torn, is one of statutory construction. The, courts which assert 
 the theory mentioned tacitly assume that in granting author- 
 ity to lease, the legislature granted something less than an au- 
 thority to lease. We believe that the only theory that can be de- 
 fended on principle is that in granting authority to execute 
 a lease the legislature conferred authority to execute an 
 effective instrument with all' the qualities and incidents with 
 which the law invests a lease. If this be true then the lease 
 does transfer possession and control from the one party to the 
 other for the term of the lease, and the rights and obligation 
 of the parties are such, and such only, as the law annexes to 
 the relation of lessor and lessee. For negligence in managing 
 and using the demised premises the lessor is not responsible. 
 If it has performed its duty in constructing tracks and neces- 
 sary structures it cannot be held responsible for the negligence 
 of the lessee in employing incompetent servants, or in negli- 
 gently handling, trains, or in negligently overloading cars, or 
 in negligently failing to provide a sufficient number of persons 
 to manage trains, or for any negligence which relates solely 
 to the mode of operating the leased road.^* 
 
 13 This section is quoted almost Pac. R. Co., 154 Cal. 285, 97 Pac 
 
 in full and the view of the authors 520; Peacock v. Detroit, &c. R. Co. 
 
 taken in Heron v. St. Paul, &c. R. (Mich.), 175 N. W. 580, 8 A. L. R. 
 
 Co., 68 Minn. 542, 71 N. W. 706, 707, 964 ; McAllister v. Chesapeake &c. 
 
 708. It is also approved in Yeates R. Co., 198 Fed. 660. The doctrine 
 
 V. Illinois Cent. R. Co., 137 Fed. 943, of the section is distinguished in 
 
 945; and in elaborate opinions in Sorenson v. Chicago, &c. R. Co., 183 
 
 Moorshead v. United R. Co., 119 Mo. La. 1123, 168 N. W. 313, 315. In 
 
 App. 541, 96 S. W. 261, 274, 280, 281 Chicago, &c. R. Co. v. Weber, 219 
 
 (affirmed in 203 Mo. 121, 100 S. W. 111. 372, 76 N. E. 489, 4 L. R. A. (N. 
 
 611, 612, quoting text at length), S.) 272, limits of the broad doctrine 
 
 where it is said to be "illuminating, of liability in Illinois are pointed out, 
 
 exhaustive and conclusive." Penn- and it is held that servants or agents 
 
 sylvania Steel Co. v. New York City of the lessee are not agents of the 
 
 R. Co., 229 Fed. 367 (calling atten- lessor to receive service of process 
 
 tion to conflict of decisions in vari- in personal injury cases; that in such 
 
 ous jurisdictions) ; Westervelt v. St. a case it may be shown by parol 
 
 Louis Transit Co., 222 Mo. 325, 121 that at the time of the accident the 
 
 S. W. 114; Pinkerton v. Pennsyl- road was operated by a lessee, and 
 
 vania Trac. Co., 193 Pa. 229, 44 Atl. that the lessor is not bound by dec 
 
 284. See also Johnson v. Southern larations in a time table, put out by 
 
 2S — Ell. Eailkoads 1 
 
§533 
 
 RAILROADS 
 
 770 
 
 §533 (470). Control reserved by lessor. — Where the lessor 
 company, in an authorized lease, retains control of the road, 
 there is reason for holding it liable for the negligence of the 
 lessee in operating the iroad. The fact that exclusive control 
 is not transferred to the lessee is an influential factor, and may 
 well, be held to constitute the basis of an exception to what we 
 conceive to be the general rule. If the lessor company does 
 retain control its duty is to exercise that control as the law 
 requires.!* 
 
 §534^(471). Liability of lessee under authorized lease — Il- 
 lustrative cases. — An authorized lease, that is, a lease executed 
 under power granted by the legislature, imposes upon the les- 
 see the duty of operating and conducting the road as the stat- 
 ute from which the lessor company derived its powers pre- 
 scribes. ^^ The lessee is under a duty to provide fences, as the 
 charter of the company from which it acquired its title re- 
 
 the lessee, where it is not shown 
 that the lessor had any knowledge 
 of it or authorized it in any way. 
 And lessor is not liable for negli- 
 gence of receiver of lessee. Henning 
 V. Sampsell, 236 111. 375, 86 N. E. 
 274. 
 
 14 DriscoU V. Norwich, &c. Co., 65 
 Cpnn. 230, 32 Atl. 354. In the case 
 cited the lessor reserved to itself the 
 control of the road while in the 
 hands of the lessee, so that there can 
 be no doubt that the conclusion as- 
 serted by the court is sound. See 
 also Central Trust Co. v. Colorado 
 Midland R. Co., 89 Fed. 560; Cen- 
 tral Trust Co. V. Denver, &c. R. Co., 
 97 Fed. 239; Braslin v. Sommerville, 
 145 Mass. 64, 13 N. E. 65. This dis- 
 tinction is noted and this section 
 •quoted with approval in Quigley v. 
 Toledo, &c. R. Co., 89 Ohio St. 68, 
 105 N. E. 185, L. R. A. 1918 E, 249, 
 253, Ann. Cas. 1915 D, 992, 994. See 
 
 also Grand Trunk R. Co. v. Parks, 
 183 Fed. 750; Texas &c. R. Co. v. 
 Lacey, 185 Fed. 25; Willson v. Col- 
 orado, &c. R. Co., 57 Colo. 303, 142 
 Pac. 174; Atlanta &c. R. Co. v. Barn- 
 well, 138 Ga. 569, 75 S. E. 645; Camp- 
 bell v. Canadian &c. R. Co., 124 Minn. 
 245, 144 N. W. 772 ; Sanders v. Penn- 
 sylvania R. Co., 225 Pa. St. 103, 73 
 Atl. 1010, 133 Am. St 857; Bellamy 
 V. Conway, &c. R. Co., 85 S. Car. 450, 
 67 S. E. 545; St. Louis, &c. R. Co. 
 V. McGrath (Tex.), 160 S. W. 444. 
 15 State V. Central, &c. R. Co., 71 
 Iowa 410, 60 Am. Rep. 806; New 
 York, &c. R. Co., In re, 49 N. Y. 
 414; Ogdenburg, &c. R. Co. v. Ver- 
 mont, &c. R. Co., 4 Hun (N. Y.) 712; 
 Pennsylvania R. Co. v. Sly, 65 Pa. 
 St. 205; Commonwealth v. Pennsyl- 
 vania R. Co., 117 Pa. St. 637, 12 Atl. 
 38; South Carolina, &c. R. Co. v. 
 Wilmington, &c. R. Co., 7 S. Car. 
 410. 
 
771 
 
 LEASES 
 
 §534 
 
 quires;'" to exercise ordinary care and diligence to prevent the 
 escape of fire, and to give signals at crossings, as provided in 
 the statute governing the lessor company.^' A lessee is liable 
 for maintaining a nuisance after notice to abate, although the 
 nuisance existed at the time the lease was executed. ^^ The 
 lessee is, as a rule, liable for injuries resulting froiri a failure 
 to properly operate and maintain the road,^* and for the negli- 
 gent acts of its servants in the operation of the road.^" It is 
 liable for the failure to carry, safely and promptly, any per- 
 sons or goods entrusted to it for carriage.^^ It may be safely 
 asserted as a general rule that when a road is transferred by 
 lease under legislative authority, the lessee company is. liable 
 as if it- were operating the road as owner.22 
 
 isLiddle v. Keokuk, &c. R. Co., 
 23 Iowa 378; Cook v. Milwaukee, 
 &c. R. Co., 36 Wis. 45; McCall v. 
 Chamberlain, 13 Wis. 637; Curry v. 
 Chicago, &c. R. Co., 43 Wis. 665. 
 See also Chicago, Rock Island, &c. 
 R. Co. V. Martin, 81 Kans. 344, 105 
 Pac. 451, 27 L. R A. (N. S.) 164. 
 
 17' Linfield . V. Old Colony, &c. R. 
 Co., 64 Mass. 562, 57 Am. Dec. 124. 
 
 18 Western, &c. R. Co. v. Cox, 93 
 Ga. 561, 20 S. E. 68. 
 
 19 St. Louis, &c. R. Co. V. Curl, 
 28 Kans. 622, 11 Am. & Eng. R. Cas. 
 458. But, as already shown, it is 
 not ordinarily liable for injuries to 
 land caused by defects in the original 
 construction of the road unknown to 
 it and not caused by operating it in 
 that condition. See Kearney v. Cen- 
 tral R. Co., 167 Pa. St. 362, 31 Atl. 
 637. The lessee has been held lia- 
 ble with the original owner or lessor 
 for damages resulting from a per- 
 manent injury to property caused by 
 the construction of the road. Stick- 
 ley V. Chesapeake, &c. R. Co., 93 Ky. 
 323, 52 Am. & Eng. R. Cas. 56. The 
 lessee is liable for the continuance 
 
 of a nuisance erected by the lessor. 
 Dickson v. Chicago, &c. R. Co., 71 
 Mo. 575. It is liable for injuries 
 arising from a failure to fence the 
 road. Missouri Pac. R. Co. v. Mor- 
 row, 32 Kans. 217, 4 Pac. 87; Illi- 
 nois Central R. Co. v. Kanouse, 39 
 111. 272, 89 Am. Dec. 307; Wabash 
 R. Co. V. Williamson, 3 Ind. App. 
 190, 29 N. E. 455 ; Ditchett v. Spuy- 
 ton, &c. R. Co., a N. Y. 425; Cook 
 V. Milwaukee, &c. R. Co., 36 Wis. 45. 
 
 20 A company is liable for fires 
 set by the engines of trains which it 
 runs over a leased road. Cantlon v. 
 Eastern R. Co., 45 Minn. 481, 48 N. 
 W. 22. 
 
 21 Wabash, &c. R. Co. v. Peyton, 
 106 111. 534, 46 Am. Rep. 705; Ma- 
 honey V.' Atlantic, &c. R. Co., 63 
 Maine 68; Feitel v. Middlesex, &c. 
 R. Co., 109 Mass. 398, 12 Am. Rep. 
 720; Burroughs v. Norwich, &c. R. 
 Co., 100 Mass. 26, 1 Am. Rep. 78; 
 Patterson v. Wabash, &c. R. Co., 54 
 Mich. 91; Philadelphia, &c. R. Co. 
 V. Anderson, 94 Pa. St. 351, 39 Am. 
 Rep. 787. 
 
 22 St. Louis, &c. R. Co. V. Curl, 
 
§ 535 RAILROADS 772 
 
 § 535 (472). Unauthorized lease— Liability of lessor to em- 
 ployes of lessee — Generally. — It is difficult without a departure 
 irom sound principle to support the doctrine of the cases which 
 hold that the lessor is liable to the employes of the lessee for 
 injuries caused by the negligence of the lessee in maintaining 
 and operating the leased road. The case of an employe is in 
 some important particulars essentially different from the case 
 of persons using the road, or of persons whose goods are trans- 
 ported over it, or of persons who are themselves carried as 
 passengers. The relations between the lessee company and its 
 employes are contractual, and the duty which the contract 
 creates is that of employer to employe. The person who takes 
 service with the lessee company voluntarily accepts that com- 
 pany as its employer and out of this contract comes the duty 
 which the contracting parties owe to each other. The employe 
 of the lessee certainly owes no duty to the lessor, and it is diffi- 
 cult to conceive a tenable ground for the conclusion that the 
 lessor owes a duty to the employe. The employer assumes to 
 perform the duties imposed upon it by law, in its character 
 of employer, and the employe voluntarily takes the lessee com- 
 pany as his employer. The employe does not contract with the 
 lessee as the agent of the lessor, but contracts directly with the 
 lessee as its own representative and not as the representative 
 of some other person or corporation. There is in all that the 
 term implies a direct and full privity of contract between the 
 lessee and its employes. There is no priority of contract be- 
 tween the lessor and the employes of the lessee, and no impli- 
 cation that for breach of the duty of employer, the employe 
 can look to the lessor for redress. In a recent case the ques- 
 
 28 Kans. 622 ; Mahoney v. Atlantic, v. Dunham, 68 Tex. 231, 4 S. W. 472, 
 
 &c. R. Co., 63 Maine 68; Davis v. 2 Am. St. 484. See also Chicago, 
 
 Providence, &c. R. Co., 121 Mass. etc. R. Co. v. Schmitz, 211 111. 446, 
 
 134 ; Patterson v. Wabash, &c. R. 71 N. E. lOSO (lessor and lessee both 
 
 Co., S4 Mich. 91 ; Murch v. Concord held liable). De Lashmutt v. Chi- 
 
 R. Corp. 29 N. H. 9, 61 Am. Dec. 631 ; cago, &c. R. CoT 148 Iowa SS6, 126 
 
 Ditchett V. Spuyten, &c. R. Co., 67 N. W. 359 (lessor and lessee both 
 
 N. Y. 425; Philadelphia, &c. R. Co. held liable). Howard v. Maysville, 
 
 V. Anderson, 94 Pa. St. 351, 39 Am. &c. R. Co., 24 Ky. 1051, 70 S. W. 631 
 
 Rep. 787; International, &c. R. Co. (both held liable). 
 
771 LEASES § 535 
 
 tion we are considering was thoroughly discussed, and it was 
 held that, although the lease was not authorized by statute, 
 the lessor was not liable to a servant of the lessee injured while 
 engaged in performing the duties of his service by reason of 
 defects in a locomotive used by the lessee in operating the 
 road.23 The theory of the court was that the lessor owed no 
 duty to the servant of the lessee, and as there was no duty 
 there could not be actionable negligence. There is unques- 
 tionably much force in the reasoning of the court in the case 
 under immediate mention, for the settled rule is that where 
 there is no duty there is no negligence, and a party cannot 
 have a right of action unless there is a breach of a specific duty 
 owing to him. In the case of an employer and employe there 
 is no consideration of public policy involved, such as there, is 
 in cases of third persons, for the employe by a voluntary con- 
 tract creates the relation of employer and employe. His rights 
 are such as his contract creates, the duty springs from the con- 
 tract and but for the contract he would really have no right on 
 the road or any of its equipments. The diflference between 
 cases where third persons sue for injuries, and cases where the 
 action is by an employe is so wide that cases deciding that 
 there is a liability to third persons are hardly in point. We 
 incline to the opinion that the lessor is not liable to the servants 
 of the lessee for injuries received by them, in cases where the 
 injuries are caused solely by the negligence of the lessee in 
 
 23 Baltimore &c. R. Co. v. Paul, between persons injured in such a 
 
 143 Ind. 23, 40 N. E. ,S19, 28 L. R. A. case and the operating company. 
 
 216. It Was said by the court, It is not so with an employe who 
 
 speaking of the duty to third per- voluntarily enters the service of 
 
 sons, that: "The law will not per- the latter company with a knowl- 
 
 mit the owner f the road to shirk edge of the facts and participates 
 
 its duty to them by turning over knowingly in the wrong, if wrong 
 
 its road to another company, nor it be." In Missouri &c. R. Co. v. 
 
 will it be permitted to deny its lia- Watts, 63 Tex. S49, 22 Am. & Eng. 
 
 bility where it has allowed such R. Cas. 277, it was held that the 
 
 other company, without authority lessor is not liable to the servant 
 
 of law, negligently to injure way- of the lessee for injuries received 
 
 farers over the track or property in the line of service required of 
 
 along the line." There is no privity him in operating the road. 
 
§535 . 
 
 RAILROADS 
 
 774 
 
 operating the road,^* but it is difficult to say on which side lies 
 the weight of authority, and in number of decisions, if we con- 
 sider those of the same courts as constituting the weight of 
 authority, it is perhaps against our opinion.^^ Whether the 
 lessor can be held liable to an employe of the lessee for negli- 
 gence in the construction of the track or the like^" is a very 
 
 24 It is so held, and the text is 
 cited with approval in Willard v. 
 Spartanburg, &c. R. Co., 124 Fed. 
 796, 800. Hukill v. Maysville &c. 
 R. Co., 72 Fed. 745; Curtis v. 
 Cleveland &c. R. Co., 140 Fed. 117; 
 Yeates v. Illinois Cent. R. Co., 137 
 Fed. 943; Banks v. Georgia R. &c. 
 Co., 112 Ga. 6SS, 37 S. E. 992; Cen- 
 tral of Georgia R. Co. v. Bessin- 
 ger, 17 Ga. App. 617, 87 S. E. 920; 
 Swice v. Maysville &c. R. Co., 116 
 Ky. 253, 75 S. W. 278; Travis v. 
 Kansas City &c. R. Co., 119 La. 
 489, 44 So. 274, 10 L. R. A. (N. S.) 
 1189, 121 Am. St, 526. To the same 
 effect are East Line &c. R. Co. v. 
 Culberson, 72 Tex. 375, 10 S. W. 
 706, 3 L. R. A. 567, 13 Am. St. 805 ; 
 Virginia &c. R. Co. v. Washington, 
 86 Va. 629, 10 S. E. 927, 7 L. R. A. 
 344. 
 
 2" Macon &c. R. Co. v. Mayes, 49 
 Ga. 355, 15 Am. Rep. 678; Chicago 
 &c. R. Co. v. Hart, 209 HI. 414, 
 70 N. E. 654, 66 L. R. A. 75; Illi- 
 nois Cent. R. Co. v. Lucas, 89 Miss. 
 411, 42 So. 607; Logan v. North 
 Carolina R. Co., 116 N. Car. 940, 21 
 S. E. 959; Harden v. North Caro- 
 lina R. Co., 129 N. Car. 354, 40 
 S. E. 184, 55 L. R. A. 784, 85 Am 
 St. 747; Davis v. Atlanta &c. R 
 Co.,, 63 S. Car. 370, 41 S. E. 468: 
 Jackson v. Southern R. Co., 11 S 
 Car. 550, 58 S. E. 605; Missouri 
 &c. R. Co, vs. Owens (Tex, Civ. 
 App.), 75 S. W. 579. It was stated 
 
 in the first edition that the weight 
 of authority is against our opinion, 
 which remains the same as before 
 expressed, but this statement was 
 criticised as incorrect in the dis- 
 senting opinion in the Illinois case 
 herein cited. There are other 
 North Carolina and Illinois cases 
 to the same effect as those herein 
 cited, and authorities upon both 
 sides are cited in a leading article 
 in 62 Cent. L. J. 181, where the 
 view we have taken is regarded 
 as the better one. 
 
 26 The authorities are very gen- 
 erally to the effect that the lessor 
 may be held liable in such a case. 
 Nugent V. Boston &c.. R. Co., 80 
 Maine 62, 12 Atl. 797, 6 Am. St. 151 ; 
 Lee V. Southern Pac. R. Co., 116 
 Cal. 97, 47 Pac. 932, 38 L. R. A. 71, 
 58 Am. St. 140, and note; Trinity 
 &c. R. Co. V. Lane, 79 Tex. 643, 15 
 S. W. 477, 16 S. W. 18. See also 
 Illinois Cent. R. Co. v. Sheegog, 
 215 U. S. 308, '30 Sup. Ct. 101, 54 
 L. ed. 208; Chesapeake &c. R. Co. 
 V. Vaughn, 159 Ky. 433, 167 S. W. 
 141. And a statute expressly de- 
 claring the lessee liable does not 
 necessarily exempt the lessor from 
 liability. Chicago &c. R. Co. v. 
 Crane, 113 U. S. 424, 5 Sup. Ct. 
 578, 28 L. ed. 1064; Bower v. Bur- 
 lington &c. R. Co.,. 42 Iowa 546; 
 Bean v. Atlantic &c. R. Co., 63 
 Maine 293. 
 
775 LEASES § 536 
 
 different question from the question here considered, namely, 
 the right of an employe of the lessee to hold the lessor liable 
 for negligence in operating the road.^'' 
 
 § 536. Liability of lessor to employes of lessee under Federal 
 Employer's Liability Act. — Where, under the local law, the lessor 
 is liable to the employes of the lessee, the lessee is regarded as 
 in effect the lessor's substitute or agent and the lessor may be 
 held liable to an employe of the lessee under the Federal Em- 
 ployer's Liability Act if he was so employed by the lessee in 
 interstate commerce at the time he was injured.^* In the case 
 to which we have referred as so holding, all the lessor's tracks 
 and property were within the state and it was not engaged in 
 interstate commerce. 
 
 §537 (473). Unauthorized lease — Liability of lessor, gen- 
 eral rule. — The general rule as declared by the great weight of 
 authority is this : Where the lease under which the road is trans- 
 ferred is unauthorized, even though a railroad company puts 
 its road in the po.ssession of a lessee, and surrenders the entire ' 
 control and management of its road, it is liable in general for 
 all damages caused by the lessee's negligence in the manage- 
 ment and conduct of the railroad and its affairs. ^^ There is, 
 
 2T The position taken in the text 58 L. ed. 591, Ann. Cas. 1914C, 159. 
 is also supported by the author of 29 York &c. R. Co. v. Winans, 
 the note in L. R. A. 1918E, 264, 17 How. (U. S.) 30, 15 L. ed. 27; 
 where he says : "The general rule Arrowsmith v. Nashville &c. R. 
 seems to be that the lessor or Co., 57 Fed. 165, 171; Briscoe v. 
 owner will be held liable for in- Southern Kansas R. Co., 40 Fed. 
 juries caused to the employes of 273; Ricketts v. Birmingham &c. 
 the lessee arising out of defective R. Co., 85 Ala. 600, S So. 353; Rome 
 switches, engines, or tracks. But &c. R. Co. v. Chasteen, 88 Ala. 591, 
 the lessor will not be held liable 7 So. 94; Lee v. Southern Pac. R. 
 when it owed no duty to the in- Co., 116 Cal.. 97, 47 Pac. 932, 38 
 , jured party, or where the injury L. R. A. 71, 58 Am. St. 140; Chat- 
 resulted from the negligent opera- tanooga &c. R. Co. v. Liddell, 85 
 tion and handling of the trains by Ga. 482, 11 S. E. 853, 21 Am. St. 
 the lessee." 169; Palmer v. Utah &c. R. Co., 2 
 
 28 Noth Carolina R. Co. v. Zach- Idaho 315, 350, 13 Pac. 425, 36 Am. 
 
 ary, 232 U. S. 248, 34 Sup. Ct. 305, & Eng. R. Cas. 443; Louisville &c. 
 
§537 
 
 RAILROADS 
 
 776 
 
 as we believe, and as we have more clearly pointed out in an- 
 other place, an important difference between authorized leases 
 and leases executed in cases where there is an entire want of 
 power to execute them, and the rules which govern the one 
 class of cases cannot be justly held to govern the other class. 
 The negligence of a lessee having actual possession and con- 
 trol of a railroad under a lease which the lessor had no power 
 to execute, does not transfer liability from the lessor to the 
 lessee, so the lessor remains liable for the wrongs of the les- 
 see,^'' except in cases where by reason of contract relations, the 
 specific duty which is violated is owing solely from the lessee 
 to the injured person. The theory upon which rriany of the 
 cases proceed is that the persons operating a road under an 
 unauthorized lease are the agents of the lessor company. ^^ But 
 
 R. Co. V. Breedon, 111 Ky. 729, 64 
 S. W. 667; Abbott v. Johnstown &c. 
 R. Co., 80 N. Y. 27, 36 Am. Rep. 
 572; Harmon v. Columbia &c., 28 
 S. Car. 401, S S. E. 835, 13 Am. St. 
 686; Parr v. Spartanburg &c. Co., 
 43 S. Car. 197, 20 S. W. 1009, 49 
 Am. St. 826; Galveston &c. R. Co. 
 V. Garteiser, 9 Tex. Civ. App. 
 456, 29 S. W. 939; International &c. 
 R. Co. V. Moody, 71 Tex. 614, 9 S. 
 W. 465; Ricketts v. Chesapeake 
 &c. R. Co., 33 W. Va. 433, 10 S. E. 
 801, 7 L. R. A. 354, 25 Am. St. 901. 
 See also Illinois Cent. R. Co. v. 
 Sheegog, 215 U. S. 308, 30 Sup. Ct. 
 101, 54 L. ed. 208; Gregory v. Geor- 
 gia Granite R. Co., 132 Ga. 587, 
 64 S. E. 686. Many other cases 
 hold the lessor liable, although it 
 does not clearly appear in the re- 
 ports whether the lease was author- 
 ized by statute or not. See North- 
 ern Pac. R. Co. V. Wentzer, 214 
 Fed. 10, and cases cited in note 
 Ann. Cas. 1915D, 996. But as stated 
 in the preceding section, some 
 courts hold otherwise as to em- 
 
 .ployes of the lessee. See alsa 
 Hukill V. Maysville &c. R. Co., 72 
 Fed 745; Virginia &c. R. Co. v. 
 Washington, 86 Va. 629, 10 S. E. 
 927, 7 L. R. A. 344. See review 
 of authorities in leading article in 
 62 Cent. L. J. 181. See also Bailey 
 v. Louisiana &c. R. Co., 129 La. 
 1029, 57 So. 325; Illinois Cent R. 
 Co. V. Lucas, 89 Miss. 411, 42 So. 
 607; Booth v. St. Louis &c. R. Co., 
 217 Mo. 710, 117 S. W. 1094; Logan 
 V. Atlantic &c. R. Co., 82 S. Car. 
 518, 64 S. E. 515. 
 
 30 It is held that the lessor is lia- 
 ble for the lessee's refusal to carry 
 freight offered for transportation. 
 Central &c. R. Co. v. Morris, 68 
 Tex. 49, 3 S. W. 457 
 
 31 Briscoe v. Southern Kansas 
 &c. R. Co., 40 Fed. 273; Nelson v. 
 Vermont &c. R. Co., 26 Vt. 717, 62 
 Am. Dec. 614. In Van Dresser v. 
 Oregon R. &c. Co., 48 Fed. 202, 
 the court held that the lessee of a 
 railroad, engaged in operating it 
 under an unauthorized lease, must 
 be considere(' us the agent of the 
 
777 
 
 LEASES 
 
 §538 
 
 whatever may be the particular theory adopted, the great 
 weight of authority is that the company that executes such a 
 lease still remains liable. ^^ 
 
 § 538 (474). Liability of lessee for injuries resulting from 
 negligence in operating the road. — The lessee is liable for all 
 injuries occasioned by its negligent operation of a road under 
 an unauthorized lease, inasmuch as its liability for its own 
 torts is the same whether it is using its own property or that 
 of another when the injury is done.^^ It is clear that principle 
 
 lessor company for the purpose of 
 service of summons in a suit 
 against such company. See also 
 Smalley v. Atlanta &c. R. Co., 73 
 S. Car. 572, S3 S. E. 1000, 1001 (cit- 
 ing text). A contract for the ship- 
 ment of freight over a railroad, 
 made by a lessee of the road, does 
 not bind the railroad company to 
 do more than its lessee is bound 
 to do. International &c. R. Co. v. 
 Thornton, 3 Tex. Civ. App. 197, 22 
 S. W. 67. 
 
 32 Washington &c. R. Co. v. 
 Brown, 17 Wall. (U. S.) 445, 21 L. 
 ed. 675; Ottawa &c. R. Co. v. Black, 
 79 111. 262; Bower v. Burlington 
 &c. R. Co., 42 Iowa 546; Braslin v. 
 Somerville &c. R. Co., 145 Mass. 
 64, 13 N. E. 65; Freeman v Minne- 
 apolis &c. R. Co., 28 Minn. 443; 
 Brown v. Hannibal &c. R. Co., 27 
 Mo. App. 394; Chollette v. Omaha 
 &c. R. Co., 26 Nebr. 159, 41 N. W. 
 1105, 37 Am. & Eng. R. Cas. 16: 
 Abbott V. Johnstown &c. R. Co., 80 
 N. Y. 27, 36 Am. Rep. 572; Ay cock 
 V. Raleigh &c. R. Co., 89 N Car. 
 321; Lakin v. Willamette &c. R. 
 Co., 13 Ore. 436, 11 Pac. 68, 57 Am. 
 Rep. 25; Bouknight v. Chicago &c. 
 R. Co., 41 S. Car. 415, 19 So. 915: 
 Harmon v. Columbia &c. R. Co., 28 
 
 S. Car. 401, 5 S. E. 835, 13 Am. St. 
 686; Hart v. Charlotte &c. R. Co., 
 Zi S. Car. 427, 12 S. E. 9; Gulf &c. 
 Co. v. Morris, 67 Tex. 692, 4 S. W. 
 156, 35 Am. & Eng. R. Cas. 94; 
 Fisher v. West Virginia &c. Co., 39 
 W. Va. 366, 19 S. E. 578, 2 L. R. A. 
 758. See generally Chicago &c. R. 
 Co. V. Whipple, 22 111. 105; Ohio 
 &c. R. Co. V. Dunbar, 20 111. 623, 
 71 Am. Dec. 291; Palmer v. Utah 
 &c. R. Co., 2 Idaho 315, 350, 13 Pac. 
 425, 36 Am. & Eng. R. Cas. 443; 
 Wasmer v. Delaware, &c. R. Co., 80 
 N. Y. 212, 36 Am. Dec. 608; Sellers 
 v. Richmond, &c. R. Co., 94 N. Car. 
 554; Pennsylvania Co. v. Sellers, 127 
 Pa. St. 406, 17 Atl. 987; East Line. 
 &c. R. Co. V. Culberson, 72 Tex. 375, 
 10 S. W. 706, 3 L. R. A. 567, 13 Am. 
 St. 805, 38 Am. & Eng. R. Cas. 225 ; 
 Great Northern, &c. R, Co. v. East- 
 ern, &c. R. Co., 12 Eng. L. & E. 224. 
 33 Wabash &c. R. Co. v. Peyton, 
 106 111. 534, 46 Am. Rep. 70S; 
 Muntz V. Algiers &c. R. Co., Ill 
 La. Ann. 423, 35 So. 624, 64 L. R. A. 
 222, 100 Am. St. 495; Cantlon v. 
 Eastern R. Co., 45 Minn. 481, 48 N. 
 W. 22; Philadelphia &c. R. Co. v. 
 Anderson, 94 Pa. St. 351, 39 Am. 
 Rep. 787. The lessee's liability i? 
 in nowise affected by the fact that 
 
§ 539 RAILROADS 778 
 
 requires the conclusion that a lessee operating under an unau- 
 thorized lease is liable for negligence in operating the road., 
 To permit a mere intruder into the franchise of a railroad com- 
 pany to escape liability for his failure to perform the duties 
 which he has assumed, upon the plea that he is acting under an 
 invalid contract and is operating the road without right, would 
 be to allow him to allege his own wrong in his defense.^* If 
 the lease is void the company operating a railroad under it can 
 not, it is obvious, shield itself from liability from injuries caused 
 by its culpable negligence. The person injured is in nowise 
 to be prejudiced by the wrongful act of the corporation that 
 causes him injury in assuming powers and duties it has no 
 right to take upon itself. There is, however, such harmony 
 among the authorities upon the general question that there is 
 no necessity for extended discussion. 
 
 § 539 (475). Contracts of the lessee. — The case of one who 
 founds his claim upon a contract with the lessee after the exe- 
 cution of the lease is essentially different from that of one who 
 bases his right on the tort of the lessee. It is obvious that the 
 lessor cannot be held liable for a breach of the contracts entered 
 into by the lessee. If the action is founded on the contract 
 there is no privity between the lessor and the person with 
 whom the lessee contracts. The contract gives the person 
 with whom the lessee contracts no right of action against the 
 lessor, for the latter has assumed no obligation whatever. ^^ 
 
 the lease was without authority 12 Am. Rep. 720; McMillan v. 
 
 and therefore unlawful. Ricketts v. Michigan &c. R. Co., 16 Mich. 79, 
 
 Chesapeake &c. R. Co., 33 W. Va. 93 Am. Dec. 208; Hall v. Brown, 
 
 433, 10 S. E. 801, 7 L. R. A. 3S4, 25 54 N. H. 495; Sprague v. Smith, 29 
 
 Am St. 901, 41 Am. & Eng. R. Cas. Vt. 421, 70 Am. Dec. 424; Cook v. 
 
 42; Haff v. Minneapolis &c. R. Co., Milwaukee &c. R. Co., 36 Wis. 45. 
 4 McCrary (U. S.) 622; Atlanta &c. 3* Sprague v. Smith, 29 Vt. 421, 
 
 R. Co. V. Ray, 70 Ga. 674; Toledo 70 Am. Dec. 424. 
 &c. Co. V. Rumbold, 40 111. 143; 35 It has been held that under a 
 
 Missouri Pac. R. Co. v. Morrow, lease transferring to the lessee all 
 
 32 Kans. 217, 4 Pac. 87; McCluer of lessor's contracts, the lessor can- 
 
 V. Manchester &c. R. Co., 79 Mass. not be held liable for goods deliv- 
 
 124, 74 Am. Dec. 624; Feital v. Mid- ered to the lessee under a contract 
 
 dlesex &c. R. Co., 109 Mass. 398, between the owner of the goods and 
 
779 LEASES § 540 
 
 § 540 (476). Joint liability. — The lessor and lessee arc usu- 
 ally jointly liable for negligence in the management of the road 
 where the lease under which it is operated is unauthorized.^" 
 There is a clear distinction between cases where the lease is 
 authorized and cases where it is unauthorized. If the lease 
 is unauthorized there is a joint wrong, for both parties assume 
 to do what the law forbids. The one attempts to escape obli- 
 gations the law imposes upon it by making a contract which 
 it has no power to make; the other attempts to assume powers 
 it cannot rightfully possess. The unauthorized lease being void, 
 the lessor has not transferred any duty, and the lessee in as- 
 suming rights and powers to which it is not entitled is really 
 an intruder and an usurper. 
 
 § 541 (477). Liability of company where it permits another 
 company to use track in common with itself. — It is held by the 
 Supreme Court of the United States that a railroad company 
 which permits another to make a joint use of its track is liable 
 to a person injured by the negligence of the company to which 
 the permission is granted. ^"^ The weight of authority supports 
 
 the lessor. Pittsburgh, &c. R. Co. v. Am. Dec. 730; Great Western &c. 
 
 Harbaugh, 4 Brewst. (Pa.) 115. But R. Co. v. Blalce, 7 H. & N. 987; Bux- 
 
 there is reason for doubting the ton v. Northeastern &c, R. Co., L. 
 
 soundness of this decision. See In- R. 3 Q. B. 548; Thomas v. Rhymney 
 
 ternational, &c. Co. v. Thornton, 3 R. Co., L. R. 5 Q. B. 226, and 
 
 Tex. Civ. App. 197, 22 S. W. 67; L. R. 6 Q. B. 266; Muschamp y. Lan- 
 
 Georgia R. &c. Co. v. Haas, 127 Ga. caster, &c. R. Co., 8 M. & W. 421 ; 
 
 187, 56 S. E. 313. Readhead v. Midland,- &c. R. Co., L. 
 
 36 Stickley v. Chesapeake, &c. R. R. 2 Q. B. 412; Illidge v. Goodwin, 
 
 Co., 93 Ky. 323, 20 S. W. 261, 52 5 C. & P. 190; Skinner v. London 
 
 Am. & Eng. R. Cas. 56; Little Miami, &c. R. Co., IS Jur. 289. It is held 
 
 &c. R. Co. V. Hambleton, 40 Ohio St. in Chicago &c. R. Co. v. Darke, 148 
 
 496, 14 Am. & Eng. R. Cas. 126. See 111. 226, 35 N. E. 750, 57 Am. & Eng. 
 
 Lockhart v. Little Rock, &c. R. Co., R. Cas. 577, that the objection that 
 
 40 Fed. 631 ; Spangler v. Atchison, the defendants are not jointly liable 
 
 &c. R. Co., 42 Fed. 305; Wisconsin, must be made in the trial court or 
 
 &c. R. Co. V. Ross, 142 111. 1, 31 N. it will not be considered on appeal. 
 
 E. 412, 34 Am. St. 49, S3 Am. & 37 Railroad Co. v. Barron, 5 Wall. 
 
 Eng. R. Cas. 73; Eaton v. Boston, (U. S.) 90, 18 L. ed. 591. In the 
 
 &c. R, Co., 11 Allen (Mass.) 500, 87 course of the opinion it was said: 
 
§541 
 
 KAIJ.ROADS 
 
 780 
 
 the doctrine of the case referred to.^* In the case to which we 
 refer the question of the effect of an authorized lease was not 
 considered, and as we believe, there was no such question in 
 the case. The case of a joint use by two companies is essen- 
 tially different from a case where the lessor company by an 
 authorized lease parts with possession and control of the road. 
 If it be true, as the authorities declare,^^ that the lease trans- 
 fers possession and control to the lessee to the exclusion of the 
 lessor, the case is entirely different from one wherein one com- 
 pany grants a privilege of common use to another or suffers 
 
 "The question is not whether the 
 Michigan company is responsible, but 
 whether the defendants, by giving to 
 that company the privilege of using 
 the road, have thereby, in the given 
 case, relieved themselves from re- 
 sponsibility. The question has been 
 settled, and we think rightly, in the 
 courts of Illinois holding the com- 
 pany liable. The same principle has 
 been affirmed in other states." Chi- 
 cago, &c. R. Co. V. Whipple, 20 111. 
 337 ; The court cited the cases of 
 Chicago &c. R. Co. v. McCarthy, 20 
 111. 38S, 71 Am. Dec. 285; Chicago 
 &c. R. Co. v. Whipple, 22 111. 105; 
 McElroy v. Nashua &c. R. Co., 58 
 Mass. 400, 50 Am. Dec. 794; Nelson 
 v. Vermont &c. R. Co., 26 Vt. 717, 
 62 Am. Dec. 614. 
 
 3S Case v. Atlanta &c. R. Co., 225 
 Fed. 862; Central Trust Co. v. Den- 
 ver, &c. R. Co., 97 Fed. 239; Peoria, 
 &c. R. Co. V. Lane, 83 111. 448; Fort 
 Wayne &c. Co. v. Hinebaugh, 43 Ind. 
 354; Delaware &c. R. Co. v. Salmon, 
 39 N. J. L. 299, 23 Am. Rep. 214; 
 Maumee Valley R. &c. Co. v. Mont- 
 gomery, 81 Ohio St. 426, 91 N. E. 
 181, 135 Am. St. 802, 26 L. R. A. (N. 
 S.) 987; Quigley v. Toledo, &c. R. 
 Co., 89 Ohio St. 68, 105 N. E. 185. L. 
 R. A. 1918E, 249, 254 (citing 
 
 text) ; Lakin v. Willamette Szc. R. 
 Co., 13 Ore. 436, 11 Pac. 68, 57 Am. 
 Rep. 25; Stetler v. Chicago, &c. R. 
 Co., 49 Wis. 609, 6 N. W. 303. And 
 the text is cited and applied in Jef- 
 ferson V. Chicago &c. R. Co., 117 
 Wis. 549, 94 N. W. 289, 290. See 
 Illinois &c. R. Co. v. Kanouse, 39 
 111. 272, 89 Am. Dec. 307 ; Harper v. 
 Newport &c. R. Co., 90 Ky. 359, 14 
 S. W. 346; Chicago &c. R. Co. v. 
 Powell, 151 Ky. 313, 151 S. W. 950. 
 Webb V. Portland &c. R. Co., 57 
 Maine 117; Peters v. Detroit &c. R. 
 Co., 178 Mich. 481, 144 N. W. 827; 
 Murch v. Concord &c. R. Co., 29 N. 
 H. 9, 61 Am. Dec. 631; Parker v. 
 Rensselaer &c. R. Co., 16 Barb. (N. 
 Y.) 315; Midland R. Co. v. Toomer, 
 62 Okla. 162, 162 Pac. 1127; Hanover 
 R. Co. V. Coyle, 55 Pa. St. 396; 
 Sprague v. Smith, 29 Vt. 421, 70 Am. 
 Dec. 424; note in 6 L. R. A. (N. S.) 
 787; Mills v. Orange &c. R. Co., 1 
 Mc Arthur (D. C.) 285. 
 
 89 State V. Central &c. R. Co., 71 
 Iowa 410, 32 N. W. 409, 60 Am. Rep. 
 806; New York &c. R. Co., In the 
 Matter of, 49 N. Y. (4 Sickels) 414, 
 420, 10 Am. Rep. 389; Pennsylvania 
 &c. Co. V. Sly, 65 Pa. St. 205 ; South 
 Carolina &c. R. Co. v. Wilmington 
 &c. R. Co., 7 S. Car. 410. 
 
781 LEASES § 542 
 
 the latter company to operate the road in its name. Conceding 
 the souijdness of the conclusion in the case decided by the 
 Supreme Court ,of the United States it cannot be justly re- 
 gai:ded as affirming that the lessor who executes a lease under 
 due authority is liable for the negligence of the lessee in operat- 
 ing the road.*" In the one class of cases there is a change of pos- 
 session and control, in the other possession is not changed, nor is 
 the right of control surrendered. 
 
 § 542 (478). Fraudulent leases. — A contract of lease, like 
 any other contract, may be set aside for the fraud of the direc- 
 tors in executing it. Fraud, however, is not presumed but must 
 be affirmatively proved. Circumstances may be established 
 from which, under familiar rules, fraud may be inferred. The 
 circumstances must be such that under the rules applicable to 
 cases of a similar character, the court or jury may infer fraud. 
 Fraud will not be presumed from the mere fact that a larger 
 rent is reserved than the subsequent earnings of the road really 
 justify, where it appears that the rent was fixed in accordance 
 with the report of competent and disinterested' experts, to 
 whom the question was referred.*^ Nor will fraud be pre- 
 sumed from the fact that the directors failed to make the con- 
 tinuance of the lease dependent upon the construction of con- 
 necting roads, which were contemplated when the lease was 
 
 40 The decision in Railroad Co. v. pany, having permitted the lessees 
 
 Brown, 17 Wall. (U. S.) 445, 21 L. and receiver to conduct the business 
 
 ed. 675, does not oppose this con- of the road in this particular, as if 
 
 elusion, for there was no considera- there were no change of possession, 
 
 tion in that case *of the effect of an is not in a position to raise any 
 
 authorized lease. The real point question as to its liability for their 
 
 in the case cited was that as there acts." 
 
 was no change of possession the *i Jessup v. Illinois Cent. R. Co., 
 
 company granting the privilege to 43 Fed. 483. See also Middletown v. 
 
 use still remained liable. The fact Boston &c. R. Co., S3 Conn. 351, 5 
 
 that thete was no change of posses- Atl. 706. Percentage of earnings is 
 
 sion clearly discriminates the case sometimes stipulated for as rent, 
 
 from one where there is an author- Terre Haute, &c. R. Co. v. Co:^, 102 
 
 ized lease, for the central idea of a Fed. 825; Catawissa R. Co. v. Phila- 
 
 lease is that it does change pos- delphia &c. R. Co., 168 Pa. St. 544, 
 
 session. In the above-named case 32 Atl. 62. 
 the court said: "Besides, the com- 
 
§543 
 
 RAILROADS 
 
 782 
 
 executed, by which the leased road was expected to become 
 part of an important through line.*^ n jg hgid that a lease by 
 a railroad company of a road constructed by a syndicate of its 
 directors is presumed fraudulent and may be' set aside at the 
 suit of a person injured thereby.** But such a lease is void- 
 able only and not void, and may be ratified by long acquies- 
 cence; and the lessee company cannot dispute its liability to 
 pay the rent reserved under such lease while holding and oper- 
 ating the leased property.** A lease frauduleiitly executed 
 may be avoided, but it cannot be justly said to be void. 
 
 § 543 (479). Unauthorized lease — Injunction. — A stockholder 
 of a corporation, or other party having an interest entitled to 
 protection, has a right to an injunction prohibiting the exe- 
 cution of an unauthorized lease.*^ It is true that such a lease 
 is void, but as it may cloud titles and rights, an injunction is 
 rightly held to be the appropriate remedy. The tendency of 
 the modern cases is to extend the remedy by injunction,**" and 
 
 *2 Jessup V. Illinois ,Cent. R. Co., 
 43 Fed. 483. 
 
 43 Barr v. New York &c. R. Co., 
 125 N. Y. 263, 26 N. E. 14S. An ap- 
 plication of stockholders to set aside 
 a traffic contract for ninety-nine 
 years, entered into by one railroad 
 company with another having only 
 a proposed road eighteen miles dis- 
 tant from the first, which has no 
 present authority to build a connect- 
 ing branch, even if the other had a 
 road, said contract being entered into 
 by the directors and officers for the 
 personal profit and advantage of in- 
 dividual members, and known to be 
 injurious to the company, will be 
 granted. Bostwick v. Chapman, 60 
 Conn. SS3, 24 Atl. 32. 
 
 44 Barr v. New York &c. R. Co., 
 125 N. Y. 263, 26 N. E. 145. 
 
 45 Pond V. Vermont &c. R. Co., 12 
 Blatchf. (U. S.) 280, Fed. Cas. No. 
 
 11265; Board v. Lafayette &c. R. Co., 
 SO Ind. 85. See Sorenson v. Chica- 
 go &c. R. Co., 183 Iowa 1123, 168 N. 
 W. 313, holding the company liable 
 under the facts, but distinguishing 
 this section and the decision of the 
 Supreme Court of the United States 
 above cited. See also Franklin v. 
 Havalena Min. Co., 16 Ariz. 200, 
 141 Pac. 727. 
 
 48 Champ V. Kendrick, 130 Ind. 
 549, 30 N. E. 787;, Pom. Eq. § 1357. 
 See generally Watson v. Sutherland, 
 S Wall. (U. S.) 74, 18 L. ed. 580; 
 Boyce v. Grundy, 3 Pet. (U. S.) 210, 
 7 L. ed. 655; Kilbourri v. Sunder- 
 land, 130 U. S. 505, 9 Sup. Ct. 594, 
 32 L. ed. 1005; Gormley v. Clark, 
 134 U. S. 338, 10 Sup. Ct. 5'S4, 33 L. 
 ed. 909; Allen v. Hanks, 136 U. S. 
 300, 10 Sup. Ct. 961, 34 L. ed. 414; 
 Morse v. Morse, 44 Vt. 84; Kerr 
 Injunctions, 32. See also Coe v. 
 
783 
 
 LEASES 
 
 §543 
 
 there is certainly no other remedy so effective or complete in 
 such cases as those of which we are speaking as an injunction. 
 The general doctrine is that where an act is entirely beyond 
 and outside of the scope of the corporate powers, and is one 
 which will injure the public or defeat public policy, ^n injunc- 
 tion will lie at the suit of the state or its representative.*'' 
 
 East &c. R. Co., 52 Fed. 531; Bos- 
 ton &c. R. Co. V. Boston &c. R. Co., 
 65 N. H. 393, 23 Atl. 529. 
 
 *■'' Attorney-General v. Delaware 
 &c. R. Co., 27 N. J. Eq. 631, 633; At- 
 torney-General V. Chicago &c. R. Co., 
 35 Wis. 425; Ware v. Regent's &c 
 Co., 3 DeGex & J. 212 ; Fishmongers' 
 Co. V. East India Co., 1 Dickens 163 ; 
 
 Browne v. Monmouthshare R. Co., 
 13 Beav. 32; Attorney-General v. 
 Johnson, 2 Wils. (Ch.) 87; Attor- 
 ney-General V. Forbes, 2 Myl. & C. 
 123 ; Attorney-General v. Great 
 Northern &c. R. Co., 4 DeGex & 
 S. 75; Attorney-General v. Mid- 
 Kent &c. R. Co., L. R. 3 Ch. App. 
 100. 
 
CHAPTER XIX. 
 
 RAILROAD SECURITIES. 
 
 Sec. 
 
 545. Power of railroad companies 
 
 to issue notes and bonds. 
 
 546. Power to guaranty bonds. 
 
 547. Income bonds. 
 
 548. Convertible bonds. 
 
 549. Negotiability of bonds — Bona 
 
 fide purchasers. 
 
 550. Form and manner of issuing 
 
 bonds — Effect of irregulari- 
 ties. 
 
 551. Interest coupons. 
 
 552. Payment of bonds and inter- 
 
 est. 
 
 553. No power to mortgage without 
 
 legislative authority. 
 
 554. Legislative authority to mort- 
 
 gage. 
 
 555. Distinction between authority 
 
 to mortgage franchises and 
 authority to mortgage prop- 
 erty. 
 
 556. Who may execute the mort- 
 
 gage. 
 
 Sec. 
 
 557. Ratification by stockholders of 
 
 unauthorized or improperly 
 executed mortgage. 
 
 558. When ultra vires mortgage 
 
 may be made effective. 
 
 559. Recording mortgages. 
 
 560. Generally as to what property 
 
 is covered by the mortgage. 
 
 561. What is covered by a mort- 
 
 gage of the undertaking. 
 
 562. Mortgage of after-acquired 
 
 property. 
 
 563. After-acquired property — 
 
 When lien attaches — ^What it 
 includes. 
 
 564. Fixtures — Rolling stock. 
 
 565. Reserved power to create prior 
 
 lien or dispose of unneces- 
 sary property. 
 
 566. Priority of mortgages. 
 
 567. Trust deeds. 
 
 568. Equitable and defective mort- 
 
 gages. 
 
 569. Statutory mortgages. 
 
 570. Debentures. 
 
 § 545 (480). Power of railroad companies to issue notes and 
 bonds. — In the absence of any provision upon the subject in 
 the charter or statute, a railroad company has implied power 
 to execute a promissory note in furtherance of its legitimate 
 
 784 
 
785 
 
 RAILROAD SECURITIES 
 
 §545 
 
 business.! It likewise has implied power to issue bonds." As 
 said in a leading case:* "There seems to be no reason why a 
 railroad corporation should not be considered as having power 
 to make a bond for any purpose for which it may lawfully con- 
 tract a debt, without any special authority to that effect, unless 
 restrained by some restrictions, express or implied, in its char- 
 ter, or in some other legislative act. A bond is merely an ob- 
 ligation under seal. A corporation having the capacity to sue 
 and be sued, the right to make contracts, under which it may 
 incur debts, and the right to make and use a common seal, a 
 contract under seal is not only within the scope of its pow- 
 ers, but was originally the usual and peculiarly appropriate 
 form of corporate agreement." So, as the corporation has 
 power to issue such negotiable instruments in the first instance, 
 it also has the power to indorse them when they have been re- 
 ceived in the payment of debts due _it, or the like, in the regu- 
 
 1 Mitchell V. Rome R. Co., 17 Ga. 
 574; Hamilton v. Newcastle &c. R. 
 Co., 9 Ind. 359; Smead v. Indian- 
 apolis &c. R. Co., 11 Ind. 104, 109; 
 Olcott V. Tioga &c. R. Co., 27 N. 
 Y. 546, 84 Am. Dec. 298; Richmond 
 &c. R. Co. V. Snead, 19 Grat. (Va.) 
 354, 10 Am. Dec. 670 (a due bill). 
 See also Louisville &c; R. Co. v. 
 Caldwell, 98 Ind. 245. The rule 
 seems to be otherwise in England. 
 Bateman v. Mid-Wales R. Co., L. R. 
 
 1 C. P. 499, 35 L. J. C. P. 205 ; Peru- 
 vian R. Co. V. Thames &c. Co., L. R. 
 
 2 Ch. 617, 36 L J. Ch. 864. See, as 
 to accommodation indorsement, J. G. 
 Brill Co. V. Norton &c. St. R. Co., 
 189 Mass. 431, 75 N. E. 1090, 2 L. 
 R. A. (N. S.) 525; Craft v. South 
 Boston R. Co., 150 Mass. 207, 22 N. 
 E., 920, 5 L. R. A. 641 ; note in 9 L. R. 
 A. (N. S.) 193. 
 
 2 Kelly v. Alabama &c. R. Co., 58 
 Ala. 489; Willoughby v. Chicago 
 Junction R. Co., SO N. J. Eq. 656, 25 
 Atl. 277; Miller v. New York &c; R. 
 
 Co., 18 How. Prac. (N. Y.) 374;^ 
 Olcott v. Tioga &c. R. Co., 27 N. "K. 
 546, 84 Am. Dec. 298; Commission- 
 ers of Craven v. Atlantic &c R. Co.,_ 
 n N. Car. 289; Philadelphia &c. R.. 
 Co. v. Lewis, 33 Pa. St. 33, 75 Am... 
 Dec. 574. See also Illinois Trust &c.. 
 Bank v. Pacific R. Co., 117 Cal. 33Z^ 
 49 Pac. 197; Memphis &c. R. Can v:. 
 Dow, 120 U. S. .287, 7 Sup. Ct. 482, 
 30 L. ed. 595 ; Coe v. East &c. R. Co., 
 52 Fed. 531; Toledo &c. R. Co. v. 
 Continental Trust Co., 95 Fed. 497; 
 Geddes v. Toronto &c. R. Co., 14 U. 
 C. C. P. 513. As to the powers of 
 public service commissioners over 
 the issuance of stocks and bonds or 
 other securities, see Kansas City &c. 
 R. Co. v. Bristow, 101 Kans. S57, 167 
 Pac. 1138, P. U. R. 1918 A, 732, L. 
 R. A. 1918 E, 342 ; and note to Laird 
 V. Baltimore &c R. Co., 47 L. R. A. 
 (N. S.) 1167. 
 
 3 Commonwealth v. Smith, 10 Al- 
 len (Mass.) 448, 87 Am. Dec. 672. 
 
§546 
 
 fiAILROADS 
 
 786 
 
 lar course of its business.^ Bonds secured by a mortgage which 
 is unauthorized, or otherwise invalid, may nevertheless be valid 
 as unsecured obligations,' and, so, on the other hand, may 
 bonds which are issued without any accompanying mortgage 
 under a statute simply giving authority "to borrow money on 
 mortgage."" Indeed, the power to mortgage is said to imply 
 and include the j)Ower to borrow money and issue bonds.'' 
 
 § 546 (481). Power to guaranty bonds. — As a general rule, 
 one corporation has no implied authority to lend its credit to 
 another by guaranty of dividends, or the like, especially if they 
 are engaged in different lines of business.® But, after much 
 litigation, it now seems to be reasonably well settled that one 
 railroad company may guaranty the bonds of another under 
 
 4 Olcott V. Tioga &c. R. Co., 27 N. 
 Y. S46. See also Bonner v. ' New 
 Orleans, 2 Woods (U. S.) 135, Fed. 
 Cas. No. 1631 ; Florida Cent. R. Co. 
 V. Schutte, 103 U. S. 118, 26 L. ed. 
 327; Tod v. Kentucky Union Land 
 Co., 57 Fed. 47. The indorsement by 
 the company of bonds issued by the 
 state to aid in the construction of 
 the road, although in the form of an 
 express guaranty, gives no lien to 
 the bondholders and in no way pre- 
 vents the company from executing 
 a mortgage to secure its own bonds 
 which it is authorized to issue. Mc- 
 Kittrick V. Arkansas Cent. R. Co., 
 152 U. S. 473, 14 Sup. Ct. 661, 38 L. 
 ed. 518. 
 
 5 Philadelphia &c. R. Co. y. Lewis, 
 33 Pa. St. 33, 75 Am. Dec. 574; 
 Union Trust Co. v. New York &c. R. 
 Co., (Ohio Com. PL) 1 R. & Corp. 
 L. J. 50. 
 
 6 McMasters v. Reed, 1 Grant Cas. 
 (Pa.) 36, approved and followed in 
 Philadelphia &c. R. Cp. v. Lewis, 33 
 Pa. St. 33, 75 Am. Dec. 574. 
 
 T Gloninger v. Pittsburgh &c. R. 
 
 Co., 139 Pa. St. 13, 21 Atl. 211, 46 
 Am. & Eng. R. Cas. 276. 
 
 8 Pennsylvania R. Co. v. ,St. Louis 
 &c. R. Co., lis U. S. 290, 6 Sup. Ct. 
 1094, 30 L. ed. 83; Louisville &c. R. 
 Co. V. Louisville Trust Co., 174 U. 
 S. SS2, 19 Sup. Ct. 817, 43 L. ed. 
 1081 ; Humboldt Min. Co. v. Ameri- 
 can &c. Co., 62 Fed. 356; Smead v. 
 Indianapolis &c. R. Co., 11 Ind. 104; 
 Lucas V. White &c. Co., 70 Iowa 541, 
 30 N. W. 771, 59 Am. Rep. 449; 
 Greene v. Middlesborough &c. Co., 
 121 Ky. 355, 89 S. W. 228; Western 
 Md. R. Co. V. Blue Ridge Hotel Co., 
 102 Md. 307, 62 Atl. 351, 3 L. R. A. 
 (N. S.) 887; Davis v. Old Colony 
 R. Co., 131 Mass. 258, 41 Am. Rep. 
 221 ; Central Bank v. Empire Stone 
 Co., 26 Barb. (N. Y.) 23; PoUetz v. 
 Public Utilities Com., 96 Ohio St. 49, 
 117 N. E. 149, L. R. A. 1918 D, 166, 
 and note; Memphis &c. Co. v. Mem- 
 phis &c. R. Co., 85 Tenn. 703, 5 S. 
 W. 52, 4 Am. St. 798; Stark Bank v. 
 U. S. Pottery Co., 34 Vt. 144; Col- 
 man V. Eastern &c. R. Co., 10 Beav. 
 t 
 
787 
 
 RAILROAD SECURITIES 
 
 546 
 
 certain circumstances. Thus, where it has power to issue bonds 
 of its own it also has implied power to guaranty the bonds of 
 another railroad company, properly taken in payment of a 
 debt, in order to enable it to sell them for an adequate price 
 or to use them in payment of its own debt." And it may be 
 safely stated, we think, as a general rule, that such a guaranty 
 may be valid, without an express grant of authority to make it, 
 if it is supported by a valuable consideration of a kind that the 
 guarantor company has authority to receive or invest in.*" 
 Some courts have gone even further in upholding such a guar- 
 anty,ii and by some the doctrine of estoppel has been applied 
 in favor of those who had made investments and acted upon 
 the faith of the guaranty. '^ A railroad company authorized by 
 statute to make contracts for leasing and operating the road 
 of another company has implied power to include in the lease 
 
 9 Rogers &c. Works v. Southern R. 
 Assn., 34 Fed. 278. See also McKit- 
 trick V. Arkansas Cent. R. Co., 1S2 
 U. S. 473, 14 Sup. Ct. 661, 38 L. ed. 
 518 (guaranty of state railway aid 
 bonds) ; Chicago &c R. Co. v. How- 
 ard, 7 Wall. ( U. S.) 392, 19 L. ed. 
 117; Atchison &c. R. Co. v. Fletcher, 
 35 Kans. 236, 10 Pac. 596; Arnot v. 
 Erie Szc. R. Co., 67 N.' Y. 315. 
 
 10 Zabriskie v. Cleveland &c. R. 
 Co., 23 How. (U. S.) 381, 16 L. ed.. 
 488; Chicago &c. R. Co. v. Howard, 
 7 Wall. (U. S.) 392, 19 L. ed. 117; 
 Green Bay &c. R. Co. v. Union &c. 
 Co., 107 U. S. 98, 2 Sup. Ct. 221, 27 
 L. ed. 413; Todd v. Kentucky Union 
 Land Co., 57 Fed. 47; Marbury v. 
 Kentucky Union Land Co., 62 
 Fed. 335 ; Low v. California Pac. 
 R. Co., 52 Cal. 53, 28 Am. Rep. 
 629; Arnot v. Erie R. Co., 67 
 N. Y. 315; Pollitz v. Public Utili- 
 ties Com., 96 Ohio St. 49, 117 N. E. 
 149, L. R. A. 1918 D, 166, 172 (quot- 
 ing text). See also Foster v. Mans- 
 field &c. R. Co., 36 Fed. 627; Mer- 
 
 cantile Trust Co. V. Kiser, 91 Ga. 
 636, 18 S. E. 358; EUerman v. Chi- 
 cago &c. Stock Yards Co., 49 N. J.. 
 Eq. 217, 23 Atl, 292, 3 Thomp. CfliCE»- 
 (2nd. ed.), §2295. ; 
 
 11 See Mathesius v. Brratskfym 
 Heights R. Co., 96 Fed. 792; Harri- 
 son V. Union Pac. R. Co., 13 Fed^ 
 52; Madison, &c. R. Co. v. Nor- 
 wich Sav. Society, 24 Ind. 46/. 
 
 12 See Cozart v. Georgia &C. Kr 
 Co., 54 Ga. 379; See State Board of 
 Agriculture v. Citizens St. R., 47 Ind. 
 407, 17 Am. Rep. 702; Arnot v. Erie, 
 &c. R. Co., 67 N. Y. 315. See also 
 Connecticut Mut. L. Ins. Co. v. 
 Cleveland &c. R. Co., 26 How. Pr. 
 (N. Y.) 225, 41 Barb. (N. Y.) 9; 
 Atchison &c. R. Co. v. Fletcher, 35 
 Kans. 236, 10 Pac. 596. But contra, 
 see ante, §§ 426, 429; Louisville &c. 
 R. Co. V. Louisville Trust Co., 174 
 U. S. 552, 557, 19 Sup. Ct. 817, 43 L. 
 ed. 1081. See generally note in 38: 
 L. R. A. (N. S.), 830, 3 Thorap. 
 Corp. (2nd. ed.), §2217. 
 
S547 
 
 RAILROADS 
 
 788 
 
 -a guaranty of the interest coupons of the latter as part of the 
 Tent to be paid.^^ 
 
 § 547 (482). Income bonds. — The right to issue income bonds 
 seems to have been conceded or assumed in many cases. Such 
 bonds, with interest payable out of the company's income or 
 net earnings, are frequently issued; but the power to issue irre- 
 deemable bonds, the interest on which is to be paid only 
 after a specified dividend has been declared on the common 
 stock is not unquestioned. The existence of such a power, in 
 the absence of an express grant of authority, has been both 
 denied^-* and afifirmed.^^ It has been held that the holder of the 
 bonds of a railroad company "payable to bearer, with interest 
 semi-annually, secured on the income from the sale of its lands 
 and the operation of its road and line" is a creditor having a 
 specific lien upon the income, which he has a right to pursue, 
 and a bill in equity will lie to reach it in the hands of another 
 ■company to which the road and property of the old company 
 ihas passed by consolidation. i' Income bonds are not, how- 
 
 is Eastern Townships Bank v. St 
 Johnsbury &c. R. Co., 40 Fed. 423, 
 40 Am. & Eng. R. Cas. 566. See 
 also Opdyke v. Pacific R. Co., 3 Dill. 
 (U. S.) 55, Fed. Cas. No. 10S46; 
 Zabriskie v. Cleveland &c. R. Co., 
 23 How. (U. S.) 381, 16 L. ed. 488; 
 Louisville Trust Co. v. Louisville 
 &c. R. Co., 75 Fed. 433; United 
 States Trust Co. v. Western Con- 
 tract Co., 81 Fed. 454; Ante, § 500. 
 
 14 Taylor v. Philadelphia &c. R. 
 Co., 7 Fed. 386, reported together 
 with McCalmont v. Philadelphia &c. 
 R. Co., 3 Am. & Eng. R. Cas. 163. 
 
 15 Philadelphia & Reading R. Co.'s 
 Appeal (Pa.), 4 Am. & Eng. R. 
 Cas. 118, 21 Am. L. Reg. 713. This 
 case and those above cited grew 
 out of the same transaction or 
 scheme. The federal court conceded 
 ithat the corporation had implied 
 
 power to borrow money, but held 
 that the scheme in question was not 
 a loan because it was never to be 
 paid back. A majority of the state 
 court held that it was a loan, as 
 it was a contract for the use of 
 money, and that it made no differ- 
 ence that it was perpetual. The 
 scheme, however, contemplated the 
 payment of six per cent, interest on 
 the face value of each bond after 
 the payment of a six per cent, divi- 
 dend on the stock, and that the 
 bonds should then rank pari passu 
 as to further interest with the com- 
 mon stock, although the bondholders 
 were to pay for their bonds less 
 than one-third of their face value, 
 and a minority of the state court 
 were of the opinion that this was 
 unauthorized. 
 18 Rutten V. Union Pac. R. Co., 17 
 
789 RAILROAD SECURITIES § 547 
 
 ever, the most desirable investments, for practicallyj at least, 
 it is largely within the -power of the company to prevent any 
 net income from being realized. Even where the bonds are 
 secured by an income mortgage, as is usually the case, although 
 it may pledge tangible property for the principal, the real se- 
 curity for the payment of interest is little more than the pledge 
 of the good faith of the company in the management and oper- 
 ation of its road.'^ Much, of course, depends upon the provi- 
 sions of the bonds and mortgage in any particular case, but, in 
 the absence of any valid limitation upon their powers, the di- 
 rectors of the company, necessarily, have a wide discretion in 
 determining what shall be treated as net income. ^^ Thus, if it 
 appears that the income contemplated is the profit of future 
 transactions of the company arising from all sources, the bond- 
 holders cannot complain if the profits which would have been 
 realized by operating the original lines exclusively have been 
 decreased by losses in the operation of new lines in conjunc- 
 , tion therewith, deemed advisable because of competition or the 
 demand for greater facilities. ^^ Where, however, a specific lien 
 is provided for upon the income from certain specified property 
 
 Fed. 480. See also Morse v. Bay conduct its operations as it may see 
 States Gas Co., 91 Fed. 938, 946. fit, subject only to the conditions of 
 Compare, however, Thomas v. New its organic law, is unqualified; and, 
 York &c. R. Co., 139 N. Y. 163, 34 consequently, the company can law- 
 N. E. 877, and Hart v. Ogdensburg fully extend its lines, -acquire new 
 &c. R. Co., 69 Hun 378, 23 N. Y. S. ones, discontinue old ones, and thus 
 6.19. essentially change the earning capa- 
 17 Spies V. Chicago &c. R. Co., 40 city of the property." See also Bar- 
 Fed. 34, 38. In this case Judge Wal- ry y. Missouri &c. R. Co., 27 Fed. 
 lace, speaking of an income mort- 1. 
 
 gage, says : "It necessarily contem- is Spies v. Chicago &c. R. Co., 40 
 
 plates such improvements as seem Fed. 34, 39; Thomas v. New York 
 
 necessary to the efficient use and op- &c. R. Co., 139 N. Y. 163, 34 N. E. 
 
 eration of such property, and such 877, 54 N. Y. S. 498 ; Day v. Ogdens- 
 
 alterations in the corpus as appear burgh &c. R. Co., 107 N. Y. 129, 13 N. 
 
 desirable are to be made at the dis- E. 765. 
 
 cretion of the directors ; and, unless i9 Spies v. Chicago &c. R. Co., 40 
 
 it contains some limitations upon the Fed. 34, 38; Buck v. Seymour, 46 
 
 powers of the directors, express or Cpnn. 156; Day v. Ogdensburgh &c. 
 
 implied, the right of the company to R. Co., 107 N. Y. 129, 13 N. E. 765. 
 
§ 547 RAILROADS 
 
 790 
 
 or lines, to be ascertained by deducting specified expenses and 
 liabilities from the gross earnings of such property or lines, a 
 dififerent rule applies and the directors have no right to deduct 
 expenses, including interest charges, incurred in operating new 
 lines acquired by the company out of the earnings of the orig- 
 inal lines, from the specific income fund to which the bond- 
 holders have a right to look under their contract.^" It is the 
 duty of the company to keep a proper account and make an 
 honest effort to ascertain the net earnings or income out of 
 which the bondholders are entitled to receive their interest.^* 
 In the case just cited an accounting was directed, and it was 
 held that upon such accounting the company should be disal- 
 lowed any sums paid or charged on account of debts which it 
 had contracted prior to the execution of the income mortgage, 
 and that it should also be disallowed any charge against income 
 arising from the sale of the income bonds at less than their face 
 value, as well as interest, which it had not paid or become 
 liable to pay, upon first mortgage bonds, which had been 
 funded and was represented by the income bonds accepted by 
 the first mortgage bondholders in lieu of interest. It was also 
 held that the expenses defrayed or incurred in producing the 
 earnings for a given interest period are the only charges which 
 can enter into the income account for that period, except the 
 payment of interest on prior incumbrances as stipulated, and 
 that the holders of coupons for each separate interest period 
 should be paid ratably out of the net income of that particular 
 period. ^2 It is sometimes provided that the coupons or inter- 
 est shall be paid in money or in scrip at the option of the com- 
 pany, and, in such a case, if the corripany does not elect to pay 
 in scrip when the interest becomes due, and the income is suffi- 
 cient, the holder of the coupon may sue for the money.^^ 
 
 20 Spies V. Chicago &c. R. Co., 40 the next. Day v. Ogdensburgh &c. 
 Fed. 34. R. Co., 107 N. Y. 129, 13 N. E. 765. 
 
 21 Barry v. Missouri &c. R. Co., 27 Much, of course, depends upon the 
 Fed. 1, 34 Fed. 829. particular contract or statute in- 
 
 22 Barry v. Missouri &c. R. Co., volved in each case. See State v. 
 27 Fed. 1. It has also been Iield that Cowen, 83 Md. 549, 35 Atl. 161, 354, 
 income bondholders are not entitled 581. 
 
 to make up a deficiency in the inter- 28 Texas &c. R. Co. v. Marlor, 123 
 
 est in one year out of a surplus in U. S. 687, 8 Sup. Ct. 311, 31 L, ed. 
 
791 
 
 RAILROAD SECURITIES 
 
 §548 
 
 § 548 (483). Convertible bonds. — There seems to be no good 
 reason why a corporation authorized to increase its stock- may 
 not lawfully receive its own bonds in payment for new shares 
 which it issues under such authority.^* Bonds are sometimes 
 issued which expressly provide that the holder may surrender 
 them to the company and receive a certain number of shares 
 of stock in exchange. Where the charter authorizes the issue 
 of such bonds convertible into stock, it is held that the power 
 to increase the capital stock by issuing shares in exchange for 
 the bonds is given by necessary implication.^^ If they provide 
 that they may be exchanged for stock at or before maturity 
 the holder will waive or forfeit his right to exchange them for 
 stock if he fails to present them until after maturity.^s It is 
 said, however, that he may demand the stock in exchange at 
 any time before maturity, and that if he makes such demand, 
 just before a dividend is declared he is entitled to the dividend 
 
 303;.MarIor v. Texas, &c. R. Co., 21 
 Fed. 383. 
 
 24 Lohman v. New York &c. R. 
 Co., 2 Sandf. Super. Ct. (N. Y.) 39; 
 Reed v. Hayt, 51 N. Y. Super. Ct. 
 121. 
 
 25 Belmont v. Erie R. Co., 52 Barb. 
 (N. Y.) 637; Ramsey v. Erie R. Co., 
 38 How. Pr. (N. Y.) 193. See also 
 Pratt V. American Bell Tel. Co., 141 
 Mass. 225, 5 N. E. 307, 55 Am. Rep. 
 465- But compare Chaflfee v. Mid- 
 dlesex R. Co., 146 Mass. 224, 16 N. 
 E. 34, holding that damages may be 
 given but that specific performance 
 will not be decreed if the company 
 has no stock. In the first case cited 
 it was held that if it clearly ap- 
 peared that the bonds were about 
 to be issued for the purpose of 
 fraudulently increasing the capital 
 stock, and not to borrow money to 
 compliete and operate the road, 
 which was the purpose for which 
 their issue was authorized, an in- 
 
 junction would lie to prevent them 
 from being issued, or to restrain 
 their conversion into stock while in 
 the hands of persons having notice of 
 the fraud. But see Jones Corp. 
 Bonds and Mortg., § 62, and com- 
 pare Great Western Min. Co. v. Har- 
 ris, 111 Fed. 38. 
 
 26 Chaffee v. Middlesex, R. Co., 
 146 Mass. 224, 16 N. E. 34. This 
 case holds that where bonds were 
 payable on the first day of Febru- 
 ary, 1895, which happened to be Sun- 
 day, it was too late to present them 
 and demand stock in exchange on 
 Monday, the second day of February, 
 but that bonds which were presented 
 a few minutes after three o'clock 
 in the afternoon of Saturday, Jan- 
 uary 31, were presented in time, 
 although the usual hour of closing 
 the office of the company was three 
 o'clock. The court said that the 
 bonds could have been presented at 
 "any reasonable time on that day." 
 
§ 548 RAILROADS 792 
 
 as weH as the stock.^" But, where he has received interest up 
 to that time, it is said to be unreasonable to hold that he is 
 also entitled to the dividend.^** An agreement merely extend- 
 ing the time of payment of the bond, before maturity, does not 
 give the holder any right to insist that it shall be converted 
 into stock after the expiration of the time to which his option 
 was originally limited, or, in other words, merely extending the 
 time of payment, does not, of itself, extend the time within 
 which stock must be demanded according to the terms of the 
 bond.28 So, where a decree of foreclosure provided that bond- 
 holders who purchased at the sale might, if they saw fit, ex- 
 change their bonds for stock, it was held that a bondholder 
 who did not become a purchaser and had overlooked the fact 
 that he owned bonds until after the conveyance of . the prop- 
 erty to the, purchasers could not then insist upon receiving 
 stock in exchange, although he was not aware of the fore- 
 closure suit and proceedings.''*" It seems that as the issue of 
 bonds convertible into stock amounts, in effect, to an issue of 
 stock, they cannot, ordinarily, be sold at a discount.^ "^ The 
 right to demand a conversion of such -^ bond into stock cannot 
 be assigned without the bond, nnd a petition in an action 
 against the corporation for refusal to allow the conversion must 
 allege that the plaintiff is the holder of the bond.^^ A bond- 
 holder who has a right to exchange his bonds for stock cannot 
 be deprived of that right by a consolidation without being given 
 an opportunity to exercise it,^^ and where a consolidation is 
 effected by, the new consolidated company assuming all the 
 
 27 Jones V. Terre Haute &c. R. within some reasonable time. Catlin 
 Co., 57 N. Y, 196. v. Green, 120 N. Y. 441. 
 
 28 See Sutliff v. Cleveland &c. R. 31 Compare Van Allen v. Illinois 
 Co., 24 Ohio St. 147. Certainly this Cent. R. Co., 7 Bosw. (N. Y.) 51S. 
 is true as to past dividends. See as to when bonds may be issued 
 
 29 Muhlenberg v. Philadelphia &c. and sold for less than par. 3 
 R. Co., 47 Pa. St. 16. * Thomp. Corp. (2nd ed.), §2241, et 
 
 30 Landis v. Western Pa. R. Co., seq. 
 
 133 Pa. St. 579, 19 Atl. 556. Where 32Denney v. Cleveland &c. R. Co., 
 
 an option to exchange stock for 28 Ohio St. 108. 
 
 bonds contains no express limitation 33 Rosenkrans v. Lafayette &c. R. 
 
 it must nevertheless be exercised Co., 18 Fed. 513. 
 
793 
 
 RAILROAD SECURITIES 
 
 §549 
 
 debts and liabilities of the old he may usually demand stock 
 in the new company in exchange for his convertible bonds. ^-^ 
 
 § 549 (484) . Negotiability of bonds — Bona fide purchasers. 
 
 — Railroad bonds, payable at a certain time and place, to bearer 
 or to order, are regarded as negotiable instruments whether 
 under seal or not.^^ This, it seems, is true, also, of convertible 
 bonds giving the holder the option of exchanging them for 
 stock,3® and the negotiability of a bond is not destroyet! by a 
 provision that it may be registered and made payable by trans- 
 fer only on the books of the company,^'' nor by a provision that 
 it may be paid before maturity,^* or that it shall be payable on 
 
 34 Day V. Worcester &c. R. Co., 
 151 Mass. 302, 23 N. E. 824. See 
 also John Hancock &c. Co. v. Wor- 
 cester &c. R. Co., 149 Mass. 214, 21 
 N. E. 364; Cayley v. Cobourg &c. 
 R. Co., 14 Grant Ch. (U. Can.) 571. 
 
 ss White V. Vermont &c. R. Co., 
 21 How. (U. S.) 575, 16 L. ed. 221 ; 
 Zabriskie v. Cleveland &c. R. Co., 23 
 How. (U. S.) 381, 16 L. ed. 488; 
 Kneeland v. Lawrence, 140 U. S. 209, 
 11 Sup. Ct. 786, 35 L. ed. 492, 46 
 Am. & Eng. R. Cas. 319, and note; 
 Raid V. Bank, 70 Ala. 199, 14 Am. & 
 Eng. R. Cas. 554, and note; Junc- 
 tion R. Co. V. Cleneay, 13 Ind. 161; 
 Connecticut &c. Co. v. Cleveland &c. 
 R. Co., 41 Barb. (N. Y.) 9; Carr v. 
 LeFevre, 27 Pa. St. 413 ; Ide v. Pas- 
 sumpsic &c. R. Co., 32 Vt. 297, 4 
 Elliott Cont., § 3585. Many other 
 authorities are referred to in subse- 
 quent notes herein, and most of the 
 cases are cited in the note to Mc- 
 Clelland V. Norfolk &c. R. Co., 110 
 N. Y. 469, 18 N. E. 237, 1 L. R. A. 
 299, 6 Am. St. 397, and in Morris 
 Canal &c. Co. v. Fisher, 1 Stockt. 
 Ch. (N. J.) 667, 64 Am. Dec. 423, 
 and note. But coupons are not with- 
 
 in a statute allowing days of grace 
 on promissory notes. Chaffee v. 
 Middlesex R. Co., 146 Mass. 224, 16 
 N. E. 34. In Everton v. Nat. Bank, 
 66 N. Y. 14, 23 Am. Rep. 9, it is held 
 that the coupons are entitled to days 
 of grace, while in Arents v. Com- 
 monwealth, 18 Grat. (Va.) 750, it is 
 held that they are not. It is gen- 
 erally held that "the mortgage fol- 
 lows and partakes of the negotiability 
 of the bonds." Kenicott v. Super- 
 visors, 16 Wall. (U. S.) 452, 21 L. 
 ed. 319; authorities cited in 
 Chicago R. &c. Co. v. Merchants' 
 Nat. Bank, 136 U. S. 268, 10 Sup. Ct. 
 999, 1003, 34 L, ed. 349. As shown 
 in Spence v. Mobile &c. R. Co., 79 
 Ala. 576, the only authorities to the 
 contrary are in Ohio and Illinois. 
 See also 3 Thomp. Corp. (2nd. ed.), 
 § 2270. 
 
 ssHotchkiss v. Nat. Banks, 21 
 Wall. (U. S.) 354, 22 L. ed. 645. See 
 also Welch v. Sage, 47 N. Y. 143. 
 
 37 Savannah &c. R. Co. v. Lancas- 
 ter, 62 Ala. 555. See generally as 
 to registered bonds, 3 Thomp, Corp. 
 (2nd ed.), § 2264, 2265. 
 
 38 Union Cattle Co. v. Internation- 
 
549 
 
 RAILROADS 
 
 794 
 
 or before a certain date,^^ nor by the fact that overdue coupons 
 are attached to it.*" Nor, it seems, is a mere recital in a bond 
 which purports to be the absolute obligation of the company 
 and is negotiable on its face, that it is one of a series of bonds 
 secured by a trust deed necessarily sufficient to destroy its ne- 
 gotiability or to put the purchaser in good faith upon inquiry 
 as to the conditions in the deed qualifying the terms of the 
 bond.^i But if the conditions in the trust deed had been incor- 
 porated in the bond or so clearly referred to therein as to notify 
 
 al Trust Co., 149 Mass. 492, 21 N. E. 
 962; Ackley School Dist. v. Hall, 
 113 U. S. 135, S Sup. Ct. 371, 28 L. 
 ed. 954. 
 
 39 Union &c. Co. v. Southern &c. 
 Co., 51 Fed. 840. See also Dicker- 
 man V. Northern Trust Co., 176 U. 
 S. 181, 44 L. ed. 423, 20 Sup. Ct. 
 311. But compare Way v. Smith, 
 111 Mass. 523; McClellan v. Nor- 
 folk &c. R. Co., 110 N. Y. 469, 18 
 N. E. 237, 1 L. R. A. 299, 6 Am. 
 St. 397. 
 
 40 Cromwell v. Sac, 96 U. S. 51, 
 24 L. ed. 681; Indiana &c. R. Co. v. 
 Sprague, 103 U. S. 756, 26 L. ed. 
 554; Morgan v. United States, 113 
 U. S. 476, 5 Sup. Ct. 588, 28 L. ed. 
 1044; State v. Cobb, 64 Ala. 127; 
 Morton v. New Orleans &c. R. Co., 
 79 Ala. 590; Grand Rapids &c. R. 
 Co. V. Sanders, 54 How. Pr. (N. Y.) 
 214; McElrath v. Pittsburgh &c. R. 
 Co., 55 Pa. St. 189. But see First 
 Nat. Bank v., Scott County Comrs , 
 14 Minn. 11, 100 Am. Dec. 194 ; Par- 
 sons V. Jackson, 99 U. S. 434, 25 L. 
 ed. 457. While this is true as to the 
 bond, the purchaser is not a bona 
 fide purchaser of the overdue cou- 
 pons so as to be protected from de- 
 fenses as to them. Gilbough v. Nor- 
 
 folk &c. R. Co., 1 Hughes (U. S.) 
 410, Fed. Cas. No. 5419. 
 
 41 Guilford v. Minneapolis &c. R. 
 Co., 48 Minn. 560, 51 N. W. 658, 31 
 Am. St. 694, 51 Am. & Eng. R. Cas. 
 98. Distinguishing Manning v. Nor- 
 folk &c. R. Co., 29 Fed. 838; Caylus 
 V. New York &c. R. Co., 10 Hun (N. 
 Y.) 295, and McClelland v. Norfolk 
 &c. R. Co., 110 N. Y. 469, 18 N. E. 
 237, 1 L. R. A. 299, 6 Am. St. Z91. 
 The correctness of this decision is 
 not, perhaps, beyond question, but it 
 seems to us that as the recital called 
 attention to nothing unusual, as such 
 bonds are nearly always secured by 
 a trust deed, and as they are intend- 
 ed to be negotiable, the purchaser 
 was not obliged to look for unusual 
 conditions in the trust deed. As 
 bonds are sold as negotiable instru- 
 ments all over the world any other 
 rule would be impracticable and dis- 
 astrous. If there had been any- 
 thing in the bonds calling attention 
 to the unusual provisions of the trust 
 deed the purchaser would doubtless 
 have been bound thereby, but that is 
 a different question. See McClelland 
 v. Norfolk &c. R. Co., 110 N. Y. 469, 
 18 N. E. 237, 1 L. R. A. 299, 6 Am. 
 St. 397; Caylus v. New York &c. R. 
 Co., 10 Hun (N. Y.) 295. 
 
795 
 
 RAILROAD SECURITIES 
 
 549 
 
 the bondholder of their existence, and, in legal effect, import 
 them into the bonds, he would doubtless have taken the bond 
 subject thereto, and it may be stated as a general rule that 
 bonds which contain special stipulations making their pay- 
 ment subject to contingencies not within the control of the 
 holders, lose the character of negotiable instruments and are 
 subject in the hands of a transferee to defenses which would 
 have been available if they were still in the hands of the orig- 
 inal payee. *2 The fact that the name of the payee is omitted 
 and that the bonds are payable in blank does not affect their 
 negotiability, and the holder may fill in his own name and main- 
 tain suit upon them. ^8 The general rule is that the purchaser 
 of negotiable bonds issued by a railroad company in good faith, 
 before maturity, without notice and for a valuable considera- 
 tion, takes them free from all defenses short of an absolute 
 want of power in the company to issue negotiable bonds.** 
 Thus, he is entitled to enforce them against the company, al- 
 though they may have been stolen,*^ or sold to a prior holder 
 
 42 McClelland v. Norfolk &c. R. 
 Co., 110 N. Y. 469, 18 N. E. 237, 1 
 L. R. A. 299, 6 Am. St. 397. See 
 also Raid v. Bank, 70 Ala. 199; Kohn 
 V. Sacramento Elec. Gas & R. Co., 
 168 Gal. 1, 141 Pac. 626. Evertson 
 V. Nat. Bank, 66 N. Y. 14, 23 Am. 
 Rep. 9. 
 
 43 White V. Vermont &c. R. Co., 
 21 How. (U. S.) 575, 16 L. ed. 221 ; 
 Chapin v. Vermont &c. R. Co., 8 
 Gray (Mass.) 575; note to Morris 
 Canal &c. Co. v. Fisher, 9 N. J. Eq. 
 667, 64 Am. Dec. 423; Hubbard v. 
 New York &c. R. Co., 14 Abb. Pr. 
 (N. Y.) 275; note to McClelland v. 
 Norfolk &c. R. Co., 110 N. Y. 469, 
 18 N. E. 237, 1 L. R. A. 299, 6 Am. 
 St 397. See however Evertson v. 
 Nat. Bank, 66 N. Y. 14, 23 Am. Rep. 
 9; Augusta Bank v. Augusta, 49 
 Maine 507. 
 
 44 Galveston &c. R. Co. v. Cow- 
 
 drey, 11 Wall. (U. S.) 459, 20 L. 
 ed. 199; McMurray v. Moran, 134 
 U. S. 150, 10 Sup. Ct. 427, 33 L. ed. 
 814; Rouede v. Mayor, 18 Fed. 719; 
 First Nat. Bank v. Wheeler, 72 N. 
 Y. 201 ; Stoney v. American Life Ins. 
 Co., 11 Paige (N. Y.) 635; Webb v. 
 Comrs., L. R. 5 Q. B. 642. But see 
 Chicago &c. R. Co. v. Loewenthal, 
 93 III. 433, 450; General Estates Co., 
 In 're, L. R. 3 Ch. 758. 
 
 45 Purchasers of stolen bonds were 
 held to take a good title in the fol- 
 lowing cases : Carpenter v. Rommel, 
 5 Phila. (Pa.) 34; Murray v. Lard- 
 ner, 2 Wall. (U. S.) 110, 7 L. ed. 
 857; Consolidated Assn. v. Avegno, 
 28 La. Ann. 552; Spooner v. Holmes, 
 102 Mass. 503, 3 Am. Rep. 491 ; Sey- 
 bell V. National &c. Bank, 2 Daly 
 (N. Y.) 383; Dutchess &c. Co. v. 
 Hachfield, 73 N. Y. 226; Raphael v. 
 Governor &c., 17 C. B. 161. Notice 
 
§549 
 
 RAILROADS 
 
 796 
 
 at less than par in violation of the charter or governing stat- 
 ute.^'' He is entitled to their full value no matter what he paid 
 for them.^'' He is not affected in any way by a subsequent 
 misapplication of the proceeds by the company to a purpose 
 for which it is forbidden to issue bonds,** and it has been held* 
 that the fact that a merchant has taken bonds in payment for 
 goods does not of itself prevent him from being a bona fide 
 purchaser or holder of such bonds.*'' Good faith Upon the part 
 of the holder will usually be presumed and the burden of prov- 
 ing fraud or bad faith is upon the party charging it.^" A bona 
 
 to trustee of defenses held not suffi- 
 cient to destroy a bona fide hold- 
 ing of bonds under the trust deed. 
 Comrs. of Johnson Co. v. Thayer, 
 94 U. S. 631, 24 L. ed. 133. 
 
 46 Ellsworth V. St. Louis &c. R. 
 Co., 96 N. Y. 553, approved in Gam- 
 ble V. Queens &c. Co., 123 N. Y. 91, 
 25 N. E. 201, 9 L. R. A. 527; Za- 
 briskie v. Cleveland &c. R. Co., 23 
 How. (U. S.) 381, 16 L. ed. 488. 
 But see Riggs v. Pennsylvania 
 &c. R. Co., 16 Fed. 804; Spence v. 
 Mobile &c. R. Co., 79 Ala. 576. See 
 generally as tending to uphold such 
 a transaction, Handley v. Stutz, 
 139 U. S. 417, 11 Sup. Ct. 530, 35 
 L. ed. 227; Memphis &c. R. Co. v. 
 Dow, 120 U. S. 287, 7 Sup. Ct. 482, 
 30 L. ed. 595; Dickerman v. North- 
 ern &c. Co., 176 U. S. 181, 20 Sup. 
 Ct. 311, 44 L. ed. 423; Thompson &c. 
 Co. V. Capital &c. Co., 65 Fed. 341; 
 Savannah &c. R. Co. v. Lancaster, 62 
 Ala. 555; Nelson v. Hubbard, 96 
 Ala. 238, 11 So. 428, 17 L. R. A. 375; 
 Rafferty v. Buffalo &c. Co., 37 App. 
 Div. 618, 56 N. Y. S. 288; Seymour 
 V. Spring &c. Assn, 144 N. Y. 333, 
 39 N. E. 365, 26 L. R. A. 859; Fideli- 
 ty Ins. &c. Co. V. Western Penna. 
 
 &c. R. Co., 138 Pa. St. 494, 21 Atl. 
 21, -21 Am. St. 911. 
 
 *'! Cromwell v. County of Sac, 96 
 U. S. 51, 24 L. ed. 681 ; Grand Rap- 
 ids &c. R. Co. v. Sanders, 17 Hun 
 (N. Y.) 552. But it is held that he 
 must pay value for them in order to 
 be protected as a bona fide purchaser. 
 Baker v. Guarantee Trust &c. Co. 
 (N. J.), 31 Atl. 174. 
 
 48 Peoria &c. R. Co. v. Thomp- 
 son, 103 111. 187; Philadelphia &c. 
 R. Co. V. Lewis, 33 Pa. St. 33, 75 
 Am. Dec. 574. 
 
 49 Kennicott v. Wayne Co., 6 Biss. 
 (U. S.) 138, Fed. Cas. No. 7710. See 
 also Mercantile Trust Co. v. Zanes- 
 ville &c. R. Co., 52 Fed. 342. 
 
 50 Murray v. Lardner, 2 Wall. (U. 
 S.) 110, 17 L. ed. 857; Kneeland v. 
 Lawrence, 140 U. S. 209, 35 L. ed 492, 
 46 Am. & Eng. R. Cas. 319, 322; 
 Spence v. Mobile &c. R. Co., 79 Ala. 
 576; Chicago &c. Co. v. Peck, 112 
 111. 408; Wickes v. Adirondack Co., 
 2 Hun (N. Y.) 112; Jones on Corp. 
 Bonds and Mort., § 200. But com- 
 pare Simmons v. Taylor, 38 Fed. 
 682; Gilman v. New Orleans &c. R. 
 Co., 72 Ala. 566; Northampton Nat. 
 Bank v. Kidder, 106 N. Y. 221, 12 
 N. E. 577, 60 Am. Rep. 443. 
 
797 
 
 RAILROAD SECURITIES 
 
 549 
 
 fide pledgee of negotiable bonds, for value and before maturity, 
 is entitled to the- same protection as a bona fide purchaser to 
 the extent of his loan.°i The pendency of a suit in which the 
 validity of negotiable bonds, not yet due, is involved, is not 
 constructive notice to one who subsequently purchases them in 
 good faith before maturity.^^ But one who takes bonds after 
 maturity or with notice of their illegality or other existing 
 defenses is not protected as a bona fide purchaser of negotiable 
 paper before maturity, unless he succeeds to the rights of such 
 a purchaser. Thus, one who purchases stolen bonds after ma- 
 turity is not a bona fide purchaser entitled to be protected in 
 his purchase as against the true owner unless a bona fide pur- 
 chaser has intervened before maturity. ^^ So, a purchaser hav- 
 ing knowledge of an. equitable lien upon the bonds will usually 
 be held to have taken them subject to such lien,^* and if he has 
 knowledge that they are issued or being disposed of for an un- 
 authorized purpose or the like, he takes them at his peril ;^^ but 
 he may be protected as a bona fide purchaser of mortgage bonds 
 
 51 Allen V. Dallas &c. R. Co., 3 
 Woods (U. S.) 316, Fed. Cas. No. 
 221 ; Claflin v. South Carolina R. Co., 
 8 Fed. 118; Morton v. New Orleans 
 &c. R. Co., 79 Ala. 590, 621 ; Hayden 
 V. Lincoln &c. R. Co., 43 Nebr. 680, 
 62 N. W. 73 ; Atwood v. Shenandoah 
 Valley R. Co., 85 Va. 966, 9 S. E. 
 748, 38 Ara. & Eng. R. Cas. 534. See 
 Duncomb v. New York &c. R. Co., 
 84 N. Y. 190; Tyrell v. Cairo &c. R. 
 Co., 7 Mo. App. 294. 
 
 52 Enfield v. Jordan, 119 U. S. 
 680, 7 Sup. Ct. 358, 30 L. ed, 523; 
 Warren v. Marcy, 97 U. S. 96, 24 
 L. ed. 977; Marshal v. Elgin, 8 Fed. 
 783; Farmers &c. Co. v. Toledo &c. 
 Co., 54 Fed. 759. 
 
 53 Northampton Nat. Bank v. Kid- 
 der, 106 N. Y. 221, 12 N. E. 577, 60 
 Am. Rep. 443, holding also that there 
 is no presumption that the thief ne- 
 gotiated the paper before it was due. 
 
 See also Hinckley v. Merchants' Nat. 
 Bank, 131 Mass. 147. 
 
 54Hervey v. 111. Midland R. Co., 
 28 Fed. 169. So, where bonds are 
 assigned after levy of execution. 
 Hetherington v. Hayden, 11 Iowa 
 335. 
 
 55 Chew V. Henrietta &c. Co., 2 
 Fed. 5; City of Chicago v. Cameron, 
 120 111. 447, 11 N. E. 899. See also 
 American &c. Co. v. St. Louis &c. 
 R. Co., 42 Fed. 819; Smith v. Flori-' 
 da &c. R. Co., 43 Fed. 731 ; Knoxville 
 V. Knoxville &c. R. Co., 22 Fed. 758 ; 
 Trask v. Jacksonville &c. R. Co. 124 
 U. S. 515, 8 Sup. Ct. 574, 31 L. ed. 
 521 ; Silliman v. Fredericksburg &c. 
 R. Co., 27 Grat. (Va.) 119; Garrard 
 V. Pittsburgh &c. R. Co., 29 Pa. St. 
 154, for instances in which the pur- 
 chaser was chargeable with knowl- 
 edge preventing him from being pro- 
 tected as a bona fide purchaser. 
 
§ 550 RAILROADS 
 
 798 
 
 notwithstanding the fact that he has knowledge of the claim 
 of one who furnished material for the railroad if he bought 
 them from a bona fide purchaser who had no such knowledge.^s 
 
 § 550 (485). Form and manner of issuing bonds — Effect of 
 irregularities. — Railroad bonds are generally issued with inter- 
 est coupons attached, which are substantially in the form of 
 promissory notes. They are usually signed by the president 
 and attested or countersigned by the secretary or other proper 
 officer according to the statute or by-laws.''' These signatures 
 may be either written or printed,'* although it is better that 
 they should be written, and it has been held that if the bonds 
 have been properly executed and signed by both of such offi- 
 cers the coupons may be valid notwithstanding the fact that 
 they are signed by only one of them.'® The presence or ab- 
 sence of a seal is generally immaterial, so far as the negotia- 
 bility of the instrument is concerned.®" The amount and time 
 and place of payment should be stated with certainty;®^ but 
 the figures denoting the number of a particular bond in a 
 series are iiot, ordinarily, an essential or material part of it, 
 and an immaterial alteration in such numbers will not affect 
 the rights of a bona fide holder.*^ Persons dealing in negoti- 
 
 .56 Porter v. Pittsburgh &c. Co., '9 Thayer v. Montgomery Co., 3 
 
 122 U. S. 267, 7 Sup. Ct. 1206, 30 Dill. (U. S.) 389, Fed. Cas. No. 
 
 L. ed. 1210. See also Commis- 13870. The coupons may be in al- 
 
 sioners v. Belles, 94 U. S. 104, 109, most any form creating an in- 
 
 24 L. ed. 46; Central R. &c. Co. v. debtedness. 
 
 Farmer's Loan & T. Co., 114 Fed. eo Ante, § S49. 
 
 • 263. Compare Shellenberger v. ei Parsons v. Jackson, 99 U. S. 
 
 Altoona &c. R. Co., 212 Pa. St. 413, 434, 25 L. ed. 457; Jackson v. Vicks- 
 
 61 Atl. 1000, 108 Am. St. 876. burg &c. R. Co., 2 Woods (U. S.) 
 
 ^"i Of course the name of the 141, Fed. Cas. No. 7150, Ledwich v. 
 
 corporation is in the body and McKim, 53 N. Y. 307; Maas v. 
 
 should also, properly, be sub- Missouri &c. R. Co., 83 N. Y. 223, 
 
 scribed "by" the officers named. 3 Am. & Eng. R. Cas. 30. 
 
 58 Lynde v. County, 16 Wall. (U. 62 Morgan v. United States, 113 
 
 S.) 6, 21 L. ed. 272; McKee v. Ver- U. S. 476, 5 Sup. Ct. 588, 28 L. ed. 
 
 non County, 3 Dill. (U. S.) 210, 1044; Wylie v. Missouri Pac. R. 
 
 Fed. Cas. No. 8851; Pennington y. Co., 41 Fed. 623; Commonwealtli 
 
 Baehr, 48 Cal. 565. v. Emigrant &c. Bank, 98 Mass. 15', 
 
799 
 
 RAILROAD SECURITIES 
 
 §550 
 
 able bonds of a corporation must take notice of any charter or 
 statutory prohibition or want of power to issue instruments of 
 that character, and so, if the bonds show upon their face that 
 the provisions of the governing statute have not been complied 
 with, the purchaser is chargeable with notice;*^ but, if the cor- 
 poration has power to issue instruments of that class, and the 
 particular bonds in question appear to be regular and in com- 
 pliance with the law, a purchaser in good faith usually has a 
 right to assume that all the preliminary proceedings were regu- 
 lar.8* Thus, a requirement that the issue of bonds shall be au- 
 thorized or ratified by the stockholders or by a resolution of 
 the board of directors may be assumed to have been complied 
 with.®^ So, generally, if the corporation has power under any 
 circumstances to issue negotiable bonds, a bona fide holder has 
 a right to presume, in the absence of anything to the contrary, 
 that they were issued under those circumstances and that all 
 conditions within the scope of the authority of the officers of 
 the company have been fulfilled.®* This, it seems, is true, and 
 
 93 Am. Dec. 126; Elizabeth v. 
 Force, 29 N. J. Eq. 587; Birdsall 
 V. Russell, 29 N. Y. 220. 
 
 63 See Nesbit v. Riverside Inde- 
 pendent Dist., 144 U. S. 610, 12 Sup. 
 Ct. 746, 36 L. ed. 562; Oilman v. 
 New Orleans &c. R.- Co., 72 Ala. 
 566; Spence v. Mobile &c. R. Co.. 
 79 Ala. 576; Commonwealth v. 
 Smith, 10 Allen (Mass.) 448, 87 Am. 
 Dec. 672; Duke v. Brown, 96 N. 
 Car. 127, 1 S. E. 873; 3 Thomp. 
 Corp. (2nd ed.), § 2286. 
 
 64 Bank v. Dandridge, 12 Wheat. 
 (U. S.) 64, 6 L. ed. 552; Pearce v. 
 Madison R. Co., 21 How. (U. S.) 
 441, 16 L. ed. 184; Railway Co. v. 
 McCarthy, 96 U. S. 258, 24- L. ed. 
 693; Stewart v. Lansing, 104 U. S. 
 505, 26 L. ed. 866; Ellsworth v. St. 
 Louis &c. R. Co., 98 N. Y. 553; At- 
 wood V. Shenandoah &c. R. Co., 85 
 Va. 966, 9 S. E. 748; Land Credit 
 
 Co., In re, L. R. D Ch. 460; 
 Fountaine v. Carmarthen R. Co., 
 L. R. 5 Eq. 316. See also National 
 Loan &c. Co. v. Rockland Co., 94 
 Fed. 335. 
 
 65 Zabriskie v. Cleveland &c. R. 
 Co., 23 How. (U. S.) 381, 16 L. ed. 
 488; Connecticut Life Ins. Co. v. 
 Cleveland &c. R. Co., 41 Barb. (N. 
 Y.) 9; Royal British Bank v. Tur- 
 quand, 6 E. & B. 327; Tyson's Reef 
 Co., In re, 3 W. W. & A'B (Vict. 
 Sup. Ct.) Cas. at Law 162. Direc- 
 tors ordinarily have power to au- 
 thorize the execution of bonds and 
 mortgages. Thompson v. Natchez 
 &c. Co., 68 Miss. 423, 9 So. 821; 
 Hodder v. Kentucky &c. R. Co., 7 
 Fed. 793. 
 
 66 Hackensack Water Co. v. De- 
 Kay, 36 N. J. Eq. 548; Athenaeum 
 Soc, In re, 4 K. & J. 549. 
 
§ 550 
 
 RAILROADS 
 
 800 
 
 a bona fide holder may enforce their payment, .although the 
 bonds may have been wrongfully put in circulation in the first 
 instance®'^ and it has been so held even where they were issued 
 in excess of the amount authorized or prescribed by statute.** 
 But securities issued in a form materially different from that 
 prescribed by the statute giving the authority, or without com- 
 pliance with a condition to be performed by some one otiier 
 than the corporation, may generally be avoided even as against' 
 a so-called bona fide purchaser.®" Thus, where the statute re- 
 quires them to be certified on their face by a trust company 
 and registered, and provides that no bond shall be valid until 
 it is so certified and registered they will not be enforced even 
 in the hands of a purchaser in good faith. '^•' Interest coupons 
 in the ordinary form, having the requisite certainty of negoti- 
 able instruments, may be severed from the bonds to which they 
 are attached and pass by delivery from hand to hand so as to 
 vest a complete title in the bona fide purchaser before maturity 
 with all the rights of a holder of ordinary commercial paper. ''^ 
 
 <iT Long Island L. & T. Co. v. 
 Columbus &c. R. Co., 65 Fed. 4SS ; 
 Grand Rapids &c. R. Co. v. San- 
 ders, 17 Hun (N. Y.) SS2; Webb v. 
 Comrs., L. R. S Q. B. 642. But see 
 Athenaeum &c. Ins. See. v. Pooley, 3 
 DeG. & J. 294. 
 
 esWarfield v. Marshall &c. Co., 
 72 Iowa 666, 34 N. W. 467, 2 Am. 
 St. 263; Baker v. Guarantee &c. Co. 
 (N. J.), 31 Atl. 174; Fidelity &c. Co. 
 V. West Pa. &c. R. Co., 138 Pa. St. 
 494, 21 Atl. 21, 21 Am. St. 911; AI- 
 lis V. Jones, 45 Fed. 148. But see 
 Commonwealth v. Smith, 10 Allen 
 (Mass.) 448, 87 Am. Dec. 672; Nes- 
 bit V. Riverside Independent Dist., 
 144 U. S. 610, 12 Sup. Ct. 746, 36 
 L. ed. 562. All bona fide bond- 
 holders participate in the mort- 
 gage security, notwithstanding 
 some of the bonds are overissued. 
 Stephens v. Benton, 1 Duv. (Ky.) 
 
 112; Stanton v.- Alabama &c. R. Co., 
 2 Woods (U. S.) 523, Fed. Cas. No. 
 13297. 
 
 69 Singer v. St. Louis &c. R. Co., 
 6 Mo. App. 427; Hackensack Water 
 Co. V. DeKay, 36 N. J. Eq. 548. See 
 also Maas v. Missouri &c. R. Co., 
 83 N. Y. 223. 
 
 TO Morrison v. Inhabitants &c.' 
 of Bernards, 36 N. J. L. 219; Maas 
 V. Missouri &c. R. Co., 83 N. Y. 
 223. 
 
 71 Mercer County v. Hackett, 1 
 Wall. (U. S.) 83, 17 L. ed. 548; 
 Commonwealth v. Chesapeake, &c. 
 Co., 32 Md. 501 ; Spooner v. 
 Holmes, 102 Mass. 503, 3 Am. Rep. 
 491 ; and numerous authorities 
 cited in note to Morris Canal &c. 
 Co. V. Fisher, 9 N. J. Eq. 667, 64 
 Am. Dec. 423, 432, and in note to 
 McClelland v. Norfolk &c. R. Co., 
 110 N. Y. 469, 18 N. E. 237, 1 L. R. 
 
801. 
 
 RAILROAD SECURITIES 
 
 §iS51 
 
 §551 (486). Interest coupons.— ^The negotiability of inter- 
 est coupons is not necessarily aifected by a statement that they 
 represent interest upon certain bonds specififed by their nUm- 
 bersJ2 They are in' a sense independent securities and may be 
 negotiated as such, yet their character as negotiable instru- 
 ments and the rights of their holders are sometimes determined 
 by the bonds to which the coupons are attached or to which 
 they refer,''3 ^nd a purchaser may be required to take notice 
 of matters to which they refer in the bonds or mortgage.^* Th6 
 peculiar relation of cotipons to their bonds is further illustrated 
 by the rules governing the application of the statute of limi- 
 tations to such instruments. Thus, the period of limitation 
 applicable to the bond is also applied to the coupon and if, 
 for instance, the statute bars simple contract debts, such as 
 the coupon would be except for its relation to the bond, in six 
 years, while it does not bar debts in the nature of the bond 
 short of twenty years, the coupon will not be barred until the 
 expiration of the twenty years;''" but the statute begins to run. 
 
 A. 299, 6 Am. St. 397; Brainerd v. 
 New York &c. R. Co., 25 N. Y. 
 496; Jones Corpi JBonds & Mort., 
 § 238. See generally upon the sub- 
 ject of this section, 4 Elliott Cont. 
 §§3S82-3586; 8 Elliott Cont, §§3585, 
 3586. 
 
 72Evertson v. Nat. Bank, 66 N. 
 Y. 14, 23 Am. Rep. 9. But see Mc- 
 Clelland V. Norfolk &c. R. Co., 110 
 N. Y. -469, 18 N. E. 237, 1 L. R. A. 
 299, 6 Am. St. 397. 
 
 ''S McCoy V. Washington Co., 3 
 Wkll. Jr. (U. S.) 381, Fed. Cas. No. 
 8731, and Smith v. County of Clark, 
 54 Mo. 58, holding particular cou- 
 pons negotiable because the bonds 
 were negotiable; Kenosha v. Lam- 
 son, 9 Wall. iU. S.) 477, 19 L. ed. 
 725; Lexington v. Butler, 14 Wall. 
 (U. S.) 282, 20 L. ed. 809; McClure 
 V. Oxford, 94 U. S. 429, 24 L ed. 
 129; Bailey v. Buchanan Co., 115 
 
 26 — ^Elt. Railxoaos I 
 
 N. Y. 297, 22 N. E. 155; State v. 
 Spartanburg &c. R. Co., 8 S. Car.' 
 129. See also 4 Elliott Cont., 
 § 3587. Though overdue they may 
 still be negotiated like other over- ' 
 due commercial paper so long as '■ 
 the bonds have not matured. ' 
 Thompson v. Perriiie, 106 U. S. 589, 
 1 Sup. Ct. 564, 567, 27 L. ed. 298; 
 Grand Rapids &c. R. Co. v. San- 
 ders, 54 How. Pr. (N. Y.) 214. See 
 Worth V. Marshall Field Co., 240 
 Fed. 395. 
 
 74 McClure v. Oxford, 94 U. S. 
 429, 24 L. ed. 129; McClelland v. 
 Norfolk &c. R. Co., 110 N. Y. 469, 
 18 N. E. 237, 1 L. R; A. 299, 6 Am. 
 St. 397; Silliriian v. Fredericks- 
 burg &c. R. Co., 27 Grat. (Vai) 119. 
 
 T5 City of Kenosha v. Lamson, 9 
 Wall. (U. S.) 477, 483, . 19 L. ed. 
 725; City of Lexington v.; Butler, 14 
 Wall. (U. S.) 282, 20 L. ed. 809; 
 
§551 
 
 RAILROADS 
 
 802 
 
 against a detached coupon from its own maturity and an ac- 
 tion upon coupons may, therefore, be barred before an action 
 upon the bonds which mature later, although the length of the 
 period of limitation is the same.^^ Coupons are so far inde- 
 pendent instruments, however, that when complete in them- 
 selves, with the requisite certainties of negotiable paper, they 
 may be sued upon, and when severed from the bond before ma- 
 turity a separate action may be maintained upon them," even 
 though the bond has been paid-''^ This rule has also been ap- 
 plied by some of the courts in favor of the holder of coupons 
 that did not contain words of negotiability or any independent 
 promise to pay the bearer or holder,^^ but others have held that 
 in such a case the coupon must be declared on in connection 
 with the bond.*" Coupons, although detached from the bond, 
 do not lose their right to participate in the mortgage security,®^ 
 
 Huey V. Macon County, 35 Fed. 481. 
 See also Meyer v. Porter, 65 Caf. 
 67, 2 Pac. 884, 1 West Coast 784; 
 Thompson v. Perrine, 106 U. S. 589, 
 1 Sup. Ct. 564, 568, 27 L. ed. 298. 
 
 T6 Clark V. Iowa City, 20 Wall. (U. 
 S.) 583, 22 L. ed.'427; Amy v. Du- 
 buque, 98 U. S. 470, 25 L. ed. 228; 
 Koshkonong v. Burton, 104 U. S. 
 668, 26 L. ed. 886; Huey v. Macon 
 County, 35 Fed. 481. See also Grif- 
 fin V. Macon County, ' 36 Fed. 885. 
 Although the bondholders are given 
 the option to sue for both principal 
 and interest six months after default 
 in the payment of interest, this does 
 not, of itself, set the statute of limi- 
 tations to running against the bonds. 
 Nebraska &c. Bank v. Nebraska &c. 
 Co., 14 Fed. 763. 
 
 7T Commissioners of Knox County 
 V. Aspinwall, 21 How. (U. S.) 539, 
 546, 16 L. ed. 208; Thomson v. Lee 
 County, 3 Wall. (U. S.) 327, 18 L. 
 ed. 177; Commonwealth v. State and 
 Chesapeake &c. R. Co., 32 Md. 501; 
 
 Beaver v. Armstrong, 44 Pa. St. 63; 
 North Penna. R. Co. v. Adams, 54 
 Pa. St. 94, 93 Am. Dec. 677. 
 
 T8 National Exch. Bank v. Hart- 
 ford &c. R. Co., 8 R. I. 375, 5 Am. 
 Rep. 582. See also Walnut v. Wade, 
 103 U. S. 683, 696, 26 L. ed. 526, 
 quoting from Clark v. Iowa City, 20 
 Wall. (U. S.) 583, 22 L. ed. 429. 
 
 79 Woods V. Lawrence County, 1 
 Black (U. S.) 386, 17 L. ed. 122; 
 Queensbury v. Culver, 19 Wall. (U. 
 S.) 83, 22 L. ed. 100; Smith v. Coun- 
 ty of Clark, 54 Mo. 58; Mayor v. 
 Potomac Ins. Co., 2 Baxt. 296; 2 
 Daniels' Negot. Instr. §§ 1511, 1512. 
 
 80 Crosby v. New London &c. R. 
 Co., 26 Conn. 121 ; Jackson v. York 
 &c. R. Co., 48 Maine 147; Evertson 
 V. Nat. Bank, 66 N. Y. 14, 23 Am. 
 Rep. 9. Approved in Jones Corp. 
 Bonds and Mortg. §§ 242, 262. 
 
 81 Stevens v. New York &c R. Co., 
 13 Blatchf. (U. S.) 412, Fed. Cas. 
 No. 13406; Champion v. Hartford 
 &c. Co., 45 Kans. 103, 25 Pac. 950, 
 
803 
 
 RAILROAD SECURITIES 
 
 §551 
 
 but the iact that they are secured by mortgage does not deprive 
 the holder of the right to sue on them at law when due;*^ nor 
 is a suit on one coupon ordinarily a bar to a subsequent suit on 
 another which was also due at the time of such suit.*' But 
 neither a bondholder nor the holder of a coupon can enforce his 
 judgment by levying an execution upon the mortgaged prop- 
 erty and selling it to the disadvantage of the other bondhold- 
 ers.** Overdue coupons usually draw interest at the legal 
 rate,*5 and it has been held that such interest is covered by the 
 
 10 L. R. A. 754; Haven v. Grand 
 Junction R. Co., 109 Mass. 88; Union 
 Trust Co. V. Monticello &c. R. Co., 
 63 -N; Y. 311, 20 Am: -Bee.' S41 ; Mil- 
 ler V. Rutland &c. R. Co., 40 Vt. 399, 
 94 Am. Dec. 413. 
 
 82 Manning v. Norfolk &c. R. Co., 
 29 Fed. 838; Welsh v. First Division 
 &c. R., 25 Minn. 314; Montgomery 
 &c. Soc. V. Francis, 103 Pa. St. 378. 
 Where the coupons are payable to 
 bearer the holder is not necessarily 
 an assignee and his right to sue in 
 the United States courts does not de- 
 pend upon the citizenship of any 
 particular holder. Thompson v. Per- 
 rine, 106 U. S. 589, 1 Sup. Ct. 564, 
 .'568, 27 L. ed. 298, 103 U. S. 806, 26 
 L. ed. 612. 
 
 83 Butterfield v. Ontario, 44 Fed. 
 171. See also Cromwell v. County 
 of Sac.,.94 U. S. 351, 24 L. ed. 195; 
 Stewart v. Lansing, 104 U. S. 505, 
 26 L. ed. 866. 
 
 84 Butler V. Rahm, 46 Md. 541 ; 
 Fish V. New York Paper Co., 29 N. 
 J. Eq. 16; Commonwealth v. Sus- 
 quehanna &c. R. Co. 122 Pa. St. 306; 
 Bowen v. Brecon Railw. L. R. 3 Eq. 
 S'41 ; Philadelphiai&c. R. CoA. Woelp- 
 per, 64 Pa, St. 366, 3 Am. Rep. 
 596; and cases cited in Pugh v. Fair- 
 mount, &c. Co., 112 U. S. 238, 5 Sup. 
 Ct. 131, 135, 28 L. ed. 684. In the 
 
 first two cases above cited it was held 
 that injunction would lie at the suit 
 of other bondholders. 
 
 «6 Aurora City v. W«st, 7 Wall. 
 (U. S.) 82, 19 L. ed. 42; Walnut v. 
 Wade, 103 U. S. 683, 26 L. ed. 526; 
 Rich V. Seneca Falls, 8 Fed, 852; 
 Farmers Loan & Trust Co. v. North- 
 ern Pac. R. Co., 94 Fed. 454; Ashue- 
 lot R. Co. V. Elliott, 57 N. H. 397; 
 Philadelphia &c. R. Co. v. Smith, 
 105 Pa. St. 195; Langston v. South 
 Carolina R. Co;,. 2 S. Car. 248, and 
 numerous authorities cited in note 
 to Morris Canal &c. Co. v. Fisher, 
 99 N. J. Eq. 667, 64 Am. Dec. 411. 
 Even where the bonds continue 
 to draw interest after maturity 
 at the same rate they did be- 
 fore, which is greater than the rate 
 fixed by statute in the absence of 
 contract. Cromwell v. Sac, 96 U. 
 S. 51, 24 L. ed. 681 ; Spencer v. 
 Pierce, 5 R. I. 63 ; Langston v. South 
 Carolina R. Co., 2 S. Car. 248. But 
 see Ohio v. Frank, 103 U. S. 697, 26 
 L. ed. 531, as to when the coupons 
 may draw the contract rate of the 
 bond. Some courts hold that coupons 
 do not bear interest, and it generally 
 concluded that it may be defeated or 
 abated where they were not present- 
 ed for payment as required and the 
 corporation shows that it was pre- 
 
§552 
 
 RAILROADS 
 
 ;804 
 
 mortgage which secures the bonds and coupons.®^ 
 
 § 552 (487). Payment of bonds and interest. — The authori- 
 ties are conflicting as to whether interest coupons are entitled 
 to days of grace, *^ but, aside from this question, they, are pay- 
 able at the time fixed in the covipons and bond, and a provision 
 in'thebond;that the interest shall be paid when the coupon is 
 presented and surrendered does not change the rule as to the 
 maturity. of the coupon or require its presentment for payment 
 at the time designated in order to hold the maker.*^ Coupons 
 are usually paid in the order in which they fall due,*® but, ordi- 
 narily, upon foreclosure of the mortgage mere priority of ma- 
 turity gives no priority of satisfaction either over other cou- 
 pons or over the bond, and the rule of distribution is that the 
 bonds and coupons all share pro rata or pari passu in the pro- 
 ceeds.®** Where, however, coupons have been presented for 
 
 pared and ready and willing to pay. 
 3 Thomp. Corp. (2nd ed.), § 232S. 
 
 86 Gibert v. Washington City &c 
 R. Co., 33 Grat. (Va.) 586. It is gen- 
 erally held, as shown by the authori- 
 ties cited in the preceding note, that 
 a demand is unnecessary to start in- 
 terest to running where the coupons 
 are payable at a fixed time and 
 place; but if no demand has been 
 made interest may be defeated or 
 abated by the mortgagor showing 
 that he had the funds ready and was 
 able and willing to pay at the time 
 and place designated. North Penna. 
 R. Co. V. Adams, 54 Pa. St. 94, 93 
 Am. Dec. 656; Emlen v. Lehigh &c. 
 Co., 47 Pa. St. 76, 86 Am. Dec. 518; 
 Walnut y. Wade, 103 U. S. 683, 26 L. 
 ed. 526. 
 
 8'? Holding that they are not : 
 Arents v. Commonwealth, 18 Grat. 
 (Va.) 750; 2 Daniels' Negot. Instr. 
 (3d ed.) §§ 1490a, ISOS. Holding that 
 they are : Evertson v. National 
 Bank, 66 N. Y. 14, 23 Am. Rep. 9; 
 
 Jones Corp. Bonds and Mort. § 245. 
 In Massachusetts they are not, un- 
 der the statute, and the soundness of 
 the New York decision is questioned. 
 Chaflfee v. Middlesex R. Co., 146 
 Mass. 224, 16 N. E. 34. 
 
 88 Green v. Daniel, .102 U. S. 187, 
 26 L. ed. 99; City of Jeffersonville 
 V. Patterson, 26 Ind. IS, 89 Am. Dec. 
 448; Langston v. South Carolina. R. 
 Co., 2 S. Car. 248; Arents v. Com- 
 monwealth, 18 Grat. (Va.) 750, 776 
 See also Frank v. Wessels, 64 N. Y. 
 155. 
 
 89 Jones Corp. Bonds arid Mort. 
 §247. 
 
 90 Dunham v. Cincinnati &c. R. 
 Co., 1 Wall. (U. S.) ,254, 17 L. ed. 
 584; Ketchum v. Duncan, 96 U. S. 
 671, 24 L. ed. But compare 
 Stevens v. New York &c. R. Co., 13 
 Blotch. (U. S.) .412, Fed. Cas. No. 
 13406; State v. .Spartanburg .&c. R. 
 Co., 8 S. Car. 129; Sewall v. Brain- 
 erd, 38 Vt. 364. 
 
805 RAILROAD SECURITIES § 552 
 
 payment and cashed they are not eih'titled to share equally with 
 the bondholders and -coupon holders- who had reason to suppose 
 that they were paid and cancelled, and not merely purchased, 
 although' a third person advanced the money to take them up 
 under an agreement with the company that they should be kept 
 alive and- delivered to him.^^ But, as against the corporation, 
 they may exist as valid securities and be entitled to be paid out 
 of any surplus remaining after the payment of the other' bonds 
 and coupons,^^ and where the persons who present the coupons 
 for payment have knowledge at the time of facts showing that 
 some one else is advancing the money and that the transaction 
 is, in efifect, a purchase rather than a final payment of the cou- 
 ponsj they cannot complain if such third person is treated hs a 
 bona fide purchaser and permitted to share pro rata with them 
 in the mortgage security.®^ The pledgee of bonds with coupons 
 attached may collect the' coupons as they fall due although the 
 debt secured thereby has not yet matured.^* In a proper case 
 the payment of a lost bond will be enforced, and a "court of 
 chancery, it seems, may" even compel the execution of a' dupli- 
 cate bond in place of a lost bond not yet due, upon' proper in- 
 demnity being furnished.^^ Bondholders cannot be compelled 
 to accept payment and relinquish their lien before' maturity,^® 
 
 91 South Covington- &c. R. Co. v: Sup. Ct. 131, 32 L. ed. 472;: Claflin 
 
 Gest, 34 Fed. 628; Lloyd v. "Wagner, V. South Carblina R. Co., 8 Fed. 118; 
 
 93 Ky. 644, 21 S. W. 334; Common- Hand v. Savannah &c. R. Co., 17 S. 
 
 wealth V. Chesapeake &c, Co., 32 Car. 219. 
 
 Md. SOI ; Cameron v. Tome, 64 Md. 94 "Warner v. Rising Fawn &c. 
 
 507, 2.Atl. 837; Bockes v. Hathorn,. Co., 3 Woods. (^U. S.) 514, Fed. Cas. ■ 
 
 20. Hun (N. Y.) 503; Union Trust No. 17188. 
 
 Co. v. Monticello &c. R. Co., 63 N. 95 New Orleans &c. R.. Co. :.v. 
 
 Y. 311, 20 Am. Rep. 541; Fidelity &c. Mississippi College, 47 Miss. 560; 
 
 Co. V. "West &c. R. Co., 138 Pa. 494, Rogers y. Chicago. &C.-.R.. Co.,,. 6 
 
 2,1, Atl. 21. Abb. N. Cas. (N. Y.) 253. .See al- 
 
 , 92 Haven v. Grand Junction R. &Ci so Chesapeake &c. Co. v. Bla-ti-, 45 
 
 Co., 109 Mass. 88; Union Trust Co. Md. 102; Miller v. Rutland &c. R. 
 
 v. Monticello &c. R. Co., 63 N. Y. Co., 40 .Vt. 399 ; Adams' Equity, 16(5,. 
 
 311, 20 Am. Rep. 541. 168...,; 
 
 .93 Ketchum v. Duncan, 96 U. S, ;»6 Randolph .y. Middleton, 26 N, 
 
 659, .24 L. ed. 868. See also Wood v. J. Eq.i 5.43.- .-.'.; ■ ■.: .. r ,, 
 
 Guarantee. &c. Co:, 128 U. S.: 416,. 9 • - 
 
§ 553 RAILROADS 806 
 
 and a clause in a bond payable at a certain time providing that 
 it "will be redeemed, if desired," at an earlier date, is for the 
 benefit of the holder rather than the maker.*^ Bonds may be 
 made payable in gold,*'^ but this is not to be implied from the 
 mere expectation of the holders where there is nothing in the 
 contract to that cfifect or justifying such an implication.**® The 
 substitution of new bonds for the old ones does not, necessar- 
 ily, operate as a payment nor prevent the holders from sharing 
 to the same extent in the mortgage security,^ but the rule is 
 otherwise where a railroad company issues new bonds in order 
 to fund its indebtedness and bondholders accept second mort- 
 gage bonds in exchange for first mortgage bonds knowing that 
 the transaction is intended as a satisfaction of the first mort- 
 gage bonds.2 
 
 §553 (488). No power to mortgage without legislative au- 
 thority. — Railroad bonds are usually secured by mortgage or 
 trust deed, and mortgages are frequently executed for other 
 purposes as well. As a railway company receives from the 
 state special privileges because of its public purpose, and has 
 public duties to perform in person, and as a mortgage may be- 
 come in effect an absolute conveyance or result in a sale , by 
 foreclosure, such a company cannot, without legislative author- 
 ity, mortgage its franchises and property essential to their 
 exercise.' This rule is not, however, applicable to property 
 
 97Allentowii School Dist. v. Grat. (Va.) 586; Stevens v. Mid- 
 
 Derr, 115 Pa. St. 439, 5 Atl. 55. Hants &c. R. Co., L R. 8 Ch. 1064. 
 
 See also Chicago &c. R. Co. v. See also Gibles v. Greenville &c. R. 
 
 Pyne, 30 Fed. 86. Co., 15 S. Car. 304 (refunding 
 
 98 Trebilcock v. Wilson, 12 Wall, bonds have the security of the first 
 
 (U. S.) 687, 20 L. ed. 460; State v. mortgage bonds for which they are 
 
 Hays, SO Mo. 34, 11 Am. Rep. 402. substituted). 
 
 90 Knox V. Lee, 12 Wall, (U. S.) 2 Fidelity &c. Co. v. Shenandoah 
 
 457, 20 L. ed. 287. &c. R. Co., 86 Va. 1, 9 S. E. 759, 19 
 
 1 Ames v. New Orleans &c. R. Am. St. 858. 
 
 . Co., 2 Woods (U; S.) 206, Fed Cas. s PuUan v. Cincinnati &c. R. 
 
 No. 329; Farmers' &c. Co. v. Green, Co., 4 Biss. (U. S.) 35; Fed. Cas. 
 
 &c. R. Co.. 6 Fed. 100; Blair v. St. No. 11461; Hays v. Ottawa &c. R. 
 
 Louis &c. R. Co., 23 Fed. 524; Gi- Co,, 61 111. 422; State v. Mexican 
 
 bert v. Washington City R. Co., 33 Gulf R. Co., 3 Rob. (La.) 513 ; 
 
807 
 
 RAILROAD SECURITIES 
 
 §553 
 
 which is not essential to or of use in the fulfillment of the cor- 
 poration's public purpose and not necessary to enable the com- 
 pany to perform its duties to the public* 
 
 Commonwealth v. Smith, 10 Allen 
 (Mass.) 448, 87 Am. Dec. 672, and 
 note; Richardson v. Sibley, 11 Al- 
 len (Mass.) 6S, 87 Am. Dec. 700, and 
 note; East Boston &c. R. Co. v. 
 Eastern R. Co., 13 Allen (Mass.) 
 422; Daniels v. Hart, 118 Mass. 
 543; New Orleans &c. R. Co. v. 
 Harris, 27 Miss. 517; Stewart v. 
 Jones, 40 Mo. 140; Pierce v. Emery, 
 32 N. H. 484; Black v. Delaware 
 &c. Canal Co., 22 N. J. Eq. 130; 
 Troy &c. R. Co. v. Kerr, 17 Barb. 
 (N. Y.) 581; Stewart's Appeal, 56 
 Pa. St. 413; Carpenter v. Black 
 Hawk G. M. Co., 65 N. Y. 43, 50; 
 Coe V, Columbus &c. R. Co., 10 
 Ohio St. 372, 75 Am. Dec. 518, and 
 note; Atkinson v. Marietta &c. R. 
 Co., 15 Ohio St. 21; Wood v. Bed- 
 ford &c. R. Co., 8 Phila. (Pa.) 94; 
 Randolph v. Wilmington &c. R. 
 Co., 11 Phila. (Pa.) 502; Susquehan- 
 na C. Co. V. Bonham, 9 W. & S. 
 (Pa.) 27; Frazier v. East Tenn. &f. 
 R. Co., 88 Tenn. 138, 12 S. W. 537; 
 Naglee v. Alexandria &c. R. Co., 
 83 Va. 707, 3 S. E. 369, 5 Am. St. 308, 
 32 Am. & Eng. R. Cas. 401 ; Hall v. 
 Sullivan R., 21 Law R. 138; Wyatt 
 V. St. Helen's &c. R. Co., 2 Q. B. 
 364; Hart v. Eastern U. R. Co., 7 
 Exchq. 246. In a number of cases 
 in the Supreme Court of the 
 United States, most of which in- 
 volved the question of the power 
 to lease, it is stated in general 
 terms that a railroad company has 
 no implied power to alienate its 
 franchises in any way, whether by 
 sale, mortgage or lease. One of 
 
 the most recent of these cases is 
 Snell V. City of Chicago, 152 U. S. 
 191, 14 Sup. Ct. 489, 492, 38 L. ed. 
 408, in which the others are cited. 
 See also ante, §§82, 83; Jennings 
 V. Dark, 175 Ind. 332, 92 N. E. 778; 
 Attorney General v. Haverhill Gas- 
 light Co., 215 Mass. 394, 101 N. E. 
 1061, Ann. Cas. 1914C, 1266n. Some 
 cases, however, hold that railroad 
 companies may mortgage their 
 property and franchises other than 
 that of existing as a corporation, 
 at least to secure indebtedness in- 
 curred for the legitimate purpose 
 of construction- or operation. Sa- 
 vannah &c. R. Co- V. Lancaster, 62 
 Ala. 555; Kelly v. Ala. &c. R. Co.. 
 58 Ala. 489; Memphis &c. R. Co. 
 V. Dow, 22 Blatch. (U. S.) 48, 19 
 Fed. 388; Bardstown &c. R. Co. v. 
 Metcalfe, 61 Ky. 199, 81 Am. Dec. 
 541 ; Shepley v. Atlantic &c. R. Co., 
 55 Maine 395; Kennebec &c. R. Co. 
 V. Portland &c. R. Co., 59 Maine 9, 
 23; Commissioners y. Atlantic &c. 
 R. Co., n N. Car. 289; Miller v. 
 Rutland &c. R. Co., 7^ Vt. 452; 
 Bickford v. Grand Junction R. Co., 
 1 Sup. Ct. of Canada 696, 738, re- 
 versing Grand Junction- R. Co. v. 
 Bickfprd, 23 Grant's Ch,' (Ont.) 302. 
 See also New Orleans &c. R. Co. 
 V. Delamore, 114 U. S. 501, S Sup. 
 Ct. 1009, 29 L. ed. 244; Owensboro 
 V. Cumberland Tel. &c. Co., 230 U. 
 S. 58, 33 Sup. , Ct. 988, 57 L. ed. 
 1389; Cooper v. Utah Light &c. 
 Co., 35 Utah 570, 102 Pac. 202. 
 
 * Piatt V. Union Pac. R. Co., 99 
 U. S. 48, 57, 25 L. ed. 424; Tucker 
 
§-554 
 
 RAILROADS 
 
 808 
 
 § 554 (489). Legislative authority to mortgage. — In almost 
 all-. of the states general laws have been enacted authorizing 
 railroad companies to mortgage their property and franchises.* 
 The authority may, sometimes, be implied or inferred from 
 the terms of the statute,'' although not expressly mentioned; 
 but, by expressly giving authority to mortgage to a certain 
 amount the implication of an authority to mortgage beyond 
 that amount may be forbidden^ Charter authority to mort- 
 gage real estate refers to real estate acquired in whatsoever 
 manner;^ and a part of a railroad may be mortgaged under 
 authority to mortgage the whole.^ It has been held that power 
 to pledge property also authorizes a mortgage of the prop- 
 
 V. Ferguson, 22 Wall. (U. S.) 527. 
 ■572, 22 L. ed. 805; Farnsworth v. 
 Minnesota &c. R. Co., 92 U. S. 49, 
 23 L. ed. 530; Taber v. Cincinnati 
 &c. R. Co., IS Ind. 459; Hendee v. 
 Pinkerton, 14 Allen (Mass.) 381; 
 Pierce v. Emery, 32 N. H. 484; 
 Bickford v. Grand Junction R. Co., 
 1 Sup. Ct. of Canada 696, 735. See 
 also Coe v. Columbus &c. R. Co., 
 10 Ohio St. 372, 75 Am. Dec. 518, 
 and note 550. This exception, it is 
 said, includes surplus land ac- 
 quired by eminent domain. Jones 
 Corporate Bonds and Mortgages, 12, 
 citing Bickford v. Grand Junction 
 R.' Co., 1 Supreme Court of Cana- 
 da 696, 735. 
 
 B Jones Corporate Bonds and 
 Mort. § 27; 
 
 6 East Boston &c. R. Co. v. East- 
 ern R. Co., 13 Allen (Mass.) 422. 
 See also Branch v. Jesup, 106 U. S. 
 468, 1 Sup. Ct. 495, 27 L. ed. 279; 
 Willamette &c. Co. v.' Bank 119 ,U. 
 $. 191, .7, Sup. Ct. 187, 30 L. ed. 384; 
 Farmers'' Loan &c. Co. v. Toledo &c. 
 R. Co.', .54 Fed. 759 ; Pierce v. Mil- 
 
 waukee &c. R. Co., 24 Wis. 551, 1 
 Am. Rep. 203. 
 
 TBrice Ultra Vires (2d Eng. ed.), 
 273. It is said, however, and right- 
 ly, as we think, that an express au- 
 thority to mortgage for certain pur- 
 poses does not necessarily negative 
 or qualify a general authority to 
 borrow for other purposes for which 
 the implied powers of a corporation 
 are usually suflficient. Jones Corpo- 
 rate Bonds and Mortgages, 7; Allen 
 V. Montgomery R. Co., 11 Ala. 437; 
 Mobile &c. R. Co. v. Talman, IS Ala. 
 472; Phillips v. Winslow, 57 Ky. 
 431, 68 Am. Dec. 729. See Pooley 
 Hall Colliery Co., In re, 21 L. T. 
 (N. S.) 690. 
 
 8 Galveston &c. R. Co. v. Cow- 
 drey, 11 Wall. (U. S.) 459, 20 L. ed. 
 199. 
 
 9 Pullan V. Cincinnati &c. R. 
 Co., 4 Biss. (U. S.) 35, 45, Fed. 
 Cas. No. 11461; Chartiers R. Co. 
 V. Hodgens, 85 Pa. St. SOI, 506; 
 Bickford v. Grand Junction &c. R., 
 1 Can. Sup. Ct. 696. But. see East 
 Boston .&c. R. Co. v. Hubbard, 10 
 Allen (Mass.) 459, note. 
 
809 
 
 RAILROAD SECURITIES 
 
 §555 
 
 erty,^" and so does a grant of power to borrow money, and exe- 
 cute "such securities in amount and kind" as the company may 
 deem expedient.^^, A mortgage, though made with charter au- 
 thority, has been he'd not to be good against the state which 
 has taken possession of the road under provisions of the char- 
 ter entitling it to declare a forfeiture.^^ 
 
 § 555 (490). Distinction between authority to mortgage fran- 
 chises and authority to mortgage property.— rAuthority to mort- 
 gage a prerogative franchise may not be inferred from a com- 
 pany's express right to sell and consequents^ right to mortgage 
 its property.^* But, from the power to mortgage a corpora- 
 tion's franchises may be implied the power to transfer both 
 franchises and property to a purchaser at a foreclosure sale.^^ 
 
 10 Mobile &c. R. Co. v. Talman, 
 15 Ala, 472. 
 
 11 Pierce v; Milwaukee &c. R. 
 Co., 24 Wis. 551, 1 Am. Rep. 203. 
 
 12 Silliman v. Fredericksburg &c. 
 R. Co., 27 Grat. (Va.) 119. See 
 also Farnsworth v. Minnesota &c. 
 R. Co., 92 U. S. 4966, 23 L. ed. 530. 
 But see People v. O'Brien, 111 N. 
 Y. 1, 18: N. E. 692, 2 L. R. A. 2SS, 
 7 Am. St. 684 ; Mower v. Kemp, 
 42 La. Ann. 1007, 8 So. 830. 
 
 13 Willamette M. Co. v. Bank of 
 British Columbia, 119 U. S. 191, 7 
 Sup. Ct. 187, 30 L. ed. 384. 
 
 14 Branch v. Atlantic &c. R. Co., 
 3 Woods (U. S.) 481, Fed. Cas. No. 
 1807; McAllister v. Plant, 54 Mass. 
 106. Generally, it would seem that 
 a statute authorizing a mortgage 
 of corporation property does not 
 by implication authorize a mort- 
 gage of franchises. Dunham-' v. 
 Isett,.15 Iowa 284; Pullan v. Cin- 
 cinnati- &C..R. Co., 4 Biss. (U. S.) 
 35, Fed. Cas.- No. 11461; Pollard v. 
 Maddox; 28 Ala. 321 ; Randolph v. 
 Wilmington &c; R. Co., 11 Phi!. 
 
 (Pa.) 502. But see Kavan.augh v. 
 St. Louis, 220 Mo. 496, 119 S. W. 
 552. A mortgage covering prop- 
 erty and franchise, having been au- 
 thorized^ by charter as to the for- 
 mer but not as to the latfet, is not 
 entirely void, but will operate to 
 convey the corporation's property. 
 Randolph v. Wilmington &c. R. 
 Co., 11 Phila. (Pa.) 502; Gloninger 
 v. Pittsburgh &c. R. Co., 139 Pa. 
 13, 21 Atl. 211, 46 Am; & Eng. R. 
 Cas. 276. See Butler v. Rahm; 46 
 Md. 541 ; Carpenter v. Black Hawk 
 G. M. Co., 65 N. Y. 43; Central G. 
 M. Co. V. Piatt, 3 Daly (N. Y.) 263. 
 15 Galveston &c. R. Co. v. Cow- 
 drey, 11 Wall. (U. S.) 459, 20 L. ed. 
 199; New Orleans &c. R. Co. v. 
 Delamorc, 114 U. S; 501, 5 Sup. Ct. 
 1009, 29 L. ed. 244; Traer v. Clews, 
 115 U. S. 528, 6 Sup. Ct. 155, 29 L. 
 ed. 467; Phillips v; Winslow, 57 
 Ky. 431, 68 Am. Dec. 729. See also 
 Chadwick v. Old Colony- R. Co., 
 171 Mass. 239, 50 N. E. -629. But 
 net, ordinarily the- franchise to be 
 a corporatioii. See also Rogiers v. 
 
§556 
 
 RAILROADS 
 
 810 
 
 Authority to mortgage a railroad company's "means, property 
 and effects," has been held sufficient to authorize a mortgage 
 of all its franchises except that of being a corporation,^** but the 
 soundness of some of these decisions, in so far as they hold 
 that a mortgage of any prerogative or true franchise was au- 
 thorized, is not entirely beyond question. There must certainly 
 be a very clear grant of power to authorize a mortgage of the 
 franchise to be a corporation. But it has been held that the 
 power to pledge the franchises and rights of a corporation im- 
 plies, as incident thereto, the power to pledge everything nec- 
 essary to the enjoyment of the franchise and upon which its 
 real value depends.*^ If the statute conferring power to mort- 
 gage specifies or enumerates the particular property to be in- 
 cluded it gives no authority to include other kinds. ^* 
 
 § 556 (491). Who may execute the mortgage. — The author- 
 ity of a corporation to mortgage its property may, unless re- 
 served to the stockholders, be exercised by its directors,'* even 
 
 Nashville &c. R. Co., 91 Fed. 299; 
 Memphis &c. R. Co. v. Railroad 
 Comrs., 112 U. S. 609, 619, 5 Sup. 
 Ct. 299, 28 L. ed. 837. 
 
 ic Meyer v. Johnston, S3 Ala. 
 237; Bradstown &c. R. Co. v. Met- 
 calfe, 61 Ky. 199, 81 Am. Dec. 541. 
 See also Wilmington R. Co. v. 
 Reid, 13 Wall. (U. S.) 264, 20 L. ed. 
 568; Pullan v. Cincinnati &c. R. 
 Co., .4 Biss. (U. S.) 35, Fed. Cas. 
 No. 11461; McAllister v. Plant, 54 
 Miss. 106. So authority to mort- 
 gage "the entire road, fixtures, and 
 equipments, with all the appurten- 
 ances, income and resources there- 
 of," does not include the right to 
 mortgage the franchise to be a cor- 
 poration, but does include, accord- 
 ing to another decision, the right 
 to mortgage the franchise to main- 
 tain a railroad and take compensa- 
 tion as a carrier. Coe v. Columbus 
 
 &c. R. Co., 10 Ohio St. 372, 75 Am. 
 Dec. 518. 
 
 17 Phillips V. Winslow, 57 Ky. 
 431. 
 
 18 See Georgia Southern &c. R. Co. 
 V. Barton, 101 Ga. 466, 28 S. E. 842; 
 Morris v. Cheney, 51 111. 451; Ta- 
 ber V. Cincinnati &c. R. Co., 15 
 Ind. 459; Bath v. Miller. 51 Maine 
 341 ; Lloyd v. European &c. R. Co., 
 18 New Bruns. 194. Compare also 
 Gloninger v. Pittsburgh &t. R. Co., 
 139 Pa. St. 13, 21 Atl. 211; Fidelity 
 Ins. &c. Co. V. Western Penna. 
 Co., 138 Pa. St. 494, 21 Atl. 21, 21 
 Am. St. 911; Grand Junction R. Co. 
 V. Bickford, 23 Grant Ch. (U. C.) 
 302. 
 
 19 Hodder v. Kentucky &c. R. 
 Co., 7 Fed. 793; Phinizy v Augusta 
 &c. R., 62 Fed. 678; Taylor v. Agri- 
 cultural &c. Assn., 68 Ala. 229; 
 Blood V. La Serena &c. Co., 113 
 
811 
 
 RAILROAD SECURITIES 
 
 §556 
 
 outside the state of its creation.^" or outside the state in which 
 the railroad is situated.-* Even where the authorization of the 
 stockholders is required, it is held that the public has no inter- 
 est in the requirement;*^ that it cannot be pleaded by the cor- 
 poration's creditors,^* and that the stockholders cannot com- 
 plain after the issuance of bonds^* to bona fide purchasers. 
 The president of a railroad company cannot mortgage its prop- 
 erty to secure its debt, even though he be authorized generally 
 to act as its financial agent.^' The use of the corporate seal in 
 
 Cal. 221, 41 Pac. 1017, 45 Pac. 252; 
 Wood V. Whelen, 93 111. 153; 
 Thomas v. Citizens' Horse R. Co., 
 104 111. 462; Hendee v. Pinkerton, 
 14 Allen (Mass.) 381; Tripp v. 
 Swanzey Paper Co., 13 Pick. 
 (Mass.) 291; Burrill v. Nahant 
 Bank, 2 Met. (Mass.) 163, 35 Am. 
 Dec. 395 ; Thompson v. Natchez &c. 
 Co., 68 Miss. 423, 9 So. 821 ; Ohio 
 &c. R. Co. V. McPherson, 35 Mo. 
 13, 86 Am. Dec. 128; McCurdy's 
 Appeal, 65 Pa. St. 290; Bank of 
 Middlebury v. Rutland &c. R. Co., 
 30 Vt. 149. 
 
 20 Galveston R. v. Cowdrey, 
 11 Wall. (U. S.) 459, 20 L. ed. 
 199; Hodder v. Kentucky &c. R. 
 Co., 7 Fed. 793; McCall v. Byram 
 Mfg. Co., 6 Conn. 428; Wright v. 
 Bundy, 11 Ind. 398; Ohio &c. R. 
 Co. V. McPherson, 35 Mo. 13, 86 
 Am. Dec. 128; Bassett v. Monte 
 Christ© M. Co., 15 Nev. 293; Coe 
 V. New Jersey Midland R. Co., 31 
 N. J. Eq. 105; Arms v. Conant, 36 
 Vt. 744. In some of the states, 
 however, charters and general 
 laws prohibit the action of the di- 
 rectors without the authorization 
 of the stockholders. Mass. Pub. 
 Stat. Ch. 106, § 23. It has been held 
 that this does not apply to a mort- 
 gage of property in Massachusetts 
 
 owned by a corporation of Ver- 
 mont. Saltmarsh v. Spaulding, 147 
 Mass. 224, 17 -N. E. 316, 4 R. & 
 Corp. Law J. 151 ; Romford Canal, 
 In re, 24 Ch. Div. 85; Landowners' 
 &c. Co. V. Ashford, 16 Ch. Div. 411 ; 
 Fountaine v. Carmarthen R. Co., 
 5 Eq. 316; Tex. Rev. Stat. Art. 
 4220; 8 Vict. Ch. 16, §38. 
 
 21 Hervey v. Illinois Midland R. 
 Co., 28 Fed. 169. But it is held that 
 a foreign corporation must comply 
 with the statute of a state in which 
 it does business, requiring the 
 authorities of stockholders to the 
 execution of the mortgage, Williams 
 v. Gaylord, 186 U. S. 157, 46 L. ed. 
 1102, 22 Sup. Ct. 798. 
 
 22 Thomas v. Citizens' Horse R. 
 Co., 104 111. 462. See also Central 
 Trust Co. v. Condon, 67 Fed. 84; 
 Beecher v. Marquette &c. Mill Co., 
 45 Mich. 103, 7 N. W. 695. 
 
 23 Hervey v. Illinois Midland R. 
 Co., 28 Fed. 169. 
 
 24 Hodder v. Kentucky &c. R. 
 Co., 7 Fed. 793; McCurdy's Appeal, 
 65 Pa. St. 290; Texas &c. R. Co. 
 V. Gentry, 69 Tex. 625, 8 S. W. 98. 
 
 26 Despatch Line of Packets v. 
 Bellamy Mfg. Co., 12 N. H. 205, 37 
 Am. Dec. 203; Hoyt v. Thompson, 
 5 N. Y. 320; Luse v. Isthmus Tran- 
 sit R. Co.,'^ Ore. 125, 25 Am. Rep. 
 
§557 
 
 RAILROADS 
 
 812 
 
 such a case only raises a rebuttable presumption that the mort- 
 gage has been authoritatively: executedi^^ The individual sig- 
 nature of an executive officer, erripowered to execute the mort- 
 gage, may, however, bind the corporation whose instrument it 
 purports to be, though the corporate name be omitted.^'' "Where 
 the authority of the agent to execute the mortgage is in gen- 
 eral terms he must include in it usual provisions only, and the 
 company will not. ordinarily, be bound by any unusual provi- 
 sions which may be included. ^s 
 
 § 557 (492). Ratification by stockholders of unauthorized or 
 irtiproperly executed mortgage. — An unauthorized mortgage, 
 which the corporation has power to execute, may be. ratified 
 by the stockholders, either directly by vote or indirectly, as by 
 the. payment of interest or the receipt and retention, of the. pro- 
 
 506.-; Whit well. V. Warner, 20 Vt. 42S. 
 But it might be otherwise if he 
 were . authorized to borrow the 
 money. Hatch v. Coddington, 9S 
 y. S. 48, 24 L. ed. 339. S,ee also 
 Bell &c. Co. V. Kentucky Glass 
 Works,, 106. Ky. 7, SO S. W. 2, 1092, 
 51 S. W. 180. And see as to esr 
 toppel where- the money is used by 
 the company, Aug;usta &c. R. Co. 
 V. Kettel, 52 Fed. 63 ; P'omeroy. v. 
 N«w York &c Co. (N. J.), 48 Atl. 
 395; Murray v. Beal,,- 23 Utah 548, 
 65. Pac, 726. ' . 
 
 ;26Wood «. •Whalen,;.f93 111. 153; 
 Northern C. R. Co. .v. Bastian; 15 
 Md. . 494;'-Gorder v. Plattsfnouth 
 Canning Co., 36 Nebn. 548, 54 N. W. 
 830; Fidelity "Ins. Co. v, Shenan- 
 doah Valley R: Co., 32 W. Va. 244, 
 9 S. E. 180. -See' alsw Koehler v. 
 Black River Falls Iron Co., 2 
 Black (U.- S.) 715, 17 L..ed. 339; 
 Reed, V. -Bradley, 17 IlL 321. It 
 has baeen held that it may be en- 
 forced -as an equitable mortgage^ if 
 the; reqiiisite seal is not attached. 
 
 Brown v. Farmers' &c. Co., 23 .Ore. 
 541, 32 Pac. 548; Pullis v; Pullis 
 Bros., 157 Mo. 565;;57 S.:W;1095. 
 
 27 Savannah, &Cj ■ R Co. v. Lans- 
 caster, 62 Ala. 555; Haven v. 
 Adams,- 4 Allen (Mass.) 80; De- 
 spatch Line of Packets v. Bellamy 
 Mfg. Co., 12 N. H. 205, 37. Am. Dec. 
 203. See also Anten. v. City, .&c. 
 R. Co., 104. Fed. 395; Sioux.. City 
 Terminal R. Co.. v. Trust Co., 173 
 U.,.S. 99, 19 Sup; Ct..341,.43 L. ed. 
 628.: : Of.;. couTse this- is not true 
 when- the instrument: pu'rports to 
 be the officers'. Brinley v. Mann, 
 56 Mass. 337,.. 48 Am. Dec; 669; 
 Miller v. Rutland, &e. R. Co., 36 
 Vt. 452. ,, -.-,...,. 
 
 28-Pacific Rolling Mill , v. Day- 
 ton,. &c.R. Co., 5 Fed. 852; -Jesup 
 ir'. City Bank of Racine, 14 Wis. 
 331. ■ See also -Savannah, :&c.- R. 
 Co. v; Lancaster, 62 Ala. 555; Hart 
 V. Eastern Un. R.. Coi, 7 Ex.- 246. 
 But see Coe v. New J^i'rse-y Mid- 
 land R. Co., 31 N. J. Eq;. 105. 
 
813 
 
 EAILROM) SECURITIES 
 
 §557 
 
 ceed-s, sor other. . acts ;r.ecognizrog -the obligatidn.^s The receipt 
 of the proceeds of an unauthorized mortgage ^has been held to 
 be such a. ratification that a corporation may not thereafter re- 
 pudiate it, even though executed in violation of a statute for- 
 bidding a .mortgage without .the approval of two-thirds of the 
 stock.^'' So, where a corporation is authorized to increase its 
 capital stock, and attempts to do so, but fails to give the statu- 
 tory notice required in such a case, both the corporation and 
 its stockholders who acquiesce therein, are estopped to question 
 the validity of a mortgage executed to secure obligations greater 
 in amount than the original capital, but less than the capital 
 as increased, notwithstanding the statute prohibits a mortgage 
 exceeding the amount of the capital stock ; and such a mort- 
 gage is ratified by the acquiescence of the stockholders for sev- 
 eral years, although it was not originally authorized by them 
 at_ a legally called meeting.^^ 
 
 29 Merchants' Bank v. State 
 Bank, 10 Wall. (U. S.) 604, 19 L. 
 ed. 1008; Railway Co. v. Mc- 
 Carthy, 96 U. S. 258, 24 L. ed. 693; 
 National Bank v. Matthews, 98 U. 
 S. 621, .25 L. ed. 188; Mahoney 
 Mining Co. v. Anglo-Calif ornian 
 Bank, 104 U. S. 192, 26 L. ed. 707; 
 Page V. Fall River, &c. R. Co., 31 
 Fed. 257; Farmers', &c. Co. v. To- 
 ledo, &c. R. Co., 67 Fed. 49; 
 Foulke V. San Diego, &c. R. Co., 
 51 Cal. 365; Lewis v. Hartford 
 Silk Mfg. Co., 56 Conn. 25, 12 Atl. 
 637; Southern, &c. Transp. Co. v. 
 Lanier, 5 Fla. 110, 58 Am. Dec. 
 448; City Fire Insurance Co. v. 
 Carrugi, 41 Ga. 660; Thomas v. 
 Citizens' Horse R. Co., 104 111. 462; 
 Ottawa, &c. R. Co. v. Murray,. 15 
 111. 336; Thompson v. Lambert, 44 
 Iowa 239; Perkins v. Portland, &c. 
 R. Co., 47 Maine 573, 74 Am;. Dec. 
 507; Harrison v. Annapolis, &c. 
 
 R.Co., 50 Md. 490; Kelley v. New- 
 buryport, &c. R. Co., 141 Mass. 
 496, 6 N. E. 745; Lester v. Webb, 
 1 Allen (Mass.) 34; Singer v. St. 
 Louis, &c. R. Co., 6 Mo. App. 
 427; Whitney Arms Co. v. Bar- 
 low, 63 N. Y. 62, 20 Am. Rep. 504; 
 Elwell V. Grand St., &c. R. Co., 
 67 Barb. (N. Y.) 83; Hays v. 
 Gallon Gas Light, &c. Co., 29 Ohio 
 St. 330; McCurdy's Appeal, 65 Pa. 
 St. 290; Trader v. Jarvis, 23 W. 
 Va. 100. 
 
 30 Forbes v. San Rafael T. Co., 
 SO Cal!' 340; Texas, &c. R. Co. v. 
 Gentry, 69 Texas 625, 8 S. W. 98. 
 See also Gribble v. Columbus, '&c. 
 Co., 100 Cal. 67, 34 Pac. 527. But 
 see Alta, &c. Co. v. Alta, &c. Coj, 
 78 Gal. 629, 21 Pac. 373; Duke v. 
 Markham, 105 N.Car. 131, 10 S. E. 
 1017, 18 Am. St. 889. 
 
 31 Farmers', '&c. Co. v. Toledo; 
 &c. R. Co., 67 Fed. 49. 
 
§558 
 
 RAILROADS 
 
 814 
 
 § 558 (493). When ultra vires mortgage may be made ef- 
 fective. — An ultra vires mortgage may be ratified by the legis- 
 lature either directly,^^ or indirectly, by an act authorizing the 
 trustees to sell the road'* or by other recognition of the obli- 
 gation.3* Where the want of power is not apparent in the char- 
 ter, or in any statute, or in the instrument itself, it has been 
 held that the corporation may not plead ultra vires against an 
 innocent holder for value.®® An ultra vires mortgage may, how- 
 ever, be enjoined in a suit in equity brought by a stockholder.*® 
 But stockholders may estop themselves from questioning the 
 validity of a moi-tgage either upon the ground that the cor- 
 poration was not legally organized or upon the ground that the 
 mortgage was not properly authorized, where they take part in 
 an attempt to organize under a valid law and acquiesce in the 
 
 S2 White Water Valley Canal 
 Co. V. Vallette, 21 How. (U. S.) 
 414, 16 L. ed. 1S4; Gross v. United 
 States, &c. Co., 108 U. S. 477, 2 
 Sup. Ct. 940, 27 L. ed. 795 ; Hatcher 
 V. Toledo, &c. R. Co., 62 111. 477; 
 Kennebec, &c. R. Co. v. Portland, 
 &c. R. Co., 54 Maine 173; Shepley 
 V. Atlantic, &c. R. Co., 55 Maine 
 395; Shaw v. Norfolk Co. R. Co., 
 5 Gray (Mass.) 162; St. Paul, &c. 
 R. Co. V. Parcher, 14 Minn. 297; 
 Richards v. Merrimack, &c. R., 44 
 N. H. 127; Pierce v. Milwaukee, 
 &c. R. Co., 24 Wis. 551, 1 Am. Rep. 
 203. 
 
 3S Richards v. Merrimack, &c. R. 
 Co., 44 N. H. 127. 
 
 34Ander v. Ely, 158 U. S. 312 
 15 Sup. Ct. 954, 39 L. ed. 996; Troy, 
 &c. R. Co. V. Boston, &c. R. Co, 
 86 N. Y. 107; Gardner v. London 
 &c. R. Co., Law R. 2 Ch. App. 201 
 Shrewsbury, &c. R. Co. v. North 
 western R. Co., 6 H. L Cas. 113 
 East Anglian R. Co. v. Eastern 
 Counties R. Co., 11 Com. B. 775 
 
 Winch V. Birkenhead, &c. R. Co., 
 5 DeGex & S. 562; Bagshaw v. 
 Eastern Union R. Co., 7 Hare 114; 
 Great Northern R. Co. v. Eastern 
 Counties R, Co., 21 Law J. Ch. 
 837 
 
 35 Monument National Bank v. 
 Globe Works, 101 Mass. 57. 3 Am. 
 Rep. 322; Singer v. St. Louis, &c. 
 R. Co., 6 Mo. App. 427; Bissell v. 
 Michigan, &c. R. Co., 22 N. Y. 258 ; 
 Whitney Arms Co. v. Barlow, 63 
 N. Y. 62. 20 Am. Rep. 504; Hays 
 V. Galion, &c. Co., 29 Ohio St. 330. 
 See Hackensack Water Co. v. De- 
 Kay, 36 N. J. Eq. 548. Ratifica- 
 tion of an ultra vires mortgage 
 by the stockholders is held not to 
 validate it in Curtin v. Salmon, 
 &c. Co., 130 Cal. 345, 62 Pac. 552, 
 80 Am. St. 132, and this would 
 seem to be correct where they 
 themselves have no power to make 
 a mortgage. 
 
 »6 McCalmont v. Philadelphia, 
 &c. R. Co., 27 Int. Rev. Rec. 162, 
 3 Am. & Eng. R. Cas. 163. 
 
815 RAILROAD SECURITIES § 559 
 
 mortgage.s'f A statutory provision requiring notice of a meet- 
 ing to authorize a mortgage is for the benefit of the stockhold- 
 ers, and if they do not complain of the failure to give such no- 
 tice no one else can do so.^* Creditors holding debentures and 
 standing in the same right as the mortgagee may, it has been 
 held, by a bill in equity filed by any of them, secure an equal 
 distribution of property mortgaged ultra vires.^* 
 
 §559 (494). Recording- mortgages. — Railroad mortgages, like 
 other mortgages — and in the case of real property subject or- 
 dinarily to the same laws and rules — must be recorded in or- 
 der to charge third parties with constructive notice ; but a 
 mortgage expressly recognizing another unrecorded mortgage 
 is entitled to no priority over it.*" In some states railroad 
 mortgages are recorded with the secretary of state. An unre- 
 corded mortgage, drawn in the form of a lease, covering rolling 
 stock to be paid for by annual rental, is not good against at- 
 tachment and execution by creditors, nor against bona fine pur- 
 chasers from the mortgagor.*^ A state's interests will not be 
 prejudiced by the neglect of an agent to record a mortgage 
 made by a railroad corporation in pursuance of a public stat- 
 ute.*2 An agreement to furnish supplies to a railroad company, 
 the title remaining in the vendor while they are being paid for 
 in instalments, if not recorded in conformity with the Illinois 
 chattel mortgage act, gives the vendor no lien against third 
 persons.**- Railroad mortgages covering the corporate fran- 
 
 3T Farmers', &c. Co. v. Toledo, But see Cheesebrough v. Millard, 
 
 &c. R. Co, 67 Fed. 49. See also 1 Johns. Ch. (N. Y.) 409, 7 Am. 
 
 • Boyce v. Montauk Gas, &c. Co., 37 Dec. 494. 
 
 W. Va. 73, 16 S. E. SOI; Texas, 41 Heryford v. Davis, 102 U. S. 
 
 &c. R. Co. V. Gentry, 69 Tex. 625. 235, 2 Am. & Eng. R. Cas. 386, 26 
 
 S8 Central Trust Co. v. Condon, L. ed. 160; Hervey v. Rhode Island 
 
 67 Fed. 84. &c. Works, 93 U. S. 664, 23 L. ed. 
 
 39DeWinton v. Brecon, 26 1003; Frank v. Denver, &c. R. Co., 
 
 Beav. 533, 5 Jur. N. S. 882. See 23 Fed. 123. 
 
 also Firbank v. Humphreys, 18 Q. 42 Memphis and Little Rock R. 
 
 B. Div. 54. Co. v. State, 37 Ark. 632. 
 
 40 Coe y. Columbus, &c. R. Co., 43 Green v. Van Buskirk, 5 Wall. 
 
 10 Ohio St. 372, 75 Am. Dec. 518. (U. S.) 307, 18 L. ed. 599; Hervey 
 
§559 
 
 RAILROADS 
 
 816^ 
 
 chises and realty, as well as the personalty connected there;with 
 and used for railroad purposes, are not, ordinarily, subject to 
 statutes regarding the acknowledgment and recording of chat- 
 tel mortgages.** And so it has been held that a mortgage cov- 
 ering both the road and the rolling stock and recorded as a real 
 estate mortgage need not be also recorded as a chattel mort- 
 gage,*^ but there is conflict among the authorities and it is gen- 
 erally safer to record it as both,*® unless, as in many of the 
 states, the question is set at rest by legislative enactment.' The 
 institution of foreclosure proceedings will not interfere with 
 the right of creditors, without actual notice of an unrecorded 
 mortgage, to levy upon the corporate property.*'' 
 
 V. Rhode Island, &c. Works, 93 U. 
 S. 664. 23 L. ed. 1003; Fosdick v. 
 Schall, 99 U. S. 235, 250, 25 L. ed. 
 339; Murch v. Wright, 46 111. 487, 
 95 Am. Dec. 455. See also Hery-. 
 ford V. Davis, 102 U. S. 235, 26 
 U ed. 160. 
 
 ** Hammock v. Loan, &c. Co., 
 105 U. S. 77, 26 L. ed. 1111; Peoria, 
 &c. R. Co. V. Thompson, 103 111. 
 187; Cooper v. Corbin, 105 111. 224. 
 Thus it has been held that they 
 are not subject to statutes requir- 
 ing record in the county where 
 the property is situated. Metro- 
 politan Trust Co. V. Pennsylvania, 
 &c. R. Co., 25 Fed. 760. But see 
 Radebaugh v. Tacoma, &c. R., 8 
 Wash. 570, 36 Pac. 460; Union, &c. 
 Co. V. Southern, &c. Co., 51 Fed. 
 840. Nor, where a special statute 
 provides that railroad companies 
 may "mortgage their corporate 
 property and franchises," is a 
 mortgage of personal property in 
 connection with the real e.state 
 and franchises subject to the pro- 
 visions of a general chattel mort- 
 gage statute requiring an affidavit 
 
 of good faith. Southern Cali- 
 fornia, &c. Co. V. Union, &c. Co., 
 64 Fed. 450. 
 
 *5 Farmers', &c. Co. v. St. 
 , Joseph, &c. R. Co., 3 Dill. (U. S.) 
 412, Fed. Cas. No. 4669; Union, &c. 
 Co. V. Southern, &c. Co., 51 Fed. 
 840; Palrober v. Forbes, 23 111. 301. 
 But see Hoyle v. Plattsburg, &c. 
 R. Co., 54 N. y. 314, 13 Am. Rep. 
 595; Williamson v. New Jersey, 
 &c. R. Co.. 29 N. J. Eq. 311 ; Rade- 
 baugh V. Tacoma, &c. R. Co., 8 
 Wash. 570, 36 Pac. 460; Jones Corp. 
 Bonds & Mort., Chapter V, where 
 the question is discussed and the 
 conflicting authorities are re- 
 reviewed. See also ante, §450. 
 
 *6 See Union, &c. Co. v. South- 
 ern, &c. Co. 51 Fed. 840; Bishop 
 V. McKillieau, 124 Cal. 321, 57 Pac. 
 76, 71 Am. St. 68; Williamson v. 
 New Jersey So. R. Co., 29 N. J. 
 Eq. 211; Hoyle v. Plattsburgh, &c. 
 R. Co., 54 N. Y. 314; Radebaugh 
 V. Tacoma, &c. R. Co., 8 Wash. 
 570, 36 Pac. 460. 
 
 *7 Coe V. New Jersey Midland 
 R. Co., 3J N. J. Eq. 105. 
 
817 
 
 RAILROAD SECURITIES 
 
 §560 
 
 § 560 (495). Generally as to what property is covered by the 
 mortgage. — The extent of property covered by -a railroad mort- 
 gage is a matter of interpretation under the rules applicable to 
 the interpretation of mortgages by individuals, reference, how- 
 ever, being had to the authorizing statute.** Nothing appear- 
 ing to the contrary in a mortgage, whose terms are general, it 
 has been held that all the property is included when the stat- 
 ute authorizes an encumbrance of the whole.*^ Of course, how- 
 ever, general words cannot extend the lien beyond the limita- 
 
 48 Wilson V. Gaines, 103 U. S. 
 417, 26 L. ed. 401 ; Coe v. New Jer- 
 sey Midland, &c. R. Co., 31 N. J. 
 Eq. 105. 
 
 *9 Coe V. New Jersey Midland, 
 &c. R. Co., 31 N. J. Eq. 105. See 
 also Columbia, &c. Co. v. Ken- 
 tucky Union R. Co., 60 Fed. 794; 
 Barnard v. Norwich, &c. R. Co., 4 
 Cliff. (N. S.) 351, 2 Fed. Cas, No. 
 1007; Scott V. Clinton, &c. R. Co., 
 6 Biss. (U. S.) 529, 21 Fed. Cas. 
 No. 12527. But compare Smith v. 
 McCullough, 104 U. S. 25, 26 L. ed. 
 637; St. Paul, &c. R. Co. v. United 
 States, 112 U. S. 733, 5 Sup. Ct. 
 366, 28 L. ed. 861; Emerson v. 
 European, &c. R. Co., 67 Maine 
 387, 24 Am. Rep. 39. In a recent 
 case a railroad company chartered 
 to build a road contracted with a 
 construction company to pay for 
 the construction of the road in 
 specified bonds secured by mort- 
 gage. Part of the road was built, 
 a proportionate part of the bonds 
 delivered, and a mortgage exe- 
 cuted and. recorded covering all 
 the property of the railroad com- 
 pany then owned or afterwards 
 acquired. The contract was then 
 cancelled and the chief promoter 
 of the railroad company, who was 
 
 also the president and only stock- 
 holder of the construction com- 
 pany, conveyed all the property 
 of the construction company, in- 
 cluding all rights of way acquired 
 or contracted for on behalf of the 
 railroad company, by deed duly 
 recorded, to a firm which then 
 conveyed it to a new railroad 
 company chartered to build a road 
 between two points on the same 
 route, S. to L. A similar disposi- 
 tion was made of the remainder 
 of the property of the construc- 
 tion company south of L., which 
 passed mto the hands of a third 
 railway company, chartered to 
 build the road over the remain- 
 der of the proposed route ; and 
 the two new companies completed 
 the road on the line originally 
 projected. The court held that 
 they took with knowledge of the 
 interest of the original company 
 and that the mortgage executed 
 by it secured to its bondholders 
 a lien on the whole of the road as 
 completed, prior to that of a 
 mortgage executed by the new 
 companies. Wade v. Chicago, &c. 
 R. Co., 149 U. S. 327, 13 Sup. Ct. 
 892, 37 L. ed. 755. 
 
§560 
 
 RAILROADS 
 
 818 
 
 tion of the statute.'" Where a railroad company's property 
 has been, without the execution of a formal instrument, mort- 
 gaged by the legislature, the statute itself interpreted with re- 
 gard to the condition of the road will determine the extent of 
 the lien.*^ Only such property as is helpful or essential in the 
 operation of the road is, as a rule, included in a general mort- 
 gage of the railroad, and, therefore, it has been held not to 
 cover property bought from a steamboat company for the pur- 
 pose of stifling competition,^^ q,- unused land bought for shops 
 and depots,'* or a temporary track,'* or woodland." A spe- 
 cific enumeration of the property covered is generally exclusive 
 of all other property.'® Thus, the words "all other property" 
 following a grant of "all lands granted by the United States" to 
 the company do not include other lands not particularly de- 
 scribed,''' nor, it seems, do they include choses in action not 
 specifically enumerated in a chattel mortgage.'^ Fuel pur- 
 
 8^0 Wilson V. Gaines, 103 U. S. 
 417, 26 L. ed. 401. 
 
 51 State V. Florida, &c. R. Co., 
 IS Fla. 690. 
 
 52 Morgan v. Donovan, 58 Ala. 
 241. 
 
 fls Youngman v. Elmira, &c. R. 
 Co., 65 Pa. St. 278. 
 
 s* Van Keuren v. Central R. Co., 
 38 N. J. L. 165. 
 
 55 Dinsmore v. Racine, &c. R. 
 Co., 12 W's. 649. 
 
 53 Smith V. McCullough, 104 U. 
 S. 25, 26 L. ed. 637; Alabama v/ 
 Montague, 117 U. S. 602, 6 Sup. 
 Ct. 911, 29 L. ed. 1000; Spies v. 
 Chicago, &c. R. Co., 40 Fed. 34; 
 Boston, &c. R. Co. v. Coffin, 50 
 Conn. ISO; Brainerd v. Peck, 34 
 Vt. 496. But see 'Calhoun v. Mem- 
 phis, &c. R., 2 Flip. (U. S.) 442, 
 Fed. Cas. No. 2309. Thus, in the 
 case first cited, supra, it was held 
 that a mortgage of "all the pres- 
 ent and in future to be acquired 
 
 property'' of a railroad company, 
 containing a clause enumerating 
 many articles having connection 
 with the management and opera- 
 tion of the road after its construc- 
 tion, did not include municipal 
 bonds issued in aid of the con- 
 struction of the road. See also 
 Wilkes V. Ferris, 5 Johns. (N. Y.) 
 335, 4 Am. Dec. 364, and note; 
 Bock V. Perkins, 28 Fed. 123; 
 Minis V. Armstrong, 31 Md. 87, 1 
 Am. Rep. 22; Driscoll v. Fiske, 21 
 Pick. (Mass.) 503; Price v. 
 Haynes, 37 Mich. 487. 
 
 57 Alabama v. Montague, 117 U. 
 S. 602, 6 Sup. Ct. 911, 29 L. ed. 
 1000. See also Wilson v. Boyce, 
 92 U. S. 320, 23 L. ed. 608; St. 
 Louis, &c. R. Co. v. McGee, 115 
 U. S. 469, 6 Sup. Ct. 123, 29 L. ed. 
 446. 
 
 58 Milwaukee, &c. R. Co. v. Mil- 
 waukee, &c. R. Co., 20 Wis. 174, 
 88 Am. Dec. 740. 
 
819 
 
 RAILROAD SECURITIES 
 
 §560 
 
 chased with the common earnings of a main line and its exten- 
 sion is not subject to the lien of a mortgage of all the property 
 of the extension.'^* "All other, corporate property * * * ap- 
 pertaining" or "appurtenant" to a railroad means only such 
 property as is indispensable or at least useful in the exercise 
 of the franchise;"" and does not include town lots,"^ or an ele- 
 vator^* or canal boats used beyond the road's termini."* Land 
 grants which the company cannot accept,"* or the conditions 
 of which have not been realized,*^ are not included in such a 
 mortgage. "All the real and personal property" has been held 
 to include earnings and profits ;"" and necessary office furniture 
 is subject to a mortgage of a road, its franchises and property."^ 
 A mortgage of a road and its fixtures, together with "all other 
 property now owned and which may be hereafter owned by the 
 railroad company," includes cars, locomotives, and other roll- 
 ing stock purchased by the company, from time to time after 
 the making of the mortgage.** And a mortgage of an entire 
 
 59 Bath V. Miller, S3 Maine 308. 
 See Hunt v, Bullock, 23 111. 320. 
 
 60 Alabama v. Montague, 117 U. 
 S. 602, 6 Sup. Ct. 911, 29 L. ed. 
 1000; New Orleans Pac. R. Co. v. 
 Parker, 143 U. S. 42, 12 Sup. Ct. 
 364, 6 Lewis' Am. R. & Corp. 43, 
 36 L. ed. 66; Morgan v. Donovan. 
 58 Ala. 241; Boston, &c. R. Co. v. 
 Coffin, SO Conn. ISO; Mississippi 
 Val. Co. y. Chicago, &c. R. Co., S8 
 Miss. 896, 38 Am. Rep. 348 ; Mil- 
 lard V Burley, 13 Nebr. 259, 13 N. 
 W. 278; State v. Glenn, 18 Nev. 
 34. 1 Pac. 186. 
 
 "1 Calhoun v. Memphis, &c. R., 
 2 Flip. (U. S.) 442, Fed. Cas. No. 
 2309; Shamokin Valley R. Co. v. 
 Livermore, 47 Pa.. St. 465, 471, 86 
 Am Dec. S52; Gardner v. London, 
 &c. R Co., L. R. 2 Ch. App. 20L 
 But see Knevals v. Florida Cent. 
 &c. R. Co., 66 Fed. 224. 
 
 «2 Humphreys v. McKissock, 140 
 
 U. S. 304, 11 Sup. Ct. 779, 35 L, ed. 
 473. 
 
 83 Parish v. Wheeler, 22 N. Y. 
 494. 
 
 64 Meyer v. Johnson, 53 Ala. 237. 
 
 «5 Campbell v. Texas, &c. R. Co., 
 2 Woods (U. S.) 263, Fed. Cas. No. 
 2369. See also New Orleans Pac. 
 R. Co. V. Parker, 143 U. S. 42, 12 
 Sup. Ct. 364, 36 L. ed. 66, 6 Lewis' 
 Am. R. & Corp. 43, and authorities 
 cited in the opinion of the court. 
 
 86 Kelly V. Alabama, &c. R. Co., 
 58 Ala. 489. 
 
 6T Raymond v. Clark, 46 Conn. 
 129; Wood v. Whelen, 93 111. 1S3; 
 Ludlow V. Hurd, 1 Dis. (Ohio) 
 552. See Hunt v. Bullock, 23 111. 
 320. 
 
 68 Meyer v. Johnston, S3 Ala. 
 237, 332, 64 Ala. 603. See also Shaw 
 V. Bill, 95 U. S. 10, 24 L, ed. 333; 
 Hamlin v. Jerrard, 72 Maine 62. 
 
§.560 RAILROADS 820 
 
 line of railroad, "with all the revenue or tolls thereof," has 
 been held to cover all the rolling stock and fixtures, whether 
 movable or immovable, essential .to the production of tolls and 
 revenues.®* Net earnings may be mortgaged, but so long as they 
 are retained by the mortgagor are subject to trustee process 
 in favor of the road's igeneral 'creditors;''" In a recent case,^^ a 
 railroad company had leased its unfinished road to a company 
 operating a connecting line and mortgaged its property, rights 
 and- franchises to secure certain bonds which were to .be dis- 
 posed of by the lessee, and the latter, in order to insure the 
 prompt payment of interest and the ready sale of the bonds, 
 being advised that it had no power to guarantee them, mort- 
 gaged to the lessor for that purpose all the net earnings 9f its 
 own lines which might accrue to it "by -reason of business com- 
 ing to it from or over" the lines of the lessor. It was held 
 that this included not only the profits of the business which 
 came literally .from off the lessor's road onto the lessee's road, 
 but, also, the net earnings or business which came to the ,latter 
 from both directions by reason of the fact that the leased road 
 was an important feeder and brought new business to the les- 
 see's road by opening up new markets and giving increased 
 facilities. The court also held that, as there was nothing in the 
 mortgage prescribing the method of ascertaining the net earnings, 
 they must be determined in the usual way, that is, from the gross 
 
 69 Maryland v. Northern Central Smith v. Eastern R. Co., 124 Mass. 
 R. Co., 18 Md. 193. See also Pul- 154; Ellis v. Boston, &c. R. Co., 
 Ian V. Cincinnati, &c. R. Co., 4 107 Mass^ 1; Emerson v. European 
 Biss. (U. S.) 35, 43, Fed. Cas.-No. &c. R. Co., 67 Maine 387, 24 Am. 
 11461. Rep. 39; Clay v. East Tenn., &c. 
 
 70 Gilman v. Illinois, &c. R. Co., R. Co., 6 Heisk. (Tenn.) 421. Op- 
 91 U. S. 603, Fed. Cas. No. 5443; erating expenses must first be 
 Galveston R. Co. v. Cowdrey, 11 paid. Parkhurst v. Northern Cen- 
 Wall. (U. S.) 459, 20 L. ed. 199; tral R. Co., .19 Md. 472, 18 Am! 
 Mississippi, &c. R. v. United Dec. 648. • : 
 States Exp. Co., 81 111. 534; Dun- fi Schmidt v. Louisville, &c. R. 
 ham V. Isett, 15 Iowa 284; Bath v. Co., 95 Ky, 289, 25 S. W. 494, 26 
 Miller, 51 Maine 341; Noyes v. S. W. 547, 61 Am. & Eng. R. Cas. 
 Rich, 52 Maine 115 ; Galena, &c. 680. 
 
 R. Co. v. Menzies, 26 III 121; < 
 
821 
 
 RAILROAD SECURITIES 
 
 §561 
 
 receipts must be deducted the cost of producing them, and that 
 it knew of "no way to arrive at' all this, save, approximately, 
 by a proportion distributing the total operating expense over 
 the whole business," thus treating the business of the entire 
 system as a unit."^ 
 
 §561 (496). What is covered by a mortgage of the under- 
 taking. — In England it is held that neither a mortgage of a 
 railroad "undertaking"^* nor one of the "undertaking, and all 
 and singular the rates, tolls' and other sums- arising,'"^* includes 
 the land on which the road is built; or the surplus lands ;''^ or 
 stock or property belonging to the company as a common car- 
 rier of passengers; or goods for hire 5^" or future calls on the 
 shareholders, • they not being niortgageable without express leg- 
 islative authority.''"' But it has been held that a mortgage of 
 the undertaking may include the rails, stations, works and other 
 buildings.'^® The undertaking is a going concern created by the 
 incorporating act :'™ and it cannot be broken up by the. iport- 
 
 .. T2 St John v.. Railway Co., 22 
 W^ll. '(U! S.) 136, 22 L. ed. 743.; 
 United States v. Kansas Pac. R. 
 Co., 99 tr. S. 4SS, 25 L. ed. 289.; 
 PuUan V. Railroad Co., S Biss. (U. 
 S.), 237, Fed. Cas. No. 11462. 
 
 73 Doe V. St. Helen's, &c. R. Co., 
 "2 Erig. R. & Cap. Cas. 756. 
 
 '74'Myatt V. St. Helen's, &c.^'R. 
 Co:, ? Q. B. 364. \ 
 
 .Ts Gardner v. Lpjidon,. &c. R. 
 Co., L. R, 2 Ch, App. 201, 217, 36 
 L.' J.-'Ch. '323; King'y. Marshall, 33 
 Beav. 565;' Stanley,' Ex parte, 33 
 Law. J.'.;Ch. 535; Moor v. 'Angib- 
 italikw'Bank,' L.' R. 10 Ch. Div. 
 681 ; W"icKham v. New Brunswick, 
 &c. R. Co., L. R-, r P. d 64.; 1 
 Cox's Joint Stock Cas, .519; Doe y. 
 St. Helen's, &c. 'R. Cq.,. 1 Gale & 
 D. 663, 2 Q."bI 364; A2"E. C. L. 
 715. /• ";■ •'" ., 
 
 76 Hart V. Eastern Uriion R. Co., 
 7 Ex. 246. 
 
 77 Lewis V. Glenn, 84 Va-. 947,.- 6 
 S. E. 866; British Provident L. & 
 F. Assn. Co., In re, 4 DeG., J. & 
 S. 407; Sankey Brook Coal Co.,, In 
 re, L. R. 10 Eq. 381;. Companies 
 Clauses Consolidation Act 1845, 8 
 and 9 Vict. Ch. . 16, § 43 ; Gardner 
 V. London, &c. R. Co.,'. L. R. 2 Qi. 
 201, 212. But see Pickering 
 V. Ilfracombe R. Co.",. L. .R. 3 
 Com. P. 235. A', mortgage, of "all 
 the lands,, tenements and' estates 
 of the company,, and. all their, un- 
 dertakings," was, held, nqt to in- 
 clude calls,, either future or exist- 
 ing, unpaid: King v. Marshall, 33 
 Beav. 565. "• 
 
 TSLegg V. 'Mathieson, 2 Giff; 71. 
 See 'Wickham v. New Brunswick, 
 &c. R. Co., Law. R. 1 P. C. 64. 
 
 ' 79 Gard'rier v. Londori, 85c. R. 
 Co., L. R. 2 Ch. 201. A mortgage 
 of the undertaking is different 
 from a mortgage of the company's 
 
§562 
 
 RAILROADS 
 
 822 
 
 gagees, nor can they, by iejectment, take from the corporation 
 property essential to the undertaking's continuance.*" That 
 which is pledged under a mortgage of the undertaking is rather 
 the income of the property than the corpus of it.*^ 
 
 § 562 (497). Mortgage of after-acquired property. — It has 
 been decided that, on the doctrine of accession, a railroad com- 
 pany will, in a mortgage of all its property, be held, even in the 
 absence of express words of futurity, to have included essential 
 property subsequently acquired under authority given before 
 the execution of the mortgage. This doctrine is not very well 
 settled,*^ and is supported by the cases only when by virtue of 
 some legislative authority the road's franchises and property 
 may be treated as an indivisible entity.** Unquestionably a 
 
 property. Jones Corporate Bonds 
 and Mortgages 62; Perkins v. 
 Pritchard, 3 Eng. Ry. & Can. Cas. 
 95; Hart v. Eastern Union R. Co., 
 6 Eng. R. & Can. Casi 818, 7 Exch. 
 246, 265. 
 
 so Myatt v. St. Helen's R. Co., 
 2 Q. B. 364, 2 Eng. R. & Can. Cas. 
 756. 
 
 81 Panama, &c. Royal Mail Co.. 
 In re, L. R. 5 Ch. 318, 321. 
 
 82 See Shaw v. Bill, 95 U. S. 10, 
 24 L. ed. 333; Calhoun v. Memphis, 
 &c. R. Co., 2 Flip. (U. S.) 442, Fed. 
 Cas. No. 2309; Parker v. New Or- 
 leans, &c. R. Co., 33 Fed. 693; 
 Phillips V. Winslow, 57 Ky. 431, 
 68 Am. St. 729; Pierce v. Emery, 
 32 N. H. 484; Boston, &c. R. v. 
 Gilmore, 37 N. H. 410, 72 Am. Dec. 
 336; Ludlow v. Hurd, 1 Dis. 
 (Ohio) 552, 560; Dinsmore v. Ra- 
 cine, &c. R. Co., 12 Wis. 649; 
 Farmers', &c. Co. v. Commercial 
 Bank, 11 Wis. 207, 212, 689; Pana- 
 ma, &c. R. M. Co., In re, L. R. 5 
 Ch. App. 318, 322; 4 Cox's Joint 
 
 Stock Cas. 35. See also Galveston,, 
 &c. R. Co. V. Cowdrey, 11 WallS 
 (U. S.) 459, 20 L. ed. 199; United 
 States V. New Orleans R., 12 Wall. 
 (U. S.) 362, 20 L. ed. 434; Barnard 
 V. Norwich, &c. R. K. Co., 4 CliflE. 
 (U. S.) 351, Fed. Cas. No. 1007; 
 Scott V. Clinton, &c. R. Co., 6 
 Biss. (U. S.) 529, Fed. Cas. No. 
 12527; Dillon v. Barnard, 1 Holmes 
 386. Of course, the rule applies 
 with particular force to property 
 acquired for a changed location 
 of the road, the lien being dis- 
 charged as to the abandoned 
 route. Elwell v. Grand St., &c. 
 R. Co., 67 Barb. (N. Y.) 83; Meyer 
 V. Johnston, S3 Ala. 237. It is not 
 applicable where mortgages are 
 placed on separate divisions. 
 Farmers', &o. Co. v. Commercial 
 Bank, 11 Wis. 207. See also Louis- 
 ville Trust Co. v. Cincinnati, &c. 
 R. Co., 91 Fed. 699, and note in 99 
 Am. St. 253, citing text. 
 
 8* Phillips v. Winslow, 57 Ky. 
 431, 68 Am. Dec. 729; Pierce v. 
 
823 
 
 RAILROAD SECURITIES 
 
 §563 
 
 railroad company having power to borrow money and secure 
 it by mortgage on its property may by express terms mortgage 
 property to be acquired subsequently.^* In a recent case,*^ this 
 doctrine was applied to a de facto corporation, and it was held 
 that, as a corporation created under the general railroad law of 
 the state might mortgage after-acquired property, a mortgage 
 or trust deed of such property by the de facto corporation, which 
 was created by an unconstitutional special act but might have 
 been organized under the general law, was valid not only as 
 against the corporation but also as against creditors."" 
 
 § 563 (497a). After-acquired property — When lien attaches 
 — What it includes.*'^ — The lien attaches to the property as soon 
 
 Emery, 32 N. H. 484; Willink v. 
 Morris -Canal & Banking Co., 3 
 Green (N. J.) Ch. 377, 657. Ordi- 
 narily it would seem that, while it 
 is not necessary to describe the 
 future acquired property, yet the 
 terms of the mortgage should be 
 broad enough to cover it and not 
 merely , operate in praesenti. 
 Thompson v. White, &c. R. Co., 
 332 U. S. 68, 10 Sup. Ct. 29, 33 L. 
 ed. 256; Maxwell v. Wilmington, 
 &c. Co., 11 Fed. 938; Louisville 
 Trust Co. V. Cincinnati, &c. R. 
 Co., 91 Fed. 699, and note in 99 
 Am. St. 253. 
 
 8* Dunham v. Cincinnati, &c. R. 
 Co., 1 Wall. (U. S.) 254, 17 L. ed. 
 584; McGourkey v. Toledo, &c. 
 R. Co., 146 U. S. 536, 13 Sup. Ct. 
 170, 36 L. ed. 1079; Campbell v. 
 Texas, &..;. R. Co., 2 Woods (U. 
 S.) 263, Fed. Cas. No. 2369; Parker 
 v. New Orleans, &c. R. Co., TiZ 
 Fed. 693: Central Trust Co. v. 
 Chattanooga, &c. R. Co., 94 Fed. 
 275 ; Farmers' Loan, &c. Co. v. 
 Metropolitan St. R. Co., 181 Fed- 
 575; Kelly v. Ala. & Cin. R. Co, 
 58 Ala. 489; Buck v. Seymour, 46 
 Conn. 156; Bell v. Chicago, &c. R. 
 
 Co., 34 1.3.. Ann. 785; Hamlin v. 
 European, &c. R. Co., 72 Maine 83; 
 Omaha, &c. R. Co. v. Wabash, &c. 
 R. Co., 108 Mo. 298, 18 S. W. 1101 ; 
 Baker v. Guarantee, &c. Co. (N. 
 J.), 31 Atl. 174; Coopers v. Wolf; 
 15 Ohio St. 523; Ludlow v. Hurd, 
 1 Dis, (Ohio) 552; Philadelphia, 
 &c. R, Co. V. Woelpper, 64 Pa. 
 St. 366, 3 Am. Rep. 596; Covey, v. 
 Pittsburg, &c. R. Co., 3 Phila. 
 (Pa.) 173: Haynes v. Kenosha St. 
 R. Co., 139 Wis. 227, 119 N. W. 568, 
 121 N. W. 124; General South 
 American Co., In re, L. R. 2 Ch. 
 Div. 337; Panama, &c. Mail Co., 
 In re, L. R. 5 Ch. 318. 
 
 .S5 McTighe v. Macon Const. Co., 
 94 Ga. 306, 21 S. E. 701, 47 Am. 
 St. 153. 
 
 *■« The text is cited in Detroit, 
 &c. R. Co. v. Campbell, 140 Mich. 
 384, 103 N. W. 856, 860, although 
 the point there decided is that a 
 de facto corporation may condemn 
 lands and only the state can ques- 
 lion the incorporation. 
 
 87 A large part of this section 
 was part of §497 in the first edi- 
 tion. 
 
§563 
 
 RAILROADS 
 
 824 
 
 as it is acquired f^ and is superior to that of a subsequent mort- 
 gage or of a judgment.^"® A mortgage of "after-acquired" prop- 
 erty has been held to include a lease of another road ;"" net earn- 
 ings ;8i another company's capital stock purchased to effect a 
 consolidation f^ a hotel open to the general public as well as 
 to passengers and employes f^ land acquired for the location 
 
 88 Parker v. New Orleans, &c. 
 R. Co., 33 Fed. 693; McGourkey 
 V. Toledo. &c. R. Co., 146 U. S. 
 536, 13 Sup Ct.-170, 23 L. ed. 1079; 
 Bear Lake, &c. Co. v. Garland, 164 
 U. S. 1, 15, 17 Sup. Ct. 7, 41 L. ed. 
 327; Frost v. Galesburg, 167 111. 
 161, 47 N. E. 357; Brady v. John- 
 son, 75 Md. 445, 26 Atl. 49, 20 L. R. 
 A. 737; Seymour v. Canandaigua, 
 &c. R- Co.. 25 Barb. (N. Y.) 284. 
 But see New Orleans, &c. R. Co. 
 V. Parker, 143 U. S. 42, 12 Sup. Ct. 
 364, 36 L. ed. 66, reversing the 
 former case on the ground that 
 the property ' (a land grant) was 
 not appurtenant, and that it was 
 not contemplated by the parties 
 or definitely located. 
 
 89 Dunham v. Cincinnati & P. R. 
 Co., 1 Wall. (U. S.) 254, 266, 17 L. 
 ed. 584; Pennock v. Coe, 23 How. 
 (U. S.) 117, 127, 16 L. ed. 436; Scott 
 V. Clinton, &c. R., 6 Biss. (U. S.) 
 529, 535, Fed. Cas. No. 12527; Mich- 
 igan Central R. Co. v. Chicago, 
 &c. R. Co., 1 Brad. (111.) 399; 
 Stevens v. Watson, 4 Abb. App. 
 Dec. (N. Y.) 302; Nichols v. Mase, 
 94 N. Y. 160; Coe v. Pennock, 6 
 Am. Law Reg. 27, 2 Redf. Am. R. 
 Cas. 667. But it generally at- 
 taches to the property in the con- 
 dition in which it comes to the 
 mortgagor and does not displace 
 existing liens. Williamson v. New 
 Jersey, &c. R, Co., 28 N. J. Eq. 
 
 277, 29 N. J. Eq. 311, 317; Bear 
 Lake, &c. Co. v. Garland, 164 U. 
 S. 1, 16, 17 Sup. Ct. 7, 41 L. ed. 
 327. Compare Porter v. Pittsburg, 
 &c. Co., 122 U. S. 267, 283, 7 Sup. 
 Ct. 1206, 30 L. ed. 1210. 
 
 !>" Buck v. Seymour, 46 Conn. 
 156; Barnard v. Norwich, &c. R. 
 Co., 4 Cliff. (U. S.) 351, 14 N. Bank 
 R. 469, Fed. Cas. No. 1007; Ham- 
 lin v. European, &c. R. Co., 72 
 Maine 83 ; Columbia Finance, &c. 
 Co. v. Kentucky, &c. R. Co., 60 
 Fed 794. But not a lease of the 
 mortgaged road executed by the 
 mortgager to another company. 
 
 "1 Tompkins v. Little Rock, &c. 
 R. Co., 15 Fed. 6; Addison v. 
 Lewis, 75 Va. 701. Contra, Emer- 
 son V. European, &c. R. Co., 67 
 Maine 387, 24 Am. Rep. 39; Pullan 
 V. Cincinnati, &c. R. Co., S Biss. 
 (U. S.) 237, Fed. Cas. No. 11462; 
 DcGraff v. Thompson, 24 Minn. 
 452. 
 
 92 Williamson v. N. J. Southern 
 R. Co., 26 N. J. Eq. 398. But not 
 unpaid subset iptions to the com- 
 pany's capital stock. Dean v. 
 Biggs, 25 Hun (N. Y.) 122. It was 
 held ill Williamson v. New Jersey 
 Southern R. Co., 26 N. J. Eq. 398, 
 that it was unnecessary to record 
 the mortgage in accordance with 
 the chattel mortgage act. 
 
 93 United States Trust Co. v. 
 Wabash, &c. R. Co., 32 Fed. 480; 
 
825 
 
 RAILROAD SECURITIES 
 
 §563 
 
 of car-houses which were never built;®* a completed rdad after- 
 wards purchased which might have been constructed' if it had 
 not been purchased.®? It does not extend to property acquired 
 by fraud, so that the title thereto does not vest iii' the' mort- 
 gagor ;®6 nor does a mortgage of a road and its appurtenances 
 existing or to be afterwards 'acquired extend to Avoodlarid seven 
 miles from the road f' or to land acquired for a cajial basin f^ 
 or: to other property not properly appurtenant to the road."® 
 
 Omaha, &c. R. Co. v. Wabash, &c.- 
 R. Co., 108 Mo. 298, 18 S.' W. 1101. 
 But not 'as an appurtenance unless 
 it is used in connection with the 
 road. Mississippi Valley Co. v. 
 Chicago, &c. R. Co., 58 Miss. 896, 
 38 Am. Rep. 348. A grain elevator 
 has been held not to be included 
 as an appurtenance. Humphreys 
 v. McKissock, 140 U. S. 304, 11 
 Sup. Ct. 779, 35 L. ed. 473. 
 
 94 Hamlin v. European, &c. R. 
 Co., 72 Maine 83, 4 Am. & Eng. R. 
 Cas. 503. See also Hawkins v. 
 Mercantile Trust Co., 96 Ga. 580, 
 23 S. E. 498. 
 
 93 Branch v. Jesup, 106 U. S. 468, 
 1 Sup. Ct. 495, 27 L. ed. 279. See 
 also Central Trust Co. v. Wash- 
 ington, &c. R. Co., 124 Fed. 813; 
 Chalmers v. J^ittlefield, 103 Maine 
 271, 69 Atl. ipO; Hinchman v. Point 
 Defiance R. Co., 14 Wash. 349, 44 
 Pac. ^7. But compare Murray v. 
 Farmville, &c. R. Co., 101 Va. 262, 
 43 S. ,E. 553; New York Sec. Co. 
 v. Louisville, &c. R. Co., 102 Fed. 
 382. 
 
 ?« .Williamson v. New Jersey 
 Southern K. Co., 28 N. J. Eq. 277, 
 29 N. J. Eq. 311, 321; Frazier v. 
 Frederick, 24 N. J. L. 162; Field 
 v., Post, 38 N. J. L. 346. See also 
 as to properJ:y where the mort- 
 
 gagor company was merged ' or 
 consolidated with another. New 
 York Sec. Co. v.- Louisville,, &c. 
 R. Co., 102 Fed. 382. 
 
 97 Dinsmore v. Ra<;ine, &c. R. 
 Co., 12 Wis; 649. See also Ald- 
 ridge v. Pardee, 24 Tex. Civ. App. 
 254, 60 S. W. 789; Pardee v. Ald- 
 ridge, 189 U, S. 429, 23 Sup. Ct. 
 514, 47 L. ed. 883; Boston, &c. R. 
 Co. v. Coffin, 60 Conn. 150; Shirley 
 V. Waco Tap. R. Co., 78 Tex.! 131, 
 10 S. W. 543. ' 
 
 98Shamokin Valley R.' Co. v. 
 Livermore, '47 Pa. St. 465,' 86 Am. 
 Dec. '552. . .. >r'.'; 
 
 99 Calhoun v. Memphis, &c. R. 
 Co., 2 Flip. (U. S.) 442, Fed. Cas. 
 No. 2309; Morgan v. Donovan, 58 
 Ala. 241; Mississippi' Valley Co. 
 V. Chicago, &c. R. Co., 58 Miss. 
 896, 38 Am. Rep. 348; Millard* v. 
 Burley, 13 Nebr..259, 13 N. W. 278; 
 Seymour- v. .:C,anandaigu^, ' &c. R. 
 Co., 25 Barb. (N. Y.) 284; Walsh 
 V. Barton, 24 Ohio St. 28; Shamo- 
 kin Valley R, Co. v. Livermore, 
 47 Pa. St. 465, 86 Am.,; Dec. 552; 
 Brainerd v. Peck, 34, Vt. 496; 
 Farmers' Loa^ &c. Coi /y. Com- 
 mercial Bank, 11 Wis..w^7. Af- 
 firmed in Diijsmore v,,Jla.ci.ne, &c. 
 R. Co., 12 Wis. 649; Fatnjers', &c. 
 Co. V. Cary, 13 Wis. 110; .Farmers', 
 
§ 563 • RAILROADS 
 
 826 
 
 Thus, it has been held not to extend to property adjacent to a 
 depot which the company leases for a store and other purposes 
 foreign to the operation of the road.^ But a mortgage of an 
 entire road, "as said railroad now is or may be hereafter con- 
 structed, maintained, operated or acquired, together with all 
 the privileges, rights, franchises,' real estate, right of way,i 
 depots, depot grounds, side tracks, water tanks, engines, cars, 
 and other appurtenances thereto belonging," has been held to 
 include real estate separated from the right of way by a street, 
 but of easy access to the station and side tracks, which real 
 estate had been subsequently purchased by the company and 
 upon which it had. built a restaurant for the accommodation of 
 its employes and passengers.* A lease by a mortgagor of the 
 mortgaged road to another company has been held not to be 
 included in the after-acquired property.* But, on the other 
 hand, it has been held that a railroad mortgage of "all property, 
 both real and personal, of every kind and description, which 
 shall hereafter be acquired for use on said railroad, and all the 
 corporate rights, privileges, franchises and immunities, and all 
 things in action, contracts, claims, and demands, whether now 
 owned or hereafter acquired in , connection or relating to the 
 said railroad," includes an after-acquired lease of terminal fa- 
 cilities to the mortgagor.* A branch road is held to be included 
 
 &c. Co. V. Commercial' Bank, IS Co. v. United States, 112 U. S. 
 
 Wis. 424, 82 Am. Dec. 689; Cal- 733, S Sup. Ct. 366, 28 L. ed. 861. 
 hcun V. Paducah, &c. R. Co., 9 < Citing Central Trust Co. v. 
 
 Cent. L. J. 66. Kneeland, 138 U. S. 414, 11 Sup. 
 
 1 Chicago, &c. R. Co. v. Mc- Ct. 357, 34 L. ed. 1014; Toledo, &c. 
 
 Guire, 31 Ind. App. 110, 65 N. E. R. Co. v. Hamilton, 134 U. S. 296, 
 
 932, 99 Am. St. 249, and note. 10 Sup. Ct. 546, 33 L. ed. 905; 
 
 •-■Oniaha, &c. R. Co. v. Wabash, Rratich v Jesnp, 106 U. S. 468, 27 
 
 &c.~R. Co., 108 Mo. 298, 18 S. W. L. ed. 279; Columbia Finance, &c. 
 
 1101. See also Central Trust Co. Co. v. Kentucky, &c. R. Co., 69 
 
 V. Kneeland, 138 U. S. 414, 11 Sup. Fed. 794, 61 Am. & Eng. R. Cas. 
 
 Ct; 357, 34 L. ed. 1014. And land 690. And so as to a suljsequent 
 
 for right of way and stockyards. franchise authorizing the company 
 
 St. Joseph, &c. R. Co. v. Smith, to sell electricity, as against the 
 
 170 Mo: 327, 70 S. W. 700. city. Old Colony Trust Co. v. 
 
 s Moran v. Pittsburgh, &c. R. Tacoma, 219 Fed. 775. See also 
 
 Co.,- 32 Fed. 878; St. Paul, &c. R. Lewis v. Weidenfeld, 114 Mich. 
 
 581, 72 N. W. 604. 
 
827 
 
 RAILROAD SECURITIES 
 
 §563 
 
 if the authority to construct it antedates the mortgage;^ other- 
 wise, not.« Iron rails, though still at a distant port, have been 
 held subject to the lien of a mortgage of "all materials what- 
 soever."^ The specification of certain after-acquired articles 
 which shall be subject to the lien excludes all others.* A mort- 
 gage of after-acquired property only attaches to such interest 
 as the mortgagor acquires, and so does not displace a lien ex- 
 isting when the property was acquired by. the mortg'agor.^ This 
 rule, applicable to all property capable of separate ownership, 
 including real estate not used for railroad purposes, does not, 
 however, ordinarily at least, apply to fixtures used in the opera- 
 
 !> Parker v. New Orleans, &c. R. 
 Co., 33 Fed. 693; Coe v. Delaware, 
 &c. R. Co., 34 N. J. Eq. 266, 4 Am. 
 & Eng. R. Cas. 513; Seymour v. 
 Canandaigua, &c. R. Co., 25 Barb. 
 (N. Y.) 284; Texas, &c. R. Co. v. 
 Gentry, 69 Tex. 625, 8 S. W. 98. 
 
 8 Meyer v. Johnston, 53 Ala. 237, 
 331, 64 Ala. 603. 
 
 TWeetjen v. St. Paul, &c. R. 
 Co., 4 Hun (N. Y.) 529. See Haven 
 V. Emery, 33 N. H. 66. Compare 
 Brainerd v. Peck, 34 Vt. 496; Phil- 
 lips V. Winslow, 57 Ky. 431, 68 
 Am. Dec. 729; Bath v. Miller, S3 
 Maine 308; Pierce v. Emery, 32 
 N. H. 484. 
 
 8 Smith V. McCuUough, 104 U. S. 
 25, 26 L. ed. 637; Raymond v. 
 Clark, 46 Conn. 129; Buck v. Sey- 
 mour, 46 Conn. 156; Brainerd v. 
 Peck, 34 Vt. 496; Hare v. Horton. 
 5 Barn. & Ad. 715. 
 
 « Dunham v. Cincinnati, &c. R. 
 Co., 1 Wall. (U. S.) 254, 17 L. ed. 
 584; Galveston R. v. Cowdrey, 11 
 Wall. (U. S.) 459, 20 L. ed. 199; 
 United States v. N. O. R., 12 Wall. 
 (U. S.) 362. 20 L. ed. 434; Fosdick 
 V. Schall, 99 U. S. 235, 25 L. ed. 
 339; Myer v. Car Co., 102 U. S. 
 
 1, 26 L. ed. 59; Branch v. Jesup, 
 106 U. S. 468, 1 Sup. Ct. 495, 27 L. 
 ed. 279; Western Union Tel. Co. 
 V. Burlington, &c. R. Co., 3 Mc- 
 Crary (U. S.) 130, 11 Fed. 1; 
 Branch v. Atlantic, &c. R. Co.. 3 
 Woods (U. S.) 481, Fed. Cas. No. 
 1807; Boston Safe Deposit, &c. 
 Co. V. Bankers', &c. Co., 36 Fed. 
 288; Lake Erie, &c. R. Co. v. 
 Priest, 131 Ind. 413, 31 N. E. 77; 
 Haven v. fimery, 33 N. H. 66; 
 Williamson v. New Jersey South- 
 ern R. Co., 28 N. J. Eq. 277, 29 N. 
 J. Eq. 311; Willink v. Morris 
 Canal & Banking Co., 3 Green (N. 
 J.) Ch. 377 It is subject to a 
 vendor's lien for unpaid purchase 
 money on realty, the mortgagee 
 not being considered a purchaser 
 for value. Loomis v. Davenport, 
 &c. R. Co., 17 Fed. 301. See Pierce 
 v. Milwaukee, &c. R. CQt 24 Wis. 
 551, 1 Am. Rep. 203. Ar mortgagee 
 has no greater right than the com- 
 pany to enforce an illegal traffic 
 contract tnade prior to the execu- 
 tion of tfte mortgage. Central 
 Trust Co. V. Wheeling, &c. R. 
 Co., 211 Fed 515. 
 
§564 
 
 RAILROADS 
 
 828 
 
 tion of tbe' road,'*' unless an agreement has been made as to 
 their legal character." ' ' 
 
 §564' (498). Fixtures— Rolling stock. — Fixtures, whether ac- 
 quired before or after the execution of such mortgage, are ordi- 
 narily subjected to its lien.i^ On the principle that fixtures, 
 though subsequently severed, are subject to the lien of a mort- 
 gage of the freehold, worn-out rails replaced by new ones have 
 beeh-'held to be included in a railroad mortgage ; and so of new 
 rails hot yet laid.^* A track laid merely for a temporary use 
 has be^ held not to come under the lien as part of the realty;'* 
 
 10 Porter v. Pittsburg, &c. Co;, 
 122 U. S.' 267, 7 Sup. Ct. 1206, 30 
 L. ed.. 1210, 3b Am. & Eng. R. Cas. 
 495 ; United States v. N. O. R. Co., 
 12 Wall (U. S!) 362, 20 L. ed. 434; 
 Wood V, Whelen, 93 111. 153. See 
 al.sp Toledo, &c. R. Co. v. Hamil- 
 ton, 134"U. S. 296; 10 Sup. Ct. 546, 
 
 33 L e'd. ^05; Fuller-Warren Co. 
 V. Hartei;; 110 Wis. 80, 85' N. W. 
 698, S3 L;^,R, a. 603, 84 Am. St. 
 
 867. / /^ , ,„;' 
 
 I'i'Bost'dri'Siafe TDeposit, &c. Co. 
 V. Bankers'. &c. Co., 36 Fed. 288; 
 WesUrn Union Tel. Co. y. Bur- 
 lington, &c. R. Co., 3 McCrary 
 (U. .S.) ■•130i' 11 Fed. 1'. See also 
 Holt'' V."' Henley, 232 ' U. S. 637, 
 
 34 '■ Sup. ^ Ct: ■ 459, • 58 L. ed. 
 767; Detroit, &c. Cooperage Co. 
 v. SisteVville Brew. Co., 233 U. 
 S. 712;i4 Siip. Ct. 753, 58' L. ed. 
 1166; State Bank v.' IdalioiOregon 
 Li'^t;-8:c; Co., 219 Fed. 594 These 
 'atgr' cases . seem to qualify the 
 doctrtne that the mortgage takes 
 precederiiJte where the property is 
 in" the "'nature of a fixture; or at 
 
 least they confine the doctrine to 
 narrower limits than some of the 
 older cases. 
 
 12 Porter v. Pittsburg, &c. R. 
 Co., 122 U. S. 267, 283, 7 Sup. Ct. 
 1206, 30 L. ed: 1210; Wood v. 
 Whelen, 93 HI. 153; Haynes .v. 
 Kenosha St. R. Co., 139 Wis. 227, 
 119 N. W. 568. But see late cases 
 cited in note to last preceding 
 section, 
 
 13 First Nr.t. Bank v. Anderson, 
 75 Va. 250, So held, if proper 
 management requires that they be 
 recast. Lehigh, &c. Co. v. Cen- 
 tral R. Co., 35 N. J. Eq. 379; Pal- 
 mer V, Forbes, 23 111. 301; Weet- 
 .ien y. St. Paul, &c. R. Co., 4 Hun 
 (N. Y.) 529. See Farmers' Loan, 
 &c. Co. V. Commercial Bjink, 11 
 Wis. 207, 15 Wis. 424; Dlnsmore 
 V. Racine, &c. R. Co., 12 Wis. (549; 
 Farm^s' Loan, Sec. Co. v. Cary, 
 13' Wis. IIQ; Brainerd v. Peck; 34 
 Vt: 496. , ' 
 
 14. Van Keuren v. Central R: Co., 
 38'N. J. L 165. 
 
823 
 
 RAILROAP SECURITIES 
 
 §565 
 
 so have repair tGols,!^ fueU^ and furniture.^'' A mo|tgage of 
 a railroad, if its terms cover such future acquisitions, will, how- 
 ever, be held in equity to apply to after-acquired rolling stock^'? 
 even if not specially mentioned; although it has been held .that 
 loose rolling stock, such as engines and cars, is, in suclj ; a casej 
 subject to the liens on it^^ when it comes into the mortgagor's 
 hands.2o 
 
 § 565 (499). Reserved power to create prior lien or to dis- 
 pose of unnecessary property. — A provision iii a railroad mort- 
 gage permitting the company to sell, pledge, or otherwise; 'dis- 
 
 15 Lehigh, &c. Co. v. Central R. 
 Co., 35 N. J. Eq. 379; Williamson 
 V. New Jersey, &c. R. Co., 29 N. 
 J. Eq. 311, 28 N. J. Eq. 277; Brain- 
 erd V. Peck, 34 Vt. 496. But see 
 Delaware, &c. R. Co. v. Oxford 
 Iron Co., 36 N. J. Eq. 4S2. 
 
 16 Hunt V. Bullock, .23 111. ,320. 
 But see Coe v. McBrown, 22 Ind. 
 252; Phillips v. Winslow, 18 B. 
 Mon. (Ky.) 431, 448, 68 Am. Dec. 
 729. 
 
 17 Raymond v. Clark, 46 Conn. 
 129; Titus v. Mabee, 25 111. 257;^ 
 Hunt V. Bullock, 23 111. 320; 
 Southbridge Savings Bank y. 
 Mason, 147 Mass. SCO, 18 N. E- 
 406, .1 L. R. A. 350; Lehigh, &c, 
 Co. V. Central R. Co., 35 N. J. Eq. 
 379; Ludlow v. Hurd, 1 Disn. 
 ,(Ohio) 552. But see Wood v. 
 Whelen, 93 111. 153. 
 
 ispennock v. Coe, 23 How. (U. 
 S.) il7, 16 L. ed. 436; Dunham v. 
 Cincinnati, &c. R. Co., 1 Wall. (U. 
 S.) 254, 266, 17 L. ed. 584; Galves- 
 ton R. V. Cowdrey, ;11 Wall. (U. 
 S.) 459, 481, 20 L. ed. 199; Scott. v. 
 Clinton, &c. R. Co., 6 Biss. (U. 
 S.) 529, 535, Fed. Cas. No. 12527; 
 Meyer v. Johnston, 53 Ala. 237,. 64; 
 
 Ala, 603; l^ichi^^p Centra.! R; Co. 
 v. Chicago, &c. R. Co., 1 Brad. 
 (111.) 399; Phillips v. Winslow, 57 
 Ky. 431, 448, 68 Am. Dec. 729; 
 Morrill vi Noyes, 56 Maine 458, 
 471, 96 Am.' Dec. 486; Hamlin v. 
 Jerrard, 72 Mainei 62; Nichols v. 
 Mase, 94 N. Y. 160; Coe v. Pen- 
 nock, 6 Am. Law Reg.. 27, 2 Redf. 
 Am. R. Cas. 667; Jones Corp. 
 Bonds and Mortgages 120. 
 
 19 PuUan V. Cincinnati, &c. R. 
 Co., 4 Biss. (U. S.) 35, 43, Fed. 
 Cas. No. 11461; Meyer v. John- 
 ston, 53 Ala. 237, 332, 64 Ala. 603; 
 Maryland v. Northern Central R. 
 Co., 18 Md. 193. But. see Miller 
 y. Rutland,, &C.-R. Co., 36 Vt. 452. 
 
 20 United States v. New Orleans 
 R., 12 Wall. (U. S.) 362, 20 L. ed. 
 434; Boston Safe Deposit, &c., Co'; 
 V. Bankers', &c. Co., 36 Fed. 288; 
 Contracting, &c. Co. vi' Continen- 
 tal Trust Co., 108 Fed. 1. See also 
 Bear Lake, -fee. Co. v. Garland, 
 164 U. S. 1, ,16, 17 Sup. Ct. 7, 41 ■ 
 L. ed. 327; Myer v. Gar Co., 102 
 U, S. 1, 26 L. ed. 59 (subject to 
 rights, of vendor under condi^ 
 tional sale) ; Frank v. Denver, &cj 
 R..Co., 23 Fed. 123. 
 
§ 566 RAILROADS 
 
 830 
 
 pose of any property not essential to the operation of the road, 
 applying the proceeds in any manner not prejudicial to the in- 
 terests of the mortgagee is not fraudulent or invalid.^^ Such 
 provision does not, however, nullify the mortgage and vt^ithdraw 
 the lien as unnecessary articles like broken rails, ties and wheels 
 are cast aside.*^ - 
 
 §566 (500). Priority of mortgages. — We shall discuss the 
 subject of preferred claims for operating expenses and the like 
 in. a subsequent chapter,*' but it may be well at this place to 
 consider briefly the subject of the priority of one mortgage over 
 another and over other claims and equities. As we have al- 
 ready shown, one of a series of bonds has no priority over others 
 of the' sam« series merely beoause it bears a smaller number.^* 
 It seeu^s, however, that first mortgage bonds, although issued 
 after a second mortgage is executed, have priority over the sec- 
 ond mortgage bonds, unless the second mortgage in terms lim- 
 its the Hen of the prior mortgage to bonds actually out, and 
 provides against reissues.*^ One Who purchases from a rail- 
 road company part of a series of bonds secured by mortgage on 
 the road, under an agreement that no more bonds shall be is- 
 sued, is entitled to be preferred over purchasers of the other 
 bonds with notice of the agreement, but not over bona fide pur- 
 chasers who have no notice of the agreement, either actual or 
 
 21 Butler V. Rahm, 46 Md. 541. 42 L. ed. 106S; Southern R. Co. v. 
 See also Nickerson v. Atchison, Carnegie Steel Co., 176 U. S. 2S7, 
 &c. R. Co.. 3 McCrary (U. S.) 20 Sup. Ct. 347, 44 L. ed. 458; Mes- 
 4SS, 17 Fed. 408. As to reserva- sick v. Hartford, &c. R. Co., 76 
 tion of power to create a prior Conn. 11, 55 Atl. 664, 100 Am. St. 
 lien, see Campbell v. Texas, &c. 977, and note in 54 Am. St. 400- 
 R. Co., 2 Woods (U. S.) 263, Fed. 433. 
 
 Cas. No. 2369. 2* Stanton v. Ala., &c. R. Co., 2 
 
 22 Coopers v. Wolf, IS Ohio St. Woods (U. S.) 523, Fed. Cas. No. 
 523. S.ee also Salem First Nat. 13297; Commonwealth v. Susque- 
 
 •Bank v., Anderson, 75 Va. 250, 68 hanna, &c. R. Co., 122 Pa. St. 306, 
 
 Am. Dec. 729. 321. See also Pittsburgh, &c. R. 
 
 i!3 See, however, on the general Co. v. Lynde, 55 Ohio St. 23. 
 
 subject, the recent cases of Vir- 2S Claflin v. South Carolina R. 
 
 gitiia, &c. Coal Co. v. Central R. Co., 4 Hughes (U. S.) 12, 8 Fed. 
 
 Co., 170 U. S. 355, 18 Sup. Ct. 657, 118. 
 
831 RAILROAD SECURITIES § 566 
 
 constructive.^® The general rule, of course, is ttet mortgages 
 have priority in the order of their execution,^^ but bona fide 
 second mortgage bondholders may obtain priority over prior 
 mortgagees if the prior mortgage is unrecorded and there is 
 nothing charging them with notice of the prior mortgage. 
 Where, however, a subsequent mortgage is, expressly made sub- 
 ject to a former mortgage such former mortgage has priority, 
 although not legally recorded.^* So, a subsequent mortgage 
 may be given priority over a former mortgage by agreement 
 between the old bondholders and the mortgagor company.^' 
 This is sometimes done in order to enable the company to com- 
 plete its road or to reorganize. A mortgage trustee, however, 
 has no power to agree that an unsecured debt or a subsequent 
 mortgage debt shall be paid in preference to the first mortgage 
 bonds.^** As a general rule, a fixed legal right under a mort- 
 gage cannot be impaired by any equities subsequently arising,*^ 
 although, as we shall hereafter see, there is an apparent excep- 
 tion to this rule in the case of operating expenses, and, by stat- 
 ute, employes are frequently given preferred claims. Thus, the 
 priority of a first mortgage is not affected by the fact that the 
 road was completed or part of it wholly built by money obtained 
 by means of a junior mortgage,^^ nor 'are unsecured claims of 
 
 26 McMurray v. Moran, 134 U. Burlington, &c. R. Co., 101 U. S. 
 S. ISO, 10 Sup. Ct. 427, 33 L. ed. 443, 25 L. ed. 1057; Meyer v. Horn- 
 814. ' by, 101 U. S. 728, 25 L. ed. 1078, 
 
 27 Wade V. Chicago, &c. R. Co., with which compare Bear v. Bur- 
 149 U. S. 327, 13 Sup. Ct. 892, 37 lington, &c. R. Co., 48 Iowa 619; 
 L. ed. 755; Columbus, &c. R. Co.'s Tommey v. Spartanburg, &c. Co., 
 Appeal, 109 Fed. 177. 1 Am. & Eng. R. Cas. 632, note. 
 
 28 Coe V. Columbus, &c. R. Co., 32 Galveston, &c. R. Co. v. Cow- 
 10 Ohio St. 372, 75 Am. Dec. 518. drey, 11 Wall. (U. S.) 459, 20 L. 
 
 29 Poland V. Lamoille Valley R. ed. 199; Dunham v. Cincinnati, &c. 
 Co., 52 Vt. 144. R. Co., 1 Wall. (U. S.) 254, 17 L. 
 
 30 Duncan v. Mobile, &c. R. Co., ed. 584; Thompson v. White 
 2 Woods (U. S.) 542, Fed. Cas. No. Water Valley R. Co., 132 U. S. 68, 
 4137; Hollister v. Stewart, 111 N. 10 Sup. Ct. 29, 33 L. ed. 256. See 
 Y. 644, 19 N. E. 782. also McGourkey v. Toledo, &c. R. 
 
 31 Jones Corp. Bonds and Mort. Co., 146 U. S. 536, 13 Sup. Ct. 170, 
 § 579. But see ante, §§ 561, 562. As 36 L. ed.' 1079 (mortgage has 
 to mechanics' liens, see Brooks v. priority over car trust cer- 
 
§ 566: 
 
 RAILROADS 
 
 832 
 
 contractors or i material men who have furnished money or ma- 
 terial for building or repairing it ordinarily entitled to priority 
 over a prior mortgage.*^ It has also been held that a claim for 
 money borrowed to pay the interest on the bonds is not enti- 
 tled to priority over the principal.^* Taxes may, of course, con- 
 stitute a lien superior to a prior mortgage,*^ and it has also 
 been held that a landholder's claim for damages for land con- 
 demned for the road is superior to a mortgage given before the 
 damages have been assessed.^® We have elsewhere considered 
 the subject of the priority of liens in cases of consolidation,^''' 
 but the question of priority sometimes arises in cases of mere 
 succession or where separate mortgages are made on different 
 divisions of a road. A mortgage on all property, materials, 
 rights and privileges of a railroad company then or thereafter 
 appertaining to the road, to secure bonds for money with which 
 to construct it, has priority over a subsequent mortgage of the 
 earnings of a, particular division or section of the road, executed 
 
 tfficates) ; Manhattan Trust Co. 
 V. Sioux City, &c. R. Co., 68 Fed. 
 72. 
 
 3? Dunham v. Cincinnati, &c. R. 
 Co., 1 Wall. (U. S.) 254, 17 L. ed. 
 584, and cases cited in note 32, 
 supra. See also New Jersey Mid- 
 land R. Co. V. Wortendyke, 27 N. 
 J. E'q. 658 ; Denniston v. Chicago, 
 &c. -R Co., 4 Biss. (U. S.) 414, 
 Fed. Cas. No. 3800; Peninsular 
 Iron Co. V. Eells, 68 Fed. 24. 
 
 34 Contracting, &c. Co. v. Conti- 
 nental Trust Co., 108 Fed. 1. 
 
 35 Georgia v. Atlantic, &c. R. 
 Co., 3 Wood (U. S.) 434, Fed. 
 Cas. No. 53S1; Stevens v. New 
 York, &C.R. Co., 13 Blatch. (U. 
 S.) 104, Fed.'Gas. No. 13405; Farm- 
 ers', &c. Co. V' Vicksburg, &c. R. 
 Co., 33 Fed. 778; Farmers' Loan 
 & T. Co. V. Stuttgart R. Co., 92 
 Fed. 246; Central Trust Co. v. 
 
 New York, &c. R. Co., 110 N. Y. 
 250, 18 N. E. 92, 1 L. R. A. 260. 
 But see Binkert v. Wabash, &c. 
 R. Co., 98 111. 205, 5 Am. & Eng. 
 R. Cas. 113. 
 
 36 Western Penna. R. Co. v. 
 Johnston, 59 Pa. St. 290. See also 
 Mercantile Trust Co. v. Pitts- 
 burgh, &c. R. Co., 29 Fed. 732; 
 Central Trust Co. v. Louisville, 
 &c. R. Co., 81 Fed. 772; Central 
 Trust Co. V. Hennen, 90 Fed. 593; 
 Penn. Mut. L. Ins. Co. v. Heiss, 
 141 111. 35, 33 Am. St. 273; BuiTalo, 
 &c. R. Co. V. Harvey, 107 Pa. St. 
 319; Crosby v. Morristown, &c. R. 
 Co. (Tenn.), 42 S. W. 507. 
 
 3TAnte, §387. See also Knee- 
 land V. Lawrence, 140 U. S. 209, 
 11 Sup. Ct. 786, 35 L. ed. 492; Wa- 
 bash, &c. R. Co. V. Ham, 114 U. S. 
 587, 5 Sup. Ct. 1081, 29 L. ed. 235. 
 
833 RAILROAD SECURITIES § 567 
 
 to secure money used in constructing such section by a lessee 
 who had agreed to construct it as part of the consideration for 
 the lease, even though the lessor company which executed the 
 first mortgage may have agreed to recognize the subsequent 
 mortgage as having priority.^* And a mortgage on the prop- 
 erty of a railroad company given by its successor has priority 
 over claims for services and advances to the old company, by 
 a creditor who did not obtain a judgment until after the execu- 
 tion of such mortgage, and whose services and advances were 
 not such as to entitle him to a statutory lien.** 
 
 § 567 (501). Trust deeds. — ^A railroad mortgage is now gen- 
 erally, made to trustees who take the mortgage title for the 
 bondholders, thus securing to them all the benefits they would 
 have had if named in the instrument.*" The trustee may be an 
 individual or a trust company.*^ It has also been held that a 
 director or an officer of the mortgagor company may be a. 
 trustee,*'* and so may a non-resident.** Upon the death of one 
 of two or more trustees, his interest has been held to vest ac- 
 cording to the right of survivorship, notwithstanding a statute 
 abolishing joint tenancies without expressly embracing trust 
 estates.** Equity will not permit a trust to fail for want of a 
 
 38 Tliompson v. White Water, 541 ; Jones Corporate Bonds and 
 &c. R. Co., 132 U. S. 68, 10 Sup. Mort. §28. 
 
 Ct. 29, 33 L. ed. 256. The court *i Hervey v. Illinois, &c. R. Co., 
 held that this agreement as to 28 Fed. 169; Farmers' Loan, &c.. 
 priority could not affect the first Co. v. Chicago, &c. R. Co., 27 Fed- 
 mortgage bondholders. See also 146. 
 
 Wade V. Chicago, &c. R. Co.. 149 42 Ellis v. Boston, &c. R. Co.,, 
 
 U. S 327, 13 Sup. Ct. 892, 37 L 107 Mass. 1; Bassett v. Monte,, 
 
 ed. 755; Farmers' Loan, &c. Co. &c. Co., IS Nev. 293. 
 
 V. Newman, 127 U. S. 649, 8 Sup. *SA statute prohibiting citizens 
 
 Ct 1.364, 32 L ed. 303; Farmers| of other states from acting as 
 
 Loan, &c. Co. v. Canada, &c. R. trustees is unconstitutional. Roby 
 
 Co., 127 Ind 250, 26 N. E. 784. v. Smith, 131 Ind. 342, 30 N. E. 
 
 39 Fogg V. Blair, 133 U. S. 534, 1093, 15 L. R. A. 792, 31 Am. St. 
 10 Sup. Ct. 338, 33 L. ed. 721. 439; Farmers' Loan, &c. Co. v, 
 
 40 McLane v. Placerville, &c. Tl. Chicago, &c. R. Co., 27 Fed. 146; 
 Co., 66 Cal 606, 6 Pac. 748; Cham- Shirk v. La Fayette, 52 Fed. 857. 
 berlain v. Conn. Cent. R. Co.. 54 ■»* McAllister v. Plant, 54 Miss 
 Conn. 472; Butler v. Rahm, 46 Md. 106. 
 
 27— Ell. Railkoads I 
 
§568 
 
 RAILROADS 
 
 834 
 
 trustee.*^ A trust deed is regarded as in effect a mortgage,*" 
 and the righf of possession remains in the grantor.*^ Author- 
 ity to mortgage is authority to execute a deed of trust,** and 
 statutes regulating the recording of mortgages embrace deeds 
 of trust.*® The power to sell without legal proceedings should 
 be unequivocally and definitely expressed in the deed.^" Fore- 
 closure in an equity court is the more usual and the safer meth- 
 od. It is frequently provided, however, that upon default of 
 payment the trustee may take possession without suit and hold 
 the property until the debt be satisfied, and this is sometimes 
 done.^i 
 
 § 568 (502). Equitable and defective mortgages. — An instru- 
 ment which was intended to be the motrgage deed of a corpora- 
 
 ls 3 Pom. Eq. Jur. (4th ed.), 
 §§988, 1007, 1026. 
 
 46 White Water, &c. Canal Co. 
 V. Vallette, 21 How. (U. S.) 414, 
 16 L. ed. 154; McLane v. Placer- 
 ville, &c. R. Co., 66 Cal. 606, 6 
 Pac. 748; Coe v. Johnson, 18 Ind. 
 218; Coe v. McBrown, 22 Ind. 252; 
 Wisconsin Cent. R. Co. v. Wis- 
 consin Riv. L. Co., 71 Wis. 94, 36 
 N. W. 837. -See also Smead v. 
 Chandler, 71 Ark. 505, Id S. W. 
 1066, 65 L. R. A. 353, and other 
 cases cited in note. 
 
 47 Southern Pacific R. Co., v. 
 Doyle, 8 Sawyer 60, 11 Fed. 253. 
 
 48 Turner v. Watkins, 31 Ark. 
 429; Wright v. Bundy, 11 Ind. 398; 
 Bennett v. Union Bank, 5 Humph. 
 (Tenn.) 612. 
 
 49 Sheffey v. Lewisburg Bank, 
 33 Fed. 315; Magee v. Carpenter, 
 4 Ala. 469; Schultze v. Houfes, 96 
 111. 335; Woodruff v. Robb, 19 
 Ohio 212. See also as to car trust 
 agreements : Chicago, &c. Equip- 
 ment Co. V. Merchants' Bank, 136 
 U. S. 268, 34 L. ed. 349; 3 Thomp. 
 Corp. §§ 2S72, 2689. 
 
 50 Mason v. York, &c. R. Co., 
 52 Maine 82. 
 
 51 See Dow v. Memphis, &c. R. 
 Co., 124 U. S. 652, 8 Sup. Ct. 673, 
 31 L. ed. 5651 ; Fee v. Swingly, 6 
 Mont. 596, 13 Pac. 375. See also 
 Etna Coal, &c. Co. v. Marting 
 Iron, &c. Co., 127 Fed. 32. But a 
 bill in equity is usually resorted 
 to even in such cases. See Shep- 
 ley V. Atlantic, &c. R. Co., 55 
 Maine 395; Land, &c. Co. v. As- 
 phalt Co., 127 Fed. 1; McLane v. 
 Placerville, &c. R. Co., 66 Cal. 
 606, 615, 6 Pac. 748; Shaw v. Nor- 
 folk, &c. R. Co., 5 Gray (Mass.) 
 162. As to responsibilities of 
 trustees generally, see Sturges v. 
 Knapp, 31 Vt. 1 ; Sprague v. Smith, 
 29 Vt. 421, 70 Am. Dec. 424. As to 
 liability of company where trus- 
 tees do not take actual or ex- 
 clusive possession, see Pennsyl- 
 vania R. Co. V. Jones, 155 U. S. 
 333, 353, 15 Sup. Ct. 136, 39 L. ed. 
 176. As to remedies of individual 
 bondholders, see 3 Thomp. Corp. 
 (2nd ed.) §§ 2594-2599. 
 
835 
 
 RAILROAD SECURITIES 
 
 §568 
 
 tion, but which, not being properly executeci by the corporation, 
 or in its name, cannot take effect as its deed, may nevertheless 
 be regarded as an equitable mortgage and entitle the holders of it 
 in equity to the full benefit of the security intended to be given.^^ 
 An agreement, even by word of mouth as to personalty, to give 
 a mortgage for certain sums, may be enforceable in equity as a 
 mortgage,-''^ and so are bonds which recite that they are a lien,^' 
 and so is an agreement to place in a third person's hands cer- 
 tain earnings or property to meet specified obligations ;'"'' and so 
 is a contract for rhe purchase of rolling stock by the payment of 
 an annual rental with provision for forfeiture upon non-pay- 
 ment.^® The holder of an old bond, to whom a new bond can- 
 
 52 Randolph v. New Jersey, &c. 
 R., 28 N. J. Eq. 49; Miller v. Rut- 
 land, &c. R. Co., 36 Vt. 452; Jones 
 Corp. Bends and Mortgages, 32. 
 See also Pullis v. PuUis Bros., 157 
 Mo. 565, 57 S. W. 1095; Brown v. 
 Farmers', &c. Co., 23 Ore. 541, 32 
 Pac. 548. A mortgage expressly 
 recognizing another is subsequent 
 thereto, notwithstanding the prior 
 mortgage is not legally executed 
 and recorded. Coe v. Columbus, 
 &c. R. Co., 10 Ohio St. 372, 75 
 Am. Dec. 518. 
 
 53 Waco Tap R. Co. v. Shirley, 
 45 Tex. 355, 13 Am. Railw. R. 233; 
 Texas, &c. R. Co. v. Gentry, 69 
 Tex. 625, 8 S. W. 98; Ashton v. 
 Corrigan, L. R. 13 Eq. 76; Peto v. 
 Brighton, &c. R. Co., 1 H. & Mil- 
 ler 468. 
 
 54 White Water Valley Canal 
 Co. V. Vallette, 21 How. (U. S.) 
 414, 16 L. ed. 154; Poland v. La- 
 moille Val. R. Co., 52 Vt. 144, 171 ; 
 Dundas v. Desjardins Canal Co., 
 17 Grant's Ch. (Upper Can.) 27. 
 
 55 Ketchum v. Pacific R, 4 Dill. 
 (U. S.) 78, 86, Fed. Cas. No. 7739; 
 
 Dillon V. Barnard, 1 Holmes (U. 
 S.) 386, Fed. Cas. No. 3915; 
 Ketchum v. St. Louis, 101 U. S. 
 306, 317, 25 L. ed. 999; Pinch v. 
 Anthony, 8 Allen (Mass.) 536; 
 Watson V. Wellington, 1 Rus. & 
 Myl. 602; Yeates v. Groves, 1 Ves. 
 Jr. 280; Lett v. Morris, 4 Sim. 607; 
 Alderson, Ex parte, 1 • Madd. 39; 
 Legard v. Hodges, 1 Ves. Jr. 477. 
 58 Hervey v. Rhode Island, &c. 
 Works, 93 U. S. 664, 23 L. ed. 1003 ; 
 Fosdick V. Schall, 99 U. S. 235, 25 
 L. ed. 339; Heryford v. Davis, 102 
 U. S. 235. 26 L. ed. 160; Frank v. 
 Denver, &c. R. Co., 23 Fed. 123. 
 But it is held that there is no 
 mortgage where a railway com- 
 pany sells rolling stock, contem- 
 poraneously hiring the same stock 
 at an annual rental of one-fifth of 
 the selling price, with provision 
 for repurchase at the end of five 
 years for a nominal price. York- 
 shire R. Wagon Co. v. Maclure, 
 21 Ch. Div. 309; North Central 
 Wagon Co. v. Manchester, &c. R. 
 Co., 35 Ch. Div. 191. 
 
§569 
 
 RAILROADS 
 
 836 
 
 not be issued because the refunding scheme provides none so 
 small, has also been held entitled to a lien for the amount of the 
 indebtedness to him equal to the other mortgage creditor's lien.^^ 
 Where no words of inheritance appear in the mortgage, but it is 
 the evident intention that the trustees should take the fee, the 
 instrument will be reformed m a proper case by a court of 
 equity.^* 
 
 §569 (503). Statutory mortgages. — A statute expressing its 
 purpose in certainss" terms ma}' constitute a nioi-tgage without 
 the execution of any instrument of conveyance."" A statutory 
 mortgage to the state may provide that it shall receive the in- 
 come by way of interest, without foreclosure, "^ and may make 
 
 57 Blair v. St. Louis, &c. R. Co., 
 23 Fed. 524. 
 
 •'8 Coe V. New Jersey, &c. R. 
 Co., 31 N. J. Eq. 105; Randolph 
 V. New Jersey, &c. R. Co., 28 N. 
 J. Eq 49; Miller v. Savage, 60 N. 
 J. Eq. 204, 46 Atl. 632. 
 
 59 Cincinnati City v. Morgan, 3 
 Wall. (U. S.) 275, 18 L. ed. 146; 
 Colt V, Barnes, 64 Ala. 108; Bruns- 
 wick and Albany R. Co. v. 
 Hughes, 52 Ga. 557; Collins v. 
 Central Bank of Georgia, 1 Kelly 
 (Ga.) 435; Whitehead v. Vine- 
 yard. .50 Mo. 30. 
 
 60 Cunningham v. Macon, &c. 
 R., 156 U. S. 400, IS Sup. Ct. 361, 
 39 L. ed. 471; Woodson v. Mur- 
 dock, 22 Wall. (U. S.) 351, 22 L. 
 ed. 716; United States v. Union 
 Pacific R. Co., 91 U. S. 72, 23 L. 
 ed. 224; Murdock v. Woodson. 2 
 Dill. (U. S.) 188, Fed. Cas. No. 
 9942; Wilson v. Boyce, 92 U. S. 
 320, 2 Dill. (U. S.) 539, Fed. Cas. 
 No. 17793; Tompkins v. Little 
 Rock. &c. R. Co., IS Fed. 6; State 
 V. Florida, &c. R. Co., 15 Fla. 690. 
 An example is Act of July 1, 1862, 
 12 Stat, at Large, 489, mortgaging 
 
 the Union Pacific Railroad. Such 
 a mortgage may include after- 
 acquired property. Whitehead v. 
 Vineyard, 50 Mo. 30; Colt v. 
 Barnes, 64 Ala. 108. The lien may 
 be released by the legislature. 
 Woodson V. Murdock, 22 Wall. 
 (U. S.) 351, 22 L. ed. 716; Darby 
 V. Wright, 3 Blatchf. (U. S.) 170, 
 Fed. Cas. No. 3574; Gibbes v. 
 Greenville, &c. R. Co., 13 S. Car. 
 228. By agreement a new lien- 
 holder may be substituted. 
 Ketchum v. St. Louis, 101 U. S. 
 306, 25 L. ed. 999. It is not neces- 
 sary that the bonds which are se- 
 cured shall mention the lien of 
 the mortgaging act. Dundas v. 
 Desjardins, &c. Co., 17 Grant (U. 
 C.) 27. The holder of bonds se- 
 cured by statutory mortgage can 
 avail himself of the security only 
 by means of foreclosure instituted 
 by the trustees in conformity with 
 the statute. Florida v. Anderson, 
 91 U. S. 667, 23 L. ed. 290. 
 
 61 Macalester v. Maryland, 114 
 U. S. 598, 5 Sup. Ct. 106S, 24 L. ed. 
 233. 
 
837 RAILROAD SECURITIES § 570 
 
 such provisions as will constitute an equitable assignment thereof 
 to which subsequent mortgages will be subject." ^ State aid 
 bonds giving a lien in favor of the state do not entitle the pur- 
 chasers to enforce the lien where it is waived or released by the 
 state.*** The bondholders cannot enforce the lien either upon 
 the principle of subrogation or under the claim that they have a 
 specific lien as direct mortgage creditors."* 
 
 § 570 (504). Debentures. — Debentures, which are the com- 
 monest form of security issued by English corporations, are 
 defined to be instruments under seal, creating a charge, accord- 
 ing to their wording, upon the property of the corporation, and to 
 that extent conferring a priority over subsequent creditors and 
 over existing creditors not possessed of such a charge.®^ They 
 are, in fact, equitable mortgages, being enforceable only in 
 equity.®" Their holder has no lien upon the corporation's traffic 
 receipts and no right to a receiver of them."'' The debenture is 
 generally not accompanied by any separate instrument. Instead 
 of securing the payment in one instrument of a debt which there 
 is a promise to pay in another or others, each mortgage deben- 
 ture ordinarily includes both the provisions in regard to the 
 security and a covenant for the payment of the debt."** In Eng- 
 land debentures ;ire not required to be recorded, but in most of 
 our states they would be very dangerous investments on this 
 
 S2 Ketchum v. St. Louis, 101 U. C. 191; General South American 
 
 S. 306, 2S L. ed. 999. Co., In re, L. R. 2 Ch. D. 337. 
 
 63 Tennessee Bond Cases, 114 "Imperial Mercantile Credit 
 
 U. S. 663, .■; Sup. Ct. 974, 1098, 29 ^^sn. v. Newry, &c. R. Co., 2 Ir, 
 
 ■r J 28 Rep. Eq. 524; Preston v. Great 
 
 Yarmouth, L. R. 7 Ch. 655. See, 
 
 04 Cunningham v. Macon, &c. R. ^^ bearing on rights of debenture 
 Co., 156 U. S. 400, IS Sup. Ct. 361, holders prior to the Railway 
 39 L. ed. 471. But see Railroad Companies Act of 1867, Bowen v. 
 Co. V. Schutte, 103 U. S. 118, 26 L. g^^^^^ ^ ^o., L. R. 3 Eq. 541; 
 ^^- ^27. Russell v. East Anglian R. Co., 3 
 
 05 3 Thorap. Corp. (2nd. ed.), Mac. & G. 104, 151. 
 
 § 2266. 68 Hart v. Eastern Union R. Co., 
 
 66 Holroyd v. Marshall, 10 H. L. 6 Eng. R. & Can. Cas. 818, 7 Exch. 
 
 246, 265; 
 
§ 570 RAILROADS ^38 
 
 account, and the fact that an attachment of property in this 
 country may take precedence over an unrecorded debenture, was 
 admitted in a recent English case.^* A so-called debenture is, 
 however, said to be coming into use in the United States, which 
 is in effect a bond or note secured by pledge of collaterals de- 
 posited with a trustee.'^" In a case in Indiana, a so-called deben- 
 ture is set out in the opinion of the court. The instrument pro- 
 vided for its receipt in payment of freight charges and tickets for 
 a certain period, and the court held that upon repudiation by the 
 company of the v.'hole arrangement the company was liable for 
 the face value of the debentures in moneyJ^ A form of deben- 
 ture bond bearing interest payable out of earnings and entitling 
 the holder to the surplus assets after payment of debts on liqui- 
 dation or dissolution has been held to be, in effect, preferred 
 stock. ''2 
 
 «» Empire, &c. Co., In re, 62 L. R. A. 683; Ward v. Johnson, 95 
 
 T. R. 493. For further considera- III. 215; Smith v. New Hampshire, 
 
 tion of the general subject of &c. Co., 68 N. H. 424, 41 Atl. 174. 
 
 English debentures see 3 Thomp. 71 Evansville, &c. R. Co. v. 
 
 Corp. (2nd ed.) § 2266. Frank, 3 Ind. App. 96, 29 N. E. 
 
 TO 2 Cook Corp. (7th ed.), 419. 
 
 § m. See also Clarke v. Cen- T2 in re Fechheimer Fxshel Co., 
 
 tral R., &(;. Co., 50 Fed. 338, 15 L. 212 Fed. 357. 
 
CHAPTER XX. 
 
 FORECLOSURE. 
 
 Sec. 
 
 575. Foreclosure — Default. 
 
 576. Option to declare whole debt 
 
 due — Election. 
 
 577. Foreclosure for default in 
 
 payment of interest. 
 
 578. Parties to foreclosure suit — 
 
 Plaintiffs. 
 
 579. Bondholders as plaintiffs. 
 
 580. Pledgees, assignees and 
 
 others as plaintiffs. 
 
 581. Defendants in foreclosure 
 
 suits — Generally. 
 
 582. When other lienholders 
 
 should be made defend- 
 ants. 
 
 Sec. 
 583. 
 
 584. 
 
 585 
 
 586. 
 
 587. 
 588. 
 589. 
 590. 
 
 Defenses to foreclosure suit. 
 
 Effect of provisions giving 
 trustees the right to take 
 possession and sell. 
 
 Rights and duties of trus- 
 tees as to possession and 
 sale. 
 
 Right to foreclose still ex- 
 ists. 
 The decree. 
 Consent decree. 
 Deficiency decree. 
 Final and appealable decrees. 
 
 § 575. (505). Foreclosure — Default. — In order to maintain a 
 .suit for the foreclosure of a mortgage, the plaintiff must be able 
 to show a default within its terms. An allegation that interest 
 coupons are unpaid has been held insufficient, where it does not 
 appear that any demand for payment has been made or that the 
 company neglected or refvised to pay at the place or in the man- 
 ner provided.' But a demand is usually unnecessary before 
 
 1 Davies v. New York, &c. Co., 
 41 Hun (N. Y.) 492; Jones Corp. 
 Bonds and Mort. §381. See also 
 Doyle V. Phoenix Ins. Co., 44 Cal. 
 264; United States, &c. Stock Co. 
 V. Atlantic, &c. Co., 34 Ohio St. 
 450, 467, 32 Am. Rep. 380. But see 
 Mayes v. Goldsmith, 58 Ind. 94; 
 Douthit v. Mohr, 116 Ind. 482, 18 
 N; E. 449, and compare Carey v. 
 Houston, 45 Fed. 438. See gen- 
 erally as to foreclosure for non- 
 
 payment of interest, Chicago, &c. 
 R. Co. V. Fosdick, 106 U. S. 47, 1 
 Sup. Ct. 10, 27 L. ed. 47; Ohio 
 Cent. R. Co. v. Central Trust Co.. 
 133 U. S. 83, 10 Sup. Ct. 235, 33 L. 
 ed. 561 ; Louisville, &c. R. Co. v. 
 Schmidt (Ky.), 52 S. W. 835; Mc- 
 Fadden v. Mays Landing, &c. R. 
 Co., 49 N. J. Eq. 176, 22 Atl. 932. 
 In a recent case a railroad com- 
 pany alleged its insolvency, and 
 prayed for a sale of its property 
 
 839 
 
§575 
 
 RAILROADS 
 
 840 
 
 instituting a suit to foreclose a mortgage,^ at least where the 
 company is insolvent and has no funds with which to pay, and 
 the right to forf.close arises as soon as the condition of the 
 defeasance is broken." Railroad mortgages and trust deeds, 
 however, generally provide that no suit to foreclose shall be 
 instituted for failure to pay interest until after the default shall 
 have continued for a specified period. A default may be waived,"* 
 
 and distribution of the proceeds 
 among its creditors. A receiver 
 was appointed. A mortgagee filed 
 a cross-bill to foreclose two mort- 
 gages, on both of which default 
 in the interest had been made, 
 but the debt secured by the sec- 
 ond only was due. The court held 
 that both mortgages might be 
 foreclosed, although by its terms 
 the first was not subject to fore- 
 closure until default in payment 
 of the principal at maturity. Mc- 
 Ilhenny v. Binz, 80 Tex. 1, 13 S. 
 W. 6SS, 26 Am. St. 70S. Where 
 the mortgage bonds have become 
 the property of the railroad com- 
 pany's lessee, such lessee will be 
 held to a strict accounting before 
 it will be permitted to foreclose 
 for an alleged default in the pay- 
 ment of interest, since there could 
 be no default so long as the rent 
 that was unaccounted for equaled 
 the unpaid interest. Chamberlain 
 V. Connecticut, &c. R. Co., 54 
 Conn. 472, 9 Atl. 244. 
 
 2 Clemens v. Luce, 101 Cal. 432. 
 35 Pac. 1032; Gillett v. Balcom, 6 
 Barb. (N. Y.) 370; Union, &c. Co. 
 V. Curtis, 35 Ohio St. 357; Elliott's 
 Gen. Pr., §313. See also Mar- 
 lor V. Texas, &c. R. Co., 21 Fed. 
 383 ; Savannah, &c. R. Co. v. Lan- 
 caster, 62 Ala. 555. But the in- 
 
 strument may, of course, be so 
 drawn as t.. require a demand. 
 Potomac, &c. Co. v. Evans, 84 Va. 
 717, 6 S. E. 2; Bolman v. Lohman, 
 1^ Ala. 63. Thus, there may be 
 no default under the provisions of 
 the particular instrument until de- 
 mand and refusal or failure to 
 comply with it. So a provision 
 in bonds requiring a demand has 
 been held to control the mortgage 
 securing them. Railway Co. v. 
 Sprague, 103 U. S. 756, 26 L. ed. 
 554. See as to what is a sufficient 
 compliance with a requirement of 
 written notice to the officers at 
 their principal office as a condi- 
 tion to foreclosure, Real Estate 
 Trust Co. v. Wilmington, &c. 
 Elec. R. Co. (Del.), 17 Atl. 756. 
 
 3 Richards v. Holmes, 18 How. 
 (U. S.) 143, 15 L. ed. 304; Chicago, 
 &c. R. Co. V. Fosdick, 106 U. S. 
 4.7, 1 Sup. Ct. 10, 27 L. ed. 47; 
 Pomeroy v. Winship, 12 Mass. 513, 
 7 Am. Dec. 91; Central Trust Co. 
 V. New York, &c. R. Co., 33 Hun 
 (N. Y.) 513. 
 
 * Dow V. Memphis, &c. R. Co., 
 20 Fed. 260; Nebraska City Bank 
 V. Nebraska Gas, &c. Co., 14 Fed. 
 763; Randolph v. Middleton, 26 
 N. J. Eq. 543. Where a railroad 
 trust deed provided that if the de- 
 fault occurred in payment of in- 
 
841 
 
 FORECLOSURE 
 
 0/5 
 
 but the waiver, if by parol and without consideration, may be 
 revoked, and then, after a demand of payment, the payment 
 waived will become due/'' So, it has been held that an agree- 
 ment not to exercise the option given in a trust deed to declare 
 the entire debt due for default in payment of interest, when lim- 
 ited to a. specified instalment, although made in coiisideration of 
 the assignment of rents accruing from the mortgaged premises 
 does not prevent the mortgagee from declaring the entire debt 
 due upon default in the payment of a subsequent instalment.® 
 Failure to pay taxes or to perform other conditions may also be 
 
 terest or principal of the bonds, 
 the trustees were to act on the 
 requisition of the holders of 2S 
 per cent, of the bonds, and if "the 
 default be in the omission of any 
 act or thing required by article 
 12 of these presents for the fur- 
 ther assurance of the title of the 
 trustees to any property or fran- 
 chise now possessed or hereafter 
 acquired, or in any provisions 
 herein contained to be performed 
 hy said company, then and in 
 either of such cases the requisi- 
 tion shall be as aforesaid; but it 
 shall be within the discretion of 
 ihe trustees to enforce or waive 
 the rights of the bondholders by 
 reascn of such default, subject to 
 the power hereby declared of a 
 majority in interest of such bond- 
 liniders to instruct the said trus- 
 tees to waive such default," it 
 -was held that the right of a ma- 
 jority to waive default extended 
 only to failure to make further 
 assurance, and not to failure to 
 pay interest or principal of the 
 bonds. HoUister v. Stewart, 111 
 N. Y. 644, 19 N. E. 782. Delay for 
 three months in bringing suit 
 after failure to pay instalment of 
 
 interest is not a waiver of a stip- 
 ulation making the whole debt 
 due at once upon such default. 
 Atkinson v. Walton, 162 Pa. St. 
 219, 29 Atl. 898. See also Fletcher 
 v. Dennison, 101 Cal. 292, 35 Pac. 
 868; Brown v. McKay, 151 111. 315, 
 37 N. E. 1037. But compare French 
 V. Row, 77 Hun 380, 28 N. Y. S. 
 849, where long delay, coupled 
 with other circumstances, was 
 held to be a waiver. Acceptance 
 of the defaulted interest before 
 instituting suit to foreclose is a 
 waiver of the right of forfeiture 
 on account of such default. Smal- 
 ley V. Renken, 85 Iowa 612, 52 N. 
 W. 507. But see Moore v. Sar- 
 gent, 112 Ind. 484, 14 N. E. 466. 
 
 5 Albert v. Grosvenor Invest- 
 ment Co., L. R. 3 Q. B. 123 ; Union 
 Trust Co. V. St. Louis, &c. Co., 5 
 Dill. (U. S.) 1, Fed. Cas. No. 
 14403; Jones Corp. Bonds and 
 Mort. §383. See also Sharpe v. 
 Arnott, 51 Cal. 188; Gardner v. 
 Watson, 13 111. 347; Massaker v. 
 Mackerley, 9 N. J. Eq. 440. 
 
 « Martin v. Land, &c. Bank. 5 
 Tex. Civ. App. 167, 23 S. W. 1032. 
 See also Malcolm v. Allen, 49 N. 
 Y. 448. 
 
§ 576 RAILROADS 842 
 
 made a cause for declaring the entire debt due and justify a fore- 
 closure for the whole amount,'^ but where there is no agreement 
 by the mortgagor to pay taxes,* or where they are paid by him 
 before the option is exercised by foreclosure or otherwise, the 
 mortgagee cannot foreclose merely because of such failure.® 
 
 § 576 (506). Option to declare whole debt due — Election. — 
 
 Where an option is given to the mortgagee to declare the whole 
 debt due, that is, the principal as well as the interest, upon the 
 failure to pay the interest or any instalment when due, he must, 
 of course, in some way, indicate his election. There is some con- 
 flict among the authorities as to whether merely instituting suit 
 to foreclose for the entire debt without giving any previous 
 notice or otherwise showing an election to exercise the option, 
 is sufficient. Much depends upon the provisions of the particular 
 mortgage or trust deed in question. It may doubtless provide 
 that notice shall be given or a declaration made of the mort- 
 gagee's intention to take advantage of the option before the 
 institution of proceedings to foreclose. But, in the absence of 
 any such provision, that is, where the mortgage merely provides 
 that, upon failure to pay interest, or any instalment, when due, 
 the entire debt shall become due, or that the mortgagee shall 
 have the option of declaring it due, the commencement of a suit 
 to foreclose for the entire debt is, according to the better rule 
 and the weight of authority, a sufficient election without a previ- 
 ous declaration thereof.^" A written notice given by the holders 
 
 7 Brickell v. Batchelder, 62 Cal. upon the interest on the bonds. 
 
 623; Pope v. Durant, 26 Iowa 233; Haight v. Railroad Co., 6 Wall. 
 
 Martin v. Clover, 63 Hun 628, 17 (U. S.) 15, 18 L. ed. 818. 
 
 N. Y. S. 638; Williams v. Town- 9 Smalley v. Renken, 85 Iowa 
 
 send, 31 N. Y. 411. See also 612, 52 N. W. 507; Fleming v. 
 
 Bonner Springs, &c. Co. v. Mc- Franing, 22 Okla. 644, 98 Pac. 961, 
 
 Clelland, 59 Kans. 778, 53 Pac. 866, 22 L. R. A. (N. S.) 360, and cases 
 
 without opinion. there cited in note. See also as 
 
 s Noble V. Greer, 48 Kans. 41, to acceleration provision gen- 
 
 28 Pac. 1004. A provision requir- erally, notes in 22 L. R. A. (N. S.) 
 
 ing the mortgagor company to pay 1110, 35 L. R. A. (N. S.) 390, 42 L. 
 
 taxes and assessments does not R, A. (N. S.) 108. 
 
 require it to pay an income tax lo Sichler v. Look. 93 Cal. 600, 
 
843 
 
 FORF.CLOSUEE 
 
 §576 
 
 of the note or bonds secured by the trust deed to the trustee, 
 requesting him to foreclose for the entire debt, has been held to 
 be sufficient declaration of an intention to exercise the option.^* 
 So, where a mortgage provided that until default in the payment 
 of interest for six months after written demand by the trustee the 
 mortgagor should remain in possession, but that after such de- 
 fault the trustee might take possession, it was held that this was 
 a limitation merely upon the right of the trustee to take posses- 
 sion, and that he might institute proceedings to foreclose without 
 giving notice and without waiting six months. ^^ Decisions may 
 be found which ?eem to go still further in this direction.'-* The 
 fact that the mortgaged property is in the possession of a re- 
 ceiver appointed at the suit of a third person will not prevent 
 the mortgagee from exercising his option to declare the entire 
 debt due, upon default in the payment of one instalment, by 
 instituting a suit to foreclose.^'* We doubt, however, if the mort- 
 
 29 Pac. 220, 223; Brown v. Mc- 
 Kay, 151 111. 315, 37 N. E. 1037; 
 Buchanan v. Berkshire, &c. Co., 
 96 Ind. 510; Taylor v. Alliance 
 Trust Co., 71 Miss. 694, IS So. 121 ; 
 Morling v. Bronson, 37 Nebr. 608, 
 56 N. W. 205 ; New York Security, 
 &c. Co. V. Saratoga, &c. Co., 88 
 Hun 569, 34 N. Y. S. 890; Young v. 
 McLean, 63 N. Car. 576. See also 
 Morgan's Louisiana, &c. Co. v. 
 Texas Cent. R. Co., 137 U. S. 171, 
 11 Sup. Ct. 61, 34 L. ed. 625. Con- 
 tra, Basse v. Gallegger, 7 Wis. 
 442, 76 Am. Dec. 225; Macloon v. 
 Smith, 49 Wis. 200, 5 N. W. 336; 
 Dean v. Applegarth, 65 Cal. 391, 4 
 Pac. 375 (distinguished in Hewitt 
 V. Dean, 91 Cal. 5, 27 Pac. 423). 
 
 iiHeffron v. Gage, 149 III. 182, 
 36 N. E. 569. See also Mallory v. 
 West Shore, &c. R. Co., 3 J. & 
 S. (N. Y. Super. Ct.) 174; Fellows 
 V. Oilman, 4 Wend. (N. Y.) 414; 
 American Tube, &c. Co. v. Ken- 
 tucky, &c. Co., 51 Fed. 826. 
 
 12 Farmers' Loan, &c. Co. v. 
 Winona, &c. R. Co., 59 Fed. 957. 
 To the same effect is Alabama, 
 &c. Co. V. Robinson, 56 Fed. 690, 
 affirming Robinson v. Alabama, 
 &c. Co., 48 Fed. 12. 
 
 13 See, for instance. Mercantile 
 Trust Co. V. Chicago, &c. R. Co., 
 61 Fed. 372. But see post, §577. 
 
 1* Mulcahey v. Strauss, 151 111. 
 70, Zl N. E. 702. It was also held 
 in this case that the failure to ob- 
 tain leave to sue the receiver did 
 not deprive the court of jurisdic- 
 tion and that the objection was 
 waived. Where the receiver is a 
 party, however, leave should be 
 obtained, for even if it is not 
 jurisdictional, the failure to ob- 
 tain it may be fatal where the 
 question is properly raised. See 
 for contract by a majority of 
 bondholders held not to prevent 
 trustee from foreclosing. Las 
 Vegas R. Co. v. Trust Co., 15 N. 
 Mex. 634, 110 Pac. 856. 
 
§577 
 
 RAILROADS 
 
 84+ 
 
 gagee could sell the property, under a decree of foreclosure, while- 
 it is in the hands of the receiver. 
 
 § 577 (507). Foreclosure for default in payment of interest. — 
 
 A foreclosure may usually be had for unpaid interest, althojigb 
 the principal debt is not due.i^ A railroad mortgage, providing: 
 that the bonds shall become due on default in the payment of" 
 interest, may be foreclosed on default, unless the statute author- 
 izing the bonds states a minimum period, not yet elapsed, dur- 
 ing which they must run, in which case the mortgage may be 
 foreclosed for the default in the payment of interest, the decree 
 directing a sale if payment is not made within a period appointed 
 by the court, and the remainder of the proceeds, after the satis 
 faction of the defaulted interest and expenses, being held by the 
 court subject to the mortgagee's lien for the payment of the sub- 
 sequently maturing interest coupons and the principal. '^^ But 
 it seems that such a suit may generally be arrested by payment 
 of the accrued interest and costs. i'' It is frequently provided in 
 
 15 Union Trust Co. v. St. Louis, 
 &c. R. Co., S Dill. (U. S.) 1, Fed. 
 Cas. No. 14403; Howell v. West- 
 ern, &c. R. Co., 94 U. S. 463, 24 L. 
 ed. 2S4; Chicago, &c. R. Co. v. 
 Fcsdick, 106 U. S. 47, 68, 1 Sup. 
 Ct. 10, 27 L. ed. 47; Farmers' Loan 
 & T. Co. V. Chicago, &c. R. Co., 
 27 Fed. 146; Central T. Co. v. New 
 York, &c. R. Co., 33 Hun (N. Y.) 
 513. Where a railroad mortgage 
 contains no provision making the 
 principal due on default in the 
 payment of interest, powers given 
 to the trustee, after default in the 
 payment of interest, to take pos- 
 session of the mortgaged property 
 and sell the sarfie and apply the 
 proceeds to the payment of inter- 
 est and principal, do not accelerate 
 the maturity of the principal so 
 as to authorize foreclosure for the 
 
 entire debt on such default. Mc- 
 Fadden v. Mays Landing, &c. R. 
 Co., 49 N. J. 176, 22 Atl. 932. 
 
 16 Howell V. Western R. Co., 94' 
 U. S. 463, 24 L. ed. 254; Wilmer v. 
 Atlanta, &c. R. Co., 2 Woods (U. 
 S.) 409, 447, Fed. Cas. No. 17775; 
 Wood V. Consolidated, &c. Co., 36' 
 Fed. 538; Macon & Augusta R. 
 Co. V. Georgia R. Co., 63 Ga. 103; 
 Central Trust Co. v. New York, 
 &c. R. Co., 33 Hun (N. Y.) 513. 
 
 IT See Philips v. Bailey, 82 Mo. 
 639; Tillinghast v. Troy, &c. R. 
 Co , 48 Hun 420, 1 N. Y. S. 243. In 
 Grape Creek Coal Co. v. Farmers', 
 &c. Co., 63 Fed'. 891, 895, it is said 
 that such right doubtless exists 
 "down to the entry of the decree," 
 but it can not be exercised after 
 a decree is entered declaring the 
 whole debt due. 
 
M5 
 
 I''ORirCLOSURE 
 
 §•577 
 
 the mortgage or trust deed that upon default in the payment 
 of interest the mortgage may be foreclosed for the entire debt. 
 Such a provision is valid/^ but it does not, at least unless it 
 clearly makes the entire debt due for all purposes, authorize a 
 personal judgment for any deficiency in the amount of the mort- 
 gaged property tc pay the principal not yet due. Its effect is 
 rather to make the principal due merely for the purposes of the 
 foreclosure or entry and sale by the trustee under the provisions 
 of the mortgage.^'' But, where the mortgaged property cannot 
 be sold in parcels, as is usually the case with railroads, the entire 
 road may be sold even upon foreclosure for default in the interest 
 alone, and the proceeds applied to the principal as well as the 
 interest.^" Practically, therefore, to this extent a default in pay- 
 
 is Richards v. Holmes, 18 How. 
 {U. S.) 143, IS L. ed. 304; Indiana, 
 &c, R. Co. V. Sprague, 103 U. S. 
 7S6, 26 L. ed. 554; McLean v. Pres- 
 ley, 56 Ala. 211 ; Marye v. Hart, 
 76 Cal. 291, 18 Pac. 325, 23 Am. & 
 Eng. Corp. Cas. 506, and note ; 
 Hoodless V. Reid, 112 111. 105; 
 Pope V. Durant; 26 Iowa 233. 
 In some jurisdictions this is the 
 rule even in the absence of any 
 express provision upon the sub- 
 ject. Farmers' Loan, &c. Co. v. 
 Nova Scotia, &c. R. Co., 24 N. S. 
 542. Where the provision is that 
 the entire debt may be declared 
 due and collected by the trustee, 
 after default in payment of in- 
 terest, at the request of a cer- 
 tain number of bondholders, or 
 the like, the condition must be 
 performed before advantage can 
 be taken of the provision. Chi- 
 cago, &c. R. Co. V. Fosdick, 106 
 U. S. 47, 1 Sup. Ct. 10, 27 L. ed. 
 47; Batchelder v. Council, &c. 
 Co., 131 N. Y. 42, 29 N. E. 801; 
 Farmers' Loan, &c. Co. v. Bank- 
 
 ers', &c. Co., 44 Hun (N. Y.) 400. 
 See as to effect of acceleration 
 provision on statute of limita- 
 tions, McCarty v. Goodsman (N. 
 Dak.), 167 N. W. 503, L. R. A. 
 1918E, 160, and note. 
 
 19 Railway Co. v. Sprague, 103 
 U. S. 756, 26 L. ed. 554; Ohio Cent. 
 R. Co. V. Central T. Co., 133 U. S. 
 83, 10 Sup. Ct. 235, 33 L. ed. 561; 
 White V. Miller, 52 Minn. 367, 54 
 N. W. 736; Morgan v. Martian, 32 
 Mo. 438; Miallory v. West Shore, 
 &c. R. Co., 35 N. Y. Super. Ct. 
 174; McClelland v. Bishop, 42 
 Ohio St. 113; Grape Creek Coal 
 Co. V. Farmers' Loan, &c. Co., 63 
 Fed. 891. (Provision held insuffi- 
 cient to authorize a decree declar- 
 ing principal due and compelling 
 its payment in order to redeem.) 
 But see Wheeler, &c. Co. v. How- 
 ard, 28 Fed. 741; Noell v. Gaines, 
 68 Mo. 649. 
 
 20 Olcott v. Bynum, 17 Wall. (U. 
 S.) 44, 21 L. ed. 570; Chicago, &c. 
 R. Co. V. Fosdick, 106 U. S. 47, 
 68, 1 Sup. Ct. 10, 27 L. ed. 47; 
 
578 
 
 RAILROADS 
 
 846 
 
 ment of interest may cause the entire debt to become due whether 
 there is a provision in the mortgage to that effect or not. It is 
 not to be inferred from this, however, that such a provision i§ 
 unimportant. While it is proper, even in its absence, to direct 
 the payment of the whole debt out of the proceeds of the sale 
 of the property as an entirety, yet, in such a case, the amount of 
 overdue interest should be stated in the decree and provision 
 made for the mortgagor to redeem before the sale upon the pay- 
 ment of such interest and costs, whereas the presence of a pro- 
 vision expressly making the entire debt due upon default in pay- 
 ment of interest will authorize a decree declaring it all due and 
 ordering a sale, unless the whole amount is paid within a rea- 
 sonable time therein specified.^^ 
 
 § 578 (508). Parties to foreclosure suit — Plaintiffs. — Where 
 the mortgage is made to trustees they may sue to foreclose it 
 without joining the bondholders.^^ Where a bill in equity is filed 
 by the trustees for the foreclosure of a mortgage, the individual 
 
 Farmers' Loan, &c. Co. v. Oregon, 
 &c. R. Co., 24 Fed. 407; Pennsyl- 
 vania R. Co. V. Allegheny, &c. R. 
 Co., 48 Fed. 139; McLean v. Pres- 
 ley, 56 Ala. 211; McTighe v. Ma- 
 con, &c. Co., 94 Ga. 306, 21 S. E. 
 701, 706, 707. 32 L. R. A. 208, 47 
 Am. St. 153; Bridges v. Ballard, 
 62 Miss. 237. 
 
 21 Grape Creek Coal Co. v. 
 Farmers' Loan, &c. Co., 63 Fed. 
 891; Chicago, &c. R. Co. v. Fos- 
 dick, 106 U. S. 47, 75, 1 Sup. Ct. 
 10, 27 L. ed. 47; Ohio Cent. R. 
 Co. V. Central Trust Co., 133 U. S, 
 83, 10 Sup. Ct. 235, 33 L. ed. 561. 
 
 22Richter v. Jerome, 123 U. S. 
 233, 8 Sup. Ct. 106, 31 L. ed. 132; 
 Savannah, &c. R. Co. v. Lancaster, 
 62 Ala. 555; Boston &c. R. Co. v. 
 Coffin, SO Conn. 150; Chicago &c. 
 Land Co. v. Peck, 112 111. 408; 
 Hale V. Nashua &c. R. Co., 60 N. 
 
 H. 333; Coe v. Columbus &c. R. 
 Co., 10 Ohio St. 372, 75 Am. Dec. 
 518. See also Grand Trunk R. Co. 
 V. Central Vermont R. Co., 88 Fed. 
 622; Rumsey v. People's R. Co., 
 154 Mo. 215, 55 S. W. 615. A trus- 
 tee under successive mortgages to 
 secure different issues of bonds 
 may, as trustee of the first mort- 
 gage, in good faith foreclose it 
 and bind the second mortgage 
 bondholders by the decree so far 
 as represented by him. Robin- 
 son V. Iron R. Co., 135 U. S. 522, 
 531, 10 Sup. Ct. 907, 34 L. ed. 276. 
 But is it said that he should make 
 both himself as trustee under the 
 second mortgage and some of the 
 second mortgage bondholders par- 
 ties defendant. See generally as 
 to parties plaintiff in such suits, 
 leading article in 54 Cent. Law 
 Jour. 364. 
 
847 
 
 FORECLOSURE 
 
 §578 
 
 bondholders are not necessary nor, as a rule, even proper parties 
 to the suit.2* They may be, admitted as. parties, however, where 
 the trustee is guilty of misconduct or shows himself incompetent 
 to properly execute the trust,-^ or where he is shown to- have 
 interests adverse to those of the bondholders.^ If a part of the 
 trustees refuse to act, the suit may be prosecuted by the remain^ 
 ing trustee or trustees, and those refusing to act may be made- 
 
 23 Railroad Co. v. Howard, 7 
 Wall. (U.S.) .392, 19 L. ed. 117; 
 Shaw V. Little Rock &c. R. Co., 
 100 U. S. 60S, 25 L. ed. 757; Wet- 
 more V. St. Paul &c. R. Co., 1 
 McCrary (U. S.) 466, 3 Fed. 177; 
 Shaw V. Norfolk &c. R. Co., 5 
 Gray (Mass.) 162. In a railroad 
 foreclosure suit the mortgage trus- 
 tee represents the bondholders, and, if 
 lie acts in good faith, whatever binds 
 him binds them, so that they have 
 no right to be made parties except 
 when the trustee is not acting in 
 good faith. Farmers' Loan &c. 
 Co. V. Kansas City &c. R. Co., S3 
 Fed. 182; Beals v. Illinois &c. R. 
 Co., 133 U. S. 290, 10 Sup. Ct. 314, 
 33 L. ed. 608; Elwell v. Fosdick, 
 134 U. S. 500, 10 Sup. Ct. 598, 33 
 L. ed. 998; McElrath v. Pitts- 
 burgh &c. R. Co., 68 Pa. St. 37. 
 See also Central Trust Co. v. 
 Peoria &c. R. Co., 104 Fed. 
 420; Baltimore v. United R. 
 &c. Co., 108 Md. 64, 69 Atl. 436, 
 16 L. R. A. (N. S.) 1006, and other 
 authorities there cited on the gen- 
 eral subject in the note. This 
 rule has been applied where the 
 trustee was made defendant to a 
 suit to cancel and satisfy the 
 mortgage under a reorganization 
 
 agreement. Pollitz v. Farmers' 
 &c. Co., 53 Fed; 210. But it. is said 
 that the trustee represents the 
 bondholders only for the protec- 
 tion of their lien under the trust 
 deed and not after he has denied 
 their right. Moran v. Hagerman, 
 64 Fed. 499. 
 
 24 Skiddy v. Atlantic &c. R. Co., 
 3 Hughes (U. S.) 320, Fed Cas. No. 
 12922. See . also next following 
 section. The simple fact that a 
 single trust company is trustee 
 under twelve mortgages given by 
 different corporations which have 
 united to form a single system, is 
 not sufficient reason for admitting 
 a committee of the bondhold- 
 ers of the principal corporation 
 by which the other roads in the 
 system are owned or controlled to 
 become party plaintiffs in a suit 
 to foreclose. Clyde v. Richmond 
 &c. R. Co., SS Fed. 445. 
 
 25 American Tube &c. Co. v. 
 Kentucky &c. Co., 51 Fed. 826; 
 Webb V. Vermont &c. R. Co., 9 
 Fed. 793; DeBetz's Petition, 9 
 Abb. N. Cas. (N. Y.) 246. See also 
 Farmers' Loan &c. Co. v. Cape 
 Fear &c. R. Co., 71 Fed. 38; 
 Farmers' Loan &c. Co. v. North- 
 ern Pac. R. Co., 66 Fed. 169. 
 
§579 
 
 KAII.UOAJJh 
 
 <S48 
 
 defendants. 2® So, where one uf several trustees dies the surviv- 
 ing trustee or trustees may maintain the suit.*^ 
 
 § 579 (509). Bondholders as plaintiffs. — In case the trustees 
 neglect or refuse to bring a foreclosure suit, or the trustee's 
 office becomes vacant, and there is no provision in the mortgage 
 forbidding such a course, one of the bondholders may bring a 
 suit on behalf of himself and all others who choose to join him, 
 to foreclose the mortgage for a default in the payment of the 
 principal or interest of his bonds. ^* Such neglect, refusal, or 
 
 26 Tillinghast v. Troy &c. R. 
 Co., 48 Hun 420, 1 N. Y. S. 243; 
 Robinson v. Alabama &c. Co., 48 
 Fed. 12. See also note in 16 L. R. 
 A. (N. S.) 1014, et seq. . 
 
 27 Alabama -fcc. Co. v. Robinson, 
 56 Fed. 690, affirming Robinson v. 
 Alabama &c. Co., 48 Fed. 12; 
 Gibbes v. Greenville &c. R. Co., 
 13 S. Car. 228. Or if no trustee 
 is left it is held that one or more 
 bondholders may foreclose for all. 
 Wheelwright v. St. Louis &e. Co., 
 56 Fed. 164; Galveston &c. R. Co. 
 V. Cowdrey, 11 Wall. (U. S.) 459, 
 20 L. ed. 199. 
 
 28 Hotel Co. V. Wade, 97 U. S. 
 13, 24 L. ed. 917; Chicago &c. R. 
 Co. V. Fosdick, 106 U. S. 47, 1 Sup. 
 Ct. 10, 27 L. ed. 47; Brooks v. Ver- 
 mont Cent. R. Co., 14 Blatchf. (U. 
 S.) 463, Fed. Cas. No. 1964; 
 Wheelwright v. St. Louis &c. Co., 
 56 Fed. 164; Mason v. York &c. R. 
 Co., 52 Maine 82; Seibert v. Min- 
 neapolis &c. R. Co., 52 Minn. 148, 
 53 N. W. 1134, 20 L. R. A. 535 and 
 note, 38 Am. St. 530, 57 Am. & 
 Eng. R. Cas. 208; March v. East- 
 ern R. Co., 40 N. H. 548, 566, 11 
 Am. Dec 732; Van Benthuysen v. 
 Central N. E. &c. R. Co., 63 Hun 
 
 627, 17 N. Y. S. 709; Common- 
 wealth V. Susquehanna &c. R, Co., 
 122 Pa. St. 306, 15 Atl. 448, 1 L. R. 
 A. 225; Chickerillg, In re, 56 Vt. 
 82. See also Young v. Haviland, 
 215 Mass. 120, 102 N. E. 338. In 
 Alexander v. Central R. Co., 3 
 Dill. (U. S.) 487, Fed. Cas. No. 
 166, the mortgage gave the trustee 
 a power of sale to be exercised at 
 the request of a majority of the 
 stockholders, upon default in the 
 payment of interest. It was held 
 that this remedy was merely cu- 
 mulative to the ordinary legal 
 remedies, and that upon refusal of 
 the trustee to bring a suit to fore- 
 close the mortgage for a default • 
 in the payment of interest, any 
 one of the bondholders could 
 maintain a suit in equity for that 
 purpose on behalf of himself and 
 others, making the trustee a party 
 defendant. Such a suit should us- 
 ually be brought by the bondhold- 
 er in behalf of himself and all 
 other bondholders, but an aver- 
 ment to this effect is unnecessary 
 when default has been made only 
 on the bonds held by the com- 
 plainant. McFadden v. Mays 
 Landing &c. R. Co., 49 N. J. Eq. 
 
849 
 
 fORECLOSUKE 
 
 §579 
 
 vacancy must be alleged and proved or the court will refuse to 
 grant relief. 2** Bondholders have also been permitted to main- 
 
 176, 22 Atl. 932. See also Tyler 
 V. Yreka &c. Co., 14 Cal. 212. In 
 a recent case the Supreme Court 
 of the United States held that a 
 foreclosure was not invalid be- 
 cause one of the trustees was a 
 director and the others stock- 
 holders in the company that pro- 
 cured the foreclosure ; because 
 one person was president of both 
 companies; because a majority of 
 the directors of one company 
 were directors of the other; be- 
 cause the president of one com- 
 pany owned most of the other 
 company's stock; or because the 
 attorneys who instituted the fore- 
 closure suit in the name of the 
 trustees were in other matters at- 
 torneys for or directors of the 
 company that procured it. Leav- 
 enworth County V. Chicago &c. R. 
 Co., 134 U. S. 688, 10 Sup. Ct. 708, 
 33 L. ed. 1064. The fact tliat ihe 
 bondholder purchased his bonds 
 at the request of the lessee of the 
 mortgaged railroad, and that the 
 suit was instituted as a means of 
 relieving it from the inconveni- 
 ence and loss attending the op- 
 eration of the road does not de- 
 prive the bondholder of his reme- 
 dy of foreclosure on default in 
 the payment of the bonds. Mc- 
 Fadden v. Mays Landing &c. R. 
 Co., 49 N. J. Eq. 176, 22 Atl. 932. 
 29 Hotel Co. V. Wade, 97 U. S. 
 13, 24 L. ed. 917; Clyde v. Rich- 
 mond &c. R. Co., SS Fed. 445; 
 Morgan v. Kansas Pac. R. Co., IS 
 Fed. 55. See also Virginia Pas- 
 senger &c. Co. V. Fisher, 104 Va. 
 
 121, SI S. E. 198. In Chicago &c. 
 R. Co. V. Fosdick, 106 U. S. 47, 
 1 Sup. Ct. 10, 27 L. ed. 47, where 
 the terms of the mortgage gave 
 the trustees the right, upon a de- 
 fault for six months in the pay- 
 ment of interest, and at the re- 
 quest of a majority of the bond- 
 holders, to take possession of the 
 railroad property and sell the 
 same, the court, by Mr. Justice 
 Matthews, said: "But inasmuch 
 as by the terms of the -first ar- 
 ticle the conveyance is declared 
 to be for the purpose of securing 
 the payment of the interest as 
 well as the principal of the bonds, 
 and by the fourth article the 
 mortgagor's right of possession 
 terminates upon a default in the 
 payment of interest as well as 
 principal on the bonds, we are of 
 opinion, independent of the provi- 
 sions of the other articles, that 
 the trustees, or on their failure 
 to do so, any bondholder, on non^ 
 payment of any instalment of in- 
 terest on any bond, migbt file a 
 bill for the enforcement of the 
 security by a foreclosure of the 
 mortgage and sale of the mort- 
 gaged property. This right be- 
 longs to each bondholder separ- 
 ately, and its exercise is "not de- 
 pendent upon the co-operation or 
 consent of any others, or of the 
 trustees. It is properly and 
 strictly enforceable by and in the 
 name of the latter, but if neces- 
 sary may be prosecuted without 
 and even against them." 
 
.§ 579 RAILROADS 850 
 
 tain the suit where the only trustee has gone beyond the jurisdicr- 
 tion of the court and it is shown that an emergency exists for 
 immediate action and that great loss will result to the complain- 
 :anits before he can be reached.*" Where a foreclosure suit has 
 been commenced by bondholders on behalf of themselves and all 
 others who desire to join them, the other bondholders may, upon 
 petition, be permitted to become complainants.*^ But it is not 
 necessary that tlicy should do so, as the interests of all the 
 bondholders are represented by the actual complainants, and by 
 the trustees, who must, in such a suit, be made parties defend- 
 ant.*2 The bondholder who brings the suit cannot, by so doing, 
 obtain an undue aidvantage over the other bondholders whose 
 rights in the security are the same as his own ; hfe is bound, in 
 such a case, to act for all and not merely for himself.''* In. an 
 action by a holder of bonds, suing on behalf of himself and 
 others, to foreclose a mortgage securing the bonds, for a default 
 ;in payment of interest thereon, a tender, unless of interest due on 
 :all the bonds, has been held insufficient to arrest the action.** 
 'Where a minority of the bondholders bring a foreclosure suit 
 ^i^aimst the wishes of the majority, the court may grant a stay of 
 proceedings upon application on condition that the bonds sued 
 
 30 Ettlinger v. Persian &c. Co., Co. v. Orr, 18 Wall. (U. S.) 471, 
 142 N. Y. 189, 36 N. E. lOSS, 40 21 L. ed. 810, where it was held 
 Am. St. 587. But mere non-resi- that a single bondholder could not 
 dence of the trustee has been held maintain the suit without notice 
 insufficient. Morgan v. Kansas to others who were named in the 
 Pac. R. Co., IS Fed. 55. mortgage. As he acts for all, he 
 
 31 Chickering, In re, 56 Vt. 82. should be reimbursed out of the 
 
 32 First Nat. Ins. Co. v. Salis- trust fund for expenses so in- 
 bury, 130 Mass. 303; Hackensack curred to the same extent as the 
 Water Co. v. DeKay, 36 N. J. Eq. trustee would have been entitled 
 548; Jones Mortgages, § 1385. to be reimbursed. Seibert v. Min- 
 
 33 Jackson v. Ludeling, 21 Wall, neapolis &c. R. Co., 52 Minn. 246, 
 (U. S.) 616, 22 L. ed. 492; New Or- 53 N. W. 1151. See Hobbs v. Mc- 
 leans Pac. R. v. Parker, 143 U. S. Lean, 117 U. S. 567, 6 Sup. Ct. 
 42, 58, 12 Sup. Ct. 364, 36 L. ed. 66, 870, 29 L. ed. 940. 
 
 6 Lewis' Am. R. & Corp. 43; Com- S4 Van Benthuysen v. Central, 
 
 monwealth v. Susquehanna &c. R. &c. R. Co., 63 Hun 627, 17 N. Y. 
 
 ■Co., 122 Pa. St. 306, IS Atl. 448, 1 S. 709. 
 L. R. A. 225. See also Railroad 
 
851 
 
 FORECLOSURE 
 
 579 
 
 on shall be paid logethcr with accrued costs.^^ It is competent 
 for the bondholders to agree among themselves upon what con- 
 ditions the right to sue may be exercised by an individual bond- 
 holder; and a provision in the mortgage that no proceedings in 
 law or equity shall be taken by any bondholder secured thereby, 
 to foreclose the equity of redemption independently of the trus^ 
 tee, until after the refusal of the trustee to comply with a requisi- 
 tion first made upon him by the holders of a certain percentage 
 of the bonds secured by such mortgage, is reasonable and valid. 
 Such provisions are to be deemed stricti juris, but are, neverthe- 
 less, to be reasonably construed in view of the nature of the 
 security, and the interest of the bondholders as a class. It is not 
 the purpose or effect of such a stipulation to divest the bond- 
 holders of their rights to judicial remedies, or to oust the courts; 
 of their jurisdiction, but it is merely the imposition of certain; 
 conditions upon *^hemselves in respect to the exercise of that 
 right. ^^ After suit is brought by individual bondholders to fore- 
 
 35 Tillinghast v. Troy &c. R. 
 Co., 48 Hun 420, 1 N. Y. S. 243. 
 
 36 Seibert v. Minneapolis &c. R. 
 Co.. 52 Minn. 148, S3 N. W. 1134, 
 20 L. R. A. 335, 38 Am. St. 530. In 
 this case the court said : "We are 
 unable to see why the bondhold- 
 ers, subject to reasonable limita- 
 tions, may not be bound by stip- 
 ulations in the mortgage of this 
 character, waiving a default, and 
 providing, subject to the condi- 
 tions named, for the foreclosure 
 by the trustee exclusively. The 
 interests of the bondholders as a 
 class and the nature of the se- 
 curity are to be considered. They 
 are agreements which the bond- 
 holders are at liberty to make, 
 and there is nothing illegal or 
 contrary to public policy in them. 
 Chicago &c. R. Co. v. Fosdick, 106 
 U. S. 47, 1 Sup. Ct. 10, 27 L. ed. 
 47, 7 Am. & Eng. R. Cas. 427, 450. 
 
 Each bondholder enters into con- 
 tract relations with each and all 
 of his co-bondholders. His right 
 to appropriate the security in sat- 
 isfaction of his bond in such law- 
 ful manner as he may choose is 
 modified not only by the express 
 provisions of the mortgage, but 
 by the peculiar nature of the se- 
 curity. Gates V. Boston &c. R. 
 Co., 53 Conn. 333; Shaw v. Rail- 
 road Co., 100 U. S. 605, 25 L. ed. 
 757; Canada &c. R. Co. v. Geb- 
 hard, 109 U. S. 527, 537, 3 Sup. 
 Ct. 363, 27 L. ed. 1020; Guilford v. 
 Minneapolis, &c. Railroad Co., 48 
 Minn. 560, 51 N. W. 658, 31 Am. 
 St. 694. The legislature would 
 have had an undoubted right to 
 haye incorporated in the enabling 
 statute authorizing the execution 
 of the mortgage and the issuance 
 of, the bonds secured thereby, a 
 provision requiring the mortgage. 
 
J 579 
 
 RAILROADS 
 
 852 
 
 'close a mortgage, the trustees may ask leave to become com- 
 plainants instead of defendants ; and, unless they have been neg- 
 ligent and unfaithful, or have interests adverse to those of the 
 ibondholiders, they will generally be allowed to do so. It has also 
 been held that as soon as they are admitted as complainants, 
 they have control of the suit, and may, upon leave of court, dis- 
 miss it, and pursue some other remedy.*'' A bondholder may 
 bring an action at law for unpaid bonds or interest, but any 
 judgment recovered in such an action will be subject to the prior 
 
 to contain similar stipulations. 
 Howell V. Western Railroad Co., 
 94 U. S. 463, 24 L. ed. 254. It is 
 clear, then, that it would be com- 
 petent for the bondholders them- 
 selves to agree to them. They 
 arc to be treated as stricti juris, 
 iibut nevertheless are to be reason- 
 ably construed in view of the na- 
 *ure of the mortgage, which is the 
 iconuiinion security for all the bond- 
 holders, and the purposes to be 
 subserved in making them. * * * 
 The trustee, as mortgagee, rep- 
 resenting the interests of all the 
 bondholders as beneficiaries, is 
 the proper party to institute fore- 
 closure proceedings, but if he un- 
 reasonably neglects or refuses to 
 discharge his duty in the prem- 
 ises, doubtless any bondholder 
 may bring an action to enforce 
 the security for the common 
 benefit." Chicago &c. R. Co. v. 
 Fosdick, 106 U. S. 47, 1 Sup. Ct. 
 10, 27 L. ed. 47. The court said: 
 ""Why may not the mortgage in 
 the common interest stipulate the 
 ■conditions under which this right 
 may be exercised by the bond- 
 Tiolders, and in order to avoid the 
 risk of rash or arbitrary proceed- 
 angs which might result in great 
 
 injury to the security, provide 
 that no such proceedings should 
 be instituted by an individual 
 bondholder except upon the re- 
 fusal of the trustee to obey the 
 requisition of a reasonable num- 
 ber of the bondholders. It is not 
 the intention or effect of such 
 conditions or stipulations to di- 
 vest the bondholders of their 
 right to judicial remedies, or to 
 oust the courts of their jurisdic- 
 tion; it is merely the imposition 
 of certain conditions upon them- 
 selves in respect to the exercise 
 of that right. And this distinc- 
 tion is well recognized by the 
 courts. Gasser v. Sun Fire Office, 
 42 Minn, 31S, 44 N. W. 2S2, and 
 cases ; Guilford v, Minneapolis 
 &c, R, Co,, 48 Minn. 560, 51 N. W. 
 658, 31 Am. St. 694. The provi- 
 sions of this mortgage are not, 
 we think, unreasonable or in- 
 valid." But see Guaranty Trust 
 &c, Co. V. Green Cove &c. R. Co., 
 139 U. S. 137, 11 Sup. Ct. 512, 35 
 L. ed, 116, for a provision held 
 invalid as attempting to oust the 
 jurisdiction of the court, 
 
 8T Richards v. Chesapeake &c. 
 R, Co., 1 Hughes (U. S.) 28, Fed. 
 Cas. No. 11771. 
 
853 
 
 FORECLOSURE 
 
 §580 
 
 lien of the mortgage.^^ Property of the company not covered 
 by the mortgage may, however, be sold on execution for such a 
 claim.39 When a railroad company mortgages its property to 
 the bondholders by name, all must join in or be made parties to 
 a suit to foreclose the mortgage, and no one can bring a suit on 
 behalf of himself and all others vifho will come in and share the 
 expenses of the suit.*" In such a case, all parties should be 
 before the court, because, if the mortgage should not prove an 
 adequate security, it is the interest of each mortgagee to diminish 
 the claim of every other mortgagee, and thereby add to his own 
 security.* "^ 
 
 § 580 (510). Pledges, assignees and others as plaintiffs. — One 
 
 who holds bonds as collateral may sue for a foreclosure in a 
 proper case by making his assignor a party. *2 Where the as- 
 
 38 Commonwealth v. Susque- 
 hanna &c. R. Co., 122 Pa. St. 306, 
 15 Atl. 448, 1 L. R. A. 225; Phila- 
 delphia &c. R. Co. V. Woelpper, 
 64 Pa. St. 366, 3 Am. Rep. 596. 
 Waiver of the right to foreclose 
 a mortgage, on default in the pay- 
 ment of interest coupons on the 
 bonds secured by it, does not af- 
 fect the right to an action at law 
 to recover on the coupons. Lyon 
 V. New York &c. R. Co., 14 Daly 
 (N. Y.) 489. 
 
 39 Carr v. LeFevre, 27 Pa. St. 
 413; Philadelphia &c. R. Co. v. 
 Johnson, 54 Pa. St. 127. See also 
 Scott V. Farmers' &c. Co., 69 Fed. 
 17. 
 
 40 Railroad Co. v. Orr, 18 Wall. 
 (U. S.) 471, 21 L. ed. 810. 
 
 41 In Railroad Co. v. Orr, 18 
 Wall. (U. S.) 471, 21 L. ed. 810, the 
 court says : "In so far as he suc- 
 ceeds in doing that [diminishing 
 the claims of his fellows], he 
 adds to his own security. Each 
 
 holder, therefore, should be pres- 
 ent, both that he may defend his 
 own claims and that he may at- 
 tack the other claims should there 
 be occasion for it. If, upon a fair 
 adjustment of the amount of the 
 debts, there should be a deficiency 
 in the security, real or apprehend- 
 ed, every one interested should 
 have notice in advance of the 
 time, place, and mode of sale, 
 that he may make timely arrange- 
 ments to secure a sale of the 
 property at its full value." 
 
 42 Morton v. New Orleans &c. 
 R. Co., 79 Ala. 590; Ackerson v. 
 Lodi Branch R. Co., 28 N. J. 
 Eq. 542. Where bonds were trans- 
 ferred as collateral to secure a 
 loan with the condition that the 
 pledgee, upon default in pay- 
 ment of the principal or inter- 
 est of the note thus secured by 
 the bonds, might sell the bonds 
 without notice, and might become 
 the purchaser thereof at any sale 
 
■;§580 
 
 RAILROADS 
 
 854 
 
 -signment is in writing it is unnecessary, in some jurisdictions, tO' 
 make the assignor a party, but in others it is held that the assign- 
 ment of the bonds or debt passes merely the equitable and not the 
 legal title to the security, and if there is any question as to the 
 ■assignor having any interest it is advisable to make him a 
 party.** But, in case the bonds have been pledged to secure a 
 debt of the corporation, it has been held that the holder will be 
 entitled to a decree for only the amount of the debt.*'* The bonds 
 are the principal and the mortgage the incident. It follows, 
 therefore, that the assignee of the bonds or debt may foreclose 
 even though he may have obtained no assignment of the mort- 
 gage, *s while the mere assignment of a mortgage, which contains 
 
 thus made, it' was held that the 
 pledgee, after having purchased 
 the bonds at a sale held in ac- 
 cordance with the terms of the 
 pledge, was entitled to a decree 
 for the full amount of the face 
 value of the bonds, with interest, 
 and not merely the price paid 
 therefor. 'Wade v. Chicago &c R. 
 Co., 149 U. S. 327, 13 Sup. Ct. 892, 
 35 L. ed. 755. 
 
 43 In Markel v. Evans, 47 Ind. 326, 
 it is held that the assignor of a note 
 secured by mortgage is neither a 
 necessary nor a proper party to a suit 
 to foreclose the mortgage. But see 
 Nichol v. Henry, 89 Ind. 54. 
 
 ■** Carpenter v. O'Dougherty, 67 
 Barb. (N. Y.) 397; Jesup v. City 
 Bank, 14 Wis. 331. Where bonds 
 are pledged by the corporation 
 to secure its own debt under 
 an agreement that the pledgee 
 may purchase them at his own 
 sale made upon default in pay- 
 ment of the notes secured, a pur- 
 chase by the pledgee in accord- 
 ance with the terms of the pledge 
 is valid as against everybody, un- 
 less fraud or breach of trust is 
 
 established. Third parties and 
 strangers have no right to ques- 
 tion the purchaser's title, but he 
 may foreclose for the full amount 
 of the bonds. Farmers' &c. Co. 
 V. Toledo &c. R. Co., 54 Fed. 759. 
 As a railroad is generally regard- 
 ed as a unit and cannot be sold in 
 parcels so as to destroy its value 
 and usefulness to the public, it 
 may be that the decisions holding 
 that the pledgee is entitled to a 
 decree merely for the amount of 
 his debt would not apply. The 
 entire road may have to be sold 
 and such a decree rendered as will 
 fix the rights of all parties or hold 
 the proceeds for future adjust- 
 ment. 
 
 *5 Carpenter v. Longan, 16 Wall. 
 (U. S.) 271, 21 L. ed. 313; Ober v. 
 Gallegher, 93 U. S. 199, 206, 23 L. 
 ed. 829; Converse v. Michigan &c. 
 Co., 45 Fed. 18; Parkhurst v. 
 Watertown &c. Co., 107 Ind. 594, 
 8 N. E. 635; Horn v. Bennett, 135 
 Ind. 158, 34 N. E. 321, 956, 24 L. R. 
 A. 800n; Jackson v. Blodgett, 5 
 Cow. (N. Y.) 202. 
 
855 FORECLOSUKE § 581 
 
 no promise to pay, without the debt, or bonds evidencing it, will 
 not entitle the assignee to maintain a suit to foreclose.'"' It may- 
 be difficult, however, to apply these rules to trust deeds or rail- 
 road mortgages made to a trustee. We suppose that in such 
 cases the assignee stands substantially in the position of his 
 assignor and is represented in the same manner, and to the same 
 extent, by the trustee. At all events the holder of bonds payable 
 to bearer is to all intents and purposes an original payee, to 
 whom the promise runs directly.*'^ It has been held that a mort- 
 gagee who has guaranteed payment of bonds and has taken up 
 some of the overdue coupons attached thereto, may foreclose his 
 mortgage subject to the rights of the holder of the bonds guar- 
 anteed ;*^ and that an assignee in bankruptcy*' or a receiver'" 
 of a corporation may maintain a suit to foreclose in a proper 
 case. 
 
 §581 (511). Defendants in foreclosure suit — Generally. — The 
 
 indorsers of railroad bonds secured by mortgage are not neces- 
 sary parties to a suit to foreclose the mortgage. Their interest 
 in the proper application of the property to the extinguishment 
 of the debt, however, it is said, gives them such an interest in 
 the suit as makes them proper parties, and they should, if pos- 
 sible, be admitted as such. But where the indorscr is a state 
 
 46Nagle V. Macy, 9 Cal. 426; 21 How. (U. S.) 575, 16 L. ed. 221; 
 Hamilton v. Lubukee, 51 111. 415, Rutten v. Union Pac. R. Co., 17 
 99 Am. Dec. 562; Hubbard v. Har- Fed. 480. The first case just cited 
 rison, 38 Ind. 323; Lunt v. Lunt, distinguishes Hayward v. An- 
 71 Maine ZIT ; Merritt v. Bartho- drews, 106 U. S. 672, 1 Sup. Ct. 544, 
 lick, 36 N. Y. 44. That an as- 27 L. ed. 271; and New York 
 signee of a mortgage giving an York Guaranty &c. Co. v. Mem- 
 option to declare whole debt due phis &c. Co., 107 U. S. 205, 2 Sup. 
 on default in payment of one in- Ct. 279, 27 L. ed. 484. 
 stalment or taxes may exercise 48 Burnett v. Hoffman, 40 Nebr. 
 such option, see Bartlett Estate 569, 58 N. W. 1134. 
 Co. V. Fairhaven Land Co., 49 49 Upton v. National Bank, 120 
 Wash. 58, 94 Pac. 900, 15 L. R. A. Mass. 153. 
 
 (N. S.) 590, 126 Am. St. 856, and so igighart v. Bierce, 36 111. 133; 
 
 other cases there cited in note. Robinson v. Williams, 22 N. Y. 
 
 47 White V. Vermont &c. R. Co., 380. 
 
§ 581 RAILROADS 856- 
 
 which has made no provision for the institution of a suit ag'ainst 
 itself, it will not be permitted to intervene in the suit, and thereby 
 oust the jurisdiction of the court. ^^ It has also been held that 
 a guarantor of the mortgage bonds of a railroad company, who 
 afterwards joins the company in borrowing money with which 
 to pay the interest coupons, is not thereby subrogated to the 
 rights of the mortgagee so as to be a necessary or even a proper 
 party to a subsequent suit to foreclose the mortgage, for there is 
 no subrogation until the entire debt is paid.^^ it is doubtful 
 whether the United States can be brought in as a party to a bill 
 to foreclose against a railroad in which it is interested,®^ but it 
 has been held that it may be bound by notice so that an effectual 
 decree may be readered foreclosing its interests in property not 
 held for government purposes."'* If the mortgagor has conveyed 
 the property his grantee should be made a party,^^ and it may be 
 said, in general, that no owner of an equity of redemption can be 
 deprived of his right to redeem unless he is made a party to the 
 foreclosure suit.''"' It is a general rule, subject, however, to ex- 
 ception, that strangers to the cause cannot be heard in it either 
 by motion or petition. Thus unsecured general creditors^'' and 
 
 51 Young V. Montgomery &c. R. 53 See Meier v. Kansas Pac. R. 
 Co., 2 Woods (U. S.) 606, Fed. Co., 4 Dill. (U. S.) 378, Fed. Cas. 
 Cas. No. 18166; Davis v. Gray, 16 No. 9394. 
 
 Wall. (U. S.) 203, 21 L. ed. 447. 54 Elliot v. Van Voorst, 3 Wall. 
 
 See also State v. Farmers Loan Jr. (U. S.) 299, Fed. Cas. No. 
 
 &c. Co., 81 Tex. 530, 17 S. W. 60. 4390; Jones Corp. Bonds and 
 
 In deciding the first case Judge Mort. § 400. 
 
 Woods said: "If the state has 55 Berlack v. Halle, 22 Fla. 236, 
 
 paid any interest on these bonds, 1 Am. St. 185, and numerous au- 
 
 and is thereby entitled to any thorities cited in note; Terrell v. 
 
 part of the proceeds from the Allison, 21 Wall. (U. S.) 289, 22 
 
 mortgaged property, she can pro- L. ed. 634. See also Little Rock 
 
 pound her claim before the mas- Trust Co. v. Southern R. Co., 195 
 
 ter, and it will be allowed." Mo. 669, 93 S. W. 944. 
 
 52 Columbia &c. Co. v. Ken- 56 Gaskell v. Viquesney, 122 
 tucky Un. R. Co., 60 Fed. 794. But Ind. 244, 23 N. E. 791, 17 Am. St. 
 see cases cited in note 51, supra, 364, and note; Beekman v. Hud- 
 and Searles v. Jacksonville &c. son, &c. R. Co., 35 Fed. 3, 3 Thomp. 
 R, Co., 2 Woods (U. S.) 621, Fed. Corp. (2nd. ed.), §§2645-2647. 
 Cas. No. 12586. 57 Bronson v. Railroad Co.. 2" 
 
857 
 
 FORECLOSURE 
 
 §581 
 
 individual stockholders^® are not generally allowed to become 
 parties to a foreclosure suit against the corporation. So, it has 
 been held that the state has no right to intervene in a suit to fore- 
 close a mortgage for the benefit of innocent bondholders for the 
 purpose of having the mortgage declared invalid as in violation 
 of the state law.^'' And prior mortgagees are not necessary par- 
 ties unless the bill seeks the appointment of a receiver, or a sale 
 of the entire property free from all liens or some other relief by 
 which their interests will be affected.®" Stockholders, however, 
 
 Black (U. S.) 524, 17 L. ed. 259; 
 Stout V. Lye, 103 U. S. 66, 26 L. 
 ed. 428; Farmers &c. Co. v. Chi- 
 cago &c. R. Co., 68 Fed. 412; Her- 
 ring V. New York &c. R. Co., 105 
 N. Y. 340, 12 N. E. 763; Thomp- 
 son V. Huron Lumber Co., 4 
 Wash. 600, 30 Pac. 741. But gen- 
 eral creditors have often been al- 
 lowed to intervene in a proper 
 case. See Hoffe v. Hoffe, 104 Cal. 
 94, 36 Pac. 389, 37 Pac. 894; Hol- 
 lins V. Brierfield &c. Co., 150 U. 
 S. 371, 14 Sup. Ct. 127, 37 L. ed. 
 1113; Louisville Trust Co. v. 
 Louisville &c. R. Co., 174 U. S. 
 674, 19 Sup. Ct. 674, 43 L. ed. 1130; 
 Franklin Nat. Bank v. Whitehead, 
 149 Ind. 560, 49 N. E. 592, 39 L. R. A. 
 725, 63 Am. St. 302. The general 
 creditors of a railroad company can- 
 not complain that a trustee in a 
 mortgage executed to secure its 
 bonds improperly released errors 
 in a decree adjudicating that the 
 rights of such company had 
 passed to another corporation, un- 
 der foreclosure proceedings, as 
 the trustee represented the mort- 
 gage bondholders, and violated no 
 duty to the company by .giving 
 the release. Loeb v. Chur, S3 Hun 
 637, 6 N. Y. S. 296. 
 
 08 Chicago &c. R. Co. v. How- 
 ard, 7 Wall (U. S.) 392, 19 L. ed. 
 117; Foster v. Mansfaeld &c. R. 
 Co., 36 Fed. 627; Central Trust 
 Co. V. Peoria &c. R. Co., 104 Fed. 
 418; Alexander v. Searcy, 81 Ga. 
 536, 8 S. E. 630, 12 Am. St. 337, 36 
 Am. & Eng. R. Cas. 239. 
 
 59 Farmers &c. Co. v. Chicago 
 &c. R. Co., 68 Fed. 412. See also 
 State V. Farmers' Loan &c. Co., 
 81 Tex. 530, 17 S. W. 60. The 
 trustee represents the bondhold- 
 ers and they are bound by a de- 
 cree against him, so that it is 
 generally held that the bondnold- 
 ers are not necessary parties de- 
 fendant. Alton Water Co. v. Brown, 
 166 Fed. 840; Baltimore v. United 
 R. &c. Co., 108' Md. 64, 69 Atl. 436. 
 But in New Jersey a bondholder 
 has been held entitled to be made 
 a party defendant. Ring v. New 
 Auditorium Pier Co., 77 N. J. Eq. 
 422, 77 Atl. 1054. 
 
 eo Woodworth v. Blair, 112 U. S. 
 8, 5 Sup. Ct. 6, 28 L. ed. 615 ;. Hagan 
 V. Walker, 14 How. (U. S.) 29, 37, 
 14 L. ed. 312; Wabash &c. R. Co. v. 
 Central Trust Co., 22 Fed. 138; Mc- 
 Henry, Ex parte, 9 Abb. (N. Y.) 
 N. Cas. 256; Miltenberger v. Logan- 
 sport R. Co., 106 U. S. 286, 1 Sup. 
 
§582 
 
 RAILROADS 
 
 858 
 
 may be admitted as parties, where the directors refuse^' to defend 
 the corporation against unfounded and illegal claims, upon the 
 same principle that bondholders are permitted to act when the 
 trustees fail to do so.«- And an assignee in bankruptcy"^ or a 
 receiver of the mortgagor is generally a necessary party."* 
 
 § 582 (512). When other lien-holders should be made de- 
 fendants. — Where a sale of the road is sought upon foreclosure 
 of a junior mortgage, and it is desirable to quiet all outstanding 
 titles, or to ascertain the validity or amount of prior liens about 
 which there is substantial doubt, that the purchaser may know 
 the value of the equity which he buys, the prior mortgagees 
 should be joined as parties.*"' A failure to join the prior mort- 
 
 Ct. 140, 27 L. ed. 117. In the first 
 case above cited the prior lienholder 
 was denied the right to intervene, and 
 in the second, prior mortgagees who 
 had been made parties were allowed 
 their costs and the bill dismissed, as 
 against them, tipon the ground that 
 they should not be put to the expense 
 of litigation. There is sharp conflict 
 among the authorities as to whether 
 the prior incumbrancers are even 
 proper parties so as to be bound by 
 the decree. It seems desirable that all 
 interests should be determined and 
 adjusted in one suit,, if possible, but 
 the weight of authority is probably to 
 the effect that in ordinary cases they 
 are not proper parties. The conflict- 
 ing decisions are collected in notes to 
 Woods V. Pittsburgh &c. R. Co., 99 
 Pa. St. 101, 3 Am. & Eng. R. Cas. 
 525, 531, and Strobe v. Downer, 13 
 Wis. 10', 80 Am. Dec. 709, 714. See 
 also post, § 582. The mortgagor can 
 not complain, however, when the 
 court adjudges that the junior mort- 
 gage is prior as to part of the prop- 
 erty and the prior mortgagees, who 
 were made parties, do not appeal. 
 
 Seibert v. Minneapolis &c. R. Co., 58 
 Minn. 39, 59 N. W. 822. 
 
 '^1 A demand upon the directors to 
 protect the interests of the corpora- 
 tion and a neglect or refusal by 
 them to do so must usually be shown 
 before the stockholders will be ad- 
 mitted to defend a foreclosure suit. 
 Dimpfell V. Ohio &c. R. Co., 110 U. 
 S. 209, 3 Sup. Ct. 573, 28 L. ed. 121 ; 
 Alexander v. Searcy, 81 Ga. 536, 8 
 S. E. 630, 12 Am. St. 337. 
 
 62 Bronson v. La. Crosse &c. R. 
 Co., 2 Wall. (U. S.) 283, 17 L. ed. 
 725; Forbes v. Memphis &c. R. Co., 
 2 Woods (U. S.) 323, Fed. Cas. No. 
 4926 ; Guarantee Trust &c. Co. v. Du- 
 luth, &c. R. Co., 70 Fed. 803. 
 
 «•■! Griffin v. Hodshire, 119 Ind. 235, 
 21 N. E. 741 ; Lenihan v. Hamann, 
 55 N. Y. 652 ; Bard v. Poole, 12 N. Y. 
 495. 
 
 «■* Raynor v. Selmes, 52 N. Y. 579. 
 But see Herring v. New York &c. 
 R. Co., 105 N. Y. 340, 12 N. E. 763. 
 
 « 5 Richards v. Chesapeake &c. R. 
 Co., 1 Hughes (U. S.) 28. Fed. Cas. 
 No. 11771; Hagan v. Walker, 14 
 How. (U. S.) 29, 14 L. ed. 312; Jer- 
 
859 
 
 FORECLOSURE 
 
 §582 
 
 gagees as parties leaves them, generally speaking, with the same 
 rights in the property that they had before the foreclosure.^^ 
 Where the extent of the prior lien-holder's claim is definitely 
 ascertained, and a foreclosure is sought subject to prior liens, he 
 is not a necessary, nor as a rule, a proper party to the bill."'' It 
 is said that "the remedy of a junior incumbrancer, both before 
 and after foreclosure, is to redeem the senior mortgage. With- 
 out the consent of the prior mortgagee, a junior lienor could not 
 enforce a sale of more than the mortgagor's equity of redemp- 
 tion. If he wished a sale free from the prior lien, and the prior 
 lienor will not consent, the decree should be that he redeem, and 
 then foreclose for the enforcement of his own lien, and that he 
 had redeemed.®^ A judicial foreclosure sale is not void because 
 
 ome V.' McCarter, 94 U. S. 734, 24 L. 
 ed. 136; Dawson v. Danbury Bank, 15 
 Mich. 489. It is said, however, to be 
 "well settled that in a foreclosure 
 proceeding the complaint can not 
 make a person who claims adversely 
 to both the mortgagor and mortgagee 
 a party, and litigate and settle his 
 rights in that case." Dial v. Reynolds, 
 96 U. S. 340, 24 L. ed. 644. See also 
 "Trial of Adverse Title in Suit to 
 Foreclose a Mortgage," 21 Cent. L. J. 
 223, and note to Strobe v. Downer, 13 
 Wis. 10, 80 Am. Dec. 709, 714. But 
 compare the well considered cases 
 of Hefner v. Northwestern &c. 
 Co., 123 U. S. 747, 8 Sup. Ct. 
 337, 31 L. ed. 309; Mendenhall v. 
 Hall, 134 U. S. SS9, 10 Sup. Ct. 616, 
 33 L. ed. 1012; Cohen v. Solomon, 
 66 Fed. 411; and in support of the 
 well-settled rule in Indiana that an 
 adverse claimant may be made a 
 party and a conclusive adjudication 
 rendered against him, see O'Brien v. 
 Moffitt, 133 Ind. 660, 33 N. E. 616, 
 36 Am. St. 566; Craighead v. Dahon, 
 IDS Ind. 72, 4 N. F. 425. See gener- 
 ally; Corcoran v. Chesapeake &c. 
 
 Co., 94 U. S. 741, 24 L. ed. 190; 
 Farmers' Loan &c. Co. v. Green Bay 
 &c. Co., 6 Fed. 100; Farmers- Loan 
 &c. Co. V. San Diego &c. Co., 40 
 Fed. 105; Converse v. Michigan &c. 
 Co., 45 Fed. 18. 
 
 oeWahash &c. R. Co. v. Central 
 Trust Co., 22 Fed. 138; Pittsburgh 
 &c. R, Co. V. Marshall, 85 Pa. St. 
 187. A junior lienholder can not 
 compel the forclosure of a mortgage 
 constituting a prior lien upon the 
 road. American &c'. Co. v. East &c. 
 R. Co., 37 Fed. 242; Seibert v. Min- 
 neapolis &c. R. Co., 52 Minn. 246, 
 53 N. W. 1151. Where prior lien- 
 holder have unnecessarily been made 
 parties, the court may, of its own 
 motion, dismiss the suit as to them, 
 for they ought not to be put to the 
 expense of making a defense where 
 the amount and priority of their 
 liens are undisputed. Wabash &c. R. 
 Co. V. Central Trust Co., 22 Fed. 138. 
 
 67 Wabash &c. R. Co. v. Central 
 Trust. Co., 22 Fed. 138; McMurtry 
 v. Montgomery &c. Co., 86 Ky. 206, 
 5 S. W. 570, 
 
 'IS Woodworth v. Blair, 112 U. S. 8, 
 
§582 
 
 RAILROADS 
 
 860 
 
 one interested in the equity of redemption, as a junior mortgagee, 
 was not a party."*" Where it is sought to cut off the right of a 
 subsequent mortgagee, judgment creditor, or other lien-holder, to 
 redeem, he must be made a party to the bill to foreclose.'^'' And, 
 in general, a junior lien-holder is entitled, on application to be 
 admitted as a party to contest the amount and validity of the 
 claims preferred against the corporation.''^ But' he is not a necesr 
 sary party to a foreclosure against the mortgagor,''^ although, as 
 we have said, he may be a proper party in any case and his 
 equity of redemption cannot be cut off unless he is made a party. 
 The original complainant in a foreclosure suit need not be made 
 a party to an intervening petition, where it appears that he no 
 longer has any interest in the fund in controversy, and no relief 
 is asked against him.''^ The question whether or not a lien is 
 
 28 L. ed. 61S ; McKernan v. Neff, 
 43 Ind. 503 ; Spurgin v. Adamson, 
 62 Iowa 661, 18 N. W. 293; Jones 
 Mort, §§ 1394, 1396. 
 
 09Compton v. Jesup, 68 Fed. 263, 
 311, citing Jones Mort. §1395; Mar- 
 tin V. Noble, 29 Ind. 216; Trayser v. 
 Trustees, 39 Ind. 556; Emigrant &c. 
 Bank v. Goldman, 75 N. Y. 127; 
 Frische v. Kramer, 16 Ohio . 125 ; 
 Fulghum V. Cotton, 3 Tenn. Ch. 296 ; 
 Rose V. Page, 2 Sim. 471. 
 
 T' Searles v. Jacksonville &c. R. 
 Co.. 2 Woods (U. S.) 621, Fed. Cas. 
 No. 12586; Beekmari v. Hudson &c. 
 R. Co., 35 Fed. 3; Memphis &c. R. 
 Co. V. State, 37 Ark. 632 ; Youngman 
 V. Elmira &c. R. Co., 65 Pa. St. 278; 
 Hosford V. Johnson, 74 Ind. 479. See 
 also 3 Thomp. Corp. (2d ed.), 
 §§2646, 2647. But, otherwise, he is 
 not, of course, a necessary party. 
 Brooks V. Vermont Cent. R. Co., 14 
 Blatch. (U. S.) 463, Fed. Cas. No. 
 1964. See generally Jones v. 'Wil- 
 liams, 155 N. Car. 179, 71 S. E. 222, 
 36 L. R. A. (N. S.) 426, and elabor- 
 
 ate note citing authorities by states 
 as to junior incumbrancers as parties 
 and also as to their assignees. 
 
 'i'l Farmers' Loan &c. Co. v. Texas 
 &c. R. Co., 32 Fed. 359. 'Where a 
 railroad extends into two states, in 
 each of which the company is a do- 
 mestic corporation, and the trustee 
 in a mortgage on the whole road 
 first brings a suit in one state to 
 foreclose, and afterwards an ancil- 
 lary suit in the other state for the 
 same purpose, it has been held that 
 he can not prevent a lien creditor 
 of the company, who has not filed 
 his claim in the first suit from in- 
 tervening in the second to establish 
 his lien. Fidelity Ins. &c. Co. v. 
 Shenandoah Val. R. Co., 32 W. 'Va. 
 244, 9 S. E. 180. 
 
 T2 Stockwell V. State, 101 Ind. 1 ; 
 Pattison v. Shaw, 6 Ind. 377; "Wil- 
 liams V. Kerr, 113 N. Car. 306, 18 S 
 E. 501. 
 
 T-'i Central Trust Co. v. Sheffield &c. 
 R. Co., 44 Fed. 526. 
 
861 
 
 FORECLOSURE 
 
 §583 
 
 prior to the mortgage sought to be foreclosed may properly be 
 tried in a foreclosure suit if the bill contains proper averments 
 that the defendant's title is suoordinate to the title of the mort- 
 gagee J"* A mortgagee should always be made a party where 
 any doubt is entertained as to the priority of his lien; for a decree 
 declaring a mortgage to be a first lien upon the property, and 
 franchises of a railroad company gives it no precedence over the 
 prior lien of a party who had no notice of the proceedings, and 
 was not a party or privy to the decree. ''^ The title usually 
 stands in the order in which conveyances were made, and cannot 
 be changed by any proceedings to which the holders of the title 
 were not parties.''^ 
 
 §583 (513). Defenses to foreclosure suit. — As a general rule 
 no defenses are allowed to a suit to foreclose in favor of bona 
 fide purchasers of railroad mortgage bonds that would not be 
 allowed in an action at law upon negotiable promissory notes.'''' 
 
 T4 Corcoran v. Chesapeake &c. 
 Co., 94 U. S. 741, 24 L. ed. 190; 
 Harland v. Bankers' &c. Tel. Co., 33 
 Fed. .199; Converse v. Michigan, &c. 
 Co., 45 Fed. 18; Lewis v. Smith, 9 
 N. Y. 502, 514, 515; Jones Corp. 
 Bonds and Mort. §407. 
 
 1 5 Pittsburgh &c. R. Co. v. Mar- 
 shall, 85 Pa. St. 187; Jones Corp. 
 Bonds and Mort. §404. A decree 
 rendered without proper notice to 
 parties to be affected thereby is void. 
 Central Trust Co. v. Florida R. &c. 
 Co., 43 Fed. 751. 
 
 70 Jerome v. McCarter, 94 U. S. 
 734, 24 L. ed. 136. See Howard v. 
 Milwaukee &c. R. Co., 7 Biss. (U. S.) 
 73, Fed. Cas. No. 6761. But if one 
 claiming to hold a prior lien is prop- 
 erly made a party to the bill, and 
 appears, but fails to procure a dis- 
 missal as to himself, he will be bound 
 by a decree and sale thereunder, and 
 can not afterward assert any rights 
 not saved to him by the decree. 
 
 Woods V. Pittsburgh &c. R. Co., 99 
 Pa. St. 101. Compare, however, 
 Washington Trust Co.' v. Norwich 
 &c. Trac. Co., 89 Conn. 59, 92 Atl. 
 880. 
 
 T7 Kenicott v. Supervisors, 16 Wall. 
 (U. S.) 452, 21 L. ed. 319; Carpen- 
 ter V. Longan, 16 WaU. (U. S.) 271, 
 21 L. ed. 314; Swett v. Stark, 31 Fed. 
 858. See also Guaranty Trust Co. v. 
 Green Cove Springs &c. R. Co.j 139 
 U. S. 137, 11 Sup. Ct. 512, 35 L. ed. 
 116. But see where they are not bona 
 fide purchasers, Chicago &c. R. Co. 
 V. Loewenthal, 93 111. 433 ; Farmers' 
 Loan &c. Co. v. San Diego &c. Co., 
 45 Fed. 518; Ryan v. Anglesea R. 
 Co. (N, J.), 12 Atl. 539; Atwood v. 
 Shenandoah &c. R. Co., 85 Va. 966, 
 9 S. E. 748. But see when the bonds 
 are in the hands of the original 
 holders. Guarantee Title &c. Co. v. 
 Dilworth Coal Co., 235 Pa. St. 594. "4 
 Atl. 516. 
 
§ 583 RAILROADS 
 
 862 
 
 The acts of the company subsequent to the execution of the 
 mortgage cannot be set up as a defense to a suit by the mort- 
 gagee to foreclose his lienj^ and neither the company nor a pur- 
 chaser who claims title by conveyance from it can deny the 
 validity of its • incorporation in a suit to foreclose a mortgage 
 which it has executed.'^" The same principle applies where the 
 mortgage is given by a consolidated company.*" It is no defense 
 that a construction company had agreed to pay the interest in 
 default,8i nor that the road has been leased,*^ and although it 
 .may be a good defense to show that the mortgagee, who holds 
 all the bonds is the lessee and has been paid by way of rental all 
 the interest alleged to be in default.** It has also been held that 
 neither a misapplication of its earnings by the mortgagor com- 
 pany in, order to cause a default, nor the fact that the largest 
 bondholder was also a stockholder and had bought the bonds, 
 after default in payment of interest, for the purpose of causing 
 a foreclosure and purchasing at the sale, constituted a good de- 
 fense either in favor of the mortgagor or another stockholder.** 
 Where, however a railroad company, executing a mortgage upon 
 its road as contemplated, has no legal title to the right of way, 
 but merely holds contracts for a small portion thereof, to be con- 
 veyed on conditions which it never performs or has agreed to 
 perform, and a new company is organized, which builds the road 
 
 7'8Bronson v. La Crosse &c. R. McCarter, 94 U. S. 734, 24 L. ed. 136; 
 
 Co., 2 Wall. (U. S.) 283, 17 L. ed. Jones Corp. Bonds and Mort. §415. 
 
 725 ; Hale v. Nashua &c. R. Co., 60 so Coe v. New Jersey &c. R. Co., 
 
 N. H. 333. 31 N. J. Eq. lOS. 
 
 ■79 Beekman v. Hudson River &c. si Foster v. Mansfield &c. R. Co., 
 
 R. Co.. 35 Fed. 3. See also William- 36 Fed. 627. 
 
 son V. Kokomo &c. Assn., 89 Ind. 82 Hale v. Nashua &c. R. Co., 60 N. 
 
 389; Farmers Loan &c. Co. v. To- H. 333. 
 
 ledo &c. R. Co., 67 Fed. 49; Thomas S3 Chamberlain v. Connecticut &c. 
 
 V. Citizens' R. Co., 104 111. 462 ; Gun- R. Co., 54 Conn. 472. 
 
 derson v. Illinois Trust &c., 199 111. 84 Farmers' Loan &c. Co. v. New 
 
 422, 65 N. E. 326. A junior mort- York &c. R. Co., 78 Hun 213, 28 
 
 gagee can not deny the validity of a N. Y. S. 933. See also Coe v. East 
 
 prior mortgage to which his mortgage &c. R. Co., 52 Fed. 531. And see 
 
 is expressly made subject. Bronson further for who have been held to be 
 
 V. La Crosse &c. R. Co., 2 Wall. (U. insufficient defenses. 3 Thomp. Corp. 
 
 S.) 283, 17 L. ed. 725; Jerome v. (2d ed.), §2662. 
 
863 ' FORECLOSURE § 584 
 
 and acquires the legal title to most of the right of way and is 
 equitably entitled to the remainder, it seems that no decree of 
 foreclosure can be sustained under the mortgage, as against the 
 new company, for the sale of its property. The mortgage credi- 
 tors of the original company could have no rights superior to the 
 company itself, and it had no such interest or title in the, road 
 as can be subjected to sale under the mortgage.^" 
 
 § 584 (514). Effect of provisions giving trustees the right to 
 take possession and sell. — It is usual, in mortgages of railroad 
 property, to confur upon the mortgage trustee a right of posses- 
 sion and sale in case of a continuing default in the payment of the 
 mortgage debt. In some instances this power can only be exer- 
 cised by the trustees at the request of a majority of the bond- 
 holders, and it is generally provided that it shall only be exer- 
 cised after the default in payment has continued for a specified 
 time. Provisions of this character in restraint of the exercise of 
 a power of summary foreclosure, to be effective, must be strictly 
 complied with. Thus, where it is provided that a power of sale 
 may be exercised by the mortgage trustees in case of a continued 
 default for sixty days after notice to the mortgagor of an inten- 
 tion to sell, but not until the sale has been previously adver- 
 tised for sixty days, the sale must be advertised for sixty days 
 from the close of the sixty days' notice to the corporation of an 
 intention to sell.**® It was also held in a comparatively recent 
 case that a power of sale given to the mortgagee can be executed 
 only by him, unless the debt has been assigned so as to pass the 
 legal title, and that the assignee of the mortgage, without the 
 debt, cannot execute the power of sale.^'^ Where the trustees 
 
 85 Chicago &c. R. Co. v. Loewen- 111. 189; Foster v. Boston, 133 Mass. 
 thai, 93 111. 433. See generally for 143; Schanewerk v. Hoberecht, 117 
 examples of defense held sufficient, 3 Mo. 22, 22 S. W. 949, 38 Am. St. 631. 
 Thomp. Corp. (2d ed.), §§2660, 2661. So a demand may be necessary un- 
 
 86 Macon &c. R. Co. v. Georgia R. der the provisions of the mortgage or 
 Co., 63 Ga. 103 ; Gibbons v. McDoug- trust deed. Las Vegas R. &c. Co. v. 
 all, 26 Grant's Ch. (Ont.) 214. To Trust Co., IS N. Mex. 634, 110 Pac. 
 same effect, see generally, Jones Corp. 856. 
 
 Bonds and Mort. §384; Shillaber v. 87 Sanford y. Kane, 133 111. 199, 24 
 
 Robinson, 97 U. S. 68, 24 L. ed. 967 ; N. E. 414, 8 L. R. A. 724, 23 Am. 
 Equitable Trust Co. v. Fisher, 106 St. 602. See also Dameron v. Esk- 
 
§585 
 
 RAILROADS 
 
 864 
 
 under a mortgage stipulating for possession of the mortgaged 
 property are denied possession upon the happening of a default, 
 it has been held that they may maintain ejectment to recover the 
 mortgaged real estate.** But since the corporate property 
 usually includes personal property and choses in action for which 
 ejectment will not lie, and since a judgment against an insolvent 
 mortgagor for damages for the non-delivery of the property 
 would be valueless, the remedy for the recovery of possession 
 by an action at law is usually inadequate.*^ Equity will, in such 
 a case, order the specific performance of a stipulation in a rail- 
 road mortgage authorizing the trustees to take possession.^" The 
 trustees, it has been held, may enforce their right to possession 
 upon default even against a contractor engaged in constructing 
 the road under t-. contract by which he is entitled to the pos- 
 session of the road until his contract is completed.*^ 
 
 § 585 (514). Rights and duties of trustees as to possession 
 and sale. — A power to take possession, if exercised at all, must 
 
 ridge, 104 N. Car. 621, 10 S. E. 700. 
 But where the trustee was a corpora- 
 tion it was held that it could take 
 possession on default by an attorney 
 appointed by it. Pilcher v. Sioux 
 City &c. Co.. 12 S. Dak. 52, 80 N. W. 
 151 ; Jones v. Williams, 155 N. Car. 
 179, 71 S. E. 222, 36 L. R. A. (N. S.) 
 426. It has also been held that a 
 sale and conveyance under a power, 
 although defectively executed, passes 
 the legal title to the purchaser, sub- 
 jec;-, however, to the right of redemp- 
 tion. Lanier v. Mcintosh, 117 Mo. 
 508, 23 S. W. 787, 38 Am. St. 676. 
 See notes jn 31 Am. St. 328, 335, and 
 19 Ara. St. 263, 266, 297. 
 
 88 Rice V. St. Paul &c. R. Co., 24 
 Minn. ■ 464 ; Seibert v. Minneapolis 
 &c. R. Co., 52 Minn. 246, 53 N. W. 
 1151. 
 
 Si* Dow v. Memphis &c. R. Co., 20 
 Fed. 260; North Carolina &c. R. Co. 
 V. Drew, 3 Woods (U. S.) 691, 713; 
 
 First Nat. Ins. Co. v. Salisbury, 130 
 Mass. 303; Jones Corp. Bonds and 
 Mort. §343. 
 
 »" Dow V. Memphis &c. R. Co., 20 
 Fed. 260 ; McLane v. Placerville &c. 
 R. Co., 66 Cal. 606. 6 Pac. 748; 
 Sacramento &c. R. Co. v. Superior 
 Ct., 55 Cal. 453 (ordered over the 
 objection of a majority of the bond- 
 holders) ; Shepley v. Atlantic &c. R. 
 Co., 55 Maine 395; Shaw v. Nor- 
 folk County R. Co,, 5 Gray (Mass.) 
 162. The jurisdiction of the court 
 is based upon its general equity juris- 
 diction to compel persons to keep and 
 perform their lawful contracts, and 
 not upon any rule of law authorizing 
 a foreclosure of mortgage liens. 
 Shepley v. Atlantic &c. R. Co., 55 
 Maine 395, per Walton, J. 
 
 91 Allen V. Dallas &c. R. Co., 3 
 Woods (U. S.) 316, Fed. Cas. No 
 221. 
 
865 FX)EECLOSURE § 586 
 
 generally be exercised by the trustees as to the entire property. 
 They cannot take possession of a part of the property which has 
 been seized on execution to satisfy the claim of a judgment cred- 
 itor, while leaving the other mortgaged property in the hands 
 of the corporation. "2. The statutes of several of the states pre- 
 scribe the duties of mortgage trustees as to taking possession 
 of the mortgaged property of a railroad upon default in payment 
 of its bonds or coupons, and operating it for the benefit of the 
 parties interested. Where the statute provides for the rights and 
 duties of trustees, it is unnecessary to provide therefor in each 
 mortgage executed under the laws of the state, since those laws 
 enter into and become a part of the mortgage.^* But in the ab- 
 sence of such a statute the trustees have, in general, only those 
 rights and powers conferred upon them bj'^ agreement of the 
 parties.^* 
 
 §586 (514). Right to foreclose still exists. — The remedies by 
 action at law to recover the debt, or by suit in equity to foreclose 
 the mortgage lien, are not taken away by a grant to the trustees 
 of a power of entry and salc^^^ A suit at law by bondholders 
 
 92 Coe V. Peacock, 14 Ohio St. 187. 434 (liable for loss of freight). 
 
 93 Mercantile Trust Co. v. Portland They are said to represent both 
 &c. R. Co., 10 Fed, 604. the bondholders and the corpora- 
 
 94 McLane v. Placerville &c. R. Co., tion, Ashuelot R. Co. v. Elliott, 57 
 66 Cat. 606, 6 Pac. 748; Macon &c. N. H. 397, aftd owe an active duty 
 R. Co. V. Georgia R. Co., 63' Ga. 103 ; to the former and to each and all 
 Shepley v. Atlantic &c. R. Co., 55 of them to preserve the property 
 Maine 395. But see as to their right and take care of their interests, 
 to sue to protect the trust, Mercantile Commonwealth v. Susquehanna &c. R. 
 T. Co. V. Texas &c. R. Co., 51 Fed. Co., 122 Pa. St. 306, IS Atl. 448, 320, 
 529; Clapp v. Spokane^ 53 Fed. SIS. 1 L. R. A. 225; HoMister v. Stewart, 
 As to the duties and liabilities of 111 N. Y. 644, 19 N. E. 782; Merrill 
 trustees in possession, see Jones v. v. Farmers' Loan &c. Co., 24 Hun 
 Seligman, 81 N. Y. 190 (duty to (N. Y.) 297; Sturges v. Knapp, 31 
 fence) ; Daniels v. Hart, 118 Mass. Vt. 1. 
 
 543 ; Sprague v. Smith. 29 Vt. 421, 95 Mercantile Trust Co. v. Missouri 
 70 Am. Dec. 424, and Rogers v. &o. R. Co., 36 Fed. 221; William- 
 Wheeler, 43 N. Y. 598 (liable in son v. New Albany &c, R. Co., 1 Biss. 
 damages for injuries); Barter v. (U. S.) 198, Fed. Cas. No. 177S3; 
 Wheeler, 49 N. H. 9, 6 Am. Rep. Martin v. Ward, 60 Ark. 510, 30 S. 
 
 28 — Ell. Railkoads I 
 
§ 586 
 
 RAILROADS 
 
 866 
 
 maiy be unaintained for non-payment of the principal or. interest, 
 bonds secured by mortgage,^^ jf ^hg mortgage contains no agree- 
 nrent on the part of the mortgagee not to sue.®'^ Indeed, it is held 
 that a provision m a deed of trust to secure bonds of a railroad 
 cornpany, which prohibits foreclosure and judicial sale, by pro- 
 viding that the mode of sale by the trustee set forth in the deed 
 shall be exclusive of all others, is of no effect.^* Stipulations as 
 to,ith€; time which must elapse between the happening of a de- 
 fault and an entry or a sale by the trustees under a power do not 
 limit the right to bring an action to foreclose the mortgage, but 
 such an action may be brought immediately upon default.®* So, 
 it, has been held that they may sue to foreclose the mortgage to 
 recover interest due to a single bondholder, although the mort- 
 gage prohibits them from taking any steps to collect the principal 
 of the bonds without the consent of a majority of the bond- 
 holders. ^ And, although the trustee is authorized at the request 
 of a certain proportion of the bondholders to take possession of 
 the mortgaged property and to operate or sell the same after 
 
 W. 1041; Utermehle v. McGreal, 1 
 App. D. C. 359; Eaton &c. R. Co. v. 
 Hunt. 20 Ind. 457 ; Stewart v. Bardin, 
 113 N. Car. 277, 18 S. E. 320; Credit 
 Foncier &c. y. Andrew, 9 Manitoba 
 65. ' .., , 
 
 ssMarlor v. Texas &c. R. Co., 19 
 Fed. 867; Welsh v. First Division of 
 St. Paul &c. R. Co., 25 Minn 314; 
 Philadelphia &c. R. Co. v. Johnson, 
 54 Pa. St 127; Common width y. 
 Susquehtnna: &c. R. Co., 122 Pa. St. 
 306, 1 L. R. A. 225. 
 
 97 Manning v. Norfolk &c. R. Co., 
 29 Fed. 838. The provision of a mort- 
 gage that holders of .bonds secured 
 by it shall not proceed at law or in 
 equity to foreclose it, or procure a 
 sale of the property independently of 
 the trustee, does not defeat an action 
 at law to recover on overdue interest 
 coupons, although the mortgage pro- 
 vides for foreclosure on default in 
 
 payment of the coupons. Lyon v. 
 New York &c. R. Co., 14 Daly (N. 
 Y.) 489. 
 
 98 Guaranty &c. Co. v. Green Cove 
 Springs &c. R. Co., 139 U. S. 137, 
 11 Sup. Ct. 512; 35 L. ed. 116. 
 
 99 Chicago &c. R. Co. v. Fosdick, 
 106 U. S. 47, 1 Sup. Ct. 10, 27 L. ed. 
 47; Central Trust Co. v. Texas &c. 
 R. Co., 23 Fed. 846 ; Mercantile Trust 
 Co. V. Missouri &c. R. Co., 36 Fed. 
 221, 1 L. R. A. 397 ; Farmers &c. Co. 
 V. Winona &c. R. Co., 59 Fed. 957; 
 Mercantile T. Co. v. Chicago &c. R. 
 Co., 61 Fed. 372 ; Farmers' &c. Co. v. 
 Chicago &c. R. Co., 61 Fed. 543 ; Cen- 
 tral Trust Co. v. New York City &c. 
 R. Co., 33 Hun (N. Y.) 513; Far- 
 mers' &c. Co. V. Nova Scotia &c. R. 
 Co., 24 N. S. 542. 
 
 1 Farmers' &c. Co. v. Chi ;agii &c.- 
 R. Co., 27 Fed. 146. 
 
867 
 
 FORECLOSURE 
 
 §587 
 
 default in payment of the mortgage debt, he may bring a suit to 
 foreclose the mortgage without such request by the specified 
 number of bondholders.^ 
 
 § 587 (515). The decree. — A course of procedure prescribed 
 by the mortgage to be pursued in case of a sale by the trustee 
 without foreclosure is not binding upon the court in proceedings 
 to foreclose such mortgage, but such a decree may be entered as 
 to the terms of payment and the manner of sale as the equities 
 of the case demand.^ The decree may provide that the sale shall 
 be made subject to such claims as shall be finally adjudicated, 
 where the amount of certain claims in dispute can only be known 
 after a long course of litigation.* A decree in an action by a 
 railroad bondholder to foreclose a moi'tgage securing bonds, 
 which directs a sale of the mortgaged property, free of all liens 
 
 2 Guaranty Trust &c. Co. v. 
 Green Cove &c. R. Co., 139 U. S. 137, 
 11 Sup. Ct. 512, 35 L. ed. 116; 
 Morgan's Louisiana &c. R. Co. v. 
 Texas Central R. Co., 137 U. S. 
 171, 11 Sup. Ct. 61, 34 L. ed. 625; 
 distinguishing Chicago &c. R. Co. 
 V. Fosdick, 106 U. S. 47, 1 Sup. Ct. 
 10, 27 L. ed. 47. Such a limitation 
 is to be strictly construed and 
 applies to proceedings by the 
 trustee ex mero motu without the 
 intervention of the court. Au- 
 thorities first above cited; also, 
 Alexander v. Central R. Co., 3 
 Dill (U. S.) 487, Fed. Cas. No. 166; 
 Credit Co. v. Arkansas Cent. R. 
 Co., 15 Fed. 46. See generally, 
 note in 16 L. R. A. (N. S.") 1006, et 
 seq. 
 
 3 Farmers' Loan &c. Co. v. 
 Green Bay &c. R. Co., 6 Fed. 100, 
 10 Biss. (U. S.) 203, 1 Am. & Eng. 
 R. Cas. 622. See also Provident 
 Life &c. Co. V. Camden &c. R. 
 Co., 177 Fed. 854. 
 
 * Turner v. Indianapolis &c. R. 
 Co., 8 Biss. (U. S.) 380, Fed. Cas. 
 No. 14259; Sage v. Central R. Co., 
 99 U. S. 334, 25 L. ed. 394; Bound v. 
 South Carolina R. Co., 58 Fed. 473. 
 See also as to providing for sale 
 subject to prior liens, Compton v. 
 Jesup, 167 U. S. 1, 17 Sup. Ct. 795, 
 42 L. ed. 55; Randolph v. Middle- 
 ton, 26 N. J. Eq. 543. But see 
 where liens are subsequent as to 
 provision for sale free from them, 
 St. Louis &c. R. Co. v. Jackson, 
 95 Fed. 560; Hardin v. Iowa R. 
 Co., 78 Iowa 726, 43 N. W. 543. 
 A consent decree in railroad fore- 
 closure proceedings, provided that 
 defendant, as purchaser, should 
 "pay, satisfy, and full discharge 
 all debts and liabilities of such 
 receivership of every kind now 
 remaining unpaid." The defend- 
 ant was held liable for an injury 
 caused by the negligence of the 
 receiver. Wabash R. Co. v. Stew- 
 art, 41 111. App. 640. 
 
§587 
 
 RAILROADS 
 
 868 
 
 and incumbrances, to satisfy plaintiff's claims, without making 
 provision for other bondholders, subsequent mortgagees, or 
 other creditors of the road, is fatally defective.^ As a general 
 rule the decree should declare the extent of the default, find the 
 amount due and order the mortgaged propei;ty sold if payment 
 is not made within a reasonable time, which should be specified 
 therein.^ It is customary, also, or at least within the power of 
 the court, to fix an "upset" price^ and direct that the fund be 
 brought into court for distribution.^ It may likewise provide 
 that bonds may be received from the purchasers in payment of 
 their bid.^ The sale of a railroad extending into two states which 
 have united in chartering the corporation by which it is owned, 
 may, it has been held, be decreed by a court sitting in one of such 
 states. 1" So, of course, if this be true, such a decree may be 
 
 5 New Orleans Pac. R. Co. v. 
 Parker, 143 U. S. 42, 12 Sup. Ct. 
 364, 36 L. ed. 66, 6 Lewis' Am. R. 
 & Corp. 43. See also Trimble v. 
 Acme Mills &c. Co., ISl Ky. 570, 
 152 S. W. 561. 
 
 6 Blossom V. Milwaukee &c. R. 
 Co., 1 Wall. (U. S.) 655, 17 L. ed. 
 673; Chicago &c. R. Co. v. Fos- 
 dick, 106 U. S. 47, 1 Sup. Ct. 10, 
 27 L. ed. 47. But it is often im- 
 practicable to determine and in- 
 sert the exact amount of costs at 
 the time the decree is drawn and 
 the omission to do so is not fatal. 
 Grape Creek Coal Co. v. Farm- 
 ers' &c. Co., 63 Fed. 891. In Knev- 
 als V. Florida Central &c. R. Co., 
 66 Fed. 224, it was held that a de- 
 cree ordering the sale of a rail- 
 road, without describing the prop- 
 erty included all the property 
 of the company covered by the 
 mortgage and connected with 
 the use and purpose of the road. 
 Trustees may not purchase at the 
 sale except, perhaps, in instances 
 
 where it is for the benefit of the 
 bondholders. See 3 Thomp. Corp. 
 (2d ed.), §§2677, 2678. 
 
 T Blair v. St. Louis &c. R. Co., 
 25 Fed. 232. A form of decree is 
 given in full in this case. Provi- 
 dent Life &c. Co. V. Camden &c. 
 R. Co., 177 Fed. 854. See also Mc- 
 Ilhenny v. Binz, 80 Tex. 1, 13 S. 
 W. 655, 26 Am. St. 705. A deposit 
 by bidders may also be required. 
 Turner v. Indianapolis &c. R. Co., 
 8 Biss. (U. S.) 380, Fed. Cas. No. 
 14259; Eastern v. Houston &c. R. 
 Co., 44 Fed. 718; Provident Life 
 &c. Co. V. Camden &c. R. Co., 177 
 Fed. 854. 
 
 8 Chicago &c. Land Co. v. Peck, 
 112 111. 408. 
 
 9 Ketchum v. Duncan, 96 U. S. 
 659, 24 L. ed. 868; Krophollerv. 
 St. Paul &c. R. Co., 2 Fed. 302; 
 Duncan v. Mobile &c. R. Co., 3 
 Woods (U. S.) 597, Fed. Cas. No. 
 4139. 
 
 10 McTighe v. Macon &c. Co., 
 94 Ga. 306, 21 S. E. 701, 32 L. R. 
 
869 
 
 FORECLOSURE 
 
 §588 
 
 rendered by a Federal court sitting in one of the states. ^^ Al- 
 though the court cannot send its process into another state nor 
 deliver possession of property in another jurisdiction, it can 
 command and enforce a transfer of the title to the purchaser.^* 
 A decree determining the rights of the parties to the suit is final 
 and conclusive between them as to all matters which were or 
 might have been litigated therein under the issues, and can only 
 be questioned by appeal or in a direct proceeding for that pur- 
 pose. ^^ But it does not affect the rights, and priorities of persons 
 who had no notice of the proceedings and were neither parties 
 nor privies thereto.^* 
 
 § 588 (516). Consent decree. — A decree entered by consent of 
 the parties has legal effect so long as it remains unreversed, and, 
 after it has been executed, is binding, at least so far as it is em- 
 braced by the issues.*^ But it has been held that so long as they 
 
 A. 208, 47 Am. St. 1S3; McElrath v. 
 Pittsburg &c. R. Co., 55 Pa. St. 
 189. See also Union Trust Co. v. 
 Olmstead, 102 N. Y. 729, 7 N. E. 
 822; Craft v. Indiana &c. R. Co., 
 166 111. 580, 46 N. E. 1132., Subject, 
 however, to existing liens in the 
 other state. Hand v. Savannah 
 &c. R. Co., 12 S. Car. 314. Some 
 of the courts refuse to recognize 
 such a decree so far as it affects 
 the road in their state which is 
 subject to an underlying mort- 
 gage. See Eaton &c. R. Co. v. 
 Hunt, 20 Ind. 4S7; Farmers' Loan 
 &c. Co. V. Bankers' &c. Co., 44 
 Hun (N. Y.) 400; Pittsburgh &c. 
 R. Co.'s Appeal (Pa.), 4 Atl. 385. 
 11 Wilmer v. Atlanta &c. Co., 2 
 Woods (U. S.) 409, 447, 454, Fed. 
 Cas. No. 17775; Blackburn v. Sel- 
 ma &c. R. Co., 2 Flip. 525, Fed. 
 Cas. No. 1467; Muller v. Dows, 
 94 U. S. 444, 24 L. ed. 207; Ran- 
 dolph v. Wilinington &c. R. Co., 
 11 Phi la. 502. 
 
 12 Muller v. Dows, 94 U. S. 444, 
 24 L. ed. 207; Jones Corp. Bonds 
 and Mort. § 417. See also as to 
 the decree operating in personam. 
 Craft v. Indiana &c. R. Co., 166 
 111. 580, 46 N. E. 1132; Lynde v. Co- 
 lumbus &c. R. Co., 57 Fed. 993. 
 
 13 Brooks v. O'Hara, 2 McCrary 
 (U. S.) 644, 8 Fed. 529; Woolery 
 v. Grayson, 110 Ind. 149, 10 N. E. 
 935; Indiana &c. R. Co. v. Bird, 
 116 Ind. 217, 18 N. E. 837, 9 Am. 
 St. 842; Herring v. New York &c. 
 R. Co., 105 N. Y. 341, 12 N. E. 
 763; Woods v. Pittsburgh &c. R. 
 Co., 99 Pa. St. 101. 
 
 1* Pittsburgh &c. R. Co. v. Mar- 
 shall, 85 Pa. St. 187. 
 
 15 Pacific R. Co. v. Ketchum, 101 
 U. S. 289, 25 L. ed. 932; Farmers 
 Loan &c. Co. v. Central R., 4 Dill. 
 (U. S.) 533, Fed. Cas. No. 4663; 
 Wadhams v. Gay, 73 111. 415; In- 
 diana &c. R. Co. V. Bird, 116 Ind. 
 217, 9 Am. St. 842, 18 N. R 837. In 
 
.S589 
 
 RAILROADS 
 
 870 
 
 remain unexecuted, decrees entered by consent, like ex parte 
 decrees, are subject to the, control of the court. ^^ A consent de- 
 cree as to matters beyond the scope of the bill will bind the court 
 in its future actions only so far as it is embraced by the bill. But 
 it will, after it is executed by one of the parties, constitute a 
 binding agreement upon the part of the other. ^^ 
 
 § 589 (517). Deficiency decree. — It was formerly held by the 
 Federal courts that, after a decree of foreclosure and sale, duly 
 confirmed, it was erroneous to direct an execution for any defici- 
 ency, that is, for the balance of the debt in case the property did 
 not sell for enough to pay it in full.'^* But, under the present 
 equity rule,^^ "a decree may be rendered for any balance that 
 may be found due to the complaint over and above the pro- 
 ceeds of the sale or sales, and execution may issue for the col- 
 lection of the same." This rule, however, does not authorize 
 such a decree unless the bill shows that the amount is actually 
 due.^" Thus, it is held in the case just cited that where there is 
 
 Hutts V. Martin, 134 Ind. 587, 593, 
 33 N. E. 676, it is said that the 
 decree is based upon the agree- 
 ment and not upon the pleadings 
 and may, therefore, be binding 
 upon the parties although not 
 within the issues. See also Nash- 
 ville &c. R. Co. V. United States, 
 113 U. S. 261, S Sup. Ct. 460, 28 L. 
 ed. 971; Knobloch v. Mueller, 123 
 111. 554, 17 N. E. 696; Indianapolis 
 &c. R. Co. V. Sands, 133 Ind. 433, 
 32 N. E. 722; Schmidt v. Oregon 
 &c. Co., 28 Ore. 9, 40 Pac. 406, 1014, 
 52 Am. St. 759. 
 
 16 Vermont &c. R. Co. v. Ver- 
 mont Central R. Co., SO Vt. 500. 
 "Consent decrees decide nothing. 
 They merely authenticate private 
 agreements, and render them ex- 
 ecutory between the parties." 
 Union Bank v. Marin, 3 La. Ann. 
 34, 35, per Rest, J. 
 
 IT Vermont &c. R. Co. v. Ver- 
 
 mont Central R. Co., 50 Vt. .'<00. 
 
 18 Noonan v. Lee, 2 Black (U. 
 S.) 499, 17 L. ed. 278; Orchard v. 
 Hughes, 1 Wall. (U. S.) 73, 17 L. 
 ed. 560. See also Libby v. Rennie, 
 31 N. J. Eq. 42. It is also held in 
 some jurisdictions that there is 
 no lien for the deficiency until 
 after a sale has been made, the de- 
 ficiency ascertained and a judg- 
 ment entered therefor. Hibberd 
 v. Smith, 50 Cal. 511; Linn v. Pat- 
 ton, 10 W. Va. 187. See also 
 Myers v. Hewitt, 16 Ohio 449, 454. 
 Contra, Fletcher v. Holmes, 25 
 Ind. 458. 
 
 19 United States Equity Rule 92. 
 See also Shepherd v. Pepper, 133 
 U. S. 626, 10 Sup. Ct. 438, 33 L. ed. 
 706; Dodge v. Freedman's &c. 
 Trust Co., 106 U. S., 445, 1 Sup, 
 Ct. 335, 27 L. ed. 206. , . 
 
 20 Ohio Cent. R. Go! v. Central 
 Trust Co., 133 U. S. 83, 10 Sup. Ct. 
 
871 FORECLOSURE § 590 
 
 no provision in the bonds or mortgage that the bonds shall 
 become due, or may be declared due, upon any contingency 
 before their maturity, it is error to find the unpaid balance due 
 when it in fact has not matured and to enter a deficiency decree 
 ordering execution therefor. So, in another receiit case, it was 
 held that on foreclosure of a mortgage for non-payment of inter- 
 est, if the principal is not due and there is no provision in the 
 bonds or mortgage that the principal shall become due on default 
 in the payment of interest, no judgment can be rendered for any 
 deficiency in the proceeds of the sale to pay the principal."^ We 
 suppose, also, that no deficiency decree, amounting to a personal 
 judgment, can be rendered in any case against a party unless the 
 court has jurisdiction of the persoft.^^ 
 
 § 590 (518). Final and appealable decrees. — A decree may be 
 final although the case be referred to a master to execute the 
 decree by a sale of the mortgaged' property.^* If, however, it 
 leaves the amount due upon the debt to be determined, and the 
 property to be sold is not ascertained and defined it is not final. ^* 
 If it determines the whole controversy between the parties, leav- 
 
 235, 33 L. ed; 561. Where proper 23 Bronson v. Railroad Co., . 2 
 facts are alleged, however, a per- Black (U. S.) 524, 17. L. ed. 347, 
 sonal decree for deficiency may be 359; Ray v. Law, 3 Crangh (U. S.) 
 awarded under the prayer for 179, 2 L. ed. 404; Whiting v, ..Unit- 
 general relief. Shepherd v. Pep- ed States Bank, 13 Peters (U. S.) 
 per, 133 U. S. 626, 10 Sup. Ct. 438, 6, 10 L. ed 33; Elliott's App. Proc. 
 33 L. ed. 706. And trustee under § 92; ' 
 
 authority of trust deed may bind 24 McGourkey. v. Toledo .&c. R. 
 
 bondholders by deficiency judg- Co., 146 U. S. 536, 13 Sup. Ct. 170, 
 
 ment. Grant v. Winona &c. R. 172, 36 L. ed. 1079; Railroad Co. 
 
 Co., 85 Minn. 422, 89 N.'w. 60. v. Swasey, 23 Wall. (U. S.) 405, 
 
 ■' 21 Farmers &c. Co. v. Grape 23 L. ed. 136; Grant v. Phoenix 
 
 Greet &c. Co., 65 Fed. 717. See &c. Co., 106 U. S. 429, 1 Sup. Ct. 
 
 also ■ Dahf orth v.'' ' Coleman, 23 414, 27 L. ed. 237 ; Parsons v. Rpb- 
 
 Wis. 528. inson, 122 U. S. 112, 7 Sup. Ct. 
 
 22 See 1 Elliott's Gen. Pr §§ 243, 1153, 30 L. ed. 1122; Burlington &c. 
 
 244, 362. See also the extreme case R. Co. v. Simmons, 123 .U. S. 52, 
 
 of'Bai-dwell v. Collins, 44 Minn. 97, 8 Sup, t.t. 58,31 L. ed. 73. 
 
 46 N.-W;3is,; 9 L. R.. A. 'i52,'' 20 ' _' __ ,,':., \'.': ', ;'' ■ V 
 
 Am. St. 547. ' ' ' ' '^-T ■' '^-.''J .- \ 
 
§590 
 
 RAILROADS 
 
 872 
 
 ing nothing to be done except to carry it into execution, it is 
 appealable as a final decree notwithstanding the fact that the 
 court retains the iund in controversy for the purpose of distribut- 
 ing it as decreed.-^ So, a decree of foreclosure, ascertaining the 
 amount due, directing payment within a specified time and pro- 
 viding for an order of sale in case of default in such payment, is 
 a final decree from which an appeal may be taken.^** It is also 
 "manifest that a .substantial error, to the prejudice of one of the 
 parties, may originate in a decree distributing the proceeds of a 
 sale under a decree of foreclosure, and no question can be suc- 
 cessfully raised against the right to appeal from such a decree. "^^ 
 There are also cases in which there are independent issues not 
 affecting all parties, and in such cases an appeal may lie as to 
 those whose interests are finally determined although the decree 
 is not final as to ail the issues between the other parties.-* Thus, 
 it has been held that a decree in a foreclosure suit awarding 
 priority to a creditor who claims an interest in locomotives in the 
 possession of the receiver and in use on the road is a final decree 
 upon a distinct and independent issue.^* And it may, perhaps, 
 
 25 Bank of Lewisburg v. Shef- 
 fey, 140 U. S. 445, 11 Sup. Ct. 7SS, 
 35 L. ed. 493; Hoflfman v. Knox, 
 50 Fed. 484. See also Stovall v. 
 Banks, 10 Wall. (U. S.) 583, 19 L. 
 ed. 1036. 
 
 2« Milwaukee &c. R. Co. v. 
 Soutter, 2 Wall. (U. S.) 440, 17 
 L. ed. 860. 
 
 87 Chicago &c. R. Co. v. Fos- 
 dick, 106 U. S. 47, 82, 1 Sup. Ct. 10, 
 12, 27 L. ed. 47. See also Blos- 
 som V. Milwaukee &c. R. Co.. 1 
 Wall. (U. S.) 657, 17 L. ed. 673; 
 Louisville &c. R. Co. v. Wilson, 
 138 U. S. 501, 11 Sup. Ct. 405, 34 
 L. ed. 1023; Kneeland v. Ameri- 
 can Loan &c. Co., 136 U. S. 89, 
 10 Sup. Ct. 950, 34 L. ed. 379. 
 
 28 Trustees v. Greenough, 105 U. 
 S. 527, 26 L. ed. 1157; Hinckley v. 
 Gilman &c. R. Co., 94 U. S. *i(!l, 
 
 2A L. ed 166; Fosdick v. Schall, 
 <^ U. S. 235, 25 L. ed. 339; Will- 
 iams V. Morgan, 111 U. S. 684, 4 
 Sup. Ct. 638, 28 L. ed. 559; Brush 
 &c. Co. V. Ele:tri'; Imp. Co., 51 
 Ffcd. 557. 
 
 29 Central Trust Co. v. Grant 
 &c. Works, 135 U. S. 207, 10 Sup. 
 Ct. 736, 34 L. ed. 97. See also 
 Farmers' Loan &c. Co., Ex parte, 
 129 U. S. 206, 9 Sup. Ct. 265, 32 
 L. ed. 656; Jordan, Ex parte, 94 
 U. S. 248, 24 L. ed 123; Central 
 Trust Co. V. Marietta &c. R. Co., 
 48 Fed. 850 (holding decision in 
 favor of an intervenor a final de- 
 cision under the Circuit Court of 
 Appeals Act). That the term 
 "final decision" in such act means 
 final judgment or decree, see Duff 
 V. Carrier, 55 Fed. 433. 
 
873 FORECLOSURE § 590 
 
 be stated as a general rule that where the parties are entirely dis- 
 missed from a case by the decree, it is so far final as to them 
 that an immediate appeal may be taken, although other mat- 
 ters are retained in which they have no interest.*" But where an 
 intervener in a foreclosure suit claimed certain rolling stock in 
 the possession of the receiver, as having been leased to the mort- 
 gagor, and, after sale of the property on foreclosure, a decree 
 was made directing the delivery of such property to the inter- 
 vener, but referring the matter to a master to determine its rental 
 value while used by the receiver, together with all questions be- 
 tween the receiver and the intervener growing out of its use and 
 restoration, it was held that the decree directing the delivery of 
 the property to the intervener was not such a final decree as to 
 prevent the court from determining at a subsequent term that the 
 title to such property had passed to the purchaser at the fore- 
 closure sale.*^ Other decisions upon various phases of this sub- 
 ject are cited below.^^ 
 
 30 Hill V. Chicago &c. R. Co., 140 Co., 146 U. S. S36, 13 Sup. Ct. 170, 
 U. S. 52, 11 Sup. Ct. 690, 35 L. ed. 36 L. ed. 1079. 
 
 331 ; Grant v. East &c. R. Co., SO 82 Doyle v. London Guaranty- 
 Fed. 795. But see Keystone &c. Co., 204 U. S. 599, 27 Sup. Ct. 313, 
 Iron Co. V. Martin, 132 U. S. 91, 51 L. ed. 641; Investment Registry 
 10 Sup. Ct. 32, 33 L. ed. 275. v. Chicago &c. R. Co., 212 Fed. 
 
 31 McGourkey v. Toledo &c. R. 594. 
 
CHAPTER XXI. 
 SALE AND REORGANIZATION. 
 
 Sec. 
 
 595. Railroad company cannot 
 sell franchise and neces- 
 sary property without 
 statutory authority. 
 
 596. Execution sales. 
 
 597. Foreclosure sales— Authori- 
 
 ty — Purchasers. 
 
 598. Sale oh default in payment 
 
 of interest— Sale of road 
 as an entirety. 
 
 599. Sale of consolidated road- 
 
 Sale by receiver pending 
 foreclosure. 
 
 600. Discretion of trustees and 
 
 officers as to time and 
 manner of sale. 
 
 601. Effect of sale— Purchaser's 
 
 title. 
 
 602. What passes to purchaser at 
 
 foreclosure sale. 
 
 603. When purchaser takes title 
 
 free from liabilities an'd 
 liens. 
 
 604. Disposition of proceeds of 
 
 sale. 
 
 Sec. 
 
 605. Disposition of proceeds- 
 
 Purchaser not bound to 
 see that they are properly 
 applied. 
 
 606. Preferred claims — Six 
 
 months' rule. 
 
 607. Setting sale aside— Grounds 
 
 — Who may sue. 
 
 608. Setting sale aside— What is 
 
 not sufficient ground. 
 
 609. Redemption. 
 
 610. Reorganization by purchas- 
 
 ers at sale— Power of leg- 
 islature to provide for. 
 
 611. Reorganization through pur- 
 
 chasing committee. 
 , 612. Statutory reorganization — 
 Liability of new corpora- 
 tion. 
 
 613. Reorganization- by agree- 
 
 ment—Rights of minprity. 
 
 614. Rights and obligations of 
 
 the parties— Laches and 
 estoppel. 
 
 615. Fraud in the sale of reor- 
 
 ganization. 
 
 616. Reorganization by the 
 
 courts. 
 
 § 595 (519). Railroad company cannot sell franchise and nec- 
 essary property without statutory authority. — In the absence of 
 legislative authority, a railroad company cannot sell its road and 
 franchises to another corporation, so as to prevent it from per- 
 forming its duties to the public,^ even though the latter cor- 
 
 1 Pennsylvania R. Co. v. St. 6 Sup. Ct. 1094, 30 L. ed. 83 ; Snell 
 Louis &c. R. Co., 118 U. S. 290, v. Chicago, 152 U. S. 191, 14 Sup. 
 
 874 
 
875 
 
 SALE AND REORGANIZATION 
 
 §595 
 
 poration should undertake to keep the road open at all times for 
 the use of the public ; for a corporation has no implied authority 
 to delegate the performance of its public duties to another com- 
 pany .* An unauthorized attempt on the part, of a railroad com- 
 
 Ct. 489, 492, 38 L. ed. 408; Oregon 
 &c. Nav. Co. V. Oregonian R. Co., 
 130 U. S. 1, 9 Sup. Ct. 409, 32 L. 
 ed. 837; Cumberland Tel. &c. Co. 
 V. Evansville, 127 Fed. 187; East 
 Line &c. R. Co. v. State, 75 Tex. 
 434, 12 S. W. 690; Gulf &c. R. Co. 
 V. Morris, 67 Tex. 692, 4 S. W. 
 156; Fisher v. West Virginia &c. 
 R. Co., 39 W. Va. 366, 19 S. E. 
 578, 23 L. R. A. 758. 3 Thomp. 
 Corp. (2nd ed.), §§2900, 2906. 
 See also Attorney-General v. 
 Haverhill Gaslight &c. Co., 215 
 Mass. 394, 101 N. E. 1061, Ann. 
 Cas. 1914 C, 1266 and note; elab- 
 orate note to Brunswick &c. Co. 
 V. United States Gas Co.,. 35 Am. 
 St. 385, 390; and note in 103 Am. 
 St. 555. In Central Transp. Co. 
 V. Pullman &c. Co., 139 U. S. 24, 
 11 Sup. Ct. 478, 484, 35 L. ed. 55; 
 Gray, J., states the reason for the 
 rule as follows: "The charter of 
 3^ corporation, read in the light of 
 any gefleral laws which are ap- 
 plicable, is the measure of its 
 powers, and the enumeration of 
 those powers implies the exclu- 
 sion of all others not fairly inci- 
 dental. All contracts made by a 
 corporation beyond the scope of 
 those powers are unlawful and 
 void, and no action can be main- 
 tained upon them in the courts, 
 and this upon three distinct 
 grounds: The obligation of ev- 
 ery one contracting with a cor- 
 poration to take notice of the le- 
 
 gal limits of its powers; the in- 
 terest of the stockholders, not to 
 be subjected to risks which they 
 have never undertaken; and, 
 above all, the interest of the pub- 
 lic that the corporation shall not 
 transcend the powers conferred 
 upon it by law. A corporation 
 cannot, without the assent of the 
 legislature, transfer its franchise 
 to another corporation, and ab- 
 negate the performance of the du- 
 ties to the public, imposed upon 
 It by its charter as the considera- 
 tion for the grant of its franchise. 
 Neither the grant of a franchise 
 to transport passengers, nor a 
 general authority to sell and dis- 
 pose of property, empowers the 
 grantee, while it continues to ex- 
 ist as a corporation, to sell or to 
 lease its entire property and fran- 
 chise to another corporation. 
 These principles apply equally to 
 companies incorporated by special 
 • charter from the legislature, and 
 to those formed by articles of as- 
 sociation under general laws." But 
 see as to "secondary franchises," 
 Qwensboro v^ Cumberland Tel. 
 &c. Co., 230 U. S. 58, 33 Sup. Ct. 
 988, 57 L. ed. 1389; Coleman v. 
 Hagey, 252 Mo. 102, 158 S. W. 829; 
 Cooper V. Utah Light &c. Co., 
 35 Utah 570, 102 Pac. 202. 
 
 2 York &c. R. Co. V. Winans, 17 
 How. (U. S.) 30, 39, 15 L. ed. 350, 
 353; Thomas v. West Jersey R. 
 Co., 101 U. S. 71, 25 L. ed. 9'-C; 
 
§595 
 
 RAILROADS 
 
 876 
 
 pany to dispose of its franchise may be ground for the forfeiture 
 of its charter.-'' Nor can one railroad corporation purchase the 
 property and franchises of another without such authority.* A 
 grant to a railroad corporation of power to sell its line will not 
 be implied unless necessary to give effect to the language of the 
 
 Clark V. Washington, 12 Wheat 
 (U. S.) 40, S4, 6 L. ed. 544; Great 
 Northern R. Co. v. Eastern Coun- 
 ties R. Co., 21 L. J. Ch. 837; cf. 
 Rogers Locomotive &c. Works v. 
 Erie R. Co., 20 N. J. Eq. 379; 
 Roper V. McWhorter, 11 Va. 214; 
 Beman v. Rufford, 1 Sim. N. 
 S. 5S0. It has been held that 
 by conveying its road and fran- 
 chises, to trustees selected by 
 itself, a railroad company can not 
 evade its legal liability for in- 
 juries afterv\rards done to persons 
 and property by the negligent op- 
 eration of its road. Acker v. 
 Alexandria &c. R. Co., 84 Va. 648, 
 5 S. E. 688; Naglee v. Alexandria 
 &c. R. Co., 83 Va. 707, 3 S. E. 369, 
 5 Am. St. 308. So, it has been 
 held that a railroad company can- 
 not, w^ithout statutory authority, 
 transfer the right to operate its 
 road so as to absolve itself from 
 its duties to the public, or its lia- 
 bility for the torts of the com- 
 pany which operates the road. 
 East Line &c. R. Co. v. Rushing, 
 69 Tex. 306, 6 S. W. 834; Interna- 
 tional &c. Co. V. Kuehn, 70 Tex. 
 S82, 8 S. W. 484; International &c. 
 R. Co. v. Eckford, 71 Tex. 274, 
 8 S W. 679; Anderson v. Cincin- 
 nati S. R. Co., 86 Ky. 44, S S. W. 
 49, 9 Am. St. 263; Chollette v. 
 Omaha &c. R. Co., 26 Nebr. 1S9, 
 41 N. W. 1106, 4 L. R. A. 135. In 
 
 one of these cases it is said that 
 legislative consent to the transfer 
 is not sufficient of itself to re- 
 lieve the company from such lia- 
 bilities; there must be an exemp- 
 tion granted or a release from 
 the obligations of the company to 
 the public. Chollette v. Omaha 
 &c. R. Co., 26 Nebr. 159, 41 N. W. 
 1106, 4 L. R. A. 135. 
 
 3 Where a railroad company, 
 having a land grant from the 
 state, disposed of the entire in- 
 terest in and control of the road 
 to another company, reserving the 
 granted land and certain corpor- 
 ate rights, but ceasing to do a 
 railroad business, it was held that, 
 as such separation of the fran- 
 chises was not authorized by the 
 legislative acts incorporating the 
 companies, judgment of forfeiture 
 and dissolution of both was auth- 
 orized in quo warranto proceed- 
 ings by the state. State v. Min- 
 nesota Cent. R. Co., 36 Minn. 246, 
 29 Am. & Eng. R. Cas. 440, 30 N. 
 W. 816. 
 
 ■I Gulf &c. R. Co. V. Morris, 67 
 Tex. 692, 4 S. W. 156. But it 
 would seem that authority given 
 to one corporation to purchase 
 the franchise of another specified 
 corporation gives the latter au- 
 thority to sell. New York &c. R. 
 Co. v. New York &c. R. Co., 52 
 Conn. 274. 
 
877 
 
 SALE AND REORGANIZATION 
 
 §595 
 
 statute.^ A provision in the charter of a railroad corporation 
 prohibiting it from purchasing, selling, leasing, or consolidating 
 with any other corporation owning a parallel or competing line 
 does not carry implied power to sell to a company which does not 
 own such a line. And it has been held that such a sale cannot be^ 
 legally made, a,lthough the two roads are expressly empowered 
 by law to consolidate.* Neither, it has been held, does the grant 
 of power to purchase other roads imply authority on the part 
 of a corporation to sell its own.'^ A general power to sell, except 
 Upon foreclosure, is not included in a power granted to a railroad 
 company to mortgage,^ or lea.'se.' But railroads are empowered 
 by general statute in many of the states to purchase the roads of 
 
 5 See Clarke v. Omaha &c. R. 
 Co., 4 Nebr. 4S8; Southern Pac. 
 R. Co. V. Esquibel, 4 N. Max. 337, 
 20 Pac. 109, 36 Am. & Eng. R. 
 Cas. 410; East Line &c. R. Co. v. 
 State, 75 Tex. 434, 12 S. W. 690; 
 State V. Consolidation Coal Co., 
 46 Md. 1, 3 Thomp. Corp. (2d ed.) 
 § 2903. 
 
 6 East Line &c. R. Co. v. State, 
 75 Tex. 434, 12 S. W. 690. 
 
 T Southern Pac. R. Co. v. Esqui- 
 bel, 4 N. M. 337, 20 Pac. 109, 36 
 Am. & Eng. R. Cas. 410. 
 
 8 Southern Pac. R. Co. v. Esquibel, 
 4 N. M. 337, 20 Pac. 109. In announc- 
 ing the opinion of the court in this 
 case, Reeves, J., said : "It was ar- 
 gued for the appellant that, if the 
 land could be mortgaged for the 
 means to construct,, equip and op- 
 erate the rpad, it could be assigned, 
 in the first place, for the same ob- 
 ject. The doctrine that a power to 
 mortgage includes a power to sell is 
 not supported by authority of law. 
 A cQrporation iriust execise its pow- 
 ers in the mode prescribed in its 
 charter. The power to procure 
 means to construct the road in 
 
 question was not a general power, it 
 was a particular power to be exer- 
 cised for a sgecific object. The 
 Texas & Pacific R. Co. was author- 
 ised to issue construction and land 
 bonds, and to execute mortgages to 
 secure the bonds on its land grant 
 and other lands the company might 
 acquire; the proceeds of the sale of 
 the bonds to be applied to the con- 
 struction, operation, and equipment 
 of the road, and for the purchase, 
 construction, completion, equipment, 
 and operating of the other roads 
 [which it was authorized to acquire] 
 as contemplated and specified in the 
 ■cts of congress. The acts require 
 that the bonds and mortgages 
 should contain an extract from the 
 law authorizing them to be issued, 
 and that the mortgages should be 
 filed and recorded in the department 
 of the interior. The appellant was 
 not a mortgagee, nor a purchaser 
 under a mortgage. No mortgage 
 bond was given in aid of the con- 
 struction of the road." 
 
 9 Pittsburgh &c. R. Co. v. Bedford 
 &c. R. Co., 81 J4 Pa. St. 104. 
 
§596 
 
 RAILROADS 
 
 878 
 
 connecting lines. ^^ And this power is frequently granted by 
 special charter. When the charter of one compiiny authorizes it 
 to purchase the property and franchise of another, this must be 
 construed to be an implied authority to that other company to 
 sell.ii and where "any railroad company" is authorized to pur- 
 chase the property and franchises of a certain corporation they 
 may, it seems, be lawfully purchased by a railroad corporation of 
 another state. ^^ . 
 
 §596 (520). Execution sales. — The franchise of a railroad 
 company,' and corporate property essential to the enjoyment of 
 the franchise, are not subject to sale on execution, unless the 
 legislature authorizes or assents to the transfer.^* But locomo- 
 tives, cars and other personal property held by the corporation, 
 if not in actual use in the operation of the road, are held by some 
 authorities to be subject to sale on execution,^* and there seems 
 
 10 In Michigan the sale of an un- 
 completed road, begun in good faith, 
 but which the company undertaking it 
 has become unable to finish, is alone 
 authorized. Young v. Toledo &c. R. 
 Co., 16 Mich. 485, 43 N. W. 632. 
 
 11 New York &c. R. Co. v. New 
 York &c. R. Co., 52 Conn. 274. See 
 also Brinkerhoff v. Newark &c. Trac. 
 Co., 66 N. J. L. 478, 49 Atl. 812; 
 Rogers v. Oxford &c. R. Co., 2 DeG. 
 & J. 662. 
 
 12 Bostpn &c. R. Co. v. Boston &c. 
 R. Co., 65 N. H. 393, 23 Atl. 529. 
 But see Merz Capsule Co. v. United 
 Capsule Co., 67 Fed. 414; McCut- 
 cheon v. Merz Capsule Co., 71 Fed. 
 787, 31 L. R. A. 415 ; People v. Bal- 
 lard, 134 N. Y. 269, 32 N. E. 54, 17 
 L. R. A. 737. 
 
 1''' Gue V. Tide Water Canal Co., 
 24 How. (U. S.) 257. 16 L. ed. 635; 
 East Alabama R. Co. v. Doe, 114 
 U. S. 340, 5 Sup. Ct. 869, 29 L. ed. 
 136; Connor v. Tennessee Cent. R. 
 Co., 109 Fed. 931, 939, 940 (citing 
 
 text) ; Wood v. Truckee Turnpike 
 Co., 24 Cal. 474; Hatcher v. Toledo 
 &c. R. Co., 62 111. 477 ; Louisville &c. 
 R. Co. V. Boney, 117 Ind. 501, 20 N. 
 E. 432, 3 L. R. A. 435; Indianapolis 
 &c. G. R. Co. V. State, 105 Ind. Zl, 
 4 N. E. 316; Brady v. Johnson, 75 
 Md. 445, 26 Atl. 49, 20 L. R. A. 737, 
 and note ; Tippets v. Walker, 4 Mass. 
 595, 597, per Parsons, C. J. ; Stewart 
 V. Jones, 40 Mo. 140; Overton Bridge 
 Co. V. Means, 33 Nebr. 857, 51 N. W. 
 240, 29 Am. St. 514; Ludlow v. Hurd, 
 1 Disney (Ohio) 552; Oakland R. 
 Co. V. Keenan, 56 Pa. St. 198; Am- 
 mant v. New Alexandria Turnpike 
 Co., 13 Serg. & R. (Pa.) 210, IS 
 Am. Dec. 593, and note; Leedom v. 
 Plymouth R. Co., 5 W. & S. (Pa.) 
 265; Baxter v. Nashville &c. Tpk. 
 Co., 10 Lea (Tenn.) 488; 3 Thomp. 
 Corp. (2nd ed.), §2908. 
 
 i*Lathrop v. Middleton, 23 Cal. 
 257, 83 Am. Dec. 112; Louisville &c. 
 R. Co. V. Boney, 117 Ind. 501, 20 N. E. 
 432; Pierce v. Emery, 32 N. H. 484; 
 
879 
 
 SALE AND REORGANIZATION 
 
 §596 
 
 to be no reason why property of a railroad corporation not es- 
 sential to the enjoyment of its franchise should not be subjected 
 to the payment of its debts. ^^ The general statutes of many of 
 the states authorize a sale of the property and franchises of a rail- 
 way corporation upon execution.i^ and it is said, perhaps too 
 broadly, that "a general power to alienate franchises necessarily 
 implies a liability to have them levied upon."^'' The statutory 
 method of sale must be strictly pursued,^* and, unless otherwise 
 provided, a railroad cannot be levied upon and sold in frag- 
 mentary parts although it may run into different counties.^' So, 
 
 Boston &c. R. Co. v. Gilmore, 37 N. 
 H. 410, 72 Am. Dec. 336. See also 
 Williamson v. New Jersey &c. R. Co., 
 29 N. J. Eq. 311; Stevens v. Buffalo 
 &c. R. Co., 31 Barb. (N. Y.) 590. 
 In Wall V. Norfolk &c. R. Co., 
 52 W. Va. 485, 44 S. E. 294, 64 L. R. 
 A. 501, 94 Am. St. 948, 951 (citing 
 text), it is said that the better view 
 seems to he that rolling stock which 
 rriay be useful in the operation of 
 the road is not subject at common 
 law to execution or attachment, but 
 that under the provision of the West 
 Virginia constitution, making roll- 
 ing stock subject to execution and 
 sale, it is also subject to attachment. 
 So, a portion of a railroad which 
 the company has abandoned the 
 use of and is proceeding to take up 
 is subject to Ipvy under execution. 
 Gardner v. Mobile &c. R. Co., 102 
 Ala. 635, IS So. 271, 48. Am. St. 84; 
 Benedict v. Heineberg, 43 Vt. 231. 
 
 15 Louisville &c R. Co. v. Boney, 
 117 Ind. 501, 20 N. E. 432, 3 L. R. A. 
 435 ; Coe v. Columbus &c. R. Co., 10 
 Ohio St. 372, 75 Am. Dec. '518. 
 
 16 Atlanta v. Grant &c. Co., 57 Ga. 
 340; Williams v. East Wareham &c. 
 R. Co., 171 Mass. 61, SO N. E. 646; 
 Commonwealth v. Susquehanna &c. 
 
 R. Co., 122 Pa. St. 306, IS Atl. 448, 
 1 L. R. A, 225; Winchester &c. R. 
 Co. V. Coif el t, 27 Grat. (Va.) Ill; 
 State V. Rives, 5 Ired. Law (N. Car.) 
 297. 
 
 IT Note to Brunswick &c. Co. v. 
 United Gas &c. Co., 35 Am. St. 385, 
 401, citing National Foundry Works 
 V. Oconto &c. Co., 52 Fed. 43, which 
 however, only inferentially sustains 
 the proposition. So, in State v. Hare, 
 121 Ind. 308, 310, 23 N. E. 145, it 
 is said that "the rule is that what- 
 ever the corporation might voluntar- 
 ily alienate, its creditors may subject 
 to sale by adverse process," citing 
 Louisville &c. R. Co. v. Boney, 117 
 Ind. 501, 20 N. E. 432, 3 L. R. A. 
 435; Coe V. Columbus &c. R. Co., lO 
 Ohio St. 372, 75 Am. Dec. 518. ' 
 
 18 James v. Pontiac &c. Co., 8 
 Mich. 91 ; Taylor v. Jenkins, 6 Jones 
 L. (N. Car.) 316; Seymour v. Mil- 
 ford &c. Co.; 10 Ohio 476. See also 
 Gregory v. Blanchard, 98 Cal. 311, 
 33 Pac. 199. 
 
 19 Macon & Western R. Co., v. Par- 
 ker, 9 Ga. 377; Noble v. State, 43 Ga. 
 466; Midland R. Co. v. Wilcox, 122 
 Ind. 84, 23 N. E. 506; Dayton, Xenia 
 &c. R. Co.. V. Lewton, 20 Ohio St. 
 401. See also- Brooks y. Railway 
 
§ 597 RAILROADS 880 
 
 it is held in a recent case that the property of a railroad company, 
 cannot be sold under process separately and apart from its fran- 
 chise, where such property is so indissolubly linked to the fran- 
 chise and to the public functions of the corporation that without 
 it the franchise will be rendered inoperative, and, that a decree 
 directing the sale of a portion of the right of way and roadbed 
 to satisfy a debt, is inoperative, where the road has not been 
 abandoned, nor the franchise under which it was built surren- 
 dered ; and the court may properly refuse to award process for the 
 enforcement of such decree, as the effect of a sale would be mere- 
 ly to cloud the title of the owner of the road and its franchise.^" 
 
 § 597 (521). Foreclosure sales^Authority^ — Purchasers — Au- 
 thority to mortgage, of course, includes the power to enforce a 
 sale of the mortgaged property upon foreclosure for default in 
 payment of the mortgaged debt.^^ And in many cases the char- 
 ter authorizes the execution of a mortgage containing a power of 
 sale.22 A. corporation may become the purchaser at a foreclosure 
 sale, or obtain the property from the purchaser, if authorized by 
 its charter to purchase and operate other lines of road. 2* So, 
 
 Co., 101 U. S. 443, 451, 2S L. ed. 10S7; 22 McLane v. Placerville &c. R. Co., 
 National &c. Works v. Oconto Wa- 66 Cal. 606, 6 Pac. 748. An order 
 ter Co., 52 Fed. 43, 45; Bound v. that a railroad be sold as an entirety. 
 South Carolina R. Co., 46 Fed. 315, together with all its franchises, on 
 316; Wheeling Bridge &c. R. Co. v. the foreclosure of a lien given by 
 Reymann &c. Co., 90 Fed. 189; Yel- statute, which makes no express pro- 
 low River Improvement Co. v. vision as to the mode of its en- 
 Wood County, 81 Wis. 554, 51 N. forcement, is in excess of the power 
 W. 1004, 17 L. R. A. 92. So, where of the court. In such a case pay- 
 it is all mortgaged it should be sold meat must be enforced out of other 
 as an entirety although it runs into property or funds, and the lien af- 
 different states. MuUer v. Dows, 94 fords the basis for the exercise, by 
 U. S. -444, 24 L. ed. 207. the court of chancery, of its flexible 
 
 20 Connor v. Tennessee Cent. R. jurisdiction to coerce payment. Lou- 
 Co., 109 Fed. 931. isville &c. R. Co. v. Boney, 117 Ind. 
 
 21 New Orleans &c. R. Co. v. 501, 20 N. E. 432, 3 L. R. A. 435. 
 Delamore, 114 U. S. 501, S Sup. Ct. 23 People v. Brooklyn &c. R. Co., 
 1009, 29 L. ed. 244; Detroit v. Mutual 89 N. W. 75. It has been held in 
 Gas Light Co., 43 Mich. 594, 5 N. W. New Hampshire that a foreign cor- 
 1039. Compare Savannah &c. R. Co. poration could lawfully become the 
 v. Lancaster, 62 Ala. 555. purchaser of a railroad at foreclo- 
 
881 
 
 SA'LE AND REORGANIZATION 
 
 §597 
 
 mortgage bondholders and other creditors may lawfully combine 
 to purchase a railroad at a foreclosure sale, if there is no inten- 
 tion of defrauding any party in interest by the use of an unfair 
 advantage, or by preventing competition at the sal'e.^* The 
 bondholders for whom the road is purchased may also be per- 
 mitted to apply their bonds in payment of the purchase-money, 
 after satisfying the costs and charges of the litigation and trust*^* 
 
 sure sale. ' Boston &c. R. Co. v. Bos- 
 ton &c. R. Co., 6S N. H. 393, 23 Atl. 
 529. See also Rogers v. Nashville 
 &c. R. Co., 91 Fed. 299 ; Central Trust 
 Co. V. Western N. Car. R. Co., 89 
 Fed. 24. There is nothing in the 
 Michigan general railroad law of 1873 
 authorizing one railroad company to 
 acquire the stock and franchises of 
 another competing company, for the 
 purpose of itself exercising such 
 franchises, and such an acquisition 
 is unlawful. Mackintosh v. Flint &c. 
 R. Co., 34 Fed. 582. But see under 
 Act of 1901, Lisman v. Knickerbock- 
 er Trust Co., 211 Fed. 413. 
 
 ^* Robinson v. Philadelphia &c. R. 
 Co., 28 Fed. 340; Kitchen v. St. Louis 
 &c. R. Co., 69 Mo. 224; Thornton v. 
 Wabash R. Co;, 81 N. Y. 462; Marie 
 V. Garrison, 83 N. Y. 14, 13 Abb. N. 
 Cas. 210; Pennsylvania Transp. Co.'s 
 Appeal, 101 Pa. St. 576; Jones Corp. 
 Bonds and Mort. § 687. See also 
 Owen V. Potter, 115 Mich. 556, IZ N. 
 W. 977; Starksweather v. Jenfler, 
 216 U. S. 524, 54 L. ed. 602. In 
 Texas a married woman can not pur- 
 chase, but a trustee may take for her. 
 Texas So. R. Co. v. Harle, 101 Tex- 
 as 170, 105 S. W. 1107. A decree of 
 foreclosure and sale of a railroad, 
 entered by consent of creditors and 
 the company, without fraud, and in 
 pursuance of a plan of reorganiza- 
 tion, will not be set aside at the 
 
 suit of some of the stockholders 
 merely because the principal of one 
 mortgage was not yet due, when the 
 sums due for interest thereon, for 
 floatitig indebtedness, and on other 
 mortgages then due, were so great 
 as to render foreclosure inevitable, 
 and when complainants do not offer 
 to do equity by paying the floating 
 dfebt, and have not been diligent in 
 opposing the plan or reorganization, 
 or in attacking the decree complained 
 of. Carey v. Houston &c. R. Co., 52 
 Fed. 671. But see Northern Pac; R. 
 Co. v. Boyd, 228 U. S. 482, 33 Sup. 
 Ct. 554, 57 L. ed. 931 ; Balleiityne v. 
 Smith, 205 U. S. 285, 51 L. ed. 803. 
 Trustee has implied authority to buy 
 in property for benefit of bondholders 
 at a figure sufficient to cover debt, 
 interest and costs so long as it does 
 not exceed value of the property. 
 Nay Aug Lumber Co. v. Scranton 
 Trust Co., 240 Pa. 500, 87 Atl. 843. 
 25 Duncan v. Mobile &c. R. Co., 3 
 Woods (U. S.) 567', Fed. Ca«. No. 
 4139 ; Farmers' Loan &c. Co. v. Green 
 &c. R., 6 Fed. 100; American 
 Water &c. Co. v. Farmers' Loan &c. 
 Co., 1i Fed. 956; Rumsey v. People 
 &c. R., 154 Mo. 215, 55 S. W. 615. 
 And the mortgage may so provide. 
 Child v. New York &c. R., 129 Mass. 
 170. See also Easton v. German-Am- 
 erican Bank, 127 U. S. 532, % Sup. Ct. 
 1297, 32 L. ed. 210. A sale to bond- 
 
§598 
 
 RAILKOADS 
 
 882 
 
 if there are no prior lienholders whose claims are unsatisfied.^® 
 
 § 598 (522). Sale on default in payment of interest — Sale of 
 road as an entirety. — Where a trust deed provides that the road 
 and property shall be sold upon a default in the payment of prin- 
 cipal or interest, but one sale is contemplated, and sufficient 
 property should be sold to, realize the debt, although default has 
 been made in the payment of interest only. And if the property 
 cannot be sold in parts without injury to the whole, it may be 
 sold as an entirety. ^'^ And even though the mortgaige contains 
 no provision making the whole debt due upon a default in the 
 payment of interest, a sale of the whole property may be decreed 
 
 holders' committee, however, ordinar- 
 ily makes the members individually 
 liable for the purchase price. Mid- 
 dendorf v. Baltimore &c. Co., 117 Md. 
 443, 84 Atl. ISO. 
 
 26 Sanxey v. Iowa City Glass Co., 
 68 Iowa 542, 27 N. W. 747. Debts 
 contracted in conserving the property 
 and maintaining its value as a go- 
 ing concern are usually considered 
 preferred claims and paid before the 
 mortgage debt is satisfied. Far- 
 mers' &c. Co, v. Kansas City &c. 
 R. Co., 53 Fed. 182; Seibert v. Min- 
 neapolis &c. R. Co., 58 Minn. 53, 59 
 N. W. 879. See Finance Company v. 
 Charleston &c. R. Co., 61 Fed. 369; 
 Bound v. South Carolina R. Co., 58 
 Fed. 473. Post, §606. It has, how- 
 ever been held erroneous to direct 
 payment of claims for supplies fur- 
 nished prior to the receivership first 
 out of the proceeds of the sale, where 
 no provision was made for such pay- 
 ment when the receiver was ap- 
 pointed, and it does not appear that 
 current earnings, before or after his 
 appointment, were diverted to paying 
 the interest on the bonded debt. 
 Cutting V. Tavares &c. R. Co., 61 
 
 Fed. ISO. A claim for cutting and 
 clearing away timber from the road 
 for its original construction has also 
 been refused preference on foreclo- 
 sure of a prior mortgage on the road. 
 Barstow v. Pine Bluff &c. R. Co., 57 
 Ark. 334, 21 S. W. 652; Farmers &c. 
 Co. v. Candler, 81 Ga. 691, 18 S. E. 
 540. 
 
 27 Wilmer v. Atlanta &c. R Co., 2 
 Woods (U. S.) 447, Fed. Cas. No. 
 17776; Chicago &c. R. Co. v. Fos- 
 dick, 106 U. S. 47, 1 Sup. Ct. 10, 27 
 L. ed. 47; Peoria &c. R. Co. v. 
 Thompson, 103 111. 187. This is the 
 general rule as to the sale of mort- 
 gaged property, which cannot' readily 
 be divided. Bound v. South Carolina 
 R. Co., SO Fed. 853; Farmers' Loan 
 &c. Co. V. Oregon &c. R. Co., 24 Fed. 
 407; Kneeland v. American Loan &c. 
 Co., 136 U. S. 89, 10 Sup. Ct. 950, 34 
 L. ed. 319; 2 Jones Mort., §§1181, 
 1459, 1478, 1616, 1619. See also 
 Clearwater &c. Bank v. Bagley &c. 
 Tel. Co., 116 Minn. 4, 133 N. "W. 91, 
 Ann. Cas. 1913A, 622, 624, 36 L. R. A. 
 (N. S.) 1132, and note citing many 
 other cases to this effect. 
 
883 
 
 SALE AND REORGANIZATION 
 
 §598 
 
 by a court of equity, if it cannot be divided without injury .** Or, 
 it seems that the court may, in a proper case, direct that the 
 property be leased for such a period as will secure the payment 
 of the sum due and the interest accruing.^* Where suit is 
 brought to foreclose a railroad mortgage for default in payment 
 of interest, the court may properly enter a decree nisi, ascertain- 
 ing the amount of interest due, and giving the debtor a reason- 
 able time to pay it; and directing that in case of non-payment, 
 the property be sold, and the proceeds applied to the payment of 
 both interest and principal. But under such a decree the debtor 
 may redeem at any time before the sale is confirmed by payment 
 of the unpaid interest and costs.^** The rule stated at the begin- 
 ning of this section requiring or permitting the sale of the road 
 as an entirety for default in payment of interest does not apply 
 in all cases. If the property is divisible, and interest only is due, 
 there being no provision making the whole debt due, it has been 
 held that no more should be sold than will pay the accrued in- 
 
 28 See McLane v. Placerville &c. 
 R. Co., 66 Cal. 606. 6 Pac. 748. In 
 Peoria &c. R. Co. v. Thompson, 103 
 111. 187, Mr. Justice Mulkey, in de- 
 livering the opinion of the court, 
 said : "When a railway, its appur- 
 tenances, privileges and franchises 
 are mortgaged as a whole, there is in 
 our opinion, no power or authority to 
 sell them separately. From the very 
 nature of the property, one would be 
 useless without the other. The fran- 
 chise could not be used at all without 
 the road, and the road could not law- 
 fully be used, as against the state, 
 without the franchise. Under such 
 circumstances, to avoid the possibility 
 of conflicting ownerships, the law 
 has wisely determined that both must 
 be sold as an entirety. Chicago, Dan- 
 ville and Vincennes R. Co. v. Loewen- 
 thal, 93 111. 433." As supporting the 
 text, see Jones on Corporate Bonds 
 and Mort., § 634. Some of the states 
 
 have statutes providing for the sale 
 of a mortgaged railroad upon fore- 
 closure as an entiret}'. See Jones 
 on Corp. Bonds and Mort., S 634, and 
 note, citing laws of Indiana, New 
 Jersey, Kansas, Kentucky and New 
 York. 
 
 2» Bardstown &c. R. Co. v. Met- 
 calfe, 4 Met. (Ky.) 199. But com- 
 pare Duncan v. Atlantic &c. R. Co., 
 4 Hughes (U. S.) 125. 
 
 30 Chicago &c. R. Co. v. Fosdick, 
 106 U. S. 47, 1 Sup. Ct. 10, 27 L. ed. 
 47. See also Howell v. Western R. 
 Co., 94 U. S. 463, 24 L. ed. 254. But 
 sale should usually be made without 
 right of redemption, even though 
 statute may give right or redemption 
 from foreclosure sales of real estate. 
 Clearwater &c. Bank v. Bagley &c. 
 Tel Co., 116 Minn. 4, 133 N. W. 91, 
 36 L. R. A. (N. S.) 1132, Ann. Cas. 
 1913A, 622, 626, and other cases there 
 cited. 
 
§ 599 RAILROADS 884 
 
 terest, and then, upon a second default, a further order of sale 
 may be made.^^ So, in case of divisional mortgages, the courts 
 have refused, in several instances, to order the entire system 
 sold.32 
 
 § 599 (523). Sale of consolidated road — Sale by receiver pend- 
 ing foreclosure. — A road formed by the consolidation of several 
 roads, each of which was subject to a mortgage before consolida- 
 tion, may properly be sold as an entirety upon foreclosure, where 
 it will sell to better advantage as a whole than if sold in divisions, 
 and the interest of the several mortgagees in the fund arising 
 from the sale may be settled, by a decree of the court.^^ But 
 where the holders of a general mortgage elect to have the road 
 sold in this manner, the holder of a prior lien upon one division 
 of the road, is entitled to have his claim paid out of the aggre- 
 gate proceeds of the sale of the entire property before any pay- 
 ment is made to the holders of the general mortgage.-^* In a 
 proper case, where the property is of such a nature as to deterior- 
 ate rapidly in value, when not in use, and is plainly insufficient in 
 value to meet the company's indebtedness, and where the income 
 
 3 1 Jones Corporate Bonds and as all interested. Farmers' Loan &c. 
 Mort., § 634, citing Fleming v. Sout- Co. v. Cape Fear &c. R. Co., 82 Fed. 
 ter, 6 Wall. (U. S.) 747, 18 L. ed. 344; Cleveland First Nat. Bank v. 
 847; Tillinghast v. Troy &c. R. Co., Shedd, 121 U. S. 74, 7 Sup. Ct. 807, 
 48 Hun 420, 425, 1 N. Y. S. 243, per 30 L. ed. 871 ; Gibert v. Washington 
 Learned P. J. See also Union Trust City &c. R. Co., 33 Grat. (Va:) 586. 
 Co. V. St. Louis &c. R. Co., S Dill. See next following section. 
 
 (U. S.) 1, 24 Fed. Cas. No. 14, 403; 33 Gibert v. Washington &c. R 
 
 Farmers' Loan &c. Co. v. Chicago Co., 33 Grat. (Va.) 586; Campbell 
 
 &c. R, Co., 27 Fed, 146; McFadden v. Texas &c. R. Co., 2 Woods (U. 
 
 V. Mays Landing &c. Co., 49 N. J. S.) 263, Fed. Cas. No. 2369. See al- 
 
 Eq. 176, 22 Atl. 932. so last note to last preceding section. 
 
 32 Wabash &c. R. Co. v. Central 3* Farmers' Loan &c. Co. v. New- 
 Trust Co., 22 Fed. 138; Union Trust man, 127 U. S. 649, 8 Sup. Ct. 1364, 
 Co. V. Illinois Midland R. Co., 117 32 L. ed. 303. Where advantageous, 
 U. S. 434, 6 Sup. Ct. 809, 29 L. ed, the road may be sold in separate sys- 
 963 ; Campbell, v. Texas &c.- R. Co., tems or divisions, especially where 
 2 Woods (ir. S.) 263, 4 Fed. Cas. there are separate divisional mort- 
 No. 2369./ But such a sale may be gages. Metropolitan Trust Co. v. 
 ordered where it is for the advantage Chicago &c. R. Co., 253 Fed. 868. 
 
 of the divisional bondholders as well 
 
885 SALE AND REORGANIZATION § 600 
 
 from the property will not meet the expense of necessary re- 
 pairs, it has been held that the court may order the road and its 
 franchise sold by the receiver pending a foreclosure suit.*^ 
 
 § 600 (524). Discretion of trustees and officers as to time and 
 manner of sale. — After a decree of foreclosure has been obtained, 
 the mortgage trustees are generally invested with discretion 
 as to when they will sell the property under the decree, or 
 whether they will sell it at all pending an appeal, subject, how- 
 ever, to the control which the court has over the execution of its 
 own decrees, and when the trustees think it best for all the bond- 
 holders that the decree should not be executed pending the dp- 
 peal the court will not order them to have it executed on the ap- 
 plication of a portion of the bondholders.^® When a sale is or- 
 dered made by the proper officer of the court it has been held 
 that he must exercise a sound legal discretion as to the manner 
 of conducting the sale, and as to whether he will strike off the 
 property for such bids as are received, or will adjourn the sale 
 Until the attendance of bidders who will pay a reasonable value 
 for it can be obtained.^'' And the court will decline to interfere 
 
 ssMiddleton v. New Jersey &c. R. and usually does fix the limit of 
 
 Co., 2€ N. J. Eq. 269. And, on the time within which it is to be 
 
 other harid, a sale of a portion of made. See Columbia Finance &c. 
 
 the mortgaged property may be post- Co. v. Kentucky Union R. Co., 60 
 
 poned until a sale of all where such Fed. 794 ; Chicago &c. R. Co. v. 
 
 portion can not be operated except in Fosdick, 106 U. S. 47, 1 SuJ). Ct. 
 
 connection with the rest. Morton 10, 27 L. ed. 47. 
 
 Trust Co. V. Metropolitan St. R. Co., 37 Blossom v. Railroad Co., 3 
 
 179 Fed. 1010. ' Wall. (U. S.) 196, 18 L. ed. 43. In 
 
 36 Farmers' Loan &c. Co. v. this case four separate adjourn- 
 
 Central R. Co., 4 Dill. (U. S.) 533. meats were had extending over a 
 
 Fed. Cas. No. 4663. See also period of seven months, although 
 
 Thomas v. San Diego &c. Co., Ill bids had been received in the 
 
 Cal. 358, 43 Pac. 965. The supreme meantime, and it was held that 
 
 court will not interfere by man- such adjournments were within 
 
 damns to compel the exeeutiori of the discretion of the officer. It 
 
 the decree of the lower coUrt by was also held that, while it was 
 
 a sale of the road. Jones on Corp. ctistomary for the officer to act 
 
 Bonds and Mort., § 640. But the under the advice of the complain- 
 
 court may, of course, fix the time ant's solicitor, unreasonable di- 
 
§601 
 
 RAILROADS 
 
 886 
 
 with this discretion and order an immediate sale at the request 
 of a part of the bondholders, where it does not clearly appear 
 that their rights are prejudiced by the delay."* The rules above 
 stated, of course, fully apply only in the absence of a governing 
 statute, expressly, or impliedly, depriving the trustee or officer 
 of any discretion as to the time and manner of the sale. 
 
 § 601 (525). Effect of sale — Purchaser's title.— The franchise 
 of being a corporation, not being a part of the mortgaged secur- 
 ity, does not pass upon a foreclosure sale.^® The corporate exis- 
 tence of a company is not destroyed by the transfer of all its 
 property to another corporation,*' unless the statute so pro- 
 
 rections of the solicitor were not 
 obligatory and should not be fol- 
 lowed. So, it has been held that 
 the court may confirm a sale made 
 on a day different from that fixed 
 by the court. Farmers Loan &c. 
 Co. V. Oregon Pac. R. Co., 28 Ore. 
 44, 40 Pac. 1089. It is not meant, 
 of course, in stating that the 
 officer has certain discretion that 
 his action is final or not subject 
 to review. See generally as to 
 discretion and manner of conduct- 
 ing sale, 3 Thomp. Corp. (2nd. ed.), 
 §§ 2672, 2674, 267S. 
 
 38 Farmers Loan &c. Co. v. 
 Central R. Co., 4 Dill. (U. S.) 
 533, Fed. Cas. No. 4663. 
 
 39 Memphis &c. R Co. v. Rail- 
 road Comrs., 112 U. S. 609, 5 Sup. 
 Ct. 299, 28 L. ed. 837; Norfolk &c. 
 R. Co. V. Pendleton, 156 U. S. 
 667, 15 Sup. Ct. 413, 39 L. ed. 574; 
 Commonwealth v. Smith, 10 Allen 
 (Mass.) 448, 87 Am. Dec. 672; Peo- 
 ple V. Cook, 110 N. Y. 443, 448, 18 
 N. E. 113, 36 Am. & Eng. R. Cas. 
 256, 258; Atkinson v. Marietta &c. 
 R. Co., 15 Ohio St. 21; Western 
 Penn. R. Co. v. Johnston, 59 Pa. 
 
 St. 290; Bank of Middlebury v. 
 Edgerton, 30 Vt. 182, 190; Miller 
 V. Rutland &c. R. Co., 36 Vt. 452, 
 498. In Meyer v. Johnson, 53 Ala. 
 237, 325. Mr. Justice Manning, 
 speaking for the court, said: 
 "Strictly, 'the franchise to exist 
 as a corporation' is not a corpor- 
 ate franchise, or 'franchise of the 
 corporation' at all. It is a fran- 
 chise of the individual corporators, 
 of the natural persons who are 
 ■shareholders of the capital stock, 
 and pertains to them as such 
 corporators, whereby they are en- 
 dowed with the privilege and capacity 
 of being constituted into and co- 
 operating together, as a body politic, 
 with power of succession, and with- 
 out individual liability. And the cor- 
 poration as such, in its collective ca- 
 pacity or by its board of directors, 
 has no more power to sell this fran- 
 chise thus pertaining to the corpora- 
 tors individually than it has to sell 
 their paid-up shares of the capital 
 stock." 
 
 *o Bruffett v. Great Western R. 
 do., 25 111. 3S3; Arthur v. Com- 
 mercial & R. Bank, 9 S. & M. 
 
887 
 
 SALE AND REORGANIZATION 
 
 §601 
 
 vides.*^ It continues in existence, until formally dissolved, for 
 the purpose of collecting and paying debts, and performing such 
 functions as it may without the ownership of its property.*^ In 
 the absence of any statute or agreement to the contrary, the fore- 
 closure and sale, duly confirmed, cuts oflf all the interest of the 
 corporation and stockholders or general creditors claiming under 
 it in the mortgaged property.** The purchaser at a foreclosure 
 sale takes only the property which the decree ordered to be 
 sold,** together with the accompanying rights and franchises 
 necessary to its profitable use and lawfully included in the mort- 
 gage and sale.*^ In a very recent case it was held by the Su- 
 
 (Miss.) 394; Wright v. Milwau- 
 kee &c. R. Co., 25 Wis. 46. See 
 also State v. Superior Court, 31 
 Wash. 445, 72 Pac. 89, 66 L. R. A. 
 897. 
 
 41 Even where the statute so 
 provides, an illegal and fraudu- 
 lent sale does not work a disso- 
 lution. White Mountains R. Co. 
 V. White Mountains R. Co., 50 N. 
 H.. SO. 
 
 42 Smith V. Gower, 3 Met. 
 (Ky.) 171, 2 Duv. (Ky.) 17; Wright 
 V. Milwaukee &c. R. Co., 25 Wis. 
 46.' 
 
 , 48 Vatable v. New York &c. R. 
 Co., 96 ^N. Y. 49; Thornton v. Wa- 
 bash :R. Co., 81 N. Y. 462; Car- 
 penter V. Catlin, 44 Barb. (N. Y.) 
 75. See also Canada Southern 
 R. Co. V. Gebhard, 109 U. S. 527, 
 3 Sup. Ct. 363, 27 L. ed. 1020. 
 
 4* Ostierberg v.' Union Trust 
 Co.,- -93 U. S. 424, 23 L. ed. 964; 
 Frank v. New York Sic. R. Co., 
 122 N. Y. 197, 25 N. B. 332; Jones 
 Corp. Boiids and" Mort., §694. 
 Oalj*! 'prop'erty covered by th6 
 mortgage.-' Wilmington- &'c. R. 
 Co. V. Dowhard, -8 Houst: ■ 227 
 (Del.), 14 Atl. 720, 32 Atl. 133, 40 
 
 Am. St. 141; St. Louis Bridge Co. 
 V. Curtis, 103 111. 410; Aldridge v. 
 Pardee, 24 Tex. Civ. App. 254, 60 
 S. W. 789; Milwaukee &c. R. Co. 
 V. Milwaukee &c. R. Co., 20 Wis. 
 174, 88 Am. Dec. 740. As to what 
 passes under sale of "railroad," 
 see Knevals v. Florida Cent. R. 
 Co., 66 Fed. 224. 
 
 45 New Orleans &c. Co. v. Dela- 
 more, 114 U. S. 501, 5 Sup. Ct. 1009, 
 29 L. ed. 244; North Carolina &c. 
 R. Co. y. Carolina &c. R. Co., 83 
 N.' Car. 489; Wright v. Milwau- 
 kee &c. R. Co., 25 Wis. 46.' In a 
 proper case the franchise to op- 
 erate the road may pass. Mem- 
 phis &c. R Go. V. Railroad ' Corhfs.j 
 112 U. S. 609, 5 Sup. Ct. 299, 28 L'. 
 ed. 837; Gunnison v. Chicago &c. 
 R. Co., 117 Fed. 629; State v. 
 Central Iowa R. Co., 71 Iowa 410, 
 32 N. W. 409, 60 Am. Rep.' 806''; 
 Parker v. Elmira &c. R; Co., 16.5 
 N. Y: 274, 59 N. E. 81. So, it has 
 been held that the purchaser at 
 foreclosure sale of a street rail- 
 way mortgage will take contracts 
 held by the mortgagor for rights 
 of way over railroad' tracks! 
 Louisville &c. R. Co. v.' Central 
 
§ 601 RAILROADS 
 
 preme Court of the United States that an exemption from taxa- 
 tion, which was i;njoyed by one of several companies afterwards 
 consolidated, did not pass to the consolidated company because 
 
 Ky. Trac. Co., 147 Ky. S13, 144 S. 
 W. 739. But compare Evansville 
 &c. Trac. Co. v. Evansville Belt R. 
 Co., 44 Ind. App. 155, 87 N. E. 21. 
 As to right of eminent domain, 
 see Lawrence v. Morgan's &c. R. 
 Co., 39 La. Ann. 427, 2 So. 69, 4 
 Am. St. 265 (holding that it passed 
 to the purchaser) ; North Carolina 
 &c. R. Co. v. Carolina Cent. R. 
 Co., 83 N. Car. 489. The question 
 whether a right of exemption 
 from taxation enjoyed by the old 
 corporation passed to the pur- 
 chaser or not has been much liti- 
 gated. The answer to this ques- 
 tion must depend upon the intent 
 of the charter or statute by which 
 such right was conferred. The 
 Supreme Court of the United 
 States has held in a number of 
 cases that an exemption from tax- 
 ation is not a franchise which will 
 pass by a conveyance of the prop- 
 erty and franchises. And that a 
 statute authorizing the mortgage 
 of the property and franchise of a 
 corporation does not include the 
 mere personal privilege like ex- 
 emption from taxation. Trask v. 
 Maguire. 18 Wall. (U. S.) 391, 21 
 L, ed. 938; Morgan v. Louisiana, 
 93 U. S. 217, 23 L. ed. 860; Wilson 
 v. Gaines, 103 U. S. 417, 26 L. ed. 
 401; Louisville &c. R. Co. v. 
 Palmes, 109 U. S. 244, 3 Sup. Ct. 
 193, 27 L. ed. 922; Memphis &c. R. 
 Co. v. Railroad Comrs., 112 U. S. 
 609, S Sup. Ct. 299, 28 L. ed. 831; 
 Chesapeake &c. R. Co. v. Miller, 
 
 114 U. S. 176, 5 Sup. Ct.. 813, 29 L. 
 ed. 121. But where a sale is made 
 by authority of the state, of all 
 rights, privileges and immunities 
 of the company, as well as its 
 property and franchise, the state 
 cannot assert any rights against 
 the purchaser which it did not 
 have as against the old corpora- 
 tion. Knoxville &c. R. Co. v. 
 Hicks, 9 Baxt. (Tenn.) 442, com- 
 mented on in Wilson v. Gaines, 
 M)3 U. S. 417, 26 L. ed. 401; Wil- 
 mington &c. R. Co. V. Alsbrook, 
 146 U. S. 279, 297, 13 Sup.' Ct. 72, 
 36 L. ed. 972; Nichols v. New 
 Haven &c. R. Co., 42 Conn. 103; 
 Atlantic &c. R. Co. v. Allen, IS 
 Fla. 637; Gonzales v. Sullivan, 16 
 Fla. 791; First Division of St. 
 Paul &c. R. Co. v. Parcher, 14 
 Minn, 297; Chicago &c. R. Co. v. 
 Pfaender, 23 Minn. 217; Hand v. 
 Savannah &c. R. Co., 17 S. Car. 
 219; Jones Corp. Bonds and Mort., 
 § 693. The privilege of regulat- 
 ing its charges conferred upon a 
 railroad company does not pass to 
 the purchasers under a mortgage 
 foreclosure sale, and the reorgani- 
 zation by such purchasers is the 
 formation of a new corporation, 
 subject to the laws in force at the 
 time of the reorganization. Dow 
 v. Beidelman, 49 Ark. 325, 455, 5 
 S. W. 297, 12S U. S. 680, 8 Sup. 
 Ct. 1028, 31 L. ed. 841. But see 
 Parker v. Elmira &c. R. Co., 165 
 N. Y. 274, 59 N. E. 81. 
 
889 SALE AND REORGANIZATION § 602 
 
 of the adoption ot a new constitution, in the meantime, prohibit- 
 ing such exemption, and that the purchaser at foreclosure sale 
 obtains no exemption from taxation and could not successfully- 
 set up as a defense to an action for taxes a judgment rendered 
 in favor of the company in a prior action by the county against 
 it for taxe's, nor a decree against the county in favor of certain 
 stockholders enjoining the collection of taxes for other years. 
 Neither the mortgage trustee nor the bondholders w^ere parties 
 to these proceedings, and the court held that the purchaser could 
 not avail himself of the judgment or decree because of the lack 
 of privity between the parties.** 
 
 § 602 (525a). What passes to purchaser at foreclosure sale. — 
 
 As stated in the last preceding section, the franchise to be a cor- 
 poration does not pass at foreclosure sale. So, it has been held 
 that charter grants, such as the franchise to charge certain rates, 
 do not constitute a contract protected by the federal constitution, 
 but are matters of law and subject to the law in force at the time 
 of the purchase, reorganization and grant of the right to become 
 a new corporatior..*^ And, in ,i recent case, it was held that the 
 successor of the Union Pacific Railroad Company by purchase 
 under a first mortgage foreclosure sale did not take the property 
 free from the obligation under an act, passed after the -execution 
 of the mortgage in the exercise by congress of its reserved right 
 to alter, amend or repeal, to permit the joint use, by the trains 
 of all roads terminating at Omaha, of the bridge authorized by 
 the statute to be constructed at that point by the Union Pacific 
 Railroad Company .^^ But, while the right of a corporation to 
 
 46 Keokuk &c. R. Co. v. Mis- Light &c. Co. v. Chicago, 194 U. 
 
 souri, 152 U. S. 301, 14 Sup. Ct. S. 1, 24 Sup. Ct. 520, 48 L. ed. 851 ; 
 
 592, 38 L. ed. 450. See also Coving- Hooker v. Burr, 194 U. S. 415, 24 
 
 ton &c. Co. y. Sandford, 164 U. Sup. Ct. 706, 48 L. ed. 1046; Union 
 
 S. 578, 17 Sup. Ct. 198, 41 L. ed. Pac. R. Co. v. Mason City &e. R. 
 
 560; Kentucky Cent. R, Co. v. Co., 199 U. S. 160, 170, 26 Sup. Ct. 
 
 Commcnwealth, 87 Ky. 661, 10 S. 19. 50 L. ed. 134. 
 W. 269; and see ante, §§380, 381. '•s Union Pac. R. Co:i'y. Mason 
 
 *■? Grand Rapids &c. R. Co. v. City &c. R. Co., 199 U.. S. 160, 26 
 
 Osborn, 193 U. S. 17, 24 Sup. Ct. Sup. Ct. 19, 50 L. ed. 134. 
 310, 48 L. ed. 598; People's Gas 
 
§603 
 
 RAILROADS 
 
 890 
 
 exist may not be mortgaged or sold, all its contract rights, as a 
 general rule, with other corporations or individuals may be, 
 including a contract with a city as to rates, and, upon foreclosure 
 of a mortgage covering them, they usually pass to the purchaser 
 at the foreclosure sale.*® 
 
 § 603 (526). When purchaser takes title free from liabilities 
 and liens.-^The purchaser generally takes the property freed 
 "from the debts^" and contracts of the vendor,^^ except sO far as 
 
 49 Vicksburg v. Vicksburg Wat- 
 erworks Co., 202 U. S. 453, 26 Sup. 
 Ct. 660, SO L. ed. 1102; Julian v. 
 Central Trust Co., 193 U. S. 93, 
 106, 24 Sup. Ct. 399, 48 L. ed. 629; 
 Omaha Water Co. v. Omaha, 147 
 Fed 1. As to the difference be- 
 tween charter rights and contract 
 rights, see also Detroit v. De- 
 troit Citizens' St. R. Co., 184 U. S. 
 387-389, 22 Sup. Ct. 410, 417-419, 
 46 L. ed. SS9.' 
 
 50 Hopkins v. St. Paul &c. R. 
 Co., 2 Dill. (U. S.) 396, Feid: Cas. 
 No. 6690; Sullivan v. Portland &c. 
 R. Co., 94 U. S. 806, 24 L. ed. 324; 
 Cooper . V. Corbin, lOS 111. 224; 
 Lake Erie &c.,R. Co. v. Griffin, 92- 
 Ind. 48;7; Moyer v." Ft., Wayne &c. 
 R; Co.! 132 Ind. 88, 31 N. E. 567;' 
 Cook V. Detroit &c. R. Co., 43 
 Mich. 349, 5 N. W. 390, 9 Am. & 
 Engv R. Gas. 443 ; Lincoln Twp. v. 
 KansasiCity &C.-R. Co., 77 Nebri 79, 
 108 -N. W. 140; North Hudson 
 County- :Rii: Co. v.= Bboraem, 28-'N. 
 J. Eq. 450; Vatab'le v. New York 
 &o. R. Co., 96:N.-Y. 49; Vilas v. 
 Page, 106 N. Y. 439, 13 N. E. 743; 
 WeiM)orough &c. Co. v. -Griffin, 
 57 - Pa. : St. 417,; Pennsylvania 
 Transp. Cb.'S Appeal, 101 Pa. St. 576 
 (not liable on judgment against 
 
 old company) ; Ryan v. Hays, 62 
 Tex. 42; Gilman v. Sheboygan &c. 
 R. Co., 37 Wis. 317. The purchas- 
 er of a railroad at foreclosure 
 sale is not liable for damages oc- 
 casioned by the acts of the old 
 company, which had already ac- 
 crued at the time of the purchase. 
 Hammond v. Port Royal &c. R. 
 Co., IS S. Car. 10. (Injuries done 
 to adjoining land.) Where one 
 railroad company is sold to an- 
 other, a person having a claim 
 against the former for damages 
 on account of personal injuries 
 cannot maintain an action against 
 the latter; and the old company 
 having been dissolved by the sale, 
 his only right of action remain- 
 ing is against the stockholders qf 
 the old company, who received 
 the purchase money. Chesapeake 
 &c. Co. V. Griest, 85 Ky. 619, 30 
 Am. & Eng. R. Cas. 149; Louis- 
 ville &c. R. Co. v.- Orr, 91 Ky. 
 109, 'IS S. W. 8; Powell v. NortH 
 Missouri R. Co., 42 Mo. 63. '■'■ 
 
 51 Hoard v. Chesapeake &c. R; 
 Co., 123 U. S. 222, 8 Sup. Ct. 74, 
 31 L.' ''ed. 130; Menasha v. ' Mil- 
 waukee &c. R. Co., 52 Wis. 414, 
 9N. W. 396; People- v." Louisville 
 &c. R."' Co.,' 120 111. 48, iO N. E. 
 
891 
 
 SALE AND REORGANIZATION 
 
 §603 
 
 his title is made subject thereto by statute^- or by the terms of 
 
 657, and see original opinion in 
 same case in 5 N. E. 379, and 25 
 Am. & Eng. R. Cas. 235. See 
 Keeler v. Atchison &c. R. Co., 
 92 Fed. 545; Lake Erie &c. R. Co. 
 V, Griffin, 92 Ind. 487; Evansville 
 &c. Trac. Co. v. Evansville Belt 
 R. Co., 44 Ind. App. 155, 87 N. E. 
 21 ; Branson v. Oregonian R. Co., 
 11 Ore. 161, 2 Pac. 86; Houston 
 &c. R. Co. V. Shirley, 54 Tex. 125. 
 But compare Joy v. St. Louis, 138 
 IJ. S. 1, 11 Sup. Ct. 243, 34 L. ed. 
 843. The purchaser at the fore- 
 closure sale is not bound by a 
 parol agreement made by the 
 president of the railroad com- 
 pany to make a farm crossing and 
 to maintain a fence of a certain 
 description. Hunter v. Burling- 
 ton &c. R. Co., 76 Iowa 490, 41 
 N. W. 305. Nor is he bound by a 
 contract of the corporation to 
 maintain a depot at a certain 
 place. Gulf &c. R. Co. v. Newell, 
 73 Tex. 334, 11 S. W. 342, IS Am. 
 St. 788; People v. Rome &c. R. 
 Co., 103 N. Y. 95, 8 N. E. 369. Even 
 though the consideration of the 
 contract was a large sum of 
 money voted by the people of the 
 county upon condition that the 
 depot should be forever rnain^ 
 tainedj and the railroad was em- 
 power by its charter to receive 
 the aid and to make the contract. 
 People V. Louisville &c. R. Co., 
 120 111. 48, 10 N. E. 657. But it 
 was h"eld by the supreme court of 
 Iowa that a railroad company 
 that has purchased a line of road 
 at a foreclosure sale of an in- 
 
 solvent company, part" of which 
 line was constructed and equipped 
 with money raised by taxes voted 
 to it by a town, assumes the ob- 
 ligations of the company whose 
 line it purchased, and cannot lease 
 such line to another company, so 
 as to surrender the exclusive use 
 thereof, and, by ce^ising to oper- 
 ate it, deprive the town of the 
 .benefits intended to be derived 
 therefrom. State v. Central Iowa 
 R. Co., 71 Iowa 410, 32 N. W. 409, 
 60 Am. Rep. 806. But compare 
 Sherwood v. Atlantic &c. R. Co., 
 94 Va. 291, 26 S. E. 943. _ A con- 
 tract between two railroad com- 
 panies in relation to the carriage 
 of freights and division of earn- 
 ings, providing that this "contract, 
 and any damages for the breach 
 of the same, shall be a continuing 
 lien upon the roads of the two 
 contracting companies, their 
 equipment and income, in whoso- 
 ever hands they may come," does 
 not constitute a lien or obligation 
 running with the land, so as to 
 make it liable in the hands of a 
 purchaser of one of them for 
 earnings that would have accrued 
 during the term of the contract. 
 Des Moines &c. R. Co. v! Wa- 
 bash &c. R. Co.; 135 U. S. 576,.' 10 
 Sup. Ct. 753, 34 L. ed. 244. 
 
 52 Statutory liens upon the 
 property existing at the time of 
 the sale continue to operate as 
 liens upon it after the transfer. 
 Hervey v. Illinois Midland R. Co., 
 28 Fed. 169. Where the Statute 
 declares judgments fo/t personal 
 
§603 
 
 RAILROADS 
 
 892 
 
 the order of sale.''* The act providing for the reorganization 
 of the purchasers into a new corporation may, however, require 
 that it shall assume certain debts and liabilities of its predecessor, 
 in which the acceptance of the act amounts to an assumption of 
 the payment of all claims. s* Or the decree of the court may 
 order the sale to be made subject to certain liabilities, in which 
 case the purcha;ser's title is based upon the decree, and he can- 
 not question its validity, nor dispute the liability which it im- 
 poses upon him.^"' The purchaser also takes his title subject, of 
 course, to all prior valid liens, of which he had or ought to have 
 had notice, not cut off by the foreclosure proceedings.^^ But he 
 
 injuries to be a prior lien upon 
 the property of railroad com- 
 panies, the purchasers of the 
 property of such a company upon 
 foreclostire of mortgage takes it 
 subject to all .unpaid judgments 
 of this class.. ,-And it has been 
 held that the purchasers were 
 bound to perform a contract en- 
 tered into by the old company for 
 th^ payment of money in liquida- 
 tion, of a ql^im for personal in- 
 juries. Frazier v. East Tennessee 
 &c. R. Co., 88 Tenn. 138, 12 S. W. 
 537. , ' . . 
 
 5a Hukle y. Atchison &c. R. Co., 
 ?1 Kans. 2S1, 80 Pac. 603 (quoting 
 text)... See Central Ind. R. Co. v. 
 Grantham, 143 Fed. 43, 52. If the 
 sale is authorized by law, the pur- 
 chaser ordinarily t^kes the prop- 
 erty free from any liability for 
 existing debts not secured by 
 prior liens and from all obliga- 
 ■tions of the mortgagor of a 
 strictly personal character. See 
 also Texas Cent. R. Co. v. Lyons 
 (Tex. Civ. App.), 34 S. W. X6^; 
 Pallas Consol. Trac. Co. v. Mad- 
 dox (Tex. Civ. App.), 31 S. W. 
 
 54 St. Louis &c. R. Co. V. Miller, 
 43 III. 199. See also Welsh, v. First 
 Div. St. Paul &c, R. Co., 25 Minn. 
 314; New Bedford R. Co. v. Old 
 Colony R. Co., 120 Mass. 397. 
 
 55 Swann v. Wright, 110 U. S. 590, 
 4 Sup. Ct. 235, 28 L. ed. 252; Far- 
 mers Loan &c. Co. v. Central R. Co., 
 17 Fed. 758; Brown v. Wabash R. 
 Co., 96 111. 297; Wabash R. Co. v. 
 Stewart, 41 III. App. 640. . See also 
 Williams v. Morgan, 111 U. S. 684, 4 
 Sup. Ct. 638, 28 L. ed. 559 ; Olcott v. 
 Headrick, 141 U. S. 543, 12 Sup. Ct. 
 81, 35 L. ed. 851 ; Riffe v. Wabash R. 
 Co., 200 Mo. App. 397, 207 S..W. 78; 
 Vilas v. Page, 106 N. Y. 439, 13 N. 
 E. 743. 
 
 56 Ketchum v. St. Louis, 101 U. S. 
 306, 25 L. ed, 999; Brooks v. Railway 
 Co., 101 U. S. 443, 25 L. ed. 1057; 
 Western Union Tel. Co. v. Burling- 
 ton &c. R. Co., 11 Fed. 1; Morgan 
 Co. v. Thomas, 76 111. 120. A ven- 
 dor's lien for purchase-money may be 
 enforced against the property in the 
 hands of a corporation composed of 
 the bondholders, by whom it was pur- 
 chased. Western Division of West- 
 ern North Carolina R. Co. v. Drew, 
 3 Woods (U. S.) 691, Fed. Cas.. No. 
 
893 
 
 SALE AND REORGANIZATION 
 
 §603 
 
 may dispute the validity of, any such, liens except those, which 
 are adjudged in the order of sale to be superior to the title which 
 he purchased.^'' And in a recent case it is held that the pur- 
 chaser succeeds to all the rights of the former owner, and of the 
 holders of liens and claims foreclosed, as against an unfore- 
 closed lien, and may intervene in a suit to enforce such lien and 
 assert the equities and rights to which it has succeeded."* The 
 new company is also liable in equity upon the .contracts of its 
 predecessor in so far as it adopts them, and claims the benefit 
 for itself.^" Thus the purchasers at a foreclosure §ale of the 
 property of a railroad company have been held liable for unpaid 
 damages for lands appropriated as the right of way by the rail- 
 road company and occupied and used as such by the pur- 
 chasers.®" The purchasers may also, in a case where it is deemed 
 advisable, assume the payment of the debts of the old cor- 
 poration, and such an assumption will bind not only them but 
 also their assignees with notice.*^ 
 
 17434. But see Columbus &c. R. Co.'s 
 Appeal, 109 Fed. 177. An equitable 
 lien for damages connected with the 
 operation of the road by trustees can 
 be enforced against the property in 
 the hands of the new corporation 
 when it is shown that funds from 
 which the claim for damages should 
 have been paid passed into the hands 
 of the new corporation upon reor- 
 ganization. Stratton v. European &c. 
 R. Co., 76 Maine 269. See Houston 
 &c. R. Co. V. Keller, 8 Tex. Civ. App. 
 537, 28 S. W. 724. 
 
 57 Jones Corp. Bonds and Mort., 
 §§ 683, 68S, citing Hackensack Water 
 Co. V. DeKay, 36 N. J. Eq. 548, 555 ; 
 Swann v. Wright, 110 U. S. 590, 4 
 Sup. Ct. 235, 28 L. ed. 252; Central 
 Nat. Bank v. Hazard, 30 Fed. 484. 
 
 58 Connor v. Tennessee Cent. R. 
 Co., 109 Fed. 931, 54 L. R. A. 687. 
 
 59 Jacksonville &c. R. Co. v. Louis- 
 ville &c. R. Co., 150 111. 480, il N. E. 
 
 924; Lake Erie &c. R. Co. v. Griffin, 
 92 Ind. 487. See also Wiggins Ferry 
 Co. v. Ohio &c. R. Co., 142 U. S. 396, 
 12 Sup. Ct. 188, 35 L. ed. 1055;' Wal- 
 ker V. Wilmington &c. R. Co., 26 S. 
 Car. 80, 1 S. E. 366; Kansas City &c. 
 R. Co. V. Frohwerk, 68 Kans. 292, 74 
 Pac. 1124. But compare Sloss Iron 
 &c. Co. V. South Carolina R. Co., 85 
 Fed. 133. 
 
 60 Lake Erie &c. R. Co. v. Griffin, 
 92 Ind. 487; Western Pennsylvania. 
 R. Co. V. Johnston, 59 Pa. St. 290; 
 Gillison v. Savannah &;c. R. Co., 7 S. 
 Car. 173; White v. Nashville &c. R. 
 Co., 7 Heisk. (Tenn.) "5l8; Rio 
 Grande &c. R. Co. v. Ortiz,. 75 Tex. 
 602, 12 S. W. 1129; Gilman v. She- 
 boygan &c. R. Co., 37 Wis. 317, 40 
 Wis. 653. Compare Moyer v. Ft. 
 Wayne &c. R. Co.. 132 Ind. 88. 
 
 61 Blair v. Sf. Louis &c. R. Co., 24 
 Fed. 148, 25 Fed. 684. See also Island 
 City Bank v. Sachtleben, 67 Tex. 420. 
 
§'604 
 
 RAILROADS 
 
 894 
 
 § 604 (527). Disposition of proceeds of sale. — The proceeds of 
 the sale, after the payment of costs and any other claims properly 
 given preference, are applied first in satisfaction of bonds secured 
 by the mortgage foreclosed, giving to each bond its pro rata 
 share in case the proceeds are insufficient to satisfy the whole 
 debt.«2 But overdue coupons may be given a preference over 
 bonds which have not yet matured, especially when a part of the 
 series to which they belong had been redeemed before the defaulf 
 occurred.*^ Where a bondholder received the bonds in pledge 
 as collateral security for a loan, he is entitled to be repaid only 
 the amount of his loan with interest."* Any surplus remaining 
 after paying the expenses and satisfying the mortgage indebted- 
 ness goes to the corporation as a trust fund for the payment of 
 other Kens or creditors, and not first to the stockholders. And 
 an agreement between the bondholders and the stockholders by 
 which, in consideration of withdrawing opposition to the fore- 
 closure suit, the stockholders are to be paid a portion of the pur- 
 
 But see Heryey v. Illinois Midland R. 
 Co., 28 Fed.. 169, holding that the 
 assumption by the purchaser of debts 
 of the old cprporation creates a per- 
 sonal obligation only and not a lien 
 upon the property. And the same 
 eflfect as the last holding is also Col- 
 umbus &:c. R. Co.'s Appeal, 109 Fed. 
 177. 
 
 82 Barry v. Missouri &c. R. Co., 34 
 Fed. 829; Pinkard v. Allen, 75 Ala. 
 73; /Hodge's Appeal, 84 Pa. St. 359. 
 See also Claflin v. Sout;h Carolina 
 R. Co., 8 Fed. 118; Watkins v. Hill, 
 8 Pick. (Mass.) 522. All the bonds 
 secured by the same mortgage are 
 deemed to have been issued at the 
 same time, and there is no priority 
 in favor of any of them because they 
 bear lower numbers than others. 
 Stanton v. Alabama &c. R. Co., 2 
 Woods (U. S.) 523, Fed. Cas. No. 
 13297. See also Mason v. York &c. 
 
 R. Co., 52 Maine 82 ; Commonwealth 
 V. Susquehanna &c. R. Co., 122 Pa. 
 St. 306, 15 Atl. 448; Appeal of Reed, 
 122 Pa. St. 565, 16 Atl. 100, 3 Thomp. 
 Corp. (2nd ed.), §§2314, 2700. Nor 
 does it ordinarily make any diflference 
 what the purchaser paid for the 
 bonds. Duncombe v. New York &c. 
 R. Co., 84 N. Y. 190. 
 
 •■>* Stevens v. New York &c. R. Co., 
 13 Blatchf. (U. S.) 412, Fed. Cas. 
 No. 13406 ; Cutting v. Tavares &c. R. 
 Co., 61 Fed. 150; Commonwealth of 
 Virginia v. Chesapeake &c. Canal Co., 
 32 Md. 501. But see Ketchum v. 
 Duncan, 96 U. S. 659, 24 L. ed, 868. 
 
 •>* Morton v. New Orleans &c. R. 
 Co., 79 Ala. 590; Peck v. New York 
 &c. R. Co., 59 How. (N. Y.) Prac. 
 419; Rice's Appeal, 79 Pa. St. 168; 
 Jesup V. City Bank, 14 Wis. 331. See 
 also Duncombe V. New York &c. R. 
 Co., 84 N. Y. 190. 
 
895' SALE AND EEORGA-NIZATION §605; 
 
 cha§e <n?oney, is fraudulent as against the general creditors.^^ 
 On. asa)e for default in interest, the proceeds will usually be ap- 
 plied, "first, to the arrears of interest, then to the mortgage debt, 
 then to the junior incumbrances, according to their respective 
 priority of lien, and the surplus to the mortgagor."®? 
 
 §605 (527a). Disposition of proceeds — Purchaser not bound 
 to see that they are properly applied.^ — It is frequently provided 
 in the mortgage or trust deed that the purchaser shall not be 
 bound to see that the proceeds of a proper sale thereunder are 
 properly applied,'''' but, as a general rule at least, no such pro- 
 vision is necessary. The purchaser who is not a party thereto 
 is not responsible for the misapplication or misappropriation of 
 the proceeds.®^ So, _as he is not responsible and has no interest 
 in the fund after it is properly paid in, it has been held that 
 he cannot maintain an action to recover it where it has been 
 misapplied.*® 
 
 § 606 (528). Preferred claims — Six months' rule. — When a 
 court of chancery is requested by the mortgagees to appoint a 
 receiver of the railroad, pending proceedings for foreclosure, it 
 may, and usually will, in the exercise of a sound discretion, im- 
 pose such terms in reference to the payment from the income dur- 
 
 83 Railroad Co. v. Howard, 7 Wall. e^ See Coler v. Barth, 24 Colo. 31, 
 
 (U. S.) 392, 19 L. ed. 117. 48 Pac. 6S6; Mosca Milling Co. v. 
 
 66 Chicago &c. R. Co. v. Fosdick, Murto, 18 Colo. App.. 437, 72 Pac. 
 
 106 U. S. 47, 27 L. ed. 47. See Gair 287. 
 
 V. Tuttle, 49 Fed. 198; Chicago &c. R. 68 Damon v. Reeves, 62 Mich. 465, 
 
 Co. V. Peck, 112 111. 408. Citizens'^ 29 N. 'W. 42; Sinclair v. Learned, 51 
 
 Bank V. Whinery, 110 Iowa 390, 81 Mich. 335, 16 N. W. 672; Wood v. 
 
 N. W. 694 ; Perkins v. Stewart, 75 Augustine, 61 Mo. 46 ; Woodwine v. 
 
 Minn. 21, 11 N. W. 434; Real Estate Woodrum, 19 W. Va. 67. The first 
 
 Trust Co. V. Pennsylvania &c. Co., two cases hold that this rule applies 
 
 237 Pa. 311, 85 Atl. 365. Arid see even where the mortgagee it the 
 
 generally as to priority of liens and purchaser, but Hunter v. Wooldert, 
 
 adjustment of claims, 3 Thomp. Corp. 55 Tex. 433, seems to hold the con- 
 
 (2nd. ed.), §§2695-2718. As to reim- trar^. 
 
 bursement for payment of prior liens 69 Day v. New Lots, 107 N. Y. 148, 
 
 and the like, see Nickerson v. Atchj- 13 N. E. 915. 
 son &c. R. Co., 17 Fed. 408; Skilton 
 V. Roberts, 129 Mass. 306. 
 
§606 
 
 RAILROADS 
 
 896 
 
 ing the receivership of outstanding debts for labor, supplies, 
 equipment, or permanent improvement of the mortgaged prop- 
 erty as may,, under the circumstances of the particular case, ap- 
 pear to be reasonable.''" It is within the power of the court to 
 use the income of Ijie receivership to discharge such obligations, 
 even where no such order is made at the time the receiver is ap- 
 pointed.''! "He who seeks equity must do equity." Such clairfts 
 are usually paid out of the earnings of the road in the hand's of 
 the receiver, but in exceptional cases where equity requires it, 
 tbey may be paid out of the proceeds of the sale, or corpus of the 
 property.''^ Ordinarily, however, they can only be paid out of 
 
 TO Fosdick V. Schall, 99 U. S. 235, 
 2S L. ed. 339; Huidekoper v. Loco- 
 motive Works, 99 U. S. 258, 25 L. ed. 
 344 ;„ Miltenberger v. Logansport R. 
 Co., 106 U. S. 286, 1 Sup. Ct. 140, 27 
 L. ed. 117; Union Trust Co. v. 
 Souther, 107 U. S. 591, 2 Sup. Ct. 
 295, 2? L;; ..ed. 488; Burnham v. 
 Bo well, ill U. S. 776, 4 Sup. Ct. 675, 
 28 L. ed. 596; United States Trust 
 Co. V. Wabash &c. R. Co., 150 U. S. 
 287, 14 SHip. Ct. 86, 37 L. ed. 1085; 
 Douglass V. Cline, 12 Bush (Ky.) 
 
 •608; Mcllhenny &c. Co. v. Binz, 80 
 Tex. 1, 13 S. W. 655, 26 Am. St. 705 ; 
 Williamson v. Washington &c. R. Co., 
 33 Grat. (Va.) 624; Fidelity &c. Co. 
 V. Shenandoah Valley R. Co., 86 Va. 
 1, 9 S. E. 759, 19 Am. St. 858; Lit- 
 zenberger v.. Jarvis &c. Trust Co., 8 
 Utah IS, 28 Pac. 871, and authori- 
 ties cited in following notes, infra. 
 See also Virginia Passenger &c. 
 Co. V. Lane Bros. Co., 174 Fed. 513. 
 Contra Cofe v. New Jersey &c. R. 
 Co., 27 N. J. Eq. 37; Metropolitan 
 Trust Co. V. Tonawanda &c. R. Co., 
 103 N. Y. 245. As to apportionment 
 
 • among the several lines of one sys- 
 tem, see Central Trust Co. v. Wa- 
 bash &c. R. Co., 30 Fed. 332. 
 
 71 Fosdick V. Schall, 99 U. S. 
 235, 25 L. ed. 339; Central Trust 
 Co. V. St. Louis &c. R. Co., 41 
 Fed. 551 ; Farmers' Loan &c. Co. 
 V. Kansas City &c. R. Co., S3 Fed. 
 182. The mortgagor is not ac- 
 countable to the mortgagee for 
 earnings, while the property re- 
 mains in his possession, until a 
 demand is made, even though the 
 mortgage covers income. Dow v. 
 Memphis &c. R. Co., 124 U. S. 652, 
 8 Sup. Ct. 673, 31 L. ed. 565; Gal- 
 veston R. Co. V. Cowdrey, H 
 Wall. (U. S.) 459, 20 L. ed. 199. 
 
 72 Fosdick V. Schall, 99 U. S. 
 235, 25 L. edj 339; Blair v. St. 
 Louis &c. R. Co., 22 Fed. 471; 
 Thomas v. Peoria R. Co., 36 Fed. 
 808; Finance Co. v. Charleston &c. 
 R. Co., 48 Fed. 188; Farmers' &c. 
 Co. V. Kansas City &c. R. Co., 53 
 Fed. 182. But not ordinarily, 
 where the suit is by stockholders- 
 or there is no diversion of in- 
 come. St. Louis &c. R. Co. V. 
 Cleveland &c. R. Co., 125 U. S. 
 658, 8 Sup. Ct. 1011, 31 L. ed. 832^ 
 Denniston v. Chicago &c. R. Co., 
 4 Bi&s. (U. S.) 414, Fed. Cas. No. 
 3800; Street v. Maryland Cent. R. 
 
897 SALE AND REORGANIZATION §606 
 
 the earnings, and it is said in a recent case that such preferences 
 are ailowed because of an implied agreement on the part of the 
 mortgagees that current debts contracted in the ordinary course 
 of the business shall be paid from current earnings before such 
 mortgagees shall have a claim to the income and that there is no 
 such implied agreement as to payment out of the corpus or body 
 of the mortgaged property.''* They may be preferred, not only 
 where they have arisen during the receivership, but also where 
 they arose a limited time before the appointment of the receiver, 
 and it is the practice of the federal courts in most jurisdictions, 
 upon the appoinment of a receiver, to impose the condition that 
 debts for materials, supplies, and labor furnished to the mort- 
 gagor within six months previous to the appointment shall be 
 paid out of the net income or proceeds of the sale before the debt 
 secured by the mortgage is paid.''* This limitation is arbitrary, 
 however, and in some cases it has been fixed at three months,^® 
 while in others -uch claims have been given a preference, al- 
 though they arose more than six months prior to the appoint- 
 ment of the receiver.''® Much depends upon the circumstances 
 
 Co., 59 Fed. 2S; Cutting v. Ta- six .months preceding the im- 
 
 vares &c. R. Co., 61 Fed. ISO; pounding of the income and the 
 
 Farmers' &c. Co. v. Northern Pac. seizure of the property by the 
 
 R. Co.. 68 Fed. 36. mortgage bondholders. Westing- 
 
 TS Mer-sick «. Hartford &c. R. house &c. Co. v. Kansas City &c. 
 
 Co., 76 Conn. 11, SS Atl. 664, 100 R. Co., 137 Fed. 26. 
 
 .\m. St. 977. See also Fordyce v. ts Mittenberger v. Logansport 
 
 Kansas City &c. R. Co., 14S Fed. &c. R. Co., 106 U. S. 286, 1 Sup. 
 
 566. Ct. 140, 27 L. ed. 117; Finance Co. 
 
 T4 Clark V. Central R. &c. Co., v. Charleston &c. R. Co., 62 Fed. 
 
 66 Fed. 803; Kelly, In re, v. Re- 205. 
 
 ceiver of Green Bay &c. R. Co., f 6 Burnham v. Bowen, 111 TJ. S. 
 
 5 Fed. 846; Thomas v. Peoria &c. 776, 4 Sup. Ct. 675, 28 L. ed. 596; 
 
 R. Co., 36 Fed. 808; Putnam v. Hale v. Frost, 99 U. S. 389, 25 L. 
 
 Jacksonville &c. R. Co., 61 Fed. ed. 419; note to Blair v. R. Co., 
 
 440; Turner v. Indianapolis &c. 22 Fed. 471; Central Trust Co. v. 
 
 R. Co., 8 Biss. (U. S.) 315, Fed. Wabash &c. R. Co., 30 Fed. 332; 
 
 Cas. No. 14258; Dow v. Memphis Farmers' &c. Co. v. Kansas City 
 
 &c. R. Co., 20 Fed. 260. The gen- &c. R. Co., S3 Fed. 182; Atkins v. 
 
 eral rule is that such preferential Petersburg R. Co., 3 Hughes (U. 
 
 claims must have accrued within S.) 307, Fed. Cas. No. 604; Mcll- 
 
 29 — Ell. Railroads I 
 
,§ 606 
 
 .KAILPftADS, 
 
 898 
 
 and equities of the particular case. But it ig.the eJtception a,nd 
 not the rule that priority of liens can be displaced in this.rway,^'' 
 and such preference is usually confined to claims for current or 
 operating expenses incurred in keeping up the railroad as a "go- 
 ing concern." Claims for work done in the original construction 
 of the road are not included and are not entitled to a preference. '^^ 
 And it was held in a comparatively recent case, where a railroad 
 went into the hands of a receiver without any funds, and the 
 earnings under the receivership were barely sufficient to pay cur- 
 rent operating expenses, that arrears of salary due the president 
 should not be paid out of the proceeds of the sale in preference 
 to the mortgage .iebt..'^® In a still later case it is held that sure- 
 ties on an appeal bond executed solely for the accommodation of 
 
 henny &c. Co. v. Binz, 80 Tex. 1, 
 13 S. W. 6SS, 26 Am. St. 70S. 
 
 ■'''" Kneeland v, American Loan 
 Co., 136 U. S. 89, 97, 10 Sup. Ct. 
 950, 34 L. ed. 379; Thomas v. 
 ■Western Car Co,, 149 U. S. 9S, 13 
 Sup. Ct. 824, 60 Am. & Eng. R, 
 Cas. 443, il L. ed, 663; Bound v. 
 South Car. R. Co., 58 Fed.' 473, 
 As to what are not "operating 
 expenses," see Central Trust Co. 
 V. Charlotte &c. R. Co., 65 Fed. 
 264; Reyburn v. Consumers' &c. 
 Co., 29 Fed. 561 ; Manchester Lo- 
 comotive Works V, Truesdale, 44 
 Minn. 115, 46 N. W. 301, 9 L. R, 
 A. 140. Claims for damages to 
 persons or property arising from 
 the operation of the road are 
 classed as operating expenses. 
 Brown, Ex parte, IS S. Car. 518; 
 Union Trust Co. v. Illinois &c. R. 
 Co., 117 U. S. 434, 6 Sup, Ct. 809, 
 29 L. ed. 963; Mobile &c. R. Co, 
 V, Davis, 62 Miss, 271; Klein v. 
 Jewett, 26 N. J. Eq. 474. 
 
 T8 Toledo &c. R. Co. v. Hamil- 
 ton, 134 U. S. 296, 10 Sup, Ct. 546, 
 
 33 L. ed. 905 ; Wood v. Guarantee 
 &c. Deposit Co,, 128 U, S. 416, 9 
 Sup, Ct. 131, 32 L. ed. 472; Lacka- 
 wanna &c. Co. V, Farmers' &c. 
 Co., 176 U, S, 298, 20 Sup. Ct. 363, 
 44 L. ed. 475; Farmers' Loan &c, 
 Co. V, Pine Bluff &c, R. Co., 57 
 Ark. 334, 21 S, W, 652; Farmers' 
 Loan &c. Co. v. Candler, 92 Ga. 
 249, 18 S, E. 540; Addison v. Lewis, 
 75 Va. 701. But compare Mcll- 
 henny &c. Co. v. Binz, 80 Tex. 1, 
 13 S. W, 665, 26 Am," St. 70S. Ante, 
 §566. 
 
 T9 National Bank v. Carolina &c. 
 R, Co., 63 Fed. 25. See also Wells 
 V. Southern &c. R, Co., 1 Fed. 270; 
 Addison v. Lewis, 75 Va. 701, and 
 compare Blair v. St. Louis &c. R. 
 Co., 23 Fed. 521 ; Olyphant v. St. 
 Louis &c. Co., 22 Fed, 179 (salary 
 of secretary preferred). For other 
 claims held not entitled to prefer- 
 ence, see Fordyce v. Omaha &c. 
 R., 145 Fed. 544; Gregg v. Metro- 
 politan Trust Co., 197 U. S. 183, 25 
 Sup, Ct, 415, 49 L, ed. 717. 
 
899 SALE AND RKORGANIZATION § 606 
 
 the company, and without pecuniary advantage to themselves, 
 are not entitled to a preference over the mortgagors, ■ although 
 the judgment appealed from was obtained prior to the foreclosure 
 and appointment of the receiver, and notwithstanding the fact 
 that the assets of the company in the hands of the receiver had 
 been preserved and increased, by virtue of such bond, to the 
 extent of the judgment.*" "It must, however," says Chief Jus- 
 tice Fuller, "be regarded as settled that a court of equity may 
 make it a condition of the issue of an order for the appointment 
 of a receiver of a railroad company that certain outstanding debts 
 of the company shall be paid from the income that may be col- 
 lected by the receiver, or from the proceeds of sale; that prefer- 
 ential payments may be directed of unpaid debts for operating 
 expenses, accrued within ninety days, and of limited amounts 
 due to other and connecting lines of road for materials and re- 
 pairs and for unpaid ticket and freight balances, in view of the 
 interests both of the property and the public, that the property 
 may be preserved and disposed of as a going concern, and the 
 company's public duty discharged; and that such indebtedness 
 may be given priority, notwithstanding there may have been no 
 diversion of income, or that the order for payment was not made 
 at the time, and as a condition, of the receiver's appointment,^ the 
 necessity and propriety of making it depending upon the facts 
 and circumstances of the particular case, and the character of 
 the claims."*^ , 
 
 80 Farmers' Loan &c. Co. v. have gone. Sureties have been re- 
 Northern Pac. R. Co., 68 Fed. 36. imbursed in other cases. Union 
 The court, in this case, insists that T. Co. v. Morrison, 125 U. S. S91, 
 there must be a diversion of funds 8 Sup. Ct. 1004, 31 L. ed. 825; Dow 
 to the benefit of the bondholders v. Memphis &c. Co., 124 U. S. 652, 
 and to the injury of the party 8 Sup. Ct. 673, 31 L. ed. 565; Rome 
 seeking the preference before the &c. R. Co. v. Sibert, 97 Ala. 393, 
 priority of the mortgage lien will 12 So. 69. But compare Pennsyl- 
 be displaced, and disapproves vania v. Calhoun, 121 U. S. 251, 7 
 Farmers' Loan &c. Co. v. Kansas Sup. Ct. 906, 30 L. ed. 915. 
 City &c. R. Co., 53 Fed. 182. These si Finance Co. v. Charleston &c. 
 two cases seem to mark,, in the R. Co., 62 Fed. 205, citing Milten- 
 dicta at least, the opposite ex^ berger v. Logansport R. Co., 106 
 tremes to which the federal courts U. S. 286, 311, 4 Sup. Ct. 140, 27 L. 
 
§607 
 
 RAILROADS 
 
 900 
 
 § 607 (529). Setting sale aside — Grounds — Who may sue. — 
 
 Mortgagors may obtain relief from a fraudulent sale upon, fore- 
 closure if they apply for it within a reasonable time after dis- 
 covering the fraud.*2 And it has been held that a Jjill for this 
 
 ed. 117; Union Trust Co. v. 
 Souther, 107 U. S. S91, 594, 2 Sup. 
 Ct. 29S, 27 L. ed. 488; Union Trust 
 Co. V. Illinois M. R. Co., 117 U. 
 S. 434, 6 Sup. Ct. 809, 29 L. ed. 963; 
 Morgan's &c. Co. v. Texas Cent. 
 R. Co., 137 U. S. 171, 11 Sup. Ct. 
 61, 34 L. ed. 62S; Kneeland v. Bass 
 Foundry &c. Works, 140 U. S. 592, 
 11 Sup. Ct. 857, 35 L. ed. 543. See 
 also Rome &c. R. Co. v. Sibert, 91 
 Ala. 393, 12 So. 69; Seibert v. 
 Minn. &c. Co., 58 Minn. 69, 59 N. 
 W. 829; Virginia &c. Co. v. Cen- 
 tral &c. Co., 170 U. S. 355, 365, 
 368, 18 Sup. Ct. 657, 42 L. ed. 1068; 
 Southern R. Co. v. Carnegie Steel 
 Co., 176 U. S. 257, 20 Sup. Ct. 347, 44 
 L. ed. 458. This case last cited holds 
 a debt for rails, bought shortly be- 
 fore the appointment of a re- 
 ceiver and needed to properly 
 operate the road, as much a cur- 
 rent debt in the ordinary course 
 of business as if it were incurred 
 by a receiver under order of court. 
 So, in Fordyce v. Kansas City &c. 
 R. Co., 145 Fed. 566, it is held that 
 a diversion of the income for the 
 benefit of the bondholders must 
 usually be shown, but that claims 
 for damages in constructing the 
 road are entitled to preference 
 over the mortgage. As to taxes 
 and street assessments, see Clyde 
 V. Richmond &c. R. Co., 63 Fed. 
 21 ; Union L. & T. Co. v. Southern 
 &c. R. Co., 49 Fed. 267; Cutting v. 
 Tavares &c. R. Co., 61 Fed. 150; 
 
 Ellis V. Boston &c. R. Co., 107 
 Mass. 1 ; Central Trust Co. v. 
 New York &c. R. Co., 110 N. Y. 
 250, 18 N. E. 92, 1 L. R. A. 260. 
 As to judgments, see Clyde v. 
 Richmond &c. R. Co., 56 Fed. 539; 
 Texas &c. R. Co. v. Bloom, 60 
 Fed. 979; Finance Co. v. Charles- 
 ton &c. R. Co., 61 Fed. 369; Chi- 
 cago &c. R. Co. v. McCammon, 
 61 Fed. 772; Fhinizy v. Augusta 
 &c. R. Co., 63 Fed. 922; Central 
 Trust Co. V. Charlotte &c. R. Co.. 
 65 Fed. 257; Penn Mutual Insur- 
 ance Co. V. Heiss, 141 111. 35, 31 N. 
 E. 138, 3 Am. St. 273; Texas &c. 
 R. Co. V. Johnson, 76 Tex. 421, 13 
 S. W. 463, 18 Am. St. 60, and 151 
 U. S. 81, 14 Sup. Ct. 250, 38 L. ed. 
 81. 
 
 82 Harwood v. Railroad Co., 17 
 Wall. (U. S.) 78, 21 L. ed. 558; 
 Jones Corp. Bonds and Mort. 
 § 651. Suit on behalf of bond- 
 holders to set aside a foreclosure 
 sale should usually be brought by 
 their mortgage trustees. Meyer 
 v. Utah &c. R. Co., 3 Utah 280, 3 
 Pac. 393. See also Shaw v. Ran- 
 road Co., 100 U. S. 605, 25 L. ed. 
 757; New Orleans &c. R. Co. v. 
 Parker, 143 U; S. 42, 12 Sup. Ct. 
 364, 36 L. ed. 66. In Kent v. Lake 
 Superior &c. Co., 144 U. S. 75, 12 
 Sup. Ct. 650, 36 L. ed. 352, it is 
 held that bondholders must seek 
 their remedy in the court which 
 rendered the decree and confirmed 
 the sale. See generally Wetmore 
 
901 
 
 SALE AND REORGANIZATION 
 
 §607 
 
 purpose may be maintained on behalf of the corporation by a 
 single stockholder upon refusal of the corporation to ask that 
 the sale be set aside. ^^ But where dissenting stockholders and 
 bondholders institute a suit to set aside a foreclosure sale on the 
 ground of fraud and collusion upon the part of the majority, it is 
 not sufficient to inake the purchasing and selling companies par- 
 ties defendant.** This right may be barred by laches,*^ and any 
 considerable delay in bringing a bill for this purpose must be 
 
 V. St. Paul &c. R. Co., 3 Fed. 177; 
 Massachusetts &c. Co. v. Chicago 
 &c. R. Co., 13 Fed. 857; Campbell 
 V. Railroad Co., 1 Woods (U. S.) 
 368, Fed. Cas. No. 2366. 
 
 83 Foster v. Mansfield &c. R. 
 Co., 36 Fed. 627. But where an 
 insolvent railroad company had 
 issued different series of mort- 
 gage bonds, some of the mort- 
 gages covering all of its property, 
 and others only part, the principal 
 of some of the mortgages being 
 due, and the company having de- 
 faulted on the interest on all of 
 them, and, in addition, it had a 
 large floating debt, running into 
 millions, with no fair prospect of 
 its being able to pay the accrued 
 interest on the bonds and the 
 floating debt without a sale of all 
 its property, it was held that a 
 decree foreclosing all the mort- 
 gages, entered by consent of the 
 creditors, should not be set aside 
 at the suit of some of the stock- 
 holders on the ground that the 
 principal of some of the mort- 
 gages was not yet due, "as it was 
 to the interest of the railroad 
 company that the rights of all the 
 mortgage bondholders should be 
 cut off to enable the company to 
 
 effect a reorganization which 
 would secure and extend its bond- 
 ed debt, and reduce the rate of 
 interest thereon, and provide the 
 necessary means to satisfy the 
 floating debt." Carey v. Houston 
 &c. R. Co., 45 Fed. 438. 
 
 84 Ribon V. Railroad Companies, 
 16 Wall. (U. S.) 446, 21 L. ed. 367. 
 Trustees through whom the 
 scheme was consummated should 
 have been made parties, and so 
 should the majority stockholders 
 and bondholders, or a sufficient 
 number of them, at least, if they 
 had participated in the distribu- 
 tion of the proceeds and were re- 
 quired to refund. 
 
 85 Sullivan v. Portland &c. R. 
 Co., 4 Cliff. (U. S.) 212, 94 U. S. 
 806, 24 L. ed. 324, Fed. Cas. 
 No. 13596; Coddington v. Railroad 
 Co., 103 U. S. 409, 26 L. ed. 400; 
 Graham v. Boston &c. R. Co., 118 
 U. S. 161, 6 Sup. Ct. 1009, 30 L. 
 ed. 196; Foster v. Mansfield &c. 
 R. Co., 36 Fed. 627. See also 
 Farmers' Loan &c. Co. v. Rocka- 
 way &c. R. Co., 69 Fed. 9; Brun- 
 son v. Morgan, 84 Ala. 598, 4 So. 
 589; McHenry v. Schenk, 88 111. 
 357; Rabe v. Dunlap, 51 N. J. Eq. 
 40, 25 Atl. 959. 
 
§607 
 
 KAILROADS 
 
 902 
 
 satisfactorily explained or a court of equity will deny relief.""' 
 The stockholders or other parties in interest i cannot wait until 
 new equities arise or until they see that the purchasers, by im- 
 proving, the property, are likely to make it valuable, and then 
 procure a return of the property with its added value, and dis- 
 charged from the equities which have attached. ^^ If the fraud is 
 concealed from the mortgagor and its stockholders for a time, 
 suit may usually be brought within a reasonable time after it is 
 discovered.^* A sale of the property to pay the arrears due a 
 single bondholder, at a grossly inadequate price and without 
 notice to the other bondholders Whose interests are affected, will 
 be set aside at the suit of such bondholders, especially where it is 
 shown that the bondholder who instituted the proceedings and 
 the persons who became purchasers at the sale, several of whom 
 were directors and officers of the road, had entered into a con- 
 spiracy to obtain the property at a sacrifice, and had prevented 
 a reasonable competition at the sale."*^ Where a sale is made 
 
 86 Harwood v. Railroad Co., 17 
 Wall. (U. S.) 78, 21 L. ed. SS8; 
 Credit Co. v. Arkansas Cent. R. 
 Co., IS Fed. 46, 5 McCrary 23; 
 Farmers' Loan &c. Co. v. Green 
 Bay &c. R. Co., 6 Fed. 100. The 
 following periods of unexplained 
 delay have been held fatal: Seven 
 years, Sullivan v. Portland &c. R. 
 Co., 94 U. S. 806, 24 L. ed. 324, 4 
 Cliif. (U. S.) 212, Fed. Cas. No. 
 13596; ten years, Foster v. Mans- 
 field &c. R. Co., 36 Fed. 627; eight 
 years, Coddington v. Pensacola 
 &c.' R. Co., 103 U. S. 409, 26 L. ed. 
 409; five years, Harwood v. Rail- 
 road Co., 17 Wall. (U. S.) 78, 21 
 L. ed. SS8; eighteen months, Gra- 
 ham V. Birkenhead &c. R. Co., 2 
 Mac. & G. (Eng. Ch.) 146; and 
 even less than a year. Northwest- 
 ern Mortg. Co. V. Bradley, 9 S. 
 Dak 495, 70 N. W. 648; Wilson v. 
 Wall, 99 Va. 353, 38 S. E. 181. 
 
 8T Twin Lick Oil Co. v. Mar- 
 bury, 91 U. S. 587, 23 L. ed. 328; 
 Kitchen v. St. Louis &c. R. Co., 69 
 Mo., 224. 
 
 88 Where the mortgagors re- 
 mained ignorant for eight years 
 of the fraud which had been prac- 
 ticed, they were permitted to 
 bring suit to set aside the sale 
 two years after the fraud was 
 discovered. White Mountains K. 
 Co. V. White Mountains R. Co., 50 
 N. H. SO. 
 
 89 Jackson v. Ludeljng, 21 Wall. 
 (U. S.) 616, 22 L. ed. 492. A de- 
 cree by which no provision is 
 made for the interests of other 
 bondholders beside the complain- 
 ant, will be set aside on appeal. 
 New Orleans &c. R. Co. v. Parker. 
 143 U. S. 42, 12 Sup. Ct. 364. 36. L 
 ed. 66. 
 
903 SALE AND REORGANIZATION § 607 
 
 under a notice setting forth that the, amount of bonds secured 
 by the mortgage foreclosed is ten times as great as it really is, 
 and all competition in bidding is thereby destroyed and the prop- 
 erty is purchased by the bondholders, such sale will be set aside 
 at the suit of judgment creditors whose liens are thereby de- 
 feated.*" But the creditors who were defrauded by the sale can 
 alone claim the benefit of a decree setting aside the sale, and 
 neither the mortgage trustee by whom the property was sold on 
 foreclosure, nor the bondholders at whose request the foreclosure 
 and sale were had, can assert any rights under the mortgage ; but 
 they hold title to the property under the sale, subject to the 
 equities of such creditors.®^ The parties in interest cannot ques- 
 tion the validity of a foreclosure sale, to which they have as- 
 sented, on the ground that it was a fraud upon the rights of 
 others. ^2 And creditors cannot ordinarily impeach a completed' 
 sale where the trustee representing them has acted in good 
 faith.'* A mortgage trustee in possession cannot without ex- 
 press authority become a purchaser at his own sale.*** And a di- 
 rector, or other person occupying a fiduciary relation toward the 
 company, must act with perfect fairness, in purchasing its prop- 
 erty at a sale under a trust deed to secure debts due to him- 
 self, or the sale will be set aside ; but the stockholdeirs must act 
 promptlv in disaffirming a sale because of the fiduciary relations 
 of the purchaser."^ Where it is shown that the purchasers at a 
 
 90 James v. Railroad Co., 6 93 Richter v. Jerome, 123 U. S. 
 Wall. (U. S.) 752, 18 L. ed. 885. 233, 8 Sup. Ct. 106, 31 L. ed. 132; 
 
 91 Railroad Co. v. Soutter, 13 Fletcher v. Ann Arbor R. Co., 
 Wall. (U. S.) 517, 20 L. ed. 543; 116 Fed. 479. 
 
 Barnes v. Chicago &c. R. Co., 122 9* Racine &c. R. Co. v. Farm- 
 
 U. S. 1, 7 Sup. Ct. 1043, 30 L. ed. ers' Loan &c. R. Co., 49 111. 331, 
 
 1128. 95 Am. Dec. 595; Kitchen v. St. 
 
 92 Barnes v. Chicago &c. R. Co., Louis &c. Co., 69 Mo. 224; Ash- 
 122 U. S. 1, 7 Sup. Ct. 1043, 30 L. hurst's Appeal, 60 Pa. St. 290. 
 
 ed. 1128; Symmes v. Union Trust 95 Twin Lick Oil Co. v. Mar- 
 Co., 60 Fed. 830. See also United bury, 91 U. S. 587, 23 L. ed. 328. 
 States V. Union Pac. R. Co, 98 U. A director of a railroad corpora- 
 S. 569, 25 ,L. ed. 143; Matthews v. tion may honestly own its bonds 
 Mui-chison, 15 Fed. 691 ; Berry v. secured by mortgage. Duncomb 
 Broach, 65 Miss. 450, 4 So. 117. v. New York &c. R. Co., 84 N. Y. 
 
I 608 
 
 RAILROADS 
 
 904 
 
 foreclosure sale have conspired with the directors of the corpo- 
 ration in effecting a fraudulent sale, they will be held as trus- 
 tees for the benefit of the parties in interest to the full value of 
 the property purchased."" It has been held that a fraudulent sale 
 cannot be validated by an act of the legislature, since the legisla- 
 ture has no power to transfer the property of one corporation 
 to another without due process of law.®^ A decree can only be 
 avoided upon proceedings for that purpose, brought by a party in 
 interest** and upon sufficient cause shown.®** 
 
 § 608. Setting sale aside — What is not sufficient ground.-^In- 
 adequacy of price alone is not- sufficient ground for setting aside 
 a sale, where the sale was honestly and fairly made;"® nor is 
 
 190, 88 N. Y. 1. And he can en- 
 force them in the usual and ordi- 
 nary way, and may purchase the 
 mortgaged property at a sale 
 which is fairly made in an effort 
 to enforce the payment of his 
 debt. Harpending v. Munson,. 91 
 N. Y. 650. As to when director 
 can not purchase, see post, § 615. 
 
 96 Drury v. Cross, 7 Wall. (U. 
 S.) 299, 19 L. ed. 40; Merrill v. 
 Farmers' Loan &c. Co., 24 Hun 
 (N. Y.) 297; Jones Corp. Bonds 
 and Mort. §633; Post, §615. 
 
 97 White Mountains R. Co. v. 
 White Mountains R. Co., 50 N. H. 
 50. See also Roche v. Waters, 72 
 Md. 264, 19 Atl. 535, 7 L. R. A. 
 533. This, we think, would un- 
 doubtedly be true if the sale were 
 absolutely void for want of juris- 
 diction, but a merely fraudulent 
 sale would seem to be voidable 
 only, and not necessarily void or 
 beyond the power of the legis- 
 lature to cure. 
 
 98 One whose interest in the 
 property expired before the final 
 
 decree was entered can not main- 
 tain a suit to have the decree re- 
 opened. Ward V. Montclair R. 
 Co., 26 N. J. Eq. 260; Graham v. 
 Boston &c. R. Co., 118 U. ■ S. 161, 
 6 Sup. Ct. 1009, 30 L. ed. 196. See 
 also Fleming, Ex parte, 2 Wall. 
 (U. S.) 759, 17 L. ed. 924; Symmes 
 V. Union Trust Co., 60 Fed. 830; 
 Wade V. Thompson, 52 Miss. 367; 
 Day V. Lyon, 11 N. J. Eq. 331; 
 Hollins V. St. Paul &c. R. Co., 29 
 N. Y. St. 208, 9 N. Y. S. 909. 
 
 SS" See generally as to confirm- 
 ing or setting aside sale, Invest- 
 ment Registry Co. v. Chicago &c. 
 R. Co., 212 Fed. 594; Painter v. 
 Union Trust Co., 246 Fed. 240; 
 Simon v. New Orleans &c. R. Co., 
 242 Fed. 62. 
 
 99 Turner v. Indianapolis &c. R. 
 Co., 8 Biss. (U. S.) 380, Fed! Cas. 
 No. 142S9; Fidelity &c. Co. v. 
 Mobile &c. R. Co., 54 Fed. 26; 
 Jones Corp. Bonds and Mort. 
 §662. See also Bethlehem Iron 
 Co. V Philadelphia &c. R. Co., 49 
 N. J. Eq. 356, 23 Atl. 1077: Cross 
 
905 SALE AND REOSGANIZATION § 608 
 
 mere increase in the value of the property sufficient cause for 
 vacating the decree. ^ A purchase of the mortgaged property by 
 a combination of the bondholders and other creditors is valid un- 
 less some unfair advantage is used to prevent competition and 
 keep down the price, and such creditors have in general all the 
 rights of bona fide purchasers.- The fact that the railroad com- 
 pany's solicitor qcts for the creditors in making the purchase 
 and that the title is taken in his name, does not invalidate the 
 sale, if it was honestly conducted and no unfair advantage was 
 taken.s The validity of the sale, it has been held, cannot be at- 
 tacked on the ground that the directors of the corporation were 
 actuated by corrupt motives in suflfering a default, and that this 
 was known to the tru.=tce, when there is no claim against him of 
 collusion or fraud, and it appears that the default justifying fore- 
 closure actually occurred, and the property was sold for an ade- 
 quate price.* In a suit to set aside a sale on foreclosure the 
 validity and sufficiency of the proceedings in the foreclosure suit 
 prior to the sale cannot be questioned, since they were matters 
 proper for adjudication in the foreclosure suit.^ 
 
 V. Allen, 141 U. S. 528, 12 Sup. Ct. inson v. Iron R. Co., 135 U. S. 522, 
 €J, 35 L. ed. 843; Lathrop v. Tracy, 10 Sup. Ct. 907, 34 L. ed. 276. 
 24 Colo. 382, 51 Pac. 486, 65 Am. 3 Pacific R. Co. v. Ketchum, 101 
 St. 229. Unless, perhaps, it is so U., S. 289, 25 L. ed. 932. But corn- 
 great as to shock the conscience. pare as to purchase by the mort- 
 Graflfam v. Burgess, 117 U. S. 180, gagee or his solicitor, Bennett, 
 6 Sup. Ct. 686, 29 L. ed. 839; Ex parte, 10 Ves. Jr. 381; Callan 
 Fletcher v. McGill, 110 Ind. 395. v. Wilson, 127 U. S. 540, 8 Sup. Ct. 
 
 1 County of Leavenworth v. 1301, 32 L. ed. 223; Lockett v. Hill, 
 Chicago &c. R. Co., 25 Fed. 219. 1 Woods (U. S.) 552, Fed. Cas. No. 
 
 2 Wetmore v. St. Paul &c. R. 8443 ; Adams v. Sayre, 76 Ala. 509 ; 
 Co., 1 McCrary (U. S.) 466, 3 Fed. Gibson v. Barbour, 100 N. Car. 
 177; Thornton v. Wabash R. Co., 192, 6 S. E. 766; Houston v. Na- 
 81 N. Y. 462; Vose v. Cowdrey, 49 tional &c. Assfl., 80 Miss. 31, 31 
 N. Y. 336; Pennsylvania Trans. So. 540, 92 Am. St. 565, and note. 
 Co.'s Appeal, 101 Pa. St. 576; Ante, These cases relate, however, to 
 § 597. Holders of junior mortgage sales under powers rather than 
 bonds- can not have a sale to the foreclosure sales. 
 
 first mortgage bondholders set * Harpending v. Munson, 91 N. 
 
 aside where no fraud is shown. Y. 650. Compare Symmes v. Union 
 Their remedy is to redeem. Rob- Trust Co., 60 Fed. 830. 
 
 5 Robinson v. Iron R. Co., 135 
 
§609 
 
 RAILROAUS 
 
 906 
 
 § 609 (530). Redemption. — A valid foreclosure and sale, duly 
 confirmed, usually cuts off the equity of redemption,^ and the 
 only remedy, if any, in such a case,, is by a suit to vacate the de- 
 cree,' unless a statutory right to redeem is given,* and even 
 where a statute gives a right of redemption from foreclosure sales 
 of real estate, it is generally held that a foreclosure sale of a rail- 
 road under a mortgage including its franchises and other prop- 
 erty should be made as an entirety without any right of redemp- 
 tion after final confirmation.* Where, however, the mortgage 
 trustee enters into possession, upon default, and manages the 
 property for the bondholders, the corporation or stockhplders 
 may institute a suit to redeem and hold him to an accounting as 
 trustee for the corporation as well as for the bondholders.'''' So, 
 
 U. S. 522, 10 Sup. Ct. 907, 34 L. 
 ed, 276. 
 
 6 Parker v. Dacres, 130 U. S. 43, 
 
 9 Sup. Ct. 433, 32 L. ed. 848; 
 Turner v. Indianapolis &c. R. Co., 
 8 Biss. (U. S.) 380, Fed. Cas. No. 
 14259; Woodruff v. Adair, 131 Ala. 
 530, 32 So. 515; Eiceman v. Finch, 
 19 Ind. 511 ; Grandin v. Emmons, 
 
 10 N. Dak. 223, 86 N. W. 723, 54 
 L. R. A. 610, 88 Am. St. 684. As 
 to who may redeem, see note to 
 Horn V. Indianapolis &c. Bank,- 
 125 Ind. 381, 25 N. E. 558, 9 L. R: 
 A. 676, 21 Ani. St. 231, 245 et seq. 
 
 7 Delaware &c. R. Co. v. Scran- 
 ton, 34 N. J. Eq. 429. 
 
 8 Brine v. Ins. Co., 96 U. S. 627, 
 24 L. ed. 858; Parker v. Dacres, 
 130 U. S. 43, 9 Sup. Ct. 433, 32 L. 
 ed. 848; Jackson &c. Co. v. Bur- 
 lington &c. R. Co., 29 Fed. 474; 
 Singer Mfg.' Co. v. McCollock, 24 
 Fed. (£1. In these cases the state 
 statute was followed by the fed- 
 eral courts. See also Benedict v. 
 St. Joseph &c. R. Co., 19 Fed. 173. 
 But a general statute applying in 
 
 ordinary cases may not authorize 
 or apply to a redemption in the 
 case of a railroad. Peoria &c. R. 
 Co. V. Thompson, 103 111. 187; 
 Hammock v. Farmers' Loan &c. 
 Co., 105 U. S. n, 26 L. ed. 1111; 
 Columbia Finance &c. Co. v. Ken- 
 tucky Union R. Co., 60 Fed. 794; 
 and other cases cited in next fol- 
 lowing note. 
 
 9 Sioux City Terminal R. &c. 
 Co. V. Trust Co., 82 Fed. 124; Pa- 
 cific N. W. Packing Co. v. Allen, 
 116 Fed. 312; Peoria &c. R. Co. v. 
 Thompson, 103 111. 187; Clear- 
 water &c. Bank v. Bagley &c. Co., 
 116 Minn. 14, 133 N. W. 91, 2,(i L. 
 R. A. (N. S.) 1132. Ann. Cas. 1913A, 
 622; McFadden v. May's Landing 
 &c. R. Co., 49 N. J. Eq. 176, 22 
 Atl. 932; McKenzie v. Bismarck 
 Water Co., 6 N. Dak. 361, 71 N. 
 W. 608. 
 
 lOAshuelot R. Co. v. Elliott, 57 
 N. H. 397. See also Clark v. Rey- 
 burn, 8 Wall. (U. S.) 318, 19 L. ed. 
 354. ■ 
 
907 SALE AND REORGANIZATION § 609 
 
 as we shall hereafter see,!'^ where a transaction is voidable be- 
 cause a director or trustee has improperly purchased at the sale, 
 the courts will usually allow a redemption. The right to redeem 
 is a favorite equity and an opportunity to exercise it should be 
 given before the sale is confirmed, that is, at least where the fore- 
 closure is for failure to pay interest, a decree nisi should be en- 
 tered declaring "the fact, nature and extent of the default 
 * * * and the amount due on account thereof, which, with any 
 further sums subsequently accruing, and having become due, 
 according to the terms of the security, the mortgagor is required 
 to pay within a reasonable time, to be fixed by the court, and 
 which, if not paid, a' sale of the mortgaged premises is di- 
 rected. "^^ Thus, in a recent foreclosure proceeding for default 
 in payment of- interest, it was held that, although the mort- 
 gage, as construed by the court, did not authorize a decree that 
 the whole debt was due, it was proper, to direct payment of the 
 whole debt from the proceeds of the sale of the property as an 
 entirety, but that the decree should also provide that the mort- 
 gagor might redeem before sale upon payment of the overdue 
 interest and costs. ^^ In another comparatively recent case'* in- 
 volving the right to redeem separate divisional mortgages on 
 railroads afterwards consolidated the judges of the circuit court 
 of appeals for the sixth circuit differed in opinion and each sup- 
 
 11 Post, § 615. mortgage contract other than that 
 
 12 Chicago &c. R. Co. v. Fos- arising from his purchase for a 
 dick, 106 U. S. 47, 1 Sup. Ct. 10, sum sufficient to pay the mort- 
 27 L. ed. 47. See also to same gage debt, is impaired by a change 
 effect, Clark v. Reyburn, 8 Wall. in the law, subsequent to the exe- 
 (U. S.) 318, 19 L. ed. 354; Howell cution of the mortgage but prior 
 V. Western R. Co., 94 U. S. 463, 24 to the sale, regarding the time 
 L. ed. 254; Foster Fed. Prac. §322. of redemption and rate of inter- 
 For form of decree, see Blair v. est payable in order to redeem. 
 St. Louis &c. R. Co., 25 Fed. 132, Hooker v. Burr, 194 U. S. 415, 24 
 237. Four months has been held Sup. Ct. 706, 48 L. ed. 1046. 
 
 to be a reasonable time. Colum- is Grape Creek &c. Co. v. Farm- 
 bia Finance &c. Co. v. Kentucky ers' &c. Co., 63 Fed. 891. See also 
 Union R. Co., 60 Fed. 794. No Olcott v. Bynum, 17 Wall. (U. S.) 
 contract right of an independent 44, 21 L. ed. 570; Holden v. Gil- 
 purchaser at a foreclosure , sale, bert, 7 Paige (N. Y.) 208. 
 who has no connection with the i* Compton v. Jesup, 68 Fed. 263. 
 
§ 610 RAILROADS 908 
 
 ported the position which he had taken by a very able argument. 
 The mortgages on the separate divisions were made to the same 
 trustee, and Judge Lurton held that the mortgagees were, there- 
 fore, to be regarded as the same, and that for this reason, as well 
 as for the further reason that it is the settled policy of the courts 
 to treat a railroad as an entirety and prevent its severance, if 
 possible, there could be no separate redemption of the division 
 covered by one of them, while Judge Taft held that they were 
 separate mortgages and that, under the circumstances of the 
 case, there could be a separate redemption. The case was com- 
 plicated by a question of suretyship and a question as to the 
 effect of prior decrees in the different states, in regard to both of 
 which the judges disagreed. They also disagreed as to whether, 
 in fixing the amount to be paid by the redemptioner he was en- 
 titled to have the principal and interest of the mortgages to be 
 redeemed reduced by the net earnings received by the pur- 
 chaser. The case is one of great importance and merits careful 
 study.15 It was afterwards taken to the Supreme Court -of the 
 United States on certificate, but that court decided it on such 
 grounds that it was found unnecessary to consider the difficult 
 points relating to the question of redemption. i® 
 
 §610 (531). Reorganization by purchasers at sale — Power of 
 legislature to provide for. — The purchaser of a railroad under a 
 sale upon foreclosure, or otherwise, by legislative authority, does 
 not, by reason of his purchase, take the place of the old corpo- 
 ration and become clothed with corporate powers,^'' unless the 
 
 15 It is impossible to give an in- referred to, see Horn v. Indian- 
 
 telligent statement of all the facts apolis Nat. Bank, 125 Ind. 381, 25 
 
 of the case, with the reasoning N. '¥.. 558, 9 L. R. A. 676, 21 Am. 
 
 and numerous authorities cited, St. 231, and note, 
 
 without taking more space than i« Compton v. Jesup, 167 U. S. 
 
 we feel justified in giving to a 1, 17 Sup. Ct. 795. 807, 808, 42 L. 
 
 review of any one case. The ed. 55. 
 
 principal questions involved were 17 Dow v. Beidelman, 49 Ark. 
 
 certified to the supreme court, but 325, 455, 5 S. W. 297, 718, 125 U. S. 
 
 it did not fully settle the law 680, 8 Sup. Ct. 1028, 31 L. ed. 841 ; 
 
 upon the subject. In addition to Memphis &c. R. Co. v. Railroad 
 
 the authorities cited in the case Commissioners, 112 U. S. 609, 5 
 
909 
 
 SALE AND REORGANIZATION 
 
 §610 
 
 statute expressly so provides. But the purchaser at a foreclosure 
 sale takes with the property all franchises which are included 
 and authorized to be included in the mortgage, and are neces- 
 sary to the successful operation of the road, including, it seems, 
 the franchise of eminent domain. ^^ The same reasons which 
 cause nearly all railroads to be built by corporations apply with 
 equal force to urge the incorporation of the purchasers of a rail- 
 road at foreclosure sale.'^ The legislature has power to provide 
 for the reorganization of the bondholders into a new corporation 
 with the rights and duties of the old corporation, upon strict 
 foreclosure of a railroad mortgage ; and it has been held that 
 when the majority effect an organization under legislative au- 
 thority, a dissenting minority have no private rights that can be 
 
 Sup. Ct. 299, 28 L. ed. 837; Norfolk 
 &c. R. Co. V. Pendleton, 156 U. S. 
 667, IS Sup. Ct. 413, 39 L. ed. 574; 
 Julian V. Central Trust Co., 193 
 U. S. 93, 24 Sup. Ct. 399, 48 L. ed. 
 629; Watson v. Albany &c. R. Co., 
 Ill Ga. 10, 36 S. E. 324; Atkinson 
 V. Marietta &c. R. Co., IS Ohio St. 
 21; Wellsborough &c. Co. v. Grif- 
 fin, 57 Pa. St. 417; Ante, §595. 
 
 18 New Orleans &c. R. Co. v. 
 Delamore, 114 U. S. 501, 5 Sup. Ct. 
 1009, 29 L. ed. 24S; Lawrence v. 
 Morgan La. R. &c. Co., 39 La. 
 Ann. 427, 2 So. 69, 4 Am. St. 265; 
 Marshall v. Western &c. R. Co., 92 
 N. Car. 322. See also North Caro- 
 lina &c. R. Co. V. Carolina Cen- 
 tral R. Co., 83 N. Car. 489. In the 
 case of Morgan v. Louisiana, 93 
 U. S. 217, 23 L. ed. 860, the Su- 
 preme Court of the United States, 
 in defining what were the fran- 
 chises which the purchaser of a 
 railroad had acquired at marshal's 
 sale, said: "The franchises of a 
 railroad corporation are rights 
 and privileges which are essen- 
 
 tial to the operations of a cor- 
 poration, and without which its 
 road and works would be of little 
 value; such as the franchise to 
 run cars, to take tolls, to appro- 
 priate earth and gravel for the 
 bed of its road, or water for its 
 engines and the like. They are 
 positive rights and privileges, 
 without the possession of which 
 the road of the company could 
 not be successfully worked. A 
 ■conveyance by a, railroad com- 
 pany of "all and singular tne 
 chartered rights, privileges, and 
 franchises of every kind" belong- 
 ing to it, or which should there- 
 after belong to it, does not in- 
 clude land grants which are not 
 directly connected with the opera- 
 tion of the road. Shirley v. Waco 
 Tap. R. Co., 78 Tex. 131, 10 S. W. 
 S43. See also Little Rock &c. R. 
 Co. V. McGehee, 41 Ark. 202. 
 
 19 See Jones Corp. Bonds and 
 Mort. §695; 3 Thomp. Corp. (2d 
 ed.), §2912. 
 
SblO 
 
 RAILROADS 
 
 910 
 
 successfully asserted against such action.-" It has also been held 
 that the bondholders, under a trust deed of railroad property, 
 acquire their rights subject to an obligation to execute the public 
 trust cast upon the mortgaged property by devoting it to the 
 public use for which it was created, and that no rights of any 
 bondholder are violated by the action of the state in creating a 
 new instrumentality to carry into effect the original design and 
 to devote the property to the only use which the law of its cre- 
 ation permits, so long as he retains his original pro rata share 
 of the trust property.-^ So. it is held that the legislature may 
 constitute the purchasers at foreclosure sale a corporation under 
 the charter of the old corporation.*^ Persons acquiring rights 
 
 20 Canada Southern R. Co. v. 
 Gebhard, 109 U. S. 527, 534, 3 Sup. 
 Ct. 363, 27 L. ed. 1020; Gates v. 
 Boston &c. R. Co., 53 Conn. 333, 5 
 Atl. 695, 24 Am. & Eng. R. Cas. 
 143. So it has been held that such 
 a statute may be amended so as 
 to be made conditional, as au- 
 thority to incorporate is a privi- 
 lege and not a property right. 
 Railroad Comrs. v. Grand Rapids 
 &c. R. Co., 130 Mich. 248, 89 N. 
 W. 967. 
 
 21 Gates V. Boston &c. R. Co., 
 53 Conn. 333, 5 Atl. 695. In this 
 case Stoddard, J., said: "There is 
 no reason why, subject to legis- 
 lative and judicial control and di- 
 rection, the majority in interest 
 in common property, of an indi- 
 visible nature, consecrated to pub- 
 lic use, should not so use that 
 property as to advance the private 
 interests in that property and se- 
 cure the public welfare." In . a 
 case where the plaintiff, owing but 
 one per cent, of the bonds, refused 
 to accept a reorganization agree- 
 ment, but sued to collect his 
 
 bonds ; and it appeared that all 
 the other bondholders had ac- 
 cepted the plan of reorganization 
 and had surrendered their bonds ; 
 that their interests demanded that 
 the reorganization be confirmed, 
 and that it had been substantially 
 confirmed -by a judgment of the 
 United States Circuit Court in 
 Oregon, the court held that plain- 
 tiff's bill must be dismissed and 
 that he must surrender his old 
 bonds and accept new ones, as 
 provided in the agreement. Pol- 
 litz V. Farmers' Loan &c. Co., 53 
 Fed. 210. But see Huber v. Mar- 
 tin, 127 Wis. 412, 105 N. W. 1031, 
 3 L. R. A. (N. S.) 653 n, 115 Am. 
 St. 1023. And see as to what is 
 necessary as against creditors on 
 reorganization of insolvent com- 
 pany, and when such reorganiza- 
 tion is fraudulent. Central Imp. 
 Co. v. Cambria Steel Co., 210 Fed. 
 696, and cases cited; Northern 
 Pac- R. Co.. v. Boyd,. 177 Fed. 804. 
 22 Witherspoon v. Texas Pacific 
 R. Co., 48 Tex. 309; Acres v. 
 Moyne, 59 Tex. 623; Gulf &c. R. 
 
911 SALE AND KEOKGANIZAliON §61) 
 
 under a mortgage upon the property of a railroad corporation 
 must be held to have acquired them subject to the power of the 
 legislature to provide for. a continuous performance of all public 
 duties imposed by law upon the corporation.^^ Statutes provid- 
 ing for the reorganization of the bondholders to form a new cor- 
 poration may be altered at the pleasure of the legislature. A 
 change in the law after the issue of the mortgage bonds does not 
 impair the obligation of a contract, although the expense of re- 
 organization is thereby increased.^* So, a^ the franchise to.be a 
 corporation is deemed to be granted anew, the company forined 
 upon reorganization may be made amenable to statutory or con- 
 stitutional pro^■^i!ons enacted after the' charter to the original 
 company was granted and before the reorganization. ^^ 
 
 §611 (531a). Reorganization through purchasing committee.. 
 
 — The bondholders or persoiis interested, such as the bondhold- 
 ers, stockholders and creditors frequently get together for the 
 purpose of purchasing and reorganizing arid appoint a purchasing 
 or reorganization committee for carrying out their plans, which 
 usually contemplate the foreclosure and purchase, or purchase at 
 the foreclosure sale, by the committee and the transfer of th- 
 property by the committee so purchasing to a new corporation 
 formed for the purpose of taking such property and carrying on 
 the business. "It rarely happens in the United States," it is said, 
 "that foreclosures of railway mortgages are anything else than 
 the machinery by which arrangements between the creditors and 
 other parties in interest are carried into effect, and a reorganiza- 
 
 Co. V. Morris, 67 Tex. 692, 700, 4 25 Trask v. Maguire, 18 Wall. 
 S. W. 1S6. See also Holland v. (U. S.) 391, 21 L. ed. 938; Railroad 
 Lee, 71 Md. 338, 18 All. 661 ; Boy- Co. v. Georgia, 98 U. S. 359, 25 L. 
 Ian V. Kelly, 36 N. J. Eq. 331; ed. 185; Keokuk &c. R. Co. v. Mis- 
 state V. Sherman, 22 Ohio St. 428. souri, 152 U. S. 301, 14 Sup. Ct. 
 
 23 Gates V. Boston &c. R. Co., 592, 38 L. ed. 450; Grand Rapids 
 53 Conn. 333, 5 Atl. 695. &c. R. Co. v. Osborn, 193 U. S. 17, 
 
 24 People V. Cook, 148 U. S. 397, 26 Sup. Ct. 310, 48 L. ed. 598; State 
 13 Sup: Ct. 645, 37 L. ed. 498; Rail- v. Sherman, 22 Ohio St. 411. But 
 road Comrs. v. Grand Rapids &c. see First Division of St. Paul &c 
 R. Co., 130 Mich. 248, 89 N. W. R. Co. v. Parcher, 14 Minn. 297. 
 967. 
 
§012 
 
 RAILROADS 
 
 912 
 
 tiun of the affairs of the corporation under a new name brought 
 about.''2« The whole matter is usually arranged by agreement, 
 and the powers and duties of the committee depend upon the 
 agreement,^^ under which they occupy a position or relation of 
 trust.^^ As elsewhere shown, the courts have looked with favor 
 upon such combinations and arrangements when propiirly plcinned 
 and carried out, but they must not be unfair and fraudulent, and 
 the trustee or committee must not unduly favor some of the 
 bondholders at the expense of the others who are parties to the 
 agreement.^* 
 
 § 612 (532). Statutory reorganization — :Liability of new cor- 
 poration. — Most of the states provide by general statutes for the 
 
 -'0 Canada So. R. Co. v. Geb- 
 •hard, 109 U. S. 527, 3 Sup. Ct. 363, 
 27 L. ed. 1020. 
 
 27 Indiana &c. R. Co. v. Swan- 
 nell, 157 111. 616, 41 N. E. 989, 30 
 L. R. A. 290; Cox v. Stokes, 156 
 N. Y. 491, 51 N. E. 320. See also 
 Peoria &c. R. Co. v. Coster, 97 
 Fed. 519. 
 
 28 Fuller V. Venable, 118 Fed. 
 543; United Water Works Co. v. 
 Omaha Water Co., 164 N. Y. 41, 58 
 N. E. 58; Cox v. Stokes, 156 N. Y. 
 491, 51 N. E. 320; Thayer v. 
 Wathen, 17 Tex. Civ. App. 382, 44 
 S. W. 906. But considerable dis- 
 cretion is usually invested in the 
 committee. Central Trust Co. v. 
 Carter, 78 Fed. 225; McHenry v. 
 New York &c. R. Co., 25 Fed. 65; 
 Mercantile Trust &c. Co. v. Low, 
 87 Fed. 241. And the courts are 
 inclined to construe the agree- 
 ment with some liberality to pro- 
 tect the committee except where 
 there is malfeasance or misfeas- 
 ance or gross negligence. Ven- 
 ner v. Fitzgerald, 91 Fed. 335 ; Van 
 Siclen V. Bartol, 95 Fed. 793. See 
 
 generally as to their duties and 
 liabilities, Lehigh Coal Co. v. 
 Central R. Cq., 34 N. J. Eq. 88; 
 Lyman v. Kansas City &c. R. Co., 
 101 Fed. 636; United Water Works 
 Co. V. Stone, 127 Fed. 587; Cush- 
 man v. Bonfield, 139 111. 219, 28 K. 
 E. 937; Industrial &c. Trust v. 
 Tod, 93 App. Div. 263, 87 N. Y. S. 
 687. 170 N. Y. 233, 63 N. E. 285; 
 Grace v. Noel Mill Co. (Tenn. 
 Ch.), 63 S. W. 246: Reed v. 
 Schmidt, 115 Ky. 67, 72 S. W. 367, 
 61 L. R. A. 270; 5 Thbmp. Corp. 
 (2nd ed.) §§6003, 6004. See also 
 note in 40 L. R. A. 216, on the re- 
 lations and rights of members of 
 a syndicate. 
 
 29 The reorganization scheme 
 and agreement must not defraud 
 creditors nor otherwise be for an 
 unlawful purpose. Northern Pac. 
 R. Co. v. Boyd, 177 Fed. 804; Cen- 
 tral Imp. Co. V. Cambria Steel 
 Co., 201 Fed. 811; Investment 
 Registry Co. v. Chicago &c. Elec. 
 R. Co., 206 Fed. 488; State v. Citi- 
 zens' Light &c. Co., 172 Ala. 232, 
 55 So. 193. 
 
913 SALE AND REORGANIZATION §612 
 
 incorporation of the purchasers of railroad property at fore- 
 closure sale.*" When they have complied with the: statute they 
 become a new and entirely different corporation from that whose 
 property apd franchises they obtained by purchase at the fore- 
 closure sale, even though the statute expressly invests them with 
 all the rights, franchises, powers and privileges possessed by the 
 old corporation.^' Under these and similar special acts it is cus- 
 tomary to reorganize the persons having an interest in the road 
 to form a new corporation for whom the porperty is purchased 
 by a trustee chosen for that purpose. A proper agreement of 
 this kind is legal and binding, and the trustee will be compelled! 
 to transfer the property to the corporation when organized.'^' 
 But none of the creditors can clairn an interest in a reorganized' 
 corporation without sharing in the expense of the sale and re- 
 organization.^* The statute providing for reorganization some- 
 times provides that the stockholders of the old corporation ma3r 
 become members of the new corporation upon certain terms. 
 And such provision is sometimes contained in the mortgage or 
 in the reorganization agreement entered into by the purchasers." 
 
 30 Thomas v, Milledgeville R. Co., Co., 103 N. Y. 58, & N. E. 355. See 
 99 Ga. 714, 27 S. E. 756; Moore v. also Wenger v. Chicago &q. R. 
 State, 71 Ind. 478; State v. Hare, 121 Co., 114 Fed. 34; Kurtz v. Phila- 
 Ind. 308, 23 N- E. 145 ; Vicksburg &;c. delphia &c. R. Co., 187 Pa. St. 59, 
 R. Co. V. Elmore, 46 L^, Ann. 1237, 40 Atl. 988. But see, where there 
 15 So. 701 ; Vilas v. Milwaukee &c. is fraud, Louisville Trust Co. v. 
 R. Co., 17 Wis. 497; 3 Thomp. Louisville &c. R. Co., 174 U. S. 
 Corp. (2nd ed.) §2912. Such a stat- 674, 19 Sup. Ct. 827, 43 L. ed. 113D; 
 ute, it IS held, does not prevent Central of Georgia R. Co. v. Paul, 
 purchasers from selling to any ex- 93 Fed. 878; St. Louis Trust Co. 
 isting corporation if they other- v. Des Moines &c. R. Co., 101 Fed. 
 wise have that right. Julian v. 632. 
 
 Central Trust Co., 193 U. S. 93, 24 33 Hancock v. Toledo &c. R. Co., 
 
 Sup. Ct. 399, 48 L. ed. 629. u Biss. (U. S.) 148, 9. Fed. 738; 
 
 31 People V. Cook, 110 N. Y. 443, Jones Corp. Bonds and Mort. 
 449, 18 N. E. 113, 36 Am. & Eng. §691, citing Fidelity Insurance &c. 
 R. Cas. 256, 258; State v. Sher- Ca's Appeal, 106 Pa. St. 144. See 
 man, 22 Ohio St. 411; Smith v. also Huston's Appeal, 127 Pa. St. 
 Chicago ^c. R. Co.. 18 Wis. 17. 620, 18 Atl. 419. 
 
 32 Marie v. Garrison, 83 N. If. 35 Unsecured creditors can not 
 14 ; Munson v. Syracuse &c. R. complain of the reorganizatioa 
 
§f)12 
 
 RAILROADS 
 
 914 
 
 A stockholder who would claim the benefit of an agreement br 
 statutory provision by which the old stockholders are permitted 
 to become members of the new corporation must show a strict 
 compliance on his. part with tlie terms of the agreen'ieht or 
 statute.^* Under a New York statute which provided that any 
 old stockholder of a company whose property and franchises are 
 purchased by trustees upon foreclosure sale for the purpose of 
 reorganization "shall have the right to assent to the plan of re- 
 adjustment and reorganization of interests pursuant to which 
 such franchises and property shall have been purchased at any 
 time within six months after the organization of said new com- 
 pany, and by complying with the terms and conditions of such 
 plan become entitled' to his pro rata benefits therein according 
 to its terms,"*^ it was held that no notice at all to the stock- 
 holders need be provided for in a scheme for reorganization en- 
 tered into in accordance with the terms of 'the statute, since all 
 stockholders who are reasonably careful of their interests and 
 >vigilant in looking after their rights may be presumed to have 
 
 "scheme as inequitable because the 
 stockholders of the old company 
 are to become stockholders of the 
 new, while the unsecured bond- 
 holders are given second pre- 
 ferred income bonds at par in full 
 for their claims. Hancock v. To- 
 ledo &c. R. Co., 11 Biss. (U. S.) 
 148, 9 Fed. 738. But compare on 
 this general subject Northern 
 Pac. R. Co. V. Boyd, 177 Fed. 804; 
 Central Imp. Co. v. Cambria Steel 
 Co., 210 Fed. 696. 
 
 36 The fact that he had no 
 actual notice of the right accord- 
 ed to stockholders to take stock 
 .until after the time allowed them 
 for exercising the privilege had 
 expired gives a stockholder no 
 right to claim stock after the ex- 
 piration of that time, where 
 tnotice was given' by publication 
 
 as required by the agreement for 
 reorganization. Thornton v. Wa- 
 bash &c. R. Co., 81 N. Y. 462; 
 Vatable v. New York &c. R. Co., 
 96 N. Y. 49. And where the bond- 
 holders purchased a railroad at 
 foreclosure sale and entered into 
 a reorganization scheme by which 
 any stockholder should be entitled 
 to exchange his stock for stock 
 of the new company on payment 
 of fifteen dollars per share within 
 a specified time, it was held that 
 the administrator of a deceased 
 stockholder could not demand new 
 shares in exchange for old ones 
 belonging to his decedent upon 
 tender of that sum after the ex- 
 piration of the time specified. 
 Dow v. Iowa Central R. Co., 70 
 Hun 186, 24 N. Y. S. 292. 
 87 N. Y. Laws 1874, Ch. 430, § 3. 
 
915 
 
 SALE AND REORGANIZATION 
 
 §612 
 
 notice of a protracted litigation to foreclose their interests in 
 the corporaton, and of a judicial sale made in pursuance thereto 
 after due notice.^^ And a stockholder who fails to comply with 
 the terms of the plan of reorganization within the time pre- 
 scribed by it, that being not less than the statutory period of six 
 months, has no right to come in after the expiration of such 
 time and claim stock upon an offer to perform the conditions pre- 
 scribed by the plan. And the fact that he had no actual notice 
 iif the adoption of the plan does not enlarge his rights.'"' Stat- 
 utes providing for the reorganization of insolvent corporations 
 do not ordinarily impose any additional liabilities upon the pur- 
 chasers, but simply confer upon them and such persons as they 
 choose to associate with them the power to exist as a corpora- 
 tion and to own and manage the property which they have 
 acquired as a railroad corporation. The new corporation or- 
 ganized thereunder does not become liable for any debts or 
 liabilities of the old company for which the purchasers would 
 not be liable by the terms of their purchase if incorporated.'**^ 
 But it does generally become liable to perform the public duties 
 imposed by law upon the old corporation. Thus, the new com- 
 pany has been h^ld lial)le for a failure to maintain aiid repair 
 bridges forming a part of the highway over its road, where 
 that duty was imposed by law upon its predecessor.^^ 
 
 38 Vatable v. New York &c. R. 
 Co., 96 JSr. Y. 49. 
 
 :^9 Vatable v. New York &c. R. 
 Co., 96 N. Y. 49. 
 
 40 Columbus &c. R. Co.'s Ap- 
 peal, 109 Fed. 177; Lake Erie &c. 
 R. Co. V. Griffin, 92 Ind. 487; Vata- 
 ble V. New York &c. R. Co., 96 N. 
 Y. 49; Houston &c. R. Co. v. Shir- 
 ley, 54 Tex. 125. See ante, §603. 
 See also Brockert v. Iowa Cent. 
 R. Co., 93 Iowa 132, 61 N. W. 405. 
 But see where reorganization is 
 fraudulent as against creditors. 
 Central Imp. Co. v. Cambria Steel 
 Co., 210 Fed. 696, and cases cited. 
 
 41 New York &c. R. Co. v. 
 
 State, 50 N. J. L. 303, 13 Atl. 1, 32 
 Am. & Eng. R. Cas. 186. In an- 
 nouncing the opinion of the court 
 in this case, Judge Reed said of 
 the defendant company: "It pro- 
 ceeded to exercise all the powers 
 with which the charter of the 
 original co^npany would invest it 
 as a purchaser, so far as the new 
 company wished to exert those 
 powers and privileges. While it 
 occupies this attitude it can not 
 ignore those duties to the public 
 which are coupled with the en- 
 joyment of the corporate privi- 
 leges." Montclair v. New York 
 &c. R. Co., 45 N. J. Eq. 436, 1& 
 
§613 
 
 RAILROADS 
 
 916 
 
 I*! B13 (533). Reorganization by agreement — Rights of mi- 
 nority. — "In the absence of statutory authority, or some pro- 
 vision in the instrument which creates the trust, nothing can 
 he done by a majority, however large, which will bind a minor- 
 ity without their consent,"*^ and a reorganization cannot, there- 
 fore, be effected, without a foreclosure, by a majority of the 
 bondholders in such a manner as to deprive dissenting bond- 
 holders of their rights under the mortgage.*^ But provisions 
 may be, and often are, inserted in the mortgage or trust deed 
 which enable a majority of the bondholders to modify the mort- 
 gage rights of all'** and sometimes '.'go far towards organizing 
 the bondholders into a body corporate to take the place and 
 perform the functions of the original corporation upon the in- 
 solvency of the latter."''''' And some of the courts have gone 
 
 Atl. 242. See also Gates v. Bos- 
 ton Air Line &c. R. Co., S3 Conn. 
 -333, 5 Atl. 69S; State v. Central 
 jlowa R. Co., 71 Iowa 410, 32 N. W. • 
 •409, 60 Am. Rep. 806; Gage v. Pon- 
 tiac &c. R Co., lOS Mich. 335, 63 
 N. W. 318; Dyer County v. Chesa- 
 peake &c. R. Co., 87 Tenn. 712, 11 
 S. W. 943; Sherwood v. Atlantic 
 &c. R. Co., 94 Va. 291, 26 S. E. 943. 
 43' Canada Southern R. Co. v. 
 Gebhard, 109 U. S. S27, 534, 3 Sup. 
 Ct. 363, 27 L. ed. 1020; Gilfillan v. 
 Union Canal Co., 109 U. S. 401, 403, 
 3 Sup. Ct. 304, 27 L. ed. 977. 
 Minority stockholders have a 
 right to complain where the ma- 
 jority stockholders attempt to re- 
 organize and sell to a new cor- 
 poration without their consent. 
 See Price v. Holcomb, 89 Iowa 
 123, 56 N. W. 407; Smith v. Smith, 
 125 Mich. 234, 84 N. W. 144. See 
 generally as to rights of minority 
 stockholders on reorganization. 
 Sparrow v. Bement, 142 Mich. 441, 
 a05 N. W. 881, 10 L. R. A. (N. S.) 
 
 725, and cases there reviewed in 
 note. 
 
 *3 Bill v. New Albany &c. R., 2 
 Biss. (U. S.) 390, Fed. Cas. No. 
 1407; Hollister v. Stewart, 111 N. 
 Y. 644, 19 N. E. 782; Taylor v. At- 
 lantic &c. R., 55 How. Prac. (N. 
 Y.) 275; Poland v. Lamoille Val- 
 ley R Co., 52 Vt. 144. See also 
 Mason v. Pewabic Min. Co., 25 
 Fed. 882, 133 U. S. 50, 10 Sup. Ct. 
 224, 33 L. ed. 524; Lake &c. El. R. 
 Co. V. Ziegler, 99 Fed. 114. And 
 it has been held that the consent 
 of a bondholder to a reorganiza- 
 tion scheine is not implied from 
 his silence. Philadelphia &c. R. 
 Co. v. Love, 125 Pa. St. 488, 17 
 Atl. 455. 
 
 ** Follit v. Eddystone Granite 
 Quarries, L. R. (1892) 3 Ch. 75; 
 Sneath v. Valley Gold, L. R. (1893) 
 1 Ch. 477. 
 
 4B Sage V. Central R. Co., 99 U. 
 S. 334, 25 L. ed. 394; Shaw v. Rail- 
 road Co., 100 U. S. 60S, 25 L. ed. 
 757. 
 
917 SALE AND REORGANIZATION ' § 613 
 
 very far in upholding reorganization schemes adopted by the 
 majority.'*^ As a foreclosure cuts off or bars the rights of the 
 stockholders and creditors against whom the decree is ren- 
 dered, it is usually the safest way in which to prepare for a 
 reorganization upon the insolvency of the corporation. Unse- 
 cured creditors and stockholders often have it in their power, 
 however, to so embarrass and delay the foreclosure proceed- 
 ings"that it is found expedient for the mortgage creditors and 
 other parties interested in the property to agree upon some 
 scheme of reorganization whereby, after the foreclosure sale, 
 all parties interested shall be allowed, upon equitable terms, 
 to come into a new company which shall own the property and 
 carry on the business. This may be necessary in order to pre- 
 serve intact a system of railways, to obtain funds required in 
 the reorganization, or to prevent the appointment of a receiver 
 and the issuance of receiver's certificates, or the allowance of 
 other preferred claims growing out of the operation of the road, 
 which would lessen the value of the property or imperil the 
 security of the bondholders, and it is, therefore, better for them 
 to "give up something of their own security" in order to avoid 
 the delay and danger of loss. Under such schemes of reorgani- 
 zation the old stockholders are usually allowed to become share- 
 holders in the new corporation upon the payment of a certain 
 sum for each share of stock held by them, or upon some other 
 equitable basis, and the bondholders are generally permitted 
 to exchange the old bonds for new ones issued by the new 
 company. Of course, in the absence of any statutory provision 
 upon the subject, no one who has not signed the agreement can 
 be compelled to come into the new company, and where all the 
 interested parties have agreed to the plan of reorganization 
 their rights are measured by the agreement.*'' Such schemes 
 
 46 Shaw V. Railroad Co., 100 U. Boston &c. R. Co., S3 Conn. 333, 
 
 S. 60S, 2S L. ed. 7S7; Canada South- S Atl. 695; Cowell v. City &c. Co., 
 
 em R. Co. V. Gebhard, 109 U. S. 130 Iowa 671. 105 N. W. 1016; Mills 
 
 527, 3 Sup. Ct. 363, 27 L. ed. 1020. See v. Potter, 189 Mass. 238, 75 N. E. 
 
 Pollitz V. Farmers' Loan &c. Co., 627. 
 
 S3 Fed. 210; Symmes v. Union i^ See generally 5 Thomp. Corp. 
 
 Trust Co., 60 Fed. 830; Gates v. (2nd ed.) §§5980-6019. 
 
§614' 
 
 RAILROADS 
 
 918 
 
 -oT reorganization, when fair and properly guarded, are legal 
 and are encouraged by the courts in order to prevent loss and 
 insure the operation of the road for the benefit of the public.*'^ 
 
 ^ 614 (534). Rights and obligations of the parties — Laches 
 and estoppel. — In the absence of a statute or provision in the 
 mortgage giving the majority power to bind the minority, it 
 lias been held th.it bondholders who refuse to participate in the 
 reorganization arc: not bound to do so, but may usually insist 
 on being paid in cash.*^ They are entitled to their proportion 
 of the money realized from the sale, but nothing more, unless 
 they come in within the time limited by the agreement.^" Even 
 in the absence of any specific limitation they should act within 
 a reasonable time and may, by their own laches, lose their 
 rights to come m,^^ or to set aside the sale.^^ So, of course, 
 one who takes part in the reorganization may thereby estop 
 
 48 Shaw V. Railroad Co., 100 U. 
 S. 605, 25 L. ed. 757; Kropholler 
 V. St. Paul &c. R., 1 McCrary (U. 
 S:) 299, 2 Fed. 302; Robinson v. 
 Philadelphia &c. R. Co., 28 Fed. 
 340; Riker v. Alsop, 27 Fed. 251; 
 Mackintosh v. Flint &c. R. 34 
 Fed. 582; Gates v. Boston &c. R. 
 Co., 53 Conn. 333, S Atl. 695. The 
 bondholders may combine to pur- 
 chase at the sale. Terbell v. Lee. 
 40 Fed. 40. The stockholders may 
 also combine with them. Penn- 
 sylvania Transportation Co.'s Ap- 
 peal, 101 Pa. St. 576. 
 
 ■I'" Brooks V. Vermont &c. R., 22 
 Fed. 211. See also Philadelphia 
 &c. R. Co. V. Love, 125 Pa. St. 
 488, 17 Atl. 455. Compare Pollitz 
 V. Farmers' Loan &c. Co., S3 Fed. 
 210, 213. 
 
 50 Bound V. South Carolina R. 
 Co., 78 Fed. 49; Vatable v. New 
 York &c. R. Co., 96 N. Y. 49; Vose 
 V. Cowdrey, 49 N.' Y. 336; Appeal 
 of Huston, 127 Pa. St. 620, 18 Atl. 
 
 419; Landis v. Western Pass. R. 
 Co., 133 Pa. St. 579, 19 Atl. 556; 
 Zuccani v. Nacupai &c. Co., 61 L. 
 T. R. 176. But minority bond- 
 holders have been permitted by 
 the court to come in and partici- 
 pate in the purchase where they 
 made their application before the 
 sale. Duncan v. Mobile &c. R., 3 
 Woods (U. S.) 597, Fed. Cas. No. 
 4139. See also Walker v. Mont- 
 clair &c. R. Co., 30 N. J. Eq. 525. 
 
 ^■1 Holland v. Cheshire R., 151 
 Mass. 231, 24 N. E. 206; Zebley v. 
 Farmers' &c. Co., 63 Hun 541, 18 
 N. Y. S. 526; Carpenter v. Catlin, 
 44 Barb. (N. Y.) 75; Dow v. Iowa 
 Central R. Co., 70 Hun 186, 24 N. 
 Y. S. 292; Landis v. Western 
 Penna. R. Co., 133 Pa. St. 579, 19 
 Atl. 556. 
 
 32 Wetmore v. St. Paul &c. R., 
 1 McCrary (U. S.) 466, 3 Fed. 177; 
 Carey v. Houston &c. R. Co., 52 
 Fed. 671 ; Farmers' &c. Co. v. 
 Rankers' S,'C Co., 119 N. Y. IS, 23 
 
919 
 
 SALE AND REORGANIZATION 
 
 §ai5 
 
 himself from thereafter. repudiating it.^^ The provisions of the 
 reorganization agreement must be duly complied with"* and a 
 change in the plan can not be made by the reorganization com- 
 mittee, unless the authority is clearly given. ^^ . But where the 
 reorganization agreement makes the reorganization committee 
 the agents of the signers, notice to the committee is notice to 
 all the signers.^** One who has signed and complied with the 
 reorganization agreement and is wrongfully excluded may re- 
 cover damages,^'' or, in other cases, equity will protect him and 
 may even enforce the agreement.^® 
 
 § 615 (535). Fraud in the sale or reorganization. — A secret 
 agreement, whereby one of the parties seeks to obtain an un- 
 due advantage, will not be tolerated by the courts,^" and a sale 
 may be set aside where the mortgage trustee enters into a 
 combination with part of the bondholders to purchase at the 
 
 N. E. 173. See also Cole v. Birm- 
 ingham &c. R. Co., 143 Ala. 427, 39 
 So. 403; Mills v. Potter, 189 Mass. 
 238, 75 N. E. 627. 
 
 53 Crawshay v. Soutter, 6 Wall. 
 ■(U. S.) 739, 18 L. ed. 845; Symme:. 
 
 V. Union Trust Co., 60 Fed. 830; 
 Matthews v. Murchison, IS Fed. 
 691. See also United States v. 
 Union Pac. R. Co., 98 U. S. 569, 
 25 L. ed. 143; St Louis &c. Co. v. 
 Sandoval &c. Co., 116 111. 770, 5 
 N. E. 370; Hollins v. St. Paul &c. 
 R. Co., 9 N. Y. S. 909, 29 N. Y. 
 St. 208; Butterfield v. Cowing, 112 
 N. Y. 486, 20 N. E. 369. 
 
 54 In order to hold a dissatisfied 
 subscriber. Miller v. Rutland &c. 
 R. Co., 40 Vt. 399, 94 Am. Dec. 
 413; United Water Works Co. v. 
 Stone, 127 Fed. 587.; Martin v. 
 Somerville &c. Co., 27 How. Prac. 
 (N. Y.) 161 ; United Water Works 
 Co. V. Omaha &c. Co., 164 N. Y. 
 41, 58 N. E. 58. And by those who 
 desire to come into the new com- 
 
 pany, in order to entitle them to 
 do so. Thornton v. Wabash &c. 
 R. Co., 81 N. Y. 462; Fuller v. 
 Venable, 118 Fed. 543; Appeal of 
 Fidelity &c. Co., 106 Pa. St. 144; 
 Van Alstyne v. Houston &c. R. 
 Co., 56 Tex. 211. 
 
 55 Dutenhofer v. Adirondack R. 
 Co., 14 N. Y. S. 558. 
 
 56 Cox V. Stokes, 78 Hun 331, 29 
 N. Y. S. 141. 
 
 67 Harris v. Davis, 44 Fed. 172; 
 Reading &c. Co. v. Reading &c. 
 Works, 137 Pa. St. 282, 21 Atl. 169. 
 
 58 May compel an accounting. 
 Riker v. Alsop, 27 Fed. 251 ; Cush- 
 man v. Bonfield, 139 111. 219, 28 N. 
 E. 937. May enforce agreement 
 of purchaser to allow others to 
 participate. Coi-nell v. Utica &c. 
 R. Co., 61 How. Prac. (N. Y.) 184; 
 Marie v. Garrison, 83 N. Y. 14. 
 See also Motley v. Southern R. 
 Co., 184 Fed. 956. 
 
 59 Bliss V. Matteson, 45 N, Y. 
 22; White, ex parte, 2 S. Car. 40y. 
 
§615 
 
 RAILROAD? 
 
 920 
 
 sale for a small price and reorganize in such a manner as to 
 sacrifice the interests of the other bondholders.*" But, as we 
 have already set'n, any number of stockholders or creditors 
 may purchase 'for themselves so long as they do so in good 
 faith without preventing competition or taking any undue ad- 
 vantage of the others."^ It has been held that a purchaser by a 
 <lirector,82 or a trustee''- at his own sale is constructively or 
 prima facie fraudulent and voidable, but mortgage trustees are 
 sometimes authorized by the courts to make a certain bid or 
 purchase at the sale for the benefit of all the bondholders, *'* and 
 in some cases purchases by directors in good faith have been 
 upheld. 85 But the company, or mortgagor, may usually avoid 
 the sale to a trustee by redeeming,®" and a director who fraudu- 
 lently purchases may be compelled to transfer the property or 
 account as a trustee."'' It has been held that property fraudu- 
 
 00 Sahlgard v. Kennedy, 1 Mc- 
 Crary (U. S.) 291, 2 Fed. 295. See 
 also Lake St. El. R. Co. v. Zieg- 
 ler, 99 Fed. 114. 
 
 01 Ante, §607. See also Carter 
 V. Ford Plate Glass Co., 85 Ind 
 180; Ketchum v. Duncan, 96 U. S, 
 659, 24 L. ed. 868; Wetmore v. St, 
 Paul &c. R. Co., 3 Fed. 177; Hay 
 den V. Official &c. Co., 42 Fed. 875 
 Osborne v. Monks (Ky.), 21 S. W. 
 101; Kitchen v. St. Louis &c. R, 
 Co., 69 Mo. 224. 
 
 62 Jones V. Arkansas &c. Co., 38 
 Ark. 17; European &c. R. Co. v. 
 Poor, 59 Maine 277; Wilkinson v. 
 Bauerle, 41 N. J. Eq. 635, 7 Atl. 
 514; Cumberland &c. Co. v. Sher- 
 man, 30 Barb. (N. Y.) 553; Iron 
 &c. Co., Re, 19 Ont. R. 113, 33 Am. 
 & Eng. Corp. Cas. 277. The com- 
 pany's attorney may purchase for the 
 bondholders. Pacific R. v. Ketchum, 
 101 U. S. 289, 25 L. ed. 932. 
 
 83 Washington &c. R. v. Alex- 
 andria &c. R., 19 Grat. (Va.) 592, 
 100 Am. Dec. 710. But he may 
 
 purchase at a sale brought about 
 by other parties. Allan v. Gillette, 
 127 U. S. 589, 8 Sup. Ct. 1331, 32 
 L. ed. 271. 
 
 64 Sage V. Central R., 99 U. S.. 
 334, 25 L. ed. 394; Rogers v. 
 Wheeler, 43 N. Y. 598. 
 
 B5 Twin Lick Oil Co. v. Mar- 
 bury, 91 U. S. 587, 23 L ed. 328; 
 Hill V. Nisbet, 100 Ind. 341; Hal-, 
 lam V. Indianola Hotel Co., 56 
 Iowa 178, 9 N. W. Ill; Saltmarsh 
 V. Spauldmg, 147 Mass. 224, 17 N. 
 E. 316; Harpending v. Munson, 91 
 N, Y. 650. See also for acts of 
 .officers in effecting reorganization ' 
 held not to be fraudulent. Symmes 
 V. Union Trust Co., 60 Fed. 830. 
 
 86 Racine &c. R. v. Farmers' &c. 
 Co., 49 HI. 331, 95 Am. Dec. 595; 
 Kitchen v. -St. Louis &c. R., 69 
 Mo. 224 : Hoyle v. Plattsburgh &c. 
 R. Co, 54 N. Y. 314, 13 Am. Dec. 
 595; Wasatch &c. Co. v. Jennings. 
 5 Utah 243, 15 Pac, 65. See also 
 James v. Cowing, 82 N. Y. 449. 
 
 8T Jackson v. Ludeling, 21 Wall. 
 
921 SALE AND REORGANIZATION § pi 5 
 
 lently transferred to a new company formed by the members of 
 an old company, with the intention of cheating, hindering and 
 delaying the creditors of the old corporation, may be reached 
 by them on execution. "* So, where a company was apparently 
 properly incorporated, and executed notes as a corporation, it 
 was held that it could not escape liability upon the notes by 
 attempting to dissolve on the ground that the incorporation 
 was invalid and by reorganizing and reincorporating.*^ As a 
 general rule, it may, perhaps, be said that any sale or device 
 by which all the assets of an insolvent corporation are to be 
 parceled out among the stockholders, leaving creditors unpaid, 
 is a fraud upon such creditor, and, in a proper case, they may 
 follow the assets or the purchase-money in the hands of the 
 stockholders. Thus, it has been held that a foreclosure sale 
 made after the company had become insolvent, and expedited 
 by an arrangement between the bondholders and the stockhold- 
 ers whereby the former received part of their debt and the lat- 
 ter the balance of the proceeds, is fraudulent as to the imse- 
 cured creditors, who may be allowed to intervene and obtain 
 satisfaction of their debts out of the proceeds of the sale set 
 apart for the stockholders."" In another case''^ an insolvent 
 railroad company sold all its property to another company for 
 
 (U. S.) 616, 22 L. ed. 492; Brad- liability therefor). A transfer of 
 
 bury V. Barnes, 19 Cal. 120; Harts all the property of a railroad com- 
 
 V. Brown. 11 111. 226; Allen v. pany to a new company formed 
 
 Jackson, 122 111. S67, 13 N. E. 840; by the members of the old with 
 
 Covington &c. R. Co. v. Bowler's the same officers and a mere ex- 
 
 Kx , 9 Bush (Ky.) 468; Raleigh v. change of stock was held fraudu- 
 
 Fitzpatrick, 43 N. J. Eq. 501, 11 lent, as against creditors in San 
 
 Atl. 1; Tobin &c. Co. v. Eraser, Francisco &c. R. Co. v. Bee, 48 
 
 81 Tex. 407, 17 S. W. 25; Hope v. Cal. 398. 
 
 Valley City Salt Co., 25 W. Va. 69 Empire Mfg. Co. v. Stuart, 
 
 789. • 46 Mich. 482, 9 N. W. 527. 
 
 68 Booth V. Bunce, 33 N. Y. 139, '''^ Railroad Co. v. Howard, 7 
 
 88 Am. Dec. 372. See also Blair Wall. (U. S.) 392, 19 L. ed. 117. 
 
 V. St. Louis &c. R. Co., 22 Fed. See also Northern Pac. R. Co. v. 
 
 36; White v. Atlanta &c. R. Co., Boyd, 228 U. S. 482, 33 Sup., Ct. 
 
 5 Ga. App. 308, 63 S. E. 234 (held 554, 559, 560, 57 L. ed. 931. 
 
 liable for torts where reorganiza- Ti Chattanooga. Rome &c. R. 
 
 tion was simply a scheme to avoid Co. v. Evans, 66 Fed. 809. 
 
§ 616 RAILROADS 
 
 922 
 
 bonds of the latter guaranteed by a banking company, and the 
 contract of sale provided tha:t, in consideration for the guar- 
 anty, the banking company should become the owner of the 
 stock and income bonds of the selling company, while the bonds 
 of the buying company, instead of being held as assets by the 
 officers of the selling company, were to be distributed among 
 its shareholders and the owners of its income bonds. The 
 court held that, as against unsecured creditors of the vendor 
 company, its income bonds in the hands of the banking com- 
 pany should be treated as paid and canceled, saying that the 
 device was "doubly fraudulent." It may be stated, as a gen- 
 eral rule, under these decisions, that a sale of all the property 
 of an insolvent railroad company, under an arrangement where- 
 by the stockholders of "the selling company or such stockhold- 
 ers and the owners of its income bonds receive the entire pur- 
 chase-price or proceeds of the sale, is fraudulent as against 
 unsecured creditors known to exist by both parties at the time 
 of the sale, and that, even in the absence of express notice of 
 their existence upon the part of the purchaser, the purchasing 
 company, knowing that the purchise-price will be placed be- 
 yond their reach, is bound to inquire as to whether there are 
 any unsecured creditors and is chargeable with the knowledge 
 which an inquiry would disclose. '^^ 
 
 §616 (536). Reorganization by the courts. — It is, perhaps, 
 not strictly correct to say that the courts will reorganize a cor- 
 poration, but in many cases they have done what they could 
 to further the reorganization of railroad companies in the inter- 
 ests of the public and of all parties concerned.'^* Thus, in a 
 
 72 Louisville Trust Co. v. Louis- v. Bee, 48 Cal. 398; Luedecke y. 
 ville &c. R. Co., 174 U. S. 674, 19 Des Moines &c. Co., 140 Iowa 223, 
 Sup. Ct. 827, 43 L. ed. 1130; Mc- 118 N. \V. 456, 32 L. R. A. (N. S.) 
 Vicker v. American &c. Co., 40 616, and note; Ewing v. Corn- 
 Fed. 861; Central of Georgia R. posite &c. Co., 169 Mass. 72, 47 N. 
 Co. V. Paul, 93 Fed. 878;, Central E, 241; Berthold v. Holladay &c. 
 Imp. Co. y. Cambria Steel Co., Co., 91 Mo, App. 233. See also 
 210 Fed. 696; Northern Pac. R. Vance v. McNabb &c. Coke Co., 
 Co. V. Boyd, 177 Fed. 804; Mont- 92 Tenn. 47, 20 S. W. 424. 
 gomery &c. R. Co. v. Branch, 59 73 See ante, § 613. Courts do not 
 Ala. 139; San Francisco &c. R Co ordinarily formulate reorganiza- 
 
923 SALE AND REORGANIZATION § 616 
 
 comparatively recent case,^* the court approved a master's re- 
 port wherein he laid down the rule that "a court of equity in 
 foreclosure proceedings upon railroad mortgages, in view of the 
 number and variety of, persons and interests to be affected, and 
 their probable sacrifice without combination, for. their protec- 
 tion, will facilitate combinations and schemes of reorganiza- 
 tion to the end that a small minority of interests shall not en- 
 force unreasonable and inequitable concessions from the ma- 
 jority, or the majority crush out or subject to disadvantage the 
 rights of the minority.''" The court also granted permission to 
 the receiver to pay to a syndicate which had proposed to effect 
 a reorganization by the advancement of funds for the purchase 
 of overdue coupons, a commission of two and one-half per cent. 
 on the money advanced in case the reorganization was per- 
 fected, stating that it would "regard with satisfaction any and 
 every legitimate effort to terminate the receivership." It took 
 care to observe, however, that receivers "should not enlist, on 
 either side, in conflicts among those interested in the prop- 
 erty," and that it would not pass upon the merits of rival schemes 
 of reorganization nor coerce the judgment or control the action 
 of the parties interested. So, in another case,''" the court con- 
 firmed a plan of reorganization, over the objection of the mi- 
 nority, who were compelled Id surrender their old bonds and 
 accept new ones upon being duly secured. And in many cases 
 
 tion plans. Paton v. Northern 74 piatt v. Philadelphia &c. R. 
 Pac. R. Co., 85 Fed. 838; Lake St. Co., 65 Fed. 872. 
 El. R. Co. V. Ziegler, 99 Fed. 114; '75 Citing Sage v. Central R. Co.. 
 Wabash &c. R. Co. v. Central 99 U. S. 334, 25 L. ed. 394; Robin- 
 Trust Co., 22 Fed. 138. But they son v. Philadelphia &c. R. Co., 28 
 often do what they can to en- Fed. 340; Carey v. Houston &c. R. 
 courage them. See Shaw v. Little Co., 45 Fed. 438. See also Clark 
 Rock &c. R. Co., 100 U. S. 60S, 25 v. Central R. &c. Co., 66 Fed. 16 
 L. ed. 757; Robinson v. Philadel- But compare Chable v. Nicaragua 
 phia &c. R. Co., 28 Fed. 340; Reed &c. Co., 59 Fed. 846. 
 V. Schmidt, 115 Ky. 67, 72 S. W. ^epollitz v. Farmers' &c. Co.. 
 367, 61 L. R. A. 270. 53 Fed. 210. 
 
§ 616 RA1LI«JADS 924 
 
 the courts have approved a fair reorganization by the majority 
 where all interests were properly protected.'" 
 
 7'' See cases cited in last two Co. v. Roanoke St. R. Co., 98 Fed. 
 
 preceding notes; also Shaw v. 47S. See also S Thomp. Corp. (2nd 
 
 Little Rock &c. R. Co., 100 U. S. ed.), §5981, et seq. 
 60S, 25 L. ed. 757; Fidelity Ins. &c. 
 
CHAPTER XXII. 
 
 RECEIVERS. 
 
 Sec. 
 
 620. Receivers generally. 
 
 621. Jurisdiction of courts of 
 
 equity — Statutory provi- 
 sions. 
 
 622. Jurisdiction is sparingly ex- 
 
 ercised — Purpose of ap- 
 pointment. 
 
 623. General rules as to when re- 
 
 ceivers of railroads will be 
 appointed. 
 
 624. Receivers will not be ap- 
 
 pointed merely because 
 parties consent. 
 
 625. Extent to which jurisdiction 
 
 has been exercised. 
 
 626. Insolvency as ground for ap- 
 
 pointment of receiver. 
 '627. When insolvency is sufficient 
 without default. 
 
 628. Default in payment of in- 
 
 debtedness as ground for 
 appointment. 
 
 629. Appointment in foreclosure 
 
 proceedings. 
 
 630. Other grounds for appoint- 
 
 ment. 
 
 631. Appointment upon applica- 
 
 tion of unsecured cred- 
 itors. 
 
 632. Appointment upon applica- 
 
 tion of secured creditors. 
 
 633. Appointment upon applica- 
 
 tion of stockholders. 
 
 634. Appointment upon applica- 
 
 tion of corporation. 
 
 635. What court may appoint. 
 
 925 
 
 Sec. 
 636. 
 
 637. 
 638. 
 
 639. 
 
 640. 
 
 641. 
 
 642. 
 
 643. 
 
 644. 
 
 645. 
 646 
 647. 
 
 648. 
 
 649. 
 
 650. 
 651. 
 
 652. 
 
 653. 
 
 Court first obtaining juris- 
 diction retains it— Conflict 
 of jurisdiction. 
 
 Extra-territorial jurisdiction. 
 
 Ancillary appointment — 
 Comity. 
 
 Procedure — Ex parte appli- 
 cation. 
 
 Parties to proceedings for 
 appointment of receiver. 
 
 Appointment upon motion or 
 petition and notice — Af- 
 fidavits. 
 
 Who may appoint — Appoint- 
 ment in vacation. 
 
 Suit must generally be pend-> 
 ing. 
 
 Who may be appointed re- 
 ceiver. 
 
 Order appointing receiver. 
 
 Effect of appointment. 
 
 Collateral attack on appoint- 
 ment. 
 
 Title and possession of re- 
 ceiver. 
 
 Authority, rights and duties 
 of receiver — Control by 
 court. 
 
 Contracts of receiver. 
 
 Suits by receivers — ^Author- 
 ity to sue. 
 
 When receiver may maintain 
 suit — Defenses to receiv- 
 er's suit. 
 
 Right of receiver to sue in 
 other jurisdictions — Com- 
 ity. 
 
§520 
 
 RAILROADS 
 
 926 
 
 654 Suits against receiver s — 
 Leave to sue must be ob- 
 tained. 
 
 655. Effect of failure to obtain 
 
 leave to sue. 
 
 656. Effect of recent Act of Con- 
 
 .^ress. 
 
 657. Rule where suit has been 
 
 commenced before ap- 
 pointment of receiver. 
 
 658. Protection of receiver by 
 
 the court. 
 
 659. Liability of receivers — Gen- 
 
 erally. 
 
 660. Liability fojr torts. 
 
 Sec. 
 
 661. Receiver is bound to per- 
 
 form public duties — Man- 
 damus. 
 
 662. Liability on contracts. 
 
 663. Liability on claims arising 
 
 from operation of the 
 road. 
 
 664. Operating expenses— Priority 
 
 of claims. 
 
 665. Liability of corporation. 
 666 Receivers of leased lines. 
 
 667. Receiver's accounts. 
 
 668. Compensation of receiver. 
 
 669. Attorney's fees. 
 
 670 Removal and discharge. 
 671. Effect of removal or dis- 
 charge. 
 
 §62(6 (537). Receivers generally. — A receiver is a person^ 
 appointed by the court to take charge of property pending liti- 
 gation, or in pursuance thereof." The appointment of a receiver 
 is an auxiliary equitable remedy, devised, on account of the in- 
 adequacy of any remedy at law, to prevent loss or injury to 
 
 1 In many of the states provi- 
 sion is made for the appointment 
 of corporations commonly called 
 "trust companies." 
 
 2 Baker v. Backus, 32 111. 79; 
 Devendorf v. Dickson, 21 How. 
 Prac. (N. Y.) 275; Merfitt v. Mer- 
 ritt, 16 Wend. (N. Y.) 405; Farm- 
 ers' Loan &:c. Co. v. Oregon Pac. 
 R. Co., 31 Ore. 237, 48 Pac. 706, 
 65 Am. St. 822. In some juris- 
 dictions, and generally in the ab- 
 sence of statutory authority, the 
 appointment of a -receiver is 
 strictly an ancillary remedy and can 
 not' be obtained where it is the 
 sole primarv object. Davis v. 
 Alton &c. R. Co,. 180 111. App. 1 ; 
 
 Winona &c. Trac. Co. v. Collins, 
 162 Ind. 693, 69 N. E. 998; 5 Thomp. 
 Corp. (2nd ed.), §6334. See also 
 Howell V. Harris-Cortner &c. Co., 
 168 Ala. 383, 52 So. 935, Ann. Cas. 
 1912B, 234, and cases cited in note. 
 And in some instances the statute 
 seems to authorize the appoint- 
 ment in the case of a corporation 
 for certain causes and not for an 
 individual, or vice versa. It is held 
 that the pending litigation need 
 not be in the same court. Under- 
 ground Elec. R. Co. v. Owsley, 176 
 Fed. 26; Erhardt v. Boaro, 113 U. 
 S. 537, 5 Sup. Ct. 565, 28 L. ed. 
 1116. But compare Martin v. 
 Harnage, 26 Okla. 790, 110 Pac. 
 
927 
 
 KECKIVEKS 
 
 §620 
 
 (property in litigation and preserve it, pendente lite, for the sake 
 of all interested,' to be finally disposed of as the court may 
 decree.-^ In the case of a receiver of a railroad his duties usu- 
 ally involve, the oper^t'on of the road fOj^^a time, and often 
 until the receivership is terminated,, under the control of the 
 court.'* A receiver, stands indifferent between the parties, and 
 occupies a fiduciary relation to all the creditors.^ He is, in a 
 sense, an officer of the court, and the court will protect the 
 property in his hands." In the absence of a statute authorizing 
 it he cannot be sued, ordinarily at least, without permission of 
 the court by whom he was appointed.'^ So, as a rule, h? can 
 only bring suit in his own name when authorized by statute or 
 
 781, 38 L. R. A. (N. S.) 228. In 
 the note to this case as last re- 
 ported it is apparently disap- 
 proved and . the Federal . cases 
 above cited and other authorities 
 are referred to as sustaining the 
 appointment in a proper case, 
 even though the litigation us in 
 anotheir court. 
 
 3 Stilwell V. Williams, 6 Madd. 
 38; Folsom v. Evans, 5 Minn. 418; 
 Myers, v. Estell, 48 Miss. 372; 
 Bank of Mississippi v. Duncan, 52 
 Miss. 740; Lyman v. Cent. Ver- 
 mont R Co., 59 Vt. 167, 10 Atl. 
 346. There are, however, cases 
 where a receiver finally disposes 
 of property; as, for instance, un- 
 der statutes authorizing a receiver 
 to wind up the affairs of a cor- 
 poration. 
 
 4See &rl) y. ^ Mor,a3c,l},,.177 U.-S- 
 584, 20 Sup. Ct. 819, 44L!.,e,d. .897; 
 Davis V. Gray, 16 Wall. (U. S.) 
 203, 21 L. ed. 447; Meyer v. John- 
 ston, 53 Ala. 237; Continental 
 Trust Co. V. Toledo &c. R,,Co.,^9 
 Fed. 514; Dayton &c. Co. v. Fel- 
 sienthal, 116 Fed. 961; Vanderbilt 
 v..'Cenfral R. Co„ 43, JJ. J. Eq. 669, 
 
 12 Atl. 188; Vermont &c. R. Co. 
 iv. Vermdint Gent. R.':Ci6:, 46 Vt. 
 792. 
 
 ;:5pa?ris., V. Gr^y, : 16 . Wall, (U. 
 S.) 203, 217; 21 L. ed. 447; Porter 
 V. Williams, 9 N. Y, 142, 59 Am, 
 Dec. 519; Vermont &c. R. Co. v. 
 Ve^mo^t Cfent., R. Co., 3.4 Vt, ,1, 
 : 6 Davis v. Gray, 16 Wall. (U. S.) 
 203, 218, 21 L. ed. 447; Toledo &c. 
 R. Co. V. Continental Trust Co., 
 95 Fed. 497; WalHng v. Miller, 
 108 N;. Y. 173, 2 Am. St. 400; Texas 
 Trunk R. Co. v. Lewis, 81 , Tex. 
 1, 16 S. W. 647, ,26 Am. St. 776; 5 
 Thomp. Corp. (2nd ed.), §§637?, 
 6375. 
 
 ; 7 Barton y, Barbour, 104 U. S. 
 126, 26 L.. ed. 672; De Graff enried 
 v.. Brifinswick ^c. Co., 57 Ga. 2Z; 
 Keqn V. Breckenridge, 96 Ind. ,69; 
 ,Waynf; . i^ike , Co., v. State, Whit- 
 taker, .134'.Ind. 6^72, 34N. E. 440; 
 D^^v^s V. Ladoga Creamery, Co., 
 128 Ind. '222, 27 N. E. 494;'; Chris- 
 tian Jensen Co., Matter of, 128 N. 
 Y. 550* 28 N. E, 665. Malott v. 
 Shimer, 153 Ind. 35, 54 N..E. 101, 74 
 4m. St. 278 ; .Allen v. Central. R. Co., 
 42 Iowa 683;. Fullerton,y. Fordyce, 
 
§621 
 
 RAILROADS 
 
 928 
 
 by the court.* As a general rule he derives his title through the 
 debtor, and can cnly maintain suit where the debtor could have 
 done so.* But there are exceptions to this general rule, for a 
 receiver may sometimes bring suits which the debtor could not 
 maintain. The paramount duty of a receiver is to secure assets 
 for the payment of the debtor's liabilities, and he may for that 
 purpose bring and sustain suits, such as a suit to set aside a 
 fraudulent conveyance made by the debtor, that the latter could 
 not successfully prosecute.^" 
 
 § 621 (538). Jurisdiction of courts of equity — Statutory pro- 
 visions. — The power to appoint a receiver is, we think, inher- 
 ent in courts of equity in a, proper case, and in those code states 
 in which the court of equity has lost its separate identity the 
 
 121 Mo. 1, 2S S. W. 587, 45 Am. St. 
 SOS ; Lyman v. Central &c. R. Co., 
 S9 Vt. 167; Kinney v. Crocker, 18 
 Wis 74. 
 
 8 Gar.ver v. Kent, 70 Ind. 428 ; 
 Wilson V. Welch, 157 Mass. 11. 31 
 N. E. 712; Green v: Winter, 1 
 Johns. Ch. (N. Y.) 60. See also 
 Pendleton v. Russell, 144 U. S. 640, 
 12 Sup. Ct. 743, 36 L. ed. 574. As 
 to when the rule does not apply, 
 see Ponder v. Catterson, 127 Ind. 
 434, 26 N. E. 66. 
 
 9 Jacobson v. Allen, 12 Fed. 454, 
 457; Republic &c. Co. v. Swigert, 
 135 111. ISO, 25 N. E. 680, 12 L. R. 
 A. 328; Bureh v. West, 33 111. App. 
 359; LaFollett v. Akin, 36 Ind. 1; 
 Spinney v. Miller, 114 Iowa 210, 
 86' N. W. 317, 89 Am. St. 351. 
 
 10 Voorhees v. Indianapolis &c. 
 Co., 140 Ind. 220, 39 N. E. 738; Na- 
 tional &c. Bank v. Vigo County 
 Nat. Bank, 141 Ind. 352, 40 N. E. 
 799; Graham Button Co. v. Spiel- 
 mann, SO N. J. Eq, 120, 24 Atl. 571 ; 
 Cole V. Satsop R. Co., 9 Wash. 
 
 487, 37 Pac. 700, 43 Am. St. 858, 10 
 Lewis Am. R. & Corp. R. 604; 
 Elliott Gen. Pr., §393. The re- 
 ceiver of a corporation may avoid a 
 chattel mortgage on its property on 
 the ground that it was not filed ac- 
 cording to law. Farmers' Loan 
 &c.. Co. V. Minneapolis &c. Works, 
 35 Minn. 543, 29 N. W. 349. . A re- 
 ceiver of a corporation may 
 properly bring an action to set 
 aside and vacate a judgment 
 against the corporation on the 
 ground that it was obtained in 
 fraud cf creditors, without con- 
 sideration, and by cohusioi. with 
 the officers of the corporation. 
 Whittlesey v. Delaney, Ti N. Y. 
 571. A receiver of a corporation 
 may repudiate the illegal transfer 
 of its securities by its officers and 
 secure them as assets. Talmage 
 v. Pell, 7 N. Y. 328. A receiver of 
 an insolvent corporation appoint- 
 ed at the instance of creditors is 
 clothed with all their rights and 
 can sue to recover unpaid stock 
 
929 
 
 RECEIVERS 
 
 §621 
 
 power has descended to the courts having equitable jurisdic- 
 tion.ii It may he exercised in aid of their jurisdiction, as a 
 general rule, whenever necessary in order to accomplish com- 
 plete justice, but not, ordinarily, where the law affords any 
 other safe or expedient remedy. ^^ The appointment of receiv- 
 ers for railroad corporations is regulated largely by statute in 
 many of the states,^^ and in England^* as well. And it has 
 been held that specification by the legislature of the cases in 
 
 subscriptions in cases where the 
 corporation can not sue. Cole v. 
 Satsop R. Co., 9 Wash. 487, 37 Pac. 
 700, 43 Am. St. 858. 
 
 11 Meyer v. Johnston, S3 Ala. 
 237; Bitting v. Ten Eyck, 85 Ind. 
 357; McElwaine v. Hosey, 135 Ind. 
 481, 490, 35 N. E. 272; Williamson 
 V. Wilson, 1 Bland (Md.) 420; 
 Dupuy V. Transportation &c. Ter- 
 minal Co., 82 Md. 408, 33 Atl. 889, 
 34 Atl. 910; Folsom v. Evans, 5 
 Minn. 418; State v. Farmers' &c. 
 Co., 90 Nebr. 664, 134 N. W. 284, 
 Ann. Cas. 1913B, 643, 648, and 
 other cases there cited; United 
 States Trust Co. v. New York &c. 
 R. Co., 101 N. Y. 478, S N. E. 316; 
 Hopkins v. Worcester &c. Canal 
 Prop., L. R. 6 Eq. 437; Feather- 
 stone V. Cooke, L. R. 16 Eq. 298; 
 •note, 64 Am. Dec. 482. There is, 
 however, considerable conflict as to 
 whether the power to appoint receiv- 
 ers of railroad companies is inherent 
 in courts of equity! See Gardner v. 
 London &c. R. Co., L. R. 2 Ch. 
 201; American &c. Co. v. Toledo 
 &c. R. Co., 29 Fed. 416, 421; Cole 
 V. Philadelphia &c. Ry. Co., 140 
 Fed. 944; Vanderbilt v. Central R. 
 Co., 43 N. J. Eq. 669, ,12 Atl. 188. 
 The prevailing rule seems to be 
 that there is no such power where 
 
 the object is to dissolve -or wind 
 up the affairs of the corporation, 
 with perhaps one or two excep- 
 tions, but that it may exist in a 
 proper case to preserve the prop- 
 erty pendente lite. See note to 
 Exchange Bank v. Bailfey, 29 Okla. 
 246, 116 Pac. 812, in 39 L. R. A. 
 (N. S.) 1032, citing and reviewing 
 the conflicting authorities. 
 
 12 Rice V. St. Paul &c. R. Co., 
 24 Minn. 464; Corey v. Long, 43 
 How. Prac. (N. Y.) 492; Sollory 
 V. Leaver, L. R. 9 Eq. 22; Cremen 
 V. Hawkes, 2 Jones & La T. 674; 
 Elliott Gen. Pr., § 394. 
 
 13 Under the Indiana statute it 
 was held that a receiver of a 
 turnpike company would be ap- 
 pointed at the suit of stockhold- 
 ers, upon a showing that the ma- 
 jority of the directors have con- 
 verted and misappropriated the 
 corporate revenues, tolls and earn- 
 ings and suffered the road to be- 
 come badly out of repair and 
 wholly impassable for six weeks, 
 although there is no prayer for a 
 dissolution of the corporation. 
 Wayne Pike Co. v. Hammons, 129 
 Ind. 368, 27 N. E. 487. 
 
 1* Whenever the judgment cred- 
 itor of a railway company is un- 
 paid the appointment of a re- 
 
 30 — Ell. Railxoads I 
 
§621 
 
 RAILROADS 
 
 930 
 
 which a receivership may be had excludes every other case and 
 prohibits the appointment, except as authorized. i'' But it seems 
 to us that the better rule is that the right is inherent in courts 
 of equity to appoint a receiver, pendente lite at least, in a proper 
 case, that such statutes are but declaratory of the common law 
 and must be construed in the light of equity jurisprudence, and 
 that they do not abridge the inherent power of the court of 
 equity. 18 The inherent authority of a court of equity to take 
 charge of and operate a railroad and control the extensive busi- 
 ness interests therewith connected with a view to its continu- 
 ance, has been denied in some jurisdictions on the grounds that 
 a court of chancery will not assume the management of a busi- 
 ness except with a view to its winding up or to keep it a going 
 concern with a view to its sale, and that the public functions of 
 the railroad corporation cannot be delegated or transferred, but 
 must be discharged by the company itself.^'' In such instances 
 
 ceiver or manager is a matter of 
 right. Manchester &c. R. Co., In 
 re, L. R. 14 Ch. Div. 645. 
 
 15 Fellows V. Hermans, 13 Abb. 
 Prac. N. S. (N. Y.) 1. The code 
 of Georgia does not materially 
 alter the equitable jurisdiction of 
 the courts to appoint receivers. 
 Skinner v. Maxwell, 66 N. Car. 45. 
 In England it has been held that 
 a court of chancery, in the ab- 
 sence of statute authority, has no 
 power to appoint a manager for a 
 railroad. Gardner v. London &c. 
 R. Co., L. R. 2 Ch. 201. But the 
 weight of authority in the United 
 States is, we think, the other 
 way, although there is some ques- 
 tion as to the better rule. 
 
 16 Bitting V. Ten Eyck, 85 Ind. 
 357; note to 64 Am. Dec. 482;" Mc- 
 Elwaine v. Hosey, 135 Ind. 481, 
 490, 35 N. E. 272; Hollenbeck v. 
 Donnell, 94 N. Y. 342; U. S. Trust 
 Co. V. New York &c. R. Co., 101 
 
 N. Y. 478, 5 N. E. 316, 25 Am. & 
 Eng. R. Cas. 601; Skinner v. Max- 
 well, 66 N. Car. 45; 1 Elliott Gen. 
 Pr., § 394. In Davis v. Gray, 16 Wall. 
 (U. S.) 203, 220, 21 L. ed. 477, 
 Swayne, J., says : "As regards the 
 statutes, we see no reason why a 
 court of equity, in the exercise 
 of its undoubted authority, may 
 not accomplish all the best re- 
 sults intended to be secured by 
 such legislation, without its aid." 
 IT East Line &c. Co. v. State, 75- 
 Tex. 434, 12 S. W. 690; Second 
 Ward Bank v. Upmann, 12 Wis. 
 499; Attorney-General v. Utica 
 Ins. Co., 2 Johns. Ch. (N. Y.) 371 ; 
 Gardner v. London &c. R. Co., L. 
 R. 2 Ch. 201. Compare Decker v. 
 Gardner, 124 N. Y. 334, 26 N. E. 
 814, 11 L. R. A. 480, and note; At- 
 torney-General V. Utica Ins. Co., 
 2 Johns. Ch. (N. Y.) 371 ; Attorney- 
 General V. Bank of Niagara, 
 Hopk. Ch. (N. Y.) 354; Slee v. 
 
931 
 
 RECEIVERS 
 
 §622 
 
 the defect of power has generally been supplied by statute/* 
 and in some states the power of courts of equity has thus been 
 greatly extended and enlarged. Such statutes, however, are 
 somewhat strictly construed. ^^ 
 
 § 622 (539). Jurisdiction is sparingly exercised^-Purpose of 
 appointment. — The appointment of a receiver is a power to be 
 somewhat sparingly exercised, arid in America it is exercised 
 reluctantly with regard to railroads, the courts proceeding cau- 
 tiously with reference to the circumstances of each particular 
 case and reserving a broad discretions^ on account of the in- 
 ability of a court of equity in all cases to properly care for the 
 
 Bloom, 5 Johns. Ch. 366, 381 ; 
 Howe V. Deuel, 43 Barb. (N. Y.) 
 504; Belmont v. Erie R. Cp., 52 
 Barb. (N. Y.) 637; Neall v. Hill, 
 16 Cal. 145, 76 Am. Dec. 508; Baker 
 V. Backus, 32 111. 79. In Decker v. 
 Gardner, 124 N. Y. 334, 26 N. E. 
 814, 11 L. R. A. 480, the court says: 
 "The court of chancery * * * de- 
 clined until the power was conferred 
 by statute to sequestrate corporate 
 property through the medium of 
 a receiver, or to dissolve corpor- 
 ate bodies, or restrain the usurpa- 
 tion of corporate powers." 
 
 18 Connelly v. Dickson, 76 Ind. 
 440; Hellebush v. Blake, 119 Ind. 
 349, 21 N. E. 976; 30 and 31 Vict. 
 Ch. 126, § 4; 36 and 37 Victoria, 
 §§ 3, 27. 
 
 19 Bangs v. Mcintosh, 23 Barb. 
 (N. Y.) 591; Chamberlain v.. 
 Rochester &c. Co., 7 Hun (N. Y.) 
 ■557. 
 
 20 Sage v. Memphis &c. R. Co., 
 125 U. S. 361, 8 Sup. Ct. 887, 31 L. 
 ed. 694, and cases cited; PuUan 
 V. Cincinnati &c. R. Co., 4 Biss. 
 
 (U. S.) 35, Fed. Cas. No. 11461; 
 People V. Albany &c. R. Co., 7 
 Abb. Prac. (N. S.) (N. Y.) 265; 
 Stevens v. Viavison 18 Grat. (Va.) 
 819, 98 Am. Dec. 692; Smith v. 
 Port Dover &c. R. Co., 12 Ont. 
 App. 288; Simpson v. Ottawa &c. 
 R. Co., 1 Ch. Chamb. (Ont.) 126. 
 In Overton v. Memphis &c. R. 
 Co., 10 Fed. 866, Judge Caldwell 
 said: "None of the prerogatives 
 of a court of equity have been 
 pushed to such extreme limits as 
 this, and there is none so likely 
 to lead to abuses. It ih no. the 
 province of a court of equity to 
 take possession of the property, 
 and conduct the business of cor- 
 porations or individuals, except 
 where the exercise of such ex- 
 traordinary jurisdiction is indis- 
 pensably necessary to save or 
 protect some clear right, of a 
 suitor, which would otherwise be 
 lost or greatly endangered, and 
 which cannot be saved or protect- 
 ed by any other action or mode of 
 proceeding." See also Vila v. , 
 
§ 623 RAILROADS 932 
 
 large business interests involved.^^ Courts of equity, however, 
 will assume the management of railroads when a proper case 
 presents itself, with a view to the winding up of insolvent com- 
 panies, or the sale of their property for the benefit of creditors, 
 and, if it is shown to be necessary, will continue the operation 
 of the roads by the intervention of receivers in order that they 
 may be sold without depreciation of the property, and in order 
 that the public interests shall not suffer. They are thus enabled 
 to protect and enforce the rights of creditors and stockholders 
 and to insure the discharge of the public function of the cor- 
 poration.22 Where the appointment of receivers to manage 
 railroads is authorized by statute, the circumstances under 
 which the appoititment may be made and the manner of their 
 appointment are often specifically set forth; but these statutes 
 are largely declaratory of the common law as administered by 
 the courts of other jurisdictions,^^ and, in the absence of spe- 
 cific provisions in the statute, the jurisdiction of a court of 
 equity may be said in general to extend to all cases where its 
 interference is necessary to protect the property or to enforce 
 the rights of persons interested in it, whether creditors or 
 stockholders.** 
 
 § 623 (540). General rules as to when receivers of railroads 
 will be appointed. — It is frequently said that the appointment 
 
 Grand Island Elec. &c. Co., 68 New Jersey the statute provides 
 
 Nebr. 222, 94 N. W. 136, 91 N. W. that a receiver may be appointed 
 
 613, 63 L. R. A. 791, 110 Am. St. 400. for any railroad which fails for 
 
 21 Kelly V. Alabama &c. R. Co., ten days to run daily trains. N. J. 
 58 Ala. 489. See Gardner v. Lon- Supp. p. 834, pi. 42. Delaware Bay, 
 don &c. R. Co., L. R. 2 Ch. 201. &c. R. Co. v. Markley, 45 N. J. 
 
 22 See post, § 625; Long Branch ''Eq. 139, 16 Atl. 436. 
 
 &c. R. Co., In re, 24 N. J. Eq. 398. 24 Davis v. Gray, 16 Wall. (U. 
 
 23 It is held in North Carolina S.) 203, 219, 21 L. ed. 447; Meyer 
 that the code, which specifies cer- v. Johnson, iZ Ala. 237; Sandford 
 tain cases in which a receiver may v. Sinclair, 8 Paige (N. Y.) 373 ; 
 be appointed, "does not materially Conro v. Port Henry Iron Co., 12 
 alter the equitable jurisdiction" Barb. (N. Y.) 27; Lawrence v. 
 of the courts of that state. Skin- Greenwich Fire Ins. Co., 1 Paige 
 ner v. Maxwell, 66 N. Car. 45. In (N. Y:) 587; Conro v. Gray, 4 
 
933 
 
 RECEIVERS 
 
 §623 
 
 of a receiver is within the sound discretion of the court. ^^ This 
 does not mean that the court can, without error, arbitrarily ap- 
 point a receiver where such appointment is unauthorized and 
 wholly uncalled for, or refuse the appointment where the right 
 is clear, fixed and definite, but that a sound discretion is to be 
 exercised according to well-established principles of law.^® It 
 is only in clear cases that the power will be exercised, and as a 
 general rule there must be a suit pending. ^^ The English courts 
 of chancery have always been averse to appointing receivers 
 for railway property in operation, "^ and our courts have often 
 expressed reluctance in. exercising the power in the absence of 
 statutory authority.^® Such reluctance is based mainly upon 
 
 How. Prac. (N. Y.) 166; Skinner 
 V. Maxwell, 66 N. Car. 45; Stev- 
 ens V. Davison, 18 Grat. (Va.) 819, 
 98 Am. Dec. 692. 
 
 25 Farmers' Loan &c. Co. v. 
 Chicago & A. R. Co., 27 Fed. 146; 
 Walker, Ex parte, 25 Ala. 81; 
 Mays V. Rose, Freem. Ch. (Miss.) 
 703, 718; Oakley v. Paterson Bank, 
 2 N. J. Eq. 173 ; Werplank v. Caines, 
 1 Johns. Ch. (N. Y.) 57; Sim- 
 mons Hardware Co. v. Waibel, 1 S. 
 Dak. 488, 47 N. W. 814, 11 L. R. A. 
 267, 36 Am. St. 7SS; Owen v. Ho- 
 man, 4 H. L. Cas. 997, 1032; Smith 
 v. Port Dover &c. R. Co., 12 On- 
 tario App. R. 288, 25 Am. & Eng. 
 R. Cas. 639; S Thorap. Corp. 
 (2nd ed.), §6355. See Elliott's 
 Gen. Pr. 394 and cases cited. 
 
 26 Milwaukee R. Co. v. Soutter, 
 5 Wall. (U. S.) 660, 18 L. ed. 678; 
 Lenox v. Notrebe, Hempst. (U. 
 S.) 225, Fed. Cas. No. 8246c; Vose 
 V. Reed, 1 Woods (U. S.) 647, Fed. 
 Cas. No. 17011; Mercantile Trust 
 Co. V. Missouri &c. R. Co., 36- 
 Fed. 221; Pond v. Framingham 
 &c. R. Co., 130 Mass. 194; Orphan 
 Asylum v.' McCartee, 1 Hopk. Ch. 
 
 (N. Y.) 423 (372) ; Daniels Ch. Pr. 
 (6th ed.) 1664. The action of the trial 
 court is subject to review on ap- 
 peal. Tysen v. Wabash R. Co., 8 
 Biss. (U. S.) 247, Fed. Cas. No. 
 14315; Winthrop Iron Co. v. 
 Meeker, 109 U. S. 180, 3 Sup. 
 Ct. Ill, 27 L. ed. 898; La Societe 
 Francaise d'Epargnes &c. v. Dis- 
 trict Court, 53 Cal. 495; Cook v. 
 Detroit &c. R. Co., 45 Mich. 453, 
 
 8 N. .W. 74, Smith v. Port Dover 
 &c. R. Co., 12 Ont. App. 288, 25 
 Am. & Eng. R. Cas. 639. Com- 
 pare Dawson v. Parsons, 137 N. 
 Y. 60S, 33 N. E. 482. 
 
 27 Crowder v. Moone, 52 Ala. 
 220; Jones v. Bank, 10 Colo. 464, 
 17 Pac. 272; Pressley v. Harrison, 
 102 Ind. 14, 1 N. E. 188; Pressley 
 V. Lamb, 105 Ind. 171, 4 N. E. 
 682; National Bank v. Kent Cir- 
 cuit Judge, 43 Mich, 292, 5 N. W. 
 627; note in Ann. Cas. 1912B, 234; 
 Post, § 641 note 2. 
 
 28 Gardner v. London &c. R. 
 Co., L. R. 2 Ch. 201, 212; Latimer 
 V. Aylesbury &c. R. Co., L. R. 
 
 9 Ch. Div. 385. 
 
 2» Sage V. Memphis &c. R. Co., 
 
§623 
 
 RAILROADS 
 
 934 
 
 the fact that the interests involved are generally large, the man- 
 agement intricate, and that the corporation is charged with a 
 public duty of which it should not be divested, and its officers ' 
 are charged with corporate duties which should not be dele- 
 gated.^" A receiver will not be appointed, as a rule, unless it 
 clearly appears prima facie that the plaintiff is entitled to a 
 final decree.^ 1 The remedy has been termed an equitable at- 
 tachment,*2 and will not be employed to change the manage- 
 ment of railroad property simply because stockholders or cred- 
 itors are dissati5;fied with the present existing management.*^ 
 They must show that they have an equitable right and that it 
 will be impaired unless the property available for its satisfac- 
 tion is protected by the appomtment of a receiver.^* A court 
 will not appoint a receiver upon slight grounds and merely be- 
 cause a receivership would do no harm f^ nor upon good grounds 
 125 U. S. 361, 8 Sup. Ct. 887, 31 L. existing right in the property in 
 
 ed. 694; Overton v. Memphis &c. 
 R. Co., 10 Fed. 866; American 
 
 order to have a receiver appoint- 
 ed. Steele v. Aspey, 128 Ind. 367, 
 
 Loan &c. Co. v. Toledo &c. R. 27 N. E. 739. 
 
 Co., 29 Fed. 416; Meyer v. John- 32 Cincinnati &c. R. Co. v. 
 
 ston, S3 Ala. 237; Kelly v. Ala- Sloan, 31 Ohio St. .1. 
 
 bama &c. R. Co., 58 Ala. 489, Ste- 
 vens v. Davidson, 18 Grat. (Va.) 
 819, 98 Am. Dec. 692. 
 
 30 Gardner v. London &c. R. 
 Co., L. R. 2 Ch. 201. See St. Louis 
 &c. R. Co. V. Dewees, 23 Fed. 
 519, Brewer and Treat, JJ. 
 
 31 Beecher v. Binninger, 7 
 Blatchf. (U. S.) 170, Fed. Cas. 
 No. 1222; Wilkinson v. Dobbie, 12 
 Blatchf. (U. S.) 298, Fed. Cas. No. 
 17670; Cofer v. Echerson, 6 Iowa 
 502; Mays v. Rose, Freem. Ch. 
 (Miss.) 703, 718; Gregory v. Greg- 
 ory, 33 N. Y. Super. Ct. 39; Owen tual Life Ins Co. v. Union Mills 
 v. Homan, 3 Macn. & G. 378; &c. Co., 37 Fed. 286; Cincinnati 
 Lloyd V. Passingham, 16 Ves. 59. &c. R. Co. v. Sloan, 31 Ohio St. 
 See also 5 Thomp. Corp. (2d 1; Cheever v. Rutland &c. R. Co., 
 ed.) § 6334, et seq. The plaintiff 39 Vt. 653. 
 
 must show that he has a present 38 Blondheim v. Moore, 11 Md. 
 
 33 American &c. Co. v. Tole- 
 do &c. R. Co., 29 Fed. 416, 420, 
 421; Fluker v. Emporia City R. 
 Co.,- 48 Kans. 577, 30 Pac. 18. In 
 the absence of gross abuse or 
 fraud, the remedy of the stock- 
 holders is to elect new officers. 
 Edison v. Edison &c. Co., 52 N. 
 J. Eq. 620, 29 Atl. 195. See gen- 
 erally as to dissensions in man- 
 agement as ground for appoint- 
 ment, note in L. R. A. 1918D, 229. 
 
 34 Union Trust Co. v. St. Louis 
 &c. R. Co., 4 Dillon (U. S.) 114, 
 Fed. Cas. No. 14402; Union Mu- 
 
935 
 
 RECEIVERS 
 
 §624 
 
 where it would be useless, as, for instance, where there are no 
 assets nor anything which could be made available to satisfy a 
 judgment;^'' nor where it appears that in the latter case the 
 plaintiff expects some of the defendants to pay his claim rather 
 than suffer annoyance from a receiver. ^'^ Indeed, a court ^of 
 equity will not mterfere in any case where such interference 
 would be a "vain and fruitless thing ;"3^ nor where there is an 
 adequate remedy at law.^® 
 
 § 624 (541). Receiver will not be appointed merely because 
 parties consent. — The mere fact that the parties consent to the 
 appointment of a receiver is not sufficient,*" especially where 
 the rights of third persons are likely to be affected,*^ or the 
 property is in the hands of a person not made a party to the 
 suit.*2 If it appears that the consent was given for the mere 
 
 365 ; Orphan Asylum Soc. v. Mc- 
 Cartee, 1 Hopk. Ch. (N. Y.) 429 
 (488); Smith v. Port Dover &c. 
 R. Co., 12 Ont. App. R. 288, 25 
 Am; & Eng. R. Cas. 639. 
 
 36 Bigelow V. Union Freight R. 
 Co., 137 Mass. 478. See Birming- 
 ham &c. R. Co., In re, L. R. 18 Ch. 
 Div. 155, 3 Am. & Eng. R. Cas. 
 616. Where the company is 
 shown to have no assets a receiv- 
 er will not be appointed. Barton 
 V. Enterprise Loan &c. Assn. 114 
 Ind. 226, 16 N. E. 486, 5 Am. St. 
 608. 
 
 37 Smith V. Port Dover &c. Co., 
 12 Ont. App. 288, 25 Am. & Eng. 
 Cas. 639. 
 
 38 Lister v. Log Cabin &c. 
 Assn., 38 Md. 115; Simpson v. Ot- 
 tawa &c. R. Co., 1 Ch. Chamb. 
 126. A receiver will only be ap- 
 pointed where the amount of the 
 judgment warrants the expense. 
 
 39 Pullan V. Cincinnati &c. R. 
 Co., 4 Biss. (U. S.) 35, Fed. Cas. 
 
 No. 11461; Milwaukee &c. R. Co. 
 V. Soutter, 2 Wall. (U. S.) 510. 
 523, 17 L. ed. 900; Overton v. 
 Memphis &c. R. Co., 10 Fed. 866; 
 Rice V. St. Paul &c. R. Co., 24 
 Minn. 464; Stevens v. Davidson, 
 18 Grat. (Va.) 819, 98 Am. Dec. 
 692. See also Galvire v. McCon- 
 nell, 53 Tex. Civ. App. 486, 117 
 S. W. 211. 
 
 *o Whelpley v. Erie R. Co., 6 
 Blatchf. (U, S.) 271, Fed. Cas. No 
 17504. See Sage v. Memphis &c, 
 R. Co., 18 Fed. 571; Nesbit v 
 North Ga. Elec. Co. 156 Fed. 979 
 Saxon V. Southwestern Brick &c 
 Co., 113 La. Ann. 637, 37 So. 540; 
 Vila V. Grand Island &c. Co., 68 
 Nebr. 222, 94 N. W. 136, 97 N. W. 
 613, 63 L R. A. 791, 110 Am. St. 400; 
 Vermont &c. R. Co. v. Vermont 
 Cent. R. Co., 50 Vt. 500. 
 
 *i Whelpley v. Erie R. Co., 6 
 Blatchf. (U. S.) 271, Fed. Cas. No. 
 17504. 
 
 *^ Searles v. Jacksonville &c. R. 
 
§ 625 RAILROADS 936 
 
 purpose of preventing the seizure of the property of the corpo- 
 ration upon legal process, and without any intent to satisfy the 
 plaintiff's demands against it, the receiver will be discharged.** 
 Courts confine themselves strictly to the business of settling, 
 according to the principles of law and equity, the real contro- 
 versies which come within the "workshop of jurisprudence," 
 and should never lend themselves to the schemes of those who 
 wish to manipulate railroad securities for purposes of adven- 
 turous speculation.** 
 
 § 625 (542). Extent to which jurisdiction has been exer- 
 cised. — Courts of equity, by reason either of inherent power or 
 statutory authority, in the United States, and in most of the 
 states, have interposed with receivers for railway property to 
 the extent necessary to accomplish the desired auxiliary aid, 
 sometimes accompanying the dissolution of the corporation 
 and winding up its aflfairs, sometimes operating the road until 
 the income shall have discharged the primary obligation,*^ and 
 at other times operating and improving the road with view to 
 its advantageous sale. They have even interfered to complete 
 a road in construction which had been retarded on account of 
 the temporary lack of funds,*® and in rare instances have taken 
 charge of lines to compel them to properly perform their pub- 
 lic duty.*'^ But the right, in such cases, to divest the corpo- 
 rate officers of their powers .md supersede them by receivers, 
 
 Co., 2 Woods (U. S.) 621, Fed. « Allen v. Dallas &c. R. Co.. 3 
 
 Cas. No. 12586; Einstein v. Rosen- Woods (U. S.) 316, Fed. Cas. No. 
 
 feld &c. Mills, 38 N. J. Eq. 309; 221; Kennedy v. St. Paul &c. R. 
 
 , Gluck V. Becker Rec. of Corp. Co., 2 Dill. (U. S.) 448, Fed. Cas. 
 
 61. . No. 7706. See also Boston &c. Co. 
 
 43 Sage V. Memphis &c. R. Co., v. Pacific Short Line &c. Co., 104 
 
 18 Fed. 571. Iowa 311, 73 N. W. 839. But mere 
 
 *4American Loan &c. Co. v. To- insolvency is not ordinarily suffi- 
 
 ledo &c. R. Co., 29 Fed. 416. cient ground of itself. Farmers' 
 
 45 Sage V. Memphis &c. R. Co., Loan &c. Co. v. Chicago &c. R. 
 
 125 U. S. 361, 8 Sup. Ct. 887, 31 Co., 27 Fed. 146; Boston &c. R. 
 
 L ed. 694; and Sage v. Memphis Co. v. Boston &c. R. Co., 65 N. H. 
 
 &c. R. Co., 18 Fed. 571. See Bar- 393, 23 Atl. 529, and see next fol- 
 
 ton V. Barbour, 104 U. S. 126, 137, lowing section. 
 
 138, 26 L. ed. 672. 47 T.ong Branch &c. R. Co , Tn 
 
937 RECEIVERS § 626 
 
 when the court can command such officers by injunction or 
 other process, has been questioned,*^ and, although the rem- 
 edy has been extended in some cases, other courts have refused 
 to appoint receivers on account of fraudulent mismanagement 
 by corporate officers where such mismanagement is in itself 
 ground for their removal.*" While courts of equity are cau- 
 tious in the exercise of this remedy, no rule can be laid down 
 which would clearly define the grounds for its exercise or draw 
 boundaries which would confine it, since the power of the 
 equity court has been so enlarged by statute that its arm can 
 be interposed in nearly every instance where complete justice 
 would otherwise fail, and the railroad corporation^" now enjoys 
 few exemptions from the rules which apply to the receivership 
 of other, corporations. 
 
 § 626 (543). Insolvency as ground for appointment of re- 
 ceiver. — Insolvency of a railway corporation is not of itself 
 ground for the appointment of a receiver, unless made so by 
 statute. Even if insolvency be shown the court will refuse to 
 appoint a receiver, unless it can interfere usefully to prevent 
 the impairment of some equitable right or of the value of some 
 claim against the corporation."^ Where insolvency is conceded 
 
 re, 24 N. J. Eq. 398; Fishback v. cago &c. R. Co., 27 Fed. 146; Mc- 
 
 Citizens' St. R. Co. Nat. Corp., George v. Big Stone &c. Co., 57 
 
 (Superior Ct. Marion Co., Ind.), Fed. 262; Denike v. N. Y. &c. Co., 
 
 March 4, 1892. 80 N. Y. 599; Floore v. Morgan 
 
 48Waterbury v. Merchants' &c. (Tex. Civ. App.), 175 S. W. 737. 
 
 Co., 50 Barb. (N. Y.) 157; Feath- See also Worth Mfg. Co. v. Bing- 
 
 erstone v. Cooke, L. R. 16 Eq. 298. ham, 116 Fed. 785; Hall v. Nieu- 
 
 49 See preceding note; Edison kirk, 12 Idaho 33, 85 Pac. 485, 118 
 V. Edison &c. Co., 52 N. J. Eq. Am. St. 188; Sheridan Brick 
 620, 29 Atl. 195. But compare Works v. Marion Trust Co., 157 
 Forbes v. Memphis &c. R. Co., 2 Ind. 292, 61 N. E. 666, 87 Am. 
 Woods (U. S.) 323, Fed. Cas. No. St. 207; Virginia &c. Chemical Co. 
 4926; Fisher v. Concord R. Co., 50 v. Hunter, 84 S. Car. 214, 66 S. E. 
 N. H. 200. m-, People's Investment Co. v. 
 
 50 See Barton v. Barbour, 104 Crawford (Tex. Civ. App.), 45 S. 
 U. S. 126, 137, 138, 26 L. ed. 672, W. 738. In absence of statute, a 
 in dissenting opinion. court of equity has no authority 
 
 51 Farmers' Loan &c. Co. v. Chi- to sit as a court of insolvency to 
 
§ 626 RAILROADS 938 
 
 or evident, with no probability of recovery, and there are dis- 
 sensions among the parties in interest, or disagreements within 
 the corporate management, which threaten dissipation of the 
 assets and endanger the securities of parties in interest, a re- 
 ceiver will usually be appointed at the suit of the proper party.^^ 
 But, ordinarily, if it be shown that it is for the best interest of 
 all concerned to leave the directors in charge of affairs, a re- 
 ceiver will not be appointed f'^ nor will the remedy usually be 
 exercised if the corporation, in obedience to a statute, is mak- 
 ing the same disposition of the earnings of the road that a 
 receiver would be required to make, and no assets would be 
 available in his hands for payment of the plaintiff's debt.^* 
 Where, in addition to the insolvency of a railroad company, its 
 property is in the hands of parties who deny the right of the 
 stockholders to share in the management of the property, 
 equity may, in order to afford relief to such stockholders, on 
 their petition, appoint a receiver to take possession of the 
 property.ss So, if a corporation has been rendered insolvent 
 by the fraudulent mismanagement of its officers, who remain 
 
 liquidate the affairs of an insolv- 11 R. & Corp. L. J. 223. See also 
 ent railway company. Pond v. Cole v. Philadelphia &c. R. Co., 
 Farmingham &c. R. Co., 130 Mass. 140 Fed. 944. And see for con- 
 194; Lawrence &c. Co. v. Rock- flicting authorities on both sides 
 bridge Co., 47 Fed. 755. Supreme as to whether the courts have in- 
 Sitting &c. V. Baker, 134 Ind. 293, herent power to appoint in such 
 33 N. E. 1128. As to what consti- a case, the note in 39 L. R. A. (N. 
 tutes insolvency of a railroad S.) 1032, referred to in a preced- 
 company, and where receiver will ing section of this chapter. 
 
 be appointed, see Intercontinental kq tt ■ t^ ,- ^ -r ■ „ 
 
 ■D ui. r -D * a T, n Union T. Co. v. St. Louis &c. 
 
 Rubber Co. v. Boston &c. R. Co., ■or' a t^m, /tt o^ ... „ . 
 
 \'>A<i T? A -io-y Q Tu r- ^- Co., 4 Dill. (U. S.) 114,. Fed. 
 
 2 63? 6^5 ^346 '" '" ^^^- ^o- 14402; Tysen v. Wabash 
 
 ^fS, M A,K ;^ P ^- Co., 8 Biss. (U. S.) 247, Fed. 
 
 52 Bill V. New Albany &c. R. (. ^ ...,, 
 
 Co., 2 Biss. (U. S.) 390, Fed. Cas. ^^^- ^°- ^^^^^■ 
 
 No. 1407; Mercantile Trust Co. v. ^4 Smith v. Port Dover &c. R. 
 
 Missouri &c. R. Co., 36 Fed. Co., 12 Ont. App. R. 288, 25 Am. 
 
 221; Kelly v. Alabama &c. R. Co., & Eng. R. Cas. 639. 
 
 58 Ala. 489; Ralph v. Wisner, 100 55 Bill v. New Albany &c. R. Co., 
 
 Mich, 164, 58 N. W. 837; Atlantic 2 Biss. (U. S.) 390, Fed. Cas. No! 
 
 Trust Co. v.. Consolidated &c. 1407. 
 
 Co., 49 N. J. Eq. 402, 23 Atl. 934, 
 
939 RECEIVERS § 627 
 
 in charge of its affairs, upon a proper application by the parties 
 in interest, its property may be put into the hands of a receiver.^" 
 So, where the officers of an insolvent corporation resign their 
 respective offices and abandon its property to the court, ^^ it is 
 proper to appoint a receiver to take charge of the effects of the 
 corporation and lo preserve them for the benefit of all the par- 
 ties in interest.^* 
 
 § 627 (544). When insolvency is sufficient without default. 
 
 — As a general rule inadequacy of mortgage security, coupled 
 wath insolvency of the mortgagor, showing that a receiver is nec- 
 essary, is sufficient ground for the relief.^" Where the company 
 is manifestly insolvent, is unable to meet its obligations to pay 
 floating debts, and cannot borrow money, and is in immment 
 peril of breaking up, although no default has yet occurred, ■ it 
 has been held that a receiver may be appointed, at the suit of 
 a bondholder, in order to preserve the corporate property,^" 
 but a receiver wil! not be appointed because of expected insolv- 
 ency at some future time.^^ In all cases it must be shown that 
 the insolvency will endanger or impair the plaintiff's rights un- 
 
 5,8 Forbes v. Memphis &c R. where the purchasers of the 
 
 Co., 2 Woods (U. S.) 323, Fed. equity of redemption at an as- 
 
 Cas. No. 4926.. See Fisher v. Con- signee's sale have diverted the 
 
 cord R. Co., 50 N. H. 200. use of the property and appro- 
 
 5'' Smith V. Danzig, 64 How. priated the income to which the 
 
 Prac. (N. Y.) 320. mortgagee is entitled. Gest v. 
 
 38 5 Thomp. Corp. (2nd ed.). New Orleans &c. R. Co., 30 La. 
 
 §§6334, 6346. Ann. 28; Brown, Ex parte, 58 Ala. 
 
 59 Central Trust Co. v. Chatta- 536. 
 
 nooga &c. R. Co., 94 Fed. 275; eo Brassey v. N. Y. &c. R. Co., 
 
 Kelly V. Alabama &c. R. Co., 58 19 Fed. 663, 17 Am. & Eng. R. Cas. 
 
 Ala. 489; Ruggles v. Southern 285. See also Cole v. Philadel- 
 
 Minnesota R. Co., (U. S. Dist of ' phia &c. R. Co., 140 Fed. 944. 
 
 Minn.) 5 Chicago Legal News 6i Edison v. Edison &c. R. Co., 
 
 110; Cheever v. Rutland &c. R. 52 N. J. Eq. 620, 29 Atl. 195. See 
 
 Co., 39 Vt. 653; Dow v. Memphis also Havemeyer v. Superior 
 
 &c. R. Co., 20 Fed. 260, 17 Am. & Court, 84 Cal. 327, 24 Pac. 121, 10 
 
 Eng. R. Cas. 324; Kerp v. Michigan L. R. A. 627, 18 Am. St. 192; Fal- 
 
 &c. R. Co., 6 Chicago Legal News mouth Nat. Bank v. Cape Cod &c. 
 
 101. A receiver will be appointed Co., 166 Mass. 550, 44 N. E. 617. 
 
§628 
 
 RAILROADS 
 
 940 
 
 less the property is preserved by a receiver.^^ j^ general, it is 
 only an extreme case that will move a court of equity to exer- 
 cise this extraordinary power because of insolvency, ^^ and it 
 must usually appear to be necessary in order to preserve the 
 best interests of all concerned. 8* Insolvency is sometimes, by 
 statute, made a ground for the appointment of a receiver,^^ and 
 in that case, when the fact of insolvency is established, the court 
 grants the application as a matter of course,^^ at least where it 
 also appears that the interest of the applicant requires it. 
 
 § 628 '(545). Default in payment of indebtedness as ground 
 for appointment. — Receivers are most frequently appointed over 
 railway property in order to protect mortgagees and bondholders 
 whose securities are a lien upon the road, in case of default in 
 payment of the principal or interest upon obligations thus se- 
 cured.^'' But default in itself is not necessarily ground for this 
 extraordinary remedy f^ it must be shown, in addition, that ulti- 
 mate loss will resull; to the mortgagees or bondholders if the 
 
 82 Lawrence Iron Works v. 
 Rockbridge Co., 47 Fed. 755; Mc- 
 George v. Big Stone Gap Imp. 
 Co., 57 Fed. 262. 
 
 63 Pullan V. Cincinnati &c. R. 
 Co., 4 Biss. (U. S.) 35, Fed. Cas. 
 No. 11461. 
 
 64 Stark V. Burke, S La. Ann. 
 740; People v. Northern R. Co., 
 42 N. Y. 217. 
 
 65 Sewell V. Cape May &c. R. 
 Co., 30 Am. & Eng. R. Cas. 155. 
 The appointment of a receiver or 
 manager under this section is a mat- 
 ter of right whenever the judg- 
 ment creditor of a railroad cor- 
 poration is unpaid. Manchester 
 &c. R. Co., In re, L. R. 14 Ch. 
 Div. 645. 
 
 66 Attorney-General v. Bank of 
 Columbia, 1 Paige (N. Y.) 511. See 
 
 also New York Nat. &c. Bank v. 
 Metropolitan Sav. Bank, 28 Wash. 
 553, 68 Pac. 90S. The facts showing 
 insolvency should be specifically 
 set forth, as a mere general alle- 
 gation is usually held insufficient. 
 Newfoundland &c. Co. v. Schack, 
 40 N. J. Eq. 222, 1 Atl. 23; Bank 
 of Florence v. United States &c. 
 Co., 104 Ala. 297, 16 So. 110. 
 67 5 Thomp. Corp. (2nd ed.), 6334 
 88 Sage V. Memphis &c. R. Co., 125 
 U. S. 361, 8 Sup. Ct. 887, 31 L. ed. 
 694; Morrison v. Buckner, 1 Hempst. 
 (U. S.) 442, Fed. Cas. No. 9844; Ty- 
 sen V. Wabash &c. R. Co., 8 Biss. 
 (U. S.) 247, Fed. Cas. No. 14315; 
 Williamson v. New Albany R. Co., 1 
 Biss. (U. S.) 198, Fed. Cas. No. 
 17753 ; American &c. Co. v. Toledo 
 &c. R. Co., 29 Fed. 416; Whitehead 
 V. Wooten, 43 Miss. 523. 
 
941 RECEIVERS § 628 
 
 property is permitted to remain in the hands of the company ,®8 
 or that the right of foreclosure exists and that a receiver is nec- 
 essary to aid the foreclosure^" Even though possession has been 
 refused upon a demand made by trustees under a mortgage 
 after there has been a default in the payment of interest upon 
 boncjs secured thereby, a receiver will not be appointed unless 
 it is shown to be necessary in order to prevent loss to the bond- 
 holders,'^! and it has been held that a receiver will not be ap- 
 pointed in a case where the default is waived by agreement for 
 extension of time, but the directors afterward disagree and a 
 portion of them rescind the agreement and petition for a re- 
 ceiver.''^ gut where, in case of default, ther,e is some other at- 
 tendant circumstances or condition present which endangers 
 the security of a bondholder, creditor or other party in interest, 
 or where the default is evidence of, or accompanies, some fraud- 
 ulent or unwise mismanagement by the officers or directors 
 which threatens loss to stockholders or others, a receiver may 
 be appointed, as, for instance, where there has been a default 
 for ten years in the payment of interest on the company's bonds, 
 and the officers refuse to permit an inspection of the company's 
 books by the bondholders,''' or where trustees fail to take pos- 
 session of the trust property upon default, as required by the 
 instrument creating the trust, and this without regard to any 
 probable deficiency of the trust property to discharge the debts 
 secured by the deed of trust.'^* Where the mortgage covers the 
 tolls and income of a road and the earnings are diverted, caus- 
 ing default in payment of the mortgage debt, a receiver will 
 
 69 Union Trust Co. v. St. Louis &c. 4 Biss. (U. S.) 35, Fed. Cas. No. 
 
 R. Co., 4 Dill. (U. S.) 114, Fed. Cas. 11461. 
 
 No. 14402 ; Cheever v. Rutland &c. 7* Wilmer v. Atlanta &c. R. Co., 2 
 
 R. Co., 39 Vt. 6S3. Woods (U. S.) 409, Fed. Cas. No. 
 
 TO American Loan &c. Co. v. To- 17775; Shaw v. Norfolk Co. R. Co., 
 
 ledo &c. R. Co., 29 Fed. 416. 5 Gray (Mass.) 162. See Sacramento 
 
 71 Union Trust Co. v. St. Louis &c. R. Co. v. Superior Court, 55 Cal. 
 
 &c. Co., 4 Dill. (U. S.) 114, Fed. 453; Rice v. St. Paul &c. R. Co., 24 
 
 Cas. No. 14402; Cheever v. Rutland Minn. 464. It has been held that 
 
 &c. R. Co., 39 Vt. 653. where the deed of trust authorized 
 
 T2 American Loan &c. Co. v. To- trustees to take possession upon de- 
 
 ledo &c. R. Co., 29 Fed. 416. fault, the default itself is sufficient 
 
 73 PuUan V. Cincinnati &c. R. Co., ground for a receiver, without refer- 
 
§ 628 RAILROADS 
 
 942 
 
 ordinarily be appointed/^ whether the default be followed by 
 foreclosure or not. Default in the payment of taxes, the com- 
 pany allowing portions of its property to be sold for such taxes, 
 has been held to be a strong indication of such hopeless insolv- 
 ency as would justify the appointment of a receiverJ^ A re- 
 ceiver may be appointed before default where insolvency is 
 manifest and it is shown that default is imminent and that the 
 corporation is on the verge of dissolution.'''' So, a receiver was 
 appointed at the suit of the corporation where it appeared that 
 public interest required that the business be uninterrupted and 
 default in payment of interest would have been followed by 
 such a struggle among. creditors as would have prevented con- 
 tinuance of the corporate business.''® As a general rule, how- 
 ever, the plaintiff must first pursue his remedy at law if an ade- 
 quate remedy is open to him, or if he have a simpler equitable 
 remedy he must pursue that before asking for the extraordi- 
 nary aid of a receivership; and it has been held that the fact 
 that the right of possession and sale is given to trustees does 
 not change the rule''* in case possession is refused. In such 
 cases a receiver will ordinarily be denied unless the trustee 
 has first attempted to recover possession by other legal or 
 equitable means available.^" It is held that the fact that the 
 charter of a corporation specially authorizes the appointment 
 
 ence to the inadequacy of the mort- '^t Brassey v. New York &c. R. Co., 
 
 gage security. Allen v. Dallas &c. R. 19 Fed. 663, 22 Blatchf. (U. S.) 72; 
 
 Co., 3 Woods (U. S.) 316, Fed. Cas. Long Dock Co. v. Mallery, 12 N. J. 
 
 No. 221. Eq. 431. 
 
 "Alien V. Dallas &c. R. Co., 3 78 Wabash &c. R. Co. v. Central 
 
 Woods (U. S.) 316, Fed. Cas. No 
 221 ; Morrison v. Buckner, 1 Hempst, 
 (U. S.) 442, Fed. Cas. No. 9844 
 Whitehead v. Wooten, 43 Miss. 523 
 Ruggles V. Southern Minnesota R, 
 Co., S Chic. L. N. 110; Hopkins v, 
 
 &c. R. Co., 22 Fed. 138, 272, 23 Fed. 
 513, 515. See also 5 Thomp. Corp. 
 (2d. ed.) §6356. But see Hugh v. 
 McRae, Chase 466. 
 
 ■79 Kennedy v. St. Paul &c. R. Co., 
 2 Dill. (U. S.) 448, Fed. Cas. No. 
 
 Worcester and Birmingham Canal 7706; Dow v. Memphis &c. R. Co., 20 
 
 Proprietors, L. R. 6 Eq. 437; De- Fed. 260; McLane v. Placerville &c. 
 
 Winton V. Brecon, 26 Beav. 533. R. Co., 66 Cal. 606, 6 Pac. 748. 
 
 76 Putnam v. Jacksonville &c. Co., so Rice v. St. Paul &c. R. Co., 24 
 
 61 Fed. 440. Minn. 464. 
 
943 
 
 RECEIVERS 
 
 §629 
 
 of a receiver in a particular contingency does not oust the courts 
 of jurisdiction to appoint one in a proper case.*^ 
 
 § 629 (546). Appointment in foreclosure proceedings. — The 
 
 right to a receiver does not necessarily accompany the right to 
 foreclose ;82 but it is held to exist in foreclosure proceedings 
 where for any reason "the complainant will not be in as good a 
 position at the final decree as at present."*^ In the language 
 of a judge who afterwards became a member of the Supreme 
 Court of the United States, "It should appear that there is 
 some danger to the property; that its protection, its preserva- 
 tion, the interests of the various holders, require possession by 
 the court before a receiver should be appointed. It does not go 
 as a matter of course; and yet it is not a matter that a court 
 can refuse simply because it is an annoyance."^* Generally, 
 insolvency of the mortgagor, coupled with inadequacy of the 
 mortgage security, is sufficient ground for this relief,*^ and 
 when the interest has long been unpaid and the value of the 
 property is manifestly insufficient, a receiver will usually be 
 appointed. 8® If the entire assets of an insolvent corporation 
 are insufficient to afford security for the payment of the mort- 
 
 81 Allen V. Dallas &c. R. Co., 3 
 Woods (U. S.) 316, Fed. Cas. No. 
 221 ; Warner v. Rising Fawn Iron 
 Co., 3 Woods (U. S.) 514, Fed. Cas 
 No. 17188; note 64 Am. Dec. 486 
 Fripp V. Chard R. Co., 11 Hare 241 
 
 82 Tysen v. Wabash &c. Co., 8 Biss 
 (U. S.) 247, Fed. Cas. No. 14315 
 Williamson v. New Albany &c. R, 
 Co,, 1 Biss. (U. S.) 198, Fed. Cas 
 No. 17753; Mercantile Trust Co. v 
 Missouri &c. R. Co., 36 Fed. 221, 36 
 Am. & Eng. R. Cas. 259; American 
 Loan &c. Co. v. Toledo &c. R. Co., 
 29 Fed. 416. 
 
 83 United States Trust Co. v. New 
 York &c. R. Co., 101 N.Y. 478, 5 
 N. E. 316 ; Decker v. Gardner, 124 N. 
 Y. 334 26 N. E. 814; United States 
 
 Trust Co. V. New York &c. R. Co., 
 67 How. Prac. (N. Y.) 390; Rug- 
 gles V. South Minn. R. Co., 5 Chic. 
 L. N. 110; Kerp v. Michigan &c. R. 
 Co., 6 Chic. L. N. 101. 
 
 84 Mercantile Trust Co. v. Missouri 
 &c. R. Co., 36 Fed. 221, 224 36 Am. 
 & Eng. R. Cas. 259. 
 
 85 Kelly V. Trustees, 58 Ala. 489; 
 Frelinghuysen v. Colden, 4 Paige Ch. 
 
 (N. Y.) 204; Astor v. Turner, 2 
 Barb. (N. Y.) 444; Ruggles v. 
 Southern Minn. R. Co., 5 Chic. L. 
 N. 110; Kerp v. Michigan &c. R. 
 Co., 6 Chic. L. N. 101. 
 
 86 Pullan V. Cincinnati &c. R. Co., 
 4 Biss. (U. S.) 35, Fed. Cas. No. 
 11461. See Farmers' Loan &c. Co. 
 V. Winona &c. R. Co., 59 Fed. 957. 
 
§629 
 
 RAILROADS 
 
 944 
 
 gage indebtedness, and the corporation is appropriating its 
 earnings to its own use, a receiver will be appointed pending a 
 suit to foreclose,*^ but where it is clear that upon foreclosure 
 the property will bring enough to pay the debt, interest and 
 costs, the court will usually decline to exercise that power on 
 the ground that there is another adequate remedy.®* An appli- 
 cation was refused on this ground in a case where mortgagees 
 were seeking to foreclose a mortgage executed by authority of 
 the legislature giving the mortgagees the right of possession.** 
 The mere disagreement of mortgage creditors in a suit to fore- 
 close is not sufiScient ground for the appointment of a receiver, 
 as equity will not interpose except to afford some incidental re- 
 lief, and will not extend its arm, simply to manage the prop- 
 erty."" Where the mortgage covers the tolls and income of the 
 road, which would otherwise be diverted from payment of the 
 debt, a receiver will be appointed incidental to the foreclosure.®^ 
 So, where a road hopelessly insolvent is about to be foreclosed, 
 and owing to dissensions among bondholders there is no other 
 
 8T Dow V. Memphis &c. R. Co., 20 
 Fed. 260; Pullam v. Cincinnati &c. 
 R. Co., 4 Biss. (U. S.) 35, Fed. Cas. 
 No. 11461; Cheever v. Rutland &c. 
 R. Co., 39 Vt. 653. See Brassey v. 
 New York &c. R. Co., 19 Fed. 663; 
 Kerp V. Michigan &c. R. Co., 6 Chic. 
 L. N. 101. The coui-t will never ap- 
 point a receiver, except where the 
 right and necessity to do so are clear. 
 Dow V. Memphis &c. R. Co., supra 
 Overton v. Memphis &c. R. Co., 10 
 Fed. 866; Credit Co. v. Arkansas 
 Cent. R., 15 Fed. 46; Texas &c. R. 
 Co. V. Rust, 17 Fed. 275; Sage v. 
 Memphis &c. R. Co., 18 Fed. 571. 
 See ante, § 628. 
 
 88 Shotwell V. Smith, 3 Edw. Ch. 
 (N. Y.) 588; Burlingame v. Farce, 
 12 Hun (N. Y.) 144. Where a rail- 
 road company has sublet a leased line 
 contrary to the provisions of the 
 
 lease a receiver will not be ap- 
 pointed in a suit by the lessor to en- 
 force a forfeiture of the lease when 
 it appears that the lessor is responsi- 
 ble, and is operating the road. Bos- 
 ton &c. R. v. Boston &c. R., 65 N. H. 
 393, 25 Atl. 529. 
 
 89 Rice V. St. Paul &c. R. Co., 24 
 Minn. 464. See also Patten v. Ac- 
 cessory Transit Co., 4 Abb. Prac. 
 (N. Y.) 235; Boston &c. R. Co. v. 
 New York &c. R. Co., 12 R. I. 220. 
 
 90 American Loan &c. Co. v. To- 
 ledo &c. R. Co., 29 Fed. 416. But the 
 fact that the company is well man- 
 aged does not always preclude the ap- 
 pointment of a receiver. Van Ben- 
 thuysen v. Central &c. R. Co., 63 
 Hun 627, 17 N. Y. S. 709. 
 
 91 De Winton v. Brecon, 26 Beav. 
 533; Allen v. Dallas &c. R. Co., 3 
 Woods (U. S.) 316, Fed. Cas. No. 
 
945 RECEIVERS § 630 
 
 way to apply the rents and profits of the road to its debts, an 
 application for a receiver may be granted.®^ And a receiver 
 has been appointed, after decree, at the suit of bondholders. en- 
 titled to the net income, when, according to statute, the sale 
 must be delayed six months.^^ Where, in a suit to foreclose, 
 the court directs the officers of the corporation to remain in 
 possession, to conduct the business subject to its orders, and to 
 account to the court, it has been held that these officers are 
 thereby constituted receivers of the court.®* 
 
 §630 (547). Other grounds for appointment. — It is difficult 
 to classify cases in which a receiver will be appointed, for the 
 reason that the grounds and purpose of the relief and the ex- 
 tent to which it may be pursued, lie so largely in the discretion 
 of the court.*^ There is a large number of cases in which re- 
 ceivers have been appointed which do not fall under the classes 
 just discussed. Where there is no person authorized to hold 
 the corporate property, the majority of the stockholders failing 
 to elect directors,*® or where ^the corporation has ceased to act 
 and the officers have converted the property to their own use,*'^ 
 when the officers, owning a majority of the stock and controll- 
 ing the road, fail to keep it in repair, thereby endangering the 
 rights of stockholders and rendering the road unproductive,®* 
 
 221. This follows the general doc- In re, IS S. Car. 304; Brown, Ex 
 
 trine that where the mortgage pro- parte, IS S. Car. 518. See Williams, 
 
 vides that the mortgagee shall have Ex parte, 18 S. Car. 299, as to rights 
 
 the rents, default in payment of the of purchasers in such a case. 
 
 debt may be sufficient cause for ap- 95 See Mercantile Trust Co. v. Mis- 
 
 pointment of a receiver to collect gouri &c. R. Co., 36 Fed. 221. 
 
 such rents. See Whitehead v. Woo- se Edison v. Edison &c. Co., S2 N 
 
 ten, 43 Miss. S23; also Central Trust j ^ ggO, 29 Atl. 19S; Lawrence v. 
 
 Co. v. Chattanooga &c. R. Co., 94 Greenwich Fire Ins. Co., 1 Paige (N. 
 
 Fed. 27S. Y.) S87; Dobson v. Simonton, 78 N. 
 
 92 Mercantile Trust Co. v. Mis- Car. 63. 
 
 souri &c. R. Co., 36 Fed. 221, 36 Am. 97 Chicago &c. R. Co. v. Cason, 133 
 
 & Eng. R. Cas. 259. Ind. 49, 32 N. E. 827; Conro v. Gray, 
 
 93Benedict v. St. Joseph &c. R. 4 How. Prac. (N. Y.) 166. 
 
 Co., 19 Fed. 173. 98 Wayne Pike Co. v. Hammons. 
 
 94 Fifty-four First Mortgage Bonds, 129 Ind. 368, 27 N. K 487, 491. 
 
§ 630 RAILROADS 946 
 
 or squander or embezzle its assets, with the connivance of the 
 directors ;*^ where the directors execute a lease, which works 
 injury to the stockholders, in violation of a by-law forbidding 
 contracts involving the franchises of the road ;i where purchas- 
 ers of an assignee in bankruptcy are operating the road for 
 their exclusive benefit and appropriate the income to which the 
 mortgage bondholders are entitled '^ or where the governing 
 body is so divided by dissension that it cannot conduct the cor- 
 porate business,^ it has been held that a receiver may be ap- 
 pointed upon proper application. So, where several railroad 
 companies, tenants in common of the right to pass through a 
 tunnel or to use a railroad station erected for their joint use,* 
 are engaged in a dispute as to their respective rights therein, it 
 has been held that the court may appoint a receiver to protect 
 the rights of the injured party, if such rights cannot readily be 
 protected by other means. The dissolution of a corporation 
 by decree of court is cause for the appointment of a statutory 
 receiver in most, if not all, of the states.^ It has been held that 
 bondholders have a right to have a receiver appointed to com- 
 plete a road, the construction of which has been stopped on 
 account of lack of funds, when completion by a certain time is 
 the condition of a valuable land grant which constitutes their 
 
 09 Forbes v. Memphis &c. R. Co., 2 Trade Auxiliary Co. v. Vickers, L. 
 
 Woods (U. S.) 323, Fed. Cas. 4926; R. 16 Eq. Cas. 303. 
 
 Fisher V. Concord R. Co., SO N. H. 4 Delaware &c. R. Co. v. Erie R 
 
 200. See also 8 Thomp. Corp. § 6347. Co., 21 N. J. Eq. 298 ; Russell v. East 
 
 A receiver may be appointed to in- Anglican R. Co., 3 M & G 104- 
 
 vestigate the validity of sales made pripp v. Chard R. Co., 11 Hare 239; 
 
 by a corporation, during and with Shrewsbury R. Co. v. Chester R. Co., 
 
 knowledge of insolvency. Nichols v. 14 l. T. 217, 433; Midland R. Co v 
 
 Perry, 11 N. J. Eq. 126. Ambergate R. Co., 10 Hare 359. 
 
 1 Stevens v. Davidson, 18 Grat. r. See Texas Trunk R. Co. v. State, 
 (Va.) 819, 98 Am. Dec. 692. ^ Tex. 1, 18 S. W. 199. holding tha^ 
 
 2 Gest V. New Orleans &c. R. Co., a court declaring a forfeiture of the 
 30 La. Ann. 28. franchise of a railroad company may 
 
 3 Edison v. Edison &c. Co., 52 N. appoint a receiver to operate the road 
 J. Eq. 620, 29 Atl. 195; Featherstone in such a manner as to subserve the 
 V. Cooke, L. R. 16 Eq. Cas. 298 ; public interests. 
 
947 RECEIVERS § 630 
 
 principal security.'' The fact that stockholders of a corporation 
 disobey an injunction restraining them from voting to effect 
 an illegal or unauthorized consolidation, is not a ground for 
 the appointment of a receiver for the corporation, since, in the 
 absence of any authority to consoUdate, the original corpora- 
 tion would continue to exist in its integrity, with all its rights 
 of property and franchises unaffected by such acts of the stock- 
 holders.''' Where the application alleges that all the property of 
 the company is mortgaged to one class of creditors; that it 
 owes large amounts to other creditors, one of whom has at- 
 tached all its property, and that it is proposing to lease its 
 property to him for a long term of years at a rental which is 
 insufficient to pay the interest upon its indebtedness, but there 
 is no allegation that the plaintiff has any lien upon, or any 
 particular right in, any of the property, and there is no show- 
 ing of any fraud or breach of trust on the part of those who are 
 managing the corporate affairs, a receiver will not be ap- 
 pointed.* It has also been held that a receiver will not be ap- 
 pointed at the suit of one who has purchased stock alleged to 
 have been illegally issued, and who claims the right to recover 
 the purchase-price of such stock, when it appears that the 
 money received for the sale of the stock has been mingled with 
 the general funds of the corporation, so that it cannot be traced 
 nor identified.^ Failure to perform a public duty has been held 
 to be ground for the appointment of a receiver ;'^'^ but the doc- 
 trine has not received any general application, and is of doubt- 
 ful soundness. Indeed, we think it is clearly unsound as ap- 
 
 8 Allen V. Dallas &c. R. Co., 3 a crime, may be aided, when neces- 
 
 'Woods (U. S.) 316, Fed. Cas. No. sary, by the more effective remedy 
 
 221 ; Kennedy v. St. Paul &c. R. Co., of a receiver. Columbian Athlectic 
 
 2 Dillon (U. S.) 448, Fed. Cas. No. Club v. State, 143 Ind. 98, 40 N. E. 
 
 7706. 914, 28 L. R. A. 727, 52 Am. St. 407. 
 
 7 Railway Co. v. Jewett, 37 Ohio 8 Pond v, Farmingham &c. R. Co., 
 
 St. 649. Injunction, at the suit of 130 Mass. 194. 
 
 the state, to prevent a corporation sWhelpley v. Erie R. Co., 6 
 
 from misusing and abusing its cor- Blatchf. (U. S.) 271, Fed. Cas. No. 
 
 porate franchises and privileges and 17504. 
 
 maintaining its property as a nui- lo Fishback v. Citizens' St. R. Co., 
 
 sance, though its acts also constitute. Nat. Corp. Rep. (Ind. Super Ct. of 
 
§631 
 
 RAILROADS 
 
 948 
 
 plied to ordinary cases in which there is nothing more than 
 nonfeasance. 
 
 § 631 (548). Appointment upon application of unsecured cred- 
 itors. — Ordinarily the application of unsecured creditors for the 
 appointment of a receiver will be denied on the ground that 
 there is a remedy at law/^ but when the remedy at law has 
 been found unavailing or is manifestly useless, ^^ and the cor- 
 poration has equitable assets which are not available upon exe- 
 cution,i3 or which are in danger of being dissipated'* the equi- 
 table relief m,ay be invoked; but the general rule, unless other- 
 wise provided by statute, is that a creditor at large, having no 
 lien or judgment can not ordinarily have a receiver appointed, 
 and courts have refused to interfere where the liability had not 
 been liquidated or established,'^ where labor claims existed 
 against several companies operating one road, but their ac- 
 counts were in confusion, and the distribution of the debt was 
 in doubt, such claims not having been reduced to judgment;'^ 
 
 Marion County), March 4, 1892; 
 Long Branch &c. R. Co., In re, 24 
 N. J. Eq. 398. ' 
 
 11 Milwaukee &c. R. Co. v. Soutter, 
 2 Wall. (U. S.) SIO, 523, 17 L. ed. 
 900; Putnam v. Jacksonville &c. R. 
 Co., 61 Fed. 440; Parmly v. Tenth 
 Ward Bank, 3 Edw. Ch. 395 (417). 
 The case must undoubtedly be excep- 
 tional to justify this relief in a suit 
 by a simple creditor. Johnson v. Far- 
 num, 56 Ga. 144; Ballin v. Ferst, 55 
 Ga. 546; Gregory v. Gregory, 1 J. & 
 S. 1. See note in L. R. A. 1918C, 632 
 et seq. But see, where the defendant 
 admits insolvency and joins in the 
 prayer. Horn v. Fere Marquette R. 
 Co., 151 Fed. 627. 
 
 12 Sage V. Memphis &c. R. Co., 125 
 U. S. 361, 8 Sup. Ct. 887, 31 L. ed. 
 694; Conro v. Gray, 4 How. Prac. 
 (N. Y.) 166; State v. Georgia Co., 
 109 N. C. 310, 13 S. E. 861, 54 Am. 
 & Eng. R. Cas. 299. 
 
 13 Covington Draw Bridge Co. v. 
 Shepherd, 21 How. (U. S.) 112, 16 
 L. ed. 38; Wood v. Dummer, 3 Ma- 
 son (U. S.) 308, Fed. Cas. i No. 
 17944; Ward v. Griswoldville Mfg. 
 Co.", 16 Conn. 593; Osborn v. Heyer, 
 2 Paige (N. Y.) 342; Bloodgood v. 
 Clark, 4 Paige (N. Y.) 574; Palmer 
 V. Clark, 4 Abb. N. Cas. (N. Y.) 25; 
 Bartlett v. Drew, 57 N. Y. 587; Grif- 
 fith V. Mangam, 73 N. Y. 611 ; John- 
 son V. Tucker, 2 Tenn. Ch. 398; Adler 
 V. Milwaukee Mfg. Co., 13 Wis. 57 
 
 (63) ; Curling v. Marquis Town- 
 shend, 19 Ves. 628; Furness v. Cat- 
 erham R. Co., 25 Beav. 614. 
 
 14 Turnbull v. Prentiss Lumber Co., 
 55 Mich. 387, 21 N. W. 375. 
 
 15 Putnam v. Jacksonville &c. R. 
 Co., 61 Fed. 440 ; Cook v. Detroit &c 
 R. Co., 45 Mich. 453, 8 N. E. 74 
 
 16 Putnam v. Jacksonville &c. R. 
 Co., 61 Fed. 440. 
 
949 
 
 RECEIVERS 
 
 631 
 
 and in one case, where a receiver was about to be discharged, 
 the court refused to continue him in order to settle claims 
 which were in dispute, and which were comparatively small.^'^ 
 Where it appears that an execution issued upon a judgment 
 against the corporation has been returned nulla bona, but that 
 there are equitable assets which cannot be reached by execu- 
 tion a court of equity will appoint a receiver.^^ And even though 
 no execution has been issued in the latter case circumstances 
 may be present which call for the same remedy.^^ An applica- 
 
 iT Milwaukee &c. R. Co. v. Sout- 
 ter, 2 Wall. (U. S.) SIO, 523, 17 L. 
 ed. 900. 
 
 1*8 Covington Draw Bridge Co. v. 
 Shepherd, 21 How. (U. S.) 112, 16 
 L. ed. 38 ; Wood v. Dummer, 3 Mason 
 (U. S.) 308, Fed. Cas. No. 17944; 
 Ward V. Griswoldville Mfg. Co., 16 
 Conn. 593; Palmer v. Clark, 4 Abb. 
 N. Cas. (N. Y.) 25; Bartlett v. Drew, 
 57 N. Y. 587; Bartlett v. Drew, 57 
 N. Y. 611 ; Griffith v. Mangara, IZ N. 
 Y. 611 ; Adler v. Milwaukee &c. Co., 
 13 Wis. 57 (63) ; Furness v. Cater- 
 ham R. Co., 25 Beav. 614. In Union 
 Trust Co. V. Illinois Midland R. Co., 
 117 U. S. 434, 458, 6 Sup. Ct. 809, 
 29 L. ed. 963, the court said: "The 
 co-plaintiffs with Hervey were judg- 
 ment creditors of the Paris and De- 
 catur Co., with executions returned 
 unsatisfied. The bill set out the pre- 
 carious condition of all the property- 
 held and used by the Illinois Midland 
 Co., and the necessity for a receiver 
 in the interest of all the creditors 
 of all four of the corporations [the 
 Illinois Midland Co., and the three 
 corporations of which it was com- 
 posed, and whose debts it had as- 
 sumed] to prevent the levy of exe- 
 cutions upon such property; and it 
 prayed for a judicial ascertainment 
 and marshalling of all the debts of 
 
 all the corporations, and their pay- 
 ment and adjustment as the respec- 
 tive rights and interests of the cred- 
 itors might appear, and for general 
 relief. The plaintiffs set forth that 
 they represented a majority of the 
 stock in all the corporations. This 
 bill was quite sufficient to enable a 
 court of equity to administer the 
 property and marshal the debts, in- 
 cluding those due the mortgage bond- 
 holders, making proper parties before 
 adjudging the merits." Courts are 
 sometimes required by statute to 
 make an appointment under such cir- 
 cumstances. Manchester &c. R. Co., 
 In re, L. R. 14 Ch. Div. 645. But it 
 generally rests in the discretion, of 
 the court, in view of all the circum- 
 stances. Plaintiff alleged that he had 
 recovered a judgment against one of 
 the defendant companies, and that it 
 had transferred its road to the other 
 defendant, that the grantee never op- 
 erated a road, nor had the grantor 
 any power to make the transfer, 
 which was made for the sole pur- 
 pose of defrauding plaintiff; and it 
 prayed a receiver. A receiver was 
 appointed. Louisville &c. R. Co. v. 
 Southworth, 38 111. App. 225. 
 
 19 Sage V. Memphis &c. R. Co., 
 125 U. S. 361, 8 Sup. Ct. 887, 31 L. 
 ed. 694; Conro v. Gray, 4 How. 
 
§631 
 
 RAILROADS 
 
 950 
 
 tion by a judgment creditor for the appointment of a receiver 
 may be entertained where the bill alleges that the property is 
 so heavily mortgaged that any attempt to enforce the plaintiff's 
 debt by sale on execution would be unavailing, since no bids for 
 more than a nominal amount would be received; while if the 
 property were placed in the hands of a receiver and carefully 
 operated for the transportation of passengers and freight there 
 would be a large surplus each year for the payment of his 
 debt. 2" The equitable aid formerly so frequently invoked to as- 
 sist creditors at large, grew out of the narrowness of the legal 
 remedy by execution, often useless because it could not reach 
 equitable assets. ^i In many of the code states statutory pro- 
 vision has been made for the appointment of receivers in pro- 
 
 Prac. (N. Y.) 166. A tax is a 
 "debt" which the state and coun- 
 ty may enforce against a corpora- 
 tion by creditors' bill for the ap- 
 pointment of a. receiver. The 
 state and county are not preclud- 
 ed from bringing such a suit be- 
 cause there is a specific remedy 
 for the collection of taxes in the 
 revenue act; nor because the state 
 has the right to have the charter 
 of the corporation declared for- 
 feited when it fails to pay its 
 taxes. State v. Georgia Co., 109 
 N. Car. 310, 13 S. E. 861, 54 Am. 
 & Eng. R. Cas. 299. See also as 
 to what are debts and who are 
 creditors having a right to receiver 
 under a statute. Summit Silk Co. 
 v. Kinston Spinning Co., 154 N. 
 Car. 421, 70 S. E. 820, Ann. Cas. 
 1912 A, 897, and note citing cases. 
 20 Sage v. Memphis &c. R. Co., 
 125 U, S. 361, 8 Sup. Ct. 887, 31 
 L. ed. 694. In announcing the 
 opinion of the court in this case, 
 Mr. Justice Harlan said; "We do 
 not mean to say that a single 
 judgment creditor or any number 
 
 of such creditors of a railroad 
 company are entitled, as matter 
 of right, to have its property put 
 in the hands of a receiver, merely 
 because of its failure or refusal 
 to pay its debts. Whether a re- 
 ceiver shall be appointed is al- 
 ways a matter of discretion, to be 
 exercised sparingly and with 
 great caution in the case of quasi 
 public corporations operating a 
 public highway, and always with 
 reference to the special circum- 
 stances of each case as it arises. 
 All that we say in this connection 
 is that, under the circumstances 
 presented in this case, the ap- 
 pointment of a receiver was with- 
 in the power of the court. The 
 order appointing him to operate 
 and manage the property was not 
 a nullity. See also Sage v. Mem- 
 phis &c. R. Co., 18 Fed. 571, where 
 the receiver was discharged be- 
 cause appointed by collusion. 
 
 21 See Bayard v. Hoffman, 4 Johns 
 Ch. (N. Y.) 450; Galveston &c. R. 
 Co. V. McDonald, 53 Tex. 510. 
 
951 RECEIVERS § 632 
 
 ceedings supplementary to execution, thus doing away in some 
 cases with the "creditors' bill" of chancery practice > and in 
 addition the statutes have given wider scope to the writ of exe- 
 cution, extending legal relief to many cases where resort to 
 equity was formerly necessary. Thus the instances in which 
 the unsecured creditor has no other remedy are now less numer- 
 ous than under the English chancery practice and the require- 
 ment that a strong, clear case must be made,^^ in connection 
 with the reluctance of the courts to divest such large interests 
 of the corporate management in order to satisfy claims which 
 are generally comparatively small,^* has resulted in a very rare 
 and sparing exercise of this power of the court of equity in aid 
 of the unsecured creditor of a railway corporation, although 
 the appointment of a statutory receiver of the effects of a judg- 
 ment debtor, on supplementary proceedings, is very frequent^s 
 
 § 632 (549). Appointment upon application of secured cred- 
 itors. — It is to preserve the security of the mortgagee or bond- 
 holder that the control of the property and business of railway 
 corporations is most often assumed by a court of equity. ^^ Be- 
 sides being available in connection with foreclosure^'^ the rem- 
 edy of a receivership is often employed at the suit of mort- 
 gagees or bondholders in cases of default,^^ insolvency,^^ fraud 
 or mismanagement by officers, or the commission or some other 
 act that endangers the mortgage security.*" Exigencies may 
 
 23 8 Thomp. Corp., §6345. Co. v. Kinston Spinning Co., 154 
 
 24 Milwaukee &c. Co. v. Sout- N. Car. 421, 70 S. E. 820, Ann. Cas. 
 ter, 2 Wall. (U. S.) 510, 523, 17 L. 1912 A, 897, and cases cited in 
 ed. 900. Under N. Y. statute re- note citing cases showing the ex- 
 ceiver will not be appointed at istence of the right under some 
 suit of a creditor at large. Le- statutes and the contrary rule in 
 high &c. Co. V. Central R. of N. the absence of statute. 
 
 J., 43 Hun (N. Y.) 546. 26Ante, § 628, and cases cited. But 
 
 25 Flint V. Webb. 25 Minn. 263; see Atlanta &c. R. Co. v. Carolina 
 Coates V. Wilkes, 92 N. Car. 376; Portland Cement Co., 140 Ga. 650 
 Heroy v. Gibson, 10 Bosw. (N. 79 S. E. 555. 
 
 Y.) 591. As to when an unsecured 27 See ante, § 629. 
 
 creditor who has not reduced his 28 See ante, § 628. 
 
 claim to judgment may have a re- 29 See a,nte, § 626. 
 
 ceiver appointed see Summit Silk so See ante, §630. 
 
§ 632 RAILROADS 952 
 
 arise to threaten the destruction or depreciate the value of the 
 property which would not justify foreclosure and which might, 
 before cause for foreclosure could accrue, materially impair the 
 petitioner's security*^ and equity many times intervenes with 
 a receiver in such cases ; or in cases where the mortgage covers 
 the tolls and income of the road, they may be so diverted as to 
 give cause for the appointment of a receiver.^^ Where bonds 
 are secured by a deed of trust in the nature of a mortgage, it is 
 frequently provided that the mortgagee or trustee may take 
 possession upon default. In that case, if the trustees, being 
 denied possession, have a remedy at law or an ordinary rem- 
 edy in equity to obtain possession, they must, as a rule, first 
 pursue such remedy before a receiver will be appointed** unless 
 such remedy be manifestly useless** or such a condition exist 
 as would make a receiver necessary immediately after posses- 
 sion should be acquired.*^ Where there is a trust deed in the 
 nature of a morti^age, the trustee must first have failed, refused 
 or neglected to perform his duty under the trust deed before 
 the individual bondholder can himself petition for a receiver, 
 to act instead of the trustee, or in conjunction with him, but 
 where the trustee has failed to do his duty the bondholder may 
 invoke the aid of a receiver.^^ ^.nd it has been held that when 
 
 siWhelpley v. Erie R. Co., 6 Cas. No. 221; Dumville v. Ash- 
 
 Blatch. (U. S.) 271, Fed. Cas. No. brooke, 3 Russ, 99 note *; Hop- 
 
 17504; Kennedy v. St. Paul &c. kins v. Worcester &c. Proprie- 
 
 Cc, 2 Dill. (U. S.) 448, Fed. Cas. tors, L. R. 6 Eq. 437; Ruggles v. 
 
 No. 7706; American L. & T. Co. Southern Minn. R. Co., S Chic. L. 
 
 V. Toledo &c. R. Co., 29 Fed. 416, N. 110. 
 
 417; Mercantile Trust Co. v. Mis- 38 Rice v. St. Paul &c. R. Co., 
 
 souri &c. R. Co., 36 Fed. 221; 24 Minn. 464. 
 
 Pennsylvania Co. &c. v. Jackson- 34 Imperial Mercantile Credit 
 
 villa &c. R. Co., 55 Fed. 131; Long Assn. v. Newry &c. R. Co., Ir. Rep. 
 
 Dock Co. V, Mallery, 12 N. J. Eq. 2 Eq. 1. 
 
 431 ; Brassey v. New York &c. R. 35 Allen v. Dallas &c. R. Co., 
 
 Co., 19 Fed. 663, 17 Am. & Eng. R. 3 Woods (U. S.) 316, Fed. Cas. 
 
 Cas. 285. No. 221; Crewe v. Edleston, 1 
 
 32Tysen v. Wabash R. Co., 8 DeG. & J. 93, 109 per Lord Jus- 
 
 Biss. (U. S.) 247, Fed. Cas. No. tice Turner. 
 
 14315; Allen v. Dallas &c. R. Co., 36 Wilmer v. Atlanta &c. R. 
 
 3 Woods (U. S.) 316, 326, Fed. Co., 2 Woods (U. S.) 409, Fed. Cas. 
 
953 KECEIVERS § 632 
 
 the trustee, on being applied to in pursuance of the terms of the 
 trust, refuses to sue, the bondholders may themselves sue, but 
 must make the trustee, the corporation and all other bond- 
 holders parties.^' If one or more bondholders have a right to 
 institute proceedings they necessarily act for all standing in a 
 similar position and cannot secure individual relief at the ex- 
 pense of others holding the same security;*^ and it has been 
 held that where the sufficiency of the security is doubtful all 
 other creditors similarly situated must have notice in order 
 that they may protect their interests.*® The rule laid down by 
 Lord Eldon in the leading English case has been followed in 
 some states as the fundamental law concerning the right of 
 a junior rnortgagee to invoke the appointment of a receiver, 
 but it is based upon the common-law theory of the mortgage. 
 This rule is to the effect that while the first mortgagee is in 
 possession and any portion of the mortgage debt remains un- 
 paid,*" the junior mortgagee can only secure the appointment 
 of a receiver by paying off the balance of the first mortgage or 
 offering to pay such claim, and in the 'general application of the 
 rule it has been held that where the elder mortgagee has not 
 asserted his right to possession or to the rents and income the 
 junior mortgagee has a right to do so;*i but a receivership on 
 the application of the junior mortgagee will not operate to de- 
 
 No. 17775; Sacramento &c. R. Co. Ct. 364; 36 L. ed. 66; Stanton v. 
 
 V. Superior Ct, SS Cal. 453; Shaw Alabama &c. R. Co., 2 Woods (U. 
 
 V. Norfolk &c. R. Co., 5 Gray S.) 523, Fed. Cas. No. 13297. 
 
 (Mass.) 162; Rice v. St. Paul &c. 39 Railway Co. v. Orr, 18 Wall. 
 
 R. Co., 24 Minn. 464. (U. S.) 471, 21 L. ed. 810. See Ov- 
 
 STCommonwealth v. Susque- erton v. Memphis &c. R. Co., 10 
 
 hanna &c. R. Co., 122 Pa. St. 306, Fed. 866; Pennock v. Coe, 23 How. 
 
 IS Atl. 448, 1 L. R. A. 225. (N. Y.)117. 
 
 38 Jackson v. Ludeling, 21 Wall. 40 Berney v. Sewell, 1 Jac. & 
 
 (U. S.) 616, 22 L. ed. 492; Vose v. W. 627. 
 
 Bronson, 6 Wall (U. S.) 452, 18 L. 4i Miltenberger v. Logansport 
 
 ed. 846; Galveston R. Co. v. Cow- &c. R. Co., 106 U. S. 286, 1 Sup. 
 
 drey, 11 Wall. (U. S.) 459, 20 L. Ct. 140, 27 L. ed. 117; Ranney v. 
 
 ed. 159; New Orleans &c. R. Co. Peyser, 83 N. Y. 1; Howell v. 
 
 V. Parker, 143 U. S. 42, 58, 12 Sup. Ripley, 10 Paige (N. Y.) 43. 
 
§ 632 RAILROADS 954 
 
 feat the priority or the rights of the elder mortgagee,*^ except 
 that in some cases it is held that his right of election to take 
 possession is defeated,*^ the coiirt having taken possession for 
 all parties. The stringency of this rule has been relaxed in 
 many of the states, in the federal courts and even in rare Eng- 
 lish cases, and v/here a clear case is made showing that the 
 mortgagee in possession is irresponsible, is committing waste 
 or material injury, endangering the security, or is fraudulently 
 or carelessly mismanaging the property so as to impair the 
 junior mortgage, a receiver may be appointed at the suit of the 
 junior mortgagee.** As we have seen,- if the senior mortgagee 
 be in possession and conduct the business so as to imperil the 
 second mortgage security a receiver may be appointed, or if 
 he have the right, by the terms of his mortgage, to take posses- 
 sion and refuses or neglects to do so, the junior mortgagee may 
 sometimes invoke the aid of a receiver to secure the rents and 
 profits. So, also, in cases where the mortgagor retains posses- 
 sion, the junior mortgagee may sometimes invoke the remedy 
 to insure the proper management of the property and to compel 
 the proper application of the revenues. It has been held that 
 at the petition of the junior mortgagee a receiver may be di- 
 rected to borrow money in order to pay the interest on first 
 mortgage bonds where default would precipitate foreclosure 
 
 42Cortleyue v. Hathaway, 11 N. takes possession for all parties in 
 
 J. Eq. 42, 64 Am. Dec. 478; Ber- interest and holds such possession 
 
 ney v. Sewell, 1 Jac. & W. 627. until his function is discharged. 
 
 43 Beverly v. Brooke, 4 Grat. ** Corcoran v. Doll, 35 Cal. 476; 
 
 (Va.) 187. Lord Eldon, in Berney Williams v. Robinson, 16 Conn. 
 
 V. Sewell, 1 Jac. & W. 627, held- that 517; Bolles v. Duff, 35 How. Prac. 
 
 the appointment of a receiver at the (N. Y.) 481 ; Boston &c. R. Co. v. 
 
 application of a junior mortgagee New York &c. R. Co., • 12 R. I. 
 
 could not prejudice the right of 220; Beverly v. Brooks, 4 Grat. 
 
 the elder mortgagee to take pos- (Va.) 187; Meaden v. Sealey,- 6 
 
 session at any time and thus dis- Hare 620; Codrington v. Parker, 
 
 possess the receiver. It seems, 16 Ves. 469; Lloyd v. Passingham, 
 
 however, that this doctrine has 16 Ves. 59; Huguenin v. Baseley, 
 
 yielded in Virginia to the gener- 13 Ves. 105 ; Rowe v. Wood, 2 
 
 ally accepted theory that a re- Jac. & W. 553. 
 ceiver, as an officer of the court, 
 
955 RKCEIVERS § 633 
 
 and prove disastrous to the second mortgage security*^ and a 
 receiver has been appointed on the application of a junior mort- 
 gagee .to operate a road and apply the revenues where lack of 
 harmony existed in the management, and without the rents and 
 profits the security was wholly inadequate, and where, under the 
 existing management, the junior mortgagee might be postponed 
 indefinitely.*'' The interference of the court under such circum- 
 stances rests upon the ground of necessity to compel a proper 
 application of the revenues, and prevent dissipation of the prop- 
 erty.*^ In case the mortgage security is inadequate, the debtor 
 insolvent, and the property about to be sold for taxes, it has been 
 held that a junior mortgagee, whose debt is not due, may, pend- 
 ing foreclosure, have an interlocutory order appointing a receiver 
 to collect rents.** 
 
 § 633 (550). Appointment upon application of stockholders. — 
 
 As d general rule a receiver will not be appointed upon the appli- 
 cation of a stockholder, because of mismanagement or internal 
 dissensions, until after he has applied to the directors and officers 
 of the corporation, and, in some cases, to the other stockholders.*'-* 
 
 *6 Lloyd V. Chesapeake &c. R. 212; Wheeler v. Pullman &c. Co., 
 
 Co., 65 Fed. 351. 143 111. 197, 32 N. E. 420, 17 L. R. 
 
 M Mercantile Trust Co. v. Mis- A. 818; Fluker v. Emporia City R. 
 
 sour! &c. R. Co., 36 Fed. 221, 1 L. Co., 48 Kans. 577, 30 Pac. 18. See 
 
 R. A. 397. '''^° ^ Thomp. Corp. (2nd ed.) 
 
 ,.,T, ,, ir T3 i-TC §6347; Feess v. Mechanic's State 
 
 *T Hiles V. Moore, 15 Beav. 175; „ , _. .^ mo nc t-. r^o 
 
 „ /- ■ 1 1 ,- HOT Bank, 84 Kans. 828, 115 Pac. 563, 
 
 Bryan v. Cormick, 1 Cox. 422. ^ n a imp a ^«^ 
 
 L. R. A. 1915A, 606, and other 
 
 48 Buchanan v. Berkshire &c. ^.^gg^ ^^^^J.^ ^-^.^^ ;„ ^^jg ^here 
 
 Co., 96 Ind. 510, 531. n^^y j,g ^uda dissensions in the 
 
 49 Hawes v. Oakland, 104 U. S. management and such a deadlock 
 450, 26 L. ed. 827; Converse v. as to vitally interfere with or 
 Dimock, 22 Fed. 573; Hand v. even prevent business and jeop- 
 Dexter, 41 Ga. 454; Pond v. ardize the corporation and rights 
 Framingham &c. R. Co., 130 Mass. of stockholders and others, and in 
 194; Rathbone v. Parkersburg &c. such a case a stockholder may ob- 
 Co., 31 W. Va. 798, 8 S. E. 570; tain a receiver. Boyle v. Su- 
 Strong V. McCagg, 55 Wis. 624, perior Court, 176 Cal. 671, 170 Pac. 
 13 N. W. 895. See also Hardee v. 1140, L. R. A. 1918 D, 226, arid 
 Sunset Oil Co., 56 Fed. 51 ; Roman authorities there cited in opinion 
 V. Woolfolk, 98 Ala. 219, 13 So. and reviewed in note. 
 
§ 633 RAILROADS 956 
 
 But, as we have already seen,5o where the directors and persons in 
 charge are fraudulently depriving the minority stockholders of 
 their rights, dissipating the property and the like, so that it would 
 be useless to apply to them for relief, and especially if they have 
 already brought about a state of insolvency, a receiver may 
 generally be appointed on the application of stockholders. ^^ 
 So, where a controlling interest in the stock of one railroad 
 company was purchased by another, which thus secured the 
 election of a board of trustees consisting of its own officers and 
 employes, and such board then executed an illegal traffic agree- 
 ment or lease whereby the entire control of the franchises and 
 property of the former company was surrendered to the latter, 
 it was held that minority stockholders of the former could main- 
 tain a bill to annul such agreement without first applying to the 
 board of trustees for relief, and the court appointed a receiver 
 upon their application, which also showed that the company, 
 as managed by the company owning the majority of its shares, 
 could not pay operating expenses and was wholly insolvent. '^^ 
 But a receiver will not be appointed upon the application of a 
 
 50 Ante, §§ 626, 630. &c. Co., S R. & Corp. L. J. 412. 
 
 siTowIe V. American &c. See, See S Thomp. Corp. (2nd. ed.), 
 60 Fed. 131; Albert v. State, 65 ^^^'^^- See also Culver Lumber Co. 
 Ind. 413; Wayne Pike Co. v. Ham- ^ Culver, 81 Ark. 102, 99 S. W. 391, 
 mens, 129 Ind. 368, 27 N. E. 487; ^? .^™- ^t- 17. Several of these de- 
 Lewis, In re, 52 Kans. 660, 35 Pac. "'!°"' ^'^ ^f ^'^ °" ^'^t"*"''^ ,^'° 
 
 287; Schmidt v. Mitchell, 101 Ky. 
 570, 41 S. W. 929, 72 Am. St. 427; 
 
 visions, but the others seem to have 
 been decided on general principles of 
 equity. 
 
 Du Puy V. Transportation &c. ^^ Earle v. Seattle &c. R. Co., 
 
 Co., -82 Md. 408, 33 Atl. 889, 34 c^ p.^ one c r tt 
 
 ' ' 30 JHed. 909. See also Evans v. 
 
 At!. 910; Mmer v. Belle Isle &c. Union Pac. R. Co., 58 Fed. 497; 
 Co., 93 Mich. 97, 53 N. W. 218, 17 gtevens v. Davison, 18 Grat. (Va.) 
 L. R. A. 412; State v. Second Ju- gip^ gg ^m. Dec. 692. But com- 
 dicial Dist. Ct., 15 Mont. 324, 39 p^^e Wallace v. Pierce- Wallace 
 Pac. 316, 27 L. R. A. 392, '48 Am. pub. Co., 101 Iowa 313, 70 N. W. 
 St. 682; Porter v. Industrial &c. 216, 38 L. R. A. 122, 63 Am. St. 
 Co., 5 Misc. 262, 25 N. Y. S. 328; 389. In Putnam v. Ruch, 54 Fed. 
 Conro v. Gray, 4 How. Prac. (N. 216, a receiver was appointed 
 Y.) 166; Haywood v. Lincoln upon the application of a stock- 
 Lumber Co., 64 Wis. 639, 28 N. W. holder because the charter had 
 184; Featherstone v. Cooke» L. been repealed. 
 R. 16 Eq. 298; Hall v. Astoria 
 
§57; RECEIVERS § 634 
 
 stockholder acting in the interest of persons hostile to the com- 
 pany j^^ and mere insolvency is generally insufficient to author- 
 ize the appointment of a receiver at the instance of a stock- 
 holder, in the absence of any statutory provision upon the sub- 
 ject.B* In many of the states, however, there are statutory 
 provisions authorizing the appointment of a receiver, in certain 
 cases, at the suit of a stockholder."^ A former shareholder is 
 not entitled to a receiver, upon the ground of mismanagement 
 by the officers and directors, after he has parted with all his 
 interest in the corporation and its efifects,^^ and in no case in 
 which a stockholder seeks the appointment of a receiver upon 
 the ground of a breach of trust or mismanagement by those in 
 control will the court appoint a receiver if he has participated or 
 acquiesced for a long time therein.^'' 
 
 § 634 (551). Appointment upon application of corporation. — 
 
 A receiver may be appointed, in a proper case, in many jurisdic- 
 tions at least, upon the application of the company itself. Thus, 
 it has been held that a receiver may be appointed upon the ap- 
 plication of a railroad company where it is shown that the 
 company is hopelessly insolvent, that its property is likely to 
 be seized by different courts and scattered abroad, its assets 
 dissipated and its system disrupted and broken up into frag- 
 ments to the irreparable injury and damage of all persons hav- 
 ing an interest in the road.^* It is said, however, that the court, 
 
 53 Belmont v. Erie R. Co., ■ 52 S7 Hood v. First Nat. Bank, 29 
 
 Barb. (N. Y.) 637. Fed. SS; Hyde Park &c. Co. v. 
 
 54Merryman v. Carroll &c. Co., Kerber, S Bradw. (111.) 132; Hager 
 
 4 Railw. & Corp. L. J. 12; ante, v. Stevens, 6 N. J. Eq. 374; Down- 
 
 § 626. But see Cole v. Philadel- ing v. Dunlap &c. R. Co., 93 Tenn. 
 
 phia &c. R. Co., 140 Fed. 944. 221, 24 S. W. 122; Gray v. Chap- 
 
 55See Supreme Sitting &c. v. Bak- lin, 2 Russ. 126. 
 
 er, 135 Ind. 293, 33 N. E. 1128, 20 L. 58 Quincy &c. R. Co. v. Humph- 
 
 R. A. 210, and note, where the reys, 145 U. S. 82, 12 Sup. Ct. 787, 
 
 statutes are referred to and the 36 L. ed. 632; Brassey v. New 
 
 authorities reviewed. York &c. R. Co., 19 Fed. 663; Wa- 
 
 56 Smith V. Wells, 20 How. Prac. . bash &c. R. Co. v. Central T. Co., 
 
 (N. Y.) 158. See also Dimpfell 22 Fed. 272; Central Trust Co. v. 
 
 V. Ohio &c. R. Co., 110 U. S. 209, Wabash &c. R. Co., 29 Fed. 618, 
 
 3 Sup. Ct. 573, 28 L. ed. 121. 623; Saxori v. Southwestern Brick 
 
§ 634 RAILROADS 958 
 
 in such a case, cannot displace vested liens, but must require 
 the property to be held and preserved by the receiver for the 
 benefit of all concerned, as their interests may appear.^* It un- 
 doubtedly requires a very strong showing to justify the ap- 
 pointment of a receiver upon the application of the corporation, 
 but we think there are cases in which the court has the power 
 to make the appointment, and is justified in exercising it. There 
 are decisions, however, which seem to hold that a receiver can 
 never be appointed upon the application of the corporation. In 
 one of them it is said that a statutory provision that no receiver 
 of a corporation shall ever be appointed upon its own petition 
 is but a legislative declaration of the rule recognized by courts 
 of equity."" In another case it is said : "That a court of equity 
 has no inherent power, except in some few cases of particular 
 jurisdiction, to appoint a receiver, except as an incident to and 
 in a suit pending, has hitherto, with the exception of the Wa- 
 bash case,^i been a universally accepted doctrine; and outside 
 of that case the doctrine that a court of equity, without statu- 
 tory authority, has jurisdiction, upon the application of an in- 
 solvent corporation, to take charge and administer its affairs 
 through a receiver, not only has no support, but whenever sug- 
 gested has been repudiated."^^ j<- jg doubtless the general rule 
 that there must ordinarily be a pending- suit, and that a corpo- 
 
 &c. Co., 113 La. Ann. 637, 37 So. parties to institute the suit. Mc- 
 
 540. Ilhenny v. Binz, 80 Tex. 1. 13 S. 
 
 BSQuincy &c. R. Co. v. Hum- W. 655, 26 Am. St. 705. 
 
 phreys, 145 U. S. 82, 12 Sup. Ct. 6 1 Wabash &c. R. Co. v. Cen- 
 
 787, 36 L. ed. 632. tral T. Co., 22 Fed. 269, and Cen- 
 
 eoTexas &c. R. Co. v. Gay, 86 tral Trust Co. v. Wabash &c. R. 
 Tex. 571, 26 S. W. 599, 25 L. R. Co., 29 Fed. 618. These cases, 
 A. .52, citing Robinson v. Hadley, which we have already cited, go 
 n Beav. 614; Leddel v. Starr, 19 further, perhaps, than the others 
 N. J; Eq. 159; Marr v. Little- heretofore cited in the same- con- 
 wood, 2 Myl. &. Cr. 455. See also nection, and are criticized in one 
 Kimball v. Goodburn, 32 Mich. 10. of the Texas cases cited in the 
 In another case the same court preceding note, as well as in the 
 suggests that the directors, as case now under consideration, 
 trustees for stockholders and 62 State v. Ross, 122 Mo. 435, 25 
 creditors, would be the proper S, W. 947, 23 L. R. A. 534. Citing 
 
959 RECEIVERS § 635 
 
 ration cannot have a receiver appointed on its ex parte applica- 
 tion alone, and it .may be true that the "Wabash Case," in so 
 far as it seems to authorize the appointment of a receiver, in 
 the absence of a pending stiit, violates the general rule, but it is 
 said that there is no rule without exceptions, and, in any event, 
 we think that where a suit is pending, as, for instance, where 
 all interested persons are made parties and the company asks 
 other relief in addition to the appointment of a receiver, the 
 facts may be such and the emergency so great as to require the 
 appointment upon the application of the company.^^ 
 
 §635 (552). What court may appoint. — The power of ap- 
 pointing a receiver is generally exercised only by courts hav- 
 ing original jurisdiction.®* But where an appellate court has juris- 
 diction of the suit by appeal, and of the parties, it may appoint a 
 receiver of the property in controversy pending the appeal, if 
 necessary in order to protect its appellate jurisdiction, or to 
 makie its decree effective.®^ And it has been held that where 
 a mortgage is foreclosed and an appeal taken from the decree 
 
 Jones V. Leadville, 10 Colo. 464, 17 T. Co., 176 U. S. 181, 20 Sup. Ct. 
 
 Pac. 272; Hugh v. McRea, Chase, 311, 44 L. ed. 423; Park v. New 
 
 (U. S.) 466, Fed. Cas. No. 6840; York &c. R. Co., 70 Fed. 641. Di- 
 
 Neall V. Hill, 16 Cal. 14S, 76 Am. rectors acting in good faith, with 
 
 Dec. 508; French Bank Case, 53 approval of a majority of the 
 
 Cal. 495; Smith v. Los Angeles stockholders may initiate receiv- 
 
 Super. Ct., 97 Cal. 348, 32 Pac. 322; ership proceedings by a friendly 
 
 French v. Gifford, 30 Iowa 143; suit on the part of a bona fide 
 
 People V. St. Clair Circuit Judge, creditor. Intercontinental Rub- 
 
 31 Mich. 456; Kimball v. Good- her Co. v. Boston &c. R. Co., 245 
 
 burn, 32 Mich. 10; Whitehead v. Fed. 122 
 
 'Wooten, 43 Miss. 523; Attorney- 64 Pacific R. Co. v. Ketchum, 95 
 
 General v. Utica Ins. Co., 2 Johns. u. S. 1, 24 L. ed. 347. 
 
 Ch. (N. Y.) 371 ; Texas &c. R. Co. 65 West v. Weaver, 3 Heisk. 
 
 V. Gay, 86 Tex. 571, 26 S. W. 599, (Tenn.) 589. See Kerr v. White, 
 
 25 L. R. A. 52; Whitfield, Ex 7 Baxt. (Tenn.) 394. For a case 
 
 parte, 2 Atk. 315, 330. See also Vila v. where, under' the circumstances, 
 
 Grand Island &c. Co., 68 Nebr. 222, ^^e Supreme Court of the United 
 
 94 N. W. 136, 97 N. W. 613, 63 L. states declined to appoint a re- 
 
 R. A. 791, 110" Am. St. 400. ceiver, but without denying its 
 
 63 See Dickerman v. Northern jurisdiction to do so. see Pacific 
 
§ 635 RAILROADS 960 
 
 of foreclosure, the suit may be considered as still pending for 
 the purpose of an application for a receiver of the rents and 
 profits, and that the court that rendered the decree is the proper 
 court to hear and determine the application.^s The general 
 rule is that an appeal removes the entire case, or so much as is 
 appealed to the appellate court, but there may be collateral 
 or independent matters, distinct from the questions involved in 
 the appeal, which are not taken from the jurisdiction of the 
 trial court."'' Owing to the fact that all long lines of railroad 
 pass through many counties, and frequently through several 
 states, and that the immediate jurisdiction of a circuit court of 
 the United States is usually more extensive than that of the 
 local courts, and because it is desirable to have the receiver- 
 ships of the various parts of a railroad controlled by courts 
 which administer a uniform system of laws and are governed 
 by the same rules when sitting as courts of equity, applications 
 for the appointment of receivers for railroad corporations are 
 usually made to the federal courts. These courts are controlled 
 by the principles of equity as developed in the high court of 
 chancery of England, . which principles, indeed, are followed in 
 the interpretation and construction of the various statutes that 
 have been enacted to regulate the apppintment of receivers.®* 
 In the states in which courts of law and courts of equity remain 
 distinct, the power to appoint receivers is usually in the courts 
 of chancery, while in the code states it is usually in the courts 
 of general jurisdiction having both law and equity jurisdiction. 
 The particular court having jurisdiction to appoint a statutory 
 receiver of a corporation for insolvency, non-user or abuse of its 
 
 R. Co. V. Ketchum, 95 U. S. 1, 24 D. Smith (N. Y.) 183. But com- 
 
 L. ed. 347; Pacific R. Co. v. Mis- pare Havemeyer v. Superior 
 
 souri Pacific R. Co., IS Am. Rep. Court, 84 Cal. 327, 24 Pac. 121, 10 ' 
 
 80; Allen v. Harris, 4 Lea (Tenn.) L, R. A. 627, 18 Am. St. 192. 
 190. 67Elliott App. Proc, §§ S41-S46. 
 
 6" Brinkman v. Ritzinger, 82 68 it has been held that the fed-' 
 
 Ind. 358. See also Penn Mut.. eral courts will follow the su- 
 
 Ins. Co. V. Semple, 38 N. J. Eq. preme court of the state in its 
 
 314; Beard v. Arbuckle, 19 W. Va. interpretation of a state statute, 
 
 145; Grantham v. Lucas, IS W. Va. but that the Texas statute does 
 
 425, 431 ; Lottimer v. Lord, 4 E. not apply to receivers of a fed- 
 
961 RECEIVERS § 636 
 
 corporate rights, or any other cause leading to its dissolution, 
 is generally det'irmined by the statutory law in the several 
 states having statutes upon this subject.*^ It was formerly the 
 practice, in many cases, to refer the matter to a master to select 
 the receiver, but this practice is seldom resorted to at the pres- 
 ent time, and, in most jurisdictions, the appointment must be 
 made by the court. A court commissioner, it has been held, has 
 no jurisdiction to appoint a receiver.''^ Where a suit is pending 
 in a federal court for the foreclosure of a railroad mortgage and 
 the appointment of a receiver, it will take jurisdiction of another 
 bill filed by lienholders, without regard to the citizenship of the 
 parties, on the ground that their right to enforce their liens in 
 the state court will be cut off when the federal court takes pos- 
 session of the property, and hence their suit may be regarded as 
 an ancillary suit.''^ 
 
 § 636 (553). Court first obtaining jurisdiction retains it — Con- 
 flict of jurisdiction. — The court which first acquires jurisdiction 
 of an action for the appointment of a receiver will retain it to 
 the end of the litigation, to the exclusion of other courts of co- 
 ordinate jurisdiction. ''8 One court will not attempt, by a writ 
 
 eral court. Guaranty Trust Co. Co., 6 Biss. (U. S.) 286, Fed. Cas. 
 
 V. Galveston City R. Co., 107 Fed. No. 5284; Bill v. New Albany &c. 
 
 311. R. Co., 2 Biss. (U. S.) 390, Fed. Cas. 
 
 69 It is held to be a question of No. 1407; Judd v. Bankers &c. Co., 
 
 local law and its determination by 31 Fed. 182 ; Ohio &c. R. Co. v. Fitch, 
 
 the highest court of the state is usu- 20 Ind. 498; Stearns v. Stearns, 16 
 
 ally followed by the federal courts. Mass. 167; McCarthy v. Peake, 18 
 
 McKinney v. Kansas Nat. Gas, Co., How. Prac. 138, 9 Abb. Prac. (N. Y.) 
 
 206 Fed. 772. 164; O'Malhony v. Belmont, 37 N. Y. 
 
 71 Quiggle V. Trumbo, 56 Cal. 626. Super. Ct. 380 ; Pugh v. Brown, 19 
 
 72 Central Trust Co. v. Bridges, 57 Ohio 202, 211 ; Riesner v. Gulf &c. R. 
 Fed. 753. See also Krippendorf v. Co., 89 Tex. 656, 36 S. W. S3, 33 L. 
 Hyde, 110 U. S. 276, 4 Sup. Ct. 27, R. A. 171, 59 Am. St. 84; 5 Thomp. 
 28 L. ed. 145; Conwell v. While Corp. (2nd ed.), § 6331. This rule ap- 
 Water Canal Co., 4 Biss. (U. S.) plies in general as between state and 
 195, Fed. Cas. No. 3148 ; Pacific R. federal courts as well as between dif- 
 Co. V. Missouri Pac. R. Co., 1 Mc- ferent state or federal courts. Lewis 
 Crary 647, 3 Fed. 772. v. American Naval Stores Co., 119 
 
 T-i Gaylord v. Fort Wayne &c. R. Fed. 391 ; Knott v. Evening Post Co., 
 
 31 — Elt,. Railroads I 
 
§ 636 RAILROADS 962 
 
 of mandamus, to control the action of receivers appointed by an- 
 other courtJ* A state court will refuse to entertain a suit to 
 foreclose against property in the hands of a federal courtj^ and a 
 federal court will not entertain a bill to compel an accounting 
 by a receiver who is acting under the order of a state court by 
 which he was appointedJ^ Nor will a federal court enjoin a 
 receiver in possession of a railroad under the appointment of a 
 state court from issuing receiver's certificates, or restrain the 
 parties from carrying out an agreement sanctioned by the state 
 courtJ'^ But the pendency of an action in a state court to set 
 aside an assignment as fraudulent and have a receiver appointed 
 has been held to be no bar to creditors' bill in a federal court by 
 parties not before the state court. ''^ Where a receiver has been 
 regularly appointed and has obtained possession of the property, 
 he cannot be interfered with by the ofificers of another court in 
 which a second suit has been begun.''' Indeed it would seem to 
 be the better law that it' is not necessary that the court which 
 first takes jurisdiction of the case, shall also first take, by its 
 officers, actual possession of the property in controversy, and 
 
 124 Fed. 342; Milwaukee &c. R. Co. Co. v. South Atlantic &c. R. Co., 57 
 
 V. Milwaukee &c. Co., 20 Wis. 174, 88 Fed. 3 ; Davis v. Railroad Co., 1 
 
 Am. Dec. 740. Woods (U. S.) 661, Fed. Cas. No. 
 
 7* State V. Marietta &c. R. Co., 35 3648; Wood v. Oregon &c. Co., 55 
 
 Ohio St. 154. See also Shields v. Fed. 901. 
 
 Coleman, 157 U. S. 168, IS Sup. Ct. 78 Rejall v. Greenhood, 60 Fed. 784. 
 
 570, 39 L. ed. 660. But see Central Trust Co. v. South 
 
 75 Milwaukee &c. R. Co. v. Mil- Atlantic &c. R. Co., 57 Fed. 3. 
 
 waukee &c. R. Co., 20 Wis. 165 (174), 79 Wilmer v. Atlanta &c. R. Co., 2 
 
 88 Am. Dec. 735. See also State v. Woods (U. S.) 409, Fed. Cas. No. 
 
 Miller, 54 Kans. 244, 38 Pac. 269. 17775 ; Young v. Montgomery &c. R. 
 
 But compare Attorney-General, In re, Co., 2 Woods (U. S.) 606; Fed. Cas. 
 
 113 Wis. 623, 88 N. W. 912. No. 18166; Fort Wayne &c. R. Co. v. 
 
 76Conkling v. Butler, 4 Biss. (U. Mellett, 92 Ind. 535; O'Mahony v. 
 
 S.) 22, Fed. Cas. No. 3100. Belmont, 5 J. & S. (N. Y.) 380. 
 
 77 Reinach v. Atlantic &c. R. Co., Property in the hands of a receiver 
 
 58 Fed. 33. See generally as to when of a state court can not he levied 
 
 federal court will not interfere with upon by the United States marshal 
 
 or displace receiver appointed by in behalf of a judgment creditor, 
 
 state court, Lancaster v. Asheville St. Wiswall v. Sampson, 14 How. CQ. 
 
 R. Co., 90 Fed. 129; Central Trust S.) 52, 14 L. ed. 322. 
 
963 
 
 RECEIVERS 
 
 §636 
 
 that it is sufficient that it shall have jurisdiction of the subject- 
 matter and of the parties, and that its aid shall have been reg- 
 ularly invoked.*" The fact that an action covering substantially 
 the same issues is begun in a state court after the filing of a bill 
 against a railroad company in the United States Circuit Court 
 in which the appointment of a receiver is asked for, but before 
 an appointment is made, and that the state court proceeds to 
 appoint a receiver and to put him in possession of the property, 
 wrill not affect the jurisdiction of the circuit court; but it will 
 proceed in due course to appoint a receiver, if occasion for such 
 
 80 Adams v. Mercantile Trust 
 Co., 66 Fed. 617; Illinois Steel Co. 
 V. Putnam, 68 Fed. 515; Sedgwick 
 V. Menck, 6 Blatch. (U. S.) 156, 
 Fed. Cas. No. 12616; Union Trust 
 Co. V. Rockford &c. R. Co., 6 Biss. 
 (U. S.) 197, per Blodgett, J., Fed. 
 Cas. No. 14401; May v. Printup, 
 59 Ga. 128; Kerp v. Michigan &c. 
 R. Co., 6 Chicago Leg. News 101. 
 But see Moran v. Sturges, 154 U. 
 S. 256, 14 Sup. Ct. 1019, 38 L. ed. 
 981. In Texas it is held that on 
 an appeal from an order of a state 
 court appointing a receiver of a 
 railroad, where it appears that 
 the federal courC had already ap- 
 pointed a receiver for such road, 
 but it does not appear when the 
 suit in which he was appointed 
 was instituted, the order of the 
 state court will not be disturbed. 
 Texas Trunk R. Co. v. State, 83 
 Tex. 1, 18 S. W. 199; Wilmer v. 
 Atlanta &c. Co., 2 Woods 409 (U. 
 S.), Fed. Cas. No. 17775. In New 
 York, under the code, the court 
 has jurisdiction of a cause and all 
 the subsequent proceedings from 
 the time process is served or a 
 provisional remedy is allowed, 
 
 and a second court will decline to 
 take jurisdiction or appoint a re- 
 ceiver where the first court has 
 granted an injunction. McCarthy 
 v. Peake, 18 How. Pr. 138. In Gay- 
 lord V. Fort Wayne &c. R. Co., 6 
 Biss. (U. S.) 286, Fed. Cas. No. 5284, 
 Drummond, J., says : "The prin- 
 ciple upon this subject is prop- 
 erly stated in the opinion of the 
 circuit court of the" northern dis- 
 trict of Illinois, in the case of the 
 U. T. Co. V. Rockford R. Co., re- 
 ported in 7 Chicago Legal News 
 33, that the court which first takes 
 cognizance of the controversy is 
 entitled to retain jurisdiction to 
 the end of the litigation, and in- 
 cidentally to take the possession 
 or control of the res, the subject- 
 matter of the controversy, to the 
 exclusion of all interference from 
 other courts of concurrent juris- 
 diction, and that the proper ap- 
 plication of this principle does 
 not require that the court which 
 first takes jurisdiction of the con- 
 troversy shall also first take the 
 actual possession of the thing in 
 controversy." 
 
§636 
 
 RAILROADS 
 
 964 
 
 action is shown, and will assert its jurisdiction. ^^ And it is 
 even held that after the technical but not necessarily final dis- 
 missal of a suit in the federal court, a suit in a state" court for 
 the appointment of a receiver will not supersede the jurisdic- 
 tion of the federal court as to any further matters connected with 
 the receivership in that court. ^^ It has been held, however, that 
 when the second suit relates tO' a different cause of action, this 
 rule does not apply, although the thing which the litigation con- 
 cerns is the same in both cases, and that, in such a case, priority 
 of possession determines the priority of right to hold the prop- 
 erty. ^^ Where a receiver appointed by a state court in a suit 
 between the railroad company and a judgment creditor was in 
 actual possession, it was held that the United States Circuit 
 Court had no jurisdiction to compel such receiver to surrender 
 
 81 Memphis v. Dean, 8 Wall. (U. 
 S.) 64, 19 L. ed. 326; Jones Corp. 
 Bonds, §463. In Bill v. New Al- 
 bany &c. R. Co., 2 Biss. (U. S.) 
 ^90, Fed. Cas. No. 1407, it was 
 held that such action on the part 
 of the state court would, if jus- 
 tice required it, be treated as an 
 interferencei, and the federal 
 court would refuse to recognize a 
 decree of foreclosure rendered in 
 the state court in an action 
 brought after suit was begun in 
 the federal court, but before final 
 adjudication. 
 
 82 Union Trust Co. v. Rockford 
 &c. R. Co., 6 Biss. (U. S.) 197, 
 Fed. Cas. No. 14401. 
 
 83 Memphis v. Dean, 8 Wall. (U. 
 S.) 64, 19 L. ed. 326. In Wilmer 
 V. Atlanta &c. R. Co., 2 Woods (U. 
 S.) 409, Woods, J., Fed. Cas. No. 
 17775, in taking the opposite view, 
 says: "It is well settled that 
 realty out of the state may be 
 reached by acting on the person. 
 Mitchell V. Bunch, 2 Paige Ch. (N. 
 
 Y.) 606, 22 Am. Dec. 669; Ramsey 
 V. Brailsford, 2 Des. (S. Car.) 582, 
 note 2 Am. Dec. 698. In the case 
 in Paige it was held that if the 
 person of the defendant is within 
 its jurisdiction, the court has 
 jurisdiction as to his property 
 situated without such jurisdiction. 
 When the property is situated 
 outside of the territorial juris- 
 diction of the court, the court 
 may require assignments to be 
 made by the defendant to the re- 
 ceiver. * ♦ * Especial atten- 
 tion is called to the cases of Wis- 
 wall V. Sampson, 14 How. (N. Y.) 
 52; Chittenden v. Brewster, 2 
 Wall. (N. S.) 191, 17 L. ed. 839; 
 Bill V. The New Albany R. Co., 2 
 Biss. (U. S.) 390, Fed. Cas. No. 
 1407. An examination of the cases 
 cited will show that actual seizure 
 of property has not been consid- 
 ered necessary to the jurisdiction 
 of the court in a case where the 
 possession of the property is 
 necessary to the relief sought. 
 
965 
 
 RECEIVERS 
 
 §636 
 
 possession to a receiver appointed by it in a suit between the 
 mortgage creditors and the company, instituted before the suit 
 in the state court was begun.^* The soundness of this decision 
 
 The commencement of the action 
 and service of process, or, accord- 
 ing to some of the cases, the sim- 
 ple commencement of the suit by 
 the filing of the bill, is sufficient 
 to give the court jurisdiction to 
 the exclusion of all other courts. 
 * * * If this court, upon the 
 bill filed in this case, has the 
 power to take possession of the 
 entire property granted by the 
 trust deed, as we have already de- 
 cided it has, then the filing of the 
 bill asking this court to take pos- 
 session of and administer the 
 trust property, and the service of 
 process excluded the jurisdiction 
 of all other courts to take pos- 
 session of and administer the 
 same property or any part there- 
 of." But see opinion of Bradley, 
 J., in next note. 
 
 siWilmer v. Atlanta &c. R. Co., 
 2 Woods (U. S.) 409, 425, Fed. 
 Cas. No. 17775, per Mr. Justice 
 Bradley. In refusing a writ of 
 assistance to put the receiver ap- 
 pointed by Judge Woods of the 
 federal court in possession of the 
 property, Mr. Justice Bradley 
 said: "It is too well settled to 
 admit of controversy that where 
 two courts have concurrent juris- 
 diction of a subject of contro- 
 versy the court which first as- 
 sumes jurisdiction has it exclu- ■ 
 sive of the other. But where the 
 objects of the suit are different, 
 this rule does not apply, although 
 the thing about or in reference to 
 
 which the litigation is had is the 
 same in both cases. * * * The 
 controversy not being the same 
 nor the parties the same, there is 
 no conflict as to the question or 
 cause. But * * * there has 
 arisen a conflict of jurisdiction 
 as to the thing or subject-matter. 
 * * * The test, I think, is this: 
 Net which action was first com- 
 menced, nor which cause of action 
 has priority or superiority, but 
 which court first acquired juris- 
 diction over the property. If the 
 Fulton county court had the 
 power to take possession when it 
 did so, and did not invade the 
 possession or jurisdiction of this 
 court, its possession will not be 
 interfered with by this court; the 
 parties must either go to that 
 court and pray for the removal 
 of its hand, or, having procured 
 an adjudication of their rights in 
 this court, must wait until the 
 action of that court has been 
 brought to a close and judicial 
 possession has ceased. Service of 
 process gives jurisdiction over 
 the person. Seizure gives juris- 
 diction over the property; and 
 until it is seized, no matter when 
 the suit was commenced, the court 
 does not have jurisdiction. The 
 alleged collusion and fraud of the 
 parties can not alter the case. It 
 is a question between the two 
 courts; and we must respect the 
 possession and jurisdiction of the 
 sister court. We can not take 
 
§636 
 
 RAILROADS 
 
 966 
 
 has many times been questioned,^^ although it has received 
 recognition in some jurisdictions.*^ It has been held, however, 
 
 the property out of its hands un- 
 less It has first wrongfully taken 
 it out of our hands. This, as we 
 have shown, has not been done. 
 The application for a writ of as- 
 sistance and for an attachment 
 must be denied." See also Barton 
 V. Keyes, 1 Flip. (U. SO 61 ; Covell 
 V. Heyman, 111 U. S. 176, 3 Sup. 
 Ct. 355, 28 L. ed. 390; Heidritter v. 
 Oilcloth Co., 112 U. S. 294, 5 Sup. 
 Ct. 135, 28 L. ed. 729; Walker v. 
 Flint, 7 Fed. 435; Erwin v. Lowry, 
 7 How. (U. S.) 172, 12 L. ed. 655; 
 Levi V. Columbia. &c. Ins. Co., 1 
 Fed. 206; Griswold v. Central &c. 
 R. Co., 9 Fed. 797. 
 
 85 See May v. Printup, 59 Ga. 
 128, where it was held that the 
 filing of a bill is sufficient to give 
 jurisdiction of the thing in con- 
 troversy, in a case where the only 
 recovery can be out of the prop- 
 erty; and that a state court which 
 takes possession of a railroad 
 pending an application to the 
 United States Circuit Court for 
 the appointment of a receiver 
 should surrender such possession 
 when it is shown that the suit in 
 the state court was filed by col- 
 lusion of the parties after the suit 
 in the federal court was begun. In 
 Adams v. Mercantile Trust Co., 
 66 Fed. 617, Pardee, J., says, con- 
 cerning the opposing views of 
 Judge Woods and Mr. Justice 
 Bradley, Wilmer v. Atlanta &c. 
 Co., supra: "The views expressed 
 by Judge Woods have been ac- 
 cepted and followed in this cir- 
 
 cuit, at least, and we fully con- 
 cur therein, as a correct exposi- 
 tion of the law, and one partic- 
 ularly applicable to the present 
 case; while the decision of Mr. 
 Justice Bradley, doubted by him- 
 self, is open to the objection that 
 thereby jurisdiction is frequently 
 made to depend upon a race be- 
 tween marshals and sheriffs, likely 
 to result in unseemly controver- 
 sies between the state and federal 
 courts." In Illinois Steel Co. v. 
 Putnam, 68 Fed. 515, 517, McCor- 
 mick, J., says: "Where a bill in 
 equity brings under the direct 
 control of the court all the prop- 
 erty and estate of the defendants, 
 * * * and the possession and 
 control of the property are neces- 
 sary to the exercise of the juris- 
 diction of the court, the filing of 
 the bill and service of process is 
 an equitable levy on the property, 
 and pending the proceedings such 
 property may properly be held to 
 be in gremio legis. The actual 
 seizure of the property is not 
 necessary to produce this effect, 
 where the possession of the prop- 
 erty is necessary to the granting 
 of the relief sought. In such 
 cases the commencement of the 
 suit is sufficient to give the court 
 whose jurisdiction is invoked the 
 exclusive right to control the 
 property." 
 
 88 East Tenn. &c. R. Co. v. At- 
 lanta &c. R. Co., 49 Fed. 608; Mer- 
 chants' &c. Bank v. Trustees, 63 
 Ga. 549. 
 
967 
 
 RECEIVERS 
 
 636 
 
 that the general rule that the court which first takes cognizance 
 of a suit has the exclusive right to decide every question aris- 
 ing therein, is subject to limitations, that it is only when prop- 
 erty is in possession of the court, either actually or construc- 
 tively that it can be protected from the process of other courts,*'' 
 and that other courts may take any action which does not amount 
 to an interference with the possession of the first court acquir- 
 ing jurisdiction.*^ So, in a comparatively recent case,*^ it was 
 held that the fact that a prior suit for foreclosure was pending 
 in the state court, with no immediate purpose to ask for a re- 
 ceiver, did not prevent the federal court from taking jurisdic- 
 tion and appointing a receiver, and that after such receiver had 
 taken possession he could not be required to deliver possession 
 to a receiver afterwards appointed by the state court in the 
 prior suit. 
 
 8T Buck V. Colbath, 3 Wall. (U. 
 S.) 334, 18 L. ed. 2S7. 
 
 88 Andrews v. Smith, 19 Blatchf. 
 <U. S.) 100, S Fed. 833. The ap- 
 pointment of a receiver by one 
 court will not be regarded as an 
 interference, with the jurisdiction 
 of another court, which has 
 granted an injunction concerning 
 property without taking it into 
 possession. San Antonio &c. R. 
 Co. V. Davis (Tex. Civ. App.), 30 
 S. W. 693. 
 
 89 East Tennessee &c. R. Co. v. 
 Atlanta &c. R. Co., 49 Fed. 608. 
 The court said: "The rule upon 
 that subject in this state is de- 
 ducible from the decision of the 
 supreme court in Merchants' &c. 
 Bank v. Trustees, 63 Ga. 549, 
 where the court uses, this lan- 
 guage: 'But it would seem here 
 that the stockholders' bill has 
 been pending here for a long time 
 
 in the circuit court of the United 
 States, and no receiver is yet ap- 
 pointed. Perhaps none ever will 
 be. Is the judgment creditor to 
 wait until one is to be appointed? 
 He is not even in this case made 
 a party to the bill in the United 
 States court. If he were, and if 
 the bill there filed was similar to 
 this in review here, and could ac- 
 complish the same end, to wit, the 
 collection of this debt by the 
 judgment creditor, having the 
 final process of the state court in 
 his hands, even then we should 
 rule that neither law, nor equity, 
 nor comity would require the 
 equity court to wait upon the 
 United States court in a case like 
 this.' The application of that de- 
 cision is that neither law, equity, 
 nor comity will require the 
 United States court to wait upon the 
 state court in a case like this." 
 
§637 
 
 RAILROADS 
 
 968 
 
 §637 (554). Extraterritorial jurisdiction. — A court of equity 
 cannot, as a rule at least, acquire extraterritorial jurisdiction 
 by appointing receivers for property lying entirely outside of 
 the state or district in which such court is organized.*" Many 
 cases are found, however, in which a receiver has been ap- 
 pointed over property lying within the jurisdiction and other 
 property lying outside of the state or country where the par- 
 ties interested in the property ^vere personally before the court 
 and subject to its orders, and the property in separate jurisdic- 
 tions went to make up an entity or belonged to the same cor- 
 porate body. ®i Thus, where a single railroad corporation cre- 
 ated by the concurrent legislation of several states owns a line 
 extending into each of those states, a court having jurisdiction 
 over the corporate body may acquire control of all its property 
 by requiring it to execute assignments, or otherwise transfer 
 the title to the receiver. ^^ And it was held in one case that 
 even though receivers had already been appointed by the state 
 
 90 Booth V. Clark, 17 How. (U. 
 S.) 322, 15 L. ed. 164; Atkins v. 
 Wabash &c. R. Co., 29 Fed. 161; 
 Texas &c. R. Co. v. Gay, 86 Tex. 
 571, 26 S. W. 599, 25 L. R. A. 52, 
 where the court carefully reviews 
 the authorities bearing upon the 
 question. See also Hale v. Har- 
 den, 89 Fed. 283; Stockbridge v. 
 Beckwith, 6 Del. Ch. 72, 33 Atl. 
 620. But see Lewis v. American 
 &c. Co!, 119 Fed. 391, where the 
 corporation made no objection. 
 So it is the general rule that a 
 receiver will not be appointed to 
 wind up or interfere with the in- 
 ternal affairs of a foreign cor- 
 poration. VanDyke v. Railway 
 Mail Assn., 118 Minn. 390, 137 N. 
 W. 15, Ann. Cas. 1913E, 455, 457, 
 and note citing many cases and 
 distinguishing this from the ap- 
 pointment of a receiver to pre- 
 
 serve assets or property within 
 the jurisdiction of the court. 
 
 91 Muller V. Dews, 94 U. S. 444, 
 24 L. ed. 207; Farmers' Loan &c. 
 Co. V. Northern Pac. R., 69 Fed. 
 871; Mead v. New York &c. R. 
 Co., 45 Conn. 199, 223; State v. 
 Northern Cent. R. Co:, 18 Md. 193; 
 Ellis v. Boston &c. R. Co., 107 
 Mass. 1; Ante, § 36. See also 
 Blackburn v. Selma &c. R. Co., 2 
 Flip. (U. S.) 525, Fed Cas. No. 
 1467, 3 Fed. Cas. 526; Central 
 Trust Co. V. Wabash &c. R. Co., 
 29 Fed. 618; Stewart v. Laberee, 
 185 Fed. 471. Where the property is 
 situated in different federal districts 
 of a state, a federal court in one of 
 the districts has jurisdiction to ap- 
 point a receiver for all the property. 
 Shelbyville v. Glover, 184 Fed. 234. 
 
 92 Northern Indiana R. Co. v. 
 Michigan Cent. R. Co., 15 How. 
 
969 
 
 RECEIVERS 
 
 §637 
 
 courts of Georgia, North Carolina and South Carolina to take 
 charge of the several parts of a railroad incorporated by and 
 extending across the three states, but having its principal of- 
 fice at Atlanta, in the state of Georgia, the circuit court for 
 the northern district of Georgia, in which suit had been brought 
 before any suit had been instituted in the state courts, had 
 jurisdiction to appoint a receiver for the whole line.®^ On th>e 
 other hand, it has been held that a federal court in one state has 
 no jurisdiction over a railroad in another state and cannot ap- 
 point a receiver cf such railroad, although it is the property of 
 a consolidated corporation created by congress.^* It is some- 
 
 (U. S.) 233, 14 L. ed. 674; MuUer 
 V. Dows, 94 U. S. 444, 24 L. ed. 
 207; Port Royal &c. R. Co. v. 
 King, 93 Ga. 63, 19 S. E. 809, 24 
 L, R. A. 730. 
 
 93 Wilnier v. Atlanta &c. Co., 2 
 Woods (U. S.) 409, Fed. Cas. No. 
 1777S. In announcing the opinion 
 of the court appointing a receiver, 
 Judge Woods said: "As the 
 property of the defendant com- 
 pany is one entire and indivisible 
 thing, and as it is all covered by 
 one deed of trust, there seems 
 to be no good reason why this 
 court should not appoint a re- 
 ceiver for the whole, even though 
 a part of the property may extend 
 into another state. The court 
 having jurisdiction of the de- 
 fendant can compel it to do all 
 in its power to put the receiver 
 in possession of the entire prop- 
 erty. If other persons outside of 
 the territorial jurisdiction of this 
 court have seized the property of 
 the defendant the receiver may 
 be compelled to ask the assist- 
 ance of the courts of that juris- 
 diction to aid him. in obtaining 
 possession, but that is no reason 
 
 why we should hesitate to appoint 
 a receiver for the whole property. 
 We think the courts of other 
 jurisdictions would feel con- 
 strained, as a matter of comity, 
 to afford all necessary aid in their 
 power to put the receiver of this 
 court in possession." But on a 
 subsequent application to that 
 court for a writ of assistance to 
 enable the receiver to get posses- 
 sion of the property of the rail- 
 road company in Georgia, which 
 the receiver appointed by the 
 courts of that state refused to 
 surrender, the application was re- 
 fused by Judge Bradley. The 
 reason upon which Judge Brad- 
 ley based his refusal of the writ 
 was that the state court had first 
 acquired jurisdiction over the 
 property by taking actual posses- 
 sion thereof, and such jurisdiction 
 should not, therefore, be disturbed 
 by a court of co-ordinate jurisdic- 
 tion in a suit by other plaintiffs 
 upon a different cause of action. 
 See Guarantee Trust Co. v. Phila- 
 delphia &c. R. Co., 69 Conn. 709, 
 38 Atl. 792, 38 L. R. A. 804. 
 94 Texas &c. R. Co. v. Gay, 86 
 
§ 638 RAILROADS 970 
 
 what difficult to reconcile or distinguish the apparently con- 
 flicting decisions upon this subject, but we are inclined to think 
 that the true distinction is this : Where the corporation is not 
 within the jurisdiction of the court, or where no part of the 
 property is within its jurisdiction, and it cannot get possession 
 or control of the property without sending its process to an- 
 other state, it has no power to appoint a receiver of such prop- 
 erty ; but where the corporation is a corporation of the same 
 state, consolidated or otherwise, although it may have lines 
 extending into other states, if it is an indivisible entirety and 
 the court has jurisdiction of all necessary parties, a receiver 
 may be appointed for the entire road.®^ 
 
 §638 (555). Ancillary appointment — Comity. — Railroad re- 
 ceiverships are generally extended over the property of the 
 company in other jurisdictions by ancillary appointment, for 
 the rule of comity and the interests of all concerned require 
 that the road should be operated as an entirety and. under one 
 management.*^ For this reason the question considered in the 
 preceding section, as to the power of a court to appoint a re- 
 ceiver of an entire road extending into other jurisdictions, is 
 
 Tex. 571, 25 S. W. 599, 25 L. R. A. R. Co., 66 Fed. 622; Port Royal 
 
 52. The court also held that the &c. R. Co. v. King, 93 Ga. 63, 19 
 
 person so appointed, being per- S. E. 809, 24 L. R. A. 730. See also 
 
 mitted by the company to take Bay State Gas Co. v. Rogers, 147 
 
 possession and operate the road, Fed. 557; Culver Lumber Co. v. 
 
 was merely the agent of the com- Culver, 81 Ark. 102, 99 S. W. 391, 
 
 pany and that the company was 118 Am. St. 17; Guarantee Trust 
 
 liable for his negligence. Co. v. Philadelphia &c. R. Co., 69 
 
 95 The appointment of a re- Conn. 709, 38 Atl. 792. 38 L. R. A. 
 
 ceiver for a foreign corporation 804; Condon v. Mutual &c. Assn., 
 
 does not, necessarily at least, pre- 89 Md. 99, 42 Atl. 944, 73 Am. St. 
 
 vent the corporation from exer- 169, 44 L. R. A. 149; Person v. 
 
 cising its franchises elsewhere. Lcary, 126 N. Car. 504, 36 S. E. 35, 
 
 Sims V. United Wireless Tel. Co., 127 N. Car. 114, 37 S. E. 149. But 
 
 179 Fed. 540. see Mercantile Trust Co. v. Kana- 
 
 90 Piatt V. Philadelphia &c. R. wha &c. R. Co., 39 Fed. 337, in 
 
 Co., 54 Fed. 569; New York &c. which it was held, contrary to the 
 
 R. Co. V. New York &c. R. Co., ruling in some of the other cases 
 
 58 Fed. 268; Dillon v. Oregon &c. above cited, that a United States 
 
971 RECEIVERS § 638 
 
 not of such vital importance as it would otherwise be. It is 
 customary to appoint as ancillary receiver the same person that 
 was originally, appointed and to leave the management of the 
 receivership very largely to the court in. which the receiver was 
 first appointed, to which court the receivers are usually required 
 to account.®^ But it is held that these matters, so far as the 
 appointment and control of the ancillary receiver are concerned, 
 rest in the discretion of the court appointing him.^* In a 
 comparatively rjcent case®^ the court refused to appoint a 
 separate receiver for a branch line of a street railway where 
 a receiver had already been appointed for the entire railway. 
 Where a new suit is brought in the same court concerning 
 the same property, requiring the aid of a receiver, as, for in- 
 stance, where creditors obtain the appointment of a receiver 
 and a new suit is brought by the mortgage trustees to fore- 
 close, the receivership will be extended so as to reach the 
 subject-matter of the second suit, and independent receivers 
 will not be appointed.^ The appointment of a receiver by the 
 courts in one jurisdiction will usually be recognized by the 
 courts of other jurisdictions, and his title to the property of 
 
 circuit court would not take juris- &c. Co., 97 Fed. 9; Sands v. 
 
 diction of a bill whose only pur- Greely, 88 Fed. 130; Security Sav. 
 
 pose is to obtain an ancillary re- &c. Assn. v. Moore, 151 Ihd. 174, 
 
 ceivership. SO N. E. 869. And compare Sims 
 
 9T Jennings v. Philadelphia &c. v. United Wireless Tel. Co., 179" 
 
 R. Co., 23 Fed. S69; Central Trust Fed. 540; Thornley v. J. C. Walsh 
 
 Co. V. Wabash &c. R. Co., 29 Fed. Co., 200 Mass. 179, 86 N. E. 355. 
 618; Chattanooga &c. R. Co. v. 99 Clap v. Interstate R. Co., 61 
 
 Felton, 69 Fed. 273; Port Royal Fed. 537. The court said that the 
 
 &c. R. Co. V. King, 93 Ga. 63, 19 appointment of a separate re- 
 
 S. E. 909, 24 L. R. A. 730. See also ceiver would do no good, but 
 
 Baldwin v. Hosmer, 101 Mich. 432, would simply complicate matters 
 
 59 N. W. 432 ; Ware v. Supreme and cause additional expense. 
 Sitting (N. J.), 28 Atl. 1041; Clyde i Mercantile Trust Co. v. Kana- 
 
 V. Richmond R. Co., 56 Fed. 539; wha &c. R. Co., 39 Fed. 337; Lloyd 
 
 S Thomp. Corp. (2nd ed.), § 6332. v. Chesapeake &c. R. Co., 65 Fed. 
 
 98 Atkins V. Wabash &c. R. Co., 351; State v. Jacksonville &c. R. 
 
 29 Fed. 161; Central Trust Co. v. Co., 15 Fla. 201; Buswell v. Su- 
 
 Texas &c. R. Co., 22 Fed. 135. See preme Sitting &c., 161 Mass. 224, 
 
 also Shinney v. North American 36 N. E. 1065, 23 L. R. A. 846; 
 
§638 
 
 RAILROADS 
 
 972 
 
 the insolvent corporation be enforced by those courts,^ so long, 
 at least, as his claims are not opposed to those of the citizens 
 of the state in which he is compelled to sue.® The rule of 
 comity between the- courts of different states requires that a 
 receiver appointed by a competent court of another state, with 
 authority to sue, shall be permitted to maintain a suit in his 
 own name,* but this courtesy will not, ordinarily, be extended 
 so as to work detriment to citizens of the state in which the 
 suit is brought. 5 Comity does not, as a rule, require that prop- 
 erty should be turned over to a receiver appointed by the courts 
 of another state if such action is opposed to the interests of 
 local creditors, and courts will not, in such a case, enforce the 
 claims of such a receiver in opposition to those of citizens of 
 
 Howell V. Ripley, 10 Paige (N. Y.) 
 43 ; Gilman v. Ketcham, 84 Wis. 
 60, 54 N. W. 395, 23 L. R. A. 52, 
 36 Am. St. 899. 
 
 2 Davis V. Gray, 16 Wall. (U. S.) 
 219, 21 L. ed. 453; Central Trust 
 Co. V. Wabash &c. R. Co., 29 Fed. 
 618; Failey v. Talbee, 55 Fed. 892; 
 Farmers' Loan &c. Co. v. North- 
 ern Pac. R. Co., 69 Fed. 871; Hale 
 V. Tyler, 104 Fed. 757; Boulware 
 V. Davis, 90 Ala. 207, 8 So. 84, 9 
 L. R. A. 601; Patterson v. Lynde, 
 ■112 HI. 196; Metzner v. Bauer, 98 
 Ind. 425; Buswell v. Supreme Sit- 
 ting &c., 161 Mass. 224, 36 N. E. 
 1065, 23 L. R. A. 846. See generally 
 as to the title and rights of a re- 
 ceiver in other jurisdictions than 
 that in which he is appointed, Gil- 
 man V. Hudson River &c. Co., 84 
 Wis. 60, 54 N. W. 395, 23 L. R. A. 
 52, and note, 36 Am. St. 899; 
 Schuyler's &c. Co., Re, 136 N. Y. 
 169, 32 N. E. 623, 20 L. R. A. 391, 
 and note; Actions by Foreign Re- 
 ceivers, il Cent. L. J. 315; Equit- 
 able Trust Co. v. Wabash R. Co., 
 244 Fed. 66. 
 
 3 Chandler v. Siddle, 3 Dill. (U. 
 S.) 477, Fed. Cas. No. 2594; Bagby 
 V. Atlantic &c. R. Co., 86 Pa. St. 
 291. See also Wyman v. Eaton, 
 107 la. 214, n N. W. 865, 70 Am. 
 St. 193, 43 L. R. A. 695; Toronto 
 Gen. Trust Co. v. Chicago &c. R. 
 Co., 123 N. Y. 37, 25 N. E. 198, 20 
 Am. St. 718; Frowart v. Blank, 
 205 Pa. St. 299, 54 Atl. 1000. 
 
 4 Metzner v. Bauer, 98 Ind. 425; 
 Hurd V. Elizabeth, 41 N. J. Law 
 1 ; Peters v. Foster, 56 Hun 607, 
 10 N. Y. S. 389; Toronto &c. Trust 
 Co. V. Chicago &c. R. Co., 123 N. 
 Y. 2,1, 47, 25 N. E. 198; Bagby v. 
 Atlantic &c. R. Co., 86 Pa. St. 291 ; 
 Lycoming Fire Ins. Co. v. Wright, 
 55 Vt. 526. But see Booth v. 
 Clark, 17 How. (U. S.) 322, 15 L. 
 ed. 164; Hazard v. Durant, 19 Fed. 
 471 ; Day v. Postal Telegraph Co., 
 66 Md. 354. 
 
 5 Runk V. St. John, 29 Barb. (N. 
 Y.) 585; Merchants' Nat. Bank v. 
 McLeod, 38 Ohio St. 174. See also 
 State V. Denton, 229 Mo. 187, 129 
 S. W. 709. 
 
'973 RECEIVERS § 638 
 
 their own state.^ It has also been held that a receiver appointed 
 by a foreign court does not acquire, by such appointment, any 
 title superior to that of a non-resident attaching creditor;'^ as 
 the available legal remedy of a receiver is coextensive only 
 with the jurisdiction of the court by which he was appointed 
 when the right of precedence or priority of creditors is asserted 
 in respect to property or funds of a non-resident debtor which 
 the receiver has not yet reduced to possession.^ But in regard 
 to this question, as in regard to the entire subject of the rela- 
 tive rights of a receiver in a foreign jurisdiction, and attaching 
 or garnishing creditors, the authorities seem to be hopelessly 
 in conflict. The solution of the problem depends so largely 
 upon the idea of comity entertained in the particular jurisdic- 
 tion in which the question arises, that it is impossible to lay 
 down any rule that will be applied in all jurisdictions. We 
 think, however, that one who is a resident of the same state in 
 which the debtor resides and in which a receiver has been ap- 
 pointed should not be permitted to go into a foreign jurisdic- 
 tion and there obtain relief which he could not obtain in his 
 own state, by attachment or garnishment proceedings, securing 
 
 8 Fawcett v. Supreme Sitting all the decisions." Hurd v. Eliza- 
 fee, 64 Conn. 170, 29 Atl. 614, 24 beth, 41 N. J. L. 1. 
 'L. R. A. 815 (a questionable de- T Patterson v. Lynde, 112 111. 
 vision); Hurd v. Columbus Ins. 196; Catlin v. Wilcox &c. Co., 123 
 Co., SS Maine 228; Day v. Postal Ind. 477, 24 N. E. 2S0, 8 L. R. A. 
 Tel. Co., 66 Md. 354, 7 Atl. 608; 62, 18 Am. St. 338. In Beardslee 
 Thurston v. Rosenfield, 42 Mo. v; Ingraham, 183 N. Y. 411, 76 N. 
 474, 97 Am. Dec. 351; Runk v. St. E. 476, 3 L. R. A. (N. S.) 1073, a 
 John, 29 Barb. (N. Y.) 585; Ly- creditor who attached real estate 
 ■coming &c. Insurance Co. v. before a receiver was appointed 
 Wright, 55 Vt. 526. See also was held to have a better right 
 Boulware v. Davis, 90 Ala. 207, 8 which could not be interfered 
 So. 84, 9 L. R. A. 601, and note; with. 
 
 Clark V. Chosen Friends, 146 Cal. 8 State v. Jacksonville &c. R. 
 
 598, 80 Pac. 931. "That the of- Co., 15 Fla. 201 ; Catlin v. Wilcox 
 
 fice'r of a foreign court should not &c. Co., 123 Ind. 477, 24 N. E. 250, 
 
 be permitted, as against the 8 L. R. A. 62, 18 Am. St. 338; 
 
 claims of creditors resident here. Farmers' &c. Ins. Co. v. Needles, 
 
 to remove from this state the as- 52 Maine 17; Hunt v. Columbian 
 
 sets of the debtor, is a proposi- Ins. Co., 55 Maine 290. 
 tion that seems to be asserted by 
 
§ 638 RAILROADS 974 
 
 a priority over the receiver appointed for the entire property.* 
 But, as we have already seen, it is held by some courts, in ac- 
 cordance with what is probably the weight of authority, that a 
 resident of a third state may obtain priority over a foreign 
 receiver. It seems to us, however, that, to be consistent, the 
 court ought, at least, to refuse to aid an attaching non-resident 
 creditor to obtain priority over a receiver of the property, al- 
 though he was appointed in a foreign jurisdiction.^" There is 
 more reason for holding, in accordance with the exception gen- 
 erally made in favor of domestic creditors, that the courts of 
 one state may allow its own creditors to obtain priority, by at- 
 tachment or garnishment of property therein, over a foreign 
 receiver who has not yet taken actual possession of such prop- 
 erty, ^^ but the practical efifect of such .action might sometimes 
 be very disastrous to great interests and its justice may well 
 be doubted. Some courts, however, have gone so far as to hold 
 that after a receiver has taken actual possession of property 
 and brought it in the course of his duty into another jurisdic- 
 tion, domestic creditors therein may attach it and thus obtain a 
 superior right to it.^^ This seems to us to be palpably erro- 
 
 9 Merchants' Nat. Bank v. Mc- E. 623, 20 L. R. A. 391, and note ; 
 Leod, 38 Ohio St. 174; Bagby v. Long v. Girdwood, ISO Pa. St. 413, 
 Atlantic &c. R. Co., 86 Pa. St. 24 Atl. 711, 23 L. R. A. 32, and 
 291 ; Oilman v. Ketcham, 84 Wis. note ; Bockover v. Life Assn., 11 
 60, S4 N. W. 395, 23 L. R. A. S2, Va. 85. 
 
 and note, 36 Am. St. 899. See also n Taylor v. Columbian Ins. Co., 
 Cole V. Cunningham, 133 U. S. 107, 14 Allen (Mass.) 353; Warren v. 
 1.0 Sup. Ct. 269, 33 L. ed. 538; Hal- Union Nat. Bank, 7 Phila. (Pa.) 
 sted V. Straus, 32 Fed. 279; Wood- 155. Cleveland &c. Co. v. Craw- 
 ward V. Brooks, 128 111. 222, 20 N. fgrd, 9 Railw. & Corp. L. J. 171. 
 E. 685. 3 L. R. A. 702, IS Am. St. ggg also Rhawn v. Pearce, 110 111. 
 104; Whipple v. Thayer, 16 Pick. 350, SI Am. Rep. 691; Lichtenstein 
 (Mass.) 25, 26 Am. Dec. 626; v. Gillett, 37 La. Ann. 522; Hunt 
 Waite, Re, 99 N. Y. 433; Bacon v. v. Columbian Ins. Co., 55 Maine 
 Home, 123 Pa. St. 452, 16 Atl. 794, 290, 92 Am. Dec. 592; Willits v. 
 2 L. R. A. 355. Waite, 25 N. Y. 577. 
 
 10 May V. First Nat. Bank, 122 12 Humphreys v. Hopkins, 81 
 111. 551, 13 N. E. 806; Hurd v. Cal. 551, 22 Pac. 892, 6 L. R. A. 
 Elizabeth, 41 N. J. L. 1 ; Schuyler's 792, IS Am. St. 76 (Thornton and 
 &c. Co., Re, 136 N. Y. 169, 32 N. McFqrland, J J., dissenting). 
 
975 
 
 RECEIVERS 
 
 §639 
 
 neous and unsound. ^^ Where a suit in which a state court has 
 appointed a receiver is removed to the United States Court 
 under the law for the removal of causes, the receiver is not 
 thereby discharged, but remains in possession until removed by 
 the federal court, and may be required to account to it for the 
 manner in which he has discharged his trust.^* 
 
 § 639 (556). Procedure — Ex parte application. — Courts of 
 equity are very unwilling to appoint a receiver upon an ex parte 
 application^^ and should not do so under ordinary circumstances, 
 since it would be unjust to condemn a man unheard and to .dis- 
 possess him of property prima facie his, and hand over its en- 
 joyment to another whose claim to it he has had no opportun- 
 
 13 Pond V. Cooke, 45 Conn. 126, 
 29 Am. Rep. 668; Chicago &c. R. 
 Co. V. Keokuk &c. Co., 108 111.- 317, 
 48 Am. Rep. 557; Killmer v. Ho- 
 bart, 58 How. Prac. (N. Y.) 452; 
 Cagill V. Wooldridge, 8 Baxt. 
 (Tenn.) 580, 35 Am. Rep. 716. See 
 also the criticism of Mr. Freeman 
 in IS Am. St. 81. See further, 
 upon the general subject of at- 
 tachment and garnishment of 
 property over which a receiver 
 has been appointed and protection 
 of receivers by the courts, Schin- 
 delholz V. Cullum, 55 Fed. 885; 
 Parsons v. Charter Oak Ins. Co., 
 31 Fed. 305; Cole v. Oil Well &c. 
 Co., 57 Fed. 534; Ames v. Union 
 &c. R. Co., 60 Fed. 966; United 
 States Trust Co. v. Omaha &c. R. 
 Co., 61 Fed. 531; Central Trust 
 Co. v. Chattanooga &c. R. Co., 68 
 Fed. 685; Relfe v. Rundle, 103 U. 
 S. 222, 26 L. ed. 337; Reynolds v. 
 Adden, 136 U. S. 348, 10 Sup. Ct. 
 843, 34 L. ed. 360; Barnett v. Kin- 
 ney, 147 U. S. 476, 13 Sup. Ct. 403, 
 37 L. ed. 247; Sercomb v. Catlin, 
 
 128 111. 556, 21 N. E. 606, 15 Am. 
 St. 147; McAlpin v. Jones, 10 La. 
 Ann. 552; Chafee v. Quidnick Co., 
 13 R. I. 442; Vermont &c. R. Co. 
 V. Vermont Cent. R. Co., 46 Vt. 
 792; Straughan v. Hallwood, 30 W. 
 Va. 274, 4 S. E. 394, 8 Am. St. 29, 
 and note. 
 
 1* Hinckley v. Oilman &c. Co., 
 100 U. S. 153, 25 L. ed. 591 ; Mack 
 V. Jones, 31 Fed. 189. 
 
 15 Bisson V. Curry, 35 Iowa 72; 
 Blondheim v. Moore, 11 Md. 365 ; 
 Cook V. Detroit &c. R. Co., 45 
 Mich. 453, 8 N. W. 74; Whitehead 
 V. Wooten, 43 Miss. 523; Vila'v. 
 Grand Island &c. Co., 68 Nebr. 
 222, 94 N. W. 136, 97 N. W. 613, 63 
 L. R. A. 791, 110 Am. St. 400; Peo- 
 ple V. Albany &c. R. Co., 55 Barb. 
 (N. Y.) 344, 369; People v. Albany 
 &c. R. Co., 7 Abb. Prac. (N. S.) 
 (N. Y.) 265; Devoe v. Ithaca &c. 
 R. Co., 5 Paige (N. Y.) 521 ; Young 
 V. Rollins, 85 N. Car. 485; Cleve- 
 land &c. R. Co. v. Jewett, 37 Ohio 
 St. 649. See also as to the neces- 
 sity for due notice to the oppos- 
 
§639 
 
 RAILROADS 
 
 976 
 
 ity to contest.!* But in exceptional cases, where it is shown 
 that the defendant has left the state or cannot be found/' or 
 where, for some other reason, it becomes absolutely necessary 
 for the court to interfere before there is time to give notice to 
 the opposite party, in order to prevent the destruction or loss 
 of property,!* a receiver may be appointed without notice. The 
 
 ing party, State v. Jacksonville 
 &c. R. Co., IS Fla. 201; Crowder 
 V. Moore, 52 Ala. 221; Word v. 
 Word, 90 Ala. 81, 7 So. 412; Johns 
 V. Johns, 23 Ga. 31 ; French v. Gif- 
 ford, 30 Iowa 148; Howe v. Jones, 
 57 Iowa 130, 8 N. W. 451, 10 N. W. 
 299; Turgeau v. Brady, 24 La. Ann. 
 348; Turnbull v. Prentiss Lumber 
 Co., 55 Mich. 387, 21 N. W. 375; 
 Meridian News &c. Co. v. Diem 
 &c. Co., 70 Miss. 695, 12 So. 702; 
 Ruffner v. Mairs, 33 W. Va. 655, 
 11 S. E. 5; Fredenheim v. Rohr, 
 S7 Va. 764, 13 S. E. 193. In Whit- 
 ney V. Hanover Nat. Bank, 71 
 Miss. 1009, 15. So. 33, 23 L. R. A. 
 531, it was held that the appoint- 
 ment of a receiver for a bank on 
 its own ex parte application was 
 void and subject to collateral at- 
 tack. 
 
 16 Baker v. Backus, 32 111. 79; 
 Arnold v. Bright, 41 Mich. 207, 2 
 N. W. 16. Notice is sometimes 
 required by statute. May v. 
 Greenhill, 80 Ind. 124; Moritz v. 
 Miller, 87 Ala. 331; Whitehead v. 
 Wooten, 43 Miss. 523. See also 
 Feess v. Mechanics' State Bank, 
 84 Kans. 828, 115 Pac. 563, L. R. A. 
 191 5 A, 606, and cases there cited. 
 
 17 People V. Norton, 1 Paige (N. 
 Y.) 17; Sandford v. Sinclair, 8 
 Paige (N. Y.) 373; Gibbons v. 
 Mainwaring, 9 Sim. 11; Dowling 
 
 V. Hudson, 14 Beav. 423. See 
 Pressley v. Harrison, 102 Ind. 14, 
 19; Whitehead v. Wooten, 43 
 Miss. 523. Thus, where no officer 
 of the corporation can be found 
 on whom service of notice can be 
 made, the court may, in its discre- 
 tion, appoint a receiver without 
 notice to the corporation. Maish 
 V, Bird, 59 Iowa 307; Dayton v. 
 Borst, 31 N. Y. 435. See also 
 Mestier v. Chevallier ■ Pavement 
 Co., 51 La. Ann. 142, 24 So. 799. 
 So, where a foreign corporation 
 has discontinued its organization, 
 and its officers have neglected to 
 hold meetings, but have converted 
 the corporate property to their 
 own use, sold it, and retain the 
 proceeds of the sale. De Bemer 
 v. Drew, 57 Barb. (N. Y.) 438. But 
 where it is shown that , all the 
 property of the defendant is in 
 the hands and under the control 
 of another railroad corporation 
 which is operating the road, the 
 non-residence of the defendant's 
 officers will not excuse a failure 
 to give notice to its lessee of an 
 application for a receiver. Wa- 
 bash R. Co. V. Dykeman, 133 Ind. 
 56, 32 N. E. 823. 
 
 18 Piatt V. Philadelphia &c. R. 
 Co, 54 Fed. 569; Olmstead y. Dis- 
 tilling &c. Co., 67 Fed. 24; Sims 
 V. Adams, 78 Ala. 395;'Ashurst v. 
 
977 
 
 RECEIVERS 
 
 §639 
 
 particular facts and circumstances which render such a sum- 
 mary proceeding proper should be set forth in the bill or peti- 
 tion on which the application is founded/" and the court should, 
 it seems, in case a receiver is granted, save to the defendant 
 the right thereafter to apply, upon meritorious grounds, for re- 
 lief against the order.^o 
 
 Lehman, 86 Ala. 370; Hardy v. 
 McClellan, S3 Miss. 507; Gibson 
 V. Martin, 8 Paige Ch. (N. Y.) 481 ; 
 Cleveland . &c. R. Co. v. Jewett, 
 yi Ohio St. 649; Oil Run Petro- 
 leum Co. V. Gale, 6 W. Va. 525, 
 545. See also 5 Thomp. Corp. (2nd 
 ed.), §6337. In a suit by judg- 
 ment creditors against a railroad 
 company for the appointment of 
 a receiver, although the complaint 
 alleged that executions had been 
 levied on defendant's rolling 
 stock, preventing its operation, 
 that it and its predecessor were 
 both insolvent, that there were 
 large quantities of stock along the 
 road under contract for immediate 
 shipment, and a great quantity of 
 grain to be threshed within the 
 next ten days, which would be 
 shipped over defendant's road if 
 it was in operation, and that if 
 trains were not running on the 
 road at once, great damage would 
 accrue both to citizens and to de- 
 fendants, it was, nevertheless, held 
 that the facts alleged did not 
 justify the appointment of a re- 
 ceiver without notice to defend- 
 ant. Chicago &c. R. Co. v. Cason, 
 133 Ind. 49, 32 N. E. 827. See Wa- 
 bash &c. R. Co. V. Dykeman, 133 
 Tnd. 56, 32 N. E. 823. 
 
 19 Moritz V. Miller, 87 Ala. 331, 
 6 So. 269; Wabash R. Co. v. Dyke- 
 
 man, 133 Ind. 56, 32 N. E. 823; 
 French v. Giflford, 30 Iowa 148; 
 People V. Albany &c. R. Co., SS 
 Barb. (N. Y.) 344; Verplanck v. 
 Mercantile Ins. Co., 2 Paige (N. 
 Y.) 438. See also Burrougs v. 
 Toxaway Co., 182 Fed. 129; Jones 
 v. Rakestraw, 59 Fla. 537, 57 So. 
 927. Affidavits gf the belief of 
 plaintiff or his attorneys that im- 
 mediate action is necessary for 
 the protection . of complaints^ 
 and that the defendants would 
 make use of the delay, occasioned' 
 by giving notice to spirit away or 
 dispose of their effects, have been; 
 held insufficient. Moritz v. MiUer„ 
 87 Ala. 331, 6 So. 269; Thompson 
 V. Tower Mfg. Co., 87 Ala. 733, 6 
 So. 928. In Wabash R. Co. v. 
 Dykeman, 133 Ind. 56, 32 N. E. 
 823, the court said: "The state- 
 ment, in the verified complaint 
 that there was an emergency for 
 the immediate appointment of a 
 receiver, without notice, was not 
 a sufficient showing. This was a 
 mere statement , of an opinion. 
 The facts on which the opinion 
 was founded should have been 
 pleaded in order to enable the 
 court to judge of its correctness." 
 20 People V. Norton, 1 Paige (N. 
 Y.) 17. See generally Dixon v 
 Dixon, 119 Md., 413, 86 Atl. 1042. 
 
§ 640 RAILROADS 978 
 
 § 640 (557). Parties to proceedings for appointment of re- 
 ceiver. — If the property of the defendant corporation is in the 
 possession of a 'essee, such lessee should be made a party to 
 the proceedings for the appointment of a receiver^^ and served 
 with notice of the application.^^ But it seems that a receiver 
 of the rents and profits may be appointed without making the 
 lessee a party.^^ It has also been held that an insolvent stock- 
 holder is not a necessary party defendant to a proceeding for 
 the appointment of a receiver and to compel individual stock- 
 holders to pay their subscriptions for the benefit of the corpo- 
 rate creditors.^* Many of the states have laws providing that 
 upon the dissolution of any corporation if a receiver is not ap- 
 pointed by some court of competent authority the directors or 
 managers of the affairs of such corporation at the time of its 
 dissolution, by whatever name they may be known in law, 
 shall be the trustees of creditors and stockholders of the corpo- 
 ration dissolved, and shall have full power to settle the affairs 
 of the corporation, collect and pay the outstanding debts and 
 divide among the stockholders the moneys and other property 
 that shall remain after the payipent of debts and necessary 
 expenses. After the title to the corporate property has vested 
 in the ofificers as trustees under such a statute, a receiver can 
 afterward be appointed only in an action or proceeding to which 
 they are parties.^s 
 
 § 641. (558). Appointnnent upon motion or petition and no- 
 tice — Affidavits. — Since the appointment of a receiver is gen- 
 
 21 Wabash R. Co. v. Dykeman, ern &c. Co., 84 Fed. 76; 5 Thomp. 
 133 Ind. 56, 32 N. E. 823; Kerp v. Corp (2nd ed.), § 6337. 
 Michigan &c. R. Co., 6 Chicago 23 Kerp v. Michigan &c. R. Co., 
 Leg. N. 101. See also Searles 6 Chicago Leg. N. 101. 
 
 V. Jacksonville &c. R. Co., 2 24Wilson v. California &c. Co., 
 
 Woods (U. S.) 621, 626, Fed. Cas. 95 Mich. 117, 54 N. W. 643. It is 
 
 No. 12S86. not ordinarily necessary to make 
 
 22 Wabash R. Co. v. Dykeman, stockholders or . directors parties. 
 133 Ind. 56, 32 N. E. 823. The cor- Ward v. Farwell, 97 111. 593; Cod- 
 poration, of course, is a necessary dington v. Canaday, 157 Ind. 243, 61 
 party where a receiver is to be N. E. .567; East Line &c. R. Co. 
 appointed for it. Scripps v. Craw- v. State, 75 Tex. 434, 12 S. W. 690. 
 ford, 123 Mich. 173, 81 N. W. 1098; 2."; People v. O'Brien, 111 N. Y. 
 Elkhart Nat. Bank v. Northwest- 1, 7 Am. St. 684; Parker v. Brown- 
 
979 
 
 RECEIVERS 
 
 §641 
 
 erally regarded as an interlocutory order, and not as a decision 
 upon the merits,^^ the appointment is usually made upon mo- 
 tion,2T or petition supported by affidavit,^® with notice to the 
 opposite party.29 It is the better practice to pray for a receiver 
 in the original bill.^" but a receiver may be appointed on the 
 final hearing, even after decree;, although not prayed for in the 
 original bill.^i In passing upon the' necessity for a receiver the 
 court will consider the sworn answer of the defendant,^* and 
 
 ing, 8 Paige (N. Y.) 388, 35 Am. 
 Dec. 717. 
 
 26 Hottenstein v. Conrad, 9 
 Kans. 435 ; Cincinnati &c. R. Co. 
 V. Sloan, 31 Ohio St. 1 ; Chicago 
 &c. Min. Co. V. United States &c. 
 Co., 57 Pa. St. 83. 
 
 2 7Commercial &c. Bank v. Cor- 
 bett, 5 Sawy. (U. S.) 172, Fed. Cas. 
 No. 3057; Hursh v. Hursh, 99 Ind. 
 500; Hottenstein v. Conrad, 9 
 Kans. 435; Blakeney v. Dufaur, IS 
 Beav. 40, 42; Cooke v. Gwyn, 3 
 Atk. 689 (653). 
 
 28 An application for the ap- 
 pointment of a receiver pending 
 litigation is made upon petition 
 or motion. Affidavits and coun- 
 ter affidavits may be filed, or oral 
 testimony heard as to the neces- 
 sity for a receiver. Pouder v. 
 Tate, 96 Ind. 330; Hursh v. Hursh, 
 99 Ind. 500. See 1 Elliott Gen. Pr., 
 §395. 
 
 29 See ante, §639. It has been 
 held unnecessary to serve notice 
 on a trustee for bondholders, who 
 is insane and confined in an asy- 
 lum in a foreign country. Ett- 
 linger v. Persian &c. Co., 66 Hun 
 94, 30 N. Y. S. 772. In Beck v. 
 Ashkettle, 18 R. I. 374, 27 Atl. 505, 
 it viras held that personal notice 
 was necessary under the statute. 
 
 and that leaving a copy at the 
 last and usual abode of the debtor, 
 who had absconded,' was insuf- 
 ficient. We doubt the soundness 
 of this decision. See as to short 
 notice being sufficient in an emer- 
 gency, Miltenberger v. Logans- 
 port R. Co., 106 U. S. 286, 1 Sup. 
 Ct. 140, 158, 27 L. ed. 117; Haugan 
 V. Netland, 51 Minn. 552, S3 N. W. 
 873. 
 
 30 See 1 Elliott Gen. Pr., § 395. 
 
 SI Connelly v. Dickson, 76 Ind. 
 440; Shannon v. Hanks, 88 Va. 338, 
 13 S. E. 437; Bowman v. Bell, 14 
 Sim. 392. See also Merritt v. Gib- 
 son, 129 Ind. 1-55, 27 N. E. 136, IS 
 L. R. A. 277. 
 
 32 Rankin v. Rothschild, 78 
 Mich. 10, 43 N. W. 1077; Good- 
 man V. Whitcomb, 1 J. & W. 569; 
 1 Elliott Gen. Pr., §395. As a 
 general rule the answer is to be 
 taken as true in so far as it is re- 
 sponsive to the allegations of the 
 bill, at least in the absence of suf- 
 ficient evidence to the contrary. 
 Thompson v. Diffenderfer, 1 Md. 
 Ch. 489; Callahan v. Shaw, 19 
 Iowa 183; Voshell v. Hynson, 26 
 Md. 82; Buchanan v. Comstock, 57 
 Barb. (N. Y.) 568. The answer of 
 one defendant only, where a ma- 
 terial co-defendant has not an- 
 
§642 
 
 RAILROADS 
 
 980 
 
 affidavits offered in its support.^^ Under the modern practice 
 ■affidavits may also be received in opposition to the answer.^* 
 -A receiver my be appointed, in a proper case, before answer^^ 
 ■and even before an appearance is entered,^ ^ but the court will 
 ■only act where a clear case of necessity for the appointment of 
 a receiver at such a time is made out.^'^ 
 
 § 642 (559) Who may appoint — Appointment in vacation. — 
 
 In the absence of a statute specially authorizing such a proceed- 
 ing, a receiver cannot be appointed by a judge or judges of a 
 court in vacation.^s It is competent, however, for the legis- 
 lature by statute to grant to a judge in vacation authority to 
 
 swered, must be regarded merely 
 as an affidavit. Kershaw v. 
 Mathews, 1 Russ. (Eng. Ch.) 362. 
 Where affidavits are oflfered in 
 ■support of the answer and to 
 'overcome the case made by the 
 affidavits in support of the mo- 
 tion, counter affidavits may be ad- 
 mitted on the part of the plain- 
 tiff. There can be no just reason 
 for excluding any .facts material 
 to the judgment of the court and 
 which will enable it to act intel- 
 ligently in the exercise of a sound 
 discretion. Young v. Rollins, 85 
 N. Car. 48S, 12 Am. & Eng. R. 
 Cas. 455. 
 
 33 Rhodes v. Lee, 32 Ga. 470; 
 Pouder v. Tate, 96 Ind. 330; Hursh 
 v. Hursh, 99 Ind. 500; Ladd v. 
 Harvey, 21 N. H. 514. 
 
 3*See Hayes y. Heyer, 4 Sandf. Ch. 
 (N. Y.) 485, 517; Sobernheimer v. 
 Wheeler, 45 N. J. Eq. 614 18 Atl. 
 234. 
 
 SBWeis V. Goetter, 72 Ala. 259; 
 Williams v. Jenkins, 11 Ga. 595; 
 Whitehead v. Wooten, 43 Miss. 
 523; Vann v. Barnett, 2 Bro. Ch. 
 
 158. But see Ranger v. Champion &c. 
 Co., 52' Fed. 609.; Union Mut. L, 
 Ins. Co. V. Union &c. Co., Zl Fed. 
 286. 
 
 36 Tanfield v. Irvine, 2 Russ. 149. 
 See also Henshaw v. Wells, 9 
 Humph. (Tenn.) 568. 
 
 37 Latham v. Chaffee, 7 Fed. 525 ; 
 Micou V. Moses, 72 Ala. 439; Clark 
 V. Ridgely, 1 Md. Ch. 70; Turnbull 
 V. Prentiss Lumber Co., 55 Mich. 
 387, 21 N. W. 375. Facts should 
 be specifically stated , and not 
 merely upon information and be- 
 lief. Cofer V. Echerson, 6 Iowa 
 502; Heavilon v. Farmers' Bank, 
 81 Ind. 249; Hanna v. Hanna, 89 
 N. Car. 68: Grand in v. LeBar, 3 N. 
 Dak. 447, 50 N. W. 151. 
 
 38 Hammock v. Loan &c. Co., 
 105 U. S. n, 26 L. ed. 1111; Hervey 
 V. Illinois Midland R. Co., 28 Fed. 
 169; Newman v. Hammond, 46 
 Ind. 119. See also Chase v. Miller, 
 88 Va. 791, 14 S. E. 545; Conkling 
 V. Ridgley, 112 111. 36, 54 Am. Rep. 
 204. But compare Walters v. 
 Anglo-American &c. Co., 50 Fed. 
 316; Greeley t. Provident Sav. 
 
981 
 
 RECEIVERS 
 
 §643 
 
 appoint a receiver,^**' even upon an ex parte application.''" It 
 has been held by the supreme court of Georgia that the ap- 
 pointment of a receiver for a corporation is not necessarily 
 the exercise of a judicial power, but that such an appointment 
 might be made by the legislature, or authorized by it to be 
 made by the executive department of the state.*^ The case 
 referred to has been cited by several text-writers,*^ apparently 
 with approval, but we doubt its soundness. Other questions 
 relating to the subject of this section have already been consid- 
 ered elsewhere.*^ 
 
 § 643 (560). Suit must generally be pending. — Since the ap- 
 pointment of a receiver by a court of equity is generally held 
 to be merely an auxiliary proceeding in aid of a pending suit to 
 determine the ultimate rights of the parties to the property for 
 which a receiver is sought,** it is the general rule that a re- 
 ceiver can only be appointed for a corporation when there is 
 
 Bank, 103 Mo. 212, IS S. W. 429. 
 May do so in chambers. Horn v. 
 Pere Marquette R. Co., ISl Fed. 
 627. 
 
 39 Pressley v. Lamb, lOS Ind. 
 171, 4 N. E. 682. See also Horn 
 V. Pere Marquette R. Co., ISl Fed. 
 626; Brewster v. Hartley, 37 Cat. 
 IS, 99 Am. Dec. 237; First National 
 Bank v. U. S. Encaustic Tile Co., 
 105 Ind. 227, 4 N. E. 846; Bitting 
 V. Ten Eyck, 8S Ind. 3S7; Greeley 
 V. Provident Sav. Bank, 103 Mo. 
 212, IS S. W. 429; McMurtry v. 
 Tuttle, 13 Nebr. 232, 13 N. W. 213 ; 
 Morriss v. Virginia Insurance Co., 
 8S Va. S88, 8 S. E. 383. In Press- 
 ley V. Lamb, supra, the court held 
 that a judge in vacation, acting 
 under the statute authorizing the 
 appointment of a receiver, is ex- 
 ercising quoad hoc "the judicial 
 power of the state." 
 
 « Real Estate Associates v. 
 ■Superior Court, 60 Cal. 223. We 
 presume, however, that this is 
 where it is only interlocutory and 
 not final. See Pressley v. Harri- 
 son, 102 Ind. 14, 1 N. E. 188; Hardy 
 v. McClellan, S3 Miss. 507. 
 
 41 Carey v. Giles, 9 Ga. 253. See 
 also United States v. Ferreira, 13 
 How. (U. S.) 40, 14 L. ed. 373; 
 Foote v. Forbes, 25 Kans. 359; To- 
 ledo &c. R. Co. V. Dunlap, 47 
 Mich. 456, 11 N. W. 271. 
 
 42 High Receivers, §§39, 343; 
 Beach Receivers, §407. 
 
 *3 See ante, § 635. 
 
 44 Bufkin v. Boyce, 104 Ind. 53, 
 3 N, E. 615; Hottenstein v. Con- 
 rad, 9 Kans. 435; Cincinnati &c. R. 
 Co. V. Sloan, 31 Ohio St. 1 ; Chi- 
 cago &c. Min. Co. V. U. S. Petro- 
 leum Co., 57 Pa. St. 83; Cooke v. 
 Gwyn, 3 Atk. 698 (653). 
 
§ 644 RAILROADS 982 
 
 a suit actually pending and that a court of chancery is not ordi- 
 narily justified in appointing a receiver before the filing of a 
 complaint or bill.^^ Under the ancient practice of the court of 
 chancery in England, a receiver was not appointed until after 
 the coming in of the defendant's answer, but it is now settled, 
 both in this country and in England, that the appointment may 
 be made before answer, provided a special necessity therefor 
 is shown to exist.'*" Except under extraordinary circumstances, 
 as where the defendant had left the state to avoid process or the 
 like, the rule seems to have been that a court could get no 
 jurisdiction to appoint a receiver until after service of process 
 and notice of the motion.*''' If an immediate necessity therefor 
 is shown to exist, the application for a receiver may be enter- 
 tained when the action is commenced, which, under the rule in 
 Indiana, is when process is issued, or an appearance to the ac- 
 tion entered, in the manner recognized.** In a recent case 
 where the service was defective and the defendant had entered 
 a special appearance to quash the notice, it was held that a 
 suit was pending so as to warrant the appointment of a receiver.*" 
 
 § 644 (561). Who may be appointed receiver. — It is customary 
 where all the parties in interest are before the court and can agree 
 upon a person to act as receiver, to appoint the receiver chosen 
 
 45 Crowder v. Moone, 52 Ala. and other cases there, cited in 
 
 220; Dale v. Kent, 58 Ind. 584; note. 
 
 Pressley v. Harrison, 102 Ind. 14, *®5 Thomp. Corp. (2nd ed.) § 6334. 
 
 1 N. E. 188; Guy v. Doak, 47 Kans. *t Whitehead v. -Wooten, 43 Miss. 
 
 523. 
 
 *8 Crowder v. Moone, 52 Ala. 
 
 , . ,, ^, ,, -^ 220; Jones v. Bank of Leadville, 
 
 W. 627; Hardy v. McClellan, S3 j^ ^olo. 464, 17 Pac. 272; Pressley 
 
 Miss. 507; Bank of Meadville v. ^ Harrison, 102 Ind. 14, 18, 1 N. E. 
 
 Hardy, 94 Miss. 587, 48 So. 731; igg^ pg^ Mitchell, J.; Pressley v. 
 
 ante, §§620, 623. See also Vila v. L^mb, lOS Ind. 171. 4 N. E. 682, 
 
 Grand Island &c. Co., 68 Nebr. and dissenting opinion of Judge 
 
 222, 94 N. W. 136, 97 N. W. 613, 63 Mitchell, on page 191 et seq. ; 
 
 L. R. A. 791;- Brant, In re, 96 Fed. Jones v. Schall, 45 Mich. 379, 8 N. 
 
 257, and authorities cited; Howell W. 68. 
 
 V. Harris &c. Co., 168 Ala. 383, 52 49 Hellebush v. Blake, 119 Ind. 
 
 So. 935, Ann. Cas. 1912B, 234, 236, 349, 21 N. E. 91^. 
 
 236, 27 Pac. 968; Merchants' &c. 
 Bank v. Kent, 43 Mich. 292, 5 N. 
 
983 RECEIVERS § 644 
 
 by them. 50 Where this cannot be done, two or more persons are 
 often agreed upon, each of whom is expected to represent and 
 look after the interests of one of the parties.^^ But the court is 
 not necessarily controlled by the expressed wish of the parties, in 
 making its selection of a receiver. Other interests may be af- 
 fected by the action of the court besides those of the parties 
 to the suit. It is also practically impossible in many cases to 
 obtain the consent of the several holders of the capital stock 
 of the corporation and of the different series of bonds secured 
 by mortgage upon its property.^^ As was well said by Justice 
 Miller, in pronouncing a judgment removing the receivers chosen 
 by the parties, to make way for a receiver selected by the court: 
 "A receiver is strictly and solely the officer of the court. It is 
 his duty so to conduct the business that the lawful rights and 
 legal interest of all persons in the property and in the business 
 shall be protected, as far as possible, with equal and exact jus- 
 tice. This is much more likely to be done by a receiver who 
 has no interest in the capital stock of the road, none in its debts, 
 and no obligation to those who have. Such a- person, acting 
 under the control of the court, seeking its' advice, and bound 
 in a sufficient surety for the faithful performance of his duty, is 
 the proper one for such an office. On the other hand, while it 
 may be true that a large personal interest may stimulate the 
 activity and direct the vigilance of the receiver, it is equally 
 true that such vigilance, whenever occasion offered, will be di- 
 rected unduly to advancing that personal interest, and that 
 activity to securing personal advantages. "^^ Jn accordance 
 
 50 In Mercantile Trust Co. v. collusion between the plaintiff and 
 Missouri &c. R. Co, 36 Fed. 221, defendant, for the purpose of pre- 
 judge Brewer said: "If parties venting unsecured creditors from 
 agree upon a receiver, of course recovering their claims by actions 
 I shall appoint whoever you agree at law, and the court removed the 
 upon." See also Pound, In re, 42 receiver. 
 
 Ch. D. 402. 53 Meier v. Kan'sas Pac. R, Co., 
 
 51 Jones Corp. Bonds and 5 Dill. (U. S.) 476, Fed. Cas. No. 
 Mortg., §459. 939S. See also Wood v. Oregon 
 
 52 In Sage v. Memphis &c. R. &c. Co., SS Fed. 901 ; Shannon v. 
 Co., 18 Fed. 571, it appeared that Hanks, 88 Va. 338, 13 S. E. 437. 
 
 a receiver had been appointed by 
 
■ 644 
 
 RAILROADS 
 
 984 
 
 with this rule, a party to the cause should not, as a rule, be 
 appointed receiver. s* But a party whose interest extends on!)' 
 to a single claim is sometimes appointed receiver to wind up 
 the business of rhe corporation/^' Stockholders and directors 
 of insolvent corporations should not be appointed unless the 
 case is exceptional and urgent,^* nor, as a general rule, should 
 persons nearly related to a party or to the judge,-'^ preferred or 
 other creditors having hostile interests to the majority,^® or 
 others whose interests or relations are such that they cannot 
 well stand indififcrent between the interested parties.^® Where 
 insolvency is due to the mismanagement of the officers, it would 
 be clearly inadvisable to hand over the road to those whose 
 administration has proved disastrous.'''' A person who cannot. 
 
 54 Finance Co. v. Charleston &c. 
 R. Co., 45 Fed. 436; Young v. Rol- 
 lins, 85 N. Car. 485. Neither the 
 solicitor employed by complain- 
 ant, nor his law partner, is such 
 a disinterested person as may 
 properly be appointed to act as 
 receiver in a foreclosure suit. 
 Merchants' &c. Nat. Bank v. Kent 
 Circuit Judge, 43 Mich. 292, S N. 
 W. 627; Baker v. Backus, 32 III. 
 79. But see Shannon v. Hanks, 88 
 Va. 338, 13 S. E. 437. Special cir- 
 cumstances may justify the ap- 
 pointment of a party. Robinson 
 V. Taylor, -42 Fed. 803, 812; Blake- 
 ney v. Dufaur, 15 Beav. 40. 
 
 55 Taylor v. Life Assn. of Amer- 
 ica, 3 Fed. 465; In the matter of 
 Knickerbocker Bank, 19 Barb. (N. 
 Y.) 602. 
 
 56 Atkins V. Wabash &c. R. Co., 
 29 Fed. 161; Farmers' Loan &c. 
 Co. V. Northern Pac. R. Co., 61 
 Fed. 546. See also Coy v. Title 
 &c. Co., 157 Fed. 794; Mercantile 
 &c. Co. V. Florence Water Co., Ill 
 Ala. 119, 19 So. 17; McCullough v. 
 
 Merchants' &c. Co., 29 N. J. Eq. 
 217; Attorney-General v. Bank, 1 
 Paige (N. Y.) 511. But compare 
 Fifty-four First Mortgage Bonds, 
 In re, 15 S. Car. 304. Certainly 
 an officer who is speculating in 
 the stock of a corporation should 
 not be appointed. Olmstead v. 
 Distilling &c. -Co., 67 Fed. 24 
 
 57 Williamson v. Wilson, 1 
 Bland 418 ; Barnes' Fed. Code, § 829. 
 
 58 People's Bank v. Fancher, 21 
 N. Y. S. 545. 
 
 59 New York &c. R. Co. v. New 
 York &c. R. Co., 58 Fed. 268; State 
 Trust Co. V. National Land &c. 
 Co., 72 Fed. 575; Benneson v. Bill, 
 62 111. 408; Lupton v. Stephenson, 
 11 Ir. Eq. 484; Sutton v. Jones, IS 
 Ves. 584 
 
 60 Williamson v. New Albany 
 &c. R. Co., 1 Biss. (U. S.) 198, 
 Fed. Cas. No. 17753; People v. 
 Third Avenue Savings Bank. 50 
 How. Prac. (N. Y.) 22. See also At- 
 kins V, Wabash &c. R. Co., 29 Fed. 
 
983 
 
 RECEIVERS 
 
 §644 
 
 with the aid of others, manage a business successfully, is as a 
 general rule regarded as unfit to wind it up alone.^^ But since 
 it is necessary that the receiver of a railroad shall be some per- 
 son who, by reason of his responsibility and business capacity 
 and of his familiarity with the conduct of a business enterprise 
 of this character is fully competent to have the management of 
 the road, cases may arise in which it is proper that officers of 
 the corporation, to whom no fault is imputed, should be made 
 receivers.®^ -pjjg selection of the receiver is a matter resting 
 very largel)^ in the discretion of the court, and vvhile the court 
 will usually be guided by the rules already stated, the relation- 
 ship of the receiver either to the parties or the cause will sel- 
 dom constitute :.n absolute disqualification, in the absence of 
 any statutory provision upon the subject. Thus, a party to the 
 
 161 ; Finance Co. v. Charleston &c. 
 R. Co., 45 Fed. 436. 
 
 61 McCullough V. Merchants' 
 Loan &c. Co., 29 N. J. Eq. 217; 
 Jones Corporate Bonds and 
 Mortg., §459. 
 
 62 Meyer v. Johnston, 53 Ala. 
 237. An order that the president 
 and directors of a railroad cor- 
 poration, under the order and sub- 
 ject to this court, shall continue 
 in possession of the road, conduct 
 and carry on its business, and 
 make a report to the couri of its 
 condition, earnings, profits and 
 expenditures, was held to consti- 
 tute such president and directors 
 receivers of the road. But upon 
 their failure to file accounts and 
 ■oerform the other duties required 
 of them, they were removed and 
 a single receiver appointed in or- 
 der to place the property "more 
 substantially in the hands and un- 
 der the custody and order of this 
 court." Gibbes v. Greenville &c. 
 R. Co., 15 S. Car. 304. The fact 
 
 that one is an officer of a rail- 
 road company will not prevent his 
 appointment as receiver thereof 
 where he is familiar with the con- 
 dition and necessities of the rail- 
 way, is an efficient manager, and 
 the insolvency of the company 
 was not promoted by bad manage- 
 ment on his part, and where the 
 parties interested consent. Farm- 
 ers' Loan &c. Co. v. Northern Pac. 
 R. Co., 61 Fed. 546; Fowler v. 
 Jarvis &c. Co., 63 Fed. 888; Ral- 
 ston v. Washington &c. R. Co., 65 
 Fed. 557. See also Mercantile Trust 
 &c. Co. v. Florence &c. Co., Ill Ala. 
 119, 19 So. 17; Barber v. Internation- 
 al Co., 73 Conn. 587, 48 Atl. 758 ; Mo- 
 ran V. Wayne Cir. Judge, 125 Mich. 
 6, 83 N. W. 104; Manchester &c. R. 
 Co., In re, 14 Ch. D. 645. So. held 
 where the officer was specially fitted 
 for the place and all parties agreed 
 upon him except a small minority of 
 the bondholders, although he had not 
 only been an officer but was also 
 related to some of the large 
 
i645 
 
 RAILROADS 
 
 986 
 
 suit may be perfectly competent in some cases.®'' So may a 
 relative of one of the parties,®* or a non-resident.®^ And one 
 corporation, having authority to act as trustee and receiver, 
 may be appointed receiver of another corporation.®® 
 
 §645 (562). Order appointing receiver. — The order of ap- 
 pointment should clearly designate the property over which 
 the receiver is appointed,®^ and the court may embody such di- 
 rections and impose such conditions therein as are just and 
 proper.®* The penalty of the bond should usually be fixed and 
 the general terms of the order prescribed at the time it is 
 granted. ®9 But it is customary, in most jurisdictions, for the 
 attorney of the moving party to draw up and submit the form 
 of order to the opposite party and to the court, after which it 
 
 stockholders and bondholders. 
 Bowling Green Trust Co. v. Vir- 
 ginia &c. Co., 133 Fed. 186. 
 
 63 Hubbard v. Guild, 1 Duer (N. 
 Y.) 662. 
 
 64See Shainwald v. Lewis, 8 Fed. 
 878. 
 
 65 Taylor v. Life Assn., 3 Fed. 
 465; Farmers' Loan &c. Co. v. 
 Cape Fear &c. R. Co., 62 Fed. 675 ; 
 Wilmer v. Atlanta &c. R. Co., 2 
 Woods (U. S.) 409, Fed. Cas. No. 
 nnS. See also Farmers' Loan 
 &c. Co. V, Chicago &c. Ji. Co., 27 
 Fed. 146; Roby v. Smith, 131 Ind. 
 342, 30 N. E. 1093, 15 L. R. A. 792, 
 31 Am. St. 439. But, for obvious 
 reasons, the appointment of a 
 non-resident is not advisable. 
 Meier v. Kansas Pac. R. Co., 5 
 Dill. (U. S.) 476, Fed. Cas. No. 
 9395; Borton v. Brines-Chase Co., 
 175 Pa. St. 209, 34 Atl. 597. 
 
 66 Kimmerle v. Dowagiac Mfg. 
 Co., 105 Mich. 640, 63 N. W. 529 
 (trust company) ; Knickerbocker 
 Bank, In re, 19 Barb. (N. Y.) 602; 
 
 Vermont &c. R. Co. v. Vermont 
 Cent. R. Co., 46 Vt. 792. 
 
 s'O'Mahoney v. Belmont, 62 N. 
 Y. 133; Crow v. Wood, 13 Beav. 
 271 ; 2 Dan. Chanc. PI. & Pr. 1737. 
 
 68 Fosdick v. . Schell, 99 U. S. 
 235, 25 L. ed. 339; United States 
 Trust Co. y. New York &c. R. Co., 
 25 Fed. 800; Central Trust Co. v. 
 St. Louis &c. R. Co., 41 Fed. 551; 
 West V. Chasten, 12 Fla. 315. The 
 order may provide that the com- 
 pany shall turn over to the re- 
 ceiver its books and papers. Amer- 
 ican Const. Co. v. Jacksonville &c. 
 R. Co., 52 Fed. 937 (also its seal) ; 
 Engel v. South &c. Co., 66 L. T. 
 R. 155. And the order may be 
 modified changing conditions 
 prior to a salfe in a proper case. 
 Royal Trust Co. v. Washburn &c. 
 R. Co., 113 Fed. 531; Union Trust 
 Co. V. Curtis, Receiver, &c., 182 
 Ind. 61, 105 N. E. 562, L. R. A. 
 1915 A, 699, and other cases there 
 cited. 
 
 6ft Capital City Water Co. v. 
 Weatherby, 108 Ala. 412, 18 So. 841. 
 
987 RECEIVERS § 646 
 
 is filed with the clerk in the form approved by the court. 
 Copies are also required, in some jurisdictions, to be served upon 
 all the interested parties.'^^ If the mortgagor is in possession 
 the order may direct him to deliver possession to the receiver,'^^ 
 and it is proper to direct the receiver therein to account from 
 time to time and to keep down incumbrances out of the rents 
 and profits/^ It may also, in a proper case, reserve to other 
 incumbrancers or parties the right to afterwards come in, and 
 may state that the appointment is made without prejudice.''* 
 In short, the court may give therein all such directions as are 
 just and proper to enable the receiver to perform his duties un- 
 til the further order of the court and to preserve the rights of 
 interested parties, until the merits of the case can be fully de- 
 termined. But the court has no power, ordinarily at least, to 
 take into its custody or control, through a receiver, upon a bill 
 to foreclose a mortgage, property not covered by the mortgage, 
 nor to make any order which will delay and hinder creditors 
 from subjecting property not covered by the mortgage to the 
 payment of their debts. ''^ 
 
 § 646 (563). Effect of appointment. — As already stated, the 
 appointment of a receiver usually determines no rights and is 
 not an adjudication upon the merits of the case.''® It gives him 
 the right to the possession and control of the property,'''' but 
 
 71 Whitney v. Belden, 4 Paige t5 Hook v. Bosworth, 64 Fed. 
 Ch. (N. Y.) 140; Rankin v. Pine, 443;. Scott v. Farmers' Loan &c. 
 4 Abb. Prac. (N. Y.) 309; Wiltsie Co., 69 Fed. 17. 
 
 Mort. Foreclosures, §644. T6Ante, § 641; Central &c. Co. 
 
 72 Griffith V. Griffith, 2 Ves. Sen. v. Buchanan, 90 Fed. 454; Colvin, 
 400; Everett v. Balding, 22 L. J. In re, 3 Md. Ch. Dec. 278; Bever- 
 Ch. 75. ley v. Brooke, 4 Grat. (Va.) 187; 
 
 73 5 Thomp. Corp. (2nd ed.), Tripp v. Chard R. Co., 11 Hare 
 §6338. 264; 1 Elliott's Gen. Pr., §194. 
 
 74 Smith V. Effingham, 2 Beav. 77 Post, §648. Property in his 
 232. The court may withhold from possession is in custodia legis. 
 the receiver a portion of the Merchants' Ins. Co., In re, 3 Biss. 
 assets upon which there is a mort- (U. S.) 162, Fed. Cas. No. 9441 ; 
 gage about to be enforced under Robinson v. Atlantic &c. Co., 66 
 power of sale. Weihl v. Atlanta Pa. St. 160; 1 Elliott's Gen. Pr., 
 &c. Co., 89 Ga. 297, 15 S. E. 282. § 195. But see Illinois Steel Co! 
 
 V. Putnam, 68 Fed. 515. 
 
1646 
 
 RAILKOADS 
 
 988 
 
 it does not divest or retroactively afEect existing liens or vested 
 rights of third persons.''* It has also been held that it does not 
 deprive secured creditors of the right to possess and enforce 
 their securities, and if the receiver has obtained possession of 
 them he may be compelled to deliver them upJ^ But the lien- 
 holder may be compelled to go into the same court to enforce 
 his lien where the entire estate is being administered.*" The 
 legal title is not transferred to the receiver by a mere inter- 
 locutory appointment,**! but, at least after he has once taken 
 possession, he has a possessory title or special property.*^ His 
 rights to the property are superior to subsequent attachments, 
 or executions*^ in the same jurisdiction, but not to prior valid 
 
 78 Favorite v. Deardorff, 84 Ind. 
 S5S; Lorch' v. Aultman &c. Co., 75 
 Ind. 162; Snow v. Winslow, 54 
 Iowa 200, 6 N. W. 191; Arnold v. 
 Weimer, 40 Nebr. 216, 58 N. W. 
 709; Davenport v. Kelly, 42 N. Y. 
 193; Wilson v. Allen, 6 Barb. (N. 
 Y.) 542; Artizan's Bank v. Tread- 
 well, 34 Barb. (N. Y.) 553; State 
 V. Superior Court, 8 Wash. 210, 
 35 Pac. 1087, 25 L. R. A. 354. See 
 also Pennsylvania Steel Co. v. 
 New York City R. Co., 198 Fed. 
 721. 
 
 79 Risk V. Kansas &c. Co., 58 
 Fed. 45. 
 
 80 Wiswall V. Sampson, 14 How. 
 (U. S.) 52, 14 L. ed. 322; Skinner 
 V. Maxwell, 68 N. Car. 400; Rob- 
 inson V. Atlantic &c. R. Co., 66 
 Pa. St. 160; Ellis v. Vernon Ice 
 &c. Co., 86 Tex. 109, 23 S. W. 858. 
 See also Cole v. Pliiladelphia &c. 
 R. Co., 140 Fed. 944; Park v. New 
 York &c. R. Co., 70 Fed. 641. 
 
 81 Fosdick V. Schall, 99 U. S. 
 235, 25 L. ed. 339; Union Bank v. 
 Kansas City Bank, 136 U. S. 223, 
 10 Sup. Ct. 1013, 34 L. ed. 341 ; St. 
 Louis &c. Co. V. Sandoval &c. Co., 
 
 Ill 111. 32; Manlove v. Burger, 38 
 Ind. 211; Ellis v. Boston &c. R. 
 Co., 107 Mass. 1; Kenney v. Home 
 Ins. Co., 71 N. Y. 396, 27 Am. Rep. 
 60; Foster v. Townshend, 2 Abb. 
 N. Cas. (N. Y.) 29; Tillinghast v. 
 Champlin, 4 R. I. 173, 67 Am. Dec. 
 510; Attorney-General v. Coven- 
 try, 1 P. Wms. 306. 
 
 82 Chicago &c. R. Co. v. Keo- 
 kuk, 108 111. 317, 48 Am. Rep. 557; 
 Singerly v. Fox, 75 Pa. St. 112; 
 Boyle v. Townes, 9 Leigh (Va.) 
 158. His title dates back to the 
 time of making the order. East 
 Tennessee &c. R. Co. v. Atlanta 
 &c. R. Co., 49 Fed. 608; Connecti- 
 cut &c. Co. V. Rockbridge Co., Ti 
 Fed. 709; Maynard v. Bond, 67 
 Mo. 315; Steele v. Sturges, 5 Abb. 
 Prac. (N. Y.) 442; Ardmore Nat. 
 Bank v. Briggs &c. Co., 20 Okla. 
 427, 94 Pac. 532, 23 L. R. A. (N. 
 S.) 1074n, 129 Am. St. 747; Texas 
 Trunk R. Co. v. Lewis, 81 Tex. 
 1, 16 S. W. 647, 26 Am. St. 776; 
 Baldwin v. Spear Bros., 79 Vt. 
 43, 64 Atl.' 235, notes in 20 L. R. A. 
 391, and 15 L. R. A. (N. S.) 658. 
 
 83 Swift's &c. Works v. John- 
 
989 
 
 RECEIVERS 
 
 646 
 
 attachments,'^^ or executions already levied.*" The appoint- 
 ment of a receiver for a corporation does not dissolve the cor- 
 poration.*^-' Pending suits against the corporation are not nec- 
 essarily abated,*'' but the right of the corporation to sue is gen- 
 erally suspended by the appointment.** It may keep up its or- 
 ganization and still perform many acts as a corporation, not- 
 withstanding the fact that the custody, control and manage- 
 ment of its property are in the hands of a receiver.*^ The sub- 
 ject of the liabilities of the corporation and of the receiver will 
 be treated in another section. 
 
 sen, 26 Fed. 828; State v. Ellis, 45 
 La. Ann. 1418, 14 So. 308; Skinner 
 V. Maxwell, 68 N. Car. 400; Mc- 
 Donald V. Charleston &c. R. Co., 
 93 Tenn. 281, 24 S. W. 252; Harri- 
 son v.- Waterberry &c. Co. (Tex.), 
 21 S. W. 109; Ames v. Trustees, 20 
 Beav. 332. See also Horn v. Pere 
 Marquette R. Co., 151 Fed. 627. 
 But see as to real estate when 
 there is no conveyance to the re- 
 ceiver, St. Louis &c. Co. V. Sand- 
 oval &c. Co., Ill 111. 32. 
 
 84 Jones V. Bank, 10 Colo. 464, 
 20 Am. & Eng. Corp. Cas. 554; 
 Kittredge v. Osgood, 161 Mass. 
 384, 37 N. E. 369. 
 
 85 Talladega &c. Co. v. Jenifer 
 &c. Cp., 102 Ala. 259, 14 So. 743; 
 Chautauqua &c. Bank v. Risley, 19 
 N. Y. 369, 75 Am. Dec. 347; Becker 
 v. Torrance, 31 N. Y. 631. See 
 also Squire v. Princeton Lighting 
 Co., 72 N. J. 883, 68 Atl. 176, IS L. 
 R. A. (N. S.) 657. 
 
 86 National Bank v. Insurance 
 Co., 104 U. S. 54, 26 L. ed. 693; 
 Jones v. Bank, 10 Colo. 464, 20 Am. 
 & Eng. Corp. Cas. 554; Heath v. 
 Missouri &c. R. Co., 83 Mo. 617; 
 State V. Railroad Comrs., 41 N. 
 
 J. L. 235; Kincaid v. Dwinelle, 59 
 N. Y. 548. 
 
 87 Wilder v. New Orleans, 87 
 Fed. 843; Toledo &c. R. Co. v. 
 Beggs, 85 III. 80, 28 Am. Rep. 613; 
 Mercantile Ins. Co. v. Jaynes, 87 
 111. 199; St Louis &c. R. Co. v. 
 Holladay, 131 Mo. 440, 33 S. W. 
 49. So it is held that it may still 
 be sued. Wyatt v. Ohio &c. R. 
 Co., 10 111. App. 289; Allen v. Cen- 
 tral R. Co., 42 Iowa 683; St Joseph 
 &c. R. Co. V. Smith, 19 Kans. 225; 
 Pringle v. Woolworth, 90 N. Y. 
 502. 
 
 88 Post, § 651 ; Kokomo City St. 
 R. Co. V. Pittsburgh &c. R. Co., 
 25 Ind. App. 335, 58 N. E. 211. But 
 see American Bank v. Cooper, 54 
 Maine 438; People v. Barnett, 91 
 111. 422. There are probably ex- 
 ceptions to this rule in regard to 
 franchises or matters in which the 
 receiver may have no interest. 
 
 89 See McCalmont v. Philadel- 
 phia &c. R. Co., 7 Fed. 386, 3 Am. 
 & Eng. R. Cas. 163; Louisyille &c. 
 R. Co. v. Cauble, 46 Ind. 277; State 
 V. Wabash R. Co., US Ind. 466, 17 
 N. E. 909; Lehigh &c. Co. v. Cen- 
 tral &c. R. Co., 35 N, J. Eq. 349; 
 
§647 
 
 RAILROADS 
 
 990 
 
 §647 (564). Collateral attack on appointment.— The order 
 or judgment appointing a receiver is not open to collateral at- 
 tack for any errors in the proceedings if the appoiritment was 
 made by a court having jurisdiction of the case. It can only 
 be assailed, as a rule, in a direct proceeding for that purpose.®** 
 Thus, where a receiver was appointed by the judge in vacation, 
 under a statute authorizing such an appointment in certain ac- 
 tions, and a complaint was duly filed and both parties appeared 
 before the judge, it was held that the appointment could not 
 be collaterally attacked by a creditor for error of the .judge 
 in deciding that the complaint stated a cause of action of the 
 kind designated, nor for any other rhere irregularity or error 
 in the order and proceedings.®^ So, where a complaint for the 
 foreclosure of a mortgage prayed for the appointment of a re- 
 ceiver to collect the rents, it was held that it challenged the 
 mortgagor to assert his right to the rent as well as to contest 
 the appointment of a receiver, and that a decree adjudging 
 that the mortgagee was entitled to the rents and appointing a 
 
 State V. Merchant, 37 Ohio St. 
 251, 9 Am. & Eng. R. Cas. 516; 
 Ohio &c. R. Co. V. Russell, 115 
 111. 52, 23 Am. & Eng. R. Cas. 149. 
 See as to dealing with the cor- 
 poration thereafter, Buchanan v. 
 Hicks, 98 Ark 370, 136 S. W. 177, 
 34 L. R. A. (N. S.) 1200, and note. 
 90 Shields v. Coleman, 157 U. S. 
 168, 15 Sup. Ct. 570, 39 L. ed. 660; 
 Comer v. Bray, 83 Ala. 217, 3 So. 
 554; Richards v. People, 81 111. 
 551 ; Cook v. Citizens' Nat. Bank, 
 73 Ind. 256; Booher v. PerriU, 140 
 Ind. 529, 40 N. E. 36; Hatfield v. 
 Cummings, 153 Ind. 280, 50 N. E. 
 817; Greenawalt v. Wilson, 52 
 Kans. 109, 34 Pac. 403; Skinner v. 
 Lucas, 68 Mich. 424 36 N. W. 203; 
 Keokuk &c. "Co. v. Davidson, 13 
 Mo. App. 561; Attorney-General 
 V. Guardian &c. Ins. Co., 77 N. Y. 
 
 272; Jones v. Blun, 145 N. Y. 333, 
 39 N. E. 954; Edrington v. Prid- 
 ham, 65 Tex. 612; Smith v. Hop- 
 kins, 10 Wash. 77, 38 Pac. 854; 
 Davis V. Shearer, 90 Wis. 250, 62 
 N. W. 1050; Russell v. East An- 
 glian R. Co., 3 Macn. & C. 104. But 
 see State v. Ross, 122 Mo. 435, 25 S. 
 W. 947, 23 L. R. A. 534; Edee v. 
 Strunk 35 Nebr. 307, 53 N. W. 70; 
 Whitney v. Hanover Nat. Bank, 
 71 Miss. 1009, 15 So. 33, 23 L. R. A. 
 531, where receiver's title is neces- 
 sarily in question. It may be col- 
 laterally attached where absolute- 
 ly void because the court has no 
 jurisdiction. State v. District Ct., 
 21 Mont. 155, 53 Pac. 272, 69 Am. 
 St. 645. 
 
 aiPressley v. Lamb, 105 Ind. 
 171, 189, 4 N. E. 682. 
 
991 
 
 RECEIVERS 
 
 §648 
 
 receiver to collect them and apply them to the mortgage debt 
 rendered the matter res adjudicata and could not be collaterally 
 attacked by the mortgagor.^^ gu^ j^ has been held that a stock- 
 holder may show, in a suit by a receiver to collect an unpaid 
 subscription, that the receiver was improperly appointed by a 
 decree not binding upon the stockholder.^* The soundness of 
 this decision, however, is questionable.^* 
 
 §648 (565). Title and possession of receiver. — The appoint- 
 ment of a receiver usually gives him the right to immediate 
 possession and control of the property over which he is ap- 
 pointed.^^ Where the defendants, or persons claiming under 
 them, refuse to surrender possession, the court appointing him 
 will assist the receiver by an order directing the surrender of 
 the specific property to him^^ and will, if necessary, enforce its 
 order by attachment.^^ In Iowa it is held that a receiver may 
 call upon the sheriff to aid in enforcing his right to take pos- 
 session of property committed to his charge by the court.^* But 
 
 92 Storm V. Ermantrout, 89 Ind. 
 214. 
 
 93 Chandler v. Brown, 77 III. 
 333i See also Libby v. Rosekrans, 
 55 Barb. (N. Y.) 202. 
 
 94 See Schoonover v. Hinckley, 
 48 Iowa 82; Burton v. Schildbach, 
 45 Mich. 504, 8 N. W. 497. The ap- 
 pointment of a receiver can not be at- 
 tacked on the ground of mere ir- 
 regularity or error, in a proceed- 
 ing by him to enforce a mechan- 
 ic's lien in favor of the corpora- 
 tion for which he is receiver. 
 Florence &c. Co. v. Hanby, 101 
 Ala. 15, 13 So. 343. 
 
 ssFosdick v. Schall, 99 U. S. 
 235, 25 L. ed. 339; Union Trust Co. 
 V. Weber, 96 111. 346, 3 Am. & Eng. 
 R. Cas. 583; Ellis v. Boston &c. 
 R. Co., 107 Mass. 1; Yeager v. 
 Wallace, 44 Pa. St. 294. See also 
 Appleton Water Works Co. v. 
 Central Trust Co., 93 Fed. 286. 
 
 But see Illinois Steel Co. v. Put- 
 nam, 68 Fed. 515; Wiswall v. 
 Sampson, 14 How. (U. S.) 52, 14 
 L ed. 322. 
 
 96 Cohen, In re, 5 Cal. 494; Peo- 
 ple V. Central City Bank, 53 Barb. 
 (N. Y.) 412; Thornton v. Wash- 
 ington Savings Bank, 76 Va. 432; 
 Geisse v. Beall, 5 Wis. 224. See 
 also Horn v. Pere Marquette R. 
 Co., 151 Fed. 627. 
 
 97 Miller v. Jones, 39 111. 54 Or 
 punish interference as a contempt. 
 Thomas v. Cincinnati &c. R. Co., 
 62 Fed. 803; Secor v. Toledo &c. 
 R. Co., 7 Biss. (U. S.) 513, Fed. 
 Cas. No. 12605. Or enjoin it. Fi- 
 delity Trust &c. Co. V. Mobile St. 
 R. Co., S3 Fed. 687; Metropolitan 
 Trust Co. V. Columbus &c. R. Co., 
 95 Fed. 18. 
 
 98 State V. Rivers, 66 Iowa 653, 
 24 N. W. 260. 
 
§ 649 RAILROADS 992 
 
 where a third person holds property under claim of title the 
 court will, in general, require the title of the receiver to be 
 established by action before it will interfere.®* The title of a 
 receiver vests, by relation, at the date of his appointment, not- 
 withstanding delay on his part in qualifying.^ Indeed, it is held 
 that even though the receiver does not qualify at all, but de- 
 clines to act, the property is still in the custody of the court,^ 
 since a receiver is only the ministerial officer of the court which 
 appoints him and his possession is the possession of the court.'' 
 This rule has even been applied as against the claim of a state 
 for taxes, and it is held that property in the hands of a receiver 
 of a federal court cannot be reached by proceedings for the col- 
 lection of state taxes without the consent of such court.* Where 
 a person purchases property with notice that proceedings are 
 pending for the appointment of a receiver, it has been held that 
 he takes it subject to the rights of such receiver, if one is 
 granted.^ 
 
 § 649 (566). Authority, rights and duties of receiver — Con- 
 trol by court. — ^The term "receiver," as used in England, is em- 
 ployed to designate a person appointed by a court of chancery 
 at the suit of some party in interest who receives rents, or other 
 
 90 Coleman v. Salisbury, 52 Ga. i Hardwick v. Hook, 8 Ga. 354; 
 
 470; Levi V. Karrick, 13 Iowa 344; Maynard v. Bond, 67 Mo. 315; 
 
 Parker v. Browning, 8 Paige (N. Rutter v. Tallis, 5 Sandf. (N. Y.) 
 
 Y.) 388, 35 Am. Dec. 717; Gelpeke 610. See also ante, §668. 
 
 V. Milwaukee &c. R. Co., 11 Wis. 2 Skinner v. Maxwell, 68 N. Car. 
 
 454. In Gelpeke v. Milwaukee &c. 4qq 
 
 R. Co., 11 Wis. 454, Dixon, C. J., '.^ u . . t r- t 
 
 ,. , ^, , .. „T » Merchants Ins. Co., In re, 3 
 
 speaking for the court, said: I ^._ ,^^ ,, , ,^^ ^^^ ^_ ^^_ 
 
 know of no case where it has been 
 
 adjudged that the possession of a 
 
 Biss. (U. S.) 162, Fed. Cas. No. 
 
 9441; Ohio &c. R. Co. v. Fitch, 20 
 
 Ind. 498; Skinner v. Maxwell, 68 
 
 stranger, who sets up a superior .. _ ... r, ,■ • a^i .■ 
 
 . , . . , ■ , , N. Car. 400; Robinson v. Atlantic 
 
 title, in pursuance of which he . t^ ,., ^^ ry cj. ^^n 
 
 , .' , ^ , , ^ &c. R. Co., 66 Pa. St. 160. 
 
 claims to have entered and to 
 
 hold, might be thus disturbed. * Tyler, In re, 149 U. S. 164 13 
 
 * * * Courts can only act in Sup. Ct. 785, 37 L. ed. 689; Oakes 
 
 such cases, where the rights of v- Myers, 68 Fed. 807. 
 the parties are obvious, and not 5 Weed v. Smull, 3 Sandf. Ch. 
 
 the subject of doubts or serious (N. Y.) 273. 
 controversy." 
 
993 RECEIVERS - § 649 
 
 income, and pays ascertained outgoings with a view to conserv- 
 ing property until it can be sold for the payment of debts and 
 liabilities of an insolvent person or corporation. If it is neces- 
 sary to continue the business a "manager" is appointed.® But 
 in the United States a receiver of a railroad is understood to be 
 a ministerial officer of a court of chancery, appointed as an in- 
 different person between the parties to a suit, whose duty it is 
 not only to preserve the tangible property of the corporation, 
 but, also, its franchises and business, that the value of the rail- 
 road as a whole may not be impaired/ and that the rights of 
 the public to have it kept in operation as a public highway may 
 not be infringed. To this end he is empowered to hire and pay 
 workmen, agents, and all necessary assistants, to make con- 
 tracts for the carriage of passengers and freight, and to do 
 such other acts as are necessary in maintaining the railroad as 
 a going concern.^ In the management of such a complicated 
 business as the operation of a railroad a large discretion is nec- 
 essarily given to a receiver. It may, perhaps, be laid down as a 
 general proposition that all outlays made by the receiver, in 
 good faith, in the ordinary course, with a view to promote the 
 
 e Manchester fee R, Co., In re, s Ordinarily, the duties of a re- 
 
 L. R. 14 Ch. 645. A manager of a ceiver only comprise the opera- 
 
 railWay company may be appoint- tion and management of the road, 
 
 ed at the suit of a judgment the payment- of current expenses, 
 
 creditor. 38 and 39 Vict. Ch. 31 ; and the application of the residue 
 
 30 and 31 Vict. Ch. 127. of the earnings and receipts to 
 
 7 Milwaukee &c. R. Co. v. Sout- the extinguishment of the indebt- 
 ter, 2 Wall. (U. S.) 510, 17 L. ed. edness,. to secure which the re- 
 900; Wallace v. Loomis, 97 U. S. ceiver was appointed. Bank of 
 146, 162, 24 L. ed. 895; Barton v. Montreal v. Chicago &c. R. Co., 
 Barbour, 104 U. S. 126, 26 L. ed. 48 Iowa 518. While a receiver 
 672; Mercantile Trust Co. v. Mis- may, of course, purchase material 
 souri &c. R. Co., 36 Fed. 221; es,s,ential for the operation pf the 
 Florida v. Jacksonville &c. R. road, he can not bind the trust 
 Co., 15 Fla. 201, 206. See also 24» by a purchase of material not 
 U. S. Stat, at Large, p. 554 (Act wanted, excessive in price and de- 
 Cong. Mar. 3,-1887, §2), as to the fective in quality. Lehigh Coal 
 duty of a receiver appointed by a &c. Co. v. Central R. Co., 35 N. 
 federal court to comply with laws J. Eq. 426. See generally as to 
 of state in which property is his appointment and powers for 
 situated. the purpose of keeping in a going 
 32 — Ell. Railroads I , ' ' . ' a"*'I 
 
§649 
 
 RAILROADS 
 
 994 
 
 business of the foad and to render it profitable and successful, 
 are fairly within the line of discretion which is necessarily al- 
 lowed to a receiver intrusted with the management and opera- 
 tion of a railroad in his hands.® Thus, -rebates of freight, paid 
 in accordance with a customary practice necessary to secure 
 business for the railway, when not illegal, the purchase-price 
 of a truck and team of horses, and the expenses of drayage and 
 wharfage have been held to be outlays properly within the dis- 
 cretion of the receiver.!" So of counsel and witness fees in 
 necessary litigation involving the receivership. ^^ But the re- 
 ceiver should usually seek the advice of the court in advance, 
 especially in case of any unusual expenditures,!^ and even then, 
 if the hearing is ex parte, the judge may afterwards change his 
 mind.!^ 
 
 concern, Erb. v. Morasch, 177 U. 
 S. 584, 20 Sup. Ct. 819, 44 L. ed. 
 897; Merley v. Saginaw Circuit 
 Judge, 117 Mich. 246, . 75 N. W. 
 466, 41 L. R. A. 817; Vanderbilt v. 
 Central R. Co., 43 N. J. Eq. 669, 
 12 Atl. 188. And as to his author- 
 ity to make shipping contracts see 
 Northern Pac. R. Co. v. American 
 Trading Co., 19S U. S. 439, 25 Sup. 
 Ct. 84 49 L. ed. 269; Kansas &c. 
 R. Co. V. Bayles, 19 Colo. 348, 35 
 Pac. 744. 
 
 9 Cowdrey v. Galveston &c. R. 
 Co., 93 U. S. 352, 23 L. ed. 950; 
 Cowdrey v. Railroad Co., 1 Woods 
 (U. S.) 331, Fed Cas. No. 3293; 
 Martin v. New York &c. R. Co., 
 36 N. J. Eq. 109. See also Con- 
 tinental Trust Co. V. Toledo &c. 
 R. Co., 59 Fed. 514. He must com- 
 ply with proper orders of the rail- 
 road or public service commis- 
 sions in the states in which the 
 railroad is operated. Railroad 
 Com. V. Alabama &c. R. Co., 185 
 Ala. 354, 64 So. 13. 
 
 10 Cowdrey v. Railroad Co., 1 
 Woods (U. S.) 334, Fed. Cas. No. 
 3293. 
 
 11 Cowdrey v. Railroad Co., 1 
 Woods (U. S.) 334, Fed. Cas. No. 
 3293; Trustees of Internal &c. 
 Fund V. Greenough, 105 U. S. 527, 
 26 L. ed. 1157; Montgomery v. 
 Petersburg Sav. &c. Co., 70 Fed. 
 746. 
 
 12 Cowdrey v. Galveston &c. R. 
 Co., 93 U. S. 352, 23 L. ed. 950. See 
 also Missouri &c. Interurban R. 
 Co. v. Edson, 198 Fed. 819 (not 
 ordinarily personally liable where 
 he follows directions of court) ; 
 Metropolitan Trust Co. v. North 
 Carolina Lumber Co., 162 Fed. 
 170; Williams v. Owensboro Sav. 
 Bank &c. Co., 153 Ky. 789, 156 S. 
 
 .W. 899. 
 
 13 Missouri Pac. R. Co. v. 
 Texas &c. R. Co., 31 Fed. 862. See 
 also Chamberlain, Ex parte, SS 
 Fed. 704, 706. 
 
995 
 
 RECEIVERS 
 
 §650 
 
 § 650 (567). Contracts of receivers. — A receiver may, in gen- 
 eral, make binding contracts on any subject within the scope 
 of his authority; and one who has, in good faith, executed such 
 a contract, should not be denied compensation, even though 
 the contract should appear to have been improvident and op- 
 . posed to the best interests of the trust. ^* He may contract to 
 carry freight at y specified rate even from points beyond the 
 terminus of his road to a point on such road and an order of 
 court is not necessary to authorize him to do so.^'' So, he may 
 effect insurance upon the property in his hands without spe- 
 cial authority from the court. ^^ But a receiver cannot bind the 
 company by a contract to perform duties of a personal nature 
 through a long series of years, ^'' nor bind the trust property 
 by a lease involving a large expenditure of money and extend- 
 ing beyond the time of the receivership.^* Where an executory 
 contract cannot, consistently with the interests of the trust, be 
 
 .1* Vanderbilt v.. Central R. Co., 
 43 N. J. Eq. 669, 12 Atl. 188. A 
 receiver of a railroad who is 
 operating the road and managing 
 and controlling it's business will 
 be presumed to have authority to 
 make contracts relative to the car- 
 riage of goods, until the authority- 
 conferred upon him by the court 
 is shown. Bayles v. Kansas Pac. 
 R. Co., 13 Colo. 181, 22 Pac. 341, 
 S L. R. A. 480. See also Lorain 
 Steel Co. V. Union R. Co., 174 Fed. 
 262. 
 
 15 Kansas Pac. R. Co. v. Bayles, 
 19 Colo. 34«, 35 Pac. 744. See also 
 Northern Pac. R. Co. v. American 
 &c. R. Co., 195 U. S. 439, 25 Sup. 
 Ct. 84, 49 L. ed. 269; Philadelphia 
 Investment Co. v. Ohio &c. R. Co., 
 41 Fed. 378; Farmers' Loan &c. 
 Co. v. Northern Pac. R. Co., 120 
 Fed. 873; Vanderbilt v. Little, 51 
 N. J. Eq. 289, 26 Atl. 1025; San 
 
 Antonio &c. R. Co. v. Barnett 
 (Tex. Civ. App.), 44 S. W. 20. 
 
 16 Thompson v. Phoenix Ins. 
 Co., 136 U. S. 287, 10 Sup. Ct. 1019, 
 34 L. ed. 408; 3 Lewis' Am. R. 
 & Corp. R. 119. See also Brown 
 V. Hazlehurst, 54 Md. 26. 
 
 iTMartin v. New York &c. R. 
 Co., 36 N. J. Eq. 109, 12 Am. & 
 Eng. R. Cas. 448. In this case 
 the receiver agreed with a land- 
 owner to give him a free annual 
 pass for himself over the road 
 during his life, in part considera- 
 tion of the release of a right of 
 way across his land, and the court 
 held that the contract could not 
 be enforced against the company. 
 
 18 Chicago Vault Co. v. Mc- 
 Nulta, 153 U. S. 554, 14 Sup. Ct. 
 915, 38 L. ed. 819. See also Mc- 
 Minnville &c. R. Co. v. Huggins, 3 
 Baxt. (Tenn.) 177. (He should ob- 
 tain the permission of the court un- 
 
§ 650 RAILROADS 996 
 
 enforced against the receiver, and the contractor has in good 
 faith expended money in preparation for its performance, it is 
 said that he should yet be made whole by an allowance of dam- 
 ages out of the fund, unless it appears that he has been guilty 
 of collusion or bad faith. ^^ For a court of equity cannot revoke 
 or annul at the pleasure of the chancellor the contracts of a . 
 receiver within the scope of the authority conferred by the or- 
 der appointing him.^" But one who contracts with a receiver 
 must be assumed to know that, if he seeks to enforce his con- 
 tract, it must come under the scrutiny of a court of equity; and 
 it will not be enforced when it appears that the unreasonable- 
 ness and improvidence of the contract were brought to his no- 
 tice before he had taken any steps toward its performance.^^ 
 And no contracts beyond such as are essential or at least proper 
 in order to the successful operation of the road may be made 
 without the sanction of the coutt.^^ There are some contracts, 
 of course, made by the corporation before the appointment of 
 a receiver which remain binding after his appointment, but 
 there are others which are not binding upon him unless he, in 
 
 \eis authorized by statute or the or- binding contract without the sanc- 
 
 der appointing him.) tion of the court." See also 
 
 i9Little V. Vanderbilt, SI N. J. Eq. Knickerbocker Trust Co. v. Green 
 
 289, 26 Atl. 102S. Vanderbilt v. Lit- Bay &c. Co., 62 Fla. S19, 56 So. 
 
 tie, 51 N. J. Eq. 289, 26 Atl. 1025. 699. But see as to reimburse- 
 
 If the conduct of the receiver require ment for expenses and losses in- 
 
 it, the court might compel him to re- curred in good faith, Vanderbilt 
 
 imburse the fund for what would thus y. Little, 51 N. J. Eq. 289, 26 
 
 be taken fjrorai it. Vanderbilt v. j\ti 102S. 
 
 Central R. Co., 43 N. J. Eq. 669, 12 22 Taylor v. Philadelphia Ac. 
 
 Atl. 188. See Moran v. Lydeck- r Co., 9 Fed. 1; Lehigh Coal 
 
 er, 27 Hun (N. Y.) 582. &c. Co. v. Central R. of N. J., 
 
 20 Vanderbilt v. Central R. Co., 35 N. J. Eq. 426; McMinnville 
 43 N. J. Eq. 669, 12 Atl. 188. &c. R. Co. v. Huggins, 3 Baxt. 
 
 21 In Lehigh Coal &c. Co. v. (Tenn.) 177. See as to liability 
 Central R. Co., 35 N. J. Eq. 426, of receivers personally on con- 
 the court, by Van Fleet, V. C, tracts beyond his powers. Kalb 
 said: "All persons dealing with &c. Mfg. Co., In re, 165 Fed. 895. 
 receivers do so at their peril. And as to how contracts should 
 and are bound to take notice of be signed, see note in 42 L. R. A. 
 their incapacity to conclude a (N. S.) 61. 
 
997 
 
 RECEIVERS 
 
 §650 
 
 some way, ratifies them.^s Where a receiver is appointed for 
 a railroad which embraces leased lines he does not necessarily 
 assume responsibility for the covenants of the leases, nor take 
 the place of the lessees, but he is entitled to a reasonable time 
 in which to determine whether to adopt or renounce them. 2* In 
 extraordinary cases, involving a large outlay of money, the re- 
 ceiver should apply to the court in advance and obtain its au- 
 thority' for the purchase or improvement proposed,^® and this 
 is always the safest course in case of doubt. In several cases 
 the courts have refused to confirm the action of receivers in 
 • reducing wages of employes without notice to the employes. 2* 
 A receiver, in a suit to foreclose a second mortgage, may be di- 
 rected to pay interest on first mortgage bonds to prevent the 
 foreclosure of the first mortgage, where it is to the interest of 
 the second mortgage bondholders and the general creditors to 
 prevent such foreclosure, although the application is opposed 
 by the first mortgage bondholders and a majority of the second 
 
 23 Girard- &c. Co. v. Cooper, 51 
 Fed. 332; Central Trust Co. v. 
 Wabash &c. R. Cp., S2 Fed. 908; 
 Ames V. Union Pac. R. Co., 60 
 Fed. 966; Seattle &c. R. Co., In 
 re, 61 Fed. S41 ; Kansas Pac. R. 
 Co. V. Bayles, 19 Colo. 348, 35 
 Pac. 744; Howe v. Harding, 76 
 Tex. 17, 13 S. W. 41, 18 Am. St. 
 17; 1 Lewis' Am. R. & Corp. 502. 
 See also Union Trust Co. v. Cur- 
 tis, 182 Ind. 61, 105 N. E. 562, 
 L. R. A. 191SA, 699; Brown v. 
 Warner, 78 Tex. S43, 14 S. W. 1032, 
 11 L. R- A. 394, 22 Am. St. 67. 
 
 a* St. Joseph &c. R. Co. v. Hum- 
 phreys, 145 U. S. 105, 12 Sup. Ct. 
 795, 36 L. ed. 640, 60 Am. & Eng. 
 R. Cas. 431, and note; United 
 States Trust Co. v. Wabash &c. 
 R. Co., 150 U. S. 287, 14 Sup. Ct. 
 86, 37 L. ed. 1085; Ames v. Union 
 Pac. R. Co., 60 Fed. 966, citing 
 
 numerous aijthorities ; Clyde v. 
 Richmond &c. R. Co., 63 Fed. 21. 
 See also Pennsylvajiia Steel Co. v. 
 New York City R. Co., 192 fed. 
 135; Fisher v. Columbia Nat. 
 Bank, 54 Ind. App. 558, 103 N. E. 
 119. But compare New York &c. 
 R. Co. V. New York &c. R. Co., 
 58 Fed. 268. 
 
 25 Bradley, J., in Cowdrey v. 
 Railroad Co., 1 Woods (U. S.) 331, 
 Fed. Cas. No. 3293. 
 
 26 Ames V. Union Pac. R. Co., 
 60 Fed. 674; Ames v. Union Pac. 
 R. Co., 62 Fed. 7, 4 Inters. Com. 
 R. 619. As to controversies with 
 employes,. see generally, Piatt 
 V. Philadelphia &c. R. Co., 65 
 Fed. 660; Continental Trust Co. 
 V. Toledo &c. R. Co., 59 Fed. 
 514; Seattle &c. R., Co., In re, 61 
 Fed. 541 ; Thomas v. Cincinnati 
 &c- R. Co., 62 Fed. 17; United 
 
§651 
 
 RAILROADS 
 
 998 
 
 mortgage bondholders who are also interested in the first mort- 
 gage.2'^ So, a receiver may be authorized in a proper case to 
 complete work already begun.^s or to pledge collaterals to se- 
 cure loans necessary for the operation of the road.*^ 
 
 § 651 (568). Suits by receivers — Authority to sue. — The right 
 of a corporation to sue or prosecute an action previously com- 
 menced is generally suspended by the appointment of an acting 
 receiver.*" But the receiver, unless specially empowered by stat- 
 ute, cannot, ordinarily, institute an action upon any debt or claim 
 accruing to the corporation which he represents without an order . 
 from the court appointing him, directing such suit to be brought.*^ 
 A general permission to bring all necessary suits is usually given, 
 however, in the order making the appointment. ^^ But authority 
 to sue will extend only to causes of action embraced within the 
 terms of the order.^* The weight of authority is to the effect 
 
 States Trust Co. v. Omaha &c. 
 R. Co., 63 Fed. 737; Arthur v. 
 Oakes, 63 Fed. 310; Dexter v. 
 Union Pac. R. Co., 75 Fed. 947; 
 Elljs V. Boston &c. R. Co., 107 
 Mass. 1. 
 
 27 Lloyd V. Chesapeake &c. R. 
 Co., 6S Fed. 3S1. 
 
 28 Miltenberger v. Logansport 
 &c. R. Co., 106 U. S. 286, 1 Sup. 
 Ct. 140, 27 L. ed. 117; Florence 
 &c. Co. V. Hanby, 101 Ala. IS, 13 
 So. 343; Morrison v. Forman, 177 
 111. 427, S3 N. E. 73; Gibert v. 
 Wa:shington City &c. R. Co., 33 
 Grat. (Va.) S86. But not, ordinar- 
 ily, to complete the road. See 
 last three authorities above cited. 
 
 29 Clarke v. Central R. Co., 54 
 Fed. 556. 
 
 30 Davis V. Ladoga Creamery 
 Co., 128 Ind. 222, 27 N. E. 494 ; Ko- 
 komo City St. R. Co. v. Pitts- 
 burgh &c. R. Co., 25 Ind. App. 
 335, 58 N. E. 211; Griffin v. Long 
 
 Island R. Co., 102 N. Y. 449; Cur- 
 tis V. Mcllhenny, 5 Jones Eq. (N. 
 Car.) 290. 
 
 31 Booth V. Clark, 17 How. (U. 
 S.) 322, 15 L. ed. 164; Bishop v. 
 McKillican, 124 Cal. 321, 57 Pac. 
 1(>, 71 Am. St. 68; Glenn v. Busey, 
 5 Mackey (D. C.) 233; Screven v. 
 Clark, 48 Ga. 41 ; Garver v. Kent, 
 70 Ind. 428; Davis v. Ladoga 
 Creamery Co., 128 Ind. 222, 27 N. 
 E. 494; Patrick v. Eells, 30 Kans. 
 680, 2 Pac. 116; State v. Games, 68 
 Mo. 289; Coope v. Bowles, 28 
 How. Prac. (N. Y.) 10; Merritt v. 
 Merritt, 16 Wend. (N. Y.) 405; 
 Battle V. Davis, 66 N. Gar. 252; 
 Davis v. Snead, 33 Grat. (Va.) 
 705; Ward v. Swift, 6 Hare (Eng.) 
 309. See also ante, §620. 
 
 32 Such general authority may be 
 given by an order made subsequent 
 to the order appointing the receiver. 
 Lathrop v. Knapp, 37 Wis. 307. 
 
 33 An order authorizing the receiv- 
 
999 RECEIVERS § 651 
 
 that even where leave to sue has been granted, a receiver cannot, 
 in the absence of statutory authority, institute and conduct ac- 
 tions in his own name, in matters concerning his receivership, 
 unless specially authorized by the court from which he receives 
 his appointment,^* and that he must, unless so authorized, bring 
 his action in the name of the corporation or party in whom was 
 the right of action before the receiver was appointed. ^^ The rea- 
 son for this is that the legal title to choses in action or other 
 property which he is authorized to reduce to possession, is ordi- 
 narily not transferred to the receiver, but remains in the owner. 
 Neither the reason nor the rule, it seems, controls in case a re- 
 ceiver brings suit upon a contract made with him as such,^" or 
 seeks to recover damages for the seizure and conversion of prop- 
 erty after it came into his possession,^ ^ since a receiver, being the 
 instrument used by the court in accomplishing its purpose, or 
 carrying into efifect its decree, must be presumed to have the 
 power to take all such steps as are essential to enforce the per- 
 formance of contracts and agreements made with him in the 
 course of his receivership,^^ and to protect the property in his 
 possession. 3* That a court of equity may empower its receiver 
 
 er to sue for all the assets of every a debt due the corporation. Gar- 
 kind and character does not give ver v. Kent, 70 Ind. 428. But see 
 a right to maintain an action for Boyd v. Royal Ins. Co., Ill N. 
 injury to property not in the re- Car. 372, 16 S. E. 389. 
 ceiver's possession. Alexander v. 36 Pouder v. Catterson, 127 Ind. 
 Relfe, 9 Mo. App. 133. See Sere- 434, 26 N. E. 66. 
 ven V. Clark, 48 Ga. 41. 37 Kehr v. Hall, 117 Ind. 405, 20 
 
 34 Manlove v. Burger, 38 Ind. N. E. 279; Singerly v. Fox, 75 
 211; Newell v. Fisher, 24 Miss. Pa. St. 112. A receiver may main- 
 392; Yeager v. Wallace, 44 Pa. St. tain replevin for property which 
 294; King v. Cutts, 24 Wis. 627. has been wrongfully taken out of 
 
 35 Cases in preceding note. his possession. Boyle v. Townes, 
 Where statute authority is lack- 9 Leigh (Va.) 158. 
 
 ing, it must appear by the averments 38 Pouder v. Catterson, 127 Ind. 
 
 of the complaint that the court 434, 26 N. E. 66. 
 
 appointing the plaintiff as receiver 39 Kehr v. Hall, 117 Ind. 405, 20 
 
 authorized him to sue in his own N. E. 279. See also Littlefield v. 
 
 name in matters concerning his Maine Cent. R. Co., 104 Maine 
 
 receivership, or he cannot recover 126, 71 Atl. 657. 
 
 in an action in his own name for 
 
§651 
 
 RAILROADS 
 
 1000 
 
 to bring all actions in his own name as receiver which may be 
 necessary, instead of suing in the name of the corporation or 
 joining it with him even in the absence of any statutory provi- 
 sions on the subject is the settled doctrine of nearly all the mod- 
 ern cases.*" And the courts of some of the states have gone to 
 the extent of holding that the appointment of a receiver author- 
 izes him, virtute officii, to bring all necessary suits in the dis- 
 charge of his trust, and makes him so far the assignee of the 
 legal title that he must sue in his own name.^^ Authority is ex- 
 pressly given to the receiver by statute in many of the states to 
 
 40 Davis V. Gray, 16 Wall. (U. 
 S.) 203, 21 L. ed. 447; Hardwick 
 V. Hook, 8 Ga. 354; Inglehart v. 
 Bierce, 36 111. 133; Helme v. Little- 
 john, 12 La. Ann. 298; Frank v. 
 Morrison, 58 Md. 423; Henning v. 
 Raymond, 35 Minn. 303, 29 N. W. 
 132; Wray v. Jamison, 10 Humph. 
 (Tenn.) 185; Boyle v. Townes, 9 
 Leigh (Va.) 158; Lathrop v. 
 Knapp, 27 Wis. 215. But in Penn- 
 sylvania and some other states, 
 where the receiver is the mere 
 custodian of the property, he is 
 held to have no title upon which 
 to maintain a suit ' in his own 
 name, but, if authorized to bring 
 suit must sue in the name of the 
 corporation. Dick v. Str,uthers, 25 
 Fed. 103; Comer v. Bray, 83 Ala. 
 217, 3 So. 554; Farmers' &c. Ins. 
 Co. v. Needles, 52 Mo. 17; Yeager 
 V. Wallace, 44 Pa. St. 294. 
 
 41 Helme v. Littlejohn, 12 La. 
 Ann. 298; Baker v. Cooper, 57 
 Maine 388; Wray v. Jamison, 10 
 Humph, (Tenn.) 185. In Wilkin- 
 son v. Rutherford, 49 N. J. L. 241, 
 8 Atl. 507, the court said : "It 
 has already been shown that there 
 is no statutory definition of the 
 
 powers of the receiver. The ques- 
 tion, consequently, that arises, 
 is as to the inherent abilitie,s of 
 a' receiver by force of the usual 
 rules or jurisdiction. I can not 
 agree to the doctrine that a re- 
 ceiver is a mere custodian of the 
 property of the person whom, in 
 certain cases, he is made to sup- 
 plant, and it would seem he is an 
 assignee of the assets within the 
 scope of his office. There seems 
 to be no reason why his power 
 should not be held to be co-ex- 
 tensive with his functions; and 
 it is clear that he can not conven- 
 iently perform those functions un- 
 less upon the theory that some 
 interest in the pjoperty, akin to 
 that of an assignee's passes to 
 him. The receiver is to discharge 
 the executory duty of collecting 
 the debts, and taking into his pos- 
 session, even against antagonistic 
 claims, the tangible property; and 
 after his appointment, a sale of 
 such property by the insolvent 
 would, it is presumed, be abso- 
 lutely void; and yet, if the inter- 
 est in the property was not vested 
 in the receiver, it would be diffi- 
 
1001 RECEIVERS § 652 
 
 prosecute and defend actions in his own name as receiver.*^ 
 Where this power is made absolute it is not necessary for him 
 to show a special authority from the court appointing him to 
 prosecute an action, ■'^ though he must set forth sufficient facts 
 to show his character as receiver, and that he is the person au- 
 thorized by the statute to act on behalf of the corporation.** 
 Where, as is the case in Indiana, a receiver is given power t6 
 bring and defend actions, collect debts, etc., in his own name, 
 "under the control of the court, * * * and generally to do 
 such acts respecting the property, as the court or judge thereof 
 may authorize," the complaint must allege that suit. was brought 
 by direction of the court appointing the receiver or it will be 
 fatally defective.*^ 
 
 §652 (569). When receiver may maintain suit — Defenses to 
 receiver's suit. — The court may empower its receiver to sue 
 upon any rights of action which belong to the person or cor- 
 poration whose property has been put into the receiver's 
 hands.*® But a receiver usually has no power to maintain suits 
 where the party whose effects he receives could not have sued, 
 
 cult to find ground on which to *5 Garver v. Kent, 70 Ind. 428; 
 
 validate the transaction. * * * Moriarity v. Ketit, . 71 Ind. 601. 
 
 These embarrassments, as well as See Davis v. Ladoga Creamery 
 
 many others of a like kind, are Co., 128 Ind. 222, 27 N. E. 494. 
 
 obviated by the adoption of the 46 Litchfield Bank v. Peck, 29 
 
 doctrine that, virtute officii, a re- Conn. 384; Mcllrath v. Snure, 22 
 
 ceiver be comes provisional assig- Minn. 391 ; Griffin v. Long Island 
 
 nee of the property committed to j^ q^ _ 102 N. Y. 449 7 N. E. 
 
 him, and this doctrine is recognized 735. Coope v. Bowles,' 28 How. 
 
 in the case of Harrison v. Maxwell,. Prac. (N. Y.) 10, 42 Barb. (N. Y.) 
 
 44 N. J. L. 316." g;., As to suits against stock- 
 
 42 See Burns' Ann. Stat' Ind. holders for unpaid subscriptions, 
 1914, § 1285. see Cutting v. Damerel, 88 N. Y. 
 
 43 Miller v. Mackenzie, 29 N. J. 410; Sawyer v. Hoag, 17 Wall. 
 Eq. 291. (U. S.) 610, 21 L. ed. 731 ; Upton 
 
 44 Asheville Division No. IS v. v. Tribilcock, 91 U. S. 45, 23 L. 
 Aston, 92 N. Car. 578; Miami Ex- ed. 203; Schoonover v. Hinckley, 
 porting Co. v. Gano, 13 Ohio 269; 48 Iowa 82; Starke v. Burke, 5 
 Gluck & Becker Rec. of Corp. La. Ann. 740; Stillman v. Dougher- 
 156. ty, 44 Md. 380; Sagory v. Dubois, 
 
652 
 
 RAILROADS 
 
 1002 
 
 and the fact that an order of court directs him to bring the 
 suit will not add to his right to maintain it.*'' This rule, how- 
 ever, as we have elsewhere shown,** is not without its excep- 
 tions, for there are cases in which a receiver may maintain a 
 suit that the corporation could not have maintained. As a gen- 
 eral rule, the same defenses may be interposed to an action by 
 the receiver on a demand due the corporation that could have 
 been set up in a suit by the corporation itself.*^ This rule is 
 subject to the exception, however, that where the receiver is 
 suing in the interest of the creditors, no defense is available 
 against him which could not equitably be opposed to a suit by 
 them. Thus, it has been held that a receiver appointed at the 
 instance of creditors may recover dividends that were fraudu- 
 lently paid by the corporation after it became insolvent,^" or a 
 subscription which the creditors themselves could enforce al- 
 though the corporation could not^^ and it has been held that a 
 debtor cannot interpose a judgment recovered upon a promis- 
 sory note of the corporation as a set-off to an action by the re- 
 ceiver to enforce payment of his indebtedness due the corpora- 
 tion.52 
 
 3 Sandf. Ch. (N. Y.) 466; Clarke 
 V. Thomas, 34 Ohio. St. 46; Means' 
 Appeal, 85 Pa. St. 75; Lathrop v. 
 Knapp, 37 Wis. 307. In Illinois a 
 suit can be maintained against the 
 stockholders only when they were 
 made parties to the suit in which 
 a receiver was appointed. Chan- 
 dler V. Brown, 71 111. 333. As to 
 suits against corporate officers for 
 breach of trust and for gross mis- 
 management and neglect of duty, 
 see McCarty's Appeal, 110 Pa. St. 
 379, 4 Atl. 925; Ackerman v. Hal- 
 sey, Z1 N. J. Eq. 356. 
 
 47 La Follett v. Akin, 36 Ind. 1 ; 
 State V. Sullivan, 120 Ind. 197, 21 
 N. E. 1093, 22 N. E. 325; Hyde v. 
 Lynde, 4 N. Y. 387. 
 
 48 Ante, § 620. 
 
 49 Litchfield Bank v. Peck, 29 
 Conn. 384; Moise v. Chapman, 24 
 Ga. 249; Brooks v. Bigelow, 142 
 Mass. 6, 6 N. E. 766 ; Cox v. Volkert, 
 86 Mo. SOS; Van Wagoner v. Pat- 
 erson &c. Co., 23 N. J. Law 283; 
 Thomas v. Whallon, 31 Barb. (N. 
 Y.) 172; Hade v. McVay, 31 Ohio 
 St. 231 ; Chase v. Petroleum Bank, 
 66 Pa. St. 169. 
 
 50 Osgood V. Ogden, 4 Keyes 
 (N. Y.) 70. 
 
 51 Cole V. Satsop R. Co., 9 Wash. 
 487, Z7 Pac. 700, 43 Am. St. 858. 
 See generally as to collection of 
 subscriptions by receivers, note to 
 Thompson v. Reno Sav. Bank, 19 
 Nev. 103, 7 Pac. 68, 3 Am. St. 797 
 833. 
 
 52 Where the effect of allowing 
 
1003 
 
 RECEIVERS 
 
 §653 
 
 § 653 (570). Right of receiver to sue in other jurisdictions 
 — Comity. — Some authorities hold that a receiver owing his 
 appointment to the common law jurisdiction of a court of equity 
 cannot sue outside of the jurisdiction of the court which ap- 
 pointed him.-'* This rule is generally followed, in the older cases, 
 and also in some of the more recent ones, by the federal courts 
 with regard to receivers appointed by the United States courts 
 in other districts,'* and is based upon the ground that a court 
 of chancery has no authority to act beyond its jurisdiction, 
 and that consequently a receiver at common law is not clothed 
 
 a set-off would be to prefer one 
 creditor over another, a set-off 
 will not be allowed. Singerly v. 
 Fox, 75 Pa. St. 112; Litchfield 
 Bank v. Church, 29 Conn. 137; 
 Williams v. Traphagen, 38 N. J. 
 Eq. 57; Clark v. Brockway, 3 
 Keyes (N. Y.) 13. See also La- 
 nier V. Gayoso &c. Inst., 9 Heisk. 
 (Tenn.) 506. But a set-off may 
 sometimes be allowed. See Colt v. 
 Brown, 12 Gray (Mass.) 233; Cox v. 
 Volkert, 86 Mo. SOS ; Berry v. Brett, 
 
 6 Bosw. (N. Y.) 627; Hade v. Mc- 
 Vay, 31 Ohio St. 231. See fur- 
 ther as to when there may or may 
 not be set-off in actions by the 
 receiver. Hynes v. Illinois Trust 
 &c. Bank, 226 III. 95, 80 N. E. 
 753, 10 L. R. A. (N. S.) 472, and 
 note; and authorities cited in note 
 in 41 L. R. A. (N. S.) 996. 
 
 53 Farmers' &c. Ins. Co. v. 
 Needles, 52 Mo. 17; Hope Mut. L. 
 Ins. Co. V. Taylor, 2 Robt. (N. Y.) 
 278; Warren v. Union Nat. Bank, 
 
 7 Phila. (Pa.) 156; Moseby v. Bur- 
 row, 52 Tex. 396. See Bartlett v. 
 Wilbur, 53 Md. 485; Graydon v. 
 Church, 7 Mich. 36; Moreau v. 
 Du Bellet (Tex. Civ. App.), 27 
 S. W. 503. See also "Actions by 
 
 Foreign Receivers," il Cent. L. 
 J. 315. 
 
 64 Booth V. Clark, 17 How. (U. 
 S.) 322, 15 L. ed. 164; Holmes v. 
 Sherwood, 3 McCrary (U. S.) 
 405, 16 Fed. 725; Wilkinson v. 
 Culver, 23 Blatchf. (U. S.) 416, 25 
 Fed. 639; Brigham v. Luddington, 
 12 Blatchf. (U. S.) 237, Fed. Cas. 
 No. 1874; Hazard v. Durant, 19 
 Fed. 471, Fowler v. Osgood, 141 
 Fed. 20. See also Quincy &c. R. 
 Co. V. Humphreys, 145 U. S. 82, 
 12 Sup. Ct. 787, 36 L. ' ed. 632; 
 Hale V. Allison, 188 U. S. 56, 23 
 Sup. Ct. 244, 47 L. ed. 380; Great 
 Western Min. &c. Co. v. Harris, 
 198 U. S. 561, 25 Sup. Ct. 770, 49 
 L. ed. 1163; Fairview Fluor Spar 
 &c. Co. V. Ulrich, 192 Fed. 894; 
 Fowler v. Osgood, 141 Fed. 20, 4 
 L. R. A. (N. S.) 824. In the note 
 to this case as last reported the 
 authorities on both sides are re- 
 viewed. In Booth v. Clark, supra, 
 the court said: "A receiver has 
 no extraterritorial power of of- 
 iicial action; none which the court 
 appointing him can confer, with 
 authority to enable him to go in- 
 to a foreign jurisdiction to take 
 possession of the debtor's proper- 
 
§653 
 
 RAILROADS 
 
 1004 
 
 with power to sue in a foreign jurisdiction. ^^ gy^ the better 
 rule, as it seems to us, and one which is well sustained by 
 authority, is that, although a receiver has not, as a matter 
 of absolute right, any extraterritorial jurisdiction or au- 
 thority to sue in a foreign jurisdiction, yet as a mat- 
 ter of comity, receivers duly appointed and qualified, and 
 invested with authority to • sue for and collect the corporate 
 assets situated in other states, may, and usually will, be per- 
 mitted to maintain suits in the courts of such other states.^* 
 This rule, however, is said to be subject to the exception that 
 
 -ty; none which can give him, up- 
 on the principle of comity a 
 privilege to sue in a foreign court 
 or another jurisdiction, as the 
 judgment creditor himself might 
 have done, where his debtor may 
 be amenable to the tribunal which 
 the creditor may seek. * * * 
 We think that a receiver could 
 not be admitted to the comity 
 extended to judgment creditor 
 without an entire departure from 
 chancery proceedings as to the man- 
 ner of his appointment, the securi- 
 ties which are taken from him for 
 the performance of his duties, and 
 the direction which the court has 
 over' him in the collection of the 
 assets of the debtor and the ap- 
 plication and distribution of 
 them." It may be that the act 
 of March 3, 1887, as corrected 
 August 13, 1888, found in 25 U. S 
 Stat. L. 433, Barnes' Fed. Code §§ 
 827, 828, may have some bearing 
 upon this question, but so far 
 as we know, the point has never 
 been made. 
 
 55 But where the receivers were 
 appointed under statutory provi- 
 sions existing at the organization 
 of the corporation and entering 
 
 into and forming part of its char- 
 ter, by which the rights and duties 
 of such receivers were defined, 
 it was held that the shareholders 
 and creditors of the corporation 
 were charged with notice of the 
 charter right of the corporation to 
 have all of its property transferred 
 to a receiver if it should become in- 
 solvent, and must be held to have 
 impliedly agreed that, in such case, 
 they would be bound by the laws of 
 the state in which the corporation 
 was organized, so far as they formed 
 a part of the charter of the com- 
 pany. Parsons v. Charter Oak L. 
 Ins. Co., 31 Fed. 305; Relfe v. 
 Rundle, 103 U. S. 222, 26 L. ed. 
 337; Davis v. Life Assn., 11 Fed. 
 781; Bockover v. Life Assn., 11 
 Va. 85. 
 
 5» Sercomb v. Catlin, 128 111. 556, 
 21 N. E. 606, 15 Am. St. 147 
 Metzner v. Bauer, 98 Ind. 425 
 Hurd V. Elizabeth, 41 N. J. L. 1 
 Hoyt V. Thompson, 5 N. Y. 320 
 Bagby v. Atlantic &c. R. Co., 86 
 Pa. St. 291 ; Lycoming Fire Ins. 
 Co. V. Wright, 55 Vt. 526; ante, § 638. 
 See also "Actions by Foreign Re- 
 ceivers," 2>1 Cent. L. J. 315, and 
 authorities cited on page 318; 
 
1005 RECEIVERS § 653 
 
 while a receiver may invoke the aid of a foreign court in ob- 
 taining possession of property or funds within its jurisdiction, 
 aid will only be extended as against those who were parties 
 to, or in some way in privity with, the proceedings in which 
 his appointment was made, or who are in possession of the 
 property or effects of the estate without right.^'^ It is gen- 
 erally the policy of each state to retain within its control the 
 property of a foreign debtor until all domestic claims have 
 been satisfied, and in many 'of the states comity will not be 
 extended by the courts to enable a receiver to take possession 
 of, and withdraw from the state, property or funds which were 
 already in such state and which resident creditors are seeking 
 to subject to the payment of their debts, by proceedings duly 
 instituted for that purpose.®^ After a receiver has reduced 
 the property or effects of the corporation to possession he 
 becomes vested with a special property therein, and is en- 
 titled to protect this' special property, while it continues, by 
 action, in like manner as if he was the absolute owner.^^ This 
 property interest of the receiver will usually be recognized 
 and enforced by the courts of other states, not alone upon prin- 
 ciples of comity, but as a matter of right.*" If he recovers 
 
 Davis V. Gray, 16 Wall. (U. S.) Stockbridge v. Beckwith, 6 Del. 
 
 219, and note in 4 L. R. A. (N. S.) Ch. 72, 33 Atl. 620; Hurd v. Eliz- 
 
 825, 21 L. ed. 447; New York &e. abeth, 41 N. J. L. 1; Wilktts v. 
 
 R. Co. V. New York &c. R. Co., Waite, 25 N. Y. 577; Lycoming 
 
 58 Fed. 268; Wigton v. Bosler, Fire Insurance Co. v. Wright, 55 
 
 102 Fed. 70; Strout v. United Vt. 526. See State v. Jacksonville 
 
 Shoe Mach. Co., 195 Fed. 313; &c. R. Co., IS Fla. 201; Thurston 
 
 Wyman v. Eaton, 107 Iowa 214, v. Rosenfield, 42 Mo. 474, 97 Am. 
 
 n N. W. 865, 43 L. R. A. 695, 70 Dec. 351. "We decline to extend 
 
 Am. St. 193; Castleman v. Tem- our wonted courtesy so far as to 
 
 plemann, 87 Md. 546, 40 Atl. 275, work detriment to citizens of our 
 
 41 L. R. A. 367, 67 Am. St. 363; own state who had been induced 
 
 Howarth v. Angle, 162 N. Y. 179, to give credit to the foreign in- 
 
 56 N. E. 489, 47 L. R. A. 725. solvent." Runk v. St. John, 29 
 
 BTCatlin v. Wilcox &c. Co., 123 Barb (N. Y.) S8S. See ante, §638. 
 
 Ind. 477, 24 N. E. 250, 8 L. R. A. 59 Kehr v. Hall, 117 Ind. 4tf5, 20 
 
 62, 18 Am. St. 340. N. E. 279; Pouder v. Catterson, 
 
 68 Ward v. Pacific Mut. L. Ins. 127 Ind. 434, 26 N. E. 66. 
 
 Co., 135 Cal. 235, 67 Pac. 124; eo See ante, §§638, 646, also 
 
§ 654 RAILROADS 1006 
 
 judgment against a debtor in his own name as receiver, he 
 may maintain an action against the debtor in another juris- 
 diction upon such judgment, as a judgment creditor.®^ So 
 where he takes the debtor's note in payment of a claim due 
 the corporation, the receiver may bring suit in a foreign state 
 to collect the note.^^ A receiver may take property of which 
 he has obtained legal possession into other jurisdictions with- 
 out affecting his title thereto. And the citizens of other states 
 into which the property is taken by the receiver in the per- 
 formance of his duties, cannot proceed against such property 
 by attachment for the debts of the corporation.''^ So, if prop- 
 erty is wrongfully and without the receiver's consent, taken 
 out of his possession, it has been held that he may follow it 
 and reclaim it wherever found, and the courts of foreign states 
 will aid him to recover it.®* 
 
 § 654 (571). Suits against receivers — Leave to sue must be 
 obtained. — In the absence of any statutory provisions on the 
 subject, it is the general rule that a suit cannot be maintained 
 against a receiver without leave of the court appointing him,®^ 
 
 Robertson v. Staed, 13S Mo. 135, Baxter (Tenn.) 580. But it has 
 
 36 S. W. 610, 33 L. R. A. 203, 58 been held in California that cars 
 
 Am. St. 569. belonging to a railroad which is 
 
 61 V^ilkinson v. Culver, 25 Fed. being operated by a receiver ap- 
 639. See also Comstock v. Fred- pointed by the United States 
 rickson, 51 Minn. 350, S3 N. W. Circuit Court in another state 
 713; Aldrich v. Aucher &c. Co., 24 may be attached for a debt due 
 Ore. 32, 32 Pac. 756, 41 Am. St. a citizen of California, if they are 
 831 ; Wilson v. Keels, 54 S. Car. sent into that state in the trans- 
 545, 32 S. E. 702, 71 Am. St. action of the business of the com- 
 816; Parker v. Stoughton Mill pany. Humphreys v. Hopkins, 81 
 Co., 91 Wis. 174 64 N. W. 751, Cal. 551, 22 Pac. 892, 6 L. R. A. 
 51 Am. St. 881. 792, 15 Am. St. 76. See howtvtr 
 
 62 Inglehart v. Bierce, 36 111. comments on this case in note to 
 133. I 638, ante. 
 
 63 Crapo V. Kelly, 16 Wall. (U. 64 McAlpin v. Jones, 10 La. Ann. 
 S.) 610, 21 L. ed. 430; Pond v. 552. 
 
 Cook?, 45 Conn. 126; Chicago &c. sswisvi^all v. Sampson, 14 How. 
 R. Co. V. Keokuk &c. Co., 108 111. (U. S.) 52, 14 L ed. 322; Barton 
 317; Cagill v. Wooldridge, 8 v. Barbour, 104 U. S. 126, 26 L. ed. 
 
1007 RECEIVERS § 654 
 
 but it has been held that where the suit is brought iri such 
 court, the fact that it entertains the suit is sufficient to estab- 
 lish the granting of leave to sue.®* Since the receiver is but 
 the "hand" of the court, it is held that any interference vsrith 
 his possession and control of the property by suit or other- 
 wise is an interference with the process of the court, and not 
 to be tolerated.*'^ And it is argued that to permit the insti- 
 tution of such suits and the taking of judgments against the 
 receiver would result in the creation of new liens upon the 
 property in the hands of the receiver, over which the court 
 would have no control, thereby clouding the title to the prop- 
 erty, and that the whole purpose of the litigation in equity 
 and of the taking possession of property through the receiver, 
 would be defeated.®^ In accordance with this view it was 
 lield that a court had no jurisdiction to entertain a suit against 
 the receiver of a railroad corporation, where it was shown that 
 leave to sue had not been obtained, although the receiver v%as 
 appointed by a court of the state of Virginia and was trans- 
 acting business in the District of Columbia, where the suit 
 was brought.*^ The court also held that the rule requiring 
 
 672; De Graff enried v. Bruns- «« Ft. Dodge v. Minneapolis &c. 
 
 wick &c. R. Co., 57 Ga. 22; Mar- R. Co., 87 Iowa 389, 54 N. W. 243. 
 
 tin V. Atchison, 2 Idaho 590, 33 In this case it was held that, 
 
 Pac. 47; Keen v. Breckenridge, 96 where mandamus against a re- 
 
 Ind. 69; St. Joseph &c. R. Co. v. ceiver is instituted in the court 
 
 Smith, 19 Kans. 225; Meredith &c. which appointed him, and the 
 
 Bank v. Simpson, 22 Kans. 414; court entertains the action, he can 
 
 Heath v. Missouri &c. R. Co., 83 not object that it is an improper 
 
 Mo. 617, 623; Little v. Dusenberry, remedy, or that the relief sought 
 
 46 N. J. L. 614, SO Am. Rep. 445; might have been obtained in a 
 
 Miller v. Loeb, 64 Barb. (N. Y.) more summary and less formal 
 
 454; Rogers v. Mobile &c. R. Co. manner. See also Ratcliff v. 
 
 (Tenn.), 12 Am. & Eng. R. Cas. Baer &c. Co., 71 Ark. 269, 72 S. 
 
 442; Melendy v. Barbour, 78 Va. W. 896. 
 
 544; Reed v. Axtell & Myers, 84 67Batton v. Barbour, 104 U. 
 
 Va. 231, 4 S. E. 587. A judgment S. 126, 26 L. ed. 672; Thompson v. 
 
 in favor of a receiver in an ac- Scott, 4 Dill. (U: . S.) 508, Fed. 
 
 tion against him begun without Cas. No. 13975. 
 
 leave of court is, it seems, a nul- 68 Thompson v. Scott, 4 .Dill, 
 
 lity, and constitutes no defense to (U. S.) 508, Fed. Cas. No. 13975. 
 
 a subsequent action. Comer v. 69 Barton v. Barbour, 104 U. S. 
 
 Felton, 61 Fed. 731. 126, 26 L. ed. 672; but in this 
 
§654 
 
 RAILROADS 
 
 1008 
 
 leave to sue applies not only to cases where the purpose of 
 the suit is to take from the receiver property which is actually 
 in his possession, placed there by order of the court, but em- 
 braces as well any suit to recover judgment against a receiver 
 for a money demand, even though the cause of action arose 
 out of the operation of a railroad by the receiver. ''<' In cases 
 where leave to sue is essential, it may be given, in the case 
 of a railroad operated by a receiver, by a general leave to all 
 persons having demands against the receiver as such, for lia- 
 bilities incurred by him in operating the road, without apply- 
 ing to the court for leave to do so, to bring suit thereon in any 
 other court having jurisdictionJi It is held that an applica- 
 tion for leave to sue is addressed to the sound discretion of 
 
 case the injury sued for was re- 
 ceived while traveling on defend- 
 ant'^ road in Virginia, and the 
 fund from which payment was 
 sought to be enforced was in Vir- 
 ginia, and the court declined to 
 pass upon the general question as 
 to the right to sue foreign re- 
 ceivers doing business outside of 
 the jurisdiction by which they 
 were ,, appointed. In, Fort Dodge 
 v. Minneapolis &c. R. Co., 87 
 Iowa 389, S4 N. W. 243, 55 Am. 
 & Eng. R. Cas. 58," it was held 
 that comity does not demand that 
 the enforcement of a statute re- 
 quiring the construction of rail- 
 road crossings should be deferred 
 to wait the action of the courts 
 of another state, which appointed 
 a receiver in reference to the 
 property of the corporation situ- 
 ated in that state. 
 
 TO Barton v. Barbour, 104 U. S. 
 126, 26 L. ed. 672. Mr. Justice 
 Woods, in delivering the opinion 
 of the court in this case, said : 
 "The evident purpose of a suitor 
 
 who brings his action against a 
 receiver without leave is to ob- 
 tain some advantage over the 
 other claimants, upon the assets 
 in the receiver's hands. His 
 judgment, if he recovered one, 
 would be against the defendant in 
 his capacity as receiver, and the 
 execution would run against the 
 property in his hands as such." 
 See this case severely criticized 
 in Lyman v. . Central Vermont R. 
 Co., 59 Vt. 167, 10 Atl. 346, and 
 see also cases cited in notes to 
 next following section, and § 817, 
 5 Thomp. Corp. (2d ed.), §6421. 
 
 71 Dow v. Memphis &c. R. Co., 
 20 Fed. 260.. In this case the fol- 
 lowing order was made: That 
 persons having demands or claims 
 of any character agai^^st the re- 
 ceiver may, without applying to 
 this court for leave to do so, 
 bring suit thereon against the re- 
 ceiver in any court in this state 
 having jurisdiction, or may file 
 their petition and have their 
 claim adjudicated in this court at 
 
1009 
 
 RECEIVERS 
 
 §654 
 
 the court,^^ and should not be granted unless the petition states 
 a prima facie cause of action against the receiver; but the 
 
 their election. This clause shall 
 not be construed as authorizing 
 the levy of any writ or process on 
 the property in the hands of the 
 receiver, or taking the same from 
 his custody or possession. Judge 
 Caldwell said : "The general' li- 
 cense to sue the receiver is given 
 because it is desirable that the 
 right of the citizens to sue in the 
 local state courts on the line of 
 the road should be interfered 
 with as little as possible. It is 
 doubtless convenient and a saving 
 and protection to the railroad 
 company and its mortgage bond- 
 holders, to halve the litigation 
 growing out of the operation of a 
 long line of railroad concentrated 
 in a single court, and on the 
 equity side of that court, where 
 justice is, administered without 
 the intervention of a jury. But, 
 in proportion as the railroad and 
 its bondholders profit by such an 
 arrangement, the citizen dealing 
 with the receiver is subjected to 
 inconvenience and expense, and he 
 is deprived of the forum, and the 
 right of trial by jury, to which, 
 in every other case of legal cog- 
 nizance, he has the right to appeal 
 for redress. * * * Where 
 property is in the hands of a re- 
 ceiver simply as a custodian, or 
 for sale or distribution, it is prop- 
 er that all persons having claims 
 against it, or upon the fund aris- 
 ing from its sale, should be re- 
 quired to assert them in the 
 court appointing a receiver. But 
 a very different question is pre- 
 sented where the court assumes 
 
 the operation of a railroad hun- 
 dreds of miles in length, and adr 
 vertises itself to the world as a 
 common carrier. This brings it 
 into constant and extensive busi- 
 ness relations with the public 
 Out of the thousands of contracts 
 it enters into dally as a common 
 carrier, some are broken and- 
 property is damaged and de- 
 stroyed, and passengers injured 
 and killed by the negligent and 
 tortious acts of its receiver and 
 its agents. * * * When a court, 
 through its receiver, becomes a 
 common carrier, and enters the 
 lists to compete with other com- 
 mon carriers for the carrying 
 trade of the country, it ought not 
 to claim or exercise any special 
 privileges denied to its compet- 
 itors and oppressive to the citi- 
 zen. The court appointing a re- 
 ceiver can not, of course, permit 
 any othqr jurisdiction to inter- 
 fere with its possession of the 
 property, or control its adminis- 
 tration of the fund, but in the 
 case of long lines of railroad, the 
 question of the legal liability of 
 its receiver to the dematids of the 
 citizen, growing out of the opera- 
 tion of the road, should be re- 
 mitted to the tribunals that would 
 have jurisdiction if the controver- 
 sy had arisen between the citizen 
 and the railroad company, giving 
 to the citizen the option of seek- 
 ing his redress in such tribunals, 
 or in the court appointing the re- 
 ceiver." 
 
 T2 Meeker v. Sprague, 5 Wash. 
 St. 242, 31 Pac. 628. But see Con- 
 
§ 655 
 
 RAILROADS 
 
 1010 
 
 court should not, as a rule, undertake to decide the case in 
 advance. ''8 
 
 § 655 (572). Effect of failure to obtain leave to sue. — It has 
 been held that a complaint in such a suit which does not allege 
 that leave to bring an action has been obtained is insufficient 
 on demurrer.''* But it has also been held that a complaint 
 which does not aver that leave to sue has been obtained is 
 sufficient to withstand a motion in arrest of judgment after 
 verdict upon issue joined. ''^ The objection that the action was 
 begun without leave of court should be interposed by the re- 
 ceiver at the first opportunity, if he relies upon the protection 
 of the court as a defense. After he has voluntarily submitted 
 to the authority of the court and joined issue without objec- 
 tion, it has been held to be too late for him to urge that leave 
 to sue him was not first obtained.''^ It has been held, however, 
 that parties who bring such a suit without leave may be puti- 
 
 well V. Lawrence, 46 Kans. 83, 26 
 Pac. 461. 
 
 73 Jordan v. Wells, 3 Woods 
 (U. S. C. C.) 527, Fed. Cas. No. 
 7524. See Palys v. Jewett, 32 N. 
 J. Eq. 302, to the eflfect that leave 
 will usually be granted unless 
 there is some good reason for not 
 granting it, and of course, a stat- 
 ute may give the right. 
 
 T'* Barton v. Barbour, 104 U. S. 
 126, 26 L. ed. 672; Keen v. Breck- 
 enridge, 96 Ind. 69; Wayne Pike 
 Co. V. State, 134 Ind. 672, 34 N. E. 
 440. And see Central Trust Co. 
 V. Wheeling &c. R. Co., 189 Fed. 
 82. Compare also International 
 &c. R. Co. V. Bradt, 57 Tex. Civ. 
 App. 82, 122 S. W. 59. And see 
 as to leave not being required in case 
 of cross-bill, Venner v. Denver 
 &c. Co., 40 Colo. 212, 90 Pac. 623, 
 122 Am. St. 1036. But see Kinney 
 V. Crocker, 18 Wis. 74; Allen v. 
 Central R. Co., 42 Iowa 683; St. 
 
 Joseph &c. R. Co. v. Smith, 19 
 Kans. 225. 
 
 75: Elkhart Car Works Co. v. 
 Ellis, 113 Ind. 215, 15 N. E. 249. 
 
 70 Naumburg v. Hyatt, 24 Fed. 
 898, 901; Mulcahey v. Strauss, 
 151 111. 70, 37 N. E. 702; Elkhart 
 Car Works Co. v. Ellis, 113 Ind. 
 215, 15 N. E. 249; Flentham v. 
 Steward, 45 Nebr. 640, 63 N. W. 
 924; Hubbell v. Dana, 9 How. 
 Prac. (N. Y.) 424; Roxbury v. 
 Central Vermont R. Co., 4 R. & 
 Corp. L. J. 204. See Jerome v. 
 McCarter, 94 U. S. 734, 24 L. ed. 
 136; Comer v. Felton, 61 Fed. 731; 
 8 Thomp. Corp. § 6420, and see ar- 
 ticle in 25 Am. L. Reg. (N. S.) 289^ 
 in which the position is taken that the 
 receiver can not give jurisdiction by 
 waiving the objection. As already 
 shown a few courts, including the Su- 
 preme Court of the United States, 
 seem to regard leave to sue as juris- 
 dictional. 
 
1011 
 
 RECEIVERS 
 
 §655 
 
 ished for contempt/^ and that the proceedings may be re- 
 strained,''* or stayed, or set aside on motion.''^ The consti- 
 tutional right to sue in the federal courts in certain cases does 
 not enable a litigant to maintain a suit without leave in one 
 of those courts against a receiver appointed by a state court.**" 
 It has been held, however, that where the receiver, wrongfully 
 or by mistake, takes possession of the property of a third per- 
 son, such person may bring suit therefor against him per- 
 sonally as a matter of right; for, in such case, the receiver 
 would be acting ultra vires, and cannot be held to represent 
 the court by which he was appointed.*^ A number of cases, 
 also, while admitting the general doctrine that a court of equity 
 may draw to itself all controversies to which the receiver 
 is a party, hold that it is not bound to do so, but may properly 
 leave the determination of actions at law for money demands, 
 the exact amount of which is uncertain, to be determined by 
 other courts of competent jvirisdiction,^^ and that the lack of 
 leave to sue does not affect the jurisdiction of the court in 
 
 TT Kennedy v. Indianapolis &c. 
 R. Co., 3 Fed. 97; Wiswall v. 
 Sampson, 14 How. (U. S.) S2, 67, 
 14 L. ed. 332; 5 Thomp. Corp. (2nd. 
 ed.), § 6421, citing additional cases 
 to same effect. 
 
 Ts Evelyn v. Lewis, 3 Hare 472; 
 Tink V. Rundle, 10 Beav. 318. 
 
 T9 De Groot v. Jay, 30 Barb. (N. 
 Y.) 483; Taylor v. Baldwin, 14 
 Abb. Prac. (N. Y.) 166. 
 
 80 Reed V. Axtell, 84 Va. 231, 4 
 S. E. 587- 
 
 81 Kenney v. Ranney, 96 Mich. 
 617, SS N. W. 982; Parker v. 
 Browning, 8 Paige (N. Y.) 388, 35 
 Am. Dec. 717; Paige v. Smith, 99 
 Mass. 395; Hills v. Parker, 111 
 Mass. SOS, 15 Am. Rep. 63. In 
 this latter case the owner of a 
 locomotive in use upon the road 
 of an insolvent railroad corpora- 
 
 tion was permitted to maintain an 
 action of replevin against the re- 
 ceiver of such corporation to re- 
 cover his property, without hav- 
 ing first obtained leave of court. 
 Christian Jansen Co., In re, 128 N. 
 Y. 550, 28 N. E. 665, holds that 
 even though property is wrongful- 
 ly in the possession of a corpora- 
 tion, it can not be replevied with- 
 out leave of court after it comes in- 
 to the possession of a receiver 
 appointed in voluntary proceed- 
 ings to dissolve the corporation. 
 
 82 Allen V. Cent. R. &c., 42 
 Iowa 683; St. Joseph &c. R. Co. v. 
 Smith, 19 Kans. 225; Chautauqua 
 County Bank v. Risley, 19 N. Y. 
 369, 75 Am. Dec. 347; Blumenthal 
 V. Brainerdi 38 Vt. 402, 91 Am. Dec. 
 349; Kinney v. Crocker, 18 Wis. 
 74. 
 
§■656 
 
 RAILROADS 
 
 1012 
 
 which such a suit is brought,^^ j^^d does not invalidate a judg- 
 ment rendered by such court in case the proceedings are n'.)t 
 stayed by the court which appointed the receiver.** 
 
 §656 (573). Effect of recent Act of Congress.— It would 
 seem highly proper that suits upon causes of action arising 
 from the negligent operation of a railroad by a receiver, or 
 from a breach of contracts made in the course of such opera- 
 tion,85 should be tried in a court of law with the aid of a 
 jury, and this is sometimes urged as a reason for denying that 
 
 83 Allen V. Central R. Co., 42 
 Iowa. 683; Nichols v. Smith, US 
 Mass. 332; Blumenthal v. Brain- 
 erd, 38 Vt. 402, 91 Am. Dec. 349; 
 Lyman v. Central Vermont R. 
 Co., S9 Vt. 167, 10 Atl. 346; Kinney 
 V. Croker, 18 Wis. 74. See also 
 Mulcahey v. Strauss, ISl 111. 70,, 
 37 N. E. 702. In Kinney v. Crock- 
 er, 18 Wis. 74, the court said: "A 
 court of equity will, on proper ap- 
 plication, protect its own receiver, 
 when the possession which he holds 
 under the order of the court is 
 sought to be disturbed." And again : 
 "But in all these cases it is not 
 a question of jurisdiction in the 
 courts of law, but only a question 
 whether equity will exercise its 
 own acknowledged jurisdiction of 
 restraining suits at law, under 
 such circumstances, and itself dis- 
 pose of the matter involved. It 
 follows that although a plaintiflf 
 in such case, desiring to prosecute 
 a legal claim for damages against 
 a receiver might, in order to re- 
 lieve himself from the liability to 
 have his proceedings arrested by 
 an exercise of its equitable juris- 
 diction very properly obtain leave 
 to prosecute; yet his failure to do 
 
 so is no bar to the jurisdiction 
 of the court of law, and no de- 
 fense to an otherwise legal ac- 
 tion in the trial. There can be 
 no room to question this conclu- 
 sion in all cases where there is 
 no attempt to interfere with the 
 actual possession of property 
 which the receiver holds under the 
 order of the court of chancery, but 
 only an attempt to obtain a judg- 
 ment at law in a claim for dam- 
 ages." 
 
 84 De Groot v. Jay, 30 Barb. (N. 
 Y.) 483; Taylor v. Baldwin, 14 
 Abb. Prac. (N. Y.) 166. 
 
 85 For instances in which such 
 suits have been maintained, see 
 Allen V. Central R. Co., 42 Iowa 
 683; Lamphear v. Buckingham, 33 
 Conn. 237; Ballou v. Farnum, 9 
 Allen (Mass.) 47; Paige v. Smith, 
 99 Mass. 395; Nichols "v. Smith, 
 115 Mass. 332; Barter v. Wheeler, 
 49 N. H. 9, 6 Am. Rep. 434; Kain 
 V. Smith, 80 N. Y. 458; Blumen- 
 thal V. Brainerd, 38 Vt. 402, 91 Am. 
 Dec. 349; Newell v. Smith, 49 Vt. 
 255; Lyman v. Central Vermont 
 R. Co., 59 Vt. 167, 10 Atl. 346. 
 See also Klein v. Jewett, 26 N T 
 Eq. 474. 
 
1013 
 
 RECEIVERS 
 
 656 
 
 leave to sue is jurisdictional.^® The view^ that leave to sue 
 in such a case ought not to be required has been taken by 
 Congress, and it is now provided^'' that every receiver or man- 
 ager of any property appointed by any court of the United 
 States may be sued in respect of any act or transaction of his 
 in carrying on the business connected with such property, with- 
 out the previous leave of the court in which such receiver or 
 manager was appointed; but such suit shall be subject to the 
 
 86 In a dissenting opinion in the 
 case of Barton v. Barbour, 104 U. 
 S. 126, Mr. Justice Miller said: 
 "In the case before us the plain- 
 tiff sues to recover damages for 
 a personal injury, caused by an 
 act done by the receiver or his 
 agents in the transaction of busi- 
 ness as a common carrier, in 
 which he was largely and contin- 
 uously engaged.: Why should the 
 receiver not be sued like any one 
 else on such a cause of action, in 
 any court of competent jurisdic- 
 tion? The reply is because he is 
 a receiver of the road on which 
 plaintiff was injured, and holds 
 his appointment at the hands of a 
 Virginia court of chancery. If 
 this be a sufficient answer, then 
 the railroad business of the en- 
 tire country, amounting to many 
 millions of dollars per annum, 
 may be withdrawn from the juris- 
 diction of the ordinary courts 
 having cognizance of such mat- 
 ters, and all the disputes arising 
 out of these vast transactions 
 must be tried alone in the court 
 which appointed the receiver. 
 Not only this, but the right of 
 trial by jury, which has been re- 
 garded as secured to every man 
 by the constitutions of the sever- 
 
 al states and of the United States, 
 is denied to the person injured, 
 and though his case has no ele- 
 ment of equitable jurisdiction he 
 is compelled to submit it to a 
 court of chancery or to one of the 
 masters of such court. In an ac- 
 tion for a personal injury, which 
 has always been considered as 
 eminently fitted for a jury, and 
 especially in the assessments of 
 damages, this constitutional right 
 is denied because the receiver of 
 a railroad, and not its owners, 
 committed the wrong." We fail 
 to see, , however, ' how these con- 
 siderations meet the question. 
 They may constitute forcible rea- 
 sons against requiring a trial 
 without a jury in the court which 
 appointed the receiver, but they 
 do not seem to be in point upon 
 the mere question of the juris- 
 diction pf another court where no 
 leave to sue is granted. Leave 
 will be given unless there is good 
 reason for withholding it, and 
 trial by jury may be had in any 
 proper case. 
 
 8T Act of Congress of March 3, 
 1887, as corrected by act of Au- 
 gust 13, 1888, §3, 24 U. S. St. 554,- 
 25 U. S. St. 436, Barnes' Fed. Code 
 §828. 
 
§656 
 
 ■RAILROADS 
 
 1014 
 
 general equity jurisdiction of the court in which he was ap- 
 pointed, so far as the same shall be necessary to the ends of 
 justice. It is held that this act gives an absolute right to sue 
 a receiver appointed by a federal court in any court having 
 jurisdiction of the subject-matter.^s The judgment of the court 
 trying such suit is as final and conclusive against the receiver 
 as against any other suitor, and will not be disturbed by the 
 court appointing liim because of any suggestion that he has 
 not obtained justice in the other court. ^^ The act applies to 
 receivers appointed before it was passed as well as to those 
 afterwards appointed, and they may be sued without leave in 
 
 88 McNulta V. Lochridge, 141 U. 
 S. 327, 332, 12 Sup. Ct. 11, 35 L. ed. 
 796; Central Trust Co. v. St. 
 Louis &c. R. Co., 40 Fed. 426; 
 Dillingham v. Russell, 73 Tex. 47, 
 11 S. W. 139, 3 L. R. A. 634, 15 
 Am. St. 753; Texas &c. R. Co. v. 
 Gay, 86 Tex. 571, 26 S. W. 599, 
 25 L. R. A. 52. See also Wheeler 
 V. Smith, 81 Fed. 319; Nashville 
 &c. Co. V. Bupn, 168 Fed. 862; 
 Chicago Great Western R. Co. v. 
 Hulbert, 205 Fed. 248; Malott v. 
 Shinier, 153 Ind. 35, 54 N. E. 101, 
 74 Am. St. 278. In Railroad Cora. 
 V. Alabama Gt. So. R. Co., 185 Ala. 
 354, 64 So. 13, it is also held that 
 under the Act of Congress (U. S. 
 Comp. St. 1901, p. 509) a receiver 
 appointed by a federal court may 
 be made a defendant without 
 leave, to a proceeding by the com- 
 mission to compel him and other 
 railroad companies to unite in 
 maintaining a union depot. Not- 
 withstanding an order of court 
 discharging the receiver and re- 
 storing the property to the re- 
 ceiver without foreclosure, and 
 giving a limited time within 
 
 which all claims must be pre- 
 sented, a suit may subsequently 
 be brought against the receiver 
 personally to recover damages for 
 personal injuries due to the negli- 
 gence of his employes. Texas 
 &c. R. Co. V. Johnson, 151 U. S. 
 81, 14 Sup. Ct. 250, 38 L. ed. 81. 
 But see Decker v. Gardner, 124 
 N. Y. 334, 26 N. E. 814, 11 L. R. 
 A. 480. 
 
 89 "This court will not entertain 
 the suggestion that its receiver 
 will not obtain justice in the state 
 courts." Central Trust Co. v. St. 
 Louis &c. R. Co., 41 Fed. 551, 42 
 Am. & Eng. R. Cas. 26; Dilling- 
 ham v. Hawk, 60 Fed. 494. The 
 appointing court has no jurisdic- 
 tion to enjoin the prosecution of 
 an action against its receiver 
 where authorized by the statute. 
 Texas &c. R. Co. v. Johnson, 151 
 U. S. 81, 14 Sup. Ct. 250, 38 L. 
 ed. 81; Central Trust Co. v. East 
 Tennessee &c. R. Co., 59 Fed. 
 523. But this statute does not 
 limit nor destroy the right of the 
 federal court to protect property 
 in the hands of its receivers from 
 
loi; 
 
 RECEIVERS 
 
 §656 
 
 the same manner as those subsequently appointed.*'' And it 
 has been held that a receiver may be sued under the provisions of 
 this act, in respect to an act of his predecessor in the ofiEce.*^ 
 Actions for personal injuries caused by a station platform be- 
 ing out of repair are included,®^ as well as actions for injuries 
 caused in the running of trains. But it has been held that such 
 statute does not authorize a suit by a stockholder against the 
 directors and receivers, without leave of court, upon a cause 
 of action which accrued before the appointment of the receiv- 
 ers and upon which they have refused to bring suit.*^ Neither 
 is a proceeding in garnishment a suit against the receiver for 
 "any act or transaction of his," within the meaning of the 
 statute.** The subjection of such suits to the general equity 
 jurisdiction of the court does not invest it with appellate or 
 supervisory jurisdiction over state courts in which the suits 
 may be brought, and it cannot annul, vacate or modify their 
 judgments. This provision merely gives the United States 
 court a right to control suits which seek to deprive the receiver 
 
 external attack. Tyler, Ex parte, 
 149 U. S. 164, 191, 13 Sup. Ct. 
 785, 793, 37 L. ed. 689. 
 
 90 See Texas &c. R. Co. v. Cox, 
 145 U. S. 593, 12 Sup. Ct. 90S, 36 
 L. ed. 829. But see Missouri Pac. 
 R. Co. V. Texas &c. R. Co., 41 
 Fed. 311. 
 
 91 McNulta V. Lochridge, 141 U. 
 S. 327, 12 Sup. Ct. 11, 35 L. ed. 
 796. But see Jones v. Schlap- 
 back, 81 Fed. 274. 
 
 92 FuUerton v. Fordyce, 121 Mo. 
 1, 25 S. W. 587, 42 Am. St. 516. 
 See also Central Trust Co. v. St. 
 Louis &c. R. Co., 40 Fed. 426; 
 Texas &c. R. Co. v. Cox, 145 U. 
 S. 593, 12 Sup. Ct. 905, 36 L. ed. 
 829; McNulta v. Lochridge, 137 
 III 270, 27 N. E. 452, 31 Am. St. 
 362. 
 
 93 Swope V. Villard, 61 Fed. 417. 
 
 And that it does not authorize an 
 independent suit, without leave of 
 court, to foreclose a mortgage on 
 property in the hands of a re- 
 ceiver. American Loan &c. Co. v. 
 Central Vt. R. Co., 84 Fed. 917. 
 
 9* Central Trust Co. v. East 
 Tennessee &c. R. Co., 59 Fed. 523; 
 Central Trust Co. v. Chattanoo- 
 ga &c. R. Co., 68 Fed. 685. Contra, 
 Irwin V. McKechnie, 58 Minn. 
 145, 59 N. W. 987, 26 L. R. A. 218, 
 49 Am. St. 495. As to the general 
 rule forbidding garnishment of 
 property in the hands of a receiver, 
 see Jackson v. Lahee, 114 111. 287, 
 2 N. E. 172; McGowan v. Myers, 
 66 Iowa 99, 23 N. W. 282; Colum- 
 bian Book Co. V. De Golyer, 115 
 Mass. 67; Smith v. McNamara, 15 
 Hun (N. Y.) 447; Taylor v. Gil- 
 lean, 23 Tex. 508. 
 
§ 657 RAILROADS 1016 
 
 of possession of the property, and all process of execution 
 which would have the effect, so far as may be necessary to 
 the ends of justice, in preventing the road from being broken 
 into parts, or deprived of its rolling stock, so as to impair the 
 value as a going concern.®^ In other words, the time and mode 
 of paying a judgment rendered by a state court remain under 
 the control of the court appointing the receiver, although the 
 amount of such judgment cannot be changed. Some of the 
 states have similar statutes, conferring a general authority 
 upon all persons to sue receivers engaged in operating rail- 
 roads under appointment by any court of equity. The act of 
 congress giving permission to sue a federal receiver applies 
 in any court of competent jurisdiction and is not limited to suits 
 in the federal courts.^^ But it does not give permission to 
 sue a receiver of a state court without the consent of the court 
 appointing him,''" and it has been held that a receiver cannot 
 be sued under such act, without leave of court, for alleged 
 wrongful acts committed in the operation of the road before 
 he became receiver.^* 
 
 § 657 (574). Rule where suit has been commenced before 
 appointment of receiver. — Where suit has been commenced 
 against ,the corporation before the appointment ' of a receiver, 
 it has been held that such stiit may, be prosecuted to judgment, 
 
 93 Central Trust Co. v. St. 274. But' compare McNulta v. 
 
 Louis &c. R. Co., 41 Fed. 551; Lochridge, 141 U. S. 327, 12 Sup. 
 
 Eddy V. Lafayette, 49 Fed. 807; Ct. 11, 35 L. ed. 796. See also 
 
 Dillingham v. Hawk, 60 Fed. 494. to the effect that the statute re- 
 
 96 Texas &c. R. Co. V. Johnson, lates only to suits arising out of 
 151 U. S. 81, 14 Sup. Ct. 250, 38 the acts of the receiver relative to 
 L. ed. 81; Central "Brust Co. v. his duties concerning the proper- 
 East Tenn. &c. R. Co., 59 Fed. ty in his hands. Coster v. Park- 
 523. Applied to a receiver ap- ersburg Branch R. Co., 131 Fed. 
 pointed by a territorial court in 115; Minot v. Martin, 95 Fed. 
 Wheeler v. Smith, 81 Fed. 319. 734. See also to the effect that a 
 
 97 Porter v. Sabin, 149 U. S. receiver required to manage and 
 473, 13 Sup. Ct. 1008, 37 L. ed. operate the property according to 
 815. the laws of the state in which it 
 
 98 Jones V. Schlapback, 81 Fed. is situated in the same manner as 
 
1017 
 
 RECEIVERS 
 
 §657 
 
 and such judgment will establish as against the receiver the 
 rightful amount of the claim. ^® In some jurisdictions, how- 
 ever, the receiver should be substituted as a party defendant. 
 The recovery of a judgment against the receiver appointed by 
 a court of equity has no further effect than to fix the amount 
 of the plaintiff's claim. An execution issued thereon cannot be 
 levied upon the property in the receiver's hands without leave 
 from the court by which the receiver was appointed. ^ This 
 rule is not changed as to the United States courts by the pro- 
 visions of the "Federal Judiciary Act," but the levying of exe- 
 cution or other judicial process upon property in the hands 
 of its receivers is, by that act, left under the control of tlje 
 court which they represent. ^ Indeed, the very object of ap- 
 
 the owner or possessor thereof, 
 under said act, is subject to a law 
 of the state making railroad com- 
 panies liable for the negligence of 
 employes having superior authori- 
 ty. Peirce v. Van Dusen, 78 
 Fed. 693, 69 L. R. A. 705. 
 
 99 Pine Lake Iron Co. v. Lafa- 
 yette Car Works, 53 Fed. 853. 
 But such a judgment does not 
 constitute a lien upon the prop- 
 erty in the receiver's hands. Bell 
 V. Chicago &c. R. Co., 34 La. Ann. 
 •785. See also Clark v. Bacorn, 
 116 Fed. 617. The receiver of a 
 railroad company may be substi- 
 tuted as defendant in an action 
 for tort committed by the' com- 
 pany before* his appointment. 
 Decker v. Gardner, 58 Hun (N. 
 Y.) 602, 11 N. Y. 388. But see 
 Jones V. Pennsylvania R. Co., 19 
 D. C. (8 Mackey) 178, holding that 
 the fact that a receiver of the 
 property of a railroad company 
 has been appointed will not affect 
 the right of recovery against the 
 company itself for personal in- 
 juries, where the receiver has al- 
 lowed existing officers to manage 
 
 the business, and received the net 
 earnings of the road, without tajc- 
 ing any part in its management, 
 the same remaining with the com- 
 pany. Receivers have been al- 
 lowed to come in in many xases. 
 Rust V. United Water' Works' Co., 
 70 Fed. 129; Andrews v. Steele 
 City Bank, 57 Nebr. \n,n N. W. 
 342. But it is held that he is not 
 a necessary party and need not 
 be substituted. Speckert v. Ger- 
 man Nat. Bank, 98 Fed. 151; Kitt- 
 ridge v. Osgood, 161 Mass. 384, Zl 
 N. E. 369; United States Vinegar 
 Co. V. Spanner, 143 N. Y. 676, 38 
 N. E. 731. 
 
 1 Missouri &c. R. Co. v. Love, 
 61 Kans. 433, 59 Pac. 1072; Skin- 
 ner V. Maxwell, 68 N. ' Car. '400; 
 Coe V. Columbus &c. R. Co., 10 
 Ohio St. 372, 75 Am. Dec. 518; 
 Ru.:sel V. East Anglian R. Co., 6 
 Eng. Railway & Canal Cases 501. 
 See also Union Trust Co. v. 
 Curtis, 182 Ind. 61, 105 N. E. 562, 
 L. R. A. 191SA, 699, 705 (citing 
 text, but not directly in point). 
 
 2 See Central Trust Co. v. St. 
 Louis &c. R. Co., 41 Fed. 551. 
 
§658 
 
 RAILROADS 
 
 1018 
 
 pointing a receiver would be defeated, if he could be stripped 
 of the property piecemeal by process issued by rival courts 
 at the suit of individual creditors. It has been held that a 
 sale of property upon execution while it was in the possession 
 of a receiver and without leave of court was illegal and void, 
 although the levy was made before the receiver was appointed." 
 
 §658 (575). Protection of receiver by the court. — Not only 
 in the matter of suits, but in all other respects, the court will 
 protect its receiver in his possession and control of the prop- 
 erty committed to his care. An attempt to disturb him in the 
 discharge of his duties with reference to such property may be 
 a contempt of court.* The offender may be attached, and, if 
 the circumstances justify it, punished by fine and imprison- 
 
 3 Walling V. Miller, 108 N. Y. 
 173, IS N. E. 65, 2> Am. St. 400. 
 Earl, J., speaking for the court, 
 says : "The lien of the execution 
 was not destroyed by the appoint- 
 ment of the receiver, but the 
 rights and interests of all parties 
 in the property were thereafter to 
 be adjusted by the court which 
 appointed the receiver, and the 
 property could not be taken out 
 of the possession of the receiver, 
 and sold upon execution, without 
 leave of court. The execution 
 creditor could bring his lien to 
 the attention of the court in the 
 action in which the receiver was 
 appointed, and ask to have the ex- 
 ecution satisfied out of the pro- 
 ceeds of the property. But per- 
 sons having liens upon the prop- 
 erty had no right to interfere 
 with its possession by the re- 
 ceiver and without any applica- 
 tion to or adjudication of the 
 court, sell and dispose of it, and 
 thus dissipate it, and deprive the 
 
 court of jurisdiction to adminis- 
 ter it." See also Pelletier v. 
 Greenville &c. Co., 123 N. Car. 
 596, 31 S. E. 855, 68 Am. St. 837. 
 It has been held otherwise where 
 the sheriff retains actual posses- 
 sion under an attachment. State 
 V. Superior Court, 8 Wash. 210, 35 
 Pac. 1087, 25 L. R. A. 354; State 
 V. Graham, 9 Wash. 528, 36 Pac. 
 1085. 
 
 4 King V. Ohio &c. R. Co., 7 
 Biss. (U. S.) 529, Fed. Cas. 7800; 
 Secor V. Toledo &c. R. Co., 7 
 Biss. (U. S.) 513, Fed. Cas. No. 
 12605; United States v. Kane, 23 
 Fed. 748; Wabash &c. R. Co., In 
 re, 24 Fed. 217; Higgins, In re, 27 
 Fed. 443; Richards v. People, 81 
 111. 551; Hazelrigg v. Bronaugh, 
 78 Ky. 62; O'Mahoney v. Belmont, 
 62 N. Y. 133; Chafee v. Quidnick 
 Co., 13 R. I. 442; Vermont & Can- 
 ada R. Co. V. Vermont Cent. R. 
 Co., 46 Vt. 792; Helmore v. Smith, 
 56 L. J. Ch. Div. 145. 
 
1019 RECEIVERS § 658 
 
 ment;'' The wrongful seizure of property in the hands of a 
 receiver upon process from another court is a contempt on the 
 part of the officers executing the writ.® And it is also con- 
 tempt of the court appointing the receiver to take property 
 from his possession upon distraint for rentJ Actual violence 
 offered to a receiver in the discharge of his duties, or such 
 threats of violence as to intimidate the receiver may amount 
 to such an interference.^ So may violence or threats by which 
 the servants or employes of the receiver are prevented from 
 carrying on the business as directed by the court. It is the 
 duty of the court to see that property which is put into its 
 hands, or in the hands of its receivers, is absolutely protected, 
 and that nobody, directly or indirectly, wrongfully interferes 
 with the management of that property.^ Where the employes 
 of another road who have struck, or any other persons, pre- 
 vent the servants of a receiver from working and thereby in- 
 terfere with the operation of the road as directed by the order 
 of the court, thej^ are guilty of contempt of court. '^'* The em- 
 ployes of a railroad operated by a receiver have the same right 
 to quit work that other employes have, and it is not unlawful 
 
 5 See cases in preceding note. 79 Fed. 389; Royal Trust Co. v. 
 
 An interference with the posses- Washburne &c. R. Co., 113 Fed. 
 
 sion and use of a street railway S31 ; Citizens' Bank v. Bay &c., 
 
 in the hands of a receiver may 110 Mich. 683, 68 N. W. 649; Al- 
 
 be enjoined. Fidelity Trust &c. Co. bany City Bank v. Schermerhorn, 
 
 V. Mobile St. R. Co., 53 Fed. 687. 9 Paige (N. Y.) Ch. 27Z. 
 
 The rule that property in the 7 Noe v. Gibson, 7 Paige (N. 
 
 hands of a receiver is in custodia y.) Ch. 513. 
 
 legis, and that interference with 8 pitzpatrick v. Eyre, 1 Hogan 
 
 such possession without leave of (Irish Rolls) 171. 
 
 the court is a contempt, is as ap- 9 United States v. Kane, 23 Fed. 
 
 plicable in the case of seizure 743. 
 
 thereof to enforce payment of 10 Doolittle, In re, 23 Fed. 544 
 
 taxes due the state as in any other Wabash R. Co., In re, 24 Fed 
 
 case. Tyler, Ex parte, 149 U. S. 217; Higgins, In re, 27 Fed. 443 
 
 164, 191, 13 Sup. Ct. 785, 793, 37 King v. Ohio &c. R. Co., 7 Biss 
 
 L- ed. 689. (U. S.) 529, Fed. Cas. No. 7800 
 
 s Commonwealth v. Young, 11 Secor v. Toledo &c. R. Co., 7 
 
 Phila. (Pa.) 606. See Mercantile Biss. (U. S.) 513, Fed. Cas. No. 
 
 Trust Co. V. Baltimore &c. R. Co., 12605. 
 
§658 RAILROADS 1020 
 
 for them to use arguments and persuasion to induce their fel- 
 low employes to do the same. But if a mere request, or mere 
 advice to quit work, is accompanied by such demonstration 
 of force as is calculated to intimidate the receiver's employes, 
 and induce them to abandon his service against their will, it will 
 be punished as a contempt.i^- In case of a disagreement be- 
 tween the receiver and his employes, the proper course for 
 them to pursue is to petition the court for an order directing a 
 just and equitable settlement of the differences. The court 
 will direct the receiver to enter into such agreements and con- 
 tracts with his employes as may give them reasonable protec- 
 tion and* at the same time guard the rights of creditors and 
 others interested in the trust property.^* Punishment for con- 
 tempt is usually by fine and imprisonment, which is largely 
 within the discretion of the court against which the contenipl: 
 was committed,^* and while the court will not be tenacious 
 of any mere prerogative to notice an unintentional interfer- 
 ence, "^^ or to visit severe punishment upon the offenders for a 
 first or unpremeditated offense,^^ it is the duty of the court to 
 see that property which is put into its hands, or in the hands 
 of its receivers, is absolutely protected, and the punishment 
 must be made severe enough to restrain and prevent all inter- 
 
 11 United States v. Kane, 23 quired tlie petitioners, however, 
 Fed. 748; Higgins, In re, 27 Fed. lo waive rule 12 of the Brother- 
 443. See also Arthur v. Oakes, 63 hood, by which it is provided that 
 Fed. 310; Farmers' Loan &c. Co. members shall refuse to handle 
 v. Northern Pac. R. Co., 60 Fed. the cars or roads with which the 
 803; Debs, In re, 158 U. S. 564, Brotherhood are at variance, 
 15 Sup. Ct. 900, 39 L. ed. 1092. since such rule is illegal, and a 
 
 12 Waterhouse v. Comer, 55 compliance with it would compel 
 Fed. 149, 53 Am. & Eng. R. Cas. the engineers to violate the inter- 
 329. In this case, Judge Speer state commerce law. 
 
 granted the petition of the i' Higgins, In re, 27 Fed. 443. 
 
 Brotherhood of Locomotive En- There is said to be no appeal 
 
 gineers for an order directing the from the judgment of the court 
 
 receiver to enter into a contract in such a case, 
 
 with them prescribing the terms i-* Doolittle, In re, 23 Fed. 544. 
 
 of service, the qualifications 15 Doolittle, In re, 23 Fed. 544, 
 
 necessary for promotion, and the and United States v. Kane, 23 Fed. 
 
 rate of compensation. He re- 748. 
 
1021 RECEIVERS § 659 
 
 ference with such property.^® It is no defense to a proceed- 
 ing for contempt in interferin-g with the receiver's possession 
 of property placed in his hands by the court^ to show that the 
 order appointing him was erroneously or improvidently made.^^ 
 An order of the court which is not void cannot be assailed in 
 a collateral proceeding/* and the court will not in a proceeding 
 to punish a contempt review the questions which were passed 
 upon when the receiver was appointed.^^ The fact that rail- 
 road companies are in some sense public agents presents an 
 additional reason why judicial control should be extended as 
 far as possible to prevent an interference with them in the exer- 
 cise of their public functions.^** An injunction will be granted, 
 in a proper case^ restraining unlawful interference by strikers 
 or others, and its violation is punishable as. a contempt of court. 
 This matter, however, will be fully considered hereafter. 
 
 § 659 (576). Liability of receivers — Generally. — A receiver 
 is the mere officer of the court by which he was appointed and 
 cannot question any order made by the court with reference to 
 the control of the receivership property, but must, ordinarily 
 at least, implicitly obey all such orders. ^^ It foUovvs from this 
 that the only personal liability which can ordinarily attach 
 to a receiver in the operation of a railroad is for some wrong- 
 ful or unauthorized act of his own. His liability for acts done 
 in the discharge of his duties is official only, and such acts bind 
 only the trust estate.^^ It accords with sound principle and 
 
 le United States v. Kane, 23 Fed. Russell v. East Anglian R. Co., 3 
 
 748. M. & G. 104. 
 
 iTCape May &c. R. Co. v. Johnson, 20 Delaware &c. R. Co. v. Erie 
 
 35 N. J. Eq. 422; Harris v. Clark, 10 R. Co., 21 N. J. Eq. 298. See also 
 
 How. Pr. 415 ; Day v. Bergen, S3 N. Union ' Trust Co. v. Curtis, 182 
 
 Y.'404. Ind. 6, 105 N. E. 562, L. R. A. 
 
 18 Cook V. Citizens' National 1915A, 699, 70S (citing this section). 
 Bank, n Ind. 256. 21 Herrick v. Miller, 123 Ind. 
 
 19 Richards, v. People, 81 111, 304, 24 N. E. 111. 
 
 SSI; Howard v. Palmer, AValkl 22 See Texas &c. R. Co.. v. Cox, 
 
 (Mich.) 391; People v. Sturtevant, 145 U. S. 593, 12 Sup. Ct. 905, .36 
 
 9 N. Y. 263, 59 Am. Dec. 536; L; ed. 829; McNulta. v. Loffkridge, 
 
§659 
 
 RAILROADS 
 
 1022 
 
 reason that a receiver exercising the franchise of a I'ailroad 
 company shall be held amenable, in his official capacity, to 
 substantially the same rules of liability that are applicable to 
 the company while it exercises the same powers of operating 
 the road.23 And this is the rule established by the great weight 
 of modern authority.^* As has been seen, there is a conflict 
 of authority as to whether this liability can be enforced by 
 suit, or must be asserted by petition in the court by which the 
 receiver was appointed, but the cases are practically unanimous 
 in holding that a receiver who assumes to exercise the rights 
 
 141 U. S. 327, 12 Sup.Ct. 11, 35 
 L. ed. 796. A receiver is not per- 
 sonally liable for the torts of his 
 employes. Kain v. Smith, 80 N. 
 Y. 458; Cardot v. Barney, 63 N. 
 Y. 281, 20 Am. Rep. 533; Erskine 
 V. Mcllrath, 60 Minn. 485, 62 N. 
 W. 1130; Klein v. Jewett, 26 N. 
 J. Eq. 474; Meara v. Holbrook, 
 20 Ohio -St. 137, S Am. Rep. 633; 
 Mersey Docks v. Gibbs, 11 H. L. 
 Cas. 686. Nor on contracts prop- 
 erly made in his official capacity. 
 Walsh V. Raymond, 58 Conn. 251, 
 20 Atl. 464, 18 Am. St. 264; Liv- 
 ingston V. Pettigrew, 7 Lans. (N. 
 Y.) 405. See also Schmidt v. Gay- 
 ner, 59 Minn. 303, 62 N. W. 265; 
 Piatt V. New York &c. R. Co., 170 
 N. Y. 451, 63 N. E. 532; Stannard 
 V. Reid, 195 N. Y. 530, 88 N. E. 
 1132. Nor for costs in actions 
 which he prosecutes by direction 
 of court. Columbian Ins. Co. v. 
 Stevens, 2,1 N. Y. 536; Devendorf 
 V. Dickinson, 21 How. Prac. (N. 
 Y.) 275. But a receiver is per- 
 sonally liable upon unauthorized 
 contracts entered into by him. 
 Ryan v. Rand, 20 Abb. N. Cas. 
 (N. Y.) 313. See also Peoria &c. 
 V. Hickey, 110 Iowa 276, 81 N. W. 
 
 473, 80 Am. St. 296; Cake v. Mo- 
 hum, 164 U. S. 311, 17 Sup. Ct. 
 100, 41 L. ed. 447. In re Kalb 
 &c. Mfg. Co., 165 Fed. 895. And 
 for wrongful and negligent acts 
 on his part by which loss is oc- 
 casioned. Ricks V. Broyles, 78 
 Ga, 610, 3 S. E. 112, 6 Am. St. 280; 
 Carr v. Morris, 85 Va. 21, 6 S. E. 
 613; Brooks v. Miller, 29 W. Va. 
 499. See also Kirker v. Owings, 
 98 Fed. 499; State &c. Bank v. 
 Farming &c. Co., 118 Iowa 698, 92 
 N. W. 712; Kain v. Smith, 80 N. 
 Y. 458; Erwin v. Davenport, 9 
 Heisk. (Tenn.) 44. He is also lia- 
 ble like any other trustee for pro- 
 fits which he makes out of a use 
 of the money or property belong- 
 ing to the trust estate. Ryan v. 
 Morrill, 83 Ky. 352; Schwartz v. 
 Keystone Oil Co., 153 Pa. St. 283, 
 25 Atl. 1018. 
 
 23 Little v. Dusenberry, 46 N. J. 
 L. 614, 50 Am. Rep. 445; Sprague 
 V. Smith, 29 Vt. 421. 7n ^.m. Dec. 
 424. 
 
 2*Cowdrey v. Galveston &c. 
 R. Co., 93 U. S. 352, 23 L. ed. 950; 
 Farlow v. Kelly, 108 U. S. 288, 2 
 Sup. Ct. 555, 27 L. ed. 726; Toledo 
 &c. R. Co. V. Beggs, 85 111. 80, 28 
 
1023 
 
 RECEIVERS 
 
 §66a 
 
 and powers of a common carrier becomes answerable in his 
 official capacity for all injuries and losses sustained by persons 
 dealing with him in that capacity to the same extent in general 
 that the corporation would have been liable.^^ 
 
 § 660 (577). Liability for torts. — Upon the principle referred 
 to in the preceding section receivers are held liable for damages 
 for personal injuries sustained by passengers^® and employes,^''^ 
 
 Am. Rep. 613; Sloan v. Central 
 Iowa R. Co., 62 Iowa 728, 16 N. W. 
 331; Paige v. Smith, 99 Mass. 395; 
 Heath v. Missouri &c. R. Co., 83 
 Mo. 617; Klein v. Jewett, 26 N. J. 
 Eq. 474; Brown, Ex parte, IS S. 
 Car. S18; Blumenthal v. Brainard, 
 38 Vt. 402, 91 Am. St. 349; Mel- 
 endy v. Barbour, 78 Va. 544; 
 Newell V. Smith, 49 Vt. 255; Ly- 
 man V. Central Vermont R. Co., 
 59 Vt. 167, 10 Atl. 346; Kinney v. 
 Crocker, 18 Wis. 74. See also Central 
 Trust Co. V. East Tenn. &c. R. 
 Co., 69 Fed. 353; Wall v. Piatt, 
 169 Mass. 398, 48 N. E. 270; Burke 
 V. Ellis, 105 Tenn. 702, 58 S. W. 
 8SS. 
 
 25 McNulta V. Lochridge, 137 
 111. 270, Z] N. E. 452, 31 Am. St. 
 362; Ohio &c. R. Co. v. Anderson, 
 10 III. App. 313; Sloan v. Central 
 Iowa R. Co., 62 Iowa 728, 16 N. W. 
 331; Klein V. Jewett, 26 N. J.. Eq. 
 474; Meara v. Holbrook, 20 Ohio 
 St. 137, 5 Am. Rep. 633; Brown, 
 Ex parte, 15 S. Car. 518; Rogers 
 V. Mobile &c. R. Co. (Tenn.), 12 
 A.mt & Eng. R. Cas. 442; Melendy 
 V. Barbour, 19, Va. 544; note to 
 Neglee v. Alexandria &c. R. Co., 
 83 Va. 707, 3 S. E. 369, 5 Am. St. 
 308; 315; Lyman v. Central Ver- 
 mont R. Co., 5? Vt. 167, 10 Atl. 
 
 346. As to whether the receiver 
 is liable for torts committed be- 
 fore his appointment, see note to 
 Emory y. Faith (113 Md. 253, 11 
 Atl. 386), in Ann. Cas. 1912A, 586, 
 589, reviewing the cases on both 
 sides; also Bush v. Stephens, 131 
 Ark. 133, 197 S. W. 1157; and note 
 in L. R. A. 1916F, 1020. 
 
 26 Mobile &c. R. Co. v. Davis, 
 62 Miss. 271; FuUerton v. Fordyce, 
 121 Mo. 1, 25 S. W. 587, 42 Am. 
 St. 516; Little v. Dusenberry, 40 
 N. J. L. 614, 50 Am. Rep. 445; 
 Bartlett v. Keim, 50 N. J. L. 260, 
 13 Ati. 7; Dillingham v. Russell, 
 73 Tex. 47, 11 S. W. 139, 3 L. R. 
 A. 634, 15 Am. St. 753; Newell v. 
 Smith, 49 Vt. 255. But see Car- 
 dot V. Barney, 63 N. Y. 281, 20 
 Am. Rep. 533. 
 
 27 Sloan V. Central Iowa R. Co., 
 62 Iowa 728, 16 N. W. 331 ; Durkin 
 V. Sharp,- 88 N. Y. 225; Meara v. 
 Holbrook, 20 Ohio St. 137, 5 Am. 
 Rep. 633; Brown, Ex parte, 15 S. 
 Car. 518; Rogers v. Mobile &c. R. 
 Co., 12 Am. & Eng. R. Cas. 442. 
 The ;i-eceiyer. of a railroad com- 
 pany,, who is operating the road, 
 can not -escape liability for in- 
 juries to his employes owing to 
 thet insufficient number of track- 
 men employed to keep the track 
 
i660 
 
 RAILROADS 
 
 1024 
 
 by reason of defects in the road or equipment,^® or the negli- 
 gence or misconduct of the receiver's servants.^® Receivers as 
 such have also been held liable for damage or loss of goods 
 entrusted to them for carriage,'" for injuries inflicted upon trav- 
 elers,^^ for injuries to stock arising from a failure to fence the 
 road,32 and, in general, for all damages for torts for which the 
 
 in good repair, on the ground that 
 the lack of sufficient trackmen 
 was due to the want of funds in 
 his hands,' as the road was not 
 paying running expenses. Gra- 
 ham V. Chapman, 58 Hun 602, UN. 
 Y; S. 318. It is held in Texas 
 that the receiver is' not liable for 
 the death of an employe tinder a 
 statute giving a right of action 
 against the "proprietor, owner, 
 charter, or hirer'' of a railroad for 
 injuries resulting in death caused 
 by his negligence or that of his 
 employes; Yoakum v. Selph, 83 
 tex; 607, 19 S. W. 145; Texas Pac. 
 R. Co. v. Collins, -84 Tex. 121, 19 
 S. W. 365; Houston &c. R. Co. v. 
 Roberts (Tex Sup.), 19 S. W. 512. 
 In a joint action against a rail- 
 road company and its receiver for 
 the death of a servant, caused by 
 the negligence of the receiver, a 
 recovery can not be had against 
 the company, where the receiver 
 was not " primarily liable. Texas 
 Pac. R. Co. V. Collins, 84 Tex. 121, 
 19 S. W. 365. 
 
 28 The fact that the defect exis- 
 ted when the receiver took pos- 
 session does not relieve; him from 
 liability for an injury, caused 
 thereby while he is operating the 
 road. A . receiver is as much 
 bound to remedy existing defects 
 which render the operation of the 
 road unsafe, as he is to discover 
 
 and repair new defects as they 
 arise. Texas &c. R. Co. v. Geiger, 
 79 Tex. 13; Bonner v. Mayfield, 
 82 Tex. 234, 18 S. W. 305. See also 
 Sheat v. Lusk, 98 Kans! 614, 159 Pac. 
 407; Robinson v. Miller, 25 Mont. 
 391, 65 Pac. 114. But compare Lusk 
 V, Eddington (Okla.), 159 Pac. 491. 
 
 29 A receiver, like any other 
 common carrier, is liable for the 
 damages occasioned by the mali- 
 cious assault upon a passenger by 
 the conductor in charge of a train, 
 aicting* within the scope of his em- 
 ployment. IDillingham v. Russell, 
 
 n Tex. 47, 11 s. ^y. 139, 3 L. R. 
 
 A. 634, 15 Am. St. 753. See also 
 Hunt V. Conner, 26 Ind. App. 41, 59 
 N. E. 50. ■■ ' ' 
 
 30 Kanisas Pacific R. Co. v. 
 Searle, 11 Colo. 1, 16 Pac. 328;' 
 Paige V. Smith, 99 Mass. 395; Me- 
 lendy V. Barbour, 78 Va. 544; 
 Newell V Smith, 49 Vt. 255; Kin- 
 ney V. Crocker, 18 Wis. 74. See 
 Cowdrey v. Galveston &c, R. Co., 
 93 U. S. 352, 23 L. ed. 950; Mobile 
 &c. R. Co. V. Davis, 62 Miss. 271. 
 
 31 McNulta V. Lockridge, 137 
 111. 270, 27 N. E. 456, 31 Am. St. 
 362; Lehigh Coal &c. Co. v. Cen- 
 tral R. Co., 42 N. J. Eq. 591, 8 Atl. 
 648. 
 
 32 Central Trust Co. v. Wabash 
 &c. R. Co., 26 Fed. 12. See also 
 Brockert v. Central Iowa R. Co., 
 82 Iowa 369, 47 N. W. 1026; Far- 
 
1025 
 
 RECEIVERS 
 
 §660 
 
 corporation itself would be liable under similar circumstances.^* 
 Where the liability of a railroad company is merely statu- 
 
 rell V. Union Trust Co., 11 Mo. 
 475, 13 Am. & Eng. R. Cas. 552. It 
 was held by the Supreme Court of 
 Missouri in the case of Combs v. 
 Smith, 78 Mo. 32, that an action 
 may be maintained against the re- 
 ceiver of a corporation for a tort 
 committed by the corporation or 
 its servants before his appoint- 
 ment. And Judge Caldwell, in 
 Dow V. Memphis &c. R. Co., 20 
 Fed. 260, held that where the bill 
 for foreclosure was filed more 
 than a year after default in the 
 payment of the mortgage debt, 
 the receiver should be required to 
 pay out of the earnings of the 
 road all debts due from the rail- 
 road company for operating ex- 
 penses, including damages for in- 
 juries to persons or property, for 
 a period of six months prior to 
 the appointment of the receiver. 
 See Miltenberger v. Logansport 
 R. Co., 106 U. S. 286, 1 Sup. Ct. 
 140, 27 L. ed. 117. And some states 
 have, statutes prohibiting any rail- 
 way company from creating mort- 
 gage liens which shall be superior 
 to judgments for injuries to per- 
 sons or property. But the weight 
 of authority hold that, in thfe ab- 
 sence of statutory provisions on 
 the subject, the owner of a judg- 
 ment in tort for injuries to per- 
 son or property inflicted in the 
 operation of the railroad before 
 the receiver was appointed is 
 merely a general creditor of the 
 corporation, and, as such, is not 
 entitled to any priority of pay- 
 
 33 — Eu,. Sailkoass I 
 
 ment over the mortgagees. Cen- 
 tral Trust Co. v. East Tennessee 
 &c. R. Co., 30 Fed. 895; Dexter- 
 ville &c. Mfg. Co., In re, 4 Fed. 
 873; Farmers' Loan &c. Co. v. 
 Green Bay &c. R. Co., 45 Fed. 664. 
 See Frazier v. East Tennessee &c. 
 R. Co., 88 Tenn. 138, 12 S. W. 537. 
 33 In Klein v. Jewett, 26 N. J. 
 Eq. 474, Van Fleet, V. C, speak- 
 ing for the court, said; "A re- 
 ceiver operating a railroad under 
 the order of a court of equity 
 stands, in respect to duty and lia- 
 bility, just where the corporation 
 would if it were operating the 
 road. * * * Whether the re- 
 ceiver is regarded as the officer 
 of the law or the representative 
 of the proprietors of the corpora- 
 tion or its creditors, or as com- 
 bining all these characters, he is 
 entrusted with the pow;ers of the 
 corporation and must, therefore, 
 necessarily be burdened with its 
 duties and liabilities. There can 
 be no such thing as an irrespon- 
 sible power, exerting force or au- 
 thority, without being subject to 
 duty, under any system of laws 
 framed to do justice. It is an in- 
 separable condition of every grant 
 of power by the state, whether ex- 
 pressed or not, that it shall be 
 properly exercised, and that the 
 grantee shall be liable for injuries 
 resulting directly and exclusively 
 from his negligence." But see as 
 to torts committed before appoint- 
 ment, authorities cited at close of 
 note 25, supra. 
 
§ 660 RAILROADS 1026 
 
 tory, however, it does not always follow that its receiver will 
 also be liable; to the same extent, for the statute may not em- 
 brace receivers within its terms or meaning. Thus, it has been 
 held that a receiver is not a "proprietor, owner, charterer or 
 hirer" of a railroad within the meaning of a statute giving a 
 right of action for damages on account of injuries, resulting in 
 death, caused by the negligence of any person of the class des- 
 ignated or his servants or agents.^* So, it has been held that 
 a statute providing that certain persons engaged in the service 
 of any railway corporation shall be deemed vice-principals and 
 that certain other persons engaged in such service shall be 
 deemed fellow servants, does not apply to the employes of the 
 receiver of such a corporation.^'^ But, on the other hand, it 
 has been held that a statute making railroad companies liable 
 for injuries to an emplo3'e, caused by the negligence of co- 
 employes of a certain class, applies to a receiver of such a com- 
 pany and his employes. ^^ No general rule can be laid down 
 upon this subject, but we think that, ordinarily, such a statute 
 applying to railroad companies would also apply to their re- 
 ceivers engaged in the operation of the road. The question can 
 only be determined, however, by a reference to the terms and 
 
 3 4 Allen V. Dillingham, 60 Fed. v. Harry, 55 Kans. 589, 40 Pac. 
 
 176; Burke v. Dillingham, 60 Fed. 1007. See also Eddy v. Lafayette, 
 
 729 ; Turner v. Cross, 83 Tex. 218, 163 U. S. 456, 16 Sup. Ct. 1082, 41 
 
 18 S. W. 578, 15 L. R. A. 262; l. ed. 225. But see Beeson v. 
 
 Dillingham v. Blake (Tex.), 32 S. Busenbark, 44 Kans. 669, 25 Pac. 
 
 W. n. But see Murphy v. Hoi- 43^ jq l R. a. 839; Henderson v. 
 
 brook, 20 Ohio St. 137, 5 Am. Rep. Walker, 55 Ga. 481; Campbell v. 
 
 ^^^- Cook, 86 Tex. 630, 26 S. W. 486, 40 
 
 38 Campbell v. Cook, 86 Tex. Am. St. 878. A statute of limita- 
 
 630, 26 S. W. 486, 40 Am. St. 878, tions in favor of the company has 
 
 59 Am. & Eng. R. Cas. 482, dis- also been held applicable in an 
 
 tinguishing Church of Holy Trin- action against the receiver. Bart- 
 
 ity V. United States, 143 U. S. lett v. Keim, SO N. J. L. 260, 13 
 
 457, 12 Sup. Ct. 511, 36 L. ed. 227. Atl. 7. And a receiver operating 
 
 36 Hornsby v. Eddy, 56 Fed. 461 ; a railroad has been held a com- 
 
 Peirce v. Van Dusen, 78 Fed. 693, mon carrier within the "Hours of 
 
 69 L. R. A. 70S; Union Trust Co. Labor Law." United States v. 
 
 V. Thomason, 25 Kans. 1; Rouse Ramsey, 197 Fed. 144. 
 
1027 RECEIVERS § 661 
 
 purpose of the particular statute under consideration in each 
 case.*'' 
 
 § 661 (578). Receiver is bound to perform duties to public — 
 Mandamus. — A receiver is also bound, in general, to perform 
 the public duties imposed by law upon the corporation whose 
 franchises he is exercising. It has been held that he may be 
 compelled, by mandamus, to construct a crossing which the 
 railroad company has neglected or refused to build ;^^ but the 
 general rule, is that a receiver will not be compelled to operate 
 the road or perform a similar public duty by mandamus, both 
 because the court which appointed him may order and compel 
 him to do so, and mandamus usually lies only when there is no 
 other adequate and simple remedy, and because another court 
 will not interfere with the court which appointed him.*® The 
 court which appointed him may compel him to perforrn such 
 duty, and it has been held that the failure of the court to pro- 
 vide funds with which to perform it is not a good excuse for 
 failing to obey the order of the court.*'' There may be public 
 duties, however, not connected with the operation of the road, 
 which the company rather than the receiver, is still obliged to 
 perform, and where the duties are statutory the terms of the 
 statute may be such as not to include receivers, although they 
 will generally be required to perform such public duties con- 
 nected with the operation of the road as the company was 
 obliged to perform. The fact that the receiver is empowered 
 by statute to operate the railroad for the use of the public does 
 not make hirn a public officer, so as to destroy this liability.*^ 
 The duty of operating the road imposed on the receiver by such 
 a statute is the same duty to the public which is imposed upon 
 every railroad corporation acting under statutory authority. 
 Its object is to secure the continued operation of the road as 
 a common carrier with the same rights and subject to the same 
 
 37' See post, §1932. 40 Peckham v. Dutchess &c. R. 
 
 38 Fort Dodge v. Minneapolis Co., 14S N. Y. 385, 40 N. E. 15. 
 &c. R. Co., 87 Iowa 389, 54 N. W. 4i Little v. Dusenberry, 46 N. J. 
 243, 55 Am. & Eng. R. Cas. 58. L. 614, SO Am. Rep. 445, 25 Am. & 
 
 39 State V. Marietta &c. R. Co., Eng. R. Cas. 632. But see Hop- 
 35 Ohio St. 154. kins v. Connel, 2 Tenn. Ch. 323. 
 
§662 
 
 RAILROADS 
 
 1028 
 
 liabilities as before the railroad corporation became insolvent. 
 But it seems that where a road cannot be operated except at 
 a loss, and the franchise has become forfeited, the receiver may- 
 be permitted by the court to dismantle it and sell the rails, 
 after repeated attempts and failure to sell the road and that 
 a purchaser who held receivers' certificates is not bound to re- 
 construct and operate it.*^ 
 
 § 662 (579). Liability on contracts. — The receiver, as a gen- 
 eral rule, cannot be compelled to perform a contract of the cor- 
 poration, where no lien was created in favor of the other con- 
 tracting party.*^ Where, however, a receiver continued to use 
 a right of way, which had been obtained by the company in 
 consideration of an agreement by it to pay the owner a certain 
 sum each month for the use of water from a spring upon his 
 land, it was held that the receiver was bound to perform the 
 contract so long as he used the right of way.** And he may 
 become liable as receiver by adopting advantageous con- 
 tracts.*^ It is improper for a receiver to contract for supplies 
 
 42 Northern Pac. R. v. Washing- 
 ton Ter., 142 U. S. 492, 12 Sup. Ct. 
 283, 3S L. ed. 1092; State v. Jack, 
 145 Fed. 281; Royal Trust Co. v. 
 Washburn &c. R. Co., 113 Fed. S31. 
 See also Union Trust Co. v. Cur- 
 tis, 182 Ind. 61, 105 N. E. 562, L. R. 
 A, 1915A, 699, 706 (citing text). 
 
 *3 Express Co. v. Railroad Co., 
 99 U. S. 191, 25 L. ed. 319. See 
 also U. S. Trust Co. v. Wabash 
 &c. R. Co., 150 U. S. 287, 14 Sup. 
 Ct. 86, 37 L. ed. 1087; Central 
 Trust Co. V. East Tenn. &c. Co., 
 79 Fed. 19; General Electric Co. 
 V. Whitney, 74 Fed. 664; Union 
 Trust Co. V. Curtis, 182 Ind. 61, 
 105 N. E. 562, L. R. A. 1915A, 699, 
 705 (citing text) ; Southern Iron 
 Car Line v. East Tenn. &c. R. Co.; 
 (Tenn. Ch.) 42 S. W. 529. The re- 
 ceiver of a railroad company is 
 
 not liable for removing a switch, 
 which the company had agreed to 
 maintain, where he has not adopt- 
 ed the company's contract as his 
 own, for his appointment and acts 
 in managing the property, as an 
 officer of the court, do not ab- 
 solve the company from liability 
 for consequent breaches of its 
 contracts. Brown v. Warner, 78 
 Tex. 543, 14 S. W. 1032, 11 L. R. 
 A. 394, 22 Am. St. 67. 
 
 ** Howe V. Harding, 76 Tex. 17, 
 13 S. W. 41, 1 Lewis Am. R. & 
 Corp. R. 502 
 
 45 St. Joseph &c. R. Co. v. Hum- 
 phreys, 145 U. S. 105, 12 Sup. Ct. 
 795, 36 L ed. 640; Whightsel v. 
 Felton, 95 Fed. 923; Mercantile 
 Trust &c. Co. V. Southern &c. Co., 
 113 Ala. 543, 21 So. 373; De Wolf 
 V. Royal Trust Co., 173 111. 435, SO 
 
1029 RECEIVERS § 663 
 
 with a company composed of the superintendent and other 
 
 officers of the railroad company for which he is the receiver, 
 but it has been held that he may give an unusually low rate of 
 freight in order to introduce into general use a cheap and val- 
 uable article, which, if brought into general demand, would 
 add greatly to the freight receipts of the road.*® The liability 
 of a receiver, as such, upon contracts made by him in the 
 course of the receivership, depends, of dourse, very largely 
 upon the nature and terms of the contract and his authority 
 to make it, although there are cases in which the court will 
 afford relief to one who has contracted with a receiver who 
 had no authority to enter into the contract.*'' The receiver is 
 not personally liable, under ordinary circumstances, to one 
 who contracts with him as receiver in regard to matters con- 
 nected with his trust.** 
 
 § 663 (580). Liability on claims arising from operation of 
 the road. — The official liability of the receiver for claims aris- 
 ing from the operation of the road ceases with his final dis- 
 charge.*"' But provision is usually made in the order discharg- 
 
 N. E. 1049; Woodruflf v. Erie R. River &c. Co., 173 Fed. 1003, with 
 
 Co., 93 N. Y. 609; Wells v. Hig- which compare Monsarrat v. Mer- 
 
 gins, 132 N. Y. 459, 30 N. E. 861. cantile Trust Co., 109 Fed. 230. 
 
 46 Clarke v. Central R. &c. Co., 49 Farmers' Loan &c. Co. v. 
 
 66 Fed. 16. But this might be Central R. Co., 7 Fed. 537; Davis 
 
 otherwise under the present in- v. Duncan, 19 Fed. 477; Archam- 
 
 terstate commerce law.. beau v. Piatt, 173 Mass. 249, 53 N. 
 
 4T' See ante, § 650. E. 816; Mobile &c. R. Co. v. 
 
 48 Girard Ins. &c. Co. v. Cooper, Davis, 62 Miss. 271; Ryan v. Hays, 
 162 U. S. 529, 16 Sup. Ct. 879, 40 L. 62 Tex. 42. An order of a federal 
 ed. 1062; Ellis v. Little, 27 Kans. court discharging the receiver, re- 
 707, 41 Am. Rep. 434; Livingston storing the property to the com- 
 V. Pettigrew, 7 Lansing (N. Y. pany without foreclosure, and re- 
 Sup. Ct.) 405; Newman v. Daven- quiring that all claims against the 
 port, 9 Baxter (Tenn.) 538. See receiver shall be presented to the 
 generally as to contracts receiver court before a given date, in de- 
 may make, and the liability there- fault whereof they shall be 
 on, ante, § 650; also Farmers' Loan barred, does not, in view of the 
 & T. Co. V. 'Northern Pac. R. Co., judiciary act of 1887-88, making 
 120 Fed. 873, and Gay v. Hudson receivers liable to suit in any 
 
§663 
 
 RAILROADS 
 
 1030 
 
 ing him, for the payment of such claims either by the railroad 
 company or by the purchasers of the property.^" The expenses 
 attending the operation of the road by the receiver may prop- 
 erly constitute a first claim upon all moneys received from such 
 operation, superior to the lien of mortgage creditors. ^^ Claims 
 for damages to persons or property arising from the operation 
 of the road are classed as operating expenses, and are en- 
 titled as such to priority of payment over mortgage bonds. ^^ 
 So, also, are rents accruing during the receivership upon roll- 
 ing stock held by the corporation under a conditional sale^^ 
 
 competent court without leave of 
 the appointing court, prevent the 
 subsequent recovery in a state 
 court of a judgment in personam 
 for personal injuries, or its en- 
 forcement by the same court. 
 Texas &c. R. Co. v. Johnson, ISl 
 U. S. 81, 14 Sup. Ct. 250, 38 L. ed. 
 81. 
 
 50 See Farmers' Loan &c. Co. v. 
 Central R. Co., 7 Fed. 537; Texas 
 &c. R. Co. V. Adams, 78 Tex. 372, 
 14 S. W. 666, 22 Am. St. 56. 
 
 51 Wallace v. Loomis, 97 U. S. 
 146, 24 L. ed. 895 ; Clark v. Central 
 R. &c. Co., 66 Fed. 803; Mobile 
 &c. R. Co. v. Davis, 62 Miss. 271; 
 Brown, Ex parte, 15 S. Car. 518; 
 Texas &c. R. Co. v. Johnson, 76 
 Tex. 421, 13 S. W. 463, 18 Am. St. 
 60; Eastern and Midland R. Co., 
 In re, L. R. 45 Ch. D. 367, 45 Am. 
 & Eng. R. Cas. 71. See also Fi- 
 nance Co, V. Trenton &c. R. Co., 
 189 Fed. 282; Hulings v. Jones, 63 
 W. Va. 60, ,60 S. E. 874. 
 
 52 Cowdrey v. Galveston &c. R. 
 Co., 93 U. S. 352, 23 L. ed. 950; 
 South Carolina &c. R. Co. v. Caro- 
 lina &c. R. Co., 93 Fed. 543; Penn- 
 sylvania Steel Co. V. New York 
 City R. Co., 208 Fed. 168; Guar- 
 
 anty Trust Co. V. Metropolitan St. 
 R. Co., 180 Fed. 637; Green v. 
 Coast Line &c. R. Co., 97 Ga. IS, 
 24 S. E. 814, 54 Am. St. 379, and 
 note; Mobile &c. R. Co. v. Davis, 
 62 Miis. 271; Klein v. Jewett, 26 
 N. J. Eq. 474; Brown, Ex parte, 
 15 S. Car. 518. But see Atlantic 
 &c. Co. V. Dana, 128 Fed. 209; St. 
 Louis Union Trust Co. v. Texas 
 &c. R. Co., 59 Tex. Civ. App. 157, 
 126 S. W. 296; Meyer Rubber Co. 
 V. Georgetown &c. R. Co., 174 
 Fed. 731. Such claims must be 
 paid, in the first instance, out of 
 the income of tlie property. But 
 if that prove insufficient, payment 
 may be made out of the proceeds 
 arising from a sale of the road. 
 Union Trust Co. v. Illinois Mid- 
 land R. Co., 117 U. S. 434, 6 Sup. 
 Ct. 809, 29 L. ed. 963. 
 
 53 Kneeland v. American L. & 
 T. Co., 136 U. S. 89, 10 Sup. Ct. 
 950. 34 L. ed. 379; Woodruff v. 
 Erie R. Co., 93 N. Y. 609; Eastern 
 and Midland R. Co., In re, L. R. 
 45 Ch. D. 367, 45 Am. & Eng. R. 
 Cas. 71; Beach Receivers, §372. 
 As to prior accrued instalments 
 due upon such rolling stock at the 
 time the receiver was appointed. 
 
1031 
 
 RECEIVERS 
 
 664 
 
 together with the cost of necessary supplies^* and the wages 
 of employes. °5 Where the receiver undertakes the operation 
 of another road than that over which he was appointed, under 
 a lease, he assumes the same liability as any other lessee ; and 
 the fact that the contract of lease was entered into with the 
 permission of the court does not remove such liability, where 
 the act of the receiver in making it was purely voluntary.^® 
 
 § 664. Operating expenses — Priority of claims. — The prac- 
 tice of allowing preferred claims for labor, supplies and the like 
 arising within a limited time before the receivership or sale has 
 already been considered.^'' Such claims are frequently called 
 "operating expenses," and are generally held not to include claims 
 for damages. ^^'' But claims for damages arising during the re- 
 
 the vendors are simply general 
 creditors. Fidelity Ins. Co. v. 
 Shenandoah Valley R. Co., 86 Va, 
 1, 9 S. E. 759, 19 Am. St. 858 
 Kneeland v. American L. & T 
 Co., 136 U. S. 89, 34 L. ed. 379; 
 Thomas v. Peoria &c. R. Co., 36 
 Fed. 808. 
 
 5*Burnham v. Bowen, 111 U. S 
 776, 4 Sup. Ct. 675, 28 L. ed. 596 
 Kneeland v. Bass Foundry &c. 
 Works, 140 U. S. 592, 11 Sup. Ct 
 857, 35 L. ed. 543; Poland v. La- 
 moille Valley R. Co., 52 Vt. 144; 
 Williamson v. Washington City 
 &c. R. Co., 33 Grat. (Va.) 624 See 
 also Citizens Trust Co. v. Na- 
 tional Equipment &c. Co., 178 Ind. 
 167, 98 N. E. 865, 41 L. R. A. (N. 
 S.) 695; post, § 677. 
 
 55 Cowdrey v. Galveston &c. R. 
 Co., 93 U. S. 352, 23 L. ed. 950; 
 Union Trust Co. v. Illinois Mid- 
 land R. Co., 117 U. S. 434 6 Sup. 
 Ct. 809, 29 L. ed. 963; Kennedy v. 
 St. Paul &c. R. Co., 2 Dill. (U. S.) 
 448. Fed. Cas. No. 7706; Stanton 
 
 v. Alabama &c. R. Co., 2 Woods 
 (U. S.) 506, Fed. Cas. No. 13296; 
 Meyer v. Johnston,- 53 Ala. 237; 
 McLane v. Placerville &c. R. Co., 
 66 Cal. 606, 6 Pac. 748; Hoover v. 
 Montclair &c. R. Co., 29 N. J. Eq. 
 4; Langdon v. Vermont &c. R. 
 Co., 54 Vt. 593. 
 
 56 Kain v. Smith, 80 N. Y. 458. 
 
 57 Ante, § 606. See also Citizens' 
 Trust Co. V. National Equipment 
 &c. Co., 178 Ind. 167, 98 N. E. 
 865, 41 L. R. A. (N. S.) 695 n; 
 Missouri &c. R. Co. v. City Trust 
 Co., 209 Fed. 45. 
 
 58 Easton v. Houston &c. R. Co., 
 38 Fed. 12; Farmers' Loan &c. Co. 
 V. Green Bay &c. R. Co., 45 Fed. 
 664; St. Loius Trust Co. v. Riley, 
 70 Fed. 32, 30 L. R. A. 456; Ames 
 V. Union Pac. S.. Co., 74 Fed. 335; 
 Farmers' Loan &c. Co. v. North- 
 ern Pac. R. Co., 74 Fed. 431 ; For- 
 dyce V. Kansas City &c. R. Co., 
 145 Fed. 566 (damages for taking 
 without condemnation) ; Pennsyl- 
 vania Steel Co. V. New York &c. 
 
§665 
 
 RAILROADS 
 
 1032 
 
 ceivership may be considered as operating expenses and given 
 a priority over a mortgage lien in a proper case, as where there 
 has been a diversion of income to betterments. ^^ Claims for 
 labor and supplies furnished to the receiver for the operation of 
 the road are generally so considered and allowed ;"■" and a few 
 other claims arising during the receivership have been so classed 
 and given priority.®^ 
 
 § 665 (581). Liability of corporation. — The corporation itself 
 is not ordinarily, under the authorities, held liable either civilly^^ 
 
 R. Co., 165 Fed. 457; Guaranty 
 Trust Co. V. Metropolitan St. R. 
 Co., 180 Fed. 637. Where a right 
 of way is taken a judgment for 
 damages therefor is held to have 
 preference and so has a claim for 
 damages in the nature of a con- 
 tinuing equitable lien where the 
 company took abutting property 
 without proceedings to condemn. 
 Central Trust Co. v. Thurman, 94 
 Ga. 735, 20 S. E. 141 (judgmeiit for 
 damages for condemnation). Con- 
 tra, Green v. Coast Line R. Co., 
 97 Ga. IS, 24 S. E. 814, 33 L. R. A. 
 806, 54 Am. St. 379. 
 
 59 Meyer Rubber Co. v. George- 
 town &c. R. Co., 174 Fed. 731; Mo- 
 bile &c. R. Co. V. Davis, 62 Miss. 
 271; Klein v. Jewett, 26 N. J. Eq. 
 474; Robinson v. New York &c. 
 Elec. R. Co., 90 App. Div. 509, 91 
 N. Y. S. 153; Ex parte Brown, 15 
 S. Car. 518; Texas &c. R. Co. v. 
 Overheiser, 76 Tex. 437, 13 S. W. 
 468; St. Louis &c. Trust Co. v. 
 Texas Southern R. Co., 59 Tex. 
 Civ. App. 157, 126 S. W. 296. See 
 also Cowdrey v. Gralveston &c. R. 
 Co., 93 U. S. 352, 23 L. ed. 950; 
 Pennsylvania Steel Co. v. New 
 York City R. Co., 208 Fed. 168. 
 
 60 Kneeland v. Bass Foundry 
 &c. Co., 140 U. S. 592, 11 Sup. Ct. 
 857, 35 L. ed. 543; Ames v. Union 
 Pac. R. Co., 74 Fed. 335; Mercan- 
 tile Trust Co. v. Farmers' &c. Co., 
 81 Fed. 254; Pennsylvania Steel 
 Co. V. New York City R. Co., 190 
 Fed. 609; McLane v. Placerville 
 &c. R. Co., 66 Cal. 606, 6 Pac. 748. 
 But compare Gregg v. Metropoli- 
 tan Trust Co., 197 U. S. 183, 25 
 Sup. Ct. 415, 49 L. ed. 718; Finance 
 Co. V. Trenton &c. R. Co., 189 Fed. 
 282; Farmers' Loan &c. Co. v. 
 Oregon &c. R. Co., 31 Ore. 237, 
 48 Pac. 706, 38 L. R. A. 424, 65 . 
 Am. St. 822; Hand v. Savannah &c. 
 R. Co., 17 S. Car. 219. 
 
 81 This whole subject is thor- 
 oughly considered in the note to 
 First Nat. Bank v. Cook (12 Wyo. 
 492, "](> Pac. 674, 78 Pac. 1083) in 
 2 L. R. A. (N. S.) 1012, and the 
 note to Citizens' Trust Co. v. Na- 
 tional Equipment &c. Co. (Ind.), 
 in 41 L. R. A. (N. S.) 695, 
 where the authorities are re- 
 viewed and considered both with 
 reference to the general rule and 
 the specific facts and distinguish- 
 ing features of each case. 
 
 62 Davis v. Duncan, 19 Fed. 477; 
 
1033 
 
 RECEIVERS 
 
 §665 
 
 or criminally®* for any acts or upon any contracts of a receiver 
 who has full possession of its property and entire charge of its 
 affairs. Where, however, the receiver has used money which 
 should have been applied to the payment of plaintiff's claim in 
 the purchase of property which is afterward surrendered to the 
 corporation upon the receiver's discharge, it seems that a court 
 of equity will hold the corporation liable for such claim to the 
 extent of the property so received by it.®* The corporation, it 
 
 Memphis &c. R. Co. v. Hoechner, 
 67 Fed. 456; Memphis &c. R. Co. 
 V. Stringfellow, 44 Ark. 322, 51 
 Am. Rep. 598; Kansas Pac. R. Co. 
 V. Searle, 11 Colo. 1, 16 Pac. 328; 
 Thurman v. Cherokee R. Co., 56 
 Ga. 376; Ohio &c. R. Co. v. Rus- 
 sell, 115 111. 52, 3 N. E. 561; Mc- 
 Nulta V. Lockridge, 137 III. 270, 
 27 N. E. 452, 31 Am. St. 362; Ohio 
 &c. R. Co. V. Davis, 23 Ind. 553, 
 85 Am. Dec. 477; Godfrey v. Ohio 
 &c. R. Co., 116 Ind. 30, 37 Am. & 
 Eng. R. Cas. 8; Kansas Pac. R. 
 Co. V. Wood, 24 Kans. 619; Turner 
 V. Hannibal &c. R. Co., 74 Mo. 602; 
 Stevens v. Atchison &c. R. Co., 
 87 Mo. App. 26; Metz v. Buffalo 
 &c. R. Co., 58 N. Y. 61, 17 Am. 
 Rep. 201 ; Erwin v. Davenport, 9 
 Heisk. (Tenn.) 44; Kansas &c. R. 
 Co. v. Dorough, 72 Tex. 108, 10 S. 
 W. 711. See also Chamberlain v. 
 New York &c. R. Co., 71 Fed. 636 ; 
 Archambeau v. New York &c. R. 
 Co., 170 Mass. 272, 49 N. E. 435 
 (citing text) ; Missouri &c. R. Co. 
 v. Wood (Tex. Civ. App.), 52 S. 
 W. 93; and Sibson v. Hamilton 
 &c. Co., 21 Wash. 362, 58 Pac. 219. 
 But the possession of the receivei; 
 must usually be exclusive in order 
 to exonerate the company, and it 
 should not hold itself out to the 
 
 public as operating the road. Rail- 
 road Co. v. Brown, 17 Wall. (U. 
 S.) 445, 21 L. ed. 675. And there 
 are other cases in which the com- 
 pany has been held liable, as 
 where the receiver was coUusively 
 appointed or the profits were in- 
 vested in betterments. See Texas 
 &c. R. Co. V. Gay, 86 Tex. 571, 26 
 S. W. 599, 25 L. R. A. 52; Houston 
 &c. R. Co. V. McFadden, 91 Tex. 
 194, 40 S. W. 216, 42 S. W. 593; 
 Holman v. Galveston &c. R. Co., 
 14 Tex. Civ. App. 499, 37 S. W. 
 464; and compare Stewart v. Rail- 
 road Co., 8 Ohio N. P. 179. The 
 entire subject is considered and 
 many authorities are reviewed in 
 the note- to Carlson v. Mid-Conti- 
 nent Development Co. (103 Kans. 
 464, 173 Pac. 910) in L. R. A. 1918F, 
 318. 
 
 83 State V. Wabash &c. R. Co., 
 115 Ind. 466, 17 N. E. 909, 1 L. R. 
 A. 179, and see note in 26 L. R. 
 A. (N. S.) 710. 
 
 6* The net earnings of the road 
 in the hands of the receiver are 
 chargeable, with the expenses of 
 operating the road, including in- 
 juries to persons and property. 
 And where such earnings have 
 been diverted to the purchase of 
 property and permanent improve- 
 
§665 
 
 RAILROADS 
 
 1034 
 
 has been held, continues liable for taxes imposed upon its prop- 
 erty or business while managed by a receiver.*^ And where the 
 duty of a railroad corporation to erect fences along its line is 
 made absolute by statute, the corporation may be held liable for 
 damages resulting from a failure to maintain such fences while 
 
 ments equity will follow them. 
 Mobile &c. R. Co. v. Davis, 62 
 Miss. 271; Texas &c. R. Co. v. 
 Bloom, 60 Fed. 979; Texas &c. R. 
 Co. V. Johnson, 76 Tex. 421, 13 S. 
 W. 463, 18 Am. St. 60, and note; 
 Texas &c. R. Co. v. White, 82 Tex. 
 £43, 18 S. W. 478; Houston &c. R. 
 Co. V. Crawford, 88 Tex. 277, 31 S. 
 W. 176, 28 L. R. A. 761, S3 Am. 
 St. 572; Garrison v. Texas &c. R. 
 Co., 10 Tex. Civ. App. 136, 30 S. 
 W. 725; Kansas City &c. R. Co. 
 V. Russell (Tex. Civ. App.), 184 S. 
 W. 299. See also Texas &c. R. 
 Co. v. Johnson, 151 U. S. 81, 38 L. 
 ed. 81, 60 Am. & Eng. R. Cas. 496, 
 and note; Texas &c. R. Co. v. 
 Bloom, 164 U. S. 636, 17 Sup. Ct. 
 216, 41 L. ed. 580; Brunner &c. Co. 
 v. Central &c. Co., 18 Ind. App. 
 174, 47 N. E. 686. Where there is 
 no evidence that earnings have 
 been diverted to the betterment 
 of the road, an instruction that 
 the company is not liable has been 
 held proper. Texas &c. R. Co. v. 
 Hoffman, 83 Tex. 286, 18 S. W. 741. 
 Rights of other parties may some- 
 times prevent the application of 
 the doctrine stated in the text, 
 and it is one not to be carelessly 
 applied. It is possible that the 
 court went too far in some cases 
 cited, but we believe the doctrine 
 is just and equitable. A corpora- 
 tion may also be liable where it 
 gets the property back, or the 
 
 like, under an order of court so 
 providing and discharging the re- 
 ceiver. Vandalia R. Co. v. Keys, 
 46 Ind. App. 353, 91 N. E. 173; 
 Baltimore &c. R. Co. v. Burris, 111 
 Fed. 882. 
 
 esphiladelphia &c. R. Co. v. 
 Commonwealth, 104 Pa. St. 80. In 
 this case, the court held the de- 
 fendant liable for a tax upon the 
 gross receipts coming into the 
 hands of the receiver. The court 
 said: "If the owner of this prop- 
 erty was not to bear the burden 
 of the public charges against it, 
 we are at a loss to determine 
 upon whom they should fall. The 
 receivers, the appointees of the 
 United States Circuit Court, were 
 owners neither of these receipts 
 nor of the property whence they 
 were derived, and they were not 
 personally accountable for the 
 taxes upon them. The decree of 
 the circuit court made no cliange 
 in the title to this property. * * * 
 The commonwealth was entitled 
 to her taxes, and that, the owner 
 of the property taxed should be 
 made to pay the charges upon it 
 is a conclusion that is but just 
 and reasonable.'' In New York, 
 where the property of an insol- 
 vent corporation has been seques- 
 trated, and is in the hands of a 
 receiver appointed in a foreclos- 
 ure proceeding who has in his 
 hands money derived from its 
 
1035 
 
 RECEIVERS 
 
 666 
 
 a receiver is in charge of its property."^ The appointment of 
 a receiver does not relieve the corporation from the con- 
 sequences of any neglect of duty on its part in the original 
 construction or subsequent maintenance of its road, and it may 
 be held liable in a proper case for damages directly traceable to 
 its fault, even though they accrue during the receivership. Thus, 
 a corporation has been held liable for damages resulting from 
 the flooding of land caused by the negligent construction of one 
 of its culverts, although the overflow occurred while the road was 
 in the hands of a receiver. ^'^ 
 
 § 666 (582). Receivers of leased lines. — A receiver may, with 
 the consent of the lessors, continue in possession of leased lines 
 operated by the insolvent corporation, but his appointment as 
 receiver does not necessarily make him an assignee of the leases 
 so as to give the rentals priority over the mortgages-®* And 
 
 gross earnings sufficient to pay 
 the taxes, — a direct application for 
 an order on him for payment may 
 be made to the court in the fore- 
 closure proceeding, by the attor- 
 ney-general by petition, making 
 the corporation and the receiver 
 parties. Central Trust Co. v. 
 New York City &c. R. Co., 110 N. 
 Y. 2S0, 18 N. E. 92, 1 L. R. A. 
 260, 13 Cent. 404, 18 N. Y. S. 30, 4 
 R, & Corp. L. J. 462. Taxes have 
 often been allowed as preferred 
 claims. See, in addition to au- 
 thorities above cited, Union Trust 
 Co. V. Illinois Midland R. Co., 
 117 U. S. 434, 6 Sup. Ct. 809, 29 L. 
 ed. 963; Perrin &c. Co. v. Cook 
 Hotel & Excursion Co., 118 Mo. 
 App. 44, 93 S. W. ?ii7. 
 
 8«Ohio &c. R. Co. V. Fitch, 20 
 Ind. 498; Louisville &c. R. Co. v. 
 Cauble, 46 Ind. 277; Kansas &c. 
 R. Co. V. Wood, 24 Kans. 619;. 
 
 Ohio &c. R. Co. V. Russell, 115 111. 
 52, 3 N. E. 561. It seems to us, 
 however, that where the receiver 
 has possession and entire and ex- 
 clusive control of the road and 
 all its assets, the receiver rather 
 than the corporation should be 
 sued when the injury is caused by 
 his own failure to fence, unless 
 the terms of the statute are such 
 as to require a different rule. 
 
 6T Union Trust Co. v. Cuppy, 26 
 Kans. 754; Kansas Pacific R. Co. 
 V. Wood, 24 Kans. 619. But the 
 receiver was also held liable for 
 maintaining the nuisance erected 
 by the corporation. Union Trust 
 Co. V. Cuppy, 26 Kans. 754. See 
 also ante, § 660. But compare 
 Bush. V. Stephens, 131 Ark. 133, 
 197 S. W. 1157, L. R. A. 1918A, 
 1131. 
 
 68 Central Trust Co. v. Wabash 
 &c. R. Co., 34 Fed. 259; ante, §650. 
 
1666 
 
 RAILROADS 
 
 1036 
 
 where the road is operated under an order of court directing 
 separate accounts to be kept with the leased lines, and expressly- 
 recognizing the right of the lessors to take possession of the 
 leased lines for non-payment of rent upon making proper applica- 
 tion therefor, the lessors cannot assert such a lien against the 
 earnings of the general system.^^ The fact that the leased line 
 was held subject to resumption of control by the lessors at any 
 time negatives the claim that the rental was a necessary expense 
 originating in the course of the receiver's administration^" And 
 where it appears that the earnings of the road did not suffice to 
 pay for necessary labor and supplies used in operating the road, 
 no equity can arise for the payment of rental on the theory of 
 diverted earnings.''^ On the other hand, where the court appoints 
 receivers for a company, for the benefit of that company and its 
 creditors, it has been held that no part of the expenses of the. 
 receivership are chargeable against the property of another road, 
 leased by the insolvent company, the receivership not being for 
 
 Rent accrued under a railroad lease 
 prior to the appointment of receiv- 
 ers for tlie lessee is an unsecured 
 liability entitled to no priority. New 
 York &c. R. Co. v. New York &c. R. 
 Co., 58 Fed. 268. See also Thomas 
 V. Western Car Co., 149 U. S. 9S, 13 
 Sup. Ct. 824, 37 L. ed. 663; Louis- 
 ville &c. R. Co. V. Central Trust Co., 
 87 Fed. 500; Lockport Felt Co. v. 
 United Box &c. Co., 182 Fed. 328; 
 note in 2 L. R. A. (N. S.) 1030. But 
 there may be a liability for rentals 
 by adoption. Central Trust Co. v. 
 Continental &c. Co., 86 Fed. 517; 
 Miltenberger v. Logansport &c. R. 
 Co., 106 U. S. 286, 1 Sup. Ct. 140, 
 27 L. Ed. 117. See also Thomas v. 
 Western Car Co., 149 U. S. 95, 60 
 Am. & Eng. R. Cas. 443. 
 
 69 Quincy &c. R. Co. v. Hum- 
 phreys, 145 U. S. 82, 12 Sup. Ct. 787, 
 36 L. ed. 632. A railroad receiver 
 
 even though appointed on the peti- 
 tion of the company itself, and for 
 the express purpose of preventing the 
 disintegration of the system, does not 
 become liable for rentals upon leased 
 lines, eo instanti, by the mere act of 
 taking possession, but is entitled to a 
 reasonable time to ascertain the situ- 
 ation of affairs and determine what 
 to do. United States Trust Co. v. 
 Wabash W. R. Co., 150 U. S. 287, 14 
 Sup. Ct. 86, 37 L. ed. 1085, 60 Am. 
 & Eng. R. Cas. 480; Seney v. Wa- 
 bash W. R. Co., 150 U. S. 310, 14 
 Sup. Ct. 94, 37 L. ed. 1092; ante, 
 §650. See also Johnson v. Lehigh 
 &c. Co., 130 Fed. 932. 
 
 70 Quincy &c. R. Co. v. Hum- 
 phreys, 145 U. S. 82, 12 Sup. Ct. 787, 
 36 L. ed. 632. 
 
 Ti Quincy &c. R. Co. v. Hum- 
 phreys, 145 U. S. 82, 12 Sup. St. 787, 
 36 L. ed. 632 ; Park v. New York &c. 
 
1037 RECEIVERS § 667 
 
 the benefit of the lessor or its creditorsJ^ In proceedings to com- 
 pel a receiver in a foreclosure suit to pay rent for use of tracks 
 and terminal facilities, where the amount of rent was left uncer- 
 tain, a contract between other parties, oppressive in its terms, is 
 not a test of the amount of rent which the receiver should pay; 
 and it not being shown that the sum paid by the receiver was 
 insufficient, the dismissal of the proceedings was properJ^ It 
 has been held, however, that receivers who take possession of 
 cars held by an insolvent railroad company under a lease, with 
 full authority to do so, and operate the cars with full knowledge 
 of the lease and the burdens assumed by the company, are bound 
 by the lease as assignees of the company.'^* It has also been heW 
 that the court has power, on consulting the receivers, and with- 
 out notice to the mortgagees, to order the lease of another road 
 which is found necessary to the profitable management of the 
 mortgaged property, and to undertake the payment of rent for 
 its use.'^^ 
 
 §.667 (583). Receiver's accounts. — Since a receiver is only 
 the ministerial officer of the court by which he was appointed, 
 deriving his authority from- its orders,'^® he is required to render 
 
 R. Co., 57 Fed. 799. See also Cox v. But, ordinarily, where the receiver 
 Terre Haute &c. R. Co., 133 Fed. simply uses the property for a rea- 
 371. sonable time in which to elect, and 
 T2 Brown v. Toledo &c. R. Co., 3S refuse to adopt the lease, he is not 
 Fed. 444. This case has, however, liable on the lease and obliged to 
 been criticized in some respects. See keep the property, although he may 
 Central Trust Co. v. Wabash &c. R. be required to pay rental while he 
 Co., 46 Fed. 32; New York &c. R. uses it. See Farmers Loan & T. Co. 
 Co. V. New York &c. R. Co., 58 Fed. v. Chicago &c. R. Co., 42 Fed. 6. 
 268. 75 Mercantile Trust Co. v. Mis- 
 ts Peoria &c. R. Co. v. Chicago &c. souri &c. R. Co., 41 Fed. 8, 43 Am. & 
 R. Co., 127 U. S. 200, 8 Sup. Ct. 112S, Eng. R. Cas. 469. See United 
 32 L. ed. 110. States Trust Co. v. Wabash &c. R. 
 T4 Easton v. Houston &c. R. Co., Co., 150 U. S. 287, 14 Sup. Ct 86, Zl 
 38 Fed. 784; Woodruff v. Erie R. L. ed. 108S, 60 Am. & Eng., R. Cas. 
 Co., 93 N. Y. 609. See also Spar- 480. 
 
 hawk V. Yerkes, 142 U. S. 1, 13, 12 76 A receiver cannot question the 
 
 Sup. Ct. 104, 35 L. ed. 915; Otis, In order of the court in reference to 
 
 re, 101 N. Y. 580, 585, 5 N. E. 571. the trust property in his hands. Her- 
 
§667 
 
 RAILROADS 
 
 1038 
 
 to the court a strict account of his management of the trustJ'^ 
 These accounts must be made at such times as the court may 
 direct,'^* and a failure to render an account when required may- 
 be cause for the removal of the receiver.''^ The court, at the in- 
 stance of a party interested, will compel the receiver to render 
 an account at the appointed time.^* The receiver's accounts are 
 usually referred to a master, whose action in passing them is 
 held to be judicial rather than ministerial,^^ and may render the 
 accounts so passed proof against collateral attack.*^ The books, 
 contracts and accounts of a receiver are in the custody of the law, 
 and bondholders, stockholders or creditors are entitled, upon 
 reasonable application, to the privilege of inspecting them.®* Al- 
 
 rick V. Miller, 123 Ind. 304, 24 N. E. 
 111. 
 
 T7Akers v. Veal, 66 Ga. 302; 
 Hooper v. Winston, 24 111. 353. See 
 also as to when an account should 
 be approved. Heffron v. Rice, 149 
 111. 216, 36 N. E. S62, 41 Am. St. 271. 
 
 ■^8 Mabry v. Harrison, 44 Tex. 286. 
 See also Adams v. Woods, 8 Cal. 
 306; De Winton v. Brecon, 28 Beav. 
 200. 
 
 '^9 Bertie v. Lord Abingdon, 8 
 Beav. S3. So declared by statute in . 
 New York; Birdseye C. & G. Consol. 
 Laws of N. Y., Vol. 3, 2nd. ed. § 107, 
 P. 3143, Art. 6. 
 
 so Adams v. Woods, 8 Cal. 306; 
 Lowe V. Lowe, 1 Tenn. Ch. 515. An 
 action at law for default of a re- 
 ceiver cannot be maintained against 
 his sureties before an accounting. 
 French v. Dauchy, 134 N. Y. 543, 31 
 N. E. 1041. 
 
 S2Cowdrey v. Railroad Co., 1- 
 Woods (U. S.) 331, Fed. Cas. No. 
 3293, affirmed in Galveston R. v. Cow- 
 drey, 11 Wall. (U. S.) 459, 20 L. ed. 
 199. 
 
 83 Farmers' Loan &c. Co. v. Cen- 
 
 tral R. Co., 1 McCrary (U. S.) 352, 
 2 Fed. 751. Unless exceptions to the 
 receiver's account are first taken be- 
 fore the master, and the receiver is 
 given an opportunity to sustain his 
 report by any additional evidence at 
 his command the federal courts will 
 decline to consider them when taken 
 before the court. Cowdrey v. Rail- 
 road Co., 1 Woods (U. S.) 331, Fed. 
 Cas. No. 3293, affirmed in Galveston 
 R. V. Cowdrey, 11 Wall. (U. S.) 
 459, 20 L. ed. 199. It has been held, 
 however, that the receiver of a cor- 
 poration to which lands were fraud- 
 lently conveyed may be compelled, in 
 an action for fraud, to account for 
 rents and profits received by him 
 from such lands; after his accounts 
 as receiver have been approved in 
 court, and he has been, discharged. 
 Pondir v. New York &c. R. Co., 72 
 Hun 384, 25 N. Y. S. 560, 31 Abb. 
 N. Cas. 29. See as to right of court 
 to surcharge account in absence of 
 objection or upon objection of 
 amicus curiae, note in 18 L. R. A. 
 (N. S.) 284. 
 
 8* Jones Corporate Bonds & Mort- 
 
1039 
 
 RECEIVERS 
 
 668 
 
 though no appeal ordinarily lies in favor of a receiver from an 
 order of court made with reference to trust property in the 
 receiver's hands,^^ he may appeal from a judgment of the court 
 erroneously fixing the amount of property in his hands, and 
 directing him to turn over more than he has in his custody, or 
 from a final decree ascertaining the balance for which he is 
 liable.so 
 
 § 668 (584). Compensation of receiver. — Receivers are allowed 
 compensation for services rendered in the proper discharge of 
 their duties as officers of the court, and it has been said that an 
 order should not be made directing the receiver to pay over the 
 entire fund in his hands without in some way providing for the 
 payment of his commissions.^'^ The receiver's compensation is 
 usually payable out of the assets in his hands, ^^ and it has been 
 held that a receiver who has been legally and properly appointed 
 can not be compelled to accept a judgment against the person 
 
 gages, § 531, citing Fowler's Petition, 
 9 Abb. N. Cas. (N. Y.) 268; Lafay- 
 ette Co. V. Neely, 21 Fed. 738. In 
 New York the statute provides that 
 the receiver's accounts, statements, 
 and all books and papers of the cor- 
 poration in the hands of such re- 
 ceiver, shall; at all reasonable times, 
 be open for the inspection of all 
 persons having an interest therein. 
 Birdseye C. & G. Consol. Laws of 
 N. Y., Vol. 3, 2nd. ed. § 107, P. 3143, 
 Art. 6. 
 
 ssHerrick v. Miller, 123 Ind. 304, 
 24 N. E. 111. 
 
 86 Hinckley v. Gilman &c. R. Co., 
 94 U. S. 467, 24 L. ed. 166; Hovey 
 V. McDonald, 109 U. S. 150, 3 Sup. 
 Ct. 136, 27 L. ed. 888 ; How v. Jones, 
 60 Iowa 70, 14 N. W. 193; Adair 
 County V. Ownby, 75 Mo. 282. 
 
 87 Weston V. Watts, 45 Hun (N. 
 Y.) 219. 
 
 88 Ferguson v. Dent, 46 Fed. 88; 
 
 Beckwith v. Carroll, 56 Ala. 12; 
 Seligman v. Laussy, 60 Ga. 20; Jaff- 
 ray v. Raab, 72 Iowa 335, 33 N. W. 
 337; Hayes v. Ferguson, 83 Tenn. 1, 
 54 Am. Rep. 398; Izard, Ex parte, 
 L. R. 23 Ch. Div. 75. See also Elk 
 Fork Oil &c. Co. v. Foster, 99 Fed. 
 495; and other cases cited in note in 
 25 L. R. A. (N. S.) 416. But most of 
 the authorities hold that this rule 
 does not apply where the appoint-, 
 ment is void or wrongfully made. 
 See Bellany v. Washita Val. Tel. Co., 
 25 Okla. 18, 105 Pac. 340, 25 L. R. A. 
 (N. S.) 412, and note reviewing au- 
 thorities on both sides and on the 
 question as to which party, if either, 
 is liable. See also Wagner v. Phila- 
 delphia &c. St. R. Co., 233 Pa. 114, 
 81 Atl. 944, Ann. Cas. 1913B, 536 
 (holding that the person improperly 
 procuring the appointment should 
 pay the costs, including expenses of 
 receivership). 
 
§668 
 
 RAILROADS 
 
 1040 
 
 procuring his appointment in payment for his services.*® Where 
 the funds in court are not sufficient to adequately compensate the 
 receiver, the person procuring his appointment may be compelled 
 to pay him in a proper case.®" The rate of compensation is fixed 
 by statutes applying to certain classes of receiverships in some 
 of the states, and where it is so fixed that rate must be allowed, 
 regardless of the value of the services rendered.®^ But the rule 
 in England "^ and in the United States, in all cases in which the 
 
 89 Radford v. Folsom, SS Iowa 276, 
 7 N. W. 604. In Hoppensack v. Hop- 
 pensack, 61 How. PraC (N. Y.) 498, 
 it was held that the receiver, being 
 an officer of the court must be com- 
 pensated out of the funds in the 
 hands of the court, and that the 
 owner thereof, in case they were 
 wrongfully taken, must look to the 
 person who procured the appoint- 
 ment of the receiver for redress. But 
 the weight of authority favors the 
 rule that a receiver who is improp- 
 erly appointed and whose appoint- 
 ment is set aside, must generally 
 look only to the plaintiff for remu- 
 neration. Weston v. Watts, 4S Hun 
 (N. Y.) 219; French v. Gifford, 31 
 Iowa 428; Moyers v. Coiner, 22 Fla. 
 422. See also note in 25 L. R. A. 
 (N. S.) 412 Periodic allowances or 
 payments before the termination of 
 the receivership are frequently made. 
 See Cowdrey v. Railroad Co., 1 
 Woods (U. S.) 331, Fed. Cas. No. 
 3293; Wilkinson v. Washington &c. 
 Co., 102 Fed. 28; Henry v. Henry, 
 103 Ala. S82, IS So. 916; Battery &c. 
 Bank v. Western &c. Bank, 126 N. 
 Car. 531, 36 S. E. 39; Martin v. Mar- 
 tin, 14 Ore. 1.65, 12 Pac. 234; Neave 
 V. Douglas, 26 L. J. Ch. 756. In 
 many jurisdictions the courts seem 
 to have a large discretion in deter- 
 
 mining whether to assess the costs 
 of the receivership against the fund, 
 or against the applicant or unsuc- 
 cessful party or to apportion them 
 among the parties, as the justice and 
 equities of the particular case may 
 •demand. Palmer v. Texas, 212 U. 
 S. 118, 29 Sup. Ct. 230, 53 L. ed. 435; 
 Sullivan &c. Co. v. Black, 159 Ala. 
 570, 48 So. 870; note in 25 L. R. A. 
 (N. S.) 418, and cases there cited. 
 
 90 Chapman v. Atlantic &c. Co., 
 119 Fed. 257; Ephraim v. Pacific 
 Bank, 129 Cal. 589, 62 Pac. 177; 
 Hendrie &c. Co. v. Parry, H Colo. 
 359, 86 Pac. 113; Frick v. Fritz, 124 
 Iowa 529, 100 N. W. 513; Tome v. 
 King, 64 Md. 166, 21 Atl. 279 ; Farm- 
 ers' Nat. Bank v. Backus, 74 Minn. 
 264, n N. W. 142. But compare 
 Atlantic Triist Co. v. Chapman, 208 
 U. S. 360, 28 Sup. Ct. 406, 52 L. ed. 
 ,528. 
 
 92 Price V. White, 1 Bailey Eq. (S. 
 Car.) 240. A court cannot allow a 
 greater compensation than the per 
 cent, upon funds passing through the 
 receiver's hands, which the statute 
 fixes as his compensation. Orient 
 Mut. Ins Co., In re, 66 Hun. 633, 21 
 N. Y. S. 237. 
 
 93 Potts v. Leigaton, 15 Ves. Jr. 
 276; Courand v. Hanmer, 9 Beav. 3; 
 
1041 
 
 RECEIVERS 
 
 §668 
 
 compensation is not definitely fixed by law,"* is that the amount 
 of compensation to be allowed is a matter within the sound disr 
 cretion of the court by whom the receiver was appointed, and is 
 to be governed by the particular circumstances of the case.®" 
 Where the duties of the receiver are very slight,®^ or where one 
 of the parties in interest serves as receiver to protect his own 
 interests,®'^ the court may be justified in allowing him little or no 
 compensation. And in case the duties of a receiver prove more 
 arduous than he or the court expected he may be allowed com- 
 pensation in addition to that fixed by the order under which he 
 was appointed.®^ If the receiver's duties are imperfectly per- 
 formed because of his negligence or misconduct, the court may 
 
 Malcolm v. O'Callyhan, 3 Neyle. & C. 
 52. 
 
 0* United States Trust Co. v. New 
 York &c. R. Co., 101 N. Y. 478, S N. 
 E. 316. 
 
 93 Cowdrey v Railroad Co., 1 
 Woods (U. S.) 331, Fed. Cas. No. 
 3293; Northern Ala. R. Co. v. Hop- 
 kins, 87 Fed SOS; Sherley v. Mat- 
 tingly, 21 Ky. L. 289, 51 S. W. 189; 
 Jones V. Keen, 115 Mass. 170; Geyser 
 Min. Co. V. Salt Lake Bank, 16 Utah 
 163, 51 Pac. iSl ; Crumlish's Admr. 
 V. Shenandoah &:c. R. Co., 40 W. Va. 
 627, 22 S. E. 90; Day v. Croft, 2 
 Beav. 488. Sometimes he is given 
 the same compensation as the presi- 
 dent of the road, and his duties and 
 responsibilities may be such as to en- 
 title him to even greater compensa- 
 tion. Central Trust Co. v. Wabash 
 &c. R. Co., 32 Fed. 187, 188. Receiv- 
 ers of railroads are frequently al- 
 lowed as much as $10,000 a year. 
 
 96Marr v. Littlewood, 2 M. & 
 Craig (Eng.) 454. A railroad re- 
 ceiver, residing at a distance from 
 the property, who entrusts the active 
 management to others, will not be 
 
 allowed the full compensation usual- 
 ly paid to railroad presidents and re- 
 ceivers who are the active executive 
 heads of going railroads. Central 
 Trust Co. of New York v. Cincin- 
 nati &c. R. Co., 58 Fed. 500. See 
 also Boston &c. Co. v Chamberlain, 
 66 Fed. 847. 
 
 9" Steel V. Holladay, 19 Ore. 517, 
 25 Pac. 11; Berry v. Jones, 11 Heisk. 
 (Tenn.) 206, 27 Am. Rep. 742; 
 Blakeney v. Dufaur, 15 Beav. 40. As 
 a general rule, perhaps, the receiver 
 should not employ the counsel of 
 either party. Speiser v. Merchant's 
 Exch. Bank, 110 Wis. 506, 86 N. W. 
 243. See also Bartelt v. Smith, 145 
 ■Wis. 31, 129 N. W, 782, Ann. Cas. 
 1912 A, 1197, and cases cited in note 
 to the effect that he is generally en- 
 titled to no compensation. 
 
 98 Stuart V. Boulware, 133 U. S. 
 78, 10 Sup. Ct. 242, 33 L. ed. 568; 
 Farmers' Loan &c. Co. v. Central 
 R Co., 8 Fed. 60; Adams v. Has- 
 kell, 6 Cal. 475. In Farmers' Loan 
 &c. Co. V. Central R. Co., 8 Fed. 60, 
 the opinion was expressed that a re- 
 ceiver should be allowed compensa- 
 
i668 
 
 RAILROADS 
 
 1042 
 
 reduce the amount of his compensation,''^ and, in a proper case, 
 may even refuse him any compensation whatever.^ It is the 
 practice in most jurisdictions to fix the amount in a general order 
 or to make allowances to the receiver for his own compensation 
 and necessary counsel fees on his ex parte application, but it is 
 said in a recent case that, in the absence of any well-settled rule 
 of practice or general order, motions to fix the compensation of 
 receivers or their counsel should not be heard ex parte, and that 
 notice should be given to all parties in interest.^ In case the 
 compensation allowed is too large or too small, it has been held 
 that an appeal may be taken from the order.^ But an appellate 
 court will not interfere to correct the allowance made by the 
 court appointing the receiver unless it has clearly abused the 
 
 tion in case he performs duties in 
 addition to those ordinarily required 
 of a receiver, and he was allowed a 
 fee for services as counsel. But in 
 other cases where claims have been 
 made by receivers for compensation 
 for legal services rendered while 
 acting as such, the claims have been 
 disallowed and the opinion expressed 
 that a receiver acting also in other 
 capacities should be paid for his 
 services in the capacity of receiver 
 only. This rule is based upon the 
 public policy which forbids receivers 
 and other trustees from entering 
 into contracts by which they may 
 make a personal profit from the 
 management of the trust estate. It 
 is said that the temptation to earn 
 fees as counsel would be liable to 
 warp the receiver's judgment as to 
 what suits are proper and necessary. 
 State V. Butler, IS Lea (Tenn.) 113; 
 Battaile v. Fisher, 36 Miss. 321. See 
 as to the general rule that a receiver 
 cannot employ himself to perform 
 services in addition to his duties as 
 a receiver. Bank of Niagara, In re, 
 
 6 Paige (N. Y.) 213; Easton v. 
 Houston &c. R. Co., 40 Fed. 189; 
 Holcorabe v. Holcombe, 13 N. J. Eq. 
 413, 417; Martin v. Martin, 14 Ore. 
 16S, 12 Pac. 234. In Kimmerle v. 
 Dowagiac &c. Co., lOS Mich. 640, 
 63 N. W. 529, it is held that a cor- 
 poration appointed as a receiver is 
 not entitled to additional compensa- 
 tion for its agent who performed the 
 duties of the oifice. 
 
 9»Appeal of Reeves, 3 Walk. (Pa.) 
 199; Stretch v. Gowdey, 3 Tenn. Ch. 
 565. 
 
 1 Clapp v. Clapp, 49 Hun (N. Y.) 
 19.5. See also Sheets Lurr.ber Co., 
 In re, 52 La. Ann. 1337, 27 So. 809; 
 Harrison v. Boydell, 6 Sim. 211. 
 
 2 Merchants' Bank v. Crysler, 67 
 Fed. 3S8, citing Daniel Ch. PI. & 
 Pr. 1592, 1593. 
 
 3 Magee v. Cowperthwaite, 10 
 Ala. 966; Herndon v. Hurler, 19 
 Fla. 397; Russell v. First Nat. 
 Bank, 65 Iowa 242, 21 N. W. 585; 
 Thompson v. Huron &c. Co., 3 
 Wash. 527, 32 Pac. 536. 
 
1043 
 
 RECEIVERS 
 
 §669 
 
 discretion with- which it is vested.* And if the facts upon which 
 the alloVvance was based are not before the appellate court, it 
 will refuse to consider the question as to whether such allowance 
 was excessive. s 
 
 §669 (585). Attorney's fees. — The receiver is entitled to the 
 benefit of legal counsel, and the court may upon application ap- 
 point one of the attorneys practicing before it to serve as his 
 legal adviser." The fees of such counsel for necessary services 
 in connection with the management of the trust will be allowed 
 by the court and paid out of the trust property.'^ The amount 
 must depend largely upon the circumstances of the particular 
 case, and in fixing it, as in fixing the compensation of the receiver, 
 the court is invested with a wide discretion.^ Indeed, the receiver 
 
 ■* Stuart V. Boulware, 133 U. S. 
 78, 10 Sup. Ct. 242, 33 L. ed. 568; 
 Morgan v. Hardee, 71 Ga. 736; 
 Heflfron v. Rice, 149 111. 216, 36 N. 
 E. 562, 41 Am. St. 271; Greeley v. 
 Provident Sav. Bank, 103 Mo. 212, 
 15 S. W. 425. 
 
 5 Jones V. Keen, 115 Mass. 170; 
 Greeley v. Provident Sav. Bank, 
 103 Mo. 212, 15 S. W. 429. 
 
 6 Blair v. St. Louis &c. R. Co., 
 20 Fed. 348. As a general rule, per- 
 haps, the receiver should not em- 
 ploy the counsel of either party. 
 Speiser v. Merchant's Exch. Bank, 
 110 Wis. 506, 86 N. W. 243. But 
 there are instances in which it may 
 be advisable that the court appoint 
 or approve the employment of coun- 
 sel who had represented one of 
 the parties and the attorney for 
 the party securing the appoint- 
 ment of the receiver has often 
 been employed. So where the 
 duties are in no way conflicting 
 and there is no good reason for 
 not employing such counsel, the 
 
 court will approve his employ- 
 ment and a reasonable bill for 
 services of the receiver. Bartlett 
 V. Smith, 145 Wis. 31, 129 N. W. 
 782, Ann. Cas. 1912 A, 1195. 
 
 7 Cowdrey v. Railroad Co., 1 
 Woods (U. S.) 331, Fed. Cas. No. 
 3293; Howes v. Davis, 4 Abb. 
 Prac. (N. Y.) 71. As to allowance 
 to receiver for fees paid counsel, 
 see Phinizy v. Augusta &c. R. 
 Co., 98 Fed. lid. Where there are 
 no surplus earnings, an attorney 
 who recovers for a railroad, in 
 the hands of a receivei", engines 
 formerly leased by it to another 
 road, and rent for their use, which 
 recovery inures to the benefit of 
 the security holders, is entitled \.o 
 a reasonable compensation, to be 
 paid out of the corpus of the 
 property. Louisville &c. R. Co. v. 
 Wilson, 138 U. S. 501, 11 Sup, Ct. 
 405, 34 L. ed. 1023. See also Rul- 
 ings v. Jones, 63 W. Va. 696, 60 S. 
 E. 874 
 
 8 Crumlish's Admr. v. Shenan- 
 
§ 669 RAILROADS 1044 
 
 usually pays the counsel and the court makes the allowance to 
 the receiver.^ Not only the fees of the receiver's counsel but 
 also those of counsel for complainant in the suit for the appoint- 
 ment of a receiver have been ordered paid out of the proceeds of 
 a sale of the property. Such an allowance, if made with modera- 
 tion and a jealous regard for the rights of those interested in the 
 fund, is not only admissible but agreeable to the principles of 
 equity and justice.^" Where a receiver is appointed with the con- 
 sent of all interested parties, and to the advantage of all, the 
 services rendered by the complainant's attorneys, being for the 
 common benefit, should be paid for from the assets of the com- 
 pany.ii And even though the creditors do not all consent, if 
 the litigation result in favor of the plaintiff and the fund be ad- 
 ministered for the benefit of all the creditors, it is only fair that 
 all should bear their ratable proportion of the expense of procur- 
 ing the receiver's appointment. In many cases the claims of 
 complainant's counsel have been allowed in whole or in part^^ 
 before the litigation was ended, and while it still remained a 
 matter of doubt whether the party who employed the attorney 
 had any interest in the fund. But this practice is to be dis- 
 couraged. The better course is to defer making any allowance to 
 
 doah &c. R. Co., 40 W. Va. 62S, 22 12 In Central Trust Co. v. Wa- 
 
 S. E. 90. But see Dalliba v. Win- bash &c. R. Co., 23 Fed. 67S, it was 
 
 schell, 11 Idaho 364, 82 Pac. 107, held that a partial allowance 
 
 114 Am. St. 267; Kronenthal v. would be made for the fees of 
 
 Rosenthal, 144 N. Y. S. 830. complainant's counsel upon appli- 
 
 9 Stuart V. Boulware, 133 U. S. cation, leaving the balance to 
 78, 10 Sup. Ct. 242, 33 L ed. 568. ^*^"'* '^"*'l ^^^ litigation should 
 See also Phinizy v. Augusta &c. ^^ disposed of, and it should be- 
 R. Co. 98 Fed. 776. come apparent whether the prop- 
 
 ' erty in the receiver's hands were 
 
 10 Trustees v. Greenough, 105 U. „,,«;„:-_<. ,.„ n 
 
 „ -„ -,, ^- T , ,,,- ,, sutticient to pay all expenses. 
 
 S. 527, 536, 26 L. ed. 1157, per Mr. xi,«„„i, „ , • / 
 
 . ' ' ., „ ^ , 1 hough a receiver may, under cer- 
 
 Tustice Bradley. Compare also ^^- .;_„„„„. , 
 
 ; . .,, „ T, r- iir-i **'" circumstances, employ coun- 
 
 Louisville &c. R. Co. v. Wilson, .., .. „j„- „ ••„ •.. , , 
 
 10O TT c cm 11 c /-* .1AC tA T ®^' *° advise him with regard to 
 
 138 U. S. 501, 11 Sup. Ct. 405, 34 L. ,.r,„ „,^ „,. • , • i. . 
 
 J ino9 r>\. u « ^ *"^ property in his charge, the 
 
 ^ „f ' 70 ^".L^ ■ ''' "^"=='*y '-^'' be apparent, or a 
 
 Dellatone, 70 Fed. 643. ^^^,^ f„^ attorney's fees will be 
 
 11 Bound v. South Carolina R. disallowed. Terry v. Martin 7 
 Co., 43 Fed. 404.. N. Mex. 54, 32 Pac. 157. 
 
1045 
 
 RECEIVERS 
 
 §669 
 
 plaintiff's counsel until it shall have been demonstrated that his 
 employment was necessary to protect the interests of the credi- 
 tors. i* If an opposite course is pursued, it may be found that 
 the entire fund in the possession of the court has been con- 
 sumed by expenses, and that nothing remains for the creditors 
 in whose interest the litigation purported to have begun. i* 
 
 13 In a dissenting opinion de- 
 livered in the case of Trustees v. 
 Greenough, 105 U. S. 527, 538, 26 L. 
 ed. 1157, Mr. Justice Miller said: 
 "While I agree to the decree of 
 the court in this case, I do not 
 agree to the opinion, so far as it 
 is an argument in favor of a prin- 
 ciple on which is founded the 
 grossest judicial abuse of the 
 present day, namely, the absorp- 
 tion of a property or a fund which 
 comes into control of a court, by 
 making allowances for attorney's 
 fees and oth'er expenses, pending 
 -the litigation, payable out of the 
 common funds, when it may be 
 finally decided that the party who 
 employed the attorney, or in- 
 curred the cost, never had any 
 interest in the property or fund 
 in litigation. This system of pay- 
 ing out of a man's property some 
 one else engaged in the effort to 
 wrest that property from him can 
 never receive my approval." 
 
 1* In Trustees v. Greenough, 105 
 U. S. 527, 536, 26 L. ed. 1157, Mr. 
 Justice Bradley, speaking for the 
 court, said: "Sometimes, no 
 doubt, these allowances have been 
 excessive and perhaps illegal; and 
 we would be very far from ex- 
 pressing our approval of such 
 
 large allowances to trustees, re- 
 ceivers, and counsel, as have 
 sometimes been made, and which 
 have justly excited severe criti- 
 cism." In Cowdrey v. Galveston 
 &c. R. Co., 93 U. S. 352, 23 L. ed. 
 950, the supreme court upheld an 
 allowance of five thousand dollars 
 in favor of counsel employed by 
 certain bondholders to foreclose 
 a mortgage, after the civil war 
 had caused the discontinuance of 
 a former suit in which the trus- 
 tees agreed with their solicitor to 
 pay him that sum for procuring 
 a foreclosure. See as to distinc- 
 tion between allowing fees to the 
 receiver's counsel and refusing to 
 allow them to counsel for the 
 trustees or for the corporation 
 for former services, Pennsylvania 
 Ins. &c. Co. V. Jacksonville &c. 
 R. Co., 93 Fed. 60; Finance &c. 
 Co. V. Charleston &c. R. Co., 52 
 Fed. 526; Petersburg &c. Ins. Co. 
 V. Dellatorre, 70 Fed. 643; Grigg 
 V. Mercantile Trust Co., 109 Fed. 
 220; Central Trust Co. v. Thur- 
 man, 94 Ga. 735, 20 S. E. 141; 
 Chesapeake &c. R. Co. v. Atlan- 
 tic &c. Co., 62 N. J. Eq. 751, 48 
 Atl. 997; Mauran v. Brown &c. 
 Co., 23 R. I. 324, 50 Atl. 331. See 
 also Baxter v. Lowe, 93 Fed. 358. 
 
§670 
 
 RAILROADS 
 
 1046 
 
 § 670 (586). Removal and discharge. — The court appointing 
 a receiver's has power to remove him at any time upon cause 
 shown, and fill his place with some one who will discharge its 
 duties in a satisfactory manner. This power of removal is held 
 to be a necessary incident of the power to appoint a receiver and 
 to control his actions,'** and its exercise rests in the sound dis- 
 cretion of the court. ''^ A receiver may be removed and super- 
 seded for a failure to give bond with sufficient sureties,'^ if he 
 becomes insolvent,'^ for physical or mental disability by which 
 he is rendered incapable of discharging the duties of his office,^** 
 or for any misconduct-' or negligence by which the interests of 
 the trust estate are menaced or endangered.-- Such a personal 
 
 15 Another court to which the 
 cause has been removed by the 
 process of law has the same 
 power in this respect as the court 
 by which the receiver was ap- 
 pointed, and receivers appointed 
 by a state court are as completely 
 under the control of a federal 
 court, to which the cause is after- 
 ward removed; as if originally ap- 
 pointed by the federal court. 
 Texas &c. R. Co. v. Rust, 17 Fed. 
 275; Hinckley v. Oilman &c. R. 
 Co., 100 U. S. 153, 25 L. ed. 591; 
 Dillon Removal of Causes, § 80, 
 p. 99. See Atkins v. Wabash &c. 
 R. Co., 29 Fed. 161. But see Young 
 V. Montgomery &c. R. Co., 2 
 Woods (U. S.) 606, Fed. Cas. No. 
 18166. 
 
 16 Walters v. Anglo-American 
 &c. Co., SO Fed. 316; Crawford v. 
 Ross, 39 Ga. 44; Colvin, In re, 3 
 Md. Ch. 278, 300; McCullough v. 
 Merchants' &c. Co., 29 N. J. Eq. 
 217. 
 
 i^See Milwaukee &c. R. Co. v. 
 Souter, 2 Wall. (U. S.) 510, 17 L. 
 ed. 900; Young v. Rollins, 90 N. 
 
 Car. 125; Cincinnati &c. R. Co. v. 
 Sloan, 31 Ohio St. 1. 
 
 18 Where the bond becomes in- 
 sufficient a receiver may be re- 
 quired to find additional siireties, 
 and, upon his failure to do so, may 
 be removed. Schakelford v. Schak- 
 elford, 32 Grat. (Va.) 481. 
 
 19 Crawford v. Ross, 39 Ga. 44; 
 Monroe v. Schermerhorn, 1 Clarke 
 Ch. (N. Y.) 366. 
 
 20 Richardson v. Ward, 6 Mad. 
 266. 
 
 21 An unlawful and unjust dis- 
 crimination by the receiver of a 
 railroad in favor of one shipper 
 and against rival shippers is suf- 
 ficient ground for his removal. 
 Beers v. Wabash &c. R. Co., 29 
 Fed. 161; Handy v. Cleveland &c. 
 R. Co., 31 Fed. 689. See Keeler 
 V. Brooklyn El. R. Co., 9 Abb. N. 
 Cas. (N. Y.) 166. See generally 
 Fowler v. Jarvis &c. Co., 63 Fed. 
 888, 66 Fed. 14; Clarke v. Central 
 R. &c. Co., 66 Fed. 16; St. George's 
 Estate, In re, 19 L. R. Ir. 566. 
 
 -- St. George's Estate, In re, 19 
 L. R. Ir. 566. 
 
1047 RECEIVERS § 670 
 
 interest in the conduct of the business as might lead the receiver 
 to sacrifice the interests of other claimants may also be cause for 
 his removal. 2^ And where it is shown that the receiver was ap- 
 pointed at the instance of the principal stockholder who has 
 controlled the corporation, and who procured his appointment for 
 a fraudulent purpose, the receiver will be removed and a new 
 receiver appointed.^* But a receiver whose management has 
 been efficient and impartial will not be removed at the request 
 of a controlling stockholder and his associates, when the litiga- 
 tion is not for the purpose of foreclosing a mortgage, but is in- 
 stituted by a minority stockholder on the ground that the in- 
 debtedness of the corporation was being wrongfully increased 
 for the benefit of the controlling stockbolders.^" When the 
 object for which the receiver was appointed has been attained^^ 
 or the litigation in aid of which he was appointed has terminated 
 by abatement or otherwise,-^ the receivership should be termi- 
 nated and the receiver finally discharged.^* And where it appears 
 that the appointment of a receiver for the property of a railroad 
 corporation was procured by collusion between the corporation 
 
 23 Beers v. Wabash &c. R. Co., 26 Sewell v. Cape May &c. R. 
 29 Fed. 161; Etowah &c. Co. v. Co., (N. J.) 30 Am. & Eng. R. 
 Wills &c. Co., 106 Ala. 492, 17 So. Cas. ISS. Upon payment of the 
 522; Williamson v. Wilson, 1 plaintiff's claim, and the re- 
 Bland (Md.) 418; Keeler v. ceiver's lawful charges, the court 
 Brooklyn El. R. Co., 9 Abb. N. is bound to discharge the receiver, 
 Cas. (N. Y.) 166; Fripp v. Chard even though some of the defend- 
 R. Co., 22 L. J. Ch. 1084, 11 Hare ants desire that he be retained. 
 241. Where two, receivers, ap- Milwaukee &c. R. Co. v. Soutter, 
 pointed to represent rival inter- 2 Wall. (U. S.) 510, 17 L. ed. 900; 
 ests, are unable to agree as to the Davis v. Duke of Marlborough, 2 
 conduct of the business, the court Swanst. * p. 167, per Lord Eldon. 
 should remove them and appoint a 27' Milwaukee &c. R. Co. \. 
 single disinterested person to act Soutter, 2 Wall. (U. S.) 510, 17 L. 
 in their stead. Meier v. Kansas gd. 900; Field v. Jones, 11 Ga. 413; 
 Pac. R. Co., S Dill. (U. S.) 476, National &c. Assn. v. Mariposa 
 Fed. Cas.. No. 9395. Co., 60 Barb. (N. Y.) 423; White- 
 
 24 Phinizy v. Augusta &c. R. side v. Prendergast, 2 Barb. Ch. 
 Co., 56 Fed. 273. (N. Y.) 472. 
 
 25 Street v. Maryland Cent. R. 28 But the discontinuance or 
 Co., 58 Fed. 47. abatement of the action does not 
 
§ 671 RAILROADS 1048 
 
 and a creditor, for the purpose of putting the property beyond 
 the reach of judicial process and without any intention of apply- 
 ing it in satisfaction of the petitioning creditor's claim, the court 
 will discharge the receiver of its own motion. ^^ A court of equity 
 will not conduct the business of the corporation through a re- 
 ceiver unless the interests of the parties unmistakably require 
 it.^° It has been held that a receiver continues to be subject to 
 the duties and possessed -of the privileges annexed to his office 
 until discharged by a formal order of court, notwithstanding the 
 litigation has ended, or other conditions have arisen which make 
 it the duty of the court to discharge him.^'- 
 
 § 671 (587). Effect of removal or discharge. — The removal 
 of a receiver does not necessarily terminate the receivership. 
 Since the receiver is a mere officer of the court, he may be super- 
 seded without affecting the trust which he is called upon to 
 administer. The removal of a receiver to make way for a suc- 
 cessor appointed by the court does not affect claims against the 
 property arising from the operation of the railroad by the first 
 receiver. The management of the court is one even if it becbmes 
 necessary to change receiver more than once.^^ After the re- 
 ceiver has been discharged by the court he is no longer liable to 
 an action either for the debts of the corporation or for any debts 
 or liabilities incurred during his receivership.^* Nor is the corpo- 
 
 of itself terminate the receiver- 2 Wall. (U. S.) 510, 523, 17 L. ed. 
 
 ship. State v. Gibson, 21 Ark. 140; 900; Copper Hill &c. Co. v. Spen- 
 
 McCosker v. Brady, 1 Barb. Ch. cer, 25 Cal. 11, 16. 
 
 (N. y.) 329; Newman v. Mills, 1 so Overton v. Memphis &c. R. 
 
 Hog. (Irish Rolls) 291. Co., 10 Fed. 866; Sage v. Memphis 
 
 20 Sage v. Memphis &c. R. Co., &c. R. Co., 18 Fed. 571; Ferry v. 
 
 18 Fed. 571; Wood v. Oregon &c. Bank, IS How. Prac. (N.Y.) 445. 
 
 .Co., 55 Fed. 901; Wilson v. Bar- 31 State v. Gibson, 21 Ark. 140. 
 
 "ney, 5 Hun (N. Y.) 257. The re- See also Fountain v. Mills, 111 
 
 ceiver will be discharged in any Ga. 122, 36 S. E. 428; Baker v. 
 
 case where it is shown to the Baker, 36 App. Div. 485, 55 N. Y. S. 
 
 court that the order appointing a 824. 
 
 receiver was improvidently or 32 Bond v. State, 68 Miss. 64S, 9 
 
 wrongfully made. McHenry v. So. 353; Gibbes v. Greenville &c. 
 
 New York &c. R. Co., 25 Fed. 114; R. Co., 15 S. Car. 304. 
 
 Milwaukee &c. R. Co. v. Soutter, 33 Farmers' Loan &c. Co. v. 
 
1049 
 
 RECEIVERS 
 
 §671 
 
 ration, as a general rule, personally liable for the latter.^* The 
 corporation may, however, be held liable for the acts and defaults 
 of the receiver's servants to the extent that earnings of the road 
 have been used in the purchase of property surrendered to the 
 corporation by the receiver upon his final discharge.^^ But after 
 the discharge of the receiver and the restoration of the property 
 to the corporation, the jurisdiction of the court over the receiver- 
 ship is ended, and it has even been held that a provision in the 
 decree relieving the property from liability for claims not filed 
 within a specified time, in the suit in which the receiver was 
 appointed, is void.^^ 
 
 Central R. Co., 7 Fed. 537; Leh- 
 man V. McQuown, 31 Fed. 138; 
 Bond V. State, 68 M.iss. 648, 9 So. 
 353; New York &c. Tel. Co. v. 
 Jewett, lis N. Y. 166, 21 N. E. 
 1036; Ryan v. Hays, 62. Tex. 42; 
 Texas &c. R. Co. v. Adams, 78 
 Tex. 372, 14 S. W. (>(£, 22 Am. St. 
 56. A judgment against an ancil- 
 lary receiver after his discharge 
 is not binding, even though the 
 court did not know of his dis- 
 charge. Reynolds v. Stockton, 140 
 U. S.'254, 11 Sup. Ct. 773, 35 L. 
 ed. 464. 
 
 3* Davis V. Duncan, 19 Fed. 477, 
 17 Am. & Enk. R! Cals. 295; God- 
 frey V. Ohio &c. R. Co., 116 Ind. 
 30, 18 N. E. 61; Texas &c. R. Co. 
 V. Watson (Tex. Civ. App.), 24 S. 
 W. 952. But it has been held that 
 the company is liable for injuries 
 caused by the negligence of a re- 
 ceiver appointed through collu- 
 
 sion, whether the court had juris- 
 diction to appoint or not. Texas 
 &c. R. Co. v. Gay, 86 Tex. 571, 26 
 S. W. 599, 25 L. R. A. 52. The 
 court regarded the receiver as the 
 agent of the company. 
 
 33 Mobile &c. R. Co. v. Davis, 
 62 Miss. 271; Texas &c. R. Co. v. 
 Johnston, 76 Tex. 421, 13 S. W. 
 463, 18 Am. St. 60. See Texas &c. 
 R. Co. V. Griffin, 76 Tex. 441, 13 S. 
 W. 471. 
 
 36 Missouri &c. R. Co. v. Chil- 
 ton, 7 Tex, Civ, App. 183, 27 S. W. 
 272; Texas &c. R. Co, v. Watts 
 (Tex.), 18 S. W. 312, following 
 Texas &c. R. Co. v. Johnson, 76 
 Tex, 421, 13 S, W, 463, 18 Am, St, 
 60. But see Ohio Coal Co. v. Whit- 
 comb, 123 Fed. 359; Denver &c. R. 
 Co. V. Gunning, 33 Colo. 280, 80 Pac. 
 727, and compare Henry v. Claffey 
 (Ind.), 127 N. E. 193. 
 
CHAPTER XXIII. 
 
 RECEIVER'S CERTIFICATES. 
 
 Sec. . Sec. 
 
 675. Definition and nature of re- 681. Lien created by receiver's cer- 
 
 ceiver's certificates. tificates. 
 
 676. Power of courts to authorize. 682. Statutory provisions as to lien. 
 
 677. Purposes for which receiver's ggj Negotiability of receiver's cer- 
 
 certificates may be issued — tificates 
 
 684. Rights of holders of receiver's 
 certificates. 
 
 Extent of power. 
 
 678. Purposes and circumstances 
 
 justifying issuance. 
 
 679. Purpose or circumstances 685. Who may question validity of 
 
 not justifying issuance. receiver's certificates. 
 
 680. Order giving authority to is- 686. Payment and redemption of 
 
 sue. certificates. 
 
 § 675 (588). Definition and nature of receiver's certificates. — 
 
 A receiver's certificate has been defined as "a non-negotiable evi- 
 dence of debt, or debenture, issued by autltority of a court of 
 chancery as a first lien upon the property of a debtor corporation 
 in the hands of a receiver."^ It frequently becomes necessary 
 that a receivef of a railroad should borrow money in order, to 
 keep the road in repair and operate it for the good of the public, 
 to prevent the loss of business and good will, and to preserve it 
 as a "going concern" for the benefit of all parties interested. Un- 
 less good security can be given it would be impossible to borrow 
 the money, and it is to the interest, both of the public and of the 
 parties, that some just means of obtaining the money and giving 
 security should be devised. This is accomplished by the issue 
 of certificates of indebtedness, negotiable in form, for the pay- 
 ment of which, out of the proceeds of the property in its hands, 
 the faith of the court is pledged.^ 
 
 § 676 (589). Power of courts to authorize. — Since the best 
 and cheapest mode of conserving a railroad is by operating trains 
 
 1 See also Turner v. Peoria &c. R. 377, 379, 381, 83 Am. St. 72 et seq; 
 Co., 95 111. 134, 35 Am. Rep. 114, Ann. Cas. 1913C, 40. 
 notes in 54 Am. St. 431, 71 Am. St. 2 Taylor v. Philadelphia &c. R Co 
 
 1050 
 
1051 
 
 RECEIVER S CERTIFICATES 
 
 §676 
 
 thereon, and keeping it in repair for their use, and since this is 
 the only way in which the public duties and obligations of the 
 railroad can be discharged and a forfeiture of its charter pre- 
 vented, power to raise money for the repair and operation of 
 the road necessarily accompanies the power to assume control of 
 it for the benefit of the corporate creditors.^ This power is a' 
 part of the jurisdiction, exercised by a court of equity, by which 
 it undertakes to protect and preserve the trust. funds in its hands.* 
 It may be stated as a general rule, therefore, that where it is 
 
 14 Phila. (Pa.) 451, 461. "The cer- 
 tificates are not debts of the com- 
 pany, but of the receivers, backed 
 by the pledged faith of the court, 
 that the property, on the proceeds of 
 which they are charged, is in its 
 possession, subject to be, and that it 
 will be, disposed of by it for the 
 payment of them. This results from 
 the fact that they are but a substi- 
 tute for common methods by which 
 money is raised for the use of a 
 receiver in a particular case, a mode 
 of appropriating, in advance, a por- 
 tion of the value of the property, in 
 order to enable the court to save a 
 greater value thereof from destruc- 
 tion." Meyer v. Johnston, S3 Ala. 
 237. See also as to the reasons jus- 
 tifying the issuance of such certif- 
 icates giving priority in the case of 
 railroad companies. International 
 Trust Co. V. Decker Bros., 152 Fed. 
 78, 11 L. -R. A. (N. S.) 152, 156, and 
 cases, cited in the opinion. 
 
 3 Meyer v. Johnston, 53 Ala. 237. 
 
 i Wallace v. Loomis, 97 U. S. 146, 
 24 L. ed. 895. In some states the is- 
 sue of receiver's certificates in cer- 
 tain cases is authorized by statute. 
 In announcing the opinion of the 
 court in the case of Meyer v. John- 
 ston, 53 Ala. 237, Judge Manning 
 
 said : "It was not necessary that 
 the question of the power of a court 
 to authorize the issue of first lien 
 certificates of indebtedness to enable 
 a receiver to raise money he might 
 need, should be decided before the 
 introduction of railroads. But these 
 properties, with their appurtenances, 
 vast in extent and value, yet very 
 perishable if unused and neglected, 
 existing as the estates of private in- 
 dividuals associated into • corpora- 
 tions, but essentially public works, in 
 whose operations the public, at large 
 and the state are concerned, when 
 drawn into litigation, must be dealt 
 with by the courts according to the 
 nature and circumstances of the sub- 
 ject. And any one can understand 
 that the best and cheapest mode of 
 conserving a railroad may be by op- 
 erating trains thereon and keeping 
 it in repair for their use. To pre- 
 serve its value, it must generally be 
 continued in operation, and be sold 
 as a going concern.'' The court also 
 said that if the road were permitted 
 to become a useless wreck, "the in- 
 convenience and loss which this 
 would inflict on the population of 
 large districts, coupled with the 
 benefit to parties who are powerless 
 to take care of themselves, of pre- 
 
§677 
 
 RAILROADS 
 
 1052 
 
 necessary that a receiver should expend money for the repair of 
 a railroad in his hands, in order to keep it in operation, the court 
 by which he was appointed has power to authorize him to borrow 
 money necessary to make such repairs, and to make the indebted- 
 ness so incurred a first lien upon the property in its hands. And 
 it is equally well settled that the court may authorize the receiver 
 to issue receiver's certificates as evidence of such indebtedness.^ 
 But, as will be further shown in the next section, the power is 
 one that is to be cautiously and somewhat sparingly exercised.® 
 
 § 677 (590). Purposes for which receiver's certificates may be 
 issued — Extent of power. — Where a portion of the road has been 
 built in a hasty manner with materials which answer only a tem- 
 porary use,^ or where valuable property rights will be lost by a 
 failure to complete unfinished portions . of the road within a 
 limited time,^ it may be necessary for the receiver to borrow 
 money with which to build such parts of the road, and the court 
 
 venting the rapid diminution of 
 value, and derangement and disor- 
 ganization that would otherwise re- 
 sult, seem to require — not for the 
 completion of an unfinished work, or 
 the improvement, beyond what is 
 necessary for its preservation, of an 
 existing one— but to keep it up, to 
 conserve it as a railroad property, 
 if the court has been obliged to take 
 possession of it, that the court 
 should borrow money for that pur- 
 pose, if it can not otherwise do so 
 in sufficiently large sums, by caus- 
 ing negotiable certificates of indebt- 
 edness to be issued, constituting a 
 first lien on the proceeds of the 
 property, and redeemable when it is 
 sold or disposed of by the court." 
 
 Wallace v. Loomis, 97 U. S. 146, 
 24 L. ed. 895; Miltenberger v. Lo- 
 gansport &c. R. Co., 106 U. S. 286, 
 1 Sup. Ct. 140, 27 L. ed. 117; Union 
 Trust Co. v. Illinois Midland R. Co., 
 
 117 U. S. 434, 6 Sup. Ct. 809, 29 L. 
 ed. 963; Meyer v. Johnston, 53 Ala. 
 237; Turner v. Peoria &c. R. Co., 95 
 111. 134, 35 Am. Rep. 144. See also 
 Central Trust &c. Co. v. Chester Co. 
 Elec. Co., 9 Del. Ch. 247, 88 Atl. 801 ; 
 Vandalia v. St. Louis R. &c. Co., 209 
 111. 73, 70 -N. E. 662 ; Knickerbocker 
 Trust Co. V. Oneonta &c. R. Co., 201 
 N. Y. 379, 94 N. E. 871; Greenwood 
 V. Algeciras R. Co., (1894) 2 Ch. 
 205, 63 L. J. Ch. 670. 
 
 e See Shaw v. Little Rock &c. R. 
 Co., 100 U. S. 60S, 25 L. ed. 757; 
 Newbold v. Peoria &c. R. Co., 5 111. 
 App. 367; Davis v. Alton &c. R. Co., 
 180 111. App. 1 ; Rochester Trust Co. 
 v. Rochester &c. R. Co., 29 Misc. 222, 
 60 N. Y. S. 409; State v. Edgefield 
 &c. R. Co, 6 Lea (Tenn.) 353. 
 
 ■^ Stanton v. Alabama &c. R. Co., 
 2 Woods (U. S.) 506, Fed. Cas. No. 
 13296. 
 
 8 Kennedy v. St. Paul &c. R. Co., 
 
1053 
 
 RECEIVER S CERTIFICATES 
 
 i677 
 
 may authorize him to issue certificates therefor.® But this juris- 
 diction to authorize expenditures and certificates for improve- 
 ments and repairs must not be exercised to the extent of improv- 
 ing the owners and lienholders out of their property. The whole 
 power of the court, when exercised to its fullest extent, without 
 the consent of the lienholders express or implied, is usually con- 
 fined in ordinary cases to making necessary repairs and protect- 
 ing the property as it is.^" The propriety of the expenditure is to 
 be judged by the necessity of making it in order to preserve the 
 value of the trust estate. ^^ This power is exercised, as a general 
 rule, only in the case of such expenditures as are necessary for 
 
 2 Dill (U. S.) 448, Fed, Cas. No. 7706, 
 S Dill. (U. S.) S19, Fed Cas. No. 
 7707. The receiver can not bind the 
 company by an oral contract to give 
 a landowner an annual pass during 
 life in consideration of a grant of 
 necessary land for a right of way. 
 Martin v. New York &c. R. Co., 36 
 N. J. Eq. 109, 12 Am. & Eng. R. Cas. 
 448. 
 
 9 Jerome v. McCarter, 94 U. S. 
 734, 24 L. ed. 136. In this case the 
 United States had made a large 
 grant of land to a company engaged 
 in digging a canal, conditioned upon 
 the completion of the canal within a 
 certain time. The receiver was au- 
 thorized to borrow the money neces- 
 sary for its completion by the issue 
 of receiver's certificates, and, upon 
 appeal, the supreme court approved 
 their issue. See also Kennedy v. 
 St. Paul &c. R. Co., 2 Dill. (U. S.) 
 448, Fed. Cas. No. 7706; Houston 
 First Nat. Bank v. Ewing, 103 Fed. 
 168; Bank of Montreal v. Chicago 
 &c. R. Co., 48 Iowa SIS. 
 
 10 Credit Co. v. Arkansas Cent. R. 
 Co., S McCrary (U. S.) 23, IS Fed. 
 46; Taylor v. Philadelphia &c. R. 
 
 Co., 9 Fed, 1 ; citing Snow v. Win- 
 slow, 54 Iowa 200, 6 N. W. 191; 
 Metropolitan Trust Co. v. Tonawan- 
 da Valley &c. R. Co., 103 N. Y. 24S, 
 8 N. E. 488, per Danforth, J. Jones 
 Corporate Bonds and Mortgages, 
 § 543. See also American Brake Shoe 
 &c. Co. V. Pere Marquette R. Co., 
 205 Fed. 14. 
 
 11 Shaw v. Railroad Co., 100 U. S. 
 605, 25 L. ed. 757. "Aside from any 
 consideration of the mortgagor and 
 others having the right to redeem, 
 against whom a court of equity has 
 power analogous to that of a mort- 
 gagee in possession to incur charges 
 for the preservation and repair of 
 the property it has taken possession 
 of through its receiver, a court of 
 equity has no power to impair the 
 obligation of a mortgage contract, by 
 creating a superior lien without the 
 mortgagee's consent, unless it be in 
 the exercise of a like equitable 
 power of preserving and protecting 
 the property. The law does not per- 
 mit the obligation of contracts to 
 be impaired. The constitution of 
 the United States inhibits even a 
 state from doing an act which shall 
 
§677 
 
 RAILROADS 
 
 1054 
 
 the protection of the property.^* And the court will not, ordi- 
 narily, authorize expenditures for the completion of a road unless 
 it is morally certain that the property in consequence will sell 
 for a higher price. ^* A receiver should not be permitted to ex- 
 pend money or incur obligations to secure mere speculative ad- 
 vantages. 
 
 have that effect. And, certainly, a 
 court, which is a portion of the gov- 
 ernment of the state, cannot have a 
 power which is denied to the state 
 in convention assembled. If, there- 
 fore, the action of a chancellor in 
 this cause goes to the extent of tak- 
 ing the property of the defendant 
 corporation into its hands for the 
 purpose, through his appointees, of 
 completing an unfinished work, or of 
 enlarging or improving a finished 
 one, beifond what is necessary for 
 its preservation, and to that end 
 raising money, by charging the rail- 
 road and its appurtenances with 
 liens which are to supersede older 
 ones, without the consent of the 
 holders of these, he has inadvertently 
 passed beyond the boundaries of a 
 chancellor's jurisdiction. In our 
 opinion no such power is vested or 
 resides in any judicial tribunal." 
 Jones Corporate Bonds and Mort- 
 gages, § 551, quoting from the opin- 
 ion of Manning, J., in Meyer v. 
 Johnston, S3 Ala. 237, 345. 
 
 12 Metropolitan Trust Co. v. Ton- 
 awanda Valley &c. R. Co., 103 N. Y. 
 245, 249, 8 N. E. 488, per Danforth, 
 J ; Jones Corporate Bonds and Mort- 
 gages, § 559, citing Hand v. Savan- 
 nah &c. R. Co., 17 S. Car. 219, 270, 
 per McGowan. The certificates of a 
 receiver of an insolvent railroad 
 company, issued under an order of 
 
 court to obtain money to operate the 
 road, are paramount liens. Central 
 Trust Co. V. Tappan, 53 Hun 638, 6 
 N. Y. S. 918. But see as to me- 
 chanic's lien, Stewart &c. Co. v. Mis- 
 souri Pac. R. Co., 28 Nebr. 39, 44 N. 
 W. 47. And see as to right of way 
 claim. Crosby v. Morristown &c. R. 
 Co. (Tenn.), 42 S. W. 507 
 
 13 Investment Co. v. Ohio &c. R. 
 Co., 36 Fed.- 48; Jones Corporate 
 Bonds and Mortgages, § 545, citing 
 Investment Co. v. Ohio &c. R. Co., 
 36 Fed. 48. In this case the circum- 
 stances were as follows : The peti- 
 tion of a receiver of an insolvent 
 railroad for authority to borrow a 
 large sum of money and issue his 
 certificates therefor, showed , that 
 part of the amount was to be used in 
 completing a portion of the road and 
 widening its gauge; $35,000 for pur- 
 chasing and laying track over an- 
 other portion already graded and 
 bridged at an expense of $49,000; 
 $47,243.18 to pay claims for material 
 furnished, which were not a lien on 
 the road; $20,000 to reimburse bond- 
 holders for advances to meet arrear- 
 ages of wages and avert a strike ; 
 $100,000 to purchase leased rolling 
 stock for which the company paid an 
 aimual rental of $28,000, the lessors 
 cancelling a claim for $7,000 unpaid 
 rent, if the purchase was made ; 
 $4,000 to relay a line of track on a 
 
1055 
 
 RECEIVER S CERTIFICATES 
 
 §678 
 
 § 678. Purposes and circumis.<lances justifying issuance. — A 
 
 greater latitude is permitted to receivers of railroads- than to 
 receivers of other corporations in the matter of incurring debts 
 for management and operation, because of the public rights 
 which are involved and of the consequences of a failure on the 
 part of the railroad to discharge its public duties.^* Accordingly 
 the courts have in some cases authorized the issue of certificates 
 to construct the unfinished portions of an incomplete railroad, 
 and to purchase the necessary rolling stock, machinery and 
 supplies for its operation,^^ and even to pay debts of the company 
 for labor, and materials due prior to the appointment of the 
 
 connecting road, and thus cancel a 
 debt of $8,000 due that road, and se- 
 cure enough additional business to 
 pay the cost in three months, and 
 $29,430 to make final payment on 
 valuable real estate. A majority of 
 the holders of both the first and 
 second mortgage bonds consented to 
 the certificates being issued; the re- 
 maining holders of first and second 
 mortgage bonds not consenting, and 
 a number of them, together with 
 other lienholders, objecting. The 
 court held that, as it was doubtful 
 whether the improvements would 
 add to the selling price of the road, 
 the petition should be denied abso- 
 lutely as to the items of $35,000 and 
 $20,000, and as to the item of $47,- 
 243.18, unless all lienholders con- 
 sented ; but that certificates should 
 be issued for the other items, if de- 
 sired by the consenting bondholders, 
 with leave thereafter to petition to 
 have them made a charge on the 
 non-consenting bondholders. See 
 also Street v. Maryland Cent. R. Co., 
 59 Fed. 25; Bibber-White Co. v. 
 White River Elec. R. Co., 115 Fed. 
 786; Rochester &c. Co. v. Rochester 
 
 &c. R. Co., 29 Misc. 222, 60 N. Y. S. 
 409; Rutherford v. Pennsylvania R. 
 Co., 178 Pa. St. 38, 35 Atl. 926; Hand 
 V. Savannah &c. R. Co., 10 S. Car. 
 406. 
 
 1* Jones Corporate Bdnds and 
 Mortgages, § 555. See also Wood v. 
 Guarantee Trust Co., 128 U. S. 416, 9 
 Sup. Ct. 131, 32 L. ed. 472; Morgan's 
 &c. Co. V. Texas &c. R. Co., 137 U. 
 S. 171, 11 Sup. Ct. 61, 34 L. ed. 625; 
 Farmers' Loan &c. Co. v. Grape 
 Creek &c. Co., 50 Fed. 481, 16 L. R. 
 A. 603, and note; Fidelity &c. Co. v. 
 Roanoke &c. Co., 68 Fed. 623; Snive- 
 ly V. Loomis Coal Co., 11 Nat. Corp. 
 Rep. 207. 
 
 15 Wallace v. Loomis, 97 U. S. 146, 
 24 L. ed. 895; Smith v. McCuUough, 
 104 U. S. 25, 26 L. ed. 637; Milten- 
 berger v. Logansport R. Co:,' 106 U. 
 S. 286, 27 L. ed. 117; Swan. v. Clark, 
 110 U. S. 602, 4 Sup. Ct. 241, 28 L. 
 ed. 256; Bank of Montreal v. 
 Thayer, 7 Fed. 622; Mercantile 
 Trust Co. V. Kanawha &c. R. Co.,- 
 50 Fed. 874; Meyer v. Johnston, 
 53 Ala. 237 ; Turner v. Peoria &c. R. 
 Co., 95' 111. 134, 35 Am. Rep. 144; 
 Bank of Montreal "v. Chicago &c. R. 
 
§679 
 
 RAILROADS 
 
 1056 
 
 receiver.^* So, a receiver may be authorized to borrow money 
 to pay taxes and to issue certificates therefor when he has no 
 funds with which to pay them.i'^ And such certificates are often 
 authorized and issued to pay current operating expenses of a 
 railroad under the receiver, including those for ordinary repairs.^" 
 
 § 679. Purpose or circumstances not justifying issuance. — 
 
 But it was held in a comparatively recent case that where a 
 receiver is appointed at the suit of a stockholder and not upon the 
 application of a bondholder, and no earnings have been diverted 
 to pay interest on the'bonds, there is no lien or equity requiring 
 the issuance of receiver's certificates for money to pay labor or 
 material claims, existing before the appointment of the receiver, 
 out of the corpus of the property.^^ And the power to issue 
 receiver's certificates is one which should be sparingly exer- 
 cised.20 It is liable to great abuse; and while it is usually re- 
 
 Co., 48 Iowa S18; Gilbert v. Wash- 
 ington City &c. R. Co., 33 Grat. 
 (Va.) 586. 
 
 16 Union Trust Co. v. Illinois Mid- 
 land R. Co., 117 U. S. 434, 6 Sup. Ct. 
 809, 29 L. ed. 963; Taylor v. Phila- 
 delphia &c. R. Co., 7 Fed. 377; Hum- 
 phreys V. Allen, 101 111. 490; Lang- 
 don V. Vermont &c. R. Co., S3 Vt. 
 228. See also McKittrick v. Arkan- 
 sas Cent. R. Co., 152 U. S. 473, 14 
 Sup. Ct. 661, 38 L. ed. .518; Milten- 
 berger v. Logansport &c. R. Co., 106 
 U. S. 286, 1 Sup. Ct. 140, 27 L. ed. 
 117; Mercantile Trust Co. v. Baltir 
 more &c. R. Co., 82 Fed. 360; First 
 Nat. Bank v. Ewing, 103 Fed. 168; 
 Hubbell V. Texas Southern R. Co., 
 59 Tex. Civ. App. 185, 126 S. W. 
 313. 
 
 IT Union Trust Co. v. Illinois Mid- 
 land R. Co., 117 U. S. 434, 461, 6 Sup. 
 Ct. 809, 29 L. ed. 963; Bernard v. 
 Union Trust Co., 1S9 Fed. 620, 16 L. 
 R. A. (N. S.) 1118; Knickerbocker 
 Trust Co. V. Oneonta &c. R. Co., 201 
 
 N. Y. 379, 94 N. E. 871 (but not to 
 pay interest on the bonds). This, in- 
 deed, is not fixing a new and addi- 
 tional lien on the property or dis- 
 placing a prior lien, but is simply 
 changing the form of the lien for 
 taxes. 
 
 18 Wallace v. Loomis, 97 U. S. 146, 
 24 -L. ed. 895; First Nat. Bank v. 
 Ewing, 103 Fed. 168; Bibber-White 
 Co. V. White River Valley Elec. R. 
 Co., 115 Fed. 786; Hoover v. Mont- 
 clair &c. R. Co., 29 N. J. Eq. 4. See 
 generally on this subject the elaborate 
 note to Hewitt v. Walters. 21 Idaho 1, 
 119 Pac. 70S, in Ann. Cas. 1913C, 35. 
 
 19 Street v. Maryland &c. R. Co., 
 59 Fed. 25. See also Cutting v. 
 Tavares &c. R. Co., 61 Fed. 150; 
 Farmers' Loan &c. Co. v. Northern 
 Pac. R. Co., 68 Fed. 36. But com- 
 pare Farmers' Loan &c Co. v. Kan- 
 sas City &c. R. Co., S3 Fed. 182, and 
 note. See generally §605, ante. 
 
 20 Kneeland v. American &c. Co., 
 136 U. S. 89, 10 Sup. Ct. 950, 34 L. 
 
1057 
 
 receiver's certificates 
 
 §680 
 
 sorted to under the pretext that it will enhance the security of 
 the bondholders, it not infrequently results in taking from them 
 the security they already have, and appropriating it to pay debts 
 contracted by the court.^i Such certificates will not be authorized 
 for construction work that practically amounts to rebuilding an 
 entire street railway system.22 
 
 § 680 (591). Order giving authority to issue. — Certificates can 
 only be issued in strict conformity to the order of court authoriz- 
 
 ed. 379; Credit Co. v. Arkansas Cent. 
 R. Co., 5 McCrary (U. S.) 23, 15 
 Fed. 46; Investment Co. v. Ohio &c. 
 R. Co., 36 Fed. 48; 8 Thomp. Corp., 
 §6405. 
 
 21 Caldwell, J., in Credit Co. v. Ar- 
 kansas Cent. R. Co., 5 McCrary (U. 
 S.) 23, 15 Fed. 46. He adds: "The 
 history of Wallace v. Loomis, 97 U. 
 S. 146, 162, 24 L. ed. 895, 2 Woods 
 506, Fed. Cas. No. 13296, Under the 
 title of Stanton v. Alabama &c. R. 
 Co., furnishes an instructive lesson 
 on this subject." Mr. Jones, in his 
 work on Corporate Bonds and Mort- 
 gages, § 541, says : "Complaint as to 
 the management of railroad receiv- 
 ers has generally come, not from the 
 stockholders, because it is seldom 
 they care to redeem, but from mort- 
 gage bondholders ; and as often, per- 
 haps, from those at whose solicita- 
 tion the receiver was appointed as 
 from others who may hold under 
 junior mortgages, and who, there- 
 fore, have a right to redeem. The his- 
 tory of such management in this 
 country shows that the bondholders 
 chiefly interested have sometimes 
 found themselves improved out of 
 their interest in the property." And, 
 in a note which he appends, he adds : 
 "Judge Baxter is reported to have 
 
 expressed himself strongly, in a re- 
 cent case before the Circuit Court 
 of the United States, against the 
 practice of placing railroads in the 
 hands of receivers. He cited the 
 case of a railroad in Georgia which 
 cost $15,000,000. The receiver, who 
 was in charge for three years, is- 
 sued certificates to the value of 
 $1,500,000, and when the road was 
 sold the proceeds were not sufficient 
 to pay the certificates. In another 
 case, in Detroit, a road cost over 
 $8,000,000. When the road came to 
 be sold eminent counsel requested 
 the judge to fix the minimum price 
 for the sale, suggesting that such 
 price should be a sum sufficient to 
 cover the charges of the receiver 
 and his counsel. 11 Chicago Legal 
 News 8." 
 
 2ii Merchants L. & T. Co. v. Chi- 
 cago R. Co., 158 Fed. 923.. And, in 
 another case, a decree authorizing 
 certificates to the amount of $150,000 
 to complete the construction of a 
 line of railroad 22 miles, 6 miles be- 
 ing completed, was reversed where 
 there were intervening petitioners 
 having mechanic's liens to the 
 amount of $80,000 which would have 
 to be postponed thereunder. Davis 
 v. Alton &c. R. Co., 180 111. App. 679. 
 
 -Ell. Railkoads I 
 
§680 
 
 RAILROADS 
 
 1058 
 
 ing them,-2 and may be issued only for the purposes mentioned 
 in such order, 2* and upon valid consideration. ^^ Notice should 
 usually be required to be given to the parties in interest before 
 an order should be made authorizing the, receiver to issue cer- 
 tificates.2o But a full opportunity to be heard as to the propriety 
 
 2 3Newbold v. Peoria &c. R. Co., 5 
 111. App. 367; State v. Edgefield &c. 
 R. Co., 6 Lea (Tenn.) 353. See also 
 Bank of Montreal v. Chicago &c. R. 
 Co., 48 Iowa 518; St. Louis Trust 
 Co. V. Texas & R. Co., 59 Tex. Civ. 
 App. 157, 126 S. W. 296. 
 
 -* Fidelity Ins. Co. v. Shenan- 
 doah &c. Co., 42 Fed. 372; Newbold 
 V. Peoria &c. R. Co., 5 111. App. 367. 
 
 -'> Certificates issued without con- 
 sideration are held absolutely void. 
 Union Trust Co. v. Chicago &c. R. 
 Co., 7 Fed. 513 ; Turner v. Peoria, 
 &c. R. Co., 95 111. 134. In Bank of 
 Montreal v. Chicago &c. R. Co., 48 
 Iowa 518. . the court says: "The re- 
 ceiver, being an officer of the court, 
 has no implied powers other than 
 those derived from the order of the 
 court. Such being true, we think 
 it clear he could not issue certificates 
 which would constitute a first lien 
 on the road except for money bor- 
 rowed, material furnished, or labor 
 performed. When the material was 
 furnished or labor performed, he was 
 authorized to issue the certificates 
 therefor, and not until then. And if 
 he made a contract for the construc- 
 tion of the road, he might issue cer- 
 tificates as the material was fur- 
 nished or the labor performed, and 
 on the completion of the road he 
 could issue his certificates in final 
 payment. But the power is not con- 
 ferred to issue certificates in payment 
 for material not furnished or labor 
 
 not performed. On the contrary, we 
 are of the opinion, it fairly appears 
 Ke was prohibited from so doing. If 
 the necessity existed for enlarged 
 powers, they should have been ap- 
 plied for. * * * j\s the certif- 
 icates on their face state they were 
 'issued under and by virtue of cer- 
 tain provisions of an order duly en- 
 tered by the district court of Clinton 
 county, Iowa, on July 27, 1876,' the 
 plaintiff is chargeable with notice of 
 all such order contains. Whether 
 under the order the receiver had the 
 power to issue negotiable securities 
 or for property agreed to be deliv- 
 ered at a future day, were legal ques- 
 tions which the plaintiff was bound to 
 determine at his peril. The receiver's 
 authority was bounded and limited 
 by the order. He had no general 
 powers, except such as could be de- 
 rived therefrom. It is true he had 
 power to issue certificates, but this 
 was not unlimited. It was only in 
 certain cases he could do so. And 
 being an officer of the court and 
 vested with the care of property in 
 his charge as such officer, we think 
 the plaintiff was bound to know 
 whether these certificates were issued 
 in accordance with the terms and 
 contingencies contemplated by the 
 order." 
 
 26 Mitchell, Ex parte, 12 S. Car. 
 83. The lienholders over whose liens 
 they are given a priority should have 
 notice and an opportunity to be 
 
1059 
 
 RECEIVER S CERTIFICATES 
 
 §680 
 
 of the expenditures and the right to make them a first lien has 
 been held equivalent to prior notice,^^ and, as a matter of fact- 
 such orders are frequently made without prior notice. This 
 however, may render the situation of the holders of the certificates 
 somewhat precarious. When it is desirable to incur expenses in 
 building or repairing the railroad, beyond what is essential for 
 its preservation, the consent, express or implied, of those whose 
 rights of property will be affected, should be had.^^ It has been 
 held that when a receiver contracts debts under a consent order- 
 such debts are not binding upon bondholders who refused their 
 consent, but they may insist upon the enforcement against' the 
 property of such liens as they held prior to the granting of the 
 order.^" Cases in which the right of the court to authorize the 
 issue of certificates constituting a lien upon the property superior 
 to that of mortgage bondholders has been called in question, have 
 not often arisen, since the consent, express or implied, of those 
 interested in the fund has usually been obtained.^" Prior lien- 
 
 heard. Bibber-White Co. v. White 
 River Valley Elec. R. Co., 115 Fed. 
 786; Illinois Steel Co. v. Ramsey,- 
 176 Fed. 853; Knickerbocker Trust 
 Co. V. Tarrytown &c. R. Co., 133 
 App. Div. 285, 117 N. Y. S. 871. 
 See also notes in 71 Am. St. 379; 
 128 Am. St. 95, 111; and Ann. Cas. 
 191 3C, 46. 
 
 • -' Union Trust Co. v. Illinois 
 &c. R. Co., 117 U. S. 434, 6 Sup. 
 Ct. 809, 29 L. ed. 963, 25 Am. & 
 Eng. R. Cas. 560. 
 
 28 Jones Corporate Bonds and 
 Mortgages, § 559. But consent is 
 not always required. Union Trust 
 Co. V. Illinois Midland R. Co., 117 
 U. S. 434, 6 Sup. Ct. 809, 29 L. ed. 
 963. If it were, such certificates 
 could seldom be issued, at least 
 where the debts exceed the value 
 of the property. 
 
 29Haiid V. Savannah &c. R.Co.. 
 
 17 S. Car. 219. The court may, in a 
 proper case, authorize the issue of 
 certificates constituting a lien 
 upon the interest of such of the 
 bondholders as have asked for 
 them, leaving the interests of the 
 non-consenting bondholders unaf- 
 fected by the order. Investment 
 Co. V. Ohio &c. R. Co., 36 Fed. 48. 
 30 Kennedy v. St. Paul &c. R. 
 Co., 2 Dill. (U. S.) 448, Fed. Cas. 
 No. 7706, 5 Dill. (U. S.) 519, Fed, 
 Cas. No. 7707; Stanton v. Alabama 
 &c. R. Co, 2 Woods (U. S.) 506, 
 Fed. Cas. No. 13296; Hoover v. 
 Montclair &c. R. Co., 29 N. J. Eq. 
 4; Vermont &c. R. Co. v. Vermont 
 Central R. Co., 50 Vt. 500; Jones 
 Corporate Bonds and Mortgages, 
 §551, citing Central Trust Co. v. 
 Seasongood, 130 U. S. 482, 9 Sup. 
 Ct. 575, 32 L. ed. 985. 
 
§680 
 
 RAILROADS 
 
 1060 
 
 holders who have not consented and who were not parties to the 
 suit in which the issue of receiver's certificates was authorized 
 and were not notified are entitled to come in^o court to dispute 
 the necessity of the expenditures which the certificates were 
 issued to meet, and to assert the superiority of their liens.^^ Join- 
 ing with the receiver, in a petition for authority to borrow iTJoney 
 oil the predit of the property, or acquiescing without ppposi- 
 tion in an order conferring such authority, is sufficient consent 
 to bind a party to the suit in which the order was made.^^ 
 
 31 While the court, under some 
 circumstances, and for some pur- 
 poses, and in advance of the prior 
 lienholders being made parties, 
 may have jurisdiction to charge 
 the property with the amount of 
 receiver's certificates issued by 
 its authority, it can not, it is said, 
 without giving such parties their 
 day in court, deprive them of their 
 priority of lien. When such prior 
 lienholders are brought before the 
 court they become entitled, upon 
 the plainest principles, of justice 
 and equity, to contest the neces- 
 sity, validity, effect and amount 
 of all such certificates, as fully as 
 if such questions were then for 
 the first time presented for de- 
 termination. If it appears that 
 they ought not to have been made 
 a charge upon the property su- 
 perior to the lien created by the 
 mortgages, then the contract 
 rights of the prior lienholders 
 must be protected. On the other 
 hand, if it appears that the court 
 did what ought to have been done, 
 even had the trustees and the 
 bondholders been before it at the 
 time the certificates were author- 
 ized to be issued, the property 
 should not be relieved from the 
 
 charge made upon it , for its pro- 
 tection and preservation. Hervey 
 V. Illinois Midland R. Co., 28 Fed. 
 169, 176, affirmed in Union Trust 
 Co. V. Illinois &c. R. Co.,. 117 U. 
 S. 434, 6 Sup. Ct. 809, 29 L. ed. 963. 
 See also Metropolitari Trust Co. 
 V. Lake Cities Elec. R. Co., 100 
 Fed. 897; Lamar Land &c. Co. v. 
 Belknap Sav. Bank, 28 Colo. 344, 
 64 Pac. 210. An appeal lies from 
 an order authorizing receiver's 
 certificates. Farmers' Loan &c. 
 Co., In re, 129 U. S. 206, 9 Sup. 
 Ct. 265, 32 L ed. 656. "The lien 
 of receiver's certificates continues 
 as long as the order authorizing 
 their issuance remains in force, 
 though such order was made with- 
 out notice to parties interested; 
 and the fact that a reference is 
 had to determine all claims 
 against the receiver, and a report 
 is confirmed which makes no allu- 
 sion to the certificates, is not an 
 adjudication against them, when it 
 appears that they were not pre- 
 sented or considered, and that 
 their holder had no notice of the 
 reference." Mercantile Trust Co. 
 V. Kanawha &c. R. Co., SO Fed. 
 874. 
 32 Metropolitan Trust Co. v. 
 
1061 
 
 RECEIVER S CERTIFICATES 
 
 §681 
 
 § 681 (592). Lien created by receiver's certificates. — Receiv- 
 er's certificates are usually made a first lien upon the income and 
 entire property in the hands of the receiver. The nature or ex- 
 tent of the lien, in the absence of any statute upon the subjct' 
 depends upon the terms of the order of the court authorizing 
 the certificates to be issued. It is not to be understood by this, 
 however, that the lien will hold good if the order is improperly 
 made and unauthorized, nor that the lien can be made superior 
 to that of the state for taxes or the like. But certificates issued 
 to raise money for the repair and preservation of the road may 
 be made a superior lien upon the property in the hands of the 
 court to that of the first mortgage, although issued at the suit of 
 junior mortgagees- and without the consent of the holders of a 
 senior mortgage.^* Parties who have acquiesced with knowl- 
 edge that the receivers have obtained loans upon the credit of 
 the property may be estopped to deny that such loans constitu+e 
 a prior and first lien upon such property.^* The court may order 
 the property in its hands to be sold subject to the lien of the 
 
 Tonawanda Valley &c. R. Co., 103 
 N. Y. 245, 8 N. E. 488, reversing 
 40 Hun (N. Y.) 80; Jones Cor- 
 porate Bonds and Mortgages, 
 § 5.52, citing Humphreys v. Allen, 
 101 111. 490. See also Central 
 Trust Co. V. Marietta &c. R. Co., 
 75 Fed. 193, 209. Receiver's cer- 
 tificates issued under an order 
 made after a decree of foreclos- 
 ure and sale of property, contain- 
 ing a provision authorized by the 
 order making them a lien on the 
 property, will constitute a first 
 lien thereon, if the order is not 
 appealed from. Farmers' Loan &c. 
 Co., In re, 129 U. S. 206, 9 Sup. Ct. 
 265, 32 L. ed. 656. 
 
 33 Wallace v. Loomis, 97 U. S. 
 146, 24 L. ed. 895 ; Union Trust Co. 
 v. Illinois &c. R. Co., 117 U. S. 
 434, 6 Sup. Ct. 809, 29 L. ed. 963; 
 
 Meyer v. Johnston, 53 Ala. 237, 
 348. See also Central Trust Co. 
 V. Marietta &c. R. Co., 75 Fed. 
 193. It has even happened that 
 the entire estate has been con- 
 sumed in the payment of debts 
 and receiver's certificates. See 
 Royal Trust Co. v. Washburn &c. 
 R., 120 Fed. 11; Kent v. Lake Su- 
 perior &c. Co., 144 U. S. 75, 12 Sup. 
 Ct. 650, 36 L. ed. 352. See as to 
 judgments and attachments hav- 
 ing priority. 8 Thomp. Corp.. 
 § 6405. 
 
 3* Jones Corp. Bonds and 
 Mortg., § 553. Claims of attor- 
 neys for the complainant having 
 a lien on the fund in court going 
 to their client, and of attorneys 
 who procured the certificates to 
 be issued have been postponed to 
 the lien of the certificates. Peters- 
 
§682 
 
 RAILROADS 
 
 1062 
 
 certificates which have been issued by its receiver,^' or the lien 
 may be transferred to the proceeds of the sale."" If the property 
 is sold subject to the lien of the certificates, it seems that such 
 lien may be enforced by the holder in an independent suit.^^ It 
 has also been held that one class of receiver's certificates may 
 have priority over another according to their terms,"^ and that 
 w^here the mortgage has been foreclosed and the time for redemp- 
 tion has expired, receiver's certificates issued thereafter on a cred- 
 itors' bill filed by stockholders could not be given a preference 
 over the mortgage where the corporation was a mining com- 
 pany and the court had power merely to wind up the corpora- 
 tion.39 
 
 § 682 (593). Statutory provisions as to lien. — In some of the 
 states statutory provisions are found which authorize receivers 
 to borrow money and create liens upon the mortgaged property 
 in certain cases. Such statutes, in the main, simply declare the 
 
 burg Sav. &c. Co. v. Dellatone, 
 70 Fed. 643; Wilcox v. Southern 
 Nat. Bank, 211 Fed. 968. 
 
 35 Mercantile Trust Co. v. 
 Kanawha &c. R. Co., SO Fed. 874. 
 
 36 Mercantile Trust Co. v. 
 Kanawha &c. R. Co., 58 Fed. 6, 60 
 Am. & Eng. R. Cas. 513. See also 
 Illinois Trust &c. Bank v. Paciiic 
 R. Co., 115 Cal. 285, 47 Pac. 60. 
 
 3T Swann v. Clark, 110 U. S. 602, 
 4 Sup. Ct. 241, 28 L. ed. 256; Mer- 
 cantile Trust Co. V. Kanawha &c. 
 R. Co., 58 Fed. 6, 60 Am. & Eng. 
 R. Cas. 513, 526. But see Turner 
 V. Peoria &c. R. Co., 95 111. 134, 35 
 Am. Rep. 144. 
 
 ss Bibber-White Co. v. White 
 River &c.' R. Co., 115 Fed. 786; 
 Bank of Commerce v. Central &c. 
 Co., lis Fed. 878. 
 
 39 Standley v. Henrie &c. Co., 
 27 Colo. 331, 61 Pac. 600. So it has 
 
 been held that certificates issued 
 by a state court to a judgment 
 creditor in a suit in which the 
 mortgagee was not made a party 
 will not bind a federal court on 
 decree for foreclosure. Metro- 
 politan Trust Co. V. Lake Cities 
 &c. R. Co., 101 Fed. 897. See also 
 Pool V. Farmers' &c. Co., 7 Tex. 
 Civ. App. 334, 27 S. W. 744. Ques- 
 tions of priority depend largely 
 upon the circumstances of each 
 case and the terms of the order 
 and certificates. See generally 
 American Trust Co. v. Metropoli- 
 tan S. S. Co., 190 Fed. 113; Bibber- 
 White Co, V. White River Valley 
 Elec. R. Co., 175 Fed. 470; Lewis 
 v. Linden Steel Co., 183 Pa. St. 248, 
 38 Atl. 606 (rank equally with 
 other debts contracted by re- 
 ceiver under authority of court 
 unless otherwise ordered) ; St. 
 
1063 receiver's certificates § 683 
 
 rule followed by chancery courts, and especially by the federal 
 courts, which we have already stated. Sometimes, however, they 
 extend that rule to private business corporations and authorize 
 liens to be created for money borrowed for some purposes other 
 than those generally authorized by the courts in the absence of 
 such a statute. It may be that the legislature has no power 
 to impair the obligation of existing contracts in this way, but, 
 as the public statutory law enters into every contract such legis- 
 lation is doubtless constitutional as to future contracts. The 
 authority of the court to create superior liens by receiver's cer- 
 tificates may, doubtless, be limited as well as extended by such 
 statutes, but whether this is the effect in any particular instance 
 must depend largely upon the particular statute in question. It 
 may also be a matter of doubt as to how far, if at all, such statutes 
 can bind the federal courts.**^ 
 
 § 683 (594). Negotiability of receiver's certificates. — It is 
 sometimes said that receiver's certificates are negotiable, and it 
 is true that they are usually negotiable in form, that is, they 
 are made payable to order or bearer, and may be transferred from 
 hand to hand by assignment or delivery. But they are not nego- 
 tiable, in the strict sense of that term, like bills of exchange or 
 promissory notes. In other words, receiver's certificates are 
 not commercial paper, whatever the form that may be given to 
 them, and a second or subsequent holder can assert no greater 
 rights than were acquired by the first taker.''^ An assignee, there- 
 Louis Union Trust Co. v. Texas *2 Union Trust Co. v. Chicago 
 Southern R. Co., 59 Tex. Civ. App. &c. R. Co., 7 Fed. 513 ; Central 
 157, 126 S. W 296 fsame). Nat. Bank v. Hazard, 30 Fed. 484; 
 41 A Texas statute classifying Stanton v. Alabama &c. R. Co., 31 
 claims against funds in the hands Fed. 585; Turner v. Peoria &c. R. 
 of a receiver, and giving a lien Co., 95 111. 134, 35 Am. Rep. 144; 
 on the earnings, has been held not note in Ann. Cas. 1913C, 58; 8 
 to prevent a court from author- Thomp. Corp., § 6407. A receiver's 
 izing receiver's certificates and certificate has none of the ele- 
 making them a first lien on the ments of a negotiable instrument ; 
 property. Kampmann v. Sullivan, it is the mere acknowledgment 
 26 Tex. Civ. App. 308, 63 S. W. that a debt is due the payee, pay- 
 173. able out of a specific fund. There 
 
§ 684 RAILROADS 1064 
 
 fore, can only recover to the extent that the original payee or 
 holder could have recovered.*^ The transfer of such a certificate 
 by written indorsement does not render the transferer liable as 
 an indorser of commercial paper, or as a guarantor, nor does 
 such an indorsement imply a warranty that the certificate is 
 collectible and will be paid.** 
 
 § 684 (595). Rights of holders of receiver's certificates. — Re- 
 ceiver's certificates are usually drawn upon an uncertain fund 
 and do not create against any one an absokite and unconditional 
 liability.^'"' As a general rule, the fund alone is liable for their 
 payment, and their validity depends upon the order of court, and 
 such order can be sustained only when the certificates are issued 
 for certain limited purposes and may sometimes be modified, 
 in effect at least, by further action adjusting the rights of parties 
 who have not had their day in court. It may readily be seen, 
 therefore, that the rights of the holders of such certificates are 
 somewhat precarious, and that even a bona fide purchaser from 
 the original holder occupies a very different position from the 
 bona fide holder of commercial paper under the law merchant. 
 Holders of such certificates must take notice of the terms of 
 the order under which they were issued and are bound to know 
 whether they were issued in accordance with such terms and 
 
 is entire harmony upon this point presume that the receiver will 
 in the adjudged cases. All agree notify him when the loan is to be 
 in holding that such certificates called or the money paid." Mer- 
 are not promissory notes or bills cantile Trust Co. v. Kanawha & 
 of exchange. McCurdy v. Bowes, O. R. Co., 50 Fed. 874. 
 88 Ind. 583, citing above cases, <3 Turner v. Peoria &c. R. Co., 
 and Baird v. Underwood, 74 111. 95 111. 134, 35 Am. Rep. 144. 
 176; Newbold V. Peoria &c. R. Co., 4* McCurdy v. Bowes, 88 Ind. 
 5 Bradwell (111.) 367; Mechanics' 583. Such certificates are assign- 
 Bank V. New York &c. R. Co., 13 able but are not negotiable in- 
 N. Y. 599, 623; Dawkes v. Lord struments within the law mer- 
 De Lorane, 3 Wils. 207. "A re- chant. McCarthy v. Crawford, 238 
 ceiver's certificates, which are or- 111. 38, 86 N. E. 750, 128 Am. St. 
 dered to be paid out of the in- 95, 29 L. R. A. (N. S.) 252, and 
 come of the road from time to other cases cited in notes, 
 time, are in the nature of a call 45 Credit Co. v. Arkansas &c. R. 
 loan, and the holder has a right to Co., IS Fed. 46. 
 
1065 
 
 RECEIVER S CERTIFICATES 
 
 §684 
 
 for an authorized purpose.*" Certificates issued in excess of tiie 
 receiver's authority are void even in the hands of a bona fide 
 holder for value,*''' and, where the certificates were disposed of 
 by the receivers at much less than their face value, the holders 
 "have been permitted to claim only the sum actually advanced 
 with interest upon surrendering the certificates.*^ Where, how- 
 €ver, the court authorizes them to be sold at a certain discount, 
 and they are sold within the limit fixed by the- court, it has been 
 held that the purchasers thereof are entitled to their face value, 
 as established by the order of the court.*'* If the certificates are 
 issued without consideration they are invalid, even in the hands 
 of an innocent holder for value. ^^ Certificates may be exchanged 
 
 46 Mercantile Trust Co. v. Kana- 
 wha &c. R Co., 58 Fed. 6, 60 Am. 
 •& Eng. R. Cas. 513; Bank of Mon- 
 treal V. Chicago &c R. Co., 48 
 Iowa 518; Knickerbocker Trust 
 Co. V. Oneonta &c. R. Co., 201 N. 
 Y. 379, 94 N. E. 871; Lewis v. 
 Linden Steel Co., 183 Pa. St. 248, 
 38 Atl. 606; St. Louis Union Trust 
 Co. V. Texas Southern R. Co., 59 
 Tex. Civ. App. 157, 126 S. W. 296. 
 
 t^ Newbold v. Peoria &c. R. Co., 
 5 111. App. 367. See also Knicker- 
 bocker Trust Co. V. Oneonta &c. 
 R. Co., 201 N. Y. 379, 94 N. E. 871. 
 But the fact that the court erred 
 in some ruling or that the bill on 
 ■which the receiver was appointed 
 was subject to demurrer does not 
 necessarily make the certificates 
 void. Farmers' Loan &c. Co. v. 
 Centralia &c. R. Co., 96 Fed. 636. 
 
 48 Stanton v. Alabama &c. R. 
 Co., 2 Woods (U. S.) 506, Fed. 
 Cas. No. 13296. See also Union 
 Trust Co. V. Illinois &c. R. Co., 
 117 U. S. 434, 6 Sup. Ct. 809, 29 L. 
 ed. 963; Central Nat. Bank v. 
 Hazard, 30 Fed. 484. But the pur- 
 
 chaser of receiver's certificates is 
 not bound to oversee the applica- 
 tion of the money which he ad- 
 vances. Where a purchaser of re- 
 ceiver's certificates has paid their 
 par value to the receiver, with- 
 out notice of any facts to put him 
 upon inquiry, his lien is not af- 
 fected by the fact that the re- 
 ceiver appropriates the money to 
 his own use. Mercantile Trust 
 Co. V. Kanawha &c. R. Co., 50 
 Fed. 874. See also Union Trust 
 Co. V. Illinois Midland R. Co., 117 
 U. S. 434, 461, 6 Sup. Ct. 809, 29 L. 
 ed. 963. 
 
 49 Union Trust Co. v. Illinois 
 &c. R. Co., 117 U. S. 434, 6 Sup. 
 Ct. 809, 29 L. ed. 963. 
 
 50 Union Trust Co. v. Chicago 
 &c. R. Co., 7 Fed. 513; Bank of 
 Montreal v. Chicago &c. R. Co., 
 48 Iowa 518; Hubbell v. Texas 
 Southern R. Co., 59 Tex. Civ. App. 
 185, 126 S. W.- 313; Jones Corp. 
 Bonds and Mortg., § 566, citing 
 Turner v. Peoria &c. R. Co., 95 
 111. 134, 35 Am. Rep. 144. If the 
 certificates are issued for an in- 
 
§ 685 RAILROADS 1066 
 
 directly for material furnished or labor performed if the exchange 
 is made for an adequate consideration.^^ But they are valid 
 only to the extent of the consideration actually received.^- 
 
 § 685 (596). Who may question validity of receiver's cer- 
 tificates. — Although receiver's certificates are not negotiable in- 
 struments under the law merchant, yet, when they are regularly 
 issued under the order of court, bondholders and purchasers of 
 the property at foreclosure sale may be estopped from question- 
 ing their validity and priority of lien after they have been sold 
 to good faith purchasers. As we have already seen, prior lien- 
 holders and bondholders, where no notice has been given to 
 them or their trustees and no hearing has been afforded them as 
 to the propriety of the expenditures and the right to make the 
 certificates a prior lien, will generally be allowed to question 
 their validity or right to priority, at least before they are issued 
 to bona fide purchasers.''* But those who consent or are given 
 due notice and an opportunity to be heard cannot afterwards 
 question their validity or priority.^* Nor can bondholders who, 
 with knowledge of the facts, permit certificates to be issued 
 
 adequate consideration, a subse- In re, 55 How. Prac. (N. Y.) 286; 
 
 quent bona fide holder for value See Mitchell, Ex parte, 12 S. Car. 83 ; 
 
 will be protected only to the Hand v. Savannah &c. R. Co., 17 
 
 amount actually advanced by the S. Car. 219; article in 12 Am. L. 
 
 first purchaser. Central Nat. Bank Rev. 660, and 13 Am. L. Rev. 40; 
 
 v. Hazard, 30 Fed. 484. note in Ann. Cas. 1913C, 58. In 
 
 51 People V. Erie R. Co., 54 ^nov^ v. Winslow, 54 Iowa 200, 6 
 How Prac. (N. Y.) 59; Jones Cor- N. W. 191, it was held that where 
 porate Bonds and Mortgages, ^^^ '°^'^ ^^^ «°ld t° ^^^'^^V the 
 § 550, citing Taylor v. Philadelphia "-"tificates .t must be regarded as 
 &c. R. Co., 14 Phila. (Pa.) 451, 461. ^°^'^ ^"''J^^' ^° ^ mechanic's lien. 
 See Coe v. New Jersey &c. R. Co., 'o enforce which suit had been in- 
 27 N T Ea 37 stituted before the receiver was 
 
 appointed, and that such lien was 
 
 52 Bank of Montreal v. Chicago ^^j divested or aflfected as the 
 &c. R. Co., 48 Iowa 518. j^^j^jg^ thereof was not made a 
 
 53 Hervey v. Illinois Midland R. party and did not consent to the 
 Co., 28 Fed. 169; Coe v. New Jer- appointment of the receiver or 
 sey &c. R. Co., 27 N. J. Eq. 37; the order or decree of the court. 
 United States Rolling Stock Co., 5i Ante, §680. 
 
1067 
 
 rfx'Eiver's certificates 
 
 §685 
 
 without objection under the order of the court, question ,their 
 validity or priority of lien after they have been issued and sold 
 to bona fide purchasers. ^^ Especially is this true where the 
 bondholders appoint a committee of their own number to repre- 
 sent them all and such committee consents to the issuance of 
 the certificates.^^ So, where the road is sold under a decree of 
 foreclosure which makes it subject to the lien of the receiver's 
 certificates, the purchaser at the foreclosure sale; is estopped from 
 questioning the validity of the lien.^^ The receiver who obtained 
 the order and issued the certificates thereunder cannot, it is 
 obvious, object to their priority of lien nor can the mortgagor 
 nor his assignee in bankruptcy.®^ And a property owner along 
 
 5B Humphreys v. Allen, 101 111. 
 490, 4 Am. & Eng. R. Cas. 14; 
 Langdon v. Vermont &c. R. Co., 
 53 Vt. 228, 4 Am. & Eng. R. Cas. 
 33. See also Union Gold Mining 
 Co. V. Rocicy Mountain Nat. 
 Bqnk, 96 U. S. 640, 24 L. ed. 648; 
 Hewitt V. Great Western Beet 
 Sugar Co., 20 Idaho 235, 118 Pac. 
 296 ; Lovett v. German Reformed 
 Church, 12 Barb. (N. Y.) dl. In 
 the Vermont case cited in this 
 note it was held that although the 
 purpose for which the receiver 
 was appointed had been accom- 
 plished so that he might have 
 been discharged, yet if he con- 
 tinued to act as receiver and is- 
 sued obligations as such, with the 
 knowledge and assent of all 
 parties interested, they were 
 estopped to deny, as against bona 
 fide holders, that the obligations 
 were what they purported to be, 
 namely, receiver's obligations en- 
 titled to priority of payment out 
 of the assets of the trust. 
 
 56 Langdon v. Vermont &c. R. 
 Co., 53 Vt. 228, 4 Am. & Eng. R. 
 Cas. 33. 
 
 57 Swann v. Clark, 110 U. S. 602, 
 4 Sup.- Ct. 241, 28 L. ed. 256; Mer- 
 cantile Trust Co. v. Kanawha &c. 
 R. Co., 58 Fed. 6, 60 Am. & Eng. 
 R. Cas. 513, 526. See also Cen- 
 tral Trust Co. v. Sheffield &c. R. 
 Co., 44 Fed. 526. In this last case 
 it appeared that, by consent of 
 all parties, the receiver of a rail- 
 road company, though not en- 
 gaged in operating the road, was 
 authorized by order of court to 
 issue certificates which should 
 constitute a lien on the company's 
 property superior to certain prior 
 mortgages, and that the money 
 obtained on such certificates was 
 used in preserving and improving 
 the property. It was held that 
 the purchasers of the property, 
 who purchased with the under- 
 standing that the receiver's cer- 
 tificates, under the order of the 
 court, constituted a prior lien on 
 the property, which they were to 
 pay, at a subsequent saje to fore- 
 close such mortgages, were 
 estopped from denying the valid- 
 ity of the certificates. 
 
 58 Jerome v. McCarter, 94 U. S. 
 
§ 686 RAILROADS 106S 
 
 the line of the road cannot restrain the completion of the road 
 by questioning the validity of the receiver's certificates.^® 
 
 § 686 (597). Payment and redemption of certificates. — A& 
 
 we have seen, receiver's certificates are not promises to pay 
 money absolutely, creating a personal liability, but are rather to 
 be considered as acknowledgments of indebtedness for the pay- 
 ment of which out of some specific fund usually to be ascertained 
 thereafter the faith of the court is said to be pledged. As a 
 general rule, therefore, an independent action will not lie tO' 
 enforce them, but the application for their payment or redemp- 
 tion should be made to the court which authorized them to be 
 issued.*" The court may, doubtless, in a proper case, order 
 them to be paid out of the fund in the hands of the receiver, but. 
 as the income or assets in tlie hands of the receiver will seldom 
 be found sufficient to redeem the certificates and pay necessary 
 expenses, -and as the courts cannot often tell in advance just 
 what will be the condition of the trust or what questions may- 
 arise, certificates are seldom redeemed in advance of the fore- 
 closure sale, and it is customary, therefore, to provide in the 
 order authorizing their issue that they shall be a lien on the pro- 
 ceeds of the sale and payable out of the purchase-money.®^ In- 
 stead of this, however, -the court may order that the lien shall 
 remain upon the property which the purchaser shall take subject 
 to such lien.*2 j^ such a case, as elsewhere stated, it has been 
 held that the lien may be enforced against the property in the 
 
 734, 24 L. ed. 136. See also Cen- eo Turner v. Peoria &c. R. Co.^ 
 
 tral Trust Co. v. Seasongood, 130 95 111. 134, 35 Am. Rep. 144. For 
 
 U. S. 482, 9 Sup. Ct. 575, 32 L. ed. cases in which an independent 
 
 985; Vilas v. Page, 106 N. Y. 439, suit may be brought, see ante, 
 
 452, 13 N. E. 743. § 681. 
 
 59 Moran v. Lydecker, 11 Abb. siSee Knickerbocker T. Co. v. O. 
 
 N. Cas. (N. Y.) 298. See also as C. & R. S. R. Co., 201 N. Y. 379; 
 
 to others not entitled to object to American Brake Shoe &c. v. Pere 
 
 priority. , Rutherford v. Penna Marquette R. Co., 205 Fed. 19 
 
 Midland R. Co., 178 Pa. St. 38, 35 62 Mercantile Trust Co. v. Kana- 
 
 Atl. 926; Nisbet v. Great North- wha &c. R. Co., 58 Fed. 6; ante, 
 
 ern Clay Co., 41 Wash. 107, 83 §681. 
 Pac. IS. 
 
1069 receiver's certificates § 686 
 
 Jiands of the purchaser or his grantees in an independent ac- 
 tion.83 jt has also been held that, although the order authoriz- 
 ing the certificates provided that they should be a first and para- 
 mount lien upon the property, a final decree vesting in the pur- 
 chaser of the property a title free from all liens operated pro 
 tanto to set the order aside and transferred the lien, if any, to 
 the proceeds of the sale.®* It was further held,.,in the same case, 
 that the holder of the receiver's certificates who was guilty of 
 laches in not acting; before the final decree, could not follow the 
 proceeds of the salfe'into the hands of bondholders who received 
 the same on 'distribution by final decree, notwithstanding the fact 
 that the court had failed to 'redeem its pledge to make the cer- 
 tificates a paramount lien byiproviding on distribution for their 
 payment. If the fund or property is insufficient to redeem or, 
 pay all the certificates in full, the holders must usually share pro 
 rata in the proceeds.*^ But this is not always the case, as ce.r- 
 tificates are sometimes issued in different series or the like with 
 provision for a difference in priority, and the rights of the holders 
 •of a portion of the certificates may, of course, be waived or made 
 subordinate to those of others by agreement, and if the proceeds 
 are insufficient to pay the latter, the former may get nothing."" 
 
 63 Ante, § 681. ment in this case it was held that 
 
 64 Mercantile Trust Co. v. Kana- the party in whose favor the 
 wha &c. R. Co., 58 Fed. 6, dis- waiver was made and whose cer- 
 tinguishing Vilas v. Page, 106 N. tificates were not paid in full, 
 Y. 439, J.3 N. E. 743. might even recover from the 
 
 6B Turner v. Peoria &c. R. Co., other party the amount paid for 
 
 ■95 111. 134, 35 Am. Rep. 144. a right of way for which the cer- 
 
 86 Fletcher v. Waring, 137 Ind. tificates were issued to the latter. 
 
 159, 36 N. E. 896. Under the agree- See also ante, § 681. 
 
CHAPTER XXIV. 
 INSOLVENCY AND DISSOLUTION. 
 Sec. Sec. 
 
 690. 
 
 Scope of the chapter. 
 
 699. 
 
 Judicial determination of 
 
 691. 
 
 Railroad company subject to 
 
 
 dissolution. 
 
 
 state insolvency law. 
 
 700. 
 
 Voluntary dissolution — Sur- 
 
 692. 
 
 Trust fund doctrine. 
 
 
 render of charter. 
 
 693. 
 
 When a corporation is 
 
 701. 
 
 Proceedings to dissolve. 
 
 
 deemed insolvent — 'Effect 
 
 702. 
 
 Dissolution in case of con- 
 
 
 of insolvency. 
 
 
 solidated company. 
 
 694. 
 
 Assignments by corporations. 
 
 703 
 
 Effect of dissolution. 
 
 695. 
 
 Preferences by corporations. 
 
 704. 
 
 Corporation may have a 
 
 696. 
 
 Preference of stockholders 
 
 
 qualified existence after 
 
 
 and olificers. 
 
 
 dissolution. 
 
 697. 
 
 Statutory preference of em- 
 
 70S. 
 
 Disposition of property on 
 
 
 ployes. 
 
 
 " dissolution. 
 
 698. 
 
 What constitutes a dissolu- 
 
 706. 
 
 Rights of creditors upon dis- 
 
 
 tion. 
 
 
 solution. 
 
 §690 (598). Scope of the chapter. — We. have already con- 
 sidered in a general way the subject of the dissolution of a cor- 
 poration by forfeiture or repeal of its charter and by expiration 
 of the time to which its charter life is limited. But we have not 
 considered what becomes of the property after dissolution, nor 
 have we treated specifically of insolvency and the relations and 
 rights of the various parties when a corporation becomes in- 
 solvent, except as incidentally connected with the subjects ot 
 foreclosure sales and receivers. In this chapter we shall treat 
 briefly of these matters, including assignments and preferences, 
 although some of the questions considered can seldom arise in 
 railroad cases and the general rules upon the subject may not 
 be applicable, in some instances, to such cases. 
 
 § 691 (599). Railroad company subject to state insolvency 
 
 law. — Domestic railroad corporations, like all other corporations, 
 are usually subject, to a certain extent at least, to the insolvency 
 laws of the states wherein they are respectively incorporated 
 
 1070 
 
1071 
 
 INSOLVENCY AND DISSOLUTION 
 
 §693 
 
 and may be proceeded against under those laws.^ But such laws, 
 as a general rule at least, have no extraterritorial effect,? and 
 they have been largely superseded as to some kinds of corpora- 
 tions by the national bankruptcy law. A voluntary, assignment of 
 personal property, however, if valid where it is made, will usu- 
 ally be treated as valid everywhere and may operate to transfer 
 personal property of the assignor wherever it is found,^ unless, 
 perhaps, where it is contrary to good morals or repugnant to 
 the policy or positive institutions of the state in -which it is 
 found;* But this rule does not apply to the same extent to 
 assignments of real estate.* The effect of state insolvency laws 
 upon consolidated corporations will be discussed elsewhere. 
 
 § 692 (600). Trust fund doctrine. — When a company becomes 
 insolvent its capital stock with all its other property is said to 
 become assets or to constittite a trust fund for the payment of 
 its debts." This is the well-known "trust fund" doctrine to 
 
 1 Piatt V. New York &c. R. Co., 
 26 Conn. 544; Central Nat. Bank 
 V. Worcester Horse R. Co., 13 
 Allen (Mass.) lOS. The Maryland 
 Act of 1888 providing for the pay- 
 ment of wages and salaries due 
 employes of insolvent employers 
 does not subject corporations to 
 the insolvent laws of the state. 
 Ellicott Machine Co. v. Speed & 
 Co., 72 Md. 72, 18 Atl. 863. 
 
 2 Warren v. First Nat. Bank, 149 
 111. 9, 38 N. E. 122, 25 L. R. A. 
 746; Franzen v. Hutchinson, 94 
 Iowa 95, 62 N. W. 69S; Glenn v. 
 Oabangh, 65 Md. 65, 3 Atl. 902. 
 But see as to the effect of insol- 
 vent laws on non-residents, Brown 
 v. Smart, 145 U. S. 454, 12 Sup. Ct. 
 958, 36 L. ed. 773; Macdonald v. 
 First Nat. Bank, 47 Minn. (sJ, 49 
 N. W. 395, 13 L. R. A. 462. 28 Am. 
 St. 328. 
 
 3 Caskie v. Webster, 2 Wall. Jr. 
 
 (U. S.) 131, Fed: Cas. No. 2500; 
 Baltimore &c R. Co. v. Glenn, 28 
 Md. 287, 92 Am. Dec. 688. We are 
 not now considering the question as 
 affected, if at alii by a national 
 bankruptcy law. Many courts re- 
 fuse to enforce foreign assign- 
 ments to the prejudice of the 
 citizens of their own state, hold- 
 ing that the rule of comity does 
 not require them to do so in such 
 a case. 
 
 * Hervey v. Rhode Island &c. 
 Works, 93 U. S. 664, 23 L. ed. 
 1003; Blake v. Williams, 23 Mass. 
 286, 17 Am. Dec. 372; Dickinson, 
 Ex parte, 29 S. Car. 453, 7 S. E. 
 593, 1 L. R. A. 685, 13 Am. St. 749; 
 Weider v. Maddox, 66 Tex. 372, 1 
 S. W. 168, 59 Am. Rep. 617. 
 
 ' Osborn v. Adams, 18 Pick. 
 (Mass.) 245. 
 
 8 Graham v. LaCrosse &c. R. 
 Co., 102 U. S. 148, 161, 26 L. ed. 
 
§ 692 RAILROADS 1072 
 
 which we have elsewhere referred. It is usually stated sub- 
 stantially as we have stated it, but the statement, perhaps, needs 
 explanation. It does not mean that there is any direct trust lien 
 upon the property of the corporation in favor of creditors, nor 
 that the corporation may not manage or dispose of it in the usual 
 course of business while the corporation is "a going concern" 
 with a reasonable prospect of continuing and there is no inten- 
 tion of suspending, although it may be insolvent in the sense that 
 its liabilities are greater than its assets, or in the sense that it 
 may not be able to fully meet its obligations as they become 
 due. It simply means, according to recent decisions, that when 
 the corporation is insolvent and a court of equity has possession 
 of its assets for administration, they must be appropriated to 
 the payment of its debts before any distribution to the stock- 
 holders.'' In such a case equity will compel the payment of a 
 balance due on unpaid stock.* The history of the evolution of 
 the "trust fund" doctrine is an interesting one, but it would not 
 be profitable to, pursue it here. Some of the courts have undoubt- 
 edly misapplied and unduly extended it, but it may well be ques- 
 
 106; Wabash &c. R. Co. v. Ham, tional Bank, 123 Mo. 313, 27 S. W. 
 
 114 U. S. 587, 595, S Sup. Ct. 1081, 657; Thomson-Houston &c. Co. v. 
 
 29 L. ed. 239; In re Fechheimer Henderson &c. Co., 116 N. Car. 
 
 &c. Co., 212 Fed. 357. See also 112, 21 S. E. 951. See also Mc- 
 
 note in 69 L. R. A. 134. Donald v. Williams, 174 U. S. 397, 
 
 'Fogg V. Blair, 133 U. S. 534, 19 Sup. Ct. 743, 43 L. ed. 1022; 
 
 541, 10 Sup. Ct. 338, 33 L. ed. 721; American Exchange Nat. Bank v. 
 
 Hollins V. Brierfield &c. Co., 150 Ward, 111 Fed. 782, 52 L. R. A. 
 
 U. S. 371, 14 Sup. Ct. 127, 37 L. ed. 356; Wilson v. Baker &c. Co., 25 
 
 1113; Chattanooga &c. R. Co. v. Idaho 378, 137 Pac. 896; Niles v. 
 
 Evans, 66 Fed. 809; O'Bear &c. Olszak, 87 Ohio St. 229, 100 N. E. 
 
 Co. V. Volfer, 100 Ala. 205, 17 So. 820, L. R. A. 1918E, 238, and note; 
 
 525, 54 Am. St. 311 ; Worthen v. Sabin v. Columbia &c. Co., 25 Ore. 
 
 Griffith, 59 Ark. 562, 28 S. W. 286, 15, 34 Pac. 692, 42 Am. St. 756, and 
 
 43 Am. St. SO; First Nat. Bank v. note; Harle-Haas Drug Co. v. 
 
 Dovetail &c. Co., 143 Ind. 550, 40 Rogers Drug Co., 19 Wyo. 35, 113 
 
 N. E. 810, 52 Am. St. 435 ; Hender- Pac. 791, Ann. Cas. 1913E, 181, and' 
 
 son' V. Indiana Trust Co., 143 Ind. note. 
 
 561, 40 N. E. 516; Fear v. Bartlett, 8 Richardson v. Green, 133 U. S. 
 
 81 Md. 435, 32 Atl. 322, 33 L. R. A. 30, 10 Sup. Ct. 280, 32 L. ed. 516; 
 
 721, and note ; Alberger v. Na- Barcalow v. Totten, S3 N. J. Eq> 
 
1073 INSOLVENCY AND DISSOLUTION § 692 
 
 tioned if others, in the present reaction, are not inclined to un- 
 duly limit it. We have stated the doctrine as explained in the 
 latest decisions of the Supreme Court of the United States, but 
 it may be somewhat difficult to reconcile the rule thus stated 
 with other statements of the rule made by the federal, as well 
 as the state, courts, although we are inclined to think there is 
 no real conflict. Thus, it is said that "when a corporation is 
 dissolved or becomes insolvent and determines to discontinue 
 the prosecution of business its property is thereafter affected by 
 an equitable lien or trust for the benefit of creditors," and that 
 the directors then hold a fiduciary relation to creditors and 
 cannot prefer themselves in view of expected suspension on ac- 
 count of insolvency, although the corporation might, while still 
 "a going concern," secure them for advancements made to carry 
 on the business with the reasonable expectation of successfully 
 overcoming financial embarrassment.* This is a much more 
 reasonable doctrine than that which forbids any preference after 
 the company has become insolvent even though it is "a going 
 concern" acting in good faith and has reasonable expectation of 
 overcoming its financial embarrassment; and the only questioiii 
 is as to whether the "trust fund" doctrine should have been ap- 
 plied at all so long as the corporation had not quit business or 
 its property had not been taken charge of by the court. The 
 capital stock and properties of a corporation, however, constitute 
 a trust fund for the payment of its debts in such a sense that 
 when there is a misappropriation of the funds of a corporation, 
 equity, on behalf of the creditors of such corporation, will follow 
 
 573, 32 Atl. 2; Morgan v. New » Sutton Mfg. Co. v. Hutchin- 
 
 York &c. R. Co., 10 Paige Ch. (N. son, 63 Fed. 496; Sabin v. Colum- 
 
 Y.) 290, 40 Am. Dec. 244. But, in bia Fuel Co., 25 Ore. IS, 34 Pac. 
 
 the absence of a statute authorizing 692, 42 Am. St. 756. But compare 
 
 it, an unsecured creditor cannot Sanford Fork &c. Co. v. Howe &c. 
 
 maintain an action at law upon an Co., 157 U. S. 312, IS Sup. Ct. 621, 
 
 unpaid subscription. City of Monte- 39 L. ed. 713. See further on this 
 
 sano V. Carr, 80 Wash. 384, 141 Pac. subject, §§695, 696; also Re Lake 
 
 894, 7 A. L. R. 95, and note on page Chelan Land Co. v. Tyler, 257 Fed.' 
 
 100. ' , 497, S A. L. R. 557, and note on page 
 
 561, et seq. 
 
§693 
 
 RAILROADS 
 
 1074 
 
 the fund so diverted, i" unless it has passed into the hands of a 
 bona fide purchaser.ii 
 
 • §693 (601). When a corporation is deemed insolvent — Effect 
 of insolvency. — ^It is extremely difficult to formulate any genera! 
 rule for determining just when a corporation is to be deemed 
 insolvent. It has been said that a corporation is insolvent when 
 it is not able to pay its debts, as they become due in the usual 
 course of businesS.^^ or when it has not property or assets suf- 
 freient to pay its debts. '^ But it frequently happens that a cor-, 
 poration or an individual may not be able to pay all debts as 
 they mature, and may yet have assets far in excess of the lia- 
 bilities. So, a corporation or an individual may not at some 
 particular time have assets equal to the liabilities and yet may 
 be able to meet all debts as they fall due or make such arrange- 
 
 10 Railroad Co. v. Howard, 7 
 Wall. (U. S.) 392, .409, 19 L. ed. 
 117;. Wabash &c. R. Co. v. Ham, 
 1.14 U. S. 587, 5 Sup. Ct..l081, 29 
 L. ed. 23S; Chicago &c. R. Co. v. 
 Chicago &c. Third Nat. Bank, 134 
 U. S. 276, 10 Sup. Ct. SSO, 33 L. 
 ed. 900; Chattanooga &c. R. Co. 
 V. Evans,- 66 Fed. 809; Bish v. 
 Bradford, 17 Ind. 490; Chicago &c. 
 Bridge Co. v. Fowler, 55 Kans. 17, 
 39 Pac. 727; Rorke y. Thomas, 56 
 N. Y. 559; Hastings v. Drew, 76 
 N. Y. 9. See also Moffat v. Smith, 
 101 Fed. 771. When one corporation 
 transfers all its assets to another cor- 
 poration without having paid its 
 debts, the latter takes the prop- 
 erty as a trustee subject to a lien 
 in favor of the creditors of the 
 old company. National Bank of 
 Jefferson v. Texas Invest. Co., 74 
 Tex. 421, 12 S. W. 101; Montgom- 
 ery &c. Co. v. Dienelt, 133 Pa. 
 St. 585, 19 Atl. 428, 19 Am. St. 663. 
 It has also been held that when 
 
 a corporation has sold all its prop- 
 erty, franchises, etc., and thus in 
 effect has been dissolved, its cred- 
 itors may enforce their demands 
 in a court of equity against the 
 former stockholders, the proceeds 
 of the property being considered 
 assets in the hands of stockhold- 
 ers for the payment of debts. But 
 no action can be maintained 
 against the purchasing company 
 if the purchase was made in good 
 faith. Chesapeake &c. R. Co. v. 
 Griest, 85 Ky. 619, 4 S. W. 323. 
 
 11 Sanger v. Upton, 91 U. S. 56, 
 60, 23 L. ed. 220; Fisk v. Union 
 Pac. R. Co., 10 Blatchf. (U.' S.) 
 518, Fed. Cas. No. 4830. 
 
 12'Atwater v. American &c. 
 Bank, 152 111. 60S, 38 N. E. 1017; 
 Mish v. Main, 81 Md. 36, 31 Atl. 
 799; People v. Excelsior &c. Co., 
 3 How. Prac. (N. S.) (N. Y.) 137. 
 
 13 See Too-f v. Martin, 13 Wall. 
 (U. S.) 40, 20 L. ed. 481; Chicago 
 Life Ins. Co. v. Auditor, 101 111. 
 
1075 INSOLVENCY AND DISSOLUTION § 694 
 
 ments as will prevent financial embarrassment. It seems to us,^ 
 therefore, that a corporation should not be deemed insolvent 
 merely because its assets are insufficient to meet all its liabilities 
 at any particular time, if it is still prosecuting business with 
 the prospect and expectation of continuing to do so successfully. 
 It is certainly not insolvent in such a sense as to justify the ap- 
 plication of the "trust fund" doctrine, even if that can be applied 
 in any case of mere insolvency, although it may, perhaps, be in- 
 solvent within the meaning of some statute. The mere insolv- 
 ency of a corporation, however, does not per se work its dissolu- 
 tion, although it may be cause for a judgment dissolving it.^* 
 A corporation may exist without. property,^'' and mere insolv- 
 ency or impairment of capital, without surrender or forfeiture 
 of the charter, does not prevent the members of the corporation 
 froni furnishing "renewed capital, , and then proceeding to use 
 the corporate powers."^* So long, at least, as the corporation 
 proceeds in good faith, with the reasonable expectation of pay^ 
 ing its debts and successfully carrying on its business, it would 
 seem that it is not insolvent in such a sense as to prevent the 
 corporation from continuing the management of its assets in the 
 regular course of business or to authorize creditors to inter-, 
 fere.i^ 
 
 § 694 (602). Assignments by corporations. — At common law, 
 and under the statutes of most of the states, an insolvent cor- 
 
 82; European &c. Society, In re, v. United States, 27 App. (D. C). 
 
 L. R 9 Eq. 122. 433; State v. Superior Court, 31 
 
 1* Leonard v. Hartzler, 90 Kans. Wash. 445, 72 Pac. 89, 66 L. R. A. 
 
 386, 133 Pac. 570, SO L. R. A. (N. 897. 
 
 S.) 383, and other cases there cited i" Coburn v. Boston &c. Co., 10 
 
 in note; Mosejjy v. Burrow, 52 Gray (Mass.) 243. 
 Tex. 396; Shenandoah Valley R. if Warren v. First Nat. Bank, 
 
 Co. V. Griffith, 76 Va. 913. See also 149 111. 9, 38 N. E. 122, 25 L. R. A. 
 
 Fields V. United States, 27 App. 746; Baker v. Louisiana &c. , R. : 
 
 (D. C.) 433. Co., 34 La. Ann. 754; Pond v. 
 
 15 Bruiifet v. Great Western R. Framingham &c. R. Co., 130 Massi, 
 
 Co., 25 111. 353; Boston Glass Mfg. 194; Paulding v. Chrome Steel. 
 
 Co. V. Langdon, 24 Pick (Mass.) Co., 94 N. Y. 334, 338. See also 
 
 49, 35 Am. Dec. 256. See also Fields Sabin v. Columbia &c. Co., 25 Ore. 
 
I 694 
 
 RAILROADS 
 
 1076 
 
 ,J)'Ofation may make a general assignment in trust for the benefit 
 of its creditors. 1"*' In the absence of any provision to the con- 
 itrary, the assignment may be made by the directors without 
 ■any action upon the part of the stockholders,^'' and it has also 
 been held that this power may be exercised by a quorum of the 
 board of directors at a regularly called meeting at which a bare 
 quorum is present.^" The president of the corporation, however, 
 has no implied authority to do so by virtue of his office.^i Such 
 an assignment does not carry with it the prerogative franchises, 
 such as that of being a corporation, and does not operate as a 
 
 IS, 34 Pac. 692, 42 Am. St. 756, and' 
 note; Harle-Haas Drug Co. v. 
 Rogers Drug Co., 19 Wyo. 35, 113 
 Pac. 79, Ann. Cas. I913E, 181, and 
 note. 
 
 18 McCallie & Jones v. Walton, 
 -37 Ga. 611, 95 Am. Dec. 369; State 
 Y. Bank, 6 Gill & J. (Md.) 205, 26 
 Am. Dec. 561 ; Tripp v. North- 
 \v«stern Nat. Bank, 41 Minn. 400, 
 43 N. W. 60; Shockley v. Fisher, 
 75 Mo. 498; Wilkinson v. Bauerle, 
 41 N. J. Eq. 635, 7 Atl. 514; Van- 
 derpoel v. Gorman, 140 N. Y. 563, 
 35 N. E. 932, 24 L. R. A. 548, 37 
 Am. St. 601; De Ruyter v. Trus- 
 tees, 3 Barb. Ch. (N. Y.) 119, cit- 
 ing authorities from many states ; 
 Warner v. Mower, 11 Vt. 385; 
 Lamb v. Cecil, 25 W. Va. 288; 
 5 Thomp. Corp. (2nd ed.), §§ 6135, 
 6136. See also United States &c. Co. 
 V. American &c. Co., 181 U. S. 434, 
 21 Sup. Ct. 670, 45 L. ed. 938; Smith 
 V. Wells &c. Co., 148 Ind. 333, 46 N. 
 E. 1000; Grand &c. Co. v. Rude &c. 
 Co., 60 Kans. 196, 55 Pac. 848; Loius- 
 ville &c. Co. V. Etheridge &c. Co., 19 
 Ky. Law 908, 43 S. W. 169; Birm- 
 ingham &c. Co. V. Freeman, 15 
 Tex. Civ. App. 451, 39 S. W. 626; 
 
 8 Thomp. Corp., §§ 6135, 6157. But 
 see Meloy v. Central Nat. Bank, 
 17 Wash. L. R. 68. 
 
 19 Dodge V. Kenwood Ice Co.,- 
 204 Fed. 577; De Camp v. Alward, 
 52 Ind. 468; Descombes v. Wood, 
 91 Mo. 196, 4 N. W. 82, 60 Am. 
 Rep. 239; Hutchinson v. Green, 91 
 Mo. 367, 1 S. W. 853; Calumet 
 Paper Co. v. Haskell &c. Co., 144 
 Mo. 331, 45 S. W. 1115, 66 Am. St. 
 425; Ardesco Oil Co. v. North 
 American &c. Co., 66 Pa. St. 375, 
 382; Wright v. .Lee, 2 S. Dak. 596. 
 51 N. W. 706, 4 S. Dak. 237, 55 N. 
 W. 931; 5 Tohmp. Corp. (2nd ed.). 
 §6138. Compare Chew v. EUing- 
 wood, 86 Mo. 260, 273, 56 Am. Rep. 
 429, and Eppright v. Nickerson, 78 
 Mo. 482. 
 
 20Simon v. Sevier Assn., 54 Ark. 
 58, 14 S. W. 1101; Chase v. Tuttle, 
 55 Conn. 455, 12 Atl.^874, 3 Am. St. 
 64; Buell v. Buckingham, 16 Iowa 
 284, 85 Am. Dec. 516. 
 
 21 Richardson v. Rogers, 45 Mich. 
 591, 8 N. W. 526. See also Chamber- 
 lain V. Bromberg, 83 Ala. 576, 3 So. 
 434. And an assignment to himself 
 is void. Rogers v. Pell, 89 Hun (N. 
 Y.) 159, 35 N. Y. 17. 
 
1077 
 
 INSOLVENCY AND DISSOLUTION 
 
 §695 
 
 dissolution. 22 Owing to the peculiar nature of a railroad com- 
 pany, however, it may be that the rules applicable to assign- 
 ments and preferences by ordinary business corporations do not 
 all apply with full force, if at all, to railroad companies, and there 
 are very few cases in which a voluntary general assignment by 
 such companies has been made. 
 
 § 695 (603). Preferences by corporations. — As a general rule, 
 in the absence of any charter or statutory provision to the con- 
 trary, a corporation may exercise the right to make an assign- 
 ment to the same extent and in the same manner as a natural 
 person. Preferences in general assignments are prohibited in 
 many of the states, but where they are permitted they may be 
 made, in the absence of any provision to the contrary, by corpo- 
 rations as well as by individuals. ^^ And even where preferences 
 in general assignments are forbidden, they may usually be made 
 by mortgage, securing particular creditors, or by transfer of 
 
 22 State V. Bank, 6 Gill. & J. 
 (Md.) 205, 26 Am. Dec. 561; Town 
 V. Bank, 2 Doug. (Mich.) 530; Ar- 
 thur V. Commercial &c. Bank, 9 Sm. 
 & M. (Miss.) 394, 48 Am. Dec. 719; 
 Parsons v. Eureka Powder. Works, 
 48 N. H. 66; Hurlbut v. Carter, 21 
 Barb. (N. Y.) 221; Germantown 
 Pass. R. Co. V. Fitler, 60 Pa. St. 
 124, 100 Am. Dec. 546, and note: 
 
 • Shryock v. Basehore, 82 Pa. St. 159; 
 Ohio L. &c. Co. V. Merchants' &c. 
 Co., 30 Tenn. 1, 53 Am. Dec. 742. 
 But see State v. Real Estate Bank, 5 
 Ark. 595, 41 Am. Dec. 109; Smith v. 
 New York &c. Co., 18 Abb. Prac. 
 (N. Y.) 419, and dissenting opinion 
 of Story, J., in Beaston v. Farmers' 
 Bank, 12 Pet. (U. S.) 102, 138, 9 L. 
 ed. 1017. 
 
 23 Gould V. Little Rock &c. R. 
 Co., 52 Fed. 680; Ringo v. Biscoe, 
 13 Ark. 563; Catlin v. Eagle Bank, 
 6 Conn. 233; Knoxville Iron Co. v. 
 
 Wilkins &c. Co., 74 Ga. 493; Rollins 
 V. Shaver &c. Co., 80 Iowa 380, 45 
 N. W. 1037, 20 Am. St. 427; Bissell 
 V. Besson, 47 N. J. Eq. 580, 22 Atl. 
 1077; Coats v. Donnell, 94 N. Y. 168; 
 note to Lyons-Thomas Hardware Co. 
 V. Perry Stove Co., 86 Tex. 143, 24 
 S. W. 16, 22 L. R. A. 802; Bier v. 
 Gorrell, 30 W. Va. 95, 3 S. E. 30, 8 
 Am. St. 17. See also 5 Thomp. Corp. 
 (2nd ed.) §§ 6169, 6170, citing numer- 
 our cases, and approving this doc- 
 trine; 8 Thomp. Corp. §§6196, 6170. 
 Contra, Rouse v. Merchants' Nat. 
 Bank, 46 Ohio St. 493, 22 N. E. 293, 
 5 L. R. A. 378, 15 Am. St. 644, follow- 
 ed, as the law of Ohio, in Smith &c. 
 Purifier Co. v. McGrotary, 136 U. S. 
 237, 10 Sup. St. 1017, 34 L. ed. 346; 
 Lyons-Thomas Hardware Co. v. 
 Perry Stove Co., 86 Tex. 143, 24 S. 
 W. 16, 22 L. R. A. 802; Kankakee 
 Woolen Mill Co. v. Karape, 38 Mo. 
 App. 229. See also 5 Thomp. Corp. 
 
§696 
 
 RAILROADS 
 
 1078 
 
 property to them in good faith before a general assignment is 
 .made.2* 
 
 § 696 (604). Preference of stockholders and officers. — It is 
 generally held that stockholders, who are also creditors, may be 
 preferred in good faith as such creditors. ^^ It is also held, in some 
 jurisdictions, that directors and officers may likewise be pre- 
 ferred,2e but there are other authorities to the effect that, after 
 a corporation has become clearly insolvent, directors and officers 
 cannot take advantage of their position to obtain a preference 
 for unsecured debts which there was no agreement to secure 
 while the corporation was solvent or at the time the debts were 
 
 (2nd ed.), §6168, citing additional 
 cases. 
 
 ■ ' 24 Ragland v. McFall, 137 111. 81, 
 27 N. E. 75 ; Henderson v. Indiana 
 Trust Co., 143 Ind. 561, 40 N. E. 
 516, and authorities cited in last 
 note, supra ; Rollins v. Shaver &c. 
 Co., 80 Iowa 380, 45 N. W. 1037, 
 20 Am. St. 427; Warner v. Little- 
 field, 89 Mich. 329, 50 N. W. 721; 
 Bank of Montreal v. Potts &c. Co., 
 . 90 Mich. 345, 51 N: W. 890. 
 
 -■> Reichwald v. Commercial Hotel 
 Co., 106 111. 439; Garrett v. Burling- 
 ,ton &c. Co., 70 Iowa 697, 29 N. W. 
 395, 59 Am. Rep. 461 ; Warfield &c. 
 Co. V. Marshall &c. Co., 72 Iowa 
 666, 34 N. W. 467, 2 Am. St. 263; 
 Lexington &c. Co. v. Page, 17 B. 
 Mon. (Ky.) 412, 66 Am. Dec. 165; 
 Burr V. McDonald, 3 Grat. (Va.) 
 215; notes in 43 L. R. A. (N. S.) 
 874, and Ann. Cas. 1914B, 1261. 
 Contra, Swepson v. Exchange &c. 
 Bank, 9 Lea (Tenn.) 713. And see 
 Howell V. Crawford, 77 Ark. 12, 89 
 S. W. 1046. 
 
 ^•1 (iould V. Little Rook &c. R. Co., 
 (.52 Fed. 680; Brown v. Grand Rapids 
 
 &c. Co., 58 Fed. 286, 22 L. R. A. 817; 
 Smith V. Skeary, 47 Conn. 47; Buell 
 V. Buckingham, 16 Iowa 284, 85 Am. 
 Dec. 516; Garrett v. Burlington &c. 
 Co., 70 Iowa 697, 29 N. W. 395, 59 
 Am. Rep. 461 ; Bank of Montreal v. 
 Potts &c. Co., 90 Mich. 345, 51 N. W. 
 512 ; Hospes v. Car Co., 48 Minn. 174, 
 50 N. W. 1117, 15 L. R. A. 470, 31 
 Am. St. 637; Schufeldt v. Smith, 131 
 Mo. 280, 31 S. W. 1039, 29 L. R. A. 
 830, 52 Am. St. 628; Duncomb v. 
 New York &c. R. Co., 84 N. Y. 190; 
 Blaloch V. Kernersville &c. Co., 110 
 N. Car. 99, 14 S. E. 501; Planters' 
 Bank v. Whittle, 78 Va. 7i7 ; Nap- 
 panee Canning Co. v. Reid, Murdock 
 &c. Co., 159 Ind. 614, 64 N. E. 870, 
 1115, 59 L. R. A. 199, citing, in the 
 majority, and. dissenting opinions, 
 most of the authorities on both sides. 
 In a later case the Appellate Court 
 of Indiana recommended to the Su- 
 preme Court that the Indiana case 
 last above cited be overruled, but 
 the supreme court reaffirmed the 
 doctrine. City Nat. Bank v. Goshen 
 &c. Co., 163 Ind. 214, 71 N. E. 652. 
 See also for additional authorities 
 
1079 
 
 INSOLVENCY AND , DISSOLUTION 
 
 §696 
 
 created.-' A corporation may, however, in good faith, and while 
 solvent, borrow money from a director, or officer, for use in its 
 business, and give a mortgage to him to secure its payment, and 
 the fact that the corporation afterwards becomes insolvent does 
 not impair the validity of his security.^* Indeed, according to 
 what seems to be the better reason and many of the later author- 
 ities a corporation may, in good faith, secure its directors who 
 have lent their credit to it, "to induce a continuance of the loan 
 of the credit, and obtain renewals of maturing paper at a time 
 when the corporation, though not in fact possessed of assets 
 equal to its indebtedness, is a going concern, and is intending 
 
 upholding such a preference, 5 
 Thomp. Corp. (2nd ed.) §6191; 
 Fricke v. Angenmeier, S3 Ind. App. 
 140, 101 N. E. 329. 
 
 2T Adams v. Kehlor &c. Co., 3b 
 Fed. 433 ; Howe &c. Co. v. Sanford 
 &c. Co., 44 Fed. 231 ; (reversed in 
 Sanford Fork &c. Co. v. Howe, &c. 
 Co., 157 U. S. 312, IS Sup. Ct. 621, 
 39 L. ed. 713) ; Consolidated Tank 
 Line Co. v. Kansas City &c. Co., 4S 
 Fed. 7 ; Farmers' Loan &c. Co. v. 
 San Diego &c. R. Co., 45 Fed. 518; 
 Bosworth V. Jacksonville &c. Bank, 64 
 Fed. 615; Bradley v. Farwell, 1 
 Holmes (U. S.) 433, Fed. Cas. No. 
 1779; Corey v. Wadsworth, 99 Ala. 
 68, 11 So. 350, 23 L. R. A. 618, 42 
 Am. St. 29; (overruled in O'Bear 
 &c. Co. V. Volfer. 106 Ala. 205, 17 
 So. 525, 54 Am. St. 31); Beach v. 
 Miller, 130 111. 162, 22 N. E. 464, 17 
 Am. St. 291, and note ; Roseboom v. 
 Whittaker, 132 111. 81, 23 N. E. 339; 
 Ingwersen v. Edgecombe, 42 Nebr. 
 740, 60 N. W. 1032; Smith v. Put- 
 nam, 61 N. H. 632 ; Stratton v, Allen, 
 16 N. J. Eq. 229; Montgomery v. 
 Phillips, 53 N. J. Eq. 203, 31 Atl. 
 622; Hill V. Pioneer Lumber Co., 113 
 
 N. Car. 173, 18 S. E. 107, 21 L. R. A. 
 560, 37 Am. St. 621 ; Sicardi v. Key- 
 stone Oil Co., 149 Pa. St. 148, 24 
 Atl. 163 ; Olney v. Conanicut &c. Co., 
 16 R. I. 597, 18 Atl. 181, 5 L. R. A. 
 361, 27 Am. St. 767, and note; Port- 
 land &c. Co. V. Rossiter, 16 S. Dak. 
 633, 94 N. W. 702, 102 Am. St. 726, 
 and note ; Sweeney v. Grape Sugar 
 Co., 30 W. Va. 443, 4 S. E. 431, 8 
 Am. St. 88; Haywood v. Lincoln 
 Lumber Co., 64 Wis. 639, 26 N. W. 
 184; Gaslight &c. Co. v. Terrell, L. 
 R. 10 Eq. 168. See also Sawyer v. 
 Hoag, 17 Wall. (U. S.) 610, 21 L. 
 ed. 731. This view is apparently in 
 accord with the weight of authority. 
 5 Thomp. Corp. (2nd ed.) §6190, and 
 additional cases there cited. See also 
 8 Thomp. Corp., § 6207. 
 
 28Twin Lick Oil Co. v. Marbury, 
 91 U. S. 587, 23 L. ed. 328 ; Hotel Co.- 
 V. Wade, 97 U. S. 13, 24 L. ed. 917 ; 
 American Exchange Nat. Bank v.- 
 Ward, 111 Fed. 782, 52 L. R. A. 356; 
 O'Connor &c. Co. v. Coosa &c. Co.;" 
 95 Ala. 614, 10 So. 290, 36 Am. St.. 
 251; Mullanphy Bank v. Schott, 135 
 111. 655, 26 N. E. 640, . 25 Am. St.. 
 401; Saltmarsh v. Spaulding, 147. 
 
§696 
 
 RAILROADS 
 
 1080 
 
 and expecting to continue its business."^® And where advance- 
 ments are made by directors under an agreement, made at the 
 time, that they are to have securities, it has been held that the 
 mere fact that such securities are not given to them until after 
 the corporation becomes insolvent will not affect their validity 
 where the entire transaction is in good faith.^" Such transac- 
 tions will, however, be closely scrutinized,^^ and the rule an- 
 nounced in the later decisions of the federal courts would not, 
 perhaps, be extended by them to cases in which a general assign- 
 ment is made or a mortgage executed to secure a director after 
 
 Mass. 224, 17 N. E. 316; Paulding v. 
 Chrome Steel Co., 94 N. Y. 334; 
 Neal's Appeal, 129 Pa. St. 64, 18 Atl. 
 564; Pyle Works, Re, 63 L. T. R. 
 628. 
 
 29 Per Brewer, J., in Sanford Fork 
 &c. Co. V. Howe, Browne & Co., 157 
 U. S. 312, 15 Sup. Ct. 620, 39 L. ed. 
 713. See also County Court v. Balti- 
 more &c. R. Co., 35 Fed. 161 ; Gould 
 V. Little Rock &c. R. Co., 52 Fed. 
 680; Hopson v. Aetna &c. Co., SO 
 Conn. 597; Illinois Steel Co. v. 
 O'Donnell, 156 111. 624, 41 N. E. 185, 
 31 L. R. A. 265, 47 Am. St. 245 ; Hen- 
 derson V. Indiana Trust Co., 143 Ind. 
 561, 40 N. E. 516; Holt v. Bennett, 
 146 Mass. 437, 16 N. E. 5; Sabin v. 
 Columbia Fuel Co., 25 Ore. 15, 35 
 Pac. 692, 42 Am. St. 756; Hill v. 
 Standard &c. Co., 198 Pa. St. 446, 
 48 Atl. 432. "So a mortgage exe- 
 cuted by a corporation whose debts 
 exceed its assets, to secure a liabil- 
 ity incurred by it or on its behalf, 
 will be sustained, if it appears to 
 have been given in good faith to keep 
 the corporation upon its feet and en- 
 able it to continue the prosecution of 
 its business. A corporation is not re- 
 quired by any duty it owes to credi- 
 tors to suspend operations the mo- 
 
 ment it becomes financially embar- 
 rassed, or because it may be doubt- 
 ful whether the objects of its crea- 
 tion can be attained by further effort 
 upon its part. It is in the line of 
 right and of duty, when attempting, 
 in good faith, by the exercise of its 
 lawful powers and by the use of all 
 legitimate means, to preserve its ac- 
 tive existence, and thereby accom- 
 plish the objects for which it was 
 created. In such a crisis in its af- 
 fairs, and to those ends, it may ac- 
 cept financial assistance from one of 
 its directors, and by a mortgage upon 
 its property secure the payment of 
 money then loaned or advanced by 
 him, or in that mode protect him 
 against liability then incurred in its 
 behalf by him." Per Harlan, J., in 
 Sutton Mfg. Co. V. Hutchinson, 63 
 Fed. 496, SOI. Compare Wyman v. 
 Bowman, 127 Fed. 257. 
 
 so See Stout v. Yaeger Mill Co., 
 13 Fed. 802; Baker v. Harpster, 42 
 Kans. 511, 22 Pac. 415. See also 
 Skinner v. Smith, 134 N. Y. 240, 31 
 N. E. 911. 
 
 !ii Twin Lick Oil Co. v. Marbury, 
 91 U. S. 587, 588, 23 L. ed. 328; 
 Richardson v. Green, 133 U. S. 30, 43, 
 10 Sup. Ct. 280, 33 L. ed. 516. See 
 
1081 INSOLVENCY AND DISSOLUTION § 696 
 
 the corporation has become hopelessly insolvent and has no in- 
 tention of continuing business. Under such circumstances 
 "entirely different considerations come into view," said Justice 
 Harlan in a comparatively recent case,^^ from which we have 
 already quoted. "In our judgment, when a corporation becomes 
 insolvent and intends not to prosecute its business, or does not 
 expect to make further effort to accomplish the object of its 
 creation, its managing officers or directors come under a duty 
 to distribute its property or its proceeds ratably among -all 
 creditor, having regard, of course, to valid liens or charges pre- 
 viously placed upon it. Their duty is 'to act up to the end or 
 design' for which the corporation was created,^* and when they 
 can no longer do so their function is to hold or distribute the 
 property in their hands for the equal benefit of those entitled to 
 it. Because of the existence of this duty in respect to a common 
 fund in their hands to be administered, the law will not permit 
 them, although creditors, to obtain any peculiar advantage for 
 themselves to the prejudice of other creditors."^* It is not, how- 
 ever, altogether safe to predict that this decision will be followed 
 in every jurisdiction without question. ^^ 
 
 also Rickerson &c. Co. v. Farrell &c not necessarily impair the force of 
 
 Co.. 75 Fed. 554; James Clark Co. Judge Harlan's decision, for the Lip- 
 
 V. Colton, 91 Md. 195, 46 Atl. 386, pincott case was an extreme case and 
 
 49 L. R. A. 698. went much further than Judge Har- 
 
 82 Sutton Mfg. Co. V. Hutchinson, Ian did. 
 63 Fed. 496, 502. See also Bosworth 35 The opinion of Justice Harlan, 
 
 V. Jacksonville N3t. Bank, 64 Fed. so far as it states that the corpora- 
 
 615. tion is not required by any duty to 
 
 33 1 Bl. Comm. 480. creditor to suspend operations the 
 
 s-i Sutton Mfg. Co. V. Hutchinson, moment it becomes embarrassed and 
 
 63 Fed. 496, 502. The court cites that it may accept financial aid from 
 
 Lippincott v. Shaw Carriage Co., 25 the directors in good faith to keep 
 
 Fed. 577, and cases following it. The it going and secure them, is quoted 
 
 authority of that case and of some with approval in Wyman v. Bow- 
 
 of the others cited is weakened, if man, 127 Fed. 257, 275, 276, and 
 
 not destroyed, by the decision in cited and distinguished in Chick v. 
 
 Sanford Fork &c. Co. v. Howe, Fuller, 114 Fed. 22,' 29. See also 
 
 Browne & Co., 157 U. S. 312, 15 Sup. Easton v. Iowa, 188 U. S. 220, 23 
 
 Ct. 621, 39 L, ed. 713, but this does Sup. Ct. 288, 292, 47 L. ed. 452; Mof- 
 
§697 
 
 RAILROAbS 
 
 1082 
 
 § 697 (605). Statutory preference of employes. — Statutes ex- 
 ist in many of the states giving laborers and employes a lien or 
 preference upon the insolvency or dissolution of a corporation. 
 It is generally held that such statutes are to be liberally con- 
 strued,^" but different courts have not always reached the same 
 conclusion as to what persons are entitled to the benefit of the 
 statute, although the provisions of many of the statutes are very 
 similar. An independent contractor is clearly not a laborer or 
 an "employe within the meaning of such a statute.^' Nor are 
 the regular officers of a corporation ordinarily included,** al- 
 though it has been held that a head miller, ^^ the superintendent 
 of a gas company,*"' and the foreman or ''boss" of a mine.^i are 
 entitled to the benefit of the statute. *2 An attorney, employed 
 for a special purpose, is not entitled to a preference under a 
 
 fat V. Smith, 101 Fed. 771; North- 
 western &c. Co. V. Cotton &c. Co., 
 70 Fed. 155, 160. 
 
 30 Mining Co. v. Cullins, 104 U. S. 
 176, 26 L. ed. 704; Pendergast v. 
 Yandes, 124 Ind. 159, 24 N. E. 724, 
 8 L. R. A. 849, 3 Lewis Am. R. & 
 Corp. 645 ; Bass v. Doerman, 112 Ind. 
 390, 14 N. E. 377. And it has been 
 held that a court can give no prefer- 
 ence to other classes than those to 
 which preferences are confined by 
 statute. Massey v. Camden &c. R. 
 Co., 78 N. J. Eq. 539, 80 AtL 557, 
 Ann. Cas. 1912B, 1246. 
 
 37Vane v. Newcombe, 132 U. S. 
 220, 10 Sup. Ct. 60, 33 L. ed. 310; 
 Tod V. Kentucky Union R. Co., ^2 
 Fed. 241, 18 L. R. A. 305 ; Delaware 
 &c R. Co. V. Oxford Iron Co., Zi N. 
 J. Eq. 192. Nor a sub-contractor, 
 although he personally works with 
 the men employed by him to work on 
 part of a railroad, which he has con- 
 tracted to construct at a fixed price. 
 Rogers v. Dexter &c. R. Co., 85 
 Maine 372, 27 Atl. 257, 21 L. R. A. 
 
 ■ 528. See also Lehigji Coal &c. Co. 
 V. Central R. Co., 29 N. J. Eq, 252. 
 
 3s Black, Appeal of, 83 Mich. 513, 
 47 N. W. 342. 
 
 30 Wells V. Southern &c. R. Co., 
 
 I Fed. 270; England v. Beatty Organ 
 &c. Co., 41 N. J. Eq. 470, 4 Atl. 307. 
 
 40 Pendergast v. Yandes, 124 Ind. 
 159, 24 N. E. 724, 8 L. R. A. 849, 3 
 Lewis Am. R. & Corp. 645. It ap- 
 peared, however, that he was not ?n 
 officer or general manager, but mere- 
 ly superintended the digging of 
 trenches and laying of pipes. 
 
 41 Mining Co. v. Cullins, 104 U. K 
 176, 26 L. ed. 704 ; Capron v. Strout, 
 
 II Nev. 304. 
 
 ■<2But compare Seventh Xat. Bank 
 V. Shenandoah Iron Co., 35 Fed. 436 ; 
 Missouri &c. R. Co. \. Baker, 14 
 Kans. 563; People v. Remington, 45 
 Hun (N. W) 329; Pennsylvania &c. 
 R. Co. V. Leuffer, 84 Pa. St. 168, 24 
 Am. Rep. 189. See also notes to 
 Pendergast v. Yandes, 3 Lewis Am. 
 R. & Corp. Cas. 645, 650, and Tod v. 
 Kentucky Union R. Co., 52 Fed. 241 
 
1083 
 
 INSOLVENCY AND DISSOLUTION 
 
 §698 
 
 statute preferring "wages or salaries to clerks, servants or em- 
 ployees.""'* 
 
 § 698 (606). What constitutes a dissolution. — As elsewhere 
 stated, a dissolution may result from the expiration of the time 
 to which the corporate life was limited, or by repeal of the charter 
 under the reserved power of repeal; but, with these and one or 
 two other exceptions, the 'general rule is that a corporation re- 
 mains in esse until dissolved by judicial decree. Many acts and 
 omissions may be cause for dissolution without operating of 
 themselves to dissolve the corporation. Thus, as we have seen, 
 insolvency does not work a dissolution,** nor does suspension 
 of business,*^ omission to elect officers,*^ failure to exercise cor- 
 porate powers,*^ lease or sale of all the corporate property,** the 
 
 18 L. R. A. 305, where the various 
 statutes are referred to and the con- 
 flicting authorities collected. Ante, 
 § 211. 
 
 *3 Louisville &c. R. Co. v. Wil- 
 son, 138 U. S. 501, 11 Sup. Ct. 405, 
 34 L. ed. 1023; Lewis v. Fisher, 80 
 Md. 139, 30 Atl. 608, 26 L. R. A. 
 278, 45 Am. St. 327. See also Man- 
 chester &c. Co., In re, L- R. (1893) 
 2 Ch. Div. 638, 60 Am. & Eng. R. 
 Cas. 541. But compare Gurney v. 
 Atlantic &c. R. Co., 58 N. Y. 358. 
 
 *•■* Nor does a judicial decree of 
 insolvency, together with an in- 
 junction against continuing busi- 
 ness, and the appointment of a 
 receiver. Second Nat. Bank v. 
 New York &c. Co., 11 Fed. 532; 
 Coburn v. Boston &c. Co., 10 Gray 
 (Mass.) 243. See also Hirsch v. 
 Independent Steel Co., 196 Fed. 
 104; Hasselman v. Japanese &c. 
 Co., 2 Ind. App. 180, 27 N. E. 318, 
 28 N. E. 207. 
 
 4R Valley Bank v. Ladies' &c. 
 Sewing Society, 28 Kans. 423; 
 Kansas City Hotel Co. v. Sauer, 
 65 Mo. 278; State v. Barron, 58 N. 
 
 H. 370; Nimmons v. Tappan, 2 
 Sweeny (32 N. Y. Super.) 652; 
 Mickles v. Rochester City Bank, 
 11 Paige (N. Y.) 118, 42 Am. Dec. 
 103. See also Brookline &c. Co. 
 V. Evans, 163 Mo. App. 564, 146 S. 
 W. 828. But compare Stoltz v. 
 Scott, 23 Idaho 104, 129 Pac. 340. 
 
 *6 Boston Glass Manufactory v. 
 Langdon, 41 Mass. 49, 35 Am. Dec. 
 292; Packard v. Old Colony R. 
 Co., 168 Mass. 92, 46 N. E. 433; 
 Harris v. Mississippi Valley &c. 
 R. Co., 51 Miss. 602; Allen v. New 
 Jersey Southern R. Co., 49 How. 
 Prac. (N, Y.) 14. See also Quitman 
 Oil Co. V. Peacock, 14 Ga. App. 
 550, 81 S. E. 908^ 
 
 *'f Swan Land &c. Co. v. Frank, 
 39 Fed. 456; Rollins v. Clay, 33 
 Maine 132; Russell v. McLellan, 
 14 Pick. (Mass.) 63; Slee v. 
 Bloom, S Johns. Ch. (N. Y.) 366, 
 reversed in Slee v. Bloom, 19 
 Johns. (N. Y.) 456, 10 Am. Dec. 
 273 ; Brandon Iron Co. v. Gleason, 
 24 Vt. 228. 
 
 *s Swan Land &c. Co. v. Frank. 
 
§698 
 
 RAILROADS 
 
 1084 
 
 assignment of such property for the benefit of creditors/" or the 
 appointment of a receiver."" The acquisition of all the stock by 
 a single member does not necessarily work a dissolution ;5i nor 
 does a consolidation necessarily operate as a complete dissolu- 
 tion of the old companies in all cases,=*2 although it may do so.^s 
 The question is generally one of intent to be determined from 
 
 39 Fed. 456 ; Mabeu v. Gulf &c. Co., 
 173 Ala. 259, 55 So. 607, 35 L. R. A. 
 (N. S.) 396; Bruffet v. Great West- 
 ern &c. R. Co., 25 111. 353; People v. 
 Union Gas &c. Co., 254 111. 395, 98 
 N. E. 768 ; Beidenkopf v. Des Moines 
 &c. Ins. Co., 160 Iowa 629, 142 N. W. 
 434, 46 L. R. A. (N. S.) 290; State 
 V. Western &c Co., 40 Kans 96, 19 
 Pac. 349, 10 Am. St. 166; Hill v. 
 Fogg, 41 Mo. 563; Sewell v. East 
 Cape &c. Co., 50 N. J. Eq. 717, 25 
 Atl. 929; Troy &c. R. Co. v. Kerr, 
 17 Barb. (N. Y.) 581; Common- 
 wealth V. Central Pass. R. Co., 52 
 Pa. St. 506. But see Commonwealth 
 V. Lumber City Water Co., 225 Pa. 
 St. 317, 74 Atl. 238. 
 
 -ts DeCamp v. Alward, 52 Ind. 468 ; 
 State V. Bank, 6 Gill & J. (Md.) 205, 
 26 Am. Dec. 561 ; Boston Glass Man- 
 ufactory V. Langdon, 24 Pick. 
 (Mass.) 49, 35 Am. Dec. 292. Ante, 
 §694. 
 
 50 National Bank v. Insurance Co., 
 104 U. S. 54, 26 L. ed. 693; Rosen- 
 blatt V. Johnston, 104 U. S. 462, 26 
 L. ed. 832; Ohio &c. R. Co. v. Rus- 
 sell, 115 111. 52, 3 N. E. 561; Heath 
 V. Missouri &c. R Co., 83 Mo. 617; 
 State V. Railroad Commissioners, 41 
 N. J. L. 235; Kincaid v. Dwinelle, 
 59 N. Y. 548 ; Jackson v. Mclnnis, 33 
 Ore. 529, 54 Pac. 884, 55 Pac. 535, 
 43 L. R. A. 128, 72 Am. St. 755; 
 Moseby v. Burrow, 52 Tex. 396; 
 
 Dewey v. St. Albans &c. Co., 56 Vt. 
 476, 48 Am. Rep, 803; Kirkpatrick 
 V. State Board, 57 N. J. L. 53, 29 
 Atl. 442. See also Railroad Comrs. 
 V. Great Southern R. Co., 185 Ala. 
 354, 64 So. 13, and notes in 2 L. R. 
 A. (N. S.) 256, and 50 L. R. A. (N. 
 S.) 383. 
 
 ■51 Newton Mfg. Co. v. White, 42 
 Ga. 148; Louisville Banking Co. v. 
 Eisenman, 94 Ky. 83, 21 S. W. 531 
 and 1049, 19 L. R. A. 684; Russell 
 V. McLellan, 14 Pick. (Mass.) 63. 
 See also Hopkins v. Roseclare &c. 
 Co., 72 111. 373; Swift v. Smith. 65 
 Md. 428, 5 Atl. 534, 57 Am. Rep. 
 336.; Wilde v. Jenkins, 4 Paige (N. 
 Y,) 481 ; Parker v. Bethel Hotel Co.. 
 96 Tenn. 252, 34 S. W. 209, 31 L. R. 
 A. 706; Button v. Hoffman, 61 Wis. 
 20, 20 N. W. 667, 50 Am. Rep. 131 ; 
 Sharpe v. Dawes, 46 L. J. Q. B. 104. 
 But see contra, Bellona Company's 
 Case, 3 Bland (Md.) 442. 
 
 52 Philadelphia &c. R. Co. \ . 
 Maryland, 10 How. (U. S.) 376, 13 
 L. ed. 461; Central R. &c. Co. v. 
 Georgia, 92 U. S. 665, 23 L ed. 757; 
 Lightner v. Boston & Albany R. Co., 
 1 Lowell (U. S.) 338, 340, Fed. Cas. 
 No. 8343 ; Meyer v. Johnston, 64 Ala. 
 603; Boardman v. Lake Shore &c. 
 R. Co., 84 N. Y. 157, 181. 
 
 33 Clearwater v. Meredith, 1 Wall. 
 (U. S.) 25, 40, 17 L. ed. 604; Shields 
 V. Ohio, 95 U. S. 319, 24 L. ed. 357 ; 
 
108: 
 
 INSOLVENCY AND DISSOLUTION 
 
 §699 
 
 the statute and agreement of consolidation.^^ So, where the 
 statute provides for a dissolution upon the failure to perform 
 ■certain conditions or upon the happening of some contingency, it 
 is lafgely a- question of legislative intent as to whether the cor- 
 poration is dissolved upon such failure or the happening of such 
 contingency. As a general rule it is not dissolved by the mere 
 failure to perform conditions subsequent,^^ nor by the happening 
 of a contingency made by the statute a ground for forfeiture.^* 
 
 §699 (607). Judicial determination of dissolution. — A judicial 
 determination of the existence of such grounds in the particular 
 instance and decree of forfeiture or dissolution is usually essen- 
 tial. But it is held that the legislature, in the charter or govern- 
 ing statute, may provide for a dissolution in certain cases of the 
 kind specified without judicial decree.^''' This doctrine, how- 
 ever, should nof be unduly extetided, and, in order to justify its 
 application in any case, it should clearly appear that the legisla-* 
 ture intended that the matters specified should per se work a 
 
 Pullman ■ Palace Car Co. v. Missouri 
 Pac. R. Co., lis U. S. 587, 594, 6 Sup. 
 Ct. 194, 29 L. ed. 499; Bishop v. 
 Brainerd, 28 Conn. 289 ; McMahan v. 
 Morrison, 16 Ind. 172, 79 Am. Dec. 
 418. See also Kansas &c. R. Co. v. 
 Smith, 40 Kans. 192, 19 Pac. 636; 
 Fee V. New Orleans &c. Co., 35 La. 
 Ann. 413 ; Cheraw &c. R. Co. v. Com- 
 missioners, 88 N. Car. 519. 
 
 3i Central R. &c. Co. v. Georgia, 
 92 U. S. 665, 670, 23 L. ed. 757; Wa- 
 tiash &c. R. Co. V. Ham, 114 U. S. 
 587, 595, 5 Sup. Ct. 1081, 29 L. ed. 
 .235. 
 
 35 Santa Rosa &c. R. Co. v. Cen- 
 tral St. R. Co. (Cal.), 38 Pac. 986; 
 State V. Pagan, 22 La. Ann. 545; 
 Chesapeake &c. Co. v. Baltimore &c. 
 R. Co., 4 G. & J. (Md.) 1, 121, 127; 
 Briggs V. Cape Cod &c. Canal Co., 
 137 Mass. 71; New York Elevated 
 R. Co., In re, 70 N. Y. 327, 338; 
 
 Brooklyn Cent. R. Co. v. Brooklyn 
 City R, Co., 32 Barb. (N. Y.) 358. 
 Compare, however. Mobile &c. Assn. 
 V. Holmes, 189 Ala. 271, 65 So. 1020; 
 Big 4 Advertising Co. v. Qingan, 15 
 Ariz. 34, 135 Pac. 713; Brandon v. 
 Urapqua Lumber &c. Co., 166 Cal. 
 322, 136 Pac. 62; People v. Stilwell, 
 157 App. Div. 839, 142 N. Y. S. 881. 
 •5fi La Grange &c. R. Co. v. Rainey, 
 7 Coldw. (Tenn.) 420. So, where the 
 statute provides that a corporation 
 shall be dissolved by a mortgage sale 
 of its franchise and property, it is not 
 dissolved by an illegal and fraudulent 
 sale, White Mts. R. Co. v. White 
 Mts. R. Co., SO N. H. 50. 
 
 37 Oakland R. Co. v. Oakland &c. 
 R. Co., 4S Cal. 365, 13 Am. Rep. 181 ; 
 Brooklyn W. &c. R. Co.', Matter of, 
 75 N. Y. 335; Brooklyn Steam &c. 
 Co. V. Brooklyn, 78 N. Y. 524. See 
 review of cases in Bybee v. Oregon. 
 
§700 
 
 RAILEOADS 
 
 1086 
 
 dissolution, and not merely that they should be sufficient for 
 dissolution."* 
 
 § 700 (608). Voluntary dissolution — Surrender of charter. — 
 
 Ordinary business corporations, where the rights of the state 
 or the public do not intervene, may cease to do business and sur- 
 render their charters by a unanimous vote of the stockholders,^* 
 although some authorities hold that the surrender of a charter 
 must be accepted by the state.®" But most of the cases holding 
 that an acceptance on the part of the state is necessary were 
 decided under special charters or under the old doctriiic that the 
 dissolution of a corporation extinguished all its debts. There 
 seems to be no valid reason why a purely private corporation, 
 incorporated under general laws and charged with no public 
 duties, should not be allowed to voluntarily cease business and 
 dissolve or surrender its charter without an express acceptance 
 on the part of the state. ""^ Nor is a unanimous vote of the stock- 
 holders always essential. A private business corporation should 
 
 &c. R. Co., 139 U. S. 663, 11 Sup. Ct. 
 641; also 8 Thomp. Corp. §6474. 
 
 jS Santa Rosa &c. R. Co. v. Cen- 
 tral St. R. Co., 112 Cal. 436, 38 Pac. 
 986; Flint &c. Co. v. WoodhuU, 25 
 Mich. 99, 12 Am. Rep. 233 ; People v. 
 Manhattan Co., 9 Wend. (N. Y.) 351, 
 382; New York &c. Co. v. Smith, 
 148 N. Y. 540, 42 N. E. 1088; La 
 Grange &c. R. Co. v. Rainey, 7 
 Coldw. (Tenn.) 420; Galveston &c. 
 R. V. State, 81 Tex. 572, 17 S. W. 
 67 ; Vermont &c. R. Co. v. Vermont 
 Cent. R. Co., 34 Vt. 1. See gen- 
 erally for discussion of this question 
 and review of the above other au- 
 thorities under various statutory pro- ' 
 visions 5 Thomp. Corp. (2nd ed.), 
 §§6474, 647S! 
 
 '<^ Mumma v. Potomac Co., 8 Pe- 
 ters (U. S.) 281, 8 L. ed. 945; Mo- 
 bile &c. R. Co. V. State, 29 Ala. 573; 
 
 Read v. Frankfort Bank, 23 Maine 
 318; Webster v. Turner, 12 Hun (N. 
 Y.) 264; Slee v. Bloom, 19 Johns 
 (N. Y.) 456, 10 Am. Dec. 273; 
 Bruce v. Piatt. 80 N. Y. 379; Hous- 
 ton V. Jefferson College, 63 Pa. St. 
 428; 5 Thomp. Corp. (2nd ed.), 
 § 6473. See also Freeo Valley R. Co. 
 V. Hodges, 105 Ark. 314, 151 S. W. 
 281. 
 
 «o Boston Glass Manufactory v. 
 Langdon, 24 Pick. (Mass.) 49, 35 
 Am. Dec. 292; Town v. Bank, 2 
 Doug. (Mich.) 530; Kincaid v. 
 Dvirinelle, 59 N. Y. 44S; Moseby v. 
 Burrow, 52 Tex. 396. 
 
 «i Merchants' and Planters' Line 
 V. Waganer, 71 Ala. 581; Holmes 
 &c. Co. V. Holmes &c. Co., 127 N. Y. 
 252, 27 N. E. 831, 24 Am. St. 448; 
 5 Thomp. Corp. (2nd. ed. ) . § 6473. 
 
1087 
 
 INSOLVENCY AND DISSOLUTION 
 
 §700 
 
 not be compelled to continue a 'losnig business, which is certain 
 to result in financial catastrophe or the failure of the object for 
 which the company was incorporated, and, in such a case, a ma- 
 jority of the stockholders may surrender the charter and take 
 steps to wind up the business."^ And there are cases of this 
 kind in which even the minority may compel the corporation to 
 wind up its business. ^^ But a charter cannot be voluntarily sur- 
 rendered and the corporation dissolved in such a manner and 
 under such circumstances as to escape liability for debts or pre- 
 clude suits therefor.®^ For this purpose the corporation still has 
 a qualified existence,^^ which is generally provided' for by statute. 
 Railroad companies, unlike strictly private corporations, owe a 
 ■duty to the public, and they cannot, therefore, voluntarily cease 
 to do business and dissolve without the consent of the state, no 
 matter what may be the true rule in regard to strictly , private 
 corporations. Xo matter whether all the stockholders consent 
 •or not, the corporation cannot evade its duties to the public 
 by a voluntary dissolution and surrender or transfer of its 
 
 «2 Hancock v. Holbrook, 9 Fed. 
 .353; Price v. Holcorab, 89 Iowa 123, 
 56 N. W. 407; Trisconi v. Winship, 
 43 La. Ann. 45, 9 So. 29, 26 Am. St. 
 175 ; Treadwell v. Salisbury Mfg. 
 ■Co., 7 Gray (Mass.) 393, 66 Am. 
 Dec. 490 ; Black v. Delaware &c. Co., 
 22 N. J. Eq. 130; Lauman v. Leba- 
 non &c. R. Co., 30 Pa. St. 42, 72 Am. 
 Dec. 685 ; McCurdy v. Myers, 44 Pa. 
 St. 535; O'Connor v. Knoxville 
 Hotel Co., 93 Tenn. 708, 28 S. W. 
 308. See also Bowditch v. Jackson 
 ■Co., 76 N. H. 351, 82 Atl. 1014, Ann. 
 ■Cas. 1913A, 366 and note. But see 
 Polar Star Lodge v. Polar Star 
 Lodge, 16 La. Ann. S3; Berr}' v. 
 Broach, 65 Miss. 450, 4 So. 117. 
 
 63 Miner v. Belle Isle Ice Co., 93 
 Mich. 97, 53 N. W. 218, 17 L. R. A. 
 412; Masters v. Electric &c. Co., 6 
 :Daly (N. Y.) 455; Marr v. Bank, 
 
 4 Coldw. (Tenn.) 471 ; O'Connor v. 
 Knoxville &c. Co., 93 Tenn. 708, 28 
 S. W. 308 ; Bristol &c. Bank, In re, 
 L. R. 44 Ch. Div. 703. But not ordi- 
 narily, Denike v. New York &c. Co., 
 80 N. Y. 599; Pyrolusite &c. Co., 
 Matter of, 29 Hun (N. Y.) 429; 
 Hardbn v. Newton, 14 Blatchf. (U. 
 S.) ild. Fed. Cas. No. 6054; Curien 
 V. Santini, 16 La. Ann. 27; Pratt v. 
 Jewett, 9 Gray (Mass.) 34; Subur- 
 ban Hotel Co., In re, L. R. 2 Ch. 737. 
 
 »-! Portland &c. Co. v. Portland, 12 
 B. Mon. (Ky.) 11; Baptist Meeting 
 House V. Webb, 66 Maine 398; Kin- 
 caid V. Dwinelle, 59 N. Y. 548, 552; 
 Directors of Bingharapton &c. Co., In 
 re, 143 N. Y. 261, 38 N. E. 297; ' 
 
 5 Thomp. Corp. (2nd ed.), § 6478; 
 White's Supp. Thomp. Corp., § 6478. 
 
 63 5 Thomp. Corp. (2nd ' ed.), 
 § 6478. 
 
§701 
 
 RAILROADS 
 
 1088 
 
 charter and franchises without the consent of the state,"^ except, 
 perhaps, where it is clearly insolvent and incapable of perform- 
 ing such duties.^'^ But it has been held that where a railroad 
 company has lost all its property by judicial sale, has done no 
 business for a great many years, and has neither elected new 
 officers nor had any old officers within the state during such 
 period, a surrender of its charter and acceptance of such sur- 
 render by the state will be presumed.^® 
 
 § 701 (609). Proceedings to dissolve. — The dissolution of a 
 corporation will not be decreed in a foreign jurisdiction,*" but 
 a valid decree of dissolution in the state in which the charter 
 was granted is generally binding everywhere.'^" Notwithstanding 
 such a decree, however, it has been held that, for the protection 
 of home creditors, the corporation may be treated in another 
 state in which it does business and in which such creditors re- 
 
 fi« New Orleans &c. R. Co. v. 
 State, 112 U. S. 12, 5 Sup. Ct. 19, 
 28 L. ed. 619; Central R. &c. Co. v. 
 Collins, 40 Ga. 582; Treadwell v. 
 Salisbury Mfg. Co., 7 Gray (Mass.) 
 393, 66 Am. Dec. 490; Lauman v. 
 Lebanon Valley R. Co., 30 Pa. St. 42, 
 72 Am. Dec. 685; Wilson v. Central 
 Bridge Co., 9 R. I. 590. See also 
 State V. Western &c. R. Co., 95 N. 
 Car. 602 ; Attorney-General v. Su- 
 perior &c. R. Co., 93 Wis. 604, SI N. 
 W. 1138. 
 
 6' Boston &c. R. Co. v. New York 
 &c. R. Co., 13 R. I. 260. See also State 
 V. Jack, 145 Fed. 281. And compare 
 Southern R. Co. v. Hatchett, 174 Ky. 
 463, 192 S. W. 694 ; Enid &c. R. Co. v. 
 State (Tex. Civ. App.), 181 S. W. 
 498. 
 
 88 Combes v. Keyes, 89 Wis. 297, 
 62 N. W. 89, 27 L. R. A. 369, 46 Am. 
 St, 839. 
 
 "9 Society v. New Haven, 8 Wheat. 
 
 (U. S.) 464, 5 L. ed. 662; Harris &c. 
 Lumber Co. v. Coffin, 179 Fed. 257; 
 Importing &c. Co. v. Locke, 50 Ala. 
 332; Federal Un. Surety Co. v. Flem 
 ister, 95 Ark. 389, 130 S. W. 574; 
 North &c. Co. V. People, 147 111. 234, 
 35 N. E. 608; Heitkamp v. American 
 &c. Co., 158 111. App. 587; Miller v. 
 Hawkeye &c. Co., 156 Iowa 557, 137 
 N.-W. 507; Wilkins v. Thorne, 60 
 Md. 253 ; Folger v. Columbia &c. Co., 
 99 Mass. 267, 96 Am. Dec. 747, and 
 note; Merrick v. Van Santvoord, 
 34 N. Y. 208; East Line &c. R. Co. v. 
 State, 75 Tex. 434, 12 S. W. 690. A 
 federal court, sitting as a court of 
 equity, has no power, in the absence 
 of any statute conferring it, to dis- 
 solve a foreign corporation and wind 
 up its affairs. Republican &c. Mines 
 V. Brown, 58 Fed. 644, 48 Am. & 
 Eng. Corp. Cas. 28. 
 
 TO Remington v. Samana Bay Co., 
 140 Mass. 494, 5 N. E. 292. 
 
1089 INSOLVENCY AND DISSOLUTION § 701 
 
 side, as still in existence in a certain sense for the purpose of 
 enabling them to reach its effects in that state.'^i at least where 
 an action has been commenced against it therein before the 
 decree of dissolution in the state of its birth.'^^ Statutes exist in 
 most of the states providing more or less specifically the mode 
 of dissolving and winding up a corporation, and keeping it alive 
 for that purpose after it has surrendered its charter or is so far 
 dissolved as to be unable to carry on its regular business.''^ In 
 the absence of a statute giving courts of equity jurisdiction it is 
 generally, although not uniformly, held that proceeding for the 
 forfeiture of a charter must be had in a court of law, usually by 
 quo warranto, at the suit of the state or its proper representa- 
 tives.'^* But the right of the state to have the charter for- 
 feited and the right of creditors and stockholders to the protec- 
 tion of a court of equity are two dififerent things. On the one 
 hand, it is true that there are many grounds or circumstances 
 which would be cause for forfeiture at the suit of the state with- 
 out giving the stockholders or creditors any right to interfere, no 
 matter whether the state enforces the forfeitvire or waives it. 
 So, on the other hand, there may be circumstances under which 
 creditors or stockholders may obtain relief even to the extent of 
 winding up the affairs of the corporation and virtually dissolv- 
 ing it, although there might not be sufficient ground for for- 
 feiture by the state ; and insolvency, which may be cause for 
 forfeiture, may also, under certain circumstances, as, for in- 
 stance, where it is impossible to accomplish the -purpose of the 
 incorporation, be cause for winding up the corporate affairs at 
 
 "1 Life Assn. v. Fassett, 102 111. 467; Stetson v. City Bank, 12 Ohio 
 
 315. St. S77; Marstaller v. Mills, 143 N. 
 
 72 Hunt V. Columbian, &c. Co., 5S Y. 398, 38 N. E. 370. 
 Maine 290, 92 Am. Dec. 592; Henry 74See ante, §§ 64, 65; Republican 
 
 V. Stuart, 14 Phila. (Pa.) 110. M. S. Mines v. Brown, 58 Fed. 645, 
 
 T 3 Tuscaloosa, &c. Assn. v. Green, 24 L. R. A. 776; Wheeler v. Pullman, 
 
 48 Ala. 346; St. Louis, &c. Coal Co. &c. Co., 143 111. 197, 32 N. E. 420, 
 
 V. Sandoval Coal Co., Ill 111. 32; 17 L. R. A. 818; People v. Weigley, 
 
 Herron v. Vance, 17 Ind. 595; Mari- 155 111. 491. 40 N. K 300; See also 
 
 ners' Bank v. Sewall, 50 Maine 220; People v. Illinois Cent. R. Co. (143 
 
 Folger V. Chase, 18 Pick. (Mass.) 63; 111. App. 337) ; Folger v. Columbian, 
 
 Von Glahn v. De Rosset, 81 N. Car. &c. Co., 99 Mass. 267, 96 Am. Dec. 
 
 35 — Ell. Railroads I 
 
§702 
 
 RAILROADS 
 
 1090 
 
 the suit of creditors or shareholders, at least under the statutes 
 of many of the statesJ^ 
 
 §702 (610). Dissolution in case of consolidated company. — 
 
 Where by the consolidation of corporations of several states a 
 new corporation is formed, which exists under the laws of two 
 or more states it has been held that each of the original com- 
 panies remains liable to be proceeded against under the insolvent 
 laws of the state by which it was created on account of its sep- 
 arate indebtedness.''* In case it has maintained no distinct place 
 of business and has chosen no new ojfificers in the state, the orig- 
 inal place of business of the defendant corporation will be re- 
 garded as continuing to be such for the purposes of the suit; 
 and its former officers, for purposes of service and place of suit, 
 will be regarded as the officers of the company.'^'' It has also 
 been held that the new corporation formed by such consolidation 
 is liable to be proceeded against in bankruptcy in either of the 
 states under whose laws it was formed,'^* and it may be wound 
 
 747, and note in which many authori- 
 ties are cited ; Decker v. Gardner, 124 
 N. Y. 334, 26 N. E. 814, 11 L. R. A. 
 480; Strong v. McCagg, 55 Wis. 624, 
 13 N. W. 895; Hinckley v. Pfister, 
 83 Wis. 64, S3 N. W. 21. In Conklin 
 V. United States, 140 Fed. 219, it is 
 held that a court of equity, without 
 statutory authority, can not decree 
 the dissolution of a corporation. See 
 also late cases cited in White's Supp. 
 (8 Thomp. Corp.) §§6510, 6520. 
 
 T5 Merchants' & Planters' Line v. 
 Waganer, 71 Ala. 581; Baker v. 
 Backus, 32 111. 79 ; Hunt v. Le Grand, 
 &c. Co., 143 III. 118, 32 N. E. 525; 
 Miner v. Belle Isle Ice Co., 93 Mich. 
 97, 53 N. W. 218, 17 L. R. A. 412, 
 6 Lewis' Am. R. & Corp. 660; New- 
 foundland R. Co. V. Schack, 40 N. J. 
 Eq. 222, 1 Atl. 23 ; Mickles v. Roches- 
 ter, &c. Bank, 11 Paige (N. Y.) 118, 
 126, 42 Am. Dec. 103; Ward v. Sea 
 
 Ins. Co., 7 Paige (N. Y.) 294; Hitch 
 V. Hawley„ 132 N. Y. 212, 30 N. E. 
 401 ; O'Connor v. Knoxville, &c. Co., 
 93 Tenn. 708, 28 S. W. 308; Hurst v. 
 Coe, 30 W. Va. 158, 3 S. E. 564; 
 Stevens v. Empire Casualty Co., 180 
 Fed. 283 (under W. Va. statute). 
 In New York it seems that creditors 
 must be judgment creditors before 
 they can maintain such a suit. Cole v. 
 Knickerbocker &c. Co., 23 Hun (N. 
 Y.) 255. But see Ailing v. Wenzel, 
 133 111. 264, 24 N. E. 551 ; 2 Lewis' 
 Am. R. & Corp. 727; White v. Uni- 
 versity Land Co., 49 Mo. App. 450. 
 
 76 Piatt V. New York, &c. R. Co., 
 26 Conn. 544. 
 
 " Piatt V. New York, &c. R. Co., 
 26 Conn. 544. 
 
 78 Boston, &c. R. Co., In re, 9 
 Blatch. (U. S.) 101, Fed. Cas. No. 
 1677. 
 
1091 
 
 INSOLVENCY AND DISSOLUTION 
 
 §703 
 
 up and dissolved in one state without its franchise in the other 
 states being affected J® Each state usually retains jurisdiction 
 over the portion of the road within its borders, but the effect of 
 the consolidation upon the old companies depends, as we have 
 elsewhere stated, very largely upon the statttte and' agreement of 
 consolidation in the particular case.*^ 
 
 § 703 (611). Effect of dissolution. — It was formerly held that, 
 upon the dissolution of a corporation, its real estate reverted to 
 the grantor and its personal property to the state or sovereign, 
 and that the debts due to it and from it were forgiven and ex- 
 tinguished, but this is no longer the rule.^^ The modern doc- 
 trine is well stated by Justice Miller in a recent case.^^ Speak- 
 ing of the effect of the repeal of a charter, he says: "In short, 
 whatever power is dependent solely upon the grant of the char- 
 ter, and which could not be exercised by unincorporated private 
 persons under the general laws of the state, is abrogated by 
 repeal of the law which granted these special rights. Personal 
 
 T9 Hart V. Boston, &c. R. Co., 40 
 Conn. S24. See also East Line, &c. 
 R. Co. V. State, 75 Tex. 434, 12 S. W. 
 690. Compare Graham v. Boston, &c. 
 R. C, 118 U. S. 161, 6 Sup. Ct. 1009, 
 30 L. ed. 196; Covington, &c. Bridge 
 Co. V. Mayer, 31 Ohio St. 317. 
 
 81 It usually ends the corporate 
 existence or power of the old com- 
 panies so far at least as to prevent 
 them from continuing to do business 
 and perform corporate acts and hold 
 and exercise franchises. State v. 
 Grant University, 115 Tenn. 238, 90 
 S. W. 294. See also Rochester R. 
 Co. V. Rochester, 205 U. S. 236, 27 
 Sup. Ct. 469, 51 L. ed. 784. 
 
 S2 Miners' Ditch Co. v. Zellerbach, 
 il Cal. 543, 99 Am. Dec. 300, 336; 
 People V. O'Brien, 111 N. Y. 1, 18 
 N. E. 692, 7 Am. St. 684, 717. Notes 
 to State Bank v. State, 12 Am. Dec. 
 234, 239; 5 Thomp. Corp. (2nd ed.) 
 
 §§6551, 6585 et seq. That it is not 
 the rule at least as to other than 
 public corporations, see Huber v. 
 Martin, 127 Wis. 412, 105 N. W. 
 1031 ; Mormon Church v. United 
 States, 136 U. S. 1, 17, 10 Sup. Ct. 
 792, 34 L. ed. 481; Higginson, In re 
 (1899), 79 L. T. Rep. 673. Debts are 
 not extinguished. Blake v. Ports- 
 mouth, &c. R. Co., 39 N. H. 435; 
 Howe v. Robinson, 20 Fla. 352; Mc- 
 Coy v. Farmer, 65 Mo. 244. Nor are 
 contract obligations generally. Mum- 
 ma V. Potomac Co., 8 Peters (U. S.) 
 281, 8 L. ed. 945. Nor a covenant in a 
 lease to pay rent. People v. National 
 Trust Co., 82 N.Y. 283. But it is 
 held that stock cannot be transferred 
 after dissolution so as to pass the 
 legal title. James v. Woodruff, 2 
 Denio (N. Y.) 574. 
 
 S3 Greenwood v. Freight Co., 105 
 U. S. 13, 18, 26 L. ed. 961. 
 
§ 704 RAILROADS 1092 
 
 and real property acquired by the corporation during its lawful 
 existence, rights of contract or choses in action so acquired, and 
 which do not, in their nature, depend upon the general powers 
 conferred by the charter, are not destroyed by such repeal ; and 
 the courts may, if the legislature does not provide some special 
 remedy, enforce such rights by the means within their power. 
 The rights of the shareholders of such a corporation to their in- 
 terest in its property are not annihilated by such a repeal, and 
 there must remain in the courts the power to protect those 
 rights."8* 
 
 § 704 (612). Corporation may have, a qualified existence after 
 dissolution. — The corporation may be, and is, by statute in many 
 of the states, kept alive in a qualified sense for a certain period 
 in order to wind up its affairs, but it cannot carry on new busi- 
 ness under its charter. Thus, where such a statute provided that 
 it should continue to be a body corporate for three years for the 
 purpose of closing up its business and disposing of its property, 
 it was held that the minority stockholders were entitled to have 
 the property sold and the proceeds, after paying debts, dis- 
 tributed as in case of the termination of a partnership ; that the 
 majority had no right to transfer the assets to a new corporation 
 designed to continue the business of the old, at a valuation fixed 
 by themselves, and to compel the minority to accept a pro rata 
 amount of stock in the new company or a pro rata amount in 
 cash at such valuation, and that the directors could be compelled 
 to account to the stockholders for their acts and doings where 
 they continued the business of the corporation for a year -after 
 
 s-i See also Brown v. Schicier, 118 vests in the stockholders, subject to 
 
 Fed. 981 ; People v. O'Brien, 111 N. the rights of creditors or corporate 
 
 y. 1, 18 N. E. 692, 2 L. R. A. 255, 7 liabilities, 5 Thomp. Corp. (2nd ed.) 
 
 Am. St. 684; Miner v. New York, §6586; Whites' Supp. §§6585-6589 
 
 &c. R. Co., 123 N. Y. 242, 25 N. E. Muncie, &c. Trac. Co. v. Citizens Gas 
 
 339; People v. De Graw, 133 N. Y. &c. Co., 179 Ind. 322, 100 N. E. 65 
 
 254, 30 N. E. 1006; International, &c. Sioux City etc. R. Co. v. Trust Co. 
 
 R. Co. V. State, 75 Tex. 356, 378, 12 173 U. S. 99, 19 Sup. Ct. 341, 43 L, 
 
 S. W. 685; Ante, §i 378, 385, 601. The ed. 628; Brown v. Schleier, 118 Fed 
 
 general rule now is that the property 981 ; Geddis v. Northwestern Trust 
 
1093 
 
 INSOLVENCY AND DISSOLUTION 
 
 704 
 
 its dissolution.*'' As a general rule, in the absence of any pro- 
 vision to the contrary, a corporation can neither sue nor be sued 
 after its dissolution,*'' and suits already commenced against it 
 are abated.**'' In many of the states, however, the statutes to 
 which we have already referred keep the corporation alive for 
 the purpose of suing and being sued in winding up its affairs.** 
 
 Co., 23 S. Dak. 531, 122 N. W. 587; 
 Taylor v. Interstate Invest. Co., 75 
 Wash. 490, 135 Pac. 240. 
 
 S3 Mason v. Pewabic Mining Co., 
 133 U. S. 50, 10 Sup. Ct. 224, 33 L. 
 ed. 524, 1 Lewis Am. R. & Corp. 
 227. See also to same effect, Froth- 
 ingham v. Barney, 6 Hun (N. Y.) 
 366. But the court will not always 
 appoint a receiver and order a sale, 
 for, where the valuation is just, a 
 company may, prior to its dissolu- 
 tion, transfer its assets to a new com- 
 pany to discharge its liabilities and 
 carry on the business and give the 
 stockholders the option of taking 
 cash or stock in such, new company, 
 where there is no question of its 
 ability to carry out the arrangement. 
 Baltimore, &c. R. Co. v. Cannon, 72 
 Md. 493, 20 Atl. 123, 3 Lewis Am. R. 
 & Corp. Cas. 202; Sawyer v. Du- 
 buque, &c. Co., 77 Iowa 242, 42 N. 
 W. 300; Treadwell v. Salisbury, &c. 
 Co., 7 Gray (Mass.) 393, 66 Am. Dec. 
 490; Buford v. Keokuk Northern 
 Line, &c. Co., 3 Mo. App. 159. 
 
 se Nelson v. Hubbard, 96 Ala. 238, 
 11 So. 428, 17 L. R. A. 375; New- 
 hall V. Western Zinc Co., 164 Cal. 
 380, 128 Pac. 1040; Brandom Ump- 
 qua Lumber &c. Co., 166 Cal. 322, 
 136 Pac. 62; Logan v. Western, &c. 
 R. Co., 87 Ga. 533, 13 S. E. 516; 
 City Ins. Co. v. Commercial Bank, 
 68 111. 348; Buck Stove Co. v. Vick- 
 
 ers, 80 Kans. 29, 101 Pac. 668; Bank 
 of Louisiana v. Wilson, 19 La. Ann. 
 1 ; Merrill v. Suffolk Bank, 31 Maine 
 57, 50 Am. Dec. 649; Gold v. Clyne, 
 58 Hun 419, 12 N. Y. S. 531; Dob- 
 son V. Siraonton, 86 N. Car. 492 ; 
 Miami, &c. Co. v. Gano, 13 Ohio 269. 
 
 »■ National Bank v. Colby, 21 
 Wall. (U. S.) 609, 22 L. ed. 687; 
 Saltmarsh v. Planters', &c. Bank, 17 
 Ala. 761 ; Terry v. Merchants' &c. 
 Bank, 66 Ga. 177; Venable Bros. v. 
 Southern etc; Co., 135 Ga. 508, 69 
 S. E. 822, 32 L. R. A. (N. S.) 446, 
 and other cases there cited in note; 
 Thornton v. Marginal Freight R. Co., 
 123 Mass. 32 ; New York, &c. Co., In 
 re, 33 N. Y. S. 726, 67 N. Y. St. 
 549; McCulloch v. Norwood, 58 N. Y. 
 562; Ingraham v. Terry, 11 Humph. 
 (Tenn.) 572; note to May v. State 
 Bank, 2 Rob. 56 (Va.), 40 Am. Dec. 
 726, 737. But compare Piatt v. Ar- 
 cher, 9 Blatchf. (U. S.) 559, Fed. 
 Cas. No. 11213; Lindell v. Benton, 
 6 Mo. 361 ; Giles v. Stanton, 86 Tex. 
 620, 26 S. W. 615. 
 
 ss Kelley &c. Co. v. Howard M. 
 Hooker Co., 178 Fed. 71; Herron v. 
 Vance, 17 Ind. 595; Castles' Admr. 
 V. Acrogen Coal Co., 145 Ky. 591, 
 140 S. W. 1034; Foster v. Essex 
 Bank, 16 Mass. 245, 8 Am. Dec. 135 ; 
 Kansas City Hotel Co. v. Sauer, 65 
 Mb. 279; Stetson v. City Bank, 2 
 Ohio St. 167; Greenbrier Lumber Co. 
 
§.705 
 
 RAILROADS 
 
 1094 
 
 In other states receivers or trustees are appointed for this pur- 
 pose.88 It has also been held, in a state in which corporations 
 are kept alive by statute for the purpose of suing and being sued, 
 that a coi-poration which continued to do business, without wind- 
 ing up, after its charter had expired, could be sued in the corpo- 
 rate name for a tort committed by it while carrying on such 
 business ;»" but it has been held in Indiana that stockholders 
 are not bound by a contract made by the officers of a corporation 
 alter the repeal or forfeiture of its charter. ^^ 
 
 § 705 (613). Disposition of property on dissolution. — Credi- 
 tors do not lose their rights nor do stockholders lose their inter- 
 est in the property upon the dissolution of a corporation. The 
 assets of the corporation become a trust fund for the payment of 
 corporate creditors, and the surplus belongs to the stockhold- 
 ers. ^^ Debts due the corporation, choses in action,®* and cer- 
 tain so-called franchises or rights and powers,®* which may be 
 regarded as property, survive the dissolution, and may be treated 
 
 V. Ward, 30 W. Va. 43, 3 S. E. 227; 
 and authorities cited in White's Supp. 
 Thomp. Corp. § 6S7S. 
 
 89 5 Thomp. Corp. (2nd ed.), 
 § 6598. 
 
 90 Miller v. Newberg, &c. Co., 31 
 W. Va. 836, 8 S. E. 600, 13 Am. .St. 
 903. 
 
 91 Wilson V. Tesson, 12 Ind. 285. 
 See also Butler v. Beach, 82 Conn. 
 417, 74 Atl. 748; United States v. Poe, 
 120 Md. 89, 87 Atl. 933. 
 
 92 Bacon v. Robertson, 18 How. 
 (U. S.) 480, 486, 15 L. ed. 406; Lum 
 V. Robertson, 6 Wall. (U. S.) 277, 
 18 L. ed. 743; Lothrop v. Stedman, 
 42 Conn. 583, 13 Blatchf. (U. S.) 
 134, Fed. Cas. No. 8519; Montgom- 
 ery, &c. R. Co. V. Branch, 59 Ala. 
 139; Commercial Fire Ins. Co. v. 
 Board, 99 Ala. 1, 14 So. 490, 42 Am. 
 St. 1 ; Heman v. Britton, 88 Mo. 549 ; 
 People V. National Trust Co., 82 N. 
 
 Y. 283 ; Western, &c. R. Co. v. Rol- 
 lins, 82 N. Car. 523; Shamokin Val- 
 ley, &c. R. Co. V. Malone, 85 Pa. St. 
 25. See ante, .§ 692 ; also 5 Thomp. 
 Corp. (2nd ed.) §6587; 8 Thomp. 
 Corp. §§6585, 6609, et seq. The au- 
 thorities above cited show that it is 
 virtually a trust fund for sharehold- 
 ers, after creditors are paid, as well 
 as for the creditors themselves. But 
 see Knott v. Evening Post, 124 Fed. 
 342. 
 
 93 Munima v. Potomac Co., 8 Pet. 
 (U. S.) 281, 8 L. ed. 945; New Jer- 
 sey V. Yard, 95 U. S. 104, 24 L. ed. 
 352; Read v. Frankfort Bank, 23 
 Maine 318 ; Thornton v. Marginal 
 Freight R. Co., 123 Mass. 32. 
 
 9* New Orleans, &c. R. Co. v. Dela- 
 more, 114 U. S. 501, 5 Sup. Ct. 1009, 
 29 L. ed. 244; People v. O'Brien, 
 111 N. Y. 1, 18 N. E. 692, 2 L. R. A. 
 255, 7 Am. St. 684, and note; Inter- 
 
1095 
 
 INSOLVENCY AND DISSOLUTION 
 
 §705 
 
 and disposed of as other property for the benefit of creditors 
 and shareholders. But the franchise to be a corporation does 
 not survive,^^ and it would seem that all such franchises or pow- 
 ers as are "dependent solely upon the grant of the charter, and 
 which could not be exercised by unincorporated private persons 
 under the general laws of the state," are abrogated by the repeal 
 of the law which granted them, under the reserved power of re- 
 peal.^® So, it has been held that the special privilege of im- 
 munity from taxation does not ordinarily survive the dissolu- 
 tion of the corporation.*'' If the legislature has failed to make 
 provision for the collection of debts, the distribution of the 
 assets and the protection of creditors and shareholders, equity 
 will provide the means.®® After the claims of creditors are satis- 
 
 national, &c. R. Co. V.' State, 75 Tex. 
 356, 378, 12 S. W. 685; Hall v. Sulli- 
 van R. Co., 1 Brunner's C. C. 613. 
 See also Scotland v. Thomas, 94 U. 
 S. 682, 24 L. ed. 219; Greenwood v. 
 Union Freight Co., 105 U. S. 13, 26 
 L. ed. 961; Hannibal, &c. R. Co. v. 
 Marion County, 36 Mo. 294. 
 
 9S See Memphis, &c. R. Co. v. Rail- 
 road Comrs., 112 U. S: 609, 5 Sup. 
 Ct. 299, 28 L. ed. 837; Willamette 
 Mfg. Co. V. Bank, 119 U. S. 191, 7 
 Sup. Ct. 187, 30 L. ed. 384; Southern, 
 &c Co. V. Orton, 32 Fed. 457; Coe v. 
 Columbus, &c. R. Co., 10 Ohio St. 
 372, 75 Am. Dec. 518, and note. 
 
 96Tomlinson v. Jessup, 15 Wall. 
 (U. S.) 454, 21 L. ed. 204; Shields 
 V. Ohio, 95 U. S. 319, 24 L. ed. 357; 
 Railroad Co. v. Maine, 96 U. S. 499, 
 24 L. ed. 836; Sinking Fund Cases, 
 99 U. S. 700, 25 L. ed. 496; Green- 
 wood V. Freight Co., 105 U. S. 13, 
 26 L. ed. 961; Erie, &c. R. Co. v. 
 Casey, 26 Pa. St. 287; International, 
 &c. R. Co. V. State, 75 Tex. 356, 378, 
 12 S. W. 685. See also St. Louis R. 
 Co. V. Gill, 156 U. S. 649, IS Sup. Ct. 
 
 484, 39 L. ed. 567, 11 Lewis Am. R. 
 & Corp. 709; Snell v. Chicago, 133 
 111. 413, 24 N. E. 532, 8 L. R. A. 858; 
 Commonwealth v. Smith, 10 Allen 
 (Mass.) 448, 87 Am. Dec. 672; Grand 
 Rapids Bridge Co. v. Prange, 35 
 Mich. 400, 24 Am. Rep. 585. 
 
 9'^ Morgan v. Louisiana, 93 U. S. 
 217, 23 L. ed. 860; Railroad Co. v. 
 Georgia, 98 U. S. 359, 25 L. ed. 185; 
 Railroad Co. v. Hamblen, 102 U. S, 
 273, 26 L. ed. 152; See also Minne- 
 apolis, &c. R. Co. V. Gardner, 177 
 U. S. 332, 20 Sup. Ct. 656, 44 L. ed. 
 793 ; Norfolk, &c. R. Co. v. Pendleton 
 156 U. S. 667, 15 Sup. Ct. 413, 39 
 L. ed. 574. But see Tomlinson v. 
 Branch, 15 Wall. (U. S.) 460, 21 L. 
 ed. 189; Humphrey v. Pegues, 16 
 Wall. (U. S.) 244, 21 L. ed. 326. See 
 ante, §§ 380, 381. 
 
 88 Curran v. Arkansas, 15 How. 
 (U. S.) 304, 14 L. ed. 705; Green- 
 wood V. Freight Co., 105 U. S. 13, 
 26 L. ed. 961 ; Howe v. Robinson, 20 
 Fla. 352; Hightower v. Thornton, 8 
 Ga. 486, 52 Am. Dec. 412 ; McCoy v. 
 
§ 706 RAILROADS 1096 
 
 fied the stockholders are entitled to share in the surplus in pro- 
 portion to the amount of their respective interests.®^ Common 
 and preferred stockholders share alike/ unless otherwise pro- 
 vided by statute or contract. If, however, a dividend has been 
 properly declared out of surplus profits, leaving the capital of 
 the company unimpaired, a shareholder entitled thereto may 
 have it preferred to the claims of creditors, even though he may 
 not ■ have demanded it until after the company has become in- 
 solvent.^ 
 
 §706 (614). Rights of creditors upon dissolution. — As we 
 have already seen, the law protects, as far as possible, the in- 
 terests of creditors upon the dissolution of a corporation. As 
 a general rule the rights of creditors are such as they have at 
 the time of the dissolution, and cannot be enlarged by subse- 
 quent proceedings after the corporate assets have passed into the 
 hands of an assignee or receiver.^ And shareholders or directors 
 who are also lawful creditors are generally entitled, as such credi- 
 tors, to share pro rata with the other creditors.* Unsecured 
 
 Farmer, 65 Mo. 244; Van Glahn v. Eq. 269, 67 Atl. 834; London, &c. 
 
 De Rosset, 81 N. Car. 467; Moore v. Co., In re, L. R. S Eq. 519. 
 Schoppert, 22 W. Va. 282. 2 Le Roy v.' Globe Ins. Co., 2 Edw. 
 
 99 Wood V. Dummer, 3 Mason (U. Ch. (N. Y.) 657. See also Van Dyck 
 
 S.) 308, Fed. Cas. No, 17944; Krebs v. McQuade, 86 N. Y. 38; Petition 
 
 V. Carlisle Bank, 2 Wall. Jr. 33, of Le Blanc, In re, 14 Hun (N. Y.) 
 
 Fed. Cas. No. 7932; Shorb v. Beau- 8. 
 
 dry, 56 Cal. 446 ; Dudley v. Price, 3 Rosebloom v. Whittaker, 132 111. 
 
 10 B. Mon. (Ky.) 84; Avery v. Cen- 81. 23 N. E. 339; Dean & Son>s Ap- 
 
 tral Bank, 221 Mo. 71, 119 S. W. peal, 98 Pa. St. 101; Clinksales v. 
 
 1106; Heath v. Barmore, SO N. Y. Pendleton, &c. Co., 9 S. Car. 318; 
 
 302; Hartman v. Insurance Co. of Marr v. Bank, 4 Coldw. (Tenn.) 471. 
 
 Valley of Virginia, 32 Grat. (Va.) See also Argues v. Union Sav. Bank, 
 
 242 (in proportion to their "in-put") ; 133 Cal. 139, 65 Pac. 307; Bisbee v. 
 
 Bridgewater Nav. Co., In re, 3 R. & Mt. Battie Mfg. Co., 107 Maine 18S, 
 
 Corp. L. J. S91 ; 5 Thomp. Corp. (2nd 11 Atl. 778. 
 ed.), § 6588. 4 Bristol Milling &c. Co. v. Pro- 
 
 1 Coltraine v. Baltimore &c. Assn., basco, 64 Ind. 406 ; In re Pleasant 
 
 110 Fed. 281; McGregor v. Home Hill Lumber Co., 126 La. 743, 52 So. 
 
 Ins. Co., 33 N. J. Eq. 181 ; Helliman 1010; Benedum v. First Citizens 
 
 V. Penna. Elec. &c. Co., 73 N. J. Bank, 72 W. Va. 124, 78 S. E. 656. 
 
1097 INSOLVENCY AND DISSOLUTION § 706 
 
 creditors usually share pro rata, as do creditors of the same class 
 with each other, but those who have taken a valid mortgage or 
 similar security, or have otherwise obtained a lawful priority, 
 will usually have the preference.^ It is held, however, in a com- 
 paratively recent case, that the holders of railroad bonds guar- 
 anteed by another corporation are not entitled, upon the in- 
 solvency of such corporation, to have a dividend declared in 
 their favor, or to have money retained in court to meet a possible 
 future liability on the guaranty, as against other creditors whose 
 claims are past due, where the railroad company is solvent and 
 the bonds are not due.® 
 
 5 Florsheim, &c. Co. v. Wetter- holders had no standing in court ; 
 mark, 10 Tex. Civ. App. 102, 30 S. that their claim was not a provable 
 W. SOS. See generally Hitner v. Dia- claim as it was not yet due and the 
 mend Steel Co., 176 Fed. 384; Stan- liability was not fixed; and that they 
 wood V. Des Moines Sav. Bank, 178 had no right to share as creditors in 
 Fed. 670; Union Nat. Bank v. Lyons, the present distribution of assets. 
 220 Mo. S38, 119 S. W. S40; S Thomp. Compare Tod v. Kentucky Land Co., 
 Corp. (2nd ed.) §§6611,6613. 57 Fed. 47 ; Marbury v. Kentucky, &c. 
 
 6 Gay Mfg. Co. v. Gittings, S3 Fed. Co., 62 Fed. 33S. 
 45. The court held that the bond-